<PAGE>
U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------- ---------------
Commission File No. 333-75297
R & R RANCHING, INC.
--------------------
(Name of Small Business Issuer in its Charter)
NEVADA 87-0616524
------ ----------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
899 South Artistic Circle
Springville, Utah 84663
-----------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (801) 489-3238
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
(1) Yes X No (2) Yes No X
--- --- --- ---
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
July 31, 1999
1,000,000
---------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Financial Statements of the Registrant required to be filed with
this 10-QSB Quarterly Report were prepared by management, and commence on the
following page, together with Related Notes. In the opinion of management,
the Financial Statements fairly present the financial condition of the
Registrant.
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
BALANCE SHEETS
[Unaudited]
ASSETS
July 31, October 31,
1999 1998
___________ ___________
CURRENT ASSETS:
Cash in bank
$ 4,010 $ 20,782
___________ ___________
Total Current Assets
4,010 20,782
___________ ___________
PROPERTY - BISON, net
84,700 -
___________ ___________
OTHER ASSETS:
Organization costs, net - 475
Deferred stock offering costs 7,521 -
___________ ___________
Total Other Assets 7,521 475
___________ ___________
$ 96,231 $ 21,257
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,214 $ 955
Accounts payable B related party 2,251 500
Interest payable B related party 3,733 -
Notes payable B related party 70,000 -
___________ ___________
Total Current Liabilities 81,198 1,455
___________ ___________
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value,
10,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, $.001 par value,
50,000,000 shares authorized,
1,000,000 shares issued and
outstanding 1,000 1,000
Capital in excess of par value 24,000 24,000
Deficit accumulated during the
development stage (9,967) (1,002)
___________ ___________
15,033 23,998
Less: stock subscription receivable - (4,196)
___________ ___________
Total Stockholder's Equity 15,033 19,802
___________ ___________
$ 96,231 $ 21,257
___________ ___________
The accompanying notes are an integral part of these unaudited financial
statements.
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
[Unaudited]
From Inception
For the Three For the Nine on August 3,
Months Ended Months Ended 1998 Through
July 31, July 31, July 31,
1999 1999 1999
__________ __________ ___________
REVENUE $ - $ - $ -
__________ __________ ___________
EXPENSES:
Bison Operating Expenses 529 1,646 1,646
General and Administrative 1,143 3,586 4,588
__________ __________ __________
Total Expenses 1,672 5,232 6,234
__________ __________ ___________
LOSS BEFORE OTHER EXPENSE (1,672) (5,232) (6,234)
OTHER (EXPENSE):
Interest Expense (1,750) (3,733) (3,733)
__________ __________ ___________
LOSS BEFORE INCOME TAXES (3,472) (8,965) (9,967)
CURRENT TAX EXPENSE - - -
DEFERRED TAX EXPENSE - - -
__________ __________ ___________
NET LOSS $ (3,472) $ (8,965) $ (9,967)
__________ __________ ___________
LOSS PER COMMON SHARE $ (.00) $ (.01) $ (.01)
__________ __________ ___________
The accompanying notes are an integral part of these unaudited financial
statements.
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON AUGUST 3, 1998
THROUGH JULY 31, 1999
[Unaudited]
Deficit
Accumulated
Preferred Stock Common Stock Capital in During the
_______________ _____________ Excess of Development
Shares Amount Shares Amount Par Value Stage
______ ______ ______ _____ _______ __________
BALANCE,
August 3, 1998 - $ - - $ - $ - $ -
Issuance of
1,000,000 shares
of common stock at
$.025 per share - - 1,000,000 1,000 24,000 -
Net loss for the
period ended
October 31, 1998 - - - - - (1,002)
______ _____ _____ _____ _____ ______
BALANCE,
October 31, 1998 - - 1,000,000 1,000 24,000 (1,002)
Net loss for the
period ended
July 31, 1999 - - - - - (8,965)
______ _____ ____ ____ ____ _____
BALANCE,
July 31, 1999 - $ - 1,000,000 $1,000 $24,000 $(9,967)
______ _____ ____ ____ ____ _____
The accompanying notes are an integral part of these unaudited financial
statements.
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
[Unaudited]
From Inception
For the Nine on August 3,
Months Ended 1998 Through
July 31, July 31,
1999 1999
__________ ___________
Cash Flows Provided by Operating Activities:
Net loss $ (8,965) $ (9,967)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Write-off of organization costs 475 475
Depreciation and amortization - 25
Changes in assets and liabilities:
(Increase) in bison calves (700) (700)
Increase in accounts payable 4,259 5,214
Increase in accounts payable
- related party 1,751 2,251
Increase in interest payable
- related party 3,733 3,733
__________ __________
Net Cash (Used) by Operating Activities 553 1,031
__________ __________
Cash Flows Provided by Investing Activities:
Payment of organization costs - (500)
Purchase of bison (84,000) (84,000)
__________ ___________
Net Cash (Used) in Investing Activities (84,000) (84,500)
__________ ___________
Cash Flows Provided by Financing Activities:
Proceeds from issuance of note
payable - related party 70,000 70,000
Proceeds from stock subscriptions
receivable 4,196 4,196
Proceeds from common stock issuance - 20,804
Payment of stock offering costs (7,521) (7,521)
__________ ___________
Net Cash Provided by Financing Activities 66,675 87,479
__________ ___________
Net Increase in Cash (16,772) 4,010
Cash at Beginning of Period 20,782 -
__________ ___________
Cash at End of Period $ 4,010 $ 4,010
__________ ___________
[Continued]
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
[Unaudited]
[Continued]
From Inception
For the Nine on August 3,
Months Ended 1998 Through
July 31, July 31,
1999 1999
__________ ___________
Supplemental Disclosures of
Cash Flow Information:
Cash paid during the period for:
Interest $ - $ -
Income taxes $ - $ -
Supplemental Schedule of Noncash Investing
and Financing Activities:
For the period ended July 31, 1999:
The Company expensed organization costs of $475.
Depreciation of $7,400 on bison heifers was capitalized as basis in
bison calves.
For the period ended October 31, 1998:
A shareholder of the Company advanced $500 in payment of
organizational costs.
The accompanying notes are an integral part of these unaudited financial
statements.
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - R & R Ranching, Inc. (the Company) was organized
under the laws of the State of Nevada on August 3, 1998. The Company has not
yet commenced planned principal operations and is considered a development
stage company as defined in SFAS No. 7. The Company is planning to engage in
the business of breeding and raising bison. The Company at the present time,
has not paid any dividends and any dividends that may be paid in the future
will depend upon the financial requirements of the Company and other relevant
factors.
Unaudited Financial Statements - The accompanying financial
statements have been prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows at July 31, 1999 and for all the periods presented have been made.
Property - Bison - Inventory consists of bison which are being
held for breeding purposes. The bison are recorded at the lower of cost or
market value [See Note 2].
Organization Costs - Organization costs of $500, which reflect
amounts expended to organize the Company, were expensed during 1999 in
accordance with Statement of Position 98-5.
Loss Per Share - The Company accounts for loss per share in
accordance with Statement of Financial Accounting Standards (SFAS) No. 128
"Earnings Per Share". his statement requires the Company to present basic
earnings per share and dilutive earnings per share when the effect is dilutive
[See Note 6].
Income Taxes - The Company accounts for income taxes in
accordance with Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". This statement requires an asset and liability
approach for accounting for income taxes [See Note 7].
Cash and Cash Equivalents - For purposes of the statement of cash
flows, the Company considers all highly liquid debt investments purchased with
a maturity of three months or less to be cash equivalents.
Accounting Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported amounts
of assets and liabilities, the disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimated by management.
NOTE 2 - BISON
Bison that are purchased for breeding are recorded at cost and
depreciated over their useful lives (15 years), using the straight-line
method. If a bison dies or is sold the full remaining amount is expensed.
Bison that are internally developed are recorded by capitalizing one
year's depreciation of the mother and all direct development costs until the
bison have reached maturity and have been selected for breeding or other
productive purposes. At the point of maturity, the bison are depreciated over
their estimated useful lives of 15 years. If the bison are sold, the costs
are charged to costs of goods sold.
During the nine months ended July 1999, operating costs related to
the bison calves in the amount of $700 and $7,100 in depreciation was
capitalized.
<PAGE> R & R RANCHING, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 2 - BISON [Continued]
The following is a summary of bison as of July 31, 1999:
Accumulated
Amount Cost Depreciation Net
________ ______ __________ ________
Breeding Stock 20 $84,000 $ (7,400) $ 76,600
Calves 18 8,100 - 8,100
________ _______ __________ _______
Total Bison 38 $92,099 $ (7,400) $84,700
________ ________ __________ ________
NOTE 3 - RELATED PARTY TRANSACTIONS
Bison Care and Management Agreement - During December, 1998 the
Company entered into an agreement with Blue Sky Bison Ranch, Ltd., of Carvel,
Alberta, Canada ("Blue Sky") under which Blue Sky would house, feed, manage
and market the Company's bison for a period of one year commencing January 1,
1999. The agreement provides for the Company to pay a monthly management fee
of $500 (Canadian) which is approximately $335 US. Blue Sky's president,
director and controlling shareholder is the father of the Company's President
and controlling shareholder. The Company recorded a related party accounts
payable in the amount of $2,251 for services rendered during the period ended
July 31, 1999.
Notes Payable - During January, 1999, the Company borrowed $70,000
from Libco Equities, Inc., a corporation organized under the laws of the
Province of Alberta, Canada ("Libco"). The loan is due on demand and provides
for interest at 10% per annum. The President and sole shareholder of the
Company is also the President, director and controlling shareholder of Libco.
Accrued interest amounted to $3,733 at July 31, 1999.
Management Compensation - The Company has not paid any compensation
to its officers and directors.
Office Space - The Company has not had a need to rent office space.
An officer/shareholder of the Company is allowing the Company to use his
office as a mailing address, as needed, at no expense to the Company.
Accounts Payable - During the period ending October 31, 1998, an
officer of the Company paid organization costs in the amount of $500 on behalf
of the Company. The Company recorded a related party accounts payable in the
amount of $500.
NOTE 4 - CAPITAL STOCK
Preferred Stock - The Company has authorized 10,000,000 shares of
preferred stock, $.001 par value, with such rights, preferences and
designations and to be issued in such series as determined by the Board of
Directors. No shares are issued and outstanding at July 31, 1999.
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 4 - CAPITAL STOCK [Continued]
Common Stock - During the period ended October 31, 1998, the Company
issued 1,000,000 shares of its previously authorized, but unissued common
stock for cash of $20,804 and a stock subscription receivable of $4,196. The
stock subscription receivable was paid in full during November, 1998. The
Company is proposing to issue up to 100,000 additional shares of common stock
and related warrants in a public offering [See Note 8].
Stock Option Plan - On August 10, 1998, the Board of Directors of the
Company adopted and the stockholders at that time approved, the 1998 Stock
Option Plan. The plan provides for the granting of awards of up to 1,000,000
shares of common stock to sales representatives, officers, directors,
consultants and employees. The awards can consist of stock options,
restricted stock awards, deferred stock awards, stock appreciation rights and
other stock-based awards as described in the plan. Awards under the plan will
be granted as determined by the board of directors. As of July 31, 1999, no
awards have been granted under the plan.
Common Stock Split - During March, 1999 the Company effected a
forward split of its issued and outstanding common stock on the basis of two
shares issued for each one share previously issued. There were 500,000 shares
of common stock issued and outstanding immediately prior to the split and
1,000,000 shares of common stock issued and outstanding immediately after the
split. There was no change in the number of authorized common shares or the
par value of common shares. The financial statements for all periods
presented have been restated to reflect the stock split.
NOTE 5 - GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles which contemplate
continuation of the Company as a going concern. However, the Company was only
recently formed and has not yet been successful in establishing profitable
operations and has current liabilities in excess of current assets. These
factors raise substantial doubt about the ability of the Company to continue
as a going concern. In this regard, management is proposing to raise funds
through sales of its common stock, which funds will be used to assist in
establishing on-going operations. There is no assurance that the Company will
be successful in raising this additional capital or achieving profitable
operations. The financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
R & R RANCHING, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 6 - LOSS PER SHARE
The following data show the amounts used in computing loss per share and the
effect on income the weighted average number of shares for the periods ended
From Inception
For the Three For the Nine on August 3,
Months Ended Months Ended 1998 Through
July 31, July 31, July 31,
1999 1999 1999
__________ __________ ___________
(Loss) from continuing operations
applicable to common stock $ (3,422) $ (8,965) $ (9,967)
__________ __________ ___________
(Loss) available to common
stockholders used in earnings
(loss) per share $ (3,422) $ (8,965) $ (9,967)
__________ __________ ___________
Weighted average number of
common shares outstanding
used in (loss) per share during
the period 1,000,000 1,000,000 1,000,000
__________ __________ ___________
NOTE 7 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability equal
to the expected future tax benefit/expense of temporary reporting differences
between book and tax accounting methods and any available operating loss or
tax credit carryforwards. At July 31, 1999, the Company has available unused
operating loss carryforwards of approximately $9,500, which may be applied
against future taxable income and which expire in various years through 2018.
The amount of and ultimate realization of the benefits from the
operating loss carry forwards for income tax purposes is dependent, in part,
upon the tax laws in effect, the future earnings of the Company, and other
future events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carry forwards the Company
has established a valuation allowance equal to the tax effect of the loss
carryforwards and, therefore, no deferred tax asset has been recognized for
the loss carryforwards. The net deferred tax assets are approximately $3,200
as of July 31, 1999, with an offsetting valuation allowance of the same amount
resulting in a change in the valuation allowance of approximately $2,860
during the nine months ended July 31, 1999.
R & R RANCHING, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 8 - SUBSEQUENT EVENTS
Proposed Public Offering of Common Stock - The Company is proposing
to make a public offering of 100,000 units consisting of a total of 100,000
shares of common stock, 100,000 A warrants and 100,000 B warrants. Each A
warrant allows the holder to purchase one share of common stock at a price of
$2.50. Each B warrant allows the holder to purchase one share of common stock
at a price of $5.00. The warrants are subject to adjustment in certain events
and are exercisable for a period of five years from the date of the offering.
The Company may call the warrants at their exercise price on 30 days notice at
any time after issuance and prior to the expiration date of the warrants. The
warrants may only be exercised or redeemed if a current prospectus is in
effect. The Company has filed a registration statement with the United States
Securities and Exchange Commission on Form SB-2 under the Securities Act of
1933. An offering price of $1.25 per unit has arbitrarily been determined by
the Company. The offering will be managed by the Company without any
underwriter. The units will be offered and sold by the directors and officers
of the Company, who will receive no sales commissions or other compensation in
connection with the offering, except for reimbursement of expenses actually
incurred on behalf of the Company in connection with the offering. The
Company estimates it will incur stock offering costs of approximately $15,000,
but any such costs will be deferred and netted against the proceeds of the
proposed public stock offering.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
- --------------------------------------------------------------------
Plan of Operation.
- ------------------
The Registrant's plan of operation for the next 12 months is to
begin its bison operation under its management agreement with Blue Sky Bison
Ranch, Ltd. As of August 11, 1999, which is subsequent to the period covered
by this Report, at least 16 of the Registrant's 20 cows have delivered calves,
and it appears that all 20 of its cows have calved, with none being lost.
However, the Registrant will not be able to determine the precise number of
calves until all cows and calves are tested and the calves are tagged in
October, 1999. Revenue from calf sales will be reduced if the crop is less
than anticipated.
Approximately 5% of a herd of bison cows must be replaced every
year due to infertility, aging, death and other causes. The following table
shows how the Registrant plans to dispose of its spring, 1999, calf crop.
These figures assume a crop of 18 calves, with equal numbers of bull and
heifer calves:
Disposition of calf Bull calves Heifer calves
- ------------------- ----------- -------------
Stay in R & R herd as -0- 1
replacement
Sold for breeding stock -0- 8
Sold for breeding stock 9 -0-
or slaughter
Because all of the Registrant's cows are young (about three to five
years old), management hopes that it will not have to use many of its heifer
calves to replace cows. This would allow the Registrant to sell almost all of
its heifer calves while its cows are in their breeding prime. However, many
factors, including illness and death of its existing cows, could force the
Registrant to keep some of its annual heifer calf crop; this would have a
negative effect on revenues because the replacement heifers would not be made
available for sale.
Most bison operations breed bulls at the rate of about one bull to
10 cows. Because the cows that it received under its Purchase Agreement with
Diving Buffalo Ranch were already pregnant, breeding bulls will not be used
until the 1999 fall breeding season. The management agreement provides for
Blue Sky to supply bulls for breeding, so the Registrant will not require
breeding bulls of its own until it moves its operations to its own location as
discussed below. Once this occurs, the Registrant will keep about one bull
for every 10 cows, to be bred for two years. The Registrant will have to keep
replacement bulls from its own herd (or purchase them, on a regular basis) in
order to ensure genetic diversity and avoid inbreeding.
Bison ranchers commonly keep bulls and cows together and let
nature dictate the breeding season. Most breeding occurs in July and August,
with a 275 day gestation period. The Registrant will breed its 20 cows during
each cow's normal cycle during the months of July and August.
Calves born in the spring of 1999 will be weaned during the months
of December, 1999, and January, 2000. The Registrant will tag (for
identification purposes), vaccinate and sell its calves during the weaning
period.
The Registrant will pay Blue Sky $500 (Canadian) (approximately
$US 340) per month under the management agreement, and will pay to Blue Sky
one-fourth (1/4) of the proceeds from the sales of its bulls and heifers
during 1999. In exchange, Blue Sky will provide grazing of the herd, winter
feeding, veterinary care, handling, identification tagging and records
maintenance, and provision of breeding bulls (at the rate of one bull per 20
cows). With additional feed expenses and reimbursement of out-of-pocket
expenses of its directors and officers, the Registrant expects annual costs of
operation in 1999 to equal approximately $5,500. This figure does not include
the initial $84,000 purchase price for the Registrant's herd.
Management estimates that it will cost approximately $500 to raise
a calf to the point where it is weaned and ready for sale. This figure
includes the payment of one-fourth of sales proceeds to Blue Sky as discussed
above. The price range for weaned heifer calves is about $2,000 to $3,000;
for weaned bulls it is $1,000 to $1,500. Therefore, the Registrant expects to
make a profit of $1,500 to $2,500 per heifer calf and $500 to $1,000 per bull
calf. These figures depend on many factors, including for example:
a calf crop of 90%;
lack of factors that would complicate pregnancy and birth
(e.g., unusually harsh weather, brucellosis and other
diseases, inferior genetic stock); and
stability of feed and bison prices.
If any one of these factors changes, the Registrant's
profitability could decrease significantly.
On September 1, 1999, the Securities and Exchange Commission
declared effective the Registrant's Registration Statement on Form SB-2.
Under this registered offering, the Registrant will offer 100,000 units, with
each unit consisting of one share of common stock; one "A" Warrant to purchase
one share of common stock at a price of $2.50; and one "B" Warrant to purchase
one share of common stock at a price of $5.00. The Registrant is currently
preparing its prospectus for printing and distribution to offerees and
management believes that the offering will commence in October, 1999. The
Registrant's anticipated use of proceeds from this offering is as follows:
Assuming
Maximum
Units
Item Sold(1)
---- ----
Secure lease on 1/4 Section of
land in Alberta, Canada for one year $ 2,800
Fence leased land 7,000
Repay loan from Libco(2) 73,169.44
Feed, including hay, grain,
water, minerals and salt for
one year (3) 2,520
Management fees to Blue Sky
Bison Ranch, Ltd., for one year(4) 4,824
Membership fees for bison
associations in U.S. and
Canada for one year 400
Accounting, attorney's and
incorporation fees 10,000
Travel 1,750
Office expenses (telephone, 1,200
photocopies, postage)
Working capital (5) 6,336.56
Total $110,000
(1) These expenditures are estimates based on the Registrant's present
intentions. None of these items is a firm commitment by the Registrant.
All figures are in U.S. dollars.
(2) On October 5, 1998, the Registrant entered into a Buffalo Sale and
Purchase Agreement with Diving Buffalo, under which the Registrant
agreed to buy 20 mature cow bison for $84,000 ($4,200 per head). This
purchase was completed, and the buffalo were delivered to the Registrant
on January 19, 1999. In order to close the purchase and begin
operations without having to wait for the receipt of proceeds under this
offering, the Registrant borrowed $70,000 from Libco Equities, Inc.,
which is controlled by the Registrant's President, William R. Davidson.
Libco has the option to convert the outstanding principal and interest
on the Note into "unregistered" and "restricted" shares of the
Registrant's common stock on a $1.00 per share basis. If Libco elects
to convert the debt into equity before the Registrant is able to repay
the Note with the proceeds of its offering, the Registrant will use the
proceeds allocated to the Note to purchase 15 bison cows at $4,000, with
the rest of those proceeds allocated to working capital.
(3) This amount has been allocated for the Registrant's second year of
operations. The management agreement with Blue Sky provides for Blue
Sky to feed the Registrant's herd during the one year term of that
agreement. See footnote 4, below.
(4) On December 1, 1998, the Registrant and Blue Sky entered into an
agreement under which Blue Sky agreed to house, feed, manage and market
the Registrant's bison for a period of one year, commencing January 1,
1999. The Registrant is responsible for a monthly management fee of
$500 (Canadian), together with one-fourth (1/4) of the sales proceeds
from bison from its herd in 1999. At the current exchange rate of
approximately US$ 0.68 per Canadian dollar, the monthly and annual
management fees are approximately US$ 340 and US$ 4,080, respectively.
W. Malcolm C. Davidson, Blue Sky's President, director and controlling
stockholder, is the father of William R. Davidson, the Registrant's
President.
(5) Working capital has been reserved for payment of variable
expenses such as feed, fencing and lease payments in case costs of these
items exceed the amounts that have been allocated.
During the next 12 months, management plans to begin searching for
a suitable 1/4 section (160 acres) property to lease for its operations.
Management intends to limit its search to the Province of Alberta, Canada, and
will try to locate a full section (640 acres), with W. Malcolm C. Davidson,
William R. Davidson's father, to lease three quarters and the Registrant to
lease one quarter.
If the Registrant is successful in its property search, it will
have to transport the herd to the new facility, hire herd management personnel
and begin paying directly for all costs that are currently covered by the
management agreement. The Registrant would also be responsible for the
purchase or lease of its own handling facilities (pens and chutes for
restraining animals during breeding, veterinary treatment and transportation).
Management believes that by locating the Registrant's herd next to W. Malcolm
C. Davidson's herd, both parties will be able to share handling facilities and
reduce expenses. However, there is no formal agreement between the parties in
this regard and it is possible that the Registrant may have to purchase
handling facilities of its own. These facilities typically cost from $2,000
to $2,500. The Registrant has not allocated any of the proceeds from its
offering to the acquisition of handling facilities. The Registrant will have
to obtain them with operating revenues or through additional debt or equity
funding if handling facilities become necessary in the next 12 months. The
Registrant can provide no assurance that it will have enough money to acquire
these facilities.
Management expects that it will hire one person to operate its
ranch once it has located a suitable property. The standard rate for ranch
workers in Alberta is approximately $10 to $12 (Canadian) (approximately US$
6.80 to US$ 8.16) per hour. The Registrant believes that the labor pool in
Alberta is large enough that it will not have difficulty finding a suitable
worker.
Results of Operations.
- ----------------------
During the quarterly period ending July 31, 1999, the Registrant
received total revenues of $0 and sustained a net loss of ($3,472).
Liquidity.
- ----------
During the quarterly period ended July 31, 1999, the Registrant
had total expenses of $1,672, while receiving $0 in revenues. At July 31,
1999, the Registrant had total assets of $96,231, of which $4,010 consisted of
cash.
During the next 12 months, the Registrant will be able to meet its
current operating expenses from anticipated bison sales. However, management
expects that the net proceeds from its offering will be necessary in order to
lease and fence its ranch and repay the Libco Equities loan.
Year 2000
- ---------
The use of computer programs that rely on two-digit date codes to
perform computations or decision-making functions has become widespread. Many
of these programs may fail as a result of their inability to properly
interpret date codes beginning on January 1, 2000. For example, such programs
may interpret the year code "00" as the year 1900 rather than 2000.
The Registrant's computer-related business activities will be
limited to record keeping for its herd and the use of a word processing
program for preparation of business correspondence and similar documents. The
manufacturers of the Registrant's software programs have represented that they
are "Year 2000 compliant" and management believes that its computer systems
are "Year 2000 compliant" for these applications.
The Registrant can give no assurance that third parties with whom
it does business (e.g., banks and utilities) will ensure Year 2000 compliance
in a timely manner or that, if they do not, their computer systems will not
have an adverse effect on the Registrant. However, the Registrant does not
believe that Year 2000 compliance issues of third parties will result in a
material adverse effect on its financial condition or results of operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
- ----------------------------
None; not applicable.
Item 2. Changes in Securities and Use of Proceeds.
- ---------------------------------------------------
None; not applicable.
Item 3. Defaults Upon Senior Securities.
- ------------------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
- --------------------------------------------------------------
None; not applicable.
Item 5. Other Information.
- ----------------------------
None; not applicable.
Item 6. Exhibits and Reports on Form 8-K.
- -------------------------------------------
(a) Exhibits.
Registration Statement on Form SB-2 (Amendment No. 2)*
(b) Reports on Form 8-K.
None.
* Incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
R & R RANCHING, INC.
Date: 10/14/99 By: /s/ William R. Davidson
-------------- -------------------------------------
William R. Davidson, President and
Director
Date: 10/14/99 By: /s/ Allyson R. N. Davidson
-------------- -------------------------------------
Allyson R. N. Davidson, Secretary/
Treasurer
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