<PAGE>
As filed with the Securities and Exchange Commission on May 28, 1999.
Registration No. 333-75297
==============================================================================
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(AMENDMENT NO. 1)
R & R RANCHING, INC.
--------------------
(Name of small business issuer in its charter)
Nevada 0279 87-0616524
------ ---- ----------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
899 South Artistic Circle
Springville, Utah 84663
(801) 489-3238
--------------
(Address and telephone number of principal executive offices)
RR1
Carvel, Alberta T0E 0H0
Canada
------
(Address of principal place of business
or intended principal place of business)
William R. Davidson
899 South Artistic Circle
Springville, Utah 84663
(801) 489-3238
--------------
(Name, address and telephone number of agent for service)
Copies to:
Branden T. Burningham, Esq.
455 East 500 South, Suite 500
Salt Lake City, Utah 84111
(801) 363-7411
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [_]
If this Form is a post effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
Title of
Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price per Offering
Registration
Registered Registered Unit/Share Price Fee
- ---------- ---------- ---------- ----- ---
Units(1) . . . . .100,000 $1.25 $125,000 (2)
Units
Common Stock . .100,000 $1.25 $125,000 $ 34.75
Shares
A Warrants . . .100,000 $0.00 --
Warrants
Common Stock
Underlying A
Warrants (3) .100,000 $2.50 $250,000 $ 69.50
Shares
B Warrants . . .100,000 $0.00 --
Warrants
Common Stock
Underlying B
Warrants (3) .100,000 $5.00 $500,000 $139.00
Shares
TOTAL. . . . . . . $243.25
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(1) Each consisting of one share of common stock, one A Warrant and one B
Warrant.
(2) A separate registration fee is payable on the shares of common stock
comprising the units; therefore, no registration fee is payable on the units.
(3) In accordance with Rule 416 under the Securities Act of 1933, as
amended, a presently indeterminable number of shares of common stock are
registered hereunder which may be issued in the event the anti-dilution
provision of the A and B Warrants becomes operative.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
R & R RANCHING, INC.
R & R Ranching, Inc., a Nevada corporation, is offering 100,000
units. For a complete description of the securities being offered, see the
caption "Description of Securities."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE THE CAPTION
"RISK FACTORS," BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
There is no public market for the units or any securities of which
they are comprised.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
Underwriting Proceeds to Issuer
Price to Discounts and or Other Public Persons
Public Commissions(1) (2)
- ------------------------------------------------------------------------------
Per Unit $1.25 $0 $1.25
Total Maximum $125,000 $0 $125,000
- ------------------------------------------------------------------------------
(1) The units will be sold by R & R Ranching's directors and
executive officers on a "direct participation" basis. As of the date of this
prospectus, R & R Ranching has not received any commitments to purchase the
units and it can not guarantee that it will be able to raise any specific
dollar amount. The offering will end on _________, 1999. R & R Ranching's
directors may extend the offering period to ________, 1999, in their sole
discretion. Each purchaser must buy a minimum of 800 units, although R & R
Ranching's directors and executive officers may let any purchaser buy less
than the minimum subscription amount, in their sole discretion. The proceeds
of this offering will not be placed in escrow and will be available for R & R
Ranching's use immediately after they are received.
(2) Before deducting estimated expenses of $15,000, all of which will be
paid by R & R Ranching.
The date of this Prospectus is ____________.
1
<PAGE>
TABLE OF CONTENTS
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Determination of Offering Price . . . . . . . . . . . . . . . . . . . . 11
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . . .13
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . .13
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Directors, Executive Officers, Promoters and Control Persons . . . . . .15
Security Ownership of Certain Beneficial Owners and Management . . . . .17
Description of Securities . . . . . . . . . . . . . . . . . . . . . . . 18
Interest of Named Experts and Counsel . . . . . . . . . . . . . . . . . 20
Disclosure of Commission Position on Indemnification for Securities . . 20
Act Liabilities
Description of Business . . . . . . . . . . . . . . . . . . . . . . . . 21
Management's Discussion and Analysis or Plan of Operation . . . . . . . 27
Description of Property . . . . . . . . . . . . . . . . . . . . . . . . 29
Certain Relationships and Related Transactions . . . . . . . . . . . . .30
Market for Common Equity and Related Stockholder Matters . . . . . . . .31
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . .32
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . .33
Changes in and Disagreements with Accountants on Accounting and . . . . 52
Financial Disclosure
2
<PAGE>
PROSPECTUS SUMMARY
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R & R Ranching
------------
R & R Ranching was formed on August 3, 1998, and has only recently
begun minimal operations.
The purposes of R & R Ranching are to operate a ranch which will
produce, raise and market bison. Management plans to engage in the business
of raising bison for sale as breeding stock or as a meat product to a bison
meat retailer. R & R Ranching intends to become active in national and local
bison associations to develop the networking contacts to market its products.
The Offering
------------
Securities Offered . . . . . .100,000 units, each 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. See "Description of
Securities."
Offering Price . . . . . . . .$1.25 per unit.
Plan of Distribution . . . . .R & R Ranching's directors and executive
officers will offer the units on a "direct
participation" basis. See the Risk Factor
"'Direct Participation' Offering."
Securities Outstanding . . . .As of the date of this prospectus, 1,000,000
shares of common stock and no shares of
preferred stock are outstanding. See
"Description of Securities."
Warrants . . . . . . . . . . .Each warrant entitles the holder to purchase one
share of common stock. A Warrants are
exercisable at $2.50 per share and B Warrants
are exercisable at $5.00 per share. See
"Description of Securities."
Transfer Agent . . . . . . . .Interwest Transfer Company, Inc., 19891 East
Murray-Holladay Road, Holladay, Utah 84117 (801)
272-9294, serves as R & R Ranching's transfer
agent and registrar for its outstanding
securities.
R & R Ranching . . . . . . . .899 South Artistic Circle, Springville, Utah
84663
(801) 489-3238
3
FORWARD-LOOKING STATEMENTS
--------------------------
This prospectus contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934. Such statements can be identified by the use
of the forward-looking words "anticipate," "estimate," "project," "likely,"
"believe," "intend," "expect," or similar words. These statements discuss
future expectations, contain projections regarding future developments,
operations, or financial conditions, or state other forward-looking
information. When considering such forward-looking statements, you should
keep in mind the risk factors noted in this section and other cautionary
statements throughout this prospectus, any prospectus supplement, and R & R
Ranching's periodic filings with the Securities and Exchange Commission that
are incorporated herein by reference. You should also keep in mind that all
forward-looking statements are based on management's existing beliefs about
present and future events outside of management's control and on assumptions
that may prove to be incorrect. If one or more risks identified in this
prospectus, a prospectus supplement, or any applicable filings materializes,
or any other underlying assumptions prove incorrect, R & R Ranching's actual
results may vary materially from those anticipated, estimated, projected or
intended.
Among the key factors that may have a direct bearing on R & R
Ranching's operating results are risks and uncertainties described under "Risk
Factors," including, for example, those attributable to market acceptance of R
& R Ranching's product line; the lack of organized markets for such products;
and currency risks with respect to the Canadian dollar.
RISK FACTORS
------------
An investment in R & R Ranching's Units is very speculative and
involves substantial risks. In addition to the general investment risks and
other information in this prospectus, you should carefully consider the
following factors in deciding whether to invest in the units.
R & R RANCHING WILL DEPEND ON HIGH QUALITY BREEDING STOCK
R & R Ranching must be able to get enough genetically consistent
breeding stock on reasonable terms and at reasonable prices in order to
succeed. R & R Ranching can not guarantee that it will be able to do this. See
"Description of Business."
HERD HEALTH WILL BE VERY IMPORTANT
The health of R & R Ranching's breeding herd and bison will have a
great impact on its profits. If its breeding herd or bison population
contracts a disease causing it to breed less productively, or which kills many
of its bison, R & R Ranching's business operations will be damaged. In
addition, many bison will be raised together, which will make them more
vulnerable to contagious disease. R & R Ranching can not guarantee that it
will be able to avoid herd health problems. See "Description of Business."
4
VOLATILE SUPPLY COSTS COULD HURT OPERATIONS
R & R Ranching's profitability is extremely sensitive to changes
in the cost of supplies because the cost of feed and other supplies are a
large part of the cost of producing bison. These costs are affected by
regional and seasonal availability and demand. Crop conditions, weather and
other factors may make feed and supplies more expensive. Increased expense or
a large decline in the availability of these supplies could have a negative
effect on R & R Ranching. See "Description of Business."
MANAGEMENT EXPECTS EARLY LOSSES
R & R Ranching was formed in August 1998 and has very limited
operating history. The purchase of breeding stock requires large up front
expenditures and working capital during the initial start-up period. R & R
Ranching expects that its initial expenses will result in losses early in its
development. It can not guarantee that it will become profitable after it
completes its initial purchases. See "Management's Discussion and Analysis or
Plan of Operation."
AUDITOR'S "GOING CONCERN" OPINION
The Independent Auditor's Report for R & R Ranching's audited
financial statements as of October 31, 1998, expresses "substantial doubt
about the Company's ability to continue as a going concern," due to its status
as a newly formed company that has not yet established profitable operations.
R & R RANCHING FACES STRONG COMPETITION
Many of its current and potential competitors have much more
financial, technical and personnel resources than R & R Ranching. R & R
Ranching can not guarantee that its competitors will not be more successful in
developing and improving bison production technologies and raising
consistently high quality bison that are more economical to raise than R & R
Ranching's bison. Also, as additional competitors begin operations, the supply
of bison may exceed demand and result in lower market prices for bison. R & R
Ranching's competitive position in the buffalo ranching industry is extremely
small.
R & R RANCHING HAS ARBITRARILY DETERMINED ITS OFFERING PRICE
R & R Ranching has set the price for the units arbitrarily. The
price is not based on any recognized criteria of value, such as assets, book
value or net worth. You should not consider the offering price to be an
indication of R & R Ranching's value. Management expects that purchasers of
units in this offering will experience immediate and substantial dilution in
net tangible book value. See "Plan of Distribution."
R & R RANCHING IS SUBJECT TO GOVERNMENT REGULATION
R & R Ranching is subject to federal, state, provincial and local
government regulations, including those restricting certain types of
investor-owned livestock production operations and those concerning
occupational safety and health, and zoning. R & R Ranching will attempt to
5
comply with all applicable regulations. However, it can not guarantee that it
will satisfy all regulations or obtain all required approvals. Failure to
comply with applicable regulations can, among other things, result in fines,
suspensions of regulatory approvals, operating restrictions, and criminal
prosecution. Changes in or additions to applicable regulations could also have
a negative effect on R & R Ranching and its business. See "Description of
Business."
R & R RANCHING WILL FACE HIGH CAPITAL COSTS
Bison operations require expensive capital assets such as:
land;
handling facilities and fences;
equipment and breeding stock;
operating funds; and
labor and management.
For a typical 40-cow bison operation, the cost of these capital
assets can be as high as $300,000. This high initial investment prevents many
small investors from entering the bison industry.
MUCH OF THE OFFERING PROCEEDS WILL BE USED TO REPAY A LOAN
Approximately $73,000 of the proceeds from this offering will be
used to repay the loan from Libco, and will not be available for R & R
Ranching's future operations. R & R Ranching's President, William R.
Davidson, is the President, sole stockholder and a director of Libco; R & R
Ranching's Secretary/Treasurer, Allyson R. N. Davidson, is also an executive
officer of Libco. Due to his control of Libco, approximately 67% of the net
proceeds of this offering will be paid indirectly to Mr. Davidson.
THE MARKET MAY NOT ACCEPT BISON MEAT
The North American meat industry is dominated by producers of
beef, pork and chicken. Bison is not a mainstream meat product, and R & R
Ranching can not guarantee that the public will want to purchase bison meat in
sufficient amounts to make R & R Ranching's operations profitable. Producers
of ostrich, another non-mainstream meat, have found it very difficult to gain
large-scale access to consumers. The ostrich meat industry was also
disadvantaged by the higher prices being paid for live ostriches as breeding
stock, as compared to the relatively low price per pound for ostrich meat.
When it became clear that no large-scale meat market would develop in the
foreseeable future, the prices of ostrich breeding stock fell to meat market
prices. The bison industry is likely to face similar difficulties.
THE BISON INDUSTRY IS NOT HIGHLY ORGANIZED
Accurate data about various facets of the bison industry is very
difficult to obtain, and organized or aggregate information for the most part
6
simply does not exist. This lack of industry organization and information
prevents many investors from entering the bison industry.
THE MARKETS FOR BISON MEAT ARE NOT WELL ORGANIZED
The bison production industry lacks well-defined and established
channels of product distribution because it is a new industry. There is no
large-scale, organized system for wholesaling or retailing buffalo products.
R & R RANCHING FACES CANADIAN CURRENCY RISK
R & R Ranching will be conducting its principal operations in
Canada. It will pay most of its operating expenses and receive most of the
proceeds from its bison sales in Canadian dollars. If the Canadian dollar
strengthens relative to the U.S. dollar, R & R Ranching's earnings may be
adversely affected when converted from Canadian dollars into U.S. dollars.
NO PLAN TO PAY DIVIDENDS
R & R Ranching does not expect to pay dividends on its common
stock in the foreseeable future. Future dividends, if any, will depend upon R
& R Ranching's earnings, if any. Purchasers who will need cash dividends from
their investment should not purchase the units.
THERE IS NO PUBLIC MARKET FOR R & R RANCHING'S SECURITIES
There is no public market for R & R Ranching's securities. R & R
Ranching can not guarantee that any public market will develop after the
offering. As a result, purchasers of the units may not be able to sell their
investment readily, if at all.
R & R RANCHING'S STOCK IS "PENNY STOCK"
The shares of common stock that make up the units are "penny
stock" as defined in Rule 3a51-1 of the Commission. This designation may
adversely affect the development of any public market for R & R Ranching's
shares of common stock or, if such a market develops, its continuation.
Broker-dealers are required to personally determine whether an investment in
"penny stock" is suitable for customers.
Penny stocks are securities (i) with a price of less than five
dollars per share; (ii) that are not traded on a "recognized" national
exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation
system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv)
of an issuer with net tangible assets less than $2,000,000 (if the issuer has
been in continuous operation for at least three years) or $5,000,000 (if in
continuous operation for less than three years), or with average annual
revenues of less than $6,000,000 for the last three years.
Section 15(g) of the 1934 Act, and Rule 15g-2 of the Commission
require broker-dealers dealing in penny stocks to provide potential investors
with a document disclosing the risks of penny stocks and to obtain a manually
signed and dated written receipt of the document before effecting any
transaction in a penny stock for the investor's account. Potential investors
7
in R & R Ranching's common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be "penny stock."
Rule 15g-9 of the Commission requires broker-dealers in penny
stocks to approve the account of any investor for transactions in such stocks
before selling any penny stock to that investor. This procedure requires the
broker-dealer to (i) obtain from the investor information concerning his or
her financial situation, investment experience and investment objectives; (ii)
reasonably determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks
of penny stock transactions; (iii) provide the investor with a written
statement setting forth the basis on which the broker-dealer made the
determination in (ii) above; and (iv) receive a signed and dated copy of such
statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment
objectives. Compliance with these requirements may make it more difficult for
purchasers of R & R Ranching's common stock to resell their shares to third
parties or to otherwise dispose of them.
WILLIAM R. DAVIDSON HAS VOTING CONTROL OF R & R RANCHING
William R. Davidson can elect all of R & R Ranching's directors,
who in turn appoint all executive officers, without regard to the votes of
other stockholders. Mr. Davidson will have absolute control over the
management and affairs of R & R Ranching, even if this offering is successful.
Mr. Davidson currently owns all of R & R Ranching's outstanding voting
securities and will own approximately 91% of the outstanding voting securities
upon completion of this offering (not taking into account the exercise of any
of the Warrants). See "Security Ownership of Certain Beneficial Owners and
Management."
R & R RANCHING IS NOT USING AN UNDERWRITER
R & R Ranching is not using an underwriter for this offering. The
"due diligence" review that an underwriter would customarily perform has not
been performed for this offering. R & R Ranching's directors and officers are
conducting the offering, which makes it less likely that a public market will
develop for R & R Ranching's securities.
THE WARRANTS MAY BECOME WORTHLESS
The value of the warrants lies in the possibility that the price
of R & R Ranching's common stock may someday exceed the exercise price of the
warrants. There is currently no market for R & R Ranching's common stock. R
& R Ranching can not guarantee that any market will ever exist or that, if it
does, the market price of the common stock will exceed the exercise price of
the warrants. If the market price does not exceed $2.50 per share (for the A
Warrants) or $5.00 per share (for the B Warrants) during the five-year term of
the warrants, they will become worthless.
CURRENT PROSPECTUS AND REGISTRATION REQUIRED FOR EXERCISE
Holders of the warrants will only be able to exercise them if R &
8
R Ranching maintains a current prospectus in effect and the exercise is
qualified or exempt from qualification under applicable securities laws of the
warrant holders' states of residence. Although R & R Ranching intends to use
reasonable efforts to update this prospectus as necessary to maintain a
current prospectus and federal and state registration or qualification for the
exercise of the warrants, it can not assure investors that it will be able to
do so when the investors wish to exercise the warrants. The value of the
warrants will decrease greatly if R & R Ranching does not maintain a current
prospectus and registration or qualification.
R & R RANCHING CAN REDEEM THE WARRANTS
If R & R Ranching maintains a current prospectus in effect, it may
redeem each of the warrants at a price of one cent ($0.01) per warrant upon 30
days' notice at any time that the warrants are exercisable. If R & R Ranching
calls the warrants, investors will have only 30 days to exercise them; if they
do not, R & R Ranching will pay them the nominal price of one cent ($0.01) per
warrant.
THE SALE OF OUTSTANDING "RESTRICTED" SHARES COULD HURT ANY MARKET FOR R & R
RANCHING'S STOCK
All of the 1,000,000 outstanding shares of R & R Ranching's common
stock are "restricted" securities within the meaning of Rule 144 of the 1933
Act. If a market for R & R Ranching's common stock ever develops, the holders
of these shares may begin selling them as early as August, 1999. Such sales
may have a negative effect on R & R Ranching's stock price. Mr. Davidson
currently owns all of the 1,000,000 shares of common stock that are currently
outstanding.
USE OF PROCEEDS
---------------
R & R Ranching estimates that its net proceeds from this offering will
be $110,000, after deducting estimated offering expenses of $15,000. R & R
Ranching plans to use these net proceeds 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
9
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 R & R Ranching's present
intentions. None of these items is a firm commitment by R & R Ranching.
All figures are in U.S. dollars.
(2) On October 5, 1998, R & R Ranching entered into a Buffalo Sale and
Purchase Agreement with Diving Buffalo, under which R & R Ranching
agreed to buy 20 mature cow bison for $84,000 ($4,200 per head). This
purchase was completed, and the buffalo were delivered to R & R Ranching
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, R & R Ranching borrowed $70,000 from Libco, which is
controlled by R & R Ranching's President, William R. Davidson. The
repayment figure assumes a payoff date of July 1, 1999, with payment of
the principal amount of the note and accrued interest, at a rate of 10%
per year. Libco has the option to convert the outstanding principal and
interest on the Note into "unregistered" and "restricted" shares of R &
R Ranching's common stock on a $1.00 per share basis. If Libco elects
to convert the debt into equity before R & R Ranching is able to repay
the Note with the proceeds of this offering, R & R Ranching 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. See "Certain
Relationships and Related Transactions"; "Description of Business"; and
"Management's Discussion and Analysis or Plan of Operation."
(3) This amount has been allocated for R & R Ranching's second year of
operations. The management agreement with Blue Sky provides for Blue
Sky to feed R & R Ranching's herd during the one year term of that
agreement. See footnote 4, below.
(4) On December 1, 1998, R & R Ranching and Blue Sky Bison Ranch Ltd.,
of Carvel, Alberta, Canada entered into an agreement under which Blue
Sky agreed to house, feed, manage and market R & R Ranching's bison for
a period of one year, commencing January 1, 1999. R & R Ranching is
responsible for a monthly management fee of $500 (Canadian), together
10
with one-fourth (1/4) of the sales proceeds from bison from its herd in
1999. At the current exchange rate of approximately US$ 0.67 per
Canadian dollar, the monthly and annual management fees are approximately
US$ 335 and US$ 4,020, respectively. W. Malcolm C. Davidson, Blue Sky's
President, director and controlling stockholder, is the father of William
R. Davidson, R & R Ranching's President. See "Description of Business."
(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.
The net proceeds from this offering will fund R & R Ranching's
operations for one year without the receipt of any operating revenues. If it
receives less than the maximum offering and no warrants are exercised, R & R
Ranching will allocate the net proceeds first to payment of its existing
obligations; these include payment of the Libco loan and payment of its
obligations under the Blue Sky management agreement. If R & R Ranching is not
able to raise sufficient proceeds under this offering, it may have to delay
the lease on the land in Alberta, Canada, and extend the management agreement.
R & R Ranching will need to be operating profitably within one year from the
completion of this offering in order to fund its operations from cash flow.
Otherwise, it will have to seek additional debt or equity funding (including
the exercise of the warrants being sold as part of the units). R & R Ranching
can give no assurance that its stock price will become high enough to induce
warrant holders to exercise their warrants, or that it will be able to obtain
additional financing from other sources.
DETERMINATION OF OFFERING PRICE
-------------------------------
There is no public market for the units or the warrants and common
stock comprising the units. R & R Ranching has arbitrarily determined the
price of the common stock based on the amount of net proceeds it needs to
repay the Libco loan and start its operations (approximately $110,000) and the
percentage ownership interest in R & R Ranching that William R. Davidson is
willing to give up. If the maximum offering is sold and none of the warrants
are exercised, Mr. Davidson will have a 91% ownership interest in R & R
Ranching. If the maximum offering is sold and all of the warrants are
exercised, Mr. Davidson will still retain a 77% interest in R & R Ranching.
R & R Ranching has arbitrarily valued the warrants; they do not
bear any relationship to its current book value, revenues, earnings, or any
other customary measure of value.
R & R Ranching can not assure that any public market that develops
for its common stock will equal or exceed the offering price or the exercise
price of the warrants. Purchasers of the units face the risk that their
shares will not be worth what they paid for them at the time that the
purchasers decide to sell them. Purchasers also face the risk that their
warrants will become worthless if the market price of R & R Ranching's common
stock is less than the exercise price of the warrants for the entire five-year
term of the warrants. See the Risk Factor "Exercisability of Warrants."
11
DILUTION
--------
Purchasers of the units will likely experience immediate and
substantial dilution in the value of R & R Ranching's common stock. The net
tangible book value of R & R Ranching as of January 31, 1999, was
approximately $22,918, or $0.046 per share. Retroactively taking into account
the two-for-one forward split of R & R Ranching's common stock on March 3,
1999, the net tangible book value was $0.023 per share. Net tangible book
value per share is determined by subtracting R & R Ranching's total
liabilities from its total tangible assets and dividing the remainder by the
number of shares of common stock outstanding.
If R & R Ranching sells all 100,000 units being offered in this
offering (at a price of $1.25 per unit), and after deduction of offering
expenses of $15,000, and taking into account the above-referenced forward
split, the net tangible book value of R & R Ranching as of January 31, 1999,
would have been $132,918, equaling $0.121 per share. This amount represents
an immediate increase of $0.098 per share (or approximately 526%) to William
R. Davidson, R & R Ranching's sole existing stockholder, and an immediate
dilution in net tangible book value of $1.129 per share (or approximately 90%)
to purchasers of units in this offering. The following table illustrates this
dilution:
<TABLE>
<S> <C>
Assuming
Maximum
Shares
Sold(1)
----
Initial public offering price per unit(2)..$1.25
Net tangible book value per share
before offering...........................$0.023
Increase per share due to new investors...$0.098
(approximately 526% increase) ------
Net tangible book value per share
after offering(3).........................$0.121
------
Dilution per share purchased by new
investors.................................$1.129
(approximately 90% decrease)
(1) These calculations do not take into account the potential exercise
of any of the warrants.
(2) Offering price per share before deduction of offering expenses.
(3) After deduction of offering expenses estimated at $15,000.
</TABLE>
12
The following table shows the number of units purchased from R & R
Ranching, the total cash paid to R & R Ranching, and the average price that
the existing stockholder and purchasers under this offering paid for their
shares:
<TABLE>
Shares Purchased(1) Total Consideration
---------------- -------------------
Number Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Existing stockholder....1,000,000 91% $ 25,000(2) 17%
New investors........... 100,000 9% $125,000(3) 83%
------- ------- ------- -------
Total.............1,100,000 100% $150,000 100%
--------- ------- -------- -------
(1) Assumes the sale of the maximum offering, without taking
into account the exercise of any of the warrants.
(2) Considers only the cash contribution paid by the existing
stockholder, and does not take into account other contributions such as
services contributed.
(3) Before deduction of offering expenses estimated at $15,000.
</TABLE>
SELLING SECURITY HOLDERS
------------------------
No security holder of R & R Ranching is offering any securities under
this offering. R & R Ranching is selling all of the units under this
offering.
PLAN OF DISTRIBUTION
--------------------
General
- -------
R & R Ranching is offering its units to the public through its
directors and executive officers, William R. Davidson and Allyson R. N.
Davidson, on a "direct participation" basis, with no minimum number of units
which must be sold. Mr. and Ms. Davidson will offer the units to pre-existing
business contacts whom they know personally. However, R & R Ranching can
provide no assurance that it will be able to sell any of the units. There is
no provision for the escrow of offering proceeds pending the receipt of any
minimum proceeds; all proceeds will be immediately available for R & R
Ranching's use. The offering will continue for a period of three months from
the date of this prospectus or until all offered units are sold, or until
terminated by R & R Ranching, whichever occurs first. R & R Ranching's Board
of Directors can extend the offering period for an additional two months in
its sole discretion.
13
All subscription payments shall be made payable to "R & R
Ranching, Inc."
The units will be offered and sold by R & R Ranching's directors
and executive officers; they will receive no compensation except for
reimbursement of expenses actually incurred in connection with offering
activities. R & R Ranching has no plans, proposals, arrangements or
understandings with any potential sales agent with respect to participation in
the distribution of R & R Ranching's securities. If R & R Ranching later
decides to seek the participation of any potential sales agent, the
Registration Statement of which this prospectus is a part will be
appropriately amended to identify such persons.
There are no formal arrangements between R & R Ranching and its
directors and executive officers pursuant to which units will be reserved for
sales to persons designated by such directors and executive officers or their
affiliates. Directors and executive officers and their affiliates may
purchase units under this offering, but it is unlikely that they will purchase
any units.
R & R Ranching is not using the services of an underwriter for the
offer and sale of the units; the independent "due diligence" review of R & R
Ranching and its affairs and financial condition which is usually performed by
the underwriter has not been performed. R & R Ranching can give no assurance
that any market for its securities will develop after the offering or that, if
such a market does develop, it will be maintained. Since the offering is not
being underwritten by a broker-dealer that would ordinarily be expected to
publish quotations for and make a market in the offered securities following
the offering, R & R Ranching has not had any discussions with any broker-
dealer firms regarding the possibility of making a market in its securities
after the offering.
Prior to this offering, there has been no public market for the
securities of R & R Ranching. All dealers effecting transactions in the
securities being offered, whether or not the dealers are participating in this
distribution, may be required to deliver a prospectus until the later of the
termination of this offering or ___________, 1999 (90 days after the date of
this prospectus). This is in addition to the obligation of dealers to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
Warrant Exercise Procedures
- ---------------------------
Warrant holders may exercise all or part of their warrants by
delivering the completed and signed Warrant Exercise Form attached to each
warrant to R & R Ranching's transfer agent, Interwest Transfer Company, Inc.,
1981 East Murray-Holladay Road, Holladay, Utah 84117, along with the exercise
price for the number of shares being purchased. The warrant holder must pay
the exercise price in lawful money of the United States by wire transfer or
check payable to the order of "R & R Ranching, Inc.," and must also deliver to
the transfer agent the warrant certificate representing the warrants being
exercised. Once the transfer agent has received each of these items, it will
14
deliver the checks or other funds to R & R Ranching and will promptly issue
certificates for the number of shares being purchased.
As long as R & R Ranching maintains a current prospectus in effect
and the exercise is qualified or exempt from qualification under applicable
securities laws of the warrant holders' states of residence, warrant holders
will be able to exercise their warrants immediately after issuance. However,
there is currently no market for R & R Ranching's common stock and it is very
unlikely that any such market will exist at the time that the warrants are
issued. Even if a market were to exist when the warrants are issued, it is
very unlikely that the market price of R & R Ranching's common stock would
exceed the exercise price of the warrants. Therefore, it will most likely not
make economic sense for warrant holders to exercise their warrants immediately
after they are issued. See the Risk Factor "Exercisability of Warrants."
LEGAL PROCEEDINGS
-----------------
R & R Ranching is not a party to any pending legal proceeding. To
the knowledge of management, no federal, state or local governmental agency is
presently contemplating any proceeding against R & R Ranching. No director,
executive officer or affiliate of R & R Ranching or owner of record or
beneficially of more than five percent of R & R Ranching's common stock is a
party adverse to R & R Ranching or has a material interest adverse to R & R
Ranching in any proceeding.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
------------------------------------------------------------
The following table sets forth the names of all current directors
and executive officers of R & R Ranching. These persons will serve until the
next annual meeting of the stockholders (held on the third Wednesday of August
of each year) or until their successors are elected or appointed and
qualified, or their prior resignation or termination.
<TABLE>
<CAPTION>
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
- ---- ---- ----------- --------------
<S> <C> <C> <C>
William R. Davidson President 8/98 *
Director 8/98 *
Allyson R.N. Davidson Secretary/ 8/98 *
Treasurer 8/98 *
</TABLE>
* These persons presently serve in the capacities
indicated.
15
Business Experience.
- --------------------
William R. Davidson, Director and President. Mr. Davidson, age 25,
is a 1998 graduate of Brigham Young University, where he received a degree in
accounting. He owned and operated his own commercial cattle operation from
1992 to 1995. Mr. Davidson was an Office Trainer at the Senior Missionary
Training Center at BYU, from April, 1995, through August, 1997. For the eight
months ending April, 1998, Mr. Davidson was employed in the Controller's
Division of the Finance/Records Department of the LDS Church. Since April,
1998, he has been the President of Libco, a closely-held consulting firm. Mr.
Davidson is a member of the Institute of Management Accountants.
Allyson R. N. Davidson, Secretary/Treasurer. Ms. Davidson is 24
years of age. From 1992 to 1994, Ms. Davidson was a student body officer at
BYU, where she was an undergraduate student. From May, 1995, to December,
1996, Ms. Davidson studied Hungarian language and worked in Budapest, Hungary.
She has also taught Hungarian language and culture to students at BYU. Ms.
Davidson has been an executive officer of Libco since July, 1998, and is
currently a student at BYU's J. Reuben Clark Law School.
Significant Employees.
- ----------------------
R & R Ranching does not employ any non-officers who are expected
to make a significant contribution to its business. However, on December 1,
1998, R & R Ranching entered into the management agreement with Blue Sky,
under which Blue Sky is to provide range, feed, care and management of R & R
Ranching's bison. Management expects that Blue Sky and W. Malcolm C. Davidson
will have a significant effect on R & R Ranching's business. Mr. Davidson has
significant experience in the bison industry and is the father of R & R
Ranching's President, William R. Davidson. R & R Ranching expects that Mr.
Davidson will consult with R & R Ranching informally to help it during the
start-up phase of operations. See "Certain Relationships and Related
Transactions" and "Description of Business."
Family Relationships.
- ---------------------
William R. Davidson and Allyson R. N. Davidson are husband and wife.
W. Malcolm C. Davidson, Blue Sky's President, director and controlling
stockholder, is William R. Davidson's father and Allyson R. N. Davidson's
father-in-law.
Involvement in Certain Legal Proceedings.
- -----------------------------------------
During the past five years, no present or former director, executive
officer or person nominated to become a director or an executive officer of
R & R Ranching:
(1) was a general partner or executive officer of any business
against which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
16
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended or vacated.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Security Ownership of Certain Beneficial Owners.
- ------------------------------------------------
The following table sets forth the shareholdings of William R.
Davidson, R & R Ranching's only stockholder, as of May 24, 1999. Mr. Davidson
has sole investment and sole voting power over the shares indicated.
<TABLE>
<CAPTION>
Number Percentage
Name and Address of Shares Beneficially Owned of Class
- ---------------- ---------------------------- --------
<S> <C> <C>
William R. Davidson 1,000,000* 100%
1310 East 1600 South
Mapleton, Utah 84664
-------- -----
TOTALS 1,000,000* 100%
</TABLE>
* This amount takes into account the forward split of R & R
Ranching's outstanding shares in the ratio of two for one, which became
effective as of March 3, 1999.
Security Ownership of Management.
- ---------------------------------
The following table sets forth the shareholdings of R & R Ranching's
directors and executive officers as of May 24, 1999. Each of these
persons has sole investment and sole voting power over the shares indicated.
<TABLE>
<CAPTION>
17
Number Percentage
Name and Address of Shares Beneficially Owned of Class
- ---------------- ---------------------------- ----------
<S> <C> <C>
William R. Davidson 1,000,000(1) 100%
1310 East 1600 South
Mapleton, Utah 84664
Allyson R. N. Davidson (2) -0- -0-
1310 East 1600 South
Mapleton, Utah 84664
-------- -----
All directors and executive
officers as a group
(2 persons) 1,000,000(1) 100%
</TABLE>
(1) This figure takes into account the forward split of R & R
Ranching's outstanding shares in the ratio of two for one, which became
effective as of March 3, 1999.
(2) Ms. Davidson may also be considered to beneficially own Mr.
Davidson's shares.
See the caption "Directors, Executive Officers, Promoters and
Control Persons," of this Prospectus, for information about the offices or
other capacities in which William R. Davidson and Allyson R. N. Davidson serve
with R & R Ranching.
Changes in Control.
- -------------------
There are no present arrangements or pledges of R & R Ranching's
securities which may result in a change in control of R & R Ranching.
DESCRIPTION OF SECURITIES
-------------------------
Common Stock
- ------------
R & R Ranching has the authority to issue 50,000,000 shares of one
mill ($0.001) par value common voting stock. The holders of R & R Ranching's
common stock are entitled to one vote per share on each matter submitted to a
vote at a meeting of stockholders. The shares of common stock do not carry
cumulative voting rights in the election of directors.
Stockholders of R & R Ranching have no pre-emptive rights to
acquire additional shares of common stock or other securities. The common
stock is not subject to redemption rights and carries no subscription or
conversion rights. In the event of liquidation of R & R Ranching, the shares
of common stock are entitled to share equally in corporate assets after
18
satisfaction of all liabilities. All shares of the common stock now
outstanding are fully paid and non-assessable.
R & R Ranching's Bylaws authorize the Board of Directors to vote
to declare dividends from surplus profits whenever they believe it to be
expedient.
The common stock holders are not personally liable for the payment
of R & R Ranching's debts.
Preferred Stock
- ---------------
R & R Ranching is also authorized to issue 10,000,000 shares of
preferred stock, with a par value of one mill ($0.001) per share. The
preferred stock may be issued in series, with such values, rights and
preferences as the Board of Directors shall determine. R & R Ranching has not
designated the value, rights or preferences of the preferred stock, and no
such shares are issued or outstanding as of the date of this Prospectus.
On August 10, 1998, R & R Ranching's Board of Directors and its
sole stockholder voted to adopt a 1998 Stock Option Plan, in which it reserved
1,000,000 shares of common stock for issuance to officers, key employees,
directors, consultants, advisors and sales representatives who meet certain
performance goals to be established by the Board or R & R Ranching's Stock
Option Committee. The Board of Directors has not designated the members of
the Committee and no options or shares of common stock have been awarded under
the 1998 Plan as of the date of this prospectus. There are no outstanding
options, warrants or calls to purchase any of R & R Ranching's authorized
securities.
There is no provision in R & R Ranching's Articles of
Incorporation or Bylaws that would delay, defer, or prevent a change in
control of R & R Ranching.
Units
- -----
R & R Ranching is offering 100,000 Units. Each Unit is comprised
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.
Each warrant is exercisable for five years, and R & R Ranching has
an option to call the warrants and redeem them at a price of $0.01 per warrant
on 30 days' notice. R & R Ranching can call the warrants at any time after
they are issued and before they expire.
19
Due to the lack of any public market for R & R Ranching's common
stock, it will most likely not make economic sense for warrant holders to
exercise their warrants immediately upon issuance. See the Risk Factor
"Exercisability of Warrants" and the heading "Warrant Exercise Procedures" of
the caption "Plan of Distribution."
From the date of call specified in the notice (unless R & R
Ranching defaults in paying for the warrants being redeemed), all rights of
the warrant holder as a warrant holder of R & R Ranching shall cease, except
for the right to receive the price of $0.01 per warrant, without interest; the
warrant being redeemed shall no longer be treated as outstanding.
INTEREST OF NAMED EXPERTS AND COUNSEL
-------------------------------------
The financial statements of R & R Ranching as of October 31, 1998,
have been included herein in reliance on the report of Pritchett, Siler &
Hardy, P.C., independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
R & R Ranching has not hired any expert or counsel on a contingent
basis. No expert or counsel will receive a direct or indirect interest in R &
R Ranching, and no such person was a promoter, underwriter, voting trustee,
director, officer or employee of R & R Ranching.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
-----------
Neither R & R Ranching's Articles of Incorporation nor its Bylaws
specifically provide for indemnification of directors, officers or controlling
persons against liability under the 1933 Act. However, Article X of the
Articles of Incorporation provides for:
elimination of directors' liability for breach of fiduciary
duty to R & R Ranching;
Company indemnification of any corporate agent in connection
with matters in which the agent acted in good faith and, in
criminal matters, in which he or she had no reason to
believe the conduct was unlawful;
no indemnification when the agent is adjudged liable for
gross negligence or wilful misconduct;
mandatory indemnification by R & R Ranching for costs and
expenses when the agent has been successful on the merits of
the case;
R & R Ranching to advance the agent's costs upon receipt of
the agent's undertaking to repay all amounts paid if he or
she is not entitled to indemnification; and
20
R & R Ranching to purchase liability insurance for agents,
at its discretion.
Article VIII of R & R Ranching's Bylaws provides for mandatory
indemnification by R & R Ranching of expenses incurred by directors, executive
officers and employees in cases in which they are not found liable for
negligence or misconduct.
This is only a summary of the indemnification provisions of R & R
Ranching's Articles of Incorporation and Bylaws. You are urged to review each
of these documents for the actual text of their indemnification provisions.
See the Exhibit Index.
Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers and controlling persons of R & R
Ranching pursuant to the foregoing provisions, or otherwise, R & R Ranching
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
DESCRIPTION OF BUSINESS
-----------------------
GENERAL
R & R Ranching is a Nevada corporation organized for the purpose
of breeding and raising bison. It is conducting this offering to raise
funding to pay off the Libco loan and to commence ranching operations in
Alberta, Canada.
On October 5, 1998, R & R Ranching executed the Purchase Agreement
under which it agreed to purchase from Diving Buffalo 20 mature bison cows at
a price of $84,000 ($4,200 per head). In order to complete the purchase and
begin operations without waiting for the proceeds from this offering, Libco
loaned $70,000 to R & R Ranching. The loan is evidenced by an unsecured
Promissory Note dated January 19, 1999. The note is for a term of one year
and bears an interest rate of 10% per year. R & R Ranching may call the note
at its option 30 days after the effective date of the Registration Statement
on Form SB-2 of which this prospectus is a part. Libco also has the option to
convert the outstanding principal and interest on the note into "unregistered"
and "restricted" shares of R & R Ranching's common stock at a conversion price
of $1.00 per share.
On December 1, 1998, R & R Ranching and Blue Sky entered into the
management agreement, under which Blue Sky agreed to provide bison management
services for R & R Ranching's bison for a period of one year, beginning
January 1, 1999. The management agreement provides for Blue Sky to provide
grazing lands; winter feed, hay, straw, grains, minerals and water; veterinary
care; handling facilities and handling labor; identification tagging and
records management; and herd bulls for breeding. Blue Sky also agreed to
market R & R Ranching's yearly calf crop at Blue Sky's expense and to assist
in marketing, selling and transporting its breeding stock at R & R Ranching's
expense. R & R Ranching is required to pay a management fee of $500
(Canadian) (approximately US$ 335) per month, with Blue Sky to have a lien on
21
R & R Ranching's bison for payment of such fees. In addition, R & R Ranching
will pay to Blue Sky one-fourth (1/4) of the proceeds from the sale of R & R
Ranching's bulls and heifers in 1999. R & R Ranching will be liable for
boarding fees over the remaining term of the management agreement at a rate of
$1200 (Canadian) (approximately US$ 804) per bison per year if the management
agreement is prematurely terminated.
PRINCIPAL PRODUCTS OR SERVICES AND THEIR MARKETS
Bison, or American Plains Buffalo, are native to the American and
Canadian plains. Although they were slaughtered near the point of extinction
in the late 19th century, recent estimates have suggested that there are now
approximately 150,000 bison in the United States and Canada.
The principal market for bison is as meat, but the heads, bones
and hides are also sold to novelty shops and to individual buyers. Animals
are also sold for organized bison hunts and to public game reserves and zoos.
Bulls and heifers are also sold to other producers as breeding stock.
About 7,500,000 pounds of meat from approximately 15,000 bison are
sold in the United States each year. The Meat and Poultry Inspection
Directory of the U.S. Department of Agriculture lists about 100 bison-
processing facilities in the United States.
Bison meat has a low fat content (less than 3%) and a cholesterol
content that is lower than beef, chicken or pork.
Nutrient Composition
(per 100 grams of cooked lean meat)(1)
-----------------------------------
Fat Calories Cholesterol
Species (Grams) (Kcal) (Mg.)
------- ------- ------ -----
Bison 2.42 143 82
Beef 9.3 211 86
Chicken 7.41 190 89
(Skinless)
(1) Source: USDA Handbook.
Many people believe bison to have a richer flavor than beef. It
is prepared much the same as beef, without special handling. It also has a
high proportion of protein, minerals and fatty acids in relation to its
caloric value. Unlike beef, bison spend very little time in the feedlot and
are not generally subjected to drugs, chemicals or hormones. For all these
reasons, bison is often considered a superior alternative to beef.
Bison meat is available in the form of steaks, patties, rib roast,
short rib, sausage and jerkey. Principal markets include wholesalers,
22
restaurants, custom meat stores and mail-order or on-the-farm sales to the
general public.
The commercial bison market is very young. At present, the demand
for breeding stock is high, and it is expected to remain high as producers
attempt to increase the size of the American and Canadian herds. Because
females are currently more valuable as breeding stock than as meat, R & R
Ranching expects that its herd will be used for breeding. Unless a
substantial market for buffalo meat develops, the market for breeding stock
will likely follow the same downward pattern as it has in the ostrich
industry. See the Risk Factor "Market Acceptance of Product Line."
The bison breeding season begins in August and continues into
October, with calving season running from May to July. Cows can begin
breeding at age two and can reproduce every year up to age 15 and every other
year to age 25. Bulls can also begin breeding at two years of age.
Although they are generally disease resistant, bison are closely
related to cattle and are subject to may of the same diseases. Brucellosis is
a contagious disease of cattle and buffalo that can cause spontaneous
abortion. R & R Ranching will be required to test its Canadian herd for
tuberculosis and brucellosis. If either disease is found, the infected
animals will have to be culled, which could have an adverse effect on R & R
Ranching's profitability.
DISTRIBUTION METHODS OF THE PRODUCTS OR SERVICES
Bison products have historically been sold directly to interested
buyers who visit the ranch or in specialty markets such as health food stores
and gourmet stores. Several U.S. producers have also established successful
mail order markets. Bison pelts, heads and skulls are typically marketed
through Western-themed retailers or directly by the producer.
Breeding stock is generally marketed to other bison producers in
bison-related publications such as the Western Livestock Journal and
BisonWorld,
the official publication of the National Bison Association. Local
newspapers and agricultural publications are also common marketing methods.
In addition, state and national bison associations often have booths and
provide marketing information at agricultural events.
Under the management agreement, Blue Sky has agreed to assist in
marketing, selling and transporting R & R Ranching's breeding stock at R & R
Ranching's expense, and to market and sell R & R Ranching's yearly calf crop
at Blue Sky's expense. "Breeding stock" refers to bison that are used to
increase the size and quality of the herd through breeding. The yearly calf
crop is the product of the breeding stock, and may itself be used as meat or
as breeding stock.
Blue Sky is active in the buying and selling of bison. It has
arranged to sell R & R Ranching's products to several of its bison industry
contacts for up to the next five years. However, Blue Sky does not have any
binding sales contract with any of these entities, and it can not guarantee
that it will be able to sell R & R Ranching's yearly calf crops through this
channel.
23
A representative of Diving Buffalo has also verbally told R & R
Ranching's President that Diving Buffalo will assist R & R Ranching in selling
its bison at R & R Ranching's request. However, Diving Buffalo is not
contractually committed to give R & R Ranching any marketing assistance.
R & R Ranching has no plans to advertise its products in the
foreseeable future. William R. Davidson intends to become active in national
and local bison associations in order to develop the networking contacts
necessary to market the products. There can be no assurance that R & R
Ranching will be able to successfully produce or market enough animals to make
its operations profitable.
COMPETITIVE BUSINESS CONDITIONS
The bison industry is diffuse; this is the case with most
agricultural industries. The NBA estimates that in 1998, approximately
250,000 head were being raised by over 2,200 producers in the United States
and Canada. Bison producers range in size from hobby farmers who maintain a
few animals as a side interest or tourist attraction to large producers owning
several hundred to several thousand bison.
R & R Ranching will begin operations with a herd of only 20 mature
cows. Because of the large number of producers in North America, many of
which will have substantially larger herds and facilities, management expects
that its operations will be a very small part of the overall bison industry.
R & R Ranching hopes to develop a reputation as a breeder of high quality
stock, which it believes will enhance its competitive position in the
industry. However, even if its operations are successful, R & R Ranching will
almost certainly remain a small player.
R & R Ranching's most significant competition will come from Adam
Ranch in northern Alberta, and Tatonka Ranch in Saskatchewan. These are the
two largest Canadian bison ranches. Each has more than 1000 cows.
The principal market for bison cows is as breeding stock. As
additional producers enter the market and begin breeding operations, supply
will almost certainly increase, making R & R Ranching's role in the bison
industry even less significant. In addition, overproduction of bison cows may
result in lower market prices for R & R Ranching's products, which would
reduce its profitability.
SOURCES AND AVAILABILITY OF RAW MATERIALS
Feed is the largest operating cost of a bison operation. In
Alberta, Canada, pasture grazing is generally sufficient for nine months of
the year. In the winter months, hay must often be used to supplement the
herd's diet. Cows will eat 15 to 25 pounds of hay per day, with weaned calves
and bulls consuming 10 pounds and 20 to 30 pounds per day, respectively. Hay
in Alberta is plentiful but, as with all agricultural crops, is subject to
significant price fluctuations.
Oats are used to supplement hay and to flush bison cows during
breeding time (to ensure a high conception rate). Other raw materials used in
the bison industry include salt and minerals, water, deworming medication,
24
antibiotics, and miscellaneous items required to repair fences, vehicles and
handling facilities. Management believes that each of these materials will be
available in sufficient quantities. Blue Sky will provide feed for R & R
Ranching's bison during the one-year term of the management agreement. R & R
Ranching has budgeted $2,520 for feed costs in the second year of operations.
See "Use of Proceeds."
Once R & R Ranching identifies a suitable property for its own
bison facility, it will be responsible for providing all of the raw materials
necessary to maintain its herd.
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS
Management believes that the pool of potential purchasers of its
breeding stock is large because of the diffuse nature of the bison production
industry. Bison can be shipped over long distances, so the market for R & R
Ranching's animals will not necessarily be limited to Alberta.
R & R Ranching may also make a portion of its herd available for
slaughter, although it will focus primarily on the production of breeding
stock. Prudent herd management requires the frequent culling of less
desirable breeding stock; R & R Ranching believes that demand for bison meat
is high enough to absorb the supply of culled animals. There is a
slaughterhouse approximately two to three hours from Blue Sky's ranch in
Alberta, Canada. This slaughterhouse is devoted exclusively to the slaughter
of bison. Management believes that this facility has enough capacity to all
bison that R & R Ranching sends to slaughter, whether directly or through
third party purchasers.
NEED FOR GOVERNMENTAL APPROVAL OF PRINCIPAL PRODUCTS OR SERVICES
The Canadian Health of Animals Branch of Agriculture and Agri-food
Canada requires all stock to be certified free of tuberculosis and
brucellosis. This involves compulsory testing for all captive bison two years
old and older. Under the management agreement, Blue Sky will handle all
veterinary care for R & R Ranching's herd.
The U. S. Department of Agriculture does not currently require
inspection of bison meat. However, because consumers believe that USDA
inspection provides an assurance of quality, many bison producers have decided
to seek USDA approval of their products voluntarily. This requires the
producer to arrange for slaughter and processing of its animals at a packing
house that the USDA has designated as an "Official Bison Establishment."
Bison that are slaughtered at an Official Bison Establishment may be branded
with a USDA inspection brand.
R & R Ranching plans to raise its bison in Canada and to focus on
the production of bison for breeding. Therefore, management does not believe
that obtaining USDA approval of its animals will be necessary.
EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS ON THE BUSINESS
Veterinary care is one of Blue Sky's management responsibilities
under the management agreement, and compliance with the Canadian disease-
25
certification regulations will be included. If and when R & R Ranching moves
its operations to its own facilities, it will take over testing
responsibilities. If any of R & R Ranching's animals are found to be infected
with tuberculosis or brucellosis, they will have to be destroyed. Large-scale
infections will require the destruction of a large portion of R & R Ranching's
herd and may have a serious negative effect on its operations and
profitability.
RESEARCH AND DEVELOPMENT
R & R Ranching does not expect that research and development will
be a significant part of its operations, other than using well-established
selective breeding techniques to ensure the quality of its herd.
COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
Management does not believe that compliance with environmental
laws will require a significant portion of its resources.
NUMBER OF EMPLOYEES
Management of R & R Ranching's herd will be the responsibility of
Blue Sky, and will be handled through its own employees until December 21,
1999. R & R Ranching will become responsible for herd management if it is
able to identify a suitable location for its own facility. R & R Ranching
expects that these duties will be delegated to experienced, competent
contractors. R & R Ranching's executive officers will manage its operations
on a part-time basis and will not receive any salary or wages for the
foreseeable future. Directors and executive officers will be compensated for
travel and out-of-pocket expenditures.
REPORTS TO SECURITY HOLDERS
R & R Ranching is not a reporting issuer under the 1934 Act. As a
result of this offering, R & R Ranching will become subject to the
informational requirements of the 1934 Act for a period of at least one fiscal
year. As of the fiscal year ending October 31, 1999 R & R Ranching having
amended its Bylaws on March 30, 1999, to change its fiscal year from December
31 to October 31), R & R Ranching may be required to register the common stock
being offered hereunder, under the 1934 Act, and continue to file annual and
quarterly reports.
The National Association of Securities Dealers, Inc. requires that
all issuers maintaining quotations of their securities on the OTC Bulletin
Board file periodic reports under the 1934 Act. In order to maintain such a
quotation, R & R Ranching will have to register its securities under the 1934
Act on Form 8-A or Form 10-SB.
The public may read and copy any materials that R & R Ranching
files with the Commission at the Commission's Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information
on the operation of the Public Reference Room by calling the Commission at 1-
800-SEC-0330. The Commission maintains an Internet site that contains
reports, proxy and information statements and other information regarding
26
issuers that file electronically with the Commission. The address of that
site is http://www.sec.gov.
R & R Ranching intends to furnish to its stockholders annual
reports containing financial statements audited and reported upon by its
independent accounting firm, and such other periodic reports as it may
determine to be appropriate or as may be required by law.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
R & R Ranching's plan of operation for the next 12 months is to
begin its bison operation under the management agreement with Blue Sky. The
Purchase Agreement provides for each of the purchased cows to have been bred
with a bull, but does not guarantee pregnancy. As of May 17, 1999, 16 of R &
R Ranching's 20 cows have delivered calves. None of these calves have been
lost. Management expects the remaining four cows to deliver calves by the end
of May, 1999. However, many factors can influence the breeding process and R
& R Ranching can not guarantee that it will have that many calves. Revenue
from calf sales will also be reduced if the crop is reduced.
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 R & R Ranching 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 R & R Ranching'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 R & R Ranching 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 R & R
Ranching 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 the Purchase Agreement 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 R & R Ranching will not require breeding bulls of its own until
it moves its operations to its own location as discussed below. Once this
occurs, R & R Ranching will keep about one bull for every 10 cows, to be bred
27
for two years. R & R Ranching 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. R & R Ranching 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. R & R Ranching will tag (for
identification purposes), vaccinate and sell its calves during the weaning
period.
R & R Ranching will pay Blue Sky $500 (Canadian) (approximately
$US 335) 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, R & R Ranching expects annual costs of
operation in 1999 to equal approximately $5,500. This figure does not include
the initial $84,000 purchase price for R & R Ranching'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, R & R Ranching 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, R & R Ranching's
profitability could decrease significantly.
R & R Ranching has allocated approximately $9,800 of the net
proceeds of this offering to the leasing and fencing of a suitable bison
property for R & R Ranching's own use. See "Use of Proceeds."
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 R & R Ranching to
lease one quarter.
28
If R & R Ranching 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. R & R Ranching 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 R & R Ranching'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 R & R Ranching may have to purchase
handling facilities of its own. These facilities typically cost from $2,000
to $2,500. R & R Ranching has not allocated any of the proceeds from this
offering to the acquisition of handling facilities. R & R Ranching 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. R & R
Ranching 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 $12 (Canadian) (approximately US$
6.70 to US$ 8.04) per hour. R & R Ranching believes that the labor pool in
Alberta is large enough that it will not have difficulty finding a suitable
worker.
Year 2000
- ---------
R & R Ranching'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 Company'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.
R & R Ranching 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 R & R Ranching. However, R & R Ranching 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.
DESCRIPTION OF PROPERTY
-----------------------
R & R Ranching does not currently own any property. Its executive
office is the office of William R. Davidson, its President, and is provided
rent free. The office consists of approximately 1200 square feet located in
an office building in Springville, Utah. During the next 12 months, R & R
Ranching plans to identify, lease and fence a pasture and feeding facility in
Alberta, Canada. Management is seeking a property of approximately 160 acres
for this purpose. R & R Ranching has not yet identified a suitable location
and there is no guarantee that it will be able to do so or that, if it does,
it will be able to obtain a lease on satisfactory terms.
29
The management agreement with Blue Sky is renewable for monthly
periods beyond the initial 12-month term. If R & R Ranching does not identify
a suitable facility of its own during this period, management expects that it
will renew its management agreement for successive one-month periods until it
is able to move its herd to a new location.
Blue Sky has subcontracted with Diving Buffalo to provide the
services that Blue Sky is required to provide to R & R Ranching under the
management agreement. Diving Buffalo is housing R & R Ranching's bison herd
at its ranch in Harlowton, Montana. There is no agreement between R & R
Ranching and Diving Buffalo in this regard and all obligations of R & R
Ranching and Blue Sky under the management agreement remain unchanged.
Diving Buffalo's property consists of approximately 640 acres and
has sufficient working corrals and handling facilities for vaccination and
truck loading of bison.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
On December 1, 1998, R & R Ranching and Blue Sky entered into the
management agreement, which provides for Blue Sky to manage R & R Ranching's
herd of bison for a period of one year, beginning January 1, 1999. Blue Sky's
management services will include:
providing grazing lands;
winter feed, hay, straw, grains, minerals and water;
veterinary care;
handling facilities and labor;
identification tagging and records management;
providing herd bulls for breeding;
marketing R & R Ranching's yearly calf crop; and
assisting with the marketing, selling and transportation of
R & R Ranching's breeding stock.
The management agreement provides for a monthly payment of $500
(Canadian) for Blue Sky's management services. At the current exchange rate
of approximately US$ 0.67 per Canadian dollar, the monthly and annual
management fees are approximately US$ 335 and US$ 4,020, respectively. If the
management agreement is terminated early, R & R Ranching will be liable for
boarding fees for the remainder of the term at the rate of $1,200 (Canadian)
(approximately US$ 804) per bison per year. For a more complete description
of the management agreement, see "Description of Business."
W. Malcolm C. Davidson, Blue Sky's President, director and
controlling stockholder, is the father of William R. Davidson, R & R
Ranching's President, and is the father-in-law of Allyson R. N. Davidson, its
30
Secretary/Treasurer. W. Malcolm C. Davidson has significant experience in the
bison industry and will be available for informal consultation with R & R
Ranching as needed. Mr. Davidson will not charge R & R Ranching for
consultation that is outside the scope of the management agreement.
William R. Davidson is the President, a director and the sole
stockholder of Libco; Allyson R. N. Davidson, R & R Ranching's
Secretary/Treasurer, is also an executive officer of Libco. W. Malcolm C.
Davidson is a director of Libco. Approximately $73,169.44 (67%) of the net
proceeds of this offering will be used to pay the Libco loan.
R & R Ranching has no parents, except to the extent that William
R. Davidson may be deemed to be its parent due to his ownership of 100% of the
outstanding shares of common stock. Mr. Davidson paid $25,000 to R & R
Ranching for 1,000,000 post-split shares of R & R Ranching at inception. R &
R Ranching used approximately $14,000 of these proceeds as part of the $84,000
purchase price of its bison herd. The remaining $11,000 are in R & R
Ranching's bank account.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
Market Information.
- -------------------
There has never been any "public market" for shares of
common stock of R & R Ranching. R & R Ranching intends to submit for listing
on the OTC Bulletin Board of the NASD, once it registers its securities to
become subject to the reporting requirements of the 1934 Act. However, it can
provide no assurance that it will meet the reporting requirements or that any
market for R & R Ranching's common stock will develop or be maintained.
If a public market ever develops in the future, the sale of
"unregistered" and "restricted" shares of common stock pursuant to Rule 144 of
the Commission by members of management may have a substantial negative impact
on any such public market. William R. Davidson would be able to sell up to
11,000 of his 1,000,000 "unregistered" and "restricted" shares in any three
month period, beginning as early as August, 1999. See the Risk Factor "Sale
of 'Restricted' Securities."
R & R Ranching will have to file quarterly and annual reports with
the Commission in order to have its securities quoted on the OTC Bulletin
Board. These reports must contain financial statements, with year-end
financial statements being audited. Management expects that the legal and
accounting fees required to prepare and file its periodic reports will total
approximately $10,000 per year.
There are no outstanding options, warrants or calls to purchase
any of the authorized securities of R & R Ranching. However, R & R Ranching
has adopted a 1998 Stock Option Plan and has reserved 1,000,000 shares of
common stock under that Plan. The issuance of any of these shares under the
Plan may dilute the holdings of purchasers under this offering.
The 1,000,000 "unregistered" and "restricted" post-split shares of
31
common stock owned by William R. Davidson are the only securities that R & R
Ranching has issued since its inception. Future sales of any of these shares,
or any shares issued under the 1998 Stock Option Plan or otherwise may
decrease the value of R & R Ranching's common stock in any "public market"
that may develop for the common stock. See "Security Ownership of Certain
Beneficial Owners and Management."
Holders.
- --------
William R. Davidson is the only record holder of R & R Ranching's
common stock as of the date of this Prospectus. No shares of its preferred
stock are outstanding.
Dividends.
- ----------
R & R Ranching has not declared any cash dividends with respect to
its common stock or its preferred stock, and does not intend to declare
dividends in the foreseeable future. There are no material restrictions
limiting, or that are likely to limit, R & R Ranching's ability to pay
dividends on its securities.
EXECUTIVE COMPENSATION
----------------------
R & R Ranching has adopted a 1998 Stock Option Plan providing for
the issuance of up to 1,000,000 "unregistered" and "restricted" shares of
common stock to key employees, directors, executive officers, consultants and
advisors. The 1998 Plan is administered by a Committee that has full
authority to award stock and options thereunder. The Committee has not
awarded any stock or options under the 1998 Plan and there are no current
plans to make any such award. If the Committee decides to award stock or
options under the 1998 Plan, the holdings of purchasers under this offering
would be diluted. In addition, the sale of "unregistered" and "restricted"
stock that is awarded under the 1998 Plan may have a negative effect on any
market price for R & R Ranching's common stock. See the Risk Factor "Sale of
'Restricted' Securities" and the Exhibit Index.
There are no employment agreements between R & R Ranching and any
member of management. R & R Ranching does not expect to enter into any such
agreement until it has successfully established its operations. R & R
Ranching can not guarantee that its operations will be successful. Other than
reimbursement of out-of-pocket expenses and the potential issuance of
securities under the 1998 Plan, R & R Ranching has no compensation
arrangements with its directors and executive officers. Neither of its
executive officers receives any salary or wages for services rendered to R & R
Ranching.
32
FINANCIAL STATEMENTS
--------------------
33
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
FINANCIAL STATEMENTS
OCTOBER 31, 1998
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
[Letterhead of Pritchett, Siler & Hardy, P.C.]
INDEPENDENT AUDITORS' REPORT
Board of Directors
R & R RANCHING, INC.
Springville, Utah
We have audited the Balance Sheet of R & R Ranching, Inc. [a development stage
company] as of October 31, 1998, and the related statement of operations,
stockholders' equity and cash flows from inception on August 3, 1998 through
October 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of R & R Ranching, Inc. as of
October 31, 1998, and the results of their operations and their cash flows for
the period from inception through October 31, 1998, in conformity with
generally accepted accounting principles.
The financial statements referred to above have been prepared assuming the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company is newly formed and has not yet established
profitable operations, raising substantial doubt about the Company's ability
to continue as a going concern. Management=s plans in regards to these
matters are also described in Note 4. The financial statements do not include
any adjustments that might result from the outcome of these uncertainties.
/s/ Pritchett, Siler & Hardy, P.C.
November 10, 1998
Salt Lake City, Utah
34
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
October 31,
1998
______
<S> <C>
CURRENT ASSETS:
Cash in bank $ 20,782
Total Current Assets 20,782
ORGANIZATION COSTS, net 475
______
$ 21,257
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 955
Accounts payable B related party 500
Total Current Liabilities 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
Capital in excess of par value 24,000
Deficit accumulated during the
development stage (1,002)
23,998
Less: Stock subscription receivable (4,196)
Total Stockholders' Equity 19,802
$ 21,257
</TABLE>
The accompanying notes are an integral part of this financial statement.
35
<PAGE>
<TABLE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENT OF OPERATIONS
<CAPTION>
From Inception
on August 3,
1998 Through
October 31, 1998
<S> <C>
REVENUE $ -
EXPENSES:
General & Administrative 1,002
LOSS BEFORE INCOME TAXES (1,002)
CURRENT TAX EXPENSE -
DEFERRED TAX EXPENSE -
NET LOSS $ (1,002)
LOSS PER COMMON SHARE $ (.00)
</TABLE>
The accompanying notes are an integral part of this financial statement.
36
<PAGE>
<TABLE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON AUGUST 3, 1998
THROUGH OCTOBER 31, 1998
[Restated]
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Capital in During the
______ _______ Excess of Development
Shares Amount Shares Amount Par Value Stage
------ ------ ------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
August 3, 1998 - $ - - $ - $ - $ -
Issuance of 1,000,000
shares of common stock
at $.025 per share for
Cash proceeds of
$20,804 and a
Subscription receivable
of $4,196. - - 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)
</TABLE>
The accompanying notes are an integral part of this financial statement.
37
<PAGE>
<TABLE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<CAPTION>
From Inception
on August 3,
1998 Through
October 31, 1998
<S> <C>
Cash Flows from Operating Activities:
Net loss $ (1,002)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 25
Changes in assets and liabilities:
Increase in accounts payable 955
________________
Net Cash (Used) by Operating Activities (22)
Cash Flows from Investing Activities:
Payment of organization costs -
Net Cash (Used) in Investing Activities -
________________
Cash Flows from Financing Activities:
Proceeds from common stock issuance 20,804
Net Cash Provided by Financing Activities 20,804
Net Increase in Cash and Cash Equivalents 20,782
Cash at Beginning of Period -
Cash at End of Period $ 20,782
Supplemental Disclosures of Cash Flow information:
Cash paid during the period for:
Interest $ -
Income taxes $ -
</TABLE>
Supplemental schedule of Noncash Investing and Financing Activities:
For the period ended October 31, 1998:
Stock Subscriptions Receivable increased by $4,196
for common stock which was issued for a receivable.
A shareholder of the Company advanced $500 in
payment of organization costs.
The accompanying notes are an integral part of this financial statement.
38
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - R & R Ranching, Inc. 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.
Organization Costs - The Company is amortizing its organization costs,
which reflect amounts expended to organize the Company, over sixty [60]
months using the straight line method. Amortization expense was $25 for
the period ended October 31, 1998.
Loss Per Share - The Company accounts for loss per share in accordance
with Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings
Per Share". This 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 5].
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.
39
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income", SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information",
SFAS No. 132, "Employer's Disclosure about Pensions and Other Postretirement
Benefits", SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", and SFAS No. 134, "Accounting for Mortgage-Backed Securities.."
were recently issued. These accounting standards have no current
applicability to the Company or their effect on the financial statements would
not have been significant.
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.
Restatement of Financial Statements - The financial statements have been
restated for all periods presented to reflect a forward common stock split on
the basis of two shares issued for each one share previously outstanding.
The reverse stock split was effected during March, 1999.
NOTE 2 - RELATED PARTY TRANSACTIONS
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 3 - 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 October 31, 1998.
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 Company is proposing to issue up to 100,000 additional shares of
common stock and related warrants in a public offering [See Note 7].
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,
40
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 October 31, 1998, no awards have been granted under the
plan.
NOTE 4 - 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.
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
additional 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.
NOTE 5 - 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 October 31, 1998, the Company
has available unused operating loss carryforwards of approximately $1,000,
which may be applied against future taxable income and which expire in 2013.
The amount of and ultimate realization of the benefits from the operating
loss carryforwards 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 carryforwards 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 $340 as
of January 31, 1999, with an offsetting valuation allowance of the same amount
resulting in a change in the valuation allowance of approximately $340 during
the period ended October 31, 1998.
NOTE 6 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share and
the effect on income and the weighted average number of shares for the period
ended October 31, 1998:
For The
Period Ended
October 31,
1998
41
Loss from continuing operations applicable to
common stock $(1,002)
Loss available to common stockholders used in
calculating loss per share $(1,002)
Weighted average number of common shares
outstanding during the period used to calculate
loss per share 1,000,000
____________
NOTE 7 - SUBSEQUENT EVENTS
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.
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 plans to file
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.
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
42
related party accounts payable in the amount of $335 for services rendered
during January 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.
Purchase of Bison Inventory - During January, 1999 the Company acquired
20 mature bison cows at a cost of $84,000. The company plans to breed and
market bison.
43
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
BALANCE SHEET
[ Unaudited ]
ASSETS
January 31,
1999
___________
CURRENT ASSETS:
Cash in bank $ 10,959
Inventory - Bison 84,000
___________
Total Current Assets 94,959
ORGANIZATION COSTS, net 450
___________
$ 95,409
___________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 955
Accounts payable - related party 836
Interest payable - related party 250
Notes payable - related party 70,000
___________
Total Current Liabilities 72,041
___________
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
Capital in excess of par value 24,000
Deficit accumulated during the
development stage (1,632)
___________
Total Stockholders' Equity 23,368
___________
$ 95,409
___________
The accompanying notes are an integral part of this financial statement.
-1- [44]
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
[ Unaudited ]
From Inception
For the Three on August 3,
Months Ended 1998 Through
January 31, 1999 January 31, 1999
________________ __________________
REVENUE $ - $ -
_____________ _____________
EXPENSES:
Bison Operating Expenses 335 335
General & Administrative 45 1,047
Interest Expense 250 250
_____________ _____________
LOSS BEFORE INCOME TAXES (630) (1,632)
CURRENT TAX EXPENSE - -
DEFERRED TAX EXPENSE - -
_____________ _____________
NET LOSS $ (630) $ (1,632)
_____________ _____________
LOSS PER COMMON SHARE $ (.00) $ (.00)
_____________ _____________
The accompanying notes are an integral part of these financial statements.
-2- [45]
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON AUGUST 3, 1998
THROUGH OCTOBER 31, 1998 AND
JANUARY 31, 1999
[ Unaudited ]
Deficit
Preferred Stock Common Stock Capital Accumulated
_______________ __________________ in Excess During the
of Par Development
Shares Amount Shares Amount 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
January 31, 1999 - - - - - (630)
_______ _______ _________ _______ ________ ______________
BALANCE,
January 31, 1999 - $ - 1,000,000 $1,000 $24,000 $(1,632)
_______ _______ _________ _______ ________ ______________
The accompanying notes are an integral part of this financial statement.
-3- [46]
<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 three on August 3,
Months Ended 1998 Through
January 31, 1999 January 31, 1999
_________________ _________________
Cash Flows from Operating Activities:
Net loss $ (630) $ (1,632)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 25 50
Changes in assets and
liabilities:
Increase in bison inventory (84,000) (84,000)
Increase in accounts payable - 955
Increase in accounts payable
- related party 336 336
Increase in interest payable
- related party 250 250
_________________ _________________
Net Cash (Used) by
Operating Activities (84,019) (84,041)
_________________ _________________
Cash Flows from Investing Activities:
Payment of organization costs - -
_________________ _________________
Net Cash (Used) in Investing
Activities - -
_________________ _________________
Cash Flows from Financing Activities:
Proceeds from issuance of note
payable - related party 70,000 70,000
Proceeds from common stock issuance 4,196 25,000
_________________ _________________
Net Cash Provided by
Financing Activities 74,196 95,000
_________________ _________________
Net Increase in Cash and Cash
Equivalents (9,823) 10,959
Cash at Beginning of Period 20,782 -
_________________ _________________
Cash at End of Period $ 10,959 $ 10,959
_________________ _________________
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 January 31, 1999:
The Company received $4,196 in payment of stock subscriptions receivable
which has been reflected as proceeds from sale of common stock.
A shareholder of the Company advanced $500 in payment of organizational
costs.
The accompanying notes are an integral part of these financial statements.
-4- [47]
<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. 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 January 31, 1999 and for all the periods
presented have been made.
Inventory - 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 4].
Organization Costs - The Company is amortizing its organization costs,
which reflect amounts expended to organize the Company, over sixty [60] months
using the straight line method. Amortization expense was $25 for the period
ended January 31, 1999.
Loss Per Share - The Company accounts for loss per share in accordance
with Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings
Per Share". This 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.
Recently Enacted Accounting Standards - Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income", SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information", SFAS No. 132, "Employer's Disclosure about Pensions and
Other Postretirement Benefits", SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", and SFAS No. 134, "Accounting for
Mortgage-Backed Securities." were recently issued. These accounting
standards have no current applicability to the Company or their effect
on the financial statements would not have been significant.
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.
Restatement of Financial Statements - The financial statements have been
restated for all periods presented to reflect a forward common stock split
on the basis of two shares issued for each one share previously
outstanding. The reverse stock split was effected during March, 1999.
-5- [48]
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 2 - 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 $335 for services rendered
during January 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.
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 3 - 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 October 31, 1998.
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
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 January
31, 1999, no awards have been granted under the plan.
-6- [49]
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 4 - BISON INVENTORY
The Company acquired 20 mature bison cows during January, 1999 for
$84,000 ($4,200 per bison). The Company intends to breed and raise bison
which will be marketed as either breeding stock or as a meat product.
The company's bison are being cared for and managed by Blue Sky under
the terms of a management agreement (See Note 2).
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. 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 additional 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.
NOTE 6 - LOSS PER SHARE
The following data show the amounts used in computing loss per share and
the effect on income and the weighted average number of shares for the
periods ended January 31, 1999:
From Inception
For the Three on August 3,
Months Ended 1998 Through
January 31, January 31,
1999 1999
___________ ___________
(Loss) from continuing
operations applicable to
common stock $ (630) $(1,630)
___________ ___________
(Loss) available to
common stockholders used in
earnings (loss) per share $ (630) $(1,630)
___________ ___________
Weighted average number of
common shares outstanding
used in (loss) per share
during the period 1,000,000 1,000,000
___________ ___________
-7- [50]
<PAGE>
R & R RANCHING, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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 January 31, 1999, the
Company has available unused operating loss carryforwards of approximately
$1,600, which may be applied against future taxable income and which expire
in 2013 through 2014.
The amount of and ultimate realization of the benefits from the operating
loss carryforwards 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 carryforwards 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 $500 as of January 31, 1999, with an offsetting
valuation allowance of the same amount resulting in a change in the valuation
allowance of approximately $214 during the three months ended January 31,
1999.
NOTE 8 - SUBSEQUENT EVENTS
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.
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 plans to file 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.
-8- [51]
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
----------
R & R Ranching has not dismissed any principal independent
accountant, and no such accountant has resigned or declined to stand for re-
election, since R & R Ranching's inception in August, 1998.
52
- ------------------------------------------------------------------------------
- -
- -----------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors And Officers
-----------------------------------------
Section 78.7502(1) of the Nevada Revised Statutes authorizes a
Nevada corporation to indemnify any director, officer, employee, or corporate
agent "who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, except an action by or
in the right of the corporation" due to his corporate role. Section 78.7502(1)
extends this protection "against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action, suit or proceeding if he acted
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful."
Section 78.7502(2) of the NRS also authorizes indemnification of
the reasonable defense or settlement expenses of a corporate director,
officer, employee or agent who is sued, or is threatened with a suit, by or in
the right of the corporation. The party must have been acting in good faith
and with the reasonable belief that his actions were not opposed to the
corporation's best interests. Unless the court rules that the party is
reasonably entitled to indemnification, the party seeking indemnification must
not have been found liable to the corporation.
To the extent that a corporate director, officer, employee, or
agent is successful on the merits or otherwise in defending any action or
proceeding referred to in Section 78.7502(1) or 78.7502(2), Section 78.7502(3)
of the NRS requires that he be indemnified "against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection with
the defense."
Section 78.751(1) of the NRS limits indemnification under Sections
78.7502(1) and 78.7502(2) to situations in which either (1) the stockholders,
(2)the majority of a disinterested quorum of directors, or (3) independent
legal counsel determine that indemnification is proper under the
circumstances.
Pursuant to Section 78.751(2) of the NRS, the corporation may
advance an officer's or director's expenses incurred in defending any action
or proceeding upon receipt of an undertaking. Section 78.751(3)(a) provides
that the rights to indemnification and advancement of expenses shall not be
deemed exclusive of any other rights under any bylaw, agreement, stockholder
vote or vote of disinterested directors. Section 78.751(3)(b) extends the
rights to indemnification and advancement of expenses to former directors,
officers, employees and agents, as well as their heirs, executors, and
administrators.
Regardless of whether a director, officer, employee or agent has
the right to indemnity, Section 78.752 allows the corporation to purchase and
maintain insurance on his behalf against liability resulting from his
corporate role.
Neither R & R Ranching's Articles of Incorporation nor its Bylaws
specifically provide for indemnification of directors, officers or controlling
persons against liability under the 1933 Act. However, Article X of the
Articles of Incorporation provides for:
elimination of directors' liability for breach of fiduciary
duty to R & R Ranching;
Company indemnification of any corporate agent in connection
with matters in which the agent acted in good faith and, in
criminal matters, in which he or she had no reason to
believe the conduct was unlawful;
no indemnification when the agent is adjudged liable for
gross negligence or wilful misconduct;
mandatory indemnification by R & R Ranching for costs and
expenses when the agent has been successful on the merits of
the case;
R & R Ranching to advance the agent's costs upon receipt of
the agent's undertaking to repay all amounts paid if he or
she is not entitled to indemnification; and
R & R Ranching to purchase liability insurance for agents,
at its discretion.
Article VIII of R & R Ranching's Bylaws provides for mandatory
indemnification by R & R Ranching of expenses incurred by directors, executive
officers and employees in cases in which they are not found liable for
negligence or misconduct.
The foregoing is only a summary of the indemnification provisions
of R & R Ranching's Articles of Incorporation and Bylaws. See the Exhibit
Index.
Item 25. Other Expenses of Issuance And Distribution
-------------------------------------------
The following table sets forth the expenses which R & R Ranching
expects to incur in connection with the issuance and distribution of the Units
registered hereby. All of these expenses, except for the Commission
registration fee, are estimated:
Securities and Exchange Commission registration fee........$ 243.25
Legal fees and expenses....................................$10,000
Accounting fees............................................$ 2,500
Printing and engraving expenses............................$ 500
Transfer agent fees........................................$ 1,500
Miscellaneous..............................................$ 256.75
--------
Total................................................$15,000
Item 26. Recent Sales of Unregistered Securities
---------------------------------------
The following table provides information about all "unregistered"
and "restricted" securities that R & R Ranching has sold since inception, and
which were not registered under the 1933 Act:
<TABLE> Number
Date of Aggregate
Name of Owner Acquired Shares* Consideration
- ------------- -------- ------ -------------
<S> <C> <C> <C>
William R. Davidson 8/10/98 1,000,000 $25,000
Common
* This figure takes into account the two-for-one forward split
of R & R Ranching's issued and outstanding common stock on March 3, 1999.
Management believes that Mr. Davidson is an "accredited investor"
as that term is defined under applicable federal and state securities laws,
rules and regulations, because he is a director and executive officer of R & R
Ranching. Management also believes that the offer and sale of these shares of
common stock were exempt from the registration requirements of Section 5 of
the Act pursuant to Section 4(2) thereof, and from similar states' securities
laws, rules and regulations covering the offer and sale of securities by
available state exemptions from such registration.
Item 27. Exhibits
--------
The following exhibits are filed as a part of this Registration
Statement:
</TABLE>
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ ------------
<S> <C>
3.1 Articles of Incorporation*
3.2 Bylaws*
4.1 Warrant Agreement*
4.2 Form of "A" Warrant*
4.3 Form of "B" Warrant*
5.1 Opinion of Branden T. Burningham, Esq. regarding legality*
10.1 1998 Stock Option Plan*
10.2 Buffalo Sale and Purchase Agreement, dated October 5, 1998*
10.3 Bison Management Agreement, dated December 1, 1998*
10.4 Promissory Note, dated January 19, 1999*
23.1 Consent of Pritchett, Siler & Hardy, P.C.
23.2 Consent of Branden T. Burningham, Esq.*
27.1 Financial Data Schedule*
* Each of these documents was filed with R & R Ranching's original
Registration Statement on Form SB-2, filed March 30, 1999, and
is incorporated herein by reference.
Item 28. Undertakings
------------
R & R Ranching hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and, notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in the volume and price
represent no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) include any additional or changed material
information
on the plan of distribution.
(2) For determining liability under the Securities Act, to treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
SIGNATURES
----------
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing of Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned in the
City of Springville, State of Utah, on May 28, 1999.
R & R RANCHING, INC.
By /s/ William R. Davidson
---------------------------------
William R. Davidson, President and
Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following person in the capacities
and on the dates stated.
/s/ William R. Davidson
----------------------------------
William R. Davidson, President and
Director
/s/ Allyson R. N. Davidson
----------------------------------
Allyson R. N. Davidson, Secretary/
Treasurer
<PAGE>
Date Filed: May 28, 1999 SEC File No. 333-75297
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
(AMENDMENT NO. 1)
R & R RANCHING, INC.
</TABLE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Amendment No. 1 to the Registration Statement on Form SB-2 for R & R Ranching,
Inc., of our report dated November 10, 1998, relating to the October 31, 1998
financial statements of R & R Ranching, Inc., which appears in such
Prospectus. We also consent to the reference to us under the caption
"Interest of Named Experts and Counsel."
/s/ Pritchett, Siler & Hardy, P.C.
Pritchett, Siler & Hardy, P.C.
Salt Lake City, Utah
May 27, 1999
