UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
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(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
- ---------- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
- ---------- 1934
For the transition period from ____________ to ___________
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Commission File Number: 0-26947
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Whispering Oaks International, Inc.
(Exact name of small business issuer as specified in its charter)
Texas 75-2742601
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(State of incorporation) (IRS Employer ID Number)
16910 Dallas Parkway, Suite 100, Dallas TX 75248
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(Address of principal executive offices)
(972) 248-1922
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(Issuer's telephone number)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES NO X
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State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
October 15, 1999: 505,000
-------------------------
Transitional Small Business Disclosure Format (check one): YES NO X
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<PAGE>
Whispering Oaks International, Inc.
Form 10-QSB for the Quarter ended September 30, 1999
Table of Contents
Page
----
Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 8
Part II - Other Information
Item 1 Legal Proceedings 9
Item 2 Changes in Securities 9
Item 3 Defaults Upon Senior Securities 9
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 5 Other Information 9
Item 6 Exhibits and Reports on Form 8-K 9
Signatures 9
2
<PAGE>
Part 1 - Item 1 - Financial Statements
Whispering Oaks International, Inc.
Balance Sheets
September 30, 1999 and 1998
(Unaudited)
1999 1998
--------- ---------
ASSETS
------
Current Assets
Cash on hand and in bank $ 286 $ 603
--------- ---------
Total current assets 286 603
--------- ---------
Livestock - At Cost 32,000 221,500
Less accumulated depreciation (18,225) (55,375)
--------- ---------
Net Livestock 13,775 166,125
--------- ---------
Total Assets $ 14,061 $ 166,728
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable - trade $ 14,567 $ 32,124
Due to affiliates 37,605 255,205
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Total current liabilities 52,172 287,329
--------- ---------
Commitments and Contingencies
Shareholders' Equity
Common stock - $0.001 par value. 25,000,000 shares
authorized. 505,000 issued and outstanding 505 505
Additional paid-in capital 29,495 29,495
Accumulated deficit (68,111) (150,601)
--------- ---------
Total shareholders' equity (38,111) (120,601)
--------- ---------
Total Liabilities and Shareholders' Equity $ 14,061 $ 166,728
========= =========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
3
<PAGE>
<TABLE>
<CAPTION>
Whispering Oaks International, Inc.
Statements of Operations and Comprehensive Income
Nine and Three months ended September 30, 1999 and 1998
(Unaudited)
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues
Sales of livestock $ 26,125 $ -- $ -- $ --
------------- ------------- ------------- -------------
Cost of Sales
Net capitalized cost of livestock -- -- -- --
------------- ------------- ------------- -------------
Gross profit 26,125 -- -- --
------------- ------------- ------------- -------------
Expenses
Livestock expenses 8,052 88,515 (105) 35,714
General and administrative 2,289 6,711 2,289 --
Depreciation 8,000 55,375 2,667 18,458
------------- ------------- ------------- -------------
Total expenses 18,341 150,601 4,851 54,172
------------- ------------- ------------- -------------
Income (Loss) from
operations before
provision for
income taxes 7,784 (150,601) (4,851) (54,172)
Provision for income taxes -- -- -- --
------------- ------------- ------------- -------------
Net Income (Loss) 7,784 (150,601) (4,851) (54,172)
Other Comprehensive Income -- -- -- --
------------- ------------- ------------- -------------
Comprehensive Income (Loss) $ 7,784 $ (150,601) $ (4,851) $ (54,172)
============= ============= ============= =============
Income (Loss) per weighted-
average share of common
stock outstanding, computed
on net loss - basic and fully diluted $ 0.02 $ (0.30) $ (0.01) $ (0.11)
============= ============= ============= =============
Weighted-average number of shares
of common stock outstanding -
basic and fully diluted 505,000 505,000 505,000 505,000
============= ============= ============= =============
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
4
<PAGE>
<TABLE>
<CAPTION>
Whispering Oaks International, Inc.
Statements of Cash Flows
Nine months ended September 30, 1999 and 1998
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
1999 1998
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<S> <C> <C>
Cash Flows from Operating Activities
Net Income (Loss) $ 7,784 $ (150,601)
Adjustments to reconcile net income to net cash
provided by operating activities
Gain on sale of livestock (26,125) --
Depreciation 8,000 55,375
Increase (Decrease) in
Accounts payable 2,336 32,124
------------- -------------
Net cash provided by (used in) operating activities (8,005) (63,102)
------------- -------------
Cash Flows from Investing Activities
Proceeds from sale of livestock 26,125 --
Purchases of livestock -- (221,500)
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Net cash provided by investing activities 26,125 (221,500)
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Cash Flows from Financing Activities
Proceeds from sale of common stock -- 30,000
Net change in advances from affiliates (33,100) 255,205
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Net cash provided by financing activities (33,100) 285,205
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Increase (Decrease) in Cash and Cash Equivalents (14,980) 603
Cash and cash equivalents at beginning of period 15,266 --
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Cash and cash equivalents at end of period $ 286 $ 603
============= =============
Supplemental Disclosures of Interest and Income Taxes Paid
Interest paid during the period $ -- $ --
============= =============
Income taxes paid (refunded) $ -- $ --
============= =============
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
5
<PAGE>
Whispering Oaks International, Inc.
Notes to Financial Statements
Note 1 - Basis of Presentation
Whispering Oaks International, Inc. (Company) was incorporated on December 8,
1997 under the laws of the State of Texas. The Company was formed to engage in
the acquisition and sale of thoroughbred race horses of every age, from
broodmares and weanlings to mature racehorses and stallions. The Company
intends, initially, to focus in the area of purchasing and selling weanlings and
yearlings at various auctions in an activity commonly referred to as
"pinhooking".
Pinhooking is essentially the purchase of thoroughbred weanlings and yearlings
at auction and reselling them at a different, but similar, auction in the near
future. The Company projects an average historical holding period of five to six
months between purchase and resale.
The Company began operations in January 1998 with its initial capitalization and
its initial livestock purchase. The Company has elected a year-end of December
31 and uses the accrual method of accounting.
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements contained in a Form 10 filed with the U.
S. Securities and Exchange Commission during 1999. The information presented
herein does not include all disclosures required by generally accepted
accounting principles and the users of financial information provided for
interim periods should refer to the annual financial information and footnotes
contained in its annual audited financial statements contained elsewhere in this
document when reviewing the interim financial results presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 1999.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure 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 estimates.
Note 2 - Summary of Significant Accounting Policies
a.) Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the
Company's cash management policies.
6
<PAGE>
Whispering Oaks International, Inc.
Notes to Financial Statements - Continued
Note 2 - Summary of Significant Accounting Policies - Continued
b.) Livestock
---------
Livestock is recorded at cost and are depreciated on a straight-line
basis, over their estimated useful lives (generally 3 years). Foals
delivered after the broodmare is purchased are capitalized by the Company
at a "zero cost" basis.
At September 30, 1999, the Company had one broodmare in its stable.
c) Organization costs
------------------
The Company has adopted the provisions of AICPA Statement of Position
98-5, "Reporting on the Costs of Start-Up Activities" whereby all
organization and initial costs incurred with the incorporation and initial
capitalization of the Company were charged to operations as incurred.
d.) Income Taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. At September 30, 1999 and 1998, respectively, the deferred tax
asset and deferred tax liability accounts, as recorded when material to
the financial statements, are entirely the result of temporary
differences. Temporary differences represent differences in the
recognition of assets and liabilities for tax and financial reporting
purposes, primarily accumulated depreciation and amortization, allowance
for doubtful accounts and vacation accruals.
As of September 30, 1999 and 1998, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. If these
carryforwards are not utilized, they will begin to expire in 2018.
e.) Earnings (loss) per share
-------------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of September 30, 1999 and 1998,
respectively, the Company had no warrants and/or options outstanding.
Note 3 - Equity Transactions
In January 1998, as revised in March 1998, the Company issued a Private
Placement Memorandum, utilizing an exemption from registration under Regulation
D, Rule 504 of the US Securities and Exchange Commission, to sell up to 200,000
shares of Common Stock at a price of $5.00 per share. As of September 30, 1999
and 1998, respectively, the Company had sold 5,000 shares of common stock
yielding gross proceeds to the Company of $25,000.
7
<PAGE>
Part I - Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(1) Caution Regarding Forward-Looking Information
This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward- looking statements. Such statements reflect the current view
of the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
(2) Results of Operations
The Company began operations on January 19, 1998 with the purchase of eight (8)
broodmares for approximately $225,000. In December 1998, the Company sold all
but one broodmare and one foal for gross proceeds of approximately $238,347. The
Company sold the remaining foal in the second quarter of 1999 for gross proceeds
of approximately $26,125. The Company accounts for all purchased livestock at
its original cost and assigns no basis to foals delivered during the Company's
ownership. Gross profits from livestock ownership were approximately $110,000
for the year ended December 31, 1998 and approximately $26,000 for the nine
months ended September 30, 1999. As of September 30, 1999, the Company owns one
broodmare.
Related to the Company's livestock ownership, the Company incurred direct
operating expenses of approximately $105,000 for the year ended December 31,
1998 and approximately $8,000 for the first nine months of 1999.
The Company has adopted the provisions of AICPA Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" whereby all organization and
initial costs incurred with the incorporation and initial capitalization of the
Company were charged to operations as incurred. Accordingly, these costs a
component of the Company's general and administrative expenses of approximately
$10,000 for the year ended December 31, 1998 and approximately $2,300 for the
nine months ended September 30, 1999.
The Company experienced net income (loss) of approximately $(76,000) for the
year ended December 31, 1998 and approximately $7,800 for the nine months ended
September 30, 1999. These events generated net earnings (loss) per share of
approximately $(0.15) per share for the year ended December 31, 1998 and
approximately $0.02 per share for the nine months ended September 30, 1999.
(3) Liquidity and Capital Resources
The Company maintained liquidity during the year ended December 31, 1998 and the
nine months ended September 30, 1999 through the sale of common stock, subject
to an exemption from registration under Regulation D, Rule 504 of the US
Securities and Exchange Commission, the sale of common stock to the Company's
founders, the proceeds from sales of livestock and non-interest bearing advances
from entities related to the Company through common ownership and/or control .
It is the intent of the controlling shareholders of the Company to fund the
necessary expenses to sustain the corporate entity and/or future purchases of
livestock.
8
<PAGE>
The Company has identified no significant capital requirements for the current
annual period. Liquidity requirements mandated by future business expansions or
acquisitions, if any are specifically identified or undertaken, are not readily
determinable at this time as no substantive plans have been formulated by
management.
Additionally, management is of the opinion that there is additional potential
opportunity for the sale of additional common stock through either private
placements or secondary offerings.
(4) Year 2000 Considerations
The Year 2000 (Y2K) date change is believed to affect virtually all computers
and organizations. The Company has undertaken a comprehensive review of its
information systems, including personal computers, software and peripheral
devices, and its general communications systems. The Company has no direct
electronic links with any customer or supplier. In addition, the Company has
held discussions with certain of its software suppliers with respect to the Y2K
date change. The Company has completed its detailed review, as a preliminary
assessment and the Company believes, as of the date of this filing, that it will
not be required to modify or replace significant portions of its computer
hardware or software and any such modifications or replacements are, or will be,
readily available. The Company has no known direct Y2K exposures and anticipates
that any costs associated with the Y2K date change compliance to have a material
effect on its financial position or its results of operations. There can be no
assurance until January 1, 2000, however, that all of the Company's systems, and
the systems of its suppliers, shippers, customers or other external business
partners will function adequately.
(Remainder of this page left blank intentionally)
9
<PAGE>
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings
of shareholders during the reporting period.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
Reports on Form 8-K - None
- --------------------------------------------------------------------------------
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Whispering Oaks International, Inc.
October 15, 1999 /s/ Kevin B. Halter
---- -----------------------------------
Kevin B. Halter
President and Director
10
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<NAME> Whispering Oaks International, Inc.
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
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