SECURITIES AND EXCHANGE COMMISSION
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Washington, D. C. 20549
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FORM 10-SB Amendment #2
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (G) OF THE SECURITIES ACT OF 1934
SANDY CREEK CORPORATION
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(Name of Small Business Issuer in its charter)
FLORIDA 62-1661659
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(State or other jurisdiction of incorporation (IRS Employer Identification
of organization) No.)
6227 Highway 393
Crestview, Florida 32539
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(Address of principal executive offices (Zip Code)
Issuer's Telephone Number (850) 683-0602
Issuer's Fax Number (850) 683-9969
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
NONE NONE
SECURITIES TO BE REGISTERED PURSUANT OT SECTION 12(g) OF THE ACT:
COMMON STOCK no par value 20,000,000
(Title of Class)
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SANDY CREEK CORPORATION
TABLE OF CONTENTS
Part Item Description of Item Page
- ---- ---- ------------------- ----
Part I Item 1 Description of Business 3
Item 2 Management's Discussion and Analysis
and results of Operations 4
Liquidy 4
Marketing Plans 5
Vertical Integration 5
Operations 5
Regulations 6
Competition 6
Economic Risks 6
Employees 6
Research and development 6
Patents and trademarks 6
Reports to security holders 7
Impact of Y2K on Company 7
Item 3 Description of Property 7
Item 4 Security Ownership of Certain Beneficial Owners
and Management 7
Item 5 Directors, Executive Officers, Promoters and
Control Persons 8
Directors and Executive Officers 8
Item 6 Executive Compensation 8
Item 7 Certain Relationships and Related Transactions 9
Item 8 Description of Securities 9
Common Stock 9
Preferred Stock 9
Item 9 Transfer Agent 9
Part II Item 1 Market Price of and Dividends on Registrant's 10
Common Equity and Related Shareholder matters 10
Market Information
Holders
Dividends
Item 2 Legal Proceedings 10
Item 3 Changes in and Disagreements with Accountants 10
Item 4 Recent Sales of Unregistered Securities 10-13
Item 5 Indemnification of Directors and Officers 13
Part F/S Item 1 Financial Statements - Annual December 31, 1999 F-1-F-10
Item 2 Financial Statements - Annual December 31, 1998 F-11-F-21
Part III Item 1 Index to Exhibits 15
Signature Page 16
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SANDY CREEK CORPORATION
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Sandy Creek Corporation's business is the breeding, raising and maintenance of
Ostrich and the processing of Ostrich products for sale to domestic and
international markets. The Company has been in the Ostrich ranching business for
four years and has researched and studied the industry in depth. The Company's
primary office is located on an eighty-acre ranch property owned by the company
with 1,300 feet of road frontage, is completely landscaped including a double
wide mobile home for the President and Chief Executive Officer of the Company,
pens for over 700 ostrich breeders and a Computerised Incubation and Hatchery
Facility.
The Company was incorporated under the laws of the State of Florida on the 15th
day of July 1996 as Sandy Creek Ostrich Ranch Inc. Through a filing in the
office of the Secretary of State of Florida on November 22, 1996. The Company
amended its Articles of Incorporation to increase the authorized capital stock
from 100 shares no par value to 5,000,000 shares no par value. On the 12th of
October 1998 the Company filed an amendment with the Office of the Secretary of
State of the State of Florida to change its corporate name to Sandy Creek
Corporation and on the 14th of December 1998 the Company filed in the office of
the Secretary of State of the State of Florida an amendment increasing its
capital stock from 5,000,000 shares of common stock no par value to 10,000,000
shares of common stock, no par value. On the 23rd of November 1999 the Company
filed in the office of the Secretary of State of the State of Florida an
amendment increasing its capital stock from 10,000,000 to 20,000,000 shares of
common stock no par value.
Major refurbishing done to date includes upgrading the existing structures and
the construction of two new feed barns. Other improvements include land
clearing, building of pens and the outfitting of a fully Computerised Hatchery
and Incubation Facility. Sandy Creek has also purchased a 6000 foot processing
plant with a 3 acre feed lot in Esto, North Bonifay, Florida ("Esto") and
secured USDA-approved status (P20027) for the plant. The purchase price was
$165,000 with a mortgage of $140,000 in addition to 100,000 shares of restricted
common stock of Sandy Creek Corporation.
The incubation and hatchery unit is very important to the healthy development of
the bird. When an egg is found on the ground care is taken to see that the egg
is placed into the incubation unit. Rubber gloves are used to carry the egg to
prevent bacteria from the hands being left on the shell. The egg is kept in the
incubation unit for a period of 39 days. The ostrich egg is marked giving it a
pen number and date and entered into the computer. Computers control the
temperature and the humidity in this unit as well as turning the egg every hour
to insure that the yoke does not become attached to any spot on the interior of
the egg. A counter tells the operator how many times this has been turned and a
log is kept on each egg. From the incubator the egg is taken to the hatch unit
where the "chick" is hatched. The total value of the incubators and hatchery
unit at the ranch would be approximately $90,000. Four of the incubation units
were acquired for restricted stock and one unit is owner financed with monthly
payments by Sandy Creek.
Ostrich birds are tagged for identification and for collection of fertility rate
and other data. Feeding programs are designed to keep birds healthy, and to
ensure consistent grow out. At six-eight months old the birds are sorted by size
and placed in grow-out pens. They are placed on special rations designed to
produce a maximum growth of lean muscle. The market-ready Ostrich is 12 to 14
months of age and will produce from 70-90 pounds of lean red meat. A yearling
Ostrich also produces from 12 to 14 square feet of hide. Skins are graded on
size, thickness and damage (cuts and scars) bacteriacized and sold.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIA CONDITION AND RESULTS
OF OPERATIONS FOR THE YEARS ENDING DECEMBER 31, 1997, DECEMBER 31, 1998 AND
DECEMBER 31, 1999.
Development Stage Activities.
The Company has been a development stage enterprise from its inception in July
1996 to December 31, 1999. The Company breeds and raises ostrich birds for the
sale of meat and hides. At present the Company has an order for 10,000 hides
which it expects to fill during the present year. To date the Company is a
development stage company engaged in the build up and build out of the farm
located in Crestview, Florida.
The Company has not yet generated sufficient revenues during its limited
operating history to fund its ongoing operating expenses, repay outstanding
indebtedness or fund its marketing efforts. There can be no assurance that sales
of the birds, skins, feathers and oils will be sufficient to operate the
business in a profitable manner.
During this developmental period, the Company has been financed in part through
services which were converted to shares of common stock, the sale of common
stock for cash and the exchange of common stock for product, real estate, birds
or other business related items.
Results of operations for the year ended December 31, 1999 as compared to the
year ended December 31, 1998.
For the year ending December 31, 1999 the Company had a loss in the amount of
$1,123,298 as compared to the year ended December 31, 1998 in which the Company
had a loss of $784,731.
The Company's General and Administrative costs aggregated approximately $928,606
for the year ended December 31, 1999 as compared to $785,498 for the year ended
December 31, 1998, representing an increase of $143,108.
Liquidity and Capital Resources.
The Company's cash balance at December 31, 1999 and June 30, 1999 was $0.00 and
$4,145 respectively. For the year ended December 31, 1999 the Company continued
to be funded in part by the sale of shares of common stock aggregating
$1,087,945 which is broken down as follows: Common stock issued for cash
$431,760; common stock issued for services $218,428; common stock issued for
inventory and breeding flock $274,257; common stock issued for contributions
$11,500; common stock issued for payment of debt $115,000; and common stock
issued for other property and equipment $37,000.
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Management believes it will be required to raise additional funds in the year
2000 and will do so in private placement, the exchange of shares for goods and
services or other methods which meet all regulatory requirements for disclosure
and filing.
The Company's future liquidity requirements will be dependent upon factors that
include the cost of operations, volume of sales and prices derived from sales of
products, the expansion of marketing activities and any unforeseen happenings
which might have an impact on breeding, raising and selling a live product.
There can be no assurance that financing, if required, will be available on
terms that are satisfactory to management.
MARKETING PLANS
It is the market for Ostrich meat that dictates profitability for a producer.
The Company has identified four target markets for its Ostrich meat:
1. Restaurants and Restaurant Chains
2. Supermarkets and Grocery Chains
3. The individual consumer
4. The export market
VERTICAL INTEGRATION
The Company had a breeding population of 400 Ostrich birds at the end of
December 31, 1999. The December total of these birds might be expected annually
to produce approximately 6,000 chicks, which will be raised for market. A
population of 6,000 market-ready birds (the outgrowth from chicks) produces
sufficient quantities of meat, hide and fat to support major marketing efforts
by the Company.
The earlier processing plant in Ocala, Florida was under a lease agreement and
the premises were vacated on August 10, 1999. The termination of the lease did
not call for any damages or extra payments. The processing plant in Ocala was
heavily damaged by fire subsequent to the lease being terminated. Production at
the Ocala plant was limited to 16,000lbs. per month. The processing capacity at
the Esto plant will accommodate the volume of market-ready birds. The Esto plant
employs four and has equipment for weighing, skinning, cryo-vac packaging and a
vacuum sealer. At the present time the plant operates only two days each week
processing 15 birds a day. This yields 70-80 pounds of meat at an average income
of $4.00-$9.00 per pound the hides generate $100 per bird. The goal of
production, is to process about 400 Ostrich birds per month per shift. Double
shifting will produce about 160,000 pounds of meat. By managing its own
processing facilities the Company realizes cost benefits in two ways. First,
costs to process each bird are operational costs only there are no charges to an
outside plant owner; and second, as USDA approved facilities, (USDA#P 20027) the
plant will be attractive to other Ostrich producers who wish to have birds
processed for meat thereby providing an additional revenue stream for the
Company.
OPERATIONS
There are many variables involved in developing and commercializing an ostrich
breeding operation. The Company cannot project with certainty the outcome of its
operations. There are no assurances that the Company will operate profitably.
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REGULATIONS
The Company is subject to many laws and regulations both in the United States
and internationally as its market expands. The meat products are subject to the
laws of the USDA and are under regular review. The Company must also comply with
Federal, State and Local Laws including the Environmental Protection Act. The
Company does not produce or utilize any toxic, hazardous or harmful substance
that could injure the health of the individual or the environment. The Company
does not anticipate any difficulty in the future in complying with all
applicable Laws and Regulations in the performance of its operations. The
Company cannot predict the impact of possible changes in response to future
legislation, rules or governmental requirements including the Food and Drug
Administration regulations which may affect the ability of the Company, as well
as others in the industry, to develop and market products. However, the Company
does not presently believe that existing applicable legislative and
administrative rules and regulations will have a significant impact on
operations.
COMPETITION
The food industry in which the Company will engage is extremely competitive.
Shelf space in supermarkets is at a premium and the Company's meat products
compete not only with other Ostrich producers but also with other specialty meat
products for space. There can be no assurance that the Company can develop
superior or more cost-effective products than its competitors, or that it can
successfully market its product.
ECONOMIC RISKS
Local, national and international economic conditions may have a substantial
adverse effect on the efforts of the Company. A downturn in the United States
economy could reduce the amount of disposable cash that individuals are willing
to pay for specialty foods or the amount of times they eat in restaurants.
Ostrich meat is perceived today as "heart healthy" however studies have not had
the length of time or the market base to compare to beef, pork or poultry
products. Any adverse finding in the health area could have an adverse effect on
the Company. As of the present moment, the interest in food that is "heart
healthy" is considered an advantage by the Company.
EMPLOYEES
At the present time the Company, at the farm employs a total of 2 management
personnel, 2 administrative and 5 farm employees. There are four employees at
the plant in Esto.
RESEARCH AND DEVELOPMENT
During the first three years of operation, the total cost of research and
development was $0.00.
PATENTS AND TRADEMARKS
The Company does not own any Patents or Trademarks and does not have any
intention at the present time to file any Patent or Trademark applications.
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REPORTS TO SECURITY HOLDERS
Prior to filing this Form 10-SB, the Company has not been required to deliver
annual reports. However, once the Company becomes a reporting company, it will
deliver annual reports to securities holders as required by the Securities
Exchange Act of 1934 (the "Exchange Act"), as amended and as required by the
rules or regulations of any exchange upon which the Company shares may be
traded.
Prior to the filing of this Form 10-SB, the Company has not filed reports with
the Securities and Exchange Commission (the "Commission"). Once the Company
becomes a reporting company, management anticipates that Forms 3, 4, 5, 10-K-SB,
10-Q-SB, 8-Kand Schedules 13D along with appropriate proxy materials will have
to be filed as they come due. If the Company issues additional shares, then the
Company will file registration statements for those shares.
IMPACT OF Y2K ON COMPANY
The Year 2000 issue arising out of computer programs is not expected to affect
the Company, its Ostrich Community or its plans for sales. No adverse effects
have been incurred and the Company has not incurred any problems with any vendor
with which it deals or client with which it does business.
ITEM 3. DESCRIPTION OF PROPERTY
The Ranch
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The Company owns 80 acres of real estate including a double wide mobile home
utilized as a residence by the President Leslie M. Lerner, farm buildings,
office facilities, ostrich pens and all personal property, tangible and
intangible utilized in or associated with the Ostrich Ranch located at 6227
Highway 393, Crestview, Florida. The ownership is on file with the Public
Records of Okaloosa County, Florida. The property was purchased for a price of
US$150,000 and a mortgage in the amount of US$126,400 is held by First National
Bank of Florida. The residence is reflected in the financial statement under
property and equipment.
The Company purchased a meat processing plant in Esto, Florida. The property was
purchased For $165,000 with a mortgage note in the amount of $140,000 and the
sum of 100,000 shares of restricted common stock were issued to the seller.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Shares by (a) each person known to be the
beneficial owner of more than 5% of the Company's outstanding Common Shares, (b)
the Directors of the Company and (c) the Directors and Officers as a group.
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NAME NUMBER OF SHARES OWNED PERCENTAGE OF
(COMMON STOCK) SHARES ISSUED
Leslie M. Lerner 1,445,000 21.484%
Judith A. King 239,000 3.832%
Nicholas Demoleas and Family 435,000 8.750%
All Directors and Officers as a Group 1,909,000 28.383%
Beneficial owners of more than 5% of the Company's outstanding shares are:
Leslie M. Lerner
6227 Highway 393
Crestview, Florida 32539
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The Directors, Executive Officers, Promoters and Control Persons are listed
below:
Name Age Position
- ---- --- --------
Leslie M. Lerner 67 Chairman, President & CEO
Nicholas P. Demoleas 45 Vice President and Director
Judith A. King 59 Treasurer and Director
The biographies of the Directors and Officers are set forth below. All Directors
hold office until the next annual shareholder's meeting or until their death,
resignation, retirement or until their successors have been elected and
qualified. Vacancies in the existing Board are filled by a majority vote of the
remaining Directors.
Mr. Leslie M. Lerner, Chairman, President and CEO - Mr. Lerner brings more than
40 years of business experience in sales and marketing in a variety of fields.
His background includes sales training classes in communications for Delta
Communications. As the California distributor and President of ABS
Communications having 25 sales persons and a total of 40 installation
specialists. Direct sales marketing for Technicolor Corporation in their film
processing division. He also managed the international distribution of a
cordless telephone known as the Escort Cordless Telephone with Mech-Tronics
Corporation. Four years ago he began the Sandy Creek Ostrich facility building
the breeding farm on a step-by-step managed basis with a belief that the timing
was right for a commercial ostrich farm to be run on a professional basis.
Mr. Nicholas P. Demoleas, Vice President and Director. Mr. Demoleas has spent
his 24 year career as a biochemist and currently works in that capacity at
Columbia Presbyterian Medical Center in New York. He received his Bachelor of
Science degree in Biochemistry at Fordham University.
Mrs. Judith A. King, Treasurer and Director. Mrs. King's 20 year career has
provided experience in banking, finance, commerce, management and management
training. She received a degree from the American Institute of Banking.
ITEM 6. EXECUTIVE COMPENSATION
A. No officer or director has received a monetary salary. A total of 390,000
shares of common stock (restricted securities) were issued to Mr. Les
Lerner and to Mrs. Judith King for services rendered through July 31, 1999
and were valued at $.05 per share. Mr. Lerner was issued an additional
120,000 shares for services through November 1999.
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B. There is no annuity, pension or retirements benefit proposed to be paid to
officers, directors or employees of the Company in the event of a
retirement. There is no existing plan provided for contributed to by the
Company or any of its employees.
C. No options have been granted for shares of either common or preferred
shares of the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No Director, Officer, Promoter or Control Person is, or has been in debt to the
Company. The $27,704 that was due from related companies has been written of
during the first quarter of 1999 (Note 8 in the audited financial of December
1998). While Item 404(b)(4) provides that no disclosure is required, the
pertinent facts are that two companies established as joint ventures for the
marketing of hides and sale of product were discontinued and the costs of these
companies were borne by Sandy Creek. The companies are no longer in operation.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue 20,000,000 shares of Common Stock, no par
value of which on the 31st of December 1999 7,168,765 shares were issued and
outstanding. The Company does not have any Preferred Shares authorized and no
preferred shares are issued and outstanding.
Shareholders of Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors without any preference. Holders of
Common Stock are entitled to one vote per share. Cumulative voting is not
allowed and thus holders of more than 50% of the shares voting for Directors can
elect all Directors. The holders of Common Stock have no preference rights to
purchase new issues of the securities of the Company.
Dividends may be paid if, and when, declared by the Board of Directors. All
shares are non-assessable and fully paid.
Upon liquidation or dissolution of the Company, holders of Common Stock are
entitled to receive pro rata, either in cash or in kind, all of the assets of
the Company after payment of the debts. There are no redemption, conversion or
pre-emptive rights attached to the Common Stock.
ITEM 9
Transfer Agent and Registrar
The Transfer and Registrar of the Company is:
Corporate Stock Transfer Attn: Carolyn Bell
3200 Cerry Creek Drive #430
Denver, Colorado 80209
Phone: (303) 282-4800
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PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
The Company's Common Stock is traded over-the-counter on the Bulletin Board by
the National Association of Securities Dealers (NASD) under the Symbol - "SCRK".
There are 1,597,365 shares of free trading shares of the Company's Common Stock.
As of December 31, 1999 the High and Low Bids for the securities during the
preceding year were $.125 and $.375 respectively. These prices reflect
inter-dealer prices, without retail mark-up, mark-down, or commission and may
not represent actual transactions.
As of December 31, 1999 there were 205 shareholders of the Company's Common
Stock. The Company has not declared or paid any dividends on its stock, and does
not anticipate declaring any dividends in the foreseeable future.
The Company's common stock is covered by the Securities and Exchange Commission
rule that imposes additional sales practice requirements on broker-dealers who
sell these securities to persons other than established customers and accredited
investors, generally institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with their spouse. For transactions covered by the
rule, the broker-dealer must make a special suitability determination for the
purchaser and transaction prior to the sale. Consequently, the rule may affect
the ability of broker dealers to sell our securities and also may affect the
ability of purchasers of our stock to sell their shares in the secondary market.
It may also cause less broker-dealers to make a market and it may affect the
level of news coverage we receive.
ITEM 2. LEGAL PROCEEDINGS.
Neither the Company, nor its Directors, nor any Officer is a party to any
material legal proceeding or litigation, which would impact the operations of
the Company.
ITEM 3. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
None
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
16,000 shares of common stock valued at $.625 per share were issued in January
1999 to J. Earl & Marilyn Gamble for acquisition of ostrich birds in a
non-public offering in reliance on Rule D Regulation 504 Section 4(2) of the
Securities Act of 1933, as amended (the "Act").
3,250 shares of common stock $0.5625 per share were issued in January 1999 to
Hazel Wilson for acquisition of ostrich birds in a non-public offering in
reliance on Rule D Regulation 504 Section 4(2) of the Act.
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2,200 shares of common stock valued at $0.5625 per share were issued in January
1999 to Ms. Clarice Pruitt for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Act.
870 shares of common stock valued at $0.5625 per share were issued in January
1999 to Ms. Clarice Pruitt for services in a non-public offering in reliance on
Rule D Regulation 504 Section 4(2) of the Act.
1,200 shares of common stock valued at $0.625 per share were issued in January
1999 to Walter D. Browning for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Act.
750 shares of common stock valued at $0.625 per share were issued in January
1999 to Walter D. Browning for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Act.
500 shares of common stock valued at $0.625 per share were issued in January
1999 to Richard Vairin for acquisition of ostrich birds in a non-public offering
in reliance on Rule D Regulation 504 Section 4(2) of the Act.
750 shares of common stock valued at $0.625 per share were issued in January
1999 to Richard A. Vairin for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Act.
10,000 shares of common stock valued at $0.5312 per share were issued in January
1999 to Nicholas Demoleas for services in a non-public offering in reliance on
Rule D Regulation 504 Section 4(2) of the Act.
3,000 shares of common stock valued at $0.5625 per share were issued in January
1999 to David Ivey for services in a non-public offering in reliance on Rule D
Regulation 504 Section 4(2) of the Act.
10,000 shares of common stock valued at $0.625 were issued in January 1999 as a
charitable gift donation to The Theologian Greek Orthodox Church, a religious
organization not affiliated with any party at Sandy Creek Ostrich Corporation.
1,500 shares of common stock valued at $0.5312 per share were issued in February
1999. The issuance was made as a non-public offering in reliance on Rule D
Regulation 504 Section 4(2) of the Act for the purchase of a tractor to be used
on the farm from Carolyn Masters
10,000 shares of common stock valued at $0.625 per share were issued in March
1999 to James & Darlene Eberlee for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Securities Act
of 1933, as amended (the "Act").
500 shares of common stock $.5312 per share were issued in March 1999 to Hank
Schneider for acquisition of one breeder ostrich bird in a non-public offering
in reliance on Rule D Regulation 504 Section 4(2) of the Act.
10,000 shares of common stock valued at $0.625 per share were issued in March
1999 to Timothy K. Broschat for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Act.
1,500 shares of common stock valued at $0.5312 per share were issued in March
1999 to Ed Hill and Jackie Dewie for acquisition of ostrich birds in a
non-public offering in reliance on Rule D Regulation 504 Section 4(2) of the
Act.
10,500 shares of common stock valued at $0.5312 per share were issued in March
1999 to George & Donna Womack for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Act.
9,000 shares of common stock valued at $0.5312 per share were issued in March
1999 to Ronald L. Borton for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Act.
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15,500 shares of common stock valued at $0.5312 per share were issued in March
1999 to Jim & Audrey Carpenter for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Act.
7,900 shares of common stock valued at $0.5312 per share were issued in March
1999 to Raymond Petters for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Act.
1,000 shares of common stock valued at $0.5312 per share were issued in March
1999 to James & Darlene Gorman for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Act.
17,750 shares of common stock valued at $0.5312 per share were issued in March
1999 to Bill English for acquisition of ostrich birds in a non-public offering
in reliance on Rule D Regulation 504 Section 4(2) of the Act.
15,000 shares of common stock valued at $0.5312 per share were issued in March
1999 to Betty Upchurch (d/b/a Town & Country Farms) for acquisition of ostrich
birds and an incubator valued at $4,000 in a non-public offering in reliance on
Rule D Regulation 504 Section 4(2) of the Act.
4,000 shares of common stock valued at $0.5938 per share were issued in March
1999 to Don LaMonica for acquisition of ostrich birds in a non-public offering
in reliance on Rule D Regulation 504 Section 4(2) of the Act.
15,000 shares of common stock valued at $0.375 per share were issued in April
1999 to Dr. Mohammed Sadek for services in a non-public offering in reliance on
Rule D Regulation 504 Section 4(2) of the Act.
17,000 shares of common stock valued at $0.375 per share were issued in April
1999 to GraJaDa Farms for acquisition of ostrich birds in a non-public offering
in reliance on Rule D Regulation 504 Section 4(2) of the Act.
6,000 shares of common stock valued at $0.4375 per share were issued in April
1999 to Howard Bolton (d/b/a Bolton Farms) for acquisition of ostrich birds in a
non-public offering in reliance on Rule D Regulation 504 Section 4(2) of the
Act.
3,500 shares of common stock valued at $0.4375 per share were issued in May 1999
to M. Martin for acquisition of ostrich birds in a non-public offering in
reliance on Rule D Regulation 504 Section 4(2) of the Act.
4,500 shares of common stock valued at $0.4375 per share were issued in May 1999
to Jeff Arnold for acquisition of ostrich birds in a non-public offering in
reliance on Rule D Regulation 504 Section 4(2) of the Act.
2,500 shares of common stock valued at $0.2969 per share were issued in May
1999 to Bill & Linda Stanford for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Act.
5,000 shares of common stock valued at $0.4375 per share were issued in June
1999 to George Johnson for services in a non-public offering in reliance on Rule
D Regulation 504 Section 4(2) of the Act.
9,000 shares of common stock valued at $0.3438 per share were issued in June
1999 to Rex Shumate for acquisition of ostrich birds in a non-public offering in
reliance on Rule D Regulation 504 Section 4(2) of the Act.
2,250 shares of common stock valued at $0.375 per share were issued in June 1999
to William Tucker for acquisition of ostrich birds in a non-public offering in
reliance on Rule D Regulation 504 Section 4(2) of the Act.
2,500 shares of common stock valued at $0.3125 per share were issued in June
1999 to Joe Baker for acquisition of ostrich birds in a non-public offering in
reliance on Rule D Regulation 504 Section 4(2) of the Act.
12
<PAGE>
1,000 shares of common stock valued at $0.4375 per share were issued in June
1999 to Clinton Bass for acquisition of ostrich birds in a non-public offering
in reliance on Rule D Regulation 504 Section 4(2) of the Act.
10,000 shares of common stock valued at $0.4375 were issued in June 1999 as a
charitable gift donation to Sports Embassy Foundation, Inc. a 501c3 charitable
foundation not affiliated with any party at Sandy Creek Ostrich Corporation.
29,500 shares of common stock valued at $0.3438 per share were issued in June
1999 to Wayne & Barbara Hodsden for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Act.
4,250 shares of common stock valued at $0.3438 per share were issued in June
1999 to Willard Huffman for acquisition of ostrich birds in a non-public
offering in reliance on Rule D Regulation 504 Section 4(2) of the Act.
390,000 shares of common stock valued at $.05 per share were issue to Les Lerner
and Judith King in lieu of salary for services year to date in July 1999 in a
non-public offering in reliance with Rule D Regulation 504 Section 4(2) of the
Act.
120,000 shares of common stock valued at $.05 per share were issue to Les Lerner
in lieu of salary for services and bonus in November 1999 in a non-public
offering in reliance with Rule D Regulation 504 Section 4(2) of the Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has provided in its by-laws under Article Eleven that it "may
indemnify any Director, Officer, agent or employee as to liabilities as provided
in Section 607.0850 of the Business Corporation Act of the State of Florida. The
Directors as far as permissible under Florida Statutes are without personal
liability for actions taken on behalf of the Corporation which are consistent
with the purposes of the Corporation and the laws of the State of Florida and
the United States of America.
The by-laws provide further that the Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is a director,
officer, employee or agent against any liability asserted against the person and
incurred by the person in any such capacity or arising out of the person's
status as such whether or not the corporation would have the power to indemnify
the person against such liability under provisions of the law. The Company has
not purchased such insurance as of this date.
PART F/S
The Independent Auditor's Report and the Financial Statements for the period
July 16, 1996 (date of inception) to December 31, 1998 are included and the
Auditor's Report and Financial Statements from January 1, 1999 to December 31,
1999 are also included.
13
<PAGE>
Independent Auditors Report - SC&G
Saltmarsh, Cleaveland & Gund 12/31/99 F-1
Financial Statements
Balance Sheet - Assets F-2
Balance Sheet - Liabilities and Stockholders Equity F-3
Statement of Operations F-4
Statement of Changes in Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7-F-10
14
<PAGE>
SC&G Florida Institute of
- ---- Certified Public Accountants
Saltmarsh, Cleveland & Gund
Certified Public Accountants American Institute of
and Consultants Certified Public Accountants
Since 1944
AICPA Private
Companies Practice Section
AICPA SEC
Practice Section
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Sandy Creek Corporation
Crestview, Florida
We have audited the accompanying balance sheet of Sandy Creek Corporation (a
development stage company) as of December 31, 1999, and the related statements
of operations, stockholders' equity and cash flows for the year then ended.
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. The financial statements of Sandy Creek Corporation as of December
31, 1998 and for the period from July 16, 1996 (date of inception) to December
31, 1998 were audited by other auditors whose report dated May 24, 1999
expressed an unqualified opinion on those statements.
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 1999 financial statements referred to above present fairly,
in all material respects, the financial position of Sandy Creek Corporation as
of December 31, 1999, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
/s/ Saltmarsh, Cleaveland & Gund
- --------------------------------
Fort Walton Beach, Florida
March 31, 2000
900 North 12th Avenue 501 West 19th Street 34 Walter Murtin Road
P.O. Drawer 13207 P.O. Box 1100 P.O. Box 848
Pensacola, Florida Panama City, Florida Fort Walton Beach, Florida
32591-3207 32402-1100 32549-0848
(850) 435-8300 (850) 769-9491 (850) 243-6713
FAX: (850) 435-8352 FAX: (850) 785-9590 FAX: (850) 243-4137
F-1
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current Assets:
Inventory $ 60,880
Accounts receivable 10,499
Prepaid expenses 835
---------
Total current assets 72,214
---------
Property and Equipment:
Buildings and ranch improvements 171,875
Furniture and fixtures 17,494
Vehicles 33,823
Machinery and equipment 176,524
Breeding flock 251,895
Land 74,100
---------
Total property and equipment 725,711
Accumulated depreciation (82,343)
---------
Net property and equipment 643,368
---------
Other Assets:
Deposit on real estate purchase 25,000
---------
Total Assets $ 740,582
=========
The accompanying notes are an integral
part of these financial statements
F-2
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 125,209
Payroll taxes payable 8,048
Due to related parties 177,978
Current portion of long term-debt 28,963
-----------
Total current liabilities 340,198
Long-Term Liabilities:
Long-term debt less current portion 181,737
-----------
Total liabilities 521,935
-----------
Stockholders' Equity:
Common stock, no par value, 20,000,000
shares authorized, 7,493,765 shares
issued and outstanding 2,182,277
Deficit accumulated during the development stage (1,963,630)
-----------
Total stockholders' equity 218,647
-----------
Total Liabilities and Stockholders' Equity $ 740,582
===========
The accompanying notes are an integral
part of these financial statements
F-3
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD
FROM JULY 15, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1999
July 15, 1996
Year Ended (Inception)
December 31, to December 31,
1999 1999
------------ ---------------
Sales $ 219,790 $ 238,772
Cost of sales 364,620 375,650
----------- -----------
Gross profit (loss) (144,830) (136,878)
Operating expenses 928,006 1,759,108
----------- -----------
Operating loss (1,072,836) (1,895,986)
----------- -----------
Other income (expense):
Other income -0- 6,680
Interest expense (31,419) (54,681)
Loss on disposal of fixed assets (19,043) (19,643)
----------- -----------
Other income (expense), net (50,462) (67,644)
----------- -----------
Net loss $(1,123,298) $(1,963,630)
=========== ===========
Net loss per share $ (.17)
===========
Weighted average shares used in computing
net loss per common share 6,563,840
===========
The accompanying notes are an integral
part of these financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
PERIOD FROM JULY 15, 1996 (DATE OF INCEPTION)
TO DECEMBER 31, 1999
Common Stock
-------------------------- Accumulated
Shares Amount Deficit
----------- ----------- -----------
<S> <C> <C> <C> <C>
Common stock issued for cash during 1996 52,800 $ 13,200 $
Net loss during 1996 (4,714)
----------- ----------- -----------
Balance at December 31, 1996 52,800 13,200 (4,714)
Common stock issued for cash and
assets during 1997 197,200 398,853
Net loss during 1997 (50,887)
----------- ----------- -----------
Balance at December 31, 1997 250,000 412,053 (55,601)
Common stock issued for cash and
assets during 1998 4,712,465 682,279
Net loss during 1998 (784,731)
----------- ----------- -----------
Balance at December 31, 1998 4,962,465 1,094,332 (840,332)
Common stock issued for cash, assets,
and services during 1999 2,531,300 1,087,945
Net loss during 1999 (1,123,298)
----------- ----------- -----------
Balance at December 31, 1999 7,493,765 $ 2,182,277 $(1,963,630)
=========== =========== ===========
The accompanying notes are an integral
part of these financial statements
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD
FROM JULY 15, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1999
Year Ended July 15, 1996 (Inception)
December 31, 1999 to December 31, 1999
----------------- --------------------
Cash Flows From Operating Activities:
<S> <C> <C>
Net loss $(1,123,298) $(1,963,630)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation 39,125 82,837
Stock issued for services 504,185 820,060
Loss on disposal of fixed assets 19,043 18,443
Changes in current assets and liabilities:
Advances to employees 1,450
Advances to related parties (27,704)
Inventory 4,843 (26,475)
Accounts receivable 17,937 17,205
Prepaid expenses (835) (835)
Accounts payable 22,931 125,209
Payroll taxes payable 6,610 8,048
----------- -----------
Net cash used in operating activities (508,009) (946,842)
----------- -----------
Cash Flows From Investing Activities:
Purchases of property and equipment (29,348) (597,187)
----------- -----------
Cash Flows From Financing Activities:
Common stock issued 431,760 1,168,399
Proceeds from long-term debt -0- 251,400
Loans from related parties 135,317 292,978
Repayment of long-term debt (33,865) (168,748)
----------- -----------
Net cash provided by financing activities 533,212 1,544,029
----------- -----------
Net Decrease in Cash (4,145) -0-
Cash, Beginning of Period 4,145 -0-
----------- -----------
Cash, End of Year $ -0- $ -0-
=========== ===========
Supplemental Disclosures:
Property and equipment acquired by borrowing under notes
payable or capital lease obligations or for stock issued $ 64,657 $ 139,191
=========== ===========
Inventory and assets acquired by stock issuance $ 311,257 $ 345,662
=========== ===========
Debt converted to capital stock $ 115,000 $ 115,000
=========== ===========
Interest paid $ 31,419 $ 54,681
=========== ===========
The accompanying notes are an integral
part of these financial statements
F-6
</TABLE>
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Sandy Creek Corporation, (the "Company") was formed on July 15, 1996 to
engage in the commercial production of ostrich meat and various products
derived from the animal's hide. The Company owns and operates an 80-acre
ostrich ranch in Crestview, Florida and has a processing facility in Esto,
Florida.
Summary of Significant Accounting Policies
Accounts Receivable:
No allowance for uncollectible accounts receivable has been established as
management believes all accounts are collectible.
Inventory:
Inventory is valued at cost determined by the first-in, first-out method.
Inventory, generally ostriches, acquired for Company common stock is valued
at management's estimated fair value of the goods received because the
value of the birds is readily determinable while the value of the Company's
common stock fluctuates over a wide range. Inventory consists of ostrich
yearlings that are being held for slaughter, and processed meat held for
sale.
Property and Equipment:
Property and equipment are stated at cost. Additions, renewals and
significant improvements are capitalized whereas expenditures for
maintenance and repairs are charged to expense. Property and equipment
acquired for the Company's common stock is valued at management's estimate
of the fair value of the asset acquired because the asset values are more
readily determinable because the Company's common stock value fluctuates
over a wide range. Assets acquired by capital lease are recorded at the
fair value of the future minimum lease payments. Amortization of leased
assets is included with depreciation expense. Depreciation is provided
using the straight-line method over the following estimated useful lives:
Years
-----
Buildings and ranch improvements 20 to 39
Furniture and fixtures 7 to 10
Vehicles 5
Machinery and equipment 5 to 10
Breeding flock 35
Office equipment 5
Advertising:
Advertising costs are expensed as incurred.
F-7
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes:
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the bases of certain assets
and liabilities for financial and tax reporting. Deferred taxes represent
future tax return consequences of these differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled.
Earnings per Share:
Basic earnings per share are computed by dividing earnings available to
common stockholders by the weighted average number of common shares
outstanding during the period
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
NOTE 2 - DEVELOPMENT STAGE OPERATIONS
The Company was formed July 15, 1996. Operations through December 31, 1999
consisted principally of the acquisition of breeder flocks and the
development of the ranch and processing facilities, and the development of
markets for the Company's products. Significant portions of the Company's
assets and operating expenses were financed through the issuance of shares
of common stock, and were valued at management's estimation of the fair
value of the goods or services received. This method of valuation was used
because the value of the services is readily determinable while the value
of the Company's common stock fluctuates over a wide range. The Company
intends to commence operations in 2000 and will no longer be in the
development stage.
NOTE 3 - INVENTORY AND BREEDING FLOCKS
Inventory: Carrying
Number Value
------ -----
Yearling birds for slaughter 16 $ 3,200
Processed products 57,680
--------
$ 60,880
========
Property:
Breeders 423 $251,895
========
F-8
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 4 - RELATED PARTY TRANSACTIONS
Amounts due to stockholders of $ 177,978 at December 31, 1999 consist of
the following:
Due to Leslie Lerner $ 47,060
Due to Judith King 130,918
--------
$177,978
========
The above amounts were advanced to the Company for operating capital and
have no stated terms.
During 1999 Leslie Lerner and Judith King received no salaries but were
issued common stock for consulting and professional services in the amounts
of 330,000 shares valued at $107,472 and 210,000 shares valued at $71,360,
respectively.
During 1999, advances from another stockholder, John Demoleas, were
converted into 192,500 shares of common stock.
NOTE 5 - LONG-TERM DEBT
Long-term debt at December 31, 1999 consists of the following:
Mortgage note payable to bank, interest at 8.5%, due
$1,107 monthly including interest through September 2003
when the remaining balance is due; secured by Company real
estate and trailer $ 123,251
Notes payable to commercial financing and leasing
companies, interest at rates from 9.9% to 19.6%, aggregate
monthly payments of $3,252 including interest, maturities
through July 2004; secured by equipment 87,449
-----------
210,700
Less current maturities (28,963)
-----------
$ 181,737
===========
Maturities of debt for years subsequent to 1999 are as follows:
2000 $ 28,963
2001 31,745
2002 22,504
2003 125,646
2004 1,842
----------
$ 210,700
==========
F-9
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 6 - COMMON STOCK
Of the total number of common shares issued at December 31, 1999, a total
of 4,998,900 shares are restricted as to the ability to resell for periods
up to one year from the date of issuance.
NOTE 7 - INCOME TAXES
At December 31, 1999, the Company had approximately $1,963,000 in net
operating loss carryforwards available for federal and state tax reporting
purposes. These carryforwards expire in various years through 2019. Due to
the uncertainty of the ultimate realization of any deferred tax assets
associated with these available loss carryforwards, management has elected
to provide a valuation allowance for the full amount of the of the net
deferred tax asset.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Contingencies:
During the year ended December 31, 1999, the Company returned an item of
equipment used in its Ocala, Florida processing plant that was closed in
1999. The equipment was being purchased under a capital lease agreement
with Security Leasing Services, Inc. The Company is liable for amounts
remaining due, if any, after the leasing company has sold the equipment.
Commitments:
In August 1999 the Company entered into an agreement to purchase a
processing facility located in Esto, Florida valued at $140,000. Under the
terms of the agreement, the Company is to pay $25,000 in cash, 100,000
shares of common stock, and assume or pay-off the outstanding mortgage on
the property that is held by a commercial bank. The 100,000 shares of
capital stock with a value of $25,000 were issued to the owners and are
carried in the balance sheet as a deposit on real estate. The $25,000 cash
payment has not yet been made. Currently, the Company is using the facility
for processing ostriches for market and is paying the mortgage payment to
the bank in the amount of $700 per month. Payments are charged to rent
expense.
F-10
<PAGE>
SANDY CREEK CORPORATION
FINANCIAL STATEMENTS
December 31, 1998
Independent Auditors Report F-12
Financial Statements
Balance Sheet - Assets F-13
Balance Sheet - Liabilities and Stockholders Equity F-14
Income Statements F-15
Statement of Changes in Stockholders' Equity F-16
Statement of Cash Flows F-17
Notes to Financial Statements F-18- F-21
F-11
<PAGE>
CARR, RIGGS & INGRAM, LLP
CERTIFIED PUBLIC ACCOUNTANTS
P.O. Box 5438 (850) 837-3141
Destin, Florida 32540 Fax: (850) 654-4619
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Sandy Creek Corporation
Crestview, Florida
We have audited the accompanying balance sheet of Sandy Creek Corporation (a
development stage Company) as of December 31, 1998 and the related statements of
operations, stockholders' equity and cash flows for the year then ended and for
the period from July 16, 1996 (date of inception) to December 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 Sandy Creek Corporation as of
December 31, 1998 and the results of its operations and its cash flows for the
year then ended and for the period from July 16, 1998 (date of inception) to
December 31, 1998 in conformity with generally accepted accounting principles.
/s/ CARR RIGGS & INGRAM, LLP
- ----------------------------
CARR RIGGS & INGRAM, LLP
Certified Public Accountants
Destin, Florida
May 24, 1999
F-12
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Current Assets
Cash $ 4,145
Advances to employees 1,450
Inventory, at cost 65,723
Accounts Receivable 28,436
---------
Total Current Assets 99,754
Property and Equipment
Building and ranch improvements 174,539
Furniture and fixtures 3,622
Vehicles 40,590
Machinery and equipment 102,680
Breeding flock 237,600
Office equipment 9,242
Land 74,100
---------
Total Property and equipment 642,373
Accumulated Depreciation (46,842)
---------
Net Property and equipment 595,531
---------
TOTAL ASSETS $ 695,285
=========
see accompanying notes
F-13
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET (CONTINUED)
DECEMBER 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 102,278
Payroll taxes payable 1,438
Due to related parties 157,661
Current portion of long term debt 27,248
-----------
Total Current liabilities 288,625
Long term liabilities
Long term debt less current portion 152,660
-----------
Total liabilities 441,285
Stockholders' equity
Common stock, no par 10,000,000
Shares authorized, 4,962,465 shares
issued and outstanding 1,094,332
Deficit accumulated during the development stage (840,332)
-----------
Total Stockholders' equity $ 695,285
===========
see accompanying notes
F-14
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGES COMPANY)
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 AND THE PERIOD
FROM JULY 16, 1996 (DATE OF INCEPTION) TO DECEMBER 31, 1998
July 15, 1996
Year Ended Inception
December 31, to December 31,
1998 1998
---- ----
Sales $ 18,982 $ 18,982
Cost of Sales 11,030 11,030
Gross Profit $ 7,952 $ 7,952
Selling, general and administrative
Expenses (785,498) (831,102)
--------- ---------
Operating (loss) (777,546) (823,150)
Other income (expense)
Interest income 10 10
Interest expense (13,265) (23,262)
Gain (loss) on disposal of
fixed asset (600) (600)
Other income 6,670 6,670
--------- ---------
(7,185) (17,182)
--------- ---------
Net loss before taxes (784,731) (840,332)
Income tax expense (benefit) -- --
--------- ---------
Net Loss $(784,731) $(840,332)
========= =========
see accompanying notes
F-15
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
PERIOD FROM JULY 15, 1996 (DATE OF INCEPTION)
TO DECEMBER 31, 1998
Common Stock Accumulated
Shares Amount Deficit
------ ------ -------
Common stock issued for cash during 1996 52,800 $ 13,200 $ --
Net Loss during 1996 -- -- (4,714)
--------- --------- ---------
BALANCE AT DECEMBER 31, 1996 52,800 13,200 (4,714)
Common stock issued for cash and assets
during 1997 197,200 398,853 --
Net Loss during 1997 -- -- (50,887)
--------- --------- ---------
BALANCE AT DECEMBER 31, 1997 250,000 412,053 (55,601)
Common stock issued for cash and assets
during 1998 4,712,465 682,279 --
Net Loss during 1998 -- -- (784,731)
--------- --------- ---------
BALANCE AT DECEMBER 31, 1998 -- -- (840,332)
See accompanying notes.
F-16
<PAGE>
<TABLE>
<CAPTION>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998 AND THE PERIOD FROM
JULY 15, 1996 DATE OF INCEPTION TO DECEMBER 31, 1998
July 15, 1996
Year Ended (Inception)
December 31, to December 31,
1998 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss $ (784,731) $ 840,332
Adjustments to reconcile net income to net cash
provided (used) by operating activities 40,529 43,712
Stock issued for services 315,875 315,875
Loss on disposal of fixed assets (600) (600)
(Increase) decrease in:
Advances to employees (1,400) (1,450)
Advances to related parties (25,252) (27,704)
Inventory (31,318)
Accounts receivable (732) (732)
(Increase) decrease in:
Accounts payable 94,728 102,278
Payroll taxes payable (540) 1,438
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (362,123) (438,833)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (84,273) (567,839)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (84,273) (567,839)
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued 324,586 736,839
Borrowings of long-term debt 126,400 251,400
Repayments of long-term debt (140,700) (134,883)
Advances from related parties 137,671 157,661
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 447,957 1,010,817
NET INCREASE IN CASH 1,561 4,145
CASH, BEGINNING OF PERIOD 2,584 --
----------- -----------
CASH, END OF YEAR $ 4,145 $ 4,145
=========== ===========
SUPPLEMENTAL DISCLOSURES
Property and equipment acquired by borrowing
under notes payable or capital lease obligations
or for stock issued $ 74,534 $ 75,534
Inventory acquired by stock issuance $ 34,405 $ 34,405
Interest paid $ 13,265 $ 23,262
See accompanying notes
F-17
</TABLE>
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
YEAR ENDED DECEMBER 31, 1998 AND THE PERIOD FROM
JULY 15, 1996 (INCEPTION) TO DECEMBER 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Sandy Creek Corporation, (the "Company") was formed on July 15, 1996 to engage
in the commercial production of ostrich meat and various products derived from
the animal's hide and oils. The company owns and operates an 80-acre ostrich
ranch in Crestview, Florida and leases a processing facility in Ocala, Florida.
SUMMARY OF SIGNIFIANT ACCOUNTING POLICIES
Inventory
Inventory is valued at cost determined by the first-in, first-out method.
Inventory acquired for Company common stock is valued at management's estimated
value of the goods received. Inventory consists of ostrich yearlings that are
being held for slaughter, and processed meat held for sale.
Property and Equipment
Property and equipment are stated at cost. Additions, renewals and betterments
are capitalized whereas expenditures for maintenance and repairs are charged to
expense. Depreciation is provided using declining methods over the following
estimated useful lives.
Years
-----
Building and ranch improvements 39
Furniture and fixtures 7
Vehicles 5
Machinery and equipment 7
Breeding flock 35
Office equipment 5
Advertising
Advertising costs are expensed as incurred.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the bases of certain assets and
liabilities for financial and tax reporting. Deferred taxes represent future tax
return consequences of these differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled.
Estimates
The preparation of financial statements in conformity with generally accepting
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly the actual results
could differ from those estimates.
NOTE 2 - DEVELOPMENT STAGE OPERATIONS
The Company was formed July 15, 1996. Operations through December 31, 1998
consisted principally of the acquisition of breeder flocks and the development
of the ranch and processing facilities. Significant portions of the Company's
assets and operating expenses were financed through the issuance of shares of
common stock, and were valued at management's estimation of fair value of the
goods or services rendered. The Company intends to commence operations in 1999
and will no longer be in the development stage.
F-18
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
YEAR ENDED DECEMBER 31, 1998 AND THE PERIOD FROM
JULY 15, 1996 (INCEPTION) TO DECEMBER 31, 1998
NOTE 3 - INVENTORY AND BREEDING FLOCKS
Inventory and breeding flocks consisted of the following at December 31, 1998
Carrying
Number Value
------ -----
Breeders 396 $ 237,600
=========
Yearlings 240 $ 48,000
Chicks 15 --
Processed products N/A $ 17,723
---------
$ 65,723
=========
NOTE 4 - LONG TERM DEBT
Long-term debt at December 31, 1998 consist of the following:
Mortgage note payable to bank, interest at 8.5%, due $1,107
monthly including Interest through September, 2003 when the
remaining balance is due; secured by Company real estate and
trailer in Crestview, Florida $ 125,605
Note payable to Chrysler Financial Company, interest at
10.75%, due $640 monthly including interest through January
2004; secured by a truck $ 29,593
Note payable to S&P Financial Services, Inc. due $1,544
monthly including interest through January 2000; secured by
equipment $ 15,900
Note payable to Associates Commercial Corporation, including
interest at 10%, due $527 monthly including interest through
July, 2000; secured by equipment $ 8,810
---------
$ 179,908
Less current maturities 27,248
---------
$ 152,660
=========
F-19
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
YEAR ENDED DECEMBER 31, 1998 AND THE PERIOD FROM
JULY 15, 1996 (INCEPTION) TO DECEMBER 31, 1998
Maturities of long-term debt for years subsequent to 1998 are as follows:
1999 $ 27,248
2000 12,643
2001 8,819
2002 9,745
2003 121,222
2004 231
NOTE 5 - COMMON STOCK
Of the total number of common shares issued at December 31, 1998, a total of
3,500,500 shares are restricted as to the ability to resell for periods up to
one year from the date of issuance.
NOTE 6 - LEASES
The Company is leasing its Ocala, Florida processing facility under a five year
operating lease through July 31, 2003. The lease contains a renewal option for
an additional five years. Monthly rentals under this lease are $3,500. Rent
expense for 1998 and for the period form inception through December 31, 1998 was
$17,500. Future minimum lease payments under this lease are as follows:
1999 $ 42,000
2000 42,000
2001 42,000
2002 42,000
2003 24,500
NOTE 7 - INCOME TAXES
At December 31, 1998 the Company had approximately $850,000 in net operating
loss carry-forwards for Federal and State tax reporting purposes. These
carry-forwards expire in various years though 2018. Due to the uncertainty of
the ultimate realisation of any deferred tax assets associated with these
available loss carry-forwards, management has elected to provide a valuation
allowance for those deferred tax asset amounts.
F-20
<PAGE>
SANDY CREEK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
YEAR ENDED DECEMBER 31, 1998 AND THE PERIOD FROM
JULY 15, 1996 (INCEPTION) TO DECEMBER 31, 1998
NOTE 8 - RELATED PARTY TRANSACTIONS
Included in the Accounts Receivable at December 31, 1998 is $27,704 from related
companies. These companies have common ownership with the Company. These
receivables originated from advances made by the Company, as well as $6,120 in
sales from the Company to two of the related companies.
Due to shareholders of $157,661 at December 31, 1998 consists of the following:
Due to Les Lerner $ 1,700
Due to Judy King 40,961
Due to John Demoleas 115,000
--------
$157,661
========
All of the above amounts have no stated terms or conditions. These amounts were
advanced to the Company for operating capital.
NOTE 9 - YEAR 2000 ISSUE (UNAUDITED)
Like other entities, the Company could be adversely affected if the computer
systems used by the Company, its suppliers, or customers do not properly process
and calculate date-related information and data from the period surrounding and
including January 1, 2000. This is commonly known as the "Year 2000" issue.
Additionally, this issue could impact noncomputer systems and devices such as
production equipment, elevators, etc. At this time, because of the complexities
involved in the issue, assurances cannot be provided that the Year 2000 issue
will not have an impact on the Company's operations.
F-21
<PAGE>
PART III
ITEM 1 INDEX TO EXHIBITS
Exhibit 1 * State of Florida Certified True Copy of Articles of
Incorporation
Exhibit 2 * Articles of Incorporation
Exhibit 3 * Amendment to Articles of Incorporation November 20, 1996
Exhibit 4 * Amendment to Articles of Incorporation October 5, 1998
Exhibit 5 * Amendment to Articles of Incorporation November 23, 1998
Exhibit 6 * Amendment to Articles of Incorporation
Exhibit 7 * By-laws of Sandy Creek Corporation
Exhibit 8 * Specimen Share Certificate
* As filed on Original Form SB-10
Signature Page
15
<PAGE>
SIGNATURE
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned thereunto duly authorized.
SANDY CREEK OSTRICH RANCH, INC.
Registrant
By: /s/ Leslie M. Lerner
------------------------
Leslie M. Lerner
Date: April 5, 2000
16
