SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
September 30, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 000-30331
STRUTHERS, INC.
---------------
(Exact name of registrant as specified in its charter)
NEVADA 57-1075246
------ ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1 CARRIAGE LANE, BLDG. D, SUITE G-E, CHARLESTON, SC 29407
---------------------------------------------------------
(Address of principal executive offices)
(843) 763-1755
--------------
(Registrant's telephone number, including area code)
NONE
----
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of September 30, 2000, 373,357,670 shares of common stock were outstanding.
As of November 13, 2000, 374,695,544 shares of common stock were outstanding.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STRUTHERS, INC. AND SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Independent Accountants' Report F-1
Consolidated Balance Sheets at September 30, 2000 (Unaudited) F-2
and December 31, 1999
Consolidated Statements of Changes in Stockholders' Equity
for the Three and Nine Months Ended September 30, 2000
and 1999 (Unaudited) F-3
Consolidated Statements of Operations for the Three Months and
Nine Months Ended September 30, 2000 and 1999 (Unaudited) F-4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and 1999 (Unaudited) F-5 - F-6
Notes to the Consolidated Financial Statements (Unaudited) F-7
2
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
and Stockholders
Struthers, Inc. and Subsidiaries
(A Nevada Corporation)
Charleston, South Carolina
We have reviewed the accompanying consolidated balance sheets of
Struthers, Inc. and Subsidiaries as of September 30, 2000 and the related
consolidated statements of changes in stockholders' equity and operations for
the three months and nine months ended September 30, 2000 and 1999, and the
consolidated statements of cash flows for the nine months ended September 30,
2000 and 1999 in accordance with standards established by the American Institute
of Certified Public Accountants. All information included in these consolidated
financial statements is the responsibility of the Company's management.
A review of interim financial information consists principally of
inquiries of Company personnel and analytical procedures applied to the
financial data. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying consolidated financial statements in
order for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets of Struthers, Inc. and
Subsidiary as of December 31, 1999 (presented herein), and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the three years in the period then ended (not presented
herein), and in our report dated March 17, 2000, we expressed an unqualified
opinion on those consolidated financial statements. We have not performed any
auditing procedures since the date of our previous report.
/s/ Rotenberg & Company, LLP
----------------------------
Rotenberg & Company, LLP
Rochester, New York
November 14, 2000
F - 1
<PAGE>
STRUTHERS, INC. & SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 2000
(UNAUDITED) AND DECEMBER 31, 1999
------------------------------------------------------------------------------------------------------------------
(Unaudited)
SEPTEMBER 30, December 31,
2000 1999
------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and Cash Equivalents $ 2,852,338 $ 201,160
Accounts Receivable 483,432 112,649
Other Receivables 37,857 --
Note Receivable - Officer 150,000 --
Deposit -- 80,000
Inventory 606,089 260,000
Prepaid Expenses and Deposits 53,021 7,376
------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 4,182,737 661,185
PROPERTY AND EQUIPMENT - NET OF ACCUMULATED DEPRECIATION 3,575,222 2,408,906
OTHER ASSETS
Intangible Assets - Net of Accumulated Amortization 3,884,368 2,259,200
------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 11,642,327 $ 5,329,291
------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Other Current Liabilities $ 103,833 $ 56,817
Compensation Payable - Stock Grants -- 50,000
Mortgage Payable - Due Within One Year 1,407 --
Note Payable - Legred Acquisition - Due Within One Year -- 900,000
Stock Payable - Due Within One Year 2,000,000 2,750,000
------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,105,240 3,756,817
OTHER LIABILITIES
Mortgage Payable - Due After One Year 37,722 --
Stock Payable - Legred Acquisition - Due After One Year -- 1,000,000
------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,142,962 4,756,817
------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common Stock - $.001 Par; 900,000,000 Shares Authorized;
373,357,670 and 356,722,690 Shares Issued and Outstanding
as of September 30, 2000 and December 31, 1999, Respectively 373,357 356,723
Convertible Preferred Stock- $.001 Par; 6,500,000 Shares Authorized;
6,500,000 Shares Issued and 6,390,833 Outstanding 6,391 --
Preferred Stock - $.001 Par; 20,000 Shares Authorized,
20,000 Shares Issued and Outstanding 20 --
Additional Paid-in Capital 11,701,586 1,381,941
Deficit (2,581,989) (1,166,190)
------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 9,499,365 572,474
------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,642,327 $ 5,329,291
------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
See Accountants Review Report
F - 2
<PAGE>
STRUTHERS, INC. & SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
-----------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE
COMMON STOCK PREFERRED STOCK ADDITIONAL TOTAL
------------------------ ----------------- PAID-IN STOCKHOLDERS'
SHARES PAR VALUE SHARES PAR VALUE CAPITAL DEFICIT EQUITY
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1998 327,692,620 $ 327,693 -- $ -- $ 136,071 $ (549,129) $ (85,365)
Issuance of Common Stock
for Cash at $.04 per Share 23,310,000 23,310 -- -- 909,090 -- 932,400
Shares Issued to Employees
- Previously Granted Shares 3,000,000 3,000 -- -- 27,000 -- 30,000
Shares Issued to Consultants
for Services Rendered 100,000 100 -- -- 9,900 -- 10,000
Shares Issued - Charitable Contribution 400,000 400 -- -- 39,600 -- 40,000
Net Loss for the Three Months Ended
(Unaudited) -- -- -- -- -- (50,000) (50,000)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE - MARCH 31, 1999 354,502,620 $ 354,503 -- $ -- $ 1,121,661 $ (599,129) $877,035
Net Loss for the Three Months
Ended (Unaudited) -- -- -- -- -- (10,794) (10,794)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 1999 354,502,620 $ 354,503 -- $ -- $ 1,121,661 $ (609,923) $ 866,241
Net Loss for the Three Months
Ended (Unaudited) -- -- -- -- -- (269,004) (269,004)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE - SEPTEMBER 30, 1999 354,502,620 $ 354,503 -- $ -- $ 1,121,661 $ (878,927) $ 597,237
Issuance of Common Stock in
Connection with the Legred
Acquisition at $.1126 per Share 2,220,000 2,220 -- -- 247,780 -- 250,000
Capital Contributed in
Form of Services -- -- -- -- 12,500 -- 12,500
Net Loss for the Three Months
Ended (Unaudited) -- -- -- -- -- (287,263) (287,263)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1999 356,722,620 $ 356,723 -- $ -- $ 1,381,941 $(1,166,190) $ 572,474
Issuance of Common Stock in
Connection with Legred Acquisition
at $.1126 per Share 6,660,000 6,660 -- -- 743,340 -- 750,000
Net Loss for the Three Months
Ended (Unaudited) -- -- -- -- -- (288,645) (288,645)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE - MARCH 31, 2000 363,382,620 $ 363,383 -- $ -- $ 2,125,281 $(1,454,835) $1,033,829
Issuance of Common Stock in
Connection with Legred
Acquisition at $.63 per Share 1,587,302 1,587 -- -- 998,413 -- 1,000,000
Shares Issued to Employees
- Previously Granted Shares 5,000,000 5,000 -- -- 45,000 -- 50,000
Issuance of Convertible Preferred Stock
for Cash at $1.00 per Share -- -- 6,500,000 6,500 6,493,500 -- 6,500,000
Issuance of Preferred Stock for Cash at
$1.00 per Share -- -- 20,000 20 19,980 -- 20,000
Net Loss for the Three Months
Ended (Unaudited) -- -- -- -- -- (588,310) (588,310)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 2000 369,969,922 $ 369,970 6,520,000 $ 6,520 $ 9,682,174 $(2,043,145) $8,015,519
Issuance of Common Stock in
Connection with
The Acquisitions of:
Elite Visions at $.82 per Share 2,303,488 2,303 -- -- 1,886,587 -- 1,888,890
Muller A.I. at $.51238 per Share 195,168 195 -- -- 99,805 -- 100,000
AutoPacker at $.48356 per Share 10,340 10 -- -- 4,990 -- 5,000
Shares Issued to Consultants for Services
Rendered at $.48 per Share 60,000 60 -- -- 28,740 -- 28,800
Conversion of Class B Preferred Stock
Into Common Stock 818,752 819 (109,167) (109) (710) -- --
Net Loss for the Three Months
Ended (Unaudited) -- -- -- -- -- (538,844) (538,844)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE - SEPTEMBER 30, 2000
(Unaudited) 373,357,670 $ 373,357 6,410,833 $6,411 $11,701,586 $(2,581,989) $9,499,365
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
See Accountants Review Report
F - 3
The accompanying notes are an integral part of this financial statement
See Accountants Review Report
F - 3
<PAGE>
STRUTHERS, INC. & SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-----------------------------------------------------------------------------------------------------------
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -----------------------
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $ 969,960 $ -- $ 2,753,019 $ --
Cost of Sales - Farm Operations 504,079 -- 1,683,226 --
-----------------------------------------------------------------------------------------------------------
GROSS PROFIT 465,881 -- 1,069,793 --
-----------------------------------------------------------------------------------------------------------
EXPENSES
Research and Development 85,000 -- 167,106 --
Marketing and Advertising 20,279 13,106 70,630 13,106
General and Administrative 548,445 259,087 1,368,849 319,881
Amortization and Depreciation 400,683 -- 967,092 --
-----------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1,054,407 272,193 2,573,677 332,987
-----------------------------------------------------------------------------------------------------------
LOSS BEFORE OTHER INCOME AND (EXPENSES) (588,526) (272,193) (1,503,884) (332,987)
OTHER INCOME AND (EXPENSES)
Interest Income 49,682 3,189 88,085 3,189
-----------------------------------------------------------------------------------------------------------
LOSS BEFORE PROVISION FOR INCOME TAXES (538,844) (269,004) (1,415,799) (329,798)
Provision for Income Taxes -- -- -- --
-----------------------------------------------------------------------------------------------------------
NET LOSS $ (538,844) $ (269,004) $ (1,415,799) $ (329,798)
-----------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 370,042,304 354,502,620 368,348,892 354,502,620
LOSS PER COMMON SHARE- BASIC AND DILUTED $ (0.00) $ (0.00) $ (0.00) $ (0.00)
-----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of
this financial statement.
See Accountants Review Report
F - 4
<PAGE>
STRUTHERS, INC. & SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
------------------------------------------------------------------------------------
For the Nine Months Ended September 30, 2000 1999
------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss $(1,415,799) $ (329,798)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Amortization and Depreciation 967,092 --
Common Shares Issued to Consultants
for Services Rendered 28,800 40,000
Charitable Contributions of Common Stock -- 10,000
CHANGES IN ASSETS AND LIABILITIES:
Accounts Receivable (370,783) --
Other Receivables (37,857) (420)
Inventory (211,794) --
Prepaid Expenses and Deposits (45,645) (775)
Accounts Payable and Other Current Liabilities 25,449 5,733
------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES (1,060,537) (275,260)
------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (1,487,541) (44,438)
Acquisition of Elite Visions (22,000) --
Acquisition of Muller A. I (131,290) --
Deposit on Investment in Struthers Pedigree Herd Corp. 80,000 (105,000)
Note Receivable - Officer (150,000) --
------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES (1,710,831) (149,438)
------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Common Stock -- 932,400
Proceeds from Issuance of Convertible
Preferred Stock 6,500,000 --
Proceeds from Issuance of Preferred Stock 20,000 --
Repayment of Mortgage (871) --
Repayment of Note Payable - Legred Acquisition (900,000) --
Repayment of Notes Payable - Other (196,583) --
------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 5,422,546 932,400
------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 2,651,178 507,702
Cash and Cash Equivalents - Beginning of Period 201,160 2,278
------------------------------------------------------------------------------------
Cash and Cash Equivalents - End Of Period $ 2,852,338 $ 509,980
------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
See Accountants Review Report
F - 5
<PAGE>
STRUTHERS, INC. & SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (UNAUDITED)
------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
------------------------------------------------------------------------------------
<S> <C>
For the Nine Months Ended September 30, 2000
------------------------------------------------------------------------------------
Issuance of Stock in Connection with Acquisition of Legred Subsidiary $ 1,750,000
------------------------------------------------------------------------------------
Issuance of Stock to Employees - Previously Granted Shares 50,000
------------------------------------------------------------------------------------
Acquisition of Assets- Elite Visions, LLC
Assets Purchased:
Inventories 26,438
Property, Plant & Equipment 427,189
Patents 1,700,818
------------------------------------------------------------------------------------
Total Assets Purchased 2,154,445
Less: Liabilities Assumed - Notes Payable (243,585)
Less: Purchase Price Financed via Future Stock Issuance (1,888,860)
------------------------------------------------------------------------------------
Cash Paid 22,000
------------------------------------------------------------------------------------
Acquisition of Assets- Muller A.I., LLC
Assets Purchased:
Inventories 107,857
Equipment 5,000
Goodwill 140,000
------------------------------------------------------------------------------------
Total Assets Purchased 252,857
Less: Liabilities Assumed - Customer Deposits (21,567)
Less: Purchase Price Financed via Future Stock Issuance (100,000)
------------------------------------------------------------------------------------
Cash Paid 131,290
------------------------------------------------------------------------------------
Acquisition of Property and Equipment via Mortgage 40,000
------------------------------------------------------------------------------------
Acquisition of Rights to "AutoPacker" - Issuance of Common Stock 5,000
------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
See Accountants Review Report
F - 6
<PAGE>
STRUTHERS, INC. AND SUBSIDIARIES
(A NEVADA CORPORATION)
CHARLESTON, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(UNAUDITED)
--------------------------------------------------------------------------------
NOTE A - BASIS OF PRESENTATION
The condensed consolidated financial statements of Struthers, Inc.
and Subsidiaries (the "Company") included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission (the "SEC"). Certain
information and footnote disclosures normally included in financial
statements prepared in conjunction with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate so that the information presented is not misleading. These
condensed financial statements should be read in conjunction with the
annual audited financial statements and the notes thereto included in
the Company's Form 10 Registration Statement, and other reports filed
with the SEC.
The accompanying unaudited interim financial statements reflect all
adjustments of a normal and recurring nature which are,
in the opinion of management, necessary to present fairly the
financial position, results of operations and cash flows of the
Company for the interim periods presented. The results of operations
for these periods are not necessarily comparable to, or indicative
of, results of any other interim period or for the fiscal year as a
whole. Factors that affect the comparability of financial data from
year to year and for comparable interim periods include the
acquisition of additional subsidiaries, and general and
administrative costs required to meet SEC reporting obligations.
Certain financial information that is not required for interim
financial reporting purposes have been omitted.
NOTE B - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries, Legred Struthers Genetics, Inc., Elite
Visions, Inc., and Muller A.I., Inc. All significant intercompany
balances and transactions have been eliminated in consolidation.
NOTE C - NOTE RECIVABLE - OFFICER
The Company advanced $150,000 to one of its officer's in the form
of a loan. The note is interest bearing at 10.5% per annum with
interest payable monthly and the principal due in twelve months.
NOTE D - STOCK PAYABLE - BRENT LEGRED
The Company would have had to issue approximately 6,060,000 shares
of common stock using the trading price of $.33 per share as of
September 30, 2000 in order to settle the outstanding obligation
to Brent Legred. A $1,000,000 installment due on November 2, 2000
was settled with the issuance of 2,457,002 shares of common stock
based on the 30 day average price of $.4070 per share.
NOTE E - PRO FORMA INFORMATION
The Company's unaudited Pro Forma Consolidated Results of
Operations for the nine months ended September 30, 2000 and 1999,
shown below are presented assuming that the Legred Elite Visions
and Muller A.I. acquisitions had been consumated on January 1,
1999:
Nine Months Ended
September 30,
-------------
2000 1999
---- ----
Pro Forma Revenues $ 2,770,354 $ 956,705
Pro Forma Net Loss $(1,500,793) $(1,221,723)
Pro Forma Net Loss Per Share $ (0.00) $ (0.00)
F-7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS CERTAIN STATEMENTS OF A
FORWARD-LOOKING NATURE RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL
PERFORMANCE OF THE COMPANY. SUCH STATEMENTS ARE ONLY PREDICTIONS AND THE ACTUAL
EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE THOSE DISCUSSED BELOW AS WELL AS THOSE DISCUSSED IN OTHER
FILINGS MADE BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION,
INCLUDING THE COMPANY'S ANNUAL REPORT INCLUDED IN ITS INITIAL REGISTRATION
STATEMENT ON FORM 10-SB.
Overview
The Company's business is the sale and marketing of products and
services designed to increase reproductive efficiency, animal production and
quality in the swine industry utilizing the technology and products it has
developed. Principal sources of revenue are through the sale of gilts (young
females that have not given birth to pigs), mature boars, barrows (castrated
male hogs), semen, artificial insemination supplies, embryo transfer services,
including embryo transfer equipment and training. The Company has developed a
semen delivery system for use in artificial insemination including the use of
the Gourley Scope(TM). The Company has perfected the surgical Embryo Transfer
System and is currently improving the procedure to include the non-surgical
implantation of embryos. Embryo transfer is the ability to remove an embryo from
a genetically superior animal and introduce it into a surrogate host (mature
recipient female). This has been done successfully, commercially in other large
farm animals but has never been successfully commercialized in swine due to the
intricate nature of the swine reproductive system. The Company anticipates
including this technology into its overall marketing plans during the first
quarter of 2001.
The Company's stud boar unit located in Bricelyn, Minnesota, with 206
Great Grand Parent boars that produce semen for sale, was augmented by the
addition of a new state-of-the-art stud boar facility that will house 400
additional boars. Each boar produces 1,200 doses of semen per year with a retail
price per dose of $7.00. At capacity, the facility can produce 480,000 doses of
semen per year. The new facility was completed during September 2000 and became
operational in October 2000. Semen sales for the two months from the date of
acquisition of Legred through December 31, 1999 were $31,074. Semen sales for
the first, second, and third quarters of 2000 were $53,374, $63,552 and $92,586,
respectively.
Gilt sales (prepubescent breeding sows) are supplied through the
Company's gilt multiplier system. The Company generates an average of 450 gilt
sales per month with an average sales price of $195 per gilt. The Company
currently has contracts with eleven gilt multiplier farms for the production of
our superior genetic lines of gilts and barrows. Gilt sales for the two months
from the date of acquisition of Legred through December 31, 1999 were $201,736.
Gilt sales for the first, second, and third quarters of 2000 were $259,360,
$221,225 and $127,090, respectively. Gilt sales in the third quarter of 2000
decreased because the Company was building its own breeding herds.
10
<PAGE>
Boar and barrow (prepubescent boars) sales are also made through the
multiplier system or from the core genetic herd. Boar and barrow sales for the
two months from the date of acquisition of Legred through December 31, 1999 were
$59,758. Boar and barrow sales for the first, second, and third quarters of 2000
were $95,090, $101,830 and $87,148, respectively. Boar and barrow sales also
decreased in the third quarter because the Company was building its own breeding
herds for use in the new stud boar facility.
The Company currently has the following two agreements for the sale of
gilts and semen for the production of TenderPrime(TM) line of meat products:
Andy Bakken Farms d/b/a A-B Duroc and Fairmont Finishers. Both customers
purchase gilts and semen from the LSG Duroc line of animals. The LSG line of
Duroc was chosen as the animal to be processed for the Tender Prime(TM) line of
high end, value added meat products. The Company has agreements (referenced in
the swine industry as "Alliances") both with A-B Duroc and Fairmont Finishers to
supply animals for the Tender Prime (TM) line of products.
The Company currently has alliances with five swine producers for the
rearing of our superior genetic line of hogs for market under the Company's
specific developed programs in order to fulfill the needs of identified meat
packers. The Company collects a percentage of the premiums paid by meat packers
for hogs from our genetic line from both the Company's own herds and alliance
herds. Current premiums paid by meat packers for our top quality hogs range from
$9.00 to $22.00 per hog. Percentages paid to alliance hog producers vary on a
per contract basis, but generally range between $4.00 and $5.00 per hog. The
Company has identified several meat packers with needs for certain types of
animals under the Company's developed protocols and programs. The Company
continues to seek additional alliance herds to fulfill those identified needs
and expects to significantly expand its herd size in future quarters. Market
sales of hogs for the two months from the date of acquisition of Legred through
December 31, 1999 were $19,895. Market sales of hogs for the first, second, and
third quarter of 2000 were $464,626, $431,143 and $394,370, respectively.
Included in those sales were sales of market hogs to a meat processor of
$379,340, $344,493 and $0 in the first, second, and third quarters,
respectively.
Sales of breeding aides, services and artificial insemination supplies
for the first, second and third quarter 2000 were $5,822, 65,015 and $255,893,
respectively. The increase in sales of breeding aides, services and AI supplies
was primarily attributable to the acquisitions of Elite Visions and Muller A.I.
during the second quarter of 2000.
11
<PAGE>
The following are selected supplementary data and analysis of the results of
operations for the three month and nine month periods ended September 30, 2000
and 1999 and for the three months ended June 30, 2000:
<TABLE>
<CAPTION>
Three Months Three Months Nine Months
Ended Ended Ended
September 30, June 30, September 30,
--------------------------------------------------------------------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
Operating Revenues:
<S> <C> <C> <C> <C> <C> <C>
Semen $ 92,586 $ -- $ 63,552 $ -- $ 209,512 $ --
Gilts 127,090 -- 221,225 -- 607,675 --
Boars and Barrows 87,148 -- 101,830 -- 284,068 --
Market Swine 394,370 -- 431,143 -- 1,290,139 --
Breeding Aides (AI Supplies) 255,893 -- 65,015 -- 326,730 --
Other Supplies 12,873 -- 4,761 -- 34,895 --
----------- ---------- -------- -------- ---------- --------
Total Operating Revenues 969,960 -- 887,526 -- 2,753,019 --
----------- ---------- -------- -------- ---------- --------
EBDITA (1) $ (138,161) (269,004) $(303,456) $(10,794) $ (289,798) $(329,798)
----------- ---------- -------- -------- ---------- --------
Net Loss $ (538,844) $ (269,004) $(588,310 $(10,794) (1,415,799) $(329,798)
----------- ---------- -------- -------- ---------- --------
Net Loss per Share
- Basic and Diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.00)
----------- ---------- -------- -------- ---------- --------
<FN>
(1) - Earnings before depreciation, interest, taxes and amortization expenses.
</FN>
</TABLE>
12
<PAGE>
Results of Operations
Three and Nine Months Ended September 30, 2000 and 1999 and for the
Three Months Ended June 30, 2000.
The following table sets forth, for the periods indicated, the
percentages of total revenues represented by certain items reflected in the
Company's consolidated statements of operations.
<TABLE>
<CAPTION>
Three Months Three Months Nine Months
Ended Ended Ended
September 30, June 30, September 30,
-------------------------------------------------------------------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
Operating Revenues:
<S> <C> <C> <C> <C> <C> <C>
Semen 9.55% 0.00% 7.16% 0.00% 7.61% 0.00%
Gilts 13.10% 0.00% 24.93% 0.00% 22.07% 0.00%
Boars and Barrows 8.98% 0.00% 11.47% 0.00% 10.32% 0.00%
Market Swine 40.66% 0.00% 48.58% 0.00% 46.86% 0.00%
Breeding Aides (AI Supplies) 26.38% 0.00% 7.33% 0.00% 11.87% 0.00%
Other Supplies 1.33% 0.00% 0.53% 0.00% 1.27% 0.00%
----- ----- ----- ----- ----- -----
Total Operating Revenues 100.00% 0.00% 100.00% 0.00% 100.00% 0.00%
Cost of Sales 51.97% 0.00% 63.50% 0.00% 61.15% 0.00%
------ ----- ------ ----- ------ -----
Gross Profit 48.03% 0.00% 36.50% 0.00% 38.85% 0.00%
------ ----- ------ ----- ------ -----
Expenses:
Research and Development 8.76% 0.00% 8.28% 0.00% 6.07% 0.00%
Marketing and Advertising 2.09% 0.00% 2.59% 0.00% 2.56% 0.00%
General and Administrative 56.54% 0.00% 63.92% 0.00% 49.72% 0.00%
Amortization and Depreciation 41.31% 0.00% 32.09% 0.00% 35.13% 0.00%
------ ----- ------ ----- ------ -----
Total Expenses 108.70% 0.00% 106.88% 0.00% 93.48% 0.00%
------- ----- ------- ----- ------ -----
Operating Loss (60.67)% 0.00% (70.38)% 0.00% (54.63)% 0.00%
Other Income 5.12% 0.00% 4.09% 0.00% 3.20% 0.00%
----- ----- ----- ----- ----- -----
Loss Before Income Taxes (55.55)% 0.00% (66.29)% 0.00% (51.43)% 0.00%
Provision for Taxes 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
----- ----- ----- ----- ----- -----
Net Loss (55.55)% 0.00% (66.29)% 0.00% (51.43)% 0.00%
-------- ----- -------- ----- -------- -----
</TABLE>
13
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1999
REVENUES
Revenues for the nine months ended September 30, 2000 were $2,753,019.
Included therein is $329,925 of gross revenue from the sale of offspring and
semen directly attributable to Norsvin acquired boars representing approximately
12% of total consolidated revenues. Of those sales the Company was obligated to
pay a royalty to Norsvin of 4% or approximately $13,197. While the Company
expects the sales under this arrangement to increase in dollar volume, the
Company expects the percentage contribution to total consolidated revenue to
continue to diminish in the future due to the development of its other product
lines. The Company had no revenues during the nine months ended September 30,
1999 since the Company first began to generate revenues after the Legred
acquisition in November 1999.
COST OF SALES
The cost of sales for the nine months ended September 30, 2000 was
$1,683,226 and represented 61.15% of total revenues. The Company had no cost of
sales during the nine months ended September 30, 1999 prior to the Legred
acquisition.
RESEARCH AND DEVELOPMENT COSTS
The Company incurred $167,106 in research and development costs,
representing 6.07% of total revenues for the nine months ended September 30,
2000. The Company did not incur any research and development costs during the
nine months ended September 30, 1999.
MARKETING AND ADVERTISING COSTS
Marketing and advertising costs for the nine months ended September
30, 2000 were $70,630 and represented 2.56% of total revenues as compared with
$13,106 for the nine months ended September 30, 1999.
GENERAL AND ADMINISTRATIVE COSTS
General and administrative costs increased by $1,048,968 from
$319,881 for the nine months ended September 30, 1999 to $1,368,849 for the nine
months ended September 30, 2000. The increase in general and administrative
costs was attributable to the Registrant's efforts in raising capital,
restructuring its business activities, and registering its common stock. The
Company was in the development stage during the nine months ended September 30,
1999.
AMORTIZATION AND DEPRECIATION
Amortization and depreciation was $967,092 for the nine months ended
September 30, 2000 and was attributed primarily to the inclusion of Legred
Struthers Genetics, Inc., Elite Visions, Inc. and Muller A. I., Inc. The Company
had no depreciation and amortization for the nine months ended September 30,
1999.
14
<PAGE>
OTHER INCOME
Other income for the nine months ended September 30, 2000 was $88,085
as compared with $3,189 for the nine months ended September 30, 1999 and
represented interest income on invested cash.
PROVISION FOR TAXES
The Company has not had any taxable income since its inception and
therefore has not incurred any income taxes. The Company has not recognized any
deferred tax benefits in connection with net operating loss carryforwards and
will not until such time as it is more likely than not that the related tax
benefits will be realized.
THREE MONTHS ENDED SEPTEMBER 30, 2000 AS COMPARED WITH THE THREE MONTHS
ENDED JUNE 30, 2000 AND THE THREE MONTHS ENDED SEPTEMBER 30, 1999
REVENUES
Revenues for the three months ended September 30, 2000 increased by
$82,434 (9.3%) to $969,960 from $887,526 for the three months ended June 30,
2000. The increase was attributed primarily to the sale of breeding aides and
services, and artificial insemination supplies through Elite Visions, Inc. and
Muller A. I., Inc. The Company had no revenues during the three months ended
September 30, 1999 since the Company first began to generate revenues after the
Legred acquisition in November 1999.
COST OF SALES
The cost of sales for the three months ended September 30, 2000 was
$504,079 and represented 51.97% of total revenues as compared with $563,551
representing 63.50% of total revenues for the three months ended June 30, 2000.
The decrease in the percentage of cost of sales in the third quarter was
primarily due to a favorable mix in sales volume attributable to the lower cost
of sales of breeding aides and services, and artificial insemination supplies
through Elite Visions, Inc. and Muller A. I., Inc. The Company had no cost of
sales during the three months ended September 30, 1999.
RESEARCH AND DEVELOPMENT COSTS
The Company expended $85,000 in research and development costs
representing 8.76% of total revenues for the three months ended September 30,
2000 as compared with $73,474 representing 8.28% of total revenues for the three
months ended June 30, 2000. The increase in the third quarter was primarily
attributable to the development of the Gourley Scope. The Company did not incur
any research and development costs during the three months ended September 30,
1999.
15
<PAGE>
MARKETING AND ADVERTISING COSTS
Marketing and advertising costs for the three months ended September
30, 2000 were $20,279 and represented 2.09% of total revenues as compared with
$23,006 representing 2.59% of total revenues for the three months ended June 30,
2000. The Company incurred $13,106 of marketing and advertising costs during the
three months ended September 30, 1999.
GENERAL AND ADMINISTRATIVE COSTS
General and administrative costs were $548,445 representing 56.54% of
total revenues for the three months ended September 30, 2000 as compared with
$567,293 representing 63.92% of total revenues for the three months ended June
30, 2000. General and administrative costs decreased by $18,848 (3.32%) in the
third quarter. The decrease in general and administrative costs was attributable
to employee bonuses and employee relocation costs incurred during the second
quarter of 2000. General and Administrative costs for the three months ended
September 30, 1999 were $259,087. The increase in the quarter ended September
30, 2000 as compared with the quarter ended September 30, 1999 was primarily
attributable to the Company's efforts in raising capital, restructuring its
business activities, and registering its common stock.
AMORTIZATION AND DEPRECIATION
Amortization and depreciation was $400,683 for the three months ended
September 30, 2000 as compared with $284,854 for the three months ended June 30,
2000. The increase in amortization and depreciation during the third quarter was
attributed primarily to the inclusion of Elite Visions, Inc. and Muller A. I.,
Inc. at the end of the second quarter of 2000. The Company had no depreciation
and amortization for the three months ended September 30, 1999.
OTHER INCOME
Other income for the three months ended September 30, 2000 was $49,682
as compared with $36,342 for the three months ended June 30, 2000 and
represented interest income earned on invested cash. The increase in the third
quarter was attributed to the cash proceeds received on the sale of preferred
stock and invested in interest bearing accounts at September 30, 2000. The
Company had interest income of $3,189 for the three months ended September 30,
1999.
PROVISION FOR TAXES
The Company has not had any taxable income since its inception and,
therefore has not incurred any income taxes. The Company has not recognized any
deferred tax benefits in connection with net operating loss carryforwards and
will not until such time as it is more likely than not that the related tax
benefits will be realized.
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and met its capital
requirements including the acquisition of Legred, Elite Visions and Muller A.
I., through the sales of equity securities. Cash flows from operations was a
negative $1,060,537 for the nine months of operations ended September 30, 2000
as compared with $867,799 in negative cash flows from operations for the six
months ended June 30, 2000. The increase in the negative cash flows during the
third quarter was due primarily to increases in accounts receivable.
Cash used in investing activities was $1,710,831 for the nine months
ended September 30, 2000. $1,640,831 of cash was used to purchase property and
equipment (including cash used in the acquisition of Elite Visions, Inc. and
Muller A. I.) and in construction of the new boar stud facility, $150,000 was
advanced to an officer of the Company in the form of a loan and $80,000 was
received on the return of a deposit on an investment in the Struthers Pedigree
Herd Corp.
The net cash provided by financing activities for the nine months ended
September 30, 2000 was $5,422,546. The Company received net proceeds on
preferred stock offerings of $6,520,000 and paid $900,000 on the notes payable
to Brent Legred and approximately $197,000 on other notes payable assumed in the
acquisition of Elite Visions during the nine months ended September 30, 2000.
As of September 30, 2000, the Company had net working capital of
$4,077,497 exclusive of stock obligations payable in common stock of $2,000,000
in connection with the Legred acquisition. The Company's primary source of
liquidity at September 30, 2000 was $2,852,338 in cash and cash equivalents,
$483,432 in trade accounts receivable and $606,089 in inventories.
The Company may, in the future, pursue additional acquisitions of
businesses, products and technologies, or enter into joint venture arrangements,
that could complement or expand the Company's business. Any material acquisition
or joint venture could result in a decrease to the Company's working capital,
depending on the amount, timing and nature of the consideration to be paid. The
Company has not completed any negotiations for any significant acquisitions,
joint ventures or mergers at the present time that have not been disclosed.
The Company does not have any material commitments for capital
expenditures during the next 12 months other than those disclosed herein. The
Company believes that existing cash and cash equivalent balances as of September
30, 2000 and the potential cash flow from operations will satisfy the Company's
working capital and capital expenditure requirements for at least the next 12
months. The Company may consider various alternatives for obtaining additional
equity or debt financing should the need occur. Any material acquisitions of
complementary businesses, products, services or technologies could require the
Company to obtain such financing. There can be no guarantee that such financing
will be available on acceptable terms, if at all.
17
<PAGE>
EFFECTS OF INFLATION
Inflation has not had a material effect on the Company's revenues and
expenses since its inception and inflation is not expected to have a material
effect in the future.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rates
The Company invests its cash in short-term variable rate money
market accounts and demand deposits. The Company's only borrowings are
fixed rate mortgages and notes payable. The Company's operations are
not materially affected by changes in interest rates
18
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
(1) Company's Annual Meeting of Stockholders was held on October 28, 2000.
(2) Messrs. Douglas W. Beatty and Rhett C. Seabrook were nominated for
re-election as directors to hold office until the next Annual Meeting
of Stockholders and until their respective successors shall have been
duly elected and qualified. Both Messrs. Beatty and Seabrook were
re-elected. The vote was as follows:
Abstentions/
Name For Against
Douglas W. Beatty 243,960,096 19,300
Rhett C. Seabrook 243,940,769 19,300
<PAGE>
(3) (i) Vote was taken to ratify and approve the appointment of
Rotenberg & Company, LLP, as independent auditors for the year
ending December 31, 2000 and to authorize the directors to fix
auditors' remuneration. The vote was as follows:
Abstentions/
For Against
243,889,376 70,720
19
<PAGE>
(1) Vote was taken to ratify, approve and confirm all prior
actions of the directors and officers of the Company and all
filed amendments to the Company's Articles of Incorporation.
The vote was as follows:
Abstentions/
For Against
242,829,626 1,130,470
(4) Not applicable
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
- No reports on Form 8-K have been filed during the quarter for which
this report is filed.
Exhibit No. Description & Location
3.1 Articles of Incorporation of Latitude
Network Inc. Incorporated by Reference to
Form 10 filed April 13, 2000
3.2 Amended Articles of Incorporation of
Latitude Network, Inc. Incorporated by
Reference to Form 10 filed April 13, 2000
3.3 Amended Articles of Incorporation of
Orbis Development, Inc. Incorporated by
Reference to Form 10 filed April 13, 2000
3.4 Amended Articles of Incorporation of
Struthers, Inc. Incorporated by Reference
to Form 10 filed April 13, 2000
3.5 Certificate of Correction of Amended
Articles of Incorporation of Struthers, Inc.
Incorporated by Reference to Form 10
filed April 13, 2000
20
<PAGE>
3.6 Amended Articles of Incorporation of
Struthers, Inc. Incorporated by Reference to
Form 10 filed April 13, 2000
3.7 By-Laws of Struthers, Inc.
Incorporated by Reference to
Form 10 filed April 13, 2000
4 See Exhibit 3.4, 3.5, 3.6 filed herewith
for rights of security holders.
Incorporated by Reference to
Form 10 filed April 13, 2000
9 Voting Trust Agreement
Incorporated by Reference to
Form 10 filed April 13, 2000
10.1 Agreement dated November 2, 1999
among Struthers, Inc., Legred Genetics,
Inc., Legred Genetics, and Brent Legred
(With exhibits). Incorporated by Reference
to Form 10 filed April 13, 2000
10.2 Assignment and Assumption of Lease
betweeen Struthers, Inc. and Legred
Struthers Genetics, Inc. Incorporated by
Reference to Form 10 filed April 13, 2000
10.3 Employment Agreement with Douglas
W. Beatty. Incorporated by Reference to Amended
Form 10 filed October 25, 2000
10.4 Employment Agreement with Rhett
Seabrook. Incorporated by Reference to
Amended Form 10 filed October 25, 2000
10.5 Employment Agreement with Bertram
K. Remley. Incorporated by Reference to
Amended Form 10 filed October 25, 2000
10.6 Employment Agreement with Brent Legred.
Incorporated by Reference to Amended Form 10
filed October 25, 2000
21.1 Articles of Incorporation of Legred Struthers
Genetics, Inc., a subsidiary of Registrant.
Incorporated by Reference to Amended Form 10
Filed August 28, 2000
21
<PAGE>
21.2 Amended Articles of Incorporation of
Legred Struthers Genetics, Inc.
Incorporated by Reference to Amended
Form 10 filed August 28, 2000
21.3 Articles of Incorporation of Elite Visions, Inc.
Incorporated by Reference to Amended Form 10
Filed August 28, 2000
21.4 Articles of Incorporation of Muller A.I., Inc.
Incorporated by Reference to Amended Form 10
Filed August 28, 2000
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
December 8, 2000 STRUTHERS, INC.
By /s/ Douglas W. Beatty
----------------------------------
Douglas W. Beatty, President
By /s/ Bertram K. Remley
----------------------------------
Bertram K. Remley,
Chief Financial Officer
22
