Securities and Exchange Commission
Washington D. C. 20549
Form 10-KSB
Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996 Commission file number 0-7320
FARM FISH, INC.
(Name of small business issuer in its charter)
MISSISSIPPI 64-0474591
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Post Office Box 23109
Jackson, MS 39225-3109
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code - (601) 354-3801
Securities Registered under Section 12(g) of the Exchange Act:
No-Par Common Stock
(Title of Class)
Check whether issuer (1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes x No ______.
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [x]
Revenues for the year ended December 31, 1996 were $3,267,890.
Aggregate market value of voting stock held by non-affiliates of the Registrant
as of December 31, 1996 - Indeterminate*
(2,688,605 shares issued and outstanding as of December 31, 1996)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement to be mailed to the shareholders of
Registrant in connection with the Annual Meeting of Shareholders to be held on
May 27, 1997 are incorporated by reference into Part III of this Form 10-KSB.
- ------------------------
* For purposes of the response to this item only, Delta Industries, Inc. and
all directors of the Registrant have been deemed affiliates of the Registrant.
* The Registrant has been advised by two broker sources who have heretofore
traded in the stock of the Registrant that there is insufficient basis for
establishing a market value.
The Officers of Farm Fish, Inc.
Name Office
Leland R. Speed Chairman of the Board of Directors
Thomas R. Slough, Jr. President
David Robison Vice-President
Charles E. Horne Secretary-Treasurer
All officers are elected by the Board of Directors. The term of office is not
fixed.
Members of the Board of Directors
Name Principal Occupation
W. D. Mounger President of Delta Royalty Company, Inc.,
(engaged generally in the oil and gas business)
T. L. Reed, III Owner of Silver Creek Plantation (engaged
in agri-business operations)
Thomas R. Slough, Jr. Vice-Chairman of Delta Industries, Inc.
(engaged in marketing ready-mix concrete)
Leland R. Speed Engaged as an officer and/or director in
various corporations, including EastGroup
Properties and Parkway Properties, Inc. which
are engaged in various commercial activities
including general financial matters and real
estate development
The term of office for all directors will expire at the Annual Meeting
scheduled for May 27, 1997.
Description of Business
General
Farm Fish, Inc., "Farm Fish" engages in the hatching and growing of catfish
(generally referred to as "producing" catfish). Farm Fish was organized in
1972 as a Subchapter C corporation. The principal executive offices of Farm
Fish are located at 100 W. Woodrow Wilson Drive, Jackson, Mississippi 39213,
and its telephone number is (601) 354-3801.
The Catfish Industry
The catfish farming industry has grown rapidly since its inception in the late
1960's. In 1969, approximately 3.2 million pounds of catfish were sold to
processing plants at an average price of approximately $0.37 per pound. In
1996, the number of pounds sold to catfish processors had increased to
approximately 4.5 million pounds, at prices ranging from approximately $ 0.73
to $ 0.80 per pound during the year.
Catfish farming is conducted primarily in Alabama, Arkansas, Louisiana and
Mississippi, with Mississippi dominating the industry.
Farm Fish's Operations
Farm Fish's primary production assets are brood ponds, a hatchery, fingerling
ponds and production ponds. The life cycle of a farm-raised catfish begins in
a brood pond, where the eggs ("spawn") are laid and fertilized. The spawn is
then retrieved and taken to the hatchery, where it is placed in water-filled
troughs which are continuously monitored to ensure the water is aerated and
kept at the proper temperature. The hatchery operates for approximately two
months each year, usually from mid-May to mid-July.
The newly hatched catfish, called "fry", are kept in the hatchery briefly and
are then transported to a fingerling pond where they remain until they are one
to two inches in length, at this stage the catfish are referred to as
"fingerlings". Some of the fingerlings may be sold to other catfish farmers,
but typically most are kept and used to stock the farm's production ponds.
The catfish are fed until they reach marketable size (usually one to one-and-
a-half pounds) and harvested with seines.
The catfish are fed a commercially prepared feed consisting of soybeans, corn,
wheat and fishmeal. The catfish are fed from approximately mid-March through
the end of October each year. Little food is supplied to the catfish during
the winter months.
Farm Fish conducts its business at its catfish farm in Humphreys County,
Mississippi. The farm consists of approximately 1,750 acres of land, of which
approximately 1,375 acres are devoted to mostly 20 acre ponds. The farm is a
complete facility for producing "farm-raised" catfish, with brood ponds, a
hatchery, fingerling ponds and production ponds.
Processing and Marketing
Farm Fish sold its processing operations in March 1986 and no longer engages
in processing live fish or marketing processed products.
Significant Customers
The Company's sales are to a limited number of catfish processors. In 1996
three processors represented 61%, 23%, and 11% of the Company's net sales. In
1995, the same three processors represented 56%, 22% and 13% of the Company's
net sales. (See Note 1 to the financial statements)
Competition
There are a substantial number of independent catfish producers in the general
market area. Farm Fish is one of the larger producers of live fish according
to reports published by the USDA's National Agricultural statistical service.
Competition among catfish farmers who produce live fish for sale to catfish
processors is based primarily on price. Production techniques are becoming
more sophisticated as the industry matures, and farmers who take advantage of
the emerging technology in areas such as the maintenance of high water quality
may develop a competitive advantage in terms of cost efficiency. The Company
continually monitors water quality of each pond to ensure optimum conditions
for fish growth. The Company has replaced some of its gas and diesel powered
aeration equipment with more efficient and cost effective electrical aeration
equipment.
Farm Fish Personnel
On December 31, 1996, Farm Fish employed approximately 26 employees, all of
whom were engaged in duties related to its catfish farming operations.
Industry Segments
Farm Fish operates in only one industry segment, ("catfish production").
Regulatory Matters
Farm Fish's facilities and operations are subject to regulation by various
federal and state agencies, including, but not limited to, the United States
Department of Agriculture, The Environmental Protection Agency, The
Occupational Safety and Health Administration and corresponding state agencies.
Compliance with existing regulations has not had a material adverse effect on
Farm Fish's earnings or competitive position in the past and is not anticipated
to have a materially adverse effect in the future. Management believes that
Farm Fish is in substantial compliance with existing laws and regulations
relating to the operation of its facilities and does not know of any major
capital expenditures necessary to comply with such regulations.
Description of Property
Farm Fish owns nearly 1,750 acres of farmland in Humphreys County, Mississippi,
near the town of Louise. Most of this land is devoted to the ponds, to the
banks and levees, which surround and separate the ponds, and to various service
and storage areas. Farm Fish has borrowings from a bank totaling $1,075,000
at December 31, 1996, secured by substantially all of Farm Fish's assets and
the guaranty of Delta Industries, Inc. ("Delta Industries"). See Note 4 to
the Consolidated Financial Statements.
Inventory
Farm Fish owns a substantial inventory of harvestable and growing fingerlings,
and during the spring of the year owns a substantial inventory of spawn and
fry. These catfish are located at the hatchery and in the fingerling and
production ponds on the catfish farm in Humphreys County, Mississippi. The
book value of the live fish inventory as of December 31, 1996 was $4,635,380.
Brood Fish
Farm Fish also owns "brood" fish which are located in the brood fish ponds on
the catfish farm in Humphreys County, Mississippi. The book value of the
brood fish as of December 31, 1996 was $44,987.
Legal Proceedings
As of December 31, 1996, there were no material legal proceedings pending or
threatened against Farm Fish.
Submission of Matters to a Vote of Security Holders
None.
Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure
None.
MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
The authorized capital stock of Farm Fish consists of 5,000,000 shares of
common stock. The 2,688,605 issued and outstanding shares of Farm Fish's
stock are held of record by approximately 1,843 stockholders. Although Farm
Fish common stock is registered under the Securities Exchange Act of 1934,
there is no readily ascertainable market value for the stock, since the stock
is not traded on any exchange, is traded infrequently over the counter, and
is not quoted in any newspaper. The stock is listed in the "pink sheets"
under the symbol "FFIH". Farm Fish has been advised by broker sources who
have heretofore traded in the stock of Farm Fish that there is insufficient
basis for establishing a market value.
Holders of Farm Fish common stock have one vote for each share held and are
entitled to accumulate their votes for the election of directors. Shares of
common stock are not subject to redemption and the holders of such shares do
not have preemptive rights. Holders of shares of common stock are entitled
to share ratably in the assets of Farm Fish legally available for distribution
to holders of common stock in the event of the liquidation, dissolution or
winding up of Farm Fish. The holders of common stock are equally entitled to
dividends when, as and if declared by the Board of Directors.
Dividends
No cash dividend has been paid by Farm Fish since May 1, 1982. Any payment of
dividends in the future will depend upon Farm Fish's growth, profitability,
available cash, financial condition and other factors that the Board of
Directors deems relevant.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of 1996 to 1995 Results of Operations
Net sales decreased by $579,283 or 15% from 1995. The decrease resulted from
a 5% decrease in the average selling price of catfish, and a 477,959 or 10%
decrease in pounds of catfish sold. The decrease in net sales is attributable
to decreased demand from the Company's largest customer, Delta Pride Catfish,
Inc., and to decreased fingerling sales.
Cost of product sold for 1996 decreased $599,529 or 22% as compared to 1995.
Of the decrease $269,000 is attributable to a change in estimated live fish
growout in 1995. (See Note 1 to the Consolidated Financial Statements). The
remaining decrease is attributable to the 10% decrease in pounds of catfish
sold, decreased fingerling sales as a percentage of total sales in 1996 which
are at a higher cost per pound and a small decrease in mortality due to more
adverse summer weather conditions in 1995. The decrease in the cost of
product sold attributable to lower volume was offset by higher catfish feed
cost in 1996 compared to 1995. The average market price paid for catfish feed
increased 26% in 1996 from 1995. Catfish feed represents the single most
significant component of Farm Fish's cost of product. The market price for
catfish feed may fluctuate substantially and exhibit cyclical characteristics
typically associated with commodity markets. From time to time, the Company
establishes prices for a portion of its anticipated feed purchases through
feed purchase agreements.
Selling, general, and administrative expenses increased $13,501 or 11% from
1995. The increase was principally due to an increase in certain professional
fees.
Interest expense decreased $24,521 or 33% due to a decrease in average
borrowings.
The effective income tax rate was 37.2% in 1996 compared to 36.7% in 1995.
As the result of the above, net income increased by $63,524 to $546,648.
Seasonality of Operating Results
In prior years, the revenues of Farm Fish have been seasonal and cyclical.
Prices for live fish have tended to rise during the first part of the year
and drift downward during the summer, only to rise again in September and
October and fall in November and December before beginning the annual price
cycle again. However, in 1995 prices were consistent throughout the year,
and in 1996 prices were consistent throughout the first three quarters of the
year and decreased slightly during the last quarter.
Liquidity and Capital Resources
The principal balance with respect to the long-term debt was $370,000 at
December 31, 1996. The Company had $195,000 available under a short-term
line of credit at December 31, 1996 and had a principal balance outstanding
of $705,000. The long-term borrowings and borrowings under the line of credit
bear interest at floating rates based upon prime (8.42% and 8.25%, respectively
at December 31, 1996), and are collateralized by substantially all the assets
of Farm Fish and the guaranty of Delta Industries, Inc.
Additional borrowings may be necessary to meet cash flow needs during the 1996
feeding season. Although there is no binding commitment from Delta Industries,
Farm Fish expects Delta Industries to continue its prior policy with respect
to assisting Farm Fish in financing its operations, in light of Delta
Industries' ownership of eighty percent (80%) of Farm Fish stock. Delta
Industries also has represented that it plans to seek repayment of the
$2,099,250 owed to it by Farm Fish as of December 31, 1996 only as cash becomes
available from operations.
During 1996, Farm Fish purchased $349,466 of property, buildings and equipment
principally with the proceeds from borrowings under the line of credit. Cash
flows provided by operating activities decreased from $853,373 in 1995 to
$63,212 used in operating activities in 1996 principally from increased
inventory levels in 1996.
At year-end 1995, Farm Fish's ratio of current assets to current liabilities
was 1.69 to 1 and its ratio of stockholders' equity to total liabilities was
1.15 to 1. At year end 1996, Farm Fish's ratio of current assets to current
liabilities was 1.60 to 1 and the ratio of stockholders' equity to total
liabilities was 1.16 to 1.
Inflation
Farm Fish's operations are sensitive to changes in the cost of feed and the
market price of live fish. As with other agricultural enterprises, these
prices are responsive to the wide range of conditions generally affecting
crop prices and food prices, and are not within Farm Fish's control.
Farm Fish, Inc.
Consolidated Financial Statements
Years ended December 31, 1996 and 1995
Report of Independent Auditors
The Board of Directors and Shareholders
Farm Fish, Inc.
We have audited the accompanying consolidated balance sheets of Farm Fish, Inc.
and subsidiary as of December 31, 1996 and 1995, and the related consolidated
statements of income, shareholders' equity, and cash flows for the years 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 audits.
We conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Farm Fish, Inc.
and subsidiary at December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
/s/Ernst & Young LLP
Jackson, Mississippi
February 5, 1997
Farm Fish, Inc.
Consolidated Balance Sheets
December 31
1996 1995
---------------------
Assets
Current assets:
Cash and cash equivalents $ 80,815 $ 22,231
Accounts receivable 174,230 202,873
Advances to employees 6,872 7,626
Inventories,principally live fish (Note 4) 4,656,796 3,721,339
---------- ----------
Total current assets 4,918,713 3,954,069
Property, buildings and equipment (Note 4):
Land 738,259 716,839
Ponds and improvements 2,112,070 1,982,895
Brood fish 44,987 44,987
Buildings 316,040 316,040
Machinery and equipment 2,089,661 1,897,539
---------- ----------
5,301,017 4,958,300
Accumulated depreciation 3,025,014 2,779,909
---------- ----------
2,276,003 2,178,391
Other assets:
Investments in cooperatives (Notes 3 and 4) 301,139 375,723
Other noncurrent assets 7,523 1,632
---------- ----------
308,662 377,355
---------- ----------
Total assets $7,503,378 $6,509,815
========== ==========
Liabilities and shareholders' equity
Current liabilities:
Note payable (Note 4) $ 705,000 $ -
Accounts payable 2,179 10,801
Accrued expenses 97,123 112,368
Payable to shareholder (Note 2) 2,175,171 2,115,389
Current maturities of long-term debt 100,000 100,000
---------- ----------
Total current liabilities 3,079,473 2,338,558
Long-term debt, less current maturities (Note 4) 270,000 570,000
Deferred income taxes (Note 5) 129,000 123,000
Shareholders' equity (Note 2):
Common stock, no par value:
Authorized shares - 5,000,000
Issued and outstanding shares - 2,688,605 4,424,336 4,424,336
Additional paid-in capital 475,776 475,776
Retained earnings (deficit) (875,207) (1,421,855)
---------- ----------
Total shareholders' equity 4,024,905 3,478,257
---------- ----------
Total liabilities and shareholders' equity $7,503,378 $6,509,815
========== ==========
See accompanying notes.
Farm Fish, Inc.
Consolidated Statements of Income
Year ended December 31
1996 1995
----------------------
Net sales (Note 3) $3,267,890 $3,847,173
Cost and expenses:
Cost of products sold 2,186,832 2,786,361
Selling, general and administrative 133,174 119,673
Interest 49,068 73,589
Other, net (Note 3) 27,976 103,803
---------- ----------
2,397,050 3,083,426
---------- ----------
Income before income taxes 870,840 763,747
Income taxes (Note 5) 324,192 280,623
---------- ----------
Net income $ 546,648 $ 483,124
========== ==========
Net income per share $ .20 $ .18
========== ==========
Weight average shares outstanding 2,688,605 2,688,605
========== ==========
See accompanying notes.
Farm Fish, Inc.
Consolidated Statements of Shareholders' Equity
Additional Retained Total
Common Stock Paid-in Earnings Shareholders'
Shares Amount Capital (Deficit) Equity
--------- ---------- -------- ----------- -----------
Balance at December 31, 1994
2,688,605 $4,424,336 $475,776 $(1,904,979) $2,995,133
Net income for 1995 - - - 483,124 483,124
--------- ---------- -------- ------------ ----------
Balance at December 31, 1995
2,688,605 4,424,336 475,776 (1,421,855) 3,478,257
Net income for 1996 - - - 546,648 546,648
--------- ---------- -------- ------------ ----------
Balance at December 31, 1996
2,688,605 $4,424,336 $475,776 $ (875,207) $4,024,905
========= ========== ======== ============ ==========
See accompanying notes.
Farm Fish, Inc.
Consolidated Statements of Cash Flows
Year ended December 31
1996 1995
----------------------
Operating activities
Net income $ 546,648 $ 483,124
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 251,854 234,043
Gain on sale of equipment (6,480) (614)
Deferred income taxes 6,000 9,000
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable and
advances to employees 29,397 (32,635)
Increase in inventories (935,457) (32,395)
Net decrease in investments in cooperatives 74,584 210,701
(Increase) decrease in other assets (5,891) 1,809
Decrease in trade accounts payableand
accrued expenses (23,867) (19,660)
--------- ----------
Net cash provided by (used in) operating activities (63,212) 853,373
Investing activities
Purchases of property, buildings and equipment (349,466) (149,592)
Proceeds from sales of equipment 6,480 7,231
---------- ----------
Net cash used in investing activities (342,986) (142,361)
Financing activities
Net increase in note payable to bank 705,000 -
Principal payments on borrowings (300,000) (350,729)
Net change in payable to shareholder 59,782 (434,916)
---------- ----------
Net cash provided by (used in) financing activities 464,782 (785,645)
---------- ----------
Increase (decrease) in cash and cash equivalents 58,584 (74,633)
Cash and cash equivalents at beginning of year 22,231 96,864
---------- ----------
Cash and cash equivalents at end of year $ 80,815 $ 22,231
========== ==========
See accompanying notes.
Farm Fish, Inc.
Notes to Consolidated Financial Statements
December 31, 1996
1. Accounting Policies
Business
Farm Fish, Inc. ("the Company") is engaged in catfish farming on approximately
1,375 water acres within the State of Mississippi. Catfish farming is
conducted in a few southern states, principally Mississippi, Louisiana,
Alabama and Arkansas. The Company's sales are to a limited number of
processors. In 1996, three processors represented 61%, 23%, and 11% of the
Company's net sales. In 1995, three processors represented 56%, 22% and 13% of
the Company's net sales. Delta Pride Catfish, Inc. ("Delta Pride") is the
Company's most significant customer. The Company's significant customers are
located within the state of Mississippi. Processed catfish are sold principally
to retail grocery stores, food brokers and restaurants.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, DAT, Inc. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of average cost or market. Live fish
inventories generally require a growing period of one to one and one-half
years from the time the fingerlings are hatched until they reach a weight that
fish are typically harvested. Cost associated with live fish are accumulated
during the growing period and consist principally of feed, labor and overhead
costs required to grow the live fish to a marketable size. Because the
Company's production cycle for fish generally exceeds one year, management
anticipates certain live fish inventories on hand at December 31, 1996 may not
be sold in 1997. Live fish inventories are classified as a current asset in
the accompanying balance sheets which is consistent with the industry practice.
Farm Fish, Inc.
Notes to Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Inventories (continued)
The quantities of live fish inventories are determined based upon estimated
growth from feed fed to each pond and are reduced for the actual quantities
sold and estimated mortality. Each pond is closed periodically and the
estimated pounds are adjusted to the actual harvest. Live catfish are highly
susceptible to disease, oxygen depletion and extreme temperatures which could
result in high mortality. Management continually monitors each pond and takes
appropriate actions to minimize the risk of loss from mortality. Given the
nature of the live fish inventories, it is reasonably possible that the
Company's actual live fish mortality will vary significantly from estimates.
The Company changed its estimate of fish grow-out in 1995 from 2.35 pounds of
feed per one pound of live fish growth to 2.5 pounds of feed fed per one pound
of live fish growth resulting in a $269,000 increase in cost of products sold
and a $170,000 decrease in net income or $.06 per share for the year ended
December 31, 1995.
Inventories consist of the following:
December 31
1996 1995
----------------------
Live fish $4,635,380 $3,694,843
Feed and supplies 21,416 26,496
---------- ----------
$4,656,796 $3,721,339
========== ==========
Property, Buildings and Equipment
Property, buildings, and equipment are stated at cost. Depreciation is
provided by the straight-line method over the assets' estimated useful lives.
Investment in Cooperatives
Investments in cooperatives consist of common stock at cost and the Company's
share of the cooperatives' allocated earnings and losses.
Farm Fish, Inc.
Notes to Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Income Taxes
Income taxes have been provided using the liability method in accordance with
FASB No. 109, "Accounting for Income Taxes". Deferred income taxes reflect
the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes.
Revenue Recognition
Revenue is recognized when product is shipped to customers.
Net Income Per Share
Net income per share is based on the average number of shares of common stock
outstanding during each year. There are no common stock equivalents.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
Impact of Recently Issued Accounting Standards
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company's adoption of
Statement 121 in the first quarter of 1996 was not material.
Farm Fish, Inc.
Notes to Consolidated Financial Statements (continued)
2. Shareholders' Equity and Related Party Transactions
In September 1984, the Company issued in a private offering 1,903,104 shares
of common stock to Delta Industries, Inc. ("Delta") at $1.25 per share. In
consideration for the stock issued, Delta canceled $2,378,880 of notes and
other amounts receivable from the Company. As a result of this transaction,
the Company became an 80% owned subsidiary of Delta.
At December 31, 1996 and 1995, the Company had non-interest bearing advances
payable to Delta totaling $2,175,171 and $2,115,389, respectively. Delta has
not charged the Company any allocation of Delta's corporate expenses.
3. Investments in Cooperatives
Investments in cooperatives consist of the following:
December 31
1996 1995
----------------------
Delta Pride Catfish, Inc. $ 130,678 $ 200,244
Producers Feed Corporation 156,482 161,500
Other 13,979 13,979
---------- ----------
$ 301,139 $ 375,723
========== ==========
The ownership of Delta Pride stock provides the Company the right to sell live
catfish to Delta Pride. Substantially all of the Company's catfish feed
purchases were from Producers Feed Corporation ("Producers") in 1996 and 1995.
In 1996 and 1995, the Company recorded $135,141 and $188,009, respectively, of
operating losses from Delta Pride which are included in other cost and expenses
in the accompanying consolidated statements of income. In 1996 and 1995,
Producers allocated patronage dividends of $79,231, and $53,351, respectively,
to the Company, which are included in other cost and expenses, net. The
Company received patronage dividend payments from Producers of $84,249 and
$76,043 in 1996 and 1995, respectively.
4. Notes Payable and Long-Term Debt
Long-term debt consists of a note payable to a bank, due in annual installments
of $100,000 plus quarterly payments of interest at a floating rate based on
prime (8.42% at December 31, 1996), maturing in 1999.
Farm Fish, Inc.
Notes to Consolidated Financial Statements (continued)
The aggregate annual maturities of long-term debt at December 31, 1996 are as
follows:
1997 $100,000
1998 100,000
1999 170,000
--------
$370,000
========
Note payable at December 31, 1996 consisted of borrowings under a line of
credit with interest at prime (8.25% at December 31, 1996). The Company had
$195,000 and $600,000 available to borrow under the line at December 31, 1996
and 1995, respectively.
Substantially all property, buildings and equipment, inventories and
investments in cooperatives are pledged as collateral to the note payable and
long-term debt.
Interest paid by the Company totaled $49,137 and $74,167 in 1996 and 1995,
respectively.
Farm Fish, Inc.
Notes to Consolidated Financial Statements (continued)
5. Income Taxes
The Company and its subsidiary are included in Delta's consolidated federal
and state income tax returns. The Company's income tax expense for financial
reporting purposes is determined on a separate company basis. The Company's
income taxes paid to Delta totaled $192,000 and $607,668, in 1996 and 1995,
respectively.
The components of deferred tax assets and liabilities are as follows:
December 31
1996 1995
---------------------
Deferred tax liabilities - Property,
buildings and equipment $ 136,000 $ 129,000
Deferred tax assets - Other (7,000) (6,000)
---------- ----------
Net deferred tax liabilities $ 129,000 $ 123,000
========== ==========
Farm Fish, Inc.
Notes to Consolidated Financial Statements (continued)
5. Income Taxes (continued)
Income tax expense consists of the following:
Year ended December 31
1996 1995
----------------------
Current:
Federal $ 275,539 $ 235,212
State 42,653 36,411
---------- ----------
318,192 271,623
Deferred:
Federal 5,200 8,000
State 800 1,000
---------- ----------
6,000 9,000
---------- ----------
$ 324,192 $ 280,623
========== ==========
The reconciliation of income taxes computed at the federal statutory rate to
income tax expense is as follows:
Year ended December 31
1996 1995
---------------------
Taxes at federal statutory rate $ 296,086 $ 259,674
State income taxes, net 28,679 24,691
Other - net (573) (3,742)
---------- ----------
$ 324,192 $ 280,623
========== ==========
6. Operating Leases
The Company leases five tractors and a bulldozer under operating leases which
expire in August 1999 and February 2000, respectively. The leases require the
Company to pay maintenance, insurance, and a fee for usage in excess of
specified limits in addition to the minimum annual rentals. Annual rentals
applicable to the leases are $72,174 through 1999 and $4,493 in 2000. Rent
expense applicable to operating leases totaled $44,568 in 1996 and $31,080 in
1995.
Farm Fish, Inc.
Notes to Consolidated Financial Statements (continued)
7. Fair Value of Financial Instruments
The carrying amount for cash and cash equivalents approximate their fair values
at December 31, 1996. The carrying amount for investments in cooperatives was
$301,139 and the fair value totaled $1,040,000 at December 31, 1996 based upon
estimates of the recent sales of stock of the cooperatives obtained by
management. The fair value of the note payable, which is at a variable
interest rate, and long-term debt, which is estimated using discounted cash
flow analysis based upon the Company's incremental borrowing rates for similar
borrowing arrangements, approximated the carrying amounts at December 31, 1996.
Exhibits and Reports on Form 8-K
(a) Exhibits Required by Item 601 of Regulation S-B:
3(a) Articles of Incorporation - Incorporated by reference from
Form 10-K for year ending
April 30, 1981
3(b) Bylaws - Incorporated by reference from
Form 10-K for year ending
April 30, 1981
3(c) Amendment to Bylaws - Incorporated by reference from
Form 10-K for year ending
December 31, 1984
3(d) Amendment to Articles of Incorporated by reference from
Incorporation - Form 10-K for year ending
December 31, 1984
(10) Material Contracts None
10(a) Asset Purchase Agreement, dated Incorporated by reference from
February 28, 1986 - Form 10-K for year ending
December 31, 1985
10(b) Note Agreements - Loans from Incorporated by reference from
Deposit Guaranty National Bank, Form 10-K for year ending
dated June 28, 1993 - December 31, 1993
10(c) Promissory Note - Loan from
Deposit Guaranty National Bank,
dated December 24, 1996 Filed herein
27 Financial Data Schedule Filed herein
(b) Reports on Form 8-K None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FARM FISH, INC., REGISTRANT
By: /s/ Thomas R. Slough, Jr.
Thomas R. Slough, Jr.,
President
DATE: March 11, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the
Registrant and in the capacity and on the date indicated.
By: /s/ Thomas R. Slough, Jr.
Thomas R. Slough, Jr.,
Director
DATE: March 11, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the
Registrant and in the capacity and on the date indicated.
FARM FISH, INC., REGISTRANT
By: /s/ David Robison
David Robison,
Vice President
DATE: March 12, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the
Registrant and in the capacity and on the date indicated.
FARM FISH, INC., REGISTRANT
By: /s/ Charles E. Horne
Charles E. Horne,
Secretary,
Principal Financial Officer
and Principal Accounting Officer
DATE: March 11, 1997
DIRECTOR'S SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the
Registrant and in the capacity and on the date indicated.
By: /s/ W. D. Mounger
W. D. Mounger, Director
DATE: March 17, 1997
DIRECTOR'S SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the
Registrant and in the capacity and on the date indicated.
By: /s/ Leland R. Speed
Leland R. Speed, Director
DATE: March 11, 1997
DIRECTOR'S SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the
Registrant and in the capacity and on the date indicated.
By: /s/ T. L. Reed, III
T. L. Reed, III, Director
DATE: March 11, 1997
Exhibit 10(c)
DEPOSIT GUARANTY NATIONAL BANK
JACKSON, MISSISSIPPI
PROMISSORY NOTE
REVOLVING MASTER NOTE
Borrower Number Note Number
3366127 0638308
FARM FISH, INC.
_________________________________
Borrower Name(s)
Amount of Note Loan Type
ROUTE 1, BOX 108A $900,000.00 121
- ---------------------------------
Address
LOUISE, MS Date of Note Date Due Term Days
- ---------------------------------
City State DEC. 24, 1996 ON DEMAND DUE ON DEMAND
39097
- -------------------
Zip Code
ON DEMAND after date, the undersigned (joint and severally, if more than one)
hereinafter called make, promises to pay to DEPOSIT GUARANTY NATIONAL BANK,
Jackson, Mississippi, or order, payable at Main Office or any Branch NINE
HUNDRED THOUSAND AND 00/100 Dollars with interest thereon from date until
paid at the per annum rate of: *_______
*DGNB prime rate floating in effect from time to time, except that
the rate will not be greater than the maximum rate permitted by law.
The rate will change if and when prime rate changes. Maker waives notice of
any rate adjustment.
Interest on this note shall be calculated on the basis of a year of 360 days
and the actual number of days elapsed.
Accrued interest on this note is payable monthly beginning Jan. 31, 1997 and
on the LAST day of each succeeding month with any remaining accrued interest
due and payable at maturity together with the outstanding principal balance
hereon. Failure to pay any installment as and when due shall, at the option
of the holder mature the entire indebtedness.
In the event any installment payment of principal and/or interest is more than
fifteen (15) days past due, Maker promises to pay a late payment charge of
$5.00 or four (4%) percent of the amount of the delinquency, whichever is
greater. On loans of $100,000.00 or less having a stated maturity of five
years or less, the late payment charge shall not exceed $50.00.
At its option, and at one or more times, Bank may, but shall have no obligation
to, debit any deposit account of any Obligor with Bank for all or any part of
any sums then due and payable to Bank hereunder.
**Or the aggregate unpaid amount of all borrowings (herein sometimes called
Advances) made by the Bank hereunder.
It is understood by the parties hereto that the undersigned may borrow, repay
and reborrow hereunder prior to demand, provided that the aggregate unpaid
principal amount of such borrowings does not exceed the amount as set forth
herein.
Maker has Pledged to Bank as collateral for payment of this and any and all
other liabilities, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising (all hereafter called
"obligation"), the following property listed below, hereinafter called
Collateral:
SECURITY AGREEMENT DATED 12/24/96 AND FINANCING STATEMENTS FILED
COVERING ALL CATFISH FARM EQUIPMENT AND FARM MACHINERY OF EVERY
DESCRIPTION OWNED BY DEBTOR AND USED IN HIS CATFISH PRODUCTION;
ALL INVENTORY OF CATFISH OWNED BY DEBTOR AND ALL ACCOUNTS,
CONTRACT RIGHTS AND CHATTEL PAPER ARISING FROM THE SALE OF
CATFISH INVENTORY AND ALL SUCH PROPERTY HEREAFTER ACQUIRED
BY DEBTOR.
ALSO A DEED OF TRUST DATED 06/28/93 AND MODIFIED BY MODIFICATION
DEED OF TRUST ON 11/11/96 AND 12/24/96 COVERING 1,740 ACRES OF
LAND LOCATED IN SECTIONS 4, 5, 8, 9, AND 17, TOWNSHIP 13 NORTH,
RANGE 3 WEST, IN HUMPHREYS COUNTY, MISSISSIPPI.
**THIS COLLATERAL ALSO SECURED NOTE NO. 0638306.
Name of Borrower: FARM FISH, INC.
Borrower Number 3366127 Note Number: 0638308
Any pledge or transferee of this note and the Collateral shall have all rights
of Bank hereunder and Bank shall thereafter be relieved from any liability with
respect to any Collateral so pledged or delivered.
Maker will at all times keep the collateral issued at all times against all
insured hazards in amounts equal to the full cash value of the collateral.
Such insurance shall be with insurance carriers which are qualified to do
business in Mississippi and in good standing with the Mississippi Department
of Insurance, and shall provide for payment of all losses thereunder to Bank
as its interest may appear, and, if required, Maker will deposit the policies
of insurance with Bank. Any money received by Bank under said policies may be
applied to the payment of the indebtedness secured hereby with such payment
applied first to interest, then to principal and any other charges, whether or
not due and payable, or at Bank's option, may be delivered by Bank to Maker for
the purpose of repairing or restoring the collateral. Maker hereby assigns to
Bank all rights to receive proceeds of insurance not exceeding the amount of
Maker's indebtedness to bank, direct any insurer to pay all proceeds directly
to Bank, and appoints Bank as its attorney-in-fact to endorse any draft or
check payable to Maker in order to collect the benefit of any such insurance.
Prior to the expiration or cancellation date of Maker's insurance policy on the
collateral, Maker shall provide Bank with a renewal or replacement policy
having an effective date the same as the expiration or cancellation date on
Maker's prior policy and meeting the same requirements as stated hereinabove.
If Maker fails to keep the collateral insured as required by Bank, such failure
shall be a default under the terms and conditions of this note. In addition,
Bank may, at its option, and in addition to any other rights and remedies the
Bank may have under this note or any other agreement with Maker, purchase
insurance at Maker's expense to protect Bank's interest continuously retroactive
to the date of expiration or cancellation of Maker's policy for Maker's
failure to keep the collateral insured. If Bank chooses to purchase insurance
upon Maker's failure to keep the collateral insured, Bank will notify Maker
about the types and amounts of the coverages at the time Bank purchases such
insurance. In addition, the insurance that the Bank purchases likely will not
provide all of the insurance coverage which Maker might normally obtain on its
own, such as liability coverage or coverages for any equity which Maker may have
in the collateral. Also, the deductibles may not be the same as the
deductibles contained in a policy which Maker might normally obtain on its own.
The insurance the Bank purchases likely will not be purchased through the same
carrier and/or agent from which Maker might have previously purchased insurance
on the collateral, and in most cases, the cost of the insurance will be
significantly higher than the insurance which Maker might obtain at its own.
If Bank pays for insurance, such payment shall be secured by the collateral,
and shall bear interest at the ANNUAL PERCENTAGE RATE set forth in Maker's
Note and/or Loan Agreement. Maker agrees to reimburse Bank on demand for such
payment, plus accrued interest, or otherwise to pay said sums in any manner of
installments required by Bank. Maker authorizes Bank to forward any information
which Bank deems necessary to third parties performing services incidental to
Bank's rights and duties under this Note and any Security Agreement with Maker,
including but not limited to, insurance monitoring and placement services.
Even if Bank purchases insurance on the collateral as set out hereinabove, Maker
has the right to purchase the required insurance form an agent or company of
Maker's choice at any time and provide the insurance policy to Bank. Upon
receipt of such policy, Bank will have the insurance cancelled for any period
during which Maker has the required insurance in force and any refund will be
made to Maker's account.
Maker shall take all necessary steps to preserve rights against prior parties
to instruments or chattel paper constituting Collateral and shall be
responsible generally for its preservation. If the Collateral shall at any
time become unsatisfactory to Bank, Maker shall within twenty-four hours after
demand, pledge as part of the Collateral additional property which is
satisfactory to bank.
Upon the happening of any of the following events, each of which shall
constitute a default hereunder, all liabilities of each Maker to Bank shall
become immediately due and payable at the option of Bank: (1) failure of any
Obligor (which shall include each maker, endorser, surety and guarantor of
this note) to perform any agreement hereunder or pay any obligation secured
hereby when due, including without limitation, failure to obtain or maintain
any required insurance on the collateral pledged to secured this note; (2) death
of any Obligor; (3) filing of any petition in bankruptcy by against any Obligor;
(4) application for appointment of a receiver for, making of a general
assignment for the benefit of creditors by, or insolvency of any Obligor, or
(5) determination by any officer of Bank that a material adverse change has
occurred in the financial condition of any Obligor. Upon occurrence of any
such event or at any time thereafter, Bank shall have the remedies of a secured
party under Uniform Commercial Code of Mississippi. Any notice of sale or other
intended disposition of the Collateral sent to Maker at least five days prior
to such action shall constitute reasonable notice to Maker. Bank may waive any
default before or after the same has been declared without impairing its rights
to declare a subsequent default hereunder, this right being a continuing one.
In addition, if Maker is in default under this Note, and Maker has purchased
credit life insurance and/or credit disability insurance in connection with
this Note, then Bank may, at its option, and notwithstanding the terms of this
policy(ies) and/or certificate(s) governing such insurance, cancel such
insurance and credit any unearned premium(s) to your outstanding balance under
this Note.
Any renewals, extensions and/or modifications of this Note may not extend the
expiration date of the credit life insurance and/or the credit disability
insurance written in connection with this Note. You should refer to your credit
life/credit disability policy and/or certificate to determine the expiration
date of such insurance.
This note, or any renewal thereof, may be extended without notice and without
affecting the liability of any Obligor or any Collateral. The Bank may at its
discretion surrender any Collateral without affecting the liability of any
Obligor.
Bank is hereby given a lien upon and a security interest in any moneys or
property, including any deposits, at any time in possession of Bank belonging
to each Obligor, all of which shall be treated as security for payment of this
note. Bank may, at its option in event of default, set off such moneys,
property or deposits against this note or any other obligation of Maker.
Name of Borrower: FARM FISH, INC.
Borrower Number 3366127 Note Number: 0638308
All Obligors waive protest of this note. If this note is not paid when due,
all Obligors agree to pay all costs and expenses of collection, including
reasonable attorney's fees and legal expenses, all of which are secured by the
Collateral. Bank shall in no event be liable to any party hereto for failure
to collect this note, in whole or in part.
Any demand upon or notice to Maker shall be sufficiently served for all
purposes if personally delivered or placed in the mail addressed to the
address shown below or such other address as may be shown on the Bank's records.
In the event that interest on this note is less than $10.00, Maker agrees to
pay a charge of $10.00 in lieu of interest.
NOTICE TO COSIGNER
(1) You are being asked to guarantee this debt. Think carefully before you do.
If the maker (borrower) does not pay the debt, you will have to. Be sure
you can afford to pay if you have to, and that you want to accept this
responsibility.
(2) You may have to pay up to the full amount of the debt if the maker
(borrower) does not pay. You may also have to pay late fees or collection
costs, which increase this amount.
(3) The Bank can collect this debt from you without first trying to collect
from the maker (borrower). The Bank can use the same collection methods
against you that can be used against the maker (borrower), such as suing
you, garnishing your wages, etc. If this debt is ever in default, that
fact may become a part of your credit record.
(4) This notice is not the contract that makes you liable for the debt.
FARM FISH, INC.
Primary SSN Endorser or CoSigner No. By: /S/ THOMAS R. SLOUGH, JR.
64-0532896 THOMAS R. SLOUGH, JR., PRESIDENT
________________________________
________________________________
________________________________
________________________________
________________________________
________________________________
________________________________
________________________________
Approved by New or Renewal
Initials Number
SAH/BJS 413 R
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 80,815
<SECURITIES> 0
<RECEIVABLES> 174,230
<ALLOWANCES> 0
<INVENTORY> 4,656,796
<CURRENT-ASSETS> 4,918,713
<PP&E> 5,301,017
<DEPRECIATION> 3,025,014
<TOTAL-ASSETS> 7,503,378
<CURRENT-LIABILITIES> 3,079,473
<BONDS> 0
0
0
<COMMON> 4,424,336
<OTHER-SE> (399,431)
<TOTAL-LIABILITY-AND-EQUITY> 7,503,378
<SALES> 3,267,890
<TOTAL-REVENUES> 3,267,890
<CGS> 2,186,832
<TOTAL-COSTS> 2,186,832
<OTHER-EXPENSES> 161,150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,068
<INCOME-PRETAX> 870,840
<INCOME-TAX> 324,192
<INCOME-CONTINUING> 546,648
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 546,648
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
