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, 1998 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 39225-3109
Jackson, MS
(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. [ ]
Revenues for the year ended December 31, 1998 were $3,773,668.
Aggregate market value of voting stock held by non-affiliates of the
Registrant as of December 31, 1998 Indeterminate*
(2,688,605 shares issued and outstanding as of December 31, 1998)
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 26, 1999 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.
<PAGE>
Farm Fish, Inc.
Form 10-KSB
Table of Contents
Item Page(s)
Part I
1. Description of Business 5-6
2. Description of Property 7
3. Legal Proceedings 7
4. Submission of Matters to 7
a Vote of Security Holders
Part II
5. Market for Registrant's
Common Stock and Related
Stockholder Matters 8
6. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 9-10
7. Financial Statements 11-22
8. Changes In and Disagreements with
Accountants on Accounting and
Financial Disclosure 7
Part III
9. Directors, Executive Officers, Incorporate by Reference
Promoters and Control Persons; Compliance Pursuant to General
With Section 16(a) of the Exchange Act Instruction E
10. Executive Compensation Incorporated by Reference
Pursuant to General
Instruction E
11. Security Ownership of Incorporated by Reference
Certain Beneficial Pursuant to General
Owners and Management Instruction E
12. Certain Relationships Incorporated by Reference
and Related Transactions Pursuant to General
Instruction E
13. Exhibits and Reports on Form 8-K 24
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
Jayne Dew 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)
R. Reed Doyle Employee 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. Spe Engaged as an officer and/or director in
various corporations, including EastGroup
Properties, Inc. and Parkway Properties, Inc.
which are real estate investment trusts engaged
in various real estate operations
The term of office for all directors will expire at the AnnualMeeting scheduled
for May 26, 1999.
<PAGE>
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 sale price of approximately $0.37 per pound.
In 1998, the number of pounds sold to catfish processors had increased to
approximately 564 million pounds, at sale prices ranging from approximately
$.69 to $.79 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.
<PAGE>
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 1998 two
processors represented 85%, and 7% of the Company's net sales. In 1997, the
same two processors represented 68% and 18% of the Company's net sales.
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, 1998, Farm Fish employed twenty-two 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.
<PAGE>
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 $495,000 at
December 31, 1998 which is an unsecured line of credit guaranteed by 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, 1998 was $4,587,245.
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, 1998 was $80,960.
Legal Proceedings
As of December 31, 1998, 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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of 1998 to 1997 Results of Operations
Net sales increased by $542,615 or 17% from 1997. The increase resulted from
a 2% increase in the sale price of catfish, and a 623,116 or 14% increase in
pounds of catfish sold.
Cost of product sold for 1998 increased $683,947 or 26% as compared to 1997.
The increase is attributable to the 14% increase in pounds of catfish sold
and an increase in mortality. In 1998, the Company experienced higher
mortality due to certain periods of oxygen depletion and extreme temperatures
during the summer months. The expense recorded for mortality, included in cost
of product sold, increased approximately $200,000 to $310,000 from 1997.
The average market price paid for catfish feed decreased 14% in 1998 from
1997. 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 $21,307 or 14% from
1997. The increase was consistent with the increase in net sales.
Interest expense decreased $14,571 or 22% due to a decrease in average
borrowings.
The effective income tax rate was 23% and 24% in 1998 and 1997, respectively,
which was lower than the statutory federal and state income tax rates due to
the utilization of separate return limitation year federal net operating loss
carryforwards of the Company's wholly-owned subsidiary, DAT, Inc., in 1998 and
1997.
As the result of the above, net income decreased by $148,228 to $63,111 in
1998 from 1997.
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 1997 prices were consistent through the first
two quarters of the year and decreased slightly in the last two quarters and
in 1998, prices increased the first two quarters of the year and steadily
decreased over the last two quarters of the year.
<PAGE>
Liquidity and Capital Resources
The Company had $1,515,000 available under a short-term line of credit with a
bank at December 31, 1998 and had borrowings outstanding of $485,000.
The borrowings under the line of credit bear interest at floating rates based
upon LIBOR (7.06% at December 31, 1998), and are unsecured. The line of
credit is guaranteed by Delta Industries.
Additional borrowings may be necessary to meet cash flow needs during the 1999
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's outstanding common stock.
Delta Industries also has represented that it plans to seek repayment of the
$2,148,821 owed to it by Farm Fish as of December 31, 1998 only as cash
becomes available from operations.
During 1998, Farm Fish purchased $206,338 of property, buildings and equipment.
Cash flows provided by operating activities was $857,191 in 1998 compared to
$179,068 in 1997. The increase is due principally to a decrease in inventories
offset by decreased net income in 1998 compared with 1997.
At year end 1998, Farm Fish's ratio of current assets to current liabilities
was 1.71 to 1 and the ratio of stockholders' equity to total liabilities was
1.46 to 1. At year end 1997, Farm Fish's ratio of current assets to current
liabilities was 1.53 to 1 and the ratio of stockholders' equity to total
liabilities was 1.17 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.
Year 2000
The Year 2000 issue arises from the fact that many existing computer programs
were written to store only two digits of date - related information in order
to more efficiently handle and store data. Thus, the programs were
unable to properly distinguish between the year 1900 and the year 2000.
The Company has internally conducted a review of its information systems to
determine the extent of any year 2000 problem. The Company plans to replace
its accounting system in 1999 with a system that is Year 2000 complaint at a
cost less than $2,000. The Company expects to incur no additional costs
associated with the Year 2000 issue.
The Company has discussed this potential problem with some if its major
suppliers and customers and is in the process of contacting others in an
effort to determine the extent to which the Company may be vulnerable to those
parties' failure to timely correct their own Year 2000 problems, To date,
the Company is unaware of any situations of non compliance that would
materially adversely affect its operations or financial condition.
The Company has not developed a Year 2000 contingency plan as
of December 31, 1998.
The Company is dependent upon feed vendors to supply feed during the feeding
season from April to October each year, and is also dependent upon local
utility companies to provide electricity to operate aeration equipment.
Because live catfish are dormant during the winter months, any year
2000 problems that the feed vendors or utility companies may have would not
affect the Company, unless these problems were not corrected by March or
April 2000. The inability of the Company's customers to effectively deal
with their year 2000 issues, if any, could potentially delay sales to the
customers which could have a significant adverse affect on the Company's cash
flows.
<PAGE>
Farm Fish, Inc.
Consolidated Financial Statements
Years ended December 31, 1998 and 1997
Contents
Report of Independent Auditors 13
Audited Consolidated Financial Statements
Consolidated Balance Sheets 14
Consolidated Statements of Income 15
Consolidated Statements of Shareholders' Equity 16
Consolidated Statements of Cash Flows 17
Notes to Consolidated Financial Statements 18
<PAGE>
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, 1998 and 1997, 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, 1998 and 1997, 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
March 5, 1999
<PAGE>
Farm Fish, Inc.
Consolidated Balance Sheets
December 31
1998 1997
_______________________
Assets
Current assets:
Cash and cash equivalents $ 24,965 $ 50,144
Accounts receivable 204,239 207,264
Advances to employees 3,359 6,260
Inventories, principally live fish 4,620,540 5,067,783
Prepaid expenses - 5,220
--------- ---------
Total current assets 4,853,103 5,336,671
Property, buildings and equipment
Land 738,259 738,259
Ponds and improvements 2,302,934 2,193,131
Brood fish 80,960 44,987
Buildings 316,040 316,040
Machinery and equipment 2,227,357 2,166,795
--------- ---------
5,665,550 5,459,212
Accumulated depreciation 3,557,251 3,289,677
--------- ---------
2,108,299 2,169,535
Other assets:
Investments in cooperatives 281,390 328,807
Other noncurrent assets 7,523 7,523
--------- ---------
288,913 336,330
--------- ---------
Total assets $7,250,315 $7,842,536
========= =========
Liabilities and shareholders' equity
Current liabilities:
Note payable to bank $ 485,000 $1,176,997
Accounts payable 120,714 11,428
Accrued expenses 80,425 159,011
Payable to shareholder 2,148,821 2,132,856
--------- ---------
Total current liabilities 2,834,960 3,480,292
Deferred income taxes 116,000 126,000
Shareholders' equity:
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) (600,757) (663,868)
--------- ---------
Total shareholders' equity 4,299,355 4,236,244
--------- ---------
Total liabilities and shareholders' equity $7,250,315 $7,842,536
========= =========
See accompanying notes.
<PAGE>
Farm Fish, Inc.
Consolidated Statements of Income
Year ended December 31
1998 1997
---------------------------
Net sales $3,773,668 $3,231,053
Cost and expenses:
Cost of products sold 3,266,121 2,582,174
Selling, general and administrative 169,814 148,507
Interest 50,238 64,809
Other, net 205,552 156,965
--------- ---------
3,691,725 2,952,455
--------- ---------
Income before income taxes 81,943 278,598
Income taxes 18,832 67,259
--------- ---------
Net income $ 63,111 $ 211,339
========= ========
Net income per basic and diluted share $ .02 $ .08
========= ========
Weighted average basic and diluted shares
outstanding 2,688,605 2,688,605
========= =========
See accompanying notes.
<PAGE>
Farm Fish, Inc.
Consolidated Statements of Shareholders' Equity
Additional Retained Total
Common Stock Paid-in Earnings Shareholders'
Shares Amount Capital (Deficit) Equity
Balance at
January 1, 1997 2,688,605 $4,424,336 $475,776 $(875,207) $4,024,905
Net income for 1997 - - - 211,339 211,339
-------------------------------------------------------
Balance at
December 31, 1997 2,688,605 4,424,336 475,776 (663,868) 4,236,244
Net income for 1998 - - - 63,111 63,111
-------------------------------------------------------
Balance at
December 31, 1998 2,688,605 $4,424,336 $475,776 $(600,757) $4,299,355
=======================================================
See accompanying notes.
<PAGE>
Farm Fish, Inc.
Consolidated Statements of Cash Flows
Year ended December 31
1998 1997
--------------------------
Operating activities
Net income $ 63,111 $ 211,339
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 267,574 264,663
Deferred income tax benefit (10,000) (3,000)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
and advances to employees 5,926 (32,422)
(Increase) decrease in inventories 47,243 (410,987)
Net decrease in investments in cooperatives 47,417 83,558
(Increase) decrease in other assets 5,220 (5,220)
Increase in trade accounts
payable and accrued expenses 30,700 71,137
--------- ---------
Net cash provided by operating activities 857,191 179,068
Investing activities
Purchases of property, buildings and equipment (206,338) (158,195)
Purchases of cooperative stock - (111,226)
--------- ---------
Net cash used in investing activities (206,338) (269,421)
Financing activities
Net increase (decrease) in note payable to bank (691,997) 471,997
Principal payments on long-term debt - (370,000)
Net change in payable to shareholder 15,965 (42,315)
--------- ---------
Net cash provided by (used in) financing activities (676,032 59,682
--------- ---------
Decrease in cash and cash equivalents (25,179) (30,671)
Cash and cash equivalents at beginning of year 50,144 80,815
--------- ---------
Cash and cash equivalents at end of year $ 24,965 $ 50,144
========= ==========
See accompanying notes.
<PAGE>
Farm Fish, Inc.
Notes to Consolidated Financial Statements
December 31, 1998
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 1998,
one processor represented 85% of the Company's net sales. In 1997, two
processors represented 68% and 18% 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, 1998 may not be sold in 1999. Live fish inventories are classified as
a current asset in the accompanying balance sheets which is consistent with
the industry practice.
<PAGE>
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.
In 1998 and 1997, the Company estimated its fish grow-out to be 2.5 pounds of
feed fed per one pound of live fish growth.
Inventories consist of the following:
December 31
1998 1997
--------------------------
Live fish $4,587,245 $5,046,367
Feed and supplies 33,295 21,416
--------- ---------
$4,620,540 $5,067,783
========= =========
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
of ten to twenty years for ponds and improvements, thirty to forty years for
buildings and three to ten years for machinery and equipment.
Investment in Cooperatives
Investments in cooperatives consist of common stock at cost and the Company's
share of the cooperatives' allocated earnings and losses.
<PAGE>
Farm Fish, Inc.
Notes to Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Income Taxes
Deferred income taxes are accounted for using the liability method and relate to
temporary differences between assets and liabilities recognized differently for
financial reporting and 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 presented. The Company had no options, warrants
or convertible securities outstanding during the years ended December 31, 1998
and 1997.
Use of Estimates
The preparation of 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 Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS No. 131") which is effective for
fiscal 1998. Under the provisions of SFAS No. 131, public business enterprises
must report financial and descriptive information about its reportable segments.
Based upon management's analysis of SFAS No. 131, the Company operates in one
reportable segment.
<PAGE>
Farm Fish, Inc.
Notes to Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income ("SFAS No. 130"). The provisions of SFAS
No. 130 require companies to classify items of comprehensive income by their
nature in a financial statement and display the accumulated balance of other
comprehensive income separately from retained earnings and capital in excess of
par value in the consolidated financial statements. The statement had no effect
on the Company's consolidated financial statements upon adoption in fiscal 1998.
In June 1998, the FSAB issued Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No.
133"). The provisions of SFAS No. 133 requires all derivatives to be recorded
on the balance sheet at fair value. SFAS No. 133 establishes "special
accounting" for fair value hedges, cash flow hedges, and hedges of foreign
currency exposures of net investments in foreign operations. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
item through earnings or recognized in other comprehensive income until the
hedged item is recognized in earnings. Management expects the adoption of this
statement will have no effect on the earnings and financial position of the
Company when it becomes effective for fiscal 1999.
2. Payable to Shareholder and Related Party Transactions
At December 31, 1998 and 1997, the Company had non-interest bearing advances
payable to Delta Industries, Inc. ("Delta") totaling $2,148,821 and $2,132,856,
respectively. Delta owns 80% of the outstanding stock of the Company.
3. Investments in Cooperatives
Investments in cooperatives consist of the following:
December 31
1998 1997
---------------------
Delta Pride Catfish, Inc. $109,061 $163,035
Producers Feed Corporation 158,350 151,793
Other 13,979 13,979
-------- --------
$281,390 $328,807
======== ========
<PAGE>
Farm Fish, Inc.
Notes to Consolidated Financial Statements (continued)
3. Investments in Cooperatives (continued)
The ownership of Delta Pride stock provides the Company the right to sell live
catfish to Delta Pride. In 1998 and 1997, the Company recorded $302,381and
$249,622, respectively, of operating losses from Delta Pride which are included
in other cost and expenses in the accompanying consolidated statements of
income. In 1998 and 1997, the Company paid $143,714 and $170,753, respectively,
to Delta Pride applicable to the allocated operating losses.
Substantially all of the Company's catfish feed purchases were from Producers
Feed Corporation ("Producers") in 1998 and 1997. In 1998 and 1997, Producers
allocated patronage dividends of $85,262 and $80,778, respectively, to the
Company, which are included in other cost and expenses, net. The Company
received patronage dividend payments from Producers of $78,705 and $85,467
in 1998 and 1997, respectively.
4. Note Payable
Note payable at December 31, 1998 consisted of borrowings under a line of credit
with a bank at 1.75 above the 90 day LIBOR rate (7.06% at December 31, 1998).
The Company had $1,515,000 and $823,003 available to borrow under the line at
December 31, 1998 and 1997, respectively.
Interest paid by the Company totaled $50,238 and $64,894 in 1998 and 1997,
respectively.
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.
<PAGE>
Farm Fish, Inc.
Notes to Consolidated Financial Statements (continued)
3. Income Taxes (continued)
The components of deferred tax assets and liabilities are as follows:
December 31
1998 1997
---------------------
Deferred tax liabilities
Property, buildings and equipment $123,000 $134,000
Deferred tax assets - Inventories (7,000) (8,000)
Net operating loss carryforward of
DAT, Inc. (37,000) (50,000)
Valuation allowance for net operating
loss carryforward 37,000 50,000
------- -------
Net deferred tax liabilities $116,000 $126,000
======= =======
Income tax expense (benefit) consists of the following:
December 31
1998 1997
---------------------
Current:
Federal $ 23,315 $ 55,881
State 5,517 14,378
-------- --------
28,832 70,259
Deferred:
Federal (9,250) (2,750)
State (750) (250)
-------- --------
(10,000) (3,000)
-------- --------
$ 18,832 $ 67,259
======== ========
The reconciliation of income taxes computed at the federal statutory rate
to income tax expense is as follows:
December 31
1998 1997
---------------------
Taxes at federal statutory rate $ 27,861 $ 94,723
State income taxes, net 3,146 9,324
Utilization of net operating loss
carryforward of DAT, Inc. (13,000) (37,000)
Other - net 825 212
------- -------
$ 18,832 $ 67,259
======= =======
<PAGE>
Farm Fish, Inc.
Notes to Consolidated Financial Statements (continued)
5. Income Taxes (continued)
The Company's wholly-owned subsidiary, DAT, Inc. has a $110,000 net operating
loss carryforward available to reduce future taxable income of DAT, Inc.
through 2001. Management has recorded a valuation allowance for the deferred
tax asset.
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 $18,404 in 1998 and $26,641
in 1997.
7. Fair Value of Financial Instruments
The carrying amount for cash and cash equivalents approximate their fair values
at December 31, 1998. The carrying amount for investments in cooperatives was
$281,390 and the fair value totaled $694,000 at December 31, 1998 based upon
recent sale prices of stock of the cooperatives obtained by management. The
fair value of the note payable, which is at a variable interest rate,
approximates the carrying amount at December 31, 1998.
<PAGE>
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 ended
April 30, 1981
3(b) Bylaws - D Incorporated by reference from
Form 10-K for year ended
April 30, 1981
3(c) Amendment to Bylaws Incorporated by reference from
Form 10-K for year ended
December 31, 1984
3(d) Amendment to Articles of Incorporated by reference from
Incorporation Form 10-K for year ended
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 ended
December 31, 1985
10(b) Note Agreements - Loans from Incorporated by reference from
Deposit Guaranty National Bank, Form 10-K for year ended
dated June 28, 1993 December 31, 1993
10(c) Promissory Note - Loan from Incorporated by reference from
Deposit Guaranty National Bank, Form 10-KSB for year ended
dated December 24, 1996 December 31, 1996
27 Financial Data Schedule Filed herein
(b) Reports on Form 8-K None
<PAGE>
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 29, 1999
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 29, 1999
<PAGE>
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 29, 1999
<PAGE>
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/ Jayne Dew
Jayne Dew,
Secretary
DATE: March 29, 1999
<PAGE>
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 29, 1999
<PAGE>
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 29, 1999
<PAGE>
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/ R. Reed Doyle
R. Reed Doyle
DATE: March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 24,965
<SECURITIES> 0
<RECEIVABLES> 204,239
<ALLOWANCES> 0
<INVENTORY> 4,620,540
<CURRENT-ASSETS> 4,853,103
<PP&E> 5,665,550
<DEPRECIATION> 3,557,251
<TOTAL-ASSETS> 7,250,315
<CURRENT-LIABILITIES> 2,834,960
<BONDS> 0
0
0
<COMMON> 4,424,336
<OTHER-SE> (124,981)
<TOTAL-LIABILITY-AND-EQUITY> 7,250,315
<SALES> 3,773,668
<TOTAL-REVENUES> 3,773,668
<CGS> 3,266,121
<TOTAL-COSTS> 3,266,121
<OTHER-EXPENSES> 375,366
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,238
<INCOME-PRETAX> 81,983
<INCOME-TAX> 18,832
<INCOME-CONTINUING> 63,111
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,111
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
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