Securities and Exchange Commission
Washington D.C. 20549
Form 10-KSB/A
Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999 Commission file number 0-7320
FARM FISH, INC.
(Name of small business issuer in its charter)
MISSISSIPPI 64-0532896
(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.
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, 1999 were $1,875,156.
Aggregate market value of voting stock held by non-affiliates of the
Registrant as of December 31, 1999 Indeterminate*
(2,688,605 shares issued and outstanding as of December 31, 1999)
__________________________
* 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.
Farm Fish, Inc.
Form 10-KSB/A
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
a Vote of Security Holders 7
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, 12
Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act
10.Executive Compensation 11
11. Security Ownership of
Certain Beneficial
Owners and Management 11
12. Certain Relationships
and Related Transactions 13
13. Exhibits and Reports on Form 8-K 27
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. Speed 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 Annual Meeting.
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 1999, the number of pounds sold to catfish processors had increased to
approximately 597 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.
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 1999
and 1998 one processor represented 76% and 85% of the Company's net sales.
The Company has historically sold significant portion of its inventory to
Delta Pride, a cooperation in which the Company is a member. The Company
has also entered into a letter agreement with Confish to sell a significant
amont of the Company's inventory.
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, 1999, Farm Fish employed twenty-three 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 $1,515,000 at
December 31, 1999 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, 1999 was $5,310,120.
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, 1999 was $80,960.
Recent Developments
The Board of Directors has authorized officers of the Company to initiate
negotiations with certain interested third parties regarding the sale of all
of the Company's land, ponds and improvements, buildings and certain equipment.
Any agreement reached for the sale of such assets would be subject to the
approval of the Board of Directors and stockholders of the Company. The
Company anticipates that any sale would be an amount which approximates the
book value of the assets being sold. If an agreement is reached, it is the
Company's intention to grow out and sell the existing live fish inventory.
While negotiations have been authorized, there can be no assurance that any
definitive agreement will be reached regarding the sale of these assets.
Legal Proceedings
As of December 31, 1999, 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 1999 to 1998 Results of Operations
Net sales decreased by $1,898,512 or 50% from 1999. The decrease resulted
primarily from a 2,507,060, or 51%, decrease in pounds of catfish sold. The
decrease in pounds of catfish sold resulted primarily from there being fewer
marketable size catfish available for sale in 1999 compared to 1998 and an
increase in the occurrence of "off-flavor" problems during the year. Certain
types of algae release a chemical in the water which is absorbed by fish and
causes a musty taste termed "off-flavor". Off-flavor is not a permanent
condition, but can adversely effect sales in a given period. Farm Fish has
taken and continues to take steps to address this problem. However, the
Company has continued to experience the "off-flavor" issue in the first quarter
of 2000. The Company is continuing its efforts at correcting this problem and
believes it will be successful. If the "off-flavor" problem is not corrected
in a timely fashion, it could have a material, adverse effect on the operations
and results of the Company.
Cost of product sold for 1999 decreased $1,602,718 or 49% as compared to 1998.
The decrease is primarily attributable to the 51% decrease in pounds of
catfish sold. In 1999, the Company experienced lower mortality, as compared
to 1998, from periods of oxygen depletion and extreme temperatures during the
summer months. The expense recorded for mortality, included in cost of product
sold, decreased approximately $160,000 to $150,000 from 1998. The average
market price paid for catfish feed decreased 10% in 1999 from 1998. Catfish
feed represents the single most significant component of Farms 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 decreased $16,534 or 10% from
1998.
Interest expense increased $11,278 or 22% due to an increase in average
borrowings.
Income tax expense (benefit) in 1999 and 1998 was different 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 1999 and 1998.
As the result of the above, net income decreased by $56,668 to $6,443 in 1999
from 1998.
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 1998 and 1999, prices increased the first two
quarters of each year and steadily decreased over the last two quarters of
each year.
<PAGE>
Liquidity and Capital Resources
The Company had $485,000 available under a short-term line of credit with a
bank at December 31, 1999 and had borrowings outstanding of $1,515,000.
The borrowings under the line of credit bear interest at floating rates based
upon LIBOR (7.87% at December 31, 1999), and are unsecured. The line of
credit is guaranteed by Delta Industries.
Additional borrowings may be necessary to meet cash flow needs during the 2000
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
$2,077,222 owed to it by Farm Fish as of December 31, 1999 only as cash becomes
available from operations.
During 1999, Farm Fish purchased $240,893 of property, buildings and equipment.
Cash flows used in operating activities was $695,079 in 1999 compared to cash
flows provided by operating activities of $857,191 in 1998. The decrease is
due principally to an increase in inventories and decreased net income in 1999
compared with 1998.
At year end 1999, Farm Fish's ratio of current assets to current liabilities
was 1.52 to 1 and the ratio of stockholders' equity to total liabilities was
1.11 to 1. 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.
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 Company completed its Year 2000 plan prior to December 31, 1999, has
experienced no significant disruptions and believes its information system
successfully responded to the Year 2000 date change. The Company's cost to
replace its accounting system was less than $2,000, and was expensed in 1999.
The Company is not aware of any material problems resulting from Year 2000
issues with its internal systems, its equipment or the products and services
of third parties. The Company will continue to monitor its operating systems
and third parties, throughout the year 2000, for potential Year 2000 issues.
Security Ownership of Certain Beneficial Owners
To the best of the Company's knowledge, no person or group (as those terms are
used in Section 13(d)(3) of the Securities Exchange Act of 1934) beneficially
owned, as of April 1, 1999, more than five percent of the Shares outstanding
except as set forth in the following table:
Stockholder Number of Shares of Percent of Class
Common Stock Owned(1)
__________________ _____________________ _________________
Delta Industries, Inc. 2,151,061 80%
100 W. Woodrow Wilson
Jackson, MS 39213
Security Ownership of Management
Stockholder Number of Shares of Precent of Class
Common Stock Owned(1)
___________________ ____________________ _________________
Thomas R. Slough, Jr. 17,805 *
W. D. Mounger 25,900 *
David Robison 100 *
Jayne Dew 6,500 *
Directors and Officers
As a Group (6 persons)(2) 50,305 1.88%
____________________________
* Less than 1%
(1) Each beneficial owner has sole voting and investment powers as to all
shares beneficially owned unless otherwise indicated in these footnotes.
(2) The directors of Farm Fish during the past fiscal year, Thomas R. Slough
Jr., W. D. Mounger, Leland R. Speed and R. Reed Doyle, were directors and
stockholders of Delta Industries, Inc. ("Delta Industries"). The shares
owned by Delta Industries are in addition to the total number of shares
owned directly by officers and directors, as shown herein.
Delta Industries, Inc. Stock Ownership of Executive Officers and Directors
Title of Class
and Name of Number of Shares of Percent of Class
Beneficial Owner Common Stock Owned(1)
__________________ ______________________ _________________
Thomas R. Slough, Jr. 8,160 (2) 1.42%
W. D. Mounger 44,061 7.65%
R. Reed Doyle 30,944 (3) 5.37%
David Robison 17,510 (4) 3.04%
Jayne Dew 500 *
Officers and Directors
As a Group (5 person) 101,175 17.56%
__________________________
* Less than 1%
(1) Each benefical owner has sole voting and investment powers as to all
shares beneficially owned unless otherwise indicated in these footnotes.
(2) Does not include 3,133 shares held in a custodial account for the benefit
of Mr. Slough's son. Mr. Slough has investment and voting power over
such shares.
(3) Includes 22,502 shares held in a trust for the benefit of Mr. Doyle's
mother. Mr. Doyle is the trustee of such trust.
(4) Includes 17,500 shares which Mr. Robison has the right to acquire through
the exercise of options.
Possible Change in Control
All of the shares of Farm Fish held by Delta Industries, are pledged as
collateral in connection with indebtedness of Delta Industries to Trustmark
National Bank of Jackson, Mississippi. Should Delta Industries be in default
under that indebtedness, Trustmark National Bank has the option of foreclosing
on the pledged stock.
Directors and Executive Officers
(a) Directors
Name Age Date Term of Director Other Positions
Office Expires Since With Farm Fish
________________ ___ ______________ ______ ___________________
Leland R. Speed 67 Annual Meeting 1982 Chairman of Board
Thomas R. Slough, Jr 73 Annual Meeting 1982 President
W. D. Mounger 74 Annual Meeting 1984 None
R. Reed Doyle 47 Annual Meeting 1998 None
(b) Executive Officers
Name Age Office Held Officer Other Positions
Since With Farm Fish
__________________ ___ ___________ ______ _______________
Leland R. Speed 67 Chairman of the 1984 Director
Board
Thomas R. Slough, Jr. 73 President 1984 Director
David Robison 51 Vice-President 1993 None
Jayne Dew 51 Secretary/ 1998 General
Teasurer Manager of Farm
Operations
Messrs. Speed and Slough were first elected as officers on December 3, 1984.
Mr. Robison was first elected in 1993. Ms. Dew was first elected in 1998. The
bylaws provide that the present officers will expire when their successors are
elected and qualify.
(c) Family Relationships
There are no family relationships among the directors and officers.
(d) Business Experience for the Past Five Years
(1) (i) Leland R. Speed is Chairman of the Board of Directors of Farm Fish
and a director of Delta Industries. Mr. Speed is also Chairman of Parkway
Properties, Inc. and EastGroup Properties, Inc. which engage generally in
the business of real estate development. He is also a director of
Mississippi Valley Gas Company, First Mississippi Corporation and KLLM
Transport Services, Inc.
(ii) Thomas R. Slough, Jr., a director and President of Farm Fish, is the
Vice-Chairman, a director and stockholder of Delta Industries, a
corporation primarily engaged in marketing ready mix concrete.
(iii) W. D. Mounger, a director of Farm Fish, is President, director and a
principal stockholder of Delta Royalty Company, Inc., a Mississippi
corporation engaged generally in the oil and gas business. Mr. Mounger is
also engaged in various commercial activities, including independent oil
and gas leasing, and is a director of Delta Industries. Until February
1997, Mr. Mounger served as a director of Deposit Guaranty National Bank
and Deposit Guaranty Corporation.
(iv) R. Reed Doyle, a director of Farm Fish, is a manager with Silver Creek
Plantation, which engages in the business of farm-raised catfish. Mr.
Doyle has been in the farm-raised catfish industry for over 25 years. Mr.
Doyle is a director of Delta Industries.
(v) David Robison, Vice-President of Farm Fish, is President and Chief
Executive Officer of Delta Industries, a corporation primarily engaged in
the marketing of ready mix concrete.
(vi) Jayne Dew, Secretary-Treasurer of Farm Fish, has been the general
manager of the farm operations for Farm Fish since 1983.
(2) Delinquent Filings
Based solely upon a review of: (i) Forms 3 and Forms 4 and amendments thereto
furnished to Farm Fish pursuant to Securities and Exchange Commission Rule 16a-
3(e) during the fisical year ended December 31, 1999; (ii) Forms 5 and amend-
ments thereto furnished to Farm Fish during the fiscal year ended December 31,
1999; and (iii) written representations of officers, directors and beneficial
owners of more than 10% of Farm Fish no-par common stock, there were not any
known failures of such officers, directors or beneficial owners of more than 10%
of Farm Fish no-par common stock to report transactions required to be reported
on the above Forms on a timely basis or to file a required Form during the
fiscal year ended December 31, 1999. Additionally, there were no late reports
made on the above Forms during the fiscal year ended December 31, 1998.
Committees
Farm Fish has no standing audit, nominating or compensation committees. The
entire Board performs such duties.
The Board of Directors is responsible for selecting nominees for the election
of directors, and evaluating the performance of incumbent directors and
determining whether to nominate them for reelection. The Board welcomes
recommendations from shareholders as to nominees for the Board of Directors.
Such recommendations should be made to Thomas R. Slough, Jr., President of Farm
Fish, in writing, at P. O. Box 23109, Jackson, Mississippi 39225-3109.
Meetings
The Board of Directors of Farm Fish held six offical meetings during the last
fiscal year. No director attended less than 75% of the meetings. In addition,
certain actions were taken during the year by unanimous written consent of all
directors in lieu of holding a formal meeting.
Executive Compensation
Except for Ms. Dew, the directors and executive officers of Farm Fish received
no cash or other compensation for services in all capacities to Farm Fish. Mr.
Slough and Mr. Robison are employees of Delta Industries; Delta Industries is
not reimbursed by Farm Fish for the salaries of Mr. Slough or Mr. Robison. Farm
Fish does not maintain any type of pension or other benefit plan for officers
of the Company. None of the officers have employment or severance arrangements
contracts with the Company.
Transactions With Management
(a) Transactions Between Farm Fish and Delta Industries
The principal shareholder of Farm Fish is Delta Industries. All members
of the Farm Fish Board of Directors also serve as directors of Delta Industries,
and the senior managements of the two companies are substantially identical.
Since it acquired its first block of Farm Fish stock in October 1982, Delta
Industries has made substantial loans and non)interest bearing advances to Farm
Fish, and has guaranteed significant amounts of Farm Fish's outstanding
indebtedness. As of December 31, 1999, Farm Fish had non-interest bearing
advances payable to Delta Industries in the amount of $2,077,222. As of
December 31, 1999, Delta Industries was guarantor of a Farm Fish short-term and
long-term note payable to Deposit Guaranty National Bank with an outstanding
principal balance $1,515,000.
(b) Transactions Between Farm Fish and Silver Creek Plantation
In September 1997 the Company purchased 591 shares of stock in Delta Pride
Catfish, Inc., a cooperative of catfish producers, from Silver Creek Plantation.
T. L. Reed, a director of the Company at the time, was the owner and president
of Silver Creek Plantation. The stock was purchased for cash in the amount of
$111,226, plus the assumption of $333,090 in operating losses of Delta Pride
allocated to such stock. The Board of Directors approved the transaction and
the purchase price after reviewing recent, comparable sales of Delta Pride
stock.
<PAGE>
Farm Fish, Inc.
Consolidated Financial Statements
Years ended December 31, 1999 and 1998
Contents
Report of Independent Auditors. . . . . . .1
Audited Consolidated Financial Statements
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . .2
Consolidated Statements of Income. . . . . . . . . . . . . . . . . .3
Consolidated Statements of Shareholders' Equity. . . . . . . . . . .4
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . .5
Notes to Consolidated Financial Statements . . . . . . . . . . . . .6
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. as of December 31, 1999 and 1998, 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 auditing standards generally
accepted in the United States. 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. at December 31, 1999 and 1998, and the consolidated results of their
operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst &Young, LLP
Jackson, Mississippi
April 12, 2000
<PAGE>
Farm Fish, Inc.
Consolidated Balance Sheets
December 31
1999 1998
Assets
Current assets:
Cash and cash equivalents $ 147,393 $ 24,965
Accounts receivable 236,568 204,239
Advances to employees 4,342 3,359
Inventories, principally live fish 5,341,273 4,620,540
--------- ---------
Total current assets 5,729,576 4,853,103
Property, buildings and equipment
Land 738,259 738,259
Ponds and improvements 2,344,732 2,302,934
Brood fish 80,960 80,960
Buildings 316,040 316,040
Machinery and equipment 2,390,365 2,227,357
--------- ---------
5,870,356 5,665,550
Accumulated depreciation 3,809,557 3,557,251
--------- ---------
2,060,799 2,108,299
Other assets:
Investments in cooperatives 390,932 281,390
Other noncurrent assets 7,523 7,523
--------- ---------
398,455 288,913
--------- ---------
Total assets $8,188,830 $7,250,315
Liabilities and shareholders' equity
Current liabilities:
Note payable to bank $1,515,000 $ 485,000
Accounts payable 142,200 120,714
Accrued expenses 40,610 80,425
Payable to shareholder 2,077,222 2,148,821
--------- ---------
Total current liabilities 3,775,032 2,834,960
Deferred income taxes 108,000 116,000
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) (594,314) (600,757)
--------- ---------
Total shareholders' equity 4,305,798 4,299,355
--------- ---------
Total liabilities and shareholders' equity $8,188,830 $7,250,315
========== ==========
See accompanying notes.
Farm Fish, Inc.
Consolidated Statements of Income
Year ended December 31
----------------------
1999 1998
Net sales $1,875,156 $3,773,668
Cost and expenses:
Cost of products sold 1,663,403 3,266,121
Selling, general and administrative 153,280 169,814
Interest 61,516 50,238
Gain on sale of equipment (63,913) -
Other, net 112,810 205,552
--------- ---------
1,927,096 3,691,725
--------- ---------
Income (loss) before income taxes (51,940) 81,943
Income tax expense (benefit) (58,383) 18,832
--------- ---------
Net income $ 6,443 $ 63,111
========= =========
Net income per basic and diluted share $ $ .02
========= =========
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, 1998 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
Net income for 1999 6,443 6,443
--------- ---------- -------- --------- ---------
Balance at
December 31, 1999 2,688,605 $4,424,336 $475,776 $(594,314) $4,305,798
See accompanying notes.
<PAGE>
Farm Fish, Inc.
Consolidated Statements of Cash Flows
Year ended December 31
1999 1998
-----------------------
Operating activities
Net income $ 6,443 $ 63,111
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 252,306 267,574
Gain on sale of equipment (63,913)
Deferred income tax benefit (8,000) (10,000)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
and advances to employees (33,312) 5,926
(Increase) decrease in inventories (720,733) 447,243
Net (increase) decrease in investments
in cooperatives (109,542) 47,417
Decrease in other assets - 5,220
Increase (decrease) in accounts
payable and accrued expenses (18,329) 30,700
------- -------
Net cash provided
by (used in) operating activities (695,080) 857,191
Investing activities
Proceeds from sale of equipment 100,000
Purchases of property, buildings and equipment (240,893) (206,338)
------- -------
Net cash used in investing activities (140,893) (206,338)
Financing activities
Net increase (decrease) in note payable to bank 1,030,000 (691,997)
Net change in payable to shareholder (71,599) 15,965
------- -------
Net cash provided by (used in) financing activities 958,401 (676,032)
------- -------
Increase (decrease) in cash and cash equivalents 122,428 (25,179)
Cash and cash equivalents at beginning of year 24,965 50,144
------- -------
Cash and cash equivalents at end of year $ 147,393 $ 24,965
======= =======
See accompanying notes.
<PAGE>
Farm Fish, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
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 1999 and 1998, one processor represented 76% and 85%, respectively, of the
Company's net sales. Delta Pride Catfish, Inc. ("Delta Pride") was the
Company's most significant customer in 1999 and 1998. 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 stocked 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, 1999 may not
be sold in 2000. Live fish inventories are classified as a current asset in
the accompanying balance sheets which is consistent with the industry practice.
<PAGE>
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 1999 and 1998, the Company estimated its fish grow-out to be 2.5 pounds of
feed fed per one pound of live fish growth. In 1999, the Company's live fish
inventories increased due to an increase in the occurrence of "off-flavor"
problems which decreased the pounds of catfish sold. Certain types of algae
release a chemical in the water which is absorded by fish and causes a musty
taste termed "off-flavor". Off-flavor is not a permanent condition, but can
adversely effect sales in a given period.
Inventories consist of the following:
December 31
1999 1998
-----------------------
Live fish $5,310,120 $4,587,245
Feed and supplies 31,153 33,295
--------- ---------
$5,341,273 $4,620,540
========= =========
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.
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 Basic and Diluted 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, 1999
and 1998.
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 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 not have a material effect on the earnings
and financial position of the Company when it becomes effective for 2001.
2. Payable to Shareholder and Related Party Transactions
At December 31, 1999 and 1998, the Company had non-interest bearing advances
payable to Delta Industries, Inc. ("Delta") totaling $2,077,222 and $2,148,821,
respectively. Delta owns 80% of the outstanding stock of the Company. In 1999,
the Company sold equipment to Delta for $100,000 resulting in a gain on sale
in the accompanying statement of income for the year ended December 31, 1999
of $63,913. Management believes the sales price approximated the fair market
value of the equipment.
3. Investments in Cooperatives
Investments in cooperatives consist of the following:
December 31
1999 1998
--------------------
Delta Pride Catfish, Inc. $218,267 $109,061
Producers Feed Corporation 158,686 158,350
Other 13,979 13,979
------- -------
$390,932 $281,390
The ownership of Delta Pride stock provides the Company the right to sell
live catfish to Delta Pride. In 1999 and 1998, the Company recorded $189,918
and $302,381, respectively, of operating losses from Delta Pride which are
included in other cost and expenses, net in the accompanying consolidated
statements of income. In 1999 and 1998, the Company paid $286,278 and
$143,714, 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 1999 and 1998. In 1999 and 1998, Producers
allocated patronage dividends of $68,922 and $85,262, respectively, to the
Company, which are included in other cost and expenses, net. The Company
received patronage dividend payments from Producers of 68,587 and $78,705 in
1999 and 1998, respectively.
<PAGE>
4. Note Payable
Note payable at December 31, 1999 and 1998 consisted of borrowings under a
line of credit with a bank at 1.75 above the 90 day LIBOR rate (7.87% at
December 31, 1999). Borrowings under this line of credit are guaranteed by
Delta. The Company had $485,000 and $1,515,000 available to borrow under the
line at December 31, 1999 and 1998, respectively.
Interest paid by the Company totaled $58,573 and $50,238 in 1999 and 1998,
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 (benefit) for
financial reporting purposes is determined on a separate company basis,
except in the current year $37,000 of benefit related to the utilization
of net operating losses was allocated by Delta. Income taxes receivable
or payable are recorded against the payable to shareholder.
The components of deferred tax assets and liabilities are as follows:
December 31
1999 1998
------------------------
Deferred tax liabilities Property,
buildings and equipment $116,000 $123,000
Deferred tax assets - Inventories (8,000) (7,000)
Net operating loss carryforward of DAT, Inc. - (37,000)
Valuation allowance for net operating
loss carryforward - 37,000
------ ------
Net deferred tax liabilities $108,000 $116,000
======== ========
Income tax expense (benefit) consists of the following:
December 31
1999 1998
-------------------------
Current:
Federal $(47,985) $ 23,315
State (2,398) 5,517
------- -------
(50,383) 28,832
Deferred:
Federal (7,500) (9,250)
State (500) (750)
------- -------
(8,000) (10,000)
------- -------
$(58,383) $ 18,832
======== =========
<PAGE>
5. Income Taxes (continued)
The reconciliation of income taxes computed at the federal statutory rate to
income tax expense is as follows:
December 31
1999 1998
--------------------
Taxes at federal statutory rate $(17,660) $ 27,861
State income taxes, net (1,913) 3,146
Utilization of net operating
loss carryforward of DAT, Inc. (37,000) (13,000)
Other net (1,810) 825
------- -------
$(58,383) $ 18,832
======== ========
6. Fair Value of Financial Instruments
The carrying amount for cash and cash equivalents approximate their fair
values at December 31, 1999. The carrying amount for investments in
cooperatives was $390,932 and the fair value totaled $421,000 at December 31,
1999 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, 1999.
7. Subsequent Event
The Board of Directors has authorized officers of the Company to initiate
negotiations with certain interested third parties regarding the sale of all of
the Company's land, ponds and improvements, buildings and certain equipment.
Any agreement reached for the sale of such assets would be subject to the
approval of the Board of Directors and stockholders of the Company. The Company
anticipates that any sale would be for am amount which approximates the book
value of the assets being sold. If an agreement is reached, it is the Company's
intention to grow out and sell the existing live fish inventory. While
negotiations have been authorized, there can be no assurance that any
definitive agreement will be reached regarding the sale of these assets,
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 Incorporation Incorporated by reference from
Form 10-K for year ended
December 31, 1984
(10)Material Contracts
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
27Financial 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: April 28, 2000
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: April 28, 2000
<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: April 28, 2000
<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: April 28, 2000
<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: April 28, 2000
<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: April 28, 2000
<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: April 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 147,393
<SECURITIES> 0
<RECEIVABLES> 236,568
<ALLOWANCES> 0
<INVENTORY> 5,341,273
<CURRENT-ASSETS> 5,729,576
<PP&E> 5,870,356
<DEPRECIATION> 3,809,557
<TOTAL-ASSETS> 8,188,830
<CURRENT-LIABILITIES> 3,775,032
<BONDS> 0
0
0
<COMMON> 4,424,336
<OTHER-SE> (118,538)
<TOTAL-LIABILITY-AND-EQUITY> 8,188,830
<SALES> 1,875,156
<TOTAL-REVENUES> 1,875,156
<CGS> 1,663,403
<TOTAL-COSTS> 1,663,403
<OTHER-EXPENSES> 202,177
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,516
<INCOME-PRETAX> (51,940)
<INCOME-TAX> (58,383)
<INCOME-CONTINUING> 6,443
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,443
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
