<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended Commission file
ended December 31, 1995. No. 33-17679-D
PIERCE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1067694
(State or other jurisdiction of (I.R.S. Employer ID.)
incorporation or organization)
13275 E. FREEMONT PLACE #101A, ENGLEWOOD, CO 80112
(Address of principal executive offices) (Zip Code)
Registrants's telephone number, including area code (303)-792-0719
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the proceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
------- -------
Class Outstanding at December 31, 1995
-------------------------- --------------------------------
Common Stock, no par value 149,517,572
1
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION *
ITEM 1. Unaudited Financial Statements
Balance Sheets - December 31, 1995 (unaudited)
and June 30, 1995 3
Statements of Operations - Three Months Ended
December 31, 1995 (unaudited) and Year To Date 4
With Last Year Comparisons
Consolidated Statement of Changes in Stockholders' Equity -
For The Six Months December 31, 1995 (Unaudited) 5
and the Years Ended 1993,1994, and 1995.
Statement of Cash Flows - Six Months Ended
December 31, 1995 (unaudited) and December 31, 1994 6
Notes to Financial Statements 7
ITEM 2. Management's Discussion and Analysis 11
PART II - OTHER INFORMATION
ITEMS 1 THROUGH 6 12
Signature 13
*The accompanying financial statements are not covered by an independent
certified public accountants' report.
2
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PIERCE INTERNATIONAL, INC.
BALANCE SHEETS
ASSETS
Unaudited
December 31, June 30,
CURRENT ASSETS: 1995 1995
------------- ---------
Cash $ 1,371 $ 808
Investments and Stocks 21,603 5,084
Accounts Receivable 28,845 26,293
Other 367 367
--------- ---------
Total current assets 52,186 32,552
PROPERTY AND EQUIPMENT: (Note 1)
Furniture and equipment 7,705 7,705
Leased equipment - -
Strawboard equipment (Note 4) 55,995 55,995
--------- ---------
63,700 63,700
Less accumulated depreciation and
amortization (4,350) (3,908)
--------- ---------
59,350 59,792
OTHER ASSETS
Long Term Investments (Note 5) 281,695 281,695
Related Party Receivable (Note 3) 62,788 62,002
--------- ---------
$ 456,019 $ 436,041
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITES:
Accounts payable and accrued
liabilities $ 2,931 $ 5,538
Advances from officers/directors/
stockholders (Note 6) 243,623 247,592
Note Payable - -
--------- ---------
Total current liabilities 246,554 253,130
NOTE PAYABLE (Note 7) 200,000 200,000
DEFERRED REVENUE (Note 4) 35,144 -
STOCKHOLDERS' EQUITY (Notes 8 & 9)
Preferred stock, not par value;
10,000,000 shares authorized;
no shares issued
Common stock, no par value;
750,000,000 shares authorized;
149,517,572 and 149,517,572
shares issued and outstanding
as of December 31, 1995 and June 30,
1995, respectively 844,542 844,542
Accumulated deficit (870,221) (861,631)
--------- ---------
(25,679) (17,089)
--------- ---------
$ 456,019 $ 436,041
--------- ---------
--------- ---------
See notes to financial statements.
3
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PIERCE INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
FOR THE THREE
MONTHS ENDED YEAR TO DATE
DECEMBER 31, DECEMBER 31,
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE:
Commissions and fees $ 0 $ 51,600 $ 0 $ 58,100
Other 21,603 282 26,388 952
----------- ----------- ----------- -----------
21,603 51,882 26,388 59,052
EXPENSES:
Administrative 9,901 13,633 19,471 46,177
Outside services 14,168 31,101 15,257 125,349
Advertising and promotion - 8,148 587 26,375
----------- ----------- ----------- -----------
Total expenses 24,069 52,882 35,315 197,901
NET OPERATING INCOME (LOSS) (2,466) (1,000) (8,927) (138,849)
Gain (Loss) on disposition of asset - 147 337 (22,639)
Foreign exchange gain (loss) - - 0 (71,205)
----------- ----------- ----------- -----------
NET INCOME (LOSS) BEFORE MINORITY INTEREST (2,466) (853) (8,590) (232,693)
MINORITY INTEREST - 12,596 - 163,642
NET INCOME (LOSS) $ (2,466) $ 11,743 $ (8,590) $ (69,051)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET INCOME(LOSS) PER COMMON SHARE * * * *
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 149,517,572 149,317,572 149,517,572 149,317,572
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
*Less than $.001 per share.
See notes to financial statements.
4
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PIERCE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
FOR THE SIX MONTHS
ENDED DECEMBER 31,
--------------------------
1995 1994
----------- ----------
<S> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(8,590) $ (69,051)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 440 2,877
Minority interest in net income (loss) - (163,642)
Changes in operating assets and liabilities:
Decrease (Increase) in accounts receivable (2,552) (17,429)
Decrease (Increase) in related party receivable (785)
Decrease (Increase) in other current assets - (24,239)
(Decrease) Increase in accounts payable and
accrued expenses (2,607) 39,997
Increase (Decrease) in deferred revenue 35,144 53,279
(Gain) Loss on sale of investments (337) 22,639
------- ---------
Net cash used in operating activities 20,713 (155,569)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) Disposal of land, property and equipment - (248,964)
Acquisition of equipment - (53,666)
(Increase) decrease in investments (16,182) 120,645
Investment in Strawboard/Database(PIDI) - (46,995)
Foreign Sub.(PIDI) Translation Adj. - (8,487)
------- ---------
Net cash used in investing activities (16,182) (237,467)
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts/payments on advances from officers/
directors/stockholders (3,968) 247,532
Receipts (Payments) on notes payable - (5,059)
Proceeds from sale of common stock of subsidiaries - 125,250
Change in minority interest - 15,000
------- ---------
Net cash provided by financing activities (3,968) 382,723
(DECREASE) INCREASE IN CASH 563 (10,313)
CASH, beginning of period 808 13,837
------- ---------
CASH, end of period $ 1,371 $ 3,524
------- ---------
------- ---------
</TABLE>
See notes to the financial statements.
5
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PIERCE INTERNATIONAL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1993, 1994 & 1995
AND THE SIX MONTHS ENDED DECEMBER 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT DEFECIT EQUITY
------------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCES, JUNE 30, 1992 136,317,572 $ 955,861 $(1,421,210) $(465,349)
Net income for the year - - 167,332 167,332
----------- ---------- ----------- ---------
BALANCES, JUNE 30, 1993 136,317,572 955,861 (1,253,878) (298,017)
Conversion of Wakefield Debt 10,000,000 94,027 - 94,027
Stock issued as compensation
$0.00 per share 3,000,000 - - -
Additional Paid in Capital to
Subsidiary - 2,574 (249) 2,325
Net income for the year - - 67,039 67,039
----------- ---------- ----------- ---------
BALANCES, JUNE 30, 1994 149,317,572 1,052,462 (1,187,088) (134,626)
Additional Paid in Capital to
Subsidiary - 34,719 - 34,719
Adj. for foreign sub. translation - - - 1,769
Chg. in minority interest - 15,000 - 15,000
Chg. in foreign sub. translation - - - (10,256)
Stock in lieu of compensation 200,000 - - -
(no market value)
PIDI investment to Equity Method
from Consolidated - (257,639) 420,992 171,840
Net loss for the year - (95,535) (95,535)
----------- ---------- ----------- ---------
BALANCES, JUNE 30, 1995 149,517,572 844,542 (861,631) (17,089)
Net loss for the quarter
ended September 30, 1995 - - (6,124) (6,124)
Net loss for the quarter
ended December 31, 1995 - - (2,466) (2,466)
----------- ---------- ----------- ---------
BALANCES, DECEMBER 31, 1995 149,517,572 $ 844,542 $ (870,221) $ (25,679)
----------- ---------- ----------- ---------
----------- ---------- ----------- ---------
</TABLE>
See notes to financial statements.
6
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PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
OPERATIONS - Pierce International, Inc. (PI) was incorporated under the
laws of the State of Colorado on July 22, 1987, for the purpose of
obtaining capital to seek potentially profitable business opportunities.
Currently, PI has business interest in two industries, natural resources
and industrial development. PI's natural resource business is conducted
through its 17.24% owned subsidiary, Pierce International Discovery, Inc.
(PIDI).
EQUITY METHOD - The investment in PIDI is accounted for using the equity
method of accounting. Although the Company does not own 20% of PIDI's
common stock, it does exercise significant influence over PIDI's
operations. The portion of PIDI income/loss is added/deducted to the basis
in the investment account. All inter-company income/expenses have been
eliminated.
NET INCOME PER COMMON SHARE - Net income (loss) per common share is
computed based upon the weighted average number of shares outstanding
during the period. Common stock equivalents were not considered (for
losses only), as their effect would be anti-dilutive.
PROPERTY, EQUIPMENT, DEPRECIATION AND AMORTIZATION - Property and equipment
are sta ted at cost. Depreciation is being provided by the straight-line
method over estimated useful lives of three to five years. All costs
related to the acquisition (including associated legal and other costs),
exploration, evaluation, and development, of the mineral properties have
been capitalized. These costs will be amortized by the units-of-production
method of accounting based upon estimated recoverable reserves.
CONTINUING OPERATIONS - The accompanying financial statements have been
prepared on a going concern basis, which contemplates continuity of
operations and realization of assets and satisfaction of liabilities in
the normal course of business. The continuation of the Company as a going
concern is dependent upon the Company raising additional capital, and
attaining and maintaining profitable operations. The Company has suffered
recurring losses from operations that raise substantial doubt about its
ability to continue as a going concern.
7
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PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
2. UNAUDITED INFORMATION:
The information furnished herein was taken from the books and record of
the Company without audit. However, such information reflects all
adjustments (consisting only of normal recurring adjustments) which are,
in the opinion of management, necessary to reflect properly the results of
the interim periods presented. Results of operations for the periods
presented are not necessarily indicative of the results to be expected
for the year. These interim financial statements should be read in
conjunction with the Company's annual report and report on Form 10-K for
the year ended June 30, 1995.
3. RELATED PARTY RECEIVABLE:
The Company has advanced $62,788 to PIDI for operations. This amount
excludes $48,000 of inter-company fees.
4. STRAWBOARD INVESTMENT:
The Company purchased strawboard equipment for $55,995. This equipment
is seen as an investment and the Company intends to resale the equipment.
The Company has received $35,144 as a deposit against this equipment, which
is stated in Deferred Revenue. Should the potential purchaser fail to
complete the transaction within 90 days, it will forfeit the deposit.
5. LONG TERM INVESTMENTS:
The balance of $281,695 is the original basis of the Company's investment
in PIDI. Deductions for PIDI's loss have been made as required by the
equity method of accounting. PIDI's operating statement for December 31,
1995, was unavailable, however, the adjustment is expected to be
immaterial.
6. RELATED PARTY PAYABLE AND RELATED PARTY TRANSACTIONS:
Advances include $192,624 due Pierce D. Parker, officer and director, or
his company, Parker Consulting Services, and $51,000 is accrued consulting
fees due Pierce D. Parker.
On May 6, 1994, the Company sold all outstanding shares of Como, Inc., a
wholly owned subsidiary, to PIDI. Como, Inc. holds the leases to the Como
property. Under the terms and conditions of the Stock Purchase Agreement,
PIDI agreed to pay $4 million
8
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PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
6. RELATED PARTY PAYABLE AND RELATED PARTY TRANSACTIONS (continued):
for the shares. PIDI paid 3 million shares of convertible preferred
stock at execution, and a payment of $100,000 was due by December, 1994.
On January 10, 1995, the Company agreed to accept 2 million shares in
lieu of the $100,000 payment.
PIDI executed a promissory note in the principal amount of $3,600,000,
bearing interest at 3% per annum, requiring quarterly interest payments and
quarterly principal reduction payments equal to 50% of the PIDI's net
profits for such quarter (after deduction of management fees) attributable
to operation of the two existing mining leases owned by Como, Inc. The
outstanding balance of the $3.6 million promissory note is due on May 6,
1999. As a result of the related party nature of this transaction, PIDI
recorded as the original basis, $268,990, which is PI's recorded basis.
7. COMMITMENTS:
As of December 31, 1995, PI had the following long term note payable:
PCS Profit Sharing Plan $200,000
PI is obligated to pay $200,000 to Parker Consulting Services Profit
Sharing Plan, owned by Pierce D. Parker, for funds it pledged for the
purpose of funding the Como project. This debt is to be paid from net
profits generated by the Como property (see note #6).
8. STOCKHOLDERS' EQUITY:
As of December 31, 1995, PI had 149,517,572 common shares issued and
outstanding. There are 750,000,000 shares authorized.
Of the total shares outstanding, 40,000,000 shares were issued as part of
PI's initial public offering and are free trading stock. All other shares
have been held a minimum of 2 years and could be sold under Rule 144.
The preferred stock may be issued by the Board of Directors in one or more
series. The Board shall determine the distinguishing features of each,
including preferences, rights and restrictions, upon the establishment of
such series.
9
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PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
9. INCENTIVE STOCK OPTION PLAN:
On August 10, 1987, the Company adopted an Incentive Stock Option Plan
(the "Plan") under which options granted are intended to qualify as
"incentive stock options" under Section 422A of the Internal Revenue code
of 1954, as amended (the "Code"). Pursuant to the Plan, options to purchase
up to 10,000,000 shares of the Company's Common Stock may be granted to
employees of the Company. The Plan is administered by the Board of
Directors which is empowered to determine the terms and conditions of
each option, subject to the limitation that the exercise price cannot be
less than the market value of the Common Stock on date of the grant (110%
of the market value in the case of options granted to an employee who owns
10% or more of the Company's outstanding Common Stock) and no option can
have a term in excess of 10 years (5 years in the case of options granted
to employees who own 10% or more of the company's Common Stock).
As of the date of this report, no options have been granted under this
Plan.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE QUARTER ENDED DECEMBER 31, 1995.
INTRODUCTION
The Company is concentrating on its two major industries, natural
resources and industrial development. The Company is making a concentrated
effort to sell strawboard equipment, and to presell strawboard.
LIQUIDITY
Working capital at December 31, 1995 was a negative $194,369. A
significant portion of current liabilities are advances from stockholders.
Cash flow continues to be irregular and the Company will continue to rely
heavily on its current investments to produce future cash flow.
RESULTS OF OPERATIONS
During the quarter ended December 31, 1995, the Company had net loss of
$2,466. The Company received stock valued at $21,603 as settlement from a
written off note receivable. As the Company develops its two primary
business operations, costs have increased in the areas of legal, accounting,
travel, and outside consulting fees.
11
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PART II - OTHER INFORMATION
ITEMS #1 THROUGH #6 (a) - No response required.
ITEM 6 (b) - No reports were filed on the Form 8-K during the quarter ended
December 31, 1995.
12
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SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the
Securities Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PIERCE INTERNATIONAL, INC.
Dated: May 7, 1996 BY: /s/ PIERCE D. PARKER
--------------------------------
Pierce D. Parker,
President (Chief Financial and
Accounting Officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1371
<SECURITIES> 21603
<RECEIVABLES> 28845
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 52186
<PP&E> 63700
<DEPRECIATION> 4350
<TOTAL-ASSETS> 456019
<CURRENT-LIABILITIES> 246554
<BONDS> 0
0
0
<COMMON> 844547
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 456019
<SALES> 0
<TOTAL-REVENUES> 21603
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 24069
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> (2466)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2466)
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F2>
<FN>
<F1>LESS THAN .001 PER SHARE
<F2>LESS THAN .001 PER SHARE
</FN>
</TABLE>
