<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
December 31, 1996. 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, 1996
----- --------------------------------
Common Stock, no par value 6,380,703
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION *
ITEM 1. Unaudited Financial Statements
Balance Sheets - December 31, 1996 (unaudited)
and June 30, 1996 3
Statements of Operations - Three Months Ended
December 31, 1996 (unaudited) and Year To Date 4
With Last Year Comparisons
Consolidated Statement of Changes in Stockholders' Equity -
For The Six Months Ended December 31, 1996 (Unaudited) 5
and the Years Ended 1995 and 1996.
Statement of Cash Flows - Six Months Ended
December 31, 1996 (unaudited) and December 31, 1995 6
Notes to Financial Statements 7
ITEM 2. Management's Discussion and Analysis 10
PART II - OTHER INFORMATION
ITEMS 1 THROUGH 6 11
Signature 12
*The accompanying financial statements are not covered by an independent
certified public accountants' report.
2
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PIERCE INTERNATIONAL, INC.
BALANCE SHEETS
UNAUDITED
ASSETS December 31 June 30,
CURRENT ASSETS: 1996 1996
Cash $ 868 $ 13,004
Investments and Stocks 162 15,747
Accounts Receivable 52,584 46,492
Other 367 367
--------- ---------
Total current assets 53,981 75,610
PROPERTY AND EQUIPMENT: (Note 1)
Undeveloped land mineral property (Note 3) 434,918 434,918
Furniture and equipment 7,705 7,705
Strawboard equipment (Note 4) 57,120 57,120
--------- ---------
499,743 499,743
Less accumulated depreciation and
amortization (5,233) (4,791)
--------- ---------
494,510 494,952
--------- ---------
$ 548,491 $ 570,562
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITES:
Accounts payable and accrued
liabilities 33,615 15,780
Advances from officers/directors/
stockholders (Note 5) 232,251 230,649
--------- ---------
Total current liabilities 265,866 246,429
NOTE PAYABLE (Note 6) 200,000 200,000
STOCKHOLDERS' EQUITY (Notes 7 & 8)
Preferred stock, not par value;
400,000 shares authorized;
no shares issued
Common stock, no par value;
30,000,000 shares authorized;
6,380,703 and 5,980,703
shares issued and outstanding
as of December 31, 1996 and June 30,
1996, respectively 844,542 844,542
Accumulated deficit (761,916) (720,409)
--------- ---------
82,626 124,133
--------- ---------
$ 548,491 $ 570,562
--------- ---------
See notes to financial statements.
3
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PIERCE INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
For the quarter ended Year to date
December 31, December 31,
(UNAUDITED) (UNAUDITED)
---------------------------------------------
1996 1995 1996 1995
REVENUE:
Net Sales $0 $0 $100,000 $0
Cost of goods sold - - 70,121 -
---------------------------------------------
GROSS MARGIN 0 0 29,879 0
EXPENSES:
Administrative 6,976 9,901 22,205 19,471
Bad debt reserve 10,600 - 33,107 -
Outside services 13,154 14,168 24,783 15,257
Advertising and promotion - - (300) 587
---------------------------------------------
Total expenses 30,730 24,069 79,795 35,315
NET OPERATING INCOME (LOSS) (30,730) (24,069) (49,916) (35,315)
Other income 6,000 21,603 12,000 26,388
Foreign exchange gain (loss) - - (92) -
Loss on investment (1,327) - (3,499) -
Gain on disposition of assets - - - 337
---------------------------------------------
NET INCOME (LOSS) BEFORE MINORITY
INTEREST (26,057) (2,466) (41,507) (8,590)
MINORITY INTEREST - - - -
---------------------------------------------
NET INCOME (LOSS) ($26,057) ($2,466) ($41,507) ($8,590)
---------------------------------------------
---------------------------------------------
NET INCOME (LOSS) PER COMMON SHARE ($0.004) ($0.000) ($0.006) ($0.001)
---------------------------------------------
---------------------------------------------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,380,703 5,980,703 6,380,703 5,980,703
---------------------------------------------
---------------------------------------------
See notes to financial statements.
4
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PIERCE INTERNATIONAL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
AND THE YEARS ENDED JUNE 30, 1995 & 1996
<TABLE>
TOTAL
COMMON STOCK AMOUNT ACCUMULATED STOCKHOLDERS'
SHARES DEFECIT EQUITY
<S> <C> <C> <C> <C>
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 income for the year - - 52,465 52,465
------------ -------- --------- --------
BALANCES, JUNE 30, 1995 149,517,572 844,542 (713,631) 130,911
25 for 1 Reverse split
March 13, 1996 (143,536,869) - - -
Net loss for the year - - (6,778) (6,778)
------------ -------- --------- --------
BALANCES, JUNE 30, 1996 5,980,703 844,542 (720,409) 124,133
Stock in lieu of compensation 400,000 - - -
Net loss for the quarter ended
September 30, 1996 - - (15,450) (15,450)
------------ -------- --------- --------
BALANCES, SEPTEMBER 30, 1996 6,380,703 844,542 (735,859) 108,683
Net loss for the quarter ended
December 31, 1996 - - (26,057) (26,057)
------------ -------- --------- --------
BALANCES, DECEMBER 31, 1996 6,380,703 $ 844,542 ($761,916) $ 82,626
------------ -------- --------- --------
------------ -------- --------- --------
</TABLE>
See notes to financial statements.
5
<PAGE>
PIERCE INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(41,507) $(8,590)
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation and amortization 442 440
Changes in operating assets
and liabilities:
Decrease (Increase) in
accounts receivable (6,093) (2,552)
Decrease (Increase) in
related party receivable - (785)
(Decrease) Increase in accounts
payable and accrued expenses 17,835 (2,607)
Increase (Decrease) in deferred revenue - 35,144
(Gain) Loss on sale of investments - (337)
-------- -------
Net cash used in operating
activities (29,323) 20,713
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in investments 15,585 (16,182)
-------- -------
Net cash used in investing
activities 15,585 (16,182)
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts/payments on advances from officers/
directors/stockholders 1,602 (3,968)
-------- -------
Net cash provided by
financing activities 1,602 (3,968)
(DECREASE) INCREASE IN CASH (12,136) 563
CASH, beginning of period 13,004 808
-------- -------
CASH, end of period $ 868 $ 1,371
-------- -------
-------- -------
See notes to the consolidated financial statements.
6
<PAGE>
PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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.
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 stated 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.
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, 1996.
7
<PAGE>
PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
3. UNDEVELOPED MINERAL PROPERTY:
On June 11, 1996, PI reclaimed the "Como" property from Pierce
International Discovery, Inc. (PIDI). PIDI, a 17.24% owned subsidiary,
failed to comply with the stock purchase agreement. Como consists of
gold and gravel mining leases on a property situated approximately 50
miles southwest of Denver, Colorado, near Como, Colorado in Park
County.
4. STRAWBOARD INVESTMENT:
The Company purchased strawboard equipment for $57,120. This
equipment is seen as an investment and the Company intends to resell
the equipment.
5. RELATED PARTY PAYABLE AND RELATED PARTY TRANSACTIONS:
Advances include $181,251 due Piece D. Parker, officer and director, or
his company, Parker Consulting Services, and $51,000 is accrued
consulting fees due Pierce D. Parker.
6. COMMITMENTS:
As of December 31, 1996, 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.
7. STOCKHOLDERS' EQUITY:
As of December 31, 1996, PI had 6,380,703 common shares issued and
outstanding. There are 30,000,000 shares authorized. A reverse split of 1
for 25 shares was approved on March 13, 1996.
Of the total shares outstanding, 160,000 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.
8
<PAGE>
PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
7. STOCKHOLDERS' EQUITY:(continued)
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.
8. 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 400,000 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.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE QUARTER ENDED DECEMBER 31, 1996.
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, 1996 was a negative $211,885. 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, 1996, the Company had net loss of
$26,057. As the Company develops its two primary business operations, costs
have increased in the areas of legal, accounting, travel, and outside
consulting fees.
10
<PAGE>
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, 1996.
11
<PAGE>
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: February 22, 1997 BY: /s/ Pierce D. Parker
----------------------------
Pierce D. Parker,
President (Chief Financial and
Accounting Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 868
<SECURITIES> 162
<RECEIVABLES> 52,584
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 53,981
<PP&E> 499,743
<DEPRECIATION> 5,233
<TOTAL-ASSETS> 548,491
<CURRENT-LIABILITIES> 265,866
<BONDS> 200,000
0
0
<COMMON> 844,542
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 548,491
<SALES> 100,000
<TOTAL-REVENUES> 112,000
<CGS> 70,121
<TOTAL-COSTS> 79,795
<OTHER-EXPENSES> 3,591
<LOSS-PROVISION> 33,107
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (41,507)
<INCOME-TAX> 0
<INCOME-CONTINUING> (41,507)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (41,507)
<EPS-PRIMARY> (0.006)
<EPS-DILUTED> 0<F1>
<FN>
<F1>RESULT WOULD BE ANTI-DILUTIVE DUE TO LOSS
</FN>
</TABLE>
