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 September 30, 1998. 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)
6746 S. Revere Parkway Ste 130, 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 September 30, 1998
-------------------------- ---------------------------------
Common Stock, no par value 7,225,703
1
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INDEX
PART I - FINANCIAL INFORMATION *
- ------------------------------
ITEM 1. Unaudited Financial Statements
Balance Sheets - September 30, 1998 (unaudited)
and June 30, 1998 3
Statements of Operations - Three Months Ended
September 30, 1996, 1997 and 1998 (unaudited) 4
Consolidated Statement of Changes in Stockholders' Equity -
For The Three Months Ended September 30, 1998 (Unaudited)
and the Years Ended 1996, 1997, and 1998. 5
Statement of Cash Flows - Three Months Ended
September 30, 1995, 1996, 1997, and 1998 (unaudited) 6, 7
Notes to Financial Statements 8
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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<CAPTION>
PIERCE INTERNATIONAL, INC.
BALANCE SHEETS
UNAUDITED
ASSETS September 30, June 30,
CURRENT ASSETS: 1998 1998
------------ ---------
<S> <C> <C>
Cash $ 678 $ 286
Investments and Stocks 1,127 1,126
Other 7,552 12,000
--------- ---------
Total current assets 9,357 13,412
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 (6,778) (6,557)
--------- ---------
Net property and equipment 492,965 493,186
--------- ---------
OTHER ASSETS 875 875
--------- ---------
$ 503,197 $ 507,473
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITES:
Bank Overdraft 0 0
Accounts payable and accrued
liabilities 117,965 148,516
Advances from officers/directors/
stockholders (Note 5) 0 0
--------- ---------
Total current liabilities 117,965 148,516
NOTES PAYABLE (Note 6) 443,466 401,612
STOCKHOLDERS' EQUITY (Notes 7 & 8)
Preferred stock, no par value;
400,000 shares authorized;
80,000 shares issued and outstanding
as of September 30, 1997 and June 30, 1997 20,000 20,000
Common stock, no par value;
30,000,000 shares authorized;
6,765,703 and 6,380,703 shares issued
and outstanding as of September 30,
1997 and June 30, 1997, respectively 864,482 864,482
Accumulated deficit (942,716) (927,137)
--------- ---------
TOTAL EQUITY (58,234) (42,655)
--------- ---------
$ 503,197 $ 507,473
========= =========
See notes to financial statements.
3
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<CAPTION>
PIERCE INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS
ENDED SEPTEMBER 30,
(UNAUDITED)
1998 1997 1996
REVENUE: ---------------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 985 $ 35,000 $ 100,000
Cost of goods sold 576 -- 70,121
---------------------------------------------------------
GROSS MARGIN 409 35,000 29,879
EXPENSES:
Administrative 14,245 21,326 15,229
Bad debt reserve 22,478 22,507
Outside services 3,769 14,325 11,629
Advertising and promotion 2,321 3,990 (300)
---------------------------------------------------------
Total expenses 20,336 62,119 49,065
NET OPERATING INCOME(LOSS) (19,927) (27,119) (19,186)
Other income 0 18,000 6,000
Recovery of bad debt 4,336 61,681 --
Foreign exchange loss 0 243 (92)
Loss on investment 0 (318) (2,172)
Other expenses 0 (1,645) --
---------------------------------------------------------
NET INCOME(LOSS) BEFORE MINORITY INTEREST (15,591) 50,842 (15,450)
MINORITY INTEREST -- -- --
---------------------------------------------------------
NET INCOME (LOSS) ($ 15,591) $ 50,842 ($ 15,450)
=========================================================
NET INCOME(LOSS) PER COMMON SHARE ($ 0.002) $ 0.008 ($ 0.002)
=========================================================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,861,120 6,509,036 6,380,703
---------------------------------------------------------
4
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<CAPTION>
PIERCE INTERNATIONAL, INC.
STATEMENTS OF CHANGE IN STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995, 1996, 1997, 1998
<S> <C> <C> <C> <C> <C>
BALANCES, JUNE 30, 1995 0 0 149,517,572 844,542 (713,631)
25 for 1 Reverse split
March 13, 1996 0 0 (143,536,869) 0 0
Net Loss 0 0 0 0 (6,778)
----------------------- --------------------------------------------
BALANCES, JUNE 30, 1996 0 0 5,980,703 844,542 (720,409)
Issuance of 80,000 shares of
preferred stock 80,000 20,000 0 0 0
Issuance of 400,000 shares of
common stock in lieu of services 0 0 400,000 0 0
Net loss 0 0 0 0 (106,414)
----------------------- ------------------------------------------
BALANCES, JUNE 30, 1997 80,000 20,000 6,380,703 844,542 (826,823)
Issuance of 300,000 shares of
common stock in lieu of prepaid
expenses 0 0 300,000 12,000 0
Issuance of 160,000 shares at $.10
and 385,000 shares at $.01, in
lieu of services 0 0 545,000 7,940 0
Net loss 0 0 0 0 (101,283)
----------------------- ------------------------------------------
BALANCES, JUNE 30, 1998 80,000 $ 20,000 7,225,703 $ 864,482 $ (928,106)
----------------------- ------------------------------------------
Net loss for the quarter
Wnded September 30, 1998 (1,591)
BALANCES, SEPTEMBER 30, 1998 80,000 $ 20,000 7,225,703 $ 864,482 ($ 929,697)
----------------------- -------------------------------------------
5
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<CAPTION>
PIERCE INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 50,842 ($15,450) ($ 6,124)
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation and amortization 221 221 220
Changes in operating assets
and liabilities:
Decrease (Increase) in
accounts receivable -- (7,687) (5,652)
Decrease (Increase) in
related party receivable -- -- 11,018
(Increase) in other assets (12,550) -- --
Increase in bank overdraft 1,049 -- --
(Decrease) Increase in accounts
payable and accrued
expenses (6,520) 13,138 (1,291)
Increase (Decrease) in deferred revenue
Gain(Loss) on sale of investments (679) -- (337)
-------- -------- -------
Net cash used in operating
activities 32,363 (9,778) (2,166)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase)decrease in property and equipment (11,205) -- --
(Increase) decrease in investments (32,182) 10,312 5,421
-------- -------- --------
Net cash used in investing
activities (43,387) 10,312 5,421
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts/payments on advances from officers/
directors/stockholders 178 (9,854) (3,255)
Net cash provided by -- -- --
financing activities 178 (9,854) (3,255)
-------- -------- --------
(DECREASE) INCREASE IN CASH (10,846) (9,320) 0
CASH, beginning of period 10,846 13,004 808
-------- -------- --------
CASH, end of period $ 0 $ 3,684 $ 808
======== ======== ========
6
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PIERCE INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
3 MONTH PERIOD ENDING
SEPTEMBER 30, 1998
Net Cash Flow From Operating Activities
Net income ($15,726)
Adjustments for differences between
income and cash flows from operating activities:
Additions:
Decrease Yorkton Securities 64
Decrease C. Henry Receivable 4,448
Depreciation Furn/Fixt 221
Increase AT&T Credit Card 261
Increase MBNA Credit Card 501
Increase Household Bank 1,035
Increase Campney&Murphy Note 42,080
Deductions:
Increase Unreal Gain/Loss (64)
Decrease Peirce Partners (226)
Decrease Accts Payable (32,214)
-------
Net cash provided by operating activities 381
Cash Flow from Financing Activity
Proceeds from Beginning Retained Earnings 11
-------
Net cash provided by financing activities 11
-----
Net increase in Cash 392
Cash, 7-01-98 286
-----
Cash, 9-30-98 $678
-----
7
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PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
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 interests 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,
1998.
8
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PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
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, and claims 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 $141,981 due Piece D. Parker, officer and director, or his
company, Parker Consulting Services, and $63,000 is accrued consulting fees
due Pierce D. Parker.
6. COMMITMENTS:
-----------
As of September 30, 1998, PI had the following long term note payable:
PCS Profit Sharing Plan $401,386
PI is obligated to pay $401,386 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 September 30, 1998, PI had 7,225,703 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 1 year and could be sold under Rule 144.
9
<PAGE>
PIERCE INTERNATIONAL, INC.
UNAUDITED
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
7. STOCKHOLDERS' EQUITY:(continued)
-------------------------------
The Company issued 80,000 shares of convertible Series I preferred stock.
The stock was issued in conjunction with a private placement conducted by
the Company. There are 400,000 shares of preferred stock authorized and may
be determined by the Board of Directors as to dividend rights, dividend
rate, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, the number of shares constituting the series and
the designation of each series.
The Series I Convertible Preferred Stock holders are entitled to dividends
when and as declared by the Company's Board of Directors from funds which
are legally available. The Series I Preferred Stock is convertible, at any
time into an identical number of shares of the Company's Common Stock.
Holders of the Series I Convertible Preferred Stock are entitled to one
vote per share on all matters submitted to a vote of the Company's
shareholders. Series I Convertible Preferred Stock does not have preemptive
rights and it is not redeemable.
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.
10
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations for the Quarter Ended September 30, 1998.
- --------------------------------------------------------------------------------
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 September 30, 1998 was a negative $120,742. 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 September 30, 1998, the Company had net income of
$5,320. The Company had an operating loss of $15,726. The Company was able to
recover a portion of bad debt it had allowed for in an earlier period. The
payment was made in marketable securities. In addition, the Company received
payment of fees related to it's strawboard business and there was not any cost
of goods associated with these fees. Although the Company produce income for the
quarter, it continues to struggle to develop reoccurring revenue.
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
September 30, 1998.
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: December 16, 1998 BY: /s/ Pierce D. Parker
--------------------------------
Pierce D. Parker,
President (Chief Financial and
Accounting Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 678
<SECURITIES> 1,127
<RECEIVABLES> 7,552
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,357
<PP&E> 500,618
<DEPRECIATION> (6,778)
<TOTAL-ASSETS> 503,197
<CURRENT-LIABILITIES> 117,965
<BONDS> 443,466
0
20,000
<COMMON> 864,482
<OTHER-SE> (942,716)
<TOTAL-LIABILITY-AND-EQUITY> 503,197
<SALES> 5,320
<TOTAL-REVENUES> 5,320
<CGS> 6,576
<TOTAL-COSTS> 6,576
<OTHER-EXPENSES> 13,365
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,105
<INCOME-PRETAX> (15,726)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,726)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,726)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
