U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2002
----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________
to _________________
Commission File No. 333-75297
----------
R & R RANCHING, INC.
--------------------
(Name of Small Business Issuer in its Charter)
NEVADA 87-0616524
State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
1065 West 1150 South
Provo, Utah 84601
-----------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (801) 377-1758
N/A
----------------------
(Former name and former address, if changed since last Report)
Securities Registered under Section 12(b) of the Exchange Act: None.
Securities Registered under Section 12(g) of the Exchange Act:
Common Stock, Par Value $0.001 Per Share
----------------------------------------
Check whether the 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 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.
(1) Yes X No (2) Yes X No
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not 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. [ ]
State Issuer's revenues for its most recent fiscal year:
October 31, 2002 -$0.00.
For the Exhibit Index, see Part III, Item 13.
State the aggregate market value of the common voting stock
held by non-affiliates computed by reference to the price at which
the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within the past 60 days.
February 13, 2003 - $165,000. There are approximately
1,067,300 shares of common voting stock of the Registrant held
by non-affiliates. This valuation is based upon the average
bid prices on February 13, 2003, for our common stock on the
OTC Bulletin Board of the NASD.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Not Applicable.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the
Issuer's classes of common equity, as of the latest
practicable date:
February 13, 2003
11,100,000
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
See Part III, Item 13.
Transitional Small Business Issuer Format Yes X No ___
PART I
Item 1. Description of Business.
- ---------------------------------
Business Development.
- --------------------
Corporate Developments.
-----------------------
R & R Ranching ("R & R Ranching, the "Company," "we,"
"our," "us" or words of similar import) is a Nevada
corporation organized on August 3, 1998, for the purpose
of breeding and raising bison. On February 11, 2000,
it completed an offering of 100,000 Units pursuant to
a Registration Statement on Form SB-2, which was
declared effective by the Securities and Exchange
Commission on September 1, 1999. The Units consist
of one share of common stock, one A Warrant to purchase
one share of common stock at a price of $2.50 and one
B Warrant to purchase one share of common stock at a
price of $5.00. The purpose of the offering was to
raise funding to pay off a related party loan and to
commence ranching operations.
On October 5, 1998, R & R Ranching executed a
Purchase Agreement under which it agreed to purchase
20 mature bison cows at a price of $84,000 ($4,200
per head). In order to complete he purchase and
begin operations without waiting for the proceeds
from its offering, Libco, a consulting firm that is
controlled by the former President of R & R Ranching,
William R. Davidson, loaned $70,000 to
R & R Ranching. The loan was paid together with
interest of $7,730 in February 2000.
On December 1, 1998, R & R Ranching and Blue Sky
entered into the management agreement, under which Blue
Sky Bison Ranch, Ltd., of Carvel, Alberta, Canada,
agreed to provide bison management services for R & R
Ranching's bison for a period of one year, beginning
January 1, 1999. The management agreement provides
for Blue Sky to provide grazing lands; winter feed,
hay, straw, grains, minerals and water; veterinary
care; handling facilities and handling labor;
identification tagging and records management; and
herd bulls for breeding. Blue Sky also agreed to
market R & R Ranching'syearly calf crop at Blue Sky's
expense and to assist in marketing, selling and
transporting its breeding stock at R & R Ranching's
expense. R & R Ranching is required to pay a management
fee of $500 (Canadian) (approximately US$ 335) per month,
with Blue Sky to have a lien on R & R Ranching's bison
for payment of such fees. In addition, R & R Ranching
will pay to Blue Sky one-fourth (1/4) of the proceeds
from the sale of R & R Ranching's bulls and heifers.
The agreement has been amended such that Blue Sky can
receive some of the calves in lieu of the monthly
management fee, the number of calves is to be determined
by the R & R Ranching's management.
On June 1, 2001, the Board of Directors of the
Registrant adopted, ratified and approved a resolution to
issue 10,000,000 "unregistered" and "restricted" shares
of its $0.001 par value common voting stock to Fred L.
Hall in consideration of the sum of $10,000 paid by
personal check of Fred L. Hall. This action was approved
by the majority stockholders of the Registrant on June 1,
2001. As a result of this transaction, Mr. Hall became
R&R Ranching's sole control person.
Principal Products or Services and Their Markets.
- -------------------------------------------
Bison, or American Plains Buffalo, are native to
the American and Canadian plains. Although they were
slaughtered near the point of extinction in the late
19th century, recent estimates have suggested that there
are now approximately 250,000 bison in the World.
The principal market for bison is as meat, but
the heads, bones and hides are also sold to novelty shops
and to individual buyers. Animals are also sold for
organized bison hunts and to public game reserves and zoos.
Bulls and heifers are also sold to other producers as
breeding stock.
About 7,500,000 pounds of meat from approximately
15,000 bison are sold in the United States each year.
The Meat and Poultry Inspection Directory of the U.S.
Department of Agriculture lists about 100
bison-processing facilities in the United States.
Bison meat has a low fat content (less than 3%)
and a cholesterol content that is lower than beef,
chicken or pork.
Nutrient Composition
(per 100 grams of cooked lean meat)(1)
-----------------------------------
Fat Calories Cholesterol Species (Grams) (Kcal) (Mg.) ------- ------- ------ -----
Bison 2.42 143 82
Beef 9.3 211 86
Chicken 7.41 190 89
(Skinless)
(1) Source: USDA Handbook.
Many people believe bison to have a richer flavor
than beef. It is prepared much the same as beef,
without special handling. It also has a high proportion
of protein, minerals and fatty acids in relation to its
caloric value. Unlike
beef, bison spend very little time in the feedlot and are
not generally subjected to drugs, chemicals or hormones.
For all these reasons, bison is often considered a superior
alternative to beef.
Bison meat is available in the form of steaks,
patties, rib roast, short rib, sausage and jerky.
Principal markets include wholesalers, restaurants, custom
meat stores and mail-order or on-the-farm sales to the
general public.
The commercial bison market is very young. At
present, the demand for breeding stock is high, and it
is expected to remain high as producers attempt to increase
the size of the American and Canadian herds. Because
females are currently more valuable as breeding stock
than as meat, R & R Ranching expects that its herd will
be used for breeding. Unless a substantial market for
buffalo meat develops, the market for breeding stock will
likely follow the same downward pattern as it has in the
ostrich industry. See the Risk Factor "Market Acceptance
of Product Line."
The bison breeding season begins in August and
continues into October, with calving season running from
May to July. Cows can begin breeding at age two and
can reproduce every year up to age 15 and every other
year to age 25. Bulls can also begin breeding at two
years of age.
Although they are generally disease resistant,
bison are closely related to cattle and are subject to
may of the same diseases. Brucellosis is a contagious
disease of cattle and buffalo that can cause
spontaneous abortion. R & R Ranching will be required
to test its Canadian herd for tuberculosis and brucellosis.
If either disease is found, the infected animals will
have to be culled, which could have an adverse effect
on R & R Ranching's profitability.
Distribution Methods of the Products or Services.
- --------------------------------------------
Bison products have historically been sold
directly to interested buyers who visit the ranch or
in specialty markets such as health food stores and
gourmet stores. Several U.S. producers have also
established successful mail order markets. Bison
pelts, heads and skulls are typically marketed
through Western-themed retailers or directly by
the producer.
Breeding stock is generally marketed to other
bison producers in bison-related publications such as
the Western Livestock Journal and Bison World, the
official publication of the National Bison Association.
Local newspapers and agricultural publications are also
common marketing methods. In addition, state and
national bison associations often have booths and
provide marketing information at agricultural events.
Under the management agreement, Blue Sky assists
in marketing, selling and transporting R & R Ranching's
breeding stock at R & R Ranching's expense, and to market
and sell R & R Ranching's yearly calf crop at Blue Sky's
expense. "Breeding stock" refers to bison that are used
to increase the size and quality of the herd through
breeding. The yearly calf crop is the product of the
breeding stock, and may itself be used as meat or as
breeding stock.
Blue Sky is active in the buying and selling of
bison. It has arranged to sell R & R Ranching's products
to several of its bison industry contacts for up to the
next five years. However, Blue Sky does not have any
binding sales contract with any of these entities, and
it can not guarantee that it will be able to sell R & R
Ranching's yearly calf crops through this channel.
A representative of Diving Buffalo Ranch, the
entity from which R& R Ranching purchased its bison, has
also verbally told R & R Ranching's President that Diving
Buffalo will assist R & R Ranching in selling its bison
at R & R Ranching's request. However, Diving Buffalo
is not contractually committed to give R & R Ranching
any marketing assistance.
R & R Ranching has no plans to advertise
its products in the foreseeable future. However,
R&R Ranching is active in national and local bison
associations in order to develop the networking
contacts necessary to market its bison. There
can be no assurance that R & R Ranching will be
able to successfully produce or market enough animals
to make its operations profitable.
Competitive Business Conditions.
- --------------------------------
The bison industry is diffuse; this is the case with
most agricultural industries. The National Bison
Association estimates that in 2001, approximately
250,000 head were being raised by over 2,400 producers
in all 50 States, and 20 countries. Bison producers range
in size from hobby farmers who maintain a few animals
as a side interest or tourist attraction to large producers
owning several hundred to several thousand bison.
R & R Ranching began operations with a herd of only
20 mature cows. Currently, R&R Ranching has 30 mature
breeding cows. Because of the large number of producers
in North America, many of which will have substantially
larger herds and facilities, management expects that
its operations will be a very small part of the overall
bison industry. R & R Ranching hopes to develop a
reputation as a breeder of high quality stock, which
it believes will enhance its competitive position in
the industry. However, even if its operations are
successful, R & R Ranching will almost certainly remain
a small player.
R & R Ranching's most significant competition
will come from Adam Ranch in northern Alberta, and
Tatonka Ranch in Saskatchewan. These are the two
largest Canadian bison ranches. Each has more than
1000 cows.
Currently, the principal market for bison cows
is as breeding stock. As additional producers enter
the market and begin breeding operations, supply will
almost certainly increase, making R & R Ranching's
role in the bison industry even less significant. In
addition, overproduction of bison cows may result in
lower market prices for R & R Ranching's products,
which would reduce its profitability.
Sources and Availability of Raw Materials.
------------------------------------------
Feed is the largest operating cost of a bison
operation. In Alberta, Canada, pasture grazing is
generally sufficient for nine months of the year.
In the winter months, hay must often be used to supplement
the herd's diet. Cows will eat 15 to 25 pounds of hay per
day, with weaned calves and bulls consuming 10 pounds and
20 to 30 pounds per day, respectively. Hay in Alberta
is plentiful but, as with all agricultural crops, is
subject to significant price fluctuations.
Oats are used to supplement hay and to flush
bison cows during breeding time (to ensure a high
conception rate). Other raw materials used in the bison
industry include salt and minerals, water, deworming
medication, antibiotics, and miscellaneous items required
to repair fences, vehicles and handling facilities.
Management believes that each of these materials will be
available in sufficient quantities. Blue Sky will provide
feed for R & R Ranching's bison during the one-year term
of the management agreement.
Once R & R Ranching identifies a suitable
property for its own bison facility, it will be responsible
for providing all of the raw materials necessary to
maintain its herd.
Dependence on One or a Few Major Customers.
-------------------------------------------
Management believes that the pool of
potential purchasers of its breeding stock is
large because of the diffuse nature of the bison
production industry. Bison can be shipped over long
distances, so the market for R & R Ranching's animals
will not necessarily be limited to Alberta.
R & R Ranching may also make a portion of its
herd available for slaughter, although it will focus
primarily on the production of breeding stock. Prudent
herd management requires the frequent culling of less
desirable breeding stock; R & R Ranching believes that
demand for bison meat is high enough to absorb the supply
of culled animals. There is a slaughterhouse approximately
two to three hours from Blue Sky's ranch in Alberta, Canada.
This slaughterhouse is devoted exclusively to the slaughter
of bison. Management believes that this facility has
enough capacity for all bison that R & R Ranching sends
to slaughter, whether directly or through third party
purchasers.
Need for Governmental Approval of Principal Products
or Services.
- ----------------------------------------
The Canadian Health of Animals Branch of Agriculture
and Agri-food Canada requires all stock to be certified
free of tuberculosis and brucellosis. This involves
compulsory testing for all captive bison two years
old and older. Under the management agreement, Blue
Sky will handle all veterinary care for R & R
Ranching's herd.
The U. S. Department of Agriculture does not
currently require inspection of bison meat. However,
because consumers believe that USDA inspection provides
an assurance of quality, many bison producers have decided
to seek USDA approval of their products voluntarily.
This requires the producer to arrange for slaughter
and processing of its animals at a packing house that
the USDA has designated as an "Official Bison
Establishment." Bison that are slaughtered at an
Official Bison Establishment may be branded with a
USDA inspection brand.
R & R Ranching plans to raise its bison in
Alberta, Canada and in Montana to focus on the production
of bison for breeding. Therefore, management does not
believe that obtaining USDA approval of its animals will
be necessary.
Effect of Existing or Probable Governmental
Regulations on the Business.
- ----------------------------------
Veterinary care is one of Blue Sky's
management responsibilities under the management agreement,
and compliance with the Canadian
disease-certification regulations will be included.
If and when R & R Ranching moves its operations to
its own facilities, it will take over testing
responsibilities. If any of R & R Ranching's
animals are found to be infected with tuberculosis
or brucellosis, they will have to be destroyed.
Large-scale infections will require the destruction of
a large portion of R & R Ranching's herd and may have
a serious negative effect on its operations and
profitability.
Research and Development.
- -------------------------
R & R Ranching expects that research and
development will not be a significant part of its
operations, other than using well-established selective
breeding techniques to ensure the quality of its herd.
Costs and Effects of Compliance with
Environmental Laws.
- -------------------------------------
Management believes that compliance with
environmental laws will require a significant portion
of its resources.
Number of Employees.
- --------------------
Management of R & R Ranching's herd will be
the responsibility of Blue Sky, and will be handled
through its own employees through the end of the
fiscal year, unless R & R Ranching is able to identify
a suitable location for its own facility. R&R Ranching
will assume day-to-day management activities if the
proper facility is located during the operational year.
R & R Ranching expects that these duties will be
delegated to experienced, competent contractors.
R & R Ranching's executive officers will manage its
operations on a part-time basis and will not receive
any salary or wages for the foreseeable future.
Directors and executive officers will be compensated
for travel and out-of-pocket expenditures.
Public Offering.
- ----------------
R & R Ranching commenced a public offering of
Units consisting of common stock and warrants in late
1999. The offering was completed on February 11, 2000,
with all 100,000 Units being sold for gross proceeds
of $125,000.
Use of Proceeds.
- ----------------
The proceeds of $125,000 have funded the operations
of the Company to date. R & R Ranching used the net
proceeds from its public offering as follows:
Repay loan from Libco $77,700
Management Fees to Blue Sky Bison $4,500
Accounting/Attorney's Fees $8,000
Offering Costs $6,517
Unused Proceeds $26,283
Total Proceeds $125,000 (1)
Risk Factors.
-------------
POOR BREEDING STOCK WOULD ADVERSELY AFFECT THE COMPANY
R & R Ranching must be able to get enough
genetically consistent breeding stock on reasonable
terms and at reasonable prices in order to succeed.
R & R Ranching can not guarantee that it will be able
to do this. See "Description of Business.
"
AN UNHEALTHY HERD WILL ADVERSELY AFFECT THE COMPANY
The health of R & R Ranching's breeding herd
and bison will have a great impact on its profits. If
its breeding herd or bison population contracts a
disease causing it to breed less productively, or
which kills many of its bison, R & R Ranching's
business operations will be damaged. In addition,
many bison will be raised together, which will
make them more vulnerable to contagious disease.
R & R Ranching can not guarantee that it will be
able to avoid herd health problems. See "Description
of Business."
VOLATILE SUPPLY COSTS COULD HURT OPERATIONS
R & R Ranching's profitability is extremely
sensitive to changes in the cost of supplies because
the cost of feed and other supplies are a large part
of the cost of producing bison. These costs are affected
by regional and seasonal availability and demand.
Crop conditions, weather and other factors may make
feed and supplies more expensive. Increased expense
or a large decline in the availability of these
supplies could have a negative effect on R & R Ranching.
See "Description of Business."
MANAGEMENT EXPECTS EARLY LOSSES
R & R Ranching was formed in August 1998 and
has very limited operating history. The purchase of
breeding stock requires large up front expenditures and
working capital during the initial start-up period.
R & R Ranching expects that its initial expenses will
result in losses early in its development. It cannot
guarantee that it will become profitable in the
foreseeable future. See "Management's Discussion and
Analysis or Plan of Operation."
AUDITOR'S "GOING CONCERN" OPINION
The Independent Auditor's Report for R & R
Ranching's audited financial statements as of October
31, 2002, expresses "substantial doubt about
[R & R Ranching's] ability to continue as a going
concern," due to its status as a newly formed company
that has not yet established profitable operations.
STRONG COMPETITION MAY HURT THE COMPANY'S OPERATIONS
Many of its current and potential competitors
have much more financial, technical and personnel
resources than R & R Ranching. R & R Ranching can not
guarantee that its competitors will not be more successful
in developing and improving bison production technologies
and raising consistently high quality bison that are
more economical to raise than R & R Ranching's bison.
Also, as additional competitors begin operations, the
supply of bison may exceed demand and result in lower
market prices for bison. R & R Ranching's competitive
position in the buffalo ranching industry is extremely
small.
FAILURE TO COMPLY WITH GOVERNMENT REGULATION MAY
ADVERSELY AFFECT OUR COMPANY
R & R Ranching is subject to federal, state,
provincial and local government regulations, including
those restricting certain types of investor-owned
livestock production operations and those concerning
occupational safety and health, and zoning. R & R Ranching
will attempt to comply with all applicable regulations.
However, it can not guarantee that it will satisfy all
regulations or obtain all required approvals. Failure to
comply with applicable regulations can, among other
things, result in fines, suspensions of regulatory
approvals, operating restrictions, and criminal
prosecution. Changes in or additions to applicable
regulations could also have a negative effect on
R & R Ranching and its business. See "Description of
Business."
R & R RANCHING WILL FACE HIGH CAPITAL COSTS
Bison operations require expensive capital
assets such as:
land;
handling facilities and fences;
equipment and breeding stock;
operating funds; and
labor and management.
For a typical 40-cow bison operation, the cost
of these capital assets can be as high as $300,000.
This high initial investment prevents many small
investors from entering the bison industry.
THE COMPANY WILL BE ADVERSELY AFFECTED IF
THE MARKET DOES NOT ACCEPT BISON MEAT
The North American meat industry is dominated
by producers of beef, pork and chicken. Bison is not
a mainstream meat product, and R & R Ranching can not
guarantee that the public will want to purchase bison
meat in sufficient amounts to make R & R Ranching's
operations profitable. Producers of ostrich, another
non-mainstream meat, have found it very difficult to
gain large-scale access to consumers. The ostrich
meat industry was also disadvantaged by the higher
prices being paid for live ostriches as breeding
stock, as compared to the relatively low price per
pound for ostrich meat. When it became clear that
no large-scale meat market would develop in the
foreseeable future, the prices of ostrich breeding
stock fell to meat market prices. The bison industry
is likely to face similar difficulties.
THE BISON INDUSTRY IS NOT HIGHLY ORGANIZED
Accurate data about various facets of the bison
industry is very difficult to obtain, and organized or
aggregate information for the most part simply does not
exist. This lack of industry organization and
information prevents many investors from entering the
bison industry.
THE LACK OF ORGANIZATION IN THE BISON MEAT MARKET
MAY MAKE THE COMPANY'S BISON HARDER TO SELL
The bison production industry lacks well
defined and established channels of product distribution
because it is a new industry. There is no large-scale,
organized system for wholesaling or retailing buffalo
products.
IF THE CANADIAN DOLLAR STRENGTHENS, R & R RANCHING'S
EARNINGS MAY BE REDUCED
R & R Ranching will be conducting its
principal operations in Canada. It will pay most
of its operating expenses and receive most of the
proceeds from its bison sales in Canadian dollars.
If the Canadian dollar strengthens relative to the
U.S. dollar, R & R Ranching's earnings may be
adversely affected when converted from Canadian
dollars into U.S. dollars.
THE MARKET PRICE OF THE SECURITIES MAY NOT EXCEED THE
EXERCISE PRICE OF THE OUTSTANDING WARRANTS
The value of the warrants lies in the possibility
that the price of R & R Ranching's common stock may
someday exceed the exercise price of the warrants.
R & R Ranching can not guarantee that the market price
for its common stock will exceed the exercise price of
the warrants. If the market price does not exceed $2.50
per share ( for the A Warrants) or $5.00 per share
(for the B Warrants) during the five-year term of the
warrants, they will become worthless.
FRED L. HALL HAS VOTING CONTROL OF R & R RANCHING
Fred L. Hall can elect all of R & R Ranching's
directors, who in turn appoint all executive officers,
without regard to the votes of other stockholders. Mr.
Hall has absolute control over the management and affairs
of R & R Ranching. Mr. Hall currently owns approximately
90% of R & R Ranching's outstanding voting securities
(not taking into account the exercise of any of the
Warrants). See "Security Ownership of Certain Beneficial
Owners and Management."
IF R & R RANCHING DOES NOT MAINTAIN A CURRENT PROSPECTUS
AND REGISTRATION, WARRANT HOLDERS WILL NOT BE ABLE TO
EXERCISE THEIR WARRANTS
Holders of the warrants will only be able to
exercise them if R & R Ranching maintains a current
prospectus in effect and the exercise is qualified or
exempt from qualification under applicable securities
laws of the warrant holders' states of residence. Although
R & R Ranching intends to use reasonable efforts to update
its prospectus as necessary to maintain a current prospectus
and federal and state registration or qualification for
the exercise of the warrants, it can not assure investors
that it will be able to do so when the investors wish to
exercise the warrants. The value of the warrants will
decrease greatly if R & R Ranching does not maintain a
current prospectus and registration or qualification.
Item 2. Description of Property.
- ---------------------------------
R & R Ranching does not currently own any property.
Its executive office is the office of Fred L. Hall, its President,
and is provided rent free.
The management agreement with Blue Sky has been
renewed for successive one-month periods until it is able
to move its herd to a new location.
Blue Sky has subcontracted with Diving Buffalo to
provide the services that Blue Sky is required to provide
to R & R Ranching under the management agreement. Diving
Buffalo is housing R & R Ranching's bison herd at its
ranch in Melstone, Montana. There is no agreement between
R & R Ranching and Diving Buffalo in this regard and all
obligations of R & R Ranching and Blue Sky under the
management agreement remain unchanged.
Diving Buffalo's property consists of approximately
640 acres and has sufficient working corrals and handling
facilities for vaccination and truck loading of bison.
Item 3. Legal Proceedings.
- ---------------------------
R & R Ranching is not a party to any pending
legal proceeding. To the knowledge of management, no
federal, state or local governmental agency is presently
contemplating any proceeding against R & R Ranching. No
director, executive officer or affiliate of R & R Ranching
or owner of record or beneficially of more than five
percent of R & R Ranching's common stock is a party adverse
to R & R Ranching or has a material interest adverse to
R & R Ranching in any proceeding.
Item 4. Submission of Matters to a Vote of Security Holders.
- ---------------------------------------------------------
No matter was submitted to a vote of the Company's
security holders during the fourth quarter of the period
covered by this Report or from inception on August 3, 1998.
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters.-------------------------------------------------
Market Information.
- -------------------
The Company's common stock is traded on the
OTC Bulletin Board of the National Association of
Securities Dealers, Inc. ("NASD"); however, the market
for shares of the Company's common stock is extremely
limited and only commenced October 18, 2000. No assurance
can be given that the present market for the Company's
common stock will continue or be maintained, and the
sale of the Company's "unregistered" and "restricted"
shares of common stock pursuant to Rule 144 of the
Commission by members of management may have a
substantial negative impact on the public market.
Fred L. Hall is able to sell up to 11,000 of his
1,002,500 "unregistered" and "restricted" shares in
any three month period. See the Risk Factor "Sale of
'Restricted'
Securities."
The Company's common stock was only recently
quoted on the OTC Bulletin Board on October 18, 2000.
The high and low bid prices for these shares of common
stock of the Company for the last year period are as
follows:
Bid
Quarter ending: High Low
Oct. 1, 2001, through
December 31, 2001 $.51 $.50
January 1, 2002, through
March 28, 2002 $.55 $.50
April 1, 2001, through
June 28, 2002 $.55 $.55
July 1 through
September 30 2002 $.55 $.50
These bid prices were obtained from the
National Quotation Bureau, Inc. ("NQB") and do not
necessarily reflect actual transactions, retail markups,
mark downs or commissions.
Each of the Units sold under R & R Ranching's
offering consists of one share of the Company's common
stock, one "A" Warrant to purchase an additional share
of common stock at a price of $2.50 per share, and one
"B" Warrant to purchase an additional share of common
stock at a price of $5.00 per share. No warrants have yet
been exercised and 100,000 "A" Warrants and 100,000 "B"
Warrants are currently outstanding. In addition, R & R
Ranching has adopted a 1998 Stock Option Plan and has
reserved 1,000,000 shares of common stock under that Plan.
The issuance of any of these shares may dilute the
holdings of purchasers under R & R Ranching's recent
offering.
The Company has 11,000,000 "unregistered" and
"restricted" shares of common stock outstanding. The
10,000,000 shares of stock are beneficially owned by
Fred L. Hall and 1,000,000 shares of stock were issued
to William R Davidson in 1998. In 2001, William R.
Davidson gifted 500,000 shares to a tax exempt
non-profit organization. All 1,000,000 shares could
be sold under Rule 144(k) without regard to any volume
limitations of Rule 144. Future sales of any of these
shares, or any shares issued under the 1998 Stock Option
Plan or otherwise may decrease the market price of R&R
Ranching's common stock in any "public market" that may
develop for the common stock.
Holders.
- --------
As of February 13, 2003, R & R Ranching has
56 record stockholders.
Dividends.
- ----------
R & R Ranching has not declared any cash
dividends with respect to its common stock or its preferred
stock, and does not intend to declare dividends in the
foreseeable future. There are no material restrictions
limiting, or that are likely to limit, R & R Ranching's
ability to pay dividends on its securities.
Sales of Unregistered Securities During the Past Five Years.
- ----------------------------------------------------
The following table provides information about all
"unregistered" and "restricted" securities that R & R
Ranching has sold since inception, and which were not
registered under the 1933 Act:
Number
Date of Aggregate
Name of Owner Acquired Shares Consideration
- ------------- -------- ------ -------------
Fred L. Hall 6/1/01 10,000,000 $10,000
Management believes that Mr. Hall is an
"accredited investor" as that term is defined under
applicable federal and state securities laws, rules
and regulations, because he is a director and executive
officer of R & R Ranching. Management also believes that
the offer and sale of these shares of common stock were
exempt from the registration requirements of Section 5 of
the Act pursuant to Section 4(2) thereof, and from similar
states' securities laws, rules and regulations covering the
offer and sale of securities by available state exemptions
from such registration.
Item 6. Management's Discussion and Analysis or Plan
of Operation.
- ----------------------------------
Plan of Operation.
- ------------------
R & R Ranching's plan of operation for the
next 12 months is to continue with its bison operation
under the management agreement with Blue Sky Bison. As
of the date of this Report, R & R Ranching's has 30 cows
and 36 calves. It is expected that each of the 30 cows
is pregnant and will deliver a calf in the Spring 2003,
assuming each cow was bred during the 2002 breeding
season. Management assumes that each cow is pregnant
based upon observation, however, it cannot accurately
account for pregnancy until after the 2003 calving season.
R&R Ranching currently is feeding the 36 calves born in
2001 and 2002 and are actively seeking buyers in the
bison breeding or bison meat markets.
As of the date of this Report, Several buyers
have expressed an interest in purchasing R & R Ranching's
calves. R&R anticipates Blue Sky Bison will complete and
market R&R Ranching's calves. However, current negotiations
have not yielded a satisfying sales contract for the calves.
Because all of R & R Ranching's cows are young (about three
to six years old), management hopes that it will not have
to use many of its heifer calves to replace cows. This
would allow R & R Ranching to sell almost all of its heifer
calves while its cows are in their breeding prime.
Currently, all of the cows and heifers owned are less than
6 years old. However, many factors, including illness and
death of its existing cows, could force R & R Ranching to
keep some of its annual heifer calf crop; this would have
a negative effect on revenues because the replacement
heifers would not be made available for sale.
Most bison operations breed bulls at the rate
of about one bull to 10 cows. Because the cows that it
received under the Purchase Agreement were already
pregnant, breeding bulls were not used until the 1999
fall breeding season. The management agreement provides
for Blue Sky to supply bull for breeding, so R & R Ranching
will not require breeding bulls of its own until it moves
its operations to its own location as discussed below.
Once this occurs, R & R Ranching will keep about one bull
for every 10 cows, to be bred for two years. Currently, it
appears that all of R&R Ranching's 30 cows are pregnant,
and were bred during the 2002 breeding season. R & R
Ranching will have to keep replacement bulls from its own
herd (or purchase them, on a regular basis) in order to
ensure genetic diversity and avoid inbreeding. Bison
ranchers commonly keep bulls and cows together and let
nature dictate the breeding season. Most breeding occurs
in July and August, with a 275 day gestation period.
R & R Ranching will breed its 30 cows during each cow's
normal cycle during the months of July and August.
Management's current plan is to use Blue Sky Bison's
bulls for the 2002 breeding season.
Calves born in the Spring of 2002 were weaned
during the month of November, 2002. R & R Ranching tagged
(for identification purposes) and vaccinated its calves
during the weaning period. R & R Ranching will pay Blue
Sky $500 (Canadian) (approximately $US 329) per month
under the management agreement, and will pay to Blue
Sky one-fourth (1/4) of the proceeds from the sales of
its bulls and heifers during 1999. In exchange, Blue Sky
will provide grazing of the herd, winter feeding, veterinary
care, handling, identification tagging and records
maintenance, and provision of breeding bulls (at the
rate of one bull per 20 cows). With additional feed
expenses and reimbursement of out-of-pocket expenses
of its directors and officers, R & R Ranching expects
annual costs of operation in 2000 to equal approximately
$12,000. Management estimates that it will cost
approximately $500 to raise a calf to the point where
it is weaned and ready for sale. This figure includes
the payment of one-fourth of sales proceeds to Blue
Sky as discussed above. The price range for weaned
heifer calves is about $1,200 to $1,500; for weaned
bulls it is $1,000 to $1,200. Therefore, R & R Ranching
expects to make a profit of $700 to $1,000 per heifer
calf and $500 to $7,00 per bull calf. These figures depend
on many factors, including for example: a calf crop of 90%;
lack of factors that would complicate pregnancy and birth
(e.g., unusually harsh weather, brucellosis and other
diseases, inferior genetic stock); and stability of feed
and bison prices. If any one of these factors changes,
R & R Ranching's profitability could decrease
significantly.
During the next 12 months, management expects
to continue its breeding operations in Melstone, Montana.
During the next 12 months, R & R Ranching will be able
to meet its current operating expenses from anticipated
bison sales. In addition, management is considering
liquidating all of the bison and pursuing other business
opportunities.
Results of Operations.
- ----------------------
The revenues for the year ended October 31,
of 2002, were $0; and expenses were $20,218; and losses
were ($20,218). These losses were primarily the result
of general and administrative expenses. During the year
ended October 31, 2002, the Company capitalized $5,795
for the twenty calves born less $2,715 for the twelve calves
transferred to Blue Sky Bison Ranch LTD. in accordance with
the management agreement.
Liquidity.
- ----------
The Company had cash of $510 at October 31, 2002.
Management feels cash loans or sale of bison will be done
to meet cash demands.
Item 7. Financial Statements.
- -----------------------------
R & R RANCHING, INC.
[A Development Stage Company]
FINANCIAL STATEMENTS
OCTOBER 31, 2002
R & R RANCHING, INC.
[A Development Stage Company]
CONTENTS
PAGE
- Independent Auditors' Report 1
- Balance Sheet, October 31, 2002 2
- Statements of Operations, for the year ended
October 31, 2002 and 2001 and from inception
on August 3, 1998 through October 31, 2002 3
- Statements of Stockholders' Equity, from inception
on August 3, 1998 through October 31, 2002 4
- Statements of Cash Flows, for the year ended
October 31, 2002 and 2001 and from inception
on August 3, 1998 through October 31, 2002 5 - 6
- Notes to Financial Statements 7 - 11