SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1997 Commission File Number 0-12977
PEGASUS INDUSTRIES, INC.
________________________________________________
(Exact name of registrant as specified in charter)
NEVADA 95-3599648
_____________________________ _______________________________________
(State or other jurisdiction) (I.R.S. Employer Identification Number)
400 N. ST. PAUL, SUITE 950, DALLAS, TX 75201
____________________________________________
(Address of principal executive offices)
(214) 520-8300
___________________________
(Registrant's telephone number)
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 dur-
ing the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing require-
ments for the past 90 days.
Yes No X
As of March 31, 1997, there were 14,343,091 shares of Common Stock outstanding.
1
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PEGASUS INDUSTRIES, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial
Statements 3
Condensed Consolidated Balance Sheets
March 31, 1997 and December 31, 1996 3
Condensed Consolidated Statement of
Income - Three Months Ended March 31, 1997
and March 31, 1996 6
Condensed Consolidated Statement of
Cash Flows - Three Months Ended March 31, 1997
and March 31, 1996 8
Item 2. Managements' Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits 12
Signatures 12
2
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PART I
ITEM I. PEGASUS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
In the opinion of management, the information set forth in the Condensed
Consolidated Balance Sheets is fairly stated in all material aspects in relation
to the consolidated balance sheets from which it has been derived.
<TABLE>
<CAPTION>
March 31,
1997 (1) December 31,
(Unaudited) 1996 (1)
___________ ____________
<S> <C> <C>
Current Assets:
Cash $ 58,310 $ 132,162
Financing Contract Receivables
Current Portion 2,860,376 2,988,990
Inventories 564,782 624,141
Prepaid Expenses and Other 88,223 35,740
___________ ____________
Total Current Assets 3,553,691 3,781,033
Property and Equipment, net of
accumulated depreciation of
$1,016,233 and $997,549 256,187 274,363
Financing Contracts Receivable -
non current portion 953,459 1,102,395
Other Assets 69,799 60,010
___________ ____________
$ 4,833,136 $ 5,217,801
___________ ____________
</TABLE>
The accompanying notes are an integral part of
the Condensed Consolidated Balance Sheets
3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31,
1997 (1) December 31,
(Unaudited) 1996 (1)
___________ ____________
<S> <C> <C>
Current Liabilities:
Accounts Payable $ 641,835 $ 557,418
Accrued Expenses 365,922 516,243
Current maturities of long
term debt 6,408,403 6,584,128
___________ ___________
Total Current Liabilities 7,472,278 7,657,789
Long-term debt, less current maturities 35,045 -
___________ ___________
7,507,323 7,657,789
Preferred Stockholders' Equity in
Subsidiary 1,128,370 (2) 1,128,370 (2)
Stockholders' Equity
Common stock, $.01 par value,
50,000,000 shares authorized;
14,343,091 shares issued and
outstanding at March 31, 1997 and
14,343,091 shares issued and out-
standing at December 31, 1996 143,431 143,431
Additional Paid in Capital 58,536 58,536
Accumulated Loss (3,944,372) (3,770,325)
___________ ___________
(3,742,405) (3,568,358)
___________ ___________
$ 4,833,136 $ 5,217,801
</TABLE>
The accompanying notes are an integral part of
the Condensed Consolidated Balance Sheets
4
<PAGE>
NOTES TO CONDENSED CONSOLIDATED BALANCE SHEET
(1) The unaudited condensed consolidated balance sheet represent the consoli-
dated assets, liabilities and stockholders' equity of the Company and its whol-
ly owned subsidiary, Zearl T. Young, Incorporated ("ZTY").
(2) Reflects the preferred stockholders' equity interest in ZTY as a result of
a reorganization in 1994. The preferred stock, issued as part of the reorgan-
ization, has a $5.00 par value and 5% cumulative dividend.
5
<PAGE>
CONSOLIDATED CONDENSED STATEMENT OF INCOME
The interim consolidated condensed statement of income contained herein
reflect all adjustments which, in the opinion of management, are necessary for
a fair statement of the results of operations for the periods presented. Ope-
rating results for the three month period ended March 31, 1997 are not neces-
sarily indicative of the results that may be expected for the year ended
December 31, 1997.
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, March 31,
1997 1996
_________ _________
(Unaudited) (Unaudited)
<S> <C> <C>
Net Sales $ 302,221 $ 832,964
Cost of Sales 339,484 546,155
_________ _________
Gross Profit (37,263) 286,809
Financing Income 573,771 511,322
_________ _________
536,508 798,131
Selling, General and
Administrative Expenses 607,090 923,490
_________ _________
Operating Income (70,582) (125,359)
Interest Expense 168,348 216,346
_________ _________
(238,930) (341,705)
Other Income 4,731 -
_________ _________
Net Loss $ (234,199) $ (341,705)
Loss per Common Share (0.02) (1) (0.02) (1)
_________ _________
Weighted Average Common Shares 14,343,091 14,352,151
_________ _________
</TABLE>
6
<PAGE>
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, March 31,
1997 1996
_________ _________
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flow provided by (used in)
operating activities:
Net income /(loss) (234,199) (341,705)
Adjustments to reconcile net cash
provided (used in) operating
activities:
Depreciation and amortization 18,176 13,058
(Increase)decrease in finance
contract receivables 276,500 716,130
(Increase)decrease in inventories 77,359 76,660
(Increase)decrease in prepaid
expenses (52,483) 40,025
Increase(decrease) in accounts
payable 84,417 110,784
Increase(decrease) in accrued
expenses (150,321) (9,000)
__________ __________
Net cash provided by (used) in
operating activities 254,698 605,952
Cash flows (used in) investing
activities:
(Increase)decrease in property and
equipment -0- (56,592)
(Increase)decrease in other assets (9,789) -0-
__________ __________
Net cash (used in) investing
activities (9,789) (56,592)
Cash flows (used in) financing
activities:
Increase(decrease) in long-term
debt (84,562) (553,899)
__________ __________
Net cash (used in) financing
activities (84,562) (610,492)
__________ __________
Net Increase in Cash (73,852) (4,540)
Cash - beginning of period 132,810 73,782
__________ __________
Cash - end of period 58,310 69,242
__________ __________
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's business consists of the sale of retail consumer products,
primarily consumer durable goods such as furniture, appliances, carpet and elec-
tronics and the related financing of those purchases with consumer finance
contracts.
LIQUIDITY AND CAPITAL RESOURCES - MARCH 31, 1997 COMPARED TO
DECEMBER 31, 1996
During the three months ended March 31, 1997, the Company's current assets
decreased by $227,342 primarily due to a decrease of $128,614 in the current
portion of finance contract receivables and a $77,359 decrease in inventory.
This is due to a 63% decrease in first quarter sales in 1997 as compared to
1996. The Company's wholly owned subsidiary Zearl T. Young, Incorporated
("ZTY"), is in serious financial difficulty due to a lack of working capital.
The decrease in sales is primarily due to ZTY's inability to purchase inventory.
Current liabilities decreased $185,511 during the three months ended March
31, 1997. Trade accounts payable increased $84,417 while accrued expenses de-
creased $150,321. Current maturities of long term debt decreased $84,562 which
consisted primarily of paydown of debt due to inventory liquidation and reduc-
tion in finance contract receivable.
The entire portion of ZTY's note payable to its primary lender is shown as
a current liability. It matured December 31,1996 and has been renewed until
April 1997. ZTY is currently in default of its financial covenants which gives
the lender the right to accelerate the note at any time. ZTY is negotiating
a Liquidation Agreement with its primary secured lender.
Long term debt increased $35,045. Finance contracts receivable decreased
$277,550.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1997 COMPARED
TO THREE MONTHS ENDED MARCH 31, 1996
The Company's consolidated statements of income and cash flows for the
three months ended March 31, 1997 and 1996 consist of the Company and of ZTY,
its wholly owned subsidiary.
Net retail sales for the quarter ended March 31, 1997 decreased $530,743 or
63% while gross profit was a deficit of $37,263. The decrease is primarily due
to the Company's working
8
<PAGE>
capital shortages which severely restricted its ability to purchase inventory.
The Company was unable to replace merchandise sold and was forced to reduce
prices on dated inventory to achieve sales.
Financing income increased $573,771 compared to the first quarter in 1996
primarily due to the collection on accounts and due to ZTY selling finance con-
tracts directly to third party finance companies for a premium.
Selling, general and administrative expenses decreased $316,400 during this
quarter as compared to a year earlier. The decrease was primarily related to
reduced staff resulting from store closings and layoffs.
The Company reported a net loss of $234,199 for the three months ended
March 31, 1997 as compared to a loss of $341,705 for the same period a year
earlier.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no exhibits to include.
(b) There are no reports on Form 8-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on April 13, 1998.
PEGASUS INDUSTRIES, INC.
/s/ Robert W. Schleizer
___________________________________________
By: Robert W. Schleizer, President
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 58,310
<SECURITIES> 0
<RECEIVABLES> 2,860,376
<ALLOWANCES> 0
<INVENTORY> 564,782
<CURRENT-ASSETS> 3,553,691
<PP&E> 256,187
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,833,136
<CURRENT-LIABILITIES> 7,472,278
<BONDS> 0
0
1,128,370
<COMMON> 143,431
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,833,136
<SALES> 302,221
<TOTAL-REVENUES> 302,221
<CGS> 339,484
<TOTAL-COSTS> 339,484
<OTHER-EXPENSES> 607,090
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 168,348
<INCOME-PRETAX> (234,199)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (234,199)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
