SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996 Commission File Number 0-12977
PEGASUS INDUSTRIES, INC.
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(Exact name of registrant as specified in charter)
Nevada 95-3599648
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(State or other jurisdiction) (I.R.S. Employer Identification Number)
400 N. St. Paul, Suite 950, Dallas, TX 75201
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(Address of principal executive offices)
(214) 520-8300
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(Registrant's telephone number)
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Par Value $0.01 Outstanding as of September 30, 1996
- ----------------------------- --------------------------------------
(Title of Class) 14,352,151
Indicate by check mark whether the registrant (1) has filed all reports re-
quired to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the re-
gistrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to
the best of registrants knowledge [in definitive proxy or information state-
ments incorporated by reference in Part III this form 10-K or any amendment
to this form 10-K. [ X ]
<PAGE>
PEGASUS INDUSTRIES, INC.
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Condensed consolidated financial statements 3
Condensed Consolidated Balance Sheets
June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statement of Income
Three Months Ended June 30, 1996 and
June 30, 1995 6
Condensed Consolidated Statement of Income --
Six Months Ended June 30, 1996 and
June 30, 1995 7
Condensed Consolidated Statement of Cash
Flows Six Months Ended June 30, 1996 and
June 30, 1995 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 11
Signatures 11
2
<PAGE>
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>
Pro Forma
June 30, December 31,
1996 (1) 1995 (1)
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<S> <C> <C>
Current Assets:
Cash $ 17,842 $ 73,782
Financing Contract Receivables
Current Portion 3,976,056 4,456,621
Inventories 1,024,090 1,026,491
Prepaid Expenses and Other 126,989 219,645
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Total Current Assets 5,144,412 5,776,539
Property and Equipment, net of
accumulated depreciation of
$957,020 and $918,472 210,778 350,869
Financing Contracts Receivable -
non current portion 2,140,953 2,625,230
Deferred Tax Benefits 60,152 60,152
Other Assets 69,428 61,420
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$7,726,288 $ 8,874,210
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</TABLE>
The accompanying notes are an integral part of the Condensed Consolidated
Balance Sheets.
3
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
Pro Forma
March 31, December 31,
1996 (1) 1995 (1)
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<S> <C> <C>
Current Liabilities:
Accounts Payable $ 680,143 $ 795,324
Accrued Expenses 342,671 238,317
Current maturities of long
term debt 7,232,642 7,678,870
----------- --------------
Total Current Liabilities 8,255,456 8,712,511
Long-term debt, less current maturities 344,442 286,828
----------- --------------
8,599,898 8,999,339
Preferred Stockholders' Equity in
Subsidiary 1,128,370 (2) 1,128,370
Stockholders' Equity
Common stock, $.01 par value,
50,000,000 shares authorized;
14,352,151 shares issued and
outstanding at June 30, 1996
and 14,342,151 shares issued
and outstanding at December
31, 1995 143,521 143,521
Additional Paid in Capital 58,446 58,446
Accumulated Loss (2,203,947) (1,455,466)
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(2,001,980) (1,253,499)
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$7,726,288 $8,874,210
</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 wholly
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 reorgani-
zation, 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 re-
flects all adjustments which, in the opinion of management, are necessary for a
fair statement of the results of operations for the periods presented. Opera-
ting results for the three month period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1996.
<TABLE>
<CAPTION>
For the Three Months Ended
June 30, June 30,
1996 1995
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
Net Sales $1,117,109 $1,486,088
Cost of Sales 793,394 778,396
------------ ------------
Gross Profit 323,715 707,692
Financing Income 477,916 581,337
------------ ------------
801,631 1,289,029
Selling, General and Administrative
Expenses 801,631 1,104,989
------------ ------------
Operating Income (170,910) 184,040
Interest Expense 235,866 228,001
Net Income/(Loss) $ (406,776) $ (43,961)
------------ ------------
Loss per Common Share (0.028)(1) (0.003)(1)
------------ ------------
Weighted Average Common Shares 14,352,151 14,352,151
------------ ------------
</TABLE>
6
<PAGE>
CONSOLIDATED CONDENSED STATEMENT OF INCOME
The interim consolidated condensed statement of income contained herein
reflects all adjustments which, in the opinion of management, are necessary
for a fair statement of the results of operations for the periods presented.
Operating results for the six month period ended June 30, 1996 are not neces-
sarily indicative of the results that may be expected for the year ended
December 31, 1996.
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, June 30,
1996 1995
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(unaudited) (unaudited)
<S> <C> <C>
Net Sales $ 1,950,073 $ 2,692,974
Cost of Sales 1,339,549 1,503,155
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Gross Profit 610,524 1,189,819
Financing Income 989,238 1,195,707
------------ ------------
1,599,762 2,385,528
Selling, General and Administrative
Expenses 1,896,031 2,101,918
------------ ------------
Operating Income (296,269) 283,610
Interest Expense 452,212 458,541
Net Income/(Loss) $ (748,481) $ (174,931)
------------ ------------
Loss per Common Share (0.05)(1) (0.01)(1)
------------ ------------
Weighted Average Common Shares 14,352,151 14,352,151
------------ ------------
</TABLE>
7
<PAGE>
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, June 30,
1996 1995
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flow provided by (used in)
operating activities:
Net income/(loss) (748,481) (174,931)
Adjustments to reconcile net cash
provided (used in) operating
activities:
Depreciation and amortization 38,548 126,679
(Increase)decrease in finance
contract receivables 964,842 163,173
(Increase)decrease in inventories 2,401 (72,224)
(Increase)decrease in prepaid
expenses 92,656 (56,282)
Increase(decrease) in accounts
payable (115,181) 68,840
Increase(decrease) in accrued
expenses 104,354 (41,275)
------------ ------------
Net cash provided by (used) in
operating activities 339,139 576,847
Cash flows (used in) investing
activities:
(Increase)decrease in property and
equipment 1,543 (1,509)
(Increase)decrease in other assets (8,008) 31,860
------------ ------------
Net cash (used in) investing
activities (6,465) 30,351
Cash flows (used in) financing activities:
Increase(decrease) in long-term debt (388,615) 55,535
------------ ------------
Net cash (used in) financing
activities (388,615) 55,535
------------ ------------
Net Increase in Cash (55,941) 99,866
Cash - beginning of period 73,782 317,723
------------ ------------
Cash - end of period 17,842 417,589
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</TABLE>
8
<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
electronics and the related financing of those purchases with consumer
finance contracts.
Accordingly, the Company experiences the normal cyclical fluctuations of
most retailers with operations during the fourth quarter (October through
December) comprising a disproportionate portion of its annual revenues and
gross profits.
LIQUIDITY AND CAPITAL RESOURCES JUNE 30, 1996 COMPARED TO DECEMBER 31, 1995
During the six months ended June 30, 1996, ZTY's current assets de-
creased by $631,562,primarily due to a decrease of $480,565 in the current
portion of finance contract receivables. The decrease is normal for ZTY due
to ZTY's inability to purchase inventory, resulting in reduced gross sales.
Inventories decreased $2,401 from December 31, 1995 to June 30, 1996. Inven-
tories are typically at the lowest levels at the end of December each year.
The Company's working capital shortages kept inventory at very low levels
throughout the first months of 1996. Management was forced to close the car-
pet store and repair shop during the second quarter due to insufficient inven-
tory. Cash balances decreased $55,940, primarily due to a $115,181 reduction
in trade accounts payable. Current liabilities decreased $457,055, primarily
due to the decrease in accounts payable and due to the $446,228 reduction in
current maturities in long term debt. Long term debt increased $57,614 during
the six month period.
RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1995
The Company's Statements of Income for the three months ended June 30,
1996 and the pro forma Statement of Income for June 30, 1995 consist solely
of operations of ZTY, its wholly owned subsidiary acquired February 28, 1995.
Net sales for the second fiscal quarter decreased from $1,486,088 in 1995
to $1,117,109 in 1996, a 25% decrease, while gross profit declined $383,977, a
54% decrease. Reduced sales for the quarter was due to ZTY operating two
fewer stores in 1996 as compared to 1995 and due to difficulties due to sales
discounts to sell aged inventory and liquidation of inventory in the two
closed stores.
9
<PAGE>
Financing income for the quarter decreased $103,461 compared to the three
month period a year earlier, an 18% decrease, primarily due to lower retail
sales and reduced base of finance contract receivables. Selling, general and
administrative expenses for the quarter decreased by $132,448 compared to the
prior year. The Company had an operating loss of $170,910 for the three
months ended June 30, 1996 as compared to operating income of $184,040 for the
same period a year earlier. The operating loss was primarily due to reduced
sales raised by working capital shortages.
Results in Operations for the Six Months Ended June 30, 1996 Compared to Six
Months Ended June 30, 1995
ZTY's sales during the six months ended June 30, 1996 were $1,950,073
compared to $2,692,974, a decrease of $257,099 (10%). Gross profit for the six
months decreased $579,295 or 49%. Financing income decreased $206,469 a 17%
decrease. Selling, general and administrative expenses decreased $205,887, a
10% decrease due to the additional store closings. The Company reported a
net loss of $748,481 for the six months ended June 30, 1996 as compared to a
net loss of $174,931 for the six month period a year earlier.
The Company reported a net operating loss of $170,910 in the quarter com-
pared to a profit of $184,040 for the same period in 1995. Net loss for the
quarter was $406,776 compared to a loss of $43,961 a year earlier.
10
<PAGE>
PART II OTHER INFORMATION
None of the items are applicable.
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 March 6, 1998.
PEGASUS INDUSTRIES, INC.
/s/ Robert W. Schleizer
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By: Robert W. Schleizer, President
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 37,264
<SECURITIES> 0
<RECEIVABLES> 4,197,149
<ALLOWANCES> 0
<INVENTORY> 1,059,147
<CURRENT-ASSETS> 5,402,960
<PP&E> 292,984
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,624,333
<CURRENT-LIABILITIES> 8,518,489
<BONDS> 0
0
1,128,370
<COMMON> 143,521
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,624,333
<SALES> 3,025,872
<TOTAL-REVENUES> 3,025,872
<CGS> 2,143,367
<TOTAL-COSTS> 2,143,367
<OTHER-EXPENSES> 2,804,955
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 621,427
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,049,106)
<EPS-PRIMARY> (0.073)
<EPS-DILUTED> (0.073)
</TABLE>
