U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
Commission File No. 1-11282
PACESETTER OSTRICH FARM, INC.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
Delaware 72-1186845
- ------------------------------------ -----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10135 Hereford Road, Folsom, Louisiana 70437
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(Address of Principal Executive Offices) (Zip Code)
(504) 796-5806
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer (1) has 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 issuer was required to file such reports, and (2)
has been subject to such filing requirements for the past 90 days.
Yes _____ No __X__
APPLICABLE ONLY TO USERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be
filed by section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes _____ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 3,590,244 shares of Common
Stock at April 7, 1996.
1
<PAGE>
PACESETTER OSTRICH FARM, INC.
INDEX
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheets - March 31, 1996 and March 31, 1995
Statement of Operations - Three Months Ended March 31, 1995 and Three Months
Ended March 31, 1996
Statements of Cash Flows - Three Months Ended March 31, 1996 and Three Months
Ended March 31, 1995
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
2
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
PACESETTER OSTRICH FARM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
------
March 31,
(unaudited) December 31,
1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and short term investments $ 1,610
Accounts receivable (net of allowance of $30,267 at
March 31, 1996 and December 31, 1995) 105,912 67,187
Livestock inventory 344,477 344,677
Other current assets 9,733
------------ ------------
Total current assets 451,999 421,597
PROPERTY, PLANT, AND EQUIPMENT, net 1,234,305 1,267,986
NOTE RECEIVABLE FROM STOCKHOLDER 42,500 42,500
OTHER ASSETS 3,173 3,173
------------ ------------
$1,731,977 $1,735,256
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 223,184 $ 220,280
Notes payable 476,267 476,267
Accrued interest
Advances from stockholders 152,960 152,960
------------ ------------
Total current liabilities 852,411 849,507
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 10,000,000
shares authorized, 3,590,244 issued and outstanding as of
March 31, 1996 and December 31, 1995, respectively 3,590 3,590
Additional paid-in-capital 3,779,217 3,779,217
Retained earnings (deficit) (2,903,241) (2,897,058)
------------ ------------
879,566 885,749
------------ ------------
$ 1,731,977 $ 1,735,256
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PACESETTER OSTRICH FARM, INC.
STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1996
----- ----
<S> <C> <C>
SALES $ 208,040 $ 114,099
COST OF SALES 59,714 200
-------------- --------------
Gross profit 148,326 113,899
OPERATING EXPENSES:
Operating 227,883 116,230
General and administrative 35,362 9,816
-------------- --------------
Operating Income (loss) (114,919) (12,147)
OTHER INCOME (EXPENSES):
Interest (13,008) (13,026)
Other 3,838 18,990
-------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES (124,089) (6,183)
INCOME TAX (EXPENSE) BENEFIT -- --
-------------- --------------
Net income (loss) $ (124,089) $ ( 6,183)
============== ==============
NET INCOME (LOSS) PER SHARE $ (0.04) $ (.00)
============== ==============
AVERAGE COMMON SHARES OUTSTANDING 3,542,224 3,590,244
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PACESETTER OSTRICH FARM, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (6,183) $ (497,027)
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation 35,648 128,277
Amortization -- 2,214
Change in deferred revenue -- 895,000
Gain (Loss) on sale of assets -- --
Decrease (increase) in :
Accounts receivable, net (38,725) (921,850)
Livestock Inventory 200 74,049
Deposit -- --
Prepaid assets 9,733 --
Other current assets --
Increase (decrease) in -
Accounts payable and accrued liabilities 2,904 372,022
Accrued interest payable -- (11,750)
Borrowings from stockholders -- 20,578
Deferred revenue -- --
------------ ------------
Net cash provided (used) by operating activities 3,577 61,513
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant, and equipment ( 1,967) (12,073)
------------ ------------
Net cash used by investing activities ( 1,967) (12,073)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from note payable -- --
Net proceeds from sale of asset
Offering costs -- --
Repayment of notes payable -- (2,234)
------------ ------------
Net cash provided (used) by financing activities -- (2,234)
Net increase (decrease) in cash 1,610 47,206
CASH AND SHORT-TERM ------------ ------------
INVESTMENTS AT BEGINNING OF PERIOD -- 7,596
CASH AND SHORT-TERM
INVESTMENTS AT END OF PERIOD $ 1,610 $ 54,802
============ ============
INCOME TAXES PAID $ -- $ --
============ ============
INTEREST PAID $ -- $ 34,976
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Pacesetter Ostrich Farm, Inc.
Notes To Financial Statements
(unaudited)
1. Basis of Presentation:
The financial information included herein reflects all adjustments which are in
the opinion of management, necessary for a fair statement of results for the
periods. All such adjustments, in the opinion of management, are of normal
recurring nature.
The results of operations for the six months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
2. Property, Plant, and Equipment:
Property, plant, and equipment consist primarily of special-use assets for the
production and raising of ostriches. The balance of property, plant, and
equipment, stated at cost less accumulated depreciation, is as follows:
Estimated Years March 31, December 31,
(Lives) 1996 1995
Land -- $ 144,727 $ 144,727
Buildings and Improvements 10 to 30 1,050,592 1,050,592
Equipment 5 to 7 396,687 396,687
Vehicles 5 60,447 60,447
Construction in Progress 31,193 31,193
--------- ---------
$ 1,683,646 $ 1,683,646
Accumulated Depreciation (449,341) (415,064)
---------- ----------
$ 1,234,305 $ 1,267,986
========== ==========
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying condensed
financial statements.
Results of Operations
For the calendar quarter ended March 31, 1996, sales decreased by
$93,941 from $208,040 for the quarter ended March 31, 1995 to $114,099 for the
quarter ended March 31, 1996. The decrease in revenues during this period was
attributable to sales of a greater mix of younger farm raised birds as compared
to the same quarter in the prior year as well as generally lower prices in the
marketplace compared to a year ago.
Cost of sales as a percentage of sales decreased from 29% for the
quarter ended March 31, 1995, to 0.2% for the quarter ended March 31, 1996. The
decrease in cost of sales as a percentage of sales from the prior year's quarter
was attributable to current sales being derived mostly from farm-raised chicks
which have limited cost basis than in the prior year. There were no write-offs
for mortality for the quarter ended March 31, 1995 and 1996. The Company's gross
profit decreased by $34,427, or 23%, from $148,326 for the quarter ended March
31, 1995 to $113,899 for the quarter ended March 31, 1996 as a result of lower
ostrich sales at higher profit margins as described above.
Operating expenses decreased from $227,883 for the quarter ended March
31, 1995 to $116,230 for the quarter ended March 31, 1996 representing a
decrease of $116,653 or 49% due to various measures taken by the Company to
reduce operating costs in consideration of the net operating losses experienced
in the past several years. General and administrative expenses decreased
substantially from $35,362 for the quarter ended March 31, 1995 to $9,816 for
the quarter ended March 31, 1996 mostly due to the re-allocation of Company
personnel, decreases in advertising and promotional expenses, and voluntary
reductions in salaries of the Company's senior management.
The Company incurred a net loss of $6,183 or $0.00 per share for the
quarter ended March 31, 1996 compared to a net loss of $124,089 or $0.04 per
share for the same quarter a year ago. The net loss for 1996 was reduced from
the year ago figure mostly due to the various cost reduction efforts described
above, as well as the general reduction in the amount of expansion occurring at
the Willcox, Arizona breeding facility.
7
<PAGE>
Liquidity and Capital Resources
The Company has incurred substantial losses for several years and
experienced cash flow difficulties which have caused it not to meet some of its
obligations as they have come due. Although the Company signed a significant
ostrich delivery contract in 1995, there is no guarantee that the contract
deliveries will be completed or that the contract will be profitable. As a
result, there can be no assurances that the Company will continue as a going
concern. In absence of the contract, the Company believes that its ostrich
inventory could be liquidated at an amount substantially in excess of book
value, if required. However, there is no guarantee that sales at such prices
would be possible.
Net cash provided by operating activities was $61,513 for the quarter
ended March 31, 1995 compared to $3,577 for the quarter ended March 31, 1996
mostly as a result of the change in deferred revenues and accounts payable from
the quarter ended March 31, 1995. Cash used by investing activities decreased
from $12,073 to $1,967 reflecting the substantial decrease in expansion at the
Willcox, Arizona facility. Net cash provided/used by financing activities
changed slightly from cash used of $2,234 for the quarter ended March 31, 1995
compared to cash provided of $0 for the quarter ended March 31, 1996, reflecting
small reductions in notes payables in the prior year's quarter. Cash and short
term investments for the Company decreased from $54,802 at March 31, 1995 to
$1,610 at March 31, 1996 reflecting the differences described above.
The value of ostrich progeny produced by the Company's proprietary
ostriches or derived by the Company as a result of the management of
non-proprietary ostriches has not been reflected in the Company's financial
statements, nor has the appreciation in value of ostrich chicks and yearlings
acquired by the Company. In addition, no related costs associated with the
maintenance of progeny from the Company's ostriches or independent owned
ostriches have been assigned to inventory.
As of March 31, 1995, the Company held proprietary livestock with an
original cost of $344,477, which management estimates to have a current fair
market value in excess of original cost, not including any market value assigned
to owned and/or the Company's share of managed eggs and chicks. There can be no
assurances, however, that the Company will be able to realize such aggregate
market value at the time of sale or other disposition.
8
<PAGE>
Inflation
While inflation has not had a material effect on the operations of the
Company in the past, at the present time there is a substantial worldwide demand
for ostrich products. It is anticipated that such market conditions will
continue for the next several years, although as with any new commodity market,
market trends and prices could fluctuate substantially.
ITEM 7. FINANCIAL STATEMENTS
--------------------
The financial statements and supplementary data are included under Item
13(a)(1) and (2) of this Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
9
<PAGE>
SIGNATURE
---------
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized on this 17th day of March, 1998.
PACESETTER OSTRICH FARM, INC.
By:S/S Walter Reid Green, Jr.
------------------------------------
Walter Reid Green, Jr.
Financial and Accounting Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,610
<SECURITIES> 0
<RECEIVABLES> 105,912
<ALLOWANCES> 0
<INVENTORY> 344,477
<CURRENT-ASSETS> 0
<PP&E> 1,683,646
<DEPRECIATION> (449,341)
<TOTAL-ASSETS> 1,731,977
<CURRENT-LIABILITIES> 852,411
<BONDS> 0
0
0
<COMMON> 3,590
<OTHER-SE> 875,976
<TOTAL-LIABILITY-AND-EQUITY> 1,731,977
<SALES> 114,099
<TOTAL-REVENUES> 133,089
<CGS> 200
<TOTAL-COSTS> 126,246
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,026
<INCOME-PRETAX> (6,183)
<INCOME-TAX> (6,183)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,183)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
