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 September 30, 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
- ---------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(504) 796-5806
--------------
(Issuer's Telephone Number, Including Area Code)
- ---------------------------------------------------------------
(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 __X___ No _____
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: 3,542,224 shares of Common
Stock at October 18, 1996.
<PAGE>
PACESETTER OSTRICH FARM, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheets - September 30, 1996 and December 31, 1995
Statement of Operations - Three Months Ended September 30, 1995, and Three
Months Ended September 30, 1996; Nine Months Ended September 30, 1995, and Nine
Months Ended September 30, 1996
Statements of Cash Flows - Nine Months Ended September 30, 1996 and Nine Months
Ended September 30, 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
<TABLE>
<CAPTION>
PACESETTER OSTRICH FARM, INC.
BALANCE SHEETS
ASSETS
September 30, December 31,
(unaudited)
1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and short term investments $ 32,696
Accounts receivable (net of allowance of $30,267 at
September 30, 1996 and December 31, 1995) 243,204 67,187
Livestock inventory 261,801 344,677
Other current assets 9,733
------------ ------------
Total current assets 537,701 421,597
PROPERTY, PLANT, AND EQUIPMENT, net 1,144,346 1,267,986
NOTE RECEIVABLE FROM STOCKHOLDER 42,500 42,500
OTHER ASSETS 3,173 3,173
------------ ------------
$1,727,720 $1,735,256
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 214,507 $ 220,280
Notes payable 476,267 476,267
Accrued interest
Advances from stockholders 169,317 152,960
------------ ------------
Total current liabilities 860,091 849,507
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 10,000,000
shares authorized, 3,590,244 and 3,542,224
shares issued and outstanding as of
September 30, 1996 and December 31, 1995,
respectively 3,590 3,590
Additional paid-in-capital 3,779,217 3,779,217
Retained earnings (deficit) (2,915,178) (2,897,058)
------------ ------------
867,629 885,749
------------ ------------
$1,727,720 $1,735,256
============ ============
</TABLE>
The accompanying notes are an integral part of
these financial statements.
3
<PAGE>
PACESETTER OSTRICH FARM, INC.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $ 51,717 $ 324,305 $ 425,105 $ 610,746
COST OF SALES 4,609 125,552 116,301 137,035
-------------- -------------- --------------- --------------
Gross profit 47,108 198,753 308,804 473,711
OPERATING EXPENSES:
Operating 185,892 217,625 668,170 474,173
General and administrative 26,236 10,727 111,557 36,132
-------------- -------------- -------------- --------------
Operating Income (loss) (165,020) (29,599) (470,923) (36,594)
OTHER INCOME (EXPENSES):
Interest (12,037) (14,225) (36,734) (38,501)
Other 1,828 18,993 10,630 56,975
-------------- -------------- -------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES (175,229) (24,831) (497,027) (18,120)
INCOME TAX (EXPENSE) BENEFIT -- -- -- --
-------------- -------------- -------------- --------------
Net income (loss) $ (175,229) $ (24,831) $ (497,027) $ (18,120)
============== ============== ============== ==============
NET INCOME (LOSS) PER SHARE $ (0.05) $ (0.01) $ (0.14) $ (0.01)
============== ============== ============== ==============
AVERAGE COMMON SHARES OUTSTANDING 3,542,224 3,590,244 3,542,224 3,590,244
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of
these financial statements.
4
<PAGE>
PACESETTER OSTRICH FARM, INC.
STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (18,120) $ (497,027)
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation 106,944 128,277
Amortization -- 2,214
Change in deferred revenue -- 895,000
Gain (Loss) on sale of assets 16,696 --
Decrease (increase) in :
Accounts receivable, net (176,017) (921,850)
Livestock Inventory 82,876 74,049
Deposit -- --
Prepaid assets -- --
Other current assets 9,733 --
Other assets -- --
Increase (decrease) in -
Accounts payable and accrued liabilities (5,773) 372,022
Accrued interest payable -- (11,750)
Borrowings from stockholders 16,357 20,578
Deferred revenue -- --
------------ ------------
Net cash provided (used) by operating activities 32,696 61,513
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant, and equipment -- (12,073)
------------ ------------
Net cash used by investing activities -- (12,073)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from note payable -- --
Net proceeds from exercise of overallotment
Offering costs -- --
Repayment of notes payable -- (2,234)
------------ ------------
Net cash provided (used) by financing activities -- (2,234)
Net increase (decrease) in cash 32,696 47,206
CASH AND SHORT-TERM ------------ ------------
INVESTMENTS AT BEGINNING OF PERIOD -- 7,596
CASH AND SHORT-TERM
INVESTMENTS AT END OF PERIOD $ 32,696 $ 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 nine months ended September 30, 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:
<TABLE>
<CAPTION>
Estimated Years September 30, 1996 December 31, 1995
(Lives)
<S> <C> <C> <C>
Land -- $ 144,727 $ 144,727
Buildings and Improvements
10 to 30 1,027,995 1,050,592
Equipment 5 to 7 396,687 396,687
Vehicles 5 60,447 60,447
Construction
in Progress 31,193 31,193
--------- ---------
$ 1,661,049 $ 1,683,646
Accumulated Depreciation
(516,703) (415,660)
---------- ----------
$ 1,144,346 $ 1,267,986
========== ==========
</TABLE>
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 September 30, 1996, sales
increased by $272,588 from $51,717 for the quarter ended September 30,
1995 to $324,305 for the quarter ended September 30, 1996. The increase
in revenues during this period was attributable mostly to increases in
international sales of birds as compared to the same quarter in the
prior year.
Cost of sales as a percentage of sales increased from 9% for
the quarter ended September 30, 1995, to 39% for the quarter ended
September 30, 1996. This increase in cost of sales as a percentage of
sales was attributable to a portion of the Company's international
sales being derived from adult birds having a higher inventory cost
basis which was recorded in prior years. There were no charges for
ostrich mortality included in cost of sales for the quarter ended
September 30, 1996, and 1995, respectively. The decrease in mortality
reflects the decrease in the number of birds acquired and physically
transported compared to a year ago, as well as the implementation of
additional internal procedures as a means of reducing the incidence of
mortality. The Company's gross profit increased from $47,108 for the
quarter ended September 30, 1995 to $198,753 for the quarter ended
September 30, 1996, representing an increase of $151,645 as a result of
its international sales described above.
Operating expenses increased from $185,892 for the quarter
ended September 30, 1995 to $217,625 for the quarter ended September
30, 1996 representing an increase of $31,733 or 17% due to costs in
conjunction with its international shipments of live birds compared to
the same period a year ago. General and administrative expenses
decreased from $26,236 for the quarter ended September 30, 1995 to
$15,509 for the quarter ended September 30, 1996 mostly due to the
continued voluntary reductions in salaries of the Company's senior
management.
The Company incurred a net loss of $24,831 or $0.01 per share
for the quarter ended September 30, 1996 compared to a net loss of
$175,229 or $0.05 per share for the quarter ended September 30, 1995.
The net loss for the quarter ended September 30, 1996 was reduced from
the prior year due not only to the Company's international sales, but
also to the continued voluntary reduction in general and administrative
costs.
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. The Company signed a
significant ostrich delivery contract in 1995 and received
approximately $1 million in October 1995. Since that time, the Company
has operated on a combination of both international and domestic sales.
Although international sales have represented a higher return than
domestic sales, there are no assurances that such shipments 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 such shipments, the Company believes that its ostrich
inventory could be liquidated at an amount in excess of book value, if
required. However, there is no guarantee that sales at such prices
would be possible or as to the timeliness of such liquidation.
Net cash provided by operating activities was $61,513 for the
nine months ended September 30, 1995 compared to $32,696 for the nine
months ended September 30, 1996 mostly as a result of the increases in
accounts payable in the nine months ended September 30, 1995 compared
to a slight decrease in accounts payable in the nine months ended
September 30, 1996. Cash used by investing activities decreased from
$12,073 to $0 for the nine months ended September 30, 1995 and 1996,
respectively, due to the elimination of expansion at the Willcox,
Arizona facility compared to the prior year. Net cash used by financing
activities decreased from cash used of $2,234 for the nine months ended
September 30, 1995 compared to $0 for nine months ended September 30,
1996, reflecting repayments of notes payable in 1995 that did not exist
in 1996. Cash and short term investments for the Company decreased from
$54,802 at September 30, 1995 to $32,696 at September 30, 1996
reflecting the receipt of cash near the end of the prior year's third
quarter which was not paid out until early in the prior year's fourth
quarter.
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.
8
<PAGE>
As of September 30, 1996, the Company held proprietary livestock with a
cost basis of $261,801, which management estimates to have a current
fair market value in excess of cost. 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.
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.
9
<PAGE>
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.
10
<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 24th day of March, 1998.
PACESETTER OSTRICH FARM, INC.
By: /s/ WALTER REID GREEN,JR.
-------------------------
Walter R. Green, Jr.
Chief Financial &
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 32,696
<SECURITIES> 0
<RECEIVABLES> 243,204
<ALLOWANCES> 0
<INVENTORY> 261,801
<CURRENT-ASSETS> 537,701
<PP&E> 1,661,049
<DEPRECIATION> (516,702)
<TOTAL-ASSETS> 1,727,720
<CURRENT-LIABILITIES> 860,091
<BONDS> 0
0
0
<COMMON> 3,590
<OTHER-SE> 864,039
<TOTAL-LIABILITY-AND-EQUITY> 1,727,720
<SALES> 324,305
<TOTAL-REVENUES> 343,298
<CGS> 125,552
<TOTAL-COSTS> 353,904
<OTHER-EXPENSES> 14,225
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,225
<INCOME-PRETAX> (24,831)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,831)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,831)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
