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, 1998
Commission File No. 1-11282
PACESETTER OSTRICH FARM, INC.
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(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)
----------------------------------------------------
(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: 3,950,224 shares of Common
Stock at August 25, 1999.
<PAGE>
PACESETTER OSTRICH FARM, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheets - March 31, 1998 and December 31, 1997
Statement of Operations - Three Months Ended March 31, 1998 and
Three Months Ended March 31, 1997
Statements of Cash Flows - Three Months Ended March 31, 1998 and
Three Months Ended March 31, 1997
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>
March 31, December 31,
1998 1997
----------- ------------
(unaudited)
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and short term investments $ 15,639 --
Accounts receivable (net of allowance of $47,603 at
March 31, 1998 and December 31, 1997) 71,188 77,781
----------- -----------
Total current assets 86,827 77,781
PROPERTY, PLANT, AND EQUIPMENT, net 44,242 50,625
NOTE RECEIVABLE FROM STOCKHOLDER 42,500 42,500
NET ASSETS OF DISCONTINUED OPERATIONS 796,220 796,220
OTHER ASSETS 20,257 3,173
----------- -----------
$ 990,046 $ 970,299
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 178,632 201,216
Notes payable 541,523 541,899
Advances from stockholders 171,042 175,965
----------- -----------
Total current liabilities 891,197 919,080
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 10,000,000
shares authorized, 3,665,224 and 3,665,224 issued and outstanding
as of March 31, 1998 and December 31, 1997, respectively 3,665 3,665
Additional paid-in-capital 3,779,217 3,779,217
Retained earnings (deficit) (3,684,033) (3,731,663)
----------- -----------
98,849 51,219
----------- -----------
$ 990,046 $ 970,299
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PACESETTER OSTRICH FARM, INC.
STATEMENT OF OPERATIONS
(unaudited)
Three Months Ended
March 31,
-------------------------------
1998 1997
----------- -----------
SALES $ 164,017 $ 161,445
COST OF SALES 17,300 17,842
----------- -----------
Gross profit 146,717 143,603
OPERATING EXPENSES:
Operating 80,513 209,513
General and administrative 10,094 32,787
----------- -----------
Operating Income (loss) 56,110 (98,697)
OTHER INCOME (EXPENSES):
Interest (8,480) (5,698)
Other -- --
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 47,630 (104,395)
INCOME TAX (EXPENSE) BENEFIT -- --
----------- -----------
Net income (loss) $ 47,630 $ (104,395)
=========== ===========
NET INCOME (LOSS) PER SHARE $ .01 $ (.03)
=========== ===========
AVERAGE COMMON SHARES OUTSTANDING 3,665,224 3,665,224
=========== ===========
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,
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 47,630 $(104,395)
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation 6,383 35,648
Amortization -- --
Change in deferred revenue -- --
Gain (Loss) on sale of assets -- --
Decrease (increase) in:
Accounts receivable, net 6,593 96,591
Livestock Inventory -- (89,401)
Deposit -- --
Prepaid assets -- --
Other current assets (17,084) (3,099)
Increase (decrease) in -
Accounts payable and accrued liabilities (22,584) 62,572
Accrued interest payable -- --
Borrowings from stockholders (4,923) --
Deferred revenue -- --
--------- ---------
Net cash provided (used) by operating activities 16,015 (2,084)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant, and equipment -- (1,223)
--------- ---------
Net cash used by investing activities -- (1,223)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from note payable -- --
Net proceeds from sale of stock -- 22,500
Offering costs -- --
Repayment of notes payable (376) --
--------- ---------
Net cash provided (used) by financing activities (376) --
Net increase (decrease) in cash 15,639 19,193
CASH AND SHORT-TERM -- --
INVESTMENTS AT BEGINNING OF PERIOD -- --
CASH AND SHORT-TERM
INVESTMENTS AT END OF PERIOD $ 15,639 $ 19,193
========= =========
INCOME TAXES PAID $ -- $ --
========= =========
INTEREST PAID $ 8,480 $ 5,698
========= =========
</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 three months ended March 31, 1998 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) 1998 1997
--------- --------- ------------
Land -- $ 27,000 $ 27,000
Buildings and Improvements 10 to 30 18,370 18,370
Equipment 5 to 7 55,276 55,276
Vehicles 5 33,799 33,799
-------- --------
$134,445 $134,445
Accumulated Depreciation
(90,203) (83,820)
-------- --------
$ 44,242 $ 50,625
======== ========
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, 1998 sales increased by $2,572
from $161,445 for the quarter ended March 31, 1997 to $164,017 for the quarter
ended March 31, 1998. The increase in revenues during this period was
immaterial.
Operating expenses decreased from $209,513 for the quarter ended March 31,
1997 to $80,513 for the quarter ended March 31, 1998, representing a decrease of
$129,000 due mostly to the general reduction in ostrich business conducted by
the Company compared to the same quarter a year ago. General and administrative
expenses decreased from $32,787 for the quarter ended March 31, 1997 to $10,094
for the quarter ended March 31, 1998 in conjunction with the reduction in
ostrich operations.
The Company incurred a net profit of $47,630 or $0.01 per share for the
quarter ended March 31, 1998 compared to a net loss of $104,395 or $0.03 per
share for the same quarter a year ago. The net profit for 1998 was mostly due to
the reduction in operating costs as the Company limited its operations at the
Willcox, Arizona facility to maintenance of existing birds and did not attempt
to produce chicks in the current year. As a result, the Company sold ostriches
from inventory that was produced from prior years' operations.
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 has completed a number
of international ostrich delivery contracts since 1995, there is no guarantee
that future contract deliveries will be completed or that such deliveries will
be profitable. As a result, there can be no assurances that the Company will
continue as a going concern.
During 1997, and continuing in 1998, management has vigorously pursued both
consolidations within the ostrich industry as well as business opportunities
outside the ostrich industry. At this time management has not secured what it
believes to be an acceptable arrangement allowing for consoldation with other
reputable ostrich companies. Due to the substantial doubt related to the future
of the domestic ostrich business, management now is only pursuing ostrich
business with respect to its South American sales, particularly Brazil. It is
facilitating such sales through existing livestock produced in prior years. At
the same time, management is evaluating other business opportunities outside the
ostrich industry.
Net cash used by operating activities was $2,084 for the quarter ended
March 31, 1997 compared to cash provided of $16,015 for the quarter ended March
31, 1998 mostly as a result of the livestock write-offs reported for the quarter
ended March 31, 1997. Cash used by investing activities decreased from $1,223 to
$0 reflecting the substantial decrease in operations at the Willcox, Arizona
facility in the current period. Net cash provided by financing activities
decreased from $0 for the quarter ended March 31, 1997 to $(376) for the quarter
ended March 31, 1998, reflecting an immaterial reduction in notes payable during
the current quarter. Cash and short term investments for the Company decreased
from $19,193 at March 31, 1997 to $15,639 at March 31, 1998 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
8
<PAGE>
maintenance of progeny from the Company's ostriches or independent owned
ostriches have been assigned to inventory.
As of March 31, 1997, the Company held proprietary livestock which
management has written down to its estimated fair market value of $227,267 at
December 31, 1997. 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.
As of March 31, 1998, under the Company's 1992 Incentive Stock Option Plan,
a total of 110,000 options were issued but not exercised. Additionally, as of
March 31, 1998, the Company had issued a total of 1,150,000 nonqualified
options, based on an option price of $.15 per share, to four of its senior
management in lieu of voluntary reductions in salary. As of the date of this
filing none of either class of these options have been exercised.
Inflation
Inflation has not had a material effect on the operations of the Company in
the past, at the present time there is a substantial doubt that worldwide demand
for ostrich products will create inflation 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 25th day of August, 1999.
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
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 15,639
<SECURITIES> 0
<RECEIVABLES> 71,188
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 840,462
<DEPRECIATION> 0
<TOTAL-ASSETS> 990,046
<CURRENT-LIABILITIES> 891,197
<BONDS> 0
0
0
<COMMON> 3,665
<OTHER-SE> 95,184
<TOTAL-LIABILITY-AND-EQUITY> 990,046
<SALES> 164,017
<TOTAL-REVENUES> 164,017
<CGS> 17,300
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 90,607
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,480
<INCOME-PRETAX> 47,630
<INCOME-TAX> 0
<INCOME-CONTINUING> 47,630
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,630
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
