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 June 30, 1996
Commission File No. 1-11282
PACESETTER OSTRICH FARM, INC.
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(Name of Small Business Issuer in Its Charter)
Delaware 72-1186845
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(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
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(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: 3,542,224 shares of Common
Stock at August 11, 1996.
1
PACESETTER OSTRICH FARM, INC.
INDEX
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheets - June 30, 1996 and December 31, 1995
Statement of Operations - Three Months Ended June 30, 1995, and Three Months
Ended June 30, 1996; Six Months Ended June 30, 1995, and Six Months Ended June
30, 1996
Statements of Cash Flows - Six Months Ended June 30, 1996 and Six Months Ended
June 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
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
PACESETTER OSTRICH FARM, INC.
BALANCE SHEETS
ASSETS
------
June 30,
(unaudited) December 31,
1996 1995
---- ----
CURRENT ASSETS:
Cash and short term investments $ 343
Accounts receivable (net of allowance of $30,267 at
June 30, 1996 and December 31, 1995) 165,199 67,187
Livestock inventory 333,194 344,677
Other current assets 9,733
------------ ------------
Total current assets 498,736 421,597
PROPERTY, PLANT, AND EQUIPMENT, net 1,200,624 1,267,986
NOTE RECEIVABLE FROM STOCKHOLDER 42,500 42,500
OTHER ASSETS 3,173 3,173
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$1,745,033 $1,735,256
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 223,346 $ 220,280
Notes payable 476,267 476,267
Accrued interest
Advances from stockholders 152,960 152,960
------------ ------------
Total current liabilities 852,573 849,507
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 10,000,000
shares authorized, 3,590,244 issued and outstanding as of
June 30, 1996 and December 31, 1995, respectively 3,590 3,590
Additional paid-in-capital 3,779,217 3,779,217
Retained earnings (deficit) (2,890,347) (2,897,058)
------------ ------------
892,460 885,749
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$ 1,745,033 $ 1,735,256
============ ============
The accompanying notes are an integral part of these financial statements.
3
PACESETTER OSTRICH FARM, INC.
STATEMENT OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1996 1995 1996
---- ---- ---- ----
SALES $ 165,348 $ 172,342 $ 373,388 $ 286,441
COST OF SALES 51,978 11,283 111,692 11,483
----------------- -------------- --------------- --------------
Gross profit 113,370 161,059 261,696 274,958
OPERATING EXPENSES:
Operating 209,644 140,318 482,278 256,548
General and administrative 49,959 15,589 85,321 25,405
----------------- -------------- --------------- --------------
Operating Income (loss) 146,233 5,152 (305,903) ( 6,995)
OTHER INCOME (EXPENSES):
Interest (11,689) (11,250) (24,697) (24,276)
Other 4,964 18,992 8,802 37,982
----------------- -------------- --------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES (152,958) 12,894 (321,798) 6,711
INCOME TAX (EXPENSE) BENEFIT -- -- -- --
----------------- -------------- --------------- --------------
Net income (loss) $ (152,958) $ 12,894 $ (321,798) $ 6,711
================= ============== =============== ==============
NET INCOME (LOSS) PER SHARE $(0.04) .00 $ (0.09) $ .00
================= ============== =============== ==============
AVERAGE COMMON SHARES OUTSTANDING 3,542,224 3,590,224 3,542,224 3,590,224
================= ============== =============== ==============
The accompanying notes are an integral part of these financial statements.
4
PACESETTER OSTRICH FARM, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 6,711 $ (373,388)
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation 71,296 89,853
Amortization 24,750 --
Change in deferred revenue -- 5,000
Gain (Loss) on sale of assets 5,799 --
Decrease (increase) in :
Accounts receivable, net ( 98,012) 21,850
Livestock Inventory 11,483 79,940
Deposit -- --
Prepaid assets -- --
Other current assets -- --
Other assets -- --
Increase (decrease) in -
Accounts payable and accrued liabilities 3,066 230,881
Accrued interest payable (11,250) --
Borrowings from stockholders -- 18,700
Deferred revenue -- --
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Net cash provided (used) by operating activities 343 72,836
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant, and equipment -- (12,073)
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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 -- (586)
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Net cash provided (used) by financing activities -- (586)
Net increase (decrease) in cash 343 60,177
CASH AND SHORT-TERM ------------ ------------
INVESTMENTS AT BEGINNING OF PERIOD -- 7,596
CASH AND SHORT-TERM
INVESTMENTS AT END OF PERIOD $ 343 $ 4,542
============ ===========
INCOME TAXES PAID $ -- $ --
============ ===========
INTEREST PAID $ -- $ 22,939
============ ===========
The accompanying notes are an integral part of these financial statements.
5
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 June 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:
Estimated Years June 30, 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 (483,022) (415,064)
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$ 1,200,624 $ 1,267,986
=========== ===========
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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 June 30, 1996, sales increased by $6,994
from $165,348 for the quarter ended June 30, 1995 to $172,342 for the quarter
ended June 30, 1996. Sales decreased from $373,388 for the six months ended June
30, 1995, to $286,441 for the six months ended June 30, 1996. The overall
decrease in sales reflects lower sales prices of birds than in the same period
in the prior year.
Cost of sales as a percentage of sales decreased by $40,695, or 78%,
from $51,978 for the quarter ended June 30, 1995, to $11,283 for the quarter
ended June 30, 1996. For the six months ended June 30, 1995 and 1996, cost of
sales decreased by 90% from $111,692 to $11,483, respectively. The decrease in
cost of sales as a percentage of sales from the prior year's quarter was
attributable to a greater proportion of total sales being derived from
farm-raised chicks which have limited cost basis. There were no charges for
ostrich mortality included in cost of sales for the quarters ended June 30,
1995,and 1996. The decrease in mortality reflects the substantial 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 as compared to prior year. The Company's
gross profit increased from $113,370 for the quarter ended June 30, 1995 to
$161,059, or 43%, for the quarter ended June 30, 1996, representing an increase
of $47,689. For the six months ended June 30, 1995 and 1996, gross profit
increased by 5% from $261,696 to $274,958 respectively. Such increases are a
result of slightly increased ostrich sales at higher profit margins as described
above.
Operating expenses decreased from $209,644 for the quarter ended June
30, 1995 to $140,318 for the quarter ended June 30, 1996 representing a decrease
of $69,326 or 33% 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 $49,959 for the quarter ended June 30, 1995 to $15,589 for the quarter
ended June 30, 1996 mostly due to the decreases in advertising and promotional
expenses, and voluntary reductions in salaries of the Company's senior
management.
7
The Company incurred a net profit of $12,894 or $0.00 per share for the
quarter ended June 30, 1996 compared to a net loss of $152,958 or $0.04 per
share for the same quarter a year ago. The company incurred a net profit of
$6,711 for the six months ended June 30, 1996, compared to a net loss of
$321,798 for the six months ended June 30, 1995. The improvement in results of
operations from the prior periods was 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. In addition, the
Company sold mostly farm-raised chicks with very limited cost basis in the
current year than in the same periods a year ago.
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. As a result, there can be no assurances that
the Company will continue as a going concern. 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.
Net cash provided by operating activities was $72,836 for the six
months ended June 30, 1995 compared to $5,456 for the six months ended June 30,
1996 mostly as a result of the increase in accounts receivable in the six months
ended June 30, 1996. Cash used by investing activities decreased from $12,073 to
$0 for the six months ended June 30, 1995 and 1996, respectively, mostly due to
the decrease in expansion at the Willcox, Arizona facility compared to the prior
year. Cash and short term investments for the Company decreased from $4,542 at
June 30, 1994 to $343 at June 30, 1995 reflecting the limited cash flow during
the six months ended June 30, 1996.
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 June 30, 1996, the Company held proprietary livestock with an
original cost of $333,194, which management estimates to have a current fair
market value in excess of book 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.
8
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.
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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
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FINANCIAL DISCLOSURE
--------------------
None.
10
SIGNATURE
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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 R. Green, Jr.
----------------------------
Walter R. Green, Jr.
Chief Financial &
Accounting Officer
11