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, 1997
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 _____ 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: 3,665,244 shares of Common
Stock at April 7, 1997.
1
PACESETTER OSTRICH FARM, INC.
INDEX
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheets - March 31, 1997 and December 31, 1996
Statement of Operations - Three Months Ended March 31, 1996 and Three Months
Ended March 31, 1997
Statements of Cash Flows - Three Months Ended March 31, 1997 and Three Months
Ended March 31, 1996
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
------
March 31,
(unaudited) December 31,
1997 1996
---- ----
CURRENT ASSETS:
Cash and short term investments $ 19,193
Accounts receivable (net of allowance of $39,921 at
March 31, 1997 and December 31, 1996) 32,930 129,521
Livestock inventory 460,176 370,775
------------ ------------
Total current assets 512,299 500,296
PROPERTY, PLANT, AND EQUIPMENT, net 1,076,241 1,110,666
NOTE RECEIVABLE FROM STOCKHOLDER 42,500 42,500
OTHER ASSETS 6,273 3,173
------------ ------------
$ 1,637,312 $ 1,656,635
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 275,900 212,908
Notes payable 449,371 450,104
Accrued interest 11,253 11,253
Advances from stockholders 169,630 169,317
------------ -------------
Total current liabilities 906,154 843,582
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 10,000,000
shares authorized, 3,665,244 and 3,590,244 issued and outstanding as of
March 31, 1997 and December 31, 1996, respectively 3,665 3,590
Additional paid-in-capital 3,801,642 3,779,217
Retained earnings (deficit) (3,074,149) (2,969,754)
------------ ------------
731,158 813,053
------------ ------------
$ 1,637,312 $ 1,656,635
============ ============
The accompanying notes are an integral part of these financial statements.
3
PACESETTER OSTRICH FARM, INC.
STATEMENT OF OPERATIONS
(unaudited)
Three Months Ended
March 31,
1996 1997
----- ----
SALES $ 114,099 $ 161,445
COST OF SALES 200 17,842
-------------- --------------
Gross profit 113,899 143,603
OPERATING EXPENSES:
Operating 116,230 209,513
General and administrative 9,816 32,787
-------------- --------------
Operating Income (loss) (12,147) (98,697)
OTHER INCOME (EXPENSES):
Interest (13,026) (5,698)
Other 18,990 --
-------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES (6,183) (104,395)
INCOME TAX (EXPENSE) BENEFIT -- --
-------------- --------------
Net income (loss) $ (6,183) $ (104,395)
============== ==============
NET INCOME (LOSS) PER SHARE $ (.00) $ (.03)
============== ==============
AVERAGE COMMON SHARES OUTSTANDING 3,590,244 3,665,244
============== ==============
The accompanying notes are an integral part of these financial statements.
4
PACESETTER OSTRICH FARM, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (104,395) $ (6,183)
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation 35,648 35,648
Amortization -- --
Change in deferred revenue -- --
Gain (Loss) on sale of assets -- --
Decrease (increase) in :
Accounts receivable, net 96,591 (38,725)
Livestock Inventory (89,401) 200
Deposit -- --
Prepaid assets -- 9,733
Other current assets (3,099)
Increase (decrease) in -
Accounts payable and accrued liabilities 62,572 2,904
Accrued interest payable -- --
Borrowings from stockholders -- --
Deferred revenue -- --
------------ ------------
Net cash provided (used) by operating activities (2,084) 3,577
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant, and equipment ( 1,223) ( 1,967)
------------ ------------
Net cash used by investing activities ( 1,223) ( 1,967)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from note payable -- --
Net proceeds from sale of stock 22,500
Offering costs -- --
Repayment of notes payable -- --
------------ ------------
Net cash provided (used) by financing activities -- --
Net increase (decrease) in cash 19,193 1,610
CASH AND SHORT-TERM ------------ ------------
INVESTMENTS AT BEGINNING OF PERIOD -- --
CASH AND SHORT-TERM
INVESTMENTS AT END OF PERIOD $ 19,193 $ 1,610
============ ============
INCOME TAXES PAID $ -- $ --
============ ============
INTEREST PAID $ 5,698 $ --
============ ============
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 three months ended March 31, 1997 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) 1997 1996
Land -- $ 144,727 $ 144,727
Buildings and Improvements 10 to 30 1,027,995 1,027,995
Equipment 5 to 7 397,910 396,687
Vehicles 5 60,447 60,447
Construction
in Progress 31,193 31,193
----------- -----------
$ 1,662,272 $ 1,661,049
Accumulated
Depreciation
(586,031) (550,383)
----------- -----------
$ 1,076,241 $ 1,110,666
=========== ===========
6
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, 1997 sales increased
by $47,346 from $114,099 for the quarter ended March 31, 1996 to
$161,445 for the quarter ended March 31, 1997. The increase in revenues
during this period was attributable to sales of a greater mix of adult
birds compared to the same quarter in the prior year.
Cost of sales as a percentage of sales increased from 0.2% for
the quarter ended March 31, 1996, to 11% for the quarter ended March
31, 1997. The increase in cost of sales as a percentage of sales from
the prior year's quarter was attributable to current sales being
derived more from adult birds which have higher cost basis than
farm-raised chicks which are reflected in the prior year. There were no
write-offs for mortality for the quarter ended March 31, 1996 and 1997.
The Company's gross profit increased by $29,704, or 26%, from $113,899
for the quarter ended March 31, 1996 to $143,603 for the quarter ended
March 31, 1997 as a result of higher ostrich sales at lower profit
margins as described above.
Operating expenses increased from $116,230 for the quarter
ended March 31, 1996 to $209,513 for the quarter ended March 31, 1997
representing an increase of $93,283 or 80% due mostly to increased
costs associated with the sales of adult birds in the current quarter
which did not occur in the same quarter a year ago. General and
administrative expenses increased from $9,816 for the quarter ended
March 31, 1996 to $32,787 for the quarter ended March 31, 1997 mostly
due to the voluntary reductions in salaries of the Company's management
in the prior year which were greater than such reductions in the
current quarter.
The Company incurred a net loss of $104,395 or $0.03 per share
for the quarter ended March 31, 1997 compared to a net loss of $6,183
or $0.00 per share for the same quarter a year ago. The net loss for
1997 was mostly due to the various costs associated with sales of adult
ostriches in the current quarter as described above.
7
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
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. In absence of such deliveries, 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 $3,577 for the
quarter ended March 31, 1996 compared to ($2,084) for the quarter ended
March 31, 1997 mostly as a result of the net loss reported for the
quarter ended March 31, 1997. Cash used by investing activities
decreased from $1,967 to $1,223 reflecting the substantial decrease in
expansion at the Willcox, Arizona facility in both periods. Net cash
provided by financing activities increased from $0 for the quarter
ended March 31, 1996 compared to $22,500 for the quarter ended March
31, 1997, reflecting proceeds from stock in the current quarter. Cash
and short term investments for the Company increased from $1,610 at
March 31, 1996 to $19,193 at March 31, 1997 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, 1997, the Company held proprietary livestock
with an original cost of $460,176, 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.
As of March 13, 1997, under the Company's 1992 Incentive
Stock Option Plan, a total of 114,500 options were issued but not
exercised. On March 30, 1997, 10,000 additional options were issued to
two of the Company's key employees based on an option price of $.15 per
share. As a result, a total of 124,500 options were issued and
unexercised as of March 31, 1997, under this Plan. Additionally, the
Company issued 450,000 nonqualified
8
options, based on an option price of $.15 per share, to four of its senior
management in lieu of voluntary reductions in salary.
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
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 8th day of April, 1998.
PACESETTER OSTRICH FARM, INC.
By: S/S Walter Reid Green, Jr.
-------------------------------
Walter Reid Green, Jr.
Financial and
Accounting Officer
10