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, 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
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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: 3,950,224 shares of Common
Stock at August 25, 1999.
PACESETTER OSTRICH FARM, INC.
INDEX
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheets - June 30, 1998 and December 31, 1997
Statement of Operations - Three Months Ended June 30, 1998, and Three Months
Ended June 30, 1997; Six Months Ended June 30, 1998, and Six Months Ended June
30, 1997
Statements of Cash Flows - Six Months Ended June 30, 1998 and Six Months Ended
June 30, 1997
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
PACESETTER OSTRICH FARM, INC.
BALANCE SHEETS
ASSETS
------
June 30, December 31,
(unaudited)
1998 1997
---- ----
Cash and short term investments $ 15,604 --
Accounts receivable (net of allowance of $47,603 at
June 30, 1998 and December 31, 1997) 3,295 77,781
----------- -----------
Total current assets 18,899 77,781
PROPERTY, PLANT, AND EQUIPMENT, net 37,859 50,625
NOTE RECEIVABLE FROM STOCKHOLDER 42,500 42,500
NET ASSETS OF DISCONTINUED OPERATIONS 796,220 796,220
OTHER ASSETS 14,748 3,173
----------- -----------
$ 910,226 $ 970,299
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 228,192 $ 201,216
Notes payable 541,522 541,899
Advances from stockholders 188,860 175,965
----------- -----------
Total current liabilities 958,574 919,080
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 10,000,000 shares authorized,
3,665,224 and 3,665,224 issued and outstanding
as of June 30, 1998 and December 31, 1997, respectively 3,665 3,665
Additional paid-in-capital 3,779,217 3,779,217
Retained earnings (deficit) (3,831,230) (3,731,663)
----------- -----------
(48,348) 51,219
----------- -----------
$ 910,226 $ 970,299
=========== ===========
The accompanying notes are an integral part of these financial statements.
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PACESETTER OSTRICH FARM, INC.
STATEMENT OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
SALES $ 48,504 $ 240,010 $ 212,521 $ 401,454
COST OF SALES 82,904 157,051 100,204 174,893
----------- ----------- ----------- -----------
Gross profit (34,400) 82,959 112,317 226,561
OPERATING EXPENSES:
Operating 96,590 112,867 177,103 321,001
General and administrative 13,954 20,855 24,048 55,021
----------- ----------- ----------- -----------
Operating Income (loss) (144,944) (50,763) (88,834) (149,461)
OTHER INCOME (EXPENSES):
Interest (2,253) (19,600) (10,733) (25,298)
Other -- 717 -- 717
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (147,197) (69,646) (99,567) (174,012)
INCOME TAX (EXPENSE) BENEFIT -- -- -- --
----------- ----------- -----------
Net income (loss) $ (147,197) $ (69,646) $ (99,567) $ (174,712)
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE $ (.04) (.02) $ (.03) $ (.05)
=========== =========== =========== ===========
AVERAGE COMMON SHARES OUTSTANDING 3,665,224 3,665,244 3,665,224 3,665,244
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
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PACESETTER OSTRICH FARM, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (99,567) $(174,012)
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation 12,766 71,296
Amortization -- --
Change in deferred revenue -- --
Gain (Loss) on sale of assets -- (372)
Decrease (increase) in :
Accounts receivable, net 74,486 78,523
Livestock Inventory -- (83,144)
Deposit -- --
Prepaid assets -- --
Other current assets -- (17,545)
Other assets (11,575) --
Increase (decrease) in -
Accounts payable and accrued liabilities 26,975 60,841
Accrued interest payable -- 19,600
Borrowings from stockholders 12,895 5,113
Deferred revenue -- --
--------- ---------
Net cash provided (used) by operating activities 15,980 (39,700)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant, and equipment -- (5,129)
Proceeds from sale of property -- 60,000
--------- ---------
Net cash provided (used) by investing activities -- 54,871
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of restricted stock -- 22,500
Offering costs -- --
Repayment of notes payable (376) (44,738)
--------- ---------
Net cash provided (used) by financing activities (376) (22,238)
Net increase (decrease) in cash 15,604 (7,067)
CASH AND SHORT-TERM -- --
INVESTMENTS AT BEGINNING OF PERIOD -- 343
CASH AND SHORT-TERM
INVESTMENTS AT END OF PERIOD $ 15,604 $ (6,724)
========= =========
INCOME TAXES PAID $ -- $ --
========= =========
INTEREST PAID $ 10,733 $ 25,298
========= =========
The accompanying notes are an integral part of these financial statements.
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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, 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 June 30, December 31,
Years 1998 1997
(Lives)
Land -- $ 27,000 $ 27,000
Buildings and Improvements 10 to 30 18,370 18,370
Equipment 5 to 7 55,276 55,276
Furniture and Fixtures 5 33,799 33,799
--------- ---------
$ 134,445 $ 134,445
Accumulated Depreciation
(96,586) (83,820)
--------- ---------
$ 37,859 $ 50,625
========= =========
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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, 1998, sales decreased by $191,506
from $240,010 for the quarter ended June 30, 1997 to $48,504 for the quarter
ended June 30, 1998. Sales decreased from $401,454 for the six months ended June
30, 1997, to $212,521 for the six months ended June 30, 1998. The overall
decrease in sales reflects the continued general decline in domestic business in
the current year.
Cost of sales decreased from $157,051 for the quarter ended June 30, 1997,
to $82,904 for the quarter ended June 30, 1998. For the six months ended June
30, 1997 and 1998, cost of sales decreased from $174,893 to $100,204
respectively. The decrease in cost of sales from the prior year was attributable
to the continued general decline in business in the current year compared to the
same periods a year ago. The Company's gross profit decreased from $82,959 for
the quarter ended June 30, 1997 to a loss of $34,400 for the quarter ended June
30, 1998, representing a decrease of $117,359. For the six months ended June 30,
1997 and 1998, gross profit decreased from $226,561 to $112,317 respectively.
Such decreases are a result of the continued general decline in the ostrich
business, particularly within the United States.
Operating expenses decreased from $112,867 for the quarter ended June 30,
1997 to $96,590 for the quarter ended June 30, 1998 representing a decrease of
$16,277 reflecting continued
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measures taken by the Company to reduce operating costs in consideration of the
continued general decline in the ostrich business. Operating expenses decreased
from $321,001 for the six months ended June 30, 1997, to $177,103 for the six
months ended June 30, 1998, representing a decrease of $143,898 due to the
reductions in operations at the Willcox, Arizona facility in light of the
continued general decline in the ostrich business. General and administrative
expenses decreased from $20,855 for the quarter ended June 30, 1997 to $13,954
for the quarter ended June 30, 1998 representing a decrease of $6,901. General
and administrative expenses also decreased from $55,021 for the six months ended
June 30, 1997, to $24,048 for the six months ended June 30, 1998, representing a
decrease of $30,973. Such decreases were due to the continued reduction in the
Company's operation in conjunction with the continued decline in the ostrich
business.
The Company incurred a net loss of $147,197 or $0.04 per share for the
quarter ended June 30, 1998 compared to a net loss of $69,646 or $0.02 per share
for the same quarter a year ago. The company incurred a net loss of $99,567 for
the six months ended June 30, 1998, compared to a net loss of $174,712 for the
six months ended June 30, 1997. Such decreases reflect the continued decline in
the ostrich business coupled with the Company's continued efforts to reduce
operating costs in recognition of the decrease in business.
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.
Net cash provided by operating activities was $15,980 for the six months
ended June 30, 1998 compared to cash used of $39,700 for the six months ended
June 30, 1997 mostly as a result of the reductions in operating costs in the
current year compared to the losses in the six months ended June 30, 1997. Cash
provided from investing activities decreased from $54,871 for the six months
ended June 30, 1997 compared to $0 for the six months ended June 30, 1998,
mostly due to the Company's sale in 1997 of property owned in Willcox, Arizona
and formerly operated as a veterninary clinic. Cash flows used in financing
activities
8
was $22,238 for the six months ended June 30, 1997, compared to $376 for the six
months ended June 30, 1998, reflecting both the issuance of restricted stock and
repayments of notes payable in the prior year. Cash and short term investments
for the Company increased from $(6,724) at June 30, 1997 to $15,604 at June 30,
1998 reflecting the limited cash flow during both periods as previously
described.
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, 1997, the Company held proprietary livestock which
management had 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 June 30, 1998, under the Company's 1992 Incentive Stock Option Plan,
a total of 110,000 options were issued but not exercised. Additionally, as of
June 30, 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 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.
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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 R. Green, Jr.
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Walter R. Green, Jr.
Chief Financial &
Accounting Officer
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