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, 1999
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
- -------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(504) 796-5806
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(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: 3,950,224 shares of Common
Stock at September 20, 1999.
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PACESETTER OSTRICH FARM, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheets - March 31, 1999 and December 31, 1998
Statement of Operations - Three Months Ended March 31, 1999 and Three Months
Ended March 31, 1998
Statements of Cash Flows - Three Months Ended March 31, 1999 and Three Months
Ended March 31, 1998
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
March 31, December 31,
(unaudited)
1999 1998
---- ----
CURRENT ASSETS:
Cash and short term investments $ 64,415 23,149
Accounts receivable (net of allowance of $50,898 at
March 31, 1999,and December 31, 1998) 70,228 169,534
Prepaid Expenses 22,759 34,138
----------- -----------
Total current assets 157,402 226,821
PROPERTY, PLANT, AND EQUIPMENT, net 474,327 399,767
NOTE RECEIVABLE FROM STOCKHOLDER 42,500 42,500
OTHER ASSETS 3,173 3,173
----------- -----------
$ 677,402 $ 672,261
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 230,301 257,730
Notes payable 656,283 600,303
Advances from stockholders 181,509 179,829
----------- -----------
Total current liabilities 1,068,093 1,037,862
LONG-TERM LIABILITIES:
Notes payable 270,337 200,682
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Total Liabilities 1,338,430 1,238,544
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 10,000,000
shares authorized, 3,950,224 issued and outstanding as of
March 31, 1999 and December 31, 1998 3,950 3,950
Additional paid-in-capital 3,779,217 3,779,217
Retained earnings (deficit) (4,444,195) (4,349,450)
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(661,028) (566,283)
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$ 677,402 $ 672,261
=========== ===========
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
March 31,
1999 1998
----- ----
SALES $ 143,567 $ 164,017
COST OF SALES 124,339 17,300
----------- -----------
Gross profit 19,228 146,717
OPERATING EXPENSES:
Operating 48,193 80,513
General and administrative 45,874 10,094
----------- -----------
Operating Income (loss) (74,839) 56,110
OTHER INCOME (EXPENSES):
Interest (8,480)
(19,906)
Other -- --
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (94,745) 47,630
INCOME TAX (EXPENSE) BENEFIT -- --
----------- -----------
Net income (loss) $ (94,745) $ 47,630
=========== ===========
NET INCOME (LOSS) PER SHARE $ (.02) $ .01
=========== ===========
AVERAGE COMMON SHARES OUTSTANDING 3,950,224 3,665,224
=========== ===========
The accompanying notes are an integral part of these financial statements.
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PACESETTER OSTRICH FARM, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (94,745) $ 47,630
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation 14,853 6,383
Amortization -- --
Change in deferred revenue -- --
Gain (Loss) on sale of assets -- --
Decrease (increase) in :
Accounts receivable, net 99,306 6,593
Livestock Inventory -- --
Deposit -- --
Prepaid assets 11,379 --
Other current assets -- (17,084)
Increase (decrease) in -
Accounts payable and accrued liabilities (27,429) (22,584)
Accrued interest payable -- --
Borrowings from stockholders 1,680 (4,923)
Deferred revenue -- --
--------- ---------
Net cash provided (used) by operating activities 5,044 16,015
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant, and equipment (89,413) --
--------- ---------
Net cash used by investing activities (89,413) --
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from notes payable 150,000 --
Net proceeds from sale of stock -- --
Offering costs -- --
Repayment of notes payable (24,365) (376)
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Net cash provided (used) by financing activities 125,635 (376)
Net increase (decrease) in cash 41,266 15,639
CASH AND SHORT-TERM -- --
INVESTMENTS AT BEGINNING OF PERIOD 23,149 --
CASH AND SHORT-TERM
INVESTMENTS AT END OF PERIOD $ 64,415 $ 15,639
========= =========
INCOME TAXES PAID $ -- $ --
========= =========
INTEREST PAID $ 19,906 $ 8,480
========= =========
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 three months ended March 31, 1999 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 assets used in the
underground construction business. The balance of property, plant, and
equipment, stated at cost less accumulated depreciation, is as follows:
Estimated Years March 31, December 31,
(Lives) 1998 1998
Land -- $ 27,000 $ 27,000
Buildings and Improvements 10 to 30 18,370 18,370
Equipment 5 to 7 468,571 379,159
Vehicles 5 84,593 84,593
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$ 598,534 $ 509,122
Accumulated Depreciation
(124,207) (109,355)
---------- ----------
$ 474,327 $ 399,767
========== ==========
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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
During 1998 the Company discontinued its ostrich operations
and completed the liquidation of its Willcox, Arizona facilities and
livestock inventory. Simultaneously, the Company obtained the services
of key personnel experienced in telecommunications construction and
began operations in the underground construction business. The Company
currently operates this construction business under the registered
trade name Pacesetter Communications until such time as a formal name
change of the corporation is completed. Accordingly, references to
prior year results of operations from January 1, 1998, through
September 30, 1998, relate mostly to ostrich operations, while the
period from October 1, 1998 through December 31, 1999, reflects the
initial stages of the underground construction business.
For the calendar quarter ended March 31, 1999, sales decreased
by $20,450 from $164,017 for the quarter ended March 31, 1998 to
$143,567 for the quarter ended March 31, 1999. The revenues during the
current period represent the initial stages of the Company's
underground construction business which had been in operations for
approximately five months at March 31, 1999, compared to revenues from
the Company's discontinued ostrich business reflected in the prior
year's revenue. Accordingly, the Company's gross profit for the quarter
ended March 31, 1999, was $19,228, generated from the construction
business, compared to $146,717 for the quarter ended March 31, 1998,
resulting from the discontinued ostrich business. Although these
quarterly figures are not comparable, the year ago figure represented
sales of mostly farm-raised birds with limited cost basis which
resulted in a significantly gross profit margin than was generated in
the current quarter as the Company was still engaged in staffing,
training, and did not generate a significant amount of construction
revenue as a result of such activities associated with a new line of
business.
Operating expenses decreased from $80,513 for the quarter
ended March 31, 1998 to $48,193 for the quarter ended March 31, 1999,
representing an increase of $32,320. Such differences represent the
operating costs associated with the discontinued ostrich business in
1998 compared to the initial stages of the undergroudn construction
business in 1999 as previously described. General and administrative
expenses increased from $10,094 for the quarter ended March 31, 1998 to
$45,874 for the quarter ended March 31, 1999. Such differences reflect
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the increased compensation to sales and other managerial personnel in
the current quarter related to underground construction compared to the
year ago figure in which such personnel did not exist and the fact that
during 1998 senior management received little or no compensation
compared to 1999 when such senior managers have had significant
portions of their compensation restored.
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
$94,745 or $0.02 per share for the quarter ended March 31, 1999. 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. In contrast
to prior year operations the current year figures reflect the expected
net losses associated with the initial stages of developing the
underground construction business as previously described.
LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred substantial losses from its prior
ostrich operations (see 1998 10-KSB) for several years and experienced
cash flow difficulties which have caused it not to meet some of its
obligations as they have come due. This has raised substantial doubt
about the Company's ability to continue as a going concern. By October
1998 the Company had begun operations in the underground construction
business, and had satisfied substantially all of its troubled debt in
conjunction with the liquidation of the Company's ostrich assets and
inventory. At this time, management is negotiating a voluntary
arrangement whereby holders of up to $500,000 of its private placement
notes payable will be exchanged for restricted common stock of the
Company. Following this transaction the Company will have eliminated
all of its past due obligations. Although the Company's construction
operations have been in existence for less than one year, the Company
is currently functioning solely from cash generated from its
underground construction operations which have continually increased
since its inception late in 1998.
Net cash provided by operating activities was $5,044 for the
quarter ended March 31, 1999 compared to cash provided of $16,015 for
the quarter ended March 31, 1998, mostly as a result of the decrease in
accounts receivable in the current quarter compared to a year ago. Cash
used by investing activities increased from $0 to $89,413 reflecting
the substantial decrease in operations at the Willcox, Arizona facility
in the prior period as well as significant equipment acquisitions
related to the construction business in the current period. Net cash
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provided by financing activities increased from cash used of $376 for
the quarter ended March 31, 1998 to $125,635 for the quarter ended
March 31, 1999, reflecting both proceeds from and repayments of notes
payable related to the expansion of the Company's newly created
construction business. Cash and short term investments for the Company
increased from $15,639 at March 31, 1998 to $64,415 at March 31, 1999
reflecting the differences described above.
As of June 30, 1999, under the Company's 1992 Incentive
Stock Option Plan, a total of 110,000 options were issued.
Additionally, as of June 30, 1999, a total of 1,250,000 nonqualified
options were issued. 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 such conditions will adversely effect the Company for the
foreseeable future.
CAUTIONARY STATEMENT
This report includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. All statements other than
statements of historical fact included in this report, including,
without limitation, the statements under the headings Managements
Discussion and Analysis or Plan of Operation regarding the Company's
results of operations, liquidity and capital resources, future
development and production levels, business strategies, and other plans
and objectives of management of the Company for future operations and
activities, are forward-looking statements. Although management of the
Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance
that such expectations will prove to be correct. These statements are
based on certain assumptions and analyses made by the Compnay in light
of its experience and its perception of historical trends, current
conditions, expected future developments and other factors it believes
are appropriate under the circumstances. Such statements are subject to
a number of assumptions, risks and uncertainties, including the risk
factors discussed below, the Company's other filings with the
Securities and Exchange Commission, general economic and business
conditions, business opportunities that may be presented to and pursued
by the Company, changes in law or regulations, and other factors, many
of which are beyond the control of the Company. Readers are cautioned
that any such statements are not guarantees of future performance and
the actual results or developments may differ materially from those
projected in the forward-looking statements. All subsequent writtten
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and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety
by these cautionary statements. Important factors that could cause
actual results to differ materially include, among others:
o Fluctuations in the market price and/or availability of underground
construction work.
o Shortages in availability of qualified personnel.
o Legal and financial implications of an unexpected catastrophic event
which may be associated with the Company's underground construction
operation.
o General domestic and international economic and political conditions.
o Unexpected weather conditions including but not limited to
droughts, flooding, or other extreme acts of nature where the
company conducts its business and/or operations.
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.
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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 29th day of September,
1999.
PACESETTER OSTRICH FARM, INC.
By: /s/ Walter Reid Green, Jr.
--------------------------
Walter Reid Green, Jr.
Financial and
Accounting Officer
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