<PAGE>
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM-10QSB
(X) Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
or
( ) Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from to .
Commission File No. 0-18222
QUANTUM LEARNING SYSTEMS, INC. (formerly known as CCR, Inc.)
------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
NEVADA 87-0432572
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1111 S.W. 17th Street, Ocala, Florida 34474-3530
---------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (904) 620-0492
--------------------
Indicate by check mark whether the Registrant (1) had filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the proceeding 12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
The number of shares outstanding of Registrant's common stock, par value $.001
per share, as of March 31, 1996 was 4,271,027 (excluding treasury shares)
shares.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
See attached financial statements.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Cambridge Academy, the Company's principle operating division for this
period, posted strong growth, increasing its operating income 177%
over the same period last year (See Note 6 to these financials).
Consolidated revenue for the nine months ended March 31, 1996 was
$597,245 representing an increase of $242,990 or 69% from the nine
months ended March 31, 1995. The increase is primarily due to
increases in Cambridge Academy educational revenues.
Gross profit for the six months ended March 31, 1996 was $558,891,
an increase of $240,106 or 75% from the nine months ended March 31,
1995. The increase is due primarily to increases in Cambridge
Academy educational revenues.
Selling, general, and administrative expenses for the nine months ended
March 31, 1996 were $670,070, an increase of $194,131 or 41% from
the nine months ended March 31, 1995. The increase is due
primarily to increases in educational subsidiary expenses,
audit expense, and corporate administrative expense.
Interest income for the nine months ended March 31, 1996 decreased
$21,532 or 35% from the nine months ended March 31, 1995.
Interest expense for the nine months ended March 31, 1996 was $1,746, a
decrease of $3,684 from the nine months ended March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, cash and cash equivalents were $4,816 compared to
$16,121 at March 31, 1995. The Company generally relies upon
internally generated funds to satisfy working capital needs and
to fund capital expenditures.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 4,816 $ 0
Accounts and Contracts Receivable (Note 2) 244,591 178,437
Notes Receivable, current portion (Note 3) 160,877 83,442
Prepaid expenses and other 482,116 539,236
---------- ----------
Total Current Assets 892,400 801,115
Property and Equipment-at cost:
Machinery and equipment 503,418 496,010
Furniture and fixtures 42,470 42,470
---------- ----------
Total Property and Equipment 545,888 538,480
Less accumulated depreciation (242,077) (163,322)
---------- ----------
Net property and equipment 303,811 375,158
Other:
Notes Receivable, less current portion
(Note 3) 1,703,651 1,838,885
Deferred Tax Asset 52,763 52,763
Other (Note 8) 251,939 162,674
---------- ----------
Total Other Assets 2,008,353 2,054,322
---------- ----------
Total Assets $3,204,564 $3,230,595
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other liabilities $ 63,030 $ 63,581
Accrued expenses 108,405 86,102
Current maturities of long-term debts (Note 4) 13,649 13,649
---------- ----------
Total current liabilities 185,084 163,332
Deferred Income Taxes 52,763 52,763
Long-term Debt, less current maturities (Note 4) 19,584 19,852
---------- ----------
Total Liabilities 257,431 235,947
Commitments and Contingencies (Note 7)
Stockholders' Equity: (Note 5)
Preferred stock, $1.00 par; 1,000,000 shares
authorized, 0 outstanding. 0 0
Common stock, $.001 par; 20,000,000 shares
authorized, 4,378,161 outstanding at March
31, 1996 and 4,353,161 June 30, 1995 4,378 4,353
Additional paid-in capital 4,572,936 4,547,961
Retained earnings (Accumulated deficit) (1,509,652) (1,437,137)
Treasury Stock, 107,134 shares at cost (120,529) (120,529)
---------- ----------
Total stockholders' equity 2,947,133 2,994,648
---------- ----------
Total Liabilities and Stockholders' Equity $3,204,564 $3,230,595
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $597,245 $354,255 $149,168 $ 87,656
Cost of Sales 38,354 35,470 12,680 (1,867)
-------- -------- -------- --------
Gross profit 558,891 318,785 136,488 89,523
Selling, general, and admin. expenses 670,070 475,939 201,935 146,325
-------- -------- -------- --------
Operating Income (Loss) (111,179) (157,154) (65,447) (56,802)
Other income (expense):
Interest income 40,410 61,942 4,047 20,547
Interest expense (1,746) (5,430) (873) (1,810)
-------- -------- -------- --------
Total Other Income (Expense) 38,664 56,512 3,174 18,737
-------- -------- -------- --------
Income (loss) from Operations
before Income Taxes (72,515) (100,642) (62,273) (38,065)
Income Tax Benefit (Expense) -0- -0- -0- -0-
-------- -------- -------- --------
Net Income (Loss) $(72,515) $(100,642) $(62,273) $(38,065)
-------- -------- -------- --------
-------- -------- -------- --------
Income (Loss) per common share:
(Note 1) $ (.017) $ (.024) $ (.014) $ (.009)
</TABLE>
See accompanying notes to financial statements.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1995 AND QUARTER ENDED MAR. 31, 1996
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------------- ----------------- ADDITIONAL
NUMBER OF NUMBER OF PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Balance, June 30,
1994 (as restated) 0 $ 0 4,353,161 $ 4,353 $ 4,547,961
Net Loss 0 0 0 0 0
--- ------ --------- ------- -----------
Balance, June 30,
1995 0 0 4,353,161 4,353 4,547,961
Stock Issued 25,000 25 24,975
Net Loss 0 0 0 0 0
--- ------ --------- ------- -----------
Balance, Mar. 31,
1996 0 $ 0 4,378,161 $ 4,378 $ 4,572,936
--- ------ --------- ------- -----------
--- ------ --------- ------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1995 AND QUARTER ENDED MAR. 31, 1996
<TABLE>
<CAPTION>
TOTAL
TREASURY ACCUMULATED SHAREHOLDERS'
STOCK (DEFICIT) EQUITY
----- --------- ------
<S> <C> <C>
$ (120,529) $ (765,603) $ 3,666,182
0 (671,534) (671,534)
---------- ----------- -----------
(120,529) (1,437,137) 2,994,648
0 0 25,000
0 (72,515) (72,515)
---------- ----------- -----------
$ (120,529) $(1,509,652) $ 2,947,133
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
---------
RESTATED
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (72,515) $(100,642)
Adjustments to reconcile net income (loss) to
net cash from operations
Depreciation & Amortization 85,862 81,319
Changes in operating assets and liabilities:
Accounts receivable (66,154) (5,852)
Accounts payable and accrued interest 46,752 (80,863)
Other assets and liabilities 18,547 (73,215)
--------- ---------
Net cash provided by operating activities 12,492 (179,253)
Cash flows from investing activities:
Purchase of fixed assets (7,408) (3,100)
--------- ---------
Net cash used by investing activities (7,408) (3,100)
Cash flows from financing activities:
Principal payments on long-term debt and
notes payable (268) (3,813)
--------- ---------
Net cash used by financing activities (268) (3,813)
--------- ---------
Net increase (decrease) in cash and cash equivalents 4,816 (186,166)
Cash and cash equivalents at beginning of period 0 202,287
--------- ---------
Cash and cash equivalents at end of period $ 4,816 $ 16,121
--------- ---------
--------- ---------
Supplemental disclosures:
Cash paid for:
Interest $ 1,746 $ 5,430
</TABLE>
See accompanying notes to financial statements.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Quantum
Learning Systems, Inc. and its wholly-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments with original maturities of
three months or less to be cash equivalents.
DEPRECIATION, MAINTENANCE, AND REPAIRS
Depreciation is provided by the straight-line method. Estimated useful
lives for depreciation purposes are as follows:
Machinery and equipment 3 - 20 years
Furniture and fixtures 4 - 15 years
Maintenance and repairs and renewals which do not prolong the useful life
of an asset are expensed as incurred.
AMORTIZATION
Amortization of intangible assets which include copyrights, royalties, and
goodwill is provided by the straight-line method. Estimated useful
lives for amortization purposes are as follows:
Goodwill 5 years
Royalties 5 - 10 years
Copyrights 10 - 20 years
CAPITALIZED PRODUCTION COSTS
The Company capitalizes all direct production costs and allocates indirect
production costs based on man hours for all internally produced video
products.
EARNINGS PER SHARE
Earnings per share have been computed based upon the weighted average
number of shares outstanding during the quarter of 4,358,536 and
4,353,161 for the quarters ended March 31, 1996 and 1995, respectively.
Common Stock Equivalents in the aggregate do not dilute
earnings per share by more than 3%. Therefore, no change is presented.
REVISION OF FINANCIAL STATEMENTS
The accompanying financial statements for the quarter ended March 31, 1995
has been revised. The revisions consisted of the restatement of
intangible assets and related amortization consistent with the
settlement reached for the adjusted purchase price of Current Concepts
Seminars ("CCS"). The original
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(CONTINUED)
REVISION OF FINANCIAL STATEMENTS (CON.)
agreement caused the issuance of 700,000 shares of QLS common stock, but
the settlement adjusts the number to 115,000 shares. The settlement was
executed in March, 1995.
NOTE 2 - ACCOUNTS AND CONTRACTS RECEIVABLE
Accounts and contracts receivable consist of the following:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
---- ----
<S> <C> <C>
Trade accounts receivable $ 464,569 $ 385,952
Due from related parties 1,230 0
Other 945 0
--------- ---------
Total Accounts Receivable 466,744 385,952
Less: Allowance for Bad Debts (222,153) (207,515)
--------- ---------
Accounts Receivable - Net $ 244,591 $ 178,437
--------- ---------
--------- ---------
</TABLE>
NOTE 3 - NOTES RECEIVABLE
Notes receivable consist of:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
---- ----
<S> <C> <C>
Gulf Ventures - Interest rate of 8%;
payments of $20,987 due December 31,
each year. $ 202,327 $ 202,327
W.T. Young Construction Company -
Interest rate of 3.6%; payments of
$150,000 plus interest on July 10,
1995 and 1996; payments of $200,000
plus interest on July 10, 1997 and
1998 with the balance plus interest
due on July 10, 1999; collateralized
by pledge of W.T. Young Construction
Company and the common stock of QlS
owned by W.T. Young 1,644,701 1,720,000
8% note receivable from Central Florida
Hearing dated July 31, 1995. 17,500 0
Less current portion (160,877) (83,442)
Total noncurrent note receivable $ 1,703,651 $ 1,838,885
----------- -----------
----------- -----------
</TABLE>
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(CONTINUED)
NOTE 4 - DEBT
Long-term debt consist of:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
---- ----
<S> <C> <C>
Note payable on various financing
leases for operating equipment $ 33,233 $ 33,501
-------- --------
Totals 33,233 33,501
Less current maturities (13,649) (13,649)
-------- --------
Total Long-term debt $ 19,584 $ 19,852
-------- --------
-------- --------
</TABLE>
The aggregate long-term debt matures during the next five years as follows:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
---- ----
<S> <C> <C>
1996 $ 11,635 $ 13,649
1997 9,651 9,651
1998 7,704 7,704
1999 4,243 2,497
2000 0 0
-------- --------
Total $ 33,233 $ 33,501
</TABLE>
NOTE 5 - STOCK WARRANTS
On January 21, 1994, the Company entered into an investment banking
agreement with M.H. Meyerson & Co. In part, the agreement required the
Company to issue warrants to purchase 300,000 shares of common stock with
an exercise price of $1.85 per Warrant with demand and piggyback
registration rights. The registration rights may not be asked
for a period of 18 months from the date of the agreement. Such rights
will be available starting in month 19 through month 48 from the date of
the agreement.
On June 1, 1994, the Management of the Company approved a new director. As
compensation for services, the Company issued warrants for the purchase
of 50,000 shares of common stock at $.50 per share. The warrants
shall be effective for a period of five years from the date of
issue. These warrants have been cancelled.
On June 1, 1994, the Management of the Company approved the issuance of
warrants to purchase 200,000 shares of common stock at $.75 per share to
an outside consultant for services to be rendered to the company.
On July 2, 1995, the Company entered into an agreement with SeaCoast
Electric, Inc. (SCE) for management services. SCE is owned, in part, by
children of officers and directors of the Company. The agreement
calls for SCE to provide management, in the form of Chief Executive
Officer and Chief Financial Officer, for all operations of all QLS
subsidiaries. In exchange, the Company
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(CONTINUED)
NOTE 5 - STOCK WARRANTS (CON.)
shall pay SCE the sum of $150,000 for management services for each fiscal
year (July to June). In addition, Cambridge Academy, a subsidiary of QLS,
shall pay one individual an annual salary of $50,000 for her work as
Director of Education. Any unpaid salary shall be eligible for the
calculation of warrants to be issued. SCE agrees to take their
fees as QLS and its subsidiaries funds allow so as not to
jeopardize the operations. In the event that at the end of the fiscal
year, SCE has not taken its entire fee, QLS shall issue a warrant for
stock, with registration rights paid for by QLS, at the strike price of
$0.10 per share. The number of shares shall be determined by the
remaining unpaid management fee.
On August 1, 1995, the company approved the sale of Warrants to two of its
Board of Directors and two independent consultants for the purchase
price of $100 to each individual. The warrants are for a total of
250,000 shares of the Company's $0.001 Common Stock at an exercise
price of $0.10 per share. The warrants may be exercised anytime from
August 1, 1995 to August 1, 2000.
NOTE 6 - BUSINESS SEGMENT INFORMATION
The Company's business operations consist of educational activities,
seminar and publication, and video production. Segment operating
information is presented for the two quarters as follows:
<TABLE>
<CAPTION>
MARCH 31,
MARCH 31, RESTATED
1996 1995
---- ----
<S> <C> <C>
Net sales to unaffiliated customers:
Educational $ 567,992 $ 320,330
Seminar and publication 17,253 33,925
Video production 12,000 0
--------- ---------
Consolidated $ 597,245 $ 354,255
--------- ---------
--------- ---------
Operating income (loss):
Educational $ 105,134 $ 65,648
Seminar and publication (54,539) (15,483)
Video production (21,982) (85,109)
--------- ---------
Consolidated 28,613 (34,944)
Corporate expenses (139,792) (122,210)
Interest expenses (1,746) (5,430)
Interest income 40,410 61,942
--------- ---------
Income (loss) before federal
income taxes $ (72,515) $(100,642)
--------- ---------
--------- ---------
</TABLE>
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Prior to the commencement of its office lease, the Company issued 25,000
shares of its common stock to the landlord of its corporate offices for
debt owed. The landlord is to sell the shares at a rate of no more than
2,000 shares per day to satisfy the debt. This stock was issued
April 5, 1994.
<PAGE>
QUANTUM LEARNING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(CONTINUED)
NOTE 7 - COMMITMENTS AND CONTINGENCIES (CON.)
If the sale of the 25,000 shares of common stock yields net proceeds of
less than the aforesaid debt of $45,598, then the deficiency immediately
becomes due and payable within five days of notice. Management has not yet
received confirmation of the monies collected from the sale of the common
stock. In addition, the Company is currently paying a discounted rent
amount. If the Company does not exercise its option to purchase the
building prior to 30 days before the expiration of the lease, April 30,
1995, then the rent shortfall between the discounted rent and the actual
rent of $24,695 will become due and payable.
On July 2, 1995 the Company entered into an agreement with SeaCoast
Electric, Inc. (SCE) for management services. SCE is owned, in part, by
children of Officers and directors of the Company. The agreement calls
for SCE to provide management, in the form of Chief Executive Officer
and Chief Financial Officer, for all operations of all QLS
subsidiaries. In exchange, the Company shall pay SCE the sum of $150,000
for management services for each fiscal year (July to June). In
addition, Cambridge Academy, a subsidiary of QLS, shall pay one
individual an annual salary of $50,000 for her work as Director of
Education. Any unpaid salary shall be eligible for the calculation of
warrants to be issued. SCE agrees to take their fees as QLS and its
subsidiaries funds allow so as not to jeopardize the operations. In the
event that at the end of the fiscal year SCE has not taken its entire fee,
QLS shall issue a warrant for stock, with registration rights paid for
by QLS, at the stike price of $0.10 per share. The number of shares shall
be determined by the remaining unpaid management fee.
The payment on the note receivable from W.T. and Glenn Young is in dispute.
The Youngs have filed for the courts to make a determination on the
agreement. Property was sold by W.T. Young Construction Company and the
proceeds applied as a payment of the note due from the Youngs.
Management's position is that an additional payment is due July 10, 1995
pursuant to the agreement. The Youngs have indicated that if the ruling
is that a payment was due July 10, 1995 in addition to the proceeds of
the land, they will return the property to the company and allow the
proceeds already given to the Company to apply as the payment due so the
note will not be in default.
NOTE 8 - OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
---- ----
<S> <C> <C>
Capitalized production costs $ 137,100 $ 137,100
Intangibles 33,437 33,437
Less: Accumulated Amortization (9,063) (7,863)
Other assets 90,465 0
--------- ---------
Total Other Assets $ 251,939 $ 162,674
--------- ---------
--------- ---------
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
An individual invested $100,000 in Cambridge Academy, a subsidiary of the
Company, prior to the merger of Cambridge Academy with QLS, Inc. and
Cambridge Academy set aside a block of stock for the individual. She
subsequently passed away. The estate filed a several count complaint,
all of which in essence alleges that the estate would like to recapture
the full value of the investment and does not want the block of stock
reserved for the individual issued to her satisfaction of the investment.
The maximum possible action against the company would be to return the
$100,000. Management has responded to the claim and Counsel for both
parties are exploring possible settlement as well as preparing for trial.
ITEM 2. Changes in Securities
The Company issued 25,000 Common Shares on February 2, 1996 for
professional services pursuant to a Form S-8 Registration Statement.
ITEM 3. Defaults upon Senior Securities
No senior securities outstanding.
ITEM 4. Submission of Matters to a Vote of Security Holders
No annual or special meeting of security holders has been held in the
current quarter.
ITEM 5. Other Information
Quantum Learning Systems, Inc. announced that QLSI had signed a definitive
agreement on February 6, 1996, for the acquisition of USPIC, Inc., a
Florida corporation. The USPIC acquisition also includes its two
subsidiary companies, United States Academy of Private Investigators,
Inc., and A-1-A Collections, Inc. All are located in Deerfield Beach,
Florida. QLSI is purchasing 100% of USPIC and its subsidiaries for
150,000 shares of QLSI's restricted common stock. The transaction is
scheduled to close March 1, 1996. On April 4, 1996 Quantum Learning
Systems, Inc. rescinded their definitive agreement for the acquisition
of USPIC, Inc.
On May 7, 1996, the Registrant entered into a definitive agreement to
acquire 100% of Corporacion Pipasa, S.A. ("Pipasa"), a Costa Rican
private company, in a tax-free exchange. The Registrant will issue
an aggregate of 25,600,000 of its common shares to the shareholders of
Pipasa. Initially, the Registrant will only acquire approximately 65%
of Pipasa in exchange for approximately 16,640,000 of its common shares.
The remaining approximately 35% of Pipasa is expected to be acquired
within the next twelve months. This entire transaction is subject to
the approval of the shareholders of the Registrant, which includes
the authorization of sufficient additional common shares to complete
the transaction, approval of the resignation of the current officers
and directors of the Registrant and their replacement by new management,
the approval of the disposal of all current operations of the
Registrant contemporaneously with the acquisition of Pipasa and in such
manner as to estoppel any contingent liability, and the change of the name
of Registrant to "Costa Rica International Holdings, Inc." or a derivation
<PAGE>
PART II - OTHER INFORMATION
(CONTINUED)
ITEM 5. Other Information (continued)
thereof acceptable to regulatory authorities. Pipasa's main line of
business is the production and marketing of poultry products. Audited
financial statements for the year ended September 30, 1995 and unaudited
financial statements for the six months ended March 31, 1996 are included
as Exhibit A.
<PAGE>
EXHIBIT A
FORM 10QSB
MARCH 31, 1996
FINANCIAL STATEMENTS
CORPORACION PIPASA, S.A.
Table of Contents
Independent Auditor's Report
EXHIBIT
-------
Balance Sheet A
Statement of Earnings B
Statement of Stockholder's Equity C
Statement of Changes in Financial Position D
Summary of Accounting Policies
Notes to Financial Statements
<PAGE>
VENEGAS, PIZARRO, UGARTE Y CO.
CONTADORES PUBLICOS AUTORIZADOS
The Shareholders
Corporacion Pipasa, S.A.
We have audited the balance sheet of Corporacion Pipasa, S.A. as of
September 30, 1995 and the related statements of earnings, stockholder's equity
and changes in financial position for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
a reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes the examination, on a test basis, of
the evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and the
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The Generally Accepted Accounting Principles require that Fixed Assets be
registered at cost; however, the Generally Accepted Accounting Principles
adopted by the Costa Rican Institute of Certified Public Accountants, allows the
revaluation of fixed assets. For the purpose of presenting Fixed Assets valued
at cost, we have reversed all fixed assets revaluations applied by Corporacion
Pipasa, S.A., which has originated changes in the financial statements,
described in Note 7.
We have issued another Audit Report dated December 1, 1995, corresponding
to the 1995 financial statements, which does include fixed assets revaluations.
In our opinion, except for what is indicated in the preceeding paragraphs,
the accompanying financial statements present fairly the financial position of
the Corporation as of September 30, 1995 and the results of its operations, the
changes in the stockholder's equity, and the changes in financial position for
the year then ended, in conformity with generally accepted accounting
principles.
Lic. Eithel Pizarro Mendez
Certified Public Accountant
Partner
December 1, 1995
<PAGE>
CORPORACION PIPASA, S.A.
(BELEN, HEREDIA, COSTA RICA)
BALANCE SHEET
SEPTEMBER 30, 1995
(U.S. DOLLARS)
NOTES
ASSETS
Current Assets:
Cash and banks $ 1,028,330
Marketable securities 1,324,353
Notes receivable 2 1,963,312
Accounts receivable, net 3 4,433,540
Inventories, net 4 5,984,909
Prepaid expenses 5 152,289
-----------
Total current assets 14,886,733
-----------
-----------
Long term investments 6 1,702,336
Property, Plant and equipment, net 7 28,338,082
Forestry rights 657,961
Copyrights, trademarks, goodwill, net 151,410
Guarantee deposits 145,872
Other assets 8,806
-----------
Total assets $45,891,200
-----------
-----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable 8 $ 9,159,313
Accounts payable 9 3,680,361
Allowance for Christmas bonus 371,800
Allowance for severance pay 10 63,858
Accumulated expenses 653,022
Estimated income tax 10 87,005
-----------
Total current liabilities 14,015,359
-----------
-----------
Long term liabilities:
Long term accounts payable 14,480
Long term notes payable 8 2,383,500
-----------
Total long term liabilities 2,397,980
-----------
Total liabilities $16,413,339
-----------
-----------
<PAGE>
CORPORACION PIPASA, S.A.
(BELEN, HERDIA, COSTA RICA)
BALANCE SHEET
SEPTEMBER 30, 1995
(U.S. DOLLARS)
(CONTINUED)
NOTES
Stockholder's equity:
Common stock, authorized and issued
2,500,000 shares of $8.40 par value
each (47.11 without the effect of the
capitalization of fixed assets
revaluation) 7, 14 $ 17,769,881
Titulos de capital, common and nominal
1,500,000 certificates of a par value
$6.64 each, which can be issued in
certificates of six shares ($0.34
without the effect of the capitalization
of assets revaluation) 7, 14 505,511
Preferred nominal shares class "c" 186,431
shares issued which bear a fixed dividend
of 10% per year of a par value of
$6.18 each 14, 15 1,151,491
Preferred nominal shares class "c" 131,400
shares issued, which bear an annual
dividend equal to the interbank rate
published by the Central Bank of Costa
Rica, revisable and adjustable every month,
plus two additional points, of a par value
of $6.50 each 14, 15 853,948
Stockholder's contributions for future
capital increase -
Additional paid-in capital -
Fixed assets revaluation surplus 7 -
Legal reserve 518,884
Retained earnings 8,678,146
-----------
Total stockholder's equity 29,477,861
-----------
Contingent liabilities 10, 11
Total liabilities and stockholder's equity $45,891,200
-----------
-----------
See accompanying notes to financial and summary of accounting policies.
<PAGE>
CORPORACION PIPASA, S.A.
(BELEN, HEREDIA, COSTA RICA)
STATEMENT OF EARNINGS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(U.S. DOLLARS)
NOTES
Net sales $57,396,036
Cost of sales 7 40,198,185
-----------
Gross profit 17,197,851
-----------
Operating expenses:
Selling 6,265,603
Export 143,963
General and administrative 4,916,216
-----------
Total operating expenses 7 11,325,782
-----------
Operating profit 5,872,069
Other income 12 1,224,590
Foreign currency translation gain 17 437,498
Other expenses 13 3,255,691
-----------
Net earnings before income taxes 4,278,466
Estimated income tax 10 230,618
-----------
Net earnings 7 $ 4,047,848
-----------
-----------
See accompanying notes to financial and summary of accounting policies.
<PAGE>
CORPORACION PIPASA, S.A.
(BELEN, HEREDIA, COSTA RICA)
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(U.S. DOLLARS)
NOTES
Capital stock:
Balance at the beginning of the year $ 21,005,497
Less, adjustment to fixed assets
revaluation 7 3,235,616
-----------
Balance at the end of the year 17,769,881
-----------
Titulos de capital:
Balance at the beginning of the year -
Capitalization of fixed assets revaluation
surplus 9,452,936
Capitalization of retained earnings 505,511
-----------
9,958,447
-----------
Less, adjustment to fixed assets
revaluation 7 9,452,936
-----------
Balance at the end of the year 505,511
-----------
Preferred shares:
Balance at the beginning of the year 1,628,717
Transferred from stockholder's
contributions for future capital
increases 376,722
-----------
Balance at the end of the year 2,005,439
-----------
Stockholder's contributions for future
capital increases:
Balance at the beginning of the year 408,008
Increase during the year 3,154
Less, transferences to preferred shares 376,722
Other decreases 34,440
-----------
Balance at the end of the year -
-----------
-----------
<PAGE>
CORPORACION PIPASA, S.A.
(BELEN, HEREDIA, COSTA RICA)
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(U.S. DOLLARS)
NOTES
Additional paid-in capital
Balance at the beginning of the year 27,083
Decrease during the year 27,083
Transfer to preferred shares -
-----------
Balance at the end of the year -
-----------
Fixed assets revaluation surplus:
Balance at the beginning of the year 7 9,338,777
Increase during the year 169,776
Capitalized the capital shares 9,452,936
Decrease during the year 55,617
-----------
Balance at the end of the year -
-----------
Legal reserve:
Balance at the beginning of the year 371,306
Increase during the year 147,578
-----------
Balance at the end of the year 518,884
-----------
Retained earnings:
Balance at the beginning of the year 7 6,698,612
Add:
Net earnings 7 4,047,848
Adjustment to income tax -
Deduct:
Dividends paid 1,414,596
Adjustment to income tax 629
Transferred to capital shares 505,511
Transferred to legal reserve 147,578
-----------
Balance at the end of the year 8,678,146
-----------
Total stockholder's equity $29,477,861
-----------
-----------
See accompanying notes to financial and summary of accounting policies.
<PAGE>
CORPORACION PIPASA, S.A.
(BELEN, HEREDIA, COSTA RICA)
STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(U.S DOLLARS)
Funds provided by operating activities:
Net earnings for the year $ 4,047,848
Add charges that do not require cash disbursements:
Increase in allowance for doubtful accounts 49,762
Depreciation 1,275,566
-----------
5,373,176
Net change in assets and liabilities relating to
operating activities:
Decrease (increase) in assets:
Accounts receivable (414,448)
Inventories 871,993
Prepaid expenses 92,913
Notes receivable (488,413)
Increase (decrease) in liabilities:
Accountants payables 307,081
Accumulated expenses (82,639)
Estimated income tax 62,845
Allowance for Christmas bonus (107,534)
Allowance for severance pay (146,726)
-----------
Net cash provided by operating activities 5,468,248
-----------
Funds provided by financing activities:
Notes payable 416,685
Bank overdrafts (227,615)
Stockholder's contributions for future
capital increases (31,286)
Additional paid-in capital (27,083)
Dividends paid (1,414,596)
-----------
Net cash provided by financing activities (1,283,895)
-----------
Funds provided by investing activities:
Marketable securities (756,329)
Long term investments 221,864
Forestry rights (103,734)
Copyrights, trademarks, and goodwill (12,895)
Guarantee deposits (12,366)
Other assets 3,994
Machinery, furniture and equipment (3,316,041)
-----------
Net cash used by investing activities (3,975,507)
-----------
Net increase in cash 208,846
Cash balance, at beginning of year 819,484
-----------
Cash balance, at end of year $ 1,028,330
-----------
-----------
See accompanying notes to financial and summary of accounting policies.
<PAGE>
CORPORACION PIPASA, S.A.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SEPTEMBER 30, 1995
(STATED U.S. DOLLARS)
The financial position, the results of the operations, the statement of
stockholder's equity and the statement of changes in the financial position
of Corporacion Pipasa, S.A. are presented in conformity with generally
accepted accounting principles. Some of the most important accounting
policies are the following:
INVENTORIES
Finished products inventories, developing poultry, production poultry, raw
materials, and replacement parts and supplies are valued at cost.
In transit merchandise is valued at the invoiced cost.
PROPERTY, PLANT AND EQUIPMENT
Property, buildings, leased property improvements, machinery and equipment,
furniture and equipment, vehicles, poultry equipment and other fixed assets
are stated at cost of acquisition or construction.
Profit or loss resulting from the sale or retirement of fixed assets are
included in the results of the period in which the transaction originated.
Significant renewals and improvements are capitalized while expenditures for
maintenance, repairs, and minor renewals which do not increase the useful
life of the asset are charged to operations as incurred.
Depreciation is computed using the straight-line method, based on the useful
life of the asset for both financial and income tax purposes.
SEVERANCE PAY
Under Costa Rican law, employees not dismissed for misconduct or leaving of
their own accord are entitled to severance pay equal to one month's salary
for each year of continous service, up to a maximum of eight month's salary.
The Company accumulates a provision to partially cover this contingent
liability, and in addition, transfers 5% of the payroll to ASEPIPASA to cover
part of the severance pay liability. Also, it pays PROVIDA with 1.5% or 2%
of the payroll for those employees who have signed for the additional
supplementary pension plan. According to the above, the contingent liability
for severance pay is 3.33% in some cases and in other cases 1.83% or 1.33%.
<PAGE>
CORPORACION PIPASA, S.A.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(STATED IN U.S. DOLLARS)
(1) ORGANIZATION
On January 7, 1991, Akron, S.A. merged with the following corporations:
Industrias Derivados de Pollo, S.A. (Idepo, S.A.), Retisa, S.A., Servicios
Multiple Pipasa (Semupi, S.A.), Avicola Chacara, S.A., Concentrados Belen,
S.A., Empolladora Belen, S.A., Granja Avicola Monica, S.A., Planta
Procesadora de Aves, S.A., Grupo Pipasa, S.A., Productores de Huevo Fertil,
S.A. (Prohufe, S.A.) and El Polluelo, S.A. prevailing the name of the company
as Akron, S.A.. Sometime afterwards the articles of incorporation were
amended and the company's name was switched to Corporacion Pipasa, S.A. The
Corporation is domiciled in La Ribera district, Belen country Heredia
province, Republic of Costa Rica.
Although Corporacion Pipasa, S.A. was formed on January 7, 1991, the
necessary legal documents were signed on February 15, 1991. Settlement of
the accounts for the merger was taken on January 31, 1991.
The main line of business of the Company is the production and marketing of
poultry products.
(2) NOTES RECEIVABLE
Notes receivable are summarized as follows:
Commercial $ 216,098
Shareholders 1,586,702
Others 160,512
-----------
$ 1,963,312
-----------
-----------
(3) ACCOUNTS RECEIVABLE
Short term accounts receivable are detailed as follows:
Commercial $ 4,040,809
Officers and employees 51,125
Others 519,779
-----------
4,611,713
Allowance for doubtful accounts 178,173
-----------
$ 4,433,540
-----------
-----------
(4) INVENTORIES
Inventories are detailed as follows:
<PAGE>
CORPORACION PIPASA, S.A.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(STATED IN U.S. DOLLARS)
(CONTINUED)
Finished products $ 1,079,915
Production poultry 3,077,024
Materials and supplies 1,085,012
Raw materials 1,125,653
In-transit 47,455
Other 1,262
-----------
6,416,321
Allowance for renewal of production poultry 431,412
-----------
$ 5,984,909
-----------
-----------
(5) PREPAID EXPENSES
Prepaid expenses are summarized as follows:
Prepaid insurance $ 57,736
Prepaid interest 42,150
Vehicles rights and taxes 5,528
Prepaid rent 32,318
Others 14,557
-----------
$ 152,289
-----------
-----------
(6) LONG TERM INVESTMENTS
Long term investments at cost are detailed as follows:
Rincon de los Toros, S.A. (100% ownership) $ 407,424
Cerveceria Americana, S.A. (9% ownership) 1,162,064
Lineas Aereas Costarricense, S.A. 1,263
Club Campestre Espanol 2,173
Certificates of Deposit, Corporacion Privada of
Inversiones de Centroamerica, S.A. 81,173
Hotel Fiesta de Playa Shares 33,557
Certificates of Deposit, Banco Nacional de Costa Rica 13,487
Others 1,195
-----------
$ 1,702,336
-----------
-----------
As of September 30, 1995, the market value of the Corporation's investment in
shares of Cerveceria Americana, S.A. is not known.
The generally accepted accounting principles require that Corporaction
Pipasa, S.A. consolidate its financial statements as of September 30, 1995
with those of Rincon de los Toros, S.A. since it owns 100% of the common
stock. Nevertheless, Corporacion Pipasa, S.A. does not consolidate its
financial statements since Rincon de los Toros, S.A. does not have operations.
<PAGE>
CORPORACION PIPASA, S.A.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(STATED IN U.S. DOLLARS)
(CONTINUED)
The following is a summary of the balance sheet and income statement of
Rincon de los Toros, S.A. as of September 30, 1995, which were not audited:
RINCON DE LOS TOROS, S.A.
BALANCE SHEET
SEPTEMBER 30, 1995
(STATED IN U.S. DOLLARS)
ASSETS
Land 416,478
------------
$ 416,478
------------
------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Notes and accounts payable $ 1,838
------------
STOCKHOLDER'S EQUITY
Common stock 4,527
Additional paid-in capital 455,818
Donated Capital 4,292
Accumulated loss 49,997
------------
Total stockholder's equity 414,640
------------
$ 416,478
------------
------------
RINCON DE LOS TOROS, S.A.
INCOME STATEMENT
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(STATED IN U.S. DOLLARS)
Income $ -
Expenses -
--------
Net profit $ -
--------
--------
On October 15, 1995, as stated in minute 17 of the General Assembly, it was
agreed to merge Rincon de los Toros, S.A. with Corporacion Pipasa, S.A.
prevailing Corporacion Pipasa, S.A.
The merging of the two companies will be made official a month after this
resolution is published on the newspaper "La Gaceta."
<PAGE>
CORPORACION PIPASA, S.A.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(STATED IN U.S. DOLLARS)
(CONTINUED)
(7) PROPERTY, PLANT AND EQUIPMENT
Property, machinery and equipment at cost are summarized as follows:
Land $ 5,967,415
Construction in progress 1,421,099
Buildings and installations 13,607,768
Plant, machinery and equipment 7,679,965
Furniture and equipment 740,249
Vehicles 3,178,354
Computer equipment 416,102
Other equipment 1,226,844
Hand tools 51,782
Water wells 87,496
Advertising signs and display 576,626
Poultry feeding equipment 70,236
Poultry feeding and transporting equipment 72,633
Miscellaneous farm equipment 41,287
Machinery in-transit 53,020
-----------
35,190,876
-----------
Less, accumulated depreciation 6,852,794
-----------
$28,338,082
-----------
-----------
For the purpose of presenting the Fixed Assets valued at cost, we have reversed
the revaluation of fixed assets applied by Corporacion Pipasa, S.A., which has
been carried out in many opportunities. This reversal has originated the
following effects:
COMMON STOCK:
Presents a decrease of $3,235,616 given that there was a capitalization of
fixed assets revaluation surplus transferred to this account. The reversal of
the fixed assets revaluation caused the value of the common stock to change
from $8.40 to $7.11.
TITULOS DE CAPITAL:
It is decreased in the sum of $9,452,936, given that this amount originated
from a capitalization of fixed assets revaluation surplus. The reversal of the
fixed assets revaluation caused the value of the Titulos de Capital to change
from $6.64 to $0.34.
RETAINED EARNINGS:
Presents an increase of $400,216 which originated from fixed assets revaluation
depreciation expense, corresponding to past periods.
NET EARNINGS:
Presents an increase of $775,373 originating from fixed assets revaluation
depreciation expense, corresponding to the 1995 period.
<PAGE>
CORPORACION PIPASA, S.A.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(STATED IN U.S. DOLLARS)
(CONTINUED)
Depreciation expense was computed by the straight line method and was allocated
as follows:
Factory overhead $ 770,366
Sales expenses 393,751
General and administrative expenses 111,449
-----------
$ 1,275,566
-----------
-----------
(8) NOTES PAYABLE
Short term notes payable are detailed as follows:
Certificates of Deposit $ 3,183,895
Banks 4,501,479
Other 1,473,939
-----------
$ 9,159,313
-----------
-----------
Long term notes payable are detailed as follows:
Certificates of Deposit $ 201,338
Banks 2,139,213
Other 42,949
-----------
$ 2,383,500
-----------
-----------
Land and buildings, machinery and equipment, and vehicles are pledged as
guarantee of notes to banks.
Long-term notes due to banks and others will mature in the following years
ending September 30, 1995:
1997 $ 1,159,115
1998 433,253
1999 490,365
2000 192,932
2001 and over 107,835
-----------
$ 2,383,500
-----------
-----------
As of September 30, 1995, long term notes bear an annual interest of 23.93%,
30.50%, 31.25%, 35.10%, 35.50%, 35.94%, 36.00%, 37.50%, 38.00%, 39.00%, and
40.00%.
(9) ACCOUNTS PAYABLE
Accounts payable are detailed as follows:
Suppliers $ 3,167,484
Payroll withholdings and taxes 477,669
Other 35,208
-----------
$ 3,680,361
-----------
-----------
<PAGE>
CORPORACION PIPASA, S.A.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(STATED IN U.S. DOLLARS)
(CONTINUED)
(10) CONTINGENT LIABILITIES
Under Costa Rican law, employees not dismissed for misconduct or leaving of
their own accord are entitled to severance pay equal to one month's salary of
each year of continous service, up to a maximum of eight month's salary. Also,
employees that retire under the Costa Rican Social Security System are entitled
to the same benefit. It is the Company's policy to accumulate a provision to
cover this contingent liability (see note on severance pay in the summary of
significant accounting policies).
The fiscal authorities could review the income tax returns of the Corporation
for the years ended on September 30, 1995, 1994, 1993, and 1992.
Sales tax returns of the Corporation could be reviewed by the fiscal
authorities.
(11) PENDING LAWSUITS
As of September 30, 1994, there was a civil responsibility lawsuit arising from
a court decision on a criminal charge involving a corporation vehicle with
bodily injuries. The plaintiff had estimated such responsibility in U.S.
$99,682 but the Court had not accepted such estimate. This lawsuit was ruled
in favor of the corporation on the grounds of refusal of incapacity alleged by
the plaintiff, for which the case was closed.
The plaintiff has introduced a new lawsuit based on identical terms, as a new
process which was notified on November 1, 1995. At the present time, a plea is
being made for this lawsuit.
(12) OTHER INCOME
Other income is detailed as follows:
Interest $ 392,519
Exchange differences 134,147
Certificados de Abono Tributario 68,773
Gain on disposal of operational assets 112,738
Breading material 31,500
Sales of scrap 49,850
Liabilities adjustment 104,275
Others 330,788
-----------
$ 1,224,590
-----------
-----------
<PAGE>
CORPORACTION PIPASA, S.A.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(STATED IN U.S. DOLLARS)
(CONTINUED)
(13) OTHER EXPENSES
Other expenses are detailed as follows:
Interest and commissions $ 2,656,509
Exchange differences 326,992
Discarded products 4,870
Non-deductible expenses 24,640
Inventory differences 45,596
Loss of fixed assets 8,984
Breading, marinade, batter, and roasting material 36,310
Legal expenses 54,460
Others 67,330
-----------
$ 3,255,691
-----------
-----------
As agreed on December 3, 1994, before notary public Lic. Rafael Angel Morales
Soto, the capital stock of the corporation was modified as follows:
a. Founder's nominal common shares, class "A", does not change, remaining
at 2,000,000 shares issued and paid with a par valued of U.S. $8.40
each (U.S. $17,769,881).
b. Class "B" nominal common shares at U.S. $4,853,424 authorized 500,000
issued (See note 7).
c. Class "C" preferred shares remain at U.S. $1,628,717 authorized, of
which $2,005,439 have been issued.
d. A new class of preferred shares is authorized for up to U.S.
$1,301,914, which refer to 200,000 nominal preferred shares of class
"D" of a par value of $6.51 each.
On September 21, 1995, as indicated on minute 16 of the Extraordinary General
Assembly, it was accorded to increase the capital of the Corporation in the sum
of $9,958,447, through the issue of 1,500,000 "titulos de capital", common and
nominal of a par value of $6.64 each one, which can be issued in certificates
of six shares each one.
(15) PREFERRED SHARES DIVIDEND POLICIES
a. Classes "C-A" and "C-B" which are the first, second, and fourth issue
of the class "C" preferred shares will receive a fixed annual
dividend of 10% payable monthly. The dividend rate could be adjusted
by the agreement of the Board of Directors.
b. Class "C-C" which is the third issued of the class "C" preferred shares
will receive an annual dividend equal to the Central Bank of Costa Rica
interbank rate, adjusted to the rate published at the end of the month,
plus two additional points, payable monthly.
<PAGE>
CORPORACTION PIPASA, S.A.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(STATED IN U.S. DOLLARS)
(CONTINUED)
c. Class "D" preferred shares will receive a dividend based on the Central
Bank of Costa Rica interbank rate plus three additional points and 1%
of the net income after taxes and allowances.
(16) MONETARY UNIT
The monetary unit of the Republic of Costa Rica is the colon.
The official exchange rate for buying and selling U.S. dollars is 20.00 for U.S.
$1.00.
The Central Bank of Costa Rica has the legal right to establish and regulate
other foreign exchange markets. At the present time the interbank exchange
rate published by the Central Bank is used for liquidating exports, imports,
and other financial transactions.
After March 2, 1992, the Central Bank of Costa Rica freed the exchange rate and
any transaction for the purchase or sale of foreign currency can be conducted
at any bank of the National Banking System. The banks participate in the
foreign exchange market using the Central Bank of Costa Rica reference exchange
rate, which is published daily.
U.S. dollar denominated assets and liabilities are recorded at the interbank
exchange rate.
At September 30, 1995, the interbank exchange rate was 186.61 and 187.62 for
selling and buying U.S. $1.00 respectively.
(17) TRANSLATION OF THE FINANCIAL STATEMENTS
The financial statements of Corporacion Pipasa, S.A. as of September 30, 1995,
were translated from Costa Rican colones to U.S. dollars. The generally
accepted accounting principles require the translation of the monetary assets
and liabilities at the exchange rate in effect at the date of such financial
statements, whereas the non-monetary assets and liabilities are translated at
the historical rate. Income and expenses are translated at the average
exchange rate of the year. Translation gains or losses are included in the
income statement.
<PAGE>
CORPORACION PIPASA, S.A.
(BELEN, HEREDIA, COSTA RICA)
BALANCE SHEET
MARCH 31, 1996
(U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and banks $ 1,016,993
Marketable securities 2,344,302
Notes receivable 2,031,684
Accounts receivable, net 5,355,282
Inventories, net 7,764,125
Prepaid expenses 183,799
------------
Total current assets 18,696,185
------------
Long term investments 1,695,507
Property, Plant and equipment, net 28,118,838
Forestry rights 704,046
Copyrights, trademarks, goodwill, net 114,618
Guarantee deposits 22,971
Other assets 137,590
------------
Total assets $ 49,489,755
------------
------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Bank overdrafts $ 610,602
Notes payable 10,844,399
Accounts payable 2,406,192
Allowance for Christmas bonus 212,239
Allowance for severance pay 38,412
Accumulated expenses 1,235,444
------------
Total current liabilties 15,347,288
------------
Long term liabilities:
Long term notes payable 3,200,079
------------
Total liabilities $ 18,547,367
------------
------------
</TABLE>
<PAGE>
CORPORACION PIPASA, S.A.
(BELEN, HEREDIA, COSTA RICA)
BALANCE SHEET
MARCH 31, 1996
(U.S. DOLLARS)
(CONTINUED)
(UNAUDITED)
<TABLE>
<S> <C>
STOCKHOLDER'S EQUITY:
Common stock, authorized and issued 2,500,000
shares of $8.40 par value each ($7.11 without
the effect of capitalization of fixed assets
revaluation) 17,769,881
Titulos de Capital, common and nominal 1,500,000
certificates of par value of $6.64 each, which
can be issued in certificates of six shares 505,511
Preferred nominal shares class "C" 186,431 shares
issued which bear a fixed dividend of 10% per
year of a par value of $6.18 each 1,151,491
Preferred nominal shares class "C" 131,400 shares
issued, which bear an annual dividend equal to
the interbank rate published by the Central Bank
of Costa Rica, revisable and adjustable every
month, plus two additional points, of a par value
of $6.50 each 853,948
Legal reserve 518,884
Retained earnings 10,142,673
------------
Total stockholder's equity 30,942,388
------------
Total liabilities and stockholder's equity $ 49,489,755
------------
------------
</TABLE>
<PAGE>
CORPORACION PIPASA, S.A.
(BELEN, HEREDIA, COSTA RICA)
STATEMENT OF EARNINGS
FOR SIX MONTHS ENDED MARCH 31, 1996
(U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<S> <C>
Net sales $ 31,258,945
Cost of sales 22,569,168
------------
Gross profit 8,689,777
Operating expenses:
Selling 3,237,235
Export 72,395
General and administrative 2,122,779
------------
Total operating expenses 5,432,409
------------
Operating profit 3,257,368
Other income 546,692
Foreign currency translation gain 77,645
Other expenses 1,884,581
------------
Net earnings $ 1,997,124
------------
------------
</TABLE>
<PAGE>
PART II - OTHER INFORMATION (CONT.)
ITEM 6. Exhibits and Reports of Form 8-K
No exhibits as set forth in Item 601 of Regulation S-K are considered
necessary in this 10-QSB filing.
February 1, 1996, Form 8-K, reporting the definitive agreement to acquire
USPIC.
March 11, 1996, Form 8-K, reporting the granting of patent to Registrant
for interactive Laser Disc Player.
March 27, 1996, Form 8-K, reporting the cancellation of USPIC definitive
agreement.
April 4, 1996, Form 8-K, reporting letter of intent for acquisition of
Corporacion Pipasa, S.A.
May 6, 1996, Form 8-K, reporting definitive agreement to acquire 100% of
Corporacion Pipasa, S.A.
<PAGE>
CONFORMED COPY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securites Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Quantum Learning Systems, Inc.
Dated: May 17, 1996 By: /s/James K. Isenhour
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James K. Isenhour
Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
CHIEF FINANCIAL OFFICER
Dated: May 17, 1996 By: /s/James K. Isenhour
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James K. Isenhour
Treasurer
SECRETARY
Dated: May 17, 1996
By: /s/Tanzee Nahas
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Tanzee Nahas
Secretary
