SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No 2 to
FORM 10-QSB/A
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended December 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
COSTA RICA INTERNATIONAL, INC.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 87-0432572
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
Suite 303, 2525 S.W. 3rd Ave., Miami, Florida 33129
(Address of principal executive offices) (Zip Code)
(305) 250-9938 / (305) 250-9939
(Registrant's telephone number including area code)
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 preceding 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 December 31, 1996 was 19,809,396 shares.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
See attached amended and restated financial statements
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following section supersedes Management's Discussion and
Analysis of Financial Condition and Results of Operations in the Quarterly
Report on Form 10-QSB for December 31, 1996.
For purposes of comparison and evaluation, Statements of Income of
Corporacion Pipasa, S.A. ("Pipasa"), the Company's sole operating subsidiary
are used. These comparisons do not reflect the fact that the Company owns
59.56% of Pipasa's common stock and, as a result, will receive income only
through the payment of dividends by Pipasa to the Company as a holder of
Pipasa's common stock.
On March 5, 1997, the Company announced through a press release, that
certain reports filed with the Securities and Exchange Commission, had to be
amended due to an overstatement in the assets reported due to an error when
applying currency translation and purchase accounting methods. This amount
is estimated to be between $20 million and $25 million. The error was
detected by the registrant with the assistance of its new external auditors,
KPMG Peat Marwick, who recently completed their re-audit. The Company
corrected these errors in Amendment No. 1 to its Annual Report on
Form 10-KSB/A filed with the Commission on September 2, 1997.
For purposes of preparing this amendment to the Quarterly Report on
Form 10-QSB as of December 31, 1996, the Company has reflected balance sheet
accounts as of September 30, 1996, certified by KPMG Peat Marwick. The balance
sheets were filed with adjusted amounts in a September 2, 1997 amendment.
Revenues of the Company for the quarter ended December 31, 1996
increased from $16,200,382 in fiscal year 1995 to $16,939,441 in fiscal year
1996, an increase of approximately 4.56% over the previous year. The Company
experienced an increase in revenues as a result of an increase in its volume
of sales in Costa Rica.
The gross profit for the quarter and three month period is slightly
lower in comparison to the previous year. The gross profit this period fell
US $356,653, a decline of 7.77%. This decline is due to the rise in the price
of raw materials such as corn and soy bean meal during 1996.
Cost of sales in December, 1996 was 75.01% as of percentage of
sales, and 71.67% over the previous year.
The net profit before taxes and minority interest for the first
quarter fell US $108,270 from $1,135,885 in 1995 to $1,027,615 in 1996, a
decline of 9.53%. The net profit after taxes and minority interest for the
first quarter fell from $617,673 in 1995 to $509,128 in 1996, a decline of
9.53%. This decline is due to the rise in the price of imported grains such
as corn and soy bean, the Company's main raw materials, and general and
administrative expenses.
The Company's selling expenses decreased by 0.86% as a result of more
efficient management of its resources. General and administrative expenses
increased 14.62% in 1996 in comparison to 1995, due to extraordinary expenses
related with Costa Rica International, Inc.
Management expects continued growth of revenues from its core
business activities. Management is continuing to expand its market operations
and to cut costs to maximize profit potential.
LIQUIDITY AND CAPITAL RESOURCES
For purposes of comparison and evaluation, the liquidity and capital
resources of Pipasa, the Company's sole operating subsidiary are used. These
comparisons do not reflect the fact that the Company owns 59.56% of Pipasa's
common stock and, as a result, will receive income only through the payment of
dividends by Pipasa to the Company as a holder of Pipasa's common stock.
As of December 31, 1996, Cash and Cash Equivalent of CRI were
$907,371, as compared to $5,129,312 at September 30, 1996.
-1-
<PAGE>
There was an increase in Cash and Cash Equivalent of Pipasa in
September 30, 1996, due to the collection of a note receivable from related
parties that had been deposited in a current account on that date.
As of December 31, 1996, the working capital ratio of Pipasa was
1.04 as compared to 0.98 at September 30, 1996.
On August 26, 1996 Pipasa entered into an agreement with Inversiones
La Ribera, S.A. (a company owned and controlled by its Chairman and Chief
Executive Officer, Mr. Chaves) to acquire, for $4,858,955, 10% of equity
ownership rights to Inolasa and Adecsa ("Inolasa Group"), an independent
third party and significant supplier of raw material to Pipasa. Inversiones
La Ribera S.A. is both a principal stockholder of Pipasa and a related party
since it is beneficially controlled by Mr. Chaves, who is President to both the
Company and Pipasa. On September 30, 1996, Pipasa had made payments of
$934,842 in connection with such agreement; the unpaid balance was to be paid
during the year ending September 30, 1997. As of the date of this filing, the
balance due for the transaction has been paid in full.
FORWARD-LOOKING INFORMATION
This management discussion and analysis of financial condition and
results of operations may include certain forward-looking statements, within
the meaning of Section 27E of the Securities Exchange Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including (without limitations) statements with respect to
anticipated future operations and financial performance, growth and
acquisition opportunity and other similar forecast and statements of
expectation. Words such as "expects", "anticipates", "intends", "plans",
"believes", "seeks", "estimates" and "should" and various of those words
and similar expressions are intended to identify these forward-looking
statements. Forward-looking statements made by the Company and its
management are based on estimates, projections, beliefs and assumptions
of management at the time of such statements and are not guarantees of
future performance. The Company disclaims any obligations to update or
review any forward-looking statements based on occurrence of future events,
the receipt of new information or otherwise.
Actual future performance outcomes and results may differ
materially from those expressed in forward-looking statements made by the
Company and its management as a result of numbers of risks, uncertainties
and assumptions. Representatives examples of these factors include
(without limitations) general industrial and economic conditions, interest
rates trends; cost of capital and capital requirements; availability of
real estate property; compensation from national hospitality companies;
shifts in customer demands; changes in operating expenses, including
employee wages, benefits and training; governmental and public policy;
changes in the continued availability of financial amounts and at the
terms necessary to support the Company's future business.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No legal proceedings of a material nature to which the Company is a
party were pending during the reporting period, and the Company knows of no
legal proceedings of a material nature pending or threatened or judgments
entered against any director or officer of the Company in his capacity as such.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No exhibits as set forth in Regulation S-K are considered necessary
in this 10-QSB/A filing.
-2-
<PAGE>
Costa Rica International, Inc.
Consolidated Condensed Balance Sheet
As of December 31, 1996 and September 30, 1996
<TABLE>
<CAPTION>
Unaudited Audited
--------- -------
December 1996 September 1996
------------- --------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 907,371 $ 5,129,312
Short term investments 1,992,262 260,339
Notes and accounts receivable - net 5,217,655 4,613,762
Due from related parties 2,952,908 1,304,500
Inventories - net 7,764,297 7,148,797
Prepaid expenses 69,666 157,889
----------- -----------
Total Current Assets 18,904,159 18,614,599
----------- -----------
Long term notes receivable - trade 98,826 211,362
Long term investment 150,839 35,190
Property, plant and eq. - net 13,247,966 13,604,108
Other assets 5,469,836 5,743,448
----------- -----------
Total Assets $37,871,626 $38,208,707
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable 10,160,488 9,411,340
Due to related parties 2,539,718 3,924,114
Current installment of long term debt 1,117,501 1,461,118
Accounts payable 2,869,353 2,562,129
Accrued expenses 1,462,234 1,642,455
----------- -----------
Total Current Liabilities 18,149,294 19,001,156
----------- -----------
Long term debt, excluding current
installments 3,595,972 3,593,601
Other Liabilities 96,216 95,639
----------- -----------
Total Liabilities 21,841,482 22,690,396
----------- -----------
Minority Interest 5,645,299 5,429,402
Stockholders' Equity
Common Stock - $.001 par; 60,000,000
shares authorized; 19,810,396 shares
outstanding as of December 31, 1996 19,810 19,560
Preferred Stock - 317,831 shares
outstanding as of December 31, 1996 2,216,072 2,216,072
Additional paid-in capital 9,375,002 9,350,252
Cumulative translation adjustment (3,788,827) (3,596,253)
Retained Earnings 2,562,788 2,099,278
----------- -----------
Total Stockholders' Equity 10,384,845 10,088,909
----------- -----------
Total Liabilities and
Stockholders' Equity $37,871,626 $38,208,707
=========== ===========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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<PAGE>
Costa Rica International, Inc.
Consolidated Condensed Statements of Income
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1996 December 31, 1995
----------------- -----------------
Corporacion
Pipasa S.A.
-----------
<S> <C> <C>
Net sales $16,939,441 16,200,382
Cost of sales 12,707,667 11,611,955
--------------- -----------------
Gross Profit 4,231,774 4,588,427
--------------- -----------------
Operating expenses
Selling 1,601,304 1,615,297
General and administrative 1,302,376 1,136,252
--------------- -----------------
Total operating expenses 2,903,680 2,751,549
--------------- -----------------
Income from Operations 1,328,094 1,836,878
Interest expense-net 547,772 740,239
Interest income (219,031) (115,987)
Exchange gains losses (gains)-net 38,356 93,370
Miscellaneous expenses (gains)-net (66,618) (16,629)
--------------- -----------------
Other expenses 300,479 700,993
--------------- -----------------
Income before income tax and
minority interest 1,027,615 1,135,885
Income taxes 140,660 98,302
--------------- -----------------
Income before minority interest 886,955 1,037,583
Minority interest 377,827 419,910
--------------- -----------------
Net income $ 509,128 617,673
Preferred Stock Dividend 76,631 71,079
--------------- -----------------
Income applicable to common stock 432,497 546,594
=============== =================
Earnings per share:
Net income per common share: $ 0.022 $ 0.035
--------------- -----------------
Weighted average number of
common shares outstanding 19,676,063 15,573,571
--------------- -----------------
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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<PAGE>
Costa Rica International, Inc.
Statements of Cash Flows
For the three months ended December 31, 1996 and 1995
Unaudited
---------
<TABLE>
<CAPTION>
Corporacion
Pipasa, S.A.
1996 1995
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 509,128 $ 617,673
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 378,395 338,363
Allowance for doubtful accounts 46,999
Loss (gain) on sale of productive assets (49,004) (11,799)
Cash provided by (used for) changes in:
Short term investment (1,764,966) (330,305)
Notes and accounts receivable (691,127) (530,678)
Due from related parties (1,750,324) (1,590,248)
Inventories (834,259) 43,537
Prepaid expenses 84,895 (68,293)
Accounts payable 300,415 467,190
Accrued expenses (46,019) (354,083)
Long term receivable - trade 107,986 43,033
----------- -----------
Net Cash Provided by Operating Activities (3,754,880) (1,328,611)
=========== ===========
CASH FLOW FROM INVESTING ACTIVITIES:
Decrease in long term investment (118,378) (73,880)
Additions to property, plant and equipment (416,144) (281,050)
Proceeds from sale of productive assets 49,004 11,799
Other assets 109,136 62,850
----------- -----------
Net Cash Provided by Investing Activities (376,382) (280,281)
=========== ===========
CASH FLOW FROM FINANCING ACTIVITIES:
Short term financing - increase in notes payable 1,161,905 531,436
Cash dividends (45,618) (64,704)
Long term financing:
New loans 562,091
Payments (323,615) (296,346)
Issue of common Stock 5,000 -
Due to related parties (1,289,578) -
Increase in Minority Interest 215,898 57,817
----------- -----------
Net Cash Provided by Financing Activities (276,008) 790,294
=========== ===========
EFFECT OF EXCHANGE RATE CHANGES ON CASH 185,329 190,205
Net Increase (Decrease) in Cash (4,221,941) (628,393)
Cash Balance at beginning of period 5,129,312 2,113,595
----------- -----------
Cash Balance at end of period $ 907,371 $ 1,485,202
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for the period for:
Interest $ 524,947 $ 702,491
=========== ===========
Income Taxes $ - $ -
=========== ===========
See accompanying notes to condensed financial statements
</TABLE>
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<PAGE>
COSTA RICA INTERNATIONAL, INC.
Notes to Financial Statements
December 31, 1996 and September 30, 1996
NOTE 1 - AGREEMENT AND PLAN OF REORGANIZATION
- ---------------------------------------------
On April 30, 1996, Corporacion Pipasa, S.A. (Pipasa) entered into an Agreement
and Plan of Reorganization with Quantum Learning Systems, Inc. (Quantum) to be
known as Costa Rica International, Inc. for the acquisition of Pipasa by
Quantum. The transaction was approved by the shareholders of CRI on August 5,
1996 and was consummated on September 30, 1996. Pursuant to this agreement,
approximately sixty percent (60%) of Pipasa is owned by CRI.
On March 5, 1997, the Company announced through a press release, that certain
reports filed with the Securities and Exchange Commission, would have to be
amended due to an overstatement in the assets reported due to an error when
applying translation and purchase accounting methods. This amount was
estimated to be between $20 million and $25 million. The error was detected
by the registrant with the assistance of its new external auditors, KPMG Peat
Marwick. The Company with the assistance of KPMG Peat Marwick corrected these
errors in its Amendment No. 1 to its Annual Report on Form 10-KSB/A filed with
the Commission on September 2, 1997.
For purposes of preparing this amendment to the Quarterly Report on
Form 10-QSB/A as of December 31, 1996, the Company has reflected balance sheet
accounts as of September 30, 1996, certified by KPMG Peat Marwick. The
balance sheets were filed with adjusted amounts in a September 2, 1997
amendment.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
PRINCIPLES OF CONSOLIDATION - The consolidated condensed financial statements
as of December 31, 1996 and September 30, 1996, include all accounts of CRI
and its currently owned subsidiary. All significant intercompany
transactions and balances were eliminated. The consolidated condensed
financial statements as of September 30, 1996 reflect Quantum's acquisition
of Pipasa from a perspective of Quantum as the accounting acquirer.
KPMG Peat Marwick has now determined that under Opinion No. 16 of the
Accounting Principal's Board, Pipasa should have been treated as the
accounting acquirer. The financial statements as of December 31, 1996 reflect
the adjustments which management currently estimates are necessary to
correct this error.
FOREIGN CURRENCY TRANSLATION - FASB 52 "Foreign Currency Translation" states
that "...if the financial statements of a foreign entity in a highly
inflationary economy are stated in any currency other than the reporting
currency, they must be remeasured into the reporting currency [using
historical rates for non-monetary assets and liabilities]... As a result
of that process, gains and losses from converting foreign currency
financial statements into reporting currency are recognized in net
income..." As of September 30, 1996, non-monetary accounts in the
audited financial statements were translated using historical rates.
However, it was determined that Costa Rica is not a highly inflationary
country, therefore, this method for translating financial statements to
U.S. Dollars does not apply. As of December 31, 1996 the financial statements
of Pipasa, have been translated into US dollars on the basis of the colon
([cent sign]) as the functional currency, as follows: assets and liabilities
denominated in dollars have been stated as nominal dollar amounts; assets and
liabilities denominated in Costa Rican Colones have been translated at the
commercial exchange rates in effect as of September 30, 1996 and December
31, 1996; stockholder's equity accounts have been translated at exchange rates
in effect when incurred or realized (historical exchange rate); income and
expenses have been translated at average exchange rates in effect during the
periods then ended. Translation adjustments have been recorded as a separate
component of stockholders' equity
-6-
<PAGE>
COSTA RICA INTERNATIONAL, INC.
Notes to Financial Statements
December 31, 1996 and September 30, 1996
and stockholders' equity was translated applying historical rates. Translation
gains and losses are accumulated in a separate account as part of the
stockholders' equity.
EARNINGS PER SHARE - Earnings per shares is calculated based on the
weighted average number of shares outstanding. Common stock equivalents
are not dilutive, therefore no change in fully diluted shares is presented.
DEPRECIATION, MAINTENANCE AND REPAIRS - Depreciation is provided by the
straight-line method. Estimated useful lives for depreciation purposes are
as follows:
Buildings 10-50 years
Machinery and equipment 5-10 years
Production equipment 5-10 years
Furniture and fixtures 3-10 years
Maintenance and repairs, which do not prolong the useful life of an asset,
are expensed as incurred.
AMORTIZATION - Amortization of intangible assets, which include copyrights
and royalties, is amortized using the straight-line method. Estimated
useful lives for amortization purposes are as follows:
Royalties 5-10 years
Copyrights 5-10 years
ESTIMATES - Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenue and expenses. Actual results could vary from the estimates
that were assumed in preparing the financial statements.
INVENTORY - Inventory is recorded at the lower of cost or market. Cost is
determined using the weighted average method for all inventories.
NEW ACCOUNTING STANDARDS - In March 1995, the Financial Accounting Standards
Board (FASB), issued Statement of Financial Accounting Standard No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" (SFAS No. 121), which becomes effective for financial
statements for fiscal years beginning after December 15, 1995. The Statement
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangible assets and goodwill related to those assets
be held and used for long-lived assets and certain identifiable assets to be
disposed of. The Company is in the process of determining the effect, if
any, of adopting this standard.
In October 1995, the FASB issued Statement of Financial Accounting Standard
No. 123, "Accounting for Stock Based Compensation" (SFAS No. 123), which
becomes effective for financial statements for fiscal years beginning after
December 15, 1995. SFAS No. 123 defines a fair value based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic
value basic method of accounting prescribed by the Accounting Principle
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
No. 25). The Company is currently accounting for the stock-based
compensation under this method.
-7-
<PAGE>
COSTA RICA INTERNATIONAL, INC.
Notes to Financial Statements
December 31, 1996 and September 30, 1996
In February 1997, the FASB issued Statement of Financial Accounting
Standard No. 128 "Earnings Per Share" (SFAS No. 128). This statement is
effective for financial statements for both interim and annual periods ending
after December 15, 1996. It requires restatement for all prior-period earnings
per share ("EPS") data presented. SFAS No. 128 establishes standards for
computing and presenting EPS and applies to entities with publicly held common
stock. This Statement replaces the presentation of primary EPS with a
presentation of basic EPS.
<PAGE>
COSTA RICA INTERNATIONAL, INC.
Notes to Financial Statements
December 31, 1996 and September 30, 1996
NOTE 3 - SUMMARY OF FINANCIAL INFORMATION
NOTES AND ACCOUNTS RECEIVABLES
- ------------------------------
Notes and account receivables consist of:
<TABLE>
<CAPTION>
<S> <C> <C>
December 1996 September 1996
------------- --------------
Trade receivable 4,416,330 3,802,023
Other 785,428 845,917
------------- --------------
5,201,758 4,647,940
------------- --------------
Allowance for doubtful accounts 143,171 212,872
------------- --------------
5,058,587 4,435,068
------------- --------------
Short term notes - trade 159,068 178,694
------------- --------------
5,217,655 4,613,762
============= ==============
INVENTORIES
Inventories, net consist of the following:
December 1996 September 1996
------------- --------------
Finished Products 2,279,133 2,176,876
In-Process 1,673,821 1,770,714
Production Poultry 1,484,590 1,452,607
Materials and Supplies 1,300,239 1,361,296
Raw Materials 518,119 786,848
In-Transit 1,051,725 19,929
------------- --------------
8,307,627 7,568,270
------------- --------------
Allowance for renewal of production
poultry inventories, net 543,330 419,473
------------- --------------
7,764,297 7,148,797
============= ==============
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
COSTA RICA INTERNATIONAL, INC.
Notes to Financial Statements
December 31, 1996 and September 30, 1996
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of:
<S> <C> <C>
December 1996 September 1996
------------- --------------
Land 2,374,489 2,444,323
Buildings and facilities 6,157,258 6,394,134
Machinery and equipment 7,004,168 6,687,936
Vehicles 1,730,468 1,685,967
Advertising signs and display 364,820 381,039
Machinery in transit 5,224 5,380
Construction in process 242,641 441,130
------------- --------------
17,879,068 18,039,909
------------- --------------
Less, Accumulated Depreciation 4,631,102 4,435,801
------------- --------------
13,247,966 13,604,108
============= ==============
</TABLE>
-9-
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant that duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COSTA RICA INTERNATIONAL, INC.
By:/s/---------------------------------
Calixto Chaves
Chairman
Dated: September 9, 1997
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 AND ACCOUNTING OFFICER
Dated: September 9, 1997 By:/s/---------------------------------
Jorge Mi. Quesada
Treasurer
SECRETARY
Dated: September 9, 1997 By:/s/----------------------------------
Monica Chaves
Secretary
-10-
