UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended March 31, 1998
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. AND SUBSIDIARY
-----------------------------------------------------
(Exact name of Company as specified in its charter)
Nevada 87-0432572
------ ----------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
95 Merrick Way, Suite 507, Coral Gables, Fl, 33134
--------------------------------------------------
(Address of principal executive offices)(Zip Code)
(305) 476-1757 or (305) 476-1758
(Company's telephone number including area code)
Indicate by check mark whether the Company (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 Company 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 Company's common stock, par value $0.001 per
share, as of May 17, 1998 was 22,256,454 shares.
<PAGE>
COSTA RICA INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
as of March 31, 1998 and September 30, 1997
Consolidated Condensed Statements of Income For the three
months and six months ended March 31, 1998 and 1997.
Consolidated Condensed Statements of Cash Flows For the six
months ended March 31, 1998 and 1997
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
Item 6. Exhibits and reports on Form 8-K
<PAGE>
COSTA RICA INTERNATIONAL INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF MARCH 31, 1998 AND SEPTEMBER 30, 1997
UNAUDITED AUDITED
MARCH 1998 SEPTEMBER 1997
---------- --------------
ASSETS
Current assets
Cash and cash equivalents $ 3,137,986 $ 1,388,290
Shot term investment 953,257 1,935,671
Notes and accounts recievable-net 9,825,298 5,818,760
Due from related parties 219,934 76,243
Inventories-net(2) 12,896,301 7,106,214
Prepaid expenses 667,231 130,088
----------- -----------
Total Current Assets 27,700,007 16,455,266
----------- -----------
Long term notes recievable - trade 149,620 176,520
Property, plant and eq. - net 26,108,756 14,350,427
Long-term investment 4,182,860 4,385,197
Other assets 2,126,399 1,187,128
Goodwill(6) 2,629,163 -
----------- -----------
Total Assets $62,896,805 $36,554,538
=========== ===========
LIABILITY STOCKHOLDERS' EQUITY
Current liabilities
Notes payable(3) $ 5,656,675 $10,126,947
Due to related party 218,275 36,870
Current and installment of long
term debt(4) 1,103,600 1,251,127
Accounts payable 10,062,410 5,191,923
Accrued expenses 2,232,753 2,137,237
----------- -----------
Total Current Liabilities 19,273,713 18,744,104
----------- -----------
Long-term debt, excluding current
installments(4) 23,657,057 5,252,149
Due to stockholders 684,544 20,489
Deferred tax liability 2,079,242
----------- -----------
Total liabilities 45,694,556 24,016,742
----------- -----------
Minority itnerest 6,821,894 5,248,362
Stockholders' Equity
Common Stock $ 22,257 $ 19,810
Preferred Stock - 2,216,072 2,216,072
Additional paid-in capital 11,972,556 9,375,002
Foreign currency translation adjustment (5,153,396) (4,675,549)
Retained earnings 3,255,709 2,122,542
----------- -----------
12,313,198 9,057,877
Less:
Due from stockholders (1,084,876) (920,476)
Treasury stock at cost (847,967) (847,967)
----------- -----------
Total Stockholders' Equity 10,380,355 7,289,434
----------- -----------
Total Liabilities and
Stockholders' Equity $62,896,805 $36,554,538
=========== ===========
See accompanying notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
COSTA RICA INTERNATIONAL
CONSOLIDATED CCONDENSED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1998 MARCH 31, 1997
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $22,607,527 $15,704,188 $43,433,554 $32,643,629
Cost of sales 17,082,899 11,788,398 32,692,997 24,496,065
----------- ----------- ----------- -----------
5,524,628 3,915,790 10,740,557 8,147,564
----------- ----------- ----------- -----------
Operating expenses
Selling 2,453,376 1,628,158 4,312,787 3,229,461
General and administrative 1,772,183 1,399,574 3,239,176 2,701,950
Goodwill amortization 22,094 - 22,094 -
----------- ----------- ----------- -----------
Total operating expenses 4,247,653 3,027,732 7,574,057 5,931,411
----------- ----------- ----------- -----------
Operating Income 1,276,975 888,058 3,166,500 2,216,153
Interest expense 549,813 556,468 1,297,015 1,104,240
Interest income (181,081) (238,587) (423,840) (457,618)
Exchange losses(gains)-net 218,948 21,166 267,711 59,522
Miscellaneous-net (421,096) (165,160) (490,261) (231,777)
----------- ----------- ----------- -----------
Other expenses, net 166,584 173,887 650,625 474,367
Income before income taxes and
minority interest 1,110,391 714,171 2,515,875 1,741,786
Income taxes 160,040 96,852 408,236 237,512
----------- ----------- ----------- -----------
Income before minority interest 950,351 617,319 2,107,639 1,504,274
Minority interest 434,709 304,216 931,305 682,044
----------- ----------- ----------- -----------
Net income $ 515,642 $ 313,103 $ 1,176,334 $ 822,230
Preferred Stock Dividend 37,295 57,051 72,664 133,682
----------- ----------- ----------- -----------
Net income applicable to
common stock 478,347 256,052 1,103,670 688,548
=========== =========== =========== ===========
BASIC EPS(5)
Weighted average number of
common shares outstanding 20,625,082 19,809,396 20,217,239 19,742,729
Earnings per share 0.023 0.013 0.055 0.035
=========== =========== =========== ===========
DILUTED EPS(5)
Increment shares from
assumed conversions of Warrants 77,867 180,994 73,664 177,742
----------- ----------- ----------- -----------
Adjusted Weighted average shares 20,702,949 19,990,390 20,290,903 19,920,471
Diluted earnings per share 0.023 0.013 0.054 0.035
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
COSTA RICA INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,176,334 $ 822,230
Adjustments to reconcile net income to
net cash provided by operation activities,
net of effect of acquisition of a subsidiary
(As de Oros)
Depreciation and amortization 870,708 706,041
Allowance for doubtful accounts 91,500 47,051
Allowance for production poultry 558,053 482,473
Amortization of goodwill 22,094 -
Gain on sale of productive assets (62,662) (60,300)
Deferred income tax benefit (17,473) -
Minority interest net income 931,305 682,044
Cash provided by (used for) changes in:
Notes and accounts recievable (1,373,591) (3,288,398)
Due from related party (1,672,343) (374,914)
Inventories (1,886,145) (720,609)
Prepaid expenses 577,238 (109,863)
Accounts payable 445,061 393,098
Accrued Expenses (408,118) 126,779
Long term receivable - trade 33,216 (71,054)
----------- -----------
NET CASH USED FOR OPERATING ACTIVITIES (714,823) (1,365,422)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITES:
Short-term investment 914,191 (1,762,328)
Initial cash balance from subsidiary acquired 1,147,472 -
Increase in long term investment (245,000) (125,622)
Additions to property, plant and equipment (982,067) (404,732)
Proceeds from sale of productive assets 270,202 60,300
Other assets (631,767) (195,902)
----------- -----------
NET CASH PROVIED BY (USED FOR) INVESTING ACTIVITIES 473,031 (2,428,284)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Short-term financing increase (decrease)
in notes payable (4,027,084) 1,495,144
Cash dividends - RICA (43,168) (79,578)
Cash dividends - Minority interest (29,497) (54,104)
Long term financing:
New loans 9,799,254 18,307
Payments (3,644,343) (556,899)
Issuance of common stock 5,000
Due to related party (35,999) (1,271,542)
Due from shareholders (211,757) -
----------- -----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 1,807,406 (443,672)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH 184,082 (155,166)
Net Increase (Decrease) in Cash 1,749,696 (4,392,544)
Cash Balance at beginning of period 1,388,290 5,129,312
----------- -----------
Cash Balance at endof period $ 3,137,986 $ 736,768
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for the period for
Interest $ 1,047,320 $ 1,126,744
=========== ===========
Income Taxes $ 64,354 $ 55,172
=========== ===========
See accompanying notes to consolidated condensed financial statements.
<PAGE>
COSTA RICA INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Accounting Policies
Management is responsible for preparing Costa Rica International, Inc.'s ("the
Company") financial statements and related information that appears in this
report. Management believes that the financial statements fairly reflect the
form and substance of transactions and reasonably present the Company's
financial condition and results of operations in conformity with Generally
Accepted Accounting Principles in the United States.
Management has included in the Company's financial statements, amounts that
are based on estimates and judgements, which it believes are reasonable under
the circumstances. The Company maintains a system of internal accounting
policies, procedures and controls intended to provide reasonable assurance,
at appropriate cost, that transactions are executed in accordance with
Company's authorization and are properly recorded and reported on the financial
statements and that assets are adequately safeguarded.
Although Management believes that the disclosures are adequate to make the
information presented not misleading, these consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on Form
10-KSB (as amended on May 8, 1998 on Form 10-KSB/A) for the fiscal year ended
September 30, 1997.
2. Inventories
Inventories are stated at the lower of market cost and are determined using the
weighted-average method, except for inventories in transit which are valued at
specific cost. Inventories are as follows:
MARCH 31,1998 SEP 30, 1997
------------- ------------
Finished products $ 1,688,716 $ 686,423
Poultry 2,542,484 2,269,993
Production poultry 4,018,067 1,708,071
Materials and Supplies 1,755,057 1,134,115
Raw materials 2,342,412 1,639,527
In transit 1,296,736 131,188
----------- ----------
13,643,472 7,569,317
----------- ----------
Allowance for Renewal of production poultry (733,586) (463,103)
Allowance for obsolescence (13,585) -
----------- ----------
$12,896,301 7,106,214
=========== ==========
<PAGE>
3. Short-Term Notes Payable
Short-Term Notes payable consist of the following:
MARCH 31, 1998 SEP 30, 1997
-------------- ------------
Loans payable $ 1,271,120 $ 6,188,036
Bank overdrafts 1,552,924 371,193
Commercial paper 2,832,631 3,562,721
Other - 4,997
---------- -----------
$ 5,656,675 $10,126,947
========== ===========
4. Long-term Debt
Long-term debt is as follows:
MARCH 31, 1998 SEP 30, 1997
-------------- ------------
Bank loans $24,517,494 $ 5,395,152
Commercial paper-unsecured 44,543 46,698
Other 198,620 1,061,426
----------- -----------
$24,760,657 $ 6,503,276
Less current installments 1,103,600 1,251,127
----------- -----------
$23,657,057 $ 5,252,149
=========== ===========
The Company has completed a private placement (the "Private Placement") of US
$20 million in notes payable bearing interest at 11.71% per annum, comprised of
US $8 million in Series A Senior Notes and US $12 million in Series B Senior
Notes, all due upon maturity on January 15, 2005. Among others, the Private
Placement includes the following terms:
-- The Series A Senior Notes and the Series B Senior Notes (collectively,
the "Notes") shall be payable annually in five consecutive principal
installments amounting to US $4,000,000 each (from the aggregate
amount). The Notes have a two-year grace period beginning on January
15, 2001.
-- The Company has guaranteed there will be no significant organizational
changes and that all federal and local laws and regulations will be
complied with.
-- Financial and business information for the Company and its subsidiaries
will be remitted periodically, as stipulated in the agreement.
-- The Company is committed to comply with several financial and
operational covenants, as well as to review the relevant terms included
in the agreement to prevent the existence of default or event of
default.
<PAGE>
5. Earnings per Share
Earnings per share is computed on the basis of the weighted-average number of
common shares outstanding plus the effect of outstanding warrants using the
treasury stock method according to SFAS No. 128. Earnings per share pertaining
to 1997 results of operations, have been restated to comply with this standard.
Following is a reconciliation of the weighted average number of shares actually
outstanding with the number of shares used in the computations of fully diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------- ------------------------------------
MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1998 MARCH 31, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Weighted average number of common shares
used in basic EPS 20,625,082 19,809,396 20,217239 19,742,729
Effect of dilutive securities:
Warrants 77,867 180,994 73,664 177,742
Weighted average number of common shares
and dilutive warrants used
in diluted EPS 20,702,949 19,990,390 20,290,903 19,920,471
</TABLE>
6. Acquisition of As de Oros
On February, 26, 1998, the Company acquired 51% of Corporacion As de Oros, S.A.
and subsidiaries ("As de Oros") of As de Oros' outstanding voting shares or
56.38% of its total common stock in a business combination accounted for as a
purchase method. The excess purchase price over the fair market value of the net
assets acquired is being amortized on the straight-line basis over a ten-year
period.
7. New Accounting Pronouncements
DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE. In February 1997, the
Financial Accounting Standards Board issued SFAS No.129, Disclosure about
Capital Structure, which requires companies to present additional information
about securities, preferred stock, and redeemable stock and is effective for
fiscal years ending after December 15, 1997.
REPORTING COMPREHENSIVE INCOME. In June 1997, the Financial Accounting Standards
Board issued SFAS No.130, Reporting Comprehensive Income. SFAS No.130
establishes standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements and is
effective for fiscal years
<PAGE>
beginning after December 15, 1997. Management of the Company believes that
adoption of SFAS No.130 will result primarily in including the difference
between net income and the annual changes in cumulative translation adjustment
in the statement of comprehensive income.
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. In June
1997, the Financial Accounting Standards Board issued SFAS No.131, Disclosures
about Segments of an Enterprise and Related Information. SFAS No.131 requires
that public businesses report certain information in the financial statements
about their products, services, geographic areas in which they operate, and
their major customers, related to the operating segments of a company. The
statement is effective for fiscal years beginning after December 15, 1997.
Management of the Company does not expect that adoption of SFAS No.131 will have
a material impact on the Company's financial position, results of operations or
liquidity.
DEVELOPING SOFTWARE FOR INTERNAL USE. In March 1998, the AICPA, issued SOP 98-1.
This SOP established accounting standards when a company is developing or
obtaining software which is for internal-use purposes. Management of the Company
does not expect that adoption of SFAS No.131 will have a material impact on the
Company's financial position, results of operations or liquidity.
8. Pro Forma Financial Information
Following is proforma financial information which presents results of operations
for the year ending September 1997, and the six months ended March 31, 1998, as
if the acquisition of As de Oros, had taken place on October 1, 1996.
FOR THE SEMESTER FOR THE YEAR
ENDED ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997
-------------- ------------------
Revenues $ 63,075,570 116,613,665
Income (loss) before
extraordinary items 755,190 (2,839,628)
Net Income 755,190 (2,839,628)
BASIC EPS
Weighted average
number of common
shares outstanding 20,217,239 19,776,063
Earnings (losses) per share $ 0,037 $ (0,144)
=============== =================
DILUTED EPS
Incremental shares from
assumed conversions of
warrants 73,664 141,163
Adjusted weighted average
shares 20,290,903 19,917,226
Diluted earnings (losses)
per share $ 0,037 $ (0,143)
=============== =================
9. Reclassifications
Certain accounts in the March 31, 1997 Consolidated Condensed statement of Cash
Flows, have been reclassified to conform to the March 31, 1998 presentation.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This management discussion and analysis of financial condition and results of
operations should be read in conjunction with the Company's report on Form
10-KSB dated December 31, 1997 and amendended on May 8, 1998 on Form 10-KSB/A.
The most significant events that took place during the second quarter of fiscal
year 1998 for the Company were (i) the negotiation to refinance part of its
subsidiaries' short-term debt, with the private placement of US $20 million of
the Company's 11.71% Series A Senior Notes and Series B Senior Notes, both due
January 15, 2005 (the "Offering"), placed by Citicorp Securities, Inc., and (ii)
the acquisition of a new subsidiary, Corporacion As de Oros, S.A. and its
subsidiaries ("As de Oros"), a Costa Rican poultry and animal feed producer with
a significant share of the domestic and commercial animal feed market in Costa
Rica.
As perhaps the most significant event in the second quarter of 1998, the Company
reached an agreement (the "Stock Purchase Agreement") to acquire 56.38% of the
total outstanding common stock of As de Oros and its wholly-owned subsidiaries,
Restaurantes As, S.A. and Corasa Estudiantes S.A., from Comercial Angui, S.A.
("Angui"), a Costa Rican privately-owned company and the majority shareholder of
As de Oros and subsidiaries, for US $2.4 million, in cash upon the maturity of a
promissory note due January 2000 and US $2.6 million in Company stock,
represented by 2,447,058 shares.
As de Oros is the second largest poultry producer in Costa Rica, with total
annual sales of $48,445,183, and assets totaling $15,204,683 as of September 30,
1997.
A. As de Oros' Overview
As de Oros was first founded in 1954 by Otoniel Aguilar. In 1970, Mr. Otoniel
Aguilar focused As de Oros' operations towards the animal feed business and
developed its poultry activities a few years thereafter. As de Oros has
subsequently become the second largest poultry company in Costa Rica, (second to
the Company's principal subsidiary Corporacion Pipasa, S.A. ("Pipasa"))
generating approximately US $48 million in sales per year. Like Pipasa, As de
Oros has businesses in chicken production, derivatives, meat products and animal
concentrates. It sells over 80 different chicken and sausage products,
commercial eggs and 70 different formulas for poultry, hogs and cattle. As de
Oros has been in the poultry business segments for more than 35 years and has an
approximately 19% share of the Costa Rican chicken production market. As de
Oros' strength is in animal feed concentrates, where it has approximately 21%
market share of the business. As de Oros also operates one of the largest fast
food chains in the country, "Restaurants As," which is comprised of 29
restaurants operating in the metropolitan area. As de Oros currently employs
approximately 1,300 people. It has a distribution network of more than 80
vehicles, and owns 12 urban and rural outlets.
<PAGE>
B. Main Business Segments and Markets
The animal feed business, including processed feed and concentrates, represents
approximately 40% of total 1997 sales (concentrates are used to feed birds, pigs
and horses, while processed feed are for dogs and shrimp). In terms of
profitability, the gross profit margin in 1997 for concentrates, extruders and
hog feed as a percentage of sales for each of the segments was 15.9%, 20.9% and
36.2%, respectively. The Company expects to increase As de Oros' gross margins.
Currently, As de Oros has an approximately 21% share of the Costa Rican animal
feed business. This segment represents the bulk of As de Oros activities. The
marketing and administrative costs associated with the animal feed business are
considerably lower than those associated with selling broiler chicken and meat
by-products. This segment is less price-sensitive than the chicken meat market,
as sales are driven largely by quality of the meat. Quality of the feed is what
ultimately determines the size and weight of the hog, chicken or cow. Prices in
this segment are heavily influenced by the market leader, Pipasa.
The broiler chicken segment represents approximately 40% of As de Oros' total
sales and roughly 21% of gross margin as a percent of chicken sales.
As de Oros defines its target market for broiler chicken by areas within Costa
Rica: urban areas and rural areas. Urban areas are found the country's central
plateau region and customers in this market have certain characteristics and
buying patterns. Distribution in urban areas tends to be daily, compared to
distribution in rural areas. The chicken is sold through the typical conduits
like supermarkets, retail traders and restaurants, including "Restaurants As."
Management is analyzing the possibility of selling Restaurantes As. As of the
date of this Report, a selling price have not been established by the Company.
If such sale takes place, purchase accounting could change.
OTHER MATTERS
The Company completed a private placement of US $20 million 11.71% notes,
comprised of US $8 million of Series A Senior Notes (the "Series A Notes"), and
U.S. $ 12 million of Series B Senior Notes ( the "Series B Notes" ), both due
January 15, 2005. The Series A Notes have been used to partially refinance the
outstanding debt of the Company's subsidiary Pipasa. The Series B Notes have
been used to refinance substantially all of the outstanding debt of As de Oros.
The refinancing of the debt of the subsidiaries improves the financial position
of Pipasa and As de Oros.
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE
THREE MONTHS ENDED MARCH 31,1997
For matters of comparison, results of operations are presented in an separate
format to show the companies results without the effect of the As de Oros
acquisition. Consolidated results are presented in a separate column of each
table all through the Management Discussion and Analysis section.
The following tables present information related to the Company's operation:
COSTA RICA INTERNATIONAL, INC.
THREE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997 % INCREASE
-------------- -------------- ----------
Net Sales $18,956,973 $15,704,188 20.71%
Operational Profit 1,088,899 888,058 22.62%
COSTA RICA INTERNATIONAL, INC.
THREE MONTHS ENDED
(With As de Oros)
MARCH 31, 1998 MARCH 31, 1997 % INCREASE
-------------- -------------- ----------
Net Sales $22,607,527 $15,704,188 43.96%
Operational Profit $1,254,881 888,058 41.30%
The following table presents certain items as a percentage of net sales for the
period indicated:
COSTA RICA INTERNATIONAL, INC.
THREE MONTHS ENDED
(With As de Oros)
MARCH 31, 1998 MARCH 31, 1997 INCREASE/(DECREASE)
-------------- -------------- -------------------
Net Sales 100% 100%
Cost of Sales 75.55% 75.07% 0.48%
Gross Profit 24.45% 24.93% -0.48%
Sales Expenses 10.85% 10.37% 0.57%
General and Adm. 8.03% 8.91% -0.85%
Net income before
minority interest 4.10% 3.93% 0.26%
<PAGE>
NET SALES
General. Net sales generated by the Company's operation for the quarters ended
March 31, 1998 and 1997 were $22,607,527 and $15,704,188 respectively, an
increase of $6,903,339 or 43.96%. After eliminating the effect of the As de Oros
acquisition, sales by segment are detailed as follows:
COSTA RICA INTERNATIONAL, INC.
THREE MONTHS ENDED
- --------------------------------------------------------------------------
SEGMENT MAR 31,1998 MAR 31,1997 % INCREASE/(DECREASE)
- --------------------------------------------------------------------------
Broiler Chicken $12,377,771 10,054,398 23.11%
By- Products 2,234,050 1,761,756 26.81%
Animal Feed 1,459,810 1,511,738 -3.44%
Exports 597,282 503,014 18.74%
Others 2,288,060 1,873,282 22.14%
- --------------------------------------------------------------------------
Total $18,956,973 $15,704,188 20.71%
- --------------------------------------------------------------------------
COSTA RICA INTERNATIONAL, INC.
THREE MONTHS ENDED
(With As de Oros)
- ------------------------------------------------------------------------
SEGMENT MAR 31,1998 MAR 31,1997 % INCREASE
- ------------------------------------------------------------------------
Broiler Chicken $13,584,688 10,054,398 35.11%
By- Products 2,340,017 1,761,756 32.82%
Animal Feed 3,064,764 1,511,738 102.73%
Exports 591,074 503,014 17.51%
Restaurants 718,319 0.00 100%
Others 2,308,665 1,873,282 23.24%
- ------------------------------------------------------------------------
Total $22,607,527 $15,704,188 43.96%
- ------------------------------------------------------------------------
Broiler chicken. Sales of broiler chicken were $13,584,688 and $10,054,398
during the three months ended March 31, 1998 and 1997, respectively. The
increase of 35.11% primarily is due to a 40.47% increase in tonnage which was
offset by a 5.36% net effect of discounts to special customers and exchange rate
variations.
By-products are the most profitable products of the Company. Total sales for
this segment were of $2,340,017 and $1,761,756 for the three months ended March
31, 1998 and 1997, respectively. The increase of $578,261 or 32.82% is due to a
13.74% increase in tonnage and the remaining 19.09% is due to price increases
among the products within this segment (patties, sausages, further-processed
products, and processing done for others) and sales mix.
<PAGE>
Animal Feed. Sales for commercial animal feed were $3,064,764 and $1,511,738 for
the quarters ended March 31, 1998 and 1997, represents an increase of $1,553,026
or 102.73%. Importantly, As de Oros' core business is among this segment, and
without the acquisition, tonnage would have increased only 0.33%. Total sales
increase corresponds to a 113.59% increase in tonnage, offset by price
adjustments due to exchange rate variations and sales mix.
Exports. The Company's exports were $591,074 and $503,014 during the quarters
ended March 31, 1998 and 1997, respectively, an increase of $88,060 or 17.51%.
This increase in exports was due to the combined result major exports of pet
food and chicken by-products. Broiler chicken tonnage decreased during the three
months ended March 31, 1998, because this was the same period that the
extraordinary export to Honduras occurred in fiscal year 1997. Nevertheless, the
introduction of the Company's exports to El Salvador has strengthen sales and
met expectations. Management intends to continue emphasizing exports to the
Central American area, with its traditional export products and with products
from the recently acquired subsidiary.
Restaurants. Sales were of $718,319 for the one month ended to March 31, 1998
due to the acquisition of As de Oros.
Others. Sales of "Others", which include animal feed and baby chicks to
integrated producers, and commercial eggs, raw materials and baby chicks to
third parties, increased 23.24% for the three months ended March 31, 1998
compared to the same period of fiscal year 1997 .
The following table displays the Company's sales distribution, for the quarters
ended March 31, 1998 and 1997:
COSTA RICA INTERNATIONAL, INC.
THREE MONTHS ENDED
- ------------------------------------------------------------------------
SEGMENT MARCH 31, 1998 MARCH 31, 1997
- ------------------------------------------------------------------------
Broiler Chicken 60.09% 64.02%
By- Products 10.35% 11.22%
Animal Feed 13.56% 9.61%
Exports 2.61% 3.20%
Restaurants 3.18% 0.00%
Other 10.21% 11.93%
- ------------------------------------------------------------------------
Total 100.00% 100.00%
- ------------------------------------------------------------------------
Cost of sales:
General. Cost of sales amounted to $17,082,899 and $11,788,398 for the quarters
ended March 31, 1998 and 1997 respectively, an increase of 44.91%. This increase
in cost of sales was due mainly to volume increase, the acquisition of As de
Oros and the combination of factors such as the adaptation process of the
reproduction hen breed and imports of fertile eggs, offset by the effect of the
lower cost of raw materials, such as imported grains and the advantage of higher
efficiency due to increase in volume. As a percentage of sales, cost of sales
was 75.56% for the three months ended March 31, 1998 compared to 75.07% for the
three months ended March 31, 1997, a net increase of 0.49%.
<PAGE>
During the three months ended March 31, 1998, the weather phenomenon "El Nino"
had a similar effect on the technical yields as during the three months ended
December 31, 1997. High temperatures were offset by temperature regulating
devices, but there were still high mortality rates due to this weather
phenomenon, combined with mortality due to pathologies. The production divisions
mostly affected were incubation and reproduction. As of the date of this filing,
temperatures have decreased and the rainy season has started in Costa Rica. This
is expected to improve the mortality yields and average weight. As disclosed in
previous reports files with the United States Securities and Exchange Commission
(the "SEC"), the Company has taken measures to mitigate the pervasive effect of
these high temperatures and pathologies but cannot assure that this weather
phenomenon will not affect other important technical yields such as weight,
conversion (pounds of feed per ponds of meat) or pathologies. The Company has
continued to import fertile eggs and chicken parts throughout the analyzed
period to meet uncovered demand. The cost of these imports is higher than
internal production. The Company intends to continue with egg imports until the
reproduction division is self-sufficient. Management expects to reach self-
sufficiency during the month of September 1998, when a substantial number of
reproduction hens are at hatching age.
The following factors have affected total cost of sales as a percentage of net
sales:
/bullet/ Average prices for imported soybean increased 8% during the first
quarter of fiscal 1998 when compared to average prices in the same
period of fiscal 1997
/bullet/ Inventory reprocess
/bullet/ Low fertility in imported eggs
/bullet/ Return to the high energetic diet formulation, with the purpose of
weight increase during January 1998
Gross profit:
Gross profit for the three months ended March 31, 1998 and 1997 was $5,524,628
and $3,915,790, respectively, an increase of $1,608,838 or 41.08%. As a
percentage of net sales, gross profit was 24.44% and 24.93% for the second
quarters of fiscal years 1998 and 1997, respectively, due to the issues
discussed above. The following table shows gross profit as a percentage of net
sales of each segment for the quarters ended March 31, 1998 and 1997:
<PAGE>
COSTA RICA INTERNATIONAL, INC.
THREE MONTHS ENDED
------------------------------------------------------
SEGMENT MARCH 31, 1998 MARCH 31, 1997 INCREASE/(DECREASE)
------------------------------------------------------
Animal feed 21.84% 21.84% 0.00%
Chicken By Products 42.44% 18.18% 24.26%
Exports 32.19% 28.53% 3.66%
Others 4.08% -0.33% 4.42%
Restaurants 54.16% -- 100%
Broiler Chicken 23.49% 28.15% -4.66%
-------------------------------------------------------
General and administrative expenses:
General and administrative expenses increased 26.52% during the three months
ended March 31, 1998, compared to the three months ended March 31, 1997. As a
percentage of net sales, this item decreased from 8.03% during the second
quarter of fiscal year 1997 to 7.82% during the same period of fiscal year
1998. The significant sales increase, due to the acquisition of a new
subsidiary, and the Company's policy to try to reach efficiencies among its
subsidiaries, has benefited the Company with this 0.21% decrease of
general and administrative expenses as a percentage of net sales.
Sales expenses
Sales expenses increased 50.68% during the first quarter of fiscal year 1998,
compared with the same period of fiscal year 1997. This increase is a result of
the incorporation of all selling expenses of As de Oros. Analysis should be made
on the percentage of sales expense over net sales, which was stable and only
varied from 10.37% to 10.85% in the quarters ended March 31, 1997 and 1998,
respectively.
Other income/expenses (net)
Other income and expenses (net) decreased by $7,303, or -4.20% when comparing
the three months ended March 31, 1998 to the same period of fiscal year 1997.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1998
COMPARED TO THE SIX MONTHS ENDED MARCH 31, 1997
Total net sales for the six months ended March 31, 1998 increased 33.05% when
compared to the same period in fiscal year 1997. The following tables present
information related to the Company's operation. For purpose of comparison this
table does not include the recently acquired subsidiary, As de Oros:
<PAGE>
COSTA RICA INTERNATIONAL, INC.
SIX MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997 % INCREASE
-------------- --------------- ----------
Net Sales $39,783,001 32,643,629 21.87%
Operational Profit 2,976,709 2,216,153 34.32%
COSTA RICA INTERNATIONAL, INC.,
(With As de Oros)
SIX MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997 % INCREASE
-------------- -------------- ----------
Net Sales $43,433,554 32,643,629 33.05%
Operational Profit
3,144,406 2,216,153 41.88%
The following table presents certain items as a percentage of net sales for the
period indicated:
COSTA RICA INTERNATIONAL, INC.
SIX MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
Net Sales 100% 100%
Cost of Sales 75.27% 75.04%
Gross Profit 24.73% 24.96%
Sales Expenses 9.93% 9.89%
General/Administrative 7.56% 8.28%
Net income before minority interest 4.80% 4.61%
NET SALES:
General. Net sales generated by the Company's operation for the six months ended
March 31, 1998 and 1997 were $43,433,554 and $32,643,629 respectively, an
increase of $10,789,925 or 33.05%. The following table displays sales amounts by
segment for each quarter:
COSTA RICA INTERNATIONAL, INC.
SIX MONTHS ENDED
- --------------------------------------------------------------
SEGMENT MARCH 31,1998 MARCH 31, 1997 % INCREASE
- --------------------------------------------------------------
Broiler Chicken 26,782,395 20,899,650 28.15%
By- Products 4,928,035 3,662,087 34.57%
Animal Feed 4,749,436 3,142,387 51.14%
Exports 1,129,064 1,045,593 7.98%
Restaurants 729,762 0 100%
Others 5,114,862 3,893,912 31.36%
- --------------------------------------------------------------
Total $43,433,554 $32,643,629 33.05%
- --------------------------------------------------------------
<PAGE>
Broiler chicken. Sales of broiler chicken increased 28.15% for the six months
ended March 31, 1998 compared to the six months ended March 31, 1997. The
increase is primarily due to a 29.62% increase in tonnage offset by a -1.47%
decrease in prices. Excluding As de Oros sales, tonnage increased 22.81%.
By-products improved profitability during this period. Total sales for this
segment increased 34.57% during the six months ended March 31, 1998 compared to
the same period of 1997. The increase of $1,265,948 is due to a 14.37% increase
in tonnage and the remaining 20.20% is due to price increases among the products
within this segment (patties, sausages, further-processed products, and
processing done for others) and sales mix. Of the tonnage increase, 2.61%
results from the As de Oros acquisition.
Animal Feed. Sales for commercial animal feed increased 51.14% during the six
months ended March 31, 1998 compared to the same period of fiscal year 1997.
This sales increase corresponds to a 60.13% increase in tonnage, offset by a
8.99% decrease due to exchange rate variations. Importantly, commercial animal
feed is As de Oros' core business and has an important market share among the
Costa Rican market. Without this new subsidiary, animal feed tonnage increased
4.59%.
Exports. The company's exports increased 7.98% during the six months ended March
31, 1998 compared to the same period of fiscal year 1997. This increase in
exports was due to the combined result of a 2.98% increase in tonnage and a 5%
price increase.
Others. Sales of "Others", which include animal feed and baby chicks to
integrated producers, and commercial eggs, raw materials and baby chicks to
third parties, increased 31.36% during the six months ended March 31, 1998
compared to the same period in fiscal year 1997.
The following table displays the Company's sales distribution, for the six
months ended March 31, 1998 and 1997:
COSTA RICA INTERNATIONAL, INC.
SALES DISTRIBUTION
SIX MONTHS ENDED
- --------------------------------------------------------------------------------
SEGMENT MARCH 31, 1998 MARCH 31,1997 NET INCREASE/(DECREASE)
- --------------------------------------------------------------------------------
Broiler Chicken 61.66% 64.02% -2.36%
By- Products 11.35% 11.22% 0.13%
Animal Feed 10.93% 9.63% 1.30%
Restaurants 1.68% 0.00% 1.68%
Exports 2.60% 3.20% -0.60%
Other 11.78% 11.93% -0.15%
- --------------------------------------------------------------------------------
<PAGE>
Note: In April of 1997, the Company's then only subsidiary, Pipasa, completed
the acquisition of the poultry division and animal feed business of
Coopemontecillos R.L. for approximately $2,700,000. Pipasa acquired the assets,
including plant, equipment, vehicle fleet, inventory, hens and raw materials and
some accounts receivable. Coopemontecillos had a 6% market share of the Costa
Rican poultry market, but this was not a significant factor in the animal feed
market.
COST OF SALES:
General. Cost of sales was $32,692,997 and $24,496,065 for the six months ended
March 31, 1998 and 1997, respectively, an increase of 33.46%. This increase in
the cost of sales was due primarily to a 46.39% increase in tonnage offset by
the effect of lower cost of raw materials, such as imported grains and the
advantage of higher efficiency due to increase in volume. As a percentage of
sales, cost of sales was 75.27% for the six months ended March 31, 1998 compared
to 75.04% in the same period of fiscal year 1997, for a net decrease of 0.22%.
The "El Nino" weather phenomenon was not as harsh on the technical yields as it
was during the six months ended March 31, 1997. Nevertheless, weather
forecasters predict high temperatures during the months of March to September
1998, which may again negatively affect the incubation, reproduction and growing
yields of the Company. As disclosed in previous reports filed with the SEC, the
Company's subsidiaries have taken measures to mitigate the pervasive effect of
these high temperatures but cannot assure that this weather phenomenon will not
affect other important technical yields such as weight, conversion (pounds of
feed per ponds of meat) or pathologies. The Company has continued to import
fertile eggs throughout the analyzed period and intends to continue with these
imports until the reproduction division is self-sufficient. Management expects
to reach self- sufficiency during the month of September 1998, when a
substantial number of reproduction hens reach hatching age.
The following factors contributed in maintaining cost of sales as a percentage
of net sales at a stable level:
/bullet/ Average prices for imported soybean meal decreased 8% during the first
half of fiscal year 1998 when compared to average prices in the same
period of fiscal year 1997.
/bullet/ Sales price increased in November 1997 and January 1998, in the by-
product segment.
/bullet/ Whole and chicken parts imports
/bullet/ Low fertility in imported eggs
/bullet/ Higher volume, with the consequent advantage of higher capacity
utilization
<PAGE>
/bullet/ Return to the standard diet formulation in November 1998. However, in
January 1998, Management decided to go switch to a high-energy diet
formulation to increase weight.
The following table presents cost of sales information by segment, with the
correspondent increase percentage, impact of volume and unit cost variations.
COSTA RICA INTERNATIONAL, INC.
SIX MONTHS ENDED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SEGMENT MAR 31, 1998 MAR 31, 1997 INCREASE VOLUME VARIATION HIGHER (LOWER) COST
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Animal feed $3,741,025 $2,651,396 41.10% 60.13% -19.04%
By Products 2,662,666 2,261,079 17.76% 14.37% 3.39%
Exports 787,867 752,044 4.76% 2.98% 1.78%
Others 4,871,454 3,760,744 29.53% 54.93% -25.40%
Broiler Chicken 20,295,168 15,070,802 34.67% 29.62% 5.04%
Restaurant 334,817 - -- 100.00% 0.00%
- ---------------------------------------------------------------------------------------------------
Total $32,692,997 24,496,065 33.46% 46.40% -12.94%
</TABLE>
Gross profit:
Gross profit for the six months ended March 31, 1998 and 1997 was $10,740,557
and $8,147,564, respectively, an increase of $2,592,994 or 31.86%. As a
percentage of net sales, gross profit was 24.73% and 24.96%, respectively for
the first half of fiscal year 1998 and 1997, due to the issues discussed above.
The following table shows gross profit for each segment for the six months ended
March 31, 1998 and 1997:
COSTA RICA INTERNATIONAL, INC.
SIX MONTHS ENDED
- --------------------------------------------------------------------------
SEGMENT MAR 31, 1998 MAR 31, 1997 INCREASE/(DECREASE)
- --------------------------------------------------------------------------
Animal feed 21.23% 15.62% 5.61%
Chicken By Products 45.97% 38.26% 7.71%
Exports 30.22% 28.07% 2.15%
Others 4.76% 3.42% 1.34%
Broiler Chicken 24.22% 27.89% -3.67%
Restaurants 54.12% -- -54.12%
- --------------------------------------------------------------------------
GROSS PROFIT 24.73% 24.96% -0.23%
- --------------------------------------------------------------------------
General and administrative expenses:
General and administrative expenses increased 19.88% for the six months ended
March 31, 1998 compared to the same period of fiscal year 1997. As a percentage
of net sales, this item decreased from 8.28% during the first half of fiscal
year 1997 to 7.46% during the same period in fiscal year 1998.
<PAGE>
Sales expenses:
Sales expenses increased by $1,083,326 or 33.54% during the first half of fiscal
year 1998, compared with the same period of fiscal year 1997. As a percentage of
net sales, sales expenses increased from 9.89% during the first half of fiscal
year 1997 to 9.93% during the same period of fiscal year 1998.
Other income/expenses (net):
Other income and expenses (net) increased by $176,258 or 37.16% when comparing
the six months ended March 31, 1998 and 1997. The Company's interest expense
increased by 17.46% when compared to the same period of fiscal year 1997,
interest income decreased 7.38% respectively, and exchange rate losses (gains)
increased 349.77% when compared to the first half of fiscal year 1997. Exchange
rate losses increased as a result of the debt restructuring.
FINANCIAL CONDITION
Liquidity and capital resources.
The Company's cash and cash equivalents totaled $3,137,986 as of March 31, 1998
and $1,388,290 at the end of fiscal year 1997, an increase of $1,749,696.
Operating activities:
For the six months ended March 31, 1998 and 1997 net cash used by operating
activities was ($714,823) and ($1,365,422), respectively. These variations are
explained mainly by a combined increase in notes and accounts receivable, due
from related party and inventories. Accounts receivables increased because of
the net sales increment in both subsidiaries. Inventories increased principally
due to an increment in raw materials and in process inventories, that were
increased this period to reach safe inventory levels.
Investing activities:
Cash used in investing activities was $473,031 and ($2,428,284) for the six
months ended March 31, 1998 and 1997, respectively. The variation in investing
activities during the six months ended March 31, 1998 compared to the same
period of fiscal year 1997 is explained mainly by a significant increase in
short-term investments during the first half of fiscal year 1997. The Company
invested $982,067 and $404,732 in property, plant and equipment during the first
half of fiscal year 1998 and fiscal year 1997 respectively. Among the most
significant investment were assets used for the normal course of operation.
Additionally, the Company acquired 56.38% of common stock of As de Oros. This
acquisition was financed through the issuance of parent company shares and long
term debt.
<PAGE>
Financing activities:
During the period under analysis, the Company financed its operations mainly
through its own funds and a new long-term loan that improved its liability
structure (see note 4). On January 23, 1998, Management concluded a negotiation
to refinance part of its subsidiary Pipasa's short-term debt, with the private
placement of US $8 million of the Company's 11.71% Series A Senior Notes due
January 15, 2005 ("the Offering"), agented by Citicorp Securities, Inc.
Additionally, on February 26, 1998 Management concluded another negotiation to
refinance most of its recently acquired subsidiary, As de Oros' debt, with the
private placement of US $12 million of the Company's 11.71% Series B Senior
Notes due January 15, 2005 ("the Offering"), agented by Citicorp Securities,
Inc. The most important effects in the Company's financial position as a result
of the Offering are:
AS OF MARCH 31, 1998 AS OF SEPTEMBER 30, 1997
-------------------------------------------------------
Working Capital $8,426,295 ($2,288,838)
Current Ratio 1.44 0.88
- ---------------------------------------------------------------------------
Future amortization payments of this private placement, are as follows:
YEAR AMORTIZATION
---- ------------
January 15, 2001 $ 4,000,000
January 15, 2002 4,000,000
January 15, 2003 4,000,000
January 15, 2004 4,000,000
January 15, 2005 4,000,000
Working Capital:
As of March 31, 1998, working capital was $8,426,295 compared to working capital
as of September 30, 1997 of $(2,288,838), an increase of $10,715,133. The effect
of the Offering in both subsidiaries substantially improved the Company's
liquidity. The current ratios were 1.44 and 0.88 as of March 31, 1998 and
September 30, 1997 respectively.
Leverage ratio:
Leverage as of March 31, 1998 and 1997 was 4.41, compared to 3.29 respectively.
This ratio increased mainly due to the 41.93% increase in stockholders' equity.
This increase in equity is explained mainly by operations income and issuance of
stock to acquire As de Oros, combined with an 89% increase in total liabilities,
that are a result of the acquired subsidiary's consolidation.
<PAGE>
OTHER MATTERS
Environmental Compliance:
The Company is not subject to any material costs for compliance with any
environmental laws in any jurisdiction in which it operates. However, in the
future, the Company could become subject to material costs to comply with
environmental laws in jurisdictions in which it does not now do business. At the
present time, the Company cannot assess the potential impact of any such
potential environmental regulation on cash flow, results of operations and
financial condition. The Company practices sustainable environmental policies
such as reforestation, processes and recycles its waste, produces of organic
fertilizer, and is currently improving its oxidation lagoons and sewage
treatment plants.
Year 2000 Issue:
The Company established a formal Year 2000 oversight committee in December 1997.
Along with this committee, the Company has a written certificate stating that
its Information Systems tools, developed by Oracle, are "FULLY COMPLIANT" with
the Year 2000 changes. The Company has begun the conversion, testing and
implementation stages of the entity's Year 2000 plan, which includes vendors,
customers and intermediaries. Testing of software, hardware and electronic
devices is being documented. Management expects to complete its Year 2000 plan
during fiscal year 1998 and fiscal year 1999. As de Oros was incorporated in
this committee since the date of the acquisition. To the extent that the Company
can not effectively implement the plan, adverse results could arise.
CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF
SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company and its representatives may from time to time make written or oral
forward-looking statements with respect to their current views and estimates of
future economic circumstances, industry conditions, company performance and
financial results. These forward-looking statements are subject to a number of
factors and uncertainties, which could cause the Company's actual results and
experiences to differ materially from the anticipated results and expectations,
expressed in such forward-looking statements. The Company wishes to caution
readers not to place undue reliance on any forward-looking statements, which
speak only as of the date made. Among the factors that may affect the operating
results of the Company are the following: (i) fluctuations in the cost and
availability of raw materials, such as feed grain costs in relation to
historical levels; (ii) market conditions for finished products, including the
supply and pricing of alternative proteins, all of which may impact the
Company's pricing power; (iii) risks associated with leverage, including cost
increases due to rising interest rates; (iv) changes in regulations and laws,
including changes in accounting standards, environmental laws, occupational,
health and safety; currency fluctuations; and (v) the effect of, or changes in,
general economic conditions.
<PAGE>
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 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. Representative
examples of these factors include (without limitations) general industrial and
economic conditions; cost of capital and capital requirements; shifts in
customer demands; 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 2. Changes in securities and use of proceeds: Issuance of 2,447,508
Common Stock to acquire new subsidiary.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following exhibits are filed with this report:
EXHIBIT NO. DESCRIPTION
- -------------------------------------------------------------------------------
10.1 Note Purchase Agreement
- -------------------------------------------------------------------------------
10.2 Stock Purchase Agreement
- -------------------------------------------------------------------------------
27 Financial Data Schedule
- -------------------------------------------------------------------------------
(b) Report on Form 8-K. One report on Form 8-K was filed by the Company
on March 11, 1998, disclosing the Company's acquisition of 51% of
the voting shares of As de Oros, or, 56.38% of its total common
stock.
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Company that duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
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 Company and in
the capacities and on the dates indicated.
COSTA RICA INTERNATIONAL, INC.
Dated: May 20, 1998 /s/ CALIXTO CAVES
------------------------------
Calixto Chaves
Chief Executive Officer
Dated: May 20, 1998 /s/ JORGE M. QUESADA
------------------------------
Jorge M. Quesada
Chief Financial Officer
Dated: May 20, 1998 /s/ MONICA CHAVES
------------------------------
Monica Chaves
Secretary
