UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
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
RICA FOODS, INC.
-----------------------------------------------------
(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)
Costa Rica International, Inc.
------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
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 August 14, 1998 was 22,256,454 shares.
<PAGE>
RICA FOODS, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets as of June
30, 1998 (Unaudited) and September 30, 1997 . . 3
Consolidated Condensed Statements of Income
(Unaudited). . . . . . . . . . . . . . . . . . 5
Consolidated Condensed Statements of Cash Flows
(Unaudited). . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Condensed Financial Statements
(Unaudited). . . . . . . . . . . . . . . . . . 9
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . 15
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings. . . . . . . . . . . . . . . . 24
ITEM 2. Changes in Securities and Use of Proceeds. . . . 24
ITEM 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . 24
ITEM 5. Other Information . . . . . . . . . . . . . . . 24
ITEM 6. Exhibits and Reports of Form 8-K. . . . . . . . 25
2
<PAGE>
RICA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF JUNE 30, 1998 AND SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
UNAUDITED AUDITED
JUNE 30, SEPTEMBER 30,
1998 1997
------------- --------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3,143,692 $ 1,388,290
Short-term investments 300,188 1,935,671
Notes and accounts receivable, net 9,069,736 5,818,760
Due from related parties 1,623,259 76,243
Inventories, net 13,205,171 7,106,214
Prepaid expenses 489,290 130,088
------------- --------------
Total Current Assets 27,831,336 16,455,266
------------- --------------
Long-term notes receivable, trade 130,069 176,520
Property, plant and equipment, net 26,252,137 14,350,427
Long-term investment 4,076,517 4,385,197
Other assets 2,346,561 1,187,128
Goodwill, net 2,675,714 -
------------- --------------
Total Assets $ 63,312,334 $ 36,554,538
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 7,026,328 $ 10,126,947
Due to related party 1,152,935 36,870
Current installments of long-
term debt 923,308 1,251,127
Accounts payable 9,224,239 5,191,923
Accrued expenses 3,192,608 2,137,237
------------- --------------
Total Current Liabilities 21,519,418 18,744,104
------------- --------------
Long-term debt, excluding current
installments 22,807,870 5,252,149
Due to stockholders 19,047 20,489
Deferred tax liability 2,026,824 -
------------- --------------
Total Liabilities 46,373,159 24,016,742
------------- --------------
Minority Interest 6,542,686 5,248,362
Stockholders' Equity
Common stock 22,257 19,810
Preferred stock 3,323,366 2,216,072
Additional paid-in capital 11,972,556 9,375,002
Foreign currency translation adjustment (5,492,525) (4,675,549)
</TABLE>
3
<PAGE>
RICA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF JUNE 30, 1998 AND SEPTEMBER 30, 1997
(CONTINUED)
UNAUDITED AUDITED
JUNE 30, SEPTEMBER 30,
1998 1997
------------- --------
Retained earnings 3,127,609 2,122,542
---------------- ---------------
12,953,263 9,057,877
Less:
Due from stockholders (15,783) (920,476)
Treasury stock, at cost (2,540,991) (847,967)
---------------- ---------------
Total Stockholders' Equity 10,396,489 7,289,434
---------------- ---------------
Total Liabilities and
Stockholders' Equity $ 63,312,334 $ 36,554,538
================ ===============
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
RICA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, 1998 JUNE 30,1997 JUNE 30, 1998 JUNE 30,1997
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales $ 30,151,295 $18,676,348 $73,584,850 $51,319,978
Cost of sales 22,564,801 14,229,212 55,257,799 38,725,278
------------ ----------- ----------- -----------
Gross profit 7,586,494 4,447,136 18,327,051 12,594,700
------------ ----------- ----------- -----------
Operating expenses
Selling 3,725,773 1,741,429 8,038,560 4,970,890
General and administrative 2,407,188 1,465,170 5,644,648 4,162,119
Goodwill amortization 144,742 - 190,647 -
------------ ----------- ----------- -----------
Total operating expenses 6,277,703 3,206,599 13,873,855 9,133,009
------------ ----------- ----------- -----------
Operating income 1,308,791 1,240,537 4,453,196 3,461,691
Interest expense 896,835 603,455 2,078,607 1,707,695
Interest income (140,930) (194,926) (449,528) (652,545)
Exchange losses, net 549,782 98,756 817,493 158,278
Miscellaneous, net (420,730) (72,776) (910,990) (304,553)
------------ ----------- ----------- -----------
Other expenses, net 884,957 434,509 1,535,582 908,875
Income before income taxes and
minority interest 423,834 806,028 2,917,614 2,552,816
Provision for income taxes 6,224 117,421 414,460 354,934
------------ ----------- ----------- -----------
Income before minority interest 417,610 688,607 2,503,154 2,197,882
Minority interest 447,702 349,406 1,379,008 1,031,450
------------ ----------- ----------- -----------
Net income (loss) (30,092) 339,201 1,124,146 1,166,432
Preferred stock dividend 128,857 104,576 201,521 229,470
Net income (loss) applicable to
</TABLE>
5
<PAGE>
RICA FOODS, INC AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
UNAUDITED
(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, 1998 JUNE 30,1997 JUNE 30, 1998 JUNE 30,1997
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Common stock $ (158,949) $ 234,625 $ 922,625 $ 936,962
============= ============ ============= ============
Basic earnings (loss) per share $ (0.01) $ 0.01 $ 0.04 $ 0.01
-------- -------- ----------- --------
Basic weighted average shares 22,256,454 19,809,396 20,896,977 19,764,952
Diluted earnings (loss) per share $ (0.01) $ 0.01 $ 0.04 $ 0.01
-------- -------- ----------- --------
Adjusted weighted average shares 22,369,372 19,909,657 20,983,726 19,916,867
</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
<PAGE>
RICA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1998 AND 1997
UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
--------------------------
1998 1997
==== ====
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,124,148 $ 1,166,432
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities
Depreciation and amortization 1,551,966 1,028,786
Allowance for doubtful accounts 128,285 112,220
Allowance for production poultry 896,720 981,012
Amortization of goodwill 190,646 -
Gain on sale of productive assets 12,666 (82,364)
Deferred income tax benefit (69,890) -
Minority interest net income 1,379,008 1,031,450
Cash provided by (used for) changes in:
Notes and accounts receivable (1,187,082) (2,427,991)
Due from related party (1,682,364) (585,147)
Inventories (2,867,498) (2,464,209)
Prepaid expenses 733,649 (149,552)
Accounts payable 780,754 1,699,514
Accrued expenses 640,285 203,389
Long-term receivable, trade 49,189 (40,181)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,680,482 473,359
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Short-term investments 1,554,092 (1,813,601)
Initial cash balance from subsidiary acquired 1,147,472 -
Increase in long-term investment (1,339,368) (159,190)
Additions to property, plant and equipment (2,434,615) (1,284,649)
Proceeds from sale of productive assets 304,755 93,324
Other assets (908,087) (254,751)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (1,675,751) (3,418,867)
----------- -----------
</TABLE>
7
<PAGE>
RICA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1998 AND 1997
UNAUDITED
(CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
--------------------------
1998 1997
==== ====
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES:
Short-term financing increase
(decrease) in notes payable (3,851,015) 1,971,531
Preferred cash dividends (201,521) (283,954)
Long-term financing:
New loans 8,844,647 2,263,082
Payments (3,827,810) (886,443)
Issuance of common stock - 5,000
Due to related party 1,133,836 (3,757,272)
Due from shareholders (739,492) -
----------- -----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 1,358,645 (688,056)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH 392,026 (290,972)
Net increase (decrease) in cash 1,755,402 (3,924,536)
Cash balance at beginning of period 1,388,290 5,129,312
---------------------------------
Cash balance at end of period $ 3,143,692 $ 1,204,776
=================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for the period for:
Interest $ 1,093,702 $ 1,746,747
=================================
Income taxes $ 127,643 $ 108,825
=================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
8
<PAGE>
RICA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. General
Management is responsible for preparing Rica Foods, Inc. F/K/A Costa Rica
International, Inc. and subsidiaries (the "Company") financial statements and
related information that appear in this Form 10-Q report. Management believes
that the financial statements reflect fairly 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 judgments, which it
believes are reasonable under the circumstances. In the opinion of Management,
all adjustments necessary for a fair presentation of the financial information
for the interim periods reported have been made. Results of the nine months
ended June 30, 1998 are not necessarily indicative of the results to be expected
for the entire fiscal year ending September 30, 1998. 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 authorization and are properly recorded and
reported in 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 unaudited 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 10KSB for the fiscal year ended September 30, 1997, as amended on May 8,
1998 on Form 10-KSB-A .
2. Inventories
Inventories are stated at the lower of market or cost, and are determined using
the weighted-average method, except for inventories in transit which are valued
at specific cost. Inventories are as follows:
JUNE 30, SEPTEMBER 30,
1998 1997
------------ --------
Finished products $ 2,663,075 $ 686,423
Poultry 2,594,316 2,269,993
Production poultry 3,329,119 1,708,071
Materials and supplies 1,732,681 1,134,115
Raw materials 1,670,039 1,639,527
In transit 1,946,298 131,188
----------- ----------
$13,935,528 $7,569,317
----------- ----------
Allowance for renewal of production
poultry (709,331) (463,103)
Allowance for obsolescence (21,026) -
----------- ----------
TOTAL $13,205,171 $7,106,214
=========== ==========
9
<PAGE>
3. Short-term Notes Payable
Short-term Notes payable consist of the following:
JUNE 30, SEPTEMBER 30,
1998 1997
------------ ------------
Loans payable $ 4,545,234 $ 6,188,036
Bank overdrafts 853,841 371,193
Commercial paper 1,438,174 3,562,721
Other 189,079 4,997
----------- ------------
TOTAL $ 7,026,328 $ 10,126,947
=========== ============
4. Long-term Debt
Long-term debt is as follows:
JUNE 30, SEPTEMBER 30,
1998 1997
------------ -----------
Bank loans $ 22,394,775 $ 5,395,152
Commercial paper-unsecured 43,410 46,698
Other 1,292,993 1,061,426
------------ -----------
Total long-term debt 23,731,178 6,503,276
Less: current installments 923,308 1,251,127
------------ -----------
TOTAL $ 22,807,870 $ 5,252,149
============ ===========
The Company completed a private placement (the "Private Placement") of US $20
million in notes payable bearing an annual interest rate of 11.71%, 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. The Private Placement includes
the following terms, among others:
- - 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 beginning on January 15,
2001. The Notes have a two-year grace period.
- - The Company has covenanted that there will be no significant
organizational changes and that the Company will comply with all federal
and local laws and regulations.
- - 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, and to review the relevant terms included in
10
<PAGE>
the agreement to prevent the existence of a default or event of default.
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 Statement of Financial Accounting Standard
("SFAS") No.128: Earnings per Share. 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 NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ----------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of common shares
used in basic earnings per share 22,256,454 19,809,396 20,896,977 19,764,952
Effect of dilutive securities
Warrants 112,918 100,261 86,749 151,915
---------- ---------- ---------- ----------
Weighted average number of common shares
used in diluted earnings per share 22,369,372 19,909,657 20,983,726 19,916,867
</TABLE>
6. Acquisition of Corporacion As de Oros S.A.
On February, 26, 1998, the Company acquired 56.38% of the outstanding common
shares of Corporacion As de Oros, S.A. and subsidiaries ("As de Oros") in a
business combination accounted for under the purchase method. The excess of
purchase price over the fair market value of the net assets acquired
("goodwill") is being amortized on the straight line basis over a five
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.
11
<PAGE>
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 beginning after December
15, 1997. Management 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 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 April 1998, the American Institute of
Certified Public Accountants ("AICPA"), issued SOP 98-1, This SOP established
accounting standards when a company is developing or obtaining software which is
for internal-use purposes, and is effective for financial statements for fiscal
years beginning after December 15, 1998. Management does not expect that
adoption of SOP 98-1 will have a material impact on the Company's financial
position, results of operations or liquidity.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND FOR HEDGING ACTIVITIES. In June, 1998,
the Financial Accounting Standards Board issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. This Statement establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value and requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. This statement is effective for financial statements for fiscal years
beginning after June 15, 1999. Management of the Company has not yet quantified
the impact of adopting SFAS No. 133.
8. Pro Forma Financial Information
Following is pro forma financial information which presents results of
operations for the year ended September 30, 1997, and the nine months ended
June 30, 1998, as if the acquisition of As de Oros, had taken place on October
1, 1996:
12
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
JUNE 30, 1998 SEPTEMBER 30, 1997
------------- ------------------
<S> <C> <C>
Revenues $112,701,401 116,613,665
Income (loss) before extraordinary items 1,317,255 (2,839,628)
Net Income 1,317,255 (2,839,628)
Basic earnings per share
Weighted average of common shares outstanding 20,896,977 19,776,063
Earnings (loss) per share $ .06 $ (0.14)
============ ============
Diluted earnings per share
Incremental shares from assumed
conversions of warrants 86,749 141,163
Adjusted weighted average shares 20,983,726 19,917,226
Diluted earnings (loss) per share $ .06 $ (0.14)
============ ============
</TABLE>
9. Employee Benefit Plan
On April 14, 1998, the Company adopted the 1998 Stock Option Plan (the "Plan").
Under the Plan, 600,000 shares of the Company's common stock, par value $.001
per share (the "Common Stock"), are reserved for issuance upon exercise of
options. The Plan is designed to serve as an incentive for retaining and
attracting qualified persons and/or entities that provide services. As of August
14, 1998, the Company had not issued any options under the Plan.
10. Reclassifications
Certain prior period balances have been reclassified to conform to the June 30,
1998 presentation.
11. Litigation
The Company, Pipasa and As de Oros are litigating several lawsuits that are in
their early stages of development. Management intends to defend these actions
vigorously. Based on information available to the Company at this time, although
the ultimate outcome of these matters cannot be predicted, Management believes
that an adverse outcome on any or all of the lawsuits would not have a material
adverse affect on the financial condition of the Company.
13
<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 for the fiscal year ended September 30, 1997, as amended on May 8, 1998
on Form 10-KSB/A.
The most significant events occurring during the nine months ended June 30, 1998
were: (i) the refinancing of part of the Company's subsidiaries' short-term
debt, with the Private Placement of an aggregate of US $20 million of the
Company's 11.71% Series A Senior Notes and Series B Senior Notes, both due
January 15, 2005, placed by Citicorp Securities Inc., and (ii) the acquisition
of a new subsidiary, Corporacion As de Oros, S.A. and subsidiaries ("As de
Oros"), a poultry and animal feed producer with a significant market share of
domestic and commercial animal feed among the Costa Rican market. The Company
reached an agreement ("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., a
Costa Rican privately-owned company and the majority shareholder of As de Oros,
for $2.4 million in cash upon the maturity of a promissory note due January 2000
and 2,447,058 shares of Company common stock then valued at approximately $2.6
million.
As de Oros is the second largest poultry producer in Costa Rica, with total
annual sales of approximately $48.45 million and assets amounting to $17
million.
Prior to the acquisition of As de Oros, there were transactions between
Corporacion Pipasa S.A. ("Pipasa"), a 59.56% owned subsidiary and As de Oros
consisting of sales of raw materials, and finished products. These transactions
have been eliminated for consolidation purposes.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30,
1998 COMPARED TO THE THREE MONTHS ENDED JUNE 30,1997
The Company incurred a net loss of $0.01 per share during the three months
ended June 30, 1998. Gross profit increased from 23.81% during the three months
ended June 30, 1997 to 25.16% during the same period of fiscal 1998. Operating
profit as a percentage of net sales decreased, primarily due to higher general,
selling and administrative expenses.
The following table presents the Company's consolidated operating results as a
percentage of net sales:
14
<PAGE>
RICA FOODS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED INCREASE
JUNE 30, 1998 JUNE 30, 1997 (DECREASE)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100% 100%
- ----------------------------------------------------------------------------------------------------------------
Cost of products sold 74.84% 76.19% (1.35%)
Selling, general and
administrative expenses 20.82% 17.17% 3.65%
Operating profit 4.34% 6.64% (2.30%)
Interest expense 2.97% 3.23% (0.26%)
Income before taxes 1.41% 4.32% (2.91%)
Provision for income taxes 0.02% 0.63% (0.61%)
Net income (0.10%) 1.82% (1.92%)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NET SALES:
Net sales for the quarters ended June 30, 1998 and 1997 were
approximately $30.15 million and $18.76 million, respectively, an increase of
$11.47 million or 61.44%. This increase is due mainly to the incorporation of
sales of the recently acquired subsidiary, As de Oros. Volume increased in the
broiler and export segments, along with price increase in the remaining
segments. Sales of each subsidiary is detailed below:
RICA FOODS, INC. AND SUBSIDIARIES
(IN THOUSANDS)
THREE MONTHS ENDED JUNE 30,
------------------------------- % INCREASE
1998 1997 (DECREASE)
- -------------------------------------------------------------------------------
Pipasa $19,323 18,676 4.27%
As de Oros 10,828 -- --
- -------------------------------------------------------------------------------
Total $30,151 18,676 61.44%
- -------------------------------------------------------------------------------
Animal Feed: Sales of animal feed increased $4.02 million or 204% during the
three months ended June 30, 1998 compared to the same period of fiscal 1997.
This increase in sales was due to the incorporation of sales of As de Oros,
whose core business is animal feed, offset by a volume decrease in Pipasa. This
volume reduction was mainly due to new credit policies in the animal feed
segment. The Company restricted sales to improve its collection period.
By - products: Sales of chicken by-products increased 2.68% during the three
months ended June 30, 1998. Pipasa's sales decreased 14.59% for the quarter
ended June 30, 1998, compared to the quarter ended June 30, 1997. During the
months of May and June of 1997 Pipasa held a strong promotional campaign that
increased
15
<PAGE>
volume. Management has scheduled other annual promotions towards the end of
fiscal 1998.
Exports: Exports increased 6.03% during the three months ended June 30, 1998
compared to the same period in fiscal 1997. This is due to an 8.73% price
increase offset by a 2.70% reduction in volume. The Company had extraordinary
exports to Honduras during the months of January to July of 1997, which explains
the decrease in volume in fiscal 1998. Nevertheless, the introduction of the
Company's exports to El Salvador has strengthened sales. Management intends to
continue emphasizing exports to Central America, with both its traditional
export products and those from As de Oros.
Broiler Chicken: Broiler chicken sales of $16.33 million represent a 41.48%
increase above broiler sales for the three months ended June 30, 1997. This
increase is due to a 38.09% volume increase and a 3.39% price increase.
Restaurants: The newly acquired restaurant segment had sales of $2.09 million
during the three months ended June 30, 1998.
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 20.81% for the three months ended June 30, 1998 compared to the same
period of fiscal year 1997.
The following table presents consolidated sales increases (decreases) by
business segment, for the three months ended June 30, 1998:
<TABLE>
<CAPTION>
RICA FOODS, INC. AND SUBSIDIARIES
(IN THOUSANDS OF DOLLARS)
THREE MONTHS ENDED
------------------------------------------------
JUNE 30, 1998 JUNE 30, 1997 INCREASE INCREASE
------------------------------ ------------- (DECREASE) (DECREASE)
SEGMENT PIPASA AS DE OROS TOTAL PIPASA PIPASA CONSOLIDATED
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Animal feed 1,510 4,481 5,991 1,968 (23.26%) 204.46%
By-products 1,877 380 2,257 2,198 (14.59) 2.68
Exports 791 - 791 746 6.03 6.03
Broiler 12,558 3,777 16,335 11,546 8.77 41.48
Restaurants - 2,096 2,096 - 100.00 100.00
Other 2,587 94 2,681 2,219 16.56 20.81
---------------------------------------------------------------------------------------
TOTAL 19,323 10,828 30,151 18,676 3.46% 61.44%
=======================================================================================
</TABLE>
Cost of Sales: Cost of sales amounted to $22.56 and $14.22 million for the
quarters ended June 30, 1998 and 1997, respectively, an increase of 58.58%. This
increase in cost of sales was primarily attributable to volume increases arising
partly as a result of the acquisition of As de Oros and to certain other
factors, such as lower technical yields in the
16
<PAGE>
reproduction, incubation and breeding division, imports of fertile eggs, offset
by the effect of lower cost of raw materials, such as imported grains, and
higher efficiency arising from increased volume. As a percentage of sales, cost
of sales was 74.84% for the three months ended June 30, 1998 compared to 76.19%
for the three months ended June 30, 1997, a net decrease of 1.35%.
During the three months ended June 30, 1998 production technical yields
normalized from the negative effect of the "El Nino" weather phenomenon. High
temperatures were offset by temperature regulating devices, but there were still
high mortality rates due to this weather factor, combined with mortality due to
pathologies. As of August 14, 1998, temperatures have decreased and the rainy
season has started in Costa Rica. This is expected to improve the mortality
yields and average weight of the chickens. The Company ceased to import fertile
eggs and chicken parts during the quarter ended June 30, 1998 as it has met
the previously uncovered demand. At this time, Management believes the Company
is self-sufficient with respect to its production of fertile eggs.
Cost of sales of the restaurant segment is lower than the other segments, since
the nature of this activity results in greater general, selling and
administrative expenses. Cost of sales for this segment was 48.43%, which
include broiler chicken and by-products.
GROSS PROFIT:
Gross profit for the three months ended June 30, 1998 and 1997 was $7.58 million
and $4.44 million, respectively, an increase of $3.13 million or 70.59%. As a
percentage of net sales, gross profit was 25.16% and 23.81% for the three months
ended June 30, 1998 and 1997, respectively, due to the issues discussed
above. The following table sets forth gross profit as a percentage of net sales
of each segment for the quarters ended June 30, 1998 and 1997:
RICA FOODS, INC. AND SUBSIDIARIES
GROSS PROFIT
THREE MONTHS ENDED JUNE 30,
--------------------------------- INCREASE
SEGMENT 1998 1997 (DECREASE)
---------------------------------------------------
Animal feed 22.32% 19.60% 2.73%
Chicken by- products 38.24 40.03 (1.78)
Exports 29.90 26.25 3.65
Broiler 23.85 25.34 (1.50)
Restaurants 51.57 0.00 51.57
Others 6.46 2.71 3.75
---------------------------------------------------
Total Gross Profit 25.16% 23.81% 1.35%
---------------------------------------------------
17
<PAGE>
SELLING GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses increased 91.26% during the three
months ended June 30, 1998, compared to the three months ended June 30, 1997. As
a percentage of net sales, these expenses increased from 17.17% during the three
months ended June 30, 1997 to 20.34% during the same period of fiscal year 1998.
In connection with the acquisition of As de Oros, the Company recorded a charge
to administrative expenses relating to amortization of goodwill and depreciation
excess of fair market value over book value of fixed assets acquired, which
amounted to $321,185 for the quarter ended June 30, 1998. As de Oros recorded
administrative expenses of $817,293, which is equivalent to 6.98% of its net
sales. Selling expenses of the restaurant segment of As de Oros consisted of 23%
of total consolidated expenses. The Company also recorded administrative
expenses pertaining to professional services (primarily legal fees, financial
printing, auditing and other related charges). Selling expenses increased by
113% compared to the same period of fiscal year 1997.
Other income and expenses increased by $450,448 or 103% when comparing the three
months ended June 30, 1998 to the same period of fiscal year 1997. This increase
is due mainly to the increase of interest expense (consolidated debt), and
exchange rate expense due to debt consolidation, offset by sales of assets and
interest revenues.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 1998
COMPARED TO THE NINE MONTHS ENDED JUNE 30, 1997
Net income applicable to Common Stock was $922,627 and $936,962 for the nine
months ended June 30, 1998 and 1997, respectively, consituting a decrease of
1.53%. The Company had net income per share of Common Stock during the nine
months ended June 30, 1998 of $0.04.
The following table presents the Company's consolidated statement of operations
as a percentage of net sales:
RICA FOODS, INC. AND SUBSIDIARIES
NINE MONTHS ENDED JUNE 30,
-------------------------- INCREASE
1998 1997 (DECREASE)
- ----------------------------------------------------------------------------
Net sales 100% 100%
- ----------------------------------------------------------------------------
Cost of products sold 75.09% 75.46% (0.37%)
18
<PAGE>
Selling, general and
administrative 18.85% 17.80% 1.05%
Operating profit 6.05% 6.75% (0.70%)
Interest expense 2.82% 3.33% (0.51%)
Income before taxes 3.96% 4.97% (1.01%)
Provision for income taxes 0.56% 0.69% (0.13%)
Net income before
minority interest 3.40% 4.28% (0.88%)
- ----------------------------------------------------------------------------
NET SALES:
Net sales generated by the Company's operations for the nine months ended June
30, 1998 and 1997 were $73.58 million and $51.31 million, respectively, an
increase of $22.2 million or 43%. This increase was mainly due to volume
increases in by-product, broiler, exports and the incorporation of sales of the
recently acquired subsidiary As de Oros. Sales of each subsidiary is detailed as
follows:
RICA FOODS, INC. AND SUBSIDIARIES
(IN THOUSANDS OF DOLLARS)
NINE MONTHS ENDED JUNE 30,
--------------------------
1998 1997 INCREASE
- --------------------------------------------------------------------
Pipasa $58,770 51,320 14.52%
As de Oros 14,815 - 100%
- --------------------------------------------------------------------
Total $73,585 51,320 43.38%
- --------------------------------------------------------------------
Animal Feed: Sales of animal feed increased $5.82 million or 117.90% during the
nine months ended June 30, 1998, compared to the same period of fiscal 1997.
This increase in sales was offset by a volume decrease in animal feed in the
Company's subsidiary, Pipasa. The Company's new subsidiary, As de Oros, has its
core business in the animal feed industry and, consequently, there are tonnage
increases with its incorporation to the Company.
By-products: Sales of chicken by-products increased 24.56% during the nine
months ended June 30, 1998 as compared to the same period of fiscal 1997. This
is due to a 4.54% increase in volume combined with price increases and a
higher margin sales mix of 20.06%. Sales mix is a factor of different
by-products having higher or lower margins.
Exports: Exports increased 16.79% during the nine months ended June 30, 1998
compared to the same period of fiscal 1997. This increase is due to a 0.58%
volume increase combined with a 16.21% price increase. The introduction of the
Company's exports to El Salvador has strengthened sales. Management intends to
continue emphasizing exports to Central America, with its traditional export
products and with products from the recently acquired subsidiary.
Broiler: Broiler chicken sales of $43.09 million for the nine months ended June
30, 1998, represent a 31.17% increase above total broiler sales during the nine
months ended June 30, 1997. This increase is due
19
<PAGE>
to a 32.65% increase in volume offset by a 1.48% decrease due to exchange rate
variations.
Restaurant: The newly acquired restaurant segment had sales of $2.84 million
during the four months ended June 30, 1998.
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 27.21% during the nine months ended June 30, 1998 compared to the same
period of fiscal year 1997.
The following table presents sales increase by business segment, for the nine
months ended June 30, 1998:
<TABLE>
<CAPTION>
RICA FOODS, INC. AND SUBSIDIARIES
NINE MONTHS ENDED
(IN THOUSANDS OF DOLLARS)
NINE MONTHS ENDED JUNE 30,
-----------------------------------------------
1998 1997 INCREASE INCREASE
-------------------------------- ------------ (DECREASE) (DECREASE)
SEGMENT PIPASA AS TOTAL PIPASA PIPASA CONSOLIDATED
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Animal feed $4,607 $6,157 $10,765 $4,940 (6.74%) 117.90%
By-products 6,660 514 7,174 5,757 15.68% 24.60%
Exports 1,920 - 1,920 1,644 16.79% 16.79%
Broiler 37,936 5,163 43,098 32,857 15.46% 31.17%
Restaurants - 2,841 2,841 - 100.00%
Others 7,648 140 7,788 6,122 24.92% 27.21%
---------------------------------------------------------------------------------
TOTAL $58,770 $14,815 $73,585 $51,320 14.52% 43.38%
---------------------------------------------------------------------------------
</TABLE>
Cost of sales: Cost of sales amounted to $55.25 million and $38.72 million
during the nine months ended June 30, 1998 and 1997, respectively, an increase
of 42.69%. This increase in cost of sales was due mainly to a volume increase
and certain other production factors, including lower yields in reproduction hen
and breeding divisions, imports of fertile eggs and chicken parts. This was
offset by the effect of a lower cost of raw materials, such as imported grains,
and higher efficiencies due to increased volume. As a percentage of sales, cost
of sales was 75.09% for the nine months ended June 30, 1998 compared to 75.46%
for the nine months ended June 30, 1997, a net decrease of 0.37%.
GROSS PROFIT:
Gross profit for the nine months ended June 30, 1998 and 1997 was $18.3 million
and $12.54 million, respectively, an increase of $5.76 million or 45.51%. As a
percentage of net sales, gross profit was 24.91% and 25.54%, respectively, for
the first three quarters of fiscal year 1998 and 1997. The following table shows
gross profit as a percentage of net sales of each segment for the nine months
ended June 30, 1998 and 1997:
20
<PAGE>
RICA FOODS, INC. AND SUBSIDIARIES
GROSS PROFIT
NINE MONTHS ENDED JUNE 30,
-------------------------- INCREASE
SEGMENT 1998 1997 (DECREASE)
---------------------------------------------------
Animal feed 21.90% 17.20% 4.70
Chicken by- products 43.39% 38.95% 4.44
Exports 30.03% 27.31% 2.72
Broiler 23.98% 26.97% (2.99)
Restaurants 53.82% 0.00% 0.00
Others 5.32% 3.16% 2.16
---------------------------------------------------
Total Gross Profit 24.91% 24.21% 0.70
---------------------------------------------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses increased $4.55 million or 49.82%
during the nine months ended June 30, 1998, compared to the nine months ended
June 30, 1997. As a percentage of net sales, this item increased from 17.80%
during the first three quarters of fiscal year 1997 to 18.85% during the same
period of fiscal year 1998. Among the main factors attributing to this
are: amortization of goodwill and depreciation excess of fair market value over
book value of fixed assets acquired and the fact that the recently incorporated
segment, restaurants, has a higher selling expense ratio over net sales,
equivalent to approximately 41%, due to the nature of its business. Selling
expenses in the restaurant segment are approximately $859,000.
Other income and expenses increased by $626,707 or 68.95% when comparing the
nine months ended June 30, 1998 to the same period of fiscal year 1997. This
increase was primarily due to an increase in interest expense and exchange rate
expense due to debt consolidation, offset by asset sales. As a percentage of net
sales, interest expense decreased from 3.33% to 2.82%. This decrease was mainly
due to the
21
<PAGE>
long-term debt restructuring that took place during January and February 1998.
FINANCIAL CONDITION
Liquidity and capital resources: The Company generated cash flows from
operations of $1.68 million as compared to a $473,359 during the nine months
ended June 30, 1997. This increase was primarily a result of higher earnings and
a smaller decrease in notes and accounts receivable, partially offset by a
smaller increase in accounts payable.
The Company used $1.68 million for investing activities. The majority of these
expenditures related to the acquisition of operating assets, including vehicle,
fleet and plant machinery. The Company also invested in the acquisition of As de
Oros. This was partially offset by the initial cash acquired from As de Oros and
proceeds from sales of securities.
Financing Activities: Cash flow provided by financing activities was $1.36
million during the nine months ended June 30, 1998 as compared to $688,056 used
during the same period of fiscal 1997. Decrease in short - term debt financing
is due primarily to the debt restructuring. Pertaining to long - term financing,
there are new loans in the amount of $8.84 million and principal payments of
debt of $3.83 million.
Future principal payments of the Private Placement, are as follows:
YEAR
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
Interest is payable each six months starting July 14, 1998.
As of June 30, 1998, working capital was $6.31 million compared to a working
capital deficit of $2.29 million as of September 30, 1997, for an increase of
$8.60 million. The effect of the Private Placement in both subsidiaries
substantially improved the Company's liquidity. The current ratios were 1.29 and
0.88 as of June 30, 1998 and September 30, 1997, respectively.
The leverage ratios as of June 30, 1998 was 2.74, compared to 1.92 as of
September 30, 1997. This ratio increased due mainly to the 35.10% increase in
stockholders' equity, in comparison to a 93.09% increase in total liabilities.
The increase in equity primarily resulted from operating income and the issuance
of stock to acquire As de Oros. The increase in liabilities is mainly the result
of consolidating As de Oros' debt.
22
<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 flows, results of operations and
financial condition. The Company practices sustainable environmental policies
such as reforestation, processes and recycles its waste, produces organic
fertilizer, and is currently improving its oxidation lagoons and sewerage
treatment plants.
YEAR 2000 ISSUE
The Company has established a central committee to coordinate the
identification, evaluation and implementation of changes to computer systems and
applications necessary to achieve a year 2000 date conversion. These actions are
necessary to ensure that the systems and applications will recognize and process
the year 2000 and beyond. Minor areas of potential business impact have been
identified and are being measured, and initial conversion efforts are underway.
The Company also is communicating with suppliers, dealers, financial
institutions and others with which it does business to coordinate year 2000
conversion. The total cost of compliance and its effect on the Company's future
results of operations is being determined as part of the detailed conversion
planning.
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 cautions 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
23
<PAGE>
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.
This Management's 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 forecasts 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 a number of risks, uncertainties and assumptions. Representative
examples of these factors include (without limitation) 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 1. LEGAL PROCEEDINGS.
The Company, Pipasa and As de Oros are litigating several lawsuits that are in
their early stages of development. Management intends to defend these actions
vigorously. Based on information available to the Company at this time, although
the ultimate outcome of these matters cannot be predicted, management believes
that an adverse outcome on any or all of the lawsuits would not have a material
adverse affect on the financial condition of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS:
The Company issued 2,447,058 common shares out of treasury to the prior owners
of 56.38% of the outstanding common stock of Corporacion As de Oros S.A.,
pursuant to the Stock Purchase Agreement involving both companies. This issuance
of Company Common Stock represented approximately 12% of total shares
outstanding at the time of acquisition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY SHAREHOLDERS
On May 29, 1998, the Company held its Annual Shareholders Meeting in Miami, and
the shareholders approved the following items:
24
<PAGE>
a) A Slate of seven members for the Board of Directors of the Company,
including the following individuals: Calixto Chaves; Jorge M. Quesada;
Luis Guinot, Jr.; Luis J. Lauredo; Federico Vargas; Alfred Smith, IV; and
Jose Pablo Chaves. Results of the election are as follows: For
(18,746,574), Against (35), Withheld (9,340) for all seven members.
b) The Company's Stock Option Plan, reserving 600,000 shares of Common Stock
for sale upon exercise of the options granted. As of the filing date, on
August 14, 1998, the Compensation Committee of the Company is evaluating
the implementation of this plan. Results are as follows: For (18,699,682);
Against (51,297); Witheld (4,970).
c) The name change of the Company to Rica Foods, Inc. Results are as follows:
For (18,721,958); Against (31,642); Withheld (2,349).
ITEM 5. OTHER INFORMATION
On June 5, 1998, the Company amended its Articles of Incorporation by filing
Articles of Amendment with the Secretary of State of the State of Nevada,
changing its name from Costa Rica International, Inc. to Rica Foods, Inc.
The amendment was approved by the Company's Board of Directors on April 14,
1998, and by the Company's shareholders at their annual meeting held on May 29,
1998. Management believes that the new name more accurately reflects the
business of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
27 Financial Data Schedule
Reports on Form 8-K:
The Company filed with the Commission a current report on Form 8-K on July 14,
1998, as amended on August 3, 1998, in connection with a change in the Company's
certifying accountant. As of July 7, 1998, the Company engaged Arthur Andersen
LLP as its certifying accountant.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RICA FOODS, INC.
By: /s/ Calixto Chaves
-----------------------
Dated: August 14, 1998 Calixto Chaves
Chief Executive Officer
26
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 3,143,692
<SECURITIES> 300,188
<RECEIVABLES> 9,069,736
<ALLOWANCES> 798,073
<INVENTORY> 13,205,171
<CURRENT-ASSETS> 27,831,336
<PP&E> 34,327,391
<DEPRECIATION> 8,075,255
<TOTAL-ASSETS> 63,312,334
<CURRENT-LIABILITIES> 21,519,418
<BONDS> 0
0
3,323,366
<COMMON> 22,257
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 63,312,334
<SALES> 73,584,850
<TOTAL-REVENUES> 73,584,850
<CGS> 55,257,799
<TOTAL-COSTS> 55,257,799
<OTHER-EXPENSES> 884,957
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 896,835
<INCOME-PRETAX> 423,834
<INCOME-TAX> 6,224
<INCOME-CONTINUING> 417,610
<DISCONTINUED> 417,610
<EXTRAORDINARY> 417,610
<CHANGES> 0
<NET-INCOME> (30,092)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
