-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OTAeRKAWK78MrWtuLzgPExFbHBBO9TzYqvDOevZYMMFycmJkNTieFwJe1gQQ9QZS rpqAHu4ypD8QbAZ15xcSIQ== 0000950152-98-005326.txt : 19980616 0000950152-98-005326.hdr.sgml : 19980616 ACCESSION NUMBER: 0000950152-98-005326 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19980615 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERCRISTO DEVELOPMENTS INC CENTRAL INDEX KEY: 0001038492 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE SERVICES [0700] IRS NUMBER: 980166912 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22541 FILM NUMBER: 98648282 BUSINESS ADDRESS: STREET 1: 240 ARGYLLE AVENUE CITY: OTTAWA ONTARIO STATE: A6 ZIP: 00000 MAIL ADDRESS: STREET 1: MERCRISTO DEVELOPMENTS INC STREET 2: 240 ARGYLE AVENUE CITY: OTTAWA ONTARIO STATE: A6 10-Q 1 MERCRISTO DEVELOPMENTS, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended APRIL 30, 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 Number 0-22541 ------- MERCRISTO DEVELOPMENTS, INC. ---------------------------- (Exact name of Registrant as Specified in Its Charter) DELAWARE 98-0166912 -------- ---------- (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 240 ARGYLE AVENUE, OTTAWA, ONTARIO, CANADA K2P 1B9 - ------------------------------------------ ------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code 613-230-9803, 800-565-6671 -------------------------- - -------------------------------------------------------------------------------- Former Name, Former Address and Former Fiscal year, if Changed Since Last Report Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding for each of the issuer's classes of common stock, as of the latest practicable date. COMMON STOCK, $.001 PAR VALUE: 17,840,519 ISSUED AND OUTSTANDING AS OF JUNE 11, 1998 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Mercristo Developments, Inc. (A Delaware Corporation) Ottawa, Ontario - Canada TABLE OF CONTENTS ----------------- Consolidated Balance Sheets at April 30, 1998 (Unaudited) and January 31, 1998 Consolidated Statements of Operations for the Three Months Ended April 30, 1998 and 1997 (Unaudited) Consolidated Statements of Cash Flows for the Three Months Ended April 30, 1998 and 1997 (Unaudited) Notes to the Consolidated Financial Statements (Unaudited) 3 Mercristo Developments, Inc. (A Delaware Corporation) Ottawa, Ontario - Canada Consolidated Balance Sheets at ------------------------------ April 30, 1998 (Unaudited) and January 31, 1998 ----------------------------------------------- (All Expressed in Terms of Canadian Dollars) --------------------------------------------
ASSETS ------ April 30 January 31 1998 1998 ---------- ---------- Current Assets - -------------- Cash and Cash Equivalents $ -- $ 14,612 Accounts Receivable 4,972,869 4,805,590 Inventories 40,000 60,500 ---------- ---------- Total Current Assets $5,012,869 $4,880,702 Due from Partnership 2,744,050 2,717,107 Due from Related Companies 93,059 210,743 Property and Equipment - Net of Accumulated Depreciation 1,940,689 1,954,041 ---------- ---------- Total Assets $9,790,667 $9,762,593 ------------ ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities - ------------------- Accounts Payable and Accrued Expenses $4,071,943 $4,018,267 Income Taxes Payable 152,821 73,427 Current Portion of Long Term Debt 77,847 77,847 ---------- ---------- Total Current Liabilities $4,302,611 $4,169,541 Deferred Revenue 955,900 1,646,472 Long Term Debt 755,319 770,409 Deferred Income Taxes 1,162,600 1,015,600 ---------- ---------- Total Liabilities $7,176,430 $7,602,022 ----------------- ---------- ---------- Stockholders' Equity - -------------------- Common Stock: $.001 Par; 100,000,000 Shares Authorized, 17,840,519 Shares Issued and Outstanding 17,840 17,840 Additional Paid Capital 1,324,627 1,324,627 Retained Earnings 1,271,770 818,104 ---------- ---------- Total Stockholders' Equity $2,614,237 $2,160,571 -------------------------- ---------- ---------- Total Liabilities and Stockholders' Equity $9,790,667 $9,762,593 ------------------------------------------ ========== ==========
The accompanying notes are an integral part of this financial statement and should be read in conjunction therewith. 4 Mercristo Developments, Inc. (A Delaware Corporation) Ottawa, Ontario - Canada Consolidated Statements of Operations ------------------------------------- for the Three Months Ended April 30, 1998 and 1997 -------------------------------------------------- (All Expressed in Terms of Canadian Dollars) -------------------------------------------- (Unaudited)
Three Months Ended April 30 1998 1997 ------------ ------------ Revenues - -------- Farm Limited Partnership $ 493,568 $ 520,982 Other 20,500 11,719 Horses Limited Partnership --- 128,250 Other 505,950 156,750 Interest 56,748 37,803 Other 5,419 875 ------------ ------------ Total Revenues $ 1,082,185 $ 856,379 ------------ ------------ Costs and Expenses - ------------------ Farm $ 175,973 $ 282,968 Horses 31,250 560,000 Marketing and Sales 1,594 47,561 General and Administrative 146,533 254,497 Depreciation and Amortization 17,909 16,720 Interest Expense 28,866 16,715 ------------ ------------ Total Costs and Expenses $ 402,125 $ 1,178,461 ------------ ------------ Income (Loss) Before Provision for Taxes $ 680,060 $ (322,082) Provision for Taxes 226,394 (128,833) ------------ ------------ Net Income (Loss) $ 453,666 $ (193,249) ============ ============ Net Income (Loss) per Common Share $ .02 $ (.01) ============ ============ Weighted Average Number of Common Shares Outstanding 17,840,519 16,560,519 ============ ============
The accompanying notes are an integral part of this financial statement and should be read in conjunction therewith. 5 Mercristo Developments, Inc. (A Delaware Corporation) Ottawa, Ontario - Canada Consolidated Statements of Cash Flows for the --------------------------------------------- Three Months Ended April 30, 1998 and 1997 ------------------------------------------ (All Expressed in Terms of Canadian Dollars) -------------------------------------------- (Unaudited)
Three Months Ended April 30 1998 1997 ------------ ------------ Operating Activities - -------------------- Net Income (Loss) for the Period $ 453,666 $ (193,249) Non-Cash Adjustments: Depreciation/Amortization 17,909 16,720 Deferred Revenue (690,572) (347,841) Deferred Income Taxes 147,000 (128,833) Changes: Accounts Receivable (167,279) 2,764,487 Inventory 20,500 395,000 Prepaid Expenses --- (360,866) Accounts Payable 53,676 (1,903,487) Income Taxes Payable 79,394 --- ------------ ------------ Net Cash Flows from Operating Activities $ (85,706) $ 241,931 ------------ ------------ Investing Activities - -------------------- Acquisition of Fixed Assets $ (4,557) $ (613,605) Due from Partnerships (26,943) (48,918) Due to/from Related Companies 117,684 42,275 ------------ ------------ Net Cash Flows from Investing Activities $ 86,184 $ (620,248) ------------ ------------ Financing Activities - -------------------- Increase in Long-Term Debt $ --- $ 426,613 Decrease in Long-Term Debt (15,090) --- ------------ ------------ Net Cash Flows from Financing Activities $ (15,090) $ 426,613 ------------ ------------ Decrease in Cash and Cash Equivalents $ (14,612) $ 48,296 Cash and Cash Equivalents - Beginning of Period 14,612 53,162 ------------ ------------ Cash and Cash Equivalents - End of Period $ --- $ 101,458 ============ ============
The accompanying notes are an integral part of this financial statement and should be read in conjunction therewith. 6 Mercristo Developments, Inc. (A Delaware Corporation) Ottawa, Ontario - Canada NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (All Expressed in Terms of Canadian Dollars) (Unaudited) Note A - Basis of Presentation ------------------------------ The condensed consolidated financial statements of Mercristo Developments, Inc. (the "Company") included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in financial statements prepared in conjunction with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the annual audited financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the Fiscal Year Ended January 31, 1998. The accompanying unaudited interim financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year as a whole. Factors that affect the comparability of financial data from year to year and for comparable interim periods include timing of the foaling season, demand for investment limited partnerships, unusual horse mortality and illness rates and non-recurring marketing expenses. Certain financial information that is not required for interim financial reporting purposes has been omitted. Note B - Receivables Accounts receivable consisted of the following at April 30, 1998 and January 31, 1998:
April 30, January 31, 1998 1998 ------------ ------------ Due from Investors $ 93,635 $ 208,153 Partnerships 3,808,142 3,499,402 Horses 3,815,142 3,815,142 ------------ ------------ Total Accounts Receivable $ 7,716,919 $ 7,522,697 Less: Amounts Due Within One Year 4,972,869 4,805,590 - ---- ------------ ------------ Amounts Due After One Year $ 2,744,050 $ 2,717,107 ============ ============
7 Note B - Receivables - continued -------------------------------- The amounts due from the investment partnerships and individual investors represent secondary financing supplied by Edwards Arabians Inc. to allow them to prepay board and care for horses in exchange for an installment obligation. Deferred revenues are amortized monthly as the services are rendered over a period of one to three years. The loans are collateralized by the horses purchased and have interest rates ranging from 8.5% to 10.5%. The loans require interest only payments during their term, with principal repayments due as the horses are sold. Partnership loans will be collected by the time the assets of the partnerships are rolled over into corporations. The anticipated wind-up dates vary among partnerships but are generally one to three years. The Company performs ongoing credit evaluation of its customers' financial condition and evaluates the collectibility of all receivables maintained. Amounts considered uncollectible are written off when such determination is made and an allowance for accounts doubtful of collection is maintained based upon the expected collectibility. The Company measures its estimates of impaired loans in accordance with the provisions of Statement of Financial Accounting Standards No. 118 Accounting by Creditors for Impairment of a Loan - Income, Recognition and Disclosures. Interest income on impaired loans is recognized only when payment is received. The Company had no impaired loans. Note C - Revenue Recognition ---------------------------- The Company recognizes revenues from the sale of horses to investment partnerships, other breeders, and individuals at the time of delivery. The vast majority of the sales of horses are made for cash under normal credit terms. Revenues from board and care, breeding, and management of horses are recognized as the services are rendered. Board and care and management fees are generally paid in advance. Many of the investment partnerships and individual investors pay for these services through the use of installment obligations with the Company, which have interest rates ranging from 8.5% to 10.5%. The installment obligations require interest only payments during their term, with principal repayments due as the horses are sold to third parties. Note D - Net Income Per Common Share ------------------------------------ Net income per common share is computed using the weighted average number of shares of common stock outstanding during each period. Note E - Contingencies ---------------------- The Canadian income tax authorities are presently reviewing the farming tax status and associated investment losses for some of the individuals in limited investment partnerships which previously purchased horses from the company. Denial of some of these losses by the tax authorities might make investing in the limited partnership less attractive and could adversely impact the demand for the company's horses. Should an adverse condition result from this, management would work vigorously to restructure the limited partnerships in accordance with any revisions to the tax code and/or would seek other sources for the sale of its horses. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION Effective January 31, 1997, pursuant to the terms and conditions of an Agreement and Plan of Reorganization by and among the Company, Egyptian Arabians Inc. and Egyptian Arabians' sole stockholder, Egyptian Arabians Inc. became a wholly-owned subsidiary of the Company. Simultaneous with that transaction, 622291 Ontario Ltd. ("622291") became a wholly-owned subsidiary of Egyptian Arabians and, 622291 was reorganized pursuant to which operations of 622291 other than the Blue Moon Farms breeding and care operations of 622291's wholly-owned subsidiary, Edwards Arabian Inc., were spun off from 622291. The transaction pursuant to which Egyptian Arabians Inc. (including directly and indirectly its wholly-owned subsidiaries, 622291 and Edwards Arabians) became a wholly-owned subsidiary of the Company has been accounted for as a recapitalization, resulting in the historical operations of 622291 being treated as the historical operations of the Company. Accordingly, the following discussion and analysis of financial condition and results of operations is a discussion of the historical financial performance of 622291's operations relating to the Blue Moon Farms operations and the operations of 622291's wholly-owned subsidiary, Edwards Arabians Inc. Since the inception of the Company's Canadian operations in 1991, the Company has generated revenue primarily by selling Straight Egyptian Arabian horses to investment limited partnerships and individual investors and by operating the breeding and care facilities at its Blue Moon Farms facilities. Revenues generated by these two activities have remained fairly constant as a percentage of the Company's overall revenues, with sales representing approximately 78% and management fees for the breeding and care of the horses representing approximately 20%. The Company has increased sales primarily as a result of increased levels of investing activities promoted by Edwards Securities Inc. which, in turn, results in a greater number of horses being boarded at the Company's Blue Moon Farms facilities. Sales to limited partnerships have traditionally accounted for approximately 50% of the Company's sales while the balance consists of sales to other farms and individual owners. Revenues from the Company's Blue Moon Farms operations, as those operations relate to the care and maintenance of the horses boarded there, are generated almost entirely (98%) from services rendered to the various limited partnerships that purchase Straight Egyptian Arabians from the Company. The Company continues to believe that the markets outside of Canada represent significant opportunities for the Company. Management intends to allocate greater resources to expanding sales channels and establishing marketing alliances in non-Canadian and international markets. During 1997, as a result of Revenue Canada's proposed assessments with the investors in the investment limited partnerships, the sales of horses was limited primarily to other breeders and individual investors. As a result, as a percentage of the Company's overall revenues for the 1997 Operating Year, sales of horses declined to approximately 43% and management fees for the breeding and care of the horses increased to approximately 52%. The volume of sales of horses in the 1998 Operating Year will continue to be negatively impacted pending the outcome of the Revenue Canada assessments with the individual investors. The Company expects farm revenues to continue to increase during the 1998 Operating Year since the foaling activity and the limited sales of horses will result in a greater number of horses under the Company's care. Revenues from the Company's Blue Moon Farms operations, as those operations relate to the care and maintenance of the horses boarded there, are generated almost entirely (97%) from services rendered to the various limited partnerships that purchased Straight Egyptian Arabian 9 horses from the Company. The Company recognizes the need to continue to apply technology in a manner that will increase its operating margins. In furtherance of those goals, the Company expects to allocate a greater percentage of its overall revenues to research and development and sales and marketing activities over the next several years. In recognition of the fact that sales of horses to investment limited partnerships have diminished as a result of Revenue Canada pronouncements, the Company has decided to diversify its base of operations by expanding into unrelated and totally distinct consumer sector businesses. The Company's management has identified several possible acquisition candidates and is evaluating the merits of pursuing those candidates. RESULTS OF OPERATIONS The following table sets forth for the periods indicated the percentages which the selected items in the Company's Consolidated Statements of Operations bear to total revenues:
Three Months Ended April 30 1998 1997 -------- -------- REVENUES Farms (1) 47.5% 62.2% Horses (2) 46.8% 33.3% Interest and Other 5.7% 4.5% -------- -------- Total Revenues 100.0% 100.0% -------- -------- COSTS AND EXPENSES Farm (1) 16.3% 33.0% Horses (2) 2.9% 65.4% Marketing and Sales .1% 5.6% General and Administrative 13.5% 29.7% Depreciation and Amortization 1.7% 2.0% Interest Expense 2.7% 2.0% -------- -------- Total Costs and Expenses 37.2% 137.7% -------- -------- Income (Loss) Before Taxes 62.8% (37.7)% Provision for Income Taxes 20.9% (15.0)% -------- -------- Net Income (Loss) 41.9% (22.7)% ======== ========
(1) - Farm revenues and costs and expenses relate to the Company's breeding operations and care of the horses. (2) - Horse revenues and costs and expenses relate to the Company's sale of horses. - continued - 10 RESULTS OF OPERATIONS - continued The following table sets forth for the periods indicated the number of horses in the Company's inventory and the changes in that inventory. Horses enter life as weanling fillies or colts, and fillies are allowed to grow up to mare status at age three. At this time, mares will begin to breed. Management of the Company expects that a mare will have an economic reproductive life of at least 15 years, although actual experience has shown that some mares have been bred and have foaled out beyond the 15 year reproductive life span. Horses have been sold to investors within a broad range of age groupings, from weanling fillies up to mature mares. The Company does not sell colts to investors. As the inventory of horses maintained by the Company constantly changes, the ages of the horses in that inventory varies depending on the ages of the horses sold and purchased by the Company. The Company does not own any stallions and instead utilizes and accesses semen from a major international organization which currently controls the largest collection of senior, world class Straight Egyptian Arabian stallions available. In addition, the Company has previously purchased semen from other senior stallions which are owned by other independent North American breeders of Straight Egyptian Arabian horses. The number of horses in the Company's inventory is significantly less than the number of horses under the Company's care and supervision.
Three Months Ended April 30 1998 1997 -------- -------- Number of Horses Beginning Inventory 4 12 Horses Acquired 2 3 Horses Sold or Exchanged (4) (7) --- --- Ending Inventory 2 8 === ===
The range of sales and purchase prices and the average sale and purchase price of horses for all periods were as follows:
Range Average ------------------ -------------- Mares $ 70,000 -$ 95,000 $ 92,000 Fillies $ 50,000 -$ 60,000 $ 55,000 Colts: Purchase $ 10,000 Sale $ 500 or less
- continued - 11 RESULTS OF OPERATIONS - continued The limited partnerships to which the Company frequently sells fillies and mares generally have a one to three year life until, for tax reasons, they are rolled over into corporations. Prior to the occurrence of these roll-overs, the Company will evaluate the holdings of a given partnership, focusing on the number of horses and the mix of colts to fillies, in order to support and maintain the investment value of those partnerships. The Company will often take fillies or mares from its existing inventory and exchange them for colts owned by the various investment partnerships. Fillies and mares are much more valuable than colts, and the price differential between the fillies and mares surrendered by the Company and the colts received in exchange is expensed as part of the cost of horses sold. In determining the value of the fillies and mares surrendered by the Company and colts received in exchange from the limited partnerships, the Company recognizes the current market value of the horses based on the Company's costs of purchasing fillies, mares and colts. Total replacement costs reflected in cost of sales were $0, and $315,000 for the three months ended April 30, 1998 and 1997, respectively. In addition, the average management fees charged by the Company for all periods presented were approximately $5,000 per investment limited partnership per year, or approximately $417 per month. THREE MONTHS ENDED APRIL 30, 1998 COMPARED WITH THREE MONTHS ENDED APRIL 30, 1997 REVENUES. Total revenues for the three months ended April 30, 1998 increased by $225,806 (20.8)% to $1,082,185 from $856,379 for the three months ended April 30, 1997. Revenues from breeding and care of horses decreased by $27,414, and the sale of horses accounted for an increase in revenues of $220,950, and interest and other revenues accounted for the remaining $32,270 increase in revenues. The sales of horses in the three months ended April 30, 1998 included $500,000 on the sale of the rights to purchase all of the colts delivered at the Blue Moons Farms facilities during the 1997-98 breeding season which was deferred from the year ended January 31, 1998. Other revenues generated by the sale of horses were very limited pending the outcome of the Revenue Canada proposed assessments with the investors. Farm revenues for board and care continued to increase as the number of horses under the Company's care has grown. Breeding fees in the first quarter 1998 as compared to the first quarter of 1997 accounted for the overall decrease in farm revenues. COSTS AND EXPENSES. Total costs and expenses for the three months ended April 30, 1998 decreased by $ 776,336 (65.9%) to $402,125 from $1,178,461 for the three months ended April 30, 1997. As the Company's horse purchases and sales activity was very limited during the three months ended April 30, 1998 as compared to the three months ended April 30, 1997, the Company was able to control the incurring of expenses associated with those activities. Farm expenses as a percentage of farm revenues decreased to 34.2% for the three months ended April 30, 1998 from 53.1% for the three months ended April 30, 1997. The decrease was primarily due to reduced salaries and staffing, cancellation of insurance on the horses and fewer horse registrations, all of which are a result of the continued Revenue Canada assessment against the investors in the limited partnerships. The cost of horses sold as a percentage of horse sales decreased to 6.2% for the three months ended April 30, 1998 from 196.5% for the three months ended April 30, 1997. The decrease was primarily due to high margin on the sale of the rights to purchase all of the colts delivered during the three months ended April 30, 1998 and the unusually high mortality rate and replacement costs of horses during the three months ended April 30, 1997. MARKETING AND SALES. The company incurred only $1,594 of marketing and sales expenses for the three months ended April 30, 1998 which was attributable to the lack of horse sales. Marketing and sales expenses for the three months ended April 30, 1997 were $47,561. GENERAL AND ADMINISTRATIVE. General and administrative expenses for the three months ended April 30, 12 1998 decreased by $107,964 to $146,533 from $254,497 for the three months ended April 30, 1997. The primary reason for the decrease was professional and consulting fees incurred in connection with the recapitalization and Registration of the Company during the three months ended April 30, 1997. INCOME TAXES. The provision for taxes for the three months ended April 30, 1998 and 1997 is based upon an effective Canadian tax rate of 40.0%. LIQUIDITY AND CAPITAL RESOURCES At April 30, 1998, the Company's primary source of liquidity included cash and cash equivalents of $0 and open trade credit with vendors of $4,071,943. The Company has not borrowed any moneys from financial institutions for working capital needs with the exception of its commercial mortgages on the construction and improvements to its facilities. The Company's working capital decreased by $903 during the three months ended April 30, 1998 from $711,161 at January 31, 1998 to $710,258 at April 30, 1998. Net cash flows from operating activities during the three months ended April 30, 1998 were a negative $85,706 as compared to a positive $241,931 for the three months ended April 30, 1997. The decrease of $327,637 resulted primarily from the reduction in deferred revenues and an increase in accounts receivable during the three months ended April 30, 1998. Net cash flows from investing activities (primarily from the collection of amounts due from related companies) during the three months ended April 30, 1998 were $86,184 as compared to net cash flows used in investing activities (primarily used in the acquisition of property and equipment) of $620,248 for the three months ended April 30, 1997. Net cash flows used in financing activities during the three months ended April 30, 1998 were $15,090 as compared with net cash flows from financing activities of $426,613 for the three months ended April 30, 1997. The decrease reflects the borrowings on new commercial property during the three months ended April 30, 1997. The balance sheet at April 30, 1998 shows an increase in current assets for the three months from $4,880,702 to $5,012,869 and an increase in current liabilities from $4,169,541 to $4,302,611 and a decrease in deferred revenues from $1,646,472 to $955,900, all compared with those figures at January 31, 1998. The increase in current assets and liabilities was primarily attributable to an increase in accounts receivable and accounts payable during the first three months ended April 30, 1998. COMPANY'S FINANCING REQUIREMENTS The Company has no current need for any externally generated financing to fund its continued operations or to fund continued internal growth. As the Financial Statements show, the Company's business has been self-financing, and does not depend on any institutional debt or commercial lines of credit (except for commercial mortgages on the Company's properties). The Company has available through Resi Corp., a related party, a line of credit that could be used to fund operating cash shortfalls and future acquisitions of new businesses. 13 PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) See Index to Exhibits (b) Reports on Form 8-K No reports on Form 8-K have been filed during the quarter for which this report is filed. 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. MERCRISTO DEVELOPMENTS, INC. Date: June 15, 1998 /s/ David G. Edwards --------------- --------------------------------------- David G. Edwards, President and Chief Financial Officer 14 INDEX TO EXHIBITS (2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION Not applicable. (3) (a) ARTICLES OF INCORPORATION Restated Certificate of Incorporation is incorporated herein by reference to Exhibit 3.1 to the Registrant's Registration Statement on Form 10 (Registration No. 0-22541) as filed on May 8, 1997. (b) BY-LAWS Amended and Restated By-laws are incorporated herein by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form 10 (Registration No. 0-22541) as filed on May 8, 1997. (4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES (a) The documents listed under Item (3) of this Index are incorporated herein by reference. (10) MATERIAL CONTRACTS Not applicable. (11) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS Computation can be clearly determined from the Financial Statements and Notes thereto included herein. (15) LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION Not applicable. (18) LETTER RE CHANGE IN ACCOUNTING PRINCIPLES Not applicable. (19) REPORT FURNISHED TO SECURITY HOLDERS Not applicable. (22) PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO VOTE OF SECURITY HOLDERS Not applicable. (23) CONSENTS OF EXPERTS AND COUNSEL Not applicable. (24) POWER OF ATTORNEY Not applicable. 15 *(27) FINANCIAL DATA SCHEDULE The Financial Data Schedule is included herein as Exhibit 27. (99) ADDITIONAL EXHIBITS Not applicable. - ------------------------- *Exhibit filed with this Report EX-27 2 EXHIBIT 27
5 CANADIAN 3-MOS JAN-31-1999 FEB-01-1998 APR-30-1998 1 0 0 4,972,864 0 40,000 5,012,869 1,940,689 0 9,790,667 4,302,611 0 0 0 17,840 2,596,397 9,790,667 505,950 1,082,185 31,250 175,973 166,036 0 28,866 680,060 226,394 453,666 0 0 0 453,666 .02 .02
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