ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
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HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
March 31, 2002 December 31, 2001
-------------- -----------------
ASSETS
------
Current assets
--------------
Cash and cash equivalents $ 119,065 $ 105,383
Accounts receivable 4,977 3,639
Due from related party 33,502 16,883
Inventory 11,247 11,925
Prepaid expenses 57,087 25,106
---------- ----------
Total current assets 225,878 162,936
---------- ----------
Property and equipment
----------------------
Land 194,256 218,750
Buildings and improvements 1,118,158 1,006,709
Furniture, fixtures and equipment 264,759 351,448
---------- ----------
1,577,173 1,576,907
Less accumulated depreciation 176,565 160,255
---------- ----------
Net property and equipment 1,400,608 1,416,652
---------- ----------
Other assets
------------
Goodwill, net of accumulated amortization of $3,319 at
March 31, 2002 and $3,101 at December 31, 2001 14,119 14,337
Amounts receivable from shareholder 19,411 19,411
Costs of issuing stock 207,896 201,396
Deferred tax asset 22,000 25,000
Investment in affiliated company 326,300 326,300
---------- ----------
Total other assets 589,726 586,444
---------- ----------
$2,216,212 $2,166,032
========== ==========
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See notes to consolidated financial statements.
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(Unaudited)
LIABILITIES AND March 31, 2002 December 31, 2001
--------------- -------------- -----------------
STOCKHOLDERS' EQUITY
--------------------
Current liabilities
-------------------
Bank overdraft $ 22,356 $ 25,224
Notes payable - related parties 112,700 112,700
Notes payable - other 33,000 33,000
Current maturities of long-term debt 370,661 371,252
Accounts payable 63,572 127,686
Accrued liabilities:
Interest 19,075 17,135
Other 49,187 71,420
Customer deposits 273,062 123,134
----------- -----------
Total current liabilities 943,613 881,551
Long-term debt, less current maturities 490,038 508,102
----------- -----------
Total liabilities 1,433,651 1,389,653
----------- -----------
Commitments and contingencies
Stockholders' equity
--------------------
Preferred stock -- --
Common stock 195 195
Additional paid-in capital 1,185,175 1,185,175
Accumulated deficit (203,037) (212,556)
Foreign currency translation adjustment (199,772) (196,435)
----------- -----------
Total stockholders' equity 782,561 776,379
----------- -----------
$ 2,216,212 $ 2,166,032
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See notes to consolidated financial statements.
4
HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three months ended March 31,
2002 2001
---- ----
Sales $ 251,933 $ 209,497
Cost of sales 44,258 21,674
Operating expenses 188,242 187,586
--------- ---------
Income from operations 19,433 237
--------- ---------
Other income (expense)
----------------------
Interest income 451 3,345
Interest expense (7,365) (16,711)
--------- ---------
Other expense, net (6,914) (13,366)
--------- ---------
Income (loss) before provision for income taxes 12,519 (13,129)
Income tax expense (benefit) 3,000 (3,500)
--------- ---------
Net income (loss) $ 9,519 $ (9,629)
========= =========
Net income (loss) per common
share $ 0.01 $ (0.02)
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See notes to consolidated financial statements.
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HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
Common
Preferred Shares Common
Stock Outstanding Stock
----- ----------- -----
Balance December 31, 2001 $ -- 649,661 $ 195
Comprehensive income:
Net income -- -- --
Foreign currency translation adjustment -- -- --
-------- -------- --------
Total comprehensive income
Balance March 31, 2002 $ -- 649,661 $ 195
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Common stock - par value of $.0003; 10,000,000 shares authorized, 649,661 shares
issued and outstanding.
Preferred stock - 2,000,000 shares authorized, no shares have been issued.
See notes to consolidated financial statements.
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Accumulated
Additional Stock Other
Paid-In Subscriptions Accumulated Comprehensive
Capital Receivable Deficit Loss Total
------- ---------- ------- ---- -----
$1,185,175 $ -- $ (212,556) $ (196,435) $ 776,379
----------
-- -- 9,519 $ 9,519
-- -- -- (3,337) (3,337)
---------- --------- ---------- ---------- ----------
6,182
----------
$1,185,175 $ -- $ (203,037) $ (199,772) $ 782,561
========== ========= ========== ========== ==========
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HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Three months ended March 31,
2002 2001
---- ----
Operating activities
--------------------
Net income (loss) $ 9,519 $ (9,629)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Amortization of goodwill 218 291
Depreciation 16,044 16,268
Deferred tax expense (benefit) 3,000 (3,500)
Decrease (increase) in:
Accounts receivable (1,338) (14,126)
Inventory 678 (5,735)
Prepaid expenses (31,981) (32,592)
Increase (decrease) in:
Bank overdraft (2,868) (10,923)
Accounts payable (64,114) (4,847)
Accrued liabilities (20,293) (57,703)
Customer deposits 149,928 139,327
--------- ---------
Net cash provided by operating activities 58,793 16,831
--------- ---------
Investing activities
--------------------
Purchases of property and
equipment -- (43,643)
Increase in amounts receivable
from shareholder (16,619) --
--------- ---------
Net cash used for investing activities (16,619) (43,643)
--------- ---------
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See notes to consolidated financial statements.
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HARP & EAGLE, LTD. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(Unaudited)
Three months ended March 31,
2002 2001
---- ----
Financing activities
--------------------
Proceeds from long term debt $ -- $ 39,903
Retirement of long term debt (18,655) (54,488)
Costs of issuing stock (6,500) (21,041)
--------- ---------
Net cash used by financing activities (25,155) (35,626)
--------- ---------
Effect of exchange rate changes
on cash (3,337) 50,810
--------- ---------
Cash and cash equivalents
Net increase (decrease) 13,682 (11,628)
Beginning of period 105,383 260,485
--------- ---------
End of period $ 119,065 $ 248,857
========= =========
Supplemental cash flow information
----------------------------------
Cash paid for interest $ 5,425 17,575
Cash paid for taxes $ -- $ --
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HARP & EAGLE, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 -- Basis of presentation
In management's opinion, the financial information, which is unaudited, reflects
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the financial information as of and for the three month
periods ended March 31, 2002 and 2001, in conformity with accounting principles
generally accepted in the United States of America. The financial statements
include the accounts of Harp & Eagle, Ltd. (Company), was formed in September
1999 under the laws of the state of Wisconsin for the purpose of acquiring all
of the issued and outstanding common stock of Castledaly Acquisition Corporation
(Castledaly). In 2000, the Company acquired approximately 63% of the outstanding
common stock of Castledaly in a series of transactions. The acquisition of
Castledaly has been accounted for in a manner similar to a pooling of interest
since it was acquired from a company under joint control and common management.
In 2001, the Company acquired the remaining 37% ownership interest of
Castledaly. Castledaly owns 100% of its subsidiary, Castledaly Manor Limited
(Manor), which owns and operates an Irish manor house inn located in the village
of Castledaly, Ireland. Operating results for the three-month period ended March
31, 2002 are not necessarily indicative of the results that may be expected for
future periods.
The business of the Company, accounting policies followed, and other information
are contained in the notes to the consolidated financial statements for the
Company as of and for the years ended December 31, 2001 and 2000, filed as part
of the Company's annual report on Form 10-KSB. These consolidated financial
statements should be read in conjunction with the annual consolidated financial
statements.
Note 2 - Earnings per share
Earnings per share has been computed based on the weighted average shares
outstanding for the periods below:
Income (loss) Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic income (loss) per common share:
Income (loss) available to common stockholders:
Three months ended March 31, 2002 $ 9,519 649,661 $ .01
------------ ============
Three months ended March 31, 2001 $ (9,629) 504,339 $ (.02)
------------ ============
During December, 2000 the Company granted options to purchase approximately
33,332 shares of common stock to four individuals, all of whom are officers,
directors and/or employees of the Company. These options were granted pursuant
to a plan adopted by the Company's board of directors. All of these options are
exercisable for a period of ten years, at the price of $3.00 per share; however,
such options will not become fully vested and exercisable until July 1, 2007.
The exercise price of these options was determined by the Company to reflect the
fair value of the common stock as of December 31, 2000. These options have been
cancelled.
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