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PEOPLES LIBERATION INC - 10QSB - 20040819 - NOTES_TO_FINANCIAL_STATEMENT
NOTES TO FINANCIAL STATEMENTS
NOTE 1. GENERAL BUSINESS AND ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Century Pacific Financial Corporation (the Company) was organized as a Delaware
corporation on December 29, 1982. The Company currently has three wholly owned
subsidiaries, Century Pacific Fidelity Corporation, Century Pacific Management
Corporation, and Global Medical Technologies, Inc. Century Pacific Fidelity
Corporation and Century Pacific Management Corporation are totally inactive at
this time and are without assets or debts. Global Medical Technologies, Inc. was
formed on April 4, 1999 to buy and sell refurbished medical equipment.
BASIS
The financial statements are prepared following accounting principles generally
accepted in the United States of America. All inter-company entries have been
eliminated.
REVENUE RECOGNITION
For the medical equipment sales the revenue is recognized upon shipment, FOB
destination for equipment delivered by the Company and FOB shipping point for
shipments made through common carrier. For the repair services, revenue is
recognized when the service is rendered.
For certain sales, payments are extended either for six months or twelve months.
These sales are recognized ratably over the payment period. The net deferred
revenue represents the portion of these sales not yet recognized.
ACCOUNTS RECEIVABLE
The detail of Accounts Receivable is listed below.
06/30/04 9/30/03
--------- ---------
Gross Accounts Receivable $ 433,700 $ 307,031
Allowance for Doubtful Accounts (24,562) (24,562)
--------- ---------
Net Amount $ 409,138 $ 282,469
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INVENTORY
Inventory is stated at the lower of cost (first-in, first-out). Most medical
equipment is bought and sold with little or no refurbishing. When refurbishing
is done, actual costs are included in the inventory costs. All inventory is
located in Arizona, with the exception of a few pieces stored in Mexico.
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EQUIPMENT AND VEHICLES
Equipment and vehicles are depreciated using the straight-line method over their
five year estimated useful lives.
Fixed assets consist of the following:
06/30/04 9/30/03
--------- ---------
Office Equipment and Furniture $ 81,329 $ 64,592
Vehicles, Forklift 54,933 54,933
Less: Accumulated depreciation (55,266) (45,154)
--------- ---------
$ 80,996 $ 74,371
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USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
EARNINGS PER SHARE
The basic earnings (loss) per share is calculated by dividing the Company's net
income available to common shareholders by the weighted average number of common
shares during the year. The diluted earnings (loss) per share is calculated by
dividing the Company's net income (loss) available to common shareholders by the
diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted
number of shares adjusted as of the first of the year for any potentially
dilutive debt or equity.
STOCK BASED COMPENSATION
The Company accounts for its stock based compensation based upon provisions in
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION and as amended by SFAS No.
148.
CONCENTRATION OF CREDIT RISK
Periodically during the year, the Company may maintain its cash in financial
institutions in excess of amounts insured by the US federal government.
ADVERTISING
Advertising costs are expensed as incurred. Advertising expense totaled $2,372
for the year ended September 30, 2003, $0 for the year ended September 30, 2002
and $0 for the year ended September 30, 2001.
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NOTE 2. STOCKHOLDERS' EQUITY
In June 2002 the Company had a 7 to 1 reverse stock split. This reverse stock
split has been retroactively applied to all years shown on the financial
statements.
On August 8, 2003 the Company converted the debt owed to a related company,
Natural Technologies to stock. The debt of $294,600 was converted to 2,946,000
shares of restricted common stock per the 1999 agreement.
On August 8, 2003 the Company converted $24,000 of note payable debt to 80,000
shares of restricted common stock.
On August 12, 2003 the Company had another reverse stock split of 2.5 to 1.
September 2003 the Company issued 200,000 common stock for consulting services
valued at $30,000.
In June 2004 the Company issued 50,000 preferred shares for $20,000 cash. These
shares are convertible one for one to common shares when the Company's common
stock price has stayed at $0.50 or above for a period of 30 days.
In June 2004 the Company's subsidiary, Global Medical Technologies (GMT), issued
630,000 shares of Preferred convertible stock for $161,000 cash. These shares
are convertible to 945,000 shares of Century Pacific Financial Corporation's
common stock. These shares are convertible 1 share to 1.5 shares of Company's
common stock when the common stock price has stayed at $0.50 or above for a
period of 30 days.
NOTE 3. INCOME TAXES:
The Company provides for income taxes under Statement of Financial Accounting
Standards No. 109, ACCOUNTING FOR INCOME TAXES. SFAS No. 109 requires the use of
an asset and liability approach in accounting for income taxes. Deferred tax
assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the current tax
rates in effect when these differences are expected to reverse.
The components of deferred taxes assets at year-ends September 30 are as
follows:
2003 2002 2001
-------- -------- --------
Tax effect of net operating losses $779,801 $776,801 $827,718
Other 0 2,960 5,979
-------- -------- --------
Net Deferred Tax Asset $779,801 $779,761 $875,697
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The estimated federal Net Operating Loss carry-forwards for the Company and the
corresponding expiration dates are listed below as of September 30, 2003.
Amount Last year
---------- ---------
Amount available from year 1991 $ 493,179 2006
Amount available from year 1992 1,205,511 2007
Amount available from year 1993 626,560 2008
Amount available from year 1994 80,024 2009
Amount available from year 1995 20,249 2010
Amount available from year 1996 1,593 2011
Amount available from year 1998 387 2018
Amount available from year 2003 300,225 2023
----------
Total $2,727,728
==========
Tax effect of net operating losses $776,258 $779,801 $776,801
Other 0 0 2,960
-------- -------- --------
Net Deferred Tax Asset $776,258 $779,761 $875,697
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NOTE 4. CONTINGENCIES AND COMMITMENTS
The Company's medical equipment offices and warehouse have a future lease
expense illustrated below.
Year 1 Year 2 Year 3 Year 4 Year 5
Real Estate Leases 52,188 30,000 30,000 0 0
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The Company sells most of its products to Mexico through a sales agent. If that
agent were no longer available, it would cost the Company time and resources to
establish another relationship.
NOTE 5. RELATED PARTIES TRANSACTIONS
The Company shares office space with Natural Technologies, Inc. Natural
Technologies, Inc. is a major shareholder of the Company.
During year 2002 the Company borrowed from an officer $85,000 for operations.
This is a demand note with no interest, it was agreed that this note be paid
using the Company's common stock. 1,000,000 shares of common stock were pledged
to repay this loan.
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NOTE 6. RELIANCE ON PRESIDENT
The president of the Company is the person who has the experience to buy and
sell used medical equipment at a profit. If he were to no longer be able or
willing to function in that capacity the Company would be severely affected.
NOTE 7. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Below is a listing of the most recent relevant accounting standards SFAS 146-148
and their effect on the Company.
SFAS 146 ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES
This statement requires companies to recognize costs associated with exit or
disposal activities, other than SFAS 143 costs, when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Examples of these
costs are lease termination costs, employee severance costs associated with
restructuring, discontinued operation, plant closing, or other exit or disposal
activity. This statement is effective after December 15, 2002.
SFAS 147 ACQUISITIONS OF CERTAIN FINANCIAL INSTITUTIONS - AN AMENDMENT OF FASB
STATEMENT NO. 72 AND 144 AND FASB INTERPRETATION NO. 9
This statement makes the acquisition of financial institutions come under the
statements 141 and 142 instead of statement 72, 144 and FASB Interpretation No.
9. This statement is applicable for acquisition on or after October 1, 2002.
SFAS 148
This Statement amends FASB Statement No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results.
The adoption of these new Statements is not expected to have a material effect
on the Company's financial position, results or operations, or cash flows.
NOTE 8. CONCENTRATION OF BUSINESS
While sales in Mexico continue to grow and comprise more than 80% of the total
sales of the company, the distribution of sales is more diverse than in previous
years, and there is currently client that accounts for more than 20% of the
total sales.
NOTE 9. SEGMENT INFORMATION
Segment information is presented in accordance with SFAS 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. This standard is based on a
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management approach, which requires segmentation based upon the Company's
internal organization and disclosure of revenue based upon internal accounting
methods. For the years 2002 and prior, management divided revenue into two
categories, sales of equipment and repair services. These two categories are
shown on the face of the statement of operations.
NOTE 10. CANCUN HOSPITAL DEBT WRITE OFF
A hospital customer in Cancun, Mexico, which purchased a large amount of the
Company's products during 2002, has experienced financial difficulty, and is
being restructured. The hospital has continued to operate and its gross revenues
have increased dramatically, however, it has been unable to pay its debt to the
company.
Negotiations with the new hospital management have progressed very slowly over
the last year. The hospital has not yet finalized an agreement for the payment
that is due. It could be possible that the Company will not be able to recover
the inventory associated with the hospital. Although management expects to
complete an arrangement for the value of this remaining inventory to the new
hospital owners, it is at risk. The total inventory associated with the hospital
is $312,550. Management decided to write off this inventory value as of
September 30, 2003. Notwithstanding this, management is vigorously pursuing all
legal remedies to resolve this matter, and is in the process of placing a lien
on the hospital and all of its assets.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following selected data of the Company is qualified by reference to and
should be read in conjunction with the consolidated financial statements,
including any notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
report.
Comparison of the nine-month periods ending June 30, 2004 and June 30, 2003 are
contained herein. Fiscal year to date revenues for the nine months ending June
30, 2004 were $1,058,246, as compared to $588,970 for the same period in 2003.
This represents an 80% increase over the previous year, however it is more in
line with revenues generated prior to the start of the war in Iraq. Revenues for
the third quarter of the fiscal year 2004 of $440,324 are higher than the
$99,701 of the prior year. This represents a 341% increase over the same period
of the previous year. The increase was primarily due to the Company having a
return to normal sales. Sales had dropped following the start of the Iraq war in
the previous years quarter. Gross profit percentage was 63% for quarter ended
6/30/04 and 65% for the quarter ended 6/30/03. The operating expenses were
normal business expenses for this period. Expenses for the quarter were 44% of
sales for 6/30/04 and 101% for 6/30/03. The operating expenses increased
slightly due to payroll increases and freight costs.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONTINUING AND FUTURE PLAN OF
OPERATIONS.
This analysis should be read in conjunction with the condensed consolidated
financial statements, the notes thereto, and the financial statements and notes
thereto included in the Company's September 30, 2003, Annual Report on Form
10-KSB. All non-historical information contained in this quarterly report is a
forward-looking statement. The forward-looking statements contained herein are
subject to certain risks and uncertainties that could cause the actual results
to differ materially from those reflected in the forward-looking statements.
As of April 15, 2002, the Company has reorganized to eliminate all stockbroker
operations from its business and has focused primarily in the areas of
biotechnology, medical equipment sales and service, and hospital design
consultation. The new Board of Directors has plans for aggressively acquiring
more medically related businesses and investing heavily in the area of
biotechnology. A private placement raised an additional $181,000 of working
capital in May of 2004, and more is anticipated during the final quarter of this
fiscal year.
Management entered into a strategic alliance agreement with Cryptic Afflictions,
LLC. Through this new agreement Century has purchased a percentage of the patent
rights for a new virus that has been discovered by Dr. Steven Robbins of Cryptic
Afflictions, LLC., the company is also providing business development for the
new virus technology company, which has been renamed Limina Biotechnologies,
Inc.
This previously undetected virus appears to be of significant importance to
researchers looking for a cure to Multiple Sclerosis and many other neurological
illnesses. Antibodies to the newly discovered virus were found in the cerebral
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spinal fluid and blood of over 90% of the patients tested with Multiple
Sclerosis. It is believed that this newly discovered virus may prove to be
responsible for a host of neurological disorders. Tests are currently being
prepared for tissue samples of lesions within the brains of patients with
Multiple Sclerosis. This will be the final round of tests before approaching the
FDA for approval of the diagnostic tests, and hopefully an eventual vaccine. Now
that patents are pending in many countries, negotiations for licensing
agreements will follow. Century's management intends to focus more on
biotechnology in the coming years.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations are conducted through its wholly owned subsidiary,
Global Medical Technologies, Inc. The liquidity requirements of the Company
consist primarily of the operating cash requirements, or working capital needed,
for Global Medical. The Company believes that cash flow from operating
activities will be adequate to meet its liquidity requirements if no growth were
contemplated. However, with the planned growth as described in the preceding
paragraphs, cash flow generated from operations will not be enough. Management
is planning a private placement to raise additional funds during the next two
quarters. These additional funds will be used to finance the growth, and invest
in the new virus research.
FORWARD LOOKING STATEMENTS
This Form 10-QSB includes "forward looking statements" concerning the future
operations of the Company. It is management's intent to take advantage of the
"safe harbor" provision of the Private Securities Litigation Reform Act of 1995.
This statement is for the express purpose of availing the Company of the
protections of such safe harbor with respect to all "forward looking statements"
contained in this Form 10-QSB. We have used "forward looking statements" to
discuss future plans and strategies of the Company. Management's ability to
predict results or the effect of future plans is inherently uncertain. Factors
that could affect results include, without limitation, competitive factors,
general economic conditions, customer relations, relationships with vendors, the
interest rate environment, governmental regulation and supervision, seasonality,
distribution networks, product introductions, acceptance, technological change,
changes in industry practices and one-time events. These factors should be
considered when evaluating the "forward looking statements" and undue reliance
should not be placed on such statements. Should any one or more of these risks
or uncertainties materialize, or should any underlying assumptions prove
incorrect, actual results may vary materially from those described herein.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Management has filed a lawsuit in Mexico to obtain payment for the equipment
delivered to the Amerimed hospital in Cancun.
ITEM 2. CHANGES IN SECURITIES
50,000 shares of Preferred stock in Century were sold to raise additional
capital in the month of May of 2004.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At an annual meeting of the shareholders, held on June 26, 2004, officers and
directors were unanimously approved by all shareholders present. It was further
approved that the name of the company will change to Century Pacific Holdings,
Inc., which will more accurately reflect the nature of the company, and that the
company will change its domicile to Nevada before the end of this fiscal year. A
stock option plan was also approved by the shareholders.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
31.1 Certification of the Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act
31.2 Certification of the Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act
32.1 Certification of the Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act
32.2 Certification of the Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act
(b) REPORTS ON FORM 8-K
There was one report on Form 8-K filed during the quarter ended
June 30, 2004. The Form 8-K was filed to report the Strategic
Alliance Agreement that was signed on April 16, 2004 between
Century Pacific Financial Corp. and Cryptic Afflictions, LLC.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CENTURY PACIFIC FINANCIAL CORPORATION
Date: August 14, 2004 By: /s/ David L. Hadley
-----------------------------------
David L. Hadley
President, Director, Chief
Executive Officer and Chief
Financial Officer
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO 15 U.S. C. 78m(a) or 78o(d)
(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICER
Solely for the purposes of complying with Exchange Act Rules adopted by the
Securities and Exchange Commission, I, the undersigned Chief Executive Officer
of Century Pacific Financial Corporation (the "Company"), hereby certify, based
on my knowledge,
1. I have reviewed this quarterly report on Form 10-QSB of Century
Pacific Financial Corporation.
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entitles,
particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this report (the "Evaluation Date"); and
c) presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize, and report financial data and have identified
for the registrant's auditors any material weaknesses in internal controls;
and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: August 14, 2004
/s/ David Hadley
--------------------------------
David Hadley
Chief Executive Officer
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EXHIBIT 31.2
CERTIFICATION PURSUANT TO 15 U.S. C. 78m(a) or 78o(d)
(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
WRITTEN CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
Solely for the purposes of complying with Exchange Act Rules adopted by the
Securities and Exchange Commission, I, the undersigned Chief Financial Officer
of Century Pacific Financial Corporation (the "Company"), hereby certify, based
on my knowledge,
1. I have reviewed this quarterly report on Form 10-QSB of Century
Pacific Financial Corporation.
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entitles,
particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this report (the "Evaluation Date"); and
c) presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize, and report financial data and have identified
for the registrant's auditors any material weaknesses in internal controls;
and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: August 14, 2004
/s/ David Hadley
--------------------------------
David Hadley
Chief Financial Officer
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EXHIBIT 32.1
CERTIFICATES OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003 (18 U.S.C. 1350)
Solely for the purposes of complying with 18 U.S.C. ss. 1350, I, the
undersigned Chief Executive Officer of Century Pacific Financial Corporation
(the "Company"), hereby certify, based on my knowledge, that the Quarterly
Report on Form 10-QSB of the Company for the quarter ended June 30, 2004 (the
"Report"):
1. Fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934: and
2. That information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ David Hadley
----------------------------------
David Hadley
Chief Executive Officer
August 14, 2004
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EXHIBIT 32.2
CERTIFICATES OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003 (18 U.S.C. 1350)
Solely for the purposes of complying with 18 U.S.C. ss. 1350, I, the
undersigned Chief Financial Officer of Century Pacific Financial Corporation
(the "Company"), hereby certify, based on my knowledge, that the Quarterly
Report on Form 10-QSB of the Company for the quarter ended June 30, 2004 (the
"Report"):
1. Fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934: and
2. That information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ David Hadley
---------------------------------
David Hadley
Chief Financial Officer
August 14, 2004
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