RICA FOODS INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Annual Report under Section 13 or 15(d)

Of the Securities Exchange Act of 1934

For the Fiscal Year Ended: September 30, 1999
Commission File No. 0-18222

RICA FOODS, INC.

(Exact Name of Registrant as specified in its charter)

Nevada 87-0432572

(State or other jurisdiction of incorporation) (IRS Employer File Number)

95 Merrick Way, Suite 507
Coral Gables, Florida 33134

(Address of principal executive offices) (Zip code)

(305) 476-1757, (305) 476-1760

(Registrant's telephone and facsimile number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock $.001 par value

(Title of Class)

Indicate by check mark 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

Check if there is no disclosure of delinquent files in response to Item 405 of
Regulation S-K is contained in this form and no disclosure will be contained to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K. ()

Issuer's revenues for its most recent fiscal year $118,549,625.

The aggregate market value of the voting stock of the Registrant held by
non-affiliates as of January 5, 2000 was approximately $51,386,802. A total of
4,194,841 shares were owned by non-affiliates as of December 29, 1999.

The number of shares outstanding of the Registrant's common stock, as of the
latest practicable date, January 5, 2000 was 12,847,921.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 1999 Annual Report to Shareholders Parts I, II and IV

Portions of the Proxy Statement for the 1998 Annual
Meeting of Shareholders Parts I, III and IV

RICA FOODS, INC.

TABLE OF CONTENTS

Page

PART I

Item 1. Description of Business.......................................... 1
Item 2. Properties....................................................... 11
Item 3. Legal Proceedings................................................ 12
Item 4. Submission of Matters to a Vote of Security Holders ............. 13

PART II

Item 5. Market for the Registrant's Common Stock and Related
Stockholders Matters........................................... 15
Item 6. Selected Financial Data.......................................... 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 17
Item 7.A.Quantitative and Qualitative Disclosures about Market Risk....... 29
Item 8. Financial Statements and Supplementary Data...................... 31
Item 9. Changes in or Disagreements with Accountants on Accounting
and Financial Disclosures...................................... 31

PART III

Item 10. Directors and Executive Officers, Promotors and Control
Persons........................................................ 32
Item 11. Executive Compensation........................................... 36
Item 12. Security Ownership of Certain Beneficial Owners and
Management..................................................... 36
Item 13. Certain Relationships and Related Transactions................... 38

PART IV

Item 14. Exhibits, Financial Statements Schedules and Reports on Form
8-K............................................................ 39

PART 1
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ITEM 1. DESCRIPTION OF BUSINESS

BACKGROUND

RICA FOODS, INC., formerly Costa Rica International, Inc. (the "Company") was
incorporated under the laws of the state of Utah on February 6, 1986 under the
name CCR, Inc. The Company undertook a public offering of its securities in
1987. In 1994, the Company changed its name to Quantum Learning Systems, Inc.
and its state of incorporation to Nevada. On August 5, 1996, the Company changed
its name to Costa Rica International, Inc., and on May 29, 1998, the Company
changed its name to RICA FOODS, INC., to better reflect its core business.

In April, 1996, Corporacion Pipasa, S.A. and Subsidiaries ("Pipasa"), a Costa
Rican corporation, entered into an agreement and plan of reorganization (the
"First Pipasa Agreement") with the Company, pursuant to which the Company
acquired 59.56% of the common stock of Pipasa in exchange for the issuance of
5,191,190 (15,573,571 pre-split) shares of the Company's common stock to the
stockholders of Pipasa. The First Pipasa Agreement provided that the Company
could acquire the remaining 40.44% of the common stock of Pipasa on or before
September 30, 1997. The additional purchase of the common stock of Pipasa did
not occur by that date.

The consolidated financial statements of the Company reflect the September 30,
1996 acquisition of Pipasa as a reverse acquisition, whereby Pipasa was treated
as the accounting acquiror and the Company as the legal acquiror.

In July 1998, an independent committee comprised of minority shareholders of the
Registrant and Management of Pipasa resumed discussions concerning the
acquisition by the Company of the remaining 40.44% of Pipasa's common stock. On
September 28, 1998, the Company and Inversiones La Ribera, S.A. ("Ribera"), a
Costa Rican corporation controlled by Calixto Chaves, the Company's President,
Chief Executive Officer and principal shareholder entered into an agreement (the
"Final Pipasa Agreement") providing for the purchase of the remaining
outstanding common stock of Pipasa held by Ribera in exchange for 3,683.595
(11,050,784 pre-split) shares of the Company's common stock. The Final Pipasa
Agreement was amended on November 9, 1998, to provide that the transaction be
subject to (I) the receipt of an opinion from an independent firm that the
transaction was fair from a financial point of view to the Company's
stockholders and (II) approval of the transaction by holders of a majority of
the issued and outstanding common stock of the Company. In December 1998, the
Company received approval of the transaction by holders of a majority of the
issued and outstanding common stock of the Company. In January 1999, the Company
received a fairness opinion from an independent consultant confirming that the
transaction is fair from a financial point of view to the Company's
stockholders.

On February 26, 1998, the Company consummated an agreement with Comercial Angui,
S.A., a Costa Rican corporation ("Comercial Angui") (the "Original Oros
Agreement") to purchase 56.38% of the outstanding common stock of Corporacion As
de Oros, S.A., and Subsidiaries, a

Costa Rican corporation ("As de Oros"), held by Comercial Angui, for
consideration consisting of (I) a promissory note with a stated amount of $2.4
million due in January, 2000, and (II) 815,686 (2,447,058 pre-split) shares of
the Company's common stock, having a then current market value of approximately
$2.6 million. Soon thereafter, an independent committee of stockholders and
Management of the Company commenced discussions with Comercial Angui and its
sole shareholder, Antonio Echeverria, concerning the possibility of purchasing
the remaining outstanding shares of As de Oros held by Comercial Angui.

The purpose of this proposed transaction, as in the case of the agreement to
purchase the remaining minority interest in Pipasa, was to eliminate the
minority ownership of As de Oros and to consolidate both the operations and the
financial results of Pipasa and As de Oros and Pipasa (collectively, the
"Subsidiaries") in the Company's financial statements. Subsequently, on
September 28, 1998, the Company and Comercial Angui entered into an agreement
(the "Final Oros Agreement") to purchase Comercial Angui's remaining 43.62%
interest in As de Oros for 1,670,921 (5,012,762 pre-split) shares of the
Company's common stock. On November 9, 1998, the Company and Comercial Angui
entered into an amendment to the Final Oros Agreement, which mirrored the
amendment to the Final Pipasa Agreement, that provided that the transaction
would not be consummated until (I) the holders of a majority of the Company's
common stock approved the transaction, and (II) the Company received a fairness
opinion that the transaction was fair to the Company's stockholders, which
approval and receipt were acknowledged on December, 1998 and January, 1999,
respectively.

REVERSE STOCK SPLIT

On December 15, 1998, the Board of Directors declared a 1 for 3 reverse stock
split (the "Split") of the Company's common stock to be effective on December
29, 1998. In connection with the Split, new certificates were issued and those
stockholders owning more than five shares of common stock, on the Split date,
received one full share for each fraction of a share to which they would be
entitled. Each shareholder holding less than 5 shares of common stock, on the
effective date, received a payment in cash for the fractional share held by them
based on the mean of the bid and ask price on the effective date of the Split.
All shares amounts have been restated to reflect the reverse stock split.

SUBSEQUENT EVENTS - ACQUISITIONS

On November 22, 1999, the Company consummated the acquisition of the remaining
43.62% or 654,300 shares of common stock of As de Oros in accordance with the
terms and conditions in the Final Oros Agreement. In exchange for the purchase
of 100% of As de Oros, the Company has issued to Angui, a total of 2,486,407
shares of Company common stock. With the November 22, 1999 acquisition, the
Company has increased the ownership interest in As de Oros to 100%, in
comparison to a 56.38% majority interest reflected as of September 30, 1999.

On December 7, 1999, the Company consummated the acquisition of the remaining
the 40.44% or 1,840,000 shares of common stock of Pipasa, pursuant to the Final
Pipasa Agreement, in exchange for a total of 3,683,595 shares of the Company's
common stock. With the transfer of

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the shares, the Company has increased the ownership interest in Pipasa to 100%,
in comparison to a 59.56% majority interest, reflected as of September 30, 1999.

FINANCING

In February 1998, the Company consummated the refinancing of a part of its
Subsidiaries' debt through the issuance of an aggregate of $20 million of the
Company's 11.71% Series A Senior Notes and Series B Senior Notes (the "Notes").
Principal payments on both Notes will be made from January 15, 2001 through
January 15, 2005 in five annual installments of $4,000,000. These Notes were
placed through Citicorp Securities, Inc. Through the proceeds of these Notes,
the Company repaid $8 million and $12 million of the indebtedness of its two
subsidiaries, Pipasa and As de Oros, respectively.

BUSINESS OF THE COMPANY

The Company's operations are largely conducted through Pipasa and As de Oros,
its two largest subsidiaries. Pipasa, founded in 1969, is the largest poultry
company in Costa Rica with a market share of approximately 50% of the chicken
meat market in Costa Rica. The main activities of Pipasa entail the production
and sale of fresh and frozen poultry, processed chicken products, commercial
eggs and concentrate for livestock and domestic animals. Pipasa has been in the
poultry business for more than 30 years with more than 14 years of experience in
exports.

As de Oros, founded in 1954, is Costa Rica's second largest poultry producer,
comprising approximately 20% of the country's poultry market and is one of the
leaders in the Costa Rican animal feed market with a market share of
approximately 27%. As de Oros also owns and operates a chain of 33 fried chicken
quick service restaurants in Costa Rica called "Restaurantes As de Oros". The
Company's Subsidiaries own a total of 60 urban and rural outlets throughout
Costa Rica, three modern processing plants and three animal feed plants. Due to
similar business activities, the combined operations of the Subsidiaries permit
the Company to achieve operational efficiencies.

The Company promotes its brand names through advertisements and marketing events
and considers its Subsidiaries to be among the most recognized Central American
chicken producers, supplying chicken in Costa Rica to Burger King, Subway,
Kentucky Fried Chicken and Pizza Hut franchises, Price Smart, Taco Bell and
Gerber Products companies. In addition, the Company, through its Subsidiaries,
was selected by the McDonald's Corporation to be one of its poultry suppliers
for all of Central America. During fiscal 1999, the Company invested
approximately $5 million in productive assets in its Subsidiaries, which has
increased efficiency and output.

The Company's Subsidiaries do not depend on the sales of only one product but
rather a diversity of lines of products available at a range of prices and
presentations, which represent an important strategic strength of the
Subsidiaries. The Company produces over 500 different products to meet consumer
demands.

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SEGMENTS

Information regarding the Company's segments for the last three fiscal years is
set forth in the Company's Fiscal 1999 Annual Report, note 15 to the
consolidated financial statements. Such information is incorporated by
reference.

The following is a brief description of the main business segments of the
Company:

Broiler Chicken
- ---------------

Poultry is a popular food item in Costa Rica because of its easy preparation,
nutritional value and low price when compared to other available meats. The per
capita consumption of poultry in Costa Rica has increased from 18.5 kilos (40.7
lbs.) in 1998 to 20.25 (44.6 lbs.) in 1999, a 9.5% increase during that period.
Poultry is consumed by all social levels and is not defined by geographic
markets. The popularity of poultry in Costa Rica extends beyond broiler chicken
and includes chicken by-products, such as sausages and cold cuts. The Company's
main brand names for broiler chicken, chicken parts, mixed cuts and chicken
breasts are Pipasa(TM) and As de Oros(TM). Broiler chicken is a generic product
that is directed to customers of all social and economic levels. Recent polls
and consumer information indicate that Costa Ricans eat chicken at least once a
week. Chicken is sold to institutional clients, schools, hospitals, restaurants
and small grocery stores. In Costa Rica, Pipasa currently supplies Burger King,
Subway, Kentucky Fried Chicken and Pizza Hut franchises, Price Smart, Taco Bell
and Gerber Products companies. It was also selected by the McDonald's
Corporation to be one of its poultry suppliers for all of Central America.

Chicken By-Products
- -------------------

Chicken by-products include sausages, bologna, chicken nuggets, chicken patties,
frankfurters, salami and pate. Chicken by-products are a very profitable segment
of the business, with gross margins as a percent of total by-products sales of
approximately 44.24% for fiscal 1999. The Company's chicken by-products are sold
through the Kimby(TM), Chulitas(TM), and As de Oros(TM) brand names and are sold
to all social and economic levels. These products are sold mainly in
supermarkets and sales are predominantly driven by price. The Kimby(TM) brand
name is the leading seller of chicken by-products in Costa Rica.

Animal Feed
- -----------

Animal feed is made with imported raw materials, such as corn and soybean meal,
along with the unused portions of chicken and other vitamins and minerals.
Animal feed is marketed for consumption by cows, pigs, birds, horses and
domestic pets. The Company's animal feed products are sold through the
Ascan(TM), Aguilar y Solis(TM), Kanin(TM), Mimados(TM) and Nutribel(TM) brand
names. Customers for the commercial animal feed brands are mainly large
wholesalers and high scale breeders. This customer group focuses on quality and
price. Products marketed through the Mimados(TM), Kanin(TM) and Ascan(TM) brand
names are targeted towards veterinarians, pet stores and supermarkets and are
sold typically to consumers with medium to higher income levels. The Company is
currently the leader in the animal feed market in Costa Rica, with a 27% market
share.

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Restaurants
- -----------

Restaurantes As de Oros operates 33 restaurants located in rural and urban areas
through out Costa Rica, including express delivery service in some restaurants.
Restaurantes As de Oros is a quick service restaurant, which offers a
diversified menu of chicken meals. Restaurantes As de Oros distinguishes itself
from other quick service chains by offering dishes and using recipes and
ingredients which appeal to the taste of Costa Ricans. The quick service
restaurant business is highly competitive in Costa Rica. During 1999, and
continuing into the next fiscal year, the Company will invest in remodeling the
facilities of its restaurants, new cooking equipment and establishing new
marketing strategies to emphasize differentiation from other quick service
restaurants.

Exports
- -------

Subsidiaries of the Company export different products to other countries in
Central America and the Caribbean. The Company exports mainly the Pipasa(TM),
Mimados(TM) and Kimby(TM) brand names.

Other
- -----

This segment includes sales of commercial eggs, non-recurrent sales of fertile
eggs and raw material sales among others. "Other" sales mainly include sales of
baby chicks and animal feed to integrated producers, who are local farmers who
raise and feed poultry on behalf of the Company. For fiscal 1999, the Company
changed its method of accounting for sales and purchases with integrated
producers. Beginning on October 1, 1998, baby chicks, animal feed and other
materials transferred to integrated producers are reflected as In Process
Inventory, as opposed to sales at cost, as was recorded for fiscal 1998 and
1997. Sales to Other, excluding integrated producers, make up less than 3% of
total sales for fiscal year 1999.

DISTRIBUTION NETWORK

The Company has a distribution fleet consisting of approximately 230 delivery
trucks specially designed to deliver poultry products. These trucks are equipped
with refrigeration chambers to ensure delivery of fresh products daily, thus
maintaining the Company's reputation for fresh quality products. In addition,
the Company has delivery trucks for animal feed and also uses independent
distributors to deliver larger quantities of this product to some of its
customers.

The Company's products are sold through supermarkets, independent distributors,
the delivery trucks that it owns or leases, and urban and rural retail outlets
throughout Costa Rica. A majority of the total distribution of the Company's
products is conducted through the Company's urban retail outlets and delivery
trucks with a smaller portion through rural outlets. The remaining distribution
is serviced through the Company's processing plants. The retail outlets, mostly
located in urban areas, are exclusively dedicated to the sale of the Company's
products and most of these outlets are leased by the Company. Through its
outlets, the Company is able to distribute its products to customers in urban
and rural areas who may not have easy access to

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supermarkets. Prices of products sold in these retail outlets are identical to
prices quoted in supermarkets. The Company's products are sold fresh as most
retail outlets are typically situated near the Company's processing facilities,
which enable trucks to make deliveries on a daily basis. The products may be
sold by the unit or wholesale. Rural outlets are strategically located near
major roadways and most are equipped with refrigeration chambers that allow for
storage of chicken. The Company plans to continue investing in increasing the
capacity of cold room storage of some strategic facilities in order to meet
increased sales plans (specifically for chicken by-products). The increased
capacity will enable distribution trucks to make more deliveries, as trucks can
simply return to the nearest agency to reload, as opposed to the main plant. In
total, through its distribution fleet and outlets, the Company sells to over
32,000 customers.

SEASONALITY

The Company's Subsidiaries have historically experienced and have come to expect
seasonal fluctuations in net sales and results of operations. The Company's
Subsidiaries have generally experienced higher sales and operating results in
the first and second quarters of the fiscal period. This variation is primarily
the result of holiday celebrations during this time of year in which Costa
Ricans prepare traditional meals, which include dishes with chicken as the main
ingredient. The Company expects this seasonal trend to continue for the
foreseeable future.

RAW MATERIALS

The primary raw material and main component for the Company's products consists
primarily of corn and soybean meal. Corn and soybean meal purchases represent
approximately 35% of total cost of goods sold and 70% of raw material costs.
Historically, the Company has been able to obtain satisfactory supply for these
materials.

The Company imports all of its corn from the United States of America through
the Chicago Board of Trade ("CBOT") and uses commodity futures and forward
purchasing for hedging purposes to reduce the effect of changing commodity
prices on a portion of its commodity purchases. The price of corn and soybean
meal, like most grain commodities, is fairly volatile and requires consistent
and daily hedging in order to minimize the effect of price increases on the
Company's profit margin. Changes in the price of corn can significantly affect
the Company's gross profit margin.

The Company purchases its soybean meal through Industrias Oleaginosas, S.A., a
Costa Rican corporation ("INOLASA"), in which the Company holds a 10% equity
ownership. In Costa Rica, there is a 5% tax for soybean meal imports, which is
not levied if purchased through INOLASA. If for any reason INOLASA cannot
deliver the soybean meal to the Company, the Company can buy its soybean meal
directly from the CBOT. Thus far, the Company has never had to go directly to
the CBOT to purchase soybean meal.

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CUSTOMER RELATIONS

The majority of the Company's customers are located in Costa Rica. No single
customer accounted for more than 10% of total consolidated sales, and the loss
of any single customer would not have a material adverse effect on the Company's
business.

BACKLOG OF ORDERS

At September 30, 1999, the Company had no backlog of sales orders.

FOREIGN COMPETITION

The Company does not have any significant domestic competition at the present
time. The Company's local market share, however, could potentially be threatened
by foreign competition. The Company believes that the likelihood of this is low
for several reasons. First, the Company has a strong reputation for producing
high quality products at a reasonable price. Costa Ricans prefer fresh chicken
to frozen chicken. Due to transportation constraints and distance, foreign
competitors would have to sell frozen chicken if they were to sell chicken in
Costa Rica.

The Agriculture Ministry in Costa Rica monitors all chicken entering the country
to prevent the spread of Newcastle Disease in Costa Rica. The Costa Rican market
is also compensated by tariff agreements at the present time. Chicken importers
must pay duties as dictated by the General Agreement on Trade and Tariffs
("GATT"). These agreements were reached at the Uruguay Round of the GATT
negotiations and are due to expire in 2004. These agreements provide that for
fiscal year 1999, only 1,000 metric tons ("MT") of poultry meat and 117 MT of
poultry by-products of whole chicken parts or chicken derivatives can be
imported to Costa Rica from countries outside of the Central American Common
Market. This quota is taxed at a rate of 34% and amounts in excess of this quota
are subject to a 166% tariff, except for whole chicken and breast cut, which are
subject to a 40% tariff. For the fiscal year 2000 tariffs have been negotiated
to reach a 158% tariff. These tariff rates were based on the average sales price
of poultry meat in Costa Rica compared to the average sales price of poultry
meat in the United States of America.

PRICING

In Costa Rica, there are no laws against monopolies; however, there are laws
against monopolistic practices. Companies which have a dominant market share in
Costa Rica cannot arbitrarily increase prices in order to take advantage of
market position. Companies also are forbidden to work in conjunction with their
competitors in order to create price collusion. Given these guidelines, the
Company's pricing strategies are influenced by two main factors: industry
conditions and currency devaluation. The Company will use its financial model to
increase prices in order to mitigate the effect of the devaluation of the colon,
the functional currency of Costa Rica. During the last 10 years, the colon has
devalued at an annual average rate of 13.11%, which the Company has mitigated by
increasing prices. During the year ended September 30, 1999, the colon devalued
10.81% and the Company mitigated this devaluation by increasing prices on
average by 11.19% for its chicken, meat by-products and animal feed segments.

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In terms of consumer reaction to price increases within the chicken broiler
segment, there is little differentiation for customers between one competitor
and another. Instead, prices are set by the leader, which in Costa Rica is the
Company's subsidiary, Pipasa. Given the consistent increase in chicken prices
over the past 13 years, the Company believes it has excellent data on consumer
reactions to price increases. According to past experience, a significant price
increase leads to a temporary decrease in sales that lasts approximately two
months.

MARKETING

The Company has a division dedicated to marketing. The marketing department's
responsibility is to advertise the Company's various products and brand names.
In addition to television and radio advertisements, the Company's distribution
centers promote the Company's brand names by distributing posters, T-shirts and
hats with the company's logo. In Costa Rica, the Company's brand names commonly
appear on billboards and bus stops. There are more marketing techniques
available for use by the Company, such as packaging presentations, promotions
and sponsoring special national events.

RESEARCH AND DEVELOPMENT

The Company conducts continuous research and development activities to improve
the quality of the diet fed to poultry during its growing stage. The annual cost
of such research and development programs is less than one percent of total
consolidated annual sales and is expensed as incurred.

EMPLOYEES COMPENSATION AND INCENTIVES

As of December 29, 1999, the Company employed approximately 3,700 persons. The
senior management level at the Company has on average almost 15 years of
experience with the Company which has enabled the Company, through creating
efficient operations, making strategic acquisitions and producing high quality
products, to achieve a market share of approximately 70% of the poultry market
in Costa Rica.

The Company believes it has good relations with its employees. Private companies
in Costa Rica typically support their own workers' associations instead of
organized unions. These associations provide certain services such as credit,
recreational facilities, subsidized housing, and healthcare benefits. The
success of the Employee's Solidarity Association ("ASERICA") at the Company and
the fact that there has never been a strike at the Company's facilities reflects
the quality of the management team and its ability to keep the Company's
employees satisfied. ASERICA provides recreational facilities, healthcare and
pension benefits as well as financial services to the Company's employees. This
association is located on land donated by Mr. Chaves and is among the largest
solidarity associations in Costa Rica. The association has a swimming pool,
soccer field, outdoor sports, sauna and a 1,000-seat gymnasium facility.

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Salaries in Costa Rica are increased twice a year, as dictated by the government
in order to counterbalance the effect of inflation and increases in the cost of
living. The Company has the policy to increase the salaries of all employees
every six months to offset the effect of inflation. By law, each year, companies
are required to make a provision equivalent to 8.33% of an employee's yearly
gross salary as severance, which must be paid upon the termination of an
employee without just cause to a maximum of eight years of employment. The
employee has the option to have 5% of the 8.33% paid to ASERICA as part of a
savings incentive program for as long as they work for the Company, not just 8
years. Few other companies in Costa Rica offer this option. The savings
incentive program works as follows: The Company pays to ASERICA an amount equal
to 5% of the employee's wages. The employee then matches the 5% payment by the
Company. In February of each year, the Company makes the final payment equal to
3.33% of the employee's total yearly gross salary. Employees currently have the
option to, but are not required to, deposit the remaining 3.33% into a pension
fund, Operadora de Fondos ("Complementarias"), a privately held company
administrated by one of the country's private banks. ASERICA manages all the
cash generated by the savings incentive program and invests in low risk
financial instruments like certificates of deposit and other highly rated or
better investment financial instruments. Employees can borrow against the amount
in their savings at a local interest rate of 18% to 30% and, once an employee
leaves the Company, the employee is entitled to the total amount accumulated in
his/her severance and savings incentive account.

All employees in Costa Rica are protected by obligatory insurance with the Caja
Costarricense de Seguro Social ("CCSS") and the Instituto Nacional de Seguros
("INS") which are the government's social security and insurance programs. All
companies in Costa Rica must pay the CCSS and the INS 21% and 1.74% of each
employee's monthly salary, respectively. The CCSS pays 70% of the employee's
normal salary during the periods in which the employee is unable to work. In
addition to these benefits, employees must pay a total of 8% of their monthly
salary to the CCSS in order to receive healthcare, pension and maternity care
benefits, and 1% to the "Banco Popular" into an obligatory savings account.

Employees of the Company are provided with a profit sharing program. If either
one of the Company's Subsidiaries has a successful year and generates profits in
excess of budgeted levels, that entity will distribute a percentage of its net
income to its employees. This incentive is calculated monthly and distributed
every two months. The Company encourages its employees to make a career at the
Company, and accordingly, in conjunction with a local university, the Company
offers a business administration program for its employees. The main goal of the
program is directed toward developing the Company's future management team. In
addition, the Human Resources Department offers in-house and outside training
for its employees in various fields, in order to assure quality in all areas.

On May 29, 1998, the Company adopted the 1998 Stock Option Plan (the "Plan").
Under the Plan, 200,000 shares of the Company's common stock, par value $.001
per share, are reserved for issuance upon the exercise of options. The plan is
designed to serve as an incentive for retaining and attracting persons and/or
entities that provide services to the Company and its Subsidiaries. As of
September 30, 1999, no shares had been issued under this plan.

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POULTRY RAISING PROCESS

The poultry raising process starts with the import of one-day old parent hens
from the United States of America. Once these hens reach their egg-laying
period, which takes about 20 weeks, they produce fertile eggs, which are then
incubated in order to produce baby chicks. The hatching period lasts 21 days,
which is divided into 19 days in hatching machines and two days in birth
chambers. These baby chicks are inoculated to prevent diseases. The chicks are
then brought to the Company's own raising house or to independent integrated
producers who raise the chicken to full size (typically a seven week process)
and provide basic elements such as vitamins, formula and a balanced ration of
feed.

The integrated producers are a group of 181 farmers who own their own land and
facilities. The producers have a long-term contract with the Company to raise
the baby chicks to adult birds with an average weight of 1.87-kilograms (4.1
1bs.). During fiscal 1999, integrated producers supplied approximately 47% of
the total number of chickens needed by the Company. These producers are paid
according to the weight and quality of the chicken produced and the mortality
rate of the chickens raised. The Company provides veterinary services and offers
vaccines and chicken feed to the farmers at wholesale prices. Regardless of
whether the Company raises the chickens or integrated producers do, the chickens
are regularly inspected for immune deficiencies, vitamin levels and general
diseases. By working in conjunction with these integrated producers, the Company
has greater flexibility to increase or decrease the number of chickens raised
depending on the Company's growth objectives.

Once the chickens reach the desired weight, they are taken to one of the
processing plants. The Company's processing houses are among the most
sophisticated and largest in the country. The plants' capacity of process is
approximately 65 million kilograms annually. The processing plants are where
chickens are slaughtered and the meat packaged or processed to make chicken
by-products.

Because Costa Rica has been declared free of Newcastle Disease, the Animal and
Plant Health Inspection Service ("APHIS"), a U.S. governmental agency, surveys
the Company's facilities to ensure that Costa Rica continues to be free of
Newcastle Disease. The Company recently adopted the guidelines of the Hazardous
Analysis and Critical Control Points ("HACCP"), which are expected to be fully
implemented in the near future. HACCP is a prevention-based food safety system
used widely throughout the food industry. It is a tool used to assess hazards
and to establish controls based on the prevention of food contamination. For
example, the temperature must be carefully controlled as microbial growth is
encouraged between 4-60 degrees Celsius or 40-160 degrees Fahrenheit. HACCP
encourages employees to gain an in-depth understanding of total food production.
Employees thus take an active role in ensuring food quality and safety. By
identifying critical points in the process flow that could lead to contamination
of food products and applying control measures at each point, the likelihood of
food borne illness is reduced. All new employees are trained as to the proper
procedures required in handling and preparing food.

-10-

REGULATIONS

The Company's poultry hatcheries and processing plants are subject to regulation
under Costa Rican law regarding cleanliness and health standards. Exports of the
Company's poultry products are regulated in the countries in which the Company
sells its products. A government health inspector is at the plant 24 hours a
day. Government representatives inspect every step of the processing cycle and
send meat samples to government laboratories for analysis for bacteria and other
organisms. In addition to government inspectors, the Company has its own staff
of inspectors that take samples of meat at each step of the production cycle,
which is analyzed in the Company's laboratories. The Company has strict sanitary
processes in order to provide consumers with product integrity, safety and
quality.

The Company's cost of compliance with laws and regulations is not considered to
be a burden on the Company nor does it have a material effect upon the Company's
capital expenditures, earnings or competitive position. The Company does not
anticipate that the costs of compliance with laws and regulations will have a
material adverse effect in the future.

ENVIRONMENTAL COMPLIANCE

The Company has been and is practicing sustainable environmental policies such
as reforesting, processing and recycling of its waste, producing organic
fertilizer, building oxidation lagoons and sewage treatment plants. The
Company's compliance with environmental laws and regulations relating to the
discharge of material into the environment or otherwise relating to the
protection of the environment has not had a material effect on the Company's
financial position and results of operations. For the next fiscal year, the
Company intends to invest approximately $580,000 in improving its sewage
treatment and rendering plants.

At the present time, 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 new environmental laws or environmental regulations in jurisdictions
in which it might conduct business. At the present time, the Company cannot
assess the potential impact of any such potential environmental regulations.

ITEM 2. PROPERTIES

The Company conducts its operations through its production facilities and
executive offices, which are all located in Costa Rica. All facilities are owned
by the Company's Subsidiaries: Pipasa and As de Oros. The following contains
descriptions of the principal facilities:

PRODUCTION AREA

The production area has the following divisions: Reproduction, Incubation,
Animal Feed, Broiler, Process and Further Processing. The production figures are
presented below:

-11-

The Reproduction division facilities consist of 36 galleys which have a capacity
to produce approximately 50 million fertile eggs annually.

The Incubation division consists of two incubation plants, which are among the
most modern in Central America. The plants' incubation and hatching halls can be
expanded to increase production. The Company expects that these plants will
fulfill production needs for many years. The Incubation facilities produce
approximately 40 million chicks annually.

The Company owns three processing plants for its Animal Feed division. These
plants perform activities, which include grinding grains, mixing flour and
packing different types of animal feed products. The facilities produce an
aggregate of approximately 310,000 tons of animal feed annually.

One day after birth, chicks are transferred to the Broiler division. During this
stage, the chicks receive three types of diet, according to growth requirements.
The growth stage lasts approximately 43 days. The Company owns 46 farms and 181
farms are under contract as integrated producers. The facilities production
capacity is approximately 35 million chickens annually, which includes the
production from the integrated producers.

The Process division is divided into slaughter and pluck, coolers and retailers,
packing and cuts and sub-products processes. The facilities have a production
capacity of 46 million kilograms annually.

The Further Processing division is divided into sausage, formed, packing and
oven and cooking areas. The facilities have a production capacity of 5 million
kilograms annually.

DISTRIBUTION

Distribution is conducted through retail outlets in Costa Rica, the majority of
which are rented. Restaurantes As de Oros consists of 33 restaurants, the
majority of which are also rented.

ADMINISTRATIVE AREA

Staff, administrative, and financial headquarters of Pipasa and As de Oros are
located in La Ribera de Belen, Heredia, Costa Rica.

ITEM 3. LEGAL PROCEEDINGS

The income tax returns for Pipasa for fiscal 1995 and 1994 were examined by the
tax authorities in Costa Rica and the Company was assessed $62,795 and $107,068
respectively, as a result of the disallowance by the Costa Rican tax authorities
of approximately 26% in the aggregate of the deductions taken by Pipasa for 1995
and 1994. Management believes these assessments are without merit and intends to
vigorously contest these claims. Management does not believe that the Company
will incur a loss as a result of these assessments. No accrual has been made for
any losses that may result from the resolution of this uncertainty.

-12-

The income tax returns of As de Oros for fiscal year 1995 were examined by the
Costa Rican tax authorities and was assessed $130,000 of additional income
taxes. Tax authorities have contested depreciation expense and income tax
withholdings of employees. As de Oros has appealed this decision and does not
expect that the final outcome will result in a material adverse effect on the
operations or the financial position of the Company. No accrual has been made
for any losses that may result from the resolution of this uncertainty.

Pipasa is a defendant in a lawsuit brought in Costa Rica in which, as a result
of this lawsuit in which the plaintiff seeks $3.6 million, Pipasa was served
with prejudgment liens for $1.5 million. These liens were on some of Pipasa's
cash accounts and were substituted by land owned by Pipasa with the approval of
a Costa Rican court. Such approval was subsequently appealed by the plaintiff
and the Superior Court ratified such substitution of collateral on November 11,
1999. The prejudgment liens on cash have been released and Pipasa expects to
receive all of the funds originally attached in January, 2000. For the same
reasons and by the same plaintiff, Pipasa was sued in the United States of
America, in the State of California and the State of Florida, respectively. The
California lawsuit has been suspended awaiting the ruling of the court of the
State of Florida on a lack of personal jurisdiction motioned raised by Pipasa.
While Pipasa still has time to answer the complaints, it cannot ascertain the
basis of the claim or the relief sought, but believes the lawsuits are without
merit and intends to assert a vigorous defense. At the present time, neither the
Company nor Pipasa can evaluate the potential impact of this lawsuit on the
financial results of the Company.

No legal proceedings of a material nature, to which the Company or the
Subsidiaries are a party, exist or were pending during the fiscal year ended
September 30, 1999. The Company knows of no legal proceedings of a material
nature pending or threatened or judgments entered against any director or
officer of the Company in his capacity as such.

The Company is involved in various other claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The following matters were submitted to a vote of the stockholders during the
fiscal year 1999:

PROPOSED ACTION BY WRITTEN CONSENT DATED DECEMBER 4, 1998:

1. To consider and vote on the approval of a Stock Purchase Agreement that
provides for the Company to acquire the remaining outstanding shares of
common stock of Corporacion Pipasa, S.A. ("Pipasa") from Inversiones La
Ribera, S.A. in exchange for the issuance of 3,683,595 (11,050,784
pre-split shares) shares of the Company's common stock for the 40.44%
ownership that was being included as a "minority interest" in the financial
statements of the Company as of September 30, 1999.

-13-

2. To consider and vote on the approval of a second Stock Purchase Agreement
that provides for the Company to acquire the remaining outstanding shares
of common stock of Corporacion As de Oros, S.A. ("As de Oros") from
Comercial Angui, S.A. in exchange for the issuance of 1,670,921 (5,012,762
pre-split shares) shares of Company stock for 43.62% ownership that was
being included as a "minority interest" in the financial statements of the
Company as of September 30, 1999.

Only consents received prior to the close of business on the date (the "Action
Date") which was the earlier to occur of i) the date on which the Company
received approval and/or disapproval of both the proposals by the holders of a
majority of the issued and outstanding shares of common stock of the Company or
ii) December 28, 1998 (unless extended by the Company pursuant to a notice
mailed to the stockholders), will be counted towards the vote on the proposals.

The Board of Directors of the Company received approval of a majority of the
stockholders of the issued and outstanding shares of common stock of the Company
by December 28, 1998, and concluded the As de Oros acquisition on November 22,
1999, and the Pipasa acquisition on December 7, 1999.

STOCKHOLDERS MEETING FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998

The Annual Meeting of Stockholders (the "Annual Meeting") was held at the
Sheraton Biscayne Bay Hotel, Miami, Florida, at 10:00 a.m., local time, on June
18, 1999, for the following purposes:

1. To elect seven members of the Company's Board of Directors to hold office
until the Company's Annual Meeting of Stockholders for the year 2000, or
until their successors were duly elected and qualified;

2. To consider and vote upon a proposal to ratify the selection of Arthur
Andersen LLP as the Company's independent auditors for the fiscal year
ended September 30, 1998; and

3. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.

The Shareholders Meeting voted for the proposals as follows:

Proposal number 1: For Director number 1: 6,867,764 votes
For Director number 2: 6,867,764 votes
For Director number 3: 6,867,764 votes
For Director number 4: 6,867,764 votes
For Director number 5: 6,867,764 votes
For Director number 6: 6,867,764 votes
For Director number 7: 6,867,764 votes

-14-

Against Director number 1: 404 votes
Against Director number 2: 404 votes
Against Director number 3: 404 votes
Against Director number 4: 404 votes
Against Director number 5: 404 votes
Against Director number 6: 404 votes
Against Director number 7: 404 votes

Proposal number 2: 6,868,062 votes For
102 votes Against
4 votes to Abstain

Relating to item number three of the purposes of the Annual Meeting, Arthur
Andersen LLP was appointed as the Company's independent auditors for the fiscal
year ended September 30, 1999.

PART II
- -------

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS

The Company's common stock started trading on the American Stock Exchange
("AMEX") under the symbol RCF on May 14, 1999 and prior to the date traded on
the NASDAQ National Market under the symbol RICA. The following tables set forth
the market price range of the Common Stock for each quarter during the years
ended September 30, 1999 and 1998, based on the high and low closing sale prices
as reported on the American Stock Exchange and NASDAQ prior to the transfer to
AMEX. Such high and low sales prices reflect interdealer prices without retail
markup, markdown or commission and may not necessarily represent actual
transactions.

Market Price Range (1)
--------------------------------

High Low
---- ---
Fiscal 1999
- -----------
First Fiscal Quarter (10/1/98 to 12/31/98) $ 8.000 $4.125
Second Fiscal Quarter (1/1/99 to 3/31/99) 9.500 6.000
Third Fiscal Quarter (4/1/99 to 6/30/99) 11.875 8.625
Fourth Fiscal Quarter (7/1/99 to 9/30/99) 11.875 10.688

Fiscal 1998
- -----------
First Fiscal Quarter (10/1/97 to 12/31/97) $6.750 $6.375
Second Fiscal Quarter (1/1/98 to 3/31/98) 4.875 4.500
Third Fiscal Quarter (4/1/98 to 6/30/98) 4.914 4.500
Fourth Fiscal Quarter (7/1/98 to 9/30/98) 4.500 4.125

- -------------

(1) Prices have been adjusted to reflect the 1 for 3 reverse stock split
effective on December 29, 1998.

-15-

As of January 5, 2000 the Company had 12,847,921 shares of common stock
outstanding and approximately 1,500 holders of record of such stock and no
shares of preferred stock were outstanding as of that date.

Dividends
- ---------

The Company has never paid any dividends on its common stock. The Company does
not anticipate paying cash dividends on common stock in the foreseeable future
based on its expected operating cash flow requirements (see "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources"). The Nevada General Corporation Law prohibits
the Company from paying dividends or otherwise distributing funds to its
stockholders, except out of legally available funds. The declaration and payment
of dividends on the Company's common stock and the amount thereof will be
dependent upon the Company's results of operations, financial condition, cash
requirements, future prospects and other factors deemed relevant by the Board of
Directors. No assurance can be given that the Company will pay any dividends on
common stock in the future.

During the year ended September 30, 1999, Pipasa distributed 510,565 series
"TCA" of preferred stock as dividends to its common stockholders, in the amount
of $1,929,766. During the year ended September 30, 1998, Pipasa distributed
282,958 series "TCA" shares of preferred stock as dividends to its common
stockholders, in the amount of $1,103,666.

Item 6. SELECTED FINANCIAL DATA

The selected financial data presented below should be read in conjunction with
the consolidated financial statements and related notes, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the other financial information included elsewhere in this Form 10-K. The data
as of September 30, 1999 and 1998 and for the fiscal years of 1999, 1998 and
1997, respectively, are derived from the Company's audited consolidated
financial statements included elsewhere in this Form 10-K. The balance sheet
data as of September 30, 1997 and 1996 and for fiscal year 1996 is derived from
audited statements not included in this Form 10-K.

-16-

(In thousands, except per share data)

1999 1998 1997 1996
---- ----- ---- ----

Net sales $ 118,550 $ 98,794 $ 64,658 $ 56.819
Cost of sales 77,275 71,464 47,847 40,730
Income from operations 12,427 6,155 3,962 5,167
Income before income taxes and minority
interest 8,174 3,641 2,382 3,016
Net income after minority interest 3,279 1,357 926 1,650
Diluted earnings per common share 0.42 0.16 0.11 -
Pro forma earnings per common share - - - 0.28
Total assets 70,323 63,005 36,554 37,103
Long-term debt, net of current portion 21,444 22,559 5,252 3,593
Cash dividends per common share - - - -
Diluted weighted average number of common
shares outstanding 7,269,769 7,113,265 6,639,075 -
Pro forma weighted average number of common 5,191,190
shares outstanding - - -

1999 1998 1997 1996
---- ----- ---- ----

Ratio of earnings to fixed charges 1.87 1.46 1.37 1.61
Ratio of earnings to fixed charges and
preferred dividends 1.71 1.38 1.28 1.50

Sales and cost of sales for fiscal years 1998, 1997 and 1996, have been restated
to reflect the change in the method of accounting for sales and purchases to
integrated producers. The effect of this restatement is a decrease in sales and
cost of sales in the amount of $4.89 million, $5.36 million and $4.72 million
for fiscal 1998, 1997 and 1996, respectively.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

Management is responsible for preparing the Company's consolidated financial
statements and related information that appears in this Form 10-K. Management
believes that the consolidated financial statements fairly reflect the form and
substance of transactions and reasonably present the Company's consolidated
financial condition and results of operations in conformity with Generally
Accepted Accounting Principles in the United States of America ("GAAP").
Management has included in the Company's consolidated financial statements
amounts that are based on estimates and judgements, which it believes are
reasonable under the circumstances. The Company maintains a system of internal
accounting policies, procedures and controls intended to provide reasonable
assurance, at the appropriate cost, that transactions are executed in accordance
with Company's authorization and are properly recorded and reported in the
consolidated financial statements, and that assets are adequately safeguarded.

-17-

The Company's operations are largely conducted through its subsidiaries,
Corporacion Pipasa, S.A. and Subsidiaries ("Pipasa") and Corporacion As de Oros,
S.A. and Subsidiaries ("As de Oros"). The Company, through its subsidiaries,
represents the largest poultry company in Costa Rica with a market share of
approximately 70% of the chicken meat market in Costa Rica. The subsidiaries'
primary business is derived from the production and sales of broiler chickens,
processed chicken by-products, commercial eggs, and pre-mixed feed and
concentrate for livestock and domestic animals. Pipasa, founded in 1969, is the
largest poultry company in Costa Rica with approximately a 50% market share of
the chicken meat market in Costa Rica. As de Oros, founded in 954, is Costa
Rica's second largest poultry producer, comprising approximately 20% of the
country's poultry market and is one of the leaders in the Costa Rican animal
feed market with a 27% market share. As de Oros also owns and operates a chain
of 33 fried chicken quick service restaurants in Costa Rica called "Restaurantes
As de Oros."

The Company's subsidiaries own a total of 60 urban and rural outlets throughout
Costa Rica, three modern processing plants and three animal feed plants. Due to
similar business activities, the combined operations of the subsidiaries permit
the Company to achieve operational efficiencies.

SEASONALITY

The Company's subsidiaries have historically experienced and have come to expect
seasonal fluctuations in net sales and results of operations. The Company's
subsidiaries have generally experienced higher sales and operating results in
the first and second quarters of the fiscal year. This variation is primarily
the result of holiday celebrations during this season, in which Costa Ricans
prepare traditional meals, which include dishes with chicken as the main
ingredient. The Company expects this seasonal trend to continue for the
foreseeable future.

ENVIRONMENT

The Company has been and is practicing sustainable environmental policies such
as reforesting, processing and recycling its waste, producing organic
fertilizer, building oxidation lagoons and sewage treatment plants. The
Company's compliance with environmental laws and regulations relating to the
discharge of material into the environment or otherwise relating to the
protection of the environment has not had a material effect on the Company's
financial position and results of operations. For the next fiscal period, the
Company intends to invest approximately $580,000 in improving its sewage
treatment and rendering plants.

At the present time, 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 new environmental laws or environmental regulations in
jurisdictions in which it might conduct business. At the present time, the
Company cannot assess the potential impact of any such potential environmental
regulations.

YEAR 2000 READINESS

The Year 2000 issue is the result of computer programs and other business
systems being written using two digits rather than four digits to represent the
year. Many of the time sensitive

-18-

applications and business systems of the Company and its business partners may
recognize a date using "00" as the year 1900 rather than the year 2000, which
could result in system failure or disruption of operations. The Company believes
it has been able to achieve Year 2000 readiness for its internal systems. The
Company has also developed a plan of communication with significant business
partners to obtain appropriate assurances that the Company's operations will not
be disrupted through these relationships and that Year 2000 issues have been
resolved by significant business partners in a timely manner. The Company
believes that it has satisfactorily resolved all significant Year 2000 problems
and that the related costs have not been material.

However, estimates of Year 2000 related costs at the beginning of the year 2000
are based on numerous assumptions, including, but not limited to, the continued
availability of certain resources, the ability to acquire accurate information
regarding third party suppliers and the ability to correct all relevant
applications and third party modification plans. There is no guarantee that the
estimates will be achieved and actual costs could differ materially from those
anticipated. Moreover, the failure of a major vendor's systems to operate
properly with respect to the Year 2000 problem on a timely basis or a Year 2000
conversion that is incompatible with the Company's systems could have a material
adverse effect on the Company's business, financial condition and results of
operations.

INFORMATION SYSTEMS AND TECHNOLOGY

The Company's subsidiaries have undergone significant strategic upgrades in
application systems in order to improve business processes. Merchandising,
production planning, and financial systems were selected for improved business
functionality and are vendor certified as Year 2000 compliant. The Human
Resources and Financial Systems were implemented during 1996 and 1999,
respectively. All critical applications were tested to ensure compliance.
Additionally, the hardware and communications infrastructure has been
inventoried, assessed, and, where necessary, upgraded and tested. The
remediation phase was complete by the end of fiscal year 1999. Testing was
performed concurrently with remediation activities and final testing was
substantially complete in the same schedule.

The Company's operations are dependent on the Year 2000 readiness of third
parties. The Company relies on third-party suppliers for infrastructure
elements, such as telephone services, electric power, water, and banking
facilities, as well as merchandise suppliers.

The vendor relations area of the project refers to the Year 2000 status
evaluation of key merchandise and service vendors. As part of the Year 2000
initiative, merchandise and service vendors have been surveyed to determine
their readiness and the Company is in the process of obtaining or negotiating to
obtain adequate assurances from such vendors. In addition, because the Company
has a select group of merchandise vendors, the Company has established
contingency plans to confront any shortage of these products or services in the
event of supplier delivery delay or failure. Although the Company has not been
put on notice that any known third party's problem will not be resolved, the
Company has limited information and no assurance that any additional information
concerning the Year 2000 readiness of third parties will be made available. The
resulting risks of the Company's business are very difficult to assess; however,
the inability to obtain merchandise from one or more key vendors on a timely
basis could have a material adverse effect on the Company's results of
operations.

-19-

The Company is developing contingency plans and identifying what actions would
be required if a critical system, service or merchandise supplier were not Year
2000 compliant.

To date, the Company has spent approximately $750,000 to complete the Year 2000
project, which was funded through operating cash flows and external financing.
Operating costs related to Year 2000 compliance projects will be incurred over
several quarters and will be expensed as costs are incurred. Costs associated
with business system solutions for improved business processes are not included
in these amounts since they will not have a material adverse effect on the
Company's financial condition or operating results. The costs of the project and
the date on which the Company plans to complete the work were based on
Management's best estimates, which were derived from numerous assumptions about
future events, including but not limited to, the availability of certain
resources and third party compliance information. Past expenditures in relation
to total estimated costs should not be considered or relied on as a basis for
estimating progress to completion for any element of the Year 2000 project.

The Company presently believes, that upon the remediation of its business
software applications, hardware, and other equipment with embedded technology,
the Year 2000 issue will not present a materially adverse risk to the Company's
future consolidated results of operations, liquidity, and capital resources.
However, if such remediation is not completed in a timely manner or the level of
timely compliance by key suppliers or vendors is not sufficient, the Year 2000
issue could have a material impact on the Company's operations including but not
limited to, failure to or delays in delivery of merchandise resulting in a loss
of the Company's business.

RESULTS OF OPERATIONS

The Company's operations resulted in $0.42 diluted earnings per share for the
year ended September 30, 1999, compared to $0.16 and $0.11 during fiscal 1998
and 1997, respectively.

The following table sets forth, for the periods indicated, certain selected
income statement data expressed as a percentage of net sales:

For the Years Ended September 30,
1999 1998 1997
---- ---- ----

Sales, net 100.00% 100.00% 100.00%
Cost of sales 65.18% 72.34% 74.00%
Gross profit 34.82% 27.66% 26.00%
Selling 14.37% 12.33% 10.52%
Administrative 9.63% 8.80% 9.36%
Goodwill amortization 0.34% 0.30% 0.00%
Operating income 10.48% 6.23% 6.13%
Interest expense 2.94% 3.15% 3.88%
Income before income taxes and
minority interests 6.89% 3.69% 3.68%
Provision for income taxes 0.64% 0.19% 0.45%
Net income 2.77% 1.37% 1.43%

-20-

Prior and subsequent to the acquisition of As de Oros, there have been
transactions between Pipasa and As de Oros consisting mainly of sales of raw
materials and finished products. Transactions subsequent to the acquisition of
this subsidiary have been eliminated in consolidation.

Sales and cost of sales, for fiscal years 1998 and 1997, have been restated to
reflect the change in the method of accounting for sales and purchases to
integrated producers. Integrated producers are local farms who raise and feed
poultry on behalf of the Company. For fiscal 1999, the Company changed its
method of accounting to reflect chickens and materials transferred to integrated
producers as in process inventory, as opposed to a sale at cost. The effect of
this restatement is a decrease in sales and cost of sales in the amount of $4.89
million and $5.36 million and for fiscal 1998 and 1997, respectively.

FISCAL 1999 COMPARED TO FISCAL 1998

Results by Segments
- -------------------

General

Net sales for the year ended September 30, 1999 were $118.55 million compared to
$98.79 million for the year ended September 30, 1998, increasing $19.76 million
or 20.00%. Cost of sales for fiscal 1999 were $77.28 million, compared to $71.46
million for fiscal 1998, increasing $5.82 million or 8.14%. The gross profit
margin for fiscal 1999 was 34.81% compared to 27.66% for fiscal 1998. The
increase in gross profit margin of 7.15% is primarily due to an increase in net
sales along with a decrease in cost of sales as a result of lower cost of raw
materials and operational efficiencies. Sales for fiscal year 1998 consolidate
the results of As de Oros for only seven months, compared to twelve months for
1999, due to the February, 1998 acquisition of this subsidiary. Increase in
sales for some segments are partially due to this factor.

The following table shows sales increase and distribution by business segment in
millions, for the years ended September 30, 1999 and 1998:

1999 1998 Increase
---- ---- --------

Sales Sales
Amount Distribution Amount distribution Amount %
------ ------------ ------ ------------ ------ -

Broiler $ 72.13 60.84% $ 60.06 60.80% $ 12.07 20.10%
Animal Feed 20.61 17.39% 17.85 18.07% 2.76 15.46%
By-Products 9.66 8.15% 9.40 9.52% 0.26 2.77%
Restaurants 9.39 7.92% 5.11 5.17% 4.28 83.76%
Exports 3.38 2.85% 2.71 2.74% 0.67 24.72%
Other 3.38 2.85% 3.66 3.70% (0.28) (7.65%)
------- ------ ------- ------ ------- ------
TOTAL $118.55 100.00% $ 98.79 100.00% $ 19.76 20.00%
======= ====== ======= ====== ======= ======

-21-

Broiler Chicken:

Sales of Broiler chicken were $72.13 million and $60.06 million for the years
ended September 30, 1999 and 1998, respectively. The increase of $12.07 million
or 20.10% is primarily due to an increase of 19.53% in tonnage, sales to
significant new customers and the inclusion of a full year of operations of As
de Oros. This increase is offset by promotions of lower priced products during
1999, which caused variations in the sales mix creating an increase in sales of
lower priced products.

Cost of sales for Broiler chicken were $46.49 million for fiscal 1999, compared
to $44.53 million for the fiscal year ended 1998. Gross profit margin for this
segment increased from 25.86% in fiscal 1998 to 35.55% in fiscal 1999. The
increase in gross profit is mainly due to a decrease in the cost of raw
materials.

Animal Feed:

Sales of animal feed were $20.61 million and $17.85 million for the years ended
September 30, 1999 and 1998, respectively. The increase of $2.76 million or
15.46% is primarily due to an increase in tonnage of 33.26%, and the inclusion
of a full year of operations of As de Oros, offset by decreases in sales prices.
Significant decreases in the cost of raw materials, an important component of
this product, has enabled other competitors to sell similar products in the
market, causing the Company to lower sales prices of certain products in order
to maintain its market share. The Company expects to maintain this sales
strategy in the foreseeable future. The decrease is offset by variations in
sales mix of different types of products of which units and sales prices have
increased.

Cost of sales for animal feed for fiscal 1999 were $15.82 million compared to
$13.98 million during fiscal 1998. The gross profit margin for this segment
increased from a 21.68% in fiscal 1998 to 23.24% in 1999. This increase is
mainly due to a decrease in sales prices, offset by a decrease in cost of raw
materials.

By-Products

Sales of by-products were $9.66 million and $9.40 million for the years ended
September 30, 1999 and 1998, respectively. The increase of $260,000 or 2.77% is
mainly due to an increase in tonnage of 18.10%, offset by variations in sales
mix towards lower priced products. During 1999, the Company lowered the sales
prices for certain key products to maintain sales volume due to strong market
competition.

Cost of sales for this segment were $5.39 million and $5.38 million for fiscal
1999 and 1998, respectively. Gross profit margin increased from 42.77% in fiscal
1998 to 44.20% in fiscal 1999. The increase in gross profit margin is mainly due
to a decrease in cost of sales.

-22-

Restaurants

The restaurant segment had sales of $9.39 million for fiscal 1999, compared to
$5.11 million during fiscal 1998, increasing $4.28 million or 83.76%. This
increase is mainly due to the consolidation of As de Oros' operations for twelve
months for fiscal 1999, compared to seven months for fiscal 1998. During fiscal
1999, competitors introduced new quick service restaurants in the market, which
have resulted in a decrease in sales in this segment. The Company has begun a
marketing strategy to increase sales through the opening of new restaurants in
rural and urban areas, remodeling some of its restaurants and investing in new
cooking equipment to improve the flavor of the product. The Company expects
that, through this marketing strategy, sales will increase in the foreseeable
future.

Cost of sales for this segment were $4.85 million in fiscal 1999 compared to
$2.71 million during fiscal 1998. The increase in cost of sales is mainly due to
the inclusion of As de Oros operations for a full year. Gross profit margins for
fiscal 1999 and 1998 were 48.35% and 46.97%, respectively.

Exports

The Company's exports were $3.38 million and $2.71 million for fiscal 1999 and
1998, respectively, increasing $670,000 or 24.72% during fiscal 1999. Increases
during 1999 are due to a 12.42% increase in tonnage, in addition to an increase
in sales. During 1999, the Company began pet food exports to the Dominican
Republic and other countries in Central America. Also during fiscal 1999, the
Company began supplying products to new customers such as Pizza Hut, McDonalds
and Burger King in countries in Central America and made non-recurring, low
sales price product mix exports to Hong Kong during the months of October and
November 1998. During fiscal 1999, Pipasa was the only Central American company
to make exports to all other countries in the region. The Company expects to
increase its export sales for the next fiscal year, increasing its market share
in the Central American and Caribbean areas.

The cost of sales of this segment for fiscal 1999 were $2.32 million compared to
$1.80 million during fiscal 1998, increasing $520,000 or 28.89%. Gross profit
margin for this segment decreased from 33.58% in fiscal 1998 to a 31.36% in
fiscal 1999. This decrease is mainly due to variations in sales mix.

Other

Sales of other items, which include commercial eggs, raw materials and baby
chicks, were $3.38 million for fiscal 1999, compared to $3.66 million for fiscal
1998, a decrease of $280,000 or 7.65%. This decrease is mainly the result of
eliminations of inter-company sales, since prior to the acquisition of As de
Oros in February 1998, there were transactions between Pipasa and As de Oros,
consisting mainly of sales of raw materials, included in this segment.

Cost of sales for Other items for fiscal 1999 were $2.41 million, compared to
$3.06 million during fiscal 1998. Gross profit margin increased from 16.39% in
fiscal 1998 to 28.70% in fiscal 1999. The increase is mainly due to a decrease
in costs of sales.

-23-

Operating expenses
- ------------------

Operating expenses increased from $21.17 million to $28.85 million, an increase
of $7.68 million or 36.27% during the year ended September 30, 1999 as compared
with fiscal 1998. The increase is primarily due to higher payroll expenses,
higher marketing expenses such as advertising and increased vehicle fleet
leasing costs, and the start up of new Pipasa subsidiaries in El Salvador and
Honduras. Also, there is an increase in operating expenses due to the full year
inclusion of As de Oros' operations, acquired in February 1998. As a percentage
of sales, operating expenses were 24.33% and 21.43% for the years ended
September 30, 1999 and 1998, respectively.

Non-operating expenses
- ----------------------

Non-operating expenses increased from $2.51 million to $4.25 million, an
increase of $1.74 million or 69.32% during the year ended September 30, 1999 as
compared with the same period of fiscal 1998. The increase is primarily due to
higher interest and exchange rate expenses, which increased $770,000. This
increase reflects the acquisition of As de Oros' consolidated debts for twelve
months during 1999, as opposed to seven months during 1998; there is also an
increase in the purchase of raw materials due to higher levels of production.

In addition, there is a decrease in other income in the amount of $1.03 million,
which is primarily due to a non-recurrent legal settlement gain recorded in
fiscal 1998 in the amount of $350,073 and the reclassification of fleet services
income for $596,000 for fiscal 1999 from other income to selling expenses.

Income tax
- ----------

Income taxes were $762,472 and $188,663 for the fiscal years ended September 30,
1999 and 1998, respectively. The lower tax rate in the prior period resulted
mainly from the utilization of additional tax credits and tax shelters in 1998,
and to higher taxable income results in 1999.

FISCAL 1998 COMPARED TO FISCAL 1997

The following table presents consolidated sales information by business segment
in millions for the years ended September 30, 1998 and 1997, respectively:

1998 1997 Increase
---- ---- --------

Sales Sales
Amount Distribution Amount distribution Amount %
------ ------------ ------ ------------ ------ -

Broiler $ 60.06 60.80% $44.28 68.48% $ 15.78 35.64%
Animal Feed 17.85 18.07% 6.95 10.75% 10.90 156.83%
By Products 9.40 9.52% 7.92 12.25% 1.48 18.69%
Restaurants 5.11 5.17% - - 5.11 100.00%
Exports 2.71 2.74% 2.33 3.60% 0.38 16.31%
Others 3.66 3.70% 3.18 4.92% 0.48 15.09%
------- ------ ------- ------ ------- ------
TOTAL $ 98.79 100.00% $ 64.66 100.00% $ 34.13 52.78%
======= ====== ======= ====== ======= ======

-24-

Results by Segments
- -------------------

General

Net sales generated by the Company's operations for the year ended September 30,
1998 were $98.79 million, an increase of $34.13 million or 52.78%, compared with
fiscal year 1997. Cost of sales for the year ended September 30, 1998 was $71.46
million, compared to $47.85 million for fiscal year 1997, an increase of $23.61
million. This increase was mainly due to volume increases and the incorporation
of the new subsidiary, As de Oros. As a percentage of net sales, the cost of
sales represented 73.64% during fiscal year 1998, compared to 75.99% during
fiscal year 1997. During the first three quarters of fiscal year 1998, the cost
of sales was slightly higher than the prior fiscal year, due to the imports of
fertile egg and chicken parts. These imports, which took place during the months
of January through June of 1998 were a consequence of the low technical yields
and high temperatures that were caused by the El Nino weather phenomenon. The
impact of these imports was significant not only in cost, but also in technical
yields. During the months of July through September of 1998, the Company ceased
imports and, as a result, its technical yields and cost of sales percentage
improved.

During fiscal 1998, Management decided to change the breed of its reproduction
hens in order to improve production yields. This change in breeders, which
temporarily affected the incubation rates, has been stabilized into normal
yields during the fourth quarter of fiscal 1998, which has resulted in weight
gain and improved conversion (amount of feed per Pound of grown meat).

Along with the improvement of technical yields came the reduction in
international prices of grains, specifically soy bean meal and corn. This
reduction contributed strongly to the cost of sales reduction from 74.00% to
72.34% of net sales.

Gross profit for fiscal year 1998 was $27.33 million, compared to $16.81 million
during fiscal year 1997, a 62.57% increase. This increase is mainly due to a
volume increase and an improvement in the general cost of sales ratio. As a
percentage of net sales, gross profit increased from 26.00% in fiscal year 1997
to 27.66% during fiscal year 1998, due to the issues discussed above in cost of
sales.

Broiler chicken

Broiler chicken sales of $60.06 million for fiscal 1998, represent a 35.64%
increase above broiler sales for fiscal year 1997. This increase is due to a
32.78% volume increase and a 2.86% price increase in fiscal 1998.

Cost of sales for broiler chicken for fiscal year 1998 was $44.53 million,
compared to $32.55 million during the same period of fiscal year 1997, a 36.80%
increase. This increase is due to a 32.78% increase in dressed pounds sold and
the remaining increase was due to an increase in unit production costs. As a
percentage of net sales, cost of sales was 73.19% during fiscal year 1998,
compared to 73.51% during fiscal year 1997.

-25-

Animal Feed

Sales of animal feed were $17.85 million during the year ended September 30,
1998 as compared to $6.95 million during the same period for fiscal 1997, an
increase of 156.83%. This increase in sales was due to the incorporation of
sales of As de Oros for the period of March to September 30, 1998, whose core
business is animal feed, combined with a volume increase in Pipasa. Sales
increase is mainly due to a 152.04% increase in volume and a variance in product
distribution.

Cost of sales for animal feed was $13.98 million for fiscal year 1998, compared
to $5.77 million during fiscal year 1997, an increase of $8.21 million or
142.29%. This variation is mainly due to the incorporation of As de Oros' sales,
which, as previously mentioned, has its main business in this segment. As a
percentage of net sales, cost of sales was 78.65% during fiscal year 1998,
compared to 82.86% during fiscal year 1997. The reduction in cost of imported
grains (soy bean meal and corn) contributed significantly to the improvement in
this ratio.

By-products

Sales of chicken by-products increased 18.81% during the year ended September
30, 1998. This increase is due to a 0.33% volume increase combined with a price
increase and a change in product mix.

Cost of sales for chicken by-products was $5.38 million during fiscal year 1998,
an increase of $510,000 or 10.47% as compared with fiscal 1997. This variation
is mainly due to a price increase, which consequently improved gross margin,
offset by the tonnage decrease as a result of intercompany elimination as a
result of the consolidation of As de Oros during fiscal 1998. As a percentage of
net sales, cost of sales was 57.45% during fiscal year 1998, compared to 60.76%
during fiscal year 1997.

Restaurants

The newly acquired restaurant segment, which consists of "Restaurantes As de
Oros" had sales of $5.11 million during the period of seven months since its
acquisition.

Exports

Exports increased 17.39% during the year ended September 30, 1998 as compared to
fiscal 1997. This increase is due to an average 1.53% price increase combined
with a 15.86% volume increase. This increase is mainly due to the continued
exports to other countries in Central America, the introduction of pet food in
the market, and extraordinary exports to Hong Kong. The Company has strengthened
sales to El Salvador and Nicaragua, and expects to focus on Honduras during
fiscal 1999.

Cost of sales for exports for fiscal 1998 was $1.80 as million compared to $1.72
million during fiscal year 1997. This increase is mainly due to a 15.86% volume
increase combined with a 0.42% price increase. Volume increased mainly in
broiler chicken, by-products, mechanically deboned meat and pet food, which was
introduced as an export product at the end of fiscal year

-26-

1997. As a percentage of net sales, cost of sales was 66.67% during fiscal year
1998, compared to 73.91% during fiscal year 1997. This improvement in the cost
of sales is primarily due to the introduction of new products in general exports
which have a higher gross margin.

Other

Sales of Other products, which include commercial eggs, raw materials and baby
chicks to third parties, increased $480,000 or 15.09% during the year ended
September 30, 1998 compared to the same period of fiscal year 1997.

Cost of sales for "Other" was $3.06 million during fiscal year 1998, compared to
$2.94 million during fiscal year 1997, a decrease of $120,000 or 4.08%. This
decrease is primarily due to a decrease in sales of commercial eggs. As a
percentage of net sales, cost of sales for "Other" was 83.61% compared to 92.45%
during fiscal year 1997.

Operating Expenses
- ------------------

General and administrative expenses were $8.69 million during fiscal year 1998,
compared to $6.05 million during fiscal year 1997, a 43.72% increase. This
increase is primarily due to expenses incurred in the acquisition of As de Oros.
As a percentage of sales, this item decreased from 9.36% during fiscal 1997, to
8.80% during fiscal year 1998 mainly due to improved sales and efficiencies
resulting from the As de Oros acquisition.

Selling expenses increased 79.14% during fiscal year 1998, compared with fiscal
year 1997. As a percentage of net sales, these expenses increased from 10.52% in
1997 to 12.33% during the same period of fiscal year 1998.

The restaurant segment contributed to the increase in selling expenses as a
percentage of net sales. This is due to the nature of the restaurant business,
which has a high gross profit and high selling expenses. Selling expenses
amounted to approximately 14% of total consolidated sales for the restaurant
segment.

In connection with the acquisition of As de Oros, the Company recorded a charge
to administrative expenses relating to the amortization of cost in excess of net
assets acquired ("Goodwill"). The Company also recorded administrative expenses
pertaining to professional services related to legal fees, financial printing,
auditing and other related charges.

Non-operating expenses
- ----------------------

Other expenses (income) increased 59.20% during fiscal year 1998, compared with
fiscal year 1997. The Company's interest expense increased by 23.87% during
fiscal 1998, compared with fiscal 1997. Miscellaneous income increased during
fiscal 1998, when compared to fiscal 1997 and 1996. This increase is primarily
due to dividends received from investments made in other companies in the amount
of $153,073 and a legal settlement in the amount of $350,073. In addition, the
Company recorded gains for transporting products to clients in the amount of
$356,645.

-27-

FINANCIAL CONDITION

Operating Activities:

As of September 30, 1999, the Company had $3.91 million in cash and cash
equivalents. Working capital was $6.23 million compared to $4.83 at the end of
fiscal year 1998, a $1.40 million increase.

Cash provided by operating activities was $12.21 million for fiscal 1999
compared to $6.39 million in fiscal 1998. Cash flows from operations improved
mainly due to increased operating earnings during fiscal year 1999. Receivables
and inventory increases associated with higher sales and production levels, were
offset by increases in accounts payable.

Investing Activities:

Cash used for investing activities during fiscal 1999 was $8.87 million compared
to $4.84 million during fiscal 1998. Investing cash flows reflect capital
expenditures, which are primarily related to the acquisition of an enterprise
resource planning system, vehicle fleet and new production equipment which the
Company plans to use to increase production capacity. In addition, the Company
has remodeled some of its quick service restaurants as part of a marketing
strategy. The Company anticipates that it will spend approximately $11 million
for capital expenditures during the next fiscal year relating primarily to
restaurant remodeling, investments in production equipment, and expansion of
plant facilities.

Financing Activities

As of September 30, 1999, the Company had lines of credit agreements with banks
for a maximum aggregate amount of $26.70 million, of which $8.66 million have
been used. Agreements may be renewed annually and bear interest at annual rates
ranging from 7.87% to 10.25%. Property and other collateral secure those
agreements.

For fiscal year ended September 30, 1999 the Company used $3.43 million for
financing activities compared to $396,000 used during the same period of fiscal
year 1998. Net cash used in financing activities primarily consists of cash
outflows for payment of short-term and long-term debt amortization, compared to
cash provided by the debt restructuring, which took place during January and
February 1998.

Management expects to finance operations and capital expenditures with its
normal operating activities and external sources. Management also expects that
there will be sufficient resources available to meet the Company's cash
requirements through the next fiscal year.

CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF
SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

-28-

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 which may impact the Company's pricing power; (iii) risks
associated with leverage, including cost increases due to rising interest rates;
(iv) changes in regulations and laws, including changes in accounting standards,
environmental laws, occupational, health and safety, currency fluctuations; and
(v) the effect of, or changes in, general economic conditions.

This management discussion and analysis of financial condition and results of
operations may include certain forward-looking statements, within the meaning of
Section 27A 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, should and variations of those words and similar
expressions are intended to identify these forward-looking statements.
Forward-looking statements made by the Company and its Management are based on
estimates, projections, beliefs and assumptions of Management at the time of
such statements and are not guarantees of future performance. The Company
disclaims any obligations to update or review any forward-looking statements
based on occurrence of future events, the receipt of new information or
otherwise.

Actual future performance outcomes and results may differ materially from those
expressed in forward-looking statements made by the Company and its Management
as a result of 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 requirement; shifts in customer
demands; changes in the continued availability of financial amounts and at the
terms necessary to support the Company's future business.

ITEM 7.A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

COMMODITY RISK MANAGEMENT

The Company imports all of its corn, the primary ingredient in chicken feed,
from the United States of America. Fluctuations in the price of corn may
significantly affect the Company's gross profit margin. The Company purchases
approximately $l.3 million of corn monthly through the Chicago Board of Trade
("CBOT"). The price of corn and soybean meal, like most grain commodities, is
fairly volatile and requires consistent and daily hedging in order to minimize
the effect of price increases on the Company's profit margin.

-29-

The Company has been actively hedging its exposure to corn price fluctuations
since 1991. The Company evaluates, on a daily basis, the prices of corn and
soybean meal. All hedging activities are supervised by the Hedging Committee,
whose members are officers and employees, which have received training at the
CBOT and attend regular seminars on commodities hedging strategies. The
committee consists of financial analysts, the Financial Director and the
Financial Vice-President and transactions are approved by the Executive
President. The committee meets at least once a month to evaluate the Company's
exposure to corn and soybean meal price fluctuations. The Company's strategy is
to hedge against price increases in corn and soybean meal, the Company is not
involved in speculative trading. Contracts range from one month to six months.

The Company will buy directly from the spot market if market conditions are
favorable, but as a general rule, the Company purchases most of its corn through
contracts. The Company's hedging strategy is set in its annual budget, which
determines how much corn and soybean meal the Company will need and the price
the Company must pay in order to meet budget forecasts. The Company uses an
internal pricing model to prepare sensitivity analysis. The Company bases its
target prices on the worst case price assumptions (i.e. high corn prices). The
prices paid by the Company for corn were 7.04% below its budgeted prices for the
year ended September 30, 1999.

The Company has a $500,000 credit line with Futures U.S.A., Inc. ("FIMAT") and
draws upon this credit line to cover its initial margin deposit. The interest
rate paid on this line of credit averages an annual rate of less than 10% on
drawn amounts. The Company is in frequent contact with its brokers (at least
three to four times a day) and receives advice from the brokers' corn experts.

The Company's monthly soybean meal purchases average approximately $640,000. The
hedging strategies for soybean meal purchases are identical to that of corn
purchases, except that the Company purchases its soybean meal through a Costa
Rican company, INOLASA, in which the Company holds a 10% equity ownership. In
Costa Rica, there is a 5% tax for soybean meal imports, which is not levied if
purchased through INOLASA. If for any reason INOLASA cannot deliver the soybean
meal to the Company, the Company can buy its soybean meal directly from the
CBOT. Thus far, the Company has never had to purchase soybean meal directly from
the CBOT.

EXCHANGE RATE RISK MANAGEMENT

The Company makes U.S. dollar payments for the majority of its raw materials and
bank facilities. This U.S. dollar expense component is not unique to the
Company, as all poultry producers in Central America must rely on U.S. companies
for raw materials such as corn, soybean meal and reproduction birds. Given its
U.S. dollar exposure, the Company actively manages its currency exchange rate
risk. The Company uses a financial model to determine the best strategy to
mitigate against the devaluation of the currency of Costa Rica, the Colon,
against the U.S. dollar. The Company systematically increases its annual sales
prices by a rate that is consistent with the Colon devaluation against the U.S.
dollar. For the fiscal years ended September 30, 1999, 1998 and 1997, the
national devaluation rates were 10.81%, 10.6% and

-30-

11.61% respectively, and correspondingly, the Company increased its prices
11.19%, 13.03% and 12.6%, respectively. Management believes that the Company's
strong market will allow for this type of price increase without sacrificing
long-term demand and market share. The Company has successfully passed along
such price increases for the last five years. Management plans to increase its
export operations in order to increase its U.S. dollar revenues, as all export
sales are made in U.S. dollars. For the fiscal year ended September 30, 1999,
exports increased 24.72%, of U.S. $674,000, compared to exports for the same
period in 1998.

In addition to fluctuations in the price of corn and soybean meal, the Company
has exposure to fluctuations in exchange rates, as payments for imported corn,
soybean meal, reproduction birds and bank facilities are in U.S. dollars. The
Company's Finance Division has the responsibility of monitoring economic and
industrial trends that influence foreign exchange levels. This division examines
areas such as poultry gross national product, gross national product ("GNP"),
inflation, devaluation, export and import growth rates, growth in real wages,
unemployment and population rates in Costa Rica.

Raw material purchases have an average payment period of 120 days, hence
exchange rate risk is for four months. During this time, accounts are paid and
costs are updated to reflect new exchange rates. In the event of a severe
devaluation of the colon, or increases in international prices, the Company may
be able to increase sales prices to recuperate its foreign exchange losses. In
addition, all of the Company's exports are denominated in U.S. dollars (even
exports within Central America). Management expects that the strategy to
increase exports will increase the Company's U.S. dollar revenues. The Company
uses a model to determine the maximum devaluation possible before considering
whether or not to incur additional U.S.-based debt. In effect, the Company
borrows in U.S. dollars when economically proven to be less expensive than
borrowing in colones.

Information required by this item is also located in this Form 10-K under the
heading "Foreign Competition."

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information required by this item is incorporated by reference to the
Independent Auditor's Reports found on pages F-2 and F-3 from the consolidated
financial statements and supplementary data on pages F-3 through F-30 on this
report.

ITEM 9. CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

There were no changes in or disagreements with the Company's accountants during
the fiscal year ended September 30, 1999.

-31-

PART III
- --------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The Directors and Executive Officers of the Company, their ages and present
positions held in the Company, as of September 30, 1999, are as follows:

NAME AGE POSITION HELD
---- --- -------------
Calixto Chaves 53 Chairman, Chief Executive
Officer, President and Director

Jose Pablo Chaves 27 Director

Dr. Federico Vargas 66 Director

Lic. Jorge M. Quesada 50 Treasurer and Director

Luis J. Lauredo 50 Director

Alfred E. Smith, IV 48 Director

Monica Chaves 28 Secretary

The Honorable Ambassador
Luis Guinot, Jr. 64 Director

The Company's Directors will serve in such capacity until the next annual
meeting of stockholders of the Company and until their successors have been
elected and qualified. The officers serve at the discretion of the Company's
Directors. Calixto Chaves and Monica Chaves are father and daughter. Calixto
Chaves and Jose Pablo Chaves are father and son. Jorge M. Quesada is the
brother-in-law of Calixto Chaves, Mr. Mauricio Marenco, Director of Investor
Relations and Assistant Secretary is married to one of Mr. Calixto Chaves'
nieces. Otherwise, there are no family relationships among the Company's
officers and directors, nor are there any arrangements or understandings between
any of the directors or officers of the Company or any other person pursuant to
which any officer or director was or is to be selected as an officer or
director.

-32-

Calixto Chaves. Mr. Chaves is the founder and President of Corporacion Pipasa,
S.A. from its inception in 1969 to the present. He is currently on the Boards of
Directors of Central American Oils and Derivatives, S.A., and American
Oleaginous Industry. From 1994 to 1996, he was a Board member of Cerveceria
Americana, a private brewery. In 1994, he served as an advisor to the President
of Costa Rica and the Ministry of Economic Business Affairs. From 1983 to 1985,
he was a member of the Board of Directors of the Sugar Cane Agricultural League.
From 1982 to 1986, he served as Minister of the Costa Rican Ministry of
Industry, Energy and Mines and became Minister of Natural Resources in 1986.
From 1982 to 1986, he was a member of the Board of Directors of MINASA, a Costa
Rican mining company. Mr. Chaves was the founder of the Chamber of Industries in
the Costa Rican province of Heredia. From 1973 to 1974, he was President of the
Board of Directors of Banco Nacional de Belen.

Dr. Federico Vargas. Dr. Vargas is a Board member of Corporacion Pipasa, S.A.,
one of the Registrant's subsidiaries. He has served as a Professor of Economics
and Social Sciences at the University of Costa Rica from 1963 to the present.
Dr. Vargas has been involved extensively in political activities since 1974.
From 1990 to 1994, he served as a Deputy in the Costa Rican Assembly. From 1993
to 1994, he was Chairman of the Legislative Section of the Partido Liberacion
Nacional Costa Rica. Prior to 1990, Dr. Vargas held a number of political
offices, including Minister of Finance on two occasions, Ambassador of Costa
Rica to the United States, Ambassador of Costa Rica to the Organization of
American States, Counselor to the President of Costa Rica in Finance and
External Debt, with the rank of Minister of Economics, and Advisor to the
President of Costa Rica. His teaching activities included serving as the
Chairman of the "Instituto de Investigaciones Economicas", University of Costa
Rica and Director of the Economics Department of the School of Economics and
Social Sciences of the University of Costa Rica. Dr. Vargas serves on the Boards
and advisory bodies of numerous charitable and educational organizations and is
the author of a number of publications in economic and educational matters. He
obtained his Bachelors in Business Administration from Nichols College in
Massachusetts in 1954 and his Ph.D. from the University of Colorado in 1967. He
has also attended the Wharton School of Finance and Commerce at the University
of Pennsylvania. Mr. Vargas graduated from the University of Costa Rica with a
degree in Business Administration.

Lic. Jorge M. Quesada. Mr. Quesada has held numerous positions with Corporacion
Pipasa, S.A. since 1985, and was its Executive Vice President from 1990 to 1999.
Mr. Quesada was appointed Executive President of Pipasa and As de Oros on March
1, 1999. He was a member of the Boards of Directors of Banco Fomento Agricola
(k/n/a BFA) from 1991 to 1996. From 1987 to 1991, he was on the Board of
Directors of Financiera Belen, S.A. Mr. Quesada has conducted numerous seminars
regarding marketing topics. He obtained his Degree in Business Administration,
with emphasis on Public Accounting, from the University of Costa Rica in 1984.

Luis J. Lauredo. From 1995 to the present, Mr. Lauredo has been President of
Greenberg Traurig Consulting, Inc., an affiliate of the international law firm,
Greenberg Traurig Hoffman, Lipoff, Quentel & Rosen, of Miami, Washington, D.C.
and New York. From 1994 to 1995, he was Executive Director of the Summit of the
Americas. From 1992 to 1994, he was a Commissioner on the Florida Public Service
Commission, as well as Chairman of the International Relations Committee of the
National Association of Regulatory Utility Commissioners. In his career, Mr.
Lauredo has held a number of positions in the banking industry, including Senior
Vice President

-33-

of the Export-Import Bank of the United States of America. He has represented
the President of the United States as special U.S. Ambassador to the
inaugurations of the Presidents of Colombia, Venezuela, Brazil, and Costa Rica.
He also served as a founding Director of the Hispanic Council on Foreign Affairs
(Washington, D.C.). Mr. Lauredo received his B.A. from Columbia University in
New York City and has attended the University of Madrid in Spain and Georgetown
University Law Center in Washington, D.C.

Alfred E. Smith, IV. Mr. Smith has been a director of the Company since June 1,
1994. Mr. Smith is a Managing Director at the Wall Street firm of Hunter
Specialists, LLC, New York, since January 1997. From 1979 to 1996, he was with
CMJ Partners, a New York Stock Exchange member firm. Mr. Smith is the Chairman
of the Government Relations Committee of the New York Stock Exchange, Director
and Secretary of the Alfred Emanuel Smith Memorial Foundation, where he also is
the Dinner Chairman; Chairman of the Cardinal's Committee for the Laity-Wall
Street Division since 1985; Founder and Chairman of Hackers for Hope since 1989;
Director of the Center for Hope since 1989; a Director at the Catholic Youth
Organization until 1997; and member at the President's Council, Memorial Sloan
Kettering Hospital since 1986; and a member of the New York City Advisory Board
of the Enterprise Foundation. Mr. Smith is also a member of the Board of
Trustees of St. Vincent's Hospital and Medical Center, since 1986, and the
Cavalry Hospital since 1998, and was a member of the Board of Trustees of Iona
Prep School, Saint Agnes Hospital, and Our Lady of Mercy Medical Center. Mr.
Smith is a member of the Association of the Sovereign Military Order of Malta.
He has received numerous awards for his charity humanitarian work, including
"Wall Street 50" Honoree Humanitarian Award, Terence Cardinal Cooke Center in
1999; Man of the Year Award at Iona Prep in 1986, Club of Champions Gold Medal
Award of the Catholic Youth Organization, Ellis Island Medal of Honor, the
National Brotherhood Award of the National Conference of Christians and Jews,
the Graymoor Community Service Award by the Franciscan Friars of the Atonement,
the American Cancer Society's Gold Sword of Hope Award, and the Terence Cardinal
Cooke Humanitarian Award by Our Lady of Mercy Medical Center. Mr. Smith was
educated at Villanova University.

Monica Chaves Ms. Chaves is Secretary of the Board of Directors of Rica Foods,
Inc. and is also member of the Board of Directors of Corporacion Pipasa. Ms.
Chaves joined Corporacion Pipasa as assistant manager in the company's Finance
Division in 1991, when she was in charge of Pipasa's Special Investment
Department. In 1996, when the Company went public, Ms. Chaves assumed the
Company's Investor Relations Department. Ms. Chaves was appointed the Vice
President of Administration of Pipasa and As de Oros on March 1, 1999. Ms.
Chaves received a bachelors degree in Business Administration from Saint
Michaels College, Vermont.

Honorable Ambassador Mr. Louis Guinot, Jr. Ambassador Luis Guinot, Jr. was born
in San Juan, Puerto Rico on April 8, 1935. He attended college in the United
States of America, where he graduated from the Catholic University of America
School of Law in Washington, D.C. After completing his undergraduate studies at
New York University, he was commissioned and Ensign in the U.S. Navy where he
served in several billets-both shore and afloat, including a tour of duty as
gunnery officer of the destroyer USS Gearing (DD710) and Senior Shore Patrol
Officer of the U.S. Sixth Fleet based in Naples, Italy. After completion of his
military obligation, Mr. Guinot entered the private practice of law in
Washington, D.C. Mr. Guinot has served as United

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States Ambassador to the Republic of Costa Rica, as the Assistant General
Counsel of the United States Department of Agriculture and as Administrator of
the Office of the Commonwealth of Puerto Rico in Washington, D.C. Additionally,
Mr. Guinot has also appeared as speaker and lecturer on United States-Latin
American Trade, NAFTA, and GATT related matters, and he is the author of several
newspaper articles on the same subject. Mr. Guinot is a member of the
Commonwealth of Virginia and the District of Columbia Bar Associations and has
been admitted to practice before the bars of the U.S. Supreme Court, the 1st and
the 11th Circuit Court of Appeals, the Bars of the Southern District of New
York, and the Southern District of Florida, Eastern Districts of Virginia, and
the Court of Military Appeals. Mr. Guinot is also a fellow of the American Bar
Foundation, served in the U.S. Presidential Commission on Civil Disorders
(Kerner Commission) and former member of the Board of Directors of the Legal
Services Corporation. Mr. Guinot was awarded the Grand Order of Juan Mora
(Silver Plaque) by the Government of Costa Rica. He has been featured speaker on
Conferences on the general subject of hemispheric free trade and served as legal
advisor to U.S. corporations doing business in Latin America as well as legal
advisor to ministries of Central and South American Countries. In addition to
serving as a member of the Board of Directors of Rica Foods Mr. Guinot was
recently appointed to serve in the Board of Directors of Tampa Energy Co. (TECO)
of Tampa, Florida.

Jose Pablo Chaves. Mr. Chaves is a member of the Board of Directors of Pipasa
and As de Oros, as well as Restaurantes As de Oros, S.A., and is a board member
of the Company and the Company's Chief Operating Officer. Mr. Chaves studied
Business Administration with emphasis in Marketing at (Babson College,
Massachusetts) and in Costa Rica. Mr. Chaves is the founder of three Costa Rican
Companies.

Compliance with Section 16(a) of the Securities Exchange Act of 1924

Section 16(a) of the Securities Exchange Act of 1934 (the "34 Act") requires the
Company's officers and directors and persons owning more than ten percent of the
Company's Common Stock to file initial reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Additionally,
Item 405 of Regulation S-K under the 34 Act requires the Company to identify in
its Form 10-K and Proxy Statement those individuals for whom one of the above
referenced reports was not filed on a timely basis during the most recent fiscal
year or prior fiscal years. Given these requirements, the Company reports that
all of the Company's officers or directors and all persons owning more than ten
percent of its shares have filed the subject reports on a timely basis during
the past fiscal year.

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ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth for the summary compensation table for the most
highly compensated officers for the last three fiscal years:

Salary Other
Name and Main Position Years Compensation Compensation
(1) (2)
--- ---

Calixto Chaves - Chief Executive Officer 1999 $128,262 $1,953
Calixto Chaves - Chief Executive Officer 1998 $126,780 $1,993
Calixto Chaves - Chief Executive Officer 1997 $104,477 $5,093