10-K 1 file001.txt FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended June 30, 2003 ------------- Commission File No. 0-1437 -------------------------- THE FIRST REPUBLIC CORPORATION OF AMERICA ----------------------------------------- (Exact name of Registrant as specified in its charter) DELAWARE 13-1938454 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 302 Fifth Avenue New York, New York 10001 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 279-6100 -------------- Securities registered pursuant to Section 12(b) of the Act: None ---- Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $1 per share ------------------------------------ (Title of Class) Indicate by check mark whether 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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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 or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes No X --- --- As of September 23, 2003, 666,616 common shares were outstanding, and the aggregate market value of common shares held by nonaffiliates of Registrant was approximately $1,672,000 (based upon the price paid by Registrant for shares). Documents Incorporated by Reference ----------------------------------- See Item 14(c) The First Republic Corporation of America 10-K Contents PAGE PART I Item 1. Business........................................................... 1 Item 2. Properties......................................................... 5 Item 3. Legal Proceedings.................................................. 8 Item 4. Submission of Matters to a Vote of Security Holders................ 8 PART II Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters............................................ 9 Item 6. Selected Financial Data............................................10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................................11 Item 7a. Quantitative and Qualitative Disclosures about Market Risks........18 Item 8. Financial Statements and Supplementary Data........................19 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........................................55 Item 9a. Controls and Procedures............................................55 PART III Item 10. Directors and Executive Officers of the Registrant.................56 Item 11. Executive Compensation.............................................58 Item 12. Security Ownership of Certain Beneficial Owners and Management.....60 Item 13. Certain Relationships and Related Transactions.....................62 Item 14. Principal Accountant Fees and Services.............................64 PART IV Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K..65 Signatures ...................................................................92 PART I ITEM 1. BUSINESS a. General Development of Business The First Republic Corporation of America (the "Company") was incorporated in the State of Delaware in February 1961, and is presently engaged, either directly or through its subsidiaries, in the real estate, hotel, seafood, and textile businesses. See Item 1(c) for a description of the businesses in which the Company and its subsidiaries are engaged. On October 31, 2002, the Company paid approximately $960,000 for a parcel of land adjacent to our Greensboro South Shopping Center. This parcel, combined with approximately 3/4 of an acre of land from our Shopping Center, was net leased for a minimum of 25 years to a developer at an annual rent of $127,000. The developer in turn has a long term lease with a major drug store chain. Rent commenced September 1, 2003. On November 14, 2002, the Company made a final payment of $1,175,000 for a total investment of $1,500,000 for a 50% interest in a joint venture that is building a store for a major supermarket chain in Worcester, Massachusetts. The Company and its joint venture partner have also guaranteed a construction loan obtained by the joint venture which provides for a maximum borrowing of $8,450,000. In connection with this investment, the Company is entitled to receive a 12% per annum preferential return on its investment, payable quarterly when the tenant begins to pay rent. The supermarket is scheduled to open by March 31, 2004. The Company's credit agreement with its principal lender had provided for a $9,000,000 term loan with an interest rate of 7.5% per annum and a $3,000,000 revolving line of credit with an interest rate equal to either (a) LIBOR plus 2% or, (b) the Alternate Base Rate (as defined) plus 0.50%. These loans were, and remain, collateralized by a mortgage on the East Newark Industrial Center. The term loan required amortization payments of $359,000 per annum. Both loans matured on October 21, 2002 and were extended to January 13, 2003 when the Company and its lender further extended the term loan until October 21, 2007 with the same amortization schedule and an interest rate of LIBOR plus 1.75%. At the same time, the Company entered into an interest rate swap agreement which fixed the all-in interest rate on the term loan at 5.53% per annum. The revolving line of credit of $3,000,000 was extended until October 21, 2005 with the same interest rate options as the old loan. In July 2002, the Company's 80.2% owned subsidiary, Bluepoints Company, Inc. ("Bluepoints") ceased the harvesting of clams at its Long Island, New York property. Bluepoints has entered into a contract to sell the two buildings at the site as well as approximately five acres of land for $1,600,000. The contract is contingent upon the ability of the purchaser to obtain certain regulatory approvals by December 1, 2003. In connection with this contract, Bluepoints has received a $60,000 nonrefundable deposit. 1 b. Financial Information about Industry Segments The sales and operating profit from operations and the identifiable assets attributable to each industry segment for the three years ended June 30, 2003 are set forth in Note 2 (Industry Segments and Foreign Operations) of the Notes to Consolidated Financial Statements, which are incorporated herein by reference to Item 8. hereof. c. Narrative Description of Business Real Estate The Company owns various loft buildings, office buildings, industrial buildings, shopping centers, and residential and other properties, situated along the East Coast of the United States in Massachusetts, Rhode Island, New York, New Jersey, Pennsylvania, Virginia, North Carolina and Florida. A general description of these properties is provided in Item 2. below. Real estate revenues accounted for approximately 29%, 24% and 23% of consolidated revenues from operations for the fiscal years ended June 30, 2003, 2002 and 2001, respectively. Hotel The Company owns and operates a 288-room hotel and convention center located in Liverpool, New York, which it operates under a Holiday Inn franchise agreement. There are approximately 20 facilities in the Liverpool/Syracuse area with which the hotel competes. Currently, the Company believes it is the third largest hotel in the area in terms of revenues. Hotel revenues accounted for approximately 13%, 10% and 9% of consolidated revenues from operations for the fiscal years ended June 30, 2003, 2002 and 2001, respectively. Seafood Bluepoints held title to approximately 13,000 acres of land under the water of the Great South Bay between Fire Island and Long Island's South Shore in New York State. Until ceasing clamming activities at this site in July 2002, Bluepoints harvested hard-shell clams on this property. In December 2002, Bluepoints donated approximately 11,500 acres with a cost basis of approximately $458,000 to the Nature Conservancy Inc., a non-profit corporation. At one time Bluepoints was a substantial factor in the market for hard shell clams. However, a significant decrease in clam production at Bluepoints, combined with substantial new production by competitors harvesting clams in other areas along the Eastern Seaboard, resulted in a diminished role for Bluepoints and continuing losses in 2 its hard-shell clam operation. These factors ultimately led to Bluepoints' decision to cease its hard shell clam operations in July 2002. These operations have not been a significant component of the Company's seafood operations for the past several years. In September 1998, Bluepoints began selling imported products, principally lobster tails from Honduras and Oman. Sales of the foregoing products were approximately $10,488,000 and $13,152,000 and losses were approximately $224,000 and $1,000 for the fiscal years ended June 30, 2003 and 2002, respectively. Bluepoints also had an arrangement with a company that sells its seafood products at the Fulton Fish Market in New York City. This venture had sales of approximately $7,043,000 and $8,637,000 and operating (losses) profits of approximately $(48,000) and $34,000 for the fiscal years ended June 30, 2003 and 2002, respectively. In June 2003, Bluepoints terminated this joint venture relationship. Bluepoints, through foreign subsidiaries, operates a shrimp farm and is a 62.5% owner of a shrimp hatchery, both of which are located in Ecuador. Sales of shrimp from the foregoing operations approximated $393,000 and $550,000 for the fiscal years ended June 30, 2003 and 2002, respectively. Bluepoints, through a foreign subsidiary, also owns a 38% interest in another Ecuadorian shrimp farming operation. See Items 12. and 13. below for information relating to shares of stock of Bluepoints and these foreign subsidiaries owned by certain affiliates of the Company. The Company also owns a seafood operation in Cape Canaveral, Florida that harvests scallops and sells other imported and domestic seafood products. In the current fiscal year, sales from this operation were approximately $1,070,000 and there was a loss of $548,000. This compares to sales of approximately $4,952,000 and a loss of $1,510,000 from operations during the prior year. Seafood revenues accounted for approximately 40%, 48% and 49% of consolidated revenues from operations for the fiscal years ended June 30, 2003, 2002 and 2001, respectively. Textile The Hanora Spinning division of the Company ("Hanora"), operates a yarn spinning plant in Woonsocket, Rhode Island. Hanora, which is not a significant factor in the market it serves, competes with a number of other yarn spinning plants on the basis of quality of product and price. During the fiscal year ended June 30, 2003, Hanora purchased approximately $193,000 of additional equipment. The backlog of yarn orders on August 31, 2003 was $7,400,000 as compared to $7,054,000 on August 31, 2002. Approximately 80% of the current backlog is expected to be shipped in the fiscal year ending June 30, 2004. Three customers accounted for approximately 35% of Hanora's total sales during the 2003 fiscal year. The loss of any one of these customers would not have a material adverse effect on the Company and its subsidiaries taken as a whole. 3 J&M Dyers, ("J&M"), another division of the Company, which operates a yarn dyeing plant in Sumter, South Carolina, is a commission dyer for rawstock, package, ombre and skein dyeing. J&M is not a significant factor in the market it serves and competes with a number of other firms that are substantially larger. At the present time, J&M does not have a significant backlog of orders. Textile revenues accounted for approximately 17%, 17% and 18% of consolidated revenues from operations for the fiscal years ended June 30, 2003, 2002 and 2001, respectively. 4 ITEM 2. PROPERTIES LOCATION GENERAL CHARACTER (1) -------------------------------------------------------------------------------- REAL ESTATE SEGMENT First Republic Office Park Two, two-story office buildings with Thruway and Electronics Parkway 49,000 and 35,000 rentable square feet; Liverpool, New York Approximately 14 acres of land; 78% rented Waltham Engineering Center 17 multi-story industrial buildings; Waltham, Massachusetts in excess of 380,000 rentable square feet; parking facilities; 99% rented. East Newark Industrial Center 30 multi-story industrial buildings; in East Newark, New Jersey excess of 1,000,000 rentable square feet; parking facilities; 72% rented. Nyanza Building Four-story and basement industrial Woonsocket, Rhode Island building; 300,000 rentable square feet; used by the Company as spinning plant (100,000 sq. ft.) and balance rented to others; 96% rented. Greensboro North Shopping Center Approximately 13.5 acres of land and Greensboro, North Carolina 140,000 square feet of space in buildings located thereon; 100% rented. Greensboro South Shopping Center Approximately 11.2 acres of land and Greensboro, North Carolina 134,250 square feet of space in buildings located thereon; 93% rented. Land Approximately 1.4 acres of land Greensboro, North Carolina net leased for a minimum of 25 years. Shopping Center Approximately 13.5 acres of land and Richmond, Virginia 130,000 square feet of space in buildings located thereon; 100% rented. London Bridge Shopping Center Approximately 10.2 acres of land and Virginia Beach, Virginia 100,000 square feet of space in buildings located thereon; 100% rented. Shipps Corner Shopping Center Approximately 5.5 acres of land and 63,000 Virginia Beach, Virginia square feet of space in buildings located thereon; 100% rented. 5 LOCATION GENERAL CHARACTER (1) -------------------------------------------------------------------------------- Sunscape Apartments 167-unit residential garden apartments Orlando, Florida located on approximately 12 acres of land; 93% rented. (Company owns 50% of Sunscape Associates, a partnership which owns the apartments). Shopping Center Approximately 22.7 acres of land and Brookhaven, Pennsylvania 196,000 square feet of space in buildings located thereon; 100% rented. Newburyport, Massachusetts Four-story building; 100,000 rentable square feet of space; 67% rented. Three-story building, 13,800 rentable square feet of space; 100% rented. Two-story building and warehouse; 5,000 square feet, presently vacant. HOTEL SEGMENT Hotel--Syracuse 288-room motor hotel and convention Thruway and Electronics Parkway center; indoor pool; operated under a Liverpool, New York Holiday Inn franchise agreement. SEAFOOD SEGMENT (2) West Sayville, New York Approximately 1,500 acres of underwater land in the Great South Bay of Long Island; approximately five acres of upland and 22,500 square feet of space in two buildings located thereon; presently vacant (3). Mattituck, New York Approximately one acre of land on Long Island; previously used as a grow out pond for the clam hatchery; presently rented. Englishman Island Approximately 600 acres of land including Guayaquil County, Ecuador approximately 288 acres owned and the balance held under a 10-year concession, expiring April 2004, containing shrimp ponds and drainage canals. 6 LOCATION GENERAL CHARACTER (1) -------------------------------------------------------------------------------- Vacant Land Bluepoints has a 62.5% interest in a Guayaquil, Ecuador company that owns approximately 100,000 square feet of riverfront land. Ayangue Bluepoints has a 62.5% interest in a Guayas Province, Ecuador company that owns approximately 56 acres of land used for a shrimp hatchery. Cape Canaveral, Florida Various leaseholds (approximately 11 acres) used by scallop operation for offloading, processing, packaging, warehouse and office. (Company owns 100% of Bluepoints International Fisheries Inc. which hold leaseholds.) TEXTILE SEGMENT Pageland, South Carolina Approximately 10 acres of land and 36,125 square foot building located thereon; pre-viously used as bulking and twisting plant, warehouse and office, presently being rented. Sumter, South Carolina Approximately 10.5 acres of land and 61,000 square foot building located thereon; used as yarn dyeing plant, warehouse and office. CORPORATE OFFICE 302 Fifth Avenue 5,400 square feet of executive offices; New York, New York month-to-month tenant at a rent of $9,700 per month. See Item 13. below. (1)--Reference is made to Schedule III for information with respect to mortgages encumbering certain properties listed in the table. (2)--Except as otherwise noted, the properties listed in the Seafood Segment are owned by Bluepoints Company, Inc., an 80.2% owned subsidiary of the Company. (3)--Hard shell clamming operations were ceased in July 2002 and the five acres of land and the two buildings are presently subject to a sales contract entered into by Bluepoints to sell the land and building. See item 1a. 7 ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 8 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS a. The Company's common stock is traded in the over-the-counter market. There have not been any quotations for the Company's common stock in the National Daily Quotation Service for the past several years. During the two most recent fiscal years, the Company has purchased shares at prices ranging from a low of $45 per share in September 2001 to a high of $50 in April 2003. Due to the absence of quotations it may be deemed that there is no established public trading market for the Company's common stock. b. As of September 23, 2003, there were 253 holders of record of the Company's common stock. c. No dividends have been paid during the two years ended June 30, 2003. The Company has no intention of paying dividends in the foreseeable future. d. The Company did not sell any securities during the past year. 9 ITEM 6. SELECTED FINANCIAL DATA

10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES Working capital at June 30, 2003 decreased by approximately $6,306,000 to $9,828,000. Net cash provided by operating activities was approximately $683,000 during the 2003 fiscal year. Net cash provided by financing activities was approximately $3,839,000. Net cash of approximately $5,744,000 was used in investing activities. The Company had a $9,000,000 term loan with its principal lender bearing interest at 7.5% and a $3,000,000 revolving line of credit with an interest rate equal to either (a) LIBOR plus 2% or (b) the Alternate Base Rate (as defined) plus 0.50%. These loans are collateralized by a mortgage on the East Newark Industrial Center. The term loan requires amortization payments of approximately $359,000 per annum. Both loans matured on October 21, 2002 and were extended to January 13, 2003 when the Company and its lender further extended the term loan until October 21, 2007 with the same amortization schedule and an interest rate of LIBOR plus 1.75%. At the same time, the Company entered into an interest rate swap agreement which fixed the all-in interest rate on the term loan at 5.53% per annum. The revolving line of credit of $3,000,000 was extended until October 21, 2005 with the same interest rate options as the old loan. At June 30, 2003, the term loan balance was $7,126,517 and $2,750,000 was outstanding on the revolving line of credit. On October 31, 2002, the Company paid approximately $960,000 for a parcel of land adjacent to our Greensboro South Shopping Center. This parcel, combined with approximately 3/4 of an acre of land from our shopping center, was net leased for a primary term of 25 years to a developer at an annual rent of $127,000. The developer in turn has a long term lease with a major drug store chain. Rent commenced September 1, 2003. On November 14, 2002, the Company made a final payment of $1,175,000 for a total investment of $1,500,000 for a 50% interest in a joint venture that is building a store for a major supermarket chain in Worcester, Massachusetts. The Company and its joint venture partner have also guaranteed a construction loan obtained by the joint venture which provides for a maximum borrowing of $8,450,000. In connection with this investment, the Company is entitled to receive a 12% per annum preferential return on its investment, payable quarterly when the tenant begins to pay rent. The supermarket is scheduled to open by March 31, 2004. During fiscal 2003, the Company borrowed $2,500,000 from United Realty Management Company, a related party, to finance the importation and sale of lobster tails. The loans bear interest at prime +1% and have no fixed repayment terms or maturity dates. 11 During the three years ended June 30, 2003, the Company incurred capital expenditures of approximately $7,270,000. In addition, approximately $1,136,000 was expended for tenant improvements during this three year period. At June 30, 2003 the Company had no significant commitments for capital expenditures and believes that its current cash position and borrowing capacity are adequate to meet cash needs for the next twelve months. The Company's equity share of losses from Ecuadorian shrimp operations was approximately $1,054,000 in fiscal 2003 as compared to $927,000 in fiscal 2002. During fiscal 2002, the Company's shrimp farms introduced "Polyculture," which is a method of farming a species of fish, Tilapia, and shrimp together. This farming method has been proven to be successful in combating White Spot Virus in Ecuador. Efforts are also continuing to increase shrimp production through the use of the Company's patented Mariculture System, the development of a product, Tolerine, designed to mitigate White Spot Virus that is decimating Ecuador's shrimp production, the micro-screening of the water supply to the ponds and other improved farming techniques. Although there can be no assurance that the shrimp production will improve, the Company believes that operations may improve in the future. This belief is based upon preliminary results from polycultured pond harvests, cost reductions that have been implemented, the efforts to increase production discussed above, and the marketing of the Mariculture System to other shrimp farmers. RESULTS OF OPERATIONS Real Estate In fiscal 2003, the Company's real estate operating profits decreased $471,000 on a decrease in revenues of $159,000. The decrease in profits was due to increased snow removal costs of $219,000 and increased utility costs of $448,000 as a result of the harsh winter and numerous snowstorms. Repairs and maintenance were reduced at our East Newark ($74,000) and Waltham ($169,000) buildings. In fiscal 2002, operating profits increased $637,000 on a decrease in revenues of $783,000. The decrease in revenues was primarily due to the sale of the Company's office building on West 39 Street in New York City on October 4, 2000. The decrease in revenues was offset by decreased fuel and utility costs of $479,000 and snow removal costs of $153,000 as a result of the mild winter. There was also a reduction in repairs and maintenance at the Nyanza property of $515,000 and at the East Newark building of $378,000. In fiscal 2001, operating profits decreased $263,000 and revenues decreased $1,225,000. The decrease in revenues was due to the sale of the Company's office building on West 39 Street in New York City on October 4, 2000 and its Miami Beach property on May 1, 2000, offset by revenue increases at substantially all the Company's other properties. The decrease in operating profits was due to the reduced revenue offset by reduced repairs and maintenance of $726,000 at the Waltham and Nyanza properties and reduced mortgage interest of $213,000. 12 Hotel In fiscal 2003, revenues increased $326,000 and profits increased $142,000 as a result of the increased revenues. Due to the unusually cold winter, fuel and utility costs increased $153,000. In fiscal 2002, revenues decreased $100,000 but profits increased $206,000 as a result of decreased fuel and utility costs of $102,000, lower repairs and maintenance of $25,000, reduced real estate taxes of $97,000 and slightly lower operating costs In fiscal 2001, revenues decreased $95,000 and profits decreased $466,000 as a result of the lower revenues, increased fuel and utility costs of $140,000, higher repairs and maintenance of $53,000, increased depreciation expense of $67,000 and higher operating costs. Seafood In fiscal 2003, overall revenues for the seafood division decreased $9,092,000 as compared to the prior year. Losses from operations (including equity share of losses in affiliated entity and excluding minority interests share of loss of subsidiaries) in fiscal 2003 were $5,074,000 as compared to losses of $4,714,000 in fiscal 2002. Revenues decreased at the Ecuadorian shrimp operations by $186,000 and losses from operations were $3,280,000 due to continued poor shrimp yields caused by the devastating outbreak four years ago of White Spot Virus that continues to decimate the Ecuadorian shrimp industry. The Company is continuing its efforts to combat the virus. The Company believes that the introduction of the Polyculture technology last year combined with the procedures introduced in prior years and the continued use of its patented Mariculture system may result in an improvement in the shrimp operations. However, there can be no assurance that these treatments will be successful. The Company's Florida operations incurred a loss of $548,000 in fiscal 2003 as compared to a loss of $1,510,000 in fiscal 2002 on a $4,251,000 decrease in revenues. Bluepoints Long Island operations (consisting of the sale of imported products and a joint sales venture at the Fulton Fish Market) had a loss of $1,133,000 as compared to a loss of $546,000 in the prior year and revenues were $18,686,000 as compared to 2002 revenues of $23,341,000. Due to continuing losses in its clamming operations, the Company closed its clam operations in July 2002 and has entered into a contract of sale for its West Sayville Long Island facility. The Company also donated its underwater clam beds, which had a cost basis of approximately $458,000 at the date of contribution in December 2002, to the Nature Conservancy Inc., a non-profit corporation. In June 2003, the Company also terminated its joint sales venture at the Fulton Fish Market. In fiscal 2002, revenues for the seafood division decreased $5,052,000 as compared to the prior year. Losses from operations (including equity share of losses in affiliated entity and excluding minority interests share of loss of subsidiaries) in fiscal 2002 were $4,714,000 as compared to losses of $4,653,000 in fiscal 2001. Revenues increased at the Ecuadorian shrimp operations by $196,000 but losses from operations were $2,737,000 due to continued poor shrimp yields caused by the devastating outbreak three years ago of White Spot Virus that decimated the Ecuadorian shrimp industry. The Company continued its efforts started in prior years to combat the virus, with the introduction of Polyculture technology combined 13 with the procedures introduced in prior years and the continued use of its patented Mariculture system. The Company's Florida operations incurred a loss of $1,510,000 in fiscal 2002 as compared to a loss of $2,583,000 in fiscal 2001 on a $3,634,000 decrease in revenues. Bluepoints Long Island operations had a loss of $546,000 as compared to a loss of $65,000 in fiscal 2001 and revenues decreased $1,654,000. The domestic seafood industry continued to experience a drop in profitability that started in September of 2000 due to the slowing economy. In fiscal 2001, revenues for the seafood division increased $5,198,000 as compared to the prior year. Losses from operations (including equity share of losses in affiliated entity and excluding minority interests' share of loss of subsidiaries) in fiscal 2001 were $4,653,000 as compared to losses of $2,501,000 in fiscal 2000. Losses from the Ecuadorian shrimp operations were $2,005,000 and revenues decreased $710,000 due to continued poor shrimp yields caused by the devastating outbreak two years ago of White Spot Virus that is decimating the Ecuadorian shrimp industry. The Company continued its efforts started in the prior year to combat the virus by importing larvae from Panama and micro-screening the water going into its ponds. The Company's Florida operations incurred a loss of $2,583,000 in fiscal 2001 as compared to a loss of $798,000 in fiscal 2000 on a $4,563,000 increase in revenues. Bluepoints Long Island operations had a loss of $65,000 as compared to a profit of $497,000 in the prior year and revenues increased $1,345,000. The domestic seafood industry experienced a severe drop in profitability starting in September of 2000 due to the slowing economy and reduced consumer confidence. Seafood operations were adversely affected by losses incurred on imported scallops caused by a precipitous drop in domestic scallop prices and lower than anticipated margins on many of our seafood products Textile In fiscal 2003, revenues for the textile division decreased $1,572,000 over the prior year and operating loss increased $144,000. Hanora Spinning's operating profit decreased $255,000 to $415,000 and revenues decreased $1,530,000. Hanora South and J&M Dyers ("J&M") incurred a combined loss of $261,000 as compared to the prior years' loss of $650,000. Losses decreased as a result of costs incurred last year in closing down our yarn spinning plant in Lake City, South Carolina. Whitlock Combing Co. Inc. ("Whitlock") incurred a loss of $404,000 including $300,000 on the loss on sale of its land and building in April 2003 as compared to a loss of $126,000 last year. During the three years ended June 30, 2003, the Company purchased approximately $1,006,000 of machinery and equipment for the textile operations. In fiscal 2002, revenues for the textile division decreased $2,222,000 over the prior year and operating loss increased $63,000. Hanora Spinning's operating profit increased $251,000, to $671,000 and revenues decreased $2,131,000. Hanora South and J&M incurred a combined loss of $650,000, as compared to the prior years' loss of $319,000 and revenues decreased $160,000. Losses increased principally due to costs incurred in closing down our yarn spinning plant in Lake City South Carolina in September 2001. Whitlock, which owned a wool combing plant in South Carolina and which discontinued operations in 1992, incurred a loss of $126,000 relating to its property in South Carolina that is being offered for sale compared to a loss of $143,000 in fiscal 2001. 14 In fiscal 2001, revenues for the textile division increased $1,735,000 and operating loss decreased $251,000. Hanora Spinning's operating profit increased $114,000, to $420,000 and revenues increased $1,924,000. Hanora South and J&M Dyers incurred a combined loss of $319,000, as compared to a loss of $416,000 in fiscal 2000 and revenues decreased $189,000. Losses decreased principally due to the higher revenues and lower depreciation at Hanora South and J&M of $136,000. Whitlock incurred a loss of $143,000 compared to a loss of $183,000 in fiscal 2000. Corporate/Other Corporate interest and expenses for the last three years was $3,972,000, $4,324,000 and $4,492,000, respectively. Corporate and other revenues for the last three years was $122,000, $236,000 and $387,000, respectively. Corporate expenses includes the operations of the Merrimac division other than those related to the ownership of currently leased real estate which are included in the real estate operations. Corporate interest and expenses in fiscal 2003 decreased due to a decrease in salaries and fringe costs of $178,000, a reduction in interest expense of $74,000 and a reduction in professional fees of $99,000. Corporate interest and expenses in fiscal 2002 decreased due to a decrease in salaries of $148,000 and a reduction in interest expense of $66,000. Corporate interest and expenses in fiscal 2001 increased due to an increase in salaries of $118,000, and increased professional fees of $171,000, offset by a reduction in interest expense of $98,000. CRITICAL ACCOUNTING POLICIES Management's discussion and analysis of financial condition and results of operations is based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies affect its significant judgments and estimates used in the preparation of its consolidated financial statements. 15 Valuation of Property Held for Use and Sale On a quarterly basis, the Company reviews the carrying value of both properties held for use and for sale. The Company records impairment losses and reduces the carrying value of properties when indicators of impairment are present and the expected undiscounted cash flows related to those properties are less than their carrying amounts. In cases where the Company does not expect to recover its carrying costs on properties held for use, the Company reduces its carrying cost to fair value, and for properties held for sale, the Company reduces its carrying value to the fair value less costs to sell. Management does not believe that the value of the properties held for sale or properties in use are impaired as of June 30, 2003. Valuation of Investments in and Advances to Affiliated Entities On a quarterly basis, the Company reviews the carrying value of the investments in and advances to affiliated entities. Although the seafood operations of the Company (particularly the Ecuadorian seafood operations) continue to generate operating losses management believes that the investments that it is currently making will return the operations to profitability. If the Company is unsuccessful in its efforts, an impairment write-down, which may be material, will be required. Management does not believe that the carrying amount of the investments in and advances to affiliated entities are impaired as of June 30, 2003. RECENT ACCOUNTING PRONOUNCEMENTS In August 2001, the FASB issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Statement No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. Statement No. 144 supersedes Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. It also supersedes the accounting and reporting of APB Opinion No. 30, Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Evens and Transactions related to the disposal of a segment of a business. Statement No. 144 is effective for fiscal years beginning after December 15, 2001. The adoption of Statement No. 144 did not have a material effect on the financial position or results of operations of the Company. In April 2002, the FASB issued Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." This statement eliminates the requirement to report gains and losses from extinguishment of debt as extraordinary unless they meet the criteria of APB Opinion 30. Statement No. 145 also requires sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The changes related to lease accounting are effective for transactions occurring after May 15, 2002 and the changes related to debt extinguishment are effective for fiscal years beginning after May 15, 2002. The adoption of Statement No. 145 did not have a material effect on the financial position or results of operations of the Company. 16 In June 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities. Statement No. 146 nullifies EITF Issue 94-3 and requires that a liability for a cost associated with an exit of disposal activity be recognized when the liability is incurred. The statement also establishes that fair value is the objective for initial measurement of the liability. Statement No. 146 is effective for exit of disposal activities that are initiated after December 31, 2002. The adoption of Statement No. 146 did not have a material effect on the financial position or results of operations of the Company. In November 2002, the FASB issued FASB Interpretation No 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others ("FIN 45"). FIN 45 requires that upon issuance of a guaranty a guarantor must recognize a liability for the fair value of an obligation assumed under a guarantee. FIN 45 also requires additional disclosures by a guarantor in its interim and annual financial statements about the obligations associated with guarantees issued. The recognition provisions of FIN 45 are effective for guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN 45 did not have a material effect on the financial position or results of operations of the Company. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"). In general, a variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. A variable interest entity often holds financial assets, including loans or receivables, real estate or other property. A variable interest entity may be essentially passive or it may engage in activities on behalf of another company. Prior to FIN 46, a company generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 changes that by requiring a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or is entitled to receive a majority of the entity's residual returns or both. FIN 46's consolidation requirements apply immediately to variable interest entities created or acquired after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. The Company does not anticipate that the adoption of FIN 46 will have a material effect on its financial position or results of operations. FORWARD-LOOKING STATEMENTS Certain statements made in this report may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21B of the Securities Act of 1934, as amended. Such forward-looking statements include statements regarding the intent, belief or current expectations of the Company and its management and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward- 17 looking statements. Such factors include, among other things, the following: the ability of the Company to increase production at its Ecuadorian shrimp farms, and to address the virus problem that is affecting shrimp production in Ecuador, the availability of scallops in the area covered by the Company's Cape Canaveral, Florida operations, the success of the Company's Polyculture process, Mariculture System, Tolerine product and micro-screening efforts, demand for the Company's textile services, general economic and business conditions, which will, among other things, affect the demand for space and rooms at the Company's real estate and hotel properties, the availability and creditworthiness of prospective tenants, lease rents and the terms and availability of financing, and adverse changes in the real estate markets, including, among other things, competition with other companies, risks of real estate development and acquisition, governmental actions and initiatives and environmental safety requirements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company currently has a variable rate term loan and a variable rate revolving line of credit which had outstanding balances of approximately $7,100,000 and $2,750,000, respectively, at June 30, 2003. The term loan bears interest at the rate of LIBOR plus 1.75% and the revolving line of credit bears interest at a rate of LIBOR plus 2.0%. With respect to the term loan, the Company has managed its exposure to changes in LIBOR through the use of an interest rate swap agreement which effectively fixes the interest rate on the term loan at 5.53%. With respect to the revolving line of credit, a 1% increase in LIBOR would result in an increase in annual interest expense of approximately $27,500. 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 19 Report of Independent Auditors Board of Directors and Stockholders The First Republic Corporation of America We have audited the accompanying consolidated balance sheets of The First Republic Corporation of America (the "Company") and subsidiaries as of June 30, 2003 and 2002, and the related consolidated statements of operations and comprehensive (loss) income, retained earnings, and cash flows for each of three years in the period ended June 30, 2003. Our audits also included the financial statement schedules listed in the accompanying index to financial statements (Item 15.a.2). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We did not audit the financial statements of (a) Marchelot S.A. and its subsidiaries, Bluepoints International Fisheries, Inc. and subsidiaries and the hotel division, which statements reflect total assets constituting 21% in 2003, 22% in 2002 and 24% in 2001, and total revenues constituting 17% in 2003, 20% in 2002, and 23% in 2001, of the related consolidated totals, and (b) Langomorro, Langostinera El Morro Cia. Ltda. and Affiliated Companies (the "Mondragon Companies," a corporation in which the Company has a 38% interest), accounted for on the equity method. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for such entities, is based solely on the reports of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion. 20 In our opinion, based on our audits and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The First Republic Corporation of America and subsidiaries at June 30, 2003 and 2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ ERNST & YOUNG LLP New York, New York October 2, 2003 21 [LETTERHEAD OF BDO] Independent Auditor's Report To the Board of Directors Marchelot S. A. and Subsidiaries New York, U.S.A. 1. We have audited the accompanying consolidated balance sheets of Marchelot S. A. (a subsidiary of Bluepoints Co. Inc. of Bermuda), and its subsidiaries as of June 30, 2003 and 2002, and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 2. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements' presentation. We believe that our audits provide a reasonable basis for our opinion. 3. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Marchelot S. A. and its Subsidiaries as of June 30, 2003 and 2002, and the results of their operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ BDO STERN August 6, 2003 Guayaquil, Ecuador 22 [LETTERHEAD OF HOYMAN, DOBSON & COMPANY, P.A.] INDEPENDENT AUDITOR'S REPORT Board of Directors Bluepoints International Fisheries, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheet of Bluepoints International Fisheries, Inc. (a Florida corporation) and Subsidiaries as of June 30, 2003, and the related consolidated statements of operations and accumulated deficit and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The Company's financial statements do not disclose deferred taxes. In our opinion, disclosure of that information is required to conform with accounting principles generally accepted in the United States of America. In our opinion, except for the omission of the information discussed in the preceding paragraph, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bluepoints International Fisheries, Inc. and Subsidiaries as of June 30, 2003 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Hoyman, Dobson & Company, P.A. August 5, 2003 23 LETTERHEAD OF DB&B INDEPENDENT AUDITORS' REPORT ================================================================================ BOARD OF DIRECTORS FIRST REPUBLIC CORPORATION OF AMERICA, HOLIDAY INN We have audited the accompanying balance sheets of FIRST REPUBLIC CORPORATION OF AMERICA, HOLIDAY INN as of June 30, 2003 and 2002, and the related statements of income and division control and cash flows for the years ended June 30, 2003, 2002 and 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The Holiday Inn is owned and operated by First Republic Corporation of America and its affiliated company, First Republic Building Corporation. The accounting records maintained in Syracuse relate only to the transactions incurred in the daily operation of the Hotel. Transactions involving debt financing, tax escrow payments, corporate income taxes and property accounts are not reflected on the Hotel's books but are the accounting responsibility of First Republic and its affiliate. These financial statements are issued for inclusion in the financial statements of First Republic Corporation of America and should not be considered separately in determining the financial position and results of operations of the Holiday Inn. 24 ================================================================================ In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the operations of First Republic Corporation of America, Holiday Inn at June 30, 2003 and 2002 and the results of its operations and its cash flows for the years ended June 30, 2003, 2002 and 2001 in conformity with accounting principles generally accepted in the United States of America. /s/ DERMODY, BURKE & BROWN Certified Public Accountants, PLLC Syracuse, NY August 1, 2003 25 The First Republic Corporation of America and Subsidiaries Consolidated Balance Sheets

See notes to consolidated financial statements. 26 The First Republic Corporation of America and Subsidiaries Consolidated Balance Sheets (continued)

See notes to consolidated financial statements. 27 The First Republic Corporation of America and Subsidiaries Consolidated Statements of Operations and Comprehensive (Loss) Income

See notes to consolidated financial statements. 28 The First Republic Corporation of America and Subsidiaries Consolidated Statements of Retained Earnings

See notes to consolidated financial statements. 29 The First Republic Corporation of America and Subsidiaries Consolidated Statements of Cash Flows

30 The First Republic Corporation of America and Subsidiaries Consolidated Statements of Cash Flows (continued)

See notes to consolidated financial statements. 31 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements June 30, 2003 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of The First Republic Corporation of America and all majority owned or controlled subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. The Company records its investment in partnerships and corporations in which it owns or owned interests ranging from 38% to 50% in accordance with the equity method. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH EQUIVALENTS The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. INVENTORIES Inventories are valued at the lower of cost or market with cost being determined by specific identification. Inventories are summarized as follows: JUNE 30, 2003 2002 ------------------------------------ Work-in-process and raw materials $1,206,510 $1,458,175 Finished goods 6,282,723 5,947,551 ------------------------------------ $7,489,233 $7,405,726 ==================================== 32 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DEPRECIATION AND AMORTIZATION Depreciation and amortization are provided by the straight-line method over the following estimated useful lives: ESTIMATED CLASSIFICATION USEFUL LIFE ---------------------------------------------------------------------- Buildings and improvements 15 to 40 years Leaseholds and improvements 3 to 31.5 years Machinery, equipment, parts and vehicles 5 to 10 years Furniture and furnishings 5 years Tenant improvements and leasing commissions are amortized over the term of the respective tenants' leases. Financing costs are amortized over the term of the related debt. REVENUES Sales of textiles and seafood are recognized when shipments are made to customers. Returns of textiles and seafood are not significant, therefore no provision has been recorded. Rental revenue is recognized on an accrual basis in accordance with the terms of the lease except that leases with scheduled rent increases are recognized on a straight-line basis over the life of the lease. Hotel revenues are recognized when the related services are rendered. Gain from sales of properties is recognized when the buyer has demonstrated a commitment to pay through adequate payments and no significant contingencies remain. 33 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ACCOUNTING FOR INCOME TAXES The liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. EARNINGS PER SHARE Basic and diluted per share amounts are based on 667,381 (2003), 668,092 (2002) and 669,195 (2001) weighted average shares of common stock outstanding. FOREIGN OPERATIONS A subsidiary, together with certain entities in which the subsidiary owns a 38% interest, is engaged in shrimp farming operations in Ecuador. Financial statements of such foreign entities were translated using the U.S. dollar as the functional currency since Ecuador had a hyperinflationary currency until February 2000. Since March 2000, these subsidiaries maintain their accounting records in U.S. dollars as a result of Ecuador dollarizing its currency. ACCUMULATED OTHER COMPREHENSIVE LOSS The components of accumulated other comprehensive loss at June 30, 2003 and 2002 are as follows:

34 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) VALUATION OF PROPERTY HELD FOR USE AND SALE The Company reviews the carrying value of both properties held for use and for sale and records impairment losses to reduce the carrying value of properties when indicators of impairment are present and the expected undiscounted cash flows related to those properties are less than their carrying amounts. In cases where the Company does not expect to recover its carrying costs on properties held for use, the Company reduces its carrying cost to fair value, and for properties held for sale, the Company reduces its carrying value to the fair value less costs to sell. Management does not believe that the value of the properties held for sale or properties in use are impaired as of June 30, 2003. VALUATION OF INVESTMENTS IN AND ADVANCES TO AFFILIATED ENTITIES The Company reviews the carrying value of the investments in and advances to affiliated entities. Although the seafood operations of the Company (particularly the Ecuadorian seafood operations) continue to generate operating losses management believes that the investments that it is currently making will return the operations to profitability. If the Company is unsuccessful in its efforts, an impairment write-down, which may be material, will be required. Management does not believe that the carrying amount of the investments in and advances to affiliated entities are impaired as of June 30, 2003. DERIVATIVE INSTRUMENTS The Company accounts for derivative instruments pursuant to FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by FASB Statement No. 138, Accounting for Certain Derivative Instruments and Hedging Activities. The Company's interest rate derivative is designated as a cash flow hedge and hedges the future cash outflows with respect to its term loan. Unrealized gains/(losses) in the fair value of this instrument are reported on the balance sheet with a corresponding adjustment to either earnings or accumulated other comprehensive income depending on the type of hedging relationship. For cash flow hedges, such unrealized gains/(losses) are reported in accumulated other comprehensive income. Over time, the unrealized gains/(losses) held in accumulated other comprehensive income will be reclassified to earnings over the same period in which the hedged item affects earnings 35 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RECENT ACCOUNTING PRONOUNCEMENTS In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Statement No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. Statement No. 144 supersedes Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. It also supersedes the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" related to the disposal of a segment of a business. Statement No. 144 is effective for fiscal years beginning after December 15, 2001. The adoption of Statement No. 144 did not have a material effect on the financial position or results of operations of the Company. In April 2002, the FASB issued Statement No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. This statement eliminates the requirement to report gains and losses from extinguishment of debt as extraordinary unless they meet the criteria of APB Opinion 30. Statement No. 145 also requires sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The changes related to lease accounting are effective for transactions occurring after May 15, 2002 and the changes related to debt extinguishment are effective for fiscal years beginning after May 15, 2002. The adoption of Statement No. 145 did not have a material effect on the financial position or results of operations of the Company. In June 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities. Statement No. 146 nullifies EITF Issue 94-3 and requires that a liability for a cost associated with an exit of disposal activity be recognized when the liability is incurred. The statement also establishes that fair value is the objective for initial measurement of the liability. Statement No. 146 is effective for exit of disposal activities that are initiated after December 31, 2002. The adoption of Statement No. 146 did not have a material effect on the financial position or results of operations of the Company. 36 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) In November 2002, the FASB issued FASB Interpretation No 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others ("FIN 45"). FIN 45 requires that upon issuance of a guaranty a guarantor must recognize a liability for the fair value of an obligation assumed under a guarantee. FIN 45 also requires additional disclosures by a guarantor in its interim and annual financial statements about the obligations associated with guarantees issued. The recognition provisions of FIN 45 are effective for guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN 45 did not have a material effect on the financial position or results of operations of the Company. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"). In general, a variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. A variable interest entity often holds financial assets, including loans or receivables, real estate or other property. A variable interest entity may be essentially passive or it may engage in activities on behalf of another company. Prior to FIN 46, a company generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 changes that by requiring a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or is entitled to receive a majority of the entity's residual returns or both. FIN 46's consolidation requirements apply immediately to variable interest entities created or acquired after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. The Company does not anticipate that the adoption of FIN 46 will have a material effect on its financial position or results of operations. 37 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. INDUSTRY SEGMENTS AND FOREIGN OPERATIONS The Company's operations in the industry segments detailed below consist of: Real Estate: Ownership of loft, office and industrial buildings, shopping centers and residential property located principally in the states of New York, New Jersey, Florida, North Carolina, Massachusetts, Rhode Island, Virginia and Pennsylvania. Hotel: Ownership and operation of a hotel and convention center in Liverpool, New York. Seafood: Harvesting and sale of hard-shell clams on property owned by the Company located underwater off Long Island's South Shore in New York State, (clamming activities ceased in July 2002) harvesting and sale of scallops on property leased by the Company in Cape Canaveral, Florida, sales of shrimp from Ecuador (grown in Company leased ponds or purchased from a 38% owned entity and other third-parties) and sales of lobster tails, shrimp and other products purchased locally or imported from various other countries. Textile: Operation of a yarn spinning plant and a dye house located in Rhode Island and South Carolina. The Company operates in four segments, as noted above. These segments are managed and reported separately because of the differences in products they produce and markets they serve. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on operating income, i.e. results of operations before certain corporate items and income taxes. There are no intersegment sales. 38 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. INDUSTRY SEGMENTS AND FOREIGN OPERATIONS (CONTINUED) Following is information about the Company's industry segments for each of the three years ended June 30:

39 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. INDUSTRY SEGMENTS AND FOREIGN OPERATIONS (CONTINUED)

(a) Includes mortgage interest expense of $1,123,424 (2003), $1,175,844 (2002), and $1,268,079 (2001). (b) Includes losses from Whitlock (see Note 10). (c) See Note 3. (d) Consists principally of investments in and advances to affiliated entities. (e) Includes interest income of approximately $22,000 (2003), $41,000 (2002) and $237,000 (2001). (f) Includes interest income of approximately $1,113,000 (2003), $1,046,000 (2002) and $1,035,000 (2001). 40 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 3. AFFILIATED ENTITIES The following table summarizes information with respect to the Company's affiliated entities:

(1)--Advances to Mondragon from the Company were approximately $16,631,000 and $15,700,000 at June 30, 2003 and 2002, respectively (see Note 9). REAL ESTATE Sunscape Associates ("Sunscape") owns a 167 unit garden apartment complex located in Orlando, Florida. The other 50% interest in Sunscape is owned by corporate entities which in turn are owned by officers and directors of the Company. Worcester Supermarket LLC: The Company has a $1,500,000 investment, representing a 50% ownership interest in a joint venture that is building a store for a major supermarket chain in Worcester, MA. The Company and its joint venture partner have also jointly guaranteed a construction loan obtained by the joint venture which provides for maximum borrowings of $8,450,000. In connection with this investment, the Company is entitled to receive a 12% per annum preferential return on its investment, payable quarterly, when the tenant begins to pay rent. 41 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 3. AFFILIATED ENTITIES (CONTINUED) SEAFOOD Bluepoints Company Inc. ("Bluepoints"): Bluepoints, an 80.2% owned subsidiary of the Company, owns Marchelot S.A. which in turn owns a 38% interest in two Ecuadorian corporations, Isca C.A. and Langomorro CIA. Ltda. (collectively, the "Mondragon Companies"), engaged in shrimp farming operations in Ecuador. The remaining 19.8% of Bluepoints is owned by certain stockholders of the Company. The Estate of A.A. Rosen owns 50% of the Mondragon Companies. Condensed combined financial information of the Mondragon Companies is as follows:

42 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. LONG-TERM DEBT AND CREDIT FACILITIES Long-term debt consists of the following:

(1)--The net book value of real estate assets pledged as collateral is approximately $17,950,000 and $18,400,000 at June 30, 2003 and 2002, respectively. (2)--In fiscal 1998, the Company refinanced a mortgage, collateralized by the Brookhaven Shopping Center in Brookhaven Pennsylvania, which had an outstanding balance of approximately $1,500,000 for $2,500,000. The new loan bears interest at 7.8% per annum and provides for monthly payments of $20,601 including principal and interest commencing February 1, 1998 through December 31, 2007 when the remaining unpaid balance of $1,769,134 will become due. The balance was $2,166,856 and $2,239,473 at June 30, 2003 and 2002, respectively. (3)--The Company had a $9,000,000 term loan with interest at 7.5% and a $3,000,000 revolving line of credit with an interest rate equal to either (a) LIBOR plus 2.0% or, (b) the Alternate Base Rate (as defined) plus 0.50%. The term loan required amortization payments of $358,800 per annum. Both loans matured on October 21, 2002, and were extended to January 13, 2003 when the Company and its lender further extended the term of the loan until October 21, 2007 with the same amortization schedule and an interest rate of LIBOR plus 1.75%. The revolving credit line of $3,000,000 was extended until October 21, 2005 with the same interest rate options as the old loan. At June 30, 2003 and 2002, the term loan balance was $7,126,517 and $7,355,500, respectively. At June 30, 2003 and 2002, there was $2,750,000 and $0, respectively, outstanding on the revolving line of credit. The interest rate at June 30, 2003 was 3.3%. 43 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. LONG-TERM DEBT AND CREDIT FACILITIES (CONTINUED) To hedge its exposure to changes in the variable rate of interest on the term loan, the Company entered into an interest rate swap agreement which effectively fixed the interest rate on the term loan at 5.53% through October 1, 2007. At June 30, 2003, the fair value of this swap agreement was $(376,717). (4)--On August 31, 1998, the Company obtained a $3,355,000 construction loan from a bank for its property at 260 Merrimac Street in Newburyport, Massachusetts. The loan was obtained for the purpose of converting the vacant property, formerly occupied by Towle Manufacturing Company, into commercial space suitable for rental. The construction loan, which matured on August 31, 2000 was extended and in October 2001 was converted to a term loan expiring August 31, 2005. The loan is collateralized by a mortgage on the Merrimac property, bears interest at 5.5% and calls for monthly payments through August 2005. A balloon payment of $3,141,405 is then due. The balance was $3,271,364 and $3,324,252 at June 30, 2003 and 2002, respectively. (5)--On September 3, 1998, the Company refinanced a mortgage on its London Bridge Shopping Center in Virginia Beach, Virginia with a new lender and paid off the old mortgage of approximately $2,520,000. The new $3,000,000 mortgage calls for monthly payments of $23,711 including principal and interest, bears interest at 7.25% and matures on September 1, 2018. The balance was $2,629,058 and $2,719,400 at June 30, 2003 and 2002, respectively. (6)--On December 18, 1998, the Company closed a loan with the Overseas Private Investment Corporation for $5,050,000. The loan is collateralized by a mortgage on the Waltham Engineering Center, bears interest at 7.3% per annum, provides for 15 semi-annual payments of principal and interest and matures on June 15, 2006. The balance was $2,019,999 and $2,693,334 at June 30, 2003 and 2002, respectively. (7)--On May 20, 1999, the Company obtained a $2,500,000 loan, from a bank, secured by a mortgage on the Shipps Corner Shopping Center, in Virginia Beach, Virginia, which the Company acquired in November 1998. The self liquidating loan calls for monthly payments of $19,000, including principal and interest, bears interest at 7% per annum, and matures in June 2019. The balance was $2,235,043 and $2,308,370 at June 30, 2003 and 2002, respectively. 44 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. LONG-TERM DEBT AND CREDIT FACILITIES (CONTINUED) (8)--On July 26, 1996, the Company obtained a $4,000,000 loan, from a bank, secured by Greensboro North Shopping Center located in Greensboro, North Carolina. The loan calls for monthly payments of $35,850, including principal and interest, bears interest at 8.35% per annum, and matures on August 1, 2006 when the remaining unpaid balance of $2,521,772 plus interest will become due. The balance was $3,117,688 and $3,280,124 on June 30, 2003 and 2002, respectively. (9)--On February 4, 1994, the Company obtained a $3,000,000 loan, from a bank, secured by Greensboro South Shopping Center located in Greensboro, North Carolina. The loan calls for monthly payments of $29,543, including principal and interest, bears interest at 8.5% per annum, and matures on March 1, 2009. The balance was $1,607,860 and $1,816,001 on June 30, 2003 and 2002, respectively. (10)--On July 7, 2000, the Company obtained a $10,500 loan from a credit corporation, to purchase a forklift. The loan called for monthly payments of $274, bore interest at 11.5%, and was to mature on June 7, 2004. The loan was repaid during the year ended June 30, 2002. Aggregate principal payments on debt outstanding as of June 30, 2003 are approximately as follows: AMOUNT -------------------- Year ending June 30: 2004 $ 1,746,000 2005 1,806,000 2006 4,956,000 2007 3,509,000 2008 8,054,000 Thereafter 4,103,000 -------------------- $ 24,174,000 ==================== 5. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS Statement No. 107, Disclosures about Fair Value of Financial Instruments, requires disclosures about fair value for all financial instruments for which it is practicable to estimate that value. 45 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 5. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) The following methods and assumptions were used by the Company in estimating fair values for financial instruments at June 30, 2003: Cash and Cash Equivalents, Accounts and Rents Receivable, Other Receivables, Prepaid Expenses and Other Assets, Restricted Cash, Cash and Securities in Trust for Tenants' Security Deposits, Mortgage Escrow Funds and Security Deposits, Due from Related Parties, Accounts Payable, Accrued Expenses and Taxes Payable, Due to Related Parties and Other Liabilities: The carrying amounts of these assets and liabilities approximate fair value due to their short term nature. Mortgage Receivable: The carrying amount of the mortgage receivable approximates fair value as such loan bears interest at a market rate for similar types of loans. Derivative Liability: The derivative liability relating to an interest rate swap agreement is carried at its fair value as determined by reference to a valuation provided by the counterparty financial institution. Notes Payable and Long-Term Debt:. For fixed rate notes payable, fair value is estimated using discounted cash flow analysis based on the Company's current incremental borrowing rate for similar types of borrowing arrangements. The fair value of the Company's notes payable and long-term debt is approximately $25,951,000. 6. INCOME TAXES Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. For financial reporting purposes, a valuation allowance has been recognized in 2003 to offset the portion of the deferred tax assets attributable to a charitable donation of land. 46 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. INCOME TAXES (CONTINUED) Significant components of the Company's deferred tax assets are as follows: JUNE 30, 2003 2002 ------------------------------------ Deferred tax assets: Book basis provisions $2,264,505 $2,000,000 Derivative instrument 151,000 - Additional minimum pension obligation 752,000 405,000 ------------------------------------ Total deferred tax assets 3,167,505 2,405,000 Valuation allowance (165,000) - ------------------------------------ Net deferred tax asset $3,002,505 $2,405,000 ==================================== The components of (loss) income before income taxes are as follow: YEAR ENDED JUNE 30, 2003 2002 2001 ------------------------------------------------------ Domestic $ (432,781) $ (107,635) $ 16,722,010 Foreign (2,191,352) (1,812,841) (1,307,195) ------------------------------------------------------ $ (2,624,133) $ (1,920,476) $ 15,414,815 ====================================================== Significant components of the income tax expense (benefit) are as follows: YEAR ENDED JUNE 30, 2003 2002 2001 ------------------------------------------------------ Current: Federal $ - $ - $ 330,000 State 380,000 463,000 804,000 ------------------------------------------------------ Total current 380,000 463,000 1,134,000 ------------------------------------------------------ Deferred: Federal (87,000) (386,000) (377,000) State (12,000) (51,000) (50,000) ------------------------------------------------------ Total deferred (99,000) (437,000) (427,000) ------------------------------------------------------ $ 281,000 $ 26,000 $ 707,000 ====================================================== 47 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. INCOME TAXES (CONTINUED) The reconciliation of income tax expense computed at the U.S. Federal statutory tax rates to income tax expense follows:

7. BENEFIT PLANS The Company and certain subsidiaries have profit-sharing plans covering substantially all nonunion employees. Contributions to one of the plans is discretionary. Total plan costs were approximately $175,000, $215,000 and $215,000, respectively, and are included in selling, general and administrative expenses on the accompanying consolidated statements of operations and comprehensive (loss) income for each of the years ended June 30, 2003, 2002 and 2001. A former subsidiary, which has been merged into the Company, had noncontributory pension plans covering certain employees. All covered employees participated in the basic pension plan with benefits based upon years of service. In addition, this subsidiary maintained a supplementary plan for salaried employees covered by the basic pension plan. This supplementary plan provided benefits based upon salary and years of credited service, with deductions for employees' primary social security benefits and benefits received under the basic plan. The funding policy is to contribute at least the minimum amounts required by the Employee Retirement Income Security Act of 1974 or additional amounts to assure that plan assets will be adequate to provide retirement benefits. 48 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 7. BENEFIT PLANS (CONTINUED) Since a significant part of this subsidiary's operations have been discontinued, substantially all employees included in the plan have been terminated and no additional service benefits will accrue to such employees.

Net periodic pension cost included the following components:

49 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 7. BENEFIT PLANS (CONTINUED) The discount rate used in determining the actuarial present value of the projected benefit obligation was 6.0% at June 30, 2003 and 7.25% at June 30, 2002. The expected long-term rate of return on plan assets was 8.0% in all three years. 8. LEASES The Company is the lessee under a noncancellable operating ground lease which expires in 2065. The lease provides for rentals of $11,404 per year and requires future minimum rental payments aggregating $696,000 at June 30, 2003. Rent expense includes real estate taxes, and in certain instances utilities and maintenance costs, and rent for the corporate home office under a month-to-month lease from a related party (see Note 9). Total rent expense for all operating leases amounted to approximately $125,000 $124,000 and $121,000 and are included in selling, general and administrative expenses on the accompanying consolidated statements of operations and comprehensive (loss) income for the years ended June 30, 2003, 2002 and 2001, respectively. The Company owns various office buildings, industrial buildings and shopping centers from which it earns rental income under leases with various tenants. Lease terms for these properties range from one to 20 years. Generally leases provide for tenants to pay additional amounts based on real estate taxes and operating expenses incurred to maintain and operate these properties in excess of base year amounts. Such operating expenses and other items billable to tenants which aggregated approximately $2,300,000 $2,200,000 and $2,400,000 and are included in rents and other revenues--real estate and hotel operations on the accompanying consolidated statements of operations and comprehensive (loss) income in the years ended June 30, 2003, 2002 and 2001, respectively. Future minimum rentals to be received under the above-mentioned leases, all of which are classified and accounted for as operating leases, are approximately as follows: AMOUNT ------------------ Year ending June 30: 2004 $ 9,700,000 2005 7,900,000 2006 6,500,000 2007 5,200,000 2008 4,000,000 Thereafter 13,500,000 ------------------ $ 46,800,000 ================== 50 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 9. RELATED PARTY TRANSACTIONS Certain stockholders, directors, officers or their relatives ("related parties") own interests in certain investments of the Company as follows: PERCENT OWNERSHIP BY INVESTMENT THE COMPANY RELATED PARTY -------------------------------------------------------------------------------- Bluepoints Company Inc. ("Bluepoints") 80.2 19.8 (1) Sunscape Associates 50.0 50.0 The Mondragon Companies 38.0 50.0 (2) Larfico Larvas Del Pacifico S.A. 62.5 25.0 Comercorp S.A. 62.5 25.0 (1)--AtJune 30, 2003 and 2002, the minority share of stockholders' deficiency of Bluepoints amounted to $9,866,989 and $8,464,256, respectively. Such deficiency results from losses which were funded by loans from the Company on behalf of the minority shareholders. Repayment of the minority interest deficiency has been jointly guaranteed by a major stockholder and the Estate of A.A. Rosen. Accordingly, the minority interest share in the deficiency of the subsidiary is shown as a receivable due from related parties in the consolidated balance sheets. (2)--Included in the investment balance of $16,631,000 and $15,700,000 are advances the Company has made to the Mondragon Companies amounting to $16,631,000 and $15,700,000 at June 30, 2003 and 2002, respectively (see Note 3). Repayment of 56.8% of any advances to the Mondragon Companies has been guaranteed by the Estate of A.A. Rosen which owns 50% of the Mondragon Companies. 51 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 9. RELATED PARTY TRANSACTIONS (CONTINUED) Certain transactions were entered into with the above-mentioned related parties and companies in which they have an ownership interest as follows:

During fiscal 2003 the Company borrowed funds from United Realty to finance Bluepoints expanded importation and sale of lobster tails. The loans bear interest at the prime rate plus 1% per annum and have no fixed repayment terms or maturity dates. Interest of $112,263 was paid on these loans. 10. OTHER MATTERS The Company is not presently involved in any material litigation nor, to its knowledge, is any material litigation threatened against the Company or its properties, other than routine litigation arising in the ordinary course of business. Management believes the costs, if any, incurred by the Company related to any of this litigation will not materially affect the financial position, operating results or liquidity of the Company. 52 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 10. OTHER MATTERS (CONTINUED) In June 1992, Whitlock, which was in the wool-combing business, sold substantially all of its assets and substantially terminated all its remaining operations. The remaining assets (included in the textile segment) of Whitlock, consisting of land and building were sold in April 2003 for $200,000. In connection with the sale of this property, a loss of $300,000 was incurred. Losses incurred to maintain the property such as real estate taxes and insurance amounted to approximately $104,300 $126,000 and $143,000 in 2003, 2002 and 2001, respectively. In July 2002, Bluepoints ceased the harvesting of clams at its Long Island, New York property and entered into a contract to sell such property for $1,600,000. The contract is contingent upon the ability of the purchaser to obtain certain regulatory approvals by December 1, 2003. In connection with this contract, Bluepoints received a nonrefundable deposit of $60,000. The carrying value of the property at June 30, 2003 was $234,841 and is reflected as assets held for sale in the accompanying consolidated balance sheet. Bluepoints also donated its underwater clam beds, which had a cost basis of approximately $458,000 at the date of contribution, to the Nature Conservancy, Inc., an unaffiliated non-profit corporation. Such charitable contribution is reflected as a component of selling, general and administrative expenses in the accompanying consolidated statement of operations and comprehensive loss. Financial instruments which potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts and rents receivable. The Company maintains operating cash accounts at financial institutions in many states along the Eastern seaboard and, for its foreign subsidiaries, in Ecuador. Such accounts are subject to risk to the extent that the balances exceed the institutions' insurable limits. The Company's policy is designed to limit exposure to any one institution. Concentrations of credit risk with regard to accounts and rents receivable are limited due to the large number of entities comprising the Company's customer base and such base being dispersed over the industries in which the Company operates. Based on an analysis of the financial instruments which potentially subject the Company to significant concentrations of credit risk, the Company's management believes that there are no significant concentrations of credit risk at June 30, 2003. During the years ended June 30, 2003, 2002 and 2001, there were 785, 931 and 935 shares of stock purchased for treasury at a cost of $38,917, $44,679 and $46,285, respectively. 53 The First Republic Corporation of America and Subsidiaries Notes to Consolidated Financial Statements (continued) 11. MORTGAGE RECEIVABLE A summary of mortgage receivable is as follows:

(1)--Payment terms of mortgage with purchaser of Hanora South's Lake City, South Carolina facility require 59 equal monthly installments commencing March 10, 2002 of approximately $4,400 and a final installment of $369,000 on February 10, 2007. 12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized consolidated quarterly financial information for the years ended June 30, 2003 and 2002 is as follows:

54 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None ITEM 9a. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures. The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act") as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting. There have not been any changes in the Company's internal control over financial reporting during the fourth fiscal quarter of the fiscal year to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 55 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT a. and b. Identification of directors and executive officers: ALL POSITIONS AND OFFICES WITH NAME AGE REGISTRANT SERVED SINCE --------------------------------------------------------------------------- Irving S. Bobrow 89 Director April 1983 Harry Bergman 61 Director October 1991 Treasurer June 1988 Secretary June 1988 President July 2001 Norman A. Halper 84 Director October 1969 Miriam N. Rosen 83 Director December 1995 Jonathan P. Rosen 59 Director February 1972 Chairman of the Board December 1995 William M. Silverman 61 Director December 1981 Louis Nimkoff 41 Director March 2003 Jane G. Weiman 59 Director December 1991 The term of office for all directors and executive officers will expire at the next annual meeting of stockholders, which is anticipated to be held in December 2003, upon the election and qualification of their successors. c. Not applicable. 56 d. Family Relationships Jonathan P. Rosen is the son of Miriam N. Rosen. Louis Nimkoff is a cousin of Jonathan P. Rosen. Jane G. Weiman is the sister-in-law of William M. Silverman and a cousin of Jonathan P. Rosen. e. Business Experience Irving S. Bobrow is a member of the New York Bar. For more than the past five years, Mr. Bobrow has been a member of the law firm of Bobrow & Rosen in New York City and has engaged in real estate investments for his own account. Louis Nimkoff is president of Brio Properties and Commercial Real Estate Group, Inc. and has been involved in commercial real estate since 1983, managing multi-family, retail office and industrial properties. Miriam N. Rosen is a member of the New York Bar. For more than the past five years, Mrs. Rosen has been counsel to the law firm of Bobrow & Rosen in New York City and has engaged in real estate investments for her own account. William M. Silverman is a member of the New York Bar. For more than the past five years, Mr. Silverman has been a member of the law firm of Otterbourg, Steindler, Houston and Rosen P.C. in New York City. Jane G. Weiman has been a private investor for more than the past five years. For the past several years, Mrs. Weiman has also been a member of the Board of the Washington, D.C. Urban League. All directors with the exception of Louis Nimkoff and executive officers have served as such for more than the past five years. f. Not applicable. g. Not applicable. Section 16(a) Beneficial Ownership Reporting Compliance The Company believes, based on written representations received by it, that for the year ended June 30, 2003, all filing requirements under Section 16(a) of the Securities Exchange Act of 1934 applicable to beneficial owners of the Company's securities and the Company's officers and directors were complied with, except that Louis Nimkoff failed to timely file an initial statement of beneficial ownership of securities on Form 3 with respect to his appointment as a director. Such Form 3 was subsequently filed. 57 ITEM 11. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The Chairman of the Company's Board of Directors has annually reviewed and set the compensation of the Chief Executive Officer of the Company who, in turn, has reviewed and set the compensation of the other officers of the Company. All such compensation is reviewed on or about April 1 of each year taking into consideration (i) the Company's financial performance during the preceding year, (ii) the performance of the employee during that year, and (iii) the need to retain competent executive officers dedicated to the enhancement of the Company's performance in future years by paying salaries comparable to those being paid to such executive officers by other companies involved in similar lines of business. The following table sets forth all compensation paid or accrued by the Company during the last three fiscal years for services in all capacities to the Chief Executive Officer and each executive officer of the Company whose cash compensation exceeds $100,000. (A) (B) (C) (D) NAME AND ANNUAL OTHER ANNUAL PRINCIPAL POSITION YEAR COMPENSATION COMPENSATION (1) -------------------------------------------------------------------------------- Jonathan P. Rosen 6-30-03 $310,284 $11,964 Chairman 6-30-02 310,284 10,714 6-30-01 310,284 10,577 Harry Bergman 6-30-03 249,651 11,964 President--Secretary--Treasurer 6-30-02 240,849 10,714 6-30-01 191,415 10,577 Robert Nimkoff 6-30-03 135,786 7,944 Vice President 6-30-02 130,619 8,351 6-30-01 216,384 10,577 Miles Berman 6-30-03 120,016 6,602 Vice President 6-30-02 114,948 7,058 6-30-01 110,405 6,603 58 (1)--The Company maintains two profit-sharing plans which cover a significant number of their employees. Vesting begins at 20% after two years of service with 100% vesting being reached after six years of service. Company contributions to one such plan are at the discretion of the Board of Directors. The Company is required to make minimum contributions to the second plan and, at the discretion of the Board of Directors, may make additional contributions. The executive officers listed above are covered under the second plan and the amount contributed by the Company to such plan on behalf of each executive officer is set forth under the heading "Other Compensation" in the Executive Compensation Summary. COMPENSATION OF DIRECTORS Each director who is not an officer of the Company is paid $3,000 per quarter. The following performance graph is a line graph comparing the yearly change in the cumulative stockholder return on the Company's Common Stock against the cumulative return of the Dow Jones U.S. Total Market Index and the S&P SmallCap 600 Index for the five fiscal years ended June 30, 2003. The stockholder return on the Company's Common Stock has been determined solely based on the price of the Common Stock since there have been no dividends declared on the Common Stock. Since there has been only limited or sporadic quotations for the Common Stock during the five year period, the price of the Common Stock at the relevant dates has been determined by utilizing the price at which the Company purchased shares of Common Stock on the dates closest to each measuring date. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN Among The First Republic Corporation of America, Inc., Dow Jones US Total Market Index and Standard & Poor's Small Cap 600 Index FISCAL YEAR ENDING JUNE 30 [GRAPHIC OMITTED]

59 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT a. Security Ownership of Certain Beneficial Owners The following table sets forth certain information with respect to all persons who are known to the Company to be the beneficial owner of more than 5% of its common stock as of September 23, 2003: AMOUNT AND NATURE TITLE OF NAME AND ADDRESS OF BENEFICIAL PERCENT CLASS OF BENEFICIAL OWNER OWNERSHIP (1) OF CLASS --------------------------------------------------------------------------- Common Mary Nimkoff 90,461 (2) 13.57% 26 Buttonball Lane Weston, Connecticut Common Jonathan P. Rosen 240,228 (3) 36.04 40 East 69th St. New York, New York Common Lynn M. Silverman 113,350 17.00 911 Park Avenue New York, New York Common Jane G. Weiman 113,290 16.99 5630 Wisconsin Avenue Chevy Chase, Maryland (1)--Except as noted below in Notes (2) and (3), all shares are owned directly by the parties listed in the table. (2)--Includes 5,756 shares representing her proportionate interest in 19,188 shares owned by Tranel, Inc. Tranel, Inc. is a corporation of which 30%, 15.2%, 34.8%, 10% and 10% of the shares of which are owned by Mary Nimkoff, Jonathan P. Rosen, Miriam N. Rosen, Louis H. Nimkoff and Robert Nimkoff, respectively. (3)--Includes 2,917 shares representing his proportionate interest in 19,188 shares owned by Tranel, Inc. 60 b. Security Ownership of Management The following table sets forth, as of September 23, 2003, certain information with respect to security holdings in the Company and Bluepoints, an 80.2% owned subsidiary of the Company, by directors of the Company and all officers and directors as a group:

(1)--Messrs. Bobrow, Silverman and Mrs. Weiman own their shares directly. Jonathan P. Rosen owns 237,311 shares directly. See Notes (2) and (3) of the preceding table. (2)--Includes 1,919 shares representing his proportionate interest in 19,188 shares owned by Tranel, Inc. (3)--Owned directly. (4)--Does not include 113,350 shares of common stock and 500 shares of Bluepoints owned by his wife (Lynn M. Silverman) directly. Mr. Silverman disclaims beneficial ownership of such shares. c. Changes in Control The Company knows of no contractual arrangements which may at a subsequent date result in a change in control of the Company. 61 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS a. Transactions with Management and Others Lynn M. Silverman, a principal stockholder of the Company, Jane G. Weiman, a director and principal stockholder of the Company, Jonathan P. Rosen, a director, chairman of the board and principal stockholder of the Company, and Miriam N. Rosen, a director of the Company, own in the aggregate 19.8% of the outstanding shares of Bluepoints. The remainder of the shares of Bluepoints is owned by the Company. Lynn M. Silverman is the wife of William M. Silverman, a director of the Company. The Company's corporate office is located in a building owned by 302 Fifth Ave. Associates, a partnership owned 100% by The Estate of A.A. Rosen, Miriam Rosen and Jonathan P. Rosen. The Company is a month-to-month tenant, paying rent of $9,700 per month as of June 30, 2003, which the Company believes is comparable to other rentals in the areas. Jonathan P. Rosen is the executor of the Estate of A.A. Rosen and Miriam Rosen is the primary beneficiary of the Estate of A.A. Rosen. The Estate of A.A. Rosen owns 50% of Isca C.A. and Langomorro CIA, Ltda. (collectively referred to as "Mondragon"), two Ecuadorian corporations engaged in shrimp farming operations. The Estate of A.A. Rosen also holds a $640,000 note payable by Bluepoints which note was originally issued in May 1991 in connection with the acquisition by Bluepoints of a 38% interest in Mondragon and an additional 12.5% interest in Larfico Larvas Del Pacifico S.A., an Ecuadorian corporation which owns and operates a shrimp hatchery and Comercorp S.A. which owns certain real property in Ecuador. The note is a demand note and bears interest at 8%. During fiscal 2003, the Company borrowed $2,500,000 from United Realty, a company in which Jonathan P. Rosen owns a 33% interest, to finance Bluepoints expanded importation and sale of lobster tails. The loans bear interest at the prime rate plus 1% per annum and have no fixed repayment terms or maturity dates. For the fiscal year ended June 30, 2003, $112,263 of interest was paid on this loan. b. Certain Business Relationships The Company and its subsidiaries purchase substantially all of their property, casualty and liability insurance through participation with a group of other entities controlled by The Estate of A.A. Rosen and Jonathan P. Rosen (the "Rosen Group Properties"). This procedure enables the group to obtain negotiated insurance rates. During the fiscal year ended June 30, 2003, total premiums incurred by the Company and its subsidiaries under this arrangement amounted to approximately $623,000. At June 30, 2003, approximately $623,000 was payable to Rosen Group Properties. Tranel Inc. and Statecourt Enterprises, Inc. each owns a 25% interest in a 167-unit garden complex located in Orlando, Florida in which the Company owns the remaining 50%. Tranel Inc. is owned by Mary Nimkoff, Jonathan P. Rosen, Miriam N. Rosen, Robert Nimkoff and Louis H. Nimkoff (see Item 12) and Statecourt Enterprises, Inc. is owned 41% by The Estate of A.A. Rosen, 33% by Jonathan P. Rosen and 26% by various trusts of which Miriam N. Rosen, is trustee. 62 c. Indebtedness of Management The Estate of A.A. Rosen owns 25% of the outstanding stock of Larfico, an Ecuadorian corporation that owns a hatchery that produces post-larval shrimp and 50% of the outstanding stock of Mondragon, an Ecuadorian company engaged in shrimp farming operations. Bluepoints beneficially owns 62.5% of the outstanding stock of Larfico and all of the outstanding stock of Emporsa, an Ecuadorian corporation engaged in shrimp farming operations. As of August 31, 2003, Larfico was indebted to Bluepoints for $196,667 of loans made by Bluepoints to Larfico at various dates between November 8, 1985 and August 5, 1989 (the "Larfico Indebtedness.") Such loans bear interest at 8% and are due August 2004. Since July 1, 2002, the largest aggregate amount of outstanding indebtedness from Larfico to Bluepoints was $196,667. In addition, as of June 30, 2003, Mondragon was indebted to the Company for $16,631,000 of loans made by the Company to Mondragon on various dates between August 28, 1991 and June 26, 2003 (the "Mondragon Indebtedness"). Such loans bear interest at 1% over the prime rate in effect at the Bank of New York and have no fixed maturity. Since July 1, 2002, the largest aggregate amount of outstanding indebtedness from Mondragon to the Company was $16,631,000. The Estate of A.A. Rosen has guaranteed the repayment of 25% of the Larfico Indebtedness and 56.8% of the Mondragon Indebtedness. Since July 1, 2002, the largest amount of outstanding indebtedness from Emporsa and Larfico to Mondragon was $451,000 which was the balance at June 30, 2003. Such loans bear no interest and have no fixed maturity. Since July 1, 2002, the largest amount of outstanding indebtedness from Mondragon to Larfico and Emporsa was $6,425,000 which was the balance at June 30, 2003. Said indebtedness has no fixed maturity and bears interest at 7.3%. As of August 31, 2003, Bluepoints was indebted to the Company for $56,153,000 of loans made by the Company to Bluepoints at various dates between November 8, 1985 and August 28, 2003. Such loans bear interest at the rate of 1% over the prime rate in effect at the Bank of New York and are due on demand. Since July 1, 2002, the largest aggregate amount of outstanding indebtedness from Bluepoints to the Company was $56,153,000. A substantial portion of the foregoing loans was used by Bluepoints to acquire and fund the Ecuadorian shrimp operations. The Estate of A.A. Rosen and Jonathan P. Rosen have jointly provided a limited guarantee with respect to the repayment of loans made by the Company to Bluepoints. Such guarantee is limited to 19.8% of the deficiency in the shareholders equity of Bluepoints. As of June 30, 2003, the amount of the guarantee was $9,866,989. d. Not applicable. 63 ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES Fees billed for professional services by the Company's principal accountant, Ernst & Young LLP, for each of the last two fiscal years in connection with (i) the audit of the Company's annual financial statements and review of interim financial statements included in Form 10-Q (collectively, "Audit Fees") and (ii) tax compliance, tax advice and tax planning (collectively, "Tax Fees") were as follows: 2003 2002 ----------------- ----------------- Audit Fees $235,500 $225,500 Tax Fees $64,600 $70,390 All Other Fees (1) $13,600 $13,400 (1) Amounts relate to tax consulting services related to the Company's defined contribution employee benefit plans. 64 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K

66 The First Republic Corporation of America and Subsidiaries Schedule II--Valuation and Qualifying Accounts

(a) Amounts charged off and credits issued, net of recoveries on accounts previously written off. 67 The First Republic Corporation of America and Subsidiaries Schedule III--Real Estate and Accumulated Depreciation Year ended June 30, 2003

68 The First Republic Corporation of America and Subsidiaries Schedule III--Real Estate and Accumulated Depreciation (continued)

(a) Cost for Federal income tax purposes approximates amounts reflected in Column E. 69 The First Republic Corporation of America and Subsidiaries Schedule III--Real Estate and Accumulated Depreciation (continued)

Note: Includes assets used in the real estate and hotel operations. 70 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES ------------------------------------------ AUDIT REPORT ON THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS For the years ended June 30, 2003 and 2002 71 [LETTERHEAD OF BDO] Independent Auditor's Report To the Board of Directors Langomorro, Langostinera El Morro Cia. Ltda. and its subsidiary and affiliated companies New York, U.S.A. 1. We have audited the accompanying consolidated and combined balance sheets of Langomorro, Langostinera El Morro Cia. Ltda. and its subsidiary and affiliated companies as of June 30, 2003 and 2002, and the related consolidated and combined statements of operations, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 2. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements' presentation. We believe that our audits provide a reasonable basis for our opinion. 3. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Langomorro, Langostinera El Morro Cia. Ltda. and its subsidiary and affiliated companies as of June 30, 2003 and 2002, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ BDO STERN August 4, 2003 Guayaquil, Ecuador 72 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES CONSOLIDATED AND COMBINED BALANCE SHEETS (EXPRESSED IN US DOLLARS)

SEE SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES AND NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS 73 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES CONSOLIDATED AND COMBINED STATEMENTS OF LOSSES (EXPRESSED IN US DOLLARS) -------------------------------------------------------------------------------- FOR THE YEARS ENDED JUNE 30, 2003 2002 2001 -------------------------------------------------------------------------------- INCOME: Net sales (Note M) 570,192 244,723 261,678 Others, net 182,197 - 23,529 -------------------------------------------------------------------------------- 752,389 244,723 285,207 -------------------------------------------------------------------------------- COST AND OPERATING EXPENSES: Cost of sales (2,220,344) (773,893) (827,652) Administrative expenses (183,662) (130,283) (143,323) Financial expenses (1,121,603) (1,165,190) (1,200,612) Others, net - (615,752) - -------------------------------------------------------------------------------- (3,525,609) (2,685,118) (2,171,587) -------------------------------------------------------------------------------- Net Loss (2,773,220) (2,440,395) (1,886,380) -------------------------------------------------------------------------------- SEE SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES AND NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS 74 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (EXPRESSED IN US DOLLARS)

SEE SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES AND NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS 75 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOW - DIRECT METHOD (EXPRESSED IN US DOLLARS) ------------------------------------------------------------------------------ FOR THE YEARS ENDED JUNE 30, 2003 2002 ------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers 570,192 244,723 Cash paid to suppliers and employees (1,352,329) (58,510) Financial expenses (3,970) (4,440) Other incomes (expenses), net 28,644 (223,613) ------------------------------------------------------------------------------ Net cash used in operating activities (757,463) (41,840) ------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, machinery and equipment (77,365) (523,023) Decrease permanent investments - 3,066 ------------------------------------------------------------------------------ Net cash used in investing activities (77,365) (519,957) ------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Contributions for future capital increases 830,000 580,000 ------------------------------------------------------------------------------ Net cash provided by financing activities 830,000 580,000 ------------------------------------------------------------------------------ Net (decrease) increase in cash (4,828) 18,203 Cash at beginning of the year 25,997 7,794 ------------------------------------------------------------------------------ Cash at end of the year 21,169 25,997 ------------------------------------------------------------------------------ SEE SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES AND NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS 76 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES RECONCILIATIONS OF NET LOSS TO NET CASH USED IN OPERATION ACTIVITIES (EXPRESSED IN US DOLLARS) ------------------------------------------------------------------------------- FOR THE YEARS ENDED JUNE 30, 2003 2002 ------------------------------------------------------------------------------- Net loss (2,773,220) (2,440,395) ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: Depreciation 558,374 579,372 Decrease in property, machinery and equipment, net 3,467 410,070 Remission of interests payable to Statecourt Enterprise, Inc. (153,553) - CHANGES IN OPERATING ASSETS AND LIABILITIES: Decrease in accounts receivable 5,410 8,507 Increase in inventories (16,582) (824,042) Decrease (increase) in prepaid expenses 10,525 (13,474) Decrease (increase) in accounts payable (102,747) 181,561 Increase in related parties, net 582,516 888,885 Increase in accrued expenses 1,128,347 1,167,676 ------------------------------------------------------------------------------- Net cash used in operating activities (757,463) (41,840) ------------------------------------------------------------------------------- SEE SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES AND NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS 77 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES -------------------------------------------------------------------------------- BUSINESS Langomorro, Langostinera El Morro Cia. Ltda., was DESCRIPTION established on November 11, 1981 in Guayaquil, Ecuador, for the purpose of carrying out fishing activities basically related to nursery, grow-out and harvest of shrimp. The Company purchased 99.98% of the capital stock of Camazul Cia. Ltda. and both Companies maintain business with Isca, Isla Camaronera C. A. On May 23, 1991, 38% of the total shares issued by Langomorro, Langostinera El Morro Cia. Ltda. and Camazul Cia. Ltda. were acquired by Marchelot S. A. (a wholly-owned subsidiary of Bluepoints Co. Inc. of Bermuda). Starting in January 1997, the Company changed the shrimp commercialization policy. It no longer exports its production but sells locally to Empacadora Promariscos S. A. The accounts payable balances as of June 30, 2003 and 2002 correspond to advances received that will be settled against shrimp sales. OPERATIONS Since the beginning of its operations in 1981 and up to June 30, 2003, the Company has had recurrent losses. As of June 30, 2003 and 2002 the accumulated losses are US$22,109,904 and US$19,336,684 respectively. The main reason for these recurrent losses are principally the deficiencies in the exploitation and production of the 548 hectares of land available in the ponds and grow-out pools. From year 1999 and to date, the Company and its subsidiary and affiliated companies have had an important decrease in its levels of production due mainly to the white spot virus. The Administration has looked for different alternatives to eliminate that virus, which not yet have given the desired results. At the date of this report, the Company and its subsidiary and affiliated companies wait for the results of a related company, which is working in polyculture of tilapia and shrimp in the same pools. The Companies consider that this new kind of production would be adapted and would allow them to recover their levels of production. PRINCIPLES OF CONSOLIDATION The consolidated and combined financial statements AND COMBINATION include the accounts of Camazul Cia. Ltda. (subsidiary) and Isca, Isla Camaronera C. A. (affiliated company) in conformity with accounting principles generally accepted in the United States of America (USA-GAAP). Investments and all the transactions and balances between consolidated and combined parties have been eliminated. 78 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES -------------------------------------------------------------------------------- ACCOUNTING PRINCIPLES The Company and its subsidiary and affiliated companies maintain their accounting records in US Dollars, as a result of the dollarization scheme stated in the Accounting Ecuadorian Standards (NEC 17) prevailing in Ecuador since March 31, 2000 (date of transition). The effect of the dollarization process was eliminated to translate the financial statements using the US Dollars as the functional currency, in accordance with accounting principles generally accepted in the United States of America. INVENTORIES Products in process (shrimp) are stated at the lower price of cost or market, and include the, cost of larvae purchases plus transportation, feed, fertilizer, fringe benefits, and depreciation. PROPERTY, MACHINERY AND These assets are recorded at cost. Expenditures EQUIPMENT for maintenance and repairs are charged to expenses as incurred, whereas major improvements are capitalized. Depreciation was calculated using the straight-line method, based on the following estimated useful lives of the related assets: 40 years for pools and structures, machinery and equipment, 20 years for boats, 10 years for furniture, laboratory equipment and other fixed assets; and 5 years for vehicles. TRANSLATION OF FOREIGN The financial position, the results of operations CURRENCY AND EXCHANGE RATES and the cash flows of the Company were translated into US Dollars in accordance with accounting principles generally accepted in the United States of America. In conformity with these accounting principles, inventories (and their transference to cost of sales), property, machinery and equipment (and their related accumulated depreciation and depreciation expenses), permanent investments and stockholders' equity accounts, were translated at the exchange rates in effect when the assets were acquired or when the assets were originally recorded. MANAGEMENT The accounting policies followed by the Company to ESTIMATES prepare the financial statements are in conformity with the accounting principles generally accepted in the United States of America, which require that management make certain estimates and use certain assumptions to determine the valuation of some of the items included in the, financial statements and make the required disclosures therein. While the estimates and assumptions used may differ from their final effect, management believes that they were adequate, based on the information available as of the balance sheet dates. Actual results could differ from those estimates. 79 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) -------------------------------------------------------------------------------- A. ACCOUNTS RECEIVABLE A summary of this account follows: June 30, 2003 2002 -------------------------------------------------------------------------------- Insurance claims 1,146 15,146 Tax withholdings 1,858 5,957 Employees 1,629 1,396 Advances to contractors 3,666 - Others 8,957 167 -------------------------------------------------------------------------------- 17,256 22,666 -------------------------------------------------------------------------------- B. DUE FROM A summary of this account follows: RELATED PARTIES June 30, 2003 2002 -------------------------------------------------------------------------------- Larfico, Larvas del Pacifico S. A. 404,841 276,848 Comercorp S. A. 351,386 212,541 Ing. Carlos Perez 36,756 50,986 Inmobiliaria Maria Luciana S. A. 30,934 25,855 Camarecsa, Camarones Ecuatorianos S. A. 18,248 11,534 Comercial Inmobiliaria Golconsa S. A. 6,931 6,931 Bunsen S. A. 892 892 Other companies, individually immaterial 717 719 -------------------------------------------------------------------------------- 850,705 586,306 -------------------------------------------------------------------------------- Correspond to amounts granted by the Company which are controlled through intercompany accounts, with non-interest bearing and without due dates. C. INVENTORIES A summary of this account follows: June 30, 2003 2002 -------------------------------------------------------------------------------- Products in process 844,319 822,295 Materials and supplies 7,667 13,109 -------------------------------------------------------------------------------- 851,986 835,404 -------------------------------------------------------------------------------- 80 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) -------------------------------------------------------------------------------- D. PROPERTY, MACHINERY A summary of this account follows: AND EQUIPMENT June 30, 2003 2002 -------------------------------------------------------------------------------- AT ACQUISITION COST: Recirculation of water 7,404,610 7,404,610 Pools and reservoirs 4,495,882 4,487,693 Machinery and equipment 996,420 952,856 Wall repairs 776,928 776,928 Pumping station 750,600 756,616 Fishing boats 433,012 414,745 Civil works 371,204 367,066 Sluices for channels 314,125 252,971 Radio equipment and others 115,364 89,163 Housing for personnel 83,103 82,310 Vehicles 71,056 83,328 Furniture and office equipment 48,658 58,714 Bridge and wharf 30,094 30,094 Computer equipment 6,592 9,118 Laboratory equipment 5,027 5,027 Land 4,184 4,184 Construction in progress - 94,247 Tools and fishing tackle 3,342 3,634 -------------------------------------------------------------------------------- 15,910,201 15,873,304 Less accumulated depreciation 3,842,724 3,321,351 -------------------------------------------------------------------------------- 12,067,477 12,551,953 -------------------------------------------------------------------------------- E. LOANS As of June 30, 2003 and 2002, correspond to loans PAYABLE granted by Marchelot S. A. in December 23, 1998, and yield an annual interest rate of 7.33%. These obligations have the personal warranty of the Company's President. As of June 30, 2003 the Company had not subscribed the loan contract related to the proportional part of the loan granted by Overseas Private Investment Corporation (OPIC) to Marchelot S. A., which was partially assigned to the Langomorro Companies Group. 81 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) -------------------------------------------------------------------------------- F. ACCOUNTS A summary of this account follows: PAYABLE June 30, 2003 2002 -------------------------------------------------------------------------------- SUPPLIERS: Superintendent of Companies 19,593 - Segrio Seguridad S. A. 16,963 16,711 Bank overdraft 12,888 66,624 Shrimp Improvement 7,800 - Gerenfoque S. A. 6,104 6,720 Empacadora Promariscos S. A. (1) 4,292 27,589 Rey Gus S. A. 2,092 - Zeigler Bros 1,980 - Insurance payable - 25,468 Liris S. A. - 6,032 Others 9,830 18,297 -------------------------------------------------------------------------------- 81,542 167,441 Tax payable withholdings 51,316 68,164 -------------------------------------------------------------------------------- 132,858 235,605 -------------------------------------------------------------------------------- G. DUE TO (1) Corresponds to advances received from RELATED Empacadora Promariscos S.A., which will be PARTIES settled with future shrimp sells. A summary of this account follows: June 30, 2003 2002 -------------------------------------------------------------------------------- Emporsa, Empacadora y Exportadora S.A. (2) 2,141,289 1,294,008 Bluepoints Co. Inc. (1) 306,937 306,937 Marchelot S.A. (2) 34,499 34,865 Others 300 300 -------------------------------------------------------------------------------- 2,483,025 1,636,110 -------------------------------------------------------------------------------- (1) As of June 30, 2003 and 2002, his account includes 295,814, that correspond to advances received in former periods, which will be settled with future exports of shrimp. 82 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) -------------------------------------------------------------------------------- (2) The obligations with related parties correspond to loans granted by these companies, with non-interest bearing and without due dates. H. ACCRUED A summary of this account follows: EXPENSES June 30, 2003 2002 -------------------------------------------------------------------------------- Personnel benefits 29,647 18,933 INTEREST PAYABLE: Bluepoints Co. Inc. 3,527,003 2,645,459 Marchelot S.A. 1,070,484 834,395 Statecourt Enterprise, Inc. - 153,553 -------------------------------------------------------------------------------- 4,627,134 3,652,340 -------------------------------------------------------------------------------- I. LONG-TERM A summary of this account follows: DEBT June 30, 2003 2002 -------------------------------------------------------------------------------- Statecourt Enterprise, Inc. 405,000 405,000 BLUEPOINTS CO. INC.: (1) Langomorro, Langostinera El Morro Cia Ltda. 6,214,000 6,214,000 Isca, Isla Camaronera C.A. 1,451,666 1,451,666 Camazul Cia Ltda. 550,000 550,000 -------------------------------------------------------------------------------- 8,620,666 8,620,666 Marchelot S.A. 307,355 307,355 -------------------------------------------------------------------------------- 8,928,021 8,928,021 -------------------------------------------------------------------------------- (1) The obligation with Bluepoints Co. Inc. started in June 1998, yields an annual interest rate of 9.25%, and without due dates. 83 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) -------------------------------------------------------------------------------- J. PAID-IN A summary of this account follows: CAPITAL June 30, 2003 2003 -------------------------------------------------------------------------------- Langomorro, Langostinera El Morro Cia. Ltda. 4,887,880 4,887,880 Isca, Isla Camaronera C.A. 1,312,670 1,312,670 -------------------------------------------------------------------------------- 6,200,550 6,200,550 -------------------------------------------------------------------------------- As of July 1, 1997, the paid-in capital was constituted with the contributions of Langomorro, Langostinera El Morro Cia. Ltda. by 171,573 and Isca, Isla Camaronera C. A. by 869,972, corresponding to 10,000 and 73,118 ordinary and nominative shares, respectively. On August 31, 1997, the paid-in capital was increased by 5,159,005, corresponding 4,716,307 to Langomorro, Langostinera El Morro Cia. Ltda. and 442,698 to Isca, Isla Camaronera C. A. The increases were performed through the capitalization of contributions for future capital increases. On December 20, 2001, the Company changed the denomination of its shares from Sucres to US Dollars according to the Superintendent of Companies Rules. K. CONTRIBUTIONS A summary of this account follows: FOR FUTURE CAPITAL INCREASES 2003 2002 -------------------------------------------------------------------------------- Balance as of June 30, 9,557,789 8,977,789 Additions 830,000 580,000 -------------------------------------------------------------------------------- Ending Balance 10,387,789 9,557,789 -------------------------------------------------------------------------------- 84 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) -------------------------------------------------------------------------------- L. ACCUMULATED As of June 30, 2003 and 2002 the Companies DEFICIT maintained an accumulated deficit of 22,109,904 and 19,336,684 respectively. In addition the stockholders' equity is negative by 5,521,565 in 2003 and 3,578,345 in 2002, and had a negative working capital of 8,661,021 in 2003 and 7,202,277 in 2002. The main reason for these recurrent losses are basically the ineffective exploitation and production of the 716 hectares of land available. The company is using just 548 hectares for ponds and grow-out pools, 71 hectares are used as service areas and 97 hectares are unused. These factors are indicative that the Company and its subsidiary and affiliated companies may be unable to continue as a going concern. However, the continuity of the Companies as a going concern will depend on their ability to obtain additional financing funds as well as an increase of the profitable operations. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The financial statements do not include any adjustments related to the recoverability and classification of recorded assets amounts or the amounts and classification of liabilities which could be required if the Companies cannot continue as a going concern. According to the article 198 of the Ecuadorian Companies' Law, when in each Company (Langomorro, Langostinera El Morro Cia. Ltda., Isca, Isla Camaronera C. A. and Camazul Cia. Ltda.) the losses reach 50% or more of the paid-in capital and all the reserves, the companies must be placed into liquidation if the stockholders do not increase the paid-in capital. Managements of the Companies estimate the causes for liquidation will be solved and will be overcome, and the companies will continue operating normally. As of June 30, 2003 the Companies had tax loss carryforwards. However, they had not determined the exact amount of these losses and had not established the amount of tax loss carryforwards that will expire if they are not used in fiscal year 2003. The losses may be deducted in the 5 years following the year in which they originated, without exceeding 25% of each year's taxable income. The Company's stockholders intend to continue supporting the operations of the Company and its subsidiary and affiliated companies as they have done in the past. 85 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) -------------------------------------------------------------------------------- In this regard, the Stockholders intend to capitalize as much as the long term debt as required. Stockholders intend to continue to fund the operations and capital improvements of the Company. The initial positive results achieved in "Polyculture" which is a method of farming fish and shrimp together which has proven to be a successful and profitable method of combating white spot syndrome is very encouraging. Stockholders consider the implementation of this procedure along with the tolerine product and the patented ozone operation will be a very profitable shrimp farming operation. M. NET SALES The volumes of shrimp sold by the companies (individually) during the years ended on June 30, 2003 and 2002, were as follows: Value ------------------------- Volume (pounds) Years ended on June 30 -------------------------------------------------- Company 2003 2002 2003 2002 -------------------------------------------------------------------------------- Langomorro, Langostinera El Morro Cia Ltda. and Camazul Cia Ltda. 167,569 80,303 384,916 209,033 Isca, Isla Camaronera C.A. 89,531 15,670 185,276 35,690 -------------------------------------------------------------------------------- Total 257,100 95,973 570,192 244,723 -------------------------------------------------------------------------------- As of June 30, 2003 and 2002, the shrimps sold by Langomorro, Langostinera El Morro Cia. Ltda. were produced using 393 hectares, resulting in a productivity of 426 and 204 pounds per hectare, respectively, in those years. The shrimps sold by Isca, Isla Camaronera C. A. were produced using 149 hectares, resulting in a productivity of 601 and 105 pounds per hectare, respectively, in those years. 86 LANGOMORRO, LANGOSTINERA EL MORRO CIA. LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (EXPRESSED IN US DOLLARS) -------------------------------------------------------------------------------- N. RELATED The Company has bought 268,890 and 200,262 pounds COMPANIES' of larvae from Larfico, Larvas del Pacifico S. A. TRANSACTIONS during the years ended on June 30, 2003 and 2002, respectively. O. INCOME TAX RETURN The Companies have been reviewed, without important objections from the tax authorities, as shown below: Companies Period reviewed -------------------------------------------------------------------------------- Langomorro, Langostinera El Morro Cia. Ltda. 1996 Isca, Isla Camaronera C. A. 1996 Camazul Cia. Ltda. 1996 P. SUBSEQUENT EVENTS Between June 30, 2003 and the auditor's report date (August 4, 2003) there have not been any subsequent events which the Company's Management considers may have an important effect on the accompanying financial statements. -------------------------------------------------------------------------------- 87 EXHIBIT A LANGOMORRO, LANGOSTINERA EL MORRO CIA, LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES DETAIL OF CONTRIBUTIONS FOR FUTURE CAPITAL INCREASES FOR THE YEAR ENDED JUNE 30, 2003 (EXPRESSED IN US DOLLARS)

88 EXHIBIT B LANGOMORRO, LANGOSTINERA EL MORRO CIA, LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES STATEMENT OF CONSOLIDATION AND COMBINATION AS OF JUNE 30, 2003 (EXPRESSED IN US DOLLARS)

89 EXHIBIT C LANGOMORRO, LANGOSTINERA EL MORRO CIA, LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES STATEMENT OF CONSOLIDATION AND COMBINATION AS OF JUNE 30, 2003 (EXPRESSED IN US DOLLARS)

90 EXHIBIT D LANGOMORRO, LANGOSTINERA EL MORRO CIA, LTDA. AND ITS SUBSIDIARY AND AFFILIATED COMPANIES STATEMENT OF CONSOLIDATION AND COMBINATION AS OF JUNE 30, 2003 (EXPRESSED IN US DOLLARS)

91 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE FIRST REPUBLIC CORPORATION OF AMERICA By /s/ Jonathan P. Rosen --------------------------------------- Jonathan P. Rosen, Chief Executive and Chief Operating Officer By /s/ Harry Bergman --------------------------------------- Harry Bergman, Chief Financial and Chief Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Harry Bergman Date October 9, 2003 ---------------------------------------------- ---------------------------- Harry Bergman, Director /s/ Irving S. Bobrow Date October 9, 2003 ---------------------------------------------- ---------------------------- Irving S. Bobrow, Director /s/ Norman A. Halper Date October 9, 2003 ---------------------------------------------- ---------------------------- Norman A. Halper, Director /s/ William M. Silverman Date October 9, 2003 ---------------------------------------------- ---------------------------- William M. Silverman, Director /s/ Miriam N. Rosen Date October 9, 2003 ---------------------------------------------- ---------------------------- Miriam N. Rosen, Director /s/ Jonathan P. Rosen Date October 9, 2003 ---------------------------------------------- ---------------------------- Jonathan P. Rosen, Director 92

FIRST REPUBLIC CORP OF AMERICA 10-K