-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MTk1vQTWvhifJh4d3qoDrku21bnOqo1uhWbdJTmHlYtr0Tpm+ew4A3bc53omONh3 mCR2igPoawq7X/irzW/wZQ== 0001017386-98-000016.txt : 19980130 0001017386-98-000016.hdr.sgml : 19980130 ACCESSION NUMBER: 0001017386-98-000016 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980129 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MADERA INTERNATIONAL INC CENTRAL INDEX KEY: 0000810750 STANDARD INDUSTRIAL CLASSIFICATION: ORDNANCE & ACCESSORIES, (NO VEHICLES/GUIDED MISSILES) [3480] IRS NUMBER: 953769906 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-16523 FILM NUMBER: 98516788 BUSINESS ADDRESS: STREET 1: 23548 CALABASAS RD STE 203 CITY: CALABASAS STATE: CA ZIP: 91302 BUSINESS PHONE: 8182238807 MAIL ADDRESS: STREET 1: 23548 CALABASAS RD STREET 2: STE 205 CITY: CALABASAS STATE: CA ZIP: 91302 FORMER COMPANY: FORMER CONFORMED NAME: WEAVER ARMS CORP DATE OF NAME CHANGE: 19940203 10QSB 1 10-QSB FOR NINE MONTHS ENDED 12/31/97 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB ( x ) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended December 31, 1997 OR ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition period from _____ to _____ Commission file number 0-16523 MADERA INTERNATIONAL, INC. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Nevada 68-0318289 - ------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 2600 Douglas Road - Suite 1004, Coral Gables, FL 33134 - ------------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) (305) 774-9411 -------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ( X ) No ( ) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ( X ) No ( ) As of December 31, 1997, there were 68,703,269 shares of common stock ($.01 par value) issued and outstanding. Total sequentially numbered pages in this document: 17 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Madera International, Inc. Balance Sheet For The Period Ended December 31 ASSETS 1996 1997 (Unaudited) (Unaudited) -------------------------- Current Assets Cash $54,871 $40,024 Receivables (Note B) 682,505 1,127,626 Inventory (Note A and C) 2,910,539 2,578,156 -------------------------- Total Current Assets 3,647,915 3,745,806 -------------------------- Property, Plant & Equipment Investment in Timber Producing Property (Note E) 27,515,000 27,500,000 Investment in sawmill and related properties (Note D) 2,600,000 2,468,191 Other investments 1,500,000 1,500,000 Furniture & equipment 18,085 22,134 Other 0 0 -------------------------- Total Property, Plant & Equipment 31,633,085 31,490,325 -------------------------- Other Assets Inter-company Aserraadera Itaya (Note A) 0 1,167,838 Investment in environmental land 0 357,544 Security deposits 0 5,794 Other receivables 57,216 28,033 -------------------------- Total Other Assets 57,216 1,559,209 -------------------------- Total Assets 35,338,216 36,795,340 -------------------------- Liabilities and Shareholder Equity Current Liabilities Accounts payable 325,255 299,147 Accrued taxes payable 10,086 0 Income taxes payable 1,600 1,600 Other accrued expenses 48,268 123,203 Current portion of long term debt (Note H) 286,796 468,000 -------------------------- Total Current Liabilities 672,005 891,950 -------------------------- Long-Term Debt (Note H) 0 0 Common stock to be issued 423,750 423,750 -------------------------- Total Liabilities 1,095,755 1,315,700 -------------------------- THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT 2 Madera International, Inc. Balance Sheet (Cont'd) For The Period Ended December 31 1996 1997 (Unaudited) (Unaudited) -------------------------- Stockholders' Equity Redeemable Preferred Stock - $.01 Par, 100,000,000 shares authorized, 333,333 shares in 1996 and 1,000,000 shares in 1997 were issued and outstanding 15,000 10,000 Common Stock - $.01 Par, 250,000,000 shares authorized, 57,401,786 in 1996 and 68,703,269 in 1997 were issued and outstanding 609,785 689,646 Paid in capital 37,412,950 37,984,865 Retained Deficit Prior (3,379,473) (3,560,942) Retained Deficit Current (415,801) 356,071 -------------------------- Total Shareholder Equity 34,242,461 35,479,640 -------------------------- Total Liabilities and Equity $35,338,216 36,795,340 ========================== THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT 3 Madera International, Inc. Unaudited Statement of Operations For The Nine Month Period Ended December 31, 1997
3 Months Fiscal Year 3 Months Fiscal Year 1996 1996 1997 1997 -------------------------------------------------------- Income: Timber sales $544,854 $789,854 $549,570 $2,015,727 Other income (expense) 0 2,255 0 135,000 -------------------------------------------------------- Total Income 544,854 792,109 549,570 2,150,727 -------------------------------------------------------- Cost of Sales: Beginning Inventory 611,539 490,000 2,578,156 2,775,918 Purchases 158,240 379,240 564,211 915,868 Inventory adjustment 2,400,000 2,400,000 0 0 Field costs 0 38,146 0 421 Field travel 0 0 0 0 Sales costs and travel 11,926 13,319 4,504 9,103 Commissions 0 0 0 0 Environmental land costs 0 0 0 121,356 Joint venture costs 0 0 0 0 -------------------------------------------------------- Total accumulated costs 3,181,705 3,320,705 3,146,871 3,822,666 Less: Ending inventory (Note A and C) (2,910,539) (2,910,539) (2,775,918) (2,775,918) -------------------------------------------------------- Cost of sales 271,166 410,166 370,953 1,046,748 -------------------------------------------------------- Gross margin (Loss) 273,688 381,943 178,617 1,103,979 -------------------------------------------------------- Operating Expenses: General and Administrative 196,010 591,494 138,132 747,908 -------------------------------------------------------- Pre-Tax Profit (Loss) $77,678 ($209,551) $40,485 $356,071 Extra-ordinary loss due to fund raising 0 (206,250) 0 0 Taxes (Note I) 0 0 0 0 -------------------------------------------------------- Operating Profit (Loss) $77,678 ($415,801) $40,485 $356,071 ======================================================== Earnings (Loss) per Share of Common Stock and Common Stock Equivalents $0.001 ($0.007) $0.001 $0.005 ======================================================== Common Stock outstanding 60,978,569 60,978,569 68,964,669 68,964,669 ========================================================
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT 4 UNAUDITED STATEMENT OF CASH FLOWS For The Nine Month Period Ended December 31, 1997 CASH FLOWS IN OPERATING ACTIVITIES 1996 1997 ------------------------ Net Profit (Loss) ($415,801) $356,071 ------------------------ Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities: (Increase) Decrease in: Receivables (493,505) (277,076) Inventory (2,420,539) 197,762 Purchase of Furniture and Equipment (18,085) (4,049) Loans to employees (8,025) 3,849 Increase (Decrease) in: Accounts payable (15,479) 69,788 Accrued expenses 0 75,000 Payment of Legal Judgment (80,000) 0 Common stock to be issue - Acquisition 0 0 NET CASH PROVIDED BY (USED IN) ------------------------ OPERATING ACTIVITIES (3,451,434) 421,345 ------------------------ CASH FLOWS FROM FINANCING ACTIVITIES (Increase) Decrease in: Inter-company 0 (1,167,838) Timber property purchase (15,000) 0 Investments (47,656) (342,544) Sawmill and related equipment purchase 0 0 Increase (Decrease) in: Due to related parties (159,000) 275,500 Preferred stock 10,000 0 Common stock 190,145 73,977 Paid in capital 3,445,209 525,223 NET CASH PROVIDED BY (USED IN) ------------------------ FINANCING ACTIVITIES 3,423,698 (635,682) ------------------------ NET INCREASE (DECREASE) IN CASH (27,736) (214,337) CASH, at Beginning of Period 82,607 254,361 ------------------------ CASH, at End of Period $54,871 $40,024 ======================== THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT 5 Madera International, Inc. UNAUDITED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY For the Nine Month Period Ended December 31,1997
Common Stock Preferred Stock Additional --------------------------------------------- Paid In Retained Shares Amount Shares Amount Capital Earnings Total ----------------------------------------------------------------------------------------- Balance, December 31, 1996 60,978,569 $609,786 1,500,000 $15,000 $37,412,950 ($3,795,274) $34,242,462 ----------------------------------------------------------------------------------------- BALANCE, March 31, 1997 61,567,019 $615,669 1,000,000 $10,000 $37,459,642 ($3,560,942) $34,524,369 ----------------------------------------------------------------------------------------- Entries for quarter ended June 30, 1997 Private placement of stock-Arthur Mintz 3,000,000 30,000 170,000 200,000 Stock issued for advertising expenses 300,000 3,000 21,000 24,000 Stock issued for consulting agreements 313,250 3,133 21,927 25,060 Stock issued for purchase of environmental timber land 2,000,000 20,000 180,000 200,000 Loss for period 4/1 thru 6/30/97 (136,065) (136,065) ----------------------------------------------------------------------------------------- BALANCE, June 30, 1997 67,180,269 $671,802 1,000,000 $10,000 $37,852,569 ($3,697,007) $34,837,364 ----------------------------------------------------------------------------------------- Entries for quarter ended September 30, 1997 Stock issued for consulting fees 1,495,000 14,950 119,600 134,550 Stock issued for legal expense 28,000 280 2,240 2,520 Profit for period ended 9/30/97 451,651 451,651 ----------------------------------------------------------------------------------------- BALANCE, September 30, 1997 68,703,269 $687,032 1,000,000 $10,000 $37,974,409 ($3,245,356) $35,426,085 ----------------------------------------------------------------------------------------- Entries for quarter ended December 31, 1997 Stock issued for consulting fees 261,400 2,614 10,456 13,070 Profit for period ended 12/31/97 40,485 40,485 ----------------------------------------------------------------------------------------- BALANCE, December 31, 1997 68,964,669 $689,646 1,000,000 $10,000 $37,984,865 ($3,204,871) $35,479,640 =========================================================================================
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT 6 MADERA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. Summary of Significant Accounting Policies: Nature of Operations Madera International, Inc., a Nevada corporation (formerly Weaver Arms Corporation) emerged from Chapter 11 Bankruptcy proceedings on January 21,1994. During the fiscal year ended March 31, 1997, the Company started two subsidiaries: Asseradora Itaya, Inc. ("Itaya") a Peruvian corporation and Madera International Environmental, Inc. ("Environmental") a Nevada corporation, together ("The Company"). All significant inter-company transactions and amounts have been eliminated in the consolidating process. For the quarter ending December 31, 1997, the consolidation process was not done thus the elimination is not reflected and a receivable from subsidiary has been recorded. The accounting for the subsidiary would cause no adverse effect on the Statement of Operations. The actual expenditures when recorded will be primarily a build up of inventory for shipment in the fourth quarter. The Company, in conjunction with Itaya, is engaged in the harvesting, milling and exporting of timber from South America. The Company sells its products to major lumber distributors throughout the world. Environmental is dedicated to the conservation of the Amazon Rain Forest. Through its three programs 1) own a tree 2) replant a tree and 3) replant a seedling for kids, Environmental manages and re-plants virgin and cleared timberland in the Brazilian Amazon Region. These programs will safeguard this region from any commercial exploitation including farming, ranching, mining and logging or the removal of any fauna or flora for any purpose. Basis of Accounting The Company's policy is to use the accrual method of accounting and to prepare and present financial statements which conform to generally accepted accounting principles. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Net Profit (Loss) Per Share The net profit (loss) per share is computed by dividing the net loss by the weighted average number of shares outstanding during the period. The effect of convertible securities are excluded from the computation because the effect on the net loss per common share would be anti-dilutive. 7 Income Taxes Income taxes are provided for using the liability method of accounting in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities. Revenue and Cost Recognition Revenues are recognized in the period in which they are considered earned. General and administrative costs are charged to expense when incurred. Inventories Inventory is stated at the lower of cost or market. Cost is determined by the first-in, first-out method. A physical inventory is taken annually. Relief of the inventory related to sales is based upon estimated costs with adjustments made at the end of the fiscal year. Property and Equipment Property and equipment are stated at cost. Depreciation is computed over the estimated useful lives of the assets, which range from 5 to 7 years. Major renewals and improvements are capitalized, while maintenance and repairs are expensed when incurred. Depreciation for the quarter ending September 30, 1997 was not calculated. Non-monetary Transactions The Company records non-monetary transactions in accordance with APB-29 "Accounting for Non-monetary Transactions." The transfer or distribution of a non-monetary asset or liability is based on the fair value of the asset or liability that is received or surrendered, whichever is more clearly evident. Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Concentration of Credit Risk The Company maintains their cash at high quality financial institutions. The balances at times, may exceed federally insured limits. The Company believes that no significant concentration of credit risk exists with respect to cash investments. 8 B. Accounts Receivable: Accounts receivable represent amounts due for sales of timber. Management has determined that the entire amount as of December 31, 1997 is fully collectible. C. Inventory: Inventory as of December 31, 1997 and 1996 consists of varying sizes of rough cut mahogany and cedar lumber awaiting customers orders in addition to unprocessed logs awaiting processing in accordance with customer requests. The valuation of the inventory was made by an independent third party who determined the quantity and value of the existing inventory. Some of the inventory was purchased from Ramiro Fernandez-Moris, President of the Company, in exchange for preferred stock (Note J). The majority of the inventory balance was purchased with cash from unrelated third parties. See accounting policies for inventory in item 1 above. D. Property and Equipment: Property and equipment is summarized as follows: 1996 1997 as adjusted ----------- ----------- Sawmill - Brazil $ 2,600,000 $ 2,600,000 Office furniture and equipment 22,134 - ----------- ----------- 2,622,134 2,600,000 Less accumulated depreciation (131,809) (65,000) ----------- ----------- Property and equipment, net $ 2,490,325 $ 2,535,000 =========== =========== E. Investment in Timber Producing Property: In January 1995 the Company entered into an agreement with Ralph Financial Corporation (RFC) to purchase the rights to 400,000 hectares of timber producing property in Brazil. In consideration for the asset acquired the Company issued 12,000,000 shares of its Series C preferred stock. The preferred stock is convertible into common stock with the conversion factor being one share of common for each 2.4 shares of preferred. In addition the Company issued 2,000,000 shares of its common stock, valued at $600,000, as a finders fee associated with the acquisition of the assets. The value of the assets acquired was based upon an appraisal by an independent third party. The value of these assets was determined to be $12,000,000. 9 During November 1995 it came to the attention of management that there may be a problem with ownership of the property that was to be transferred to the Company. The Company placed RFC on notice to perform the transfer of assets by December 15, 1995 or the agreement would be rescinded. As a result of nonperformance by RFC, the Board of Directors of the Company approved a rescission of the transaction on December 17, 1995 and all parties were placed on notice of the rescission. As part of the rescission the Company is pursuing legal action to recover all 12,000,000 shares of the Company's Series C preferred stock and 425,000 shares of the Company's common stock that were issued as part of the original transaction. Subsequent to year end the Company has recovered some of the stock and received a judgment against Ralph Financial, which judgment calls for the return of the balance of the stock, cancellation of any of the stock that may be in 3rd party hands, and the collection of $200,000 plus legal fees for stock that may have been sold. As a result of this rescission the Company has adjusted the full value of the acquired asset and reversed the preferred stock issuance during the year ended March 31, 1996. In July 1994 the Company entered into an agreement with Ramiro Fernandez-Moris and his family to acquire a series of assets held by them in a family owned corporation. These assets consist of 478,000 acres of timber producing property in Brazil that are owned in fee in Brazil, as well as substantial acreage in Bolivia and Peru that are long term concessions. In exchange for these assets the Company issued 10,000,000 shares of its Series B preferred stock. The preferred stock issued is convertible into a maximum of 15,000,000 shares of the Company's common stock to be adjusted by any stock splits and subject to the production of earnings of $2,000,000 annually from the assets acquired. During the year ended March 31, 1996 the preferred stock was converted to 13,500,000 shares of the Company's common stock. In addition to the timberland acquired, the Company also acquired as part of the agreement a working sawmill located in Brazil that is in operation and existing inventory of banac and cedar with a value of $630,000. The value of the assets acquired were based upon an appraisal by an independent third party. The original value of these assets was determined to be $30,200,000. In addition the Company issued 500,000 shares of its Series Class B preferred stock, valued at $500,000, as a finders fee associated with the acquisition of the assets. In 1994 pursuant to the approval of the bankruptcy plan of reorganization, the Company entered into an agreement with Importaciones Y Exportaciones, Sociedad Anomia ("IMEXSA"), a Nicaragua corporation, to acquire approximately 400,000 Hectares (a Hectare equals 2.47 Acres) of virgin timber property located in Nicaragua. The Company originally issued a convertible note to IMEXSA for the acquisition of the 400,000 Hectares in the amount of $5,000,000. This was based upon the estimated value of the land acquired at the time of the agreement. IMEXSA subsequently exercised the conversion option and was issued 3,400,000 (post split) shares of the Company's common stock in exchange for the original note. 10 Subsequent to the original agreement, the land acquired was determined to have a much greater value than the original estimate. The estimated value was based upon a study made of the property by an authority in Nicaragua. Based upon information received from the study performed, the trading value of the Company's common stock, which began May 12, 1994, and with consideration given to the vast amount of timber located on the property, management made the decision to value the property at a midpoint between the original $5,000,000 agreed upon purchase price and the $20,400,000 value of the Company's common stock issued for the acquisition of the property. Management believes the value of $12,000,000 for the property was fairly stated based upon the fair value of common stock issued. In addition to the 3,400,000 (post split) shares of the Company's common stock issued for the acquisition of the property, the Company also issued 323,333 (post split) shares of the Company's common stock to three entities as fees associated with the acquisition of the property. The value of these shares was determined to be $1.00 per share. As a result, the Company's investment in the land acquired is $12,970,000. During the fiscal year ending March 31, 1995 the Nicaraguan government chose to withdraw the extraction rights for all of the 400,000 Hectares the Company owns. As a result of this governmental action the value of the property owned by the Company has been significantly reduced. Due to the uncertainties with the Nicaraguan government the determination of the remaining value of the property is uncertain. Management has made the decision to write off the full value of the Nicaraguan asset during its fiscal year ending March 31, 1995. As part of this write off 1,666,667 of the original 3,400,000 (post split) shares issued have been recovered and canceled. F. Other Investment: In April 1995 the Company entered into an agreement with Mandarin Overseas Investment Co., Ltd., (Mandarin) a company incorporated under the laws of the Turks and Caicos Islands to acquire 98% of the outstanding shares of Asseradora Itaya (Itaya), a subsidiary of Mandarin. Mandarin is the owner of timber concessions in Peru consisting of 30,000 hectares of timber producing properties. The concession is for ten (10) years with a renewable option for an additional ten (10) years, and a further option to turn the concession into fee ownership for a minimal cost. The extraction rights are approximately 270,000 cubic meters annually. Pursuant to the purchase agreement the Company and Mandarin agreed the purchase price shall be $1,500,000. During the year ended March 31, 1996 the Company issued 5,070,000 shares of its common stock with a value of $1,064,250 as part of this transaction. In addition the Company is negotiating with Mandarin, or their successors, the additional number of common shares with a value of $423,750 to be issued as final payment of this transaction. The $423,750 is reflected in the financial statements of the Company as a liability. This amount is not owing to Mandarin, instead it is due to entities that replaced 11 Mandarin in the transaction, these include Forest & Environmental Resources, Inc. and Gateway Industries Ltd. The Company has not converted this amount into stock due to the continued low current market price for the stock. G. Miscellaneous: Miscellaneous assets at December 31, 1997 and 1996 consist of the following: 1997 1996 ----------- ----------- Receivables - other $ 28,033 $ 57,216 - ----------- ----------- $ 28,033 $ 57,216 =========== =========== H. Notes Payable - Related Party: Notes payable - related party are summarized as follows: 1997 1996 -------- -------- Notes payable to Mr. Ramiro Fernandez-Moris, 468,0000 286,796 President of the Company, in 1997, and Mr. Daniel Lezak, former President, respectively, in 1996. All notes bear interest at prime plus 1%. Principal and interest is due and payable on demand or within one year. Less current portion 468,0000 286,796 -------- -------- $ - $ - ======== ======== I. Income Taxes: The Company's total deferred tax asset as of December 31, 1997 is as follows: Deferred tax assets: Net operating loss carry forwards $ 1,200,000 Valuation allowance (1,200,000) ----------- Net deferred tax asset $ - =========== 12 As of March 31, 1997, the Company had net operating loss carry forwards, before any limitations, which expire as follows: Year Ending March 31, Federal ----------- ---------- 2010 $1,654,000 2011 1,680,000 2012 100,000 ---------- $3,434,000 ========== Pursuant to the Internal Revenue Code Section 382, use of the Company's net operating loss will be limited due to a cumulative change in ownership of more than 50%. J. Stockholders' Equity: Preferred Stock During the twelve months ended March 31, 1997 the Company issued 1,000,000 shares of convertible Series D preferred stock to Ramiro Fernandez-Moris, President of the Company in exchange for $2,400,000 of timber inventory owned by Mr. Fernandez-Moris which is located in Brazil. The conversion feature of the preferred stock floats such that at the time of conversion a calculation will be performed to determine the exact number of common shares that are necessary to be issued to Ramiro Fernandez-Moris to ensure he has at least a 51% ownership interest in the Company. The conversion period is for five years and can only be completed if any of the following events occur: sale of the Company, retirement of Ramiro Fernandez-Moris, the termination of Ramiro Fernandez-Moris without cause or the expiration of the five year period. No further issuances have been made as of the current period. Authorized preferred stock currently also consists of Series A, B and C preferred stock which have various conversion features for the exchange of common stock for each share of preferred stock. As of March 31, 1997, all outstanding Series A, B and C preferred shares had been converted. This position continues for the current period. Common Stock During the three months ended December 31, 1997 and 1996 the Company issued 261,400 and 3,577,000 shares of common stock, respectively, in exchange for consulting and other services provided. Shares continue to be issued during the current fiscal year, refer to the Statement of Changes in Equity for details of current quarter issuances. In August 1994 the Company approved a 3 to 1 reverse split of the Company's common stock as of August 11, 1994. The effects of the reverse split was to convert three (3) shares of common stock into one (1) share of common stock. 13 The number of shares outstanding of common stock may require a non-material adjustment in subsequent periods due to the possible share adjustments from the rescinded transactions (Note E) and the results of the lawsuit that is to be filed to recover these shares. Common Stock Class A and Class B Warrants During the quarter ended December 31, 1997, the Board of Directors resolved to discontinue all Class A and Class B Warrants. This action was taken to reflect the current market prices and to avoid dilution at these prices. The Board left the door open for future warrant issues that may aid in future financing. K. Supplemental Cash Flow Information: Supplemental disclosures of cash flow information for the years ended March 31, 1997, and 1996 are summarized as follows: 1997 1996 ---------- ---------- Cash paid for interest $ 56,000 $ 48,000 ========== ========== Noncash investing and financing activities: Investment acquired with stock issuance - 1,500,000 Common stock issued for services 599,200 751,480 Preferred stock (Series D) issued for inventory 2,400,000 - Common stock issued for investment - 1,064,250 These adjustments continue during the fiscal year, a detailed analysis will be supplied with the 10K at the end of the fiscal year. L. Commitments and Contingencies: Operating Leases The Company leases office facilities under operating leases which expire in June 2000. The accompanying statement of operations includes expenses from operating leases of $12,079 for 1997. Future minimum lease payments due under noncancellable operating leases as of December 31, 1997 are as follows: 1998 $10,598 1999 22,534 2000 11,167 Thereafter - ------- $44,299 ======= Litigation During the year ended March 31,1996 the Company was a defendant in two legal proceedings. Both cases resulted in a judgement against the 14 Company, albeit, both judgments were settlements to avoid further costs, in the amounts of $158,834 and $100,000. The Company paid $145,000 during the year ended March 31, 1997 and the remaining balance of $113,834 is reflected in accounts payable. The $100,000 judgment was settled with a $50,000 payment, thus saving $50,000. These payments continue until payoff. The litigation against Ralph Financial, Inc. was successful in that the Company recovered all unsold shares of Common and Preferred Stock issued in this transaction and a judgment for $200,000 plus legal fees for that portion of the stock that was sold. M. Prior Period Adjustment: During the fiscal year ended March 31, 1997, that part of the "investment in timber producing property" (Note E) attributable to the physical sawmill facility was reclassified to property and equipment. Accordingly, a prior period adjustment has been recorded to reflect depreciation expense in the fiscal year ended March 31, 1996 in the amount of $65,000. Due to the net loss from operations in the prior period, there is no income tax effect of this adjustment. N. Subsequent Event: Subsequent to year end, the Company entered into an agreement with its President to purchase from him an additional 251,000 acres of timberland. The purchase is to be recorded at original cost and will be completed upon the receipt of appropriate documentation that demonstrates ownership transferred to the Company. This agreement is expected to be completed in the second quarter of the 1998 fiscal year. This additional timberland is destined for environmental programs that are being established through the Company's wholly-owned subsidiary, Madera International Environmental, Inc. The transaction was completed in June, 1997 at a cost of $441,000 of which $241,000 was recorded as due to related parties and the balance of $200,000 was paid through the issuance of 2,000,000 shares of Common Stock to Wood International, Inc. Additionally an environmentally oriented sale of approximately 6,700 Acres of that property was accomplished at $135,000 creating a small profit. 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the Nine Months Ended December 31, 1997 Financial Condition: The Company's working capital resources during the nine months ended December 31, 1997 were provided by operations, loans from related parties (See Notes to Financial Statements), and stock placements. Loans from related parties provided minimal proceeds during the three months ended December 31, 1997, increasing the Company's debt to related parties from $192,500 at fiscal year-end March 31, 1997 to $468,000 during the December, 1997 quarter. The Company's operations for the nine months ended December 31, 1997 utilized cash resources for continuing to build its inventory, but also provided additional working capital with increased sales and a profitable operation. Profit for the nine months ended December 31,1997 is $356,071 and for the three month quarter is $40,485. Management believes that the Company's working capital resources and anticipated cash flow from timber sales will be sufficient to support operations during the year ending March 31, 1998. However, management continues to seek alternative financing for the continued opportunities in South America. Results of Operations: During the nine months ended December 31, 1997, the Company's sales efforts resulted in increased orders for its hardwoods coupled with increased sales. The Company achieved profitability of $356,071 for the nine month period and $40,485 for the quarter. The Company continues to direct funds toward the accumulation of inventory and the procurement of sales. Based upon existing orders and planned shipping the projection for the entire fiscal year appears profitable. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS.. The Company has engaged counsel to analyze and prepare for recovery of stock issued in certain transactions. This analysis and recovery procedure will be outlined in the third quarter. All other legal matters have been resolved. ITEMS 2. through 4. are not applicable. ITEM 5. OTHER INFORMATION. Not applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MADERA INTERNATIONAL, INC. ------------------------- (Registrant) Date: January 29, 1998 /s/ Ramiro Fernandez-Moris -------------------------------- Ramiro Fernandez-Moris, Chairman, President & CEO January 29, 1998 /s/ Regina Fernandez -------------------------------- Regina Fernandez, Chief Financial Officer 17 EX-27 2
5 9-MOS MAR-31-1998 DEC-31-1997 40,024 0 1,127,626 0 2,578,156 3,745,806 31,490,325 (131,809) 36,795,340 891,950 0 0 10,000 689,646 34,779,994 36,795,340 2,015,727 2,150,727 1,046,748 0 747,908 0 0 356,071 0 356,071 0 0 0 356,071 (0.005) (0.005)
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