SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarter ended October 31, 1997
Commission File No. 0-29164
TRI-NATIONAL DEVELOPMENT CORP.
(Name of Small Business Issuer in its charter)
Wyoming 33-0741573
(State of other Jurisdiction I.R.S. Employer
of incorporation or organization) Identification No.
480 Camino Del Rio S., Suite 140
San Diego, California 92108
(Address of principal executive officers)
Securities registered pursuant to section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value 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 and 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
----- -----
As of December 16, 1997, 16,373,542 shares of the registrant's common stock
were outstanding. The aggregate market value of the Registrants's free-
trading common stock, held by non-affiliates on September 29, 1997 was
approximately $7,080,000, based on the closing price of the stock on
October 31, 1997.
<PAGE>
TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED UNAUDITED BALANCE SHEETS
ASSETS:
- -------
OCT 31, APR 30,
1997 1996
-------- --------
Current Assets:
- ---------------
Cash $ 117,284 $ 33,557
U. S. Treasury Bills 256,846 -
Certificates of Deposit 29,110 -
Accounts Receivable 299,196 163,284
Notes Receivable (Note 2) 237,633 239,332
---------- ----------
Total Current Assets 940,068 436,173
Investments-MRI Medical Diagnostics,
Inc. (Note 3) 496,994 496,994
Investments-Hills of Bajamar (Note 4) 3,843,661 3,841,661
Investments-Plaza Resort Timeshares
(Note 5) 13,279,055 13,279,055
Notes Receivable-Baja Promocion
Internacional (Note 6) 4,200,000 4,200,000
Property, Furniture, and Equipment
(Note 7) 649,190 674,555
---------- ----------
Total Assets $23,408,967 $22,928,438
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
- -------------------------------------
Current Liabilities:
- --------------------
Accounts Payable $ 268,565 $ 227,313
Notes Payable-Current Portion 7,186 7,458
---------- ----------
Total Current Liabilities 275,752 234,771
Notes Payable-Net of Current Portion
(Note 8) 9,485,781 10,196,925
---------- ----------
Total Liabilities 9,761,533 10,431,696
---------- ----------
STOCKHOLDERS' EQUITY:
- ---------------------
Common Stock 9,128,963 7,720,982
Preferred Stock 6,000,000 6,000,000
Minority Interest (328,538) (350,720)
Accumulated Deficit (1,152,991) (873,520)
---------- ----------
Total Stockholders' Equity 13,647,434 12,496,742
---------- ----------
Total Liabilities and Stockholders' Equity $23,408,967 $22,928,438
========== ==========
See accompanying notes to financial statements.
<PAGE>
TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED
OCT 31, OCT 31,
1997 1996
-------- --------
REVENUES:
- ---------
Revenues $ 245,881 $ -
Gain on Sale of Assets - -
---------- ----------
Total Revenues 245,881 -
EXPENSES:
- ---------
General and Administrative Expenses 515,781 141,862
---------- ----------
Income Before Unusual Items (269,901) (141,862)
---------- ----------
UNUSUAL ITEMS:
- --------------
Gain (Loss) on Debt Settlement - -
Write-Down of Shares Received
in Settlement (351,916)
Write-Down of wholly owned subsidiary - (98,503)
Gain on Sale of MRI Medical
Diagnostics Inc. shares - 6,813
Exchange gain (loss) - (15,443)
Write-Down of Investments - -
---------- ----------
Total Unusual Items - (459,050)
---------- ----------
Minority Interest (9,570) -
Income Before Income Taxes (279,471) (600,912)
Income Taxes - -
---------- ----------
Net Income $ (279,471) $ (600,912)
---------- ----------
Earnings per share-Primary (0.017) (0.070)
Earnings per share-Fully Diluted (0.015) N/A
See accompanying notes to financial statements.
<PAGE>
TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
OCT 31, OCT 31,
1997 1996
-------- --------
CASH FROM OPERATING ACTIVITIES:
- -------------------------------
Net Income $ (279,471) $ (600,912)
Add (deduct) items not using
(providing) cash:
Depreciation and Amortization 54,301 204
Write-Down-Investment in MRI Medical
Diagnostics Inc. 351,916
Net Change in Non-Cash Working
Capital Items (1,274,554)
Gain on Sale of MRI Medical Diagnostics (6,813)
Changes in Operating Assets and
Liabilities:
Increase in Notes and Accounts
Receivable (134,213) -
Decrease in Prepaid Expenses - -
Increase (Decrease) in Accounts Payable 41,252 -
Decrease in Accrued Interest Payable - -
---------- ----------
Net Cash Flow Provided From
Operating Activities (318,131) (1,530,158)
---------- ----------
CASH FROM INVESTING ACTIVITIES:
Increase in Furniture and Equipment (28,935) (2,046)
Decrease in MRI Medical Diagnostics
Investment -
Decrease in GSDIC Investment -
Purchase U. S. Treasury Bills (256,846)
Purchase Certificates of Deposit (29,110)
Purchase of Hills of Bajamar (2,000) (28,402)
Purchase of Plaza Timeshares -
---------- ----------
Net Cash Flow Used in Investing Activities (316,891) (30,448)
---------- ----------
CASH FROM FINANCING ACTIVITIES:
Increase in Notes Payable-Net of
Current Portion -
Decrease in Notes, Loans, Guarantees
Payable (711,414)
Proceeds from the sale of shares 1,407,981 1,528,508
Preferred Stock Issued -
Sales of Treasury Stock - (27,494)
Proceeds from the sale of shares-
MRI Diagnostics - 62,217
Minority Interest 22,182
---------- ----------
Net Cash Flow From Financing Activities 718,749 1,563,232
---------- ----------
Net Increase in Cash 83,727 2,625
Cash-Beginning of Fiscal Year 33,557 7,078
---------- ----------
Cash-End of Fiscal Year $ 117,284 $ 9,704
========== ==========
See accompanying notes to financial statements.
<PAGE>
TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED UNAUDITED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED COMMON TREASURY MINORITY ACCUM
STOCK STOCK STOCK INTEREST DEFICIT TOTAL
----- ----- ----- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
APRIL 30, 1997 $6,000,000 $7,720,982 $ - $ (350,720) $ (873,520) $12,496,742
ISSUANCE OF PREFERRED
STOCK - -
ISSUANCE OF COMMON
STOCK 1,407,981 1,407,981
SALE OF TREASURY STOCK - -
MINORITY INTEREST 22,182 22,182
NET INCOME (279,471) (279,471)
---------- ---------- -------- ---------- ---------- ----------
BALANCE AT
OCTOBER 31, 1997 $6,000,000 $9,128,963 $ - $ (328,638) $(1,152,991) $13,647,434
========== ========== ======== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TRI-NATIONAL DEVELOPMENT CORP.
NOTES TO THE FINANCIAL STATEMENTS
October 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business Activity
Tri-National Development Corp. is a publicly traded international real
estate development and management company. The Company was incorporated on
July 31, 1979 as Rocket Energy Resources Ltd. under the laws of the
Province of British Columbia, Canada by registration of its Memorandum and
Articles. The Company changed its name to MRI Medical Technologies, Inc. in
April of 1989. On December 7, 1992, the Company changes its name to
Tri-National Development Corp. and recapitalized on the basis of five (5)
common shares of MRI Medical Technologies, Inc. for one (1) common share of
Tri-National Development Corp. In January of 1997, the Shareholders
approved a special resolution to change the corporate domicile from
Vancouver, B.C. to the state of Wyoming. On February 24, 1997, the
Company's Article of Continuation were accepted by the state of Wyoming and
it is now incorporated under the laws of the state of Wyoming. The Company
maintains its executive offices in San Diego, California at 480 Camino Del
Rio S. in Suite 140 and its telephone number is 619-718-6370.
Consolidation
The consolidated financial statements include the accounts of Greater San
Diego Imaging Center LLC, a subsidiary owned 2/3 by the Company. An offset
for the 1/3 minority interest held by First Colonial Ventures, Ltd. has
been provided for in the financial statements.
Furniture and Equipment
Furniture and equipment are stated at cost and depreciated over the
estimated useful lives of the assets (five to seven years) using the
straight line method.
2. NOTES RECEIVABLE
On December 30, 1996, First Colonial Ventures, Ltd. signed a note to the
Company to purchase a 1/3 interest of Greater San Diego Imaging Center.
At October 31, 1997, the unpaid principal was $237,632.99. The note is due
and payable, together with interest, on December 31, 1997.
In March 1992, the Company advanced $383,064 to MRI Medical Diagnostics,
Inc. (MRI MD) to enable MRI Grand Terrace, Inc. (Grand Terrace) to acquire
a retirement hotel located in Grand Terrace, California. The loan was
evidenced by a 15% note receivable from MRIMD and a second trust deed and
an assignment of rents from MRI Grand Terrace, Inc. On March 22, 1993,
Grand Terrace filed a complaint against Chino Valley Bank, as a result of
the purchase of the residential retirement hotel in Grand Terrace from the
Chino Valley Bank. MRI claimed that the sellers of the property (Chino
Valley Bank) had failed to disclose that the property's parking lot
encroached on the property of the adjacent parcel of land. Grand Terrace
stopped making mortgage payments to the mortgage holder (the same Chino
Valley Bank), which then filed a Notice of Default as an initial step to
foreclosure on the property. Grand Terrace then
<PAGE>
sought Bankruptcy protection in July of 1993, and was ultimately dismissed
from Bankruptcy in May of 1995. The Chino Valley Bank subsequently sold
the property in foreclosure to itself. Tri-National filed it's own action
against the Chino Valley Bank in early 1995, claiming that it was defrauded
and misrepresented when it advanced the $383,064 for the closing in 1992.
The case is still pending and has not come to trial. The Company purchased
the remaining stock of MRI Grand Terrace, Inc., as described in Note 10 to
these financial statements, in an effort to control both lawsuits against
the Chino Valley Bank, which is also a publicly traded company. As a
result of the uncertainty of the final results of the lawsuits, the Company
wrote off the investment, which at the time was $100,000.
3. INVESTMENT IN MRI MEDICAL DIAGNOSTICS INC., A COLORADO CORPORATION
In 1992 the Company sold its wholly owned subsidiary, MRI Medical
Diagnostics Inc., a California corporation. In return the Company received
6,000,000 restricted common shares of the purchaser, MRI Medical
Diagnostics Inc. (MRI-Med), a Colorado public corporation (formerly
Petro-Global, Inc.), plus certain mineral properties and leases. The mineral
properties were written down to a nil value in the records of the Company.
MRI-Med filed for Chapter 11 bankruptcy protection on July 22, 1993. After
dividends in kind totaling 2,000,000 shares in 1992 and 1993, and due to
uncertainty in the underlying value of the remaining 4,000,000 MRI-Colorado
shares held by the Company, the carrying cost of these shares was written-off
in 1994. Tri-National Development Corp. filed a reorganization plan on
behalf of MRI-Med in August 1995 and, in settlement of the litigation
described in Note 3, the Company received 5,900,000 shares of MRI-Med at a
deemed value of $0.50 per share, ordered by the U.S. Federal Bankruptcy
Court, plus 1,400,000 for reimbursement of current expenses. MRI Medical
Diagnostics, Inc. is currently a publicly traded company, with shares
trading in the $.03 to $.10 range. The investment is recorded in the books
at a cost of $496,994.
4. REAL ESTATE DEVELOPMENT PROPERTY: HILLS OF BAJAMAR
The Hills of Bajamar (formerly the Santa Fe Ranch) consists of
approximately 2,470 acres (divided into ten 247 acres parcels) of
undeveloped land located fifty miles south of San Diego, California on the
Pacific Coast of the State of Baja California, Mexico, in the Municipality
of Ensenada. The Company originally had a right to acquire a 100% interest
in the property pursuant to a series of agreements requiring ongoing
payments for each 247 acres parcel released by the vendor.
The Company subsequently entered into an agreement with Pacific Medical
International, Inc. (PMI) whereby, subject to shareholder approval, it
divested itself of all of its rights in consideration for: retention of
86.45 acres of the first parcel of the Santa Fe Ranch to be released by the
original vendor; and the greater of (1) a one percent royalty on the gross
proceeds from the sale of any land that is part of the said Santa Fe Ranch,
or (2) $150,000 for each 247 acres parcel released by the vendor, beginning
with the release of the fourth parcel and continuing with each release
thereafter.
Prior to receiving shareholder approval, the Board renegotiated the
agreement and, on June 23, 1995, the Company held an Extraordinary General
Meeting that approved the renegotiated agreement. Under the renegotiated
agreement, the Company was granted 51% of the issued and outstanding
shares of PMI with any dilution of stock to raise further funding to come
from the shareholdings of the minority shareholders of PMI and not their
treasury. PMI also agreed to assume
<PAGE>
a convertible promissory note to a Mr. Yates on renegotiated terms and
Yates agreed to such assumption by PMI. The Yates note was originally
secured by the Company's rights to its 86.45 acres of the Santa Fe Ranch.
The renegotiated note with PMI provides for Yates to receive the greater of
$2,000 or 50% of the sale price for each acre of the Santa Fe Ranch sold
until all funds due to him are paid, with Yates also to receive a lien
against the first 250 acres of the Santa Fe Ranch as security.
The Company then entered into a new agreement in November of 1996 with PMI
to acquire all right and title to the 237 acres already in escrow, as well
as, the balance of the contract for the remaining 2,233 acres for a
$700,000 promissory note payable, 500,000 shares of TND Class B Series B
Preferred Stock at a value of $4.00 per share and the return of its 51%
interest in PMI. The Company's basis in the Hills of Bajamar taking into
account cash invested, stock surrendered and notes given total, $3,843,661.
PMI remains responsible for its own debts.
5. PLAZAS RESORT TIMESHARES AND COMMERCIAL PROPERTY
In December of 1996, the Company entered into an acquisition agreement with
Valcas International, S.A. de C.V., to acquire 100% of the stock of
Inmobilario Plaza Baja California, S.A. de C.V., a Mexican corporation,
including its existing assets, which include 16+ developed acres of ocean
front land with plans for 326 timeshare resort units, plus a 26,000 square
foot adjacent commercial building under construction for $13,279,055,
payable with notes for $9,279,055 and 1,000,000 Class B Series B
Convertible Preferred shares with a value of $4.00 per share.
6. BAJA PROMOCIONES INTERNATIONAL, S.A. de C.V.
On April 27, 1997, the Company entered into an agreement to sell 200 acres
in the very northern corner of the Hills of Bajamar to Baja Promociones
International, Inc. for use as a Indy style racing facility for $4,200,000
and retained a 25% interest in the business. The Company has received a
note in the amount of $4,200,000. The buyer is to receive a credit of
$1,000,000 upon completion of the construction of the main road from the
toll road to the race facility property. The buyer is contracting to start
construction by the end of September 1997. The cost of this property was
$473,083, yielding a gain on sale of $3,726,917.
7. FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following:
Furniture and equipment $712,671
Less accumulated depreciation (63,842)
--------
$649,189
========
<PAGE>
8. LONG-TERM NOTES PAYABLE
Long-term notes payable at October 31, 1997, consisted of the following:
Note payable to Valcas Internacional,
S.A. de C.V. payable in semi-
annual installments of $927,905
with interest commencing after
May 1, 1999 at 6% per annum, with
the first installment due May 1,
1999 and final installment due
November 1, 2002 $9,279,055
Note payable to North County Bank
Guaranteed by a stockholder and
secured by equipment, due in
monthly installments of $864,
including interest at 10.5%,
through October, 2001 33,527
Note payable to GSDIC LLC at 10% with
A balloon payment due May 1, 1998 180,385
----------
9,492,967
Less current portion (7,186)
----------
Long-term debt, net at current portion $9,485,781
==========
Maturities at long-term debt are as follows:
Year ending
April 30 Amount
-------- ------
1998 $ 7,186
1999 2,053,423
2000 1,865,004
2001 1,866,017
2002 1,856,670
Thereafter 1,844,667
----------
$9,492,967
==========
9. WRITE DOWN OF INVESTMENTS
The Company wrote off its investment in MRI Grand Terrace, Inc. at July 31,
1996 as it has no assets and its worth is dependant on the outcome of
litigation pending against the Chino Valley Bank (see Note 2). The amount
of the write off is $100,000.
10. INCOME TAXES
The Company began the year with loss carryforwards from prior years
totaling, $4,280,257. These losses offset the net income in the current
year of $3,068,628, leaving no taxable income and no taxes for the year
ending April 30, 1997. There will be a loss carryforward available in the
amount of $1,211,629, to reduce future federal income taxes.
<PAGE>
11. LEASES
The Company leases two office facilities in San Diego, California under
operating leases which expire in 1999 and the year 2,000, respectively.
The leases generally require the Company to pay all maintenance, insurance
and property taxes and are subject to certain minimum escalation
provisions. Rent expense for all operating leases was approximately
$44,200 for the year ended April 30, 1997.
Future minimum operating lease payments as of April 30, 1997 are as
follows:
1998 $ 113,382
1999 102,369
2000 30,452
----------
$ 246,203
==========
12. GREATER SAN DIEGO IMAGING CENTER LLC
On June 4, 1996 the Company entered into an Asset Purchase Agreement with
Greater San Diego Imaging Center, LLC (GSDIC) with an effective date of
November 1, 1996. GSDIC owns and operates a magnetic resonance imaging
center in San Diego, California. The Company agreed to purchase the fixed
assets, certain trade accounts receivable, certain assignable contracts,
leases and agreements, prepaid expenses and the goodwill of the business.
The purchase price is $599,999 for the fixed assets and $1.00 for other
assets and is payable as follows:
(a) by payment of $300,000, of which $25,000 U.S. was paid upon
execution of the agreement (partially paid from deposit on letter
agreement), and
(b) by the issuance of 857,142 common shares in the capital of
TND based upon a value of $0.35 U.S. per share for total share
consideration having a value of $300,000 U.S., and
(c) subsequent to June 4, 1996, the Company agreed to purchase
additional accounts receivable in the amount of $102,700, in exchange
for 291,935 common shares of TND, based on a price of $.35 per share,
and
(d) on December 30, 1996, the Company entered into an agreement
with First Colonial Ventures, Ltd. to sell it 1/3 of GSDIC for
$350,000 cash, payable over 6 months. As of October 31, 1997, First
Colonial had paid $112,367.01.
13. SHARE CAPITAL
The authorized capital of the Company consists of 110,100,000 shares
divided into, 100,000 Class A Preferred shares with a par value of $1.00
each; 5,500,000 Class B Series A Convertible Preferred shares with a par
value of $1.00 each; 4,500,000 Class B Series B Convertible Preferred
shares with a par value of $1.00 each, of which 1,500,000 are issued and
outstanding; and 100,000,000 common shares without par value, of which
15,955,292 are issued and outstanding.
Included in the 15,955,292 common shares issued and outstanding are 749,483
common shares held in escrow and may not be released by the transfer agent,
traded in or dealt with in any manner whatsoever without the consent of the
regulatory authorities.
There were employee stock options to purchase 875,000 common shares of the
Company outstanding at October 31, 1997.
<PAGE>
The Company carried out a private placement of 1,956,491 units of the
Company at a price of $0.285 per unit for gross proceeds of $521,971. Each
unit consisted of one common share in the capital of the Company and a two
year non-transferable share purchase warrant. Each non-transferable share
purchase warrants entitled the holder thereof to purchase one common share
in the capital of the Company at any time during the first six months of
the term of the warrant at a price of $0.285, at any time during the second
six months of the term of the warrant at a price of $0.40, at any time
during the third six months of the term of the warrant at a price of $0.55
or at any time during the final six months of the term of the warrant at a
price of $0.75. The term of the warrant commenced on the October 30, 1996.
The Company also carried out a private placement of 968,021 units of the
Company at a price of $0.35 per unit for gross proceeds of $338,807. Each
unit consisted of one common share in the capital of the Company and a two
year non-transferable share purchase warrant. Each non-transferable share
purchase warrants entitled the holder thereof to purchase one common share
in the capital of the Company at any time during the first year of the term
of the warrant at a price of $0.40 or at any time during the final year of
the term of the warrant at a price of $0.50. The term of the warrant
commenced on the October 30, 1996.
14. RELATED PARTY TRANSACTIONS
The aggregate payments paid and accrued to related parties during the year
are as follows:
Management and consulting fees $48,000.00
15. OPTIONS AND WARRANTS
Issued and Outstanding Common Shares at October 31, 1997:
Stock Options Granted During the Year:
875,000 Employee Stock Options were issued in December of 1996 to
purchase common shares in the capital of the Company at a price of $.25 per
share and expiring December 31, 1999 (see Note 8). At October 31, 1997,
100,000 Employee Stock Options had been exercised.
Warrants Granted During the Year:
The Company issued a single issuer private placement in July 1997 for
375,000 common shares at $.40 per share for $150,000 with warrants to
purchase an equal number of shares at a price of $1.00 per share for 1
year.
Directors: M.A. Sunstein
Jay Pasternack
Ted Takacs
Shane Kennedy
Dr. Robert Rosen
Arthur Lilly
Dr. J.J. Parker
<TABLE> <S> <C>
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<S> <C>
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<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> OCT-31-1997
<CASH> 117,284
<SECURITIES> 285,956
<RECEIVABLES> 536,829
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 940,068
<PP&E> 712,672
<DEPRECIATION> 63,842
<TOTAL-ASSETS> 23,408,967
<CURRENT-LIABILITIES> 275,752
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0
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<COMMON> 9,128,963
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<SALES> 0
<TOTAL-REVENUES> 245,881
<CGS> 0
<TOTAL-COSTS> 525,352
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