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
<PAGE>
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
<PAGE>
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
<PAGE>
Madera International, Inc.
Unaudited Statement of Operations
For The Nine Month Period Ended December 31, 1997
<TABLE>
<CAPTION>
3 Months Fiscal Year 3 Months Fiscal Year
1996 1996 1997 1997
--------------------------------------------------------
<S> <C> <C> <C> <C>
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
========================================================
</TABLE>
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
4
<PAGE>
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
<PAGE>
Madera International, Inc.
UNAUDITED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Month Period Ended December 31,1997
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional
--------------------------------------------- Paid In Retained
Shares Amount Shares Amount Capital Earnings Total
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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
=========================================================================================
</TABLE>
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
6
<PAGE>
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
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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
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<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 40,024
<SECURITIES> 0
<RECEIVABLES> 1,127,626
<ALLOWANCES> 0
<INVENTORY> 2,578,156
<CURRENT-ASSETS> 3,745,806
<PP&E> 31,490,325
<DEPRECIATION> (131,809)
<TOTAL-ASSETS> 36,795,340
<CURRENT-LIABILITIES> 891,950
<BONDS> 0
0
10,000
<COMMON> 689,646
<OTHER-SE> 34,779,994
<TOTAL-LIABILITY-AND-EQUITY> 36,795,340
<SALES> 2,015,727
<TOTAL-REVENUES> 2,150,727
<CGS> 1,046,748
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 747,908
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 356,071
<INCOME-TAX> 0
<INCOME-CONTINUING> 356,071
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 356,071
<EPS-PRIMARY> (0.005)
<EPS-DILUTED> (0.005)
</TABLE>
