SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 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 24736
Midland, Inc.
(Exact name of small business issuer as specified in its charter)
Colorado 84 107820
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
12528 Kirkham Court, Nos. 6 & 7 Poway, CA 92064
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (619) 679 3290
Indicate by check mark whether the issuer (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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: As of
August 15, 1997, there were approximately 2,239,170 common shares
and 63,000 Series A preferred shares outstanding.
I. PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MIDLAND, INC.
BALANCE SHEETS
June 30, December 31,
1997 1996
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ - $ 2,688
Accounts receivable, no
allowance deemed necessary - 58,424
Inventories - 5,000
Prepaid expense and other - 27,487
TOTAL CURRENT ASSETS - 93,599
PROPERTY AND EQUIPMENT, net - 25,795
OTHER ASSETS
License agreement, net - 131,250
Slotting fee, net - 41,448
TOTAL OTHER ASSETS - 172,698
$ - $ 292,092
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 301,030 $ 512,500
Bank overdraft - 76,822
Accrued expenses - 239,194
Current portion of long term debt - 109,614
TOTAL CURRENT LIABILITIES 301,030 938,130
LONG TERM DEBT, less
current portion - 25,375
STOCKHOLDERS' DEFICIT
Preferred stock, $0.40 par value
(1,000,000 shares authorized,
54,000 and 63,000 issued and
outstanding on December 31, 1996,
and June 30, 1997, respectively) 25,200 21,600
Common stock - $.40 par value
(10,000,000 shares authorized,
845,565 and 1,739,170 issued and
outstanding as of December 31,
1996, and June 30, 1997,
respectively) 695,668 338,226
Additional paid-in-capital 1,183,146 940,366
Accumulated deficit (2,205,044) (1,971,605)
TOTAL STOCKHOLDERS' DEFICIT ( -) (671,413)
$ - $ 292,092
MIDLAND, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the six months ended June 30, 1997, and June 30, 1996,
respectively
SALES $ - $ 1,193,686
COST OF SALES - 474,060
Gross profit - 719,627
OPERATING EXPENSES
General and administrative
expenses 118,709 1,169,716
Depreciation - 28,859
TOTAL OPERATING EXPENSES 118,709 1,198,575
LOSS FROM OPERATIONS (118,709) (478,948)
OTHER INCOME (EXPENSES)
Interest - (11,800)
Other - (2,185)
TOTAL OTHER INCOME (EXPENSES) - (13,985)
LOSS BEFORE INCOME TAXES (118,709) (492,933)
Provision for income tax - -
NET LOSS $(118,709) $(492,933)
Net loss per common share $ (.09) $ (.57)
Weighted average number of
shares outstanding 1,298,087 857,005
MIDLAND, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the six months
ended June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(118,709) $(492,933)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation - 28,859
Amortization of license agreement
included in costs of goods sold - -
Gain on sale of property and equipment - -
Changes in operating assets and
liabilities:
Accounts receivable 58,424 (922)
Inventory 5,000 64,494
Prepaid expenses 27,487 (19,305)
Other assets 172,698 (57,862)
Increase (decrease) in:
Accounts payable (211,470) 233,039
Long term debt/Slotting fee (134,989) 100,000
Accrued expenses (239,194) (3,690)
Bank overdraft (76,822) 69,731
NET CASH USED IN OPERATING ACTIVITIES (517,575) (73,589)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment - (129,886)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt 153,845 -
Net proceeds from long-term debt - 214,273
Proceeds from convertible debt - -
Proceeds from additional
paid-in-capital/offering costs 361,042 (43,487)
NET CASH PROVIDED BY FINANCING ACTIVITIES 514,887 170,786
NET INCREASE (DECREASE) IN CASH (2,688) (32,689)
CASH, BEGINNING OF PERIOD 2,688 32,727
CASH, END OF PERIOD $ - $ 38
MIDLAND, INC.
Notes to Financial Statements
(Unaudited)
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation
of the financial condition of registrant have been included, and
the disclosures are adequate to make the information presented not
misleading.
Note 1. A summary of significant accounting policies is currently
on file with the U.S. Securities and Exchange Commission in
registrant's Form 8-A.
Note 2. The loss per share was computed by dividing net loss by
the weighted average number of shares of common stock outstanding
during the period.
Note 3. Registrant has not declared or paid dividends on its
common shares since inception.
Note 4. The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-Q and do
not include all information and footnotes required by generally
accepted accounting principles for complete financial statements.
Note 5. Income taxes have not been provided for in that registrant
has not had a tax liability from inception to the date of these
notes.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations:
Failure of Coffee Business:
The Company, during 1996, was engaged in the sale of gourmet
coffee, related products and accessories through service
concessions located in a chain of grocery stores in Southern
California. The Company owned and operated service concessions,
almost all of which were located in one supermarket chain in
Southern California, Ralph's.
Beginning in late October, 1996, the Company began to experience
difficulties in its relationship with Ralphs, the result of which
was that Ralphs refused to pay the Company for the coffee which the
Company was selling to Ralphs, which, in turn, caused the Company
to default on its obligations to Daymar and also to Restaurant
Blend, which, in turn, resulted in the Company being unable to
deliver coffee to Ralphs and its other sales outlets, which, in
turn, resulted in Ralphs and the Company's other sales outlets
notifying the Company of their intention to terminate their
respective relationships. The Company negotiated a settlement with
Ralphs in February, 1997, whereby their contract was mutually
terminated. Ralphs kept the slotting fees paid by the Company and
the Company was relieved of all liabilities claimed by Ralphs.
Subsequently, the Company settled all liabilities with Brothers,
Daymar, Restaurant Blend and most, if not all, of its others
creditors; however, the Company is presently in default of many of
the settlement agreements which it reached with these entities.
Mega-Hell and Mill Agro Acquisitions:
On February 18, 1997 (the Closing Date), the Company executed,
delivered and closed under a Plan and Agreement of Purchase (the
Purchase Agreement) with the shareholders (the Shareholders) of
MILL-AGRO (HELLAS) SA, a Panamanian company, and MEGAHEL NAUTICAL
SA, a Greek company (both of which business entities are
collectively referred to herein as the Subsidiaries), whereby the
Company acquired from the Shareholders all of the outstanding
proprietary interest of these entities, thereby making them
wholly-owned subsidiaries of the Company. This acquisition was
subsequently rescinded.
Liquidity and Capital Resources:
The Company presently has, and during the period of this report,
had no source of liquidity or capital, other than such liquidity as
resulted from the exercise of outstanding warrants and the receipt
of proceeds therefrom.
PART II - OTHER INFORMATION
Item 1. Litigation
There is no pending litigation to which the Company is presently a
party which has not been satisfied prior to the date of this
filing, and which is required to be disclosed under this item,
other than the following:
Matossian and Fidiparex S.A.: In December of 1995 counsel for
Robert Matossian and Fidiparex S.A. demanded rescission of and
subsequent conversion into Common Stock of notes which the Company
had entered into with certain affiliates of a former director of
the Company, Mr. Mark S. Pierce, on December 30, 1994, alleging,
among other claims, breach of fiduciary duty to the Company by
Messrs. Robert W. Marsik and Pierce. The notes were converted into
Common Stock on August 17, 1995. Mr. Matossian was a consultant to
the Company from June 1, 1993, until July 31, 1995, when his
consulting agreement was terminated by the Company. Mr. Matossian
was also a director of the Company with Messrs. Pierce and Marsik
during the time that the notes were entered into and the conversion
of the notes effected. Matossian, through various nominees on his
behlaf, filed suit purportedly on behalf of the Company against
Messrs. Pierce and Marsik essentially reiterating the foregoing
points. The suit was filed in the San Diego, California, Superior
Court (Case No. 704105). Messrs. Pierce and Marsik and the Company
filed counter-claims against Mr. Matossian and his nominees
alleging breach of contract and fiduciary duty to the Company,
securities fraud and other related claims. The Company is of the
opinion that Matossian has no claims, and has been advised by
independent counsel that the claims of Matossian are frivolous and
groundless and initiated solely for the purpose of attempting to
interpose corporate black mail to gain a pecuniary settlement.
Matossian had previously offered to settle his so-called claims for
260,000 shares of Common Stock and $162,500 in cash.
Office Park Litigation: In March, 1997, the Company was sued by
the owner of the office park facility in which its Los Angeles
operations were located. The suit claims that the Company has
breached the lease, and seeks damages for rent from the date of the
claimed breach, December, 1996, through the end of the lease in
September, 1998. The maximum exposure from the suit approximates
$30,000, and is currently being negotiated for settlement as a part
of the debt restructuring initiated by the Company in the final
quarter of 1996.
Item 2. Change in Securities
This item is not applicable to the Company for the period covered
by this report.
Item 3. Defaults Upon Senior Securities
This item is not applicable to the Company for the period covered
by this report.
Item 4. Submission of Matters to a Vote of Security Holders
There were no meetings of security holders during the period
covered by this report; thus, this item is not applicable.
Item 5. Other Information
There is no additional information which the Company is electing to
report under this item at this time.
Item 6. Exhibits and Reports on Form 8-K
None.
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 this 2nd day of September, 1997.
MIDLAND, INC.
(Registrant)
By /s/ Robert W. Marsik
Robert W. Marsik President
and Chief Executive Officer
By /s/ Robert W. Marsik
Robert W. Marsik, Chief Financial
and Accounting Officer and Treasurer
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