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 March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ___________.
Commission file number: 33-55254-34.
MAUI USA, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 87-0485322
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
505 FRONT STREET, SUITE 233, LAHAINA, MAUI, HAWAII 96761
(Address of principal executive offices) (Zip Code)
(808) 667-0647
(Issuer's telephone number)
(Former name, former address and former
fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 May 6, 1996, 8,000,000 shares of Class A Common Stock and 2,000,000
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shares of Class B Common Stock of the issuer were outstanding.
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MAUI USA, INC.
INDEX
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Page
Number
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Operations - For the
three months ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statement of Cash Flows - For the
three months ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II - OTHER INFORMATION
Item 3. Default Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS - MARCH 31, 1996 AND DECEMBER 31, 1995
Maui USA Inc.
Consolidated Balance Sheet
March 31, 1996 December 31, 1995
ASSETS (unaudited)
Cash (including restricted
cash of $1,003,622
and $1,142,872) $ 1,200,237 $ 1,202,656
Land under development 16,708,377 15,278,255
Furniture and equipment, 15,536 16,626
net
Other 79,313 74,393
Total Assets $ 18,003,463 $ 16,571,930
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable $ 1,433,370 $ 615,926
Note payable 7,500,000 7,500,000
Payable to affiliates 3,639,037 2,990,845
Total liabilities 12,572,407 11,106,771
Stockholders' equity
Common Stock
Class A, $.001 par value; 8,000 8,000
authorized - 25,000,000
shares, outstanding -
8,000,000 shares
Class B, $.001 par value; 2,000 2,000
authorized - 5,000,000
shares, outstanding -
2,000,000 shares
Additional paid-in capital 5,556,149 5,556,149
Accumulated deficit (135,093) (100,990)
Total stockholders' equity 5,431,056 5,465,159
Total liabilities and
stockholders' equity $ 18,003,463 $ 16,571,930
See accompanying notes to consolidated financial statements.
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STATEMENT OF OPERATIONS - FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995
Maui USA Inc.
Consolidated Statement of Operations
(unaudited)
Three Months Ended March 31,
1996 1995
Interest income $ 11,573 $ 13,584
General and administrative
expenses (45,676) (29,331)
Net loss $ (34,103) $ (15,747)
Loss per common share
Primary $ (0.003) $ (0.001)
See accompanying notes to consolidated financial statements.
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STATEMENT OF CASH FLOWS - FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995
Maui USA Inc.
Consolidated Statement of Cash Flows
(unaudited)
Three Months Ended March 31,
1996 1995
Cash flows from operating
activities
Net loss $ (34,103) $ (15,747)
Adjustments to reconcile
net loss to net cash
provided by operating
activities
Depreciation and 1,090 -
amortization
Changes in assets and
liabilities
Increase in other assets (4,920) (5,038)
Increase in accounts 817,444 216,837
payable
Net increase in payable 648,192 162,561
to affiliates
Net cash provided by 1,427,703 358,613
operating activities
Cash flows used in
investing activities
Costs of land under (1,430,122) (1,111,927)
development
Net purchases of - (7,382)
furniture and
equipment
Net cash used in (1,430,122) (1,119,309)
investing activities
Net decrease in cash (2,419) (760,696)
Cash at beginning of
period
(including restricted 1,202,656 1,569,797
cash of $1,142,872 and
$1,209,368)
Cash at end of period
(including restricted $ 1,200,237 $ 809,101
cash of $1,003,622
and $692,916)
See accompanying notes to consolidated financial statements.
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NOTES TO FINANCIAL STATEMENTS
MAUI USA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996
1. BASIS OF PRESENTATION
In the opinion of management, the unaudited financial information included
in this report contains all adjustments, consisting of normal recurring
adjustments only, necessary for a fair presentation of the results of
operations and cash flows for the interim period covered and the financial
condition of the Company at the dates of the balance sheets. The
operating results for the interim period are not necessarily indicative of
the results to be expected for the full fiscal year. The accounting
policies followed by the Company are set forth in Note 2 to the financial
statements included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1995.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Assets to be Disposed Of." FAS 121 requires
that long-lived assets and certain identifiable intangibles held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Additionally, FAS 121 generally requires that the long-lived
assets and certain identifiable intangibles to be disposed of be reported
at the lower of the carrying amount or fair value less cost to sell. The
adoption of FAS 121 by the Company did not have a material effect on the
unaudited financial information included in this report.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123 (FAS 123), "Accounting for Stock-Based
Compensation," which establishes financial accounting and reporting
standards for stock-based employee compensation plans. The adoption of
FAS 123 by the Company did not have a material effect on the unaudited
financial information included in this report.
2. MATERIAL CONTINGENCIES
Closing of the acquisition agreement dated August 8, 1994, as amended,
with 3521 Corp. (the Division) and transfer of the assets and liabilities
from the Division to the Company were conditional upon the approval of the
Bank of Bermuda (the Bank), and removal of a $7.6 million lien against the
property in favor of the Bank. During 1995, the Bank had formally
requested repayment of the $7.5 million loan and noted the Company was in
default under certain loan covenants. As a result of ongoing discussions
with the Bank, in late 1995 the Bank approved the transfer of the 50 acres
from the Division to the Company and removed the $7.6 million lien against
the property. However, as of March 31, 1996, the Bank had not approved
the transfer of the $7.5 million note payable from the Division to the
Company. On January 26, 1996, the Company and Isleinvest Ltd. signed a
letter of intent with a prospective investor whereby the Company would
receive approximately $12 million in financing. In connection with this
agreement, the Company is planning to allocate a portion of the proceeds
to repay half of the $7.5 million loan from the Bank of Bermuda and create
a $3.75 million subordinated loan to the Company. The Company also
intends to use the proceeds to fund the general contractor's escrow
account for construction of the Project, as well as provide additional
working capital to the Company. Management believes that the financing
transaction will be concluded in early-to-mid 1996, but there is no
assurance that a final agreement will be reached with this investor.
Discussions with the Bank on these matters resulted in an agreement to
transfer title in the land from the Division to the Company and the
conveyance of title was recorded on December 28, 1995. Management of the
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Company is in discussions with the Bank to meet the remaining conditions
for closing and believes such will be accomplished without any adverse
effects to the Company. The unaudited financial information does not
include any adjustments that might result from the Company's inability to
satisfy the Bank.
3. EVENT SUBSEQUENT TO MARCH 31, 1996
On April 1, 1996, the Company entered into a $11,456,000 fixed-price
contract with a construction company which amends two existing contracts
for mass grading and infrastructure construction for the Kahana Ridge
Project. In connection with this amended contract, the Company is
required to place into escrow $4 million to fund the initial costs of
construction.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
MATERIAL CHANGES IN FINANCIAL CONDITION
Maui USA, Inc. (the "Company") is continuing with its development of
three adjoining parcels of land, totalling approximately sixty acres, located
on the Kahana Ridge in West Maui (the "Project"). The expected completion
date for development of the Project is February 1997. Costs incurred during
the three month period ended March 31, 1996 relate to development of the
infrastructure of the Project and resulted in a significant increase
(approximately $1,430,000) in Land Under Development (as set forth on the
Company's unaudited consolidated balance sheet.) The increase in Accounts
Payable and Payable to Affiliates from December 31, 1995 is due principally to
the land development costs incurred in connection with the Project.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Increased general and administrative expenses for the three month
period ended March 31, 1996 compared to the respective corresponding 1995
period relate primarily to non-capitalizable media advertising expenses for
the Project.
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PART II - OTHER INFORMATION
ITEM 3. DEFAULT UPON SENIOR SECURITIES
As part of an acquisition agreement dated August 8, 1994, as
amended, with 3521 Corp., the Company assumed a demand note payable to the
Bank of Bermuda for $7,500,000 secured by a mortgage on the Project and
certain assets of 3521 Corp., bearing interest at the London Interbank Offered
Rate (LIBOR) plus 2% (7.47% at March 29, 1996). The Company is also obligated
to pay a commitment fee of 2.5% per year on the outstanding loan. The loan is
guaranteed by MRE Corp., the parent of 3521 Corp. During 1995, the Bank of
Bermuda formally requested repayment and noted that the Company was in default
under certain loan covenants. The lender and the Company are in discussions
to cure the events of default in existence at March 31, 1996 and extend the
loan, but there is no assurance that a resolution will be reached to satisfy
the lender.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: May 13, 1996 MAUI USA, INC.
By: /s/ Myron O. Kirkeby
Myron O. Kirkeby
President, Chief Executive
Officer and Treasurer
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<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<CASH> 1,200,237 1,202,656
<SECURITIES> 0 0
<RECEIVABLES> 8,000 8,000
<ALLOWANCES> 0 0
<INVENTORY> 16,708,377 15,278,255
<CURRENT-ASSETS> 0 0
<PP&E> 21,794 21,794
<DEPRECIATION> 6,258 5,168
<TOTAL-ASSETS> 18,003,463 16,571,930
<CURRENT-LIABILITIES> 1,433,370 615,926
<BONDS> 11,139,037 10,490,845
0 0
0 0
<COMMON> 10,000 10,000
<OTHER-SE> 5,421,056 5,455,159
<TOTAL-LIABILITY-AND-EQUITY> 5,431,056 5,465,159
<SALES> 0 0
<TOTAL-REVENUES> 11,573 13,584
<CGS> 0 0
<TOTAL-COSTS> (45,676) (29,331)
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (34,103) (15,747)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (34,103) (15,747)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (34,103) (15,747)
<EPS-PRIMARY> (.003) (.001)
<EPS-DILUTED> 0 0
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