Form 10-QSB
QUARTERLY OR TRANSITION REPORT
UNDER SECTION 13 OR 15(d)
(As last amended by 34-2231, eff. 6/3/93)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter year ended September 30, 1998
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to
Forestry International, Inc.
(Name of small business issuer as specified in its charter)
0-23310
Commission File Number
Colorado 84-1116284
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1205, Ampere Street, Ste 206, Boucherville, (QC) J4M 7M6
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (514) 495-7747
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the 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. X Yes No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. N/A Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of September 30, 1998, registrant had one class of
commons stock, of which 15,757,833 shares were outstanding.
Transitional Small Business Disclosure Format (Check one): Yes X No
(Added by Exch Act Rel No. 31905, eff 4/26/93)
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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Forestry International, Inc.
Balance Sheet
September 30
1998 1997
Consolidated
(Unaudited) (Unaudited)
Assets
Current Assets:
Cash and Cash Equivalents $ 834 $ 7,113
Notes and Accounts Receivable
Net of Allowance - 595,961
Equipment held for sale 1,050 13,750
Inventory - 643,449
Prepaid Expenses and Deposits - 30,469
Total Current Assets 1,884 1,290,742
Investment - Forestry Development Costs - 758,884
Notes Receivable - Long Term - 356,037
Property and Equipment
Building and Nursery Facilities - 40,000
Machinery and Equipment - 206,769
Office Equipment 6,000 55,643
Computers and Software 6,000 29,015
Vehicles - 158,761
Less Accumulated Depreciation 8,750 165,770
Net Property and Equipment 3,250 324,418
Other Assets:
Goodwill - 2,079,210
Deferred Income Tax Benefit
Net of Valuation Allowance of
$1,668,075 and $1,334,000 - -
Other Assets - 9,201
Total Other Assets - 2,088,411
Total Assets $ 5,134 $ 4,818,492
(See Accompanying Notes to Financial Statements)
Forestry International, Inc.
Balance Sheet
September 30
1998 1997
Consolidated
(Unaudited) (Unaudited)
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Notes Payable $ - $ 775,225
Note Payable, Related Party - 100,000
Accounts Payable 110,333 360,247
Accrued Payroll and Other Expenses 136,579 175,191
Income Tax Payable 40,308 18,303
Due to Related Party 6,186 -
Total Current Liabilities 293,406 1,428,966
Long Term Debt - Unrelated 1,052,127 2,580,600
Contingency
Stockholders' Equity:
Preferred Stock, Par Value $.0001
Per Share, Authorized
10,000,000 Shares
Common Stock, Par Value $.0001
Per Share, Authorized
100,000,000 Shares: Issued and
Outstanding 15,757,833 Shares 1,586 1,560
Additional Paid in Capital 6,966,558 6,844,571
Retained Earnings (8,308,542) (6,037,205)
Total Stockholders' Equity (1,340,398) 808,926
Total Liabilities and Stockholders' Equity $ 5,134 $ 4,818,492
(See Accompanying Notes to Financial Statements)
Forestry International, Inc.
Statement of Operations and Changes in Retained Earnings
Three Months Ended September 30 Nine Months Ended September 30
1998 1997 1998 1997
Consolidated Consolidated
(Unaudited)(Unaudited) (Unaudited) (Unaudited)
Operating Revenue $ - $ 3,879,615 $ - $ 6,869,131
Cost of Sales - 3,712,553 - 6,520,752
_________ __________ _________ _________
Gross Margin - 167,062 - 348,379
Operating Expenses:
Gen. & Administrative 30,079 407,835 101,753 1,497,194
_________ _________ _________ _________
Operating Loss (30,079) (240,773) (101,753) (1,148,815)
_________ _________ _________ _________
Other Income (Expense):
Interest and Dividends - 16,835 - 39,882
Gain on Brandon Settlement - - - 95,009
Interest Expense - (82,484) - (302,892)
Loss on Sale of Asset - (25,791) - (98,284)
Other - 94,412 - 101,965
_________ _________ _________ _________
Total Other Income and Exp - 2,972 - (164,320)
_________ _________ __________ _________
Loss Before Income Taxes (30,079) (237,801) (101,753) (1,313,135)
Income Tax (Benefit) - - - -
_________ _________ _________ _________
Net Loss ($ 30,079) ($ 237,801) ($ 101,753)($ 1,313,135)
_________ _________ _________ _________
Retained Earnings, Beginning ($ 8,206,789)
Retained Earnings, Ending ($ 8,308,542)
Net Loss per Common Share ($0.002) ($0.015) ($ 0.006) ($0.084)
Weighted Average Number
of Common Shares 15,757,833 15,599,517 15,757,833 15,599,517
(See Accompanying Notes to Financial Statements)
Forestry International, Inc.
Statement of Cash Flows
Three Months Ended September 30 Nine Months Ended September 30
1998 1997 1998 1997
Consolidated Consolidated
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash Flows from Operating Activities:
Net Loss ($ 30,079) ($ 237,801) ($ 101,752) ($1,313,135)
Adjustments to Reconcile Net Loss
Amortization & Depreciation 250 42,445 750 132,070
Gain on Brandon Settlement - - - 95,009
Loss (Gain) on Sale of
Property & Equipment - (1,196) - 55,168
(Increase) Decrease in:
Notes and Accounts Rec. - (290,300) - (184,356)
Inventory - 566,016 - (144,996)
Prepaid Expenses and
Deposits (20) (84) (20) (10,435)
Other Assets - - - (94,713)
Increase (Decrease) in:
Acc Pay And Accrued Exp 3,930 123,441 18,974 (147,448)
Due to Related Parties (8,915) - (3,710) -
Income Tax Payable - (22,500) (600) (234,117)
Net Cash Used by Oper.
Activities (34,834) 180,021 (86,358) (1,846,953)
Cash Flows From (Applied to)
Investing Activities:
Notes Receivable, Net - 12,781 - 48,068
Purchase of Prop. And Equip. - (3,917) - (41,489)
Proceeds from Sale of
Property and Equipment 16,625 201,296 59,125 1,457,220
Increase in Forestry
Development Costs - - - (30)
Net Cash Used by Investing
Activities 16,625 210,160 42,500 1,463,769
Cash Flows From (Applied to)
Financing Activities:
Issuance of Common Stock 18,275 - 25,275 -
Issuance of Notes Payable - 16,900 - 2,443,091
Repayment of Debt - (729,070) - (3,008,630)
Net Increase (Decrease) in
Related Party Debt - 100,000 - 100,000
Other Items - 400 - 400
Net Cash Provided by
Financing Activities 18,275 (611,770) 7,000 (465,139)
Net Increase (Decrease)
in Cash 66 (221,589) (1,958) (848,323)
Cash, Beginning of Period 748 228,702 2,772 855,436
Cash, End of Period 814 7,113 814 7,113
(See Accompanying Notes to Financial Statement)
FORESTRY INTERNATIONAL, INC.
Notes to Financial Statements
September 30, 1998
(1) Basis of Presentation
The accompanying unaudited financial statements have been prepared by
Forestry in accordance with generally accepted accounting principles pursuant
to the rules and regulations of the Securities and Exchange Commission. In
the opinion of management, the accompanying financial statements include all
adjustments (of a normal recurring nature) which are necessary for fair
presentation of the financial results for the interim periods presented. Certain
information and footnote disclosures normally included in financial statements
have been condensed or omitted pursuant to such rules and regulations.
Although Forestry believes that the disclosures are adequate to make the
information presented not misleading, it is suggested that these financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company s 1997 Annual Report on Form 10-KSB.
The results of operations for the nine months ended September 30, 1998 are
not necessarily indicative of the results to be expected for the full year.
(2) Computation of Net Income Per Share
Net Income per common and common equivalent share is computed using the
weighted average number of common shares outstanding during the periods.
Outstanding stock options are non-dilutive as of September 30, 1998.
(3) Liquidity
The Company s financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The company has
a shareholders equity of ($1,340,398) at the quarter ended September 30,
1998. The company generated no operating revenue for the nine months ended
September 30, 1998. See Item 2, Management's Plan of Operation.
(4) Operating Lease
The Company pays a total of $425.00 per month for its operating office in
Mississippi.
(5) Concentrations
On September 30, 1998 cash in bank account did not exceed federally
insured limits.
(6) Contingency
A civil action for back-wages claims for approximately $97,000 was filed on
March 19, 1998 by David L. Shorey former President of the Company in
Arizona Superior Court against Forestry International. The Company is
vigorously defending the lawsuit against it, and has several defenses and
claims that Forestry believes eliminate all of David Shorey's claims.
Forestry's defense is based upon the fact that there are no written documents
or materials that support David Shorey's claims for compensation independent
of his own assertions. Moreover, there are claims and setoffs based upon Mr.
Shorey's actions while he was President, which more than offsets his claims
for compensation.
To that effect, on October 2, 1998, Forestry filed a counterclaim against Mr.
David Shorey based on the alleged conversion of Company property to his
own use, and also a second claim contending a breach of fiduciary duty as an
officer and director of Forestry International, Inc. The latter claim stipulates
that Mr. Shorey substituted a promissory note to allow the conversion of that
debt into a recourse debt convertible into Forestry common shares without
any consideration to the Company.
Although final resolution of this matter may not occur until 1999 or
thereafter, the occurrence of the future judgement is not determinable. As of
December 31, 1997, the Company had accrued salaries payable to Mr. David Shorey
in the amount of $59,774.
No other legal proceedings to which the Company is a party or to which the
property of the Company is subject is currently pending against the Company,
and no such material proceeding is known to be contemplated against any
officer or director which is adverse to the Company, except as mentioned in
the preceeding paragraphs.
ITEM 2. MANAGEMENT S PLAN OF OPERATION.
Forestry International's initial involvement and primary business was the
acquisition of clonal technology relating to the accelerated development of
rapid-growth hardwood trees as an alternative wood species source. Effective
September 5, 1997, the Company took another direction with a new
management team and a growth strategy plan.
The Company sold its interest in the remaining Paulownia plantation located
in Sparta Georgia to pursue other business opportunities. While actively
negotiating on an acquisition and until a new business venture is determined,
the Company has eliminated the majority of its payroll and will utilize contract
consultants to maintain its reporting requirements. It is anticipated that only
nominal funding should be necessary for the next several months, which
amounts should be available from debt financing.
The Company, as of December 31,1997 had net operation loss carryforwards
for federal and state income tax purposes of approximately $3,838,000 and
$2,485,000 respectively. Management plans to use these losses to its
advantage to save taxes on the operations of future acquisitions. Forestry will
consult tax specialists to determine to which extent this may be used to its
greatest benefit.
New management has determined that the Company's new business strategy
plan is primarily to seek one or more potential businesses which may, in the
opinion of its Board of Directors and Principal Consultant, warrant the
Company's involvement. In seeking to attain its business objective, the
Company will mainly focus on targets within the Forest Products Industry but
will not restrict its search to that industry. Forestry may investigate
businesses of essentially any kind or nature, including but not limited to, high
technology, manufacturing, service, research and development,
communications and others. Management's discretion is otherwise
unrestricted, and it may participate in any business whatesoever which may,
in the opinion of management, meet the business objectives discussed herein.
The Company may acquire any entity or position in a company which is (i) a
fully integrated corporation in a specific segment of its industry; or (ii) in
its preliminary or development stage; or (iii) is a going concern. In other
instances, possible business endeavors may involve the acquisition of or a
merger with a company that does not need additional equity, but seeks to
establish a public trading market for its securities. Businesses that seek the
Company's participation in their operations may desire to do so to avoid what
such businesses deem to be adverse factors related to undertaking a public
offering. Such factors include substantial time requirements and legal costs,
along with other conditions or requirements imposed by Federal and State
securities laws.
Since new management got involved in the daily operation of Forestry
International, the analysis of potential business endeavors will be undertaken
by or under the supervision of the Company's Directors and their principal
consultants. The Directors and principal consultants are comprised of
individuals of varying business experiences, and management will rely on their
own business judgment in formulating decisions as to the types of businesses
that the Company may acquire or in which the Company may participate.
In analyzing prospective businesses, management will consider such factors
as available technical, financial and managerial resources, working capital and
other financial requirements such businesses history of operations, if any, and
prospect for the future, the nature of present and expected compensation, the
quality and experience of management services, the depth of that
management, the potential for further research and development and risk
factors. Forestry will also consider their niche market, the opportunities to
improve operating margins, potential growth and expansion, the economic of
the region in which the target is located, the potential for profit, the
perceived public recognition or acceptance of such businesses, products,
services and other relevant factors. The Company will seek opportunities in the
United States, with an emphasis in the southeast. Canada will also be
considered in future development program. Management believes that geographic
and customer diversification will enhance the Company's stability to
fluctuations in regional economic conditions or changes that affect particular
market segments.
Generally, the Company will analyze all available information and make a
determination based upon a composite of available facts, without reliance
upon a single factor as controlling.
Forestry has targeted several acquisitions to fulfill its management objectives.
Also, it is anticipated that prospective businesses will be available to the
Company from various sources, including its management, its professional
advisors, securities broker dealers, venture capitalists members of the
financial community, and others who may present unsolicited proposals. In some
instances, the Company may publish notices or advertisements in financial or
trade publications seeking potential business acquisition. In certain
circumstances, the Company may agree, in connection with an acquisition, to
pay a finder's fee or other compensation to an investment banking firm or
other person who submits to the Company a business in which Forestry
participates.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
N\A
Item 2. Changes in Securities
N\A
Item 3. Defaults Upon Senior Securities
N\A
Item 4. Submission to a Vote of Security Holders
N\A
Item 5. Other Information
N\A
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Forestry International, Inc.
(Registrant)
By: /s/ Louis R.. Turp, President
(Signature and Title)
November ??,1998
Date
