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 June 30, 1999
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) J4B 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 June 30, 1999, registrant had one class
of commons stock, of which 18,629,333
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
June 30
1999 1998
(Unaudited) (Unaudited)
Assets
Current Assets:
Cash and Cash Equivalents $ 2,664
$ 748
Equipment held for sale
- 17,675
Total Current Assets
2,664 18,423
Property and Equipment
Office Equipment
6,000 6,000
Computers and Software 6,000
6,000
12,000 12,000
Less Accumulated Depreciation 11,200
8,500
Net Property and Equipment 800
3,500
Other Assets:
Deferred Income Tax Benefit
Net of Valuation Allowance of
$1,367,560 and $1,656,043
- -
Other Assets
- -
Total Other Assets
- -
Total Assets
$ 3,464 $
21,923
(See Accompanying Notes to Financial Statements)
Forestry International, Inc.
Balance Sheet
June 30
1999 1998
(Unaudited) (Unaudited)
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Current Portion of Long-Term Debt $ 342,984
$ -
Accounts Payable
128,493 110,152
Accrued Payroll and Other Expenses 138,471
132,829
Income Tax Payable
42,764 40,308
Due to Related Party
18,964 15,101
Total Current Liabilities 671,676
298,390
Long Term Debt - Unrelated -
1,052,127
Contingency (Note 5)
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 18,629,333 Shares
1,863 1,556
Common stock subscribed 325,000 shares 18,275
Additional Paid in Capital
7,200,321 6,948,313
Retained Earnings (
7,888,671) (8,278,463)
Total Stockholders' Equity (668,212)
(1,328,594)
Total Liabilities and Stockholders' Equity $ 3,464
$ 21,293
(See Accompanying Notes to Financial Statements)
Forestry International, Inc.
Statement of Operations and Changes in Retained Earnings
Three Months
Ended June 30 Six Months Ended June 30
1999 1998
1999 1998
(Unaudited)
(Unaudited) (Unaudited) (Unaudited)
Operating Revenue $ -
$ - $ -
$ -
Cost of Sales -
- -
-
_________
__________ _________ _________
Gross Margin - -
-
-
Operating Expenses:
Gen. & Administrative 78,634
35,988 123,997 71,674
_________
_________ _________ _________
Operating Loss (78,634)
(35,988) (123,997) (71,674)
_________
_________ _________ _________
Other Income (Expense):
Interest Expense (9,707)
- (21,870)
-
Total Other Income and Exp -
- -
-
_________
_________ __________ _________
Loss Before Income Taxes
(35,988)
(71,674)
Income Tax (Benefit) -
- -
-
_________
_________ _________ _________
Net Loss ($ 88,341)
($ 35,988) ($ 145,867) ($71,674)
_________
_________ _________ _________
Retained Earnings, Beginning ($7,800,330)
($7,742,804) ($ 8,206,789)
Retained Earnings, Ending ($7,888,671)
($7,888,671) ($ 8,278,463)
Net Loss per Common Share ($0.005) ($0.042)
($ 0.008) ($0.069)
Weighted Average Number
of Common Shares 18,154,999
15,417,833 17,849,749 15,599,517
(See Accompanying Notes to Financial Statements)
Forestry International, Inc.
Statement of Cash Flows
Three Months Ended June
30 Six Months Ended June 30
1999
1998 1999
1998
(Unaudited)
(Unaudited) (Unaudited) (Unaudited)
Cash Flows from Operating Activities:
Net Loss ($88,341) ($
35,988) ($145,867) ($ 71,673)
Adjustments to Reconcile Net Loss
Amortization & Depreciation 400 250
800 500
(Increase) Decrease in:
Prepaid Expenses and
Deposits -
- 330
-
Other Assets -
- -
-
Increase (Decrease) in:
Acc Pay And Accrued Exp 315 9,089
(16,625) 15,044
Due to Related Parties (11,632)
- 18,964
5,205
Income Tax Payable -
- 2,456
(600)
Net Cash Used by Oper.
Activities (75,994)
(46,142) (139,942)
(51,524)
Cash Flows from (Applied to)
Investing Activities:
Net Cash Used by Investing
Activities -
39,700 -
42,500
Cash Flows From (Applied to)
Financing Activities:
Issuance of Common Stock
for cash 44,223
7,000 48,223
7,000
Issuance of Common Stock
for services 24,000
- 74,000
-
Issuance of Notes Payable -
- -
-
Increase in Debt 9,707
- 19,416
-
Net Cash Provided by
Financing Activities 77,930
7,000 141,639 7,000
Net Increase (Decrease)
in Cash 1,936
558 1,697
(2024)
Cash, Beginning of Period 728
190 967 2,772
Cash, End of Period 2,664
748 2,664
748
(See Accompanying Notes to Financial Statement)
FORESTRY INTERNATIONAL, INC.
Notes to Financial Statements
June 30, 1999
(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
Companys 1998 Annual Report on
Form 10-KSB. The results of operations for the six months ended
June 30, 1999 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 June 30, 1999.
(3) Liquidity
The Companys 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
($668,212) at the quarter ended June 30,
1999. The company generated no operating revenue for the six
months ended June 30, 1999. See
Item 2, Management's Plan of Operation.
(4) Concentrations
On June 30, 1999 cash in bank account did not exceed federally
insured limits.
(5) 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 INTERNATIONAL, INC.
Notes to Financial Statements
June 30, 1999
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 has accrued salaries
payable to Mr. David Shorey in the amount of $59,774.
On November 17, 1998 in the United States District Court of
Jackson Mississippi, Forestry filed a
$35,000,000 civil action against Randy Pope, President of
Dixieland Forest Products, Inc. for breach
of contract, breach of duty of good faith and fair dealing
including wrongful foreclosure. The
Company is seeking restitution in equity as well as compensatory
and punitive damages as a result
of Defendant's actions. Mr. Pope filed a counter-claim for
$300,000 based on money he paid for the
operation of Dixieland, which was payment for the benefit of
Dixieland. A trial has been set for the
trial calender commencing February 7, 2000 and ending February
25, 2000. Unless there is a
settlement before such time, the trial should proceed within
that time frame.
On March 17, 1999 the Arizona Department of Revenue filed an
amended complaint against Forestry
International, Inc. claiming $10,869.34 in unpaid income taxes,
plus interest as of March 9, 1999
in the amount of $31,894.32 for the audited period of March 31,
1993 through March 31, 1994.
Although the initial audit by the Arizona Department of Revenue
reflected a tax liability base on the
sale of certain common shares by Forestry. It appears that
Forestry may not have owned the common
shares in question and therefore, no gain should have been
recognise on the transaction. If this
assumption is correct, there should be no tax liability related
to the transaction. Although one can
never predict with absolute accuracy the outcome of litigation,
it is our opinion that Forestry has a
good case and is prepared to see it through conclusion. The
result of this case is presently
indeterminable.
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.
(6) Subsequent Events
On July 20, 1999, Forestry International and a fully integrated
timber company agreed on a second
letter of intent for the acquisition of that company for the
purchase of all assets and the assumption
of all liabilities.
ITEM 2. MANAGEMENTS 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 June 30, 1999 had net operation loss
carryforwards for federal and state income
tax purposes of approximately $3,984,000 and $2,631,000
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)
September 16, 1999
Date
