UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
Commission file number 0-25909
Australian Forest Industries
(Exact name of small business issuer as specified in its charter)
Nevada 86-0931332
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
(Address of principal executive offices)
(Issuer's telephone number)
Check whether the issuer (1) has 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 |_|
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
The number of shares of the issuer's outstanding common stock, which is the only
class of its common equity, on May 25, 2005 was 257,400,680.
ITEM 1 FINANCIAL STATEMENTS
Description Page No.
FINANCIAL INFORMATION:
Financial Statements
Consolidated Balance Sheets at March 31, 2005 (Unaudited)............. 1
Consolidated Statement of Operations (Unaudited)...................... 2
Consolidated Statements of Cash Flows (Unaudited) .................... 3
Notes to Consolidated Financial Statements (Unaudited)................ 4
ITEM 1. FINANCIAL STATEMENTS
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2005 2004
------------ ------------
CURRENT ASSETS
Accounts receivable $ 2,532,221 $ 1,611,756
Inventory 2,100,018 1,983,039
Prepaid expenses and other 23,239 141,609
------------ ------------
Total Current Assets 4,655,478 3,736,404
PROPERTY, PLANT AND EQUIPMENT, net of accumulated 9,625,989 9,712,015
OTHER ASSETS
Receivable from related party 495,621 500,496
Long-term timber supply contract, net of amortization 838,621 849,705
------------ ------------
$ 15,615,709 $ 14,798,620
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to bank $ 953,079 $ 421,097
Accounts payable 3,877,807 3,154,429
Current portion of capitalized lease obligations 1,100,821 731,217
Accrued payroll, related taxes and benefits 537,905 542,414
------------ ------------
Total Current Liabilities 6,469,612 4,849,157
CAPITALIZED LEASE OBLIGATIONS 2,624,733 2,797,975
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.001, 5,000,000 shares
authorized, none issued and outstanding
Common stock, par value $0.001, 300,000,000 shares
authorized, 257,400,680 issued and outstanding 257,400 257,400
Additional paid-in capital 9,810,817 9,810,817
Comprehensive income 121,928 42,210
Accumulated deficit (3,668,781) (2,958,939)
------------ ------------
Total Stockholders' Equity 6,521,364 7,151,488
------------ ------------
Total Liabilities and Stockholders' Equity $ 15,615,709 $ 14,798,620
============ ============
See accompanying notes to financial statements.
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AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarter Ended
March 31,
--------------------------------
2005 2004
-------------- --------------
REVENUE - SALES $ 3,306,566 $ 4,130,645
COSTS AND EXPENSES
Cost of goods sold 3,036,222 3,066,112
Selling, general and administrative 567,264 1,000,643
Management fees 140,000
Interest expense 74,163 101,105
Depreciation and amortization 198,759 209,950
-------------- --------------
Total Costs and Expenses 4,016,408 4,377,810
-------------- --------------
OPERATING LOSS (709,842) (247,165)
-------------- --------------
NET LOSS $ (709,842) $ (247,165)
============== ==============
NET LOSS PER SHARE
$ (0.01) $ (0.01)
============== ==============
WEIGHTED AVERAGE SHARES OUTSTANDING 257,400,680 257,400,680
============== ==============
See accompanying notes to financial statements.
2
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarter Ended
March 31,
--------------------------------
2005 2004
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 2,505,461 $ 2,699,878
Payments to suppliers and employees (4,182,203) (3,143,299)
Other income 448,130
-------------- --------------
Net Cash (Used in) Provided by Operating Activities (1,676,742) 4,709
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for property, plant, and equipment (61,023) (1,653,287)
Proceeds from sale of property, plant, and equipment 1,577,222
-------------- --------------
Net Cash Used in Investing Activities (61,023) (76,065)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from borrowings/capitalized leases 1,196,111 1,031,626
Long-term timber supply contract (849,705)
Loans to related parties (241,096)
-------------- --------------
Net Cash Provided by (Used In) Financing Activities 1,196,111 (59,175)
-------------- --------------
NET DECREASE IN CASH (541,654) (130,531)
EFFECT OF EXCHANGE RATES ON CASH 9,672 154,345
CASH AT BEGINNING OF YEAR (421,097) 459,927
-------------- --------------
CASH AT END OF YEAR $ (953,079) $ 483,741
============== ==============
See accompanying notes to financial statements.
3
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary in order to make the
financial statements not misleading have been included. Results for the three
months ended March 31, 2005 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2005. For further information,
refer to the financial statements and footnotes thereto included in Australian
Forest Industries' annual report on Form 10-KSB for the year ended December 31,
2004.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
It should be noted that this Management's Discussion and Analysis of Financial
Condition and Results of Operations may contain "forward-looking statements."
The terms "believe," "anticipate," "intend," "goal," "expect," and similar
expressions may identify forward-looking statements. These forward-looking
statements represent the Company's current expectations or beliefs concerning
future events. The matters covered by these statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those set forth in the forward-looking statements, including the Company's
dependence on weather-related factors, introduction and customer acceptance of
new products, the impact of competition and price erosion, as well as supply and
manufacturing restraints and other risks and uncertainties. The foregoing list
should not be construed as exhaustive, and the Company disclaims any obligation
subsequently to revise any forward-looking statements to reflect events or
circumstances after the date of such statements, or to reflect the occurrence of
anticipated or unanticipated events. In light of the significant uncertainties
inherent in the forward-looking information included herein, the inclusion of
such information should not be regarded as a representation that the strategy,
objectives or other plans of the Company will be achieved. The Company wishes to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made.
RESULTS OF OPERATIONS
We are currently in the second year of operations and have generated significant
revenues to date. Our activities from inception to date were related to our
formation, preparation of our business model, arranging and planning financing
and the acquiring all rights, title and interest to our timber rights located in
the Canberra region in addition to the implementation and construction of our
first sawmill also in the Canberra region.
LIQUIDITY AND CAPITAL RESOURCES
On March 31, 2005 and December 31, 2004 we had current assets of $4,655,478 and
$3,736,404, respectively.
Net cash used in operating activities for the three months ending March 31, 2005
was $(1,676,742). Net cash used in operating activities for the period from
inception to March 31, 2004 was $4,709. The decrease in net cash was a result of
an increase in payments to suppliers and employees of $1,038,904 which was a
consequence of our growing business and the addition of a significant number of
employees.
In the three months ending March 31, 2005, the Company experienced an increase
in net cash provided by financing activities of $1,255,286 as a result of the
reduction of payments related to a long term timber supply contract in the
amount of $849,705 as well as loans to related parties of $241,096.
The Company is presently commencing construction of a second sawmill in Bombala
NSW in the third quarter of 2005 and it is anticipated to be operational in the
third quarter of 2006. Such sawmill will be used primarily for processing the
logs resulting from the Bombala Agreement which was entered into in 2004.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the appropriate
application of certain accounting policies, many of which require estimates and
assumptions about future events and their impact on amounts reported in the
financial statements and related notes. Since future events and their impact
cannot be determined with certainty, the actual results will inevitably differ
from our estimates.
5
Management believes application of accounting policies, and the estimates
inherently required by the policies, are reasonable. These accounting policies
and estimates are constantly re-evaluated, and adjustments are made when facts
and circumstances dictate a change. Historically, management has found the
application of accounting policies to be appropriate, and actual results
generally do not differ materially from those determined using necessary
estimates.
Item 3. Controls and Procedures.
(a) Our principal executive officer and principal financial officer
have each evaluated the effectiveness of our disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) as of a date within 90 days
prior to the filing date of this quarterly report and have each concluded that
our disclosure controls and procedures are adequate.
(b) There were no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
(c) Not applicable
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PART II
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit Index
Exhibit 31.1 Certification of Chief Executive Officer
Exhibit 31.2 Certification of Chief Financial Officer
Exhibit 32.1 Certification of Chief Executive Officer
Exhibit 32.1 Certification of Chief Financial Officer
b. Reports on Form 8-K
None.
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.
AUSTRALIAN FOREST INDUSTRIES
/s/ Michael Timms
-----------------
Name: Michael Timms
Title: CEO, President and Chairman of the Board
Date: June 14, 2005
/s/ Colin Baird
---------------
Name: Colin Baird
Title: Chief Financial Officer
Date: June 14, 2005