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 June 30, 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.)
4/95 Salmon Street, Port Melbourne, Victoria
Australia, 3207
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 011 61 3 8645 4340
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 August 25, 2005 was 257,400,680.
ITEM 1 FINANCIAL STATEMENTS
Description Page
No.
FINANCIAL INFORMATION:
Financial Statements
Consolidated Balance Sheets at June 30, 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.)
UNAUDITED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
2005 2004
------------ ------------
CURRENT ASSETS
Cash $ 101,130
Accounts receivable 2,185,991 $ 1,611,756
Inventory 2,180,927 1,983,039
Prepaid expenses and other 10,373 141,609
------------ ------------
Total Current Assets 4,478,421 3,736,404
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $3,094,226 and $2,721,972 in 2005 and 2004 respectively 11,286,320 9,712,015
OTHER ASSETS
Receivable from related party 377,462 500,496
Long-term timber supply contract, net of amortization of $36,943 831,705 849,705
------------ ------------
Total Assets $ 16,973,908 $ 14,798,620
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 421,097
Accounts payable $ 4,236,945 3,154,429
Current portion of capitalized lease obligations 1,069,681 731,217
Accrued payroll, related taxes and benefits 543,893 542,414
------------ ------------
Total Current Liabilities 5,850,519 4,849,157
CAPITALIZED LEASE OBLIGATIONS 4,093,099 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 282,088 42,210
Accumulated deficit (3,320,015) (2,958,939)
------------ ------------
Total Stockholders' Equity 7,030,290 7,151,488
------------ ------------
Total Liabilities and Stockholders' Equity $ 16,973,908 $ 14,798,620
============ ============
See accompanying notes to financial statements
3
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
2005 2004 2005 2004
------------- ------------- ------------- -------------
REVENUE - SALES $ 3,439,748 $ 2,434,709 $ 6,746,314 $ 6,565,354
COSTS AND EXPENSES
Cost of goods sold 822,929 51,564 3,859,151 3,117,676
Selling, general and administrative 2,803,685 2,172,488 3,860,949 3,173,131
Management fees 350,000 357,064 357,064
Interest expense 105,894 (2,472) 180,057 98,633
Depreciation and amortization 173,495 109,683 372,254 319,633
------------- ------------- ------------- -------------
Total Costs and Expenses 4,256,003 2,688,327 8,272,411 7,066,137
------------- ------------- ------------- -------------
OPERATING LOSS (816,255) (253,618) (1,526,097) (500,783)
OTHER INCOME 1,165,021 1,165,021
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ 348,766 $ (253,618) $ (361,076) $ (500,783)
============= ============= ============= =============
NET LOSS PER SHARE $ 0.01 $ 0.01 $ (0.01) $ 0.01
============= ============= ============= =============
WEIGHTED AVERAGE SHARES
OUTSTANDING 257,400,680 257,400,680 257,400,680 257,400,680
============= ============= ============= =============
See accompanying notes to financial statements.
4
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended
June 30,
--------------------------
2005 2004
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES
Receipts from customers $(6,277,164) $ 6,554,523
Payments to suppliers and employees 6,980,750 (6,759,784)
Other income 447,450
----------- -----------
Net Cash (Used in) Provided by Operating Activities (703,586) 242,189
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for property, plant, and equipment (5,005,438) (1,865,160)
Proceeds from sale of property, plant, and equipments 3,485,318 1,577,961
----------- -----------
Net Cash Used in Investing Activities (1,520,120) (287,199)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from borrowings/capitalized leases 1,746,819 1,555,934
Long term timber supply contract (231,695)
Loans to related parties 997,575 (1,201,561)
----------- -----------
Net Cash Proved by Financing Activities 2,744,394 122,678
NET DECREASE IN CASH 520,688 77,668
EFFECT OF EXCHANGE RATES ON CASH 1,539
CASH AT BEGINNING OF YEAR (421,097) 599,290
----------- -----------
CASH AT END OF YEAR $ 101,130 $ 676,958
=========== ===========
See accompanying notes to financialstatements.
5
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 and six months ended
June 30, 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.
Operating costs for the six-month period ended June 30, 2005 aggregated
$8,272,411 as compared to $7,066,137 for the corresponding period in 2004. This
includes a decrease in management fees of $357,064 which were a result of
management's decisions to reduce costs for the period ending June 30, 2005. This
also includes an increase in cost of goods sold and selling, general and
administrative expenses of $1,429,293 from the corresponding period in 2004
which was result of the continuing development of our business plan and
increasing of our sales efforts. In the six-month period ended June 30, 2005 we
realized a net loss of $(361,076) as compared to net income of $7,495,849 for
the corresponding six-month period ending in 2004. The reduction in income from
2004 to 2005 was due to our other income being $6,831,611. Our net loss per
share was $(0.01) for both periods in 2005 and 2004.
LIQUIDITY AND CAPITAL RESOURCES
On June 30, 2004 and 2005 we had current assets of $4,478,421.
Net cash used in operating activities for the six months ending June 30, 2005
was $(703,586) as compared to $242,189 for the six months ending June 30, 2004.
The decrease in net cash was a result of other income for the period in 2005 as
compared to other income of $447,450.
In the six months ending June 30, 2005, the Company experienced an increase in
net cash provided by financing activities of $2,744,394 as a result of the
reduction of payments related to a long term timber supply contract in the
amount of $231,695 as well as the repayment of loans to related parties of
$997,575.
The Company is presently completing a second sawmill in Canberra which is
anticipated to be operational in the third quarter of 2005 and which will be
used primarily for processing the logs resulting from the Bombala Agreement
which was entered into in 2004.
7
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.
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
8
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: September 14, 2005
/s/ Colin Baird
- --------------------------------
Name: Colin Baird
Title: Chief Financial Officer
Date: September 14, 2005
9