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 May 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from __________________
to __________________
Commission File Number 0-26578
LANDMARK INTERNATIONAL, INC.
(Exact Name of Small Business Issuer as specified in its Charter)
Nevada 33-0662114
(State or other Jurisdiction of I.R.S. Employer
Incorporation or Organization Identification No.)
4400 MacArthur Boulevard, Suite 635, Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
(714) 476-1990
(Issuer's telephone number)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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
Indicate the number of shares outstanding of each of the issuer's
classes of Common Equity, as of the latest practicable date.
Common Stock, $.001 par value 11,100,000
- ---------------------------------- ---------------------
Title of Class Number of Shares outstanding
at May 31, 1996
No exhibits included.
PART I.
Item 1. FINANCIAL STATEMENTS
LANDMARK INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
May 31, August 31,
1996 1995
CURRENT ASSETS:
Cash $ 693 $ --
Accounts Receivable, (less allowance for
for doubtful accounts of $7,960 and
allowance for sales returns and
discounts of $1,600) 77,150 149,648
Employee Advances 65,141 2,691
TOTAL CURRENT ASSETS $ 142,984 $ 152,339
PROPERTY AND EQUIPMENT
Furniture & Equipment $ 8,243 $ 1,880
Office Equipment 1,880 8,243
Total Depreciable Property 10,123 10,123
Less: Accumulated Depreciation 2,476 (958)
NET PROPERTY AND EQUIPMENT $ 7,647 $ 9,165
OTHER ASSETS
Deposits $ 4,000 $ 4,000
La Mirage Investment 0 2,010,013
Note Receivable Mesa Valley LLC 3,712,000
Prepaid Expenses 90,910 90,910
Prepaid Barter Exchange 909,090 909,090
Certificate of Deposit 950,000 --
TOTAL OTHER ASSETS $ 5,666,000 $ 3,014,013
TOTAL ASSETS $ 5,816,631 $ 3,175,517
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Cash overdraft $ -- $ 14,483
Accounts Payable & Accrued Expenses 55,669 19,188
Wages Payable 12,558
Federal Income Taxes Payable 29,857 5,059
State Income Taxes Payable 13,512 3,493
Officers Compensation Payable 32,500 5,000
Payroll Taxes Payable 127,482 86,326
TOTAL CURRENT LIABILITIES $ 259,020 $ 146,107
LONG TERM LIABILITIES
Deferred interest on Mesa Valley
LLC Note Receivable 512,000 --
TOTAL LIABILITIES $ 771,020 $ 146,107
STOCKHOLDER'S EQUITY Capital Stock:
Common Stock ($.001 Par Value, 50,000,000
shares authorized and 11,100,000 and
10,820,000 shares issued and outstanding) $11,100 $ 10,820
Preferred Stock ($.001 Par Value, 10,000,000
shares authorized and 480,000 shares
issued and outstanding) 480 480
Total Capital Stock $ 11,580 $ 11,300
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LANDMARK INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
CONTINUED
Additional Paid In Capital:
Common Stock $ 2,363,800 $ 2,664,080
Preferred Stock 2,599,520 1,599,520
Total Additional Paid In Capital $ 4,963,320 $ 4,263,600
Services Receivable for Common Stock (1,250,000)
Retained Earnings 70,711 4,510
TOTAL STOCKHOLDER'S EQUITY $ 5,045,611 $ 3,029,410
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 5,816,631 $ 3,175,517
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LANDMARK INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine For the Nine For the Three For the Three
Months Ended Months Ended Months Ended Months Ended
May 31, June 30, May 31, June 30,
1996 1995 1996 1995
SALES $ 331,740 $ 420,953 $ 21,211 $ 176,809
OPERATING EXPENSES:
Selling, General & Administrative 417,358 413,467 117,418 146,506
INCOME (LOSS) FROM OPERATIONS BEFORE INCOME
TAXES (85,618) 7,486 (96,207) 30,303
GAIN ON SALE OF LAND 189,987 189,987
INCOME (LOSS) BEFORE INCOME TAXES 104,369 7,486 93,780 30,303
PROVISION FOR INCOME TAXES 38,168 -- 35,596 --
NET INCOME (LOSS) $ 66,201 $ 7,486 $ 58,184 $ 30,303
Net Income (Loss) Per Share $ nil $ nil $ nil $ nil
Weighted Average Number of Shares Outstanding 10,914,725 10,000,000 11,100,000 10,000,000
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LANDMARK INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Nine For the Nine For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
May 31, June 30, May 31, June 30,
1996 1995 1996 1995
NET CASH FLOW FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 66,201 $ 7,486 $ 58,184 $ 30,303
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation 1,518 541 506
(Increase) Decrease in Receivables 72,498 (64,468) 55,609 (1,518)
(Increase) Decrease in deposits (4,000) (4,000)
(Increase) in Employee Advances (62,450) (4,418) (54,368) (3,967)
Increase in Payables 112,913 78,270 84,565 22,394
TOTAL ADJUSTMENTS $ 124,479 $ 5,925 $ 86,312 $ 12,909
NET CASH FLOW FROM OPERATING ACTIVITIES: $ 190,680 $ 13,411 $ 144,496 $ 43,212
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of Equipment (8,773) (3,120)
La Mirage Investment 2,010,013 2,010,013
Note Receivable - Mesa Valley LLC (3,712,000) (3,712,000)
Deferred Interest - Mesa Valley Note 512,000 512,000
Additional Paid-in Capital 1,000,000 1,000,000
Issuance of Shares in Recapitalization 22,400
Bank Overdraft 13,054
Certificate of Deposit (950,000) (950,000)
Common Stock Sales 950,000 950,000
CASH FLOWS FROM FINANCING ACTIVITIES $ (189,987) $ 22,400 $ (189,987) $ (13,054)
NET INCREASE IN CASH AND CASH EQUIVALENTS $693 $27,038 $45,491 $27,038
CASH AND CASH EQUIVALENTS, BEGINNING $ $ $ 46,184 $
CASH AND CASH EQUIVALENTS, ENDING $ 693 $ 27,038 $ 693 $ 27,038
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LANDMARK INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996
NOTE 1 - ORGANIZATION
Landmark International, Inc. (the "Company"), through its
wholly-owned California subsidiary, STM
Communications, Inc., provides marketing and customer service for
long distance and local telephone
carriers.
The Company reincorporated in Nevada on October 27, 1994, by merger
into a wholly-owned Nevada subsidiary. This subsidiary was organized
under the laws of the State of Delaware under the name
Envirodynamics, Ltd. on October 5, 1994, and is the successor by
domestication under Delaware law to Envirodynamics, Ltd. which was
incorporated in the Isle of Man on January 28, 1988 under the name
Vinyltex Limited, which changed its name to Envirodynamics, Ltd. on
January 23, 1989, and reincorporated in the Turks and Caicos on
January 10, 1992.
STM Communications, Inc. effected a reverse merger with Landmark
International, Inc. on October 27,
1994. For financial reporting purposes, the shares issued by
Landmark International, Inc. are considered
outstanding since the date of incorporation of the Company, and the
shares retained by the stockholders
of Landmark International, Inc. are reflected as consideration issued
to consummate the reverse
acquisition.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Principles of Consolidation
The accompanying financial statements include the accounts of
Landmark International, Inc. (Parent)
and STM Communications, Inc. (Subsidiary). Intercompany balances and
transactions have been
eliminated in consolidation. 10,000,000 shares of Landmark
International, Inc. were exchanged for
10,000,000 shares of STM Communications, Inc. It is accounted for
under the pooling of interest
method. The Company, nor its subsidiary, had any activity prior to
the merger. These financial
statements reflect all activity of STM Communications, Inc. since its
inception.
Fiscal Year
The Company's fiscal year ended August 31st of each year.
Revenue Recognition
Revenues from sales are recognized at the time orders are verified by
the long distance or local carrier. The effect of future returns or
refunds are reserved for at the time sales are recognized. The
reserve represents management's estimate base don historical
experience and other relevant factors.
Property
Property is recorded at cost and is depreciated using the straight
line method over the estimated useful lives of the related assets,
generally five to seven years. Accelerated depreciation methods
(MACRS) are used for tax purposes.
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Net Earnings Per Share of Common Stock
Primary net earnings per share are computed by dividing net earnings
by the weighted average number of shares of Common Stock and Common
Stock equivalents outstanding during the period. The 480,000 shares
of Series "A" preferred stock is convertible to Common Stock and is
treated as a Common Stock equivalent and is included in the primary
earnings per share.
Basis of Accounting
The financial statements are prepared on the accrual basis of
accounting in accordance with generally accepted accounting
principles (GAAP). GAAP requires the use of some estimates, namely in
the area of bad debt allowances, useful lives of depreciable assets,
valuation allowances for deferred tax assets based on future taxable
income, and sales return allowances. Actual results could be
different that the estimates used in these financial statements.
NOTE 3 - CONCENTRATION OF CREDIT RISK & SIGNIFICANT CUSTOMERS
The Company's customers are generally located in the Southwestern
region of the United States. The Company is paid by the telephone
company providing the actual service to its customers. Forty percent
(40%) of the Company's sales are with Pacific Bell and forty percent
(40%) with GTE telephone companies. In the case of a downturn in the
economy, or the loss of one of its major customers currently under
contract, the effect on sales and operations is unknown.
NOTE 4 - LEASES
Leases - Rent was paid on a month-to-month basis at $2,000 per month
until May 1995. Beginning on June 1, 1995, a two year lease was
signed for office space at $2,000 per month for two years. Future
minimum rental payments are as follows:
Fiscal Year Ending Amount
------------------ ------
August 31, 1996 $24,000
August 31, 1997 18,000
August 31, 1998 0
August 31, 1999 0
August 31, 2000 0
Total $42,000
NOTE 5 - OUTSIDE SERVICES
Outside services are operating expenses incurred with independent
contractors.
NOTE 6 - PAYROLL TAXES
Payroll Taxes Payable - Due to the start-up nature of the Company,
payroll taxes were not timely paid. Appropriate penalties and
interest have been included in the financial statements.
NOTE 7 - STOCKHOLDER'S EQUITY
Merger
On October 27, 1994 STM Communications, Inc. effected a reverse
merger with Landmark
International, Inc. (a publicly held company), reincorporated in the
State of Nevada. In connection with
the merger, Landmark International, Inc. issued 7,500,000 shares
(75% of all outstanding common
shares) of $.001 par value Common Stock to a third party.
7
Apartment Building
On August 8, 1995, the Company purchased land and an apartment
complex, La Mirage Apartments, for investment purposes. The
transaction exchanged Landmark International, Inc. 120,000 shares of
Common Stock plus 480,000 shares of Preferred Stock. The 600,000
shares were to be valued at $5.00 per share for a total value of
$3,000,000. However, through independent appraisal, it was determined
that the apartment building and land before any renovation has a fair
market value of $2,000,000. The $2,000,000 fair market value, which
is lower than the cost of $3,000,000, is used for financial reporting
purposes. There were additional fees of $10,013, paid in cash, which
were capitalized. This property was sold in the quarter for gain of
$189,987.
The 480,000 shares of Series "A" Preferred Stock is convertible to
$2,400,000 of Common Stock (480,000 shares at $5 per share) within
one year of August 8, 1995 at the option of the Company, or any time
after August 8, 1996 at the option of the holder.
Carlsbad Renovation Project
On August 29, 1995, the Company entered into a stock for future
services transaction. This called for Carlsbad Enterprises, Inc. to
provide renovation on the La Mirage property. The Company issued
500,000 shares of Common Stock at $2.50 per share totalling
$1,250,000. Since this is for future services, this transaction is
treated as a subscription for stock and a reduction in the
stockholder's equity section until such a time the services are
provided. An independent appraisal shows this renovation added to the
La Mirage Apartments will raise the fair market value of the project
to $3,100,000.
Landmark has entered into a Letter of Intent to sell the La Mirage
complex. It is in the interest of management to seek a buyer for the
property.
Sale of Shares
On February 29, 1996 the Company sold 380,000 shares of stock for
$950,000, paid in a certificate of deposit for that amount.
MBCI Script
On August 31, 1995, the Company entered into an agreement with
Merchants Business Card International (MBCI), an International Asset
Intermediary (barter exchange, whereby goods and services are sold
for MBCI Script on a dollar for dollar basis). The agreement called
for the Company to purchase $909,090 in MBCI Script, plus $90,910
service and rate fee, in exchange for $1,000,000 of Landmark
International, Inc., restricted Common Stock (200,000 shares).
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND
FINANCIAL CONDITION
The Company did not have significant operations until the acquisition
of STM Communications, Inc. in October 1, 1994. The information provided for the
nine months ended June 30, 1995 includes only five months of operations.
Revenues
Revenues were $21,211 and $331,740, respectively in the three and
nine months ended May 31, 1996, compared to $176,809 and $420,953 for the three
and nine months ended June 30, 1995 and represent revenue from marketing.
Revenue is based on the volume of sales of the telecommunications products sold
by the Company for its customers and revenue is directly related to the number
of sales personnel employed by the Company. In the quarter ended May 31, 1996
the Company's major customers had minimal activity so the Company's revenues
were
8
adversely affected. Revenue levels have returned to their historical levels. As
of May 1996 the Company has 12 sales representatives. Revenue growth in the
future is expected to be dependent upon sufficient funding to hire new sales
personnel. The Company's customers pay 60-90 days after invoicing by the
Company. Management believes it could increase sales personnel and revenue
several fold if it had sufficient capital to carry the resulting overhead for
60-90 days. The Company is seeking to raise funds through a private placement,
but there can be no assurance any placement will be successful.
Operating expenses
In the three and nine months ended May 31, 1996 operating expenses
were $166,094 and $299,940, respectively, compared to $117,418 and $417,350 for
the three and nine months ended June 30, 1995, resulting in losses from
operations of $(96,207) and $(85,610) in 1996 respectively, and losses in the
1995 periods. The losses in 1991 were due to a lack of revenue to offset the
burden of fixed costs. The largest component of operating expenses are employee
salaries, which (exclusive of officers' pay) are generally 48% of revenues. This
percentage is expected to stay relatively constant regardless of the Company's
operations. Outside services represent consultants or outside service providers.
These services are expected to remain constant regardless of revenues. Legal and
accounting expenses are expected to remain constant or be reduced since a large
portion of these expenses relate to the Company's commencement of its reporting
obligations. Due to the start up nature of the Company, payroll taxes were not
timely paid, and penalties have been included in the operating expenses.
Liquidity
The Company has no sources of liquidity other than operations or
potential private placements of its securities. No placement has been arranged
as of February 1996. There are no commitments for capital expenditures. The
Company's business is not seasonal. The Company has obtained a $909,090 credit
toward barter in goods or services from Merchants Business Card International,
in exchange for 200,000 shares of Company common stock. The Company anticipates
that it will be able to obtain a portion of the goods or services it may require
in the future from MBCI, by using this barter credit.
9
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K: None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 25, 1996 By:/s/ William J. Kettle
---------------------
William J. Kettle
President (Chief accounting and financial
officer and duly authorized officer)
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