<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES ACT OF 1934
TIMBER RESOURCES INTERNATIONAL, INC.
(Exact name of Small Business Issuer in Its Charter)
DELAWARE 13-4008378
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
570 LEXINGTON AVENUE, 45TH FLOOR, NEW YORK, NY 10022
(Address of principal executive offices) (Zip Code)
(212) 751-1511
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which
To be so Registered Each Class is to be Registered
------------------- ------------------------------
n/a n/a
Securities registered under Section 12(g) of the Exchange Act:
COMMON EQUITY, PAR VALUE $.001
(Title of Class)
1
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
FORM 10-SB/A1
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
<S> <C>
ITEM 1. DESCRIPTION OF BUSINESS............................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS.........................................................8
ITEM 3. DESCRIPTION OF PROPERTY...........................................13
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT........................................................13
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS...........................................................14
ITEM 6. EXECUTIVE COMPENSATION............................................16
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................17
ITEM 8. DESCRIPTION OF SECURITIES.........................................18
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON REGISTRANT'S COMMON
Equity AND OTHER STOCKHOLDER MATTERS..............................20
ITEM 2. LEGAL PROCEEDINGS.................................................21
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.....................21
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES...........................21
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.........................24
PART F/S
FINANCIAL STATEMENTS........................................................24
PART III
ITEM 1. INDEX TO EXHIBITS.................................................25
ITEM 2. DESCRIPTION OF EXHIBITS...........................................25
SIGNATURES..................................................................27
</TABLE>
2
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Timber Resources International, Inc. (the "Registrant") was
incorporated on May 28, 1998, under the laws of the State of Delaware. The
Registrant is in the business of manufacture and sale of forest products. The
Registrant also plans to be engaged in the acquisition and management of
commercial timberlands globally. The Registrant is considered to be in the
development stage.
The principal executive offices of the Registrant are located at
570 Lexington Avenue, 45th Floor, New York, NY 10022.
Since the inception, the Registrant has primarily directed its
efforts towards raising capital for its operation. During the fiscal year ended
on June 30, 1999, the Registrant raised $200,000 in capital through Regulation
D, Rule 504 Offerings and $680,000 though Convertible Notes.
In April 1999, the Registrant purchased 1,000,000 shares of common
stock of Jupiter Industries International, Inc. ("JII" and d.b.a.
"Forestworld.com"), a private company incorporated under the laws of Nevada
and operating out of Burlington, Vermont for a cash consideration of $111,000
which resulted in the Registrant having a 4.02% stock ownership in JII.
JII's (d.b.a. Forestworld.com) mission was to create the Internet
portal for the forest products industry focusing on e-commerce supporting
transactions that provide for the efficient and cost-effective movement of
conventional and certified wood products between suppliers and end-users.
Forestworld.com internet site also features expansive searchable
forestry and forest products directories and databases that are designed to
build an online community in the forest products industry. Through
Forestworld.com, the Registrant received access to a rapidly developing
infrastructure for timber buying and selling over the Internet, with the
potential link to an extended customers and suppliers base worldwide.
Forestworld.com also provided several high-visibility links from its Web site to
the Registrant.
3
<PAGE>
In April 1999, the Registrant provided a twelve-month loan to Jupiter
Industries International totaling $209,000 to finance considerable upgrading of
the Forestworld.com Web site.
In July 1999, the management of JII made a decision to sell the
assets of Forestworld.com to a newly formed Delaware corporation,
Forestworld.com, Inc. The Board of Directors of the Registrant as a
shareholder of JII approved this decision, since it became apparent that JII
was unable to carry out Forestworld's business plan due to its increasing
financing requirements to fund large scale Internet marketing campaign and
e-commerce. This transaction was completed on July 17, 1999. The Registrant
presently maintains a ten percent (10%) stock ownership in JII.
The Registrant's Chairman was granted a seat on the Board of Directors
of Forestworld.com (Delaware). The strategic partnership with Forestworld.com
gives the Registrant certain advantages in the market place over its
competitors. It gives the Registrant free unlimited usage of all services of the
Forestworld's Internet portal site including e-commerce transactions, and use of
commercial databases.
In May 1999, the Registrant purchased 100% of the issued and
outstanding shares of Southern Hardwoods, Inc., a Florida corporation for a
total of $500,000 worth of the Registrant's common stock. Southern Hardwoods was
incorporated in the State of Florida on May 5, 1998. Southern Hardwoods operates
a sawmill in the port of Pensacola. The $200,000 worth of common stock was paid
at the time of the transfer (June 1999) at the then publicly traded price of
$2.00, $100,000 worth (at the then currently traded prices) will be payable (at
the then currently publicly traded prices) on each of the following dates: May
15, 2000, May 15, 2001, and May 15, 2002.
In addition, the Registrant acknowledged and accepted the secured debt
of $200,000 of principal plus accrued interest since the date of the Promissory
Notes (September 8, 1998) between Southern Hardwoods and Theodore S. Williams,
J. Barry Cook, Michael White and Roger A. Carlson. These Promissory Notes mature
on September 1, 2008. The eight percent (8%) per annum interest is payable on
each year anniversary date of these Promissory Notes.
As of April 28, 2000, the Registrant was in compliance with its debt
obligations. To date, the Registrant has paid $16,640 towards the interest on
the notes. This acquisition was accounted by utilizing the "purchase
4
<PAGE>
method" whereby any excess of cost over the fair market value of the assets
received has been capitalized as goodwill.
After the completion of this acquisition, Southern Hardwoods operated
as a wholly owned subsidiary of the Registrant with its own management
organization.
This subsidiary specializes in the processing of tropical hardwoods
for various applications. Southern Hardwoods has a permit from the US Department
of Agriculture for the export of exotic tropical hardwood logs and lumber from
Guyana. Southern Hardwoods markets predominantly the following hardwoods:
greenheart, locust, mahogany, purpleheart, teak, and mora.
At the time of the acquisition, Southern Hardwoods operated out of a
15,000 square foot production facility at the Port of Pensacola, which was under
the lease through the year 2010. In December 1999, Southern Hardwoods signed a
ten-year lease with the Port of Pensacola for two warehouses and office space,
totaling 40,000 sq. ft. The current total operational space at the Port of
Pensacola is 55,000 sq. ft. The Lease was unanimously approved by the City
Council. The new expanded facility will allow for installation of additional
equipment to produce high-end finished flooring, molding and furniture
components.
The raw lumber delivered from the suppliers is processed at the sawmill
in Pensacola. The raw timber is processed for sale as dimensional lumber,
flooring and other wood products primarily for use in new residential home
construction, home remodeling and repair, specialized industrial application,
and furniture manufacturing. The current production capacity of the Pensacola
mill is 10,000 board feet of sawn lumber per shift, with the target to increase
the production to 30,000 board feet in the second quarter of 2000.
As of April 28, 2000, the Registrant has six (6) employees. The
subsidiary currently employs fourteen (14) employees. The Registrant expects the
total number of employees to reach twenty (20) or more within six months. The
employees of Southern Hardwoods are not unionized. The Registrant believes that
the employee relationships are good. The Registrant's wage scale is generally
competitive with other forest products companies.
5
<PAGE>
The product line includes the following products: hardwood dimensional
lumber, finished hardwood flooring, architectural moldings, outdoor furniture,
various unassembled furniture components, and crane mats. The markets are
predominantly in the United States market and the Caribbean.
Primarily, the Registrant purchases its raw materials in Guyana (South
America) and West Africa in order to obtain favorable pricing. The Registrant is
establishing its presence in these countries to gain uninterrupted access to
high quality timber species at a significantly lower costs that its competitors.
The Registrant gets supply from several local timber companies in Guyana. The
raw timber is shipped in the form of logs, cants, and sawn lumber. The supply
from Guyana is shipped to the Registrant's facility in Pensacola via the ports
of New Orleans and Pensacola. The Registrant expects to be primarily dependent
upon two (2) suppliers namely Exocitic African Hardwoods, Ltd. of Nigeria and
Timber Traders (S.A.) Inc. of Guyana South America.
In December 1999, the Registrant signed an exclusive agreement with
Exotic African Hardwoods, Ltd., a corporation registered in Nigeria, West Africa
for the supply of selected species of hardwoods from Africa. The species include
mahogany, teak, iroko, red and yellow apa, ofun, and oomo. The first shipment of
teak was delivered to the Registrant's subsidiary in Pensacola in December 1999.
Teak will be processed at the sawmill in Pensacola. Teak lumber will be used for
the manufacturing of flooring and furniture components.
There are numerous competitors, and the major markets, both Domestic
and International, in which the Registrant sells its principal products are very
competitive. The Registrant's products are in competition with similar products
produced by others, and in some instances, with products produced by other
industries from other materials. Many of the Registrant's competitors have
substantially greater financial and operating resources than the Registrant.
Many factors influence the Registrant's competitive position, including prices,
costs, product quality, types of wood species.
The Registrant is aggressively building its customer base throughout
the world using the extensive past business relationships its management team
brings to the company and relying on the initial good market acceptance of its
products. Management believes that the Registrant will be
6
<PAGE>
able to establish trade names that will be well recognized in the industry and
associated with a high level of quality and value.
By strategic collaborating with local timber producers and wholesale
distributors in the targeted regions of operations, the Registrant achieves
quick market penetration and gains strong advantage over its competitors.
The Registrant currently derives a significant portion of its revenues
from sales of forest products to certain key customers.
In December 1999, the Registrant signed an exclusive agreement with
Timber Products S.A., a company headquartered in Santo Domingo, the Dominican
Republic. This Agreement underlines the terms of distribution of the
Registrant's products throughout the Dominican Republic, Puerto Rico, Haiti and
the Central American Commonwealth countries of Guatemala, Honduras, El Salvador,
Costa Rica, and Panama. The Dominican Republic is one of the fastest growing
markets in the region that can potentially absorb large volumes of wood
products. The lumber will be used mainly for construction industry. The first
shipment under this Agreement, valued at US $191,500, was executed at the end of
December 1999. The second order under this Agreement was received in January
2000. The order, valued at US $150,000 was delivered in March 2000.
In January 2000, the Registrant received an initial order for hardwood
crane mats from Marino Crane of Middletown, Connecticut. Crane mats are flat
wooden platforms approximately 20 feet long, 4 feet wide and 10 inches thick.
The mats are used to stabilize cranes on the job site. The crane mats will be
manufactured by Southern Hardwoods, Inc., a Subsidiary of the Registrant. This
order valued at US $135,000 was delivered in April 2000.
The Registrant's management believes that the Registrant complies in
all material respects with all-applicable federal, state, and local provisions
relating to the protection of the environment. Compliance with these laws,
regulations, and demands usually involves capital expenditures, as well as
operating costs. The Registrant cannot easily quantify future amounts of capital
expenditures required to comply with these laws, regulations, and demands, or
the effects on operating costs, because in some instances and in certain
countries where the Registrant operates, compliance standards have not been
developed or have not become final or definitive. The Registrant is not aware of
any pending legislative, administrative or judicial action relating to the
protection of the environment that could materially and adversely affect the
Registrant.
7
<PAGE>
The Registrant plans to market its products both directly and
indirectly. A direct sales force is being developed to market the Registrant's
products.
When the Registrant becomes subject to the reporting requirements of
Section 12(g) the Registrant will be required to file annual and quarterly
reports in accordance with the Securities Act of 1934.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
During the fiscal year ended June 30, 1998 and the fiscal year ended
June 30, 1999, the Registrant was engaged primarily in fund raising activities.
The Registrant had only external sources of capital.
During the fiscal year ended on June 30, 1999, the Registrant raised
$200,000 in capital through Regulation D, Rule 504 Offerings and $680,000 though
Convertible Notes.
In May 1999, the Registrant acquired Southern Hardwoods, Inc. via a
share exchange agreement. The Registrant purchased 100% of the issued and
outstanding shares of Southern Hardwoods, Inc. for a total of $500,000 worth of
the Registrant's common stock. In addition, the Registrant acknowledged and
accepted the secured debt of $200,000 in principal, plus eight percent (8%)
annual interest. At the close of the acquisition, the Registrant issued $200,000
worth of common shares at the then tradeing price of $2.00 per share. The
remaining balance is payable in installments of $100,000 worth of common stock
on the annual anniversary of the acquisition for the next three (3) years.
During the fiscal year ended June 30, 1999, the only operating facility
of the Registrant was Southern Hardwoods.
The Registrant has undergone significant material changes in its
financial conditions and results of operations since the fiscal year ending June
30, 1999.
During the quarter ended September 30, 1999, the Registrant raised
$395,000 through Convertible Notes at ten percent (10%) interest.
In December 1999, the Registrant received $15,000 through the sale of
common stock pursuant to a Private Placement Offering.
8
<PAGE>
In March 2000, the Registrant received a total of $400,000 through the
sale of common stock pursuant to a Regulation D, Rule 504 Offering.
In January 2000, the Registrant received $100,000 through debt
financing at eight percent (8%) interest rate and $24,800 through the sale of
common stock pursuant to a Private Placement Offering.
In February 2000, the Registrant received 437,000 through the sale of
its common stock pursuant to a Private Placement Offering.
In March 2000, the Registrant received $440,000 through the sale of
common stock pursuant to a Private Placement Offering. These funds were used for
the expansion of the Registrant's operations.
In December 1999, the Registrant entered into an exclusive agreement
with Timber Products S.A., a company headquartered in Santo Domingo, the
Dominican Republic. The first order valued at $191,500 was shipped to the
Dominican Republic in December 1999. A second order valued at $150,000 was
delivered in March 2000.
During November 1999 and December 1999, the Registrant introduced a new
line of products, hardwood crane mats. After the successful testing of the
prototype in December 1999, the Registrant received its first order from Marino
Crane of Middletown, Connecticut. The Registrant anticipates receiving regular
orders for hardwood crane mats from this same customer. The first order valued
at $135,000 was delivered in April 2000. The Registrant plans to establish
itself as a large supplier of this type of specialized products.
In the quarter ended March 31, 2000, the Registrant had both internal
and external sources of capital.
For the next twelve months, the Registrant intends to fund its
operations through debt and equity financing and through the revenues derived
from the sales of the Registrant's products.
The Registrant requires $1,500,000 to meet its cash needs in the fiscal
year ended June 30, 2000. The $1,500,000 will be used to fund current
operations, as well as for general, research and administrative expenses.
During the quarter ended March 31, 2000, the Registrant raised $100,000
through the sale of Convertible Notes at eight percent (8%) interest and
$501,800 through sale of common stock pursuant to a Regulation D, Rule 504
Offering.
The Registrant generated $476,500 in revenues in the quarter ended
March 31, 2000.
9
<PAGE>
During the quarter ended June 30, 2000, the Registrant raised
$95,000 through the sale of common stock pursuant to a Regulation D, Rule 504
Offering.
The Registrant will require $3,000,000 to meet its cash needs for the
next fiscal year. The Registrant plans to fund its operations through revenues
from its operations, as well as through debt and equity financing.
The Registrant is dependent upon two (2) major customers. These
agreements provide assurance that the Registrant will have continuing orders.
The customers dictate their product requirements through purchase orders, which
cover period of a one month's supply to a one year contract. In most cases,
standard sale terms are net 30 days from date of shipment. Sales are recorded at
time of shipment from the Registrant's facilities to customers.
The key objectives of the Registrant's plan of operations for the next
(12) twelve months are to position the company to become a vertically integrated
forests products company. The Registrant intends to sustain
continuous growth by acquiring operating timber companies that fit within the
vertical integrated model.
The Registrant's business plan is to gain brand name recognition as a
large supplier of specialized wood products. The Registrant will pursue product
development and market research specializing in the following market segments:
hardwood sawn lumber, finished hardwood flooring, outdoor furniture, and crane
mats.
The Registrant is aggressively building its customer base utilizing the
extensive past business relationships that its management team brings to the
company and relying on the initial positive market acceptance of its products.
Management believes that the Registrant will be able to establish trade names
that will be well recognized in the industry and associated with a high level of
quality and value.
The Registrant plans to sell its products to customers in both the
United States and overseas.
The Registrant anticipates a significant change in the number of
employees during the next twelve months. The Registrant plans to increase the
number of employees at its operating facility in Pensacola from fourteen (14) to
twenty (20) employees.
In the next twelve months, the Registrant has planned a significant
upgrade of the equipment at its Subsidiary's mill in Pensacola. The Registrant
will be upgrading the electrical system at the plant to increase the power
supply to accommodate the increased production.
The Registrant plans to install additional re-sawing equipment that
will allow for the increase in its production capacity from the current capacity
of 10,000 board feet a day, to 30,000 board feet a day.
The Registrant also plans to install molders, planers, and dry kiln
equipment. This new equipment will facilitate a specialized line of products,
such as outdoor hardwood furniture, moldings, and hardwood flooring as well as
increase the quality of the currently produced dimensional lumber. The
installation of this dry kiln equipment will bring about a decrease in the costs
of the finished products and eliminate the dependence of the subsidiary upon the
outside dry kilning facilities. The installation of this dry kiln equipment will
also decrease the length of the production cycle by
10
<PAGE>
eliminating the dependence on transportation of green lumber to outside dry
kilns, and the transportation of dried lumber to the subsidiary's warehouse.
For the next (12) twelve months, the Registrant will finance its
operations though both internal and external sources of capital.
The implementation and expansion of the Registrant's business,
including acquisitions, will require a commitment of substantial funds. Issuing
additional shares of common stock will result in dilution to the existing
shareholders. If adequate funds are not available, the Registrant's business
could be adversely affected since internally generated funds are not expected to
be sufficient to fund the Registrant's expansion needs in the next twelve (12)
months.
The Registrant intends to pursue additional funding through the sale of
additional shares of common stock. The Registrant is anticipating that revenues
from operations will allow it to expand its business. The Registrant plans to
develop more value-added products with higher profit margins that will increase
the revenue stream.
The Registrant intends to expand its operations overseas. It plans to
gain substantial market share in the timber export in countries such as Guyana
(South America) and Dominican Republic. The success of the Registrant's
operations in these regions is subject to the political and economic
uncertainties of those regions. These unknowns and risk factors characterized by
unexpected changes in rules and regulations, policy changes regarding foreign
trade and foreign investments, changes in tax laws for foreign companies, local
government policies, and competition of local companies. These and other factors
could have an adverse impact on the Registrant's business and financial results
in the future or require the Registrant to modify its current business
practices.
The Registrant continues to negotiate for the acquisition of commercial
timberlands in Guyana, South America. These negotiations are part of long-term
program to establish strong presence in Guyana that has extensive
under-developed resources of high quality hardwoods. Currently, the Registrant
receives regular supplies of hardwoods from Guyana for the Subsidiary's facility
in Pensacola. In the next twelve (12) months, the Registrant plans to initiate
harvesting and sawmilling operations in Guyana.
11
<PAGE>
In December 1999, the Registrant entered into an exclusive agreement
with Exotic African Hardwoods, Ltd., of Nigeria, West Africa. As of January
2000, the Subsidiary receives regular shipments of West African teak. The teak
lumber is then processed at the Subsidiary's facility in Pensacola.
In January 2000, the Registrant entered into a strategic partnership
agreement with Timber Traders (S.A.) Inc., of Guyana, South America to
exclusively supply the Registrant with hardwood lumber from South America and
the Caribbean. The agreement insures uninterrupted supply of raw materials for
the subsidiary's facility in Pensacola.
The Registrant's business is not subject to seasonal effects.
There are uncertainties and risks attributed to the immature and
emerging nature of the markets in the Caribbean, and the Central American
Commonwealth countries. These markets are still in their development stage. The
Registrant and its Subsidiary mainly have to rely on the experiences of its
local partners and of its own management team to make strategic decisions with
respect to its operations.
The executive management team of the Registrant consists of Mr. Aziz
Hirji, President and Chief Executive Officer, Dr. Anna Petinova, Interim Vice
President of Administration and Finance, Mr. Peter Maharaj, Vice President
of Marketing and Mr. Hank Midden, Vice President of Operations.
The executive management team of the subsidiary consists of Mr.
Peter Maharaj, President.
In November 1998, the Registrant signed a five-year agreement (the
"Financial Advisory Agreement") with Villiers Capital Partners, LLC ("VCP").
Pursuant to this Financial Advisory Agreement, VCP provides corporate finance,
investor and financial relations, strategic and capital planning, and other
financial and management advice to the Registrant. This Financial Advisory
Agreement expires in October 2003, however, it provides for automatic one-year
renewals unless cancelled by either party in writing.
12
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTY
The Registrant's principal office is located at 570 Lexington Avenue,
45th Floor, New York, NY 10022. This office is approximately 3,500 square feet
and is shared with Villiers Capital Corporation.
The Registrant's subsidiary initially had a lease for 15,000 square
foot operating facility on the territory of the Port of Pensacola. The
subsidiary leased this space for $2,075 a month plus Florida State sales tax of
7.5%.
In December 1999, Southern Hardwoods signed a new lease with the Port
of Pensacola adding 40,000 sq. ft. of warehouse and office space to its
operating facilities of 15,000 sq. ft. The current lease is for the period of
ten (10) years beginning January 5, 2000, and ending January 4, 2010. The
subsidiary has the right to extend the lease for another 10-year period. The
lease payment for the first year is $5,000 a month ($60,000 a year) plus the
Florida State Sales tax of 7.5%. The lease payments will escalate by $5,000 a
year each year during the 10-year lease, equaling $110,000 in the year 10.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the information as to the shares of
common stock owned as of April 28, 2000:
(I) Each person who beneficially owns so far as the Registrant has
been able to ascertain, more than 5% of the outstanding
3,453,274 shares of the Registrant.
(II) Each Director.
(III) Each of the officers named in the summary compensation table.
(IV) All the directors and officers as a group unless otherwise
indicated in the footnotes below on the table is subject to
community property laws where applicable, the persons as to
whom the information is given has sole investment power over
the shares of common stock.
13
<PAGE>
NAME NUMBER PERCENT
1. Oyster Bay Trust* 333,334 9.65%
2. Anna Petinova 66,668 1.93%
3. James W. Mahan 1,133,334 32.82%
4. Peter R. N. Maharaj -0- 0%
5. Hank Midden -0- 0%
*Aziz Hirji, the President of the Registrant is the trustee and beneficiary of
Oyster Bay Trust.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS:
NAME AGE POSITION TERM SERVED
SINCE
1. Aziz Hirji 48 Chairman, Director, 1 year 6/98
CEO and President
2. Anna Petinova 36 Director, Secretary, 1 year 6/98
Treasurer, Interim
Vice President of
Administration and
Finance
3. Peter R. N. Maharaj 34 Vice President N/A 8/99
Marketing and
President of
The Subsidiary
4. Hank Midden 58 Vice President N/A 6/99
Operations
14
<PAGE>
AZIZ HIRJI
Mr. Hirji has over 25 years of international business management and
investment experience. He is the founder, Chairman, President and CEO of Timber
Resources International, Inc., where he directs the strategic and business
development of the company. Prior to founding Timber Resources International, he
held senior executive and directors positions in a number of private companies
in North America and Europe, covering a wide range of industries with a
particular emphasis on construction and timber. He has headed several
timber-related projects, involving financing, restructuring and strategic
planning. Mr. Hirji also has extensive experience in public and private capital
raising transactions. Mr. Hirji is a graduate of the International Institute of
Management in Glion-Sur-Montreux, Switzerland.
ANNA PETINOVA
Dr. Petinova is a member of the Board of Directors, Secretary,
Treasurer, and Interim Vice President of Administration and Finance. She has a
strong background in business development and extensive experience in the
corporate environment. Her duties include overseeing corporate finance, and
management of administration and investor relations. During the last four years,
she co-led several investment projects assisting companies in raising financing
and going public. Prior to joining Villiers Capital Corporation in 1996, Dr.
Petinova held senior management positions in several U.S. companies where she
was extensively involved in financing privately held middle market companies
serving the forestry and construction sectors.
PETER R. N. MAHARAJ
Peter Maharaj brings more than a decade of experience in marketing,
strategic planing and management to Timber Resources International. During the
last few years, he has directed the export marketing programs of large timber
and forest product companies in Guyana, Suriname, Chile and Argentina,
developing marketing strategies targeted at niche markets in the U.S.A., Europe
and the Caribbean. Mr. Maharaj is the former president of Timber Traders S.A.
Inc., a timber brokerage firm based in Guyana. His past experience also includes
contract negotiation, project management, and business administration in real
estate and construction. His family has been in the forestry business for over
40 years with commercial teak and mahogany properties in Trinidad. Mr. Maharaj
received his MBA from the University of West Indies.
15
<PAGE>
HANK MIDDEN
Mr. Midden brings to Timber Resources International, Inc., nearly four
decades of experience in business ownership and management, operations and
national sales, including 28 years in timber-related enterprises. In 1971, Mr.
Midden founded Bartley Lumber and Material Company, a sawmill and logging
operation in Florida, which he built into the largest mill in the area,
averaging approximately $1.5 million in sales per year. From 1981 to 1983, Mr.
Midden was a factory representative for the top sawmill and logging equipment
manufacturer in the U.S., Morbark Industries, where he designed and supervised
the installation of turnkey sawmills. In 1983, he founded Midden Lumber and
Equipment Company, also in Florida, which specializes in wholesale lumber and
equipment sales and the design and installation of sawmill equipment.
ITEM 6. EXECUTIVE COMPENSATION
The Registrant has entered into employment agreements with each of its
officer and directors and each of its other executive officers.
Aziz Hirji, the Registrant's Chairman, President and Chief Executive
Officer has a five year employment agreement with the Registrant. Salaries for
the five years are $150,000, $180,000, $240,000, $240,000 and $300,000. No
salaries were paid during the years ended June 30 1998 and June 30, 1999.
Bonuses for the five years of up to $80,000, $120,000, $120,000, $120,000,
$120,000 may be granted based upon the Registrant's performance against
financial targets as defined by the Board of Directors. No bonuses were granted
for the years ended June 30, 1998 and June 30, 1999. Ten-year warrants for
common stocks priced at $0.05 are granted for the five years as follows:
1,000,000, 1,500,000, 1,500,000, 1,500,000, and 2,000,000.
Dr. Anna Petinova, Director, Secretary, Treasurer, and Interim Vice
President of Administration and Finance is employed with the Registrant for
twenty (20) hours a week. The Registrant's Interim Vice President of
Administration and Finance has a six-month renewable employment agreement with
the Registrant. Monthly salaries for the first three six-month terms are $3,500,
$5,000, and $5,000, and $7,500 for any subsequent six-month term. Dr. Petinova
is not in receipt of any salary at this time. Ten-year warrants for common
stock priced at $0.05 shall be granted at the rate of 100,000 warrants per
month.
16
<PAGE>
Mr. Midden, Vice President of Operations has a four-year employment
agreement with the Registrant effective as of May, 1999. This employment
agreement provides for an annual salary of $90,000.
Mr. Maharaj, Vice President of Marketing, has a five-year employment
agreement with the Registrant effective as of September, 1999. This
employment agreement provides for an annual salary of $60,000.. Mr.
Maharaj is not in receipt of any salary at this time.
SUMMARY COMPENSATION TABLE
There was no executive or director who received any cash or non-cash
compensation in excess of $100,000 in the years of 1998 or 1999.
OFFICERS SALARY OTHER ANNUAL COMPENSATION
-------- ------ -------------------------
1. Aziz Hirji -0- -0-
2. Anna Petinova -0- -0-
3. Peter R.N. Maharaj -0- -0-
4. Hank Midden 90,000 -0-
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 28, 1998 the Registrant entered into an agreement with Villiers
Capital Corporation, a New York corporation ("Villiers") whereby Villiers has
agreed to provide office space and other support facilities including furniture,
computer and office equipment, secretarial, receptionist, and bookkeeping
services, conference room facilities, telephone and telefax equipment, local and
long distance access and other amenities to the Registrant for a monthly fee of
$15,000. The agreement had an initial one-year term that expired on May 28,
1999, and provides for automatic one-year renewals unless canceled by either
party in writing. The Registrant and Villiers have certain common shareholders,
officers, and directors. Aziz Hirji, the Registrant's President is co-founder,
director and major shareholder of Villiers. Anna Petinova, the Registrant's
Secretary, Treasurer, Interim Vice President of Administration and Finance is a
stockholder and officer in Villiers.
In November 1998, the Registrant entered into a five-year agreement
(the "Financial Advisory Agreement") with Villiers Capital Partners, LLC, a New
York limited liability company ("VCP"). Pursuant to the Financial Advisory
Agreement, VCP provides corporate finance, investor and financial
17
<PAGE>
relations, strategic and capital planning, and other financial and management
advice to the Registrant. The base compensation is $3,500 a month. The initial
five-year term expires on October 31, 2003. The Financial Advisory Agreement
provides for automatic one-year renewals unless cancelled by either party in
writing. In addition to the base monthly compensation, VCP is entitled to
receive a commission for any funds raised for the Registrant in accordance with
the "Lehman" formula which ranges from one to five percent of the funds raised.
The Registrant's Interim Vice President of Administration and Finance is an
officer in VCP.
ITEM 8. DESCRIPTION OF SECURITIES
(a) COMMON STOCK: On April 28, 2000, the Registrant had 3,453,274 shares of the
common stock issued and outstanding. The Registrant's Articles of Incorporation
authorized the issuance of up to 100,000,000 of the Registrant's common equity
shares with a par value of $0.001.
Holders of shares of the common stock are entitled to one vote for each
share on all matters to be voted on by the shareholders. Holders of common stock
have no cumulative voting rights. Holders of shares of common stock are entitled
to share proratably in dividends, if any, as may be declared from time to time
by the Board of Directors in its discretion, from funds legally available
therefore.
In the event of a liquidation, dissolution or winding up of the
Registrant, the holders of shares of common stock are entitled to share pro rata
all assets remaining after payments in full of all liabilities. Holders of
common stock have no preemptive rights to purchase the Registrant's common
stock. All of the outstanding shares of common stock are fully paid and
non-assessable.
(b) PREFERRED STOCK: The Registrant is also authorized to issue 6,000,000 shares
of preferred stock with a par value of $5.00. The Registrant's Board of
Directors may fix and determine the designations, rights, preferences or other
rights, preferences or other variations of each class or series of the preferred
stock. At this time the Registrant's has not issued any preferred stock.
(c) POSSIBLE CLASSIFICATION OF REGISTRANT'S SECURITIES AS A "PENNY STOCK": By
virtue of Rule 3a51-1 of the Securities Act of 1934 (the "Act"), if the
Registrant's common stock has a price of less than $5.00 per share it will be
considered a "penny stock". The perquisites required of broker-dealers
18
<PAGE>
engaging in transactions involving "penny stocks" have discouraged, or even
barred, many brokerage firms from soliciting orders for certain low priced
stocks.
Still further, with respect to the trading of penny stocks,
broker-dealers have an obligation to satisfy certain special sales practice
requirements pursuant to Rule 15g-9 of the Act, including a requirement that
they make an individualized written suitability determination for the purchase
and receive the purchaser's written consent prior to the transaction.
Still even further, such broker-dealers have additional disclosure
requirements as set forth in the Securities Enforcement Act Remedies and Penny
Stock Reform Act of 1990. These disclosure requirements include the requirement
for a broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the risks of the penny stock market.
Still even further, a broker-dealer must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customers
account.
Accordingly, the above penny stock regulations and the associated
broker-dealer requirements will have an adverse effect on the market liquidity
of the Registrant's common stock and the ability of any present and prospective
shareholder investors to sell their securities in the secondary market.
However, regardless of the price of the Registrant's stock, in the
event the Registrant has net tangible assets in excess of $2,000,000 and if the
Registrant has been in continuous operation for at least three (3) years, or
$5,000,000, if the Registrant has been in continuous operation for less than
three (3) years, Rule 3a51-1(g) of the Act will preclude the Registrant's common
stock from being classified as a "penny stock".
19
<PAGE>
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND OTHER
STOCKHOLDER MATTERS
(a) MARKET INFORMATION: The Registrant's common stock trades on the
National Quotation Bureau Electronic Quotation Service under the symbol TMBE.
The Registrant's common stock price as of the close of business as of April
28, 2000 was $1.00 per share.
(b) PRICE RANGE: The Registrants commenced trading on February 19, 1999. The
following is the range of the high and low bids for the Registrant's common
stock for each quarter of 1999 and the first quarter of 2000, as determined by
the over-the-counter market quotations reflect inter-dealer prices, without
retail market, mark-down or commission and may not represent actual
transactions.
<TABLE>
<CAPTION>
1999
----
QUARTER HIGH BID LOW BID
<S> <C> <C>
March $1.00 $.31
June $1.63 $1.03
Sept.* $5.84 $.88
Dec. $1.50 $.44
</TABLE>
<TABLE>
<CAPTION>
2000
----
QUARTER HIGH BID LOW BID
<S> <C> <C>
March $5.00 $2.33
June $1.00 $ .77
</TABLE>
* Effective September 28, 1999 the Registrant's shares were reverse split with
one (1) new share for each thirty (30) old shares.
Effective March 15, 2000, the Registrant's shares were forward split with one
(1) additional share being issued for each one (1) share held by a shareholder
of the Registrant.
20
<PAGE>
(a) HOLDERS: The Registrant has approximately 86 common stock shareholders.
(b) DIVIDENDS: The Registrant has not declared nor paid any cash dividends on
its Common Stock, does not anticipate that any dividends will be declared nor
paid in the foreseeable future, and intends to retain earnings to finance the
development and expansion of the Company's operations.
ITEM 2. LEGAL PROCEEDINGS
The Registrant is not involved in any legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The accountant has no resigned, declined to stand for re-election, nor
were they dismissed. The principal accountant's report on the financial
statements for the last two fiscal years contains no adverse opinion or
disclaimer of opinion, nor were they modified as to uncertainty, audit scope, or
accounting principles. There have been no disagreements with any former
accountants or any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
(a) RECENT SALES: The Registrant had the following stock issuances as described
below. All such shares were sold by the officers and directors of the Registrant
and no underwriters were utilized.
1. On June 26, 1998, 10,000,000 shares of common stock at $.01
per share pursuant to a Regulation D, Rule 504 Offering for a
total offering of $100,000.
2. On February 23, 1999, 100,000 shares of common stock at $1.00
per share pursuant to a Regulation D, Rule 504 Offering for a
total offering of $100,000.
3. On March 31, 1999, 100,000 shares of common stock at $1.00 per
share pursuant to a Regulation D, Rule 504 Offering for a
total offering of $100,000.
21
<PAGE>
4. On May 17, 1999, an initial 100,000 shares of common stock
were issued in exchange for all of the issued and outstanding
shares of Southern Hardwoods, Inc.
5. On September 28, 1999, the Registrant's shares wee reverse
split with one (1) new share for each thirty (3) old shares.
6. On September 28, 1999, 335,340 post reverse split shares of
common stock were issued pursuant to the conversion of the
Convertible Notes which totaled $1,006,010.10 of unpaid
principal and accrued interest.
7. On December 27, 1999, 55,000 shares of common stock at $.30
per share for a total offering of $15,000.
8. On January 10, 2000, 9,800 shares of common stock at $1.00 per
share for a total offering of $9,800.
9. On January 12, 2000, 15,000 shares of common stock at $1.00
per share for a total offering of $15,000.
10. On January 31, 2000, 104,378 shares of common stock were
issued pursuant to the conversion of the Convertible Notes
with totaled $104,278 of unpaid principal and accrued
interest.
11. On February 14, 2000, 7,655 shares of common stock at $3.92
per share for a total offering of $30,000.
12. On February 24, 2000, 1,556 shares of common stock at $4.50
per share for a total offering of $7,000.
13. On March 10, 2000, 5,334 shares of common stock at $3.75 per
share for a total offering of $20,000.
14. Effective March 16, 2000, the Registrant's shares were forward
split with one (1) additional share being issued for each one
(1) share held by a shareholder of the Registrant.
15. On March 16, 2000, 1,133,334 post forward split shares of
common stock at $.35 per share for a total offering of
$400,000.00.
22
<PAGE>
16. On March 23, 2000, 20,000 post forward split shares of common
stock at $1.00 per share for a total offering of $20,000.
17. On May 17, 2000, 45,000 post forward split shares of common
stock at $1.00 per share for a total offering of $45,000.
18. On June 15, 2000, 100,000 post forward split shares of common
stock at $.50 per share for a total offering of $50,000.
(b) EXEMPTIONS FROM REGISTRATION:
With respect to the issuance of the 10,000,000 common shares listed
at item 4(a)1, the 100,000 shares listed at item 4(a)2, the 100,000 shares
listed at item 4(a)3, and the 1,133,334 shares listed at item 4(a)15, the
45,000 shares listed at item 4(a)17 and the 100,000 shares listed at item
4(a)18,such issuances were made in reliance on the private placement
exemptions provided by Section 4(2) of the Securities Act of 1933 as amended,
(the "Act"), SEC Regulation D, Rule 504 of the Act and Delaware Securities
Commission Regulations Rule 9(b)(9)(1) (the "Delaware Statute").
With respect to the issuance of 100,000 shares listed at 4(a)4, the
335,340 shares listed at 4(a)5, the 15,000 common shares listed at 4(a)6, the
9,800 shares listed at 4(a)7, the 15,000 shares listed at 4(a)8, the 104,278
shares listed at item 4(a)10, the 7,655 shares listed at item 4(a)11, the 1,556
shares listed at item 4(a)12, the 5,334 shares listed at item 4(a)13, and the
20,000 shares listed at item 4(a)16, such issuances were made in reliance upon
the private placement exemptions provided by Section 4(2) of the Act and the
Delaware Statute.
In each instance, each of the share purchasers had access to sufficient
information regarding the Registrant so as to make an informed investment
decision. More specifically, each purchaser signed either a written Subscription
Agreement, a Share Exchange Agreement, or a Convertible Note, with respect to
their financial status and investment sophistication wherein they warranted and
represented, among other things, the following:
1. That they had the ability to bear the economic risks of
investing in the shares of the Registrant.
2. That they had sufficient knowledge in financial, business, or
investment matters to evaluate the merits and risks of the
investment.
3. That they had a certain net worth sufficient to meet the
suitability standards of the Registrant.
23
<PAGE>
4. That the Registrant has made available to them, his counsel
and his advisors, the opportunity to ask questions and that
they have been given access to any information, documents,
financial statements, books and records relative to the
Registrant and investment in the shares of the Registrant.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation and By-laws of the Registrant provide for
indemnification of the Registrant's officers and directors for liabilities
arising due to certain acts performed on behalf of the Registrant that are not a
result of any act of omission by any such director or officers: provided,
however, that the foregoing provision shall not eliminate or limit the liability
of directors or officers (i) for acts of omissions which involve intentional
misconduct, fraud or a knowing violation of the law, or (ii) the payment of
dividends in violation of Section 145 of the Delaware General Corporation Law.
Although the state statutes allow for indemnification of officers and directors,
the SEC rules prohibit indemnification of officers and directors of publicly
held companies.
PART F/S
The following financial statements are submitted pursuant to the
information required by Item 310 of Regulation S-B:
FINANCIAL STATEMENTS
NO. DESCRIPTION
FS-1 Timber Resources International, Inc. and Subsidiary
(A Developmental Stage Company) Consolidated
Financial Statements June 30, 1999 and June 30, 1998
FS-2 Timber Resources International, Inc. and Subsidiary
(A Developmental Stage Company) Consolidated
Financial Statements (Unaudited, Prepared By The
Management) September 30, 1999
24
<PAGE>
FS-3 Timber Resources International, Inc. and Subsidiary
(A Developmental Stage Company) Consolidated
Financial Statements (Unaudited, Prepared By The
Management) December 31, 1999
FS-4 Timber Resources International, Inc. and Subsidiary
(A Development Storage Company Consolidated Financial
Statement (Unaudited) Prepared By the Management)
March 31, 2000.
PART III
ITEM 1. INDEX TO EXHIBITS
The exhibits listed and described below in Item 2 are filed herein as
the part of this Registration Statement.
ITEM 2. DESCRIPTION OF EXHIBITS
The following documents are filed herein as Exhibit Numbers 2, 3, 5, 6
and 7 as required by Part III of Form 1-A:
EXHIBIT NO. DESCRIPTION
2 CHARTER AND BY-LAWS
2.1 Certificate of Incorporation of Timber
Resources International, Inc.
2.2 By Laws of Timber Resources International,
Inc.
2.3 Articles of Incorporation of Southern
Hardwoods, Inc.
3 NONE INSTRUMENTS REFINING THE RIGHTS OF THE SECURITY
HOLDERS
5 NONE VOTING TRUST AGREEMENTS
25
<PAGE>
6 MATERIAL CONTRACTS
6.1 Binding Letter of Intent - Acquisition of
Southern Hardwoods, Inc.
6.2 U.S. Department of Agriculture Import Period
for Plants and Plant Products - Southern
Hardwoods, Inc.
6.3 Exclusive Purchasing Agreement with
Hardwoods Limited dated November 1, 1999.
6.4 Agreement for Exclusive Distribution with
Timber Products, S.A. and Timber Traders,
S.A., Inc. dated December 2, 1999
6.5 Exclusive Purchasing Agreement with Timber
Traders, S.A., Inc. dated January 4, 2000
6.6 Lease between Southern Hardwoods, Inc. and
City of Pensacola, Florida dated November 18,
1999
6.7 Agreement for certain services and amenities
with Villiers Capital Corporation dated May 28,
1998.
6.8 Financial Advisory Agreement with Villiers
Capital Partners, LLC dated November 1, 1998
6.9 Employment Agreement with Aziz Hirji dated
June 1, 1998
6.10 Employment Agreement with Anna Petinova
dated June 1, 1998
6.11 Employment Agreement with Henry Midden
dated May 1, 1999
6.12 Employment Agreement with Peter Maharaj
dated September 1, 1999
26
<PAGE>
7 NONE MATERIAL FOREIGN PATENTS
27 FINANCIAL DATA SCHEDULE
SIGNATURES
In accordance with Section 12 the Securities and Exchange Act of 1934,
the Registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
TIMBER RESOURCES
INTERNATIONAL, INC.
DATED: July 21, 2000 BY: /s/ Aziz Hirji
----------------------------------
AZIZ HIRJI
President
27
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NO. DESCRIPTION
<S> <C>
FS-1 TIMBER RESOURCES INTERNATIONAL, INC. AND
SUBSIDIARY (A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS JUNE 30,
1999 AND JUNE 30, 1998
FS-2 TIMBER RESOURCES INTERNATIONAL, INC. AND
SUBSIDIARY (A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED,
PREPARED BY THE MANAGEMENT) SEPTEMBER 30,
1999
FS-3 TIMBER RESOURCES INTERNATIONAL, INC. AND
SUBSIDIARY (A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED,
PREPARED BY THE MANAGEMENT) DECEMBER 31,
1999
FS-4 TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STORAGE COMPANY CONSOLIDATED
FINANCIAL STATEMENT (UNAUDITED) PREPARED BY THE
MANAGEMENT) MARCH 31, 2000.
</TABLE>
<PAGE>
EXHIBIT FS-1
TIMBER RESOURCES INTERNATIONAL, INC. AND
SUBSIDIARY (A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1999
AND JUNE 30, 1998
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
* * * * *
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
INDEPENDENT AUDITORS' REPORT dated December 8, 1999
CONSOLIDATED FINANCIAL STATEMENTS PAGE NO.
<S> <C>
Consolidated Balance Sheets as of June 30, 1999 and 1998 1
Consolidated Statements of Operations for the year ended June 30, 1999
and for the period from May 28, 1998 (date of inception) to June 30, 1998 2
Consolidated Statements of Stockholders' Equity (Deficit) for the year ended
June 30, 1999 and for the period from May 28, 1998 (date of inception)
to June 30, 1998 3
Consolidated Statements of Cash Flows for the year ended June 30, 1999 and for
the period from May 28, 1998 (date of inception) to June 30, 1998 4
Notes to Consolidated Financial Statements 5-12
</TABLE>
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Timber Resources International, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheets of Timber
Resources International, Inc. and Subsidiary (a development stage company) as of
June 30, 1999 and 1998, and the related statements of operations, stockholders'
equity (deficit) and cash flows for the year ended June 30, 1999, for the period
from May 28, 1998 (date of inception) to June 30, 1998, and the cumulative
period from May 28, 1998 (date of inception) to June 30, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Timber Resources International, Inc. and Subsidiary (a development stage
company) as of June 30, 1999 and 1998, and the results of its operations and its
cash flows for the periods then ended, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
15 to the financial statements, the Company is dependent upon external sources
for working capital to finance its expansion since internally generated funds
are not expected to be sufficient to fund the Company's needs for one year.
These conditions raise substantial doubt about its ability to continue as a
going concern. Management's plans regarding those matters also are described in
Note 15. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Janover Rubinroit, LLC
--------------------------
Garden City, New York
December 8, 1999
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash $ 63,377 $ 870
Loan receivable - Jupiter Industries International, Inc.
net of reserve for impairment 1,000 -
Prepaid expenses 72,979 60,000
Debt issuance costs, net of accumulated amortization of
$3,010 and $-0- 30,990 -
----------- --------
Total current assets 168,346 60,870
Fixed assets, at cost 86,120 -
Less accumulated depreciation 718 -
----------- --------
85,402 -
Other assets:
Cost in excess of net assets acquired, net of
accumulated amortization of $2,498 597,035 -
Investment - Jupiter Industries International, Inc.
net of reserve for impairment 1,000 -
Other assets 642 -
----------- --------
598,677 -
----------- --------
$ 852,425 $ 60,870
============ ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 295,894 $ 21,000
Notes payable - convertible debt 680,000 -
Current portion of long-term debt 100,000 -
Due to stockholder - 20,000
----------- --------
Total current liabilities 1,075,894 41,000
Long-term debt 400,000 -
Stockholders' equity (deficit):
Preferred stock, $5.00 par value; 6,000,000 shares
authorized; none issued - -
Common stock, $.001 par value; authorized 100,000,000 shares,
issued and outstanding 550,000 and 500,000 shares,
respectively - Note 8 16,500 15,000
Capital in excess of par value 478,500 85,000
Deficit accumulated during the developmental stage (1,118,469) (80,130)
----------- --------
(623,469) 19,870
----------- --------
$ 852,425 $ 60,870
============ ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-1-
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
AND FOR THE PERIOD
MAY 28, 1998 (DATE OF INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
MAY 1998
(INCEPTION)
THROUGH
1999 1998 JUNE 30, 1999
------------ --------- -------------
<S> <C> <C> <C>
Expenses:
Financial advisory fees - related party - Note 10 $ 28,000 $ - $ 28,000
Rent and services fees - related party - Note 10 180,000 - 180,000
Selling, general and administrative expenses - Note 12 493,165 80,130 573,295
Depreciation and amortization 6,226 - 6,626
------------ --------- -------------
Total expenses 707,391 80,130 787,521
------------ --------- -------------
Operating loss (707,391) (80,130) (787,521)
Loss from asset impairment - Note 3 (323,225) - (323,225)
Interest income 5,225 - 5,225
Interest expense (12,948) - (12,948)
------------ --------- -------------
Net loss $ (1,038,339) $ (80,130) $ (1,118,469)
============ ========= =============
Basic and diluted loss per share $(2.04) $(0.16) $(2.20)
============ ========= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-2-
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED JUNE 30, 1999
AND FOR THE PERIOD
MAY 28, 1998 (DATE OF INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During Total
Common Stock Paid-In Developmental Stockholders'
Shares Amount Capital Stage Equity (Deficit)
------- -------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Balances at May 28, 1998
(date of inception) - $ - $ - $ - $ -
Issuance of common stock
par value $.001
Compensation at $.03 per share
from Founder 166,667 5,000 - - 5,000
Cash at $.30 per share from
private placement 333,333 10,000 90,000 - 100,000
Stock issuance costs (5,000) (5,000)
Net loss - - (80,130) (80,130)
------- -------- ----------- ------------- -----------------
Balance at June 30, 1998 500,000 15,000 85,000 (80,130) 19,870
------- -------- ----------- ------------- -----------------
Compensation at $.03 per share
to director 33,333 1,000 - - 1,000
Cash at $30 per share
from private placement 6,667 200 199,800 - 200,000
Compensation at $.60 per share 6,667 200 3,800 - 4,000
Shares issued at $60 per share
in acquisition of wholly-owned
subsidiary 3,333 100 199,900 - 200,000
Registration costs (10,000) (10,000)
Net loss (1,038,339) (1,037,621)
------- -------- ----------- ------------- -----------------
Balance at June 30, 1999 550,000 $16,500 $478,500 $(1,118,469) $(622,751)
======= ======== =========== ============= =================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-3-
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999
AND FOR THE PERIOD
MAY 28, 1998 (DATE OF INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
MAY 1998
(INCEPTION)
THROUGH
1999 1998 JUNE 30, 1999
------------ --------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,038,339) $(80,130) $(1,118,469)
Adjustments to reconcile net loss to net cash used in
operating activities:
Interest accrued on loan receivable (5,225) - (5,225)
Stock issued as compensation 5,000 5,000 10,000
Depreciation 6,226 - 6,226
Reserve for impairment of assets 323,225 - 323,225
Changes in assets and liabilities:
Prepaid expenses 3,135 (60,000) (56,865)
Accounts payable and accrued expenses 264,227 21,000 285,227
------------ --------- -------------
Net cash used in operating activities (441,751) (114,130) (555,881)
------------ --------- -------------
Cash flows from investing activities:
Investment - Jupiter Industries International, Inc. (111,000) - (111,000)
Loan - Jupiter Industries International, Inc. (209,000) - (209,000)
Acquisition of assets, net of cash acquired 8,258 - 8,258
------------ --------- -------------
Net cash used in investing activities (311,742) - (311,742)
------------ --------- -------------
Cash flows from financing activities:
Prepaid debt expense (34,000) - (34,000)
Proceeds from issuance of common stock 200,000 100,000 300,000
Stock issuance costs (10,000) (5,000) (15,000)
Loan from stockholder (20,000) 20,000 -
Proceeds from issuance of convertible debt 680,000 - 680,000
------------ --------- -------------
Net cash provided by financing activities 816,0000 115,000 931,000
------------ --------- -------------
Increase in cash 62,507 870 63,377
Cash - beginning of period 870 - -
------------ --------- -------------
Cash - end of period $ 63,377 $ 870 $ 63,377
============ ========= =============
Supplemental disclosure of cash flows information:
Cash paid during the period for interest $ - $ - $ -
============ ========= =============
Cash paid during the period for income taxes $ - $ - $ -
============ ========= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-4-
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DEVELOPMENT STAGE OPERATIONS:
Timber Resources International, Inc. (the "Company") was incorporated
on May 28, 1998 under the laws of the State of Delaware and intends to conduct
timber related activities internationally, including management and acquisition
of timberlands globally, manufacturing of sawn lumber, and the sale of
value-added wood products. The Company is considered to be in the development
stage, has not generated any revenues to date, and has directed its efforts
since inception towards raising capital for its proposed operations.
In May 1999, the Company acquired 100% of the outstanding stock of its
wholly-owned subsidiary, Southern Hardwoods, Inc. in exchange for stock in
Timber Resources International, Inc. The acquisition was accounted for using the
purchase method whereby any excess of cost over the fair market value of the
assets received has been capitalized to goodwill.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All significant intercompany accounts
and transactions have been eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FIXED ASSETS
Fixed assets are stated at cost and are depreciated on a straight-line
basis over their estimated useful lives. Repairs and maintenance are charged to
expense as incurred; renewals and betterments, which significantly extend the
useful lives of existing fixed assets, are capitalized.
GOODWILL
Amortization is provided using the straight-line method over the
estimated useful life of 20 years.
INCOME TAXES
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". As required under SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying amounts of assets
and liabilities and the respective tax basis amounts. Deferred tax assets and
liabilities are measured under tax rates that are expected to apply to taxable
income in the years in which these differences are expected to be settled. The
effect of a change in tax rates on deferred tax assets and liabilities is
recognized in the period of the tax change.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
-5-
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
EARNINGS PER SHARE
Effective December 15, 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings per Share". Statement No. 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Under the new requirements for calculating earnings
per share, the dilutive effect of stock options will be excluded from basic
earnings per share but included in the computation of diluted earnings per
share. All earnings per share amounts have been restated so as to comply with
Statement No. 128.
FAIR VALUE DISCLOSURES
The carrying amounts of cash, other current assets, accounts payable
and accrued expenses, and other current liabilities approximate fair value
because of the short-term maturity of these instruments. The stated value of
long-term debt, including current maturities, approximates fair value.
NOTE 3 - INVESTMENT IN AND LOAN TO JUPITER INDUSTRIES INTERNATIONAL, INC.:
In April 1999, the Company purchased 1,000,000 shares of common stock
of Jupiter Industries International, Inc. ("Jupiter") for $111,000 which
represents a 4.02% interest in Jupiter whose main assets were the assets
of Forestworld.com. In exchange for this investment, the Company received
various strategic benefits including links to the Company's website from
Forestworld.com. The value of these benefits cannot be determined by management
at this time. As of the day of acquisition of the assets of Forestworld.com in
March 1999, no directors or officers of the Company have been involved in the
operations of Jupiter.
In addition, the Company loaned $209,000 to Jupiter to be repaid in
April 2000 with interest at 10% per annum.
To secure additional financing for Forestworld.com, Jupiter's
management decided to reverse the Asset Purchase Agreement and form a new
corporation. On the completion of this transaction, Jupiter received 5,000,000
shares of Forestworld.com, Inc., a Delaware corporation, which represents a 25%
interest. The Company remains a shareholder of Jupiter. The Company's Chief
Executive Officer/President/Director is a member of the board of directors of
Forestworld.com, Inc. No fees for director services have been received to date
and any future fees shall be remitted to the Company.
Jupiter has a financial advisory services agreement with Villiers
Capital Partners, LLC ("VCP") which is similar to the agreement the Company has
with VCP (see Note 10). No material fees have been paid through June 30, 1999.
Due to the inability to ascertain the true value of the investment and
to ascertain the collectibility of the loan, both the investment and the loan
have been reserved against for possible impairment as follows:
<TABLE>
<CAPTION>
Investment in Loan to
Jupiter Industries Jupiter Industries
International, Inc. International, Inc.
------------------- -------------------
<S> <C> <C>
Original basis $111,000 $209,000
Accrued interest - 5,225
Less: Reserve for impairment 110,000 213,225
-------- --------
$ 1,000 $ 1,000
======== ========
</TABLE>
-6-
<PAGE>
NOTE 4 - ACQUISITION OF SUBSIDIARY:
On May 13, 1999, Timber Resources International, Inc. purchased all of
the outstanding stock of Southern Hardwoods, Inc. for shares of common stock of
Timber Resources International, Inc. valued at $500,000 payable as follows:
<TABLE>
<S> <C>
Upon acquisition at $60 per share $ 200,000
Three $100,000 notes payable in common shares at the then-
current price per share on May 15, 2000, 2001 and 2002 300,000
--------
$ 500,000
=========
</TABLE>
The acquisition was recorded under the purchase method of accounting;
therefore, the purchase price has been allocated to assets acquired and
liabilities assumed based on estimated fair values. The excess of the purchase
price over the fair value of net assets has been recorded as goodwill of
approximately $600,000 which is being amortized over twenty years.
<TABLE>
<S> <C>
Supplemental cash flow information:
Fair value of assets acquired $ 99,533
Liabilities assumed (207,791)
Common stock issued (200,000)
Notes payable in common stock 300,000
--------
Net cash (received) in acquisition (8,258)
Cash acquired in acquisition 8,258
--------
Cash paid for acquisition $ -
========
</TABLE>
NOTE 5 - FIXED ASSETS:
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Equipment $ 86,120 $ -
Less accumulated depreciation 718 -
-------- --------
$ 85,402 $ -
======== ========
</TABLE>
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Interest $ 23,614 $ -
Officers' salaries 221,000 16,000
Professional fees 36,280 -
Debt and equity issuance costs 15,000 5,000
-------- --------
$295,894 $ 21,000
======== ========
</TABLE>
-7-
<PAGE>
NOTE 7 - LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Amounts due to shareholders of the subsidiary,
payable in stock of the parent, at the
then-current publicly traded price, due in
$100,000 installments on
May 15, 2000, 2001, and 2002 $300,000 $ -
Promissory notes, payable with accrued interest at 8%
per annum, due on September 1, 2008 200,000 -
-------- --------
500,000 -
Less current maturities 100,000 -
-------- --------
$400,000 $ -
======== ========
</TABLE>
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
<S> <C>
2000 $100,000
2001 100,000
2002 100,000
2003 -
2004 -
Thereafter 200,000
--------
$500,000
========
</TABLE>
NOTE 8 - STOCKHOLDERS' EQUITY:
PRIVATE PLACEMENTS
In June 1998, the Company completed a private placement of 333,333
shares of its Common Stock for $.30 per share, or $100,000.
In February 1999, 3,333 shares of common stock were issued in a private
placement for $30 per share, or $100,000.
In May 1999, 3,333 shares of common stock were issued in a private
placement for $30 per share, or $100,000.
FOUNDER'S SHARES
In June 1998, the Company issued 166,667 shares to its President as
compensation for services rendered to the Company valued at $.03 per share, or
$5,000. The shares were assigned to an affiliated trust.
-8-
<PAGE>
NOTE 8 - STOCKHOLDERS' EQUITY: (CONTINUED)
COMPENSATORY SHARES
In May 1999, 33,333 shares of common stock were issued to the Company's
Interim Vice President of Finance and Administration/Director as compensation
for services rendered to the Company valued at $.03 per share, or $1,000.
In June 1999, 6,667 shares of common stock were issued as compensation
to Destler Services, Inc. for $.60 per share, or $4,000.
In July 1999, 1,667 shares of common stock were issued at $30 per
share, or $50,000, as compensation to Highlander Capital Management.
In November 1999, 30,000 shares of common stock were issued at $1 per
share, or $30,000, as compensation to Adam Barnett.
REVERSE STOCK SPLIT
On September 29, 1999, the Board of Directors approved a one-for-thirty
reverse stock split of the common stock. All quantities of common stock in these
financial statements reflect the reverse split.
PREFERRED STOCK
The Company is authorized to issue up to 6,000,000 shares of $5.00 par
value convertible preferred stock. The rights and privileges of the shares will
be determined by the Company's board of directors at the time of issuance. None
of the shares have been issued.
NOTE 9 - EARNINGS PER SHARE:
The following table sets forth the computation of basic and diluted
loss per share:
<TABLE>
<CAPTION>
Years ended
------------------------------
June 30, June 30,
1999 1998
------------ ------------
<S> <C> <C>
Numerator:
Net loss - numerator for basic and diluted loss per share $ (1,038,339) $ (80,130)
============ ============
Denominator:
Denominator for basic loss per share - weighted average shares 508,333 500,000
Effect of dilutive securities - warrants 73,333 -
------------ ------------
Denominator for diluted loss per share - weighted average shares
and dilutive potential common shares 581,666 500,000
============ ============
Loss per share:
Basic $ (2.04) $ (.16)
======== =======
Diluted $ (2.04) $ (.16)
======== =======
</TABLE>
In accordance with SFAS No. 128, as a result of net losses, the
inclusion of warrants were antidilutive and, therefore, were not utilized in the
computation of diluted loss per share.
-9-
<PAGE>
NOTE 10 - COMMITMENTS:
RENT AND SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Corporation ("Villiers") whereby Villiers has agreed to provide office space and
various business services to the Company for a monthly fee of $15,000. The
agreement had an initial one-year term that expired on May 28, 1999, and
provides for automatic one-year renewals unless canceled by either party in
writing. The Company's Chief Executive Officer/President/Director/Stockholder is
a stockholder and director and the Interim Vice President of Finance and
Administration/Director/Stockholder is a stockholder and officer, respectively,
in Villiers. Expenses under this agreement totaled $180,000 and $15,000 in the
year ended June 30, 1999 and from inception to June 30, 1998, respectively.
FINANCIAL ADVISORY SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Partners, LLC ("VCP"), a wholly owned subsidiary of Villiers Capital
Corporation, whereby VCP has agreed to provide corporate finance, investor
relations, strategic and capital planning and other financial and management
advice for a monthly fee of $3,500. The Agreement has an initial five-year term
expiring October 31, 2003 and provides for automatic one-year renewals unless
cancelled by either party in writing. In addition to the monthly fee, VCP will
receive a commission for any funds they raise for the Company in accordance with
the "Lehman" formula which ranges from one to five percent of funds raised.
Expenses under this agreement were $28,000 and $-0- for the year ended June 30,
1999 and from inception to June 30, 1998, respectively.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with the Chief Executive
Officer/President/Director commencing on June 1, 1998 for five years ending
on May 31, 2003. The agreement may be renewed for another five-year term at
mutually agreed upon terms and conditions. Salaries for the five years are
$150,000, $180,000, $240,000, $240,000 and $300,000. No salaries were paid
during the years ended June 30, 1999 and 1998 (see Note 6). Bonuses for the
five years of up to $80,000, $120,000, $120,000, $120,000 and $120,000 may be
granted based upon the Company's performance against financial targets as
determined by the board of directors. No bonuses were granted for the years
ended June 30, 1999 and 1998. Ten year warrants for common stock priced at
$.05 are granted for the five years as follows: 1,000,000 warrants,
1,500,000, 1,500,000, 1,500,000 and 2,000,000. All warrants are issued as of
the last day of the fiscal year beginning June 30, 1999. The number of
warrants shall be adjusted for any splits or reverse splits of the Company's
common stock.
The Company has an employment agreement with the Interim Vice
President of Finance and Administration/Director commencing on June 1, 1998
for an initial six-month term. The agreement shall automatically renew for
successive six-month terms unless cancelled by either party. Monthly salaries
for the first three six-month terms are $3,500, $5,000 and $5,000. No
salaries were paid during the years ended June 30, 1999 and 1998 (see Note
6). Subsequent six-month terms shall be at a monthly salary of $7,500.
Bonuses may be granted based upon the Company's performance against financial
targets as determined by the board of directors. No bonuses were granted for
the years ended June 30, 1999 and 1998. Ten-year warrants for common stock
priced at $.05 shall be granted at the rate of 100,000 warrants per month
issued on the first of each month beginning July 1, 1998. The number of
warrants shall be adjusted for any splits or reverse splits of the Company's
common stock.
-10-
<PAGE>
NOTE 10 - COMMITMENTS: (CONTINUED)
The Company has an employment agreement with its Vice President of
Operations commencing on May 1, 1999 for four years at a salary of $7,500 per
month.
WAREHOUSE LEASE
The Company, through its subsidiary, leases warehouse space from the
Port of Pensacola, Florida for approximately $24,900 per year plus applicable
sales tax expiring October 31, 1999. The Company has renewed this lease
subsequent to year end for a ten-year term expiring January 4, 2010. Rent
expense for the year ended June 30, 1999 was $2,230.
Minimum annual commitments under a non-cancelable lease in effect at
June 30, 1999 are as follows:
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
<S> <C>
2000 $ 42,450
2001 $ 62,500
2002 $ 67,500
2003 $ 72,500
2004 $ 80,000
Thereafter $542,500
</TABLE>
NOTE 11 - INCOME TAXES:
At June 30, 1999, the Company had federal net operating loss
carryforwards of approximately $625,000. The net operating losses will expire in
the various years through June 30, 2014. The Company also had state net
operating loss carryforwards in the state in which it operates.
A reconciliation of income tax computed at the federal statutory
corporate tax rate to income tax expense on the net loss from continuing and
discontinued operations is:
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998
------------------------------ ---------------------------
Amount Percent Amount Percent
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Income tax benefit at
federal statutory rate $(212,500) (34.0)% $(20,400) (34.0)%
Valuation allowance 212.500 34.0 20.400 34.0
--------- ----- -------- -----
$ - - % $ - - %
========= ===== ======== =====
</TABLE>
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
The Company has a net deferred tax asset at June 30, 1999 and 1998 of
approximately $212,500 and $20,400, respectively. This amount consists primarily
of net operating losses. A valuation allowance has been established to reduce
this net deferred asset to zero based upon the uncertainty regarding realization
of such tax benefits given the Company's development stage status.
-11-
<PAGE>
NOTE 12 - RELATED PARTY TRANSACTIONS:
A material portion of the Company's selling, general and administrative
expenses were paid to Villiers Capital Corporation ("VCC") as reimbursements for
amounts advanced for various expenses including travel, entertainment, telephone
and other office expenses.
NOTE 13 - INDUSTRY SEGMENTS:
The Company operates substantially in one industry segment as described
in Note 1.
NOTE 14 - SUBSEQUENT EVENTS:
On September 20, 1999, the Company issued six Convertible Notes for a
combined value of $975,000. The notes are for one year and bear interest at a
rate of 10% per annum. The holders of the notes have the option to convert only
the entire amount and not any portion thereof, of the unpaid principal and
interest into shares of common stock of the Company at a share price equal to
fifty percent of the share price of the last trade on the NASD OTC Bulletin
Board on the date of conversion. The conversion may take place anytime while the
note is outstanding. The Company has the right to prepay unpaid principal of
this note without penalty. In the event the Company elects to prepay the Notes,
the holders have ten days to exercise their conversion rights.
In addition, the holder shall be issued warrants equal to five percent
of the converted principal exercisable at a share price equal to the share price
for the holder on the date of conversion. These warrants expire after five years
on September 20, 2004. Cash in the amount of $680,000 was received during the
year ended June 30, 1999. On September 28, 1999, the notes and accrued interest
were converted into 335,337 shares of common stock.
As per generally accepted accounting principles, the right to convert
the debt to equity is considered a beneficial conversion feature. As such, the
entire $975,000 fair value of these notes are considered to be additional
paid-in capital with an allocation to be made between the beneficial conversion
feature and the warrants. The corresponding charge to interest will also be
recorded in the year ended June 30, 2000.
See Note 8 for issuances of common stock subsequent to year end and a
one-for-thirty reverse stock split.
NOTE 15 - GOING CONCERN MATTERS:
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. From its date of inception (May
12, 1998) through June 30, 1999, the Company has been building its customer base
and preparing for production primarily through external sources of liquidity.
Any further business activities are based upon the successful raising of capital
via external sources. Failure to do so may indicate that the Company will be
unable to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability of assets that might be necessary should the Company be unable to
continue as a going concern. The Company intends to pursue additional funding in
the form of direct equity and debt financing. The Company also expects revenues
from operations to allow it to expand its business.
Management believes that the Company will require $1,500,000 to meet
its cash needs for the year ending June 30, 2000 to be used to fund current
operations as well as research and general and administrative expenses. During
the quarter ended September 30, 1999, the Company had raised $395,000 through
convertible debt.
<PAGE>
EXHIBIT FS-2
------------
TIMBER RESOURCES INTERNATIONAL, INC. AND
SUBSIDIARY (A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, PREPARED
BY THE MANAGEMENT) SEPTEMBER 30, 1999
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
*********************
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, PREPARED BY THE MANAGEMENT)
SEPTEMBER 30, 1999
<PAGE>
[LOGO] [LETTERHEAD]
MANAGEMENT'S REPORT
To the Stockholders of
Timber Resources International, Inc. and Subsidiary:
Management is responsible for the integrity and objectivity of the data
included in this report. The financial statements have been prepared in
accordance with generally accepted accounting principles. Where necessary,
they reflect estimates based on management judgement.
Established accounting procedures and related systems of internal
control provide reasonable assurance that assets are safeguarded, that the
books and records properly reflect all transactions, and that policies and
procedures are implemented by qualified personnel.
/s/ Aziz Hirji
Aziz Hirji
Chairman and CEO
December 15, 1999
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
TABLE OF CONTENTS
MANAGEMENT'S REPORT dated December 15, 1999
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet as of September 30, 1999 1
Consolidated Statements of Operations for the quarter
Ended September 30, 1999 2
Consolidated Statements of Stockholders' Equity (Deficit)
For the quarter ended September 30, 1999 3
Consolidated Statements of Cash Flows for the quarter
Ended September 30, 1999 4
Notes to Consolidated Financial Statements 5
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
A S S E T S September 30, 1999
------------------
<S> <C>
Current assets:
Cash $ 19,242
Loan receivable - net of reserve for impairment 1,000
Prepaid expenses 88,761
Inventories 98,516
Other Current Assets 78,135
-----------
Total current assets 285,654
Fixed assets, at cost: 86,120
Less accumulated depreciation 2,872
-----------
83,248
Other assets:
Investment in subsidiary 25,700
Investment - net of reserve for impairment 1,000
Goodwill and other intangibles, net of accumulated
amortization of $9,992 589,541
Other assets 642
-----------
616,883
-----------
$ 985,785
===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 553,383
Notes payable - convertible debt 100,000
Current portion of long-term debt 100,000
-----------
Total current liabilities 753,383
Long-term debt 400,000
Shareholders' and members' equity:
Preferreds tock, $5.00 par value,
6,000,000 shares authorized, non issued
Common stock, $0.001 par value;
authorized 100,000,000 shares, issued
and outstanding 885,337 shares 16,836
Additional paid-in capital 1,453,164
Deficit (1,637,598)
-----------
(167,598)
$ 985,785
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Three months ended May 1998 through
September 30, 1999 September 30, 1999
<S> <C> <C>
Costs and expenses:
Financial advisory and investment banking fees $ 33,250 $ 61,250
Rent and services fees 116,314 296,314
Selling, general, research and
administrative expenses 275,913 1,241,654
Depreciation and amortization 2,166 8,792
-------------------- --------------------
Total expenses 427,643 1,608,010
-------------------- --------------------
Operating loss (427,643) (1,608,010)
Interest income 5,284
Interest expense (16,640) (29,588)
-------------------- --------------------
Net loss $ (438,999) $ (1,637,598)
==================== ====================
Basic and diluted loss per share $ (0.49) $ (2.69)
==================== ====================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED JUNE 30, 1999 AND
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During Total
Common Stock Paid-In Developmental Stockholders'
Shares Amount Capital Stage Equity (Deficit)
------ ------ ------- ----- ----------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1998 500,000 $ 15,000 $ 85,000 $ (80,130) $ 19,870
------- -------- ------------ ------------- -----------
Compensation at $.03 per share
to director 33,333 1,000 1,000
Cash at $.30 per share
from private placement 6,667 200 199,800 200,000
Compensation at $.60 per share 6,667 200 3,800 4,000
Shares issued at $60 per share
in acquisition of wholly-owned
subsidiary 3,333 100 199,900 200,000
Registration costs (10,000) (10,000)
Net loss (1,038,339) (1,037,621)
------------- -----------
Balance at June 30, 1999 550,000 $ 16,500 $ 478,500 $ (1,118,469) $ (622,751)
------- -------- ----------- ------------- -----------
Shares issued at $3 per share
at conversion of six debt Notes 335,337 336 974,664 975,000
Net loss $ (438,999) $ (438,999)
------------- ------------
Balance at September 30, 1999 885,337 $ 16,836 $ 1,453,164 $ (1,637,598) $ (86,750)
======= ======== =========== ============== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Three months ended
September 30, 1999
---------------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (438,999)
Adjustments to reconcile net loss to net cash
used in operating activities:
Interest accrued on loan receivable (5,284)
Stock issued as compensation
Depreciation 2,154
Changes in assets and liabilities:
Inventories (95,504)
Accounts payable and accrued expenses 257,489
---------------------------
Net cash used in operating activities (280,144)
---------------------------
Cash flows from investing activities:
Cash expenditures-net
Other net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock 150,748
Stock issuance costs (14,739)
Proceeds from issuance of convertible debt 100,000
---------------------------
Net cash provided by financing activities 236,009
---------------------------
Increase in cash (44,135)
Cash - beginning of period 63,377
---------------------------
Cash - end of period $ 19,242
===========================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DEVELOPMENT STAGE OPERATIONS:
Timber Resources International, Inc. (the "Company") was incorporated
on May, 28, 1998 under the laws of the State of Delaware and intends to conduct
timber related activities internationally, including management and acquisition
of timberlands globally, manufacturing of sawn lumber, and the sale of
value-added wood products. The Company is considered to be in the development
stage, has not generated any revenues to date, and has directed its efforts
since inception towards raising capital for its proposed operations.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All significant accounts and
transactions have been eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FIXED ASSETS
Fixed assets are stated at cost and are depreciated on a straight-line
basis over their estimated useful lives. Repairs and maintenance are charged to
expense as incurred; renewals and betterments, which significantly extend the
useful lives existing fixed assets, are capitalized.
GOODWILL
Amortization is provided using the straight-line method over the
estimated useful life of 20 years.
INCOME TAXES
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No 109, "Accounting for
Income Taxes". As required under SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying amounts of assets
and liabilities and the respective tax basis amounts.
5
<PAGE>
Deferred tax assets and liabilities are measured under tax rates that are
expected to apply to taxable income in the years in which these differences are
expected to be settled. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in the period of the tax change.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
EARNINGS PER SHARE
Effective December 15, 1997, the Financial Accounting standards Board
issued Statement No. 128, "Earnings per Share". Statement No. 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Under the new requirements for calculating earnings
per share, the dilutive effect of stock options will be excluded from basic
earnings per share but included in the computation of diluted earnings per
share. All earnings per share amounts have been restated so as to comply with
Statement No. 128.
FAIR VALUE DISCLOSURES
The carrying amounts of cash, other current assets, accounts payable
and accrued expenses, and other current liabilities approximate fair value
because of the short-term maturity of these instruments. The stated value of
long-term debt, including current maturities, approximates fair value.
NOTE 3 - FIXED ASSETS
<TABLE>
<CAPTION>
September 30,
1999
-------------
<S> <C>
Equipment $86,120
Less accumulated depreciation 2,872
-------------
$83,248
</TABLE>
6
<PAGE>
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
September 30,
1999
-------------
<S> <C>
Interest
Officers' Salaries $ 63,500
Professional Fees 92,696
Equipment Rental 96,744
Other Saw Mill Supplies 288,393
Debt and equity issuance costs 12,000
--------
$553,383
--------
--------
</TABLE>
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30,
1999
-------------
<S> <C>
Amounts due to shareholders of the subsidiary,
Payable in stock of the parent, at the then-current
Publicly traded, price, due in $100,000 installments
on May 15, 2000, 2001, and 2002 $300,000
Promissory notes, payable with accrued interest at
8% per annum, due on September 1, 2008. 200,000
--------
500,000
Less current maturities 100,000
--------
$400,000
--------
--------
</TABLE>
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30, 1999
<S> <C>
2000 $100,000
2001 100,000
2002 100,000
2003 -
2004 -
Thereafter 200,000
--------
$500,000
--------
--------
</TABLE>
7
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY
CONVERSION OF DEBT NOTES
On September 28, 1999, 335,340 post reverse split shares of common
stock were issued pursuant to the conversion of the Convertible Notes which
totals $1,006,010.10 unpaid principal and accrued interest.
COMPENSATORY SHARES
In November 1999, 30,000 shares of common stock were issued at $1 per
share, or $30,000, as compensation to Adam Barnett.
In December 1999, 75,500 shares of common stock were issued at $.10 per
share, or $7,500, as compensation to Trevor Alfred.
REVERSE STOCK SPLIT
On September 29, 1999, the Board of Directors approved a one-for-thirty
reverse stock split of the common stock. All quantities of common stock in these
financial statements reflect the reverse split.
PREFERRED STOCK
The Company is authorized to issue up to 6,000,000 shares of $5.00 par
value convertible preferred stock. The rights and privileges of the shares will
be determined by the Company's Board of Directors at the time of issuance. None
of the shares have been issued.
NOTE 7 - COMMITMENTS
RENT AND SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Corporation ("Villiers") whereby Villiers has agreed to provide office space and
various business services to the Company for a monthly fee of $15,000. The
agreement had an initial one-year term that expired on May 28, 1999, and
provides for automatic one-year renewals unless canceled by either party in
writing. The Company's Chief Executive Officer, President, Director, Stockholder
is a stockholder and director and the Interim Vice President of Finance and
Administration/Director/Stockholder is a stockholder and officer, respectively,
in Villiers.
8
<PAGE>
FINANCIAL ADVISORY SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Partners, LLC ("VCP"), a wholly owned subsidiary of Villiers Capital
Corporation, whereby VCP has agreed to provide corporate finance, investor
relations, strategic and capital planning and other financial and management
advice for a monthly fee of $3,500. The Agreement has an initial five-year term
expiring October 31, 2003 and provides for automatic one-year renewals unless
cancelled by either party in writing. In addition to the monthly fee, VCP will
receive a commission for any funds they raise for the Company in accordance with
the "Lehman" formula, which ranges from one to five percent of funds raised.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with the Chief Executive
Officer/President/Director commencing on June 1, 1998 for five years ending on
May 31, 2003. The agreement may be renewed for another five-year term at
mutually agreed upon terms and conditions. Salaries for the five years are
$150,000, $180,000, $240,000 $240,000 and $300,000. No salaries were paid during
the years ended June 30, 1999 and 1998 (see Note 6). Bonuses for the five years
of up to $80,000, $120,000, $120,000, $120,000 and $120,000 may be granted based
upon the Company's performance against financial targets as determined by the
board of directors. No bonuses were granted for the years ended June 30, 1999
and 1998. Ten year warrants for common stock priced at $.05 are granted for the
five years as follows: 1,000,000 warrants, 1,500,000, 1,500,000, 1,500,000 and
2,000,000. All warrants are issued as of the last day of the fiscal year
beginning June 30, 1999. The number of warrants shall be adjusted for any splits
or reverse splits of the Company's common stock.
The Company has an employment agreement with the Interim Vice President
of Finance and Administration/Director commencing on June 30, 1998 for an
initial six-month term. The agreement shall automatically renew for successive
six-month terms unless cancelled by either party. Monthly salaries for the first
three six-month terms are $3,500, $5,000 and $5,000. No salaries were paid
during the years ended June 30, 1999 and 1998 (see Note 6). Subsequent six-month
terms shall be at a monthly salary of $7,500. Bonuses may be granted based upon
the Company's performance against financial targets as determined by the board
of directors. No bonuses were granted for the years ended June 30, 1999 and
1998. Ten-year warrants for common stock priced at $.05 shall be granted at the
rate of 100,000 warrants per month issued on the first of each month beginning
July 1, 1998. The number of warrants shall be adjusted for any splits or reverse
splits of the Company's common stock.
The Company has an employment agreement with its Vice President of
Operations commencing on May 1, 1999 for four years at a salary of $7,500 per
month.
The Company has an employment agreement with its Vice President of
Marketing commencing on September 1, 1999 for five years at a salary of $60,000
per annum, payable at the rate of $5,000 a month.
9
<PAGE>
WAREHOUSE LEASE
The Company, through its subsidiary, leases 55,000 square feet of
warehouse space from the Port of Pensacola, Florida. The Company has renewed
this lease for a ten-year term expiring January 4, 2010.
Minimum annual commitments under a non-cancelable lease in effect are
as follows:
<TABLE>
<CAPTION>
Year Ended January 4
--------------------
<S> <C>
2001 $60,000
2002 $65,000
2003 $70,000
2004 $75,000
2005 $85,000
2006 $90,000
2007 $95,000
2008 $100,000
2009 $105,000
2010 $110,000
</TABLE>
This guaranteed annual minimum would consist of the following fees -
wharfage, dockage, handling, and stevedore - that would generate as the result
of Southern Hardwoods having a presence at the Port. The wharfage rates in
effect during the initial term of this lease shall be as follows: $1.40 for
annual short tons from 1 to 30,000; $1.20 for annual short tons from 30,001 to
60,000; and $1.00 for annual short tons from 60,001 and greater.
NOTE 8 - INDUSTRY SEGMENTS
The Company operates substantially in one industry segment as described
in Note 1.
10
<PAGE>
EXHIBIT FS-3
------------
TIMBER RESOURCES INTERNATIONAL, INC. AND
SUBSIDIARY (A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, PREPARED
BY THE MANAGEMENT) DECEMBER 31, 1999
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
*********************
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, PREPARED BY THE MANAGEMENT)
DECEMBER 31, 1999
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
TABLE OF CONTENTS
MANAGEMENT'S REPORT dated January 20, 2000
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS
<S> <C>
Consolidated Balance Sheet as of December 31, 1999 1
Consolidated Statements of Operations for the quarter
Ended December 31, 1999 2
Consolidated Statements of Stockholders' Equity (Deficit)
For the quarter ended December 31, 1999 3
Consolidated Statements of Cash Flows for the quarter
Ended December 31, 1999 4
Notes to Consolidated Financial Statements 5
</TABLE>
<PAGE>
[LOGO] [LETTERHEAD]
MANAGEMENT'S REPORT
To the Stockholders of
Timber Resources International, Inc. and Subsidiary:
Management is responsible for the integrity and objectivity of the data
included in this report. The financial statements have been prepared in
accordance with generally accepted accounting principles. Where necessary,
they reflect estimates based on management judgement.
Established accounting procedures and related systems of internal
control provide reasonable assurance that assets are safeguarded, that the
books and records properly reflect all transactions, and that policies and
procedures are implemented by qualified personnel.
Aziz Hirji
Chairman and CEO
January 20, 2000
[FOOTER]
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
A S S E T S December 31,1999
----------------
<S> <C>
CURRENT ASSETS:
Cash $ 7,406
Receivables 191,500
Loan receivable - net of reserve for impairment 1,000
Prepaid expenses 70,967
Inventories 177,000
----------------------
Total current assets 447,873
Fixed assets, at cost: 86,120
Less accumulated depreciation 5,026
----------------------
81,094
Other assets:
Investment - net of reserve for impairment 1,000
Goodwill and other intangibles, net of accumulated 582,047
----------------------
amortization of $17,486 583,047
----------------------
$ 1,112,014
======================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 823,193
Notes payable - convertible debt 100,000
Current portion of long-term debt 100,000
----------------------
Total current liabilities 1,023,193
Long-term debt 400,000
Shareholders' and members' equity:
Preferreds tock, $5.00 par value,
6,000,000 shares authorized, non issued
Common stock, $0.001 par value;
authorized 100,000,000 shares, issued
and outstanding 1,045,837 shares 16,851
Additional paid-in capital 1,468,149
Deficit (1,796,179)
----------------------
(311,179)
$ 1,112,014
======================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Three months ended Three months ended May 1998 through
December 31, 1999 September 30, 1999 September 30, 1999
------------------ ------------------ ------------------
<S> <C> <C> <C>
Costs and expenses:
Financial advisory and investment banking fees $ 3,500 $ 33,250 $ 64,750
Rent and services fees 15,000 116,314 311,314
Selling, general, research and
administrative expenses 126,922 270,629 1,368,576
Depreciation and amortization 3,226 2,166 12,018
------------------ ------------------ ------------------
Total expenses 148,648 422,359 1,756,658
------------------ ------------------ ------------------
Operating loss (148,648) (422,359) (1,756,658)
Interest income 862
Interest expense (10,795) (16,640) (40,383)
------------------ ------------------ ------------------
Net loss $ (158,581) $ (438,999) $ (1,796,179)
================== ================== ==================
Basic and diluted loss per share $ (0.17) $ (0.49) $ (2.69)
================== ================== ==================
</TABLE>
2
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE QUARTER ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During Total
Common Stock Paid-In Developmental Stockholders'
Shares Amount Capital Stage Equity (Deficit)
------ ------ ------- ----- ---------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1998 500,000 $ 15,000 $ 85,000 $ (80,130) $ 19,870
------- -------- -------- ------------- ---------------
Compensation at $.03 per share
to director 33,333 1,000 1,000
Cash at $.30 per share
from private placement 6,667 200 199,800 200,000
Compensation at $.60 per share 6,667 200 3,800 4,000
Shares issued at $60 per share
in acquisition of wholly-owned
subsidiary 3,333 100 199,900 200,000
Registration costs (10,000) (10,000)
Net loss (1,038,339) (1,037,621)
------------- ---------------
Balance at June 30, 1999 550,000 $ 16,500 $ 478,500 $ (1,118,469) $ (622,751)
-------- -------- ---------- ------------- ---------------
Shares issued at $3 per share
at conversion of six debt Notes 335,337 336 974,664 975,000
Net loss $ (438,999) $ (438,999)
-------------- ---------------
Balance at September 30, 1999 885,337 $ 16,836 $ 1,453,164 $ (1,637,598) $ (86,750)
-------- -------- ------------ ------------- ----------
Shares issued at $.30 per share 55,000 15 14,985 15,000
Compensation at $1.00 per share 30,000 30,000 30,000
Compensation at $.10 per share 75,500 7,500 7,500
Net loss $ (158,581) $ (158,581)
------------- -----------
Balance at December 31, 1999 1,045,837 $ 16,851 $ 1,468,149 $ (1,796,179) $ (200,331)
========= ======== =========== ============= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Three months ended
December 31, 1999
---------------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (158,581)
Adjustments to reconcile net loss to net cash
used in operating activities:
Interest accrued on loan receivable (862)
Stock issued as compensation 37,500
Depreciation 2,154
Changes in assets and liabilities:
Accounts and other receivables (113,365)
Inventories (78,484)
Prepaid expenses 17,794
Accounts payable and accrued expenses 267,758
---------------------------
Net cash used in operating activities (26,086)
---------------------------
Cash flows from investing activities:
Cash expenditures-net
Other net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock 15,000
Stock issuance costs (750)
---------------------------
Net cash provided by financing activities 14,250
---------------------------
Increase in cash (11,836)
Cash - beginning of period 19,242
---------------------------
Cash - end of period $ 7,406
===========================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DEVELOPMENT STAGE OPERATIONS:
Timber Resources International, Inc. (the "Company") was incorporated
on May, 28, 1998 under the laws of the State of Delaware and intends to conduct
timber related activities internationally, including management and acquisition
of timberlands globally, manufacturing of sawn lumber, and the sale of
value-added wood products. The Company is considered to be in the development
stage, has not generated any revenues to date, and has directed its efforts
since inception towards raising capital for its proposed operations.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All significant accounts and
transactions have been eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FIXED ASSETS
Fixed assets are stated at cost and are depreciated on a straight-line
basis over their estimated useful lives. Repairs and maintenance are charged to
expense as incurred; renewals and betterments, which significantly extend the
useful lives existing fixed assets, are capitalized.
GOODWILL
Amortization is provided using the straight-line method over the
estimated useful life of 20 years.
INCOME TAXES
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No 109, "Accounting for
Income Taxes". As required under SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying amounts of assets
and liabilities and the respective tax basis amounts.
5
<PAGE>
Deferred tax assets and liabilities are measured under tax rates that are
expected to apply to taxable income in the years in which these differences are
expected to be settled. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in the period of the tax change.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
EARNINGS PER SHARE
Effective December 15, 1997, the Financial Accounting standards Board
issued Statement No. 128, "Earnings per Share". Statement No. 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Under the new requirements for calculating earnings
per share, the dilutive effect of stock options will be excluded from basic
earnings per share but included in the computation of diluted earnings per
share. All earnings per share amounts have been restated so as to comply with
Statement No. 128.
FAIR VALUE DISCLOSURES
The carrying amounts of cash, other current assets, accounts payable
and accrued expenses, and other current liabilities approximate fair value
because of the short-term maturity of these instruments. The stated value of
long-term debt, including current maturities, approximates fair value.
NOTE 3 -FIXED ASSETS
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Equipment $86,120
Less accumulated depreciation 5,026
------------
$81,094
</TABLE>
6
<PAGE>
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Interest
Officers' Salaries $108,500
Professional Fees 100,325
Equipment Rental 186,774
Other Saw Mill Supplies 426,844
Debt and equity issuance costs 750
-------
$823,193
-------
-------
</TABLE>
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Amounts due to shareholders of the subsidiary,
Payable in stock of the parent, at the then-current
Publicly traded, price, due in $100,000 installments
on May 15, 2000, 2001, and 2002. $300,000
Promissory notes, payable with accrued interest at
8% per annum, due on September 1, 2008. 200,000
-------
500,000
Less current maturities 100,000
-------
$400,000
-------
-------
</TABLE>
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31, 1999
<S> <C>
2000 $100,000
2001 100,000
2002 100,000
2003 -
2004 -
Thereafter 200,000
-------
$500,000
-------
-------
</TABLE>
7
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY
PRIVATE PLACEMENTS
In December 1999, the Company completed a private placement of 55,000
shares of its Common Stock for $.30 per share, or $15,000.
COMPENSATORY SHARES
In November 1999, 30,000 shares of common stock were issued at $1 per
share, or $30,000, as compensation to Adam Barnett.
In December 1999, 75,500 shares of common stock were issued at $.10 per
share, or $7,500, as compensation to Trevor Alfred.
PREFERRED STOCK
The Company is authorized to issue up to 6,000,000 shares of $5.00 par
value convertible preferred stock. The rights and privileges of the shares will
be determined by the Company's Board of Directors at the time of issuance. None
of the shares have been issued.
NOTE 7 - COMMITMENTS
RENT AND SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Corporation ("Villiers") whereby Villiers has agreed to provide office space and
various business services to the Company for a monthly fee of $15,000. The
agreement had an initial one-year term that expired on May 28, 1999, and
provides for automatic one-year renewals unless canceled by either party in
writing. The Company's Chief Executive Officer/President/Director/Stockholder is
a stockholder and director and the Interim Vice President of Finance and
Administration/Director/Stockholder is a stockholder and officer, respectively,
in Villiers.
FINANCIAL ADVISORY SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Partners, LLC ("VCP"), a wholly owned subsidiary of Villiers Capital
Corporation, whereby VCP has agreed to provide corporate finance, investor
relations, strategic and capital planning and other financial and management
advice for a monthly fee of $3,500. The Agreement has an initial five-year term
expiring October 31, 2003 and provides for automatic one-year renewals unless
cancelled by either party in writing. In addition to the monthly fee, VCP
8
<PAGE>
will receive a commission for any funds they raise for the Company in
accordance with the "Lehman" formula, which ranges from one to five percent of
funds raised.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with the Chief Executive
Officer/President/Director commencing on June 1, 1998 for five years ending on
May 31, 2003. The agreement may be renewed for another five-year term at
mutually agreed upon terms and conditions. Salaries for the five years are
$150,000, $180,000, $240,000 $240,000 and $300,000. No salaries were paid during
the years ended June 30, 1999 and 1998 (see Note 6). Bonuses for the five years
of up to $80,000, $120,000, $120,000, $120,000 and $120,000 may be granted based
upon the Company's performance against financial targets as determined by the
board of directors. No bonuses were granted for the years ended June 30, 1999
and 1998. Ten year warrants for common stock priced at $.05 are granted for the
five years as follows: 1,000,000 warrants, 1,500,000, 1,500,000, 1,500,000 and
2,000,000. All warrants are issued as of the last day of the fiscal year
beginning June 30, 1999. The number of warrants shall be adjusted for any splits
or reverse splits of the Company's common stock.
The Company has an employment agreement with the Interim Vice President
of Finance and Administration/Director commencing on June 30, 1998 for an
initial six-month term. The agreement shall automatically renew for successive
six-month terms unless cancelled by either party. Monthly salaries for the first
three six-month terms are $3,500, $5,000 and $5,000. No salaries were paid
during the years ended June 30, 1999 and 1998 (see Note 6). Subsequent six-month
terms shall be at a monthly salary of $7,500. Bonuses may be granted based upon
the Company's performance against financial targets as determined by the board
of directors. No bonuses were granted for the years ended June 30, 1999 and
1998. Ten-year warrants for common stock priced at $.05 shall be granted at the
rate of 100,000 warrants per month issued on the first of each month beginning
July 1, 1998. The number of warrants shall be adjusted for any splits or reverse
splits of the Company's common stock.
The Company has an employment agreement with its Vice President of
Operations commencing on May 1, 1999 for four years at a salary of $7,500 per
month.
The Company has an employment agreement with its Vice President of
Marketing commencing on September 1, 1999 for five years at a salary of $60,000
per annum, payable at the rate of $5,000 a month.
WAREHOUSE LEASE
The Company, through its subsidiary, leases 55,000 square feet of
warehouse space from the Port of Pensacola, Florida. The Company has renewed
this lease for a ten-year term expiring January 4, 2010.
9
<PAGE>
Minimum annual commitments under a non-cancelable lease in effect are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 4
<S> <C>
2001 $60,000
2002 $65,000
2003 $70,000
2004 $75,000
2005 $85,000
2006 $90,000
2007 $95,000
2008 $100,000
2009 $105,000
2010 $110,000
</TABLE>
This guaranteed annual minimum would consist of the following fees -
wharfage, dockage, handling, and stevedore - that would generate as the result
of Southern Hardwoods having a presence at the Port. The wharfage rates in
effect during the initial term of this lease shall be as follows: $1.40 for
annual short tons from 1 to 30,000; $1.20 for annual short tons from 30,001 to
60,000; and $1.00 for annual short tons from 60,001 and greater.
NOTE 8 - INDUSTRY SEGMENTS
The Company operates substantially in one industry segment as described
in Note 1.
10
<PAGE>
EXHIBIT FS-4
------------
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STORAGE COMPANY CONSOLIDATED FINANCIAL
STATEMENT (UNAUDITED) PREPARED BY THE
MANAGEMENT) MARCH 31, 2000.
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC.
AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
*********************
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, PREPARED BY THE MANAGEMENT)
MARCH 31, 2000
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
---------------------------------------------------
(A DEVELOPMENTAL STAGE COMPANY)
-------------------------------
TABLE OF CONTENTS
-----------------
MANAGEMENT'S REPORT dated April 11, 2000
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Balance Sheet as of March 31, 2000 1
Consolidated Statements of Operations for the quarter
Ended March 31, 2000 2
Consolidated Statements of Stockholders' Equity (Deficit)
For the quarter ended March 31, 2000 3
Consolidated Statements of Cash Flows for the quarter
Ended March 31, 2000 4
Notes to Consolidated Financial Statements 5
</TABLE>
<PAGE>
[TIMBER RESOURCES INTERNATIONAL, INC. LETTERHEAD]
MANAGEMENT'S REPORT
To the Stockholders of
Timber Resources International, Inc. and Subsidiary:
Management is responsible for the integrity and objectivity of the
data included in this report. The financial statements have been prepared in
accordance with generally accepted accounting principles. Where necessary,
they reflect estimates based on management judgement.
Established accounting procedures and related systems of internal
control provide reasonable assurance that assets are safeguarded, that the
books and records properly reflect all transactions, and that policies and
procedures are implemented by qualified personnel.
Aziz Hirji
Chairman and CEO
April 11, 2000
<PAGE>
TIMBER RESOURCES INTERNATIONAL INC, AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
<TABLE>
<CAPTION>
ASSETS March 31, 2000
------ --------------
<S> <C>
CURRENT ASSETS:
Cash $ 185,719
Receivables 290,275
Loan receivable - net of reserve for impairment 1,000
Prepaid expenses 17,000
Inventories 201,337
---------------
Total current assets 695,331
Fixed assets, at cost: 86,120
Less accumulated depreciation 7,180
---------------
78,940
Other assets:
Investment - net of reserve for impairment 1,000
Goodwill and other intangibles, net of accumulated 574,553
---------------
amortization of $24,980 575,553
---------------
$ 1,349,824
===============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT?
Current liabilities:
Accounts payable and accrued expenses $ 961,544
Notes payable - convertible debt 100,000
Current portion of long-term debt 100,000
---------------
Total current liabilities 1,161,544
Long-term debt 400,000
Shareholders' and members' equity:
Preferreds tock, $5.00 par value,
13,000,000 shares authorized, non issued
Common stock, $0.001 par value;
authorized 100,000,000 shares, issued
and outstanding 3,453,274 shares 118,305
Additional paid-in capital 2,039,900
Deficit (2, 369,925)
---------------
(211,720)
$ 1,349,824
===============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
---------------------------------------------------
(A DEVELOPMENTAL STAGE COMPANY)
STATEMENTS OF CASH FLOWS
------------------------
FOR THE QUARTER ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Three months ended
March 31, 2000
------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (573,746)
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock issued as compensation 100,127
Depreciation 2,648
Changes in assets and liabilities:
Accounts and other receivables (90,000)
Inventories (33,112)
Prepaid expenses 53,967
Accounts payable and accrued expenses 138,351
------------------
Net cash used in operating activities (401,765)
------------------
Cash flows from investing activities:
Cash expenditures-net
Other net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock 606,078
Stock issuance costs (26,000)
------------------
Net cash provided by financing activities 580,078
------------------
Increase in cash 178,313
Cash - beginning of period 7,406
------------------
Cash - end of period $ 185,719
==================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
---------------------------------------------------
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------------------------
FOR THE QUARTER ENDED MARCH 31, 2000
------------------------------------
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During Total
Common Stock Paid-In Developmental Stockholders'
Shares Amount Capital Stage Equity (Deficit)
------ ------ ------- ----- ----------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1998 1,000,000 $ 15,000 $ 85,000 $ (80,130) $ 19,870
---------- --------- ------------ ------------- -----------
Compensation at $.0150 per share
to director 66,666 1,000 1,000
Cash at $.15 per share
from private placement 13,334 200 199,800 200,000
Compensation at $.30 per share 13,334 200 3,800 4,000
Shares issued at $30 per share
in acquisition of wholly-owned
subsidiary 6,666 100 199,900 200,000
Registration costs (10,000) (10,000)
Net loss (1,038,339) (1,037,621)
------------- -----------
Balance at June 30, 1999 1,100,000 $ 16,500 $ 478,500 $ (1,118,469) $ (622,751)
---------- --------- ------------ ------------- -----------
Shares issued at $1.50 per share
at conversion of six debt Notes 670,674 975 974,025 975,000
Net loss $ (438,999) $ (438,999)
------------- -----------
Balance at September 30, 1999 1,770,674 $ 17,475 $ 1,452,525 $ (1,637,598) $ (86,750)
---------- --------- ------------ ------------- -----------
Shares issued at $.15 per share 110,000 15 14,985 15,000
Compensation at $.50 per share 60,000 30,000 30,000
Compensation at $.05 per share 151,000 7,500 7,500
Net loss $ (158,581) $ (158,581)
------------- -----------
Balance at December 31, 1999 1,880,674 $ 17,490 $ 1,467,510 $ (1,796,179) $ (200,331)
---------- --------- ------------ ------------- -----------
Shares issued at $.50 per share
from private placement 19,600 98 9,702 9,800
Compensation at $.50 per share 80,000 40,000 40,000
Shares issued at $.50 per share
from private placement 30,000 15 14,985 15,000
Compensation at $.50 per share 16,654 8,327 8,327
Shares issued at $.50 per share
at conversion of the Debt Note 208,556 105 104,173 104,278
Compensation at $ 1.00 per share 20,000 20,000 20,000
Shares issued at $ 1.96 per share
from private placement 10,206 20 19,980 20,000
Shares issued at $ 1.96 per share
from private placement 5,104 10 9,990 10,000
Compensation at $1.50 per share 700 1,050 1,050
Shares issued at $2.25 per share
from private placement 3,112 7,000
Compensation at $2.25 per share 12,000 27,000 27,000
Compensation at $1.875 per share 2,000 3,750 3,750
Shares issued at $1.875 per share
from private placement 10,668 20 19,980 20,000
Shares issued at $.35 per shares
from private placement 1,134,000 400 399,600 400,000
Shares issued at $1.00 per share
from private placement 20,000 20 19,980 20,000
Registration costs (26,000) (26,000)
Net loss (573,746) (573,746)
------------- -----------
Balance at March 31, 2000 3,453,274 $ 118,305 $ 2,039,900 $ (2,369,925) $ (93,872)
========== ========= ============ ============= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENTAL STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Three months Three months Three months
ended ended ended May 1998 through
March 31, 2000 December 31, 1999 September 30, 1999 September 30, 1999
-------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Sales $ 476,500 $ $ $
Less allowance for uncollectibles 119,125
-------------- ----------------- ------------------ ------------------
Net sales 357,375
Costs and expenses:
Financial advisory /investment banking 40,803 3,500 33,250 64,750
fees
Rent and services fees 152,000 15,000 116,314 311,314
Cost of merchandise sold 327,072
Selling, general, research and
administrative expenses 397,320 126,922 270,629 1,368,576
Depreciation and amortization 9,648 3,226 2,166 12,018
-------------- ----------------- ------------------ ------------------
Total expenses 926,843 148,648 422,359 1,756,658
-------------- ----------------- ------------------ ------------------
Operating loss (569,468) (148,648) (422,359) (1,756,658)
Interest income 862
Interest expense (4,278) (10,795) (16,640) (40,383)
-------------- ----------------- ------------------ ------------------
Net loss $ (573,746) $ (158,581) $ (438,999) $ (1,796,179)
============== ================= ================== ==================
Basic and diluted loss per share $ (0.17) $ (0.17) $ (0.49) $ (2.69)
============== ================= ================== ==================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
TIMBER RESOURCES INTERNATIONAL, INC. AND SUBSIDIARY
---------------------------------------------------
(A DEVELOPMENTAL STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NOTE 1 - DEVELOPMENT STAGE OPERATIONS:
Timber Resources International, Inc. (the "Company") was
incorporated on May, 28, 1998 under the laws of the State of Delaware and
intends to conduct timber related activities internationally, including
management and acquisition of timberlands globally, manufacturing of sawn
lumber, and the sale of value-added wood products. The Company is considered
to be in the development stage, has not generated any revenues to date, and
has directed its efforts since inception towards raising capital for its
proposed operations.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All significant accounts and
transactions have been eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FIXED ASSETS
Fixed assets are stated at cost and are depreciated on a
straight-line basis over their estimated useful lives. Repairs and
maintenance are charged to expense as incurred; renewals and betterments,
which significantly extend the useful lives existing fixed assets, are
capitalized.
GOODWILL
Amortization is provided using the straight-line method over the
estimated useful life of 20 years.
INCOME TAXES
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No 109, "Accounting for
Income Taxes". As required under SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying amounts of
assets and liabilities and the respective tax basis amounts.
5
<PAGE>
Deferred tax assets and liabilities are measured under tax rates that are
expected to apply to taxable income in the years in which these differences are
expected to be settled. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in the period of the tax change.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
EARNINGS PER SHARE
Effective December 15, 1997, the Financial Accounting standards Board
issued Statement No. 128, "Earnings per Share". Statement No. 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Under the new requirements for calculating earnings
per share, the dilutive effect of stock options will be excluded from basic
earnings per share but included in the computation of diluted earnings per
share. All earnings per share amounts have been restated so as to comply with
Statement No. 128.
FAIR VALUE DISCLOSURES
The carrying amounts of cash, other current assets, accounts payable
and accrued expenses, and other current liabilities approximate fair value
because of the short-term maturity of these instruments. The stated value of
long-term debt, including current maturities, approximates fair value.
NOTE 3 -FIXED ASSETS
<TABLE>
<CAPTION>
March 31, 2000
--------------
<S> <C>
Equipment $86,120
Less accumulated depreciation 7,180
-------------
$78,940
</TABLE>
6
<PAGE>
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
March 31, 2000
----------------
<S> <C>
Officers' Salaries $176,000
Professional Fees 59,288
Equipment Rental 136,277
Other Saw Mill Supplies 258,233
Shipping and Transportation 147,089
Raw Materials 184,657
$961,544
--------
--------
</TABLE>
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, 2000
---------------
<S> <C>
Amounts due to shareholders of the subsidiary,
Payable in stock of the parent, at the then-current
Publicly traded, price, due in $100,000 installments
on May 15, 2000, 2001, and 2002. $300,000
Promissory notes, payable with accrued interest at
8% per annum, due on September 1, 2008. 200,000
--------
500,000
Less current maturities 100,000
--------
$400,000
--------
--------
</TABLE>
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Quarter ended March 31, 2000
----------------------------
<S> <C>
2000 $100,000
2001 100,000
2002 100,000
2003 -
2004 -
Thereafter 200,000
--------
$500,000
--------
--------
</TABLE>
7
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY
PRIVATE PLACEMENTS
On January 10, 2000 the Company completed a private placement of
19,600 shares of common stock at $.50 per share for a total offering of
$9,800.
On January 12, 2000 the Company completed a private placement of
30,000 shares of common stock at $.50 per share for a total offering of
$15,000.
On January 31, 2000, 208,756 shares of common stock were issued
pursuant to the conversion of the Convertible Notes with total $104,278 of
unpaid principal and accrued interest.
On February 14, 2000 the Company completed a private placement of
15,310 shares of common stock at $1.96 per share for a total offering of
$30,000.
On February 24, 2000 the Company completed a private placement of
3,112 shares of common stock at $2.25 per share for a total offering of
$7,000.
On February 24, 2000 the Company completed a private placement of
3,112 shares of common stock at $2.25 per share for a total offering of
$7,000.
On March 10, 2000 the Company completed a private placement of
10,668 shares of common stock at $1.875 per share for a total offering of
$20,000.
On March 16, 2000 the Company completed a private placement of
1,133,334 shares of common stock at $.35 per share for a total offering of
$400,000.
On March 23, 2000 the Company completed a private placement of
20,000 shares of common stock at $1.00 per share for a total offering of
$20,000.
COMPENSATORY SHARES
On January 10, 2000, 80,000 shares of common stock were issued at $.50
per share, or $40,000, as compensation to Adam Barnett.
On January 12, 2000, 16,654 shares of common stock were issued at $.50
per share, or $8,327, as compensation to Trevor Alfred.
On February 1, 2000, 20,000 shares of common stock were issued at $1.00
per share, or $20,000, as compensation to Jennifer Casciorizzo.
On February 22, 2000, 700 shares of common stock were issued at $1.50
per share, or $1,050, as compensation to Trevor Alfred.
8
<PAGE>
On February 28, 2000, 12,000 shares of common stock were issued at
$2.25 per share, or $27,000, as compensation to IC Services.
On March 10, 2000, 2,000 shares of common stock were issued at $1.875
per share, or $3,750, as compensation to Trevor Alfred.
PREFERRED STOCK
The Company is authorized to issue up to 6,000,000 shares of $5.00 par
value convertible preferred stock. The rights and privileges of the shares will
be determined by the Company's Board of Directors at the time of issuance. None
of the shares have been issued.
NOTE 7 - COMMITMENTS
RENT AND SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Corporation ("Villiers") whereby Villiers has agreed to provide office space
and various business services to the Company for a monthly fee of $15,000.
The agreement had an initial one-year term that expired on May 28, 1999, and
provides for automatic one-year renewals unless canceled by either party in
writing. The Company's Chief Executive Officer/President/Director/Stockholder
is a stockholder and director and the Interim Vice President of Finance and
Administration/Director/Stockholder is a stockholder and officer,
respectively, in Villiers.
FINANCIAL ADVISORY SERVICES AGREEMENT
The Company has entered into an agreement with Villiers Capital
Partners, LLC ("VCP"), a wholly owned subsidiary of Villiers Capital
Corporation, whereby VCP has agreed to provide corporate finance, investor
relations, strategic and capital planning and other financial and management
advice for a monthly fee of $3,500. The Agreement has an initial five-year
term expiring October 31, 2003 and provides for automatic one-year renewals
unless cancelled by either party in writing. In addition to the monthly fee,
VCP will receive a commission for any funds they raise for the Company in
accordance with the "Lehman" formula, which ranges from one to five percent
of funds raised.
9
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with the Chief Executive
Officer/President/Director commencing on June 1, 1998 for five years ending on
May 31, 2003. The agreement may be renewed for another five-year term at
mutually agreed upon terms and conditions. Salaries for the five years are
$150,000, $180,000, $240,000 $240,000 and $300,000. No salaries were paid during
the years ended June 30, 1999 and 1998 (see Note 6). Bonuses for the five years
of up to $80,000, $120,000, $120,000, $120,000 and $120,000 may be granted based
upon the Company's performance against financial targets as determined by the
board of directors. No bonuses were granted for the years ended June 30, 1999
and 1998. Ten-year warrants for common stock priced at $.05 are granted for the
five years as follows: 1,000,000 warrants, 1,500,000, 1,500,000, 1,500,000, and
2,000,000. All warrants are issued as of the last day of the fiscal year
beginning June 30, 1999. The number of warrants shall be adjusted for any splits
or reverse splits of the Company's common stock.
The Company has an employment agreement with the Interim Vice President
of Finance and Administration/Director commencing on June 30, 1998 for an
initial six-month term. The agreement shall automatically renew for successive
six-month terms unless cancelled by either party. Monthly salaries for the first
three six-month terms are $3,500, $5,000 and $5,000. No salaries were paid
during the years ended June 30, 1999 and 1998 (see Note 6). Subsequent six-month
terms shall be at a monthly salary of $7,500. Bonuses may be granted based upon
the Company's performance against financial targets as determined by the board
of directors. No bonuses were granted for the years ended June 30, 1999 and
1998. Ten-year warrants for common stock priced at $.05 shall be granted at the
rate of 100,000 warrants per month issued on the first of each month beginning
July 1, 1998. The number of warrants shall be adjusted for any splits or reverse
splits of the Company's common stock.
The Company has an employment agreement with its Vice President of
Operations commencing on May 1, 1999 for four years at a salary of $7,500 per
month.
The Company has an employment agreement with its Vice President of
Marketing commencing on September 1, 1999 for five years at a salary of $60,000
per annum, payable at the rate of $5,000 a month.
WAREHOUSE LEASE
The Company, through its subsidiary, leases 55,000 square feet of
warehouse space from the Port of Pensacola, Florida. The Company has renewed
this lease for a ten-year term expiring January 4, 2010.
Minimum annual commitments under a non-cancelable lease in effect are
as follows:
10
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 4
--------------------
<S> <C>
2001 $60,000
2002 $65,000
2003 $70,000
2004 $75,000
2005 $85,000
2006 $90,000
2007 $95,000
2008 $100,000
2009 $105,000
2010 $110,000
</TABLE>
This guaranteed annual minimum would consist of the following fees -
wharfage, dockage, handling, and stevedore - that would generate as the result
of Southern Hardwoods having a presence at the Port. The wharfage rates in
effect during the initial term of this lease shall be as follows: $1.40 for
annual short tons from 1 to 30,000; $1.20 for annual short tons from 30,001 to
60,000; and $1.00 for annual short tons from 60,001 and greater.
NOTE 8 - INDUSTRY SEGMENTS
The Company operates substantially in one industry segment as described
in Note 1.
11
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.1* CERTIFICATE OF INCORPORATION OF TIMBER
RESOURCES INTERNATIONAL, INC.
2.2* BY LAWS OF TIMBER RESOURCES INTERNATIONAL,
INC.
2.3* ARTICLES OF INCORPORATION OF SOUTHERN
HARDWOODS, INC.
6.1* BINDING LETTER OF INTENT - ACQUISITION OF
SOUTHERN HARDWOODS, INC.
6.2* U.S. DEPARTMENT OF AGRICULTURE IMPORT
PERIOD FOR PLANTS AND PLANT PRODUCTS -
SOUTHERN HARDWOODS, INC.
6.3* EXCLUSIVE PURCHASING AGREEMENT WITH
HARDWOODS LIMITED DATED NOVEMBER 1,
1999.
6.4* AGREEMENT FOR EXCLUSIVE DISTRIBUTION WITH
TIMBER PRODUCTS, S.A. AND TIMBER TRADERS,
S.A., INC. DATED DECEMBER 2, 1999
6.5* EXCLUSIVE PURCHASING AGREEMENT WITH
TIMBER TRADERS, S.A., INC. DATED JANUARY 4,
2000
6.6* LEASE BETWEEN SOUTHERN HARDWOODS, INC.
AND CITY OF PENSACOLA, FLORIDA DATED
NOVEMBER 18, 1999
</TABLE>
----------------------------------
* Previously filed
<PAGE>
<TABLE>
<S> <C>
6.7* AGREEMENT FOR CERTAIN SERVICES AND
AMENITIES WITH VILLIERS CAPITAL CORPORATION
DATED MAY 28, 1998.
6.8* FINANCIAL ADVISORY AGREEMENT WITH VILLIERS
CAPITAL PARTNERS, LLC DATED NOVEMBER 1,
1998
6.9* EMPLOYMENT AGREEMENT WITH AZIZ HIRJI
DATED JUNE 1, 1998
6.10* EMPLOYMENT AGREEMENT WITH ANNA PETINOVA
DATED JUNE 1, 1998
6.11* EMPLOYMENT AGREEMENT WITH HENRY MIDDEN
DATED MAY 1, 1999
6.12* EMPLOYMENT AGREEMENT WITH PETER MAHARAJ
DATED SEPTEMBER 1, 1999
27* FINANCIAL DATA SCHEDULE
</TABLE>
-------------------------------------
* Previously filed
