UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended March 31, 1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from to
Commission file number 0-16523
MADERA INTERNATIONAL, INC.
(Name of small business issuer in its charter)
Nevada 68-0318289
(State of incorporation) (I.R.S. Employer Identification No.)
9455 Collins Avenue, Suite 308, Surfside, Florida 33154
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (305) 865-8840
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common stock, $01 par value
(Title of class)
Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during
the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
(X) YES ( ) NO
As of June 3, 1996 , 49,661,919 common shares were outstanding and
the aggregate market value of the common shares (based upon the
average bid and asked prices on such date) of the Registrant held
by nonaffiliates was approximately $4,469,572.
Check if there is no disclosure of delinquent filers in response to
item 405 of Regulation S-B contained in this form,
and no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form IO-KSB or any
amendment to this Form IO-KSB. ( )
Revenues for the fiscal year ended March 31, 1996 totaled $189,000.
Documents incorporated by reference: See Item 13 hereof.
Total number of pages in this document: 33
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
1. SUMMARY
Madera International, Inc., a Nevada corporation, merged in
February, 1994, with Weaver Arms Corporation, its parent
("Weaver"), with Weaver changing its name to "Madera
International, Inc" ("Registrant"). Weaver emerged from its
Chapter 11 reorganization proceeding ("Bankruptcy Proceeding") on
January 21, 1994. Weaver entered the Bankruptcy Proceeding on
July 14, 1989 and operated as a debtor-in-possession until the
Bankruptcy Court entered an order confirming Registrant's Second
Amended Plan of Reorganization (As Modified) (the "Plan") on
January 21, 1994.
Pursuant to the Plan, creditors and other claimants received
Units consisting of one (1) share of Registrant's common stock
and one (1) Class A warrant entitling the holder to purchase one
(1) share of the Registrant's common stock at a price of $3.00
per share if exercised prior to August 29, 1994. The exercise
price increases to $3.50 between August 30, 1994 and February 1,
1995 (date of termination), unless extended by the Registrant's
board of directors. Upon exercise of the Class A warrant, the
holder shall receive one (1) Class B warrant for the purchase of
one (1) share of Registrant's common stock at an exercise price
of $5.00 per share. The Class B warrant is exercisable until
February 1, 1995, unless extended by the Registrant's board of
directors. On February 28, 1996, the Registrant's board of
directors extended both the Class A warrant and the Class B
warrant until February 1, 1997.
Each Class A and Class B warrant is redeemable by Registrant
for $0.01 per warrant, at any time after January 21, 1994, upon
30 days prior written notice to the holder thereof. Upon written
notice to the appropriate parties and/or regulatory agencies, the
Registrant has the right to reduce the exercise price and/or
extend the term of the Class A and Class B warrants.
Upon confirmation of the Plan, the Registrant began to
engage in the business of harvesting and exporting timber from
Nicaraguan timberland. This timberland was previously owned by
and was purchased from Madera H.P.Z. and Importaciones y
Exportaciones, S.A. (the "Nicaraguan Corporations") in accordance
with an order entered by the U.S. Bankruptcy Court on January 13,
1994. The Nicaraguan Corporations owned the equivalent of fee
simple title to approximately 4,000 square kilometers of land,
which included the right to harvest and export the timber growing
thereon. As consideration for this purchase, the Registrant
issued a promissory note in the amount of $5,000,000 secured by
the land purchased. The Secured Timber Note was convertible at
the option of the Nicaraguan Corporations into 49% of the
Outstanding common stock and Class A warrants of the Registrant
to be issued under the Plan, and was converted effective January
20, 1994.
Subsequent to the original agreement, valuation of the
<PAGE>
assets acquired was received. These valuations were
significantly higher than the original estimate. Also, stock
issued for the properties was trading at a level that caused a
revaluation to occur. The new values were reflected in the
Registrant's audited financial statement for the fiscal year
ended March 31, 1994, however, further acquisitions in the same
area as reflected in the Proforma Financial Statements forced a
total revaluation of the properties. Additional stock was issued
to compensate for the revaluation. Management believes the value
of $12 Million placed on the property was fairly stated based
upon the fair value of common stock issued at the time of
conversion.
In addition to the 10,200,000 pre-split shares of the
Company's common stock issued for the acquisition of the
property, the Company issued 1,013,500 pre-split shares of its
common stock to four entities as fees associated with the
acquisition. The value of these shares was determined to be
$1.00 per share for 970,000 pre-split shares of exempt shares and
par value, or $.01 per share, for 43,500 pre-split restricted
shares.
As a result of the issuance of the aforementioned shares of
common stock, the Company's investment in the property was
$12,970,435.
During the fiscal year ending March 31, 1995, the government
of Nicaragua withdrew the extraction rights for all of the
400,000 hectares owned by the Company in Nicaragua. This
significantly reduced the value of the property. Management
decided to write-off the full $12,970,435 value of the Nicaraguan
assets during the fiscal year ending March 31, 1995. As part of
this write off, 5,000,000 shares of the 10,200,000 shares
originally issued for the acquisition were recovered and
cancelled.
In February 1994, Registrant also entered into a ten year
joint venture with Insumas Electoricos e Industriales, C.A.
("Inselinca"), a large timber concessionaire in Venezuela.
Registrant purchased a 50% interest in all of the timber
concessions owned by Inselinca, amounting to 325,000 hectares
(813,000 acres), for 1,000,000 shares of preferred stock with a
face value of $3 per share totaling $3,000,000. For conservative
valuation purposes, the timber concessions of Inselinca were
valued at $6,000,000.
Registrant had no ownership in Inselinca, but was to receive
and maintain a fifty percent (50%) ownership in the concessions
acquired by the Registrant. This transaction was reversed during
the quarter ended September 30, 1994. The Inselinca group could
not demonstrate the values previously warranted to the
Registrant, and due to conflict with the acquisition of hardwood
in other parts of South America, Management decided to reverse
the transaction. As a result, the Registrant rescinded its
original joint venture agreement with Inselinca, and cancelled
the 3,000,000 shares of its Class A Preferred stock originally
issued.
The Registrant's reversal of the aforementioned transactions
was offset by Registrant's acquisition of properties in South
America. In July 1994, Registrant entered into an agreement with
Ramiro Fernandez-Moris and his family to acquire assets held by
<PAGE>
them in the family owned corporation Forest and Environmental
Resources of the Amazon, Inc. ("FEROA"). These assets consist of
478,000 acres of fee owned timber producing property in Brazil,
as well as substantial acreage in Bolivia and Peru that are long
term concessions. The value of these properties is based upon an
independent third party appraisal supplied as part of the due
diligence procedure. The value used is $27,000,000. In addition
to the real property, a working sawmill was also acquired as part
of the agreement. This sawmill is located in Brazil, and is in
operation. It's appraised value is $2,600,000. It has a
capacity of 200 cubic meters a day. The final part of the
acquisition consists of existing inventory of banac and cedar at
cost of $630,000.
The consideration for this purchase was 10,000,000 shares of
Class B Preferred stock, convertible into a maximum of 15,000,000
shares of common stock to be adjusted by any stock splits and
subject to the production of earnings of $2,000,000 annually from
the assets acquired. A finders fee was paid for this acquisition
amounting to approximately five percent (5%) of the acquisition
value. The Preferred shares issued to the principals for this
transaction have been converted into Common shares as of March 3,
1996, the Preferred shares issued to the finders are still
outstanding.
On August 15, 1994, Registrant through its wholly-owned
subsidiary LVA, Inc. ("Newcorp") acquired one hundred percent
(100%) of the issued and outstanding shares of Las Vegas
Airlines, Inc., a Nevada Corporation ("LVA"). LVA operates
scheduled service to the Grand Canyon as well as chartered
services. In exchange for the LVA shares, Newcorp was to pay one
hundred thousand dollars ($100,000) in cash and to issue a four
hundred thousand dollar ($400,000) promissory note, payable in
monthly installments through March 1, 1995. In exchange for
fifty one percent (51%) of the LVA shares, Registrant agreed to
issue one million five hundred thousand (1,500,000) of its
convertible preferred stock to the former LVA shareholder. The
LVA shares were delivered into an escrow and were to be released
as installment payments on the Note were made by Newcorp. Prior
to any payment by Newcorp to LVA, one of LVA's planes crashed.
Due to LVA's potential liability as a result of this accident,
Newcorp withdrew from the transaction. Newcorp was formed for
the purpose of this transaction, and is non-operational.
January 10, 1995, Registrant entered into a letter
agreement with Ralph Financial Corporation ("RFC"), pursuant to
which Registrant acquired the rights to 400,000 hectares of
timber producing properties in Brazil in exchange for 12,000,000
newly issued shares of Series C Preferred Stock with a stated
value of $1.00 per share. Registrant determined that the
representations made by RFC were not accurate. Registrant
rescinded the transaction as of December 15, 1995 (See Item
13.b., Reports on Form 8-K). The shares issued by Registrant for
this transaction have been cancelled, however, legal action may
be required to recover them.
On March 30, 1995, Registrant entered into a Timber
Concession Purchase Agreement with Mandarin Overseas Investment
Co., Ltd. ("Mandarin") for the acquisition of a twenty three and
one half percent (23.5%) interest in a mahogany rich concession
in Peru. The Registrant had certain disputes with Mandarin. In
the resolution of those disputes, the Registrant acquired an
additional sixty percent (60%) interest, bringing the
<PAGE>
Registrant's total interest to 83.5%. The concession encompasses
30,000 hectares and has approximately 400 million board feet of
marketable hardwood in reserve. The concession is for ten (10)
years with a renewable option for an additional ten (10) years,
and a further option to turn the concession into fee ownership
for a minimal cost. The extraction rights are approximately
270,000 cubic meters annually.
The purchase price of this acquisition is one million five
hundred thousand dollars ($1,500,000), payable as follows: the
Registrant will issue common stock in 1996 when approved by its
Board of Directors.
BUSINESS
Registrant specializes in the harvesting and exportation of
timber products from Central and South America to buyers
throughout the world. Registrant owns approximately 478,000
acres of prime timber property in the State of Amazonas, Brazil.
This property has abundant species of commercial value,
including Spanish Cedar, Banak and Marupa. Harvest is seasonal.
Raw materials are transported by river to the Company's mill,
the Froeste Wood Saw Mill, located at Rua de Maio, Benjamin
Constat, Amazonas, Brazil. At the end of the March 31, 1996
fiscal year, an inventory of approximately 6,666,000 board feet
of cedar, marupa and banak in various sizes of rough cut lumber
were awaiting customer orders. Lumber is sold to established
customers who are members of the National Hardwood Lumber
Association (NHLA). The NHLA sales code applies to established
uniform practices in the conduct and regulation governing
elements of all transactions.
In May 1995, Registrant acquired an interest in
approximately 30,000 hectares of prime timber producing property
in Peru. This land is rich in mahogany, and will begin supplying
revenues in late 1997.
In its first full year of harvesting operation, which should
commence in late 1996, Madera plans to harvest 1,000 hectares of
forest which will produce 35 cubic meters of wood in the round
per hectare, or 35,000 cubic meters of wood in the round. This
converts into nearly 15 million board feet of timber. This
program will increase in subsequent years. The timber will be
sold throughout the world to wholesalers and end users. The
selective felling of timber will be supported by a reforestation
program, which includes surveys and forest inventories, and
promotes preservation and conservation of those areas affected by
the harvesting program.
In order to realize the maximum return of its timber
properties, Registrant will be required to make a substantial
investment in its timber operation. Registrant will be dealing
with contract labor in the countries in which it has properties,
therefore, will have little responsibility for labor.
Registrant's management intends to balance the pursuit of
profits with the needs of the fragile environment. Registrant
is committed to an extensive reforestation program, planting more
new trees than harvested. This will ensure that every acre is
<PAGE>
fully restocked to guarantee a continual supply of trees for the
future, while maintaining the precious wildlife, water resources
and ecosystem of the forest.
Based on recent prices of comparable lumber as that found on
Registrant's property, initial price indicators conservatively
estimated sales prices of $1.00. per board foot. It should be
noted that this is an average price considering the mix of
hardwoods being marketed by Registrant. These estimates would
generate sales of $10 Million U.S. in Registrant's first full
year of operation, building to $40 Million U.S. annually in four
years.
Employees
The Registrant has no employees; all services are performed
by outside contractors or officers/directors (see "ITEM 11.
EXECUTIVE COMPENSATION"). Most of the efforts of the Registrant
will be performed by contract labor in the particular country
wherein the timber operations occur. It is anticipated that
several hundred laborers will be employed in each of the
countries in which the Registrant is actively harvesting and
distributing timber and related products.
ITEM 2. DESCRIPTION OF PROPERTY
Registrant leases it's office space (approximately 990
square feet) on a month to month basis at the rate of $1,386.00
per month. Subsequent to year end, offices of Registrant will
move to Miami, Florida, with new space commitment.
ITEM 3. LEGAL PROCEEDINGS
On January 11, 1995, the Company was named as a defendant
in a case entitled Harris Forest Products, Inc., an Oregon
Corporation vs. Madera International, Inc., a Nevada Corporation,
filed January 11, 1995 in the Circuit Court for the State of
Oregon, County of Clackamas, Case No. 95-01-165. Plaintiff
alleged breach of contract, alleging that it entered into an
agreement on August 4, 1994 with the defendant for the purchase
and sale of railroad ties, that defendant failed to ship the
order, and that plaintiff suffered damages for lost profits in
the amount of $10,990,000.00. The plaintiff further alleged
breach of contract arising from an alleged agreement between the
plaintiff and defendant for the purchase and sale of one million
board feet of kiln dried Caribbean Pine, claiming damages in the
amount of $4,100,760.00. Plaintiff's third claim was based on an
alleged account that was stated between plaintiff and defendant
in the amount of $3,520.25 for sums allegedly advanced by
plaintiff to defendant. On March 6, 1995 a default judgment
was taken in the amount of $15,940.483.25. The defendant filed a
Motion for Relief from Judgment on April 11, 1995. An Order
Granting Defendant's Motion for Relief from Judgment was entered
on May 15, 1995. Management denies all essential allegations of
this case. On March 1, 1996, a pretrial settlement conference
was held at which the parties agreed to a Stipulated Judgement
With Covenant Not to Record or Execute (See Exhibit No. 2.1). A
settlement in the amount of $50,000.00 was agreed upon, with
<PAGE>
payment of $25,000.00 to be made by the Company on or before July
1, 1996, and a second payment of $25,000.00 to be made on or
before January 1, 1997. In the event of default, Plaintiff shall
be entitled to collect the full judgement of $100,000.00 plus
statutory interest at the rate of 9% per annum.
Wrights Executives, Inc., dba, Beacon Hill Resources vs.
Madera International, Inc., a Nevada Corporation, filed on
February 7, 1995, in the District Court of the State of Nevada,
County of Cark, Case No. A 342542 is a matter whereby the
plaintiff alleged that it was owed $125,736.03 resulting from an
agreement entered into by plaintiff and Forest and Environmental
Resources of the Amazon, Inc. ("FEROA"), pursuant to which the
plaintiff agreed to loan FEROA $70,137.00, with interest to
accrue at the rate of one and one-half percent (1 1/2%) per
month. In furtherance of the agreement, FEROA executed a
promissory note in the amount of $88,000.00 on July 2, 1988 in
favor of plaintiff. Plaintiff alleged that FEROA transferred
all of its assets consisting of timber properties and concessions
to defendant, and that stock paid by the defendant in
consideration of the transfer was not transferred to FEROA, but
to Ramiro Fernandez-Moris, the chairman of FEROA, resulting in
FEROA becoming insolvent, and unable to pay its obligation to the
plaintiff. A Motion for Summary Judgment against the Company was
substantiated on November 27, 1995, and the Company ordered to
pay the sum of $158,834.00 to the Plaintiff. Registrant has
settled this matter on behalf of Registrant, Ramiro Fernandez-
Moris and FEROA. The settlement is for $171,500.00, payable at a
minimum of $5,000.00 per month, commencing May 1996, and
continuing until the debt is paid off. Plaintiff has the option
to convert into common stock at a 25% discount from the bid price
as long as the bid price is $0.50 per share or higher. This
option applies only after the stock reaches a bid price of $0.50,
and may be exercised in any portion of the total value.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security
holders during the year ended March 31, 1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
1. MARKET INFORMATION
The Company's Common Stock has been trading in the over-the-
counter market since May 13, 1994. There is no established
public trading market for the Company's Class A warrants issued
under the Plan. Bid and ask prices for the Common Stock are
carried electronically on the National Daily Quotation Service's
Bulletin Board under the symbol "WOOD" and are published in by
the National Quotation Bureau, Incorporated in the "pink sheets."
The range of high and low bids for the Company's Common Stock
from the periods indicated are as set forth in the following
table:
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended March 31, 1996
Common Common Class
Quarter Range Stock-Bid Stock-Asked A Warrants
- ------- ----- --------- ----------- ----------
<S> <C> <C> <C> <C>
1 High 0.06 0.16 (1)
Low 0.06 0.12 (1)
2 High 0.15 0.30 (1)
Low 0.08 0.12 (1)
3 High 0.08 0.12 (1)
Low 0.07 0.10 (1)
4 High 0.08 0.10 (1)
Low 0.06 0.08 (1)
<FN>
__________________
(1) Not quoted.
</TABLE>
Source: Report dated 5/31/96 Real Time Quotes, from the National
Quotation Bureau, Incorporated, Cedar Grove, New Jersey
(The foregoing information is believed to be accurate, but is not
guaranteed.) The quotations listed above represent prices between
dealers and do not include retail mark-up, mark-down or commission
and there can be no assurance that they represent actual
transactions.
Market Makers:
1. Fahnstock & Co.
2. First London Securities Corporation.
3. La Jolla Capital Corporation
4. M. H. Meyerson & Co.
5. Naib Trading Corporation
6, Paragon Securities
7. Wien Securities
There is presently no trading market of any kind for the
Company's Class A warrants.
As of May 29, 1996, 641,000 shares of the Registrant's common
Stock were eligible for sale under Rule 144, subject to certain
limitations included in such Rule. In general, under Rule 144, a
person (or persons whose shares are aggregated) who has satisfied
a two year holding period, under certain circumstances, may sell
within any three month period a number of shares which does not
exceed the greater of 1% of the Registrant's then outstanding
Common Stock or the average weekly trading volume of such Common
Stock during the four calendar weeks prior to such sale. Rule 144
also permits, under certain circumstances, the sale of shares
without any quantity limitation by a person who has satisfied a
three-year holding period and who is not, and has not been for the
preceding three months, an "affiliate" of the Registrant.
Other than the Class A and B warrants issued in connection
with the Plan, there are not presently outstanding any options,
warrants or other rights to purchase, or any securities
convertible into or exchangeable for, shares of the Common Stock
<PAGE>
of the Company. Registrant has one (1) class of Preferred Stock
outstanding which is convertible into common stock (see "ITEM 1.
DESCRIPTION OF BUSINESS - 1. SUMMARY").
The Class A warrant entitles the holder to purchase one (1)
share of the Registrant's common stock at a price of $3.50 per
share if exercised prior to February 1, 1997. Upon exercise of
the Class A warrant, the holder shall receive one (1) Class B
warrant for the purchase of one (1) share of Registrant's common
stock at an exercise price of $5.00 per share. The Class B
warrant will be exercisable until February 1, 1997, unless
extended by the Registrant's board of directors.
Each Class A and Class B warrant is redeemable by the
Registrant for $0.01 per warrant, at any time after January 21,
1994, upon 30 days prior written notice to the holder thereof.
Upon written notice to the appropriate parties and/or regulatory
agencies, the Registrant shall have the right to reduce the
exercise price and/or extend the term of the Class A and Class B
warrants.
The Registrant has not granted any rights, or otherwise
agreed, to register any shares of the Common Stock of the
Registrant under the Securities Act of 1933 for any security
holder.
II HOLDERS
As of June 3, 1996, there were approximately 2,051 record
holders of the Registrant's Common Stock. See "Description of
Securities." This includes 551 direct holders and approximately
1,500 street holders.
III DIVIDENDS
A. Since inception, the Registrant has not paid any
dividends on its capital stock.
B. The Registrant does not foresee that it will have the
ability to pay any dividends on its capital stock during the
fiscal year ending March 31, 1997, nor does management have any
present intention to pay any dividends in the foreseeable future.
At the present time, the Registrant's anticipated working capital
requirements are such that it intends to follow a policy of
retaining earnings in order to finance the future expansion and
development of its business. See "Description of Securities."
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
1. PLAN OF OPERATION
The Registrant has set up a network of brokers that are
beginning to supply potential customers for the products to be
shipped. Upon receipt of approval of product available for
shipment, Registrant's staff will inform the brokers of the
product's availability. At that time, the brokers will inform
customers and the flow of product will begin. It should be noted
that all customers that require financing for shipments will be
required to be approved by financiers before any shipment is
arranged.
Regular shipments of product have commenced in 1996 to
customers in Italy.
<PAGE>
II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Registrant continues to accumulate inventory in Brazil.
All administrative expenses are being held to a minimum and will
continue in that manner. Based upon the inquiries that have been
generated by the sales force, it appears that the projections
included in the Plan or Reorganization can still be achieved. The
shipments, however, are dependent upon financing which the
Registrant expects to acieve in the third quarter of 1996.
The producing properties now held by the Registrant encompass
approximately 600,000 acres.
The Registrant's working capital resources during the years
ended March 31, 1995 and March 31, 1996 have been provided
primarily from two sources: (1) the efforts of the Management of
the Registrant in bringing capital to the Registrant through the
use of Private Placements, as well as direct loans arranged by
Management, and (2) direct loans from it's investment bankers.
The commitments from these sources have led the Company to a
working capital balance at March 31, 1996 of
$(588,627) versus a working capital balance of $187,573 at the
1995 fiscal year end. The ngative working capital as of March 31,
1996 arises from the inclusion of two items in the Current
Liability Section of the Registrant's Balance Sheet (See Financial
Statements, Page F-4 and Page F-5). These items; Stock to be
Issued and Loans from Insiders, will be converted into equity in
the coming fiscal year, thus improving the working capital for
fiscal 1997.
Registrant is in the process of actively marketing its
product. Whereas it was originally thought that minimal marketing
effort would be required due to the world wide shortage of timber
products, Registrant has learned that marketing and sales efforts
are required. These efforts both increase the cost of the product
and increase the need for capital and financing. These increased
needs add additional risk to the success of Registrant in
establishing itself in this industry. Therefore, Registrant will
actively pursue strategic alliances with industry participants
that may eliminate or reduce this risk factor. Registrant cannot
assure its shareholders that it will be successful in this quest.
ITEM 7. FINANCIAL STATEMENTS
See Pages F-1 through F-15 attached hereto for copies of the
audited annual financial statements of the Company.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; Compliance With Section 16(a) of the Exchange Act.
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Name Age Position
<S> <C> <C>
Ramiro Fernandez-Moris 67 President, Chief Executive
Officer, Director, and
Chairman of the Board
Daniel Lezak 62 Director(1)
Ray Fernandez 41 Executive Vice President
- Sales
Regina Fernandez 36 Secretary
Roman Fernandez-Moris 39 Vice President and Director
<FN>
(1) Daniel Lezak resigned as Director on May 1, 1996.
</TABLE>
Mr. Ramiro Fernandez-Moris produced lumber from family owned
timberlands in Cuba until he was forced into exile by Castro's
regime. In 1962, he founded Karobi Lumber Company in Florida,
trading significant amounts of Banak and Mahogany logs from
Colombia, Equador, and Brazil. In 1968, he organized Tropical
Lumber Company to expand production to Brazil, Peru, and Bolivia.
During the 1962-1968, 1978-1985, and 1987-1989 periods, Mr.
Fernandez-Moris was a supplier for Georgia Pacific at various
locations. Mr. Fernandez-Moris was Chairman of the Board and
Treasurer of Forest & Environmental Resources of the Amazon, Inc.
Mr. Lezak is a certified public accountant and business
management consultant with over 30 years experience in management,
finance and securities transactions. Since 1965, Mr. Lezak has
been rehabilitating financially distressed companies, both public
and private. This rehabilitation has been accomplished through
various means, some of which are acquisition, reorganization and
sale. He specializes in Chapter II bankruptcies and has been
instrumental in the revitalization of over 50 companies through
these proceedings. Prior to establishing his own business, Mr.
Lezak was a corporate trouble shooter and executive for Remanco,
Inc., Hughes Aircraft, Winsco Instruments and Controls, which
merged into Genisco Technology Corp., and John Retiz and Company.
Mr. Lezak currently is an Officer and/or Director of General
Residential Corporation and Turbo, Inc., both of which are public
companies. On May 1, 1996, Mr. Lezak resigned as Chairman and
Director, and assumed the role of Chairman of the Advisory Board.
Mrs. Regina Fernandez, born in Havana, Cuba, and a resident
of Miami since 1960, attended Miami-Dade Community College. In
1980, she joined the staff of 1st Nationwide Saving and in 1982
was promoted to Operations Manager, responsible for the
supervision of 23 employees. She was the only 1st Nationwide
Savings employee in Florida to be honored in 1983 and 1984 for
outstanding job achievements. In 1985, Mrs. Fernandez was
employed by Karobi Lumber, where she specialized in organization,
administration, distributions, and financing, and was assigned to
South American operations in Brazil, Peru and Bolivia. In 1992,
<PAGE>
Mrs. Fernandez joined World Trade Services, heading lumber
operations, contracting lumber sales and procurement from South
America as well as domestic suppliers. In 1994, she was employed
as a Commercial Expert for Bureau Veritas, N.A., working closely
with the international trading industry. On March 2, 1996, Mrs.
Fernandez joined Madera as Secretary.
Mr. Ramiro (Ray) Fernandez-Moris, Jr. attended the National
Hardwood Lumber Association Inspection Training School in 1976,
specializing in the study of quality control and the technical
aspects of the lumber business. He has been involved in lumber
sales, trading, and marketing for many years.
Mr. Roman Fernandez-Moris attended the National Hardwood
Lumber Association inspection training school in 1976. He was a
supervisor for Pat Brown Lumber Co., in Roxboro, North Carolina
from 1977 to 1979. From 1979 to 1984, Mr. Fernandez-Moris was an
exclusive contractor for Kimball International, specializing in
the procurement of tropical species. From 1984 until 1986, he was
associated with Georgia Pacific in Savannah, Georgia. Mr.
Fernandez-Moris was Director of Field Operations in Peru for
Comercial Maderara during 1987-1992, and served as President and
Director of Forest & Environmental Resources of the Amazon, Inc.
from May 1993 until August 1994.
ITEM 10. EXECUTIVE COMPENSATION
No executive officer of the Company earned in excess of
$120,000 during the fiscal year ended March 31, 1996. All
executive officers as a group (5 persons) received cash
compensation of approximately $64,214 during the fiscal year ended
March 31, 1996. The salaries of officers will be set by the
board of directors of the Registrant. No officer will receive
more than $120,000 in annual compensation until the volume of
Registrant's sales exceeds $5,000,000, or the Registrant's profits
exceed $250,000 for two successive quarters, whichever first
occurs.
Except for the Stock Option Plan described below, the Company
does not have any formal bonus plans, stock option plans or any
other similar compensation plans for its executive officers.
Directors of the Company do not receive any compensation for
attendance at meetings of the Board of Directors.
In June 1994, the Company adopted a stock option plan (the
"Plan") to attract and retain qualified persons for positions of
substantial responsibility as officer, directors, consultants,
legal counsel, and other positions of significance to the Company.
The adoption of the Plan was ratified by the Company's
shareholders August 1994, at the Company's next Annual Meeting of
Shareholders. The Plan provides for the issuance of both
Incentive Stock Options and Non-Qualified Stock Options. The
Plan, which is administered by the Board of Directors, provides
for the issuance of a maximum of two million (2,000,000) options
to purchase shares of common stock at the market price on the date
of grant. Such options are exercisable over a 10 year period from
the date of grant. Each option lapses, if not previously
exercised, on the 10th anniversary of the date of grant or 90 days
after the optionee has terminated his continuous activity with the
<PAGE>
Company, except that if his continuous activity with the Company
terminates by reason of his death, such option of the deceased
optionee may be exercised within one year after the death of such
optionee, but in no event later than five years after the date of
grant. Options granted Linder the Plan to Company employees may
not be sold, pledged, assigned or transferred in any manner
otherwise than by will or the laws of descent or distribution.
Options granted under the Plan to persons who are not Company
employees may be sold, pledged, assigned, or transferred to other
persons who, at the time of such sale, pledge, assignment or
transfer, qualify as optionees under the Plan.
Compliance with Section 16(a) of Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors and executive officers, and persons who
own more than ten percent of a registered class of the Company's
equity securities to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the
Registrant. Officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish the
Registrant and Exchange with copies of all Section 16(a) forms
they file. All of these filing requirements were satisfied.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information as of June
3, 1996 with respect to the beneficial ownership of the
Registrant's Common Stock, par value $.0l per share, by holders of
more than 5% of the Registrant's Common stock, by each director
and executive officer of the Registrant, and by all directors and
officers of the Registrant as a group. This calculation is based
only upon the shares issued and does not give effect to Class A
Warrants since there is not expressed intent to convert the
warrants into common stock.
<TABLE>
<CAPTION>
Number of Shares Percent
Name of Beneficial Owner Beneficially Owned(l) of Class(2)(5)
Common Stock
<S> <C> <C>
Daniel Lezak 1,870,416 (3)(4) 4%
Ramiro Fernandez-Moris 20,700,000 (3)(4) 42%
Regina Fernandez-Moris 125,000 (5)
Roman Fernandez-Moris 202,000 (5)
Ramiro (Ray) Fernandez-Moris, Jr. 202,000 (5)
All directors and officers as a group (5 individuals)
Common Stock 23,099,416 47%
<PAGE>
<FN>
(1) Unless otherwise indicated, all shares are beneficially owned
and the sole voting and investment power is held by the
person named in the table above. The address for each beneficial
holder is c/o the Company,
(2) Based upon 49,661,919 shares of Common Stock outstanding.
See "Description of Securities.
(3) 1,803,749 of these shares are owned by entities in which Mr. Lezak
is General Manager. Mr. Lezak disclaims any beneficial
ownership in such shares.
(4) Includes 82,917 shares which are owned by the Lezak Family Trust.
(5) Less than One Percent (1%).
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Upon confirmation of the Plan, the Registrant began to engage
in the business of harvesting and exporting timber from Nicaraguan
timberland. This timberland was previously owned by and was
purchased from Madera H.P.Z. and Importaciones y Exportaciones,
S.A. (the "Nicaraguan Corporations") in accordance with an order
entered by the U.S. Bankruptcy Court on January 13, 1994. The
Nicaraguan Corporations owned the equivalent of fee simple title
to approximately 4,000 square kilometers of land, which included
the right to harvest and export the timber growing thereon. As
consideration for this purchase, the Registrant issued a
promissory note in the amount of $5,000,000 secured by the land
purchased. The Secured Timber Note was convertible at the option
of the Nicaraguan Corporations into 49% of the outstanding common
stock and Class A warrant) of the Registrant to be issued under
the Plan, and was converted effective January 20, 1994.
The aforementioned transactions entered into with Noel Zepeda
Mejia and the Nicaraguan Corporations were written off during the
current fiscal year as a direct result of adverse action taken by
the government of Nicaragua. This action was the withdrawal of
all extraction rights for the property. Management was able to
recover 1,666,667 of the original 3,400,000 (post split) shares of
stock issued for this transaction, and the stock was cancelled
(see Note D. of Footnotes to Financial Statements).
In February 1994, the Registrant entered into a ten year
joint venture with Inselinca, a large timber concessionaire in
Venezuela (see Summary). This venture was rescinded after
learning that the access to timber in the concessions owned by
Inselinca was not as it had been represented. The stock issued
for that transaction has been cancelled.
The Registrant's investmant banking relationship with First
Capital Network was terminated during the fiscal year ended March
31, 1995, and there are no further ties between the Registrant and
that company. All debts of Registrant to First Capital Network
were paid.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
a. The following documents are filed as part of this report:
<PAGE>
Page
Number
(1) Financial Statements -
Report of Independent Accountants F-3
Balance Sheet at March 31, 1996 and 1995 F-4
Statement of Operations for the Years Ended F-6
March 31, 1996 and 1995
Statement of Changes in Stockholders' Equity F-7
for the Years Ended March 31, 1996, 1995 and 1994
Statement of Cash Flows for the Years Ended F-8
March 31, 1996 and 1995
Notes to Financial Statements F-9
(2) Exhibits to this report are as follows:
Ex. No. Description of Document
- ------- -----------------------
2.1 Stipulated Judgment With Covenant Not To Record Or Execute,
with respect to Item 3. Legal Proceedings.
b. Reports on Form 8-K - fourth quarter ended March 31, 1996
1. Form 8-K, dated December 15, 1995 with respect to Item 2.,
Acquisition or Disposition of Assets.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized.
MADERA INTERNATIONAL, INC.
Dated: June 21, 1996
By: /s/ Ramiro Fernandez-Moris
Ramiro Fernandez-Moris, Chief Executive Officer
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Signature Title Date
/s/ Ramiro Fernandez-Moris President, June 21, 1996
Ramiro Fernandez-Moris Chief Executive Officer
(Principal Executive Officer,
and Principal Financial
Officer) Director, and Chairman
of the Board
/s/ Daniel Lezak Director June 21, 1996
Daniel Lezak
/s/ Roman Fernandez-Moris Vice President June 21, 1996
Roman Fernandez-Moris and Director
<PAGE>
MADERA INTERNATIONAL, INC.
FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
F-1
<PAGE>
MADERA INTERNATIONAL, INC.
FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditor's Report................................ F-3
Balance Sheet............................................... F-4
Statement of Operations..................................... F-6
Statement of Changes in Stockholders' Equity................ F-7
Statement of Cash Flows..................................... F-8
Notes to Financial Statements............................... F-10
</TABLE>
F-2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
and Stockholders of Madera International, Inc.:
We have audited the balance sheet of Madera International, Inc.
as of March 31, 1996 and 1995, and the related statement of
operations, stockholders' equity, and cash flows for the years
then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these 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, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Madera International, Inc. as of March 31, 1996 and 1995, and
the results of it's operations and cash flows for the years then
ended in conformity with generally accepted accounting
principles.
/s/ Harlan & Boettger
June 11, 1996
F-3
<PAGE>
MADERA INTERNATIONAL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
March 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
ASSETS:
CURRENT ASSETS
Cash $ 82,607 $ 19,333
Accounts receivables (Note B) 189,000 4,000
Inventory (Note C) 490,000 630,000
----------- -----------
TOTAL CURRENT ASSETS 761,607 653,333
----------- -----------
OTHER ASSETS
Investment in timber producing
property (Note D) 30,100,000 42,700,000
Other investment (Note E) 1,500,000 -
Deposits 1,535 -
----------- -----------
TOTAL OTHER ASSETS 31,601,535 42,700,000
----------- -----------
$32,363,142 $43,353,333
=========== ===========
</TABLE>
F-4
<PAGE>
MADERA INTERNATIONAL, INC.
BALANCE SHEET
(Continued)
<TABLE>
<CAPTION>
March 31,
----------------------------
1996 1995
---------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES
Accounts payable $ 420,734 $ 225,213
Accrued expenses 58,354 26,886
Common stock payable (Note E) 423,750 -
Income taxes payable 1,600 800
Related party debt - current
portion (Note F) 445,796 229,661
----------- -----------
TOTAL CURRENT LIABILITIES 1,350,234 482,560
Related party debt, less
current portion (Note F) - -
----------- -----------
TOTAL LIABILITIES 1,350,234 482,560
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value,
250,000,000 shares authorized,
41,964,132 and 12,075,632 shares
issued and outstanding at March
31, 1996, and 1995 419,640 120,755
Additional paid-in capital 33,967,741 44,216,396
Preferred stock, $0.01 par value,
100,000,000 shares authorized,
500,000 and 22,500,000 shares
issued and outstanding at
March 31, 1996 and 1995 5,000 225,000
Retained deficit (3,379,473) (1,691,378)
----------- ----------
TOTAL STOCKHOLDERS' EQUITY 31,012,908 42,870,773
----------- ----------
$32,363,142 $43,353,333
=========== ===========
</TABLE>
F-5
<PAGE>
MADERA INTERNATIONAL, INC
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended March 31,
-------------------------------
1996 1995
----------- ----------
<S> <C> <C>
REVENUES
Timber sales $ 189,000 $ 213,623
COST OF SALES 171,532 193,468
---------- ----------
Gross proit 17,468 20,155
OPERATING EXPENSES
Legal and professional fees 764,865 446,507
Field operations and travel 11,217 642,087
Administrative and other costs 116,515 218,124
Bad debt 46,000 -
Legal settlements (Note I) 258,834 -
----------- ----------
TOTAL OPERATING EXPENSES 1,197,431 1,306,718
----------- ----------
(Loss) from operations (1,179,963) (1,286,563)
OTHER INCOME (EXPENSES)
Miscellaneous income 6,166 228
Interest expense (40,998) (16,790)
Loss from disposition of
assets (Note D) (472,500) (350,630)
----------- -----------
TOTAL OTHER INCOME (EXPENSES) (507,332) (367,192)
----------- -----------
LOSS BEFORE TAXES (1,687,295) (1,653,755)
TAXES (Note G) 800 800
----------- -----------
NET LOSS $(1,688,095) $(1,654,555)
=========== ===========
NET LOSS PER COMMON SHARE $(.06) $(.19)
=========== ===========
AVERAGE COMMON SHARES OUTSTANDING 27,514,882 8,898,721
=========== ===========
</TABLE>
F-6
<PAGE>
MADERA INTERNATIONAL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional
---------------------- -------------------- Paid in Retained
Shares Amount Shares Amount Capital Deficit Total
--------- ----------- ----------- -------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, March 31, 1994 6,686,665 $ 66,866 - $ - $12,903,134 $ (36,823) $12,933,177
Issuance of preferred stock
for asset acquisitions 22,500,000 225,000 42,505,000 42,730,000
Issuance common stock for
asset acquisition 2,000,000 20,000 - - 580,000 - 600,000
Cancelled common stock as
result of write-off of
investment (1,666,667) (16,667) - - (12,953,333) - (12,970,000)
Issuance common stock to
settle claims 847,416 8,474 - - (8,474) - -
Issuance common stock for
relief of debt 600,000 6,000 - - 594,000 - 600,000
Issuance common stock 1,281,534 12,815 - - 388,618 - 401,433
Issuance common stock for
services rendered 2,326,684 23,267 - - 207,451 - 230,718
Net loss for the year - - - - - (1,654,555) (1,654,555)
---------- ---------- ----------- -------- ----------- ----------- -----------
BALANCE, March 31, 1995 12,075,632 $ 120,755 22,500,000 $225,000 $44,216,396 $(1,691,378) $42,870,773
Issuance of stock 2,350,000 23,500 - - 118,500 - 142,000
Conversion of preferred
stock for common stock 13,500,000 135,000 (10,000,000) (100,000) (35,000) - -
Issuance of stock for
services 9,393,500 93,935 - - 657,545 - 751,480
Issuance of stock for
investment 5,070,000 50,700 - - 1,013,550 - 1,064,250
Return of stock issuances for
recision of contracts
for assets (425,000) (4,250) (12,000,000) (120,000) (12,003,250) - (12,127,500)
Net loss - - - - - (1,688,095) (1,688,095)
---------- ---------- ----------- -------- ----------- ----------- -----------
BALANCE, March 31, 1996 41,964,132 $ 419,640 $ 500,000 $ 5,000 $33,967,741 $(3,379,473) $31,012,908
========== ========== =========== ======== =========== ============ ===========
</TABLE>
F-7
<PAGE>
MADERA INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Year Ended March 31,
-------------------------------------
1996 1995
------------ -------------
<S> <C> <C>
CASH FLOWS IN OPERATING ACTIVITIES
Net loss $ (1,688,095) $ (1,654,555)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Common stock issued for services
rendered 811,400 230,718
Loss from investments 472,500 350,630
Changes in operating assets and
liabilities:
Other assets (1,535) -
Accounts receivable (185,000) 30,271
Accounts payable 195,521 178,218
Other current liabilities 142,348 13,876
------------ ------------
NET CASH (USED IN) OPERATING
ACTIVITIES (252,861) (850,842)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related party debt 216,135 464,434
Net proceeds from sale of stock 100,000 401,433
------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 316,135 865,867
------------ ------------
INCREASE IN CASH 63,274 15,025
CASH, AT BEGINNING OF YEAR 19,333 4,308
------------ ------------
CASH, AT END OF YEAR $ 82,607 $ 19,333
============ ============
</TABLE>
F-8
<PAGE>
MADERA INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
A. Summary of Significant Accounting Policies:
Nature of Operations
Madera International, Inc., (formerly Weaver Arms Corporation) emerged
from Chapter 11 Bankruptcy proceedings on January 21, 1994.
The Company engages in the business of harvesting and exporting timber
from certain Central and South American timberland.
Basis of Accounting
The Company's policy is to use the accrual method of accounting and to
prepare and present financial statements which conform to generally
accepted accounting principles. 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 reported amounts
of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
Net Loss Per Share
The net loss per share is computed by dividing the net loss by the
weighted average number of shares outstanding during the period. The
effect of convertible securities are excluded from the computation
because the effect on the net loss per common share would be anti-
dilutive.
Income Taxes
Income taxes, are provided for using the liability method of accounting
in accordance with Statement of Financial Accounting Standards No. 109
(SFAS 109), "Accounting for Income Taxes." A deferred tax asset or
liability is recorded for all temporary differences between financial and
tax reporting. Deferred tax expense (benefit) results from the net
change during the year of deferred tax assets and liabilities.
F-9
<PAGE>
MADERA INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
A. Summary of Significant Accounting Policies (continued):
Revenue and Cost Recognition
Revenues are recognized in the period in which they are considered earned.
General and administrative costs are charged to expense when incurred.
Inventories
Inventory is recorded at the lower of cost or market. Cost is determined
by the first-in, first-out method.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the depreciable assets using the straight-
line method. Major renewals and improvements are capitalized, while
maintenance and repairs are expensed when incurred.
Nonmonetary Transactions
The Company records nonmonetary transactions in accordance with APB-29
"Accounting for Nonmonetary Transactions." The transfer or distribution of
a nonmonetary asset or liability is based on the fair value of the asset or
liability that is received or surrendered, whichever is more clearly
evident.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less
to be cash equivalents.
F-10
<PAGE>
MADERA INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
B. Accounts Receivable:
Accounts receivable represent amounts due for sales of timber. Management
has determined that the entire amount as of March 31, 1996 is fully
collectible.
C. Inventory:
Inventory as of March 31, 1996 and 1995 consists of varying sizes of rough
cut banac and cedar lumber awaiting customers orders. The valuation of the
inventory was made by an independent third party who determined the
quantity and value of the existing inventory.
D. Investment in Timber Producing Property:
In January 1995 the Company entered into an agreement with Ralph Financial
Corporation (RFC) to purchase the rights to 400,000 Hectares of timber
producing property in Brazil. In consideration for the asset acquired the
Company issued 12,000,000 shares of its Series C Preferred stock. The
preferred stock is convertible into common stock with the conversion factor
being one share of common for each 2.4 shares of preferred.
The value of the assets acquired was based upon an appraisal by an
independent third party. The value of these assets was determined to be $
12,000,000. In addition the Company issued 2,000,000 shares of its common
stock, valued at $ 600,000, as a finders fee associated with the
acquisition of the assets.
During November 1995 it came to the attention of management there may be a
problem with ownership of the property that was to be transferred to the
Company. Recognizing this the Company placed RFC on notice to perform the
transfer of assets by December 15, 1995. As a result of the Company not
receiving transfer of the assets the Board of Directors of the Company
approved a rescission of the transaction on December 17, 1995 and all
parties were placed on notice of the rescission. As part of the rescission
the Company is pursuing legal action to recover all 12,000,000 shares of
the Company's Series C Preferred Stock and 425,000 shares of the Company's
common stock that were issued as part of the original transaction.
Subsequent to year end the Company has recovered some of the stock and is
still pursuing legal action to recover the remaining stock. As a result of
this rescission the Company has written off the full value of the asset
during the year ended March 31, 1996.
F-11
<PAGE>
MADERA INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
D. Investment in Timber Producing Property (continued):
In July 1994 the Company entered into an agreement with Ramiro Fernandez-
Moris and his family to acquire a series of assets held by them in a family
owned corporation. These assets consist of 478,000 acres of timber
producing property in Brazil that are owned in fee in Brazil, as well as
substantial acreage in Bolivia and Peru that are long term concessions. In
exchange for these assets the Company issued 10,000,000 shares of its
Series B Preferred stock. The preferred stock issued is convertible into a
maximum of 15,000,000 shares of the Company's common stock to be adjusted
by any stock splits and subject to the production of earnings of $2,000,000
annually from the assets acquired. During the year ended March 31, 1996
the preferred stock was converted to 13,500,000 shares of the
Company's common stock.
In addition to the timberland acquired the Company also acquired as part of
the agreement a working sawmill located in Brazil that is in operation and
an existing inventory of banac and cedar with a value of $ 630,000. The
value of the assets acquired was based upon an appraisal by an independent
third party. The original value of these assets was determined to be $
30,200,000. In addition the Company issued 500,000 shares of its Series
Class B preferred stock, valued at
$ 500,000, as a finders fee associated with the acquisition of the assets.
In 1994 pursuant to the approval of the bankruptcy plan of reorganization,
the Company entered into an agreement with Importaciones Y Exportaciones,
Sociedad Anomia ("IMEXSA") a Nicaragua corporation to acquire approximately
400,000 Hectares (a Hectare equals 2.47 Acres) of virgin timber property
located in Nicaragua.
The Company originally issued a convertible note to IMEXSA for the
acquisition of the 400,000 Hectares in the amount of $ 5,000,000. This was
based upon the estimated value of the land acquired at the time of the
agreement. IMEXSA subsequently exercised the conversion option and was
issued 3,400,000 (post split) shares of the Company's common stock in
exchange for the original note.
Subsequent to the original agreement, the land acquired was determined to
have a much greater value than the original estimate. The estimated value
was based upon a study made of the property by an authority in Nicaragua.
Based upon information received from the study performed, the trading value
of the Company's common stock, which began May 12, 1994, and with
consideration given to the vast amount of timber located on the property,
management made the decision to value the property at a midway between the
original $ 5,000,000 agreed upon purchase price and the $ 20,400,000 value
of the Company's common stock issued for the acquisition of the property.
Management believes the value of $12,000,000 for the property was fairly
stated based upon the fair value of common stock issued.
F-12
<PAGE>
MADERA INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
D. Investment in Timber Producing Property (continued):
In addition to the 3,400,000 (post split) shares of Company's common stock
issued for the acquisition of the property, the Company also issued 323,333
(post split) shares of the Company's common stock to three entities as fees
associated with the acquisition of the property. The value of these shares
was determined to be $1.00 per share. As a result, the Company's
investment in the land acquired is $12,970,000.
During the fiscal year ending March 31, 1995 the Nicaragua government chose
to withdraw the extraction rights for all of the 400,000 Hectares the
Company owns. As a result of this governmental action the value of the
property owned by the Company has been significantly reduced. Due to the
uncertainties with the Nicaraguan government the determination of the
remaining value of the property is uncertain. Management has made the
decision to write off the full value of the Nicaraguan asset during its
fiscal year ending March 31, 1995. As part of this write off 1,666,667 of
the original 3,400,000 (post split) shares issued have been recovered and
cancelled.
E. Other Investment:
In April 1995 the Company entered into an agreement with Mandarin Overseas
Investment Co., Ltd., (Mandarin) a company incorporated under the laws of
the Turks and Caicos islands to acquire 87% of the outstanding shares of
Asseradora Italya (Italya), a subsidiary of Mandarin. Mandarin is the
owner of timber concessions in Peru consisting of 30,000 hectacres of
timber producing properties.
Pursuant to the purchase agreement the Company and Mandarin agreed the
purchase price shall be $1,500,000. During the year ended March 31, 1996
the Company has issued 5,070,000 shares of its common stock with a value
of $1,064,250 as part of this transaction. In addition the Company is
negotiating with Mandarin the additional number of common shares with a
value of $423,750 to be issued as final payment of this transaction. The
$423,750 is reflected in the financial statements of the Company as a
liability.
F. Related Party Debt:
Notes summarized as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Notes payable to Mr. Daniel Lezak,
former President of the Company and
to various companies that Mr. Lezak
is the general manager. All notes
bear interest at Prime plus 1%.
Principal and interest for all notes
is due and payable July 1, 1996. $ 445,796 $ 229,661
Less current portion 445,796 229,661
--------- ---------
$ -0- $ -0-
--------- ---------
</TABLE>
F-13
<PAGE>
MADERA INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
G. Income Taxes:
The provision for income taxes for the years ended March 31, 1996 and 1995
consists solely of the minimum state taxes.
The Company's total deferred tax asset as of March 31, 1996 is as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards $1,100,000
Valuation allowance (1,100,000)
----------
Net deferred tax assets $ -
----------
</TABLE>
As of March 31, 1996, the Company had net operating loss carryforwards,
before any limitations which expire as follows:
<TABLE>
<CAPTION>
Year Ending
March 31, Federal
- ----------- ----------
<S> <C>
2009 $ 36,000
2010 1,654,000
2011 1,680,000
---------
$3,370,000
----------
</TABLE>
Pursuant to the Internal Revenue Code Section 382, use of the Company's net
operating loss will be limited due to a cumulative change in ownership of
more than 50%.
H. Stockholders' Equity:
During the twelve months ended March 31, 1996 and 1995 the Company
authorized and issued 9,393,500 and 2,326,684 shares of common stock
respectively in exchange for consulting and other services provided.
In August 1994 the Company approved a 3 to 1 reverse split of the Company's
common stock as of August 11, 1994. The effects of the reverse split was
to convert three (3) shares of common stock into one (1) share of common
stock.
The number of shares outstanding common stock may require a non-material
adjustment in subsequent periods due to the possible share adjustments from
the rescinded transactions (Note D) and the results of the lawsuit that is
to be filed to recover these shares.
I. Litigation:
During the year ended March 31, 1996 the Company was a defendant in two
legal proceedings. Both cases resulted in a judgement against the Company
in the amounts of $158,834 and $100,000. The total of $258,834 is
reflected in the accounts payable of the Company.
F-14
<PAGE>
MADERA INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
J. Supplemental Cash Flow Information:
Supplemental disclosures of cash flow information for the years ended March
31, 1996, and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Noncash investing and
financing activities:
Related party debt reduced with
stock issuance $ - $ 600,000
Investment acquired with stock
issuance 1,500,000 42,730,000
</TABLE>
K. Commitments and Contingencies:
Operating Leases
The Company leases office facilities under operating leases which expire in
June 1998. The accompanying statement of operations includes expenses from
operating leases of $12,079 for 1996. Future minimum lease payments, due
under noncancelable operating leases as of March 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $ 16,632
1998 16,632
1999 2,772
</TABLE>
L. Common Stock Class A Warrants:
The Company has Class A Warrants with an exercise price established by the
Board of Directors of $3.50 per share. This exercise price is in effect
from August 30, 1994 until February 1, 1997.
At March 31, 1996 there were 20,029,966 Class A warrants outstanding.
F-15
<PAGE>
EXHIBIT 2.1
1
2
3
4
5
6
7
8 IN THE CIRCUIT COURT OF THE STATE OF OREGON
9 FOR THE COUNTY OF CLACKAMAS
10 HARRIS FOREST PRODUCTS, INC., )
an Oregon corporation, )
11 )
Plaintiff, ) No, 95-01-165
12 )
vs. ) STIPULATED JUDGMENT
13 ) WITH COVENANT NOT TO
MADERA INTERNATIONAL, INC., ) RECORD OR EXECUTE
14 a Nevada corporation, )
15 Defendant. )
16 Based upon the Stipulation of the parties hereto, it is
17 hereby
18 ORDERED AND ADJUDGED that the plaintiff shall have a
19 judgement against Defendant, Madera international, Inc., in the
20 face amount of $100,000.00.
21 Defendant may satisfy this judgemnt with payment Qf
22 25,000.00 by cashier's check to be received by Plaintiff's
23 attorney, Ted A. Troutman, on or before July 1, 1996 a second
24 payment of $25,000.00 by cashiers check received by Plaintiff's
25 attorney, Ted A. Troutman, on or before January 1, 1997 for
26
Page 1 STIPULATED JUDGEMENT
EXHIBIT A
PAGE 1 of 2
<PAGE>
1 total payment of $50,000.00.
2 Plaintiff shall not execute on the judgment or record the
3 judgement unless Defendant defaults on the payment terms of this
4 covenant not to execute.
5 In the event of default by defendant, Plaintiff shall be
6 entitled to collect the full judgement of 100,000.00, plus
7 statutory interest at the rate of 9% per annum from the date of
8 defendant's default.
9 MONEY JUDGMENT
10
11 (1) Judgment creditor: Harris Forest Products, Inc.
12 (2) Judgment Creditor's
Attorney: Muir & Troutman
13
14 (3) Judgment Debtor: Madera International, Inc.
15 (4) Principal Amount
of Judgment: $100,000.00
16 (5) Prejudgment Interest: 0
17 (6) Attorney Fees: 0
18 (7) Cost Bill: 0
19 (8) Postjudgment interest: 9% per annum on total judgment
from date of recording of
20 judgment until fully paid.
21
22 DATED March 18, 1996
23 /s/
--------------------------
24 CIRCUIT COURT JUDGE
25 SO MOVED AND SUBMITED
BY /S/ Ted. A Troutman
--------------------------
Ted A. Troutman, OSB 84447
Attorney for Plaintiff
Page 2 - STIPULATED JUDGMENT
EXHIBIT A
PAGE 2 OF 2
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 82,607
<SECURITIES> 0
<RECEIVABLES> 189,000
<ALLOWANCES> 0
<INVENTORY> 490,000
<CURRENT-ASSETS> 761,607
<PP&E> 31,600,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,363,142
<CURRENT-LIABILITIES> 1,350,234
<BONDS> 0
0
5,000
<COMMON> 419,640
<OTHER-SE> 30,588,268
<TOTAL-LIABILITY-AND-EQUITY> 32,363,142
<SALES> 189,000
<TOTAL-REVENUES> 189,000
<CGS> 171,532
<TOTAL-COSTS> 171,532
<OTHER-EXPENSES> 1,197,431
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,688,095)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,688,095)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,688,095)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
