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, 1997
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required) For the transition period
Commission file number 0-16523
Madera International, Inc.
(Name of small business issuer in its charter)
Nevada 68-0318289
(State of incorporation or organization) (I.R.S. Employer Identification No.)
2600 Douglas Road, Suite 1004, Coral Gables, Florida 33134
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (305) 774-9411
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common stock, $0.01 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, 61,567,019 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 non-affiliates was approximately
$3,500,000.
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 1O-KSB or any
amendment to this Form 1O-KSB. ( )
Revenues for the fiscal year ended March 31, 1997 totaled $1,489,000.
Documents incorporated by reference: See Item 13 hereof.
Total number of pages in this document:[33]
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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"). The history of Weaver is
contained in prior 10 K's, which history includes the detailed explanation of
Weaver's emergence from Chapter 11 proceeding as Madera International, Inc.
In July 1994, Registrant entered into an agreement with Ramiro
Fernandez-Moris and his family to acquire assets held by 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. Its 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 was converted also during the current fiscal year.
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 canceled, however, legal action is ongoing to allow the
cancellation completion and potential recovery.
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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 Registrant's total
interest to 83.5%. Then subsequently, due to the potential of this property,
Registrant acquired an additional 14.5% bringing its total ownership to 98%. 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). This amount has been paid with the exception of
$423,750 that remains on the books as a liability until stock is issued
converting the liability to equity. The Registrant will issue common stock in
1997 when approved by its Board of Directors.
In January, 1997, Registrant purchase an additional 251,000 acres of
prime timberland close to its fee owned property in Brazil. This additional
acreage is destined for environmental programs that are being established by
Registrant. These programs will be conducted in a wholly owned subsidiary,
Madera International Environmental, Inc.
BUSINESS
Registrant specializes in the harvesting and exportation of timber
products from South America to buyers throughout the world. Registrant owns
approximately 707,000 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,
1997 fiscal year, an inventory of approximately 3,000,000 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.
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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 had 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 is being delayed, since it has been determined it is more
advantageous to purchase logs from independent producers and to preserve the
prime forests owned by the Registrant . The timber will be sold throughout the
world to wholesalers and end users. The selective felling of timber is 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 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 $1.50. 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.
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ITEM 2. DESCRIPTION OF PROPERTY
Registrant leases its office space (approximately 1,700 square feet)
on a two (2) year lease at the rate of $3,200.00 per month. The lease runs from
August 1, 1996 through July 31, 1998.
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
and full payment has been made, thus resolving the matter. However, the original
attorney involved, although dropping out of the case and abandoning Registrant
is now claiming an additional amount due of under $10,000.00. This claim is
being opposed by Registrant.
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 Clark, 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
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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. This claim is being paid by Registrant.
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, 1997.
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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 NASDAQ Bulletin
Board 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 originally under the symbol "WOOD", then changed
arbitrarily by the NASDAQ to "MDIT" under which it now trades. 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:
Fiscal Year Ended March 31, 1997
-----------------------------------------------------
Quarter Range Common Stock - Bid Common Stock - Asked Class A Warrants
- ------- ----- ------------------ -------------------- ----------------
1 High $0.06 $0.09 (1)
Low 0.06 0.12 (1)
2 High 0.06 0.09 (1)
Low 0.06 0.09 (1)
3 High 0.07 0.09 (1)
Low 0.07 0.09 (1)
4 High 0.12 0.13 (1)
Low 0.07 0.09 (1)
________________
(1) Not quoted.
Source: Report dated 5/31/97 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.
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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
Other Market Makers enter and leave the market from time to time.
There is presently no trading market of any kind for the Company's Class A
warrants.
As of May 29, 1997, in excess of 15,000,000 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 one 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 two-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 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
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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, 1997, there were approximately 2,800 record holders of
the Registrant's Common Stock. See "Description of Securities." This includes
531 direct holders and approximately 2,300 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,
1998, Management however, is contemplating the possible spin-off of its wholly
owned subsidiary, Madera International Environmental, Inc as a dividend to its
shareholders, if this is approved it will be subsequently announced. 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
I. 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.
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Regular shipments of product have commenced in 1996 to customers in
Italy.
II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Registrant continues to accumulate inventory in Brazil. The
inventory now exceeds $3 Million. Shipments have begun on a regular basis,
although it continues to be difficult to obtain appropriate shipping schedules
from shipping companies. This is expected to change as continued regular
shipping occurs. Profit was first demonstrated in the third quarter and
continues into the fourth quarter as described in the financial statements. The
prophecy discussed in the previous fiscal year is beginning to materialize. The
accumulated inventory will be turned into profitable sales as the current year
develops. 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 projected sales are approaching their
target. The shipments, however, continue to be dependent upon financing which
the Registrant expects to continue to receive.
The producing properties now held by the Registrant encompass
approximately 707,000 acres.
The Registrant's working capital resources during the years ended March
31, 1996 and March 31, 1997 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) equity conversions arranged by it's investment
bankers. The commitments from these sources have led the Company to a working
capital balance at March 31, 1997 of $(588,627) versus a working capital balance
of $(588,627) at the 1996 fiscal year end. The negative 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.
ITEM 7. FINANCIAL STATEMENTS
See Pages F-1 through F-15 attached hereto for copies of the audited
annual financial statements of the Company.
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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.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- -----------------------------------------------
Name Age Position
- ---- --- --------
Ramiro Fernandez-Moris 68 President, Chief Executive Officer,
Director, and Chairman of the Board
Ray Fernandez 42 Executive Vice President - Sales
Regina Fernandez 37 Secretary
Roman Fernandez-Moris 40 Vice President and Director
Arthur Mintz 61 Director
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.
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
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was assigned to South American operations in Brazil, Peru and Bolivia. In 1992,
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.
Mr. Arthur Mintz, a lawyer licensed to practice in state and federal
courts, has over 30 years of business and legal expertise. He has been Vice
President and General Counsel of Lease Resolution Corp. He has served as
Chairman of the Board, President, and General Counsel for Olicon Imaging
Systems, Inc., AMRR Leasing Corp., and Mobile M.R Venture Ltd. He holds a J.D.
and L.L.B. from Northwestern Law School and a B.A. from Northwestern University.
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.
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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 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 under 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
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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.
Name of Beneficial Owner Number of Shares Percent of
and Class Beneficially Owned (1) Class (2)(3)
Preferred Stock
- ---------------
Ramiro Fernandez-Moris (1) 1,000,000 100.00%
Common Stock
- ------------
Ramiro Fernandez-Moris (1) 20,700,000 33.40%
Regina Fernandez 125,000 0.02%
Roman Fernandez-Moris 202,000 0.03%
Ramiro (Ray) Fernandez-Moris, III 202,000 0.03%
Arthur Mintz 3,000,000 4.90%
All Directors and Officers as a
group (5 individuals)
Preferred Stock 10,000,000 100.00%
Common Stock 24,229,000 39.07%
(1) Unless otherwise indicated, all shares are beneficially owned and the sole
voting and investing 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 61,567,019 shares of Common Stock outstanding. See "Description
of Securities.
(3) Less than One Percent (1%).
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Beginning in July, 1994 upon the acquisition of property from the
Fernandez-Moris family, this family has gradually assumed control of the
Registrant and is now the controlling shareholder and also in control of the
operations of the Registrant. Additionally, as required by any negative cash
flows, the family has consistently provided funding for the operations.
Additional properties have been acquired from the family at their cost,
subsequent to the original acquisition, which was an arms length transaction.
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These transactions are reported in other sections of this document as well as
the Financial Report of the independent accountants.
Certain relationships that existed prior to the Fernandez-Moris family
assuming control of the Registrant have been previously reported in past 10 K
Reports. These relationships no longer exist and have not existed for more than
one (1) year.
Ramiro Fernandez-Moris, President and principal shareholder
beneficially of the Registrant has received 1,000,000 shares of Class D
Preferred Stock of the Registrant. The Certificate of Designation as filed with
the State of Nevada states that this class of Preferred Stock allows the holder
the right to convert it into a fifty one (51) percent control factor of the
voting Common Stock. The conversion period is for five (5) years and can only be
done in the event of any of the following: Sale of the Company, Retirement of
Ramiro Fernandez-Moris, The termination of Ramiro Fernandez-Moris without cause,
or the expiration of the five year period. These conversion privileges were made
to protect Ramiro Fernandez-Moris who placed his assets into the Registrant at a
time when the stock was selling at a much higher price and to reflect that the
existing market value is lower than the fair market value of the underlying
assets.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
a. The following documents are filed as part of this report:
Number
(1) Financial Statements - ------
Report of Independent Accountants F-1
Balance Sheet at March 31, 1996 and 1995 F-2 - 3
Statement of Operations for the Years Ended F-4
March 31, 1996 and 1995
Statement of Changes in Stockholders' Equity F-5
for the Years Ended March 31, 1996, 1995 and 1994
Statement of Cash Flows for the Years Ended F-6
March 31, 1996 and 1995
Notes to Financial Statements F-7 - 15
15
<PAGE>
(2) Exhibits to this report are as follows:
Ex. No. Description of Document
N/A
b. Reports on Form 8-K - fourth quarter ended
1. Form 8-K, dated December 15, 1995 with respect to Item 2.,
Acquisition or Disposition of Assets.
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Madera International, Inc. and Subsidiaries:
We have audited the consolidated balance sheets of Madera International, Inc.
and subsidiaries as of March 31, 1997 and 1996, and the related consolidated
statements 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. and
subsidiaries as of March 31, 1997 and 1996, and the results of its consolidated
operations and cash flows for the years then ended in conformity with generally
accepted accounting principles.
Harlan & Boettger, LLP
San Diego, California
June 2, 1997
F-1
<PAGE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of March 31,
1996
as adjusted
1997 (Note M)
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 254,361 $ 82,607
Accounts receivable (Note B) 850,550 189,000
Inventory (Note C) 2,775,918 490,000
----------- -----------
TOTAL CURRENT ASSETS 3,880,829 761,607
PROPERTY AND EQUIPMENT, net (Notes D and M) 2,486,276 2,535,000
OTHER ASSETS
Investment in timber producing
property (Note E) 27,500,000 27,500,000
Other investment (Note F) 1,500,000 1,500,000
Miscellaneous (Note G) 46,882 -
Deposits 5,794 1,535
----------- -----------
TOTAL OTHER ASSETS 29,052,676 29,001,535
----------- -----------
$35,419,781 $32,298,142
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
F-2
<PAGE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
As of March 31,
1996
as adjusted
1997 (Note M)
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 228,984 $ 420,734
Accrued expenses 50,178 58,354
Common stock payable (Note F) 423,750 423,750
Notes payable - related party (Note H) 192,500 445,796
----------- -----------
TOTAL CURRENT LIABILITIES 895,412 1,348,634
TOTAL LIABILITIES 895,412 1,348,634
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note L) - -
STOCKHOLDERS' EQUITY (Note J)
Preferred stock, $0.01 par value,
100,000,000 shares authorized,
1,000,000 and 500,000 shares
issued and outstanding at March 31,
1997 and 1996, respectively 10,000 5,000
Common stock, $0.01 par value,
250,000,000 shares authorized,
61,567,019 and 41,964,132 shares
issued and outstanding at March
31, 1997 and 1996, respectively 615,669 419,640
Additional paid-in capital 37,459,642 33,967,741
Retained deficit (3,560,942) (3,442,873)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 34,524,369 30,949,508
----------- -----------
$35,419,781 $32,298,142
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended March 31,
1996
as adjusted
1997 (Note M)
---------- -----------
REVENUES
Timber sales $1,911,241 $ 189,000
COST OF SALES 1,221,679 171,532
---------- -----------
Gross profit 689,562 17,468
OPERATING EXPENSES
Legal and professional fees 583,493 764,865
Field operations and travel 40,027 11,217
Administrative and other costs 155,879 116,515
Depreciation (Note M) 66,809 65,000
Bad debt - 46,000
Legal settlements (Note L) - 258,834
---------- -----------
TOTAL OPERATING EXPENSES 846,208 1,262,431
---------- -----------
Loss from operations (156,646) (1,244,963)
OTHER INCOME (EXPENSES)
Miscellaneous income 118,109 6,966
Interest expense (48,578) (40,998)
Loss from disposition of assets (Note E) (30,954) (472,500)
---------- -----------
TOTAL OTHER INCOME (EXPENSES) 38,577 (506,532)
---------- -----------
LOSS BEFORE INCOME TAXES (118,069) (1,751,495)
INCOME TAXES (Note I) - -
---------- -----------
NET LOSS $ (118,069) $(1,751,495)
========== ===========
NET LOSS PER COMMON SHARE $ (.002) (.06)
========== ===========
AVERAGE COMMON SHARES OUTSTANDING 52,514,943 27,514,882
========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
<TABLE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
<CAPTION>
Common Stock Preferred Stock Paid-In Retained
Shares Amount Shares Amount Capital Deficit Total
---------- --------- ----------- --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
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 for cash 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
rescission of contracts for
assets (425,000) (4,250) (12,000,000) (120,000) (12,003,250) -- (12,127,500)
Net loss -- -- -- -- -- (1,686,495) (1,686,495)
----------- --------- ----------- --------- ------------ ----------- ------------
BALANCE, March 31, 1996, as
previously reported 41,964,132 $ 419,640 500,000 $ 5,000 $ 33,967,741 $(3,377,873) $ 31,014,508
----------- --------- ----------- --------- ------------ ----------- ------------
Adjustment for correction of
an error in prior period -- -- -- -- -- (65,000) (65,000)
----------- --------- ----------- --------- ------------ ----------- ------------
BALANCE, March 31, 1996,
as adjusted 41,964,132 $ 419,640 500,000 $ 5,000 $ 33,967,741 $(3,442,873) $ 30,949,508
----------- --------- ----------- --------- ------------ ----------- ------------
Issuance of stock for cash 4,250,000 42,500 -- -- 437,500 -- 480,000
Issuance of stock for services 10,650,100 106,501 -- -- 546,689 -- 653,190
Conversion of preferred stock
Series B for common stock 702,787 7,028 (500,000) (5,000) (2,028) -- --
Issuance of common stock for
relief of debt 4,000,000 40,000 -- -- 119,740 -- 159,740
Issuance of preferred stock
Series D for inventory
(Note J) -- -- 1,000,000 10,000 2,390,000 -- 2,400,000
Net loss -- -- -- -- -- (118,069) (118,069)
----------- --------- ----------- --------- ------------ ----------- ------------
BALANCE, March 31, 1997 61,567,019 $ 615,669 1,000,000 $ 10,000 $ 37,459,642 $(3,560,942) $ 34,524,369
=========== ========= =========== ========= ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended March 31,
1996
as adjusted
1997 (Note M)
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(118,069) $(1,751,495)
Adjustments to reconcile net loss
to net cash used in operating activities:
Stock issued for services rendered 653,190 751,480
Loss from investments -- 472,500
Depreciation (Note M) 66,809 65,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (661,550) (185,000)
Inventory 114,082 --
Other assets (51,141) (1,535)
Increase (decrease) in:
Accounts payable (191,750) 195,521
Accrued expenses (8,176) 140,748
--------- -----------
NET CASH USED IN OPERATING
ACTIVITIES (196,605) (312,781)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant & equipment (18,085) --
--------- -----------
NET CASH USED IN INVESTING
ACTIVITIES (18,085) --
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related party debt -- 234,055
Payments on related party debt (93,556) --
Proceeds from issuance of common stock 480,000 142,000
--------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 386,444 376,055
--------- -----------
INCREASE IN CASH 171,754 63,274
CASH, AT BEGINNING OF YEAR 82,607 19,333
--------- -----------
CASH, AT END OF YEAR $ 254,361 $ 82,607
========= ===========
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
A. Summary of Significant Accounting Policies:
Nature of Operations
Madera International, Inc., a Nevada corporation (formerly Weaver Arms
Corporation) emerged from Chapter 11 Bankruptcy proceedings on January 21,
1994. During the fiscal year ended March 31, 1997, the Company started two
subsidiaries: Asseradora Itaya, Inc. ("Itaya") a Peruvian corporation and
Madera International Environmental, Inc. ("Environmental") a Nevada
corporation, together ("The Company"). All significant intercompany
transactions and amounts have been eliminated in the consolidating process.
The Company, in conjunction with Itaya, is engaged in the harvesting,
milling and exporting of timber from South America. The Company sells its
products to major lumber distributors throughout the world.
Environmental is dedicated to the conservation of the Amazon Rain Forest.
Through its three programs 1) own a tree 2) replant a tree and 3) replant a
seedling for kids, Environmental manages and replants virgin and cleared
timberland in the Brazilian Amazon Region. These programs will safeguard
this region from any commercial exploitation including farming, ranching,
mining and logging or the removal of any fauna or flora for any purpose.
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.
F-7
<PAGE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
A. Summary of Significant Accounting Policies: (continued)
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.
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 stated 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 assets, which range from 5 to 7 years.
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.
Concentration of Credit Risk
The Company maintains their cash at high quality financial institutions.
The balances at times, may exceed federally insured limits. The Company
believes that no significant concentration of credit risk exists with
respect to cash investments.
F-8
<PAGE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED 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, 1997 is fully
collectible.
C. Inventory:
Inventory as of March 31, 1997 and 1996 consists of varying sizes of rough
cut mahogany 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. Some of the inventory was
purchased from Ramiro Fernandez-Moris, President of the Company, in
exchange for preferred stock (Note J). The majority of the inventory
balance was purchased with cash from unrelated third parties.
D. Property and Equipment:
Property and equipment is summarized as follows:
1996
as adjusted
1997 (Note N)
----------- -----------
Sawmill - Brazil $ 2,600,000 $ 2,600,000
Office furniture and equipment 18,085 -
----------- -----------
2,618,085 2,600,000
Less accumulated depreciation (131,809) (65,000)
----------- -----------
Property and equipment, net $ 2,486,276 $ 2,535,000
=========== ===========
E. 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. 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.
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.
F-9
<PAGE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
E. Investment in Timber Producing Property: (continued)
During November 1995 it came to the attention of management that there may
be a problem with ownership of the property that was to be transferred to
the Company. The Company placed RFC on notice to perform the transfer of
assets by December 15, 1995 or the agreement would be rescinded. As a
result of nonperformance by RFC, 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 adjusted the full value of the acquired
asset and reversed the preferred stock issuance during the year ended March
31, 1996.
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 existing inventory of banac and cedar with a value of $630,000. The
value of the assets acquired were 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.
F-10
<PAGE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
E. Investment in Timber Producing Property: (continued)
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 midpoint 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.
In addition to the 3,400,000 (post split) shares of the 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 Nicaraguan 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.
F. 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 98% of the outstanding shares of
Asseradora Itaya (Itaya), a subsidiary of Mandarin. Mandarin is the owner
of timber concessions in Peru consisting of 30,000 hectares of timber
producing properties. 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.
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 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-11
<PAGE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
G. Miscellaneous:
Miscellaneous assets at March 31, 1997 and 1996 consist of the following:
1997 1996
----------- -----------
Receivables - other $ 31,882 $ -
Down payment on timber property 15,000 -
----------- -----------
$ 46,882 $ -
=========== ===========
H. Notes Payable - Related Party:
Notes payable - related party are summarized as follows:
1997 1996
-------- -------
Notes payable to Mr. Ramiro
Fernandez-Moris, President of the Company,
and Mr. Daniel Lezak, former President,
respectively. All notes bear interest at
prime plus 1%. Principal and interest for $192,500 $445,796
all notes is due and payable on
demand or within one year.
Less current portion 192,500 445,796
-------- --------
$ - $ -
======== ========
I. Income Taxes:
The Company's total deferred tax asset as of March 31, 1997 is as follows:
Deferred tax assets:
Net operating loss carryforwards $ 1,200,000
Valuation allowance (1,200,000)
-----------
Net deferred tax asset $ -
===========
F-12
<PAGE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
I. Income Taxes: (continued)
As of March 31, 1997, the Company had net operating loss carryforwards,
before any limitations, which expire as follows:
Year Ending
March 31, Federal
----------- ----------
2010 $1,654,000
2011 1,680,000
2012 100,000
----------
$3,434,000
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%.
J. Stockholders' Equity:
Preferred Stock
During the twelve months ended March 31, 1997 the Company issued 1,000,000
shares of convertible Series D preferred stock to Ramiro Fernandez-Moris,
President of the Company in exchange for $2,400,000 of timber inventory
owned by Mr. Fernandez-Moris which is located in Brazil. The conversion
feature of the preferred stock floats such that at the time of conversion a
calculation will be performed to determine the exact number of common
shares that are necessary to be issued to Ramiro Fernandez-Moris to ensure
he has at least a 51% ownership interest in the Company. The conversion
period is for five years and can only be completed if any of the following
events occur: sale of the Company, retirement of Ramiro Fernandez-Moris,
the termination of Ramiro Fernandez-Moris without cause or the expiration
of the five year period.
Authorized preferred stock at March 31, 1997 also consists of Series A, B
and C preferred stock which have various conversion features for the
exchange of common stock for each share of preferred stock. As of March 31,
1997, all outstanding Series A, B and C preferred shares had been
converted.
Common Stock
During the twelve months ended March 31, 1997 and 1996 the Company issued
10,650,100 and 9,393,500 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
F-13
<PAGE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
J. Stockholders' Equity: (continued)
convert three (3) shares of common stock into one (1) share of common
stock.
The number of shares outstanding of common stock may require a non-material
adjustment in subsequent periods due to the possible share adjustments from
the rescinded transactions (Note E) and the results of the lawsuit that is
to be filed to recover these shares.
Common Stock Class A and Class B Warrants
The Company has Class A Warrants with an exercise price established by the
Board of Directors of $3.50 per share. The Class A Warrants entitle the
holder to purchase one share of common stock and at the time of exercise,
to receive one Class B Warrant. Class B Warrants entitle the holder to
purchase one share of the Company's common stock at an exercise price of
$5.00 per share. The Company has the right to reduce the exercise price
and/or extend the term of the Class A and Class B Warrants.
At March 31, 1997 there were 20,029,966 Class A Warrants outstanding.
K. Supplemental Cash Flow Information:
Supplemental disclosures of cash flow information for the years ended March
31, 1997, and 1996 are summarized as follows:
1997 1996
---------- ----------
Cash paid for interest $ 48,578 $ 40,998
========== ==========
Noncash investing and financing activities:
Related party debt reduced with stock
issuance $ 159,740 $ -
Investment acquired with stock issuance - 1,500,000
Common stock issued for services 653,190 751,480
Preferred stock (Series D) issued for
inventory 2,400,000 -
Common stock issued for investment - 1,064,250
L. Commitments and Contingencies:
Operating Leases
The Company leases office facilities under operating leases which expire in
June 2000. The accompanying statement of operations includes expenses from
F-14
<PAGE>
MADERA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
L. Commitments and Contingencies: (continued)
operating leases of $12,079 for 1997. Future minimum lease payments due
under noncancelable operating leases as of March 31, 1997 are as follows:
1998 $10,598
1999 22,534
2000 11,167
Thereafter -
-------
$44,299
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 Company paid $145,000 during
the year ended March 31, 1997 and the remaining balance of $113,834 is
reflected in accounts payable.
M. Prior Period Adjustment:
During the fiscal year ended March 31, 1997, that part of the "investment
in timber producing property" (Note E) attributable to the physical sawmill
facility was reclassed to property and equipment. Accordingly, a prior
period adjustment has been recorded to reflect depreciation expense in the
fiscal year ended March 31, 1996 in the amount of $65,000. Due to the net
loss from operations in the prior period, there is no income tax effect of
this adjustment.
N. Subsequent Event:
Subsequent to year end, the Company entered into an agreement with its
President to purchase from him an additional 251,000 acres of timberland.
The purchase is to be recorded at original cost and will be completed upon
the receipt of appropriate documentation that demonstrates ownership
transferred to the Company. This agreement is expected to be completed in
the second quarter of the 1998 fiscal year. This additional timberland is
destined for environmental programs that are being established through the
Company's wholly-owned subsidiary, Madera International Environmental, Inc.
F-15
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in this Annual Report Form 10-KSB of our report
dated June 2, 1997, on our audits of the consolidated financial statements and
schedules of Madera International, Inc. and Subsidiaries (The "Company").
Harlan & Boettger, LLP
San Diego, California
June 2, 1997
F-16
<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 10, 1997
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, Chief Executive Officer June 16, 1997
- -------------------------- (Principal Executive Officer,
Ramiro Fernandez-Moris and Principal Financial
Officer) Director, and Chairman
of the Board
/s/ Roman Fernandez-Moris Vice President and Director June 16, 1997
- --------------------------
Roman Fernandez-Moris
/s/ Arthur Mintz Director June 16, 1997
- --------------------------
Arthur Mintz
17
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<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
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