SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 8-K-A
Amendment to
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
April 24, 1998
GREEN CAPITAL GROUP, INC.
-------------------------
(Formerly known as Pacific Forest Corporation)
(Exact name of registrant as specified in charter)
Nevada
------
(State or Other Jurisdiction of Incorporation)
33-55254-14 87-0438451
------------------------ --------------------------------
(Commission file number) (IRS employer identification no.)
1221 Brickell Avenue, Suite 900, Miami, FL 33131
- ------------------------------------------ -----------
(Address of principal executive offices) (Zip Code)
(305) 377-8796
--------------
(Registrant's telephone number, including area code)
<PAGE>
Item 1. Changes in Control of Registrant.
Not applicable
Item 2. Acquisition or Disposition of Assets.
Not applicable
Item 3. Bankruptcy or Receivership.
Not applicable
Item 4. Changes in Registrant's Certifying Accountant.
Not applicable
Item 5. Other Events.
Not applicable
Item 6. Resignation of Registrant's Directors.
Not applicable
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Business Acquired.
Not applicable
(b) Financial Statements and Pro Forma Financial Information.
Description
-----------
Independent Auditor's Report
Audited Consolidated Balance Sheet of Green Capital N.V. and
Subsidiaries as of December 31, 1997 and 1996
Audited Consolidated Statements of Results and Retained Earnings of
Green Capital N.V. and Subsidiaries for the periods of twelve and
seven months ended December 31, 1997 and 1996
Audited Consolidated Statements of Cash Flows of Green Capital N.V.
and Subsidiaries for the periods of twelve and seven months ended
December 31, 1997 and 1996
2
<PAGE>
Unaudited Condensed Consolidated Balance Sheet of Green Capital N.V.
and Subsidiaries as of March 31, 1998
Unaudited Condensed Consolidated Statement of Results of Green Capital
N.V. and Subsidiaries for the three months ended March 31, 1998
and 1997
Unaudited Condensed Consolidated Statement of Cash Flow of Green
Capital N.V. and Subsidiaries for the three months ended March 31,
1998 and 1997
Unaudited Condensed Consolidated Balance Sheet (Proforma) of Green
Capital Group, Inc. and Subsidiaries as of March 31, 1998
Unaudited Condensed Consolidated Statement of Results (Proforma) of
Green Capital Group, Inc. and Subsidiaries for the three months
ended March 31, 1998 and 1997
Notes to the Consolidated Financial Statements
(c) Exhibits.
None
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GREEN CAPITAL GROUP, INC.
Date: September 25, 1998 By: /s/ Oscar S. Christian
----------------------------------
Oscar S. Christian, President
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
CECILIANO
& CIA
To the Board of Directors and Stockholder of
Green Capital N.V. and Subsidiaries
We have audited the consolidated balance sheets of Green Capital N.V.
and its subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of results and retained earnings, and of cash flows for
the periods of twelve and seven months then ended. These consolidated financial
statements are responsibility of Company's Management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statements presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Green
Capital N.V. and its subsidiaries as of December 31, 1997 and 1996, and the
results of its operations and cash flows for the periods of twelve and seven
months then ended, in conformity with accounting principles generally accepted
in the United States of America.
As it is indicated in note 4 to the consolidated financial statements,
as of December 31, 1997 and 1996, the trust created by the company is
insufficient to fund the estimated costs necessary for future maintenance of
plantations related to units sold. Management's plans to cover such
insufficiency are also described in such note.
Law 6663 stamp for
(cent)1,000 adhered to and
canceled in the original
Insurance policy R-1153, expires:
September 30, 1998
July 13, 1998
F-1
<PAGE>
GREEN CAPITAL N.V. AND SUBSIDIARIES
AUDITED CONSOLIDATED BALANCE SHEETS
as of December 31, 1997 and 1996
(amounts expressed in US Dollars)
<TABLE>
<CAPTION>
ASSETS NOTE 1997 1996
---- ---- ----
<S> <C> <C>
Current assets:
Cash on hand and in banks $ 30,486 $ 57,112
Accounts receivable 3 940,378 376,423
Trust assets 4 137,417 244,631
-------------------- -------------------
Total current assets 1,108,281 678,166
Property, machinery and equipment, net 5 8,011,514 1,407,294
Plantations under development 5 and 6 4,996,425 2,008,470
Other assets 7 1,604,146 1,130
-------------------- -------------------
Total assets $ 15,720,366 $ 4,095,060
==================== ===================
LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities:
Notes payable 8 $ 401,991 $ 235,000
Current portion of long term debt 9 253,603 260,000
Accounts payable to suppliers 99,718 26,509
Provision for future plantations' maintenance costs 10 163,756 79,369
Accrued expenses and others liabilities 35,510 30,305
-------------------- -------------------
Total current liabilities 954,578 631,183
Long term debt 9 13,481,675 2,646,879
Provision for future plantations' maintenance costs 10 521,694 247,206
Other liabilities 48,189 50,806
-------------------- -------------------
Total liabilities 15,006,136 3,576,074
-------------------- -------------------
Stockholder's equity:
Capital stock 11 6,000 6,000
Additional capital contributions 216,397 212,600
Retained earnings 427,598 299,929
Currency translation adjustment 2 64,235 457
-------------------- -------------------
Total stockholder's equity 714,230 518,986
-------------------- -------------------
Total liabilities and stockholder's equity $ 15,720,366 $ 4,095,060
==================== ===================
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
F-2
<PAGE>
GREEN CAPITAL N.V. AND SUBSIDIARIES
AUDITED CONSOLIDATED STATEMENTS OF RESULTS AND RETAINED EARNINGS
for the periods of twelve and seven months ended December 31, 1997 and 1996
(amounts expressed in US Dollars)
<TABLE>
<CAPTION>
NOTE 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income from sales of teakwood contracts 2 and 12 $ 2,828,095 $ 1,156,990
-------------------- -------------------
Operating expenses and costs:
Maintenance costs of teakwood plantations 2 and 10 (736,993) (523,542)
General and administrative (1,229,359) (282,457)
Marketing and selling (390,482) (44,951)
-------------------- -------------------
Total operating expenses and costs (2,356,834) (850,950)
-------------------- -------------------
Operating profit 471,261 306,040
Financial expenses (222,786) --
Amortization of goodwill 2 and 7 (152,004) 1,526
Other income (expenses), net 31,198 (7,637)
-------------------- -------------------
Net (loss) profit of the period 127,669 299,929
Retained earnings at the beginning of the period 299,929 --
-------------------- -------------------
Retained earnings at the end of the period $ 427,598 $ 299,929
==================== ===================
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
F-3
<PAGE>
GREEN CAPITAL N.V. AND SUBSIDIARIES
AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the periods of twelve and seven months ended December 31, 1997 and 1996
(amounts expressed in US Dollars)
<TABLE>
<CAPTION>
NOTE 1997 1996
---- ---- ----
<S> <C> <C>
Cash flows of the operating activities:
Net profit of the period $ 127,669 $ 299,929
-------------------- -------------------
Adjustments to reconcile the net profit of the period
with the net cash provided
by operating activities:
Depreciation 5 20,170 20,170
Goodwill amortization 152,004 (1,526)
Provision for future plantations' maintenance costs 10 358,875 326,575
Allowance for doubtful receivables 3 239,796 52,024
Imputed interests 222,786 --
Increase in assets:
Accounts receivable (696,537) (428,447)
Other assets -- (244,631)
Increase in liabilities:
Accounts payable 73,209 26,509
Accrued expenses and others liabilities 5,205 30,305
Other liabilities -- 52,332
-------------------- -------------------
Total adjustments 375,508 (166,689)
-------------------- -------------------
Net cash provided by operating activities 503,177 133,240
-------------------- -------------------
Cash flows of the investing activities:
Acquisition of fixed assets (25,426) (22,184)
Increase in other assets 1,117 (1,130)
-------------------- -------------------
Net cash used by investing activities (24,309) (23,314)
-------------------- -------------------
Cash flows of the financing activities:
Notes payable 166,991 235,000
Long-term debt (740,060) (506,871)
Stockholder's additional capital contributions 3,797 212,600
Capital stock -- 6,000
-------------------- -------------------
Net cash provided by financing activities (569,272) (53,271)
-------------------- -------------------
Net (decrease) increase in cash and cash equivalents (90,404) 56,655
Cash on hand and in banks at the beginning of the period 57,112 --
Effect of currency translation adjustments 63,778 457
-------------------- -------------------
Cash on hand and in banks at the end of the period $ 30,486 $ 57,112
==================== ===================
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
F-4
<PAGE>
GREEN CAPITAL N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(amounts expressed in US Dollars)
<TABLE>
<CAPTION>
As of
March 31,1998
-------------
<S> <C>
ASSETS
Current assets:
Cash on hand and in banks $ 67,655
Accounts receivable 1,372,570
Receivable from stockholder 11,208
Other assets 145,989
----------------------------
Total current assets 1,597,422
Property, machinery and equipment, net 8,007,809
Plantations under development 4,996,425
Other assets 1,562,071
----------------------------
Total assets $ 16,163,727
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 397,000
Current portion of long term-debt 1,144,916
Accounts payable to suppliers 204,786
Payable to stockholder 38,159
Provision for future plantations' maintenance costs 191,131
Accrued expenses and others liabilities 42,389
----------------------------
Total current liabilities 2,018,381
Long term-debt 12,540,313
Provision for future plantations' maintenance costs 631,194
Other liabilities 47,535
----------------------------
Total liabilities 15,237,423
Stockholders' equity:
Capital stock 6,000
Additional capital contributions 216,397
Retained earnings 637,752
Currency translation adjustment 66,155
----------------------------
Total stockholder's equity 926,304
----------------------------
Total liabilities and stockholders' equity $ 16,163,727
============================
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
F-5
<PAGE>
GREEN CAPITAL N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF RESULTS
(Unaudited)
(amounts expressed in US Dollars)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, 1998 March 31, 1997
---------------------- ----------------------
<S> <C> <C>
Income from sales of teakwood contracts $ 778,917 $ 556,225
Operating expenses and costs:
Maintenance costs of teakwood plantations 258,537 165,059
Marketing and selling 6,662 24,462
General and administrative 238,209 126,697
---------------------- ----------------------
Total operating expenses and costs 503,408 316,218
---------------------- ----------------------
Operating profit $ 275,509 $ 240,007
Other expenses, net 65,355 11,449
---------------------- ----------------------
Net profit of the period 210,154 228,558
Retained earnings at the beginning of the period 427,598 299,929
---------------------- ----------------------
Retained earnings at the end of the period $ 637,752 $ 528,487
====================== ======================
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
F-6
<PAGE>
GREEN CAPITAL N.V. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
(amounts expressed in US Dollars)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, 1998 March 31, 1997
---------------------- ----------------------
<S> <C> <C>
Cash flows of the operating activities:
Net profit of the period $ 210,154 $ 228,558
Adjustments to reconcile net profit of the period to net
cash provided by operating activities:
Depreciation 5,043 5,044
Goodwill amortization 41,421 (654)
Provision for future plantations' maintenance costs 177,814 89,719
Allowance for doubtful receivables -- --
Increase in assets:
Accounts receivable (443,400) (188,802)
Other assets (8,572) (3,021)
Increase in liabilities:
Accounts payable 105,068 (26,538)
Maintenance costs charged to the provision (40,939)
Payable to stockholder 38,159
Accrued expenses and others liabilities 6,879 44,103
---------------------- ----------------------
Total adjustments (118,527) (80,149)
---------------------- ----------------------
Net cash provided (used) by operating activities 91,627 148,409
---------------------- ----------------------
Cash flows of the investing activities:
Disposition of fixed assets (1,339) 4,559
Increase in other assets
---------------------- ----------------------
Net cash used (provided) by investing activities (1,339) 4,559
---------------------- ----------------------
Cash flows of the financing activities:
Amortization of long term debt (50,048)
Notes payable (4,991) 55,544
Capital stock -- --
---------------------- ----------------------
Net cash provided (used) by financing activities (55,039) 55,544
---------------------- ----------------------
Net increase (decrease) in cash and cash equivalent 35,249 208,512
Cash on hand and in banks at beginning of period 30,486 57,112
Effect of currency translation adjustments 1,920 3,246
---------------------- ----------------------
Cash on hand and in banks at end of period 67,655 268,870
====================== ======================
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
F-7
<PAGE>
GREEN CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (PROFORMA)
(Unaudited)
(amounts expressed in US Dollars)
<TABLE>
<CAPTION>
As of
March 31,1998
-----------------------
<S> <C>
ASSETS
Current assets:
Cash on hand and in banks $ 67,655
Accounts receivable 1,372,570
Receivable from stockholder 11,208
Other assets 145,989
-----------------------
Total current assets 1,597,422
Property, machinery and equipment, net 8,007,809
Plantations under development 4,996,425
Other assets 1,562,071
-----------------------
Total assets $ 16,163,727
=======================
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable $ 397,000
Current portion of long term-debt 1,144,916
Accounts payable to suppliers 204,786
Payable to stockholder 38,159
Provision for future plantations' maintenance costs 191,131
Accrued expenses and others liabilities 89,924
-----------------------
Total current liabilities 2,065,916
Long term-debt 12,540,313
Provision for future plantations' maintenance costs 631,194
Other liabilities
-----------------------
Total liabilities 15,237,423
Stockholders' equity:
Capital stock 7,325
Additional capital contributions 278,322
Retained earnings 574,502
Currency translation adjustment 66,155
-----------------------
Total stockholders' equity 926,304
-----------------------
Total liabilities and stockholders' equity $ 16,163,727
=======================
</TABLE>
F-8
<PAGE>
GREEN CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF RESULTS (PROFORMA)
(Unaudited)
(amounts expressed in US Dollars)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, 1998 March 31, 1997
---------------------- ----------------------
<S> <C> <C>
Income from sales of teakwood contracts $ 778,917 $ 556,225
Operating expenses and costs:
Maintenance costs of teakwood plantations 258,537 165,059
Marketing and selling 6,662 24,462
General and administrative 244,459 126,727
---------------------- ----------------------
Total operating expenses and costs 509,658 316,248
---------------------- ----------------------
Operating profit $ 269,259 $ 239,977
Other expenses, net 65,355 11,449
---------------------- ----------------------
Net profit of the period $ 203,904 $ 228,528
Retained earnings at the beginning of the period 370,598 246,743
---------------------- ----------------------
Retained earnings at the end of the period $ 574,502 $ 475,271
====================== ======================
</TABLE>
F-9
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(amounts expressed in US Dollars)
1. Domicile, Activities, Accounting Records, and Currency:
------------------------------------------------------
Green Capital Group, Inc. (the parent company), is domiciled in Nevada.
Green Capital N.V. (the holding company) is domiciled in Curacao, as
well as its subsidiary Green Capital Management (Capital Management),
which is the parent company of Promociones Capital Verde S.A. and
Bosque Teca Verde S.A. (BTV). The subsidiary El Reino de Papa Juan S.A.
is domiciled in the Republic of Costa Rica. Promociones Capital Verde
S.A. as well as its wholly owned subsidiary Reforestadora Capital Verde
S.A. are domiciled in Costa Rica. Bosque Teca Verde S.A. is domiciled
in The Netherlands. All the companies are referred herein as the
Company. Their main line of business is the development of teakwood
plantations and the sale of teakwood contracts, for which they count
with 297 hectares planted of teakwood out of a total of 1,508 suitable
for such purpose. The holding company and its subsidiary Green Capital
Management, as well as BTV, keep their accounting records in US
dollars. The other companies keep their accounting records in colones
((cent)), the official currency of Costa Rica (note 14).
2. Principal Accounting Policies:
-----------------------------
Principal accounting policies followed by the Company are in conformity
with accounting principles generally accepted in the United States of
America.
Consolidation:
The consolidated financial statements include the accounts of Green
Capital N.V. and its wholly owned subsidiaries, as well as those of the
other companies mentioned in note 1. All significant intercompany
balances and transactions have been eliminated in consolidation.
Financial statements of subsidiaries domiciled in Costa Rica were
consolidated as of September 30 of each year.
Translation of the Financial Statements into US Dollars:
The financial statements of El Reino de Papa Juan S.A., Promociones
Capital Verde S.A., and Reforestadora Capital Verde S.A, have been
translated into US dollars on the basis of the Costa Rican colon as the
functional currency, as follows:
a. Monetary and non monetary assets and liabilities, at the
exchange rate in force at the end of the period.
b. Equity accounts, at the historical exchange rates.
c. The adjustment resulting from translation is included as
part of the stockholder's equity, in an account denominated
"Currency translation adjustment".
Property, Machinery, and Equipment:
These are recorded at cost. Repairs that do not extend useful life of
assets are charged to the results of the period. Depreciation is
recorded at the rates required to amortize the cost over their
estimated useful life (10 years for vehicles, machinery, furniture and
office equipment, between 12 and 50 years for buildings and similar
ones), using the straight-line method. Depreciation expense is charged
to the results of the period.
The accompanying notes are an integral part
of the consolidated financial statements
F-10
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts expressed in US Dollars)
2. Principal Accounting Policies, continued:
-----------------------------
Plantations Under Development:
Teakwood
Costs related with sowing and maintenance of teakwood plantations sold
are estimated (as to the moment of harvest) and directly registered as
part of the results of the period in which the sale of units is made.
The company begins planting only when teakwood contracts are sold.
Provision for future plantations' maintenance cost is reviewed and
adjusted periodically based on current conditions and technicians'
opinion.
Secondary Forest
Timber trees' plantations other than teakwood, acquired as product of
the purchase of the operative lands, are registered at cost.
Goodwill:
Since it is related mostly with lands acquired for teakwood plantation,
it is amortized during a period no greater than 40 years and according
to selling of teakwood contracts, calculated with basis on the hectares
available for teakwood plantation during such period.
Sale of Teakwood Contracts:
Income from the sale of teakwood contracts is recognized when the
contract is signed (note 12).
Employees' Legal Benefits:
These are recognized when the payment is made.
3. Accounts Receivable:
-------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
(A) Contracts $ 645,392 $310,049
Others 586,806 118,398
----------- ---------
Total 1,232,198 428,447
Less: Allowance for doubtful accounts (291,820) (52,024)
----------- ---------
Net $ 940,378 $376,423
</TABLE>
(A) They correspond to teakwood contracts pending of collection,
which were signed in 1997 and 1996, respectively (note 12).
4. Trust Assets:
------------
It corresponds to funds transferred to a trust (note 12) in order to
cover teakwood plantations' maintenance costs over the units sold. A
unit corresponds to a half planted hectare, but a portion of a unit can
also be sold (i.e. a quarter, a half, etc.). Funds are invested at
sight, with variable interest rates depending on term.
The accompanying notes are an integral part
of the consolidated financial statements
F-11
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts expressed in US Dollars)
4. Trust Assets, continued:
------------
Due to inadequate maintenance practices followed by former owner of
Bosque Teca Verde's teakwood plantations and subsequent improvement of
infrastructures, in line with Green Capital's high maintenance and
quality standards, as well as due to further financing of the Company's
expansion, part of the trust's funds were used to finance such
activities. Consequently, as of December 31, 1997 and 1996, the funds
held in trust are insufficient in approximately $510,522 and $81,944,
respectively, to cover estimated future maintenance costs of
plantations. Management's plan is to cover such insufficiency with
future sales of units of the teakwood plantations to be developed in
the new lands acquired (note 5).
Management's intention is to create a trust for each plantation in
order to control its costs separately, according to the auditors'
recommendation.
5. Property, Machinery, and Equipment:
----------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
(A) Facilities $ 207,920 $ 108,321
(A) Boats 95,500 45,701
Furniture and equipment 47,608 22,182
----------- ------------
Total 351,028 176,204
Accumulated depreciation (40,340) (20,170)
----------- ------------
Net 310,688 156,034
(A) (B) Land 7,700,826 1,251,260
----------- ------------
Total $8,011,514 $1,407,294
</TABLE>
(A) It includes assets with a fair value of $3,397,219, which were
acquired through the purchase on credit of 100% shares of El Reino
de Papa Juan S.A. in 1996. As of that date, purchase value of
shares was $3,413,750, which generated a negative goodwill of
$4,979,925, including the value of timber other than teak. This
negative goodwill was applied to reduce proportionally the
appraisal's value of the non-current assets acquired. However, in
September 1997, terms of debt agreement related with the
acquisition of the company were modified (note 9), whereby the
aforementioned negative goodwill became positive in the amount of
$258,991 (note 7). Consequently, assets were adjusted at purchase
cost, allocated according to their fair value. Fair value was
determined based on a valuation made by an independent appraiser in
December 1995, detailed as follows:
Location Description Appraisal value
-------- ----------- ---------------
Salma Farm Land $1,476,480
Facilities 159,160
Teakwood plantation 546,042
Dominical Land 147,955
Farm
Teakwood plantation 109,720
La Florida Land 1,469,397
The accompanying notes are an integral part
of the consolidated financial statements
F-12
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts expressed in US Dollars)
Facilities 48,727
Boats 91,500
Communication Equipment 4,000
Timber (woods other than 4,996,425
teak) (note 6)
-------------------
Total $ 9,049,406
===================
Since the rights of usufruct on acquired teakwood plantations had
been already sold to investors, their market value was adjusted to
zero. Consequently, $655,762 was charged to goodwill arisen from
this transaction. (note 7).
(B) In September, 1997, the holding company acquired 80% of the
shares of Compania Ganadera Internacional S.A., for a total of
$7,500,000 (note 9), which main asset is a land comprising 2,500
hectares located in the Pacific coast of Costa Rica with a fair
value of $5,758,680, according to an appraisal made by an
independent expert in March 23, 1998. This transaction generated a
goodwill of $1,499,763 (note 7).
Depreciation expense of $20,170 for 1997 and 1996, was charged to
the results of each period.
6. Plantations Under Development:
-----------------------------
Teakwood:
The Company developed its teakwood plantations in five phases,
which situation as of December 31, 1997 is described as
follows:
Phase 1: Began in 1987 and 1988, covering an
extension of 37 hectares planted in a
total of 70 hectares of land.
Phase 2: Began in 1992, covering an extension of
60 hectares planted in a total of 95
hectares of land.
Phase 3: Began in 1993 and 1994 , covering an
extension of 68 hectares planted in a
total of 188 hectares of land, from
which 81 are suitable for teakwood
plantation.
Phase 4: Began in 1995, covering an extension
of 60 hectares planted in a total of
232 hectares of land, from which 67 are
suitable for teakwood plantation.
Phase 5: Began in 1997, covering an extension
of 72 hectares planted in a total of
2,500 hectares of land, from which
1,300 are suitable for teakwood
plantation.
In general, teakwood exploitation is expected to begin in the
fourth year after the trees are planted. Subsequently, intermediate
thinnings every three years are planned; however, the main harvest
is expected to be obtained 20 years after plantation.
The accompanying notes are an integral part
of the consolidated financial statements
F-13
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts expressed in US Dollars)
6. Plantations Under Development, continued:
-----------------------------
Secondary Forest:
At the balance sheet's date, the plantations' accumulated costs
correspond to a secondary forest and a natural reserve planted of trees
other than teak. Value of standing timber for $4,996,425 was determined
based on a valuation made by an independent appraiser as of December
31, 1995 (note 5). Exploitation of timber must be made according to a
forestry plan approved by the government.
7. Other Assets:
------------
They correspond mainly to goodwill generated in the acquisition of 80%
of the shares of Compania Ganadera Internacional, S.A. and 100% of the
shares of El Reino de Papa Juan S.A. (note 5). As of December 31, 1997,
it is presented net of an accumulated amortization for $154,621.
8. Notes Payable:
-------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
(A) John William Kramer and De Leede Investment B.V. $179,991 $200,000
(B) Investor 180,000 --
Other 42,000 35,000
--------- ----------
Total $401,991 $235,000
</TABLE>
(A) Amount owed for the purchase of 100% of Bosque Teca Verde's
shares. It does not bear any interest rate nor has a maturity date.
It is guaranteed by Bosque Teca Verde's shares.
(B) According to the Company's management, it corresponds to an
advance received from a investor for purchase of "units", which was
not completed. Consequently, the Company's management believes it
is entitled to file a claim or a lawsuit against the investor for
not fulfilling his contractual obligations, and consequently, to
compensate the Company for the damages caused. However, according
to a confirmation's reply received from creditor, it is a loan that
does not bear any interest, it is not documented, nor does it have
a guarantee, but which is due on July 1998.
9. Long-term Debt:
--------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
(A) Maria Marta Batalla G. $ 7,010,000 --
(B) Gambordela Enterprises Inc. 8,109,766 $2,906,879
------------- ----------
Total 15,119,766 2,906,879
Less: Current portion ( 253,603) (260,000)
------------- -----------
Long-term debt 14,866,163 2,646,879
Less: Discount on notes payable (1,384,488) --
------------- -------------
Net $13,481,675 $2,646,879
</TABLE>
(A) On September 16, 1997, the holding company and Mrs. Maria Marta
Batalla G. signed a contract (note 5), which establishes the
following clauses:
The accompanying notes are an integral part
of the consolidated financial statements
F-14
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts expressed in US Dollars)
9. Long-term Debt, continued:
--------------
a. Mrs. Batalla sells and transfers 80% of Ganadera's capital
stock. The main asset of the company is a farm called "Rancho
Nuevo" with an area of 2,500 hectares.
b. Mrs. Batalla will be appointed as president of the company
during the term of the contract; however, during such term, she
will not be able to dispose of the company's assets.
c. The purchase price of the company's shares is $7,500,000, which
must be paid as follows:
March 1999 $1,000,000
March 2000 1,500,000
March 2001 2,000,000
March 2002 2,000,000
1/ March 2003 1,000,000
1/ In September 1997, $500,000 were paid, which will be deducted
from the last payment.
Nevertheless the payment schedule mentioned above, the holding
company must pay to the seller $1,500 for each unit (1/2
hectare) planted of teak. Additionally, it must pay $2,500 for
each unit sold during the first year, $2,250 in the second year,
$1,700 in the third and fourth year, and $166 in the last year.
Such payments will be deducted from the annual payments stated
above.
d. Ganadera's shares will be pledged as collateral guarantee.
e. The holding company commits to constitute a trust to cover
all maintenance costs of all units sold until they are ready for
commercial exploitation.
f. The term of the loan agreement is for 5 years starting on
March 1, 1998.
g. The holding company has the option to purchase the additional
20% of Ganadera's shares at any time during the term of the
contract for an amount of $200,000.
(B) On September 12, 1997, the contract with Gambordela Enterprises
Inc. for purchasing 100% of the shares of El Reino de Papa Juan
S.A. (note 5) was restructured as to price and conditions. The
principal effect of the restructuring was a price increment on
assets acquired in the amount of $5,452,916. Main conditions
established in this contract are the following:
a. The purchase price to acquire 100% of the shares is $8,866,666
payable as follows:
i. $866,666 payable on February 28, 1998, which at the auditors'
report date were almost paid.
The accompanying notes are an integral part
of the consolidated financial statements
F-15
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts expressed in US Dollars)
9. Long-term Debt, continued:
--------------
ii. Immediately following consummation of the transaction
described in note 15, Green Capital Group Inc. will issue
that number of shares from its restricted common stock equal
in market value to $4,200,000 (but in no event more than
4,200,000 shares in the aggregate), which represents partial
payment of the balance of $8,000,000 owed. The holding
company has the option to repurchase all these shares within
18 months from the date of issuance at a purchase price of
$4,200,000 in the aggregate. The agreement provides for
additional shares to be issued, if any, to maintain the
aggregate market value of such shares at $4,200,000. This
option may be rescinded in case of a weekly payment delay, as
described in the following paragraph.
iii. The balance of $3,800,000 will be paid in weekly
installments of $10,000 each starting February 1998, for a
five-year period, at a 9% yearly interest. The remaining
balance due at the end of the five-year period will be paid
in a single payment. Any delay of more than fourteen days in
a weekly payment is cause of rescission of contract.
b. The shares of El Reino de Papa Juan S.A. are pledged as a
collateral guarantee until paid in full.
As of December 31, 1997 and 1996, maturities of the long-term
debt are as follow:
Year 1997 1996
---- ---- ----
1998 -- $1,200,000
1999 $ 5,357,330 1,200,000
2000 1,672,089 246,879
2001 2,188,232 --
2002 5,138,512 --
2003 510,000 --
------------- -----------
$14,866,163 $2,646,879
10. Provision for Future Plantations' Maintenance Cost:
--------------------------------------------------
It corresponds to an estimation of future maintenance costs on units
sold. The holding company is responsible for maintenance costs of
plantations until the main harvest of timber is obtained (note 6).
Rights of usufruct on plantations corresponding to units sold belong to
investors through a foundation domiciled in Curaao (note 12).
11. Capital Stock:
-------------
It is constituted by an authorized capital stock of $30,000,
divided into 30,000 shares with a par value of $1.00 each. Of those
shares, a total of 6,000 are subscribed, issued and fully paid.
The accompanying notes are an integral part
of the consolidated financial statements
F-16
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts expressed in US Dollars)
12. Contracts:
---------
Teakwood:
These were signed by Green Capital N.V., Stichting Green Capital, a
Foundation established in accordance with The Netherlands Antilles law,
and investors who desire to participate in the right to usufruct of
teakwood plantations owned by the former. Through such contracts,
investors acquire a participation in the Foundation for a minimum
period of 20 years, who in return, receive the full rights of usufruct
over the surface areas of the aforementioned plantations. Consequently,
the investor acquires the full rights over all teakwood proceeds for a
period of no less than 20 years. The most important clauses of the
contracts are the following:
a. The Foundation is obliged to look after the interests of the
investors, and for that purpose, it shall exercise its rights of
usufruct over each of the teakwood plantations' surface areas, in
accordance with the instructions and for the benefit of the
investor.
b. The price of the right of usufruct per unit is as follows:
Area Price
---- -----
5,000 SQ. M. (1/2 hectare) $18,000
2,500 SQ. M. (1/4 hectare) 10,000
1,250 SQ. M. (1/8 hectare) 5,750
625 SQ. M. (1/16 hectare) 3,500
The amount obtained from the investors will be deposited in an
escrow account of Green Capital with the ABN AMRO Bank N.V., in
order to be distributed pursuant to the escrow agreement described
below.
c. At the conclusion of the agreement, the investor has all rights
to the usufruct over the participation's surface area at the
Foundation, less five percent of the sales resulting therefrom,
which will be income of the holding company.
d. Green Capital N.V. commits to render to the investor the
following services during the term of the agreement:
i. Weeding of the ground.
ii. Pruning of the teak trees
iii. Maintenance of fences, internal roads, drainage ditches,
and bridges
iv. General guarding, protecting and supervising of the
plantation
v. Intermediate thinning of inferior quality trees and/or
cutting of trees in accordance with a forestry schedule,
as well as the required re-planting
vi. Issuance of written reports to investors regarding the
progress and growth of the teak trees, at least twice a
year.
The accompanying notes are an integral part
of the consolidated financial statements
F-17
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts expressed in US Dollars)
12. Contracts, continued:
---------
vii. Access to and guidance over the plantation in order to show
progress
viii. Collection of the sales results and the distribution
thereof to the investor, accompanied by a certified
accountant attestation regarding the result of the sale.
Trust Agreement (Fideicomiso B.T.V. or Green Capital Trust):
It was signed between Bosque Teca Verde S.A. (Trustee) and K.P.M.G
Servicios Legales S.A. (the trustee) in March 1994, in order to
guarantee the maintenance of teakwood plantations owned by Cabsa Dos
S.A., a wholly-owned subsidiary of El Reino de Papa Juan S.A. The most
important clauses of this contract are:
a. The creation of this trust originates in an agreement executed
among the following entities: Stichting Bosque Teca Verde
(Stichting), Bosque Teca Verde S.A. and Cabsa Dos S.A. (Cabsa),
which establishes that Cabsa has assigned and transferred to
Stichting, a company domiciled in The Netherlands, the right of
usufruct over all teak trees planted and that B.T.V. is in charge
of the marketing and sale of the "units" (corresponding to 1/2,
1/4, 1/8 or 1/16 of hectare planted) on behalf and in
representation of Cabsa, with prior authorization from Stichting
Bosque Teca Verde.
b. The sole beneficiary of 100% of the profits earned by this trust
is B.T.V.
c. B.T.V. shall place in the trust with K.P.M.G., a portion of the
proceeds coming from the sale of the "units". Additionally, B.T.V.
shall specifically instruct K.P.M.G. to transfer to Cabsa an
adequate amount of funds to cover all maintenance costs of "units"
sold, in order to guarantee to the participants that the "units" so
acquired be adequately and timely maintained through appropriate
and professional assistance.
d. Trust funds will be used to pay maintenance cost of the "units"
sold, professional services rendered, and other corresponding
payments, upon instructions of BTV and according to the trust
agreement.
e. If the funds of the trust are insufficient for any reasons,
B.T.V., from time to time, will increase them to a reasonable
amount so that the maintenance of the "units" is duly covered, as
well as to make the corresponding payments.
f. The trust deed shall be in force for a term of twenty-three
years.
Escrow Agreement (ABN):
It was signed in November 1996, between ABN AMRO Bank N.V. (Escrow
Agent), Green Capital Foundation, and Green Capital N.V., for the
purpose of receiving and holding funds (selling of participation) to be
delivered to Green Capital N.V., the Escrow Agent, Green Capital Trust
and Green Capital Management N.V., upon receipt of the written approval
and instructions of both the investor and Green Capital N.V.
During the period, distribution of funds coming from participation's
sales was carried out in a way different than the one stated in the
agreement, upon instructions received from Green Capital N.V.
The accompanying notes are an integral part
of the consolidated financial statements
F-18
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts expressed in US Dollars)
12. Contracts, continued:
---------
Consequently, as of December 31, 1997 and 1996, funds deposited in the
trust are insufficient for the adequate future maintenance of the
"Units" sold (note 4).
Forestry Contracts:
They were signed between the Ministry of Natural Resources, Energy and
Mining, the Ministry of Finance, and three of the wholly-owned
subsidiaries of El Reino de Papa Juan S.A., detailed as follows:
a. Forestal Baru Teca S.A.: It was signed in July 1990. The company
commits to develop a reforestation project in an area of 73
hectares. There is no term for wood's exploitation.
b. Inversiones Forestales de Dominical S.A.: It was signed in
October 1991. Through this contract, the company commits to handle
a reforestation project in an area of 53.5 hectares. There is no
term for wood's exploitation.
c. Cabsa: It was signed in July 1995. The company committed to
develop the reforestation project in an area of 110 hectares. This
contract shall be in force for a twenty year-term.
Principal commitments of the companies are:
i. Fulfill the technical plan of forestry handling approved by
the General Office of Forestry (DGF, for its name in
Spanish), as well as to follow any technical recommendation
given by such entity.
ii. Contract a forestry technician who will have to inform
DGF on a quarterly basis about the project's progress.
iii. Inform promptly the General Office of Forestry of any
use given to the wood extracted from the reforestation
project, which must be made according to the forestry plan
approved by such organization. Likewise, the company must pay
the corresponding tax established by the Forestry Law before
extracting or industrializing the wood from the project.
iv. Obtain a previous authorization from the General Office
of Forestry in order to get a tax exoneration over the import
of equipment, machinery, and supplies, which will be required
for carrying out the forestry plan.
13. Contingent Liabilities:
----------------------
Fiscal:
In Costa Rica, the income tax returns for the last four fiscal periods
are open for examination by fiscal authorities. Consequently, the
Company is contingently liable for potential claims of additional
taxes; however, any claims that could arise from tax assessment
corresponding to periods previous to companies' acquisition are
responsibility of former management, according to the purchase
contracts signed by the parties. Management considers that returns for
1996 and 1997 fiscal years, just as same were filed, would not be
substantially adjusted as a result of any future review.
The accompanying notes are an integral part
of the consolidated financial statements
F-19
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, Continued
(amounts expressed in US Dollars)
13. Contingent Liabilities, continued:
----------------------
Additionally, the 1997 assets' tax return of a company domiciled in
Costa Rica has not been filed, situation which could be sanctioned by
fiscal authorities with a penalty of $2,116, plus interests and
surcharges.
Employees' Legal Benefits:
In Costa Rica, the payment of severance benefits, equivalent to one
month's salary for each year worked, is limited to a maximum payment of
eight months, effective at death, retirement with pension, or
separation of the employee without just cause. This benefit is not
applicable when the employee voluntarily resigns or is separated with
just cause. As of December 31, 1997 and 1996, the maximum exposure for
this concept amounts to $25,217 and $12,642 respectively.
Others:
During the periods of twelve and seven months ended at the
balance sheets' dates, the Company has not reported to welfare
institutions certain salaries of employees. Consequently, it is
contingently liable for the payment of withholding taxes and social
contributions for the amounts of approximately $43,660 and $16,960
corresponding to the aforementioned periods, respectively, which does
not include penalties nor surcharges.
14. Exchange Rate Regulations and Restrictions on Foreign Currencies:
----------------------------------------------------------------
In Costa Rica, transactions related with the exchange of foreign
currencies must be carried out through the banks authorized for this
purpose by the Central Bank, whereby each bank is authorized to
establish the exchange rate for the purchase and sale of foreign
currencies.
As of December 31, 1997 and 1996, the reference exchange rate for
selling transactions, fixed by the Central Bank, was of (cent)220.19
and (cent)244.53 for $1.00 respectively. For purchasing transactions, a
difference of (cent)0.46 and (cent)0.49 less is applicable.
As of the date of the independent auditors' report, the reference
selling exchange rate was of (cent)257.83 for $1.00.
15. Subsequent Events:
-----------------
In April 1998, Green Capital N.V. was acquired by Pacific Forest
Corporation, a publicly-traded US "shell" corporation, whereby the
holding company becomes a wholly-owned subsidiary of the US corporation
through an exchange of shares, and the US corporation becomes the
holding company and changes its name to Green Capital Group Inc.
The accompanying notes are an integral part
of the consolidated financial statements
F-20
