-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RmgKMNTQrUcYaTavRVSG+Rzd8qjg7G8evmpzhCPTQoSl5nlCjIDSJ0FDsEjPgdFN o9nkkYT6CkuzfAlqM4Y+4g== 0001017386-97-000032.txt : 19970702 0001017386-97-000032.hdr.sgml : 19970702 ACCESSION NUMBER: 0001017386-97-000032 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970701 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MADERA INTERNATIONAL INC CENTRAL INDEX KEY: 0000810750 STANDARD INDUSTRIAL CLASSIFICATION: ORDNANCE & ACCESSORIES, (NO VEHICLES/GUIDED MISSILES) [3480] IRS NUMBER: 953769906 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-16523 FILM NUMBER: 97633668 BUSINESS ADDRESS: STREET 1: 23548 CALABASAS RD STE 203 CITY: CALABASAS STATE: CA ZIP: 91302 BUSINESS PHONE: 8182238807 MAIL ADDRESS: STREET 1: 23548 CALABASAS RD STREET 2: STE 205 CITY: CALABASAS STATE: CA ZIP: 91302 FORMER COMPANY: FORMER CONFORMED NAME: WEAVER ARMS CORP DATE OF NAME CHANGE: 19940203 10KSB 1 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] 1 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. 2 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. 3 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. 4 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 5 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. 6 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. 7 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 8 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. 9 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. 10 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 11 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. 12 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 13 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. 14 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 (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 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 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 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 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 MADERA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Additional
Common Stock Preferred Stock Paid-In Retained Shares Amount Shares Amount Capital Deficit Total ---------- --------- ----------- --------- ------------ ----------- ------------ 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 =========== ========= =========== ========= ============ =========== ============
The accompanying notes are an integral part of these consolidated financial statements. F-5 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 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 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 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 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 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 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 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 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 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 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 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 EX-27 2
5 12-MOS MAR-31-1997 MAR-31-1997 254,361 0 850,550 0 2,775,918 3,880,829 31,486,276 0 35,419,781 895,412 0 0 10,000 615,669 33,898,700 35,419,781 1,911,241 1,911,241 1,221,679 1,221,679 846,208 0 48,578 (118,069) 0 (118,069) 0 0 0 (118,069) (.002) (.002)
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