UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004 Commission File
Number 0-25909
AUSTRALIAN FOREST INDUSTRIES (f/k/a Multi-Tech International, Corp.)
(Name of small business issuer in its charter)
Nevada 86-0931332
(State or other jurisdiction of (I.R.S. Employer incorporation
or organization) Identification No.)
4/95 Salmon Street, Port Melbourne, Victoria
Australia, 3207
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 011 61 3 8645 4340
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange
Title of Each Class on Which Registered
NONE NONE
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 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 Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES |X| NO |_|
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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |_|
The aggregate market value of the voting common stock held by non-affiliates of
the registrant as of May 13, 2005 was approximately $601,020 based on 400,680
shares of common stock. The number of shares of Common Stock of the registrant
outstanding on May 13, 2005 was 257,400,680.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY
Australian Forest Industries f/k/a Multi-Tech International, Corp., hereinafter
referred to as "the Company", "we' or "us", was originally organized by the
filing of Articles of Incorporation with the Secretary of State of the State of
Nevada on September 21, 1998 under the name Oleramma, Inc. The Articles of
Incorporation authorized the issuance of one hundred five million (105,000,000)
shares, consisting of one hundred million (100,000,000) shares of Common Stock
at par value of $0.001 per share and five million (5,000,000) shares of
Preferred Stock at par value of $0.001.
On April 28, 1999, the Company changed its name to BuckTV,Com, Inc. on the basis
that the Company would market consumer products through an InteractiveWeb site.
The Company again changed its name in November 2002 to Multi-Tech International,
Corp.
On September 1, 2004, we entered into a Share Exchange Agreement with Timbermans
Group Pty Ltd, an Australian corporation and its wholly-owned subsidiary at the
time Integrated Forest Products Pty Ltd, an Australian corporation as well
("Share Exchange Agreement" and "Share Exchange", respectively). Pursuant to
such Share Exchange Agreement, we:
o completed a 200-1 reverse stock split of our common stock
o increased our authorized number of shares from 100,000,000 to
300,000,000
o changed our name from Multi-Tech International, Inc. to Australian
Forest Industries
o appointed Messrs. Michael Timms, Norman Backman, Colin Baird, Antony
Esplin and Roger Timms to the board of directors
o issued 257,000,000 shares of our common stock as a result of the
Share Exchange Agreement
Thus, upon completion of the Share Exchange, Integrated Forest Products Pty Ltd
("IFP") became a wholly-owned subsidiary of the Company and the Company's symbol
on the OTC-BB was changed from "MLTI" to "AUFI".
GENERAL
The majority of the issued and outstanding ordinary shares in the capital of the
Company are held by Timbermans Group Pty Ltd, a leading supplier of softwood
timber products in Australia. The shareholders of Timbermans Group are the same
individuals who comprise our board of directors.
IFP owns a minority interest in Radiata Forest Services Pty Ltd which is a
company owned jointly by a number of timber companies in the Canberra region.
Radiata purchases logs on behalf of its shareholders and distributes them among
those shareholders.
The timber industry in Australia experienced a strong demand from internal
growth in residential and commercial construction along the Eastern coast of
Australia. Additionally, export demand from China and elsewhere in Asia for
lumber and other wood products continued to be very strong in recent years and
management expects that this trend will continue in the foreseeable future.
The facilities of the Company are located in Australia. The business of the
Company consists of a pine sawmilling and timber facility at Canberra, which has
a capacity to process 165,000 cubic meters of sawn timber. This sawmill produced
120,000 cubic meters of log in the Fiscal Year 2004. The Company is currently in
the process of arranging the financing for the construction of a second sawmill.
With this second sawmill, the Company intends to exploit the log resource
generated by our contract with Timbermans Group Pty Ltd which grants us the
right to the Bombala Agreement described below.
1
In April 2003, Timbermans Group Pty Ltd entered into an agreement with the
government of New South Wales which granted Timbermans the 20 year wood supply
rights to timber from the Bombala forest, equal to approximately 300,000 cubic
meters of wood ("Bombala Agreement"). This Agreement was assigned to the Company
at that time with the full knowledge of the New South Wales government.
Management believes that this is the last significant undeveloped pine forest in
Eastern Australia. The Bombala Agreement provides, inter alia, that the log
purchase price review mechanism is linked to the sawn timber actual price
achieved for the products produced at the new sawmill to be built at Bombala,
the market price for structural radiata pine timber, the ABS producer price
index for softwood in Sydney and input costs such as wages and fuel. This
mechanism is expected to adequately protect the Company from any decreasing
market prices and in part from increased costs during the term of the Bombala
Agreement. With the signing of the Bombala Agreement, the Company has insured
its supply for at least 20 years and is renewable at the Company's option. With
this asset the Company believes it has secured a major asset.
The Company's core markets are Australia and Southern Asia. The Company's
revenues are generated solely in its core markets.
Recent events
The proposed new sawmill at Bombala is planned to begin construction in the 3rd
quarter of 2005 after the approvals of the government of New South Wales and
local council have been obtained.
The new mill operation will be situated on approximately 300 acres of land on
the Monaro Highway, just south of Bombala. Management believes that the new mill
will be a state of the art mill. It will be constructed by industry experts,
including Acora Reneco Group, and will utilize state of the art machinery and
technology.
The mill is expected to comprise sawing machines from the USA, Canada, Europe
and Australia, and to have proven production capabilities, as well as safety,
environmental and efficiency capabilities.
The total mill and ancillary investment are expected to be approximately $30
million (US). Most of the timber from the new mill will be transported in green
form to the Integrated Forest Products plant at Canberra, for drying and
dressing processing. The balance will be sold in green form.
The new mill is expected to initially process 300,000 cubic meters per year of
log, although designed to cut in excess of 400,000 cubic meters per year, under
the Bombala Agreement.
Furthermore, negotiations are at an advanced stage for the sale of all mill
residues of sawdust, bark and waste wood chips.
The new sawmill at Bombala is expected to put the Company in a position to
produce at a lower cost relative to its current cost level, and in compliance
with all applicable safety standard. In addition, it is expected to provide
acces to the Company to a large and high quality log supply, to Acora Reneco
Group as leading Australian timber technology, mill and equipment suppliers, low
cost production from expanding Integrated Forest Products and will allow the
Company to concentrate on structural timber. Finally, the new sawmill is
expected to create competitive economics of scale and to generate profits from
the future integration of the Company's operations in Canberra and Bombala.
The Company recently purchased a new timber treatment facility for its
operations in Canberra that was commissioned in early 2005. With its new timber
treatment facility, management expects that it will be able to offer treated
pine framing to the market as from March 2005. With the new facility, the
Company expects to be able to meet an increased demand for treated timber as a
result of changing rules and regulations for the construction of new homes that
require the use of such timber for framing to be termite resistant.
Furthermore, Integrated Forest Products recently commissioned a new sawlog line
which is expected to lift the log intake rate of its facility in Canberra to
over 160,000 cubic meters per year, thereby increasing its sawing capacity by
38%, provide a recovery increase, a higher sawing accuracy, greater operator
safety and a better timber finish.
2
Strategy
The Company's strategy is to maximize shareholder value, primarily by realizing
economics of scale and profits, initially through the securing of access to
additional log supplies from private forests, the installation of a new log
sawing line at Integrated Forest Products to improve its efficiency, and the
continuation of the meeting of milestones laid down in the Bombala Agreement.
The medium term strategy of the Company is to build a new green sawmill in
Bombala, and to expand its drying and planing facilities for the intake of green
sawn timber from the facilities then operated at Bombala. The long term strategy
of the Company is to combine its wood chip production facilities, and to export
wood chips with its strategic partner the State Forest of New South Wales,
utilizing both the Company's and the State Forest of New South Wales' supply,
or, alternatively, to establish a fibre board factory at Bombala utilizing its
available wood chips. Other options are also being investigated.
Employees
At the end of December 2004, we employed 121 full time equivalents. Employees
play a crucial role in the success of our business. We encourage our employees
to take initiative to further enhance our efficiency in timber production. In
order to assist our employees, we constantly seek to train and educate them,
either on an individual basis (product knowledge and quality control) or on a
more collective basis (office automation and management skills). We have never
experienced a work stoppage resulting from labor problems.
Our employees are members of the CFMEU which is one of the largest unions in
Australia. As a result, each non-executive employee is a party to a collective
bargaining agreement known as an Enterprise Bargaining Agreement which
determines the terms of employment of each non-executive employee. Management
believes that its relations with such union are impeccable and the risk of work
stoppages is extremely unlikely.
Competition
The Australian wood products market is a competitive market and could become
more competitive in the future. Our competitors are diverse and offer products
similar to our products. Some of our competitors have access to significantly
greater financial, marketing and other resources than us. Increased competition
may result in price reductions for our products, reduced revenues and gross
margins and loss of market share. We are committed to executing our strategy as
set out above, inter alia, by focusing on our ability to source capital
equipment at very competitive prices and effectively manage facilities as a
result of management's extensive consulting experience.
At the time many sawmills in Australia are facing limitations on log supply as
older forests are becoming less productive and a series of significant forest
fires over the past five years have diminished the availability of high quality
logs.
We believe that we have certain competitive advantages our (i) ability to
construct efficient low cost mills, as a result of our strategic alliance with
Acora Reneco Group, (ii) access to log resources through the Bombala Agreement,
(iii) excess drying and dressing capacity in the Canberra processing facilities,
(iv) low cost operating and management techniques, and (v) operations management
system, which we believe to be superior to the systems of our competitors.
Finally, unlike most of our competitors, we believe that we have the ability for
low cost incremental expansion of our Canberra and future Bombala facilities,
mainly because of our spare processing capacity, subject to the availability of
logs - the supply of which we believe to have secured through our Bombala
Agreement, our log merchandising facility at Bombala for greater fibre recovery
from whole log, and the availablity of in-house process control and selective
hi-tech equipment.
It is our belief that, if we get the new facility in operation in 2006, we can
record operating performance equal or better than that shown by the large
capital forestry companies including the high growth ones.
3
ITEM 2. DESCRIPTION OF PROPERTY
Our main facility is located in Australia which consists of pine sawmilling and
timber facility at Canberra, which has a capacity to products 165,000 cubic
meters of log. We are currently in the process of arranging the financing for
the construction of a second in the Bombala region to further exploit the log
resources generated by the Bombala Agreement.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any material pending legal proceedings or government
actions, including any bankruptcy, receivership, or similar proceedings.
Management of the Company does not believe that there are any proceedings to
which any director, officer, or affiliate of the Company, any owner of record of
the beneficially or more than five percent of the common stock of the Company,
or any associate of any such director, officer, affiliate of the Company, or
security holder is a party adverse to the Company or has a material interest
adverse to the Company.
4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The Company's Common Stock is traded on the OTC-Bulletin Board under the
symbol AUFI. The following sets forth the range of the closing bid prices for
the Company's Common Stock for the period January 1, 2003 through May 16, 2005.
Such prices represent inter-dealer quotations, do not represent actual
transactions, and do not include retail mark-ups, mark-downs or commissions.
Such prices were determined from information provided by a majority of the
market makers for the Company's Common Stock.
----------------------------------------------------------------------------
High Close Low Close
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2003
----------------------------------------------------------------------------
First Quarter 0.40 0.20
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Second Quarter 0.12 0.05
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Third Quarter 0.02 0.02
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Fourth Quarter 0.015 0.015
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2004
----------------------------------------------------------------------------
First Quarter 0.015 0.015
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Second Quarter 0.015 0.015
----------------------------------------------------------------------------
Third Quarter 0.015 0.015
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Fourth Quarter 2.50 0.60
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----------------------------------------------------------------------------
2005
----------------------------------------------------------------------------
First Quarter 1.51 1.50
----------------------------------------------------------------------------
Second Quarter (through May
16, 2005) 1.50 1.50
----------------------------------------------------------------------------
(b) The approximate number of holders of the Common Stock of the Company as of
May 16, 2005 was 900.
(c) No cash dividends were declared by the Company during the fiscal year ended
December 31, 2004. While the payment of dividends rests within the discretion of
the Board of Directors, it is not anticipated that cash dividends will be paid
in the foreseeable future, as the Company intends to retain earnings, if any,
for use in the development of its business. The payment of dividends is
contingent upon the Company's future earnings, if any, the Company's financial
condition and its capital requirements, general business conditions and other
factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
5
It should be noted that this Management's Discussion and Analysis of Financial
Condition and Results of Operations may contain "forward-looking statements."
The terms "believe," "anticipate," "intend," "goal," "expect," and similar
expressions may identify forward-looking statements. These forward-looking
statements represent the Company's current expectations or beliefs concerning
future events. The matters covered by these statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those set forth in the forward-looking statements, including the Company's
dependence on weather-related factors, introduction and customer acceptance of
new products, the impact of competition and price erosion, as well as supply and
manufacturing restraints and other risks and uncertainties. The foregoing list
should not be construed as exhaustive, and the Company disclaims any obligation
subsequently to revise any forward-looking statements to reflect events or
circumstances after the date of such statements, or to reflect the occurrence of
anticipated or unanticipated events. In light of the significant uncertainties
inherent in the forward-looking information included herein, the inclusion of
such information should not be regarded as a representation that the strategy,
objectives or other plans of the Company will be achieved. The Company wishes to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made.
RESULTS OF OPERATIONS
We are currently in the second year of operations and have generated significant
revenues to date. Our activities from inception to date, were related to: our
formation; preparation of our business model; arranging and planning financing
and the acquiring all rights, title and interest to our timber rights located in
the Canberra region; and the implementation and construction of our first
sawmill also in the Canberra region.
Operating costs for the period from inception to December 31, 2003 aggregated
$12,764,139. This includes costs incurred in procuring our rights under the
Bombala Agreement and operating expenses for our Canberra sawmill. We incurred
an operating loss of $60,162 and a total net loss of $56,569 or $.0002 per
share.
Operating costs for the twelve-month period ended December 31, 2004 aggregated
$14,531,990. This includes an increase in costs of goods sold of $2,443,463
which were a result of general costs associated with the growth of our business
and management fees to our executive officers of $556,771 which were not paid in
the prior fiscal year. As a result of the above we realized a loss of $868,406
for the twelve-month period ended December 31, 2004 or $.003 per share.
LIQUIDITY AND CAPITAL RESOURCES
On December 31, 2003 and 2004 we had current assets of $3,446,184 and
$3,734,404, respectively.
Net cash used in operating activities for the period from inception to December
31, 2003 was $747,887. Net cash used in operating activities for the period from
inception to December 31, 2004 was $(56,542). The decrease in net cash was a
result of an increase in payments to suppliers and employees of $4,979,980 which
was a consequence of our growing business and the addition of a significant
number of employees.
In the twelve months ending December 31, 2004, the Company experienced an
increase in net proceeds from borrowings/capitalized leases of $4,968,800 and
during that same period an increase in loans to related parties of $1,350,201,
thus resulting in net cash provided by financing activities of $1,808,526.
The Company is presently completing a second sawmill in Canberra which is
anticipated to be operational in the third quarter of 2005 and which will be
used primarily for processing the logs resulting from the Bombala Agreement.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's discussion and analysis of its financial condition and results of
operations are based upon its financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires the Company to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to bad debts, income taxes and contingencies and
litigation. The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
6
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Recent Accounting Pronouncements Affecting The Company:
In December 2004, the FASB issued SFAS No. 123 (revised 2004), or SFAS 123R,
"Share-Based Payment." This statement replaces SFAS 123, "Accounting for
Stock-Based Compensation" and supersedes Accounting Principles Board's Opinion
No. 25 (ABP 25), "Accounting for Stock Issued to Employees." SFAS 123R will
require us to measure the cost our employee stock-based compensation awards
granted after the effective date based on the grant date fair value of those
awards and to record that cost as compensation expense over the period during
which the employee is required to perform services in exchange for the award
(generally over the vesting period of the award). SFAS 123R addresses all forms
of share-based payments awards, including shares issued under employee stock
purchase plans, stock option, restricted stock and stock appreciation rights. In
addition, we will be required to record compensation expense (as previous awards
continue to vest) for the unvested portion of previously granted awards that
remain outstanding at the date of adoption. SFAS 123R is effective for fiscal
periods beginning after June 15, 2005. Therefore, we are required to implement
the standard no later than our third fiscal quarter which begins on July 1,
2005. SFAS 123R permits public companies to adopt its requirements using the
following methods: (1) a "modified prospective" method in which compensation
cost is recognized beginning with the effective date (a) based on the
requirements of SFAS 123R for all share-based payments granted after the
effective date and (b) based on the requirements of SFAS 123 for all awards
granted to employees prior to the effective date of SFAS 123R that remain
unvested on the effective date; or (2) a "modified retrospective" method which
includes the requirements of the modified prospective method described above,
but also permits entities to restate their financial statements based on the
amounts previously recognized under SFAS 123 for purposes of pro forma
disclosures for either (a) all prior periods presented or (b) prior interim
periods of the year of adoption.
7
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
AUDITED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
CONTENTS
--------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm Page F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Cash Flows F-4
Consolidated Statement of Stockholders' Equity F-5
Notes to Consolidated Financial Statements F-6
8
MEYLER & COMPANY, LLC
CERTIFIED PUBLIC ACCOUNTANTS
ONE ARIN PARK
1715 HIGHWAY 35
MIDDLETOWN, NJ 07748
Report of Independent Registered Public Accounting Firm
To the Board of Directors
Australian Forest Industries
Melbourne, Australia
We have audited the accompanying balance sheets of Australian Forest Industries
(formerly Multi-Tech International Corp.) as of December 31, 2004 and 2003 and
the related statements of operations, stockholders' equity, and cash flows for
each of the two years in the period ended December 31, 2004. These consolidated
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 audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 audit provides 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 Australian Forest Industries as
of December 31, 2004 and 2003, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 2004, in
conformity with U.S. generally accepted accounting principles.
/s/ Meyler & Company, LLC
Middletown, NJ
May 1, 2005
F-1
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
----------------------------
2004 2003
------------ ------------
CURRENT ASSETS
Cash $ 459,927
Accounts receivable $ 1,611,756 1,873,003
Inventory 1,983,039 1,030,799
Prepaid expenses and other 141,609 82,455
------------ ------------
Total Current Assets 3,736,404 3,446,184
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $2,721,972 and $2,036,081 in 2004 and 2003, respectively 9,712,015 7,000,911
OTHER ASSETS
Receivable from related party 500,496
Long-term timber supply contract, net of amortization of $36,943 849,705
------------ ------------
$ 14,798,620 $ 10,447,095
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 421,097
Accounts payable 3,154,429 $ 1,762,425
Current portion of capitalized lease obligations 731,217 351,308
Accrued payroll, related taxes and benefits 542,414 539,460
------------ ------------
Total Current Liabilities 4,849,157 2,653,193
CAPITALIZED LEASE OBLIGATIONS 2,797,975 5,628
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.001, 5,000,000 shares
authorized, none issued and outstanding
Common stock, par value $0.001, 300,000,000 shares
authorized, 257,400,680 issued and outstanding 257,400
Common stock , no par value, 6,649,705 shares
authorized, 5,319,764 issued and outstanding 9,813,217
Additional paid-in capital 9,810,817
Comprehensive income 42,210 65,590
Accumulated deficit (2,958,939) (2,090,533)
------------ ------------
Total Stockholders' Equity 7,151,488 7,788,274
------------ ------------
Total Liabilities and Stockholders' Equity $ 14,798,620 $ 10,447,095
============ ============
See accompanying notes to financial statements.
F-2
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended
December 31,
------------------------------
2004 2003
------------ ------------
REVENUE - SALES $ 12,990,558 $ 12,703,977
COSTS AND EXPENSES
Cost of goods sold 11,685,458 9,241,995
Selling, general and administrative 1,130,163 2,472,810
Management fees 556,700
Stock based compensation 255,000
Interest expense 217,251 529,034
Depreciation and amortization 687,418 520,300
------------ ------------
Total Costs and Expenses 14,531,990 12,764,139
------------ ------------
OPERATING LOSS (1,541,432) (60,162)
NON-OPERATING INCOME
Other income 443,041 3,793
Interest income 1,328
Gain on disposal of assets 228,657
------------ ------------
Total Non-Operating Income 673,026 3,793
------------ ------------
NET LOSS $ (868,406) $ (56,369)
============ ============
See accompanying notes to financial statements.
F-3
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended
December 31,
----------------------------
2004 2003
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 15,342,971 $ 13,385,860
Payments to suppliers and employees (17,737,064) (12,757,084)
Interest received 1,403 10,265
Interest paid (301,555)
Other income 2,420,067 108,846
Net GST paid 217,636
------------ ------------
Net Cash (Used in) Provided by Operating Activities (56,542) 747,887
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for property, plant, and equipment (4,049,749) (49,408)
Proceeds from sale of property, plant, and equipment 1,667,148 21,876
------------ ------------
Net Cash Used in Investing Activities (2,382,601) (27,532)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from borrowings/capitalized leases 3,158,727 (1,810,073)
Repayment of borrowings/capitalized leases 522,115
Long-term timber supply contract (849,705)
Loans to related parties (500,496)
------------ ------------
Net Cash Provided by (Used In) Financing Activities 1,808,526 (1,287,958)
------------ ------------
NET DECREASE IN CASH (630,617) (567,603)
EFFECT OF EXCHANGE RATES ON CASH (250,407) 253,706
CASH AT BEGINNING OF YEAR 459,927 773,824
------------ ------------
CASH AT END OF YEAR $ (421,097) $ 459,927
============ ============
RECONCILIATION OF NET LOSS TO NET CASH (USED IN)
PROVIDED BY OPERATING ACTIVITIES
Net loss from operations $ (868,406) $ (56,369)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation 687,418 520,300
Stock based compensation 255,000
Changes to provisions for employee benefits (17,493) 49,959
Changes to other provisions 31,073
Non-cash charges on related party loans 563,268
Changes in assets and liabilities:
Decrease (increase) in other assets (56,028) 25,294
Decrease (increase) in inventory (1,015,050) 380,450
Decrease (increase) in receivables 332,236 (231,157)
Increase (decrease) in payables 625,781 (534,931)
------------ ------------
Net Cash (Used in) Provided by Operating Activities $ (56,542) $ 747,887
============ ============
NON-CASH FINANCING AND INVESTING ACTIVITIES
They were no material non-cash financing and investing activities during the
years ended December 31, 2004 and 2003 except as noted in the cash flow
statement in respect to borrowings for capitalized lease arrangements.
See accompanying notes to financial statements.
F-4
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Accumulated
Preferred Stock Common Stock Additional Other Total
--------------- ------------------------ Paid-In Accumulated Comprehensive Stockholders'
Shares Amount Shares Amount Capital Deficit Income (loss) Equity
-------------------------------------------------------------------------------------------------------
Balance, December 31, 2002 5,319,764 $9,813,217 $(2,034,164) $7,779,053
Net loss for the year ended
December 31, 2003 (56,369) (56,369)
Adjustments from exchange
rate changes $65,590 65,590
----- ------ ----------- ------------ ------------ ------------ ------- ----------
Balance, December 31, 2003
and prior to Reverse Merger 5,319,764 9,813,217 (2,090,533) 65,590 7,788,274
Reverse Merger (Note 1)
Exchange of Integrated
Forest Products Pty Ltd
shares for Australian
Forest Industries (5,319,764) (9,813,217) $ 9,813,217
Shareholders equity of
Australian Forest
Industries at date of
merger 400,680 400 11,257,463 (11,257,863)
Reverse Merger capitalization (11,257,863) 11,257,863
Issuance of shares at date of
merger 240,000,000 240,000 (240,000)
Issuance of shares for
consulting agreement 17,000,000 17,000 238,000 255,000
Adjustment from exchange
rate changes (23,380) (23,380)
Net loss for the year ended
December 31, 2004 (868,406) (868,406)
----- ------ ----------- ------------ ------------ ------------ ------- ----------
Balance, December 31, 2004 257,400,680 $ 257,400 $ 9,810,817 $(2,958,939) $42,210 $7,151,488
===== ====== =========== ============ ============ ============ ======= ==========
See accompanying notes to financial statements.
F-5
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2004
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Australian Forest Industries ("the Company"), through its wholly owned
subsidiary Integrated Forest Products Pty Ltd ("Integrated"), operates a
saw mill in Australia which cuts pine timber into building products to
supply the commercial and residential industry along the eastern coast of
Australia.
Reverse Merger
On September 1, 2004, Integrated, owned by the Timbermans Group Pty Ltd
("Timbermans"), entered into a share exchange agreement with the Company
and issued 240,000,000 shares of its common stock to acquire Integrated.
In connection with the share exchange agreement, Integrated became a
wholly owned subsidiary of the Company and Integrated's officers and
directors became the officers and directors of the Company. Prior to the
merger, the Company was a non-operating "shell" corporation. Pursuant to
Securities and Exchange Commission rules, the merger of a private
operating company (Integrated) into a non-operating public shell
corporation with nominal net assets is considered a capital transaction.
Accordingly, for accounting purposes, the merger has been treated as an
acquisition of the Company by Integrated and a recapitalization of the
Company. The historical financial statements for the years ended December
31, 2004 and 2003 are those of Integrated. Since the merger is a
recapitalization and not a business combination, pro forma information is
not presented.
Foreign Currency Translation
For 2004, the Company considered the Australian dollar to be its
functional currency. Assets and liabilities were translated into US
dollars at the year-end exchange rates. Statement of operations amounts
were translated using the average rate during the year. Gains and losses
resulting from translating foreign currency financial statements were
accumulated in other comprehensive income, a separate component of
stockholders' equity.
Cash Equivalents
For purposes of reporting cash flows, cash equivalents include investment
instruments purchased with a maturity of three months or less. There were
no cash equivalents in 2004 or 2003.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Inventories
Inventories are stated at the lower of cost or market value. Cost is
determined using the first-in, first-out (FIFO) method.
F-6
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Equipment and Depreciation
Equipment is stated at cost and is depreciated using the straight line
method over the estimated useful lives of the respective assets. Routine
maintenance, repairs and replacement costs are expensed as incurred and
improvements that extend the useful life of the assets are capitalized.
When equipment is sold or otherwise disposed of, the cost and related
accumulated depreciation are eliminated from the accounts and any
resulting gain or loss is recognized in operations.
Net Loss Per Common Share
The Company computes per share amounts in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share".
SFAS No. 128 requires presentation of basic and diluted EPS. Basic EPS is
computed by dividing the income (loss) available to Common Stockholders by
the weighted-average number of common shares outstanding for the period.
Diluted EPS is based on the weighted-average number of shares of Common
Stock and Common Stock equivalents outstanding during the periods.
Consolidated Financial Statements
The consolidated financial statements include the Company and its wholly
owned subsidiaries. All significant intercompany transactions and balances
have been eliminated in consolidation.
Comprehensive Income (Loss)
SFAS No. 130 establishes standards for the reporting and disclosure of
comprehensive income and its components to be presented in association
with a company's financial statements. Comprehensive income is defined as
the change in a business enterprise's equity during a period arising from
transactions, events or circumstances relating to non-owner sources, such
as foreign currency translation adjustments and unrealized gains or losses
on available-for-sale securities. It includes all changes in equity during
a period except those resulting from investments by or distributions to
owners. Comprehensive income is accumulated in accumulated other
comprehensive income (loss), a separate component of stockholders' equity.
Business Combinations and Goodwill
SFAS No. 123, "Accounting for Stock-Based Compensation" prescribes
accounting and reporting standards for all stock-based compensation plans,
including employee stock options, restricted stock, employee stock
purchase plans and stock appreciation rights. SFAS No. 123 requires
employee compensation expense to be recorded (1) using the fair value
method or (2) using the intrinsic value method as prescribed by accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB25") and related interpretations with pro forma disclosure
of what net income and earnings per share would have been if the Company
adopted the fair value method. The Company accounts for employee stock
based compensation in accordance with the provisions of APB 25. For
non-employee options and warrants, the company uses the fair value method
as prescribed in SFAS 123.
F-7
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Business Combinations and Goodwill (Continued)
In July 2001, the FASB issued SFAS NO. 142, "Goodwill and Other Intangible
Assets", which the Company adopted during 2003. SFAS No. 142 requires,
among other things, the discontinuance of goodwill amortization. In
addition, the standard includes provisions for the reclassification of
certain existing recognized intangibles as goodwill, reassessment of the
useful lives of existing recognized intangibles, reclassification of
certain intangibles out of previously reported goodwill and the
identification of reporting units for purposes of assessing potential
future impairment of goodwill.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 changes the
accounting for long-lived assets to be held and used by eliminating the
requirement to allocate goodwill to long-lived assets to be tested for
impairment, by providing a probability weighted cash flow estimation
approach to deal with situations in which alternative courses of action to
recover the carrying amount of possible future cash flows and by
establishing a primary-asset approach to determine the cash flow
estimation period for a group of assets and liabilities that represents
the unit of accounting for long-lived assets to be held and used. SFAS No.
144 changes the accounting for long-lived assets to be disposed of other
than by sale by requiring that the depreciable life of a long-lived asset
to be abandoned be revised to reflect a shortened useful life and by
requiring the impairment loss to be recognized at the date a long-lived
asset is exchanged for a similar productive asset or distributed to owners
in a spin-off if the carrying amount of the asset exceeds its fair value.
SFAS No 144 changes the accounting for long-lived assets to be disposed of
by sale by requiring that discontinued operations no longer be recognized
at a net realizable value basis (but at the lower of carrying amount or
fair value less costs to sell), by eliminating the recognition of future
operating losses of discontinued components before they occur, and by
broadening the presentation of discontinued operations in the income
statement to include a component of an entity rather than a segment of a
business. A component of an entity comprises operations and cash flows
that can be clearly distinguished operationally, and for financial
reporting purposes, from the rest of the entity.
Revenue Recognition
The Company's policy is to recognize revenue at the time products are
shipped from its facilities.
NOTE B - INVENTORY
Inventory consists of the following at December 31,
2004 2003
---------- ----------
Raw materials and supplies $ 53,298 $ 159,504
Work in progress 456,694 179,505
Finished goods 1,473,047 691,790
---------- ----------
$1,938,039 $1,030,799
========== ==========
F-8
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
NOTE C - EQUIPMENT
Equipment is comprised of the following at December 31,
Useful
Life 2004 2003
----------- ----------- -----------
Land $ 932,400 $ 932,400
Buildings 40 1,343,034 1,343,034
Plant and equipment 40 9,607,919 6,403,631
Capital works in progress 395,134 327,169
Motor vehicles 5 155,500 30,758
----------- -----------
12,433,987 9,036,992
Less: accumulated depreciation 2,721,972 2,036,081
----------- -----------
$ 9,712,015 $ 7,000,911
=========== ===========
NOTE D - RELATED PARTY TRANSACTIONS
Receivable From Related Party
At December 31, 2004, the Company advanced $500,496 to the Timbermans
Group which is currently the controlling shareholders. The advance is
unsecured and has no specific repayment date. Subsequent to December 31,
2004, the Timbermans Group loaned the Company $1,000.000.
Long-Term Log Supply Contract
In November 2003, the Timbermans Group entered into a 20 year long-term
log supply contract with the New South Wales State Government. To obtain
the contract, the Timbermans Group paid $886,648. In February 2004, it
assigned the contract to the Company's wholly owned subsidiary in
Australia - Integrated Forest Products Pty, Ltd. The contract is being
amortized over 20 years.
The Company has an informal management fee agreement with the Timbermans
Group for business and consulting management. There is no written
agreement. During the year ended December 31, 2004, the management fee
paid to the Timbermans Group was $556,700.
NOTE E - SHORT TERM BORROWING
The Company has an overdraft facility with the National Bank of Australia
in the amount of $780,000 at the Australian base rate plus 1.80% annually.
The amount of the overdraft at December 31, 2004 was $421,097.
Additionally, the Company has a facility to acquire equipment under
capitalized leases aggregating $1,666,080. See Note F, Capitalized Lease
Obligations.
The Company, in connection with the Long Term Timber Supply Contract, has
placed a bank guarantee in the amount of $780,000 with the New South Wales
Government to insure a steady supply of timber.
All of the credit facilities are secured by a first ranking mortgage
debenture over all the assets and undertakings of Integrated, a first
ranking mortgage over the land and buildings at Morwell, Canberra, a fixed
charge over all the Company's receivables, a term deposit letter of
set-off over Integrated for
F-9
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
NOTE E - SHORT TERM BORROWING (CONTINUED)
$1,000,000, a master lease agreement with Directors Guarantee and
Indemnity for $1,666,080, and a $1,560,000 guarantee and indemnity from
the Directors of Integrated.
To the extent that the Timbermans Group advances funds to Integrated, the
Timbermans Group loan facility with the National Bank of Australia has a
letter of subordination up to $1,800,000.
NOTE F - CAPITAL LEASE OBLIGATIONS
The Company has obtained various pieces of equipment under capital leases
expiring through 2009. The assets and liabilities under these capital
leases ($1,666,080 with the National Bank of Australia) are recorded at
the lower of the present values of the minimum lease payments or the fair
values of the assets. The assets are included in property and equipment
and are being depreciated over their estimated useful lives.
As of December 31, 2004, minimum future lease payments under these capital
leases are:
For the
Years Ending
December 31, Amount
------------ ----------
2005 $ 954,473
2006 946,228
2007 946,228
2008 946,228
2009 343,819
----------
Total minimum lease payments $4,136,976
==========
December 31,
------------------------
2004 2003
---------- ----------
Total minimum lease payments $4,136,976 $ 374,782
Less: amounts representing interest 607,784 17,846
Net minimum lease payments 3,529,192 356,936
Less: current portion 731,217 351,308
---------- ----------
Long-term portion $2,797,975 $ 5,628
========== ==========
NOTE G - INCOME TAXES
The Company has adopted Financial Accounting Statement SFAS No. 109,
Accounting for Income Taxes. Under this method, the Company recognizes a
deferred tax liability or asset for temporary differences between the tax
basis of an asset or liability and the related amount reported on the
financial statements. The principal types of differences, which are
measured at current tax rates, are net operating loss carry forwards. At
December 31, 2004, these differences resulted in a deferred tax asset of
approximately $887,700. SFAS No. 109 requires the establishment of a
valuation allowance to reflect the likelihood of realization of deferred
tax assets. Since realization is not assured, the Company has recorded a
valuation allowance for the entire deferred tax asset, and the
accompanying financial statements do not reflect any net asset for
deferred taxes at December 31, 2004.
F-10
AUSTRALIAN FOREST INDUSTRIES
(Formerly Multi-Tech International Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
NOTE G - INCOME TAXES (CONTINUED)
The Company's net operating loss carry forwards amounted to approximately
$2,958,000 at December 31, 2004, which have unlimited expiration.
NOTE H - STOCKHOLDERS' EQUITY
In connection with the Reverse Merger on September 1, 2004, the company
issued 17,000,000 shares to a consultant. The shares were valued at $0.015
per share which was the average trading price for the third quarter.
F-11
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Through the September 30, 2004 reporting period, our accountants were Michael
Johnson & Co., LLC. In January 2005, we changed accountants to Meyler & Company
LLC, independent certified public accountants. At no time has there been any
disagreement with such accountants regarding any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.
ITEM 8A. DISCLOSURE CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures.
As of the end of the period covering this Form 10-KSB, we evaluated the
effectiveness of the design and operation of our "disclosure controls and
procedures". The Company's President conducted this evaluation by himself.
(i) Definition of Disclosure Controls and Procedures.
Disclosure controls and procedures are controls and other procedures that are
designed with the objective of ensuring that information required to be
disclosed in our periodic reports filed under the Exchange Act, such as this
report, is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. As defined by the SEC, such disclosure
controls and procedures are also designed with the objective of ensuring that
such information is accumulated and communicated to our management, including
the President and Chief Financial Officer, in such a manner as to allow timely
disclosure decisions.
(ii) Limitations on the Effectiveness of Disclosure Controls and Procedures and
Internal Controls.
The Company recognizes that a system of disclosure controls and procedures (as
well as a system of internal controls), no matter how well conceived and
operated, cannot provide absolute assurance that the objectives of the system
are met. Further, the design of such a system must reflect the fact that there
are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be
circumvented in a number of ways. Because of the inherent limitations in a
cost-effective control system, system failures may occur and not be detected.
However, our officers and directors believe that our system of disclosure
controls and procedures provides reasonable assurance of achieving their
objectives.
(iii) Conclusions with Respect to Our Evaluation of Disclosure Controls and
Procedures.
Our officers and directors have concluded, based on the evaluation of these
controls and procedures, that our disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company required to be included in our periodic SEC filings.
(b) Changes in Internal Controls.
There have been no changes in our internal controls over financial reporting
during the last fiscal quarter of 2004 that has materially affected or is
reasonably likely to affect the Company's internal control over financial
reporting.
ITEM 8B. OTHER INFORMATION
Not applicable.
9
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
OFFICERS AND DIRECTORS
We have 5 executive officers who also serve as our board of directors. Our
directors are elected at each annual meeting of shareholders. The following
individuals are all of our executive officers and directors:
Name Age Positions and Offices With The Company
---- --- --------------------------------------
Michael Timms 54 Chief Executive Officer; President; Chairman
of the Board
Norman Backman 56 Chief Operating Officer; Director
Colin Baird 46 Chief Financial Officer; Director
Tony Esplin 42 Executive Vice President - Marketing; Director
Roger Timms 49 Executive Vice President - Engineering; Director
The following is a biographical summary of the directors and officers of the
Company:
Michael Timms
Mr. Michael Bruce Timms was born at 30 May 1950 in Bega, New South Wales,
Australia. He has spent over thirty years in the sawmilling industry. He has
been involved with design and construction of over seven greenfield sawmill
facilities and scores of equipment upgrades across Australia and Canada in both
the Hardwood and Softwood sectors, through his engineering business, Acora
Reneco Group Pty Ltd. Among other responsibilities he works as Chief Executive
Officer and President of the Company and is Chairman of the Board.
Norman Backman
Mr. Norman William Backman was born at 20 September 1948 in Melbourne,
Australia. He has over thirty years of experience in the sawmilling industry. He
has worked for a long period with Amcor and Brown & Dureau as Mill Manager at
the Morwell facility. At Integrated Forest Industries Pty Ltd he will work as
Director of Operations. Mr. Backman has access to a team of industry experienced
individuals possessing relevant and highly refined sawmill information
technology systems technology and cost accounting experience.
Colin Baird
Mr. Colin Baird was born at 22 June 1958 in Melbourne, Australia. He is a
qualified accountant who has operated his own practice, Colib Pty Ltd since
1987. He has been involved in the timber industry through his association with
some of his clients since 1983. At present his practice has in excess of 500
clients. Mr. Baird is Director of Finance of the Company.
Tony Esplin
Mr. Tony Esplin was born at 23 August 1962 in Melbourne, Australia. He has had
twelve years of experience in the sawmill industry covering fabrication of
sawmill equipment, project management of new sawmills through his own business,
Acora Reneco Group Pty Ltd. Over the last four years he has been involved in the
on site management of Integrated Forest Products, covering all aspects of
sawmill administration, including log procurement and product marketing. He
works as Director of Marketing & Log Procurement for the Company.
10
Roger Timms
Mr. Roger Kenneth Timms was born 24 April 1956 in Bega, New South Wales,
Australia. He has spent over twenty-five years in the sawmilling industry. He is
currently involved in the design, supply and installation of sawmill equipment
in Australia and part owns a company, Acora Reneco Group Pty Ltd, which performs
these functions. He is the Company's Director of Engineering.
Director Positions in Other Public Companies
No director holds any directorship in a company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934 or
subject to the requirements of Section 15(d) of such Act. No director holds any
directorship in a company registered as an investment company under the
Investment Company Act of 1940. However, with the exception of Norman Backman,
the remaining directors have other business interest and work for the Company on
a part-time basis at the present time.
Code of Conduct
The Company does not have an Audit or Strategy committee. Neither does the
Company have a standing nominating committee or any committee performing a
similar function. For the above reasons, the Company has not adopted a code of
ethics.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires executive officers
and directors who beneficially own more than ten percent (10%) of the Company's
Common Stock to file initial reports of ownership and reports of changes of
ownership with the Securities and Exchange Commission. Executive officers,
directors and greater than ten percent (10%) beneficial owners are required by
Commission regulations to furnish the Company with copies of all Section 16(a)
forms they file.
The information required to be compliant with Section 16(a) is found herein.
However, at the present time the required individuals have not filed the
appropriate Section 16(a) forms although it has been represented to the Company
that such are being prepared and will be filed shortly after the filing of this
annual report.
11
ITEM 10. EXECUTIVE COMPENSATION
The table below sets forth all annual and long-term compensation paid by the
Company through the latest practicable date to the Chief Executive Officer of
the Company and to all executive officers of the Company who received total
annual salary and bonus in excess of $100,000 for services rendered in all
capacities to the Company and its subsidiaries during the fiscal year ended
December 31, 2004 only as the Company did not have operations in 2003.
The following table sets forth information concerning all remuneration paid by
the Company as of December 31, 2004 to the Company's Directors and Executive
Officers:
Summary Compensation Table
Long-Term
Compensation
Awards
------------
Securities
Underlying
Options (#) All Other
Name and Principal Position Year Salary Bonus /SARS Compensation
--------------------------- ---- ------ ----- ----- ------------
Michael Timms -
Chairman of the Board; CEO and President 2004 $ 56,000 0 0
Coin Baird - Chief Financial Officer
and Director 2004 28,000 0 0
Tony Esplin - Executive Vice President
- Marketing; Director 2004 56,000 0 0
Norman Backman - Chief Operating
Officer; Director 2004 140,000 0 0
Roger Timms - Executive Vice President
- Marketing; Director 2004 20,000 0 0
Directors' Compensation
Other than minimal expenses incurred for traveling to Canberra which were
reimbursed by the Company, during the fiscal year ended December 31, 2004 our
Directors did not received a fee for serving in that capacity.
Employment Contracts
There are no employment agreements with the executive officers at this time.
12
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth information regarding the beneficial ownership of
the shares of the Common Stock (the only class of shares previously issued by
the Company) at May 16, 2005, by (i) each person known by the Company to be the
beneficial owner of more than five percent (5%) of the Company's outstanding
shares of Common Stock, (ii) each director of the Company, (iii) the executive
officers of the Company, and (iv) by all directors and executive officers of the
Company as a group. Other than the Timbermans Group Pty Ltd, each person named
in the table, has sole voting and investment power with respect to all shares
shown as beneficially owned by such person and can be contacted at the address
of the Company.
----------------------------------------------------------------------------------------------------------------------
Title of Class Name of Beneficial Owner Shares of Common Stock Percent of Class
----------------------------------------------------------------------------------------------------------------------
Common Timbermans Group Pty Ltd(1) 140,000,000 54.47%
----------------------------------------------------------------------------------------------------------------------
Common Jeffrey Reade 17,000,000 6.61%
----------------------------------------------------------------------------------------------------------------------
Common Norman Backman(2) 20,000,000 7.78%
----------------------------------------------------------------------------------------------------------------------
Common Colin Baird(3) 20,000,000 7.78%
----------------------------------------------------------------------------------------------------------------------
Common Tony Esplin(4) 20,000,000 7.78%
----------------------------------------------------------------------------------------------------------------------
Common Michael Timms(5) 20,000,000 7.78%
----------------------------------------------------------------------------------------------------------------------
Common Roger Timms(6) 20,000,000 7.78%
----------------------------------------------------------------------------------------------------------------------
Directors and Officers
as a group 240,000,000 93.39%
----------------------------------------------------------------------------------------------------------------------
(1) Timbermans Group Pty Ltd is an Australian corporation with 5 shareholders
who are the same individuals as our officers and directors. For the purposes of
aggregating the securities ownership of officers and directors, we have included
those shares held by Timbermans Group.
(2) Mr. Backman maintains his shares in a holding company organized under the
laws of the Cayman Islands of which he has sole beneficial control.
(3) Mr. Baird maintains his shares in a holding company organized under the laws
of the Cayman Islands of which he has sole beneficial control.
(4) Mr. Esplin maintains his shares in a holding company organized under the
laws of the Cayman Islands of which he has sole beneficial control.
(5) Mr. Michael Timms maintains his shares in a holding company organized under
the laws of the Cayman Islands of which he has sole beneficial control.
(6) Mr. Roger Timms maintains his shares in a holding company organized under
the laws of the Cayman Islands of which he has sole beneficial control.
13
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
Timbermans Group Pty Ltd owns the majority of the shares of common stock of the
Company and its shareholders are the same individuals as our officers and
directors. Three of the directors of our Company also own 100% of Acora Reneco
Group which is the largest Australian manufacturer and designer of original
sawmilling equipment as well as an agent for sales and distribution for
sawmilling equipment manufactured by other companies. The Company presently has
an agreement in place pursuant to which Acora supplies the Company's sawmill
equipment needs. All transactions between Acora and the Company are at arms
length terms.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Exhibit Description
10.1 Enterprise Bargaining Agreement
10.2 ARG Agreement
10.3 Bombala Timber Supply Agreement
10.4 Radiata Pine Log Sale Agreement
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of the Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K.
None.
14
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
For the Company's fiscal year ended December 31, 2004, the cost for professional
services rendered for the audit of our financial statements and the review of
the Form 10-KSB aggregated $15,000.
All Other Fees
The Company did not incur any other fees related to services rendered by our
principal accountant for the fiscal year ended December 31, 2004.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AUSTRALIAN FOREST INDUSTRIES
/s/ Michael Timms
-----------------
Name: Michael Timms
Title: Chief Executive Officer, President and Chairman
Date: May 18, 2005
/s/ Colin Baird
---------------
Name: Colin Baird
Title: Chief Financial Officer and Director
Date: May 18, 2005
/s/ Roger Timms
---------------
Name: Roger Timms
Title: Executive Vice President and Director
Date: May 18, 2005
15