UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
INFORMATION STATEMENT
PURSUANT TO SECTION 14(C) AND SECTION 14F-1
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
SCHEDULE 14C
(RULE 14C-101)
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934 Check the appropriate box:
|X| Preliminary Information Statement
|_| Definitive Information Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
AUSTRALIAN FOREST INDUSTRIES
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the Appropriate Box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which the transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
-------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials
|_| check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
AUSTRALIAN FOREST INDUSTRIES
4/95 Salmon Street, Port Melbourne,
Victoria, Australia, 3207
DEFINITIVE INFORMATION STATEMENT
PURSUANT TO SECTION 14 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED, AND REGULATION 14C AND SCHEDULE 14C THEREUNDER
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
INTRODUCTION
This notice and information statement (the "Information Statement") was mailed
on or about January __, 2007 to the stockholders of record, as of January 2,
2007, of Australian Forest Industries, a Nevada corporation (the "Company")
pursuant to: (i) Section 14(f) of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 14f-1 issued thereunder, to inform the
stockholders of the Company of the closing of the transactions set forth in the:
(a) Stock Purchase and Recapitalization Agreement dated September 18, 2006 (the
"Stock Purchase Agreement") by and among the Company and SIMBA Mines, Inc., a
Nevada corporation ("SIMBA") pursuant to which the Company purchased from SIMBA
all of the issued and outstanding shares of its wholly-owned subsidiary
Simbajamba Mines Limited, a company incorporated pursuant to the laws of Samoa
("Simbajamba"), and (b) Shares Sale Agreement of Shares in Rockbury Properties
Limited dated September 18, 2006 (the "Share Sale Agreement" and together with
the Stock Purchase Agreement, the "Agreements" ) by and between the Company and
Bongani International Group Limited ("BIG"), a company incorporated pursuant to
the laws of the British Virgin Islands, pursuant to which the Company purchased
from BIG all of the issued and outstanding shares of its wholly-owned
subsidiary, Rockbury Properties Limited, a company incorporated pursuant to the
laws of the British Virgin Islands ("Rockbury"), and (ii) Section 14(c) of the
Exchange Act to inform the Stockholders that stockholders representing a
majority of the issued and outstanding common stock of the Company executed a
written consent dated September 18, 2006 providing for an amendment to the
Company's Certificate of Incorporation changing its name to Zebra Copper, Inc.;
(iii) complete a reverse split of the Company's common stock on a 515.20136
-for-1 basis; and (iv) incorporate an Australian company, Australian Forest
Industries Limited ("AFIL") and transfer all of the issued and outstanding
equity of Integrated Forest Products Pty Ltd, a company incorporated pursuant to
the laws of Australia and a wholly-owned subsidiary of the Company, to AFIL (the
"AFIL Transfer") and following the IFP Transfer, distribute all of the issued
and outstanding equity of AFIL to the shareholders of the Company in the form of
a dividend. This notice and information statement attached hereto shall be
considered the notice required under the Nevada Revised Statutes (the "NRS").
While approval of the Company's stockholders is not required under the NRS or
the Agreements to consummate the Agreements, we have been informed that holders
of approximately 93.24% of the outstanding voting stock of the Company have no
objection to our consummating the Transactions and have approved the amendment
to our Certificate of Incorporation. Our Board of Directors has unanimously
approved the Agreements. Accordingly, your approval is not required and is not
being sought.
Please read this notice carefully. It describes the essential terms of the
Agreements and contains certain information concerning the Agreements and the
parties. The Agreements are attached to this Information Statement as Appendix A
and Appendix B. Additional information about the Company is contained in its
periodic reports filed on Forms 10-QSB for its quarterly fiscal periods and its
annual report filed on Form 10-KSB, each as filed with the United States
Securities and Exchange Commission (the "Commission").
These reports, their accompanying exhibits and other documents filed with the
Commission may be inspected without charge at the Public Reference Section of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549.
Copies of such material may also be obtained from the Commission at prescribed
rates. The Commission also maintains a Web site that contains reports, proxy and
information statements and other information regarding public companies that
file reports with the Commission. Copies of these reports may be obtained from
the Commission's EDGAR archives at http://www.sec.gov/index.htm.
The principal executive office of the Company is located at AUSTRALIAN FOREST
INDUSTRIES, 4/95 Salmon Street, Port Melbourne, Victoria, Australia, 3207. The
Company's telephone number is: 011 61 3 8645 4340.
THIS IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS AND NO
STOCKHOLDERS' MEETING WILL BE HELD TO CONSIDER ANY MATTER DESCRIBED HEREIN.
AUSTRALIAN FOREST INDUSTRIES
4/95 Salmon Street, Port Melbourne,
Victoria, Australia, 3207
DEFINITIVE INFORMATION STATEMENT
PURSUANT TO SECTION 14 OF THE SECURITIES EXCHANGE ACT OF 1934
AND REGULATION 14C AND SCHEDULE 14C THEREUNDER
To our Stockholders:
NOTICE IS HEREBY GIVEN that the following action was taken pursuant to a Written
Consent of the Majority Stockholders of the Company:
1. The Stock Purchase and Recapitalization Agreement and the Share Sale
Agreement (collectively the "Agreements") were ratified and the officers of the
Company have been authorized to consummate the transactions contemplated by the
Agreements.
2. Immediately following the closing of the Agreements, the change of the
Company's name to "Zebra Copper, Inc.", to be effective as of the filing of an
amendment to the Company's Certificate of Incorporation with the Nevada
Secretary of State, attached hereto as Appendix C.
3. Immediately following the closing of the Agreements, complete a reverse split
on a 515.20136 -for-1 basis; (pro-rata reduction of the outstanding shares) of
the Company's issued and outstanding shares of Common Stock. There will not be a
reduction in par value or the number of authorized shares of Common Stock.
The Board of Directors has fixed the close of business on January 2, 2007,
as the Record Date for determining the Stockholders entitled to Notice of the
foregoing.
The Company has asked brokers and other custodians, nominees and
fiduciaries to forward this Information Statement to the beneficial owners of
the Common Stock held of record by such persons and will reimburse such persons
for out-of-pocket expenses incurred in forwarding such material.
This Information Statement will serve as written Notice to stockholders
pursuant to the NRS.
THIS IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS AND NO
STOCKHOLDERS' MEETING WILL BE HELD TO CONSIDER ANY MATTER DESCRIBED HEREIN.
By order of the Board of Directors,
/s/ Michael Timms
----------------------------------------
January 4, 2007 Chief Executive Officer, President
and Chairman of the Board
TABLE OF CONTENTS
Page
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 1
CHANGE IN CONTROL - THE STOCK TRANSACTIONS 1
Stock Purchase and Recapitalization Agreement 1
Share Sale Agreement of Shares in Rockbury Properties Limited 2
Change in Control 6
Proposed New Directors 7
Material Terms of the Agreements 9
Certain Federal Income Tax Consequences 11
Accounting Treatment 12
Appraisal Rights 12
Interest of Certain Persons in the Share Transactions 12
Federal Securities Law Consequences
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 12
BUSINESS OF THE COMPANY 13
BUSINESS OF SIMBA 19
BUSINESS OF BIG 20
MANAGEMENT OF THE COMPANY
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF SIMBAJAMBA MINES LTD.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF ROCKBURY PROPERTIES LTD.
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS 32
AMENDMENT TO THE CERTIFICATE OF INCORPORATION 41
DOCUMENTS INCORPORATED BY REFERENCE 42
FINANCIAL STATEMENTS OF SIMBAJAMBA MINES LIMITED
Index to Financial Statements of SIMBAJAMBA MINES LIMITED F-1
Report of Independent Certified Accountant F-2
Balance Sheets for the period of January 19, 2004 (Inception)
ended December 31, 2004 F-3
Statements of Operations for the period of January 19, 2004 (Inception)
to December 31, 2004 F-4
Statements of Stockholders' Deficit for the period of January 19, 2004
(Inception) to December 31, 2004 F-5
Statements of Cash Flows for the for the period of January 19, 2004
(Inception) to December 31, 2004 F-6
Notes to Financial Statements F-7 to F-10
Page
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Report of Independent Certified Accountant F-12
Balance Sheets for the years ended December 31, 2005 and December
31, 2004 F-13
Statements of Operations for the years ended December 31,
2005 and 2004 F-14
Statements of Stockholders' Deficit for the years ended
December 31, 2005 and 2004 F-15
Statements of Cash Flows for the years ended December 31,
2005 and 2004 F-16
Notes to Financial Statements F-17 to F-19
Unaudited Balance Sheet for the nine month periods ended
September 30, 2006 and September 30, 2005 F-21
Unaudited Statements of Operations for the nine month
periods ended September 30, 2006 and September 30, 2005 F-22
Unaudited Statements of Changes in Stockholders' Equity (Deficit)
for the period of January 19, 2004 (inception) to September 30, 2006 F-23
Unaudited Statements of Cash Flows for the nine month
periods ended September 30, 2006 and 2005 F-24
Notes to Unaudited Financial Statements F-25 to F-28
FINANCIAL STATEMENTS OF ROCKBURY PROPERTIES LIMITED
Index to Financial Statements of Rockbury Properties Limited FF-1
Report of Independent Certified Accountant FF-2
Balance Sheet for the period of July 21, 2005 (inception) ended
September 30, 2005 FF-4
Statements of Operations for the period ending September 30, 2005 FF-5
Statements of Stockholders' Deficit for the period ending September 30, 2005 FF-6
Notes to Financial Statements FF-7
FINANCIAL STATEMENTS OF AUSTRALIAN FOREST INDUSTRIES
Report of Independent Certified Accountant FFF-1
Balance Sheets for the years ended December 31, 2005 and December
31, 2004 FFF-2
Statements of Operations for the years ended December 31,
2005 and 2004 FFF-3
Statements of Stockholders' Deficit for the years ended
December 31, 2005 and 2004 FFF-4
Statements of Cash Flows for the years ended December 31,
2005 and 2004 FFF-5
Notes to Financial Statements FFF-6 to FFF-11
Unaudited Balance Sheet for the nine month periods ended
September 30, 2006 and September 30, 2005 FFF-12
Unaudited Statements of Operations for the nine month
periods ended September 30, 2006 and September 30, 2005 FFF-13
Unaudited Statements of Cash Flows for the nine month
periods ended September 30, 2006 and 2005 FFF-14
Notes to Unaudited Financial Statements FFF-15 to FFF-16
EXHIBIT A - Stock Purchase and Recapitalization Agreement A-1
EXHIBIT B - Shares Sale Agreement B-1
EXHIBIT C - Amendment to the Certificate of Incorporation C-1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information included in this Information Statement may contain forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
This information may involve known and unknown risks, uncertainties and other
factors which may cause the Company's actual results, performance or
achievements to be materially different from future results, performance or
achievements expressed or implied by any forward-looking statements. In
addition, with respect to the Agreements, the following factors, among others,
could cause actual events to differ materially from those described herein:
inability to satisfy various conditions to the closing of the Agreements, the
costs related to the Agreements; the ability to defend against potential legal
proceedings, if any; the effect of the Agreements on creditor, vendor, supplier,
customer or other business relationships; the ability to retain personnel,
including key personnel; and the results and effects of our inability to obtain
interim financing.
Forward-looking statements, which involve assumptions and describe the Company's
future plans, strategies and expectations, are generally identifiable by use of
the words "may," "will," "should," "expect," "anticipate," "estimate,"
"believe," "intend" or "project" or the negative of these words or other
variations on these words or comparable terminology. These forward-looking
statements are based on assumptions that may be incorrect, and there can be no
assurance that these projections included in these forward-looking statements
will come to pass. The Company's actual results could differ materially from
those expressed or implied by the forward-looking statements as a result of
various factors. The Company does not undertake an obligation to update publicly
any forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
CHANGE IN CONTROL - THE STOCK TRANSACTIONS
Stock Purchase and Recapitalization Agreement
On September 18, 2006, Australian Forest Industries, a Nevada corporation (the
"Company") and SIMBA Mines, Inc., a Nevada corporation ("SIMBA") entered into
Stock Purchase and Recapitalization Agreement (the "Stock Purchase Agreement")
pursuant to which the Company purchased from SIMBA all of the issued and
outstanding shares of its wholly-owned subsidiary Simbajamba Mines Limited, a
company incorporated pursuant to the laws of Samoa ("Simbajamba") (the
"Simbajamba Stock Transaction"). The Stock Purchase Agreement was approved by
the Board of Directors of each of the Company and SIMBA on September 18, 2006.
In consideration for the Simbajamba Stock Transaction, the stockholders of SIMBA
shall receive a convertible promissory note of the Company in favor of SIMBA in
the amount of US$41,547,000 (the "Convertible Note"); and (ii) the settlement of
all outstanding loan balances between the Company and SIMBA. The Convertible
Note is due in 28 days from the date of the consummation of the Stock Purchase.
The terms of the Note provide that the Note will, upon maturity, at the option
of SIMBA, convert to 5,193,375 shares of common stock of the Company (post
Consolidation as discussed herein) with a book value of US$8.00 per share. In
addition, the Agreement provides that, immediately after the effective closing
date of the Stock Purchase Agreement, with the exception of the Chairman, Mr.
Michael Timms, the members of the Board of Directors and officers of the Company
shall resign and Board of Directors of the Company will consist of Michael
Timms, Ian R. Egan, Mark Smyth, David Furlong, Teddy Lourenco de Almeida and
Luis Cupenala. Each of these events undertaken without respect to the other
constitutes a "change in control."
1
The Stock Purchase Agreement provides that the Company's name will be changed to
Zebra Copper, Inc. through an amendment to its Certificate of Incorporation
(referred to herein as the "Amendment"). In addition, in order to consummate the
transaction contemplated by the Stock Purchase Agreement, the Company prior to
the consummation of the transactions contemplated by the Stock Purchase
Agreement shall: (i) complete a reverse split of its common stock on a 515.20136
-for-1 basis; and (ii) incorporate an Australian company, Australian Forest
Industries Limited ("AFIL") and transfer all of the issued and outstanding
equity of Integrated Forest Products Pty Ltd, a company incorporated pursuant to
the laws of Australia and a wholly-owned subsidiary of the Company, to AFIL;
(iii) following the IFP Transfer, distribute all of the issued and outstanding
equity of AFIL to the shareholders of the Company in the form of a dividend.
Share Sale Agreement of Shares in Rockbury Properties Limited
Also on September 18, 2006, the Company and Bongani International Group Limited
("BIG"), a company incorporated pursuant to the laws of the British Virgin
Islands, entered into a shares sale agreement of Shares in Rockbury Properties
Limited (the "Share Sale Agreement") pursuant to which the Company purchased
from BIG all of the issued and outstanding shares of its wholly-owned
subsidiary, Rockbury Properties Limited ("Rockbury"), a company incorporated
pursuant to the laws of the British Virgin Islands (the "Rockbury Share
Transaction" and together with the Simbajamba Stock Transaction, the "Stock
Transactions" ). The Share Sale Agreement was approved by the Board of Directors
of each of the Company and BIG on September 18, 2006. In consideration for the
Share Sale Agreement, the stockholders of BIG shall receive 4,806,625 shares of
common stock of the Company (post consolidation); and (b) the settlement of all
outstanding loan balances between BIG and Rockbury. The Rockbury Share
Transaction will not be consummated until the completion of an audit of Rockbury
Properties Limited by an auditor which is approved by the Company.
The following are answers to some of the questions about the Stock Transactions
that you, as one of our stockholders, may have. We urge you to read this
Information Statement, including the Stock Purchase Agreement and the Share Sale
Agreement, (together, the "Agreements"), attached hereto as Appendix A and B,
carefully because the information in this section is not complete.
Has the Board of Directors approved the Stock Transactions?
Yes. On September 18, 2006 our Board of Directors approved the Agreements and
all of the transactions and developments contemplated thereby (including the
change of our name to "Zebra Copper, Inc." and the reverse split of the
Company's common stock on a 515.20136 -for-1 basis ").
Why are the companies entering into the Stock Transaction?
The Board of Directors of each of our company, SIMBA and BIG have determined
that a business combination between the three represents an opportunity for the
shareholders of each company to participate in the attractive business of copper
mining. The Stock transactions will give the Company access to resources and
capital which is necessary to effectively implement its business plans.
How are the number of issued and outstanding shares of our Common Stock
decreased?
2
The Board approved resolutions to effect a reverse split of the Company's common
stock on a 515.20136 -for-1 basis. Under this reverse stock split each 515.20136
shares of our Common Stock will be converted automatically into 1 share of
Common Stock. To avoid the issuance of fractional shares of Common Stock, the
Company will issue an additional share to all holders of a fractional share. The
effective date of the reverse stock split will be January 12, 2007.
PLEASE NOTE THAT THE REVERSE STOCK SPLIT WILL NOT CHANGE YOUR PROPORTIONATE
EQUITY INTERESTS IN THE COMPANY, EXCEPT AS MAY RESULT FROM THE ISSUANCE OR
CANCELLATION OF SHARES PURSUANT TO THE FRACTIONAL SHARES.
What are the material effects of the reverse stock split?
As a result of the Stock Purchase Agreement, the Company must recapitalize
itself by performing a reverse stock split. When a company engages in a reverse
stock split, it substitutes one share of stock for a predetermined amount of
shares of stock. It does not increase the market capitalization of the company.
An example of a reverse split is the following. For example, a company has
10,000,000 shares of common stock outstanding. Assume the market price is $.01
per share. Assume that that company declares a 1 for 5 reverse stock split.
After the reverse split, that company will have 1/5 as many shares outstanding
or 2,000,000 shares outstanding. The stock will have a market price of $0.05. If
an individual investor owned 10,000 shares of that company before the split at
$.01 per share, he will own 2,000 shares at $.05 after the split. In either
case, his stock will be worth $100. He's no better off before or after. Except
that such company hopes that the higher stock price will make that company look
better and thus the company will be a more attractive merger target for
potential business. There is no assurance that that Company's stock will rise in
price after a reverse split or that a suitable merger candidate will emerge.
The reverse split will affect all of our stockholders uniformly and will not
affect any stockholder's percentage ownership interests in the Company or
proportionate voting power, except to the extent that the reverse split results
in any of our stockholders owning a fractional share. In lieu of issuing
fractional shares, one share will be issued to all holders of a fractional share
..50 or greater and the fractional share of less than .50 will be cancelled.
The principal effect of the reverse split will be that the number of shares of
Common Stock issued and outstanding will be reduced from 257,400,680 shares as
of January 11, 2007 to approximately 501,249 shares on January 12, 2007
(depending on the number of fractional shares that are issued or cancelled). The
number of authorized shares of Common Stock will not be affected.
The reverse split will not affect the par value of our Common Stock. As a
result, on the effective date of the reverse split, the stated capital on our
balance sheet attributable to our Common Stock will be reduced to up to
1/515.20136 of its present amount, and the additional paid-in capital account
shall be credited with the amount by which the stated capital is reduced. The
per share net income or loss and net book value of our Common Stock will be
increased because there will be fewer shares of our Common Stock outstanding.
The reverse split will not change the proportionate equity interests of our
stockholders, nor will the respective voting rights and other rights of
stockholders be altered, except for possible immaterial changes due to the
cancellation of fractional shares. The Common Stock issued pursuant to the
reverse split will remain fully paid and non-assessable. The reverse split is
not intended as, and will not have the effect of, a "going private transaction"
covered by Rule 13e-3 under the Securities Exchange Act of 1934. We will
continue to be subject to the periodic reporting requirements of the Securities
Exchange Act of 1934.
Stockholders should recognize that they will own a fewer number of shares than
they presently own (a number equal to the number of shares owned immediately
prior to the filing of the certificate of amendment divided by 515.20136) and
will be significantly diluted as a result of the issuances contemplated in the
Stock Purchase Agreement.
What is the procedure for exchange of stock certificates?
The reverse split will become effective on January 12, 2007, which we will refer
to as the "effective date." Beginning on the effective date, each certificate
representing pre-reverse split shares will be deemed for all corporate purposes
to evidence ownership of post-reverse split shares.
3
Our transfer agent, Transfer Online, will act as exchange agent for purposes of
implementing the exchange of stock certificates and payment of fractional share
interests. We refer to such person as the "exchange agent." Holders of
pre-reverse split shares are asked to surrender to the exchange agent
certificates representing pre-reverse split shares in exchange for certificates
representing post-reverse split shares in accordance with the procedures set
forth in the letter of transmittal enclosed with this Information Statement. No
new certificates will be issued to a stockholder until that stockholder has
surrendered the stockholder's outstanding certificate(s) together with the
properly completed and executed letter of transmittal.
Our stockholders are not entitled to appraisal rights under the Nevada Revised
Statutes in connection with the reverse stock split.
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE AND SHOULD NOT SUBMIT ANY
CERTIFICATES WITHOUT THE LETTER OF TRANSMITTAL.
Will Fractional Shares be issued?
We will not issue fractional certificates for post-reverse split shares in
connection with the reverse split. Instead, an additional share shall be issued
to all holders of a fractional share
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE AND SHOULD NOT SUBMIT ANY
CERTIFICATES WITHOUT THE LETTER OF TRANSMITTAL.
Summary of Reverse Stock Split
Below is a brief summary of the reverse stock split:
o The issued and outstanding Common Stock shall be reduced on the
basis of 1 post-split share of the Common Stock for every 515.20136
pre-split shares of the Common Stock outstanding. The consolidation
shall not affect any rights, privileges or obligations with respect
to the shares of the Common Stock existing prior to the
consolidation.
4
o Stockholders of record of the Common Stock as of January 11, 2007
shall have their total shares reduced on the basis of one post-split
share of Common Stock for every 515.20136 pre-split shares
outstanding.
o As a result of the reduction of the Common Stock the pre-split total
of issued and outstanding shares of 257,400,680 shall be
consolidated to a total of approximately 501,249 issued and
outstanding shares (depending on the number of fractional shares
that are be issued or cancelled).
o The Company's authorized number of common stock shall remain at
300,000,000 shares of the Common Stock.
This action has been approved by the Board and the written consents of the
holders of the majority of the outstanding voting capital stock of the Company.
Do I have the right to vote on the Stock Transfers?
No, you do not. If we were holding a meeting to approve such proposals, our
stockholders would be entitled to consider and vote upon the Stock Transfers.
Stockholders of the Company representing 93.24% of all of the issued and
outstanding common stock of the Company have executed a written consent
approving the Stock Transactions, so no further approval is required.
Do I have the right to vote on the Amendment?
No, you do not. If we were holding a meeting to approve such proposals, our
stockholders would be entitled to consider and vote upon the Amendment. However,
we are not holding a meeting of our stockholders, nor are we soliciting proxies
in favor of such a proposal. Stockholders of the Company representing 93.24% of
all of the issued and outstanding common stock of the Company have executed a
written consent approving the Amendment, so no further approval is required.
Will the Stock Transactions effect where our shares of common stock are traded?
Our shares of common stock are currently traded on the over the counter
electronic bulletin board ("OTC") under the symbol AUFI. The Stock Transactions
will not affect where our shares are traded.
When do you expect the Stock Transactions to be completed?
We hope to complete the Stock Transactions as soon as possible, assuming that
all of the conditions to the closing of the Stock Transactions as set forth in
the Agreements are either waived or completed to the satisfaction of the
parties.
5
Who can help answer my questions?
If you have any questions about the Agreements or the business of SIMBA, you
should contact, Ian Egan, the Chairman at:
Simba Mines, Inc.
300 Center Avenue, Suite 302.
Bay City, Michigan, 48708,
USA Telephone No. (989) 891-1274
If you have questions about our business, you should contact Michael Timms the
Chairman, CEO and President, at:
Australian Forest Industries
Suite 4
95 Salmon Street
Port Melbourne, 3207
AUSTRALIA
Telephone No. 011 61 3 8645 4340 1130
Change in Control
The change in the majority of the directors of the Company will occur by virtue
of the closing of the transactions contemplated by the Stock Purchase Agreement
(the "Closing"). The Company's Board of Directors currently consists of Michael
Timms, Colin Baird, Antony Esplin and Roger Timms (the "Board"). Messrs. Baird,
Esplin and R. Timms have submitted letters of resignation from the Board to take
effect contemporaneously with the Closing. The members of the Board and
stockholders of the Company representing 93.24% of the issued and outstanding
common stock of the Company have also executed written consents that in the
event of Closing appoint Ian R. Egan, Mark Smyth, David Furlong, Teddy Lourenco
de Almeida and Luis Cupenala to fill the vacancies on the Board to be created by
the foregoing resignations. Michael Timms shall remain Chairman of the Board.
In consideration for the Simbajamba Stock Transaction, SIMBA shall receive a
convertible promissory note of the Company in favor of SIMBA in the amount of
US$41,547,000 (the "Convertible Note"); and (ii) the settlement of all
outstanding loan balances between the Company and SIMBA. The Convertible Note is
due in 28 days from the date of the consummation of the Stock Purchase. The
terms of the Note provide that the Note will, upon maturity, at the option of
SIMBA, convert to 5,193,375 shares of common stock of the Company (post
Consolidation as discussed herein) with a book value of US$8.00 per share which,
following the reverse stock split will equal 49.45% of the issued and
outstanding common stock of the Company assuming the consummation of each the
Simbajamba and Rockbury transactions.
In addition, in consideration for the Share Sale Agreement, BIG shall receive:
(i) 4,806,625 shares of common stock of the Company (post reverse stock split)
(ii) the settlement of all outstanding loan balances between the Company and
BIG. Thus the shares of common stock issueable upon the conversion of the
convertible note and the shares to be issued upon the closing of the Share Sale
Agreement will equal 45.77% of the issued and outstanding common stock of the
Company assuming the consummation of each the Simbajamba and Rockbury
transactions.
6
The Agreements and the Stock Transactions contemplated thereby has been approved
by the Company's Board of Directors and consented to by stockholders of the
Company representing 93.24% of the issued and outstanding common stock of the
Company. The amendment to the Company's Certificate of Incorporation changing
the name of the Company from "Australian Forest Industries" to "Zebra Copper,
Inc." has been approved by the Company's Board of Directors and consented to by
stockholders of the Company representing 93.24% of the issued and outstanding
common stock of the Company. Accordingly, none of the actions described in this
Information Statement will be submitted for a vote to the stockholders of the
Company. The Company prepared this notice on its own behalf.
New Directors
Nominees
In addition to Michael Timms, who shall remain Chairman of the Board of
Directors, the following seven individuals shall be appointed to the board of
directors upon the closing of the Stock Purchase. Each are to be elected at that
time and each to hold office until the next annual meeting and until his
successor is elected and qualified.
The following further sets forth certain information furnished to the Company
regarding the persons who are nominees for the election as directors of the
Company.
Ian Egan - Acting Chief Executive Officer
Mr. Egan has been a Director of Kenmare Resources plc, a UK listed company since
August 1998, a mining and exploration company listed on the London and Dublin
Stock Exchanges. Since 2006, Mr. Egan has also acted as Chairman of the Board of
Simba Mines, Inc. In addition, he acts as an advisor to Eden Waters Pty Ltd an
Australian land development company and Acora Reneco Pty Ltd an Australian
engineering, timber and metals group that is Australia's leading supplier of
equipment, technology and engineering services to the sawmill industry. Mr. Egan
is currently a director of a number of other privately held companies. He is a
fellow of the Australasian Institute of Mining and Metallurgy ("F Aus/MM") and a
Fellow of the Australian Society of Certified Practicing Accountants ("FCPA").
Mr. Egan will be the acting Chief Executive Officer of the Company responsible
for its management. Mr. Egan has worked in the resource industry for more than
thirty years, including holding senior management positions at BHP Limited, Utah
Mining Australia Limited and Mineral Deposits Limited.
David Furlong - Executive Chief Operating Officer
Mr. Furlong will be the Chief Operating Officer of the Company. Mr. Furlong is a
qualified geologist, with over 15 years international experience in mining. For
the past 5 years he has been acting as an independent geological consultant.
Previously Mr. Furlong worked as senior geologist for Satellite Goldfields (part
of Glencoe Mining plc) in Ghana and with Mount Isa Mines Ltd in Australia.
Luis Cupenala (Non-Executive)
Mr. Luis Cupenala is the Executive Chairman of Bongani Investment Holdings
("BIH"). The Company has it origins at Bongani Investment and Consultants which
Mr. Cupenela co-founded in 1998. Prior to founding BIH, Mr. Cupenela was
Chairman of Groupo Velentin Ameos ("GVA") in Angola for 14 years where he
transformed the business from a war torn operation employing some 40 persons to
a highly respected business employing over 1,000 people with operations in
property, timber, transportation tourism and gaming. Mr. Cupenala has been
Chairman of BIH since its incorporation in 2004. Mr. Cupenela is a South African
permanent resident and a citizen of Angola.
7
Teddy de Almeida (Non-Executive)
Mr. Teddy de Almeida has been Chief Executive Officer of BIH since 2004, and one
of BIH's founders. He is President of the Angolan - South African Chamber of
Commerce. Prior to forming BIH, Mr. de Almeida worked for GVA, one of the
largest companies in Angola where since 1998 he was Chief Executive Officer and
was responsible for securing contracts with major South African companies.
Mark Smyth (Secretary, Treasurer and Director)
Mr. Smyth has over 35 years of experience in the natural resources sector. Since
1975 he has co-founded a number of companies involved in the exploration and
production of gold, oil, gas and diamonds around the world. Prior to 1975 he was
with Selection Trust where he was part of the project development teams for the
Mt. Newman iron ore and Agnew nickel projects in Australia. He has a law degree
from Oxford University and is a solicitor in England and Wales, Hong Kong and
several states in Australia. From 2002-2003 Mr Smyth was a Director of Palladex
plc. Mr. Smyth was Chairman of Simba Mines Inc. from 2004-2005 and Chief
Executive Officer of Simba Mines Inc. this year. Mr. Smyth is also Chief
Executive Officer of CityView Corporation Limited since 2006 and a Director of
Thor Mining plc since 2005.
Material Terms of the Agreements
On September 18, 2006, Australian Forest Industries, a Nevada corporation (the
"Company") and SIMBA Mines, Inc., a Nevada corporation ("SIMBA") entered into
Stock Purchase and Recapitalization Agreement pursuant to which the Company
purchased from SIMBA all of the issued and outstanding shares of its
wholly-owned subsidiary Simbajamba Mines Limited, a company incorporated
pursuant to the laws of Samoa ("Simbajamba") (the "Simbajamba Stock Purchase").
The Stock Purchase Agreement was approved by the Board of Directors of each of
the Company and SIMBA on September 18, 2006, and will become effective following
the satisfaction or waiver of the conditions precedent set forth in the Stock
Purchase Agreement or at such other date as the Company and SIMBA shall agree
(the "Closing"), but in no event shall the Closing occur earlier than twenty
(20) days before this Information Statement shall have been mailed to the
Company's stockholders of record on the record date established therefor
(January 2, 2007).
Also on September 18, 2006, the Company and Bongani International Group Limited
("BIG"), a company incorporated pursuant to the laws of the British Virgin
Islands, entered into a shares sale agreement (the "Share Sale Agreement")
pursuant to which the Company purchased from BIG all of the issued and
outstanding shares of its wholly-owned subsidiary, Rockbury Properties Limited
("Rockbury"), a company incorporated pursuant to the laws of the British Virgin
Islands (the "Rockbury Share Purchase" and together with the Simbajamba Stock
Purchase, the "Stock Transactions" ). The Share Sale Agreement was approved by
the Board of Directors of each of the Company and BIG on September 18, 2006 and
will become effective following the satisfaction or waiver of the conditions
precedent set forth in the Stock Purchase Agreement or at such other date as the
Company and BIG shall agree (the "Closing"), but in no event shall the Closing
occur on the earlier of (i) twenty (20) days after this Information Statement
shall have been mailed to the Company's stockholders of record on the record
date established therefor (January 2, 2007); and (ii) on the date of the
completion of an audit of Rockbury Properties Limited by an auditor which is
approved by the Company.
8
Stockholders of the Company representing 93.24% of all of the issued and
outstanding common stock of the Company have, in connection with the
transactions and developments contemplated by the Agreement, executed a written
consent to approve and adopt a resolution authorizing an amendment to the
Company's Certificate of Incorporation changing the name of the Company to "
Zebra Copper, Inc." Pursuant to the NRS, the Company is hereby notifying its
stockholders of the approval of the name change, pursuant to the Exchange Act,
filing this Information Statement on Schedule 14C which will be mailed to all
stockholders of record as of the record date established therefor (January 2,
2007).
The terms of the Agreements are more fully described below.
Material Terms of the Agreements
The following discussion summarizes the material terms of the Agreements, a copy
of which are attached to this Information Statement as Appendix A and B and
incorporated herein by reference and made an integral part hereof. Stockholders
of the Company are urged to read the Agreements carefully as they are the legal
documents that govern the Stock Transactions.
Stock Purchase Agreement
The Stock Purchase. Subject to the terms and conditions of the Stock
Purchase Agreement, the Company will purchase from SIMBA all of the issued and
outstanding shares (1 ordinary share) of Simbajamba Mines Limited, a company
incorporated pursuant to the laws of Samoa and a wholly-owned subsidiary of
SIMBA.
Immediately after the effective closing date of the Stock Purchase Agreement,
with the exception of the Chairman, Mr. Michael Timms, the members of the Board
of Directors and officers of the Company shall resign and Board of Directors of
the Company will consist of Michael Timms and Ian R. Egan, Mark Smyth, David
Furlong Teddy Lourenco de Almeida and Luis Cupenala. Each of these events
undertaken without respect to the other constitutes a "change in control."
Closing. The Closing will take place as of December 31, 2006 or such other
mutually agreed upon time after the satisfaction or waiver of the conditions set
forth in the Stock Purchase Agreement.
Effective Date. The effective date of the closing of the transactions
contemplated by the Stock Purchase Agreement.
Certificate of Incorporation and Bylaws of the Company Following the Share
Transaction. The Certificate of Incorporation and Bylaws of the Company, as in
effect at the Effective Time and except as amended as described in this
Information Statement (name change and increase in authorized share capital),
will be the Certificate of Incorporation and Bylaws, respectively, of the
Company following the Stock Purchase.
9
Directors and Officers of the Company Following the Share Transaction. The
Agreement provides that certain of the directors and officers of the Company
shall be replaced at Closing. The Directors of the Company following the Closing
shall be Michael Timms, Ian R. Egan, Mark Smyth, David Furlong, Teddy Lourenco
de Almeida and Luis Cupenala. The Officers of the Company following the Closing
shall be Michael Timms (Chairman), Ian R. Egan (President), and Mark Smyth
(Secretary and Treasurer).
Representations and Warranties. The Agreement contains various
representations and warranties of the Company and SIMBA. The Company represents
and warrants to SIMBA as to, among other things: (i) capital structure; (ii) SEC
filings; and (iii) financial statements. SIMBA represents and warrants to the
Company as to, among other things: (i) capital structure; (ii) financial
statements; (iii) intellectual property; (iv) absence of certain adverse
changes; (v) litigation; (vi) material contracts, and (vii) liabilities or
claims. All representations and warranties in the Agreement shall survive the
Closing for a period of twelve (12) months from the Effective Date.
Certain Covenants of the Parties. Pursuant to the Agreement, the Company
and SIMBA have agreed, among other thing, prior to, or simultaneous with, the
consummation of the transactions contemplated by the Stock Purchase Agreement
provides that the Company's name will be changed to Zebra Copper, Inc. through
an amendment to its Certificate of Incorporation (referred to herein as the
"Amendment"). In addition, the Company prior to the consummation of the
transactions contemplated by the Stock Purchase Agreement shall: (i) complete a
reverse split of its common stock on a 515.20136 -for-1 basis; and (ii)
incorporate an Australian company, Australian Forest Industries Limited ("AFIL")
and transfer all of the issued and outstanding equity of Integrated Forest
Products Pty Ltd, a company incorporated pursuant to the laws of Australia and a
wholly-owned subsidiary of the Company, to AFIL; (iii) following the IFP
Transfer, distribute all of the issued and outstanding equity of AFIL to the
shareholders of the Company in the form of a dividend.
Indemnification. The Company has agreed to indemnify SIMBA and its
shareholders from any losses, claims, damages or expenses incurred as a result
of any breaches of the Stock Purchase Agreement by the Company (which
indemnification shall survive the Closing). Similarly, SIMBA has agreed to
indemnify the Company from any losses, claims, damages or expenses incurred as a
result of any breaches of the Agreement by SIMBA (which indemnification shall
survive the Closing).
In addition, subject to the terms and conditions of the Stock Purchase
Agreement, each of the parties has agreed (i) to keep confidential all
information furnished in connection with the Stock Purchase, and (ii) to
promptly inform the other parties of the occurrence of certain events.
Conditions to the Stock Transaction. The obligations of the Company and
SIMBA to effect the Stock Purchase are subject to the satisfaction or waiver on
or prior to the Closing Date of a number of conditions, including but not
limited to the following:
(a) Each of the representations and warranties of the Company, and SIMBA,
as applicable, set forth in the Stock Purchase Agreement shall have been
true and correct in all material respects as of the date of the Stock
Purchase Agreement and as of the Closing Date; and
10
(b) The Company and SIMBA, as applicable, shall have performed in all
material respects all obligations required to be performed by it under the
Stock Purchase Agreement at or prior to the Closing Date.
Termination. In the event the Closing of this Stock Purchase Agreement shall not
take place due to breach of or failure to meet any condition, then any
non-breaching or non-failing party shall have the right to terminate this Stock
Purchase Agreement, in which event no party shall have any further right or
obligation as against any other.
Share Sale Agreement of Shares in Rockbury Properties Limited
The Share Sale. Subject to the terms and conditions of the Share Sale
Agreement, the Company will purchase from BIG all of the issued and outstanding
shares of Rockbury Properties Limited, a company incorporated pursuant to the
laws of British Virgin Islands and a wholly-owned subsidiary of BIG.
Completion. The Completion will take place as of December 31, 2006 or such
other mutually agreed upon time after the satisfaction or waiver of the
conditions set forth in the Share Sale Agreement including but not limited to
the completion of an audit of Rockbury Properties Limited by an auditor which is
approved by the Company.
Representations and Warranties. The Agreement contains various
representations and warranties of the Company and BIG. The Company represents
and warrants to BIG as to its authority. BIG represents and warrants to the
Company as to, among other things: (i) capital structure; (ii) authority; (iii)
disputes and litigation; (iv) titles, and (v) liabilities or claims.
In addition, subject to the terms and conditions of the Stock Purchase
Agreement, each of the parties has agreed (i) to keep confidential all
information furnished in connection with the Stock Purchase, and (ii) to
promptly inform the other parties of the occurrence of certain events.
Conditions to the Stock Transaction. The obligations of the Company and
BIG to effect the Share Purchase are subject to the satisfaction or waiver on or
prior to the Completion of a number of conditions, including but not limited to
the following:
(a) Each of the representations and warranties of the Company, and BIG, as
applicable, set forth in the Share Sale Agreement shall have been true and
correct in all material respects as of the date of the Share Sale
Agreement and as of the Completion; and
(b) The Company and BIG, as applicable, shall have performed in all
material respects all obligations required to be performed by it under the
Share Sale Agreement at or prior to the Completion.
Termination. In the event the Completion of this Share Sale Agreement
shall not take place due to breach of or failure to meet any condition, then any
non-breaching or non-failing party shall have the right to terminate this Share
Sale Agreement, in which event no party shall have any further right or
obligation as against any other.
Certain Federal Income Tax Consequences
11
The following discussion summarizing certain federal income tax consequences is
based on the Internal Revenue Code of 1986, as amended, the applicable Treasury
Regulations promulgated thereunder, judicial authority and current
administrative rulings and practices in effect on the date of this Information
Statement. This discussion is for general information only and does not discuss
consequences that may apply to special classes of taxpayers (e.g., non-resident
aliens, broker-dealers or insurance companies). Stockholders are urged to
consult their own tax advisors to determine the particular consequences to them.
The receipt of the common stock following the effective date of the reverse
stock split, including whole shares issued in lieu of fractional shares, solely
in exchange for the common stock held prior to the reverse stock split will not
generally result in a recognition of gain or loss to the stockholders. The
adjusted tax basis of a stockholder in the common stock received after the
reverse stock split will be the same as the adjusted tax basis of the common
stock held prior to the reverse stock split exchanged therefor, and the holding
period of the common stock received after the reverse stock split will include
the holding period of the common stock held prior to the reverse stock split
exchanged therefore. No gain or loss will be recognized by the Company as a
result of the reverse stock split.
Appraisal Rights
Under Nevada law, the state in which the Company is incorporated, the Company is
not required to provide its stockholders with a right of appraisal in any matter
to which this Information Statement relates and stockholders are accordingly not
provided with such right. Stockholders of the Company have no right to dissent
from the actions to be taken pursuant to the written consent of stockholders of
the Company representing a majority of the common stock of the Company issued
and outstanding.
Interests of Certain Persons in the Share Purchase
No director, executive officer, associate of any director or executive officer,
or any other person has any substantial interest, direct or indirect, by
security holdings or otherwise, resulting from the amendment to the Company's
Certificate of Incorporation set forth herein, which is not shared by all other
stockholders of the Company pro rata, and in accordance with their respective
interests.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth ownership information as of the Record Date
(January 2, 2007) and immediately following the closing of the Stock Purchase,
with respect to: (i) each current director or executive officer of the Company;
(ii) all directors and executive officers of the Company as a group, prior to
the closing of the Stock Purchase; and (iii) each person known to the Company to
be a beneficial owner of more than 5% of the outstanding voting securities of
the Company. As of the Record Date, the authorized capital stock of the Company
consists of: (i) 300,000,000 shares of common stock, $0.001 par value; and (ii)
5,000,000 shares of preferred stock, $0.001 par value. The Company has: (i)
257,400,680 shares of common stock; and (ii) no shares of preferred stock;
issued and outstanding and at the Closing, the Company will not, have
outstanding any capital stock or other securities or any rights, warrants or
options to acquire securities of the Company or any convertible or exchangeable
securities and, other than pursuant to the Stock purchase Agreement and the
Convertible Note, no person has or, at Closing will have, any right to purchase
or otherwise acquire any securities of the Company. In addition, at the Closing
following the Reverse Stock Split, the Company will have 501,249 shares of
common stock; and (ii) no shares of preferred stock; issued and outstanding.
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.
12
------------------------------ ---------------------------- --------------------------- ---------------------
Title of Class Name of Beneficial Shares of Common Stock Percent of Class
Owner
------------------------------ ---------------------------- --------------------------- ---------------------
Common Timbermans Group Pty 140,000,000 54.47%
Ltd (1)
------------------------------ ---------------------------- --------------------------- ---------------------
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 240,000,000 93.39%
Group
------------------------------ ---------------------------- --------------------------- ---------------------
(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 is a former director and maintains his shares in his and his
wife's name
(3) Mr. Baird maintains his shares in his and his wife's name
(4) Mr. Esplin maintains his shares in his and his wife's name
(5) Mr. Michael Timms maintains his shares in his and his wife's name
(6) Mr. Roger Timms maintains his shares in his and his wife's name
BUSINESS OF THE COMPANY
General
The business of the Company consists of a pine sawmilling and timber facility at
Canberra, Australia which has a capacity to process 200,000 cubic meters of sawn
timber. This sawmill produced 120,000 cubic meters of log in the Fiscal Year
2005. The Company is currently in the process of arranging the financing for the
construction of a second sawmill.
13
With this second sawmill, the Company intends to exploit the log resource
generated by our contract with Timbermans Group which grants us the right to the
Bombala Agreement described below.
The majority of the issued and outstanding ordinary shares in the capital of the
Company are held by Timbermans Group, a leading supplier of softwood timber
products in Australia. The shareholders of Timbermans Group are the same
individuals who comprise the Company's board of directors (except for Norman
Backman who resigned from the board of directors on September 27, 2006).
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.
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.
Trademarks and Service Marks
The Company has not registered any marks with the United States Patent and
Trademark Office.
14
Employees
At the end of December 2006, we employed 121 full time employees. In the
Company's vision, employees play a crucial role in the success of the Company.
The Company encourages its employees to take initiative to further enhance the
Company's efficiency in timber production. The Company has never experienced a
work stoppage resulting from labor problems.
The Company's 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.
Corporate Information
Australian Forest Industries f/k/a Multi-Tech International, Corp., 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 Stockat 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, the Company 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, the Company:
o completed a 200-1 reverse stock split of our common stock
o increased its authorized number of shares from 100,000,000 to 300,000,000
o changed its 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 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 Company's symbol on the OTC-BB was changed from "MLTI" to "AUFI".
Our principal executive offices are located at AUSTRALIAN FOREST INDUSTRIES,
4/95 Salmon Street, Port Melbourne, Victoria, Australia, 3207. The Company's
telephone number is: 011 61 3 8645 4340.
15
Common Stock
During the fiscal year 2004 and up to October 31, 2006, the Company's Common
Stock has traded on the over-the-counter electronic bulletin board. The price
ranges presented below represent the highest and lowest quoted sales prices
during each quarter for 2004, 2005 and 2006 reported by Nasdaq. The quotes
represent prices between dealers and do not reflect mark-ups, markdowns or
commissions and therefore may not necessarily represent actual transactions.
Year Period Sales Information
---- ------ -----------------
High Low
---- ---
2006 1st Quarter $4.35 $0.75
2nd Quarter $1.00 $0.52
3rd Quarter $0.71 $0.11
4th Quarter $0.50 $0.30
2005 1st Quarter $1.51 $1.50
2nd Quarter $1.50 $1.50
3rd Quarter $1.75 $1.60
4th Quarter $8.00 $1.25
2004 1st Quarter $0.15 $0.15
2nd Quarter $0.15 $0.15
3rd Quarter $0.15 $0.15
4th Quarter $2.50 $0.60
There are currently 257,400,680 shares of common stock of the Company issued and
outstanding. At December 31, 2006 there were approximately 1355 holders of
record of Common Stock.
No cash dividends on its common stock were paid or declared by the Company
during the fiscal year ended December 31, 2006. The Company intends, for the
foreseeable future, to retain all future earnings for use in its business. The
amount of dividends the Company pays in the future, if any, will be in the
discretion of the Board and will depend upon the Company's earnings, capital
requirements, financial condition and other relevant factors.
MANAGEMENT
Directors; Executive Officers
The following table sets forth certain information concerning the current
directors and executive officers of the Company. The following individuals are
all of our executive officers and directors:
------------------------ ------ ------------------------------------------------
Name Age Positions and Offices with the Company
------------------------ ------ ------------------------------------------------
Michael Timms 55 Chief Executive Officer; President;
Chairman of the Board
------------------------ ------ ------------------------------------------------
Colin Baird 47 Chief Financial Officer; Director
------------------------ ------ ------------------------------------------------
Tony Esplin 43 Executive Vice President - Marketing; Director
------------------------ ------ ------------------------------------------------
Roger Timms 50 Executive Vice President - Engineering; Director
------------------------ ------ ------------------------------------------------
16
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.
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.
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.
Committees
The Board of Directors does not have a Compensation, Audit or Nominating
Committee, and the usual functions of such committees are performed by the
entire Board of Directors.
Meetings of the Board of Directors
During fiscal 2006, the Company held 6 meetings of the Board of Directors.
17
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's executive officers, directors and persons who own more than ten
percent of a registered class of the Company's equity securities to file certain
reports regarding ownership of, and transactions in, the Company's securities
with the Securities and Exchange Commission (the "SEC"). These officers,
directors and stockholders are also required by SEC rules to furnish the Company
with copies of all Section 16(a) reports that are filed with the SEC.
To the best of our knowledge, all other Forms 3, 4, and 5 required to be filed
during the year ended December 31, 2006 were timely filed.
Except as set forth herein, no officer or director of the Company (current or
following the consummation of the Share Transactions as set forth above) has,
during the last five years: (i) been convicted in or is currently subject to a
pending a criminal proceeding; (ii) been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to any
Federal or state securities or banking laws including, without limitation, in
any way limiting involvement in any business activity, or finding any violation
with respect to such law, nor (iii) has any bankruptcy petition been filed by or
against the business of which such person was an executive officer or a general
partner, whether at the time of the bankruptcy of for the two years prior
thereto.
Indemnification
Section 78.751 of the Nevada Revised Statutes enables a corporation in its
original articles of incorporation or an amendment to eliminate or limit the
personal liability of a director to a corporation or its stockholders for
violations of the director's fiduciary duty, except:
o for any breach of a director's duty of loyalty to the corporation or
its stockholders;
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; or
o for any transaction from which a director derived an improper
personal benefit.
The Company's Articles of Incorporation provides in effect for the elimination
of the liability of directors to the extent permitted by the Nevada Revised
Statutes.
Section 78.7502 of the Nevada Revised Statutes provides, in summary, that
directors and officers of Nevada corporations are entitled, under certain
circumstances, to be indemnified against all expenses and liabilities (including
attorney's fees) incurred by them as a result of suits brought against them in
their capacity as a director or officer, if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, if they
had no reasonable cause to believe their conduct was unlawful; provided, that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, they
are fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper. Any such indemnification may be made by the corporation
only as authorized in each specific case upon a determination by the
stockholders or disinterested directors that indemnification is proper because
the indemnitee has met the applicable standard of conduct. The Company's bylaws
entitle our officers and directors to indemnification to the fullest extent
permitted by the Nevada Revised Statutes.
18
We have agreed to indemnify each of our directors and certain officers against
certain liabilities, including liabilities under the Securities Act of 1933 (the
"Securities Act"). Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons pursuant to the provisions described above, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than our payment of expenses incurred or paid by
our director, officer or controlling person in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
BUSINESS OF SIMBA
Overview
The business of SIMBA consists of the development of its copper interests in
Angola. SIMBA's subsidiary Simbajamba Mines Ltd ("Simbajamba") holds a 40%
interest in the 3,615 square kilometre copper license area known as Cachoeiras
de Binga and a 35% interest in each of two nearby license areas known as
Benguela and Zenza/Dondo. The mineral rights for the Cachoeiras de Binga license
were granted by the Government of Angola in January 2006. The rights for the
Benguela and Zenza/Dondo license were also granted in January 2006. Each License
is more fully described below. Simbajamba was incorporated in the country of
Samoa on January 19, 2004 pursuant to Samoa's International Companies Act of
1987 and is in the development stage.
Business Strategy
A major work program is required to convert the measured resource to a proven
reserve status so that plant construction can commence. The directors of SIMBA
decided that the optimum way to fund their program would be to transfer
everything to a company with a fully reporting 12g status and OTCBB exchange
listing to provide the financial transparency related to secure efficient
financing. Accordingly on September 18, 2006 SIMBA entered into the Stock
Purchase Agreement with the Company.
Competition
Copper is readily tradable on the open market. Thus any production from the
company's deposits should be able to place in the market at the market price for
product. Currently copper metal is priced at around $3.00 per pound. Copper is a
malleable and ductile metal used heavily in building construction,
transportation, electrical, automotive and telecommunications. With China and
India and other growing economies drawing down global inventories, supply has
difficulty keeping pace with demand.
19
The mineralogy and geometry of the Cachoeiras de Binga ore bodies is relatively
simple and it is anticipated that an extraction system can be based upon:-
o opencast mining or underground mining, depending upon overburden
thickness: underground mining would be low-cost, trackless and
linked to the developing open cuts
o heap leach of the ore
o electro winning of the copper on site or export of a processed
product to a toll refinery
A final proposal for an operational program can be designed after the Company's
exploration program is complete.
Trade Marks and Service Marks
SIMBA has not registered any marks with the United States Patent and Trademark
Office.
Litigation
SIMBA is not involved in any litigation.
Corporate Information
SIMBA is a Nevada company, administered from Michigan, USA, and is listed on the
Pink Sheets under the symbol SBAM:PK.
BUSINESS OF BIG
Overview
BIG is a private investment company. A subsidiary of BIG is Rockbury Properties
Limited ("Rockbury") which holds a 40% interest in the Cachoeiras de Binga
license and a 35% interest in each of two nearby licenses known as Benguela and
Zenza. Each License is more fully described below. Rockbury Properties Limited
was incorporated in the British Virgin Islands on 21 July 2005.
Benguela and Zenza are still at the exploration stage. However Cachoeiras de
Binga, according to compiled reports, has a measured resource of approximately
131 thousand tons of copper metal and an inferred copper resource of 918
thousand tons of copper metal.
Business Strategy
A major work program is required to convert the measured resource to a proven
reserve status to enable plant construction to commence. BIG decided that the
optimum way to fund this program would be to transfer Rockbury to a company with
a fully reporting 12g status and OTCBB exchange listing so as to provide the
financial transparency needed to secure efficient financing. Accordingly on
September 18 2006 BIG entered into the Share Sale Agreement with the Company.
Competition
Copper is readily tradable on the open market. Currently there is a supply
shortage with pricing of around $3.00 per pound.
20
Trade Marks and Service Marks
Rockbury has not registered any marks with the United States Patent and Trade
Mark Office.
Employees
Rockbury has no employees. Any work required is done on a contractual basis.
Litigation
Rockbury is not involved in any litigation.
Corporate Information
BIG is a privately held company associated with the majority shareholders of
Bongani Investment Holdings Limited (BIH) which is a private South African
company with a wide range of activities in Angola and Southern Africa. BIG's
extensive expertise, experience and relationships in Africa and internationally
will be available to the Company to assist in developing its copper mining
activities in Africa.
CACHOEIRAS DE BINGA LICENSE
The Cachoeiras de Binga License was granted by the Republic of Angola Ministry
of Geology and Mining on January 18, 2006 for a term of three years at which
time the exploration license will be converted to a mining license that will be
held by the Company for the life of the mine. Under the terms of the License,
the Company is required to perform certain tasks and to make annual payments of
US$30,000 to the Angola Ministry of Geology and Mining. Assuming the
consummation of each of the Simbajamba and Rockbury transactions, the Company
(through its subsidiaries) would control 80% of the License rights. The Company
is currently in negotiations to purchase the remaining 20% of the License
rights.
Location
The Cachoeiras de Binga license block lies immediately to the east of the
regional town of Sumbe, some 385 kilometers south of Luanda on the main coastal
road. The block is defined by the following coordinates.
Vertex Latitude Longitude
Deg. Min. Sec. Deg. Min. Sec.
A 10 44 12 13 50 48
B 10 44 12 14 08 12
C 11 45 18 14 08 12
D 11 45 18 14 00 00
E 11 53 30 14 00 00
F 11 53 30 13 50 48
The block covers an area of 3,615 square kilometers and extends approximately 35
kilometers east - west and 127 kilometers north - south.
21
Geology
The block straddles the Cretaceous Kwanza Basin and the Pre - Cambrian Basement.
The copper occurrences lie within the Lower Cretaceous of the Kwanza Basin. The
copper ores arc present in the basal sediments of the Lower Cretaceous (mainly
the Upper Cuvo Formation) and they are contained in stratiform ore - bodies in
finely bedded mudstones, siltstones and conglomeratic sandstone.
Three broad stratigraphic units can be distinguished in the area, a basal
terrigenous unit of lower Aptian age, unconformablv overlying the Pre -Cambrian
Basement, a middle evaporitic unit of Aptian - Albian age and an overlying,
predominantly marine succession that extends up into the Miocene.
Lower Cuvo Formation
The Lower Cuvo Formation consists of reddish continental beds. The formation
varies in thickness from 0 - 100 meters as it infills depressions in the
underlying basement. Deeply incised palaeovalleys, indicating drainage towards
the west, contain boulders of more than 1 meter diameter, directly overlying the
basement gneisses, followed by conglomerate and sandstone in a fining - upward
sequence, These sediments were derived from a deeply weathered crust on which
continental sediments had accumulated since the Palaeozoic and Cretaceous beds
with a pure continental affiliation cover vast areas of north - east Angola.
Upper Cuvo Formation
The transitional continental - lagoonal deposits of the Upper Cuvo Formation
show the first marine influence and mark the beginning of the marine
transgression accompanying Lower Cretaceous oceanic rifting. The Upper Cuvo
contains a fining upwards, cyclic sequence of coarse and fine sandstones -with
increasingly abundant intercalations of siltstone, marl, limestone and limestone
shell beds rich in ostracods. The lagoonal sediments, which include thin beds of
anhydrite, gypsum and other salts and finely bedded siltstones with plant and
coal remains are typical of euxinic environments in restricted basins. The
sulphides (Cu at Cachoeiras de Binga and Zn at Loeta) are contained in the Upper
Cuvo Formation.
Evaporite Beds
Towards the centre of the basin, the Upper Cuvo formation passes laterally into
and is overlain by a sequence of saline evaporitic cycles and calcareous units
of lagoonal and marine origin. The evaporites regionally total 2000 meters in
thickness. The basal unit, the so - called "Sel Massif" consisting of 350 meters
of halite with anhydrite in the basin centre is considered to be a lateral
equivalent of the Upper Cuvo Formation. At Cachoeiras de Binga, the hanging wall
limestones are considered to be pan of the overlying Binga evaporitic cycle.
Copper Mineralization
The copper mineralization at Cachoeiras de Binga is stratiform and contained in
a finely bedded mudstone and siltstone of the Upper Cuvo Formation, and lies
just below a massive limestone.
A typical sample of mineralized siltstone is composed of quartz and feldspar
grains in calcareous cement, forming light grey bands that alternate with
thinner dark laminae containing carbonaceous material. Bornite and chalcopyrite
are concentrated in discrete bands that are concordant with the sedimentary
laminations of the rock, following such minor primary features as cross
laminations. The sulphides are extremely fine grained and occur as irregularly
shaped patches intergranular with the detrital particles. Minor chalcocite
occurs as small patches throughout the rock but is mostly associated with
Bornite. Covellite is rare.
22
The mineralization is remarkably stratiform; lateral thinning of the ore zone
corresponds to a diminishing thickness of the sedimentary host. Some drill hole
intersections show that the mineralization may extend into the footwall
conglomerate or into the overlying limestone. There is an indication of mineral
zoning with chalcocite as a principal mineral in the sandstone just below the
main ore zone and a greater abundance of pyrite towards the top of the
mineralized zone. Peres, the chief of the Angolan Geological Survey research
program noted that mineralization appeared to be overlying palaeotroughs in the
basement that were filled in by a greater thickness of conglomeratic sandstone.
Palaeogeographicallv, the deposit is located at the southern extremity of the
Kwanza Basin where it narrows to an approximately 10 kilometer wide trough. This
trough is squeezed between the continental coast of that time and an offshore
barrier, the Morro Lisa Ridge, which is located inland from Porto Amboim. The
copper bearing formations are laterally transitional into the evaporitic beds
(Sel Massif), but the mineralization is not found within the evaporite
environment itself. The heavy metals are associated with euxinic environments of
small isolated basins along the upland coast, whereas the evaporites are
indicative of more open environments with easier access to seawater across low
reefs and other barriers.
Historical Work
Two major phases of work have taken place at Cachoeiras de Binga. These are
summarized in two reports:
o Peres, 1971 (Angolan Geological Survey)
o Croese, 1983 (UNDP)
In 1970 and 1971, Peres of the Angolan Geological Survey reported on an
intensive study of the Cachoeiras de Binga Copper Deposit. This report detailed
the results of an approximately 5,000m drilling program over 5 areas of the
deposit known as Cachoeiras I-V. The result of this program was a 'Proven
Reserve' as calculated by Peres of approximately 7.3 Mt @ 2.25%Cu.
The area was re - evaluated in 1982 - 1983 in a UNDP Program led by Croese. This
program effectively confirmed the Peres study of Cachoeiras I to III but
examined the untested extensions. The testing was based on a limited program of
drilling (7 boreholes), some geophysics (resistivity and electromagnetic) and
geochemistry carried out under the direction of Russian geologist, Vassiliev.
The Vassiliev study, reported in 1983, consisted of geochemical studies of an
area of "approximately 90 square kilometers" to the north of the Cuvo River,
This demonstrated a northwards extension of the mineral field, of which
Cachoeiras de Binga was part. According to Vassiliev, the geochemical results
showed that the mineralization was likely to underlie an area of 15 km x 30 km,
i.e. 450 to 500 square kilometers extending to the village of Cholo Cholo. Given
the grades and thickness encountered at Cachoeiras de Binga, and analysis of his
geochemical data, Vassiliev proposed a potential for up to 3 million tones of
copper in the area.
A recent independent review by Dr, Michael Smith, consultant to Simbajaiaba, has
concluded the following resources at Cachoeiras de Binga (based on the Peres and
Croese Reports):
23
Resource Tons Grade Cu Tons Cu
-------- ---------- -------- ---------
Measured 7,285,800 2.25 163,931
-------- ---------- -------- ---------
Inferred 51,000,000 2.14 1,147,500
-------- ---------- -------- ---------
These are of course only based on analysis of data, and have not been verified
by drilling. In this regard they are subject to due-diligence and are not
N143-101 compliant.
Recent Work
Simbajamba and is currently undertaking an extensive soil geochemistry program
at Cachoeiras de Binga, The purpose of this program is to test for extensions of
the known mineralization over an area approximately 20 km to the north and south
of Cachoeiras I. This program is currently in progress, and to date
approximately 700 samples have been taken.
Simbajamba also has also recently commissioned and completed a satellite imagery
interpretation and structural geology interpretation of the entire Cachoeiras de
Binga license. The results of this study indicate that copper mineralization in
the Cachoeiras district is considered to have been controlled by euxinic basins
which developed during the early stages of the rifting of the south Atlantic. In
addition to the generation of new extensional faults, many of the basement
structures would have been reactivated during extension associated with the
rifting event, and some of these may have controlled the development of local
basins. The Cachoeiras de Binga Copper Deposit is speculated to lie on the
northern part of a transtensional basin. As a result of this study, a further 12
exploration targets have been identified and are based on criteria including the
presence of possible Cretaceous transtensional or fault bounded basins, major
fault zones, inflections and intersections between major faults and proximity to
known copper mineralization.
Future Work
The Company's strategy at Cachoeiras de Binga is two-fold; to fast track the
project to production, whilst expanding known resources.
The Company's immediate concern at Cachoeiras de Binga is to verify and upgrade
the current Measured Resource (7.3 Mt @ 2.25%) to a Proven and Probable
Resource. This will be done through a drilling program and associated works over
a period of 11 months. It is anticipated that a full bankable feasibility
document can be produced within this timeframe.
The verification, expansion and conversion of inferred resources to reserves
will be an ongoing program over the project's lifetime.
BENGUELA LICENSE
The Benguela License was granted by the Republic of Angola Ministry of Geology
and Mining on January 18, 2006 for a term of three years at which time the
exploration license will be converted to a mining license that will be held by
the Company for the life of the mine. Under the terms of the License, the
Company is required to perform certain tasks and to make annual payments of
US$30,000 to the Angola Ministry of Geology and Mining. Assuming the
consummation of each of the Simbajamba and Rockbury transactions, the Company
(through its subsidiaries) would control 70% of the License rights. The Company
is currently in negotiations to purchase the remaining 30% of the License
rights.
Location
24
The Benguela license lies to the south of the Cachoeiras de Binga license,
centered around the coastal towns of Benguela and Lobito. The license is defined
by the following co-ordinates:
Vertex Latitude Longitude
Deg. Min. Sec. Deg. Min. Sec.
A 13 43 05 12 00 00
B 13 51 16 12 00 00
C 13 51 16 12 45 16
D 13 00 00 11 45 15
Geology
The geology of the Benguela district is essentially the same as at Cachoeiras de
Binga, and consists of three broad stratigraphic units - a basal terrigenous,
unit of Lower Aptian age, unconformably overlying the Pre - Cambrian Basement, a
middle evaporitic unit of Aptian - Albian age and an overlying, predominantly
marine succession that extends up into the Miocene. The stratigraphy can be
summarized as follows:
A - CENOZOIC
1 - Quaternary Formations
1.1 -Recent
1.2-Pleistocene
2 - Tertiary Formations
1.3 - Miocene
1.4 - Oligocene
1.5 -Eocene
B - MEZOZOIC
1 - Cretaceous Formations
1.1 -Santonian
1.2- Cenomanian
1.3 -Albian
1.4 - Aptian - Calcareous Formation
1.5 - Basal Formations
C - PROTEROZOIC
1 - Basement Complex
Copper Mineralization
Copper mineralization at Benguela occurs in two different styles:
o Vein type copper mineralization in the Basement Complex
o Stratiform copper mineralization in the lower sedimentary sequence
Vein type mineralization in the basement consists of "infiltration of
malachite, chrysocolla and more rarely azurite, in the migmatized gneisses of
rock fissures of the region". It would appear that these occurrences are
relatively sparse, and are not of any economic interest.
Stratiform copper mineralization occurs in a grey arkosic sandstone at the base
of the Cretaceous. This unit is in turn overlain by conglomerates and calcareous
and dolomitic limestones. The copper bearing arkosic sandstone unit would appear
to be variable in thickness.
25
Historical Work
Whilst no formal, modern exploration appears to have taken place, a number of
small mines have been active in the Benguela district during the last century.
The most important of these were:
1. Biopio Mine
Small surface pit exploiting oxidized copper ore in sandstones
2. Unhande Mine
Small surface pit exploiting oxidized copper ore in silicified limestones and
Sandstones
3. English Mine
Small underground mine (galleries) exploiting oxidized copper ore in red beds,
dipping at approximately 25 degrees west
Recent Work
Simbajamba has recently acquired a number of reports and maps relating to the
Benguela district. These are currently being translated and digitized.
Future Work
The Company regards the Benguela license as a grass roots exploration project.
This is reflected in the proposed work program which details initially a
two-phase program consisting of:
o Reconnaissance and ground truth
o Phase 1 Exploration
|_| Soil Geochemistry
|_| Drilling
Given the Benguela license's close proximity to Cachoeiras de Binga,
opportunities for cost savings exist, and it is anticipated that both programs
can be run together.
ZENZA/DONDO LICENSE
The Zenza/Dondo License was granted by the Republic of Angola Ministry of
Geology and Mining on January 18, 2006 for a term of three years at which time
the exploration license will be converted to a mining license that will be held
by the Company for the life of the mine. Under the terms of the License, the
Company is required to perform certain tasks and to make annual payments of
US$30,000 to the Angola Ministry of Geology and Mining. Assuming the
consummation of each of the Simbajamba and Rockbury transactions, the Company
(through its subsidiaries) would control 70% of the License rights. The Company
is currently in negotiations to purchase the remaining 30% of the License
rights.
26
Location
The Zenza/Dondo license lies approximately 135 km south east of Luanda in Caunza
Norte province. The co-ordinates of the license are as follows:
Vertex Latitude Longitude
Deg. Min. Sec. Deg. Min. Sec.
A 14 06 0 09 05 00
B 14 20 0 09 05 00
C 14 20 0 09 22 00
D 14 06 0 09 22 00
Geology
The regional geology of the Zenza / Dondo is the same as that at Cachoeiras de
Binga and Benguela, and consists broadly three statigraphic units - a basal
terrigenous unit of Lower Aptian age, unconformably overlying the Pre - Cambrian
Basement, a middle evaporitic unit of Aptian - Albian age and an overlying,
predominantly marine succession that extends up into the Miocene. Locally, the
stratigraphy is as follows:
1) - Superficial deposits with debris of Basement Complex igneous and
metamorphic rock
2) - Superior clayey limestone, micaeous, fossiliferous, with small, lenticular,
embedded sandstone, wish a thickness greater than 60 meters.
3) - Red, micaceous, sandstone, clayey-calcareous cement with embedded white,
arkosic sandstone, of calcareous cement, part mineralized, with an average
thickness of 15 meters.
4) - Inferior limestone, clay, micaceous rock, fossilipherous rock, with
lenticular sandstone embedding, with an average thickness of 20 meters.
5) - Pink conglomeratic sandstone, of calcareous-clayey and fossiliferous
cement, rock, with clay and limestone embedding, with an average thickness over
50 meters.
These units dip at approximately 12-18 degrees to the south-west and strike
approximately 50-60 degrees to the north-west.
The lenticular structure of the observed formations, the granular nature of the
sandstones and the existence of conglomeratic levels with remnants of a
gneissic-granite complex, demonstrate that the strata were formed under
torrential conditions, in shallow waters, near the flank of the continental
margins, composed of Pre-Cambrian formations. The white, arkosic sandstone
contains abundant fragments of feldspar, becoming at times a type of
conglomerate. The facies of this rock is distinctly torrential. There is no
clear discordance in the facies in the contacts of the different formations. The
passage from one formation to another occurs generally in a gradual wav, where
one finds intermediate types, with sandy limestone and calcareous sandstone.
Copper Mineralization
Copper ore, in the form of chalcocite, malachite, azurite and chrysocolla,
occurs in the white, arkosic sandstone, interstratified in the sandstone and
limestone formations detailed above. The layer of white sandstone is present in
a lenticular form, with great variety in thickness, from 0.6 to 7 meters. The
layer, which strikes between N 60 W and N 50(degree) W, dips generally towards
the SW.
27
Chalcocire is found disseminated irregularly. Malachite, some azurite, and
chrysocolla impregnate the cement of the arkosik sandstone, surrounding, at
times, the grains of quartz with a thin film, or encrust the walls of small
joints. Associated with the copper are tiny grains of galena, dispersed
irregularly.
Generally speaking the distribution of the ore is quite irregular. Copper grades
taken from trenches and pits through the mineralized zone range up to 8%.
Historical Work
The Zenza Copper deposit was first discovered in 1900, and between 1901 and 1917
a large amount of prospecting was reportedly carried out by the first licensee,
a German known as Hans Grundler. It is said that he conducted a pitting,
trenching and drilling program, although no records are in existence to verify
this.
A report dated 1950 by Trigo Mira, an Engineer from the Angolan Geological
Survey, details a substantial amount of work carried out at this time. This
consisted of 18 trenches, 70 pits and 7 drill holes, the deepest drilled to a
depth of 104 meters. Approximately 370 samples from these activities were
assayed for copper.
A topographical survey covering some 700 hectares was also carried out in the
area.
Recent Work
Simbajamba has recently acquired a number of reports and maps relating to the
Zenza/Dondo copper deposit. These data mostly relate to the 1950 drilling
trenching and pining program. This data is currently being digitized and
analyzed.
Future Work
As with Benguela, the Company considers the Zenza / DONDO license as a grass
roots exploration project. Even though there is a reasonable amount of
historical data available, it relates to a relatively small area. The grass
roots nature of the project is reflected in the proposed work program, which
details initially a two-phase program consisting of:
o Reconnaissance and ground truth
o Phase 1 Exploration
|_| Soil Geochemistry
|_| Drilling
The Zenza / DONDO license is located quite close to the capital, Luanda. It is
anticipated that there will be certain common logistical elements with the
Cachoeiras de Binga and Benguela Projects.
While the Company considers Benguela and Zenza/Dondo to be at the exploration
stage, according to historic reports of previous geological exploration,
Cachoeiras de Binga has a "measured resource" of approximately 131 thousand tons
of copper metal and an inferred copper resource of 918 thousand tons of copper
metal and is close to the coast, with available water, power and is close to a
nearby town and deep water port.
Current Mineral Policy and Law of the Republic of Angola
28
The Mining Law of 1992 (1/92) of the Republic of Angola reflects the current
mining policy which aims at reducing the dominance of the state owned companies
by eliminating monopoly of mineral rights and providing opportunities for the
private sector to invest in the mining sector. The Mining Law is consistent with
the Law on Foreign Investment emphasizing:
Participation of the private sector
Joint venture opportunties of private with state mining enterprise
Enabling fiscal regime
All minerals belong to the State. This is enshrined in the Constitution.
The Ministry of Geology and Mines manages mineral exploration and
development activities through the granting of relevant prospecting and
mining titles as well as supervision.
A Prospecting License is issued for a maximum period of five years,
including extension. Surface charges are 1 or 3 US$/km2/year at issue and
US$3/km2/year for renewal.
A work plan must be provided together with minimum expenditure, technology
to be used, staff qualifications and skills, and any other requirements
that may be imposed. A program of employment and training of Angolans must
also be given. At renewal, 50% of the area must be relinquished.
Periodic reports by the license holder must be made covering all data and
information obtained during the carrying out of the program.
Compensation must be made by the license holder for any damages to third
parties.
A Prospecting License holder may apply for and be granted a Mining Title,
after submission of a feasibility study. An applicant may also be a
respondent to tenders promoted by Government on deposits already
evaluated. Operations can only be carried out by mining companies, either
state owned, mixed, private or joint, and partnership.
The period of title varies from deposit to deposit and is dependent on the
life of the mine and extended by one or more extension periods on the same
or negotiated conditions.
Prospecting licenses and Mining Titles are not transferable, assignable or
negotiable without prior approval by the Council of Ministers.
29
The Government has the option to participate in companies undertaking
mining. For large projects of investments more than US $50m the Government
requires 10-15% free equity. Any excess shares would be bought at market
rates.
Generally rights and obligations are specified in the license. Based on the
fiscal regime indicated below, applicants make proposals which can be negotiated
as a package during the process of granting a Mining Title.
30
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Simbajamba Mines Ltd.
Plan of Operation
During the first quarter of 2007 and following the consummation of the
Simbajamba and Simbajamba transactions, Simbajamba intends to integrate its
prospecting licenses from the Republic of Angola with Simbajamba in order and to
seek financing to exploit the mineral rights granted with respect to such
licenses. It is expected the Company's mining operations will require financing
of at least US$30,000,000. We will have to issue debt or equity or enter into a
strategic arrangement with a third party. There can be no assurance that
additional capital will be available to us. We currently have no agreements,
arrangements or understandings with any person to obtain funds through bank
loans, lines of credit or any other sources.
Financial Condition and Results of Operation
For the Period of Inception (January 19, 2004) to December 31, 2004
Simbajamba had revenues of US$491 during the period from January 19, 2004 to
December 31, 2004 from interest income. During the period from January 19, 2004
to December 31, 2004, Simbajamba's expenses were US$3,321,667 which resulted in
a net loss of US$(3,321,176) for the period. During the period from January 19,
2004 to December 31, 2004, Simbajamba's costs and expenses have been primarily
start up and consulting expenses in connection with the obtaining the
prospecting license agreements as well as geological research with respect to
the territories under the license agreements.
For the Fiscal Year ended December 31, 2005
Simbajamba had revenues of US$149 during the fiscal year ended December 31, 2005
from interest income. During the fiscal year ended December 31, 2005,
Simbajamba's expenses were US$1,097,864 which resulted in a net loss of
US$1,097,715 for the period. During the fiscal year ended December 31, 2005,
Simbajamba's costs and expenses have been primarily start up and consulting
expenses in connection with the obtaining the prospecting license agreements as
well as geological research with respect to the territories under the license
agreements.
For the Nine Month Period ended September 30, 2006
Simbajamba had no revenues during the nine month period ended September 30,
2006. During the nine month period ended September 30, 2006, Simbajamba's
expenses were US$203,840 which resulted in a net loss of US$203,840 for the
period which was a decrease of US$460,776 from the net loss of US$664,616 for
the nine month period ended September 20, 2005. During the nine month period
ended September 30, 2006, Simbajamba's costs and expenses have been primarily
start up and consulting expenses in connection with the obtaining the
prospecting license agreements as well as geological research with respect to
the territories under the license agreements.
Off Balance Sheet Arrangements
Simbajamba did not have any off-balance sheet debt nor did Simbajamba have any
transactions, arrangements, obligations (including contingent obligations) or
other relationships with any unconsolidated entities or other persons that may
have a material current or future effect on financial conditions, changes in
financial conditions, result of operations, liquidity, capital expenditures,
capital resources, or significant components of revenue or expenses.
31
Rockbury Properties Limited
Plan of Operation
During the first quarter of 2007 and following the consummation of the Rockbury
and Simbajamba transactions, Rockbury intends to integrate its prospecting
licenses from the Republic of Angola with Simbajamba in order and to seek
financing to exploit the mineral rights granted with respect to such licenses.
It is expected the Company's mining operations will require financing of at
least US$30,000,000. We will have to issue debt or equity or enter into a
strategic arrangement with a third party. There can be no assurance that
additional capital will be available to us. We currently have no agreements,
arrangements or understandings with any person to obtain funds through bank
loans, lines of credit or any other sources.
Financial Condition and Results of Operation
For the Period of Inception (July 21, 2006) to December 31, 2006
Rockbury had no revenues during the period from July 21, 2005 (Inception) to
December 31, 2006. During the period from July 21, 2005 (Inception) to December
31, 2006, Rockbury's expenses were $2,926,695. During the period from July 21,
2005 (Inception) to December 31, 2006, Rockbury's costs and expenses have been
primarily start up and consulting expenses in connection with the obtaining the
prospecting license agreements as well as geological research with respect to
the territories under the license agreements. During the period from July 21,
2005 (Inception) to December 31, 2005.
Off Balance Sheet Arrangements
Rockbury did not have any off-balance sheet debt nor did Rockbury have any
transactions, arrangements, obligations (including contingent obligations) or
other relationships with any unconsolidated entities or other persons that may
have a material current or future effect on financial conditions, changes in
financial conditions, result of operations, liquidity, capital expenditures,
capital resources, or significant components of revenue or expenses.
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements give effect to
the proposed stock purchase agreements of Simbajamba Mines Ltd. and Rockbury
Properties, pursuant to the respective agreements.
The unaudited pro forma condensed financial statements are based on the
respective historical financial statements and notes thereto of the Company,
Simbajamba and Rockbury. The unaudited pro forma condensed combined balance
sheet assumes that the transactions (including the spin off of Integrated Forest
Products Pty Ltd which includes all of the operating assets of the Company) took
place on September 30, 2006 and combines the Company's, Simbajamba's and
Rockbury's September 30, 2006 balance sheets. The unaudited pro forma condensed
statements of operations assumes that the transactions took place as of the
beginning of the periods presented and combines Simbajamba's statements of
operations for the period of January 19, 2004 (Inception) to September 30, 2006
with Rockbury's statements of operations for the period of July 31,2005
(Inception) to September 30 ,2006, respectively. In the opinion of the Company,
Simbajamba and Rockbury, all adjustments necessary to present fairly the
unaudited pro forma condensed combined financial statements have been made based
on the proposed terms and structure of the merger.
32
The pro forma adjustments have been made solely for purposes of developing such
pro forma information for illustrative purposes necessary to comply with the
disclosure requirements and is not necessarily indicative of the operating
results or financial position that would have occurred if the merger had been
consummated on the dates indicated, nor is it necessarily indicative of future
operating results or financial position.
These unaudited pro forma condensed financial statements should be read in
conjunction with the historical financial statements and the related notes
thereto of each of the Company, Simbajamba and Rockbury which are included
herein and Management's Discussion and Analysis of Financial Condition and
Results of Operations with respect to each of Simbajamba and Rockbury.
33
AUSTRALIAN FOREST INDUSTRIES
(A Development Stage Company)
PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
Simbajamba Rockbury Australian Forest
Mines Properties Industries Inc.
LTD LTD Consolidated
September 30, September 30, September 30,
2006 2006 2006
----------- ----------- -----------
CURRENT ASSETS
Cash $ -- $ -- $ --
Unpaid Share capital -- 299 299
----------- ----------- -----------
Total Current Assets $ -- $ 299 $ 299
----------- ----------- -----------
FIXED ASSETS
Fixed Asset Investments -- 197 197
----------- ----------- -----------
Total Fixed Assets $ -- $ 197 $ 197
----------- ----------- -----------
Total Assets $ -- $ 496 $ 496
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accrued Expenses Payable $ 117,015 $ 6,695 $ 123,710
Accounts Payable 521,222 -- 521,222
Note Payable 749,494 2,920,195 3,669,689
----------- ----------- -----------
Total Current Liabilities $ 1,387,731 $ 2,926,890 $ 4,314,621
----------- ----------- -----------
Total Liabilities $ 1,387,731 $ 2,926,890 $ 4,314,621
=========== =========== ===========
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock 5,000,000 shares authorized
Common Stock 300,000,000 shares authorized
257,400,680 issued and outstanding on September 30,2006 $ 2,080,000 $ 301 $ 2,080,301
Additional Paid In Capital 1,155,000 -- 1,155,000
Accumulated Deficit (4,622,731) (2,926,695) (7,549,426)
----------- ----------- -----------
Total Stockholders' Equity $(1,387,731) $(2,926,394) $(4,314,125)
=========== =========== ===========
Total Liabilities and Stockholders' Equity -- $ 496 $ 496
=========== =========== ===========
The accompanying notes are an integral part of these financial statements
34
AUSTRALIAN FOREST INDUSTRIES
(A Development Stage Company)
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Australian
Simbajamba Rockbury Forest
Mines LTD Properties LTD Industries Inc.
January 19, July 31, January 19,
2004 2005 2004
(Inception) to (Inception) to (Inception) to
September 30, September 30, September 30,
2006 2006 2006
------------- ------------- -------------
INCOME
Interest Income $ 640 $ -- $ 640
------------- ------------- -------------
Total Income $ 640 $ -- $ 640
------------- ------------- -------------
EXPENSES
Mineral Exploration Costs $ 1,474,373 $ -- $ 1,474,373
Professional Fees 1,039,019 6,695 1,045,714
Travel Expenses 279,922 -- 279,922
Administrative Expenses 1,287,893 2,920,000 4,207,893
Interest Expense 41,155 -- 41,155
Marketing Expenses 501,009 -- 501,009
------------- ------------- -------------
Total Expenses $ 4,623,371 $ 2,926,695 $ 7,550,066
------------- ------------- -------------
NET LOSS $ (4,622,731) $ (2,926,695) $ (7,549,426)
============= ============= =============
Basic and diluted loss per common share (0.3340) (9723.2392) (0.2933)
Weighted average common shares outstanding 13,839,583 301 257,400,680
The accompanying notes are an integral part of these financial statements
35
AUSTRALIAN FOREST INDUSTRIES
(A Development Stage Company)
PRO FORMA CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND ACCUMULATED DEFICIT
Unaudited
For the Period January 19, 2004 (Inception) to September 30, 2006
Common Stock Additional Accumulated
---------------------------- ----------------------------- Paid In Deficit
Shares Value Shares Value Capital (Dev. Stage) Total
------------ ------------- ------------- ------------- ------------- ------------- -------------
Shares Issued 257,400,680 $ 2,080,301 $ 2,080,301
Additional
Paid In Capital $ 1,155,000 1,155,000
Net Loss -- -- (7,549,426) (7,549,426)
------------ ------------- ------------- ------------- ------------- ------------- -------------
Balance at
September 30, 2006 -- -- 257,400,680 $ 2,080,301 $ 1,155,000 $ (7,549,426) $ (4,314,125)
============ ============= ============= ============= ============= ============= =============
The accompanying notes are an integral part of these financial statements
36
AUSTRALIAN FOREST INDUSTRIES
(A Development Stage Company)
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Australian
Simbajamba Rockbury Forest
Mines LTD Properties LTD Industries Inc.
January 19, July 21, January 19,
2004 2005 2004
(Inception) to (Inception) to (Inception) to
September 30, September 30, September 30,
2006 2006 2006
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (4,622,731) $ (2,926,695) $ (7,549,426)
Adjustments to reconcile net loss to net cash
used in operating activities:
Shares issued for services 2,670,000 -- 2,670,000
Changes in assets and liabilities:
Assets -- (197) (197)
Accounts Payables 638,237 6,695 644,932
------------- ------------- -------------
Net Cash used in operating activities $ (1,314,494) $ (2,920,197) $ (4,234,691)
============= ============= =============
CASH FLOWS FROM FINANCING ACTIVITIES
Note Payable $ 749,494 $ 2,920,195 $ 3,669,689
Shares Issued for Cash 565,000 301 565,301
------------- ------------- -------------
Net Cash from financing activities $ 1,314,494 $ 2,920,496 $ 4,234,990
============= ============= =============
Net Increase (decrease) for period and balance end of period $ -- $ 299 $ 299
CASH BEGINNING OF PERIOD -- -- --
CASH END OF PERIOD $ -- $ 299 $ 299
============= ============= =============
Supplemental Cash Flow Information:
Interest paid during period $ 41,155 $ -- $ 41,155
============= ============= =============
The accompanying notes are an integral part of these financial statements
37
Australian Forest Industries Inc.
NOTES TO THE SEPTEMBER 30, 2006
PRO FORMA FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION
Simbajamba Mines Ltd. (The "Company") was incorporated in the country of Samoa
on January 19, 2004 under Samoa's International Companies Act of 1987 and is in
the development stage.
Simbajamba Mines Ltd. holds mining rights to carry out prospecting, survey and
reconnaissance operations over a certain geographical area in South Kwanza
Province, Angola.
Rockbury Properties Limited was incorporated in the British Virgin Islands on
July 21, 2005
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company. as a going concern. However, it has sustained continued operating
losses and lacks sources of revenue, which creates uncertainty about the
Company's ability to continue operations as a going concern.
The Company's ability to continue operations as a going concern, to realize its
assets and discharge its liabilities is dependent upon obtaining financing
sufficient for continued operations as well as the achievement and maintenance
of a level of profitable operations. Management expects to raise capital in
order for it to continue operations.
Management believes that the current business plan if successfully implemented
may provide the opportunity for the Company to continue as a going concern.
The Company substantially transacts all its business in U.S. dollars.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements, in conformity with generally accepted
accounting principles and generally accepted in the United States of America,
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and
expense during the reporting period. Actual results could differ from those
estimates.
Cash Equivalents
Cash equivalents consist of highly liquid investments with maturities of three
months or less when purchased.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES cont.
Earnings per Share
Earnings (loss) per share are computed by dividing net income or loss by the
weighted-average number of common shares outstanding for the period.
Property, Plant and Equipment
38
Australian Forest Industries Inc.
NOTES TO THE SEPTEMBER 30, 2006
PRO FORMA FINANCIAL STATEMENTS
Expenditures for new facilities or equipment are capitalized and depreciated
using the straight-line method at rates sufficient to depreciate such costs over
their estimated productive lives, which do not exceed the related estimated mine
lives, of such facilities based on proven and probable reserves. For the period
ended September 30, 2006, the Company had no capitalized assets.
Mineral Exploration Costs
Mineral exploration costs are expensed as incurred. When it has been determined
that a mineral property can be economically developed as a result of
establishing proven and probable reserves, costs incurred prospectively to
develop the property are capitalized as incurred and will be amortized using the
unit-of-production method over the estimated life of the ore body based on the
estimated recoverable units mined from proven and probable reserves.
Income Taxes
The Company provides for income taxes in accordance with SFAS 109, Accounting
for Income Taxes. SFAS 109 prescribes the use of the liability method. Deferred
tax assets and liabilities are determined based on the difference between the
financial statement carrying amounts and the tax basis of assets and liabilities
and are measured using the enacted statutory tax rates in effect at the balance
sheet date. The Company records a valuation allowance to reduce its deferred tax
assets when uncertainty regarding their realizability exists. There have been no
material income tax transactions during the development stage of the business.
There were no deferred tax assets or liabilities as of September 30, 2006 and
December 31, 2005. (See Note 5)
Marketing Costs:
The Company expenses marketing costs as incurred.
NOTE 3 - INVESTMENTS
The investments are stated at their nominal value.
NOTE 4 - COMMITMENTS
On January 22, 2004 the Company was granted prospecting rights for a three-year
period to a defined geographical area consisting of 3,615 square kilometers
located in South Kwanza Province by the Republic of Angola Ministry of Geology
and Mines ("MGM"). The Company is required to perform compulsory minimal works
(as defined in the agreement) and to pay $30,000 annually to the MGM. In
addition the Company is required to invest $400,000 in the first year and
$1,600,000 in the following years. The sharing split is the Company 80% and
Angolan nationals, Maelo-Exploracao e Obras Publicas LDA, 20%.
39
Australian Forest Industries Inc.
NOTES TO THE SEPTEMBER 30, 2006
PRO FORMA FINANCIAL STATEMENTS
NOTE 5 - INCOME TAXES
Under Samoan law and under British Virgin Islands law, an "International
Company" is not subjected to income taxes therefore since the Company does not
currently conduct business in the United States, no provision for income taxes
has been made.
NOTE 6 - CONCENTRATIONS OF CREDIT RISK
Simbajamba Mines Ltd. maintains its cash with one major financial institution in
Australia. Australian bank deposits are not government insured. Management
believes the risk is limited because the institution is a large national
institution with a strong financial position.
NOTE 7 - SUBSEQUENT EVENT
This review was undertaken to finalize the acquisition of Simbajamba Mines Ltd.
and Rockbury Properties LTD, by Australian Forest Industries Inc. Upon closing,
currently scheduled after December 31, 2006, Australian Forest Industries Inc.
will assume all of the outstanding liabilities of Simbajamba Mines Ltd.
40
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
General
Pursuant to the terms of the Agreement, the Company shall: (i) change its name
to "Zebra Copper, Inc." pursuant to an amendment to the Company's Certificate of
Incorporation (the "Amendment"). Stockholders of the Company representing 93.24%
of the issued and outstanding shares of common stock have executed a written
consent approving the Amendment, attached hereto as Appendix C.
Management of the Company believes that the new name, "Zebra Copper, Inc." will
promote public recognition and more accurately reflect the Company's new
business. The increase in the authorized capital of the Company is required in
order to consummate the transactions contemplated by the Stock Purchase
Agreement. The amendment to the Certificate of Incorporation as attached hereto
as Appendix C will be filed with the Secretary of State of the State of Nevada.
WHERE YOU CAN FIND MORE INFORMATION
The Company files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission ("SEC"). You may
read and copy any reports, statements and other information filed by the Company
at the SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call (800) SEC-0330 for further information on the
public reference rooms. The company's filings are also available to the public
from commercial document retrieval services and at the web site maintained by
the SEC at http://www.sec.gov.
41
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows the Company to "incorporate by reference" information into this
Information Statement, which means that the Company can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is considered part of this
Information Statement, except for any information superseded by information
contained directly in this Information Statement or in later filed documents
incorporated by reference in this Information Statement.
This Information Statement incorporates by reference the documents set forth
below that the Company previously filed with the SEC. These documents contain
important information about the Company and its finances.
AUSTRALIAN FOREST INDUSTRIES SEC FILINGS (FILE NO. 0-25909)
AUSTRALIAN FOREST INDUSTRIES PERIOD OR DATE FILED
---------------------------- --------------------
Annual Report on Form 10-KSB Fiscal Year ended December 31, 2005
Quarterly Report on Form 10-QSB Fiscal Quarter ended March 31, 2006.
Quarterly Report on Form 10-QSB Fiscal Quarter ended June 30, 2006.
Quarterly Report on Form 10-QSB Fiscal Quarter ended September 30, 2006.
Current Report on Form 8K October 6, 2006
Current Report on Form 8K November 28, 2006
You can obtain copies of them by requesting them in writing or by telephone from
Australian Forest Industries at the following address:
AUSTRALIAN FOREST INDUSTRIES
4/95 Salmon Street, Port Melbourne,
Victoria, Australia, 3207
Telephone No. 011 61 3 8645 4340
By order of the Board of Directors,
/s/
-------------------------------------
Michael Timms
Chief Executive Officer, President
and Chairman of the Board
42
Simbajamba Mines LTD.
(A Development Stage Company)
AUDITED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 19, 2004
(Date of inception of the Development Stage Company)
TO DECEMBER 31, 2004
Simbajamba Mines LTD.
(A Development Stage Company)
AUDITED FINANCIAL STATEMENTS
FOR THE PERIOD JANUARY 19, 2004
(Date of inception of the Development Stage Company)
TO DECEMBER 31, 2004
TABLE OF CONTENTS
Page No.
--------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANT F-2
Balance Sheet F-3
Statement of Operations and Accumulated Deficit F-4
Statement of Changes in Stockholders' Equity (Deficit) F-5
Statement of Cash Flows F-6
Notes to Audited Financial Statements F-7 to F-10
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANT
To the Board of Directors and Shareholders of Simbajamba Mines Ltd.
I have audited the accompanying balance sheet of Simbajamba Mines Ltd. (a
development stage company), as of December 31, 2004 and the related statements
of operations, stockholders deficit and cash flows for the period January 19,
2004 (date of inception) to December 31, 2004. These financial statements are
the responsibility of the Company's management. My responsibility is to express
an opinion on these financial statements based on my audit.
I conducted my audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I 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. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Simbajamba Mines LTD. (a
development stage company), as of December 31, 2004, and the results of their
operations and their cash flows for the period January 19, 2004, (date of
inception) to December 31, 2004 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has sustained continuing operating losses and
lacks sources of revenue, which raises substantial doubts about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Michael F. Albanese, CPA
Parsippany, New Jersey
December 14, 2006
F-2
Simbajamba Mines Ltd.
(A Development Stage Company)
BALANCE SHEET
December 31, 2004
ASSETS
CURRENT ASSETS
Cash $ 25,117
-----------
Total Current Assets 25,117
-----------
Total Assets $ 25,117
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued Expenses Payable $ 111,293
-----------
Total Current Liabilities 111,293
-----------
Total Liabilities 111,293
-----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock .001 par value ; 500,000,000 shares authorized,
16,125,000 shares issued and outstanding 3,235,000
Accumulated Deficit (3,321,176)
-----------
Total Stockholders' Equity (Deficit) (86,176)
-----------
Total Liabilities and Stockholders' Equity (Deficit) $ 25,117
===========
SEE INDEPENDENT AUDITOR'S REPORT AND NOTES TO FINANCIAL STATEMENTS.
F-3
Simbajamba Mines Ltd.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE INITIAL PERIOD FROM JANUARY 19, 2004 TO DECEMBER 31, 2004
INCOME
Interest Income $ 491
--------------
EXPENSES
Mineral Exploration Costs $ 1,130,721
Professional Fees 495,962
Administrative Expenses 1,147,384
Marketing Expenses 481,652
Travel Expenses 65,948
--------------
Total Expenses 3,321,667
--------------
NET LOSS $ (3,321,176)
==============
SEE INDEPENDENT AUDITOR'S REPORT AND NOTES TO FINANCIAL STATEMENTS.
F-4
Simbajamba Mines Ltd.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND ACCUMULATED DEFICIT
FOR THE INITIAL PERIOD FROM JANUARY 19, 2004 TO DECEMBER 31, 2004
Common Stock Accumulated
--------------------------- Deficit
Shares Value Dev. Stage Total
----------- ----------- ----------- -----------
Shares Issued for Services Rendered 13,350,000 $ 2,670,000 $ -- $ 2,670,000
Shares Issued for Cash 2,775,000 565,000 -- 565,000
Net Loss (3,321,176) (3,321,176)
----------- ----------- ----------- -----------
Balance at December 31, 2004 16,125,000 $ 3,235,000 $(3,321,176) $ (86,176)
=========== =========== =========== ===========
SEE INDEPENDENT AUDITOR'S REPORT AND NOTES TO FINANCIAL STATEMENTS.
F-5
Simbajamba Mines Ltd.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE INITIAL PERIOD FROM JANUARY 19, 2004 TO DECEMBER 31, 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (3,321,176)
Adjustments to reconcile net loss to net cash
used in operating activities:
Shares issued for services 2,670,000
Changes in liabilities:
Accounts payable 111,293
--------------
Net cash used in operating activities (539,883)
CASH FLOWS FROM FINANCING ACTIVITIES
Shares issued for cash 565,000
--------------
Net increase for initial period
and balance end of period $ 25,117
==============
SEE INDEPENDENT AUDITOR'S REPORT AND NOTES TO FINANCIAL STATEMENTS.
F-6
Simbajamba Mines Ltd.
NOTES TO 2004 AUDITED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION
Simbajamba Mines Ltd. ("the Company") was incorporated in the country of Samoa
on January 19, 2004 under Samoa's International Companies Act of 1987 and is in
the development stage. SMJA Investments Inc. is the parent company of Simbajamba
Mines Ltd.
SMJA Investments Inc. was incorporated in Canada under the Federal Business
Corporations Act on October 22, 2004. On January 12, 2005 a name change was
completed by SMJA Investments Inc. to Simba Mines, Inc.
On December 15, 2004 SMJA Investments Inc., acquired all of the outstanding
shares of Simbajamba Mines Ltd. (3,225,000 shares) in exchange for 16,125,000
shares of Simba Mines Inc. The shares were converted on a 5:1 basis.
Simbajamba Mines Ltd. holds mining rights to carry out prospecting, survey and
reconnaissance operations over a certain geographical area in South Kwanza
Province, Angola.
The accompanying financial statements have been audited for the period ended
December 31, 2004 and the accompanying financial statements have been prepared
in conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, it has sustained
continued operating losses and lacks sources of revenue, which creates
uncertainty about the Company's ability to continue operations as a going
concern.
The Company's ability to continue operations as a going concern, to realize its
assets and discharge its liabilities is dependent upon obtaining financing
sufficient for continued operations as well as the achievement and maintenance
of a level of profitable operations. Management expects to raise capital in
order for it to continue operations.
Management believes that the current business plan if successfully implemented
may provide the opportunity for the Company to continue as a going concern.
The Company substantially transacts all its business in U.S. dollars.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements, in conformity with generally accepted
accounting principles and generally accepted in the United States of America,
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, disclosures of contingent assets and liabilities
at the date of the
F-7
Simbajamba Mines Ltd.
NOTES TO 2004 AUDITED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES cont.
financial statements and the reported amounts of revenue and expense during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents
Cash equivalents consist of highly liquid investments with maturities of three
months or less when purchased.
Earnings per Share
Earnings (loss) per share are computed by dividing net income or loss by the
weighted-average number of common shares outstanding for the period.
Property, Plant and Equipment
Expenditures for new facilities or equipment are capitalized and depreciated
using the straight-line method at rates sufficient to depreciate such costs over
their estimated productive lives, which do not exceed the related estimated mine
lives, of such facilities based on proven and probable reserves. For the period
ended December 31, 2004, the Company had no capitalized assets.
Mineral Exploration Costs
Mineral exploration costs are expensed as incurred. When it has been determined
that a mineral property can be economically developed as a result of
establishing proven and probable reserves, costs incurred prospectively to
develop the property are capitalized as incurred and will be amortized using the
unit-of-production method over the estimated life of the ore body based on the
estimated recoverable units mined from proven and probable reserves.
Income Taxes
The Company provides for income taxes in accordance with SFAS 109, Accounting
for Income Taxes. SFAS 109 prescribes the use of the liability method. Deferred
tax assets and liabilities are determined based on the difference between the
financial statement carrying amounts and the tax basis of assets and liabilities
and are measured using the enacted statutory tax rates in effect at the balance
sheet date. The Company records a valuation allowance to reduce its deferred tax
assets when uncertainty regarding their realizability exists. There were no
deferred tax assets or liabilities as of December 31, 2004. (See Note 5)
F-8
Simbajamba Mines Ltd.
NOTES TO 2004 AUDITED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES cont.
Marketing Costs:
The Company expenses marketing costs as incurred.
NOTE 3 - ACQUISITIONS
Acquisitions are accounted for as purchases and, accordingly, are included in
the Company's consolidated results of operations from the date of acquisition.
These financial statements reflect a single entity, Simbajamba Mines Ltd. For
the purpose of a share exchange entered into with Simba Mines Inc as of December
15, 2004, therefore there were no acquisitions of Simbajamba Mines Ltd. recorded
as of December 31, 2004.
NOTE 4 - COMMITMENTS
On January 22, 2004 Simbajamba Mines Ltd. was granted prospecting rights for a
three-year period to a defined geographical area consisting of 3,536 square
kilometers located in South Kwanza Province by the Republic of Angola Ministry
of Geology and Mines ("MGM"). Simbajamba Mines Ltd. is required to perform
compulsory minimal works (as defined in the agreement) and to pay $30,000
annually to the MGM. In addition the Company is required to invest $400,000 in
the first year and $1,600,000 in the following years. The sharing split is
Simbajamba Mines Ltd. 80% and Angolan nationals, Maelo-Exploracao e Obras
Publicas LDA, 20%.
NOTE 5 - INCOME TAXES
Under Samoan law, an "International Company" is not subjected to income taxes;
and, since Simbajamba Mines Ltd. does not currently conduct business in the
United States, no provision for income taxes has been made.
NOTE 6 - STOCKHOLDER'S EQUITY (DEFICIT)
The Company is authorized to issue a maximum of 500,000,000 shares of Common
stock, with a par value of $0.001.
Common stock of Simbajamba Mines, Ltd. issued for services (13,350,000 shares)
and cash considerations (2,775,000 shares) during the year ended December 31,
2004 was exchanged for 16,125,000 shares Simba Mines Inc.
NOTE 7 - CONCENTRATIONS OF CREDIT RISK
Simbajamba Mines Ltd. maintains its cash with one major financial institution in
Australia. Australian bank deposits are not government insured. Management
F-9
Simbajamba Mines Ltd.
NOTES TO 2004 AUDITED FINANCIAL STATEMENTS
NOTE 7 - CONCENTRATIONS OF CREDIT RISK cont.
believes the risk is limited because the institution is a large national
institution with a strong financial position.
NOTE 8 - SUBSEQUENT EVENT
This audit was undertaken to finalize the acquisition of Simbajamba Mines Ltd.,
a fully owned subsidiary of Simba Mines Inc., by Australian Forest Industries
Inc. Upon closing, currently scheduled after December 31, 2006, Australian
Forest Industries Inc. will assume all of the outstanding liabilities of
Simbajamba Mines Ltd.
F-10
Simbajamba Mines LTD.
(A Development Stage Company)
2005 AUDITED FINANCIAL STATEMENTS
Simbajamba Mines LTD.
(A Development Stage Company)
2005 AUDITED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page No.
--------
REPORT OF INDEPENDENT REGISTERED ACCOUNTANT F-12
Balance Sheets
December 31, 2005 and December 31, 2004 F-13
Statements of Operations
For the Twelve Month Period Ended December 31, 2005,
January 19, 2004 (Inception) to December 31, 2004 and
January 19, 2004 (Inception) to December 31, 2005. F-14
Statements of Changes in Stockholders' Equity (Deficit)
For the Twelve Month Period Ended December 31, 2005
and January 19, 2004 (Inception) To December 31, 2004 F-15
Statements of Cash Flows
For the Twelve Month Period Ended December 31, 2005,
January 19, 2004 (Inception) to December 31, 2004 and
January 19, 2004 (Inception) to December 31, 2005. F-16
Notes to Audited Financial Statements F-17
F-11
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANT
To the Board of Directors and Shareholders of Simbajamba Mines Ltd.:
I have audited the accompanying balance sheets of Simbajamba Mines Ltd. (a
development stage company), as of December 31, 2005 and 2004 and the related
statements of operations, stockholders deficit and cash flows for the period
January 19, 2004 (date of inception) to December 31, 2005. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I 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. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Simbajamba Mines LTD. (a
development stage company), as of December 31, 2005 and 2004, and the results of
their operations and their cash flows for the period January 19, 2004, (date of
inception) to December 31, 2005 in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has sustained continuing operating losses and
lacks sources of revenue, which raises substantial doubts about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Michael F. Albanese, CPA
Parsippany, New Jersey
December 14, 2006
F-12
Simbajamba Mines Ltd.
(A Development Stage Company)
BALANCE SHEET
ASSETS
December 31, December 31,
2005 2004
----------- -----------
CURRENT ASSETS
Cash $ 2,494 $ 25,117
----------- -----------
Total Current Assets 2,494 25,117
----------- -----------
Total Assets $ 2,494 $ 25,117
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued Expenses Payable $ 41,629 $ 111,293
Accounts Payable 518,701 --
Note Payable 626,055 --
----------- -----------
Total Current Liabilities 1,186,385 111,293
----------- -----------
Total Liabilities 1,186,385 111,293
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock .001 par value; 500,000,000 shares authorized,
10,350,000 shares issued and outstanding on December 31,2005
16,125,000 shares issued and outstanding on December 31, 2004 2,080,000 3,235,000
Additional Paid In Capital 1,155,000
Accumulated Deficit (4,418,891) (3,321,176)
----------- -----------
Total Stockholders' Equity (Deficit) (1,183,891) (86,176)
----------- -----------
Total Liabilities and Stockholders' Equity (Deficit) $ 2,494 $ 25,117
=========== ===========
SEE INDEPENDENT AUDITOR'S REPORT AND NOTES TO FINANCIAL STATEMENTS.
F-13
Simbajamba Mines Ltd.
(A Development Stage Company)
STATEMENT OF OPERATIONS
For Twelve Jan 29, 2004 Jan 19, 2004
Months Ended (Inception) to (Inception) to
December 31, December 31, December 31,
2005 2004 2005
------------ ------------ ------------
INCOME
Interest Income $ 149 $ 491 $ 640
------------ ------------ ------------
EXPENSES
Mineral Exploration Costs $ 342,448 $ 1,130,721 $ 1,473,169
Professional Fees 465,930 495,962 961,892
Travel Expenses 156,656 65,948 222,604
Administrative Expenses 103,115 1,147,384 1,250,499
Interest Expense 16,053 -- 16,053
Marketing Expenses 13,662 481,652 495,314
------------ ------------ ------------
Total Expenses $ 1,097,864 $ 3,321,667 $ 4,419,531
------------ ------------ ------------
NET LOSS $ (1,097,715) $ (3,321,176) $ (4,418,891)
============ ============ ============
Basic and diluted loss per common share (0.0747) (0.2106)
Weighted average common shares outstanding 14,685,205 15,767,740
SEE INDEPENDENT AUDITOR'S REPORT AND NOTES TO FINANCIAL STATEMENTS.
F-14
Simbajamba Mines Ltd.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND ACCUMULATED DEFICIT
For the Period January 19, 2004 (Inception) to December 31, 2005
Common Stock Accumulated Accumulated
------------------------- Paid In Deficit
Shares Value Capital Dev. Stage Total
----------- ----------- ----------- ----------- -----------
Shares Issued for Services 13,350,000 $ 2,670,000 $ -- -- $ 2,670,000
Shares Issued for Cash 2,775,000 565,000 -- -- 565,000
Net Loss -- -- -- (3,321,176) (3,321,176)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 2004 16,125,000 3,235,000 -- (3,321,176) (86,176)
Common Stock Returned to Treasury (5,775,000) (1,155,000) 1,155,000 -- --
Net Loss -- -- -- (1,097,715) (1,097,715)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 2005 10,350,000 $ 2,080,000 $ 1,155,000 $(4,418,891) $(1,183,891)
=========== =========== =========== =========== ===========
SEE INDEPENDENT AUDITOR'S REPORT AND NOTES TO FINANCIAL STATEMENTS.
F-15
Simbajamba Mines Ltd.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
January 19, January 19,
For Twelve 2004 2004
Months Ended (Inception) to (Inception) to
December 31, December 31, December 31,
2005 2004 2005
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(1,097,715) $(3,321,176) $(4,418,891)
Adjustments to reconcile net loss to net cash
used in operating activities:
Shares issued for services -- 2,670,000 2,670,000
Changes in liabilities:
Accrued Payables 449,038 111,293 560,331
----------- ----------- -----------
Net Cash used in operating activities (648,677) (539,883) (1,188,561)
CASH FLOWS FROM FINANCING ACTIVITIES
Note Payable 626,055 -- 626,055
Shares Issued for Cash -- 565,000 565,000
----------- ----------- -----------
Net Cash from financing activities 626,055 565,000 1,191,055
Net Increase (decrease) for period and balance end of period (22,622) 25,117 2,494
CASH BEGINNING OF PERIOD 25,117 -- --
CASH END OF PERIOD $ 2,494 $ 25,117 $ 2,494
=========== =========== ===========
Supplemental Cash Flow Information:
Interest paid during period $ 16,053 $ -- $ 16,053
=========== =========== ===========
SEE INDEPENDENT AUDITOR'S REPORT AND NOTES TO FINANCIAL STATEMENTS.
F-16
Simbajamba Mines Ltd.
NOTES TO 2005 AUDITED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION
Simbajamba Mines Ltd. (The "Company") was incorporated in the country of Samoa
on January 19, 2004 under Samoa's International Companies Act of 1987 and is in
the development stage. SMJA Investments Inc. is the parent company of Simbajamba
Mines Ltd.
SMJA Investments Inc. was incorporated in Canada under the Federal Business
Corporations Act on October 22, 2004. On January 12, 2005 a name change was
completed by SMJA Investments Inc. to Simba Mines, Inc.
On December 15, 2004 SMJA Investments Inc., acquired all of the outstanding
shares of Simbajamba Mines Ltd. (3,225,000 shares) in exchange for 16,125,000
shares of Simba Mines Inc. The shares were converted on a 5:1 basis.
Simbajamba Mines Ltd. holds mining rights to carry out prospecting, survey and
reconnaissance operations over a certain geographical area in South Kwanza
Province, Angola.
The accompanying financial statements have been audited for the period ended
December 31, 2005 and the accompanying financial statements have been prepared
in conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, it has sustained
continued operating losses and lacks sources of revenue, which creates
uncertainty about the Company's ability to continue operations as a going
concern.
The Company's ability to continue operations as a going concern, to realize its
assets and discharge its liabilities is dependent upon obtaining financing
sufficient for continued operations as well as the achievement and maintenance
of a level of profitable operations. Management expects to raise capital in
order for it to continue operations.
Management believes that the current business plan if successfully implemented
may provide the opportunity for the Company to continue as a going concern.
The Company substantially transacts all its business in U.S. dollars.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements, in conformity with generally accepted
accounting principles and generally accepted in the United States of America,
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and
expense during the reporting period. Actual results could differ from those
estimates.
F-17
Simbajamba Mines Ltd.
NOTES TO 2005 AUDITED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Cont.
Cash Equivalents
Cash equivalents consist of highly liquid investments with maturities of three
months or less when purchased.
Earnings per Share
Earnings (loss) per share are computed by dividing net income or loss by the
weighted-average number of common shares outstanding for the period.
Property, Plant and Equipment
Expenditures for new facilities or equipment are capitalized and depreciated
using the straight-line method at rates sufficient to depreciate such costs over
their estimated productive lives, which do not exceed the related estimated mine
lives, of such facilities based on proven and probable reserves. For the periods
ended December 30, 2005, and December 31, 2004, the Company had no capitalized
assets.
Mineral Exploration Costs
Mineral exploration costs are expensed as incurred. When it has been determined
that a mineral property can be economically developed as a result of
establishing proven and probable reserves, costs incurred prospectively to
develop the property are capitalized as incurred and will be amortized using the
unit-of-production method over the estimated life of the ore body based on the
estimated recoverable units mined from proven and probable reserves.
Income Taxes
The Company provides for income taxes in accordance with SFAS 109, Accounting
for Income Taxes. SFAS 109 prescribes the use of the liability method. Deferred
tax assets and liabilities are determined based on the difference between the
financial statement carrying amounts and the tax basis of assets and liabilities
and are measured using the enacted statutory tax rates in effect at the balance
sheet date. The Company records a valuation allowance to reduce its deferred tax
assets when uncertainty regarding their realizability exists. There have been no
material income tax transactions during the development stage of the business.
There were no deferred tax assets or liabilities as of December 31, 2005, and
December 31, 2004. (See Note 6).
Marketing Costs:
The Company expenses marketing costs as incurred. Marketing costs were $13,662
and $481,652 for the years ended December 31, 2005 and 2004, respectively, and
were primarily a result of shares
F-18
Simbajamba Mines Ltd.
NOTES TO 2005 AUDITED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Cont.
issued to various consultants for services to be performed during the
development stages of the business.
NOTE 3 - NOTES PAYABLE
The note payable is an unsecured note for up to US $650,000 repayable on demand
with interest at LIBOR to be capitalized and be paid upon any repayment of the
loan. The note is with a related party. The balance was $626,055 and $0 as of
December 31, 2005 and 2004, respectively. Interest expense was $16,053 and $0
for the years ended December 31, 2005 and 2004.
NOTE 4 - ACQUISITIONS
Acquisitions are accounted for as purchases and, accordingly, are included in
the Company's consolidated results of operations from the date of acquisition.
These financial statements reflect a single entity, Simbajamba Mines Ltd. For
the purpose of a share exchange entered into with Simba Mines Inc as of December
15, 2004, therefore there were no acquisitions of Simbajamba Mines Ltd. recorded
as of December 31, 2005.
NOTE 5 - COMMITMENTS
On January 22, 2004 the Company was granted prospecting rights for a three-year
period to a defined geographical area consisting of 3,615 square kilometers
located in South Kwanza Province by the Republic of Angola Ministry of Geology
and Mines ("MGM"). The Company is required to perform compulsory minimal works
(as defined in the agreement) and to pay $30,000 annually to the MGM. In
addition the Company is required to invest $400,000 in the first year and
$1,600,000 in the following years. The sharing split is the Company 80% and
Angolan nationals, Maelo-Exploracao e Obras Publicas LDA, 20%.
NOTE 6 - INCOME TAXES
Under Samoan law, an "International Company" is not subjected to income taxes
therefore since SML does not currently conduct business in the United States, no
provision for income taxes has been made.
NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT)
The Company is authorized to issue a maximum of 500,000,000 shares of Common
stock, with a $0.001 par value.
Common stock of Simbajamba Mines, Ltd. issued for services (13,350,000 shares)
and cash considerations (2,775,000 shares) during the year ended December 31,
2004, was exchanged for Simba Mines Inc.'s 16,125,000 shares. NOTE 7 -
STOCKHOLDERS' EQUITY (DEFICIT) Cont.
In 2005, 5,775,000 shares previously issued in 2004 for services were cancelled
and returned to treasury. The company has classified this as additional paid in
capital.
On December 31, 2005, there were 10,350,000 shares outstanding and on December
31, 2004 there were 16,125,000 shares outstanding.
NOTE 8 - CONCENTRATIONS OF CREDIT RISK
Simbajamba Mines Ltd. maintains its cash with one major financial institution in
Australia. Australian bank deposits are not government insured. Management
believes the risk is limited because the institution is a large national
institution with a strong financial position.
NOTE 9 - SUBSEQUENT EVENT
This audit was undertaken to finalize the acquisition of Simbajamba Mines Ltd.,
a fully owned subsidiary of Simba Mines Inc., by Australian Forest Industries
Inc. Upon closing, currently scheduled after December 31, 2006, Australian
Forest Industries Inc. will assume all of the outstanding liabilities of
Simbajamba Mines Ltd.
F-19
Simbajamba Mines LTD.
(A Development Stage Company)
REVIEWED FINANCIAL STATEMENTS
FOR THE NINE MONTH PERIOD JANUARY 1, 2006 TO SEPTEMBER 30, 2006
Simbajamba Mines LTD.
(A Development Stage Company)
REVIEWED FINANCIAL STATEMENTS
FOR THE NINE MONTH PERIOD JANUARY 1, 2006 TO SEPTEMBER 30, 2006
TABLE OF CONTENTS
Page No.
--------
Balance Sheets
September 30, 2006 and December 31, 2005 F-21
Statements of Operations
For the Nine Month Periods Ended September 30, 2006 and 2005
and for the Periods January 19, 2004 (Inception) to
September 30, 2006 and 2005 F-22
Statements of Changes in Stockholders' Equity (Deficit)
For the Period January 19, 2004 (Inception) to September 30, 2006 F-23
Statements of Cash Flows
For the Nine Month Periods Ended September 30, 2006 and 2005
And for the Periods January 19, 2004 (Inception) to
September 30, 2006 and 2005 F-24
Notes to Audited Financial Statements F-25 - F-28
F-20
Simbajamba Mines Ltd.
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
ASSETS
September 30, December 31,
2006 2005
----------- -----------
CURRENT ASSETS
Cash $ -- $ 2,494
----------- -----------
Total Current Assets -- 2,494
----------- -----------
Total Assets $ -- $ 2,494
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accrued Expenses Payable $ 117,015 $ 41,629
Accounts Payable 521,222 518,701
Note Payable 749,494 626,055
----------- -----------
Total Current Liabilities 1,387,731 1,186,385
----------- -----------
Total Liabilities 1,387,731 1,186,385
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock .001 par value; 500,000,000 shares authorized,
10,350,000 shares issued and outstanding on September 30,
and on December 31 2,080,000 2,080,000
Additional Paid In Capital 1,155,000 1,155,000
Accumulated Deficit (4,622,731) (4,418,891)
----------- -----------
Total Stockholders' Equity (Deficit) (1,387,731) (1,183,891)
----------- -----------
Total Liabilities and Stockholders' Equity (Deficit) $ -- $ 2,494
=========== ===========
F-21
Simbajamba Mines Ltd.
(A Development Stage Company)
STATEMENT OF OPERATIONS
(Unaudited)
For Nine Months For For Nine Months January 19, 2004 January 19, 2004
Ended Ended (Inception) to (Inception) to
September 30, September 30, September 30 September 30
2006 2005 2006 2005
------------ ------------ ------------ ------------
INCOME
Interest Income -- $ 149 $ 640 $ 640
------------ ------------ ------------ ------------
-- 149 640 640
------------ ------------ ------------ ------------
EXPENSES
Mineral Exploration Costs 1,205 201,254 1,474,373 1,331,975
Professional Fees 77,127 312,874 1,039,019 808,836
Travel Expenses 57,318 63,976 279,922 129,923
Administrative Expenses 37,393 75,076 1,287,893 1,222,459
Interest Expense 25,102 -- 41,155 --
Marketing Expenses 5,695 11,585 501,009 493,237
------------ ------------ ------------ ------------
Total Expenses 203,840 664,765 4,623,371 3,986,431
------------ ------------ ------------ ------------
NET LOSS (203,840) $ (664,616) $ (4,622,731) $ (3,985,791)
============ ============ ============ ============
Basic and diluted loss per common share (0.0197) (0.0412) (0.3340) (0.2502)
Weighted average common shares outstanding 10,350,000 16,125,000 13,839,583 15,930,025
F-22
Simbajamba Mines Ltd.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND ACCUMULATED DEFICIT
Unaudited
For the Period January 19, 2004 (Inception) to September 30, 2006
Common Stock Accumulated Accumulated
------------------------------- Paid In Deficit
Shares Value Capital Dev. Stage Total
----------- ----------- ----------- ----------- -----------
Shares Issued for Services 13,350,000 $ 2,670,000 $ -- $ -- $ 2,670,000
Shares Issued for Cash 2,775,000 565,000 -- -- 565,000
Net Loss -- -- -- (3,321,176) (3,321,176)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 2004 16,125,000 3,235,000 -- (3,321,176) (86,176)
Common Stock Returned to Treasury (5,775,000) (1,155,000) 1,155,000 -- --
Net Loss -- -- -- (1,097,715) (1,097,715)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 2005 10,350,000 2,080,000 1,155,000 (4,418,891) (1,183,891)
Net Loss -- -- -- (203,840) (203,840)
----------- ----------- ----------- ----------- -----------
Balance at September 30, 2006 10,350,000 $ 2,080,000 $ 1,155,000 $(4,622,731) $(1,387,731)
=========== =========== =========== =========== ===========
F-23
Simbajamba Mines Ltd.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
For Nine Months For For Nine Months January 19, 2004 January 19, 2004
Ended Ended (Inception) to (Inception) to
September 30, September 30, September 30 September 30
2006 2005 2006 2005
----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (203,840) $ (664,616) $(4,622,731) $(3,985,791)
Adjustments to reconcile net loss to net cash
used in operating activities:
Shares issued for services -- -- 2,670,000 2,670,000
Changes in assets and liabilities:
Prepaid Expenses -- (1,299) -- (1,299)
Accounts Payables 77,907 166,465 638,237 277,756
----------- ----------- ----------- -----------
Net Cash used in operating activities (125,933) (499,450) (1,314,494) (1,039,334)
CASH FLOWS FROM FINANCING ACTIVITIES
Note Payable 123,439 476,917 749,494 476,917
Shares Issued for Cash -- -- 565,000 565,000
----------- ----------- ----------- -----------
Net Cash from financing activities 123,439 476,917 1,314,494 1,041,917
Net Increase (decrease) for period and
balance end of period (2,494) (22,533) -- 2,584
CASH BEGINNING OF PERIOD 2,494 25,117 -- --
CASH END OF PERIOD $ -- $ 2,584 $ -- $ 2,584
=========== =========== =========== ===========
Supplemental Cash Flow Information:
Interest paid during period $ 25,102 $ -- $ 41,155 $ --
=========== =========== =========== ===========
F-24
Simbajamba Mines Ltd.
NOTES TO THE SEPTEMBER 30, 2006
FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION
Simbajamba Mines Ltd. (The "Company") was incorporated in the country of Samoa
on January 19, 2004 under Samoa's International Companies Act of 1987 and is in
the development stage. SMJA Investments Inc. is the parent company of Simbajamba
Mines Ltd.
SMJA Investments Inc. was incorporated in Canada under the Federal Business
Corporations Act on October 22, 2004. On January 12, 2005 a name change was
completed by SMJA Investments Inc. to Simba Mines Inc.
On December 15, 2004 SMJA Investments Inc., acquired all of the outstanding
shares of Simbajamba Mines Ltd. (3,225,000 shares) in exchange for 16,125,000
shares of Simba Mines Inc. The shares were converted on a 5:1 basis.
Simbajamba Mines Ltd. holds mining rights to carry out prospecting, survey and
reconnaissance operations over a certain geographical area in South Kwanza
Province, Angola.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Simbajamba Mines Ltd. as a going concern. However, it has sustained continued
operating losses and lacks sources of revenue, which creates uncertainty about
the Company's ability to continue operations as a going concern.
The Company's ability to continue operations as a going concern, to realize its
assets and discharge its liabilities is dependent upon obtaining financing
sufficient for continued operations as well as the achievement and maintenance
of a level of profitable operations. Management expects to raise capital in
order for it to continue operations.
Management believes that the current business plan if successfully implemented
may provide the opportunity for the Company to continue as a going concern.
The Company substantially transacts all its business in U.S. dollars.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements, in conformity with generally accepted
accounting principles and generally accepted in the United States of America,
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and
expense during the reporting period. Actual results could differ from those
estimates.
Cash Equivalents
Cash equivalents consist of highly liquid investments with maturities of three
months or less when purchased.
F-25
Simbajamba Mines Ltd.
NOTES TO THE SEPTEMBER 30, 2006
FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES cont.
Earnings per Share
Earnings (loss) per share are computed by dividing net income or loss by the
weighted-average number of common shares outstanding for the period.
Property, Plant and Equipment
Expenditures for new facilities or equipment are capitalized and depreciated
using the straight-line method at rates sufficient to depreciate such costs over
their estimated productive lives, which do not exceed the related estimated mine
lives, of such facilities based on proven and probable reserves. For the period
ended September 30, 2006, the Company had no capitalized assets.
Mineral Exploration Costs
Mineral exploration costs are expensed as incurred. When it has been determined
that a mineral property can be economically developed as a result of
establishing proven and probable reserves, costs incurred prospectively to
develop the property are capitalized as incurred and will be amortized using the
unit-of-production method over the estimated life of the ore body based on the
estimated recoverable units mined from proven and probable reserves.
Income Taxes
The Company provides for income taxes in accordance with SFAS 109, Accounting
for Income Taxes. SFAS 109 prescribes the use of the liability method. Deferred
tax assets and liabilities are determined based on the difference between the
financial statement carrying amounts and the tax basis of assets and liabilities
and are measured using the enacted statutory tax rates in effect at the balance
sheet date. The Company records a valuation allowance to reduce its deferred tax
assets when uncertainty regarding their realizability exists. There have been no
material income tax transactions during the development stage of the business.
There were no deferred tax assets or liabilities as of September 30, 2006 and
December 31, 2005. (See Note 6)
Marketing Costs:
The Company expenses marketing costs as incurred. Marketing costs were $5,695
and $11,585 for the nine months ended September 30, 2006 and 2005 respectively
and were primarily a result of shares issued to various consultants for services
to be performed during the development stages of the business.
NOTE 3 - NOTES PAYABLE
The note payable is an unsecured note for up to US $750,000 repayable on demand
with interest at LIBOR to be capitalized and be paid upon any repayment of the
loan. The note is with a related party. The balance was $749,494 as of September
30, 2006. Interest expense was $25,102 for the nine months ended September 30,
2006 and $0 for the nine month period ended September 30, 2005.
F-26
Simbajamba Mines Ltd.
NOTES TO THE SEPTEMBER 30, 2006
FINANCIAL STATEMENTS
NOTE 4 - ACQUISITIONS
Acquisitions are accounted for as purchases and, accordingly, are included in
the Company's consolidated results of operations from the date of acquisition.
These financial statements reflect a single entity, Simbajamba Mines Ltd. For
the purpose of a share exchange entered into with Simba Mines Inc as of December
15, 2004, therefore there were no acquisitions of Simbajamba Mines Ltd. Recorded
as of September 30, 2006
NOTE 5 - COMMITMENTS
On January 22, 2004 the Company was granted prospecting rights for a three-year
period to a defined geographical area consisting of 3,615 square kilometers
located in South Kwanza Province by the Republic of Angola Ministry of Geology
and Mines ("MGM"). The Company is required to perform compulsory minimal works
(as defined in the agreement) and to pay $30,000 annually to the MGM. In
addition the Company is required to invest $400,000 in the first year and
$1,600,000 in the following years. The sharing split is the Company 80% and
Angolan nationals, Maelo-Exploracao e Obras Publicas LDA, 20%.
NOTE 6 - INCOME TAXES
Under Samoan law, an "International Company" is not subjected to income taxes
therefore since SML does not currently conduct business in the United States, no
provision for income taxes has been made.
NOTE 7 - STOCKHOLDERS' DEFICIT
The Company is authorized to issue a maximum of 500,000,000 shares of Common
stock, with a $0.001 par value.
Common stock of Simbajamba Mines, Ltd. issued for services (13,350,000 shares)
and cash considerations (2,775,000 shares) during the year ended December 31,
2004, exchanged for Simba Mines Inc.'s 16,125,000 shares.
In 2005, 5,775,000 shares previously issued in 2004 were cancelled and returned
to treasury. The company has classified this as additional paid in capital.
On September 30, 2006 and December 31, 2005, there were 10,350,000 shares
outstanding.
NOTE 8 - CONCENTRATIONS OF CREDIT RISK
Simbajamba Mines Ltd. maintains its cash with one major financial institution in
Australia. Australian bank deposits are not government insured. Management
believes the risk is limited because the institution is a large national
institution with a strong financial position.
F-27
Simbajamba Mines Ltd.
NOTES TO THE SEPTEMBER 30, 2006
FINANCIAL STATEMENTS
NOTE 9 - SUBSEQUENT EVENT
This review was undertaken to finalize the acquisition of Simbajamba Mines Ltd.,
a fully owned subsidiary of Simba Mines Inc., by Australian Forest Industries
Inc. Upon closing, currently scheduled after December 31, 2006, Australian
Forest Industries Inc. will assume all of the outstanding liabilities of
Simbajamba Mines Ltd.
F-28
ROCKBURY PROPERTIES LIMITED.
FINANCIAL STATEMENTS
30 SEPTEMBER 2006
ROCKBURY PROPERTIES LIMITED.
FINANCIAL STATEMENTS
TABLE OF CONTENTS
Financial Statements
Report of Independent Auditor FF-2
Balance Sheet FF-4
Statement of Operations
For the Period Ended 30 September 2006 FF-5
Statement of changes in shareholders deficit FF-6
Notes to the Financial Statements FF-7
FF-1
Rockbury Properties Limited
INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF ROCKBURY PROPERTIES LIMITED
We have audited the financial statements of Rockbury Properties Limited for the
period ended 30 September 2006 set out on pages 2 to 6. These financial
statements have been prepared in accordance with the accounting policies set out
therein.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The director's responsibilities for preparing the financial statements in
accordance with applicable law and United States Accounting Standards (United
States Generally Accepted Accounting Practice) are set out in the Statement of
Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies Act
1985. We also report to you whether in our opinion the information given in the
Director's Report is consistent with the financial statements.
In addition we report to you if, in our opinion, the company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
directors' remuneration and other transactions is not disclosed.
We read the Director's Report and consider the implications for our report if we
become aware of any apparent misstatements within it.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgments made by the director in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
FF-2
OPINION
In our opinion:
o the financial statements give a true and fair view, in accordance with
United States Generally Accepted Accounting Practice, of the state of the
company's affairs as at 30 September 2006 and of its loss for the period
then ended;
o the financial statements have been properly prepared in accordance with
the Companies Act 1985; and
o the information given in the Director's Report is consistent with the
financial statements.
ASHINGS LIMITED
Chartered Accountants
Registered Auditors
Barbican House
26-34 Old Street
London
EC1V 9QQ
17 November 2006
FF-3
ROCKBURY PROPERTIES LIMITED
BALANCE SHEET
30 September 2006
ASSETS
US $
----------
FIXED ASSETS
Fixed Asset Investments 197
CURRENT ASSETS
Unpaid share capital 299
----------
Total Assets 496
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accrued expenses payable 6,695
Amounts due to parent company 2,920,195
----------
2,926,890
----------
SHAREHOLDERS' DEFICIT
Ordinary Shares $1 nominal value; 50,000 shares authorised
301 Shares issued 301
Accumulated deficit (2,926,695)
----------
(2,926,394)
----------
Total liabilities and shareholders deficit 496
==========
FF-4
ROCKBURY PROPERTIES LIMITED
STATEMENT OF OPERATIONS
30 September 2006
21 July 2005
(incorporation)
to 31 September 2006
US $
----------
Income --
Expenses
Operating expenses 2,920,000
Auditors remuneration 6,695
----------
Total expenses 2,926,695
----------
Net Loss (2,926,695)
==========
Basic and diluted loss per ordinary share (9,723)
Weighted average ordinary shares 301
FF-5
ROCKBURY PROPERTIES LIMITED
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY AND ACCUMULATED DEFICIT
Ordinary Shares Accumulated
------------------------- Paid In Accumulated
Shares Value Capital Deficit Total
$ $ $ $
----------- ----------- ----------- ----------- -----------
Shares issued for cash 301 301 -- -- 301
Net Loss -- -- -- (2,926,695) (2,926,695)
----------- ----------- ----------- ----------- -----------
Balance as at 30 September 2006 301 301 -- (2,926,695) (2,926,394)
=========== =========== =========== =========== ===========
FF-6
ROCKBURY PROPERTIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION
Rockbury Properties Limited was incorporated in the British Virgin Islands on 21
July 2005.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements, in conformity with generally accepted
accounting principles and generally accepted in the United States of America,
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and
expense during the reporting period. Actual results could differ from those
estimates.
Earnings per Share
Earnings (loss) per share are computed by dividing net income or loss by the
weighted-average number of common shares outstanding for the period.
Income Taxes
The Company provides for income taxes in accordance with SFAS 109, Accounting
for Income Taxes. SFAS 109 prescribes the use of the liability method. Deferred
tax liabilities and assets are determined based on the difference between the
financial statement carrying amounts and the tax basis of assets and liabilities
and are measured using the enacted statutory tax rates in effect at the balance
sheet date. The Company records a valuation allowance to reduce its deferred tax
assets when uncertainty regarding their realizability exists. There have been no
material income tax transactions during the development stage of the business.
NOTE 3 - INVESTMENTS
The investments are stated at their nominal value. In the director's opinion the
investments are worth not less than $40,000,000
NOTE 4 - SHAREHOLDERS' DEFICIT
The Company is authorized to issue a maximum of 50,000 Ordinary shares, with a
$1.00 par value.
NOTE 5 - RELATED PARTY TRANSACTIONS
During the year Bongani International Group Limited (the parent company)
incurred costs on behalf of Rockbury Properties Limited. As at 30 September 2006
he amounts owing to Bongani International Group Limited amounted to $2,920,195.
/s/
----------------------------------- 17 November 2006
C R Page Date
For and on behalf of
S. J. Kelly
Director
FF-7
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
as of December 31, 2005 and 2004 and the related statements of operations,
stockholders' equity, and cash flows for each of the two years in the period
ended December 31, 2005. 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. The Company is not required to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, 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, 2005 and 2004, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 2005, in
conformity with accounting principles generally accepted in the United Staes of
America.
/s/ Meyler & Company, LLC
Middletown, NJ
May 17, 2005
FFF-1
AUSTRALIAN FOREST INDUSTRIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
2005 2004
------------ ------------
(Restated)
------------ ------------
CURRENT ASSETS
Cash $ 127,014 $ 225,189
Accounts receivable 1,622,974 1,611,756
Inventory 1,778,340 1,983,039
Prepaid expenses and other 193,739 142,350
------------ ------------
Total Current Assets 3,722,067 3,962,334
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $2,402,939 and $2,349,923 in 2005
and 2004, respectively 13,040,126 10,317,803
OTHER ASSETS
Receivable from related party 273,175
Long-term timber supply contract, net
of amortization of $91,843 and
$36,943 in 2005 and 2004, respectively 794,805 849,705
------------ ------------
$ 17,556,998 $ 15,403,017
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 117,772 $ 421,097
Accounts payable 2,690,957 3,154,507
Current portion of capitalized lease obligations 1,076,013 731,217
Due to Timberman shareholders 3,213,912 660,010
Related party payable 592,844
Accrued payroll, related taxes and benefits 599,389 571,186
------------ ------------
Total Current Liabilities 8,290,887 5,538,017
OTHER LIABILITIES
Capitalized lease obligations 3,512,882 2,797,975
Deferred capital gain 1,396,481
Due to National Australian Bank 4,818,000 5,229,350
------------ ------------
Total Liabilities 18,018,250 13,565,342
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 257,400 257,400
Additional paid-in capital 4,503,417 4,503,417
Accumulated other comprehensive income 333,619 21,796
Accumulated deficit (5,555,688) (2,944,938)
------------ ------------
Total Stockholders' Equity (461,252) 1,837,675
------------ ------------
Total Liabilities and Stockholders' Equity $ 17,556,998 $ 15,403,017
============ ============
See accompanying notes to financial statements.
FFF-2
AUSTRALIAN FOREST INDUSTRIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended
December 31,
2005 2004
------------- -------------
(Restated)
REVENUE - SALES $ 13,499,799 $ 12,990,558
COSTS AND EXPENSES
Cost of goods sold 15,441,948 11,685,458
Selling, general and administrative 653,091 1,285,332
Stock based compensation 255,000
Interest expense 703,757 374,847
Depreciation and amortization 480,826 315,369
------------- -------------
Total Costs and Expenses 17,279,622 13,916,006
------------- -------------
OPERATING LOSS (3,779,823) (925,448)
NON-OPERATING INCOME
Other income 225,851 443,041
Interest income 164,941 1,328
Gain on disposal of assets 778,281 228,657
------------- -------------
Total Non-Operating Income 1,169,073 673,026
------------- -------------
NET LOSS $ (2,610,750 $ (252,422)
============= =============
Net Loss per share (Basic and Diluted) $ (0.01) $ (0.01)
============= =============
Weighted Average Common Shares Outstanding 257,400,680 257,400,680
============= =============
See accompanying notes to financial statements.
FFF-3
AUSTRALIAN FOREST INDUSTRIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended
---------------------------
December 31,
2005 2004
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES (Restated)
Net income (loss) $ (2,610,750) $ (252,422)
Adjustments to reconcile net income to cash flows
used in operating activities:
Depreciation 438,947 315,369
Amortization of Timber contract 41,878
Amortization of leaseback gain 224,492 255,000
Changes in operating activities:
(Increase) decrease in prepaid expenses 18,048 (59,895)
(Increase) decreasein inventories 204,699 (952,240)
(Increase) decrease in receivables (11,217) 261,247
(Increase) decrease in related party receivable 273,175 (273,175)
(Increase) in Timber contract (886,648)
Increase (decrease) in accounts payable and other
liabilities (463,550) 1,392,082
Increase (decrease) in bank overdraft (303,325) 421,097
Increase (decrease) in related party payable 592,844
Increase (decrease) in accrued payroll 28,203 31,726
Increase in taxes payable (69,437)
Net Cash (Used in) Provided by
Operating Activities (1,635,993) 252,141
CASH FLOWS FROM INVESTING ACTIVITIES
Capital additions (5,327,925) (5,078,041)
Disposition of capital assets 1,716,416 815,150
------------ ------------
Net Cash Used in Investing Activities (3,611,509) (4,262,891)
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from shareholders 2,553,902 660,010
Capital leases 1,059,703 3,172,256
National Australian bank loan (411,350) 5,229,350
Sale/leaseback deferred credit 1,611,320
Timberman controlling interest (5,307,400)
------------ ------------
Net Cash Provided by (Used In)
Financing Activities 4,813,575 3,754,216
EFFECT OF EXCHANGE RATES ON CASH 335,752 21,796
------------ ------------
(DECREASE) INCREASE IN CASH (98,175) (234,738)
CASH AT BEGINNING OF PERIOD 225,189 459,927
------------ ------------
CASH AT END OF PERIOD $ 127,014 $ 225,189
============ ============
See accompanying notes to financial statements.
FFF-4
AUSTRALIAN FOREST INDUSTRIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Preferred Stock Common Stock Additional
--------------- -------------------------- Paid-In
shares Amounts Shares Amount Capital
--------------------------------------------------------------------------------------------
Balance, December 31, 2002 5,319,764 $ 9,813,217
Net loss for the year ended
December 31, 2003
Adjustments from exchange
rate changes
------ ------ ----------- -------------- ------------
Balance, December 31, 2003
and prior to Reverse Merger 5,319,764 9,813,217
Reverse Merger (Note 1)
Exchange of Integrated
Forest Products Pty Ltd
shares for Australian
Forest Industries
Shareholders equity of
Australian Forest
Industries at date of
merger 400,680
Reverse Merger capitalization
Issuance of shares at date of
merger
Issuance of shares for
consulting agreement 17,000,000 17,000 238,000
Timbermans Group Pty. Ltd.
investment in Company (5,307,400)
Cumulative losses of Timber-
man's Group Pty. Ltd.
Adjustment from exchange
rate changes
Net loss for the year ended
December 31, 2004
------ ------ ----------- -------------- ------------
Balance, December 31, 2004 257,400,680 257,400 4,503,417
Adjustments from exchange
rate changes
Net loss for the year ended
December 31, 2005
------ ------ ----------- -------------- ------------
Balance, December 31, 2005 257,400,680 $ 257,400 $ 9,810,817
====== ====== =========== ============== ============
Other Total
Accumulated Comprehensive Stockholders'
Deficit Income (loss) Equity
-------------------------------------------------------------------------------
Balance, December 31, 2002 $ (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 (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 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 255,000
Timbermans Group Pty. Ltd.
investment in Company (5,307,400)
Cumulative losses of Timber-
man's Group Pty. Ltd. (601,983) (601,983)
Adjustment from exchange
rate changes (43,794) (43,794)
Net loss for the year ended
December 31, 2004 (252,422) (252,422)
------------- -------------- -------------
Balance, December 31, 2004 (2,944,938) 21,796 1,837,675
Adjustments from exchange
rate changes 311,823 311,823
Net loss for the year ended
December 31, 2005 (2,610,750) (2,610,750)
------------- -------------- -------------
Balance, December 31, 2005 $ (5,555,688) $ 333,619 $ (461,252)
============= ============== =============
See accompanying notes to financial statements.
FFF-5
AUSTRALIAN FOREST INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
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, 2005 and 2004 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 2005 and 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 2005 or 2004.
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.
FFF-6
AUSTRALIAN FOREST INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
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.
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.
Stock Based Compensation
The Company accounts for stock issued for services using the fair value
method. In accordance with the Emergency Issues Task Force ("EITF")
96-18 , the measurement date of shares issued for service is the date at
which the counterpart's performance is complete.
Fair Values of Financial Instruments
The Company uses financial instruments in the normal course of business.
The carrying values of cash, accounts receivable, advance receivable,
bank overdraft, accounts payable and accrued expenses approximate their
fair value due to the short-term maturities of these assets and
liabilities. The carrying values of notes payable and loans payable
approximate their fair value based upon management's estimates using the
best available information.
Recent Accounting Pronouncements
In December 2004, the FASB issued Statement of Financial Accounting
Standards No. 153 (SFAS 153), "Exchanges of Non-monetary Assets."
SFAS 153 amends the guidance in APB No. 29,
FFF-7
AUSTRALIAN FOREST INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (Continued)
"Accounting for Non-monetary Assets." APB No.29 was based on the
principle that exchanges of non-monetary assets should be measured on
the fair value of the assets exchanged. SFAS 153 amends APB No. 29 to
eliminate the exception for non-monetary exchanges of similar productive
assets and replaces it with a general exception for exchanges of
non-monetary assets that do not have commercial substance if the future
cash flows of the entity are expected to change significantly as a
result of the exchange. SFAS 151 is effective for financial statements
issued for fiscal years beginning after June 15, 2005. The adoption of
SFAS 153 is not expected to have a material effect on the Company's
financial position or results of operations.
In December 2004, the FASB revised Statement of Financial Accounting
Standards No. 123 (SFAS 123(R)), "Accounting for Stock-Based
Compensation." The SFAS 123(R) revision established standards for the
accounting for transactions in which an entity exchanges its equity
instruments for goods or services and focuses primarily on accounting
for transactions in which an entity obtains employee services in
share-based payment transactions. It does not change the accounting
guidance for share-based payment transactions with parties other than
employees. For public entities that file as small business issuers, the
revisions to SFAS 123(R) are effective as of the beginning of the first
interim or annual reporting period that begins after December 15, 2005.
The adoption of SFAS 123(R) is not expected to have a material effect on
the Company's financial position or results of operations.
In May 2005, the FASB issued SFAS no. 154, "Accounting Changes and Error
Corrections ("SFAS No. 154") which replaces APB Opinion No. 20,
"Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in
Interim Financial Statements-An Amendment of ABP Opinion No. 28. SFAS
No. 154 provides guidance on the accounting for and reporting of
accounting changes and error corrections. Specially, this statement
requires "retrospective application" of the direct effect for a
voluntary change in accounting principle to prior periods' financial
statements, if it is practical to do so. SFAS No. 154 also strictly
defines the term "restatement" to mean the correction of an error
revising previously issued financial statements. SFAS No. 154 is
effective for accounting changes and corrections of errors made in
fiscal years beginning after December 15, 2005 and are required to be
adopted by the Company in the first quarter of fiscal year 2006.
Management does not anticipate that adoption will have a material impact
on our results of operations, financial position or cash flows.
Revenue Recognition
The Company's policy is to recognize revenue at the time products are
shipped from its facilities.
NOTE B - VARIABLE INTEREST ENTITIES
In January 2003, the FASB issued FIN 46 and in December 2003, it issued
a revised interpretation of FIN 46 (FIN 46-R), which supersedes FIN 46
and clarifies and expands current accounting guidance for determining
whether certain entities should be consolidated in the Company's
consolidated financial statements. An entity is subject to FIN 46 and is
called a Variable Interest Entity (VIE) if it has (1) equity that is
insufficient to permit the entity to finance its activities without
additional subordinated financial support from other parties, or (2)
equity investors that cannot make significant decisions about
FFF-8
AUSTRALIAN FOREST INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
NOTE B - VARIABLE INTEREST ENTITIES (CONTINUED)
the entity's operations, or that do not absorb the expected losses or
receive the expected returns of the entity. A VIE is consolidated by its
primary beneficiary, which is the party that has a majority of the
expected losses or a majority of the expected residual returns of the
VIE, or both.
The Company has concluded that the entity, Timbermans Group Pty. Ltd. is
deemed to be VIE under FIN 46 and accordingly has been consolidated in
the financial statements for 2005 and 2004. Timbermans Group, a holding
company, had total assets of $7,357,379 and $5,307,658, total
liabilities of $8,050,323 and $5,181,152, accumulated earnings
(deficits) of $(693,017) and $126,428 at December 31, 2005 and 2004,
respectively, and income (losses) of $(354,176) and $243,935 for the
years then ended.
NOTE C - INVENTORY
Inventory consists of the following at December 31,
2005 2004
---------- ----------
Raw materials and supplies $ 228,547 $ 53,298
Work in progress 605,692 456,694
Finished goods 944,101 1,473,047
---------- ----------
$1,778,340 $1,938,039
========== ==========
NOTE D - EQUIPMENT
Equipment is comprised of the following at December 31,
Useful Life 2005 2004
------------ -------------- --------------
Land $ 1,133,042 $ 1,166,139
Buildings 40 1,261,795 1,343,034
Plant and equipment 40 11,866,257 9,607,919
Capital works in progress 987,936 395,134
Motor vehicles 5 194,035 155,500
-------------- --------------
15,443,065 12,667,726
Less: accumulated depreciation 2,402,939 2,349,923
------------- -------------
$13,040,126 $10,317,803
NOTE E - RELATED PARTY TRANSACTIONS
Due to Related Party
At December 31, 2005 and 2004, the Company was indebted to the
shareholders of Timbermans for $3,213,912 and $660,010, respectively.
The loans are non interest bearing, they are unsecured and have no
specific repayment date.
Long-Term Log Supply Contract
In November 2004, 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 2005, 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.
FFF-9
AUSTRALIAN FOREST INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
NOTE F - 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, 2005 and
2004 was $117,772 and $421,097, respectively.
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 $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 G - CAPITAL LEASE OBLIGATIONS
The Company has obtained various pieces of equipment under capital
leases expiring through 2010. The assets and liabilities under these
capital leases ($5,354,455) 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. The capitalized leases are secured by the equipment
purchased.
As of December 31, 2005, minimum future lease payments under these
capital leases are:
For the
Years Ending
December 31, Amount
------------- ----------
2006 $1,376,073
2007 1,376,073
2008 1,376,073
2009 962,772
2010 263,463
==========
Total minimum lease payments $5,354,455
December 31,
2005 2004
---------- ----------
Total minimum lease payments $5,354,455 $4,136,976
Less: amounts representing interest 765,560 607,784
---------- ----------
Net minimum lease payments 4,588,895 3,529,192
Less: current portion 1,076,013 731,217
---------- ----------
Long-term portion $3,512,882 $2,797,975
========== ==========
FFF-10
AUSTRALIAN FOREST INDUSTRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
NOTE H - DUE TO AUSTRALIAN NATIONAL BANK
The Timbermans Group has a loan with the National Bank of Austraila in
the amount of $4,818,000 at December 31, 2005. The loan is secured by
the assets of the Company and personal guarantees of the Company's
Directors. The loan bears interest at the rate of 5.9% and is due July
7, 2008.
NOTE I - 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, 2005.
The Company's net operating loss carry forwards amounted to
approximately $2,958,000 at December 31, 2004, which have unlimited
expiration.
NOTE J - STOCKHOLDERS' EQUITY
In connection with the Reverse Merger on September 1, 2005, 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.
NOTE K - SALE - LEASEBACK TRANSACTION
Under the terms of the sale-leaseback arrangement, a gain of $1,611,320
was realized on the transaction and has been deferred and will be
amortized to income over a five year period. $214,839 has been included
in other income for the period ended December 31, 2005.
The amortization of the gain for the next five years is as follows.
Gain
Year Amortization
---- ------------
2006 $ 322,264
2007 322,264
2008 322,264
2009 322,264
2010 107,425
-----------
$ 1,396,481
NOTE L - RESTATEMENT
The financial statements for the year ended December 31, 2004 have been
restated to include the financial statements of the Timbermans Group which
the Company has considered a VIE.
FFF-11
Item 1. Condensed Financial Statements
AUSTRALIAN FOREST INDUSTRIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30 December 31,
2006 2005
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash $ 127,014
Accounts receivable $ 2,667,853 1,622,974
Inventory 2,340,943 1,778,340
Prepaid expenses and other 71,256 193,739
------------ ------------
Total Current Assets 5,080,052 3,722,067
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $2,794,801 and $2,402,939 in 2006 and 2005, respectively 16,482,095 13,040,126
OTHER ASSETS
Long-term timber supply contract, net of amortization of $107,400 and
$91,843 in 2006 and 2005, respectively 712,586 794,805
------------ ------------
$ 22,274,733 $ 17,556,998
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 2,106,989 $ 117,772
Accounts payable 4,681,752 2,690,957
Current portion of capitalized lease obligations 1,076,013 1,076,013
Due to Timberman shareholders 5,991,199 3,213,912
Related party payable 606,487 592,844
Accrued payroll, related taxes and benefits 898,739 599,389
------------ ------------
Total Current Liabilities 15,361,179 8,290,887
OTHER LIABILITIES
Capitalized lease obligations 4,067,491 3,512,882
Deferred capital gain 1,181,414 1,396,481
Due to National Australian Bank 4,928,880 4,818,000
------------ ------------
Total Liabilities 25,538,964 18,018,250
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, 500,473 and 257,400,680 issued and outstanding 257,600 257,400
at September 30, 2006 and December 31, 2005 respectively
Additional paid-in capital 4,573,217 4,503,417
Accumulated other comprehensive income 225,992 333,619
Accumulated deficit (8,321,040 (5,555,688)
------------ ------------
Total Stockholders' Equity (3,264,231) (461,252)
------------ ------------
Total Liabilities and Stockholders' Equity $ 22,274,733 $ 17,556,998
============ ============
See accompanying notes to financial statements.
FFF-12
AUSTRALIAN FOREST INDUSTRIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
September 30 September 30,
---------------------------- ----------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
(Restated) (Restated)
REVENUE - SALES $ 4,008,572 $ 3,377,974 $ 11,350,633 $ 10,124,288
COSTS AND EXPENSES
Cost of goods sold 2,414,890 1,894,605 6,525,037 5,753,756
Selling, general and administrative 2,706,697 1,888,529 6,737,478 5,829,987
Provision for Doubtful Accounts 134,154 266,649
Interest expense 254,564 138,355 647,648 418,088
Depreciation and amortization 149,162 208,597 436,287 580,851
------------ ------------ ------------ ------------
Total Costs and Expenses 5,659,467 4,130,086 14,613,099 12,582,682
------------ ------------ ------------ ------------
OPERATING LOSS (1,650,895) (752,112) (3,262,466) (2,458,394)
NON-OPERATING INCOME
Other income 12,037 97,382 145,325 99,915
Interest income 83,555 247,586
Gain on disposal of assets 648 799,496 104,203 1,963,799
------------ ------------ ------------ ------------
Total Non-Operating Income 96,240 896,878 497,114 2,063,714
NET INCOME (LOSS) $ (1,554,655) $ 144,766 $ (2,765,352) $ (394,680)
============ ============ ============ ============
NET LOSS PER SHARE $ (3.11) $ 0.29 $ (5.53) $ (0.79)
============ ============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 500,473 500,473 500,473 500,473
============ ============ ============ ============
See accompanying notes to financial statements.
FFF-13
AUSTRALIAN FOREST INDUSTRIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended
September 30,
--------------------------
2006 2005
----------- -----------
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(2,765,352) $ (394,680)
Adjustments to reconcile net income to cash flows used
in operating activities:
Depreciation 391,862 372,254
Stock based compensation 70,000
Amortization of Timber contract 15,557
Amortization of leaseback gain (252,150)
Changes in operating activities:
(Increase) decrease in prepaid expenses 53,046 132,860
(Increase) decrease in inventories (562,603) (241,717)
(Increase) decrease in receivables (1,044,880) (1,612,693)
(Increase) decrease in related party receivable (273,175)
(Increase) decrease in timber contract 66,662 10,506
Increase (decrease) in accounts payable and other liabilities 1,990,795 1,181,904
Increase (decrease) in bank overdraft 1,989,217 (421,097)
Increase (decrease) in related party payable 13,643 1,061,522
Increase (decrease) in accrued payroll 299,350 (11,795)
Increase (decrease) in taxes payable 69,437
----------- -----------
Net Cash (Used in) Provided by Operating Activities 334,584 (196,111)
CASH FLOWS FROM INVESTING ACTIVITIES
Net capital additions (3,833,830) (1,172,640)
----------- -----------
Net Cash Used in Investing Activities (3,833,830) (1,172,640)
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from shareholders 2,777,287 115,979
Capital leases 554,609 1,422,477
National Australian bank loan 110,880 (184,983)
Sale leaseback deferred credit 37,083
----------- -----------
Net Cash Provided by (Used In) Financing Activities 3,479,859 1,353,473
EFFECT OF EXCHANGE RATES ON CASH (107,627) (198,001)
----------- -----------
(DECREASE) INCREASE IN CASH (127,014) (213,279)
CASH AT BEGINNING OF PERIOD 127,014 225,189
----------- -----------
CASH AT END OF PERIOD $ 0 $ 11,910
=========== ===========
See accompanying notes to financial statements.
FFF-14
AUSTRALIAN FOREST INDUSTRIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary in order to make the financial statements not
misleading have been included. Results for the nine months ended September
30, 2006 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2006. For further information,
refer to the financial statements and footnotes thereto included in
Australian Forest Industries' annual report on Form 10-KSB for the year
ended December 31, 2005.
NOTE 2 - LOAN FROM TIMBERMANS GROUP (RELATED PARTY)
During the nine months ended September 30, 2006, the company received an
additional $2,777,287 from Timberman investors.
NOTE 3 - CAPITALIZED LEASE OBLIGATIONS
During the nine months ended September 30, 2006, the Company purchased
$3,900,000 in new equipment of which $1,981,000 was financed under
capitalized leases over a five year period.
NOTE 4 - STOCKHOLDERS' EQUITY
During the quarter ended September 30, 2006, the company issued 200,000
shares of stock for consulting services received. The shares were valued
at $.35 per share.
On August 30, 2006, the Board of Directors declared a 515 to 1 reverse
stock split of its common stock. As a result of this reverse split,
500,473 shares are considered issued and outstanding. All per share
amounts have been adjusted to give effect to the reverse stock split.
NOTE 5 - CHANGE OF CONTROL
The Company has entered into a letter of intent dated August 25, 2006,
under which and subject to a definitive agreement and closing thereof, it
will acquire all the issued share capital of Simbajamba Mines Limited
("Simbajamba") a wholly owned subsidiary of Simba Mines Inc. ("Simba") for
$41,547,000 and all the issued share capital of Rockbury Properties
Limited ("Rockbury"), a wholly owned subsidiary of Bongani International
Group Limited ("BIG") for $38,453,000.
FFF-15
In settlement of the above purchases, The Company proposes to issue
5,193,375 new ordinary shares to Simba and 4,806,625 new common shares to
BIG. They will rank equal with the consolidated 500,473 common shares of
AUFI and have a book value of $8 per share.
Upon closing of the acquisitions, AUFI will control 80% of the Cachoeiras
de Binga and 70% respectively of the Benguela and Zenza copper licenses in
Angola. In addition, discussions are in progress with BIG for the
acquisition of a controlling interest in two significant copper/cobalt
concession areas in the DRC. At closing, AUFI will change its name to
Zebra Copper Inc ("Zebra").
AUFI has also entered into a letter of intent to sell its wholly owned
subsidiary Integrated Forest Products Pty Ltd ("IFP") to an Australian
unlisted company, Australian Forest Industries Limited ("AFIL"), which
will issue new ordinary shares ranking equal as consideration. It is
intended that following the closing of this proposed transaction, the AFIL
shares will be distributed as a dividend to the shareholders of AUFI
listed on its share register at August 30, 2006
NOTE 6 - RESTATEMENT
The financial statements for the nine months ended September 30,
2006 have been restated to include the financial information of Timbermans
Group which is considered a Variable Interest Entity under the Provisions
of FIN 46.
FFF-16
Appendix A
Stock Purchase and Recapitalization Agreement
STOCK PURCHASE AND RECAPITALIZATION AGREEMENT
This Agreement has been made and entered into as of this 18th day of September,
2006, by and between between SIMBA MINES INC., a Nevada corporation having its
principal business address at 300 Center Ave., Suite 202, Bay City, Michigan
48708 ("Seller"); and AUSTRALIAN FOREST INDUSTRIES INC., a Nevada corporation
having its principal business address at 4/95 Salmon Street, Port Melbourne,
Victoria, Australia, 3207 ("Purchaser").
RECITALS
A. The respective Boards of Directors of each of Seller and Purchaser,
have approved and declared advisable to effect a stock sale (the "Stock Sale")
pursuant to which Purchaser will purchase from Seller 1 ordinary share (the
"Transferred Shares") of Simbajamba Mines Limited, a company incorporated
pursuant to the laws of Samoa and a wholly-owned subsidiary of Seller (the
"Company").
B. The respective Boards of Directors of the Company, Seller and Purchaser
have determined that the Stock Sale is in furtherance of and consistent with
their respective long-term business strategies and is fair to and in the best
interests of their respective stockholders.
C. For financial accounting purposes, it is intended that the Stock Sale
will be accounted for as a "purchase";
NOW, THEREFORE, in consideration of the premises, and of the representations,
warranties, covenants and agreements contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
The Stock Sale
SECTION 1.1 The Stock Sale.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, Seller shall sell, convey, assign, transfer and
deliver to the Purchase, free and clear of all Liens, and Purchaser will buy
from Seller, the Transferred Shares.
A-1
(b) The aggregate purchase price for the Transferred Shares (the
"Stock Purchase Price") shall be: (i) a convertible promissory note of Purchaser
in favor of Seller in the amount of US$41,547,000 (the "Convertible Note"); and
(ii) the settlement of all outstanding loan balances between the Company and
Seller as specifically set forth on Schedule 1.1(b) attached hereto.
SECTION 1.2 Closing. Subject to the terms and conditions of this
Agreement, the closing of the Stock Sale and the consummation of the other
transactions contemplated hereby (the "Closing") shall take place at the offices
of Cohen & Czarnik LLP 140 Broadway, 36th Floor, New York 10005 on October 25,
2006 at 10:00 a.m. local time (or at such other date, time and place as the
parties hereto may agree).
SECTION 1.3 Effective Time. On the date of Closing, Seller shall deliver
to Purchaser a stock certificate (the "Transferred Shares Certificate")
representing the Transferred Shares duly endorsed in blank or accompanied by
stock powers endorsed in blank.
SECTION 1.4 Directors. The directors of Purchaser shall, from and after
the Closing, be Michael Timms (Chairman), Ian R. Egan, Mark Smyth, David
Furlong, Teddy Lourenco de Almeida and Luis Cupenala until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the charter and the by-laws of
Purchaser.
SECTION 1.5 Officers. The officers of Purchaser shall, from and after the
Closing, be appointed as follows: (i) Ian R. Egan (President), (ii) Michael
Timms (Chairman), and (iii) Mark Smyth (Secretary and Treasurer).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants and covenants to Purchaser as follows and
acknowledges that Purchaser is relying upon such representations and warranties
in connection with the Contemplated Transactions (as hereinafter defined):
SECTION 2.1 Capitalization. The outstanding and issued capital stock of
the Company consists of 1 ordinary share which is owned by Seller. The Company
does not and, at the Closing, the Company will not, have outstanding any capital
stock or other securities or any rights, warrants or options to acquire
securities of the Company or any convertible or exchangeable securities and,
other than Purchaser pursuant to this Agreement, no person has or, at Closing
will have, any right to purchase or otherwise acquire any securities of the
Company. There are, and at Closing there will be, no outstanding obligations of
the Company to repurchase, redeem or otherwise acquire any securities of the
Company. All of the Transferred Shares are, and at Closing will be, duly
authorized, duly and validly issued, fully paid and non-assessable, and none
were issued in violation of any preemptive rights, rights of first refusal or
any other contractual or legal restrictions of any kind.
A-2
SECTION 2.2 Title to the Shares. Seller is the beneficial owner and holds
good and valid title to the Transferred Shares free and clear of any Lien. Upon
consummation of the Contemplated Transactions and the satisfaction of the
conditions to Closing set forth herein, Purchaser will own all of the issued and
outstanding shares of capital stock of the Company, free and clear of any Lien.
At the Closing, Seller will deliver the Transferred Shares to Purchaser free and
clear of any Lien, other than restrictions imposed by the Securities Act of
1933, as amended, and applicable securities Laws including the laws of Samoa.
SECTION 2.3 Authority Relative to this Agreement. Each of Seller and the
Company has full power, capacity and authority to execute and deliver each
Transaction Document to which it is or, at Closing, will be, a party and to
consummate the transactions contemplated hereby and thereby (the "Contemplated
Transactions"). The execution, delivery and performance by each of Seller and
the Company of each Transaction Document and the consummation of the
Contemplated Transactions to which the Company or Seller, is, or at Closing,
will be, a party will have been duly and validly authorized by Seller and the
Company, respectively, and no other acts by or on behalf of either Seller or the
Company will be necessary or required to authorize the execution, delivery and
performance by Seller and the Company of each Transaction Document and the
consummation of the Contemplated Transactions to which it is or, at Closing,
will be, a party. This Agreement and the other Transaction Documents to which
Seller and/or the Company is a party have been duly and validly executed and
delivered by Seller and the Company and (assuming the valid execution and
delivery thereof by the other parties thereto) will constitute the legal, valid
and binding agreements of each of Seller and the Company enforceable against
Seller and the Company in accordance with their respective terms, except as such
obligations and their enforceability may be limited by applicable bankruptcy and
other similar Laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies is subject to the discretion
of the court before which any proceeding therefor may be brought (whether at law
or in equity).
SECTION 2.4 No Conflicts; Consents. The execution, delivery and
performance by each of Seller and the Company of each Transaction Document to
which it is a party and the consummation of the Contemplated Transactions to
which Seller and/or the Company is a party, will not: (i) violate any provision
of the articles or memorandum of association of Seller or the Company; (ii)
require Seller or the Company to obtain any consent, approval or action of or
waiver from, or make any filing with, or give any notice to, any Governmental
Body or any other person, except as set forth on Schedule 2.4 (the "Company
Required Consents"); (iii) violate, conflict with or result in a breach or
default under (with or without the giving of notice or the passage of time or
both), or permit the suspension or termination of, any material Contract
(including any Real Property Lease) to which Seller or the Company is a party or
by which it or any of its assets is bound or subject, or to the best of Seller's
knowledge and information result in the creation of any Lien upon any of the
Transferred Shares or upon any of the Assets of the Company; (iv) violate any
Order, any Law, of any Governmental Body against, or binding upon, Seller or the
Company or upon any of their respective assets or the Business; or (v) violate
or result in the revocation or suspension of any Permit.
A-3
SECTION 2.5 Corporate Existence and Power. The Company is a company duly
organized, validly existing and in good standing under the laws of Samoa, and
has all requisite powers, authority and all Permits required to own and/or
operate its Assets and to carry on the Business as conducted as of the date
hereof. The Company has no subsidiaries and does not directly or indirectly own
any equity or other interest or investment in any other person.
SECTION 2.6 Charter Documents and Corporate Records. The Company has
heretofore delivered to Purchaser true and complete copies of the certificate of
incorporation and memorandum of association and minute books, or comparable
instruments, of the Company as in effect on the date hereof. The stock transfer
books of the Company have been made available to Purchaser for its inspection
and are true and complete in all respects in accordance with their tenor.
SECTION 2.7 Financial Statements.
(a) Schedule 2.7A sets forth true, complete and correct copies of:
(i) the Company's financial statements as of and for the year ended December 31,
2005 (the "Annual Statement"); and (ii) the Company's financial statements as of
and for the three months ended June 30, 2006 (the "Interim Statements"). The
Annual Statement present fairly and accurately in all material respects the
financial position of the Company as of its date, and the earnings, changes in
stockholders' equity and cash flows thereof for the periods then ended in
accordance with GAAP, consistently applied. Each balance sheet contained therein
or delivered pursuant hereto fully sets forth all consolidated Assets and
Liabilities of the Company existing as of its date which, under GAAP, should be
set forth therein, and each statement of earnings contained therein or delivered
pursuant hereto sets forth the items of income and expense of the Company which
should be set forth therein in accordance with GAAP.
(b) All financial, business and accounting books, ledgers, accounts
and official and other records relating to the Company have been properly and
accurately kept and completed, and the Company has no knowledge, notice belief
or information there are any material inaccuracies or discrepancies contained or
reflected therein.
SECTION 2.8 Liabilities. The Company has not incurred any Liabilities
since December 31, 2005 (the "Latest Balance Sheet Date") except (i) current
Liabilities for trade or business obligations incurred in connection with the
purchase of goods or services in the ordinary course of the Business and
consistent with past practice, and (ii) Liabilities reflected on any balance
sheet referred to in Section 2.7(a).
A-4
SECTION 2.9 Company Receivables. Except to the extent of the amount of the
allowance for doubtful accounts reflected in the Annual Statements, all the
Receivables of the Company reflected therein, and all Receivables that have
arisen since the Latest Balance Sheet Date (except Receivables that have been
collected since such date), are valid and enforceable Claims subject to no known
defenses, offsets, returns, allowances or credits of any kind, and constitute
bona fide Receivables collectible in the ordinary course of the Business except
as enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium, fraudulent conveyance or similar laws or principles of
equity affecting the enforcement of creditors rights generally.
SECTION 2.10 Absence of Certain Changes.(a) Since July 1, 2006 the Company
has conducted the Business in the ordinary course consistent with past practice,
except as disclosed on Schedule 2.10 hereof, and there has not been:
(i) Any material adverse change in the Condition of the
Business;
(ii) Any damage, destruction or other casualty loss (whether
or not covered by insurance), condemnation or other taking affecting the
Business or the Assets of the Company;
(iii) Any change in any method of accounting or accounting
practice by the Company;
(iv) Except for normal increases granted in the ordinary
course of business, any increase in the compensation, commission, bonus or other
direct or indirect remuneration paid, payable or to become payable to any
officer, stockholder, director, consultant, agent or employee of the Company, or
any alteration in the benefits payable or provided to any thereof;
(v) Any material adverse change in the relationship of the
Company with its employees, customers, suppliers or vendors;
(vi) Except for any changes made in the ordinary course of
Business, any material change in any of the Company's business policies,
including advertising, marketing, selling, pricing, purchasing, personnel,
returns or budget policies;
(vii) Any agreement or arrangement whether written or oral to
do any of the foregoing.
(viii) The Company has no Liability that is past due.
A-5
SECTION 2.11 Leased Real Property. (a) The Company has no fee interest,
purchase options or rights of first refusal in any real property and the Company
has no leasehold or other interest in any real property, except as set forth on
Schedule 2.11 (the "Leased Real Property"), and all leases including all
amendments, modifications, extensions, renewals and/or supplements thereto
(collectively, "Real Property Leases") are described on Schedule 2.11.
SECTION 2.12 Personal Property; Assets. The Company has good and valid
title to (or valid leasehold interest in) all of its personal property and
Assets, free and clear of all Liens, except the Permitted Liens and as indicated
on Schedule 2.12. The machinery, equipment, computer software and other tangible
personal property constituting part of the Assets and all other Assets (whether
owned or leased) are in good condition and repair (subject to normal wear and
tear) and are reasonably sufficient and adequate in quantity and quality for the
operation of the Business as previously and presently conducted. Schedule 2.12
contains a list and description of all tangible personal property owned or
leased by the Company with a book value (before depreciation) of $10,000 or
more. The Assets constitute all of the assets, which are necessary to operate
the Business of the Company as currently conducted.
SECTION 2.13 Contracts. (a) Schedule 2.13 sets forth an accurate and
complete list of all Contracts to which the Company is a party or by which it or
its Assets are bound or subject that: (i) cannot be canceled upon 30 days'
notice without the payment or penalty of less than One Thousand Dollars
($1,000); or (ii) involve aggregate annual future payments by or to any person
of more than Five Thousand Dollars ($5,000). True and complete copies of all
written Contracts (including all amendments thereto and waivers in respect
thereof) and summaries of the material provisions of all oral Contracts so
listed have been made available to Purchaser.
(b) All Contracts to which the Company is a party are valid,
subsisting, in full force and effect and binding upon the Company and the other
parties thereto, in accordance with their terms, except that no representation
or warranty is given as to the enforceability of any oral Contracts. To the best
of Seller's knowledge and belief, except as set forth on Schedule 2.13, the
Company is not in default (or alleged default) under any such Contract.
SECTION 2.14 Patents and Intellectual Property Rights. The Company does
not own any patents, trademarks, trade names, service marks, brand marks, brand
names, or registered copyrights (collectively, the "Intellectual Property").
SECTION 2.15 Claims and Proceedings. There are no outstanding Orders of
any Governmental Body against or involving the Company, its Assets, the
Business, or the Transferred Shares. There are no actions, suits, claims or
counterclaims, examinations, Company Required Consents or legal, administrative,
governmental or arbitral proceedings or investigations (collectively, "Claims")
(whether or not the defense thereof or Liabilities in respect thereof are
covered by insurance), pending or, to the best of Seller's knowledge, threatened
on the date hereof, against or involving the Company, its Assets, the Business
or the Transferred Shares.
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SECTION 2.16 Taxes. (a) Except as set forth in Schedule 2.16:
(i) The Company has timely filed or, if not yet due but due
before Closing, will timely file all Tax Returns required to be filed by it for
all taxable periods ending on or before the date of Closing and all such Tax
Returns are or, if not yet filed, will be, upon filing, true, correct and
complete in all material respects;
(ii) the Company has paid, or if payment is not yet due but
due before Closing, will promptly pay when due to each appropriate Tax
Authority, all Taxes of the Company shown as due on the Tax Returns required to
be filed by it for all taxable periods ending on or before the date of Closing;
(iii) the accruals for Taxes currently payable as well as for
deferred Taxes shown on the financial statements of the Company as of the date
of the Annual Statement or the date of any financial statements delivered
hereunder: (A) adequately provide for all contingent Tax Liabilities of the
Company as of the date thereof; and (B) accurately reflect, as of the date
thereof, all unpaid Taxes of the Company whether or not disputed, in each case
as required to be reflected thereon in order for such statements to be in
accordance with GAAP;
(iv) no extension of time has been requested or granted for
the Company to file any Tax Return that has not yet been filed or to pay any Tax
that has not yet been paid and the Company has not granted a power of attorney
that remains outstanding with regard to any Tax matter;
(v) the Company has not received notice of a determination by
a Tax Authority that Taxes are currently owed by the Company (such determination
to be referred to as a "Tax Deficiency") and, to Seller's knowledge, no Tax
Deficiency is proposed or threatened;
(vi) all Tax Deficiencies have been paid or finally settled
and all amounts determined by settlement to be owed have been paid;
(vii) there are no Tax Liens on or pending against the Company
or any of the Assets, other than those which constitute Permitted Liens;
(viii) there are no presently outstanding waivers or
extensions or requests for a waiver or extension of the time within which a Tax
Deficiency may be asserted or assessed;
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(ix) no issue has been raised in any examination,
investigation, Company Required Consents, suit, action, claim or proceeding
relating to Taxes (a "Tax Company Required Consents") which, by application of
similar principles to any past, present or future period, would result in a Tax
Deficiency for such period;
(x) there are no pending or threatened Tax Audits of the
Company;
(xi) the Company has no deferred intercompany gains or losses
that have not been fully taken into income for income Tax purposes;
(xii) there are no transfer or other taxes (other than income
taxes) imposed by any state on the Company by virtue of the Contemplated
Transactions; and
(xiii) no claim has been made by any Tax Authority that the
Company is subject to Tax in a jurisdiction in which the Company is not then
paying Tax of the type asserted.
(b) To Seller's knowledge, the Company has collected and remitted to
the appropriate Tax Authority all sales and use or similar Taxes required to be
collected on or prior to the date of Closing and has been furnished properly
completed exemption certificates for all exempt transactions and has no
information otherwise or notice of any claim by any government or jurisdiction
with regards thereto. The Company has maintained and has in its possession all
records, supporting documents and exemption certificates required by applicable
sales and use Tax statutes and regulations to be retained in connection with the
collection and remittance of sales and use Taxes for all periods up to and
including the date of Closing. With respect to sales made by the Company prior
to the date of Closing for which sales and use Taxes are not yet due as of the
date of Closing, all applicable sales and use Taxes payable with respect to such
sales will have been collected or billed by the Company and will be included in
the Assets of the Company as of the date of Closing.
SECTION 2.17 Compliance with Laws. The Company is not in violation of any
order, judgment, injunction, award, citation, decree, consent decree or writ
(collectively, "Orders") and to the best of Seller's knowledge, belief and
information, any Laws of any Governmental Bodies affecting the Company, the
Transferred Shares or the Business.
SECTION 2.18 Permits. The Company has obtained all licenses, permits,
certificates, certificates of occupancy, orders, authorizations and approvals
(collectively, "Permits"), and has made all required registrations and filings
with all Governmental Bodies, that are necessary to the ownership of the Assets,
the use and occupancy of the Leased Real Property, as presently used and
operated, and the conduct of the Business or otherwise required to be obtained
by the Company. All Permits required to be obtained or maintained by the Company
are listed on Schedule 2.18 and are in full force and effect; no violations are
or have been recorded, nor have any notices or violations thereof been received,
in respect of any Permit; and no proceeding is pending or threatened to revoke
or limit any Permit; and the consummation of the Contemplated Transactions will
not (or with the giving of notice or the passage of time or both will not) cause
any Permit to be revoked or limited.
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SECTION 2.19 Environmental Matters. To the best of Seller's knowledge,
belief and information, the Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under,
any Environmental Law.
SECTION 2.20 Finders Fees. Other than as set forth in Section 4.7, there
is no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of the Company who might be
entitled to any fee or commission from the Company in connection with the
consummation of the Contemplated Transactions.
SECTION 2.21 Disclosure. Neither this Agreement, the Schedules hereto, nor
any reviewed or unaudited financial statements, documents or certificates
furnished or to be furnished to Purchaser by or on behalf of the Company or
Seller pursuant to this Agreement contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading. There
are no events, transactions or other facts, which, either individually or in the
aggregate, may give rise to circumstances or conditions which would have a
material adverse effect on the general affairs or Condition of the Business.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents, warrants and covenants to Seller as follows and
acknowledges that Seller is relying upon such representations and warranties in
connection with the Contemplated Transactions:
SECTION 3.1 Authority Relative to this Agreement. Purchaser has full power
and authority to execute and deliver each Transaction Document to which it is
or, at Closing, will be, a party and to consummate the Contemplated
Transactions. Following the approval of the boards of directors of Purchaser and
the shareholders of Purchaser with respect to the Contemplated Transactions, the
execution, delivery and performance by Purchaser of each Transaction Document
and the consummation of the Contemplated Transactions to which it is or, at
Closing, will be, a party have been duly and validly authorized and approved by
Purchaser and no other acts by or on behalf of Purchaser are necessary or
required to authorize the execution, delivery and performance by Purchaser of
each Transaction Document and the consummation of the Contemplated Transactions
to which it is or, at Closing, will be a party. This Agreement and the other
Transaction Documents to which Purchaser is a party have been, duly and validly
executed and delivered by Purchaser and (assuming the valid execution and
delivery thereof by the other parties thereto) constitutes, or will, at the
Closing, constitute, as the case may be, the legal, valid and binding agreements
of Purchaser enforceable against it in accordance with their respective terms,
except as such obligations and their enforceability may be limited by applicable
bankruptcy and other similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies is subject to
the discretion of the court before which any proceeding therefor may be brought
(whether at law or in equity).
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SECTION 3.2 No Conflicts; Consents. The execution, delivery and
performance by Purchaser of each Transaction Document to which it is a party and
the consummation of the Contemplated Transactions to which Purchaser is a party
does not and will not: (i) violate any provision of the certificate of
incorporation or by-laws of Purchaser, as the case may be; (ii) require
Purchaser to obtain any consent, approval or action of or waiver from, or make
any filing with, or give any notice to, any Governmental Body or any other
person, except as set forth on Schedule 3.2 (the "Purchaser Required Consents");
(iii) except as set forth in Schedule 3.2, violate, conflict with or result in
the breach or default under (with or without the giving of notice or the passage
of time), or permit the suspension or termination of, any material Contract to
which Purchaser is a party or any of them or any of its assets is bound or
subject or result in the creation or any Lien upon any assets of Purchaser; or
(iv) violate any Order or, to Purchaser's knowledge, any Law of any Governmental
Body against, or binding upon, Purchaser, or upon any of its respective assets
or businesses.
SECTION 3.3 Corporate Existence and Power of Purchaser. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and has all requisite corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 3.4 Capitalization. The authorized capital stock of Purchaser
consists of: (i) 300,000,000 shares of common stock, $0.001 par value (the
"Purchaser Common Stock"); and (ii) 5,000,000 shares of preferred stock, $0.001
par value. Purchaser has; (i) 257,400,680 shares of common stock; and (ii) no
shares of preferred stock; issued and outstanding and at the Closing, Purchaser
will not, have outstanding any capital stock or other securities or any rights,
warrants or options to acquire securities of Purchaser or any convertible or
exchangeable securities and, other than pursuant to this Agreement and the
Convertible Note, no person has or, at Closing will have, any right to purchase
or otherwise acquire any securities of Purchaser. In addition, at the Closing
following the Reverse Stock Split (See Section 4.8), Purchaser will have 501,249
shares of common stock; and (ii) no shares of preferred stock; issued and
outstanding There are, and at Closing there will be, no outstanding obligations
of Purchaser to repurchase, redeem or otherwise acquire any securities of
Purchaser. All of Purchaser Common Stock is, and at Closing will be, duly
authorized, duly and validly issued, fully paid and non-assessable, and none
were issued in violation of any preemptive rights, rights of first refusal or
any other contractual or legal restrictions of any kind.
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SECTION 3.5 Disclosure of Information. Purchaser has been given the
opportunity: (i) to ask questions of, and to receive answers from, persons
acting on behalf of the Company concerning the terms and conditions of the
Contemplated Transactions and the business, properties, prospects and financial
conditions of the Company; and (ii) to obtain any additional information (to the
extent the Company or Seller possesses such information or is able to acquire it
without unreasonable effort or expense and without breach of confidentiality
obligations) necessary to verify the accuracy of information provided about the
Company.
SECTION 3.6 SEC Filings. Purchaser has filed with the SEC all forms,
reports, schedules, and statements that were required to be filed by it with the
SEC within the three (3) year period ending on the Effective Time, and
previously has furnished or made available to the Company accurate and complete
copies of all the SEC Documents. As of their respective dates, the SEC Documents
were prepared in accordance with the Exchange Act and the Securities Act and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated in those documents or necessary to make the
statements in those documents not misleading, in light of the circumstances
under which they were made. As of their respective dates, these reports and
statements will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated in them or necessary to make the
statements in them not misleading, in light of the circumstances under which
they are made and these reports and statements will comply in all material
respects with all applicable requirements of the Exchange Act and the Securities
Act.
SECTION 3.7 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Purchaser
that are included or incorporated in the SEC Documents were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as otherwise indicated in the notes to them) and fairly present the
consolidated financial position, results of operations, and cash flows from
operating, investing, and financing activities of Purchaser as of the dates and
for the periods indicated, except that the unaudited consolidated interim
financial statements in the SEC Documents are subject to normal year-end
adjustments and were prepared in accordance with the instructions to SEC Form
10-QSB and, accordingly, omit or condense certain footnotes and other
information normally included in financial statements prepared in accordance
with GAAP. The consolidated financial statements of Purchaser that are included
or incorporated in any subsequent report or statement that Purchaser mails to
its shareholders generally or files with the SEC during the period after the
date of this Agreement and before the Closing Date will be prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as otherwise indicated in them, the notes to them, or any related report
of Purchaser's independent accountants) and will fairly present the financial
information that they purport to present, except that the unaudited,
consolidated interim financial statements will be subject to normal year-end
adjustments and will omit or condense certain footnotes and other information
normally included in financial statements prepared in accordance with GAAP.
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SECTION 3.8 Charter Documents and Corporate Records. Purchaser has
heretofore delivered to Seller true and complete copies of the certificate of
incorporation, by-laws and minute books, or comparable instruments, of Purchaser
as in effect on the date hereof. The stock transfer books of Purchaser have been
made available to Seller for its inspection and are true and complete in all
respects.
SECTION 3.9 Liabilities. Except as set forth on Schedule 3.9, Purchaser
has not incurred any Liabilities since June 30, 2006 except (i) current
Liabilities for trade or business obligations incurred in connection with the
purchase of goods or services in the ordinary course of the business and
consistent with past practice, and (ii) Liabilities reflected on any balance
sheet referred to in Section 3.7.
SECTION 3.10 Absence of Certain Changes. (a) Since June 30, 2006,
Purchaser has conducted its business in the ordinary course consistent with past
practice and except as disclosed on Schedule 3.10 hereto there has not been:
(i) Any change in any method of accounting or accounting
practice by Purchaser;
(ii) Any increase in the compensation, commission, bonus or
other direct or indirect remuneration paid, payable or to become payable to any
officer, stockholder, director, consultant, agent or employee of Purchaser, or
any alteration in the benefits payable or provided to any thereof;
(iii) Any material adverse change in the relationship of
Purchaser with its employees, customers, suppliers or vendors;
(iv) Except for any changes made in the ordinary course of
business, any material change in any of Purchaser's business policies, including
advertising, marketing, selling, pricing, purchasing, personnel, returns or
budget policies;
(v) Any agreement or arrangement whether written or oral to do
any of the foregoing; and
(vi) Purchaser has no Liability that is past due except as
shown on the financial statements as filed with the SEC.
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SECTION 3.11 Contracts. (a) Schedule 3.11 sets forth an accurate and
complete list of all Contracts to which Purchaser is a party or by which it or
its assets are bound or subject that: (i) cannot be canceled upon 30 days'
notice without the payment or penalty of less than One Thousand Dollars
($1,000); or (ii) involve aggregate annual future payments by or to any person
of more than Five Thousand Dollars ($5,000). True and complete copies of all
written Contracts (including all amendments thereto and waivers in respect
thereof) and summaries of the material provisions of all oral Contracts so
listed have been made available to Seller.
(b) All Contracts to which Purchaser is a party are valid,
subsisting, in full force and effect and binding upon Purchaser and the other
parties thereto, in accordance with their terms, except that no representation
or warranty is given as to the enforceability of any oral Contracts. To the best
of Purchaser's knowledge and belief, except as set forth on Schedule 3.13,
Purchaser is not in default (or alleged default) under any such Contract.
SECTION 3.12 Claims and Proceedings. There are no outstanding Orders of
any Governmental Body against or involving Purchaser, its assets or its
business. There are no Claims (whether or not the defense thereof or Liabilities
in respect thereof are covered by insurance), pending or, to the best of
Purchaser's knowledge, threatened on the date hereof, against or involving
Purchaser, its assets or its business except as are set forth on Schedule 3.12.
SECTION 3.13 Taxes. Except as set forth on Schedule 3.13: (a)
(i) Purchaser has filed or, if not yet due but due before
Closing, will timely file all Tax Returns required to be filed by it for all
taxable periods ending on or before the date of Closing and all such Tax Returns
are or, if not yet filed, will be, upon filing, true, correct and complete in
all material respects;
(ii) Purchaser has paid, or if payment is not yet due but due
before Closing, will promptly pay when due to each appropriate Tax Authority,
all Taxes of Purchaser shown as due on the Tax Returns required to be filed by
it for all taxable periods ending on or before the date of Closing;
(iii) the accruals for Taxes currently payable as well as for
deferred Taxes shown on the financial statements of Purchaser as of the date of
the Interim Statements or the date of any financial statements delivered
hereunder: (A) adequately provide for all contingent Tax Liabilities of
Purchaser as of the date thereof; and (B) accurately reflect, as of the date
thereof, all unpaid Taxes of Purchaser whether or not disputed, in each case as
required to be reflected thereon in order for such statements to be in
accordance with GAAP;
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(iv) no extension of time has been requested or granted for
Purchaser to file any Tax Return that has not yet been filed or to pay any Tax
that has not yet been paid and Purchaser has not granted a power of attorney
that remains outstanding with regard to any Tax matter;
(v) Purchaser has not received notice of a Tax Deficiency and,
to Purchaser's knowledge, no Tax Deficiency is proposed or threatened;
(vi) all Tax Deficiencies have been paid or finally settled
and all amounts determined by settlement to be owed have been paid;
(vii) there are no Tax Liens on or pending against Purchaser
or any of the assets, other than those which constitute Permitted Liens;
(viii) there are no presently outstanding waivers or
extensions or requests for a waiver or extension of the time within which a Tax
Deficiency may be asserted or assessed;
(ix) no issue has been raised in any examination,
investigation, suit, action, claim or proceeding relating to Taxes which, by
application of similar principles to any past, present or future period, would
result in a Tax Deficiency for such period;
(x) there are no pending or threatened Tax Audits of
Purchaser;
(xi) Purchaser has no deferred intercompany gains or losses
that have not been fully taken into income for income Tax purposes;
(xii) there are no transfer or other taxes (other than income
taxes) imposed by any state on Purchaser by virtue of the Contemplated
Transactions; and
(xiii) no claim has been made by any Tax Authority that
Purchaser is subject to Tax in a jurisdiction in which Purchaser is not then
paying Tax of the type asserted.
Each reference to a provision of the Code in this Section 3.16 shall be treated
for state and local Tax purposes as a reference to analogous or similar
provisions of state and local law.
(b) To Purchaser's knowledge, Purchaser has collected and remitted
to the appropriate Tax Authority all sales and use or similar Taxes required to
be collected on or prior to the date of Closing and has been furnished properly
completed exemption certificates for all exempt transactions and has no
information otherwise or notice of any claim by any government or jurisdiction
with regards thereto. Purchaser has maintained and has in its possession all
records, supporting documents and exemption certificates required by applicable
sales and use Tax statutes and regulations to be retained in connection with the
collection and remittance of sales and use Taxes for all periods up to and
including the date of Closing. With respect to sales made by Purchaser prior to
the date of Closing for which sales and use Taxes are not yet due as of the date
of Closing, all applicable sales and use Taxes payable with respect to such
sales will have been collected or billed by Purchaser and will be included in
the assets of Purchaser as of the date of Closing.
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SECTION 3.14 Compliance with Laws. Purchaser is not in violation of any
Orders and to the best of Purchaser's knowledge, belief and information, any
Laws of any Governmental Bodies affecting Purchaser or Purchaser Common Stock.
SECTION 3.15 Environmental Matters. To the best of Purchaser's knowledge,
belief and information, Purchaser is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under,
any Environmental Law.
SECTION 3.16 Finders Fees. Other than as set forth in Section 4.7, there
is no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of Purchaser who might be entitled
to any fee or commission from Purchaser in connection with the consummation of
the Contemplated Transactions.
SECTION 3.17 Disclosure. Neither this Agreement, the Schedules hereto, nor
any reviewed or unaudited financial statements, documents or certificates
furnished or to be furnished to Seller by or on behalf of Purchaser pursuant to
this Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading. There are no events,
transactions or other facts, which, either individually or in the aggregate, may
give rise to circumstances or conditions which would have a material adverse
effect on the general affairs or business of Purchaser.
ARTICLE IV
COVENANTS AND AGREEMENTS
Seller covenants to Purchaser; and Purchaser covenant to Seller that:
SECTION 4.1 Filings and Authorizations. The parties hereto shall cooperate
and use their respective best efforts to make, or cause to be made, all
registrations, filings, applications and submissions, to give all notices and to
obtain all governmental or other third party consents, transfers, approvals,
Orders and waivers necessary or desirable for the consummation of the
Contemplated Transactions in accordance with the terms of this Agreement
including without limitation the preparation of any SEC Documents required to be
filed with the SEC in connection with the transactions contemplated by this
Agreement; and shall furnish copies thereof to each other party prior to such
filing and shall not make any such registration, filing, application or
submission to which Seller reasonably objects in writing. All such filings shall
comply in form and content in all material respects with applicable Law. The
parties hereto also agree to furnish each other with copies of such filings and
any correspondence received from any Governmental Body in connection therewith.
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SECTION 4.2 Confidentiality. Each party hereto shall hold in strict
confidence, and shall use its best efforts to cause all of its officers,
employees, agents and professional counsel and accountants, (collectively,
"Representatives") to hold in strict confidence, unless compelled to disclose by
judicial or administrative process, or by other requirements of Law, all
information concerning any other party which it has obtained from such party
prior to, on, or after the date hereof in connection with the Contemplated
Transactions, and each party shall not use or disclose to others, or permit the
use of or disclosure of, any such information so obtained, and will not release
or disclose such information to any other person, except its Representatives who
need to know such information in connection with this Agreement and who shall be
advised of the provisions of this Section 4.2. The foregoing provision shall not
apply to any such information to the extent; (i) known by any party prior to the
date such information was provided to such party in connection with the
Contemplated Transactions; (ii) made known to such party from a third party not
in breach of any confidentiality requirement; or (iii) made public through no
fault of such party or any of its Representatives.
SECTION 4.3 Expenses. Seller, Purchaser and the Company shall bear their
respective expenses, in each case, incurred in connection with the preparation,
execution and performance of the Transaction Documents and the Contemplated
Transactions, including, without limitation, all fees and expenses of their
respective Representatives.
SECTION 4.4 Tax Matters. Seller and Purchaser shall reasonably cooperate,
and shall cause their respective Representatives reasonably to cooperate, in
preparing and filing all Tax Returns, including maintaining and making available
to each other all records necessary in connection with the preparation and
filing of Tax Returns, the payment of Taxes and the resolution of Tax Audits and
Tax Deficiencies with respect to all taxable periods. Refunds or credits of
Taxes that were paid by the Company with respect to any periods shall be for the
account of the Company.
SECTION 4.5 Further Assurances. At any time and from time to time after
the date of Closing, upon the reasonable request of any party hereto, the other
party(ies), shall do, execute, acknowledge and deliver, or cause to be done,
executed, acknowledged or delivered, all such further documents, instruments or
assurances, as may be necessary, desirable or proper to carry out the intent and
accomplish the purposes of this Agreement.
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SECTION 4.6 Restricted Securities. The parties acknowledge and agree that
the Transferred Shares being issued or transferred pursuant to the Contemplated
Transactions are being issued or transferred pursuant to the exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") and constitute "restricted securities" within the meaning of
the Securities Act. Such securities may not be transferred absent compliance
with the provisions of the Securities Act, other applicable Laws, and all stock
certificates evidencing such securities shall bear a legend to such effect and
to the effect that such shares are subject to the terms and provisions of this
Agreement.
SECTION 4.7 Consulting Securities. The parties acknowledge and agree that
in consideration of certain consulting services performed for Seller and the
Purchaser, Purchaser shall issue shares of Purchaser Common Stock to the
following entities in the amounts as set forth (the "Consulting Shares"): (i)
700,000 shares of common stock to; Alan von Hohenberg-Balladur; (ii) 700,000
shares of common stock to Jay Morris Bracher; and (iii) 600,000 shares of common
stock to Andreas Poell.
SECTION 4.8 Purchaser Common Stock Reverse Stock Split. The parties
acknowledge and agree that prior to the consummation of the transactions
contemplated by this Agreement, Purchaser shall: cause a reverse stock split of
Purchaser Common Stock of 515.20136 shares for 1 share (the "Reverse Stock
Split").
SECTION 4.9 Name Change. The parties acknowledge and agree that prior to,
or simultaneous with, the consummation of the transactions contemplated by this
Agreement, Purchaser shall prepare an amendment to its certificate of
incorporation (the "Amendment") with the Secretary of State of the State of
Nevada which changes the name of Purchaser to "Zebra Copper Inc."
SECTION 4.10 Purchaser Spin Off Transaction. The parties acknowledge and
agree that prior to the consummation of the transactions contemplated by this
Agreement, (i) Purchaser shall form and incorporate an Australian unlisted
public company, "Australian Forest Industries Limited" ("AFIL") and transfer
(the "IFP Transfer") all of the issued and outstanding equity of Integrated
Forest Products Pty Ltd, a company incorporated pursuant to the laws of
Australia and a wholly-owned subsidiary of Purchaser, to AFIL; (ii) following
the IFP Transfer, Purchaser shall distribute (the "AFIL Spin Off") all of the
issued and outstanding equity of AFIL to the shareholders of Purchaser in the
form of a dividend.
SECTION 4.11 Shareholder Approval. The parties acknowledge and agree that
prior to the consummation of the transactions contemplated by this Agreement,
(i) Purchaser shall obtain a written consent to the Contemplated Transactions
(specifically including but not limited to the Amendment and the AFIL Spin Off)
from shareholders that represent a majority of the issued and outstanding common
stock of Purchaser; and (ii) Purchaser shall: (a) prepare Form 14C, an
information statement, (b) file such statement with the SEC, and (c) mail a
statement to each of its shareholders at least 15 days prior to the Closing Date
(collectively, subsection (i) and (ii), "Purchaser Shareholder Approval").
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SECTION 4.12 Post Closing Transactions. The parties acknowledge and agree
that it is anticipated that following the consummation of the transactions
contemplated by this Agreement, (i) Purchaser shall consummate the purchase (the
"Rockbury Purchase") of all of the issued and outstanding equity of Rockbury
Properties Limited ("Rockbury"); the consideration for the Rockbury Purchase
shall be: (a) 4,806,625 shares of common stock of Purchaser (post
Consolidation); and (b) the settlement of all outstanding loan balances between
Bongani International Group Limited and Rockbury; (ii) Purchaser will prepare
and file a registration statement with the Securities and Exchange Commission in
order to raise up to US$10,000,000 by the sale of its registered shares of
common stock; and (iii) Purchaser will pursue a listing of its common stock on
the AIM market of the London Stock Exchange.
SECTION 4.13 Due Diligence. Prior to the Closing Date The parties agree
that each of them shall be entitled, through its Representatives, to make such
investigation of the properties, businesses and operations of each other party,
and such examination of the books, records and financial condition of the other
parties, as such party reasonably deems necessary. Any such investigation and
examination shall be conducted at reasonable times, under reasonable
circumstances and upon reasonable notice. No investigation by a party shall
diminish or obviate any of the representations, warranties, covenants or
agreements of the other parties contained in this Agreement.
ARTICLE V
CONDITIONS TO CLOSING
SECTION 5.1 Conditions to the Obligations of the Parties. The obligations
of the Parties to consummate the Contemplated Transactions are subject to the
satisfaction of the following conditions:
(a) Consummation of Agreements. Purchaser shall have consummated the
Reverse Stock Split, the AFIL Spin Off, properly filed the Amendment and
obtained Purchaser Shareholder Approval.
(b) Consulting Shares. Purchaser shall issue the Consulting Shares
as set forth in Section 4.7 hereof.
(c) No Injunction. No provision of any applicable Law and no Order
shall prohibit the consummation of the Contemplated Transactions.
(d) No Proceedings or Litigation. No Claim instituted by any person
(other than pursuant to this Agreement) shall have been commenced or pending
against the Company, Purchaser, Seller or any of their respective Affiliates,
officers or directors, which Claim seeks to restrain, prevent, change or delay
in any respect the Contemplated Transactions or seeks to challenge any of the
terms or provisions of this Agreement or seeks damages in connection with any of
such transactions.
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SECTION 5.2 Conditions to the Obligations of Seller. The obligations of
Seller hereunder to consummate the Contemplated Transactions are subject, at the
option of Seller, to the fulfillment prior to or at the Closing of each of the
following further conditions:
(a) Performance. Purchaser shall have performed and complied in all
material respects with all agreements, obligations and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date.
(b) Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement and in any certificate or
other writing delivered by Purchaser pursuant hereto shall be true in all
material respects at and as of the Closing Date as if made at and as of such
time (except for those representations and warranties made as of a specific date
which shall be true in all material respects as of the date made).
(c) No Material Adverse Change. From the date hereof through the
Closing, there shall not have occurred any event or condition that has had or
could have a material adverse effect on Purchaser.
(d) Documentation. There shall have been delivered to the Company
the following:
(i) a certificate, dated the Closing Date, of the Chairman of
the Board and the President of Purchaser confirming the matters set forth in
Section 5.2(a) (b) and (c) hereof;
(ii) the Convertible Note executed by Purchaser in favor of
Seller in a form as attached hereto as Appendix A;
(iii) resolutions adopted by the board of directors of
Purchaser authorizing the transactions contemplated hereby, certified by the
Secretary of Purchaser;
(iv) the resignation letters of each officer and director of
Purchaser (other than Mr. Michael Timms) effective as of the Closing; and
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SECTION 5.3 Conditions to the Obligations of Purchaser. All obligations of
Purchaser to consummate the Contemplated Transactions hereunder are subject, at
the option of Purchaser, to the fulfillment prior to or at the Closing of each
of the following further conditions:
(a) Performance. The Company shall have performed and complied in
all material respects with all agreements, obligations and covenants required by
this Agreement to be performed or complied with by them at or prior to the
Closing Date.
(b) Representations and Warranties. The representations and
warranties of the Company, contained in this Agreement and in any certificate or
other writing delivered by the Company pursuant hereto shall be true in all
material respects at and as of the Closing Date as if made at and as of such
time (except for those representations and warranties made as of a specific date
which shall be true in all material respects as of the date made).
(c) No Material Adverse Change. From the date hereof through the
Closing, there shall not have occurred any event or condition that has had or
could have a material adverse effect on the Company.
(d) Documentation. There shall have been delivered to Purchaser the
following:
(i) A certificate, dated the Closing Date, of the Chairman of
the Board, the President or Chief Financial Officer of Seller confirming the
matters set forth in Section 5.3(a) (b) and (c) hereof;
(ii) A certificate, dated the Closing Date, of the Secretary
of Seller certifying, among other things, that attached or appended to such
certificate: (i) is a true and correct copy of the Company's articles of
incorporation and all amendments thereto, if any, as of the date thereof
certified by the appropriate governmental agency within Samoa; and (ii) is a
true and correct copy of the Company's memorandum of association as of the date
thereof;
(iii) A resolutions adopted by the board of directors of
Seller authorizing the transactions contemplated hereby, certified by the
Secretary of Seller;
(iv) resolutions adopted by the shareholders of Seller that
represent a majority of the issued and outstanding common stock of Seller,
certified by the Secretary of Seller;
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(v) Transferred Share Certificate representing the Transferred
Shares duly endorsed in blank or accompanied by stock powers duly endorsed in
blank and in suitable form for transfer to Purchaser by delivery.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 Survival of Representations, Warranties and Covenants. (a)
Notwithstanding any right of Purchaser fully to investigate the affairs of the
Company and Seller and the rights of Seller to fully investigate the affairs of
Purchaser, and notwithstanding any knowledge of facts determined or determinable
by Seller, Purchaser, or the Company, pursuant to such investigation or right of
investigation, Seller and Purchaser have the right to rely fully upon the
representations, warranties, covenants and agreements of the Company, and Seller
and Purchaser respectively, contained in this Agreement, or listed or disclosed
on any Schedule hereto or in any instrument delivered in connection with or
pursuant to any of the foregoing. All such representations, warranties,
covenants and agreements shall survive the execution and delivery of this
Agreement and the Closing hereunder. Notwithstanding the foregoing, all
representations and warranties of Seller and Purchaser respectively, contained
in this Agreement, on any Schedule hereto or in any instrument delivered in
connection with or pursuant to this Agreement shall terminate and expire twelve
(12) months after the date of Closing.
(b) All representations and warranties of Seller and Purchaser shall
terminate and expire twelve (12) months after the date of Closing; provided,
however, that the liability of Seller and Purchaser shall not terminate as to
any specific claim or claims of the type referred to in Section 6.3 hereof,
whether or not fixed as to Liability or liquidated as to amount, with respect to
which Seller and/or Purchaser has been given specific notice on or prior to the
date on which such Liability would otherwise terminate pursuant to the terms of
this Section 6.1(b), or which arise or result from or are related to a Claim for
fraud.
SECTION 6.2 Obligation of Seller to Indemnify. Seller agrees to indemnify,
defend and hold harmless Purchaser (and their respective directors, officers,
employees, Affiliates, successors and assigns) from and against all Claims,
losses, Liabilities, Regulatory Actions, damages, deficiencies, judgments,
settlements, costs of investigation or other expenses (including Taxes,
interest, penalties and reasonable attorneys' fees and fees of other experts and
disbursements and expenses incurred in enforcing this indemnification)
(collectively, the "Losses") suffered or incurred by Purchaser, or any of the
foregoing persons arising out of any breach of the representations and
warranties of Seller contained in this Agreement, or of the covenants and
agreements of Purchaser contained in this Agreement or in the Schedules or any
other Transaction Document.
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SECTION 6.3 Obligation of Purchaser to Indemnify. Purchaser jointly and
severally agree to indemnify, defend and hold harmless Seller (and any heirs,
successor or assignee thereof) from and against any Losses suffered or incurred
by Seller or any of the foregoing persons arising out of any breach of the
representations and warranties of Purchaser, or of the covenants and agreements
of Purchaser contained in this Agreement or in the Schedules or any other
Transaction Document.
SECTION 6.4 Notice and Opportunity to Defend Third Party Claims. (a)
Within ten (10) days following receipt by any party hereto (the "Indemnitee") of
notice of any demand, claim, circumstance or Tax Audit which would or might give
rise to a claim, or the commencement (or threatened commencement) of any action,
proceeding or investigation that may result in a Loss (an "Asserted Liability"),
the Indemnitee shall give notice thereof (the "Claims Notice") to the party or
parties obligated to provide indemnification pursuant to Sections 6.2, or 6.3
(collectively, the "Indemnifying Party"). The Claims Notice shall describe the
Asserted Liability in reasonable detail and shall indicate the amount
(estimated, if necessary, and to the extent feasible) of the Loss that has been
or may be suffered by the Indemnitee.
(b) The Indemnifying Party may elect to defend, at its own expense
and with its own counsel, any Asserted Liability unless: (i) the Asserted
Liability includes a Claim seeking an Order for injunction or other equitable or
declaratory relief against the Indemnitee, in which case the Indemnitee may at
its own cost and expense and at its option defend the portion of the Asserted
Liability seeking equitable or declaratory relief against the Indemnitee, or
(ii) the Indemnitee shall have reasonably, and in good faith, after consultation
with the Indemnifying Party, concluded that: (x) there is a conflict of interest
between the Indemnitee and the Indemnifying Party which could prevent or
negatively influence the Indemnifying Party from impartially or adequately
conducting such defense; or (y) the Indemnitee shall have one or more defenses
not available to the Indemnifying Party but only to the extent such defense
cannot legally be asserted by the Indemnifying Party on behalf of the
Indemnitee. If the Indemnifying Party elects to defend such Asserted Liability,
it shall within ten (10) days (or sooner, if the nature of the Asserted
Liability so requires) notify the Indemnitee of its intent to do so, and the
Indemnitee shall cooperate, at the expense of the Indemnifying Party, in the
defense of such Asserted Liability. If the Indemnifying Party elects not to
defend the Asserted Liability, is not permitted to defend the Asserted Liability
by reason of the first sentence of this Section 6.4(b), fails to notify the
Indemnitee of its election as herein provided or contests its obligation to
indemnify under this Agreement with respect to such Asserted Liability, the
Indemnitee may pay, compromise or defend such Asserted Liability at the sole
cost and expense of the Indemnifying Party. Notwithstanding the foregoing,
neither the Indemnifying Party nor the Indemnitee may settle or compromise any
claim over the reasonable written objection of the other, provided that the
Indemnitee may settle or compromise any claim as to which the Indemnifying Party
has failed to notify the Indemnitee of its election under this Section 6.4(b) or
as to which the Indemnifying Party is contesting its indemnification obligations
hereunder. If the Indemnifying Party desires to accept a reasonable, final and
complete settlement of an Asserted Liability so that such Indemnitee's Loss is
paid in full and the Indemnitee refuses to consent to such settlement, then the
Indemnifying Party's liability to the Indemnitee shall be limited to the amount
offered in the settlement. The Indemnifying Party will exercise good faith in
accepting any reasonable, final and complete settlement of an Asserted
Liability. In the event the Indemnifying Party elects to defend any Asserted
Liability, the Indemnitee may participate, at its own expense, in the defense of
such Asserted Liability. In the event the Indemnifying Party is not permitted by
the Indemnitee to defend the Asserted Liability, it may nevertheless participate
at its own expense in the defense of such Asserted Liability. If the
Indemnifying Party chooses to defend any Asserted Liability, the Indemnitee
shall make available to the Indemnifying Party any books, records or other
documents within its control that are necessary or appropriate for such defense.
Any Losses of any Indemnitee for which an Indemnifying Party is liable for
indemnification hereunder shall be paid upon written demand therefor.
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SECTION 6.5 Limits on Indemnification. (a) Notwithstanding the foregoing
or the limitations set forth in Section 6.5(b) below, in the event such Losses
arise out of any fraud related matter on the part of any Indemnifying Party,
then such Indemnifying Party shall be obligated to indemnify the Indemnitee in
respect of all such Losses.
(b) Seller shall not be liable to indemnify Purchaser pursuant to
Section 6.2 above and Purchaser shall not be liable to indemnify Seller pursuant
to Section 6.3 above: (i) unless a Claims Notice describing the loss is
delivered to the Indemnifying Party within 6 months after the Closing (except
for Losses arising out of an Indemnifying Party's fraud); and; (ii) with respect
to special, consequential or punitive damages; or (iii) in respect of any
individual Loss of less than $10,000.
SECTION 6.6 Exclusive Remedy. The parties agree that the indemnification
provisions of this Article VI shall constitute the sole or exclusive remedy of
any party in seeking damages or other monetary relief with respect to this
Agreement and the Contemplated Transactions, provided that, nothing herein shall
be construed to limit the right of any party to seek: (i) injunctive relief for
a breach of this Agreement; (ii) legal or equitable relief for a Claim for
fraud; or (iii) indemnity under the bylaws of Purchaser if they are or have been
a director or officer of Purchaser.
ARTICLE VII
SPECIFIC PERFORMANCE; TERMINATION
SECTION 7.1 Specific Performance. Seller and Purchase acknowledges and
agrees that, if Seller or Purchaser fails to proceed with the Closing in any
circumstance other than those described in clauses (a), (b), (c) or (d) of
Section 7.2 below, the others will not have adequate remedies at law with
respect to such breach. In such event, and in addition to each party's right to
terminate this Agreement, each party shall be entitled, without the necessity or
obligation of posting a bond or other security, to seek injunctive relief, by
commencing a suit in equity to obtain specific performance of the obligations
under this Agreement or to sue for damages, in each case, without first
terminating this Agreement. Seller or Purchaser specifically affirms the
appropriateness of such injunctive, other equitable relief or damages in any
such action.
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SECTION 7.2 Termination. This Agreement may be terminated and the
Contemplated Transactions may be abandoned at any time prior to the Closing:
(a) By mutual written consent of Seller and Purchaser;
(b) By Seller if: (i) there has been a misrepresentation or breach
of warranty on the part of Purchaser in the representations and warranties
contained herein and such misrepresentation or breach of warranty, if curable,
is not cured within thirty days after written notice thereof from Seller; (ii)
Purchaser has committed a breach of any covenant imposed upon it hereunder and
fails to cure such breach within thirty days after written notice thereof from
Seller; or (iii) any condition to Seller's obligations under Article V becomes
incapable of fulfillment through no fault of Seller and is not waived by Seller;
(c) By Purchaser, if: (i) there has been a misrepresentation or
breach of warranty on the part of Seller in the representations and warranties
contained herein and such misrepresentation or breach of warranty, if curable,
is not cured within thirty days after written notice thereof from Purchaser;
(ii) Seller has committed a breach of any covenant imposed upon it hereunder and
fails to cure such breach within thirty days after written notice thereof from
Purchaser; or (iii) any condition to Purchaser's obligations under Article V
becomes incapable of fulfillment through no fault of Purchaser and is not waived
by Purchaser; and
(d) By Seller or by Purchaser, if any condition under Section 5.1
becomes incapable of fulfillment through no fault of the party seeking
termination and is not waived by the party seeking termination.
SECTION 7.3 Effect of Termination; Right to Proceed. Subject to the
provisions of Section 7.1 hereof, in the event that this Agreement shall be
terminated pursuant to Section 7.2, all further obligations of the parties under
this Agreement shall terminate without further liability of any party hereunder
except that: (i) the agreements contained in Section 4.2 shall survive the
termination hereof; and (ii) termination shall not preclude any party from
seeking relief against any other party for breach of Section 4.2. In the event
that a condition precedent to its obligation is not met, nothing contained
herein shall be deemed to require any party to terminate this Agreement, rather
than to waive such condition precedent and proceed with the Contemplated
Transactions.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. (a) Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally by
hand or by recognized overnight courier, or mailed (by registered or certified
mail, postage prepaid return receipt requested) as follows:
If to Purchaser, one copy to:
Australian Forest Industries Inc
Suite 4
95 Salmon Street
Port Melbourne, 3207
AUSTRALIA
Attention: Mr. Michael Timms
Chairman,
Chief Executive Officer
and President
If to Seller, one copy to:
SIMBA MINES INC.
300 Center Ave.
Suite 202
Michigan 48708
Bay City,
Attention: Mr. Ian Egan
Chairman
(b) Each such notice or other communication shall be effective when
delivered at the address specified in Section 8.1(a). Any party by notice given
in accordance with this Section 8.1 to the other parties may designate another
address or person for receipt of notices hereunder. Notices by a party may be
given by counsel to such party.
SECTION 8.2 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) and the collateral agreements executed in connection with the
consummation of the Contemplated Transactions contain the entire agreement among
the parties with respect to the subject matter hereof and related transactions
and supersede all prior agreements, written or oral, with respect thereto.
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SECTION 8.3 Waivers and Amendments; Non-Contractual Remedies; Preservation
of Remedies. This Agreement may be amended, superseded, cancelled, renewed or
extended only by a written instrument signed by Seller and Purchaserr. The
provisions hereof may be waived in writing by Seller and Purchaser, as the case
may be. Any such waiver shall be effective only to the extent specifically set
forth in such writing. No failure or delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof. Nor shall any waiver on the part of any party of any such right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any other or further exercise thereof or the exercise of any
other such right, power or privilege. Except as otherwise provided herein, the
rights and remedies herein provided are cumulative and are not exclusive of any
rights or remedies that any party may otherwise have at law or in equity.
SECTION 8.4 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Nevada applicable to agreements made
and to be performed entirely within such State without regard to the conflict of
laws rules thereof.
SECTION 8.5 Consent to Jurisdiction. Each of the parties hereto
irrevocably and voluntarily submits to personal jurisdiction in the State of
Nevada and in the Federal courts in such state in any action or proceeding
arising out of or relating to this Agreement and agrees that all claims in
respect of such action or proceeding may be heard and determined in any such
court. If for any reason the Federal courts in such state will not entertain
such action or proceeding, then the parties hereto irrevocably and voluntarily
submit to personal jurisdiction in the state courts located in the State of
Nevada in any action or proceeding arising out of or relating to this Agreement
and agree that all claims in respect of any action or proceeding may be heard
and determined in any such court. Each of the parties further consents and
agrees that such party may be served with process in the same manner as a notice
may be given under Section 8.1. The parties hereto agree that any action or
proceeding instituted by any of them against any other party with respect to
this Agreement will be instituted exclusively in the United States District
Court located within the State of Nevada, or alternatively, in the State courts
located therein. Seller and Purchaser irrevocably and unconditionally waive and
agree not to plead, to the fullest extent permitted by law, any objection that
they may now or hereafter have to the laying of venue or the convenience of the
forum of any action or proceeding with respect to this Agreement in any such
courts.
SECTION 8.6 Binding Effect; No Assignment. This Agreement and all of its
provisions, rights and obligations shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, heirs and legal
representatives. This Agreement may not be assigned (including by operation of
Law) by any party hereto without the express written consent of the other party
and any purported assignment, unless so consented to, shall be void and without
effect.
SECTION 8.7 Exhibits. All Exhibits and Schedules attached hereto are
hereby incorporated by reference into, and made a part of, this Agreement.
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SECTION 8.8 Severability. If any provision of this Agreement for any
reason shall be held to be illegal, invalid or unenforceable, such illegality
shall not affect any other provision of this Agreement, this Agreement shall be
amended so as to enforce the illegal, invalid or unenforceable provision to the
maximum extent permitted by applicable law, and the parties shall cooperate in
good faith to further modify this Agreement so as to preserve to the maximum
extent possible the intended benefits to be received by the parties.
SECTION 8.9 Counterparts. The Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
SECTION 8.10 Third Parties. Except as specifically set forth or referred
to herein, nothing herein express or implied is intended or shall be construed
to confer upon or give to any person other than the parties hereto and their
permitted heirs, successors, assigns and legal representatives, any rights or
remedies under or by reason of this Agreement or the Contemplated Transactions.
ARTICLE IX
DEFINITIONS
SECTION 9.1 Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" of any person means any other person directly or indirectly through
one or more intermediary persons, controlling, controlled by or under common
control with such person.
"Agreement" or "this Agreement" shall mean, and the words "herein", "hereof" and
"hereunder" and words of similar import shall refer to, this agreement as it
from time to time may be amended.
"Assets" shall mean all cash, instruments, properties, rights, interests and
assets of every kind, real, personal or mixed, tangible and intangible, used or
usable in the Business. The term "audit" or "audited" when used in regard to
financial statements shall mean an examination of the financial statements by a
firm of independent certified public accountants in accordance with generally
accepted auditing standards for the purpose of expressing an opinion thereon.
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"Business" shall mean the ownership and operation of the business of the
Company.
"Condition of the Business" shall mean the financial condition, prospects or the
results of operations of the Business, the Assets or the Company.
"Contract" shall mean any contract, agreement, indenture, note, bond, lease,
conditional sale contract, mortgage, license, franchise, instrument, commitment
or other binding arrangement, whether written or oral.
The term "control", with respect to any person, shall mean the power to direct
the management and policies of such person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other persons by or through stock ownership, agency or otherwise; and the
terms "controlling" and "controlled" shall have meanings correlative to the
foregoing.
"GAAP" shall mean generally accepted accounting principles in effect on the date
hereof (or, in the case of any opinion rendered in connection with an audit, as
of the date of the opinion) as set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States.
"Governmental Bodies" shall mean any government, municipality or political
subdivision thereof, whether federal, state, local or foreign, or any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, or any court, arbitrator,
administrative tribunal or public utility.
"knowledge" with respect to: (a) any individual shall mean actual knowledge of
such individual; and (b) any corporation shall mean the actual knowledge of the
directors and executive officers of such corporation; and "knows" has a
correlative meaning. The terms "any Shareholder's knowledge," and "Shareholder's
knowledge," including any correlative meanings, shall mean the knowledge of any
Shareholder.
"Laws" shall mean any law, statute, code, ordinance, rule, regulation or other
requirement of any Governmental Bodies.
"Liability" shall mean any direct or indirect indebtedness, liability,
assessment, claim, loss, damage, deficiency, obligation or responsibility, fixed
or unfixed, choate or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, actual or potential, contingent or otherwise
(including any liability under any guaranties, letters of credit, performance
credits or with respect to insurance loss accruals).
"Lien" shall mean any mortgage, lien (including mechanics, warehousemen,
laborers and landlords liens), claim, pledge, charge, security interest,
preemptive right, right of first refusal, option, judgment, title defect,
covenant, restriction, easement or encumbrance of any kind.
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"person" shall mean an individual, corporation, partnership, joint venture,
limited liability company, association, trust, unincorporated organization or
other entity, including a government or political subdivision or an agency or
instrumentality thereof.
"Receivables" shall mean as of any date any trade accounts receivable, notes
receivable, sales representative advances and other miscellaneous receivables of
the Company.
"SEC" means the United States Securities and Exchange Commission.
"SEC Documents" means all forms, notices, reports, schedules, statements, and
other documents filed by Purchaser with the SEC within the three years from the
Effective Time, whether or not constituting a "filed" document, and includes all
proxy statements, registration statements, amendments to registration
statements, periodic reports on Forms 10-KSB, 10-QSB, and 8-K, and annual and
quarterly reports to shareholders.
"Tax" (including, with correlative meaning, the terms "Taxes" and "Taxable")
shall mean: (i)(A) any net income, gross income, gross receipts, sales, use, ad
valorem, transfer, transfer gains, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, rent, recording, occupation,
premium, real or personal property, intangibles, environmental or windfall
profits tax, alternative or add-on minimum tax, customs duty or other tax, fee,
duty, levy, impost, assessment or charge of any kind whatsoever (including but
not limited to taxes assessed to real property and water and sewer rents
relating thereto), together with; (B) any interest and any penalty, addition to
tax or additional amount imposed by any Governmental Body (domestic or foreign)
(a "Tax Authority") responsible for the imposition of any such tax and interest
on such penalties, additions to tax, fines or additional amounts, in each case,
with respect to any party hereto, the Business or the Assets (or the transfer
thereof); (ii) any liability for the payment of any amount of the type described
in the immediately preceding clause (i) as a result of a party hereto being a
member of an affiliated or combined group with any other person at any time on
or prior to the date of Closing; and (iii) any liability of a party hereto for
the payment of any amounts of the type described in the immediately preceding
clause (i) as a result of a contractual obligation to indemnify any other
person.
"Tax Return" shall mean any return or report (including elections, declarations,
disclosures, schedules, estimates and information returns) required to be
supplied to any Tax Authority.
"Transaction Documents" shall mean, collectively, this Agreement, and each of
the other agreements and instruments to be executed and delivered by all or some
of the parties hereto in connection with the consummation of the transactions
contemplated hereby.
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SECTION 9.2 Interpretation. Unless the context otherwise requires, the
terms defined in this Agreement shall be applicable to both the singular and
plural forms of any of the terms defined herein. All accounting terms defined in
this Agreement, and those accounting terms used in this Agreement except as
otherwise expressly provided herein, shall have the meanings customarily given
thereto in accordance with GAAP as of the date of the item in question. When a
reference is made in this Agreement to Sections, such reference shall be to a
Section of this Agreement unless otherwise indicated. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. The use of the neuter gender
herein shall be deemed to include the masculine and feminine genders wherever
necessary or appropriate, the use of the masculine gender shall be deemed to
include the neuter and feminine genders and the use of the feminine gender shall
be deemed to include the neuter and masculine genders wherever necessary or
appropriate. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this Stock Purchase and
Recapitalization Agreement as of the date set forth above.
PURCHASER:
AUSTRALIAN FOREST INDUSTRIES INC.
By:
-----------------------------------
Michael Timms
Chief Executive Officer
and President
SELLER:
SIMBA MINES INC.
By:
-----------------------------------
Mr. Ian Egan
Chairman
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Appendix B
Share Sale Agreement of Shares in Rockbury Properties Limited
-------------------------------------------------
DATED September 18, 2006
(1) BONGANI INTERNATIONAL GROUP LIMITED
(2) AUSTRALIAN FOREST INDUSTRIES
-------------------------------------------------
SHARE SALE AGREEMENT
OF SHARES IN ROCKBURY PROPERTIES LIMITED
-------------------------------------------------
CONTENTS
Heading Number Page
1 Definitions and interpretation.........................................3
2 Sale of shares.........................................................8
3 Consideration..........................................................8
4 Additional Obligations of the Seller...................................8
5 Completion.............................................................9
6 Warranties.............................................................9
7 Completion.............................................................9
8 Matters pending Completion............................................10
9 Confidentiality.......................................................11
10 Notices...............................................................12
11 Costs.................................................................12
12 General...............................................................13
Schedule 1 - Particulars of the Company.....................................16
Schedule 2 - Seller's Warranties............................................17
Schedule 3 - Purchaser's Warranties.........................................20
Schedule 4 - Completion requirements........................................21
B-2
AGREEMENT dated September 18, 2006
PARTIES:
(1) BONGANI INTERNATIONAL GROUP LIMITED a company incorporated in the British
Virgin Islands under company number 1005441 and whose registered office is
at the Euro-American Trust And Management Services Limited, PO Box 3161,
Road Town, Tortola, British Virgin Islands. (`Seller')
(2) AUSTRALIAN FOREST INDUSTRIES a company incorporated in the State of Nevada
under company number 0-25909 and whose registered office is at 3/4 95
Salmon Street, Port Melbourne, 3207, Australia (`Purchaser')
INTRODUCTION:
(A) The Seller is the registered holder and beneficial owner of all the issued
shares in Rockbury Properties Limited a company registered in the British
Virgin Islands under company registration number 668490 and whose
principal place of business is at Road Town, Tortola, British Virgin
Islands ('Company').
(B) The Seller is willing to sell the Shares to the Purchaser, and the
Purchaser is willing to purchase them, on the terms and subject to the
conditions of this Agreement.
(C) The Company has an outstanding liability in the form of a loan which it
owes to the Seller which, whilst in flux, the parties agree is
approximately US$2,500,000 at the date of this agreement.
(D) Details of the Company are set out in Schedule 1.
IT IS AGREED as follows:
1 Definitions and interpretation
1.1 The definitions and interpretation provisions set out in this clause
shall apply in this Agreement:
"Agreed Rate" the base rate of Natwest Bank plc (or such other London
Clearing Bank as the party entitled to receive payment
of Interest may nominate) from time to time in force;
"Agreed Form" the form agreed by the parties prior to the execution of
this Agreement and either initialled for the purpose of
identification by or on behalf of the Sellers'
Solicitors and the Purchaser's Solicitors or executed or
delivered contemporaneously with the execution of this
Agreement;
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"Agreement" this agreement including its schedules, appendices and
attachments;
"Business Day" means a day (not being a Saturday or Sunday) when banks
are open for general business in London;
"Close Relative" means any spouse, child, step-child, adopted child,
grandchild, parent or spouse's parent; or any child,
step-child, adopted child or grandchild of any such
person; or any spouse of any of the above, and for the
purposes of this definition 'spouse' includes de facto
spouse or co-habitee;
"Company" the company as set out in Schedule 1;
"Completion" the performance by the parties of the obligations (to
the extent not previously waived in terms of this
Agreement) assumed by them respectively under clause [7]
and Schedule [4];
"Completion Date" the date of Completion;
"Concessions" all mining concessions, mineral rights, mining rights,
mining licences and other approvals held by the Rockbury
Companies and in particular, all rights to explore and
exploit copper, cobalt and associated substances in
Angola pursuant to the licences below:
(1) The Foreign Co Limited: the Zenza Licence,
Benguela Licence;
(2) Silverplace Limited: the Cachoeiras de Binga
Licence;
"Confidential
Information" (i) any information concerning the business, accounts,
finances, contractual arrangements or intellectual
property (whether owned or licensed) or other dealings,
transactions, affairs or property of the Company or any
of the Rockbury Companies but does not include
information which is trivial or obvious or otherwise
clearly of a non-confidential nature or information
which has become a matter of public knowledge (other
than by reason of a breach of clause 9 or its unlawful
disclosure by any person) and (ii) any information in
respect of which an obligation of confidence is owed to
any third party by the Company or any of the Rockbury
Companies;
"Consent" all regulatory consents and approvals required fully to
explore and exploit the Concessions.
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"Consideration" the consideration for the Shares payable in accordance
with Clause 3;
"Consideration Shares" 4,806,625 non-assessable shares of common stock
in the capital of the Purchaser to be issued as set out
in Clause 3 as the consideration for the sale of the
Shares;
"Default Rate" the Agreed Rate plus 3 per cent;
"Encumbrance" any interest or equity of any person (including, without
limitation, any right to acquire, option, right of
pre-emption or right of conversion) or any mortgage,
charge, pledge, lien, assignment or any other
encumbrance, priority or security interest or
arrangement of whatever nature over or in the relevant
property;
"Group" the Company and Rockbury Companies;
"Hazardous Substance" any waste, pollutant, contaminant, or other
hazardous toxic, radioactive, noxious, flammable,
corrosive or caustic matter (whether in solid, liquid or
gaseous form);
"Interest" interest (as well after as before judgment) at the rate
in question accruing daily and compounded with rests on
the last day of each calendar month;
"Notice" notices as set out in clause 10;
"Purchaser's Solicitors" Cohen & Czarnik LLP of 140 Broadway, 36th
Floor, New York, New York 10005 or their successors in
business or any other firm of solicitors appointed by
the Purchaser for the purposes of this Agreement;
"Related Company" in relation to a company, any company which is
a holding company of that company or a subsidiary of
that company or of such holding company (and the
expression 'Related Companies' shall be construed
accordingly);
"Sellers' Solicitors" Atlantic Law LLP of One Great Cumberland
Place, London W1H 7AL or their successors in business or
any other firm of solicitors appointed by the Purchaser
for the purposes of this Agreement;
"Shares" the shares owned by the Seller constituting the whole of
the issued share capital of the Company;
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"Simba Mines Inc" a company incorporated in the State of Nevada
under company number E0541902005-1 and whose registered
office is at 6100 Neil Road, Suite 500, Reno, Nevada
89511, USA.
"Rockbury Companies" the interests of the Company being; 50% ownership of the
issued share capital of Silverplace Limited, a private
limited liability company registered in England and
Wales under company number 5565274; 50% ownership of the
issued share capital of The Foreign Co Limited, a
private limited liability company registered in England
and Wales under company number 5508219; and 51% of the
issued share capital of Future Corp Limited, a private
limited liability company registered in England and
Wales under company number 5611908;
"Taxation" or "Tax" any and all forms of tax, duty, rate, levy or other
imposition whenever and by whatever authority imposed
and whether of the United Kingdom or elsewhere,
including (without limitation) income tax, corporation
tax, advance corporation tax, capital gains tax, capital
transfer tax, inheritance tax, development land tax,
value added tax, customs duties, excise duties, rates,
council tax, stamp duty, stamp duty reserve tax, stamp
duty land tax, stamp duty reserve tax, capital duty,
national insurance and social security or other similar
contributions, and any interest, penalty, fine or
surcharge in connection with any such taxation; and any
reference to taxation shall include amounts which
represent or are equivalent to or are deemed to be
taxation;
"Taxation Authority" any government, state or municipality or any
local, state, federal or other fiscal, revenue, customs
or excise authority, body or official competent to
impose, collect or assess tax in the British Virgin
Islands or elsewhere;
"US$" or "US Dollars" United States dollars, the lawful currency of the United
States of America;
Warranties the warranties, representations and undertakings
contained or referred to in clause 6 and Schedules 2 and
3
1.2 References to statutes or statutory provisions include those
statutes or statutory provisions as amended, extended, consolidated,
re-enacted or replaced from time to time and any orders,
regulations, instruments or other subordinate legislation made under
them.
1.3 Unless specified to the contrary, use of the singular is deemed to
include the plural, use of any gender is deemed to include every
gender and any reference to a person is deemed to include a
corporation, a partnership and other body or entity; and (in each
case) vice versa.
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1.4 References to this Agreement or any other document shall, where
appropriate, be construed as references to this Agreement or such
other document as varied, supplemented, novated and/or replaced in
any manner from time to time.
1.5 Any undertaking by any of the parties not to do any act or thing
shall be deemed to include an undertaking not to permit or suffer or
assist the doing of that act or thing.
1.6 The headings shall not affect interpretation.
2 Sale of Shares
2.1 The Seller shall sell the Shares with full title guarantee and free
from Encumbrances and the Purchaser shall purchase the Shares
pursuant to this Agreement.
3 Consideration
3.1 The Consideration shall be the issue and allotment of the
Consideration Shares credited as fully paid by the Purchaser to the
Seller or a designated nominee of the Seller with full title
guarantee.
3.2 The Consideration Shares shall be issued credited as fully paid up
and shall rank pari passu in all respects with the existing shares
of common stock in the Purchaser and shall carry the right to
receive in full all dividends declared, made or paid after the date
of this Agreement.
3.3 The Purchasers agree to discharge the full balance of outstanding
debt as from the date of this agreement owed by the Company to the
Seller to be paid in case within 3 months of the completion of this
Agreement.
4 Additional Obligations of the Seller
4.1 The Seller warrants and represents to the Purchaser that it is
entitled to sell and transfer to the Purchaser the full legal and
beneficial ownership of the Shares free from any Encumbrance on the
terms of this Agreement.
4.2 The Seller shall not before Completion dispose of any interest in
the Shares or grant any Encumbrance over the Shares.
4.3 The Seller shall sell the Shares with all rights now and in the
future attaching to them.
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4.4 The Seller waives, and agrees to procure the waiver of, any
restrictions on transfer (including pre-emption rights) which may
exist in relation to the Shares under the existing articles of
association of the Company or otherwise.
4.5 For so long after Completion as they remain the registered holder of
any of the Shares the Sellers shall hold them and any distributions,
property and rights deriving from them in trust for the Purchaser
and shall deal with the Shares and any distributions, property and
rights deriving from them as the Purchaser directs.
5. Completion
Completion shall take place as set out in clause 7 on the Completion Date
and at such place or time as the parties shall agree.
6. Warranties
6.1 The Seller warrants, represents and undertakes with the Purchaser in
the terms of Schedule 2.
6.2 The warranties are deemed to be repeated on each day up to and
including the day of Completion and any reference made to the date
of this Agreement (whether express or implied) in relation to any
Warranty shall be construed, in relation to any such repetition, as
a reference to each such day.
6.3 The Seller acknowledges that the Purchaser is entering into this
Agreement in reliance on the Warranties.
7 Completion
7.1 Completion shall take place at the offices at such time, place and
date as the Seller and the Purchaser may agree.
7.2 On Completion the parties will comply with their respective
obligations under Schedule 4.
7.3 If any of the requirements of Schedule 4 (to the extent not
previously waived in terms of this Agreement) are not complied with
on the date fixed for Completion the party not in default may
(without prejudice to its other rights and remedies including the
right to claim damages for the breach):
7.3.1 defer Completion to a date not more than 30 days after such
date (and so that the provisions of this clause 7.3, apart
from this clause 7.3.1, shall apply to Completion as so
deferred); or
7.3.2 proceed to Completion so far as practicable (without prejudice
to its rights under this Agreement); or
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7.3.3 rescind this Agreement without liability to any other party
and in the event of such rescission it is agreed that the
parties rights and obligations shall cease immediately on
termination but their accrued rights and obligations shall not
be affected; or
7.3.4 waive all or any of the obligations in question of the other
party.
8 Matters pending Completion
8.1 Pending Completion, the Seller shall procure that the Purchaser and
its advisers shall be given full access to the Properties and to the
books, records and documents of title of the Company and its
Subsidiaries and that the directors, employees and advisers of the
Seller and of the Company and the Rockbury Companies will promptly
provide all such information and explanations regarding the Company
and its businesses, assets and affairs as the Purchaser or any of
the Purchaser's advisers may reasonably request.
8.2 The Seller undertakes (except only as may be necessary to give
effect to this Agreement or except with the prior written consent of
the Purchaser) that it will not and will procure that neither the
Company nor any of the Rockbury Companies nor any of the Sellers'
Rockbury Companies will do, allow or procure any act or omission
before Completion which would constitute a breach of or would be
inconsistent with the terms of this Agreement or any of the
Warranties contained in Schedule 2 to this Agreement.
8.3 The Purchaser shall not, in exercising its rights under clause 8.2,
assume any liability to the Seller or to any third party for any act
carried out with its consent or at its request or for the
consequences of any such act or of any failure to act or any
withholding of consent and the Seller shall indemnify the Purchaser
against any claim made by any third party in connection with any
such act or failure to act.
8.4 The Seller shall immediately disclose to the Purchaser in writing
any of the following which may become known to them or any of them
after the date of this Agreement and before Completion:
8.4.1 any breach of any of the Warranties;
8.4.2 any breach by the Seller of any obligation on their part under
this Agreement and, where that breach is capable of remedy, it
is not remedied to the Purchaser's satisfaction;
8.4.3 anything occurring (except something arising from an act or
omission of the Purchaser) which has, or would be likely to
have after Completion, a material adverse effect on the
business of the Company or any of the Rockbury Companies (as
presently carried on) including, without limitation, any of
the following:
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8.4.3.1 a strike, lock-out or other significant
industrial dispute arising or being threatened in
relation to the Company or any of the Rockbury
Companies;
8.4.3.2 any litigation or arbitration proceedings being
instituted or threatened by or against the Seller
or the Company or any of the Rockbury Companies.
8.5 If any such disclosure shall be made as set out in this Clause 8, or
if the Purchaser otherwise becomes aware of any such matter or
thing, the Purchaser may at any time before Completion, by written
notice to the Sellers, rescind this Agreement.
9 Confidentiality
9.1 The Seller undertakes to the Purchaser that it will not and will
procure that none of its Related Companies and no officer or
employee of it or of any Related Company will at any time after the
date of this Agreement disclose to anyone or use for their own
purposes or through any failure to exercise all due care and
diligence cause any unauthorised disclosure of any Confidential
Information which they or any of them now possess or come into
possession of prior to Completion.
9.2 Despite clause 9.1, the Seller may disclose Confidential
Information:
9.2.1 to their professional advisers solely for the purpose of
taking advice on matters concerning this Agreement in which
case the Seller shall ensure that such professional advisers
are aware of the confidential nature of the information and
shall use their best endeavours to procure that such advisers
keep such information confidential on terms equivalent to this
clause;
9.2.2 to the extent required by law, or by any regulatory authority
to which the Seller may be subject.
9.3 The Seller will on demand made by the Purchaser at any time after
Completion deliver up or cause to be delivered up to the Purchaser,
or destroy or erase or cause to be destroyed or erased at the
Purchaser's direction, all notes and records on whatever media
(including copies) containing Confidential Information, in each case
being in the custody, control or possession of the Seller or any of
its Related Companies.
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10 Notices
10.1 Every notice given or required to be given under this Agreement
shall be in writing and in the English language. A Notice shall, in
the case of the Purchaser, be sent to its registered office from
time to time and, in the case of the Seller, be sent to the Seller's
Solicitors (marked for the attention of Mr Will Osmond) at any place
of business of theirs from time to time or at such other address as
the Seller or Purchaser shall have notified to the other party in
accordance with this clause.
10.2 Every Notice shall be sent by courier, or by first class recorded
delivery post (if within the United Kingdom), or by prepaid airmail
(if elsewhere), or by facsimile transmission. A Notice addressed to
a corporation shall be marked for the attention of its chief
executive (or equivalent officer). To be valid a Notice must be
despatched on a Business Day.
10.3 A Notice shall be deemed to be served, if by courier, at the time of
delivery and, if posted, at 10.00 a.m. on the second Business Day
after the day it was put in the post if sent within the United
Kingdom or at 10.00 a.m. (local time at the place of destination) on
the fifth Business Day after the day it was put in the post if sent
by airmail. If sent by facsimile transmission it shall be deemed to
be served at the expiration of two hours after the time of despatch,
if despatched before 3.00 p.m. (local time to the sender), and in
any other case at 10.00 a.m.(local time to the sender) on the first
Business Day after the date of despatch.
10.4 In proving service of a Notice it shall be sufficient to prove that
delivery was made or that the envelope containing the Notice was
properly addressed and posted (either by prepaid first class
recorded delivery post or by prepaid airmail, as the case may be) or
that the sender's facsimile transmission report confirmed receipt.
11. Costs
AUFI shall pay the costs and expenses incurred by each party in connection
with the preparation, negotiation and implementation of this Agreement and
the documents referred to in this Agreement.
12 General
12.1 None of the rights or obligations of either party under this
Agreement may be assigned or transferred without the prior written
consent of the other party. However, the Purchaser may at any time
freely assign all or any part of its rights and benefits under this
Agreement, and any cause of action arising under or in respect of
any of them, to any transferee of the whole or any part of the share
capital of the Company who may enforce the assigned rights, benefits
and/or causes of action pursuant to the Contracts (Rights of Third
Parties) Act 1999 as if the Transferee had also been named in this
Agreement as the Purchaser but in relation to the Transferee's own
loss and/or interests as beneficial owner of the whole or any part
of the share capital of the Company.
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12.2 This Agreement is binding on and shall apply for the benefit of the
parties' personal representatives, successors in title and permitted
assignees.
12.3 This Agreement and the documents referred to in it constitute the
entire agreement between the parties relating to their subject
matter, and supersede all previous agreements between the parties
relating to that subject matter. There shall be deemed to be
comprised in this Agreement all letters and acknowledgements
exchanged between the parties contemporaneously with and expressed
to be ancillary to this Agreement.
12.4 Any variation or waiver of any of the terms of this Agreement shall
not be binding unless set out in writing, expressed to amend this
Agreement and signed by or on behalf of each of the parties.
12.5 Due to the variety of jurisdictions from which the parties of this
agreement are based, the parties have agreed that this Agreement
shall be governed by the laws of England and the parties submit to
the non-exclusive jurisdiction of the English Courts.
12.6 If any provision of this Agreement, or any part of a provision of
this Agreement, is found to be illegal, invalid or unenforceable the
remaining provisions, or the remainder of the provision concerned,
shall continue in effect.
12.7 A failure or delay in enforcing compliance with any term of this
Agreement shall not be a waiver of that or any other term of this
Agreement.
12.8 Each party confirms that, in agreeing to enter into this Agreement,
that party has not relied on any representation, warranty,
collateral contract or other assurance except those set out in this
Agreement. To the extent any previous representation, warranty,
collateral contract or assurance was made to or with a party that
party waives all rights and remedies in respect of it. However,
nothing in this clause shall limit or exclude liability for fraud.
12.9 All obligations of the parties shall continue in full force and
effect after Completion, except for any obligations then already
fully performed.
12.10 The express rights and remedies provided in this Agreement do not
exclude any other rights or remedies provided by law, except to the
extent that the rights and remedies of a party are expressly
excluded or restricted by the terms of this Agreement.
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12.11 Completion shall not constitute a waiver of any breach of this
Agreement even if the breach was known about at the time of
Completion.
12.12 This Agreement may be executed in any number of counterparts and all
the counterparts when taken together will constitute one agreement.
Each party may enter into this Agreement by executing a counterpart.
12.13 Each party shall execute such further documents and perform and do
such further acts and things following Completion as the other party
may reasonably request in writing in order to carry the provisions
of this Agreement into full effect. The costs and expenses incurred
in carrying out any such request will be paid by the party making
the request.
12.14 At any time after Completion the Seller shall provide or procure to
be provided to the Purchaser and its agents and advisers all
information in their possession or under their control concerning
the business, accounts, finance or contractual arrangements or other
dealings, transactions or affairs of the Group as the Purchaser
shall from time to time reasonably require and the Seller will give
or procure to be given to the Purchaser and its agents and advisers
such access (including the right to take copies) to such documents
containing such information as the Purchaser shall from time to time
reasonably require.
12.15 Each party agrees to co-operate with and assist the other parties in
the taking of all steps necessary or appropriate to complete the
transactions contemplated by this Agreement, including, without
limitation, the provision of information appropriate for submission
to the Exchange or any other relevant regulatory or governmental
agencies.
12.16 Each individual signing this Agreement on behalf of a party
represents that he has been fully empowered by that party to execute
this Agreement, that all necessary action to authorise execution of
this Agreement by him has been taken by such party, that the party
on whose behalf he executes this Agreement has full authority, power
and capacity to enter into this Agreement and that all necessary
actions have been taken to enable that party lawfully to enter into
this Agreement.
12.17 Unless expressly provided in this Agreement, no provision of this
Agreement is enforceable pursuant to the Contracts (Rights of Third
Parties) Act 1999 by any person who is not a party to it.
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Schedule 1 - Particulars of the Company
Part 1
1. Registered Number: 668490
2. Place of Incorporation: British Virgin Islands
3. Date of Incorporation: 21 July 2005
4. Type of company: BVI
5. Authorised share capital: $50,000
6. Issued share capital: 300 of $1 each
7. Registered holders of the issued share capital: Bongani International
Group
8. Beneficial owners of the issued share capital:
9. Loan capital: N/A
10. Registered office: Euro American Trust & Management Services Ltd, Road
Town, Tortola, British Virgin Islands
11. Directors: Matthew Stokes
12. Secretary: Euro American Trust & Management Services Ltd, Road Town,
Tortola, British Virgin Islands
13. Nature of business: Holding Company
14. Accounting Reference Date:
15. Accountants:
16. Date of latest accounts filed:
17. Date of latest annual return filed:
18. Tax residence: British Virgin Islands
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Schedule 2 - Seller's Warranties
A GENERAL
1. Capacity
1.1 The Seller has full power to enter into and perform its obligations
under this Agreement which will, when executed, constitute lawful
and binding obligations on the Seller in accordance with its terms.
1.2 The Seller is the beneficial owner of or are otherwise entitled to
sell and transfer to the Purchaser the full legal and beneficial
ownership of the Shares on the terms of this Agreement.
2. Information
2.1 All written information which has been given by the Seller or any of
their professional advisers or any officers or employees of the
Group to the Purchaser or any of its professional advisers in the
course of the negotiations leading to this Agreement (including,
without limitation, replies to enquiries relating to the Properties)
was when given, is now, and will at Completion be materially true
and accurate and not materially misleading in any respect. In so far
as such information was expressed as a matter of opinion such
opinion was truly and honestly held and not given casually or
recklessly or without due regard for its accuracy.
2.2 The facts set out in the introduction to this Agreement and Schedule
1 are true, accurate and complete in all respects and there are no
other facts or matters which would render any such facts or
information misleading.
3. Effect of Agreement
3.1 Compliance with the terms of this Agreement:
3.1.1 does not require the consent or agreement of any person who is
not a party to this Agreement;
3.1.2 will not cause any of the Rockbury Companies to lose any
interest in or the benefit of any asset, right, licence or
privilege including benefits under the Concessions it
presently owns or enjoys;
3.1.3 will not relieve any person of any obligation to the Group;
3.1.4 will not result in any of the employees of the Group becoming
entitled by virtue of their contract of service to any
enhancement in or improvement to their remuneration, benefits
or terms and conditions of service;
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3.1.5 will not cause the Group or the Seller to be in breach of any
of their respective obligations;
3.1.6 will not result in any present or future indebtedness of the
Group becoming due prior to its stated maturity;
3.1.7 will not give rise to or cause to become exercisable any
option or right of pre-emption; and
3.1.8 will not result in the creation or imposition of any
Encumbrance on or over any of the assets of the Group or the
Shares and so far as the Seller is aware the attitudes or
actions of customers, suppliers, employees and other persons
towards the Group will not be prejudicially affected by any
compliance with any of the terms of this Agreement.
B THE COMPANY AND ROCKBURY COMPANIES
1. Share capital and constitution
1.1 Apart from this Agreement and any existing Encumbrance pursuant to
the Concessions, there is no Encumbrance on, over or affecting the
issued or unissued share or loan capital of the Company or the
Rockbury Companies and there is no agreement or commitment to give
or create any such Encumbrance.
1.2 The copy of the memorandum and articles of association of the
Company supplied to the Purchaser is true and complete and the
Company has at all times carried on its business and affairs within
the powers and in accordance with the provisions of its memorandum
and articles of association and they set out fully the rights and
restrictions attaching to each class of authorised share capital of
the Company.
2. Title, encumbrances and assets
2.1 The Company or the Rockbury Companies has possession and control of
and a good and marketable title to the Concessions and no distress,
execution or other process has been levied on any of such assets nor
do any circumstances exist under which any person may claim
entitlement to possession of any of such assets in competition with
or in priority to the Company.
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2.2 No Concessions of the Company or the Rockbury Companies have been
depleted by any fraudulent or other unlawful act on the part of any
person.
3. Trading
3.1 The Company has never traded, has no assets or contracts other than
the Rockbury Companies.
3.2 No loan or loan capital or redeemable share capital or warrants or
options convertible into shares of the Company is outstanding.
4. Disputes and litigation
4.1 There are no court orders, injunctions or unsatisfied judgments
outstanding against the Sellers, the Company or the Rockbury
Companies nor are they party to any undertaking or assurance given
to a court, tribunal, regulatory authority, governmental agency or
any other person in connection with the determination or settlement
of any claim or proceedings.
4.2 Neither the Company, the Rockbury Companies nor any of its officers
nor any person for whose acts or defaults the Company or Rockbury
Companies may be liable is involved in any civil, criminal or
arbitration proceedings and no such proceedings and no claims of any
nature are pending or threatened by or against the Company or
Rockbury Companies and there are no facts likely to give rise to any
such proceedings.
4.3 The Company or Rockbury Companies are not the subject of or engaged
in, and there are no facts or circumstances likely to cause it to be
the subject of or engaged in, any proceedings, investigations or
enquiries by or before any governmental or municipal department,
commission, board, tribunal or other administrative, judicial or
quasi-judicial agency (whether in the United Kingdom or elsewhere)
in which any unfavourable judgment, decision, ruling or finding
could adversely affect the Company or Rockbury Companies in any way.
5. Consents and compliance with laws
5.1 The Company and Rockbury Companies have performed all obligations
required to be performed with respect to or affecting its business,
employees and assets and is not in default under any laws,
regulations, orders, decrees, judgments, contracts, agreements,
licences, obligations or restrictions of whatever nature binding
upon it or which affect its assets or employees or the operations of
its business.
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Schedule 3 - Purchaser's Warranties
1. Capacity
1.1 The Purchaser has full power to enter into and perform its
obligations under this Agreement which will, when executed,
constitute lawful and binding obligations on the Purchaser in
accordance with its terms.
1.2 The Purchaser is duly authorised and entitled to issue to the Seller
the Consideration Shares which will be non-assessable shares of its
common stock.
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Schedule 4 - Completion requirements
On Completion the parties will comply with the following requirements:
Sellers' obligations:
1. The Sellers shall deliver to the Purchaser's Solicitors:
1.1 transfers of the Shares duly executed by the registered holders of
such Shares in favour of the Purchaser or its nominees together with
the respective share certificates;
1.2 the certificate of incorporation, (and, if applicable any
certificates of incorporation on change of name) any common seal,
any securities seal, statutory minute books and registers (duly made
up to the date of Completion), share certificate book and copies of
the memorandum and articles of association of the Company and each
of the Rockbury Companies;
1.3 all original documents giving title to the Concessions
2. The Sellers shall procure that there shall be held a meeting of the
directors of the Company attended by a quorum of the directors, at which:
2.1 the transfers referred to in paragraphs 1.1 shall be approved for
registration (subject to stamping with any required stamp duty);
2.2 such other business as the Purchaser may reasonably require shall be
transacted; and
the Sellers shall deliver to the Purchaser certified copies of the minutes
of such board meeting[s].
Purchaser's obligations:
3. Against compliance with the above provisions of this Schedule the
Purchaser shall:
3.1 deliver to the Sellers' Solicitors definitive share certificates in
respect of the Consideration Shares;
3.2 procure that there shall be held a meeting of the directors of the
Purchaser attended by a quorum of the directors, at which this
agreement and the transaction entailed is approved and consented to
and that a copy of the board minutes of such meeting is provided to
the Seller.
B-19
EXECUTED by )
AUSTRALIAN FOREST INDUSTRIES ).............../s/................
(NAME)
Position: ) Director
(i) EXECUTED by )
).............../s/................
BONGANI INTERNATIONAL GROUP
LIMITED (NAME)
Position: ) Director
B-20
Appendix C
Amendment Articles of Incorporation of Australian Forest Industries
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION
OF
AUSTRALIAN FOREST INDUSTRIES
Pursuant to the Nevada Revised Statutes 78.385 and 78.390
We, the undersigned, being, respectively, the Chairman of the Board of Directors
of Australian Forest Industries, Inc. (the "Corporation"), a corporation
organized and existing under the Nevada Revised Statutes hereby certify:
FIRST: The Corporation is a corporation formed under the laws of the State of
Nevada, and its Articles of Incorporation was filed in the office of the
Secretary of State on September 21, 1998 and amended on March 31, 2000"
SECOND: The Articles of Incorporation are hereby amended by deleting the
existing ARTICLE I and replacing it in its entirety with the following
amendments:
"ARTICLE I: The name of the corporation is Zebra Copper, Inc., a Nevada
corporation."
THIRD: This amendment to the Articles of Incorporation has been duly adopted in
accordance with the General Corporation Law of the State of Nevada.
FOURTH: The number of shares of the Corporation outstanding and entitled
to vote on an amendment to the Articles of Incorporation is: 257,400,680; that
the said changes and amendment have been consented to and approved by a majority
vote of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
FIFTH: The number of shares voted for such amendments was [ ] (93.24%) and the
number voted against such amendment was 0.
The undersigned has signed these Articles on January __, 2007
By: _________________
Name: Michael Timms
Chief Executive Officer, President
and Chairman of the Board