UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB/A
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
4/95 Salmon Street, Port Melbourne,
Victoria
Australia, 3207
(Address
of principal executive offices) (Zip Code)
Issuer's
telephone number: 011 61 3 8645 4340
Securities
registered under Section 12(b) of the Exchange Act:
|
Name of Each Exchange
Title of Each
Class
on
Which Registered
NONE NONE
|
Securities
registered under Section 12(g) of the Exchange Act:
Common
Stock, $0.001 par value
(Title of
Class)
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YES [X] NO []
Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The
aggregate market value of the voting common stock held by non-affiliates of the
registrant as of May 9, 2006 was approximately $380,646 based on 400,680 shares
of common stock. The number of shares of Common Stock of the registrant
outstanding on May 9, 2006 was
257,400,680.
PART I
ITEM 1. DESCRIPTION OF
BUSINESS
HISTORY
Australian
Forest Industries f/k/a Multi-Tech International, Corp., hereinafter referred to
as "the Company", "we' or "us", was originally organized by the filing of
Articles of Incorporation with the Secretary of State of the State of Nevada on
September 21, 1998 under the name Oleramma, Inc. The Articles of Incorporation
authorized the issuance of one hundred five million (105,000,000) shares,
consisting of one hundred million (100,000,000) shares of Common
Stock at par value of $0.001 per share and five million (5,000,000) shares of
Preferred Stock at par value of $0.001.
On April
28, 1999, the Company changed its name to BuckTV,Com, Inc. on the basis that the
Company would market consumer products through an InteractiveWeb site. The
Company again changed its name in November 2002 to Multi-Tech International,
Corp.
On
September 1, 2004, we entered into a Share Exchange Agreement with Timbermans
Group Pty Ltd, an Australian corporation and its wholly-owned subsidiary at the
time Integrated Forest Products Pty Ltd, an Australian corporation as well
(“Share Exchange Agreement” and “Share Exchange”, respectively). Pursuant to
such Share Exchange Agreement, we:
|
·
|
completed
a 200-1 reverse stock split of our common
stock
|
|
·
|
increased
our authorized number of shares from 100,000,000 to
300,000,000
|
|
·
|
changed
our name from Multi-Tech International, Inc. to Australian Forest
Industries
|
|
·
|
appointed
Messrs. Michael Timms, Norman Backman, Colin Baird, Antony Esplin and
Roger Timms to the board of
directors
|
|
·
|
issued
257,000,000 shares of our common stock as a result of the Share Exchange
Agreement
|
Thus,
upon completion of the Share Exchange, Integrated Forest Products Pty Ltd
(“IFP”) became a wholly-owned subsidiary of the Company and the Company’s symbol
on the OTC-BB was changed from “MLTI” to “AUFI”.
GENERAL
The
majority of the issued and outstanding ordinary shares in the capital of the
Company are held by Timbermans Group, a leading supplier of softwood timber
products in Australia. The shareholders of Timbermans Group are the same
individuals who comprise our board of directors.
IFP owns
a minority interest in Radiata Forest Services Pty Ltd which is a company owned
jointly by a number of timber companies in the Canberra region. Radiata
purchases logs on behalf of its shareholders and distributes them among those
shareholders.
The
timber industry in Australia experienced a strong demand from internal growth in
residential and commercial construction along the Eastern coast of Australia.
Additionally, export demand from China and elsewhere in Asia for lumber and
other wood products continued to be very strong in recent years and management
expects that this trend will continue in the foreseeable future.
The
facilities of the Company are located in Australia. The business of the Company
consists of a pine sawmilling and timber facility at Canberra, which has a
capacity to process 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.
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.
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 New South Wales government. Management believes
that this is the last significant undeveloped pine forest in Eastern Australia.
The Bombala Agreement provides, inter alia, that the log
purchase price review mechanism is linked to the sawn timber actual price
achieved for the products produced at the new sawmill to be built at Bombala,
the market price for structural radiata pine timber, the ABS producer price
index for softwood in Sydney and input costs such as wages and fuel. This
mechanism is expected to adequately protect the Company from any decreasing
market prices and in part from increased costs during the term of the Bombala
Agreement. With the signing of the Bombala Agreement, the Company has insured
its supply for at least 20 years and is renewable at the Company’s option. With
this asset the Company believes it has secured a major asset.
The
Company’s core markets are Australia and Southern Asia. The Company’s revenues
are generated solely in its core markets.
Recent
events
The
proposed new sawmill at Bombala is planned to begin construction in the 3rd
quarter of 2006 after the approvals of the government of New South Wales and
local council have been obtained.
The new
mill operation will be situated on approximately 300 acres of land on the Monaro
Highway, just south of Bombala. Management believes that the new mill will be a
state of the art mill. It will be constructed by industry experts, including
Acora Reneco Group, and will utilize state of the art machinery and
technology.
The mill
is expected to comprise sawing machines from the USA, Canada, Europe and
Australia, and to have proven production capabilities, as well as safety,
environmental and efficiency capabilities.
The total
mill and ancillary investment are expected to be approximately $30 million (US).
Most of the timber from the new mill will be transported in green form to the
Integrated Forest Products plant at Canberra, for drying and dressing
processing. The balance will be sold in green form.
The new
mill is expected to initially process 300,000 cubic meters per year of log,
although designed to cut in excess of 400,000 cubic meters per year, under the
Bombala Agreement.
Furthermore,
negotiations are at an advanced stage for the sale of all mill residues of
sawdust, bark and waste wood chips.
The new
sawmill at Bombala is expected to put the Company in a position to produce at a
lower cost relative to its current cost level, and in compliance with all
applicable safety standards. In addition, it is expected to provide access to
the Company to a large and high quality log supply, to Acora Reneco Group as
leading Australian timber technology, mill and equipment suppliers, low cost
production from expanding Integrated Forest Products and will allow the Company
to concentrate on structural timber. Finally, the new sawmill is expected to
create competitive economics of scale and to generate profits from the future
integration of the Company’s operations in Canberra and Bombala.
In early
2005, the Company recently purchased a new timber treatment facility for its
operations in Canberra. With this new timber treatment facility, management has
been able to offer
treated pine framing to the market since March 2005. With the new facility, the
Company has been able
to meet an increased demand for treated timber as a result of changing rules and
regulations for the construction of new homes that require the use of such
timber for framing to be termite resistant.
Furthermore,
Integrated Forest Products commissioned a new sawlog line in 2005 which has
lifted the log intake rate of its facility in Canberra to over 160,000 cubic
meters per year, thereby increasing its sawing capacity by 38%, providing a
recovery increase, a higher sawing accuracy, greater operator safety and a
better timber finish.
Strategy
The
Company’s strategy is to maximize shareholder value, inter alia, by realizing
economics of scale and profits, initially through the securing of access to
additional log supplies from private forests, the installation of a new log
sawing line at Integrated Forest Products to improve its efficiency, and the
continuation of the meeting of milestones laid down in the Bombala Agreement.
The medium term strategy of the Company is to build a new green sawmill in
Bombala, and to expand its drying and planing facilities for the intake of green
sawn timber from the facilities then operated at Bombala. The long term strategy
of the Company is to combine its wood chip production facilities, and to export
wood chips with its strategic partner the State Forest of New South Wales,
utilizing both the Company’s and the State Forest of New South Wales’ supply,
or, alternatively, to establish a fibre board factory at Bombala utilizing its
available wood chips. Other options are also being investigated.
Employees
At the
end of December 2005,
we employed 121 full time equivalents. In the Company’s vision, employees play a
crucial role in the success of the Company. We encourage our employees to take
initiative to further enhance our efficiency in timber production. In order to
assist our employees, we constantly seek to train and educate them, either on an
individual basis (product knowledge and quality control) or on a more collective
basis (office automation and management skills). We have never experienced a
work stoppage resulting from labor problems.
Our
employees are members of the CFMEU which is one of the largest unions in
Australia. As a result, each non-executive employee is a party to a collective
bargaining agreement known as an Enterprise Bargaining Agreement which
determines the terms of employment of each non-executive employee. Management
believes that its relations with such union are impeccable and the risk of work
stoppages is extremely unlikely.
Competition
The
Australian wood products market is a competitive market and could become more
competitive in the future. Our competitors are diverse and offer
products similar to our products. Some of our competitors have access to
significantly greater financial, marketing and other resources than us.
Increased competition may result in price reductions for our products, reduced
revenues and gross margins and loss of market share. We are committed to
executing our strategy as set out above, inter alia, by focusing on
our ability to source capital equipment at very competitive prices and
effectively manage facilities as a result of management’s extensive consulting
experience.
At the
time many sawmills in Australia are facing limitations on log supply as older
forests are becoming less productive and a series of significant forest fires
over the past five years have diminished the availability of high quality
logs.
We
believe that we have certain competitive advantages our (i) ability to construct
efficient low cost mills, as a result of our strategic alliance with Acora
Reneco Group, (ii) access to log resources through the Bombala Agreement, (iii)
excess drying and dressing capacity in the Canberra processing facilities, (iv)
low cost operating and management techniques, and (v) operations management
system, which we believe to be superior to the systems of our
competitors.
Finally,
unlike most of our competitors, we believe that we have the ability for low cost
incremental expansion of our Canberra and future Bombala facilities, mainly
because of our spare processing capacity, subject to the availability of logs –
the supply of which we believe to have secured through our Bombala Agreement,
our log merchandising facility at Bombala for greater fibre recovery from whole
log, and the availablity of in-house process control and selective hi-tech
equipment.
It is our
belief that, when we get the new facility in operation in 2007, we can record
operating performance equal or better than that shown by the large capital
forestry companies including the high growth ones.
ITEM
2. DESCRIPTION OF PROPERTY
Our main
facility is located in Australia which consists of pine sawmilling and timber
facility at Canberra, which has a capacity to process 200,000 cubic meters of log. We are
currently in the process of arranging the financing for the construction of a
second in the Bombala region to further exploit the log resources generated by
the Bombala Agreement.
ITEM
3. LEGAL PROCEEDINGS
We are
not a party to any material pending legal proceedings or government actions,
including any bankruptcy, receivership, or similar proceedings. Management of
the Company does not believe that there are any proceedings to which any
director, officer, or affiliate of the Company, any owner of record of the
beneficially or more than five percent of the common stock of the Company, or
any associate of any such director, officer, affiliate of the Company, or
security holder is a party adverse to the Company or has a material interest
adverse to the Company.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART
II
ITEM
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The
Company's Common Stock is traded on the OTC-Bulletin Board under the symbol
AUFI. The following sets forth the range of the closing bid prices for the
Company's Common Stock for the period January 1, 2003 through May 9, 2006. Such
prices represent inter-dealer quotations, do not represent actual transactions,
and do not include retail mark-ups, mark-downs or commissions. Such prices were
determined from information provided by a majority of the market makers for the
Company's Common Stock.
|
|
|
High
Close
|
Low
Close
|
|
|
|
|
|
|
2004
|
|
|
|
|
First
Quarter
|
|
0.015
|
0.015
|
|
Second
Quarter
|
|
0.015
|
0.015
|
|
Third
Quarter
|
|
0.015
|
0.015
|
|
Fourth
Quarter
|
|
2.50
|
0.60
|
|
|
|
|
|
|
2005
|
|
|
|
|
First
Quarter
|
|
1.51
|
1.50
|
|
Second
Quarter
|
|
1.50
|
1.50
|
|
Third
Quarter
|
|
1.75
|
1.60
|
|
Fourth
Quarter
|
|
8.00
|
1.25
|
|
|
|
|
|
|
2006
|
|
|
|
|
First
Quarter
|
|
4.35
|
.75
|
|
Second
Quarter (through May 15th)
|
|
1.00
|
.75
|
|
|
(b)
The approximate number of holders of the Common Stock of the Company as of
May 16, 2006 was 900.
|
|
|
(c)
No cash dividends were declared by the Company during the fiscal year
ended December 31, 2005. While the payment of dividends rests within the
discretion of the Board of Directors, it is not anticipated that cash
dividends will be paid in the foreseeable future, as the Company intends
to retain earnings, if any, for use in the development of its business.
The payment of dividends is contingent upon the Company's future earnings,
if any, the Company's financial condition and its capital requirements,
general business conditions and other
factors.
|
ITEM
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING STATEMENTS
It should be noted that this
Management's Discussion and Analysis of Financial Condition and Results of
Operations may contain "forward-looking statements." The terms "believe,"
"anticipate," "intend," "goal," "expect," and similar expressions may identify
forward-looking statements. These forward-looking statements represent the
Company's current expectations or beliefs concerning future events. The matters
covered by these statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those set forth in the
forward-looking statements, including the Company's dependence on
weather-related factors, introduction and customer acceptance of new products,
the impact of competition and price erosion, as well as supply and manufacturing
restraints and other risks and uncertainties. The foregoing list should not be
construed as exhaustive, and the Company disclaims any obligation subsequently
to revise any forward-looking statements to reflect events or circumstances
after the date of such statements, or to reflect the occurrence of anticipated
or unanticipated events. In light of the significant uncertainties inherent in
the forward-looking information included herein, the inclusion of such
information should not be regarded as a representation that the strategy,
objectives or other plans of the Company will be achieved. The Company wishes to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made.
RESULTS OF
OPERATIONS
We are
currently in the third year of operations and have generated significant
revenues to date. Our activities from inception to date were related
to our formation, preparation of our business model, arranging and planning
financing and the acquiring all rights, title and interest to our timber rights
located in the Canberra region in addition to the implementation and
construction of our first sawmill also in the Canberra region.
We earn
revenue from one product, Structural Radiata Pine Timber
(lumber). Sales are recorded when a customer is
invoiced. While we sold more timber in 2005 (68,000 m3) than 2004
(48,000 m3), an approximate 13% decline in the selling price of timber impacted
our revenue.
Operating
costs for the year ended December 31, 2004 aggregated $13,916,006. This includes
costs incurred in procuring our rights under the Bombala Agreement and operating
expenses for our Canberra sawmill. We incurred an operating loss of $(925,448)
and a total net loss of $(252,422) or $(0.01) per share.
Operating
costs for the twelve-month period ended December 31, 2005 aggregated
$17,069,222. This includes an increase in costs of goods sold of $(3,587,314)
which were a result of general costs associated with the growth of our business.
As a result of the above we realized a loss of $(3,569,423) for the twelve-month
period ended December 31, 2005 or $(0.01) per share. While the cost of logs has
remained constant, the quality of timber, which is measured by the recovery of
structural timber from a given log, has declined. Additionally,
direct and indirect labor costs have increased 19.6% from 2004 to
2005.
While the
cost of logs has remained constant, the quality of timber, which is measured by
the recovery of structural timber from a given log, has
declined. Additionally, direct and indirect labor costs have
increased 19.6% from 2004 to 2005.
LIQUIDITY AND CAPITAL
RESOURCES
On
December 31, 2004 and 2005 we had current assets of $3,962,334 and $3,722,067,
respectively.
Net cash
used in operating activities for the period from inception to December 31, 2004
was $270,978. Net cash used in operating activities for the period from
inception to December 31, 2005 was $(4,148,578). The decrease in net cash was
partially a result of an increase in related party payables and decrease in
related party receivables of $273,175 which was a consequence of our growing
business and the addition of a significant number of employees.
Historically,
our major shareholder, Timbermans Group, has covered any shortfall in working
capital. There are no liabilities associated with our working capital
deficit that are past due.
The
Company completed a new sawline in Canberra which was operational in the third
quarter of 2005 which is used primarily for processing the logs resulting from
the Bombala Agreement.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
The
Company’s discussion and analysis of its financial condition and results of
operations are based upon its financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, the Company evaluates
its estimates, including those related to bad debts, income taxes and
contingencies and litigation. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
Recent
Accounting Pronouncements Affecting The Company:
In
December 2004, the FASB issued SFAS No. 123 (revised 2004), or SFAS 123R,
“Share-Based Payment.” This statement replaces SFAS 123, “Accounting
for Stock-Based Compensation” and supersedes Accounting Principles Board’s
Opinion No. 25 (ABP 25), “Accounting for Stock Issued to
Employees.” SFAS 123R will require us to measure the cost our
employee stock-based compensation awards granted after the effective date based
on the grant date fair value of those awards and to record that cost as
compensation expense over the period during which the employee is required to
perform services in exchange for the award (generally over the vesting period of
the award). SFAS 123R addresses all forms of share-based payments
awards, including shares issued under employee stock purchase plans, stock
option, restricted stock and stock appreciation rights. In addition, we will be
required to record compensation expense (as previous awards continue to vest)
for the unvested portion of previously granted awards that remain outstanding at
the date of adoption. SFAS 123R is effective for fiscal periods
beginning after June 15, 2005. Therefore, we are required to
implement the standard no later than our third fiscal quarter which begins on
July 1, 2005. SFAS 123R permits public companies to adopt its
requirements using the following methods: (1) a “modified prospective” method in
which compensation cost is recognized beginning with the effective date (a)
based on the requirements of SFAS 123R for all share-based payments granted
after the effective date and (b) based on the requirements of SFAS 123 for all
awards granted to employees prior to the effective date of SFAS 123R that remain
unvested on the effective date; or (2) a “modified retrospective” method which
includes the requirements of the modified prospective method described above,
but also permits entities to restate their financial statements based on the
amounts previously recognized under SFAS 123 for purposes of pro forma
disclosures for either (a) all prior periods presented or (b) prior interim
periods of the year of adoption.
AUSTRALIAN
FOREST INDUSTRIES
AUDITED
FINANCIAL STATEMENTS
FOR THE
YEARS ENDED DECEMBER 31, 2005 AND 2004 (RESTATED)
CONTENTS
|
Report
of Independent Registered Public Accounting Firm
|
Page
|
F-1
|
|
Consolidated
Balance Sheets
|
|
F-2
|
|
|
|
|
|
Consolidated
Statements of Operations
|
|
F-3
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
F-4
|
|
|
|
|
|
Consolidated
Statement of Stockholders’ Equity
|
|
F-5
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Notes
to Consolidated Financial Statements
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F-6
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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 (restated) and the related statements of operations,
stockholders’ equity, and cash flows for each of the two years in the period
ended December 31, 2005 (restated). 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 (restated), and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 2005
(restated), in conformity with accounting principles generally accepted in the
United States of America.
Reference
is made to Note A – Restatements.
/s/ Meyler & Company,
LLC
Middletown,
NJ
May 17,
2006 (Except for Notes A, B, and G
as
to which the date is December 29, 2006)
AUSTRALIAN
FOREST INDUSTRIES
CONSOLIDATED
BALANCE SHEETS
ASSETS
|
|
|
December 31,
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
(Restated)
|
|
|
(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
|
|
|
|
|
|
|
|
|
|
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 |
|
|
$ |
15,129,842 |
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
Bank
overdraft
|
|
$ |
117,772 |
|
|
$ |
421,097 |
|
|
Due
to National Australia Bank
|
|
|
4,818,000 |
|
|
|
5,229,350 |
|
|
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 |
|
|
|
386,835 |
|
|
Related
party
payable 592,844
|
|
|
|
|
|
|
|
|
|
Accrued
payroll, related taxes and benefits
|
|
|
599,389 |
|
|
|
571,186 |
|
|
Total
Current Liabilities
|
|
|
13,108,887 |
|
|
|
10,494,192 |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Capitalized
lease obligations
|
|
|
3,512,882 |
|
|
|
2,797,975 |
|
|
Deferred
capital gain
|
|
|
1,575,514 |
|
|
|
|
|
|
Total
Liabilities
|
|
|
18,197,283 |
|
|
|
13,292,167 |
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
(5,734,721 |
) |
|
|
(2,944,938 |
) |
|
Total
Stockholders’ Equity
|
|
|
(640,285 |
) |
|
|
1,837,675 |
|
|
Total
Liabilities and Stockholders’ Equity
|
|
$ |
17,556,998 |
|
|
$ |
15,129,842 |
|
See
accompanying notes to financial statements.
AUSTRALIAN
FOREST INDUSTRIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
For
the Year Ended
|
|
|
|
|
December 31
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
|
|
|
|
|
|
|
|
REVENUE
- SALES
|
|
$ |
13,499,799 |
|
|
$ |
12,990,558 |
|
|
|
|
|
|
|
|
|
|
|
|
COSTS
AND EXPENSES
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
15,272,772 |
|
|
|
11,685,458 |
|
|
Selling,
general and administrative
|
|
|
611,867 |
|
|
|
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
|
|
|
17,069,222 |
|
|
|
13,916,006 |
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(3,569,423 |
) |
|
|
(925,448 |
) |
|
|
|
|
|
|
|
|
|
|
|
NON-OPERATING
INCOME
|
|
|
|
|
|
|
|
|
|
Other
income -Government Grant
|
|
|
|
|
|
|
443,041 |
|
|
Interest
income
|
|
|
1,359 |
|
|
|
1,328 |
|
|
Gain
on disposal of assets
|
|
|
778,281 |
|
|
|
228,657 |
|
|
Total
Non-Operating Income
|
|
|
779,640 |
|
|
|
673,026 |
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$ |
(2,789,783 |
) |
|
$ |
(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.
AUSTRALIAN
FOREST INDUSTRIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
For
the Year Ended
|
|
|
|
|
December 31
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(2,789,783 |
) |
|
$ |
(252,422 |
) |
|
Adjustments
to reconcile net income to cash flows used
|
|
|
|
|
|
|
|
|
|
in
operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
438,947 |
|
|
|
315,369 |
|
|
Amortization
of Timber contract
|
|
|
54,900 |
|
|
|
36,943 |
|
|
Amortization
of leaseback gain
|
|
|
(35,806 |
) |
|
|
|
|
|
Gain
on sale of equipment
|
|
|
(2,389,601 |
) |
|
|
(228,657 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating activities:
|
|
|
|
|
|
|
(Increase)
in prepaid expenses
|
|
|
(51,389 |
) |
|
|
(59,895 |
) |
|
(Increase)
decrease in inventories
|
|
|
204,699 |
|
|
|
(952,240 |
) |
|
(Increase)
decrease in receivables
|
|
|
(11,217 |
) |
|
|
261,247 |
|
|
(Increase)
decrease in related party receivable
|
|
|
273,175 |
|
|
|
(273,175 |
) |
|
Increase
(decrease) in accounts payable and other liabilities
|
|
|
(463,550 |
) |
|
|
1,392,082 |
|
|
Increase in
related party payable
|
|
|
592,844 |
|
|
|
|
|
|
Increase in
accrued payroll
|
|
|
28,203 |
|
|
|
31,726 |
|
|
Net
Cash (Used in) Provided by Operating Activities
|
|
|
(4,148,578 |
) |
|
|
270,978 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Disposal
costs
|
|
|
(118,866 |
) |
|
|
|
|
|
Capital
additions
|
|
|
(5,200,874 |
) |
|
|
(5,078,041 |
) |
|
Investment
in long-term timber supply contract
|
|
|
|
|
|
|
(886,648 |
) |
|
Disposal
of capital assets
|
|
|
1,652,675 |
|
|
|
815,150 |
|
|
Net
Cash Used in Investing Activities
|
|
|
(3,667,065 |
) |
|
|
(5,149,539 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Bank
overdraft
|
|
|
(303,325 |
) |
|
|
421,097 |
|
|
Loans
from shareholders
|
|
|
2,827,077 |
|
|
|
660,010 |
|
|
Capital
leases
|
|
|
1,059,703 |
|
|
|
3,172,256 |
|
|
National
Australian bank loan
|
|
|
(411,350 |
) |
|
|
5,229,350 |
|
|
Proceeds
from sale of assets
|
|
|
4,233,540 |
|
|
|
446,714 |
|
|
Timberman
controlling interest
|
|
|
|
|
|
|
(5,307,400 |
) |
|
Net
Cash Provided by (Used In) Financing Activities
|
|
|
7,405,645 |
|
|
|
4,622,027 |
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATES ON CASH
|
|
|
311,823 |
|
|
|
21,796 |
|
|
DECREASE
IN CASH
|
|
|
(98,175 |
) |
|
|
(234,738 |
) |
|
CASH
AT BEGINNING OF PERIOD
|
|
|
225,189 |
|
|
|
459,927 |
|
|
CASH
AT END OF PERIOD
|
|
$ |
127,014 |
|
|
$ |
225,189 |
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
695,405 |
|
|
$ |
325,601 |
|
See
accompanying notes to financial statements.
AUSTRALIAN
FOREST INDUSTRIES
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY (RESTATED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Preferred
Stock
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders’
|
|
|
|
Shares
|
Amount
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income (loss)
|
|
|
Equity
|
|
|
Balance,
December 31, 2002
|
|
|
|
|
5,319,764 |
|
|
$ |
9,813,217 |
|
|
|
|
|
$ |
(2,034,164 |
) |
|
|
|
|
$ |
7,779,053 |
|
|
Net
loss for the year ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56,369 |
) |
|
|
|
|
|
(56,369 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
from exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rate
changes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
65,590 |
|
|
|
65,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
prior to Reverse Merger
|
|
|
|
|
5,319,764 |
|
|
|
9,813,217 |
|
|
|
|
|
|
(2,090,533 |
) |
|
|
65,590 |
|
|
|
7,788,274 |
|
|
Reverse
Merger (Note 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
of Integrated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forest
Products Pty Ltd
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
for Australian
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forest
Industries
|
|
|
|
|
(5,319,764 |
) |
|
|
(9,813,217 |
) |
|
$ |
9,813,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders
equity of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australian
Forest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industries
at date of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
merger
|
|
|
|
|
400,680 |
|
|
|
400 |
|
|
|
11,257,463 |
|
|
|
(11,257,863 |
) |
|
|
|
|
|
|
|
|
|
Reverse
Merger capitalization
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,257,863 |
) |
|
|
11,257,863 |
|
|
|
|
|
|
|
|
|
|
Issuance
of shares at date of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
merger
|
|
|
|
|
240,000,000 |
|
|
|
240,000 |
|
|
|
(240,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
consulting
agreement
|
|
|
|
|
17,000,000 |
|
|
|
17,000 |
|
|
|
238,000 |
|
|
|
|
|
|
|
|
|
|
|
255,000 |
|
|
Timbermans
Group Pty. Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment
in Company
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,307,400 |
) |
|
|
|
|
|
|
|
|
|
|
(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
|
|
|
|
|
257,400,680 |
|
|
|
257,400 |
|
|
|
4,503,417 |
|
|
|
(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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,789,783 |
) |
|
|
|
|
|
|
(2,789,783 |
) |
|
Balance,
December 31, 2005
|
|
|
|
|
257,400,680 |
|
|
$ |
257,400 |
|
|
$ |
9,810,817 |
|
|
$ |
(5,734,721 |
) |
|
$ |
333,619 |
|
|
$ |
(640,285 |
) |
See
accompanying notes to financial statements.
AUSTRALIAN
FOREST INDUSTRIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2005
NOTE A –
RESTATEMENTS
The
Company’s financial statements for the year ended December 31, 2005 and 2004
have been restated. The effects of the restatements are presented in
the following table:
|
|
|
Year Ended December 31,
2005
|
|
|
Year Ended December 31,
2004
|
|
|
|
|
As Reported
|
|
|
Restated
|
|
|
As Reported
|
|
|
Restated
|
|
|
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
$ |
225,189 |
(1) |
|
Prepaid
expense and other
|
|
|
|
|
|
|
|
$ |
141,609 |
|
|
|
142,350 |
(1) |
|
Property,
plant and equipment,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
of accumulated depreciation
|
|
|
|
|
|
|
|
|
9,712,015 |
|
|
|
10,317,803 |
(1) |
|
Receivable
from related party
|
|
|
|
|
|
|
|
|
273,175 |
|
|
|
|
(2) |
|
Due
to Timbermans shareholders
|
|
|
|
|
|
|
|
|
660,010 |
|
|
|
386,835 |
(1)(2) |
|
Current
liabilities
|
|
|
8,290,887 |
|
|
|
13,108,887 |
|
|
|
5,264,842 |
|
|
|
10,494,192 |
(5) |
|
Other
liabilities
|
|
|
4,818,000 |
|
|
nil
|
|
|
|
5,229,350 |
|
|
nil
|
|
|
Accrued
expense
|
|
|
|
|
|
|
|
|
|
|
542,414 |
|
|
|
571,186 |
(1) |
|
Deferred
capital gain
|
|
$ |
1,396,481 |
|
|
$ |
1,575,514 |
(3) |
|
|
|
|
|
|
|
|
|
Accumulated
deficit
|
|
|
(5,555,688 |
) |
|
|
(5,734,721 |
) |
|
|
(2,958,939 |
) |
|
|
(2,944,938 |
)
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
15,441,948 |
|
|
|
15,272,772 |
(4) |
|
|
|
|
|
|
|
|
|
Selling,
general and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
administrative
|
|
|
653,091 |
|
|
|
611,687 |
(4) |
|
|
1,271,331 |
|
|
|
1,285,332 |
(1) |
|
Other
income
|
|
|
225,851 |
|
|
nil
|
(4)
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
164,941 |
|
|
|
1,359 |
(4) |
|
|
|
|
|
|
|
|
Notes:
|
1)
|
Restated
to include the accounts of Timbermans Group Pty. Ltd., an entity deemed to
be a Variable Interest Entity.
|
|
2)
|
Reclassification
of related party receivable against payable to same related
party.
|
|
3)
|
Recalculation
of amortization relating to deferred gain on sale leaseback
transaction. Amortization is based upon life of acquired
equipment instead of loan repayment
amortization.
|
|
4)
|
Reclassification
of components of other income deemed to be operating and therefore offset
against cost of sales and selling, general and administrative
expenses.
|
|
5)
|
Reclassification
of loans from National Australia Bank to current from other
liabilities.
|
NOTE B
- - 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
AUSTRALIAN
FOREST INDUSTRIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2005
NOTE B
- - SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reverse
Merger (Continued)
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
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.
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.
AUSTRALIAN
FOREST INDUSTRIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2005
NOTE B
- - SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 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 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, “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.
AUSTRALIAN
FOREST INDUSTRIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2005
Recent Accounting
Pronouncements (Continued)
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 results of operations, financial
position or cash flows.
Revenue
Recognition
The
Company is in the business of producing lumber for the building
industry. In this connection, it receives orders from distributors
and lumber yards throughout Australia. The Company ships its finished
products FOB shipping point and title passes at that point. The
Company also assures itself that there are valid sales arrangements, that sales
prices are fixed and determinable, and that collectibility is reasonably
assured.
NOTE C -
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 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 a VIE under FIN 46 and accordingly has been consolidated in the financial
statements for 2005 and 2004. Timbermans Group, a holding company
which acquired the Company through an exchange agreement, became the majority
shareholder of Australian Forest Industries by investing $5,307,400 in the
Company which
AUSTRALIAN
FOREST INDUSTRIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2005
NOTE C -
VARIABLE INTEREST ENTITIES (CONTINUED)
was
borrowed from National Australia Bank. See Note G – Short-Term
Borrowing. The 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 D -
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 E -
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
|
|
|
30 |
|
|
|
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 F -
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 $386,835, respectively. The loans
are non interest bearing, are unsecured and have no specific repayment
date. This indebtedness is the net result of transaction between the
Company and Timbermans.
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.
NOTE G -
SHORT TERM BORROWING
The
Company has an overdraft facility with the National Bank of Australia in the
amount of $499,000 at the Australian base rate plus 1.80%
annually. The amount of the overdraft at December 31, 2005
and
AUSTRALIAN
FOREST INDUSTRIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2005
NOTE G -
SHORT TERM BORROWING (CONTINUED)
2004 was
$117,772 and $421,097, respectively. The facility is secured by the
assets of the Company and Timbermans Group Pty. Ltd., and personal guarantees of
the principal Officers and Directors of the Company. The notes
currently bear interest at the rate of 11.9% per annum with a default rate of
18.4% per annum.
The
Company, in connection with the Long Term Timber Supply contract, has placed a
bank guarantee in the amount of $576,700 with the New South Wales government to
insure a steady supply of timber with an issue fee of 1.40% of fair value and a
fee of 1.40% of face value payable semi-annually. Of the $576,700
bank guarantees, $489,100 is secured by the wife of a principal Officer and
Director and $87,600 is secured by the assets of the Company, Timbermans Group
Ptr. Ltd., and the personal guarantees of the principal Officer and Directors of
the Company.
In 2004,
the Timbermans Group Ptr. Ltd. obtained a credit facility of $5,307,400 to
acquire a majority interest in Australian Forest Industries. The
credit facility is secured by the assets of Australian Forest Industries,
Timbermans Group Ptr. Ltd., the personal guarantees of the principal Officers
and Directors of Australian Forest Industries and Timbermans Group Ptr. Ltd., as
well as personal properties of certain principal Officers and
Directors. The loan bears interest at the rate of 6.2% on $2,880,000
and a floating rate on the balance of the loan. The loan balance at
December 31, 2005 and 2004 was $4,818,000 and $5,229,350,
respectively.
In
addition, the Company has a $5,760,000 facility with National Australia Bank to
acquire capital equipment which would be secured by such
purchases. At December 31, 2005, the Company has executed Capital
Lease Agreements aggregating $4,588,895. See Note H – Capital Lease
Obligation of the Notes to Financial Statements.
All of
the above credit facilities are renewable every six months.
NOTE H -
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 |
|
AUSTRALIAN
FOREST INDUSTRIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2005
|
|
|
December 31
|
|
|
|
|
2005
|
|
|
2004
|
|
|
Total
minimum lease payments
|
|
$ |
5,354,455 |
|
|
$ |
4,136,976 |
|
|
Less:
amounts representing
|
|
|
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 |
|
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
In April
2005, the Company entered into a transaction to sell equipment to the National
Bank of Australia and leased it back under a new capitalized lease
agreement. Under SFAS No. 98, the gain of $1,611,320 will be deferred
and amortized over the life of the related equipment. For the year
ended December 31, 2005, $35,806 has been included in operating
income.
|
The
amortization of the gain for the next five years is as
follows.
|
|
|
Gain
|
|
Year
|
Amortization
|
|
2006
|
$53,710
|
|
2007
|
53,710
|
|
2008
|
53,710
|
|
2009
|
53,710
|
|
2010
|
53,710
|
|
Thereafter
|
1,306,964
|
|
|
$1,575,514
|
ITEM
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Through
the September 30, 2004 reporting period, our accountants were Michael Johnson
& Co., LLC. In January 2005, we changed accountants to Meyler & Company
LLC, independent certified public accountants. At no time has there been any
disagreement with such accountants regarding any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or
procedure.
ITEM
8A. DISCLOSURE CONTROLS AND PROCEDURES
(a)
Disclosure Controls and Procedures.
As of the
end of the period covering this Form 10-KSB, we evaluated the effectiveness of
the design and operation of our "disclosure controls and procedures". The
Company’s President conducted this evaluation by himself.
(i)
Definition of Disclosure Controls and Procedures.
Disclosure
controls and procedures are controls and other procedures that are designed with
the objective of ensuring that information required to be disclosed in our
periodic reports filed under the Exchange Act, such as this
report,
is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. As defined by the SEC, such disclosure
controls and procedures are also designed with the objective of ensuring that
such information is accumulated and communicated to our management, including
the President and Chief Financial Officer, in such a manner as to allow timely
disclosure decisions.
(ii)
Limitations on the Effectiveness of Disclosure Controls and Procedures and
Internal Controls.
The
Company recognizes that a system of disclosure controls and procedures (as well
as a system of internal controls), no matter how well conceived and operated,
cannot provide absolute assurance that the objectives of the system are met.
Further, the design of such a system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control
systems,
no evaluation of controls can provide absolute assurance that all control issues
have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns
can occur
because of simple error or mistake. Additionally, controls can be
circumvented in a number of ways. Because of the inherent limitations in a
cost-effective control system, system failures may occur and not be
detected.
However,
our officers and directors believe that our system of disclosure controls and
procedures provides reasonable assurance of achieving their
objectives.
The
Company's management, including the CEO and CFO believe that our system of
disclosure controls and procedures provide reasonable assurance that information
required to be disclosed in our periodic reports filed under the Exchange Act
is, in fact, being disclosed
(iii)
Conclusions with Respect to Our Evaluation of Disclosure Controls and
Procedures.
Our
officers and directors have concluded, based on the evaluation of these controls
and procedures, that our disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company required to
be included in our periodic SEC filings.
(b)
Changes in Internal Controls.
There
have been no changes in our internal controls over financial reporting during
the last fiscal quarter of 2005 that has materially affected or is reasonably
likely to affect the Company's internal control over financial
reporting.
ITEM
8B. OTHER INFORMATION
Not
applicable.
PART
III
ITEM
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT
OFFICERS
AND DIRECTORS
We have 5
executive officers who also serve as our board of directors. Our directors are
elected at each annual meeting of shareholders. The following individuals are
all of our executive officers and directors:
|
Name
|
Age
|
Positions
and Offices With The Company
|
|
Michael
Timms
|
55
|
Chief
Executive Officer; President; Chairman of the Board
|
|
Norman
Backman
|
57
|
Chief
Operating Officer; Director
|
|
Colin
Baird
|
47
|
Chief
Financial Officer; Director
|
|
Tony
Esplin
|
43
|
Executive
Vice President - Marketing; Director
|
|
Roger
Timms
|
50
|
Executive
Vice President - Engineering;
Director
|
The
following is a biographical summary of the directors and
officers of the Company:
Michael
Timms
Mr.
Michael Bruce Timms was born at 30 May 1950 in Bega, New South Wales, Australia.
He has spent over thirty years in the sawmilling industry. He has been involved
with design and construction of over seven greenfield sawmill facilities and
scores of equipment upgrades across Australia and Canada in both the Hardwood
and Softwood sectors, through his engineering business, Acora Reneco Group Pty
Ltd. Among other responsibilities he works as Chief Executive Officer and
President of the Company and is Chairman of the Board.
Norman
Backman
Mr.
Norman William Backman was born at 20 September 1948 in Melbourne, Australia. He
has over thirty years of experience in the sawmilling industry. He has worked
for a long period with Amcor and Brown & Dureau as Mill Manager at the
Morwell facility. At Integrated Forest Industries Pty Ltd he will work as
Director of Operations. Mr. Backman has access to a team of industry experienced
individuals possessing relevant and highly refined sawmill information
technology systems technology and cost accounting experience.
Colin
Baird
Mr. Colin
Baird was born at 22 June 1958 in Melbourne, Australia. He is a qualified
accountant who has operated his own practice, Colib Pty Ltd since 1987. He has
been involved in the timber industry through his association with some of his
clients since 1983. At present his practice has in excess of 500 clients. Mr.
Baird is Director of Finance of the Company.
Tony
Esplin
Mr. Tony
Esplin was born at 23 August 1962 in Melbourne, Australia. He has had twelve
years of experience in the sawmill industry covering fabrication of sawmill
equipment, project management of new sawmills through his own business, Acora
Reneco Group Pty Ltd. Over the last four years he has been involved in the on
site management of Integrated Forest Products, covering all aspects of sawmill
administration, including log procurement and product marketing. He works as
Director of Marketing & Log Procurement for the Company.
Roger
Timms
Mr. Roger
Kenneth Timms was born 24 April 1956 in Bega, New South Wales, Australia. He has
spent over twenty-five years in the sawmilling industry. He is currently
involved in the design, supply and installation of sawmill equipment in
Australia and part owns a company, Acora Reneco Group Pty Ltd, which performs
these functions. He is the Company’s Director of Engineering.
Director
Positions in Other Public Companies
No
director holds any directorship in a company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934 or
subject to the requirements of Section 15(d) of such Act. No director holds any
directorship in a company registered as an investment company under the
Investment Company Act of 1940. However, with the exception of Norman
Backman, the remaining directors have other business interest and work for the
Company on a part-time basis at the present time.
Code
of Conduct
The
Company does not have an Audit or Strategy committee. Neither does the Company
have a standing nominating committee or any committee performing a similar
function. For the above reasons, the Company has not adopted a code of
ethics.
COMPLIANCE
WITH SECTION 16(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Section
16(a) of the Securities Exchange Act of 1934 requires executive officers and
directors who beneficially own more than ten percent (10%) of the Company's
Common Stock to file initial reports of ownership and reports of changes of
ownership with the Securities and Exchange Commission. Executive officers,
directors and greater than ten percent (10%) beneficial owners are required by
Commission regulations to furnish the Company with copies of all Section 16(a)
forms they file.
The
information required to be compliant with Section 16(a) is found herein.
However, at the present time the required individuals have not filed the
appropriate Section 16(a) forms although it has been represented to the Company
that such are being prepared and will be filed shortly after the filing of this
annual report.
ITEM
10. EXECUTIVE COMPENSATION
The table
below sets forth all annual and long-term compensation paid by the Company
through the latest practicable date to the Chief Executive Officer of the
Company and to all executive officers of the Company who received total annual
salary and bonus in excess of $100,000 for services rendered in all capacities
to the Company and its subsidiaries during the fiscal years ended December 31,
2004 and 2005.
The following table sets forth
information concerning all remuneration paid by the Company as of December 31,
2005 to the Company's Directors and Executive Officers:
Summary Compensation
Table
|
|
|
|
|
|
Long-Term
Compensation
Awards
|
|
|
|
|
|
|
|
|
|
Name and Principal
Position
|
|
Year
|
|
Salary
|
Bonus
|
|
Securities
Underlying
Options
(#) /SARS
|
|
All
Other
Compensation
|
|
|
Michael Timms
- -
Chairman of the Board; CEO and
President
|
|
2005
|
|
$ 75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
56,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coin Baird - Chief Financial
Officer and Director
|
|
2005
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
28,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tony Esplin – Executive Vice
President – Marketing; Director
|
|
2005
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
56,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Norman Backman – Chief Operating
Officer; Director
|
|
2005
|
|
140,000
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
140,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger Timms – Executive Vice
President – Marketing; Director
|
|
2005
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
20,000
|
|
|
|
|
|
|
|
|
Directors'
Compensation
Other
than minimal expenses incurred for traveling to Canberra which were reimbursed
by the Company, during the fiscal year ended December 31, 2005 our Directors did
not received a fee for serving in that capacity.
Employment
Contracts
There are
no employment agreements with the executive officers at this time.
ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security
Ownership of Certain Beneficial Owners
The
following table sets forth information regarding the beneficial ownership of the
shares of the Common Stock (the only class of
shares previously issued by the Company) at May 15, 2006
by (i) each person known by the Company to be the beneficial owner of more than
five percent (5%) of the Company’s outstanding shares of Common
Stock, (ii) each director of the Company, (iii) the
executive officers of the Company, and (iv) by all directors and executive
officers of the Company as a group. Other than the Timbermans Group
Pty Ltd, each person named in the table, has sole voting and
investment power with respect to all shares shown
as beneficially owned by such person and can be contacted at the
address of the Company.
|
Title
of Class
|
Name
of Beneficial Owner
|
Shares
of Common Stock
|
|
Percent
of Class
|
|
|
|
|
|
|
|
Common
|
Timbermans
Group Pty Ltd1
|
140,000,000
|
|
54.47%
|
|
Common
|
Jeffrey
Reade
|
17,000,000
|
|
6.61%
|
|
Common
|
Norman
Backman2
|
20,000,000
|
|
7.78%
|
|
Common
|
Colin
Baird3
|
20,000,000
|
|
7.78%
|
|
Common
|
Tony
Esplin4
|
20,000,000
|
|
7.78%
|
|
Common
|
Michael
Timms5
|
20,000,000
|
|
7.78%
|
|
Common
|
Roger
Timms6
|
20,000,000
|
|
7.78%
|
|
Directors
and Officers as a group
|
|
240,000,000
|
|
93.39%
|
1Timbermans
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.
2Mr.
Backman maintains his shares in his and his wife’s name
3Mr. Baird
maintains his shares in his and his wife’s name
4Mr.
Esplin maintains his shares in his and his wife’s name
5Mr.
Michael Timms maintains his shares in his and his wife’s name
6Mr. Roger
Timms maintains his shares in his and his wife’s name
ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Timbermans Group Pty Ltd owns the
majority of the shares of common stock of the Company and its shareholders are
the same individuals as our officers and directors. Three of the directors of
our Company also own 100% of Acora Reneco Group which is the largest Australian
manufacturer and designer of original sawmilling equipment as well as an agent
for sales and distribution for sawmilling equipment manufactured by other
companies. The Company presently has an agreement in place pursuant to which
Acora supplies the Company’s sawmill equipment needs. All transactions between
Acora and the Company are at arms length terms.
ITEM
13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Exhibit Description
10.1 Letter
of Offer to Timbermans Group Pty Ltd from National Australia Bank
Limited
10.2 Letter
of Offer to Integrated Forest Products Pty Ltd from National Australia Bank
Limited
10.3 Deed
of Sale between Integrated Forest Products Pty Ltd and National Australia Bank
Limited
10.4 Sale/Leaseback
Agreement with National Bank of Australia
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
32.2
|
Certification
of the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
(b)
Reports on Form 8-K.
None.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND
SERVICES
Audit Fees
For the Company's fiscal year ended
December 31,
2005, the cost for professional services rendered for the
audit of our financial statements and the review of the Form 10-KSB
aggregated $15,000.
All Other Fees
The Company did not incur any other fees
related to services rendered by our principal accountant for the fiscal year ended
December 31, 2005.
SIGNATURES
In accordance with Section 13 or 15(d)
of the Exchange Act, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AUSTRALIAN
FOREST INDUSTRIES
/s/ Michael
Timms
Name:
Michael Timms
Title:
Chief Executive Officer, President and Chairman
Date:
March 28, 2008
/s/ Colin
Baird
Name:
Colin Baird
Title:
Chief Financial Officer and Director
Date:
March 28, 2008
/s/ Roger
Timms
Name:
Roger Timms
Title:
Executive Vice President and Director
Date:
March 28, 2008