25 Oct Amazonas Florestal (AZFL) – research report
Amazonas Florestal (AZFL) hit our radars yesterday because it had its first ever day of volume with 293,320 shares traded including some suspicious block trades.
Today the block trading continued with big blocks of 1.5 million, 200k, and 415k. AZFL finished today's trading session with 3,403,900 shares traded up 14% at $.057/share.
What put AZFL on the top of my list of tickers to research tonight was when I noticed the name Edward W. Withrow III listed as a Director for AZFL on at their Nevada business entity page.
Edward W Withrow III showed up in our PRTN research report as a major shareholder in that AwesomePennyStock promoted shell.
Amazonas Florestal claims to own the Title for a property denominated Fazenda Jatuarana. The property contains 90,108 acres (141 sq miles) of virgin rainforest land located in the state of Amazonas, Brazil. Those forests contain millions of cubic meters of harvestable timber, which has a potential through sustainable management to increase in volume each year. AZFL plans on pursuing a strategy that will allow it to develop into a profitable enterprise while practicing responsible management its properties. AZFL places an asset value on the property at $47,000,000.
History of Amazonas Florestal Ltd (AZFL)
Amazonas Florestal Ltd was incorporated in the state of Nevada as Ecologic Rentals Inc by Edward W Withrow III, William Nesbitt, and Calli Bucci on December 18, 2008. On July 7, 2009, Ecologic Rentals Inc changed its name to Ecologic Systems, Inc.
Around this same time, Ecologic Systems Inc was purchased by Ecologic Transportation Inc (EGCT) (which at this point had become an Edward W Withrow III company). Ecologic Systems Inc became a wholly owned subsidiary of EGCT.
On March 16, 2012, Ecologic Transportation Inc (EGCT) entered into a share exchange with Amazonas Florestal Inc (a Florida business entity). EGCT purchased 100% of the outstanding Amazonas Florestal Inc shares in exchange for 70,000,000 shares of Ecologic Systems Inc stock. The attorney helping with the agreement was W. L. MacDonald of MacDonald Tuskey.
Here is a list of the Amazonas Florestal Inc shareholders that split the 70,000,000 AZFL shares.
Michael Ibar - 4,200,000 shares
Reny De Oliveira - 11,200,000 shares
Pedro De Oliveira - 11,200,000 shares
Keitiane Da Gama - 11,200,000 shares
Candido Ibar - 18,200,000 shares
Stephen Wayner - 2,800,000 shares
Ricardo Cortez - 11,200,000 shares
Subsequent to the closing, EGCT spun off the Ecologic Systems Inc entity. Ecologic Systems Inc ceased to operate as a wholly owned subsidiary of EGCT and became its own publicly traded shell.
As part of the share exchange agreement, the Amazonas Florestal Inc shareholders agreed to take on a $60,000 debt Note owed to an anonymous "non-affiliated" 3rd party. The $60,000 debt Note was convertible into shares of AZFL at $.001/share and on March 29, 2012 the Note was converted into 60,000,000 shares of AZFL stock.
4,020,618 shares were issued to Ecologic Transportation Inc (EGCT) as part of an anti-dilution agreement which requires them to own 3% of the outstanding AZFL share count at all times.
On April 11, 2012, Ecologic Systems Inc changed its name to Amazonas Florestal Ltd.
On April 19, 2012, Amazonas Florestal Ltd effected a 3:1 forward split.
The 4,200,000 shares owned by Michael Ibar became 12,600,000 shares
The 11,200,000 shares owned by Reny De Oliveira became 33,600,000 shares
The 11,200,000 shares owned by Pedro De Oliveira - 33,600,000 shares
The 11,200,000 shares owned by Keitiane Da Gama - 33,600,000 shares
The 18,200,000 shares owned by Candido Ibar - 54,600,000 shares
The 2,800,000 shares owned by Stephen Wayner - 8,400,000 shares
The 11,200,000 shares owned by Ricardo Cortez - 33,600,000 shares
The 60,000,000 shares issued for the conversion of the $60,000 debt Note became 180,000,000 shares ($.00033/share).
The 4,020,618 shares owned by EGCT became 12,061,854 shares.
The overall outstanding share count became 402,061,854 shares.
Digging Deeper into the History of Amazonas Florestal Inc
As already mentioned in the previous section of this report, Amazonas Florestal Inc was a Florida business entity when it was acquired by the Ecologic Systems entity.
Prior to becoming Amazonas Florestal Inc, Amazonas Florestal was a limited liability entity incorporated in the state of Florida as Amazonas Florestal LLC on July 9, 2010. On February 16, 2011, Amazonas Florestal LLC filed documents with the Florida SOS to convert the entity from a limited liability company to a corporation thus becoming Amazonas Florestal Inc.
The managing members of the LLC were Reny De Oliveira, Pedro De Oliveira, Sandoval F Cardoso de Freitas, and Ramiro R Fernandez. The entity was incorporated by Ramiro R Fernandez who also acted as the entity's resident agent.
This wasn't Ramiro R Fernandez' first go around with a public traded shell claiming to own rain forest property. From 1994 - 2000, Fernandez acted as an officer of Madera International Inc (WOOD) including the CEO and Chairman of the Board. Through WOOD, Fernandez claimed to own several rain forest properties spread out through South America (Nicaragua, Venezuela, Peru, and Brazil).
Madera International + the Amazonas property.
According to the Madera International Inc filings, the properties in Brazil were located in Amazonas.
Registrant specializes in the harvesting and exportation of timber products from South America to buyers throughout the world. Registrant owns approximately 707,000 acres of prime timber property in the State of Amazonas, Brazil. This property has abundant species of commercial value, including Spanish Cedar, Banak and Marupa. Harvest is seasonal.
Madera International Inc placed an asset value of $42,230,000 for the Amazonas properties.
SEC charges Madera International and Ramiro R. Fernandez with Fraud
On September 19, 2001, the SEC charged Madera International Inc and Ramon M Fernandez (father of Ramiro R Fernandez) with fraud. The Complaint found here is full of allegations of fraud including the following:
During the period since its inception in February 1994 until 2000, Madera has recorded as assets various purported timber producing properties for which it cannot establish clear title; assigned and recorded arbitrary values for those timber producing properties; recorded revenues from phony sales transactions; failed to disclose significant related party transactions; and caused false sales invoices, shipping documents, cash receipts records and audit confirmations to be furnished to Madera's independent auditors. Madera also issued false press releases concerning, among other things, the company's operations and profit forecasts.
Madera had no reasonable basis for recording this transaction as a $12 million investment in timber producing property. At the time Madera recorded the Nicaraguan Property as an asset, Madera was unable to show that the seller of the Nicaraguan Property, Imexsa, possessed clear title to the property. In fact, the Nicaraguan government had at most conveyed to Imexsa a permit for exploration and development of the property. On or about July 29, 1994, the Nicaraguan government withdrew the extraction rights to the property.
On or about October 10, 1994, Madera cancelled the stock that had been issued to Imexsa because the Nicaraguan Property had "now proven of questionable value as a result of government action in Nicaragua." Nevertheless, Lezak continued to include the Nicaraguan Property at a value of $12 million in Madera's September 30, 1994 quarterly report, filed on November 14, 1994, and Madera's December 31, 1994 quarterly report. Madera did not write-off its purported $12 million investment in the Nicaraguan Property until February 1995.
At the time of recording the Venezuelan concession as an asset, Madera had no reasonable basis for recording it as a $3 million asset and could not establish whether Inselinca owned the concession or that the concession had the value ascribed to it.
Madera had no reasonable basis for recording the First Brazilian Properties as assets valued at over $30 million. Lezak did not ascertain when the Brazilian Properties were originally acquired by FEROA or Fernandez-Moris, nor did he determine their original cost. Lezak also failed to take adequate steps to determine whether Fernandez-Moris and FEROA had clear title to the Brazilian Properties, and whether the $30 million valuation of the properties represented by Fernandez-Moris was valid.
By 1995, Lezak knew that no significant amounts of timber had been harvested from the property because it was uneconomical to do so. Lezak knew that Fernandez-Moris was instead purchasing timber for resale from third parties. Despite knowing that it was not economical to harvest timber from the Brazilian Properties, Lezak and Fernandez-Moris nevertheless continued to value the 478,000 acres of timber producing property in the Brazilian rain forest at $27 million in Madera's financial statements filed with the SEC.
Madera included the Second Brazilian Property at a value of $12 million in its financial statements contained in its March 31, 1995 annual report on Form 10-K and its quarterly reports on Form 10-Q for the quarters ended June 30, 1995 and September 30, 1995.
Madera had no evidence that Ralph Financial had ever owned the Second Brazilian Property or that legal title to the property had been conveyed to Madera. The Second Brazilian Property was written off as an asset by Madera at the quarter ended December 31, 1995 because, according to Lezak, Skluth was unable to demonstrate that he had actually owned the property and could not transfer proper title to Madera.
Lezak and Fernandez-Moris knew, or were reckless in not knowing, that Madera should not have recorded or reported the Second Brazilian Property as an asset because Madera lacked clear title to the property and the valuation for the property was arbitrarily established.
That is only a small portion of the allegations. It is well worth the time to read the whole Complaint here.
In January of 2003, Ramiro R Fernandez was added as a Defendant in the litigation. See the January 2003 litigation release here.
The Securities and Exchange Commission today announced that, on January 3, 2003, it filed an amended complaint in the United States District Court for the District of Columbia joining Ramiro Rafael ("Ray") Fernandez as an additional defendant in its action against former executives of timber company Madera International, Inc. The amended complaint also alleges additional facts concerning the falsification of Madera's financial statements from 1994 through 2000.
Ray Fernandez was Madera's Executive Vice President in charge of sales and marketing and Chief Executive Officer of Madera International Environmental, Inc., a wholly-owned subsidiary of Madera. In December 1998, he was additionally elected Chairman of the Board of Directors of Madera, and later, in November 2000, also became its Chief Executive Officer, replacing his father, Ramiro M. Fernandez-Moris. The amended complaint alleges that
Fernandez signed, in his capacities as Director and Chairman of the Board, Madera's fiscal year 1999 annual report on Form 10-K that was filed with the SEC on March 8, 2000 and that contained numerous false statements.
Fernandez posted numerous false statements concerning Madera on an Internet message board during the period April through September 19, 2001.
At the same time he inflated the share price of Madera through these fraudulent public disclosures about Madera's assets, operations, and revenues, Fernandez sold personal holdings of Madera common stock. Specifically, from May 2000 through July 2001, Fernandez sold at least 7,939,200 shares of Madera common stock and obtained proceeds of at least $68,791.65.
The amended complaint also alleges additional facts concerning Madera's purported acquisitions totaling nearly 730,000 acres of timber property located in the Brazilian rain forest in July 1994 and May 1997. It alleges that, under Brazilian law, Madera never acquired valid legal title to any of this property.
Further thoughts about the Amazonas property
Research definitely suggests that AZFL is now involved with the same properties that WOOD once claimed ownership of back in the late 1990s.
If they are indeed the same properties then the SEC once said of that properties that they are
"not economical to harvest timber from the Brazilian Properties"
The properties were not actually owned by Ramiro R. Fernandez and his family. That under Brazilian law the Fernandez family
"never acquired valid legal title to any of this property"
Whether or not they are the same property (which I am very certain they are). The SEC also said that the valuation placed on the properties were arbitrary and not based on the actual purchase price of the properties.
"Generally Accepted Accounting Principles ("GAAP") do not permit a long-lived asset to be written-up in value above its original cost."
How much did Amazonas Florestal purchase its properties for?
According to the Amazonas Florestal OTC filings, Amazones Florestal acquired the Amazonas properties in exchange for 49% of its membership interests from Amazonas Industria, Comercio e Exportacao de Produtos de Maderia, Ltda, a Brazilian company.
49% interest of its membership interests would have been 49% of the shares of the company. That 49% interest became 34,300,000 AZFL shares (102,900,000 post-split shares). At today's trading price of $.057/share would equal $5,854,300 not $47,000,000 - and I'm pretty sure the $5.8 million number is much more than what the SEC would actually allow.
Bottom line is that AZFL is obviously over-valuing their Brazilian property. There is a good reason why AZFL is a non-SEC reporting entity only providing unaudited, unregulated financials through the OTC.
A valuation for the Jaturana Farm, Amazonas property was provided by Edson Ferreira Braga and Diana Rodrigues Braga in June of 2010. View the valuation here (from the EGCT filings). The valuation was done for Amazonas, Industria Comercio E Exportacao De Produtos De Madeira Ltda - the alleged owners of the property at that time.
What is missing is the documentation showing that Amazonas Florestal purchased the property from Amazonas, Industria Comercio E Exportacao De Produtos De Madeira Ltda.
AZFL has an office at 1110 Briskell Avenue, Suite 430 in Miami - Suite 430 is owned by Capital Company USA which provides virtual office services. A call to their office today was greeted by a woman saying 'good morning - something something Dental Office' adding further suspicion that AZFL uses a virtual office.
It turns out that several business also share their Brazilian address - Salvador Street, 120 - 12th floor - Vieiralves Business Center.
Here is a link to the AZFL website.
AZFL sure looks like it is setting up as a repeat of the old Madera International Inc scam. We already have the purported timber producing properties which probably lack clear title and were recorded at arbitrary values.
I expect that some where down the road here we could see phony sales transactions and failed disclosure for significant related party transactions as insiders dump stock using false press releases and possibly some paid promotions.
The recent trading activity for AZFL screams out that something big may be on the horizon for AZFL. The "non-affiliated" owner of those 180,000,000 shares from the conversion of $60,000 in debt ($.00033/share) will be looking to dump those shares at some point and that could mean a paid promotion.
Keep AZFL on high alert. Yesterday I added AZFL to our watch list for a future paid promotion.