U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: February 28, 1999
Commission File Number: 0-26920
USAsurance Group, Inc.
(Exact name of small business issuer as specified in its charter)
Colorado
(State or other jurisdiction of incorporation or organization)
84-1298212
(IRS Employer Identification No.)
7345 E. Peakview Ave.
Englewood, Colorado
(Address of principal executive offices)
80111
(Zip Code)
(303) 689-0123
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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 _____.
The number of shares of the registrant's only class of common stock issued and
outstanding, as of February 28, 1999, was 2,216,000 shares.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the nine month period ended
February 28, 1999, are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PLAN OF
OPERATION
The following discussion should be read in conjunction with the Financial
Statements and notes thereto included herein. In connection with, and because it
desires to take advantage of, the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company cautions readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on the behalf of the Company,
whether or not in future filings with the Securities and Exchange Commission.
Forward looking statements are statements not based on historical information
and which relate to future operations, strategies, financial results or other
developments. Forward looking statements are necessarily based upon estimates
and assumptions that are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are beyond the
Company's control and many of which, with respect to future business decisions,
are subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed
in any forward looking statements made by, or on behalf of, the Company. The
Company disclaims any obligation to update forward looking statements.
Introduction
Through the fiscal year ended May, 1997, the Company was engaged in the
business of investing in the viatical settlement industry by acquiring life
insurance policies from individuals or pools of policies from other companies.
During the fiscal year ended May 31, 1997, the industry changed due to advances
in medication that prolongs life for these individuals and the Company has
ceased further participation in the viatical settlement business due to the
extended life expectancies resulting in lower returns. Subsequently, management
began to seek, investigate and, if such investigation warranted, acquire an
interest in business opportunities presented to it by persons or firms who or
which desire to seek the perceived advantages of an Exchange Act registered
corporation. Applicable thereto, effective February 16, 1999, the Company,
through a recently formed wholly owned subsidiary, Akahi Corp. ("Akahi"), did
enter into an Ownership Purchase Agreement (the "Agreement"), wherein Akahi did
agree to acquire all of the member interests in and to 2Xtreme Performance
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International L.L.C., a Delaware limited liability company ("2X" or the "2x
Acquisition"). 2X was a multifaceted network marketing company based in Dallas,
Texas, which offers five categories of health, wellness and beauty products,
including products related to general health, fitness, personal care, body
cleansing and weight management. All of its products are organically grown, wild
harvested and cold processed. It markets its products through television
"infomercial" advertising and print media, as well as through its 100,000 member
associates/distributors. It commenced its business in March 1996 and during its
most recent fiscal year, generated approximately $40,000,000 in revenues and
earned a profit from such operations. The Company's current plan of operations
related to this acquisition of assets is discussed in detail hereinbelow.
Results of Operations
Comparison of Results of Operations for the nine month periods ended February
28, 1999 and 1998.
The Company had no revenues for the nine month periods ended February 28,
1999 and February 28, 1998. In the nine month period ended February 28, 1999,
general and administrative expenses decreased $25,948 (45%) from $57,710 for the
nine month period ended February 28, 1998 to $31,762. This decrease was due
primarily to reduction of overhead, which eliminated approximately $23,000 in
officer compensation during the applicable period, as well as a significant
decrease in costs associated with professional services, rent and office
supplies. The Company incurred a net loss of $(31,762) for the nine month period
ended February 28, 1999, compared to a net loss of $(57,710) for the nine months
ended February 28, 1998, a decrease of $25,948, or 45%, primarily due to the
matters described above.
Since June 1995, the Company purchased, for its own account, 10 different
insurance policies with a face value of $538,294 from individuals, for an
aggregate purchase price of $489,795. Five of these policies have matured and
net aggregate proceeds from these policies in the total amount of $75,903 have
been paid to the Company, one of which matured during the nine months ended
February 28, 1998, with the Company receiving approximately $27,000 as a result
of such maturity, the proceeds of such matured policy having previously been
recognized as income on an accrual basis. Because the Company's Financial
Statements are prepared on an accrual rather than a cash basis, this income was
accounted for in the quarter ended May 31, 1997. None of the policies matured
during the nine month period ended February 28, 1999. The Company recognizes
income (earned discount) on each purchased policy by accruing, over the period
between the acquisition date of the policy and the Company's estimated date of
collection of the face value of the policy (the accrual period), the difference
(the unearned discount) between (a) the death benefit payable (face
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value under the policy less the amount of fees, if any, payable to a referral
source upon collection of the face value; and (b) the carrying value of the
policy. The carrying value of each policy is reflected on the Company's balance
sheet under "purchased life insurance policies" and consists of the purchase
price, other capitalized cost and the earned discount on the policy accrued to
the balance sheet date. The Company capitalizes as incurred the following costs
of a purchased policy: (i) the purchase price paid for the policy; (ii) policy
premiums, if any, paid by the Company; (iii) amounts, if any, paid to referral
sources upon acquisition of the policy; and (iv) amounts paid to retained
physicians or other medical consultants who estimated the insured's life
expectancy. The carrying value of a policy change over time and is adjusted
quarterly to reflect the earned discounts accrued on the policy, amounts paid
for any additional future increases in coverage, any additional premium payments
and any premium refunds if the policy becomes covered by premium waiver
provisions. The length of the accrual period is determined by the Company based
upon its estimate of the date on which it will collect the face value of the
policy. Such date is based upon the Company's estimate of the life expectancy of
the insured, after review of the medical records of the insured by the Company's
medical consultants, and also takes into account the historical accuracy of the
life expectancies estimated by the Company's consultants and the typical period
(collection period) between the date of the insured's death and the date on
which the Company collects the face value of the policy.
The unearned discount is accrued over the accrual period using the straight
line method. Under the straight line method, the unearned discount is earned
evenly throughout the accrual period and the unearned discount will be fully
accrued as earned discount by the end of the accrual period.
Any change in accrual periods will not cause a restatement of earned
discounts in prior periods but will impact earned discounts in the current and
future periods on policies owned by the Company (by either accelerating or
decelerating the recognition of remaining unearned discount). The Company cannot
predict how any accrual period will change, if at all, in the future.
Comparison of Results of Operations for the Three Month Periods Ended February
28, 1998 and 1997.
The Company had no revenues for the three month periods ended February 28,
1999 and 1998. In the three month period ended February 28, 1999, general and
administrative expenses decreased $6,771 (63%) from $10,601 for the three month
period ended February 28, 1998 to $3,830. This decrease was primarily due to the
factors cited above for the results of operations for the nine month periods
ended february 28, 1999 and 1998.
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The Company incurred a net loss of $(7,401) for the three month period
ended February 28, 1999, compared to a net loss of $(12,393) for the three
months ended February 28, 1998, a decrease of $(4,992), or 40%, primarily due to
the reasons also described above.
Plan of Operation
As of the date of this report, the Company's principal business is
operated through its two wholly owned subsidiaries, Akahi Corp. and Akahi.com,
Inc. The assets acquired from 2X, described hereinabove, were acquired by Akahi
Corp. Akahi (which means "the number one" in Hawaiian).com specializes in
developing, marketing and selling cutting-edge nutritional and high-tech
products through a vast direct sales network (i.e., network marketing). In the
three years of prior operations by previous ownership, this business has
developed to one which generates over $40 million a year in annual revenues.
As a result of the acquisition, the Company's infrastructure presently
includes over 100,000 distributors from all 50 states. It utilizes
state-of-the-art computer systems that can place and process over 300,000 orders
each week and maintains an Internet presence which is growing rapidly.
The past and sustained future growth of the Company is found in its
unique business strategy: To harness four fast-growing facets of operations and
synergistically turn them into one united profit center. These operations
include:
- Natural Health Products. Management believes that this market
is one of America's premiere markets for current and future
growth. According to the Nutrition Business Journal Annual
Industry Overview, sales for nutritional products were $6.5
billion a year in 1996, with an annual growth rate of 15% per
annum over the last four year period recorded. According to
the aforesaid Journal, 75 million Americans report they take
or have tried nutritional supplements, and the numbers are
growing every day. When you consider sales for prescription
drugs are over $100 billion a year - and more and more people
are trying natural alternatives - management believes that the
growth potential of the natural health products industry is
staggering.
- High Tech Products. Of all the markets studied by the
Company, the high-tech market is at or near the top in
terms of explosive growth potential. The U.S. Department
of Commerce estimates that the Internet doubles in size
every 100 days. According to Business Week, CEO's expect
to generate almost 40% of annual sales via the Internet
within 10 years. It is anticipated that this market will
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grow significantly in the near future, as more people become
owners of computers and access the Internet.
- Direct Marketing. Direct marketing has been the most powerful
and most targeted form of marketing ever invented. In 1998
alone, it is estimated that direct marketing resulted in over
$160 billion in sales all across America.
- Network Marketing. Akahi.com, Inc., a Texas corporation
handles the Company's network marketing activities. Management
believes that no marketing area has grown faster than network
marketing. According to associations that track growth, direct
selling (of which network marketing is a significant part)
grew by more than 60% in the most recent six year period
studied. More importantly, more than $80 billion worth of
products and services were sold through this form of marketing
in the most recent year studied.
The Company plans for growth by focusing on two major areas:
health/wellness/nutrition and high-tech fields. Within those two areas, the
Company has, and will continue to (i) develop and sell proprietary products and
services, and (ii) create opportunities for individuals to build their own
home-based businesses to generate additional income. When these two objectives
are met, management believes that Akahi.com will be able to enhance the health,
wealth and personal success of its customers, as well as its distributors and
employees.
What management believes sets the Company apart from other companies of
its type is its unique Direct-Net(TM) marketing strategy. This strategy brings
together the four facets of operations mentioned above into a proven successful
highly effective system. Direct-Net overcomes the biggest problem that
management believes typically stifles the growth of network marketing companies:
most people are not natural salespeople. They hate selling or are afraid to go
out and sell products or services. Direct-Net provides the system that "does
most of the selling" for distributors. This includes ready-to-use,
professionally-created direct marketing promotions and business kits
distributors can purchase and use to build their own businesses. For example,
instead of trying to write their own sales letters, distributors can purchase
sales letters that have been tested and proven to generate response.
Liquidity and Capital Resources
The Company's prior primary need for capital has been the funding of policy
purchases. Prior to the 2X Acquisition, the Company relied upon the proceeds
from the sale of common stock of $329,448 derived from a private offering and
loans from related
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parties of $175,340. During the nine month period ended February 28, 1998, the
Company financed its operations from cash flow generated from a outstanding
receivable derived from the maturity of one life insurance policy in the amount
of $27,000. As a result of the 2x Acquisition, the Company's cash position
increased dramatically. As of February 28, 1999, the Company had a cash position
of $1,455,051 (including $1,123,000 of restricted cash), compared to $2,003 at
the end of February 1998.
The relevant terms of the 2X Acquisition provide for the Company to
tender a total purchase price of $4.5 million. Of this purchase price, $1
million has been already tendered. The Company obtained these funds by selling
an aggregate of 650,000 shares of its " restricted" common stock for aggregate
proceeds of $65,000 ($.10 per share). The balance was provided by the Company
obtaining a loan in the amount of $935,000 from Consolidated Capital, Inc., a
nonaffiliate of the Company. The principal balance accrued interest at the rate
of 10.5% per annum and all principal and interest as accrued is due and payable
one year from the date of the note. It is secured by all of the assets of the
Company.
The balance of $3.5 million is due pursuant to the terms of two
promissory notes, including one note in the principal amount of $3.1 million,
with the other in the principal amount of $400,000 (the "Notes"). The $3.1
million Note is secured by a Security Agreement, Financing Statements, a Pledge
Agreement, and Guaranties. Terms of the $3.1 million Note provide for repayment
at an interest rate of the Prime Rate as announced daily in The Wall Street
Journal with a balloon payment to be paid 120 days after the Closing Date.
Failure to pay off this Loan in full within such 120-day period shall cause the
Loan interest rate to be increased to the Prime Rate plus 1% as announced daily
by The Wall Street Journal. In the event the Company fails to pay off this Loan
in full within 210 days after the Closing Date, it has the option to buy a
month-to-month extension at the cost of Fifty Thousand Dollars ($50,000.00) per
month to be paid monthly, on the first of each month, to the Sellers in addition
to the balloon principal amounts owed and accruing interest as described above.
Failure to make the full balloon payment of principal and interest within one
(1) year after the Closing Date or to timely make any of the extension payments
shall permit Sellers, at their option, to exercise any and all remedies set
forth in the applicable Loan documents.
The $400,000 Note, which is payable to the principal member of 2X,
accrues interest at a rate consistent with the $3.1 million Note described above
and is due and payable in eleven (11) installments of $30,000 of principal each,
plus accrued interest on the unpaid principal balance to the date of each
installment payment, commencing on the 1st day of April 1999 and continuing on
the same day of each and every consecutive month thereafter through
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and including the 1st day of February, 2000, plus one final installment of the
entire unpaid principal and accrued interest on or before February 16, 2001.
Relevant to the Company's prior viatical settlement business, in June
1995, Terry Whiteside, the Company's former President loaned the Company the
principal sum of $42,340, which the Company utilized to purchase its initial
insurance policy with a face value of $58,000. In August 1995, Ms. Whiteside
loaned the Company the principal sum of $58,000. Additionally in August 1995, a
minority shareholder of the Company loaned the Company the principal sum of
$75,000. Each of these aforesaid loans are unsecured and all have been extended
until August 1999 by the mutual consent of the parties, with interest accruing
at the rate of 7% per annum. The Company utilized the proceeds of these loans to
purchase insurance policies.
The Company's common stock shares are currently traded on the NASDAQ over
the counter Bulletin Board using the trading symbol "UASG".
Year 2000 Disclosure
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results by or at the
Year 2000. As a result, many companies will be required to undertake major
projects to address the Year 2000 issue. As a result of the recent 2X
Acquisition, management has recently begun a review of the Company's current
computer systems and as of the date of this report, it appears that the
Company's computer systems are not Y2K compliant. In order to make the Company's
computer system compliant, the Company will need to upgrade the two databases
utilized by the Company, including Foxpro 2.6, which runs the Genesis database,
which is required for all invoices and is the main company database and is of
particular concern to management, and Telemagic. It is expected that the
upgrades to Telemagic will be minor. The Company is presently contemplating
purchasing the latest version of Foxpro, rather than attempt to upgrade. The
Company also utilizes Mas90 accounting software. Mas90 claims that the
acquisition of upgrades will make this software Y2K compliant. From a
preliminary analysis provided by outside consultants, management believes that
it will cost approximately $250,000 to bring the current system compliant. The
Company has commenced the process necessary to bring the system into conformity
with all Y2K issues and it is anticipated that this will be accomplished by the
end of calendar 1999.
The Company believes that the potential impact, if any, of these systems not
being Y2K compliant will, at most, require employees to
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manually complete otherwise automated tasks or calculations and it should not
impact the Company's ability to continue its sales activities. The Company will
be initiating formal communications with its significant suppliers, business
associates and customers to determine the extent to which the Company is
vulnerable to those third parties failure to correct their own Year 2000 issues.
There can be no guarantee, however, that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems would not have a material adverse effect on the Company.
The Company has determined it has limited or no exposure to contingencies
related to the Year 2000 issue with respect to products sold to third parties.
The Company will utilize both internal and external resources to complete tasks
and perform testing necessary to address the Year 2000 issue.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - None
ITEM 2. CHANGES IN SECURITIES - NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
NONE.
ITEM 5. OTHER INFORMATION - NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
On February 18, 1999, the Company filed a report on Form 8-K, advising
of the 2X Acquisition described herein. The contents of this Form 8-K are hereby
incorporated by referenced as if set forth.
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USAsurance Group, Inc.
Consolidated Balance Sheet
- -----------------------------------------------------------------
Unaudited Audited
February May
28, 1999 31, 1998
---------- ---------
ASSETS
Current Assets:
Cash $1,455,051 $ 2,003
Inventory 1,635,646 0
Other Current Assets 464,412 0
---------- ---------
Total Current Assets 3,555,109 2,003
---------- ---------
Property and Equipment 1,565,775 3,890
Less Accumulated Depreciation (2,089) (1,558)
---------- ---------
Net Property and Equipment 1,563,686 2,332
---------- ---------
Other Assets
Goodwill 3,894,578 0
Other Assets 491,663 407,776
---------- ---------
Total Other Assets 4,386,241 407,776
---------- ---------
TOTAL ASSETS $9,505,036 $ 412,111
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Current Portion of Long-Term Debt $ 81,653 0
Accounts Payable 1,870,669 18,703
Other Current Liabilities 2,471,391 14,608
---------- ---------
Total Current Liabilities 4,423,713 33,311
---------- ---------
Long-Term Debt - Related Party 111,840 103,340
Long-Term Debt - Other 361,364 75,000
Long-Term Debt - Acquisition 3,835,000 0
---------- ---------
Total Long-Term Debt 4,308,204 178,340
---------- ---------
TOTAL LIABILITIES 8,731,917 211,651
---------- ---------
SHAREHOLDERS' EQUITY
Other Shareholder Equity 1,068,548 401,748
Retained Earnings (Deficit) (295,429) (201,288)
---------- ---------
TOTAL SHAREHOLDERS' EQUITY 773,119 200,460
---------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $9,505,036 $ 412,111
========== =========
The Accompanying Notes Are An Integral Part Of These Unaudited
Financial Statements.
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USAsurance Group, Inc.
Unaudited Consolidated Statement Of Operations
- -----------------------------------------------------------------
Unaudited Unaudited
3 Month 3 Month
Period Ended Period Ended
February February
28, 1999 28, 1998
------------ ------------
Income: $ 0 $ 0
General & Administrative Expenses:
Compensation - Officers 600 8,250
Depreciation 177 177
Legal And Accounting 2,645 1,674
Professional Services 0 0
Rent 0 500
Stock Transfer 408 0
Telephone 0 0
Travel 0 0
------------ ------------
Total 3,830 10,601
------------ ------------
Net (Loss) Before Other Income (3,830) (10,601)
============ ============
Other Income (Expense)
Interest Income 0 829
Other Income 0 500
Interest Expense (3,571) (3,121)
------------ ------------
Total Other Income (Expense) (3,571) (1,792)
------------ ------------
Net (Loss) $ (7,401) $ (12,393)
============ ============
Basic & Diluted (Loss)
Per Common Share ($0.00) ($0.01)
============ ============
Weighted Average Common Shares
Outstanding 1,674,333 1,566,000
============ ============
The Accompanying Notes Are An Integral Part Of These Unaudited
Financial Statements.
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USAsurance Group, Inc.
Unaudited Consolidated Statement Of Operations
- -----------------------------------------------------------------
Unaudited Unaudited
9 Month 9 Month
Period Ended Period Ended
February February
28, 1999 28, 1998
------------ ------------
Income: $ 0 $ 0
General & Administrative Expenses:
Compensation - Officers 1,800 24,750
Depreciation 531 531
Legal And Accounting 28,838 13,610
Office 6 5,739
Professional Services 0 7,500
Rent 0 1,538
Stock Transfer 587 0
Telephone 0 1,566
Travel 0 2,476
------------ ------------
Total 31,762 57,710
------------ ------------
Net (Loss) Before Other Income (31,762) (57,710)
============ ============
Other Income (Expense)
Interest Income 0 1,329
Other Income 0 500
Interest Expense (10,613) (9,258)
------------ ------------
Total Other Income (Expense) (10,613) (7,429)
------------ ------------
Net (Loss) $ (42,375) $ (65,139)
============ ============
Basic (Loss) Per Common Share ($0.03) ($0.04)
============ ============
Weighted Average Common Shares
Outstanding 1,601,714 1,566,000
============ ============
The Accompanying Notes Are An Integral Part Of These Unaudited
Financial Statements.
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USAsurance Group, Inc.
Consolidated Statement Of Cash Flows
- -----------------------------------------------------------------
Unaudited Unaudited
9 Month 9 Month
Period Ended Period Ended
February February
28, 1999 28, 1998
------------ ------------
Net (Loss) $ (42,375) $ (65,139)
Adjustments To Reconcile Net Loss
To Net Cash Used In Operating
Activities:
Depreciation 531 531
Contributed Services And Rent 1,800 26,250
Changes In Operating Assets
And Liabilities:
(Increase) Decrease In Receivable 0 27,000
(Increase) in Interest Receivable 0 (1,250)
(Increase) In Purchased Life
Insurance Policies 0 (776)
Decrease In Deposits
With Insurance Companies 0 38,476
Increase In Accounts Payable 9,935 5,075
Increase In Interest Payable 10,613 2,258
------------ ------------
Net Flows From Operations (19,496) 32,425
Cash Flows From Investing Activities:
Purchase of Business (1,000,000) 0
------------ ------------
Net Cash Flows From Investing (1,000,000) 0
------------ ------------
Cash Flows From Financing Activities:
Loans Made To Other Parties 0 (50,000)
Funds Received From Loans 17,991 22,000
Payments Made on Loans 0 (4,000)
Common Stock 65,000 0
Cash From Acquisition 1,454,553 0
Funds Borrowed for Acquisition
of Assets 935,000 0
------------ ------------
Cash Flows From Financing 2,472,544 (32,000)
------------ ------------
Net Increase In Cash 1,453,048 425
Cash At Beginning Of Period 2,003 729
------------ ------------
Cash At End Of Period $ 1,455,051 $ 1,154
============ ============
Summary Of Non-Cash Investing
And Financing Activities:
Reclass Trade Payable to Note Payable $ 9,491 $ 0
============ ============
Note Payable for Purchase of Business $ 3,500,000
============
The Accompanying Notes Are An Integral Part Of These Unaudited
Financial Statements.
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USAsurance Group, Inc.
Notes To Unaudited Financial Statements
For The Nine Month Period Ended February 28, 1999
- -------------------------------------------------
Note 1 - Unaudited Financial Information
- ----------------------------------------
The unaudited financial information included for the three month and nine month
interim periods ended February 28, 1999 and February 28, 1998 were taken from
the books and records without audit. However, such information reflects all
adjustments (consisting only of normal recurring adjustments, which are of the
opinion of management, necessary to reflect properly the results of interim
periods presented). The results of operations for the nine month period ended
February 28, 1999 are not necessarily indicative of the results expected for the
fiscal year ended May 31, 1999.
Note 2 - Acquisition of Assets
- ------------------------------
On February 16, 1999, the Company entered into an agreement to purchase all of
the assets and assume the liabilities related to such assets from 2Xtreme
Performance International LLC ("2Xtreme"), a Texas limited liability company.
2Xtreme is a direct response marketing business with a networking marketing
component dealing in vitamins and dietary supplements.
The assets were paid for by Akahi Corp., a newly created wholly owned subsidiary
of the Company. Akahi paid $1,000,000 to the seller at closing, $935,000 of
which was borrowed and $65,000 of which was generated through the sale of
650,000 shares of the Company's common stock. The balance of the purchase price
($4.6 million) is due pursuant to two promissory notes, one for $3.1 million and
one in the principal amount of $400,000.
The acquisition has been accounted for as a purchase and for accounting purposes
will be considered effective February 29, 1999. The operations of 2Xtreme will
be consolidated with those of the Company beginning March 1, 1999.
Note 3 - Pro Forma Financial Information
- ----------------------------------------
The following pro forma financial information is presented as if 2Xtreme had
been acquired at the beginning of the respective periods:
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3 Months Ended 9 Months Ended
Feb. 28, 1999 Feb. 28, 1999
------------ ------------
Revenues $ 9,554,939 $ 31,775,743
Net Income (Loss) 277,352 (143,449)
Net Income (Loss) Per Share .17 (.09)
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
USAsurance Group, Inc.
(Registrant)
Dated: April 19, 1999
By:/s Peter L. Hirsch
----------------------
Peter L. Hirsch, President
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USAsurance Group, Inc.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED FEBRUARY 28, 1999
EXHIBITS Page No.
EX-27 Financial Data Schedule . . . . . . . . . . . . . 18
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE QUARTER ENDED FEBRUARY 28, 1999,AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> FEB-28-1999
<CASH> 1,455,051
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,635,646
<CURRENT-ASSETS> 3,555,109
<PP&E> 1,565,775
<DEPRECIATION> (2,089)
<TOTAL-ASSETS> 9,505,036
<CURRENT-LIABILITIES> 4,423,713
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 773,119
<TOTAL-LIABILITY-AND-EQUITY> 9,505,036
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,830
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,571
<INCOME-PRETAX> (7,401)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,401)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,401)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
