UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
AMENDMENT NO. 2
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
AMERICAN BENEFITS GROUP, INC.
(Name of Small Business Issuer in its charter)
Florida 0-30247 65-0647122
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
10 Fairway Drive, Suite 307, Deerfield Beach, Florida 33441
(Address of principal executive offices) (zip code)
Issuer's toll free telephone number: (888) 533-4555
Issuer's toll free fax number: (877) 305-4171
Securities to be registered under Section 12(g) of the Act:
Title of each class Name of each exchange on which each class
is to be registered
------------------------- ------------------------------------------
Common OTC Bulletin Board
Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock, no par value
INTRODUCTORY STATEMENT
American Benefits Group, Inc. (the "Company" or "ABFG") has elected to
file this Form 10-SB/A registration statement on a voluntary basis in order to
become a reporting company under the Securities Act of 1934. The primary purpose
for this is that the Company intends to be listed for trading on the OTC
Electronic Bulletin Board. Under the current NASD rules, in order to become
listed on the OTC Electronic Bulletin Board, a company now must be a reporting
company under the Securities Act of 1934.
This registration statement, including the information that may be
incorporated herein by reference, contains forward-looking statements including
statements regarding, among other items, the Company's business and growth
strategies, and anticipated trends in the Company's business and demographics.
These forward-looking statements are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. Actual results
could differ materially from these forward-looking statements as a result of
factors described in this section "Risk Factors," including among others,
regulatory or economic influences.
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
A. General Overview
ABFG was incorporated under the laws of the State of Florida pursuant to
The Florida Business Corporations Act as Living Benefits Group, Inc. on February
26, 1996. The Company underwent name changes to Lifeline Benefits Group, Inc. on
April 21, 1996 and to American Benefits Group, Inc. on December 12, 1996. Unless
otherwise indicated by the context, all references to "ABFG" or "the Company" in
this Report shall be read to refer to American Benefits Group, Inc. and all of
its subsidiaries, and all of its majority owned affiliates.
Upon incorporation, the Company was engaged in the business of Viatical
Settlements. Effective June 30, 1997, the Company ceased its business operations
in Viatical Settlements. On July 1, 1997, subsequent to divesting itself of any
and all interest in the Viatical Settlement business, the Company commenced its
current business of mining and marketing precious and semi-precious stones,
jewelry, art and other goods and services.
The Company operates one segment: Mining precious stones and minerals;
processing and manufacturing products; marketing finished products and services
(Mining of precious stones and related products). The Company's reportable
segment is a strategic business unit that offers different products and
services.
The Mining of precious stones and related products segment includes
American Benefits Group, Inc. (ABFGINC), the parent company and its subsidiaries
and affiliates; American Benefits Group, Limited (ABFGLTD) - 100%; ABFG Sales
Ltd. (ABFGSL-Cdn) - 100%; ABFG Sales Limited (ABFGSL-US) - 100%; American
Benefits Group (Israel) Ltd. (ABFGISR) - 100%; American Benefits Group
(Israel-Madagascar) Ltd. (ABFGISR-MAD) - 100%; ABFG Resources Madagascar
S.A.R.L. (ABFGMAD); Saowani Development S.A.R.L. (SAO) - 90%; Stones and Wood
Corporation S.A.R.L.` (S&W) - 100%; Club Rodeo Ltd. (CLUB) - 100%; and E-Block
Technology Inc. (E-BLOCK) - 100%.
Regulation
As a result of the Company's change of business on July 1, 1997, the
Company voluntarily ceased the trading of its common stock over the National
Association of Broker Dealers ("NASD') Over the Counter Bulletin Board Quotation
Medium (OTC: BB). The Company filed the required "Issuer Information and
Disclosure Statement pursuant to Rule 15c2-11(a) (5) on April 2, 1998 and the
NASD cleared the Company's common stock for quotation over the OTC: BB medium on
June 18, 1998. The Company's stock ceased being quoted on the OTC:BB Quotation
Medium on July 4, 1999 as a result of the Company's failure to file a Form 10-SB
and clear comments of the SEC pursuant to NASD Regulations 6530 and 6540. This
Report is being filed to enable the Company to become a Reporting Issuer under
those Regulations and thereafter to be quoted over the OTC:BB Quotation Medium.
B. Organization
As of March 31, 2000, the Company was considered to be in the development
stage of operations. According to the Financial Accounting Standards Board of
the Financial Accounting Foundation, a development stage company is defined as a
company that devotes most of its activities to establishing a new business
activity. In addition, planned principle activities have not commenced, or have
commenced and have not yet produced significant revenue. FAS-7 requires that
all development costs be expensed during the development period. The Company
expensed $5,078,756 of development costs for the thirty-three months ended March
31, 2,000.
<PAGE>
The Development Costs were allocated for the following projects:
Mining Development $3,479,957
Internet Development $1,589,799
E-Block Research & Development $ 10,000
----------
$5,078,756
Mining Development Project
The Mining Development Project commenced in August of 1997 with the
acquisition of 90% of the issued and outstanding shares of SAO, SAO had an
interest in 13 mining perimeters in the Democratic Republic of Madagascar. The
Company retained mining specialists to explore and test the mining perimeters,
as well as source other potential mining perimeters. Subsequently, after the
acquisition, Saowani lost its interest in 13 mineral perimeter rights in
Madagascar before the exploration and testing programs were completed.
Subsequent to the loss of the 13 mining perimeters, SAO reacquired interests in
3 of the mining perimeters.
On June 19, 1998, the Company acquired 70% of the issued and outstanding
shares of World Gems Corporation S.A.R.L. (World Gems). World Gems held
interest in 34 mining perimeters of which ABFG, through the acquisition, would
explore and test the mining perimeters. Subsequently, World Gems lost its
mineral perimeter rights in Madagascar before the exploration and testing
programs were completed.
On May 11, 1999, the Company acquired 100% of the issued and outstanding
shares of S & W which had interests in 37 mining perimeters in the Democratic
Republic of Madagascar. On May 28, 1999, Consulting Geologists and Engineers,
Watts, Griffis and McOuat, was retained to perform a technical review of the
sapphire mining perimeters obtained by the Company. The scope of the technical
review was to perform a site visit to review the local geology, exploration
potential and the possible size and grade of the deposit with on-site technical
personnel; a review of land position and ownership; a review of operational
history; a review of sampling process, methodology, kind of wash plant used to
recover the sapphires and the size and efficiency of the plant; a review of the
mining operation including the amount of stripping of overburden involved,
thickness of gravel; and a review of the marketing contracts. The Company began
testing operations of precious stones, namely sapphires, on these mining
perimeters, on May 31, 1999.
On June 29, 1999 the Company, through its Malagasy subsidiary, SAO became
a partner to a joint venture with Ms. Eliana Georgette Samuel Harinoro whereby
SAO was given exclusive rights to explore and test on three (3) emerald bearing
mining perimeters (these mining perimeters were part of the original 13 mining
perimeters of SAO). SAO will fund the exploration and testing. Profits arising
from the Joint Venture will be distributed on a basis of 80% to SAO and 20% to
Ms. Harinoro. The Mining perimeters are classified as Type I mining perimeters.
Since the commencement of operations in 1997 to present, a total of
$3,479,957 was spent on exploring and testing mining perimeters in Madagascar.
Internet Shopping Mall Development
----------------------------------
On January 15, 1999, the Company launched its first Internet store,
TheGemStore.com, and operated the Internet site as a beta test site until March
14, 1999. During this time period, three Internet sites were launched -
VirtualVitamins.com, ArtonRodeo.com, and AdventureandTravel.com - as beta test
sites, along with securing an Internet secure e-commerce license. On March 15,
1999, the Company launched its Internet Shopping Mall, RodeoIsland.com, on a
beta test basis to test and evaluate site traffic, visitations, order placement,
order fulfillment and order delivery. On March 31, 2000, the Internet Shopping
Mall development project was still in a beta test mode. Total cost of the
Internet Development Project was $1,589,799.
<PAGE>
sites, along with securing an Internet secure e-commerce license. On March 15,
1999, the Company launched its Internet Shopping Mall, RodeoIsland.com, on a
beta test basis to test and evaluate site traffic, visitations, order placement,
order fulfillment and order delivery. On December 31, 1999, the Internet
Shopping Mall development project was still in a beta test mode. Total cost of
the Internet Development Project was $1,364,789.
E-Block Research and Development
On September 7, 1997, the Company established a wholly-owned subsidiary of
the parent company, E-Block Technology Inc. (EBTI), based in Canada, to research
and develop the technology of using hyper-compression to form building blocks
from indigenous materials such as clay and sand (E-block).
The objective of E-Block is to allow the Company to use the E-Block as a
building product for the purpose of constructing homes, hospitals, medical
clinics, schools, community centers, etc. The Company plans to establish a test
manufacturing facility in Madagascar and plans to initially donate the
infrastructure to the community. Management believes that the donation of the
infrastructure to the community is the Company's civic duty and responsibility
in order to increase the standard of living of the Malagasy people through
improved living conditions, improved medical facilities and increased
educational facilities. Upon completion of the testing, a pricing structure will
be established and the E-Block will be marketed.
The R&D arm has tested various formulations of clay, sand and other
components and has developed a superior formulation of same. This new
formulation has resulted in the development of e-block. EBTI is very proud of
this new formulation and feels that it has developed an economical substitute
for conventional construction materials such as lumber, cement blocks and
bricks. Preliminary production tests have produced e-blocks with considerable
compressive strength and a very high thermal insulation value, ranging from R45
to R55. In addition to a high thermal insulation value, the e-block also has a
very high audio insulation factor for blocking out sound.
The e-block lends itself to many construction applications. The e-block
can be drystacked to form structural walls of buildings. An economic analysis of
the construction costs of an e-block wall has shown the cost of construction to
be 66% lower than those of conventional cement blocks, concrete or brick walls.
This will result in a considerable saving in construction costs. Tests have also
shown that an e-block wall can be constructed in less time than a conventional
wall of cement block, concrete or brick. On a test basis, a saving of 80% has
been attained. This time factor will be critical for projects where a schedule
is of concern. The use of e-block in construction can be performed by unskilled
labor as compared to the skilled craftsmen that are required for a conventional
cement block, concrete or brick wall. This is a very important consideration in
construction, especially in areas where there is a shortage of skilled craftsmen
and an abundance of unskilled labor. The Company views the development of
e-block as a very economical substitute for conventional construction materials
such as brick, lumber, or concrete and as a building product for the future.
The Research and Development (R&D) arm of EBTI has studied the various
machinery available to manufacturer hyper-compressed blocks and has developed a
short list of suggested equipment manufacturers. Total cost of the E-Block
Research and Development is $10,000.
Marketing
<PAGE>
On May 20, 1999, the Company and the Menavi Group of Companies (Menavi
International Ltd., of Israel; Advance Cutting Center (Israel) Ltd.; and Advance
Cutting Center Ltd. of Bangkok), based in Israel, formed a Joint Venture, known
as Total Gem Management Ltd. (TGM).
The formation of the TGM Joint Venture positioned ABFG as a fully
vertically integrated company involved from the mining of precious stones
through to the marketing of cut and polished gems, and fine pieces of quality
jewelry. It is anticipated that product lines within ABFG's retail outlet, the
Gemstore.com, a retail outlet within the Internet Shopping Mall, RodeoIsland.com
will be increased as a result of the alliance. The GemStore.com will have access
to world renowned jewelry designers, and precious stones such as diamonds thus
being able to increase its product lines of designer jewelry, diamonds, and
other precious stones. It is anticipated that there will be increased sales in
the wholesale division with group lots of raw, processed, and cut and polished
gems.
Menavi International Ltd. is one of the most reputable companies in the
industry. It's subsidiaries, Advance Cutting Center Ltd. and Advance Cutting
Center (Israel) Ltd. utilize one of the most advanced computerized robot systems
(Robogem) in the industry specially designed to increase yields and to deliver
the perfect cut known as the "Carmel Cut" and are thus on the leading edge of
the industry in technical expertise.
C. Industry Background
The information contained in this section is produced from a report
prepared for the Company by Menahem Sevdermish and Avi Meirom of the Geological
Institute For Precious Stones and Diamonds of Israel, principals of the
Company's Joint Venture, TGM.
Current market demand for wholesale polished sapphires is increasing. Upon
an evaluation, the report indicates that the future sapphire market looks
strong. Industry experts believe that retail sales of jewelry will reach $60
billion every year. It is estimated that of that $60 billion, nearly 20% ($12
billion) is in the sale of colored gemstone-set jewelry. Of this $12 billion, it
is safe to assume that Sapphire-set jewelry accounts for 20% ($2.4 billion) of
these sales. Factor in that retail jewelry is generally marked-up 100%, bringing
the value to $1.2 billion. Also factor in that 30% of the actual set jewelry
cost is for the metal (i.e., gold, silver, platinum) setting, which brings the
total estimated market for loose polished sapphires used in the set jewelry
totaling, approximately, $840 million annually. As a conservative estimate, The
Gemological Institute for Precious Stone and Diamonds foresees the market for
loose polished sapphires to range between $750 -- $900 million per year. The
report stated that three main sectors of the sapphire market should be accounted
for in calculating the "total" sapphire market: sales of reported loose polished
sapphires; sales of shipped sapphire-set jewelry; and, sales of under-reported
or non-reported polished sapphires.
Wholesale value of reported loose polished sapphires
The wholesale value of reported polished sapphires in 1998 was estimated
at $324 million and is represented in the following chart:
United States $ 150 million
Japan $ 27 million
Europe $ 75 million
Southeast Asia $ 18 million
Others $ 54 million
------------------------------------------------
<PAGE>
Total $ 324 million
The Gemological Institute for Precious Stone and Diamonds reports that a
strong US market, a relatively weak European market, and a recovering Asian
market most likely puts the market, more realistically, at $300 million.
Sapphire shipped - set jewelry
Today, the majority of sapphires reach the market already set in jewelry.
It is estimated, by The Gemological Institute for Precious Stone and Diamonds,
that the market for Shipped Sapphire-Set Jewelry is at least equivalent to that
for Reported Loose Polished Sapphires, but more likely one-and-a-half times the
size -- $340 -- $450 million.
Under-reported and non-reported sales of polished sapphires
The ability to accurately depict the market for Under-Reported and
Non-Reported Sales of Polished Sapphires, a common practice in the industry, is
obviously impossible. However, conservative estimates by The Gemological
Institute for Precious Stone and Diamonds place the value of this market at $150
million and even then, the value may be safely increased by 25%.
The importance of Internet shopping
Since the advent of the World Wide Web (Internet), sales from this Retail
source have expanded greatly. Sales in 1998 were 4.5 billion dollars, over 10
billion dollars in 1999 with a projection of over $119.3 billion dollars for
Y2005 (Source: ACTIVMEDIA 02/2000). The Company elected to utilize this retail
method for selling its mined precious stones in order to better control prices
and to eliminate the middleman to increase profit.
The importance of the Company's Internet shopping mall
The Company's Internet shopping Mall ("RodeoIsland.com.") was established.
The Company then commenced expansion so that non-related entities could also
avail themselves to "RodeoIsland.com" to sell their products. The Company's
intent is to continue to use "RodeoIsland.com" as a major retail outlet for it's
mined precious stones and to expand the site to other parties so that eventually
the site will compete with the Mining Division of the company as a major source
of income. In 1999, Club Rodeo was established which is a membership program
allowing members to purchase goods and services at a discounted price. Members
enroll with Club Rodeo, paying an annual membership for the right to purchase
goods and services at a discounted price. Members would also qualify for
purchase rebates and other rewards and benefits.
The importance of compressed clay housing in developing nations
The e-block lends itself to many construction applications of particular
importance to third world nations. The e-block can be dry stacked to form walls
of buildings. An economic analysis shows up to a 66% savings in construction
costs utilizing the e-block as opposed to traditional construction materials
such as concrete or brick is possible. E-block construction is quicker than
traditional methods and the construction can be undertaken by unskilled labor.
D. Products
The primary business of the Mining segment is to explore, develop, and
exploit precious and semi-precious stones, process the precious and
semi-precious stones, manufacture carat jewelry, market processed precious and
semi-precious stones, market carat jewelry and other related products and
<PAGE>
services, such as internet development, hosting, marketing and broadcasting.
Since the commencement of operations in 1997, the Company has acquired and
retained interests in forty (40) precious stone mining perimeters in the
Democratic Republic of Madagascar. These mining perimeters allow ABFG and Joint
Venture Partners to explore, test, and mine for sapphires, corundum, emeralds,
and garnet. With the acquisition of S&W, testing operations began on May 31,
1999. For the period ending March 31, 2000, ABFG's share of extracted mine
grade sapphire ore from the mining perimeters was 333,082.2 grams. The cost of
testing was $2,313,547.92 or $6.95 per gram. A typical grade of sapphire ore
will yield .85 carats of polished stone for each one (1) gram of mine grade
sapphire ore. The expected yield from the 333,082.2 grams of mine grade
sapphire ore should yield 283,120 carats of polished sapphire stones.
Since the commencement of operations in Madagascar in 1997, ABFG has
implemented a buying program, purchasing raw sapphire stones. For the period
ending March 31, 2000, ABFG purchased 184,500 grams of selected grade sapphire
at a cost of $2,490,000 or $13.50/gram. Of the 184,500 grams purchased, 105,500
grams of selected grade sapphire ore has yielded 84,299.62 carats of polished
sapphire stones at a cost of $5.83 per carat of finished stones.
Since commencement of operations in 1997, ABFG has sourced several
manufacturers of carat jewelry in the United States, Canada, Thailand and
Israel. ABFG is reviewing and testing various manufacturers of jewelry to ensure
the quality of the carat jewelry conforms to the price point structure
established. ABFG has been able to establish manufacturing costs ranging from
$18.45 per carat of precious stone for a simple design (sapphire stud earring)
to $996.47 per carat of precious stone for an intricate design (women's sapphire
ring with diamonds).
The Marketing of the polished stones and jewelry is achieved by the
establishment of an e-commerce enabled web store, TheGemstore.com (The
Gemstore). The Gemstore was launched on the World Wide Web (Internet) on January
15, 1999. The Gemstore provides the consumer with a variety of carat jewelry
containing sapphires. The consumer is able to purchase the carat jewelry through
a secured e-commerce system. The e-commerce system used by ABFG has been
certified secure by ePubliceye.com, InternetSecure Inc., I-stores.com, VISA
International, and MasterCard International.
On March 15, 1999, ABFG launched its Internet Shopping Mall,
RodeoIsland.com (Rodeo Island) to house The Gemstore and other in-house
developed Internet stores developed which include ArtonRodeo.com (Art On Rodeo),
AdventureandTravel.com (Adventure and Travel), and VirtualVitamins.com (Virtual
Vitamins). The objective of Rodeo Island is to provide a common area for
consumers to visit and shop for goods and services. In doing so, consumers will
be exposed to The Gemstore and thus increasing the sales of carat jewelry.
Since the establishment of Rodeo Island, ABFG has been able to attract
sixteen (16) independent storefronts to the Internet Shopping Mall. These
additional storefronts allow ABFG to receive revenue in the form of space
rental, advertising, commissions from affiliate programs and sales of products
purchased at a wholesale level and sold at a retail level. Management of ABFG
believe that the success of an Internet Shopping Mall will be the ability of the
Internet Shopping Mall to attract consumers by making available a variety of
products, the majority of which will be basic "Brick and Mortar" consumables.
In order to maintain Rodeo Island ABFG's in-house stores and facilitate
the addition of additional store fronts, ABFG established an Internet Solutions
<PAGE>
Division (ISD) to provide design, development, production, maintenance and
support. In addition to ISD, ABFG established ABFG-TV which is an Internet
Broadcasting Division mandated to provide ABFG with advertising and promotional
design and production for Radio, Television and Internet Broadcasting. Since the
commencement of the ISD and ABFG-TV, these cost centers have been able to
attract additional revenue by contracting their services to third parties.
On November 4, 1999, Club Rodeo was established to provide a marketing
platform for the products and services of Rodeo Island. Club Rodeo will offer
memberships to consumers. As a member, the consumer will have various privileges
such as substantial discounts on products and services. A member can purchase
goods and services with discounts of up to 25% off Rodeo Island's published
prices from ABFG in-house stores. Members would also receive cash rebates of up
to 6% on goods and services based on their own volume purchases and residual
income of up to 6% on purchases made by other members and "Passport" members
referred to Club Rodeo by the member. Club Rodeo membership is renewable on an
annual basis.
The following tables include quarterly and year-to-date revenue and
operating income by segment, as well as units mined through testing, bought,
processed and sold.
American Benefits Group, Inc.
Revenue and Operating Income (Loss) and Purchase/Mining Production by Segment
(Dollars in thousands)
<PAGE>
<TABLE>
<CAPTION>
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June 30, 2000 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Year
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue by Segment:
Mining 11 17 0 N/A 28
----------------------------------------------------------------------------------------------------------------
Operating Income by Segment:
Mining 8 2 0 N/A 10
Corporate 0 0 0 N/A 0
Development (302) (223) N/A (525)
Other (5) (4) N/A (9)
----------------------------------------------------------------------------
Net Income Before Tax (299) (225) N/A N/A (524)
----------------------------------------------------------------------------------------------------------------
Raw Mine Grade 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Year
----------------------------------------------------------------------------------------------------------------
Units:
Beginning Inventory(grams) 69,925.3 316,306.21 317,532.2 N/A 69,925.3
1. Production (grams) 172,880.9 1,226.0 94,550.0 N/A 268,656.9
2. Buying (grams) 79,000.0 0 0 N/A 79,000.0
----------------------------------------------------------------------------
Total Available: (grams) 321,806.2 317,532.2 412,082.2 N/A 417,582.2
3. Processed (grams) 5,500.0 0 0 N/A 5,500.0
----------------------------------------------------------------------------
Ending Inventory (grams) 316,306.2 317,532.2 412,082.2 N/A 317,532.2
----------------------------------------------------------------------------------------------------------------
Cost:
Beginning Inventory (000's) 921 3,196 3,305 N/A 921
4. Production (000's) 778 109 589 N/A 1,476
5. Buying (000's) 1,580 0 0 N/A 1,580
----------------------------------------------------------------------------
Total Available: (000's) 3,279 3,305 3,894 N/A 3,977
6. Processed (000's) -83 0 0 N/A --
----------------------------------------------------------------------------
Ending Inventory (000's) 3,196 3,305 3,894 N/A 3,894
----------------------------------------------------------------------------------------------------------------
Polished Stones 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Year
----------------------------------------------------------------------------------------------------------------
Units:
Beginning Inventory (carats) 293.6 23,924.80 23,472.03 N/A 293.6
7. Processed (carats) 0.0 0 0 N/A 0.0
8. Buying (carats) 23,631.2 0 0 N/A 23,631.3
----------------------------------------------------------------------------
Total Available: (carats) 23,924.8 23,924.80 23,472.03 N/A 23,924.8
9. Bulk Sales (carats) 0 N/A 0 N/A 0
10. Processed (carats) 0 452.77 12.7 N/A 465.5
----------------------------------------------------------------------------
Ending Inventory (carats) 23,924.8 23,472.03 23,459.3 N/A 23,459.3
----------------------------------------------------------------------------------------------------------------
Cost:
Beginning Inventory (000's) 19 2,788 2,768 N/A 19
11. Production (000's) 0 0 0
12. Buying (000's) 2,769 N/A 0 N/A 2,769
----------------------------------------------------------------------------
Total Available: (carats) 2,788 2,788 2,768 N/A 2,788
13. Bulk Sales (000's) 0 0 0 N/A 0
14. Processed (000's) 0 20 1 N/A 21
Ending Inventory (000's) 2,788 2,768 2,767 N/A 2,767
----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Benefits Group, Inc.
Revenue and Operating Income (Loss) and Purchase/Mining Production by Segment
(Dollars in thousands)
----------------------------------------------------------------------------------------------------------------
June 30, 2000 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Year
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue by Segment:
Mining 0 0 1,209 3,832 5,041
----------------------------------------------------------------------------------------------------------------
Operating Income by Segment
Mining: 0 0 804 2,454 3,258
Corporate 0 0 (121) (383) (504)
Development (79) (115) (105) (2598) (2,897)
Other 0 3 (1) 10 12
----------------------------------------------------------------------------
Net Income Before Tax (79) (112) 577 (517) (131)
----------------------------------------------------------------------------------------------------------------
Raw Mine Grade 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Year
----------------------------------------------------------------------------------------------------------------
Units:
Beginning Inventory(grams) 0 0 0 5,500.0 0.0
15. Production (grams) 64,425.3 64,425.3
16. Buying (grams) 0 25,500.0 80,000.0 105,500.0
----------------------------------------------------------------------------
Total Available: (grams) 0 0 25,500.0 149,925.3 169,925.3
17. Processed (grams) -20,000.0 -80,000.0 -100,000.0
Ending Inventory (grams) 0 0 5.500.0 69,925.3 69,925.3
----------------------------------------------------------------------------------------------------------------
Cost:
Beginning Inventory (000's) 0 0 82 0
18. Production (000's) 838 838
19. Buying (000's) 175 640 815
----------------------------------------------------------------------------
Total Available: (000's) 175 1,561 1,654
20. Processed (000's) -93 -640 -733
----------------------------------------------------------------------------
Ending Inventory (000's) 82 921 921
----------------------------------------------------------------------------------------------------------------
Polished Stones 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Year
----------------------------------------------------------------------------------------------------------------
Units:
Beginning Inventory (carats) 450.8 450.8 450.8 450.8 450.8
21. Processed (carats) 0
22. Buying (carats) 19,647.19 62,216.1 81,863.3
----------------------------------------------------------------------------
Total Available: (carats) 450.8 450.8 20,098.0 62,669.9 82,314.1
23. Bulk Sales (carats) -19,647.2 -62,216.1 -81,863.3
24. Processed (carats) -157.2 -157.2
----------------------------------------------------------------------------
Ending Inventory (carats) 450.8 450.8 450.8 293.6 293.6
----------------------------------------------------------------------------------------------------------------
Cost:
Beginning Inventory (000's) 31 31 31 38 31
25. Production (000's) 0
26. Buying (000's) 289 995 1,284
----------------------------------------------------------------------------
Total Available: (carats) 31 31 320 1,033 1,314
27. Bulk Sales (000's) -282 -995 1,277
28. Processed (000's) -19 -19
----------------------------------------------------------------------------
Ending Inventory (000's) 31 31 38 19 19
----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Benefits Group, Inc.
Revenue and Operating Income (Loss) and Purchase/Mining Production by Segment
(Dollars in thousands)
----------------------------------------------------------------------------------------------------------------
June 30, 2000 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Year
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue by Segment:
Mining 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------
Operating Income by Segment 0 0 0 0 0
Mining: 0 0 0 0 0
Corporate 0 0 0 0 0
Development (38) (289) (119) (167) (613)
Other (18) 0 0 (4) (22)
----------------------------------------------------------------------------
Net Income Before Tax (56) (289) (119) (171) (635)
----------------------------------------------------------------------------------------------------------------
Raw Mine Grade 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Year
----------------------------------------------------------------------------------------------------------------
Units:
Beginning Inventory(grams) 0 0 0 0 0
29. Production (grams) 0 0 0 0 0
30. Buying (grams) 0 0 0 0 0
----------------------------------------------------------------------------
Total Available: (grams) 0 0 0 0 0
31. Processed (grams) 0 0 0 0 0
----------------------------------------------------------------------------
Ending Inventory (grams) 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------
Cost:
Beginning Inventory (000's) 0 0 0 0 0
32. Production (000's) 0 0 0 0 0
33. Buying (000's) 0 0 0 0 0
----------------------------------------------------------------------------
Total Available: (000's) 0 0 0 0 0
34. Processed (000's) 0 0 0 0 0
----------------------------------------------------------------------------
Ending Inventory (000's) 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------
Polished Stones 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Year
----------------------------------------------------------------------------------------------------------------
Units:
Beginning Inventory (carats) 0 0 0 0 0
35. Processed (carats) 0 0 0 0 0
36. Buying (carats) 0 0 0 450.8 450.8
----------------------------------------------------------------------------
Total Available: (carats) 0 0 0 450.8 450.8
37. Bulk Sales (carats) 0 0 0 0 0
38. Processed (carats) 0 0 0 0 0
----------------------------------------------------------------------------
Ending Inventory (carats) 0 0 0 450.8 450.8
----------------------------------------------------------------------------------------------------------------
Cost:
Beginning Inventory (000's) 0 0 0 0 0
39. Production (000's) 0 0 0 0 0
40. Buying (000's) 0 0 0 31 31
----------------------------------------------------------------------------
Total Available: (carats) 0 0 0 31 31
41. Bulk Sales (000's) 0 0 0 0 0
42. Processed (000's) 0 0 0 0 0
----------------------------------------------------------------------------
Ending Inventory (000's) 0 0 0 31 31
----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
E. Acquisitions and Business Strategies
The process in the Democratic Republic of Madagascar to enable
Corporations such as the Company to acquire sufficient Mining perimeters in
order to make its mining operations financially viable requires the Company,
depending on the type of Mining perimeter being acquired, to either incorporate
a Malagasy Subsidiary to hold the Mining perimeter or to enter into an Agreement
with Malagasy Nationals for these Malagasy Nationals to hold the mining
perimeters in their name on the Company's behalf as a "Nominee". The "Nominee"
is usually paid for their consent to act with a lump sum payment paid at the
time the National and the Company enters into the Agreement. These Nationals
will be the legal owner of the mining perimeters with either the Company, an
acquired Malagasy Corporation or a newly created Malagasy Subsidiary Corporation
to be the beneficial owner of the mining perimeters (similar to the North
American practices of a mine Company having a lease-hold interest in the
property).
The Company, through its Director, Dror Moradov, sourced a number of
mining perimeters in the Democratic Republic of Madagascar, which the Company
believes to have Sapphires and Emeralds. These mining perimeters were acquired
by the Company through the Company's purchase of shares in the Malagasy
Corporations having the legal right to exploit the precious stones or through
the establishment of Joint Ventures where the National holds the interest for
the Company.
The Company's first purchase occurred on the 26th day of August, 1997 when
it acquired Ninety (90%) percent of the issued shares of SAO, a Corporation
incorporated pursuant to the laws of the Democratic Republic of Madagascar. SAO
held interests in mining perimeters, which the Company believed to have reserves
of sapphires and emeralds. The purchase price for the Ninety (90%) per cent
share holding was payment of Three Million (3,000,000) pre-dividend Common
Shares of the Company to Fulcrum Holdings of Australia Inc. ("Fulcrum") a
Corporation incorporated pursuant to the laws of the State of Delaware, being
one of the United States of America. Fulcrum was party to an Agreement with SAO
and certain of the Shareholders of SAO whereby Fulcrum agreed to purchase Ninety
(90%) percent of the issued and outstanding shares of SAO in exchange for shares
of a Publicly Traded Company and a covenant that Fulcrum would spend sufficient
monies to enable production to occur from the mining perimeters owned or
controlled by SAO. The Company was Assigned Fulcrum's position in the said
Agreement with Saowani and the Shareholders with the consent of all parties for
the consideration noted herein before. Director Dror Moradov was a Director of
SAO.
As a result of this transaction, Fulcrum became a registered shareholder
of three million (3,000,000) pre-dividend Restricted Rule 144 Common Shares of
the Company representing 37.6 percent of the Company's issued and outstanding
shares at that time. Two Directors of the Company, Gerald E. Sklar and Dror
Moradov collectively own 100% of the shares of Fulcrum Holdings of Australia,
Inc.. Subsequently, SOA. lost its mining perimeter rights in Madagascar.
However, SOA has been able to negotiate a joint venture with the owners of 3 of
the previously lost mining perimeters.
The Company's second purchase occurred on the 19th day of June, 1998 when
it acquired 70% of the issued shares of World Gems Corporation S.A.R.L., a
corporation incorporated pursuant to the laws of the Democratic Republic of
Madagascar. The purchase price for the Seventy (70%) per cent share holding was
payment of One Million (1,000,000) Restricted Rule 144 Common Shares of the
Company and a Note Payable of $100,000 from the Company to Fulcrum Holdings of
Australia Inc. ("Fulcrum") a Corporation incorporated pursuant to the laws of
the State of Delaware, being one of the United States of America. Fulcrum was
party to an Agreement with World Gems Corporation S.A.R.L. whereby Fulcrum
agreed to purchase Seventy (70%) percent of the issued and outstanding shares of
World Gems Corporation S.A.R.L. in exchange for shares of a Publicly Traded
Company and a covenant that Fulcrum would spend sufficient monies to enable
production to occur from the mining perimeters owned or controlled by World
<PAGE>
Gems. The Company was Assigned Fulcrum's position in the said Agreement with
World Gems and the Shareholders with the consent of all parties for the
consideration noted herein before. Two Directors of the Company, Gerald E. Sklar
and Dror Moradov collectively own One Hundred (100%) Per Cent of the shares of
Fulcrum Holdings of Australia. After the purchase, Fulcrum held a position in
the Company representing 40.08 percent of the Company's issued and outstanding
shares at that time Subsequently, World Gems Corporation S.A.R.L. lost its
mining perimeter rights in Madagascar and the Board of Directors elected to
write off the investment in World Gems Corporation S.A.R.L. as worthless. The
Note Payable of $100,000 was canceled with the approval of Fulcrum.
The Company's third purchase occurred on the 11th day of May, 1999 when
the Company acquired One Hundred (100%) Per Cent of the issued and outstanding
shares of S & W, a Malagasy Corporation for and in consideration of Four Million
Five Hundred Thousand (4,500,000) Restricted Rule 144 Shares of the Company from
Carlyle Consulting Group Inc., a Corporation incorporated pursuant to the laws
of the Grand Cayman Islands, the sole shareholder of Stones and Wood Corporation
S.A.R.L.. The Company's purchase of the shares of Stones and Woods Corporation
S.A.R.L. was made by American Benefits Group (Israel) Ltd., a One Hundred (100%)
Percent owned Subsidiary of the Company. S & W owned the interests in 19 Type
III mining perimeters for mining of corundum (sapphire and ruby deposits), as
well as interests in several mining operations, including mining equipment. The
Company also acquired interests in 18 Type I Mining perimeters for 497,000
Restricted Rule 144 Shares in Madagascar, individually owned by Malagasy
Nationals, who were the Shareholders of S & W prior to Carlyle Consulting Group
Inc.'s acquisition of the Shares. These 18 Type I mining perimeters are held by
the Malagasy Nationals as nominees on behalf of S & W. These 18 Type I Mining
perimeters are for Corundum and Garnet. Certain of S & W's mining perimeters are
currently being tested through Stones and Wood's Joint-Venture Agreement with
Adam Mining Company Ltd. (ADAMCO), a Malagasy Corporation, whereby Stones and
Wood receives Twenty Five (25%) Per Cent of all testing obtained from ADAMCO's
testing efforts on the mining perimeters as a Lease Payment.
Mining Development
The Company has acquired testing and mining concessions on 40 mining
perimeters in the Democratic Republic of Madagascar. The mining strategy is to
test, explore and map out reserves for precious stones such as sapphires,
emeralds, rubies, and other precious stones. Upon completing a reserve
calculation the Company will perform an evaluation of the reserve and an
economic analysis for the establishment of a viable mine operation. The testing
and exploring will be completed based on a Work Program developed by the
Company's Geologists and Engineers, Watts, Griffis and McOuat Limited.
Map Of Mine Area
The first requirement is to produce a large-scale plan of the mine area
which will provide a base on which to plot all of the information currently
available, including topography, geology and the outline of the present
workings. Ideally, the scale of this map would be about 1:5000, but not less
than 1:10,000.
This same base plan will also be used to plot the locations of exploration pits,
trenches and drill holes.
Pits And Trenches
One site geologists would have studied the definitions of Proven and
Probable Reserves so that they can develop a feel for the spacing of the pits
and and/or trenches that will be required to meet the requirements. Pits and
<PAGE>
trenches would be spaced as follows:
o If the deposit occurs in the form of a wide blanket, whose length and
width are somewhat similar, then the best approach will be to sink pits to
bedrock at regular spacings on a grid, 50 meters for Probable Reserves and
25 meters for Proven Reserves.
o If the deposit is much longer in one dimension than the other, as it will
be if it is confined to a drainage channel, then the best approach would
be to dig trenches to bedrock across the deposit at intervals of about 50
meters for Probable Reserve and 25 meters for Proven Reserves.
Accurate elevations of the collar and depth of each pit will be required,
as well as a topographic profile of each trench.
Logging Of Pits And Trenches
A visual inspection would be made of each pit and trench and a small
sketch made to show the lithology encountered from surface to bottom. Particular
notice would be paid to the distribution of the sapphires, whether they are
randomly distributed throughout the host material, or occur in definite bands.
If they do occur in definite bands, the thickness would be recorded.
Testing for precious stones
The Company's testing procedure involves excavating raw material and
placing this material into a soaking pit initiating the first stage extraction
process. In the first stage, the material is soaked, breaking down the material
into a paste or "rough slurry".
The "rough slurry" is then moved to the second stage in a trommel, where
large rocks, boulders and lumps are removed by a trommel screen with a 6"
(minus) mesh. While the large rocks are rejected, they are continuously and
rigorously inspected for embedded gems. The second stage process produces a
"fine slurry".
The "fine slurry" is then pumped into the third stage extraction plant,
which separates the precious stones and captures them in locked jigger boxes
while the waste water slurry flows into a tailing's settling pond where the
water is held for reuse in the first stage.
The precious stones are emptied from the locked jigger boxes at the end of
each shift under strict security supervision where the shifts' production is
weighed and recorded. The sorted precious stones are then put on a light table
and re-run through a second stage sorting process to enable categorization by
size and grade. The sorted stones are then recorded and placed in special locked
boxes for shipment.
To facilitate it's Malagasy Testing Operations, the Company has entered
into 3 Agreements with Dove Gems & Jewelry Co. Ltd. for the purchase of testing
equipment which will be transported from Thailand to the Company's Madagascar
mine sites. The purchase price for the testing equipment was USD Five Hundred
and Sixty-six Thousand Three Hundred Forty-nine dollars and forty-three cents
(USD$566,349.43).
Processing Of Samples
The volume of all of the material recovered from each individual pit and
trench, or portion of a trench, would be measured, processed through a wash
plant, and manually sorted to recover all of the sapphires in the sample. The
<PAGE>
grade of the sample in carats per cubic meter would then be estimated.
Estimation Of Reserves
After all of the pits and/or trenches have been excavated and the samples
have been processed for the particular area or site, the resulting information
will be plotted on sections and used to complete an estimate of reserves.
Upon completion of the mapping of the test holes, pits and trenches and
the calculation of the estimate of the reserve, the Company would have the
Company's independent Geologists and Engineers verify the results of the
exploration work including the calculation of the estimate of reserves.
The personnel required to operate the Company's testing operations in The
Democratic Republic of Madagascar are obtained from four sources.
The first source of workers are trained Security Personnel. These
individuals are all military trained, accustomed to living in "third world"
conditions, have extensive security training and are familiar with the
Democratic Republic of Madagascar.
The second source of workers is from April Mining Ltd. April supplies the
testing operations with supervisory licensed mechanics and heavy equipment
operators. Most of the workers have double licenses with security experience.
The majority of this group of workers has extensive experience in working and
living in third world countries.
The third source of workers is Dove Gems & Jewelry Co. Ltd. which augments
April's heavy equipment operators with Thai operators fully trained in testing
procedures and accustomed to living and working in third world countries.
The final source of workers is local Malagasy laborers who form the
majority of mine workers. These laborers will be trained as heavy equipment
operators and mechanics by the April workers.
Transportation and finishing of precious stones
From the mine sites, the stones are transported to Tel Aviv, Israel;
Bangkok, Thailand and/or Sri-Lanka for cleaning and processing.. The stones will
be transported either by way of an International Security Company, bonded and
insured, or by the Company's own Security Division. The fee charged by the
Sub-Contracted Factories for cleaning, heating, cutting and polishing of the
stones averaged five ($5) dollars/carat.
Marketing of precious stones
The marketing of the Company's mined precious stones is three-fold:
Firstly, the Company will inventory the majority of its stones. Certain of
the inventoried stones will be in a finished state and certain of the inventory
will be in a raw state. The intent of inventorying a large percentage of
production is to firstly not create an excess of product on the world market so
as to devalue the retail price of the product and secondly to create a large
enough inventory of stones so that the company will be in a position to use the
inventory as collateral for any loans required in order for the company to meet
its long term growth plans.
Secondly, the Company will use it's inventoried production to either sell
large quantities to particular buyers in a rough or finished state and to enable
the Company to have sufficient reserves of product to withstand any run of the
<PAGE>
retail price.
Thirdly, the Company will finish certain of its product to a jewelry state
for sale over its Internet Shopping Mall, "RodeoIsland.com" and Club Rodeo. By
eliminating the "middleman", the Company's net margins will be higher than could
otherwise be expected and that the success of said sales will attract clients
and consumers to the site thus increasing the profitability of the site in its
own right.
Storage of precious stones
The Company will utilize five storage locations for its mined precious
stones: The first site will be in the Democratic Republic of Madagascar where
the rough stones are extracted from the various mine sites and will be stored
pending shipment to other sites. The Company has a highly trained Security
Group, familiar with Madagascar and the mining industry, to safe guard the
product in Madagascar. The cost of storage at a Company controlled storage
location in Madagascar is far less than moving the product to world markets
immediately upon being extracted and the security at the Company storage site is
more protective than other sites available for raw product. Storage in
Madagascar also affords the Company savings in Transportation Costs as
controlled transportation of gems required for the Company's long-range goals
will only be shipped off the island.
The second storage site will be at the precious stone finishing facilities
in Israel, Thailand or Sri Lanka. Only those stones required by the Company will
be shipped to these facilities for finishing. While at the finishing facilities
the gems are insured by both the Company and the finishing facility for the
finished value of the stones.
The third storage facility will be at the Company's New York Marketing
Office, Total Gem Management, where sufficient finished stones will be
inventoried in order for the Company to create a presence in New York and to
generate sales from which the Company's web site will benefit as awareness of
the Company's product becomes well known.
The fourth storage site will be the Company storage facility in Calgary,
Alberta, Canada where a clearing house will be created to enable the Company to
meet its Internet retail sales and to store sufficient stones to conclude any
financing or large scale sails.
The fifth storage site will be in Israel at the vaults of Menavi
International Ltd. This storage site has been selected for primarily finished
stones in order for the Company to take advantage of the Israeli stone market
and the advance cutting techniques only available in Israel.
F. Mine Economic Analysis and Marketing Strategy
Testing from ABFG's test mine site (which does not include the testing
results from Joint Venture with ADAMCO) for the period May 30, 1999 to March 31,
2000 has resulted in the Company extracting 311,313.6 grams of sapphire mine
grade ore after completion of Sort I. The Sort I process entails the removal of
rock contaminants from the initial mining process. Upon completion of the Sort
II, the mine grade ore yielded 298,861.1 or 96% of sapphire stones. The Sort II
process entails the further grading of the precious stones and removal of
non-precious stones that were not detected in the Sort I process. The Sort III
process of the sapphire stones generated 150,250.7 grams of facet quality
sapphires and 147,687.8 grams of cabochon quality sapphire stones. The Sort III
process entails sorting the precious stones by grade and by size. Total weight
produced through testing was 297,938.5 grams of sapphire stones. During this
period, 25,185 m3 were processed yielding an average of 11.83 grams of sapphire
stone (Post Sort III) per cubic meter. The yield, based on the testing
performed, yielded 5.97 grams of facet quality sapphire per cubic meter and 5.85
grams of cabochon quality sapphire per cubic meter of ore processed.
<PAGE>
period, 18,483 m3 were processed yielding an average of 11.46 grams of sapphire
stone (Post Sort III) per cubic meter. The yield, based on the testing
performed, yielded 5.88 grams of facet quality sapphire per cubic meter and 5.59
grams of cabochon quality sapphire per cubic meter of ore processed.
The sapphire stones from the testing have not been cut and polished as of
the date of writing to establish the exact quality of the sapphire stones.
The Company's Geologists and Engineers, Watts, Griffis and McOuat visited
the test site, M-4, and in their report issued July 24, 1999, reported, based on
5,003 cubic meters mined, Facet quality sapphire stone yield of 5.82 grams per
cubic meter and cabochon quality sapphire stone yield of 3.96 grams per cubic
meter. The yield for Facet quality sapphire stone of 5.88 grams per cubic meter
tested by the Company is consistent with the yield as reported by the Company's
Geologists and Engineers at 5.82 grams per cubic meter. The average of Facet
yield, as based on the Company's tests, had a range of 2.31 grams/m3 to a high
of 13.44 grams/m3
The Company has developed an Economic Model for production using Economic and
Modeling software, Crystal Ball 4.0(trademark of Decisioneering, Inc.), to
perform a sensitivity analysis to estimate potential production of the current
test mine site, M-4. The production model used the following assumptions:
Hours of Work:
Worst case: 0
Best case: 18 (2 shifts)
Most likely case: 14
Excavation Production:
Worst case: 8.37% of capacity (150m3) or 12.55 cubic meters per hour
Best case: 100% of capacity (150m3) or 150 cubic meters per hour
Most likely case: 27% of capacity (150m3) or 40 cubic meters per hour
Production Yield: (Ore Grade)
Worst case: 0 grams per cubic meter
Best case: 32.17 grams per cubic meter
Most likely case: 11.46 grams per cubic meter
Facet Grade - Sort III
Worst case: 30%
Best case: 60%
Most likely case: 51.3%
Cutting Wastage:
Worst case: 85%
Best case: 80%
Most likely case: 83%
Cut Stone Grade - Extra Fine
Worst case: 0.00%
Best case: 10.00%
Most likely case: 3.00%
Cut Stone Grade - Fine
Worst case: 0.00%
Best case: 20.00%
<PAGE>
Most likely case: 6.00%
Cut Stone Grade - Good
Worst case: 0.00%
Best case: 30.00%
Most likely case: 10.00%
Mining Costs
Worst case: $14,000.00 per day
Best case: $8,400.00 per day
Most likely case: $10,500.00 per day
Cut Stone Pricing for 0.5 - 1.0 cts size (Gemstone price Reports,
Gemworld International, Inc. vol. 15) US$/Carat:
Commercial, grade 1 $ 30.00
Commercial, grade 2 $ 50.00
Commercial, grade 3 $ 75.00
Commercial, grade 4 $ 125.00
Good, grade 4 $ 125.00
Good, grade 5 $ 185.00
Good, grade 6 $ 250.00
Fine, grade 6 $ 250.00
Fine, grade 7 $ 450.00
Fine, grade 8 $ 600.00
Extra fine, grade 8 $ 600.00
Extra fine, grade 9 $1,000.00
Overview
The model was run on a 10,000 trial basis. The results of the model
indicate that daily production of sapphire ore can range from 228.72 grams to
94,478.91 grams with a median of 18,142.69 grams per day. The certainty of
producing 18,169.65 grams per day is between .017 and .023.
The yearly production of sapphire ore can range from 60,381.35 grams to
24, 942,432.12 grams with a median of 4,789,670.25 grams per year. The certainty
of producing 4,789,670.25 grams per year is between .017 and .023.
The cost of mining the sapphires ranged from $8,430.85 per day to
$13,910.82 per day, with a median of $10,866.35 per day. The certainty of
incurring the daily mining cost of $10,866.35 is between .016 and .022.
The yearly production of polished facet quality stones ranged from
29,408.8 carats to 12,906,393.3 carats with a median of 1,937,785.4 carats.
The market value of the inventory of facet quality stones ranged from
$53.69 per carat to $182.79 per carat with a median of $108.98 per carat.
The yearly market value of the polished facet quality stones ranged from
$3,185,371.73 to $1,701,249,929.17 with a median of $208,200,546.14.
The cost of the inventory of polished facet quality stones ranged from
$2,627,957.26 to $69,470,251.87 with a median of $12,877,561.74.
Based on the model, the average cost (median) of producing one carat of
facet quality sapphire which includes the mining, cleaning, and processing
ranged from $5.37 a carat to $104.51 per carat with a median of $6.63 per carat.
This results in a gross margin, before selling costs, ranging from $48.32 per
carat to $78.28 with a median of $102.35 per carat.
<PAGE>
Based on the median yearly production of polished facet stones to be
1,937,785.4 carats with a probability of .018 to .024, one can extrapolate that
the yearly annual revenue from the sale of polished facet quality stones would
be $211,179,852 with a gross margin of $198,332,336.
The model is based on the assumption of a single mine operation and a zero
value for the Cabochon quality sapphire stones.
Marketing strategy
The Company plans to build up inventory of rough or unpolished sapphire
ore and polished facet quality sapphire stones. The Company proposes to market
20% of polished facet quality sapphire stones, through bulk or wholesale sales
to provide cash flow for the mining operations, overhead, and sales costs. Based
on the economic model of producing 1,937,785.4 carats of polished facet quality
sapphire stones, a 20% sale would result in a sale of 387,557 carats with a
median market value of $108.98 per carat resulting in a gross revenue of
$42,235,961. This would provide the Company with a pre-tax net profit of
$13,235,961 after deducting for mining operations (estimated $13 million),
overhead (estimated $12 million) and sales costs (estimated $4 million).
The Company plans to market a further 20% of its inventory of polished
facet quality sapphire stones by incorporating the sapphire stones into carat
jewelry and marketing the carat jewelry on the Internet.
The estimated cost of producing carat jewelry made using gold and in some
cases incorporating diamonds to accent the sapphire has been established at
$233.20 per carat of sapphire stone used. The retail value of the jewelry is
valued at $765.00 per carat of sapphire stone used. This would result in jewelry
costs of $90,378,292 with a market value of $296,481,105.
The Company plans to retail the jewelry through their Internet shopping
mall, RodeoIsland.com with a sale price being 80% of appraised retail value of
the carat jewelry.
The Company plans to further offer its carat jewelry at a discounted price
of the RodeoIsland sales price to members of Club Rodeo at 75% of RodeoIsland
sales price. Club Rodeo Members will receive cash rebates of up to 6% of the
Club Rodeo price and residual income up to 6% for purchases made by customers
referred to by the Club Rodeo member.
The Company plans on retailing their carat jewelry products on the basis
that 25% of the sales would be through RodeoIsland with the balance (75%)
through Club Rodeo. The impact of this sales strategy would provide the Company
with a weighted average of 65% of appraised retail value of the carat jewelry.
Based on the Company planning to produce jewelry with 20% (387,557 carats), of
the sapphire production, the revenue to the Company would be 65% of the
appraised value of $296,481,105 or $192,712,718.
Club Rodeo members would be eligible for a cash rebate on their purchases
of up to 6% plus up to a further 6% residual income from purchases made by
referrals. The Company has budgeted 10% of Club Rodeo sales for the
rebate/residual income program. Based on the budgeted revenue through Club Rodeo
of $133,416,497.00, it is estimated that $13,416,000 would be expended on the
rebate/residual income program.
The Company plans to advertise using print, radio and television media to
promote and advertise their Internet Shopping Mall, RodeoIsland.com. The budget
<PAGE>
established for the advertising campaign is 10% of sales revenue or $19,271,000.
The projected yearly summary of the retail sales of carat jewelry would be as
follows:
RodeoIsland sales $ 59,296,000
Club Rodeo $ 133,416,000
--------------
TOTAL SALES $ 192,712,000
Cost of Goods $ 90,378,000
--------------
Gross Margin $ 102,334,000
Less: Club Rodeo rebates $ 13,341,000
Advertising $ 19,271,000
Overhead @5% $ 9,600,000
--------------
NET MARGIN $ 60,122,000
==============
The Company is an emerging Company and anticipates that it would be able to
generate such retail sales over a planned growth period of five years. It is
anticipated that the first years retail sales would be $13,000,000 or 7% of the
overall planned sales.
Sales in the following years are projected as follows:
Year 2 $ 23,896,000
Year 3 $ 47,793,000
Year 4 $ 95,585,000
Year 5 $ 192,712,000
Club Rodeo will be marketed. Each membership will be offered at $200.00 and
renewed on an annual basis. The Company is planning to offer, as commission
sales on memberships, 50% of the membership price to referring members. The
administrative costs for establishing the membership and maintaining the
membership is budgeted at $50.00 per member. This would result in membership
sales margin of $50 per member on an annual basis. It is projected that each
growth would be aggressive, and would be as follows at the end of each year:
Year 1 9,360
Year 2 36,000
Year 3 79,920
Year 4 141,120
Year 5 219,600
The Company plans to introduce other products and services to RodeoIsland. The
Company will be seeking to market products produced by other companies either
through assignment, commission or portal basis. The Company will also be
reviewing other products to manufacture and retail through RodeoIsland and Club
Rodeo.
BUSINESS REVENUE STRATEGY
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
($000,000's) Year 1 Year 2 Year 3 Year 4 Year 5
------------ ------ ------ ------ ------ ------
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bulk Sales 42.2 42.2 42.2 42.2 42.2
----------------------------------------------------------------------------------------------------------
Retail 13.0 23.9 47.8 95.6 193.0
----------------------------------------------------------------------------------------------------------
Memberships 1.9 7.2 16.0 28.2 43.9
---- ---- ----- ----- -----
----------------------------------------------------------------------------------------------------------
TOTAL REVENUE 57.1 73.3 106.0 166.0 279.1
----------------------------------------------------------------------------------------------------------
COST OF GOODS
----------------------------------------------------------------------------------------------------------
Mining 13.0 13.0 13.0 13.0 13.0
----------------------------------------------------------------------------------------------------------
Retail 6.1 11.2 22.4 44.8 90.5
----------------------------------------------------------------------------------------------------------
Membership .0 3.6 8.0 14.1 21.9
----------------------------------------------------------------------------------------------------------
Sales-Mining 4.0 4.0 4.0 4.0 4.0
----------------------------------------------------------------------------------------------------------
Sales-Retail 1.3 2.4 4.8 9.6 19.3
---- ---- ----- ----- -----
----------------------------------------------------------------------------------------------------------
Total Cost of Goods 25.3 34.2 52.2 85.5 148.7
---- ---- ----- ----- -----
----------------------------------------------------------------------------------------------------------
GROSS MARGIN 31.8 39.1 53.8 80.5 130.4
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
OVERHEAD
----------------------------------------------------------------------------------------------------------
Mining 12.0 12.0 12.0 12.0 12.0
----------------------------------------------------------------------------------------------------------
Retail .6 1.2 2.4 4.8 9.6
----------------------------------------------------------------------------------------------------------
Membership .5 1.8 4.0 7.1 11.0
---- ---- ----- ----- -----
----------------------------------------------------------------------------------------------------------
TOTAL OVERHEAD 13.1 15.0 18.4 23.9 32.6
---- ---- ----- ----- -----
----------------------------------------------------------------------------------------------------------
PRE-TAX NET PROFIT 18.7 24.1 35.4 56.6 97.8
---- ---- ----- ----- -----
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</TABLE>
G. Competition
Sapphires are mined, most notably, in 18 countries worldwide. Of these
countries the Malagasy sapphire market competes directly with the Australian
sapphire market production from which, due to the lower price of African goods,
has dropped significantly in 1998 according to a report by Paul Mahler (a
Canadian gem dealer). (This report can be found at
http://canjewel.polygon.net/docs/mar99/gemmarket.html).
With very little competition and the strong presence of the Malagasy
sapphire on the world sapphire market, the Company believes that it is in a
prime position to take advantage of a burgeoning demand for finished sapphire
products and to take the lead in E-commerce sales of sapphire jewelry products.
H. Workers
The Company currently employs 266 full time workers and management
believes that employee relations are good.
I. Government
The development, production and sale of stones is subject to federal,
state, provincial and local regulation in a variety of ways, including
environmental regulation and taxation. Federal, state, and local environmental
regulations generally have a significant effect on all companies, including the
Company, engaged in mining or other extractive activities, particularly with
respect to the permit requirements imposed on such companies, the possibilities
of project delays, and the increased expense required to comply with such
regulations. The Company believes it is in compliance with all such regulations
in all the jurisdictions in which it operates. The Company's management does not
believe the Company's ability to proceed with its plans in a timely and
commercially reasonable manner has been affected in a materially adverse way or
in a significantly different manner from other such companies in the industry.
Most operations involving the exploration for stones are subject to
existing laws and regulations relating to exploration procedures, safety
precautions, employee health and safety, air quality standards, pollution of
stream and fresh water sources, odor, noise, dust, and other environmental
protection controls adopted by federal, state, and local governmental
authorities as well as the rights of adjoining property owners. The Company may
be required to prepare and present to federal, state, or local authorities data
pertaining to the effect or impact that any proposed exploration or production
of minerals may have upon the environment. All requirements imposed by any such
authorities may be costly and time-consuming and may delay commencement or
continuation of exploration or production operations.
Future legislation and regulations are expected to continue to emphasize
the protection of the environment and, as a consequence, the activities of the
Company may be more closely regulated to further the cause of environmental
protection. Such legislation and regulations, as well as future interpretation
of existing laws may require substantial increases in capital and operating
costs to the Company and delays, interruptions, or a termination of operations,
the extent of which cannot be predicted. If Bills proposing changes to the
mining laws of Madagascar, which could include royalty fees, are enacted they
could have a significant effect on the ownership and operation of mining claims
in Madagascar including claims owned or held by the Company. Although it is not
possible to predict whether or in what form the government might enact changes
to the mining laws, amendments to current laws and regulations governing
operations and activities of mining companies or more stringent implementation
thereof could have a material adverse impact on the Company.
Applicable laws and regulations require the Company to make certain
capital and operating expenditures to maintain current operations and initiate
new operations. The Company's estimate of expenditures required to comply with
applicable regulations is included in all of its budgets for its projects.
Although these costs are difficult to determine, the Company is not currently
aware of any expenditures that are required in excess of budgeted amounts. The
Company incurs expenditures for land reclamation undertaken in the normal course
of operations in compliance with federal and state land restoration laws and
regulations. Under certain circumstances, it may be required to close an
operation until a particular problem is remedied or to undertake other remedial
actions, however, the Company is not aware of the existence of any such
circumstances at this time.
The Company is subject to income taxes, state and local franchise taxes,
<PAGE>
personal property taxes, and state severance taxes levied by various
governmental units in the countries in which the Company operates. State
severance taxes vary between the states and, within a single state, the amount
of tax, based on a percentage of the value of the stone being extracted, vary
from one type of stone to another stone. The Company's operations are also
subject to taxation by each locality in which it owns mining perimeters or does
business.
The Federal Trade Commission (FTC), which exercises jurisdiction over the
advertising of jewelry, has in the past several years instituted enforcement
actions against several jewelry companies for false and misleading advertising
of certain products. These enforcement actions have resulted in consent decrees,
agency cease and desist orders, judicial injunctions and the payment of fines by
the companies involved. In addition, the FTC has increased its scrutiny of
infomercials. There can be no assurance that the FTC will not question the
Company's advertising in the future. The FTC has been very active in enforcing
its requirements that companies possess adequate substantiation in their files
for claims in product advertising.
The Company intends to manufacture certain products pursuant to contracts
with customers who will distribute the products under their own or other
trademarks. Such customers are subject to the governmental regulations discussed
in this section in connection with their purchase, marketing, distribution and
sale of such products, and the Company will be subject to such regulations in
connection with the manufacture of such products and its delivery of services to
such customers. However, although some of the Company's customers are
independent companies, and their labeling, marketing and distribution of such
products is beyond the Company's control, the failure of these customers to
comply with applicable laws or regulations could have a material adverse effect
on the Company. Governmental regulations in foreign countries where the Company
plans to sell products may prevent or delay entry into the market or prevent or
delay the introduction, or require the reformulation, of certain of the
Company's products. Compliance with such foreign governmental regulations
generally will be the responsibility of the Company's customers in those
countries. Those customers are independent companies over which the Company will
have no control.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION
1999 compared to 1998
Overview
The following should be read in conjunction with the Company's Financial
Statements and the notes related thereto, contained elsewhere in this Form
10-SB/A (the "Report"). The Company intends that certain matters discussed in
this Form 10-SB/A are "forward-looking statements" intended to qualify for the
safe harbors from liability established by the Private Securities Litigation
Reform Act of 1995. These forward-looking statements can generally be
identified as such because the context of the statement will include words such
as the Company "believes", "anticipates", "expects", or "estimates", or words of
similar meaning. Similarly, statements that describe the Company's future
plans, objectives or goals are also forward-looking statements. Such
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those anticipated as of the
date of this report. Certain of such risks and uncertainties are described in
close proximity to such statements or elsewhere in this report.
Shareholders, potential investors and other readers are urged to consider these
factors in evaluating the forward-looking statements and are cautioned not to
place undue reliance on such forward-looking statements.
Except for the historical information contained herein, certain of the
matters discussed in this report are "forward-looking statements," as defined in
Section 21E of the Securities Exchange Act of 1934, which involve certain risks
and uncertainties, which could cause actual results to differ materially from
those discussed herein including, but not limited to, risks relating to changing
economic conditions, changes in the prices of minerals, the results of
development and testing of the mining perimeters and actual mining and other
risks disclosed in this report.
The Company cautions readers that any such forward-looking statements are
based on management's current expectations and beliefs, but are not guarantees
of future performance. Actual results could differ materially from those
expressed or implied in the forward-looking statements. Unless the context
otherwise requires, the term "Company" refers to American Benefits Group, Inc.
For 1999, the Company had its first sales since commencement of operations
in 1997 which amounted to $5.041 million. The sales generated a gross margin of
$3.255 million or 65%. There were no sales in 1998.
On June 30, 1999, the Company had expended $2.99 million for Development
during the year as compared to $.743 million in 1998.
The Company had a development cost reduction of $100,000 as a result of a
cancellation of a note payable due to the sellers of World Gem Corporation
S.A.R.L. Management has elected to record the cancellation of debt on the World
Gem transaction as a reduction of development costs as the write-off of the
worthless subsidiary was charged to development costs.
The net operating results for the Company resulted in a loss of $(.004)
per share for 1999 compared to a loss of $(.03) per share in 1998.
Liquidity and capital resources
The Company's main source of liquidity is its inventory of precious
stones, jewelry and art. The precious stones are readily liquid and the amount
in inventory when liquidated would not impact the market to cause a negative
impact to the value of the inventory or the world market. The inventory consists
of the following:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
March 31, 2000 Jun 30/99 Jun 30/98
--------------------------------------------------------------------------------------------------------------------
COST UNITS COST UNITS COST
UNITS ($000) ($000) ($000)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rough, unprocessed stone (Grams) 412,082.2 $3,893 69,925.13 $ 921 0 $ 0
--------------------------------------------------------------------------------------------------------------------
Polished Gems (Carats) 23,459.3 $2,767 293.6 $ 19 450.8 $ 31
--------------------------------------------------------------------------------------------------------------------
Finished Jewelry (cost) N/A $ 2 N/A $ 7 N/A $ 0
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Art (cost) N/A $ 53 N/A $ 53 N/A $ 0
--------------------------------------------------------------------------------------------------------------------
TOTAL $6,715 $1,000 $ 31
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The inventory value of $6.715 million for March 31, 2000 is valued at cost.
The market value of the inventory has a value of $15.4 million on March 31,
2000, $1.2 million on June 30, 1999 and $90 thousand on June 30, 1998. The
dramatic increase in market value is due principally to an inventory of cut and
polished precious stones. The incremental cost of inventory from June 30, 1999
to March 31, 2000 increased by $5.7 million producing an increase in market
value of $14.2 million or a ratio of 2.5 to 1.
The higher inventory of precious stones, art and jewelry is primarily
related to:
i) Increased testing of mine sites in Madagascar;
ii) Build up of polished gems stock;
iii) Build up of art and jewelry inventory to ensure fulfillment of
testing of the Internet Shopping Mall.
Capital expenditures amounted to approximately $1.57 million for the nine
months of the current fiscal year, $7.54 million in 1999 and $.644 million in
1998. The capital expenditures of the Company were incurred in three areas:
Development Projects, $5.1 million (accumulated March 31, 2000); Fixed Assets,
$.284 million (accumulated March 31, 2000); and Mining Concessions, $4.4 million
(accumulated March 31, 2000).
The majority of expenses for Development Projects are soft costs expended
in development projects which included Mining Development (accumulated total
$3.48 million, March 31, 2000), Internet Development (accumulated total $1.59
million, March 31, 2000), and E-Block Research and Development (accumulated
total $10 thousand, March 31, 2000).
The balance of the Capital Expenditures was for fixed assets which, on
March 31, 2000, included $169 thousand for office furniture, $115 thousand for
mine facilities and equipment, $19 thousand for the initial organization costs
of the Company, and $4.4 million for the acquisition of SOA, S & W and the
mining interests in 37 mining perimeters in Madagascar. Although the Company
does not know the exact amount of Capital Expenditures it will incur, it
estimates the capital required in 2000 will be in the range of $10-15 million.
The Company plans to continue to increase its testing and development of the
mining perimeters in Madagascar and in other countries, continue to develop and
test the Internet Shopping Mall, RodeoIsland.com and continue to research and
develop the e-block technology.
The Company has current liabilities as of March 31, 2000 of $4.15 million
which consists of Cost of Goods $2.6 million, Trade Payables $809 thousand and
$737 thousand to a major shareholder of the Company. The Company has no lines
of credit established and has contingent liabilities as of March 31, 2000 of
$566 thousand for fixed asset purchase. The Company has a positive working
capital of $2.6 million as of March 31, 2000and a liquidity ration of 1.63
(current assets/current liabilities).
The Company has financed its operations for the year end June 30, 1999
through sales, several equity issues and credit from a major shareholder. The
equity issues for 1999 were $7.8 million resulting in the Company issuing
25,292,075 shares of common stock at an average price of $.3085 per share. The
Common Stock was issued under Rule 504, $1 million, Rule 504, 10,000,000 shares
at an average price of $.10 per share, and Rule 144, $6.3 million, 15,292,075
Rule 144 shares at an average price of $.4448 per share. Sales in 1999 amounted
to $5.0 million. The Company expects that the future growth of the Company will
be financed from internally generated funds, additional capital injection by the
major shareholder, bank lines of credit, establishment of a subordinated debt
secured with the precious stone inventory, and continuation of its equity
program.
The Board of Directors of the Company have not declared a cash dividend or
dividend in kind as of March 31, 2000.
Additional information
The Company intends to provide an annual report to its security holders,
and to make quarterly reports available for inspection by its security holders.
The annual report will include audited financial statements.
The Company will, as a result of this filing, become subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Act")
and, in accordance with the Commission, such reports, proxy statements and other
information may be inspected at public reference facilities of the Commission at
Judiciary Plaza, 450 Fifth Street N.W., Washington D.C. 20549; Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; 7 World
Trade Center, New York, New York, 10048; and 5670 Wilshire Boulevard, Los
Angeles, California 90036. Copies of such material can be obtained from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street
N.W., Washington, D.C. 20549, at prescribed rates. For further information, the
SEC maintains a website that contains reports, proxy and information statements,
and other information regarding reporting companies at http://www.sec.gov.
ITEM 3. DESCRIPTION OF PROPERTY
The principal physical mining perimeters owned or leased by the Company
are as follows:
Corporate office
The registered corporate office is located at 10 Fairway Drive, Suite 307,
Deerfield Beach, Florida, 33441. These premises are 200 sq. ft, and cost the
Registrant $500 per month (inclusive of operating costs) on a month to month
basis.
Marketing and Internet operations office (executive office)
The Company's marketing and Internet office is located at 900, 840 - 7th
Avenue S.W., Calgary, Alberta, Canada, T2P 3G2. These premises are approximately
13,325 sq. ft, lease from a company owned by a principal of the Company on a
month to month basis, and cost the Registrant $4.50 per sq. ft. per year rent.
Operating costs, at cost, are $6.71 per square foot per year.
Madagascar Office
The Malagasy Office is located Lot 152E Bis Amborompotsy, Talatamaty,
Antananarivo 105, Madagascar. These premises are approximately 2500 sq. ft. and
cost the Registrant $600 per month rent and operating costs of $ 300 per month.
The Registrant became the lessee on 1st November 1997 and the lease is on a
<PAGE>
month to month basis
Saowani Development S.A.R.L. Mining perimeters
The Company (SAO) is partner to a joint venture with Ms. Eliana Georgette
Samuel Harinoro whereby SAO was given exclusive rights to explore and test on
three (3) emerald bearing mining perimeters (these mining perimeters were part
of the original 13 mining perimeters of SAO). The Joint Venture commenced in
June 1999, SAO will fund the exploration and testing of the mining perimeters.
Profits arising from the Joint Venture will be distributed on a basis of 80% to
SAO and 20% to Ms. Harinoro. The Mining perimeters are classified as Type I
mining perimeters.
The Registrant's subsidiary interest in the permits is as joint venture
partner. There are no encumbrances registered against the title to the lands or
the permits. The terms of the permits is two (2) years renewable exploitation
permits for the emerald and sapphires mining perimeters and four (4) years
research permits, which can be changed to thirty (30) years exploitation
renewable permits for the gold. There are fixed costs regarding the renewal of
the permits. This cost is a government tax which is not exceeding $ 200 per
perimeter per annum. This agreement secures SAO interest in the mining
perimeters for its commitment to arrange the investment needed for the
development of the permits. The Registrant has the sole right to mine each of
the mining perimeters. There is no need for the Registrant to insure its mining
perimeters interests as there is no danger of the `stones' being destroyed or
damaged by an insurable peril.
S & W
The Company has acquired interests in 37 mining perimeters through its
acquisition of S & W by its subsidiary American Benefits Group (Israel) Ltd. The
mining perimeters consist of 18 Type I mining perimeters and 19 Type III mining
perimeters. The Type I mining perimeters allow ABFG to test for Corundum on 17
mining perimeters, Garnet on 11 mining perimeters and Sapphires on 5 mining
perimeters. The Type III mining perimeters allow ABFG to test, explore and
exploit on all 19 mining perimeters for Corundum.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of June 22, 2000,
with respect to the beneficial ownership of common stock by (i) each person who,
to the knowledge of the Company, beneficially owned or had the right to acquire
more than 5% of the outstanding common stock, (ii) each Director of the Company,
and (iii) all executive Officers and Directors of the Company as a group:
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
------------------------------------- ----------------------------- --------------
<S> <C> <C>
Fulcrum Holdings of Australia, Inc. 14,500,000 20.95%
Gerald E. Sklar, beneficial owner 85%
Dror Moradov, beneficial owner 15%
1 South Ocean Blvd., Suite 301
Boca Raton, Florida 33432
Carlyle Consulting Company Ltd. 4,500,000 6.50%
P.O. Box 792
Cayman Island, BVI
Jerry G. Mikolajczyk 1,400,000 2.02%
10 Fairway Drive, Suite 307
Deerfield Beach, Florida 33441
Gerald E. Sklar 1,400,000 2.02%
900, 840 7th Avenue, SW
Calgary, Alberta T2P 3G2
Canada
Dror Moradov 1,400,000 2.02%
115A Maibahoaka
Ivato Antananarivo 105, Madagascar
Peter D. Jones 400,000 0.58%
900, 840 7th Avenue SW
Calgary, Alberta T2P 3G2
Canada
<FN>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities.
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The President, CEO, CFO and Director of the Registrant is Jerry G.
Mikolajczyk. Jerry is 47 years old and for the past several years was directly
involved in large development companies. Jerry was appointed to his positions
August 26th 1997 and will stand for re-election as director at the next annual
meeting of shareholders for a further one year term.
The Vice President and Director of the Registrant is Gerald Sklar. Gerald
is 61 years old and has been involved in public companies for the past several
years. Gerald was appointed to his positions July 16th, 1997 and will stand for
re-election as director at the next annual meeting of shareholders for a further
one year term.
The Vice President and Director is Dror Moradov. Dror is 36 years and has
been involved in mining and gem operations in Israel Thailand and Madagascar for
the past thirteen years. Dror was appointed to his positions August 26th, 1997
and will stand for re-election as director at the next annual meeting of
shareholders for a further one year term.
DIRECTORS AND EXECUTIVE OFFICERS
Name Age Position
<PAGE>
---- --- --------
Jerry George Mikolajczyk 47 President, CEO, CFO, and Director
Gerald E. Sklar 61 Vice-President and Managing Director
Dror Moradov 36 Vice-President and Director
DIRECTOR COMPENSATION
All Directors of the Company or any of it's Subsidiaries, past and
present, have received no compensation from the Company save and except for
payment of their valid Company expenses..
ITEM 6. EXECUTIVE COMPENSATION
Summary compensation table (Annual compensation)
<TABLE>
<CAPTION>
Name and Principal Salary ($) and Other Annual
Position Year Compensation
------------------ ---- ---------------------------
<S> <C> <C>
Jerry G. Mikolajczyk - President, CEO & CFO 1997 0
1998 0
1999 0
Gerald E. Sklar - Vice President 1997 0
1998 0
1999 0
Dror Moradov- Vice President 1997 0
1998 0
1999 0
</TABLE>
Underlying Options
The Company, to date, has not granted any options to purchase stock of the
Company to any individuals.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's first acquisition occurred on the 26th day of August, 1997
when it acquired Ninety (90%) percent of the issued shares of SAO ("Saowani") a
Corporation incorporated pursuant to the laws of the Democratic Republic of
Madagascar. The acquisition was made through an Assignment of another parties
interest in an Agreement with Saowani for the third party's purchase of the
Saowani shares. The Company's purchase price for the Ninety (90%) per cent share
holding was payment of Three Million (3,000,000) Rule 144 Common Shares of the
Company to Fulcrum Holdings of Australia Inc. ("Fulcrum") a Corporation formed
pursuant to the laws of the State of Delaware. Fulcrum was the party to the
Agreement with Saowani and certain of the Shareholders of Saowani whereby
Fulcrum agreed to purchase Ninety (90%) percent of the issued and outstanding
shares of Saowani in exchange for shares of a Publicly Traded Company and a
covenant that Fulcrum would spend sufficient monies to enable production to
occur from the mining perimeters owned or controlled by Saowani or its
Shareholders. The Company was Assigned Fulcrum's position in the Agreement with
Saowani and the Shareholders with the consent of all parties concerned for the
previously noted consideration including the covenant to expend sufficient
monies to enable production from the Saowani Mining perimeters to result.
As a result of this transaction, Fulcrum became a Registered Shareholder
<PAGE>
of Three Million (3,000,000) Restricted Rule 144 pre-dividend Common Shares of
the Company representing Thirty Seven and Six Tenths ( 37.6%) Per Cent of the
Company's issued and outstanding stock at that time. Two Directors of the
Company, Gerald E. Sklar and Dror Moradov collectively own One Hundred (100%)
Per Cent of the shares of Fulcrum Holdings of Australia, Inc..
The Company's second purchase occurred on the 19th day of June, 1998 when
it acquired 70% of the issued shares of World Gems Corporation S.A.R.L., a
corporation incorporated pursuant to the laws of the Democratic Republic of
Madagascar. The purchase price for the Seventy (70%) per cent share holding was
payment of One Million (1,000,000) Restricted Rule 144 Common Shares of the
Company plus a Note Payable in the amount of One Hundred Thousand ($100,000.00)
Dollars to Fulcrum. Fulcrum was party to an Agreement with World Gems and
certain of the shareholders of World Gems whereby Fulcrum agreed to purchase
Seventy (70%) percent of the issued and outstanding shares of World Gems in
exchange for shares of a Publicly Traded Company and a covenant that Fulcrum
would spend sufficient monies to enable production to occur from the mining
perimeters owned or controlled by World Gems or its shareholders. The Company
was Assigned Fulcrum's position in its Agreement with World Gems and the
Shareholders with the consent of all parties for the consideration previously
noted.
As a result of this transaction Fulcrum became a Registered Shareholder of
a further One Million (1,000,000) Restricted Rule 144 Common Shares of the
Company for consideration of $1,000. Two Directors of the Company, Gerald E.
Sklar and Dror Moradov, collectively own One Hundred (100%) Per Cent of the
shares of Fulcrum Holdings of Australia, Inc. Upon completion of this purchase,
it gave Fulcrum a position in the Company representing Forty and Eight
Hundredths ( 40.08%) Per Cent of the issued and outstanding shares.
Subsequent to this transaction World Gems forfeited the Perimeter Rights
it had acquired in Madagascar and the Company's Board of Directors elected to
write off it's investment in World Gems as worthless. The One Hundred Thousand
($100,000.00) Dollar Note Payable to Fulcrum was written off with the consent of
Fulcrum.
The Company entered into an Agency Agreement on July 1, 1997, with Gerald
Sklar, Managing Director and shareholder of the Company, and with Trikal
International Management Limited to perform services on behalf of the Company.
The Agency Agreement allowed Gerald E. Sklar and Trikal to incur expenses on
behalf of the Company and its subsidiaries and that the Company and its
subsidiaries agree to reimburse Gerald E. Sklar and/or Trikal for all expenses
incurred plus reasonable overhead cost reimbursements. On December 31, 1999, the
Company owed Trikal $775,194 for expenses paid by Trikal in excess of cash
advances from the Company.
ITEM 8. DESCRIPTION OF SECURITIES
The Registrant has two hundred ten million (210,000,000) authorized shares
of which two hundred million (200,000,000) are Common Voting Shares with no par
value and ten million (10,000,000) are Preferred Shares with a par value of ten
($10.00) dollars per share.
Common Stock
Pursuant to the company's Certificate of Incorporation, the Board of
Directors has authority to issue up two hundred million (200,000,000) shares of
Common Stock at no par value. As of June 22, 2000 there were 69,219,075 shares
of Common Stock outstanding and 205 holders of record of Common Stock. Each
holder of common Stock is entitled to one vote for each share hold on all
matters. Cumulative voting in elections of Directors and all other matters
brought before Stockholders Meetings, whether they be annual or special, is not
provided for under the Company's Certificate of Incorporation or By Laws.
However, under certain circumstances, cumulative voting rights in the election
of the Company's Directors may exist under Florida law. See "Description of
Capital Stock Application of Florida General Corporate Law." The holders of
Common Stock will be entitled to receive such Dividends if any as may be
declared by the Board from time to time out of legally available funds, subject
to any Preferential Dividend Rights of any outstanding shares of Preferred
Stock. Upon the liquidation , dissolution, or winding up of the Company, the
holders of the Common Stock will be entitled to share ratably in all assets of
the Company that are legally available for distribution, after payment of all
debt and other liabilities and distribution in full of preferential amounts, if
any, to be distributed to holders of Preferred Stock. The holders of Common
Stock are not entitled to Preemptive, Subscription, Redemption, or Conversion
Rights. The rights, preferences and privileges of holders of Common Sock are
subject to, and may be adversely affected by, the rights of any series of
Preferred Sock which the Company may designate and issue in the future.
Preferred Stock
Pursuant to the Company's Certificate of Incorporation, the Board of
Directors has the authority, without further action by the Stockholders, to
issue up to TEN MILLION (10,000,000) Shares of Preferred Stock, in one or more
series and to fix the designation, powers, preferences, privileges and relative
participating, optional or special rights and qualifications, limitations or
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences any or all of which may
be greater than the rights of the Common Stock. The Board of Directors, without
Stockholder approval, can issue Preferred Stock with voting, conversion or other
rights that could adversely affect the voting power and other rights of the
holders of Common Stock. Preferred Stock could thus be issued quickly with terms
calculated to delay or prevent a change in control of the Company or make
removal of Management more difficult. Additionally, the issuance of Preferred
Stock may have the effect of decreasing the market price of the common stock and
may adversely affect the voting and other rights of the holders of Common Stock.
As of the date of this Form, the are no issued and outstanding shares of
Preferred Stock.
Registration Rights
There are no particular Registration Rights for shares of the Company in
effect.
Transfer Agent and Registrar
Florida Atlantic Stock Transfer Company has been appointed as the Transfer
Agent and Registrar for the Company's Common Stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The common stock is currently quoted on the National Daily Quotation
<PAGE>
Bureau's "Pink Sheets" under the symbol "ABFG." The following table sets forth
the high and low last sale prices for the common stock for each fiscal quarter,
or interim period, in which the common stock has been publicly traded. These
prices do not reflect retail mark-ups, markdowns or commissions and may not
represent actual transactions.
Quarter Ended Low High
------------------- ------ -------
September 30, 1998 $ .562 $ .843
December 31, 1998 $ .281 $ .468
March 31, 1999 $ .36 $ .40
June 30, 1999 $ .375 $ .50
September 30, 1999 $ .15 $ .25
December 31, 1999 $ .13 $ .16
March 31, 2000 $ .35 $ .42
The closing sales price on June 22, 2000 reported on the Pink Sheets was
$0.175 per share of common stock.
To date, the Company has not paid any cash dividends on its common stock.
On November 18, 1998, the Company forward split its common stock on a three for
one basis.
ITEM 2. LEGAL PROCEEDINGS
Other than litigation in the ordinary course of business, the Company is
not presently a party to any material litigation. However, the Company,
disclosed in the March 31, 2000 unaudited financial statements certain
litigation against the Company which management believes would not materially
affect the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no disagreements between the Registrant and its
Accountants. The Registrant has retained the services of three different
Accountants during its first three years of operation, all at the direction of
its Directors.
The first financial statements for the period ending June 30, 1996 were
prepared by Messrs. Daskal, Boulton et. al. of Boca Raton, Florida. These
accountants were retained by the prior management of the Registrant.
The second year's financial statements for the period ending June 30, 1997
were prepared by Messrs. Sweeney Gates et. al. of Fort Lauderdale, Florida.
These accountants were known to the prior management of the Registrant and in
order to effect an orderly transition of accounting information were retained by
new management to prepare the second year's financial statements.
The five audited financial statements prepared for the years ended June
30th, 1996, June 30th 1997, Dec 31, 1997, June 30, 1998, and June 30, 1999;and
three unaudited (Review) financial statements for the periods ending September
30, 1999, December 31, 1999 and March 31, 2000 disclosed no adverse opinions,
disclaimer of opinion or was qualified or modified as to uncertainty, audited
scope, or accounting principles. The election of management to change
accountants was in no way related to the opinions expressed by the accountants
nor did any of the accountants refuse to act for the Registrant.
The five audited financial statements prepared for the years ended June
30th, 1996, June 30th 1997, Dec 31, 1997, June 30, 1998, and June 30, 1999;and
three unaudited (Review) financial statements for the periods ending September
30, 1999 and December 31, 1999 and March 31, 2000 disclosed no adverse opinions,
disclaimer of opinion or was qualified or modified as to uncertainty, audited
scope, or accounting principles. The election of management to change
accountants was in no way related to the opinions expressed by the accountants
nor did any of the accountants refuse to act for the Registrant.
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In February 2000, the Company issued an aggregate of 15,395,000 Shares of
Common stock to an aggregate of 44 officers, workers and consultants of the
Company as additional compensation for services rendered. The value of the
shares on the date of issuance was $1,438,581.00. The shares were issued without
registration under the Securities Act in reliance on the exemption from
registration provided by 4(2) of the Securities Act.
In November 1999, the Company issued 2,358,000 Shares of Common stock to
Falcon Energy of Illinois, Inc. (Falcon). This issue was part of an unfilled
issue. On December 30, 1998, Trikal International Management, Limited ("Trikal")
subscribed for 3,858,000 shares of the Company's common stock for $.069 per
share. This subscription was made pursuant to an agreement with Falcon Energy of
Illinois ("Falcon") whereby Trikal would subscribe and have the Shares
registered in the name of Falcon in consideration and satisfaction of a debt
owed by Trikal to Falcon of $266,100. This debt is reflected in a Promissory
Noted dated November 6, 1998. The Company subsequently issued 1.5 million Shares
leaving a balance of 2,358,000 which should have been issued as part of the
original subscription which was made pursuant to Rule 504 of Regulation D.
In October 1999, the Company issued 1,000,000 Shares of Common stock to
Saul Ben-Heim of Israel in connection with services rendered. The value of the
Shares on the date of issuance was $57,500. The Shares were issued without
registration under the Securities Act in reliance on the exemption from
registration provided by 4(2) of the Securities Act.
In October 1999, the Company issued an aggregate of 225,000 Shares of
Common stock to 9 consultants of the Company as additional compensation for
services rendered. The value of the shares on the date of issuance was $19,935.
The shares were issued without registration under the Securities Act in reliance
on the exemption from registration provided by 4(2) of the Securities Act.
In June 1999, the Company issued an aggregate of 5,220,000 Shares of
Common stock to 36 workers and consultants as additional compensation for
services rendered. The value of the shares issued on the date of issuance was
$1,096,200. The shares were issued without registration under the Securities Act
in reliance on the exemption from registration provided by 4(2) of the
Securities Act.
From February 1999 through June 1999, the Company issued and sold an
aggregate of 7,410,075 Shares of Common stock to an aggregate of 47 accredited
investors. The Common Shares were sold pursuant to an offering of Rule 144
Common Stock at a unit price of $.30 per unit. The aggregate sale resulted in an
aggregate offering of $2,223,025. The units were issued without registration
under the Securities Act in reliance on the exemption from registration provided
by Rule 144 and Section 4(2) promulgated under the Securities Act of 1933, as
amended.
In June 1999, the Company issued and sold 23,000 Common Shares to Dove
Gems & Jewelry Co., Ltd. in exchange for a deposit on equipment. The value of
the shares on the date of issuance was $23,055. The shares were issued without
registration under the Securities Act in reliance on the exemption from
registration provided by 4(2) of the Securities Act.
In May 1999, the Company's subsidiary, American Benefits Group (Israel)
Ltd., purchased certain assets of Carlyle Consulting Corporation in exchange for
the Company's issuance of 4,500,000 Shares of Common stock. The value of the
shares on the date of issuance was $3,151,891.13. The shares were issued without
registration under the Securities Act in reliance on the exemption from
<PAGE>
registration provided by 4(2) of the Securities Act.
In May 1999, the Company's subsidiary, American Benefits Group (Israel)
Ltd., purchased certain assets of Marc Suzannah in exchange for the Company's
issuance of 497,000 Shares of Common stock. The value of the shares on the date
of issuance was $348,108.87. The shares were issued without registration under
the Securities Act in reliance on the exemption from registration provided by
4(2) of the Securities Act.
From December 1998 through to May 1999, the Company issued and sold to 14
accredited investors 10,000,000 Units, each Unit consisting of 1 share of Common
stock at an average price $.10 per Unit for an aggregate offering price of
$1,000,000. The Units were issued without registration under the Securities Act
in reliance on the exemption from registration provided by Regulation D
promulgated under the Securities Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Chapter 607 of the Florida Statutes provides for the indemnification of
officers and directors under certain circumstances against expenses incurred in
successfully defending against a claim and authorizes Florida corporations to
indemnify their officers and directors under certain circumstances against
expenses and liabilities incurred in legal proceedings involving such persons
because of their being or having been an officer or director.
Section 607.0850 of the Florida Statutes permits a corporation, by so
providing in its certificate of incorporation, to eliminate or to limit a
director's liability to the corporation and its stockholders for monetary
damages arising out of certain alleged breaches of their fiduciary duty. Section
607.0850 provides that no such limitation of liability may affect a director's
liability with respect to any of the following: (i) breaches of the director's
duty of loyalty to the corporation or its stockholders; (ii) acts or omissions
not made in good faith or which involve intentional misconduct of knowing
violations of law; (iii) liability for dividends paid or stock repurchased or
redeemed in violation of the Florida General Corporation Law; or (iv) any
transaction from which the director derived an improper personal benefit.
Section 607 does not authorize any limitation on the ability of the corporation
or its stockholders to obtain injunctive relief, specific performance or other
equitable relief against directors.
The Company's By-laws provide each director or officer of the corporation
shall be indemnified as of right to the fullest extent permitted by current or
future legislation or by current or future judicial or administrative decisions
against any fine, liability, cost, or expense, including attorneys' fees,
asserted against or incurred by the director or officer. The corporation can
agree to grant the same right of indemnification to other agents or workers of
the corporation and to persons serving at the request of the corporation as its
representative in the position of a director, officer, agent, or employee of
another enterprise. The right of indemnification shall extend to the heirs,
personal representatives, and estate of each person granted the right pursuant
to the preceding sentences. The right of indemnification shall not be exclusive
of other rights to which those seeking an indemnification may be entitled. The
corporation may maintain insurance at its expense to protect itself and any such
person against any fine, liability, cost, or expense, whether or not the
corporation would have the legal power to directly indemnify the person against
that liability.
The foregoing right of indemnification is not deemed to be exclusive of
<PAGE>
any other rights to which those seeking indemnification may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors, or
otherwise.
PART F/S
FINANCIAL STATEMENTS
The audited financial statements of the Company, prepared by Moffitt &
Company, P.C. Certified Public Accountants, 5040 East Shea Boulevard, Suite 270,
Scottsdale, Arizona 85254 required by Regulation S-X commence on page F/S 1
hereof in response to this Item of this Registration Statement on Form 10-SB/A
and are incorporated herein by this reference.
PART III
ITEM 1. INDEX TO EXHIBITS
2 Reorganization Agreement (not applicable)
3 (i) Articles of Incorporation and Amendments thereto **
3 (ii) Amended and Restated By-Laws **
4 Instruments defining the rights of holders (refer to exhibit 3) **
9 Voting Trust agreement (not applicable)
10 Material contracts:
1. Agreement to purchase shares of Saowani Development S.A.R.L. from
Fulcrum; Letter of Intent; Assignment Agreements dated 7/97 and
8/97 **
2. Agreement to purchase shares of American Benefits Group from Fulcrum
Share Purchase Agreement between Fulcrum and World Gems Corporation
S.A.R.L. **
3. Agreement to purchase shares of Trump Oil Ltd. from Gerald Sklar **
4. Agreement to purchase shares of Stones & Wood from Carlyle
Consulting Corporation, Ltd. **
5. Memorandum of Understanding for Joint Venture Agreement with Menavi
Group; Amendment to Agreement. **
6. Memorandum of Understanding for Joint Venture Agreement with Dove
Gems & Jewelry Co., Ltd. **
7. Joint Venture Agreement between Ms. Eliana Georgette Samuel Harinoro
and Saowani Development S.A.R.L. **
8. Mining Agreement between Adam Mining Company Ltd. and S & W **
9. Agency Agreement between American Benefits Group, Inc. and Gerald
Sklar and Trikal International Management Ltd. **
10. Mining Agreement between American Benefits Group, Ltd. and April
Mining Group, Ltd. **
11 Statement re: Computation of per share earnings (see Footnotes in
Financial Statements)
21 Subsidiaries of the Registrant **
24 Power of Attorney (not applicable)
27 Financial Data Schedules - June 30, 1998 and June 30, 1999, March 31,
2000 *
<PAGE>
99 A Technical Review of Sapphire Mining perimeters in Northern
Madagascar for American Benefits Group, Inc. **
* To be filed by amendment
** Previously filed
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Form 10-SB/A to be
signed on its behalf by the undersigned, thereunto duly authorized.
American Benefits Group, Inc.
June 23, 2000 /s/ Jerry G. Mikolajczyk
----------------------------------------
President, Chief Executive Officer and
Chief Financial Officer
/s/ Gerald E. Sklar
----------------------------------------
Vice-President
AMERICAN BENEFITS GROUP, INC.
AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
TABLE OF CONTENTS
Page No.
--------
INDEPENDENT ACCOUNTANTS' REVIEW REPORT.............................. 1
FINANCIAL STATEMENTS
Consolidated Balance Sheet................................... 2
Consolidated Statements of Comprehensive (Loss).............. 3
Consolidated Statements of Operations........................ 4
Consolidated Statement of Shareholders' Equity............... 5 - 6
Consolidated Statements of Cash Flows........................ 7 - 8
Notes to Consolidated Financial Statements................... 9 - 19
<PAGE>
MOFFITT & COMPANY, P.C.
Certied Public Accountants
5040 East Shea Blvd., Suite 270
Scottsdale, Arizona 85254
(480) 951-1416
Fax (480) 948-3510
[email protected]
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Shareholders and Board of Directors
American Benefits Group, Inc. and Subsidiaries
(Development Stage Companies)
Deerfield Beach, Florida
We have reviewed the accompanying balance sheet of American Benefits Group, Inc.
and Subsidiaries (Development Stage companies) as of March 31, 2000, and the
related statements of comprehensive (loss), operations, shareholders' equity
and cash flows for the nine months then ended and for the period from July 1,
1997 (date of development stage) to March 31, 2000, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information included in
these financial statements is the representation of the management of American
Benefits Group, Inc. and Subsidiaries.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
As discussed in Note 24, certain conditions indicate that the company may be
unable to continue as a going concern. The accompanying financial statements do
not include any adjustments to the financial statements that might be necessary
should the company be unable to continue as a going concern.
/s/ Moffitt & Company, P.C.
Moffitt & Company, P.C.
Scottsdale, Arizona
June 19, 2000
<PAGE>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,036
Accounts receivable 1,097
Refundable taxes 31,765
Inventories 6,716,914
----------
TOTAL CURRENT ASSETS $ 6,750,812
PROPERTY AND EQUIPMENT 183,605
OTHER LONG-TERM ASSETS
Unamortized mining perimeters 4,293,477
OTHER ASSETS
Investment in joint venture - Total Gem Management 17,300
Deposits 76,874
----------
TOTAL OTHER ASSETS 94,174
----------
TOTAL ASSETS $ 11,322,068
===================
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable
Inventory - Menavi Group $ 2,600,000
Trade 809,902
Related entities 737,173
---------------
TOTAL CURRENT LIABILITIES $ 4,147,075
MINORITY INTEREST DEFICIENCY ( 6,807)
SHAREHOLDERS' EQUITY
Preferred stock
Par value - $10 per share
Authorized - 10,000,000 shares
No shares are issued or outstanding
Common stock
No par value
Authorized 200,000,000 shares
Issued and outstanding - 69,219,075 shares 9,857,144
Cumulative currency translation adjustment 9,294
Retained earnings (deficit) ( 372,194)
Deficit accumulated during the development
stage ( 2,312,444)
---------------
TOTAL SHAREHOLDERS' EQUITY 7,181,800
----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 11,322,068
======================
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND
FOR THE PERIOD FROM JULY 1, 1997 (DATE OF DEVELOPMENT STAGE)
TO MARCH 31, 2000
(UNAUDITED)
JULY 1, 1997
(DATE OF
NINE MONTHS DEVELOPMENT
ENDED STAGE) TO
MARCH 31, 2000 MARCH 31, 2000
---------------- ---------------
<S> <C> <C>
NET (LOSS) $ ( 1,549,188) $ ( 2,312,444)
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustments ( 6,730) 9,294
---------------- ---------------
NET COMPREHENSIVE (LOSS) $ ( 1,555,918) $ ( 2,303,150)
================ ===============
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND
FOR THE PERIOD FROM JULY 1, 1997 (DATE OF DEVELOPMENT STAGE)
TO MARCH 31, 2000
(UNAUDITED)
JULY 1, 1997
(DATE OF
NINE MONTHS (DEVELOPMENT)
ENDED STAGE) TO
MARCH 31, 2000 MARCH 31, 2000
--------------- ----------------
<S> <C> <C>
REVENUE - SALE OF GEMS FROM TESTING
AND RELATED PRODUCTS $ 28,406 $ 5,068,907
--------------- ----------------
COST AND EXPENSES
Purchases, commissions and fees for test gems 19,884 1,802,516
Development costs 1,557,710 5,585,646
--------------- ----------------
TOTAL COST AND EXPENSES 1,577,594 7,388,162
--------------- ----------------
NET (LOSS) BEFORE MINORITY INTERESTS ( 1,549,188) ( 2,319,255)
MINORITY INTEREST IN LOSS OF
CONSOLIDATED SUBSIDIARY 0 6,811
--------------- ----------------
NET (LOSS) $ ( 1,549,188) $ ( 2,312,444)
=============== ================
NET (LOSS) PER COMMON SHARE
Basic and diluted ( .03)
===============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic and diluted 53,349,519
===============
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 1, 1997 TO MARCH 31, 2000
(UNAUDITED)
PREFERRED STOCK COMMON STOCK
-------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ---------- --------
<S> <C> <C> <C> <C>
BALANCE, JULY 1, 1997 1,683,000 $ 1,683
CHANGE IN PAR VALUE 475,750
ISSUANCE OF COMMON
STOCK FOR CASH 3,300,000 60,000
ISSUANCE OF
COMMON STOCK FOR
ACQUISITION OF 90%
OF SAOWANI
DEVELOPMENT S.A.R.L.,
AT BOOK VALUE OF
SUBSIDIARY 3,000,000 36
REPAYMENT OF
SHAREHOLDER'S
RECEIVABLE
STOCK DIVIDEND 15,966,000
CUMULATIVE CURRENCY
TRANSLATION
ADJUSTMENT
ISSUANCE OF COMMON
STOCK FOR 70% OF WORLD
GEMS CORPORATION S.A.R.L. 1,000,000 1,000
NET (LOSS) FOR THE YEAR
ENDED JUNE 30, 1998
------ ------ ---------- --------
BALANCE, JUNE 30, 1998 0 0 24,949,000 538,469
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY(CONTINUED)
FOR THE PERIOD FROM JULY 1, 1997 TO MARCH 31, 2000
(UNAUDITED)
DEFICIT
CUMULATIVE ACCUMULATED TOTAL
ADDITIONAL CURRENCY RETAINED DURING THE SHAREHOLDERS'
PAID IN TRANSLATION EARNINGS DEVELOPMENT SHAREHOLDER EQUITY
CAPITAL ADJUSTMENT (DEFICIT) STAGE RECEIVABLE (DEFICIT)
------------ ------------ ---------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
475,750 $ 0 $(353,788) $ 0 $ (95,000) $ 28,645
(475,750)
60,000
36
95,000 95,000
3,860 3,860
1,000
(18,406) (620,244) (638,650)
------------ ------------ ---------- ------------- ------------- ---------------
0 3,860 (372,194) (620,244) 0 (450,109)
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY(CONTINUED)
FOR THE PERIOD FROM JULY 1, 1997 TO MARCH 31, 2000
(UNAUDITED)
PREFERRED STOCK COMMON STOCK
---------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
------- ------- ---------- -----------
<S> <C> <C> <C> <C>
CUMULATIVE CURRENCY
TRANSLATION
ADJUSTMENT $ $
ISSUANCE OF COMMON STOCK FOR
CASH 7,075 1,134,423
SHAREHOLDER'S LOANS 5,358,000 416,100
SERVICES 10,795,000 2,768,702
DEPOSIT ON EQUIPMENT 23,000 23,055
ACQUISITION OF STONES AND
WOOD CORPORATION S.A.R.L. 4,997,000 3,500,000
LESS COSTS TO ACQUIRE
FINANCING (39,621)
NET (LOSS) FOR YEAR
ENDED JUNE 30, 1999
------- ------- ---------- -----------
BALANCE, JUNE 30, 1999 0 0 52,599,075 8,341,128
ISSUANCE OF COMMON
STOCK FOR
SERVICES 10,120,000 1,044,766
SHAREHOLDER'S LOANS 6,500,000 471,250
CUMULATIVE CURRENCY
TRANSLATION
ADJUSTMENT
NET (LOSS) FOR THE
NINE MONTHS ENDED
MARCH 31, 2000
------- ------- ---------- -----------
BALANCE, MARCH 31, 2000 0 $ 0 69,219,075 $9,857,144
======= ======= ========== ===========
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY(CONTINUED)
FOR THE PERIOD FROM JULY 1, 1997 TO MARCH 31, 2000
(UNAUDITED)
DEFICIT
CUMULATIVE ACCUMULATED TOTAL
ADDITIONAL CURRENCY RETAINED DURING THE SHAREHOLDERS'
PAID IN TRANSLATION EARNINGS DEVELOPMENT SHAREHOLDER EQUITY
CAPITAL ADJUSTMENT (DEFICIT) STAGE RECEIVABLE (DEFICIT)
----------- ------------- ---------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
$ 12,164 $ $ $ $ 12,164
1,134,423
416,100
2,768,702
23,055
3,500,000
(39,621)
(143,012) (143,012)
----------- ------------- ---------- ------------- ------------ ---------------
0 16,024 (372,194) (763,256) 0 7,221,702
1,044,766
471,250
(6,730) (6,730)
(1,549,188) (1,549,188)
----------- ------------- ---------- ------------- ------------ ---------------
0 $ 9,294 $(372,194) $ (2,312,444) $ 0 $ 7,181,800
=========== ============= ========== ============= ============ ===============
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND
FOR THE PERIOD FROM JULY 1, 1997 (DATE OF DEVELOPMENT STAGE)
TO MARCH 31, 2000
(UNAUDITED)
JULY 1, 1997
(DATE OF
NINE MONTHS DEVELOPMENT
ENDED STAGE) TO
MARCH 31, 2000 MARCH 31, 2000
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (1,549,188) $ (2,312,444)
Adjustments to reconcile net (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 187,341 242,983
Minority interest in loss of consolidated subsidiary 0 1,537
Issuance of common stock for services 1,044,766 3,813,468
Loss on investment in subsidiary 0 101,000
Cancellation of debt 0 (100,000)
Changes in operating assets and liabilities:
Accounts receivable 3,819,397 (1,097)
Refundable taxes (3,838) (21,512)
Employee advances and other receivables 2,729 4,374
Inventories (5,715,880) (6,716,914)
Accounts payable 2,245,563 2,954,195
---------------- ----------------
NET CASH FLOWS PROVIDED (USED) BY
OPERATING ACTIVITIES 30,890 (2,034,410)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (21,042) (283,988)
Purchase of mining perimeters 0 (572,780)
Investment in joint venture - Total Gem Management (1,300) (17,300)
Deposits on equipment and attorney retainer (3,819) (53,816)
---------------- ----------------
NET CASH FLOWS (USED) BY INVESTING
ACTIVITIES (26,161) (927,884)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 0 1,323,167
Proceeds (Repayments) from related entity loan (46,587) 1,624,283
---------------- ----------------
NET CASH FLOWS (USED) PROVIDED BY
FINANCING ACTIVITIES (46,587) 2,947,450
---------------- ----------------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH AND CASH
EQUIVALENTS $ (6,730) $ 9,294
---------------- ----------------
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND
FOR THE PERIOD FROM JULY 1, 1997 (DATE OF DEVELOPMENT STAGE)
TO MARCH 31, 2000
(UNAUDITED)
JULY 1, 1997
(DATE OF
NINE MONTHS DEVELOPMENT
ENDED STAGE) TO
MARCH 31, 2000 MARCH 31, 2000
---------------- ----------------
<S> <C> <C>
NET (DECREASE) IN CASH $ (48,588) $ (5,550)
CASH BALANCE, BEGINNING OF PERIOD 49,624 6,586
---------------- ----------------
CASH BALANCE, END OF PERIOD $ 1,036 $ 1,036
================ ================
SUPPLEMENTARY DISCLOSURE OF
CASH FLOW DATA:
Interest paid $ 0 $ 2,239
================ ================
Taxes paid $ 0 $ 0
================ ================
NON CASH INVESTING AND FINANCING
ACTIVITIES
ISSUANCE OF COMPANY STOCK FOR
SAOWANI DEVELOPMENT S.A.R.L. $ 0 $ 36
================ ================
ISSUANCE OF COMPANY STOCK AND
PROMISSORY NOTES FOR WORLD
GEMS CORPORATION S.A.R.L. $ 0 $ 101,000
================ ================
ISSUANCE OF COMPANY STOCK FOR
SHAREHOLDER'S LOAN $ 471,250 $ 887,350
================ ================
ISSUANCE OF COMPANY STOCK FOR
SERVICES $ 1,044,766 $ 3,813,468
================ ================
ISSUANCE OF COMPANY STOCK FOR
DEPOSIT ON EQUIPMENT $ 0 $ 23,055
================ ================
ISSUANCE OF COMPANY STOCK FOR
STONES AND WOOD CORPORATION S.A.R.L. $ 0 $ 3,500,000
================ ================
</TABLE>
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
-----------------------------
The consolidated financial statements include the accounts of American
Benefits Group, Inc. and the following subsidiaries:
SUBSIDIARY OWNERSHIP PERCENTAGE
---------- ---------------------
American Benefits Group, Ltd. 100%
Saowani Development S.A.R.L. 90%
E - Block Technology Inc. 100%
ABFG Sales Ltd. (Canada) 100%
ABFG Sales Limited (USA) 100%
American Benefits Group (Israel) Ltd. 100%
American Benefits Group
(Israel-Madagascar) Ltd. 100%
Stones and Wood Corporation S.A.R.L. 100%
ABFG Resources Madagascar S.A.R.L. 100%
Club Rodeo Ltd. 100%
All material inter-company accounts and transactions have been
eliminated.
NATURE OF BUSINESS
--------------------
American Benefits Group, Inc., which was formerly known as Lifeline
Benefits Group, Inc. and Living Benefits Group, Inc., was incorporated
on February 26, 1996, in the state of Florida. The company was
involved in the business of viatical settlements. Effective September
30, 1997, the company ceased its business operations in viatical
settlements, liquidated all assets and paid all liabilities. On July
16, 1997, the company was acquired by new shareholders and the company
is now in the business of exploring and extracting mining perimeters
in the Democratic Republic of Madagascar.
American Benefits Group, Ltd. provides management services to related
entities. The company also owns 1% of American Benefits Group (Israel)
Ltd. and 1% of American Benefits Group (Israel-Madagascar) Ltd.
Saowani Development S.A.R.L. is a joint venture partner in three
mining perimeters in Madagascar.
E-Block Technology Inc. is presently performing research and testing
of clay, sand and additives for the formulation and manufacture of
clay blocks. ABFG Sales Ltd. (USA and Canada) are the retail sales
entities.
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NATURE OF BUSINESS (CONTINUED)
---------------------------------
American Benefits Group (Israel) Ltd. holds a 100% interest in Stones
and Wood Corporation S.A.R.L. and 1% interest in ABFG Resources
Madagascar S.A.R.L. American Benefits Group (Israel-Madagascar) Ltd.
was formed to own various assets such as equipment used in
international companies.
Stones and Wood Corporation S.A.R.L. owns 37 mining perimeters in
Madagascar. ABFG Resources Madagascar S.A.R.L. is a mine operator in
Madagascar. Club Rodeo Ltd. retails to club members through the
internet.
CASH AND CASH EQUIVALENTS
----------------------------
The company considers securities with maturities of three months or
less, when purchased, to be cash equivalents.
INVENTORIES
-----------
Inventories are stated at the lower of cost (determined principally by
the average cost method) or market. For rough stones, the elements of
cost include direct labor, materials, equipment costs, and overhead
and the full absorption of fixed mining costs. For cut and polished
stone, the inventory includes the rough stone costs plus the cost to
process and finish the stones to complete them for setting into
jewelry.
LONG-LIVED ASSETS
------------------
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of the asset in question may not be recoverable.
This standard did not have a material effect on the company's results
of operations, cash flows or financial position.
PROPERTY AND EQUIPMENT
------------------------
Property and equipment are carried at cost. Repairs and maintenance
costs are charged against income while renewals and betterments are
capitalized as additions to the related assets. The assets are
depreciated using the straight-line method with the following lives:
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT (CONTINUED)
-------------------------------------
Office furniture 10 years
Computers 3 years
Film equipment 3 years
Communication equipment 3 years
Office security equipment 5 years
Reprographics equipment 3 years
Computer software 1 year
Mining equipment 3 years
COMPENSATED ABSENCES
---------------------
Employees of the corporation are entitled to paid vacations, sick days
and other time off depending on job classification, length of service
and other factors. It is impractical to estimate the amount of
compensation for future absences, and accordingly, no liability has
been recorded in the accompanying financial statements. The
corporation's policy is to recognize the costs of compensated absences
when paid to employees.
INCOME TAXES
-------------
The company accounts for income taxes on an asset and liability
approach to financial accounting. Deferred income tax assets and
liabilities are computed annually for the difference between the
financial statements and tax basis of assets and liabilities that will
result in taxable or deductible amounts in the future, based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period, plus or minus the change
during the period in deferred tax assets and liabilities. The company
intends to reinvest its undistributed international earnings to expand
its international operations; therefore, no tax has been provided to
cover the repatriation of such undistributed earnings.
NET EARNINGS PER SHARE
-------------------------
The company adopted Statement of Financial Accounting Standards No.
128 that requires the reporting of both basic and diluted earnings per
share. Basic earnings per share is computed by dividing net income
available to common shareowners by the weighted average number of
common shares outstanding for the period. Diluted earnings per share
reflects the potential
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET EARNINGS PER SHARE (CONTINUED)
--------------------------------------
dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. There were
no options outstanding that would cause dilution of the common stock.
Computation of net (loss) per common share
Basic and diluted
Numerator $ (1,549,188) = $ ( .03)
----------
Denominator $ 53,349,519
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY
------------------------------------------------
The parent company theory is used for disclosing the minority interest
in the consolidated balance sheet.
ACCOUNTING ESTIMATES
---------------------
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting
principles. These estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities, and the reported revenues and expenses. Actual
results could vary from the estimates that were used.
INTERNATIONAL CURRENCY TRANSLATION
------------------------------------
For translation of its international currencies, the company has
determined that the local currencies of its international subsidiaries
are the functional currencies.
UNAUDITED FINANCIAL INFORMATION
---------------------------------
The accompanying financial statements as of March 31, 2000 are
unaudited. In management's opinion, such information includes all
normal recurring entries necessary to make the financial information
not misleading.
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 2 DEVELOPMENT STAGE OPERATIONS
As of March 31, 2000, the company was in the development stage of
operations. According to the Financial Accounting Standards Board of
the Financial Accounting Foundation, a development stage company is
defined as a company that devotes most of its activities to
establishing a new business activity. In addition, planned principle
activities have not commenced, or have commenced and have not yet
produced significant revenue.
FAS-7 requires that all development costs be expensed during the
development period. The company expensed $1,557,710 of development
costs for the nine months ended March 31, 2000 and $5,586,646 for the
period from July 1, 1997 (date of development stage) to March 31,
2000.
NOTE 3 COMPREHENSIVE INCOME
Statement of Financial Accounting Standards ("SFAS") No. 130,
Reporting Comprehensive Income, establishes a standard for reporting
and displaying comprehensive income and the components within the
financial statements. Comprehensive income includes charges and
credits to equity that are not the result of transactions with
shareholders. Comprehensive income is composed of two subsets - net
income and other comprehensive income. Included in other comprehensive
income for the company are cumulative translation adjustments on
foreign currency transactions. These adjustments are accumulated
within the statement of shareholders' equity under the caption
Accumulated Other Comprehensive Income. As of March 31, 2000,
accumulated other comprehensive income, as reflected in the
consolidated statement of shareholders' equity was comprised of
cumulative translation adjustments totaling $9,294.
Cumulative translation adjustments are not adjusted for income taxes
as they relate to indefinite investments in non-U.S. subsidiaries.
NOTE 4 INVENTORIES
Inventories are summarized as follows:
Rough stones $ 3,893,548
Cut and polished gems 2,767,600
Art 52,639
Jewelry 2,136
Cosmoceuticals 991
-------------
$ 6,716,914
=============
See Accompanying Notes and Independent Accountants' Review Report
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 5 PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Office furniture $ 45,245
Computers 63,556
Film equipment 1,442
Communication equipment 25,069
Office security equipment 8,843
Reprographics equipment 15,984
Computer software 8,180
Mining equipment 115,669
-------
283,988
Less accumulated depreciation 100,383
-------
Book value $ 183,605
=======
Depreciation expense for the nine months ended March 31, 2000 amounted
to $63,271.
NOTE 6 UNAMORTIZED MINING PERIMETERS
The company is amortizing the mining perimeters by the straight-line
method over 345 months, which is the estimate life of the perimeters.
Adjusted cost base of the perimeters $ 4,432,780
Less accumulated amortization 139,303
---------------
Book value $ 4,293,477
================
Amortization for the nine months ended March 31, 2000 is $115,693.
NOTE 7 INCOME TAXES
(Loss) before income taxes $(1,549,188)
------------
The provision for income taxes is estimated as follows:
Currently payable $ 0
------------
Deferred $ 0
------------
A reconciliation of the provision for income taxes
compared with the amounts at the U.S. Federal
Statutory and foreign rates were as follows:
Tax at U.S. Federal Statutory income tax rates $ 0
------------
Taxes at foreign rates $ 0
------------
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 7 INCOME TAXES (CONTINUED)
Deferred income tax assets and liabilities reflect the
impact of temporary differences between amounts
of assets and liabilities for financial reporting
purposes and the basis of such assets and liabilities
as measured by tax laws.
The net deferred tax assets is: $ 0
------------
The deferred tax liability is: $ 0
------------
Temporary differences and carry forwards that gave rise to
deferred tax assets and liabilities included the following:
DEFERRED TAX
-------------------
ASSETS LIABILITIES
-------- -----------
Net operating loss
U.S. federal $250,000 $ 0
Foreign 335,000 -
-------- -----------
Subtotal 585,000 0
Valuation allowance 585,000 0
-------- -----------
Total deferred taxes $ 0 $ 0
======== ===========
A reconciliation of the valuation allowance is as follows:
Balance, July 1, 1999 $ 158,000
Addition for the nine months ended March 31, 2000 427,000
----------
Balance, March 31, 2000 $ 585,000
==========
NOTE 8 NON QUALIFIED STOCK OPTION PLAN
The company has a nonqualified stock option plan which gives the Board
of Directors or a committee designated by the Board of Directors
authority to issue additional shares of its common stock at specified
prices as determined by the Board of Directors. The Board of Directors
have not granted any options as of March 31, 2000.
NOTE 9 PREFERRED STOCK
The preferred stock has preferences over the common stock for
dividends and upon company dissolution.
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 10 INTERNATIONAL SUBSIDIARIES
The following amounts are included in the consolidated financial
statements for international subsidiaries:
Current assets $ 32,975
Current liabilities 294,888
Net property and equipment 104,106
NOTE 11 INTEREST EXPENSE
The company did not have any interest costs for the nine months ended
March 31, 2000.
NOTE 12 RENT
The company rents office space on a month to month basis from a
related entity. Rent expense for the nine months ended March 31, 2000
is $86,474.
NOTE 13 AGENCY AGREEMENT
The companies have entered into an agency agreement with a corporation
director and a company controlled by the director. Under the
agreement, the director and the authorized company may incur expenses
on behalf of American Benefits Group, Inc. and Subsidiaries and
American Benefits Group, Inc. and Subsidiaries agree to reimburse the
director and company for all expenses incurred plus reasonable
overhead cost reimbursements. The company owes the related entity
$717,568 at March 31, 2000.
NOTE 14 JOINT VENTURE AGREEMENT (TGM)
In April 1999, the company entered in to a joint venture agreement,
known as Total Gem Management Ltd., with the Menavi Group, an Israeli
corporation. Total Gem Management Ltd. (TGM) will be responsible to
manage and handle the company's sapphires from the point after mining
and sorting.
American Benefits Group, Inc. is required to provide $1,000,000 cash
to TGM and Menavi Group will provide $1,000,000 of gems (wholesale
value). As of March 31, 2000, the company advanced $17,300 towards the
$1,000,000 commitment.
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 14 JOINT VENTURE AGREEMENT (TGM) (CONTINUED)
AMERICAN
BENEFITS MENAVI
DIVISION OF PROFITS GROUP, INC. GROUP
--------------------- ----------- -----
On goods from American
Benefits Group, Inc. mines
Total net sales on cut
and semicut-stones 66.6% 33.4%
On unprocessed rough 75% 25%
On goods purchase by American
Benefit Group, Inc.
Total net sales minus
total purchase cost
As of March 31, 2000, there was no income or expense from the joint
venture.
NOTE 15 RELATED PARTY TRANSACTIONS
The company purchased $1,580,000 of raw sapphire stones from a company
controlled by a director of the company.
NOTE 16 SAOWANI - HARINORO
On June 20, 1999, the company entered into a joint venture for testing
and small scale mining of three emerald perimeters in Madagascar. The
joint venture is for one and one half years and profits are
distributed 80% to Saowani and 20% to Harinoro. As of March 31, 2000,
there was no income or expense from the joint venture.
NOTE 17 COMMITMENT TO PURCHASE MINING EQUIPMENT
To facilitate its Malagasy Testing Operations, the company has entered
into 3 agreements with Dove Gems & Jewelry Co. Ltd. for the purchase
of testing equipment which will be transported from Thailand to the
company's Madagascar mine sites. The purchase price for the testing
equipment is $566,349. The company has made deposits in the amount of
$73,055 towards the purchase contracts.
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 18 CORPORATION INCOME TAX RETURNS
The company has not filed its United States income tax returns for the
years ended June 30, 1998 and 1999. However, the company has incurred
losses and it is anticipated that the company will not have any tax
liabilities for these years.
NOTE 19 NET OPERATING LOSS CARRYFORWARDS
The company has the following net operating loss carryforwards:
EXPIRATION
COUNTRY NINE MONTHS AMOUNT DATE
------- ----------- ------ ----
United States June 30, 1998 $ 586,686 2013
United States June 30, 1999 97,589 2014
Canada June 30, 1998 103,428 2003
Canada June 30, 1999 15,005 2004
NOTE 20 CHANGE IN TRADING STATUS
On July 3, 1999, the National Association of Securities Dealers, Inc.
(NASD) and the Securities and Exchange Commission (SEC) de-listed the
stock of the company from the Over-the-counter bulletin Board (OTCBB)
to the "Pink Sheets". This action arises for the SEC's approval of
amendments to NASD Rules 6530 and 6540 requiring an issuer to make
periodic financial report filings to the SEC and to remain current
with those required filings, in order for an issuer of stock to
continue being quoted on the OTCBB. Prior to these amendments, there
was no requirement for an issuer of stock on the OTCBB to file any
reports with the SEC. Management is in the process of filing Form 10SB
to become a reporting issuer.
NOTE 21 SUBSEQUENT EVENTS
On April 20, 2000 the company formed the following 100% owned
subsidiaries:
Quick Moor, Inc. - to develop, market and manufacture a quick mooring
system for docking boats.
Rodeoisland.com Inc. -to own and operate the Rodeoisland.com Website.
What's Up Docks 2000 Inc. - to market and install platforms and boat
docks.
In June 2000, the company received three contracts to supply and
install $186,131 (Canadian dollars) of boat docks.
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
AMERICAN BENEFITS GROUP, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 22 LITIGATION
Judgements
----------
The company has nine judgements entered against it for unpaid accounts
payable totaling $118,390. The company has accrued and included in
accounts payable $130,178 for these unpaid bills and future legal
expenses.
Claims - Accounts Payable
----------------------------
The company is the defendant in two lawsuits for unpaid accounts
payable which total $37,985. The $37,985 is included in accounts
payable.
Claims - Breach of Contract
-------------------------------
The company is the defendant in a $540,000 lawsuit by three
individuals who claim that they had a three year contract to perform
services for the corporation. While the results of litigation cannot
be predicted, management believes, based on the advice of company
counsel, that the final outcome of such litigation will not have a
material adverse effect on the company's financial position.
NOTE 23 DOVE GEMS & JEWELRY CO. LTD. AGREEMENT
The company has an agreement with Dove Gems & Jewelry Co. Ltd. whereby
Dove may purchase 50% of the raw stones mined by the company for cost,
which is $1,946,774 as of March 31, 2000.
NOTE 24 GOING CONCERN
These financial statements are presented on the basis that the company
is a going concern. Going concern contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business over a reasonable length of time. The company has incurred
development losses of $2,312,444, has nine judgements entered against
the corporation, is the defendant in three lawsuits, and is delinquent
in the payment of its accounts payable. These factors raise doubt as
to the company's ability to continue as a going concern.
See Accompanying Notes and Independent Accountants' Review Report
<PAGE>
