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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-SB
GENERAL INFORMATION FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
AMERICAN GROUP, INC.
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(Name of Small Business Issuer in Its Charter)
Nevada 88-0326984
- ------------------------------- -------------------
(State of Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
10570 Hagen Ranch Road, Boynton Beach, Florida 33437
(Address of Principal Executive Offices) (Zip Code)
tel. (877) 266-2987 fax (561) 477-7255
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(Registrant's Telephone Number, including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act:
None.
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
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TABLE OF CONTENTS
PART I
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Item 1. Description of Business.............................................. 1
Item 2. Management's Discussion and Analysis................................. 5
Item 3. Description of Property.............................................. 8
Item 4. Security Ownership of Certain Beneficial Owners and Management....... 8
Item 5. Directors, Executive Officers, Promoters and Control Persons......... 9
Item 6. Executive Compensation...............................................10
Item 7. Certain Relationships and Related Transactions.......................11
Item 8. Description of Securities............................................11
PART II
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Item 1. Market Price of and Dividends
on the Registrant's Common Equity and
Other Shareholder Matters...................................13
Item 2. Legal Proceedings....................................................13
Item 3. Changes in and Disagreements With Accountants........................13
Item 4. Recent Sales of Unregistered Securities..............................14
Item 5. Indemnification of Directors and Officers............................15
PART F/S
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The financial information required by this item is included as
set forth on Page F-1.
PART III
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Item 1. Index to Exhibits....................................................16
Item 2. Description of Exhibits
The Exhibits required by this item are included as set forth
in the Exhibit Index.
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PART I
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Item 1. Description of Business
Introduction
The name of the Company is American Group, Inc. (the "Company"). Since
May, 1998, the Company's principal business has been the custom blending of soil
mixes for the commercial nursery industry. The Company entered the custom soil
blending business with the acquisition of LPS Acquisition Corp. which does
business under the name Lantana Peat and Soil ("LPS"). LPS is a distributor of
custom blended soil mixes to several hundred wholesale nursery customers located
primarily in Florida. Prior to May, 1998, the Company was inactive.
The Company has executed a letter agreement dated July 2, 1999, whereby
the rights the Company has to acquire Torland 9006-1474, Quebec, Inc. have been
extended through August 15, 1999. The purchase will require the Company to pay
$400,000 at the time of closing and an additional $800,000 during the following
year. Further, the Company will be required to issue an additional 700,000
shares of its common stock at time of closing. The Company is presently trying
to raise the capital needed to close the transaction in an exempt offering of
debt. There can be no assurance that the Company will be successful with this or
any other activity to raise additional capital.
History
The Company was incorporated in the State of Nevada in October, 1994.
There are 50,000,000 shares of common stock authorized of which 18,115,000 are
presently issued and outstanding. In November, 1998, the Company effectuated a
reverse 1:10 stock split of its issued and outstanding shares.
On May 31, 1998 the Company acquired all the common stock of LPS for
120,000 shares of the Company's common stock and assumption of accounts payable,
accrued expenses and notes payable. In addition, the Company purchased all the
common stock of Lator International, Inc for 30,000 shares of the Company's
common stock and assumption of accrued expenses and notes payable.
Business Activities
The Company, through its wholly owned subsidiary LPS, is a custom
blender of soil mixes for the commercial nursery industry. The Company produces
over 300 custom soil blends.
In February, 1999, the Company began construction of a new $1,500,000
soil blending facility located near Homestead, Florida, the heart of the Florida
nursery industry, which will have the capacity to produce upwards of $15,000,000
in blended soil products annually. In addition to the increased capacity, the
new facility is located within fifteen minutes drive time to the Homestead
markets. The plant is anticipated to be completed in October , 1999.
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Soil Blending
The Company's ingredients for custom soil blending are Canadian and
Florida peat moss, sawdust, sand, wood chips, pine bark and wood mulch. The soil
blends are made for a specific purpose such as the germination of seeds, the
propagation of cuttings, growing plants and flowers in pots.
The Company obtains raw materials for its blending processes from
locations throughout Florida and Southern Georgia, except for it's sphagnum peat
moss which comes from Canada. No other growing medium can cost effectively
control soil aeration and water retention as well as peat moss.
Differentiation From Competition
The Company differentiates itself from competitors by its exclusive
relationship with Torland, which allows it to purchase high quality sphagnum
peat moss at approximately 66% of the cost of other suppliers, and its planned
"state of the art" mixing plant located near Homestead, Florida which will
significantly increase the Company's capacity to produce its custom blended soil
products with efficiencies that will reduce the Company's current operating
costs, and enhance its commitment to customer service.
Seasonality
The Company's customers are primarily commercial nurseries which
require soil mixes on a twelve month basis. The Company's strongest months for
delivery to customers occurs during April through June and mid-August through
November.
Marketing
The Company markets its products by direct sales. LPS's current
customer base is composed of approximately 350 commercial nurseries throughout
Florida.
Financing
The Company currently internally finances its routine operating
activities.
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Government Regulation
The Company is subject to federal, state and local regulations
including environmental protection regulations. Such regulations deal with the
handling, transport and disposal of materials the Company uses in its processes.
The Company believes that it is in compliance with these regulations.
Trademarks
The Company has registered trademarks for the names "AGRO PEAT & SOIL",
"AGROMIX" and "AGROMAX".
Employees
As of March, 1999, the Company had twelve employees of which four are
in management. The Company believes that its labor relations are good. No
employee is represented by a labor union.
Subsidiaries
The Company has two wholly-owned subsidiaries, LPS Acquisition Corp., a
Florida corporation, dba Lantana Peat and Soil and Lator International, Inc.
("Lator"), a Florida corporation. LPS operates the soil mixing business of the
Company. Lator was acquired for its right to acquire Torland.
The principal executive offices of the Company are located at 10570
Hagen Ranch Road, Boynton Beach, Florida 33437, tel. (877) 266-2987. The
Company's stock symbol on the OTCBB is "MOSS".
Risk Factors
Going Concern Considerations
In Note 2 to the audited financial statements, the Company's
independent auditors have reported that the Company has suffered recurring
losses from operations that raise substantial doubt about its ability to
continue as a going concern. The Company's operating losses and the Company's
need for financing raises substantial doubt about the Company's ability to
continue as a going concern. During the year ended May 31, 1999, the Company
incurred net losses of $1,099,167 and during the year ended May 31, 1998, the
Company incurred a net loss of $2,997,532. Also, during the year ended May 31,
1999, the Company had negative cash flow from operations of $531,863. These
factors along with an accumulated deficit of $4,142,023 at May 31, 1999 raise
substantial doubt about the Company's ability to continue as a going concern.
In the event that the Company is unable to generate sufficient revenues
from operations, or is unable to obtain additional financing, it may be unable
to provide for its present cost levels, and this raises substantial doubt about
the Company's ability to continue as a going concern.
Management's plans in regard to this matter are to raise capital,
become profitable by integrating its operations with Torland and increase
efficiency by relocating its operations into a new state of the art soil
blending facility near Homestead, Florida, close to the major portion of its
customer base. Additionally, the Company plans, along with the integration with
Torland, to begin utilizing this state of the art soil blending plant, which
management believes will substantially decrease its operating costs. Management
believes these efforts will generate positive cash flow. There can be no
assurance that the Company's planned financing activities will be successful or
that the Company will have the ability to implement its business plan and
ultimately attain profitability. The Company's long-term viability as a going
concern is dependent upon three key factors, as follows:
1. The Company's ability to obtain adequate sources of debt or
equity funding to meet current levels of operations and fund
the expansion of its business operations;
2. The ability of the Company to acquire or internally develop
viable businesses and assets; and
3. The ability of the Company to ultimately achieve adequate
profitability and cash flows from operations to sustain and
expand its operations.
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Financing
Until such time as the operating results of the Company improve
sufficiently, the Company must obtain outside financing to fund the expansion of
the business and to meet the obligations of the Company as they become due. Any
additional debt or equity financing may be dilutive to the interests of the
shareholders of the Company. Such outside financing must be provided from the
Company's operations, or from the sale of equity securities, borrowing, or other
sources of third party financing in order for the Company to expand its
operations. Further, the sale of equity securities could dilute the Company's
existing stockholders' interest, and borrowings from third parties could result
in assets of the Company being pledged as collateral and loan terms which would
increase its debt service requirements and could restrict the Company's
operations. There is no assurance that capital will be available from any of
these sources, or, if available, upon terms and conditions acceptable to the
Company.
Competition
There are a number of companies which provide soil mixes to commercial
nurseries. Other companies emphasize service, price, or distribution as
competitive strategies. Many of the Company's competitors are well established
companies with substantially greater capital resources, research and development
staffs and facilities, and substantially greater marketing capabilities than
the Company. No assurances can be given that the Company will be able to
successfully compete with such companies or alternative technologies.
Certain Securities Law Considerations
The Company's stock is considered penny stock and subject to the penny
stock rules promulgated under the Securities Exchange Act of 1934, Rules 15g-1
to 15g-9. The penny stock rules require broker-dealers to take steps under
certain circumstances prior to executing any penny stock transactions in
customer accounts. Among other things, Rule 15g-3 requires a broker or dealer to
advise potential purchasers of a penny stock of the lowest offer and highest bid
quotations for such stock, and Rule 15g-4 requires a broker or dealer to
disclose to the potential purchaser its compensation in connection with such
transaction. Under Rule 15g-9, a broker or dealer who recommends such securities
to persons other than established customers must make a special written
suitability determination for the purchaser and receive the purchaser's prior
agreement to such a transaction. The effect of these regulations may be to delay
transactions in stocks that are deemed to be penny stocks, and therefore sales
of the Company's common stock by brokers or dealer and resales by investors
could be adversely affected.
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Item 2. Management Discussion and Analysis of Financial Condition
The following Management Discussion and Analysis of Financial Condition
is qualified by reference to and should be read in conjunction with, the
Company's Consolidated Financial Statements and the Notes thereto as set forth
beginning on page F-1.
Forward-looking Statement and Information
The Company is including the following cautionary statement in this
Form 10-SB for any forward-looking statements made by, or on behalf of, the
Company. Forward-looking statements include statements concerning plans,
objectives, goals, strategies, expectations, future events or performance and
underlying assumptions and other statements which are other than statements of
historical facts. Certain statements contained herein are forward-looking
statements and, accordingly, involve risks and uncertainties which could cause
actual results or outcomes to differ materially from those expressed in the
forward-looking statements. The Company's expectations, beliefs and projections
are expressed in good faith and are believed by the Company to have a reasonable
basis, including without limitations, management's examination of historical
operating trends, data contained in the Company's records and other data
available from third parties, but there can be no assurance that management's
expectations, beliefs or projections will result or be achieved or accomplished.
In addition to other factors and matters discussed elsewhere herein, the
following are important factors that, in the view of the Company, could cause
actual results to differ materially from those discussed in the forward-looking
statements: the ability of the Company to effectuate and successfully operate
acquisitions and the ability of the Company to obtain acceptable forms and
amounts of financing to fund planned acquisitions.
Introduction
The Company adopted a new fiscal year end, May 31, 1998. Prior to this
change, the Company used the calendar year. The following presentation of the
Management Discussion and Analysis of Financial Condition covers the five months
ended May 31, 1998 and the year ended May 31, 1999.
The Company's continued existence is dependent upon its ability to
resolve its liquidity problems, principally by obtaining equity capital and
commencing profitable operations. While pursuing equity capital, the Company
must continue to operate on cash flow generated from operations and financing
activity. The Company experienced a loss of $1,099,167 for the year ended May
31, 1999 and has a negative working capital of $585,516. In 1998 and 1999, the
Company loaned Torland $967,500 (in connection with four different agreements
totalling $967,500) to fund its operations and to acquire capital assets. It is
uncertain whether the funds will be repaid. In the event that the Company
completes its acquisition of Torland this indebtedness will become an
intercorporate liability. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to this matter are to raise capital, become profitable by integrating its
operations with Torland and increase efficiency by relocating its operations
into a new state of the art soil blending facility in Homestead, Florida, close
to the major portion of its customer base. Additionally, the Company plans,
along with the integration with Torland, to begin utilizing this state of the
art soil blending plant, which management believes will substantially decrease
its operating costs. Management believes these efforts will generate positive
cash flow.
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Five Months Ended May 31, 1998
For the five months ended May 31, 1998 the Company was inactive.
For the five months ended May 31, 1998, the Company's principal source
of revenue consisted of miscellaneous income which is not expected to reoccur.
Operating expenses for the five month period ended May 31, 1998
consisted of general and administrative expenses of $21,532. In addition the
Company provided for a $3,000,000 impairment loss on its purchased goodwill.
The Company had a net loss of $2,997,532 for the five month period
ended May 31, 1998. Due to the utilization of its net operating loss no
provision for income taxes was required.
Year Ended May 31, 1999
Revenues for the year ended May 31, 1999 were $2,240,995 which
consisted of revenues from LPS, which the Company acquired in May, 1998. There
were no revenues for the five months ended May 31, 1998.
Gross profit margins as a percentage of revenues for the year ended May
31, 1999 were 6.9%.
Operating expenses for the year ended May 31, 1999 were $1,174,428
consisting of selling, general and administrative expenses, including the
payment-in-kind of common stock of the Company valued at $100,000.
The net loss of $1,099,167 for the year ended May 31, 1999 consists of
non-cash losses of $240,687 (which includes depreciation and amortization costs
of $140,687, and expenses for professional fees of $100,000) and operating
losses of $858,480.
At May 31, 1999, the Company had cash and cash equivalents of $13,397
which was an increase of $9,850 compared to the cash held at May 31, 1998.
During the year ended May 31, 1999, the Company used net cash for operations of
$531,863, which was primarily due to the Company's operating loss. This was
funded by additional borrowings. In addition, the Company had a working capital
deficit of $483,529 at May 31, 1999.
Qualitative Discussion
The Company believes that LPS's present operations may not require that
LPS obtain any additional capital during the next twelve months. However, one of
the Company's objectives for the next twelve months is to increase the capital
base of LPS, so that LPS can increase the scope of its
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operation with the construction of its new soil blending facility, and to
acquire additional soil blending capacity. It is unknown at this time whether
the Company will be successful in raising capital on reasonable terms for the
purpose of increasing the capital base of LPS. During late 1998, the Company
raised approximately $950,000 in cash through the sale of its common stock in a
private placement.
The Company anticipates that most, if not all, of any acquisitions it
may make during the next twelve months would be of operating entities that have
employees, or of assets that have employees associated with such assets.
Accordingly, the Company anticipates that there would be a significant increase
in the number of its employees at the operating unit or subsidiary level, at
such time, if any, that acquisitions may be consummated.
The Company believes that LPS's cash requirements for LPS's current
operations during the next twelve months can be met through LPS's internal cash
flow from operations. The Company's other cash requirements would be in
connection with additional capital for LPS's growth, in an amount not yet
determined, if any, and for the acquisition of Torland or other assets, if any,
in the amount not yet determined. The Company must pay $1,200,000 and 700,000
shares of its common stock to acquire the equity of Torland.
Until such time as the operating results of the Company improve
sufficiently, the Company must obtain outside financing to fund the expansion of
the business and to meet the obligations of the Company as they become due. Any
additional debt or equity financing may be dilutive to the interests of the
shareholders of the Company. Such outside financing must be provided from the
Company's operations, or from the sale of equity securities, borrowing, or other
sources of third party financing in order for the Company to expand its
operations. Further, the sale of equity securities could dilute the Company's
existing stockholders' interest, and borrowings from third parties could result
in assets of the Company being pledged as collateral and loan terms which would
increase its debt service requirements and could restrict the Company's
operations. There is no assurance that capital will be available from any of
these sources, or, if available, upon terms and conditions acceptable to the
Company.
Year 2000 Issues
The Company presently believes that its computers are Y2K compliant and
the Company presently anticipates no Y2K impact in connection with its suppliers
or customers. However, the Company is presently assessing its Year 2000
compliance status and the status of its suppliers and customers.
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have time sensitive software may recognize a
date using"00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculation causing disruption of business activities.
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Based on ongoing assessments, the Company believes that no significant
modifications of existing computer software will be required. The Company
believes that its computer systems will function properly with respect to dates
in the year 2000 and thereafter. The Company also believes that costs related to
the Year 2000 issue will not be significant.
The Company has assessed its relationships with significant suppliers
and customers to determine the extent to which the Company is vulnerable to any
known third party's failure to remedy their own Year 2000 issues. Based on these
assessments, management believes that significant exposure does not exist with
respect to known third parties.
Y2K Contingency Plans. In the event that the Company's computers
ultimately are shown not to be Y2K compliant, the Company will acquire compliant
computers.
Item 3. Description of Property.
The Company's principal executive offices are located at 10570 Hagen
Ranch Road, Boynton Beach, Florida 33437 in 1,400 square feet of office space on
a month to month lease for $4,000 per month, which includes approximately 11
acres of land where the Company operates its soil mixing business. LPS plans on
relocating near Homestead, Florida in October, 1999. The Company will lease that
facility for $7,500 per month (adjusted annually) as part of a ten year lease
with an additional five consecutive three year option terms. The Company
believes that its properties are adequate for its present needs and that
suitable space will be available to accommodate its future needs.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of July 15, 1999,
with respect to the beneficial ownership of shares of common stock by (i) each
person who is known to the Company to beneficially own more than 5% of the
outstanding shares of common stock, (ii) each director of the Company, (iii)
each executive officer of the Company and (iv) all executive officers and
directors of the Company as a group. Unless otherwise indicated, each
stockholder has sole voting and investment power with respect to the shares
shown.
Number of Shares
of Common Stock Percent
Name Beneficially Owned of Class
---- ------------------ --------
Eric W. Deckinger 7,020,000 38.7%
10570 Hagen Ranch Road
Boynton Beach, Florida 33437
John Stewart -0- -0-%
10570 Hagen Ranch Road
Boynton Beach, Florida 33437
Atlas Marketing Associates 3,500,000(1) 19.3%
Companies House Tower Street
Ramsey, Isle of Man
M. J. Shulman, Inc.
d/b/a Shulman & Associates 1,405,000(2) 7.7%
7777 Glades Avenue, Suite 214
Boca Raton, Florida 33434
Karvi Corp. 1,400,000(3) 7.7%
6021 Main Street
Voorhees, New Jersey 08043
All Officers and Directors as
a Group--Two Persons 7,020,000 38.7%
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(1) Atlas Marketing Associates is majority owned and controlled by R. B. Emory
(2) M. J. Shulman, Inc. is majority owned and controlled by Manny Shulman
(3) Karvi Corp. is majority owned and controlled by Karlton Zamost.
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Item 5. Directors, Executive Officers, Promoters and Control Persons.
The following table sets forth the directors and executive officers of
the Company.
Name and Address Age Position
---------------- --- --------
Eric W. Deckinger 52 Director, President
John Stewart 53 Director, Treasurer
and Vice-president
Directors are elected annually and hold office until the next annual
meeting of the stockholders of the Company or until their successors are elected
and qualified. Officers serve at the discretion of the Board of Directors. There
is no family relationship between or among any of the directors and executive
officers of the Company. The Company does not pay any cash compensation for
attendance at directors meetings or participation in directors functions.
Biographies
Eric W. Deckinger is the president and a director of the Company,
positions he has held since May 1998. Mr. Deckinger was the owner and executive
officer of LPS and its predecessor Kedac, Inc. from 1994 until LPS was acquired
by the Company in 1998.
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Mr. Deckinger was the principal shareholder, director and executive
officer of Kedac, Inc. In December 1994, Kedac, Inc., purchased certain assets
from Can-Flo International, Inc., which at that time owned Lantana Peat & Soil.
Shortly thereafter, a creditor of Can-Flo International, Inc. filed suit against
Kedac, Inc. and Mr. Deckinger claiming a fraudulent transfer of certain assets
from Can-Flo International to Kedac, Inc. In January 1997, Kedac, Inc. filed
under Chapter 11 of the Bankruptcy Code in order to stop the litigation. In
August, 1997, the court approved a liquidating Chapter 11 plan for Kedac, Inc.
whereby LPS Acquisition Corp. purchased certain assets of Kedac, Inc. and
assumed certain liabilities of Kedac, Inc. One of the assets acquired by LPS was
the name Lantana Peat and Soil and LPS has continued to operate the Company
under that name. The lawsuit was discharged in Bankruptcy as to Kedac, Inc. in
August 1997. The Company subsequently acquired LPS Acquisition Corp. in May,
1998. As to Mr. Deckinger the litigation is still pending. Mr. Deckinger has
denied all of the allegations in the litigation and has vigorously defended
himself in this matter. Currently the parties are in negotiations to resolve the
outstanding litigation.
Prior to 1994, Mr. Deckinger was the President of Leonard L. Farber,
Incorporated, a privately held developer of commercial real estate, where Mr.
Deckinger managed more the $400 million of real estate development and
construction. Mr. Deckinger has a B.S. degree from the University of Pittsburgh.
The Company owns a $3,000,000 key man life insurance policy on Mr.
Deckinger.
John Stewart was the general manager of Kedac, Inc. the predecessor of
LPS in 1994 (which was acquired by LPS in 1997) until LPS was acquired by the
Company in 1998. He has been a Director of the Company since May, 1998. Prior to
1994, Mr. Stewart was employed by Kedac, Inc., the predecessor of LPS.
Item 6. Executive Compensation.
The following table reflects compensation for services to the
Company for the fiscal years ended May 31 , 1999 and 1998 of the chief executive
officer. No other executive officer of the Company received compensation which
exceeded $100,000 during 1999 and 1998.
SUMMARY COMPENSATION TABLE
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<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------- ------------------------------
AWARDS PAYOUTS
OTHER ----------- ------- ALL
NAME AND ANNUAL RESTRICTED SECURITIES OTHER
PRINCIPAL COMPEN- STOCK UNDERLYING LTIP COMPEN-
POSITION YEAR SALARY (1) BONUS SATION AWARDS OPTIONS/SARS PAYOUTS SATION
- ---------- ----- ---------- ----- ------ ------------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eric W. 1998 $ 93,600 -0- 10,050 -0- -0- -0- -0-
Deckinger 1997 $ -0- -0- -0- -0- -0- -0- -0-
President
</TABLE>
Employment Agreements
The Company does not have an employment contract with any of its
employees.
Employee Stock Option Plan
The Company believes that equity ownership is an important factor in
its ability to attract and retain skilled personnel, and the Board of Directors
of the Company may adopt an employee stock option program. The purpose of the
stock option program will be to further the interest of the
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Company, its subsidiaries and its stockholders by providing incentives in the
form of stock options to key employees and directors who contribute materially
to the success and profitability of the Company. The grants will recognize and
reward outstanding individual performances and contributions and will give such
persons a proprietary interest in the Company, thus enhancing their personal
interest in the Company's continued success and progress. This program will also
assist the Company and its subsidiaries in attracting and retaining key
employees and directors.
Item 7. Certain Relationships and Related Transactions.
The current Board of Directors of the Company has adopted a policy that
Company affairs will be conducted in all respects by standards applicable to
publicly-held corporations and that the Company will not enter into any
transactions and/or loans between the Company and its officers, directors and 5%
stockholders, unless the terms are no less favorable than could be obtained from
independent third parties and unless such transactions are approved by a
majority of the independent disinterested directors of the Company.
In November, 1998, the Company issued 10,000,000 shares of common stock
to Atlas Marketing Association, Inc. for cash consideration of $950,000 pursuant
to an exemption under Rule 504 of Regulation D of the Act. Atlas was an
accredited investor. The Company believes that Atlas had knowledge and
experience in financial and business matters which allowed it to evaluate the
merits and risk of the purchase of these securities of the Company, and that it
was knowledgeable about the Company's operations and financial condition. The
terms and conditions of this financing were determined by the parties through
arms length negotiations and the Company believes the terms are no less
favorable to the Company than terms attainable from unaffiliated third parties.
In November, 1998 the Company issued 7,500,000 shares of common stock
to Eric W. Deckinger in exchange for the assumption by Mr. Deckinger, a Director
and President of the Company of $750,000 of the Company's debt to third parties.
The Company believes that Mr. Deckinger had knowledge and experience in
financial and business matters which allowed him to evaluate the merits and risk
of the receipt of these securities of the Company, and that he was knowledgeable
about the Company's operations and financial condition. The terms and conditions
of this financing were determined by the parties through arms length
negotiations and the Company believes the terms are no less favorable to the
Company than terms attainable from unaffiliated third parties.
In May, 1999, the Company issued 862,158 shares of nonvoting preferred
stock to MJ Shulman, Inc. in exchange for $862,158 of the Company's debt held by
and loaned by MJ Shulman, Inc.. The Company believes that MJ Shulman, Inc. had
knowledge and experience in financial and business matters which allowed it to
evaluate the merits and risk of the purchase of these securities of the Company.
The Company believes that MJ Shulman, Inc. was knowledgeable about the Company's
operations and financial condition. The terms and conditions of this financing
were determined by the parties through arms length negotiations and the Company
believes the terms are no less favorable to the Company than terms attainable
from unaffiliated third parties.
Item 8. Description of Securities.
The authorized capital stock of the Company consists of 50,000,000
shares of common stock, $0.001 par value and 10,000,000 Series A nonvoting
preferred stock, $.001 par value. As of July 15, 1999, the Company had issued
and outstanding 18,115,000 shares of common stock and 862,158 nonvoting
preferred stock.
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The following summary description of the securities of the Company is
qualified in its entirety by reference to the Articles of Incorporation
("Articles") and the Bylaws of the Company, copies of which are filed as
exhibits to this Form 10-SB.
Common Stock
The holders of common stock are entitled to one vote per share with
respect to all matters required by law to be submitted to stockholders of the
Company. The holders of common stock have the sole right to vote, except as
otherwise provided by law or by the Articles of Incorporation. The common stock
does not have any cumulative voting, preemptive, subscription or conversion
rights. The election of directors and other general stockholder action requires
the affirmative vote of a majority of shares represented at a meeting in which a
quorum is represented.
The holders of common stock are entitled to receive dividends when, as
and if declared by the Board of Directors out of funds legally available
therefor only after accrued dividends are paid to holders of preferred stock and
other senior securities. In the event of liquidation, dissolution or winding up
of the affairs of the Company, the holders of common stock are entitled to share
ratably in all assets remaining available for distribution to them subject to
the rights of holders of preferred stock and other senior securities.
Preferred Stock
There have been designated 1,000,000 shares of Series A Preferred Stock
(the "Preferred Stock"). The Preferred Stock has a stated value of $1.00 per
share. The holders of Preferred Stock are entitled to receive dividends at the
rate of 5% per annum payable semi-annually, in arrears. At the sole discretion
of the Company, the dividends may be paid in cash, or by the in-kind payment of
common stock. A cash dividend shall only be made out of funds legally available
therefor. If dividends are paid in common stock, the value of the in-kind common
stock shall be the Current Market Price (as defined below). In the event the
Company fixes a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution with respect to the Common
Stock payable in (i) securities of the Company other than shares of Common Stock
or (ii) assets, then and in each such event the holders of Preferred Stock shall
receive, at the same time such distribution is made with respect to Common
Stock, the number of securities or such other assets of the Company which they
would have received had their Preferred Stock been converted into Common Stock
immediately prior to the record date for determining holders of Common Stock
entitled to receive such distribution. The Preferred Stock is not convertible
into any security of the Company. The Preferred Stock shall have no voting
rights. In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the holders of shares of Preferred Stock then
outstanding shall be entitled to receive out of assets of the Corporation
available for distribution to stockholders, before any distribution of assets is
made to holders of any other class of capital stock of the Corporation, an
amount equal to $1.00 per share, plus accumulated and unpaid dividends thereon
to the date fixed for distribution. At or before May 31, 2004, if there is a
transaction resulting in any person or group acquiring beneficial or pecuniary
ownership of 50% or more of the common equity of the Corporation, then the
Corporation, at its sole discretion, may redeem any and/or all of the shares of
Series A Preferred Stock as may be outstanding, upon thirty days written notice
to holders. In such event, the Redemption Price for each share of Series A
Preferred Stock shall be $3.00, plus cash payment for accumulated and unpaid
dividends thereon to the date fixed for redemption. At any time after May 31,
2004, the Corporation, at its sole discretion, may redeem any and/or all of the
shares of Series A Preferred Stock as may be outstanding, upon thirty days
written notice to holders. The Redemption Price for each share of Series A
Preferred Stock shall be $1.40, plus cash payment for accumulated and unpaid
dividends thereon to the date fixed for redemption. The Company has issued and
outstanding 862,158 shares of Preferred Stock.
12
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Stock and
Other Shareholder Matters.
The Company's common stock is currently traded on the over-the-counter
bulletin board ("OTCBB") under the symbol "MOSS." The following table sets
forth, for the periods indicated, the reported high and low closing bid
quotations for the common stock of the Company as reported on the OTCBB . The
bid prices reflect inter-dealer quotations, do not include retail markups,
markdowns or commissions and do not necessarily reflect actual transactions.
To the best of the Company's knowledge, from March 31, 1997 to May 31,
1998, no broker-dealer made an active market or regularly submitted quotations
for the Company's stock, and that during this period, there were only a de
minimis and infrequent number of trades and de minimis trading volume.
HIGH LOW
QUARTER ENDED BID BID
- ----------------- ----- -----
March 31, 1997 $ (*) $ (*)
June 30, 1997 $ (*) $ (*)
September 30, 1997 $ (*) $ (*)
December 31, 1997 $ (*) $ (*)
March 31, 1998 $ (*) $ (*)
June 30, 1998 (**) $ 2-1/2 $ 7/8
September 30, 1998 (**) $ 7/8 $ .10
December 31, 1998 $ 5.00 $ .40
March 31, 1999 $ 4-5/16 $ 3-7/8
June 30, 1999 $ 3-3/4 $ 2-1/2
- ----------
(*) During this period, there were only a de minimis and infrequent number of
trades and a de minimis trading volume.
(**) Pre-reverse split. On December 21, 1998 The Company executed a 10 to 1
reverse split of its Common Stock.
The bid price on the Company's common stock was $2.375 per share on
July 15, 1999.
As of July 15, 1999, there were approximately 675 holders of record of
the Company's common stock.
The Company's transfer agent is Silverado Stock Transfer, Inc., 8170
Southeastern Avenue, #4-236, Las Vegas, Nevada 89123, (702) 263-0920.
Dividend Policy
The Company has not paid, and the Company does not currently intend to
pay cash dividends on its common stock in the foreseeable future. The current
policy of the Company's Board of Directors is for the Company to retain all
earnings, if any, to provide funds for operation and expansion of the Company's
business. The declaration of dividends, if any, will be subject to the
discretion of the Board of Directors, which may consider such factors as the
Company's results of operations, financial condition, capital needs and
acquisition strategy, among others.
Item 2. Legal Proceedings.
None.
Item 3. Changes in and Disagreements With Accountants.
13
<PAGE>
Mr. Kurt D. Saliger, C.P.A. ("Saliger"), conducted the audits of the
Company for the years ended December 31, 1997 and 1996. Saliger was dismissed on
December 21, 1998. There were no disagreements on accounting matters or
financial disclosures. Kurt D. Saliger, C.P.A. has provided the Company with a
letter pursuant to Rule 304 of Regulation S-B.
(a) On December 21, 1998, the Company engaged Sweeney, Gates &
Co.("Sweeney, Gates") as its independent accountant. The
decision to engage Sweeney, Gates as the Company's independent
accountant was approved by the President of the Company. The
decision to change auditors was based on the Company's
relocation of its executive offices to Florida.
(b) In a report dated March 2, 1998 Saliger reported on the
Company's financial statements as of December 31, 1997, and
the related statements of operations, stockholders' equity and
cash flows for the year then ended. The report did not contain
an adverse opinion or disclaimer of opinion, nor was such
report qualified or modified as to uncertainty, audit scope,
or accounting principles.
(c) Since December 31, 1997 and through the present, there were no
reportable events requiring disclosure pursuant to Item 304 of
Regulation S-B.
(d) Effective December 21, 1998, the Company engaged Sweeney,
Gates as its independent accountant. During the two calendar
years ended December 31, 1997, and since then, neither the
Company nor anyone on its behalf consulted Sweeney, Gates
regarding either the application of accounting principles to a
specified transaction, either completed or proposed, or the
type of audit opinion that might be rendered on the Company's
financial statements, nor has Sweeney, Gates provided to the
Company a written report or oral advice regarding such
principles or audit opinion.
Item 4. Recent Sales of Unregistered Securities.
During the past three years, the following transactions were effected
by the Company in reliance upon exemptions from registration under the
Securities Act of 1933 as amended (the "Act") as provided in Section 4(2)
thereof except as otherwise indicated below. Each certificate issued for
unregistered securities contained a legend stating that the securities have not
been registered under the Act and setting forth the restrictions on the
transferability and the sale of the securities. No underwriter participated in,
nor did the Company pay any commissions or fees to any underwriter in connection
with any of these transactions. None of the transactions involved a public
offering.
In November, 1998 the Board of Directors issued 120,000 shares of
common stock to Coventry Industries Corp. to complete the previous acquisition
of LPS from Coventry pursuant to an agreement between the Company and Coventry.
The Company believes that Coventry had
14
<PAGE>
knowledge and experience in financial and business matters which allowed it to
evaluate the merits and risk of the receipt of these securities of the Company,
and that it was knowledgeable about the Company's operations and financial
condition.
In November, 1998 the Company issued 7,500,000 shares of common stock
to Eric W. Deckinger in exchange for the assumption by Mr. Deckinger, a Director
and President of the Company of $750,000 of the Company's debt to third parties.
The Company believes that Mr. Deckinger had knowledge and experience in
financial and business matters which allowed him to evaluate the merits and risk
of the receipt of these securities of the Company, and that he was knowledgeable
about the Company's operations and financial condition. The terms and conditions
of this financing were determined by the parties through arms length
negotiations and the Company believes the terms are no less favorable to the
Company than terms attainable from unaffiliated third parties.
In November, 1998 the Company issued 80,000 shares of common stock to
three persons who provided professional services to the Company. The Company
believes that each of these persons had knowledge and experience in financial
and business matters which allowed them to evaluate the merits and risk of the
receipt of these securities of the Company. All of these persons were providers
of professional services to the Company and in such capacity they were
knowledgeable about the Company's operations and financial condition.
In November, 1998, the Company issued 10,000,000 shares of common stock
to Atlas Marketing Association, Inc. for cash consideration of $950,000 pursuant
to an exemption under Rule 504 of Regulation D of the Act. Atlas was an
accredited investor. The Company believes that Atlas had knowledge and
experience in financial and business matters which allowed it to evaluate the
merits and risk of the purchase of these securities of the Company, and that it
was knowledgeable about the Company's operations and financial condition. The
terms and conditions of this financing were determined by the parties through
arms length negotiations and the Company believes the terms are no less
favorable to the Company than terms attainable from unaffiliated third parties.
In May, 1999, the Company issued 862,158 shares of nonvoting preferred
stock to MJ Shulman, Inc. in exchange for $862,158 of the Company's debt held by
and loaned by MJ Shulman, Inc.. The Company believes that MJ Shulman, Inc. had
knowledge and experience in financial and business matters which allowed it to
evaluate the merits and risk of the purchase of these securities of the Company.
The Company believes that MJ Shulman, Inc. was knowledgeable about the Company's
operations and financial condition. The terms and conditions of this financing
were determined by the parties through arms length negotiations and the Company
believes the terms are no less favorable to the Company than terms attainable
from unaffiliated third parties.
Item 5. Indemnification of Directors and Officers.
The following summary description of material provisions of the
Company's Articles of Incorporation and Bylaws is qualified in its entirety by
reference to the Articles of Incorporation ("Articles") and the Bylaws of the
Company, copies of which are included as exhibits to this Form 10-SB.
The Company's Articles of Incorporation, Article 10, provides that no
Director or Officer of the Company shall be personally liable to the corporation
of any of its stockholders for damages for breach of fiduciary duty as a
director or officer involving any act or omission of any such director or
officer provided, however, that the foregoing provision shall not eliminate or
limit the liability of
15
<PAGE>
a director of officer for acts or omission which involve intentional misconduct,
fraud or a knowing violation of law, or the payment of dividends in violation of
Section 78.300 of the Nevada Revised Statutes. Any repeal or modification of
this Article of the Stockholders of the Company shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a
director or officer of the Company for acts or omission prior to such repeal or
modification.
The Company's Bylaws, Article IX, provides:
a.) Any person made a party to any action, suit or proceeding, by
reason of the fact that he, his testator or interstate
representative is or was a director, officer or employee of
the Company or any company in which he served as such at the
request of the Company shall be indemnified by the Company
against the reasonable expenses, including attorneys' fees,
actually and necessarily incurred by him in connection with
the defense of such action, suit or proceedings, or in
connection with any appeal therein, except in relation to
matters as to which it shall be adjudged in such action suit
or proceeding or in connection with any appeal therein that
such officer director or employee is liable for the gross
negligence of misconduct in the performance of his duties.
b.) The foregoing right of indemnification shall not be deemed
exclusive of any other rights to which any officer or director
or employee may be entitled apart from the provisions of the
section
c.) The amount of indemnity to which any officer or any director
may be entitled shall be fixed by the Board of Directors,
except that in any case in which there is no disinterested
majority of the Board available, the amount shall be fixed by
arbitration pursuant of the then existing rules of the
American Arbitration Association.
PART F/S
The financial information required by this item is included as set
forth on Page F-1.
PART III
Item 1. Index to Exhibits.
All exhibits set forth below are provided herewith.
3.1 Articles of Incorporation and Amendments thereto.
3.2 By-Laws and Amendments thereto.
4.1 Form of Common Stock Certificate.
4.2 Form of Certificate of the Designation, Preferences,
Rights and Limitations of Series A Preferred Stock
16
<PAGE>
10.1 LPS Acquisition Agreement dated May 28, 1998
10.2 Torland Acquisition agreement dated May 1999
10.3 Torland loan document #1
10.4 Torland loan document #2
10.5 Torland loan document #3
10.6 Torland loan document #4
16.1 Letter on change of certifying accountant
21.1 Subsidiaries of the registrant
27.1 Financial Data Schedule for the period ended December 31, 1997
27.2 Financial Data Schedule for the period ended May 31, 1998
27.3 Financial Data Schedule for the period ended May 31, 1999.
Item 2. Description of Exhibits.
The Exhibits required by this item are included as set forth
in the Exhibit Index.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
American Group, Inc.
August ___________, 1999 By /s/ Eric W. Deckinger
Director and President
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1
INDEPENDENT ACCOUNTANTS REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets F-3
Consolidated Statements of Income F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to the Consolidated Financial Statements F-7
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors
American Group, Inc.
We have audited the accompanying consolidated balance sheets of American Group,
Inc. and subsidiaries as of May 31, 1999 and 1998, and the related consolidated
statements of income, stockholders' equity and cash flows for the year ended May
31, 1999 and the five months ended May 31, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Group, Inc. as of May 31, 1999 and 1998 and the results of its
consolidated operations and its consolidated cash flows for the year ended May
31, 1999 and the five months ended May 31, 1998 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered losses from operations and has a
net working capital deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2 and 14. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Sweeney, Gates & Co.
July 22, 1999
Fort Lauderdale, FL
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
American Group, Inc.
Las Vegas, Nevada
I have audited the accompanying related statements of operations,
stockholders' equity and cash flows for the year ended December 31, 1997 of
American Group, Inc. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the results of their operations of American
Group, Inc. and their cash flows for the year ended December 31, 1997 in
conformity with generally accepted accounting principles.
Kurt D. Saliger, CPA
March 2, 1998
Las Vegas, Nevada
F-2
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 13,397 $ 3,547
Accounts receivable, less allowance for doubtful accounts
of $10,000 in 1999 and 1998, respectively 90,102 227,680
Stock subscription receivable 151,839 --
Inventory 79,009 44,116
Prepaid expenses -- 7,890
----------- -----------
Total current assets 334,347 283,233
Property, plant and equipment, net of accumulated
depreciation of $101,716 and $0, respectively 309,082 152,183
Other assets:
Note receivable 967,500 399,000
Interest receivable 101,987 43,667
Equipment deposit 187,500 --
Goodwill less accumulated amortization of
$38,971 and $0 in 1999 and 1998, respectively 740,447 821,480
Other 3,984 3,984
----------- -----------
$ 2,644,847 $ 1,703,547
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ -- $ 39,357
Current portion of notes payable 199,751 979,404
Current portion of capital lease obligation payable 75,343 --
Accounts payable and accrued expenses 644,769 391,036
----------- -----------
Total current liabilities 919,863 1,409,797
----------- -----------
Long term liabilities:
Long term debt less current portion 52,689 291,603
Long term capital lease obligation less current portion 107,157 --
----------- -----------
159,846 291,603
----------- -----------
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000 shares authorized;
862,158 issued and outstanding in 1999 862 --
Common stock, $.001 par value, 50,000,000 shares authorized,
18,115,000 and 535,000 shares issued and outstanding, 18,115 535
respectively
Additional paid-in capital 5,688,184 3,044,468
Accumulated deficit (4,142,023) (3,042,856)
----------- -----------
Total stockholders' equity 1,565,138 2,147
----------- -----------
$ 2,644,847 $ 1,703,547
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended Five months ended Year ended
May 31, 1999 May 31, 1998 Dec. 31, 1997
------------ ------------ -------------
<S> <C> <C> <C>
Revenue $ 2,240,995 $ $
Cost of sales 2,086,746 -- --
------------ ------------ ------------
Gross profit 154,249 -- --
Selling, general and administrative expenses 1,174,428 21,532 8,907
------------ ------------ ------------
Operating loss (1,020,179) (21,532) 8,907
------------ ------------ ------------
Other income (expenses):
Impairment loss of purchased intangible assets -- (3,000,000) --
Interest expense (153,420) -- --
Interest income 74,432 -- --
Other income -- 24,000 --
------------ ------------ ------------
(78,988) (2,976,000) --
------------ ------------ ------------
Net income (loss) $ (1,099,167) $ (2,997,532) $ (8,907)
============ ============ ============
Net income (loss) per share, basic and fully diluted $ (0.11) $ (7.78) --
============ ============ ============
Weighted average shares outstanding 10,001,154 385,000 385,000
============ ============ ============
</TABLE>
The accompanying are an integral part of these financial statements.
F-4
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED MAY 31, 1999
THE FIVE MONTHS ENDED MAY 31, 1998 AND YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Preferred Stock Common Stock
---------------- --------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance, January 1, 1997 -- -- 140,000 $ 140
Forward Stock Split -- -- 3,360,000 3,360
Forward Stock Split -- -- 350,000 350
-------- ------ ---------- --------
Balance, December 31, 1997 -- $ -- 3,850,000 $ 3,850
Reverse stock split -- -- (3,465,000) (3,465)
Issuance of shares for purchase of LPS
Acquisition, Inc. and Lator International,
Inc -- -- 150,000 150
Net Loss -- -- -- --
-------- ------ ---------- --------
Balance, May 31, 1998 -- -- 535,000 535
Sale of common stock -- -- 10,000,000 10,000
Conversion of notes payable 862,158 862 7,500,000 7,500
Common stock issued in connection with
compensation to certain consultants -- -- 80,000 80
Net loss -- -- -- --
-------- ------ ---------- --------
Balance, May 31, 1999 862,158 $ 862 18,115,000 $ 18,115
======== ====== ========== ========
Additional
paid-in Accumulated
capital deficit Total
------------ ----------- -----
Balance, January 1, 1997 $ 44,863 $ (36,417) $ 8,586
Forward Stock Split (3,360) -- --
Forward Stock Split (350) -- --
----------- ----------- -----------
Balance, December 31, 1997 $ 41,153 $ (45,324) $ (321)
Reverse stock split 3,465 -- --
Issuance of shares for purchase of LPS
Acquisition, Inc. and Lator International,
Inc 2,999,850 -- 3,000,000
Net Loss -- (2,997,532) (2,997,532)
----------- ----------- -----------
Balance, May 31, 1998 3,044,468 (3,042,856) 2,147
Sale of common stock 940,000 -- 950,000
Conversion of notes payable 1,603,796 -- 1,612,158
Common stock issued in connection with
compensation to certain consultants 99,920 -- 100,000
Net loss -- (1,099,167) (1,099,167)
----------- ----------- -----------
Balance, May 31, 1999 $ 5,688,184 $(4,142,023) $ 1,565,138
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended Five months ended Year ended
May 31, 1999 May 31, 1998 Dec. 31, 1997
------------ ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,099,167) $(2,997,532) $ (8,907)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Amortization 38,971 -- --
Depreciation 101,716 -- --
Issuance of common stock for services 100,000 -- --
Impairment loss of purchased intangible assets -- 3,000,000 --
Changes in assets and liabilities
Accounts receivable 137,578 -- --
Other receivables (57,821) -- --
Inventory (34,893) -- --
Prepaid expenses 7,890 -- --
Bank overdraft (39,357) -- --
Accounts payable and accrued expenses 313,220 -- --
----------- ----------- ---------
Net cash provided by (used in) operations (531,863) 2,468 (8,907)
----------- ----------- ---------
Cash flows from investing activities:
Purchase of equipment (258,615) -- --
Deposit on new equipment (187,500) -- --
----------- ----------- ---------
Net cash used by investing activities (446,115) -- --
----------- ----------- ---------
Cash flows from financing activities:
Issuance of notes receivable (568,500) (49,000) --
Proceeds from notes payable 722,387 50,000 --
Payments on loans payable (1,575,879) -- --
Proceeds from sale of common stock 2,409,820 -- --
----------- ----------- ---------
Net cash provided by financing activities 987,828 1,000 --
----------- ----------- ---------
Net increase(decrease) in cash 9,850 3,468 (8,907)
Cash at beginning of year 3,547 79 8,986
----------- ----------- ---------
Cash at end of year $ 13,397 $ 3,547 $ 79
=========== =========== =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 145,434 $ -- $ --
=========== =========== =========
Cash paid during the year for taxes $ -- $ -- $ --
=========== =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - American Group, Inc. (the "Company") was incorporated on October
14, 1994 under the laws of the State of Nevada. The Company was inactive and in
the development stage until May 31, 1998 when it purchased LPS Acquisition Corp.
("LPS") and Lator International, Inc. ("Lator"). The Company changed its
year-end from December 31 to May 31 effective May 31, 1998. LPS wholesales
custom blended soil mixes to customers in Florida. Lator had no transactions
except notes receivable and payable. Lator also owns the right to purchase
Torland 9006-1974 Quebec, Inc. ("Torland"), a Canadian entity that controls
leases for a peat bog and operates a facility which harvests and packages peat.
Principles of consolidation - The accompanying consolidated financial statements
include the accounts of the Company and all majority-owned subsidiaries. All
material intercompany accounts and transactions have been eliminated in
consolidation.
Inventory - Inventory, consisting mainly of finished product, is stated at lower
of cost or market. Provision for potentially unsaleable inventory is made based
upon management's analysis of inventory levels and future sales forecasts.
Property, plant, and equipment - Property, plant, and equipment are stated at
cost. Major renewals and improvements are capitalized, while maintenance and
repairs are expensed when incurred. The cost and accumulated depreciation for
property, plant and equipment sold, retired, or otherwise disposed of are
relieved from the accounts, and resulting gains or losses are reflected in
income. Depreciation is computed over the estimated useful lives of depreciable
assets using the straight-line method.
Goodwill - The excess of the cost over the fair value of net assets acquired is
amortized on a straight-line basis over 20 years.
Asset Impairment - The Company periodically evaluates the recoverability of its
long-lived assets, comparing the respective carrying values to the current and
expected future cash flows to be generated from such assets. The recoverability
of property, plant, and equipment, intangible assets and goodwill are evaluated
on a separate basis for the Company and each acquisition.
Income tax - Income tax assets and liabilities are computed annually for
temporary differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future,
based upon 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.
F-7
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income (loss) per share - The Company accounts for income taxes according to
Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128"). FAS
128 requires presentation of basic and diluted earnings or loss per share. The
Company does not have any potentially dilutive shares outstanding. Earnings or
loss per share is computed by dividing net income or loss by the weighted
average number of shares outstanding during the period.
Fair value of financial instruments - The fair value of the Company's financial
instruments such as accounts receivables, accounts payable, and notes payable
approximate their carrying value.
Reclassification - Certain previously reported amounts have been reclassified to
conform with the current presentation.
2. GOING CONCERN
The Company's continued existence is dependent upon its ability to resolve its
liquidity problems, principally by obtaining equity capital and commencing
profitable operations. During the interim, the Company must continue to operate
on cash flows generated from loans and raising capital. The Company experienced
a loss of $1,099,167 for the year ended May 31, 1999, and has a negative working
capital of $585,516. In 1999 and 1998, the Company loaned Torland $967,500 to
fund its operations and to acquire capital assets. It is uncertain whether the
funds will be repaid. (See Note 4). These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to this matter are to raise capital, become profitable by integrating its
operations with Torland and increase efficiency by relocating its operations
into a new facility in Homestead, Florida, near its customer base. Additionally,
the Company plans, upon integration with Torland, to begin utilizing this new
facility, which management believes will substantially decrease its operating
costs. Management believes these efforts will generate positive cash flow.
3. ACQUISITIONS
On May 28, 1998 the Company acquired all the common stock of LPS for 120,000
shares of the Company's stock and assumption of accounts payable, accrued
expenses and notes payable.
F-8
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS (continued)
In addition, the Company purchased all the common stock of Lator for 30,000
shares of the Company's stock and assumption of accrued expenses and notes
payable.
The purchase price was as follows:
Value of stock at market $ 3,000,000
Fair value of liabilities assumed 1,569,580
-------------
$ 4,569,580
=============
The transaction was recorded as follows:
Impairment of acquired intangible assets $ 3,000,000
Fair value of assets 790,162
Goodwill 779,418
-------------
$ 4,569,580
=============
Concurrently with its valuation, and in accordance with SFAS 121, management
evaluated the various intangible assets and determined that such assets were
permanently impaired due to the Company's current period operating loss combined
with a history of operating losses. Therefore, an impairment for the intangibles
of $3,000,000 was recognized in 1998.
The following unaudited pro forma summary presents the consolidated results of
operations of the Company for the five months ended May 31, 1998 as if the
acquisition had occurred on January 1, 1998:
Revenue $ 820,415
Net Loss (593,284)
Net loss per share
$ (1.54)
The unaudited pro forma assumes the amortization of goodwill of $16,238 for the
five months.
F-9
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. NOTE RECEIVABLE
The note receivable consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
10% demand note receivable due from Torland
9006-1474, Quebec, Inc. $ 967,500 $ 399,000
========= =========
</TABLE>
At May 31, 1999 and 1998, $101,987 and $43,667 was due the Company for interest.
This amount has been classified as long term since it will be used for the
acquisition of Torland, which has principally long-term assets.
5. PROPERTY, PLANT, AND EQUIPMENT
Property and equipment consisted of the following at May 31:
<TABLE>
<CAPTION>
1999 1998 Estimated
---- ---- Useful Life
<S> <C> <C> <C>
Machinery and equipment $ 279,134 $ 43,009 2-5 years
Furniture and fixtures 19,300 14,285 1-5 years
Vehicles 112,364 94,889 3-5 years
------------- -------------
410,798 152,183
Accumulated depreciation (101,716) -
-------------- -------------
$ 309,082 $ 152,183
============== =============
</TABLE>
Depreciation expense for 1999 was $101,716.
F-10
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. NOTES PAYABLE
Notes payable consisted of the following at May 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Demand note, non-interest bearing, due to the President $ 17,425 $ -
Demand note, non-interest bearing, due to an individual, payable
in monthly installments of $1,500 27,160 34,660
Note payable, 10% interest, due to a finance company, payable in monthly
installments of $1,992, due October 2002, secured by
1998 dump truck 70,355 86,347
Demand note payable, 10% interest due to an individual,
guaranteed by Coventry Industries Corp. and the President 137,500 -
collateralized by accounts receivable and inventory
Note payable, prime rate of interest, due to a bank secured by the
President's home and securities, guaranteed by the President,
payments of interest only of $3,272 monthly. Maturing on
October 12, 1998, (See Note 9) - 450,000
Note payable, 13% interest, due to a finance company secured by the
securities of the president, accounts receivable, inventory and
guaranteed by the President and his wife, payments of interest only
of $3,250 monthly through November 1998, then principal
and interest maturing on November 2000, (See Note 9) - 300,000
Demand note, 10% interest, due to investment banking firm, - 400,000
(See Note 10) ------------ -------------
252,440 1,271,007
Less: current maturities (199,751) (979,404)
------------ -------------
$ 52,689 $ 291,603
============ =============
</TABLE>
F-11
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. NOTES PAYABLE (continued)
Maturities of long-term debt are as follows:
2000 $ 199,751
2001 19,516
2002 21,560
2003 11,613
------------
$ 252,440
------------
7. CAPITAL LEASE OBLIGATIONS
The Company leases certain operating equipment, which were accounted for as
capital leases. At May 31, 1999, the equipment and accumulated depreciation was
as follows:
Machinery and equipment $ 225,887
Less: accumulated depreciation (31,103)
------------
$ 194,784
============
The following is a schedule by year of the future minimum lease payments under
capital leases together with the present value of the net minimum lease payments
as of May 31, 1999:
2000 $ 105,953
2001 64,177
2002 22,401
2003 22,401
2004 3,734
------------
Total minimum lease payments 218,666
Less: amount representing interest (36,166)
------------
Present value of net minimum lease payments 182,500
Less: current portion (75,343)
------------
$ 107,157
============
F-12
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. OPERATING LEASES
The Company has various operating leases with terms from one to six years.
Expenses for the leases for the year ended May 31, 1999 totaled $147,460. The
Company conducts its operations from a leased facility which is renewed on a
month to month basis pending the Company's relocation to its new facility in
Homestead, Florida.
Future minimum rental payments for operating leases with initial or remaining
noncancelable lease terms in excess of one year are as follows at May 31, 1999:
2000 $ 54,185
2001 54,185
2002 29,216
2003 22,362
2004 1,863
-------------
Total minimum payments $ 161,811
=============
9. ISSUANCE OF COMMON STOCK
In November 1994, the Company issued 30,000 shares of common stock for cash of
$7,500. In June 1996, the Company issued 10,000 shares of common stock for cash
of $12,503. In October 1996, the Company issued 100,000 shares of common stock
for cash of $25,000. On April 19, 1997, at a special meeting of the directors,
the directors approved, effective immediately, a forward stock split of 25 to 1;
increasing the number of common shares outstanding from 140,000 to 3,500,000
common shares outstanding.
On December 18, 1997, at a special meeting of the directors, the directors
approved, effective immediately, a forward stock split of 1.1 to 1; increasing
the number of common shares outstanding from 3,500,000 to 3,850,000.
On November 16, 1998, the Company approved a reverse stock split of 1 to 10;
decreasing the number of common shares outstanding from 3,850,000 to 385,000.
This reverse split has been retroactively applied to all periods presented.
F-13
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. ISSUANCE OF COMMON STOCK (continued)
On November 16, 1998 the Company sold 10,000,000 shares of its common stock for
cash consideration of $950,000 pursuant to an exemption under Rule 504 of
Regulation D of the Securities Act of 1933, as amended. In connection with this
transaction, stock subscriptions receivable were $151,839 at May 31, 1999. This
amount has been received by the Company during June 1999. The Company also
issued 7,500,000 of common stock to its President in exchange for $750,000 of
outstanding debt held by the President (See Note 6). In November 1998 the
Company issued 80,000 shares of common stock at $.125 per share in exchange for
professional services rendered to the Company.
10. PREFERRED STOCK
On May 31, 1999, the Company issued 862,158 shares of preferred stock to an
investment banker, in exchange for $862,158 of debt and accrued interest (See
Note 6). The terms of the preferred stock include a 5% non-cumulative dividend,
payable in stock or cash. The Company has the right to redeem the preferred
stock at 140% if the Company is not sold or at 300% if the Company is sold.
11. INCOME TAXES
The company had available a net operating loss carryforward of $42,856 as of
December 31, 1997, which it utilized to offset taxable income for the five
months ended May 31, 1998. However, due to change in control and a change in
business, the carryforwards were eliminated.
The Company had available at May 31, 1999, a net operating loss carry-forward
for federal and state tax purposes of approximately $1,100,000 which could be
applied against taxable income in subsequent years through 2019. The tax effect
of the net operating loss is approximately $410,000, and a valuation allowance
of $410,000 has been recorded, since realization is uncertain.
12. COMMITMENTS AND CONTINGENCIES
LPS, which was acquired on May 28, 1998, had a lease for its operating
facilities that expired on December 31, 1998. LPS continues to occupy the
facility on a month-to-month basis. The Company will have to relocate in 1999.
Management has completed negotiations for the new facility. The Company has also
deposited $187,500 for equipment to be used in its operating facilities.
F-14
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. CONCENTRATION OF SUPPLIER AND SALES
The Company purchases from Torland a substantial amount of its products. The
Company is dependent upon the supplier continuing in business and its ability to
ship to the United States. The Company believes that it could replace the
supplier.
During 1998, the Company purchased approximately $290,000 of sphagnum peat moss
from Torland and had accounts payable to Torland at May 31, 1999 of $264,126.
14. YEAR 2000 COMPUTER CONSIDERATIONS (UNAUDITED)
The Company has completed an inventory of computer systems and other electronic
equipment that may be affected by the year 2000 issue and that are necessary to
conduct Company operations. All computer and electronic systems identified
during the inventory are year 2000 compliant.
Because of the unprecedented nature of the year 2000 issue, its effects and the
success of related remediation efforts will not be fully determinable until the
year 2000 and thereafter. Management cannot assure that the Company is or will
be year 2000 ready, that the Company's remediation efforts will be successful in
whole or in part, or that parties with whom the Company does business will be
year 2000 compliant.
15. SUBSEQUENT EVENTS
The Company has executed a letter agreement dated July 2, 1999, whereby the
rights the Company has to acquire Torland 9006-1474, Quebec, Inc. have been
extended through August 15, 1999. (See Note 4). The purchase will require the
Company to pay $400,000 at the time of closing and an additional $800,000 during
the following year. Further, the Company will be required to issue an
additional 700,000 shares of its common stock at time of closing. The Company is
presently trying to raise the capital needed to close the transaction in an
exempt offering of debt. There can be no assurance that the Company will be
successful with this or any other activity to raise additional capital.
F-15
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
OCT 14 1994 ARTICLES OF INCORPORATION
16156-94 of
CHERYL A. LAU SECRETARY OF STATE American Group, Inc.
Know all men by these present;
That the undersigned, have this day voluntarily associated ourselves together
for the purpose of forming a corporation under and pursuant to the provisions of
Nevada Revised Statutes 78.010. to Nevada Revised Statues 78.090 inclusive, as
amended, and certify that;
1. The name of this corporation is:
American Group, Inc.
2. Offices for the transaction of any business of the Corporation, and where
meetings of the Board of Directors and of Stockholders may be held, may be
established and maintained in any part of the State of Nevada, or in any
other state, territory, or possession of the United States.
3. The nature of the business is to engage in any lawful activity.
4. The Capital Stock shall consist of 50,000,000 shares of common stock,
$0.001 par value.
5. The members of the governing board of the corporation shall be styled
directors, of which there shall be no less than 1. The Directors of this
corporation need not be stockholders. The first Board of Directors is:
Samuel J. Incorvia, whose address is 3965 S. Maryland Parkway, Suite 155,
Las Vegas, NV 89119.
6. This corporation shall have perpetual existence.
<PAGE>
7. This Corporation shall have a president, a secretary, a treasurer, and a
resident agent, to be chosen by the Board of Directors, any person may
hold two or more offices.
8. The resident agent of this Corporation shall be Samuel J. Incorvia, 3965
S. Maryland Parkway, Suite 155, Las Vegas, NV 89119.
9. The Capital Stock of the corporation, after the fixed consideration
thereof has been paid or performed, shall not be subject to assessment,
and the individual liable for the debts and liabilities of the
Corporation, and the Articles of Incorporation shall never be amended as
the aforesaid provisions.
10. No director or officer of the corporation shall be personally liable to
the corporation of any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or omission of
any such director or officer provided, however, that the foregoing
provision shall not eliminate or limit the liability of a director or
officer for acts or omissions which involve intentional misconduct, fraud
or a knowing violation of law, or the payment of dividends in violation of
Section 78.300 of the Nevada Revised Statutes. Any repeal or modification
of this Article of the Stockholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the
personal liability of a director of officer of the Corporation for acts or
omissions prior to such repeal or modification.
11. Except to the extent limited or denied by Nevada Revised Statutes 78.265
Shareholders have a preemptive right to acquire unissued shares, treasury
shares or securities convertible into such shares, of this corporation.
<PAGE>
I, the undersigned, being the incorporator herein above named for the purpose of
forming a corporation pursuant to the general corporation law of the State of
Nevada, do make and file these Articles of Incorporation, hereby declaring and
certifying that the facts within stated are true, and accordingly have hereunto
set my hand this 14 day of Oct., 1994.
/s/ Samuel J. Incorvia
-----------------------------------
Samuel J. Incorvia
3965 S. Maryland Parkway, Suite 155
Las Vegas, NV 89119
State of NEVADA )
)ss
County of CLARK )
On 10-14-94, personally appeared before me, a notary public, personally known to
me to be the person whose name is subscribed to the above instrument who
acknowledged that he/she executed the instrument.
/s/ Netta Girard
-----------------------------------
Signature
NETTA GIRARD
Notary Public
State of Nevada
Clark County
My Appointment Expires Nov. 5, 1997
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE
OF THE
STATE OF NEVADA
OCT 14 1994
CHERYL A. LAU SECRETARY OF STATE
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT
BY RESIDENT AGENT
In the matter of American Group, Inc., I, Samuel J. Incorvia, with address at:
3965 S. Maryland Parkway, Suite 155, City of LAS VEGAS, County of CLARK, State
of NEVADA 89119, hereby accept appointment as Resident Agent of the
above-entitled corporation in accordance with NRS 78.090.
FURTHERMORE, that the principal office in this State is located at 3965 S.
Maryland Parkway, Suite 155, City of LAS VEGAS, County of CLARK, State of
NEVADA 89119.
IN WITNESS WHEREOF, I have hereunto set my hand this 14 day of Oct., 1994.
/s/ Samuel J. Incorvia
---------------------------
RESIDENT AGENT
NRS 78.090 Except any period of vacancy described in NRS 78.097, every
corporation shall have a resident agent, who may wither a natural person or a
corporation, resident or located in this state, in charge of its principal
office. The resident agent may be any bank or banking corporation, or other
corporation, located and doing business in this state... The certificate of
acceptance must be filed at the time of the initial filing of the corporate
papers.
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
American Group, Inc.
ARTICLE I - OFFICES
The principal office of the Corporation shall be located at 3965 S.
Maryland Pkwy. #15 Las Vegas, NV, and it may be changed from time to time by the
Board of Directors. The Corporation may also maintain offices at such other
places within or without the United States as the Board of Directors may, from
time to time, determine.
ARTICLE II - MEETINGS OF STOCKHOLDERS
SECTION 1 - ANNUAL MEETINGS:
The annual meeting of the stockholders of the Corporation shall be held
within six (6) months after the close of the fiscal year of the Corporation, for
the purposes of electing directors, and transacting such other business as may
properly come before the meeting.
SECTION 2 - SPECIAL MEETINGS:
Special meetings of the stockholders may be called at any time by the
Board of Directors or by the President, and shall be called by the President or
the Secretary at the written request of the holders of twenty five percent (25%)
of the shares then outstanding and entitled to vote thereat, or as otherwise
required by law.
SECTION 3 - PLACE OF MEETINGS:
All meetings of stockholders shall be held at the principal office of
the Corporation, or at such other places as shall be designated in the notices
or waivers of notice of such meetings.
SECTION 4 - NOTICE OF MEETINGS:
(a) Except as otherwise provided by statute, written notice of each meeting of
stockholders, whether annual or special, stating the time when and place where
it is to be held, shall be served either personally or by mail, not less than
ten or more than sixty (60) days before the meeting, upon each stockholder of
record entitled to vote at such meeting, and to any other stockholder to whom
the giving of notice may be required by law. Notice of a special meeting shall
also state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by, or at the direction of, the person or
persons calling the meeting. If, at any meeting, action is proposed to be taken
that would, if taken, entitle stockholders to receive payment for their shares
pursuant to statute, the notice of such
BYLAWS - 1
<PAGE>
meeting shall include a statement of that purpose and to that effect If mailed,
such notice shall be directed to each such stockholder at his address, as it
appears on the records of the stockholders of the Corporation, unless he shall
have previously filed with the Secretary of the Corporation a written request
that notices intended for him be mailed to some other address, in which case, it
shall be mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
stockholder of record after the mailing of such notice and prior to the meeting,
or to any stockholder who attends such meeting, in person or by proxy, or
submits a signed waiver of notice either before or after such a meeting. Notice
of any adjourned meeting of stockholders need not be given, unless otherwise
required by statute.
SECTION 5 - QUORUM
(a) Except as otherwise provided herein, or by statute, or in the Certificate of
Incorporation (such certificate and any amendments thereof being hereinafter
collectively referred to as the "Certificate of Incorporation"), at all meetings
of stockholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of stockholders holding of record 51% of the
total number of shares of the Corporation then issued and outstanding and
entitled to vote, shall be necessary and sufficient to constitute a quorum for
the transaction of any business. The withdrawal of any stockholder after the
commencement of a meeting shall have no effect on the existence of a quorum,
after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
stockholders, the stockholders, by a majority of the votes cast by the holders
of shares entitled to vote thereat, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present, any business, may be transacted
at the meeting as originally called if a quorum had been present.
SECTION 6 - VOTING:
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation, any corporate action, other than the election of directors, to be
taken by vote of the stockholders, shall be authorized by a majority of votes
cast at a meeting of stockholders by the holders of shares entitled to vote
thereat.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of stockholders, each holder of record of stock
of the Corporation entitled to vote thereat, shall be entitled to one vote for
each share of stock registered in his name on the books of the Corporation.
(c) Each stockholder entitled to vote or to express consent or dissent without a
meeting, may do so by proxy; provided, however, that the instrument authorizing
such proxy to act shall have been
BYLAWS - 2
<PAGE>
executed in writing by the stockholder himself or by his attorney-in-fact
thereunto duly authorized in writing. No Proxy shall be valid after the
expiration of eleven (11) months from the date of its execution, unless the
person executing it shall have specified therein the length of time it is to
continue in force. Such instrument shall be exhibited to the Secretary at the
meeting and shall be filed with the minutes of the meeting.
(d) Any action, except election of directors, which may be taken by a vote of
stockholders at a meeting, may be taken without a meeting if authorized by a
written consent of shareholders holding at least a majority of the voting power,
provided that if a greater proportion of voting power is required by such action
at such meeting, then such greater proportion of written consents shall be
required.
ARTICLE III - BOARD OF DIRECTORS
SECTION 1 - NUMBER, ELECTION AND TERM OF OFFICE:
(a) The number of the directors of the Corporation shall be not less than 1 nor
more than 9, unless and until otherwise determined by vote of a majority of the
entire Board of Directors. The number of Directors shall not be less than one
(1).
(b) Except as may otherwise be provided herein or in the Certificate of
Incorporation by way of cumulative voting rights the members of the Board of
Directors of the Corporation, who need not be stockholders, shall be elected by
a majority of the votes cast at a meeting of stockholders, by the holders of
shares of stock present in person or by proxy, entitled to vote in the election.
(c) Each director shall hold office until the annual meeting of the stockholders
next succeeding his election, and until his successor is elected and qualified,
or until his prior death, resignation or removal.
SECTION 2 - DUTIES AND POWERS
The Board of Directors shall be responsible for the control and management
of the affairs, property and interests of the Corporation and may exercise all
powers of the Corporation, except as are in the Certificate of Incorporation or
by statute expressly conferred upon or reserved to the stockholders.
SECTION 3 - ANNUAL AND REGULAR MEETINGS; NOTICE:
(a) Regular annual meeting of the Board of Directors shall be held immediately
following the annual meeting of the stockholders, at the place of such annual
meeting of stockholders.
(b) The Board of Directors, from time to time, may provide by resolution for the
holding of other
BYLAWS - 3
<PAGE>
regular meetings of the Board of Directors, and may fix the time and place
thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
change was made within the time limited, and in the manner set forth in
Paragraph (b) Section 4 of this Article III, with respect to special meetings,
unless such notice shall be waived in the manner set forth in Paragraph (c) of
such Section 4.
SECTION 4 - SPECIAL MEETING; NOTICE:
(a) Special meetings of the Board of Directors shall be held whenever called by
the President or by one of the directors, at such time and place as may be
specified in the respective notices or waivers of notice thereof.
(b) Except as otherwise required by statute, notice of special meetings shall be
mailed directly to each director, addressed to him at his residence or usual
place of business, at least four (4) days before the day on which the meeting is
to be held, or shall be sent to him at such place by telegram, radio or cable,
or shall be delivered to him personally or given to him orally, not later than
the day before the day on which the meeting is to be held. A notice, or waiver
of notice except as required by Section 8 or this Article III, need not specify
the purpose of the meeting.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
SECTION 5 - CHAIRMAN:
At all meetings of the Board of Directors, the Chairman of the Board, if any and
if present, shall preside. If there shall be no Chairman, or he shall be absent,
then the Vice Chairman shall preside, and in his absence, a Chairman chosen by
the directors shall preside.
SECTION 6 - QUORUM AND ADJOURNMENTS:
(a) At all meetings of the Board of Directors, the presence of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business, except as otherwise provided by law, by the Certificate
of Incorporation, or by these Bylaws.
(b) A majority of the directors, present at the time and place of any regular or
special meeting,
BYLAWS - 4
<PAGE>
although less than a quorum, may adjourn the same from time to time without
notice, until a quorum shall be present.
SECTION 7 - MANNER OF ACTING:
(a) At all meetings of the Board of Directors, each director present shall have
one vote, irrespective of the number of shares of stock, if any, which he may
hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or by these Bylaws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors.
(c) Unless otherwise required by amendment to the Articles of Incorporation or
statute, any action required or permitted to be taken at any meeting of the
Board of Directors or any Committee thereof may be taken without a meeting if a
written consent thereto is signed by all the members of the Board or Committee.
Such written consent shall be filed with the minutes of the proceedings of the
Board or Committee.
(d) Unless otherwise prohibited by Amendments to the Articles of Incorporation
or statute, members of the Board of Directors or of any Committee of the Board
of Directors may participate in a meeting of such Board or Committee by means of
a conference telephone network or a similar communications method by which all
persons participating in the meeting can hear each other. Such participation is
constituted presence of all of the participating persons at such meeting, and
each person participating in the meeting shall sign the minutes thereof, which
may be signed in counterparts.
SECTION 8 - VACANCIES:
Any vacancy in the Board of Directors, occurring by reason of an increase in the
number of directors, or by reason of the death, resignation, disqualification,
removal (unless vacancy created by the removal of a director by the stockholders
shall be filled by the stockholders at the meeting at which the removal was
effected) or inability to act of any director, or otherwise, shall be filled for
the unexpired portion of the term by a majority vote of the remaining directors,
though less than a quorum, at any regular meeting or special meeting of the
Board of Directors called for that purpose.
SECTION 9 - RESIGNATION:
Any director may resign at any time by giving written notice to the Board of
Directors, the President or the Secretary of the Corporation. Unless otherwise
specified in such written notice such resignation shall take effect upon receipt
thereof by the Board of Directors or such officer, and the acceptance of such
resignation shall not be necessary to make it effective.
BYLAWS - 5
<PAGE>
SECTION 10 - REMOVAL:
Any director may be removed with or without cause at any time by the affirmative
vote of stockholders holding of record in the aggregate at least a majority of
the outstanding shares of stock of the Corporation at a special meeting of the
stockholders called for that purpose, and may be removed for cause by action of
the Board.
SECTION 11 - SALARY:
No stated salary shall be paid to directors, as such, for their services, but by
resolution of the Board of Directors a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special meeting of the
Board, provided, however, that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
SECTION 12 - CONTRACTS:
(a) No contract or other transaction between this Corporation and any other
corporation shall be impaired, affected or invalidated, nor shall any director
be liable in any way by reason of the fact that one or more of the directors of
this Corporation is or are interested in, or is a director or officer, or are
directors or officers of such other corporations, provided that such facts are
disclosed or made known to the Board of Directors, prior to their authorizing
such transaction.
(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no directors
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors prior to
their authorization of such contract or transaction, and provided that the Board
of Directors shall authorized, approve or ratify such contract or transaction by
the vote (not counting the vote of any such Director) of a majority of a quorum,
not withstanding the presence of any such director at the meeting at which such
action is taken. Such director or directors may be counted in determining the
presence of a quorum at such meeting. This Section shall not be construed to
impair, invalidate or in any way affect any contract or other transaction which
would otherwise be valid under the law (common, statutory or otherwise)
applicable thereto.
SECTION 13 - COMMITTEES:
The Board Of Directors, by resolution adopted by a majority of the entire Board,
may from time to time designate from among its members an executive committee
and such other committees, and alternate members thereof, as they may deem
desirable, with such powers and authority (to the extent permitted by law) as
may be provided in such resolution. Each such committee shall serve at the
pleasure of the Board.
BYLAWS - 6
<PAGE>
ARTICLE IV -OFFICERS
SECTION 1 - NUMBER, QUALIFICATIONS, ELECTION AND TERM OF OFFICE:
(a) The officers of the Corporation shall consist of a President, a Secretary, a
Treasurer, or a President and Secretary-Treasurer, and such other officers,
including a Chairman of the Board of Directors, and one or more Vice Presidents,
as the Board of Directors may from time to time deem advisable. Any officer
other than the Chairman or Vice Chairman of the Board of Directors may be, but
is not required to be a director of the Corporation. Any two or more offices may
be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of Directors
at the regular annual meeting of the Board following the annual meeting of
stockholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor shall have been
elected and qualified or until his death, resignation or removal.
SECTION 2 - RESIGNATION:
Any officer may resign at anytime by giving written notice of such resignation
to the Board of Directors, or to the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice, such resignation
shall take effect upon receipt thereof by the Board of Directors or by such
officer, and the acceptance of such resignation shall not be necessary to make
it effective.
SECTION 3 - REMOVAL:
Any officer may be removed, either with or without cause, and a successor
elected by a majority vote of the Board of Directors at any time.
SECTION 4 - VACANCIES:
A vacancy in any office by reason of death, resignation, inability to act,
disqualification or any other cause, may at any time be filled for the
unexpired portion of the term by a majority vote of the Board of Directors.
SECTION 5 - DUTIES OF OFFICERS:
Officers of the Corporation shall, unless otherwise provided by the Board of
Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these Bylaws, or may from time to time be specifically conferred or imposed by
the Board of Directors. The President shall be the chief executive officer of
the Corporation.
BYLAWS - 7
<PAGE>
SECTION 6 - SURETIES AND BONDS:
In case the Board of Directors shall so require any officer, employee or agent
of the Corporation shall execute to the Corporation a bond in such sum, and
with such surety or sureties as the Board of Directors may direct, conditioned
upon the faithful performance of his duties to the Corporation, including
responsibility for negligence for the accounting for all property, funds or
securities of the Corporation which may come into his hands.
SECTION 7 - SHARES OF STOCK OF OTHER CORPORATIONS:
Whenever the Corporation is the holder of shares of stock of any other
corporation, any right or power of the Corporation as such stockholder
(including the attendance, acting and voting at stockholders' meetings and
execution of waivers, consents, proxies or other instruments) may be exercised
on behalf of the Corporation by the President, any Vice President or such other
person as the Board of Directors may authorize.
ARTICLE V - SHARES OF STOCK
SECTION 1 - CERTIFICATE OF STOCK:
(a) The certificates representing shares of the Corporation's stock shall be in
such form as shall be adopted by the Board of Directors, and shall be numbered
and registered in the order issued. The certificates shall bear the following:
the Corporate Seal, the holder's name, the number of shares of stock and the
signatures of: (1) the Chairman of the Board, the President or a Vice President
and (2) the Secretary, Treasurer, any Assistant Secretary or Assistant
Treasurer.
(b) No certificate representing shares of stock shall be issued until the full
amount of consideration therefore has been paid, except as otherwise permitted
by law.
(c) To the extent permitted by law, the Board of Directors may authorize the
issuance of certificates for fractions of a share of stock which shall entitle
the holder to exercise voting rights, receive dividends and participate in
liquidating distributions, in proportion to the fractional holdings; or it may
authorize the payment in cash of the fair value of fractions of a share of stock
as of the time when those entitled to receive such fractions are determined; or
it may authorize the issuance, subject to such conditions as may be permitted by
law, of scrip in registered or bearer form over the signature of an officer or
agent of the Corporation, exchangeable as therein provided for full shares of
stock, but such scrip shall not entitle the holder to any rights of a
stockholder, except as therein provided.
SECTION 2 - LOST OR DESTROYED CERTIFICATES:
The holder of any certificate representing shares of stock of the Corporation
shall immediately notify the Corporation of any loss or destruction of the
certificate representing the same. The Corporation
BYLAWS - 8
<PAGE>
may issue a new certificate in the place of any certificate theretofore issued
by it, alleged to have been lost or destroyed. On production of such evidence of
loss or destruction as the Board of Directors in its discretion may require, the
Board of Directors may, in its discretion, require the owner of the lost or
destroyed certificate, or his legal representatives, to give the Corporation a
bond in such sum as the Board may direct, and with such surety or sureties
as may be satisfactory to the Board, to indemnify the Corporation against any
claims, loss, liability or damage it may suffer on account of the issuance of
the new certificate. A new certificate may be issued without requiring any such
evidence or bond when, in the judgment of the Board of Directors, it is proper
to do so.
SECTION 3 - TRANSFER OF SHARES:
(a) Transfer of shares of stock of the Corporation shall be made on the stock
ledger of the Corporation only by the holder of record thereof, in person or by
his duly authorized attorney, upon surrender for cancellation of the certificate
or certificates representing such shares of stock with an assignment or power
of transfer endorsed thereon or delivered therewith, duly executed, with such
proof of the authenticity of the signature and of authority to transfer and of
payment of taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the absolute owner thereof for all purposes and,
accordingly, shall not be bound to recognize any legal, equitable or other claim
to, or interest in, such share or shares of stock on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
SECTION 4 - RECORD DATE:
In lieu of closing the stock ledger of the Corporation, the Board of Directors
may fix, in advance, a date not exceeding sixty (60) days, nor less than ten
(10) days, as the record date for the determination of stockholders entitled to
receive notice of, or to vote at, any meeting of stockholders, or to consent to
any proposal without a meeting, or for the purpose of determining stockholders
entitled to receive payment of any dividends or allotment of any rights, or for
the purpose of any other action. If no record date is fixed, the record date for
the determination of stockholders entitled to notice of, or to vote at, a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which the notice is given, or, if no notice is given, the
day preceding the day on which the meeting is held. The record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the resolution of the directors relating thereto is adopted.
When a determination of stockholders of record entitled to notice of, or to vote
at, any meeting of stockholders has been made, as provided for herein, such
determination shall apply to any adjournment thereof, unless the directors fix a
new record date for the adjourned meeting.
BYLAWS - 9
<PAGE>
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any funds
available therefor, as often, in such amount, and at such time or times as the
Board of Directors may determine.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be 12-31, and may be changed by the
Board of Directors from time to time subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal shall be in such form as shall be approved from time to time
by the Board of Directors.
ARTICLE IX - INDEMNITY
(a) Any person made a party to any action, suit or proceeding, by reason of the
fact that he, his testator or interstate representative is or was a director,
officer or employee of the Corporation or of any corporation in which he served
as such at the request of the Corporation shall be indemnified by the
Corporation against the reasonable expenses, including attorneys' fees, actually
and necessarily incurred by him in connection with the defense of such action,
suit or proceedings, or in connection with any appeal therein, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding or in connection with any appeal therein that such officer, director
or employee is liable for gross negligence or misconduct in the performance of
his duties.
(b) The foregoing right of indemnification shall not be deemed exclusive of any
other rights to which any officer or director or employee may be entitled apart
from the provisions of this section.
(c) The amount of indemnity to which any officer or any director may be entitled
shall be fixed by the Board of Directors, except that in any case in which
there is no disinterested majority of the Board available, the amount shall be
fixed by arbitration pursuant to the then existing rules of the American
Arbitration Association.
ARTICLE X - AMENDMENTS
SECTION 1 - BY STOCKHOLDERS:
All bylaws of the Corporation shall be subject to alteration or repeal, and new
bylaws may be made by the affirmative vote of stockholders holding of record in
the aggregate at least a majority of the
BYLAWS - 10
<PAGE>
outstanding shares of stock entitled to vote in the election of directors at any
annual or special meeting of stockholders, provided that the notice or waiver of
notice of such meeting shall have summarized or set forth in full therein, the
proposed amendment.
SECTION 2 - BY DIRECTORS:
The Board of Directors shall have power to make, adopt, alter, amend and repeal,
from time to time, bylaws of the Corporation, provided, however, that the
stockholders entitled to vote with respect thereto as in this Article X
above-provided may alter, amend or repeal bylaws made by the Board of Directors,
except that the Board of Directors shall have no power to change the quorum for
meetings of stockholders or of the Board of Directors or to change any
provisions of the bylaws with respect to the removal of directors of the filling
of vacancies in the Board resulting from the removal by the stockholders. In any
bylaw regulating an impending election of directors is adopted, amended or
repealed by the Board of Directors, there shall be set forth in the notice of
the next meeting of stockholders for the election of Directors, the bylaws so
adopted, amended or repealed, together with a concise statement of the changes
made.
BYLAWS - 11
<PAGE>
CERTIFICATE OF PRESIDENT
THIS IS TO CERTIFY that I am the duly elected, qualified and acting
President of
American Group, Inc.
----------------------------------------
and that the above and foregoing bylaws constituting a true original copy were
duly adopted as the bylaws of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand.
DATED: October 15, 1994
---------------------------
/s/ David W. Rodgers
---------------------------------
PRESIDENT
BYLAWS - 12
<PAGE>
Amendment to Bylaws:
Pursuant to a meeting of the Board of Directors Held April 19, 1997 and
subsequent Shareholders meeting held April 29, 1997, the following amendment to
the bylaws is made, effective immediately:
RESOLVED, that Article V, Section 5 be amended to state: "A unanimous vote by
the Shareholders shall be required to reverse split the stock of the corporation
for the period beginning April 19, 1997, and ending April 19, 1998."
Furthermore, that preceding amendment shall only be amended by a unanimous vote
of shareholders and Board of Directors. This supercedes the provisions provided
in Article X, Sections 1 and 2 Amendment of Bylaws.
<PAGE>
AMENDMENT TO BYLAWS
Pursuant to unanimous vote by the Board of Directors on October 16, 1995, the
following amendment is made to the by-laws, effective immediately:
RESOLVED, that Article II, Section 2 of the By-Laws be amended as
follows "Special meetings of the stockholders may be called at any
time by the Board of Directors or by the President, and shall be
called by the President or the Secretary at the written request of
ten percent (10%) of the shares then outstanding and entitled to
vote thereat, or as otherwise required by law."
<PAGE>
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT INCORPORATED
UNDER THE LAWS OF THE STATE OF NEVADA
INCORPORATED IN THE STATE OF NEVADA
NUMBER AMERICAN GROUP, INC. SHARES
1461 50,000,000 AUTHORIZED SHARES
PAR VALUE: $0.001 PER SHARE
CUSIP # 026388386
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
AMERICAN GROUP, INC.
transferable on the books of the corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed.
This Certificate is not valid until countersigned by the Transfer Agent
and registered by the Registrar.
Witness the facsimile seal of the corporation and the fascimile signatures
of its duly authorized officers.
Countersigned & Registered:
SILVERADO STOCK TRANSFER, INC.
8170 S. Eastern, #4-236
Las Vegas, NV 89123
(702) 263-0920
By___________________________
Dated:
/s/ John Stewart /s/ Eric W. Deckinger
- ----------------------------- --------------------------
TREASURER PRESIDENT
AMERICAN GROUP, INC.
CORPORATE
NEVADA
CORPORATE SEAL
<PAGE>
NOTICE:
Signature must be Medallion Guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a savings bank), or
a trust company.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants in entireties
JT - as joint tenants with rights of survivorship
UGMA (State) - Uniform Gift to Minors Act
JT TEN - as joint tenants with rights of survivorship
Additional abbreviations may be used though not in the above list
For Value Received, _____________ hereby sell, assign and transfer unto
- ------------------------------------------ -------------------------------
Please Insert Social Security Number or Daytime Telephone (Optional)
other identifying number of assignee
- ------------------------------------------ -------------------------------
_______________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________________Share of
the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint:
___________________________________________________________________Attorney to
transfer the said stock on the book of the within named Corporation with full
power of substitution in the premises.
Dated:______________________________
_________________________________________________________________
NOTICE: The signature to this assignment must correspond with the
name as written upon the face of the certificate in every
particular without alteration or enlargement, or any
change whatever.
Transfer Fee: $18.00 Per Certificate Issued in Advance
Submit Transfers to:
Silverado Stock Transfer, Inc.
8170 S. Eastern, #4-236
Las Vegas, NV 89123
(702) 263-0920
<PAGE>
CERTIFICATE OF THE DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS OF
SERIES A PREFERRED STOCK
OF
AMERICAN GROUP, INC.
American Group, Inc. (hereinafter referred to as the "Corporation" or
"Company"), a corporation organized and existing under the laws of the State of
Nevada,
DOES HEREBY CERTIFY:
That, the Articles of Incorporation of the Corporation authorizes the
issuance of 10,000,000 shares of Preferred Stock, $.001 par value per share, and
expressly vests in the Board of Directors of the Corporation the authority to
issue any or all of said shares in one or more series and by resolution or
resolutions to establish the designation, number, full or limited voting powers,
or the denial of voting powers, preferences and relative, participating,
optional, and other special rights and the qualifications, limitations,
restrictions and other distinguishing characteristics of each series to be
issued:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors by the Articles of Incorporation, the Series A Preferred Stock, par
value $.001 with a stated value of $1.00 per share ("Preferred Stock"), is
hereby authorized and created, said series to consist of up to 1,000,000 shares.
The voting powers, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations or restrictions thereof
shall be as follows:
1. Dividends on Preferred Stock
----------------------------
(a) The holders of Preferred Stock shall be entitled to
receive dividends at the rate of 5% per annum payable semi-annually, in
arrears. At the sole discretion of the Company, the dividends may be
paid in cash, or by the in-kind payment of common stock. A cash
dividend shall only be made out of funds legally available therefor. If
dividends are paid in common stock, the value of the in-kind common
stock shall be the Current Market Price (as defined below).
(b) Dividends in Kind of Assets or Other Securities. In the
event the Company shall make or issue, or shall fix a record date for
the determination of holders of Common Stock entitled to receive, a
dividend or other distribution with respect to the Common Stock payable
in (i) securities of the Company other than shares of Common Stock or
(ii) assets, then and in each such event the holders of Preferred Stock
shall receive, at the same time such distribution is made with respect
to Common Stock, the number of securities or such other assets of the
Company which they would have received had their Preferred Stock been
converted into Common Stock immediately prior to the record date for
determining holders of Common Stock entitled to receive such
distribution.
<PAGE>
2. No Conversion of Preferred Stock into Common Stock
--------------------------------------------------
The Preferred Stock is not convertible into any security of
the Company.
3. Voting
------
The Preferred Stock shall have no voting rights.
4. Liquidation Rights
------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of
Preferred Stock then outstanding shall be entitled to receive out of
assets of the Corporation available for distribution to stockholders,
before any distribution of assets is made to holders of any other class
of capital stock of the Corporation, an amount equal to $1.00 per
share, plus accumulated and unpaid dividends thereon to the date fixed
for distribution ("Liquidation Amount").
(b) A consolidation or merger of the Corporation (in the event
that the Corporation is not the surviving entity) or sale of all or
substantially all of the Corporation's assets shall be regarded as a
liquidation, dissolution or winding up of the affairs of the Company
within the meaning of this Section 4. In the event of such a
liquidation as contemplated by this Section 4(b), the holders of
Preferred Stock shall be entitled to receive an amount equal to the
greater of the Liquidation Amount or that which such holders would have
received if they had converted their Preferred Stock into Common Stock
immediately prior to such liquidation or winding up (without giving
effect to the liquidation preference of or any dividends on any other
capital stock ranking prior to the Common Stock).
(c) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation which involves the
distribution of assets other than cash, the Corporation shall promptly
engage competent independent appraisers to determine the value of the
assets to be distributed to the holders of shares of Preferred Stock
and the holders of shares of Common Stock. The Corporation shall, upon
receipt of such appraiser's valuation, give prompt written notice to
each holder of shares of Preferred Stock of the appraiser's valuation.
5. Redemption at the Discretion of the Corporation
-----------------------------------------------
(a) Redemption at or before May 31, 2004 (the First Period):
2
<PAGE>
(i) At or before May 31, 2004, if there is a
transaction resulting in any person or group acquiring
beneficial or pecuniary ownership of 50% or more of the common
equity of the Corporation, then Corporation, at its sole
discretion, may redeem any and/or all of the shares of Series
A Preferred Stock as may be outstanding from time to time (the
"First Period Redemption Date"), upon thirty days written
notice to holders (the "First Period Redemption Notice").
(ii) The Redemption Price (the "First Period
Redemption Price") for each share of Series A Preferred Stock
shall be $3.00, plus cash payment for accumulated and unpaid
dividends thereon to the date fixed for redemption.
(b) Redemption after May 31, 2004 (the "Second Period"):
(i) At any time after May 31, 2004, the Corporation,
at its sole discretion, may redeem any and/or all of the
shares of Series A Preferred Stock as may be outstanding from
time to time (the "Second Period Redemption Date"), upon
thirty days written notice to holders (the "Second Period
Redemption Notice").
(ii) The Redemption Price (the "Second Period
Redemption Price") for each share of Series A Preferred Stock
shall be $1.40, plus cash payment for accumulated and unpaid
dividends thereon to the date fixed for redemption.
(c) Notice and Procedure.
(i) The notice required by clause 5(a)(i) and 5(b)(i)
above shall be delivered by the Corporation to each holder of
record of Series A Preferred Stock, at such holder's address
as shown on the records of the Corporation; provided, however,
that the Corporation's failure to give such Redemption Notice
shall in no way affect the Corporation's right to redeem the
Series A Preferred Stock.
(ii) The Redemption Notice shall contain the
following information:
(A) the Redemption Date and the Redemption
Price; and
(B) the number of shares of Series A Preferred
Stock being redeemed.
3
<PAGE>
(iii) Surrender of Certificates. Each holder of
shares of Series A Preferred Stock to be redeemed shall
surrender the certificate(s) representing such shares to the
Corporation at the place designated in the Redemption Notice,
and thereupon the Redemption Price for such shares as set
forth in this Section 5 shall be paid to the order of the
person whose name appears in such certificate(s) and each
surrendered certificate shall be canceled and retired. In the
event some but not all of the shares of Series A Preferred
Stock represented by a certificate(s) surrendered by a holder
are being redeemed, the Corporation shall execute and deliver
to or on the order of the holder, at the expense of the
Corporation, a new certificate representing the number of
shares of Series A Preferred Stock which were not redeemed.
(iv) All shares of Series A Preferred Stock so
redeemed shall have the status of authorized but unissued
Series A Preferred Stock, but such shares so redeemed shall
not be reissued as shares of the series of Series A Preferred
Stock created hereby.
IN WITNESS WHEREOF, AMERICAN GROUP, INC. has caused its corporate seal
to be hereunto affixed and this certificate to be signed by Eric Deckinger, its
president, and JOHN STEWART, its secretary, this ___ day of ________________,
1999.
AMERICAN GROUP, INC.
By________________________________________
Eric Deckinger, President
By________________________________________
John Stewart, Secretary
THE STATE OF FLORIDA ss.
ss.
COUNTY OF ___________ ss.
BEFORE ME, the undersigned authority, on this day personally appeared
Eric Deckinger, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL of office this ____ day of __________,
1999.
___________________________
NOTARY PUBLIC IN AND FOR
THE STATE OF FLORIDA
THE STATE OF FLORIDA ss.
ss.
COUNTY OF ___________ ss.
4
<PAGE>
BEFORE ME, the undersigned authority, on this day personally appeared
John Stewart, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL of office this ____ day of __________,
1999.
___________________________
NOTARY PUBLIC IN AND FOR
THE STATE OF FLORIDA
<PAGE>
AGREEMENT
between
AMERICAN GROUP, INC., a Nevada corporation
and
COVENTRY INDUSTRIES CORP., a Florida corporation
This Agreement (the "Agreement") made as of May 28, 1998,
between American Group, Inc., a Nevada corporation ("AGI"), and Coventry
Industries Corp., a Florida corporation ("Coventry").
WHEREAS, Coventry owns all of the issued and outstanding shares of
common stock, par value $1.00, of LPS Acquisition Corp., a Florida corporation
("LPS").
WHEREAS, AGI wishes to acquire from Coventry all of the issued and
outstanding common shares of LPS for the consideration and on the other terms
which follow.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth herein, it is agreed as follows:
1. Recitals. The above recitals are true and correct and are herein
incorporated by this reference.
2. Plan of Reorganization. Coventry is the owner of 1,000 shares of LPS
common stock, being all of the issued and outstanding common stock of LPS (the
"LPS Stock"). At closing, Coventry will sell AGI the LPS Stock in exchange for
(i) 75,000 shares of Coventry Series F Preferred Stock (the "Coventry Stock")
held by AGI and (ii) 1,200,000 share of AGI common stock, par value $.001.
3. Closing Date. The closing shall be held on May 28, 1998, or such
other date as may be agreed upon by the parties.
4. Delivery of Shares and Debt Instruments. At closing, the parties
shall deliver to each other the following share certificates.
(a) AGI shall deliver to Coventry a certificate or
certificates for 1,200,000 shares of AGI Common Stock and a certificate
representing 75,000 shares of the Coventry Stock with an assignment executed in
blank and in form satisfactory to Coventry and its counsel.
(b) Coventry shall deliver to AGI a certificate or
certificates for the LPS Stock with an assignment executed in blank and in form
satisfactory to AGI and its counsel.
<PAGE>
5. Additional Consideration.
(a) Coventry represents and warrants to AGI that Coventry is a
party to an escrow account maintained by Atlas, Pearlman, Trop & Borkson, Fort
Lauderdale, Florida, in an amount greater than $500,000, being funds deposited
in that account by Profutures Special Equities, Ltd., for the benefit of
Coventry.
(b) Subject to the provisions of Section 5(c), below, Coventry
agrees that it will lend to, or invest on an equity basis in, AGI up to $500,000
from proceeds which may become available to Coventry from such escrow account
for the purpose of financing LPS operations. The timing, nature and amount of
any investment in AGI which Coventry may make pursuant to this Section 5 will be
determined in the sole discretion of Coventry.
(c) The parties confirm their understanding that (i) Coventry
has agreed to pay Robert Claire, Trustee, prior to any loan to or investment in
AGI, $125,000 from the $500,000 of escrow proceeds described in the preceding
paragraph if and when such funds become available to Coventry, and (ii) such
funds are payable by Coventry as guarantor of non-interest bearing loans by
Robert Claire, Trustee, to LPS in the aggregate principal amount of $125,000.
6. Representations of Coventry. Coventry hereby makes the following
representations and warranties to AGI, each of which is true as of the date
hereof and will be true as of the closing date with the same effect as though
such representations and warranties had been made on the closing date:
(a) Coventry is the sole shareholder of LPS and there are no
warrants, options or other rights outstanding to have issued, or otherwise to
acquire, any shares of the capital stock of LPS. The LPS Stock to be transferred
by Coventry to AGI hereunder is free and clear of all voting trusts, agreements,
arrangements, encumbrances, liens, claims, equities and liabilities of every
nature and Coventry will convey clear and unencumbered title thereto to AGI. The
shares of LPS Stock are fully paid and non-assessable.
(b) This Agreement constitutes the valid and binding
obligation of Coventry enforceable in accordance with its terms except as
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors rights.
(c) The execution and delivery of this Agreement by Coventry
does not, and the consummation of the transactions contemplated herein will not,
violate or constitute a breach or an occurrence of default (or an event which,
with notice or lapse of time or both would constitute a default) under any
provision of, or conflict with, or result in acceleration of any obligations
under, or result in the creation or imposition of
<PAGE>
any security interest, lien or other encumbrance, or give rise to a right by any
party to terminate its obligations under any mortgage, deed of trust, conveyance
to secured debt, note, loan, lien, lease, agreement, instrument, order,
judgment, decree or other arrangement to which Coventry, LPS, or either of them,
is a party or to which either is bound.
(d) Neither the execution nor the delivery of this Agreement,
nor the consummation of the transactions herein contemplated, nor compliance
with the terms hereof, will conflict with or result in a breach of any of the
terms, conditions or provisions of the Articles or Incorporation or By-Laws of
Coventry or LPS.
(e) Neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby will
violate any statute or law or any judgment, decree, order, award, regulation or
rule of any court, governmental authority or arbitration panel applicable to
Coventry or LPS or give rise to a right of termination by any governmental
authority of any license, registration, certificate, right of authority to
engage in business in such places where either Coventry or LPS now does, or has
a right to engage in, business.
(f) Coventry has delivered to AGI true and correct copies of
the financial statements of LPS for the period ended March 31, 1998, a copy of
which is attached hereto as Exhibit 6(e) and incorporated herein by this
reference. Such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied. Since March 31,
1998, LPS has (i) no short- or long-term debt or other obligations other than as
set forth in the financial statements for the year ended March 31, 1998, or as
described in Section 5(c) hereof, excluding trade payables incurred in the
ordinary course of business, (ii) no tax liens or encumbrances of any nature on
its assets, (iii) continued its operations and business as they are presently
conducted, (iv) entered into no employment, consulting or similar agreements,
and (v) not issued or agreed to issue any equity security or any other
securities or obligations that are convertible into or exchangeable, for such
equity securities. Coventry is not aware of any events having a material adverse
effect on LPS since March 31, 1998, including, but not limited to, a loss of a
material customer or contract, which would result in a reduction in revenues or
operating results in the aggregate of greater than 10% for the year ending
December 31, 1998, compared to the year ended December 31, 1997.
(g) Except for liabilities or obligations disclosed or
provided for in the financial statements attached hereto as Exhibit 6(f), and
except for liabilities or obligations incurred in the ordinary course of
business consistent with past practices, LPS does not have any liabilities or
obligations of any nature, whether absolute, accrued, contingent, potential or
unassigned or otherwise, that would be required to be disclosed on a balance
sheet of LPS.
<PAGE>
(h) Coventry is acquiring the AGI Stock in a private
transaction exempt from registration under applicable federal and state
securities laws, for its own account for investment and not with a view to the
distribution or resale thereof. Coventry shall not sell, assign, transfer,
hypothecate or otherwise convey the AGI Stock except in compliance with
applicable federal and state securities laws. Coventry shall have the right to
dividend the AGI stock to Coventry's shareholders upon the prior delivery to AGI
of an opinion of counsel, in form and substance acceptable to AGI, that such
dividend is to be made pursuant to a registration statement or an exemption from
registration under applicable federal and state securities laws.
(i) There is no outstanding order, judgment, injunction, award
or decree of any court, governmental or regulatory body or arbitration tribunal
against or involving LPS. There is no action, suit, claim or legal,
administrative or arbitration proceeding, or, to the best knowledge of Coventry
after due inquiry, any investigation (whether or not the defense or liabilities
in respect thereof are covered by insurance) pending, or to the best knowledge
of Coventry, after due inquiry, threatened against or involving LPS or any of
its assets. To the best knowledge of LPS, after due inquiry, there is no fact,
event or circumstance that are likely to give rise to any suit, action, claim,
investigation or proceeds that would be required to be disclosed if currently
pending or threatened.
(j) LPS has good and valid title to all the properties and
assets of the type required to be reflected on the balance sheets attached
hereto as Exhibit 6(f) which it purports to own and all such properties and
assets are free and clear of all title defects or objections, liens, claims,
charges, security interests or other encumbrances of any nature whatsoever.
(k) LPS has timely filed all tax returns and reports required
to be filed by it, including, where applicable, all federal, state, county and
local income, gross receipts, excise, import, property, franchise, ad valorem,
license, sales, use and withholding tax reports and returns. All returns are
true and correct. To the best knowledge of Coventry, there is no basis for any
additional claim or assessment.
(l) LPS currently maintains policies of property insurance
that provide coverage in kind and amount reasonably necessary to protect against
the risks inherent or associated with the operation of LPS. All insurance
policies are in full force and effect. There is not any state of facts and no
event has occurred forming the basis for any claim covered by a property,
casualty, fidelity, automobile, general liability, libel or slander, workman's
compensation, health insurance or reinsurance or excess polity that is not fully
covered by insurance or that may be expected to exceed the available limits of
liability of the applicable insurance policies, nor has any carrier declined
coverage or reserved its rights to determine its liability to provide coverage
to LPS with respect to any claim or circumstance.
<PAGE>
(m) LPS has complied in all material respect with all laws,
including applicable rules and regulations, or all applicable federal, state,
local and foreign governments and their respective agencies concerning the
environment, public health and safety and employee health and safety, and no
complaint, action, suit, proceeding, hearing, investigation, claim, demand or
notice has been filed or commenced against either LPS alleging any failure to
comply with any such law or regulation, including, without limitation, any law
of any government or agency concerning release or threatened release of
hazardous substances, public health and safety or pollution or protection of the
environment.
7. Representations of AGI. AGI hereby makes the following
representations and warranties to Coventry each of which is true as of the date
hereof and will be true as of the closing date with the same effect as though
such representations and warranties had been made on the closing date:
(a) AGI is a corporation duly organized and existing under and
by virtue of the laws of the State of Nevada, is in good standing under the laws
thereof, and is qualified to do business and is in good standing in any other
jurisdiction in which it is required to be qualified.
(b) When issued and delivered pursuant to this Agreement, the
AGI Stock will be duly and validly issued, and fully paid and nonassessable.
(c) AGI is the record and beneficial owner of the 75,000
Coventry Stock and are free and clear of all liens, encumbrances, options,
warrants, voting trusts, stockholder agreements, arrangements, and equities and
liabilities of any nature and AGI will convey clear and unencumbered title
thereto to AGI. The Coventry Stock is fully-paid and non-assessable. AGI has
full power and authority to assign the Coventry Stock.
(d) This Agreement constitutes the valid and binding
obligation of AGI enforceable in accordance with its terms, except as such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors rights.
(e) The execution and delivery of this Agreement by AGI does
not, and the consummation of the transactions contemplated herein will not,
violate or constitute an occurrence of default (which violations or defaults
either singularly or in the aggregate would be considered material) under any
provision of, or conflict with, or result in acceleration of any obligations
under, or give rise to a right by any party to terminate its obligations under
any mortgage, deed of trust, note, loan, lien, lease, agreement, instrument,
order, judgment, decree or other arrangement to which AGI is a party or by which
it is bound.
<PAGE>
(f) Neither the execution nor the delivery of this Agreement,
nor the consummation of the transactions herein contemplated, nor compliance
with the terms hereof, will conflict with or result in a breach of any of the
terms, conditions or provisions of the Articles of Incorporation or By-Laws of
AGI as amended, or any agreement or instrument to which AGI is now a party.
(g) AGI is acquiring the LPS Stock in a private transaction
exempt from registration under applicable federal and state securities laws, for
its own account and for investment and not with a view to the distribution or
resale of any thereof.
(h) In consideration with its acquisition of the LPS Stock,
AGI has made such investigations of LPS as it has deemed necessary for purposes
of such acquisition and has not relied on Coventry with respect to such purchase
except to the extent of any representation or warranty of AGI specifically set
forth in this Agreement.
8. Conditions of Closing. All of the obligations of the parties under
this Agreement are subject to the fulfillment, prior to or on the closing date
set forth in Section 3 of this Agreement, of each of the following conditions:
(a) Delivery by AGI of the following:
(i) Certificates for the Coventry Stock endorsed
in blank;
(ii) Certificates of AGI for the Common Stock
being sold hereunder;
(iii) AGI's certification that all
representations and warranties made by it contained in Section 7 of this
Agreement shall be true on and as of the closing date as though such
representations and warranties were made at and as of such date, and shall be
true on and as of said closing date as though such representations and
warranties were made at and as of such date; and
(b) Delivery by Coventry of the following:
(i) Certificates for the LPS Stock described in
Section 2 hereof;
(ii) Delivery of such other instruments as are
required to be delivered under Section 4 hereof; and
(iii) A certificate of Coventry that all
representations and warranties made by it contained in Section 6 of this
Agreement shall be true on and as of the closing date set forth in Section 3 of
this Agreement as though such representations and warranties were made at and as
of such date, and shall be true on
<PAGE>
and as of said closing date as though such representations and warranties were
made at and as of such date.
9. Investment Purpose. Each of the parties represents and warrants that
it is acquiring the securities to be acquired hereby for investment purposes and
not for the distribution or resale except for the right of Coventry to dividend
the AGI Stock to AGI's shareholders in accordance with Section 6(h) hereof.
Sales of such securities may be made only pursuant to applicable securities
laws. Each of the parties acknowledges that it has been advised that such
securities have not been registered under any securities act and that there is
no obligation or intention to register any of the securities.
10. Representations to Survive Closing. All the terms, conditions,
warranties, representations and guarantees contained in this Agreement shall
survive delivery of the securities and debt instruments transferred at the
closing hereunder and any investigations made by or on behalf of the parties at
any time.
11. Indemnification.
(a) Each of the parties agrees to indemnify, defend and hold
the other party and, if applicable, its shareholders, officers, directors,
successors and assigns, harmless from and against any and all claims, damages,
liability, loss, cost or expense, which either party may suffer or become liable
for as a result of or in connection with any material breach by the other party
of any representation or warranty, covenant or agreement made or contained in
this Agreement or in any related agreement or instruments executed and delivered
pursuant to this Agreement on or prior to the closing date set for in Section 3
hereof.
(b) Within 60 days after learning of the assertion by a third
party of any claim against which a party claims indemnification under this
Agreement (the "Indemnified Party"), the Indemnified Party shall notify the
other party (the "Indemnifying Party") and afford the Indemnifying Party the
opportunity to assume the defense or settlement thereof at the Indemnifying
Party's own expense with counsel of his or its own choosing and the Indemnified
Party shall cooperate fully and make available to the Indemnifying Party all
pertinent information under its control or in its possession. The Indemnified
Party shall have the right to join in the defense of any claim with the counsel
of its own choosing and at its own expense.
(c) Notwithstanding the notice requirements provided
hereunder, the right to indemnification under this Agreement shall not be
affected by any failure to give or any delay in giving notice unless, and then
only to the extent that, the rights and remedies of the party to whom notice was
to have been given shall have been prejudiced.
<PAGE>
(d) Notwithstanding anything to the contrary contained in this
Agreement, the parties shall be entitled to exercise and resort to all rights
and remedies for misrepresentations or breaches afforded to them by statute, at
law or in equity, including without limitation, recision, specific performance,
action for damages, or any other remedies and relief as may be afforded to them
under this Agreement or by a court of competent jurisdiction.
12. Miscellaneous.
(a) Each of the parties hereto will bear its own legal fees
and other expenses in connection with the transactions contemplated by this
Agreement.
(b) If any term or provision of this Agreement or any exhibits
thereto or the application thereof to any person, property or circumstances
shall to any extent be invalid or unenforceable, the remainder of this Agreement
or the exhibits thereto or the application or such term or provision to person,
property or circumstances other than those as to which it is invalid and
unenforceable shall not be affected thereby, and each term and provision of this
Agreement or the exhibits thereto shall be valid and enforced to the fullest
extent permitted by law.
(c) Any notices, requests or consents hereunder shall be
deemed given, and any instruments delivered, two days after they have been
mailed by first class mail, postage prepaid, or upon receipt of delivered
personally or by facsimile transmission as follows:
If to Coventry: Robert Hausman, President
Coventry Industries Corp.
7777 Glades Road, Suite 211
Boca Raton, Florida 33434
Joel D. Mayersohn, Esquire
Atlas, Pearlman, Trop & Borkson, P.A.
200 E. Las Olas Boulevard
Ft. Lauderdale, Florida 33301
If to AGI: Louis Zanette, President
American Group, Inc.
=========================
except that any of the foregoing may from time to time by written notice to the
other designate another address which shall thereupon become its effective
address for the purposes of this paragraph.
<PAGE>
(d) This Agreement, including the exhibits and documents
referred to herein which are a part hereof, contain the entire understanding of
the parties hereto with respect to the subject matter and may be amended only by
a written instrument executed by the parties hereto or their successors or
assigns. Any paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(e) This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(f) This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors but shall not
insure to the benefit of anyone other than the parties signing this Agreement
and their respective successors.
(g) This Agreement shall be governed by the laws of the State
of Florida.
(h) The parties have either (i) been represented by
independent legal counsel in connection with the negotiations and execution of
this Agreement, or (ii) each has had the opportunity to obtain independent legal
counsel, has been advised that it is in its best interests to do so, and by
execution of this Agreement has waived such right.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
AMERICAN GROUP, INC.
By: _____________________________
Louis Zanette, President
COVENTRY INDUSTRIES CORP.
By: _____________________________
Robert Hausman, President
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of this ____
day of May, 1999 by and among JENNICA DEVELOPMENTS LIMITED, an Ontario
corporation ("Seller"), AMERICAN GROUP, INC., a Nevada corporation ("Buyer"),
and 9006-1474 QUEBEC INC., a Quebec corporation doing business as Torland
("Torland"), and 9075-7774 QUEBEC INC., a Quebec corporation ("AGI Quebec")
which is wholly owned by Buyer.
W I T N E S S E T H:
WHEREAS, Seller owns 10 Class A shares of common stock of Torland
representing all of the issued and outstanding capital stock of Torland (the
"Stock"); and
WHEREAS, Seller desires to sell to Buyer and AGI Quebec, and Buyer and
AGI Quebec desire to purchase from Seller, the Stock upon the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE AND STOCK
---------------------------
Subject to the terms and conditions set forth in this Agreement, as of
the date hereof, Seller agrees to sell, convey, transfer, assign and deliver to
Buyer, and Buyer agrees to purchase from Seller, the Stock pursuant to a Stock
Transfer Form.
<PAGE>
ARTICLE 2
CONSIDERATION AND LOAN REPAYMENT - CLOSING
------------------------------------------
Section 2.1 Consideration and Loan Repayment. Torland is indebted to
Seller in the amount of $1,200,592.86 (CDN) (the "Seller Receivable"). Buyer and
AGI Quebec shall buy the Seller Receivable for $1,200,592.86 (CDN) or its U.S.
equivalent, and will pay the balance of $1,200,000 (USD) to Seller, all as
follows: upon the execution and delivery of this Agreement, Buyer will wire
transfer $400,000 to an account designated by Seller. In addition, Buyer and AGI
Quebec will enter into a Promissory Note in the form attached as Exhibit 2.1.A
(the "Note") in the principal amount of $800,000 (USD), with interest at the
rate of 8% per year, payable as follows:
On or before Amount
------------ ------
October 15, 1999 $200,000 plus accrued interest
January 15, 2000 $200,000 plus accrued interest
April 15, 2000 $200,000 plus accrued interest
July 15, 2000 $200,000 plus accrued interest
All amounts shall first be applied to repayment of the Seller Receivable; the
balance shall be consideration for the Stock. All amounts payable hereunder
shall be secured pursuant to the security agreements and guarantees referenced
herein. In addition to the foregoing, Seller will receive additional
consideration from AGI Quebec and Buyer pursuant to a Share Exchange Agreement,
Amalgamation Agreement and Support Agreement, all in the forms of Exhibit 2.1.B
(collectively the "AGI Quebec Agreements").
Section 2.2 Closing. Subject to the conditions contained herein,
including those in Section 5 and 6, the parties shall close the transactions
contemplated by this Agreement on April 15, 1999, at a time and place and in a
manner to be mutually agreed upon. It is contemplated that the parties may
execute the documents and agreements contemplated herein via fax, with the
original execution copies of such documents to be delivered to all parties
signing them. Until such time as the executed originals are delivered, the
consideration, including the cash component and the Note, together with such
other documents as Seller may reasonably request including the Buyer's
certificate representing the Stock, shall be conditionally delivered to Richard
F. Wolf, Esq., counsel to Seller, and the stock certificates and documents of
transfer, and such other documents as Buyer may reasonably request, shall be
conditionally delivered to Robert I. Claire, Esq., counsel for Buyer.
2
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
In order to induce Buyer to enter this Agreement, Seller represents and
warrants to Buyer the following which shall survive until May 1, 2000:
Section 3.1 Torland is in good standing as of the date hereof under the
laws of Quebec, Canada;
Section 3.2 Seller owns ten (10) Class A common shares of Torland, free
and clear of all liens and encumbrances, which shares constitute 100% of the
authorized, issued and outstanding common shares of Torland; and
Section 3.3 Except as provided in this Agreement or the agreements
referenced herein, upon the payment of the Purchase Price set forth herein,
neither Seller nor any affiliate (including Louis Zanette, Tony Zanette, or any
family member of either of them) will have any ownership, security interest,
mortgage, lien, or claim to, the capital stock or assets of Torland;
Section 3.4 With respect to Torland's BEX leases 120, 122, 123, 124 and
125 (the "Leases"):
(a) The Leases are currently in good standing, with all
fees and taxes which are required to have been paid
have been paid;
(b) No default has occurred which has not been cured and
Torland is in material compliance with all the terms,
conditions and restrictions of the Leases;
(c) The Leases are registered/recorded in the name of
Torland; and
(d) A change of ownership/control of Torland will not
trigger a default or termination of the Leases.
Section 3.5 Torland owns all of its assets referenced in its most
recent financial statements except assets which have been sold or transferred in
the ordinary course of business.
Section 3.6 Other than those matters which are to be satisfied or
assumed as a result of or in connection with the transaction contemplated by
this Agreement, there is no litigation or similar proceeding pending, or any
judgment in existence, or to the knowledge of the President of Torland,
threatened against or relating to Torland, or to its properties, or business nor
has Torland received written notice of any such action, or of any governmental
investigation relative to Torland, its properties and businesses.
3
<PAGE>
Section 3.7 Torland has paid any and all taxes, license fees, or other
charges levied, assessed or imposed, upon the business and any property of
Torland, except those which are not yet due and payable.
Section 3.8 Torland has duly prepared and filed all tax returns and
reports required to be filed by it on or before the date hereof with all
governmental, provincial, Federal, State and local tax authorities, that the
returns so filed are true and correct in all material respects, and that all
such taxes, including sales, corporate, property, excise and use taxes, if any,
due and owing pursuant to such returns have been paid.
Section 3.9 Neither Torland nor Seller is presently involved in any
active or outstanding disputes with any tax authority.
Section 3.10 Neither Torland nor Seller has entered into any agreements
to sell, mortgage, pledge or transfer any parts of Torland's business as a going
concern, and that there are no claims by any third parties arising out of such
agreement.
Section 3.11 Neither Torland nor Seller has entered into any agreement
with any broker or fiduciary agent, which will in any manner give rise to a
cause of action for a brokerage commission or fee arising out of this sale.
Section 3.12 The Seller and Torland have the legal power and right to
enter into and perform this Agreement and the consummation of the transaction
contemplated by this Agreement will not result in a breach of any terms or
provision of, nor constitute a default under, any contract, mortgage or other
instruments to which Seller or Torland is a party or by which it is bound except
where such breach or default would not have a material adverse effect on
Torland.
Section 3.13 Financial Statements. The financial statements attached
hereto are true and correct in all material respects and present fairly the
financial condition at and as of the dates shown thereon.
4
<PAGE>
ARTICLE 4
BUYER'S REPRESENTATIONS AND WARRANTIES
In order to induce Seller to sell the Stock hereunder, Buyer hereby
makes the following representations and warranties.
Section 4.1 Buyer's Authority. Buyer has full power and authority to
make, execute, deliver and perform this Agreement and the agreements referenced
herein. This Agreement constitutes the legal, valid and binding obligation of
Buyer enforceable against it in accordance with its terms.
Section 4.2 No Conflicts. The making, execution, delivery and
performance of this Agreement and the agreements and documents contemplated
herein and the consummation of the transactions contemplated hereby do not and
will not violate or conflict with any provision, or result in the default,
acceleration or other breach, of any note, mortgage, indenture, loan or other
instrument by which Buyer is affected or bound.
Section 4.3 Consents and Approvals. No filings with, notices to or
approvals of any United States governmental or regulatory body or any
governmental or regulatory agency of any state or local government or any other
person are necessary to be obtained by Buyer for the consummation of the
transactions contemplated hereby.
Section 4.4 Securities Matters. Buyer acknowledges and agrees that the
shares of Stock have not been and will not be registered under the Securities
Act of 1933, as amended, or under any Canadian, provincial or state securities
law, and Buyer will not resell the Stock unless they are so registered or unless
a valid exemption from registration is available. Buyer consents to the
imposition of a legend to this effect on the certificates for the Stock and to a
notation to this effect on the certificates for the Stock and in the appropriate
records of Torland. Buyer represents and warrants that it, or its
representatives, has had an adequate opportunity to ask questions and receive
answers from the Seller and the officers of Torland concerning any and all
matters relating to the transaction described herein. Buyer further represents
and warrants that (i) Buyer has such knowledge, sophistication and expertise in
the business and financial matters that Buyer is capable of evaluating the
merits and risks of an investment in the Stock; (ii) Buyer fully understands the
nature, scope and duration of limitations on transfer described in this Section,
and (iii) Buyer can bear the economic risk of an investment in the Stock and can
afford a complete loss of such investment.
5
<PAGE>
Section 4.4 No Material Misrepresentations. No representation, warranty
or covenant of the Buyer contained herein contains any untrue statement of a
material fact or omits a material fact necessary to make the statement contained
therein not misleading.
ARTICLE 5
CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
The obligation of Buyer to purchase the Stock under this Agreement is
subject to the satisfaction of all of the following conditions:
Section 5.1 Accuracy of Seller's Representations and Warranties. Except
as otherwise permitted by this Agreement, all representations and warranties by
Seller in this Agreement shall be true.
Section 5.2 Performance by Seller. Seller shall have performed,
satisfied and complied with all covenants, agreements and conditions required by
this Agreement.
Section 5.3 Absence of Litigation. No action, suit or proceeding before
any court or any governmental body or authority, pertaining to the transactions
contemplated hereby, shall have been instituted or threatened.
Section 5.4 Corporate Approval. The execution and delivery of this
Agreement by Torland and Seller, and the performance of the transactions
contemplated hereby, shall have been duly authorized by all necessary corporate
action.
Section 5.5 Consents. All necessary agreements and consents of any
parties to the consummation of the transactions contemplated by this Agreement,
or otherwise pertaining to the matters covered by it, shall have been obtained
by Seller and delivered to Buyer.
Section 5.6 Approval and Delivery of Documents. All certificates and
documents required to be delivered by Seller and Torland under this Agreement
shall be delivered to Buyer in a form satisfactory in all reasonable respects to
Buyer and its counsel.
Section 5.7 Certain Agreements. The following agreements shall have
been executed and delivered:
6
<PAGE>
5.7.1 The Promissory Note issued by Buyer in the form of
Exhibit 2;
5.7.2 The Supply Contract by and among Torland, LPS
Acquisition Corp., a Florida corporation, and Buyer in the form attached hereto
as Exhibit 5.7.2;
5.7.3 Torland Guarantee and Hypothec (Moveable and Immoveable)
given by Torland in the form of Exhibit 5.7.3;
5.7.4 Employment Agreement by and among Torland, Louis Zanette
and Buyer in the form of Exhibit 5.7.4;
5.7.5 Funding Agreement by and between Torland and Buyer in
the form of Exhibit 5.7.5;
5.7.6 Legal Opinion of Axelrod, Smith and Kirschbaum in the
form of Exhibit 5.7.6;
5.7.7 Legal Opinion of Bondy Baker Wolf in the form of Exhibit
5.7.7;
5.7.8 Assignment of Receivable in the form of Exhibit 5.7.8;
and
5.7.9 AGI Quebec Agreements.
5.8 Stock. Buyer shall have received a certificate representing the
Stock to be transferred hereunder, together with such documents of transfer as
Buyer may reasonably request.
5.9 Release. Buyer shall have received a release executed and delivered
by Louis Zanette and Seller of any claims against Torland arising prior to the
date hereof in the form of Exhibit 5.9.
5.10 Lator Agreement. Buyer will cause Lator International, Inc. to
acknowledge that the September 24, 1997 letter agreement with Torland has been
terminated.
7
<PAGE>
ARTICLE 6
CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
--------------------------------------------
The obligation of Seller to sell and transfer the Stock under this
Agreement is subject to the satisfaction of all of the following conditions:
Section 6.1 Accuracy of Buyer's Representations and Warranties. Except
as otherwise permitted by this Agreement, all representations and warranties by
Buyer in this Agreement shall be true.
Section 6.2 Performance by Buyer. Buyer shall have performed, satisfied
and complied with all covenants, agreements and conditions required by this
Agreement.
Section 6.3 Absence of Litigation. No action, suit or proceeding before
any court or any governmental body or authority, pertaining to the transactions
contemplated hereby, shall have been instituted or threatened.
Section 6.4 Corporate Approval. The execution and delivery of this
Agreement by Torland and Buyer, and the performance of the transactions
contemplated hereby, shall have been duly authorized by all necessary corporate
action.
Section 6.5 Consents. All necessary agreements and consents of any
parties to the consummation of the transactions contemplated by this Agreement,
or otherwise pertaining to the matters covered by it, shall have been obtained
by Buyer and delivered to Buyer.
Section 6.6 Approval and Delivery of Documents. All certificates and
documents required to be delivered by Buyer and Torland under this Agreement
shall be delivered to Seller in a form satisfactory in all reasonable respects
to Seller and its counsel.
Section 6.7 Certain Agreements. The agreements set forth in Section 5.7
shall have been executed and delivered.
Section 6.8 Payment. Seller shall have received the payment of $400,000
as contemplated in Section 2 hereof.
Section 6.9 Release. Seller and Louis Zanette shall have received a
release from Torland of any claims arising prior to the date hereof in the form
of Exhibit 6.9. In addition, Seller and all of its affiliates shall be released
from all personal guarantees given on behalf of Torland. Should the Buyer,
notwithstanding its best efforts, be unable to secure a release of any personal
guarantee, then the Buyer shall indemnify,
8
<PAGE>
defend and hold harmless the Seller, Louis Zanette and their affiliates from any
liability, claim, costs or damages in respect of those guarantees. The Buyer's
best efforts shall include but not be limited to providing its corporate
guarantee, or that of any of its affiliates in substitution for the Seller's or
Zanette's.
Section 6.10 Payment of Legal Fees. Buyer shall pay all of Seller's
legal fees incurred in connection with this Agreement and the transactions
contemplated herein at closing.
Section 6.11 Stock Pledge. The shares of Stock shall be pledged to
secure the obligations of AGI and Torland pursuant to a Pledge Agreement in the
form of Exhibit 6.11.
ARTICLE 7
FURTHER ACTIONS
---------------
Seller, at the Closing, or at any time after the Closing, will execute,
acknowledge and deliver any further deeds, assignments, conveyances and other
assurances, documents and instruments of transfer, reasonably requested by
Buyer, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by Buyer for the purposes of
assigning, transferring, granting, conveying and confirming to Buyer, or
reducing to possession any or all property to be conveyed and transferred under
this Agreement.
ARTICLE 8
INDEMNIFICATION
---------------
Section 8.1 Indemnification of Seller. Torland and Buyer agree to
indemnify, defend and hold harmless Seller from and against all taxes,
penalties, fines, damages, sanctions, losses, assessments, liabilities, costs
and other expenses (including reasonable attorneys' fees), whether or not
resulting from third party claims (collectively "Losses"), in any way arising
out of or related to any act or omission of Torland or Buyer after Closing and
any breach or other default of any agreements, representations, warranties or
covenants on the part of Torland or Buyer contained in this Agreement or any of
the documents referred to herein.
Section 8.2 Indemnification by Seller. Seller agrees to indemnify,
defend and hold harmless Buyer from and against all Losses in any way arising
out of or related to
9
<PAGE>
any breach or other default of any agreements, representations, warranties or
covenants on the part of Seller contained in this Agreement.
Section 8.3 Notice of Claim. In the event of a breach or other claim,
the party claiming such breach or making such other claim (the "Indemnitee")
shall give written notice ("Notice") to the party in breach or against whom such
other claim is made (the "Indemnitor") stating that payment of an amount
described in such notice is due and payable to the Indemnitee under the
provisions of this Agreement on grounds set forth in such notice.
Section 8.4 Defense. If any action, litigation, suit, investigation,
arbitration or other proceeding ("Proceeding") is brought against an Indemnitee
for which such Indemnitee is or may be entitled to indemnification pursuant to
Sections 8.1 or 8.2 from an Indemnitor, the Indemnitee shall promptly give
notice to the Indemnitor of such Proceeding. The Indemnitor shall, at its own
expense, have the opportunity to be represented by counsel of its choosing and
to assume and conduct the defense of any such Proceeding upon providing a
written undertaking to that effect to the Indemnitee. If, after such
opportunity, the Indemnitor or its counsel does not assume the defense of any
such Proceeding, it shall be bound by the results obtained by the Indemnitee. In
the event that the Indemnitee does not receive written notice from the
Indemnitor within fifteen (15) days of having given notice to the Indemnitor of
any such Proceeding, the Indemnitor shall be deemed to have elected not to
assume the defense of such Proceeding, and in such event the Indemnitee will
have the right to conduct such defense and to compromise and settle such
Proceeding without the consent of the Indemnitor. In the event that the
Indemnitor does elect to assume the defense of such Proceeding, the Indemnitee
will cooperate with and make available to the Indemnitor such assistance and
materials as may be reasonably requested by it, and the Indemnitee will have the
right at its expense to participate in the defense; provided, however, that
neither party will have the right to compromise or settle such Proceeding
without the prior written consent of the other party which shall not be
unreasonably withheld.
Section 8.5 Cooperation and Access. The parties shall cooperate fully
with each other after the Closing Date with respect to any claims, demands, tax
or other audits, suits, actions and proceedings by or against Torland, Seller or
Buyer, as the case may be, in respect of Torland or the Stock, whether or not
either party has notified the other of a claim for indemnity with respect to
such matter.
Section 8.6 Limitations. No claim for indemnification may be made
hereunder unless and until the amount of such claim or claims equals or exceeds
$50,000, and then only for such excess. In no event shall the amount payable by
reason of
10
<PAGE>
indemnification exceed the amount owing under the Note which may from
time to time be outstanding. In no event may a claim for indemnification be
brought after May 1, 2001, except for a claim under Section 3.3. Other than a
claim of indemnification hereunder, the Buyer may not assert any other claims,
whether arising under contract, statute, common law or otherwise, with respect
to any matter involving the transfer of the Stock to the Buyer or any of the
transactions contemplated by this Agreement or under this Agreement.
Notwithstanding anything contained herein, the covenants and obligations of
Buyer and Torland with respect to the payment of the consideration to Seller set
forth in Article 2 shall not be subject to any of the limitations in this
Section 8.6 as to amount, time or otherwise.
Section 8.7 Set-Off. Buyer and Torland shall have the right to satisfy
any amount due and owing hereunder pursuant to Article 2 hereof or under the
Employment Agreement by them to the Seller by way of set-off against any
liquidated amount due and owing from time to time by the Seller to Buyer and
Torland; provided, however, that Buyer and Torland must first notify Seller in
writing of their intent to set off, stating with reasonable particularity the
reasons therefor, and the amount to be set off; and provided further that Seller
has not provided written objection thereto within 15 days of receipt of such
written notice of setoff.
ARTICLE 9
NOTICES
-------
Section 9.1 Notices to Parties. All notices and other communications
shall be effective upon receipt if hand delivered or sent by facsimile
transmission and confirmed by U.S. mail and shall be effective one (1) day after
sending by a nationally recognized overnight delivery service to the addresses
stated below, or to such other addresses as to which either party shall have
previously notified the other party in writing. Any such notice not contemplated
above shall be effective upon receipt. For the purposes of this Section, the
addresses of the parties shall be as follows:
If to Seller: JENNICA DEVELOPMENTS LIMITED
9190 The Lane
Naples, FL 34109
11
<PAGE>
With a copy to: Richard F. Wolf, Esq.
Bondy Baker Wolf
72 Talbot Street North
Essex, Ontario N8M 1A2
CANADA
If to Buyer or
AGI Quebec: AMERICAN GROUP, INC.
10570 Hagen Ranch Road
Boynton Beach, FL 33437
Attn: Eric W. Deckinger, President
With a copy to: Robert I. Claire, Esq.
7280 W. Palmetto Park Road
Suite 106
Boca Raton, FL 33433
9.2 Change of Address. A party may change the address to which such
communications are to be directed by notice to the other parties as provided in
Section 9.1.
ARTICLE 10
MISCELLANEOUS
-------------
Section 10.1 Complete Agreement. This Agreement, including the
Schedules and Exhibits referred to herein, is the complete agreement between the
parties and supersedes all prior negotiations and agreements. There are no
representations, warranties, covenants, conditions, terms, agreements, promises,
understandings, commitments or other arrangements other than those expressly set
forth or incorporated herein or made in writing on or after the date of this
Agreement and the letter agreement dated September 24, 1997 between Torland and
Lator International, Inc. is null and void and of no further force and effect.
Section 10.2 Governing Law. This Agreement has been made and accepted
in the State of Florida and it shall be interpreted in accordance with, and
governed by, the laws of the State of Florida. Venue for any proceeding arising
hereunder shall be Palm Beach County, Florida.
12
<PAGE>
Section 10.3 Binding Agreement; Successors. This Agreement shall be
binding upon, inure to the benefit of and be enforceable by the successors,
assigns, heirs, legatees, executors, personal representatives, guardians,
custodians, administrators and conservators of the parties hereto, provided that
no assignment of this Agreement shall be effective without the express written
consent of the other parties.
Section 10.4 Headings. The article, section, subsection, Schedule and
Exhibit headings herein are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement, nor are they deemed to
constitute a part of this Agreement.
Section 10.5 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
Section 10.6 Time of the Essence. Time shall be of the essence of this
Agreement and of each and every part thereof.
Section 10.7 Waiver. The failure of either party to exercise or enforce
any right or remedy conferred upon it hereunder shall not be deemed to be a
waiver of any such right or remedy nor operate to bar the exercise or
enforcement thereof at any time thereafter.
Section 10.8 Confidentiality. Except to the extent required by law, the
parties shall maintain the terms of this Agreement and all agreements and
documents referenced herein strictly confidential.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the day and year first above written.
JENNICA DEVELOPMENTS LIMITED, an Ontario
corporation
By:
--------------------------------------
Its:
-------------------------------------
13
<PAGE>
AMERICAN GROUP, INC., a Florida corporation
By:
----------------------------------------
Its:
----------------------------------------
9006-1474 QUEBEC INC., a Quebec corporation
doing business as Torland
By:
----------------------------------------
Its:
----------------------------------------
9075-7774 QUEBEC INC.
By:
----------------------------------------
Eric W. Deckinger
Its:
----------------------------------------
14
<PAGE>
EXHIBIT 10.3
PROMISSORY NOTE
$617,500.00 Boca Raton, Florida
May 31, 1999
FOR VALUE RECEIVED the undersigned, TORLAND USA, INC., promises to pay
to the order of AMERICAN GROUP, INC., the principal sum of SIX HUNDRED SEVENTEEN
THOUSAND FIVE HUNDRED and 00/100 Dollars, as per the Disbursement Schedule
attached hereto as Exhibit A, plus interest at the rate of ten (10%) percent per
annum, on demand.
This Note may be prepaid in whole or part without penalty, prior to
demand. Each installment payment shall be credited first on the interest then
due; and the remainder on principal; and interest shall thereupon cease upon the
principal so credited. In the event Maker defaults in its obligation to payoff
the entire principal sum, and accrued and unpaid interest upon demand, this Note
and the sums due hereunder shall bear interest at the maximum rate provided by
law.
The Maker waives demand, protest and notice of maturity, non-payment or
protest and all requirements necessary to hold each of them liable as Maker.
The Maker further agrees, to pay all costs of collection, including
reasonable attorney's fees and court costs, in case the principal of this Note
or any payment on the principal or any interest thereon is not paid upon demand,
whether suit be brought or not.
MAKER:
TORLAND USA, INC.,
a Florida Corporation
BY: /s/ Louis Zanette
--------------------------
LOUIS ZANETTE,
President
<PAGE>
Register
Due from Torland Page 1
8/4/1999
<TABLE>
<CAPTION>
Date Num Transaction Decrease C Increase Balance
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5/22/1998 49,000.00 49,000.00
cat: [First Union Cap account]
6/4/1998 Torland 45,000.00 94,000.00
cat: [First Union Cap account]
6/16/1998 Torland 50,000.00 144,000.00
cat: [First Union Cap account]
6/19/1998 Torland 50,000.00 194,000.00
cat: [First Union Cap account]
7/21/1998 Torland 50,000.00 244,000.00
cat: [First Union Cap account]
8/13/1998 Coventry Industries 11,500.00 255,500.00
cat: [First Union Cap account]
8/27/1998 Torland 50,000.00 305,500.00
cat: [First Union Cap account]
9/15/1998 Torland 25,000.00 330,500.00
cat: [First Union Cap account]
11/4/1998 Torland 31,000.00 361,500.00
cat: [First Union Cap account]
11/10/1998 10,000.00 371,500.00
cat: [First Union Cap account]
11/12/1998 Torland 2,000.00 373,500.00
cat: [First Union Cap account]
11/16/1998 10,000.00 383,500.00
cat: [First Union Cap account]
11/20/1998 1,000.00 384,500.00
cat: [First Union Cap account]
11/24/1998 9,000.00 393,500.00
cat: [First Union Cap account]
12/1/1998 15,000.00 408,500.00
cat: [First Union Cap account]
12/22/1998 Torland 30,000.00 438,500.00
cat: [First Union Cap account]
1/7/1999 15,000.00 453,500.00
cat: [First Union Cap account]
1/12/1999 15,000.00 468,500.00
cat: [First Union Cap account]
1/25/1999 Torland 15,000.00 483,500.00
cat: [First Union Cap account]
1/28/1999 Torland 15,000.00 498,500.00
cat: [First Union Cap account]
2/4/1999 Torland 5,000.00 503,500.00
cat: [First Union Cap account]
2/9/1999 Torland 15,000.00 518,500.00
cat: [First Union Cap account]
2/26/1999 Torland 5,000.00 523,500.00
cat: [First Union Cap account]
5/7/1999 Torland 35,000.00 558,500.00
cat: [First Union Cap account]
</TABLE>
Exhibit A
<PAGE>
Register
Due from Torland Page 2
8/4/1999
<TABLE>
<CAPTION>
Date Num Transaction Decrease C Increase Balance
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5/7/1999 Torland 55,000.00 613,500.00
cat: [First Union Cap account]
5/13/1999 Robert Hausman 4,000.00 617,500.00
cat: [First Union Cap account]
</TABLE>
<PAGE>
LATOR INTERNATIONAL, INC.
7777 GLADES ROAD, SUITE 213
BOCA RATON, FLORIDA 33434
July 17, 1997
Louis Zanette, President
9006-1474, Quebec Inc.
d/b/a Torland
CP 96 Port-Cartier, Quebec G5B2G7
Canada
RE: Loan of $225,000.00 to 9006-1474 Quebec Inc. d/b/a
Torland (the "Corporation")
Dear Mr. Zanette:
Please allow this letter to serve as our Company's intent to loan you and your
company $225,000.00 by Promissory Note bearing interest at ten (10%) percent
simple interest per annum (the "Loan"). The Loan shall be repayable by you and
your company within six (6) months and shall be secured by a Chattel
Mortgage/Movable Hypothec on approximately 34,000 bales of sphagnum peat moss
harvested by your company in Port-Cartier. The amounts due under the Loan shall
be repaid as you ship peat to us F.O.B. Boynton Beach, Florida.
Kindly signify your acceptance to this letter agreement by signing this letter
at the bottom where indicated and returning to me via facsimile.
Very truly yours,
/s/ Manny Shulman
-----------------------------
Manny J. Shulman, President
MS:cg
The foregoing letter agreement is hereby acknowledged and agreed to this 17th
day of July, 1997.
By: /s/ Louis Zanette
-------------------------------
Louis Zanette, President
9006-1464 Quebec Inc.,
d/b/a Torland
a Corporation organized and
operating under the laws of the
Province of Quebec, Canada
and Individually
<PAGE>
DEMAND NOTE
FOR VALUE RECEIVED, the borrower, 9006-1474 Quebec, Inc., who has execute this
note below shall pay to Lator International, Inc. (the lender or his or her
assignee) the principle amount of fifty thousand dollars ($50,000), together
with interest calculated at ten percent (10%), per year on the outstanding
balance. The entire amount, principal and interest, shall be due and payable ON
DEMAND by holder of this note. Failure to make a payment by due date shall be
considered a default of the loan. Should a default exist for more than (15)
days, the borrower agrees to pay the holder of this note reasonable costs of
collection including attorney fees, as authorized by state law.
Borrower: /s/ Louis Zanette Date October 28, 1997
------------------------
Louis Zanette
<PAGE>
PROMISSORY NOTE
---------------
We promise to pay, six months from the date of the making hereof, being the
16th day of September, 1997, to LATOR INTERNATIONAL, INC. of Boca Raton,
Florida, the sum of SEVENTY FIVE THOUSAND ($75,000.00) in the lawful currency of
the United States of America, plus simple interest in the amount of TEN PERCENT
(10%) per annum.
THIS 16th DAY OF SEPTEMBER, 1997
9006-1474 Quebec, Inc. doing business as
Torland per:
/s/ Louis Zanette
----------------------------
LOUIS ZANETTE
-AND-
/s/ Louis Zanette
----------------------------
LOUIS ZANETTE
<PAGE>
July 30, 1999
Securities and Exchange Commission
450 5th Street, NW
Washington, DC 20549
Re: American Group, Inc.
I was previously the principal accountant for American Group, Inc. and under the
date of March 2, 1998. I reported on the financial statements of American Group,
Inc. as of and for the years ended December 31, 1997 and 1996. On December 21,
1998 my appointment as principal accountant was terminated. I have read the
American Group statements included under item 3 of its Form 10-SB dated July 30,
1999 and I agree with such stantments
Kurt D. Saliger, CPA
<PAGE>
21.1 Subsidiaries of the Registrant
Lator International, Inc., a Florida corporation, 100% owned.
LPS Acquisition Corp., a Florida corporation, 100% owned.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Dec-31-1997
<CASH> 79
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 79
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 79
<CURRENT-LIABILITIES> 400
<BONDS> 0
0
0
<COMMON> 3850
<OTHER-SE> (4,171)
<TOTAL-LIABILITY-AND-EQUITY> 79
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 8,907
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,907)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,907)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,907)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> May-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> May-31-1998
<CASH> 3,547
<SECURITIES> 0
<RECEIVABLES> 237,680
<ALLOWANCES> 10,000
<INVENTORY> 44,116
<CURRENT-ASSETS> 283,233
<PP&E> 152,183
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,703,547
<CURRENT-LIABILITIES> 1,409,797
<BONDS> 0
0
0
<COMMON> 535
<OTHER-SE> 1,612
<TOTAL-LIABILITY-AND-EQUITY> 1,703,547
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 21,532
<OTHER-EXPENSES> 2,976,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,997,532)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,997,532)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,997,532)
<EPS-BASIC> (7.78)
<EPS-DILUTED> (7.78)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> May-31-1999
<PERIOD-START> Jun-01-1998
<PERIOD-END> May-31-1999
<CASH> 13,397
<SECURITIES> 0
<RECEIVABLES> 100,102
<ALLOWANCES> 10,000
<INVENTORY> 79,009
<CURRENT-ASSETS> 334,347
<PP&E> 410,798
<DEPRECIATION> 101,716
<TOTAL-ASSETS> 2,644,847
<CURRENT-LIABILITIES> 919,863
<BONDS> 0
0
862
<COMMON> 18,115
<OTHER-SE> 1,546,161
<TOTAL-LIABILITY-AND-EQUITY> 2,644,847
<SALES> 2,240,995
<TOTAL-REVENUES> 2,240,995
<CGS> 2,086,746
<TOTAL-COSTS> 2,086,746
<OTHER-EXPENSES> 1,174,428
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 153,420
<INCOME-PRETAX> (1,099,167)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,099,167)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,099,167)
<EPS-BASIC> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
