<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ______
Commission file number 0-30474
American Group, Inc.
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(Exact name of small business issuer as specified in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
88-0326984
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(IRS Employer Identification No.)
10570 Hagen Ranch Road, Boynton Beach, FL 33437
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(Address of principal executive offices)
888-328-9322
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes (x) No ( ).
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. As of January 15, 2000 the
registrant had issued and outstanding 19,415,000 shares of common stock.
Transitional Small Business Disclosure Format (check one);
Yes ( ) No (x)
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Page No.
--------
Condensed Consolidated Balance Sheets at
November 30, 1999(unaudited) and
May 31, 1999 (audited) 2
Condensed Consolidated Statements of Operations
for the three and six months ended November 30, 1999
and 1998 (unaudited) 3
Condensed Consolidated Statements of Cash Flow for
the six months ended November 30, 1999
and 1998 (unaudited) 4
Notes to the Condensed Consolidated Financial
Statements (Unaudited) 5
1
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS May 31, November 30,
1999 1999
-------- ------------
*
<S> <C> <C>
Current assets:
Cash $ 13,397 $ 250
Accounts receivable, less allowance for doubtful accounts
of $10,000 90,102 173,002
Stock subscription receivable 151,839 -
Inventory 79,009 39,436
Prepaid expenses - 2,070
----------- -----------
Total current assets 334,347 214,758
Property, plant and equipment, net of accumulated
depreciation of $101,716 and $123,003, respectively 309,082 1,560,400
Other assets:
Note receivable 967,500 -
Interest receivable 101,987 -
Equipment deposit 187,500 310,500
Goodwill, net - 3,374,384
Other 3,984 3,984
----------- -----------
$ 1,904,400 $ 5,464,026
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable $ 199,751 $ 1,244,633
Current portion of capital lease obligation payable 75,343 90,649
Accounts payable and accrued expenses 644,769 759,538
----------- -----------
Total current liabilities 919,863 2,094,820
----------- -----------
Long term liabilities:
Long term debt less current portion 52,689 465,070
Convertible long term debt - 600,000
Long term capital lease obligation less current portion 107,157 55,114
----------- -----------
159,846 1,120,184
----------- -----------
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000 shares authorized;
862,158 issued and outstanding 862 862
Common stock, $.001 par value, 50,000,000 shares authorized,
18,115,000 and 19,415,000 shares issued and outstanding,
respectively 18,115 19,415
Additional paid-in capital 2,551,716 4,360,416
Accumulated deficit (1,746,002) (2,131,671)
----------- -----------
Total stockholders' equity 824,691 2,249,022
----------- -----------
$ 1,904,400 $ 5,464,026
=========== ===========
* condensed from audited financial statements
</TABLE>
2
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three For the three For the six For the six
months ended months ended months ended months ended
November 30, November 30, November 30, November 30,
1999 1998 1999 1998
------------- ------------- ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue $ 833,993 $ 671,781 $ 1,406,134 $1,292,386
Cost of sales 757,767 532,976 1,336,168 1,040,829
----------- ---------- ----------- ----------
Gross profit 76,226 138,805 69,966 251,557
Selling, general and administrative expenses 269,753 330,824 400,682 476,410
----------- ---------- ----------- ----------
Operating loss (193,527) (192,019) (330,716) (224,853)
----------- ---------- ----------- ----------
Other income (expenses):
Interest expense (38,922) (23,306) (67,954) (45,042)
Interest income 351 12,895
Other income 102 106
----------- ---------- ----------- ----------
(38,469) (23,306) (54,953) (45,042)
----------- ---------- ----------- ----------
Net loss $ (231,996) $ (215,325) $ (385,669) $ (269,895)
=========== ========== =========== ==========
Net loss per share, basic and fully diluted $ (0.01) $ (0.35) $ (0.02) $ (0.15)
=========== ========== =========== ==========
Weighted average shares outstanding 19,215,000 621,667 18,716,648 1,790,714
=========== ========== =========== ==========
</TABLE>
3
<PAGE>
AMERICAN GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six For the six
months ended months ended
November 30, November 30,
1999 1998
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (385,669) $ (269,895)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 21,287 37,296
Issuance of common stock for services 8,000
Changes in assets and liabilities
Accounts receivable (82,900) 36,757
Other receivables 101,987 (24,933)
Inventory 19,970 15,458
Accounts payable and accrued expenses 183,149 115,495
-------- ---------
Net cash provided by (used in) operations (142,176) (81,822)
-------- ---------
Cash flows from investing activities:
Cash used in business acquisition, net of cash acquired (397,520)
Deposit on new equipment (123,000) (75,000)
-------- ---------
Net cash used by investing activities (520,520) (75,000)
-------- ---------
Cash flows from financing activities:
Issuance of notes receivable (110,000) (344,500)
Proceeds from notes payable and long term debt 600,000 552,000
Payments on loans payable (52,290) (767,542)
Proceeds from sale of common stock 211,839 752,120
-------- ---------
Net cash provided by financing activities 649,549 192,078
-------- ---------
Net increase (decrease) in cash (13,147) 35,256
Cash at beginning of period 13,397 3,547
-------- ---------
Cash at end of period $ 250 $ 38,803
======== =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 67,954 $ 45,042
======== =========
Cash paid during the year for taxes $ -- $ --
======== =========
</TABLE>
Supplemental Disclosure of Non-cash Investing and Financial Activities
In November 1998 the Company issued 7,500,000 shares of common stock to its
President in exchange for $750,000; 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; The Company issued 80,000 shares of common stock at
$.10 per share (market value) in exchange for professional services rendered to
the Company; On August 15, 1999 the Company issued 700,000 shares of common
stock in connection with the acquisition of Torland.
4
<PAGE>
AMERICAN GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
November 30, 1999
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions of Form 10-QSB and
Article 310 of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The preparation requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results may differ from these estimates. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six month period ended November 30, 1999 are not
necessarily indicative of the results that may be expected for the year ended
May 31, 2000.
For further information, refer to the consolidated financial statements and
footnotes thereto for the year ended May 31, 1999 included in the Company's Form
10-SB 12G as filed with the Securities and Exchange Commission.
5
<PAGE>
Item 2. Management's Discussion and Analysis or Plan or Operation.
Forward-looking Statement and Information
The Company is including the following cautionary statement in this Form 10-QSB
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'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 $385,669 for the six months ended November 30,
1999 and has a negative working capital of $1,880,062. 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.
Six months Ended November 30, 1999 compared to for the Six months ended November
30, 1998
Revenues for the six months ended November 30, 1999 were $1,406,134 compared to
$1,292,386 for the six months ended November 30, 1998. The increase in sales can
be attributed to the inclusion of three full months of sales for Torland which
was acquired on August 15, 1999.
Gross profit margins as a percentage of revenues for the six months ended
November 30, 1999 and 1998 were 5.0% and 19.5%, respectively. The decrease in
the gross profit margin can be attributed to increased labor and material costs
as a percentage of sales. The Company's current facility is not adequate to
handle the volume of business currently in place. The Company is currently
relocating to Homestead, FL where it is expected to reverse this trend.
Operating expenses for the six months ended November 30, 1999 and 1998 were
$400,682 and $476,410, respectively, consisting of selling, general and
administrative expenses.
The net losses for the six months ended November 30, 1999 and 1998 were $385,669
and $269,895, respectively. The decrease is due to the deterioration on the
Company's gross profit margin during 1999.
6
<PAGE>
Three months Ended November 30, 1999 compared to for the three months ended
November 30, 1998
Revenues for the three months ended November 30, 1999 were $833,993 compared to
$671,781 for the three months ended November 30, 1998. The increase in sales can
be attributed to the inclusion of three full months of sales for Torland which
was acquired on August 15, 1999.
Gross profit margins as a percentage of revenues for the three months ended
August 31, 1999 and 1998 were 9.1% and 20.7%, respectively. The decrease in the
gross profit margin can be attributed to increased labor and material costs as a
percentage of sales. The Company's current facility is not adequate to handle
the volume of business currently in place. The Company is currently relocating
to Homestead, FL where it is expected to reverse this trend.
Operating expenses for the three months ended November 30, 1999 and 1998 were
$269,753 and $330,824, respectively, consisting of selling, general and
administrative expenses.
The net losses for the three months ended November 30, 1999 and 1998 were
$231,996 and $215,325, respectively. The decrease is due to the deterioration on
the Company's gross profit margin during 1999.
Qualitative Discussion
The Company believes that LPS's present operations will require that LPS obtain
additional capital during the next twelve months. 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 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.
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 has been unable to meet its cash requirements for its current
operations through internal cash flow in the prior twelve months. These
requirements were only met by the additional sale of stock. The Company believes
that LPS's cash requirements for LPS's current operations during the next twelve
months, excluding capital requirements for the construction of its new soil
blending facility, 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, the funding of the acquisition of Torland or other
assets, if any, in the amount not yet determined. The Company must pay an
additional $835,000 and 700,000 shares of its common stock in connection with
the acquisition of the equity of Torland.
7
<PAGE>
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 has not had any Year 2000 deficiencies.
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. 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.
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
9
<PAGE>
Item 6. Exhibits and Report on Form 8-K.
(a) Exhibits.
No. Description
- --- ------------
27 Financial Data Schedule (Electronic filing only).
(b) Reports on Form 8-K.
During the three months ended November 30, 1999 the Company did not file
any reports on Form 8-K.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
American Group, Inc.
a Nevada corporation
Date: January 18, 2000 By: /s/ Eric W. Deckinger
---------------------
Eric W. Deckinger,
President
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 250
<SECURITIES> 0
<RECEIVABLES> 173,002
<ALLOWANCES> 10,000
<INVENTORY> 39,436
<CURRENT-ASSETS> 214,758
<PP&E> 1,560,400
<DEPRECIATION> 112,359
<TOTAL-ASSETS> 5,464,026
<CURRENT-LIABILITIES> 2,094,820
<BONDS> 0
0
862
<COMMON> 19,415
<OTHER-SE> 2,228,745
<TOTAL-LIABILITY-AND-EQUITY> 5,464,026
<SALES> 1,406,134
<TOTAL-REVENUES> 1,406,134
<CGS> 1,336,168
<TOTAL-COSTS> 1,336,168
<OTHER-EXPENSES> 400,682
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,954
<INCOME-PRETAX> (385,669)
<INCOME-TAX> 0
<INCOME-CONTINUING> (385,669)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (385,669)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
