SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File No 0-26509
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SOUTHERN GROUP INTERNATIONAL, INC.
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(Exact name of small business issuer as specified in its charter)
Florida 65-06001212
--------------------------------- ------------------------
(State or other jurisdiction (IRS Employer ID Number)
of incorporation or organization)
69 Mall Drive, Comack, New York 11725
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(Address of principal executive offices)
(631) 543-2800
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Issuer's Telephone Number
90 Adams Avenue, Hauppauge, New York 11788
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(Former name, former address and former fiscal year, if changed
since last report)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 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
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As of July 31, 2000, the issuer had 1,402,200 shares of common stock, par value
$.0001 per share issued and outstanding.
<PAGE>
PART I
Item 1. Financial Statements
SOUTHERN GROUP INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
AND FOR THE PERIOD AUGUST 10, 1995 (INCEPTION) TO
JUNE 30, 2000
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TABLE OF CONTENTS
Page No.
ACCOUNTANT'S REPORT.................................................. 3
FINANCIAL STATEMENTS
Balance sheets................................................... 4
Statements of Operations......................................... 5
Statements of Changes in Stockholders' Equity.................... 6
Statements of Cash Flows......................................... 7
Notes to Financial Statements.................................... 10
2
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STEWART H. BENJAMIN
CERTIFIED PUBLIC ACCOUNTANT, P.C.
27 SHELTER HILL ROAD
PLAINVIEW, NY 11803
TELEPHONE: (516) 933-9781
FACSIMILE: (516) 827-1203
To the Board of Directors and Shareholders
Southern Group International, Inc.
Hauppauge, New York
I have reviewed the accompanying balance sheets of Southern Group International,
Inc. (a development stage company) as of March 31, 2000 and December 31, 1999,
and the related statements of operations, stockholders' equity and cash flows,
for the three months ended March 31, 2000 and 1999, and for the period from
August 10, 1995 (inception), to March 31, 2000, in accordance with Statements on
Standards for Accounting and Review Services, issued by the American Institute
of Certified Public Accountants. All information included in these financial
statements is the representation of the management of Southern Group
International, Inc.
A review consists principally of inquiries of Company personnel analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, I do not express such an opinion.
Based on my reviews, I am not aware of any material modifications that should be
made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
Stewart H. Benjamin
Certified Public Accountant, P.C.
Plainview, New York
July 31, 2000
3
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SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited) (Audited)
-------------------- ---------------------
<S> <C> <C>
Current assets
Cash $ 21,242 $ 1,976
Securities available-for-sale (Notes 1 & 2) -- 29,531
-------------------- ---------------------
$ 21,242 $ 31,507
==================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Loan payable (Note 3) $ -- $ 2,831
Loans payable, related parties (Note 4) -- 15,039
-------------------- ---------------------
Total liabilities -- 17,870
-------------------- ---------------------
Stockholders' equity (Note 5)
Preferred stock, $.0001 par value, 10,000,000 shares
authorized and zero shares issued and outstanding -- --
Common stock, $.0001 par value; authorized -
80,000,000 shares; issued and outstanding -
1,402,200 shares in 2000 and 1,245,800 in 1999 140 125
Additional paid-in capital 78,564 62,939
Deficit accumulated during the development stage (57,462) (72,083)
Unrealized gain on marketable securities -- 22,656
-------------------- ---------------------
Total stockholders' equity 21,242 13,637
-------------------- ---------------------
$ 21,242 $ 31,507
==================== =====================
</TABLE>
See accompanying notes and accountant's review report.
4
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SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
Six Months Six Months Aug. 10, 1995
Ended Ended (inception) to
June 30, June 30, June 30,
2000 1999 2000
-------------------- --------------------- ---------------------
<S> <C> <C> <C>
Costs and expenses
General and administrative:
Bank charges $ 42 $ 85 $ 1,674
Filing fees 300 250 900
Edgar filing service fees 305 677 1,045
Legal fees -- 10,000 10,500
Accounting fees 1,250 1,100 3,350
Transfer agent fees -- -- 2,360
Miscellaneous -- -- 64
-------------------- --------------------- ---------------------
Total costs and expenses 1,897 12,112 19,893
-------------------- --------------------- ---------------------
Other income (expenses)
Gain on sale of marketable securities 17,089 -- 17,089
Impairment of investment in related party -- -- (50,000)
Interest income 81 -- 81
Interest expense (652) (1,989) (4,739)
-------------------- --------------------- ---------------------
Total other income (expenses) 16,518 (1,989) (37,569)
-------------------- --------------------- ---------------------
Net income (loss) $ 14,621 $ (14,101) $ (57,462)
==================== ===================== =====================
Income (loss) per common share $ .01 $ (.02)
==================== =====================
Weighted average common shares outstanding 1,247,519 645,800
==================== =====================
</TABLE>
See accompanying notes and accountant's review report.
5
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SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Statements of Changes in Stockholders' Equity
Period from August 10, 1995 (Date of Inception), to June 30, 2000
<TABLE>
<CAPTION>
Deficit Unrealized
Common stock Additional Accumulated Gain on
--------------------------- Paid-in From Marketable
Shares Amount Capital Inception Securities
----------- ------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Balances, August 10, 1995 -- $ -- $ -- $ -- $ --
Sale of common stock 642,800 64 -- -- --
Net loss for the period (64)
----------- ------------- ------------- ------------ ----------
Balances, December 31, 1995 642,800 64 -- (64) --
The Company was inactive
during 1996 -- -- -- -- --
----------- ------------- ------------- ------------ ----------
Balances, December 31, 1996 642,800 64 -- (64) --
The Company was inactive
during 1997 -- -- -- -- --
----------- ------------- ------------- ------------ ----------
Balances, December 31, 1997 642,800 64 -- (64) --
Sale of common stock 3,000 1 2,999 -- --
Net loss (3,589)
----------- ------------- ------------- ------------ ----------
Balances, December 31, 1998 645,800 65 2,999 (3,653) --
Prior period adjustment -- -- -- (833) --
Sale of common stock 297,500 30 29,720 -- --
Shareholders loans converted to stock 233,750 23 23,352 -- --
Common stock issued for marketable
securities, valued at $.10 per share 68,750 7 6,868 -- --
Change in unrealized gain on
marketable securities -- -- -- -- 22,656
Net loss (67,597)
----------- ------------- ------------- ------------ ----------
Balances, December 31, 1999 1,245,800 125 62,939 (72,083) 22,656
Shareholders loans converted to stock 156,400 15 15,625 -- --
Change in unrealized gain on
marketable securities -- -- -- -- (22,656)
Net income 14,621
----------- ------------- ------------- ------------ ----------
Balances, June 30, 2000 1,402,200 $ 140 $ 78,564 $ (57,462) $ --
=========== ============= ============= ============ ==========
</TABLE>
See accompanying notes and accountant's review report.
6
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SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Six Months Aug. 10, 1995
Ended Ended (inception) to
June 30, June 30, June 30,
2000 1999 2000
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 14,621 $ (14,101) $ (56,629)
Adjustments to reconcile net income (loss) to net
cash used in operating activities
Realized gain on sale of available-for-sale securities (17,089) -- (17,089)
Impairment loss on related party receivable -- -- 50,000
Changes in assets and liabilities
Increase (decrease) in accrued expenses -- (200) --
----------- ------------ -----------
NET CASH USED IN OPERATING ACTIVITIES (2,468) (14,301) (23,718)
----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of available-for-sale securities 23,965 -- 23,965
Increase in loan receivable, related party -- -- (51,633)
Decrease in loan receivable, related party -- -- 800
----------- ------------ -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 23,965 -- (26,868)
----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term debt 600 38,672 99,682
Repayment of short-term debt (2,831) (43,128) (60,668)
Proceeds from issuance of common stock -- 17,250 32,814
----------- ------------ -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (2,231) 12,794 71,828
----------- ------------ -----------
NET INCREASE (DECREASE) IN CASH 19,266 (1,507) 21,242
CASH - BEGINNING OF PERIOD 1,976 2,396 --
----------- ------------ -----------
CASH - END OF PERIOD $ 21,242 $ 889 $ 21,242
=========== ============ ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for interest $ 652 $ 1,989 $ 3,774
=========== ============ ===========
Cash paid during the period for income taxes $ -- $ -- $ --
=========== ============ ===========
Change in unrealized gain on marketable securities $ (22,656) $ -- $ --
=========== ============ ===========
Common stock issued for marketable securities $ -- $ -- $ 6,875
=========== ============ ===========
Conversion of shareholders loans to capital stock $ (15,640) $ (23,375) $ (39,015)
=========== ============ ===========
</TABLE>
See accompanying notes and accountant's review report.
7
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SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Nature of Operations
The financial statements presented are those of Southern Group International,
Inc., a development stage company (the "Company"). The Company was incorporated
under the laws of the state of Florida on August 10, 1995. The Company's
activities, to date, have been primarily directed towards the raising of
capital.
As shown in the financial statements, as of June 30, 2000, the Company has
incurred an accumulated deficit of $57,462. The Company's continued existence is
dependent on its ability to generate sufficient cash flow to meet its
obligations on a timely basis. Accordingly, the financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue in existence. The Company has been exploring sources to obtain
additional equity or debt financing. The Company has also indicated its
intention to participate in one or more as yet unidentified business ventures,
which management will select after reviewing the business opportunities for
their profit or growth potential.
The Company will engage a consultant, who will be compensated based on
performance, to effect a merger once a candidate has been identified. The
Company has elected not to recognize compensation expense for its executive
officers, as they devote an insignificant amount of time to the Company.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reporting amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
Securities Available-For-Sale
Securities available-for-sale consist of marketable equity securities not
classified as trading securities. Securities available-for-sale are stated at
fair value, and unrealized holding gains and losses are reported as a separate
component of stockholders' equity.
Dividends on marketable equity securities are recognized in income when
declared. Realized gains and losses are determined on the basis of the actual
cost of the securities sold.
-6-
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SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Notes to Financial Statements
Income (Loss) Per Common Share
Income (loss) per common share is computed by dividing the net income (loss) by
the weighted average shares outstanding during the period.
Note 2 - Securities Available-For-Sale
Securities available-for-sale at December 31, 1999 consisted of 8,750 shares of
Yournet Inc., which is traded on the OTC Bulletin Board. During the six months
ended June 30, 2000, the Company sold securities available-for-sale for total
proceeds of $23,965 resulting in gross realized gains of $17,089.
Note 3 - Loan Payable
The Company has a bank line-of-credit which provides borrowings up to $75,000.
The line-of-credit is guaranteed by a stockholder of the Company, and principal
and interest on advances are payable monthly at the bank prime rate plus 1%. The
line-of-credit is due to expire in October 2001. The Company has fully repaid
the bank line-of-credit on February 25, 2000. Interest expense related to the
bank line-of-credit was $51 during the six months ended June 30, 2000.
Note 4 - Loans Payable - Stockholders
Loans of $37,450 were received from certain stockholders during the year ended
December 31, 1999, proceeds of which were used to repay a portion of the bank
line-of-credit. Stockholders' loans totaling $23,375 were converted to equity as
a result of a resolution adopted by the board of directors on May 5, 1999,
whereby 600,000 shares of restricted common stock were issued for an aggregate
consideration of $60,000. The loans provide for interest at a rate of 8% and
were due on January 31, 2000. Pursuant to a resolution by the board of directors
on June 29, 2000, the loans and accrued interest totaling $15,640 were converted
to equity. The stockholders received 156,400 shares of common stock, valued at
$.10 per share. Interest expense related to the stockholders' loans was $600
during the six months ended June 30, 2000.
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SOUTHERN GROUP INTERNATIONAL, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 5 - Common Stock Transactions
Pursuant to a resolution adopted by the Board of Directors on May 5, 1999, the
Company issued 600,000 shares of restricted common stock at a price of $.10 per
share, for an aggregate consideration of $60,000, which includes conversion of
stockholders' loans of $23,375, cash contributions of $29,750 and marketable
securities valued at $6,875. The price of $.10 per share, which exceeds the book
value per share, was determined as the fair value by management, as there was no
public market for the stock on the date of issuance.
Pursuant to a resolution adopted by the Board of Directors on June 29, 2000, the
Company converted stockholders' loans totaling $15,640 to 156,400 shares of
common stock, valued at $.10 per share. The price of $.10 per share, which
exceeds the book value per share, was determined as the fair value by
management, as there was no public market for the stock on the date of issuance.
10
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Southern Group International, Inc.
Management's Discussion and Analysis or Plan of Operations
Results of Operations
During the period from August 10, 1995 (inception) through June 30,
2000, the Company has engaged in no significant operations other than
organizational activities and acquisition of capital. During this period, the
Company received no revenues.
For the current fiscal year, the Company anticipates incurring a loss
as a result of expenses associated with registration and compliance with
reporting obligations under the Securities Exchange Act of 1934, and expenses
associated with locating and evaluating acquisition candidates. The Company
anticipates that until a business combination is completed with an acquisition
candidate, it will not generate revenues.
Liquidity and Capital Resources
The Company remains in the development stage and, since inception, has
experienced no significant change in liquidity or capital resources or
stockholders' equity other than the receipt of proceeds from the sale of stock
in the amount of $32,814 and conversion of stockholders' loans to common stock
in the amount of $39,015. Substantially all of such funds have been used to pay
expenses incurred by the Company.
The Company intends to enter into a business combination. In order to
do so, it will require additional capital to pay ongoing expenses, including
particularly legal and accounting fees incurred in conjunction with preparation
and filing of this registration statement on Form 10-SB, and in conjunction with
future compliance with its on-going reporting obligations.
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Item 2. Management's Discussion and Analysis or Plan of Operation
The Company is considered a development stage company with limited
assets or capital, and with limited operations or income since 1995. It is
anticipated that the Company will require only nominal capital to maintain the
corporate viability of the Company and any additional needed funds will most
likely be provided by the Company's existing shareholders or its officers and
directors in the immediate future. Current shareholders have not agreed upon the
terms and conditions of future financing and such undertaking will be subject to
future negotiations. Repayment of any such funding will also be subject to such
negotiations. However, unless the Company is able to facilitate an acquisition
of or merger with an operating business or is able to obtain significant outside
financing, there is substantial doubt about its ability to continue as a going
concern.
In the opinion of management, inflation has not and will not have a material
effect on the operations of the Company until such time as the Company
successfully completes an acquisition or merger. At that time, management will
evaluate the possible effects of inflation on the Company as it relates to its
business and operations following a successful acquisition or merger.
Management plans may but do not currently provide for experts to secure
a successful acquisition or merger partner so that it will be able to continue
as a going concern. In the event such efforts are unsuccessful, existing
shareholders have expressed an interest in additional funding if necessary to
continue the Company as a going concern, and to provide funding for required
future filings under the Securities Exchange Act of 1934.
Plan of Operation
During the next twelve months, the Company will actively seek out and
investigate possible business opportunities with the intent to acquire or merge
with one or more business ventures. In its search for business opportunities,
management will follow the procedures outlined in Item 1, above. Because the
Company has limited funds, it may be necessary for the officers and directors to
either advance funds to the Company or to accrue expenses until such time as a
successful business consolidation can be made. The Company will not make it a
condition that the target company must repay funds advanced by its officers and
directors. Management intends to hold expenses to a minimum and to obtain
services on a contingency basis when possible. Further, the Company's directors
will defer any compensation until such time as an acquisition or merger can be
accomplished. However, if the Company engages outside advisors or consultants in
its search for business opportunities, it may be necessary for the Company to
attempt to raise additional funds. As of the date hereof, the Company has not
made any arrangements or definitive agreements to use outside advisors or
consultants or to raise any capital. In the event the Company does need to raise
capital, most likely the only method available to the Company would be to
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private sale of its securities. Because of the nature of the Company as a
development stage company, it is unlikely that it could make a public sale of
securities or be able to borrow any significant sum from either a commercial or
private lender. There can be no assurance that the Company will be able to
obtain additional funding when and if needed, or that such funding, if
available, can be obtained on terms acceptable to the Company.
The Company does not intend to use any employees, with the possible
exception of part-time clerical assistance on an as-needed basis. Outside
advisors or consultants will be used only if they can be obtained for minimal
cost or on a deferred payment basis. Management is convinced that it will be
able to operate in this manner and to continue its search for business
opportunities during the next twelve months.
Year 2000 Compliance
The Year 2000 Issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates where the date has
been stored as just two digits (e.g. 98 for 1998). On January 1, 2000, any clock
or date recording mechanism including date sensitive software which uses only
two digits to represent the year, may have recognized the date using 00 as the
year 1900 rather than the year 2000. This may have resulted in a system failure
or miscalculations causing disruption of operations, including among other
things, a temporary inability to process transactions, send invoices, or engage
in similar activities.
The Company has confirmed that its systems are year 2000 Compliant. It
has experience no Y2K problems to date.
The Company believes that it has disclose all required information
relative to Year 2000 issues relating to its business and operations. However,
there can be no assurance that the systems of other companies on which the
Company's systems rely also will be timely converted or that any such failure to
convert by another company would not have an adverse affect on the Company's
systems.
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included or incorporated by reference in
this Form 10-QSB which address activities, events or developments which the
Company expects or anticipates, will or may occur in the future, including such
things as future capital expenditures (including the amount and nature thereof),
finding suitable merger or acquisition candidates, expansion and growth of the
Company's business and operations, and other such matters are forward-looking
statements. These statements are based on certain assumptions and analysis made
by the Company in light of its experience and its perception of historical
trends, current conditions and expected future developments as well as other
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<PAGE>
factors it believes are appropriate in the circumstances. However, whether
actual results or developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties, general economic
market and business conditions; the business opportunities (or lack thereof)
that may be presented to and pursued by the Company; changes in laws or
regulation; and other factors, most of which are beyond the control of the
Company. Consequently, all of the forward-looking statements made in this Form
10-QSB are qualified by these cautionary statements, and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequence to or effects on the Company or its business or operations.
The Company assumes no obligations to update any such forward-looking
statements.
PART II
Item 6. Exhibits and reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of
regulation S-B, as described in the following index of
exhibits, are incorporated herein by reference, as follows:
Exhibit No. Description
3(i).1 Articles of Incorporation of Southern Group International, Inc.(1)
3(ii).1 By-Laws of Southern Group International, Inc. (1)
27.1 Financial data Schedule *
(1) Incorporated by reference from the Form 10-SB filed by the Company on
June 25, 1999.
* Filed herewith
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(b) No Reports on Form 8-K were filed during the quarter ended
June 30, 2000
14
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated August 10, 2000
SOUTHERN GROUP INTERNATIONAL, INC.
By:/s/ Konrad C. Kim
-----------------
Konrad C. Kim, President
15
