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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
AMENDED
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE EXT. OF 1934
For the quarterly period ended September 30, 1996.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from July 1, 1996 to September 30, 1996.
Commission file number 0-16423.
Citadel Environmental Group, Inc.
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(exact name of Registrant as specified in its charter)
COLORADO 84-0907969
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification #)
750 N. Diamond Bar Boulevard, Suite 202, Diamond Bar, California
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(Address of principal executive offices)
91765
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(Zip Code)
909-396-5153
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(Registrant's telephone number, including area code)
Citadel Asset Management, Ltd.
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2055 Anglo Drive, Suite 105, Colorado Springs, Colorado 80918
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(Former name, former address and former fiscal year,
if changed form 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 than 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 / /
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Class of Stock No. of Shares Outstanding Date
-------------- ------------------------ ----
Common 4,524,744 November 14, 1996
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CITADEL ENVIRONMENTAL GROUP, INC.
Form 10-Q
Index
Page
Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets...............................................3, 4
Statements of Operations........................................5
Statements of Cash Flow.........................................6
Notes to Financial Information..................................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................8
PART II. OTHER INFORMATION...................................................10
Item 1. Legal Proceedings ...........................................10
Item 2. Changes in Securities..........................................10
Item 3. Defaults upon Senior Securities................................10
Item 4. Submission of Matters to a Vote of Security Holders............10
Item 5. Other Information..............................................10
Item 6. Exhibits and Reports on Form 8-K...............................10
Signatures.....................................................11
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CITADEL ENVIRONMENTAL GROUP, INC.
PART I. FINANCIAL INFORMATION
BALANCE SHEETS
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September 30, December 31,
1996 1995
Unaudited Audited
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ASSETS
CURRENT ASSETS
Cash and equivalents. . . . . . . . . . . . . .$ 48,663 $ 1,565
Notes receivable. . . . . . . . . . . . . . . . 140,000
Advances to Subsidiaries. . . . . . . . . . . . 68,892
------------
Total current assets. . . . . . . . . . . . . .$ 257,555
FURNITURE AND EQUIPMENT
Furniture and equipment . . . . . . . . . . . .$ $ 21,352
Less accumulated depreciation . . . . . . . . . (21,352)
Furniture and equipment - net . . . . . . . . . 0 0
OTHER ASSETS (see Note D) . . . . . . . . . . . 0 12,500
------------ ------------
TOTAL . . . . . . . . . . . . . . . . . . . . .$ 257,555 $ 14,065
See notes to the financial information
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CITADEL ENVIRONMENTAL GROUP, INC.
BALANCE SHEETS (continued)
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September 30, December 31,
1996 1995
Unaudited Audited
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable. . . . . . . . . . . . . . . .$ 3,500 $ 262
Accrued expense . . . . . . . . . . . . . . . . 26,500 7,730
Notes payable . . . . . . . . . . . . . . . . . 24,000
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Total current liabilities . . . . . . . . . . .$ 54,000 $ 7,992
STOCKHOLDERS' EQUITY:
Preferred stock, Series A, B, and C no par value;
5,000,000 shares authorized, 0 shares issued
and outstanding at September 30, 1996 and
December 31, 1995
Common Stock, no par value;
25,000,000 shares authorized, 4,524,744 shares
issued and outstanding at September 30, 1996;
732,744 shares issued and outstanding
at December 31, 1995 . . . . . . . . . . . 782,772 516,637
Current year (loss). . . . . . . . . . . . . . (68,653) (14,903)
Accumulated (deficit). . . . . . . . . . . . . (510,564) (495,661)
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Total stockholders' equity . . . . . . . . . . 203,555 6,073
TOTAL. . . . . . . . . . . . . . . . . . . . . $ 257,555 $ 14,065
See notes to the financial information
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CITADEL ENVIRONMENTAL GROUP, INC.
STATEMENTS OF OPERATIONS
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NINE MONTHS ENDED
September 30
1996 1995
Unaudited Unaudited
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Revenue . . . . . . . . . . . . . . . . . . . .$ 0 $ 0
COSTS AND EXPENSES:
Selling, General Administration . . . . . . . . 97,622 6,630
OPERATION (LOSS). . . . . . . . . . . . . . . . (97,622) (6,630)
OTHER REVENUE . . . . . . . . . . . . . . . . . 28,969 45
NET (LOSS) APPLICABLE TO COMMON STOCK . . . . . (68,653) (6,585)
See notes to financial information
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CITADEL ENVIRONMENTAL GROUP, INC.
STATEMENTS OF CASH FLOWS
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THREE MONTHS ENDED
September 30
1996 1995
Unaudited Unaudited
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . $ (86,804) $ (381)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization. . . . . . . . . 0 350
(Increase) decrease in current assets. . . . . (204,947) 0
Increase (decrease) in accounts payable
and other current liabilities. . . . . . . 53,317 0
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Net cash provided (used) by operating
activities . . . . . . . . . . . . . . . . (238,434) (31)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of Treasury Stock . . . . . . . . . . 266,135 0
NET INCREASE/DECREASE IN CASH AND
EQUIVALENTS. . . . . . . . . . . . . . . . 27,701 (31)
CASH AND EQUIVALENTS - BEGINNING OF PERIOD . . 20,962 1,389
CASH AND EQUIVALENTS - END OF PERIOD . . . . . $ 48,663 $ 1,369
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See notes to the financial information
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CITADEL ENVIRONMENTAL GROUP, INC.
NOTES TO FINANCIAL INFORMATION
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A. In the opinion of management, all adjustments necessary to a fair statement
of the results for such periods have been included, all adjustments being of
normal, recurring nature.
B. The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
C. Earnings per share information is omitted because it is not material to an
understanding of the financial statements.
D. The records of Tonopah reflect the following assets and liabilities at
9/30/96.
Notes receivable $ 61,130
Notes & advances to subsidiaries 442,000
Capitalized permit acquisition costs 200,000
51% interest in AMD (for sale) --
100% interest in AHW (for sale) __
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TOTAL ASSETS $ 703,130
Advance from Citadel $ 68,892
Accounts payable/accruals 20,500
Notes payable 97,069
Long-term debt 400,000
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TOTAL LIABILITIES $ 586,461
While Tonopah assets exceed book liabilities by approximately $112,000 without
giving value to Tonopah's ownership interest in AMD and AHW, Citadel has not
ascribed any value to its ownership in the discontinued operations of Tonopah
because Citadel has not completed its evaluation of Tonopah's potential
liabilities and has not yet received qualified offers for the sale of Tonopah
subsidiaries. However, several parties have expressed interest in acquiring
Tonopah's subsidiaries and negotiations for their sale are in process.
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CITADEL ENVIRONMENTAL GROUP, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On August 12, 1996, Citadel acquired all the outstanding common stock
of Tonopah Resources International, Inc. ("Tonopah"). Tonopah is a holding
company which owns an interest in companies involved in various aspects of the
environmental industry. At the date of acquisition, Tonopah owned 51% of
Allen/Moore Diversified Services, Inc., which owns and operates a waste
oil/water treatment facility in Arizona, 49% of GEC Construction & Management,
Inc., which specializes in environmental construction projects mainly in Arizona
and 100% of Arizona Hazardous Waste, Inc., which specializes in pickup and
delivery of hazardous waste mainly in the Tucson area of Arizona. Additionally,
Tonopah owns 100% interest in a company that plans to develop and operate a
medical waste treatment facility in New Mexico, which is currently in the
permitting stage.
As part of the acquisition, Citadel exchanged 1,050,000 common shares,
1,500,000 shares of Preferred Series A, 1,500,000 shares of Preferred Series B
and 2,000,000 shares of Preferred Series C issued by the Company for 100% of
Tonopah's common stock. This acquisition was approved by the shareholders at a
special meeting held on August 12, 1996. At this same meeting the shareholders
approved a name change and change in terms of the Preferred shares.
In addition, Citadel commenced a private placement offering on August
5, 1996, which sold 186,666 Units at the price of $1.50 per Unit. Each Unit
consisted of one share of common stock and one warrant to purchase a share of
common stock at $3.00. Of the Units sold Citadel received cash (net of sales
commissions) of $76,134, a note for $140,000 and exchanged a Tonopah demand note
in the amount of $50,000. The private placement was terminated on September 30,
1996.
Upon Citadel's completion of the acquisition of Tonopah and following
the special shareholders' meeting, three new directors were elected: David L.
Norris, Robert R. Barber and Horst Engel. The first meeting of Citadel's new
Board of Directors occurred on October 11, 1996. The Board had previously been
expanded and David J. D'Appolonia was appointed director and elected Chairman of
the Board and, at the October 11, meeting, the Board was further expanded and
Richard Landi was appointed director.
At its meeting on October 11, 1996, the Board reviewed the structure,
business and operating status of Tonopah and its subsidiaries and determined
that Tonopah needed to be restructured. The Board accepted the resignation of
Tonopah's officers and directors and appointed Robert Barber as Tonopah's sole
director for the purpose of developing and implementing a restructuring plan to
liquidate Tonopah's interest in operating subsidiaries and continue to pursue
obtaining a permit for the New Mexico medical waste treatment facility. As a
result, Citadel's Board of Directors determined to discontinue Tonopah's
operations.
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At its meeting on October 11, 1996, the Board of Directors also
determined that Citadel needed to recapitalize. Actions were taken to negotiate
with Citadel's preferred shareholders (who were also holders of $1,100,000 debt
securities of Tonopah) to exchange their debt in Tonopah and preferred shares in
Citadel for common shares in Citadel and to commence a new private placement to
raise additional capital to support Citadel's business plan of growth by
acquisition. Subsequently, an agreement was reached whereby the collective
holders of 1,500,000 shares of Preferred Series A, 1,5000,000 shares of
Preferred Series B and 2,000,000 shares of Preferred Series C and $700,000 of
Tonopah notes would exchange the subject preferred shares and notes for
2,440,000 shares of Citadel common stock effective September 30, 1996. Plans
for a new private placement to raise an additional $1,000,000 by sale of
convertible preferred stock and warrants were initiated wherein the purchasers
of the August 5, 1996 private placement will be given the opportunity to convert
their investment into the new private placement.
As a result of these developments, including both the acquisition of
Tonopah and the discontinuance of Tonopah's operations effective within the
quarter ended September 30, 1996, and the issuance of Preferred Series A, B and
C shares followed by their exchange for common shares within the same quarter,
Citadel has elected to collapse these transactions for accounting purposes into
a single transaction the effect of which is an exchange of common stock of
Citadel for common stock of Tonopah. Tonopah is a holding company for assets
consisting of shares of subsidiaries held for sale, right to a permit to operate
a medical waste treatment facility (if the permit is granted), notes receivable
from subsidiaries and certain liabilities consisting of accounts and notes
payable. Tonopah has no employees and has no plans to recommence operations.
Because Citadel has never received any dividend or distribution from
Tonopah and because Citadel has operated independently from Tonopah, Citadel
believes that it has no liability to Tonopah's general creditors. Citadel
intends that Tonopah liquidate its assets and discharge its liabilities without
financial assistance from Citadel. Net proceeds of the liquidation, if and when
received, will be used by Citadel for working capital.
RESULTS OF OPERATION
Revenues are not material.
Total costs and expenses for the quarters ended September 30, 1996 and 1995
were $86,804 and $399, respectively. Total costs and expenses for the September
30, 1996 quarter are associated primarily with completion of the Tonopah
acquisition and general administration.
Working capital through the third quarter of 1996 was $203,555 and was not
material for the third quarter of 1995.
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CITADEL ENVIRONMENTAL GROUP, INC.
PART II. OTHER INFORMATION
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Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES
Other than as noted in Item 2 above, not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Registrant hereby incorporates by reference Registrant's Form 8-K
dated August 27, 1997 as to a special meeting of shareholders held on
August 12, 1996. At this meeting the shareholders (1) approved the
name change of registrant from "Citadel Asset Management, Ltd." to
"Citadel Environmental Group, Inc."; (2) approved the acquisition of
Tonopah Resources International, Inc. for an aggregate of 1,050,000
shares of common stock, 1,500,000 shares of Series A Preferred Stock,
1,500,000 shares of Series B Preferred Stock and 2,000,000 shares of
Series B Preferred Stock; and (3) elected David L. Norris, Robert R.
Barber and Horst Engel as Directors. Thereafter the Board also
appointed David J. D'Appolonia as a director and further appointed him
as Chairman of the Board.
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Registrant hereby incorporates herein by reference Registrant's Form
8-K dated August 27, 1997.
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SIGNATURES
Pursuant to the requirements 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: December 17, 1996 CITADEL ENVIRONMENTAL GROUP, INC.
By /s/ RICHARD LANDI
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Richard Landi, President
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