UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ending June 30, 1996
Commission File Number 0-16447
AMERICAN CONSOLIDATED GROWTH CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 52-1508578
(State of incorporation )
(I.R.S. Employer Identification No.)
8100 E. Arapahoe Road, Suite 309, Englewood, CO. 80112
(Address of principle executive offices) (Zip Code)
(303) 220-8686
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Common Stock $.10 par value
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by section 13 or 15(d) of
Securities Exchange Act of 1934 during the preceding 12 months
(or for such a 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 [ ]
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is contained in this form
and no disclosure will be contained, to the best of the
Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-
KSB. [ ]
State issuer's revenues for its most recent fiscal year
$8,897,455.
The aggregate market value of the voting stock of the
Registrant held by non-affiliates as of June 30, 1996, was
$853,198. A total of 3,412,792 shares were owned by non-
affiliates as of June 30, 1996.
The number of shares of Common Stock, $.10 par value,
outstanding on June 30, 1996 was 7,601,321 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference are found in Item 13.
Table of Contents
Part I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security
Holders
Part II
Item 5. Market for Common Equity and Related Stockholder Matter
Item 6. Management's Discussion and Analysis or Plan of
Operation
Item 7. Financial Statements
Item 8. Changes in and Disagreements with Accountants and
Financial Disclosure
Part III
Item 9. Directors and Executive Officers, Promoters
and Control Persons; Compliance with Section 16(a)
of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners
and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and reports on Form 8-K
SIGNATURES
FINANCIAL STATEMENTS AND SCHEDULES
PART I
Item 1. Description of Business.
General
American Consolidated Growth Corporation (the "Company" or
"AMGC") is a U.S. public company engaged in the financial
development of its wholly owned subsidiary, Eleventh Hour, Inc.,
a national staffing services business. The common stock of the
Company is traded under the symbol "AMGC" on the Electronic
Bulletin Board, NASDAQ (OTC-BB). The principle executive offices
of the Company are located at 8100 E. Arapahoe Road, Suite 309,
Englewood, CO 80112. Telephone number: (303) 220-8686.
Facsimile number: (303) 220-3288.
History
Originally named "American Consolidated Gold Corporation,"
the Company was incorporated in the State of Delaware on April
2, 1987. The Company was formed for the purpose of merging
Marathon Gold Corporation, ("Marathon") a Utah corporation, and
Centennial Gold Corporation, ("Centennial") a Colorado
corporation, with the Company as the survivor. The merger
became effective on September 8, 1987, completing a reverse
stock split of the issued and outstanding common shares of
Marathon on a share basis of 10 for 1 and of the issued and
outstanding common shares of Centennial on a basis of 5 for 1.
Prior to the merger, the Company owned no property and conducted
no business. Marathon and Centennial, the Company's
predecessors, were development stage companies engaged in gold
mining exploration operations beginning in 1981 and 1982,
respectively. Neither company was successful in producing any
significant revenues from these activities.
In January of 1991, the Company acquired new management and
discontinued all mining exploration operations. The name of the
Company was changed to American Consolidated Growth Corporation
and a new fiscal year ending date of June 30 was adopted.
During fiscal year ended June 30, 1992, all property, plant
and equipment of the Company relating to its original mining
exploration activities were sold. The Company changed its
primary purpose and business to "technology banking," or the
acquisition of and investment in U.S.-based emerging growth
technologies. The primary acquisition completed during this
period of time was the purchase by the Company of all of the
assets of Ultratech Knowledge Systems, Inc., a Colorado
corporation. The acquisition resulted in the Company receiving
a significant equity position in two Colorado corporations:
Advance Display Technologies, Inc., ("ADTI") a research and
development stage company engaged in the fiber optics display
field, and Ultratech Knowledge Systems, Inc., DBA AGTsports,
Inc., ("AGT") a research and development stage company engaged
in the computer software and services business for the golf and
recreation industries. On May 5, 1993, the Company completed a
reverse split of its issued and outstanding common stock on a
per share basis of 1 for 10.
On July 1, 1994, the Company acquired 100% of the issued
and outstanding common shares of a private company, Eleventh
Hour, Inc., ("EHI"), and its affiliated entities, in
consideration for one million restricted shares of the Company's
issued and outstanding common stock. EHI is a national staffing
services company engaged in temporary and permanent employee
placement and outsourcing. The company and its operations are
discussed in-depth in the "Investments" section of this report.
(See "Investments - Eleventh Hour, Inc.").
On January 26, 1995, the Company acquired new management
and changed the Company's primary purpose and business to
staffing services and the development of Eleventh Hour, Inc.,
the sole revenue producing business and primary asset of the
Company. In order to increase shareholder value, management
authorized implementation of a restructuring plan calling for
the termination of all former technology-related activities, the
elimination of all non-producing assets and the exclusive
development and expansion of EHI's staffing services business.
Subsequent to fiscal year ended June 30, 1995, due to continuing
financial difficulties and the inability of Advanced Display
Technologies, Inc. and AGTsports, Inc. to bring their products
to market, both of these investments were written down to zero
value on the books of the Company. (See the Company's Form 10-
KSB/A, June 30, 1995).
On March 27, 1996, the Board of Directors of the Company
adopted a resolution to change the fiscal year to December 31
following the fiscal 1996 period ending June 30, 1996.
On June 27, 1996, the annual meeting of AMGC stockholders
was held in Englewood, Colorado. The stockholders ratified the
election of the newly expanded Board of Directors of the Company
and approved three stock option plans. (See - Part I , Item 4.
"Submission of Matters for a Vote of Security Holders " and Part
III. Item 9. "Directors and Executive Officers").
As of June 30, 1996, the Company had a working capital
deficiency of approximately $1,052,000 and a stockholders'
deficit of $2,069,000. Although the Company continues to
experience lack of adequate funding to fully pursue its business
objectives, following the recent completion of the internal
restructuring efforts and assuming new sources of financing will
be secured, the Company believes it will be able to successfully
meet all of its current obligations.
Investments
As of June 30, 1996, the Company had active investments in
one company: Eleventh Hour, Inc., a wholly owned subsidiary
engaged in the staffing services industry. (See "Eleventh Hour,
Inc." below).
As of June 30, 1996, the Company held 1,400,000 common
shares of Advanced Display Technologies, Inc., a research and
development company and former affiliate of AMGC. During fiscal
1995, this investment was written down to zero value following a
determination by management that ADTI had failed to successfully
bring its products to market and certain claims existed
concerning the ADTI shares. Additionally, as reported in the
Legal Proceedings and Subsequent Events section of this report,
the shares have become the subject of a lawsuit in Colorado.
(see "Legal Proceedings - ADTI" and "Subsequent Events - ADTI").
As reported in the Company's Form 10-KSB/A for the fiscal
year ended June 30, 1995, (See "Subsequent Events - AGTsports,
Inc.") the Company divested itself of its former shareholdings
and investment in AGTsports, Inc. in September of 1995. The
Company entered into a joint venture agreement with Global Links
Trading, Limited, ("GLT") a computer software licensing company
and transferred 100% of its shareholdings of AGTsports, Inc. to
GLT in exchange for an overriding royalty of 15% on gross sales
of certain GLT products. For the fiscal year ending June 30,
1996, GLT produced no sales relating to the Company's joint
venture agreement with GLT. The agreement carries no expense to
the Company. Pending further development of GLT products and
markets, management can provide no assurance GLT will be
successful in its business plan or in achieving sales which
would result in material royalty payments to the Company.
Due to the recurring loss history of the Company and
considering the limited number of sources of new funding for
working capital, the auditors of the Company have raised
significant doubts as to the abilities of the Company to
continue as a going concern.
Eleventh Hour, Inc.
Eleventh Hour, Inc. ("EHI") was acquired on June 30, 1994
for 1,000,000 shares of the issued and outstanding common stock
of the Company. The acquisition successfully retired $720,996
of EHI long term debt and converted $1,658,000 of outstanding
EHI notes into redeemable common stock, ("puts") of AMGC. The
acquisition was accounted for as a purchase as reported in the
Company's Form 10-KSB/A for the fiscal year ended June 30, 1995.
In fiscal 1996, AMGC converted the puts into equity and seven
year promissory notes. (See "Subsequent Events - Other
Events").
EHI is a 100% wholly owned subsidiary of the Company.
Management believes the subsidiary shall continue to benefit
from the growing trend towards temporary and outsourcing
services, improving economic conditions and implementation of
the Company's business strategy.
Services and Products of EHI
EHI is a national provider of temporary personnel and
outsourcing services to businesses, professional and service
organizations and government agencies. The Company provides a
broad range of staffing services through its national network of
eight (8) Company-owned branch locations in California,
Colorado, Kansas and Missouri. During its most recent fiscal
year, the subsidiary served more than 5,000 customers across the
U.S.
The primary product of the business is represented by
temporary placement of individuals who possess a wide variety of
office, light industrial and other skills, including
secretarial, word processing, data entry, telemarketing,
assembly, picking, packing and sorting and shipping and
receiving. In addition, the Company provides temporary
personnel with various technical and professional skills such as
programming, designing, engineering and accounting. Permanent
placement of qualified personnel represents another important
product for the Company. Taken together, the services provided
by EHI can be viewed as a spectrum ranging from traditional
temporary services to value-added outsourcing solutions.
EHI has established an Onsite Staffing Coordinator Program;
a cost effective solution for clients who spend administrative
and personnel department time and resources managing employees
whose jobs are generally routine and are characterized by high
turnover rates. This program most often includes the placement
of an EHI Staffing Specialist onsite who coordinates and
supervises all staffing service functions for the client. The
specialist typically interfaces with the client's Human
Resources department, helping to increase management time where
it is more effectively spent and reducing unnecessary functions
where needed. The onsite program utilizes temporary staff to
help control overhead costs and to improve profitability in
positions previously filled by permanent employees. This
service is often provided to clients who have highly fluctuating
personnel needs such as light manufacturing companies and
assembly and packaging businesses.
Operations of EHI.
As of June 30, 1996, the subsidiary recorded gross revenues
from operations of $8,897,455, a decrease from 1995 fiscal
revenues of $10,372,461. A net loss for fiscal 1996 was $76,174
compared to earnings of $450,537 in fiscal 1995. The decrease
in performance was attributed mainly to increased workers
compensation costs, higher competition in the marketplace and
the continuing need for additional sources of financing to grow
operations. (See "Financial Statements"). Due to increasing
costs of certain workers compensation claims, EHI elected not to
renew a contract with a major client during the fiscal year
ended June 30, 1996. The claim activity was determined by
management to represent undue risk and made the account
unprofitable for EHI to continue as a service provider. In the
final month of fiscal year ended June 30, 1996, EHI combined
temporary and permanent placement sales of $1,030,776.
Eleventh Hour, Inc. was founded by Norman L. and Valerie A.
Fisher, (See "Biographical Data"), who established the staffing
business as a Colorado corporation on December 21, 1988. EHI
utilizes a central headquarters located in Englewood, Colorado
for management of its affiliate branch offices, including all
accounting, support and supervisory services. The address and
telephone number of the principle executive offices of EHI are:
Eleventh Hour, Inc., 8100 East Arapahoe Road, Suite 311,
Englewood, CO, 80112. Telephone number: (303) 220-5300.
Markets of EHI
According to the August 1996 issue of the Staffing Industry
Report, published by Staffing Industry Analysts, Inc., revenues
from combined U.S. staffing industry segments generated an
estimated $62.9 billion in 1995, with combined temporary help
services generating an estimated $40.6 billion. Temporary help
is one of the fastest growing segments, especially in the areas
of light industrial, medical and technical support personnel.
Eleventh Hour, Inc. employs over 4,000 temporaries annually,
chiefly in the areas of clerical and light industrial services.
These employees represented over 85% of EHI's annual gross
revenues in fiscal 1996. Permanent placement of executives is a
secondary market for EHI.
Another independent industry study published in May of 1996
by the National Association of Temporary and Staffing Services
reports payroll receipts for the temporary help segment in
excess of $7 billion for the first quarter of 1996. The study
forecasts continuing growth in the staffing services industry
due to several factors: the need for business organizations to
remain flexible in order to compete in an interconnected global
economy; the ever-evolving social contract between the workforce
and business organizations wherein larger numbers of people view
temporary employment as a way to gain greater job security and
higher career paths; the difficulties all types of business
organizations experience in attracting, evaluating and
recruiting employees; a broadening of the types of staffing
arrangements offered by staffing companies, as reflected in the
expanding services industries; and the overall health of the
U.S. economy, which celebrated its fifth anniversary of growth
in March, 1996.
Demographically, the U.S. staffing services industry is
highly fragmented, with an estimated 3,000 to 5,000 private
firms operating over 10,000 offices. The size of these
companies varies greatly, ranging from smaller "mom and pop"
temporary service businesses with annual revenues of less than
$500,000 to larger international companies such as Manpower,
Inc., a company with revenues in excess of $6 billion. Despite
the considerable competition, smaller, well-managed companies,
especially those with a specialized focus, can succeed on a
local or regional basis.
For employers, the use of temporary personnel is a proven
technique to mitigate the rising costs of recruiting, fringe
benefits, employee turnover and other employee-related expenses.
These advantages have led many companies to adopt business
strategies which focus on their core business competencies, with
non-core business support functions being "outsourced" to
service companies such as EHI. Outsourcing services remains an
emerging industry and is, as such, still relatively undefined.
It parallels the temporary help services industry in that it is
also highly fragmented, with few large companies operating on a
national level. EHI believes all segments within the industry
are experiencing a trend toward consolidation and has
implemented new strategies to help adapt to the changing
marketplace, (See "Strategies" below).
Strategies
EHI plans to continue providing a wide range of high
quality services to a diverse group of clients through its 8
existing branch office locations. EHI promotes a philosophy of
developing and maintaining long term relationships with its
clients, striving to achieve high levels of performance and
customer satisfaction to attract and retain local, regional and
national accounts. The Company continues to explore growth
opportunities to expand its existing service offerings, develop
additional skill classes and enter new markets by selectively
expanding its offices through targeted acquisitions.
Prominent industry analysts such as the N.A.T.S.S. and
Staffing Analysts, Inc. have reported extensively on the ongoing
trend toward consolidation within the Staffing Services
industry. In conjunction with this trend, management of EHI has
adopted plans to target and acquire smaller companies for the
purpose of expanding EHI's market presence in fiscal 1997. The
profile for such targets includes businesses with core temporary
accounts generating revenues of up to $5,000,000 annually.
Management believes such acquisitions can be made without
excessive capital outlay utilizing existing EHI resources
management and personnel.
Recent Developments
During the fiscal year ended June 30, 1996, EHI
successfully completed the relocation of its primary Colorado
branch office to a new facility located at 8586 E. Arapahoe Road
in Englewood, Colorado. The office enabled EHI to obtain a more
desirable and highly visible location adjacent to offices of
United Airlines near the Denver Technological Center. Based
upon existing growth, Management believes the new office will
achieve increased sales performance and profitability in fiscal
1997.
On March 17, 1996, EHI established its eighth branch
office, a new location based in Springfield, Missouri providing
both temporary and permanent placement services. As of June 30,
1996, the Springfield office had doubled its monthly sales on a
month to prior month basis. Assuming productivity at the new
branch continues to grow at its present pace, management
anticipates the new location to achieve profitability within its
first year of operations.
On June 24, 1996, EHI established a new position based from
within EHI's corporate offices in Englewood, Colorado: Director
of New Business Development. Veteran EHI sales manager Michael
Maloney, will target national corporate accounts utilizing state-
of-the-art computer systems together with existing EHI resources
and personnel.
On October 10, 1996, Eleventh Hour, Inc. entered into a
preliminary agreement with Concord Growth Corporation, of Palo
Alto, California, to refinance the accounts receivables of EHI.
The agreement significantly increases EHI's existing line of
credit up to $1.5 million and reduces the current rate of
interest by over fifty percent. In the opinion of management,
the new financing is expected to assist the Company in
accomodating future sales growth of EHI and to help increase EHI
cash flow and overall profitability. (See "Subsequent Events -
EHI Receivables Financing").
Subsequent Events
EHI Receivables Financing. On October 10, 1996, the
Company entered into a preliminary financing agreement with
Concord Growth Corporation, of Palo Alto, California to
refinance the accounts receivables of EHI. The agreement is
expected to significantly reduce EHI's interest expense on
accounts receivables financing by over fifty percent and
provides a new credit line of up to $1.5 million. The Company
believes EHI will utilize the new financing to complete targeted
acquisitions of local and regional staffing businesses in the
period ending December 31, 1997 and to accomodate future sales
growth of EHI. Although no assurance can be provided that
acquisitions will be made or EHI future sales will increase, in
the opinion of management, the savings to the Company in annual
interest payments resulting from the accord will be significant
and will have a favorable material impact on the future
profitability of the Company.
Advanced Display Technologies, Inc. On July 19, 1996,
the Company was named a defendant in Display Group, LLC vs.
American Consolidated Growth Corporation, a civil replevin
action concerning the Company's ownership of 1,400,000 shares of
common stock of Advanced Display Technologies, Inc., ("ADTI") a
former affiliate of the Company. During the year ended June 30,
1995, the Company determined the shares were worthless due to
ADTI's failure to bring its products to market and as a result
of the significant decrease in trading volume and quoted stock
price of ADTI. As of the date of the filing of this report, the
Company can provide no assurance as to the outcome of the case.
In the event the Company is unsuccessful in its efforts to
retain the subject shares, in the opinion of counsel, no adverse
consequences are anticipated to occur, other than the loss of
the title to the stock. However, upon review of the facts and
historical evidence available to the Company, Management
believes there is a strong likelihood it shall become involved
in extensive litigation with Display Group, LLC, ADTI and their
officers and directors in order to resolve outstanding issues
arising from transactions involving the Company and these
parties and to protect the interests of the Company and its
shareholders. (See "Legal Proceedings - ADTI" and "Financial
Statements - Footnote 12").
Other Events
Change in Fiscal Year
As reported on the Company's Form 8-K dated April 3, 1996,
on March 27, 1996, the Board of Directors approved a resolution
to change the current fiscal year of the Company from June 30 to
December 31.
Income Tax Return
As of June 30, 1996, following a change of principle
independent auditors, the Company has yet to file federal and
state income tax returns for fiscal 1995. The Company has been
advised penalties and interest are accruing and that subject to
filing, such amounts that may be owed have yet to be determined.
Refinancing of Debt
As reported on the Company's Form 8-K dated April 3, 1996,
the Company executed subscription agreements with certain AMGC
debt holders thereby converting $1,599,296 of short term debt
into seven year promissory notes and restricted common shares of
the Company's issued and outstanding common stock at $1.00 per
share. The notes expire on March 1, 2003 and carry a 14%
interest rate payable quarterly. The subsription agreements
terminated the 1994 Put Agreement and resulted in the surrender,
return and cancellation of certain outstanding shares of the
Company's issued and outstanding common stock. The debt was
originally assumed by AMGC pursuant to the July 1, 1994
acquisition of EHI. These debt conversion transactions are
discussed in greater detail in the financial section of this
report (See "Financials - Footnote 8"). In the opinion of
management, the new agreements represent a positive step in the
ongoing financial development of AMGC and EHI and are expected
to have a favorable material impact on the financial health and
future profitability of the Company.
Resignation of Chairman and CEO
On June 27, 1996, the Board of Directors of the Company
accepted the resignation of interim Chairman Mickey E. Fouts,
who served as CEO from January 17, 1996 to June 27, 1996. The
Board of Directors appointed Mr. Norman L. Fisher as acting
President and authorized the recruitment and review of new
candidates to be recommended to the AMGC stockholders for the
Chairmanship of the Company.
Operations During Fiscal Year
During the fiscal year ending June 30, 1996, the Company
has been engaged primarily in the financial development of its
wholly owned subsidiary, Eleventh Hour, Inc. During the
reporting period ended June 30, 1996, in the opinion of
management, the Company had very little liquid resources and was
unable to fully pursue its business objectives. However,
pursuant to the restructuring of the Company authorized on
January 26, 1995, management believes it has successfuly
implemented a new business plan designed to maximize shareholder
value through the continuing financial development of EHI and
the reduction and restructuring of existing debt. As of June
30, 1996 the Company has established both short and long-term
plans to finance operations and to negotiate several material
contracts.
Segment Reporting.
As of June 30, 1996, the Company had active investments and
operations related to one company: Eleventh Hour, Inc. (See
"Investments - Eleventh Hour, Inc.).
Trademarks and Trade Names.
The Company, through its wholly owned subsidiary, Eleventh
Hour, Inc. owns one Trade Name: "XIth Hour, Inc."
Compliance with Environmental Laws and Regulations
The Company liquidated all of its mining properties and
operations in the fiscal year ended June 30, 1992. The Company
does not believe that it is subject to any local, state, or
federal statutory and regulatory requirements with respect to
environmental safety and land reclamation that would affect it
adversely in the future. However, there can be no assurance of
this. Compliance to date has had no material effect on the
Company's method of conducting its business and the cost of such
compliance has not been significant.
Employees
During the period ending June 30, 1996, the Company had one
full time employee together with 38 full time employees of the
wholly owned subsidiary, Eleventh Hour, Inc. None of these
employees are represented by any Union or collective bargaining
group and there is no prior history of any strikes, slow-downs
or other labor disputes. The Company is highly dependent on its
full time employee and certain members of EHI management. (See
"Executive Officers of the Company").
Executive Officers of the Company
The Executive Officers of the Company are as Follows:
Norman L. Fisher President, Treasurer and Director.
Mr. Fisher is also the Chief Executive Officer of Eleventh
Hour, Inc.
Valerie A. Fisher Vice President and Director.
Mrs. Fisher is also the Executive Vice President of EHI.
Cory J. Coppage Chief Operating Officer, Secretary and
Director
(See Item 10. "Directors and Executive Officers of the
Registrant - Biographical Information").
International Operations
The Company conducted operations only in the United
States.
Item 2. Properties
During the fiscal year ending June 30, 1996, the Company's
business offices were located at 8100 East Arapahoe Road, Suite
309, Englewood, CO, 80112, where the Company offices at present.
The office space is leased under a three year non cancelable
lease expiring in March, 1998, with a renewal option for an
additional two years at the then-current market rate. EHI
leases office space for its branch offices in Overland Park,
Kansas, Tustin, California, Englewood, Colorado and Springfield,
Missouri. (See Operating Leases in Notes to Consolidated
Financial Statements). The following is a schedule of future
minimum rental payments required under the above referenced
operating leases as of June 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
Years-Ending
June 30 Amount
1997 $ 230,218
1998 208,972
1999 111,364
2000 84,305
$ 634,859
</TABLE>
Total rent expense charged to operations for the years
ended June 30, 1995 and 1996 was $221,948 and $264,924,
respectively. The Company's operating leases require current
monthly payments of $21,960 with expirations at various dates
through May, 2000.
Item 3. Legal Proceedings
On July 19, 1996, the Company became a defendant in Display
Group, LLC vs. American Consolidated Growth Corporation, Civil
Action No. 96-CV-1560, Division 5 of Arapahoe County District
Court, in the State of Colorado. The suit is a replevin action
concerning 1,400,000 shares of ADTI common stock brought by
Display Group, LLC, the management arm of Advanced Display
Technologies, Inc., a former affiliate of the Company. As of
September 30, 1996, the preliminary finding of the Court was
that a reasonable probability existed for possession of the
shares to be held by the Plaintiff and the shares were turned
over to Display Group pending the outcome of a jury trial on the
matter.
Based upon the opinion of counsel, provided appropriate
testimony can be presented by certain key individuals involved,
the Company believes there is a reasonable probability the case
will be decided in the Company's favor. However, the Company can
provide no assurance as to the outcome of the case. In the
event the Company is unsuccessful in its efforts to retain the
subject shares, in the opinion of counsel, no adverse
consequences are anticipated to occur, other than the loss of
the title to the stock. During the year ended June 30, 1995, the
Company determined the shares were worthless due to ADTI's
failure to bring its products to market and the significant
decrease in trading volume and quoted stock price of ADTI.
In September of 1996, the Company received notice from Jeff
Robinson of Corporate Partners, Inc. of a claim involving a
$250,000 license fee allegedly owed as a result of agreements
related to the licensing of the ADTI technology between CPI and
former management of the Company in prior years. The Company
has retained special legal counsel to refute the allegation and
intends to vigorously defend any such action, if necessary.
Upon review of the facts and historical evidence available
to the Company, Management believes there is a strong likelihood
it shall become involved in extensive litigation with Display
Group, LLC, ADTI and their officers and directors in order to
resolve outstanding issues arising from transactions involving
the Company and these parties and to protect the interests of
the Company and its shareholders. (See "Subsequent Events -
ADTI" and Financial Statements - "Footnote 12").
In June of 1996, the Company received notice of Complaint
from the North Dakota Securities Commission alleging breach of
the State's "Blue Sky" securities laws. The Company believes
the action is the outgrowth of an offer by AMGC in February,
1996 to convert a $50,000 obligation owed to a former EHI
investor and North Dakota resident into restricted common stock
and/or a promissory note. As of June 30, 1996, the Company
believes the Commissioner's office will pursue the matter and a
hearing was scheduled to be held in October of 1996. The
Company has retained special legal counsel in North Dakota to
review the case and as of the date of the filing of this report,
the Company is unable to determine the outcome of this matter or
consequences involved.
In September of 1996, the Company received notice from the
Internal Revenue Service to provide information concerning the
tax year ended 1994. On October 9, 1996, a meeting was held at
the offices of the Company with an agent of the IRS to determine
the accuracy of certain items reported on the Company's tax
returns for those periods. As of the date of the filing of this
report, the Company is unable to determine the outcome of this
examination and what, if any, material or financial consequences
may result.
During fiscal 1996, in the opinion of Management, the
Company was not part of any active litigation having any
material or adverse effect on the Company.
Item 4. Submission of Matters to a Vote of Security Holders
On June 27, 1996, the Company submitted for a vote of
security holders four items contained on its 1996 Proxy
Statement. All four items were ratified by a majority of the
voting shares of the Company as follows:
1) Election of Directors: The following directors were
appointed for a three year term of service: Norman L. Fisher,
Valerie A. Fisher, Cory J. Coppage, Geoff Dawson and Joe Lee.
2) Equity Incentive Plan: The 1996 Equity Incentive Plan
(the "Incentive Plan") was adopted in order to provide for the
grant of qualified incentive stock options to full time
employees of the Company. The Incentive Plan provides for a
maximum number of 800,000 shares of Common Stock. Incentive Plan
participation is limited to employees who perform vital services
in the management, operation and development of the Company and
who significantly contribute to the achievement of the Company's
long-term corporate economic objectives. The following
employees received 100,000 share incentive stock options under
the Incentive Plan: Norman L. Fisher, President, Treasurer and
Director, Valerie A. Fisher, Vice President and Director, Cory
J. Coppage, Chief Operating Officer, Secretary and Director, and
Mary Y. Hartley, EHI Vice President and Controller. All options
were granted with an exercise price over thirty percent above
the fair market value of the Common Stock at the time of the
grant ($0.76 per share), or at $1 per share. As of June 30,
1996, the current market value of the Common Stock remains below
the exercise price, therefore no dollar value is attached to the
options at present.
3) Non-Employee Director Stock Option Plan. The 1996 Non-
Employee Director Stock Option Plan, (the "Director Plan") was
adopted in order to provide non-employee directors with added
incentive to continue in the service of the Company. Awards
under the Non-Employee Director Plan provide for the grant of
options to each non-employee member of the Company's Board of
Directors at an exercise price equal to or not less than the
fair market value of the Common Stock on the date of grant.
Under the Director Plan, the maximum number of shares of Common
Stock that may be granted is 100,000. Two directors have been
granted 25,000 share options under the Director Plan: Geoff
Dawson and Joe Lee. Both options carry an exercise price equal
to the fair market value of the Company's Common Stock at the
time of grant, ($0.25).
4) Employee Non-Qualified Stock Option Plan. The 1996
Employee Non-Qualified Stock Option Plan (the "Employee Plan")
was adopted in order to provide for the grant of non-qualified
incentive stock options to a key employee of the Company. Under
the Employee Plan, the maximum number of shares of Common Stock
represented by options is 400,000 shares. Upon exercise of the
options, the option holders must pay to the Company the full
exercise price as established by the plan in order to acquire
their shares. Employee Plan participation is limited to the
Chief Executive Officer of the Company's wholly owned
subsidiary, Eleventh Hour, Inc., who performs vital services in
the management, operation and development of EHI and
significantly contributes to the achievement of the Company's
long-term corporate economic objectives. Mr. Fisher received a
400,000 share option to purchase shares of the Company's Common
Stock at an exercise price of $1.00 per share. As of June 30,
1996, the exercise price of the option remains above the current
market value of the stock and as such, no dollar value is
attached to the option.
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
As of the date of this report, trading activity in the
Company's securities is extremely limited. The Company is
unable to assess whether it will be able to revive confidence in
the trading markets with the investment community and its
shareholders.
Market Information
The Company's common stock, par value $.10 per share
("Common Stock") is traded in the over-the-counter market,
NASDAQ, under the stock trading symbol "AMGC."
(1) Bid
<TABLE>
<CAPTION>
<S> <C> <C>
Quarter Ending (2) High (3) Low
June 30, 1996 $ 0.37 .25
March 31, 1996 0.37 .25
December 31, 1995 0.25 .18
September 30, 1995 0.44 .37
June 30, 1995 0.41 .25
March 31,1995 1.25 .38
December 31, 1994 4.50 1.37
September 30, 1994 10.00 8.50
June 30, 1994 3.50 1.50
March 31, 1994 4.00 1.00
December 31, 1993 2.00 1.00
September 30, 1993 1.00 1.00
</TABLE>
(1) Such over-the-counter market quotations reflect inter-
dealer prices, without any retail markup, markdown, or
commission and may not necessarily represent actual
transactions.
(2)(3) At the time of this report, the only activities in the
Company's trading Common stock, of which the Company is aware,
is by Broker/Dealers known as wholesalers. Consequently, there
has been little or no retail trading activity in the Company's
securities during the fiscal year ended June 30, 1996. The
quotes shown above were arrived at by averaging the bid and the
ask price in the marketplace during these periods and are
provided for informational purposes only. The Company believes
these quotes to be estimates and therefore should not be relied
upon for investment purposes.
Holders of Record
As of June 30, 1996, there were approximately 2,100
shareholders of record of Common Stock.
Dividends
During the fiscal year ended June 30, 1996, no dividends
were declared or issued.
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations
In the fiscal year ending June 30, 1996, revenues were
$8,897,455 as compared to the year ending June 30, 1995 of
$10,372,461. Following the change in the primary purpose and
business of the Company, net loss decreased from $9,973,547 in
fiscal 1995 to a net loss of $701,774 in fiscal 1996. However,
gross margins remained relatively stable over the same period:
$2,682,410 in fiscal 1995 compared to $2,259,221 in fiscal 1996.
For the year ended June 30, 1996, direct expenses were
$6,638,234 and interest expenses totaled $467,481. In fiscal
1995, the Company experienced a non-recurring loss of $7,976,740
resulting from costs associated with the write down and
liquidation of certain assets and the internal restructuring of
the Company. In fiscal 1996, income related to certain
discontinued operations was was recognized of $84,237. The
Company experienced significant legal, accounting and other
related costs which are included in both discontinued and
continuing operations. Certain legal costs included in
discontinued operations were offset by the gain on sale of
investments of approximately $170,000. Decrease in revenues was
also attributed to the termination of a major client account in
fiscal 1996 as a result of expenses related to workers
compensation claims which made the account unprofitable.
As of June 30, 1996, the Company believes the primary
internal restructuring measures have been successfully
completed. These efforts included a change in the primary
purpose and business of the Company, the write down and
liquidation of all non-performing assets, the resolution of
numerous outstanding business matters related to the former
business of the Company, the reduction or elimination of
significant portions of short term debt and the adoption of new
measures designed to increase working capital and revenues. In
the opinion of management, the Company has progressed
significantly as compared to the period ending June 30, 1995.
Short term debt obligations were reduced by 45% through the
conversion of $1,599,296 of short term debt into equity and long
term promissory notes, thereby increasing cash flow of the
Company. The Company assisted in providing new working capital
and management support to alleviate certain debts of EHI and
improve its operations. During fiscal 1996, the Company has
been able to successfully continue operations, to reposition
itself in the marketplace, to acquire new management and
consulting expertise and to improve its marketing strategies.
All of these efforts have been made for the purpose of
increasing shareholders' equity and profitability on a going
forward basis.
The foregoing discussion contains certain forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Act of 1934, which
are intended to be covered by the safe harbors created thereby.
These statements include the plans and objectives of management
for future operations, including plans and objectives relating
to the development. The forward-looking statements included
herein are based on current expectations that involve numerous
risks and uncertainties. Assumptions related to the foregoing
involve judgements with respect to, among other things, future
economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the
Company. Although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any of
the assumptions could be innaccurate and, therefore, there can
be no assurance that the forward-looking statements included in
this Form 10-KSB will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will
be achieved.
Liquidity and Capital Resources
Cash and cash equivalent's balance on June 30, 1996 was
$156,067 and current assets were $1,250,605. Current ratios for
the year ending June 30, 1996 were .54 to 1 as compared to .31
to 1 the previous year. There was a significant change in
working capital during fiscal year 1996 due mainly to the change
in the purpose and primary business of the Company.
As of June 30, 1996, the Company had a working capital
deficiency of $1,052,150 and a stockholders' deficit of
$2,068,840 which includes non-recurring losses of $7,976,740 in
fiscal 1995 sustained due to the write down and liquidation of
certain technology assets, resolution of outstanding issues
related to the former business of the Company and internal
restructuring of AMGC.
Assuming the subsidiary business continues to experience
positive cash flow and to be profitable on a going forward basis
and provided new sources of outside financing are secured,
Management believes the Company will be able to successfully
meet all of its current obligations. However, no assurances can
be given the Company will be successful in these endeavors.
Item 7. Financial Statements and Supplementary Data
This response is submitted as a separate section of this
report (see Financials - Page F-1).
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
There have been no disagreements with the Company's
independent accountants on accounting or financial disclosure.
Part III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange
Act.
As of June 30, 1996, the Executive Officers and Directors
of the Company, their ages and positions held in the Company
were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Positions held
Norman L. Fisher 49 President, Treasurer, Director
Valerie Fisher 48 Vice President and Director
Cory J. Coppage 33 Chief Operating Officer
Secretary and Director
Joe Lee 62 Director
Geoff Dawson 54 Director
</TABLE>
The directors serve for a term of three years and are elected at
an annual meeting of shareholders and serve until their
successors are duly elected and qualified or until their earlier
resignation or removal.
Biographical Information
Norman L. Fisher - President, Treasurer and Director
Mr. Fisher is the co-founder, President and Chief Executive
Officer of EHI and the President and Treasurer and Director of
the Company. He has over twenty years of management experience,
including four years with Norrell Services as a Regional Manager
from 1978 to 1982 and six years as an Executive Vice President
and Managing Director of Talent Tree, Inc. from 1982 to 1988.
As a member of the Executive Committee and Board of Directors of
Talent Tree, Inc. Mr. Fisher was responsible for the nationwide
expansion of operations from a local Houston, Texas-based
business with three offices to a major national service with 135
branch locations and app. $250 million in annual sales. In
1988, Mr. Fisher co-founded EHI in Englewood, Colorado. Mr.
Fisher, 49, is a graduate of Western State College and holds a
Bachelor of Science Degree in Business Administration. He is a
well-known figure in the personnel services industry and has
served in various capacities in both national and local industry
associations. Mr. Fisher is married to Valerie A. Fisher.
Valerie Fisher - Vice President and Director
Mrs. Fisher, 48, is the co-founder and Executive Vice President
of EHI and Vice President and Director of AMGC. She has over
eighteen years of experience in the personnel services industry,
entering the business as an Account Manager for Norrell Services
in 1977. In 1979, Mrs. Fisher was responsible for establishing
a new branch location for Norrell in Anaheim, California, which
achieved profitability within its first six months of operation.
In 1982, she left Norrell to join her husband, Mr. Norman
Fisher, in establishing operations in Colorado for Talent Tree,
Inc.; a successful enterprise which also achieved profitability
within its first seven months of operation. In 1983, as a
Managing Director, Mrs. Fisher expanded Talent Tree's presence
in Colorado and later, as Vice President and General Manager of
the Colorado, was responsible for developing a state-of-the-art
computer system for the Company, including the majority of all
operating systems, accounting systems and sales management
functions. Mrs. Fisher was responsible for the creative
development of many of Talent Tree's marketing and staffing
concepts and supervises these and other functions at EHI.
Cory J. Coppage - Chief Operating Officer, Secretary and
Director
Mr. Coppage, 33, is the Chief Operating Officer, Secretary and
Director of the Company. He has over seven years of business
management experience including two years of administration
service with AMGC. Mr. Coppage is a graduate of Regis
University, where he earned a Bachelor of Science Degree in
Business Administration. From 1989 to 1994, he gained valuable
management experience in the liability insurance field as a
licensed property & casualty agent and field manager for
Liability Insurance Operations Network, Inc., and W.J. Plemons
Insurance Agency of Atlanta, GA, prior to joining the Company as
assistant Secretary of the Corporation and aide to the Chairman
in 1994. In 1995, Mr. Coppage became the Secretary of AMGC and
received an appointment to the AMGC Board of Directors. He has
studied corporate finance and marketing and has successfully
completed educational programs in the areas of SEC reporting of
public companies and shareholder and investor relations. He is
the Director of Shareholder Relations and assists in the
development, publishing and distribution of informational
materials on the Company.
Geoff Dawson - Director
Mr. Dawson, 55, accepted an appointment as an outside
member of the Board of Directors of AMGC on January 25, 1996.
He is the Non-Executive Chairman of Global Links Trading, Ltd.,
Chief Executive Officer of R.S.P.D. International, Ltd., G.P.D.
Holdings, Ltd., and a Director of Promindus BVBA (Belgium),
George Philips Holdings, Ltd. and ACCRESS BVBA (Belgium). Mr.
Dawson has wide experience in international business with an
emphasis on real estate investments and international trade
projects in developing countries. He is a British citizen and a
graduate of the Chambers College of Engineering and the
Northhampton School of Architecture. From 1980 to 1990, Mr.
Dawson was a Director of the European Property Trust. His
present duties at R.S.P.D. International, Ltd. include
initiating, building and expanding the Company's acitivites
throughout Europe and in South Africa as a major real estate
investment, development and trading company.
Joe Lee - Director
Mr. Lee, 58, accepted an appointment as an outside member
of the Board of Directors of AMGC on January 25, 1996. He is
Chairman of the Board of Directors of Denver Business College,
Inc., General Manager of Universal Management, Inc., President
of School Management, Inc. and the General Partner of The
Educational Plaza, a 110,000 square foot private educational
facility located in Denver, Colorado. Mr. Lee has expertise in
the administration and management of independent colleges and
schools, with a special emphasis on financial and staff
personnel management. He is a past president and past
commissioner of the Association of Independent Colleges and
Schools. From 1973 to 1982, Mr. Lee owned and operated Parks
College, Inc., formerly Parks School of Business, in Denver,
Colorado. From 1984 to 1986 he was Chairman of Trend Systems,
Inc., where he supervised the operation of nine schools and
three branch campuses in the states of Washington and Oregon.
Mr. Lee's present duties as Chairman of Denver Business College,
Inc. include overall responsibility for operation of the main
campus and three branch campuses. Mr. Lee is also a Director of
Prides Business College in Adelaide, South Australia.
Item 10. Executive Compensation
The following table sets forth the salary, bonus and other
compensation approved by Board of Directors of the Company for
the President and the Company's four other most highly
compensated executive officers (the "named executive officers").
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Position Fiscal 1996 Compensation Long
Term Compensation
Salary Bonus Awards: Other
Stock Options (1) Compensation
Norman L. Fisher $113,960 (2) -0- 500,000 -0-
President and Treasurer
President & CEO of EHI
Valerie A. Fisher $123,527 (2) -0- 100,000 -0-
Vice President
Executive Vice
President of EHI
Cory J. Coppage $46,512 (3) -0- 100,000 -0-
Chief Operating Officer
and Secretary
</TABLE>
(1) All stock options as indicated above were awarded to
employees of the Company at an exercise price of $1.00 per
share. As of June 30, 1996, no stock options have been
exercised and no shares have been issued.
(2) Indicates salary paid by the Company's wholly owned
subsidiary, Eleventh Hour, Inc. Mr. and Mrs. Fisher are full
time employees of EHI.
(3) Indicates salary paid by the Company's wholly owned
subsidiary, Eleventh Hour, Inc. Mr. Coppage is a full time
employee of the Company.
Other Compensation
Additional compensation paid to officers of the Company
during fiscal 1996 included salary and expenses of $18,900 to B.
Greg Bohannon, C.P.A., who served as interim Chief Financial
Officer from January 25, 1996 to June 14, 1996. The
compensation was paid subsequent to June 30, 1996 in the form of
15,000 restricted common AMGC shares at $1.00 per share, with
the balance of $3,900 to be paid in cash or by note in the
future. Mr. Bohannon also received a stock grant of 50,000
restricted common shares on January 25, 1996 and completed a
stock purchase of 50,000 restricted common shares for $12,500 in
fiscal 1996.
Mickey E. Fouts, former interim Chairman and Chief
Executive Officer, received compensation of $34,667, including
salary and expenses for the period January 17, 1996 to June 27,
1996. Mr. Fouts completed a stock purchase of $300,000 shares
for $51,000 in fiscal 1996. (See Item 12. ""Certain
Relationships and Related Party Transactions").
Committees, Compensation Committee Interlocks and Insider
Participation
Executive Committee. The committee members are Mr.
Norman L. Fisher, President, Mrs. Valerie Fisher, Vice
President, Mr. Cory J. Coppage, Chief Operating Officer and
Secretary and Mr. Joe Lee, Director. The committee acts in lieu
of meetings of the Board of Directors and its actions are
subject to approval and ratification by the entire Board of
Directors. During fiscal 1996, the Executive Committee held 8
meetings which were attended by no less than 75% of the
committee members.
Audit Committee. The committee members are Mr. Norman L.
Fisher, President and two outside members of the AMGC Board of
Directors, Mr. Joe Lee and Mr. Geoff Dawson. The committee makes
recommendations to the Board concerning independent auditors and
services, reviews the scope and results of such services
together with management and provides monitoring and guidance
concerning the Company's accounting procedures and internal
controls to the Board of Directors. During fiscal 1996, the
Audit Committee held 2 meetings which were attended by 100% of
the committee members.
Compensation Committee. The Board of Directors has
delegated to the Compensation Committee the responsibility of
establishing and administering the Company's executive
compensation plans subject to the Board's final approval of
major new compensation systems and the Chief Executive Officer's
compensation. The Committee is comprised of two directors who
are not officers or employees of the Company, Mr. Geoff Dawson
and Mr. Joe Lee, and one inside director, Mr. Norman L. Fisher.
The principal duties of the Compensation Committee are to review
key employee compensation, policies, plans and programs; to
monitor performance and compensation of employee-directors and
officers of the Company and other key employees and to provide
recommendations and periodic reports to the Board concerning
such matters. During fiscal 1996, the Compensation Committee
held 2 meetings which were attended by 100% of the committee
members.
Meetings of the Board of Directors
On January 17, 1996, the Board of Directors nominated Mr.
Geoff Dawson and Mr. Joe Lee to serve as independent outside
members of the AMGC Board of Directors. During fiscal 1996, the
expanded AMGC Board convened on two occasions at the principle
offices of the Company: on March 27, 1996 and June 26, 1996. In
total, there were four meetings held by the AMGC Board during
fiscal 1996. There were no incumbent directors who attended
less than 75% of the meetings of the Board and Committees
thereof on which such director served during that period.
Director Agreements and Compensation
On March 27, 1996, the Company executed outside director
agreements with Mr. Dawson and Mr. Lee. The agreements, which
became effective on January 17, 1996, provide for a three year
term of service and compensation in the form of non-qualified
stock options of 25,000 shares per director. Additionally,
directors receive $1,600 for attending each of the four
quarterly scheduled meetings of the Board, plus expenses.
Compensation for meeting attendance is payable at the Company's
option in cash or in equivalent AMGC restricted common shares
set at the market price on the day of issue. Directors who are
U.S. residents are entitled to participate in the Company's
health and welfare benefit programs. Employee directors are not
entitled to receive compensation for Board service. During
fiscal 1996, no compensation was paid or distributed to any
directors of the Company.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
Stock Ownership
The following table sets forth certain information
regarding the beneficial and economic ownership of AMGC common
stock as of June 30, 1996 by: (1) each stockholder known by the
Company to be the beneficial owner of more than 5% of the
outstanding Common Stock; (2) each director and nominee for
director; (3) all directors and executive officers as a group.
The beneficial ownership reflected in the following table is
calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"). Shares issuable on
exercise of options exercisable within 60 days of June 30, 1996
are deemed to be outstanding for the purpose of computing the
percentage of ownership of persons beneficially owning such
options, but have not been deemed to be outstanding for the
purpose of computing the percentage ownership of any other
person. As of June 30, 1996, the total outstanding shares of
the Company's common stock were 7,601,321.
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address Number of Shares Held Percent of Class
Norman L. Fisher,
President and Treasurer 1,053,479 (a) (b) 13.8 %
5002 Mineral Circle
Littleton, CO 80122
Valerie A. Fisher,
Vice President 100,000 (b) (c) 8.4 %
5002 Mineral Circle
Littleton, CO 80122
Cory J. Coppage, Chief
Operating Officer and
Secretary 150,000 (d) 1.9 %
7255 E. Quincy Ave, #550
Denver, CO 80237
Geoff Dawson, Director 1,750,000 (e)(f)(h)(i) 23.0 %
22 Kings Court South
Chelsea Manor Gardens
London, England SW3-5EG
Joe Lee, Director 25,000 (g) .03 %
4250 S. Olive Street, #216
Denver, CO 80237
Mick Dragoo, Shareholder 1,110,050 14.6 %
8634 S. Willow
Tempe, AZ 85284
George & Philips Holdings,
Ltd., Shareholder 1,275,000 (h) 16.7 %
P.O. Box 438
Roadtown, Tortola BWI
GPD Holdings, Ltd.,
Shareholder 450,000 (i) 5.9%
c/o Consolidated Services
P.O. Box HM 2257
Hamilton, Bermuda HM JX
Officers and Directors
as a Group (five persons) 3,078,479 (j)(k) 40.4%(k)
</TABLE>
(a) Includes options to purchase 500,000 shares.
(b) Includes 535,229 shares held jointly by Mr. and Mrs. Fisher,
who are married.
(c) Includes options to purchase 100,000 shares.
(d) Includes options to purchase 100,000 shares.
(e) Includes options to purchase 25,000 shares.
(f) As of June 30, 1996, Mr. Dawson's beneficial ownership of
record as indicated above includes the corporate AMGC
shareholdings of George & Philips Holdings, Ltd. See footnote
(h)(i) below.
(g) Includes options to purchase 25,000 shares.
(h) Mr. Dawson is a managing director of George & Philips
Holdings, Ltd. The Company believes Mr. Dawson shares the
voting rights to and exercises certain voting authority over
these shares.
(i) Mr. Dawson is a managing director of GPD Holdings, Ltd. The
Company believes Mr. Dawson shares the voting rights to and
exercises certain voting authority over these shares.
(j) Includes all shares depicted except for those shares held by
Mick Dragoo, who is neither an officer nor director, and 535,229
shares held jointly by Mr. and Mrs. Fisher and added in the
calculation as such.
(k) Excludes Valerie Fisher's shareholdings except for the
100,000 share option as all other shares are jointly held with
her husband, Norman L. Fisher.
All ownership is beneficial and of record except as
specifically indicated otherwise. Beneficial owners listed
above have sole voting and investment power with respect to the
shares shown unless otherwise indicated. Economic interest is
calculated by including shares directly owned and, in the case
of individuals and all directors and executive officers as a
group, shares such individuals or group are entitled to receive
upon exercise of outstanding options exercisable within 60 days
of June 30, 1996. The economic interest and security ownership
indicated above includes qualified and non-qualified stock
options awarded by the Company to certain key executives on or
before April 3, 1996. Beneficial ownership is calculated in
accordance with Section 13(d) of the Exchange Act and the rules
promulgated thereunder.
Compliance with Section 16(a) of the Securities Exchange Act of
1934
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's executive officers and directors to file
initial reports of ownership and reports of changes in ownership
with the Securities Exchange Commission. Executive officers and
directors are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. Based solely
on a review of the copies of such forms furnished to the Company
and written representations from the Company's executive
officers and directors, as of the date of this report, the
Company is unable to make a determination as to whether or not
any officers or directors failed to file on a timely basis any
reports relating to transactions involving common stock of the
Company owned by them. The Company has implemented internal
procedures for the purpose of determining whether officers or
directors have failed to file timely reports relating to
transactions involving common stock of the Company, and, if
necessary, to file any such reports in the appropriate time and
manner.
Item 12. Certain Relationships and Related Transactions
Included in related party accrued expenses at June 30, 1996
is $18,900 due to a former officer for accrued payroll. Mr. B.
Greg Bohannon, C.P.A., who served as interim Chief Financial
Officer from January 25, 1996 to June 14, 1996 received
compensation subsequent to June 30, 1996 in the form of 15,000
restricted common AMGC shares at $1.00 per share, with the
balance of $3,900 to be paid in cash or by note in the future.
Mr. Bohannon also received a stock grant of 50,000 restricted
common shares on January 25, 1996 and completed a stock purchase
on that date of 50,000 restricted common shares for $12,500 at
$0.25 per share, the market price of the stock as determined by
the Board at that date. Mickey E. Fouts, former interim
Chairman and CEO, received compensation of $34,667, including
salary and expenses for the period January 17, 1996 to June 27,
1996. On January 17, 1996, the Company entered into a stock
purchase agreement with Mickey E. Fouts, the former interim
Chairman and CEO of the Company. The agreement authorized Mr.
Fouts' purchase of 300,000 restricted common shares at $0.17 per
share, the fair market price of the stock as determined by the
Board at that date. Consideration for the purchase was a
collateralized, interest bearing personal recourse note of
$51,000 due June 30, 1997, made to the benefit of the Company.
The Company accrued Mr. Fouts' salary until June 27, 1996, at
which time Mr. Fouts' accrued wages and expenses were applied
toward payment of the note together with a payment received from
Mr. Fouts of $16,333, thereby completing the stock purchase.
Three officers and directors of the Company entered into
employment agreements during fiscal 1996 which which expire in
periods ranging from two to three years renewable in successive
one-year terms unless terminated by either party. Subsequent to
June 30, 1996, the Company entered into a note payable with an
employee in the amount of $35,000. The note provides for
monthly interest payments at 14% through April 1997 when all
principle and unpaid interest is due. The note is convertible
into restricted common stock in $10,000 increments at a
conversion price equal to 65% of the average bid price during
the thirty days prior to conversion.
During fiscal 1996, 400,000 shares of common stock were
issued to officers for services. During fiscal 1995, 1,231,167
shares of common stock were issued to either board of directors
members or related companies due to common board members for
services rendered. Conversion and cash proceeds from related
party stock issuance were $185,650.
(See "Certain Relationships and Related Party Transactions" and
"Notes to Financial Statements - Note 10".)
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a)(1) and (a)(2) List of Financial Statements and Schedules
(a)(3) List of Exhibits (in accordance with Item 601 of
Regulation S-B).
Exhibit Number Description of Exhibit
3.1 Articles of Incorporation of the Company*
3.2 Bylaws of the Company*
* (Incorporated by reference to the Company's Form S-4
Registration Statement, effective with the Commission on August
7, 1987, file number 33-13335.
AMERICAN CONSOLIDATED
GROWTH CORPORATION
AND SUBSIDIARY
Consolidated Financial Statements
June 30, 1996 and 1995
Table of Contents
Page
Independent Auditors' Report F - 2
Consolidated Financial Statements
Consolidated Balance Sheet F - 3
Consolidated Statements of Operations F - 4
Consolidated Statement of Changes in
Stockholders' Equity (Deficit) F - 5
Consolidated Statements of Cash Flows F - 6
Notes to Consolidated Financial Statements F - 8
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
American Consolidated Growth Corporation and Subsidiary
Englewood, Colorado
We have audited the consolidated balance sheet of American
Consolidated Growth Corporation and Subsidiary as of June 30,
1996, and the related statements of operations, stockholders'
equity (deficit), and cash flows for the years ended June 30,
1995 and 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated 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 consolidated financial statements are free of material
misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by the management, as well as evaluating the
overall consolidated 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 Consolidated Growth
Corporation, Inc. and Subsidiary as of June 30, 1996 and the
results of its operations and cash flows for the years ended
June 30, 1995 and 1996, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 to the consolidated financial
statements, the Company has a working capital and stockholders'
deficiency of $1,052,150 and $2,068,840, respectively at June
30, 1996, and has suffered recurring losses from operations.
These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plan in
regard to this matter is also discussed in Note 2. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
October 8, 1996
Denver, Colorado
Consolidated Balance Sheet
June 30, 1996
<TABLE>
<CAPTION>
Assets
<S> <C>
Current assets
Cash $156,067
Accounts receivable - trade, less of
allowance for doubtful accounts of 1,060,389
$25,000 (Note 5)
Prepaid expenses 34,149
Total current assets 1,250,605
Furniture and equipment - net (Note 3) 193,181
Other assets 20,723
Total assets $1,464,509
Liabilities and Stockholders' Deficit
Current liabilities
Current maturities of long-term debt $122,532
(Note 6)
Common stock subject to put option 84,724
(Note 8)
Note payable (Note 5) 764,986
Notes payable - related party (Note 10) 206,700
Checks written in excess of bank balance 115,610
Accounts payable 382,004
Accrued payroll 457,201
Accrued expenses - related party (Note 84,248
10)
Other current liabilities 84,750
Total current liabilities 2,302,755
Long-term debt (Note 6) 1,230,594
Commitments and contingencies (Notes 2, 7
and 12)
Stockholders' deficit (Notes 7, 8, 10 and
13)
Series A preferred stock, $.10 par value;
40,000,000 shares authorized; no shares -
issued and outstanding
Common stock, $.10 par value; 40,000,000
shares authorized, 7,575,966 shares 757,597
issued and outstanding
Additional paid-in capital 29,576,028
Accumulated deficit (32,402,465)
(2,068,840)
Total liabilities and stockholders' $1,464,509
deficit
</TABLE>
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Years Ended
June 30,
1995 1996
<S> <C> <C>
Revenues $ 10,372,461 $ 8,897,455
Direct expenses 7,690,051 6,638,234
Gross margin 2,682,410 2,259,221
Other expenses
General and administrative expenses 2,028,723 2,506,546
Depreciation and amortization 85,839 71,205
Interest 248,783 467,481
2,363,345 3,045,232
Income (loss) from continuing operations 319,065 (786,011)
(Note 9)
Discontinued operations (Notes 4 and 9)
(Loss) income from discontinued (1,947,343) 84,237
operations
Loss on disposal of discontinued (8,345,269) -
operations
Total discontinued operations (10,292,612) 84,237
Net loss $ (9,973,547) $ (701,774)
Income (loss) per common share
Continuing operations $ .05 $ (.10)
Discontinued operations (1.58) .01
$ (1.53) $ (.09)
Weighted average shares of common stock 6,532,516 7,404,140
outstanding
</TABLE>
Consolidated Statement of Changes in Stockholders' Equity
(Deficit)
June 30, 1996
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In
Shares Amount Capital
<S> <C> <C> <C>
Balance June 30, 1994 4,266,184 $426,618 $30,156,414
Common stock issued for
acquisition of EHI (Notes 9 631,290 63,129 (3,723,618)
and 11)
Rescission of dividend
(Note 8) - - 687,435
Common stock issued
for cash 176,135 17,614 333,738
Common stock issued for 1,996,150 199,615 434,746
services
Common stock issued for
conversion of debt related 92,761 9,276 711,720
to acquisition of EHI
(Note 9)
Permanent decline in market - - -
value of securities
Net loss - - -
Balance June 30, 1995 7,162,520 716,252 28,600,435
Common stock issued for cash 5,000 500 4,500
Common stock issued for 495,750 49,575 62,800
services
Common stock issued for
conversion of notes payable 109,167 10,917 98,898
Common stock issued for 368,702 36,870 331,832
conversion of put options
Retirement of common stock (565,173) (56,517) 75,718
Accrued officers' salaries - - 401,845
contributed to capital
Net loss - - -
Balance, June 30, 1996 7,575,966 $757,597 $29,576,028
</TABLE>
Continued on the following page.
Continued from the previous page.
<TABLE>
<CAPTION>
Total
Unrealized Stockholders'
Accumulated Gain (Loss) on Equity
Deficit Securities (Deficit)
<S> <C> <C> <C>
Balance June 30, 1994 $(21,727,144) $1,327,393 $10,183,281
Common stock issued for acquisition
of EHI (Notes 9 and 11) - - (3,660,489)
Rescission of dividend (Note 8) - - 687,435
Common stock issued for cash - - 351,352
Common stock issued for services - - 634,361
Common stock issued for conversion
of debt related to acquisition
of EHI (Note 9) - - 720,996
Permanent decline in market value
of securities - (1,327,393) (1,327,393)
Net loss (9,973,547) - (9,973,547)
Balance June 30, 1995 (31,700,691) - (2,384,004)
Common stock issued for cash - - 5,000
Common stock issued for services - - 112,375
Common stock issued for conversion
of notes payable - - 109,815
Common stock issued for conversion
of put options - - 368,702
Retirment of common stock - - 19,201
Accrued officers' salaries
contributed to capital - - 401,845
Net loss (701,774) - (701,774)
Balance June 30, 1996 (32,402,465) - (2,068,840)
Consolidated Statements of Cash Flows
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended
June 30,
1995 1996
<S> <C> <C>
Cash flows from operating activities
Net loss $(9,973,547) $(701,774)
Adjustments to reconcile net loss to net
cash used in operations
Depreciation and amortization (including
$9,797 from discontinued operations in 95,636 71,205
1995)
Provision for losses on accounts - 25,000
receivable
Loss on disposal of equipment - 3,841
Settlement payments on unrecorded debt 144,138 -
Gain on sale of investments - (170,187)
Interest on put option conversion - 124,830
Common stock issued for services 634,361 112,375
Impairment of investment in affiliates
and other investments 7,976,740 -
Changes in operating assets and
liabilities
Accounts receivable (371,382) (52,097)
Prepaid expenses 1,084,201 (22,149)
Other assets (14,065) 3,295
Accounts payable and accrued (516,116) 371,641
liabilities
9,033,513 467,754
Net cash used in operating (940,034) (234,020)
activities
Cash flows from investing activities
Acquisition of equipment (84,768) (24,747)
Proceeds from sale of investment - 434,179
Net change in due from related parties 371,293 -
Net cash provided by investing 286,525 409,432
activities
Cash flows from financing activities
Net change in note payable 162,846 -
Proceeds from related party - note - 196,700
payable
Payments on due to related parties (28,000) -
Proceeds from long-term debt 385,483 71,208
Principal payments on long-term debt (119,855) (261,853)
Payments on capital lease obligations (6,702) (26,801)
Payments on common stock subject to put (87,457) (7,757)
option
Proceeds from issuance of common stock 351,352 5,000
Net cash provided by (used in) 657,667 (23,503)
financing activities
Net increase in cash 4,158 151,909
Cash at beginning of year - 4,158
Cash at end of year $ 4,158 $ 156,067
</TABLE>
Continued on following page.
Consolidated Statement of Cash Flows
Continued from previous page.
Supplemental disclosure of cash flow information:
Cash paid during the year for interest and $300,961 and
$289,140 for 1995 and 1996, respectively.
Cash paid during the year for income taxes was $0 for 1995
and 1996.
Supplemental disclosures of non-cash financing and investing
activity:
During fiscal 1996, $1,603,190 of common stock subject to
put option was converted to $1,230,591 of notes payable,
$368,702 of common stock and $3,897 of accrued interest.
During fiscal 1996, accrued officers' salaries of $401,845
were contributed to capital.
During fiscal 1996, the Company converted long-term debt of
$97,016 to equity.
During fiscal 1996, Company satisfied $43,000 of accrued
expenses through the issuance of common stock.
During fiscal 1996, a $10,000 note payable due to a related
entity was offset against a related party receivable.
Included in accrued expenses at June 30, 1996 is $11,000
related to the retirement of the Company's common stock.
During fiscal 1996, the Company converted accrued interest
of $10,200 to long-term debt.
During 1995, the Company acquired $14,652 of office
equipment through a capital lease obligation. Pursuant to
the acquisition of EHI on July 1, 1994, the Company
converted $720,996 of note obligations into common stock
and converted $1,658,298 of note obligations into
redeemable common stock. Also during fiscal 1995, the
Company recorded the recission of a dividend payable for
$687,435 to additional paid-in capital.
On July 1, 1994, ACGC acquired all of the outstanding
common stock of EHI. The net assets related to the
acquisition were recorded as follows:
<TABLE>
<CAPTION>
<S> <C>
Accounts receivable $ 654,600
Due from related parties 11,682
Other assets 9,952
Furniture and equipment - net 191,748
Prepaid expenses 10,332
Intangible assets 22,196
Note payable (552,509)
Accounts payable and accrued expenses (1,165,488)
Accrued wages - related party (403,847)
Long-term debt (2,439,155)
Net assets $(3,660,489)
Common stock issued $ 63,129
Excess purchase price applied against
additional paid-in capital (3,723,618)
$(3,660,489)
</TABLE>
Note 1 - Organization and Summary of Significant Accounting
Policies
The consolidated financial statements consist of American
Consolidated Growth Corporation ("ACGC") and its wholly owned
subsidiary, Eleventh Hour, Inc.("EHI") which are collectively
referred to as the Company.
ACGC, a Delaware corporation, was incorporated in April 1987 and
formerly was engaged in the business of acquiring interests in
emerging technology companies. ACGC provided funding and other
assistance to these companies in exchange for equity positions
in those companies. On July 1, 1994, the Company acquired all
of the outstanding common stock of EHI, a staffing service
company, through the issuance of 1,000,000 shares of ACGC common
stock, the retirement of $720,996 of long-term debt, and the
conversion of $1,658,298 of long-term debt into redeemable
common stock. Of the 1,000,000 shares, 631,290 were issued to
officers of EHI, 92,761 were issued pursuant to the conversion
of debt and 275,949 were redeemable shares issued to EHI
noteholders. The acquisition has been accounted for under the
purchase method. EHI's results of operations are included in
the accompanying fiscal 1995 consolidated statement of
operations since the date of acquisition.
In January 1995, the Company's existing Board of Directors
resigned and were replaced with the former directors of EHI.
The new Board elected to engage exclusively in the staffing
industry. The Company provides temporary placement of clerical
and accounting personnel. The Company currently operates
personnel agencies in Colorado, California, Missouri and Kansas.
The former operations of ACGC are included in discontinued
operations in the accompanying consolidated financial
statements.
Principles of Consolidation
The consolidated financial statements include the accounts of
ACGC and its wholly-owned subsidiary, EHI. All intercompany
balances and transactions have been eliminated in consolidation.
Property and Equipment
Property and equipment are stated at cost. Depreciation and
amortization are calculated using the straight-line method over
the estimated useful lives of the related assets of 3 to 20
years. Equipment under capital lease obligations are recorded
at the lessor of fair market value or the present value of
future minimum lease payments. Maintenance and repairs and
renewals which do not prolong the useful life of an asset are
expensed as incurred.
Note 1 - Organization and 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 disclosure of contingent assets
and liabilities at the date of financial statements and the
reported amounts of revenues and expenses during the reporting
period. Specifically, estimates with respect to future costs of
contingent liabilities outlined in notes 2, 9, and 12. Actual
results could differ from those estimates.
Income Taxes
The Company recognizes deferred tax liabilities and assets for
the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred
tax liabilities and assets are determined based on the
difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect. The
measurement of deferred tax assets is reduced, if necessary, by
the amount of any tax benefits that, based on available
evidence, are not expected to be realized.
Net Income (Loss) Per Common Share
Net income (loss) per common share has been computed based on
the weighted average number of common shares outstanding during
each year. Common stock equivalents have been excluded from the
weighted average number of common shares outstanding as their
effect would be anti-dilutive.
Accounting Standards Not Yet Adopted
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," which
requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Statement 121
also addresses the accounting for long-lived assets that are
expected to be disposed of. The Company adopted Statement 121
in 1996 the adoption of which had no effect on the Company's
financial statements.
In October 1995, the FASB issued Statement No. 123, "Accounting
for Stock-Based Compensation" ("FAS 123"). FAS 123 establishes
financial accounting and reporting standards for stock-based
employee compensation plans. FAS 123 is effective for
transactions entered into in fiscal years beginning after
December 15, 1995. The Company currently accounts for stock-
based compensation awards under the provisions of Accounting
Principles Board Opinion No. 25, as permitted by FAS 123, and
intends to continue to do so.
Note 2 - Management's Plan
The accompanying consolidated financial statements have been
prepared on a going concern basis which contemplates the
realization of assets and liquidation of liabilities in the
ordinary course of business. The Company has suffered recurring
losses from discontinued operations and as of June 30, 1996, the
Company had a working capital deficiency of $1,052,150 and a
stockholders' deficit of $2,068,840. The Company's ability to
meet its current obligations is dependent upon obtaining
adequate sources of financing or maintenance of sufficient
profitability from solvent operations. The Company is currently
negotiating outside financing, however, there is no assurance
the financing alone will be sufficient. Assuming the subsidiary
continues to experience positive cash flow and current
negotiations to secure new sources of outside financing are
finalized during the current fiscal year, management believes
the Company will be able to successfully meet all of its current
obligations. There can be no assurances that the Company will
be successful in these endeavors. The accompanying consolidated
financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts
or amounts and classification of liabilities that might be
necessary should the Company be unable to continue in existence.
Note 3 - Furniture and Equipment
Furniture and equipment at June 30, 1996 consists of the
following:
<TABLE>
<CAPTION>
<S> <C>
Office equipment $106,174
Office furniture and fixtures 791,725
897,899
Less accumulated depreciation (704,718)
Furniture and equipment - net $193,181
</TABLE>
Note 4 - Investments and Significant Charges to Operations
Significant charges to operations during fiscal 1995 were as
follows:
<TABLE>
<CAPTION>
<S> <C>
The Company owns a 30.73% equity interest in Advance
Display Technologies ("ADTI"). The investment in ADTI
is reported on the equity method. During the quarter
ended June 30, 1995, the Company determined the
investment was worthless as trading volume and quoted
stock price of ADTI had decreased significantly.
Furthermore, the original transactions relating to the $4,687,915
acquisition of the ADTI shares are in dispute (Note
12). The impairment of the investment totaled
$4,687,915.
</TABLE>
Note 4 - Investments and Significant Charges to Operations
(continued)
<TABLE>
<CAPTION>
<S> <C>
At June 30, 1995, the Company held approximately
435,000 common shares of AGTsports, Inc. ("AGT"). The
investment has been accounted for under FAS 115 and is
classified as available-for-sale securities. As
discussed in Note 1, the Company discontinued its
operations related to acquiring equity interests in
emerging technology companies. As a result of the
change in the focus and control of both the investee
and the Company, there was a significant decline in the
market value and trading volume of the securities.
Subsequent to year end, the securities were sold for 39,986
approximately $264,000 which was considered the market
value at June 30, 1995. Accordingly, the investment
was written down to the market value and an unrealized
loss of $39,986 was recognized.
Subsequent to June 30, 1995, the Company created a
joint venture with AGT and Global Links Trading, Ltd.
("GLT"), an unrelated entity. The joint venture will
finance and develop the software projects of AGT.
Pursuant to the joint venture agreement, the Company
received a 40% equity interest in AGT in consideration
for the transfer to the joint venture of a receivable
due from AGT of $660,589 and all AGT preferred shares
held at June 30, 1995 of $1,312,500. Under the
agreement, the Company is to transfer to the joint
venture the AGT common shares received in consideration
for a 15% royalty on gross sales of the joint venture.
It was determined the royalty income did not represent
a sufficient future revenue stream to support the 1,973,089
carrying value of the AGT preferred shares and the
receivable due from AGT. Accordingly, the preferred
shares of $1,312,500 and the receivable of $660,589
were fully impaired.
Pursuant to the acquisition of AGT's assets in January
of 1991, ACGC issued 200,000 shares of the Company's
common stock to two directors of AGT in exchange for
the release of these individuals rights to revenue from
the development of the AGT software. The Company
recorded an asset of $405,000 related to the software
on the date of acquisition. Currently, no future
revenue stream can be identified to support the
carrying value of the asset and the Company determined 405,000
the asset should be fully impaired. Accordingly, the
asset carrying value of $405,000 has been written off.
Also pursuant to the January 1991 transaction, ACGC
acquired investments in a certain oil joint venture and
a certain broker/dealer in the amount of $870,750 which
were carried at the lower of cost or market. The
Company has determined there is no market or any
identifiable future revenue stream to support the
carrying value of these investments. Accordingly, 870,750
$870,750 has been written off.
Total $7,976,740
</TABLE>
Note 4 - Investments and Significant Charges to Operations
(continued)
All of the above adjustments were made during the quarter ended
June 30, 1995 and are included as part of discontinued
operations (Note 9).
Note 5 - Note Payable
The Company has a short-term financing agreement which is
collateralized by the Company's accounts receivable. The note
carries an interest rate of .1% daily and matures December 1996.
The financing agreement contains a six month renewal option for
an indefinite period. The outstanding balance at June 30, 1996
was $764,986.
Note 6 - Long-Term Debt
Long-term debt consists of the following at June 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
Notes payable to former noteholders of EHI (Note 8)
with interest at 14%, payable quarterly, beginning
October, 15, 1996 through February 2003, when all
principal and unpaid interest is due. The noteholders $1,230,594
were granted a security interest in a life insurance
policy on an officer of the Company.
Notes payable to private investors with interest at
10%. The notes are currently in default. Certain note
holders have the option of converting note obligations
into restricted shares at a conversion price of $2 per
share of common stock. Notes are without collateral. 85,282
Note payable to an unrelated company with interest at
10% through June 1998 when all principal and unpaid
interest is due. Note is without collateral. 27,250
Note payable to private investor with interest at 12%,
note balance due in full in August 1995. The note is
currently in default. Note is guaranteed by the
subsidiary of the Company. 10,000
1,353,126
Less current portion
(122,532)
$1,230,594
</TABLE>
Note 6 - Long-Term Debt (continued)
Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ending June 30,
<S> <C>
1997 $ 122,532
1998 -
1999 -
2000 -
2001 -
Thereafter 1,230,594
$ 1,353,126
</TABLE>
Subsequent to June 30, 1996, the Company entered into two notes
payable of $50,000 and $25,000 with an unrelated company and
individual, respectively. The notes provide for quarterly
interest payments at 14% through September 1997 when all
principal and unpaid interest is due. The notes are convertible
into restricted common stock in $10,000 increments at a
conversion price equal to 65% of the average bid price during
the thirty days prior to conversion.
Note 7 - Commitments
Dividend Recession
In 1991, a dividend of $687,435 was declared by the Company.
The Company did not have the adequate capital resources to
declare the dividend at that time. Accordingly, the dividend
was rescinded in 1995 and results in an increase in additional
paid-in capital in the accompanying consolidated financial
statements of $687,435 at June 30, 1995.
Operating Leases
The Company leases office space in Overland, Kansas. The lease
expires in August 1998. The Company is responsible for taxes,
insurance, utilities and operating expenses. The lease contains
an escalation clause that allows the rental payments to be
increased by $2,025 annually. The lease agreement allows the
lessee the option to renew the lease for an additional 5 years
at the then current market rate.
The Company leases office space under a sublease in Springfield,
Missouri. The lease expires in September 1996. The Company is
responsible for insurance, utilities and operating expenses.
The lease contains a renewal option of an additional six months
at terms identical to the existing lease.
Note 7 - Commitments (continued)
The Company leases office space in Tustin, California expiring
February 1999. The Company is responsible for taxes, insurance,
utilities and operating expenses. The lease is personally
guaranteed by the majority stockholders. The lease contains a
renewal option for up to two additional three year periods.
The Company leases its corporate facility and an operating
facility in Englewood, Colorado under two operating leases. The
leases expire in April 1998 and May 2000, respectively. Under
the lease for the operating facility, the Company is responsible
for taxes, insurance, utilities and operating expenses. In
addition, this lease is guaranteed by the majority stockholders
and contains a renewal option for an additional five years at
the then current market rate.
The Company leases various office equipment under operating
leases expiring between January 1997 and May 2000. The Company
is responsible for taxes, insurance and operating expenses.
The following is a schedule of the future minimum rental
payments required under the above operating leases as of June
30, 1996:
<TABLE>
<CAPTION>
Year Ending June 30,
Amount
<S> <C>
1997 $230,218
1998 208,972
1999 111,364
2000 84,305
$634,859
</TABLE>
Total rental expense charged to operations for the years ended
June 30, 1995 and 1996 was $221,948 and 264,924, respectively.
Note 8 - Common Stock Subject to Put Option
Pursuant to the acquisition of EHI in fiscal 1995, ACGC offered
to purchase the outstanding debt from the EHI noteholders for
either (1) shares of ACGC's common stock at a conversion rate of
$6.00 or (2) the payment of $.20 per dollar of debt.
Noteholders accepting the common stock were given two options.
The first was accepting the common stock valued at $6.00 per
share and the agreement of the Company to register the same.
The second option was accepting the common stock with a
mandatory redemption requirement in which the Company was to
repurchase 1/12 of the shares held each quarter for a period of
three years at $6.00 per share. During fiscal 1996, the Company
was unable to meet the repurchase obligations and negotiated new
agreements with the putholders. Under the new agreements, of
the total common stock subject to put option, $1,230,594 was
converted to notes payable (Note 6) and $368,702 was converted
to common stock. Of the amount converted to notes payable,
$110,541 is due to related individuals and of the amount
converted to common stock, $19,278 was issued to a related
individual. The common stock was issued at a purchase price of
$1.00 per share with a provision to issue additional shares, as
provided in the agreements, if the average bid price of the
Company's common stock is less than $1.00 per share at December
31, 1996. Common stock subject to put option of $84,724 remains
outstanding at June 30, 1996. Subsequent to year end,
additional put options of $34,377 were converted to notes
payable.
Note 9 - Discontinued Operations
In January 1995, the Company's Board of Directors approved a
plan to engage exclusively in the staffing services industry and
discontinue the former operations of ACGC. Pursuant to this
plan, the Company terminated all equity interests in the
emerging technology companies. The loss on discontinuance of
the segment is non-recurring and has been accounted for as
discontinued operations. Revenues of the segment were
approximately $107,000 and $0 for the years ended June 30, 1995
and 1996. Management anticipates the future operating losses of
the discontinued segment will not be significant.
(Loss) gain from discontinued operations consists of the
following:
<TABLE>
<CAPTION>
Years Ended June 30,
1995 1996
<S> <C> <C>
Stock-based compensation to former $(1,085,862) $ -
officer
Consulting services (634,361) -
Loss on failed partnership venture (500,000) -
(Note 10)
(Loss) gain on investments (Note 4) (7,976,740) 170,187
General and administrative (65,663) (85,950)
Interest (29,986) -
$(10,292,612) $ 84,237
</TABLE>
Note 10 - Related Party Transactions
During fiscal 1996 the Company entered into a $100,000 line-of-
credit agreement with two officers and directors of the Company.
The agreement provided for monthly interest payments at 10% per
annum through June 1, 1996 when all principal and unpaid
interest was due. Subsequent to year end, the line-of-credit
agreement was extended to July 1, 1997. The outstanding
borrowings on the line of credit were $71,700 at June 30, 1996.
In addition, the officers paid $65,348 of expenses on behalf of
the Company which is included in the related party accrued
expenses at June 30, 1996.
The Company entered in to a $125,000 note payable agreement with
a company owned by a director of the Company. The note provides
for quarterly interest payments at 14% per annum through June
1997 when all principal and unpaid interest is due. The note is
convertible into the Company's common stock at a conversion
price equal to 65% of the average bid price during the thirty
days prior to conversion. Subsequent to June 30, 1996, the
Company entered into a new note agreement for an additional
$18,000 under identical terms as the original note due September
1997.
At June 30, 1995, the Company had recorded notes payable of
$144,139 pursuant to various settlement agreements with private
investors. The private investors had advanced funds to a
previous officer of the Company to acquire additional equity
interests in affiliates. The proceeds were never deposited into
a Company bank account and the stock was not issued. In fiscal
1996, the Company entered into various settlement agreements
with these investors whereby $53,714 was paid in cash, notes
payable of $85,285 were issued (Note 6), 259,167 shares of the
Company's common stock were issued and 8,800 shares of AGT stock
owned by the Company were issued. Subsequent to year end,
$30,000 of the notes payable were converted to 51,854 shares of
common stock, including interest, at $.62 per share. Also
subsequent to year end, an additional 10,516 shares of common
stock were issued in settlement of these liabilities. In
addition, the Company facilitated the settlement of a claim by
one of the private investors through the transfer of 689,675
shares of the Company's common stock to this investor from other
existing shareholders. Under another claim from a private
investor, the Company entered into a settlement agreement
whereby the Company was released from all liability under the
claim and 400,000 shares of the Company's common stock
previously issued to the investor were surrendered. Of these
shares, 200,000 were transferred to the investor previously
discussed in settlement of a claim and the remaining 200,000
shares were transferred to an affiliated entity owned by a
director in payment of services rendered.
The Company has a $10,000 note payable to an affiliated entity
with interest at 10% per annum. The note is payable in full in
November 1996 and is without collateral.
Accrued wages due to two officers of the Company in the amount
of $401,845 at June 30, 1995 were contributed to capital during
fiscal 1996.
Note 10 - Related Party Transactions (continued)
Included in related party accrued expenses at June 30, 1996 is
$18,900 due to a former officer for accrued payroll. Subsequent
to June 30, 1996 the Company agreed to pay the amount through
the issuance of 15,000 shares of the Company's common stock at
$1.00 per share and a $3,900 payment in cash.
Three officers and directors of the Company entered into
employment agreements during fiscal 1996 which expire in periods
ranging from two to three years renewable in successive one-year
terms unless terminated by either party.
Subsequent to June 30, 1996, the Company entered into a note
payable with an employee in the amount of $35,000. The note
provides for monthly interest payments at 14% through April 1997
when all principal and unpaid interest is due. The note is
convertible into restricted common stock in $10,000 increments
at a conversion price equal to 65% of the average bid price
during the thirty days prior to conversion.
During fiscal 1996, 400,000 shares of common stock were issued
to officers for services. During fiscal 1995, 1,231,167 shares
of common stock were issued to either board of directors members
or related companies due to common board members for services
rendered. Conversion and cash proceeds from related party stock
issuance were $185,650.
On August 29, 1994, the Company purchased a limited partnership
interest related to AGTsports, Inc. The Company advanced
$500,000 of the $1,500,000 purchase price; however, the
partnership failed and the Company was unable to reacquire its
investment.
Note 11 - Income Taxes
The components of the long-term deferred tax asset at June 30,
1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets
Net operating loss carryforward $4,820,000
Investment allowance/Capital loss 2,380,000
Total deferred tax assets 7,200,000
Less valuation allowance (7,200,000)
$ -
</TABLE>
Note 11 - Income Taxes (continued)
A valuation allowance was recorded for the above deferred tax
asset due to the Company's history of losses. At June 30, 1996,
the Company has net operating loss carryforwards for tax
purposes of approximately $14,000,000. If not used, these
carryforwards will expire in varying amounts during the years
1996 to 2011. Furthermore, these net operating loss
carryforwards are limited in their use due to a change in
control of the Company. In addition, the Company has capital
loss carryforwards of approximately $7,000,000 which can be used
only to offset future capital gains and which are also limited
in their use due to a change in control of the Company.
Currently, the Company is under an examination by the Internal
Revenue Service for their fiscal 1994 tax return. The outcome
of the examination is indeterminable at this time.
Note 12 - Contingent Liabilities
As part of various transactions to acquire its investment in
ADTI, the Company incurred a $2,175,000 debenture to CPI as part
of various transactions with affiliates. The Company, in 1992,
reduced its ownership in ADTI for assumption of the debenture by
ADTI. While no formal suit has been filed, ADTI is disputing
their shares now held by the Company. Furthermore, CPI alleges
the Company owes $250,000 to CPI in exchange for a consent to
license ADTI technology. Upon review of the facts and
historical evidence available to the Company, Management refuted
the allegations through special legal counsel. In the estimation
of Management, barring any immediate efforts by officials of
ADTI to complete the repurchase agreement, the Company believes
there is a strong likelihood it shall become involved in
extensive litigation in order to rescind all former transactions
with ADTI, to recover its rightful property or the cash
equivalent thereof, and to protect the interests of the Company
and its shareholders.
In June of 1996, the Company received notice of Complaint from
the North Dakota Securities Commission alleging breach of the
State's "Blue Sky" securities laws. The Company believes the
action is the outgrowth of an officer by AMGC in February 1996
to convert a former EHI investor and North Dakota resident's
redeemable common stock into restricted common stock and/or a
promissory note. As of June 30, 1996, the Company believes the
Commissioner's office will pursue the matter. The Company has
retained special legal counsel in North Dakota. Based upon the
opinion of counsel, the Company believes there is a reasonable
probability the case will not be decided in the Company's favor
and may result in certain one time fines and legal costs. The
investor's outstanding common stock was $50,000 at June 30,
1996. The Company is not able to estimate its liability, if
any, with respect to this matter.
Note 13 - Stock Option Plans
Stock Option Plans
Effective April 1996, the Company adopted an Equity Incentive
Plan (the "Incentive Plan") for all full-time employees. The
Incentive Plan covers an aggregate of 800,000 shares and is
administered by the Stock Option Plan Committee appointed by the
Board of Directors. The aggregate value of shares granted or
exercised in any one calendar year may not exceed $100,000. The
options expire five years after the date of grant for
stockholders who possess more than 10% of the voting power of
all classes of stock and expire ten year from the date of grant
for all others. Options must be granted at an exercise price
which is not less than the fair market value of the stock on the
date of grant, as determined by the Stock Option Plan Committee.
In the case of options granted to a stockholder who possesses
more than 10% of the voting power of all classes of stock, the
exercise price will not be less than 110% of the fair market
value of the stock on the date of grant.
Effective April 1996, the Company adopted a Non-Qualified
Employee Stock Option Plan (the "Non-Qualified Plan") for key
management employees of the Company. The Non-Qualified Plan is
administered by the Stock Option Plan Committee appointed by the
Board of Directors and covers a total of 400,000 shares. The
Non-Qualified Plan provides that options may be granted at
exercise prices not less than 100% of the fair market value, as
defined, of the common stock of the Company on the date of grant
and in no event less than par value of the common stock. Unless
otherwise provided in the option agreement, the options expire
ten years from the date of grant.
Effective April 1996, the Company adopted a Non-Employee
Director Stock Option Plan ("Non-Employee Plan"). The Non-
Employee Plan is also administered by the Stock Option Plan
Committee and covers a total of 100,000 shares. The Non-
Employee Plan provides that options may be granted at exercise
prices not less than 100% of the fair market value, as defined,
of the common stock of the Company on the date of grant and in
no event less than par value of the common stock. The options
expire ten years after the date of grant.
The following is a summary of options granted:
<TABLE>
<CAPTION>
Number of Exercise
Options Price
<S> <C> <C>
Outstanding, June 30, 1995 - -
Incentive options granted 400,000 $1.00/share
Non-qualified options granted 400,000 $1.00/share
Director options granted 50,000 $.25/share
$.25 to
Outstanding June 30, 1996 850,000 1.00/share
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 156,067
<SECURITIES> 0
<RECEIVABLES> 1,085,389
<ALLOWANCES> 25,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,250,605
<PP&E> 897,899
<DEPRECIATION> 704,718
<TOTAL-ASSETS> 1,464,509
<CURRENT-LIABILITIES> 2,302,755
<BONDS> 0
0
0
<COMMON> 757,597
<OTHER-SE> (2,826,437)
<TOTAL-LIABILITY-AND-EQUITY> 1,464,509
<SALES> 8,897,455
<TOTAL-REVENUES> 8,897,455
<CGS> 6,638,234
<TOTAL-COSTS> 6,638,234
<OTHER-EXPENSES> 2,577,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 467,481
<INCOME-PRETAX> (786,011)
<INCOME-TAX> 0
<INCOME-CONTINUING> (786,011)
<DISCONTINUED> 84,237
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (701,774)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
