SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
-----------
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ending December 31, 1997
Commission File Number 0-16447
American Consolidated Growth Corporation
(Exact name of registrant as specified in its charter)
Delaware 52-1508578
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(State of incorporation ) (I.R.S. Employer Identification No.)
621 17th Street, Suite 1730, Denver, CO 80202
(Address of principal executive offices and zip code)
(303) 297-8686
--------------
(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 [ ]
As of December 31, 1997 9,956,523 shares common shares, $0.10 par value per
share, were outstanding.
<PAGE>
American Consolidated Growth Corporation
INDEX
Part I FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets 3
December 31, 1997 and June 30, 1997
Consolidated Statements of Income 4
Three and Six Months Ended December 31, 1997 and 1996
Consolidated Statements of Cash Flows 5
Six Months Ended December 31, 1997 and 1996
Item 2. Management's Discussion and Analysis 6
Part II OTHER INFORMATION
Item 1. Legal Proceedings 7
Item 2. Changes in Securities 7
Item 3. Default on Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Part III SIGNATURES 10
Exhibit 27 11
2
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PART I.
ITEM 1. American Consolidated Growth Corporation
(and Wholly Owned Subsidiaries)
CONSOLIDATED BALANCE SHEET
(unaudited)
ASSETS
December 31, June 30,
1997 1997
------------ ------------
(unaudited) (unaudited)
Current assets
<S> <C> <C>
Cash and cash equivalents $ 48,189 $ 2,140
Accounts receivable - trade,
Less allowance for doubtful accounts of $25,000 981,520 902,614
Prepaid expenses 3,169 21,670
------------ ------------
Total current assets 984,689 926,424
Furniture and equipment, net $ 92,315 $ 120,432
Other assets 14,311 12,887
Total assets $ 1,139,505 $ 1,059,743
============ ============
LIABILITIES and SHAREHOLDERS' DEFICIT
Current liabilities
Current maturities of long term debt $ 293,909 $ 295,751
Common stock subject to put option 51,213 51,213
Note payable 647,863 595,278
Notes payable - related party 80,700 230,700
Checks written in excess of bank balance 85,006 156,207
Accounts payable 376,180 500,127
Accrued payroll & taxes 136,895 234,592
Accrued expenses - related party 40,582 45,028
Other current liabilities 206,998 180,109
------------ ------------
Total current liabilities $ 1,919,346 $ 2,289,005
Long term debt $ 1,267,999 $ 1,267,999
Stockholders' deficit
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
9,956,523 shares issued and outstanding $ 995,652 $ 975,419
Additional paid-in capital $ 29,356,830 $ 29,366,946
Accumulated deficit (32,400,322) (32,839,625)
------------ ------------
(2,047,840) (2,497,260)
Total liabilities and shareholders' equity $ 1,139,505 $ 1,059,743
============ ============
3
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<CAPTION>
American Consolidated Growth Corporation
(and Wholly Owned Subsidiaries)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------------ -------------------------
1997 1996 1997 1996
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $ 3,325,986 $ 2,393,028 $ 6,182,827 $ 4,928,594
Direct expenses 2,730,029 1,825,591 4,951,882 3,719,854
----------- ----------- ----------- -----------
Gross margin 595,957 567,437 1,230,945 1,208,740
Other expenses
General and administrative expenses 380,388 714,310 902,197 1,279,696
Depreciation and amortization 17,722 18,115 37,256 33,731
Interest 51,714 105,205 141,661 226,801
----------- ----------- ----------- -----------
449,824 837,630 1,081,114 1,540,228
Income from Sale of Assets 289,472 -- 289,472 --
----------- ----------- ----------- -----------
Income (loss) from continuing operations $ 435,605 $ (270,193) $ 439,303 $ (331,488)
Income (loss) per common share
Continuing Operations $ .04 $ (.03) $ .04 $ (.04)
Weighted average shares
of common stock outstanding 9,956,523 7,705,489 9,956,523 7,914,466
4
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<TABLE>
<CAPTION>
AMERICAN CONSOLIDATED GROWTH CORPORATION
(and Wholly Owned Subsidiaries)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31,
1997 1996
---- ----
Cash flows from operating activities
<S> <C> <C>
Net Profit $ 439,303 $(331,488)
Adjustments to reconcile net loss to net cash used in operations
to net cash provided by (used in) operating activities:
Depreciation and amortization 37,256 33,731
Provision for losses on accounts receivable
Loss on disposal of equipment
Settlement payments on unrecorded debt
Gain on sale of assets
Interest on put option conversion
Common stock issued for services
Impairment of investment in affiliates and other
investments
Changes in operating assets and liabilities
Accounts receivable (78,906) 272,344
Prepaid expenses 18,501 18,820
Other assets (1,424) (3,620)
Accounts payable and accrued liabilities (168,259) 68,811
Accrued wages (97,697) (231,631)
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Net cash used in operating activities $ 148,774 $(173,033)
Cash flows from investing activities
Acquisition of equipment 978 5,353
Proceeds from sale of investment
Net change in due from related parties
--------- ---------
Net cash provided by investing activities $ 978 $ 5,353
Cash flows from financing activities
Change in notes payable
Long term notes payable (1,842) (120,554)
Note payable - Concord Growth Corp. 52,585
Notes payable - related party (150,000)
Proceeds from related party - note payable
(24,000)
Proceeds from long term debt 53,009
Payments on due to related parties (4,446) 25,213
Proceeds from issuance of common stock for debt -- 77,952
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Net cash provided by (used in) financing
activities (103,703) $ (11,620)
Net increase (decrease) in cash 46,049 (156,060)
Cash at June 30, 2,140 156,067
--------- ---------
Cash at December 31, 1997 $ 48,189 7
5
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American Consolidated Growth Corporation
(and Wholly Owned Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Management Representation
The accompanying unaudited interim financial statements have been prepared
in accordance with the instructions to Form 10-QSB and does not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of Management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. The results of operations for any interim
period are not necessarily indicative of results for the year. These statements
should be read in conjunction with the financial statements and related notes
included in the Company's Annual Report to shareholders on Form 10-KSB/A for the
year ended June 30, 1997.
ITEM 2: Management's Discussion and Analysis
In the fiscal quarter ending December 31, 1997, the Company was primarily
engaged in financial development of its wholly owned subsidiary, Eleventh Hour,
Inc. ("EHI"), a staffing services business. For the six month period just
ending, the Company produced revenues of $6,182,827, with a net profit of
$439,303, or $0.04 per share. The earnings were produced primarily as a result
of the sale of Eleventh Hour's Overland Park, Kansas operations to Western Staff
Services, Inc., of Walnut Grove, California. The sale was completed during the
quarter ending December 31, 1997 for $289,472. The subsidiary also generated
increasing temporary sales during the quarter ending December 31, 1997, with
profits of $179,105 as compared to $2,984 in the same period in the prior fiscal
year, representing a 6000% increase. The increased performance was attributed to
higher demand for temporary workers provided by EHI, together with the reduction
of overhead expenses, specifically, lowered financing costs and the reduction of
EHI corporate expenses.
As of December 31, 1997, in the opinion of management, the Company has
progressed significantly as compared to the same period in the prior fiscal
year. Short term debts were reduced by $148,714. Following completion of a
federal tax audit for the fiscal years 1990 to 1994, the Company accrued certain
federal and state corporate tax liabilities of approximately $92,000. At
December 31, 1997, following negotiations with the Internal Revenue Service, the
Company determined the actual federal tax liability was substantially less than
the $81,261 previously accrued and the item was written down to $7,380. The
federal tax was paid subsequent to the quarter ended December 31, 1997. State of
Delaware franchise taxes were also recalculated utilizing the Company's net
asset value, resulting in the write down of accrued taxes of $42,000 down to
$3,900. During fiscal 1997, Eleventh Hour entered into an account receivables
financing agreement with Concord Growth Corporation, of San Mateo, California.
The agreement significantly reduced EHI's interest expense on financing of
account receivables by over fifty percent. During the quarter ending December
31, 1997, the Company negotiated a further reduction in the interest rate and
renewed the contract through October 30, 1998. The effect of the improved
financing is anticipated to assist EHI in accommodating future sales growth.
Although no assurance can be provided 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.
6
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During fiscal 1997, 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. During the quarter ended December 31,
1997, the Company entered into negotiations with third parties to help
re-finance operations and to seek potential merger and capital partners for the
business of Eleventh Hour, Inc. Although no assurance can be provided these
efforts will result in new financing for the subsidiary or the expansion of its
business, the Company believes the addition of investment banking contacts and
related business relationships will have a material favorable impact on the
Company's ability to improve profitability on a going-forward basis. In the
fiscal year ended June 30, 1997, AMGC reported unaudited gross revenues of
$10,207,667.
Liquidity and Capital Resources
Cash and cash equivalent's balance on December 31, 1997 was $48,189 and
current assets were $984,689. As of December 31, 1997, the Company had a working
capital deficiency of $(934,657) and a stockholders' deficit of $(2,047,840). In
the opinion of management, provided new sources of working capital can be
secured, 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.
PART II.
ITEM 1. Legal Proceedings
During the quarter ended December 31, 1997, the Company was not a party to,
nor aware of any material litigation involving the Company or its operations.
During fiscal 1997, the Company was a party to Display Group LLC vs. AMGC,
a civil action in Colorado concerning the ownership of 1,400,000 common shares
of Advanced Display Technologies, Inc., a former affiliate of the Company. Due
to the non-performance of this investment, the shares were written to a value of
zero in the Company's certified audit of fiscal 1995. As of the date of the
filing of this report, pending the outcome of a jury trial on the matter, the
Company is unable to predict 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 fiscal 1997, the Company assigned its legal
rights and expenses in this case to a third party, who is pursuing related
claims against ADTI as result of former agreements concerning the licensing of
ADTI technologies in prior years. Pending the outcome of such activities, the
Company is unable to predict whether or not the shares can be recovered or what,
if any, material consequences may occur.
ITEM 2. Changes in Securities
(a) Security Ownership of Certain Beneficial Owners and Management: the
following table sets forth the number of shares of the Registrant's $0.10 par
value common stock beneficially owned by: (1) each person who, as of December
31, 1997, was known by the Company to own beneficially more than five percent
(5%) of its common stock; (2) the individual Directors of the Registrant; and
(3) the Officers and Directors of the Registrant 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").
7
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Shares issuable on exercise of options exercisable within 60 days of December
31, 1997 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. The outstanding shares as of December 31, 1997
was 9,956,523.
Name and Address Number of Shares Held Percent of Class
- ---------------- --------------------- ----------------
Louis F. Coppage, Chairman and CEO 5,950 .059 %
283 Kimbrough
Memphis, TN 38103
Norman L. Fisher 953,479 (a)(b) 9.58 %
President and CEO of
Eleventh Hour, Inc.
5002 Mineral Circle
Littleton, CO 80122
Cory J. Coppage, Secretary and
Treasurer 150,000 (c) 1.51 %
7255 E. Quincy Ave, #550
Denver, CO 80237
Joe Lee, Director 49,000 (d) .49 %
4250 S. Olive Street, #216
Denver, CO 80237
B. Mack DeVine, Director 25,000 (d) .251 %
P.O. Box 620
Tampa, FL 33601
Mick Dragoo, Shareholder 1,110,050 11.15 %
8634 S. Willow
Tempe, AZ 85284
George & Philips Holdings, Ltd.,
Shareholder 1,275,000 12.81 %
P.O. Box 438
Roadtown, Tortola BWI
Officers and Directors as a Group
(five persons) 1,183,429 11.89 %
(a) Includes options to purchase 400,000 shares.
(b) Includes 535,229 shares held jointly by Mr. and Mrs. Norman L. Fisher, who
are officers of EHI.
(c) Includes options to purchase 100,000 shares.
(d) Includes options to purchase 25,000 shares and shares held by Lee
Properties LLLP.
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 December 31, 1997. The economic interest and security
ownership indicated above includes qualified and non-qualified stock options
awarded by the Company to certain key executives in fiscal 1996. Beneficial
ownership is calculated in accordance with Section 13(d) of the Exchange Act and
the rules promulgated thereunder.
8
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ITEM 3. Default on Senior Securities.
As of December 31, 1997, the Company has material commitments for capital
expenditures including promissory notes of $1,267,999 which come due in
February, 2003 and carry 14% interest. The interest is payable quarterly at
approximately $45,000 per quarter. At December 31, 1997, the Company is in
arrears on interest payments totaling approximately $90,000. Subsequent to the
period just ending, the Company completed payment of $45,000 in interest due on
the promissory notes through October 15, 1997. As of the date of filing of this
report, the Company has no knowledge of any existing or pending legal action
from these parties. However, in the event the Company is unable to bring the
interest payments current in the near term, no assurances can be provided
litigation will not ensue. In such an event, the Company is unable to determine
what, if any, adverse consequences may occur.
ITEM 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Security Holders during this
reporting period.
ITEM 5. Other Information.
As of December 31, 1997, the Company had no other reportable events which
were not previously disclosed in the below referenced exhibits and reports.
ITEM 6. Exhibits and Reports on Form 8-K
(Incorporated by reference).
9
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on this 15th day of
February, 1998.
Dated: February 15, 1998
By: /s/ Louis F. Coppage
-------------------------------
Louis F. Coppage
Chief Executive Officer
And President
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this report has been signed by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Dated: February 15, 1998
By: /s/ Cory J. Coppage
-------------------------------
Cory J. Coppage
Secretary and Treasurer
10
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM BALANCE SHEET AND
STATEMENT OF OPERATIONS ACCOUNTS FILED AS FOR 10-QSB AND IS QUALIFIED IN ITS
ENTIRETY BY SUCH REGISTANTS'S ANNUAL REPORT ON 10-KSB FOR THE YEAR END PERIOD
JUNE 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 48,189
<SECURITIES> 0
<RECEIVABLES> 981,520
<ALLOWANCES> 25,000
<INVENTORY> 0
<CURRENT-ASSETS> 984,689
<PP&E> 92,315
<DEPRECIATION> 17,722
<TOTAL-ASSETS> 1,139,505
<CURRENT-LIABILITIES> 1,919,346
<BONDS> 1,267,999
0
0
<COMMON> 9,956,523
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,139,505
<SALES> 6,182,827
<TOTAL-REVENUES> 6,182,827
<CGS> 2,730,029
<TOTAL-COSTS> 2,730,029
<OTHER-EXPENSES> 449,824
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,714
<INCOME-PRETAX> 439,303
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 439,303
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
