SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
AMENDMENT #1
(Mark One)
[XX] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995 or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-17057
ATLANTIS GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 65-0250676
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
4275 Aurora St., Suite F
Coral Gables, Florida 33146
(Address of principal executive offices)
(305) 443-2588
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes XX No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by
court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: The
number of shares of the registrant's common stock outstanding as
of November 21, 1995 was 8,553,385.
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ATLANTIS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
Sept 30, December 31,
1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash $ 119,191 $ 164,782
Accounts Receivable-net 806,895 368,703
Inventories 443,657 739,429
Due from related entity 51,769 318,000
Prepaid Expenses 84,152
Loans receivable
-related parties 184,908 153,241
Total Current Assets 1,690,572 1,744,155
PROP, PLANT & EQUIP-NET 882,368 1,168,439
OTHER ASSETS:
Investment in mining rts 82,501 82,501
Licenses-net 1,091,056 1,152,824
Non compete-net 0
Subordinated capital note 50,000
Deposits & other assets 41,092 39,227
Total Other Assets 1,264,649 1,274,552
TOTAL ASSETS $ 3,837,589 $4,187,146
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
ATLANTIS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
Sept 30, December 31,
1995 1994
<S> <C> <C>
CURRENT LIABILITIES:
Current Portion-LTD $ 68,327 $ 69,813
Current Portion-Lease 7,175 0
Note Payable 818,084 70,609
Account Payable 1,466,265 1,658,987
Accrued Expenses 99,278 127,613
Advances on contracts 670,502 1,117,503
Income taxes payable 43,311 47,500
Dividends payable 0 9,450
Total Current Liab 3,172,942 3,101,475
OTHER LIABILITIES:
Obligations under Lease 25,115 0
Notes Payable, LT Portion 0 1,699
Total Other Liabilities 25,115 1,699
TOTAL LIABILITIES 3,198,057 3,103,174
COMMITMENTS AND CONTINGENCIES:
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.01
par value with liquidation preference
values of $10 and $15 per share
2,000,000 shares authorized;
198,944 and 213,533 shares issued
& outstanding respectively 1,989 2,135
Common stock, $.01 par value,
50,000,000 shares authorized;
8,034,335 and 4,817,657 shares
issued and outstanding 80,343 48,176
Additional PIC 1,376,455 25,300
Additional PIC-PFD 889,281 1,049,778
Treasury Stock (534,000)
Retained (Deficit) (1,174,536) (41,417)
Total Stockholder's Equity 639,532 1,083,972
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $3,837,589 $4,187,146
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
ATLANTIS GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Mos Ended Three Mos Ended
Sept 30, 1995 Sept 30, 1994
<S> <C> <C>
INCOME
OPERATIONS REVENUE $ 905,600 $ 278,544
JOINT OPERATE REVENUE 631,257 0
TOTAL INCOME 1,536,857 278,544
COST OF SALES(excluding depreciation
and amortization)
OPERATIONS C.O.S. 790,533 255,367
JOINT OPERATE C.O.S. 507,854 0
TOTAL COST OF SALES 1,298,387 255,367
GROSS PROFIT 238,470 23,177
EXPENSES:
AMORT & DEPN 182,386 1,302
JOINT OPERATING EXPENSE 123,403 0
OTHER GEN & ADMIN 418,641 20,861
TOTAL GEN & ADMIN 724,430 22,163
(LOSS) INCOME
FROM OPERATIONS $(485,960) $ 1,014
OTHER (EXPENSES) INCOME
INTEREST INCOME 7,880 120
INTEREST EXPENSE ( 9,866) (1,911)
TOTAL OTHER (EXP) INCOME (1,986) (1,791)
NET (LOSS) BEFORE TAXES $(487,946) $ ( 777)
INCOME TAXES 0 348
NET (LOSS) $(487,946) $ ( 429)
========= ===========
(LOSS) PER COMMON SHARE $ (0.082) $ NIL
========= ======
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 5,915,085 2,830,000
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
ATLANTIS GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Nine Mos Ended Nine Mos Ended
Sept 30, 1995 Sept 30, 1994
<S> <C> <C>
INCOME
OPERATIONS REV $ 2,405,993 $ 914,488
JOINT OPERATING REV 1,590,646 0
TOTAL INCOME 3,996,639 914,488
COST OF SALES(excluding depreciation
and amortization)
OPERATIONS COS 1,996,607 693,406
JOINT OPERATE COS 1,297,358 0
TOTAL COST OF SALES 3,293,965 693,406
GROSS PROFIT 702,674 221,082
EXPENSES:
AMORT & DEPN 538,215 3,906
JT OPERATING EXPENSE 293,288
OTHER GEN & ADMIN 993,373 41,689
TOTAL GEN & ADMIN 1,824,876 45,595
(LOSS) INCOME
FROM OPERATIONS $ (1,122,202) $ 175,487
OTHER (EXPENSES) INCOME
INTEREST INCOME 7,880 120
INTEREST EXPENSE (18,797) ( 5,378)
TOTAL OTHER (10,917) ( 5,258)
NET (LOSS) INCOME
BEFORE TAXES $ (1,133,119) $ 170,229
INCOME TAXES 0 (59,296)
NET (LOSS) INCOME $ (1,133,119) $ 110,933
=========== =======
(LOSS) INCOME PER
COMMON SHARE $ (0.207) $ 0.039
======== ======
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 5,468,655 2,830,000
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
ATLANTIS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Nine Months
Ended Ended
Sept 30, 1995 Sept 30, 1994
<S> <C> <C>
Cash Flows from
Operating Activities
Net Income (Loss) $( 1,133,119) $ 110,933
Adjustments to reconcile net
(loss)income to net cash
used in operating activities
Non-Cash Items:
Amort. and Depr. 538,215 3,906
Stock issued for
services rendered 336,150
Changes in assets
(increase) decrease:
Accounts receivable (438,192) 165,226
Prepaid expenses 100,549
Inventories 295,772
Loans receivable
-related party ( 31,667)
Due from related
parties ( 1,769) ( 76,431)
Changes in liabilities
increase (decrease):
Accounts payable
and accrued exp (136,405) ( 170,051)
Advances on contract ( 447,001)
Reclass from accts pay
to note payable 777,381
Net cash used in operating
activities ( 140,086) 33,583
Cash Flows from
Investing Activities:
Investment in mining rights ( 57,058)
Subordinate cap. note ( 50,000)
Purch of fixed assets ( 40,244)
(Increase) Decrease
in deposits ( 2,000) 2,000
Net cash used in investing
activities ( 92,244) (55,058)
Cash Flows from
Financing Activities:
Proceeds from
Long Term Lease 35,878
Payments on Borrowing ( 33,085) ( 171)
Payments on
Capital Lease ( 3,588)
Proceeds on Stock Subs 187,534 147,082
Net cash provided by
Fin. Activities 186,739 146,911
Net Increase (Decrease)
in Cash ( 45,591) 125,436
Cash at beginning
of period 164,782 ( 34,809)
Cash at end of period $ 119,191 $ 90,627
======= =======
</TABLE>
Note: Total Interest Paid for the quarter $8,265
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE FINANCIAL STATEMENTS
<PAGE>
ATLANTIS GROUP, INC
CONSOLIDATED STATEMENT OF CASH FLOWS
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
During the first quarter of 1995, the Company issued 106,667 common
shares with a value of $55,694 as payment for accounts payable;
33,150 common shares with a value of $33,150 as payment on accrued
expenses; and 200,000 common stock with a value of $176,500 toward
long term employment contracts and 25,000 common shares worth
$25,000 for a field consultant's bonus. The Company also issued
75,423 common shares for the conversion of the "1992 Series"
Preferred Stock and its accrued dividends.
During the second quarter of 1995, the Company issued 75,000 common
shares with a value of $56,250 for current services rendered;
50,000 common shares worth $25,250 to field consultants as bonuses
and issued 2,317 common shares for the conversion of the "Vulcan
Series" of Preferred Stock.
During the third quarter of 1995, the Company issued 278,370 common
shares with a value of $119,841 for services to a former officer
rendered in accordance with an employment agreement and as a bonus
to a field consultant.
<PAGE>
ATLANTIS GROUP, INC..
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
Note 1. BASIS OF REPRESENTATION
On November 1, 1994, the Company acquired Rubeck Engineering
and Construction, Inc. in a transaction qualifying as a tax-free
reorganization and treated as a reverse acquisition. As such,
Rubeck Engineering and Construction, Inc. is treated as the
acquiror for accounting purposes. Therefore, the operating results
shown for the comparative 1994 period are those of Rubeck
Engineering and not those of the Atlantis Group, Inc.
The accompanying financial statements reflect all adjustments
which, in the opinion of management, are necessary for fair
presentation of the financial position and the results of
operations for the interim period represented.
Certain financial information, which is normally included in
financial statements prepared in accordance with generally accepted
accounting principles, but which is not required for interim
reporting purposes has been condensed or omitted. The accompanying
financial statements should be read in conjunction with the
financial statements and notes thereto as of December 31, 1994,
which financial statements are contained in the Company's Annual
Report of Form 10-K.
Note 2. EARNINGS (LOSS) PER SHARE
Per share information is computed based upon the weighted
average number of shares outstanding during the period. In the
first quarter of 1994, Rubeck Engineering and Construction, Inc.
was a privately held corporation with 1,960 common shares
outstanding. In order to make the earnings per share calculation
comparable, the amount of common shares issued to Rubeck
Engineering and Construction, Inc. in November 1994 in the stock
for stock exchange was used. The Company issued 2,830,000 (post
split) shares of its common stock for the 100% of the outstanding
stock in Rubeck Engineering and Construction, Inc.
Note 3. TERMINATION OF GUARANTEED LIABILITIES
The default in the first quarter of 1995 by the Company's
former subsidiary, Mitchell Pole Company, Inc. which was sold on
August 12 1994, and the subsequent demand by the bond trustee for
Microterra to perform under its corporate guarantees, were
terminated on July 28, 1995. On that date, a new issue of
Industrial Revenue Bonds was closed and the proceeds used to
defease (pay off) the prior defaulted bond issues. Accordingly,
the Company's guarantee obligations were terminated.
<PAGE>
Note 4. SUBORDINATED CAPITAL NOTE
On September 26, 1995, the Company executed a Memorandum of
Intent to acquire, with common stock, up to 49% of Management and
Business Associates, Inc.("MBA") an environmental 8(a) construction
company in Coral Gables, Florida. The acquisition is dependent
upon the completion of due diligence. The Memorandum also includes
cash advances within five (5) days of $50,000 and within
twenty-one (21) days of $25,000 and up to $1,000,000 in the event
of
positive due diligence results to MBA in exchange for subordinated
capital notes. The notes shall be payable at 7.75% interest only
with a maturity of five (5) years from date of issuance. Repayment
of the notes prior to maturity is based upon the net profits after
tax of MBA. On September 26th, the Company sent $50,000 to MBA in
exchange for a subordinated capital note.
Note 5. INVESTMENT IN WELLSPRING
On September 27, 1995 the Company issued 1,000,000 shares of
its common stock (restricted as to further transfer) to Wellspring
Capital Fund, a newly organized Delaware corporation which intends
to elect to become a business development company under the
Investment Company Act of 1940. The Company received 52,400 shares
of preferred stock that is convertible in 1996. The preferred
stock carries and annual, cumulative rate of $0.80 per share. This
issuance is treated as par value treasury stock.
Note 6. INVESTMENT IN ATLANTIS CAPITAL, INC.
On September 26, 1995, the Company capitalized a wholly-owned
subsidiary, Atlantis Capital, Inc. with 1,000,000 shares of its
common stock. This subsidiary is to be used as a financing vehicle
with bonding companies. The issuance is treated as par value
treasury stock for purposes of the consolidated statements.
Note 7. NOTE PAYABLE-AMWEST
On April 19, 1995 signed a note in settlement of claims filed
with Amwest Surety Insurance Company in the principal sum of
$794,876.95 which is to be adjusted up or down to the amount
actually paid out for claims and bearing interest at the rate of
6%. The note was to mature on October 19,1995, unless a
Registration Statement filed by the Company was effective, in which
case an automatic 90 day extension is to be granted.
If no Registration Statement is effective on October 19, 1995, then
the note is to be paid in three monthly installments.
<PAGE>
Note 8. SUBSEQUENT EVENTS
On October 10, 1995, the Company sent an additional $10,000
to Management and Business Associates in exchange for a
subordinated capital note.
On October 19, 1995, a Registration Statement for the Company
was not effective and the note to Amwest Surety Insurance Company
was to be paid in three monthly installments. The note was
extended by Amwest to February 28, 1996.
In November 1995, the Company issued 519,050 common shares
under form S-8 to a consulting company in exchange for a five (5)
year contract.
<PAGE>
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (AMENDED)
BUSINESS OPERATIONS:
On November 9, 1994, the Company acquired Rubeck Engineering
and Construction, Inc., a privately-held company based in Los
Angeles, in a stock-for-stock exchange. The shareholders of Rubeck
received more than 50% of the issued and outstanding stock
following the acquisition; the acquisition was a "reverse
acquisition". In order to accomplish the acquisition, a reverse
stock split was required; a 20-1 reverse split was done.
Rubeck is a California corporation, organized on March 18,
1991 with principal offices located at 206 South Detroit Street,
Los Angeles, California 90036-3034. Its main telephone number at
that address is (213) 931-1695. Rubeck is engaged in the
installation of fueling stations, including:
1. Retrofitting of existing fueling stations with EPA-required
upgrades;
2. Construction of new, environmentally sound, underground and
aboveground fuel storage systems;
3. Decommissioning of old fuel tanks; and
4. Remediation (bio-remediation) of hazardous materials from
groundwater and soil.
Rubeck's contracts are almost entirely with the governmental
sector, such as the Department of the Interior, the National Park
Service and the Department of Defense (Air Force, Army and Navy).
The three months ended September 30, 1995 and the period since
the end of that quarter have seen the Company's business plan and
structure evolve along the lines previously discussed in the
10-QSB for June 30, 1995. In summary, existing environmental
contracting operations are being consolidated or will be terminated
in favor of the anticipated arrangement with a Florida-based
contracting company, the bio-recycling of chemically-treated wood
waste will again be focused upon, and the Vulcan machine, if the
marketing study shows sufficient profitable utilization potential,
will be refurbished and place in service.
BUSINESS PLAN CONTINUING REASSESSMENT
For the past several months, Management has been reassessing
the Company's business plan, in light of the status of the Company
since the November, 1994 acquisition of Rubeck Engineering and
Construction, Inc. At the time of the acquisition, the Company had
disposed of both its "white wood" manufacturing subsidiary in
Camilla, Georgia and the acreage in Fitzgerald, Georgia intended
for the wooden pole chemical treatment plant. As a result, the
Company was essentially focused on (1) the bio-recycling process
and the so-called "barrier product" and (2) the Vulcan High
Temperature Fluid Wall Reactor. Since Rubeck's acquisition by the
Company, Management has emphasized the Rubeck operations, while
exploring the continuation of the pre-existing business plan. as
a result of this reassessment, various decisions have been made and
are being implemented.
<PAGE>
1. Termination of Coast and HWB Joint Operations.
A. Coast Engineering and Construction Corporation/ sub-contracts
to Rubeck.
During August and September, it became clear that at least
one, if not more, of Coast's jobs was operating at a substantial
loss and that Coast was insolvent. On or about September 15, 1995
Coast terminated all jobs and relinquished them to its bonding
company. The effect of this was to terminate the Rubeck
sub-contracts on those jobs. This left Rubeck with only its own
directly bid jobs (2 jobs).
The termination of Coast's jobs has resulted in the closure
of Coast and therefore Rubeck will not receive any further
subcontracts or assignments from Coast. Accordingly, Rubeck has
terminated the January 4, 1995 Covenant not to Compete between the
two corporations as of October 1, 1995.
B. HWB Construction/Joint Operating Agreement.
It was determined that the indebtedness of HWB Construction
substantially exceeded the assumed indebtedness as disclosed at the
time of the execution of the Joint Operating Agreement. Actual
debts and liabilities were calculated as being approximately
$812,000 as compared to an estimated $400,000. As a result,
permitting HWB Construction to retain the first $400,000 of gross
margin would not have been sufficient. Under these circumstances,
it appeared highly unlikely that Rubeck could recover the funds
which it would be required to advance or could receive a sufficient
return for its mentor and administrative services. Accordingly,
although HWB Construction has been notified by the U.S. Army Corps
of Engineers that the Corps is exercising its contractual option
to renew the HWB contract for 1995-1996, the Company and HWB have
mutually terminated the Joint Operating Agreement as of September
30, 1995 and Mr. Baccani's employment as of November 15, 1995. In
connection with the termination, Mr. Baccani received 250,000
warrants to purchase the Company's common stock and has resigned
as a director of the Company.
2. Rubeck Engineering and Construction, Inc. Direct
Operations.
With the termination by Coast of its jobs and the termination
of the HWB Construction Joint Operating Agreement, Rubeck has only
two current jobs and does not have any bonding with which to bid
for new jobs. One of the jobs is operating at approximately
break-even. The other job is approximately 29% complete and will
likely
result in a profit of approximately $122,000. The profit from the
one job is not sufficient to offset the overall liabilities of
Rubeck. Under the circumstances, Management is now evaluating the
viability of Rubeck.
In settlement of the claims of Amwest Surety Insurance Company
("Amwest"), Rubeck gave Amwest a note in the principal sum of
$794,876.95, which is to be adjusted up or down to the amount
actually paid out for claims and bearing interest at the rate of
6%. The note assumed that registration of an offering of Common
Stock underlying warrants issued by the Company would be effective
by October 19, 1995, and then allowed 90 days for the exercise of
<PAGE>
warrants and repayment of the note. However, if registration were
not effective by October 19, 1995 then Rubeck was to pay the note
in three equal installments. The registration was not effective
by October 19th (and is not effective as of the filing of this Form
10-QSB) and Rubeck is not able to commence the installment
payments. Amwest is considering its course of action and has not
declared a default.
Mr. Antico, Rubeck's President, and his wife, have personally
guaranteed the bonding for Coast (and for Rubeck). Given the
closure of Coast, and the problems of Rubeck, it is considered
unlikely that the guarantees of the Anticos would be sufficient to
secure new or additional bonding for Rubeck such that it could bid
for new work. Because of its prior loss history, the Company's
guarantee is not acceptable to the bonding companies either. It
is recognized that, since the Anticos personally guaranteed that
note, Amwest will pursue the Anticos, which would further diminish
the value of any guarantee by the Anticos for other bonding.
Recognizing that Rubeck must secure bonding capacity and
secure new jobs in order to remain viable, Management is now
considering Rubeck's future. In an effort to provide collateral
for bonding, the Company established a new subsidiary, Atlantis
Capital, Inc. and funded such corporation by the contribution to
capital of one million shares of the Company's Common Stock.
However, since that stock is currently restricted it has limited
collateral value. Accordingly, the Company is registering those
shares in its current Registration Statement and will evaluate its
ability to secure bonding following effectiveness of the
Registration Statement.
In the interim, Charles R. Schuster, the Company's Chairman
of the Board, who was a co-founder of Rubeck, requested the
opportunity to try to make Rubeck viable and profitable. On
November 16, 1995, Mr. Schuster resigned as Chairman of the Board
of the Company and was elected as President of Rubeck, taking over
total control of its day-to-day operations. Mr. Jorge H. Antico
has assumed the position of Chairman of the Board.
Management is considering several courses of action with
respect to Rubeck, including:
1. If sufficient bonding is available following
effectiveness of the Registration Statement, Rubeck may
be retained or may be consolidated with MBA, discussed
below; or
2. If sufficient bonding is not available, Rubeck may
be sold to Mr. Schuster or a third party or else
terminated.
3. Operations with Management & Business Associates, Inc.
On September 23, 1995 the Company entered into a Memorandum
of Intent with Management & Business Associates, Inc. ("MBA") of
<PAGE>
Coral Gables, Florida. MBA is certified as an 8(a) firm by the
U.S. Small Business Administration, an "8(a) company" being a
minority-owned enterprise entitled to participate in various
federal programs such as set-asides. In order for MBA to retain
its status as an 8(a) company, the Company has an option to acquire
up to a maximum of 49% of MBA. Initially the Company holds a 9%
interest while the parties conduct mutual due diligence. Subject
to reasonable extensions, all due diligence is to be completed by
December 31, 1995 and the Company will then determine whether to
terminate the agreement or to exercise its option and to what
extent to exercise its option if it elects to proceed. Based upon
its current due diligence, the Company anticipates proceeding and
exercising its entire option; however, a final decision must await
the receipt of audited financial statements from MBA including
those for the year 1995. However, at the present time the Company
is assisting MBA in several areas, such as bonding and financing.
MBA has a strong construction management team and established
job control systems. It is a qualified and even preferred provider
of certain services and is growing in several areas, such as
government building management and disaster response, and desires
to grow into a real estate development company.
One aspect of the current discussions with MBA involves the
possible distribution of all or a part of the 49% holding, if that
course of action is elected, to the shareholders of the Company so
as to give them a direct interest in MBA. However, no final
decision is expected until after the decision whether to terminate
or proceed has been made. As a step toward future cooperative
operations, the president and primary owner, Manuel E. Iglesias,
has been elected as a director of the Company.
4. Vulcan High Temperature Fluid Wall Reactor. The Company
purchased the Reactor in early 1991, expecting to use it internally
in remediating the soil at the old Camilla wood treatment site.
When the Georgia EPD refused to permit the Company to reopen that
site, the Reactor was left in storage in Illinois. However, the
Company sought third-party contracts to utilize the Reactor and in
anticipation of securing such contracts preparations were made to
refurbish the Reactor and put it into use. In mid-1992, the
Company had a complete inspection made of the machine by its
inventor and a company engineer and secured a refurbishment report
and estimate. Recently, the Company's auditors had an independent
survey of the Reactor made together with an up-dated estimate for
the refurbishment and upgrade costs. It appears that to refurbish
the Reactor and provide certain upgrades to incorporate
improvements subsequent to the Reactor's original construction will
cost $800,000 to $1,000,000. The Company believes that the Reactor
and the technology which it embodies offer a valuable alternative
to incineration of toxic, hazardous waste. A prior lease/license
arrangement with a Nevada company did not develop and the Company
has entered into a Joint Operating Agreement with Scientific
Equipment Systems, LLC ("SES"), a Louisiana limited liability
company which is 50% owned by Charles R. Schuster, who until <PAGE>
November 16th was the Company's Chairman of the Board. Pursuant
to the Agreement, Management has moved the Reactor out of storage
and to Louisiana, to the facility of SES, where it is being
dismantled, to the extent necessary, to secure more specific detail
costs for the refurbishment and upgrades. It is the responsibility
of SES to conduct a marketing study and determine the probable
utilization of the Reactor so that a final decision can be made on
the potential profitability of expending the funds for the
refurbishment. The Company believes that with the termination of
the Mitchell Pole Company, Inc. bond guarantees, its financing can
now proceed. Such financing includes funding to allow for the
rehabilitation of the Reactor.
5. Bio-Recycling - Disposal. Management recognizes the need
for the chemically-treated wood bio-recycling process developed by
the Company, and has retained the Company's exclusive license with
Louisiana State University by paying the minimum annual royalty.
The process has received recognition not only in the United States,
but in Canada, Europe, and Australia. The process appears to offer
a substantial profit base. The process has been proven and scaled
up in a pilot plant operation. Notwithstanding that, the Company
has had difficulty securing financing for the first full scale
facility. Utility companies and the telephone companies have, for
a variety of reasons, ranging from concerns about cost to concerns
about admitting to environmental problems, declined to provide long
term disposal contracts which would permit project financing.
Although the State of New Jersey has authorized the issuance and
sale of solid waste facility revenue bonds to finance construction,
the potential underwriters want to limit the issue to 60% to 70%
of the cost of the plant, which means that the Company must raise
the balance of the plant cost and the initial working capital.
Despite substantial, on-going, and diligent efforts to secure such
capital, both in the U.S. and abroad, the Company has been unable
to do that. In the absence of such financing, the Company does not
intend to incur the capital costs and debt liability, as the
operation would be undercapitalized. Accordingly, Management
discontinued what had been a fruitless search for the capital and
instead has been seeking a strategic partner or a joint venture
partner or a licensee. Preliminary discussions have been held with
both U.S. and Canadian firms, and a Letter of Intent with an
American firm is presently under negotiation.
6. Bio-recycling - "barrier product". With the retrenchment
of the utilities in anticipation of deregulation, it appears that
maintenance is being deferred. This strengthens the market for the
Company's barrier product, which is intended to protect standing
poles, while in use, from deterioration at and below the ground
line. The product, which offers related benefits related to
potential leaching of treatment chemicals, utilizes the same
microbial consortia used in the bio-recycling operations and offers
a way to dispose of the Company's excess bio-mass and waste water.
Thus, the manufacture of the "barrier product" is to be located at
the bio-recycling plants. Management does not intend to attempt
to manufacture the "barrier product" outside of such a plant.
Accordingly, completion of the Company's research and development
of the product is being postponed until there is a bio-recycling
<PAGE>
(disposal) plant. Since production of the barrier product is tied
to the bio-recycling plant, the Company's plans for the barrier
product are dependent upon the results of the negotiations
regarding the LSU license as discussed above.
7. Mentor Program and "Incubator" Assistance/BDC Investment.
The Company's experience with the HWB Joint Venture shows that the
Company's Management can be of assistance with small, start-up
ventures which require assistance. Under appropriate
circumstances, such assistance can help defray the Company's
management/executive overhead. Accordingly, Management has been
exploring various potential opportunities which would offer such
utilization of the management and executive capacity, while
providing profit potential to the Company from its participation
in such enterprises, which would be developed and spun off as
independent companies. During the reassessment of the Company's
business plan, this has increasingly become a more important
consideration. In September, the Company invested in a newly
organized company which intends to elect to be a business
development company ("BDC") under the Investment Company Act of
1940. A BDC's essential purpose is to provide both financing and
management support services to client portfolio companies, assist
those companies in growing to a size warranting public company
status, and then distributing an interest in such newly-public
companies to its shareholders as the return on their investment.
While the Company's ultimate relationship and role to that BDC is
not determined, the offering of mentor and incubator assistance is
going to become a part of the Company's revised business plan for
1996. The Company may provide such services directly, it may
provide them in conjunction with the BDC, and/or it may provide
them through the BDC. Management's present concept is to acquire
an interest in the companies to which it provides such services
and then to distribute all or portion of such interests to its
shareholders so as to give them a direct interest in such
companies. With the consolidation of the Company's construction
operations into MBA, where the Company would hold only a minority
interest, in the absence of other operations the Company could fall
into the definition of an investment company. Accordingly,
Management decided to position itself for that possibility by
acquiring an interest in a new BDC with the expectation that the
Company's role and the extent of its relationship could be
determined as events in 1996 may dictate.
LIQUIDITY AND CAPITAL RESOURCES:
At the time of the acquisition of Rubeck by the Company, the
Company had sold its operating subsidiary (Mitchell Pole Company,
Inc.), disposed of the site intended for the wood treatment
facility in Fitzgerald, Georgia, had entered into a sale-leaseback
transaction with respect to the Madison Parish Port bio-recycling
plant site, and completely depleted its cash, while having
liabilities of approximately $1,010,300. Rubeck anticipated the
availability of excess cash from its work-in-process to carry the
<PAGE>
post-reorganization corporate structure overhead long enough to
raise capital to pay off pre-existing liabilities, increase working
capital and expand bonding capacity to create growth. However,
subsequent to the Company's acquisition of Rubeck, several problems
emerged, some of which were anticipated.
First, the re-emergence of market interest and support for the
Company did not immediately develop. Initial efforts for a private
placement of common stock to obtain proceeds for the payment of the
pre-Rubeck reorganization liabilities of the Company were
unsuccessful. As a result, the ability of the Company to repay
those previously existing liabilities was limited to the cash flow
of Rubeck and it adversely affected Rubeck's working capital.
Second, an unresolved dispute by Rubeck with Amwest Surety
Insurance Company and the Department of the Interior on the basis
for calculation for the volume of soil removed for remediation at
Yosemite created a disruption of cash flow on that job which
carried over to other jobs.
Third, Rubeck's major job at the end of 1994 was in a northern
area of the country where a seasonal closure from November to May
is required by the U.S. Air Force. The seasonal closure
interrupted the job with a limited amount of work to be completed
under a contract where recovery of overhead and profit components
is "backloaded" at the end of the contract.
Fourth, the bonding companies denied additional bonding
availability to Rubeck pending receipt of audited consolidated
financial statements reflecting the acquisition of Rubeck by the
Company and a capital infusion to strengthen the balance sheet and
pay off pre-existing debt. This, in turn, has adversely impacted
Rubeck's ability to bid for new work since November, 1994.
Fifth, the default on the Mitchell Pole Company, Inc. bonds
(now resolved; see below) concerned potential investors and
lenders, who deferred all action pending a resolution of that
potential liability. This adversely affected all financing which
the Company was negotiating.
To overcome the loss of work due to the unavailability of
bonding, pending the issuance of the audited consolidated financial
statements and infusion of capital, Management:
1. Utilized Coast Engineering and Construction
Corporation to subcontract work to Rubeck or assign
contracts to Rubeck; and
2. Entered into a Joint Operating Agreement with HWB
Construction (which became a related entity) to cooperate
on its workload.
This resulted in Rubeck and the Joint Operating Agreement starting
jobs since February as follows:
<PAGE>
<TABLE>
<S> <C> <C>
February: Rubeck - 2 jobs, HWB - 1 job
March: Rubeck - 2 jobs, HWB - 2 jobs
April: Rubeck - 0 jobs, HWB - 3 jobs
May: Rubeck - 2 jobs, HWB - 1 job
June: Rubeck - 1 job, HWB - 0 jobs
July: Rubeck - 1 job, HWB - 1 job
August: Rubeck - 0 jobs, HWB - 1 job
September: Rubeck - 0 jobs, HWB - 0 jobs
However, this strategy did not wholly solve the problem, short
term. Because contract payment schedules (i) require the
withholding of a retention from job progress payments, (ii) usually
impose a deferral on the recovery of overhead and profit to the end
of the contract, and (iii) only reimburse the contractor after
costs and expenses are incurred, the effort to maximize the number
of jobs resulted in severely straining the available cash flow and
causing payables to accumulate. There was no immediate excess cash
flow with which to deal with pre-existing liabilities, especially
those of the Company prior to the Rubeck acquisition.
Additionally, contracting work profit margins suffered from the
shortage of working capital by (i) causing some of the lowest
priced suppliers to stop delivering goods to Rubeck's job sites and
forcing Rubeck to purchase supplies at less than favorable terms
and (ii) extending construction schedules, as Management was unable
to staff construction sites with sufficient manpower to complete
the jobs in the least, and therefore most profitable, time, and
(iii) extending construction schedules and thereby increasing
project overheads, and (iv) extending construction schedules and
delaying completion, thereby increasing the G&A costs allocated to
each project.
A further complication has been the lack of bonding. In
conjunction with the year-end audit of the Company's financial
statements, the 1992, 1993 and 1994 financial statements of Rubeck
were re-audited by the Company's auditors. This, together with the
new management's unfamiliarity with events prior to November, 1994
contributed to a delay in the completion and release of the audit.
In turn, this delayed the filing of Form 10-K and the issuance of
the Form 10-K and financial statements to bonding companies. The
result was that most bonding companies refused to continue or
extend bonding, thus prohibiting Rubeck from bidding for jobs
requiring bonding. Since Rubeck's government contracts require
bonding, this precluded Rubeck from obtaining additional government
contracts.
In summary, events since the Company's acquisition of Rubeck
have severely strained Rubeck's cash. During the first nine months
of 1995, Management has focused its attention on, and directed all
available cash to, the fuel storage system jobs of Rubeck
(primarily obtained by assignment or subcontract from Coast) and,
secondarily, HWB Construction, in the expectation that as the jobs
matured they would not only replace the cash committed to them, but
<PAGE>
also generate cash flow available for the reduction of the non-job
liabilities. While this strategy was adequate for job performance,
the Company was required to limit the starting of new jobs and
restrict on-going jobs (which lengthened job completion times and
lessened the overall profit) while recognizing that the jobs would
not generate sufficient liquidity to pay for current G&A and the
prior liabilities.
RESULTS OF OPERATIONS
The Rubeck subsidiary realized gross revenues of $458,599 and
$278,544 for the three months ended September 30, 1995 and 1994 and
$1,958,992 and $914,488 for the nine months ended September 30,
1995 and 1994 respectively. This represents a 64.6% increase of
revenues over the same quarter in 1994 and a 114.2% increase of
revenue over the year to date figures for 1995 over 1994. However,
the Cost of Sales was 86.8% for the 1995 year to date period and
75.8% for the 1994 year to date period. This increase of 11% in
year to date cost of sales was mostly caused by the liquidity
strain discussed earlier. For the first time since 1992, Rubeck
experienced a negative gross profit for the quarter of $(36,162).
It also incurred a net loss for the quarter of $(360,544), which
resulted in a year to date loss for Rubeck of $(321,056). Strained
cash flow cripples the ability of Rubeck to complete its jobs in
the most cost efficient manner possible.
Similarly, the Company realized minimal net losses of $(429),
for the second quarter of 1994 while sustaining net losses of
$(487,960) in the second quarter of 1995. In the first nine months
of 1994, the Company realized $110,933 in net profits, but in the
first nine months of 1995, the Company sustained $(1,133,119) of
losses. $(812,063) of this year's loss to date is due to the
parent company and subsidiaries other than Rubeck having no current
operations, but incurring costs for overhead, including accounting,
legal, royalties, public company expenses, and quarterly
amortization of the High Temperature Fluid Wall Reactor of $102,762
and the bio-recycling license of $20,588. However, one subsidiary,
Microterra Bio-Technologies of Madison, Inc. is in the process of
disposing of the inventory of stored wood waste; 40% of such waste
was disposed of in the three months ended September 30, 1995,
resulting in the recognition of deferred income (from 1992) in the
amount of $447,001 and the corresponding cost of sales of
$295,772.
The balance of such waste is being disposed of in the last quarter
and is expected to result in the recognition of additional deferred
income in the approximate amount of $670,502 and corresponding cost
of sales of $443,657. The effect of the HWB joint operations on
the profitability of the Company was nil as the first $400,000 of
profits earned by the joint operations will be retained by HWB and
be charged as a cost to the joint operations. The third quarter
produced net profits of $8,984 and year to date net profits of
$88,360, which has been charged off as an expense of the joint
operating consortium. Management acknowledges the Company needs
the ability to bond additional jobs and the liquidity to
efficiently complete existing jobs in order to create the cash flow
necessary to cover the corporate overhead expenses.
<PAGE>
Management had anticipated profits in the third quarter,
following the slow down in the second quarter. However, Rubeck
realized losses due to a combination of lack of working capital and
no bonding availability for bidding new work. The lack of working
capital caused an extension of construction completion times
increasing construction costs. The lack of bonding capacity
precluded the Company from increasing its revenues because no
bidding was possible. The majority of the work performed in 1995
(total of 17 contracts) was work backlog obtained by Rubeck prior
to November 1994, subcontracting obtained from Coast Engineering
and Construction Corp. and work performed under the Joint Operating
agreement with HWB Construction.
COMPANY'S CONTINGENT LIABILITIES UNDER MITCHELL POLE COMPANY, INC.
BONDS TERMINATED
In March 1995, the Company was notified that the Mitchell Pole
Company, Inc, which it had sold in August 1994, had not made
payment on its bond obligations for the 1992A, 1992B and 1993
Series of Bonds, and demand was made upon the Company. The Company
was informed by the purchaser of Mitchell Pole Company, Inc. that
the default was being deliberately induced so that a new purchaser
could restructure the debt of Mitchell Pole by purchasing the
facility with the proceeds of a new bond issue. On May 1, 1995 the
1992A and 1992B Series Bonds went into payment default and on June
7, 1995 the Trustee accelerated the indebtednesses. Then, on July
1, 1995 the 1993 Series Bonds went into payment default and on July
17, 1995 the Trustee accelerated the indebtedness. On July 28,
1995, the new purchaser closed its new bond issue, purchased the
facility, and the proceeds were used to defease (pay off) the prior
bonds which the Company had guaranteed. On July 28, 1995 both
Union Planters Bank, the Trustee, and the Development Authority of
Mitchell County (Georgia) released all parties to the prior bonds,
including the Company. As of July 31, 1995, Union Planters Bank,
the Trustee, and the Company have entered into a Mutual General
Release terminating the Company's guarantees and the contingent
liabilities thereunder.
SUMMARY
During 1994, the Company experienced severe cash/working
capital restrictions. The then Management undertook a plan to
reduce liabilities and working capital demands, including debt
service requirements, by disposing of assets and the attached
liabilities and cash demands. In November, 1994 the Company
acquired Rubeck Engineering and Construction, Inc. which initially
experienced a substantial growth in 1995. However, that growth
made increasing demands on the Company's cash flow, which created
delays in the performance of projects, thereby reducing their
profitability. The termination by Coast of its projects thereby
causing a loss to Rubeck of the subcontracts, together with the
determination of HWB's actual liabilities as compared to its
estimated liabilities, reduced Rubeck's jobs to the point that the
<PAGE>
lack of bonding made Rubeck unprofitable. At the same time, the
post-acquisition difficulties which created liquidity problems,
have not been solved. As a result, the Company is again
experiencing substantial cash flow and working capital
restrictions. To resolve these, the Company continues to pursue
various immediate financing alternatives, including short term
loans, private placements with interested investors, and securing
the exercise of outstanding warrants. The Company has privately
issued 8,450,000 Warrants (2,000,000 Warrants issued March 20,
1995, 3,000,000 Warrants issued June 20, 1995, 3,000,000 Warrants
issued November 9, 1995, and 450,000 Warrants issued under a
Warrant Agreement of November 10, 1995 authorizing up to 2,000,000
Warrants) to certain interested investors. The Company has filed
a Registration Statement which is in progress at the Securities and
Exchange Commission and anticipates registration of the underlying
shares in the near future so as to induce the investors to exercise
their options and provide the needed working capital. The Company
anticipates that some warrantholders will exercise their warrants
prior to the effectiveness of the Registration Statement so as to
provide the Company with sufficient working capital until the
effectiveness, when it is anticipated that a substantial number of
the warrants will be exercised.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company has settled the previously reported suit by
Consolidated Rail Corporation, Civil Action 94-4521 (CSF) in the
United States District Court for the District of New Jersey. The
suit involved charges for the transportation of chemically-treated
wood waste to a subsidiary's bio-recycling pilot plant pilot in
Tallulah, Louisiana. The parties agreed on the shipments for which
the subsidiary (which has ceased operations) had not made payment
and the Company secured an installment payment program for the
agreed balance owing.
The landlord of the Company's former offices in Boca Raton,
Florida, Canpro Investment, Ltd. filed an action against the
Company in the Circuit Court for Palm Beach County, Florida at No.
CL95-3167 AJ seeking possession of the premises and $22,361.19 in
unpaid rent, together with attorney's fees and costs. In order to
reduce costs, the Company has not filed a defense and has permitted
the plaintiff to secure a default judgment.
On July 28, 1995, a former financial public relations firm to
the Company, Universal Media, Inc., filed suit against the Company
in the Circuit Court for Broward County at No. 95-1058402 seeking
the payment of various invoices, totaling $94,905.52, for work
performed from 1991 through 1993, plus interest and legal fees.
The Company has settled the suit for $54,000 plus interest and
legal fees, for a total of $85,000.
On August 16, 1995, a former lender of $100,000 to the
Company, J. Austin Scheibel, filed suit against the Company in the
Maricopa Court Superior Court (Arizona) at No. CV95-13431 seeking
the payment of damages arising from his seizure of unregistered
stock pledged as collateral for the loan. Mr. Scheibel seeks
$680,000 in compensatory damages, together with interest and
attorneys fees and seeks $250,000 in other damages. The Company
disputes the entire claim and expects to vigorously defend the
suit. The Company has filed a motion to dismiss the suit which
has been filed and is in process.
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 1995 Annual Meeting of Shareholders on
September 27, 1995 in Marina del Rey, California. At the meeting
the following occurred:
a. The nominated slate of directors, Messrs. Schuster, Antico
and Baccani and Ms. Dangelmayer, were elected;
b. The appointment of Weinberg & Company, now Weinberg,
Pershes & Company, as the Company's auditors, was approved.
c. The Company's Certificate of Incorporation was amended to
change the name of the Company from "Microterra, Inc." to "Atlantis
Group, Inc.".
d. The Company's Certificate of Incorporation was amended to
decrease the number of authorized shares of capital stock from
10,000,000 shares of Preferred Stock and 80,000,000 shares of
Common Stock to 2,000,000 shares of Preferred Stock and 50,000,000
shares of Common Stock.
e. The Company's Board of Directors was authorized to adopt
a quasi-reorganization.
Item 5. Other Information
On August 8, 1995 the Company entered into a Joint Operating
Agreement with Scientific Equipment Systems, LLC ("SES"), a
Louisiana limited liability company which is 50% owned by Charles
R. Schuster, until November 16th the Chairman of the Board of
Company, for the refurbishment, repair, possible enhancement and
modification of the High Temperature Fluid Wall Reactor and its
operation by SES. Under the terms of the Joint Operating
Agreement, the Company has moved the Reactor to Lockport, Louisiana
where SES is partially dismantling it to the extent necessary to
secure a detailed estimate of the refurbishment and repair costs.
SES is to commence initial marketing to determine the type and
volume of waste streams for which the Reactor could be used, as
well as the current costs for disposal of such waste streams.
Based upon the marketing information, the Company will determine
what enhancements and modifications would maximize the potential
for the Reactor's use in disposing of selected waste streams.
Assuming the marketing shows that the Reactor can be operated
profitably and the costs can be recovered, the Company plans to do
such refurbishment, repairs, enhancements and modifications as are
necessary and desirable. Thereafter, SES will operate the Reactor
and pay to the Company the agreed royalty, together with the
royalty owed by the Company, the funds required for any dividend
on the Vulcan Series of Preferred Stock, and amortization of the
costs incurred by the Company.
On September 23, 1995 the Company entered into a Memorandum
of Intent to acquire up to 49% of an SBA certified 8(a) company,
Management & Business Associates, Inc. ("MBA") of Coral Gables,
Florida. The Company has acquired an immediate 9% interest in MBA,
the parties are engaging in mutual due diligence through December
31, 1995 (although that will probably be extended in order to
provide time to MBA to deliver its audited financial statements for
1995), following which the Company will determine whether or not
<PAGE>
to proceed and the extent to which it will proceed, if at all.
(See discussion under Management's Discussion and Analysis in Part
I, above)
On September 27, 1995 the Company issued one million shares
of its Common Stock (restricted as to further transfer) to
Wellspring Capital Fund, a newly-organized Delaware corporation
which intends to elect to become a business development company
under the Investment Company Act of 1940. The Company received
Convertible Preferred Stock from the Fund, and Management is
considering what role and relationship the Company may have with
such corporation. (See discussion under Management's Discussion
and Analysis, in Part I above)
On November 9, 1995, the Company entered into a Warrant
Agreement to entitle the holders to purchase up to 3,000,000 shares
of the Company's Common Stock at an exercise price of $.50 per
share. The Warrants expire six months after the effective date of
the Company registering the Common Stock underlying these
Warrants.
All Warrants under this Warrant Agreement have been issued.
On November 10, 1995, the Company entered into a further
Warrant Agreement to entitle the holders to purchase up to
2,000,000 shares of the Company's Common Stock at an exercise price
of $.50 per share. The Warrants expire six months after the
effective date of the Company registering the Common Stock
underlying these Warrants. To date, Warrants to purchase 450,000
under this Warrant Agreement have been issued.
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ATLANTIS GROUP, INC.
Date: April 29, 1996 Manuel E. Iglesias
Manuel E. Iglesias, President/CEO
Date: April 29, 1996 Lorenzo Palomares
Lorenzo Palomares, CFO
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 119,191
<SECURITIES> 0
<RECEIVABLES> 806,895
<ALLOWANCES> 0
<INVENTORY> 443,657
<CURRENT-ASSETS> 1,690,572
<PP&E> 1,300,002
<DEPRECIATION> 417,634
<TOTAL-ASSETS> 3,837,589
<CURRENT-LIABILITIES> 3,172,942
<BONDS> 0
<COMMON> 80,343
0
1,989
<OTHER-SE> 1,731,736
<TOTAL-LIABILITY-AND-EQUITY> 639,532
<SALES> 3,996,639
<TOTAL-REVENUES> 3,996,639
<CGS> 3,293,965
<TOTAL-COSTS> 3,293,965
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,797
<INCOME-PRETAX> (1,133,119)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,133,119)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,133,119)
<EPS-PRIMARY> ( .21)
<EPS-DILUTED> ( .21)
</TABLE>
