U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM 10-QSB
(Mark One)
___ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended: June 30, 1996
___ TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT
For the transition period from _______ to _______.
Commission file number: 0-19154.
AMERICAN ASSET MANAGEMENT CORPORATION
(Exact name of small business issuer as specified in its charter)
NEW JERSEY 22-2902677
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Morristown Road, Suite 108, Bernardsville, New Jersey 07924
(Address of principal executive offices)
Issuer's telephone number, including area code: (908) 766-1701
(Former name, former address and former fiscal year,
if changed since last report)
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___ NO_X_.
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: As
of August 1, 1997 there were 936,119 shares outstanding of the
issuer's no par value common stock.
Transitional Small Business Disclosure Format (check one):
YES___ NO_X_
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
_________________________________________________________________
June 30, December 31,
___1996___ ____1995____
_____________ASSETS________________
Cash & cash equivalents $ 19,885 $ 274,354
Mortgage loans receivable 97,611 658,426
Notes receivable 35,419 34,254
Prepaid and other current assets 61,512 55,926
Total current assets 214,427 1,022,960
Land and development costs 1,506,009 1,490,386
Furniture & equipment, at cost,
less accumulated depreciation 23,833 23,384
Other assets 2,407 17,225
Total assets 1,746,676 2,553,955
__LIABILITIES AND STOCKHOLDERS' EQUITY__
Current liabilities:
Accounts payable & accrued expenses $ 262,632 $ 375,733
Liability for land development 160,417 160,417
Loans payable 290,173 277,080
Lot deposits 424,000 358,000
Warehouse loans payable 90,151 639,750
Mortgages payable 228,248 228,248
Total current liabilities 1,455,621 2,039,228
Stockholders' equity:
Common stock, no par value;
10,000,000 shares authorized;
936,119 shares issued and
outstanding 2,434,325 2,434,325
Additional paid-in capital 231,207 231,207
Accumulated deficit (2,370,477) (2,150,805)
Total stockholders' equity 295,055 514,727
Total liabilities and
stockholders' equity 1,746,676 2,553,955
See accompanying Notes to Consolidated Financial Statements.
<PAGE> -2-
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
_________________________________________________________________
For the Three Months|For the Six Months
__Ended June 30,___|__Ended June 30,___
__1996__ __1995___|__1996__ __1995__
Revenues:
Mtg. origination fees $ 54,305 $212,223 $ 103,343 $ 261,369
Application fees 16,495 37,705 21,820 57,030
Mtg. interest income 5,158 4,229 16,090 4,229
Total revenues 75,958 254,157 141,253 322,628
Selling, general
and administrative
expenses:
Salaries & benefits 116,182 257,964 201,234 502,387
Commissions &
related expenses 18,148 63,473 27,406 74,976
Other expenses 76,628 170,558 133,450 272,097
Total selling,
general and
administrative
expenses 210,958 491,995 362,090 849,460
Income/(loss)
from operations (135,000) (237,838) (220,837) (526,832)
Other income 588 514 1,165 2,073
Income before provisions
for St. income taxes (134,412) (237,324) (219,672) (524,759)
Provision for State
income taxes - - - -
Net income/(loss) $(134,412) $(237,324) (219,672) (524,759)
Net income/(loss) $ (0.14) $ (0.26) $ (0.23) $ (0.57)
per share
Weighted avg. no.
of shares of common
stock outstanding 936,119 916,104 936,119 916,104
See accompanying Notes to Consolidated Financial Statements.
<PAGE> -3-
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
_________________________________________________________________
For the Three Months|For the Six Months
6/30/96 6/30/95 | 6/30/96 6/30/95
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(134,412)$(237,324)$(219,672)$(524,759)
Adjustments to
reconcile net loss
to net cash used in
operating activities:
Depreciation
& amortization 997 3,850 4,456 9,868
CHANGES IN ASSETS
& liabilities:
Increase(decrease) in:
Notes receivable (589) 1,411 (1,165) 2,106
Mtg. loans receivable (97,611) (540,515) 560,815 (540,515)
Fees & Int. receivable
prepaid & other assets 10,958 (26,883) 9,232 (40,176)
Increase(Decrease) in:
Accounts payable,
accrued expenses,
commissions payable
& deferred income (3,915) 52,304 (113,101) 130,306
Warehouse line payable 90,151 524,594 (549,599) 524,594
NET CASH (USED IN)
PROVIDED BY OPERATING
ACTIVITIES (134,421) (222,563) (309,034) (438,576)
CASH FLOWS FROM
INVESTING ACTIVITIES
Lot deposits (4,000) 50,000 62,000 80,000
Increase in land &
development costs (2,994) (49,347) (15,623) (49,347)
Purchase of fixed assets (1,966) - (4,905) (8,300)
Net Cash (Used In) Provided
By Investing Activities (8,960) 653 41,472 22,353
CASH FLOWS FROM
FINANCING ACTIVITIES
Purchase of common stock - - - -
Increase in Mtg. Payable - 40,500 - 40,500
Loans payable 133,557 191,908 13,093 191,908
NET CASH (USED IN) PROVIDED
BY FINANCING ACTIVITIES 133,557 232,408 13,093 232,408
NET INCR/(DECR) IN CASH (9,824) 10,498 (254,469)(183,815)
CASH @ BEGINNING OF PERIOD 29,709 17,926 274,354 212,239
CASH @ END OF PERIOD $ 19,885 $ 28,424 19,885 28,424
See accompanying Notes to Consolidated Financial Statements.
<PAGE> -4-
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
_________________________________________________________________
1. BACKGROUND AND BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements of
American Asset Management Corporation and subsidiaries (the
"Company") are unaudited. In the opinion of management, all
adjustments and intercompany eliminations necessary for a fair
presentation of the results of operations have been made and were
of a normal recurring nature. The consolidated financial
statements of the Company include the operations of both
wholly-owned subsidiaries, Capital Financial Corp. and American
Asset Development Corporation. The Company's operations consist
of specialized and mortgage banking services and real estate
development. These interim consolidated financial statements
should be read in conjunction with the consolidated financial
statements and related notes thereto contained in the Company's
1995 Annual Report on Form 10-KSB. The results of the three
months ended June 30, 1996 are not necessarily indicative of the
results of the full year.
2. REVENUE AND EXPENSE RECOGNITION
Application fees and commitment fees are recorded when
received and other fee income is recorded when loans close.
Expenses are recognized as they are incurred.
3. NET INCOME/(LOSS) PER COMMON SHARE
Net income/(loss) per common share is based on the weighted
average number of shares of Common Stock outstanding. No effect
has been given to shares issuable upon exercise of outstanding
warrants as the effect would be antidilutive.
4. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform
with the current year's presentation.
-5-
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF PLAN OF OPERATION
_________________________________________________________________
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 Compared to the Three Months
Ended June 30, 1995.
Revenues for the three months ended June 30, 1996 and 1995
were $75,958 and $254,157, respectively. The decrease in the
1996 period of $178,199, or 70.1%, was the result of a 74.4%
decrease in mortgage origination fees and a 56.3% decrease in
application fees, and a 122% increase in mortgage interest
income, all of which were generated by Capital Financial Corp.,
the Company's wholly-owned mortgage banking subsidiary. The
decrease in application fee revenue reflects a significant
decrease in the number of mortgage applications received. The
decrease in mortgage origination fee revenue was due to a
relatively small number of closings as a result of the reduction
in the Company's sales force. In addition, the reduction in the
number of applications the Company received, the number of loans
in process began to significantly decrease during the period
ended June 30, 1996. These decreases resulted in a significant
decrease in loan closings during the period. Loans typically
close approximately 90 days from the date of application. The
Company is continuing its efforts to attract experienced loan
originators with established business relationships with
realtors, attorneys and accountants as sources of referrals for
mortgage applications in its service area. During the three
month period ended June 30, 1996, the Company received 72
mortgage loan applications for processing from borrowers seeking
loans aggregating approximately $11,727,750 as compared to 130
applications in an aggregate amount of approximately $24,568,910
in the comparable 1995 period. The Company closed 19 loans
aggregating approximately $3,453,275 in the three months ended
June 30, 1996 compared to 55 loans closed aggregating
approximately $10,684,310 in the comparable 1995 period.
Total selling, general and administrative expenses ("SG&A")
for the three months ended June 30, 1996 decreased $281,037 or
57.1% to $210,958 from $491,995 in the comparable 1995 period.
The decreased SG&A in the 1996 quarter was primarily due to
decreased employee compensation costs, other expenses and by
lower commission expenses. As a percentage of revenues, SG&A
was 278% in the current period compared to 194% in the 1995
period.
-6-
<PAGE>
As a result of the foregoing, the Company's net loss for the
three months ended June 30,, 1996 was $134,412 or $0.14 per
share, compared to a net loss of $237,324 or $0.26 per share for
the comparable 1995 period. The decreased loss in the 1996
period vs. the comparable 1995 period is attributable to
decreased revenues and decreased expenses as discussed above,
including the expense saved resulting from the elimination of
certain sales and administrative personnel and the closing of
two branch offices in September 1995.
Six Months Ended June 30, 1996 Compared to the Six Months Ended
June 30, 1995
Revenues for the six months ended June 30, 1996 were
$141,253 compared to $322,628 for the comparable 1995 period.
The $181,375 decrease, or 56.2%, was the result of a 60.5%
decrease in mortgage origination fees, a 61.7% decrease in
application fees and a 380% increase in mortgage interest income.
The decrease in mortgage origination fees and application fees
was the result of the Company's decision to substantially replace
its sales force during the six month period. The increase in
mortgage interest income was a result of the Company utilizing
it's warehouse credit line to provide borrowers with construction
to permanent mortgage loans, at interest rates higher than those
charged to the Company by its warehouse credit line lender.
During the six months ended June 30, 1996, the Company received
93 mortgage loan applications for processing from borrowers
seeking loans aggregating approximately $15,014,950 compared to
202 loan applications aggregating approximately $43,898,275
received in the comparable period in 1995. The Company closed 32
loans aggregating approximately $5,904,775 in the six months
ended June 30, 1996, compared to 69 loans closed aggregating
approximately $13,132,110 in the comparable 1995 period.
Total SG&A expenses for the six months ended June 30, 1996
decreased by 57.4% to $362,090 from $849,460 in the comparable
1995 period, primarily as a result of decreased salaries and
benefits of 59.9%, decreased commission and related expenses of
63.5% and other expenses of 51%. As a result, SG&A, expressed
as a percentage of revenues, decreased to 256% in the 1996
period from 263% in the 1995 period. The Company is actively
seeking additional experienced loan officers to complement its
present sales, management and support staff.
As a result of the foregoing, the Company's net loss for the
six months ended June 30, 1996 was $219,672 or $0.23 per share,
compared to a net loss of $524,759, or $0.57 per share for the
comparable 1995 period. The decreased loss in the 1996 period
is attributable to expenses decreasing at a greater rate than
revenues, partially attributable to the closing of the two
branch offices, as discussed above.
-7-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company had cash and cash
equivalents of $19,885 compared to $274,354 at December 31, 1995
a decrease of $254,469, or 92.7%. The decrease was primarily
attributable to cash used in operating activities. Cash used in
operating activities was the net result of the net loss for the
six month period ended June 30, 1996, decreases in mortgage loans
receivable, decreases in accounts payable and accrued expenses,
commissions payable, warehouse loan payable, increases in loans
payable to others, decreases in fees and interest receivable,
loans payable to officers/affiliates and deferred income, which
were partially offset by cash provided by depreciation and
amortization, increases in notes receivable and prepaid and other
current assets. Cash used in investing activities included
increased land and development costs and purchase of office
equipment.
As a result of decreases in revenues and costs associated
with the Company implementing its operational plans, the Company
continues to be adversely affected by a lack of working capital.
The Company continues to be dependent on short term borrowings in
addition to revenues generated by its mortgage banking
operations. The Company will continue to incur losses until such
time, if ever, that future revenues are sufficient to offset
operating costs.
The increase in mortgage applications and closings during the
period ending June 30, 1996 vs. the period ending March 31, 1996
are having a positive effect on the Company's cash flow.
However, there can be no assurance that the number of future
closings will be sufficient to offset expenses. Loans in process
have increased from 22 loans with an aggregate principal amount
of approximately $4,567,547 as of December 31, 1995 to 69 loans
aggregating approximately $10,837,897 as of June 30, 1996.
In October 1993, the Company received final subdivision
approval by municipal authorities on the Company's real estate
development in Hunterdon County, New Jersey, known as Murray Hill
Estates. As a condition of receiving final approval and prior to
completing the sale of any lots, the Company will be required to
complete certain improvements to the property or post performance
bonds in lieu thereof. In August 1994, the Company received a
commitment from a commercial bank for two lines of credit
aggregating $700,000, consisting of a $250,000 site improvement
loan and a $450,000 revolving line of credit to finance
construction of a model home and up to two residences in the
subdivision. The site improvement loan which closed in November
1994, is secured by a first mortgage on the development and
collateralized by personal guarantees of the Company's President
and Executive Vice President. The interest rate on the site
improvement loan is the bank's prime interest rate plus 1% and is
payable monthly. The loan expires on November 30, 1996.
<PAGE> -8-
At June 30, 1996, the Company utilized $228,248 of the
$250,000 site improvement loan. At June 30, 1996 the interest
rate on the loan was 10.5%.
The Construction line of credit may be used to construct a
model home on the development and up to two residences upon
receipt of contracts of sale. Construction financing cannot
exceed $150,000 for each residence and no more than three
construction loans can be outstanding at any one time under the
revolving line of credit. As of June 30, 1996 the company had
not utilized the construction line of credit and has no
intentions of doing so in the future.
The Company plans on completing the balance of the required
improvements to the property when it has the funds to do so and
then aggressively seek to sell some, if not all of the remaining
unsold lots to pay off debt and restore working capital to the
Company. There can be no assurance the Company will be
successful in this endeavor.
In May, 1995, the Company received a $5,000,000 warehouse
line of credit from a mortgage warehouse lender which enables the
Company to borrow funds secured by residential mortgage loans
which will be temporarily accumulated, or warehoused, and then
sold.
In January 1996, the Company entered into a contract to sell
to a real estate development corporation, 5 building lots which
range in size from 3 to 5 1/2 acres for a total purchase price of
$487,500. The Company received a $250,000 non-refundable deposit
which entitles the purchaser to receive deeds to two building
lots and the deed to a third lot once the balance of $42,500 is
paid to the Company, when the Company is legally able to transfer
title to the lots.
The Company continues to seek capital through, among other
means, an infusion of additional noncollateralized loans, the
sale of additional equity in the Company or its subsidiaries and
issuance of debt. There can be no assurance that the Company
will be able to obtain additional capital on terms acceptable to
the Company.
In the event the Company's plans change, its assumptions
change or prove to be inaccurate due to unanticipated expenses,
delays, problems or otherwise, or if the Company is unsuccessful
in raising additional working capital or generating sufficient
cash flow through operations, the Company could be required to
curtail its operations as presently conducted.
-9-
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) None
Changes in Registrant's Certifying Accountants
On April 15, 1996 the registrant engaged R. D. Hunter &
Company, LLP as its principal independent accountant who will
report on the financial statements of the registrant for the year
ending December 31, 1995.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant cause this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN ASSET MANAGEMENT CORPORATION
(Registrant)
Date: August 1, 1997 By:_s/Richard G. Gagliardi____________
Richard G. Gagliardi
Chairman, President and Chief
Executive Officer (Principal
Executive and Financial Officer)
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 19,885
<SECURITIES> 0
<RECEIVABLES> 133,030
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 214,427
<PP&E> 61,512
<DEPRECIATION> 997
<TOTAL-ASSETS> 1,746,676
<CURRENT-LIABILITIES> 1,455,621
<BONDS> 0
0
0
<COMMON> 2,434,325
<OTHER-SE> 231,207
<TOTAL-LIABILITY-AND-EQUITY> 1,746,676
<SALES> 75,958
<TOTAL-REVENUES> 75,958
<CGS> 0
<TOTAL-COSTS> 134,330
<OTHER-EXPENSES> 76,628
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (134,412)
<INCOME-TAX> 0
<INCOME-CONTINUING> (134,412)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (134,412)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
