<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MAY 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER 1-10374
AMERICAN PHOENIX GROUP, INC.
(Exact name of registrant as specified in its charter)
NEVADA 5 PARK PLAZA, SUITE 1260
(State or Other Jurisdiction IRVINE, CALIFORNIA
of Incorporation) (Address of Principal Executive Office)
94-3101792 92714
(I.R.S. Employer (Zip Code)
Identification No.)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 639-8711
____________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period 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 May 31, 1996, there were 32,922,109 shares of Registrant's Common Stock
(par value $.01) outstanding.
==============================================================================
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operation
In the third quarter ending May 31, 1996, the Company earned total
revenues of $1,765,924; incurred total costs and expenses of $784,807; and had
net income of $308,117, resulting in net earnings per share of $.01. The Company
had no revenue in the comparable period of 1995 and incurred $37,469 in general
and administrative costs.
These results reflect earnings for the second consecutive quarter. These
revenues were generated principally by the Company's subsidiaries Marine
Turbine Australia Pty Ltd ("MTA") and Masling Industries Pty Ltd. ("MASLING").
The Company also generated significant revenue from the sale of a minority
interest in Masling and from the note portfolio acquired from P.R. Finance &
Investment Ltd. ("PRFI") on February 27, 1996.
The Company is actively seeking to acquire technology related businesses
principally by the issuance or exchange of Company stock and/or other
securities. The Company believes it can add value to these strategic
acquisitions by focusing the international expertise of the Company's current
management team and financial adviser to strategic planning, asset redeployment
and enhancement, and raising capital through the Company's financial adviser
and other third parties for technology development and marketing. The Company's
new management team intends to focus principally on companies that have
short-term revenue-generating potential or that have long-term contracts and
financial commitments in place. The Company will attempt to avoid investments
that require greater capital than the Company believes it can raise readily or
that are not likely to generate revenue in the next twelve months. As revenues
and asset values of the Company's subsidiaries are developed, the Company may
hold or divest itself of these subsidiaries through spin offs or exchanges for
the shares or assets of other companies.
Analysis of Financial Condition
The Company's management believes that it has sufficient working capital
to continue operations as presently conducted through the next fiscal year. Upon
consummation of the pending merger with Kushi Macrobiotics Corp., ("KUSHI") the
Company believes that its capital resources will be significantly enhanced.
The Company currently does not envision further capital expenditure on
commercializing applications of the Modular Power Unit (MPU) technology other
than by MTA in the pursuit boats under development. To commercialize other
application of the MPU, the Company would seek outside capital, government
assistance or partnerships with cross industry leaders.
The Company continues to seek acquisition targets that may add value to
the Company's shareholders. The Company's current management believes that such
transactions as enhance the Company's net assets and shareholders' equity also
improve the Company's ability to attract outside capital.
Liquidity and Capital Resources
The Company's principal financial adviser is Consortium Investment Group
Pty Ltd ("CIG"), located in Australia. During fiscal year 1996 CIG has been the
Company's principal source of capital through private placements with third
parties, loans or direct investments. CIG has also provided funding to Rubywell.
CIG materially assisted the Company in the Notes Portfolio acquisition from
PRFI. The Company also has a AU$2.6 million loan commitment from the National
Bank of Australia to meet the obligation due to Masling shareholders, described
below. Consequently, the Company believes that it can meet or extend its current
financial commitments.
On March 5, 1996, CIG committed to lend the company AU$3.5 million to
fund the next generation MTA pursuit boat prototype. The Company raised
US$400,000 in the sale of MTA shares to CIG. The Company believes that funds
from the CIG Financing Commitment, the Note Purchase Agreement and other sources
are likely to be sufficient to meet operating expenses for the next 12 months
and the costs of development and commercialization to be incurred in commencing
production of MTA's
<PAGE> 3
ocean pursuit craft. However, if for any reason these funds were not to be
available to the Company, the Company's plan of operation would be materially
and adversely affected. No assurance can be made that alternative capital
sources will become available.
Material Commitments
Pursuant to the Notes Purchase, the Company was required to deliver its
promissory note in the principal amount of US$3 million on or before May 25,
1996. As extended, this note matures, and becomes due and payable, on July 25,
1996, unless the parties agree to extend maturity of the note further, which
management believes is likely. The Company believes it can obtain such funds
before maturity of the note from third parties. Alternatively, the Company may
seek to satisfy the note by issuing new shares of common stock to the note
holder or negotiating an extension of the note.
A further payment by MTA to the former Masling shareholders in the
amount of AU$2.6 million has been extended and becomes due on July 31, 1996. MTA
believes it can meet this commitment from the Company's capital resources
described above (National Bank of Australia) or renegotiated and extended
further.
License and Royalty Revenues
MTA will receive license revenues of US$1.6 million per year for 5 years
from Rubywell, its exclusively retained research partner, to develop additional
"horizontal" product applications (such as a four engine combining gearbox,
capable of driving a 100' hull to 125 MPH) from MTA's core technology. In turn,
MTA must pay research royalties of 8 percent to 10 percent on product sales to
Rubywell to enable it to recover its cost for the investment in the technology
enhancement and improvement. Consequently, MTA may receive income of US$7.5
million over the next five years regardless of product sales so long as this
license is renewed annually, which is at the sole option of Rubywell. Should
Rubywell determine not to renew the license, applications other than the two
engine combining gearbox for marine application would not be further developed.
The research royalty is treated as an unaccrued royalty, which will be accounted
for by MTA as a direct expense provided that it is able to collect from its
product sales. Under these mandates, MTA, as an Australian research and
development company, will continue to have an incentive to develop new products
which the Company believes will ensure competitive improvement of the MPU and
gearbox design.
Future Acquisitions and Certain Effects of the Kushi Merger
Upon consummation of the Kushi merger, the Company's shareholders will
acquire approximately 70 percent of Kushi, which will be renamed American
Phoenix Group, Inc. Prior to consummation of the merger, the Company intends to
effect a rollback of its outstanding shares. Recent reductions in the number of
outstanding shares have reduced this rollback, effectively increasing the number
of shares, post-merger, that each Company shareholder will receive. The Company
is expected to have approximately 9.6 million shares outstanding post-merger.
Concurrent with the consummation of the Kushi merger, the Kushi plans to
transfer Kushi's current food business assets to a new subsidiary. The shares of
this subsidiary will be issued to the shareholders of the merged company in
equal proportions, so that the pre-merger shareholders of the Company would
receive 70 percent of the new Kushi subsidiary. The merged company expects to
maintain Kushi's Nasdaq listing, while shares of this new subsidiary are
expected to trade over the counter.
Kushi has warrants outstanding which, if exercised, would raise
approximately $17 million in additional capital. The exercise price of these
warrants is $6.25 per share and the stock must have traded at an average price
of $8.00 per share for the prior thirty days. Because the Company cannot predict
the post-merger trading price of its common stock, there can be no assurance
these warrants will be exercised.
<PAGE> 4
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, August 31,
1996 1995
----------- -------------
(Unaudited) (Derived from
Audited
Financial
Statements)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash (including cash held in attorney's
trust account for the benefit of the
Company of $908,388) $ 1,111,697 $ 1,039
Accounts receivable 273,917
Inventory 1,215,015
Accrued interest receivable 293,676
Receivable from sale of subsidiary stock 760,000
Receivable from related party 85,356
Prepaid expenses 2,401
----------- --------
TOTAL CURRENT ASSETS 3,742,062 1,039
INVESTMENT IN BARLILE CORP. LTD. 833,000
INVESTMENT IN NOTES RECEIVABLE PORTFOLIO 9,700,000
PROPERTY AND EQUIPMENT, Net 968,616
OTHER ASSETS
Organization costs 10,847
Deposits and advances to affiliated
company 3,091,00 282,468
Other deposit 150,000 150,000
----------- --------
TOTAL OTHER ASSETS 3,251,848 432,468
----------- --------
$18,495,526 $433,507
=========== ========
</TABLE>
<PAGE> 5
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, Continued
<TABLE>
<CAPTION>
May 31, August 31,
1996 1995
--------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Notes payable $ 5,583,391 $ 696,762
Accounts payable and accrued expenses 979,901 846,790
Income taxes payable 731,614
Reserve for rescission/guarantee 526,000 526,000
Loans payable to related parties 346,228
Net liabilities of discontinued operations 594,188
----------- -----------
TOTAL CURRENT LIABILITIES 7,820,906 3,009,968
MINORITY INTEREST 152,953
SHAREHOLDERS' EQUITY (DEFICIENCY)
Preferred stock - authorized 20,000,000
shares, $.01 par value ,issued and
outstanding 4,000,000 shares at August
31, 1995 40,000
Common stock - authorized 50,000,000 shares,
$.01 par value,issued and outstanding
32,922,109 shares at May 31, 1996 and
9,267,783 at August 31, 1995 329,220 92,678
Additional paid-in capital 19,930,655 8,825,830
Accumulated deficit (9,738,208) (11,534,969)
----------- ------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY) 10,521,667 (2,576,461)
----------- ------------
$18,495,526 $ 433,507
=========== ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 6
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
REVENUES
Service and parts sales $ 351,413
Licence fees 84,269
Consulting fees 39,936
Gain on sale of equipment
Gain on sale of subsidiary stock 399,071
Discharge of net liabilities of
discontinued operations 594,188
Interest-loan portfolio 297,047
----------- ---------
TOTAL REVENUES $ 1,765,924
COSTS AND EXPENSES
Cost of goods sold 151,895
Research and development 37,469
Selling, general and administrative 623,917
Share of minority interest
Interest 8,995
---------- ---------
TOTAL COSTS AND EXPENSES 784,807 37,469
---------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 981,117 (37,469)
PROVISION FOR INCOME TAXES 673,000
---------- --------
NET INCOME (LOSS) $ 308,117 $(37,469)
========== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 26,500,000 Nil
========== ========
EARNINGS (LOSS) PER COMMON SHARE $0.01 $0.00
===== =====
PROFORMA EARNINGS (LOSS) PER COMMON SHARE
ASSUMING FULL CONVERSION OF PREFERRED
SHARES $0.00
=====
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 7
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED MAY 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
REVENUES
Service and parts sales $ 351,413
Licence fees 1,719,994
Consulting fees 39,936
Gain on sale of equipment 6,269
Gain on sale of subsidiary stock 1,067,801
Discharge of net liabilities of
discontinued operations 594,188
Interest-loan portfolio 297,047
----------- ---------
TOTAL REVENUES $ 4,070,379
COSTS AND EXPENSES
Cost of goods sold 151,895
Research and development 124,514
Selling, general and administrative 1,360,984 902
Share of minority interest 60,754
Interest 26,985 10,086
----------- ---------
TOTAL COSTS AND EXPENSES 1,600,618 135,502
----------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,469,761 (129,233)
PROVISION FOR INCOME TAXES 673,000
----------- ---------
NET INCOME (LOSS) $ 1,796,761 $(129,233)
=========== =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 26,500,000 Nil
=========== ==========
EARNINGS (LOSS) PER COMMON SHARE $0.07 $0.00
===== =====
PROFORMA EARNINGS (LOSS) PER COMMON SHARE
ASSUMING FULL CONVERSION OF PREFERRED
SHARES $(0.01)
======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 8
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY)
YEAR ENDED AUGUST 31, 1995 AND NINE MONTHS ENDED MAY 31, 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------- ----------------------- Additional Accumulated
Shares Amount Shares Amount Paid-in Capital Deficit Total
---------- -------- ----------- ---------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, August 31, 1994 4,000,000 $ 40,000 $ $8,642,342 $ (8,740,531) $ (58,189)
Adjustment for reverse
acquisition 9,267,783 92,678 (92,678)
Research and development
and other expenses
incurred by former parent
of MTA 276,166 276,166
Net loss for the year (2,794,438) (2,794,438)
---------- -------- ---------- --------- ---------- ------------ ------------
BALANCE, August 31, 1995 4,000,000 40,000 9,267,783 92,678 8,825,830 (11,534,969) (2,576,461)
Conversion of preferred
shares into common shares (4,000,000) (40,000) 20,000,000 200,000 (160,000)
Cancellation of shares
issued to Rubywell (9,000,000) (90,000) 90,000
Sale of shares in Reg S
placements 7,420,903 74,209 2,736,117 2,810,326
Issuance of shares for
services 1,365,748 13,657 727,351 741,008
Issuance of shares to
acquire interest in
Barlile 1,195,642 11,956 821,044 833,000
Issuance of shares to
acquire notes receivable 3,000,000 30,000 6,670,000 6,700,000
Cancellation of shares issued
to Maker, Inc. (45,000) (450) 450
Cancellation of shares issued
to E.C.I. Construction
Services, Inc. (500,000) (5,000) 5,000
Issuance of shares for payment
of note payable 217,033 2,170 214,863 217,033
Net income for the nine months
ended May 31, 1996 1,796,761 1,796,761
--------- -------- ---------- --------- ----------- ----------- ------------
BALANCE, May 31, 1996
(Unaudited) $ 32,922,109 $ 329,220 $19,930,655 $(9,738,208) $ 10,521,667
========= ======== ========== ========= =========== =========== ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE> 9
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MAY 31,1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,796,761 $(129,233)
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Gain on sale of property and equipment (6,269)
Gain on sale of subsidiary stock (1,067,801)
Reversal of net liabilities of
discontinued operations (594,188)
Research and development and other
expenses incurred by Rubywell Pty.
Ltd. and credited to additional
paid-in capital of Marine Turbine
Australia, Pty. Ltd. 124,514
Expenses satisfied by issuance of
common stock 646,874
Changes in operating assets and liabilities:
Accounts receivable (87,551)
Inventory (137,901)
Accrued interest receivable (293,676)
Prepaid expenses 7,323
Accounts payable and accrued expenses 189,911
Income taxes payable 673,000
Accrued interest on notes payable 26,985
----------- ----------
Net cash provided (used) by operating
activities 1,159,737 (10,988)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and
equipment 312,651
Deposits and advances to affiliated
company (2,808,026)
Deposit received on sale of subsidiary
stock 400,000
Advances and loans to related parties 34,849 (282,468)
Deposit paid to acquire Masling, net
of cash received (140,000)
----------- ----------
Net cash provided (used) by investing
activities (2,513,177) 30,183
----------- ----------
</TABLE>
<PAGE> 10
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
NINE MONTHS ENDED MAY 31,1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock 2,810,326
Repayments of loans from related parties (346,228) (19,195)
Net cash provided (used) by financing
activities 2,464,098 (19,195)
----------- ---------
INCREASE IN CASH 1,110,658
CASH, Beginning of period 1,039 175
----------- ---------
CASH, End of period $ 1,111,697 $ 175
=========== =========
NON-CASH TRANSACTIONS:
</TABLE>
During the nine months ended May 31, 1996, the Company issued 1,365,748 shares
of its common stock for services, 1,195,642 shares to acquire interest in
Barlile, 3,000,000 shares and a note payable for $3,000,000 to acquire a loan
portfolio and 217,033 shares for payment of note payable.
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 11
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED MAY 31, 1996 AND 1995
(UNAUDITED)
1. ORGANIZATION AND BUSINESS
The Company was incorporated in Nevada in 1989, and amended its Articles
of Incorporation to change its name from E.C.I. International, Inc.
(formerly E.C.I. Environmental, Inc.) to its present name in December
1995. Until December 1993, the Company served as a holding company for
four wholly-owned subsidiaries: Environmental Control Industries (a
California corporation founded in 1982, and the Company's principal
operating subsidiary), PacTherm, Inc., E.C.I. Construction Services,
Inc. (formerly Environmental Industrial Safety, Inc.), and Western
Environmental Insurance Company. On August 31, 1993, the Company
adopted a formal plan of discontinuance of all operating segments. On
August 31, 1994, Environmental Control Industries and PacTherm, Inc.
filed Chapter 7 Bankruptcy with the United States Bankruptcy Court,
Northern District of California, whereby it will be liquidated and
dissolved upon the resolution of the court. The net liabilities to be
disposed of have been separately classified in the accompanying
consolidated balance sheets at their expected net realizable values at
August 31, 1995. During the nine months ended May 31, 1996, the Company
reversed the net liabilities of discontinued operations since there were
no debts that survived.
Description of Business - American Phoenix Group, Inc.'s (the
"Company"), through its wholly owned subsidiary, Marine Turbine
Australia Pty. Ltd. ("MTA"), principal product under development is a
marine craft ("pursuit craft") designed for high speed ocean pursuit.
MTA's pursuit craft is designed to be able to maintain continuous
pursuit speeds in excess of 70 mph. These boats are expected to be
approximately 55 feet in length. MTA developed proprietary technology
utilizing aircraft lightweight gas turbine engines coupled to the
Modular Power Unit ("MPU"). MPU uses a selective transmission system,
the combining gear box, which is designed to accept power from two or
more turbines on demand from the pursuit craft pilot. The MPU allows
the pursuit craft to operate at cruise speed on one engine and engage
the second engine on demand to rapidly attain pursuit speeds.
2. BASIS OF PRESENTATION
The accompanying financial statements have been prepared by the Company.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. In the opinion of
the Company's management, the disclosures made are adequate to make the
information presented not misleading, and the consolidated financial
statements contain all adjustments necessary to present fairly the
financial position as of May 31, 1996, results of operations for the
three months and nine months ended May 31, 1996 and 1995 and cash flows
for the nine months ended May 31, 1996 and 1995.
<PAGE> 12
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
The results of operations for the three months and nine months ended May
31, 1996 are not necessarily indicative of the results of operations to
be expected for the full fiscal year ending August 31, 1996.
Reverse Acquisition - Effective August 31, 1995, the Company issued
4,000,000 shares of its Series B Preferred Stock to Rubywell Pty. Ltd.,
an Australian proprietary limited company, ("Rubywell") in exchange for
all outstanding common stock of MTA, an Australian proprietary limited
company. Each share of Series B Preferred Stock is convertible into five
shares of common stock. On March 4, 1996, Rubywell gave notice to the
Company of its exercise of its right to convert 4,000,000 shares of
Series B Preferred Stock into 20,000,000 shares of common stock. This
transaction was accounted for as a reverse acquisition whereby American
Phoenix Group, Inc. was the legal survivor, however, the accounting
reflects MTA as the survivor since MTA, as the operating entity, was in
effect the continuing business and, accordingly, the accompanying
financial statements include the accounts and operations of both
companies from August 31, 1995 forward.
3. ACQUISITIONS
Barlile - On July 26, 1995, through the Company's wholly owned
subsidiary, Tokan Holdings, Inc. ("Tokan"), the Australian Foreign
Investment Review Board gave approval for Tokan to lodge a tender offer
through September 25, 1995 to acquire up to all of the issued and
outstanding common stock of Barlile Corp. Ltd. ("Barlile") for AU$2.50
per share. Barlile is listed on the Australian Stock Exchange. Tokan
elected not to proceed with lodging a full tender offer. On October 5,
1995, Tokan reached an agreement to acquire 552,100 shares of Barlile
common stock (or approximately 13.55 percent of the outstanding shares)
for AU$1,380,250 to be delivered at settlement. On October 26, 1995,
the Company delivered 1,086,947 shares of its common stock as a
guarantee against Tokan's payment due at settlement, and issued an
additional 108,695 shares of the Company's common stock (or US$103,519)
reserved to compensate for foreign currency exchange rate fluctuations
at the time of settlement. This transaction settled for the
consideration of an aggregate of 1,195,642 shares of the Company's
common stock in exchange for 552,100 shares of Barlile common stock.
Notes Receivable Portfolio - On February 27, 1996, the Company and P.R.
Finance & Investment Ltd. entered into the Note Purchase Agreement,
which was amended as of May 3, 1996 (as amended the "Note Purchase
Agreement"). Under the Note Purchase Agreement, the Company acquired
approximately $9.6 million principal amount in promissory notes for
3,000,000 shares of the Company's common stock, and the Company's
promissory note in the principal amount of $3,000,000. This note that
was originally due on May 25, 1996 was extended to July 25, 1996.
During the three months ended May 31, 1996, the Company accrued interest
income of $293,676 and management expense of $36,862.
Masling - On February 16, 1996, MTA paid a non-refundable deposit of
AU$370,000 for the purchase of 100% outstanding shares of Masling
Industries Pty. Ltd. ("Masling"). MTA contemporaneously paid a
non-refundable deposit of AU$30,000 for the purchase of certain assets
of Masling Rotor Wing Pty. Ltd. from Masling stockholders, subject to
Cootamundra Shire Counsel approval, which has been orally obtained. A
further AU$2,600,000 was due and payable on settlement date, May 16,
1996 that was extended to July 1996. The acquisition was made effective
in February 1996 and, accordingly, the accompanying financial statements
include the accounts and operations of Masling from March 1996 forward.
<PAGE> 13
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. NOTES PAYABLE
The notes payable consisted of the following at May 31, 1996:
<TABLE>
<S> <C>
John Errecart $ 506,714
Note payable on acquisition of notes
receivable portfolio 3,000,000
Note payable on acquisition of
Masling (A$2,600,000) 2,076,677
----------
$5,583,391
==========
</TABLE>
5. SALE OF SUBSIDIARY STOCK
During the six months ended February 29, 1996, the Company sold 1,250
shares of MTA's common stock to Consortium Investment Group Pty. Ltd.
for a total consideration of $1,160,000 (AU$1,500,000) of which
AU$500,000 had been paid, AU$600,000 is payable on or before May 15,
1996 and AU$400,000 is payable on or before June 30, 1996. The date of
the receipt of the balance of AU$1,000,000 has been extended to August
15, 1996. Prior to this sale, the Company owned 100% of MTA and after
this transaction, the Company owned 88% of MTA. This transaction
resulted in a gain of $1,067,801 representing the excess of the issued
prices of MTA's shares over the Company's carrying amount.
During the three months ended May 31, 1996, MTA sold 937 shares of its
common stock to Consortium Development Fund ("CDF") for a total
consideration of $897,664 (AU$1,123,875) which was paid in full. During
the same period, the Company repurchased the shares from CDF in exchange
for 2,247,750 shares of the Company's common stock at $.40 per share.
The Company recorded the transaction as issuance of shares of common
stock above par value. No gain or loss was recognized from the exchange
of the shares.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
AMERICAN PHOENIX GROUP, INC.
(Small Business Issuer)
July 15, 1996 /s/ Patrick N. DiCarlo
- ---------------------------- ------------------------------------
Date President, Chief Executive Officer
and Principle Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 1,111,697
<SECURITIES> 0
<RECEIVABLES> 273,917
<ALLOWANCES> 0
<INVENTORY> 1,215,015
<CURRENT-ASSETS> 3,742,062
<PP&E> 968,616
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,495,526
<CURRENT-LIABILITIES> 7,820,906
<BONDS> 0
329,220
0
<COMMON> 0
<OTHER-SE> 10,192,447
<TOTAL-LIABILITY-AND-EQUITY> 18,495,526
<SALES> 351,413
<TOTAL-REVENUES> 4,070,379
<CGS> 151,895
<TOTAL-COSTS> 1,600,618
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 26,985
<INCOME-PRETAX> 2,469,761
<INCOME-TAX> 673,000
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,796,761
<EPS-PRIMARY> .07
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</TABLE>
