<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 DECEMBER 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 0000-26110
AMERICAN PHOENIX GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 930 E. ARQUES AVE
(State or Other Jurisdiction SUNNYVALE, CA
of Incorporation) (Address of Principal Executive Office)
133-768554 94086-4552
(I.R.S. Employer (Zip Code)
Identification No.)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
____________
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 December 31, 1996, there were 27,969,371 shares of Registrant's Common
Stock (par value $.01) outstanding.
==============================================================================
<PAGE> 2
PART I
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Condensed Consolidated Financial Statements and related notes thereto included
elsewhere herein. American Phoenix Group, Inc., a Nevada corporation ("APG"),
merged with Kushi Macrobiotics Corp., a Delaware corporation (the "Company"),
in September 1996 and adopted APG's corporate name. In November 1996 the
Company acquired Tetherless Access Asia Limited, an Australian corporation
("TAAL"), in a share-for-share exchange. Both transactions were accounted for
as reverse acquisitions. The Company adopted APG's fiscal year end after the
Kushi merger and TAAL's fiscal year end after the TAAL acquisition. In
connection with the TAAL acquisition, the Company sold substantially all of its
assets for cash and short term secured notes to raise capital. Consequently,
the results of operation for the three and six months ended December 31, 1996
and 1995 are those of TAAL. No comparison should be made to the discontinued
operations of the Company.
OVERVIEW
TAAL offers low-cost, medium-speed, wireless data communications
products and services, particularly in developing economies outside the United
States. By use of a short-range radio signal, computers or computer networks
are connected to the national or international telecommunications network,
avoiding the need for local telephone lines and connections.
The Company was incorporated in Delaware in May 1994. The Company
marketed premium macrobiotic food products until September 1996. To address
declining revenues, in early 1996 the Company sought a strategic alliance to
broaden its revenue base. However, APG's management did not consider the
macrobiotic food products to be compatible with its technology financing and
development businesses. Consequently, the Company spun off its food business
to its stockholders prior to the APG merger.
As previously disclosed, the Company acquired 100 percent of the
outstanding ordinary shares of TAAL in exchange for the Company's issuance to
the TAAL shareholders of four million shares of Common Stock and eight million
shares of Preferred Stock in four series of two million shares each, designated
Series A, B, C and D. The transaction assumes a 2:1 reverse split of the
Company's Common Stock after issuance of the four million shares of Common
Stock. The Preferred Stock converts automatically into an aggregate of 24
million shares of Common Stock. There is no adjustment for the reverse split
in the number of shares of Preferred Stock or the conversion ratio into Common
Stock. The Series A, B, C, and D Preferred Stock convert at six
<PAGE> 3
months, 24 months, 36 months, and 48 months after issuance and confer voting
rights together with Common Stock on an as-converted basis until conversion.
The TAAL shareholders conditioned their acquisition of the Company
stock on the Company's disposition of its assets for $10 million or more. Thus,
the Company disposed of its assets to raise capital and to allocate the
Company's capital resources exclusively to the TAAL business.
RESULTS OF OPERATIONS
Total revenues during the three and six months ended December 31,
1996, were approximately $244,000 and $352,000, respectively, compared to
$203,000 and $241,000 in the comparable periods in 1995. TAAL's principal
source of revenue historically has been sales of wireless network hardware.
The Company has changed its mission to that of a network service provider. The
Company derives revenues from recurring fees charged to users of the Company's
wireless network systems. As a result, the Company's receipt of revenues from
providing network services will be delayed while the Company builds and
installs networks and obtains subscribers. In addition, the Company expects to
allocate substantially all available revenues into working capital and
investment into business expansion. Consequently, due to these front end
expenditures in building a network infrastructure, the Company's management
does not expect the Company to realize positive cash flow for several years
until the network infrastructure has been established.
Total general and administrative expenses were approximately
$1,652,000 and $2,569,000 for the three and six months ended December 31, 1996,
compared to $883,000 and $1,510,000 in the comparable periods in 1995. The
increased general and administrative expenses reflect key management and other
personnel additions at the Company's operating locations and in the corporate
headquarters located in Sunnyvale, CA.
The Company recorded interest income of approximately $142,000 during
the three and six months ended December 31, 1996. This income reflects the
amortization of the present value discount recorded for certain notes received
in payment of the Company's disposition of assets in November 1996. The
remaining discount balance at December 31, 1996 of $84,000 will be fully
amortized by February 28, 1997.
During the last six months months ended December 31, 1996, the Company
incurred total interest expense of approximately $59,000, reflecting accrued
interest on a $2.2 million note payable. The Company expects to pay the note
and accrued interest with the issuance of common stock during the three months
ending March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
-2-
<PAGE> 4
The Company had working capital of approximately $9.9 million at
December 31, 1996, an increase of over $9.5 million over the $420,000 working
capital deficit at June 30, 1996. The increase in working capital is
principally due to approximately $8.1 million net assets ($10.3 million gross
proceeds less $2.2 million related debt) to be realized from the disposition of
its discontinued operations. At December 31, 1996, the Company had total cash
of approximately $873,000 and $9.7 million notes receivable due by February 28,
1997.
The Company is in various stages of implementing wireless networks in
Argentina, Australia, New Zealand, China, Philippines and Alaska. The Company
believes that its existing capital resources are likely to be sufficient to
fund the planned costs of developing existing networks, launch new network
systems, and meet operating expenses for the next 12 months from the $10.3
million in funds generated by its sale of assets, anticipated revenues from its
network systems, and anticipated reduction of debt with equity. The planned
use of these proceeds during the next 12 months includes: $1.8 million for
working capital which primarily will be allocated to the purchase of inventory;
$1.5 million for capital equipment expenditures for network systems; $2.6
million costs associated with installing and developing network systems;
$700,000 for product development; $1.2 million for sales and marketing costs;
and $1.4 million for overhead and general corporate purposes. However, if for
any reason these funds were unavailable to the Company, the Company's plan of
operation would be materially and adversely affected. Although the Company
believes that its current capital resources are sufficient, no assurance can be
made that alternative capital sources will become available.
To provide additional capital, the Company recently commenced a
private placement of up to $7.5 million in Common Stock at $3.00 per share. The
investors will also receive warrants to purchase a total of 1,500,000 shares of
Common Stock, in three series of 500,000 each, exercisable at $3.00, $5.00 and
$7.00, respectively. The Company has received commitments for $4 million and
expressions of interest for an additional $1.5 million from institutional
sources. The Company is cautiously optimistic that this private placement will
be completed within the next 30 to 45 days.
The Company has also received a written proposal, subject to execution
of a definitive underwriting agreement, for a registered public offering of up
to $3 million in Common Stock. The Company currently is evaluating the
feasibility and desirability of this proposal. However, the Company also
anticipates that exercise of its outstanding warrants at $3.75 per share
becomes more likely if the TAAL business continues to grow. Although these
warrants represent a significant potential source of capital, there can be no
assurance that they may be exercised within the next 60 days.
In connection with the Company's disposition of its notes portfolio in
November 1996, the Company received a promissory note in the principal amount
of $8.6 million from Capital Finance Corporation Pty. Ltd. ("Capital Finance").
The Company received an initial payment of $500,000. A payment of $5 million
was due on January 31, 1997. At Capital Finance's request, the Company granted
Capital Finance an extension of up to 60 days. Capital Finance's request
-3-
<PAGE> 5
arises from certain delays occasioned by a policy review by one of its
principal lenders, which resulted in retroactive policy changes. Capital
Finance has assured the Company of its ability and intent to pay this sum from
other sources within this period. Capital Finance has represented to the
Company that it currently has in excess of AU$100 million in assets under
management. In addition, Capital Finance has informed the Company that it has a
line of credit with Overseas Chinese Banking Corporation Limited (formerly
known as The Bank of Singapore (Australia) Limited) for over AU$60 million, in
addition to other institutional and private capital sources. Consequently, the
Company believes that Capital Finance is capable of meeting its payment
obligation. This extension is not expected to have a significant adverse
impact on the Company's liquidity over the next 60 days, assuming the Company
receives at least $1.5 million from Capital Finance, funding from the private
placement, or other sources, as described above. However, if for any reason
the Company is unsuccessful in consummating its private placement or other
financings and this payment is materially delayed beyond 60 days, the Company's
liquidity and ability to fund its future operations is likely to be
substantially reduced.
In connection with the sale of certain shares of the Company's Common
Stock by Rubywell Pty. Ltd. ("Rubywell") to Budbox, Inc. ("Budbox"), Rubywell
assigned Budbox's promissory note in the amount of $1.5 million in payment of
sums owed to the Company by Rubywell. The Company received the first two
payments totaling $500,000. A third payment of $500,000 was due on January 31,
1997. Budbox has requested a brief extension of the payment due date because
the Company has not effected the transfer of the subject shares to Budbox. The
Company is confident this matter will be resolved shortly. Nonetheless, the
Company is reasonably assured of Budbox's ability and intent to meet this
payment obligation within the next thirty days. The Company does not expect
this delay to have a material adverse impact on its working capital or
liquidity, assuming the Company receives at least $1.5 million from Capital
Finance, funding from the private placement, or other sources, as described
above.
In September 1996, the Company loaned $200,000 to Vancouver
Development Company ("VDC") in exchange for which it received a promissory note
from VDC payable on or about November 11, 1996. When this loan was made, the
Company was was negotiating an acquisition of VDC. This note was to be repaid
through escrow from the proceeds of sale of certain real property. Although
the property is in escrow, the transaction has not closed. The Company
anticipates repayment of the note within the next thirty days. This delay is
not expected to have a significant adverse impact on the Company's liquidity
over the next 60 days, assuming the Company receives at least $1.5 million from
Capital Finance, funding from the private placement, or other sources, as
described above.
From time to time the Company seeks to use equity financing to
consummate acquisitions or to meet its outstanding obligations. The Company
negotiated the payment of a note with an approximate balance of $2.2 million by
issuing approximately 800,000 shares of the Company's Common Stock at $2.75 per
share, effective November 30, 1996. In addition, the Company negotiated the
payment of approximately $1.7 million in accrued fees and expenses to
-4-
<PAGE> 6
various parties, which were incurred during the year ended August 31, 1996, by
issuing shares of Common Stock.
-5-
<PAGE> 7
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
DECEMBER 31, 1996 AND JUNE 30, 1996
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 872,551 $ 187,957
Inventory 907,724 592,482
Accounts receivable 367,457 112,719
Prepaid expenses 24,918 29,848
Notes receivable 9,656,649
------------ ------------
TOTAL CURRENT ASSETS 11,829,299 923,006
PROPERTY AND EQUIPMENT, Net 587,606 311,515
OTHER ASSETS
Funds held in escrow 150,944
Deposits and other assets 154,416 220,584
------------ ------------
305,360 220,584
------------ ------------
$ 12,722,265 $ 1,455,105
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,360,017 $ 500,788
Reserve for rescission/guarantee 526,000
------------ ------------
TOTAL CURRENT LIABILITIES 1,886,017 500,788
LIABILITIES TO BE SATISFIED BY THE ISSUANCE
OF SHARES OF COMMON STOCK 3,932,731
STOCKHOLDERS' EQUITY
Preferred stock - authorized 10,000,000 shares, $.01 par value,
issued and outstanding - 8,000,000 shares at December 31,
1996 and June 30, 1996 80,000 80,000
Common stock - authorized 50,000,000 shares, $.001 par value,
issued and outstanding - 24,969,371 shares at December 31,
1996 and 4,000,000 at June 30, 1996 24,969 4,000
Additional paid-in capital 15,849,288 6,921,821
Subscriptions receivable (321,540)
Accumulated deficit (8,729,200) (6,051,504)
------------ ------------
6,903,517 954,317
------------ ------------
$ 12,722,265 $ 1,455,105
============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 8
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
REVENUES $ 352,264 $ 241,393
----------- -----------
COSTS AND EXPENSES
Cost of sales 294,309 164,455
Selling, general and administrative 2,568,754 1,509,529
Research and development 250,158 74,978
----------- -----------
TOTAL COSTS AND EXPENSES 3,113,221 1,748,962
----------- -----------
LOSS FROM OPERATIONS (2,760,957) (1,507,569)
----------- -----------
OTHER INCOME (EXPENSE)
Interest income 142,109 4,399
Interest expense (58,848)
----------- -----------
83,261 4,399
----------- -----------
NET LOSS $(2,677,696) $(1,503,170)
=========== ===========
NET LOSS PER SHARE $ (0.29) $ (0.38)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 9,242,343 4,000,000
=========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 9
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
REVENUES $ 243,883 $ 203,193
------------ ------------
COSTS AND EXPENSES
Cost of sales 198,270 141,286
Selling, general and administrative 1,652,441 883,318
Research and development 36,237 43,967
------------ ------------
TOTAL COSTS AND EXPENSES 1,886,948 1,068,571
------------ ------------
LOSS FROM OPERATIONS (1,643,065) (865,378)
------------ ------------
OTHER INCOME (EXPENSE)
Interest income 141,059 2,137
Interest expense (58,848)
------------ ------------
82,211 2,137
------------ ------------
NET LOSS $ (1,560,854) $ (863,241)
============ ============
NET LOSS PER SHARE $ (0.11) $ (0.22)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 14,484,686 4,000,000
============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 10
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,677,696) $(1,503,170)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 99,186 38,476
Amortization of discount on notes receivable (132,053)
Changes in operating assets and liabilities:
Inventory (315,242) (248,076)
Accounts receivable (254,738) (194,105)
Prepaid expenses 4,930 485
Accounts payable and accrued expenses (117,626) 203,085
----------- -----------
Net cash used in operating activities (3,393,239) (1,703,305)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in other assets 176,447 (6,605)
Collection of notes receivable 728,000
Purchases of property and equipment (328,334) (197,479)
----------- -----------
Net cash used in investing activities 576,113 (204,084)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received on reverse merger 804,107
Sale of common stock 2,697,613 1,912,014
----------- -----------
Net cash provided by financing activities 3,501,720 1,912,014
----------- -----------
NET INCREASE IN CASH 684,594 4,625
CASH, beginning of period 187,957 333,574
----------- -----------
CASH. end of period $ 872,551 $ 338,199
=========== ===========
</TABLE>
<PAGE> 11
AMERICAN PHOENIX GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. COMMENTS
The accompanying condensed financial statements are unaudited but, in
the opinion of management of the Company, contain all adjustments,
consisting of only normal recurring accruals, necessary to present
fairly the financial position at December 31, 1996, the results of
operations for the three and six months ended December 31, 1996 and
1995, and the changes in cash flows for the six months ended December
31, 1996. Certain information and footnote disclosures normally
included in financial statements that have been prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and
Exchange Commission, although management of the Company believes that
the disclosures in these financial statements are adequate to make the
information presented therein not misleading. For further information,
refer to the financial statements and notes thereto included in the
Company's 1996 Form 10-KSB filed with the Securities and Exchange
Commission. Operating results for the six months ended December 31,
1996 are not necessarily indicative of the results that may be expected
for the year ending June 30, 1997.
2. BASIS OF PRESENTATION
On June 1, 1996, American Phoenix Group, Inc., a Nevada corporation
("APG") and Kushi Macrobiotics Corporation ("Kushi") entered into an
Agreement and Plan of Merger which provided for the merger of APG into
and with Kushi. Pursuant to the merger agreement which closed on
September 26, 1996, Kushi was the surviving corporation and all of the
issued and outstanding shares of common stock of APG were converted
into that number of shares of common stock of Kushi which constituted
85% of the issued and outstanding shares of Kushi as of the effective
time of the merger. As of August 31, 1996, APG had 38,088,869 issued
and outstanding shares of common stock which were converted into
16,251,465 shares of Kushi's shares ( a conversion ratio of .4267 for
each share of APG). Immediately after the merger, the Company had
19,119,371 issued and outstanding shares of common stock. Subsequently,
Kushi changed its name to American Phoenix Group, Inc. and adopted the
fiscal year end of APG. Although as a matter of corporate law, the
existence of APG ceased upon the merger, for accounting purposes, APG
was deemed the survivor and the merger was considered a reverse
acquisition of Kushi by APG. Prior to the effective time of the merger,
Kushi transferred substantially all of its assets and liabilities to
Kushi Natural Foods Corp. ("Kushi Foods"), an entity newly organized
for the purpose of pursuing the natural foods business of Kushi. All of
the issued and outstanding common stock of Kushi Foods were distributed
to the pre-merger stockholders of Kushi as dividends.
On October 24, 1996, the Company entered into a definitive Agreement
and Plan of Reorganization (the "TAAL Agreement"), by and among the
Company, TAAL, and other persons constituting holders of all of the
issued and outstanding capital stock of TAAL. The TAAL agreement was
closed on November 13, 1996. Consummation of the agreement has
<PAGE> 12
resulted in a change of control of the Company. Under the terms of the
TAAL agreement, the Company acquired all of the outstanding capital of
TAAL in exchange for 4,000,000 shares of the Company's common stock and
8,000,000 shares of the Company's Preferred Stock comprised of four
separate series denominated as Series A through D. Each Series of the
Preferred stock (comprised of 2,000,000 shares each) will be
convertible into 6,000,000 shares of common stock upon the expiration
of the applicable periods. The conversion ratio applied gives effect to
a contemplated reverse split of 2:1 of the common stock . The initial
issuance of 4,000,000 shares of common stock at the closing of the
transaction represented pre-split shares. The transaction was accounted
for as a reverse acquisition whereby the Company which was the legal
acquirer was considered, for accounting purposes, to be the acquiree
since TAAL shareholders acquired majority control of the Company.
Subsequently, the Company adopted TAAL's fiscal year end of June 30.
In September 1996, TAAL foreclosed on delinquent obligations due from
its affiliate, Tetherless Access, Ltd. ("TAL USA"). Pursuant to the
foreclosure, TAAL succeeded to the assets and liabilities of TAL USA.
The objective of TAL USA was, and the objective of the Company is, the
creation of low cost medium speed wireless data communications by
obviating the need for wire lines in geographic locations, particularly
in developing economies outside the United States, where such lines are
either non-existent or costly to install. The historical financial
statements include the combined balance sheets of TAAL and TAL USA as
of June 30, 1996 and combined results of operations for the three and
six months ended December 31, 1995.
3. NOTES RECEIVABLE
Notes receivable consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Non-interest bearing promissory note from the sale of a loan portfolio
payable as follows: $500,000 on December 1, 1996, $3,000,000 on
December 15, 1996, $2,000,000 on January 31, 1997 and $3,100,000 on
February 28, 1997. The December 1, 1996 installment was received. The
December 15, 1996 installment was subsequently extended to January 31,
1997 with interest at 10% per annum. As of the date hereof, the January
31 installments totaling $5,000,000 had not been received. The amount
outstanding included accrued
interest of $13,151. $ 8,113,151
Non-interest bearing promissory note due in various installments as
follows: $150,000 on November 30, 1996, $350,000 on December 31, 1996,
$500,000 on January 31, 1997 and $500,000 on February 28, 1997. The
November 30 installment was received. As of the date hereof, the
December 31, 1996 and the January 31, 1997
installments had not been received. 1,350,000
</TABLE>
<PAGE> 13
<TABLE>
<S> <C>
Promissory note due on November 11, 1996. As of the date
hereof, this note is still outstanding. 200,000
Non-interest bearing promissory note of $156,000 payable in
two equal installments of $78,000 on November 21, 1996
and December 31, 1996. The November 21
installment was received. 78,000
------------
$ 9,741,151
Less imputed interest on notes receivable (84,502)
------------
$ 9,656,649
============
</TABLE>
<PAGE> 14
AMERICAN PHOENIX GROUP, INC.
AND TETHERLESS ACCESS ASIA LIMITED
UNAUDITED COMBINED BALANCE SHEETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
APG APG TAAL TAAL
Per Books Adjustments Adjusted Per Books Adjustments Adjusted
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash 807,103 (20,000) 787,103 26,431 (28,431) 0
Inventory 0 442,472 (442,472) 0
Accounts receivable 0 123,936 (123,936) 0
Prepaid expenses 0 15,416 (15,416) 0
Notes receivable 9,524,596 132,053 9,656,649 0
Investment in Barlile Corp. 0 0
---------- ----------- ---------- ----------
TOTAL CURRENT ASSETS 10,331,699 10,443,752 610,254 0
PROPERTY AND EQUIPMENT, Net 49,683 3,300 46,363 546,459 (497,481) 48,976
OTHER ASSETS
Funds held in escrow 160,944 160,944 0
Insurance escrow deposit 150,000 (150,000) 0 0
Deposits and other assets 69,190 69,190 85,175 (85,175) 0
Intercompany accounts 225,000 225,000 1,413,379 1,413,379
Investments 0 137,984 (137,984) 0
---------- ----------- ---------- ----------
595,134 445,134 1,636,538 1,413,379
---------- ----------- ---------- ----------
10,976,516 10,935,269 2,793,251 1,462,356
========== =========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable 0 0
AP & accrued exp. 682,917 682,917 286,970 (281,287) 5,682
Reserve for recission/guarantee 526,000 526,000 0
---------- ----------- ---------- ----------
TOTAL CURRENT LIABILITIES 1,208,917 1,208,917 286,970 5,682
LIABILITIES TO BE SATISFIED BY
COMMON STOCK 3,783,159 149,572 3,932,731 0
STOCKHOLDERS' EQUITY
Preferred stock 0 0
Common stock 20,969 20,969 6,665,114 6,665,114
Additional paid-in capital 23,140,789 23,140,789 3,767,787 (1,732,075) 2,035,712
Subscriptions receivable 0 (321,540) (321,540)
Accumulated deficit, July 1, 1996 (16,970,101) (262,374) (17,232,476) (514,504) (5,834,316) (6,348,820)
Net loss (207,217) (135,662) (7,090,575) (573,792)
---------- ----------- ---------- ----------
5,984,440 5,793,621 2,506,282 1,456,674
---------- ----------- ---------- ----------
10,976,516 10,935,269 2,793,252 1,462,356
========== =========== ========== ==========
<CAPTION>
TAAL Division TAL Division Consolidation/
Per Books Adjustments Adjusted Total Eliminations Consolidated
------------ ----------- ------------ ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash 85,448 85,448 872,551 872,551
Inventory 907,724 907,724 907,724 907,724
Accounts receivable 367,457 367,457 367,457 367,457
Prepaid expenses 24,918 24,918 24,918 24,918
Notes receivable 0 9,656,649 9,656,649
Investment in Barlile Corp. 0 0 0
---------- ---------- ----------- ----------
TOTAL CURRENT ASSETS 1,365,547 1,385,547 11,829,299 11,829,299
PROPERTY AND EQUIPMENT, Net 492,245 492,245 587,606 587,606
OTHER ASSETS
Funds held in escrow 0 150,944 150,944
Insurance escrow deposit 0 0 0
Deposits and other assets 86,226 85,226 154,416 154,416
Intercompany accounts (2,214,675) 2,214,675 0 1,638,379 (1,638,379) 0
Investments 194,642 (194,642) 0 0 0
---------- ---------- ----------- ----------
(1,934,807) 85,226 1,943,739 305,330
---------- ---------- ----------- ----------
(57,015) 1,953,018 14,360,543 12,722,235
========== ========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable 0 0 0
AP & accrued exp. 671,418 671,418 1,360,017 1,360,017
Reserve for recission/guarantee 0 526,000 526,000
---------- ---------- ----------- ----------
TOTAL CURRENT LIABILITIES 671,418 671,418 1,886,017 1,886,017
LIABILITIES TO BE SATISFIED BY
COMMON STOCK 0 3,932,731 3,932,731
STOCKHOLDERS' EQUITY
Preferred stock 0 0 80,000 80,000
Common stock 5,365,505 5,365,505 (12,051,588) (12,026,619) 24,969
Additional paid-in capital 1,216,662 2,214,675 3,431,337 28,607,838 (12,758,561) 15,849,287
Subscriptions receivable 0 (321,540) (321,540)
Accumulated deficit, July 1, 1996 (5,537,000) (5,537,000) (29,118,295) 23,066,791 (6,051,504)
Net loss (1,773,600) (1,968,242) (2,677,696) (2,677,696)
---------- ---------- ----------- ----------
(728,433) 1,291,800 8,541,895 6,903,516
---------- ---------- ----------- ----------
(57,015) 1,963,018 14,360,643 12,722,265
========== ========== =========== ==========
</TABLE>
<PAGE> 15
TETHERLESS ACCESS ASIA LIMITED AND TETHERLESS ACCESS, LTD.
UNAUDITED COMBINED CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
APG APG TAAL TAAL
Per Books Adjustments Adjusted Per Books Adjustments Adjusted
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0.7900
REVENUES 0 0
----------- --------------------- ---------
COSTS AND EXPENSES
Cost of sales 0 0
Selling, general and administrative 210,097 1,650 211,747 7,097,005 (6,516,783) 580,222
Research and development 0 0
----------- --------------------- ---------
TOTAL COSTS AND EXPENSES 210,097 211,747 7,097,005 580,222
----------- --------------------- ---------
LOSS FROM OPERATIONS (210,097) (211,747) (7,097,005) (580,222)
----------- --------------------- ---------
INTEREST INCOME 2,880 132,053 134,933 6,430 6,430
INTEREST EXPENSE (58,848) (58,848) 0
----------- --------------------- ---------
NET LOSS (207,217) (135,662) (7,090,575) (573,792)
=========== ===================== =========
</TABLE>
<TABLE>
<CAPTION>
TAL Division TAL Division Consolidation/
Per Books Adjustments Adjusted Total Eliminations Consolidated
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES 352,264 352,264 352,264 352,264
----------- ----------------------- ----------
COSTS AND EXPENSES
Cost of sales 294,309 294,309 294,309 294,309
Selling, general and administrative 1,582,143 194,642 1,776,785 2,588,754 2,588,754
Research and development 250,158 250,158 250,158 250,158
----------- ----------------------- ----------
TOTAL COSTS AND EXPENSES 2,126,810 2,321,252 3,113,221 3,113,221
----------- ----------------------- ----------
LOSS FROM OPERATIONS (1,774,346) (1,968,988) (2,760,957) (2,760,857)
----------- ----------------------- ----------
INTEREST INCOME 746 746 142,109 142,109
INTEREST EXPENSE 0 (58,848) (68,848)
----------- ----------------------- ----------
NET LOSS (1,773,600) (1,968,242) (2,677,696) (2,677,696)
=========== ======================= ==========
</TABLE>
<PAGE> 16
TETHERLESS ACCESS ASIA LIMITED AND TETHERLESS ACCESS, LTD.
UNAUDITED COMBINED CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
TAAL TAAL TAL,Division
Per Books Adjustments Adjusted Per Books Adjustments
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES 0.7900 0 241,393
-------- ---------------------------
COSTS AND EXPENSES
Cost of sales 0 164,455
Selling, general and
administrative 154,197 154,197 1,355,332
Research and development 0 74,978
---------- ---------------------------
TOTAL COSTS AND EXPENSES 154,197 154,197 1,594,765
---------- ---------------------------
LOSS FROM OPERATIONS (154,197) (154,197) (1,353,372)
---------- ---------------------------
OTHER INCOME 10 10 4,389
---------- ---------------------------
NET LOSS (154,187) (154,187) (1,348,983)
========== ===========================
</TABLE>
<TABLE>
<CAPTION>
TAL,Division Consolidation/
Adjusted Total Elimination Consolidated
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES 241,393 241,393 241,393
--------------------------- -------
COSTS AND EXPENSES
Cost of sales 164,455 164,455 164,455
Selling, general and
administrative 1,355,332 1,509,529 1,509,529
Research and development 74,978 74,978 74,978
----------------------------- ---------
TOTAL COSTS AND EXPENSES 1,594,765 1,748,962 1,748,962
----------------------------- ---------
LOSS FROM OPERATIONS (1,353,372) (1,507,569) (1,507,569)
------------------------------ ----------
OTHER INCOME 4,389 4,399 4,399
------------------------------ ----------
NET LOSS (1,348,983) (1,503,170) (1,503,170)
============================== ==========
</TABLE>
<PAGE> 17
TETHERLESS ACCESS ASIA LIMITED
AND TETHERLESS ACCESS, LIMITED
UNAUDITED COMBINED BALANCE SHEETS
JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
TAAL TAAL TAL Division TAL Division
Per Books Adjustments Adjusted Per Books Adjustments Adjusted Total
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0.7900
ASSETS
CURRENT ASSETS
Cash 158,957 158,957 29,000 29,000 187,957
Inventory 0 592,482 592,482 592,482
Accounts receivable 0 112,719 112,719 112,719
Prepaid expenses 0 29,848 29,848 29,848
------------ ------------------------- --------------------------
TOTAL CURRENT ASSETS 158,957 158,957 764,049 764,049 923,006
PROPERTY AND EQUIPMENT, Net 20,405 20,405 291,110 291,110 311,515
OTHER ASSETS
Deposits and other assets 0 87,592 87,592 87,592
Intercompany accounts 4,772,809 4,772,809 0 4,772,809
Investments 132,992 132,992 0 132,992
------------ ------------------------- --------------------------
4,905,800 4,905,800 87,592 87,592 4,993,392
------------ ------------------------- --------------------------
5,085,162 5,085,162 1,142,751 1,142,751 6,227,913
============ ========================= ==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
AP & accrued exp. 3,950 3,950 496,838 496,838 500,788
Intercompany accounts 1,231,611 1,231,611 1,231,611
Reserve for rescission/
guarantee 0 0 0
------------ ------------------------- --------------------------
TOTAL CURRENT LIABILITIES 3,950 3,950 1,728,449 1,728,449 1,732,399
STOCKHOLDERS' EQUITY
Common stock 1,827,929 1,827,929 4,951,304 4,951,304 6,779,233
Additional paid-in capital 3,767,787 3,767,787 0 3,767,787
Accumulated deficit (514,504) (514,504) (5,537,002) (5,537,002) (6,051,506)
------------ ------------------------- --------------------------
5,081,212 5,081,212 (585,698) (585,698) 4,495,514
------------ ------------------------- --------------------------
5,085,162 5,085,162 1,142,751 1,142,751 6,227,913
============ ========================= ==========================
</TABLE>
<TABLE>
<CAPTION>
Consolidation/ TAL
Eliminations Consolidated June 30, 1995
-------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash 187,957 333,574
Inventory 592,482 23,924
Accounts receivable 112,719 895
Prepaid expenses 29,848 26,485
------------------------------
TOTAL CURRENT ASSETS 923,006 384,878
PROPERTY AND EQUIPMENT, Net 311,515 126,118
OTHER ASSETS
Deposits and other assets 87,592 5,395
Intercompany accounts (4,772,809) 0
Investments 132,992
------------------------------
220,584 5,395
------------------------------
1,455,104 516,391
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
AP & accrued exp. 500,788 192,858
Intercompany accounts (1,231,611) 0
Reserve for rescission/
guarantee 0
------------------------------
TOTAL CURRENT LIABILITIES 500,788 192,858
STOCKHOLDERS' EQUITY
Common stock (4,951,304) 1,827,929 2,697,491
Additional paid-in capital 1,410,106 5,177,893
Accumulated deficit (6,051,506) (2,373,958)
------------------------------
954,316 323,533
------------------------------
1,455,104 516,391
==============================
</TABLE>
<PAGE> 18
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)
February 19, 1997 /s/ Daniel A. France
- ---------------------------- ------------------------------------
Date Chief Financial Officer
