U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM 10-QSB
(Mark One)
_X_ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended: September 30, 2000
___ 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_X_ 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: As
of November 14, 2000 there were 1,316,989 shares outstanding of
the issuer's no par value common stock.
Transitional Small Business Disclosure Format (check one):
YES___ NO_X_
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
_________________________________________________________________
Sept 30, December 31,
___2000___ ____1999____
_____________ASSETS________________
Cash & cash equivalents $ 207,864 $ 340,906
Mortgage loans held for sale 3,089,590 240,000
Mortgage loans receivable -0- 242,273
Notes receivable 10,392 34,892
Prepaid expenses &
other current assets 97,054 21,986
Total Current Assets 3,404,900 880,057
Land Development Costs 704,217 761,263
Property & Equipment, net of accumulated
depreciation & amortization 16,296 21,235
Total Assets 4,125,413 1,662,555
__LIABILITIES AND STOCKHOLDERS' EQUITY__
Current Liabilities:
Warehouse finance facility 2,968,922 234,024
Deferred income 925 4,100
Lot deposits 69,160 -0-
Accounts payable, accrued expenses
and other current liabilities 144,077 180,778
Total Current Liabilities 3,183,084 418,902
COMMITMENTS AND CONTINGENCIES
Stockholders' equity:
Common stock, no par value;
10,000,000 shares authorized;
1,316,989 shares issued
and outstanding
at 9/30/00 & 12/31/99 3,852,825 3,852,825
Additional paid-in capital 231,207 231,207
Accumulated deficit (3,141,703) (2,840,379)
Total Stockholders' Equity 942,329 1,243,653
Total Liabilities and
Stockholders' Equity 4,125,413 1,662,555
See accompanying Notes to Consolidated Financial Statements.
-2-
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
_________________________________________________________________
For the Three Months|For the Nine Months
__Ended Sept 30,___|__Ended Sept 30,___
___2000__ __1999___|__2000__ __1999__
Revenues:
Mtg origination fees $ 188,073 $ 165,036 $ 435,846 $655,591
Land sales -0- -0- 145,924 -0-
Application &
commitment fees 5,190 8,905 12,585 41,858
Mtg interest income 120,314 35,874 203,379 130,834
Total revenues 313,577 209,815 797,734 828,283
Expenses:
Employee compensation
& benefits 98,919 104,553 290,239 336,798
Commissions 130,555 60,742 284,674 229,416
Other expenses 91,378 117,828 296,197 392,729
Land development costs -- -- 146,971 --
Interest expense 44,859 20,398 91,915 42,250
Total expenses 365,711 303,521 1,109,996 1,001,193
Loss from operations (52,134) (93,706) (312,262) (172,910)
Other income 4,153 3,783 10,938 18,915
Loss before provision
for income taxes (47,981) (89,923) (301,324) (153,995)
Provision for
income taxes -0- -0- -0- -0-
Net loss (47,981) (89,923) (301,324) (153,995)
LOSS PER COMMON SHARE,
Basic $ (0.04) $ (0.07) $ (0.23) $ (0.12)
Diluted $ (0.04) $ (0.07) $ (0.23) $ (0.12)
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING,
Basic 1,316,989 1,315,293 1,316,989 1,315,293
Diluted 1,316,989 1,315,293 1,316,989 1,315,293
See accompanying Notes to Consolidated Financial Statements.
-3-
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
_________________________________________________________________
For the Three Months|For the Nine Months
__Ended Sept 30,___|__Ended Sept 30,___
___2000__ __1999___|__2000__ __1999__
Cash flows from operating activities:
Net loss $ (47,981) $(89,923) $(301,324) $(153,995)
Adjustments to reconcile
net loss to net cash
provided by/(used in)
operating activities:
Depreciation
and amortization 3,010 1,919 9,276 5,535
Changes in assets & liabilities:
Mortgage loans
held for sale (912,590) -0- (2,849,590) -0-
Mortgage loans
receivable -0- (230,400) 242,273 727,874
Prepaid expenses &
other current assets (28,267) 44,696 (75,068) (19,511)
Land development costs (66,234) (42,276) 57,046 (177,648)
Warehouse finance
facility 864,640 171,904 2,734,898 (631,053)
Deferred Income (1,087) (5,545) (3,175) (51,973)
Accounts payable
and accrued expenses (67,148) (7,142) (36,701) 37,865
Net cash provided by/
(used in) operating
activities (255,657) (156,767)(222,365) (262,906)
Cash flows from investing activities:
Purchases of fixed assets(2,468) (1,473) (4,337) (21,427)
Lot deposits 69,160 2,000 69,160 2,000
Proceeds from notes
receivable -0- -0- 24,500 43,999
Net cash provided
by/(used in)
investing activities 66,692 527 89,323 24,572
Cash flows from financing activities:
Payments of loans payable -0- (12,045) -0- (31,364)
Net increase/(decrease) in
cash & cash equivalents (188,965) (168,285)(133,042) (269,698)
Cash and cash equivalents
at beginning of period 396,829 506,672 340,906 608,085
Cash and cash equivalents
at end of period 207,864 338,387 207,864 338,387
Supplemental Disclosure of
Cash Flow Information:
Cash paid during the
period for interest $ 44,859 $ 20,398 $ 91,916 $ 42,250
See accompanying Notes to Consolidated Financial Statements.
-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
1999 Annual Report on Form 10-KSB. The results of operations for
the three and nine months ended September 30, 2000 are not
necessarily indicative of the results of the full year.
2. NET LOSS PER SHARE
Basic EPS and Diluted EPS for the nine months ended
September 30, 2000 and 1999 have been computed by dividing the
net loss for each respective period by the weighted average
shares outstanding during that period. All outstanding warrants
and options have been excluded from the computation of Diluted
EPS as they are antidilutive.
3. SEGMENT REPORTING
The Company has two primary operating segments including
originating and selling loans secured primarily by first
mortgages on one-to-four family residential properties (CFC) and
real estate development (AADC). Segment selection was based upon
the nature of operations as determined by management and all of
the operations of these segments are conducted in New Jersey.
Certain selected financial information of these segments is
described below:
CFC AADC Parent Total
September 30, 2000
Revenues $ 651,810 $145,924 $ $ 797,734
Segment Profit (Loss) (182,513) (790) (118,021) (301,324)
Net identifiable assets 3,364,005 739,330 22,078 4,125,413
CFC AADC Parent Total
September 30, 1999
Revenues $ 828,283 $ $ $ 828,283
Segment Profit (Loss) 15,908 (2,314) (167,589) (153,995)
Net identifiable assets 1,429,286 802,703 34,121 2,266,110
-5-
Item 2.
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
_________________________________________________________________
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1999.
Total revenues for the three months ended September 30, 2000
and 1999 were $313,577 and $209,815 respectively. The increase
in revenues during the 2000 period was the result of an increase
in mortgage closings of $23,037 or approximately 13.9% and an
increase in mortgage interest income of $84,440 or approximately
235.4%. This was partially offset by a decrease in application
and commitment fees of $3,715; all of which were generated by
Capital Financial Corp., ("Capital") the Company's wholly-owned
mortgage banking subsidiary. The increase in mortgage
origination fee revenue was due to an increase in the amount of
net revenue per dollar amount of loans closed during the three
month period ended September 30, 2000 as compared to the
comparable 1999 period. The increase in mortgage interest income
during the period was primarily due to the difference the Company
paid to its warehouse lender as compared to the amount of
interest the Company received on second mortgages it owned while
being warehoused awaiting sale to institutional and other
investors and to a lesser extent due to a small increase in the
number of new construction loans in progress being serviced by
the Company as compared to the number being serviced during the
comparable 1999 period.
During the three month period ending September 30, 2000
increased interest rates continued to sharply reduce the number
of refinance applications the Company received, as well as a
reduction in real estate sales in the Company's service area
primarily due to a reduction in the available supply of homes for
sale. In addition, during the 2000 period the Company decided to
primarily refocus its sources of applications by expanding its
wholesale business and to lessen its dependence on its retail
sale personnel which have not been economically viable sources of
originations for the Company in the past. To that end, during
the nine month period ended September 30, 2000, the Company added
two wholesale executives to represent the Company in the
wholesale market place. These individuals have demonstrated the
ability and experience the Company believes necessary to attract
new sources of mortgage originations, although there can be no
assurance that the Company will be successful in its endeavor.
During the three month period ended September 30,2000, the
Company received 110 mortgage loan applications for processing
from borrowers seeking loans aggregating approximately
$19,107,159 as compared to 55 applications in an aggregate amount
of approximately $10,362,810 in the comparable 1999 period. Of
the loans originated during the three months ended September 30,
2000, 10 loans of 9% of the total, were refinance applications
and 84 loan applications or 76.3% were purchase loans, compared
to 55 loans in the comparable 1999 period of the 13 or 23.6% of
the total were refinances and 42 or 76.3% of the total were
purchase loans. During the three month period ended September
30, 2000, the Company received 16 second mortgage loan
applications which totaled $687,200 as compared to none during
the same period in 1999. The Company closed 53 loans aggregating
approximately $9,748,985 compared to 59 loans closed aggregating
approximately $11,125,376 in the comparable 1999 period.
Total expenses for the three months ended September 30, 2000
increased to $365,711 from $303,521 in the comparable 1999
period. The increased total expenses in the 2000 quarter was
primarily due to an increase of $5,634 in employee compensation
and benefits, an increase of $69,813 in commissions and a $24,461
increase in interest expense. These were partially offset by a
decrease in other expenses of $26,450 which reflected primarily
decreases in appraisal and credit reporting fees and telephone
and accounting fees. As a percentage of revenues, total expenses
were 116.6% in the quarter ended September 2000 compared to
144.6% in the comparable 1999 period. The Company did not sell
any land during the 2000 or the 1999 periods.
As a result of the foregoing, the Company's net loss for the
three months ended September 30, 2000 was $47,981 or $0.036 per
share, compared to a net loss of $89,923 or $0.068 per share for
the comparable 1999 period.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1999.
Total revenues for the nine months ended September 30, 2000
were $797,734 compared to $828,283 for the comparable 1999
period. The $30,549 decrease in revenue was primarily the result
of a decrease of $219,745 in mortgage origination fee income and
a decrease in application fee income of $29,273 which was offset
in part by an increase in mortgage interest income of $72,545 and
$145,924 in land sales during the 2000 period as compared to an
absence of land sales recorded during the 1999 period. The
decrease in mortgage origination fees and application fees was
the result of higher mortgage interest rates which caused a
reduced amount of mortgage applications and closings during the
period. During the nine months ended September 30, 2000 the
Company received 262 mortgage loan applications for processing
from borrowers seeking loans aggregating approximately
$49,654,143 compared to 216 loan application aggregating
approximately $47,864,796 received in the comparable period in
1999. The Company closed 128 loans aggregating $24,143,950 in
the nine months ended September 30, 2000, compared to 187 loans
closed aggregating approximately $39,485,983 in the comparable
1999 period.
Total expenses for the nine months ended September 30,
2000 increased to $1,109,996 from $1,001,193 in the comparable
1999 period, primarily as a result of an increase in land
development costs of $146,972 as compared to an absence of land
development costs during the same nine month period ended
September 30, 1999. These costs are construction costs for the
two houses the Company is building under contract to be sold. In
addition, there was an increase of $55,258 in commissions paid
during the period, and an increase of $49,665 in interest expense
as compared with the same period in 1999. These increased
expenses were partially offset by decreases in employee
compensation and benefits of $46,559 and a reduction of $96,532
in other expenses which reflects primarily decreases in interest
expense, appraisal and credit report fees, rent, telephone, legal
and accounting. Total expenses expressed as a percentage of
revenues, was approximately 139.1% during the nine month
period ended September 30, 2000 and during the comparable 1999
period was 120.8%. The Company sold land during the nine months
ended September 30, 2000 and as a result had cost of land sold
expenses as compared to an absence of land sold expense during
the nine month period ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, the Company had cash and cash
equivalents of $207,864 compared to $340,906 at December 31,
1999, a decrease of $130,042 or 39.0%. The decrease was
primarily attributable to cash used by the investment of
approximately $225,000 in two single family homes which the
Company anticipates it will sell to buyers in the forth quarter
2000 and the first quarter of 2001 respectively. Cash flows from
operating activities for the nine months ended September 30, 2000
were provided by depreciation and collection of notes, commission
advances and mortgage loans receivable and offset by the cash
utilized primarily in the net loss from operations, accrued
expenses and the increase in cash requirements to finance the
increase in warehouse loans payable. Cash provided by investing
activities was the net result of the receipt of additional lot
deposits which was offset by an increase in land development
costs.
The decrease in mortgage applications and closings during
the period ended September 30, 2000 compared to the period ended
September 30, 1999 are having a negative effect on the Company's
cash flow. The reduction in overall expenses has trailed the
reduction in cash flow from operations in time and in money.
There can be no assurance that the number of future loan
closings and the price the Company receives for the remaining
building lot owned will be sufficient to offset expenses of
carrying costs.
Loans in process have increased from 13 loans with an
aggregate principal amount of approximately $2,999,581 as of
December 31, 1999 to 96 loans aggregating approximately
$18,713,834 as of September 30, 2000. As of November 7, 2000 the
Company has 66 loans in process aggregating approximately
$13,524,971.
During the period ended September 30, 2000, the Company
continued marketing its services to the public through its
Internet presence using its website home page on a major website
belonging to a national provider of mortgage loans and other
financial statistics. The Company's website provides the public
with its lending programs and interest rates on a daily basis, in
addition to the rates of other lenders that the Company competes
with. During the three month period ended September 30, 2000 the
Company has received numerous inquiries which have resulted in
mortgage loan applications from persons seeking mortgage
financing.
The Company utilizes two $5,000,000 warehouse lines of
credit, which together total $10,000,000 for its daily mortgage
loan funding operations and whenever possible the Company employs
its available cash to fund mortgage loans which generates
mortgage interest income, as well as save interest costs and
other fees associated with utilizing its warehouse credit lines.
These warehouse lines are maintained with mortgage warehouse
lenders which enable the Company to borrow funds secured by
residential mortgage loans which will be temporarily accumulated
or warehoused and then sold. At September 30, 2000 the Company
had borrowed $2,968,922 from its warehouse lines of credit
representing approximately $3,089,590 in closed loans ready for
sale, of which two loans were new construction loans aggregating
approximately $485,000. The construction loans will remain in
the warehouse until such time that all construction work is
completed, the balance of approximately $144,000 in disbursements
are made and the loans are sold to an institutional investor.
In September 1998, the Board of Directors authorized the
Company to build up to two, at any one time, single family homes
on the lots owned by the Company, on speculation and offer them
for sale to prospective buyers. The Company believes that
construction costs for each home to be built will be
approximately $225,000 and it will afford it a better opportunity
to obtain a profit from the transaction then if it sold an
undeveloped lot. Although there can be no assurance that the
Company will be successful in this undertaking, the Company has
retained an on-site construction manager who is a non-affiliate
of the Company, to assist the Company in this construction
project.
On March 3, 2000 the Company entered into a contract to sell
one of its building lots and construct a single family residence
for approximately $481,600. Construction commenced during
May 2000. The terms of the contract provide for a $1,000
deposit which is currently being held in escrow by the buyer's
realtor and the balance of approximately $47,160 is to be paid
within 10 days of contract approval. A deposit in the amount of
$48,160 was released to the Company during April 2000 upon
mortgage approval and the Company's President has personally
guaranteed the deposit in the event of default by the Company.
The buyers have received a mortgage commitment through a
non-affiliate of the Company. The contract further provides for
an additional buyer's deposit of approximately $73,400 to be paid
at the time of closing when title to the residence is transferred
to the buyers from the Company and the remainder of the purchase
price is to be paid to the Company with the proceeds of a
mortgage loan. The Company anticipates that the title will be
transferred to the buyers during the first quarter of 2001.
In July 2000, the Board of Directors voted on and authorized
a moderate increase in salary for the President and implemented
an incentive bonus plan for the President based on profitability
which will be reviewed and paid quarterly when earned.
On July 13, 2000 the Company entered into a contract to sell
a building lot which contains a house the Company built on
speculation. During August, 2000 the contract was approved after
attorney review. The terms of the contract provide for a $21,000
deposit currently being held in escrow by the buyer's realtor.
The balance of the buyer's deposit of approximately $23,590 is to
be paid upon transfer of title which the Company estimates will
be in December 2000. As of November 7, 2000 the buyer has been
approved for a mortgage loan made through a non-affiliate of the
Company. The balance of the purchase price, aggregating
approximately $383,300 is to be paid to the Company with the
proceeds of a mortgage loan.
As of November 2000 the Company owns 2 improved and 1
unimproved building lots in its Hunterdon County, New Jersey real
estate development; one of which, as of March 2000, is under
contract to build a house and transfer title to the buyer and one
lot containing a house the Company built on speculation is under
contract as of July 2000.
On August 9, 2000 the Company was notified by U.S.
Department of Housing and Urban Development ("HUD") that its
approval with the agency as a non-supervised lender was upgraded
to what is commonly referred to as Full Eagle status. This
approval allows the Company to act in the capacity of a mortgage
banker rather than a mortgage broker to underwrite and close
loans in its own name and HUD will insure these loans without
prior approval from the Company's sponsoring investors, as
previously required. This approval also allows the Company to
expand its wholesale product line to include third party
origination of FHA loans through this new delegated underwriting
privilege. Additionally, this approval allows the Company to be
potentially more competitive in the market place with these types
of loans.
During June of 1999 the Company became licensed as a
mortgage banker in the State of Connecticut. In September 2000
the Company decided not to renew this mortgage banking license as
it was not cost effective to do so. Accordingly, since September
30, 2000 the Company is only licensed as a mortgage banker for
first and second mortgages in the State of New Jersey.
The Company estimates that it will require additional
capital in order to successfully implement its future operational
plans. As a result, the Company is seeking additional capital
through, among other means, an infusion of noncollateralized
loans and the sale of additional equity in the Company. However,
there can be no assurance that the Company will be able to obtain
additional capital on terms acceptable to the Company.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Part 1 - Item 3 contained in the
Company's 10-KSB for the year ended December 31, 1999 for further
information relating to two pending actions commenced against,
among others, the Company and its President described below.
The first action was commenced in the Supreme Court of the
State of New York, Queens County in March 1993, by two
individuals who allege that misrepresentations were made or
material information was omitted in connection with their
investment in the Company's 1989 private offering of Common
Stock.
In the other action, which commenced in March 1999 in the
Chancery Division of the Superior Court of New Jersey, Union
County, the plaintiffs allege that the Company aided and abetted
a former director in converting the assets of two New Jersey
limited liability companies (the "LLC's") by accepting loans and
payments from the LLC's and the former director and repaying the
loans to the former director in the form of cash and Company
stock.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 Financial Data Schedule (For SEC use only)
(b) No reports on Form 8-K where filed during the quarter
ended September 30, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN ASSET MANAGEMENT CORPORATION
(Registrant)
Date: November 15, 2000 By:_s/Richard G. Gagliardi_____
Richard G. Gagliardi
Chairman, President and Chief
Executive Officer (Principal
Executive and Financial Officer)