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, 2001
___ 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 12, 2001 there were 1,295,970 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,
___2001___ ____2000____
_____________ASSETS________________
Cash & cash equivalents $ 263,749 $ 371,012
Mortgage loans held for sale 1,870,257 3,762,229
Mortgage loans receivable -0- 24,000
Notes receivable, net 28,946 28,946
Prepaid expenses &
other current assets 61,351 52,721
Total Current Assets 2,224,303 4,238,908
Land Development Costs 188,095 408,985
Property & Equipment, Net 6,005 14,035
Total Assets 2,418,403 4,661,928
__LIABILITIES AND STOCKHOLDERS' EQUITY__
Current Liabilities:
Warehouse finance facility 1,821,031 3,690,458
Note payable, current 20,136 -0-
Deferred income 22,436 17,622
Accounts payable, accrued expenses
and other current liabilities 107,142 133,665
Total Current Liabilities 1,970,745 3,841,745
Note Payable, Net of
Current Maturities 46,009 -0-
COMMITMENTS AND CONTINGENCIES
Stockholders' Equity:
Common stock, no par value;
10,000,000 shares authorized;
1,316,989 shares issued;
1,316,989 shares outstanding at
12/31/00 & 1,295,970 shares
outstanding at 9/30/01 3,852,825 3,852,825
Additional paid-in capital 231,207 231,207
Accumulated deficit (3,611,238) (3,263,849)
Treasury stock, at cost;
21,019 shares (71,145) -0-
Total Stockholders' Equity 401,649 820,183
Total Liabilities and
Stockholders' Equity 2,418,403 4,661,928
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,___
___2001__ __2000___|__2001__ __2000__
Revenues:
Mtg origination fees $ 234,518 $ 188,073 $ 736,098 $435,846
Land sales -0- -0- 490,078 145,924
Application &
commitment fees 6,920 5,190 16,771 12,585
Mtg interest income 140,447 120,314 337,709 203,379
Total Revenues 381,885 313,577 1,580,656 797,734
Expenses:
Employee compensation
& benefits 107,461 98,919 321,245 290,239
Commissions 176,907 130,555 500,387 284,674
Other expenses 153,083 91,378 430,542 296,197
Land development costs -- -- 451,769 146,971
Interest expense 92,750 44,859 229,299 91,915
Total Expenses 530,201 365,711 1,933,242 1,109,996
Loss From Operations (148,316) (52,134) (352,586) (312,262)
Other Income 1,196 4,153 5,197 10,938
Loss Before Provision
For Income Taxes (147,120) (47,981) (347,389) (301,324)
Provision For
Income Taxes -0- -0- -0- -0-
Net loss (147,120) (47,981) (347,389) (301,324)
LOSS PER COMMON SHARE,
Basic $ (0.11) $ (0.04) $ (0.26) $ (0.23)
Diluted $ (0.11) $ (0.04) $ (0.26) $ (0.23)
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING,
Basic 1,310,060 1,316,989 1,314,671 1,316,989
Diluted 1,310,060 1,316,989 1,314,671 1,316,989
See accompanying Notes to Consolidated Financial Statements.
-3-
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
_________________________________________________________________
For the Nine Months
Ended Sept 30,
__2001__ __2000__
Cash flows from operating activities:
Net loss $ (347,389) $ (301,324)
Adjustments to reconcile
net loss to net cash
used in operating activities:
Depreciation
and amortization 8,467 9,276
Changes in operating assets & liabilities:
Mortgage loans
held for sale 1,891,972 (2,849,590)
Mortgage loans
receivable 24,000 242,273
Prepaid expenses &
other current assets (8,630) (75,068)
Land development costs 220,890 57,046
Warehouse finance
facility (1,869,427) 2,734,898
Deferred Income 4,814 (3,175)
Accounts payable
and accrued expenses (26,523) (36,701)
Net cash used in operating
activities (101,826) (222,365)
Cash flows from investing activities:
Purchases of fixed assets (437) (4,337)
Lot deposits -0- 69,160
Proceeds from notes
receivable -0- 24,500
Net cash (used in) provided by
investing activities (437) 89,323
Cash flows from financing activities:
Payments of note payable (5,000) -0-
Net decrease in
cash & cash equivalents (107,263) (133,042)
Cash and cash equivalents
at beginning of period 371,012 340,906
Cash and cash equivalents
at end of period 263,749 207,864
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. ("CFC") and American Asset
Development Corporation ("AADC"). 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 2000 Annual Report on Form 10-KSB.
The results of operations for the three and nine months ended September
30, 2001 are not necessarily indicative of the results of the full year.
2. NET LOSS PER SHARE
Basic EPS and Diluted EPS for the three and nine months ended
September 30, 2001 and 2000 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, 2001
Revenues $1,090,578 $490,078 $ -0- $1,580,656
Segment Profit (Loss) (196,497) 37,797 (188,689) (347,389)
Net identifiable assets 2,186,094 219,148 13,161 2,418,403
CFC AADC Parent Total
September 30, 2000
Revenues $ 651,810 $145,924 $ -0- $ 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
4. NOTE PAYABLE
Note Payable consists of the following at September 30, 2001:
Note payable - interest imputed at 7.5
percent per annum, quarterly
payments of principal and
interest of $5,000. Final
payment due September 2004 $ 66,145
Less Current Maturities 20,136
Note Payable, Net of Current Maturities $ 46,009
5. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
For the Nine Months Ended September 30,
2001 2000
Cash paid during the period for:
Interest $229,299 $ 91,916
Disclosure of non-cash investing and finance activities:
Nine Month Period Ended September 30, 2001
As a result of a litigation settlement 20,019 shares
of Company Common Stock were repurchased and held
in treasury, in exchange for the assumption of a
note payable $ 71,145
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, 2001 COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 2000.
Total revenues for the three months ended September 30, 2001
and 2000 were $381,885 and $313,577, respectively. The increase
in revenues during the 2001 period was the result of an increase
in mortgage origination fees of $46,445 or approximately 24.6% and
an increase in mortgage interest income of $20,133 or approximately
16.7%. In addition, there was an increase in application and
commitment fee income of $1,730, or 33.3%; all of which were generated
by Capital Financial Corp., ("CFC") the Company's wholly-owned
mortgage banking subsidiary. The increase in mortgage origination
fee and application and commitment fee revenue was due to an
increase in the number of loans closed from 53 during the 2000
period to 65 loans closed during the three month period ended
September 30, 2001. The increase in mortgage interest income
during the period was primarily due to an increase in mortgages
owned while being warehoused and awaiting sale to institutional
and other investors.
During the three month period ended September 30, 2001
decreasing interest rates caused a sharp increase in the number
of refinance applications the Company received. In addition,
during the 2001 period the Company continued its primary focus on
its sources of loan applications through expanding its wholesale
business and to lessen its dependence on its retail sales
personnel which has not been an economically viable source of
originations for the Company in the past. During the nine
month period ended September 30, 2001, the Company added
a wholesale executive with approximately 10 years of mortgage
banking experience to represent the Company in the sub-prime
credit wholesale marketplace. This individual has demonstrated the
ability and experience the Company believes necessary to attract
new sources of mortgage originations at potentially higher profit
margins than the Company has been operating with in the past.
However, there can be no assurance that the Company will be
successful in this endeavor.
During the three month period ended September 30, 2001 the
Company received 110 mortgage loan applications for processing
from borrowers seeking loans aggregating approximately
$21,250,750 as compared to 110 applications in an aggregate amount
of approximately $19,107,159 in the comparable 2000 period. Of
the loans originated during the three months ended September 30,
2001, 45 loans or approximately 41% of the total, were refinance
applications and 65 loan applications or approximately 59% were
purchase loans, compared to 94 loans in the comparable 2000 period
of which 10 or approximately 9.1% of the total were refinances and
84 or approximately 76.3% of the total were purchase loans, which
include second mortgages. During the three month period ended
September 30, 2001, the Company received 7 second mortgage loan
applications which totaled $173,900 as compared to 16 second mortgage
loans which totaled $687,200 during the same period in 2000. The
Company closed 65 loans in the 2001 period aggregating approximately
$13,328,571 compared to 53 loans closed aggregating approximately
$9,748,985 in the comparable 2000 period.
Total expenses for the three months ended September 30, 2001
increased to $530,201 from $365,711 in the comparable 2000
period. The increased total expenses in the 2001 quarter was
due to an increase of $8,542 or 8.6% in employee compensation
and benefits, an increase of $46,352 or approximately 35.5% in
commissions which was proportionally equal to the increase in
mortgage loan closings and dollar amount, a $47,891 or approximately
106.7% increase in interest expense which was primarily due to a
larger number of mortgage loans carried in the warehouse for longer
periods of time due to the volume of loans investors were reviewing
and purchasing, and an increase in other expenses of $61,705 or
approximately 67.5% which includes increases in legal and accounting
fees, appraisal and credit reporting fees and telephone expense. As a
percentage of revenues, total expenses were approximately 138.8%
in the quarter ended September 2001 compared to 116.6% in the
comparable 2000 period. The Company did not sell any land during
the 2001 or the 2000 periods.
As a result of the foregoing, the Company's net loss for the
three months ended September 30, 2001 was $147,120 or $0.11 per
share, compared to a net loss of $47,981 or $0.04 per share for
the comparable 2000 period.
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE NINE MONTHS
ENDED SEPTEMBER 30, 2000.
Total revenues for the nine months ended September 30, 2001
were $1,580,656 compared to $797,734 for the comparable 2000
period. The $782,922 increase in revenue was the result
of an increase of $300,252 in mortgage origination fee income,
an increase in application fee income of $4,186, an increase
in mortgage interest income of $134,330 and an increase of
$344,154 in land sales during the 2001 period. The increase
in mortgage origination fees and application fees was the result of
a greater amount of mortgage applications and closings during the
period. During the nine months ended September 30, 2001, the
Company received 438 mortgage loan applications for processing
from borrowers seeking loans aggregating approximately
$82,838,050 compared to 262 loan applications aggregating
approximately $49,654,143 received in the comparable period in
2000. The Company closed 228 loans aggregating $40,606,562 in
the nine months ended September 30, 2001, compared to 128 loans
closed aggregating approximately $24,143,950 in the comparable
2000 period.
Total expenses for the nine months ended September 30,
2001 increased to $1,933,242 from $1,109,996 in the comparable
2000 period, as a result of an increase in land development costs
of $304,798, an increase of $215,713 in commissions during the
period which was proportionally equal to the increase in mortgage
loan closings and dollar amount , an increase of $137,384 in interest
expense which was primarily due to a larger number of mortgage loans
carried in the warehouse for longer periods of time due to the volume
of loans investors were reviewing and purchasing, an increase in
employee compensation and benefits of $31,006 and an increase in other
expenses of $134,345 as compared with the same period in 2000. Other
expenses reflect primarily increases in legal fees due to litigation
expenses and to a lessor extent an increase in accounting fees. Total
expenses expressed as a percentage of revenues, was approximately
122.3% during the nine month period ended September 30, 2001 and
139.1% during the comparable 2000 period.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2001, the Company had cash and cash
equivalents of $263,749 compared to $371,012 at December 31,
2000, a decrease of $107,263 or 28.9%. The decrease was
primarily attributable to cash used in operating activities.
Cash flows from operating activities for the nine months ended
September 30, 2001 were provided by depreciation and amortization
and a decrease in mortgage loans receivable, and offset by the cash
utilized primarily in the net loss from operations and a reduction
of accounts payable and accrued expenses.
The increase in mortgage applications and closings during
the period ended September 30, 2001 compared to the period ended
September 30, 2000 are having a positive effect on the Company's
cash flow, although the amounts were not sufficient to offset
operating expenses. The increase in overall expenses has had a
greater negative effect on the Company's cash flow than the positive
effect of increases in mortgage closings.
Loans in process have increased from 65 loans with an
aggregate principal amount of approximately $15,594,832 as of
December 31, 2000 to 85 loans aggregating approximately
$16,693,063 as of September 30, 2001. As of November 7, 2001 the
Company had 95 loans in process aggregating approximately
$19,898,688, as compared to 66 loans in process aggregating
approximately $13,524,971 as of November 7, 2000. In addition, as
of November 7, 2001 the Company is reviewing a total of 17 mortgage
loan requests from sub-prime borrowers that total approximately
$2,457,335. There can be no assurance that any of these loan requests
will result in closings for the Company.
During the period ended September 30, 2001, 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, 2001 the
Company has received numerous inquiries from potential refinance
borrowers which have resulted in mortgage loan applications from
persons seeking mortgage financing.
During July 2001, the Company authorized the purchase of up to
ten percent (10%) of the outstanding common stock, no par value, of
American Asset Management Corporation from time-to-time in the open
market or through privately negotiated transactions.
The Company utilizes one $6,000,000 warehouse line of credit 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, and saves interest costs and
other fees associated with utilizing its warehouse credit line.
The warehouse line is maintained with 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. At September 30, 2001 the Company had borrowed $1,821,031
from its warehouse line of credit representing approximately $1,870,257
in closed loans ready for sale.
As of November 2001, the Company owns one (1) building lot in
Hunterdon County, New Jersey and has no contracts of sale pending.
The Board of Directors had previously authorized the Company to build
Single family colonial style homes on the lots for speculation and
offer them for sale to prospective buyers. The Company has decided not
to build such a house on speculation on its remaining building lot
because of the weakening economy and the Company is marketing the lot
as build to suit under contract only.
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, 2000 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. This action was settled during August 2001. The terms
of the settlement provide for the Company to receive all 21,019
shares of common stock owned by the Plaintiffs, in exchange for
payment by the Company of $80,000 in total, payable in equal
quarterly payments without interest through September 2004.
As of September 30, 2001 the Company has paid $5,000 and is in
full compliance with the settlement agreement.
In the second 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 2. Changes in Securities and Use of Proceeds
During the quarter ended September 30, 2001, the Board authorized
the issuance of an aggregate of 75,000 common stock purchase options
at $0.40 per share to three (3) directors of the Company in equal
25,000 share amounts. The issuance's were made pursuant to the
exemption from registration in Section 2(a)3 and 4(2) of the
Securities Act of 1933.
In August 2001, the Company purchased 21,019 shares of common
stock, no par value, as part of a litigation settlement outlined in
Part II of this report.
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K where filed during the quarter
ended September 30, 2001.
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 16, 2001 By:_s/Richard G. Gagliardi_____
Richard G. Gagliardi
Chairman, President and Chief
Executive Officer (Principal
Executive and Financial Officer)