4
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ending December 31, 1996
Commission File Number 0-16447
AMERICAN CONSOLIDATED GROWTH CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 52-1508578
(State of incorporation ) (I.R.S. Employer ID Number)
8100 E. Arapahoe Road, Suite 309, Englewood, CO 80112
(Address of principal executive offices) (zip code)
(303) 220-8686
(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 Securities
Exchange Act of 1934 during the preceding 12 months (or for such
a 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, 7,914,466 common shares, $0.10 par value
per share, were outstanding.
AMERICAN CONSOLIDATED GROWTH CORPORATION
and Wholly Owned Subsidiaries
INDEX
Part I FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets 3
December 31, 1996 and June 30, 1996
Consolidated Statements of Income 4
Six Months Ended December 31, 1996 and 1995
Consolidated Statements of Cash Flows 5
Six Months Ended December 31, 1996 and 1995
Consolidated Statement of Changes in
Stockholders' Equity (Deficit) 6
Item 2. Management's Discussion and Analysis 7
Part II OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 9
Item 3. Default on Senior Securities 9
Item 4. Submission of Matters to a Vote of Security
Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Part III SIGNATURES 10
PART I.
ITEM 1. AMERICAN CONSOLIDATED GROWTH CORPORATION
(and Wholly Owned Subsidiaries)
CONSOLIDATED BALANCE SHEET
ASSETS
December 31, 1996 June 30, 1996
(unaudited)
Current assets
Cash $ 7 $156,067
Accounts receivable 788,045 1,060,389
Prepaid expenses 15,329 34,149
Total current assets 803,381 1,250,605
Furniture and equipment, net 154,097 193,181
Other assets 24,343 20,723
Total assets $ 981,821 $1,464,509
LIABILITIES and STOCKHOLDERS' DEFICIT
Current liabilities
Current maturities of long-term debt $ 138,136 $ 122,532
Common stock subject to put option 51,213 84,724
Note payable 644,432 764,986
Notes payable - related party 230,700 206,700
Checks written in excess of bank balance 131,307 115,610
Accounts payable 461,119 382,004
Accrued payroll 68,832 457,201
Accrued expenses - related party 52,534 84,248
Other current liabilities 257,925 84,750
Total current liabilities 2,036,198 2,302,755
Long-term debt $ 1,267,999 $ 1,230,594
Commitments and contingencies
Stockholders' deficit
Series A, preferred stock, $0.10 par value;
40,000,000 shares authorized.
No shares issued and outstanding.
Common Stock, $0.10 par value;
40,000,000 shares authorized.
7,914,466 shares issued and
outstanding 788,908 757,597
Additional paid-in capital 29,622,669 29,576,028
Accumulated deficit (32,733,953) (32,402,465)
(2,322,376) (2,068,840)
Total liabilities and shareholders'
deficit $ 981,821 $ 1,464,509
AMERICAN CONSOLIDATED GROWTH CORPORATION
(and Wholly Owned Subsidiaries)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
1996 1995 1996 1995
Revenues $2,393,028 $2,147,607 $4,928,594 $4,552,617
Direct expenses 1,825,591 1,590,256 3,719,854 3,384,319
Gross margin 567,437 557,351 1,208,740 1,168,298
Other expenses
General and administrative
expenses 714,310 663,319 1,279,696 1,208,923
Depreciation and
amortization 18,115 19,523 33,731 40,537
Interest 105,205 90,047 226,801 170,342
837,630 772,889 1,540,228 1,419,802
(Loss) income from
continuing operations $(270,193) $(215,538) $(331,488) $(251,504)
Income (loss) per common share
From Continuing Operations $ (.03) $ (.03) $ (.04) $ (.03)
Weighted average shares
of common stock
outstanding 7,705,489 7,180,086 7,914,466 7,339,887
AMERICAN CONSOLIDATED GROWTH CORPORATON
(and Wholly Owned Subsidiaries)
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
Total
Additional Stockholders'
Common Stock Paid-in Accumulated Equity
Shares Amount Capital Deficit (Deficit)
Balance June 30,
1995 7,162,520 $716,252 $28,600,435 $(31,700,691) $(2,384,004)
Common stock issued
for cash 5,000 500 4,500 - 5,000
Common stock issued
for services 495,750 49,575 62,800 - 112,375
Common stock issued for
conversion of notes
payable 109,167 10,917 98,898 - 109,815
Common stock issued for
conversion of put
options 368,702 36,870 331,832 - 368,702
Retirement of common
stock (565,173) (56,517) 75,718 - 19,201
Accrued officers'
salaries contributed
to capital - - 401,845 - 401,845
Net loss - - - (701,774) (701,774)
Balance June 30,
1996 7,575,966 757,597 29,576,028 (32,402,465) (2,068,840)
Common stock issued
for services 254,000 25,400 9,300 - 34,700
Common stock issued for
conversion of notes
payable 66,854 6,685 40,616 - 47,301
Retirement of common
stock (18,225) (1,826) (3,275) - (5,101)
Common stock 10,516 1,052 - - 1,052
Net loss - - - (331,488) (331,488)
Balance December 31,
1996 7,889,111 $788,988 $29,622,669 $(32,733,953) $(2,322,376)
AMERICAN CONSOLIDATED GROWTH CORPORATION
(and Wholly Owned Subsidiaries)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31,
1996 1995
Cash flows from operating activities
Net loss $(331,488) $(35,966)
Adjustments to reconcile net loss to
net cash used in operations
to net cash provided by (used in)
operating activities:
Depreciation and amortization (including
$9,797 from discontinued operations in 1995) 33,731 21,014
Provision for losses on accounts receivable
Loss on disposal of equipment
Settlement payments on unrecorded debt
Gain on sale of investments
Interest on put option conversion
Common stock issued for services
Impairment of investment in affiliates and other
investments
Changes in operating assets and liabilities
Accounts receivable 272,344 106,120
Prepaid expenses 18,820 12,000
Other assets (3,620) 12,890
Accounts payable and accrued liabilities 68,811 (147,936)
Accrued wages (231,631) -
Net cash used in operating activities (173,033) $ (31,878)
Cash flows from investing activities
Acquisition of equipment $ 5,353 $ (23,179)
Proceeds from sale of investment 263,992
Net change in due from related parties (5,699)
Net cash provided by investing
activities $ 5,353 $ 235,114
Cash flows from financing activities
Net change in note payable (120,554) (76,125)
Proceeds from related party - note payable (24,000)
Payments on due to related parties
Proceeds from long-term debt 53,009
Principal payments on long-term debt (137,488)
Payments on capital lease obligations (1,400)
Payments on common stock subject to put option 25,213 (8,881)
Proceeds from issuance of common stock 77,952 16,500
Net cash provided by (used in)
financing activities 11,620 $(207,394)
Net increase (decrease) in cash (156,060) (4,158)
Cash at June 30, 156,067 4,158
Cash at December 31, $ 7 $ 0
AMERICAN CONSOLIDATED GROWHT CORPORATION
(and Wholly Owned Subsidiaries)
Notes to Consolidated Financial Statements
Note 1. Management Representation
The accompanying unaudited interim financial statements have
been prepared in accordance with the instructions to Form 10-QSB
and does not include all the information and footnotes required
by generally accepted accounting principles for complete
financial statements. In the opinion of Management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The
results of operations for any interim period are not necessarily
indicative of results for the year. These statements should be
read in conjunction with the financial statements and related
notes included in the Company's Annual Report to shareholders on
Form 10-KSB/A for the year ended June 30, 1996.
ITEM 2: Management's Discussion and Analysis
In the fiscal quarter ending December 31, 1996, the Company
was primarily engaged in the financial development of its
subsidiary business, Eleventh Hour, Inc. ("EHI"). For the six
month period just ending, the Company produced revenues of
$4,928,594 with a net loss of ($331,488). The loss was
attributed to costs associated with the restructuring of AMGC,
interest expenses on long term debt and the settlement of
professional service fees provided by third parties.
In the opinion of management, the Company has improved
significantly as compared to the period just ending. During the
quarter ended December 31, 1996, the Company successfully secured
a new financing contract with Concord Growth Corporation of Palo
Alto, California. The contract effectively reduces EHI's
interest expense on its accounts receivables financing by fifty
percent and improves EHI operating cash flow and profitability on
a going-forward basis.
During the quarter ended December 31, 1996, the Company
entered into a letter of intent with International Nursing
Services, Inc., (INS) concerning the proposed sale of Eleventh
Hour, Inc. to INS. The terms of the proposed transaction include
the transfer of the Eleventh Hour name and EHI assets to INS, as
well as certain liabilities of both EHI and AMGC, in return for
shares of the issued and outstanding common stock of INS, (stock
symbol: NURS). Although no assurance can be provided the
transaction will be closed successfully, management believes the
transaction represents an important opportunity for the Company
to improve asset value, reduce debt and increase shareholder
value overall. During the current period, the Company has been
able to successfully continue operations, to improve its position
in the marketplace, to acquire outside consulting expertise and
to strengthen its marketing strategies. All of these efforts
have been made for the purpose of increasing shareholders' equity
and profitability on a going forward basis. In the fiscal year
ending June 30, 1996, such efforts included the resolution of
numerous outstanding business matters related to the former
business of the Company, the reduction or elimination of
significant portions of short term debt and the adoption of new
measures designed to increase working capital and revenues.
Note 1. Management Representation
The accompanying unaudited interim financial statements have
been prepared in accordance with the instructions to Form 10-QSB
and does not include all the information and footnotes required
by generally accepted accounting principles for complete
financial statements. In the opinion of Management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The
results of operations for any interim period are not necessarily
indicative of results for the year. These statements should be
read in conjunction with the financial statements and related
notes included in the Company's Annual Report to shareholders on
Form 10-KSB/A for the year ended June 30, 1996.
ITEM 2: Management's Discussion and Analysis
In the fiscal quarter ending December 31, 1996, the Company
was primarily engaged in the financial development of its
subsidiary business, Eleventh Hour, Inc. ("EHI"). During the
quarter ended December 31, 1996, the Company signed a definitive
agreement with International Nursing Services, Inc., (INS)
concerning the proposed sale of Eleventh Hour, Inc. to INS. The
terms of the proposed transaction include the transfer of the
Eleventh Hour name and EHI assets to INS, as well as certain
liabilities of both EHI and AMGC, in return for shares of the
issued and outstanding common stock of INS, (stock symbol: NURS).
As of the date of filing of this report, the Company is awaiting
proxy approval from the Securities Exchange Commission to hold a
shareholder vote on the matter. Although no assurance can be
provided the transaction will be closed successfully, or that
proxy approval will be forthcoming, management believes the
transaction represents an important opportunity for the Company
to improve asset value, reduce debt and increase shareholder
value overall.
During the current period, the Company has been able to
successfully continue operations, to improve its position in the
marketplace, to acquire outside consulting expertise and to
strengthen its marketing strategies. All of these efforts have
been made for the purpose of increasing shareholders' equity and
profitability on a going forward basis. In the fiscal year
ending June 30, 1996, such efforts included the resolution of
numerous outstanding business matters related to the former
business of the Company, the reduction or elimination of
significant portions of short term debt and the adoption of new
measures designed to increase working capital and revenues. For
the six month period just ending, the Company produced revenues
of $4,928,594 with a net loss of ($331,488). The loss was
attributed to decreased performance of the subsidiary, costs
associated with the restructuring of AMGC, interest expenses on
long term debt and accounts receivable financing and the
settlement of professional service fees provided by third
parties.
In the opinion of management, the Company has improved
significantly as compared to the period just ending. During the
quarter ended December 31, 1996, the Company successfully secured
a new financing contract with Concord Growth Corporation of Palo
Alto, California. The contract effectively reduces EHI's
interest expense on its accounts receivables financing by fifty
percent and the Company believes it will improve EHI operating
cash flow and profitability on a going-forward basis.
Liquidity and Capital Resources
Cash and cash equivalent's balance on December 31, 1996 was
$7 and current assets were $803,381. As of December 31, 1996,
the Company had a working capital deficiency of $1,232,817 and a
stockholders' deficit of $2,322,376, which includes non-recurring
losses of $7,976,740 in fiscal 1995 sustained due to the write
down and liquidation of certain technology assets, resolution of
outstanding issues related to the former business of the Company
and internal restructuring of AMGC. Provided new sources of
working capital can be secured, in the opinion of management, the
Company will be able to successfully meet all of its current
obligations. However, no assurances can be given the Company
will be successful in these endeavors.
PART II.
ITEM 1. Legal Proceedings
During the quarter ended December 31, 1996, the Company was
a defendant in civil action 96-CV-1560, Division 5, Arapahoe
County, Colorado; Display Group, LLC vs. American Consolidated
Growth Corporation. The suit is a replevin action concerning the
Company's former shareholdings of ADTI common stock. Following a
preliminary finding of the Court, the shares were turned over to
Display Group, LLC, the management arm of Advanced Display
Technologies, Inc., a former affiliate of the Company, pending
the outcome of a jury trial. As of December 31, 1996, in the
opinion of special AMGC legal counsel, the Company is unable to
determine the outcome of the case. However, no other adverse
consequences are anticipated to occur as the ADTI shares were
written to a value of zero in fiscal 1995.
As of December 31, 1996, the Company was the subject of an
informal inquiry from the North Dakota Securities Commission
alleging potential breach of the State's "Blue Sky" securities
laws. The Company believes the inquiry is the outgrowth of
certain debt conversion negotiations with a North Dakota resident
concerning a $50,000 investment made in Eleventh Hour, Inc. in
prior years. As of December 31, 1996, the Company is unable to
determine the outcome of this matter and what, if any, material
or financial consequences may result.
ITEM 2. Changes in Securities
(a) Security Ownership of Certain Beneficial Owners and
Management: the following sets forth the number of shares of the
Registrant's $0.10 par value common stock beneficially owned by:
(1) each person who, as of December 31, 1996, was known by the
Company to own beneficially more than five percent (5%) of its
common stock; (2) the individual Directors of the Registrant; and
(3) the Officers and Directors of the Registrant as a group. The
outstanding shares as of December 31, 1996 was 7,914,466.
Name and Address Number of Shares Held Percent of Class
Norman L. and Valerie A. Fisher 949, 279 (a) 13 %
5002 Mineral Circle
Littleton, CO 80122
Cory J. Coppage 150,000 (b) 1.8 %
7255 E. Quincy Ave, #550
Denver, CO 80237
Geoff Dawson 1,750,000 (c)(d) 22.0 %
22 Kings Court South
Chelsea Manor Gardens
London, England SW3-5EG
Joe Lee 49,000 (e) .03 %
4250 S. Olive Street, #216
Denver, CO 80237
Mick Dragoo 1,110,050 14.0 %
8634 S. Willow
Tempe, AZ 85284
George & Philips Holdings, Ltd. 1,275,000 16.1 %
P.O. Box 438
Roadtown, Tortola BWI
GPD Holdings, Ltd. 450,000 5.6%
c/o Consolidated Services
P.O. Box HM 2257
Hamilton, Bermuda HM JX
(a) Includes options to purchase 400,000 shares. All shares are
held jointly by Mr. and Mrs. Fisher, who are married.
(b) Includes options to purchase 100,000 shares.
(c) Includes options to purchase 25,000 shares.
(d) Mr. Dawson's beneficial ownership of record includes
corporate ownership of AMGC shareholdings of George & Philips
Holdings, Ltd. and GPD Holdings, Ltd., as shown above. Mr.
Dawson is a managing director of both companies and represents
such interests as an outside director of the AMGC Board.
(e) Includes options to purchase 25,000 shares.
(1) All ownership is beneficial and of record except as
specifically indicated otherwise.
(2) Beneficial owners listed above have sole voting and
investment power with respect to the shares shown unless
otherwise indicated. Economic interest is calculated by
including shares directly owned and, in the case of individuals
and all directors and executive officers as a group, shares such
individuals or group are entitled to receive upon exercise of
outstanding options exercisable within 60 days of December 31,
1996. The economic interest and security ownership indicated
above includes qualified and non-qualified stock options awarded
by the Company to certain key executives on or before April 3,
1996.
(3) Beneficial ownership is calculated in accordance with Section
13(d) of the Exchange Act and the rules promulgated thereunder.
ITEM 3. Default on Senior Securities.
As of December 31, 1996, the Company is in arears on $88,351
in redeemable common stock and is negotiating for the settlement
and conversion of this amount with third parties into restricted
common AMGC stock and/or seven year promissory notes bearing 14%
interest annually.
ITEM 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Security Holders
during this reporting period.
ITEM 5. Other Information.
During the quarter ended December 31, 1996, the Company
received notice from the Internal Revenue Service to provide
information concerning the tax year ended 1994. As of the date of
the filing of this report, the Company is unable to determine the
outcome of this examination and what, if any, material or
financial consequences may result.
As of September 30, 1996, the Company had no other
reportable events which were not previously disclosed in the
below referenced exhibits and reports.
ITEM 6. Exhibits and Reports on Form 8-K
8-K dated July 3, 1996 hereby incorporated by reference.
8-K dated April 3, 1996 hereby incorporated by reference.