SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
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Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ending September 30, 1997
For the fiscal year ending June 30, 1997
Commission File Number 0-16447
American Consolidated Growth Corporation
(Exact name of registrant as specified in its charter)
Delaware 52-1508578
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(State of incorporation) (I.R.S. Employer
Identification No.)
5031 S. Ulster Street, Suite 205, Denver, CO 80237
(Address of principal executive offices and zip code)
(303) 220-8686
(Issuer's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class: Common Stock $.10 par value
(303) 220-8686
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(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 September 30, 1997, 9,806,523 shares common shares, $0.10 par value per
share, were outstanding.
American Consolidated Growth Corporation
INDEX
Part I FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets 3
September 30, 1997 and June 30, 1997
Consolidated Statements of Income 4
Three Months Ended September 30, and 1996
Consolidated Statements of Cash Flows 5
Three Months Ended September 30, and 1996
Item 2. Management's Discussion and Analysis 6
Part II OTHER INFORMATION
Item 1. Legal Proceedings 7
Item 2. Changes in Securities 7
Item 3. Default on Senior Securities 8
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
2
PART I.
ITEM 1. American Consolidated Growth Corporation
(and Wholly Owned Subsidiaries)
CONSOLIDATED BALANCE SHEET
(unaudited)
ASSETS
September 30, 1997 June 30, 1997
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Current assets
Cash and cash equivalents $ 2,344 $ 2,140
Accounts receivable - trade,
Less allowance for doubtful
accounts of $25,000 790,910 902,614
Prepaid expenses 24,778 21,670
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Total current assets 818,032 926,424
Furniture and equipment, net $ 112,984 $ 120,432
Other assets 12,887 12,887
Total assets $ 943,903 $ 1,059,743
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LIABILITIES and SHAREHOLDERS' DEFICIT
Current liabilities
Current maturities of long term debt $ 275,751 $ 295,751
Common stock subject to put option 51,213 51,213
Note payable 449,103 595,278
Notes payable - related party 224,700 230,700
Checks written in excess of bank balance 94,107 156,207
Accounts payable 595,625 500,127
Accrued payroll & taxes 242,229 234,592
Accrued expenses - related party 42,968 45,028
Other current liabilities 191,153 180,109
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Total current liabilities $ 2,166,849 $ 2,289,005
Long term debt $ 1,267,999 $ 1,267,999
Stockholders' deficit
Series A, preferred stock,
$.10 par value; 40,000,000
shares authorized
No shares issued and outstanding
Common Stock, $.10 par value;
40,000,000 shares authorized
9,806,523 shares issued and
outstanding $ 980,652 $ 975,419
Additional paid-in capital $ 29,364,330 $ 29,366,946
Accumulated deficit (32,835,927) (32,839,625)
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(2,490,945) (2,497,260)
Total liabilities and shareholders' equity $ 943,903 $ 1,059,743
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3
American Consolidated Growth Corporation
(and Wholly Owned Subsidiaries)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
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1997 1996
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Revenues $ 2,856,841 $ 2,535,566
Direct expenses 2,221,853 1,894,263
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Gross margin 634,988 641,303
Other expenses
General and administrative expenses 521,809 565,386
Depreciation and amortization 19,534 15,616
Interest 89,947 121,596
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631,290 702,598
Income from continuing operations $ 3,698 $ (61,295)
Income (loss) per common share
Continuing Operations $ .0004 $ (.01)
Weighted average shares
of common stock outstanding 9,806,523 7,705,489
4
AMERICAN CONSOLIDATED GROWTH CORPORATION
(and Wholly Owned Subsidiaries)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
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1997 1996
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Cash flows from operating activities
Net Profit $ 3,698 $ (61,295)
Adjustments to reconcile net loss to net cash used in operations
to net cash provided by (used in) operating activities:
Depreciation and amortization 19,534 15,616
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 111,704 208,803
Prepaid expenses (3,108) 30,386
Other assets -0- -0-
Accounts payable and accrued liabilities 44,442 78,593
Accrued wages 7,637 (241,630)
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Net cash used in operating activities $ 183,907 $ (30,473)
Cash flows from investing activities
Acquisition of equipment (12,086) (1,404)
Proceeds from sale of investment
Net change in due from related parties
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Net cash provided by investing activities $ (12,086) $ (1,404)
Cash flows from financing activities
Net change in note payable (166,175) (197,218)
Proceeds from related party - note payable (6,000) (11,618)
Proceeds from long term debt (2,060) 1,275
Payments on due to related parties
Proceeds from issuance of common stock for debt 2,618 77,049
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Net cash provided by (used in) financing activities 171,617 $(133,062)
Net increase (decrease) in cash 204 (103,993)
Cash at June 30, 2,140 156,067
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Cash at September 30, $ 2,344 52,074
5
American Consolidated Growth 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, 1997.
ITEM 2: Management's Discussion and Analysis
In the fiscal quarter ending September 30, 1997, the Company was primarily
engaged in financial development of its wholly owned subsidiary, Eleventh Hour,
Inc., a staffing services business. For the three month period just ending, the
Company produced revenues of $2,856,841, with a net profit of $3,698. The
earnings were produced primarily as a result of internal cost cutting measures
implemented by management during a period of increasing temporary sales at
Eleventh Hour, Inc. For the quarter ending September 30, 1997, the subsidiary
earned profits of $94,000. Compared to the same quarter in the prior fiscal
year, AMGC's performance in the first quarter of fiscal 1998 represented a 105%
increase in earnings, allowing the Company to report its first profitable
quarter of business since a major restructuring program was implemented in
fiscal 1995. The increased performance was attributed to higher demand for
temporary workers provided by EHI, together with the reduction of overhead
expenses, specifically, lowered financing costs and the reduction of EHI
corporate expenses.
As of September 30, 1997, in the opinion of management, the Company has
progressed significantly as compared to the same period in the prior fiscal
year. A new financing agreement was completed in fiscal 1997 with Concord Growth
Corporation, of San Mateo, California. The agreement significantly reduced EHI's
interest expense on accounts receivables financing by over fifty percent. In
addition, the effect of the agreement is anticipated to assist EHI in
accomodating future sales growth. Although no assurance can be provided EHI
future sales will increase, in the opinion of management, the savings to the
Company in annual interest payments resulting from the accord will be
significant and will have a favorable material impact on the future
profitability of the Company.
During fiscal 1997, the Company has been able to successfully continue
operations, to reposition itself in the marketplace, to acquire new management
and consulting expertise and to improve its marketing strategies. All of these
efforts have been made for the purpose of increasing shareholders' equity and
profitability on a going forward basis. During the quarter ended September 30,
1997, the Company entered into negotiations with third parties to help
re-finance operations and to seek potential merger and capital partners for the
business of Eleventh Hour, Inc. Although no assurance can be provided these
efforts will result in new financing for the subsidiary or the expansion of its
business, the Company believes the addition of investment banking contacts and
related business relationships will have a material favorable impact on the
Company's ability to improve profitability on a going-forward basis. In the
fiscal year ended June 30, 1997, AMGC reported unaudited gross revenues of
$10,207,667.
6
Liquidity and Capital Resources
Cash and cash equivalent's balance on September 30, 1997 was $2,344 and
current assets were $818,032. As of September 30, 1997, the Company had a
working capital deficiency of $1,348,817 and a stockholders' deficit of
$2,490,945. In the opinion of management, provided new sources of working
capital can be secured, 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 September 30, 1997, the Company resolved an
outstanding tax dispute with the IRS for the years 1990, 1991, 1992, 1993, and
1994. The IRS determined that due to a prior change in the control and business
of the Company, former net operating loss carry-forwards were disallowed of
approximately $14,000,000. In addition, the Company was assessed $60,000 in
corporate taxes with $20,000 in penalties and interest. As of the date of filing
of this report, these tax liabilities remain outstanding. Management believes
the liabilities will be significantly reduced by net operating losses to be
reported on the Company's forthcoming corporate income tax returns for the
fiscal years ending June 30, 1995 and June 30, 1996, which are currently being
prepared for filing.
During the quarter ended September 30, 1997, the Company reached a
settlement agreement with the North Dakota Securities Commission alleging breach
of the State's "Blue Sky" securities laws. The terms of the agreement confirm no
violations of the laws occurred and the Company agreed to repay $80,000 to a
former EHI investor residing in North Dakota. As of the date of filing of this
report, a liability of $60,000 remains outstanding, which the Company is
reducing in incremental monthly payments of $5,000.
During fiscal 1997, the Company was a party to Display Group LLC vs. AMGC,
a civil action in Colorado concerning the ownership of 1,400,000 common shares
of Advanced Display Technologies, Inc., a former affiliate of the Company. Due
to the non-performance of this investment, the shares were written to a value of
zero in the Company's certified audit of fiscal 1995. As of the date of the
filing of this report, pending the outcome of a jury trial on the matter, the
Company is unable to predict the outcome of the case. In the event the Company
is unsuccessful in its efforts to retain the subject shares, in the opinion of
counsel, no adverse consequences are anticipated to occur, other than the loss
of the title to the stock. During fiscal 1997, the Company assigned its legal
rights and expenses in this case to a third party desiring to pursue related
claims against ADTI as result of former agreements concerning the licensing of
ADTI technologies in prior years. The Company incurred $6,655 in legal expenses
prior to the assignment agreement but carries no ongoing legal expense in the
case.
ITEM 2. Changes in Securities
(a) Security Ownership of Certain Beneficial Owners and Management: the
following table 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 September
30, 1997, 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 beneficial
ownership reflected in the following table is calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act").
Shares issuable on exercise of options exercisable within 60 days of September
7
30, 1997 are deemed to be outstanding for the purpose of computing the
percentage of ownership of persons beneficially owning such options, but have
not been deemed to be outstanding for the purpose of computing the percentage
ownership of any other person. The outstanding shares as of September 30, 1997
was 9,806,523.
Number of Percent
Name and Address Shares Held of Class
- ---------------- ----------- --------
Louis F. Coppage, Chairman and CEO 5,950 .061 %
283 Kimbrough
Memphis, TN 38103
(3/17/97 to Present)
Norman L. Fisher, Director, AMGC 953,479 (a)(b) 9.78 %
President and CEO of Eleventh Hour, Inc.
5002 Mineral Circle
Littleton, CO 80122
(President and Treasurer of AMGC
from 6/30/96 to 6/30/97)
Cory J. Coppage, Secretary and Treasurer 150,000 (c) 1.53 %
7255 E. Quincy Ave, #550
Denver, CO 80237
Joe Lee, Director 25,000 (d) .256 %
4250 S. Olive Street, #216
Denver, CO 80237
B. Mack DeVine, Director 25,000 (d) .256 %
P.O. Box 620
Tampa, FL 33601
Mick Dragoo, Shareholder 1,110,050 11.38 %
8634 S. Willow
Tempe, AZ 85284
George & Philips Holdings, Ltd.,
Shareholder 1,275,000 13.07 %
P.O. Box 438
Roadtown, Tortola BWI
Officers and Directors as a Group
(five persons) 1,183,429 12.13 %
(a) Includes options to purchase 400,000 shares.
(b) Includes 535,229 shares held jointly by Mr. and Mrs. Norman L. Fisher, who
are officers of EHI.
(c) Includes options to purchase 100,000 shares.
(d) Includes options to purchase 25,000 shares.
All ownership is beneficial and of record except as specifically
indicated otherwise. 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
8
options exercisable within 60 days of September 30, 1997. 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. 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 As of September 30, 1997, the Company has material commitments for
capital expenditures including promissory notes of $1,267,999 which come due in
February, 2003 and carry 14% interest. The interest is payable quarterly at
approximately $45,000 per quarter. At September 30, 1997, the Company is arrears
on the interest payment due July 15, 1997. Management has established verbal
working agreements with the holders of these Notes concerning payment of
interest due for the period. In the event litigation should arise resulting from
the default provisions of the Notes, the Company is unable to determine what
consequences may occur. As of the date of filing of this report, the Company has
no knowledge of any existing or pending legal action from these parties.
However, in the event the Company is unable to bring the interest payments
current in the near term, no assurances can be provided litigation will not
ensue. In such an event, the Company is unable to determine what, if any,
adverse consequences may occur.
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.
As of September 30, 1997, 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
(Incorporated by reference).
9