FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2005
Commission File Number 0-20642
AMERICAN CONSOLIDATED MANAGEMENT GROUP, INC.
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(Exact name of registrant as specified in its charter)
Utah 87-0375093
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
714 Fairview Road, Greer, South Carolina 29651
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(Address of principal executive offices)
(Zip Code)
(864) 848-1900
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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 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.
[X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding as of May 10, 2005
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Common Stock 13,125,652
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
American Consolidated Management Group, Inc.
Balance Sheets
(unaudited)
3/31/05 12/31/04
---------------- ----------------
ASSETS
Current Assets
Cash $ 2,717 $ 38,878
Accounts Receivable - -
Inventory - 16,017
Prepaids 1,800 3,600
---------------- ----------------
Total Current Assets 4,517 58,495
Machinery and Equipment (net of accum.depr) 124,153 54,592
---------------- ----------------
Total Property Plant and Equipment 124,153 54,592
Total Assets $ 128,670 $ 113,087
================ ================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Related Party Payables $ 2,293,483 $ 2,213,482
Accounts Payable and Accrued Expenses 528,475 494,775
Current Portion of Capital Lease Obligation 15,569 -
Other 65,000 65,000
---------------- ----------------
Current Liabilities 2,902,527 2,773,257
---------------- ----------------
Long-Term Liabilities
Contingent Royalty Payable 2,640,000 2,640,000
Long Term Portion of Capital Lease Obligation 51,745 -
---------------- ----------------
Long Term Liabilities 2,691,745 2,640,000
---------------- ----------------
Commitments and Contingencies
Common Stock, $.01 par value, 70,000,000 shares
authorized, 13,125,652 issued and outstanding 131,257 131,257
Paid in capital 1,807,334 1,807,334
Accumulated Deficit (7,404,193) (7,238,761)
---------------- ----------------
Total Shareholder's Deficit (5,465,602) (5,300,170)
---------------- ----------------
Total Liabilities and Equity $ 128,670 $ 113,087
================ ================
See accompanying notes to condensed consolidated financial statements.
2
American Consolidated Management Group, Inc.
Statement of Operations
(unaudited)
For the Quarter Ended
March 31, 2005 March 31, 2004
---------------- ----------------
Revenues $ - $ -
General and Administrative Expenses
Legal 5,758 174,522
Consulting 66,723 298,247
Rent 18,547 -
Depreciation 6,837 -
Other 36,912 121,352
---------------- ----------------
Total General and Administrative Expenses 134,777 594,121
---------------- ----------------
Loss from Operations (134,777) (594,121)
Other Expense
Interest Expense (30,653) (475,416)
---------------- ----------------
Loss before provision for Income taxes (165,430) (1,069,537)
---------------- ----------------
Provision for Income taxes - -
---------------- ----------------
Net Loss $ (165,430) $ (1,069,537)
================ ================
Loss per Share, basic and diluted $ (0.01) $ (0.09)
================ ================
Weighted Average Shares, basic and diluted 13,125,652 12,004,774
================ ================
See accompanying notes to condensed consolidated financial statements.
3
American Consolidated Management Group, Inc.
Statement of Cash Flows
(unaudited)
For the Quarter Ended
March 31, 2005 March 31, 2004
---------------- ----------------
Operating Activities
Net Income (Loss) $ (165,430) $ (1,069,537)
Adjustments to reconcile net (loss) to net cash
used for operating activities
Issuance of Stock for Services Rendered - 480,162
Depreciation 6,837 -
Increase (Decrease) in cash due to changes in
Inventory 16,017 -
Prepaids 1,800 -
Accounts Payable and Accruals 33,700 55,375
---------------- ----------------
Net cash used for Operating activities (107,076) (534,000)
Investing Activities
Capital expeditures (76,399) (5,739)
---------------- ----------------
Net cash used for Investing activities (76,399) (5,739)
Financing Activities
Net Increase in Capital Lease Obligation 67,314
Net Proceeds from Related Party Payables 80,000 538,913
---------------- ----------------
Net cash provided by Financing activities 147,314 538,913
---------------- ----------------
Net Change in Cash and Cash Equivalents (36,161) (826)
Cash at the Beginning of the Period 38,878 1,008
---------------- ----------------
Cash at the End of the Period $ 2,717 $ 182
================ ================
Cash Paid for:
Interest 4,050 -
================ ================
Taxes - -
================ ================
See accompanying notes to condensed consolidated financial statements.
4
AMERICAN CONSOLIDATED MANAGEMENT GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - Interim Condensed Consolidated Financial Statements
The accompanying condensed consolidated financial statements have been
prepared without audit. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows as of the dates and
for the periods presented herein have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to the Securities and Exchange Commission's rules and regulations. These
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the December
31, 2004 Annual Report on Form 10-KSB. The results of operations for the three
months ended March 31, 2005 are not necessarily indicative of the operating
results that may be expected for the year ending December 31, 2005. The
Company's significant accounting policies are set forth in Note 2 to the
condensed consolidated financial statements in the December 31, 2004 Annual
Report on Form 10-KSB.
NOTE 2 - Net Income (Loss) Per Common Share
Basic net loss per common share is computed on the basis of the
weighted average number of common shares outstanding in accordance with SFAS No.
128, Earnings per Share. The treasury stock method is used to compute the effect
of stock options on the weighted average number of common shares outstanding for
the diluted method. Since the Company incurred a loss, the effect of stock
options on the treasury stock method is anti-dilutive.
NOTE 3 - Going Concern
At December 31, 2004, in the Company's audited financial statements
included in its Form 10-KSB the audit report contained an explanatory paragraph,
which stated there was substantial doubt about the ability of the Company to
continue as a going concern. The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. Because of
significant losses and the lack of any revenue generating activities, the
Company's ability to continue as a going concern is dependent on attaining
future profitable operations, and obtaining additional financing and/or equity.
There can be no assurance that the Company will continue as a going concern.
The Company's working capital requirements for the foreseeable future
will vary based upon a number of factors, including the costs to complete
product development work, the cost of completing its facilities, the timing of
market launches and the level of sales of its products. The Company had $2,717
of cash on hand at March 31, 2005. The Company does not have sufficient cash to
execute its business plan. There can be no assurance that the Company will
obtain sufficient funding to execute its business plan or that if implemented,
the plan will be successful.
5
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations and financial condition. The
discussion should be read in conjunction with the consolidated financial
statements and notes thereto.
Financial Position
The Company had $2,717 in cash as of March 31, 2005. As of March 31,
2005, the Company's working capital deficit was $2,898,010 and current
liabilities were $2,902,527. In the three months ended March 31, 2005, the
Company generated no revenues.
The Company has experienced net operating losses during the current and
past two fiscal years and has a significant working capital deficit. The Company
anticipates having a negative cash flow from operating activities in future
quarters. The Company also expects to incur further operating losses in the
future until such time, if ever, as there is a substantial increase in orders
for its products and product sales generating sufficient revenue to fund its
continuing operations. There can be no assurance that sales of its products will
ever generate significant revenue, that the Company will ever generate positive
cash flow from its operations or that it will attain or thereafter sustain
profitability in any future period. In light of these circumstances, the ability
of the Company to continue as a going concern is significantly in doubt. The
attached financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Plan of Operation
On March 23, 2004, the Company entered into a license agreement with
Beta Foods, LLC (the "Beta Agreement"). The Company has obtained an exclusive
license to enhance, commercialize, manufacture and market the all-natural plant
product compound (the trade secret technology) developed by Dr. Jack Watkins in
the United States, Mexico, Central America, Canada and all countries in the
European Union for a term of fifty years. In consideration for the license, the
Company agreed to pay Beta Foods, LLC (i) a 10% royalty on product sales, (ii)
$300,000 and (iii) 2,500,000 shares of the Company's restricted stock.
Approximately 25% of Beta Foods, L.L.C. is beneficially owned by family members
of Mr. George Mappin, a director and officer of the Company, approximately 25%
of Beta Foods, L.L.C. is beneficially owned by Mr. Herschel Walker, a director
and officer of the Company and approximately 25% of Beta Foods, L.L.C. is
beneficially owned by family members of Mr. Richard Shanks, a shareholder of the
Company.
Effective April 12, 2004, the Company also entered into a one-year
lease for a plant for the manufacture, development and application of the
process, and began acquiring manufacturing and laboratory equipment to
manufacture, test, analyze and enhance the technology. Lease payments are $6,182
per month until the end of the lease on April 30, 2005. Thereafter, the Company
has been has been leasing the facilities on a month-to-month bases. The Company
has not entered into any arrangements to extend its lease. Funding for equipment
acquisitions is anticipated to be provided from capital raised from the
agreement with Cornell Capital Partners, L.P., discussed below, although there
can be no assurance that such funding will be available.
On November 11, 2004, the Company also entered into a lease agreement
with Renaissance Hospitality, Inc. whereby the Company is leasing laboratory
equipment that will be located at the Company's plant. The lease calls for
payments of $1,812.86 per month beginning on December 1, 2004 and continuing for
48 months thereafter. At the end of the lease the Company has the option to buy
the equipment for the sum of $1.00. Renaissance Hospitality, Inc. is owned by
Stacy Chapman and George Mappin, Jr., both of whom are children of George
Mappin, a director and officer of the Company. In addition, Mr. Mappin, Jr. owns
750,000 shares of the Company's common stock.
6
In March 2005, the Company entered into an agreement with Nu Specialty
Foods Group, LLC, a North Carolina limited liability company located in Graham,
North Carolina whereby Nu Specialty Foods shall purchase Sunutra(TM) powders for
incorporation into their biscuit product line. Specifically, the products
covered by this agreement as for the food service industry and consist of frozen
unbaked biscuit dough, frozen baked biscuits, and biscuit dry-mix. Nu Specialty
will possess the exclusive right to manufacture these products with Sunutra(TM)
for a period of three (3) years provided certain minimum purchase requirements
are maintained. In addition, Nu Specialty must purchase a minimum of 1,586
pounds of this powder on, or before June 1, 2005 thereby providing the Company
with minimum anticipated cash inflow in excess of $100,000.00. There are no
revenues to date under this agreement. Nu Specialty is a specialized food
company that supplies certain fast food chains as well as school lunch programs
across the U.S.
The Company has no other agreements in place with respect to the
marketing, distribution and sale of the our Sunutra(TM) product. There can be no
assurance that the agreement with Nu Specialty Foods Group, LLC will be
commercially successful, or that the Company will enter into other agreements
relating to the commercialization of applications of our Sunutra(TM) product.
The Company's business plan does not contemplate distributing this
powder or a food product containing it directly to the consumer at first, but
selling the powder custom blended by product to leading food manufacturers to
include in their domestic or worldwide product lines. The Company believes this
will be attractive to food manufacturers because it will allow these selected
manufacturers to sell a more nutritious product or a nutritious version of an
existing product. To date, the Company has not entered into substantial
agreements with food manufacturers and there can be no assurance that the
Company will enter into significant agreements with such manufacturers. In
furtherance of the its objective, the Company has also started to assemble a
management team of experienced professionals within the food industry to
commercialize this product.
Liquidity and Capital Resources
To date, the Company has financed its operations principally through
private placements of debt and equity securities. The Company generated $147,314
in net proceeds through financing activities from related party payables for the
three months ended March 31, 2005. The Company used net cash of $107,076 for
operating activities during the three months ended March 31, 2005. As of March
31, 2005, the Company's current liabilities totaled $2,902,527 and the Company
had working capital deficit of $2,898,010.
Our liabilities are comprised of related party payables in the amount
of $2,293,483, payable and accrued expenses in the amount of $524,875 and other
liabilities in the amount of $65,000. The Company has no obligations that commit
the Company to expend funds on capital expenditures in the future.
The Company's working capital requirements for the foreseeable future
will vary based upon a number of factors, including the costs to complete
product development work, the cost of completing its facilities, the timing of
market launches and the level of sales of its products. The Company had $2,717
of cash on hand at March 31, 2005 and more cash is needed to execute its
business plan. The Company will need to obtain at least $4 million to execute
its business plan over the next twelve months. Thereafter, the Company's cash
needs have not been determined. The Company is currently involved in ongoing
negotiations with several food service providers, as well as capital and credit
sources, and when, and if, certain contingencies are met by the Company, a
contract, or contracts, as well as financing, may follow. However, the Company
has no contractual arrangements that guarantee that the Company will have
adequate funding during the remainder of 2005 or thereafter, the Company has
been unsuccessful in raising the funds required to execute its business plan to
date and there can be no assurance that additional funding will be available on
commercially reasonable terms or at all. Any inability to obtain necessary
funding will have a material adverse effect on the Company, including possibly
requiring the Company to cease its operations.
In May 2004, the Company entered into Loan Agreements with Upstate
Capital Investments, LLC and Herschel Walker, an officer and director of the
Company. Jack Shaw and Brian Holden, who together own over 2,000,000 shares of
the Company's common stock, are affiliated with Upstate Capital Investments,
LLC. Each of these lenders agreed to provide the Company with a $350,000 loan
that accrues interest at the rate of ten percent per annum and is due in a
single balloon payment on the six month anniversary of the agreement. The
Company also agreed to issue to each of the lenders 50,000 shares of the
Company's restricted stock as additional consideration for the loans. Upstate
7
Capital Investments, LLC funded its loan obligation in May 2004, which loan is
included in Related Party Payables, and the Company plans to issue the 50,000
shares owed to Upstate Capital Investments, LLC. Mr. Walker has not funded his
loan obligation and will not in the future. As a result, the Company will not be
issuing any shares to Mr. Walker in connection with his loan. On November 12,
2004, Upstate Capital Investments, LLC agreed to extend the maturity date of the
loan so that all principal and interest is due and payable in a single balloon
payment on May 14, 2005. The Company does not have the funds to repay the
amounts owing on the Upstate Capital Investments, LLC loan and is in default
under this loan. As a result, the Company will need to find funding to repay the
amounts owed. There can be no assurance that the Company will be successful in
locating sources of funding to repay the loan or the funding, if available, will
be obtained on favorable terms.
On March 25, 2004, the Company entered into a final Standby Equity
Distribution Agreement (the "Cornell Agreement") with Cornell Capital Partners,
L.P. (the "Investor"), a Delaware limited partnership. This agreement provides
for that the Company may receive up to $10,000,000 in funding from the sale of
common stock, payable in installments. The funding may occur over a period of
two years. Investor received 195,000 shares of the Company's common stock as a
commitment fee in connection with the Cornell Agreement. The Cornell Agreement
contains certain provisions that must be met prior to funding, including, but
not limited to, a requirement that a resale registration statement with respect
to the securities to be acquired by Investor is filed and has been declared
effective by the SEC and the authorization for the Company's common stock to be
traded in the OTC Bulletin Board. These contingencies have not been satisfied
and the Company is not actively working to satisfy the contingencies. As a
result, there can be no assurance that these and other contingencies will be
satisfied and there can be no assurance that any funding will be provided by
Investor under the Cornell Agreement. In connection with the Cornell Agreement,
the Company also executed a Registration Rights Agreement, Placement Agent
Agreement and Escrow Agreement.
The Company also entered into an agreement with Newbridge Securities
Corporation ("Newbridge") in March 2004. Under the terms of this agreement,
Newbridge is acting as the Company's exclusive placement agent in connection
with the Cornell Agreement. Newbridge is providing placement agent related
services under this Agreement. The services will be performed during the period
that the Cornell Agreement is in effect. The Company has issued to Newbridge
5,000 shares of the Company's common stock as consideration for services under
this agreement.
On November 11, 2004 the Company received a $300,000 line of credit
from Beta Foods, LLC. Under the terms of the arrangement, Beta Foods, L.L.C.
advanced the Company $100,000 and advanced the additional $200,000.00 in
subsequent monthly installments. All sums advanced bear interest at the rate of
ten percent (10%) per annum, until maturity, after which any unpaid sum will
bear interest at the rate of eighteen percent (18%) per annum. Interest with
respect to each installment begins to run on the date funds are advanced. All
sums advanced pursuant to this line of credit become due and payable on June 30,
2005. The Company does not have the funds to repay the amounts that are being
borrowed from Beta Foods, L.L.C.
On January 11, 2005, the Company filed its petition for declaratory
judgment against Aloe Commodities International, Inc. ("Aloe"), in the K-192nd
Judicial District Court, Dallas County, Texas, under Cause No. 05-00355. Aloe is
asserting that the Company owes Aloe money pursuant to a promissory note
executed by Renaissance Man, Inc., a Texas corporation ("RMI") with a remaining
principal balance of $800,000.00, plus interest, as well as an additional
$247,525 in connection with inventory purchases by RMI (the "Aloe Claims"). This
petition asks that the court grant a judgment stating that all Aloe Claims
against the Company are invalid because the Company is unable to locate any
written instrument agreeing to pay this debt and Statute of Frauds law in Texas
requires a written instrument agreeing to pay debt of another. The litigation is
in the early stages, is subject to all of the risks and uncertainties of
litigation and there can be no assurance as to the probable result of this
litigation. This litigation may be costly, could divert our resources from other
planned activities, and could have a material adverse effect on our results of
operations and financial condition. The Company has accrued $800,000 plus
interest related to this litigation and management believes the final settlement
will not exceed this amount.
Stock Based Compensation
During the three months ended March 31, 2005, the Company issued no
shares of stock.
8
Off-Balance Sheet Arrangements (Contingent Royalty Payable)
As of March 31, 2004, Associated Receivables Funding, Inc. ("ARF")
claimed that approximately $6,457,600 was allegedly owed in connection with
certain funding that was provided by ARF. The Company disputed the amount of the
obligation. On or about May 14, 2004, the Company entered into a Compromise and
Settlement Agreement (the "Settlement") which effectively eliminates a
significant amount of the obligation to ARF. Under the terms of the Settlement,
ARF released all claims against the Company except for an obligation for the
Company to pay ARF $360,000. The Company has no obligation to pay ARF any
additional amounts. As additional consideration to enter into the Settlement,
Beta Foods, L.L.C. agreed to assume an obligation to pay ARF the amount of
$2,640,000 (the "Beta Obligation"). The liability of Beta Foods, L.L.C. to pay
the Beta Obligation is expressly limited to the payment of the increased royalty
amount under the Beta Agreement which are contingent on sales of the
phytonutrient product by the Company. Beta Foods, L.L.C. is not required to use
any of its general assets or operations to repay this obligation. As
consideration for Beta Foods, L.L.C. to assume the Beta Obligation, the Company
agreed to increase the amount of the royalty payable to Beta Foods, L.L.C in
connection with the sale of Company product to 30% until such obligation is
satisfied and until amounts equal to the additional tax liabilities incurred by
Beta Foods, L.L.C. and its members have been paid.
In accordance with SFAS No. 15 "Accounting for Debtors and Creditors in
Troubled Debt Restructurings", the maximum amount of additional royalties due
under the agreement of $2,640,000 is recorded as a long-term contingent royalty
liability on the balance sheet as of September 30, 2004. This liability will be
reduced by the additional royalty paid from sales, if any, of the phytonutrient
product by the Company. At such a time that no further sales of the
phytonutrient product by the Company will occur, any remaining liability will be
removed from the balance sheet since no obligation to repay the contingent
liability exists outside of the one generated by sales of the phytonutrient
product by the Company.
The Company is not a party to any other off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors.
Critical Accounting Policies
The Company's accounting policies are discussed in Note 2 to the
Company's audited financial statements included in the Company's December 31,
2004 Annual Report on Form 10-KSB. Of these significant accounting policies, the
Company considers its policies regarding the Valuation Allowance for Deferred
Income Taxes to the most critical accounting policy due to significance of this
amount and judgment exercised in relation to this estimate. Under SFAS No. 109,
the Company can record a net deferred tax asset on its balance sheet and a net
deferred tax benefit on its income statement related to its net operating losses
if it believes that it is more likely than not that it will be able to utilize
its net operating losses to offset future taxable income utilizing certain
criteria required by SFAS No. 109. If the Company does not believe, based on the
balance of the evidence, that it is more likely than not that it can fully
utilize its net operating losses, it must reduce its deferred tax asset to the
amount that is expected to be realized through future realization of profits.
The Company has determined at this time that net operating losses
generated prior to the change in control (in 2002) are unusable by the Company.
The Company also believes it is more likely than not that net operating loss
carryforwards generated since the change in control will not be able to be used
due to recurrent operating losses and the Company has provided a full valuation
allowance for these amounts.
Recent Accounting Pronouncements
The Company has not adopted any new accounting policies that would have
a material impact on the Company's financial condition, changes in financial
conditions or results of operations.
9
Forward-Looking Statements
When used in this Form 10-QSB or other filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized officer of the Company's executive officers, the words
or phrases "would be", "will allow", "intends to", "will likely result", "are
expected to", "will continue", "is anticipated", "estimate", "project", or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
The Company cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made, and advises
readers that forward-looking statements involve various risks and uncertainties.
The Company does not undertake, and specifically disclaims any obligation to
update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statement.
Item 3. Controls and Procedures
The Company has evaluated, with the participation of the Company's
Chief Executive Officer and Chief Financial Officer, the effectiveness of the
design and operation of the Company's disclosure controls and procedures as of
March 31, 2005 pursuant to Exchange Act Rule 15a-15(e). Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company required to be
included in the Company's periodic SEC filings. There have been no significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation.
10
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
On February 11, 2003, JWT Specialized Communications, Inc. ("JWT")
filed a complaint against the Company in the Court of Common Pleas for
Greenville County, South Carolina. The Complaint was amended on July 11, 2003
naming the Company and RMI as defendants. JWT seeks recovery of monies allegedly
due it for advertising services that were provided to the RMI between January 6,
1999 and September 13, 2000. The complaint states that JWT is seeking
$572,878.59 plus costs incurred from the defendants. The Company timely answered
the complaint and denied any liability to JWT based upon the fact that the
alleged services were provided before RMI became of subsidiary of the Company
and that the Plaintiff never had any contract or agreement with the Company
which would obligate the Company for some or all of the alleged damages. The
Company believes that RMI is the responsible party, if any. Based upon
information obtained from the Greenville County (SC) Clerk of Court, it is
likely that this matter will be heard in May or June, 2005.
On January 11, 2005, the Company filed its petition for declaratory
judgment against Aloe Commodities International, Inc. ("Aloe"), in the K-192nd
Judicial District Court, Dallas County, Texas, under Cause No. 05-00355. Aloe is
asserting that the Company owes Aloe money pursuant to a promissory note
executed by RMI with a remaining principal balance of $800,000.00, plus
interest, as well as an additional $247,525 in connection with inventory
purchases by RMI (the "Aloe Claims"). This petition asks that the court grant a
judgment stating that all Aloe Claims against the Company are invalid because
the Company is unable to locate any written instrument agreeing to pay this debt
and Statute of Frauds law in Texas requires a written instrument agreeing to pay
debt of another.
The litigation described above is in the early stages, is subject to
all of the risks and uncertainties of litigation and there can be no assurance
as to the probable result of the litigation. The litigation may be costly, could
divert our resources from other planned activities, and could have a material
adverse effect on our results of operations and financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
In May 2004, the Company entered into a Loan Agreements with Upstate
Capital Investments, LLC. Jack Shaw and Brian Holden, who together own over
2,000,000 shares of the Company's common stock, are affiliated with Upstate
Capital Investments, LLC. The lender provided the Company with a $350,000 loan
that accrued interest at the rate of ten percent per annum and was due in a
single balloon payment on the six month anniversary of the agreement. Upstate
Capital Investments, LLC agreed to extend the maturity date of the loan so that
all principal and interest was due and payable in a single balloon payment on
May 14, 2005. The Company does not have the funds to repay the amounts owing on
the Upstate Capital Investments, LLC loan and is in default on the repayment of
this loan. As of March 31, 2005, approximately $380,000 was owed to Upstate
Capital Investments, LLC under this loan arrangement.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable
Item 5. Other Information.
Not applicable
11
Item 6. Exhibits and Reports on Form 8-K.
(a)
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
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3(i).1 Articles of Restatement of Articles of Incorporation
(Incorporated by reference to Exhibit 3(i).1 of the Company's
Quarterly Report on Form 10-QSB, dated June 30, 2002)
3(ii).1 Bylaws of the Company
10.1 2004 Professional Employee Consultant Stock Compensation Plan
(Incorporated by reference to Exhibit 4.5 of the Company's
Registration Statement on Form S-8 (SEC File No. 333-113819))
10.2 Standby Equity Distribution Agreement between the Company and
Cornell Capital Partners, LLP dated March 25, 2004
(Incorporated by reference to Exhibit 10.4 of the Company's
Annual Report on Form 10-KSB, dated December 31, 2003)
10.3 Escrow Agreement, by and between the Company, Cornell Capital
Partners, LP and Butler Gonzalez, LLP, dated March, 2004
(Incorporated by reference to Exhibit 10.3 of the Company's
Quarterly Report on Form 10-QSB, dated March 31, 2004)
10.4 Consulting Agreement, but and between the Company and William
Strenglis, dated January 13, 2004 (Incorporated by reference
to Exhibit 10.4 of the Company's Quarterly Report on Form
10-QSB, dated March 31, 2004)
10.5 Registration Rights Agreement, by and between the Company and
Cornell Capital Partners, LP, dated March 14, 2004
(Incorporated by reference to Exhibit 10.5 of the Company's
Quarterly Report on Form 10-QSB, dated March 31, 2004)
10.6 Placement Agent Agreement, by and between the Company, Cornell
Capital Partners, LP and Newbridge Securities Corporation,
dated March 14, 2004 (Incorporated by reference to Exhibit
10.6 of the Company's Quarterly Report on Form 10-QSB, dated
March 31, 2004)
10.7 Compromise and Settlement Agreement, by and between the
Company and Associated Receivables Funding, Inc., dated May
14, 2004 (Incorporated by reference to Exhibit 10.7 of the
Company's Quarterly Report on Form 10-QSB, dated March 31,
2004)
10.8 License Agreement, by and between the Company and Beta Foods,
LLC, dated March 23, 2004 (Incorporated by reference to
Exhibit 10.8 of the Company's Quarterly Report on Form 10-QSB,
dated March 31, 2004)
10.9 Amendment to the License Agreement, by and between the Company
and Beta Foods, LLC, dated May 14, 2004 (Incorporated by
reference to Exhibit 10.9 of the Company's Quarterly Report on
Form 10-QSB, dated March 31, 2004)
10.10 Loan Agreement, by and between the Company and Herschel
Walker, dated May 14, 2004 (Incorporated by reference to
Exhibit 10.10 of the Company's Quarterly Report on Form
10-QSB, dated March 31, 2004)
10.11 Loan Agreement, by and between the Company and Upstate Capital
Investments, LLC, dated May 14, 2004 (Incorporated by
reference to Exhibit 10.11 of the Company's Quarterly Report
on Form 10-QSB, dated March 31, 2004)
10.12 Standard Industrial Commercial Multi-Tenant Lease, dated March
31, 2003 (Incorporated by reference to Exhibit 10.12 of the
Company's Quarterly Report on Form 10-QSB, dated March 31,
2004)
10.13 Standard Sublease, dated March 15, 2004 (Incorporated by
reference to Exhibit 10.13 of the Company's Quarterly Report
on Form 10-QSB, dated March 31, 2004)
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10.14 Consent to Sublease, by and between the Company and the
guarantor and lessor identified therein, dated March 19, 2004
(Incorporated by reference to Exhibit 10.14 of the Company's
Quarterly Report on Form 10-QSB, dated March 31, 2004)
10.15 Lease Agreement, dated November 11, 2004, by and between the
Company and Renaissance Hospitality, Inc. (Incorporated by
reference to Exhibit 10.15 of the Company's Quarterly Report
on Form 10-QSB, dated September 30, 2004)
10.16 Line of Credit Agreement, dated November 11, 2004, by and
between the Company and Beta Foods, L.L.C. (Incorporated by
reference to Exhibit 10.16 of the Company's Quarterly Report
on Form 10-QSB, dated September 30, 2004)
10.17 License Agreement with Nu Specialty Foods Group, L.L.C., dated
March 1, 2005 (Incorporated by reference to Exhibit 10.1 of
the Company's Current Report on Form 8-K, filed on March 2,
2005)
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K:
None.
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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 CONSOLIDATED MANAGEMENT GROUP, INC.
(Registrant)
Date: May 16, 2005 By /s/ Herschel J. Walker
-------------------------
Herschel J. Walker
President and CEO
14