UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2005
|_| Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to ___________.
---------
AAMPRO GROUP, INC.
(Exact name of registrant as specified in its charter)
NEVADA 87-0419231
(State or Other Jurisdiction of I.R.S. Employer Identification
Incorporation or Organization) Number
1120 Route 22 E, Bridgewater, New Jersey 08807
(Address of Principal Executive Offices and Zip Code)
Issuer's Telephone Number: (908) 252-0008
Former name, former address, and former fiscal year, if changed since last
report: No Changes.
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $0.001 per share
Indicate by mark (X) 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.
YES |X| NO | |
Indicate by mark (X) if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. Number of shares outstanding of each of the registrant's
classes of common stock as of August 19, 2005: 53,102,860 Common Stock:
Item 1 - Financial Statements
AAMPRO Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
June 30, 2005
(Unaudited)
Assets
Current Assets
Cash $ 170,037
Accounts receivable, net of allowance of $185,236 554,587
Other current assets 41,528
-----------
Total Current Assets 766,152
Customer lists, net 170,300
Property and equipment, net 27,092
-----------
Total Assets 963,544
===========
Liabilities and Stockholders' (Deficit)
Current Liabilities
Accounts payable and accrued expenses 554,464
Health benefits payable 983,963
Payroll taxes payable 1,937,470
Current maturities of long-term debt 27,285
Client deposits 85,059
-----------
Total Current Liabilities 3,588,241
Long-term debt, excluding current maturities 14,115
-----------
Total Liabilities 3,602,356
-----------
Stockholders' (Deficit)
Preferred stock Series A, convertible, no par value, 10,000,000 shares
authorized, 0 shares issued and outstanding --
Common stock, $.001, 300,000,000 shares authorized, 53,102,860
issued and outstanding 53,103
Additional paid-in capital 1,978,857
Accumulated (deficit) (4,670,772)
-----------
Total Stockholders' (Deficit) (2,638,812)
-----------
Total Liabilities and Stockholders' (Deficit) $ 963,544
===========
See notes to the condensed consolidated financial statements.
AAMPRO Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------ ------------ ------------ ------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net Revenue $ 500,501 $ 606,816 $ 1,018,640 $ 1,284,057
Staffing Revenue 85,202 -- 247,139 --
Payroll Processing Revenue 67,847 -- 120,617 --
------------ ------------ ------------ ------------
653,550 606,816 1,386,396 1,284,057
Total Revenue
Cost of Revenues 566,071 530,922 1,061,411 1,183,365
------------ ------------ ------------ ------------
Gross Profit 87,479 75,894 324,985 100,692
------------ ------------ ------------ ------------
Operating Expenses
General and administrative expenses 351,012 367,479 651,759 640,949
Stock based compensation 44,250 -- 44,250 --
Depreciation 5,124 530 9,942 7,878
Amortization 6,500 24,456 9,100 34,125
------------ ------------ ------------ ------------
Total Operating Expenses 406,886 392,465 715,051 682,952
------------ ------------ ------------ ------------
Loss From Operations (319,407) (316,571) (390,066) (582,260)
------------ ------------ ------------ ------------
Other Income (Expense)
Interest income 12 1,437 32 1,437
Interest expense (1,139) (3,478) (7,712) (5,810)
------------ ------------ ------------ ------------
Total Other (Expense) (1,127) (2,041) (7,680) (4,373)
------------ ------------ ------------ ------------
(320,534) (318,612) (397,746) (586,633)
Loss Before Income Taxes
Income Taxes (1,400) -- (1,400) --
------------ ------------ ------------ ------------
Net Loss $ (321,934) $ (318,612) $ (399,146) $ (586,633)
============ ============ ============ ============
Loss Per Share $ (0.01) $ (0.01) $ (0.01) $ (0.01)
============ ============ ============ ============
Weighted Average Number of Common
Shares Outstanding 53,102,860 53,999,989 53,102,860 51,999,989
See notes to the condensed consolidated financial statements.
AAMPRO Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flow
(Unaudited)
Six Months Ended
June 30,
----------------------
2005 2004
--------- ---------
Cash Flows From Operating Activities
Net Loss $(399,146) $(586,633)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used in) Operations
Depreciation and amortization 19,042 41,896
Allowance for bad debt (6,941) --
Stock based compensation 44,250 --
Write-off of investment -- 22,500
Decrease (Increase) in Assets
Accounts receivable (197,331) (169,038)
Other current assets (9,855) (11,972)
Increase (Decrease) in Liabilities
Accounts payable and accrued expenses 134,559 (43,227)
Health benefits payable (16,931) 109,321
Payroll taxes payable 480,586 499,549
Client deposits 9,000 (6,406)
--------- ---------
Net Cash Provided by (Used in) Operating Activities 57,233 (144,010)
--------- ---------
Cash Flows From Investing Activities
Cash paid for equipment (1,377) (5,626)
--------- ---------
Cash Flows From Financing Activities
Proceeds from notes receivable -- 212
Repayments of long-term debt (12,678) (16,001)
Proceeds from issuance of common stock -- 50,000
Net Cash Provided by (Used in)Financing Activities (12,678) 34,211
--------- ---------
Net Increase (Decrease) in Cash 43,178 (115,425)
Cash at Beginning of Period 126,859 146,412
--------- ---------
Cash at End of Period 170,037 $ 30,987
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period
for:
Interest 7,712 $ 5,810
--------- ---------
Income Taxes 1,400 $ --
--------- ---------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
During the six months ended June 30, 2004 the Company issued 2,000,000
shares of its common stock valued at $72,500 for investments
See notes to the condensed consolidated financial statements.
AAMPRO Group, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
June 30, 2005
(Unaudited)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statement have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Item 310 of Regulation S-B.
Accordingly, they do not include all of 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.
Operating results for the six months ended June 30, 2005 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2005. The unaudited condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-KSB for the year ended
December 31, 2004.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of AAMPRO Group, Inc.
and its wholly owned subsidiaries, AAMPRO, Inc., AAMPRO Pay, LLC, and AAMPRO
Staffing Concepts, Inc. All significant intercompany balances and transactions
have been eliminated.
REVENUE RECOGNITION
The Company has adopted a new revenue recognition policy under which
compensation of worksite employees will be recognized as revenue components
("net method"). The change in policy was made based in part on the collective
weight of the indicators included in Emerging Issues Task Force No. 99-19,
Reporting Revenues Gross as a Principal versus Net as an Agent ("EITF 99-19").
The policy has been applied to the current consolidated statement of operations
and retroactively applied to the previous years' consolidated statement of
operations. The new policy had no effect on the gross profit, net income (loss)
or shareholders' equity (deficit) amounts previously reported by the Company in
its public filings. Revenue is recognized as services are provided. Billings to
the Company's clients is based on the average annual cost for services spread in
equal payments over the clients' annual billing cycle. Billings do not reflect
actual expenses incurred due to the front-loading and subsequent phase-out of
expenses and taxes. As a direct result of this averaging, net income is
decreased during the first half of the year and subsequently increases during
the second half of the year. Furthermore, gross revenues generally increase in
the fourth quarter primarily due to salary increases and bonuses that client
companies award their employees during this period. Gross billings for the three
months ended June 30, 2005 and 2004 were $3.0 and $3.5 million, respectively,
less worksite employee costs of $2.5 and $2.9, respectively. Gross billings were
recognized for the six months ended June 30, 2005 and 2004 of $5.9 and $7.3
million, respectively, less worksite employee costs of $4.9 and $6.0 million,
respectively.
RECLASSIFICATIONS
Insurance costs of $195,050 have been reclassified to cost of revenues from net
revenues for the six months ended June 30, 2005 to conform to the three months
ended June 30, 2005.
AAMPRO Group, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements (Continued)
June 30, 2005
(Unaudited)
STOCK-BASED COMPENSATION
The Company has adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). The provisions of SFAS
123 allow companies to either expense the estimated fair value of stock options
or to continue to follow the intrinsic value method set forth in Accounting
Principles Bulletin Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25") but disclose the pro forma effects on net income (loss) had the fair
value of the options been expensed. The Company follows the provisions of FASB
123 in their accounting for stock based compensation.
On April 10, 2003, the Company entered into an option agreement with an officer
of the Company, whereby, the officer was granted 5,400,000 options of the
Company's common stock. The agreement between the Company and the officer
expires on March 31, 2008. On each anniversary (through 2008), the Company shall
grant to the officer an additional 5,400,000 options at an exercise price equal
to the fair market value of the Company's common stock on the date of each such
grant. On April 10, 2005, the Company granted 5,400,000 options at an exercise
price of $0.01. The options have been valued at $27,000.
On April 10, 2003, the Company entered into an option agreement with an officer
of the Company, whereby, the employee was granted 900,000 options of the
Company's common stock. The agreement between the Company and the employee
expires on March 31, 2008. On each anniversary (through 2008), the Company shall
grant to the officer an additional 900,000 options at an exercise price equal to
the fair market value of the Company's common stock on the date of each such
grant. On April 10, 2005, the Company granted 900,000 options at an exercise
price of $0.01. In 2004, the options have been valued at $4,500.
On April 10, 2003, the Company entered into a consulting agreement with a
consultant of the Company, whereby, for services to be provided to the Company
through March 31, 2008, the consultant was granted 2,550,000 options of the
Company's common stock. On each anniversary (through 2008), the Company shall
grant to the consultant an additional 2,550,000 options at an exercise price
equal to the fair market value of the Company's common stock on the date of each
such grant. On April 10, 2005, the Company granted 2,550,000 options at an
exercises price of $0.03. In 2004, the options have been valued at $12,750.
The following table summarizes stock options activity during the six months
ended June 30, 2005:
Weighted
Number of Average
Options Exercise Price
---------- ----------
Options outstanding at January 1, 2005 18,000,000 $ 0.05
Granted 8,850,000 0.01
Exercised -- --
Expired -- --
---------- ----------
Options outstanding and exercisable at June 30, 2005 26,850,000 0.04
========== ==========
The fair value of the options granted in 2005 were $44,250. The fair value was
determined as of the date of grant using the Black-Scholes pricing model, based
on the following assumptions; annual expected rate of return of 0%, annual
volatility of 186% and a risk free interest rate of 4.14%.
AAMPRO Group, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements (Continued)
June 30, 2005
(Unaudited)
LITIGATION
In March 2005, there was a settlement reached in the litigation with the former
majority shareholder that is subject to formal approval by the Court. The
pending settlement will include the release of all claims by all parties, the
reverse of the prior acquisition transaction between the parties, and the spin
off of all assets and liabilities of the AAMPRO Group, Inc. and its related
subsidiaries to its shareholder into multiple publicly traded entities. The
settlement is subject to Court approval (a hearing on which is currently
scheduled for August 30, 2005), and will not be effective until such approval is
received.
GOING CONCERN UNCERTAINTY
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America, which contemplates continuation of the Company as a going concern. The
Company has had recurring operating deficits in the past few years and
accumulated large deficits. This raises substantial doubt about the Company's
ability to continue as a going concern.
Management of the Company believes that its current cash and cash equivalents
along with cash to be generated by existing and new business operations in 2005
will be sufficient to meet its anticipated cash needs for working capital and
capital expenditures for the next fiscal year.
If cash generated from operations is insufficient to satisfy the Company's
liquidity requirements, management may seek to restructure the liabilities of
the Company and/or sell additional equity, debt securities and/or obtain a
credit facility. The sale of additional equity or convertible debt securities
could result in additional ownership dilution to our stockholders. The
incurrence of indebtedness would result in an increase in our fixed obligations
and could result in borrowing covenants that would restrict our operations.
There can be no assurance that financing will be available in amounts or on
terms acceptable to us, if at all. If financing is not available when required
or is not available on acceptable terms, we may be unable to develop or enhance
our products or services. In addition, we may be unable to take advantage of
business opportunities or respond to competitive pressures. Any of these events
could have a material and adverse effect on our business, results of operations
and financial condition.
In view of these matters, realization of the assets of the Company is dependent
upon the Company's ability to meet its financial requirements and the success of
future operations. These consolidated financial statements do not include
adjustments relating to the recoverability and classification of recorded asset
amounts and classification of liabilities that might be necessary should the
Company be unable to continue in existence.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
FORWARD - LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements about our business,
financial condition, and prospects that reflect our assumptions and beliefs
based on information currently available. We can give no assurance that the
expectation s indicated by such forward-looking statements will be realized. If
any of our assumptions should prove incorrect, or if any of the risks and
uncertainties underlying such expectations should materialize, our actual
results may differ materially from those indicated by the forward-looking
statements.
The key factors that are not within our control and that may have a direct
bearing on operating results include, but are not limited to, acceptance of our
services, our ability to expand our customer base, our ability to raise capital
in the future, the retention of key employees and changes in the regulation of
our industry. There may be other risks and circumstances that we are unable to
predict. When used in this Quarterly Report, words such as, "believes,"
"expects," "intends," "plans," "anticipates," "estimates" and similar
expressions are intended to identify forward-looking statements, although there
may be certain forward-looking statements not accompanied by such expressions.
All forward-looking statements are intended to be covered by the safe harbor
created by Section 21E of the Securities Exchange Act of 1934.
OVERVIEW
AAMPRO Group, Inc., together with its consolidated subsidiaries, provides full
service staffing resources to its clients by providing permanent placement,
temporary staffing services, payroll administration, and professional services
(including outsourcing services of worksite employees). The Company expanded its
services beyond that of a professional services organization to that of a full
service staffing firm in the fourth quarter of 2004. The Company's services are
designed to improve the productivity and profitability of small and medium-sized
businesses by relieving business owners and key executives of many
employer-related administrative and regulatory burdens and enables them to focus
on the core competencies of their businesses.
The Company is organized in three basic operating segments--Staffing Services,
Payroll Administration, and Professional Services. Within the Staffing Services
Segment, the Company provides three primary services--permanent placement,
temporary staffing, and human resource consulting services. Payroll
administration services include the processing of the payrolls for clients along
with the administration of benefits, tax filings, and workman's compensation
programs. The Professional Services segment includes the outsourcing of the
employment and administration services performed for clients.
The Company provides its services on a national basis with a primary focus in
the New York, New Jersey and Pennsylvania area, and is currently executing a
long-term expansion strategy target both organic growth and the acquisition of
smaller and like-sized competitors.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and related notes included elsewhere herein. Historical
results and percentage relationships are not necessarily indicative of the
operating results for any future period.
REVENUES
Total revenues for the six months ended June 30, 2005 increased by $102,339 or
8%, from $1,284,057 in 2004 to $1,386,396 in 2005, while total revenues for
three months ended June 30, increased by $46,734 or 8%, from $606,816 in 2004 to
$653,550 in 2005, as a result of the corresponding reductions in revenues
attributed to the cessation of providing services to certain clients, offset by
the increased costs for the staffing and payroll administration services.
Overall net revenues from contract worksite employees for the six months ended
June 30, 2005, decreased $265,417 or 21%, from $1,284,057 in 2004 to $1,018,640
in 2005, as compared to a decrease of $106,315 or 18% for the three months ended
June 30, 2005, going from $606,816 in 2004 to $500,501 in 2005. The net revenues
for the first half and second quarter of 2005 included revenues from contract
worksite employees along with staffing and payroll administration services. In
2004, all of the net revenues were from contract worksite employees. Gross
revenues for the contract worksite employee for the six months ended June 30,
declined by approximately $1.4 million from $7.3 million in 2004 to $5.9 million
in 2005, while gross revenues for the contract worksite employee for the three
months ended June 30, declined by approximately $.5 million from $3.5 million in
2004 to $3.0 million in 2005 The net decreases for the six months and the three
months ended June 30, 2005, were primarily attributable to ceasing to provide
services for certain customers. Staffing revenues and payroll processing
revenues for the six and three months ended June 30, 2005, were $247,139 and
$120,617, respectively, as compared to the three months ended June 30, 2004 of
$85,202 and $67,847, respectively. There were no revenues for staffing or
payroll processing in 2004.
COST OF REVENUES AND GROSS MARGIN
The Company's cost of revenue for the six months ended decreased by $121,954
from $1,183,365 in 2004 to $1,061,411 in 2005, while the cost of revenues for
the three months ended increased by $35,149 from $ 530,922 in 2004 to $566,071
in 2005 as a result of the corresponding reductions in revenues attributed to
the cessation of providing services to certain clients, offset by the increased
costs for the staffing and payroll administration services. The Company has
strategically evaluated the overall 2005 operations, and the profitability of
providing services to its clients, and has decided to cease doing business with
several unprofitable clients in order to streamline its client base, and better
focus its overall operations. Gross profit margins increased by $224,293 or 17%
for the six months ended June 30, from $100,692 in 2004 to $324,985 in 2005, and
by $11,585 for the three months ended June 30, from $75,984 in 2004 to $87,479
in 2005. Both the six month as three month gross margin amounts are as a result
of the elimination of certain unprofitable clients, and the inclusion of the
higher margin staffing and payroll administration services in 2005. The Company
continues to expand its operations with a focus on providing quality services
with higher profitability.
OPERATING EXPENSES
Operating expenses for the six months ended June 30, increased $32,099 from
$682,952 in 2004 to $715,051 in 2005, and for the three months ended June 30,
increased by $14,421 from $392,465 in 2004 to $406,886 in 2005. Variations for
the comparative results for the six months and the three months ended June 30,
2005 were due to increased costs associated with the new staffing and payroll
administration services and stock based compensation, partially offset by the
continuation of the Company's overall cost containment program.
NET LOSS
The net loss for the six months ended June 30, decreased by $187,487, from a
loss of $586,633 in 2004 to $399,146 in 2005, as compared to an increase of
$3,322 for the three months ended June 30, from a loss of $318,612 in 2004 to
$321,934 in 2005.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2005, the Company had cash and cash equivalents totaling $170,037
compared to $30,987 at June 30, 2004. Net cash provided by operating activities
during the six months ended June 30, 2005 was $57,233 as compared with $144,010
used by operating activities in 2004, or an increase in net cash by $201,243
resulting from increases in trade receivables, and payables and accrued
expenses, offset by reductions in health benefit liabilities. The Company's
capital requirements are dependent on several factors, including marketing,
acquisitions, and professional fees and consulting expenses.
Management of the Company believes that its current cash and cash equivalents
along with cash to be generated by existing and new business operations in 2005
and beyond will be sufficient to meet its anticipated cash needs for working
capital and capital expenditures for the next year.
If cash generated from operations is insufficient to satisfy the Company's
liquidity requirements, management may seek to restructure the liabilities of
the Company and/or sell additional equity, debt securities and/or obtain a
credit facility. The sale of additional equity or convertible debt securities
could result in additional ownership dilution to our stockholders. The
incurrence of indebtedness would result in an increase in our fixed obligations
and could result in borrowing covenants that would restrict our operations.
There can be no assurance that financing will be available in amounts or on
terms acceptable to us, if at all. If financing is not available when required
or is not available on acceptable terms, we may be unable to develop or enhance
our products or services. In addition, we may be unable to take advantage of
business opportunities or respond to competitive pressures. Any of these events
could have a material and adverse effect on our business, results of operations
and financial condition.
RISK AND UNCERTAINTY
AAMPRO's business is subject to the effects of general economic conditions and
in particular competition and government regulation. Other risks and
uncertainties for the Company include, but are not limited to:
- - Adverse changes in general economic conditions in any of the areas in
which we do business.
- - We might not be able to fund its working capital needs from cash flow or
we may not be able to raise capital
- - Increased competition
- - Litigation
We may experience material fluctuations in future revenues and operating results
on a quarterly or annual basis resulting from a number of factors, including but
not limited to the risks discussed above. The preceding statements under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" which are not historical facts are forward-looking statements. These
forward-looking statements involve risks and uncertainties that could render
them materially different, including, but not limited to, the risk that new
products and product upgrades may not be available on a timely basis, the risk
that such products and upgrades may not achieve market acceptance, the risk that
competitors will develop similar products and reach the market first, and the
risk that we would not be able to fund its working capital needs from cash flow.
CRITICAL ACCOUNTING POLICIES
Revenue Recognition and Returns
Revenue is recognized as services are provided. The Company's revenues consist
of administrative fees paid by its clients under certain agreements, which are
based upon each worksite employee's gross pay and a markup, computed as a
percentage of the gross pay. Billing to the Company's clients is based on the
average annual cost for services spread in equal payments over the clients'
annual billing cycle. Billings do not reflect actual expenses incurred due to
the front-loading and subsequent phase-out of expenses and taxes. As a direct
result of this averaging, net income is decreased during the first half of the
year and subsequently increases during the second half of the year. Furthermore,
gross revenues generally increase in the fourth quarter primarily due to salary
increases and bonuses that client companies award their employees during this
period.
Revenues for services provided under staffing contracts are recognized as
services are provided by the temporary, contract or leased employees. Revenue
from direct placements or "fixed fee contracts" is recognized at the time the
candidate begins the first full day after the completion of a 30-day contingency
period. Revenue from permanent placements, which are also considered fixed fee
contracts, is recognized at the time the candidate begins the first full day
after the completion of a required amount of temporary hours as stipulated in
the Temp to Perm contract.
Revenues for payroll processing services are recognized when the service is
performed based on a fixed fee-processing period.
Item 3: Controls and Procedures
Under the supervision and with the participation of our management, including
our principal executive officer, we conducted an evaluation of our disclosure
controls and procedures, as such term is defined under Rule 13a-14(c)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), within 90 days of the filing date of this report. In designing and
evaluating the Company's disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving their objectives
and management necessarily applied its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based on this evaluation, the
Company's chief executive officer concluded that as of June 30, 2005, the
Company's disclosure controls and procedures were (1) designed to ensure that
material information relating to the Company, including its consolidated
subsidiaries, is made known to the Company's chief executive officer by others
within those entities, particularly during the period in which this report was
being prepared and (2) effective, in that they provide reasonable assurance that
information required to be disclosed by the Company in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms.
Limitations on the Effectiveness of Internal Controls
Management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material errors. An internal control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations on all internal control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. The design of any
system of internal control is also based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions. Over time, controls may become inadequate because of changes in
circumstances, and/or the degree of compliance with the policies and procedures
may deteriorate. Because of the inherent limitations in a cost effective
internal control system, financial reporting misstatements due to error or fraud
may occur and not be detected on a timely basis.
There have been no significant changes (including corrective actions with regard
to significant deficiencies or material weaknesses) in our internal controls or
in other factors that could significantly affect these controls subsequent to
the date of the evaluation referenced in the above paragraph.
PART II
Item 1. Legal Proceedings
In August 2003, Alan Sporn and Corporate and Shareholder Solutions, Inc. filed a
suit against the Company in the Superior Court of New Jersey, Chancery Division,
Hunterdon County, alleging, among other things, breach of contract and the
issuance of certain shares of preferred stock which the plaintiffs claim are
allegedly due to them. The Company is vigorously defending this action and has
filed an answer denying all of the plaintiffs' claims and has counterclaimed.
The parties to this litigation have executed a settlement agreement in March
2005, which is subject to Court approval. Reference is made to the Company's
annual report on Form 10-KSB for the year ended December 31, 2004 for additional
information relating to Litigation.
Item 5: Other Information
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AAMPRO GROUP, INC.
(Registrant)
By /s/ Stephen Farkas
- ------------------------------
(Stephen Farkas, President, Chief Executive Officer,
Principal Accounting Officer and Director)