UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[X] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2000;
or
[ ] Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For transition period from ________________ to _________________
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
(Name of Small Business Issuer in Its Charter)
Utah 87-0401400
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2035 N.E. 181st
Gresham, OR 97230
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (503) 492-1500
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No[ ]
As of February 19, 2001, the Registrant had outstanding 4,868,730
shares of Common Stock.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
-1-
Item 1: Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - September 30, 2000 and
March 31, 2000 3
Condensed Consolidated Statements of Operations - Six months ended
September 30, 2000 and 1999 and Three months ended September
30, 2000 and 1999 5
Statements of Stockholders' Equity 7
Condensed Consolidated Statements of Cash Flows - Six months
ended September 30, 2000 and 1999 and Three months ended
September 30, 2000 and 1999 9
Notes to Condensed Consolidated Financial Statements - September
30, 2000 11
Item 2: Management's Discussion and Analysis or Plan of Operation 22
Item 1. Legal Proceedings 25
Item 2. Changes in Securities 25
Item 3. Defaults upon Senior Securities 25
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 26
-2-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Consolidated Balance Sheet
ASSETS
September 30, March 31,
2000 2000
------------------ -----------------
CURRENT ASSETS
Cash and cash equivalents $ 9,736 $ 8,914
Accounts receivable, net (Note 1) 521,455 586,829
Inventory (Note 1) 177,612 232,310
Prepaid and other current assets 8,000 102,359
Marketable securities (Note 1) - 2,485
------------------ -----------------
Total Current Assets 716,803 932,897
------------------ -----------------
PROPERTY AND EQUIPMENT (NOTE 1)
Furniture, fixtures and equipment 460,384 404,322
Capital leases 1,277,899 1,277,899
------------------ -----------------
Total depreciable assets 1,738,283 1,682,221
Less: accumulated depreciation (736,838) (597,131)
------------------ -----------------
Net Property and Equipment 1,001,445 1,085,090
------------------ -----------------
OTHER ASSETS
Deposits 73,618 62,733
------------------ -----------------
Total Other Assets 73,618 62,733
------------------ -----------------
TOTAL ASSETS $ 1,791,866 $ 2,080,720
================== =================
The accompanying notes are an integral part of these consolidated
financial statements.
-3-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, March 31,
2000 2000
------------------ -----------------
CURRENT LIABILITIES
Accounts payable $ 910,329 $ 449,011
Accrued expenses and other current liabilities 927,254 822,780
Deferred revenue 7,000 20,000
Line of credit (Note 3) 188,231 416,171
Current portion of notes payable (Note 4) 390,414 546,542
Current portion of notes payable, related parties (Note 5) 101,732 69,797
Current portion of capital lease obligations (Note 6) 301,340 302,551
------------------ -----------------
Total Current Liabilities 2,826,300 2,626,852
------------------ -----------------
LONG-TERM DEBT
Reserve for discontinued operations (Note 2) 734,988 734,988
Notes payable (Note 4) 247,084 62,981
Notes payable, related parties (Note 5) 1,307,509 1,224,049
Capital lease obligations (Note 6) 231,167 389,275
------------------ -----------------
Total Long-Term Debt 2,520,748 2,411,293
------------------ -----------------
Total Liabilities 5,347,048 5,038,145
------------------ -----------------
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, par value $0.001 per share: 10,000,000
shares authorized; issued and outstanding: 94,953
Series B shares, 150,000 Series C shares 245 245
Common stock, par value $0.001 per share: 125,000,000
shares authorized; issued and outstanding: 5,483,730
shares issued and 4,008,730 outstanding. (Note 9) 4,008 3,876
Additional paid-in capital 7,713,971 7,640,045
Accumulated deficit (11,273,406) (10,601,591)
------------------ -----------------
Total Stockholders' Equity (Deficit) (3,555,182) (2,957,425)
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 1,791,866 $ 2,080,720
================== =================
The accompanying notes are an integral part of these consolidated
financial statements.
-4-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Consolidated Statements of Operations
For the Six Months Ended For the Three Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
--------------- --------------- ---------------- ---------------
NET SALES $ 2,700,297 $ 2,069,089 $ 1,338,775 $ 941,000
COST OF SALES 2,233,624 1,561,885 1,287,380 726,537
--------------- --------------- ---------------- ---------------
GROSS PROFIT 466,673 507,204 51,395 214,463
--------------- --------------- ---------------- ---------------
GENERAL AND ADMINISTRATIVE EXPENSES
Depreciation and amortization 6,417 15,618 2,908 6,606
General expenses 829,930 713,395 368,038 386,065
--------------- --------------- ---------------- ---------------
Total General and Administrative Expenses 836,347 729,013 370,946 392,671
--------------- --------------- ---------------- ---------------
GAIN (LOSS) FROM OPERATIONS (369,674) (221,809) (319,551) (178,208)
--------------- --------------- ---------------- ---------------
OTHER INCOME AND (EXPENSES)
Other income and expenses 10,032 20,981 (939) 17,002
Interest expense (312,173) (278,417) (146,622) (132,311)
--------------- --------------- ---------------- ---------------
Total Other Income and (Expenses) (302,141) (257,436) (147,561) (115,309)
--------------- --------------- ---------------- ---------------
LOSS BEFORE INCOME TAXES AND
DISCONTINUED OPERATIONS (671,815) (479,245) (467,112) (293,517)
--------------- --------------- ---------------- ---------------
DISCONTINUED OPERATIONS
Gain from sale of USPA - 869,336 - 55,947
Loss from operations of USPA - (5,871) - -
--------------- --------------- ---------------- ---------------
Total Discontinued Operations - 863,465 - 55,947
--------------- --------------- ---------------- ----------------
INCOME TAXES - - - -
--------------- --------------- ---------------- ---------------
NET INCOME (LOSS) $ (671,815) $ 384,220 $ (467,112) $ (237,570)
=============== =============== ================ ===============
OTHER COMPREHENSIVE GAIN (LOSS)
Gain (loss) on valuation of marketable securities $ - $ (725,438) $ - $ 72,406
Total Other Comprehensive Gain (Loss) - (725,438) - 72,406
--------------- --------------- ---------------- ---------------
NET COMPREHENSIVE GAIN (LOSS) $ (671,815) $ (341,218) $ (467,112) $ (165,164)
=============== =============== ================ ===============
The accompanying notes are an integral part of these consolidated
financial statements.
-5-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Consolidated Statements of Operations (Continued)
BASIC LOSS PER SHARE
OF COMMON STOCK -
CONTINUING OPERATIONS $ (0.17) $ (.14) $ (0.12) $ (.08)
=============== =============== ================ ===============
BASIC LOSS PER SHARE
OF COMMON STOCK
DISCONTINUED OPERATIONS $ - $ .2 $ - $ .02
=============== =============== =============== ================
The accompanying notes are an integral part of these consolidated
financial statements.
-6-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Consolidated Statements of Stockholders' Equity
September 30, 2000 and 1999
Common Stock Preferred Stock Other Additional
---------------------------- ------------------------ Comprehensive Paid-In Accumulated
Shares Amount Shares Amount Loss Capital Deficit
------------- ------------ ----------- ----------- ---------------- -----------------------------
Balance, April 1, 1998 2,929,263 $ 2,929 244,953 $ 245 $ - $ 7,026,260 $ (5,718,980)
Stock issued for cash 48,000 48 - - - 59,954 -
Stock issued for Quade
acquisition (Note 2) 238,333 238 - - - 417,678 -
Stock adjustment on PPW
acquisition (Note 2) (45,310) (45) - - - (226,505) -
Expense recognized for
vested options - - - - - 17,496 -
Stock issued for loan 4,000 4 - - - 2,183 -
Loss on valuation of
marketable securities - - - - (435,188) - -
Net loss for the year ended
March 31, 1999 - - - - - - (3,461,500)
------------- ------------ ----------- ----------- ---------------- ------------- --------------
Balance, March 31, 1999 3,174,286 3,174 244,953 245 (435,188) 7,297,066 (9,180,480)
Stock issued for Quade
acquisition (Note 2) 451,667 452 - - - 144,099 -
Stock issued for consulting
services 250,000 250 - - - 181,384
Expense recognized for
vested options - - - - - 17,496
Recognition of loss on
valuation of marketable
securities - - - - 435,188 - -
Net loss for the year ended
March 31, 2000 - - - - - - (1,421,111)
------------- ------------ ----------- ----------- ---------------- ------------- --------------
Balance, March 31, 2000 3,875,953 $ 3,876 244,953 $ 245 $ - $ 7,640,045 $ (10,601,591)
============= ============ =========== =========== ================ ============= ==============
The accompanying notes are an integral part of these consolidated
financial statements.
-7-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Consolidated Statements of Stockholders' Equity (Continued)
September 30, 2000 and 1999
Common Stock Preferred Stock Other Additional
---------------------------- ------------------------ Comprehensive Paid-In Accumulated
Shares Amount Shares Amount Loss Capital Deficit
------------- ------------ ----------- ----------- ---------------- -----------------------------
Balance, March 31, 2000 3,875,953 $ 3,876 244,953 $ 245 $ - $ 7,640,045 $ (10,601,591)
============= ============ =========== =========== ================ ============= ==============
Stock issued for consulting
services 32,777 32 - - - 34,028 -
Expense recognized for
vested options - - - - - 8,748 -
Stock issued for interest
on notes payable 100,000 100 - - - 31,150 -
Net loss for the six months
ended September 30, 2000 - - -- - - (671,815)
Balance at
September 30, 2000 4,008,730 $ 4,008 244,953 $ 245 $ - $ 7,713,971 $(11,273,406)
============ =========== ========== ====== ================ =========== =============
The accompanying notes are an integral part of these consolidated
financial statements.
-8-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Consolidated Statements of Cash Flows
For the Six Months Ended For the Three Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
OPERATING ACTIVITIES
Net income (loss) $ (671,815) $ 384,220 $ (467,112) $ (165,164)
Adjustments to reconcile net income
to net cash provided by operating activities:
Gain on sale of USPA, Ltd. - (869,336) - -
Depreciation and amortization 140,307 141,706 72,110 69,694
Common stock issued for services and interest 118,669 10,983 4,374 6,609
Gain (loss) on sale of marketable securities - - - -
Changes in operating assets and liabilities net
of Quade acquisition:
(Increase) decrease in inventory 54,482 15,251 32,016 5,254
(Increase) decrease in accounts receivable 65,301 (52,712) 12,536 (188,259)
(Increase) decrease in other current assets (9,815) 5,499 (12,815) (15,213)
Increase (decrease) in accounts payable 419,240 69,226 526,152 35,904
Increase (decrease) in other current liabilities 243,340 301,117 103,318 221,172
--------------- --------------- --------------- --------------
Net Cash Provided (Used) by Operating Activities 359,709 5,954 270,579 (30,003)
--------------- --------------- --------------- --------------
INVESTING ACTIVITIES
Proceeds from sale of marketable securities 2,485 - - -
Proceeds from sale of USPA, Ltd. - 221,470 - -
Purchases of property and equipment (10,662) - (6,412) -
--------------- --------------- --------------- --------------
Net Cash Provided (Used) by Investing Activities (8,177) 221,470 (6,412) -
--------------- --------------- --------------- --------------
FINANCING ACTIVITIES
Payments on capital lease obligations (159,319) (147,273) (81,566) (79,685)
Proceeds (payments) from notes payable (10,151) - - (12,694)
Borrowings (payments) from related party debt 46,700 (68,664) 15,310 (23,939)
Net borrowings (payments) on factoring line of credit (227,940) (52,264) (188,524) 60,036
--------------- --------------- --------------- --------------
Net Cash Provided (Used) by Financing Activities (350,710) (268,201) (254,780) (56,282)
--------------- --------------- --------------- --------------
INCREASE (DECREASE) IN CASH 822 (40,777) 9,387 (86,285)
CASH, BEGINNING OF PERIOD 8,914 41,967 349 87,475
--------------- --------------- --------------- --------------
CASH, END OF PERIOD $ 9,736 $ 1,190 $ 9,736 $ 1,190
=============== =============== =============== ==============
The accompanying notes are an integral part of these consolidated
financial statements.
-9-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Consolidated Statements of Cash Flows (Continued)
For the Six Months Ended For the Three Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
CASH PAID FOR
Interest $ 123,060 $ 195,298 $ 72,771 $ 87,253
Income taxes $ - $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Common stock issued for services $ 118,669 $ 10,983 $ 4,374 $ 6,609
Equipment purchased through capital
lease obligation $ - $ - $ - $ -
The accompanying notes are an integral part of these consolidated
financial statements.
-10-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Notes to the Consolidated Financial Statements
September 30, 2000 and 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
a. Quarterly Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates. The accompanying
consolidated unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-QSB but
do not include all of the information and footnotes required by
generally accepted accounting principles and should, therefore,
be read in conjunction with the Company's fiscal 2000 financial
statements in Form 10-KSB. These statements do include all normal
recurring adjustments which the Company believes necessary for a
fair presentation of the statements. The interim operating
results are not necessarily indicative of the results for a full
year. Effective for fiscal quarters ending after March 15, 2000,
the Securities and Exchange Commission adopted a rule requiring
companies' independent auditors review the companies' financial
information prior to the companies filing their Quarterly Reports
on Form 10- QSB with the Commission. The Company's September 30,
2000 Form 10-QSB was not reviewed prior to submission to the
Commission. A Form 8-K will be filed when the review is completed
by the independent auditors.
b. Principles of Consolidation
The accompanying consolidated financial statements include
American Resources and Development Company and its subsidiaries,
Pacific Printing and Embroidery L.L.C. (PPW) and Fan-Tastic, Inc.
(FTI).
c. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
e. Concentrations of Risk
The Company maintains its cash in bank deposit accounts at high
credit quality financial institutions. The balances, at times,
may exceed federally insured limits.
In the normal course of business, the Company extends credit to
its customers.
f. Inventories
Inventories are stated at the lower of cost or market using the
first-in, first-out method. Inventory consists of items available
for resale.
-11-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Notes to the Consolidated Financial Statements
September 30, 2000 and 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Property and Equipment
Property, equipment and capital leases are recorded at cost and
are depreciated or amortized over the estimated useful life of
the related assets, generally three to seven years. When assets
are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts, and any
resulting gain or loss is reflected in income for the period.
The costs of maintenance and repairs are charged to income as
incurred. Renewals and betterments are capitalized and
depreciated over their estimated useful lives.
h. Accounts Receivable
Accounts receivable are shown net of the allowance for bad debts
of $63,822 at March 31, 2000.
i. Financial Instruments
Statement of Financial Accounting Standards No. 107, "
Disclosures about Fair Value of Financial Instruments" requires
disclosure of the fair value of financial instruments held by the
Company. SFAS 107 defines the fair value of a financial
instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties. The
following methods and assumptions were used to estimate fair
value:
The carrying amount of cash equivalents, accounts receivable and
accounts payable approximate fair value due to their short-term
nature.
At March 31, 2000, the Company held 1,045,000 shares of GCA stock
(See Note 2). Because of GCA filing for bankruptcy in July of
1999, substantial doubt exists regarding the ability of the
Company to recover its investment in GCA. At July 14, 2000, GCA
was still in Chapter 11 bankruptcy and its market value was $0.06
per share. Furthermore, the majority of the Company's stock in
GCA is restricted and the Company does not have the ability to
have the restriction removed because GCA is not current in its
SEC filings. As a result, the Company wrote off its cost in GCA
at March 31, 2000 and incurred a loss of $1,434,239.
j. Income Taxes
Income taxes consist of Federal Income and State Franchise taxes.
The Company has elected a March 31 fiscal year-end for both book
and income tax purposes.
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards No.109 (SFAS No.
109), "Accounting for Income Taxes," which requires the asset and
liability method of accounting for tax deferrals.
k. Basic Loss Per Common Share
Basic loss per common share is computed based on the weighted
average number of common shares outstanding during the period.
The common stock equivalents are antidilutive and, accordingly,
are not used in the net loss per common share computation. Fully
diluted loss per share is the same as the basic loss per share
because of the antidilutive nature of common stock equivalents.
Basic net loss from continuing operations per common share and
diluted net loss from continuing operations per common share
amounts, calculated in accordance with SFAS 128, were $(0.12) and
$(.08)
-12-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Notes to the Consolidated Financial Statements
September 30, 2000 and 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
k. Basic Loss Per Common Share (Continued)
for the three months ended September 30, 2000 and 1999,
respectively. Basic net (loss) income from discontinued
operations per common share and diluted net loss from
discontinued operations per common share were $0.00 and $.02,
respectively. Weighted average common shares outstanding were
4,008,730 and 3,618,779 for the three months ended September 30,
2000 and 1999, respectively.
l. Revenue Recognition
Revenue for contract screen printing, embroidery and product
sales are recognized when the goods have been shipped. Franchise
fees are recognized as revenue when all material services
relating to the sale have been substantially performed by FTI.
Material services relating to the franchise sale include
assistance in the selection of a site and franchisee training.
m. Goodwill
On March 31, 1998, the Company recognized goodwill of $1,696,412
from the purchase of Pacific Print Works (aka Pacific Printing
and Embroidery LLC). The Company amortized $128,198 of goodwill
from the PPW acquisition in fiscal 1999. In the fourth quarter of
fiscal 1999, the Company wrote-off its remaining goodwill from
the PPW acquisition due to a permanent impairment, resulting in
an additional expense of $1,568,215. The Company recognizes
goodwill from the excess of the purchase price of its
acquisitions over the fair value of the net assets acquired.
The Company evaluates the recoverability of goodwill and reviews
the amortization period on an annual basis. Several factors are
used to evaluate goodwill, including but not limited to:
management's plans for future operations, recent operating
results and projected, undiscounted cash flows.
n. Recent Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income" during the year
ended March 31, 1999. SFAS No. 130 established standards for
reporting and display of comprehensive income (loss) and its
components (revenues, expenses, gains and losses) in a full set
of general purpose financial statements. This statement requires
that an enterprise classify items of other comprehensive income
by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity
section of a balance sheet.
o. Advertising
The Company follows the policy of charging the costs of
advertising to expense as incurred.
p. Prior Period Reclassification
Certain 1999 amounts have been reclassified to conform to the
presentation of the 2000 consolidated financial statements.
-13-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Notes to the Consolidated Financial Statements
September 30, 2000 and 1999
NOTE 2 - MERGERS AND ACQUISITIONS
Golf Ventures, Inc.
In November 1997, Golf Ventures, Inc., a former Company
subsidiary, merged with U.S. Golf Communities. U.S. Golf
Communities was the controlling company in this merger and
subsequent to the merger the combined company's name changed to
Golf Communities of America (GCA). This merger resulted in a less
than 20% American Resources' ownership in GVI. Therefore,
subsequent to the merger, the Company's investment in GVI is
reflected as an investment in accordance with Financial
Accounting Standards Board Statement No. 121.
The Company has a reserve for discontinued operations of $734,988
at March 31, 2000.
Pacific Print and Embroidery, LLC (aka Pacific Print Works)
In May 1998, the Company acquired 83% of the outstanding shares
of Pacific Print Works (PPW). The acquisition was accounted for
by the purchase method of accounting, and accordingly, the
purchase price was allocated to assets acquired and liabilities
assumed based on their fair market value at the date of
acquisition. Liabilities assumed in excess of assets acquired was
$629,252 and 213,472 shares of the Company's common stock were
issued to PPW shareholders with a guaranteed share value of $5.00
resulting in goodwill of $1,686,411. In addition, depending on
PPW's performance from April 1, 1998 through March 31, 2001,
additional shares of the Company's common stock would be issued
to the Sellers if minimum earnings levels were met. Based on the
$5.00 guarantee and the Company's share value from October 1998
through March 1999, the Company is obligated to issue additional
shares of common stock to the Sellers. An amendment to the PPW
Stock Purchase Agreement is being evaluated by the Company and
the Sellers in which the Company would issue another 854,000
shares of the Company's common stock to the Sellers and any
additional earnings requirements by PPW or per share value
guarantee by the Company would be eliminated.
Quade, Inc. and U.S. Polo Association, Ltd.
In 1997, Quade, Inc. acquired from the U.S. Polo Association ("US
Polo") the exclusive master license rights to the US Polo name
for the United States and Canada. On July 23, 1998, the Company
purchased Quade by issuing 238,333 shares of its common stock.
Effective October 8, 1998, the Company and Jordache Enterprises,
through its affiliate, Iron Will, Inc. ("Iron Will") formed a
joint venture company, U.S. Polo Association, Ltd. (US Polo), to
hold the master license granted by the US Polo Association and to
perform all licensing activities relating to the US Polo
Association licenses and trademarks for the United States and
Canada. The Company and Iron Will each owned 50% of US Polo and
management and the Board of Directors for US Polo were shared
equally by the Company and Iron Will. For its ownership in US
Polo, the Company contributed, through Quade, Inc., all assets
and liabilities relating to the business of the licensing of US
Polo including the master license and sublicense agreements in
the US Polo name and trademarks. Iron Will contributed $900,000.
The Company's investment in this joint venture was accounted for
under the equity method of accounting. The Company's share of
losses from this joint venture for the year ended March 31, 1999
were $127,268.
-14-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Notes to the Consolidated Financial Statements
September 30, 2000 and 1999
NOTE 2 - MERGERS AND ACQUISITIONS (Continued)
In March 1999, the Company's Board of Directors made a decision
to sell its 50% ownership in U.S. Polo to Iron will. In June
1999, the Company closed its sale of U.S. Polo ownership to Iron
Will. For its sale of U.S. Polo, the Company received the
cancellation of $1,000,000 in debt from Jordache Enterprises, the
cancellation of $13,185 in interest and cash of $221,470. In
addition, the Company received another $70,000 upon the
collection of U.S. Polo royalties earned through May 31, 1999.
The results of operations of Quade, Inc. and U.S. Polo for the
year ended March 31, 1999 has generated a loss of $252,972 on
sales of $232,712. A gain on the disposal of U.S. Polo for
$867,587 was recognized for year ending March 31, 2000. No income
tax benefit or expense has been attributed to the disposal of
U.S. Polo.
In addition, the Company and the former owner of Quade amended
the original stock purchase agreement. Under the amendment, an
additional 451,667 shares of common stock were issued to the
former owner of Quade and to a Quade creditor and the additional
earnings requirements by Quade or U.S. Polo to receive additional
Company common stock was eliminated. In return, the $5.00 per
share guaranteed value of the initial common shares issued to the
Quade shareholder was removed.
NOTE 3 - LINE OF CREDIT
In November 1998, the Company entered into an accounts receivable
financing agreement to sell, with recourse, up to $1 million of
receivables, net of a 15% collection reserve. The Company is
charged .065% daily for all receivables sold and uncollected
under this financing agreement. At September 30 and March 31,
2000, the Company had a payable of $188,231 and $416,171,
respectively, for net funds advanced from this accounts
receivable line of credit. The Company received $2,242,992 and
$1,640,063 from the sale of receivables for the six months ended
September 30, 2000 and 1999 and recognized $60,386 and $42,863 in
interest expense from the discount of selling these receivables,
respectively.
NOTE 4 - NOTES PAYABLE
Notes payable are comprised of the following: September 30,
2000
-----------------
Note payable, unsecured, bearing interest at 12%, payable in
monthly installments of $7,000, including interest. Due on
demand. $ 26,603
Convertible subordinated debentures, originally due June 30, 1996
bearing interest at 12% per annum. Interest payable quarterly. 187,000
Note payable to shareholder of PPW, unsecured. Modified in August
2000. Modified agreement requires payments of $190,000 through
February 2002 without interest. Note will default to $327,084
if payments are not made timely plus 9% interest less payments
made subsequent to modified agreement. A gain on the
modification of debt for $137,084 will be recorded when there
is no risk of default on this debt. 327,084
Note payable to former shareholder of PPW, interest rate of 10%,
due on demand, unsecured. 96,811
-----------------
Subtotal 637,498
-15-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Notes to the Consolidated Financial Statements
September 30, 2000 and 1999
NOTE 4 - NOTES PAYABLE (Continued)
Less current portion (390,414)
-----------------
Long-term portion $ 247,084
=================
Maturities of long-term debt are as follows:
September 30, 2001 $ 390,414
September 30, 2002 247,084
-----------------
$ 637,498
NOTE 5 - NOTES PAYABLE, RELATED PARTIES
September 30,
2000
-----------------
Notes payable to Miltex Industries, secured by 700,000 shares of
GCA and 1,475,000 shares of the Company's common stock.
Interest at 15% with monthly principal and interest payments of
$11,000 with a final balloon payment December 31, 2001. $ 770,054
Note payable to a shareholder, secured by GCA stock. Interest
payable monthly at 13.5% with interest and principal payments
of $5,000 per month. Due October 31, 2001. 315,859
Note payable to a Company owned by a shareholder. Interest
payable at 72% with interest and principal payments due
currently. 76,377
Notes payable to shareholders (includes officers and directors of
the Company). Interest rates average 10.5%. Unsecured, due on
demand, but not expected to be repaid until 2003. 246,951
-----------------
Subtotal 1,409,241
Less current portion (101,732)
-----------------
Long-term portion $ 1,307,509
=================
Maturities of notes payable, related parties are as follows:
September 30, 2001 $ 105,841
September 30, 2002 1,056,449
September 30, 2003 246,951
-----------------
$ 1,409,241
-16-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Notes to the Consolidated Financial Statements
September 30, 2000 and 1999
NOTE 6 - CAPITAL LEASES
Property and equipment payments under capital leases as of March
31, 2000 is summarized as follows:
Year End
March 31,
2001 $ 373,124
2002 225,438
2003 123,785
2004 88,308
2005 32,378
------------
Total minimum lease payments 843,033
Less interest and taxes (151,207)
------------
Present value of net minimum lease payments 691,826
Less current portion (302,551)
------------
Long-term portion of capital lease obligations $ 389,275
============
The Company recorded depreciation on capitalized lease equipment
expense of $232,589 and $196,606 for the years ended March 31,
2000 and 1999, respectively.
NOTE 7 - INCOME TAXES
The Company had net operating loss carry-forwards available to
offset future taxable income. The Company has net operating loss
carry-forwards of approximately $7,500,000 to offset future tax
liabilities. The loss carry-forwards will begin to expire in
2014.
Deferred income taxes payable are made up of the estimated
federal and state income taxes on items of income and expense
which due to temporary differences between books and taxes are
deferred. The temporary differences are primarily caused by the
use of the equity method for reporting investment in
subsidiaries. The deferred tax asset is offset in full by a
valuation allowance because it can not be reasonably determined
that the net operating loss will be useable.
NOTE 8 - PREFERRED STOCK
The shareholders of the Company have authorized 10,000,000 shares
of preferred stock with a par value of $0.001. The terms of the
preferred stock are to be determined when issued by the board of
directors of the Company.
SERIES B:
At March 31, 2000, there are 94,953 shares of series B preferred
stock issued and outstanding. The holders of these series B
preferred shares are entitled to an annual cumulative cash
dividend of not less than sixty cents per share. At March 31,
2000, there is a total of $406,620 of accrued and unpaid
dividends related to the series B preferred stock which have been
included in the accompanying consolidated financial statements.
These series B preferred shares were convertible into shares of
the Company's common stock which conversion option expired March
31, 1995.
-17-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Notes to the Consolidated Financial Statements
September 30, 2000 and 1999
NOTE 9 - COMMON STOCK ISSUED BUT NOT OUTSTANDING
The Company has issued 160,820 shares of common stock which had
been offered to the holders of the Series B preferred stock and
the debentures. The shares have not been accepted by the holders
of those investments as of the date of the consolidated financial
statements. Additionally, the Company has issued 1,475,000 shares
of common stock as collateral for the note payable to Banque SCS
(Note 5).
NOTE 10 - STOCK OPTIONS
In August 1997, the Company's Board of Directors approved the
1997 American Resources and Development Company Stock Option Plan
(Option Plan). Under the Option Plan, 500,000 shares of the
Company's common stock are reserved for issuance to Directors and
employees. Options are granted at a price and with vesting terms
as determined by the Board of Directors.
In August 1999, the Board of Directors granted options to
purchase 696,291 shares of common stock at $0.25. Fifty percent
of these options vest immediately and the remainder vest in
August 2000. The options were issued to various officers and
directors of the Company for past services, risk associated with
various debt incurred by officers for the Company and guarantees
by officers of Company debt, and for future services. No
compensation expense was recognized, as the option price was
greater than the fair market value of the stock at the date of
the option grant.
In December 1997, the Board of Directors granted options to
purchase 39,000 shares of stock at $2.00. These options are
exercisable beginning March 31, 1998, are exercisable over
staggered periods and expire after ten years. No compensation
expense was recognized as the option price was greater than the
fair market value of the stock at the date of the option grant.
In October 1997, the Board of Directors granted options to
purchase 140,000 shares of stock at $2.00. These options are
exercisable beginning March 31, 1998, over staggered periods and
expire after ten years. Compensation expense of $1,458 per month
will be recognized for 40,000 of the options issued over a 4 year
vesting period and $1,458 per month will be recognized for
100,000 of the options over a 10 year vesting period. In July
1998, the Board of Directors changed the terms of the 100,000
options vesting over 10 years. 25,000 of these options were fully
vested and the remainder of the options were canceled. As a
result, compensation expense of $52,498 was recognized for the
year ended March 31, 1998 for the vesting of these options.
Pro forma net income and net income per common share was
determined as if the Company had accounted for its employee stock
options under the fair value method of Statement of Financial
Accounting Standards No. 123.
Pro forma expense in year 1 would be $77,660, $52,402 and $5,646
in years 2 and 3, respectively, with an increase in pro forma
expenses per share of $0.02 in year 1, $0.05 in year 2 and $0.00
in year 3.
-18-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Notes to the Consolidated Financial Statements
September 30, 2000 and 1999
NOTE 10 - STOCK OPTIONS (Continued)
On March 1, 2000, the Company granted options to a company to
purchase up to 340,000 shares of the Company's common stock. This
company is to provide various investor relations services. The
Company is recognizing a $32,385 expense over 4 months based upon
the value of the options as calculated from an option pricing
model.
The options expire September 1, 2001, are not transferrable and
are exercisable at any time at the following rates:
85,000 shares at $1.08 per share;
85,000 shares at $1.32 per share;
85,000 shares at $1.49 per share;
85,000 shares at $1.72 per share.
On January 22, 1999, the Company granted options to a consultant
to purchase up to 160,000 shares of the Company's common stock.
The consultant is to provide various investor and public
relations services through January 21, 2000 and the Company is
recognizing an expense of $6,000 over the term of the services
based upon the value of the options as calculated from an option
pricing model. The options expire in December 31, 2001, are not
transferrable and are exercisable at any time at the following
rates:
40,000 shares at $0.50 per share;
40,000 shares at $1.00 per share;
40,000 shares at $2.00 per share;
40,000 shares at $3.00 per share.
For the pro forma disclosures, the options' estimated fair value
was amortized over their expected ten-year life. The fair value
for these options was estimated at the date of grant using an
option pricing model which was designed to estimate the fair
value of options which, unlike employee stock options, can be
traded at any time and are fully transferable. In addition, such
models require the input of highly subjective assumptions,
including the expected volatility of the stock price. Therefore,
in management's opinion, the existing models do not provide a
reliable single measure of the value of employee stock options.
The following weighted-average assumptions were used to estimate
the fair value of these options:
March 31,
2000
Expected dividend yield 0%
Expected stock price volatility 70%
Risk-free interest rate 6.5%
Expected life of options (in years) 10
-19-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Notes to the Consolidated Financial Statements
September 30, 2000 and 1999
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Office Lease
The Company leases office and warehouse space in Salt Lake City,
Utah and Portland, Oregon and leases space for a retail store in
Oregon. Lease commitments for the years ended March 31, 2001
through March 31, 2003 are $467,478, $421,671 and $67,574,
respectively.
Legal Proceedings
The Company is involved in various claims and legal actions
arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not
have a material adverse effect on the Company's financial
position, results of operations, or liquidity.
NOTE 12 - GOING CONCERN
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. In order to carry
out its operating plans, the Company will need to obtain
additional funding from outside sources. The Company has received
funds from a private placement and debt funding and plans to
continue making private stock and debt placements. There is no
assurance that the Company will be able to obtain sufficient
funds from other sources as needed or that such funds, if
available, will be obtainable on terms satisfactory to the
Company.
NOTE 13 - BUSINESS SEGMENTS
Effective March 31, 1999, the Company adopted SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related
Information." The Company conducts its operations principally in
the contract screen printing and embroidery industry with Pacific
Print works, Inc. and the retail franchise industry with
Fan-Tastic, Inc.
Certain financial information concerning the Company's operations
in different industries is as follows:
For the Six
Months Ended Pacific Corporate
September 30, Print Works Fan-Tastic Unallocated
------------- ----------- ---------- -----------
Net sales 2000 $ 2,610,953 $ 89,344
1999 1,886,860 182,228
Operating income (loss) 2000 (57,078) (126,932)
applicable to industry 1999 2,450 (110,098)
segment
General corporate expenses 2000 $ 185,664
not allocated to industry 1999 114,160
segments
-20-
AMERICAN RESOURCES AND DEVELOPMENT COMPANY
Notes to the Consolidated Financial Statements
September 30, 2000 and 1999
NOTE 13 - BUSINESS SEGMENTS (Continued)
For the Six
Months Ended Pacific Corporate
September 30, Print Works Fan-Tastic Unallocated
------------- ----------- ---------- -----------
Interest expense 2000 (198,842) (24,442) (88,889)
1999 (159,185) (19,278) (99,954)
Other income (expenses) 2000 (968) - 11,000
1999 17,888 3,093 -
Income (loss) from
discontinued operations 2000 - - -
1999 - - $ 867,215
Assets 2000 $ 1,753,669 $ 33,938 4,259
Depreciation and 2000 135,890 3,936 481
amortization 1999 134,860 6,497 2,378
Property and equipment 2000 10,662 - -
acquisitions 1999 - - -
NOTE 14 - SUBSEQUENT EVENTS
On June 7, 2000, the Company announced the signing of a letter of
intent to merge with Royal Avalon S.A. De C.V., a Mexico based
apparel manufacturer. Royal Avalon has been manufacturing
T-shirts in Mexico for the past five years. The letter of intent
between the Company and Royal Avalon calls for the Company to
issue its common stock to Royal Avalon shareholders for the
purchase of the business.
During the past seven months the Company has performed
significant due diligence relating to the viability of the merger
with Royal Avalon. The Company's management and board of
directors believes the merger will not be finalized as the letter
of intent has expired and the merger would not be in the best
interest of the Company's shareholders.
In January 2001 the Company issued 140,000 shares of the
Company's common stock to two officers of the Company as payment
of approximately $80,000 in loans and accrued salaries to the
Company.
In January 2001 the Company issued 220,000 shares of the
Company's common stock to a director of the Company for services
performed.
In January 2001 the Company issued 500,000 shares of the
Company's common stock to a consultant for investor and public
relations services and debt and or capital raising efforts.
-21-
Item 2. Management's Discussion and Analysis or Plan of Operations
Forward Looking Statements
The statements in this report concerning certain expected future expenses as a
percentage of net sales, future financing and working capital requirements and
availability constitute forward - looking statements that are subject to risks
and uncertainties. These risks could cause actual results or activities to
differ materially from those expected. Factors that could adversely affect cost
of sales and general expenses as a percentage of net sales include, but are not
limited to, increased competitive factors, changes in consumer preferences, as
well as an inability to increase sales. Other factors could include a failure to
adequately fund operations. In addition, unfavorable business conditions, or
changes in the general economy could have adverse effects. Factors that could
materially affect future financing requirements include, but are not limited to,
the ability to obtain additional financing on acceptable terms. Factors that
could materially affect future working capital requirements include, but are not
limited to, the factors listed above and the industry factors and general
business conditions noted above.
The following table sets forth, for the periods indicated, selected Company
income statement data expressed as a percentage of net sales.
Three Months Six Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 96.2% 77.2% 82.7% 75.5%
Gross profit 3.8% 22.8% 17.3% 24.5%
General expenses 27.5% 41.0% 30.7% 34.5%
Depreciation and amortization 0.2% 0.7% 0.2% 0.8%
Loss from operations -23.9% -18.9% -13.7% -10.7%
Other income and expenses -0.1% 1.8% 0.4% 1.0%
Interest expense -11.0% -14.1% -11.6% -13.5%
Loss before income taxes
and discontinued operations -34.9% -31.2% -24.9% -23.2%
Discontinued operations 0.0% 5.9% 0.0% 41.7%
Income taxes 0.0% 0.0% 0.0% 0.0%
Net Income (loss) -34.9% -25.2% -24.9% 18.6%
For the three months ended September 30, 2000 ("second quarter fiscal 2001"),
compared to the three months ended September 30, 1999 ("second quarter fiscal
2000"):
Sales for the three months ended September 30, 2000 were $1,338,775 compared to
$941,000 for the three months ended September 30, 1999. Pacific Print Works
("PPW") sales for the second quarter fiscal 2001 were $1,300,605 compared to
$851,386 for the second quarter fiscal 2000. The $449,219 increase in PPW's
revenue was primarily due to a $412,000 increase in sales to a customer in the
second quarter fiscal 2001 compared to the second quarter fiscal 2000. Sales in
the second quarter fiscal 2001 included T-shirt garments of $445,000 in addition
to screen printing revenue.
-22-
Gross profit and the gross profit as a percentage of sales declined for the
second quarter fiscal 2001 as compared to the second quarter fiscal 2000,
$51,395 and 3.8% compared to $214,463 and 22.8%. The decline in gross profit was
primarily due to an increase in production salaries and wages, an increase in
costs of garments sold to customers of $430,000 with a profit of $9,000 on these
garments, an increase in materials for garment finishing, screen and freight
costs and an increase in rent costs. Production salaries and wages increased
$34,000 due to an increase of 5% in production volume and a pay increase to the
top three production management employees. Materials used for garment finishing
and screens increased $25,000 due to the increase in production. Rent costs
increased by $39,000 because PPW required extra space due to the increase in
revenue (i.e., $1,338,775 for second quarter fiscal 2001 compared to $941,000
for second quarter fiscal 2000.)
General and administrative expenses for the first quarter fiscal 2001 were
$368,038 as compared to $386,065 for the second quarter fiscal 2000.
The gain (loss) from operations before other income and expenses for the second
quarter fiscal 2001 was a loss of $319,551 as opposed to a loss of $178,208 for
the second quarter fiscal 2000.
Interest expense for the second quarter fiscal 2001 was $146,622 compared to
$132,311 for the prior year.
For the six months ended September 30, 2000 ("YTD fiscal 2001"), compared to the
six months ended September 30, 1999 ("YTD fiscal 2000"):
Sales for the six months ended September 30, 2000 were $2,700,297 compared to
$2,069,089 for the six months ended September 30, 1999. Pacific Print Works
("PPW") sales YTD fiscal 2001 were $2,610,953 compared to $1,886,860 for the YTD
fiscal 2000 sales. The $724,093 increase in PPW's revenue was primarily due to a
$412,000 and $366,000 increase in sales to PPW's two largest customers YTD
fiscal 2001 compared to YTD fiscal 2000. The increase to these customers is
largely due to PPW's high density printing capabilities in addition to the
overall quality of the printing and related services.
Gross profit and the gross profit as a percentage of sales declined slightly for
YTD fiscal 2001 as compared to the YTD fiscal 2000, $466,673 and 17.3% compared
to $507,204 and 24.5%. The decline in gross profit margin was primarily due to
an increase in production salaries and wages, an increase in costs of garments
sold to customers of $346,000 with a profit of $16,000 on these garments, an
increase in materials for garment finishing, screen and freight costs and an
increase in rent costs. Rent costs increased by $78,000 because PPW required
extra space due to the increase in revenue (i.e., $2.7 million for the six
months ended September 30, 2000 compared to $2.1 million for the six months
ended September 30, 1999.)
General and administrative expenses for the YTD fiscal 2001 were $829,930 as
compared to $713,395 for the YTD fiscal 2000. The increase in general and
administrative expenses is primarily due to $110,000 in investor relation
expenses incurred in the first quarter fiscal 2001.
The gain (loss) from operations before other income and expenses for the YTD
fiscal 2001 was a loss of $369,674 as opposed to a loss of $221,809 for the YTD
fiscal 2000.
Interest expense for the YTD fiscal 2001 was $312,173 compared to $278,417 for
the prior year.
The Company had a $869,336 gain from the sale of its 50% ownership in USPA Ltd.
in the YTD fiscal 2000 without any similar gain for YTD fiscal 2001.
For the three months ended September 30, 1999 ("second quarter 99"), compared to
the three months ended September 30, 1998 ("second quarter 98"):
Sales for the three months ended September 30, 1999 were $941,000 compared to
$926,334 for the three months ended September 30, 1998. Pacific Print Works
("PPW") sales for the three months ended September 30, 1999 were $851,386
compared to $710,549 for the three months ended September 30, 1998. The $140,837
increase in PPW's revenue was primarily due to an increase in sales to PPW's
four largest customers. The increase with these customers is largely due to
PPW's high density printing capabilities in addition to the overall quality of
the printing and related services. PPW expects a similar or larger increase in
sales over the next two quarters based on its relationship and orders with
existing customers in addition to PPW samples with potential new customers.
-23-
Sales for Fan-Tastic declined by $126,171 which was primarily due to second
quarter 99 sales coming from four stores as opposed to six stores in second
quarter 98 and franchise sales of $78,000 in the second quarter 98 as opposed to
zero in the second quarter 99.
Gross profit and the gross profit as a percentage of sales declined for the
second quarter 99 compared to the second quarter 98, $214,463 and 22.8% compared
to $240,324 and 25.9%. The decrease in gross profit was primarily due to the
decline in Fan-Tastic franchise sales as noted above. The gross profit from PPW
operations increased by approximately $60,000.
General and administrative expenses for the second quarter 99 were $386,065 as
compared to $502,147 for the second quarter 98. Fan-Tastic saw a decline in
general and administrative expenses of approximately $50,000 due to less rent
and payroll expenses resulting from the closure of 2 stores. The Company expects
general and administrative expenses over the next two quarter to be similar to
the second quarter 99 amount.
Depreciation and amortization expenses were $6,016 in the second quarter 99
compared to $57,523 for the second quarter 98. This decrease is primarily due to
zero goodwill amortization in the second quarter 99 as the Company wrote off all
goodwill from the PPW acquisition at March 31, 1999.
The loss from operations for the second quarter 99 was reduced to $178,208
compared to $319,546 for the second quarter 98. The reduction in the loss is
primarily due to the increase in sales and the reduction in general and
administrative expenses as discussed above.
Interest expense for the second quarter 99 was $132,311 compared to $135,323 for
the prior year.
The Company had a $55,947 gain from the sale of its 50% ownership in USPA Ltd.
in the second quarter 99. For its sale of USPA Ltd., in June 1999 the Company
received the cancellation of $1,000,000 in debt from Jordache Enterprises, the
cancellation of $13,185 in interest and cash of $221,470. In addition, the
Company received $74,040 in October 1999 from the collection of U.S. Polo
royalties earned through May 31, 1999.
For the six months ended September 30, 1999 ("YTD 99"), compared to the six
months ended September 30, 1998 ("YTD 98"):
Sales for the six months ended September 30, 1999 were $2,069,089 compared to
$1,735,368 for the six months ended September 30, 1998. Pacific Print Works
("PPW") sales for the six months ended September 30, 1999 were $1,886,860
compared to $1,335,507 for the six months ended September 30, 1998. The $551,353
or 41% increase in PPW's revenue was primarily due to an increase in sales to
PPW's four largest customers. The increase with these customers is largely due
to PPW's high density printing capabilities in addition to the overall quality
of the printing and related services. PPW expects a similar or larger increase
in sales over the next six quarters based on its relationship and orders with
existing customers in addition to PPW samples with potential new customers.
Sales for Fan-Tastic declined by $217,663 which was primarily due to YTD 99
sales coming from four stores as opposed to six stores in YTD 98 and franchise
sales of $112,000 YTD 98 as opposed to zero for YTD 98. Franchise sales from
October 1999 through March 31, 2000 are expected to increase compared to April
1, 1999 through September 30, 1998 but franchise sales beyond fiscal 2000 are
based upon the amount of advertising incurred.
Gross profit and the gross profit as a percentage of sales increased for the YTD
99 compared to the YTD 98, ($507,204 and 24.5% compared to $411,803 and 23.7%).
The increase in gross profit was primarily due to the increase in PPW sales and
gross profit for the YTD 99 compared to YTD 98 ($417,000 vs. $246,000) that was
partially reduced by a decline in Fan-Tastic franchise sales as noted above.
General and administrative expenses for the YTD 99 were $713,395 as compared to
$976,692 for the YTD 98. Fan-Tastic saw a decline in general and administrative
expenses of approximately $10,000 due to less rent and payroll expenses
resulting from the closure of 2 stores. The Company expects general and
administrative expenses over the next six months to be similar to the YTD 99
amount.
-24-
Depreciation and amortization was $15,618 in the YTD 99 compared to $66,735 for
the YTD 98. This decrease is primarily due to zero goodwill amortization in the
YTD 99 as the Company wrote off all goodwill from the PPW acquisition at March
31, 1999.
The loss from operations for the YTD 99 was reduced to $221,809 compared to
$667,558 for the YTD 98. The reduction in the loss is primarily due to the
increase in sales and the reduction in general and administrative expenses as
discussed above.
Interest expense for the second quarter 99 was $278,417 compared to $242,365 for
the prior year, which was due to a greater amount of debt outstanding for YTD
99.
The Company had a $869,336 gain from the sale of its 50% ownership in USPA Ltd.
in the YTD 99. For its sale of USPA Ltd., in June 1999 the Company received the
cancellation of $1,000,000 in debt from Jordache Enterprises, the cancellation
of $13,185 in interest and cash of $221,470. In addition, the Company received
$74,040 in October 1999 from the collection of U.S. Polo royalties earned
through May 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company had total assets of $1,791,866, total
liabilities of $5,347,048 and total stockholders' deficit of $3,555,182 compared
with total assets of $2,080,720, total liabilities of $5,038,145 and total
stockholders deficit of $2,957,425 at March 31, 2000. The changes in assets,
liabilities and stockholders equity is due primarily to losses from operations
and interest expense. At September 30, 2000 the Company's current ratio was
approximately .254 current assets to 1 current liabilities.
Management intends to improve its overall financial structure and provide
operating capital through private placement of the Company's common stock and
seeking the conversion of debt to equity. There is no assurance that the Company
will be able to obtain sufficient funds from other sources as needed or that
such funds, if available, will be obtainable on terms satisfactory to the
Company.
Part II - Other Information
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Default upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Effective for fiscal quarters ending after March 15, 2000, the
Securities and Exchange Commission adopted a rule requiring companies'
independent auditors review the companies' financial information prior to the
companies filing their Quarterly Reports on Form 10-QSB with the Commission. The
Company's September 30, 2000 Form 10-QSB was not reviewed prior to submission to
the Commission. A Form 8-K will be filed when the review is completed by the
independent auditors.
Item 6. Exhibits and Reports on Form 8-K
Not applicable.
-25-
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 thereto duly authorized.
AMERICAN RESOURCES AND
DEVELOPMENT COMPANY
(Registrant)
/s/ B. Willes Papenfuss President, Chief Executive February 19, 2001
----------------------- Officer and Director
B. Willes Papenfuss (Principal Executive
Officer)
/s/ Timothy M. Papenfuss Secretary / Treasurer and February 19, 2001
------------------------ Director (Chief Financial
Timothy M. Papenfuss Officer, Chief Accounting
Officer and Controller)
-26-