UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM 10-QSB
(Mark One)
_X_ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended: March 31, 2005
___ TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT
For the transition period from _______ to _______.
Commission file number: 0-19154.
AMERICAN ASSET MANAGEMENT CORPORATION
(Exact name of small business issuer as specified in its charter)
NEW JERSEY 22-2902677
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1280 Route 46 West, Parsippany, New Jersey 07054
(Address of principal executive offices)
Issuers telephone number, including area code: (973) 299-8713
_____________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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 ___ No _X_.
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuers
classes of common equity, as of the latest practicable date: As of
April 18, 2005 there were 1,316,989 shares of the issuers no par
value common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
YES___ NO_X_
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
________________________________________________________________________
March 31, December 31,
___2005__ ____2004___
_____________ASSETS________________ _Unaudited_
Cash $ 174,393 $ 308,387
Mortgage loans held for sale 200,000 360,400
Prepaid expenses and other current assets 5,490 8,174
Total Current Assets 379,883 676,961
Property & Equipment, Net 4,025 4,524
Other Assets 57,966 57,966
Total Assets 441,874 739,451
__LIABILITIES AND STOCKHOLDERS DEFICIT__
Current Liabilities:
Warehouse line of credit 198,000 356,796
Accounts payable, accrued expenses
and other current liabilities 227,561 255,292
Notes payable, related parties 330,540 327,500
Total Current Liabilities 756,101 939,588
__COMMITMENTS AND CONTINGENCIES__
Stockholders Deficit:
Series A Cumulative Convertible Participating
Preferred Stock, no par value; (liquidation
Preference $210,000); 600,000 shares authorized,
210,000 shares issued and outstanding 205,000 205,000
Series B Cumulative Convertible Participating
Preferred stock, no par value; 300,000 shares
authorized, 25,000 shares issued and outstanding
(liquidation preference $25,000) 25,000 25,000
Common stock, no par value; 10,000,000 shares
authorized, 1,316,989 shares issued and
outstanding 3,852,825 3,852,825
Additional paid in capital 171,998 171,998
Accumulated deficit (4,569,050) (4,454,960)
Total Stockholders Deficit (314,227) (200,137)
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT 441,874 739,451
See Accompanying Notes to Consolidated Financial Statements.
-2-
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
___________________________________________________________________________
For the Three Months
______Ended March 31,______
____2005____ ____2004____
Revenues:
Net gain from sale of mortgages $ 2,174 $ 34,076
Broker revenue 48,396 5,700
Interest income 3,513 11,600
Total revenues 54,083 51,376
Expenses:
Employee compensation and commissions 84,120 60,127
Other expenses 74,015 80,775
Losses on derivative instrument, net - 45,782
Interest expense 10,038 18,996
Total expenses 168,173 205,680
Net Loss (114,090) (154,304)
Dividends on Preferred Stock 5,875 5,875
Net Loss Attributable to Common Stockholders (119,965) (160,179)
Loss Per Common Share:
Basic $ (0.09) $ (0.12)
Diluted $ (0.09) $ (0.12)
Weighted Average Number of Shares
Of Common Stock Outstanding:
Basic 1,316,989 1,316,989
Diluted 1,316,989 1,316,989
See Accompanying Notes to Consolidated Financial Statements.
-3-
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
_____________________________________________________________________
For the Three Months
____Ended March 31,____
___2005___ ____2004____
Cash flows from operating activities:
Net loss $(114,090) $ (154,304)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 499 900
Accrued interest expense 3,625 -
Losses on derivative instrument - 45,782
Changes in:
Mortgage loans held for sale 160,400 (317,710)
Prepaid expenses & other current assets 2,684 5,051
Warehouse line of credit (158,796) 311,387
Accounts payable, accrued expenses and other (26,481) 6,026
Net cash used in operating activities (132,159) (102,868)
Cash flows from investing activities:
Purchases of derivative instrument - (76,563)
Decrease in other assets - 270
Net cash used in investing activities - (76,293)
Cash flows from financing activities:
Payments on notes payable (585) (5,980)
Proceeds from issuance of notes payable, related parties - 100,000
Payment of preferred stock dividends (1,250) (5,875)
Net cash provided by/(used in) financing activities (1,835) 88,145
Net decrease in cash (133,994) (91,016)
Cash at beginning of period 308,387 345,947
Cash at end of period $ 174,393 $ 254,931
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 6,561 $ 20,516
Supplemental schedule of non-cash investing
and financing activities:
Accrued preferred stock dividends $ - $ 5,875
See Accompanying Notes to Consolidated Financial Statements.
-4-
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
__________________________________________________________________________
1. BACKGROUND AND BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements of American
Asset Management Corporation and subsidiaries (the Company ) are unaudited.
In the opinion of management, all adjustments and intercompany eliminations
necessary for a fair presentation of the results of operations have been made
and were of a normal recurring nature. These interim consolidated financial
statements should be read in conjunction with the consolidated financial
statements and related notes thereto contained in the Companys 2004 Annual
Report on Form 10-KSB. Reference is made to the Companys annual financial
statements for the year ended December 31, 2004, for a description of the
accounting policies which have been continued without change. Also, refer
to the footnotes within those annual statements for additional details of
the Companys financial condition, results of operations and changes in cash
flows. The details in those notes have not changed except as a result of
normal transactions in the interim. The results of the three months ended
March 31, 2005 are not necessarily indicative of the results of the full year.
Going Concern Uncertainty
The Company has incurred significant operating losses over the past 18
months.During the three months ended March 31, 2005, the Company incurred a net
loss of $114,090 and used $132,159 of cash to fund operating activities. As of
March 31, 2005, the Company had $174,393 remaining in cash. Moreover, as of
this date the Company net worth dropped below the $250,000 level required by the
U.S. Department of Housing and Urban Development (HUD) necessary for the Company
to continue to be a HUD non-supervised lender. In addition, the Company is not
in compliance with the terms of its warehouse line of credit which calls for
maintaining a similar amount of net worth. If the Company is not able to
generate profitable future operations, obtain additional borrowings to fund its
operations, and increase its net worth in order to satisfy its HUD compliance
requirement and warehouse lender the Company may not be able to continue in
existence in its present form, or at all.
2. LOSS PER SHARE
Basic loss per share and diluted loss per share for the three month periods
ended March 31, 2005 and 2004 have been computed by dividing the net loss
attributable to common stockholders for each respective period by the weighted
average shares outstanding during that period. All potential common stock
arising from the conversion of the Companys preferred stock has been excluded
from the computation of diluted loss per share as its effect is antidilutive.
3. RECLASSIFICATION
During the fourth quarter of 2004, the Company completed a review of its
operating statement classifications and determined that changes were required
to conform its presentation to industry and accounting standards. The following
represents the effects of these changes on the Company previously reported
results for the three months ended March 31, 2004:
Operating Statement Caption As Previously Reported As Adjusted
Mortgage Originations Fees $123,709 $ -
Net Gain From Sale of Mortgages $ - $ 34,076
Interest Income $ 27,225 $ 11,600
Application and Loan Commitment Fees $ 16,425 $ -
Employee Compensation and Benefits $ 99,145 $ -
Commissions $ 68,353 $ -
Employee Compensation and Commissions $ - $ 60,127
Other Expenses $ 96,909 $ 80,775
-5-
There was no effect on the Companys net loss for the three months ended
March 31, 2004 as a result of the above reclassifications.
4. WAREHOUSE LINE
On March 11, 2004, the Company obtained a new warehouse line of credit
from a bank in the amount of $7,000,000. This line expired on March 31, 2005.
During March 2005, the Company requested that the bank provide it with a new
warehouse credit line in the amount of $4,000,000 with a due date of June 30,
2005. On April 1, 2005, the request was approved. The line is secured by
residential mortgage loans and a personal guarantee of the Company President.
The line bears various interest rates from prime plus three-quarters to prime
plus one and a half percent. The percentage is directly related to the type
of loan written. The Company is required to maintain several financial
covenants including: 1) maintaining a minimum adjusted net worth of $250,000,
and 2) not exceeding a maximum leverage ratio of 20 to 1. The Company has not
met the minimum adjusted net worth requirement of the new agreement.
5. Notes Payable to Related Parties.
Related party notes payable are unsecured, provide for interest at various
fixed and variable rates per annum, are payable on demand and consist of the
following at:
March 31, 2005 December 31, 2004
Note payable to Chairman of the Board $ 20,000 $ 20,000
Note payable to relative of Chairman 50,000 50,000
Notes payable to other Board Members 249,415 250,000
Accrued interest payable 11,125 7,500
Total $330,540 $327,500
Interest expense on the related party notes payable amounted to $5,737
and $-0- for the three months ended March 31, 2005 and 2004, respectively.
During April 2005, the Company repaid the $50,000 which was borrowed
from the relative of the Companys Chairman.
6. Commitments and Contingencies
On March 25, 1999, the Company, its President, and the Companys wholly
owned subsidiary, Capital Financial Corp (Capital) (collectively, The Company
Defendants) and one of the Companys former directors together with other
individuals were named in an action filed in the Superior Court of New Jersey,
Chancery Division by two New Jersey limited liability companies (the LLCs).
The plaintiffs allege that the Companys former director and certain other
defendants other than the Company Defendants (Other Defendants) misappropriated
assets and opportunities of the LLCs for their own use, engaged in self-dealing
with respect to the LLCs, breached the operating agreements of the LLCs and
converted and embezzled assets and fund of the LLCs. The Company Defendants
are alleged to have aided and abetted the Companys former director in converting
the assets of the LLCs by accepting loans and payments from the LLCs and the
Companys former director and repaying loans to the Company former director in
the form of cash and Company stock.
The LLCs seek declaratory and injunctive relief against the Company
Defendants; an accounting of (1) all shares of Company stock purchased by the
Companys former director and Other Defendants and (2) all payments to or from
the Company and the Companys former director and Other Defendants; imposition
of a lien or equitable trust in favor of the LLCs on shares of the Companys
stock issued to the Companys former director and Other Defendants; and certain
unspecified compensatory and punitive damages, attorneys fees and costs.
-6-
In April 1999, the Court granted a preliminary injunction, which among
other things, enjoins the Company Defendants from allowing the transfer of any
Company stock held in the name of the Companys former director and Other
Defendants and directs the Company and related Defendants to provide an
accounting of all such stock
The Company denies any wrongdoing and believes that the claims against
the Company Defendants are without merit, and that it has meritorious defenses
and intends to defend the action vigorously. The trial in this case has been
postponed by the court numerous times. It is currently scheduled to begin in
August 2005. However, at this time the Company cannot predict its ultimate
liability, if any, that may result from this action.
Required December 31, 2004 HUD filing:
The Company has not yet completed its required electronic HUD filing for
the year ended December 31, 2004.
7. Preferred Stock Dividends
The Company has, as of March 31, 2005, $15,125 of cumulative unpaid
Dividends on their Series A and Series B Cumulative Convertible Preferred
Stock. Of this amount $9,250 has been recorded as a liability as of March
31, 2005, as the Company has declared these dividends.
Item 2.
AMERICAN ASSET MANAGEMENT CORPORATION AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
_________________________________________________________________________
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: The statements which are not historical facts contained in this report
on Form 10-QSB are forward looking statements that involve a number of known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward looking statements. Such factors, include, but are not limited to,
those relating to competition, the ability to successfully market new mortgage
products and services, the economic conditions in the markets served by the
Company, the ability to hire and retain key personnel and other risks detailed
in the Company other filings with the Securities and Exchange Commission. The
words believe, anticipate, expect, intend and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date the statements
were made.
CRITICAL ACCOUNTING POLICIES
Estimates and assumptions are required in the determination of mortgage
loans held for sale. Some of these judgments can be subjective and complex,
and, consequently, actual results may differ from these estimates. For any
individual estimates or assumptions made by the Company, there may be other
reasonable estimates or assumptions. The Company believes, however, that given
facts and circumstances, it is unlikely that applying any such other reasonable
judgment would cause a material adverse effect on the Companys consolidated
results of operations, financial position or cash flows for the periods
represented in this section. The Companys most critical accounting policy is
described below.
-7-
MORTGAGE LOANS HELD FOR SALE: Mortgage loans held for sale represent
mortgage loans originated and held pending sale to interim and permanent
investors. The mortgages are carried at the lower of cost or market. The
Company generally sells whole loans without servicing rights retained. Gains
or losses on such sales are recognized at the time legal title transfers to
the investor based upon the difference between the sales proceeds from the
final investor and the basis of the loan sold, adjusted for net deferred loan
fees and certain direct costs and selling costs. The Company defers net loan
origination fees as components of mortgage loans held for sale on the balance
sheet. Such costs are not amortized and are recognized into income as a
component of the gain or loss upon sale.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2005 Compared to the Three Months Ended
March 31, 2004.
Total revenues for the three months ended March 31, 2005 were $54,083
compared to $51,376 for the three months ended March 31, 2004, an increase of
$2,707 or approximately 5.3%. The increase was primarily attributable to an
increase in broker revenue to $48,396 from $5,700, an increase of $42,696, or
approximately 649% in the comparable 2004 period. This was partially offset by a
decrease of $8,087 in mortgage interest income to $3,513 or approximately 69.7%
from $11,600 in the comparable 2004 period and by a decrease in the net gain
from sale of mortgages of $31,902 to $2,174 from $34,076, or 93.6%, in the
comparable 2004 period, from Capital, the Company mortgage banking subsidiary.
The decrease in mortgage activity was due to a decrease in mortgage closings
where the Company acted as a banker and a reduced amount of closed loans pending
sale to institutional investors during the 2005 period. This was partially
offset by an increase in brokered loans during the period. In response to a
lower amount of closed loans during the three month period ended March 31, 2005,
the Company terminated its association with 5 of its 7 member retail sales
force.The Company continues to focus on expanding its retail sales force by
seeking to hire sales personnel with established sources of non-refinance
purchase mortgages who will work on a commission basis.
During April and May 2005, the Company hired two new sales persons, one of
whom has 30 years of mortgage banking experience. The Company feels that in
order to expand its business and have any chance of becoming profitable it must
hire sales personnel who are willing to build their respective sources of
business by developing long term relationships with the traditional sources of
purchase mortgages. These sources are primarily realtors, accountants,
financial planners, and real estate attorneys.
The Company has been disappointed in the past by the type of refinance
Mortgage oriented sales personnel it has been associated with and accordingly
has decided to hire individuals who it believes exhibit strong sales ability or
who appear to have a successful sales background, not necessarily in mortgage
banking, and to train those individuals to build repeat business and referral
relationships. To that end, during May 2005, the Company has appointed the 30
year mortgage banker as its new sales manager. The Company believes that its
new manager has the experience to hire and train a new sales force with a goal
of establishing continuing sources of purchase mortgages for the Company and not
solely by refinance mortgages, as has been the Companys retail sales experience
in the past. Additionally, the Company hopes that increasing and training its
own retail sales force will lessen its dependency on wholesale customers as
sources of business.
There can be no assurance the Company will be successful in its
relationships with wholesale correspondents and retail loan originators as it
faces intense competition from the other lenders it competes with for this
business, many of which have greater resources and experience than the Company.
-8-
As of December 31, 2004, the Company had a $7,000,000 warehouse line of
credit from a mortgage warehouse lender which provided the Company with a
facility to borrow funds secured by originated residential mortgage loans which
were temporarily warehoused and then sold. The warehouse line of credit, which
expired on March 31, 2005, was secured by the personal guarantee of the
Companys President. On April 1, 2005 the Company received approval of a new
$4,000,000 warehouse line of credit, secured by the personal guarantee of the
Companys President, with the same commercial lending institution at favorable
terms to the Company. This line expires on June 30, 2005. The Company believes
that the amount of this new credit line will be sufficient to meet the Companys
mortgage warehouse needs at present. The Companys net worth, as of April 1,
2005, did not meet the minimum net worth covenant agreed upon with the new
mortgage warehouse lender and the Company is currently not in compliance with
the net worth requirement. In the event that the Companys net worth falls below
the minimum of $250,000, the warehouse lender has the right to lower the credit
line to a maximum of 20 times the net worth of Capital The lender was advised in
May 2005 that as of March 31, 2005 the net worth of Capital was approximately
$196,431. The lender did not change the credit line as the Company has only
borrowed approximately $198,000 from the credit line as of March 31, 2005. The
$198,000 warehouse credit line loan was paid off during April 2005. As of May
18, 2005 the Company has not borrowed funds under its credit line as it has only
brokered loans in process for which it does not use the credit line. If the
Company warehouse credit line were not renewed on June 30, 2005, the Company
believes it could secure a warehouse credit line from another lending
institution. However, if the Company is not successful in securing a new
warehouse credit line the Company could transact business as a broker although
its operations would be materially adversely affected by such an event. The
Company will borrow under its warehouse line of credit only against takeout
commitments issued by qualified investors who have pre-approved the loans and
committed to purchase the closed loan from the Company. By using the warehouse
funds instead of table funding, (funding provided by the investor who purchases
the loan from the Company), the Company has generally been able to receive more
favorable pricing from its investors which the Company believes has made it more
competitive in the marketplace. The warehouse line has also allowed the Company
to sell loans to investors which do not table fund and only purchase closed
loans from its correspondents, i.e. Capital.
During the three month period ended March 31, 2005, the Company continued
marketing its services to the public through the Internet using its website
home page linked to a major website belonging to a national provider of
mortgage loans and other financial statistics. The national providers
website provides the public with the Company lending programs and interest
rates on a daily basis, in addition to the rates of other lenders that the
Company competes with. As a result of its marketing through the Internet, the
Company has received numerous inquiries which have resulted in mortgage loan
applications and closings from persons seeking mortgage financing.
During the three months ended March 31, 2005, Capital received 20 mortgage
applications aggregating a principal amount of $5,253,100 compared to 79
applications aggregating a principal amount of $18,579,018 during the period
ended March 31, 2004. The decrease of 59 or approximately 74.7% in number of
applications is a decrease of $13,325,918 or approximately 71.7% in principal
amount when compared to the three months ended March 31, 2004. The decrease
in applications was primarily a result of poor sales force performance during
the 2005 period which resulted in a decreased amount of applications and to a
lesser extent, an absence of the Company wholesale business. The absence
was due to the loss of the Companys primary wholesale customer due to that
customer becoming a mortgage banker. During the three months ended March 31,
2005, Capital closed 15 residential mortgage loans aggregating approximately
$3,661,219 compared to 30 closed loans aggregating approximately $7,865,306 a
decrease in number of 15 or 50.0% and a decrease in amount of $4,204,087 or
approximately 53.5% when compared to the three months ended March 31, 2004.
-9-
At March 31, 2005, the Company had approximately 11 residential mortgage
applications in process in the principal amount of $2,553,000 compared to
57 residential mortgage applications in process in the principal amount of
$10,730,137 at March 31, 2004, a decrease of 46 in number or approximately
80.7% and a decrease of $8,177,137 in amount, or approximately 76.2%.
Total expenses for the three months ended March 31, 2005 were $168,173 a
decrease of $37,507 or approximately 18.2% from $205,680 in the comparable
2004 period. The decrease in expenses was primarily due to an absence of
losses on derivative instruments during the period ended March 31, 2005 as
compared to losses on derivative instruments of $45,782 during the comparable
2004 period, a decrease in other expenses of $6,760 which was an approximately
8.4% decrease from $80,775 during the same period in 2004 to $74,015 during
the period ended March 31, 2005, and to a lesser extent a decrease of $8,958
or approximately 47.2% in interest expense to $10,038 from $18,996 in the
same period of 2004. This was partially offset by an increase in employee
compensation and benefits of $23,993 or approximately 39.9% from $60,127
during the same period in 2004 to $84,120 during the period ended March 31,
2005. As a percentage of revenues, expenses were approximately 210.9% in
the current period compared to 300.3% in the comparable 2004 period.
As a result of the foregoing and the effect of cumulative preferred stock
dividends of $5,875, the Company loss attributable to common stockholders
for the three months ended March 31, 2005 was $119,965 or $0.09 per common
share, compared to net loss of $160,179 or $0.12 per common share for the
three months ended March 31, 2004.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2005, the Company had cash of $174,393 compared to
$308,387 at December 31, 2004, a decrease of $133,994 or approximately
43.4%. This decrease is primarily attributable to net cash used in
operating activities of $132,159 which is comprised of $114,090 in net
losses, and a decrease in accounts payable and accrued expenses of $26,481.
The Company utilized one $7,000,000 warehouse line of credit for its
daily mortgage loan funding operations. This line of credit expired on
March 31, 2005 and was replaced on April 1, 2005 by a new line with the same
lender for a reduced amount of $4,000,000 at similar rates of interest.
The current warehouse line, which expires on June 30, 2005, enables the
Company to borrow funds secured by residential mortgage loans which will
be temporarily accumulated or warehoused and then sold. At March 31, 2005,
the Company had borrowed $198,000 from its warehouse line of credit
representing approximately $200,000 in closed loans ready for sale. Funds
from the Companys warehouse line of credit are used for and are secured by
residential mortgage loans and a personal guarantee of the Company President.
The terms of the warehouse line of credit and the Company internal control
policies require that a commitment be obtained from the purchaser, prior to
the Company closing the loan with the mortgagor. Accordingly, the Company
typically does not record any provision for uncollectible mortgage loans held
for sale. At March 31, 2005 the Company was not in compliance with the net
worth requirement of the old warehouse credit line and the Company is not in
compliance with the net worth requirement of its current credit line.
The Company incurred a net loss attributable to common stockholders of
approximately $120,000 during the three months ended March 31, 2005. Also, as
of March 31, 2005, the Company had a working capital deficit (current assets
less current liabilities)of $376,218. These matters raise substantial doubt
about the Companys ability to continue as a going concern.
-10-
Managements plans to address its need for financing to continue its
operations include raising additional proceeds from debt transactions with
related parties and to increase revenue and reduce expenses to improving
their operating performance. However, there can be no assurance that the
Company will be successful in this regard or will be able to eliminate both
its working capital deficit and its operating losses. The accompanying
consolidated financial statements do not contain any adjustment which may
be required as a result of this uncertainty.
During April 2005 the Companys President, who is the Companys sole
executive officer, allowed his salary to accrue in an effort to preserve
the Company cash. However, the Companys President cannot work for the
Company indefinitely without a salary. In the event the Company is
unsuccessful in raising operating capital and/or by restoring profitability,
the Companys President has advised the Company that he will seek employment
elsewhere.
During April 2005, the Company repaid the $50,000 note payable which was
owed to a relative of the Company Chairman.
During May 2005 the Company terminated the employment of its mortgage
underwriter because the underwriter was underutilized due to the higher
percentage of brokered loans, approximately 91%, as compared to loans which
are underwritten by the Company. The Company feels that it can either rehire
or attract a new underwriter on the same terms if and when business conditions
warrant doing so.
As of May 12, 2005, the Company had not declared the dividend payment on
its Class A and Class B Cumulative Convertible Preferred Shares which were due
to be declared and paid on April 1, 2005.
Item 3. Controls and Procedures
At the end of the period covered by this report, an evaluation was carried
out under the supervision and with the participation of the Company management,
including the Chief Executive Officer (CEO) who also serves as the Chief
Financial Officer (CFO), of the effectiveness of the Companys disclosure
controls and procedures. Based on that evaluation, the CEO/CFO has concluded
that the Companys disclosure controls and procedures are effective to ensure
that all information required to be disclosed by the Company in reports that it
files or submits under the Securities and Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.
During the quarter ended March 31, 2005, there were no changes in the
Company internal control over financial reporting that have materially affected,
or are reasonably likely to materially affect, its internal control over
financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Part 1 - Item 3 contained in the Companys 10-KSB for
the year ended December 31, 2004 for further information relating to the pending
action commenced against, among others, the Company and its President described
below. See also Note 6 to the consolidated financial statements included in
Item 1 of this Form 10-QSB.
-11-
Item 2. Defaults Upon Senior Securities.
As of May 12, 2005, the Company had not declared the dividend payment on
its Class A and Class B Cumulative Convertible Preferred Shares, in the amount
of $5,875 which were due to be declared and paid on April 1, 2005.
Item 5. Other Information
On April 1, 2005 the Company entered into a new $4,000,000 warehouse credit
line with Independence Community Bank. This credit line expires on June 30,
2005. The warehouse line of credit enables the Company to borrow funds secured
by residential mortgage loans which will be temporarily accumulated or
warehoused and then sold. Funds from this line of credit are used for and are
secured by residential mortgage loans and a personal guarantee of the Companys
President. The terms of the warehouse line of credit and the Companys internal
control policies require that a commitment be obtained from the purchaser, prior
to the Company closing the loan with the mortgagor. Accordingly, the Company
typically does not record any provision for uncollectible mortgage loans held
for sale. The Company was not in compliance with the net worth requirements of
this line of credit on April 1, 2005 or as of the date of this report.
Item 6. Exhibits
(a) Exhibits
10.1 Extension of Warehouse Line of Credit between the
Company and Independence Community Bank, dated April 1, 2005
31.1 Certification of Principal Executive Officer and Chief
Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Principal Executive Officer and Chief
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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 ASSET MANAGEMENT CORPORATION
(Registrant)
Date: May 23, 2005 By:_s/Richard G. Gagliardi__________
Richard G. Gagliardi
Chairman, President and Chief
Executive Officer (Principal
Executive and Financial Officer)
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