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 March 31, 2004
----------------
Commission File Number: 000-25947
NORTH AMERICAN LIABILITY GROUP, INC.
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(Name of Small Business issuer in its Charter)
Florida 65-0386286
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
2929 East Commercial Boulevard, Suite 610, Ft. Lauderdale, FL 33308
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(Address of Principal Executive Offices) (Zip Code)
954-771-5500
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(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
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
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference or any amendment to this Form 10-QSB.
[ ]
The issuer is a developmental stage company, and as such has yet
to generate any substantial revenues.
As of March 31, 2004 the issuer had 125,284,898 shares of common
stock outstanding.
Documents incorporated by reference: NONE
Transition Small Business Disclosure Format (check one):
YES [ ] NO [X]
NORTH AMERICAN LIABILITY GROUP, INC.
Form 10-QSB Index
Page
Part I: Financial Information 1
Item 1. Financial Statements (Unaudited) 1
Condensed Consolidated Balance Sheet - March
31, 2004 (Unaudited) 1
Condensed Consolidated Statements of
Operations - Three months ended March 31,
2004 and 2003 and cumulative for the period
from March 23, 1999 (inception) through
March 31, 2001 (Unaudited) 2
Condensed Consolidated Statements of Cash
Flows - Three months ended March 31, 2004
and 2003 and cumulative for the period
from March 23, 1999 (inception) through
March 31, 2004 (Unaudited) 3
Notes to Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis or
Plan of Operation 11
Part II: Other Information 14
Item 1. Legal Proceedings 14
Item 2. Change in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
NORTH AMERICAN LIABILITY GROUP, INC.
AND SUBSIDIARY
(A Development Stage Company)
Condensed Consolidated Balance Sheet
(Unaudited)
March 31, 2004
Assets
------
Current assets:
Cash $ 23,446
Prepaid expenses 2,985
-----------
Total current assets 26,431
Property and equipment, net 11,432
Other assets
Deposits 4,400
Due from related parties 44,622
-----------
Total other assets 49,022
-----------
Total assets $ 86,885
===========
Liabilities and Stockholders' Deficiency
----------------------------------------
Current liabilities:
Accounts payable $ 174,595
Accrued expenses 763,783
Due to related parties 260,968
Notes payable 551,466
-----------
Total current liabilities 1,750,812
Stockholders' deficiency:
Series 2001 convertible preferred stock 42,470
Series 2001A convertible preferred stock -
Series 2001B convertible preferred stock -
Class B preferred stock -
Common Stock 2,868,109
Accumulated deficit (4,574,506)
-----------
Total stockholders' deficiency (1,663,927)
Total liabilities and stockholders'
deficiency $ 86,885
===========
See accompanying notes to the consolidated financial statements.
1
NORTH AMERICAN LIABILITY GROUP, INC.
AND SUBSIDIARY
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
Cumulative for
Three Three the period from
months months March 23, 1999
ended ended (inception) to
March 31, March 31, March 31
2004 2003 2004
----------- ----------- --------------
Gross revenues $ - $ - $ 45,744
Cost of sales - - 264
----------- ----------- -----------
Net revenue - - 45,480
Operating expenses 175,555 - 3,728,408
Other income(expenses):
Other income 2,122 - 61,210
Interest expense (95,808) (29,327) (412,761)
Impairment of assets - - (315,027)
Provision for loss on
non-cancelable leases - - (225,000)
----------- ----------- -----------
Total other income(expenses) ( 93,686) ( 29,327) (891,578)
----------- ----------- -----------
Net (loss) $ (269,241) $ ( 29,327) $(4,574,506)
=========== =========== ===========
Loss per common share:
Basic and diluted $ (0.00) $ (0.00)
=========== ===========
Weighted average common shares
outstanding: 169,829,162 7,058,158
=========== ===========
Basic and diluted
See accompanying notes to the consolidated financial statements.
2
NORTH AMERICAN LIABILITY GROUP, INC.
AND SUBSIDIARY
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Cumulative for
Three Three the period from
months months March 23, 1999
ended ended (inception) to
March 31, March 31, March 31
2004 2003 2004
----------- ----------- ---------------
Cash flows from operating activities
Net loss $ (269,241) $ (29,327) $ (4,574,506)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Forgiveness of related party
note payable - - (59,088)
Depreciation and amortization 424 - 294,245
Loss on impairment of assets - - 315,027
Provision for loss on non-cancelable
leases - - 225,000
Common stock issued for services - - 2,055,405
Increase (decrease) in cash caused
by changes in:
Other current assets (1,570) - (2,985)
Other assets - - (4,400)
Accounts payable (17,560) - 174,595
Accrued expenses 178,675 12,452 603,790
Due from related parties (44,622) 16,875 476,383
----------- ----------- ------------
Net cash used in operating activities (153,894) - (496,534)
Cash flows from investing activities
Acquisition of property and equipment (9,359) - (286,358)
Cash flows from financing activities
Repayment of note payable to related party - (200,000)
Proceeds from issuance of preferred stock - - 49,000
Proceeds from issuance of capital stock 160,000 - 806,174
Due to related parties (949) - (400,302)
Proceeds from issuance of notes payable - - 551,466
----------- ----------- ------------
Net cash provided by financing activities 159,051 - 806,338
----------- ----------- ------------
Net increase (decrease) in cash (4,202) - 23,446
Cash at beginning of period 27,648 - -
----------- ----------- ------------
Cash at end of period $ 23,446 $ - $ 23,446
=========== =========== ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ - $ - $ 15,310
=========== =========== ============
See accompanying notes to the consolidated financial statements.
3
NORTH AMERICAN LIABILITY GROUP, INC.
AND SUBSIDIARY
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Cumulative for
Three Three the period from
months months March 23, 1999
ended ended (inception) to
March 31, March 31, March 31
2004 2003 2004
----------- ----------- ---------------
Noncash activity
Purchase of intangible assets from related party $ - $ - $ 399,353
=========== =========== ============
Reduction of capital lease obligation upon
abandonment of assets $ - $ - $ 65,006
=========== =========== ============
See accompanying notes to the consolidated financial statements.
4
NORTH AMERICAN LIABILITY GROUP, INC.
AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
(1) Statement of Information Furnished
----------------------------------
The accompanying unaudited condensed consolidated
financial statements as of March 31, 2004 and for three
months ended March 31, 2004 and 2003 and the cumulative
period from March 23, 1999 (Inception) to March 31, 2004
have been prepared in accordance with accounting
principles generally accepted in the United States of
America for interim financial information and pursuant
with the rules and regulations of the Securities and
Exchange Commission for Form 10-QSB. Accordingly, the
condensed consolidated financial statements do not include
all the information and notes to the financial statements
required by accounting principles generally accepted in
the United States of America for complete financial
statements. In the opinion of management, the
accompanying unaudited condensed consolidated financial
statements contain all adjustments (consisting of only
normal recurring adjustments) considered necessary for a
fair presentation of North American Liability Group, Inc.
and Subsidiary's financial position, results of
operations, and cash flows for the periods presented.
These results have been determined on the basis of
accounting principles generally accepted in the United
States of America and applied consistently with those used
in the preparation of the Company's 2003 financial
statements.
The results of operations for the interim periods ended
March 31, 2004 and 2003 are not necessarily indicative of
the results to be expected for the full year. These
interim financial statements should be read in conjunction
with the December 31, 2003 financial statements and
related notes included in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 2003.
(2) Loss Per Share
--------------
Basic loss per common share amounts are based on the
weighted average shares outstanding of 169,829,162 and
7,058,158 for the quarters ended March 31, 2004 and 2003,
respectively. Diluted loss per common share amounts
reflect the potential dilution that could occur if
convertible preferred shares are converted into common
stock. No conversion is assumed if such conversion would
have an anti-dilutive effect on diluted loss per common
share amounts.
(3) Recent Financial Accounting Standards
-------------------------------------
In January 2003, the FASB issued FIN No. 46,
"Consolidation of Variable Interest Entities, "("FIN
46"). FIN 46 clarifies the application of Accounting
Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity
investors do not
4
(3) Recent Financial Accounting Standards, Continued
------------------------------------------------
have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the
entity to finance its activities without additional
subordinated financial support from other parties. FIN 46
applies immediately to variable interest entities (VIE's)
created after January 31, 2003, and to variable interest
entities in which an enterprise obtains an interest after
that date. It applies in the first fiscal year or interim
period beginning after June 15, 2003, to variable interest
entities in which an enterprise holds a variable interest
that it acquired before February 1, 2003.
The Company has not identified any VIE's for which it
is the primary beneficiary or has significant involvement.
In December 2003, the FASB issued FIN No. 46 (revised
December 2003), "Consolidation of Variable Interest
Entities" ("FIN 46-R") to address certain FIN 46
implementation issues. The effective dates and impact of
FIN 46 and FIN 46-R are as follows:
(i) For special purpose entities (SPE's) created prior to
February 1, 2003, the Company must apply either the
provisions of FIN 46 or early adopt the provisions of
FIN 46-R at the end of the first interim or annual
reporting period ending after December 15, 2003.
(ii) For non-SPE's created prior to February 1, 2003, the
Company is required to adopt FIN 46-R at the end of the
first interim or annual reporting period ending after
March 15, 2004.
(iii) For all entities, regardless of whether a SPE, that were
created subsequent to January 31, 2003, the provisions
of FIN 46 were applicable for variable interests in
entities obtained after January 31, 2003. The Company
is required to adopt FIN 46-R at the end of the first
interim or annual reporting period ending after March
31, 2004.
The adoption of the provisions applicable to SPE's and all
other variable interests obtained after January 31, 2003
did not have a material impact on the Company's
consolidated financial statements. The Company is
currently evaluating the impact of adopting FIN 46-R
applicable to non-SPE's created prior to February 1,
2003, but does not expect a material impact.
(4) Capitalization
--------------
(A) COMMON STOCK
In the first half of 2003, the Company issued 6,000 shares
of its common stock in voluntary conversions of 2,800
shares of its Series 2001 Convertible Preferred stock.
On July 30, 2003, the Majority Shareholders and the Board
of Directors approved amendments to the Articles of
Incorporation which were designed to reorganize the
capital structure of the
5
(4) Capitalization, Continued
-------------------------
Company. The Articles increased the total number of
authorized common shares to 500,000,000. The stock has
no par value .
On September 1, 2003, the Company affected a one hundred-
for-one reverse split of its outstanding common stock.
In accordance with the Plan and Agreement of Merger, as
described in Note 1, the Company issued 56,625,000 shares
of common stock as a result of a 75-to-1 conversion of its
Series 2001A Convertible Preferred stock outstanding at
the time of the merger. In addition, the Company issued
160,000,000 shares of common stock in a 16-to-1 exchange
for the 10,000,000 issued and outstanding shares of Nor-
American Liability Corporation.
Following the merger, 31,125,000 shares of common stock
were issued in a voluntary 1-to-1 conversion of
outstanding shares of Series 2001A convertible preferred
stock.
During the first quarter of 2004, shareholders were issued
35,304,000 shares of common stock in a conversion of
35,304,000 shares of Series 2001A Preferred stock.
Also during the first quarter, the Company's Chairman,
Bradley Wilson, contributed capital in the amount of
$160,000 in exchange for 160,000 shares of restricted
common stock.
At March 31, 2004 and 2003, the Company had outstanding
125,284,898 and 7,058,158 shares of common stock,
respectively.
(B) PREFERRED STOCK
In 2001, Series 2001 Convertible Preferred stock was
approved to be issued in a private offering as follows:
(i) Holders of Series 2001 Convertible Preferred
Stock shall receive preference in the event of
liquidation, dissolution or winding up of the corporation.
Specifically, in the event of liquidation, dissolution or
winding up holders of Series 2001 Preferred Stock shall be
paid Five Dollars ($5.00) per share for each Preferred
Share, plus all declared and unpaid dividends.
(ii) Shares of Series 2001 Convertible Preferred Stock
shall have no voting rights.
(iii) Each share of Series 2001 Convertible Preferred
Stock may, at the option of the holder, be converted into
common stock of the corporation at any time after twelve
months after the issuance of such shares. The conversion
ratio per share of the Series 2001 Convertible
6
(4) Capitalization, Continued
-------------------------
Preferred Stock shall be the lesser of $5.00 per share or
30% below the trading price of the common stock as priced
the prior trading day to conversion. This conversion
ratio is subject to change in the event of subdivision
of common stock or issuance of a stock dividend.
During the year ended December 31, 2003, the Company
cancelled 2,800 shares of its Series 2001 Convertible
Preferred stock in voluntary conversions to 6,000 shares
of its common stock. As of March 31, 2004, the number of
shares outstanding of Series 2001 Convertible Preferred
stock was 22,100.
On July 30, 2003, the Majority Shareholders and the Board
of Directors approved amendments to the Articles of
Incorporation which were designed to reorganize the
capital structure of the Company. The Articles increased
the total number of authorized preferred shares to
150,000,000, of which 100,000,000 are Series 2001A
Convertible Preferred stock with the following
characteristics:
(i) Each share of 2001A Convertible Preferred Stock
entitles the holder thereof to one vote, either in person
or by proxy, at meetings of shareholders, and such vote
shall be equal to the voting rights of the common stock
and shall be counted with the common stock toward election
of directors or such other action as the class of common
stock shall be entitled.
(ii) Each share of Series 2001A Convertible Preferred
Stock may, at the option of the holder, be converted into
shares of common stock on a one for one basis at any time
after February 1, 2002.
Prior to the Plan and Agreement of Merger taking effect,
the Company cancelled 775,000 shares of Series 2001A
Convertible Preferred shares held by the former President
of the Company.
In accordance with the Plan and Agreement of Merger, the
Company issued 94,375,000 shares of Series 2001A
Convertible Preferred in a 125-to-1 forward stock split.
Following the merger, 31,125,000 outstanding shares of
Series 2001A convertible preferred stock were cancelled in
a voluntary 1-to-1 conversion to shares of common stock.
On December 15, 2003, the Company entered into a Sales
Restriction Agreement with certain holders of Series 2001A
Preferred stock to prohibit the holders from selling or
otherwise transferring their interest in the stock between
June 20, 2003 and June 19, 2004. Subject to the Agreement
are 4,062,900 Common shares and 6,771,500 Series 2001A
Preferred shares.
7
(4) Capitalization, Continued
-------------------------
During the first quarter of 2004, shareholders converted
35,304,000 shares of Series 2001A Preferred stock one-for-
one to shares of common stock .
At March 31, 2004, 27,946,000 shares of Series 2001 A
Convertible Preferred stock were issued and outstanding.
In the above action of July 30, 2003, the Company voided
the Series 2001 B Convertible Preferred stock and
cancelled its 2,727,444 outstanding shares. It also
created a new Class B Preferred stock, the main feature of
which is the existence of ten votes per share for each
share of this series.
On February 2, 2004, the Company cancelled 158,000,000
shares of its Common stock. The cancelled shares were
held by Bradley Wilson, Chairman of the Company and a non-
related party, each canceling 79,000,000 shares. In
consideration of canceling their shares, 30,000,000 and
20,000,000 shares of Class B Preferred stock were issued
to Mr. Wilson and the non-related party, respectively.
Shares of Class B Preferred stock carry 10 votes per share
and cannot be converted into common stock prior to
September 1, 2005.
At March 31, 2004 there were 50,000,000 outstanding Class
B Preferred shares.
(5) Related Party Transactions
--------------------------
In February, 2004 the Company issued three notes totaling
$42,000 to a related party, FJW Pendylum, Inc., in which
a shareholder of the Company is a shareholder of FJW
Pendylum, Inc. The notes bear interest at 6% and are due
in February 2005. At March 31, 2004, $42,000 is
outstanding on the notes and included in due from related
parties in the accompanying consolidated financial
statements.
The president, current and former principal stockholders,
and certain employees from time to time made advances to
the Company. The advances have been made for financing
and working capital purposes. At March 31, 2004 and 2003
respectively, the total of such advances and accrued
interest was $260,968 and $468,043.
The Company has an agreement with KIWI Network Solutions,
Inc to share space in the Company's executive offices.
Under the terms of this agreement the Company receives
back 50% of the rent paid under its lease agreement for
the Ft. Lauderdale office space. At March 31, 2004,
approximately $2,600 is owed to the Company relating to
this agreement and is included in due from related parties
in the accompanying consolidated financial statements.
The Company leases an apartment for one member of its
Board of Directors. The lease is non-cancelable and
expires November 30, 2004. Rent and fees paid in total at
March 31, 2003 amount to $8,148. Rent paid in the quarter
ended March 31, 2004 amounted to
8
(5) Related Party Transactions, Continued
-------------------------------------
$4,710. Rent remaining to be paid is $10,990, all of
which is due to be paid in 2004.
The Company has a one year agreement to reimburse
apartment rental costs for one of its Directors. The
amount of reimbursement paid during the quarter ended
March 31, 2004 was $7,500. The amount of rental
reimbursement remaining to be paid in 2004 is $7,500.
The Company, through its wholly-owned subsidiary North
American Liability Corporation ("the Subsidiary"), has an
Employment Agreement with the Subsidiary's Chairman and
CEO
Harold Fischer. Under this agreement, which is for a
term of three years, Fischer is to receive a base annual
salary of $200,000 plus an incentive bonus of up to one
time his salary based upon his performance. The
Subsidiary was also to issue, upon execution of the
agreement, to the employee 1,000,000 shares of common
stock. Furthermore, the Subsidiary was to grant to the
employee, at the date of the agreement, 4,000,000 Rule 144
shares of common stock which are to be held in escrow and
released to the employee in three equal installments on
the first, second, and third anniversary of employment.
No shares have been issued by the Subsidiary under this
Employment Agreement.
The Subsidiary also has a Consulting Agreement with James
Jarboe as Consultant and Director. Under this agreement,
which is for a term of two years, Jarboe is to receive
base annual compensation of $24,000 plus a bonus to be
paid in cash and stock of 10% of any debt or equity
capital raised. No bonus has been paid for capital
raising in the quarter ended March 31, 2004. A bonus will
also be paid for the procurement of business at the Group
or Policy level for a fair commercial market fee to be
determined at the time the business is completed with the
Subsidiary. No bonus has been paid for business
procurement in the quarter ended March 31, 2004. The
Subsidiary was also to grant, immediately upon execution
of the Consulting Agreement, 2,000,000 Rule 144 shares of
common stock. No shares have been issued by the
Subsidiary under this Consulting Agreement.
The Subsidiary has a Consulting Agreement with David
Tews as Consultant and Director. Under this agreement,
which is for a term of two years, Tews is to receive base
annual compensation of $24,000 plus a bonus to be paid in
cash and stock of 10% of any debt or
equity capital raised. No bonus has been paid for capital
raising in the quarter ended March 31, 2004. A bonus will
also be paid for the procurement of business at the Group
or Policy level for a fair commercial market fee to be
determined at the time the business is completed with the
Subsidiary. No bonus has been paid for business
procurement in the quarter ended March 31, 2004. The
Subsidiary was also to grant, immediately upon execution
of the Consulting Agreement, 2,000,000 Rule 144 shares of
common stock. No shares have been issued by the
Subsidiary under this Consulting Agreement.
In December 2003, the Company settled its note payable
to the former controlling shareholder. With principal and
accumulated interest, the debt amounted to $444,088. In
the settlement, the Company paid $200,000, the current
president contributed $185,000,
9
(5) Related Party Transactions, Continued
-------------------------------------
and $59,088 was forgiven.
(6) Accrued Expenses
----------------
Accrued expenses at March 31, 2004 consisted of the
following:
2004
-----------
Accrued lease obligations 309,718
Accrued interest 297,297
Accrued salaries 156,768
763,783
(7) Subsequent Transactions
-----------------------
On May 7, 2004 the Company announced that it had closed a
private placement wherein an investor contributed $250,000
in return for 500,000 shares of restricted common stock.
On May 3, 2004, the Subsidiary's chairman and two
directors resigned their positions from the Subsidiary's
board of directors and their respective positions as
officer and consultants.
(8) Going Concern Matters
---------------------
The accompanying financial statements have been prepared
on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities
in the normal course of business. Due to its past
financial difficulties, the Company has accumulated debts,
including judgments, and accrued interest of approximately
$1,100,000 relating to its former line of business and
maintains these on its balance sheet as current
liabilities. Interest on these balances is accruing at a
rate of approximately $13,000 per quarter as of March 31,
2004. The Company is continuing in its efforts to resolve
these obligations and others through settlements.
However, there is no assurance that the Company will be
able to settle in terms agreeable to the Company and if it
does not do so, this will have a material adverse affect
on the ability of the Company to operate properly in the
future. As shown in the financial statements, the Company
has incurred cumulative losses of $4,574,506 during its
development stage and has classified all of its debt as
current at March 31, 2004. These factors among others may
dictate that the Company will be unable to continue as a
going concern for a reasonable period of time.
10
Item 2. Management Discussion and Analysis or Plan of Operation
FORWARD LOOKING STATEMENTS
All statements contained herein that are not historical
facts, including but not limited to, statements regarding the
anticipated impact of future capital requirements and future
development plans are based on current expectations. These
statements are forward looking in nature and involve a number of
risks and uncertainties. Actual results may differ materially.
Among the factors that could cause actual results to differ
materially are the following: amount of revenues earned by the
Company's operations; the availability of sufficient capital to
finance the Company's business plan on terms satisfactory to the
Company; general business and economic conditions; and other risk
factors described in the Company's reports filed from time to
time with the Commission. The Company wishes to caution readers
not to place undue reliance on any such forward looking
statements, which statements are made pursuant to the Private
Securities Litigation Reform Act of 1995 and, as such, speak only
as of the date made.
Results of Operations
---------------------
Three Months Ended March 31, 2004 Compared with Three Months
Ended March 31, 2003.
-----------------------------------------------------------------
We had no revenues for the three months ended March 31, 2004
and 2003. There is no assurance that we will any have revenues in
fiscal 2004.
As we had no sales in this quarter, we had no cost of sales
for the quarters.
Operating expenses for the three months ended March 31, 2004
were $175,555 as opposed to no operating expenses for the three
months ended March 31, 2003. The increase is due to the launch of
our new business.
Other expenses for the three months ended March 31, 2004 were
$93,686 as compared to $29,327 for the three months ended March
31, 2003, an increase of $64,359 (220%). This increase was due
primarily to an increase in interest expense.
The Company's net loss for the three months ended March 31,
2004 was $269,241 as compared to $29,327 for the three months
ended March 31, 2003, an increase of approximately $240,000 or
818%. This increase in net loss was primarily due to the increase
in operating and other expenses as referenced above.
12
Liquidity and Capital Resources
-------------------------------
On March 31, 2004, the Company had a working capital deficit
of approximately $1,724,381. Since its inception, the Company has
continued to sustain losses. The Company's operations since
inception have been funded by the sale of common and preferred
stock, and proceeds from loans secured by the Company's common
stock. These funds have been used for working capital and capital
expenditures and other corporate purchases. The Company has had
losses of $4,574,506 since inception. The Company is seeking
financing through equity financing. There can be no assurance
that the Company will be able to obtain funding at terms
acceptable to the Company. These factors indicate that the
Company may not be able to continue as a going concern.
Other Events
------------
In February 2004, we converted 35,304,000 of our of Series
2001 A Preferred Stock into 35,304,000 shares of our common
stock. Also in February 2004, Bradley Wilson and Regency
Financial Group, Inc., agreed to tender to us and we retired
158,000,000 shares of common stock and they were collectively
issued a total of 50,000,0000 shares of the Company's Class B
Preferred Stock.
In May 2004, in return of contributing $160,000 to our
capital, we agreed to issue Bradley Wilson 160,000 shares of our
common stock. Also in May 2004, in return of contributing
$250,000 to our capital, we agreed to issue Terry Hunter 250,000
shares of our common stock.
Off-Balance Sheet Arrangements
------------------------------
The Company does not maintain off-balance sheet arrangements
nor does it participate in non-exchange traded contracts
requiring fair value accounting treatment.
Item 3. Controls and Procedures
-------------------------------
As of March 31, 2004, an evaluation was performed under
the supervision and with the participation of the Company's
management, including the Principal Executive Officer and the
Principal Accounting Officer, of the effectiveness of the design
and operation of the Company's disclosure controls and
procedures. Based on that evaluation, the Company's management,
including the Principal Executive Officer and the Principal
Accounting Officer, concluded that the Company's disclosure
controls and procedures were effective as of March 31, 2004.
There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect
internal controls subsequent to March 31, 2004.
13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Due to its financial difficulties, the Company is in default
on a number of debt and lease obligations as of March 31, 2001.
The Company and other parties to the obligations are in various
stages of negotiation and legal proceedings. The Company has
provided accruals in its financial statements for all known
contingencies. Except for any legal proceedings related to these
obligations, the Company is not aware of any legal proceedings
pending against it as of March 31, 2004.
Item 2. Change in Securities
--------------------
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None.
14
SIGNATURES
North American Liability Group, Inc.
By /s/ Bradley Wilson
------------------------------
Bradley Wilson, President
Date: May 17, 2004
15