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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
Commission File No.: 0-27947
AMERICAN SOUTHWEST HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware
86-0800964
(State or other jurisdiction of
(I.R.S. Employer Identification Number)
incorporation or organization)
4225 North Brown Avenue
Scottsdale, Arizona 85251
(Address of principal executive offices)
(480) 946-4006
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filings requirements for the past 90 days. Yes x No o
At July 21, 2005, the Issuer had 85,720,806 outstanding shares of common stock, $.001 par value.
Transitional Small Business Disclosure Format Yes o No x
Table of Contents
AMERICAN SOUTHWEST HOLDINGS, INC.
(An Exploration Stage Company)
TABLE OF CONTENTS
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2005
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - As of March 31, 2005 (Unaudited) and December 31, 2004
3
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - Three Months Ended March 31, 2005 and 2004
4
Condensed Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended March 31, 2005 and 2004
5
Notes to Condensed Consolidated Financial Statements
6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
8
Item 3. Controls and Procedures
9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
10
Item 2. Changes in Securities
10
Item 3. Defaults Upon Senior Securities
10
Item 4. Submission of Matters to a Vote of Security Holders
10
Item 5. Other Information
10
Item 6. Exhibits
10
Signatures
11
2
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PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements
AMERICAN SOUTHWEST HOLDINGS, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Condensed Consolidated Balance Sheets
March 31, 2005
December 31,
(unaudited)
2004
ASSETS
Cash & cash equivalents
$
82,401
$
205,493
Receivables
18,214
3,065
Stock subscriptions receivable
19,984
–
Total current assets
120,599
208,558
Property and equipment, net
3,855
4,202
Goodwill - mining rights
1,880,274
1,880,274
Total assets
$
2,004,728
$
2,093,034
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities
$
252,057
$
147,937
Due to related parties
409,506
334,714
Loans payable to related parties
41,495
41,495
Total current liabilities
703,058
524,146
Common stock
$.001 par value, 100,000,000 shares authorized,
and 85,720,806 and 82,150,806 shares issued and
outstanding as of March 31, 2005 and
December 31, 2004, respectively
85,721
82,151
Paid in capital
14,628,109
14,525,117
Common stock subscribed
89,701
67,095
Deficit accumulated during development stage
(13,500,417
)
(13,099,597
)
Foreign currency translation adjustment
(1,444
)
(5,878
)
Total shareholders' equity
1,301,670
1,568,888
Total liabilities and shareholders' equity
$
2,004,728
$
2,093,034
The accompanying notes are an integral part of the condensed consolidated financial statements.
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AMERICAN SOUTHWEST HOLDINGS, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
Cumulative
During
For the Three Months Ended March 31,
Exploration
2005
2004
Stage
Revenue misc. (including interest)
$
–
$
–
$
83,938
Other general & administrative costs
225,682
9,465
5,524,184
Depreciation
347
–
61,862
Organizational costs
–
–
120,000
Write off of Hiab project
–
–
7,697,615
Exploration expenses
170,091
–
185,107
General & administrative costs
396,120
9,465
13,588,768
Operating loss
(396,120
)
(9,465
)
(13,504,830
)
Other income:
Foreign currency loss
(4,700
)
–
4,413
Loss before income taxes
(400,820
)
(9,465
)
(13,500,417
)
Provision for income taxes
–
–
–
Net loss
$
(400,820
)
$
(9,465
)
$
(13,500,417
)
Foreign currency translation adjustment
4,434
–
(1,444
)
Comprehensive loss
$
(396,386
)
$
(9,465
)
$
(13,501,861
)
Net loss per share - basic & diluted
$
–
$
–
Weighted average shares outstanding
85,066,584
23,513,950
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
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AMERICAN SOUTHWEST HOLDINGS, INC. AND SUBSIDIARY
(An Exploration Stage Company)
Condensed Consolidated Statements of Cash Flows
(unaudited)
Cumulative
Since
For the Three Months Ended March 31,
Inception,
2005
2004
10/20/1989
Cash flows from operating activities:
Reconciliation of net loss to net cash
used by operating activities:
Net loss
$
(400,820
)
$
(9,465
)
$
(13,500,417
)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation
347
–
397
Stock issued in exchange for services
–
–
346,592
Stock issued for cancellation of warrants
–
–
38,063
Changes in Operating Assets and Liabilities:
Accounts receivable
(15,149
)
–
(14,970
)
Accounts payable and accrued liabilities
104,120
(5,399
)
247,387
Due to related parties
74,792
–
391,668
Net cash used by operating activities
(236,710
)
(14,864
)
(12,491,280
)
Cash flows from investing activities:
Purchase of property and equipment
–
–
(172
)
Costs related to acquisition of Metal Sands Limited
–
–
(24,038
)
Cash received from acquisition of Metal Sands
–
–
169,601
Amounts lent to Metal Sands prior to acquisition
–
(38,805
)
(312,436
)
Net cash used in investing activities
–
(38,805
)
(167,045
)
Cash flows from financing activities:
Sale of stock and warrants
39,467
–
12,606,041
Net borrowings from related parties
–
72,519
4,515
Stock issue costs
–
–
(5,198
)
Stock subscription deposits
69,717
–
136,812
Net cash provided by financing activities
109,184
72,519
12,742,170
Effect of exchange rate on cash
4,434
–
(1,444
)
Net (decrease) increase in cash
(123,092
)
18,850
82,401
Cash and cash equivalents at beginning of period
205,493
4,579
–
Cash and cash equivalents at end of period
$
82,401
$
23,429
$
82,401
The accompanying notes are an integral part of the condensed consolidated financial statements.
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AMERICAN SOUTHWEST HOLDINGS, INC. AND SUBSIDIARY
(An Exploration Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
Summary of Significant Accounting Policies and Use of Estimates:
Presentation of Interim Information:
The condensed consolidated financial statements included herein have been prepared by American Southwest Holdings, Inc. (“we”, “us”, “our” or “Company”) without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and should be read in conjunction with our Annual Report on Form 10-KSB for the year ended December 31, 2004 as filed with the SEC under the Securities and Exchange Act of 1934. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, as permitted by the SEC, although we believe the disclosures, which are made are adequate to make the information presented not misleading. Further, the consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to present fairly our financial position at March 31, 2005 and the results of our operations and cash flows for the periods presented. The December 31, 2004 consolidated balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
Interim results are subject to significant seasonal variations and the results of operations for the three months ended March 31, 2005 are not necessarily indicative of the results to be expected for the full year.
Nature of Corporation:
American Southwest Holdings, Inc. (formerly Namibian Copper Mines, Inc.) is a mineral development company. It has previously investigated and initially invested in the Hiab Copper Project. The fund raising for this project was unsuccessful and all initial investment was lost and written off. Currently, the Company is investigating projects in Australia. In accordance with SFAS 7 the Company is considered an exploration stage company.
The Company was incorporated in the state of Delaware on October 20, 1989, under the name of Cordon Corporation and subsequently changed its name to Ameriserv Financial Corporation (Ameriserv). On April 19, 1994, bankruptcy proceedings for Ameriserv finalized in the US Bankruptcy Court, Northern District of Texas. Under the terms of the bankruptcy, the Company was forced to liquidate all of its assets. The proceeds were then distributed among the creditors, thereby satisfying all of the Company’s outstanding debts. The Company halted operations and ceased to do business at the conclusion of the bankruptcy proceedings. The Company utilized fresh-start accounting in its reorganization effective July 28, 1995.
On July 28, 1995 the name was changed to Namibian Copper Mines, Inc. and the Company invested in the feasibility study of the Hiab Copper Project Namibia. Funds were raised through private placement and the Company earned an interest in this project. As a result of falling copper prices, the project became marginal and the Company made the decision to withdraw from the project.
On June 9, 2000 the name was changed to American Southwest Holdings, Inc.
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AMERICAN SOUTHWEST HOLDINGS, INC. AND SUBSIDIARY
(An Exploration Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.
Summary of Significant Accounting Policies and Use of Estimates (continued):
During the year ended December 31, 2004, the Company acquired Metal Sands Limited (“MSL”). MSL is a mineral sands development company incorporated in Australia, with mineral sands tenements held in South West of Western Australia. MSL was incorporated in Australia on September 8, 2000, as Rainbow Nominees Pty Ltd. MSL changed its name to Metal Sands Pty Limited on May 28, 2001, and to Metal Sands Pty Ltd on May 12, 2002. On June 21, 2002, MSL converted to an Australian public liability company, Metal Sands Limited. Metal Sands Limited had minimal operations from December 15, 2004, the date of acquisition, through December 31, 2004.
2.
Financial Condition and Ability to Continue as a Going Concern:
The Company has had no revenues from operations since inception and has a deficit from expenditures since inception to March 31, 2005 in the amount of $13,500,417. The Company has relied to date, and will continue to rely on its ability to raise equity to fund working capital requirements and fund exploration expenditures. Management will continue to control expenditures in line with its ability to raise equity working capital.
The ability of the Company to obtain financing and adequately manage its expenses, and thus maintain solvency, is dependent on equity market conditions, the ability to find a joint venture partner, the market for precious metals, and the willingness of other parties to lend the Company money. While the Company has been successful at certain of these efforts in the past, there can be no assurance that current efforts will be successful. These financial statements do not reflect the outcome of these uncertainties.
3.
Stockholders’ Equity:
Common Stock:
During the three months ended March 31, 2005, the Company issued shares of its common stock as follows:
·
2,630,000 shares in connection with common stock subscriptions received in the prior year in the amount of $67,095.
·
940,000 shares for cash in the amount of $47,712.
During the three months ended March 31, 2004, the Company issued 4,750,000 shares of its common stock for cash in the amount of $72,519.
Common Stock Subscribed:
During the three months ended March 31, 2005, the Company received $69,717 cash and is due $19,984 for common stock subscriptions received during the period to purchase 1,794,000 shares of the Company’s common stock.
During the three months ended March 31, 2005, the Company realized costs in the amount of $8,245 in connection with its equity activity.
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Item 2.
Management's Discussion and Analysis or Plan of Operation
Forward-Looking Statements
Certain matters discussed in this report may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this discussion, the words "believes," "anticipates," "expects," and similar expressions are intended to identify forward-looking statements. Such matters involve risks and uncertainties that may cause actual results to differ materially, including the following: changes in economic conditions; general competitive factors; the Company's ability to execute its business model and strategic plans; and the risks described from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Quarter Ending March 31, 2005
Operations.
For the quarter ending March 31, 2005 the Company experienced a comprehensive loss of $396,386, which was comprised primarily of its general and administrative costs of $225,682, exploration expenses of $170,091 and net foreign currency loss and adjustment of $266. In comparison, during the quarter ending March 31, 2004 the Company's comprehensive loss was $9,465. The increase in the comprehensive loss in the 2005 quarter primarily resulted from the expenses incurred by the Company's operating subsidiary, which was acquired in December 2004. During the quarter ending March 31, 2004 the Company's operations had been inactive. The Company expects its general and administrative expenses to continue at the same level throughout the remainder of 2005. The Company expects its exploration expenses to increase throughout the remainder of 2005 as its exploration program on its properties continues.
Liquidity and Capital Resources.
The Company raised approximately $137,413 from foreign private placements throughout the quarter. The Company will need to continue substantial fund raising in 2005 and 2006, because the Company's planned exploration program for its mining properties requires expenditures of approximately $8,000,000 over the next 5 years, with approximately $5,500,000 of exploration expenditures planned for the next two years.
Since we have not generated any revenue, we have included a reference to our ability to continue as a going concern with our financial statements for the quarter ending March 31, 2005. Our accumulated deficit at March 31, 2005 was ($13,500,417). All exploration costs are expensed as incurred.
These financial statements have been prepared on the going concern basis, which assumes that adequate sources of financing will be obtained as required and that our assets will be realized, and liabilities settled in the ordinary course of business. Accordingly, these financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.
In order to continue as a going concern, we require additional financing. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to continue as a going concern, we would likely be unable to realize the carrying value of our assets reflected in the balances set out in the preparation of the financial statements.
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The Company currently has no commitment for funding all or a portion of its future exploration expenses from a third party. There is no assurance the Company will be able to obtain in the near future all or a portion of its future exploration expenses.
In the future the Company may consider selling some of its properties or joint venturing the exploration and mining of some of its properties, if exploration capital cannot be readily obtained.
Item 3.
Controls and Procedures
Our President (Chief Executive Officer) and Treasurer (Principal Financial Officer), based on the evaluation of our disclosure controls and procedures has concluded that, as of March 31, 2005, our disclosure controls and procedures were ineffective to ensure that the information we are required to disclose in reports that we file or submit 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. More specifically, the Company identified a material weakness due to a lack of sufficient personnel with appropriate knowledge in U.S. GAAP and lack of sufficient analysis and documentation of the application of U.S. GAAP to transactions, including but not limited to equity transactions. Management plans to identify an appropriate service provider to eliminate this material weakness. During the quarter ended March 31, 2005, there was no change in our internal control over financial reporting identified in connection with the evaluation that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1.
Legal Proceedings.
There are no material legal proceedings pending for the Registrant at March 31, 2005.
Item 2.
Changes in Securities.
In January 2005 the Company issued 2,630,000 restricted common stock shares to 5 foreign purchasers who had paid approximately $67,095 for the shares in the prior quarter. This issuance is not subject to regulation under the Securities Act of 1933.
In February and March 2005 the Company issued a total of 940,000 restricted common stock shares to 2 foreign purchasers who paid approximately $47,712 for the shares. This issuance is not subject to regulation under the Securities Act of 1933.
At March 31, 2005 the Company had received subscriptions for 1,794,000 restricted common stock shares from 7 foreign purchasers who had paid approximately $89,701 for the shares which were issued in the following quarter. This issuance is not subject to regulation under the Securities Act of 1933.
Item 3.
Defaults Upon Senior Securities
None.
Item 4.
Submission of Matter to a Vote of Security Holders
On March 28, 2005 a majority of the Company's shareholder's approved an increase in the Company's authorized common stock from 100,000,000 to 300,000,000 shares. The vote was 59,865,278 shares for; 0 shares against; 200,000 shares abstained; 0 shares withheld; and no broker non-votes.
Item 5.
Other Information
None.
Item 6.
Exhibits
Exhibit
Number
Description
31
Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32
Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto authorized.
AMERICAN SOUTHWEST HOLDINGS, INC.
Date: July 25, 2005 By: /s/ Alan Doyle
Alan Doyle
President (Chief Executive Officer)
and Treasurer (Principal Financial Officer)
11
EXHIBIT 31
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 15 U.S.C. 78m(a) OR 78o(d)
(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
I, Alan Doyle, certify that:
(1)
I have reviewed this Quarterly Report on Form 10-QSB for the quarter ended March 31, 2005 of American Southwest Holdings, Inc.;
(2)
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
(4)
The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
(5)
The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
/s/ Alan Doyle
Alan Doyle
President (Chief Executive Officer),
Treasurer (Principal Financial Officer)
July 25, 2005
2
EXHIBIT 32
CERTIFICATE OF CHIEF EXECUTIVE OFFICER AND
PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)
The undersigned, Alan Doyle, President (Chief Executive Officer) and Treasurer (Principal Financial Officer) of American Southwest Holdings, Inc. (the "Company"), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 2005 (the "Report"). The undersigned hereby certifies that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial results of operations of the Company.
/s/ Alan Doyle
Alan Doyle
President (Chief Executive Officer),
Treasurer (Principal Financial Officer)
July 25, 2005
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