UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
[X] Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 2004
-------------------
Commission File Number: 000-25947
-----------
NorMexSteel, Inc.
f/k/a North American Liability Group, Inc.
---------------------------------------------------
(Name of Small Business Issuer in its Charter)
Florida 65-0386286
------------------------------- -------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
478 East Altamont Dr., Ste 108, Altamonte Springs, FL 32701
---------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
705-739-9092
---------------------------
(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
i
This Amendment to the Form 10-KSB for the period ended
December 31, 2004 is being filed for the purposes of
reflecting the Auditor's execution of the Report of
Independent Registered Certified Public Accounting Firm
filed on May 13, 2005 under SEC Accession
No.:0000943440-05-000185. Reflection of execution of the
Report of Independent Certified Public Accounting Firm
was inadvertently omitted from the original submission.
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.
[X] YES [ ] 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 in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer is a development stage company, and as such has yet to
generate substantial revenues.
The aggregate market value of the voting stock held by non-
affiliates of the registrant based on the closing bid price on
May 10, 2005, was approximately $ 463,251,250.
As of May 10, 2005, the issuer had approximately 280,955,000
shares of Common Stock outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
ii
TABLE OF CONTENTS
-----------------
Page
----
Part I
------
Item 1 Description of Business 4
Item 2 Properties 6
Item 3 Legal Proceedings 6
Item 4 Submission of Matters to a Vote of
Security Holders 6
Part II
-------
Item 5 Market for Company's Common Equity and Related
Stockholder Matters 6
Item 6 Management Discussion and Analysis 10
Item 7 Financial Statements
Report of Independent Registered
Certified Public Accounting Firm F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Stockholders'
Equity (Stockholders' Deficit) F-4
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
Item 8 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 10
Part III
--------
Item 9 Directors, Executive Officers, Promoters, and
Control Persons; Compliance with Section 16(a)
of the Exchange Act 11
Item 10 Executive Compensation 12
Item 11 Security Ownership of Certain Beneficial
Owners and Management 12
Item 12 Certain Relations and Related Transactions 13
Item 13 Exhibits and Reports on Form 8-K 14
Item 14 Principal Accountant Fees and Services 15
Signatures 16
iii
PART I
This Annual Report on Form 10-KSB contains forward-looking
statements that are not statements of historical fact. Forward-
looking statements by their nature involve substantial risks and
uncertainties, and actual results may differ materially from such
statements. These forward-looking statements are based on the
Company's expectations and are subject to a number of risks and
uncertainties, including but not limited to, those risks
associated with economic conditions generally and the economy in
those areas where the Company has or expects to have assets and
operations; risks relating to changes in interest rates and in
the availability, cost and terms of financing; risks related to
the performance of financial markets; risks related to changes in
domestic and foreign laws, regulations and taxes; risks
associated with future profitability; and other factors discussed
elsewhere in this report.
Item 1. Description of Business
-----------------------
Our History
-----------
We were incorporated in the State of Florida on November 13,
1992, under the name Innovative Technology Systems, Inc. On
January 12, 2000, we changed our name to Stanfield Educational
Alternatives, Inc. (see "Stanfield" below). On November 18, 2003,
we changed our name to North American Liability Group, Inc. (See
"NALG" below).
Recent Acquisition
------------------
Effective on March 15, 2005, we acquired 75% of the
outstanding shares of capital stock of Grupo Industrial N.K.S.,
S.A., de CV ("NKS") in exchange for 250,000,000 shares of our
restricted and unregistered common stock. NKS, a Mexican
corporation, is the owner of a steel mill foundry and other
assets in Lazaro Cardenas, Mexico. NKS has represented to the
Company that the value of these hard assets is in excess of
USD $200,000,000. After the acquisition, the shareholders of
NKS that received our common stock controlled, as a group,
approximately 89% of all outstanding shares of our common stock.
At the time of this acquisition, the shareholders of NKS
assumed control of the Company and new directors were elected and
installed.
Stanfield
---------
On December 30, 1999, we purchased intellectual properties
and certain fixed assets at fair market value from The National
Children's Reading Foundation. Lawrence W. Stanfield, who was
then our CEO and President, was the sole shareholder of The
National Children's Reading Foundation. On January 12, 2000, we
changed our name to Stanfield Educational Alternatives, Inc. On
April 24, 2000, we opened our first corporate advancement center,
and we had planned to open two additional centers in the fall of
4
2000. However, as of December 31, 2001, these plans were
abandoned and the corporate advancement center was closed. At
that time, we were an educational corporation and franchisor of
the Stanfield Ed-vancement Centers, a network that provided a
comprehensive range of educational and tutorial services to
individuals of all ages. We also developed and published a
variety of specialized educational programs including a computer
global internet educational campus in various languages. We
developed a variety of educational programs for children of all
ages for both video and television production.
Since we ultimately were never able to generate sufficient
revenues or capital to launch the Stanfield business in a
meaningful sense, we abandoned our plans to operate as an
educational corporation. As a result, on June 20, 2003, Larry
Stanfield entered into an agreement, subject to some conditions,
to transfer his holdings in the Company to Bradley W. Wilson,
following which Mr. Wilson became our sole officer and director.
Those conditions were all met. At that time, due to our lack of
business operations, we could be defined as a "shell" company
whose sole purpose at the time was to locate and consummate a
reverse acquisition with an as yet unidentified private entity.
NALG
----
On October 2, 2003, we completed a triangular merger with
Nor-American Liability Corporation ("Nor-American"). Nor-American
was a newly formed Florida corporation that was created to
support the development of captive professional and general
liability insurance programs. Nor-American is a development stage
company that has received no revenues to date. At the closing,
the Company acquired all of Nor-American's issued and outstanding
shares of common stock in exchange for 160,000,000 "unregistered"
and "restricted" shares of our common stock. As a result of the
Merger, Nor-American became a wholly-owned subsidiary of us. On
November 18, 2003, we changed our name to North American
Liability Group, Inc.
Through this new subsidiary, we had intended to provide
services to professional groups seeking to obtain affordable
professional liability insurance rates through the creation of
captive insurance companies. We had anticipated our services to
include evaluation, development and management of captive
insurance programs. We have been seeking physicians, attorneys,
accountants, engineers, condominium associations and other
business and professional groups in similar industries to assist
in the creation and management of captive insurance programs.
There is no assurance that we will be able to accomplish any of
these goals with respect to the captive insurance business.
Now that we have closed on the purchase of NKS, our primary
focus will be on operating the steel foundry business in Mexico
and looking for other complementary businesses in Mexico and in
support of the steel foundry operations.
5
Employees
---------
As of December 31, 2004, we had one employee. This employee
is considered full-time and is not represented by a union. We
believe our relationship with our employee to be good. Our new
subsidiary, NKS, has no current employees, but we intend to re-
hire the full slate of former employees at such time that we have
secured sufficient capital to recommence operations of the
facility.
Item 2. Properties
----------
We currently rent an office at 478 East Altamont Dr., Ste
108, Altamonte Springs, FL 32701 for $1,000 per month on a month-
to-month basis.
Item 3. Legal Proceedings
-----------------
Due to our financial difficulties, we defaulted on a number
of debt and lease obligations. We have several judgments totaling
approximately $378,000 that were entered against us. We are
currently trying to resolve these obligations through
settlements. However, there is no assurance that we will be able
to settle on terms favorable to us and if we are unable to do so,
this will have a material adverse affect on our ability to
operate properly in the future.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No items were submitted to a vote of security holders during
the year ended December 31, 2004.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
--------------------------------------------------------
Our common stock is listed for trading on the Over-the-
Counter Bulletin Board inter-dealer trading system. The Company's
trading symbol is NXSI. We declared no dividends on our common
stock during the years ended December 31, 2004 and 2003, and we do
not
anticipate paying dividends in the future. The high and low
closing inter-dealer sales prices for each quarter of the last two
fiscal years are as follows:
2004 2003
------------- -----------------
High Low High Low
---- ---- ----- ----
1st Qtr - - - -
2nd Qtr - - - -
3rd Qtr 7.50 1.60 - -
4th Qtr 5.25 0.30 - -
From the first quarter of 2003 through the second quarter of 2004,
there was no meaningful trading of the Company's common stock.
6
Number of Shareholders and Total Outstanding Shares
---------------------------------------------------
As of April 8, 2005, approximately 280,955,000 shares of
our common stock were outstanding and, as far as we can
determine, were held by approximately 300 holders of record of
our common stock.
Dividends
---------
We have not paid any cash dividends since our inception and
do not anticipate paying cash dividends in the foreseeable
future.
Preferred Shares
----------------
As of December 31, 2004, the Company had 57,510,100 shares
of preferred stock outstanding. The preferred shares are
convertible into a like number of shares of common stock.
Common Shares
-------------
Our common stock is traded in the over-the-counter market,
and the shares are subject to the provisions of Section 15(g) and
Rule 15g-9 of the Securities Exchange Act of 1934, commonly
referred to as the "penny stock" rule. Section 15(g) sets forth
certain requirements for transactions in penny stocks and Rule
15g9(d)(1) incorporates the definition of penny stock as that
term is used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines a penny stock to be any
equity security that has a market price less than $5.00 per
share, as well as the shares of companies that are considered
blind pools or blank check companies, subject to certain
exceptions. Rule 3a51-1 provides that any equity security is
considered to be a penny stock unless that security is:
registered and traded on a national securities exchange meeting
specified criteria set by the Commission; authorized for
quotation on one of the trading systems (not including the OTC
Bulletin Board) of The NASDAQ Stock Market; issued by a
registered investment company; excluded from the definition on
the basis of price (at least $5.00 per share) or the issuer's net
tangible assets; or exempted from the definition by the
Commission. If the Company's shares are deemed to be a penny
stock, trading in the shares will be subject to additional sales
practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited
investors, generally persons with assets in excess of $1,000,000
or annual income exceeding $200,000, or $300,000 together with
their spouse. In addition, several states restrict or prohibit
trading in penny stocks and shares of blank check and blind pool
companies.
For transactions covered by the penny stock rules, broker-
dealers must make a special suitability determination for the
purchase of such securities and must have received the
purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to
the first transaction, of a risk disclosure document relating to
the penny stock market. A broker-dealer also must disclose the
commissions payable to both the broker-dealer and the registered
7
representative, and current quotations for the securities.
Finally, monthly statements must be sent to customers purchasing
penny stocks disclosing recent price information for the penny
stocks held in their account and information on the limited
market in penny stocks. These rules may make it less likely that
a broker-dealer will act as a market maker for our shares or
agree to engage in transactions for the purchase and sale of our
shares.
Item 6. Management's Discussion and Analysis or Plan of
Operations
-----------------------------------------------
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
---------------------
Year Ended December 31, 2004 Compared to Year Ended December 31,
2003
------------------------------------------------------------------
---
We had no revenues for the years ended December 31, 2004 and
December 31, 2003. Our prior operations failed to generate any
revenues and since merging with Nor-American, a newly formed
company, we have also had no revenues. There is no assurance that
we will have revenues in fiscal 2005.
As we had no sales in either 2004 or 2003, we had no cost of
sales for those fiscal years.
Operating expenses for 2004 were $1,197,092 as compared to
$178,937 for 2003, an increase of $1,018,155 or 569%.
This increase was due to the Company's ceasing its operations in
the education business and its initial costs for reorganizing
itself as a management services business.
Other income for the year ended December 31, 2004 was
$15,921 as compared to other expense of $137,479 for the year
ended December 31, 2003, a decrease of other expense of
$153,400. Again, this was due to the cessation of
operations of the education business, offset by the reversal of
accrued salaries due to the termination of various employees.
8
The Company's net loss for the year ended December 31, 2004
was $1,181,171 an increase of $864,755 or 273%. This
increase in net loss was primarily due to the compensation charge
of
$500,000 relating to the issuance of stock options and an increase
in other operating expenses as noted above.
As a result of the foregoing, for the year ended December
31, 2004, the Company had a loss per share of $3.11 as compared to
a loss per share of $1.79 for the year ended December 31, 2003, on
a basic basis and a fully diluted basis. No conversion of common
stock equivalents has been assumed as such conversion would have
had
an anti-dilutive effect on diluted loss per common share amounts.
Liquidity and Capital Resources
-------------------------------
On December 31, 2004, the Company had a working capital
deficit of approximately $1,400,000. Since its inception, the
Company has continued to incur 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 cumulative losses of approximately $5,500,000 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.
Recent Accounting Pronouncements
--------------------------------
In December 2004, the FASB issued SFAS No. 123
(revised 2004), Share-Based Payment ("FAS 123(R)"), a revision of
SFAS No. 123 ("FAS 123"). For small business issuers, this
Statement must be implemented at the beginning of the fiscal year
that begins after December 15, 2005. This Statement establishes
standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services and
addresses transactions in which an entity incurs liabilities in
exchange for goods or services that are based on the fair value
of the entity's equity instruments or that may be settled by the
issuance of those equity instruments. FAS 123 focuses primarily
on accounting for transactions in which an entity obtains employee
services in share-based payment transactions. The original
pronouncement, issued in October 1995, defined a fair
value based method of accounting for share-based payments, but
permitted companies to disclose such payments either employing the
fair value based method of accounting or by using the intrinsic
value method as defined by APB No. 25, Accounting for Stock Issued
to Employees. For companies reporting under the intrinsic value
method, FAS 123 required a proforma footnote disclosure of the
impact of the fair value based method for financial reporting
purposes. The 2004 revision to FAS 123, FAS 123(R), eliminates
the intrinsic value method as provided by APB No. 25. As of
January 31, 2005, the Company does not have any share-based
payment arrangements. Depending upon the extent to which the
Company implements share-based compensation plans, adoption of
this statement could have a material impact on the Company's
future consolidated financial statements.
In December 2004, the FASB issued SFAS No. 153, Exchanges of
Nonmonetary Assets-an amendment of APB Opinion No. 29 ("FAS 153").
The guidance in APB Opinion No. 29, Accounting for Nonmonetary
Transactions ("APB 29"), is based on the principle that exchanges
of nonmonetary assets should be measured based on the fair value
of the assets exchanged. However, the guidance in APB 29 included
certain exceptions to that principle. FAS 153 amends APB 29 to
eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial
substance. A nonmonetary exchange has commercial substance if
the future cash flows of the entity are expected to change
significantly as a result of the exchange. The adoption of FAS
153 did not have a material impact on the Company's financial
statements.
Item 7. Financial Statements
--------------------
Financial Statements for the fiscal year ended December 31,
2004 appear at the end of this document.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
------------------------------------------------
The Company had no disagreements with its accountants.
ITEM 8A. CONTROLS AND PROCEDURES
-----------------------
In accordance with Exchange Act Rules 13a-15 and 15d-15, the
Company's management carried out an evaluation with the
participation of the Company's Chief Executive Officer and Chief
Financial Officer, its principal executive officer and principal
financial officer, respectively, of the effectiveness of the
Company's disclosure controls and procedures as of the end of the
period covered by this report. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded as
of the end of the period covered by this Form 10-KSB that the
Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the
Company required to be included in periodic reports filed under
the Securities Exchange Act of 1934, as amended. There were no
changes in the Company's internal controls over financial
reporting identified in connection with the evaluation by the
Chief Executive Officer and Chief Financial Officer that occurred
during the Company's fourth quarter that have materially affected
or are reasonably likely to materially affect the Company's
internal controls over financial reporting.
10
PART III
Item 9. Directors, Executive Officers Promoters and Control
Persons
---------------------------------------------------
This table sets forth the name, age and position of each
director and executive officer of the Company:
NAME AGE POSITION
James W. Wolff 63 President, Chief Executive
Officer, Director
Garth Jensen 51 Chief Financial Officer,
Director
Bernardo Vergara 54 Director
Arturo Sojo 65 Director
Bradley Wilson 46 Chairman, President,
Director
James W. Wolff, President,Chief Executive Officer and Director
since March 2005. Mr. Wolff has worked for Chemical Bank and
been a Sr. Vice President of several banks including First Bank
& Trust of Palm Beach, Gulfstream Bank of Boca Raton, Florida
and President of Provident International Bank Limited.
Garth Jensen, Chief Financial Officer, Director. Mr. Jensen has
served as CFO since November 2004. He has served as CFO of both
private and public companies over the past seven years including
IBI Corporation (also a Director of the corporation), a publicly
traded international mining company, and National Electronic
Technologies Inc., a publicly traded internet communications
company. Prior to establishing his consulting practice, Mr.
Jensen was V.P.and Treasurer at Imperial Life and Treasurer at
Ralston Purina Canada.
Bernardo Vergara, Director since March 2005. Mr. Vergara was
formerly the Mexican Consul for the Province of Alberta in Canada.
He has extensive experience as a director of public companies, as
well as well-developed negotiating skills dealing with governments
and government agencies.
Arturo Sojo, Director since March 2005. Mr. Sojo is a Computer
Systems Engineer with many years of experience as Project and
Systems Manager for various corporations including IBM and Apple
Computers. Mr. Sojo has extensive experience in finance and real
estate through various partnerships he is involved in, including
Auge Grupo Promoter, Corporacion Hipotecaria and Fondo De Desarrollo
Patrimonial. In addition, he is a partner in Sadmex, a pipe
manufacturer
Bradley Wilson, Director, Chairman and President. Mr. Wilson
has served in these capacities since October 2003. Mr. Wilson has
been President of Merbank Capital Corporation, a private
consulting company in Orlando, Florida, since 1992. Mr. Wilson
resigned from his position on March 5, 2005.
11
Item 10. Executive Compensation
----------------------
The table below summarizes all compensation awarded to, earned
by, or paid to our executive officers for each of the last three
completed fiscal years.
----------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
----------------------------- ----------------------------------------------
Restricted
Annual Stock Warrants LTIP All Other
Name Title Year Salary Bonus Compensation Awarded & Options Payouts Compensation
$ $ ($) ($) (#) ($) ($)
----------------------------------------------------------------------------------------------------------------------
Bradley Wilson President, CEO 2004 0 0 0 0 0 0 0
2003 0 0 0 0 0 0 0
2002 0 0 0 0 0 0 0
Garth Jensen CFO 2004 0 0 0 0 1,000,000 0 0
2003 0 0 0 0 0 0 0
2002 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------------
Compensation to Directors
-------------------------
Our President did not receive any remuneration from us
during the fiscal year. We have expensed and paid compensation
for Mr. Hal Fischer (a former director of our subsidiary) in the
amount of $11,100. David Tews (also a former director of our
subsidiary) has received no compensation for 2004.
During November 2004, our Chief Financial Officer was granted
one million Options to purchase the Company's common stock at an
exercise price of $1.00. The options vest immediately and have a
life of three years.
During 2005, the Company has granted each director an option
to acquire 500,000 shares of our common stock at a price of $1.00
per share. The term of the option is 3 years.
Effective March 15, 2005, new directors were appointed as of
the closing of the NKS acquisition.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
---------------------------------------------------
As of December 31, 2004, there were approximately 302,996
shares of our common stock, no par value outstanding, and as of
May 11, 2005, there were approximately 280,955,009 shares
outstanding. The following tabulates holdings of our
shares by each person who, subject to the above, at the date of
this annual report, holds of record or is known by our management
to own beneficially more than 5% of the common shares and, in
addition, by all of our directors and officers individually and
as a group. To the best of our knowledge, each named beneficial
12
owner has sole voting and investment power with respect to the
shares set forth opposite his name.
SHAREHOLDER(2) SHARES HELD %
-------------- ----------- ---
Jaegermeister Inc. 14,000,000 5%
Sky Loyal International Inc. 50,000,000 17%
Taurus Trust 25,000,000 9%
Rysco Capital Investment Ltd 14,000,000 5%
Global Village Market
Holdings International Ltd. 14,000,000 5%
Manter Enterprises Inc. 14,000,000 5%
Global Ocean International
Investment Limited (1) 62,500,000 22%
Douglas Payne 13,500,000 5%
VK Patel International LLC 25,000,000 9%
All Directors and Executive
Officers as a Group (4 persons) 0%
(1) This company is controlled by Micheal Tismer, a person not
related to the Company.
(2) The addresses for these shareholders is in care of the
Company.
13
Item 12. Certain Relations and Related Transactions
------------------------------------------
The president, current and former principal stockholders,
and certain employees from time to time made advances to us. The
advances have been made for financing and working capital
purposes. At December 31, 2004 and 2003, respectively, the total
of such advances and accrued interest was $185,176 and $261,917.
As a result of the closing of the purchase of NKS in 2005,
certain former stockholders of NKS received shares of our
common stock equal to more than 5% of our total outstanding
shares of common stock (see Beneficial Ownership Table above)
Item 13. Exhibits and Reports on Form 8-K
--------------------------------
(a)
Exhibit
Number Description
------- -----------
3.1 Articles of Incorporation (1)
3.2 Articles of Amendment to the Articles of Incorporation
3.2 By-Laws (1)
10.1 Share Purchase Agreement between the Registrant and
Grupo Industrial N.K.S., S.A., de CV, dated as of
July 20, 2004.
10.2 Plan and Agreement of Merger, dated September 22, 2003,
by and between Stanfield Educational Alternatives, Inc.,
NALC Acquisition, Inc. and North-American Liability
Corporation (2)
23.1 Consent of Independent Registered Certified Public
Accounting Firm
31.1 Certification of Chief Executive Officer pursuant to
Securities Exchange Act Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.2 Certification of Chief Financial Officer pursuant to
Securities Exchange Act Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32.1 Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(1) Incorporated by reference to the registrant's registration
statement on Form 10-SB, file number 000-25947, as filed with
the SEC on May 3, 1999, as amended.
(2) Incorporated by reference to registrant's current report on
Form 8-K, file number 000- 25947, as filed with the SEC on
October 15, 2003.
(b) Reports on Form 8-K
The following reports were filed on Form 8-k:
September 16, 2004: Entry into a material Definitive
Agreement. As of September 10, 2004, the Company has finalized
the Letter of Intent to originally acquire 100% of all classes of
shares issued and outstanding of Grupo Industrial N.K.S., S.A.,
de CV ("NKS"). As of this date, the Company and stock holders of
NKS have mutually agreed that the Company will acquire 75% of all
the shares of NKS in a share exchange agreement, whereby the
Company will deliver 250,000,000 common restricted shares in
exchange for 75% of all the issued outstanding shares of NKS.
NKS, a Mexican corporation, is the owner of a Steel Mill Foundry
and other assets in Lazaro Cardenas, Mexico. NKS has represented
to the Company that the value of these hard assets has a value in
excess of USD$200,000,000.
14
September 16, 2004: Amendments to Articles of Incorporation
or Bylaws; On September 10, 2004, the holders of a majority of
the Company' outstanding voting shares executed a written
consent, amending the Company's Articles of incorporation to
increase the total number of authorized shares of the Company's
Common Stock from 500,000,000 to 1,000,000,000.
March 15, 2005: As of March 15, 2005, the Company has
completed a transaction resulting in the acquisition of 75% of
all issued and outstanding shares of Grupo Industrial N.K.S.,
S.A., de CV ("NKS"). The Company and stockholders of NKS have
mutually agreed that the Company will acquire 75% of all the
shares of NKS in exchange for 250,000,000 of the Company's common
restricted shares. NKS, a Mexican corporation, is the owner of a
Steel Mill Foundry and other assets in Lazaro Cardenas, Mexico.
NKS has represented to the Company that the value of these hard
assets has a value in excess of USD$200,000,000.
Item 14. Principal Accountant Fees And Services
--------------------------------------
Audit Fees billed for fiscal 2004 and 2003 for professional
services rendered by the principal accountant for the audit of
the registrant's annual financial statements and review of
financial statements included in the registrant's Form 10-QSB were
$25,424 and $14,864, respectively. Audit related fees for fiscal
year 2004 and 2003 amounted to $3,500 and $0, respectively. These
fees relate to the filing of the registrant's Form S-8. There
were no other fees billed to us by our principal accountant.
15
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities
Exchange Act, the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in
Altamonte Springs, Florida on May 16, 2005.
NorMexSteel, Inc.
By: /s/ James Wolff
----------------------------------
James Wolff
President, Chief Executive Officer
By: /s/ Garth Jensen
----------------------------------
Garth Jensen
Chief Operating Officer
In accordance with the requirements of the Securities Act of
1934, this report has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/S/James Wolff D/P May 16, 2005
----------------------------
James Wolff
By: /s/ Garth Jensen
----------------------------- D May 16, 2005
Garth Jensen
16
Report of Independent Registered Certified Public Accounting Firm
-----------------------------------------------------------------
To the Board of Directors and Stockholders
North American Liability Group, Inc.:
We have audited the accompanying consolidated balance sheets of North
American Liability Group, Inc and subsidiary (the "Company") (a development
stage company)as of December 31, 2004 and 2003, and the related consolidated
statements of operations, stockholders' equity (deficiency), and cash
flows for the years then ended, and for the period March 23, 1999 (inception)
to December 31, 2004. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of December 31, 2004 and 2003, and the results of their operations
and their cash flows the years then ended, and for the period from March
23, 1999 (inception) to December 31, 2004, in conformity with U.S. generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company (a development stage company) will continue as a going concern.
As discussed in Note 12 to the financial statements, the Company's net
loss during the development period raises substantial doubt about the
entity's ability to continue as a going concern. Management's plans and
intentions with regard to these matters are discussed in Note 12.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Tedder, James, Worden & Associates, P.A.
Orlando, Florida
May 10, 2005
NORTH AMERICAN LIABILITY GROUP, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
December 31, 2004 and 2003
2004 2003
----------------- -----------------
Assets
------
Current assets:
Cash $ 6,329 $ 27,648
Prepaid expenses 171 1,415
----------------- -----------------
Total current assets 6,500 29,063
Property and equipment, net 1,805 2,497
Other assets:
Deposits - 4,400
----------------- -----------------
Total other assets - 4,400
----------------- -----------------
Total assets $ 8,305 $ 35,960
================= =================
Liabilities and Stockholders' Deficiency
----------------------------------------
Current liabilities:
Accounts payable $ 185,561 192,155
Accrued expenses 764,618 585,108
Due to related parties 185,176 261,917
Notes payable 226,466 551,466
----------------- -----------------
Total current liabilities 1,361,821 1,590,646
Stockholders' deficiency:
Series 2001 convertible preferred stock 42,470 42,470
Series 2001A convertible preferred stock - -
Series 2001B convertible preferred stock - -
Class B preferred stock - -
Common stock 4,673,783 2,708,109
Deferred compensation (583,333) -
Accumulated deficit (5,486,436) (4,305,265)
----------------- -----------------
Total stockholders' deficiency (1,353,516) (1,554,686)
Total liabilities and stockholders' ------------------ -----------------
deficiency $ 8,305 $ 35,960
================= =================
See accompanying notes to the consolidated financial statements.
F-2
NORTH AMERICAN LIABILITY GROUP, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
For the year ended
----------------------------
Cumulative for
the period from
March 23, 1999
December 31 December 31 (inception) to
2004 2003 December 31, 2004
------------- ------------- -----------------
Gross revenues $ - $ - $ 45,744
Cost of sales - - 264
------------- ------------- ---------------
- - 45,480
Operating expenses 1,197,092 178,937 4,749,945
Other income(expenses):
Other income 159,094 59,088 218,182
Interest expense (143,173) (196,567) (460,126)
Impairment of assets - - (315,027)
Provision for loss on
non-cancelable leases - - (225,000)
------------- ------------- ---------------
Total other (income) expense 15,921 (137,479) 781,971
------------- ------------- ---------------
Net loss (1,181,171) (316,416) (5,486,436)
============= ============= ===============
Loss per common share:
Basic $ (3.11) $ (1.79)
============= =============
Diluted $ (3.11) $ (1.79)
============= =============
Weighted average common shares
outstanding:
Basic 379,493 176,716
============= =============
Diluted 379,493 176,716
============= =============
See accompanying notes to the consolidated financial statements.
F-3
NORTH AMERICAN LIABILITY GROUP, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Shareholders' Equity (Deficiency)
Preferred Stock Common Stock Deferred Accumulated
Shares Amount Shares Amount Compensation Deficit Total
---------- -------- ----------- ---------- ------------ ----------- -----------
Balance March 23, 1999 (inception) - $ - - $ - $ - $ - $ -
Issuance of stock - - 1,510,000 1,510 - - 243,034
Shares issued to reflect
re-capitalization of reverse
acquisition - - 5,435,000 241,524 - - -
---------- -------- ----------- ---------- ------------ ----------- -----------
Net loss - - - - - (233,968) (233,968)
---------- -------- ----------- ---------- ------------ ----------- -----------
Balances at December 31, 1999 - - 6,855,000 243,034 - (233,968) 9,066
Issuance of common stock - - 405,140 403,140 - - 403,140
Issuance of common stock for
services - - 2,069,250 2,055,405 - - 2,055,405
---------- -------- ----------- ---------- ------------ ----------- -----------
Net loss - - - - - (2,422,299) (2,422,299)
---------- -------- ----------- ---------- ------------ ----------- -----------
Balances at December 31, 2000 - - 9,329,390 2,701,579 - (2,656,267) 45,312
Reverse stock split - - (9,211,435) - - - -
Issuance of Series 2001
convertible preferred stock 25,500 49,000 - - - - 49,000
Issuance of Series 2001 A
convertible preferred stock 5,603,000 - - - - - -
Issuance of Series 2001 B
convertible preferred stock 5,643,175 - - - - - -
---------- -------- ----------- ---------- ------------ ----------- -----------
Net loss - - - - - (906,351) (906,351)
---------- -------- ----------- ---------- ------------ ----------- -----------
Balances at December 31, 2001 11,271,675 49,000 117,955 2,701,579 - (3,562,618) (812,039)
Conversion of Series 2001
convertible preferred stock
to common stock (600) (1,153) 2,679 1,153 - - -
Conversion of Series 2001 A
convertible preferred stock
to common stock (4,073,000) - 4,073,000 - - - -
Conversion of Series 2001 B
convertible preferred stock
to common stock (2,915,731) - 2,915,731 - - - -
Cancellation of common stock - - (54,051) - - - -
---------- -------- ----------- ---------- ------------ ----------- -----------
Net loss - - - - - (426,231) (426,231)
---------- -------- ----------- ---------- ------------ ----------- -----------
See accompanying notes to the consolidated financial statements.
F-4
Preferred Stock Common Stock Deferred Accumulated
Shares Amount Shares Amount Compensation Deficit Total
---------- -------- ----------- ---------- ------------ ----------- -----------
Balances at December 31, 2002 4,282,344 47,847 7,055,314 2,702,732 - (3,988,849) (1,238,270)
Conversion of Series 2001
convertible preferred stock
to common stock (2,800) (5,377) 6,000 5,377 - - -
Cancellation of common stock in
100 for 1 reverse stock split - - (6,990,424) - - - -
Cancellation of Series 2001 B
convertible preferred stock
for voidance of series (2,727,444) - - - - - -
Cancellation of Series 2001 A
convertible preferred stock
of the prior controlling
shareholder (775,000) - - - - - -
Issuance of Series 2001 A
convertible preferred stock in
125 for 1 forward stock split 94,375,000 - - - - - -
Conversion of Series 2001 A
convertible preferred stock
for common stock in 1 for 75
merger agreement (755,000) - 56,625,000 - - - -
Conversion of Series 2001 A
to common stock (31,125,000) - 31,125,000 - - - -
Issuance of common stock in
merger agreement - - 160,000,000 - - - -
Issuance of common stock for
rounding - - 8 - - - -
---------- -------- ----------- ---------- ------------ ----------- -----------
Net loss - - - - - (316,416) (316,416)
---------- -------- ----------- ---------- ------------ ----------- -----------
Balances at December 31, 2003 63,272,100 42,470 247,820,898 2,708,109 - (4,305,265) (1,554,686)
========== ======== =========== ========== ============ =========== ===========
Preferred Stock Common Stock Deferred Accumulated
Shares Amount Shares Amount Compensation Deficit Total
---------- -------- ----------- ---------- ------------ ----------- -----------
Issuance of common stock - - 660,000 410,000 - 410,000
Preferred stock converted to
common stock (35,304,000) - 35,304,000 - - -
Common stock converted to
preferred stock 50,000,000 - (158,000,000) - -
Cancellation of common shares - - (33,721,200) - - -
1 for 30 reverse split - - (88,994,491) - - -
Issuance of common stock - - 341 174 - 174
Forgiveness of debt - - 487,500 - 487,500
Preferred stock converted to
common stock (458,000) - 458,000 - - -
Cancellation of common shares - - (497,590) - - -
Cancellation of preferred shares (20,000,000) - - (32,000) - (32,000)
Common stock awarded to consultant - - - 600,000 (600,000) - -
Intrinsic value of stock options
issued - - - 500,000 - - 500,000
Amoritzation of deferred
compensation - - - - 16,667 - 16,667
1 for 10 reverse split (2,726,962)
Net loss - - - - (1,181,171) (1,181,171)
---------- -------- ----------- ---------- ------------ ----------- -----------
Balances at December 31, 2004 57,510,100 $ 42,470 302,996 $4,673,783 $ (583,333) $(5,486,436) $(1,353,516)
========== ======== =========== ========== ============ =========== ===========
See accompanying notes to the consolidated financial statements.
F-5
NORTH AMERICAN LIABILITY GROUP, INC.
AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the year ended Cumulative for
--------------------------- the period from
March 23, 1999
(inception) to
December 31, December 31, December 31,
2004 2003 2004
------------- ------------ ---------------
Cashflows from operating activities:
Net loss $ (1,181,171) $ (316,416) $ (5,486,436)
Adjustments to reconcile net loss to net cash
used in operating activities:
Forgiveness of related party note payable - (59,088) (59,088)
Depreciation and amortization 692 49 294,464
Loss on impairment of assets - - 315,027
Provision for loss on non-cancelable leases - - 225,000
Common stock issued for services 16,667 - 2,072,072
Bad debt expense 42,000 - 42,000
Intrinsic value of stock options granted 500,000 - 500,000
Increase(decrease) in cash caused by
changes in:
Other current assets 1,244 (1,415) (171)
Other assets 4,400 (4,400) (0)
Accounts payable (6,594) 15,247 185,561
Accrued expenses 342,010 201,380 767,174
Due to related parties (76,741) 69,837 444,264
------------- ------------ ---------------
Net cash used in operating
activities (357,493) (94,806) (700,133)
Cashflows from investing activities:
Acquisition of property and equipment - (2,546) (276,999)
Cashflows from financing activities
Repayment of note payable to related party - (200,000) (200,000)
Proceeds from issuance of preferred stock - - 49,000
Proceeds from issuance of common stock 410,174 - 1,056,348
Due to related parties - - (399,353)
Issuance of note receivable (42,000) - (42,000)
Payment for preferred stock (32,000) - (32,000)
Repayment/proceeds of notes payable - 325,000 551,466
------------- ------------ ---------------
Net cash provided by financing activities 336,174 125,000 983,461
------------- ------------ ---------------
Net increase(decrease) in cash (21,319) 27,648 6,329
Cash at beginning of period 27,648 - -
Cash at end of period $ 6,329 $ 27,648 $ 6,329
============= ============ ===============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 18,185 $ - $ 33,495
============= ============ ===============
Non-cash activity:
Purchase of intangible assets from related party $ - $ - $ 399,353
============= ============ ===============
Reduction of capital lease obligation upon
abandonment of assets $ - $ - $ 65,006
============= ============ ===============
Satisfaction of notes payable and accrued interest
By third party $ 487,500 $ - $ 487,500
============= ============ ===============
See accompanying notes to the consolidated financial statements.
F-6
NORTH AMERICAN LIABILITY GROUP, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(1) Summary of Significant Business and Accounting Policies
(a) Organization
------------
The Company is in its development stage and needs
substantial additional capital to complete its development
and to reach an operating stage. The accompanying consolidated
financial statements have been prepared assuming that the
Company will continue as a going concern, and therefore,
will recover the reported amount of its assets and satisfy
its liabilities on a timely basis in the normal course of
its operations. See note 12 for a discussion of
management's plans and intentions.
(b) Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts
of North American Liability Group, Inc. and its wholly owned
subsidiary North-American Liability Corporation, collectively
referred to as the "Company". All significant intercompany
accounts and transactions have been eliminated in consolidation.
(c) Revenue Recognition
-------------------
The Company records revenue as earned when goods or
services are provided. The Company did not recognize any
revenue for the years ended December 31, 2004 and 2003.
(d) Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation
for financial statement purposes is computed using the
straight-line method over the estimated useful lives of
the individual assets, which range from 3 to 5 years.
The Company periodically reviews its long-lived assets and
intangibles for potential impairment and will record an
impairment change whenever events or changes in circumstances
indicate the carrying amount of the assets may not be fully
recoverable. As of December 31, 2004 and 2003, management
does not believe that any assets are impaired.
(e) Fair Value of Financial Instruments
-----------------------------------
The Company's financial instruments include cash,
accounts payable, and amounts due to related parties.
Due to the short-term nature of these instruments, the
fair value of these instruments approximate their
recorded value. The Company has other liabilities which
it believes are stated at estimated fair market value.
F-7
NORTH AMERICAN LIABILITY GROUP, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(1) Summary of Significant Business and Accounting Policies
(Contd..)
(f) Use of 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 and liabilities at the
date of the financial statements and the reported
amounts of revenue and expenses during the reporting
period. Actual results could differ from those
estimates.
(g) Income Taxes
------------
The Company uses the asset and liability method of
accounting for income taxes. Under the asset and
liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable
to differences between the financial statement carrying
amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those
temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(h) Loss Per Share
--------------
Basic loss per common share amounts are based on the
weighted average shares outstanding of 379,493 and
176,716 (adjusted for reverse stock splits) for the
years ended December 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.
(i) Stock-based compensation
At December 31, 2004, the Company had a stock option
plan, which is described more fully in Note 10. The
Company has elected to continue to follow the intrinsic
value method in accounting for its stock-based employee
compensation arrangements. The following table illustrates
the effect on net income and earnings per share if the
Company had applied the fair value recognition provisions
of SFAS No. 123 to stock-based employee compensation for
the year ended December 31, 2004.
2004
------------
Reported net loss $ (1,181,171)
Stock-based employee compensation
included in reported net loss 500,000
Stock-based employee compensation
determined under the fair value
based method (1,492,000)
Pro forma net loss $ (2,173,171)
============
Basic and diluted loss per share: $ (3.11)
As reported ============
Pro forma $ (5.73)
============
The weighted average fair value of options granted in
2004 was approximately $1.49 using the Black-Scholes
option-pricing model with the following assumptions:
Volatility 314%
Risk free interest rate 3.22%
Expected life in years 3 years
Dividend yield 0.00%
No stock options were issued or outstanding prior to January 1,
2004.
(2) Recent Financial Accounting Standards
In December 2004, the FASB issued SFAS No. 123 (revised
2004), Share-Based Payment ("FAS 123(R)"), a revision of SFAS No.
123 ("FAS 123"). For small business issuers this Statement must be
implemented at the beginning of the fiscal year that begins after
December 15, 2005. This Statement establishes standards for the
accounting for transactions in which an entity exchanges its equity
instruments for goods or services and addresses transactions in
which an entity incurs liabilities in exchange for goods or
services that are based on the fair value of the entity's equity
instruments or that may be settled by the issuance of those equity
instruments. FAS 123 focuses primarily on accounting for
transactions in which an entity obtains employee services in
share-based payment transactions. The original pronouncement,
issued in October 1995, defined a fair value based method of
accounting for share-based payments, but permitted companies to
disclose such payments either employing the fair value based method
of accounting or by using the intrinsic value method as defined by
APB No. 25, Accounting for Stock Issued to Employees. For companies
reporting under the intrinsic value method, FAS 123 required a
proforma footnote disclosure of the impact of the fair value based
method for financial reporting purposes. The 2004 revision to
FAS 123, FAS 123(R), eliminates the intrinsic value method as
provided by APB No. 25. As of January 31, 2005, the Company does
not have any share-based payment arrangements. Depending upon the
extent to which the Company implements share-based compensation plans,
adoption of this statement could have a material impact on the
Company's future consolidated financial statements.
F-8
NORTH AMERICAN LIABILITY GROUP, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(3) Property and Equipment
At December 31, 2004 and 2003, property and equipment
consisted of the following:
2004 2003
-------- --------
Furniture and equipment $ 2,546 $ 2,546
Less accumulated depreciation (741) (49)
-------- --------
Property and equipment, net $ 1,805 $ 2,497
======== ========
Depreciation expense for the years ended December 31, 2004
and 2003 was $692 and $49, respectively.
(4) Leases
Operating
---------
The Company is obligated under a non-cancelable operating
lease for office space through December 2004. Rent expense of
$16,977 was incurred for the year ended December 31, 2004.
(5) Capitalization
(A) COMMON STOCK
At December 31, 2004 and 2003, the Company had outstanding
302,996 and 247,820,898 shares of common stock, respectively.
Effective July 13, 2004, the Company's Board authorized a 1 for
30 reverse stock split. On November 1, 2004, the Company
effected an additional 1 for 10 reverse split.
(B) PREFERRED STOCK
Series 2001
As of December 31, 2004, 22,100 shares of Series 2001 Preferred
Stock remain outstanding.
Series 2001A
During the first quarter of 2004, the Company cancelled 35,304,000
shares of its Series 2001A Convertible Preferred Stock in voluntary
conversions to 35,304,000 shares of its common stock. During
the third quarter of 2004, 458,000 shares of Series 2001A
Convertible Preferred Stock were converted to 458,000 shares of
its common stock. As of December 31, 2004 and 2003, the number of
shares outstanding of Series 2001A Convertible Preferred Stock was
27,448,000 and 63,250,000, respectively.
F-9
NORTH AMERICAN LIABILITY GROUP, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(5) Capitalization (Contd...)
Series 2001B
During February 2004, 526,667 shares (adjusted for stock splits)
were converted to 50,000,000 shares of Class B Preferred Stock.
In November 2004, the Company repurchased 20,000,000 shares
of class B Preferred Stock from the non-related party for
$32,000. As a result, 30,000,000 shares of Class
B Preferred Stock are outstanding as of December 31, 2004.
(6) Income Tax
The Company has no provision for taxes as they have a net
operating loss of approximately $5,500,000 that expires in
varying times through the year 2023. The total deferred tax
asset associated with the net operating loss has been reduced
by a valuation allowance to $0 at December 31, 2004 and 2003,
and no net deferred asset has been recorded, as the
possibility of utilizing the net operating loss is dependent
on the Company achieving profitable operations. U.S. tax
rules impose limitations on the use of net operating losses
and tax credits following certain defined changes in stock
ownership. The Company has not completed the complex
analysis required by the Internal Revenue Code to determine
if an ownership change has occurred. If such a change were
deemed to have occurred, the limitation could reduce or
eliminate the amount of these benefits that would be
available to offset future taxable income each year, starting
with the year of ownership change.
(7) Related Party Transactions
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 December 31, 2004 and 2003
respectively, the total of such advances, including accrued
interest, was $185,176 and $261,917.
The Company rented an apartment for one member of the
Subsidiary's Board of Directors. That agreement expired when
the Board Member resigned. During the year ended December
31, 2004, rent expense of $2,660 was incurred by the
Company.
During 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, and $59,088 was forgiven.
(8) Accrued Expenses
Accrued expenses at December 31, 2004 and 2003, consisted of
the following:
2004 2003
-------- --------
Accrued lease obligations $378,318 $309,718
Accrued interest 137,378 201,490
Accrued salaries 170,000 73,900
Other 78,922 --
-------- --------
$764,618 $585,108
======== ========
The accrual for lease obligations resulted from the default
on a number of the Company's lease obligations.
F-10
NORTH AMERICAN LIABILITY GROUP, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(9) Notes Payable
Notes Payable as of December 31, 2004 and December 31, 2003 is
$226,466 and $551,466, respectively, plus accrued interest.
Interest accrues at various rates between 9 and 12 percent per annum.
During 2004, the Company settled secured notes payable (including
accrued interest) of $487,500 through a third party pledging
Company common stock as collateral. As a result, the Company
accounted for this transaction as a contribution of capital.
(10) Stock Options
During 2004, the Company established a stock option plan under
which options to purchase shares of common stock may be granted
to employees, directors, officers, agents, consultants and
independent contractors.
During November 2004, the Company granted 1,000,000 stock
options to the Company's Chief Financial Officer. The options
have an exercise price of $1.00, vest immediately, and have
a life of three years. At the grant date, these options had
an intrinsic value of $500,000 which has been charged to
operating expenses in the accompanying consolidated
statements of operations for the year ended December
31, 2004. These options remain outstanding at December
31, 2004, are fully exercisable and have a remaining life
of 2.9 years.
(11) Subsequent Events
NALG closed and completed the purchase of 75% of all the issued
and outstanding shares of Grupo Industrial NKS., de CV ("NKS") on
March 11, 2005, in exchange for 250 million shares of the Company's
common stock. NKS is the owner of a steel mill foundry in Lazaros
Cardenas, Mexico.
On March 14, 2005 the Company announced the appointment of a new
Board of Directors and the appointment of new Officers of the
Company. Bernardo Vergara has been appointed Chairman of the
Board. Mr. Vergara was formerly the Mexican Consul for the
Province of Alberta in Canada. Arturo Sojo has been appointed a
Director of the Company. Mr. Sojo is a partner in a pipe
manufacturer, Sadmex among other companies.
James Wolff has been appointed President, CEO and Director of
the Company. Mr. Wolff has been a Senior Vice-President of several
banks including First Bank& Trust of Palm Beach and Gulfstream
Bank of Boca Raton among others. Garth Jensen remains as CFO
and Director of the Company, originally appointed November 25, 2004.
Mr. Jensen has been CFO of IBI Corporation, a TSE listed international
resource company and CFO of National Electronic Technologies
Inc., a TSE listed internet communications company, among others.
F-11
NORTH AMERICAN LIABILITY GROUP, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(11) Subsequent Events (Contd.)
The Company changed its name to NorMexSteel, Inc, effective April
12, 2005 to reflect the changes in the operations of the Company.
The new trading symbol is NXSI.
Bradley Wilson, the Company's President, resigned from his
position effective March 5, 2005.
(12) Going Concern Matters
The accompanying consolidated 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 $1,400,000 relating to its
current and former lines 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 December 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 consolidated financial statements, the Company has
incurred cumulative losses of approximately $5,500,000 during its
development stage and has classified all of its debt as current
for the years ended December 31, 2004 and 2003. As a result of
the recent acquisition of NKS, the Company's primary focus will
be on operating the steel foundry business in Mexico and looking
for other complementary businesses in Mexico and in support of the
steel foundry operations. These factors among others may dictate
that the Company will be unable to continue as a going concern for
a reasonable period of time.
(13) Fourth Quarter Adjustments
During the fourth quarter of 2004, the Company recorded certain
material adjustments to its financial statements, as follows:
(a) Based on a consulting agreement, the Company recorded
$500,000 of expense relating to the intrinsic value of stock
options granted to its Chief Financial Officer. In addition,
the Company recorded $600,000 of deferred compensation which
is being expensed over the term of the agreement.
(b) The Company reversed approximately $100,000 of previously
expensed accrued salaries to terminated employees, which has
been included in other income.
F-12