MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
The Company's primary line of business is currently being conducted
through Tomahawk Construction Company, a wholly owned subsidiary ("Tomahawk").
Tomahawk has traditionally focused its operations on a wide range of
construction projects as a qualified American Indian Minority Business
Enterprise. Tomahawk's construction projects have included utility work,
earthwork, structural concrete, bridge work, asphalt and concrete paving,
commercial buildings, pump stations and treatment plants.
Unfortunately, Tomahawk's ability to generate revenues has been
seriously stifled as a result of filing Chapter 11 Bankruptcy on September 15,
1994. Although Tomahawk emerged from Bankruptcy on August 25, 1995, it has been
unable to obtain any substantial construction contracts. Nonetheless, Tomahawk
continues to bid for new construction projects. (For more information on
Tomahawk's Bankruptcy proceedings, see the Company's Form 10KSB for December 31,
1997.)
As a result of the Company's inability to generate revenues, as it did
in the past through a competitive bidding process, the Company has decided to
shift its operational focus. The Company is in the process of implementing a new
plan of operation in order to satisfy its debts and create operating revenues.
The Company's plan is threefold.
1. The Company plans to reduce its debt through eliminating all of its
engineering subsidiaries.
The Company currently has 10 closed subsidiaries with no
significant assets. The Company is currently in negotiations to sell
off all of these subsidiaries and thereby eliminate most of the
liabilities associated with these subsidiaries from its balance sheet.
The Company intends to complete the sell off by September 30, 1998.
These transactions are expected to have significant impact on the
Company's financial position in the third quarter of 1998.
2. The Company plans to create an integrated system that will focus on
providing housing to Native Americans.
The Company's goal is to position itself to provide
residential construction and lending services to Native Americans
throughout the country. On August 6, 1998, the Company took a large
step in this direction through the acquisition of First American
Mortgage Company ("FAMC"). (For more information on the FAMC
transaction, see the Company's 8-K filed on August 19, 1998). FAMC is a
mortgage company whose focus is to provide financing to Native
Americans. FAMC has already implemented its first pilot program with
the Chicksaw Nation in Oklahoma that has allowed FAMC to secure Ten
Million dollars ($10,000,000) in mortgage funding. FAMC is currently in
negotiations to obtain additional mortgage funding through three
additional Indian Nations in Oklahoma.
In addition, the Company has plans to acquire Cottonwood
Development of K.C., Inc. ("Cottonwood") whose primary line of business
will be the manufacture structural insulated panels ("SIPs"). SIPs are
an alternative to wood source or other conventional building materials
in residential and commercial construction. The advantages of SIPs are
ease of construction, better
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insulation, industry wide recognition for their resistance to lateral
loads generated by earthquakes and high winds. The Company has already
begun negotiations with the Chicksaw Nation to form a joint venture to
assist Cottonwood with its plans. Cottonwood is in the preliminary
stages of obtaining financing through private stock placements.
The Company believes that the acquisition of FAMC and the
potential acquisition of Cottonwood will provide the necessary
resources that will allow Tomahawk to secure construction projects
through the utilization of FAMC as a potential financing source and
Cottonwood as a reduced cost material source. The Company's management
believes that these three resources will allow it to better cater to
its niche market, Native Americans. The Company's management further
believes that it will be able to provide a superior product at lower
cost which will allow the Company to expand its market focus outside of
the Native American communities.
3. The Company intends to implement its plans to construct and
subsequently operate a Hydroponic facilities.
The Company through Tomahawk intends to construct a hydroponics
facility and operate it through a Hydroponics Division ("HDC"). The Company
believes that this venture will provide some diversity to the Company's overall
plan of operation. The Company is in possession of construction plans that will
allow it to build a unique hydroponics facility. The facility will utilize nexus
greenhouse structures that are a computerized system that monitors the growing
any of vine crops to include tomatoes, peppers, English cucumbers and lettuce.
The Company has conducted a feasibility study and a pro forma balance sheets
which show that the venture could be profitable. The Company is in the initial
stages of obtaining financing.
The Company's ability to bring its plans to successful fruition are
contingent upon obtaining sufficient capital which it has not successfully
obtained as of the date of this filing. However, the Company has several
prospects for obtaining conventional type loans and is utilizing equity
financing methods to obtain the necessary funds. There is no guarantee that the
Company will be able to obtain sufficient funding.
Liquidity and Capital Resources
The Company and its subsidiaries continue to have very restricted
liquidity. As reported in the Company's Form 10KSB for the year ended December
31, 1997, the Company has experienced severe financial difficulty as a result of
Bankruptcy proceedings involving its subsidiary Tomahawk. Although Tomahawk
emerged from Bankruptcy in August of 1995, Tomahawk's ability to obtain
construction projects has been severely limited as a result of those
proceedings. The Company's overall plan to improve its liquidity and capital
resources as been outline directly above.
In the interim, the Company will continue to utilize the resources of
its president Delmar Janovec until it plans begin generating revenues. Mr.
Janovec has advanced in excess of $490,000 to date to support the Company's
limited operations and has continued to work without pay since October 1, 1996.
However, there is no guarantee that Mr. Janovec will continue such support. The
Company will also utilize its common stock to compensate consultants, employees
and creditors when possible. In addition, the Company's subsidiaries Tomahawk
and FAMC are currently seeking financing through lending institutions and
private investors.
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The Company entered into several Stock Exchange Agreements during the
quarter in the hopes of improving its capital resources. On June 19, 1998, the
Company exchanged 2,678,571 shares of it common stock for 1,500,000 shares of
Kelly's Coffee Group, Inc.'s common stock. On June 19 ,1998, the Company
exchanged 16,257,166 shares of its common stock for 113,800 shares of Flexweight
Corporation's common stock. All shares issued were issued pursuant to section
4(2) of the Securities Act of 1933. The Company acquired these shares as an
investment and is considering further business arrangements with these entities
in the construction arena.
The Company also issued approximately Thirty Four Million One Hundred
Thousand (34,100,000) shares of its common stock pursuant to an S-8 option plan
to pay employees and consultants. Subsequent to the issuance of these shares the
Company discovered that it had not properly filed a required Financial Data
Schedule with its Form 10QSB for the period ended March 31, 1998. The Company
has subsequently submitted the required Financial Data Schedule. This oversight,
however, may have jeopardized the validity of its Form S-8.
During the quarter ended June 30, 1998, the Company's working capital
deficit was approximately $1,557,769. The Company has no comparison for the same
quarter in 1997 because no financial statement was prepared for that quarter.
Furthermore, the Company can not produce such statements due to a lack of cash
flow which would be required in order to recompile financials for that quarter.
However, the Company believes that a comparison is of no material value given
that the Company's poor financial position this year stems from the Company's
inability to produce revenues as a result of Tomahawks now concluded Bankrupcty.
Any changes in the Company's working capital deficit is believed to be
immaterial.
Net stockholders' equity in the Company was a deficit of $3,133,967, as
of June 30, 1998. Due to the financial difficulties that the Company experienced
in 1997 no quarterly financials were filed for the quarter ended June 30, 1997.
However, the Company's net stockholder's equity for June 30, 1997, was also a
significant deficit. The Company's deficit is a result of the Company's
inability to generate construction revenues and the accumulation of debts in its
inoperable engineering subsidiaries prior to current managements involvement
with the Company.
The Company believes its proposed plans will enable the Company to
substantially reduce its debt for third quarter of 1998 through the elimination
of unprofitable debt ridden subsidiaries should allow the Company to reduce or
perhaps eliminate its net stockholder's equity deficit and decrease its working
capital deficit. In addition, the Company anticipates that its plans involving
FAMC, Cottonwood, HDC and Tomahawk will hopefully allow the Company to begin
producing some revenues before the end of the year.
Results of Operations
The Company's operations for the second quarter consisted of bidding
for construction projects and formulating a plan of operation. The Company was
unsuccessful at its attempts to procure revenue construction projects during the
quarter. However, the Company made significant progress towards its plan of
operation, including the signing of an agreement which allowed the Company to
acquire a 100% interest in FAMC subsequent to the end of the second quarter.
(For more information on the acquisition of FAMC, see the Company's Form 8-K
filed on August 19, 1998)
Net service income for the quarter ended June 30, 1998, was $ 0. Although
no comparable numbers are available, the net service income was nominal for the
same period in 1997. Unfortunately, the Company
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had no net service income because of Tomahawks inability to procure any revenue
construction projects. Likewise, in the comparable quarter in 1997, the Company
was unable to procure any significant construction projects
Operating expenses were $0 for the quarter ended on June 30, 1998. No
comparable numbers are available for the comparable period in 1997. However, the
operating expenses for the comparable quarter in 1997 are believed to have been
significantly higher given that the operating expenses were $737,256 for the
year ended December 31, 1997. The decrease in operating expenses is a result of
the Company's lack of construction operations.
General, and administrative expenses were $62,630 for the quarter ended
on June 30,1998. Again , the Company has no comparable for the same period in
1997. The Company does not believe, however, that there is any material
difference in general and administrative expenses for the comparable period. The
Company's administrative staff consists of three employees and the
administration of the Company and other related expenses have not changed
significantly since the first quarter of 1997.
The Company's net loss was $62,630 for the quarter ended on June 30,
1998. Again, the Company has no comparable for the same period in 1997. However,
the Company believes that the net loss in the comparable quarter in 1997 was
substantially higher due to the fact that the Company has significantly reduced
its expenses in both first and second quarter 1998.
The management highly recommends reading this Form 10QSB in conjunction
with the Company's Form 10KSB for the year ended December 31, 1997, in order to
gain a more complete picture of the Company's financial condition in light of
the fact that no substantiated comparable numbers were available for the quarter
ended June 30, 1997.
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