UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
(Mark one)
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2000
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission File Number: 0-28453
Ameri-First Financial Group, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 75-2610236
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(State of incorporation) (IRS Employer ID Number)
6060 N. Central Expressway, Ste. 560 #7, Dallas, TX 75206
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(Address of principal executive offices)
(214) 800-2842
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(Issuer's telephone number)
Securities Registered under Section 12(b) of the Exchange Act
Title of each Class Name of Each Exchange on which Registered
None None
Securities registered Under Section 12(g) of the Exchange Act
Common Stock, $0.00001 Par Value
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days. Yes NoX
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of management'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. [ ]
State issuer's revenues for its most recent fiscal year: $4,110,871
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days: $-0-(stock is not quoted).
As of October 4, 2002 the issuer had 2,327,262 shares of common stock issued
and outstanding.
PART 1
Item 1. Description of the Business
Background. On September 27, 1996, Ameri-First Financial Group, Inc.'s
predecessor company incorporated under the laws of Nevada under the name of
U-Bake Pizza, Inc. On March 20, 1998, U-Bake Pizza, Inc. changed its name to
Oregon Outerwear, Inc. On May 18, 1998, Oregon Outerwear, Inc. changed its name
to Pacific Sports Holdings, Inc. Pacific Sports Holdings, Inc. began trading on
the OTC Bulletin Board on or about April 7, 1998.
On March 30, 1998 Pacific Sports Holdings, Inc. acquired 100% of SouthBay Golf,
Inc. in a tax-free reorganization and exchange of common shares of Pacific
Sports Holdings, Inc. SouthBay Golf, Inc.,a Nevada corporation, was incorporated
on March 11, 1998. On March 31, 1998, Pacific Sports Holdings, Inc. acquired
Mardock, Inc. a sportswear, corporate logo and promotional accessories business.
Due to Mardock's consistent history of losses, Mardock, Inc. was sold back to
Mardock's founder on April 30, 1999. Pacific Sports Holdings, Inc. acquired 70%
of Outback Apparel Group, Inc. on May 12, 1998 and an additional 15% ownership
on August 14, 1998. Outback Apparel Group, Inc., a Nevada corporation
incorporated on May 12, 1998.
SouthBay Golf, Inc. arranged for the manufacturing, and designed and sold golf
clubs, golf bags and head covers under the exclusive worldwide license for the
Head Golf brand name, and on a non-exclusive basis hats, towels, gloves,
umbrellas and other accessories. The Company operated this business under a
trademark licensing agreement with Head Sport AG dated April 1, 1998.
Outback Apparel Group, Inc. arranged for the manufacturing, and designed and
sold swimwear, active wear and T-shirts under the exclusive North America
license for the Spark brand name. The Company operated this business under a
trademark licensing agreement with Spank Sport International of Australia dated
May 31, 1998.
Results from the golf and swimwear subsidiaries were disappointing, and, in
March 1999, Pacific Sports Holdings, Inc. discontinued operations.
On May 3, 1999, the Company entered into an agreement whereby it would exchange
what was then 5,500,000 (Notes 1,100,000 post-split) of its common shares for
Series A Preferred Shares of Tahoe Air Corp., convertible into 50.0001% of the
then issued and outstanding shares of common stock of the airline.
On August 26, 1999, the Company changed its name to Tahoe Pacific Corporation
and on August 27, 1999 authorized a reverse stock split of 1 for 5.
Tahoe Air Corp., a Nevada corporation, was formed in 1996 to operate a new
scheduled airline to select west coast cities from the South Lake Taho,
California airport. On June 25, 1999 Tahoe Air Corp. began providing daily jet
service from South Lake Taho (TVL) to Los Angeles (LAX) and San Jose (SJC). The
airline was unable to demonstrate sufficient demand for its service, and on
November 22, 1999 suspended flight operations.
In anticipation of acquiring certain assets of Ameri-First Financial Corporation
on January 10, 2000, the Company changed its name to Amer-First Financial Group,
Inc. On February 7, 2000, the Company acquired Ameri-First Financial Corporation
for what was then 4,500,000 shares of its Common Stock.
In March 2000, the Company entered into an Agreement and Plan of Merger with
Itronics Communications Corporation, a Delaware corporation, whereby Itronics
was the surviving corporation and changed its name to Ameri-First Financial
Group, Inc. In connection with an Agreement and Plan of Reorganization, the
Ameri-First shareholders exchanged 4,706,114 shares or 100% of the Ameri-First
shares, for 4,706,114 shares of Itronics Communications Corporation, which
changed its name to Ameri-First Financial Group.
In approximately May 2000, the former management of the Registrant determined
that it would be in the best interest of the Registrant for it to become a hotel
owner for investment purposes. The Registrant began negotiations with HMGT
Management Corporation, a Delaware corporation engaged in the management of
hotels, and Wilkerson Consulting, Inc., a Nevada corporation acting as an
acquisition agent for parties desiring to purchase hotels. The principals of the
aforementioned corporations are as follows:
HMGT Management Corporation (subsequently merged into Homegate Corporation which
later changed its name to Covenant Financial Corporation)
Gary W. Bell President/Director
C. Keith Wilkerson II Vice-President/Director
Keith Newton Secretary/Treasurer/Director
Majority owned (84%) by Wilkerson Consulting, Inc., of which Charles
Wilkerson is the beneficial owner.
Wilkerson Consulting, Inc.
Charles K. Wilkerson President/Secretary/Treasurer/
Director
Kathy Wilkerson Vice-President
Wholly owned by the Wickliffe Trust
Wickliffe Trust
C. Keith Wilkerson II Trustee
Charles K. Wilkerson Primary Beneficiary
Following the negotiations with HMGT Management Corporation and Wilkerson
Consulting, Inc., two separate agreements were reached to facilitate the
Registrants investment in hotel properties. On June 9, 2000 the Registrant
entered into an Exclusive Agency Agreement with Wilkerson Consulting, Inc. The
pertinent terms of the Exclusive Agency Agreement were as follows:
1. The Registrant had a five day right of first refusal to (a) purchase any
hotel or motel to be sold by an entity that is owned by, controlled by, or
associated with Charles K. Wilkerson, and (b) purchase any hotel or motel
placed under contract by Charles K. Wilkerson or any entity that is owned
by, controlled by, or associated with Charles K. Wilkerson; and
2. For all hotels and motels purchased by the Registrant, a consulting fee
would be paid to Wilkerson Consulting, Inc. as set forth below:
1. 2% of the purchase price of the property in cash; and
2. Common stock of the Registrant (restricted under Rule 144) equal in
value to 2% of the purchase price of property, with the value of the
stock to be based on the published "Bid" price of the Registrant's
stock as of the day prior to closing of the property.
On June 15, 2000, the Registrant entered into a Hotel/Motel Management Agreement
with HMGT Management Corporation. Under the terms of the Hotel/Motel Management
Agreement, HMGT Management Corporation would manage all hotels owned by the
Registrant, or its subsidiaries, in the future and would be paid a percentage of
the gross revenue received by the hotels.
Acquisition of Five (5) Homegate Hotels
On June 28, 2000, Ameri-First Holdings, Inc. ( a wholly owned subsidiary of
the Registrant) closed the purchase of five (5) hotels from VPS I, L.P., a
Delaware limited partnership. The hotels were located in Irving, Texas (one
hotel), San Antonio, Texas (two hotels), Amarillo, Texas (one hotel) and El
Paso, Texas (one hotel). VPS I, L.P. is a limited partnership having HMGT
Properties, Inc. as its general partner and AQW Corporation as its limited
partner. The principals of the aforementioned entities were as follows:
HMGT Properties, Inc., a Texas corporation
Gary W. Bell President/Director
C. Keith Wilkerson II Vice-President/Secretary/
Treasurer/Director
Wholly owned by Amerand Corporation
AQW Corporation, a Texas corporation
Gary W. Bell President/Director
C. Keith Wilkerson II Vice-President/Secretary/
Treasurer/Director
Wholly owned by Amerand Corporation
Amerand Corporation, a Delaware corporation
Gary W. Bell President/Director
Charles K. Wilkerson Vice-President/Director
Owned 50% by Gary W. Bell and 50% by Wickliffe Trust
The purchase price of the five hotels was $34,000,000.00. The Registrant
paid the price by (a) assuming approximately $17,600,000.00 in debt secured by
all five hotels, (b) the issuance of 4,500,000 shares of the common stock,
restricted by Rule 144, of the Registrant, and (c) the payment of $250,000.00 in
cash. In addition, the Registrant purchased the accounts receivable by
transferring 66,000 free trading shares of Integrated Technology Group, Inc.
(ITGI) to VPS I, L.P. The price of the hotels was determined by prior management
to be an accurate valuation of the property based on VPS I, L.P.'s asking price
and the information provided by the VPS I, L.P. In connection with the purchase
of these hotels, the Company issued 4,500,000 shares of Company common stock and
paid $250,000 to VPS I, L.P., but the debt was not paid and the shares of
Integrated Technology Group, Inc. were never transferred.
Pursuant to the Exclusive Agency Agreement with Wilkerson Consulting, Inc.,
the aforementioned purchase obligated the Registrant to pay Wilkerson
Consulting, Inc. $1,360,000.00 ($680,000 in cash, $680,000 in stock). As payment
for this obligation, and for pre-payment of future obligations, the Registrant
and Wilkerson Consulting, Inc. entered into a Stock Purchase Agreement wherein
the Registrant agreed to re-purchase 800,000 shares of the common stock of the
Registrant at a price of $2.00 per share. The shares were to be owned by
Wilkerson Consulting, Inc. pursuant to payments made under the Exclusive Agency
Agreement. No payments were made to Wilkerson Consulting and no shares of stock
were issued to Wilkerson Consulting pursuant to the above mentioned agreement.
Wilkerson Consulting received a note for $1,800,000 from the Company in
consideration for amounts due Wilkerson Consulting for management fees in
connection with managing the five hotels as well as finders fees associated with
the acquisitions of such hotels. The note was settled in January 2001 for the
issuance of 1,000,000 shares of Company common stock. Prior to this issuance of
Company common stock, the Company affected a 1 for 25 reverse stock split.
Events Subsequent to Settlement Agreement
Subsequent to the execution of the Settlement Agreement, the Registrant,
its subsidiaries and prior management failed and refused to make the required
payments under the terms of the Promissory Note. The five (5) hotels previously
owned by the Registrant were managed and owned by The Tour Group, Inc. whose
principals are listed below:
The Tour Group, Inc.
Gary W. Bell President/Director
C. Keith Wilkerson II Vice-President/Secretary/
Director
Owned 50% by Gary W. Bell and 50% by C. Keith Wilkerson II
The five Homegate hotels have been foreclosed upon.
In December 2000, the Registrant, by and through its former president,
Jeffrey Bruteyn, informed the principals of The Tour Group, Inc. and Wilkerson
Consulting, Inc. that there was no money to perform an audit or to do the
necessary work to comply with the disclosure requirements for a public company.
Therefore, in the interest of itself as a shareholder, and in the interest of
the other shareholders, Wilkerson Consulting, Inc. proposed an additional
settlement agreement.
The Registrant agreed to enter into a series of agreements wherein the
following would take place:
1. The Registrant would perform a 1-for-25 reverse split of its common stock;
2. Wilkerson Consulting, Inc. would be issued 1,000,000 post-reverse split
shares of the Registrant's common stock in exchange for releasing the
Registrant from its liability on the Promissory Note ($1,800,000)
effectuated to settle the aforementioned lawsuit.
3. That the current officers and directors of the Registrant would resign; and
4. Given that the securities subsidiary, Ameri-First Securities, Inc., was
losing money and in danger of defaulting on its net capital requirements,
it was in the best interest of the Registrant to sell the subsidiary to
Jeffrey Bruteyn. Therefore, the Registant entered into an agreement wherein
the stock of Ameri-First Securities, Inc. was transferred to Jeffrey
Bruteyn for $10.00 and an agreement of Jeffrey Bruteyn to indemnify the
Registrant from any liabilities arising from the operation of Ameri-First
Securities, Inc.
The above agreements were signed to be effective as of December 22, 2000.
Current management was elected in March 2001.
Business of the Issuer
Ameri-First's future lied in the investment in Ameri-First Financial Corporation
and its wholly owned subsidiary Ameri-First Securities Corporation. Ameri-First
Securities was a member of the National Association of Securities Dealers, Inc.
and engaged in the investment banking and securities brokerage business. In
December 2000, our former CEO resigned and received al1 investments held by the
Company.
The Company's business strategy is to utilize its securities to purchase real
estate properties and manage them as well. In March 2000, the Company acquired 5
hotel properties and began managing and operating hotels. The hotels were
foreclosed upon in December 2000 by a financial institution and the Company now
has no operations and is seeking acquisitions or merger candidates.
The acquisition plan is not limited to a certain type of property, class of
hotel or a particular price range. Each property is evaluated individually and
will be carefully researched prior to acquisition. In general, the hotel
properties will need to be refinanced and a renovation and repositioning plan
will be implemented upon acquisition. Depending on the property, the renovation
and repositioning plan will be a six month to five year plan and will cost
between five (5%) and fifty (50%) percent of the purchase price. The funds for
renovation and repositioning will be derived from either the hotel earnings or
through the refinancing of the property.
Subsequent to acquisition, the goal of new management is to transform acquired
properties into a source of earnings and to create equity in the property
through management. Management seeks to provide high quality service to guests,
a fiscally responsible approach to costs and the implementation of a
concentrated marketing effort to drive occupancy rates.
Item 2. Description of Property
The Company has no property. The Company maintains its office at 6060 N. Central
Expressway, Suite 560 #7, Dallas, TX 75206, which it shares with Hospitality
Plus where Keith Newton, the Company's Secretary and Treasurer, serves as an
officer, and which is owned by the Wickliffe Trust, of which Charles Wilkerson
is the beneficial owner. The Company does not pay any rent for use of such
property.
Item 3. Legal Proceedings.
The Company is not a party to any material pending litigation nor is it aware of
any threatened legal proceeding.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to securities holders during the year ended December
31, 2000.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's common stock was traded in the National Association of Securities
Dealers OTC Bulletin Board "OTCBB" under the symbol "AMFS". The following table
sets forth the high and low closing bid prices for the periods indicated, as
reported by the OTCBB.
Closing Bid Closing Ask
High Low High Low
---- ---- ---- ---
1998
1st Quarter 6.25 5.625 6.25 5.625
2nd Quarter 4.25 2.50 4.875 2.50
3rd Quarter 3.00 1.25 3.125 1.505
4th Quarter 2.75 1.50 3.00 2.125
1999
1st Quarter 8.75 4.6875 8.75 5.00
2nd Quarter 8.75 4.6875 9.00 4.875
3rd Quarter 3.75 1.875 4.00 2.00
4th Quarter 3.90 .125 4.00 .25
2000
1st Quarter 5.3125 4.50 5.375 3.75
Closing Price
High Low
2nd Quarter 4.13 1.26
3rd Quarter 1.81 1.09
4th Quarter 1.44 .19
These quotations are inter-dealer prices without retail markup, markdown or
commissions, and may not necessarily represent actual transactions.
As of September 25, 2002, there were 240 shareholders of record of the Company's
common stock.
The Company has never paid cash dividends. The Board of Directors of the Company
currently anticipates that it will retain all available funds for use in the
operation of the business and does not anticipate paying and cash dividends in
the foreseeable future.
The stock transactions below have been retroactively adjusted to reflect the 1
for 25 reverse stock split.
In May 1999, the Company issued 44,000 shares of common stock in connection with
the acquisition of Tahoe which transaction was valued at $3,655,000. We believe
that this transaction was exempt from registration pursuant to Section 4(2) of
the Securities Act of 1933 as the recipient had sufficient knowledge and
experience in financial and business matters that it was able to evaluate the
merits and risks of an investment in the Company, and since the transaction was
non-recurring and privately negotiated.
The Company completed a private placement in June 1999 pursuant to which it sold
5,233 shares of its voting common stock for a total of $850,301. In connection
with the private placement Ameri-First incurred direct costs of the offering of
$128,539. The net proceeds were $721,762.
In December 1999, the Company issued 31,376 shares of common stock for
consulting services valued at $1,508,486 or the fair value of the services
provided. The Company believes the transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.
In December 1999, the Company issued 1,200 shares of common stock for assets
valued at $30,000. The Company believes the transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
In March 2000, the Company issued 50,000 shares of common stock in connection
with the merger between Itronics Communications Corporation and Ameri-First
Financial Group. We believe that this transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933 as the recipient had
sufficient knowledge and experience in financial and business matters that it
was able to evaluate the merits and risks of an investment in the Company, and
since the transaction was non-recurring and privately negotiated.
In March 2000, the Company issued 75,600 shares of common stock in connection
with the acquisition of assets from Ameri-First Financial Securities, which
transaction was valued at $945,045. We believe that this transaction was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933 as the
recipient had sufficient knowledge and experience in financial and business
matters that it was able to evaluate the merits and risks of an investment in
the Company, and since the transaction was non-recurring and privately
negotiated.
In June 2000, the Company issued 180,000 shares of common stock to VPS I, L.P in
connection with the acquisition of five hotels which stock was valued at
$16,457,401. We believe that this transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933 as the recipient had
sufficient knowledge and experience in financial and business matters that it
was able to evaluate the merits and risks of an investment in the Company, and
since the transaction was non-recurring and privately negotiated.
In September 2000, the Company issued 84,306 shares of common stock to various
individuals in consideration for services rendered. We believe that this
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 as the recipients had sufficient knowledge and experience
in financial and business matters that it was able to evaluate the merits and
risks of an investment in the Company, and since the transactions were
non-recurring and privately negotiated.
In September 2000, the Company issued 97,360 shares of common stock to Hess
Capital, LLC for payment of debt and interest of $1,672,830. We believe that
this transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 as the recipient had sufficient knowledge and experience
in financial and business matters that it was able to evaluate the merits and
risks of an investment in the Company, and since the transaction was
non-recurring and privately negotiated.
In September 2000, the Company issued 59,959 shares of common stock to Southeast
International for deposits on property valued at $1,700,000. We believe that
this transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 as the recipient had sufficient knowledge and experience
in financial and business matters that it was able to evaluate the merits and
risks of an investment in the Company, and since the transaction was
non-recurring and privately negotiated.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Caution Regarding Forward-Looking Information
This annual report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of the Company or
management as well as assumptions made by and information currently available to
the Company or management. When used in this document, the words "anticipate,"
"believe," "estimate," "expect" and "intend" and similar expressions, as they
relate to the Company or its management, are intended to identify
forward-looking statements. Such statements reflect the current view of the
Company regarding future events and are subject to certain risks, uncertainties
and assumptions, including the risks and uncertainties noted. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated, expected or intended. In each instance,
forward-looking information should be considered in light of the accompanying
meaningful cautionary statements herein.
Results of Operations, Liquidity and Capital Resources
Overview
The Company seeks to purchase real estate properties and manage them as well. At
December 31, 2000, the Company did not own or manage any real estate properties.
Comparison of Operating Results For the Year Ended December 31, 2000 Compared to
the Year Ended December 31, 1999
The Company's revenues increased by $4,067,030 or 9,277% from $43,841 for the
year ended December 31, 1999 to $4,110,871 for the year ended December 31, 2000.
The increase in revenues resulted from the acquisition of the five hotels that
were acquired in June of 2000 and foreclosed upon in December 2000.
Operating expenses, general and administrative expenses, and selling expenses
increased by $3,394,924 of 147% from $2,612,788 for the year ended December 31,
1999 to $6,007,712 for the year ended December 31, 2000. The increase in
operating expenses, general and administrative expenses and selling expenses was
due to the increased operations of the Company.
Depreciation expense increased from $0 for the year ended December 31, 1999 to
$2,690,655 for the year ended December 31, 2000. The increase in depreciation
was due to the depreciation on the hotel properties and its other property and
equipment.
For the year ended December 31, 2000, the Company recorded a loss on investments
and other assets of $2,770,000 a decrease of $915,955 from a loss of investments
and other assets of $3,685,955 for the year ended December 31, 1999. The loss on
investments and other assets during the year 2000 was associated with the former
chief executive officer taking the assets of Ameri-First Securities, Inc.
resulting in a loss of $1,070,000, and deposits made in Company stock for
acquisition that never closed resulting in a loss of $1,700,000.
Settlement expense was $1,800,000 for the year ended December 31, 2000 compared
to settlement expense of $0 for the year ended December 31, 1999. The settlement
expense was due to a settlement with Wilkerson Consulting whereby Wilkerson
Consulting received a note for $1.8 million which note was later converted into
1,000,000 shares of Company common stock following the 1:25 reverse stock split
resulting in Wilkerson Consulting becoming the Company's majority stockholder.
Loss on repossessed assets increased $12,909,352 from $762,479 for the year
ended December 31, 1999 to $13,671,831 for the year ended December 31, 2000. The
increase in loss on repossessed assets was due to the foreclosure on the five
hotels by a financial institution in December 2000.
The Company's loss from operations increased $15,811,946 or 225% from $7,017,381
for the year ended December 31, 1999 to $22,829,327 for the year ended December
31, 2000. The increased net loss resulted principally from operating expenses,
depreciation expenses, settlement expenses and loss on repossessed assets.
Net loss increased from $7,145,507 for the year ended December 31, 1999 to
$23,127,488 for the year ended December 31, 2000.
Net loss per share increased from $1.99 per share for the year ended December
31, 1999 to $2.19 per share for the year ended December 31, 2000.
As of December 31, 2000, the Company had an accumulated deficit of $32,350,653.
Liquidity and Capital Resources
For the year ended December 31, 2000, the Company did not generate positive cash
flow from its operations. The hotel operations did not generate sufficient cash
flow to pay the obligations of the Company. Therefore, the hotel properties were
foreclosed upon.
As of December 31, 2000, the Company had no assets and a working capital deficit
of $1,099,764.
Wilkerson Consulting is paying the Company's expenses on an as needed basis.
There can be no assurance that Wilkerson Consulting will continue to fund the
Company's operations as well as its ongoing legal and accounting expenses. In
addition, there can be no assurance that any new capital will be available to
the Company or that adequate funds for the Company's operations, whether from
financial markets, or other arrangements will be available when needed or on
terms satisfactory to the Company. The Company has no commitments from officers,
directors or affiliates to provide funding. The failure of the Company to obtain
adequate additional financing may require the Company to delay, curtail or scale
back some or all of its operations. Any additional financing may involve
dilution of the Company's then-existing shareholders.
There can be no assurances that the Company will be able to either (1) achieve a
level of revenues adequate to generate sufficient cash flow from operations; or
(2) obtain additional financing through either private placement, public
offerings and/or bank financing necessary to support the Company's working
capital requirements. To the extent that funds generated from any private
placements, public offerings and/or bank financings are insufficient, the
Company will have to raise additional working capital. No assurance can be given
that additional financing will be available, or if available, will be on terms
acceptable to the Company. If adequate working capital is not available, the
Company may not renew its operations.
The Company's auditor has expressed substantial doubt about the Company's
ability to continue as a going concern.
Item 7. Financial Statements
The required financial statements are included in this document beginning on
page F-1.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
S.W. Hatfield, Certified Public Accountant, of Dallas, Texas audited the
Registrant's financial statements at and for the year ended December 31, 1999,
and the opinion of S.W. Hatfield was not qualified in any manner. For certain
business reasons, the Board of Directors of the Registrant has chosen not to
engage S.W. Hatfield to audit the Registrant's financial statements at and for
the year ended December 31, 2000. The auditor-client relationship between the
Registrant and S.W. Hatfield has ceased.
During the Registant's relationship with S.W. Hatfield, there were no
disagreements between the Registrant and S.W. Hatfield on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. In addition, there were no disagreements between the
Registrant and S.W. Hatfield on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope and procedures for
the December 31, 1999 financial statements. Further, there have been no
disagreements between the Registrant and the S.W. Hatfield on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope and procedures for December 31, 1999 to the present.
On August 27, 2002, the Registrant engaged Malone & Bailey PLLC as it its
independent accountants for the fiscal years ended December 31, 1999, December
31, 2000 and December 31, 2001. During the most recent fiscal year and any
subsequent interim period prior to engaging Malone & Bailey, the Company did not
consult with Malone & Bailey regarding either (i) the application of accounting
principals to a specified transaction, either completed or proposed; or the type
of audit opinion that might be rendered on the Company's financial statements;
or (ii) any matter that was either the subject matter of a disagreement (as
defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or
a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K). Malone &
Bailey PLLC has reviewed the disclosure required by Item 304(a) before it was
filed with the Commission and has been provided an opportunity to furnish the
Company with a letter addressed to the Commission containing any new
information, clarification of the Company's expression of its views, or the
respects in which it does not agree with the statements made by the Company in
response to Item 304(a). Malone & Bailey PLLC did not furnish a letter to the
Commission.
Item 9. Directors. Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The directors and officers of the Company are listed below with information
about their respective backgrounds.
Name Age Position
------ ----- ----------
Gary Bell 33 President and Director
Keith D. Newton 35 Secretary, Treasurer and Director
C. Keith Wilkerson, II 33 Vice President and Director
Directors are elected to serve until the next annual meeting of the shareholders
of the Company or until their successors have been elected and qualified.
Officers will hold their positions at the pleasure of the board of directors,
absent any employment agreement, of which none currently exists or is
contemplated. The directors and officers will devote full time to the Company's
affairs on an "as needed" basis, which, depending on the circumstances, could
amount to as little as two hours per month, or more than forty hours per month,
but more than likely will fall within the range of five to ten hours per month.
Gary Bell, Keith D. Newton, C. Keith Wilkerson, II and Charles Wilkerson are
related parties.
Gary Bell has served as the President and Director of the Company since March
2001. Mr. Bell has served as the Secretary and Treasurer since June 2001. Mr.
Bell has served as the Secretary and Treasurer of Inn-Vestors, Inc. since July
2002. From May 1998 through June 2001, Mr. Bell served as the President and
Chief Executive Officer of Amerand Corporation. From November 1993 through May
1998, Mr. Bell served as the President and Chief Executive Officer of Nature's
Landscape, Inc. Mr. Bell is educated in business management and being
self-employed for the majority of his working career, he has developed the
skills which the Company believes are necessary to analyze an investment and to
evaluate its reparation and renovation needs to be a successful asset to the
Company's portfolio.
Keith D. Newton has served as the Secretary, Treasurer and Director of the
Company since March 2001. Mr. Newton has served as the President of Hospitality
Plus since April 2000. Mr. Newton has served as the President and Director of
Inn-Vestors, Inc. since July 2002. From February 1997 through April 2000, Mr.
Newton served as a Sales Manager with Borders. Mr. Newton received his education
in business administration and management from McNeese State University, and has
experience in retail management including regional representation for fine
retailers. Being familiar with budgets and the financial concerns of high volume
sales and operations, Mr. Newton has assumed the role of supervising and
managing the Company's finances.
C. Keith Wilkerson, II has served as Vice President and Director of the Company
since March 2001. Mr. Wilkerson established a company that provides project
management services to hotel developers and investors, assisting in high-end
hotel construction, renovation, and installation. Mr. Wilkerson is a decorated
veteran of the United States Air Force, and has earned a Masters Degree in
Educational Administration from Faith Baptist College. After leaving the armed
forces of the United States, the next five years of his work experience were
spent teaching and coaching at the collegiate level. Through a series of events
Mr. Wilkerson was recruited by two separate hotelier's and has a distinguished
operational record in the managing of upscale hotel properties.
No director or officer of the Company has been convicted in any criminal
proceeding (excluding traffic violations) or is the subject of a criminal
proceeding which is currently proceeding. No director or officer of the Company
is the subject of any legal proceeding involving the Company or the performance
of his duties as such director or officer.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's directors, executive
officers and persons who own more than ten percent of a registered class of the
Company's equity securities ("10% holders"), to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Directors, officers and 10% holders are required by SEC regulation to furnish
the Company with copies of all of the Section 16(a) reports they file. Based
solely on a review of reports furnished to he Company or written representations
from the Company's directors and executive officers during the fiscal year ended
December 31, 2000, all Section 16(a) filing requirements applicable to its
directors, officers and 10% holders for such year were complied with.
Item 10. Executive Compensation
The Company currently pays no compensation to its officers and directors and has
paid no compensation in any amount or of any kind to its executive officers or
directors for the fiscal year ended December 31, 2000. During the fiscal year
ended December 31, 1999, the Company issued 150,000 shares to Jeffrey M.
Gardiner, its Former President and Assistant Secretary, in consideration for
services rendered. James V. Moodhe received a salary of $240,000 for the fiscal
year ended December 31, 1998.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following information table sets forth certain information regarding the
Company's common stock owned on September 25, 2002 by (1) any person (including
any "group") who is known by the Company to own beneficially more than 5% of its
outstanding Common Stock, (2) each director and executive officer, and (3) all
executive officers and directors as a group.
Name and Address(1) Shares Owned Percentage
------------------- --------------- -------------
Gary Bell 80,000(2) 3.4%
Keith Newton 80,000(2) 3.4%
C. Keith Wilkerson, II 80,000(2) 3.4%
Janaxral Desri 268,000 11.5%
Covenant Financial Corporation 80,000 3.4%
Wilkerson Consulting 1,337,160 (3)(4) 57.5%
Charles Wilkerson 1,337,160 (4) 57.5%
Wickliffe Trust 1,337,160 57.5%
Executive Officers and Directors as 240,000 10.3%
a group (three persons)
(1) Business Address is 6060 North Central Expressway, Suite 560 #7, Dallas,
Texas 75206, with the exception of Janaxral Desri whose business address is
13663 Jupiter, Suite 401, Dallas, Texas 75238.
(2) Gary Bell, Keith Newton and C. Keith Wilkerson, II are affiliates of
Covenant Financial Corporation due to their positions as officers of such
corporation.
(3) Wilkerson Consulting, which is owned by the Wickliffe Trust, is the
majority stockholder of Covenant Financial Corporation.
(4) Wilkerson Consulting. is owned by Wickliffe Trust, of which C. Keith
Wilkerson, II, Kristin Newton, and Cara Adams serve as trustees and whereby
Charles Wilkerson and Katherine Wilkerson are the beneficiaries.
Item 12. Certain Relationships and Related Transactions.
In March 2000, the Company acquired the assets of Ameri-First Securities, Inc.
for 75,600 shares of common stock from Jeffrey Bruteyn, the Company's former
chief executive officer.
In November, 2000, Jeffrey Bruteyn, the Company's former chief executive
officer, entered into a settlement agreement with the Company whereby Mr.
Bruteyn paid the Company $10 and returned 75,600 shares of Company common stock
to the Company for cancellation in consideration for the assets of Ameri-First
Securities.
The Company had a note payable with Wilkerson Consulting, of which Charles
Wilkerson and Katherine Wilkerson are the beneficiaries, for $1,800,000. The
note was received in settlement of amounts due Wilkerson Consulting, Inc. for
management services with the hotels as well an amount due for a finders fee for
the purchase of the hotels. The note was due on or before May 1, 2002. In
January 2001, following a 1 for 25 reverse stock split, the Company issued
1,000,000 shares to Wilkerson Consulting in consideration for settling the note
payable. Wilkerson Consulting became the majority shareholder of the Company
upon completion of this transaction.
In January 2001, Wilkerson Consulting received 257,160 shares of Company common
stock from Jeffrey Bruteyn, the Company's former chief executive officer, as
part of a settlement agreement between the parties.
Hospitality Plus, a company owned by the Wickliffe Trust of which C. Keith
Wilkerson, II, Kristin Newton, and Cara Adams serve as trustees and whereby
Charles Wilkerson is the beneficiary, has provided office space to the Company
without charge.
Wilkerson Consulting is owned by Wickliffe Trust, of which C. Keith Wilkerson,
II, Kristin Newton, and Cara Adams serve as trustees and whereby Charles
Wilkerson is the beneficiary, is paying the expenses of the Company on an as
needed basis.
The officers and directors are involved in other business activities and most
likely will become involved in other business activities in the future, many of
which may involve a conflict of interest.
Item 13. Exhibits and Reports on Form 8-K.
(a) Financial Statements and Exhibits
Financial Statements: The following financial statements are submitted as
part of this report:
Page
------
Report of Independent Certified Public Accountants F-2
Balance Sheets - December 31, 1999 and 1998 F-3
Consolidated Statements of Income and Comprehensive Income
Years Ended December 31, 1999 and 1998 F-5
Consolidated Statements of Changes in Shareholders' Equity
Years Ended December 31, 1999 and 1998 F-6
Consolidated Statement of Cash Flows
Years Ended December 31, 1999 and 1998 F-7
Notes to Consolidated Financial Statements F-8
Exhibits
10.1 Exclusive Agency Agreement with Wilkerson Consulting
10.2 Hotel/Motel Management Agreement with HMGT Corporation
(b) Reports on Form 8-K
March 23, 2000 - Acquisition of Itronics Communications Corporation by
Ameri-First Financial Group, Inc. for $100,000 cash and 50,000 shares of
restricted, unregistered shares of common stock of Ameri-First Financial
Group, Inc.
SIGNATURES
In accordance with Section 13 and 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 4th day of October, 2002.
Dated: October 4, 2002 AMERI-FIRST FINANCIAL GROUP, INC.
by: /s/ Gary Bell
-----------------------------
Gary Bell
President and Director
Pursuant to the requirements of The Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated:
/s/Gary Bell October 4, 2002
-------------------
Gary Bell
President and Director,
(Principal Executive Officer)
/s/ Keith D. Newton October 4, 2002
-------------------
Keith D. Newton
Secretary, Treasurer and Director
/s/ C. Keith Wilkerson, II October 4, 2002
--------------------
C. Keith Wilkerson, II
Vice President and Director
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Ameri-First Financial Group, Inc.
Dallas, Texas
We have audited the accompanying balance sheet of Ameri-First Financial Group,
Inc. as of December 31, 2000, and the related statements of operations,
stockholders' equity, and cash flows for each of the two years then ended. 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 auditing standards generally accepted
in the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Ameri-First Financial Group,
Inc. as of December 31, 2000, and the results of its operations and its cash
flows for each of the two years then ended, in conformity with accounting
principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred losses through December 31, 2000
totaling $22,182,446 and $7,145,507 and at December 31, 2000 had a capital
deficit of $1,849,711. The Company will require additional working capital to
develop its business until the Company either (1) achieves a level of revenues
adequate to generate sufficient cash flows from operations; or (2) obtains
additional financing necessary to support its working capital requirements.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to this matter are also
described in Note 2. The accompanying financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Malone & Bailey, PLLC
Houston, Texas
www.malone-bailey.com
August 11, 2002
AMERI-FIRST FINANCIAL GROUP, INC.
BALANCE SHEET
December 31, 2000
Assets $ -
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 20,000
Accrued expenses 29,711
Current portion of long-term debt 1,050,052
------------
------------
Total current liabilities 1,099,763
------------
Long-term debt 749,948
Commitments
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.00001 par value, 25,000,000 shares
Authorized, 611,870 shares issued and outstanding 6
Additional paid in capital 29,555,891
Accumulated deficit (31,405,608)
------------
Total Stockholders' Equity (Deficit) (1,849,711)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ -
============
See accompanying summary of accounting policies and
notes to financial statements
AMERI-FIRST FINANCIAL GROUP, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2000 and 1999
2000 1999
------------ -----------
Revenues $4,110,871 $ 43,841
Operating Expenses:
Operating expenses 2,890,627 -
General and administrative 2,953,246 2,313,599
Selling expenses 163,839 299,189
Depreciation expense 2,690,655 -
Loss on investments and other assets 1,824,955 3,685,955
Settlement expense 1,800,000 -
Loss on repossessed assets 13,671,831 762,479
------------ -------------
------------ -------------
25,995,153 7,061,222
------------ -------------
Loss from operations (21,884,282) (7,017,381)
------------ -------------
Other income (expense):
Other income 55,781 -
Interest expense (391,364) (128,126)
Interest income 37,422 -
------------ -------------
(298,161) (128,126)
------------ -------------
------------ -------------
Net loss $(22,182,443) $(7,145,507)
============ =============
Net loss per share:
------------ -------------
Net loss basic and diluted $ (52.98) $ (49.68)
============ =============
Weighted average shares outstanding:
Basic and diluted 418,726 143,834
============ =============
See accompanying summary of accounting policies and
notes to financial statements
AMERI-FIRST FINANCIAL GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended December 31, 2000 and 1999
Additional paid
Common stock in capital Accum.
Deficit Total
----------------------------- ----------------- -------------------
Shares Amount
-------------- ------------- ----------------- ------------------- ------------------
Balances,
December 31, 1998 106,436 $ 1 $ 1,470,676 $ (2,077,658) $ (606,981)
Issuance of common stock
in connection with
acquisition of Tahoe 44,000 1 3,654,999 - 3,655,000
Issuance of common stock
for services 31,376 - 1,508,486 - 1,508,486
Issuance of common stock
for cash 5,233 - 721,762 - 721,762
Issuance of common stock
for assets 1,200 - 30,000 - 30,000
Expenses paid by
shareholders - - 203,757 - 203,757
Net loss - - - (7,145,507) (7,145,507)
------------ ------------- ----------------- ------------------- ------------------
Balances,
December 31, 1999 188,245 2 7,589,680 (9,223,165) (1,633,483)
Issuance of common stock
in connection with
reverse merger 2,000 - 50 - 50
Issuance of common stock
for services 84,306 1 1,874,760 - 1,874,761
Issuance of common stock
in connection with
acquisition of assets 75,600 1 945,044 - 945,045
Issuance of common stock
in connection with
acquisition of 5 hotels 180,000 2 16,457,399 - 16,457,401
Issuance of common stock
for payment of debt 97,360 1 1,672,829 - 1,672,830
Issuance of common stock
for deposits on
property 59,959 - 1,700,000 - 1,700,000
Common stock received in
connection with sale of
assets back to former
CEO and retired (75,600) (1) (945,044) - (945,045)
Expenses paid by
Shareholders - - 261,173 - 261,173
Net loss - - - (22,182,443) (23,127,488)
------------ ------------- ----------------- ------------------- ------------------
Balances,
December 31, 2000 611,870 $ 6 $29,555,891 $(31,405,608) $(1,849,711)
============ ============= ================= =================== ==================
AMERI-FIRST FINANCIAL GROUP, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2000
2000 1999
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(22,182,443) $(7,145,507)
Adjustments to reconcile net deficit to cash
used by operating activities:
Depreciation and amortization 2,690,655 23,835
Common stock issued for services 1,874,761 1,508,486
Loss on repossessed assets and investments 15,496,786 3,685,955
Expenses paid by shareholder 261,173 203,757
Settlement expenses 1,800,000 -
Net change in:
Prepaid assets and other 112,938 (25,438)
Accounts payable and accrued expenses (149,493) 228,189
--------------- -------------
CASH FLOWS USED IN OPERATING ACTIVITIES (95,623) (1,520,723)
--------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets 95,427 -
Capital expenditures (22,023,250) -
--------------- -------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES (21,927,823) -
--------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 22,023,250 795,905
Sale of common stock, net - 721,762
--------------- -------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 22,023,250 1,517,666
--------------- -------------
NET INCREASE (DECREASE) IN CASH (196) (3,057)
Cash, beg. of period 196 3,253
--------------- -------------
Cash, end of period $ - $ 196
=============== =============
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid - -
Income taxes paid - -
NONCASH TRANSACTIONS:
Acquisition of hotels for common stock $ 16,457,401 -
Acquisition of investments for common stock $ 945,045 -
Issuance of common stock for debt $1,672,830 -
Loss on foreclosure of hotel properties and
settlement of mortgage note payable to a
financial institution $ 13,671,831 -
See accompanying summary of accounting policies and
notes to financial statements
AMERI-FIRST FINANCIAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
Nature of business
Ameri-First Financial Group, Inc. ("Ameri-First") was incorporated in September
1996 in California. Ameri-First was engaged in providing private and publicly
traded companies with investment banking services. In March 2000, Ameri-First
acquired 5 hotel properties and began managing and operating hotels. The hotels
were foreclosed upon in December 2000 by a financial institution and Ameri-First
now has no operations and is seeking acquisition or merger candidates.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the balance sheet. Actual results could differ from
those estimates.
Cash Equivalents
Cash equivalents include highly liquid, temporary cash investments having
original maturity dates of three months or less. For reporting purposes, such
cash equivalents are stated at cost plus accrued interest which approximates
fair value.
Investments
Ameri-First holds minority equity investments in companies. Ameri-First accounts
for these minority investments under the cost method. Certain investments carry
restrictions on immediate disposition. Investments in public companies with
restrictions of less than one year are classified as available-for-sale and are
adjusted to their fair market value with unrealized gains and losses, net of
tax, recorded as a component of accumulated other comprehensive income. Upon
disposition of these investments, the specific identification method is used to
determine the cost basis in computing realized gains or losses, which are
reported in other income and expense. Declines in value that are judged to be
other than temporary are reported in other income and expense. During December
2000, the former CEO resigned and received all investments held by Ameri-First.
Ameri-First recorded a settlement expense of $1,070,000 which is included in
loss on investments and other assets.
Revenue Recognition
Revenues are recorded as services are performed. Hotel revenues are recorded in
the period in which occupancy rights are provided to guests and tenants.
Long-lived Assets
Property and equipment are stated at cost less accumulated depreciation. Major
renewals and improvements are capitalized; minor replacements, maintenance and
repairs are charged to current operations. Depreciation is computed by applying
the straight-line method over the estimated useful lives of each asset.
Ameri-First performs reviews for the impairment of long-lived assets whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable.
Income Taxes
The asset and liability approach is used to account for income taxes by
recognizing deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities. Ameri-First records a valuation allowance to
reduce the deferred tax assets to the amount that is more likely than not to be
realized.
Earnings Per Common Share
Basic and diluted net loss per share excludes dilution and is computed by
dividing net loss by the weighted average number of common shares outstanding
for the period presented
Recent Accounting Pronouncements
Ameri-First does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Ameri-First's results of
operations, financial position or cash flows.
NOTE 2 - FINANCIAL CONDITION AND GOING CONCERN
Ameri-First has incurred losses totaling $22,182,443 and $7,145,507 for the
years ended December 31, 2000 and 1999, respectively and had a capital deficit
of $1,849,711 at December 31, 2000. Because of these losses, Ameri-First will
require additional working capital to develop business operations.
The Company intends to raise additional working capital either through private
placements, public offerings and/or bank financing or will seek a merger or
acquisition candidate.
There are no assurances that Ameri-First will be able to either (1) achieve a
level of revenues adequate to generate sufficient cash flow from operations; or
(2) obtain additional financing through either private placement, public
offerings and/or bank financing necessary to support Ameri-First's working
capital requirements. To the extent that funds generated from any private
placements, public offerings and/or bank financing are insufficient, Ameri-First
will have to raise additional working capital. No assurance can be given that
additional financing will be available, or if available, will be on terms
acceptable to Ameri-First. If adequate working capital is not available
Ameri-First may not renew its operations.
These conditions raise substantial doubt about the Ameri-First's ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might be necessary
should Ameri-First be unable to continue as a going concern.
NOTE 3 - ACQUISITIONS AND DIVESTITURES
In June 2000, Ameri-First consummated its acquisition of VPS I, L.P., a Delaware
limited partnership and ac1quired 5 hotels located in Irving, Texas (one), San
Antonio, Texas (two), Amarillo, Texas (one) and El Paso, Texas (one) for an
aggregate purchase price of approximately $34 million. The purchase price
consisted of $17,600,000 in cash and the issuance of 180,000 shares of
Ameri-First common stock valued at $16,457,401. In connection with the
acquisition, Ameri-First entered into a note payable with a financial
institution for $17,600,000. This acquisition was accounted for as a purchase.
The unaudited pro forma information for 2000 as if Ameri-First and VPS I, L.P.
had been combined as of the beginning of 2000 included revenue and a net loss of
$36.4 billion and $275 million, respectively, and basic and diluted earnings per
common share of $0.16 each.
The following presents the unaudited pro forma results of operations of
Ameri-First for the years ended December 31, 2000 and 1999, as if the
acquisition of VPS I, L.P. had occurred on January 1, 1999:
Years Ended December 31,
----------------------------
2000 1999
----------- ------------
Pro forma revenues $6,313,000 $ 4,118,000
Pro forma operating income $(21,653,000) $(6,690,000)
Pro forma net loss $(22,589,000) $(7,898,000)
Pro forma basic and diluted net loss per share $ (1.80) $ (0.98)
During March 2000, Ameri-First acquired the assets of Ameri-First Securities,
Inc. for 75,600 shares of common stock or $945,045.
Ameri-First's CEO resigned and received the assets in a settlement for $10 and
returned 75,600 shares of common stock. Ameri-First recorded a loss on the
transaction of $124,955. The returned 75,600 shares of common stock were
subsequently retired by Ameri-First.
During the year ended December 31, 2000 Ameri-First had issued 59,958 shares of
common stock as deposits in connection with the acquisition of 2 properties.
Ameri-First did not close either transaction and recorded a loss of $1,700,000
which is included in loss on deposits and investments for the year ended
December 31, 2000.
In May 1999, Ameri-First acquired a 50.01% interest in Tahoe Air Corporation
("Tahoe") for 44,000 shares of common stock valued at $3,655,000. Ameri-First
determined there was no value in Tahoe and wrote off the amount. The loss was
recorded during the year ended December 31, 1999 for $3,685,955.
NOTE 4 - REVERSE MERGER
On March 22, 2000, Ameri-First entered into merger agreement with Itronics
Communications Corporation and exchanged 100% of its shares for 4,706,114 shares
of Itronics or 99% of Itronics. In connection with the merger Itronics changed
its name to Ameri-First Financial Group, Inc.. For accounting purposes this
transaction will be treated as an acquisition of Itronics and a recapitalization
of Ameri-First. This tax-free transfer is pursuant to section 351 of the
Internal Revenue Code of 1986 as amended. Ameri-First is the accounting acquirer
and the results of its operations carry over.
Since Itronic's balance sheet is insignificant, a pro-forma consolidated balance
sheet is not presented here.
NOTE 5 - LOSS ON FORECLOSURE
In December 2000, a financial institution foreclosed upon the 5 hotel properties
that were in default. Ameri-First had failed to make the payments. In connection
with the foreclosure Ameri-First recorded a loss of $13,671,831 for the year
ended December 31, 2000. Ameri-First has no remaining assets or operations as of
December 31, 2000.
NOTE 6 - LONG-TERM DEBT
Ameri-First has a note payable with Wilkerson Consulting, Inc. for $1,800,000.
The note is unsecured and bears interest at 10%. The note was due May 1, 2002.
The note was received in settlement of amounts due Wilkerson Consulting, Inc.
for management services with the hotels as well as an amount due for a finders
fee for the purchase of the hotels. The note is payable in monthly installments
of $108,103 including accrued interest. No payments were made on this note. In
connection with the issuance of the note payable Ameri-First recorded a
settlement expense of $1,800,000 for the year ended December 31, 2000.
The note payable was settled in January 2001 for the issuance of 1,000,000
shares of common stock. Prior to this issuance the Board of Directors authorized
a 1 for 25 reverse stock split in January 2001. As a result, Wilkerson
Consulting, Inc. became the majority shareholder of Ameri-First.
Ameri-First had a mortgage note payable with a financial institution that was
secured by 5 hotel properties. Ameri-First was delinquent on its payments and
the properties were foreclosed upon in December 2000. A loss of $13,671,831 was
recorded in connection with the foreclosure.
NOTE 7 - INCOME TAXES
For the period from inception through December 31, 2000, Ameri-First has
incurred net losses and, therefore, has no tax liability. The net deferred tax
asset generated by the loss carry-forward has been fully reserved. The
cumulative net operating loss carry-forward is approximately $29,606,000 at
December 31, 2000, and will expire in the years 2013 through 2020.
Deferred income taxes consist of the following at December 31,:
2001
--------------
Long-term:
Deferred tax assets $10,066,000
Valuation allowance (10,066,000)
--------------
$ -
==============
In January 2001, Ameri-First had a change in ownership, which has resulted in
Ameri-First's net operating loss carryforwards being subject to certain
utilization limitations in the future.
NOTE 8 - SHAREHOLDERS EQUITY
Common Stock:
In December 2000, Ameri-First issued 84,306 shares of common stock for
consulting services valued at $1,874,761 or the fair value of the services
provided.
In September 2000, Ameri-First issued 59,959 shares of common stock as a deposit
for 2 property acquisition valued at $1,700,000 or the market price at the date
of the deposit. Ameri-First never closed on either of the transactions and
recorded the amount as a loss.
In September 2000, Ameri-First issued 97,360 shares of common stock for
shareholder debt including accrued interest of $1,672,830.
In June 2000, Ameri-First issued 180,000 shares of common stock in connection
with the acquisition of 5 hotel. See Note 3 for more discussion on the
acquisition.
In March 2000, Ameri-First issued 2,000 shares of common stock in connection
with the reverse merger with Itronics. See Note 4 for more discussion on the
acquisition.
In March 2000, Ameri-First acquired the assets of Ameri-First Securities, Inc.
for 75,600 shares of common stock or $945,045. See Note 3 for more discussion on
this purchase. In December 2000, Ameri-First sold back the assets to Jeffrey
Bruteyn, the former CEO, and received the common stock back and subsequently
retired those shares. Ameri-First recorded a loss of $124,955 on the
transaction.
In December 1999, Ameri-First issued 31,376 shares of common stock for
consulting services valued at $1,508,486 or the fair value of the services
provided.
In December 1999, Ameri-First issued 1,200 shares of common stock for assets
valued at $30,000 or the fair value of the assets acquired.
Ameri-First completed a private placement in June 1999 pursuant to which it sold
5,233 shares of its voting common stock for a total of $850,301. In connection
with the private placement Ameri-First incurred direct costs of the offering of
$128,539. The net proceeds were $721,762.
In May 1999, Ameri-First issued 44,000 shares of common stock in connection with
the acquisition of Tahoe. See Note 3 for more discussion on the acquisition.
In December, 2000, the Board of Directors authorized a 1 for 25 reverse stock
split of the Ameri-First's common stock. The financial statements as of December
31, 2000 have been retroactively adjusted to reflect the effect of this change.
NOTE 9 - RELATED PARTY TRANSACTIONS
After the foreclosure of the 5 hotel properties, Ameri-First neither owns nor
leases any real or personal property. An officer has provided office services
without charge. Such costs are immaterial to the financial statements and
accordingly are not reflected herein. The officers and directors are involved in
other business activities and most likely will become involved in other business
activities in the future. If a specific business opportunity becomes available,
such persons may face a conflict of interest. A Company policy for handling such
a conflict has not yet been formulated.
NOTE 10 - CONSULTING AGREEMENT
Ameri-First entered into an agreement with Wilkerson Consulting, Inc.
("Wilkerson") and agreed to pay Wilkerson 2% of the purchase price of hotel
acquisitions in cash and 2% in common stock. Also, HMGT Management Corporation
would manage each property owned by Ameri-First. Ameri-First never paid the fees
due under this agreement and satisfied the obligation by issuing a promissory
note for $1,800,000, which was converted to a majority ownership in January
2001.