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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 333-2856
American Equities Income Fund, Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-3429295
(State of incorporation) (I.R.S. Employer Identification No.)
East 80 Route 4, Suite 202, Paramus, New Jersey 07652
(Address of principal executive offices) (Zip Code)
(201) 368-5900
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports, and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to
be filed by Sections 12, 13 or 15(d) of the Securities Exchange act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date: As of September 30, 1996, the Company had 1,000 shares of
common stock, $1.00 par value, issued and outstanding.<PAGE>
AMERICAN EQUITIES INCOME FUND, INC.
INDEX
Page(s)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheet as at September 30, 1996 3
Statement of Cash Flows as at September 30, 1996 4
Notes to Financial Statements 5
Item 2. Plan of Operations. 6 - 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities. 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information. 9
Item 6. Exhibits and Reports on Form 8-K. 9
-2-
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AMERICAN EQUITIES INCOME FUND, INC.
(A Development State Company)
BALANCE SHEET
(Unaudited)
SEPTEMBER 30, 1996
ASSETS
Current Assets:
Republic National Bank $ 67
American Equities Income Fund-Checking 39,933
Cash - Escrow 30,000
Total Current Assets $ 70,000
Other Assets:
Organizational costs $ 8,383
Total Other Assets 8,383
Total Assets $ 78,383
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Due to American Equities, Inc. $ 8,383
Escrow Payable 30,000
Total Current Liabilities $ 38,383
Stockholders' Equity:
Common Stock $ 1,000
Additional Paid-in capital 39,000
Total Stockholders' Equity $ 40,000
Total Liabilities and Stockholders' Equity $ 78,383
See notes to financial statements.
-3-
<PAGE>
AMERICAN EQUITIES INCOME FUND, INC.
(A Development State Company)
STATEMENT OF CASH FLOWS
FOR PERIOD MARCH 11, 1996 (INCEPTION)
THROUGH SEPTEMBER 30, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in accounts payable $ 8,383
Increase in organizational costs (8,383)
Net cash flows from operating activities -
CASH FLOWS FROM INVESTING ACTIVITIES
- -
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock $ 40,000
Proceeds from issuance of secured note 30,000
Net cash flows from financing activities 70,000
NET INCREASE IN CASH $ 70,000
CASH, BEGINNING OF PERIOD -
CASH, END OF PERIOD $ 70,000
See notes to financial statements.
-4-
AMERICAN EQUITIES INCOME FUND, INC.
(A Development State Company)
NOTES TO FINANCIAL STATEMENTS
NOTE A - FORMATION AND OPERATION OF THE COMPANY
American Equities Income Fund, Inc. (the "Company") was incorporated under the laws of
the State of Delaware on March 11, 1996. The Company is considered to be in the
development stage as defined in Financial Accounting Standard No. 7.
The Company intends to be in the business of factoring accounts receivable ("Receivables")
and providing other financial services to client companies.
No statement of operations has been included since there were no operational activities other
than the issuance of common stock as presented in these financial statements and
accompanying footnotes.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
Accounting records of the Company and financial statements are maintained and prepared on
the accrual basis.
Year End
The Company's year end for financial reporting tax purposes is December 31.
Cash Equivalents
For financial statement purposes, with respect to the State of Cash Flows, cash equivalents
include time deposits and all highly liquid investments with original maturities of three
months or less. The amount included on the Company's Statement of Cash Flows is
comprised of exclusively of cash.
NOTE C - STOCKHOLDERS' EQUITY
The Company is authorized to issue 1,000 shares of common stock at $1.00 par value. On
March 22, 1996, there were 1,000 shares of common stock issued and outstanding.
The holders of the common stock are entitled to one vote per share on all matters to be voted
on by shareholders.
-5-
NOTE D - ONGOING SECURED NOTE OFFERING
The Company is currently offering subscriptions for up to an aggregate of $15,000,000 of its
secured promissory notes (the "Notes") in denominations of $1,000 each, or any integral
multiple thereof. The Notes will bear interest at 12% per annum, payable interest only
monthly, annually or upon maturity, at the option of the investor, with all principal and
accrued interest, if any, due on September 30, 2006. Accrued but unpaid interest will be
compounded monthly at the rate of 12% per annum. The Notes may be accelerated by the
Note Holders on the first day of the fifth, sixth, seventh eighth and ninth years upon six
months written notice to the Company. The Notes will be secured by the Receivables
acquired with the proceeds of the offering or funds obtained from the repayment of such
Receivables or any after acquired Receivables. The Notes are prepayable in whole or in part
at any time without premium or penalty.
ITEM 2. PLAN OF OPERATIONS
The Company was formed on March 11, 1996 to be a special purpose corporation in
financial services and to acquire and factor accounts receivable. The Company is a wholly
owned subsidiary of American Equities Group, Inc. ("AEG"), which was formed on June 17,
1992 to act as a general partner of partnerships and acquire and factor accounts receivable,
lend funds to businesses, engage in leasing transactions and act as a financial intermediary
and manager for its special purpose subsidiaries. AEG is the general partner of one
partnership and the parent corporation of six special purpose corporations and will manage
the Company's day-to-day affairs.
The Company intends to acquire accounts receivable ("Receivables") principally from
companies in the publishing, printing and general service industries (e.g. firms which have
no tangible products but conduct such services as telemarketing and market research). Based
upon the prior performance of AEG in similar investments, an investor can expect that
approximately 50% of the purchased Receivables will come from companies engaged in the
publishing business, approximately 30% of the purchased Receivables will come from
companies engaged in the printing business and approximately 20% of the purchased
Receivables will come from companies engaged in general services businesses.
On August 27, 1996, the Company's initial public offering of up to $15,000,000
aggregate principal amount (ranging to a minimum of $500,000 aggregate principal amount)
of the Company's ten-year promissory notes (the "Notes") was declared effective by the
Securities and Exchange Commission. As of September 30, 1996, the Company had raised
approximately $30,000, all of which was being held in an interest-bearing escrow account
pending receipt of the minimum offering proceeds ($500,000). Once such minimum offering
proceeds are raised the Company expects to begin acquiring Receivables. The Notes will
bear interest at the rate of 12% per annum. Interest is payable monthly or annually in
arrears or upon maturity with the payments due on the first day of the each month or year.
Principal is payable in one payment upon maturity of the Notes.
-6-
Compensation and Fees to AEG
AEG will receive the following compensation and fees from the Company in connection
with this Offering and the conduct of the Company's business.
Recipient(1) Nature of Payment Amount of Payment
AEG Operations and Overhead 5% of the gross proceeds
Expense Allowance of the Company's initial
public offering or $750,000 if the
maximum amount of such offering
is sold ($25,000 if only the
minimum amount of such offering
is sold).
Factoring Fee AEG will receive 50% of the
factoring fees obtained from
acquisition of Receivables
during the Company's operational
stage. Such fees will typically
equal 7% to 10% of the face
amount of the receivables being
factored.
Reimbursement of AEG will receive
Offering Expenses approximately $32,000 from
the gross proceeds of the
Company's initial public offering
as reimbursement of certain
offering expenses advanced by
AEG in connection with such
offering.
______________________
(1) While the officers and directors of the Company will not receive any direct
compensation from the Company in connection with their services, such officers and
directors are officers and directors of AEG and, therefore, will indirectly benefit from the
above payments.
Operations and Overhead Expenses
AEG will pay all operational and overhead expenses of the Company out of its portion
of the fees earned in the factoring of the Receivables, which fee will typically equal 7% to
10% of the face amount of the Receivables being factored. The Company and AEG will
share the fees charged, 50% to the Company and 50% to AEG. Such costs and expenses to
be paid by AEG will include personnel costs, including employee salaries associated with the
identification, evaluation, purchasing, monitoring and collection of Receivables; the use of
AEG's accounting and computer systems; and expenses incurred for administrating investor
accounts and other administrative services and providing managerial assistance to the
Company. Any costs and expenses which exceed the amount of fees generated by the
factoring of the Company's Receivables shall be paid by AEG out of its own funds.
-7-
AEG shall also receive approximately 5% of the gross proceeds of the Company's initial
public offering as an Overhead Allowance. AEG will receive this one-time fee for preparing
all of the necessary systems required in order to provide the Company with a turn-key
management program which will eliminate the traditional start-up time of a new company.
AEG has invested a significant amount of time and money to properly staff the various
departments that will be required if and when the Company sells the minimum amount of the
offering. In addition, AEG has arranged for the necessary computer systems, banking
systems, servicing, collection and tracking operations, credit review facilities, investor
services systems, accounting procedures and has procured the necessary office space in order
to affectively service and manage the Company's funds and Receivables that it acquires.
Furthermore, AEG has initiated a national marketing effort to arrange for business to be
available to the Company once it has raised the minimum amount of the offering.
There are no known trends, events or uncertainties that are reasonably likely to
materially impact the Company's short-term and long-term liquidity or results of operations.
The default rate for all Receivables acquired by AEG and its affiliates is under 10% of such
total amount of Receivables. However, none of such defaults have resulted in loss to AEG
or any of its affiliates as such defaults are charged against reserves held by AEG after it
receives its fee.
The Company believes it will be able to satisfy its cash requirements for the foreseeable
future. If the Company desires to acquire additional Receivables beyond those which can be
acquired with the proceeds of its initial public offering, it will need to raise additional funds
in the following twelve months. There is no assurance the Company will seek or secure
additional funds to acquire additional Receivables. Management does not believe that
investors will be adversely affected if the Company is not able to expand its business by
acquiring additional Receivables.
-8-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
-9-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly cause this to be signed on its behalf by the undersigned thereunto duly authorized.
Date: April 8, 1997 By:/S/ David S. Goldberg
David S. Goldberg
Chief Executive Officer and
Chief Financial Officer
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<PERIOD-END> SEP-30-1996
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