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Registration No. 333-___________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
(Name of Small Business Issuer in its charter)
FLORIDA 6162 65-0181535
- ------------------------ ------------------------- ----------------
(State of Incorporation) (Primary Standard (I.R.S. Employer
Industrial Classification I.D. Number)
Number
15544 N.W. 77th Court, Miami Lakes, Florida 33016 (305) 828-2599
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(Address and telephone number of principal executive offices)
15544 N.W. 77th Court, Miami Lakes, Florida 33016
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(Address of principal place of business)
Nelson Locke, President
America's Senior Financial Services, Inc.
15544 N.W. 77th Court
Miami Lakes, Florida 33016
(305) 828-2599
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(Name, address and telephone number of agent for service)
Copies to:
Akerman, Senterfitt & Eidson, PA
One Southeast Third Avenue
Suntrust International Center
28th Floor
Miami, FL 33131-1704
(305) 374-5600
Fax:(305) 374-5095
Approximate date of proposed commencement of sale to the public: From time to
time after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
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CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
Proposed
Amount of Proposed Maximum
Shares Maximum Aggregate Amount of
Title of Each Class of To be Offering Price Offering Registration
Securities to be Registered Registered Per Unit(1) Price Fee
- --------------------------- ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Common Stock 424,000 $1.25 $662,500 $174.90
</TABLE>
================================================================================
(1) Calculated in accordance with Rule 457(c).
The Company hereby amends the Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Acts of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8 (a),
may determine.
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Subject to completion dated February 24, 2000.
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
PROSPECTUS
FEBRUARY ___ , 2000
424,000 shares of common stock
Our common stock is traded on the over-the-counter market and is quoted on the
OTC Electronic Bulletin Board under the symbol AMSE.
The shares for this offering are being sold by the selling security holders
named under Plan of Distribution Selling Security Holders.
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PROSPECTUS SUMMARY
THE OFFERING
Common stock offered by selling security holders 424,000 shares
Shares of common stock to be outstanding assuming
all shares to which this prospectus relates are sold 8,571,209 shares
OUR COMPANY
America's Senior Financial Services, Inc. ("AMSE", or "America's Senior"), along
with its wholly-owned subsidiaries, Dow Guarantee Corp. ("Dow"), and Jupiter
Mortgage Corporation ("Jupiter"), is a licensed mortgage lender active in
originating, processing and obtaining funding for forward and reverse mortgage
loans secured by single family residences which are funded by financial
institutions or independent investors. AMSE and its subsidiaries are
collectively known as the "Company".
We receive income from two sources in connection with our mortgage lending
activities: we charge certain non-refundable mortgage application fees to
potential borrowers and upon closing a loan, receive additional fees payable by
the borrower or investor which fees are based upon a percentage of the loan
and/or the interest rates charged.
Our executive offices are located at: 15544 N.W. 77th Court, Miami Lakes,
Florida 33016 and our telephone number is: 305-828-2599. We are a Florida
corporation which was incorporated in 1990.
RISK FACTORS
The matters described below address some of the factors that make an
investment in our common stock risky.
WE HAVE HAD A HISTORY OF OPERATING LOSSES AND THIS MAY CONTINUE TO BE THE CASE
We have incurred losses in each of the last two years and have
incurred losses for the nine month periods ended September 30, 1999 and
September 30, 1998. We cannot assure that we can achieve profitability in the
short and/or long terms, if at all. We may be required to raise additional
capital in the future to sustain our operations. We can give no assurance that
we will be successful in procuring such capital on terms we deem to be
favorable. If we are unable to procure such capital, we may be required to
curtail our level of activities.
IF WE LOSE OUR KEY PERSONNEL, OUR BUSINESS AND PROSPECTS MAY BE ADVERSELY
AFFECTED.
We only have a few key officers and directors. If any of them should
leave our company, this could have an adverse effect on our business and
prospects.
AVAILABILITY OF MORTGAGES AT REASONABLE RATES.
The success of our mortgage origination business is dependent upon the
availability of mortgage funding at reasonable rates. Although there has been no
limitation on the availability of mortgage funding in the last few years, there
can be no assurance that mortgages at attractive rates will continue to be
available.
COMPETITION.
There are many sources of mortgages available to potential borrowers
today. These sources include consumer finance companies, mortgage banking
companies, savings banks, commercial banks, credit unions, thrift institutions,
credit card issuers and insurance companies. Many of these alternative sources
are substantially larger and have considerably greater financial, technical and
marketing resources than we do. Additionally, many financial services
organizations against whom we compete for business have formed national loan
origination networks or have purchased home equity lenders. We compete for
mortgage loan business in several ways, including convenience in obtaining a
loan, customer service, marketing and distribution channels, amount and term of
the loan, loan origination fees and interest rates. If any of these competitors
significantly expand their activities in our market, our business could be
materially adversely affected. Changes in interest rates and general economic
conditions may also affect our business and our competitors. During periods of
rising interest rates, competitors who have locked into lower rates with
potential borrowers may have a competitive advantage.
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GROWTH BY ACQUISITIONS
We have made three major acquisitions since mid-1998 and are currently
in the process of making additional acquisitions. In July 1998, we acquired Dow
Guarantee Corp., a south Florida mortgage lender since 1985. In January 1999, we
acquired Capital Funding of South Florida, Inc., a central and north Florida
mortgage lender since 1994. In August 1999, we acquired Jupiter Mortgage
Corporation, a central Florida mortgage lender since 1984. Additional
acquisitions may result in the issuance of more common stock and the incurrence
of additional debt. Acquisitions may also require additional management and
financial controls and could place a strain on our current resources. Our
ability to successfully integrate both completed and potential acquisitions into
our core business and to achieve synergies with the acquired entity will be
significant in terms of our growth, future prospects and results of operations.
We can give no assurance to our ability to successfully integrate any such
acquisitions.
ADDITIONAL SHARES COULD DEPRESS OUR STOCK PRICE
As of February 15, 2000, we have issued a total 1,146,129 warrants
and options which can be exercised for our common stock at various exercise
prices. Many shares of common stock underlying these warrants and options have
been granted the right to have such shares registered for resale under the
Securities Act. In addition, we have entered into letters of intent and/or
written agreements for the acquisition of entities which provide for the payment
of a portion of the total acquisition consideration in shares of our common
stock. This includes the right in some circumstances to have additional shares
of common stock paid over the next five years based upon the financial
performance and results of such acquired entities. All of these actual and
potential share issuances may have a negative effect on the share price of our
common stock in the future.
CONVERSION OF OUR DEBENTURES AND EXERCISE OF WARRANTS WILL RESULT IN ISSUANCE OF
MORE SHARES OF COMMON STOCK
We issued $2,500,000 of convertible debentures in May 1999. Each
debenture is convertible into common stock. The number of shares of common stock
that may be issued upon conversion of the convertible debentures depends upon
the market price of our common stock at the time of the conversion. As of
January 27, 2000, $1 million of this debt has already converted into 269,933
shares for principal and interest. Based upon the recent price of common stock
of $2.25 per share, if the debentures were converted into common stock, we would
issue 797,872 shares of common stock. See "Recent Sale of Convertible
Debentures." We may sell up to $7,500,000 of additional convertible debentures.
We also issued warrants to purchase 34,483 shares of our common stock at $8.70
per share, to the purchaser of the debentures and warrants to purchase 246,129
shares of our common stock at $8.70 per share to other placement agents and
consultants, we will issue more warrants in the event of the sale of additional
debentures.
WE ARE SUBJECT TO EXTENSIVE REGULATION
Our operations are subject to extensive regulation, supervision and
licensing by federal, state and local governmental authorities and are subject
to various laws and judicial and administrative decisions imposing requirements
and restrictions on part or all of our operations. Our consumer lending
activities are subject to the Federal Truth-in-Lending Act and Regulation Z
(including the Home Ownership and Equity Protection Act of 1994), the Federal
Equal Credit Opportunity Act, as amended, and Regulation B, the Fair Credit
Reporting Act of 1970, as amended, the Federal Real Estate Settlement
Procedures Act and Regulation X, the Home Mortgage Disclosure Act, the Federal
Debt Collection Practices Act and the National Housing Act of 1934, as well as
other federal and state statutes and regulations affecting our activities.
We are also subject to the rules and regulations of, and
examinations by, state regulatory authorities with respect to originating and
processing loans. These rules and regulations, among other things, impose
licensing obligations on us, establish eligibility criteria for mortgage loans,
prohibit discrimination, govern inspections and appraisals of properties and
credit reports on loan applicants, collection, foreclosure and claims handling,
investment and interest payments on escrow balances and payment features,
mandate certain disclosures and notices to borrowers and, in some cases, fix
maximum interest rates, fees and mortgage loan amounts. Failure to comply with
these requirements can lead to loss of approved status, certain rights of
rescission for mortgage loans, class action lawsuits and administrative
enforcement action.
USE OF PROCEEDS
All the shares of the common stock being sold in connection with this
registration statement are being sold by selling shareholders. Therefore we will
receive no proceeds from the sale of these shares.
MARKET FOR THE SHARES
Our Common Stock has been trading on the over-the-counter market since
February 20, 1998. The following sets forth the range of high and low bid
quotations for the periods indicated as reported by National Quotation Bureau,
Inc. Such quotations reflect prices between dealers, without retail mark-up,
markdown or commission and may not represent actual transactions.
<TABLE>
<CAPTION>
High bid Low bid
-------- -------
<S> <C> <C>
February 20, 1998 through March 31, 1998 $ 5.75 $5.75
April 1, 1998 through June 30, 1998 6.625 5.75
July 1, 1998 through September 30, 1998 7.375 5.50
October 1, 1998 through December 31, 1998 7.50 6.375
January 1, 1999 through March 31, 1999 5.75 7.00
</TABLE>
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April 1, 1999 through June 30, 1999 7.625 6.6875
July 1, 1999 through Sept. 30, 1999 6.96875 5.00
Oct. 1, 1999 through Dec. 31, 1999 8.50 2.25
Jan. 1, 2000 through Feb. 18, 2000 4.75 1.125
As of December 15, 1999 there were approximately 515 holders of record
of our common stock.
DIVIDEND POLICY
We have not previously paid any dividends to our shareholders and we do
not anticipate that any dividends will be paid in the foreseeable future. The
Board of Directors intends to follow a policy of using retained earnings, if
any, to finance the growth of the company. The declaration and payment of
dividends in the future will be determined by the Board of Directors in light of
conditions then existing, including the company's earnings, financial condition,
capital requirements and other factors.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto that appear elsewhere herein.
This Form SB-2 contains forward looking statements including, without
limitation, statements relating to the Company's plans, expectations,
intentions, and adequate resources, and are made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. The words
"believes" "intends" "expects" "plans" "anticipates" "estimates" or "potential"
and similar expressions identify forward looking statements. The Company does
not undertake to update, revise, or correct any of the forward looking
information. Actual results may differ materially from those expressed in any
forward looking statement made by or on behalf of the Company. Some important
factors that could cause the Company's actual results or expectations to differ
materially from those discussed in the forward looking statements include, but
are not limited to loss of the Company's significant customers, changes in
consumer demand for the Company's core products, interest rates in general,
actions of regulatory or consumer protection agencies that have an effect on the
Company's ability to market its products, Federal and State legislation, capital
expenditures, economic conditions in general and inability to retain qualified
employees.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997:
Results of Operations:
These results for fiscal 1998 are pro-forma, and include the following:
1998 - AMSE, Dow and Capital Funding pro-forma combined twelve month
performance.
1997 - AMSE "stand alone" (prior to the acquisition of Dow and Capital Funding).
<TABLE>
<CAPTION>
1998 1997 Change
---- ---- ------
<S> <C> <C> <C>
Gross loans originated $192,000,000 $41,600,000 +362%
Total dollars funded $145,000,000 $32,000,000 +353%
Units funded 1,477 320 +362%
Gross Fee Income $4,703,000 $542,000 +767%
</TABLE>
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<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Earnings (loss) before
non-recurring items: (439,379) (67,300)
Non-recurring
expense items: 15,142 4,900
Net income (loss): (454,521) (72,200)
% of Gross Fee Income 9.7% 13%
</TABLE>
In the mortgage industry, there are several benchmarks used to measure
a company's growth. The first benchmark offered is loan origination volume. In
1998, the Company's pro-forma loan origination volume increased by $150,400,000
or 362% from our 1997 level of $41,600,000. This increase includes the
origination benefit derived from our acquisitions of Dow Guarantee Mortgage and
Capital Funding of South Florida. The second benchmark to review is our closed
loan unit volume. This number represents true unit production, and ties directly
to the Company's gross fee income level. In 1998, the Company closed 1,477
units, versus 320 units in 1997. This is an increase in closed loans of 362%.
The third benchmark to be considered is gross fee income. This number represents
the commissions and other fees the Company earns on its closed loans. In 1998,
the Company grossed $4,703,000 in fees, versus $542,000 in 1997, primarily due
to the acquisition of Dow and Capital Funding.
The Company's business strategy involves developing a mix of forward
and reverse mortgage originations, where the forward (or traditional) mortgage
products subsidize the costs to grow the reverse mortgage production. In 1998,
reverse mortgage production was limited to the Miami Lakes facility. In 1998,
Miami Lakes originated over 300 reverse mortgages, compared to the 1997
production level of under 100 loans. In 1999 the Company plans to increase its
training and development of the employees of its subsidiaries, and expects their
contribution to increase total reverse mortgage production. Ultimately, the
Company seeks a balance of business that is about 65% forward and 35% reverse.
In 1998, on a consolidated basis, the Company achieved a balance of about 80%
forward and 20% reverse. In 1997, less than 10% of the Company's total
production was reverse mortgages.
In 1998, the Company's pro-forma loss was $454,521. While most expense
categories showed increases, the increases relate to the acquisitions that
occurred. Several categories stand out because they are key to the development
of the Company's growth strategy. $267,060 is directly attributable to goodwill
amortization caused by acquisitions. The Company has elected to amortize the
goodwill over a shorter term than the maximum allowed by accounting rules,
thereby increasing the annual charge to earnings. In 1998, the Company spent
$64,800 in employee retention activity. By spending these funds, we saw
continuity in staff and avoided a drop in sales that could have resulted from a
less efficient staff. Another major expense increase occurred in advertising and
marketing. Consistent with the Company goal of establishing itself as a national
source for Reverse Mortgages, the Company spent over $175,000 on advertising,
versus $50,000 in 1997. In 1998 we expanded our direct mail efforts and began
utilizing cable television and radio. All the effort was directed at development
of the reverse mortgage origination, which increased by over 500%. The benefits
will be felt in 1999, when we close these loans. By way of this discussion, the
reader can see that these few categories account for $506,860 which exceeds our
entire year's pro-forma loss. These expenses should be considered an investment
in the Company's growth plan. Once our subsidiaries begin to
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implement certain efficiencies derived from this consolidation, these expense
dollars should be offset by increased sales at higher margins, and should result
in a planned return to profitability.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999:
These results are proforma, unaudited, and include the following:
3rd Quarter 1999 -- AMSE, Dow, and Jupiter combined nine month performance.
3rd Quarter 1998 -- AMSE "stand alone" (including operations of Dow from
July 31, 1998 the date of acquisition).
<TABLE>
<CAPTION>
9 months
ended September 30th
-------------------------------
1999 1998 Change
------- ------- ------
<S> <C> <C> <C>
Gross Loans Originated (thousands) 132,622 39,021 240%
Total Dollars Funded (thousands) 99,466 29,266 240%
Gross Fee Income (thousands) 2,984 878 240%
Earnings (Loss) before (2,808,880) (97,131) n/a
Goodwill Charges:
Goodwill Expense: 2,540,851 28,495 n/a
Net Income (Loss): (5,349,731) (125,626) n/a
</TABLE>
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Revenues for the three-month period ending September 30, 1999 increased to
$1,013,321 from $512,745 for the three-month period ending September 30, 1998.
Revenues for the nine months ending September 30, 1999 increased to $2,984,009
from $877,755 for the nine months ended September 30, 1998. This growth in
revenues was primarily attributable to the contributions of the Dow, Capital and
Jupiter subsidiaries, whose results (except for the two months ended September
30, 1998 of Dow) were not part of AMSE's 1998 results.
Total Expenses for the three-month period ended September 30, 1998 compared to
the three-month period ended September 30, 1999 increased to $1,581,547 from
$532,285. Total Expenses for the nine-month period ending September 30, 1999
compared to the nine months ended September 30, 1998 increased to $7,863,589
from $1,001,748. This increase in expenses was partially attributable to the
inclusion of the costs associated with the Dow, Capital and Jupiter
subsidiaries, which were not a part of AMSE during the third quarter of 1998
(except for the two months ended September 30, 1998 of Dow).
These expenses also include an impairment write-down of $2,359,311 against the
goodwill of Dow Guarantee Corp. (Dow). This impairment was taken due to Dow
having negative operations in the last five months of 1998 and during the
second quarter of 1999. These negative operations were specifically the result
of increased professional fees relating to the stringent reporting requirements
to AMSE, and represent approximately a $12,000 increase over what Dow would
typically have spent on such fees. Dow also recognized approximately $10,000 of
non capitalized expenses pertaining to the move of their primary office. During
the second quarter of 1999 Dow lost some key sales personnel, these individuals
had historically been responsible for approximately 10% of Dow's revenues.
These personnel have been replaced. Dow also has had no growth in revenues from
the date of acquisition.
The Company has also recognized approximately $1,491,628 of Debenture Financing
Costs. These Debentures are immediately convertible into Common Stock and
therefor the expenses are recognized immediately and not amortized over the
life of the debenture. These expenses include approximately $280,000 of fees
paid out of the debenture financing and the issuance of 185,500 shares of the
Company's Common Stock issued to consultants and placement agents. The Common
Stock issued is valued with a 10% discount from the 7.25 average trading price
at the time the debenture was issued, due to the restrictions imposed on the
transferability of the shares.
Total Other Expenses for the three-month period ended September 30, 1998
compared to the three-month period ended September 30, 1999 increased to
$9,669 from $625. Total Other Expenses for the nine-month period ending
September 30, 1999 compared to the nine months ended September 30, 1998
increased to $470,151 from $1,633. This increase in expenses was primarily due
to the Interest expense of the conversion benefit of the convertible debentures
of $441,176.
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Liquidity and Capital Resources
We sold a $2,500,000 convertible debenture in May 1999. The debentures
are convertible into our common stock at the option of the debenture holder. As
of February 10, 2000, $1,000,000 of this debenture has been converted into
296,207 shares of our common stock. The issuance of this common stock represents
the payment of both principal and interest on the debentures. If converted, the
debentures will be converted into common stock at a price of the lower of (a)
$8.70 per share or (b) 85% of the average closing bid price for the common stock
for 5 trading days selected by the debenture holder from the 20 trading days
ending immediately before the conversion of the debenture. However, the Company
may not issue more than 9.9% of its outstanding common stock to the holder. We
also issued warrants to purchase 34,483 shares of our common stock at $8.70 per
share to the purchaser of the debentures and will issue more warrants in the
event of the sale of additional debentures. The material risk associated with
this type of debenture is that if our stock price were lower it could have a
significant dilutive effect.
The Company may seek to obtain additional equity and/or debt financing
in the future on terms deemed favorable by the Company. No assurances can be
given as to the Company's ability to procure any such debt and/or equity
financing in the future.
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INDUSTRY OBSTACLES:
The Reverse Mortgage Industry is fragmented, dominated by small
regional firms, and generally lacks nationwide leadership. We saw this as an
opportunity to aggregate production, and used this weakness as the core of our
growth strategy. In 1998, we were involved in the formation of the National
Reverse Mortgage Lenders Association (NRMLA). NRMLA was created to help this
Industry become mainstream, and we are a driving member of NRMLA.
AMSE's results have started to reflect its business model which is
built on a mix of revenue weighted toward a higher forward mortgage
contribution. However, our overhead allocation is weighted toward the
development of our Reverse Mortgage business. In 1998, we used the more
predictable cash flows of forward mortgages to subsidize the growth of reverse
mortgages (RM). Specific percentages have been developed that allow AMSE to
invest heavily in its RM marketing and development, which should allow the
Company to achieve profitable operation in the future.
In 1998, AMSE spent considerable resources to develop a program whereby
mortgage brokers, financial planners, and other advisors to the senior
demographic could participate in the growth of the Reverse Mortgage Industry.
Surveys have shown (National Association of Mortgage Brokers 1998) there were
about 200,000 brokers operating in the United States. Yet, less than 2,000
brokers (internal estimate) know anything significant about the product and even
fewer know where to direct their clients. By developing a program that allows
them to participate in the growth of our business, AMSE is opening a huge
channel of potential RM distribution.
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FUTURE PLANS FOR GROWTH AND PROFITABILITY:
The Company has developed a specific strategy for the future. The
strategy addresses several key needs.
1. The Company plans to grow through internal development of its captive
(and growing) loan origination staff. Our training focus is on the
Reverse Mortgage segment of our business. In 1998, by following this
strategy, the Miami Lakes office increased its Reverse Mortgage
origination pipeline by almost 500%. Along the way, valuable lessons
were learned about the training involved with regular mortgage sales
people. In 1999, these internal techniques were used to train our
subsidiaries to produce RMs.
2. Currently, the key growth engine is acquisition activity. In July 1998
the Company acquired Dow Guarantee Mortgage, adding approximately
$84,000,000 in loan production. In January of 1999, the Company
acquired Capital Funding of South Florida, adding another $62,500,000
in loan production. In August of 1999, the Company acquired Jupiter
Mortgage Corporation, adding approximately $125,000,000 in loan
production. On September 30, 1999 we merged Capital with and into
Jupiter in an effort to consolidate and or eliminate duplicative back
office functions.
3. In addition to the completed acquisitions mentioned above, we continue
to seek additional acquisition candidates, including the following:
PINNACLE FINANCIAL CORPORATION
On February 3, 2000, America's Senior Financial Services, Inc., a
Florida corporation (the "Registrant"), entered into a Merger Agreement
with Pinnacle Financial Corporation, a Florida corporation
("Pinnacle"). Pursuant to the terms of the Merger Agreement, AMSE
Acquisition 3 Corp., a wholly-owned subsidiary of the Registrant will
merge with and into Pinnacle, with Pinnacle surviving as a wholly-owned
subsidiary of the Registrant (the "Merger"). The purchase price for the
Merger is $18,000,000, payable in a combination of: (1) $8,500,000 in
cash payable at the closing; (ii) $5,000,000 comprised of shares of the
Registrant's common stock payable at closing; and (iii) $4,500,000
comprised of shares of the Registrant's common stock payable over a
five-year period from the closing at a rate of twenty percent (20%) per
year subject to Pinnacle achieving certain earnings results for such
five-year period. In addition, Pinnacle's shareholders may also be
entitled to receive an earnout payment based upon a percentage of the
increase in the value of the Registrant over such five-year period. The
Merger Agreement also provides for the payoff by the Registrant of
certain existing debt of Pinnacle.
The closing of the Merger transaction is subject to several conditions
to closing of both the Registrant and Pinnacle, including but not
limited to the obtaining of adequate financing by the Registrant with
respect to the cash consideration to be paid in the transaction. There
can be no assurances that such closing conditions will be met and the
merger transaction will be consummated or if consummated, it will be
upon the terms as currently contemplated.
SENIOR INCOME REVERSE MORTGAGE CORPORATION
On October 8, 1999, the Registrant entered into a Stock Purchase
Agreement with Senior Income Reverse Mortgage Corporation ("Senior
Income"), whereby the Registrant agreed to purchase all of the
outstanding cash and $3,000,000 in the form of shares of the
Registrant's common stock. The number of shares which constitute the
$3,000,000 stock component of the purchase price is subject to
adjustment at both the first anniversary and the second anniversary of
the closing date in the event that the Registrant's common stock price
at such dates has fallen below certain defined amounts.
The closing of the stock purchase transaction is subject to several
closing conditions of both the Registrant and the shareholders,
including but not limited to the obtaining of adequate financing by the
Registrant with respect to the cash consideration to be paid in the
transaction. There can be no assurances that such closing conditions
will be met and the stock purchase will be consummated or if
consummated, it will be upon the terms as currently contemplated.
4. Simultaneous with growth through acquisitions, we are continuing to
develop our "participant network" of mortgage brokers, financial
planners, and other persons dedicated to working with the senior
demographic.
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BUSINESS
We are a licensed mortgage lender active in originating, processing and
obtaining funding for forward and reverse mortgage loans secured by single
family residences which are funded by financial institutions or independent
investors. We receive income from two sources in connection with our mortgage
lending activities: we charge certain non-refundable mortgage application fees
to potential borrowers and upon closing a loan, receive an additional fees
payable by the borrower or investor which fees are based upon a percentage of
the loan and/or the interest rates charged.
We are a Florida corporation which was incorporated on February 26,
1990 under the name Phoenix Management Associates, Inc. We changed our name to
America's Senior Financial Services, Inc. on December 11, 1997. We do business
under the trade names America's Senior Financial Services, Dow Guarantee and
Jupiter Mortgage Corporation.
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The following table sets forth the approximate loan production and fee
income for America's Senior, Dow and Capital Funding during the periods
indicated.
FISCAL YEARS ENDED DECEMBER 31
------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Loans originated by America's Senior(1)
Gross dollars originated $45,550,000 $41,600,000
Total dollars funded $35,000,000 $32,000,000
Number of loans 350 320
Gross fee revenue $830,000 $542,000
Loans originated by Dow (2)
Gross dollars originated $84,000,000 $84,000,000
Total dollars funded $60,000,000 $60,000,000
Number of loans 615 630
Gross fee revenue $2,454,000 $2,600,000
Loans originated by Capital Funding (3)
Gross dollars originated $62,500,000 $35,000,000
Total dollars funded $50,000,000 $28,000,000
Number of loans 512 287
Gross fee revenue $1,419,000 $773,000
</TABLE>
- ------------------------
(1) American Senior's retail production only. Does NOT include subsidiaries.
(2) Acquired in July 1998. The figures include the period before acquisition by
the Company.
(3) Acquired in January 1999.
The Company currently originates all types of residential mortgage
products, and serves all age groups and credit categories. We have implemented a
plan to specialize in serving the senior citizen homeowner market using the
"Reverse Mortgage" as a base. Reverse Mortgages (RM) are a special type of
mortgage loan specifically developed to serve the unique needs of the senior
community. AMSE has been originating Reverse Mortgages since 1994. On March 1,
1999, the Company launched a training program for the employees of Dow and
Capital Funding to support the Company's overall business model, and to maximize
consolidated Reverse Mortgage production through the addition of this product
category at its subsidiaries and the education of its captive employee base to
properly market and sell RM product.
14
<PAGE> 15
HOW REVERSE MORTGAGES WORK
A reverse mortgage (RM) is a type of home equity loan that allows
homeowners to convert some of the equity in their homes into cash without an
obligation on their part for monthly repayment. RMs works much like forward
mortgages, only in reverse. Rather than making a payment to the lender each
month, the lender pays the borrower. Unlike conventional home equity loans, RMs
do not require any repayment of principal, interest, or servicing fees for as
long as the borrower lives in their home. Funds obtained from an RM may be used
for any purpose, including meeting housing expenses such as taxes, insurance,
fuel, and maintenance costs, as well as any personal expenses such as health
care expenses. The loan does not come due until the borrower dies, sells, or
moves out of the home permanently.
REQUIREMENTS AND RESPONSIBILITIES OF THE REVERSE MORTGAGE BORROWER
The RM funds may be paid to the borrower in a lump sum, in monthly
advances, through a line-of-credit, or in a combination of the three, depending
on the type of RM and the lender. The amount the homeowner is eligible to borrow
is based on age, the equity in the home, and the interest rate the lender is
charging. The calculation is done utilizing special software developed by the
secondary market investors.
Because the borrower retains title to the home with an RM, the borrower
also remains responsible for taxes, repairs, and maintenance. Depending on the
plan selected, the RM becomes due with interest either when the borrower
permanently moves, sells the home or dies. The lender does not take title to the
home when the borrower dies, but the heirs must pay off the loan. The debt is
usually repaid by refinancing the loan into a forward mortgage (if the heirs are
eligible) or by using the proceeds from the sale of the home.
The Company has established ongoing correspondent relationships with
selected mortgage funding organizations such as Federal National Mortgage
Association (Fannie Mae), Federal Housing Administration and several
non-governmental lenders which have established reverse mortgage funding
programs. These organizations buy reverse mortgages which meet their individual
and agency or government underwriting requirements. The Company receives a fee
upon funding which is generally 2% of the appraised value of the subject
property.
LOAN OFFICE NETWORK. The Company originates mortgage loans through its
network of 13 retail loan offices. As of February 21, 2000 the following are
the locations of the loan origination offices maintained by America's Senior,
Dow, and Jupiter.
America's Senior:
-----------------
Addresses: 15544 NW 77th Court; Miami Lakes FL 33016
911 East 86th Street, Suite #30, Indianapolis IN 46240
420 Columbus Avenue, Valhalla, New York 10595
21 Alden Street, Cranford, New Jersey 07016
DOW:
----
Addresses: 9501 NE 2nd Ave; Miami Shores FL 33138
Jupiter:
--------
Addresses: 1070 E. Indiantown Road; Jupiter FL 33477
11398 Okeechobee Boulevard, Suite 2,
Royal Palm Beach, FL 33411
29 E. Osceola Street, Stuart, Florida 34994
1000 South Federal Highway; Stuart FL 34994
729 SE Federal Highway; Stuart FL 34994
2014 SE Port St. Lucie Blvd.; Port St. Lucie FL 34952
1874 SE Port St. Lucie Blvd.; Port St. Lucie FL 34952
22 W. Monument Ave.; Kissimmee FL 34741
15
<PAGE> 16
The Company's loan officers at its 13 retail loan offices assist the
applicant in explaining the various mortgage loan programs available, completing
the loan application, arranging for appraisals, credit reports,
pre-underwriting, quality control, fraud prevention, state and federal
compliance issues, and various other tasks in connection with the proper
preparation of a loan package. The loan package is then forwarded to the
Company's funding sources for compliance review and loan approval. If the loan
package is approved, the loan can be closed and funded and the Company receives
its fees, which are based upon a percentage on the amount of the loan and/or
interest rates.
Generally, the Company acts only to originate mortgage loans which are
funded by third party financing sources. While the Company has credit
arrangements to fund loans with its own funds, these are used in a very limited
manner, and loans funded with these facilities are generally not held longer
than 90 days. Accordingly, the risks of collection, delinquencies and
foreclosures are very limited.
MARKETING AND ADVERTISING
As an independent mortgage originator, the Company seeks to identify
persons who are seeking mortgage loan funding. Currently, the Company advertises
in local and regional newspapers, yellow page telephone directories, internet
websites, direct mail and cable television. The Company markets through national
Trade Association participation, senior oriented direct mail, participation in
senior events, free video tapes given to potential clients, state level trade
shows, and HUD/Fannie Mae focus group activities.
For the fiscal year ended December 31, 1998, the Company expended
approximately $175,000 for sales and marketing activities. In 1999 the Company
is seeking to expand its marketing activities to consistently include nationwide
advertising of its Reverse Mortgage effort, and expects to invest more than
$250,000 in marketing and advertising costs.
FUNDING SOURCES
The Company has established ongoing correspondent relationships with
selected mortgage funding organizations such as Federal National Mortgage
Association (Fannie Mae), the FHLMC (Freddie Mac), the Federal Housing
Administration (FHA), the Veteran's Administration (VA), and certain conforming
and non-conforming non-governmental wholesale lenders.
The Company generally functions as a concurrent lender ('table
funding'), and has pre-sold its whole loans on a flow basis, prior to the
closing of the loan. This means that at the actual closing (or upon the
expiration of any applicable loan rescission period, such as would apply in the
case of a refinance) the funding organization wires the necessary monies
directly to the third party closing the loan. The funds generally do not flow in
to any of the Company's accounts. The Company then receives from the closer, the
fees due the Company.
16
<PAGE> 17
The funding organizations have no contractual obligation to fund any
mortgage loans originated by the Company. Each loan is considered for funding
based upon the underwriting standards established by the individual funding
organization, in compliance with the government (FHA, VA) or quasi-governmental
agency (FNMA, FHLMC) which will ultimately acquire the loan as part of a
mortgage backed security (MBS).
The funding organizations are all major wholesale funding sources, and
the Company represents that it only sells loans to those organizations which are
properly licensed to conduct business in the states that the Company operates
in, and that the funding organizations are generally HUD, VA, FNMA, or FHLMC
approved conduits.
EXPANSION STRATEGY
In July 1998, January 1999 and August 1999, the Company acquired Dow,
Capital Funding and Jupiter respectively. Additionally the Company has entered
into written agreements with Senior Income and Pinnacle. The closing of these
transactions are contingent upon certain conditions, including the Company
obtaining adequate financing to fund the acquisitions. There can be no
assurances given that either of these transactions will take place. See "Future
Plans For Growth And Profitability". The Company is seeking to acquire
additional mortgage originators and may also consider the acquisition of
ancillary organizations such as title companies, health care providers, and
other financial service organizations focused on the senior citizen market.
During May of 1999 the Company raised $2.5M for operating and acquisition
capital and has an additional $7.5M available per the convertible debentures
previously discussed.
COMPETITION
The Company faces intense competition in the business of originating
mortgage loans. The Company's competitors in the industry include consumer
finance companies, mortgage banking companies, savings banks, commercial banks,
credit unions, thrift institutions, credit card issuers and insurance companies.
Many of these competitors are substantially larger and have considerably greater
financial, technical and marketing resources than the Company. In addition, many
financial services organizations that are much larger than the Company have
formed national loan origination networks or purchased home equity lenders.
Competition among industry participants can take many forms, including
convenience in obtaining a loan, customer service, marketing and distribution
channels, amount and term of the loan, loan origination fees and interest rates.
To the extent any of these competitors significantly expand their activities in
the Company's market, the business of the Company could be materially adversely
affected. Fluctuations in interest rates and general economic conditions may
also affect the Company and its competition. During periods of rising rates,
competitors that have locked in lower rates to potential borrowers may have a
competitive advantage.
The Company believes its competitive strengths include emphasizing
customer education to attract borrowers for reverse mortgages, and its ongoing
high level of customer service which causes it to retain a very high percentage
of its clients.
REGULATION
The Company's operations are subject to extensive regulation,
supervision and licensing by federal, state and local governmental authorities
and are subject to various laws and judicial and administrative decisions
imposing requirements and restrictions on part or all of its operations. The
Company's consumer lending activities are subject to the Federal
Truth-in-Lending Act and Regulation Z (including the Home Ownership and Equity
Protection Act of 1994), the Federal Equal Credit Opportunity Act, as amended,
and Regulation B, the Fair Credit Reporting Act of 1970, as amended, the Federal
Real Estate Settlement Procedures Act and Regulation X, the Home Mortgage
Disclosure Act, the Federal Debt Collection Practices
17
<PAGE> 18
Act and the National Housing Act of 1934, as well as other federal and state
statutes and regulations affecting the Company's activities.
The Company is also subject to the rules and regulations of, and
examinations by, state regulatory authorities with respect to originating and
processing loans. These rules and regulations, among other things, impose
licensing obligations on the Company, establish eligibility criteria for
mortgage loans, prohibit discrimination, govern inspections and appraisals of
properties and credit reports on loan applicants, regulate assessment,
collection, foreclosure and claims handling, investment and interest payments on
escrow balances and payment features, mandate certain disclosures and notices to
borrowers and, in some cases, fix maximum interest rates, fees and mortgage loan
amounts. Failure to comply with these requirements can lead to loss of approved
status, certain rights of rescission for mortgage loans, class action lawsuits
and administrative enforcement action.
EMPLOYEES
At February 10, 2000, the Company employed approximately 135 persons.
The Company has satisfactory relations with its employees.
FACILITIES
All of the operations of the Company are conducted from premises leased
from independent landlords.
The following table sets forth information concerning these facilities:
America's Senior Financial Services
<TABLE>
<CAPTION>
Location Tenant Approx. Size Lease Expiration Monthly Rent
--------------- ------------ ---------------- ------------
<S> <C> <C> <C>
15544 NW 77th Court,
Miami Lakes, FL 33016 3,250 sf Aug. 2001 $3,500
911 East 86th Street, #30 1,227 sf May 2000 1,278
Indianapolis, IN 46240
420 Columbus Avenue 2,500 sf Feb. 2002 2,750
Valhalla, NY 10595
21 Alden Street 1,000 sf Month to Month 900
Cranford, NJ 07016
</TABLE>
Dow Guarantee Mortgage
<TABLE>
<CAPTION>
Location Tenant Approx. Size Lease Expiration Monthly Rent
--------------- ------------ ---------------- ------------
<S> <C> <C> <C>
9501 NE 2nd Ave.
Miami Shores, FL 33138 5,500 sf Dec. 2001 $6,000
</TABLE>
18
<PAGE> 19
JUPITER MORTGAGE CORPORATION
<TABLE>
<CAPTION>
Location Tenant Approx. Size Lease Expiration Monthly Rent
--------------- ------------ ---------------- ------------
<S> <C> <C> <C>
1070 E Indiantown Road 5,500 sf Nov. 2004 $5,750
Jupiter, FL 33477
11398 Okeechobee Blvd., Suite 2 1,500 sf Oct. 2000 1,800
Royal Palm Beach, FL 33411
29 E. Osceola St. 1,000 sf June 2001 980
Stuart, FL 34994
1874 S.E. Port St. Lucie Blvd. 1,800 sf Feb. 2003 1,886
Port St. Lucie, FL 34952
2014 S.E. Port St. Lucie Blvd. 850 sf Feb. 2000 780
Port St. Lucie, FL 34952
729 SE Federal Hwy., Suite 100 550 sf Month to Month 2,000
Stuart, FL 34994
22 W. Monument Ave. 450 sf Month to Month 800
Kissimmee, FL 34741
1000 S. Federal Hwy. 500 sf Month to Month 1,000
Stuart, FL 34994
</TABLE>
Leases may provide for rent escalations tied to increases in operating
expenses or fluctuations in the consumer price index.
MANAGEMENT
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Nelson A. Locke 49 Chairman of the Board,
President and Treasurer.
Cheryl D. Locke 43 Executive Vice President-
Personnel, Director.
Elly Shea 56 Senior Vice President, Production.
Thomas G. Sherman, Esq. 49 Director.
Compensation and Audit Committee.
Michael J. Shelley 38 Director.
Compensation and Audit Committees.
Charles M. Kluck 48 Director-President of Dow.
Nelson A. Locke and Cheryl D. Locke are married.
</TABLE>
19
<PAGE> 20
Nelson A. Locke founded the Company in 1990 and has served as its
President and Director since that time. He is the architect of the Company's
business model. He is the past President of the Florida Association of Mortgage
Brokers - Miami Chapter and has earned the NAMB's certified residential mortgage
lender designation. In 1997 he was named FAMB's 'Broker of the Year', and in
1998 was awarded the prestigious FAMB 'President's Award' for his public
relations efforts on behalf of the Florida Mortgage Brokerage Industry. He is a
founder and director of the National Reverse Mortgage Lenders Association. Mr.
Locke is a Marine Corps. veteran (non commissioned officer) and holds a B.A.
from California State University.
Cheryl D. Locke is the Company's Executive Vice President. She is a
member of the Board of Directors, and serves on the Company's audit committee.
She is directly responsible for the HR function, supervising the Company's
personnel department and reviewing AMSE's compliance with state and federal
employment issues. She joined the Company in 1990 on a part time basis, as a
loan officer. By 1994, she had risen to senior loan officer. From 1995 to 1998,
she directly supervised all loan production and closing. In January 1998, she
was appointed EVP and elected to the Company's Board of Directors.
Elly Shea has been an advocate of Reverse Mortgages since their
inception. Working in the industry for over 10 years, she has participated in RM
product development and marketing. From 1994 to 1998, she was Southeast
Correspondent Manager for TransAmerica HomeFirst. She understands the special
needs of senior citizens, and has worked diligently to help bring ethical
products to Florida seniors. She has been Senior Vice President-Production of
the Company since August 1998.
Thomas J. Sherman has been an attorney in private practice in Coral
Gables, Florida since 1980. He is also President and owner of Union Title
Services, Inc., a full service title insurance agency. Mr. Sherman is a graduate
of the University of Miami School of Law. Since 1990, Mr. Sherman has served as
the Company's general counsel. He became a director in January 1998.
Michael J. Shelley has been President and CEO of MJS Financial, Inc.
since 1993. From 1991 to 1993 he was senior sales representative for Siemens
Automotive. Mr. Shelley is a Phi Beta Kappa graduate of the University of
Illinois with a B.A. in Economics and also has a Master of Science degree from
the University of Illinois in Finance. He became a director in January 1998.
Charles M. Kluck has been the President of Dow Guarantee Corp. since
its founding in 1985. Dow was acquired by the Company on July 31, 1998. He
continues to serve in that capacity. He became an director in July 1998.
BOARD COMMITTEES
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee, consisting of Thomas J. Sherman and
Michael Shelley, reviews the adequacy of internal controls and results and scope
of the audit and other services provided by the Company's independent auditors.
The Compensation Committee, consisting of Thomas Sherman and Michael Shelley,
establishes and recommends salaries, incentives and other forms of compensation
for officers and other key employees.
20
<PAGE> 21
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid to the
Company's chief executive officer for the last three completed fiscal years. No
executive officer of the Company received compensation of $100,000 or more
during any such year.
<TABLE>
<CAPTION>
Other Annual
Principal Position Year Salary Bonus Compensation
------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Nelson A. Locke 1998 $70,000 -0- $5,000
President 1997 $50,000 -0- -0-
1996 $30,000 -0- -0-
</TABLE>
DIRECTOR COMPENSATION No fees are paid for director services.
EXECUTIVE EMPLOYMENT AGREEMENTS
In July 1998 the Company entered into a five (5) year employment
agreement with Nelson A. Locke. Mr. Locke is employed as President and Chairman
at an annual salary of $70,000 and such additional compensation as he
determines. The agreement provides certain health, life and disability
insurance, and autos to Mr. Locke. The Agreement provides for the establishment
of an "Executive Performance Bonus Pool" described below. The agreement provides
that in any calendar year when the Company's stock price increases by at least
20%, that he shall be eligible for stock options equal to 5% of his total common
stock holdings at the end of the calendar year which may be exercised at $1.00
per share and may be paid for by interest-free promissory note. Mr. Locke waived
these options for 1998 as this event would have been harmful to future business
and investor prospects.
In October 1999 the Board of Directors approved a change in Mr.
Locke's annual base salary to $200,000. His health, life, option plan,
disability insurance and auto allowances remain the same. However, Mr. Locke
voluntarily deferred the increase of the base salary until further notice, in
the interest of protecting the company's cash flows.
In January 1998 the Company entered into a five (5) year employment
agreement with Cheryl D. Locke. Mrs. Locke is employed as Executive Vice
President, Secretary and Director at an annual salary of $50,000. The agreement
provides certain health, life and disability insurance, an auto to Mrs. Locke,
special performance bonus of up to $25,000 to be paid at the discretion of the
President. She is entitled to commission on loan originations for which she was
submitting loan officer. The agreement provides that in any calendar year when
the Company's loan origination's increase by at least 20%, that she shall be
eligible for stock options equal to 5% of her total common stock holdings at the
end of the calendar year which may be exercised at $1.00 per share and may be
paid for by interest-free promissory note. Mrs. Locke waived these options for
1998 as this event would have been harmful to future business and investor
prospects.
In July 1998 the Company's subsidiary, Dow Guarantee Corp., entered
into an employment agreement with Charles M. Kluck for a term of five years,
under which Mr. Kluck will be paid an annual salary of $110,000.
21
<PAGE> 22
In July 1998 the Company's subsidiary, Dow Guarantee Corp., entered
into an employment agreement with Linda C. Kluck for a term of five years, under
which Ms. Kluck will be paid an annual salary of $70,000.
In August 1998 the Company entered into an employment agreement with
Elly Shea for a term of three years, under which Mrs. Shea will be paid an
annual salary of $65,000, an auto, certain health and life insurance, and
certain other performance bonuses which may be in the form of cash compensation
or stock.
In August of 1999 the Company's subsidiary, Jupiter Mortgage Corp.,
entered into an employment agreement with Michael J. Buono for a term of 5
years, under which Mr. Buono will be paid an annual salary of $150,000.
In August of 1999 the Company's subsidiary, Jupiter Mortgage Corp.,
entered into an employment agreement with Deanne J. Anderson for a term of 1
year, under which Ms. Anderson will be paid an annual salary of $120,000.
EXECUTIVE PERFORMANCE BONUS POOL
The Company's employment agreement with its President, Nelson A. Locke, provides
that ten percent (10%) of the Company's pre-tax net income for 1998 through 2002
in excess of the pre-tax net income for December 31, 1997 shall be contributed
to an annual bonus pool for the benefit of the President and other key employees
of the Company. The allocation of any bonus among the President and other key
employees is made by the Compensation Committee.
No bonus was allocated for 1998.
STOCK OPTION PLANS.
INCENTIVE STOCK OPTION PLAN
The Company's Board of Directors and Shareholders have adopted two
stock option plans. Pursuant to the Incentive Stock Option Plan (the "ISO
Plan"), options to acquire a maximum of 2,500,000 shares, but not more than
eight percent (8%) of the total authorized shares of the Company, may be granted
to directors, officers, employees, consultants and other independent contractors
and persons who performed services relating to the Company, including wholly or
partially owned subsidiaries.
The Plan is administered by the Compensation Committee consisting of
two non-employee directors or in the absence of such a committee, the Board of
Directors.
Pursuant to the ISO Plan, the Company may grant Incentive Stock Options
as defined in ss. 422(b) of the Internal Revenue Code of 1986 and non-qualified
stock options not intended to qualify under such section. The price at which the
Company's common stock may be purchased upon exercise of Incentive Stock Options
granted under the Plan will be required to be at least equal to the fair market
value of the common stock on the date of grant. Non-qualified stock options may
be at any price designated by the Committee on the date of grant. Options
granted under the Plan may have maximum terms of not more than
22
<PAGE> 23
ten (10) years and are not transferable except by will or the laws of descent
and distribution. No Incentive Stock Options under the Plan may be granted to an
individual owning more than ten percent (10%) of the total combined voting power
of all classes of stock issued by the Company unless the purchase price of the
common stock under such option is at least one hundred ten percent (110%) of the
Fair Market Value of the shares issuable on exercise of the option at the date
of grant and such option is not exercisable more than five (5) years from the
date of grant.
Generally, options granted under the Plan terminate upon the grantee's
employment or affiliation with the Company, but the Committee may authorize an
expiration date of up to ninety (90) days following such termination. If
termination was due to death or disability, the options expire one (1) year
after such termination or the termination date set forth in the option,
whichever is earlier. If termination is due to retirement the option expires
ninety (90) days after termination or the termination date set forth in the
option, whichever is earlier.
If the Change of Control takes place, the Board may vote to immediately
terminate all outstanding options or may vote to accelerate the expiration of
options to the tenth day after the effective date of the Change of Control. If
the Board votes to immediately terminate the options, it shall make a cash
payment to the grantees equal to the difference between the exercise price and
the Fair Market Value of the shares that would have been subject to the
terminated option on the date of the Change of Control. A Change of Control of
the Company is generally deemed to occur when any person becomes the beneficial
owner of or acquires voting control with respect forty percent (40%) or more of
the total voting shares of the Company, the Company is merged into any other
company, or substantially all of its assets are acquired by another company, or
three or more directors nominated by the Board to serve as a director, each
having agreed to serve in such capacity, failed to be elected in a contested
election of directors.
Incentive Stock Options granted under the Plan are subject to the
restriction of the aggregate Fair Market Value as of the date of grant of
options which first become exercisable in any calendar year cannot exceed
$100,000.
The Plan provides for appropriate adjustments in the number and type of
shares covered by the Plan and options granted thereunder in the event of any
reorganization, merger, recapitalization or certain other transactions involving
the Company.
Until the closing of an underwritten public offering by the Company,
pursuant to a registration statement filed and declared effective under the
Securities Act of 1933 covering offer and sale of the Company's common stock for
the account of the Company, the Company has the right of first refusal to
acquire any shares which were acquired pursuant to the exercise of options under
the Plan at the Fair Market Value on the date of the shareholder's notice to the
Company and the Company shall have the right to repurchase any option shares
following holder's termination of service or affiliation with the Company for
any reason at the original exercise price of the option.
NON-QUALIFIED STOCK OPTION PLAN.
Pursuant to the Non-Qualified Stock Option Plan (the "Non-ISO Plan"),
options to acquire a maximum of two percent (2%) of the total authorized shares
of the Company may be granted to any person who performed services for the
Company and its subsidiaries.
23
<PAGE> 24
Non-qualified stock options may be at any price designated by the
Committee on the date of grant. Options granted under the Plan may have maximum
terms of not more than ten (10) years and are not transferable except by will or
the laws of descent in distribution.
Generally, options granted under the Plan terminate thirty (30) days
after termination of the grantee's employment or affiliation with the Company.
If termination was due to death or disability, the options expire one (1) year
after such termination or the termination date set forth in the option,
whichever is earlier.
Any conditions or restrictions on exercise lapse on a Change of Control
unless otherwise set forth in the Option Agreement.
The Plan is administered by a Stock Option Committee consisting of two
or more non-employee directors or in the absence of such a committee, the Board
of Directors.
The Plan provides for appropriate adjustments in the number and type of
shares covered by the Plan and options granted thereunder in the event of any
reorganization, merger, recapitalization or certain other transactions involving
the Company.
Until the closing of an underwritten public offering by the Company,
pursuant to a registration, filed and declared effective under the Securities
Act of 1933 covering offer and sale of the Company's common stock for the
account of the Company, the Company has the right of first refusal to acquire
any shares which were acquired pursuant to the exercise of options under the
Plan. At the Fair Market Value on the date of the shareholder's notice to the
Company and the Company shall have the right to repurchase any option shares
following holder's termination of service or affiliation with the Company for
any reason at the original exercise price of the option.
NON-PLAN STOCK INCENTIVES.
In 1998, the Company issued 74,400 shares of its Common Stock to
employees as incentive compensation. These shares vest at three years. There is
no prorated vesting schedule. During 1999 we issued an additional 128,300
shares to employees as incentive compensation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
A shareholder, Louis Weltman of Vistra Growth Partners, Inc. provides
investment banking services to the Company. In 1998 such shareholder was paid
fees of $60,000 and 66,667 shares of the Company's common stock for services in
connection with the Company's acquisition of Dow. In 1999 he was paid $74,000,
issued 170,600 shares of common stock and a warrant to purchase 228,888 shares
of common stock in connection with the sale of our 3% Convertible Debentures.
Also in 1999 he was paid $90,000 in connection with the acquisition of Jupiter.
The Company's President borrowed $22,500 from the Company in December
1998, which was repaid in January 1999 with interest at 5%.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 31, 2000, the beneficial
ownership of the Company's 8,288,159 outstanding shares of Common Stock by (1)
the only persons who own of record or are known
24
<PAGE> 25
to own, beneficially, more than 5% of the Company's Common Stock; (2) each
director and executive officer of the Company; and (3) all directors and
officers as a group.
<TABLE>
<CAPTION>
Number of
Name Shares Percent(1)
---- --------- ----------
<S> <C> <C>
Nelson A. Locke(2) 2,650,000 31.3%
Cheryl D. Locke(2) 2,650,000 31.3%
Charles M. Kluck(3) 550,000 6.6%
Elly Shea 48,000 .6%
Thomas G. Sherman, Esq. 110,000 1.3%
Michael J. Shelley 107,500 1.3%
Louis Weltman 549,488 6.6%
All officers and directors
as a group (6 persons) 3,465,500 41.8%
</TABLE>
--------------------------
(1) Based upon 8,288,159 shares outstanding as of January 31, 2000.
(2) Nelson A. Locke and Cheryl D. Locke own such shares as joint
tenants.
(3) Includes 200,000 shares owned by his sister, Linda Kluck.
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 25,000,000 shares of Common Stock,
$.001 par value. The holders of Common Stock are entitled to one vote for each
share held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voting for the election of
directors can elect all of the directors then up for election. The holders of
Common Stock are entitled to receive dividends when, as and if declared by the
Board of Directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining which are available
for distribution to them after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the Common
Stock. Holders of shares of Common Stock, as such, have no conversion,
preemptive or other subscription rights, and there are no redemption provisions
applicable to the Common Stock. All of the outstanding shares of Common Stock
are fully paid and nonassessable.
25
<PAGE> 26
PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of Preferred Stock
with rights, preferences and limitations to be determined by the Board of
Directors. As of the date hereof, no shares of Preferred Stock have been issued.
INDEMNIFICATION
The Florida Business Corporation Act provides that a person who is
successful on the merits or otherwise in defense of an action because of service
as an officer or director or a corporation, such person is entitled to
indemnification of expenses actually and reasonably incurred in such defense.
F.S. 607.0850(3).
Such Act also provides that the corporation may indemnify an officer or
director, advance expenses, if such person acted in good faith and in a manner
the person reasonably believed to be in, or not opposed to, the best interests
of the corporation and, with respect to a criminal action, had no reasonable
cause to believe his conduct was unlawful. F.S. 607.0850(1)(2).
A court may order indemnification of an officer or director if it
determines that such person is fairly and reasonably entitled to such
indemnification in view of all the relevant circumstances. F.S. 607.0850(9).
INDEMNIFICATION AGAINST PUBLIC POLICY
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or person controlling the
company, the company has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
PLAN OF DISTRIBUTION/SELLING SECURITY HOLDERS
Plan of distribution
The shares offered hereby may be sold from time to time directly by the
selling security holders. Alternatively, these selling security holders may from
time to time offer the shares through underwriters, dealers or agents. The
distribution of the shares by the selling security holders may be effected in
one or more transactions that may take place on the over-the-counter market,
including:
o ordinary broker's transactions,
o privately-negotiated transactions or
o through sales to one or more broker-dealers for resale, at market
prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
Customary or specifically negotiated brokerage fees or commissions may
be paid by the selling security holders in connection with such sales of shares.
The shares offered by the selling security holders may be sold by one or more of
the following methods, without limitations:
26
<PAGE> 27
o a block trade in which a broker or dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this Prospectus;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and
o face-to-face transactions between sellers and purchasers without a
broker-dealer.
In effecting sales, brokers or dealers engaged by the selling security
holders may arrange for other brokers or dealers to participate. The selling
security holders and intermediaries through whom such shares are sold may be
deemed "underwriters" within the meaning of the Securities Act of 1933 with
respect to the shares offered, and any profits realized or commissions received
may be deemed underwriting compensation.
At the time a particular offer of shares is made by or on behalf of a
selling security holder, to the extent required, a prospectus will be
distributed which will set forth the number of shares being offered and the
terms of the offering, including the name or names of any underwriters, dealers
or agents, if any, the purchase price paid by any underwriter for shares
purchased from the selling security holder and any discounts, commissions or
concessions allowed or reallowed or paid to dealers and the proposed selling
price to the public.
The following security holder may offer shares of common stock issuable
upon conversion of debentures and exercise of warrants.
Except as indicated below, none of the selling security holders having
any affiliation with the Company other than as security holders:
27
<PAGE> 28
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Beneficially Owned Prior Being Offered for Selling
Selling Shareholder to the Offering(1) Shareholders' Account
- ------------------- ------------------------ -------------------------
<S> <C> <C>
The Charterbridge Financial
Group, Inc. 224,000 224,000 (2)
Telluride Holdings, L.C.(3) 75,000 75,000 (3)
Brickell Equity Group, Inc. 375,000 75,000 (4)
Mark Bergman 50,000 50,000 (5)
------------------- -----------
424,000
</TABLE>
- --------------------
(1) As used herein, beneficial ownership means the sole power to vote, or direct
the voting of, a security, or the sole or shared power to dispose, or direct
the disposition of, a security. Except as otherwise indicated, each selling
shareholder has beneficial ownership with respect to his/her shares of
common stock.
(2) These shares were issued pursuant to an Agreement, dated January 6, 2000,
between the Company and The Charterbridge Financial Group, Inc., by which
the Company issued shares of common stock with registration rights in return
for certain financial advisory services.
(3) These shares were issued pursuant to a Financial Advisory Agreement, dated
February 2, 2000 by and between the Company and Capitalink, L.C., by which
the Company issued shares of common stock to Telluride Holdings, L.C., (a
wholly owned subsidiary of Capitalink, L.C.) with registration rights in
return for certain financial advisory services.
(4) These shares were issued pursuant to a Consulting Agreement, dated as of
January 1, 2000, by and between the Company and Brickell Equity Group, Inc.,
by which the Company issued shares of common stock with registration
rights in return for certain financial advisory services.
(5) These shares were issued pursuant to an Investor Relations Consulting
Agreement, dated January 20, 2000, by and between the Company and Access1
Financial, by which the Company issued shares of common stock with
registration rights in return for certain financial advisory services.
28
<PAGE> 29
REGULATION M
We have informed the selling security holders that Regulation M
promulgated under the Securities Exchange Act may be applicable to them with
respect to any purchase or sale of our common stock. In general, Rule 102 under
Regulation M prohibits any person connected with a distribution of our common
stock from directly or indirectly bidding for, or purchasing for any account in
which it has a beneficial interest, any of our common stock or any right to
purchase our common stock for a period of one business day before and after
completion of its participation in the distribution.
During any distribution period, Regulation M prohibits the selling
security holders and any other persons engaged in the distribution from engaging
in any stabilizing bid or purchasing our common stock except for the purpose of
preventing or retarding a decline in the open market price of our common stock.
No person may effect any stabilizing transaction to facilitate any offering at
the market.
The selling security holders may be entitled, under agreements entered
in to with us, to indemnification against liabilities under the Securities Act,
the Securities Exchange Act and otherwise.
LEGAL MATTERS
The validity of the shares offered hereby is being passed upon for the
Company by Akerman, Senterfitt & Eidson, PA, Miami, Florida.
EXPERTS
The consolidated financial statements of America's Senior Financial
Services, Inc. and subsidiary as of and for the years ended December 31, 1998
and 1997, the financial statements of Dow Guarantee Corp. as of and for the
years ended December 31, 1998 and 1997, and the financial statements of Capital
Funding of South Florida, Inc. as of and for the year ended December 31, 1998,
which are included in this prospectus and incorporated by reference in the
Registration Statement, have been audited by Ahearn, Jasco + Company, P.A.,
independent auditors, as stated in their reports appearing herein and
incorporated by reference in the Registration Statement, and are included and
incorporated by reference in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements of Jupiter Mortgage Corporation
as of and for the years ended December 31, 1998 and 1997,which are included in
this prospectus and incorporated by reference in the Registration Statement,
have been audited by Wisneski, Blakiston & Leslie, P.A., independent auditors,
as stated in their reports appearing herein and incorporated by reference in the
Registration Statement, and are included and incorporated by reference in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
registration statement on Form SB-2 under the Securities Act with respect to the
securities being offered. This prospectus, filed as a part of the registration
statement, does not contain certain information contained in or annexed as
exhibits to the registration statements. Reference is made to exhibits to the
registration statement for the complete text. For further information with
respect to the Company and the securities hereby offered, reference is made to
the registration statement and to the exhibits filed as part of it, which may be
inspected and copied at the public reference facilities of the commission in
Washington D.C., and at the Commission's regional offices at
o 500 West Madison Street, Chicago, IL 60604;
o 7 World Trade Center, New York, NY 10048;
o and 5757 Wilshire Boulevard, Los Angeles, CA 90034;
o and copies of such material can be obtained from the Public Reference
Section of the Commission, 450 5th Street, N.W., Washington, D.C. 20549,
at prescribed rates and are available on the World Wide Web
at: http://www.sec.gov.
29
<PAGE> 30
<TABLE>
<S> <C>
Index to Financial Statements
America's Senior Financial Services, Inc.
1998 Audited Financial Statements ......................................... F-1
Dow Guarantee Corporation
1998 Audited Financial Statements ......................................... F-18
Capital Funding of South Florida
1998 Audited Financial Statements ......................................... F-29
Jupiter Mortgage Corporation
1998 Audited Financial Statements ......................................... F-39
America's Senior Financial Services, Inc.
Unaudited Financial Statements for the nine months ended September 30, 1999
Consolidated Balance Sheets ............................................... F-47
Statements of Operations .................................................. F-48
Statements of Cash Flows .................................................. F-49
Statement of Changes in Stockholders' Equity .............................. F-50
Notes to the nine months ended financial statements ....................... F-51
Pro forma Financial Information
Balance Sheets at December 31, 1998 ....................................... F-53
Statements of Operations at December 31, 1998 ............................. F-54
Balance Sheets at September 30, 1999 ...................................... F-55
Statements of Operations at September 30, 1999 ............................ F-56
</TABLE>
<PAGE> 31
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
INDEPENDENT AUDITORS' REPORT
F-1
<PAGE> 32
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
AND SUBSIDIARY
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statement of Changes in Stockholders' Equity 4
Consolidated Statements of Cash Flows 5-6
NOTES TO FINANCIAL STATEMENTS 7-15
F-2
<PAGE> 33
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
America's Senior Financial Services, Inc.
We have audited the accompanying consolidated balance sheets of America's
Senior Financial Services, Inc. and subsidiary (collectively, the "Company") as
of December 31, 1998 and 1997, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the 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 generally accepted auditing
standards. 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 consolidated financial position of America's Senior
Financial Services, Inc. and subsidiary as of December 31, 1998 and 1997, and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/ Ahearn, Jasco + Company, P.A.
------------------------------------------
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
February 26, 1999, except for Note 10,
for which the date is March 26, 1999
F-3
<PAGE> 34
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 195,728 $ 86,376
Brokerage fees receivable 49,853 5,495
Employee advances 70,528 --
Due from shareholder 22,618 --
Prepaid expenses 46,699 --
---------- --------
TOTAL CURRENT ASSETS 385,426 91,871
PROPERTY AND EQUIPMENT, net 254,783 61,418
GOODWILL, net 3,348,215 --
OTHER ASSETS 319,940 27,770
---------- --------
TOTAL $4,308,364 $181,059
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 5,798 $ 10,754
Accounts payable 173,904 17,126
Accrued compensation and related taxes 49,054 17,640
---------- --------
TOTAL CURRENT LIABILITIES 228,756 45,520
---------- --------
LONG-TERM DEBT, less current portion 13,287 19,702
---------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value; 25,000,000 shares
authorized, shares issued and outstanding, 5,898,867
in 1998 and 4,367,000 in 1997 5,899 4,367
Additional paid-in capital 4,584,932 169,647
Retained earnings (deficit) (457,443) (58,177)
Unearned compensation - restricted stock (67,067) --
---------- --------
TOTAL STOCKHOLDERS' EQUITY 4,066,321 115,837
---------- --------
TOTAL $4,308,364 $181,059
========== ========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 35
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
REVENUES $1,797,632 $ 541,546
---------- ----------
EXPENSES:
Payroll and related expenses 1,335,488 307,690
Administrative, processing, and occupancy 722,828 301,106
Employee recruitment 50,333 --
Goodwill amortization 71,239 --
---------- ----------
TOTAL EXPENSES 2,179,888 608,796
---------- ----------
LOSS FROM OPERATIONS (382,256) (67,250)
---------- ----------
OTHER EXPENSES:
Acquisition costs 14,969 --
Interest expense 2,041 4,906
---------- ----------
TOTAL OTHER EXPENSES 17,010 4,906
---------- ----------
LOSS BEFORE INCOME TAXES (399,266) (72,156)
PROVISION FOR INCOME TAXES -- --
---------- ----------
NET LOSS $ (399,266) $ (72,156)
========== ==========
EARNINGS (LOSS) PER SHARE:
Basic $ (0.082) $ (0.025)
========== ==========
Diluted $ (0.082) $ (0.025)
========== ==========
Weighted average common shares outstanding 4,849,247 2,854,400
========== ==========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 36
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON Common Additional Retained Total
STOCK Stock, at Paid-in Restricted Earnings Stockholders'
# OF SHARES par value Capital Stock (Deficit) Equity
----------- --------- ----------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY, January 1, 1997 2,650,000 $2,650 $ 15,620 $ -- $ 120,126 $ 138,396
S corporation distributions -- -- -- -- (29,032) (29,032)
Issuances of common stock 1,117,000 1,117 1,650 -- -- 2,767
Record distribution payable and other
adjustments upon S corporation termination -- -- 59,580 -- (77,115) (17,535)
Private placement offering 600,000 600 92,797 -- -- 93,397
Net loss for the year ended
December 31, 1997 -- -- -- -- (72,156) (72,156)
--------- ------ ---------- ----------- --------- ----------
STOCKHOLDERS' EQUITY, December 31, 1997 4,367,000 4,367 169,647 -- (58,177) 115,837
Stock issued pursuant to the Dow acquisition 616,667 617 3,436,883 -- -- 3,437,500
Restricted stock issued to employees 74,400 74 74,326 (74,400) -- --
Recognition of restricted stock earned -- -- -- 7,333 -- 7,333
Issuances of common stock for cash, net
of expenses 840,800 841 904,076 -- -- 904,917
Net loss for the year ended
December 31, 1998 -- -- -- -- (399,266) (399,266)
--------- ------ ---------- --------- --------- ----------
STOCKHOLDERS' EQUITY, December 31, 1998 5,898,867 $5,899 $4,584,932 $ (67,067) $(457,443) $4,066,321
========= ====== ========== ========= ========= ==========
</TABLE>
See notes to financial statements.
F-6
<PAGE> 37
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(399,266) $(72,156)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 106,195 21,259
Recognition of restricted stock earned 7,333 --
Changes in certain assets and liabilities, net of amounts
from an acquisition:
Brokerage fee receivable 6,429 74,343
Employee advances 28,544 --
Prepaid expenses and other (46,464) 12,538
Accounts payable, accrued compensation and related taxes 14,046 10,806
--------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (283,183) 46,790
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (205,302) (18,538)
Acquisition expenditures, net of cash acquired (294,395) --
Changes in other assets 21,304 --
--------- --------
NET CASH USED IN INVESTING ACTIVITIES (478,393) (18,538)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 904,917 96,164
Change in long-term debt (11,371) (12,130)
S corporation distributions -- (46,567)
Loan to shareholder (22,618) --
--------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 870,928 37,467
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 109,352 65,719
CASH AND CASH EQUIVALENTS, Beginning of year 86,376 20,657
--------- --------
CASH AND CASH EQUIVALENTS, End of year $ 195,728 $ 86,376
========= ========
</TABLE>
See notes to financial statements.
F-7
<PAGE> 38
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(continued)
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid in cash during the period $ 18,135 $ 4,906
========= ========
Income taxes paid in cash during the period $ -- $ --
========= ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
On July 31, 1998, the Company recorded net tangible assets of $189,157 and goodwill of $3,419,454
in connection with the Dow acquisition (see Note 9). During 1998, the Company issued restricted
stock to employees valued at $74,400.
</TABLE>
See notes to financial statements.
F-8
<PAGE> 39
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
America's Senior Financial Services, Inc. ("AMSE") was
incorporated on February 26, 1990 and does business as Value Financial -
Senior Funding. On July 31, 1998, AMSE acquired Dow Guarantee Corp.
("Dow"). AMSE and its subsidiary Dow (collectively referred to as "the
Company"), are licensed mortgage lenders in the State of Florida. The
Company is engaged in originating, processing, and concurrently funding
mortgage loan applications. In addition to providing traditional (or
forward) mortgage loan services, the Company also arranges reverse
mortgages specifically developed to serve the special needs of the senior
citizen community, and has generated a substantial portion of the reverse
mortgages originated in Florida. The Company sells its closed loans to
investors for resale into the secondary market. All significant
intercompany balances and transactions are eliminated in consolidation.
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 revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
REVENUE RECOGNITION AND CREDIT RISKS
The Company derives its revenues primarily from mortgage
application fees paid by potential borrowers and from brokerage and
processing fees payable by the borrower and others at the time of
closing. The brokerage and processing fees are recognized as revenue at
the time the loans are closed.
The Company operates in the mortgage banking industry;
therefore, it is highly dependent on the status of the economy and
interest rates.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and depreciated using
the straight-line method over the estimated useful lives of the assets.
Useful lives for most assets range from five to seven years. Expenditures
for routine maintenance and repairs are charged to expense as incurred.
INTANGIBLE ASSETS
The excess of investment cost over the fair value of net assets
acquired (goodwill) is being amortized over a period of 20 years. The
goodwill arose from the Dow acquisition. Amortization of goodwill in the
amount of $71,239 was charged to operations in 1998.
ADVERTISING
The costs of advertising, promotion, and marketing programs are
charged to operations in the year incurred. Advertising expense was
$155,132 and $46,586 for the years ended December 31, 1998 and 1997,
respectively.
INCOME TAXES
Through November 2, 1997, AMSE, with the consent of its
shareholders, had elected under provisions of the Internal Revenue Code
to be an S corporation. In lieu of corporation income taxes, the
shareholders of an S corporation are taxed on their proportionate share
of taxable income. Therefore, no provision or liability for income is
included in the accompanying financial statements for results of
operations through November 2, 1997. Effective that date, this election
was terminated when AMSE issued common stock to a corporation. This S
corporation status termination results in AMSE directly paying taxes on
its earnings.
F-9
<PAGE> 40
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES (continued)
Effective November 3, 1997, the Company accounts for its income
taxes in accordance with Financial Accounting Standards Board Statement
No. 109, "Accounting for Income Taxes." Deferred tax liabilities and
assets are recognized for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse.
NET LOSS PER COMMON SHARE
The Company has adopted SFAS No. 128, "Earnings Per Share." SFAS
128 requires companies with complex capital structures or common stock
equivalents to present both basic and diluted earnings per share ("EPS")
on the face of the income statement. Basic EPS is calculated as income
available to common stockholders divided by the weighted average number
of common shares outstanding during the period. Diluted EPS is calculated
using the "if converted" method for convertible securities and the
treasury stock method for options and warrants as previously prescribed
by Accounting Principles Board Opinion No. 15, "Earnings Per Share." The
effect of common shares issuable under the terms of the Company's
preferred stock outstanding are excluded from the calculation of diluted
EPS since the effect is antidilutive. The adoption of SFAS 128 did not
have an impact on the Company's reported results.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments
purchased with an original maturity of three months or less. The Company
occasionally maintains cash balances in financial institutions in excess
of the federally insured limits.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, receivables, and accounts payable and accrued expenses are
reflected in the financial statements at fair value because of the
short-term maturity of those instruments. The fair values of the
Company's debt obligations, as disclosed in Note 3, are the same as the
recorded amounts because rates and terms approximate current market
conditions.
RECLASSIFICATIONS
Certain amounts in the 1997 financial statements have been
reclassified to conform to the 1998 presentation.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 130 and 131 are effective for
fiscal years beginning after December 15, 1997. The Company adopted these
standards in 1998, and such adoption did not have any impact on the
Company's results of operations or financial position, as the new
standards are limited to the form and content of disclosures.
F-10
<PAGE> 41
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31,
1998 and 1997:
1998 1997
------------ ---------
Office equipment $ 31,080 $ 47,930
Furniture and fixtures 176,674 18,525
Leasehold improvements 87,022 --
Vehicles 42,586 42,586
---------- --------
Total cost 337,362 109,041
Less: Accumulated depreciation (82,579) (47,623)
---------- --------
Property and equipment, net $ 254,783 $ 61,418
========== ========
Depreciation expense for the years ended December 31, 1998 and
1997 was $34,956 and $21,259, respectively.
NOTE 3 - LONG-TERM DEBT AND CREDIT AGREEMENTS
INSTALLMENT NOTES
Long-term debt consists of installment notes for the Company's
vehicles. The terms of the notes and the balances owed as of December 31,
1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Payable in monthly installments of $549, including interest at the rate of
4.9% per annum, through January 2002, secured by a vehicle. $ 19,085 $ 24,351
Other, repaid in 1998. -- 6,105
-------- --------
Total long-term debt 19,085 30,456
Less: Current portion (5,798) (10,754)
-------- --------
Long-term debt, net of current portion $ 13,287 $ 19,702
======== ========
</TABLE>
Future maturities of long-term debt are approximately $5,800 in
1999, $6,300 in 2000, $6,500 in 2001, and $500 in 2002.
CREDIT AGREEMENTS
The Company has two credit lines with a financial institution.
The credit lines are guaranteed by a director/shareholder. The total
amount available under the agreements is $50,000. As of December 31,
1998, no amounts were outstanding.
The Company has an agreement with a financial institution to
provide a $1,000,000 mortgage warehousing facility which assists the
Company in originating and closing mortgages. The Company is liable under
the agreement only if there is a default during a mortgage closing
process. There were no amounts owed under this agreement as of December
31, 1998. Interest paid during 1998 for borrowings under this agreement
totaled $16,094 and is included in operating expenses.
F-11
<PAGE> 42
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 4 - INCOME TAXES
As discussed in Note 1, AMSE was taxed as an S corporation from
inception through November 2, 1997. Effective that date, the S
corporation status was terminated, and therefore, AMSE must directly pay
taxes on its earnings. As a result of the termination, a final S
corporation distribution of $17,535 was accrued, $59,580 of undistributed
S corporation earnings were reclassified to additional paid-in capital,
and deferred income tax assets of $240 (net of an allowance of the same
amount) were established for the tax bases of assets and liabilities that
are different than those recognized for financial reporting purposes.
A summary of income taxes for the year ended December 31, 1998
and for the period from November 3, 1997 through December 31, 1997 is as
follows:
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Currently payable:
Federal $ -- $ --
State -- --
Deferred tax benefit (112,220) (2,200)
---------- --------
Income tax benefit for the applicable period (112,220) (2,200)
Deferred tax asset established November 2, 1997 -- (240)
---------- --------
Income tax benefit, prior to allowance (112,220) (2,440)
Valuation allowance 112,220 2,440
---------- --------
Net income tax provision $ -- $ --
========== ========
</TABLE>
Temporary differences between the financial statement carrying
amounts and tax bases of assets and liabilities that give rise to net
deferred income tax assets at December 31, 1998 and 1997 relate to the
following:
<TABLE>
<CAPTION>
1998 1997
---------- --------
<S> <C> <C>
Allowance accounts $ -- $ 2,240
Net operating loss carryforward 111,040 200
Restricted stock awards 3,620 --
Valuation allowance (114,660) (2,440)
--------- -------
Net deferred income tax liability $ -- $ --
========= =======
</TABLE>
There are no significant deferred tax liabilities. The Company
has used a combined estimated federal and state tax rate of approximately
35% for all deferred tax computations. The tax benefit prior to the
allowance differs from the Federal statutory rate of 34% because of
non-deductible expenses (including the goodwill amortization), the surtax
exemptions and rate brackets, and the effect of state income taxes.
The Company has recorded a valuation allowance in accordance
with the provisions of SFAS No. 109 to reflect the estimated amount of
deferred tax assets which may not be realized. In assessing the
realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation future taxable income during the periods in
which temporary differences and/or carryforward losses become deductible.
F-12
<PAGE> 43
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 4 - INCOME TAXES (continued)
The Company has available tax net operating loss carryovers
("NOLs") as of December 31, 1998 of approximately $339,200. The NOLs
expire beginning in 2012. Certain provisions of the tax law may limit the
net operating loss carryforwards available for use in any given year in
the event of a significant change in ownership interest. There have
already been significant changes in stock ownership; however, management
believes that an ownership change has not yet occurred which would cause
the net operating loss carryover to be limited.
NOTE 5 - RELATED PARTY TRANSACTIONS
A shareholder of AMSE provides investment banking services to
the Company. In connection with these investment banking activities, this
shareholder received fees consisting of cash of $60,000 and 66,667 shares
of restricted AMSE stock [which were issued pursuant to the Dow
acquisition (see Note 9)].
At December 31, 1998, the Company's president and majority
shareholder owed the Company $22,500 (plus accrued interest of $118)
under notes bearing interest at 5%. These notes were repaid on January
28, 1999.
NOTE 6 - STOCKHOLDERS' EQUITY
COMMON STOCK
The holders of the common stock are entitled to one vote per
share and have non-cumulative voting rights. The holders are also
entitled to receive dividends when, as, and if declared by the Board of
Directors. Additionally, the holders of the common stock do not have any
preemptive right to subscribe for, or purchase, any shares of any class
of stock.
PREFERRED STOCK
Subsequent to December 31, 1998, the Company amended its
Articles of Incorporation to authorize preferred stock (see Note 10).
RECAPITALIZATION AND SHARE OFFERINGS
In November 1997, the Board of Directors voted to amend the
Company's articles of incorporation to change the number of authorized
shares to 25,000,000 with a par value of $0.001. The outstanding shares
of common stock at that date were converted into 2,650,000 shares of the
new $0.001 par value stock. The shares of the Company have been restated
to January 1, 1997, as well as other share and per share amounts, as if a
stock split had occurred.
During November and December 1997, 1,117,000 shares of common
stock were issued to various accredited investors and employees. In
December 1997, 600,000 shares were issued to new investors through a
Regulation D, Rule 504 private placement offering, as well as 700,000
common stock purchase warrants. In 1998, certain accredited investors
purchased 140,800 shares for $231,500 in cash (before expenses) and
66,667 shares were issued to the Company's investment banker pursuant to
the Dow acquisition, in which 550,000 shares were issued to the sellers.
F-13
<PAGE> 44
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 6 - STOCKHOLDERS' EQUITY (continued)
RECAPITALIZATION AND SHARE OFFERINGS (continued)
Each of the 700,000 stock purchase warrants issued pursuant to
the private placement offering entitled the registered holder to purchase
one share of the Company's common stock for $1. The warrants were
exchanged in 1998 with proceeds to the Company, before expenses, of
$700,000.
The Company had also issued 133,333 stock purchase warrants to
certain accredited investors. Each of these warrants entitled the holder
to purchase one share of common stock for $1 per share. The warrants
expired February 19, 1999.
CONTINGENT STOCK ISSUANCES
In conjunction with the acquisition of Dow in July 1998 (see
Note 9), the Company agreed to an aggregate value guarantee for the
550,000 shares of the Company's common stock issued in that transaction.
If, at such time as a registration statement has been declared effective
by the U.S. Securities and Exchange Commission (the initial measurement
date) and the value of the shares at that date is not at least
$2,750,000, then the Company shall issue additional shares of its common
stock so that the total shares received by the former Dow shareholders
multiplied by the then fair market value (as defined) equals $2,750,000.
There is also an additional measurement date if an underwriter of a
public offering of the Company's stock imposes a lock-up on the stock
issued to the former Dow shareholders; this date is one year after the
expiration of the lock-up period, and the adjustment formula is similar
to the initial formula. As of February 26, 1999, no shares would be due
to the former Dow shareholders if this date were the initial measurement
date.
RESTRICTED STOCK AWARDS
During 1998, a total of 74,400 restricted shares of the
Company's common stock were granted to certain employees. The market
value of shares awarded was $74,400. This amount was recorded as unearned
compensation - restricted stock and is shown as a separate component of
stockholders' equity. Unearned compensation is being amortized to expense
over the three-year vesting period and, net of forfeitures, amounted to
$7,333 in 1998.
NASD OTC BULLETIN BOARD TRADING
The Company's common stock began public trading on the
over-the-counter market in April 1998 under the symbol AMSE.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
OFFICE LEASES
The Company leases office space in various locations as well as
certain office equipment. Future minimum lease payments subsequent to
December 31, 1998 under these operating leases are as follows: $144,377
in 1999, $137,417 in 2000, $118,062 in 2001, and $12,956 in years 2002
and 2003. Rent expense for the years ended December 31, 1998 and 1997
totaled $60,841 and $40,906, respectively.
LITIGATION
From time to time, the Company is exposed to claims, regulatory,
and legal actions in the normal course of business, some of which are
initiated by the Company. At December 31, 1998, management believes that
any such outstanding issues will be resolved without significantly
impairing the financial condition of the Company.
F-14
<PAGE> 45
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 8 - NET INCOME (LOSS) PER COMMON SHARE
For the year ended December 31, 1998 and 1997, basic and diluted
weighted average common shares include only common shares outstanding.
The inclusion of common share equivalents would be anti-dilutive and, as
such, they are not included.
A reconciliation of the number of common shares shown as
outstanding in the consolidated financial statements with the number of
shares used in the computation of weighted average common shares
outstanding is shown below:
<TABLE>
<CAPTION>
1998 1997
------------- --------------
<S> <C> <C>
Common shares outstanding at December 31st 5,898,867 4,367,000
Effect of weighting (1,049,620) (1,512,600)
---------- ----------
Weighted average common shares outstanding 4,849,247 2,854,400
========== ==========
</TABLE>
The number of shares have been restated to reflect the number of
shares issued upon the 1997 amendment of the articles of incorporation,
as if a stock split had occurred (see Note 6).
NOTE 9 - ACQUISITION ACTIVITIES
DOW GUARANTEE CORP.
The acquisition of Dow was completed on July 31, 1998 and was
accounted for as a purchase. Identified tangible assets and liabilities
were recorded at their estimated fair market values and the excess of the
total cost over the net fair values of identified assets and liabilities
was recorded as goodwill. The purchase price for these assets totaled
$3,782,757, with 550,000 shares of common stock of the Company being
issued to the sellers (valued at $3,437,500), costs of $171,111
(including 66,667 shares issued to the Company's investment banker), and
assumed liabilities of $174,146. The cost of the acquisition was
allocated to tangible assets and goodwill totaling $363,303 and
$3,419,454, respectively.
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
On January 29, 1999, the Company completed an acquisition of
Capital Funding of South Florida, Inc. ("CFSF"). This acquisition will be
accounted for as a purchase. Identified tangible assets and liabilities
will be recorded at their estimated fair market values and the excess of
the total cost over the net fair values of identified assets and
liabilities will be recorded as goodwill. The financial statements of the
Company will include the operating results of the acquired entity from
the date of its acquisition.
Based on preliminary information, the purchase price for these
assets was estimated at $2,172,000, with 221,664 shares of common stock
of the Company being issued to the sellers (valued at $1,552,000), cash to
the sellers of $300,000, costs of $165,000, and assumed liabilities of
approximately $155,000. The cost of the acquisition is anticipated to be
allocated to the assets as follows:
Depreciable tangible property and equipment $ 80,000
Receivables and other current assets, net 75,000
Other assets 90,000
Goodwill 1,927,000
----------
Total $2,172,000
==========
F-15
<PAGE> 46
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 9 - ACQUISITION ACTIVITIES (continued)
CAPITAL FUNDING OF SOUTH FLORIDA, INC. (continued)
The acquisition agreement with CFSF contains an aggregate value
guarantee whereby the former shareholders of CFSF may be entitled to
additional shares of the Company's common stock. If the value of the
shares issued in the transaction are not at least $6.42 per share at the
first anniversary of the transaction, the Company must issue additional
shares so that the total shares received multiplied by the then market
value (as defined) equals this guaranteed amount.
OTHER ACTIVITIES
In December 1998, the Company advanced $250,000 to a potential
acquisition target pursuant to a promissory note. The note is secured by
263,445 unrestricted and 2,148,500 restricted shares of the target's
stock, which have an aggregate value of approximately $580,000. The note
is non-interest bearing and presently has no due date. The Company also
advanced $10,000 to the target pursuant to a letter of intent to
negotiate an acquisition. These amounts are recorded as other assets on
the accompanying balance sheet at December 31, 1998.
PRO-FORMAS
The following pro forma summary presents the results of
operations as if the Dow and CFSF acquisitions had occurred at January 1,
1998, after giving effect to certain adjustments, including amortization
of goodwill. These pro forma results have been prepared for illustrative
purposes only and do not purport to be indicative of what would have
occurred had the acquisitions been made as of those dates, or results of
which may occur in the future.
<TABLE>
<CAPTION>
1998 Consolidated 1998 Consolidated
Pro forma (12 months) Pro forma (12 months)
AMSE and Dow AMSE, Dow and CFSF
--------------------- ---------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $3,287,900 $4,720,500
Expenses 3,757,700 5,170,000
----------- ----------
Loss from operations (469,800) (449,500)
Interest expense 2,000 6,700
----------- ----------
Net loss $ (471,800) $ (442,800)
=========== ==========
</TABLE>
NOTE 10 - SUBSEQUENT EVENTS
PREFERRED STOCK
Effective March 23, 1999, the Company amended its Articles of
Incorporation to add the following provision: "THE CORPORATION IS ALSO
AUTHORIZED TO ISSUE TEN MILLION (10,000,000) SHARES OF PREFERRED STOCK
HAVING A PAR VALUE OF $.001 PER SHARE (THE `PREFERRED STOCK'). SHARES OF
PREFERRED STOCK MAY BE ISSUED FROM TIME TO TIME IN ONE OR MORE SERIES.
THE BOARD OF DIRECTORS IS AUTHORIZED TO FIX THE NUMBER OF SHARES IN EACH
SERIES, THE DESIGNATION THEREOF AND THE RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS OF EACH SERIES, AND SPECIFICALLY, THE BOARD OF DIRECTORS IS
AUTHORIZED TO FIX WITH RESPECT TO EACH SERIES (a) THE DIVIDEND RATE; (b)
REDEEMABLE FEATURES, IF ANY; (c) RIGHTS UPON LIQUIDATION; (d) WHETHER OR
NOT THE SHARES OF SUCH SERIES SHALL BE SUBJECT TO A PURCHASE, RETIREMENT
OR SINKING FUND PROVISION; (e) WHETHER OR NOT THE SHARES OF SUCH SERIES
SHALL BE CONVERTIBLE INTO OR EXCHANGEABLE FOR SHARES OF ANY OTHER CLASS
AND, IF SO, THE RATE OF CONVERSION OR EXCHANGE; (f) RESTRICTIONS, IF ANY,
UPON THE PAYMENT OF DIVIDENDS ON COMMON STOCK; (g) RESTRICTIONS, IF ANY,
UPON THE CREATION OF INDEBTEDNESS; (h) VOTING POWERS, IF ANY, OF THE
SHARES OF EACH SERIES; AND (i) SUCH OTHER RIGHTS, PREFERENCES AND
LIMITATIONS AS SHALL NOT BE INCONSISTENT WITH THE LAWS OF THE STATE OF
FLORIDA."
F-16
<PAGE> 47
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 10 - SUBSEQUENT EVENTS (continued)
PREFERRED STOCK (continued)
As of March 26, 1999, no preferred stock has been issued.
STOCK OPTION PLAN
On March 15, 1999, the shareholders of the Company approved the
adoption of a stock option plan. The plan calls for a maximum of
2,000,000 incentive stock options and 500,000 non-qualified stock options
to be issued, at the discretion of the Board of Directors, over the next
ten years. Terms of the options, when issued, are as follows: (a) for
non-qualified options, the term of the option may not exceed ten years,
the options may be granted to any eligible person with the remaining
terms to be determined by the designated Board Committee; and (b) for
incentive options, the term of the option may not exceed ten years, the
exercise price may not be less than the fair market value of the optioned
share on the date of grant, the option may contain vesting provisions,
and the option may contain other terms to be determined by the designated
Board Committee. As of March 26, 1999, no options have been issued.
The Company will account for these options following the
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation."
SFAS No. 123 establishes optional alternative accounting methods for
stock-based compensation as well as certain required disclosures. The
Company has elected to account for stock-based employee compensation
under previously existing accounting guidance. As such, SFAS No. 123 for
employee compensation will be adopted for disclosure purposes only and
will not impact the Company's financial position, annual operating
results, or cash flows. For transactions with other than employees in
which services were received in exchange for stock or options, the
transactions will be recorded on the basis of the fair value of the
services received, or the fair value of the equity instrument issued,
whichever can be more reliably measured.
SEC REGISTRATION STATEMENT
In April 1999, the Company expects to file a Form 10-SB
registration statement with the U.S. Securities & Exchange Commission for
purposes of registering its common stock under the Securities Exchange
Act of 1934.
NOTE 11 - PRO FORMA INCOME TAXES AND EARNINGS (UNAUDITED)
As discussed in Note 1, having elected status as an S
corporation, the shareholders of AMSE paid the federal income tax on
AMSE's earnings through November 2, 1997. Additionally, AMSE was exempt
from Florida income tax on its earnings during that period since Florida
does not separately tax S corporations. As a result, no income tax
expense was provided in the historical financial statements for taxable
income through November 2, 1997.
Below is a pro forma schedule estimating the amount of income
tax benefit, and the resulting loss after taxes for the period ended
December 31, 1997, as if AMSE had not made the election to be taxed as an
S corporation.
Loss before income taxes - historical $(72,156)
Pro forma benefit for federal and state taxes 25,250
Valuation allowance for deferred tax asset (25,250)
--------
Net income (loss), after pro forma tax provision $(72,156)
========
F-17
<PAGE> 48
DOW GUARANTEE CORP.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
INDEPENDENT AUDITORS' REPORT
F-18
<PAGE> 49
DOW GUARANTEE CORP.
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statement of Changes in Stockholders' Equity 4
Statements of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6-9
F-19
<PAGE> 50
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Dow Guarantee Corp.
We have audited the accompanying balance sheets of Dow Guarantee Corp. (the
"Company"), as of December 31, 1998 and 1997, and the related statements of
operations, changes in stockholders' equity, and cash flows for the 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 generally accepted auditing
standards. 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 Dow Guarantee Corp. as of
December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
As discussed in Note 1, on July 31, 1998, all of the outstanding shares of the
Company were acquired by America's Senior Financial Services, Inc.
/s/ Ahearn, Jasco + Company, P.A.
------------------------------------------
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
February 26, 1999
F-20
<PAGE> 51
DOW GUARANTEE CORP.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 90,808 $185,767
Brokerage fees receivable 27,929 54,478
Employee advances 60,778 33,120
Prepaid expenses and taxes 18,268 1,890
---------- --------
TOTAL CURRENT ASSETS 197,783 275,255
PROPERTY AND EQUIPMENT, net 116,602 39,113
GOODWILL, net 3,348,215 --
DUE FROM PARENT 24,080 --
OTHER ASSETS 10,784 9,965
---------- --------
TOTAL $3,697,464 $324,333
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 106,259 $ 126,974
Accrued compensation and related taxes 40,724 29,963
---------- --------
TOTAL CURRENT LIABILITIES 146,983 156,937
---------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value; 1,000,000 shares
authorized, 1,000,000 shares issued and outstanding 90,462 90,462
Additional paid-in capital 3,593,149 --
Retained earnings (deficit) (133,130) 76,934
---------- --------
TOTAL STOCKHOLDERS' EQUITY 3,550,481 167,396
---------- --------
TOTAL $3,697,464 $324,333
========== ========
</TABLE>
See notes to financial statements.
F-21
<PAGE> 52
DOW GUARANTEE CORP.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
REVENUES $2,454,062 $2,599,574
---------- ----------
EXPENSES:
Payroll and related expenses 1,560,504 1,742,832
Administrative, processing, and occupancy 933,689 854,831
Goodwill amortization 71,239 --
---------- ----------
TOTAL EXPENSES 2,565,432 2,597,663
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (111,370) 1,911
PROVISION FOR INCOME TAXES -- 820
---------- ----------
NET INCOME (LOSS) $ (111,370) $ 1,091
========== ==========
</TABLE>
See notes to financial statements.
F-22
<PAGE> 53
DOW GUARANTEE CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Common Additional Retained Total
Stock Common Paid-in Earnings Stockholders'
# of Shares Stock Capital (Deficit) Equity
-------------- ------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY,
January 1, 1997 1,000,000 $ 90,462 $ -- $ 75,843 $ 166,305
Net income for the year ended
December 31, 1997 -- -- -- 1,091 1,091
--------- -------- ---------- --------- ----------
STOCKHOLDERS' EQUITY,
December 31, 1997 1,000,000 90,462 -- 76,934 167,396
Recapitalization based on a
July 31, 1998 acquisition of the
shares of the Company (Note 1)
-- -- 3,518,149 (98,694) 3,419,455
Capital contributed by parent
-- -- 75,000 -- 75,000
Net loss for the year ended
December 31, 1998
-- -- -- (111,370) (111,370)
--------- -------- ---------- --------- ----------
STOCKHOLDERS' EQUITY,
December 31, 1998 1,000,000 $ 90,462 $3,593,149 $(133,130) $3,550,481
========= ======== ========== ========= ==========
</TABLE>
See notes to financial statements.
F-23
<PAGE> 54
DOW GUARANTEE CORP.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (111,370) $ 1,091
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 97,648 25,483
Changes in certain assets and liabilities:
Brokerage fees receivable 26,549 (4,225)
Employee advances (27,658) 67,747
Prepaid expenses and taxes (16,378) (1,407)
Accounts payable, accrued compensation and other (9,954) 19,270
---------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (41,163) 107,959
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in other assets and due from parent (24,899) --
Acquisition of property and equipment (103,897) (9,294)
---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (128,796) (9,294)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITY - Capital
contribution by parent 75,000 --
---------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (94,959) 98,665
CASH AND CASH EQUIVALENTS, Beginning of year 185,767 87,102
---------- ---------
CASH AND CASH EQUIVALENTS, End of year $ 90,808 $ 185,767
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid in cash during the period $ 16,094 $ --
========== =========
Income taxes paid in cash during the period $ 10,000 $ 3,294
========== =========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
On July 31, 1998, the Company recorded goodwill and additional
paid-in capital and adjusted its assets and liabilities to fair value in
connection with a purchase of the Company's stock.
See notes to financial statements.
F-24
<PAGE> 55
DOW GUARANTEE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Dow Guarantee Corp. (the "Company") was incorporated on March 20,
1985. The Company is a licensed mortgage lender in the State of Florida
and is engaged in originating, processing, and funding mortgage loan
applications.
On July 31, 1998, the shareholders of the Company exchanged all
of the issued and outstanding common stock of the Company to America's
Senior Financial Services, Inc. ("AMSE") for 550,000 shares of AMSE
common stock in a tax-free transaction. As a result, the Company became a
wholly-owned subsidiary of AMSE on that date. In accordance with
applicable accounting principles, this transaction has been recorded as a
purchase of the Company by AMSE for financial reporting purposes.
Management of AMSE has placed a value of $3,437,500 on the common stock
of AMSE issued to the shareholders of the Company. This value was
determined at a discount from the common stock's trading level during the
time the transaction was completed, as the shares are restricted as to
transfer. According to "push down" accounting rules, this transaction,
including costs incurred, is recorded on the books of the Company. As a
result, the recorded values of the assets and liabilities of the Company
were adjusted to their fair values at that date and goodwill was recorded
for the excess of the purchase price over the net fair value.
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 revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
REVENUE RECOGNITION AND CREDIT RISKS
The Company derives its revenues primarily from mortgage
application fees paid by potential borrowers and from brokerage and
processing fees payable by the borrower and others at the time of
closing. The brokerage and processing fees are recognized as revenue at
the time the loans are closed.
The Company operates in the mortgage banking industry,
therefore, it is highly dependent on the status of the economy and
interest rates.
INTANGIBLE ASSETS
The excess of investment cost over the fair value of net assets
acquired (goodwill) is being amortized over a period of 20 years.
Amortization of goodwill in the amount of $71,239 was charged to
operations in 1998.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at acquisition cost and
depreciated using the straight-line method over the estimated useful
lives of the assets. Useful lives range from five to seven years.
Expenditures for routine maintenance and repairs are charged to expense
as incurred.
ADVERTISING
The costs of advertising, promotion, and marketing programs are
charged to operations in the year incurred. Advertising expense was
$30,717 and $31,002 for the years ended December 31, 1998 and 1997,
respectively.
F-25
<PAGE> 56
DOW GUARANTEE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES
The Company accounts for its income taxes in accordance with
Financial Accounting Standards Board Statement No. 109, "Accounting for
Income Taxes." Deferred tax liabilities and assets are recognized for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse. The Company anticipates filing a consolidated return with AMSE.
The tax provision shown on the accompanying statement of operations was
calculated as if the Company filed a separate income tax return.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments
purchased with an original maturity of three months or less. The Company
occasionally maintains cash balances in financial institutions in excess
of the federally insured limits.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, receivables, and accounts payable and accrued expenses are
reflected in the financial statements at fair value because of the
short-term maturity of those instruments.
STATEMENT OF COMPREHENSIVE INCOME
A statement of comprehensive income has not been included, per
SFAS 130, "Reporting Comprehensive Income," as the Company has no items
of other comprehensive income.
RECLASSIFICATIONS
Certain amounts in the 1997 financial statements have been
reclassified to conform to the 1998 presentation.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31,
1998 and 1997:
1998 1997
---------- ---------
Office equipment $ 77,906 $ 122,116
Furniture and fixtures 15,445 57,271
Leasehold improvements 31,080 5,991
---------- ---------
Total cost 124,431 185,378
Less: Accumulated depreciation (7,829) (146,265)
---------- ---------
Property and equipment, net $ 116,602 $ 39,113
========== =========
F-26
<PAGE> 57
DOW GUARANTEE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 2 - PROPERTY AND EQUIPMENT (continued)
Depreciation expense for the years ended December 31, 1998 and
1997 was $26,409 and $25,483, respectively. At July 31, 1998, the
historical cost of all property and equipment was adjusted to fair value
in connection with an acquisition (see Note 1).
NOTE 3 - CREDIT AGREEMENTS
LINES OF CREDIT
In October 1996, the Company established two credit lines with a
financial institution. The credit lines are guaranteed by an officer and
former shareholder. The total amount available under the agreements is
$50,000. As of December 31, 1998 and 1997, no amounts were used from the
credit facilities.
MORTGAGE WAREHOUSING AGREEMENT
In May 1997, the Company entered into an agreement with a
financial institution to provide a $1,000,000 mortgage warehousing
facility that assists the Company in originating and closing mortgages.
The Company is liable under the agreement only if there is a default
during a mortgage closing process. There were no amounts owed under this
agreement as of December 31, 1998 or 1997. Interest paid during 1998 for
borrowings under this agreement totaled $16,094.
NOTE 4 - INCOME TAXES
A summary of income taxes for the years ended December 31, 1998
and 1997 is as follows:
1998 1997
-------- --------
Currently payable:
Federal $ -- $ 800
State -- 20
Deferred benefit from net operating loss (14,050) --
Valuation allowance 14,050 --
-------- -----
Total income tax provision $ -- $ 820
======== =====
The tax provision differs from the Federal statutory rate of 34%
because of non-deductible expenses (including the goodwill amortization),
the surtax exemptions and rate brackets, and the effect of state income
taxes. There are no significant deferred tax assets or liabilities other
than from the net operating loss.
The Company has recorded a valuation allowance in accordance
with the provisions of SFAS No. 109 to reflect the estimated amount of
deferred tax assets that may not be realized. In assessing the
realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets
will not be realized.
The Company has available tax net operating loss carryovers as
of December 31, 1998 of approximately $84,400.
F-27
<PAGE> 58
DOW GUARANTEE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 5 - COMMITMENTS AND CONTINGENCIES
OFFICE LEASE
The Company leases office space in various locations, as well as
certain office equipment. Future minimum lease payments subsequent to
December 31, 1998 under these operating leases are as follows: $94,956 in
years 1999 and 2000, $93,293 in 2001, and $12,956 in years 2002 and 2003.
Rent expense for the years ended December 31, 1998 and 1997 totaled
$86,725, and $92,633, respectively.
LITIGATION
From time to time, the Company is exposed to claims, regulatory,
and legal actions in the normal course of business, some of which may be
initiated by the Company. At December 31, 1998, management believes that
any such outstanding issues will be resolved without significantly
impairing the financial condition of the Company.
F-28
<PAGE> 59
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
AND
INDEPENDENT AUDITORS' REPORT
F-29
<PAGE> 60
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations 3
Statement of Changes in Stockholders' Equity 4
Statement of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6-8
F-30
<PAGE> 61
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Capital Funding of South Florida, Inc.
We have audited the accompanying balance sheet of Capital Funding of South
Florida, Inc. (the "Company"), as of December 31, 1998, and the related
statement of operations, changes in stockholders' equity, and cash flows for
the year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides 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 Capital Funding of South
Florida, Inc. as of December 31, 1998, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
As discussed in Note 1, on January 29, 1999, all of the outstanding shares of
the Company were acquired by America's Senior Financial Services, Inc.
/s/ Ahearn, Jasco + Company, P.A.
------------------------------------------
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
April 9, 1999
F-31
<PAGE> 62
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 23,543
Brokerage fees receivable 45,828
Interest receivable from shareholders 6,000
---------
TOTAL CURRENT ASSETS 75,371
PROPERTY AND EQUIPMENT, net 79,983
NOTES RECEIVABLE FROM SHAREHOLDERS 100,000
OTHER ASSETS 67,739
---------
TOTAL $ 323,093
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - lines of credit $ 110,455
Accounts payable 25,909
Accrued compensation 17,873
Other accrued liabilities 35,000
---------
TOTAL CURRENT LIABILITIES 189,237
---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 10,000 shares
authorized, 2,000 shares issued and outstanding 2,000
Additional paid-in capital 59,369
Retained earnings 72,487
---------
TOTAL STOCKHOLDERS' EQUITY 133,856
---------
TOTAL $ 323,093
=========
See notes to financial statements.
F-32
<PAGE> 63
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
REVENUES $1,419,184
----------
EXPENSES:
Compensation 826,415
Administrative, processing, and occupancy 476,956
----------
TOTAL EXPENSES 1,303,371
----------
INCOME FROM OPERATIONS 115,813
INTEREST INCOME 7,735
INTEREST EXPENSE (4,742)
----------
NET INCOME $ 118,806
==========
See notes to financial statements.
F-33
<PAGE> 64
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON Additional Total
STOCK Common Paid-in Retained Stockholders'
# OF SHARES Stock Capital Earnings Equity
-------------- ------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY,
January 1, 1998 2,000 $2,000 $59,369 $ 228,984 $ 290,353
S corporation distributions -- -- -- (275,303) (275,303)
Net income for the year ended
December 31, 1998 -- -- -- 118,806 118,806
----- ------ ------- --------- ---------
STOCKHOLDERS' EQUITY,
December 31, 1998 2,000 $2,000 $59,369 $ 72,487 $ 133,856
===== ====== ======= ========= =========
</TABLE>
See notes to financial statements.
F-34
<PAGE> 65
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 118,806
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and valuation allowance 59,518
Changes in certain assets and liabilities:
Brokerage fees receivable (38,406)
Interest receivable from shareholders (6,000)
Accounts payable and accrued liabilities 34,003
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 167,921
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in other assets 87
Purchases of property and equipment (34,524)
---------
NET CASH USED IN INVESTING ACTIVITIES (34,437)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
S corporation distributions (275,303)
Repayment of shareholder advances (150,000)
Proceeds from lines of credit, net 70,580
---------
NET CASH USED IN FINANCING ACTIVITIES (354,723)
---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (221,239)
CASH AND CASH EQUIVALENTS, Beginning of year 244,782
---------
CASH AND CASH EQUIVALENTS, End of year $ 23,543
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid in cash during the period $ 4,742
=========
Income taxes paid in cash during the period $ --
=========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Property and equipment with a net book value of $66,514 was
transferred from depreciable assets to other assets when the property was
removed from current use in the business.
See notes to financial statements.
F-35
<PAGE> 66
CAPITAL FUNDING OF SOUTH FLORIDA, INCORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Capital Funding of South Florida, Inc. (the "Company") was
incorporated on August 29, 1994. The Company is a licensed mortgage
lender in the State of Florida and is engaged in originating, processing,
and funding mortgage loan applications.
On January 29, 1999, the shareholders of the Company exchanged
all of the issued and outstanding common stock of the Company to
America's Senior Financial Services, Inc. ("AMSE") for 221,664 shares of
AMSE common stock in a tax-free transaction. As a result, the Company
became a wholly-owned subsidiary of AMSE on that date.
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 revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
REVENUE RECOGNITION AND CREDIT RISKS
The Company derives its revenues primarily from mortgage
application fees paid by potential borrowers and from brokerage and
processing fees payable by the borrower and others at the time of
closing. The brokerage and processing fees are recognized as revenue at
the time the loans are closed.
The Company operates in the mortgage banking industry,
therefore, it is highly dependent on the status of the economy and
interest rates.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at acquisition cost and
depreciated using the straight-line method over the estimated useful
lives of the assets. Useful lives range from five to seven years.
Expenditures for routine maintenance and repairs are charged to expense
as incurred.
ADVERTISING
The costs of advertising, promotion, and marketing programs are
charged to operations in the year incurred. Advertising expense was
$15,955 for the year ended December 31, 1998.
INCOME TAXES
The Company, with the consent of its shareholders, has elected
under the Internal Revenue Code to be an S corporation. In lieu of
corporation income taxes, shareholders of an S corporation are taxed on
their proportionate share of the Company's taxable income. Therefore, no
provision or liability for income taxes has been included in the
accompanying financial statements.
On January 29, 1999, as a result of the acquisition by AMSE of
the Company's common stock, the Company ceased to be an S corporation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments
purchased with an original maturity of three months or less. The Company
occasionally maintains cash balances in financial institutions in excess
of the federally insured limits.
F-36
<PAGE> 67
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, receivables, accounts payable and accrued expenses, and
notes payable are reflected in the financial statements at fair value
because of the short-term maturity of those instruments.
STATEMENT OF COMPREHENSIVE INCOME
A statement of comprehensive income has not been included, per
SFAS 130, "Reporting Comprehensive Income," as the Company has no items
of other comprehensive income.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31,
1998:
Office and other equipment $ 78,100
Furniture and fixtures 13,125
Leasehold improvements 40,377
----------
Total cost 131,602
Less: Accumulated depreciation (51,619)
----------
Property and equipment, net $ 79,983
==========
Depreciation expense for the year ended December 31, 1998 was
$25,732. The balance sheet caption, "other assets," includes property not
currently in use in the operation of the Company; a valuation allowance
of $33,786 was charged to earnings in 1998 to reduce this property to its
estimated net realizable value of $66,514.
NOTE 3 - NOTES PAYABLE
The Company has two credit lines with financial institutions.
The balances due at December 31, 1998 were $61,455, with interest at
10.25%, and $49,000, with interest at 8.5%. The notes are due on demand,
are unsecured, and are guaranteed by a shareholder.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
OFFICE LEASE
The Company leases office space in various locations, as well as
certain office equipment. Future minimum lease payments subsequent to
December 31, 1998 under these operating leases are as follows: $43,900 in
1999, $24,000 in 2000, and $12,000 in 2001. Rent expense for the year
ended December 31, 1998 totaled $70,359.
LITIGATION
From time to time, the Company is exposed to claims, regulatory,
and legal actions in the normal course of business, some of which may be
initiated by the Company. At December 31, 1998, management believes that
any such outstanding issues will be resolved without significantly
impairing the financial condition of the Company.
F-37
<PAGE> 68
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
NOTE 5 - RELATED PARTY TRANSACTIONS
NOTES RECEIVABLE
Two shareholders each owe the Company $50,000 under promissory
notes dated December 31, 1997. Both notes bear interest at 6% per annum
and the interest is payable annually on December 31st. The notes are due
on January 1, 2004. The interest due December 31, 1998 was not paid and
is therefore recorded as a receivable from shareholders.
The fair value of these notes is not subject to reasonable
estimation because of their related party nature.
DISTRIBUTIONS TO SHAREHOLDERS
The shareholders of the Company received S corporation
distributions totaling $275,303 in 1998.
SHAREHOLDER ADVANCES
At December 31, 1997, the Company owed its shareholders $150,000
pursuant to non-interest bearing advances received in December 1997.
These amounts were repaid in January 1998.
F-38
<PAGE> 69
INDEPENDENT AUDITOR'S REPORT
To the Stockholders
Jupiter Mortgage Corporation
We have audited the accompanying balance sheets of Jupiter Mortgage Corporation
(an S Corporation) as of December 31, 1998 and 1997, and the related statements
of income, changes in stockholders' equity, and cash flows for the 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 generally accepted auditing
standards. 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 Jupiter Mortgage Corporation
as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ WISNESKI, BLAKISTON & LESLIE, P.A.
Jupiter, Florida
March 12, 1999
F-39
<PAGE> 70
JUPITER MORTGAGE CORPORATION
BALANCE SHEETS
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 214,835 $ 60,282
Brokerage fees receivable 67,714 16,078
Loan to employees 7,628 3,776
Prepaid expenses 889 5,514
----------- ------------
TOTAL CURRENT ASSETS 291,066 85,650
PROPERTY AND EQUIPMENT, net 66,865 49,832
DEPOSITS 11,334 4,302
----------- -----------
$ 369,265 $ 139,784
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Escrow deposits $ 4,452 $ 9,690
Accounts payable -- 5,338
Line of credit 93,609 36,000
----------- -----------
TOTAL CURRENT LIABILITIES 98,061 51,028
STOCKHOLDERS' EQUITY
Common stock, $1 par value; 1,000 shares
authorized, issued and outstanding 1,000 1,000
Paid-in capital 124,106 24,106
Retained earnings 146,098 63,650
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 271,204 88,756
----------- -----------
$ 369,265 $ 139,784
=========== ===========
</TABLE>
See accompanying notes.
F-40
<PAGE> 71
JUPITER MORTGAGE CORPORATION
STATEMENTS OF INCOME
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
REVENUES $ 2,746,104 $ 1,725,225
EXPENSES
Payroll and related expenses 1,632,728 1,044,275
Administrative, processing, and occupancy 995,928 633,424
------------ -----------
TOTAL EXPENSES 2,628,656 1,677,699
------------ -----------
NET INCOME $ 117,448 $ 47,526
============ ==========
</TABLE>
See accompanying notes.
F-41
<PAGE> 72
JUPITER MORTGAGE CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Common Additional Total
Stock Common Paid-in Retained Stockholders'
# of Shares Stock Capital Earnings Equity
----------- ------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY,
January 1, 1997 1,000 $1,000 $ 24,106 $ 27,185 $ 52,291
Net income for the year ended
December 31, 1997 -- -- -- 47,526 47,526
Distributions to stockholders' -- -- -- (11,061) (11,061)
--------- ------ -------- -------- --------
STOCKHOLDERS' EQUITY,
December 31, 1997 1,000 1,000 24,106 63,650 88,756
Capital contributed by stockholders' -- -- 100,000 -- 100,000
Net income for the year ended
December 31, 1998 -- -- -- 117,448 117,448
Distributions to stockholders' -- -- -- (35,000) (35,000)
--------- ------ -------- -------- --------
STOCKHOLDERS' EQUITY,
December 31, 1998 1,000 $1,000 $124,106 $146,098 $271,204
========= ====== ======== ======== ========
</TABLE>
See accompanying notes.
F-42
<PAGE> 73
JUPITER MORTGAGE CORPORATION
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 117,448 $ 47,526
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 16,797 22,084
Increase in current liabilities 47,033 43,930
Increase in current assets (50,863) (19,260)
Increase in deposits (7,032) (4,042)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 123,383 90,238
CASH FLOWS FROM INVESTING ACTIVITIES
Cash used to purchase equipment (33,830) (62,467)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (33,830) (62,467)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt -- (1,927)
Capital contributed 100,000 --
Distributions to stockholders (35,000) (11,061)
------------ -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 65,000 (12,988)
----------- -----------
NET INCREASE IN CASH 154,553 14,783
CASH, Beginning of year 60,282 45,499
------------ ------------
CASH, End of year $ 214,835 $ 60,282
=========== ============
SUPPLEMENTAL DISCLOSURES
Interest paid in cash during the period $ 4,578 $ 624
=========== ============
</TABLE>
See accompanying notes.
F-43
<PAGE> 74
JUPITER MORTGAGE CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
Jupiter Mortgage Corporation (the Company), is a Florida Corporation
incorporated on June 29, 1984. The Company is a licensed correspondent mortgage
lender in the Palm Beach County Florida area.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments purchased with
an original maturity of three months or less. The company occasionally
maintains cash balances in financial institutions in excess of the federally
insured limits.
Property and equipment
Property and equipment is stated at cost less accumulated depreciation.
Improvements are capitalized if they have a useful life of more than one year.
Maintenance and repairs are charged to expense as incurred. Depreciation is
computed using various methods over the estimated useful lives of the assets.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that directly affect the reported amounts of assets and liabilities and
disclosure of continent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Revenue recognition and credit risks
The company derives its revenues primarily from mortgage application fees paid
by potential borrowers and from brokerage and processing fees payable by the
borrower and others at the time of closing. The brokerage and processing fees
are recognized as revenue at the time the loans are closed.
The Company operates in the mortgage banking industry, therefore, it is highly
dependent on the status of the economy and interest rates.
Advertising
The costs of advertising, promotion, and marketing programs are charged to
operations in the year incurred. Advertising expense was $44,128 and $44,621
for the years ended December 31, 1998 and 1997, respectively.
F-44
<PAGE> 75
JUPITER MORTGAGE CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income taxes
The Company has elected under the Internal Revenue Code to be an S Corporation.
In lieu of corporation income taxes, the stockholders are taxed on their
proportionate share of the Company's taxable income. Therefore, no provision or
liability for income taxes is included in the financial statements.
Fair value of financial instruments
Cash, receivables, and accounts payable and accrued expenses are reflected in
the financial statements at fair value because of the short-term maturity of
those instruments.
Statement of comprehensive income
A statement of comprehensive income has not been included, per SFAS 130,
"Reporting Comprehensive Income", as the Company has no items of other
comprehensive income.
Reclassifications
Certain amounts in the 1997 financial statements have been reclassified to
conform to the 1998 presentation.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Computer and other office equipment $ 54,655 $ 27,277
Furniture and fixtures 56,540 49,822
Vehicles 47,098 47,098
Leasehold improvements 9,158 14,942
----------- -----------
167,451 139,139
Less allowance for depreciation (100,586) (89,307)
----------- -----------
$ 66,865 $ 49,832
=========== ===========
</TABLE>
Depreciation expense for the years ended December 31, 1998 and 1997 was $29,940
and $22,084, respectively.
F-45
<PAGE> 76
JUPITER MORTGAGE CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
3. CREDIT ARRANGEMENTS
Lines of credit
The Company has two lines of credit. One is a $50,000 line which expires
September 30, 1999, with interest at 11% paid monthly. The second line, entered
into in 1998, is for $50,000 with interest at 11% paid monthly. At December 31,
1998 and 1997, approximately $94,000 and $36,000, respectively, was outstanding
on the lines. The lines are personally guaranteed by the Company's
shareholders.
Mortgage warehousing agreement
During 1998, the Company entered into an agreement with a financial institution
to provide a $2,000,000 mortgage warehousing facility that assists the Company
in originating and closing mortgages. The Company becomes liable under the
agreement if the loans are not resold and all amounts in process at December
31, 1998 were subsequently sold. Interest paid during 1998 was less than
$5,000. The line is personally guaranteed by the Company's shareholders.
4. COMMITMENTS AND CONTINGENCIES
Office leases
The Company operated six offices during 1998 (4 in 1997) with aggregate monthly
rents approximating $7,000 and $5,000 during most of the years ended December
31, 1998 and 1997, respectively. One of the offices is leased on a
month-to-month basis. The other leases expire at various times through November
2003. The leases are personally guaranteed by the Company's shareholders.
Minimum future commitments under existing leases are as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
1999 $ 107,700 $ 37,800
2000 $ 107,400 $ 23,000
2001 $ 83,800 $ 19,200
2002 $ 79,700 $ --
2003 $ 69,100 $ --
</TABLE>
Litigation
From time to time, the Company is exposed to claims, regulatory, and legal
actions in the normal course of business, some of which may be initiated by the
Company. At December 31, 1998 and 1997, management believes that any such
outstanding issues will be resolved without significantly impairing the
financial condition of the Company.
F-46
<PAGE> 77
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
30-Sep-99 31-Dec-98
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 617,520 $ 195,728
Loans held for sale 2,455,035 --
Brokerage fees receivable 129,190 49,853
Due from employees and shareholders 182,376 93,146
Prepaid expenses 158,129 46,699
----------- -----------
TOTAL CURRENT ASSETS 3,542,250 385,426
PROPERTY AND EQUIPMENT, net 573,044 254,783
GOODWILL, net 6,009,475 3,348,215
OTHER ASSETS 779,543 319,940
----------- -----------
TOTAL $10,904,312 $ 4,308,364
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 17,129 $ 5,798
Accounts payable 469,405 173,904
Warehouse lines & lines of credit 2,611,608 --
Accrued compensation and related taxes 58,900 49,054
----------- -----------
TOTAL CURRENT LIABILITIES 3,157,042 228,756
----------- -----------
LONG-TERM DEBT, less current portion 2,641,448 13,287
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.001 par value; 10,000,000 shares
authorized, no shares issued and outstanding -- --
Common stock, $0.001 par value; 25,000,000 shares
authorized, shares issued and outstanding, 6,909,431
and 5,898,867 in 1999 and 1998, respectively 7,287 5,899
Additional paid-in capital 11,016,698 4,584,932
Retained earnings (deficit) (5,807,174) (457,443)
Unearned compensation - restricted stock (110,989) (67,067)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 5,105,822 4,066,321
----------- -----------
TOTAL $10,904,312 $ 4,308,364
=========== ===========
</TABLE>
F-47
<PAGE> 78
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES 1,013,321 512,745 2,984,009 877,755
----------- ----------- ----------- -----------
EXPENSES:
Payroll and related expenses 1,018,250 347,369 2,349,668 603,467
Administrative, processing and occupancy 506,819 156,421 1,481,452 369,786
Debenture Financing Costs -- -- 1,491,628 --
Goodwill amortization 56,478 28,495 2,540,841 28,495
----------- ----------- ----------- -----------
TOTAL EXPENSES 1,581,547 532,285 7,863,589 1,001,748
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (568,226) (19,540) (4,879,580) (123,993)
----------- ----------- ----------- -----------
OTHER EXPENSES:
Interest expense 9,669 625 28,975 1,633
Interest expense - Conversion discount of
Convertible Debentures -- -- 441,176 --
----------- ----------- ----------- -----------
TOTAL OTHER EXPENSES 9,669 625 470,151 1,633
LOSS BEFORE INCOME TAXES (577,895) (20,165) (5,349,731) (125,626)
PROVISION FOR INCOME TAXES -- -- -- --
----------- ----------- ----------- -----------
NET LOSS $ (577,895) $ (20,165) $(5,349,731) $ (125,626)
=========== =========== =========== ===========
LOSS PER SHARE:
Basic $ (0.082) $ (0.004) $ (0.795) $ (0.027)
=========== =========== =========== ===========
Diluted $ (0.082) $ (0.004) $ (0.795) $ (0.027)
=========== =========== =========== ===========
Weighted average common shares outstanding
(basic and diluted) 7,089,510 4,966,725 6,729,597 4,579,598
=========== =========== =========== ===========
</TABLE>
F-48
<PAGE> 79
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,349,731) $ (125,626)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,596,633 51,480
Non-Cash Interest expense and Other Non-Cash Costs-
convertible debentures 1,932,804
Recognition of restricted stock earned 38,280 --
Changes in certain assets and liabilities, net of amounts
from an acquisition:
Brokerage fee receivable (79,337) (69,395)
Employee advances (111,848) (76,642)
Prepaid expenses and other (111,430) (68,064)
Accounts payable, accrued compensation and related taxes 316,678 24,719
----------- -----------
NET CASH USED IN
OPERATING ACTIVITIES (767,951) (263,528)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (213,327) (36,795)
Acquisition expenditures, net of cash acquired (1,103,924) 9,821
Changes in other assets (726,180) 34,814
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (2,043,431) 7,840
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 598,948 430,500
Change in long-term debt 2,611,608 (10,025)
Change in due from shareholders 22,618 --
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,233,174 420,475
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 421,792 164,787
CASH AND CASH EQUIVALENTS, Beginning of period 195,728 86,376
----------- -----------
CASH AND CASH EQUIVALENTS, End of period $ 617,520 $ 251,163
=========== ===========
</TABLE>
F-49
<PAGE> 80
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Common Additional
Stock Stock, At Paid-in Restricted
# of Shares Par Value Capital Stock
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY, December 31, 1998 5,898,867 $ 5,899 $ 4,584,932 $ (67,067)
Stock issued pursuant to an acquisition 237,664 237 1,558,963
Contribution to Capital 40,000
Stock issued pursuant to an acquisition- Jupiter 360,750 361 2,499,639
Stock issued for debenture financing costs 185,548 186 1,211,442
Beneficial Conversion feature of Convertible Debentures 441,176
Restricted stock issued to employees 82,202 82 82,120 (82,202)
Recognition of restricted stock earned 38,280
Issuances of common stock for cash, net of expenses 521,900 522 598,426
Net loss for the period ended September 30, 1999
--------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY, September 30, 1999 7,286,931 $ 7,287 $11,016,698 $ (110,989)
========= =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Retained Total
Earnings Stockholders'
(Deficit) Equity
----------- -----------
<S> <C> <C>
STOCKHOLDERS' EQUITY, December 31, 1998 $ (457,443) $ 4,066,321
Stock issued pursuant to an acquisition 1,559,200
Contribution to Capital 40,000
Stock issued pursuant to an acquisition- Jupiter 2,500,000
Stock issued for debenture financing costs 1,211,628
Beneficial Conversion feature of Convertible Debentures 441,176
Restricted stock issued to employees --
Recognition of restricted stock earned 38,280
Issuances of common stock for cash, net of expenses 598,948
Net loss for the period ended September 30, 1999 (5,349,731) (5,349,731)
----------- -----------
STOCKHOLDERS' EQUITY, September 30, 1999 $(5,807,174) $ 5,105,822
=========== ===========
</TABLE>
F-50
<PAGE> 81
Note 1. Basis of Presentation
The unaudited, condensed, consolidated financial statements included
herein, commencing at page F-1, have been prepared in accordance with the
requirements of Regulation S-B and supplementary financial information included
herein, if any, has been prepared in accordance with Item 310(b) of Regulation
S-B and, therefore, omit or condense certain footnotes and other information
normally included in financial statements prepared in accordance with generally
accepted accounting principles. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the financial information for the interim periods reported have been made.
Certain reclassifications have been made to the 1998 financial information to
conform to the presentation used in 1999. Results of operations for the three
months ended September 30, 1999 and the nine months ended September 30, 1999,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. These financial statements should be read in
conjunction with the Company's Form 10-SB as originally filed with the
Securities and Exchange Commission on April 16, 1999, and as subsequently
amended.
Note 2. Loss Per Share
The Company follows the provisions of SFAS No. 128, "Earnings Per
Share", which requires presentation of basic earnings per share including only
outstanding common stock, and diluted earnings per share including the effect of
dilutive common stock equivalents. The Company's basic and diluted losses per
share for all periods presented are the same since the Company's convertible
debentures, stock options, and warrants are anti-dilutive.
Note 3. Income Taxes
The Company follows the provisions of SFAS No. 109, "Accounting for
Income Taxes". In accordance with this statement, the Company records a
valuation allowance so that the deferred tax asset balance reflects the
estimated amount of deferred tax assets that may be realized. Therefore, the
deferred tax assets generated by the net losses in the periods presented have
been offset in their entirety by a deferred tax asset valuation allowance.
Note 4. Convertible Debentures
In May 1999, the Company entered into a Securities Purchase Agreement,
pursuant to which the Company issued $2,500,000 of 3% convertible debentures,
which are due May 6, 2002, and common stock purchase warrants for 34,383 shares
at $8.70 per share, which expire May 31, 2004. The Securities Purchase
Agreement, among other terms, allows the Company to require the buyer to
purchase additional convertible debentures up to $7,500,000. The holder of the
debentures may take the interest in either cash or Company common stock. The
debentures are convertible into common stock at the option of the holder, and
are converted at a price of the lower of (a) $8.70 per share, or (b) 85% of the
average closing bid price for the common stock for 5 of the 20 trading days
ending immediately before the conversion. At the time the Company entered into
this agreement the debentures would be convertible at $6.16 per share of the
Company's common stock. Under EITF Topic D-60 this beneficial conversion rate
has resulted in the Company recognizing an interest expense of $441,176. In
connection with the placement, the Company issued 185,548 shares of common stock
and paid $268,780 in fees to consultants and placement agents, which resulted in
additional costs recognized of $1,491,628.
Note 5. Impaired Asset
On July 31, 1998, the Company acquired Dow Guarantee Corp. ("Dow") in a
tax free reorganization which was accounted for as a purchase per APB 16. The
recorded purchase price was approximately $3,437,500. Substantially all of the
purchase price was allocated to goodwill. For the period from acquisition
through December 31, 1998, Dow recorded a loss before goodwill amortization of
$40,131. During the three month period ended March 31, 1999, however, Dow
recorded a profit before goodwill amortization of $14,521. During the three
month period ended June 30, 1999, Dow lost $20,205
F-51
<PAGE> 82
before goodwill amortization. Because the subsidiary has operated at a
cumulative loss since the Company acquired it, an impaired asset review of Dow
was initiated. Pursuant to SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", the Company
evaluated the recoverability of the long-lived Dow asset, including goodwill.
Based on the second quarter of 1999 results, the Company has determined that
Dow's estimated future non-discounted cash flows are below the carrying value of
Dow as a long-lived asset. Accordingly, the Company has recorded an impairment
charge to adjust the carrying value of Dow's goodwill, the only long-lived asset
deemed to be presently affected, to fair value. The adjustment recorded was to
reduce the estimated fair value of the goodwill of Dow to approximately $830,000
by recording a non-cash impairment loss of approximately $2,243,000. The
estimated fair value of Dow was based, among other factors, on the price of
Company securities, which were sold during June 1999; management believes that
the fair value of Dow approximates the amount to which it was written down.
Note 6. Jupiter Acquisition
On August 18, 1999, the Company acquired Jupiter Mortgage Corp.
("Jupiter") in a tax-free reorganization which was accounted for as a purchase
per APB 16. The recorded purchase price was approximately $3,150,000, with
360,750 shares of common stock of the Company issued to the sellers (valued at
$2,500,000), cash to the sellers of $500,000, and costs associated with the
acquisition of approximately $150,000.
Note 7. Loans held for Sale/ Warehouse Line of Credit
As part of the Jupiter acquisition, the Company obtained certain loan
funding credit facilities. As a result, the balance sheet of the Company now
includes a "Warehouse line of credit" and "loans held for sale". The warehouse
line of credit is used to fund loans as they are produced, and this line of
credit is secured by the mortgages.
F-52
<PAGE> 83
AMSE/CFSF/JUPITER Comparative Proforma
CONSOLIDATED FINANCIAL STATEMENTS
AMERICA'S SENIOR FINANCIAL SERVICES,INC. AND SUBSIDIARIES
CONSOLIDATED PROFORMA BALANCE SHEET AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
PROFORMA
AMSE CFSF JUPITER ADJUSTMENTS CONSOLIDATED
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 195,728 $ 23,543 $ 214,835 $ 434,106
Brokerage fee's receivable 49,853 45,828 67,714 163,395
Notes & Other Receivable 22,618 106,000 128,618
Employee advances 70,528 -- 7,628 78,156
Prepaid expenses 46,699 -- 889 47,588
Property and equipment, net 254,783 79,983 66,865 401,631
Other Assets 319,940 67,739 11,334 (319,940)a 79,073
Goodwill, Net 3,348,215 -- 4,763,398 a 8,111,613
- ----------------------------------------------------------------------------------------------------------------
Total Assets $ 4,308,364 $ 323,093 $ 369,265 $9,444,180
LIABILITIES:
Current portion of long-term debt $ 5,798 $ 110,455 $ 93,609 $ 209,861
Accounts payable and accrued expenses 173,904 60,909 4,452 143,871 a 383,136
Commission payable 49,054 17,873 -- 66,927
Income taxes payable -- -- -- --
Long-Term debt, less current portion 13,287 -- -- 13,287
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities 242,043 189,237 98,061 673,211
STOCKHOLDERS' EQUITY:
Common Stock 5,899 2,000 1,000 599 a 9,498
Additional paid-in capital 4,584,932 59,369 124,106 4,517,574 a 9,285,981
Retained earnings (58,177) (46,317) 28,650 17,668 a (58,177)
Income YTD (399,266) 118,806 117,448 (236,254)a (399,266)
Unearned Compensation - restricted stock (67,067) -- -- (67,067)
- ----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 4,066,321 133,856 271,204 $8,770,969
- ----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $ 4,308,364 $ 323,093 $ 369,265 $9,444,180
================================================================================================================
</TABLE>
(a) To record estimated purchase accounting entry as if the Capital & Jupiter
acquisition took place on December 31, 1998.
F-53
<PAGE> 84
AMERICA'S SENIOR FINANCIAL SERVICES,INC. AND SUBSIDIARIES
PROFORMA STATEMENTS OF OPERATIONS AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
1998 01/01/98 to 1998 1998
HISTORIC 7/31/98 HISTORIC HISTORIC PROFORMA
AMSE DOW CFSF JUPITER ADJUSTMENTS CONSOLIDATED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES: $ 1,797,632 $ 1,490,249 $ 1,419,184 $ 2,746,104 $ 7,460,904
------------------------------------------------------ ----------- -----------
EXPENSES:
Payroll and related expenses 1,335,488 822,372 826,415 1,632,728 4,617,003
Administrative, processing, and occupancy 722,828 630,023 476,956 995,928 2,825,735
Acquisition costs 14,969 -- -- -- 14,969
Employee recruitment 50,333 -- -- -- 50,333
Goodwill amortization 71,239 -- -- -- 359,859 (a) 431,098
------------------------------------------------------ ----------- -----------
TOTAL EXPENSES 2,194,857 1,452,395 1,303,371 2,628,656 359,859 7,939,138
------------------------------------------------------ ----------- -----------
PROFIT (LOSS) FROM OPERATIONS (397,225) 37,854 115,813 117,448 (359,859) (478,234)
------------------------------------------------------ ----------- -----------
INTEREST EXPENSE, (INCOME) NET 2,041 16,094 (2,993) -- 22,877
------------------------------------------------------ ----------- -----------
PROFIT (LOSS) BEFORE INCOME TAXES (399,266) 21,760 118,806 117,448 (359,859) (501,111)
PROVISION FOR INCOME TAXES -- -- -- -- 0
------------------------------------------------------ ----------- -----------
NET PROFIT (LOSS) $ (399,266) $ 21,760 $ 118,806 $ 117,448 $ (359,859) $ (501,111)
====================================================== =========== ===========
</TABLE>
(a) To annualize goodwill expense as if these acquisitions took place on Jan 1,
1998.
F-54
<PAGE> 85
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
PROFORMA STATEMENTS OF OPERATIONS INCLUDING JUPITER
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
01/01/99 TO
HISTORIC 8/18/99 PROFORMA
AMSE JUPITER ADJUSTMENTS CONSOLIDATED
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES: $ 2,984,009 $ 1,771,773 $ 4,755,782
----------- ----------- -------- -----------
EXPENSES:
Payroll and related expenses 2,349,668 1,103,902 3,453,570
Administrative, processing, and occupancy 1,481,452 822,308 2,303,760
Debenture Financing Costs 1,491,628 -- 1,491,628
Goodwill amortization 2,540,841 -- 164,040 (a) 2,704,881
----------- ----------- -------- -----------
TOTAL EXPENSES 7,863,589 1,926,210 164,040 9,953,839
----------- ----------- -------- -----------
PROFIT (LOSS) FROM OPERATIONS (4,879,580) (154,437) (164,040) (5,198,057)
----------- ----------- -------- -----------
Interest Expense (Net) 28,975 -- 28,975
Interest Expense - conversion discount of
Convertible Debentures 441,176 -- 441,176
----------- ----------- -------- -----------
470,151 -- 470,151
PROFIT (LOSS) BEFORE INCOME TAXES (5,349,731) (154,437) (5,668,208)
PROVISION FOR INCOME TAXES -- -- --
----------- ----------- -------- -----------
NET PROFIT (LOSS) $(5,349,731) $ (154,437) (164,040) $(5,668,208)
=========== =========== ======== ===========
</TABLE>
(a) To annualize goodwill as if this acquisition took place on January 1, 1999.
F-55
<PAGE> 86
<TABLE>
<CAPTION>
<S> <C>
No dealer, salesman or other person is authorized
to give any information or make any information or make
any representations not contained in this Prospectus with
respect to the offering made hereby. This Prospectus does 424,000 Shares of Common Stock
not constitute an offer to sell any of the securities offered
hereby in any jurisdiction where, or to any person to
whom it is unlawful to make such an offer. Neither the AMERICA'S SENIOR
delivery of this Prospectus nor any sale made hereunder FINANCIAL SERVICES, INC.
shall, under any circumstances, create an implication that
there has been no change in the information set forth
herein or in the business of the Company since the date
hereof.
TABLE OF CONTENTS
PROSPECTUS
Prospectus Summary................................................. 4
Risk Factors....................................................... 4
Use of Proceeds.................................................... 5 FEBRUARY __, 2000
Market for the Shares.............................................. 5
Dividend Policy.................................................... 6
Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................................................ 6
Recent Sale of Convertible Debentures.............................. 9
Business........................................................... 10
Management......................................................... 16
Executive Compensation............................................. 18
Security Ownership of certain Beneficial
Owners and Management............................................ 21
Indemnification.................................................... 23
Certain Relationships and Related
Transactions......................................................
Plan of Distribution/Selling Security Holders...................... 23
Description of Securities..........................................
Legal Matters...................................................... 26
Experts............................................................ 26
Additional Information............................................. 26
Financial Statements...............................................F-1
</TABLE>
<PAGE> 87
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is hereby made to the provisions of Section F.S. 607.0850 of
the Florida Business Corporation Act which provides for indemnification of
directors and officers under certain circumstances.
Reference is hereby made to Article IX of Registrant's By-laws which is
filed as Exhibit 2(c)and Article VI of the Articles of Incorporation which is
filed as Exhibit 2(a).
Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the
issuance and distribution of the securities offered hereby.
Registration Fee $ --
Printing Expenses* 1,500
Legal Fees and Expenses* 5,000
Accounting Fees and Expenses* 1,000
Blue Sky Fees and Expenses* 3,000
Transfer Agent Fees and Expenses* 1,000
Misc.* 200
-------
Total $11,700
- --------------------
*Estimated
Item 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following provides information concerning all sales of securities
within the last three years which were not registered under the Securities Act
of 1933.
On December 1997, the Company issued 1,117,000 shares of common stock
to its founders, directors, certain employees and advisors. Such shares were
issued for $2,767, which was received in cash or services. Such shares were
issued without registration pursuant to an exemption from registration under
Section 4(2) of the Securities Act of 1933.
In December 1997, the Company sold 600,000 shares of common stock and
700,000 Common Stock Purchase Warrants to 41 investors for $100,000. Such
offering was made pursuant to Rule 504 of Regulation D. Each Common Stock
Purchase Warrant entitled to the holder to purchase one share of common stock
for $1.00 per share. During 1998, 700,000 of the Warrants were exercised and the
Company issued 700,000 shares of common stock pursuant to Rule 504 of Regulation
D.
In July 1998, the Company issued a total of 550,000 shares of common
stock to Charles and Linda Kluck in connection with the acquisition of Dow and
66, 667 to Vista Growth Partners, Inc. for services in connection with such
acquisition. Such shares were issued without registration pursuant to an
exemption from registration under Section 4(2) of the Securities Act of 1933.
II-1
<PAGE> 88
The Company issued 74,400 shares to employees as restricted stock
awards in 1998 and 128,300 shares during 1999. Such shares were issued without
registration pursuant to an exemption from registration under Section 4(2) of
the Securities Act of 1933.
In 1998, the Company issued shares to investors pursuant to an
exemption from registration under Section 4(2) of the Securities Act of 1933.
<TABLE>
<CAPTION>
Date Consideration Shares Purchaser Accredited/Sophisticated
---- ------------- ------ --------- ------------------------
<S> <C> <C> <C> <C>
9/11/98 $ 1,000 500 Carpenter, Michael Sophisticated
9/11/98 1,000 (a) 500 Shea, Elly Sophisticated
9/11/98 20,000 10,000 Weinstein, Mitchell D. Sophisticated
9/11/98 20,000 10,000 Snyder, Scott A. Sophisticated
9/14/98 20,000 10,000 Hoffberger, Robert Sophisticated
9/11/98 20,000 10,000 Aurelia Holdings Ltd. Sophisticated
9/11/98 15,000 7,500 Donahue, Edwin Sophisticated
9/16/98 10,000 5,000 Antosek, Richard B. Sophisticated
9/16/98 15,000 7,500 Gittelman, Marc C. Sophisticated
9/18/98 5,000 2,500 Stott, Robert S. Sophisticated
9/23/98 10,000 5,000 Bailey, Darryl L. Sophisticated
10/12/98 10,000 10,000 Snyder, Scott A. Sophisticated
10/12/98 7,500 17,500 Gittleman, Marc C. Sophisticated
10/12/98 10,000 10,000 Aurelia Holdings Ltd. Sophisticated
10/12/98 5,000 2,500 Antosek, Richard Sophisticated
10/12/98 10,000 10,000 Weinstein, Mitchell D. Sophisticated
10/12/98 10,000 10,000 Hoffberger, Robert Sophisticated
10/28/98 10,000 5,000 Shelley, Michael J. Sophisticated
10/26/98 1,000 (a) 500 Shea, Elly Sophisticated
12/11/98 3,000 1,500 Perez, Jorge Sophisticated
12/11/98 15,000 7,500 Gibson, Paul D. Sophisticated
12/11/98 5,000 2,500 Prado, Gary Sophisticated
12/11/98 4,000 2,000 Allen, Robert W. Sophisticated
12/11/98 1,576 1,300 Prado, Gary Sophisticated
12/11/98 1,212 1,000 Prado, Gary Sophisticated
12/11/98 1,212 1,000 Prado, Gary Sophisticated
-------- -------
$231,500 140,800
======== =======
</TABLE>
- --------------------
(a) These shares were purchased for cash by Elly Shea an officer of the
corporation.
II-2
<PAGE> 89
In 1999 the Company issued shares to investors pursuant to an
exemption from registration under Section 4(2) of the Securities Act of 1933.
<TABLE>
<CAPTION>
Date Consideration Shares Purchaser Accredited/Sophisticated
---- ------------- ------ --------- ------------------------
<S> <C> <C> <C> <C>
1/4/99 $ 4,000 2,000 Deery, Scott Sophisticated
2/17/99 100 100 Charlesworth, Steven Sophisticated
2/17/99 100 100 Charlesworth, Joan Sophisticated
2/17/99 100 100 Charlesworth, Carrie Sophisticated
2/17/99 1,000 1,000 Charlesworth, David E. Sophisticated
2/17/99 1,000 1,000 Hersha, Julia Jean Sophisticated
2/17/99 1,000 1,000 Langston, Timothy Sophisticated
2/17/99 1,000 1,000 Edgar, Derek Sophisticated
2/17/99 4,000 4,000 Fleming, Carol Sophisticated
2/17/99 4,000 4,000 Locke, Victor M. Sophisticated
2/26/99 15,000 15,000 Snyder, Scott A. Sophisticated
2/26/99 15,000 15,000 Aurelia Holdings Ltd. Sophisticated
2/23/99 10,000 10,000 Biondo, Jane M. Sophisticated
3/1/99 1,500 1,500 Locke, Edwin Sophisticated
2/25/99 40,000 40,000 Brickell Equity Group, Ltd. Sophisticated
2/25/99 60,000 60,000 Palmun Associates Sophisticated
3/15/99 7,000 7,000 Donahue, Edwin Sophisticated
3/15/99 100 100 Frantz, Arlee Sophisticated
5/5/99 75,000 37,500 Palmun Associates Sophisticated
6/9/99 25,000 12,500 Rosen, Kenneth Sophisticated
6/9/99 50,000 25,000 Kahn, Marc A & Laurie D Kahn JT Ten Sophisticated
10/4/99 100,048 29,644 Buono, Michael J Sophisticated
10/15/99 5,002 1,482 Buono, Michael J Sophisticated
10/12/99 25,012 7,411 Pargulski, John M Sophisticated
10/12/99 25,002 7,408 Girard, Dean J Sophisticated
10/4/99 100,001 29,630 Buono, Ronald J Sophisticated
10/4/99 33,800 10,015 Glass, Michael Sophisticated
10/4/99 60,000 17,778 Anderson, Deanne J Sophisticated
10/4/99 25,012 7,411 Bashwiner, Robert T Sophisticated
10/4/99 27,040 8,012 Douglas, James R Sophisticated
10/4/99 67,600 20,030 Kauff, Richard L Sophisticated
11/24/99 50,625 15,000 Palmun Associates A Partnership Sophisticated
12/1/99 50,625 15,000 Kahn, Albert L and Ellen B Kahn JT Ten Sophisticated
12/16/99 27,000 8,000 Kahn, Marc Sophisticated
1/25/00 7,500 5,000 Bailey, Darryl L Sophisticated
-------- ---------
$919,167 419,721
======== =========
</TABLE>
In 1999 the Company issued the following shares to investors pursuant
to 504 of Regulation D.
<TABLE>
<CAPTION>
Date Consideration Shares Purchaser Accredited/Sophisticated
---- ------------- ------ --------- ------------------------
<S> <C> <C> <C> <C>
1/26/99 $100,000 100,000 Fidra Holdings, Ltd. Accredited
1/26/99 34,000 34,000 Fidra Holdings, Ltd. Accredited
1/26/99 50,000 50,000 Fidra Holdings, Ltd. Accredited
1/26/99 50,000 50,000 Fidra Holdings, Ltd. Accredited
2/25/99 16,666 16,666 Weltman, Louis Sophisticated
2/25/99 16,667 16,667 Brickell Equity Group, Inc. Sophisticated
2/25/99 16,667 16,667 Palmun Associates Sophisticated
-------- -------
$284,000 284,000
======== =======
</TABLE>
On January 29, 1999 we issued 221,664 shares of our common stock as
follows to the former shareholders and the investment banker of Capital Funding
of South Florida, Inc. Such shares were issued without registration pursuant to
section 4(2) of the Securities Act of 1933.
George & Tracy Pollis 105,228
Paula Police 105,228
First Fidelity Capital Markets, Inc. 11,088
We also issued 16,000 shares to our investment banker Vistra Growth
Partners, Inc. in connection with the acquisition.
During May of 1999 we issued 185,500 shares to placement agents and
advisors in connection with the $2,500,000 convertible debenture sold on May 5,
1999. On August 12, 1999 we issued 23,000 shares of our Common Stock in
connection with two new employees and in exchange for various assets of theirs
in order to open our offices in New York and New Jersey. In November of 1999 we
issued 125,000 shares of common stock to the shareholders of a potential
acquisition candidate. These shares were returned and voided during February of
2000. We also issued 5,200 shares of our common stock to Brickell Equity Group,
Inc. for consulting services on December 20, 1999.
Through January 31, 2000 we issued a total of 296,207 shares to
Fennell Avenue Associates LLP in connection with the conversion of, and
applicable interest on $1,000,000 principal of the convertible debenture issued
in May of 1999.
On August 18, 1999 we issued 360,750 shares of our common stock as
follows to the former shareholders and the investment banker of Jupiter Mortgage
Corporation. Such shares were issued without registration pursuant to
Section 4(2) of the Securities Act of 1933.
Deanne J. Anderson 169,553
Michael J. Buono 169,553
First Fidelity Capital Markets, Inc. 21,644
All of the securities listed in the charts above were issued pursuant
to individual subscription agreements provided by each purchaser. Each purchaser
is a sophisticated investor, as documented in their subscription agreement.
All of the individuals listed were given access to all documents, financial
statements, stockholder records, minute books and all other records of the
company in which they desired. These individuals also had the opportunity to
meet with and ask questions of the officers of the Company.
None of the securities discussed above were registered under the
Securities Act of 1933, exemption being claimed in each case pursuant to
Regulation D or Section 4(2) thereof. All shares which were not issued under
Rule 504 exemption were issued with restrictive legend and stop transfer orders.
No general advertising or solicitation was utilized in connection with any such
sales. All investors were offered access to the Company's books and records and
the opportunity to meet with officers of the Company.
II-3
<PAGE> 90
Item 27. EXHIBITS
The following Exhibits are incorporated by reference to the Exhibits of the same
number filed with the Company's Registration Statement on Form 10-SB filed
April 16, 1999:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2(a) Articles of Incorporation of the Registrant*
2(b) Articles of Amendment to Articles of Incorporation*
2(c) By-Laws of the Registrant*
2(d) Incentive Stock Option Plan*
2(e) Non-Qualified Stock Option Plan*
6(a) Employment Agreement as of January 2, 1998 between Registrant and
Nelson A. Locke*
6(b) Employment Agreement as of January 2, 1998 between Registrant and
Cheryl D. Locke*
6(c) Employment Agreement as of July 31, 1998 between Registrant and Dow
Guarantee Corp. and Charles M. Kluck*
6(d) Employment Agreement as of July 31, 1998 between Registrant and Dow
Guarantee Corp. and Linda C. Kluck*
6(e) Employment Agreement as of August 10, 1998 between Registrant and
Vistra Growth Partners, Inc.*
6(f) Agreement for purchase of Dow Guarantee Corp.*
6(g) Agreement for purchase of Capital Funding of South Florida, Inc.*
6(h) Consulting Agreement with Vistra Growth Partners, Inc.*
22 Subsidiaries*
</TABLE>
II-4
<PAGE> 91
The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
<S> <C>
5.1 Opinion of Counsel**
10.1 Financial Advisory Agreement dated February 2, 2000 with Capitalink, L.C.
10.2 Investor Relations Consulting Agreement dated January 20, 2000 with Access1 Financial, Inc.
10.3 Consulting Agreement dated January 1, 2000 with Brickell Equity Group, Inc.
10.4 Investment Banking Agreement dated January 7, 2000 with Charterbridge Financial Group, Inc.
10.5 Investor Relation Services Agreement dated January 7, 2000 with Charterbridge Financial Group, Inc.
23 Consent of counsel is contained in Exhibit 5.1**
23.1 Independent Auditors Consent
23.2 Independent Auditors Consent
27 Financial Data Schedule
</TABLE>
* previously filed
** 5.1 and 23 to be filed by amendment.
Item 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel, the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the questions whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
4. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
5. That for the purpose of determining any liability under the
Securities Act of 1935, each such post-effective amendment shall be deemed to be
a new registration statement relating
II-5
<PAGE> 92
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
6. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB- 2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Miami
Lakes and State of Florida on February 24, 2000.
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
By: /s/ Nelson A. Locke
-------------------------------
Nelson A. Locke
President/principal executive officer/principal accounting officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
Nelson A. Locke President and Director, Principal Executive February 24, 2000
Officer/Principal Accounting Officer
Cheryl D. Locke Director February 24, 2000
Thomas G. Sherman Director February 24, 2000
Michael J. Shelley Director February 24, 2000
Charles M. Kluck Director February 24, 2000
</TABLE>
II-6
<PAGE> 1
EXHIBIT 10.1
FINANCIAL ADVISORY AGREEMENT
AGREEMENT (the "Agreement"), dated as of February 2, 2000, by and
between Capitalink, L.C., a Florida corporation with its principal place of
business at 800 Douglas Road, La Puerta del Sol, #245, Coral Gables, Florida
33134 ("Capitalink", or the "Financial Advisor"); and America's Senior Financial
Services, Inc., a Florida corporation with its principal place of business at
15544 N.W. 77th Court, Miami Lakes, Florida 33016 ("AMSE"). Financial Advisor
and AMSE are hereinafter collectively referred to as the "Parties".
W I T N E S S E T H:
WHEREAS, the Parties hereto desire for the Financial Advisor to advise
AMSE with respect to its corporate development activities, capital formation
initiatives and the further development and implementation of AMSE's public
markets strategy under the terms and conditions of this Agreement;
WHEREAS, the Parties hereto desire to memorialize the services to be
provided to AMSE by Financial Advisor, the compensation to be received by
Financial Advisor from AMSE for providing such services, and the terms and
conditions that shall govern the relationship between the Parties.
NOW THEREFORE, the Parties, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the Parties, who by
executing this Agreement agree to be bound by its terms and conditions, hereby
agree as follows:
1. TERM. This Agreement shall be for a term of three (3) years,
commencing as of the date first written above, and terminating one day prior to
the third anniversary hereof. Notwithstanding the forgoing and except for
earlier termination as otherwise provided for hereinafter, either Party hereto
may terminate this Agreement after the initial eighteen (18) months of the term
hereof, upon ninety (90) days prior written notice.
2. SERVICES TO BE PROVIDED BY FINANCIAL ADVISOR. The Financial Advisor
will provide the following services to AMSE:
(a) Study and review the business operations and historical
financial performance of AMSE (based upon management's forecast of financial
performance) so as to enable the Financial Advisor to provide advice to AMSE.
(b) Assist AMSE in attempting to formulate the optimal
strategy to meet AMSE's working capital and capital resources needs during the
term of this Agreement.
(c) Assist in the formulation of the terms and structure of
any reasonably proposed business combination transaction ("Transaction"),
involving AMSE and presented to Financial Advisor by AMSE, or to AMSE by
Financial Advisor.
<PAGE> 2
(d) Arrange for or assist AMSE in obtaining debt and/or equity
financing in such amounts that AMSE agrees are required for the purpose of
financing AMSE's operations ("Financing").
(e) Assist in any presentation to the Board of Directors of
AMSE, as requested, in connection with a proposed transaction or financing.
(f) Subject to the following, if requested, render an opinion
(a "Fairness Opinion"), to the Board of Directors of AMSE as to whether the
consideration to be paid in any proposed acquisition of any business by AMSE is
fair and appropriate from the financial point of view of its shareholders.
Notwithstanding the foregoing the Parties hereto hereby agree that with respect
to the rendering of any Fairness Opinion, AMSE shall offer Financial Consultant
the right of first refusal during the term hereof to so render such Fairness
Opinion. Financial Advisor shall notify AMSE within twenty-four (24) hours after
AMSE so notifies Financial Advisor of the request for such Fairness Opinion as
to whether Financial Advisor is willing and able to render such Fairness Opinion
on terms so reasonably requested by AMSE. AMSE shall only be required to retain
Financial Advisor to render such Fairness Opinion hereunder in the event the
cost of rendering such Fairness Opinion by Financial Advisor is at least ten
percent (10%) less than the lowest bona fide bid for such opinion received by
AMSE. In addition, AMSE agrees to so notify Financial Advisor of such lowest
third party bid received by AMSE to render such opinion in order to enable
Financial Advisor to so satisfy the foregoing price qualification. The Parties
further agree and acknowledge that Financial Advisor shall have twenty-four (24)
hours to respond to AMSE in order to satisfy such pricing qualification. Any
non-responsiveness hereunder shall be deemed to mean that a Party cannot pr is
unwilling to satisfy any such requests or price qualifications. For purposes of
this SubSection all notices may be given telephonically, or by person or by fax
and shall be deemed given when the call is made, or the notice delivered or
transmitted.
(g) Advise AMSE as to the expected reaction of the financial
community to any transaction and assist in determining the optimum means of
communicating the pertinent aspects of such transaction, such as strategic
considerations, benefits to AMSE and financial impact to the financial
community.
3. STATUS OF FINANCIAL ADVISOR. The Financial Advisor hereby represents
and acknowledges that the Financial Advisor is a broker-dealer registered with
the National Association of Securities Dealers, Inc. and with New York, New
Jersey, Florida, Connecticut and California. Financial Advisor does not
represent that it is acting as an attorney or certified public accountant, and
advises AMSE to seek professional advice necessary in all legal and accounting
matters. Financial Advisor's role is to use its best efforts to assist AMSE in
its efforts to obtain financing and to perform the advisory services detailed
herein. Accordingly, Financial Advisor will identify potential investors, help
negotiate one or more mutually agreeable transaction(s) and coordinate the
needed professionals to prepare the documentation, review same to confirm that
it meets the needs of AMSE and assure the timely closing of the contemplated
transaction(s).
4. FEES. For providing the financial advisory and investment banking
services contemplated herein, AMSE agrees to compensate the Financial Advisor as
follows:
- 2 -
<PAGE> 3
(a) TRANSACTION FEES - ACQUISITIONS. It is understood by the
Parties that Financial Advisor is relying upon AMSE to provide compensation to
it based on the successful completion of each merger or acquisition
transaction(s) as provided for in this Section 4(a).
(i) In the event a Transaction is initiated by AMSE
during the term of this Agreement, and such Transaction results in a
Letter of Intent during the term of this Agreement and is subsequently
closed with such third party and AMSE during the term of this Agreement
or within twelve (12) months subsequent to the termination of this
Agreement (subject to the termination provisions described herein), a
transaction fee ("Transaction Fee"), computed as follows based upon the
consideration for such Transaction and payable upon the closing of such
Transaction shall be due and owing by AMSE to Financial Advisor:
Five percent (5%) of the first two million dollars;
four percent (4%) of the next two million dollars;
three percent (3%) of the next two million dollars
and one percent (1%) of the balance of the
consideration of the Transaction, but in no event
less than $25,000 for any Transaction consummated by
AMSE, PROVIDED HOWEVER, that Financial Advisor and
AMSE agree that Transactions calling for a
consideration of less than $500,000 to be paid by
AMSE are to be expressly exempted from a Transaction
Fee in consideration of AMSE agreeing to pay
Financial Advisor the monthly consulting fees, as
more fully detailed herein.
(ii) For Transactions involving acquisition
candidates identified by AMSE or its directors or its management who
are acquired by or merged with AMSE, Financial Advisor shall be paid
compensation for the consummation of the Transaction, as follows: A
success fee based on seventy-five percent (75%) of the Modified Lehman
Formula defined in the preceding Paragraph, PROVIDED HOWEVER, that
Financial Advisor and AMSE agree that Transactions calling for a
consideration of less than $500,000 to be paid by AMSE are to be
expressly exempted from a Transaction Fee in consideration of Financial
Advisor receiving the monthly consulting fees from AMSE, as more fully
detailed herein.
For purposes herein, "consideration" shall mean everything paid or
payable by one Party to the other in a transaction, including but not limited
to, cash, securities, promissory notes, loans or any other purchase related
consideration excluding payments contingent upon future events or conditions.
With respect to any such payments contingent upon future events or conditions,
the parties hereto hereby agree that the parties will use their best efforts to
then agree as to any fair and reasonable consideration to be paid to Financial
Advisor hereunder with respect to any such aspect of such consideration, after
taking into account various factors, including without limitation the present
value of any such future payments.
Any such Transaction Fee due to the Financial Advisor will be an
obligation of AMSE to be paid in cash or other consideration that is acceptable
to the Financial Advisor, PROVIDED HOWEVER, that the Parties agree that AMSE
shall pay such fees in a manner reasonably determined upon the then mutual
agreement of AMSE and Financial Advisor to allow for sufficient working capital
for the operation of AMSE; it being the intent of both AMSE and Financial
Advisor to use their
- 3 -
<PAGE> 4
respective best efforts to ensure that any payments of any cash fees hereunder
do not jeopardize the working capital need of AMSE. In the event that any such
fees are not paid at closing of any Transaction as provided for herein; then the
Parties agree to establish a fee payment schedule for each such Transaction (in
form and substance similar to the fee schedule previously utilized by AMSE. in
connection with its acquisition by AMSE of Dow Guarantee Corp., which schedule
has previously been disclosed to Financial Advisor), and which will provide for
at a minimum that the entire fee will be paid within six (6) months of the
closing of such Transaction, and for a minimum twenty-five percent (25%) of the
total fee to be paid in cash at the closing of such Transaction. Notwithstanding
anything contained herein to the contrary, in AMSE's sole and complete
discretion, the Parties hereto hereby agree that any fee due hereunder in
connection with any non-cash consideration paid or payable, may be paid in kind
by AMSE hereunder to Financial Advisor, provided that Financial Advisor is
afforded piggyback registration rights with respect to the same.
(b) TRANSACTION FEES. PRIVATE PLACEMENT OR SECOND PUBLIC
OFFERING: It is understood by the Parties that Financial Advisor is relying upon
AMSE to provide compensation to it in the event of the successful completion of
one or more financing transactions as herein defined. As part of this Agreement,
AMSE agrees to retain Financial Advisor to advise AMSE with respect to AMSE's
ongoing capital formation initiatives and generally, to consult to and with
AMSE. Financial Advisor will receive compensation for such consulting services
and a "success fee" under the different circumstances outlined herein, as
follows, PROVIDED HOWEVER, that Financial Advisor and AMSE agree that in the
event AMSE procures gross proceeds of not more than $500,000 upon the
consummation of a private financing, no consideration shall be required to be
paid hereunder by AMSE to Financial Advisor with respect to any such private
financing. Notwithstanding anything contained herein to the contrary, the
Parties hereto hereby agree that in no event shall the following compensation
(inclusive of the issuance of any options or warrants hereunder), together with
any compensation payable by AMSE to any underwriter or placement agent in
connection with any such private placement or second public offering, exceed in
the aggregate the maximum permitted by the National Association of Securities
Dealers, Inc., which the Parties hereto hereby believe to be eighteen (18%)
percent of the gross proceeds of such offering. The Parties hereto hereby agree
and acknowledge that it is the intention of the Parties hereto that such
compensation (together with any other compensation payable by AMSE to any
underwriter or placement agent) not be deemed excess compensation by such
regulatory body. In the event such aggregate compensation, as described above,
is or may be so deemed to be excess compensation, the Parties hereto hereby
agree to restructure such compensation arrangement payable hereunder to
Financial Advisor to ensure that such aggregate compensation may not be deemed
excess compensation. In calculating the amount of compensation payable hereunder
for the foregoing purposes, the Parties agree to use the standards and/or
guidelines utilized by the National Association of Securities Dealers, Inc. to
value non-cash elements of compensation.
(i) Financial Advisor shall be compensated for the
consummation of any private placement financing(s), and paid at closing
out of the proceeds of the Financing, as follows: a success fee based
on a "Modified Lehman Formula", as follows: 7.5% of the first $500,000;
5% of the next two million dollars of gross proceeds; 4% of the next
two million dollars of gross proceeds; 3% of the next two million
dollars of gross proceeds; 2% of the next two million dollars of gross
proceeds; and 1% of the transaction value in excess of $8.5 million,
PROVIDED HOWEVER, that if AMSE identifies the funding source, or in the
event of a
- 4 -
<PAGE> 5
second public offering, then the compensation provided to the Financial
Advisor shall be fifty percent (50%), of the success fee calculated
hereunder;
(ii) In addition to the cash compensation to be paid
to Financial Advisor upon the closing of a Financing as described in
Paragraph (i) above, Financial Advisor shall be entitled to participate
in the equity of AMSE after a private placement financing or a second
public offering has been consummated and the proceeds realized by AMSE.
Specifically, Financial Advisor shall receive 0.5% of the outstanding
Common Stock of AMSE for each $500,000 of equity capital raised by
Financial Advisor up to a maximum amount of 5% of AMSE's outstanding
Common Stock, based on the number of shares of Common Stock issued and
outstanding immediately after each equity capital raise. If, however,
any such private placement financing, or second public offering was
identified by AMSE prior to the execution of this Agreement (See
Exhibit A, attached hereto and incorporated herein by reference, for a
list of such funding sources) the equity that Financial Advisor shall
receive shall be fifty percent (50%) of the amount indicated above, up
to a maximum amount of two and one-half percent (2.5%) of AMSE's
outstanding Common Stock.
(iii) In addition to the grant of equity as detailed
herein, Financial Advisor shall receive options to purchase shares of
Common Stock of AMSE under the following terms and conditions:
Financial Advisor shall receive options to purchase 0.75% of AMSE's
Common Stock for each $500,000 of cash consideration received by AMSE
pursuant to the efforts of Financial Advisor, up to a maximum amount of
5% of AMSE's outstanding Common Stock, based on the number of shares of
Common Stock issued and outstanding immediately after each equity
capital raise. If, however, any such private placement financing, or
second public offering was identified by AMSE prior to the execution of
this Agreement (See Exhibit A for list of such funding sources), then
the amount of the options that Financial Advisor shall receive shall be
fifty percent (50%) of the amount indicated above, up to a maximum
amount of two and one-half percent (2.5%) of AMSE's outstanding Common
Stock.. Said options shall expire three (3) years from the date of
issuance of the options, which date shall be the date as of the
consummation of such Financing. The exercise price of the options shall
be the greater of 120% of the per share price paid by an investor(s)
pursuant to the Financing or 120% of the exercise price of any
derivative securities issued to an investor in connection with the
Financing; and the options may not be exercised during the first year
of the issuance. The Company agrees to provide reasonable piggyback
rights with regard to such options.
(iv) The Financial Advisor hereby agrees to provide
AMSE's designee, Nelson A. Locke, his successors and or his assigns,
with an irrevocable seven (7) year proxy with respect to the voting
rights associated with any shares beneficially owned by Financial
Advisor, its successors, transferees and/or assigns, except as provided
below, obtained by the Financial Advisor pursuant to this Agreement.
Financial Advisor agrees that the certificates evidencing such shares
shall bear an appropriate restrictive legend evidencing such proxy.
Moreover, Financial Advisor hereby agrees to give AMSE and/or Nelson A.
Locke a right of first refusal, as more fully described below, with
respect to the sale or other disposition of all or a portion of such
shares during the term said proxy is in effect. Financial Advisor
further agrees to normal and reasonable lock-up provisions requested by
a bona fide
- 5 -
<PAGE> 6
underwriter of a second public offering with respect to the shares
obtained or otherwise acquired pursuant to the terms of this Agreement.
Financial Advisor further agrees to execute any reasonable
documentation required by AMSE in connection with the foregoing. In
addition, and notwithstanding anything contained herein to the
contrary, provided the above-right of first refusal is adhered to, any
purchaser of such shares who purchases such shares pursuant to a public
sale of the same effectuated on an exchange or on an inter-dealer
quotation system, shall not be bound by such proxy requirement.
(v) With respect to the right of first refusal
granted AMSE and/or Nelson A. Locke in Section (iv) above, the parties
hereto hereby agree that in the event of a contemplated public sale of
any such shares by Financial Advisor, Financial Advisor hereby agrees
to notify AMSE and Nelson Locke in writing of any such contemplated
public sale, including any price limitations associated with such sale.
AMSE and/or Nelson A. Locke shall have five (5) days from the date
notice is deemed given hereunder to so notify Financial Advisor in
writing of the exercise of such right of first refusal with respect to
all or any of such shares, and, if exercised, the consummation of the
sale of such shares shall be effectuated within five (5) days after
notice is deemed given hereunder of such exercise. The per share price
payable by the Company and/or Nelson A. Locke shall be the fifteen (15)
day average closing price of the shares, as reported on any exchange or
inter-dealer quotation system, including the "pink sheets" or the
bulletin board, that the shares are then publicly traded, for the
fifteen (15) trading days for which quotations are readily available
immediately preceding the day prior to the date said notice is given
hereunder by Financial Advisor. Any said notice by Financial Advisor
shall include the computation for such share price, and if such price
is disputed by AMSE or Nelson A. Locke, the parties hereto hereby agree
to use their best efforts to resolve the same. If no so notice is given
within such five (5) day period by the Company and/or Nelson Locke,
then Financial Advisor may publicly sell such shares the subject of
such notice within the thirty (30) day period commencing as of the
earlier of (i) the date AMSE and Nelson A. Locke notify the Financial
Advisor that they are not exercising such right of first refusal and
(ii) the date said five day period during which Nelson A. Locke and/or
the Company must notify Financial Advisor of their desire to exercise
such right of first refusal expires. In the event Financial Advisor
does not sell any of the shares within said thirty (30) day period,
then with respect to such shares not so sold, the right of first
refusal shall remain in effect and the foregoing procedure must be
followed in its entirety with respect to any such future sales. In the
event of any private sales or dispositions of such shares, the
foregoing procedure with respect to the public sale must be adhered to,
with the following modifications: The identity of a bona-fide third
party offeror, together with all other information reasonably requested
by the Company and/or Nelson A. Locke must be made available to Nelson
A. Locke and the Company, including the terms and conditions of such
third party offer. The right of first refusal shall be at a price per
share equal to the lower of (i) the bona fide third party offer, as
evidenced by a written offer of such third party and (ii) the market
price (as determined above for public sales). In addition, AMSE and/or
Nelson A. Locke shall have fifteen (15) days to respond to such offer,
instead of the five days with respect to public sales, and the thirty
day period during which Financial Advisor must consummate the
transaction shall commence as of the earlier of the dates specified
above with respect to public sales, as described above, except that the
second measuring date shall be at the end of the fifteen day period,
described in the forepart of this sentence. All bona-fide non-public
sales and/or dispositions, including gifts and
- 6 -
<PAGE> 7
distributions, must provide that the purchaser and/or transferee,
including any donees, agree to be bound by the proxy requirements set
forth above. In addition, any dispositions for no consideration, i.e.
gifts and/or distributions, must provide that such transferees and/or
donees agree to bo bound by the terms of the afore-described rights of
first refusal. In addition, Financial Advisor agrees and acknowledges
that, notwithstanding anything contained herein to the contrary, the
ability of Financial Advisor to dispose of any such shares may be
limited and/or restricted by applicable law and regulation, including,
without limitation, the prohibition against trading on inside or
non-public information, which the Financial Advisor may be privy to as
a consequence of the services being provided hereunder to AMSE.
(vi) Notwithstanding anything contained herein to the
contrary, Financial Advisor hereby agrees that at no time shall
Financial Advisor beneficially own (including all options and other
derivative securities owned of record or beneficially by Financial
Advisor) in excess of 9.9% of the then outstanding shares of Common
Stock of AMSE. To the extent, any issuance of options or the issuance
of equity hereunder causes Financial Advisor to so beneficially own
such equity, as described above, in excess of such percentage, then the
amount of options and/or shares issuable hereunder shall be reduced
such that such ownership shall not exceed such percentage. Financial
Advisor further agrees and acknowledges Financial Advisor's obligation
to act in accordance with applicable securities laws and regulations,
including those prohibitions on effectuating transactions on insider or
non-public information.
(vii) As additional consideration and in lieu of
"small" fees as more fully detailed above, AMSE agrees to pay Financial
Advisor a monthly consulting fee, as of the first day of each month, in
the amount of $2,000 beginning as of the date of this Agreement
(pro-rated, however for the first month based upon the number of days
remaining is such month based upon the date of this Agreement). The
parties hereby agree that the first such monthly consulting fee payment
shall be deferred for a period of up to ninety (90) days from the date
of this Agreement. In addition, to the extent that AMSE, in its sole
determination, which shall not be unreasonably applied, determines that
it does not have sufficient cashflow with which to make such payments,
such payments shall be waived. Otherwise, if AMSE determines that it
has sufficient cash flow to make such payments, it will make such
payments to Financial Advisor as provided for herein. Accordingly,
Financial Advisor shall serve as a consultant to AMSE with respect to
such matters as may from time to time be requested by the Board of
Directors of AMSE, any of its subsidiaries, or members of AMSE's
Executive Committee, provided that, for the period of time twenty-four
(24) months subsequent to the completion of a private placement or
second public offering pursuant to which AMSE realizes gross proceeds
from any such transaction of not less than $15,000,000, or until the
expiration of this Agreement (whichever is sooner), the consulting fee
shall increase to $5,000 per month.
(c) OTHER CONSIDERATION: In addition to any fees that may be
payable to the Financial Advisor hereunder and regardless of whether any
Transaction or Financing is consummated:
(i) AMSE will be responsible for all of its legal and
other professional fees associated with the preparation and review of
any necessary documentation and the
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<PAGE> 8
closing of any agreed upon Transaction. Any investor or acquisition
candidate will be responsible for all of his or its legal and other
professional fees associated with the closing of any agreed upon
Transaction. Should Financial Advisor choose to retain professionals in
addition to those retained by AMSE, then Financial Advisor will be
solely responsible for all such legal and professional fees unless
approved in advance and in writing by AMSE. In the event either Party
shall enforce any remedy at law or in equity arising from this
Agreement and is the prevailing Party in such action, it shall be
entitled to recover its reasonable attorneys' fees and costs including
on appeal from the non-prevailing Party.
(ii) AMSE hereby agrees from time to time upon
request to reimburse the Financial Advisor (a) for all reasonable
travel, and all other out-of-pocket expenses incurred in performing the
services hereunder (provided that the reimbursement for expenses in
excess of $200.00 shall be subject to the prior approval of AMSE, such
approval not to be unreasonably withheld; and (b) for all reasonable
travel, and out-of-pocket expenses incurred in assisting AMSE to
prepare for, or defend against any action, suit, proceeding, or claim
brought or threatened to be brought arising out of or based upon our
services hereunder and in providing evidence, producing documents or
otherwise participating in any such action, suit, proceeding, or claim
except in the event that the costs are incurred as a result of the
ordinary negligence or willful misconduct of the Financial Advisor.
5. MISCELLANEOUS:
(a) Financial Advisor acknowledges that AMSE will be providing
confidential information to Financial Advisor. The Parties hereto agree that
they will cooperate with each other and provide full due diligence, and that all
conversations, documentation, or work products will be kept in the utmost
confidence. Financial Advisor agrees to execute as part of this Agreement a more
detailed confidentiality and non-disclosure agreement. Likewise, AMSE
acknowledges that Financial Advisor will be providing confidential information
to AMSE. Accordingly, AMSE agrees that the information, including but not
limited to, Financial Advisor's database of investors, methods, systems and
procedures, will be kept confidential and shall not, without the prior written
consent of Financial Advisor, be disclosed by AMSE, except to its attorneys,
accountant and Board of Directors. Financial Advisor intends to introduce AMSE
to its contacts, including private and institutional financing sources or
strategic alliances. AMSE agrees that it will respect Financial Advisor's
relationships with these investors and other sources of financing and that AMSE
shall not participate in or permit the circumvention of any obligation to
Financial Advisor created by this Agreement or any means. Except as otherwise
provided herein, it is agreed that should AMSE (i) complete a transaction or
(ii) receive funds from a financing source introduced by Financial Advisor
within either the period of one (1) year from the date of the initial
introduction, or during the term hereof, whichever period is longer, AMSE shall
pay Financial Advisor its fees according to this Agreement. As used herein, the
term "introduced" or 'introduction" shall mean one or more formal meetings
(where a formal meeting is defined as a meeting with a principal investor or his
authorized agent who has been introduced by Financial Advisor and who has
reviewed AMSE's material and expressed an interest in making an investment in
AMSE and has the financial wherewithal to so make such investment), and shall
exclude sources to whom AMSE is previously known or to whom AMSE has been
previously introduced to by others, directly or indirectly, during the term of
this Agreement or prior to the date of introduction facilitated by Financial
Advisor hereunder, except
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<PAGE> 9
such exclusion shall not pertain to those persons identified on Schedule B,
annexed hereto and incorporated herein by reference.
(b)
(i) Recognizing the matters of the type contemplated
in this engagement sometimes result in litigation and that the
Financial Advisor's role is advisory, AMSE agrees to hold the Financial
Advisor harmless and to indemnify the Financial Advisor from and
against any and all losses, claims, damages, liabilities or reasonable
expenses whatsoever as incurred by Financial Advisor in defending any
litigation or proceeding, commenced or threatened, or in connection
with any claim whatsoever, whether or not resulting in any liability,
to which such Financial Advisor may become subject under any applicable
Federal or state law or otherwise caused by or arising out of or based
upon or otherwise relating to or in connection with the Financial
Advisor's engagement hereunder, or any Transaction closed pursuant to
this Agreement. However, such indemnification and contribution shall
not apply to any claim, loss or expense, which has arisen solely from
the Financial Advisor's negligence or willful misconduct in performing
its services hereunder.
(ii) The indemnity provided herein shall remain
operative and in full force and effect regardless of (i) any
withdrawal, termination, or consummation or failure to initiate or
consummate any transaction referred to herein, (ii) any termination or
the completion or expiration of this Agreement or the Financial
Advisor's engagement as AMSE's Financial Advisor and (iii) whether or
not the Financial Advisor shall be called upon to render any formal or
informal advice in the course of such Agreement.
(iii) The invalidity or enforceability of any
particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted.
(iv) Upon execution, this Agreement may only be
modified by an addendum which shall be in writing signed by both
Parties and which shall be incorporated and merged into this Agreement
as if fully set forth at the time of the initial execution of this
Agreement. All such addendum hereto shall not alter the original terms
and conditions of this Agreement, except as specifically stated in the
addendum.
(v) This Agreement shall not be assigned by either
Party without the prior written consent of the Parties, and that this
understanding extends to any invoices of any kind tendered to AMSE by
Financial Advisor during the life of this Agreement, or outside of this
Agreement by nature of any "side agreements" which may be executed in
the future.
(vi) No waiver by a Party of any default or breach by
any other Party under this Agreement shall operate as a waiver of any
future default or breach, whether of like or different character or
nature.
(c) In consideration of Financial Advisor executing this
Agreement, AMSE shall pay to Financial Advisor a signing bonus in the form of
75,000 shares of AMSE's common stock. Such shares shall be issued by AMSE
pursuant to an exemption under federal and state securities and shall be
restricted shares as held by Financial Advisor. Financial Advisor represents
that it takes such shares for investment purposes only and not with a view
towards distribution of such shares;
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<PAGE> 10
and further represents and warrants that such shares shall only be sold pursuant
to an effective registration statement or pursuant to an applicable exemption
under federal and state securities laws. AMSE agrees that it will allow
Financial Advisor certain "piggyback" registration rights with respect to such
shares to the extent and upon the terms and conditions provided for in the
Registration Rights Agreement to be entered into by and between AMSE and
Financial Advisor as of the date of this Agreement.
6. TERMINATION:
(a) Notwithstanding anything contained herein to the contrary,
the Company may terminate this Agreement with the Financial Advisor pursuant to
its terms at any time for cause by giving written notice of termination. Such
termination will become effective upon giving of such notice. Upon any such
termination for cause, the Financial Advisor shall have no right to the
Transaction Fees or other consideration as provided for hereunder. For purposes
of this Agreement, "cause" shall mean: (i) the Financial Advisor or any of its
affiliates is or are indicted of a felony; (ii) the Financial Advisor or any of
its affiliates in carrying out the duties and obligations hereunder, has or have
been accused in a civil action to have committed negligence or misconduct
resulting in either case in material harm to the Company, or (iii) the Financial
Advisor materially breaches any provision of this Agreement and fails to cure
the same during the fifteen (15) day period after notice of the same is given
hereunder to Financial Advisor.
(b) In addition, either Party may terminate this Agreement
upon the occurrence of any of the following events: (i) an assignment by a Party
for the benefit of creditors; or (ii) the filing of a voluntary or involuntary
petition by or against a Party under any federal or state law for the purpose of
adjudicating the other Party bankrupt, or (iii) the filing of a voluntary or
involuntary petition by or against a Party for reorganization, dissolution, or
arrangement on account of or to prevent bankruptcy or insolvency, or (iv) the
appointment of a receiver for the assets of a Party; or (v) loss of any permit
or approvals needed to conduct the business of the Parties. Each of the
foregoing events shall constitute a default hereunder and a breach of this
Agreement. All remedies of both Parties hereunder are cumulative and may, to the
extent permitted by law, be exercised concurrently or separately, and the
exercise of any one remedy shall not preclude the exercise of any other remedy.
No failure or delay on the part of either Party to exercise any right or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise by either Party of any right or remedy hereunder preclude any other or
further exercise of any right or remedy. If any payment is not made when due
hereunder, the Parties shall pay interest on such payment at the maximum rate
permitted by Florida law.
7. NOTICE: Any notice required or permitted by this Agreement shall be
in writing and shall be deemed given at the time it is deposited in the United
States Mail, postage prepaid, certified or registered mail, return receipt
requested or hand delivered with a receipt addressed to the Party whom it is to
be given to the addresses first indicated above, and with respect to AMSE,
addressed to the attention of Nelson A. Locke, President, and with respect to
Capitalink, addressed to the attention of James S. Cassel, President.
Either Party may change its address to which notices shall be sent by a notice
similarly sent.
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<PAGE> 11
8. GOVERNING LAW. This Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the State of Florida and venue
for any dispute relating to or arising under this Agreement shall be in
Miami-Dade County, Florida courts.
9. ENTIRE AGREEMENT. This Agreement represents the entire understanding
of the Parties with respect to the subject matter hereof and supersedes and
merges herein all prior negotiations, understanding, agreements and
representations. No amendment of this Agreement shall be binding or any affect
unless in writing duly signed by the Party against which such amendment is
sought to be enforced.
10. HEADINGS. Any titles herein have been inserted as a matter of
convenience of reference only and shall not control or affect the meaning or
construction of any of the terms and provisions hereof. As used in this
Agreement, the plural shall include the singular and the singular shall include
the plural whenever appropriate.
11. COUNTERPARTS. The Parties hereto may execute this Agreement in any
number of separate counterparts, each of which, when executed and delivered by
the Parties hereto, shall have the force and effect of any original. All such
counterparts shall be deemed to constitute one and the same instrument.
12. CONFIDENTIALITY. The Parties to this Agreement each agree to keep
the contractual relationship and the terms and conditions herein confidential
except (i) as may be required by force of law including the disclosure
obligations under applicable securities law, (ii) due to demand of any federal
or state or local agency, and (iii) except to the Party's attorney, accountant
or employees who have a need to know. Each Party agrees to notify the other
Party if any other disclosure is required.
It is hereby agreed that the terms and conditions as contained herein
are satisfactory to all Parties and they set their hands and seal to this
Agreement as of the date first set forth above.
CAPITALINK, L.C.
By: /s/ BARRY E. STEINER
----------------------------------
Barry E. Steiner
Managing Director
AMERICA'S SENIOR
FINANCIAL SERVICES, INC.
By: /s/ NELSON A. LOCKE
----------------------------------
Nelson A. Locke
President
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<PAGE> 1
EXHIBIT 10.2
INVESTOR RELATIONS
CONSULTING AGREEMENT
This Consulting Agreement (the "AGREEMENT") is made and entered into
this 20th Day of January, 2000 (the effective date) between ACCESS1
FINANCIAL (the Consultant), whose principal place of business is 2224
Main St., Santa Monica, Ca 90405, and America's Senior Financial
Services, Inc, 15544 N.W. 77th Court, Miami Lakes, FL 33014.
WHEREAS:
The Consultant is willing and capable of providing on a "BEST EFFORTS" basis,
various consulting services. The Client desires to retain the Consultant for a
period of twelve months (12) from the effective date as a non-exclusive,
Independent Contractor based upon the following terms and conditions. The
Consultant shall provide services including financial public relations for and
on behalf of the client in relation to interactions with broker-dealers,
shareholders and members of the public. This may also include certain fund
raising efforts as requested by Client of the Consultant. In consideration of
the mutual promises and agreements hereinafter set forth, the receipt and
sufficiency of which are hereby acknowledged, the parties herein agree as
follows:
CONSULTING SERVICES. The Client hereby retains the Consultant as an independent
consultant to the Client and the Consultant hereby accepts and agrees to such
retention. This Agreement constitutes and embodies the entire understanding and
agreement of the parties and supersedes and replaces all prior understandings,
agreements and negotiations between the parties. The Consultant shall render to
the Client such services of an advisory or consultative nature in order to act
as the Investor Relations arm of the Client.
(1) DISCLOSURE OF INFORMATION. The Consultant recognizes and acknowledges that
it will have access to certain confidential information of the Client and
its affiliates that are valuable and unique assets or property of the
Client and its affiliates. The Consultant will not, during or after the
term of this agreement, disclose, without the prior consent or
authorization of the Client, any of such information to any person, except
to authorized representatives of the Consultant its affiliates for any
reason or purpose whatsoever. The Client agrees that such authorization may
be conditioned upon the disclosure being made pursuant to a secrecy
agreement, protective order, rule, regulation or procedure under which the
confidentiality of the information is maintained in the hands of the person
to whom the information is to be disclosed or in compliance with the terms
of a judicial order or administrative process, It is the intention of the
parties that the Consultant will gather all publicly available information
relating to the Client and confer with officers and directors of the Client
in an effort to consolidate the information obtained in summary form for
the dissemination to interested parties.
<PAGE> 2
(2) TIME, PLACE AND MANNER OF PERFORMANCE. It is intended that the Consultant
will provide research on the Company and distribute the Company's story to
institutions, portfolio managers, broker dealers, and retail clients and
other persons whom the Consultant determines in its sole discretion, are
capable of effectively disseminating such information to the general
public. The Consultant will also advise the Client concerning investor
relations and promotional matters relating to the Client and its business
and will showcase the Company on various web sites periodically during the
course of the contract. Consultant will act upon the Client's behalf in the
investment community, with existing shareholders, and the public. It is
expressly agreed and acknowledged that the Consultant will not be expected
to provide any investment advice or recommendations regarding the client to
anyone. The Consultant will focus on contacting persons, generally through
conventional communications in order to familiarize them with information
concerning the Client. Additionally, the Consultant shall be available for
advice and counsel to the officers and directors of the Client at such
reasonable and convenient times and places as may be mutually agreed upon.
Except as aforesaid, the time, place and manner of performance of the
services hereunder, including the amount of time to be allocated by the
Consultant to any specific service, shall be determined in the sole
discretion of the Consultant. In addition to the above, the consultant
agrees that the consulting contract shall also include these work products:
Company information distributed to consultant's network via phone,
e-mail, regular mail, and/or fax on a regular basis of no less than
once every 60 days;
Creation and distribution of report on company to consultant's network
of market makers, broker-dealers, and stock brokers;
Monitor the Internet chat rooms and bulletin boards for comments about
the company, and respond if appropriate;
Our Analysts will cover the company's performance and business plan
execution;
As needed, assist with inbound shareholder relations.
(3) WORK PRODUCT. It is agreed that, prior to public distribution, all
information and materials produced for the Client shall be the sole and
exclusive property of the Consultant. All copyright and title to said work
shall be the property of the Consultant free and clear of all claims
thereto by the Client, and the Client shall retain no claim of authorship
therein.
(4) NATURE OF RELATIONSHIP. It is understood and acknowledged by the parties
that the Consultant is being retained by the Client in an independent,
non-exclusive capacity and that, in this connection, the Consultant hereby
agrees, except as provided in paragraph (4) herein above or unless the
Client shall have otherwise consented in writing, not to enter into any
agreement or incur any obligation on behalf of the client.
2
<PAGE> 3
(5) CONFLICT OF INTEREST. The Consultant shall be free to perform services for
other persons. The Consultant will notify the Company of its performance of
consulting services for any other person that could conflict with its
obligation under this agreement. Upon receiving such notice, the Client may
terminate this agreement or consent to the Consultants outside consulting
activities; failure to terminate this agreement shall constitute the
Client's on going consent to the Consultant's outside consulting
activities.
(6) INDEMNIFICATION FOR SECURITIES LAW VIOLATIONS. The Client agrees to
indemnify and hold harmless the Consultant against any losses, claims,
damages, liabilities and/ or expenses (including any legal or other
expenses reasonably incurred in investigating or defending any action or
claim in respect thereof) to which the Consultant may become subject under
the Securities Act of 1993, as amended, or the Securities Exchange Act of
1934, as amended, because of the actions of the Client or its agents
excepting, the consultant who shall not be indemnified for action of
himself, his agents or assigns that may result in any action or claims to
which the client or the consultant may become subject under the Securities
Act of 1933, as amended and the Securities Exchange Act of 1934, as
amended.
(7) NOTICES. Any notices required to be given under this Agreement shall be
sufficient. If in writing and delivered or sent registered or certified
mail to the principal office of each party.
(8) WAIVER OF BREACH. Any waiver by the Consultant of a breach of any provision
of this Agreement by the Client shall not operate or be construed as a
waiver of any subsequent breach by the Client.
(9) WAIVER AND MODIFICATION. Any waiver, alteration or modification of any of
the provisions of this Agreement shall be made in writing and signed by the
parties hereto. Each party may waive any of its rights herein without
effecting a waiver with respect to any subsequent occurrences or
transactions.
(10) APPLICABLE LAW. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special
proceedings hereunder be construed in accordance with and pursuant to the
laws of the state of Nevada and that any action or any proceeding that may
be brought arising out of, in connection with or by reason of this
Agreement, the laws of the state of Nevada applicable and shall govern to
the exclusion of law of any other forum, without regard to the jurisdiction
in which any action or special proceeding may be instituted.
(11) SEVERABILITY. This Agreement may be dissolved at any time by the expressed
consent of both parties. In the event any part of this agreement shall be
held to be invalid by any competent court or arbitration panel, this
Agreement shall be interpreted as if only that part is invalid and that the
parties to this Agreement will continue to execute the rest of this
Agreement to the best of their abilities unless both parties mutually
consent to the dissolution of this Agreement.
3
<PAGE> 4
(12) COUNTERPARTS. This Agreement may be executed in counter parts, each of
which shall be deemed an original but both of which taken together shall
constitute the same document.
(13) COMPENSATION: The Client agrees to use reasonable best efforts to register,
issue and deliver in 50,000 shares of America's Senior Financial Services,
Inc. in the name of Mark Bergman within one-hundred and twenty (120) days
from the time of contract execution. The shares represent all of the
compensation due hereunder and some of the value of the shares will be
applied to printing, media distribution, web listing, etc.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the day and year first above written.
/s/ Mark Bergman 1/20/00 /s/ Nelson Locke 1/20/00
- ---------------------- -------- -------------------- ----------
MARK BERGMAN, PRES/CEO DATE NELSON LOCKE, CEO DATE
ACCESS1 FINANCIAL AMERICA'S SENIOR FIN'L
4
<PAGE> 1
EXHIBIT 10.3
CONSULTING AGREEMENT
This Agreement is made effective as of December 31, 1999, by and between
America's Senior Financial Services of 15544 N.W. 77th Court, Miami Lakes, FL
33016, and Brickell Equity Group, Inc., 1717 North Bayshore Drive - #3154;;
Miami, Florida 33132.
In this Agreement, the party who is contracting to receive services shall be
referred to as "AMSE", and the party who will be providing the services shall be
referred to as "Brickell".
Brickell has a background in Financial Services Industry, with an emphasis on
public companies and their unique financial needs regarding the raising of
working capital; and is willing to provide services to AMSE based on this
background.
AMSE desires to have services provided by Brickell.
Therefore, the parties agree as follows:
1. DESCRIPTION OF SERVICES. Beginning on January 1, 2000, Brickell will provide
the following services, (collectively the "Services"): consult and advise the
corporate controller and president about financing the company's working capital
requirements, and assist the president with certain shareholder relations
regarding publicly available information only. This consulting contract shall be
for a period of one year, renewable by mutual consent.
2. PAYMENT. AMSE will pay a fee to Brickell of $150,000 per year for the
Services. This fee shall be payable in a lump sum payable in AMSE restricted
shares of common stock, in an amount of shares not to exceed 150,000 shares,
based on actual consulting work completed. 75,000 shares shall be registered via
AMSE's best efforts on an upcoming SB2. Upon termination of this Agreement,
payments under this paragraph shall cease; provided, however, that Brickell
shall be entitled to payments for periods or partial periods that occurred prior
to the date of termination and for which Brickell has not yet been paid.
3. EXPENSE REIMBURSEMENT. Brickell shall be entitled to reimbursement from AMSE
for the following "out-of-pocket" expenses:
- travel expenses
- meals, excluding alcoholic beverages
4. TERM/TERMINATION. This Agreement may be terminated by either party upon 30
days written notice to the other party.
5. RELATIONSHIP OF PARTIES. It is understood by the parties that Brickell is an
independent contractor with respect to AMSE, and not an employee of AMSE. AMSE
will not provide fringe benefits, including health insurance benefits, paid
vacation, or any other employee benefit, for the benefit of Brickell.
6. ASSIGNMENT. Brickell's obligation under this Agreement may not be assigned or
transferred to any other person, firm, or corporation without the prior written
consent of AMSE.
7. NOTICES. All notices required or permitted under this Agreement shall be in
writing and shall be deemed delivered when delivered in person or deposited in
the United States mail, postage prepaid, addresses as follows:
<PAGE> 2
Company:
America's Senior Financial Services
Nelson Locke
President
15544 NW 77th Court
Miami Lakes, FL 33016
Consultant:
Brickell Equity Group, Inc.
Consultant
1717 North Bayshore Drive, #3154
Miami, Florida
Such address may be changed from time to time by either party by providing
written notice to the other in the manner set forth above.
8. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties
and there are no other promises or conditions in any other agreement whether
oral or written. This Agreement supercedes any prior written or oral agreements
between the parties.
9. AMENDMENT. This Agreement may be modified or amended if the amendment is made
in writing and is signed by both parties.
10. SEVERABILITY. If any provision of this Agreement shall be held to be invalid
or unenforceable for any reason, the remaining provisions shall continue to be
valid and enforceable. If a court finds that any provision of this Agreement is
invalid or unenforceable, but that by limiting such provision it would become
valid and enforceable, then such provision shall be deemed to be written,
construed, and enforced as to limited.
11. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver or limitation of
that party's right to subsequently enforce and compel strict compliance with
every provision of this Agreement.
12. APPLICABLE LAW. This Agreement shall be governed by the laws of the State of
Florida.
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<PAGE> 3
America's Senior Financial Services
By: /s/
----------------------------------------------
America's Senior Financial Services
President
Brickell Equity Group, Inc.
By: /s/ Frances W. Baur
----------------------------------------------
Brickell Equity Group, Inc.
Consultant
-3-
<PAGE> 4
This Summary is not an official part of your document. It contains highlights of
the important information that has been entered into the document.
SUMMARY
OF THE
CONSULTING AGREEMENT
DATE PREPARED
January 1, 2000
COMPANY
America's Senior Financial Services
CONSULTANT
Brickell Equity Group, Inc.
EXPENSE REIMBUSEMENT section included.
SUPPORT SERVICES section included.
4
<PAGE> 1
EXHIBIT 10.4
INVESTMENT BANKING RIDER
This non-exclusive Agreement (the "Agreement") is dated January 6, 2000 and is
entered into by and between AMERICA'S SENIOR FINANCIAL SERVICES, INC.
(hereinafter referred to as "CLIENT") and THE CHARTERBRIDGE FINANCIAL GROUP,
INC. (hereinafter referred to as "CFG").
1. CONDITIONS. This Agreement will not take effect, and CFG will have no
obligation to provide any service whatsoever, unless and until CLIENT returns a
signed copy of this Agreement to CFG (either by mail or facsimile copy). CLIENT
shall be truthful with CFG in regard to any relevant material regarding CLIENT,
verbally or otherwise, or this entire Agreement will terminate and all monies
paid shall be forfeited without further notice.
Agreed, CLIENT'S INITIALS: __________
Upon execution of this Agreement, CLIENT agrees to cooperate with CFG in
carrying out the purposes of this Agreement, keep CFG informed of any
developments of material importance pertaining to CLIENT'S business and abide by
this Agreement in its entirety.
2. SCOPE AND DUTIES. During the term of this Agreement, CFG will perform the
following services for CLIENT:
2.1 ADVICE AND COUNSEL. CFG will provide advice and counsel
regarding CLIENT'S strategic business and financial plans,
strategy and negotiations with potential lenders/investors,
joint venture, corporate partners and others involving
financial and financially-related transactions.
2.2 MERGERS AND ACQUISITIONS. At the request of the CLIENT, CFG
will provide assistance to CLIENT, as mutually agreed, in
identifying M&A candidates, assisting in any due diligence
process, recommending transaction terms and giving advice and
assistance during negotiations.
2.3 INTRODUCTIONS TO THE INVESTMENT COMMUNITY. CFG has a
familiarity or association with numerous broker/dealers and
investment professionals across the country and will enable
contact between CLIENT and/or CLIENT'S affiliate to facilitate
business transactions among them. CFG shall use its contact in
the brokerage community to assist CLIENT in establishing
relationships with private equity capital sources (venture
capital, etc) and securities dealers while providing the most
recent information about CLIENT to interested securities
dealers on a regular and continuous basis. CFG understands
that this is in keeping with CLIENT'S business objectives and
plan to market CLIENT'S business or project to the investment
community.
<PAGE> 2
2.4 CLIENT AND/OR CLIENT'S AFFILIATE TRANSACTION DUE DILIGENCE.
CFG will participate and assist CLIENT in the due diligence
process on all proposed financial transactions affecting
CLIENT of which CFG is notified in writing in advance,
including conducting investigation of and providing advice on
the financial, valuation and stock price implications of the
proposed transaction(s).
2.5 ANCILLARY DOCUMENT SERVICES. At the request of the CLIENT, CFG
will assist and cooperate with CLIENT in the development,
editing and production of such documents as are reasonably
necessary to procure the agreed upon capital, including a
private placement memorandum or investment marketing
memorandum, as necessary.
2.6 ADDITIONAL DUTIES. CLIENT and CFG shall mutually agree upon
any additional duties that CFG may provide for compensation
paid or payable by CLIENT under this Agreement. Although there
is not requirement to do so, such additional agreement(s) may
be attached hereto and made a part hereof by written
amendments to be listed as "Exhibits" beginning with "Exhibit
A" and initialed by both parties.
2.7 STANDARD OF PERFORMANCE. CFG shall devote such time and
efforts to the affairs of the CLIENT as is reasonably
necessary to render the services contemplated by this
Agreement. CFG is not responsible for the performance of any
services, which may be rendered hereunder if the CLIENT fails
to provide the requested information in writing prior thereto.
The services of CFG shall not include the rendering of any
legal opinions or the performance of any work that is in the
ordinary purview of a certified public accountant. CFG cannot
guarantee results on behalf of CLIENT but shall use
commercially reasonable efforts in providing the services
listed above. If an interest is expressed in satisfying all or
part of CLIENT'S financial needs, CFG shall notify CLIENT and
advise it as to the source of such interest and any terms and
conditions of such interest. CFG'S duty is to introduce and
market CLIENT'S funding request to appropriate funding
sources. CFG will in no way act as a "broker-dealer" under
state securities laws. Because all final decisions pertaining
to any particular investment are to be made by CLIENT, CLIENT
may be required to communicate directly with potential funding
sources.
2.8 NON-GUARANTEE. CFG MAKES NO GUARANTEE THAT CFG WILL BE ABLE TO
SUCESSFULLY MARKET AND IN TURN SECURE A LOAN OR INVESTMENT
FINANCING FOR CLIENT, OR TO SUCCESSFULLY PROCURE SUCH LOAN OR
INVESTMENT WITHIN CLIENTS DESIRED TIMEFRAME OR TO GUARTANTEE
THAT IT WILL SECURE ANY LOAN OR INVESTMENT FINANCING WITH A
SPECIFIC OR MINIMUM RETURN, INTEREST RATE OR OTHER TERMS.
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NEITHER ANYTHING IN THIS AGREEMENT TO THE CONTRARY NOR THE
PAYMENT OF DEPOSITS TO CFG BY CLIENT PURSUANT TO FEE AGREEMENT
FOR SERVICES NOT CONTEMPLATED HEREIN SHALL BE CONSTRUED AS ANY
SUCH GUARANTEE. ANY COMMENTS MADE REGARDING POTENTIAL TIME
FRAMES OR ANYTHING THAT PERTAINS TO THE OUTCOMNE OF CLIENT'S
FUNDING REQUESTS ARE EXPRESSIONS OF OPINION ONLY. THE PARTIES
HERETO ACKNOWLEDGES AND AGREES THAT CLIENT IS NOT REQUIRED TO
MAKE EXCLUSIVE USE OF CFG FOR ANY SERVICES OR DOCUMENTATION
DEEMED NECESSARY FOR THE PURPOSE OF SECURING INVESTMENTS. CFG
HAS MADE NO SUCH DEMANDS IN ORDER FOR CLIENT'S PROJECT TO BE
MARKETED UNDER THE TERMS OF THIS AGREEMENT. CFG HOLDS NO
EXCLUSIVE RIGHTS TO THE MARKETING OF CLIENT'S PROJECT.
Agreed, CLIENT'S INITIALS:________
3. COMPENSATION TO CFG.
3.1 AMSE will pay for services described herein. The fees shown below
(exclusive of those outlined in 3.2, 3.3, and 3.4 below) shall be payable
as follows:
A) INITIAL PAYMENT DUE UPON ACCEPTANCE OF AGREEMENT: = 20,500 AMSE RESTRICTED
SHARES WITH DEMAND
REGISTRATION PURSUANT
TO SECTION 10.
B) DUE IN MONTH (6) = 31,125 AMSE RESTRICTED
SHARES WITH DEMAND
REGISTRATION RIGHTS
PURSUANT TO SECTION 10.
C) DUE IN MONTH TWELVE (12) = 31,125 AMSE RESTRICTED
SHARES WITH DEMAND
REGISTRATION RIGHTS
PURSUANT TO SECTION 10
3.2 Fees for Direct Investment, Merger/Acquisition. In the event that CFG, on a
non-exclusive basis, introduces CLIENT or a CLIENT affiliate to any third
party funding source(s), underwriter(s), merger partner(s) or joint
venture(s) who then enters into a funding, underwriting, merger, joint
venture or similar agreement with CLIENT or CLIENT'S affiliate, CLIENT
hereby agrees to pay CFG advisory fees pursuant to the
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following schedule and based on the aggregate amount of such funding,
underwriting, merger, joint venture or similar agreement with CLIENT or
CLIENT'S affiliate. Advisory fees are deemed and shall be due and payable
at the first close of the transaction, however, in certain circumstances
when payment of advisory fees at closing is not possible, within 24 hours
after CLIENT has received the proceeds of such investment. This provision
shall survive this Agreement for a period of one year after termination or
expiration of this Agreement. In other words, the advisory fee shall be
deemed earned and due and payable for any funding, underwriting, merger,
joint venture or similar transaction which first closes within a year of
the termination or expiration of this Agreement as a result of an
introduction as set forth above. CFG shall also be entitled to 50% of the
investment marketing fee outlined in paragraph 3.2, A or B or 3.3 below in
connection with any and all investment offers from CLIENT or any other
source (not including those introduced by CFG) when CFG is invited to
participate or assist in negotiations.
Agreed, CLIENT INITIALS:________
A. DIRECT INVESTMENT. For a direct investment made by CLIENT in a
third party investor either introduced to CLIENT by CFG or which
contacted CLIENT directly as a result of CFG'S efforts, CLIENT
shall pay CFG a finder's fee of 5.0% of total investment amount
received by CLIENT from the third party investor.
B. MERGER/ACQUISITION. For a merger/acquisition entered into by
CLIENT as a result of the efforts of, or an introduction by CFG
during the term of this Agreement, Client shall pay CFG 5.0% of
the total value of the transaction. The 5.0% shall be paid in cash
upon the date of the closing of the merger/acquisition.
Additionally, (i) if stock is used as part or all of the
consideration in the transaction, CFG shall receive restricted
trading stock equivalent to 10% of the stock (used for the
transaction) upon close of transaction, and (ii) upon close of a
successful merger or acquisition, CFG shall receive 3% of the
value of the combined, merged or surviving entity (whichever is
larger) in the form of the surviving entity's restricted trading
stock. Subject to any required adjustments by the NASD or SEC if
any.
THE FEES PROVIDED FOR IN SECTION 3.2, AND 3.3 ARE NOT INTENDED TO
AND WILL NOT APPLY CUMULATIVELY TO THE SAME FUNDING; HOWEVER, EACH
MAY APPLY TO DIFFERENT PORTIONS OF A TRANSACTION COMPRISING
DIFFERENT FUNDING SOURCES.
3.3 EXPENSES. If CLIENT accepts any investment provided under this Agreement,
CLIENT shall reimburse CFG for reasonable expenses incurred in performing
its duties pursuant to this Agreement (including printing, postage, express
mail, photo reproduction, travel, lodging, and long distance telephone and
facsimile charges).
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Such reimbursement shall be at the CLIENT'S advanced approval and payable
within 24 hours after CLIENT'S receipt of CFG invoice for same.
3.4 ADDITIONAL FEES. CLIENT and CFG shall mutually agree upon any additional
fees that CLIENT may pay in the future for services rendered by CFG under
this Agreement. Such additional agreement(s) may, although there is no
requirement to do so, be attached hereto and made a part hereof as Exhibits
beginning with Exhibit A.
3.5 INVESTMENT SOURCE(S) DISCLOSURE. It is fully understood that in some cases
CFG'S investment/lending sources are sources that may be public sources,
which may independently approach CLIENT without the assistance of CFG. CFG
makes no claims to have special relationships with sources and is not to be
considered as having any special relationships with sources and is not to
be considered as having any capabilities of expediting or `pushing'
CLIENT'S case through any approval channels outside the norm of any request
of this type. The sources in the CFG database are sources compiled by CFG
from created relationships as well as lists purchased or requested for the
purpose of building a comprehensive lender/investor marketing service.
Agreed, CLIENT'S INITIALS:___________
4. INDEMNIFICATION. The CLIENT agrees to indemnify and hold harmless CFG, each
of its officers, directors, employees, and shareholders against any and all
liability, loss and costs, expenses or damages, including but not limited
to, any and all expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or
any claim whatsoever or howsoever caused by reason of any injury (whether
to body, property, personal or business character or reputation) sustained
by any person or to any person or property, arising out of any grossly
negligent act, failure to act, neglect, any untrue or alleged untrue
statement of a material fact or failure to state a material fact which
thereby makes a statement false or misleading, or any breach of any
material representation, warranty or covenant by CLIENT or any of its
agents, employees, or other representatives. Nothing herein is intended to
nor shall it relieve either party from liability for its own act, omission
or negligence. All remedies provided by law, or in equity shall be
cumulative and not in the alternative.
CFG agrees to indemnify and hold harmless CLIENT, each of its officers,
directors, employees and shareholders against any and all liability, loss
and costs, expenses or damages, including but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever or howsoever caused by reason of any injury (whether to body,
property, personal or business character or reputation) sustained by any
person or to any person or property, arising out of any grossly negligent
act, any untrue or alleged untrue statement of a material fact or failure
to state a material fact which thereby makes a statement false or
misleading, or any breach of any material representation, warranty or
covenant by CFG or any oft its agents, employees, or other representatives.
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Nothing herein is intended to nor shall it relieve either party from
liability for its own act, omission or negligence. All remedies provided by
law, or in equity shall be cumulative and not in the alternative.
5. CLIENT REPRESENTATIONS. CLIENT hereby represents, covenants and warrants to
CFG as follows:
5.1 AUTHORIZATION. CLIENT and its signatories herein have full power and
authority to enter into this Agreement and to carry out the
transactions contemplated hereby.
5.2 NO VIOLATION. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate
any provision of the charter or by-laws of CLIENT, or violate any terms
of provision of any other material agreement to which CLIENT is a party
of any applicable statute or law.
5.3 CONTRACTS IN FULL FORCE AND EFFECT. All contracts, agreements, plans,
leases, policies and licenses to which CLIENT is a party are valid and
in full force and effect.
5.4 LITIGATION. Except as set forth below, there is no action, suit,
inquiry, proceeding or investigation by or before any court or
governmental or other regulatory or administrative agency or commission
pending or, to the best knowledge of CLIENT, threatened or invoking
CLIENT, or which questions or challenges the validity of this Agreement
or its subject matter and CLIENT does not know or have any reason to
know of any valid basis for any such action, proceeding or
investigation.
5.5 CONSENTS. No consent of any person, other than the signatories hereto,
is necessary to the consummation of the transactions contemplated
hereby, including, without limitation, consents from parties to loans,
contracts, lease or other agreements and consents from governmental
agencies, whether federal, state, or local.
5.6 CFG RELIANCE. CFG has and will rely upon the documents; instruments and
written information furnished to CFG by the CLIENT'S officers or
designated employees.
5.7 CLEINT'S MATERIAL. All representations and statements provided herein
about the CLIENT are true and complete and accurate. As detailed in
paragraph 4 above, CLIENT agrees to indemnify CFG, its officers,
directors, agents and employees.
5.8 CLIENT'S AFFILIATES AND OTHER MATERIAL. To the best knowledge of
CLIENT, CLIENT represents and warrants that all representation and
warranties provided
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herein regarding CLIENT are true, complete and accurate with respect to
and if applied to CLIENT'S affiliates as well.
5.9 SERVICES NOT EXPRESSED OR IMPLIED.
A. CFG is not and will not be a market-maker (but may be a placement
agent by other "Selling Agreement" from time-to-time) in CLIENT'S
securities or in any securities in which CLIENT or CLIENT'S
affiliates has an interest, and,
B. Any payments made herein to CFG are not, and shall not be construed
as, compensation to CFG for the purpose of making a market, to cover
CFG'S out-of-pocket expenses for making a market, or for the
submission by CFG of an application to make a market in any
securities, and
C. No payments made herein to CFG are for the purpose of effecting the
price of any security or influencing any marker-making functions,
including but not limited to, bid/ask quotations, initiation and
termination of quotations, retail securities activities, or for the
submission of any application to make a market.
D. CFG advises that it is not a NASD broker dealer.
6. CONFIDENTIALITY.
6.1 CFG and CLIENT each agree to keep confidential and provide reasonable
security measures to keep confidential information where release may be
detrimental to their respective business interests. CFG and CLIENT shall
each require their employees, agents, affiliates, other licensees, and
others who will have access to the information through CFG and CLIENT
respectively, to first enter appropriate non-disclosure Agreements
requiring the confidentiality contemplated by this Agreement in
perpetuity.
6.2 CFG will not, either during its engagement by the CLIENT pursuant to
this Agreement or at any time thereafter, disclose, use or make known
for its or another's benefit any confidential information, knowledge, or
data of the CLIENT or any of its affiliates in any way acquired or used
by CFG during its engagement by the CLIENT. Confidential information,
knowledge or date of the CLIENT and its affiliates shall not include any
information that is, or becomes generally available to the public other
than as a result of a disclosure by CFG or its representatives.
7. MISCELLANEOUS PROVISIONS.
7.1 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified and
supplemented only by written agreement of CFG and CLIENT.
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7.2 WAIVER OF COMPLIANCE. Any failure of CFG, on the one hand, or CLIENT on
the other, to comply with any obligation, agreement, or condition
herein may be expressly waived in writing, but such waiver or failure
to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
7.3 EXPENSES: Transfer Taxes, Etc. Other than as expressly set forth in
this Agreement, the parties shall bear their own costs and expenses in
carrying out the provisions of this Agreement.
7.4 COMPLIANCE WITH REGULATORY AGENCIES. Each party agrees that all
actions, direct or indirect, taken by it and its respective agents,
employees and affiliates in connection with this Agreement and any
financing or underwriting hereunder shall conform to all applicable
Federal and State securities laws.
7.5 NOTICES. Any notices to be given hereunder by any party to the other
may be effected either by personal delivery in writing, by a reputable,
national overnight delivery service, by facsimile transmission or by
mail, registered or certified, postage prepaid with return receipt
requested. Notices shall be addressed to the "Contact Person" at the
addresses appearing on the signature page of this Agreement, but any
party may change his address or "contact person" by written notice in
accordance with this subsection. Notices delivered personally shall be
deemed delivered as of actual receipt, notices sent by facsimile shall
be deemed delivered one (1) day after electronic confirmation of
receipt, notices sent by overnight delivery service shall be deemed
delivered one (1) day after delivery to the service, mailed notices
shall be deemed delivered as of five (5) days after mailing.
7.6 ASSIGNMENT. This Agreement is not assignable without the express
written advance consent of AMSE, at the sole discretion of its Board of
Directors.
7.7 DELEGATION. Neither party shall delegate the performance of its duties
under this Agreement without the prior written consent of the other
party.
7.8 PUBLICITY. Neither CFG nor CLIENT shall make or issue, or cause to be
made or issued, any announcement or written statement concerning this
Agreement or the transactions contemplated hereby for dissemination to
the general public without the prior consent of the other party. This
provision shall not apply, however, to any announcement or written
statement required to be made by law or the regulations of any Federal
or State governmental agency, except that the party required to
disclose shall consult with and make reasonable efforts to accommodate
changes to the required disclosure and the timing of such announcement
suggested by the other part.
7.9 GOVERNING LAW. This Agreement and the legal relations among the parties
hereto shall be governed by and construed in accordance with the laws
of the State of
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California, without regard to its conflict of law doctrine. CLIENT and
CFG agree that if any action is instituted to enforce or interpret any
provision of this Agreement, the jurisdiction and venue shall be San
Diego County, California.
7.10 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
7.11 HEADINGS. The heading of the sections of this Agreement are inserted
for convenience only and shall not constitute a part hereto or affect
in any way the meaning or interpretation of this Agreement.
7.12 ENTIRE AGREEMENT. This Agreement including any Exhibits hereto, and the
other documents and certificates delivered pursuant to the terms
hereto, set forth the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein, and
supersedes all prior agreements, promise, covenants, arrangements,
communications, representations or warranties, whether oral or written,
by any officers, employee or representative of any party hereto.
7.13 THIRD PARTIES. Except as specifically set forth or referred to herein,
nothing herein express or implied is intended or shall be construed to
confer upon or give to any person or entity other than the parties
hereto and their successors or assigns, any rights or remedies under or
by reason of this Agreement.
7.14 ATTORNEYS' FEES AND COSTS. If any action is necessary to enforce and
collect upon the terms of this Agreement; the prevailing party shall be
entitled to reasonable attorneys' fees and costs, in addition to any
other relief to which that party may be entitled. This provision shall
be construed as applicable to the entire Agreement.
7.15 SURVIVABILITY. If any part of this Agreement is found, or deemed by a
court of competent jurisdiction to be invalid or unenforceable, that
part shall be severable from the remainder of the Agreement.
7.16 FURTHER ASSURANCES. Each of the parties agrees that it shall from
time-to-time take such actions and executes such additional instruments
as may be reasonably necessary or convenient to implement and carry out
the intent and purposes of this Agreement.
7.17 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement shall
be deemed to constitute either party becoming the partner of the other,
the agent or legal representative of the other, nor create any
fiduciary relationship between them, except as otherwise expressly
provided herein. It is not the intention of the parties to create nor
shall this Agreement be construed to create any commercial relationship
or other partnership. Neither party shall have any authority to act for
or to assume any obligation or responsibility on behalf of the other
party, except as otherwise expressly provided herein. The rights,
duties, obligations and liabilities
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of the parties shall be separate, not joint or collective. Each party
shall be responsible only for its obligations as herein set out and
shall be liable only for its share of the costs and expenses as
provided herein.
7.18 NO AUTHORITY TO OBLIGATE THE CLIENT. Without the consent of the Board
of Directors of CLIENT, CFG shall have no authority to take, nor shall
it take, any action committing or obligating CLIENT in any manner, and
it shall not represent itself to others as having such authority.
8. ARBITRATION. WITH RESPECT TO THE ARBITRATION OF ANY DISPUTE, THE
UNDERSIGNED HEREBY ACKNOWLEDGE AND AGREE THAT:
A. ARBITRATION IS FINAL AND BINDING ON THE PARTIES;
B. THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDY IN COURT,
INCLUDING THEIR RIGHT TO JURY TRIAL;
C. PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED AND DIFFERENT
FROM COURT PROCEEDING;
D. THE ARBITRATOR'S AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS
OR LEGAL REASONING AND ANY PARTY'S RIGHT OF APPEAL OR TO SEEK
MODIFICATION OF RULING BY THE ARBITRATORS IS STRICTLY LIMITED;
E. THIS ARBITRATION PROVISION IS SPECIFICALLY INTENDED TO INCLUDE ANY
AND ALL STATUTORY CLAIMS WHICH MIGHT BE ASSERTED BY ANY PARTY;
F. ALL DISPUTES, CONTROVERSIES, OR DIFFERENCES BETWEEN CLIENT, CFG OR
ANY OF THEIR OFFICER, DIRECTORS, LEGAL REPRESENTATIVES, ATTORNEYS,
ACCOUNTANTS, AGENTS OR EMPLOYEES, OR ANY CUSTOMER OR OTHER PERSON OR
ENTITY, ARISING OUT OF, IN CONNECTION WITH OR AS A RESULT OF THIS
AGREEMENT, SHALL BE RESOLVED THROUGH ARBITRATION RATHER THAN THROUGH
LITIGATION;
G. THE UNDERSIGNED CLIENT HEREBY AGREES TO SUBMIT THE DISPUTE FOR
RESOLUTION TO THE AMERICAN ARBITRATION ASSOCIATION, IN SAN DIEGO,
CALIFORNIA WITHIN FIFTEEN (15) DAYS AFTER RECEIVING A WRITTEN
REQUEST TO DO SO FROM NAY OF THE AFORESAID PARTIES;
H. IF ANY PARY FAILS TO SUBMIT THE DISPUTE TO ARBITRATION ON REQUEST,
THEN THE REQUESTING PARTY
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MAY COMMENCE AN ARBITRATION PROCEEDING, BUT IS UNDER NO OBLIGATION
TO DO SO;
I. ANY HEARING SCHEDULED AFTER AN ARBITRARION IS INITIATED SHALL TAKE
PLACE IN SAN DIEGO COUNTY, CALIFORNIA, AND THE FEDERAL ARBITRATION
ACT SHALL GOVERN THE PROCEEDING AND ALL ISSUES RAISED BY THIS
AGREEMENT TO ARBITRATE;
J. IF ANY PARTY SHALL INSTITUTE ANY COURT PROCEEDING IN AN EFFORT TO
RESIST ARBITRATION AND BE UNSUCCESSFUL IN RESISTING ARBITRATION OR
SHALL UNSUCCESSFULLY CONTEST THE JURISDICTION OF ANY ARBITRATION
FORUM LOCATED IN SAN DIEGO COUNTY, CALIFORNIA, OVER ANY MATTER WHICH
IS THE SUBJECT OF THIS AGREEMENT, THE PREVAILING PARTY SHALL BE
ENTITLED TO RECOVER FROM THE LOSING PARTY ITS LEGAL FEES AND ANY
OUT-OF-POCKET EXPENSES INCURRED IN CONNECTION WITH THE DEFENSE OF
SUCH LEGAL PROCEEDING OR ITS EFFORTS TO ENFORCE ITS RIGHTS TO
ARBITRATION AS PROVIDED FOR HEREIN;
K. THE PARTIES SHALL ACCEPT THE DECISION OF ANY AWARD AS BEING FINAL
AND CONCLUSIVE AND AGREE TO ABIDE THEREBY;
L. ANY DECISION MAY BE FILED WITH ANY COURT AS A BASIS FOR JUDGMENT AND
EXECUTION FOR COLLECTION.
9. TERM/TERMINATION. This Agreement is a quarterly agreement for the term of one
(1) year and shall terminate automatically on January 3, 2000. However, the
CLIENT or CFG shall have the right to terminate the balance of this agreement at
any time after the 75th day following the mutual execution of this Agreement by
the parties, providing written notice is given to the other party at least
fifteen (15) days prior to the expiration of the current quarter of the
Agreement. Quarterly payments referred above means quarterly payments earned for
services rendered up to time of termination. *Quarterly payments of cash and/or
stock shall become immediately due and payable upon termination. Work in
progress (WIP) compensation would only be due and payable upon successful
completion and funding of the WIP. Quarterly payments referenced above means
quarterly payments earned for services rendered up to time of termination.
I. 10. REGISTRATION OF SHARES. CFG shall have "DEMAND" registration rights
for all shares issued in accordance with this agreement. Proof of
registration application shall be delivered to CFG within 3 days of AMSE'S
filing of same with the SEC.
A) CLIENT agrees to file a Registration Statement (SB-2 or similar) for
the registration of the initial shares and all subsequent quarterly
shares with the US Securities and Exchange Commission (SEC) within 30
calendar days of the execution of the Agreement.
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B) Failure to file Registration Statement within 30 days will result in the
immediate issuance of an additional 20% of the original number of shares due
CFG at execution.
C) If the Registration Statement has not been declared effective within 90 days
after initial filing then CLIENT will issue an additional 20% of the total
number of shares submitted for Registration on behalf of CFG.
D) B and C are commutative and not individually exclusive.
11. NON-CIRCUMVENTION. In and for valuable consideration, CLIENT hereby agrees
that CFG may introduce (whether by written, oral, data, or other form of
communication) CLIENT to one or more opportunities, including, without
limitation, existing or potential investors, lenders, borrowers, trusts, natural
persons, corporations, limited liability companies, partnerships, unincorporated
businesses, sole proprietorships and similar entities (an ""Opportunity"" or
""Opportunities""). CLIENT further acknowledges and agrees that the identity of
the subject Opportunities, and all other information concerning an Opportunity
(including without limitation, all mailing information, phone and fax numbers,
email addresses and other contact information) introduced hereunder are the
property of CFG, and shall be treated as confidential information by CLIENT, its
affiliates, officers, directors, shareholders, employees, agents,
representatives, successors and assigns. CLIENT shall not use such information,
except in the context of any arrangement with CFG in which CFG is directly and
actively involved, and never without CFG'S prior written approval. CLIENT
further agrees that neither it nor its employees, affiliates or assigns, shall
enter into, or otherwise arrange (either for it/him/herself, or any other person
or entity) any business relationship, contact any person regarding such
Opportunity, either directly or indirectly, or any of its affiliates, or accept
any compensation or advantage in relation to such Opportunity except as directly
through CFG, without the prior written approval of CFG. CFG is relying on
CLIENT'S assent to these terms and their intent to be bound by the terms by
evidence of their signature. Without CLIENT'S signed assent to these terms, CFG
would not introduce any Opportunity or disclose any confidential information to
CLIENT as herein described.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, all as of the day and year first above written.
CLIENT:
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
By:/s/ Nelson A. Locke , not personally
-------------------------------
President/CEO
Date: 1-7-00
-------------------------------------
Address: 15544 NW 77 th Court
---------------------------------
Miami Lakes, FL 33016
---------------------------------
Contact Person: N. LOCKE
-----------------------------
CFG:
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THE CHARTERBRIDGE FINANCIAL GROUP, INC.
By:______________________________
Date:____________________________
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EXHIBIT 10.5
AGREEMENT FOR FINANCIAL PUBLIC SUPPORT/RETAIL SUPPORT
This INVESTOR RELATION SERVICES Agreement (this "Agreement") is made effective
as of January 6, 2000, by and between "AMERICA'S SENIOR FINANCIAL SERVICES,
INC." ET AL, and THE CHARTERBRIDGE FINANCIAL GROUP, INC. In this Agreement, the
party who is contracting to receive the services shall be referred to as "AMSE"
or "CLIENT", and the party who will be providing the services shall be referred
to as "CFG". CFG and "AMSE shall cumulatively referred to as "the parties"
hereinafter.
1. DESCRIPTION OF SERVICES. Beginning on January 6, 2000, CFG will provide the
following services (collectively, the "Services") to enhance AMSE
visibility and market value:
A. Produce (Concept, Research, Writing, Printing) a CLIENT
Shareholder Communications/Investor Relations piece which
shall be distributed Bi-monthly (Every other Month). This
Investor Relations (hereinafter referred to as "IR") piece
includes relevant milestone updates, contract news,
earnings,/revenue growth updates, and financing news about
CLIENT;
B. Distributes to selective CFG shareholders via e-mail CLIENT
news and information;
C. Monitor OTC Internet Message Boards regarding CLIENT;
D. Add CLIENT information to Interactive CFG portfolio page
website;
E. Participate in CLIENT due diligence presentation to market
makers;
F. Schedule live monthly radio interview featuring CLIENT ( to be
scheduled pursuant to availability);
G. Assist in drafting press releases as is appropriate and in
concert with CLIENT'S milestones and newsworthy events;
H. Distribute press releases to CLIENT shareholders;
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I. * Distribute CLIENT news and relevant information to market
makers, financial media, selected internet stock pages/threads
and OTC analyst community;
J. Present CLIENT'S to various media, periodical sources;
K. Provide general financial public relations support to CLIENT;
and
L. **Feature Company in Monthly "Live-Chat" Internet Broadcasts.
* CLIENT agrees to complete and return signed PR Newswire membership
application for distribution of press releases or provide PR Newswire
account number to CFG.
** Addition charge of $1,800 per live chat plus production and
internet/broadcast fees.
2. PAYMENT FOR "IR" PRODUCTION SERVICES. AMSE will pay annually for services
described herein. The fees shall be payable as follows:
3. A) Initial Payment Due Upon Execution of Agreement = 70,700 AMSE RESTRICTED
SHARES WITH DEMAND
REGISTRATION RIGHTS
PURSUANT TO SECTION 4.
B) Due on April 1, 2000 = 23,600 AMSE RESTRICTED
SHARES WITH DEMAND
REGISTRATION RIGHTS
PURSUANT TO SECTION 4.
C) Due on July 1, 2000 = 23,600 AMSE RESTRICTED
SHARES WITH DEMAND
REGISTRATION RIGHTS
PURSUANT TO SECTION 4.
D) Due on October 1, 2000 = 23,600 AAMSE
RESTRICTED SHARES WITH
DEMAND REGISTRATION
RIGHTS PURSUANT TO
SECTION 4.
4. REGISTRATION OF SHARES. CFG shall have "DEMAND" registration rights for all
shares issued in accordance with this agreement. Proof of registration
application shall be delivered to CFG within 3
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days of AMSE'S filing of same with the SEC.
A) CLIENT agrees to file a Registration Statement (SB-2 or similar) for
the registration of the initial shares and all subsequent quarterly
shares with the US Securities and Exchange Commission (SEC) within 30
calendar days of the execution of the Agreement.
B) Failure to file Registration Statement within 30 days will result in
the immediately issuance of an additional 20% of the original number of
shares due CFG at execution.
C) If the Registration Statement has not been declared effective within 90
days after initial filing then CLIENT will issue an additional 20% of
the total number of shares submitted for Registration on behalf of CFG.
D) B and C are commutative and not individually exclusive.
5. TERM/TERMINATION. This Agreement is a quarterly agreement for the term of one
(1) year and shall terminate automatically on January 5, 2000. However, the
CLIENT of CFG shall have the right to terminate the balance of this agreement at
any time after the 75th day following the mutual execution of this Agreement by
the parties, providing written notice is given to the other party at least
fifteen (15) days prior to the expiration of the current quarter of the
Agreement. *Quarterly payment referred to above means payment earned for
services rendered up to time of termination. Quarterly payments of cash and/or
stock shall become immediately due and payable upon termination. Work in
progress (WIP) compensation would only be due and payable upon successful
completion and funding of the WIP. * Quarterly payment reference to above means
payment earned for service rendered up to time of termination.
6. NON CIRCUMVENTION. In and for valuable consideration, CLIENT hereby agrees
that CFG may introduce it (whether written, oral, data, or otherwise made by
CFG) to Opportunities, including, without limitation, existing or potential
investors, lenders, borrowers, trust, corporations, unincorporated business
entities. CLIENT further acknowledges and agrees that the identity of the
subject Opportunities, and all other information concerning the Opportunity
(including without limitation, all mailing information, phone number, email
addresses, and other contact information) introduced hereunder are the property
of CFG, and shall be treated as confidential information. CLIENT shall not use
such information except in the context of any joint venture with CFG, and never
without CFG'S prior written approval. CLIENT further agrees that they, nor their
company, employees, affiliates or assigns, shall not enter into, or any of its
affiliates, or accept any compensation or advantage in relation to the
opportunity except as directly through CFG, without the prior written approval
of CFG. CFG is relying on CLIENT assent to these terms and their intent to be
bound by the terms be evidence of their signature. Without CLIENT signed assent
to these terms, CFG would not introduce any Opportunity or disclose any
confidential information to Second Party as herein described.
7. CONFIDENTIALITY. CFG will not at any time or in any manner, either directly
or indirectly, use for the personal benefit of CFG, or divulge, disclose, or
communicate in any manner any information that is proprietary to AMSE without
AMSE'S express written consent. CFG will protect such information and treat is
as strictly confidential. This provision shall continue to be effective after
the termination of this Agreement.
3
<PAGE> 4
Upon termination of this Agreement, CFG will return to AMSE all records, notes,
documentation and other items that were used, created, or controlled by CFG
during the term of this Agreement.
7. ENTIRE AGREEMENT. This Agreement contains the entire Agreement of the
parties, and there are no other promises or conditions in any other
agreement whether oral or written.
8. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a count finds that any provision
of this Agreement is invalid or unenforceable, but that by limiting such
provision it would become valid and enforceable, then such provision shall
be deemed to be written, construed, and enforced as so limited.
9. COUNTERPARTS. If any provision of this Agreement shall be held to be valid
of unenforceable for any reason, the remaining provisions shall continue to
be valid and enforceable. If a court finds that any provision of the
Agreement is invalid or unenforceable, but that by limiting such provision
it would become valid and enforceable, then such provision shall be deemed
to be written, construed, and enforced as so limited.
10. CHOICE OF LAW. This Agreement shall be governed by, and shall be construed
in accordance with, the laws of the State of California.
11. ARBITRATION. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration
administered by the American Arbitration Association in accordance with its
applicable rules, and judgment upon an award by the arbitrator may be
entered in any court having jurisdiction thereof.
12. ASSIGNABILITY. This agreement is not assignable without the express written
advance consent of AMSE, at the sole discretion of its Board of Directors.
Party contracting services:
AMERICA'S SENIOR FINANCIAL SERVICES, INC
By: /s/ Nelson A. Locke, not personally
----------------------
President/CEO
Date: 1-6-00
--------------------
Address: 15544 NW 77th Court
Miami Lakes, FL 31016
4
<PAGE> 5
Services Provider:
THE CHARTERBRIDGE FINANCIAL GROUP, INC.
By:/s/
------------------------------
Date:
----------------------------
5
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of America's Senior
Financial Services, Inc. on Form SB-2 of our report as listed below, appearing
in the Prospectus, which is part of this Registration Statement:
Our Independent Auditors' Report dated March 12, 1999 on the 1998 and 1997
consolidated financial statements of Jupiter Mortgage Corporation.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ WISNESKI, BLAKISTON & LESLIE, P.A.
- --------------------------------------
Wisneski, Blakiston & Leslie, P.A.
Certified Public Accountants
Jupiter, Florida
February 23, 2000
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of America's Senior
Financial Services, Inc. on Form SB-2 of our report as listed below, appearing
in the Prospectus, which is part of this Registration Statement:
1. Our Independent Auditors' Report dated February 26, 1999 (except for
note 10, for which the date is March 26, 1999) on the 1998 and 1997
consolidated financial statements of America's Senior Financial
Services, Inc and subsidiary;
2. Our Independent Auditors' Report dated February 26, 1999 on the 1998
and 1997 financial statements of Dow Guarantee Corp.; and
3. Our Independent Auditors' Report dated April 9, 1999 on the 1998
financial statements of Capital Funding of South Florida, Inc.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Ahearn, Jasco + Company, P.A.
- --------------------------------
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
February 23, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> SEP-30-1998 SEP-30-1999
<CASH> 251,163 617,520
<SECURITIES> 0 0
<RECEIVABLES> 74,890 556,847
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 491,178 3,542,250
<PP&E> 222,826 711,415
<DEPRECIATION> 62,700 138,371
<TOTAL-ASSETS> 4,048,424 10,904,312
<CURRENT-LIABILITIES> 59,485 3,157,042
<BONDS> 0 2,641,448
0 0
0 0
<COMMON> 4,698 7,287
<OTHER-SE> 3,963,810 5,098,535
<TOTAL-LIABILITY-AND-EQUITY> 4,048,424 10,904,312
<SALES> 0 0
<TOTAL-REVENUES> 877,755 2,984,009
<CGS> 0 0
<TOTAL-COSTS> 1,001,748 7,863,589
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,633 470,151
<INCOME-PRETAX> (125,626) (5,349,731)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (125,626) (5,349,731)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (125,626) (5,349,731)
<EPS-BASIC> (.027) (.795)
<EPS-DILUTED> (.027) (.795)
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