Registration No. 333-89255
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT No. 1 to
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FUNDS AMERICA FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
65-0847728 Florida 1026002
(IRS EMPLOYER State or other jurisdiction of (Primary Standard
(Identification No.) Incorporation or organization) Classification Code)
(Address, including zip code and telephone number,
including area code of registrant's principal
executive offices)
Kim A. Naimoli
Chairman, President and Chief Executive Officer
545 Fort Lauderdale Beach Boulevard Suite 201
Ft. Lauderdale, Florida 33316
(954) 733-7777
(Name, address, including zip code and
telephone number, including area code of agent for service)
Copies to:
Jeffrey G. Klein, Esq.
23123 State Road 7, Suite 350-B
Boca Raton, Florida 33428
Approximate date of commencement of proposed sale to public: As soon as
practicable after the Registration Statement becomes effective.
-1-
<PAGE>
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ X ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering:____
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: _____
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box:
----
<TABLE>
<S> <C> <C> <C> <C>
CALCULATION OF REGISTRATION FEE
Proposed Max Proposed Max Amount of
Title of Securities Amount to be Offering Price Aggregate Offering Registration
Common Stock Registered Per Share (1) Price(2) Fee
Common Stock, no par
value per share 456,111 $ 0.021 $ 9,734 $278
</TABLE>
(1)(2) Based upon an agreement between the Registrant and the holders of the
securities to be registered, pro rata, which calls for the common
stock to be valued at an aggregate of 10.62% of the Registrant's
stockholder's equity.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IN NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION (SEC) 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.
The date of this Preliminary Prospectus is October 10, 2000.
-2-
<PAGE>
CROSS REFERENCE SHEET
Part 1
1. Front Cover Page of Prospectus............Facing Page, Cross Reference Sheet
2. Inside Front Cover and Outside Back
Cover pages of Prospectus......................Prospectus, Cover Sheet
3. Summary Information Risk Factors............Prospectus Summary, Risk Factors
4. Use of Proceeds..............................................Use of Proceeds
5. Determination of Offering Price..............Determination of Offering Price
6. Dilution............................................................Dilution
7. Selling Security Holders............................Selling Security Holders
8. Plan of Distribution..........................Plan of Distribution, Summary,
9. Legal Proceedings..........................................Legal Proceedings
10. Directors, Executive Officers, Promoters
and Control Management...............Directors, Executive Officers,
Promoters and Control Persons
11. Security Ownership of Certain Beneficial
Owners and Management.................Security Ownership of Certain
Beneficial Owners and Management
12. Description of Securities..........................Description of Securities
13. Interest of Named Experts and Counsel.................................Expert
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities.............Disclosure of Commission position
On Indemnification for Securities Act
Liabilities
15. Organization Within Last Five Years.........Summary, Description of Business
16. Description of Business..............................Description of Business
17. Management's Discussion and Analysis or
Plan of Business.............................Management Discussion and
Analysis of Financial Condition and Results
of Operations and Plan of Operation
18. Description of Property..............................Description of Property
19. Certain Relationships and Related
Transactions........................ Certain Relationships and Related
Transactions
20. Market for Common Equity and Related............Market for Common Equity and
Stockholder Matters Related Stockholder Matters
21. Executive Compensation................................Executive Compensation
22. Financial Statements....................................Financial Statements
23. Changes in and Disagreements with Accountants....Changes in and Disagreement
on Accounting and Financial Disclose with Accounting and Financial
Disclosure
PART II Information Not Required in Prospectus
24. Indemnification..............................................Indemnification
25. Other Expenses of Issuance and Distribution.......Other Expenses of Issuance
and Distribution
26. Recent Sale of Unregistered Securities...........Recent Sale of Unregistered
Securities
27. Exhibits............................................................Exhibits
28. Undertakings....................................................Undertakings
-3-
<PAGE>
TABLE OF CONTENTS
Part 1 Page
1. Prospectus, Cover Sheet 1
2. Facing Page, Cross Reference Sheet 3
3. Prospectus Summary, Risk Factors 5
4. Use of Proceeds 13
5. Determination of Offering Price 13
6. Dilution 13
7. Selling Security Holders 13
8. Plan of Distribution, Summary, 14
9. Legal Proceedings 16
10. Directors, Executive Officers,Promoters and Control Persons 16
11. Security Ownership of Certain
Beneficial Owners and Management 20
12. Description of Securities 21
13. Expert 21
14. Disclosure of Commission position
On Indemnification for Securities Act Liabilities 21
15. Summary, Description of Business
16. Description of Business 22
17. Management Discussion and Analysis of Financial
Condition and Results of Operations and Plan of Operation 27
18. Description of Property 28
19. Certain Relationships and Related Transactions 28
20. Market for Common Equity and
Stockholder Matters Related Stockholder Matters 30
21. Executive Compensation 30
22. Financial Statements 33 & 38
23. Changes in and Disagreement on Accounting and Financial Disclose 33
PART II Information Not Required in Prospectus
24. Indemnification 33
25. Other Expenses of Issuance and Distribution 34
26. Recent Sale of Unregistered Securities 34
27. Exhibits 55
28. Undertakings 54
-4-
<PAGE>
ITEM 3. SUMMARY INFORMATION AND RISK FACTORS
SUMMARY INFORMATION
This Prospectus contains certain forward-looking statements concerning Funds
America Finance Corporation (the "Company" "we" or "our"), its operations,
performance, and financial conditions, including future economic performance,
plans, and objectives, and the likelihood of success in developing its business.
These statements are based upon a number of assumptions and estimates, which are
subject to significant uncertainties, many of which are beyond our control. The
words may, would, could, will, expect, anticipate, believe, intend, plan, and
estimate, as well as similar expressions, are meant to identify such
forward-looking statements. Actual results may differ materially from those
expressed or implied by such forward-looking statements. Factors that could
cause actual results to differ materially include, but are not limited to, those
set forth in Risk Factors.
We are a Florida corporation and we were organized in June 1998 and began
business in April 1999. We are engaged in the retail consumer- credit business
with emphasis on first lien loans on mobile homes. We intend to expand our
portfolio for loans by offering for sale to prospective clients, including other
retail credit businesses, banks, insurance companies, and, subject to and with
all appropriate legal safeguards, including the filing of required registration
statements, use of approved indentures and other types of debt instruments.
Other sources of funds may involve credit arrangements with banks, insurance
companies, finance companies, and other similar financial industry entities,
where there are pre-arranged terms and based upon pre-arranged criteria. It is
our intent to provide first position financing on mobile homes and to expand our
loan portfolio by making new loans We hope to expand our geographical reach to
include all of Florida and, subject to the availability of additional financing
and similar laws on lending for consumer homes, we would like to expand into
Georgia and Alabama. Subject to the availability of funds we plan to offer
mobile homeowners optional insurance premium financing on property damage
coverage for their mobile homes.
We are currently located at 545 Fort Lauderdale Boulevard, Suite 201 Fort
Lauderdale , Florida 33316 and our telephone number is (954) 733-7777.
The Offering
As of May 31, 2000, we had 3,880,000 shares of our common stock outstanding.
This offering is comprised of securities which will be issued only upon the
registration of this offering The shares issued pursuant to this registration
will be issued pursuant to various consulting agreements and for legal services.
Although we will not receive any proceeds from the sale of these securities, we
have agreed to pay all expenses incurred in connection with the registration of
the securities. We anticipate registration expenses to be approximately $15,000.
One of the consulting agreements which we have entered into grants the
consultant the opportunity to exercise warrants to purchase shares of our common
stock. If these warrants are exercised, we will however, receive proceeds from
the exercise of the warrants of $10,000.
Summary Financial Information
The summary financial data contained in this section has been selected from our
Financial Statements and should be read together with our audited and unaudited
Financial Statements, including the notes accompanying these statements and any
pro forma financial statements included elsewhere in this Prospectus. This
information is qualified in its entirety by reference to the Financial
Statements and the accompanying notes thereto.
The statement of operations for the year ended June 30, 1999 reflects the
acquisition of the assets of the mobile home notes from Mark Sand made on April
12, 1999 and the issuance of all shares of common stock issued to date by the
Company.
-5-
<PAGE>
<TABLE>
<S> <C> <C>
Statement of Operations Data:
Year Ended 6/30/99 Nine Months Ended 3/31/00
(Audited) (Unaudited)
Net Revenues $ 3,260 $ 15,407
Loss from Operations (7,428) ( 20,107)
Net Loss (7,428) (19,871)
Net Loss per share .00 (0.01)
JUNE 30, 1999 MARCH 31, 2000
Audited Unaudited
Total Liabilities $ 8,336 $ 15,825
----- ------
25,000,000 shares authorized; issued and
outstanding 3,880,000 shares
Stockholders' equity
Common stock, no par value
Authorized 25,000,000 shares;
issued and outstanding 3,880,000. $106,150 $111,750
.
Accumulated deficit (7,428) (27,299)
Stock Subscription Receivable (1,380) (6,980)
--------- ---------
Total stockholders' equity $ 97,342 $ 93,296
-------- -------
Total Liabilities and Stockholders' Equity $ 105,678 $109,121
========= ========
</TABLE>
-6-
<PAGE>
Investors should review our complete audited financial statements, which are
included elsewhere in this Prospectus.
Risk Factors
An investment in the Common Stock registered hereby involves a number of risks,
some of which, including market, liquidity, credit, operational, legal and
regulatory risks, could be substantial and are inherent in our business You
should carefully consider the following information in this Prospectus, before
purchasing any of the shares of Common Stock registered hereby.
Need for Additional Capital: A Lack of Liquidity Could Adversely Affect Our
Ability to Fund Operations and jeopardize Our Financial Condition
The access to capital is essential to our business. In the recent past we have
relied upon borrowings through private transactions or the exchange of our
equity securities for assets to finance our activities. Our success depends on
our ability to operate a recently acquired consumer credit portfolio consisting
solely of mobile home loans as well as the raising of capital in order to make
new loans and pay operating expenses. Our access to capital in amounts adequate
to finance our activities could be impaired by factors that affect us in
particular or the industry in general. If we incurred large losses in our
business, if the level of our business activity decreased due to market
downturn, if regulatory authorities took significant action against us or if we
discovered that one of our employees had engaged in serious unauthorized or
illegal activity, our ability to obtain debt or equity capital could be
impaired.
We began operations in June 1998and thus have a very limited operating history.
Accordingly, we are subject to the risks of any relatively new business and the
likelihood of success must be considered in light of the problems, expenses,
difficulties, and complications of the consumer credit, finance, and loan
business and the competitive environment in which we operate. As a result, you
could lose all or a substantial part of your investment.
Salaries, office equipment, marketing expenses, presentation materials, and
costs related to SEC filings will require substantial funding. There can be no
assurance that we will be successful in raising such capital or that the capital
will be available, or available when needed and at competitive rates. There is
also no assurance that raising needed funds would not reduce the value of the
shares of common stock now being registered. Prior to our purchase of the mobile
home notes we had conducted no business operations. Accordingly, our future
success is totally dependent upon our ability to operate the credit/loan service
business profitably and successfully.
-7-
<PAGE>
Future profitable operations are dependent upon our ability to increase and
organize sales efforts and to constantly expand the number of loan originations
and services offered. The consumer credit mobile home financing service business
is an early stage business and there can be no assurance that it will operate
successfully. Our success in these areas depends upon our ability to
successfully raise marketing dollars necessary for us to begin these efforts in
order to reach the desired level of success. You should consider this factor in
light of the risks, expenses and difficulties that are associated with our early
stage of development, particularly because we operate in the new and rapidly
evolving financial markets. These risks include, but are not limited to, an
evolving and unpredictable business model, the difficulty in managing our growth
and the uncertainties regarding future revenues. We cannot assure that we will
be successful in addressing these risks, and the failure to do so could have a
material adverse effect on our business, prospects, financial condition and
results of operations. As the consumer loan business is known to have a high
rate of failure and because other companies may have greater operational and
financial resources than us, there can be no assurance that we will be able to
compete successfully.
We Are dependent upon the experience and knowledge of our Key Employees,Kim
Naimoli and Mark Sand, our President/Chairman and Vice-president, respectively.
Among the benefits accruing to the Company from these individuals is their
experience in the real estate and loan business and as such, their ability to
attract needed capital and manage our loan portfolio. Both Naimoli and Sand have
employment contracts with us. When these employment agreements terminate or
should either one or both of these individuals leave or otherwise not be
available to us for service, our operations could be materially and adversely
affected. We intend to purchase, however there presently is not in place,
key-person insurance on the lives of both of the forgoing officers. Whether
funds will be available for such purposes cannot be assured and will depend upon
our success in raising capital. Even if insurance benefits are received there
can be no assurance that replacement personnel could be found or if found,
available at affordable rates. Accordingly, the loss of the services of either
officer may adversely affect our business and affairs. Further, the inability to
add quality personnel to our staff could have an adverse effect on our expansion
and growth plans.
-8-
<PAGE>
Salaries and Other Compensation of Key Employees.
We have entered into employment agreements with Naimoli, Sand, and Janis M.
Dorony, Secretary to the Company. Subject to our Common Stock having been
actively and publicly traded on a public market within the United States for a
period of six (6) months, an annual bonus becomes payable in shares of our comm
stock determined by dividing 3.84% of our pre-tax profits for the then subject
year by the average bid price for our Common Stock during the last five (5)
trading days prior to the end of the last day of each year and the initial five
(5) days of the new year. Mr. Sand, Ms. Naimoli, and Ms. Dorony are entitled to
an annual cash bonus equal to 3.84% of our pre-tax profits for the then subject
year after their respective employment agreements have been in effect for at
least six (6) months. Any compensation earned, which is not taken as a result of
cash flow considerations, is forever waived. Arthur Schnur and Steven Naimoli,
Directors of the Company, have each been granted options to purchase 50,000
shares of our Common Stock at an exercise price of $.25 per share. However no
such annual or other compensation, or any bonus, has been paid as of the date of
this Prospectus to any of our officers or directors.
It is anticipated that each of the officers of the Company will spend such time
as is reasonably needed to adequately attend to our business and affairs and
that such time will increase in proportion to our growth until such jobs become
full time employment or their employment otherwise comes to an end.
Offering Price Arbitrarily Determined.
In each instance where our equity securities have been offered, exchanged, or
sold the price of our Common Stock was arbitrarily determined by us and bore
then and bears no relationship to the assets, book value, earnings, net worth,
or its fair market value or any value.
Absence of Trading Market.
Although it is our objective to have our common stock quoted on the OTC Bulletin
Board as soon as practicable there is presently no public market for our common
stock. There is no assurance that a trading market will develop or be sustained.
Accordingly, you may have to hold your securities indefinitely and may have
difficulty in selling such securities if an active trading market does not
develop. We have not paid, nor do we presently contemplate the payment of, any
cash dividends on our common stock. You may not be able to freely trade your
shares of common stock. Our common stock is not listed on a national securities
exchange and is not quoted on the NASD's Electronic Bulletin Board. Accordingly,
there is a limited public market for our securities, and there can be no
assurance that a more liquid market will develop in the future. You must be
prepared to bear the economic risk of your investment for an indefinite period
of time.
-9-
<PAGE>
Organizer's Control of the Company.
After completion of this registration, and issuance of the shares to be
registered to AmeriNet shareholders, and to others, the current stockholders
will continue to own over 50% of the Common Stock giving them voting control
over the Company. Since the Common Stock does not have cumulative voting rights,
they will be able to continue to determine and direct our affairs and policies.
You will not be able to control matters requiring approval by stockholders. Kim
Naimoli and Mark Sand beneficially own 82.46% before or 74.23% after the
offering of the stock (without giving effect to the exercise of outstanding
stock options). As a result, they will effectively control virtually all matters
requiring approval by our stockholders, including: amendments of the Articles of
Incorporation, approval of mergers and acquisitions and similar transactions,
and the election of directors.
Substantial Near and Long Term Capital Needs, the Uncertainty of Additional
Funding, and; Dilution.
We currently estimate that we will require between $ 100,000 and $200,000 in
operating capital over the next twelve (12) months including capital
expenditures. We expect to obtain this funding from the sales of equity and/or
convertible debt securities in the private and/or public markets and/or obtain
bank financing. Our capital requirements will depend largely on how aggressive
we are in expanding our loan portfolio and the exercise of other available
financial products, opportunities, and markets. If additional funds are raised
through the issuance of equity securities, the percentage ownership of our
current shareholders will be reduced and such equity securities may have rights,
preferences, and privileges senior to those of the holders of our common stock.
There can be no assurance that additional capital will be available on terms
favorable to us or our shareholders, if at all. If adequate funds are not
available; we may be required to curtail operations significantly or to obtain
funds through entering into collaboration agreements on unattractive terms that
may require us to relinquish certain rights. Our inability to raise capital
would have a material adverse effect on the business, financial condition, and
results of operations.
We Face Competition From Other Entities Providing Services Similar to Ours.
We will face intense competition in all aspects of our business. We will compete
with financial intermediaries, commercial banks, savings associations, credit
unions, loan brokers and insurance companies that also provide mortgage
financing. These companies may offer convenience and customer service superior
to our company. In addition, these companies may have better marketing and
distribution channels. There can be no assurance that we will be able to compete
effectively in this highly competitive industry, which could have a material
impact upon our ability to expand our operations
-10-
<PAGE>
Year 2000 Disclosure
.
Most businesses, financial and other institutions around the world have reviewed
and modified their computer systems to ensure that they are Year 2000 compliant.
The issue, in general terms, is that many existing computer systems and
microprocessors (including those in non-information technology equipment and
systems) use only two digits to identify a year in the date field with the
assumption that the first two digits of the year are always 19. Consequently, on
January 1, 2000, computers that were not Year 2000 compliant may have read the
year 1900. Systems that calculate, compare or sort using the incorrect date may
have malfunctioned.
At and since January 1, 2000, Year 2000 problems have not been significant and
wide-spread computer failures have not materialized
Penny Stock Rules May Adversely Affect Investor's Ability to Resell and
Therefore the Liquidity of Their Investment.
Broker-Dealer practices in connection with transactions in "penny stocks" are
regulated by penny stock rules adopted by the SEC. Penny stocks are generally
equity securities with a price of less than $5.00 other than securities
registered on certain national security exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in those securities is provided by the exchange or system. The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock, to deliver a standardized risk disclosure document that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer must also provide its customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson, in the transaction and monthly account statements showing
the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that prior to a transaction in a penny
stock, the broker- dealer must make a special written determination that the
stock is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a
stock that becomes subject to the penny stock rules. If our Common Stock becomes
subject to these penny stock rules, investors and those whose stock is being
registered hereby, may find it more difficult to sell their shares.
-11-
<PAGE>
Holders of our common stock may be further limited in their ability to sell or
transfer their shares depending upon additional rules or regulations which may
be imposed by various state securities statutes and applicable "Blue Sky"
provisions.
We can offer no assurance that a public market will develop in our Common Stock
or any warrants issued therefore or that we will be able to comply with any
applicable Blue Sky requirements..
Presently, no public market exists in our securities and there is little
likelihood of any active and liquid public trading market developing following
the effective date of this registration. Thus, stockholders may find it
difficult to sell their shares. To date, neither we or anyone on our behalf, has
taken any affirmative steps to request any broker-dealer to act as a market
maker for our securities. Further, there have been no discussions between us or
anyone acting on our behalf and any market maker regarding its participation in
the future trading market for our securities.
Losses Since Inception.
We have no meaningful working capital and expect that we will sustain losses for
the year ending June 30, 2000 and have incurred a net loss for the nine months
ended March 31, 2000 of $19,871. We have sustained losses since our inception.
If we are successful in raising additional capital, expanding our loan portfolio
and improving the quality of the loans made we hope to become profitable. There
can be no assurances that such efforts and plans will be successful. Without
additional capital, we will not likely be successful..
Forward Looking Statements.
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The words anticipate, believe, estimate, anticipate, expect,
will, could, may, intend and similar words are intended to identify
forward-looking statements. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including the risks described above and elsewhere in this Prospectus.
Current Prospectus and State Blue Sky Registration Required.
The purchasers of any securities registered hereby will be able to resell such
securities in the public market only if the securities are qualified for sale or
exempt from qualification under applicable state securities laws of the
jurisdictions in which the proposed purchasers reside. Although we intend to
-12-
<PAGE>
seek to qualify for sale the securities registered hereby in those states in
which the securities may be offered, no assurance can be given that such
qualifications will occur. The securities may be deprived of any value and the
market for the securities may be limited if the securities are not qualified or
exempt from qualification in the jurisdictions in which any prospective
purchaser of the securities then reside.
ITEM 4 USE OF PROCEEDS
All shares of common stock registered hereby are offered for registration
purposes only and no offer to sell or sale thereof is intended or made.
Accordingly, we will not receive any proceeds as a result of the registration of
the shares so registered. We may however receive limited funding from the
exercise of warrants. To the extent that any of our warrant holders exercise
their warrants, any proceeds received therefrom will be used for general working
capital purposes.
ITEM 5. DETERMINATION OF OFFERING PRICE
Not applicable. The selling security holders will be able to determine the price
at which they sell their securities.
ITEM 6. DILUTION
Our agreement with Amerinet provides that upon the effective date of the
registration statement we will issue to the Amerinet shareholders an amount of
shares equal to 10% of the Company's common stock outstanding immediately
following such issuance. As a result, the current shareholders will experience
an immediate 10% dilution in the value of their holdings.
ITEM 7. SELLING SECURITY HOLDERS
The securities are being sold by the selling security holders named below. The
table indicates that all the securities will be available for resale after the
offering. However, any or all of the securities listed below may be retained by
any of the selling security holders, and therefore, no accurate forecast can be
made as to the number of securities than will be held by the selling security
holders upon termination of this offering. The selling security holders listed
in the table have sole voting and investment powers with respect to the
securities indicated. We will not receive any proceeds from the sale of the
securities.
-13-
<PAGE>
Relationship Amount To be Percentage Owned
With Issuer Registered
Name
Jeffrey Klein Counsel 12,500 Less than 1%
Lawrence Schecterman None 12,500 Less than 1%
* Does not include the 431,111 shares to be issued to the Amerinet
shareholders. These shares will only be issued to the Amerinet shareholders
on the effective date of this Registration statement.
ITEM 8. PLAN OF DISTRIBUTION
The shares registered hereby may be sold or distributed from time to time by the
stockholders or by pledgees, donees or transferees of, or successors in interest
to, the stockholders directly to one or more purchasers, including pledgees, or
through brokers, dealers or underwriters who may act solely as agents or may
acquire shares as principals, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices, at negotiated prices or at
fixed prices, which may be changed. The shares registered are being issued to
the shareholders of AmeriNet pursuant to agreement in exchange for consulting
and other services, and to Jeffrey G. Klein, Esq. and Lawrence Schechterman for
their assistance in the preparation of this Registration Statement. The stock
will not be issued to AmeriNet unless and until this Registration Statement is
declared effective.
The distribution of the shares registered may be effected in one or more of the
following methods:
ordinary brokers transactions, which may include long or short sales,
purchases by brokers, dealers or underwriters as principal and resale
-14-
<PAGE>
by such purchasers for their own accounts pursuant to this prospectus,
"at the market" to or through market makers or into an existing market
for the common stock,
in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents,
through transactions in options,swaps or other derivatives, whether exchange
listed or otherwise, or
any combination of the foregoing, or by any other legally available means.
In addition, the stockholders or their successors in interest may enter into
hedging transactions with broker-dealers who may engage in short sales of shares
of common stock in the course of hedging the positions they assume with the
stockholders. The stockholders or their successors in interest may also enter
into option or other transactions with broker-dealers that require the delivery
by such broker-dealers of the shares, which shares may be resold thereafter
pursuant to this Prospectus.
Brokers, dealers, underwriters or agents participating in the distribution of
the shares may receive compensation in the form of discounts, concessions or
commissions from the stockholders and/or the purchasers of shares for whom such
broker-dealers may act as agent or to whom they may sell as principal, or both.
Such compensation as to a particular broker-dealer may be in excess of customary
commissions. The selling stockholders and any broker-dealers acting in
connection with the sale of the shares hereunder may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act and any
commission received by them and any profit realized by them on the resale of
shares as principals may be deemed underwriting compensation under the
Securities Act. Neither the Company nor any stockholder can presently estimate
the amount of such compensation. We know of no existing arrangements between any
stockholder and any broker, dealer, underwriter or agent relating to the sale or
distribution of the shares.
Each stockholder and any other person participating in a distribution of
securities will be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including, without limitation, Regulation M,
which may restrict certain activities of, and limit the timing of purchases and
sales of securities by stockholders and other persons participating in a
distribution of securities. Furthermore, under Regulation M, persons engaged in
a distribution of securities are prohibited from simultaneously engaging in
market making and certain other activities with respect to such securities for a
specified period of time prior to the commencement of such distributions,
subject to specified exceptions or exemptions. All of the foregoing may affect
the marketability of the securities registered hereby.
-15-
<PAGE>
Any securities covered by this Prospectus that qualify for sale pursuant to Rule
144 under the Securities Act may be sold under that Rule rather than pursuant to
this Prospectus.
There can be no assurance that the stockholders will sell any or all of the
shares of common stock being registered for them hereunder.
ITEM 9. LEGAL PROCEEDINGS
There is no current, pending or threatened litigation in which the Company is or
may be a party to the best knowledge of management.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS.
The following sets forth the names and ages of all of the Directors and
Executive Officers of the Company, positions held by such person, length of
service, when first elected or appointed, and the term of office.
Name and Age First Elected Term Position
to Office of Office
Kim A. Naimoli (40) May 2, 1999 (1)(2) Chairman of the Board
of Directors, President
and Chief Executive
Officer
Mark Sand (46) July 1, 1998 (1)(2) Vice President and
Director, Chief
Operating Officer
Janis M. Dorony (46) May 2, 1999 (1)(2) Secretary, Director
Arthur Schnur(39) May 2, 1999 (1) Director
Steven P. Naimoli(50) May 2, 1999 (1) Director
---------------------
(1) Officers serve pursuant to employment agreements entered into with the
Company
(2) Each of these Directors was appointed on an interim basis until the next
annual meeting of shareholders or until duly elected and qualified.
We currently intend to hold next annual meeting during December 2000. All
directors are to serve until their successors assume office after election at
our next annual meeting of stockholders.
-16-
<PAGE>
Our Board of Directors sets corporate policies, which are implemented by
management. In the event that our Board of Directors determines that a member
faces a conflict of interest, for any reason, it is expected that the subject
director will abstain from voting on the matter, which raised the issue of
conflict.
Kim A. Naimoli.
Ms. Naimoli has been a director since May 2, 1999 when she was also appointed
President and Chief Executive Officer and Chairman of the Board of Directors.
Since October 1999, she has also served as president of 3045 Corporation, a
company which intends to develop a website where individuals can obtain mortgage
information Since March 1996 Ms. Naimoli has served as president of Coral
Mortgage, Inc., a correspondent mortgage lender, of which she is the founder.
From October 1994 to April 1998, Ms. Naimoli served as vice president of Credit
Bureau Services, Inc.; from 1989 to May 1994 she was the manager of Credit
Bureau Affiliates, Inc. where she supervised 23 employees in the credit
reporting and mortgage reporting divisions. Ms. Naimoli is affiliated with many
related financial industry organizations including, but not limited to, New York
Association of Mortgage Brokers and Mortgage Bankers Association of CNY where
she served as vice president. Ms. Naimoli is also the exclusive retail
originator in Florida for Apartment Lending Corp., a commercial mortgage lender
licensed in all fifty states.
Mark Sand.
Mr. Sand has been a director since our inception and also our Vice President.
Mr. Sand served as President and principal mortgage broker for Funding USA,
f/k/a Citivest Financial Services, a mortgage brokerage firm from March 1989 to
the present. Prior to that he was a mortgage broker for ASAP Mortgage
Corporation from December 1988 to March 1989. From September 1983 until October
1988 Mr. Sand owned and operated the Sands Group, Ltd., a commercial real estate
firm in New York City. In March 1998, Mr. Sand filed for protection under
Chapter 13 of the US bankruptcy laws. The bankruptcy plan was confirmed in
September 1998. Funding USA, a company in which Mr. Sand is a principal, was
subject to professional disciplinary proceedings brought in 1993 by the Florida
Department of Banking. As a result of the foregoing, Funding USA was placed on
probation for a period of six months.
-17-
<PAGE>
Janis M. Dorony.
Ms. Dorony has been with us since May 2, 1999. Prior to joining us, Janis held
various administrative positions and was a director of Foreclosure Arbitrations
a company engaged in the business of assisting mortgagees in foreclosure cases
in restructuring their finances and restore all of their property rights where
she served from March 1998 to January 1999.
Steven P. Naimoli.
Mr. Naimoli joined us in May 1999. He is the husband of Kim Naimoli. From 1979
through May 1994 he served as President of SPN Holdings, Inc. a real estate
investment company. In October 1994 he joined as President of Credit Bureau
Services, Inc., also a credit- reporting agency, leaving in April 1998. From
April 1999 to the present he has served as Vice President of Coral Mortgage,
Inc. a commercial mortgage lender and since May 1998 he has also served as
Manager of Quick Credit Corp. of Fort Lauderdale, Florida, a credit reporting
agency.
Arthur Schnur.
Mr. Schnur joined us in May 1999. From 1987 to the present Mr. Schnur has worked
as a mortgage broker at ASAP Mortgage Corp. He serves as an outside director and
provides management with a valuable contact in the mortgage brokerage and
financing business.
Family Relationships
Except for the relationship of Kim Naimoli and Steven Naimoli, who are husband
and wife, there are no family relationships among directors, executive officers
or persons chosen by the Company to be nominated as a director or appointed as
an executive officer of the Company or any affiliate of the Company.
Involvement in Certain Legal Proceedings
To the best knowledge and belief of the Company, except as disclosed above,
during the past five (5) years no present or former director, executive officer,
or person nominated as a director or appointed as an executive officer of the
Company or any of its affiliated subsidiaries, has been involved in:
Any bankruptcy petition by or against any business of which such
person was a general partner or executive either at the time of the
bankruptcy or within two years prior to that time;
Any conviction in criminal proceedings or subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
Being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily, barring, suspending, or
otherwise limiting his/her involvement in any type of business,
securities, or banking activities; and
-18-
<PAGE>
Being found by any court of competent jurisdiction (in a civil
action), the SEC, or the Commodities Futures Trading Commission to
have violated a federal or state securities or commodities law, and
the judgment has not been reversed, suspended, or vacated.
Material Employees and Consultants
The following persons do not work for us as either executive officers or
directors. However, they play a material role in the operations of our
affiliates.
We have engaged the Yankee Companies, Inc. a Florida corporation ("Yankee"), to
provide strategic planning advice; AmeriNet Group.com, Inc. f/k/a/ Equity Growth
Systems, Inc. , a publicly held Delaware corporation,("AmeriNet") provides our
management with assistance in the process of registering with the SEC and
developing policies and procedures for regulatory compliance; and, Liberty
Group, Inc., a Florida corporation ("Liberty"), provides us with management
consulting advice and management services.
Compensation of Directors
Current directors serve in such capacity without cash compensation.
Audit and Compensation Committees
The Board of Directors has a standing Audit and Compensation Committees,
comprised of Ms. Naimoli and Mr. Sand. The Audit Committee assists the Board of
Directors in exercising its fiduciary responsibilities for oversight of audit
and related matters, including corporate accounting, reporting and control
practices. The Compensation Committee is responsible for overseeing our
executive compensation programs. It administers certain compensation and benefit
plans and approves annual compensation and recommends to the Board of Directors
long-term incentive compensation to be granted to executive officers, directors
and our consultants.
-19-
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our common stock as
of May 30, 2000 by:
1. each person or entity known by us to beneficially own 5% or more of the
outstanding shares of common stock;
2. each of our directors and officers; and
3. all directors and executive officers as a group.
4. all of our directors can be contacted at our principal place of business
<TABLE>
<S> <C> <C> <C>
NAME AND TITLE OF AMOUNT AND NATURE PERCENTAGE OF CLASS
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP (1)(2) Before Issuance of After Issuance
Of shares to be Of shares to be
Registered Registered
Kim Naimoli, President, CEO, Chairman 1,200,000 30.92% 27.84%
Mark Sand, Vice President, Director 2,000,000 51.54% 46.39%
Janis M. Dorony, Secretary 200,000 5.15% 4.64%
Arthur Schnur, Director -0- -0- -0-
Steven P. Naimoli, Director -0-* -0- -0-
</TABLE>
(*Does not include options to purchase up to 50,000 shares each of common
stock at an exercise price of $.25 per share.)
All Other Owners of 5% or more of the
Company's Common Equity NONE
All Directors and
Officers as a
Group (5 persons) 3,400,000 78.87%
---------------------------------
(1) Record and beneficial owner based on 3,880,000 shares of common stock as of
May 31, 2000
(2) There are outstanding options to purchase an aggregate of 100,000 shares to
two directors and when issued, these shares in the hands of the directors
will be less than 5% of the then issued and outstanding shares. These
options may be exercised at any time on or prior to March 31, 2004 at a
price of $.25 per share. We have also granted to Yankee an option for
shares of common stock equal to 5% of our outstanding or reserved common
stock immediately following complete exercise of the option, but not less
than 250,000 shares. The option is good for one year from and after August
1, 1999, at an agreed upon aggregate price of $10,000 pro rated by formula
based on the total number of our shares then outstanding.
(3) Upon the effectiveness of this Registration Statement there will be issued
to AmeriNet 431,111 shares of our common stock, all of which shares are
accounted for in this percentage.
-20-
<PAGE>
To the best of our knowledge and belief, there are no arrangements,
understandings, agreements relative to the disposition of our securities, the
operation of which would at a subsequent date result in a change in our control.
The shares being registered hereby are being registered to permit public
secondary trading, and the stockholders may offer all or part of the shares for
resale from time to time. However, such stockholders are under no obligation to
sell all or any portion of such shares or are such stockholders obligated to
sell any shares immediately under this prospectus, and should not for any
purpose be considered selling shareholders.
ITEM 12. DESCRIPTION OF SECURITIES
The following description is a summary and is qualified in its entirety by the
provisions of our Articles of Incorporation and Bylaws copies of which have been
filed as exhibits to the registration statement of which this prospectus is a
part.
Common Stock
We are authorized to issue 25,000,000 no par value shares of our common stock.
As of the date of this Prospectus, there were 3,880,000 shares of common stock
outstanding. There are 350,000 shares of common stock issuable pursuant to
outstanding options and warrants, and 431,111 shares of common stock reserved
for issuance pursuant to payment to AmeriNet. The holders of common stock are
entitled to one vote per share on all matters to be voted upon by the
stockholders. The holders of common stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available for that purpose. In the event of
liquidation, dissolution or winding up of our business, holders of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights of preferred stock, if any,
then authorized and outstanding. The common stock has no preemptive or
conversion rights or other subscription rights. There are no redemption
provisions applicable to the common stock.
The authorization and issuance of preferred stock by the Board of Directors
could adversely affect the rights of holders of shares of common stock by, among
other things, establishing preferential dividends, liquidation rights or voting
power. The issuance of such preferred stock could be used by us to discourage or
prevent efforts to acquire control through the acquisition of shares of common
stock.
ITEM 13. EXPERTS
Our financial statements as of and for the year ended June 30, 1999, included in
this Prospectus have been so included in reliance on the report of Dohan and
Company, CPA's, independent auditors, given on the authority of said firm as
experts in auditing and accounting.
ITEM 14. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted for our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
It is the opinion of our current management as to each transaction described
above that the terms of transactions involving our officers and directors were
materially more favorable to us than it could have obtained from unrelated
sources.
-21-
<PAGE>
ITEM 16. DESCRIPTION OF BUSINESS
THE BUSINESS
It is our intent to provide first position financing on mobile homes and to
expand our loan portfolio by making new loans and our geographical reach to
include all of Florida and, subject to the availability of additional financing
and similar laws on lending for consumer homes, we would like to expand into
Georgia and Alabama. Subject to the availability of funds we plan to offer
mobile homeowners optional insurance premium financing on property damage
coverage for their mobile homes. We intend to obtain all necessary and required
licensing for finance companies in all states in which we may operate if, and to
the extent, so required.
We have had very limited operations. However, Mr. Mark Sand, our vice president
and director and his immediate family have since 1974 consummated more than 300
loans that are secured by liens on mobile homes. The consumer finance industry
has inherent risks including, but not limited to, a high cost of collection
should a loan go into default and we are required to hold the underlying mobile
home property for an extended period of time while being responsible for paying
the land rent.
In May 1999, we issued 2,000,000 shares of our previously unissued, no par
value, common stock, to Mr. Sand, in an exchange transaction, and in exchange
for a series of secured third party notes having a face value of $86,640. Except
for servicing these notes we presently have no other operations. In May 1999 we
entered into a consulting agreement with Amerinet Group.com, Inc. [f/k/a Equity
Growth Systems, Inc. (AmeriNet)] to provide advice and services to aide us in
becoming a reporting company under the provisions of the Securities Exchange Act
of 1934, as amended (Exchange Act), in exchange for our issuing shares of our
common stock in payment for such services. Pursuant to that agreement we are
required to issue in the names of each of the AmeriNet shareholders of record as
of the close of business on June 30, 1999 (2,231 shareholders), pro-rata, an
amount of shares equal to 10% of our common stock outstanding immediately
following such issuance, subject to anti-dilutive rights, and for a period of
one year following the date of issuance (431,111) shares). We are further
required to register the shares issued to AmeriNet shareholders and is doing so
pursuant to this Registration Statement. We will have no further role or
involvement in any subsequent sales of any of such shares. No commissions or
other compensation is being paid in conjunction with the distribution. However,
material transfer agency, printing, and mailing costs may be involved. In May
1999, we also issued to two of our directors Steven Naimoli, the husband of our
chief executive officer, and Arthur Schnur, options to purchase 50,000 shares of
our common stock at a price of $.25 per share.
-22-
<PAGE>
We were organized in June 1998. We began to do business in April 1999 when we
acquired a small portfolio of mobile home loans in exchange for our common stock
from one of our officer/directors, Mr. Mark Sand. Our sole present business is
management of the loan portfolio. We provide highly collateralized loans with a
low default rate while yielding high interest rates and intends to expand
geographically.
We intend to operate a retail credit business specializing in first lien, loans
on mobile homes, which, as part of our source of funds for loans, intends to
develop pools of loans which we will resell, either to other retail credit
businesses, banks, insurance companies, and, under appropriate legal safeguards,
including filing or required registration statements, use of approved indentures
and trustees, to the public. Other sources of funds may involve credit
arrangements with banks, insurance companies, finance companies, and the like,
permitting loan approvals on pre-arranged terms and based on pre-arranged
criteria. Appropriate licensing for finance companies is intended to be acquired
in all states requiring such licensing. Initially, we intend to concentrate our
efforts in Dade, Broward, and Palm Beach Counties, Florida where there are
estimated to be more than 60,000 mobile homes. We intend to provide financing to
owners of insured mobile homes who can demonstrate that they hold clear and
unencumbered title to their mobile homes and are either current on their ground
rent at their mobile home park or, with the loan proceeds, such rent will be
brought current. If appraisals and other factors meet our established policies a
loan can be fully processed within 24 hours of the application.
We may conduct credit risk analysis and also rely primarily on the ability to
foreclose on a defaulted loan. We rely heavily upon the experience of Mr. Sand,
our vice president, in matters concerning mobile home financing. Financing to
owners of mobile homes is intended to be made only to those who hold clear
title, are current in rent payments to their mobile home park and whose mobile
home is covered by a dissast insurance policy where we are named as a loss
payee. Loan proceeds may be used to bring current any rent then owing.
Generally, loans can be funded within 24 hours. Service and competitive rates
are essential to a successful consumer loan financing business as well as the
management of the loan portfolio so that performance is not materially affected
by defaults.
We intend to initially concentrate our efforts in South Florida, particularly in
Miami-Dade, Broward and Palm Beach Counties where there are more than 60,000
mobile homes. Under Florida law we may charge up to a 30% interest rate on the
first $2,000 principal amount of a loan, 24% on the next $1,000 loaned, and 18%
on the next $3,000 to $25,000 of each loan. We have established a current policy
of not loaning any amount greater than 50% of the value of the mobile home.
Loans are secured by filed liens and typical real estate foreclosure procedures
are not applicable since the mobile homes are considered much like automobile
and not real property, making repossession available as a remedy for a defaulted
loan.
-23-
<PAGE>
Our average mobile home loan is $4,000. Under current Florida law we are
permitted to charge interest on loaned funds as follows: Up to 30% interest on
the first $2,000 of the loan principal; 24% on the next $1,000; and 18% on the
next $3,000-$25,000 of loan principal. Our current policy is not to loan an
amount greater than 50% of the fair market value of the mobile home. The loan is
secured by the filing of a lien with the State of Florida in the County where
the mobile home is located. We further secure the principal of the loan by
taking actual possession of the title to the mobile home. This can be likened to
a bank holding title to an automobile until the car loan is paid in full or the
home is sold in which case the balance of the loan together with accrued
interest would then become due and payable. We do not intend to maintain any
reserves for bad debt.
To further secure our position we require borrowers to carry homeowner's
insurance where we are named as loss payee. Loans are not made until this
coverage is in place. There are circumstances where a mobile homeowner does not
carry such insurance. In such circumstances it is our intention to offer as an
option to the borrower eight-month insurance premium financing so that the
necessary insurance coverage can be purchased. We presently do not have the
financial ability to implement such a premium financing program and will have to
limit our loans to circumstances where such overage is already in place.
Financing of such premiums can carry rates anywhere between 26% to 50% of the
amount loaned under Florida Law.
We intend to expand geographically into other Florida Counties beside those
above-mentioned and eventually into other States. Whether such expansion will be
feasible depends upon many factors including, but limited to, available capital,
favorable legislation, and the continued popularity of mobile homes as a viable
housing alternative. Over the past five years, the mobile home finance industry
has experienced a relatively low default rate. In the event of default we
believe we are adequately protected by our loan to value ratio requirements. The
50% loan to value ratio allows the Company, in the event of default, to sell the
mobile home at a significant discount to value, thereby quickly converting the
mobile home into cash, and covering the loan amount and related expenses
including any ground rents which become due and the cost of repossession or
foreclosure. Since timely payment of rent is a term of all loans we do not
believe that the need to pay back-rent will pose any material financial problem.
-24-
<PAGE>
Marketing and Sales
We believe that we have identified a profitable niche in the financial
marketplace that allows us to provide highly collateralized loans with a
relatively low default rate while charging interest rates greater than the
current financial environment standards. In light of the average mobile home
loan being between $4,000 and $5,000, and that many mobile homes were built
prior to 1985, most traditional lending institutions have little or no interest
in servicing these clients. Further, due to the geographic concentration of
these mobile homeowners in mobile home parks, we can utilize direct marketing to
solicit potential business. This will also permit advertising to be targeted and
at lower cost than mass advertising alone. It is very important, in the context
of us being able to induce third parties to re-purchase loans that appropriate
checks be conducted.
Seventy (70%) of the current portfolio of loans acquired in the exchange
transaction with Mr. Sand do not have existing property damage insurance. We
intend to offer to finance the requisite loan premiums but presently cannot do
so without raising further capital. It is anticipated that the average loan will
be approximately $490 and financed at 30% over an eight-month period. Aside from
the need for capital, projected profit margins are critical for our financial
success. Within the mobile home market we believe that a realistic objective is
to develop an organization that maintains approximately a 20% net profit margin
and continues to develop new business services that are essential to business
operations as they may arise. We have current manpower sufficient to service 80
to 100 loans per month. Additional manpower, and therefore additional capital
necessary to attract and maintain such manpower, will be necessary to achieve
the Company's goals of consummating averages of 80 loans per month in the first
year of operations, 120 loans per month for the second, and 160 in the third
year.
Competition.
We must be able to compete with other more established financial and lending
institutitions who are better capitalized and more visible in the community. If
we cannot or if we are unable to respond to rapid financial market changes, we
may be unable to secure any type of market share in the mobile home loan market.
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our marketing efforts.
Our success will depend, in part, on our ability to enhance existing services,
develop new services that address the increasingly varied needs of prospective
customers, and respond to technological advances and emerging industry standards
and practices on a cost-effective and timely basis.
-25-
<PAGE>
We are gearing our operations with a view toward geographic growth by attracting
capital on a secured basis, increasing the sales, marketing and support staff,
and the addition of related services that are marketable along with our existing
service offerings. Such expansion programs will require substantial additional
funds which may make it very difficult for us to compete in the marketplace.
Management is not aware of any competing companies in the United States whose
sole business is the financing of mobile homes. One possible comparable company
is Greentree Financial Acceptance Corp. (Greentree), one of the larger consumer
loan companies servicing the manufactured home community. We believe, however,
that our business philosophy differs. Our concern is primarilywith resale value,
insurability and clear title. Greentree requires a good credit rating and
history. We believe a credit check is not imperative given the level of security
that we intend to obtain and our loan-to-value policies. We believe that
everyone meeting our criteria will be given a loan. Factors important to us are:
clear and unencumbered title; we hold title and are named first lienholder; the
mobile home must be located in a mobile home park; the borrower must be current
with their park rent or part of the proceeds of the loan necessary to bring the
rent current must be paid; and, adequate property damage insurance must be in
place naming us as loss payee.
Supervision and Regulation.
The consumer finance industry is heavily regulated and there are significant
debtor and creditor rights. Our success depends not only on competitive factors
but also on state and federal regulations affecting lenders and creditors. These
regulations are designed to protect debtors and not shareholders. Changes in the
regulation of the consumer credit industry continue to occur, and the ultimate
effect of these regulatory changes cannot be predicted. Except for the
foregoing, we do not anticipate unusual consequences to our business as a result
of governmental regulation, other than the fact that, like all other businesses,
we are forced to incur expenses and delays in complying with the many laws and
regulations applicable to all businesses in the United States.
Employees
Except for those officers and directors disclosed in Management, we have has no
other employees. Without additional capitalization we will not likely be in a
position to hire needed employees and the burden of business of the Company must
be borne by existing employees. In the interim, to the extent that
administrative or support services are required, we rely on staffing provided by
Funding USA, a company owned and controlled by Mark Sand. The part time
employees are provided as part of a sublease agreement effective August 1, 1999.
-26-
<PAGE>
Reports to the Security Holders.
After the effective date of this document, we will be subject to the reporting
requirements of the Exchange Act and will file reports and other information
with the Securities and Exchange Commission (the "Commission") In accordance
therewith , our annual report will contain audited financial statements. We are
not required to deliver an annual report to security holders and will not
voluntarily deliver a copy of the annual report to the security holders.
Such reports and other information filed by us will be available for inspection
and copying at the public reference facilities of the Commission, 450 Fifth
Street, N.W. Washington, D.C. 20549 at prescribed rates. Information on the
operation of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. In addition, the Commission maintains a World Wide website on
the Internet at http://sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.
ITEM 17. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AND PLAN OF OPERATION
Liquidity and Capital Resources
We were incorporated in June 1998 but did not commence operations until April
1999. During our first full quarter of operations we generated gross revenues of
$5,300 from our mobile home portfolio. We are currently investigating means to
expand our loan portfolio and develop other sources of revenues. We may be able
to secure additional financing through a private placement of our securities. We
may offer shares of our common stock. There can be no assurances that we will be
successful in securing this financing or that it can be obtained at a
commercially reasonable cost. If we are successful in securing additional
financing, we will use the proceeds thereof for operating expenses, working
capital and to register the corporate notes, stock or debt instruments. If we
are successful in obtaining secured debt financing, where the loans are
collateralized by the mobile homes, we anticipate that all monies received from
debt financing will be used to expand our loan portfolio and not for working
capital.
If we are successful in securing the additional financing, we intend to expand
our loan portfolio by making new loans and extending our geographical reach
beyond the south Florida geographical area. We also may offer insurance premium
financing on property damage for mobile homes. We intend to carefully control
our growth in order to minimize operating expenses and to utilize facilities and
equipment available from our stockholders at below market costs until such time
as income from operations provides a reliable flow of operating capital; and to
thereafter carefully monitor our growth so that expansion related expenses do
not result in operating losses. We also intend to use proceeds from the sale of
securities only for capital expenditures, principally involving the use of
capital for loans. Until such time as we have secured the additional financing
and our profitable, our officers will continue to defer their salaries. Based on
the foregoing, we believe that the Company will be able to sustain its current
operations until additional sources of financing are identified.
-27-
<PAGE>
Our operations began in April 1999 when Mr. Mark Sand exchanged a portfolio of
notes receivable in the amount of $86,640 to the Company which in turn has
generated interest and other fees of $5,300. We have also relied upon loans from
stockholders and subscriptions received for shares of common stock.
Our operating expenses for the year ended June 30, 1999, totaled $10,688, of
which $10,520 represented fees for professional services. These fees were
incurred primarily in connection with the filing of this Registration Statement
and we do not expect that ongoing professional fees will continue at their
current level. Nevertheless, because of our professional fees, we incurred a
loss of $7,428.
As of June 30, 1999, we had a total of $105,678 in total assets, which consisted
primarily of our loan portfolio totaling $81,602 less an allowance of $2,040 for
credit losses a mobile home with a value of $5,250, and cash and cash
equivalents totaling $4,620. Total current liabilities as of June 30, 1999 were
$8,336. We did not have any long- term debt. Our stockholders'equity was
$97,342.
We have recovered two mobile homes from borrowers as of June 30, 1999. . In one
transaction, as a result of a foreclosure we repossessed the mobile home and
sold the home prior to June 30, 1999. In the other, we took title in lieu of
foreclosure and subsequently disposed of the mobile home in August 1999.
YEAR 2000 CONCERNS
The Y2K compliance issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Computer programs
that have time sensitive software may recognize a date using "00" as the year
1900 rather than 2000. This could result in a systems failure or miscalculation
causing disruption of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. We currently do not own any computer systems nor are we
reliant on any key suppliers. We do however utilize the office equipment of
Funding USA, an entity controlled by our vice president and chief operating
officer, Mark Sand, from whom we sublease space. Any computer equipment
purchased in the future will be inspected to insure that the equipment is Y2K
compliant.
ITEM 18. DESCRIPTION OF PROPERTY
We own no real estate and subleases nominal space from Funding USA, a company
owned and controlled by Mark Sand. The Company pays a monthly rental of $715 and
the sublease is on a month-to-month basis effective August 1, 1999. The lease
also includes the use of office equipment.
ITEM 19. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a list of transactions which we have entered into since our
inception with either an officer, director, nominee for election as director, 5%
or more holders of our common stock, or member of the immediate family of any of
the foregoing individuals..
The valuation of the consideration exchanged was not based on objective
ascertainable criteria, such as comparison of the relative operations and net
worth of the entities involved, since at such time, we were a relatively
inactive private company without material earnings or assets, rather, they were
based on the quantity of common stock which management, at that time, was
willing to provide based on management's fiduciary obligations to the
stockholders; and, the willingness of then existing shareholders to suffer a
dilution in the book value of their investment in exchange for the potential
liquidity that would eventually be available as a result of owning equity in a
publicly traded corporation.
-28-
<PAGE>
Each of the officers and directors acquired their shares with the intent to hold
the shares for investment purposes, and not with a view to further resale or
distribution, except as permitted under exemptions from registration
requirements under applicable securities laws. That means that they may not sell
such securities unless they are either registered with the SEC and comparable
agencies in the states or other jurisdictions where the purchasers reside, or
they are transferred pursuant to applicable exemptions provided in Section 4 of
the Securities Act or rules promulgated by the SEC under authority of Sections 3
and 4 of the Securities Act. The most widely used exemption from registration
requirements is provided by SEC Rule 144, which requires a one year holding
period prior to resale, and limits the quantities of securities that can be sold
during floating 90 day periods. In addition to restrictions on resale, the
shareholders holding the restricted securities are subject to the short term
profit provisions of the Exchange Act, Section 16(b), which provides in
essential part that profits on securities transactions effected within six
months of an inverse transaction (that is, purchases and sales are inverse
transactions), whether or not involving specifically identifiable shares, must
be paid to the Company.
Each certificate has been issued with a restrictive legend required with respect
to issuance of securities pursuant to exemptions from registration requirements
under the Securities Act and each recipient acknowledged their understanding
that the shares were restricted from resale unless they were either registered
under Section 5 of the Securities Act and comparable state laws, or the
transaction was effected in compliance with available exemptions from such
registration requirements.
In April 1999, we issued 2,000,000 shares of our no par value common stock to
Mr. Mark Sand, a Vice President, Treasurer and Director of the Company in
exchange for a portfolio of secured third party consumer notes. The notes had a
face value of $86,640. In addition, we received a mobile home, which was part of
a foreclosure and a loan receivable from Mr. Sand. The agreed upon market value
of the notes, mobile home and loan receivable was $100,000, which latter value
was used in determining the number of shares to be exchanged. The exchange was
made in reliance upon a tax-free exchange for federal income tax purposes. The
exchange agreement may not be deemed to have been negotiated at arm's length.
In or about April 1999 we entered into a consulting agreement with AmeriNet to
provide advice and related services to aide us in becoming a reporting company
under the Exchange Act in exchange for the issuance of shares of our common
stock to AmeriNet, and in addition, an option to purchase shares of our common
stock to Yankee for providing strategic planning advice and to certain other
service providers acting under or pursuant to that agreement or as otherwise
stated in elsewhere in this Prospectus. We are required to issue in the name of
the AmeriNet shareholders an amount of shares equal to 10% of our common stock
outstanding immediately following such issuance, subject to anti-dilutive rights
and for a period of one year following the date of issuance or 431,111. We also
issued 25,000 shares each to Jeffrey G. Klein, Esq. and Lawrence Schechterman
for services rendered which shares are issued and outstanding. We are further
obligated, at our own cost and expense, to register all such shares except
12,500 shares of the total shares held each by Messrs. Klein and Schechterman.
Those shares are being registered hereby. The option given to Yankee is for that
number of shares of common stock equal to 5% of our outstanding or reserved
common stock immediately following complete exercise of the option, but not less
than 250,000 shares. The option is good for one year from and after August 1999,
at an agreed upon aggregate price of $10,000 pro rated by formula based on the
total number of shares then outstanding. These shares are not being registered
hereby, however, they do carry piggyback registration rights for any later
registered offering of our securities.
-29-
<PAGE>
Related Party Transactions
Except as described above we are not aware of any other related party
transactions.
ITEM 20. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Absence of Market for Common Stock
Neither our common stock nor any other securities issued by us have ever traded
on any recognized securities exchange, and our common stock is not currently
traded on the National Association of Securities Dealers Automated Quotation
System Over the Counter Bulletin Board("OTCBB"), in the National Quotations
Bureau Pink Sheets or on any other quote board. We hope to establish a market
for our shares. However, there can be no assurance that any recognized public
market will develop for our common stock. Holders of our common stock may not be
readily able to dispose of their interests in our common shares. Even if a
market develops for our shares, there can be no assurance as to the price that
our common shares will be traded.
ITEM 21. EXECUTIVE COMPENSATION
Remuneration of Executive Officers-Summary Compensation Table
The following table shows the contracted compensation of the President/Chief
Executive Officer, Vice President/Treasurer, and Secretary. We have no other
executive officers. To date, only nominal salaries have been paid to any
officers or directors. Kim N Naimoli , Janis Dorony and Mark Sand have
employment agreements each having an initial term of two years and commenced on
June 1, 1999, and renew themselves automatically unless notice is given by
either party on or before the 180th day prior to termination of the then current
term.
-30-
<PAGE>
Summary Compensation Schedule
<TABLE>
<S> <C> <C> <C> <C>
Annual
Compensation (1) Long Term Compensation
Number of
Securities
Name and Principal Underlying All Other
Positions Year Salary Options Compensation
--------- ---- ------ ------------ ------------
Kim A. Naimoli 1999 None Annual bonus based on
pre-tax profits (2)
Chairman, President
and Chief Executive
Officer
Mark Sand 1999 None Annual bonus based on
Vice President/ treasurer pre-tax profits (2)
Janis M. Dorony 1999 None Annual bonus based on
Secretary pre-tax profits (2)
Arthur Schnur 1999 None (3)
Director
Steven Naimoli 1999 None (3)
Director
-----------------------------------------
</TABLE>
(1) These amounts are agreed upon but no bonus or other annual compensation was
paid during the past fiscal year..
(2) Subject to our common stock having been actively and publicly traded on a
public market within the United States for a period of six months, an
annual bonus payable in shares of our common stock determined by dividing
3.84% of our , pre-tax profits for the then subject year by the average bid
price for our common stock during the last five trading days prior to the
end of the last day of each year and the initial five days of the new year.
In addition, Mr. Sand , Ms. .Naimoli, and Ms. Dorony are entitled to an
annual cash bonus equal to 3.84% of our, pre-tax profits for the then
subject year after the agreement has been in effect for at least six
months. Any compensation earned which is not taken as a result of cash flow
considerations is forever waived
(3) Each has been granted an option to purchase 50,000 shares of our common
stock at an exercise price of $.25 per share.
-31-
<PAGE>
Compensation Under Plans
Except as disclosed above or below, none of our executive officers have received
or became entitled to any cash or non-cash compensation under any Company plans
(as the term plan is defined in Instruction 3 to Item 402 of Regulation S-B
promulgated by the SEC) during the last calendar year, nor have we awarded any
stock options or other forms of indirect compensation.
Manner of Determining Executive Compensation
Whenever reasonably feasible, we have used compensation formulas in our
employment agreements with executive officers on a basis that rewards them for
success of the areas under their responsibilities through stock and cash
bonuses. However, recruitment of qualified personnel, in most instances,
requires that they be provided with a guaranteed base draw or salary. Specific
details of such compensation agreements are summarized above.
Arrangements with Directors
Other than as indicated above and below there are no arrangements or
understandings regarding compensation for services provided as a director,
including any additional amounts payable for committee participation or special
assignments.
We have understandings with each of our executive officers and directors
regarding duties to be performed and compensation to be received as an employee
of ours (because certain of our current directors are also executive officers,
all relevant disclosure concerning their compensation arrangements is discussed
above).
Key Employees
Our executive officers and directors above described are essential for our
operation and therefore constitute key employees.
Stock Option Plans
We have granted stock options to two of our directors as discussed under
Executive Compensation. We have no other stock option plan.
-32-
<PAGE>
ITEM 22. FINANCIAL STATEMENTS
Statements in this report that do not relate to present or historical conditions
are "forward looking statements" We may make future oral or written
forward-looking statements which also may be included in documents other than
this Report that are filed with the Commission. Forward-looking statements
involve risks and uncertainties that may differ materially from results.
Forward-looking statements in this Report and elsewhere may relate to our plans,
strategies, objectives, expectations, intentions and adequacy of resources.
ITEM 23. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Prior to retaining the independent accounting firm of Dohan and Company, CPAs,
we did not have an independent accounting firm. There are no disagreements on
any accounting issues with the accounting firm
PART III.
ITEM 24. INDEMNIFICATION
Our Articles of Incorporation limit, to the maximum extent permitted by the
Florida Statutes ("Florida Law"), the personal liability of directors of
monetary damages for breach of their fiduciary duties as directors, and provides
that we may indemnify our officers, directors, employees and other agents to the
fullest extent permitted by Florida law. Florida law provides that a corporation
may indemnify a director, officer, employee or agent made or threatened to be
made a party to an action by reason of the fact that he was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses actually and reasonably incurred in connection with
such action if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, if he had no reasonable cause to believe
his conduct was unlawful. Florida law does not permit a corporation to eliminate
a director's duty of care, and the provisions of the Company's Articles of
Incorporation have no effect on the availability of equitable remedies, such as
injunction or rescission, for a director's breach of the duty of care.
We may enter into indemnification agreements with our directors and officers
which may require us, among other things, to indemnify such directors and
officers against liabilities that may arise by reason of their status or service
as directors and officers against liabilities (other than liabilities arising
from willful misconduct of a culpable nature), to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified, and to obtain directors' and officers' insurance, if available on
reasonable terms.
-33-
<PAGE>
ITEM 25. Other Expenses of Issuance and Distribution
The following table is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in connection
with the issuance and distribution of the securities being offered hereby. Items
marked with an asterick (*) represent estimated expenses. We have agreed to pay
all costs and expenses of this offering. Selling security holders will incur no
expense.
Item Expense
SEC Registration Fee $ 278
Legal 15,000*
Accounting 500*
Miscellaneous 1,000*
---------------------------------------------------------
TOTAL....................................... $16,778*
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
During 1999, we issued 3,880,000 shares of our common stock in transactions more
particularly described below.
In April 1999 we issued 2,000,0000 shares of common stock to Mr. Mark Sand in an
exchange transaction whereby we acquired a portfolio of consumer notes. An
additional 1,200,000 shares were issued to our President, Kim M. Naimoli and
200,000 shares were issued to Janis M. Dorony, our Secretary.
-34-
<PAGE>
Also in May 1999, we entered into a consulting agreement with Amerinet
Group.com, Inc. [f/k/a Equity Growth Systems, Inc.] whose payment for services
rendered will be in our common stock in the amount of 431,111 shares, which
shares are being registered hereby and in accordance with the agreement between
the parties.
Also in May 1999 we issued options to purchase up to 50,000 shares each to
Messrs. Schnur and Naimoli.
We have also issued 480,000 shares of our common stock to various persons or
entities in consideration for services provided as more particularly described
below:
Name Date of Issuance Shares
Bell Enterprises April 1, 1999 180,000
Liberty Group April 1, 1999 200,000
Jeffrey G. Klein May 1, 1999 25,000
Lawrence Schechterman May 1, 1999 25,000
Roman Fischer April 1, 1999 50,000
All shares issued to date our restricted securities and bear appropriate
restrictive legends.
Additional Information
Subsequent to the effectiveness of this offering the Company will be subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and in accordance therewith intends to file
reports, proxy statements and other information with the Securities and Exchange
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, NW,
Room 1024, Washington, D. C. 20549; at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and at Seven World Trade Center, 13th
Floor, New York, New York 10048. In addition, the Company is required to file
electronic versions of these documents through the Securities and Exchange
Commissions' Electronic Data Gathering, Analysis and Retrieval System (EDGAR).
The Commission maintains a World Wide Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Securities and Exchange
Commission. Copies of such material may also be obtained at prescribed rates
from the Public Reference Section of the Securities and Exchange Commission at
Judiciary Plaza, 450 Fifth Street, NW, Room 1024, Washington, D. C. 20549.
-35-
<PAGE>
We have filed with the Securities and Exchange Commission a Registration
Statement on Form SB-2, as amended (the "Registration Statement"), under the
Securities Act with respect to the securities being registered by this
Prospectus. As permitted by the rules and regulations of the Securities and
Exchange Commission, this Prospectus does not contain all the information set
forth in the Registration Statement and the exhibits thereto. For further
information with respect to the Company and the registration of the securities,
reference is made to the Registration Statement and the exhibits thereto.
Statements contained in this Prospectus concerning the provisions of documents
filed with the Registration Statement as exhibits are necessarily summaries of
such documents, and each such statement is qualified in its entirety by
reference to the copy of the applicable document filed with the Securities and
Exchange Commission. The Registration Statement may be inspected without charge
at the Public Reference Section of the Securities and Exchange Commission at
Judiciary Plaza, 450 Fifth Street, NW, Room 1024, Washington, D. C. 20549, and
copies of all or any part thereof may be obtained from the Securities and
Exchange Commission at prescribed rates.
Transfer Agent and Registrar
Our transfer agent for our common stock is Florida Atlantic Stock Transfer,
Inc., whose address is 7130 Knob Hill Road, Tamarac, Florida 33321, telephone
number (954) 726-4954.
LEGAL MATTERS
The validity of the common stock registered hereby and certain other matters
will be passed on for the Company by Jeffrey G. Klein, Esq., 23123 State Road 7,
Suite 350-B, Boca Raton, Florida 33428. Mr. Klein will receive 50,000 shares of
the common stock of the Company in partial payment for his services, 25,000
shares of that will be issued to Lawrence Schechterman a service provider to Mr.
Klein.
-36-
<PAGE>
FUNDS AMERICA FINANCIAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
PAGE
FUNDS AMERICA FINANCIAL CORPORATION
Independent Auditor's Report 38
Balance Sheet As of June 30, 1999 39
Statement of Operations
For the year ended June 30, 1999 40
Statement of Cash Flows
For the year ended June 30, 1999 41
Statement of Stockholders' Equity
For the year ended June 30, 1999 42
Notes to Financial Statements
For the year ended June 30, 1999 43-49
Balance Sheet as of March 31, 2000 (Unaudited) 50
Statement of Operations For the nine and three month periods ended
March 31, 2000 and March 31, 1999 (Unaudited) 51
Statement of Stockholders' Equity As of March 31, 2000
(Unaudited) 52
Statement of Cash Flows
For the nine Months Ended March 31, 2000 and 1999 (unaudited) 53
Notes to Financial Statement 54
-37-
<PAGE>
Independent Auditor's Report
Stockholders and Board of Directors
Funds America Finance Corporation
Fort Lauderdale, Florida
We have audited the accompanying balance sheet of Funds America Finance
Corporation, as of June 30, 1999, and the related statements of operations, cash
flows, and stockholders' equity 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 Funds America Finance
Corporation at June 30, 1999, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
/s/ Dohan and Company, CPA's
August 12, 1999
Miami, Florida
-38-
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
BALANCE SHEET
June 30, 1999
--------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 4,620
Notes receivable secured by mobile homes,
less allowance for credit losses of $2,040 79,562
Mobile home held for resale 5,250
Loan receivable 300
Deferred offering costs 15,250
Organization costs, less accumulated amortization of $54 696
--------------------------------------------------------------------------------
TOTAL ASSETS $ 105,678
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accrued liabilities $ 7,250
Due to stockholder, on demand, non-interest bearing 1,086
--------------------------------------------------------------------------------
TOTAL LIABILITIES 8,336
================================================================================
COMMITMENTS AND CONTINGENCIES (NOTES 4, 6, and 7)
STOCKHOLDERS' EQUITY
Common stock, no par value, 25,000,000 shares authorized,
3,880,000 shares issued and outstanding 111,750
Accumulated deficit (7,428)
Stock subscription receivable (6,980)
--------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 97,342
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 105,678
================================================================================
See accompanying notes.
-39-
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1999
--------------------------------------------------------------------------------
INTEREST AND FEES ON LOANS
Interest income $ 5,300
Provision for credit losses (2,040)
--------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 3,260
--------------------------------------------------------------------------------
OPERATING EXPENSES
Amortization 54
General and administrative 114
Professional fees 10,520
--------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 10,688
--------------------------------------------------------------------------------
NET LOSS BEFORE INCOME TAX BENEFIT (7,428)
INCOME TAX BENEFIT -
--------------------------------------------------------------------------------
NET LOSS $ (7,428)
================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (BASIC AND DILUTED) 2,452,747
================================================================================
NET LOSS PER SHARE (BASIC AND DILUTED) $ (0.00)
================================================================================
See accompanying notes.
-40-
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
STATEMENT OF CASH FLOWS
For Year enedd June 30, 1999
--------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (7,428)
Adjustments to reconcile net loss to net
cash used by operating activities:
Amortization 54
Professional fees (paid by issuance of common stock) 4,750
Provision for loan losses 2,040
Changes in assets and liabilities:
Loan receivable (300)
Deferred offering costs (15,250)
Accrued liabilities 7,250
--------------------------------------------------------------------------------
NET CASH USED BY OPERATING ACTIVITIES (8,884)
--------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of notes receivable 5,528
--------------------------------------------------------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 5,528
--------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from stockholder 44,000
Repayment of advances from stockholder (35,294)
Receipt of subscription receivable 20
Organization costs (750)
--------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,976
--------------------------------------------------------------------------------
NET INCREASE IN CASH AND EQUIVALENTS 4,620
CASH AND CASH EQUIVALENTS-BEGINNING -
--------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS-ENDING $ 4,620
================================================================================
SUPPLEMENTAL DISCLOSURES
Interest and fees received $ 5,300
Interest paid $ -
Taxes paid $ -
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING TRANSACTIONS:
Common stock issued for purchase of mobile home held for resale $ 5,250
Common stock issued for investment in mobile home notes receivable $ 86,640
Common stock issued for loan receivable from stockholder $ 8,110
Common stock issued for subscription receivable $ 1,400
================================================================================
See accompanying notes
-41-
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
For the Year Ended June 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Stock
Common Stock Accumulated Subscription
Description Shares Amount Deficit Receivable Total
------------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock for mobile home
and notes receivable 2,000,000 $ 100,000 $ - $ - $ 100,000
Issuance of common stock for consulting services 430,000 4,500 - - 4,500
Issuance of common stock for subcription receivable 1,400,000 7,000 - (7,000) -
Payments on subcription receivable - - - 20 20
Issuance of common stock for legal services 50,000 250 - - 250
Net loss for the year ended June 30, 1999 - - (7,428) - (7,428)
------------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1999 3,880,000 $ 111,750 $ (7,428) $ (6,980) $ 97,342
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
-42-
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
------------------
Funds America Finance Corporation (the Company) is a Florida
corporation formed in June 1998, primarily to provide collateralized
consumer financing to mobile home owners in the South Florida area
initially, and throughout the state once sufficient funding is
attained. Other than the formation, there were no transactions in
June 1998. The first transactions occurred in April 1999.
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 disclosures of contingent assets and liabilities at
the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Notes Receivable
-----------------
Notes receivable that management has the intent and ability to hold
for the foreseeable future or until maturity or payoff are reported
at their outstanding unpaid principal balances reduced by any
chargeoff.
The Company calculates its provision for credit losses based on
changes in the present value of the expected future cash flows of
its loans discounted at the loan's effective interest rate in
accordance with Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards No. 114. Periodic
evaluation of the adequacy of the allowance is based on the
management's past loan loss experience, known and inherent risks in
the portfolio, adverse situations that may affect the borrower's
ability to repay, the estimated value of any underlying collateral
and current economic conditions.
Revenue Recognition
--------------------
Interest income is accrued monthly based on the terms of each note
using the interest (actuarial) method. Accrual of interest income on
notes receivable is suspended when a loan is contractually
delinquent for thirty-one days or more. The accrual is resumed when
the loan becomes contractually current at which time past-due
interest income is recognized.
Income Taxes
------------------
Income taxes are computed under the provisions of the Financial
Accounting Standards Board (FASB)Statement No. 109 (SFAS No. 109),
"Accounting for Income Taxes".
Property and Equipment
-----------------------
Property and equipment, consisting of furnishings and equipment will
be stated at cost, less accumulated depreciation. Depreciation will
begin when the assets are placed in service and will be computed
using the straight-line method over the estimated useful lives of
the assets, which are expected to range from five to ten years.
Organization costs
-------------------
Organization costs are amortized over fifteen years on a straight-
line basis
-43-
<PAGE>
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Advertising
---------------
Advertising costs will be expensed as incurred.
Concentrations of Credit Risk
-----------------------------
The Company offers no income / no credit check loans to mobile home
owners and extends credit based on the appraised fair market value
of the mobile home. The Company takes a first lien position on the
mobile home and requires that the mobile home be insured, with the
Company named as loss payee. Loan conditions also require that the
borrower must be current with the lot rent and remain so for the
term of the loan. Exposure to losses on receivables is principally
dependent on the value of the collateral in the event it is
repossessed. The Company monitors its exposure for credit losses and
maintains allowances for anticipated losses.
Deferred Offering Costs
------------------------
Deferred offering costs consist of legal and filing fees incurred in
the registration related to the public offering of the Company's
stock. These costs will be charged against stockholders' equity upon
completion of the registration.
Impairment of Long-Lived Assets
--------------------------------
The Company follows FASB Statement No. 121 (SFAS No. 121),
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". SFAS No. 121 requires that
impairment losses are to be recorded when long-lived assets to be
held and used are reviewed for impairment whenever events or changes
in circumstances indicate that the related carrying amount may not
be recoverable. When required, impairment losses on assets to be
held and used are recognized based on the estimated future cash
flows expected. Long-lived assets to be disposed of, if any, are
reported at the lower of carrying amount or fair value less cost to
sell. Following SFAS No. 121 did not result in a material impact on
the Company's financial position and results of operations.
Basic Net Loss Per Common Share
--------------------------------
The Company follows the provisions of FASB Statement No. 128
(SFAS No. 128), "Earnings Per Share". SFAS No. 128 requires
companies to present basic earnings per share (EPS) and diluted
EPS, instead of primary and fully diluted EPS presentations that
were formerly required by Accounting Principles Board Opinion No.
15, "Earnings Per Share". Basic EPS is computed by dividing net
income or loss by the weighted average number of common shares
outstanding during each year.
Cash and Cash Equivalents
---------------------------
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
------------------------------------
Cash, notes receivable, debt, accrued expenses and other liabilities
are carried at amounts which reasonably approximate their fair value
due to the short-term nature of these amounts or the relatively high
rates of interest charged on the notes receivable which are
consistent with current market rates for such debt.
-44-
<PAGE>
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Comprehensive Income
------------------------
In June 1997, the FASB issued Statement No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting and
display of comprehensive income and its components (revenue,
expenses, gains and losses) in a separate full set of
general-purpose financial statements. The provisions of this
statement were effective for fiscal years beginning after December
15, 1997. Management believes that the Company does not have items
of a material nature that would require presentation in a separate
statement of comprehensive income.
NOTE 2. NOTES RECEIVABLE SECURED BY MOBILE HOMES
Notes receivable secured by mobile homes consisted of thirty-two
consumer notes, collateralized by mobile homes. The notes provide
for repayment over terms ranging from twenty-four to eighty-four
months, with annual interest rates generally between 24% and 30%
(one is at 14%).
Principal payments pursuant to the terms of the notes, for the year
ended June 30, are as follows:
2000 $ 19,708
2001 19,344
2002 18,669
2003 13,068
2004 and thereafter 10,813
--------
81,602
Estimated allowance for credit losses (2,040)
--------
Notes receivable secured by mobile homes, net $79,562
========
NOTE 3. MOBILE HOME HELD FOR RESALE
The mobile home, acquired through repossession by the Company's
Vice-President before the portfolio acquisition and stock exchange,
is a 1972 Mercury, singlewide, with two bedrooms and bathrooms. The
cost of repossession was $1,750 and the cost basis was $3,500.
During August 1999, the mobile home was sold for $3,500, resulting
in a loss on the sale of $1,750.
NOTE 4. RELATED PARTY TRANSACTIONS
In March 1999, the Company and its Vice-President entered into a
transaction in which two million shares of the Company's common
stock, valued at $100,000, were issued in exchange for:
1. Loans receivable secured by mobile homes and a mobile home,
recorded at the historical cost of $86,640 and $5,250
respectively, and
2. A loan receivable from the Vice-President in the amount of
$8,110.
The Company is affiliated with various other entities through
common ownership and control with its Vice-President who is also
a shareholder. The Company neither owns nor leases any real or
personal property. The Vice-President, through his wholly owned
company, Funding U.S.A., provides office services, including
office supplies, telephone, and facilities without charge. Such
costs are immaterial to the financial statements and,
accordingly, have not been reflected herein.
Beginning August 1, 1999, the Company has agreed to pay a fee of
$500 monthly to Funding U.S.A. for general office facilities and
services.
-45-
<PAGE>
NOTE 4. RELATED PARTY TRANSACTIONS (Continued)
The officers and directors of the Company are involved in other
business activities and may, in the future, become involved in
other business opportunities. If a specific business opportunity
becomes available, such persons may face a conflict in selecting
between the Company and their other business interests. The Company
has not formulated a policy of the resolution of such conflicts.
The Board of Directors authorized the issuance of 1.4 million
restricted shares to the President and Secretary of the Company on
June 29, 1999. These shares were issued at a value of $.005 per
share. A stock subscription receivable of $7,000 was recorded at
the date of issuance.
In May 1999, the Company entered into an employment agreement with
its Vice-President and in June 1999, the Company entered into an
employment agreement with its President and Secretary to provide
executive services to the Company. The agreements provide for
annual compensation to each executive of both a cash bonus and a
bonus payable in shares. The bonus payable in shares of the
Company's common stock is determined by dividing 3.84% of the
Company's pre-tax profits for each calendar year by the average bid
price during the last five trading days prior to the end of the
last day of each year and the initial five days of the new year.
However, the agreement must be in effect for at least one half of
the subject year and the Company's common stock must be actively
trading on a public market. The cash bonus shall equal 3.84% of the
Company's pre-tax profits for each calendar year after the
agreement has been in effect for at least six months. The officers
are guaranteed minimum weekly draws against the bonus, in a sum
equal to 1/52 of the preceding year's bonus, but not less than
$500. If the Company has not generated pre-tax profits to make such
payments, the $500 payments will be waived.
NOTE 5. INCOME TAXES
At June 30, 1999, the Company had a net operating loss carryforward
of approximately $7,400. This loss may be carried forward to offset
federal income taxes in future years through the year 2019.
However, if subsequently there are ownership changes in the
Company, as defined in Section 382 of the Internal Revenue Code,
the Company's ability to utilize net operating losses available
before the ownership change may be restricted to a percentage of
the market value of the Company at the time of the ownership
change. Therefore, substantial net operating loss carryforwards
could, in all likelihood, be limited or eliminated in future years
due to a change in ownership as defined in the Code. The
utilization of the remaining carryforwards is dependent on the
Company's ability to generate sufficient taxable income during the
carryforward periods and no further significant changes in
ownership.
The Company computes deferred income taxes under the provisions of
FASB Statement No. 109 (SFAS 109), which requires the use of an
asset and liability method of accounting for income taxes. SFAS No.
109 provides for the recognition and measurement of deferred income
tax benefits based on the likelihood of their realization in future
years. A valuation allowance must be established to reduce deferred
income tax benefits if it is more likely than not that, a portion of
the deferred income tax benefits will not be realized. It is
Management's opinion that the entire deferred tax benefit resulting
from the net operating loss carryforward may not be recognized in
future years. Therefore, a valuation allowance equal to the deferred
tax benefit has been established, resulting in no deferred tax
benefits as of the balance sheet date.
-46-
<PAGE>
NOTE 6. GOING CONCERN AND MANAGEMENT'S PLANS
The financial statements have been prepared assuming that the
Company will continue as a going concern. Management's plans in
regard to these matters are as follows:
o Raise additional financing through a private placement of
securities, which is currently in the discussion and planning
stage, the proceeds of which will be used for operating expenses,
working capital, and to register corporate notes or other debt
instruments in order to raise the requisite capital for expansion
of the Company's services
o Expand the loan portfolio by making new loans and extend the
Company's geographical reach to include all of Florida
o Offer insurance premium financing on property damage insurance
for mobile homes (once the requisite licenses are obtained)
o The Company expects to operate without additional staffing prior
to completion of the private placement described above, and once
fully operational, no more than two additional staff are expected
to be added to process and service new loans
While there is no assurance that the Company will be able to
accomplish its plans, management believes that it has an acceptable
time frame. Since officers' compensation is deferred subject to
profitability, Management expects that the Company can subsist for
at least twelve months based on the cash flow derived from current
revenues, or until such time as its plan for expansion can be
implemented.
The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
-47-
<PAGE>
NOTE 7. COMMITMENTS AND CONTIGENCIES
Year 2000
------------
The year 2000 issue results from certain computer systems and
software applications that use only two digits (rather than four)
to define the applicable year. As a result, such systems and
applications may recognize a date of "00" as 1900 instead of the
intended year 2000, which could result in data miscalculations and
software failures. The Company does not own any computer systems as
of year-end and does not have any key suppliers. Thus, the Year
2000 issue is not expected to have a material impact on the
Company's financial position or results of operations.
Consulting Agreement
----------------------
In May 1999, the Company entered into a consulting agreement with
Amerinet Group.com, Inc. f/k/a Equity Growth Systems, Inc. (Equity)
to provide advice and services to aide the Company with
registration of its common stock with the Securities and Exchange
Commission. Pursuant to the agreement, the Company is required to
issue in the names of each of Amerinet's shareholders of record, as
of the close of business on June 17, 1999, an amount of shares
equal to 10% of the Company's common stock outstanding, immediately
following such issuance and registration, subject to anti-dilutive
rights for a period of twelve months following the original date of
issuance. The reasonable market value of the shares is the lesser
of $50,000 or 10% of the Company's stockholder equity. The shares
shall be issued on the 30th day following the date of this
agreement. As of June 30, 1999 these shares had not been issued and
services had not been rendered.
In August 1999, the Company entered into a consulting agreement
with The Yankee Companies, Inc. (Yankee) to provide strategic
planning advice. Pursuant to the agreement, the Company has granted
the consultant stock options to purchase up to 5% of the Company's
outstanding or reserved common stock, immediately following
complete exercise of such options. The exercise
NOTE 7. COMMITMENTS AND CONTIGENCIES (Continued)
price of the options, assuming they are all exercised, will be
$10,000. The number of shares purchasable would be 250,000 and the
exercise price would be $.04 per share, in the event that an
aggregate of 5,000,000 shares of capital stock are outstanding. If
the shares outstanding were 10,000,000, then the number of shares
purchasable would be 500,000 and the exercise price would be $.02
per share. These options are exercisable beginning 60 days after
the effective date of the agreement and shall end 365 days
following the effective date of the agreement.
-48-
<PAGE>
NOTE 8. COMMON STOCK
The Company issued 430,00 shares of common stock for consulting
services rendered by Bell Entertainment Inc. and Mr. Roman G.
Fisher in connection with the registration of securities. These
services and shares were valued at $4,500.
The Company issued 50,000 shares valued at $250 to for legal
services connected with the registration of securities.
NOTE 9. STOCK OPTIONS
The Company granted stock options to two Directors elected in May
1999, in return for services to the Company. At June 30, 1999,
there were outstanding options for 100,000 shares with an exercise
price of $.25 per share. These options expire in April 2004.
NOTE 10. SUBSEQUENT EVENT
The Company is in the process of registering certain shares of its
common stock with the Securities and Exchange Commission.
-49-
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
BALANCE SHEET - Unaudited
March 31, 2000
--------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 11,441
Notes receivable secured by mobile homes,
less allowance for credit losses of $2,109 47,106
Mobile homes held for resale 9,215
Due from stockholder 2,151
Loan receivable 300
Equipment, furniture & improvements, less
accumulated depreciation of $384 7,249
Deferred offering costs 15,250
Organization costs, less accumulated amortization of $166 584
------------
TOTAL ASSETS $ 93,296
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accrued liabilities $ 11,750
Deferred interest 4,075
----------
TOTAL LIABILITIES 15,825
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, no par value, 25,000,000 shares authorized,
3,880,000 shares issued and outstanding 111,750
Accumulated deficit (27,299)
Stock subscription receivable (6,980)
-----------
TOTAL STOCKHOLDERS' EQUITY 77,471
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 93,296
===========
See accompanying notes.
-50-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
FUNDS AMERICA FINANCE CORPORATION
STATEMENTS OF OPERATIONS - Unaudited
-----------------------------------------------------------------------
Nine Months Ended Three Months Ended
March March March March
31, 2000 31, 1999 31, 2000 31, 1999
------------ ------------- -------------- -------------
INTEREST AND FEES ON LOANS
Interest income $ 17,516 $ - $ 4,365 $ -
Provision for credit losses (2,109) - (500) -
------------- -------------- ------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 15,407 - 3,865 -
------------- -------------- ------------- -------------
OPERATING EXPENSES
Amortization and depreciation 496 - 229 -
General and administrative 16,338 60 7,070 60
Professional fees 18,680 5,770 4,000 5,770
------------- -------------- ------------- -------------
TOTAL OPERATING EXPENSES 35,514 5,830 11,299 5,830
------------- -------------- ------------- -------------
NET LOSS BEFORE OTHER INCOME (20,107) (5,830) (7,434) (5,830)
OTHER INCOME
Gain on sale of mobile home 236 - - -
------------- ---------------- ------------- --------------
TOTAL OPERATING EXPENSES 236 - - -
------------- ---------------- ------------- --------------
NET LOSS AFTER OTHER INCOME AND BEFORE INCOME TAX BENEFIT (19,871) (5,830) (7,434) (5,830)
INCOME TAX BENEFIT - - - -
------------- ---------------- ------------- --------------
NET LOSS $ (19,871) $ (5,830) $ (7,434) $ (5,830)
=============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (BASIC AND DILUTED) 2,452,747 - 2,452,747 -
============= =============== ============= ==============
NET LOSS PER SHARE (BASIC AND DILUTED) $ (0.01) $ - $ (0.00) $ -
============= =============== ============= ==============
</TABLE>
See accompanying notes.
-51-
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Stock
Common Stock Accumulated Subscription
Description Shares Amount Deficit Receivable Total
------------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock for mobile home and notes receivable 2,000,000 $ 100,000 $ - $ - $ 100,000
Issuance of common stock for consulting services 430,000 4,500 - - 4,500
Issuance of common stock for subscription receivable 1,400,000 7,000 - (7,000) -
Payments on subscription receivable - - - 20 20
Issuance of common stock for legal services 50,000 250 - - 250
Net loss for the year ended June 30, 1999 - - (7,428) - (7,428)
---------------- ------------ ----------- --------- ------
Balance, June 30, 1999 - Audited 3,880,000 111,750 (7,428) (6,980) 97,342
Net loss for the six months ended March 31, 2000 - Unaudited - - (19,871) - (19,871)
---------------- ------------ ----------- ---------- ------
Balance, March 31, 2000 - Unaudited 3,880,000 $ 111,750 $ (27,299) $ (6,980) $ 77,471
================ =========== =========== ========= =======
</TABLE>
-52-
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
STATEMENTS OF CASH FLOWS - Unaudited
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
------------------- ------------------
Nine Months Nine Months
Ended Ended
March March
31, 2000 31, 1999
------------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (19,871) $ (5,830)
Adjustments to reconcile net loss to net
cash used by operating activities:
Amortization and depreciation 496 -
Professional fees (paid by issuance of common stock) - 4,750
Provision for loan losses 69 -
Gain on sale of mobile home (236) -
Changes in assets and liabilities:
Accrued liabilities 4,500 -
Deferred interest 4,075 -
----------------- ----------------
NET CASH USED BY OPERATING ACTIVITIES (10,967) (1,080)
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of notes receivable 32,387 -
Investment in mobile home for resale (10,349) -
Purchases of fixed assets (7,633) -
Proceeds from sale of mobile home 6,620 -
------------------- ---------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 21,025 -
------------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances to stockholder (2,151) (6,095)
Advances from stockholder - 8,120
Repayment of advances from stockholder (1,086) -
Organization costs - (750)
Receipt of stock subscription receivable - 20
------------------- ---------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (3,237) 1,295
------------------- ---------------
NET DECREASE IN CASH AND EQUIVALENTS 6,821 215
CASH AND CASH EQUIVALENTS - BEGINNING 4,620 -
------------------- ---------------
CASH AND CASH EQUIVALENTS - ENDING $ 11,441 $ 215
================== ===============
SUPPLEMENTAL DISCLOSURES:
Interest and fees received $ 17,516 $ 4,365
Interest paid $ - $ -
Taxes paid $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING TRANSACTIONS:
Common stock issued for purchase of mobile home held for resale $ - $ 5,250
Common stock issued for investment in mobile home notes receivable$ - $86,640
Common stock issued for loan receivable from stockholder $ - $ 8,110
Common stock issued for subscription receivable $ - $ 1,400
================ ===============
</TABLE>
-53-
See accompanying notes.
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and 1999
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information, the instructions to Form 10-QSB and item 310 (b) of Regulation SB.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included. For
further information, refer to the financial statements and footnotes included in
the Company's Form 10-KSB for the year ended June 30, 1999 as filed with the
Securities and Exchange Commission.
NOTE B - LOSS PER SHARE
Basic and diluted net loss per share was computed based on the weighted average
number of shares of common stock outstanding during the periods.
ITEM 28. UNDERTAKINGS
Funds America Finance Corporation will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to
Rule 424(b), if, in the aggregate, the changes in the volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
-54-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
REGISTRANT:
FUNDS AMERICA FINANCE CORPORATION
DATE: October 11, 2000 BY: /s/ Kim A. Naimoli
KIM A. NAIMOLI, President
EXHIBITS
INDEX TO EXHIBITS
Designation Page
of Exhibit Number
as Set Forth or Source of
in Item 601 of Incorporation
Regulation S-B By Reference Description
(2) Articles of Incorporation:
2.1 (1) Articles of Incorporation,
dated June 30, 1998
2.2 56 Amendment to Articles of
Incorporation, dated April 14, 1999.
(3) By-Laws:
3.1 (1) Bylaws
(4) Instruments defining the rights of
Holders, including debentures:
4.1 Specimen Common Stock Certificate
(5) Opinion re: legality:
5.1 * Form of Opinion re: legality
(10) Material Contracts:
10.1 (1) Employment agreement between the
Company and Mark Sand
10.2 (1) Employment agreement between the
Company and Kim Naimoli
10.3 (1) Employment agreement between the
Company and Janis Dorony
10.4 (1) Consulting agreement between the
Company and Equity Growth Systems
10.5 (1) Consulting agreement between the
Company and Liberty Group
10.6 61 Consulting agreement between the
Company and Yankee
(11) Statements Regarding Computation of
Per Share Earnings
(23) Consent of experts and counsel:
23.2 78 Consent of Jeffrey G. Klein, Esq.
23.3 79 Consent of Dohan and Company, CPA's
(27) 80 Financial Data Schedule.
--------
* To be filed by amendment
(1) Filed as an exhibit to the Registrant's Registration Statement on Form
SB-2 filed October 18, 1999, bearing the exhibit designation number shown
above; incorporated by reference herein as permitted by Commission Rule
12b-23.
-55-
