SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Event Requiring Report: March 22, 2000
AMERI-FIRST FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Nevada 000-28453 84-0849132
(State of Incorporation) (Commission (IRS Employer
File Number) Identification #)
4514 Cole Avenue, Suite 806, Dallas, Texas 75205
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(Address of Principal Executive Offices)
214-599-9050
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(Registrant's telephone number, including area code)
Itronics Communications Corporation.
16910 Dallas Parkway, Ste. 100, Dallas, Texas 75248
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(Registrant's Former Name and Address)
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
On March 22, 2000, a change in control of the Registrant occurred in
conjunction with closing under an Agreement and Plan of Reorganization (the
"Reorganization Agreement") between the Registrant and Ameri-First Financial
Group, Inc., a Nevada corporation.
The closing under the Reorganization Agreement consisted of a stock for
stock exchange in which the Registrant acquired all of the issued and
outstanding common stock of AFFG in exchange for the issuance of 9,386,116
shares of its common stock. As a result of this transaction, the Registrant
became a wholly-owned subsidiary of the Company.
The Reorganization was approved by the unanimous consent of the Board of
Directors of Ameri-First Financial Group on March 20, 2000. The Reorganization
is intended to qualify as a reorganization within the meaning of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
<PAGE>
Prior to the Agreement, Ameri-First Financial Group had 9,386,116 shares
of common stock issued and outstanding. Following the Agreement, Registrant had
9,436,116 shares of common stock outstanding. Ameri-First Financial Group,
formerly known as Tahoe Pacific Corporation and Pacific Holdings, Inc., was
incorporated in the State of Nevada on September 27, 1996.
Upon effectiveness of the Reorganization Agreement, pursuant to Rule
12g-3(a) of the General Rules and Regulations of the Securities and Exchange
Commission, Ameri-First Financial Group became the successor issuer to Itronics
Communications Corporation, Inc. for reporting purposes under the Securities
Exchange Act of 1934 and elects to report under the Act effective March 22,
2000.
A copy of the Agreement is filed as an exhibit to this Form 8-K and is
incorporated in its entirety herein. The foregoing description is modified by
such reference.
(b) The following table contains information regarding the shareholdings
of the Company's current directors and executive officers and those persons or
entities who beneficially own more than 5% of the Company's common stock:
NAME AMOUNT OF COMMON STOCK PERCENT OF
BENEFICIALLY OWNED (1) COMMON STOCK
Hess Capital, L.L.C. 2,900,000 30.73%
c/o Ameri-First Financial Group, Inc.
4514 Cole Avenue, Suite 806
Dallas, TX 75205
Jeffrey C. Bruteyn 500,000 5.30%
4514 Cole Avenue, Suite 806
Dallas, TX 75205
James N. Chatham II 100,000 1.06%
4514 Cole Avenue, Suite 806
Dallas, TX 75205
James M. Leath 100,000 1.06%
4514 Cole Avenue, Suite 806
Dallas, TX 75205
Dennis W. Bowden 900,000 9.54%
4514 Cole Avenue, Suite 806
Dallas, TX 75205
All Directors and Executive Officers
as a group (4 persons) 1,600,000 16.96%
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(1) Based upon 9,436,116 outstanding shares of common stock.
COMPANY'S BUSINESS AND SUBSIDIARIES
Ameri-First Financial Group, Inc. (OTCBB: "AMFR"), is collectively involved
in diversified financial services through its subsidiary, Ameri-First Financial
Corp. ("AFFC"), an investment banking firm, and its subsidiary, Ameri-First
Securities, a full-service NASD Broker/Dealer.
<PAGE>
(A) History
Background. On September 27, 1996, Ameri-First Financial Group, Inc.'s
predecessor company incorporated under the laws of Nevada under the name of
U-Bake Pizza, Inc. On March 20, 1998, U-Bake Pizza, Inc. changed its name to
Oregon Outerwear, Inc. On March 18, 1998, Oregon Outerwear, Inc. changed its
name to Pacific Sports Holdings, Inc.
On March 30, 1998 Pacific Sports Holdings, Inc. acquired 100% of SouthBay
Golf, Inc, in a tax-free reorganization and exchange of common shares of Pacific
Sports Holdings, Inc. SouthBay Golf, Inc., a Nevada corporation, was
incorporated on March 11, 1998. On March 31, 1998, Pacific Sports Holdings, Inc.
acquired Mardock, Inc., a sportswear, corporate logo and promotional accessories
business. Due to Mardock's consistent history of losses, Mardock, Inc. was sold
back to Mardock's founder on April 30, 1999. Pacific Sports Holdings, Inc.
acquired 70% of Outback Apparel Group, Inc. on May 12, 1998 and an additional
15% ownership on August 14, 1998. Outback Apparel Group, Inc., a Nevada
corporation, incorporated on May 12, 1998.
SouthBay Golf, Inc. arranged for the manufacturing, and designed and sold
golf clubs, golf bags and head covers under the exclusive worldwide license for
the Head Golf brand name, and on a non-exclusive basis hats, towels, gloves,
umbrellas and other accessories. The Company operated this business under a
trademark licensing agreement with Head Sport AG dated April 1, 1998.
Outback Apparel Group, Inc. arranged for the manufacturing, and designed
and sold swimwear, active wear and T-shirts under the exclusive North America
license for the Spank brand name. The Company operated this business under a
trademark licensing agreement with Spank Sport International of Australia dated
May 31, 1998.
Results from the golf and swimwear subsidiaries were disappointing, and, in
March 1999, Pacific Sports Holdings, Inc. discontinued operations.
On May 3, 1999, the Company entered into an agreement whereby it would
exchange 5,500,000 (Notes 1,100,000 post-split) of its common shares for Series
A Preferred Shares of Tahoe Air Corp., convertible into 50.0001% of the then
issued and outstanding shares of Common Stock of the airline.
On August 26, 1999, the Company changed its name to Tahoe Pacific
Corporation and on August 27, 1999 authorized a reverse stock split of 1 for 5.
Tahoe Air Corp., a Nevada corporation, was formed in 1996 to operate a new
scheduled airline to select West Coast cities from the South Lake Tahoe,
California airport. On June 25, 1999 Tahoe Air Corp. began providing daily jet
service from South Lake Tahoe (TVL) to Los Angeles (LAX) and San Jose (SJC). The
airline was unable to demonstrate sufficient demand for its service, and on
November 22, 1999 suspended flight operations.
<PAGE>
In anticipation of acquiring certain assets of Ameri-First Financial
Corporation on January 10, 2000, the Company changed its name to Ameri-First
Financial Group, Inc. On February 7, 2000, the Company acquired Ameri-First
Financial Corporation for 4,500,000 shares of its Common Stock issued to Hess
Capital, LLC, the beneficial owner of Ameri-First Financial Corp..
(B) Business of the Issuer
Ameri-First's future lies in the investment in Ameri-First Financial
Corporation and its wholly owned subsidiary Ameri-First Securities Corporation.
Ameri-First Securities is a member of the National Association of Securities
Dealers, Inc., and engages in the investment banking and securities brokerage
business.
Organization Chart
Set forth below is an organization chart of the Company and its significant
subsidiaries and affiliates as of the date of this registration statement.
Ameri-First First Financial Group, Inc.
Ameri-First Financial Corporation
Ameri-First Securities Corporation
Competition
The securities business is highly competitive. The securities subsidiary
competes with other securities firms. Certain of these competitors have
substantially greater financial, technical and operating resources than the
securities subsidiary. The securities subsidiary's ability to compete
successfully in its principal markets is dependent upon a number of factors,
many of which (including market and competitive conditions) are outside its
control.
Regulation
Securities companies are subject to supervision and regulation in the
states in which they transact business. Such supervision and regulation relates
to numerous aspects of a securities company's business and financial condition.
The primary purpose of such supervision and regulation is the protection of
investors. The extent of such regulation varies, but generally derives from
state statutes that delegate regulatory, supervisory and administrative
authority to state securities departments. Accordingly, the authority of the
state securities departments includes the establishment of standards of solvency
and fair dealings that must be met and maintained by broker-dealers, including
licensing requirements.
In addition to state regulation, the Securities and Exchange Commission
("SEC") and National Association of Securities Dealers, Inc. also extensively
regulate the business activities of the securities firm.
<PAGE>
Employees
Currently, the Company and its subsidiaries have a total of 14 employees,
all of which are located in Dallas, Texas. None of the employees are represented
by a labor union. The Company considers its employee relations to be good.
See "RISK FACTORS".
PROPERTY
The Company maintains offices at 4514 Cole Avenue, Suite 806, Dallas,
Texas, 75205; and the space, approximately 3,649 square feet, is leased.
DESCRIPTION OF SECURITIES
The Company has an authorized capitalization of 100,000,000 shares of
common stock .001 par value per share. Prior to the execution of this Agreement,
the Company had 9,386,116 shares of common stock issued and outstanding. The
Company's post-merger issued and outstanding shares is 9,436,116.
MARKET FOR Ameri-First Financial Group's SECURITIES
Ameri-First Financial Group, Inc. is a non-reporting publicly traded
company with certain of its securities exempt from registration under the
Securities Act of 1933, as amended, pursuant to Regulation D, Rule 504 of the
General Rules and Regulations of the Securities and Exchange Commission.
Ameri-First Financial Group's common stock is presently traded on the NASD OTC
Bulletin Board under the symbol "AMFR." The NASDAQ Stock Market has implemented
a change in its rules requiring all companies trading securities on the NASD OTC
Bulletin Board to become reporting companies under the Securities Exchange Act
of 1934.
The Company was required to become a reporting company by the close of
business on March 23, 2000. Ameri-First Financial Group, Inc. acquired 100% the
outstanding shares of Itronics Communication Corporation to become successor
issuer to it pursuant to Rule 12g-3 in order to comply with the reporting
company requirements implemented by the NASDAQ Stock Market.
MANAGEMENT
Name Age Title
---- --- -----
Jeffrey C. Bruteyn 29 President/CEO
James N. Chatham II 33 Vice President/Secretary
James Leath 68 Director
Dennis W. Bowden 46 Director
<PAGE>
Jeffrey C. Bruteyn. Received a BBA in finance from Baylor University in
1989. From 1991 to 1993, Mr. Bruteyn was a Senior Vice President for Investment
Capital Resources, Inc. From 1993 to 1994, Mr. Bruteyn was a Senior Financial
Advisor for American Express Financial Advisors. From 1994 to 1997, Mr. Bruteyn
was an Investment Banker for First London Securities Corporation where he worked
as a director in the Mergers and Acquisitions Department. He was also a Senior
trader at First London Securities prior to in 1997, becoming the Financial
Director for Ameri-First Acceptance Corporation. At Ameri-First, Mr. Bruteyn was
responsible for all in-house funding activities. In 1998, Mr. Bruteyn became
president of Ameri-First Securities Corporation before becoming CEO of
Ameri-First Financial Group, Inc.
James N. Chatham II. Mr. Chatham graduated from Lamar University with a
B.A. in History and a minor in Economics. From there, Mr. Chatham completed a
degree in French and French History from the Universite de Strasbourg, France.
Upon return from France, Mr. Chatham attended the University of Houston Law
School. After law school, Mr. Chatham joined an investment group that developed
a broadcasting property in College Station, Texas. The station was sold to a Fox
Television Group prior to Mr. Chatham's tenure with Fox. Mr. Chatham became head
of marketing and development for Fox Television in Central Texas. Mr. Chatham
left Fox to become Vice President of Suncreek Media, Inc. There, he was in
charge of marketing and international distridution for the company's television
products. Upon leaving Suncreek, he became Director of Public Relations for
Ameri-First Acceptance Corp. In 1998, Mr. Chatham became Vice President of
Ameri-First Securities Corporation until assuming the Vice Presidency of
Ameri-First Financial Group, Inc.
James M. Leath. For more than a decade, Marvin Leath served in the U.S.
House of Representatives representing the 11th Congressional District of Texas.
Congressman Leath was a member of the House Budget Committee, and Chairman of
that panel's Subcommittee on Foreign Affairs and Defense. He also sat as a
senior member of the House Armed Services Committee, with a seat on four of its
principal subcommittees. In addition, he served as a member of the House
Committee on Public Works, with jurisdiction over federal transportation and
infrastructure programs to local and state governments. During his service in
the House, the congressman also developed strong relationships with the
Republican and Democratic leadership in the House before retiring voluntarily in
1991 to start his own government relations consulting business. Prior to
entering Congress, Mr. Leath was president and owner of four rural banks in
central Texas. In 1976, he chartered and opened Central National Bank in Waco,
Texas, and served as Chairman and CEO of that establishment until he resigned in
1977 to campaign for the 11th District House seat.
Dennis W. Bowden. Mr. Bowden received a B.S. degree from the University of
North Texas. From 1980 to 1981 he was Vice President of Astro Wing Airlines.
From 1981 to 1990, Mr. Bowden was President of Independent Financing. From 1990
to 1995, he was President of American Eagle Acceptance Corp. In 1995, Mr. Bowden
started at Acceptance.
<PAGE>
EXECUTIVE COMPENSATION
At this time, no one is receiving any salary or other remuneration from the
Company.
TERM OF OFFICE FOR DIRECTORS
All directors of the Company hold office for four years or until their
successors are elected and qualified. Currently, there are four directors of the
Company. The by-laws permit the Board of Director to fill any vacancy and such
director may serve until the next annual meeting of shareholders or until his
successor is elected and qualified. Officers serve at the discretion of the
Board of Directors.
RISK FACTORS
AMERI-FIRST FINANCIAL GROUP IS CURRENTLY OPERATING AT A LOSS. If losses
continue, Ameri-First Financial Group may need to raise additional capital
through the placement of its securities or from debt or equity financing. If the
Company is not able to secure such financing or obtain alternative sources of
funding, management may be required to curtail operations. There is no assurance
that the Company will be able to continue to operate if additional sales of its
securities cannot be generated or other sources of financing located.
COMPETITION FROM LARGER AND MORE ESTABLISHED COMPANIES MAY HAMPER
MARKETABILITY.
At the present time, Ameri-First Financial Group is operating in a
competitive industry. There are a variety of financial services companies
available in the marketplace.
There are numerous financial services companies in all of the areas where
we intend to operate and will operate in the future.
ISSUANCE OF FUTURE SHARES MAY DILUTE INVESTORS' SHARE VALUE.
The Company's Articles of Incorporation, as amended, of Ameri-First
Financial Group authorizes the issuance of 100,000,000 shares of common stock.
The future issuance of all or part of the remaining authorized common stock may
result in substantial dilution in the percentage of the Company's common stock
held by its then existing shareholders. Moreover, any common stock issued in the
future may be valued on an arbitrary basis by Ameri-First Financial Group. The
issuance of the Company's shares for future services or acquisitions or other
corporate actions may have the effect of diluting the value of the shares held
by investors, and might have an adverse effect on any trading market, should a
trading market develop for the Company's common stock.
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Not Applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
Successor Issuer Election.
Pursuant to Rule 12g-3(a) of the General Rules and Regulations of the
Securities and Exchange Commission, and upon effectiveness of the Agreement, the
Company became the successor issuer to Itronics Communications Corporation, Inc.
for reporting purposes under the Securities Exchange Act of 1934 and elects to
report under the Act effective March 22, 2000.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
Pursuant to the terms of the aforementioned Agreement, the Registrant has
accepted the resignation of Kevin Halter and Kevin Halter, Sr, as the
Registrant's Director and Officer as of March 22, 2000, and appointed Jeffrey C.
Bruteyn as President and Director of the Registrant.
ITEM 7. FINANCIAL STATEMENTS
Financial statements for Itronics Communications , Inc. are filed herewith.
The Registrant is required to file consolidated financial statements by
amendment hereto not later than 60 days after the date that this Current Report
on Form 8-K must be filed.
ITEM 8. CHANGE IN FISCAL YEAR
Ameri-First Financial Group has a December 31 fiscal year end. The fiscal
year of Visual is December 31. The Company will file a Transitional Report on
Form 10-QSB, if required.
EXHIBITS
2.1 Agreement and Plan of Reorganization between Itronics Communications
Corporation and Ameri-First Financial Group, Inc. as
dated March 22, 2000.
*3.1 Articles of Incorporation of Ameri-First Financial Group.
*3.2 By-Laws of Ameri-First Financial Group, Inc.
*24.1 Consent of accountants
27.1 Financial Data Schedule for Itronics Communications Corporation.
99.1 Financials for Itronics Communications, Inc.
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*To be filed by amendment
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
By /s/ Jeffrey C. Bruteyn
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Jeffrey C. Bruteyn
President
Date: March 22, 2000
EXHIBITS
2.1 Agreement and Plan of Reorganization between Itronics Communications
Corporation and Ameri-First Financial Group, Inc. as dated March 22,
2000.
*3.1 Articles of Incorporation of Ameri-First Financial Group.
*3.2 By-Laws of Ameri-First Financial Group, Inc.
*24.1 Consent of accountants
27.2 Financial Data Schedule for Itronics Communications Corporation.
99.1 Financials for Itronics Communications Corporation
99.2 Financials for Ameri-First Financial Group, Inc.
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*To be filed by amendment
AGREEMENT AND PLAN OF REORGANIZATION
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AGREEMENT AND PLAN OF REORGANIZATION, dated March 22nd, 2000, between
Ameri-First Financial Group, Incorporated ("AFFG") a Nevada corporation and
Itronics Communications Corporation(Itronics), a Delaware corporation.
PLAN OF REORGANIZATION
----------------------
The reorganization will comprise in general, the acquisition of Itronics by
AFFG pursuant to an I.R.S. qualified tax free exchange whereupon Itronics shall
become a wholly owned subsidiary of Ameri-First Financial Group, all subject to
the terms and conditions of the agreement hereinafter set forth. For purposes of
this Agreement, the terms "shares", "stock" and/or "common capital stock" shall
be interchangeable.
AGREEMENT
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In order to consummate the foregoing Plan of Reorganization, and in
consideration of the premises and of the representations and undertakings herein
set forth, the parties agree as follows:
1. Transfer of shares. Upon and subject to the terms and conditions herein
stated, AFFG shall acquire from Itonics shareholders, whose signatures appear
below, whom shall transfer, assign, and convey to AFFG all of the issued and
outstanding shares of Itronic's common stock to AFFG in exchange for the sum of
$100,000.00 together with 50,000 shares of AFFG common capital stock. By virtue
of the transaction, AFFG shall acquire Itronics as a going concern, including
all of the properties and assets of Itronics of every kind, nature, and
description, tangible and intangible, wherever situated, including, without
limiting the generality of the foregoing, its business as a going concern, its
goodwill, and the corporate name (subject to changes referred to or permitted
herein or occurring in the ordinary course of business prior to the time of
closing provided herein). Upon, and immediately subsequent to, the
aforementioned acquisition, AFFG will merge into its wholly-owned subsidiary
(Itronics) under the general corporation law of the state of Nevada Corporations
Code.
2. Issuance and delivery of stock. In consideration of and in exchange for
the foregoing transfer, assignment, and conveyance, and subject to compliance by
AFFG and Itronics with their warranties and undertakings contained herein, AFFG
shall issue and deliver to Itronics the amount of $100,000.00 together with one
or more stock certificates registered in the name of the undersigned
shareholders of Itronics, on a pro-rata basis totaling 50,000 in exchange for
9,386,116 shares of Itronics Common stock constituting 100% of the issued and
outstanding shares of Itonics including warrants, options, or claims regarding
any other shares of Itronics. All of the shares exchanged shall, upon such
issuance and delivery, shall be fully paid and non-assessable.
3. Investment intent. 3.1 Each Itronics Shareholder ("Subscriber")
understands and acknowledges that the AFFG Shares being acquired hereunder have
not been registered under the Securities Act of 1933 (the "Act") or applicable
state securities laws; (ii) the Subscriber cannot sell such Stock unless such
securities are registered under the Act and any applicable state securities laws
or unless exemptions from such registration requirements are available; (iii) a
legend will be placed on any certificate or certificates evidencing the Stock,
stating that such securities have not been registered under the Act and setting
forth or referring to the restrictions on transferability and sales of the
securities.
3.2 Such Subscriber (i) is acquiring the Shares solely for the
Subscriber's own account for investment purposes only and not with a view
toward resale or distribution, either in whole or in part; (ii) has no
contract, undertaking, agreement or other arrangement, in existence or
contemplated, to sell, pledge, assign or otherwise transfer the Shares to
any other person; (iii) agrees not to sell or otherwise transfer the
Subscriber's Shares unless and until such securities are subsequently
registered under the Act and any applicable state securities laws or unless
an exemption from any such registration is available.
3.3 Such Subscriber understands that an investment in the Shares
involvessubstantial risks and Subscriber recognizes and understands the
risks relating to this transaction and acquisition of the AFFG shares.
3.4 Such Subscriber has, either alone or together with the
Subscriber's Purchaser Representative (as that term is defined in
Regulation D under the Act), such knowledge and experience in financial and
business matters that the Subscriber is capable of evaluating the merits
and risks of the acquisition by AFFG.
<PAGE>
4. Dissenting shares: None. Itronics represents and warrants that there are
no dissenting shareholders with respect to the proposed merger or acquisition.
5. Place of closing. The closing of this agreement and all deliveries
hereunder shall take place via electronic closing by fax or e-mail.
6. Time of closing. The closing shall be 3:00 PM, Eastern Standard time (or
such other time as may be mutually agreed upon) on the closing date which shall
be March 21, 2000, unless extended by mutual agreement of the parties. The last
date fixed by mutual agreement of the parties or otherwise becoming effective
under this paragraph shall constitute the closing date.
7. Representations and warranties of Ameri-First Financial Group. AFFG and
its shareholders represent and warrant to Itronics that:
(a) Corporate status. AFFG is a corporation duly organized and existing
under the laws of the State of Nevada, intending to re-domicile in
Delaware, with an authorized capital stock consisting of 100,000,000 Common
shares, of which 9,436,116 shares are currently issued and outstanding;
AFFG has one subsidiary.
<PAGE>
(b) Lawsuits and claims. AFFG is not a party to or threatened by any
litigation, proceeding, or controversy before any court or administrative
agency which might result in any change in the business or properties of
AFFG or which change would be substantially adverse taking into account the
entire business and properties of AFFG; AFFG is not in default with respect
to any judgment, order, writ, injunction, decree, rule, or regulation of
any court or administrative agency.
(d) Taxes. Ameri-First Financial Group has filed with the appropriate
governmental agencies all tax returns required by such agencies to be filed
by it and is not in default with respect to any such filing. AFFG has paid
all taxes claimed to be due by state and local taxing authorities and has
not been examined by representatives of the United States Internal Revenue
Service for federal taxes since inception.
8. Representations and warranties of Itronics. Itronics represents and
warrants to AFFG that:
(a) Corporate status. Itronics is a Delaware corporation duly organized and
existing under the laws of the State of Delaware, with an authorized
capital stock consisting of 100,000,000 shares of common stock, .00001 par
value, of which One Million (1,000,000) shares have been duly issued and
are outstanding fully paid and non-assessable; and no shares of preferred
stock, or any other form of stock or security, of which no shares are
issued or outstanding. Visual has no subsidiary.
(b) Corporate authority. Itronics and its shareholders have the corporate
right and authority to acquire and operate the properties and business now
owned and operated by it and to issue and deliver the number of shares of
its Common stock required to be issued hereunder to AFFG.
(c) Disposition of assets. Since December 31, 1999, there has been no
material adverse change in the assets or liabilities or in the condition,
financial or other, of Itronics except changes occurring in the ordinary
course of business and changes referred to or permitted herein.
(d) Lawsuits and claims. Itronics is not a party to or threatened by any
litigation, proceeding, or controversy before any court or administrative
agency which might result in any change in the business or properties of
Itonics or which change would be substantially adverse, taking into account
the entire business and properties of Itonics.
(e) Taxes. Itonics has filed with the appropriate governmental agencies all
tax returns required by such agencies to be filed by it and is not in
default with respect to any such filing. Itronics has paid all taxes
claimed to be due by state and local taxing authorities and has not been
examined by representatives of the United States Internal Revenue Service
for federal taxes during the past three fiscal years.
9. Interim conduct of business by Itronics. Until the time of closing,
Itronics will conduct its business in the ordinary and usual course, and prior
to the time of closing it will not, without the written consent of AFFG, borrow
any money, incur any liability other than in the ordinary and usual course of
business or in connection with the performance or consummation of this
agreement, encumber or permit to be encumbered any of its properties and assets,
dispose or contract to dispose of any property except in the regular and
ordinary course of business, enter into any lease or contract for the purchase
of real estate, form or cause to be formed any subsidiary, pay any bonus or
special remuneration to any officer or employee, declare or pay any dividends,
make any other distributions to its shareholders, or issue, sell, or purchase
any stock, notes, or other securities.
10. Access to information. From the date hereof each party shall allow the
other free access to its files and audits, including any and all information
relating to taxes, commitments, and contracts, real estate and personal property
titles, and financial condition. From the date hereof each party agrees to cause
its auditors to cooperate with the other in making available all financial
information requested, including the right to examine all working papers
pertaining to audits made by such auditors.
<PAGE>
11. Conditions and obligations of AFFG. Unless at the time of closing the
following conditions are satisfied, Ad Pads shall not be obligated to make the
transfer, assignment and conveyance as set forth in Paragraph1 herein, and
otherwise to effectuate its part of the reorganization herein provided:
(a) The representations and warranties of Itronics set forth herein, are,
on the date hereof and as of the time of closing, substantially correct.
(b) The directors of Itronics have approved the consummation of this
agreement and the matters herein provided.
(c) No litigation or proceeding is threatened or pending for the purpose of
with the probably effect of enjoining or preventing the consummation of
this agreement or which would materially affect Itronics operation or its
assets.
(d) Itronics has complied with its agreements herein to be performed by it
prior to the time of closing.
12. Conditions of obligations of Itronics. Unless at the time of closing
the following conditions are satisfied, Itronics shall not be obligated to issue
and deliver the shares of its Common stock as set forth in Paragraph 1 herein,
and otherwise to effectuate its part of the reorganization herein provided:
(a) The representations and warranties of AFFG set forth in Paragraph 9
are, on the date hereof and as of the time of closing, substantially
correct subject to any change made because of any action approved by
Itronics.
(b) The directors of AFFG have approved and the holders of all of the
outstanding shares of AFFG have voted in favor of the consummation of this
agreement and the matters herein provided.
(c) No litigation or proceeding is threatened or pending for the purpose or
with the probable effect of enjoining or preventing the consummation of
this agreement or which would materially affect AFFG or the operation of
the properties and business to be acquired by it hereunder.
(d) AFFG has complied with its agreements herein to be performed by it
prior to the time of closing, including payment of the $100,000.00 to the
undersigned shareholders and agreement to deliver 50,000 common capital
shares of Ameri-First Financial Group, Incorporated.
13. Abandonment of agreement. If by reason of the provisions of Paragraphs
11 or 12 above either party is not obligated to effectuate the reorganization,
then either party which is not so obligated may terminate and abandon this
agreement by delivering to the other party written notice of termination prior
to the time of closing, and thereupon this agreement shall be terminated without
further obligation or liability upon either party in favor of the other.
14. Authorization by shareholders. Itronics and AFFG shall promptly take
such action as may be necessary to call special meetings of their respective
shareholders to authorize the consummation of this agreement and the matters
herein provided, and each will recommend to its shareholders that this agreement
and the matters herein provided, and all other matters necessary or incident
thereto, be approved, authorized, and consummated.
<PAGE>
15. Listing of AFFG stock issued to Itronics. AFFG shall not be required to
prepare and file a registration statement under the Securities Act of 1933
covering the shares of Common stock to be delivered hereunder; however, it shall
prepare an 8-K filing providing the requisite information on the acquisition.
16. Brokers' fees. Neither party has incurred nor will incur any liability
for brokerage fees or agents' commissions in connection with the transactions
contemplated hereby.
17. Execution of documents. At any time and from time to time after the
time of closing, AFFG will execute and deliver to Itronics and Itronics will
execute and deliver to AFFG such further conveyances, assignments, and other
written assurances as Itronics or AFFG shall reasonably request in order to vest
and confirm Itronics' shareholders and AFFG, respectively, title to the shares
and/or assets to be and intended to be transferred, assigned, and conveyed
hereunder.
18. Parties in interest. Nothing herein expressed or implied is intended or
shall be construed to confer upon or to give any person, firm, or corporation
other than the parties hereto any rights or remedies under or by reason hereof.
19. Completeness of agreement. This agreement contains the entire
understanding between the parties hereto with respect to the transactions
contemplated hereby.
20. Survival of Representations and Warranties. Each of the parties hereto
hereby agrees that all representations and warranties made by or on behalf of
him or it in this Agreement or in any document or instrument delivered pursuant
hereto shall survive for a period of three (3) years following the Closing Date
and the consummation of the transactions contemplated hereby, except with
respect to the representation and warranties set forth in Sections 4 which shall
survive applicable statute of limitations period.
IN WITNESS HEREOF, the Parties hereto have hereunder set their hands and seals,
effective on the date above stated, as witnessed below:
Ameri-First Financial Group, Inc.
A Nevada corporation
By:______________________________
Jeffrey C. Bruteyn, President
Itronics Communications, INC.
A Delaware corporation
By:_____________________________.
Kevin B. Halter, President
HALTER CAPITAL CORPORATION
By:_________________________________.
Kevin B. Halter, Shareholder
No. of Shares Owned: Fifty Thousand (50,000)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 1100778
<NAME> Itronics Communications Corporation
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 94
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 94
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 94
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 93
<TOTAL-LIABILITY-AND-EQUITY> 94
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
ITRONICS COMMUNICATIONS
CORPORATION
(a wholly-owned subsidiary of
Halter Capital Corporation)
Financial Statements
and
Auditor's Report
June 30, 1999 and
December 31, 1998 and 1997
S. W. HATFIELD, CPA
certified public accountants
Use our past to assist your future sm
<PAGE>
ITRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
CONTENTS
Page
----
Report of Independent Certified Public Accountants F-3
Financial Statements
Balance Sheets as of June 30, 1999, December 31, 1998 and 1997 F-4
Statements of Operations and Comprehensive Income
for the six months ended June 30, 1999 and
for the years ended December 31, 1998 and 1997 F-5
Statement of Changes in Stockholder's Equity
for the six months ended June 30, 1999 and
for the years ended December 31, 1998 and 1997 F-6
Statements of Cash Flows
for the six months ended June 30, 1999 and
for the years ended December 31, 1998 and 1997 F-7
Notes to Financial Statements F-8
F-2
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors and Stockholders
Itronics Communications Corporation
We have audited the accompanying balance sheets of Itronics Communications
Corporation (a Delaware corporation and a wholly-owned subsidiary of Halter
Capital Corporation) as of June 30, 1999, December 31, 1998 and 1997 and the
related statements of operations and comprehensive income, changes in
stockholders' equity and cash flows for the six months ended June 30, 1999 and
for each of the years ended December 31, 1998 and 1997, respectively. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Itronics Communications
Corporation as of June 30, 1999, December 31, 1998 and 1997, and the results of
its operations and its cash flows for the six months ended June 30, 1999 and
each of the years ended December 31, 1998 and 1997, respectively, in conformity
with generally accepted accounting principles.
S. W. HATFIELD, CPA
Dallas, Texas
September 14, 1999
Use our past to assist your future sm
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-3
<PAGE>
<TABLE>
<CAPTION>
ITRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
BALANCE SHEETS
June 30, 1999, December 31, 1998 and 1997
June 30, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
------
Current Assets
Cash on hand and in bank $ -- $ 94 $ 274
Advances to parent company 94 -- --
------------ ------------ ------------
Total Assets $ 94 $ 94 $ 274
============ ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Liabilities $ -- $ -- $ --
------------ ------------ ------------
Commitments and Contingencies
Stockholder's Equity
Preferred stock - $0.00001 par value
5,000,000 shares authorized; none
issued and outstanding -- -- --
Common stock - $0.00001 par value
10,000,000 shares authorized
100,000 issued and outstanding 1 1 1
Additional paid-in capital 999 999 999
Accumulated deficit (966) (966) (726)
------------ ------------ ------------
Total stockholders' equity 94 94 274
------------ ------------ ------------
Total Liabilities and Stockholder's Equity $ 94 $ 94 $ 274
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ITRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Six months ended June 30, 1999 and
Years ended December 31, 1998 and 1997
Six months Year Year
ended ended ended
June 30, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
Revenues $ -- $ -- $ --
------------ ------------ ------------
Expenses
General and administrative expenses -- 180 460
------------ ------------ ------------
Net Loss -- (180) (460)
Other Comprehensive Income -- -- --
------------ ------------ ------------
Comprehensive Income $ -- $ (180) $ (460)
============ ============ ============
Net loss per weighted-average
share of common stock
outstanding, calculated on
Net Loss - basic and fully diluted nil nil nil
=== === ===
Weighted-average number of shares
of common stock outstanding 100,000 100,000 100,000
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
ITRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
Six months ended June 30, 1999 and
Years ended December 31, 1998 and 1997
Common Stock Additional
----------------- paid-in Accumulated
Shares Amount capital deficit Total
------- ------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1997 100,000 $ 1 $ 999 $ (266) $ 734
Net loss for the year -- -- -- (460) (460)
------- ------- ---------- ----------- -------
Balances at December 31, 1997 100,000 1 999 (726) 274
Net loss for the year -- -- -- (180) (180)
------- ------- ---------- ----------- -------
Balances at December 31, 1998 100,000 1 999 (906) 94
Net loss for the period -- -- -- -- --
------- ------- ---------- ----------- -------
Balances at June 30, 1999 100,000 $ 1 $ 999 $ (906) $ 94
======= ======= ========== =========== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
ITRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
STATEMENTS OF CASH FLOWS
Six months ended June 30, 1999 and
Years ended December 31, 1998 and 1997
Six months Year Year
ended ended ended
June 30, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net loss for the period $ -- $ (180) $ (460)
Adjustments to reconcile net loss to
net cash provided by operating activities -- -- --
------------ ------------ ------------
Net cash used in operating activities -- (180) (460)
------------ ------------ ------------
Cash Flows from Investing Activities -- -- --
------------ ------------ ------------
Cash Flows from Financing Activities
Cash advanced to parent (94) -- --
------------ ------------ ------------
Net cash used in financing activities (94) -- --
------------ ------------ ------------
Decrease in Cash (94) (180) (460)
Cash at beginning of period 94 274 734
------------ ------------ ------------
Cash at end of period $ -- $ 94 $ 274
============ ============ ============
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period $ -- $ -- $ --
============ ============ ============
Income taxes paid for the period $ -- $ -- $ --
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
ITRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
NOTES TO FINANCIAL STATEMENTS
NOTE A - Organization and Description of Business
Itronics Communications Corporation (Company) was incorporated on August 22,
1995 under the laws of the State of Delaware as a wholly-owned subsidiary of
Halter Capital Corporation.
The Company has never had any operations or assets since inception. The current
business purpose of the Company is to seek out and obtain a merger, acquisition
or outright sale transaction whereby the Company's stockholders will benefit.
The Company is not engaged in any negotiations and has not undertaken any steps
to initiate the search for a merger or acquisition candidate.
The Company is fully dependent upon its current management and/or significant
stockholders to provide sufficient working capital to preserve the integrity of
the corporate entity during this phase. It is the intent of management and
significant stockholders to provide sufficient working capital necessary to
support and preserve the integrity of the corporate entity.
The Company has a year end of December 31 and follows the accrual method of
accounting.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Income taxes
------------
The Company provides deferred income taxes, where material, based on the
asset and liability method under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". At December
31, 1998 and 1997, respectively, the deferred tax asset and deferred tax
liability accounts, consisting solely of temporary differences in
accumulated depreciation, were not material to the financial statements and
no valuation allowance was provided against deferred tax assets.
The Company files its income tax returns as a component of its parent
company's consolidated tax return. Accordingly, all net operating losses
are offset against the tax liabilities of the Company's parent. No net
operating loss carryforwards exist as of December 31, 1998 and 1997,
respectively.
F-8
<PAGE>
ITRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B - Summary of Significant Accounting Policies - Continued
3. Loss per share
--------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of June 30, 1999, December 31, 1998 and
1997, the Company has no warrants and/or options issued and outstanding.
NOTE C - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
NOTE D - Related Party Transactions
As of June 30, 1999, the Company had advanced funds totaling approximately $94
to Halter Capital Corporation, the Company's parent. The advances are due upon
demand and are non-interest bearing.
F-9
<PAGE>
ITRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
BALANCE SHEETS
September 30, 1999 and 1998
(Unaudited)
1999 1998
----- -----
ASSETS
------
Current Assets
Cash on hand and in bank $ -- $ 94
Advances to parent company 94 --
----- -----
Total Assets $ 94 $ 94
===== =====
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Liabilities $ -- $ --
----- -----
Commitments and Contingencies
Stockholder's Equity
Preferred stock - $0.00001 par value
5,000,000 shares authorized; none
issued and outstanding -- --
Common stock - $0.00001 par value
10,000,000 shares authorized
100,000 issued and outstanding 1 1
Additional paid-in capital 999 999
Accumulated deficit (966) (966)
----- -----
Total stockholders' equity 94 94
----- -----
Total Liabilities and Stockholder's Equity $ 94 $ 94
===== =====
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
<TABLE>
<CAPTION>
ITRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Nine and Three months ended September 30, 1999 and 1998
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ --
------------- ------------- ------------- -------------
Expenses
General and administrative expenses -- 180 -- --
------------- ------------- ------------- -------------
Net Loss -- (180) -- --
Other Comprehensive Income -- -- -- --
------------- ------------- ------------- -------------
Comprehensive Income $ -- $ (180) $ -- $ --
============= ============= ============= =============
Net loss per weighted-average
share of common stock
outstanding, calculated on
Net Loss - basic and fully diluted nil nil nil nil
=== === === ===
Weighted-average number of shares
of common stock outstanding 100,000 100,000 100,000 100,000
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
ITRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1999 and 1998
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
1999 1998
------------- -------------
Cash Flows from Operating Activities
Net loss for the period $ -- $ (180)
Adjustments to reconcile net loss to
net cash provided by operating activities -- --
------------- -------------
Net cash used in operating activities -- (180)
------------- -------------
Cash Flows from Investing Activities -- --
------------- -------------
Cash Flows from Financing Activities
Cash advanced to parent (94) --
------------- -------------
Net cash used in financing activities (94) --
------------- -------------
Decrease in Cash (94) (180)
Cash at beginning of period 94 274
------------- -------------
Cash at end of period $ -- $ 94
============= =============
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period $ -- $ --
============= =============
Income taxes paid for the period $ -- $ --
============= =============
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
ITRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
NOTES TO FINANCIAL STATEMENTS
NOTE A - Organization and Description of Business
Itronics Communications Corporation (Company) was incorporated on August 22,
1995 under the laws of the State of Delaware as a wholly-owned subsidiary of
Halter Capital Corporation.
The Company has never had any operations or assets since inception. The current
business purpose of the Company is to seek out and obtain a merger, acquisition
or outright sale transaction whereby the Company's stockholders will benefit.
The Company is not engaged in any negotiations and has not undertaken any steps
to initiate the search for a merger or acquisition candidate.
The Company is fully dependent upon its current management and/or significant
stockholders to provide sufficient working capital to preserve the integrity of
the corporate entity during this phase. It is the intent of management and
significant stockholders to provide sufficient working capital necessary to
support and preserve the integrity of the corporate entity.
The Company has a year end of December 31 and follows the accrual method of
accounting.
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements contained elsewhere in this document.
The information presented herein does not include all disclosures required by
generally accepted accounting principles and the users of financial information
provided for interim periods should refer to the annual financial information
and footnotes contained in its annual audited financial statements contained
elsewhere in this document when reviewing the interim financial results
presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 1999.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-13
<PAGE>
ITRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Income taxes
------------
The Company provides deferred income taxes, where material, based on the
asset and liability method under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". At September
31, 1999 and 1998, respectively, the deferred tax asset and deferred tax
liability accounts, consisting solely of temporary differences in
accumulated depreciation, were not material to the financial statements and
no valuation allowance was provided against deferred tax assets.
The Company files its income tax returns as a component of its parent
company's consolidated tax return. Accordingly, all net operating losses
are offset against the tax liabilities of the Company's parent. No net
operating loss carryforwards exist as of September 30, 1999 and 1998,
respectively.
3. Loss per share
--------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of September 30, 1999 and 1998, the
Company has no warrants and/or options issued and outstanding.
NOTE C - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
NOTE D - Related Party Transactions
As of September 30, 1999, the Company had advanced funds totaling approximately
$94 to Halter Capital Corporation, the Company's parent. The advances are due
upon demand and are non-interest bearing.
F-14
<PAGE>
PART F/S
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
FINANCIAL STATEMENTS
TABLE OF CONTENTS
Independent Auditors' Report................................................F-1
Consolidated Balance Sheet for the Years Ended
June 30, 1999 and 1998.....................................................F-3
Consolidated Statement of Operations for the Years
Ended June 30, 1999 and 1998...............................................F-4
Consolidated Statement of Shareholders' Equity for
the Years Ended June 30, 1999 and 1998.....................................F-5
Consolidated Statement of Cash Flows for the Years
Ended June 30, 1999 and 1998...............................................F-6
Supplemental Disclosure of Noncash Activities...............................F-7
Notes to Consolidated Financial Statements
June 30, 1999 and 1998.....................................................F-8
Consolidated Balance Sheet for December 31, 1999
and June 30, 1999..........................................................F-14
Consolidated Statement of Operations for the Six Months
Ended December 31, 1999 and the Twelve Months Ended June 30, 1999..........F-15
Consolidated Statement of Shareholders' Equity for the
Six Months Ended December 31, 1999 and the
Twelve Months Ended June 30, 1999..........................................F-16
Consolidated Statement of Cash Flows for the Six Months
Ended December 31, 1999 and the Twelve Months Ended June 30, 1999..........F-17
<PAGE>
Charles E. Smith
Certified Public Accountant
709 B West Rusk, Suite 580
Rockwall, Texas 75087
Telephone (214) 212-2307
To the Board of Directors and Stockholders
of Ameri-First Financial Group, Inc.
I have audited the accompanying consolidated balance sheet of Ameri-First
Financial Group, Inc. (a Nevada corporation) and subsidiaries as of June 30,
1999, and the related consolidated statements of income, retained earnings, and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. My responsibility is to express
an opinion on these consolidated financial statements based on my audit. The
consolidated financial statements of Ameri-First Financial Group, Inc. (formerly
Pacific Sports Holdings, Inc.) as of June 30, 1998 were audited by other
auditors whose report dated September 11, 1998, expressed an unqualified opinion
on those statements.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated 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. I believe my audit provides a reasonable basis for my
opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ameri-First
Financial Group, Inc. and subsidiaries as of June 30, 1999, and the results of
their operations and cash flows for the year then ended in conformity with
generally accepted accounting principles.
Charles E. Smith
Rockwall, Texas
February 9, 2000
F-1
<PAGE>
Charles E. Smith
Certified Public Accountant
709 B West Rusk, Suite 580
Rockwall, Texas 75087
Telephone (214) 212-2307
February 9, 2000
Mr. Jeffrey C. Bruteyn
Ameri-First Financial Group, Inc.
4514 Cole Ave., Suite 806
Dallas, Texas 75205
Dear Mr. Bruteyn:
This letter shall serve to evidence my consent to inclusion of the
consolidated financial statements of Ameri-First Financial Group, Inc. and
subsidiaries as of June 30, 1999 in the Form 10-SB filing of your company.
Please advise me if I may be of any further service in this respect
Yours Truly,
/s/ Charles E. Smith
--------------------
Charles E. Smith
F-2
<PAGE>
<TABLE>
<CAPTION>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Consolidated Balance Sheet
June 30, 1999 and 1998
Assets
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Current assets:
Cash $ 629 $ 37,049
Trade accounts receivable, less allowances for bad debt and returns 104,648
Inventories 165,199
Prepaid expenses and other current assets 105,638 275,750
Other current receivables 600
------------- -------------
Total current assets 106,867 582,646
Property and equipment 155,207
Investments 1,500
Excess of cost over net assets acquired, less accumulated amortization 76,531
------------- -------------
$ 108,367 $ 814,384
============= =============
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of debt payable to shareholder $ 1,255,000 $ 17,653
Current installments of capital lease commitment 2,041 4,606
Accounts payable 244,945 91,399
Accrued expenses 162,528 28,688
------------- -------------
Total current liabilities 1,664,514 142,346
Capital lease commitment, excluding current maturities 2,018
Long-term notes payable to shareholders, excluding current maturities 518,440
------------- -------------
Total liabilities 1,664,514 662,804
------------- -------------
Shareholders' equity:
Common Stock, $0.001 par value. Authorized 25,000,000; issued and
outstanding 4,166,414 and 2,520,900 at June 30, 1999 and 1998 4,166 2,521
Paid-in capital 6,818,751 467,856
Accumulated deficit (8,379,064) (318,797)
------------- -------------
Net shareholders' equity (1,556,147) 151,580
Commitments and contingencies (see notes) $ 108,367 $ 814,384
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Consolidated Statement of Operations
Years Ended June 30, 1999 and 1998
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Net sales $ 87,683 $ 230,853
Cost of sales 598,378 124,528
------------- -------------
Gross profit (510,695) 106,325
Operating expenses:
Selling 22,338
General and administrative expenses 2,991,795 239,078
------------- -------------
2,991,795 261,416
------------- -------------
Loss from operations (3,502,490) (155,091)
Other expenses:
Other 18,768 (103,689)
Loss on repossessed assets and sale of business (762,479)
Loss on writeoff of investments (3,685,955)
Interest, net (128,126) (11,486)
------------- -------------
(4,557,792) (115,175)
------------- -------------
Loss before minority interest (8,060,282) (270,266)
Minority interest (15) (30)
------------- -------------
Net loss $ (8,060,267) $ (270,236)
============= =============
Net loss per share - basic and diluted $ (2.76) $ (0.13)
============= =============
Weighted average shares - basic and diluted 2,923,855 2,091,375
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Consolidated Statement of Shareholders' Equity
Years Ended June 30, 1999 and 1998
Common stock Additional Net
------------------------- paid-in Accumulated shareholders'
Shares Amount capital deficit equity
---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1997 802,800 $ 803 $ 51,565 $ 20,417 $ (31,951)
Shares issued for cash 58,100 58 145,192 145,250
Shares issued for acquisition of:
Mardock 60,000 60 240 300
South Bay Golf 1,600,000 1,600 6,400 8,000
Capital contributions 264,459 264,459
Distribution to shareholders (16,610) (16,610)
Net loss (270,236) (270,236)
---------- ---------- ---------- ----------- ------------
Balance at June 30, 1998 2,520,900 $ 2,521 $ 467,856 $ (266,429) $ 99,212
Shares issued for barter credit
for advertising 80,000 80 999,920 1,000,000
Shares issued to buy minority
15% of Outback Sports 60,000 60 240 300
Shares issued to buy majority
50.01% of Tahoe Air Corp. 1,100,000 1,100 3,653,900 3,655,000
Shares issued for services 274,698 275 820,001 820,276
Shares issued for cash 130,816 130 850,171 850,301
Less offering costs (128,539) (128,539)
Capital contributions 155,202 155,202
Net loss (8,060,267) (8,060,267)
---------- ---------- ---------- ----------- ------------
Balance at June 30, 1999 4,166,414 $ 4,166 $6,818,751 $(8,326,696) $ (1,608,515)
========== ========== ========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Consolidated Statement of Cash Flows
Years Ended June 30, 1999 and 1998
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (8,060,267) $ (270,236)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 13,435
Non-cash expenses 343,592
Stock issued for expenses 1,700,575
Writeoff of investments paid for with stock 3,654,500
(Increase) decrease in assets:
Accounts receivable 104,648 19,312
Other receivables (600)
Inventory 165,199 (92,603)
Prepaid expenses and other current assets 170,111 (258,681)
Increase (decrease) in liabilities:
Accounts payable 153,546 19,082
Accrued expenses 133,840 (15,885)
------------- -------------
Net cash used in operating activities (1,634,856) (585,576)
Cash flows used in investing activities:
Proceeds from disposal of property and equipment (3,716)
Cash paid for acquisition of assets (189,623)
------------- -------------
Net cash used in investing activities 0 (193,339)
Cash flows from financing activities:
Proceeds from borrowings on notes payable 718,907 440,000
Payment on notes payable (2,228)
Proceeds from issuance of stock 721,762 145,250
Distribution to shareholders (16,610)
Principal payments under capital lease obligations 2,565 (14,503)
Capital contributions 155,202 243,320
------------- -------------
Net cash provided by financing activities 1,598,436 795,229
------------- -------------
Net increase in cash $ (36,420) $ 16,314
Cash at beginning of period 37,049 20,735
------------- -------------
Cash at end of period $ 629 $ 37,049
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Consolidated Statement of Cash Flows
Years Ended June 30, 1999 and 1998
Supplemental Disclosure of Noncash Activities
Supplemental disclosure of noncash financing activities:
In the year ended June 30, 1998:
Common stock valued at $8,000 was issued for receivables of $100 Common
stock valued at $300 was issued as part of a purchase acquisition
A related party note payable of $21,139 was converted to equity and
recorded as additional paid-in capital
In the year ended June 30, 1999:
Common stock valued at $3,655,000 was issued for 50.01% of Tahoe Air Corp.
Common stock valued at $300 was issued as part of a purchase acquisition
Supplemental disclosure of cash flow information:
1999 1998
--------- ---------
Cash paid during the year for:
Interest 0 1,656
Income taxes 0 2,700
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(1) Summary of Significant Accounting Policies and Practices
(a) General
-------
Ameri-First Financial Group, Inc. and subsidiaries (the "Company") is
engaged in investment banking. Prior to that business, the Company was engaged
through its subsidiary, Southbay Golf, in the design, marketing and sales of
golf equipment under the exclusive worldwide license for the Head Golf brand
name, and on a non-exclusive basis for golf accessories. It also formerly
through its subsidiary, Outback, marketed and distributed sportswear, swimwear
and accessories under the Spank brand name. Through a subsidiary, Mardock, which
was disposed of in early 1999, the Company marketed items including caps, mugs,
hats, pens, bags and other items corporations use for their promotional needs.
(b) Basis of Presentation
---------------------
On March 20, 1998, by amendment to U-Bake's Articles of Incorporation,
U-Bake changed its name to Oregon Outerwear, Inc.
On May 18, 1998, by amendment to Oregon Outerwear, Inc.'s Articles of
Incorporation, Oregon Outerwear, Inc. changed its name to Pacific Sports
Holdings, Inc.
On August 25, 1999, by amendment to Pacific Sports Holdings, Inc.'s
Articles of Incorporation, Pacific Sports Holdings, Inc. changed its name to
Tahoe Pacific Corporation.
On January 5, 2000, by amendment to Tahoe Pacific Corporation's Articles of
Incorporation, Tahoe Pacific Corporation changed its name to Ameri-First
Financial Group, Inc.
On August 25, 1999, by amendment to Pacific Sports Holdings, Inc.'s
Articles of Incorporation, the Company approved a one for five reverse stock
split. These consolidated financial statements have been presented to reflect
the reverse stock split as if it had been effected on June 30, 1997.
(C) Principles of Consolidation
---------------------------
The consolidated financial statements include the financial statements of
Ameri-First Financial Group, Inc. and its related subsidiaries. All significant
intercompany balances have been eliminated in consolidation.
(d) Cash Equivalents
----------------
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
(e) Revenue Recognition
-------------------
Revenue is recognized upon shipment of product. Allowances for estimated
returns and discounts are provided when the related revenue is recorded.
F-8
<PAGE>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(f) Inventories
-----------
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
(g) Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation of plant and
equipment is calculated on the straight-line method over the estimated useful
lives of the assets.
(h) Income Taxes
------------
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(i) Income (loss) per Share
-----------------------
Basic net income (loss) per share is based on the weighted average number
of actual shares outstanding during the period. Options to purchase common stock
are included in the calculation of income (loss) per share provided their impact
is not dilutive. As of June 30, 1999 and 1998, no stock option plan was in
place, and therefore, no stock options or other common stock equivalent
instruments have been issued.
(j) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
-----------------------------------------------------------------------
The Company accounts for long-lived assets under the Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." This statement requires
that long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount an asset to
future net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value, less costs to sell.
(k) Product Design and Development Costs
------------------------------------
The Company charges all product design and development costs to expense
when incurred. Product design and development costs aggregated approximately
$18,668 for the year ended June 30, 1998. In the year ended June 30, 1999, the
lines requiring design and development were dropped.
F-9
<PAGE>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(l) New Accounting Standards
------------------------
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" (SFAS 130), and Statement No. 131,
"Disclosure about Segments of an Enterprise and Related Information" (SFAS 131).
SFAS 130 establishes new standards for reporting comprehensive income and its
components. SFAS 130 requires adoption currently. However, since comprehensive
income does not differ from historical amounts, no disclosure is required. SFAS
131 requires disclosures of certain information regarding operating segments,
products and services, geographic areas and major customers. SFAS 131 requires
adoption for the Company effective July 1, 1998. Management has determined that
the adoption of the above statements will not have a material impact upon the
Company's financial position or results of operations.
In April 1998, SEC issued SOP 98-5, "Reporting on Cost of Start-up
Activities." SOP 98-5 requires that all costs of start-up activities, including
organizational costs, be expensed as incurred. The Company adopted this
statement effective July 1, 1998. The Company has not yet evaluated the impact
of this statement.
(2) Property and Equipment
At June 30, 1999 and 1998, a summary of property and equipment, at cost, is
as follows:
Machinery and equipment $ 0 $ 319,448
Furniture and office equipment 0 51,043
Leasehold improvements 0 37,904
--------- ---------
0 408,395
Less accumulated depreciation and amortization 0 253,188
--------- ---------
Property and equipment, net $ 0 $ 155,207
(3) Acquisitions
On March 30, 1998, the Company acquired 100% of the assets of South Bay
Golf, Inc. in exchange for 8,000,000 shares of the Company's common stock. The
assets of South Bay consisted entirely of the Head Golf license. The acquisition
was accounted for as a purchase. Results of operations of South Bay were minimal
from the date of acquisition to June 30, 1999. No amounts have been allocated to
the Head Golf license.
The fair values assigned to the assets acquired were as follows:
Trade receivables $ 100
Cost in excess of fair value 7,900
-------------
Total purchase price $ 8,000
On March 31, 1998, the Company acquired certain assets from Mardock, Inc.
for a total of $200,000 cash and 300,000 shares of the Company's common stock.
The acquisition has been accounted for as a purchase and the results of
operations are included in the Company's consolidated financial statements from
the date of acquisition through the date of its sale on March 31, 1999.
The fair value assigned to the net assets acquired was $129,909. The
Company recorded goodwill of $70,391 and amortized this amount over a ten year
estimated life, until it was written off at the time of sale on March 31, 1999.
F-10
<PAGE>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(3) Acquisitions (cont'd)
In May 1998, the Company purchased 70% of the outstanding stock of Outback
Apparel Group, Inc. ("Outback") for cash consideration of $70. The assets of
Outback consisted primarily of the Spank license. The acquisition was accounted
for as a purchase. Results of operations of Outback were minimal from the date
of acquisition to June 30, 1999. No amounts have been allocated to the Spank
license.
In May 1999, the Company entered into an agreement to purchase 50.01% of
Tahoe Air Corp. in exchange for 1,100,000 shares of the Company's common stock
valued at $3,655,000. The investment subsequently became virtually worthless and
has been written down to $500.
(4) Inventory
Inventory recorded at the lower of first-in, first-out cost or market as of
June 30, 1998 and June 30, 1999 consists of the following:
1998 1999
---------- ----------
Raw materials $ 73,844 $ 0
Work in process 23,888 0
Finished goods 67,467 0
---------- ----------
$ 165,199 $ 0
(5) Leases
The Company has a noncancelable operating lease, primarily for office
space, with an unrelated party. The Company also has a 36 month capital lease
for equipment. Rental expense for the operating lease during the year ended June
30, 1999 and 1998 amounted to $53,568 and $7,920, respectively.
The Company leased a manufacturing facility from a shareholder for its
subsidiary Mardock, Inc. through March 31, 1999 when the subsidiary was sold.
The rent expense associated with this lease for the years ended June 30, 1999
and 1998 amounted to $23,760 and $7,920, respectively.
Future minimum lease payments under noncancelable operating lease and
future minimum capital lease payments as of June 30, 1999 are:
Operating Operating
lease lease
--------- ---------
Year ending June 30:
2000 $ 2,041 $ 35,712
All amounts are current installment obligations.
F-11
<PAGE>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(6) Notes Payable to Shareholders
Notes payable to shareholders at June 30, 1999 consist of the following:
Various notes payable to shareholder, principal due on demand,
interest at 10% due monthly, secured by equipment and
receivables of the Company. $1,255,000
(7) Income Taxes
As of June 30, 1999 and 1998, the Company has Federal tax loss
carryforwards of approximately $8,247,000 and $196,000, respectively.
The future tax benefits of the net operating loss carryforwards have not
been recognized since their realization is dependent upon the Company's ability
to generate future earnings.
At June 30, 1999 and 1998, due to the uncertainty of the Company's ability
to generate future earnings, the Company has established offsetting deferred tax
assets (generated from the aforementioned tax loss carryforwards) and related
valuation allowances.
(8) Commitments and Contingencies
Guaranteed Minimum Royalty Payments
- -----------------------------------
South Bay Golf is a licensee under a Trademark License Agreement with Head
Sports AG ("Head") which granted the Company exclusive worldwide rights to
market and distribute golf clubs, bags and head covers. The Company also had
worldwide nonexclusive marketing and distribution rights for golf accessories
including hats, towels and umbrellas.
The agreement provides for royalties based on the following percentages of
sales: 5% for 1998, 6% for 1999 and 7% for 2000 and all subsequent years.
Guaranteed minimum annual royalties are/were as follows:
Contract Year Amount
------------------------------ -------------
April 1, 1998 - March 31, 1999 $ 600,000
April 1, 1999 - March 31, 2000 800,000
April 1, 2000 - March 31, 2001 1,300,000
April 1, 2001 - March 31, 2002 1,500,000
April 1, 2002 - March 31, 2003 1,750,000
In June 1999, Head sued the Company for $1,000,000 over the royalties due
to Head. The lawsuit was settled in January 2000 for $20,000, and the settlement
of this lawsuit is reflected in the books of the Company in January 2000.
Outback Apparel Group, Inc. is a licensee under a Trademark License
Agreement with Spank Sport ("Spank") which grants the Company the exclusive
right to manufacture, distribute, advertise and sell certain Spank swimwear
products in North America.
F-12
<PAGE>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(8) Commitments and Contingencies (cont'd)
Guaranteed Minimum Royalty Payments (cont'd)
- -----------------------------------
The agreement provides for royalties based on 5% of sales. Guaranteed
minimum annual sales are as follows:
Calendar Year Amount
------------- ------------
1998 $ 3 million
1999 5 million
2000 8 million
2001 12 million
The Company has not been able to meet the minimum sales and royalty
requirements and are in default on their agreement. The Company does not expect
any legal action from Spank based on the Company's financial condition and no
liability has been recorded for these royalties.
(9) Other Expense
In the year ended June 30, 1999, the majority of other expense consists of
the writeoff of investments determined to have little value and the loss on the
sale of one of its subsidiaries.
In the year ended June 30, 1998, the majority of other expense consists of
the writeoff of an investment determined to be without value.
(10) Subsequent Events
As explained in Note 8, the Company settled a lawsuit with Head over
minimum royalty payments.
On February 7, 2000, the Company purchased Ameri-First Securities, Inc., an
NASD registered broker dealer.
F-13
<PAGE>
<TABLE>
<CAPTION>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Consolidated Balance Sheet
December 31, 1999 and June 30, 1999
Assets
December 31, June 30,
1999 1999
------------ ------------
<S> <C> <C>
Current assets:
Cash $ 196 $ 629
Trade accounts receivable, less allowances for bad debt and returns
Inventories
Prepaid expenses and other current assets 100,538 105,638
Other current receivables 10,900 600
------------ ------------
Total current assets 111,634 106,867
Property and equipment
Excess of cost over net assets acquired, less accumulated amortization 1,500 1,500
------------ ------------
$ 113,134 $ 108,367
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of debt payable to shareholder $ 1,255,000 $ 1,255,000
Current installments of capital lease commitment 2,041
Accounts payable 308,172 244,945
Accrued expenses 183,445 162,528
------------ ------------
Total current liabilities 1,746,617 1,664,514
Capital lease commitment, excluding current maturities Long-term notes payable
to shareholders, excluding current maturities
Total liabilities 1,746,617 1,664,514
------------ ------------
Shareholders' equity:
Common Stock, $0.001 par value. Authorized 25,000,000; issued and
outstanding 4,706,114 and 4,166,414 at December 31, 1999 and
June 30, 1999, respectively 4,706 4,166
Paid-in capital 7,584,976 6,818,751
Accumulated deficit (9,223,165) (8,379,064)
------------ ------------
Net shareholders' equity (1,633,483) (1,556,147)
$ 113,134 $ 108,367
============ ============
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Consolidated Statement of Operations
Six Months Ended December 31, 1999 and
Twelve Months Ended June 30, 1999
Six Months Year Ended
Dec. 31, 1999 June 30, 1999
------------- -------------
<S> <C> <C>
Net sales $ 0 $ 87,683
Cost of sales 0 598,378
------------- -------------
Gross profit 0 (510,695)
Operating expenses:
Selling
General and administrative expenses 823,199 2,991,795
------------- -------------
823,199 2,991,795
------------- -------------
Loss from operations (823,199) (3,502,490)
Other expenses:
Other 18,768
Loss on repossessed assets and sale of business (762,479)
Loss on writeoff of investments (3,685,955)
Interest, net (20,917) (128,126)
------------- -------------
(20,917) (4,557,792)
------------- -------------
Loss before minority interest (844,116) (8,060,282)
Minority interest (15) (15)
------------- -------------
Net loss $ (844,101) $ (8,060,267)
============= =============
Net loss per share - basic and diluted $ (0.18) $ (2.76)
============= =============
Weighted average shares - basic and diluted 4,644,755 2,923,855
============= =============
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Consolidated Statement of Shareholders' Equity
Six Months Ended December 31, 1999 and
Year Ended June 30, 1999
Common stock Additional Net
------------------------- paid-in Accumulated shareholders'
Shares Amount capital deficit equity
---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1998 2,520,900 $ 2,521 $ 467,856 $ (318,797) $ 151,580
Shares issued for barter credit
for advertising 80,000 80 999,920 1,000,000
Shares issued to buy minority
15% of Outback Sports 60,000 60 240 300
Shares issued to buy majority
50.01% of Tahoe Air Corp. 1,100,000 1,100 3,653,900 3,655,000
Shares issued for services 274,698 275 820,001 820,276
Shares issued for cash 130,816 130 850,171 850,301
Less offering costs (128,539) (128,539)
Capital contributions 155,202 155,202
Net loss (8,060,267) (8,060,267)
---------- ---------- ---------- ----------- ------------
Balance at June 30, 1999 4,166,414 $ 4,166 $6,818,751 $(8,379,064) $ (1,556,147)
Shares issued for stock 30,000 30 29,970 30,000
Shares issued for services 509,700 540 688,210 688,750
Capital contributions 48,000 48,000
Net loss (844,101) (844,101)
---------- ---------- ---------- ----------- ------------
Balance at December 31, 1999 4,706,114 $ 4,736 $7,584,931 $(9,223,165) $ (1,633,498)
========== ========== ========== =========== ============
</TABLE>
F-16
<PAGE>
<TABLE>
<CAPTION>
AMERI-FIRST FINANCIAL GROUP, INC.
AND SUBSIDIARIES
(formerly Tahoe Pacific Corporation, and
formerly Pacific Sports Holdings, Inc.)
Consolidated Statement of Cash Flows
Six Months Ended December 31, 1999 and
Year Ended June 30, 1999
Six Months Year Ended
Dec. 31, 1999 June 30, 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (844,101) $ (8,060,267)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Non-cash expenses 688,750 343,592
Stock issued for expenses 1,700,575
Writeoff of investments paid for with stock 3,654,500
(Increase) decrease in assets:
Accounts receivable 104,648
Other receivables (10,300) (600)
Inventory 165,199
Prepaid expenses and other current assets 5,100 170,111
Increase (decrease) in liabilities:
Accounts payable 61,201 153,546
Accrued expenses 20,917 133,840
------------- -------------
Net cash used in operating activities (78,433) (1,634,856)
Cash flows used in investing activities:
Proceeds from disposal of property and equipment
Cash paid for acquisition of assets
Net cash used in investing activities 0 0
Cash flows from financing activities:
Proceeds from borrowings on notes payable 718,907
Payment on notes payable
Proceeds from issuance of stock 30,000 721,762
Distribution to shareholders
Principal payments under capital lease obligations 2,565
Capital contributions 48,000 155,202
------------- -------------
Net cash provided by financing activities 78,000 1,598,436
------------- -------------
Net increase in cash $ (433) $ (36,420)
Cash at beginning of period 629 37,049
------------- -------------
Cash at end of period $ 196 $ 629
============= =============
</TABLE>
