FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: March 31, 2000
Commission file number: 000-28453
Ameri-First Financial Group, Inc.
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(exact name of registrant as specified in its charter)
Nevada 84-0849132
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(State of Incorporation) (IRS ID No.)
4514 Cole Avenue, Suite 806, Dallas, Texas 75205
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 214-599-9050
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ].
Shares of common stock outstanding at March 31, 2000: 6,646,116
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page Number
Item 1. Financial Statements 1 - 6
Item 2. Managements's Discussion and Analysis
of Financial Condition and Results of
Operations 7
PART II - OTHER INFORMATION 9
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<CAPTION>
AMERI-FIRST FINANCIAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2000 and December 31, 1999
ASSETS
March 31, 1999 Dec 31, 1999
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<S> <C> <C>
CURRENT ASSETS:
Cash $0 $0
Commission and other receivables 472,185 $346,068
Deposits with clearing organizations 501,262 $221,319
Securities owned 1,127,388 $711,225
Investment receivable 205,000
Prepaid expenses 100,539 $100,539
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Total current assets $2,406,374 $1,379,151
PROPERTY AND EQUIPMENT:
Furniture and fixtures 36,882 23,224
Vehicles 98,245 97,437
Computer system 12,758 10,512
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Total property and equipment 147,885 131,173
Accumulated depreciation (27,155) (12,191)
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Total property and equipment, net of depreciation 120,730 118,982
OTHER ASSETS:
Advance to affiliate 10,000 10,000
Investments 1,500 1,500
Goodwill 168,534
Accumulated amortization - goodwill (1,054)
Organization costs 12,572
Accumulated amortization - organization costs (4,102)
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Total other assets 187,450 11,500
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TOTAL ASSETS $2,714,554 $1,509,633
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Bank overdraft $19,334 $11,946
Accounts payable and accrued expenses 513,114 $533,743
Payable to clearing organizations 1,158,281 735,750
Current portion of notes payable 17,127
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Total current liabilities 1,707,856 1,281,439
LONG TERM LIABILITIES
Notes payable 1,305,577 1,308,104
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TOTAL LIABILITIES 3,013,433 2,589,543
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value 6,646 4,706
Additional paid-in-capital 8,528,130 8,138,559
Current earnings (8,833,657) (9,223,175)
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Total Stockholders' Equity (298,881) (1,079,910)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,714,552 $1,509,633
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1
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AMERI-FIRST FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended March 31, 2000 and 1999
Three months Three months
ended ended
March 31, 2000 March 31, 1999
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Revenue $701,236 $0
Sales (net) $0 40,011
Cost of sales 469,999
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Gross profit $701,236 ($429,988)
Operating expenses:
Selling expenses 93,155 4,521
Depreciation and amortization 6,461 6,104
General and administrative 217,752 1,031,167
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Total Operating Expense 317,368 1,041,792
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Net operating income 383,868 (1,001,781)
Other income:
Interest income 5,639 858
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Net income 389,507 (1,000,923)
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Weighted average shares outstanding 6,170,542 4,706,114
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INCOME (LOSS) PER SHARE $0.06 ($0.21)
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2
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<CAPTION>
AMERI-FIRST FINANCIAL GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY AND ACCUMULATED DEFICIT
December 31, 1999 to March 31, 2000
Common Paid In Accumulated
Shares Amount Capital Deficit Total
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<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1999 4,706,114 4,706 7,584,976 (9,223,165) (1,633,483)
Shares issued for 100% of
Ameri-First Securities Corp. 1,890,002 1,890 943,154 945,044
Shares issued for 100% of
Itronics Comm. Corp. 50,000 50 50
Net income - three months
ended March 31, 2000 389,509 389,509
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Balance
March 31, 2000 6,646,116 6,646 8,528,130 (8,833,656) (298,880)
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3
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<TABLE>
<CAPTION>
AMERI-FIRST FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended March 31, 2000 and 1999
Three months Three months
ended ended
March 31, 2000 March 31, 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $389,507 ($1,000,923)
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Items not requiring cash - depreciation and amortization 16,499 6,104
(Increase) decrease in current assets (1,023,923) 1,904
Increase (decrease) in current liabilities 401,914
(Increase) decrease in other assets (8,950)
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NET CASH (USED) BY OPERATING ACTIVITIES (224,953) (992,915)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (16,712) 0
Capital contributed by shareholder 219,677
Change from purchase of subsidiary 878,022
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NET CASH FROM INVESTING ACTIVITIES 202,965 878,022
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 100,000
(Increase) decrease in notes payable 14,600
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NET CASH FROM FINANCING ACTIVITIES 14,600 100,000
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NET INCREASE IN CASH ($7,388) ($14,893)
CASH, BEGINNING OF PERIOD (11,946) 2,947
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CASH, END OF PERIOD ($19,334) ($11,946)
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4
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Ameri-First Financial Group, Inc.
(Formerly Itronics Communications Corporation and
formerly Tahoe Pacific Corporation)
Notes to Consolidated Financial Statements
March 31, 2000
(1) Summary of Significant Accounting Policies and Practices
(a) General
Ameri-First Financial Group, Inc. and subsidiaries (the Company) is
engaged in investment banking and securities business. In January 2000, the
Company purchased Ameri-First Securities, Inc., an NASD registered broker
dealer.
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) 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.
(c) 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.
(d) Revenue Recognition
Revenue is recognized upon shipment of product. Allowances for
estimated returns and discounts are provided when the related revenue is
recorded.
(e) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first- out method.
(f) 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.
5
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Ameri-First Financial Group, Inc.
(Formerly Itronics Communications Corporation and
formerly Tahoe Pacific Corporation)
Notes to Consolidated Financial Statements
March 31, 2000
(g) 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.
(h) 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 March 31, 2000, no stock option plan was in
place, and therefore, no stock options or other common stock equivalent
instruments have been issued.
(i) 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.
(j) Product Design and Development Costs
The Company charged all product design and development costs to expense
when incurred. The lines requiring design and development were dropped in the
last two years.
6
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Ameri-First Financial Group, Inc.
(Formerly Itronics Communications Corporation and
formerly Tahoe Pacific Corporation)
Notes to Consolidated Financial Statements
March 31, 2000
(k) 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 comprehenisve
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 ahve a material impact upon the
Comapny's financial position or results of operations.
(2) Acquisitions
In January 2000, the Company purchased 100% of the outstanding stock of
Ameri-First Securities, Inc. for the issuance of 1,890,002 shares of newly
issued restricted common stock.. The acquisition was accounted for as a
purchase.
In March 2000, the Company purchased 100% of the outstanding stock of
Itronics Communications Corporation for the issuance of 50,000 shares of newly
issued restricted common stock.. The acquisition was accounted for as a
purchase.
(3) 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 twelve months
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 twelve months ended June 30,
1999 and 1998 amounted to $23,760 and $7,920 respectively.
7
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<CAPTION>
Ameri-First Financial Group, Inc.
(Formerly Itronics Communications Corporation and
formerly Tahoe Pacific Corporation)
Notes to Consolidated Financial Statements
March 31, 2000
<S> <C>
(4) Notes Payable to Shareholders
Notes payable to shareholders at March 31, 2000 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
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(5) 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.
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.
(6) 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
8
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Ameri-First Financial Group, Inc.
(Formerly Tahoe Pacific Corporation and
formerly Pacific Sports Holdings, Inc.)
Notes to Consolidated Financial Statements
March 31, 2000
(7) Commitments and Contingencies (con't)
Guaranteed Minimum Royalty Payments (con't)
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.
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
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Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The Company is engaged in investment banking and through its
subsidiary, Ameri-First Securities, Inc., is involved in the securities business
as Ameri-First Securities, Inc. is a full service NASD registered broker/dealer.
The Company purchased Ameri-First Securities, Inc. in January 2000, and
has increased its position in securities during the quarter and generally
increased its liquid position. The working capital increased from $97,712 to
$698,518 during the quarter which represents an increase of $600,806 or a 715%
increase. The income also was $.06 per share which compares to prior periods
when there was always losses.
The goodwill recorded on the balance sheet represents the excess of the
value of the stock exchanged for 100% of the outstanding stock of Ameri-First
Securities, Inc.
The Company still has some significant payables owed which were assumed
when the Company performed a reverse merger with Tahoe Pacific Corporation in
1999. In the second quarter, the Company intends to divest itself of these
entities or to settle these debts.
7
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not involved in any legal proceedings.
Item 2. Changes in Securities.
Registrant has made no changes in its securities.
Item 3. Defaults Upon Senior Securities.
Registrant has no senior securities and accordingly no
defaults.
Item 4. Submission of Matters to a Vote of Security Holders.
Registrant submitted a Reorganization Agreement to a vote of
security holders which was approved and effected on March 22,
2000.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
Form 8-K - Changes in Control of Registrant - March 22, 2000
8
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ameri-First Financial Group, Inc.
(Registrant)
BY: /s/ Jeffrey Bruteyn
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Jeffrey Bruteyn
Its: President
DATE: May 12, 2000
Dallas, Texas
9
