SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): January 22, 1997
Commission File Number: 0-12666
AMERICAN FINANCIAL HOLDING, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 87-0458888
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
225 SOUTH 200 WEST, SUITE 302
FARMINGTON, UTAH 84025-0683
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(801) 451-9580
NONE
(Former name, former address, and formal fiscal year, if changed since
last report)
- ---------------------------------------------------------------------
ITEM 5. OTHER EVENTS
- ---------------------------------------------------------------------
As a result of a review of the corporate and capital structure of American
Financial Holding, Inc. (The "Company"), management has analyzed a restructuring
plan that it believes may effectively separate its principal marketing and most
promising reinsurance activities from its corporate parent, which has
significant net operating losses, a substantial amount of which were a part of
the losses previously accumulated by the publicly-held corporation when current
management acquired control in 1988. Management of the Company believes that
the separation of Triad from the Company will enhance the ability of Triad to
obtain additional financing and provide other long-term benefits to its
stockholders.
The restructuring would consist of the transfer of Income Builders, Inc.,
American Financial Reinsurance, Inc., and American Financial Marketing, Inc.,
to Triad and the immediate distribution of shares of common stock of Triad to
the American Financial Holding stockholders. As a result, Triad, as a separate
publicly-held corporation and its subsidiaries, would continue with its
marketing activities (Income Builders and American Financial Marketing) and its
reinsurance activities (American Financial Reinsurance, Inc.) and would operate
and seek financing on its own.
The Company has applied for a $10 million combination debt and equity
funding to Triad to fund its reinsurance company capital and surplus, retire its
outstanding surplus debenture, acquire other books of business or insurance
companies, and expand its marketing activities. The Company's agreement to
complete a restructuring such as that outlined above would likely be a condition
precedent to obtaining such funding. There can be no assurance as to when, if
ever, such funding could be obtained. The Company does, however, have a letter
of intent from a funding group for such a debt and equity funding. The Company
has not determined whether a restructuring such as that outlined above would be
implemented in the absence of substantial amounts of additional funding for the
Company's proposed business activities, either from the possible funding
referred to above or from other sources.
If and when management implements such a restructuring, the Company will
undertake the necessary regulatory and other compliance measures to complete the
restructuring, which will likely take several months. It is not anticipated
that shareholder approval will be required. The completion of the restructuring
outlined above is subject to the completion of certain regulatory filings and
other requirements. To the extent that the restructuring includes the offer and
sale of securities, it will only be effected by means of a prospectus.
Although management believes that it is probable that a restructuring such
as outlined herein will be completed, there can be no assurance that it will in
fact be effected; that the Company will be able to fund the legal, accounting,
and other work necessary; or that such a restructuring will be beneficial to the
Company's stockholders.
Below are pro forma condensed consolidated financial statements of Triad
and its subsidiaries, showing its financial condition and results of operations
as of the date and for the periods indicated, based upon a preliminary analysis
and certain stated assumptions, the implementation of a restructuring such as
that outlined above and the completion of a $10,000,000 loan as applied for.
TRIAD FINANCIAL SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Triad Financial Systems, Inc. (Triad) is a subsidiary of American Financial
Holding, Inc. (AFH) which is included, along with other AFH subsidiaries, in
the consolidated financial statements of AFH. The following pro forma condensed
consolidated balance sheet of Triad Financial Systems, Inc. (Triad) and
Subsidiaries as of September 30, 1996 is presented as if a reorganization had
occurred on September 30, 1996 whereby Triad and the other subsidiaries of AFH
are separated from AFH. The following pro forma statements of operations for
the nine months ended September 30, 1996 and for the year ended December 31,
1995 are presented as if the reorganization had occurred on January 1, 1995.
To accomplish the reorganization, it is proposed that AFH will transfer its
interest in Income Builders, Inc., a wholly-owned subsidiary, to Triad and will
settle a receivable from Triad all in exchange for Triad issuing 4,279,449
shares common stock to AFH. AFH will then distribute the Triad common stock to
the AFH shareholders on the basis of one Triad common share for each AFH common
share outstanding.
The reorganization will result in Triad being the parent of the operating
subsidiaries and, accordingly, Triad and its consolidated subsidiaries will
remain the reporting entity for financial reporting purposes. The historical
consolidated operations of AFH and subsidiaries will continue to be presented as
the historical operations of Triad and subsidiaries. The assets transferred to
Triad from AFH have been recorded at historical cost in the accompanying pro
forma balance sheet. Certain assets and liabilities of AFH will be retained by
AFH and are presented as a disposition of AFH by Triad and Subsidiaries.
In addition to the reorganization, the pro forma financial statements
include an adjustment resulting from the proceeds of a proposed $10,000,000
loan, bearing interest at the LIBOR rate plus 2 percent (8.5 percent at
September 30, 1996), due in 2002. The pro forma financial statements also
reflect the use of a portion of the proceeds from the loan to repay certain
liabilities. The remaining cash from the loan is deemed to have been invested
in instruments earning interest at 13.5 percent annually.
The pro forma financial statements are derived from the historical
financial statements and notes thereto of American Financial Holding, Inc. and
Subsidiaries. These pro forma financial statements are condensed and should be
read in conjunction with those historical financial statements. Pro forma
adjustments have been made to the historical financial information to reflect
the effects of the reorganization and earnings from the investment of the
proceeds of the notes payable. The pro forma financial statements are presented
for informational purposes only and may not be indicative of the future
consolidated operations or financial position of Triad and subsidiaries, and
they do not necessarily present the consolidated results of operations or
financial position of Triad and subsidiaries had the reorganization and the
borrowings under the notes payable occurred at the dates indicated above.
TRIAD FINANCIAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1996
<TABLE>
DISPOSAL OF
AMERICAN
FINANCIAL PRO FORMA
HISTORICAL HOLDING, ADJUSTMENTS PRO FORMA
ASSETS INC.
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash $677,857 $ 1,833 B $10,000,000
C (858,473) $9,821,217
Marketable securities 57,517 57,517
Commissions receivable 91,055 91,055
Interest 5,112 5,112
receivable
Other receivable 21,000 21,000
Real estate contract 161,151 161,151
---------- ----------
receivable
TOTAL CURRENT ASSETS 1,013,692 10,157,052
PROPERTY AND EQUIPMENT, NET 110,601 (2,167) 108,434
OTHER ASSETS 227,416 (201,715) 25,701
---------- ---------- ---------- ----------
TOTAL ASSETS $1,351,709 $(202,049) $9,141,527 $10,291,187
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $412,587 C $(412,587) $ --
Commissions payable 69,447 69,447
Short term borrowings 20,471 20,471
Accrued liabilities 308,822 (7,804) 301,018
Income Taxes Payable 268,241 (268,241) --
Preferred dividends
payable 22,471 22,471
Current portion of long- C
term debt 21,449 (563) (20,886) --
---------- ---------- ---------- ----------
TOTAL CURRENT
LIABILITIES 1,123,488 413,407
---------- ----------
LONG-TERM DEBT, NET OF B
CURRENT PORTION 587,198 (76,588) 10,000,000
C (425,000) 10,085,610
---------- ----------
MINORITY INTEREST
(PREFERRED STOCK IN
CONSOLIDATED SUBSIDIARY) 455,986 (455,986) --
STOCKHOLDERS' DEFICIT
Preferred stock -- 515 515
Common stock 42,794 42,794
Additional paid-in 7,431,370 (6,975,900) 455,470
capital
Stockholders' notes (383,966) (383,966)
receivable, net
Unrealized loss on (27,291)
investments (27,291)
Accumulated deficit (7,877,870) 7,582,518 (295,352)
---------- ----------
TOTAL STOCKHOLDERS' (814,963) (207,830)
DEFICIT
---------- ---------- ---------- ----------
TOTAL LIABILITIES AND $1,351,709 $ (202,049) $ 9,141,527 $10,291,187
STOCKHOLDERS DEFICIT
========== ========== ========== ==========
</TABLE>
See the accompanying notes to pro forma condensed consolidated financial
statements.
TRIAD FINANCIAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1996
Commission revenue $3,242,422 $3,242,422
Commission expense 2,694,404 2,694,404
---------- ----------
GROSS PROFIT 548,018 548,018
General and administrative
expense 1,074,039 1,074,039
---------- ----------
LOSS FROM OPERATIONS (526,021) (526,021)
Interest income 172,644 E $925,580 1,098,224
Interest expense (44,667) D (637,500) (682,167)
Gain (loss) on sale of
assets (3,083) (3,083)
---------- ----------
LOSS BEFORE INCOME TAXES (401,127) (113,047)
Income tax provision 12,022 12,022
---------- ----------
LOSS BEFORE MINORITY (413,149) (125,069)
INTEREST
Minority interest,
preferred dividend of
subsidiary 36,456 A (36,456) 36,456
---------- ----------
NET LOSS (449,605) (125,069)
Preferred dividends -- A 36,456 --
---------- -------- ----------
NET LOSS APPLICABLE TO
COMMON STOCK $(449,605) $288,080 $(161,525)
========== ======== ==========
NET LOSS PER COMMON SHARE $ (0.11) $ (0.04)
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,261,652 4,261,652
========== ==========
FOR THE YEAR ENDED DECEMBER 31, 1995
Commission revenue $4,759,357 $4,759,357
Commission expense 4,095,800 4,095,800
---------- ----------
GROSS PROFIT 663,557 663,557
General and administrative
expense 1,427,802 1,427,802
---------- ----------
LOSS FROM OPERATIONS (764,245) (764,245)
Interest income 195,835 E $1,234,106 1,429,941
Interest expense (32,305) D (850,000) (882,305)
---------- ----------
LOSS BEFORE INCOME TAXES (600,715) (216,609)
Income tax provision 12,381 12,381
---------- ----------
LOSS BEFORE MINORITY (613,096) (228,990)
INTEREST
Minority interest,
preferred dividend of
subsidiary 24,064 A (24,064) --
NET LOSS (637,160) (228,990)
Preferred dividends -- A 24,064 24,064
---------- -------- ----------
NET LOSS APPLICABLE TO $ (637,160) $ 384,106 $(253,054)
COMMON STOCK
NET LOSS PER COMMON SHARE $ (0.16) $ (0.07)
========== =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,872,672 3,872,672
=========== =========
</TABLE>
See the accompanying notes to pro forma condensed consolidated financial
statements
TRIAD FINANCIAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A - The disposition of American Financial Holding, Inc. (AFH) is presented as a
separate column. The amounts presented represent the assets, liability and
stockholders' deficit items that will be retained by AFH and not
transferred to Triad Financial Systems, Inc. (Triad) and Subsidiaries.
Included in the disposition column are pro forma adjustments to reclassify
Triad preferred stock which was presented in the historical financial
statements as minority interest.
B - Reflects the proceeds from a $10,000,000 loan from a third-party lender,
which loan bears interest at the LIBOR rate plus 2 percent (8.5 percent at
September 30, 1996), due in 2002, secured principally by the outstanding
stock of American Financial Reinsurance, Inc.
C - Reflects the use of $858,473 of the proceeds from the loan referred to in
Note B to pay certain accounts payable, notes payable and a surplus
debenture note payable.
D - Reflects additional interest expense as a result of the note payable.
E - Reflects the interest income that would have been earned had the remaining
proceeds from the note payable been invested in investments earning at an
estimated annual rate of 13.5 percent.
SIGNATURES
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 hereunto duly authorized.
AMERICAN FINANCIAL HOLDING, INC.
Dated: January 27, 1997 By /s/ Kenton L. Stanger, President
Director and Principal Executive Officer
