SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 1998.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
---- ----
Commission file number: 0-20033
AMERIRESOURCE TECHNOLOGIES, INC.
--------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 84-1084784
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8815 E. Long Street Lenexa, Kansas 66215
----------------------------------------
(Address if principle executive office) (Zip Code)
(913) 859-9292
--------------
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
The number of outstanding shares of the issuer's common stock, $0.0001
par value (the only class of voting stock), as of September 30, 1998 was
380,102,031.
<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS...................................................3
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS....................................4
PART II
ITEM 1. LEGAL PROCEEDINGS......................................................6
ITEM 6. REPORTS ON FORM 8-K....................................................7
SIGNATURES.....................................................................7
INDEX TO EXHIBITS..............................................................8
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2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to AmeriResource
Technologies, Inc., a Delaware corporation, and its subsidiaries and
predecessors unless otherwise indicated. Consolidated, unaudited, condensed
interim financial statements including a balance sheet for the Company as of the
quarter ended September 30, 1998, statement of operations, statement of
shareholders equity and statement of cash flows for the interim period up to the
date of such balance sheet and the comparable period of the preceding year are
attached hereto as Pages F-1 through F-6 and are incorporated herein by this
reference.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
3
<PAGE>
INDEX TO FINANCIAL STATEMENTS PAGE
- ----------------------------- ----
Unaudited Consolidated Condensed Balance Sheet, September 30, 1998..........F-2
Unaudited Consolidated Condensed Statement of Operations, for the nine
months ended September 30, 1998 and 1997...................................F-4
Unaudited Consolidated Condensed Statement of Cash Flows, for the nine
months ended September 30, 1998 and 1997...................................F-5
Notes to Unaudited Consolidated Condensed Financial Statements,
September 30, 1998.........................................................F-6
F-1
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Unaudited Consolidated Condensed Balance Sheet
September 30, 1998
ASSETS
Current Assets:
Cash and cash equivalents $ 1,762
-----------
Receivables:
Trade 734,785
Related party 143,981
Notes receivable-related party 252,060
Notes receivable-other 75,000
Other receivables 193,000
Allowance for doubtful accounts (583,855)
Net receivables 814,971
Prepaid insurance and other assets 50,344
Total current assets 867,077
Property, Plant and Equipment-Net 28,655
Other Assets:
Marketable securities 184,607
Organization costs-net of amortization 525
Total other assets 184,132
Total assets $ 1,080,864
===========
See notes to unaudited consolidated financial statements.
F-2
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Unaudited Consolidated Condensed Balance Sheet
September 30, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable:
Trade $ 637,419
Related party 54,655
Current portion of long-term debt:
Related party 707,990
Other 317,799
Accrued payroll and related expenses 440,316
Accrued interest:
Related party 97,473
Other 86,997
Income tax payable 35,960
Total current liabilities 2,378,609
Long-term Debt-Net of current portion 1,680,939
Commitments and contingencies 105,000
Total Liabilities $ 4,164,548
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; authorized 10,000,000
shares; Series A, issued and outstanding 3,089,621
shares authorized 3,090
Common stock, $.0001 par value; authorized 500,000,000
Shares; issued and outstanding 380,102,031 shares 38,011
Additional paid-in capital 7,243,673
Common stock held in treasury; 11,553,600 shares at cost (236,625)
Accumulated deficit (10,131,833)
Total Stockholders' Equity (3,083,684)
Total liabilities and Stockholders' Equity $ 1,080,864
============
See notes to unaudited consolidated financial statements.
F-3
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
For the Nine Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
For the three months Ended For the Nine months Ended
September 30 September 30 September 30 September 30
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Service Income $ 21,365 $ (480) $ 21,365 $ 43,663
Operating expenses 0 672,520 50,573 736,086
General and administrative expenses 474,849 548,849 497,867 796,374
Loss from sold and closed subsidiaries 0 0 0 0
Total Expenses 474,849 1,221,369 548,440 1,532,460
------------- ------------- ------------- -------------
Operating loss (453,484) (1,221,849) (527,075) (1,488,797)
Other Income (Expense):
Loss on sale of assets 3,769 0 3,769 0
Interest expense 128 11,677 128 34,810
------------- ------------- ------------- -------------
Net loss (457,381) (1,233,526) (530,972) (1,523,607)
============= ============= ============= =============
Net loss per common share 0.00 0.00 0.00 0.00
============= ============= ============= =============
Weighted average common shares
Outstanding 271,533,703 162,963,803 271,533,703 162,963,803
============= ============= ============= =============
</TABLE>
See notes to unaudited consolidated financial statements.
F-4
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Unaudited Consolidated Condensed Statement of Cash Flows
For the Nine Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30 September 30
1998 1997
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (530,972) $(1,523,607)
Non-Cash Items:
Depreciation and amortization 27,408 114,639
Provision for bad debts 0 16,490
Changes in Assets Affecting Operations-Increase (Decrease):
Accounts receivable 53,166 1,850,970
Other receivables 0 (2,871)
Work-in-process 0 83,401
Prepaid insurance and other expenses 95 105,040
Changes in Liabilities Affecting Operations-Increase (Decrease):
Accounts payable 17,759 41,905
Accrued payroll and related expense (206,591) (75,844)
Accrued interest (9,237) 19,934
Commitments and contingencies 0 (80,652)
Other current liabilities 0 (91,508)
Net cash provided by (used in) operating activities (648,372) 457,087
Cash Flows from Financing Activities:
Proceeds from issuance of debt 217,171 114,281
Repayment of debt 0 (579,509)
Proceeds from issuance of common stock 663,775 0
Net cash provided by financing activities 880,946 (465,228)
Cash flows from investing activities:
Purchase of treasury stock (231,000) 0
Net cash used in operating activities (231,000) 0
Net increase (decrease) in cash 1,574 (8,141)
Cash and cash equivalents-beginning of period 188 8,336
Cash and cash equivalents-end of period 1,762 195
</TABLE>
See notes to unaudited consolidated financial statements.
F-5
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Condensed Financial Statements
September 30, 1998
1. Summary of Significant Accounting Policies
The accompanying financial statements have been prepared in accordance
with the instructions of Form 10-QSB and do not include all of the information
and footnotes required by Generally Accepted Accounting Principles for complete
accounting statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included.
2. Corporations Included in the Consolidated Financial Statements
Name Location
----------------------------------- ------------------
First American Mortgage Corporation Lenexa, Kansas
KLH Engineers & Contractors, Inc. Closed
KLH Engineering of Colorado Springs, Inc. Closed
KLH Engineering of Lakewood, Inc. Closed
KLH Engineering of Grand Junction, Inc. Closed
KLH Engineering of San Mateo, Inc. Closed
KLH Engineering of Greeley, Inc. Closed
Tomahawk Construction Company, Inc. Lenexa, Kansas
3. Basis of Presentation and Principles of Consolidation
The consolidated financial statements include the combined accounts of
AmeriResource Technologies, Inc., First Americans Mortgage Corporation, Tomahawk
Construction Company Inc. and the accounts of all the closed subsidiaries. All
material intercompany transactions have been eliminated in consolidation.
4. Additional footnotes included by reference
Except as indicated in Notes above, there have been no other material
changes in the information disclosed in the notes to the financial statements
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997. Therefore, those footnotes are included herein by reference.
F-6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
General
- -------
The Company's primary line of business has been conducted through
Tomahawk Construction Company, a wholly owned subsidiary (Tomahawk) and through
the acquisition of First Americans Mortgage Corp., a wholly owned subsidiary
(FAMC) that was finalized in August of this year. Tomahawk's past construction
projects have included utility work, earth work, structural concrete, bridge
work, commercial buildings, and treatment plants. Tomahawk is currently focusing
on interfacing its construction experience with FAMC to perform the same type of
construction activities for different Native American Tribes. Tomahawk is also
focusing on residential construction that will enhance the mortgage operations
of FAMC.
The acquisition of FAMC has enabled ARET to diversify its operations
and revenue stream that will also allow Tomahawk the opportunity to enter into
another related market "residential construction." FAMC is currently one of the
leading mortgage companies in the United States that has been able to develop a
new market of providing mortgages to Native Americans, on and off the
reservations. FAMC has developed a special financing program through its
partnership with PMI, Freddie Mac and Washington Mutual. This special program is
presently being utilized with two of the largest native American Nations in the
state of Oklahoma which will provide the financing for approximately 300
mortgages in the year 1999. This special program is presently with two of the
largest Native American Tribes/Indian Nations in the state of Oklahoma and will
provide financing for approximately 300 mortgages in the year of 1999. FAMC and
PMI are now reviewing other Native American Tribes and their locations to
implement this program on a National level.
FAMC will continue to develop its business relationships with PMI,
Freddie Mac, and Washington Mutual that will ultimately affect the lives of
Native Americans that have never had the opportunity to own their own home.
Through this relationship, FAMC will financially grow which will allow for
future expansion into other areas within the United States.
Unfortunately, Tomahawk's ability to generate revenues with their
former clients have been seriously affected as a result of filing Chapter 11
Bankruptcy on September 15, 1994. Although Tomahawk emerged from Bankruptcy on
August 25, 1995, it has been unable to obtain any substantial construction
contracts. Nonetheless, Tomahawk continues to bid for new construction projects.
(For more information on Tomahawk's Bankruptcy proceedings, see the Company's
Form 10-KSB for December 31, 1997.)
Management, with the services of a consultant, is currently assessing
the issues and problems pertaining to the potential Y2K problems and how this
may affect the operations of the Company. Management will be working with these
consultants to provide the course of action to be taken by the Company, if
required.
Subsequent Event
ARET entered into a consulting contract, for services, with L.B.I.
Group and its associates on or about July 20, 1998. The consulting services were
for a period of three years to perform various functions to include promotion,
marketing, assistance in locating potential companies to merge into ARET as
operating subsidiaries and any other services that were deemed necessary for the
continued growth of ARET. However, due to events that occurred within the
financial markets in Asia and the U.S. market during August and September,
L.B.I. Group/Associates were unable to perform under the contract and therefore
4
<PAGE>
the contract was terminated for convenience of all parties on/or about November
6, 1998. Upon their failure to perform, L.B.I. Group/Associates agreed to a
monetary settlement to be paid over the next eleven months and in full by
December 1, 1999. Therefore, this settlement amount has not been reflected in
the accounting transactions for this 10-QSB and will be reflected in the 10-KSB
for the year ending 1998.
ARET, according to the terms of the Promissory Note of $169,760.80 to
the Olivia I. Dodge Charitable Remainder Unitrust, converted and issued the
corresponding restricted 144 common shares pursuant to the Promissory Note and
the Securities Act of 1934 to the Dodge Trust on/or about October 17, 1998.
Therefore, this accounting transaction has not been reflected in this quarter
and will be reflected in the 10-KSB for the year ending 1998.
Liquidity and Capital Resources
- -------------------------------
The Company and its subsidiaries continue to have very restricted
liquidity. The Company has experienced severe financial difficulty as a result
of Bankruptcy proceedings involving its subsidiary Tomahawk. Although Tomahawk
emerged from Bankruptcy in August of 1995, Tomahawk's ability to obtain
construction projects has been severely limited as a result of those
proceedings.
The acquisition of FAMC will begin to generate new revenues through the
last quarter of 1998 and into the year of 1999 which will begin to have a
positive affect on the liquidity of ARET and its subsidiaries. This new revenue
stream will continue to make a positive impact in the liquidity during the year
of 1999 and into the year 2002.
In the interim, the Company will continue to utilize the resources of
its CEO, Delmar Janovec, until its plans begin generating revenues. Mr. Janovec
has advanced $572,949 to date as a loan to support the Company's limited
operations and has continued to work without pay since October 1, 1996. However,
there is no guarantee that Mr. Janovec will continue such support. The Company
will also utilize its common stock to compensate consultants, employees and
creditors when possible.
During the quarter ended September 30, 1998, the Company's working
capital deficit was approximately $1,511,532 a decrease of $322,584 from the
same quarter in 1997. This was caused by the construction subsidiary not having
contracts in place during the third quarter of 1998 as well as the acquisition
expenses of FAMC.
Net stockholders' equity in the Company declined from a deficit of
$3,076,717 at the end of September 30, 1997 to a deficit of $3,083,684, as of
September 30, 1998. The Company's deficit is a result of the Company's inability
to generate construction revenues and the accumulation of debts in its
inoperable engineering subsidiaries prior to current management's involvement
with the Company. Acquisition costs of FAMC also contributed to this increase in
a deficit.
Results of Operations
- ---------------------
The Company's operations for the third quarter consisted of bidding for
construction projects and formulating a plan of operation that included the
acquisition of FAMC. FAMC contribution was minor due to the acquisition date of
the Company during this quarter. The Company was unsuccessful in its attempts to
procure revenue through construction projects during the quarter.
5
<PAGE>
Net service income for the quarter ended September 30, 1998, was
$21,365 as compared to a deficit of $480 for the third quarter in 1997. This is
due to the acquisition of FAMC.
Operating expenses decreased from $672,520 for the quarter ended
September 30, 1997 to $0 for the quarter ended on September 30, 1998. The
decrease is primarily due to expenses that were incurred and recorded for the
settlement of the MK-Ferguson/DOE claim in the quarter ended September 30, 1997.
General and administrative expenses were $474,849 for the quarter ended
on September 30, 1998 as compared to $548,849 for the third quarter in 1997.
This decrease is due to further reduction of staff and expenses that were
incurred in estimating a large project with Fluor-Daniels for Procter & Gamble
Company.
The Company's net loss went from $1,233,526 for the quarter ended
September 30, 1997 to $457,381 for the quarter ended on September 30, 1998. This
decrease in net loss is due to the reduction of staff and the acquisition of
FAMC.
The management highly recommends reading this Form 10-QSB in
conjunction with the Company's Form 10-KSB for the year ended December 31, 1997,
in order to gain a more complete picture of the Company's financial condition.
PART II
ITEM 1. LEGAL PROCEEDINGS
The only change in the Company's legal proceedings during the third
quarter of 1998 is as follows:
American Factors Group, LLC v. AmeriResource Technologies, Inc. - As earlier
- -------------------------------------------------------------------
indicated in the 10-QSB's and 10-KSB a complaint was filed against the Company
and certain subsidiaries for breach of contract in the extension of credit on a
factoring agreement. The Company disputes this claim in that the contract called
for American Factors Group to purchase the receivables from the Company on a
non-recourse basis. The Company demanded an arbitrator hearing which was
conducted in mid-August with a ruling on or about September 15, 1998 in the
favor of American Factors Group for principal and interest. The Company is
reviewing its legal options with its outside legal counsel.
Subsequent Event
Industrial State Bank v. AmeriResource Technologies, Inc. - On November 25,
- -------------------------------------------------------------
1998, an action was filed against the Company, in the District Court of Johnson
County, Kansas, Case Number 98 C 14923, for the non-payment of a Line of Credit
that had matured even though some discussions had taken place in regards to
reaching some solution other than the filing of any legal action. The Company is
reviewing its legal options with its outside legal counsel and may have some
grounds for a legal defense against this action.
For additional information regarding the Company's legal proceeding,
see the Company's "Legal Proceedings" section in its Form 10-KSB for December
31, 1997.
6
<PAGE>
ITEM 6. REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K, August 6, 1998,
regarding the acquisition of First Americans Mortgage Corporation.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Annual
Report on Form 10-QSB to be executed on its behalf by the undersigned, thereunto
duly authorized.
AMERIRESOURCE TECHNOLOGIES, INC.
/s/ Delmar Janovec December 21, 1998
----------------------------------
Delmar Janovec
Chairman of the Board of Directors
and Chief Executive Officer
7
<PAGE>
INDEX TO EXHIBITS
Exhibits marked with an asterisk have been filed previously with the
Commission and are incorporated herein by reference.
EXHIBIT PAGE DESCRIPTION
NO. NO.
3.1 * Articles of Incorporation and Bylaws.
Incorporated by reference to the Company's
Form S-4 registration statements, effective
February 11,1992. File No. 33-44104.
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S SEPTEMBER 30,
1998, QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,762
<SECURITIES> 184,607
<RECEIVABLES> 814,971
<ALLOWANCES> 583,855
<INVENTORY> 0
<CURRENT-ASSETS> 867,077
<PP&E> 28,655
<DEPRECIATION> 27,408
<TOTAL-ASSETS> 1,080,864
<CURRENT-LIABILITIES> 2,378,609
<BONDS> 0
0
0
<COMMON> 3,090
<OTHER-SE> 3,083,684
<TOTAL-LIABILITY-AND-EQUITY> 1,080,864
<SALES> 0
<TOTAL-REVENUES> 21,365
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 457,381
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
