<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 2000.
[ ] 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
incorporation or organization) Identification No.)
4465 South Jones, Las Vegas, Nevada 89103
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(702) 579-3347
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
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
On August 11, 2000, the number of shares outstanding of the issuer's
Common Stock, $0.0001 par value (the only class of voting stock), was
664,821,312.
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Table of Contents
<TABLE>
<S> <C>
Part I - Financial Information................................................3
Item 1. Financial Statements.......................................3
Item 2. Management's Discussion and Analysis or Plan of
Operation................................................3
Part II - Other Information...................................................4
Item 5. Other Information..........................................4
Item 6. Exhibits and Reports on Form 8-K...........................5
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
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 June 30, 2000, 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-17 and are incorporated herein by this reference.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere herein.
Except for historical information contained herein, certain statements herein
are forward-looking statements that are made pursuant to the safe harbor
provisions of the private securities litigation reform act of 1995.
Forward-looking statements involve estimates of the Company's financial
position, business strategy and other plans and objectives for future
operations. Although the Company believes that these expectations are
reasonable, there can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if substantially realized,
that they will have the expected effects on its business or operations.
General
As AmeriResource Technologies, Inc. (the "Company") sold most of its
operating subsidiaries in 1999, it is attempting to acquire income producing
assets which are hoped to generate profits. Accordingly, the Company's
operations during the quarter ended June 30, 2000, have surrounded merger and
acquisition negotiations.
The Company is seeking to acquire the assets of Magnolia Manors, Inc.
in exchange for cash and stock. Magnolia Manors and the Company have executed an
asset purchase agreement whereby the Company's subsidiary, Crestwood Villas,
will acquire Magnolia's assets. This agreement is expected to close after the
Company is successful in prioritizing Magnolia's existing mortgages. However, no
financing has been arranged or secured. Magnolia owns and operates approximately
21 assisted living facilities located in Alabama. The Company is acquiring
Magnolia in its attempt to enter the Assisted Living Care market as well as the
performing real estate industry.
In April 2000, the Company's wholly owned subsidiary, Crestwood Villas,
Inc., made a formal offer to purchase a casino and hotel in Mesquite, Nevada.
Crestwood Villas has also
3
<PAGE> 4
executed a Letter of Intent to purchase all of the outstanding shares of Nevstar
Gaming & Entertainment. These offers are subject to the Company securing the
$9,000,000 purchase price pursuant to debt financing and the execution of a
definitive purchase agreement for both the casino and hotel and for Nevstar
Gaming & Entertainment. The Company is currently working with two major
financing sources to fund these acquisitions. Nevstar Gaming & Entertainment
recently filed for Chapter 11 bankruptcy and the Company is still seeking to
acquire it.
On July 18, 2000, the Company assigned its March 30, 2000 real estate
purchase agreement to acquire the Mesquite Star Hotel and Casino to its newly
acquired subsidiary West Texas Real Estate and Resources, Inc.("WTRER") The
Company acquired WTRER on July 13, 2000. Please see "Item 5-Other Information"
for additional information about this acquisition.
Results of Operations
The Company had no revenue or income for the quarter ended June 30,
2000, as compared to $2,760 for the second quarter in 1999. The decrease is
attributable to the Company's operations during the quarter ended June 30, 2000
surrounding merger and acquisition negotiations.
As a result of the Company's lack of operations, expenses were reduced
during the quarter ended on June 30, 2000. For the quarter ended on June 30,
2000, no operating expenses were incurred and general and administrative
expenses were only $113,512, as compared to operating expenses of $885 and
general and administrative expenses of $275,653 for the same quarter in 1999.
During the quarter ended on June 30, 2000, the Company realized a gain
on marketable securities of $21,000, and a net loss of $111,904 for the quarter
ended June 30, 2000, as compared to its $84,014 net loss for the quarter ended
June 30, 1999.
Liquidity and Capital Resources
The Company's total current assets as of the quarter ended June 30,
2000 were $35,006, as compared to $30,165 during the same period in 1999. The
Company's current liabilities increased from the quarter ended June 30, 1999 at
$2,587,453 to the quarter ended June 30, 2000, at $2,630,357.
The Company's net stockholders' deficit decreased from $5,586,047 for
the quarter ended June 30, 1999 to $5,410,708 for the quarter ended June 30,
2000. The Company's deficit was reduced primarily as a result of the gain on
marketable securities.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
4
<PAGE> 5
Pursuant to a Definitive Agreement dated July 13, 2000 (the
"Agreement"), the Company acquired West Texas Real Estate and Resources, Inc., a
Texas corporation ("WTRER"). The Company acquired all of the outstanding equity
of WTRER from LBI Properties, Inc., a Florida corporation ("LBI"), in exchange
for $1.7 million secured by a promissory note. The term of the promissory note
extends until the $1.7 million is paid by the Company and provides for interest
at seven and one-half percent (7 1/2 %) per annum. It will be necessary for the
Company to secure financing in order to pay the $1.7 million purchase price
evidenced by the promissory note. The promissory note is secured by Five
Million, Two Hundred Seventy-Five Thousand, Two Hundred Forty (5,275,240) shares
of WTRER's common stock, which constitutes the outstanding equity of WTRER
acquired by the Company under the Agreement.
As a result of the acquisition of WTRER, the Company acquired an oil,
gas and mineral lease on approximately 200 acres in Pecos County, Texas. The
lease is described by appraisers as "proved undeveloped petroleum reserves that
are recoverable from additional wells yet to be drilled." Production from these
reserves will require the drilling of additional wells, the deepening of
existing wells or the installation of enhanced recovery facilities. The Company
intends to utilize all acquired assets described herein in the manner they were
previously used and intend to continue the operations of all businesses acquired
in the same manner as prior to its acquisition.
Subsequent to the quarter ended June 30, 2000, the Company terminated
its financing agreement with Jay Dello & Associates. Part of the Company's
reasoning for terminating this agreement was unauthorized withdrawals of
approximately $400,000 from the Company's escrow account held by Jay Dello &
Associates. Such monies are still missing and no explanation has been provided
to the Company for the withdrawals or the continued absence. The Company is in
the process of pursuing legal redress for these missing funds against Jay Dello
& Associates as well as all of its principals.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
The following exhibits are attached hereto.
3.1 * Articles of Incorporation
3.2 * Bylaws.
10 8 Definitive Agreement dated July 13, 2000 by
and between the Company acquired West Texas
Real Estate and Resources, Inc.
27 15 Financial Data Schedule for the 3 month
period ending June 30, 2000.
5
<PAGE> 6
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 Quarterly Report on
Form 10-QSB to be executed on its behalf by the undersigned, hereunto duly
authorized.
AMERIRESOURCE TECHNOLOGIES, INC.
/s/ Delmar Janovec
-----------------------------------
Delmar Janovec
Chairman of the Board of Directors
and Chief Executive Officer
6
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AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
2000 1999
(unaudited) (audited)
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 1) $ 5,006 $ 165
Notes receivable - other (Note 3) 30,000 30,000
-------- --------
Total current assets 35,006 30,165
-------- --------
Other assets:
Escrow Funds (restricted) (Note 1) 400,000 --
Marketable securities (Note 12) 239,643 426,241
--------
Total other assets 639,643 426,241
-------- --------
Total assets $674,649 $456,406
======== ========
</TABLE>
(continued)
F-1
<PAGE> 8
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
December 31,
June 30, 2000 1999
(unaudited) (audited)
------------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable:
Trade $ 276,374 $ 276,374
Related party (Note 2) 70,413 70,413
Notes payable - related party (Note 2 and 4) 579,089 555,577
Notes payable (Note 4) 956,643 956,643
Accrued payroll and related expenses 231,681 231,681
Accrued interest:
Related party (Note 2) 277,952 277,952
Other 202,245 182,853
Income Tax Payable 35,960 35,960
------------ ------------
Total current liabilities 2,630,357 2,587,453
OTHER LIABILITIES
Convertible debentures 3,350,000 3,350,000
Commitments and contingencies (Note 10) 105,000 105,000
------------ ------------
Total other liabilities 3,455,000 3,455,000
------------ ------------
Total liabilities 6,085,357 6,042,453
------------ ------------
STOCKHOLDERS' DEFICIT (NOTE 6)
Preferred stock, $.001 par value; authorized, 5,000,000
shares; issued and outstanding, 329,621 shares (Note 6) 330 330
Common Stock, $.0001 par value; authorized,
1,000,000,000 shares; issued and outstanding,
550,821,312 shares 55,081 55,081
Additional paid-in capital 9,154,352 9,154,352
Accumulated deficit (14,520,471) (14,795,810)
------------ ------------
Total stockholders' deficit (5,410,708) (5,586,047)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 674,649 $ 456,406
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 9
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
<TABLE>
<CAPTION>
For the quarter ended For the six months ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
(unaudited) (unaudited) (unaudited) (unaudited)
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net service income $ -- $ 2,760 $ -- $ 45,258
Operating expenses -- 885 -- 1,233
General and administrative expenses 113,512 275,653 213,987 275,653
------------- ------------- ------------- -------------
Operating loss (113,512) (273,778) (213,987) (231,653)
------------- ------------- ------------- -------------
Other income (expense):
Loss on sale of subsidiaries -- (39,950) -- (39,950)
Interest expense (19,392) (286) 19,392 (437)
Gain on marketable securities 21,000 230,000 508,717 230,000
------------- ------------- ------------- -------------
Total other income (expense) 1,608 189,613 489,325 189,613
------------- ------------- ------------- -------------
Net income (loss) before income tax (111,904) (84,014) 275,338 (42,015)
Income tax provision (Note 7) -- -- -- --
------------- ------------- ------------- -------------
Net income (loss) $ (111,904) $ (84,014) $ 275,338 $ (42,015)
============= ============= ------------- =============
Earnings per share $ (.00) $ (.00) $ .00 $ (.00)
============= ============= ============= =============
Weighted average common shares outstanding 550,821,312 458,060,312 550,821,312 458,060,312
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
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AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
<TABLE>
<CAPTION>
For the quarter ended For the six months ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------- ------ ------- -------
<S> <C> <C> <C> <C>
Reconciliation of net loss provided by (used in) operating
activities:
Net income (loss) after extraordinary loss (111,904) (84,014) 275,338 (42,015)
Non-cash items:
Depreciation -- 8,600 -- 8,600
Non-cash services through issuance of stock -- 319,714 -- 150,000
(Gain)/loss on sale of subsidiary -- 39,950 -- 39,950
Reduction of investments 102,738 (230,000) 102,738 (230,000)
Changes in assets affecting operations - (increase) decrease
Accounts receivable -- 10,050 -- 10,050
Escrow fund (restricted) (500,000) -- (500,000) --
Prepaid insurance and other expenses -- (1,950) -- (1,950)
Changes in liabilities affecting operations - increase
(decrease)
Accounts payable 42,904 -- -- --
Other current liabilities -- (30,642) -- (22,655)
-------- -------- -------- --------
Net cash provided by (used in) operating activities (466,262) 31,708 (121,924) (88,020)
-------- -------- -------- --------
Cash flows from financing activities:
Repayment of debt -- (6,476) -- (6,476)
-------- -------- -------- --------
Net cash provided by (used in) financing activities -- (6,476) -- (6,476)
Cash flows from investing activities:
Purchase of fixed assets -- (25,782) -- (53,087)
Proceeds from sale of subsidiaries 550 -- 550
Proceeds from sale of marketable securities 39,880 125,791
-------- -------- -------- --------
Net cash provided by (used in) investing activities 39,880 (25,232) 125,791 (52,537)
-------- -------- -------- --------
Increase (decrease) in cash (426,382) (30,914) 3,867 (29,007)
Cash - beginning of period 431,888 38,059 165 36,152
Cash - end of period 5,506 7,145 5,506 7,145
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
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AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND BUSINESS COMBINATIONS
AmeriResource Technologies, Inc., formerly known as KLH Engineering
Group, Inc (the Management Company), a Colorado corporation, was
incorporated March 3, 1989 for the purpose of providing diversified
civil engineering services throughout the United States, to be
accomplished through acquisitions of small to mid-size engineering
firms. On July 16, 1996, the Company changed its name to AmeriResource
Technologies, Inc.
At December 31, 1998, the Management Company directly or indirectly
owned 100% of the stock of KLH Engineering of Colorado Springs, KLH
Engineering of San Mateo, KLH Engineering of Grand Junction, KLH
Engineering of Lakewood, KLH Engineering of Greeley, and KLH Engineers
and Constructors. All of the Subsidiaries closed their operations
during 1996, with the exception of KLH Pueblo, which was sold to a
third party during 1996. On June 30, 1999, the Company sold all its
shares to a third party for $550 in the following subsidiaries:
KLH Engineering of Colorado Springs, Inc.
KLH Engineering of Lakewood, Inc.
KLH Engineering of Grand Junction, Inc.
KLH Engineering of Greeley, Inc.
KLH Engineering of San Mateo, Inc.
KLH Engineering & Constructors, Inc.
Morton Technologies, Inc.
LBH Engineering, Inc.
Coffee Engineering & Surveying, Inc.
Scanlon & Associates, Inc.
Effective December 14, 1998, the Company acquired Gold Coast Resources,
Inc. (Gold Coast) in a stock purchase agreement. The Company received
all the outstanding shares of The Travel Agents Hotel Guide, Inc. (a
wholly owned subsidiary of Gold Coast) in exchange for a convertible
debenture in the amount of $3,350,000.
Effective July 1, 1998, the Company acquired First Americans Mortgage
Corporation (First Americans) in an agreement for the exchange of
stock. The two shareholders of First Americans transferred 100% of
their shares in exchange for 45,000,000 shares of the Company's stock
(see Note 2). First Americans was incorporated on July 31, 1995 in
Missouri. On December 31, 1999, the Company sold 100% of the shares of
First Americans to an officer of First Americans for $30,000 note
receivable. This note is payable to the Company over 5 years at the
prime interest rate.
On May 13, 1994, the Company entered into an agreement to acquire
Tomahawk Construction Company, a Missouri corporation (Tomahawk). The
acquisition, which was completed on July 27, 1994, was accomplished by
merging Tomahawk into a wholly-owned subsidiary of the Company.
Tomahawk then became a subsidiary of the Company. This transaction has
been treated as a reverse acquisition.
F-5
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AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Tomahawk is a Kansas City, Kansas-based general contractor and
qualified American Indian Minority Business Enterprise specializing in
concrete and asphalt paving, utilities, grading/site work, structural
concrete and commercial buildings. Tomahawk was organized on April 12,
1980, as a Missouri corporation. Tomahawk had no operations during 1999
or the first two quarters of 2000.
The Company entered into a financing agreement in December 1999 with
Jay Dello & Associates (Jay Dello), Ltd. for the purpose of providing
financing for merger & acquisitions of targeted companies. The
financing agreement was terminated by the Company on or about June 18,
2000 due to non-performance.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity
with principles of accounting applicable to a going concern, which
contemplates the realization of assets and the liquidation of
liabilities in the normal course of business. The Company has incurred
continuing losses and has not yet generated sufficient working capital
to support its operations. The Company's ability to continue as a going
concern is dependent, among other things, on its ability to reduce
certain costs, and its obtaining additional financing and eventually
attaining a profitable level of operations.
It is management's opinion that the going concern basis of reporting
its financial condition and results of operations is appropriate at
this time. The Company plans to increase cash flows and to take steps
towards achieving profitable operations through the sale or closure of
unprofitable operations, and through the merger with or acquisition of
profitable operations.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the combined accounts of
AmeriResource Technologies, Inc., The Travel Agents Hotel Guide, Inc.
and Tomahawk Construction Company. All material intercompany
transactions and accounts have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company considers
currency on hand, demand deposits with banks or other financial
institutions, money market funds, and other investments with original
maturities of three months or less to be cash equivalents.
ESCROW FUNDS
The escrow funds was established solely for the proceeds of securities
sold by the Company. Upon termination of the financing agreement with
Jay Dello, approximately $400,000 was removed from this account by Jay
Dello, JD Guidace, Jerald Delgiudice, James G. Delgiudice and his
associates without the authorization of either Delmar A. Janovec or the
Company. The Company is in the process of pursuing legal action for
misrepresentation of numberous issued and the unauthorized removal of
funds from this account.
F-6
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AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONVERTIBLE DEBENTURES
The convertible debentures were issued in the purchase of Gold Coast
and are guaranteed by Lexington Sales Corporation, Ltd. These
debentures pay interest of 7% per year (cumulative), payable at the
time of each conversion until the principal amount is paid in full or
has been converted. The debentures convert into shares of the Company's
common stock (par value $.0001) at any time after December 14, 2001.
After December 14, 2001, the debentures can be converted in whole or
part. The number of shares issuable upon conversion is determined by
dividing the principal converted plus accrued interest (less any
required withholding) by the conversion price in effect on the
conversion date. The conversion price is the average bid closing price
of the Company's common stock for the five trading days immediately
preceding and ending on the day proceeding the date of conversion.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting
period. In these financial statements assets and liabilities involve
extensive reliance on management's estimates. Actual results could
differ from those estimates.
INCOME TAX
The Company elected to file a consolidated tax return and the income
tax provision is on a consolidated basis. Prior to 1992, the
Subsidiaries filed separate corporate returns.
Effective January 1, 1993, the Financial Accounting Standards Board
(FASB) issued FASB No. 109, "Accounting for Income Taxes". FASB No. 109
requires that the current or deferred tax consequences of all events
recognized in the financial statements be measured by applying the
provisions of enacted tax laws to determine the amount of taxes payable
or refundable currently or in future years. There was no impact on from
the adoption of this standard.
Deferred income taxes are provided for temporary differences in
reporting income for financial statement and tax purposes arising from
differences in the methods of accounting for construction contracts and
depreciation.
Construction contracts are reported for tax purposes and for financial
statement purposes on the percentage-of-completion method. Accelerated
depreciation is used for tax reporting, and straight-line depreciation
is used for financial statement reporting.
LOSS PER COMMON SHARE
Loss per common share is based on the weighted average number of common
shares outstanding during the period. Options, warrants and convertible
debt outstanding are not included in the computation because the effect
would be antidilutive.
F-7
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AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
2. RELATED PARTY TRANSACTIONS
At June 30, 2000, the Company had notes payable balances and related
accrued interest to an officers (Note 4).
3. NOTES RECEIVABLE
The Company had the following notes receivable:
<TABLE>
<S> <C>
Notes receivable from First Americans Mortgage Corp, bearing interest at the
prime rate, principal and interest payments due December 31,
starting December 31, 2000 through December 31, 2004. $30,000
-------
Total Notes Receivable $30,000
-------
</TABLE>
4. NOTES PAYABLE
The Company had the following notes payable:
RELATED PARTY:
<TABLE>
<S> <C>
Note dated August 11, 1995, payable to an officer in the original amount of
$344,837, unsecured. Note bears interest at 8.75% and are due in full on
August 11, 1997, this was extended until August 11, 2000. $217,985
Note payable to an officer, unsecured. Note bears
interest at 8% and are due on demand. 361,104
--------
Total notes payable - related parties 579,089
Less current portion 579,089
--------
Long-term portion $ -
========
</TABLE>
F-8
<PAGE> 15
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
4. NOTES PAYABLE (CONTINUED)
OTHERS:
<TABLE>
<S> <C>
Note dated August 31, 1998, payable to American Factors in the
original amount of $430,924, unsecured.
The note bears interest at 9%. 490,000
---------
Notes payable to various subcontractors and suppliers for goods and services
provided in contracts. The notes have no interest rate and are paid to the
extent a payment for providing services or goods on specified contracts are
collected. This debt is under class 7 of the Plan of Reorganization and is
to be paid from cash flows of Tomahawk. 464,643
---------
Various notes payable with interest rates ranging from 0% to 12.75%,
monthly payments from $226 to $243, uncollateralized. 2,000
---------
Total notes payable 956,643
---------
Less current portion (956,643)
---------
Long-term portion $ --
=========
Maturities of notes payable at June 30, 2000, are as follows:
2000 $956,643
2001 --
2002 --
2003 --
Thereafter --
$956,643
</TABLE>
5. STOCKHOLDERS' EQUITY
COMMON STOCK
The Company increased its authorized shares from 500,000,000 to
1,000,000,000 during 1999. The Company did not issue any stock in
the first six months of 2000.
F-9
<PAGE> 16
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
5. STOCKHOLDERS' EQUITY (CONTINUED)
PREFERRED STOCK
The Company has currently designated 2,500,000 shares of their
authorized preferred stock to Series A Convertible Preferred Stock
and an additional 2,500,000 shares to Series B Convertible
Preferred Stock.
Both Series A and B preferred stock bear a cumulative $.125 per
share per annum dividend, payable quarterly. The shareholders have
a liquidation preference of $1.25 per share, and in addition, all
unpaid accumulated dividends are to be paid before any
distributions are made to common shareholders. These shares are
subject to redemption by the Company, at any time after the second
anniversary of the issue dates (ranging from August 1990 through
December 1995) of such shares and at a price of $1.25 plus all
unpaid accumulated dividends. Each preferred share is convertible,
at any time prior to a notified redemption date, to one common
share. The preferred shares have equal voting rights with common
shares and no shares were converted in 1998. Dividends are not
payable until declared by the Company. At June 30, 2000, the
amount of dividends in arrears on the preferred stock was
$1,368,406.
6. INCOME TAX
No current or deferred tax provision resulted, as there was both
an accounting and a tax loss for each of the periods presented.
The primary permanent differences between tax and accounting
losses are non-tax deductible penalties, losses from closure of
subsidiaries and amortization of certain goodwill.
The Company has available for income tax purposes, a net operating
loss carryforward of approximately $14,000,000 expiring from 2004
to 2007, including $970,000 subject to certain recognition
limitations. A valuation allowance for the full amount of the
related deferred tax asset of approximately $1,380,000 has not
been recorded, since there is more than a 50 percent chance this
will expire unused.
The significant temporary differences are associated with bad
debts, deferred compensation and accrued vacation.
All of the net operating loss carryforward of approximately
$14,000,000 is subject to significant recognition limitations due
to the merger with Tomahawk.
F-10
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AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
7. CLOSED AND SOLD SUBSIDIARIES
As of December 31, 1996 the following subsidiaries have ceased
operations: KLH Engineering of Colorado Springs, KLH Engineering
of Grand Junction, KLH Engineering of Lakewood, KLH Engineering of
Greeley, KLH Engineering of San Mateo and KLH Engineers and
Constructors.
In April 1996, the Company sold KLH Engineering of Pueblo to an
outside party for a $40,000 note receivable, $33,433 in cash and
$166,567 in assumption of debt. During 1998, an allowance of
$20,000 was recorded, due to the notes questionable collectibilty.
During 1999, the balance of $20,000 was written off due to
uncollectibility.
On June 30, 1999, the Company sold all its shares to a third party
for $550 in the following subsidiaries: KLH Engineering of
Colorado Springs, KLH Engineering of Grand Junction, KLH
Engineering of Lakewood, KLH Engineering of Greeley, KLH
Engineering of San Mateo, KLH Engineers and Constructors, Morton
Technologies, Inc., LBH Engineering, Inc., Coffee Engineering &
Surveying, Inc. and Scanlon & Associates, Inc. The assets and
liabilities of these subsidiaries are not included in the
consolidated financial statements.
8. PROFIT-SHARING PLAN
The Company has an employee savings and profit-sharing plan for
all eligible employees which includes an employees savings plan
established under the provisions of Internal Revenue Code Section
401(k). The Company's contributions to the plan are at the Board
of Director's discretion, but may not exceed the maximum allowable
deduction permitted under the Internal Revenue Code at the time of
the contribution. No contributions were made under this plan in
1997 or 1998. The Company distributed 100% of this plan during
1999.
F-11
<PAGE> 18
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
9. OTHER COMMITMENTS AND CONTINGENCIES
The Company's subsidiaries are typically subject to various claims
arising in the ordinary course of business which usually relate to
claims of professional negligence or contract breaches.
The Company maintains general liability and workmen's compensation
insurance with the standard industry insurance limits.
In October 1993, the U.S. Securities and Exchange Commission (the
"SEC") began a private "order of investigation" of the Company. In
a letter dated February 14, 1996, the SEC's Central Regional
Office ("CRO") informed the Company that it planned to recommend
to the SEC that a civil injunctive action for violations of
federal securities laws, alleged to have occurred during 1993, be
brought against two former Presidents and Directors of the
Company, Fred Boethling and Richard Kendall (the "Former
Management"), and against the Company itself. During the time
frame of the violations alleged by the SEC, no members of the
current management of either AmeriResource Group, AmeriResource
Technologies, Inc. or Tomahawk were involved in any transactions
with the Company or the Company's securities, or in the
preparation of any of the Company's disclosure or sales material.
The Company was given the opportunity to submit a written
statement to the SEC setting forth its positions and arguments
concerning the recommendations (a "Wells Submission"). The Company
engaged counsel independent of Former Management to prepare its
Wells Submission, which was delivered to the SEC on April 21,
1995. On April 30, 1996, the Company submitted documents to the
SEC with a request to finalize the settlement of this matter. The
SEC informed the Company in October 1997 that no action will be
taken against the Company.
In February 1996, Imperial Premium Finance filed an action in the
Superior Court of the State of California for the County of Los
Angeles. This action is for premiums financed for errors and
omissions coverage. This matter has been settled by allowing a
stipulated judgement in the amount of $60,000. This obligation is
recorded in the contingencies and commitments section of the
financial statements.
On September 16, 1994, Tomahawk filed for protection pursuant to
Title 11 of the U.S. Codes under Chapter 11, in the Western
District of Missouri, Western Division. A plan of reorganization
was filed on or about March 9, 1996 and an Amended Plan of
Reorganization on April 29, 1996. The court confirmed the amended
plan on August 28, 1996.
F-12
<PAGE> 19
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
9. OTHER COMMITMENTS AND CONTINGENCIES (CONTINUED)
Tomahawk filed suit against M.K. Ferguson for work completed in
Oak Ridge, Tennessee. The claim was settled in May 1997 for the
sum of $1,851,444. Tomahawk has agreed with its subcontractors to
sharing a percentage of the delay claim only, in exchange for
releases of money owed by Tomahawk. Tomahawk has agreed to settle
with its bonding company (USF&G) by paying $500,000 for a release
of $2,300,000 of bond claims. In addition, Tomahawk has agreed to
pay Industrial State Bank the sum of $336,000 for release of the
Bank's claim on the settlement money. Tomahawk will also pay the
Internal Revenue Service $22,000 for a release of all liens.
In July 1996, a judgement was entered in favor of Lexington
Insurance Company in the amount of $39,774 with interest (8%). In
December 1997, the court entered an order ordering the Company to
appear for a hearing in aid of execution. A hearing date is to be
determined. This obligation is recorded as a contingency and
commitment.
In October 1996, the Internal Revenue Service (IRS) placed liens
on the assets of all of the Company's Colorado and California
subsidiaries for failure to pay payroll taxes in 1996. The Company
is several months behind in payment and is attempting to resolve
this matter. The total of the liens is approximately $480,000. The
Company also faces potential action by the State of Colorado.
In February 1996, American Factors Group, L.L.C. (American
Factors) filed suit against the Company and certain subsidiaries
for breach of contract and fraud in the extension of credit in a
factoring agreement. An arbitrator was appointed and a hearing was
held in July 1998. The parties in favor of American Factors
reached a settlement of $490,000. This is recorded in the notes
payable section of the financial statements.
F-13
<PAGE> 20
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
9. OTHER COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company has defaulted upon interest and principal with respect
to a promissory note in favor of the Olivia I. Dodge Charitable
Remainder Unitrust (the "Dodge Trust") which became due to
December 31, 1995. According to the Dodge Trust's attorney, the
total due (including interest) as of May 1, 1996 is $169,761. This
note was settled during 1998 when the Company issued the Dodge
Trust 1,959,281 shares of common stock.
Anderson & Associates, Inc. (AAI) obtained a judgment against
Tomahawk construction in Harris County, Texas in the amount of
$3,337. AAI is actively continuing their collection efforts for
this note. This obligation is reflected in the accounts payable
section of the financial statements.
On July 30,1996, Youngblood Enterprises, Inc. obtained a judgment
against KLH Engineering Group, Inc. in the State of Colorado.
Thereafter, Youngblood Enterprises, Inc. assigned the judgement to
Billie Youngblood. On April 8, 1998, Billie Youngblood registered
this judgment in the District Court in Johnson County, Kansas. As
of the date of this letter, the judgement has been satisfied and
the judgment will be dismissed in the near future.
The Company has defaulted upon interest and principal with respect
to a $40,819 note in favor of the Roy Lee Johnston Trust (the
"Johnston Trust"). The Johnston Trust has received a judgement in
its favor but has been unsuccessful in their attempts to collect.
This obligation is reflected in the notes payable section of the
financial statements.
In January 1997, the Carpenters District Council of Kansas City
Pension Fund and certain other plaintiffs (collectively, the
"Carpenters Fund") filed a complaint in the United States District
Court for the Western District of Missouri against Tomahawk
seeking payment of unpaid pension fund and welfare fund benefits
and an accounting of the benefits that were to have been paid.
Based upon the claims asserted by the Carpenters Fund against
United States Fidelity & Guaranty Company, the amount of the
unpaid benefits is approximately $4,200. It appears a settlement
may occur in the near future which will result in no liability to
the Company, therefore no liability has been recorded in the
financial statements.
F-14
<PAGE> 21
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
9. OTHER COMMITMENTS AND CONTINGENCIES (CONTINUED)
In January 1997, the Construction Industry Laborers Pension Fund
and certain other plaintiffs (collectively, the "Construction
Fund") filed a complaint in the United States District Court for
the Western District of Missouri against Tomahawk seeking payment
of unpaid pension fund, welfare fund benefits, vacation fund and
training fund benefits and an accounting of the benefits that were
to have been paid. Based upon the claims asserted by the
Construction Fund against United States Fidelity & Guaranty
Company, the amount of the unpaid benefits is approximately
$41,000. It appears a settlement may occur in the near future
which will result in no liability to the Company, therefore no
liability has been recorded in the financial statements.
In January 1997, the Kansas City Cement Masons Pension Fund and
certain other plaintiffs (collectively, the "Cement Fund") filed a
complaint in the United States District Court for the Western
District of Missouri against Tomahawk seeking payment of unpaid
pension fund, welfare fund benefits, vacation fund and training
fund benefits and an accounting of the benefits that were to have
been paid. Based upon the claims asserted by the Cement Fund
against United States Fidelity & Guaranty Company, the amount of
the unpaid benefits is approximately $7,700. It appears a
settlement may occur in the near future which will result in no
liability to the Company, therefore no liability has been recorded
in the financial statements.
In January 1997, the Mo-Kan Teamsters Pension Fund and certain
other plaintiffs (collectively, the "Teamsters Fund") filed a
complaint in the United States District Court for the Western
District of Missouri against Tomahawk seeking payment of unpaid
pension fund, welfare fund benefits, vacation fund and training
fund benefits and an accounting of the benefits that were to have
been paid. Based upon the claims asserted by the Teamsters Fund
against United States Fidelity & Guaranty Company, the amount of
the unpaid benefits is approximately $4,200. It appears a
settlement may occur in the near future which will result in no
liability to the Company, therefore no liability has been recorded
in the financial statements.
In December 1997, Morthole & Zeppetello (Morthole) commenced
action against the Company based upon an alleged failure of the
Company to pay under the terms of a promissory note, dated May 3,
1996. The case was dismissed pursuant to a settlement agreement
reached by the parties. The Company defaulted on the settlement
agreement and a judgement was then entered in the amount of $8,500
plus interest of 10% per annum from May 3, 1996 forward and
attorney's fees of $1,275. The judgment remains pending, therefore
no liability has been recorded in the financial statements.
F-15
<PAGE> 22
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
9. OTHER COMMITMENTS AND CONTINGENCIES (CONTINUED)
In January 1998, OCI, Inc. commenced an action against the Company
for certain temporary services provided for the Company. The
amount alleged to be owed is $2,436 plus interest. On December 14,
1998, a settlement was reached between the parties and the Company
will pay the sum of $100 per month until the principal amount has
been paid. This is recorded in the accounts payable section of the
financial statements.
In August 1998, the City of Greenwood Village (the "City"),
Colorado filed a third party complaint against a subsidiary, KLH
Engineering of Lakewood. The City alleges that the Company
negligently performed inspection services with respect to a
drainage system constructed in the City by the developer, KTC.
Presently, the parties are in discussions with respect to filing a
default judgment against the Company that will ensure no claim is
made against the Company.
The Company's subsidiary, KLH Engineers & Constructors, Inc. has
defaulted on a promissory note to Thomas Little, a former officer
of the subsidiary. The note became due on November 14, 1996. The
principal amount owed is $17,500 with 10% interest accruing from
the date of the note, October 29, 1990. This obligation is
reflected in the notes payable section of the financial
statements.
In November 1998, an action was filed against the Company in the
District Court of Johnson County, Kansas. The plaintiff,
Industrial State Bank, claims it is owed for non-payment of a line
of credit in the amount of $1,071,000 which matured in August of
1998. The Company filed a counter action against Industrial State
Bank for misappropriations of funds. The parties are settled this
lawsuit during 1999, when a gain on settlement of debt was
recorded in financial statements.
Lincoln Property Company, N.C, filed an action against a
subsidiary, KLH Engineering of San Mateo. This action alleged that
the Company negligently provided construction services. In March
of 1999, this action was dismissed.
Lexington Sales Corporation, Ltd (Lexington) guarantee the
convertible debentures issued in the acquisition of Gold Coast.
The consideration given to Lexington in this transaction consists
of Lexington receiving 10% of the gross proceeds (if and) when the
Company either merges or is sold to another party and 20,000,000
shares of the Company's stock.
F-16
<PAGE> 23
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
10. MARKETABLE SECURITIES
At June 30, 2000 marketable equity securities are stated at their
lower of aggregate cost or market value. The Company has
marketable securities available for sale. No other investments in
trading or held-to-maturity marketable securities exist as of June
30, 2000.
<TABLE>
<S> <C>
Marketable securities available for sale at June 30, 2000:
3,635,500 shares of common stock,
Kelly's Coffee Group, Inc. $181,750
125,526 shares of restricted common stock,
Oasis Hotels and Casino International (formerly
Flexweight Corporation) 57,893
--------
Total marketable securities $239,643
========
</TABLE>
11. GOING CONCERN UNCERTAINTY
The accompanying financial statements have been prepared in
conformity with principles of accounting applicable to a going
concern, which contemplates the realization of assets and the
liquidation of liabilities in the normal course of business. The
Company has incurred continuing losses and has not yet generated
sufficient working capital to support its operations. The
Company's ability to continue as a going concern is dependent,
among other things, on its ability to reduce certain costs, obtain
new contracts and additional financing and eventually, attaining a
profitable level of operations.
It is management's opinion that the going concern basis of
reporting its financial condition and results of operations is
appropriate at this time. The Company plans to increase cash flows
and take steps towards achieving profitable operations through the
sale or closure of unprofitable operations, and through the merger
with or acquisition of profitable operations.
12. BANKRUPTCY PROCEEDINGS OF SUBSIDIARY
On September 16, 1994, Tomahawk filed for protection pursuant to
Title 11 of the U.S. Code under Chapter 11, in the Western
District of Missouri. On August 28, 1995 the court confirmed the
Company's amended plan of reorganization. The plan provides for
payment of claims through the continued operations of the Company,
and contingent upon the collection of receivables on completed
projects. The Company has reclassified various payables into
long-term debt relative to these claims in the amount of $464,643.
F-17
<PAGE> 24
INDEX TO EXHIBITS
Exhibits marked with an asterisk have been filed previously with the
Commission and are incorporated herein by reference.
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. NO. DESCRIPTION
--- --- -----------
<S> <C> <C>
3.1 * Articles of Incorporation
3.2 * Bylaws.
10 8 Definitive Agreement dated July 13, 2000 by
and between the Company acquired West Texas
Real Estate and Resources, Inc.
27 15 Financial Data Schedule for the 3 month
period ending June 30, 2000.
</TABLE>
7
