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 March 31, 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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1881 Hicks Road, #C, Rolling Meadows, IL 60008
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(Address of Principal Executive Offices) (Zip Code)
(847) 221-2801
--------------------
(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 XX NO
On May 3, 2000, the number of shares outstanding of the issuer's Common
Stock, $0.0001 par value (the only class of voting stock), was 550,821,312.
<PAGE>
Table of Contents
PART I - FINANCIAL INFORMATION.................................................3
ITEM 1 FINANCIAL STATEMENTS...........................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.....4
PART II- OTHER INFORMATION.....................................................6
ITEM 1. LEGAL PROCEEDINGS.............................................6
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.....................6
INDEX TO EXHIBITS..............................................................8
<PAGE>
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 March 31, 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-21 and are incorporated herein by this reference.
<PAGE>
<PAGE>
To Stockholders of AmeriResource Technologies, Inc. and subsidiaries
We have reviewed the accompanying consolidated balance sheet of AmeriResource
Technologies, Inc. and subsidiaries as of March 31, 2000 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the quarter then ended, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. All information included in these consolidated financial
statements is the representation of the owners of AmeriResource Technologies,
Inc. and subsidiaries.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as whole. Accordingly, we do not express an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements in order for them
to be in conformity with generally accepted accounting principles.
The consolidated financial statements for the year ended December 31, 1999 were
audited by us and we expressed an unqualified opinion on them in our report
dated April 15, 2000. The consolidated financial statements for the quarter
ended March 31, 1999 were compiled by us, therefore we express no assurance on
them.
May 2, 2000
Salt Lake City, Utah
The accompanying notes are an integral part of these financial statements.
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<TABLE>
<CAPTION>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
March 31, March 31,
2000 1999
(reviewed) (audited)
----------- -----------
Current assets:
<S> <C> <C>
----------- -----------
Cash and cash equivalents (Note 1) ........... $ 2,175,852 $ 165
----------- -----------
----------- -----------
Notes receivable - other (Note 3) ............ 30,000 30,000
----------- -----------
----------- -----------
Total current assets ............ 2,205,852 30,165
----------- -----------
----------- -----------
Property and Equipment (Note 1):
----------- -----------
Equipment .................................... 599,843 599,843
----------- -----------
Furniture, fixtures and library .............. 120,989 120,989
----------- -----------
Vehicles ..................................... 53,087 53,087
----------- -----------
Less accumulated depreciation ................ (773,919) (773,919)
----------- -----------
----------- -----------
Net property, plant and equipment -- --
----------- -----------
----------- -----------
----------- -----------
Other assets:
----------- -----------
----------- -----------
----------- -----------
Marketable securities (Note 12) .............. 382,261
426,241
----------- -----------
Total other assets ........................... 382,261 426,241
----------- -----------
Total assets .................................... $ 2,588,113 $ 456,406
----------- -----------
(continued)
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet_Toc411951707s
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, March 31,
2000 1999
(reviewed) (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) 555,577 555,577
------------ ------------
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 182,853 182,853
------------ ------------
Income Tax Payable 35,960 35,960
------------ ------------
------------ ------------
Total current liabilities 2,587,453 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 6,042,453 6,042,453
------------ ------------
------------ ------------
Stockholders' equity (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
------------ ------------
shares; issued and outstanding, 550,821,312 shares 55,081 55,081
------------ ------------
Additional paid-in capital 9,154,352 9,154,352
------------ ------------
------------ ------------
Accumulated deficit (12,664,103) (14,795,810)
------------ ------------
------------ ------------
Total stockholders' equity (3,454,340) (5,586,047)
------------ ------------
------------ ------------
Total liabilities and stockholder' equity $ 2,588,113 $ 456,406
------------ ------------
------------ ------------
------------ ------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months Ended March 31, 2000 and March 31, 1999
March 31, March 31,
2000 1999
(reviewed) (unaudited)
------------- -------------
------------- -------------
<S> <C> <C>
Net service income . $ -- $ 42,498
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------------- -------------
Operating expenses . -- (348)
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General and administrative expenses . 96,073 (573,743)
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Operating loss . (96,073) (531,593)
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Other income (expense):
------------- -------------
Gain on sale of treasury stock . -- 3,666
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Interest expense . -- (151)
------------- -------------
Gain on marketable securities . 2,227,780 --
------------- -------------
------------- -------------
Total other income (expense) 2,227,780 3,515
------------- -------------
------------- -------------
Net income (loss) before income tax 2,131,707 (528,078)
------------- -------------
------------- -------------
Income tax provision (Note 7) -- --
------------- -------------
------------- -------------
Net income $ 2,131,707 $ (528,078)
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------------- -------------
------------- -------------
Earnings per share $ (.003) $ (.00)
------------- -------------
------------- -------------
Weighted average common shares outstanding 493,417,979 427,060,312
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The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
$.0001 Par Value $.001 Par Value
Common Stock Preferred Stock
--------------------- ------------------ Additional Stock
Number Number Paid-In Subscription Treasury Accumulated
Of Shares Amount Of Shares Amount Capital Recievable Stock Deficit Total
----------- --------- --------- -------- ---------- --------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 .... 382,060,312 $ 38,206 3,089,621 $ 3,090 $7,916,968 $ $ (76,886) $(13,728,795)$(5,827,418)
=========== ========= ========= ======== ========== ========= ========= ============ ============
Issuance of Shares for:
S-8 options exercised 7,000,000 700 (700)
Cash ..................... 54,000,000 5,400 194,600 (80,000) 120,000
Consulting services ...... 65,000,000 6,500 645,000 651,500
Legal services ........... 40,000,000 4,000 396,000 400,000
Write off of subscription
receivable ............. 80,000 80,000
Sale of Treasury Stock .......... 76,886 76,886
Converted from Preferred
shares to Common shares ..... 2,760,000 276(2,760,000) (2,760) 2,484 --
Adjustment to retained earnings from sale of subsidiary
3,400,035 3,400,035
Net loss for the year ended
December 31, 1999 (4,467,050) (1,709,246)
----------- --------- --------- -------- ---------- --------- --------- ------------- ------------
Balance at December 31, 1999 .... 550,820,312 $ 55,082 329,621 $ 330 $9,154,352 $ $ $(14,795,810)$(5,586,047)
=========== ========= ========= ======== ========== ========= ========= ============ ============
Net loss for the three months
ended March 31, 2000
(reviewed)..................... 2,131,707 2,131,707
----------- --------- --------- -------- ---------- --------- --------- ------------- ------------
Balance at March 31, 2000
(reviewed)..................... 550,820,312 $ 55,082 329,621 $ 330 $9,154,352 $ $ $(12,664,103)$(3,454,340)
=========== ========= ========= ======== ========== ========= ========= ============ ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2000 and March 31, 1999
March 31, March 31,
2000 1999
(reviewed) (unaudited)
----------- -----------
----------- -----------
<S> <C> <C>
Reconciliation of net loss provided by (used in) operating
activities:
----------- -----------
----------- -----------
Net income (loss) after extraordinary loss $ 2,131,707 $ (528,078)
----------- -----------
----------- -----------
Non-cash items:
----------- -----------
(Gain) on sale of securities (2,227,780) (3,336)
----------- -----------
Non-cash services through issuance of stock -- 470,000
----------- -----------
Change in assets affecting operations-
(increase)
decrease
----------- -----------
Changes in liabilities affecting operations - increase (decrease)
----------- -----------
Accounts payable -- 4,355
----------- -----------
Accrued payroll and related -- 8,659
----------- -----------
Escrow fees -- (672)
----------- -----------
----------- -----------
Net cash provided by (used in) operating activities (96,073) (49,072)
----------- -----------
----------- -----------
----------- -----------
Cash flows from financing activities:
----------- -----------
----------- -----------
Proceeds from issuance of debt -- 20,959
----------- -----------
----------- -----------
Net cash provided by (used in) financing activities -- 20,959
----------- -----------
----------- -----------
----------- -----------
Cash flows from investing activities:
----------- -----------
Purchase of fixed assets -- (27,305)
----------- -----------
Proceeds from sale of marketable securities 2,271,760 57,325
----------- -----------
----------- -----------
Net cash provided by (used in) investing activities 2,271,760 30,020
----------- -----------
----------- -----------
Increase (decrease) in cash 2,175,687 1,907
----------- -----------
----------- -----------
Cash - beginning of period 165 36,152
----------- -----------
----------- -----------
Cash - end of period $ 2,175,852 $ 38,059
----------- -----------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
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 the Travel Agent's Hotel
Guide, Inc. (Travel Agent's) in a stock purchase agreement. The Company received
all the outstanding shares of Travel Agents 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.
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 2000.
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., Gold Coast Resources, 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.
Property, Plant and Equipment
The Company's fixed assets are presented at cost. Certain Subsidiaries use tax
depreciation methods which approximates straight-line. All others are being
depreciated on a straight-line basis. The estimated useful lives used are as
follows:
Furniture, fixtures and library 5 to 17 years
Equipment, including capitalized leased equipment 3 to 7 years
Vehicles 5 to 7 years
Construction equipment 3 to 10 years
The fixed assets were written off during 1999, therefore no depreciation expense
was recorded in 2000.
Summary of significant accounting policies (continued)
Publication Rights
The publication rights are for The Travel Agents Hotel Guide. This is a
publication used by travel agents to sell hotel rooms primarily throughout the
United States. The rights consist of the publication rights, logo, client list
and business concept. These rights were deemed worthless during 1999 and written
off.
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 preceding
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
For the years ended December 31, 1999 and 1998, 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.
1. Summary of significant accounting policies (continued)
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.
2. Related party transactions
At March 31, 2000, the Company had notes payable balances to officers,
a former officer and other stockholders (Note 4). In addition, there
was related accrued interest.
3. Notes receivable
The Company had the following notes receivable:
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 30,000 31, 2004.
Total Notes Receivable 30,000
-----------
4. Notes payable
The Company had the following notes payable:
Related Party:
---------------------------------------------------------
Note dated August 11, 1995, payable to an officer in the
original amount of $344,837, unsecured. Note bears
interest at 8.75% and is due in full on August 11, 1997,
this was extended until August 11, 1999. 350,342
---------------------------------------------------------
---------------------------------------------------------
Note payable to an officer, unsecured. Note bears
interest at 8% and is due on demand. 361,104
---------------------------------------------------------
---------------------------------------------------------
Total notes payable - related parties 711,446
---------------------------------------------------------
Less current portion 711,446
---------------------------------------------------------
Long-term portion $ -
---------------------------------------------------------
4. Notes payable (continued)
Others:
Note dated August 31, 1998, payable to American
Factors in the original amount of $430,924,
unsecured. The note bears interest at 9%. 430,924
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 897,567
Less current portion (897,567)
Long-term portion $ --
Maturities of notes payable at March 31, 2000, are as follows:
2000 897,567
2001 --
2002 --
2003 --
Thereafter --
$--------
897,567
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
quarter of 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 March 31, 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 losses carryforward of approximately $14,000,000 is
subject to significant recognition limitations due to the merger with
Tomahawk.
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.
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 believes that all pending professional liability proceedings are
adequately covered by insurance. However, due to the nature of the Company's
business, the Company has historically been able to procure insurance, but
there can be no assurance such insurance will be adequate or that it will be
renewable or remain available in the future.
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 Financing 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.
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 it's 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.
Tomahawk was named co-defendant in a lawsuit brought by private plaintiffs
for damages allegedly sustained as a result of construction activity
performed on a sewer project in Johnson County, Kansas. An unspecified
amount of damages was sought. The court dismissed the action, and there is
no ultimate liability to the Company since the recovery is limited to
insurance proceeds.
On April 26, 1996, Dyer Brothers Construction Company filed an action
against the Company's Lakewood subsidiary and the subsidiary's former
President, alleging negligence in the design of roadways. The roadways were
initially approved by the county and the Company believes its exposure is
minimal. The Company is represented by outside counsel in the lawsuit and an
answer has been filed.
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. An award of $422,066 was
issued in favor of American Factors. The counsel for American Factors has
indicated that they will proceed against the Company and the other
defendants based on alleged fraud. Settlement discussions between the
Company and American Factors are currently taking place. This is recorded in
the notes payable section of the financial statements.
9. Other commitments and contingencies (continued)
In September 1996, John Larry Adams, the Company's former Executive Vice
President, filed suit against the Company for unreimbursed expenses. In
September 1996, the Company settled this matter by allowing a stipulated
judgement to be entered for $80,652 plus interest. In January, 1998, this
matter was settled by Delmar Janovec contributing 2,000,000 shares of stock
to Mr. Adams.
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.
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 July 1997, Naylor commenced an action against Tomahawk based upon
injuries suffered while in the employment of a subcontractor employed
byTomahawk. The damaged alleged to be suffered by Naylor are greater than
$43,500. At this time, Tomahawk does not contemplate that there will be any
ultimate liability on its part as any claim should be covered by its
insurance coverage, 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.
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 settled this lawsuit during 1999, when a gain on settlement of debt
was recorded in financial statements.
An action was filed against a subsidiary, KLH Engineering of San Mateo, by
Lincoln Property Company, N.C. This action alleged that the Company
negligently provided construction services. In March of 1999, this action
was dismissed.
The convertible debentures issued in the acquisition of Travel Agent's are
guaranteed by Lexington Sales Corporation, Ltd (Lexington). 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.
10. Marketable securities
At March 31, 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 March 31, 2000.
1999
-----------------
-----------------
Marketable securities available for sale:
-----------------
-----------------
6,900,500 shares of restricted common stock,
-----------------
Kelly's Coffee Group, Inc. $ 324,368
-----------------
-----------------
125,526 shares of restricted common stock,
-----------------
Oasis Hotels and Casino International (formerly
Flexweight Corporation) 57,893
-----------------
-----------------
Total marketable securities $ 257,893
-----------------
-----------------
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.
<PAGE>
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 the 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 March 31, 2000, have surrounded merger and
acquisition negotiations.
The Company is attempting 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.
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 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.
Results of Operations
The Company had no revenue or income for the quarter ended March 31,
2000, as compared to $42,498 for the first quarter in 1999. The decrease is
attributable to the sale of FAMC, which had generated net service income in
1999.
As a result of the Company's lack of operations, expenses were reduced
during the quarter ended on March 31, 2000. For the quarter ended on March 31,
2000, no operating expenses were incurred and general and administrative
expenses were only $96,073, as compared to operating expenses of $348 and
general and administrative expenses of $573,743 for the same quarter in 1999.
During the quarter ended on March 31, 2000, the Company realized a gain
on marketable securities of $2,227,780, which primarily allowed the Company to
realize net income of $2,131,707 for the quarter ended March 31, 2000, as
compared to its $528,078 net loss for the quarter ended March 31, 1999.
Liquidity and Capital Resources
As a result of its ownership of common stock in Kelly's Coffee, which
has recently appreciated, the Company's liquidity improved greatly during the
quarter ended March 31, 2000. Total current assets as of the quarter ended March
31, 2000 were $2,205,852, as compared to $30,165 during the same period in 1999.
The Company's current liabilities remained the same from the quarter ended March
31, 1999 to the quarter ended March 31, 2000, at $2,587,453.
The Company's net stockholders' equity decreased from $5,586,047 for
the quarter ended March 31, 1999 to $3,454,340 for the quarter ended March 31,
2000. The Company's deficit was reduced primarily as a result of the gain on
marketable securities.
<PAGE>
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
<PAGE>
INDEX TO EXHIBITS
Exhibits marked with an asterisk have been filed previously with the
Commission and are incorporated herein by reference.
EXHIBIT PAGE
NO. NO. DESCRIPTION
- --- --- -----------
3.1 * Articles of Incorporation
3.2 * Bylaws.
27 31 Financial Data Schedule for the 3 month
period ending March 31, 2000.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000876490
<NAME> AmeriResources Technologies, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1.000
<CASH> 2,175,852
<SECURITIES> 382,261
<RECEIVABLES> 30,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 773,919
<DEPRECIATION> (773,919)
<TOTAL-ASSETS> 2,588,113
<CURRENT-LIABILITIES> 2,587,453
<BONDS> 3,350,000
105,000
330
<COMMON> 55,081
<OTHER-SE> (3,509,751)
<TOTAL-LIABILITY-AND-EQUITY> 2,588,113
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 96,073
<LOSS-PROVISION> 2,227,780
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,131,707
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,131,707
<EPS-BASIC> .003
<EPS-DILUTED> 0
</TABLE>
