<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 SEPTEMBER 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 September 30, 2000, the number of shares outstanding of the issuer's
Common Stock, $0.0001 par value (the only class of voting stock), was
695,071,312.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION....................................................................................1
ITEM 1. FINANCIAL STATEMENTS...................................................................1
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OR PLAN OF
OPERATION..............................................................................2
PART II - OTHER INFORMATION.......................................................................................3
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.......................................................3
INDEX TO EXHIBITS.................................................................................................5
</TABLE>
<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 September 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.
1
<PAGE> 4
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OR PLAN OF OPERATION
AmeriResource Technologies, Inc., a Delaware corporation (the
"Company"), does not currently engage in active operations other than seeking to
initiate or acquire business operations. The Company seeks to accomplish this
goal through a merger or acquisition. As of November 13, 2000, the Company had
established contacts with a few business entities, but had not yet reached any
formal definitive agreement to effect a merger or acquisition with any entity.
Magnolia Manors and the Company executed an asset purchase agreement
whereby the Company's subsidiary Crestwood Villas, Inc. would acquire the
assets. Although this agreement has expired, the Company is continuing to
discuss the possibility of the assumption of debt on some of Magnolia's
facilities. Magnolia now owns and operates approximately 11 assisted living care
facilities which are effectively controlled by Finova Realty Capital and ORIX
Real Estate Capital Markets. These entities control the facilities on the basis
of their substantial liens on the facilities. The Company is still seeking to
acquire the assets of certain Magnolia Manors Inc. facilities in exchange for a
combination of debt assumption and cash, although no assurances can be given the
Company will ever be successful in effecting such acquisition.
In April 2000, the Company, through a wholly owned subsidiary, made a
formal offer to purchase a casino and hotel in Mesquite, Nevada, and all of the
outstanding shares of NevStar Gaming & Entertainment. These offers are subject
to, among other things, the Company securing the $9,000,000 in debt financing.
In July 2000, NevStar filed for Chapter 11 Bankruptcy to prevent a foreclosure
on its assets. On or about October 19, 2000, a lien holder was successful in
implementing a foreclosure action against NevStar. The Company is negotiating to
acquire this lien holder's position regarding NevStar. Although no assurances
can be given the Company will ever be successful in securing the requisite
funds, or in effecting this acquisition, it is currently working with three
financing sources to fund the acquisition.
Results of Operations
As a result of the Company's lack of operations, no income has been
generated for the fiscal year through September 30, 2000. The Company reported a
net loss of $1,052,315 and of $856,859 for the three (3) and nine (9) months
ended September 30, 2000, respectively, as compared to a net gain of $449,440
and $407,425 for the same periods in 1999. This loss is attributable to expenses
associated with merger and acquisition negotiations which are accounted for as
general and administrative expenses as well as a one time charge for the
settlement of legal expenses with former counsel, Craft Fridkin & Rhyne. The
general and administrative expenses for the quarter ended September 30, 2000,
was $1,044,321, as compared to these expenses totaling $148,189 for the same
quarter in 1999.
Liquidity and Capital Resources
The Company's total current assets as of the quarter ended September
30, 2000 were $43,517, as compared to $30,165 as of December 31, 1999. The
Company had total assets of
2
<PAGE> 5
$2,383,160 as of September 30, 2000, as compared to $456,406 as of December 31,
1999. The increase in total assets is due to the Company's acquisition of oil
and gas property in Pecos County, Texas, effected when it acquired West Texas
Real Estate and Resources, Inc., a Texas corporation on July 13, 2000 (this
acquisition was reported in the Company's Form 10-QSB for the quarter ended June
30, 2000). Another substantial increase in total assets is due to the Company's
recognition of $400,000 as funds improperly withdrawn from the Company's escrow
account. Although the recovery of these funds is still uncertain, the Company
intends to pursue the receipt of such funds to the fullest extent its resources
allow.
The Company's current liabilities from the quarter ended September 30,
2000 were $2,737,066, versus $2,587,453 as of December 31, 1999.
The Company's total stockholders' deficit was decreased to $3,808,906
as of September 30, 2000 as compared to the net stockholder's deficit of
$5,586,047 as of December 31, 1999. The Company's deficit was reduced primarily
as a result of the increase in additional paid-in capital.
PART II - OTHER INFORMATION
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.
27 6 Financial Data Schedule for the quarter ending June 30, 2000.
3
<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
Dated: November 13, 2000
4
<PAGE> 7
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(unaudited) (audited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 13,517 $ 165
Notes receivable - other (Note 3) 30,000 30,000
------------ ------------
Total current assets 43,517 30,165
------------ ------------
OTHER ASSETS:
Oil & Gas Property 1,700,000 --
Escrow Funds (restricted) (Note 1) 400,000 --
Marketable securities (Note 12) 239,643 426,241
------------ ------------
Total other assets 2,339,643 426,241
------------ ------------
TOTAL ASSETS $ 2,383,160 $ 456,406
============ ============
</TABLE>
(continued)
F-1
<PAGE> 8
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(unaudited) (audited)
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable:
Trade $ 276,374 $ 276,374
Related party (Note 2) -- 70,413
Notes payable - related party (Note 2 and 4) 759,217 555,577
Notes payable - current portion (Note 4) 845,643 956,643
Accrued payroll and related expenses 331,681 231,681
Accrued interest:
Related party (Note 2) 277,952 277,952
Other 210,239 182,853
Income Tax Payable 35,960 35,960
------------ ------------
Total current liabilities 2,737,066 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 6,192,066 6,042,453
------------ ------------
STOCKHOLDERS' DEFICIT (NOTE - 5)
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,
695,071,312 and 550,820,312 shares 63,986 55,081
Additional paid-in capital 11,979,447 9,154,352
Accumulated deficit (15,852,339) (14,795,810)
------------ ------------
Total stockholders' deficit (3,808,906) (5,586,047)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 2,383,160 $ 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 nine months ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
(unaudited) (unaudited) (unaudited) (unaudited)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net service income $ -- $ 86,314 $ -- $ 131,572
Operating expenses -- -- -- 1,233
General and administrative expenses 1,044,321 148,189 1,440,928 423,842
-------------- -------------- -------------- --------------
Operating loss (1,044,321) (61,875) (1,440,928) (293,503)
-------------- -------------- -------------- --------------
Other income (expense):
Loss on sale of subsidiaries -- (483,506) -- (523,456)
Gain on extinguishment of debt -- 995,093 -- 995,093
Interest expense 7,994 (272) (27,386) (709)
Gain on marketable securities -- -- 611,455 230,000
-------------- -------------- -------------- --------------
Total other income (expense) 7,994 511,315 584,069 700,928
-------------- -------------- -------------- --------------
Net income (loss) before income tax (1,052,315) 449,440 856,859 407,425
Income tax provision (Note 7) -- -- -- --
-------------- -------------- -------------- --------------
Net income (loss) $ (1,052,315) $ 449,440 $ (856,859) $ 407,425
============== ============== ============== ==============
Earnings per share $ (.00) $ .00 $ (.00) $ .00
============== ============== ============== ==============
Weighted average common shares outstanding 551,165,979 458,060,312 550,821,312 458,060,312
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 10
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the quarter ended For the nine months ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
(unaudited) (unaudited) (unaudited) (unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Reconciliation of net loss provided by (used in) operating activities:
Net income (loss) after extraordinary loss (1,052,315) 449,440 (856,643) 407,425
Non-cash items:
Depreciation -- -- -- 8,600
Non-cash services through issuance of stock 853,617 669,474 1,212,004 707,500
(Gain)/loss on sale of subsidiary -- 483,506 -- 523,456
Reduction of investments -- (230,000) -- (230,000)
(Gain) on forgiveness of debt -- (995,093) -- (995,093)
(Gain) on sale of marketable securities -- (611,455)
Changes in assets affecting operations - (increase) decrease
Accounts receivable -- 543,217 -- 553,267
Other receivables -- 118,250 -- 118,250
Escrow fund (restricted) -- -- (400,000) --
Prepaid insurance and other expenses -- 300 (1,650)
Changes in liabilities affecting operations - increase
(decrease)
Accounts payable -- (327,290) 100,000 (327,290)
Other current liabilities 107,994 (590,523) 27,386 (613,178)
------------ ------------ ------------ ------------
Net cash provided by (used in) operating activities (90,704) 121,281 (728,708) 151,287
------------ ------------ ------------ ------------
Cash flows from financing activities:
Proceeds from borrowing 109,715 133,227
Proceeds from the sale of common stock 100,000 100,000
Repayment of debt (111,000) (114,470) (111,000) (120,946)
------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities 98,715 (114,470) 122,227 (120,946)
Cash flows from investing activities:
Purchase of fixed assets -- (10,924) -- (64,011)
Proceeds from sale of subsidiaries -- (550) -- --
Proceeds from sale of marketable securities -- 619,833 --
------------ ------------ ------------ ------------
Net cash provided by (used in) investing activities -- (11,474) 619,833 (64,011)
------------ ------------ ------------ ------------
Increase (decrease) in cash 8,011 (4,663) 13,352 (33,670)
Cash - beginning of period 5,506 7,145 165 36,152
Cash - end of period 13,517 2,482 13,517 2,482
============ ============ ============ ============
</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
SEPTEMBER 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND BUSINESS COMBINATIONS
AmeriResource Technologies, Inc., formerly known as KLH Engineering
Group, Inc., a Delaware corporation, was incorporated March 3, 1988 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
<PAGE> 12
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 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.
The Company acquired all of the outstanding stock in West Texas Real
Estate & Resources', Inc. (West Texas) for a convertible note payable
in the amount of $1,700,000. West Texas owns the rights to certain
leased oil rights that has a value exceeding $10,000,000 which has been
reflected in a certified audit report issued to West Texas for the
leased oil rights.
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.,
Tomahawk Construction Company, and West Texas Real Estate & Resources',
Inc. 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.
F-6
<PAGE> 13
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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
numerous issues and the unauthorized removal of funds from this
account.
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.
F-7
<PAGE> 14
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
2. RELATED PARTY TRANSACTIONS
At September 30, 2000, the Company had notes payable balances and
related accrued interest to an officer (Note 4).
3. NOTES RECEIVABLE
The Company had the following notes receivable:
Note 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
========
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 are due in full on August 11, 1997,
this was extended until August 11, 2001. $217,985
Note payable to an officer, unsecured. Note
bears interest at 8% and are due on demand. 541,232
--------
Total notes payable -
related parties 759,217
Less current portion 759,217
--------
Long-term portion $ --
========
F-8
<PAGE> 15
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
4. NOTES PAYABLE (CONTINUED)
OTHERS:
Note dated July 20, 2000, payable to LBI
Properties, Inc. in the original amount
of $1,700,000, secured by oil property.
Convertible into common stock at the
current market price if not paid in 2
years. Note bears interest at 7%. $ 1,700,000
Note dated August 31, 1998, payable to
American Factors, secured by 30,000,000
shares of the Company's common stock.
The note bears interest at 9% and has
monthly payments of $40,000.
379,000
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 2,545,643
Less current portion (1,700,000)
-----------
Long-term portion $ 845,643
===========
Maturities of notes payable at September 30, 2000,
are as follows:
2000 $ 845,643
2001 1,700,000
2002 --
2003 --
Thereafter --
-----------
$ 2,545,643
===========
F-9
<PAGE> 16
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
5. STOCKHOLDERS' EQUITY
COMMON STOCK
The Company increased its authorized shares from 500,000,000
to 1,000,000,000 during 1999. The Company issued 59,050,000
shares of common stock (S-8) for services. In addition, the
Company issued 30,000,000 shares of restricted common stock to
be used as collateral on the American Factors note.
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 September 30, 2000, the amount of
dividends in arrears on the preferred stock was $1,368,406.
STOCK OPTIONS
The Company issued options to purchase 3,000,000 shares of
common stock at $.01 per share in exchange for services. These
options expire on July 1, 2002.
The Company issued options to purchase 30,000,000 shares at
$.06 per share. These options were exercised during the third
quarter through extinguishments of debt plus some cash.
F-10
<PAGE> 17
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
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.
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
SEPTEMBER 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
SEPTEMBER 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 paid $336,000 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 also paid 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. On July
15,2000, the Company executed a promissory note payable to
American Factors in the amount of $490,000. The note is
secured by 30,000,000 shares of the Company" common stock,
which is being held in escrow by a third party. The stock will
be returned to treasure upon payment of the note. This is
recorded in the notes payable section of the financial
statements.
F-13
<PAGE> 20
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 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. The judgement has been satisfied and
has been dismissed.
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
accounts 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
SEPTEMBER 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
SEPTEMBER 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.
The parties reached a settlement with KTC with no liability to
KLH Engineering Group.
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 accounts 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 the third quarter of 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 with no liability
to the Company.
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 The Travel Agents Hotel Guide
either merges or is sold to another party and 20,000,000
shares of the Company's stock.
On July 11, 2000 the Company reached an agreement with Craft
Fridkin & Rhyne in a dispute over fees. The Company issued
32,000,000 shares of common stock (S-8) in exchange for legal
services of $445,000 owed by the Company.
F-16
<PAGE> 23
AMERIRESOURCE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
10. MARKETABLE SECURITIES
At September 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 September 30, 2000.
Marketable securities available for sale at September 30,
2000:
6,054,500 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
==========
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.
27 6 Financial Data Schedule for the quarter ending June 30, 2000.
</TABLE>
5
