Note: This amendment no. 1 on Form 10-QSB/A replaces in its entirety the
report on Form 10-QSB filed July 16, 2001, which inadvertently
consisted of a refiling of the Form 10-QSB for the first fiscal quarter
ended March 31, 2001.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the
Quarterly Period Ended June 30, 2001
Commission File Number 0-12666
American Financial Holding, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 87-0458888
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 Gemini, Suite 100
Houston, Texas 77058
(Address of principal executive offices) (Zip Code)
(281) 488-3883
(Issuer's telephone number)
n/a
(Former name, former address and former fiscal year,
if changed since last report)
Check mark whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or
for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of July 13, 2001, issuer had
3,599,500 shares of issued and outstanding common stock, par value $0.001.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN FINANCIAL HOLDING, INC.
BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
2001 2000
------------- -------------
ASSETS
Current Assets
Cash.........................................................................$ -- $ 960
------------- -------------
Total Current Assets..................................................... -- 960
------------- -------------
Total Assets......................................................................$ -- $ 960
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable.............................................................$ -- $ 252,937
Payable to Tambora Financial Corporation..................................... -- 194,671
Interest payable to Tambora Financial Corporation............................ -- 15,964
Payable to Triad Financial Systems, Inc. owners.............................. -- 240,014
Interest payable to Triad Financial Systems, Inc. owners..................... -- 123,962
Payable to officers.......................................................... -- 18,865
------------- -------------
Total Current Liabilities................................................ -- 846,413
------------- -------------
Stockholders' Deficit
Preferred stock - $0.001 par value; 5,000,000 shares
authorized; no shares outstanding......................................... -- --
Common stock - $0.001 par value; 50,000,000 shares
authorized; 3,599,550 and 199,550 shares issued and
outstanding, respectively.................................................. 3,600 200
Additional paid-in capital................................................... 8,968,288 8,117,416
Accumulated deficit.......................................................... (8,971,888) (8,963,069)
------------- -------------
Total Stockholders' Deficit.............................................. -- (845,453)
------------- -------------
Total Liabilities and Stockholders' Deficit.......................................$ -- $ 960
============= =============
The accompanying notes are an integral part of these financial statements.
2
AMERICAN FINANCIAL HOLDING, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------------- -------------------------------
2001 2000 2001 2000
-------------- ------------- -------------- -------------
Interest income........................................$ 5,057 $ 43,243 $ 5,057 $ 86,485
-------------- ------------- -------------- -------------
General and administrative expenses.................... (36,731) (47,243) (106,675) (93,800)
-------------- ------------- -------------- -------------
Loss From Continuing Operations........................ (31,674) (4,000) (101,618) (7,315)
Loss from discontinued operations -
Income Builders..................................... -- (8,718) -- (61,201)
-------------- ------------- -------------- -------------
Loss Before Extraordinary Item......................... (31,674) (12,718) (101,618) (68,516)
Extraordinary gain from
forgiveness of debt................................. 92,799 -- 92,799 --
-------------- ------------- -------------- -------------
Net Income (Loss)......................................$ 61,125 $ (12,718) $ (8,819) $ (68,516)
============== ============= =============== =============
Basic and Diluted Loss Per Common Share
Continuing Operations.............................$ (0.01) $ -- $ (0.03) $ --
Discontinued Operations........................... -- -- -- (0.02)
Extraordinary gain................................ 0.03 -- 0.03 --
-------------- ------------- -------------- -------------
Net Loss .........................................$ 0.02 $ -- $ -- $ (0.02)
============== ============= ============== =============
Weighted-Average Number of Common
Shares Outstanding.................................. 3,599,550 3,599,550 3,599,550 3,599,550
============== ============= ============== =============
The accompanying notes are an integral part of these financial statements.
3
AMERICAN FINANCIAL HOLDING, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Six Months
Ended June 30,
2001 2000
------------- -------------
Cash Flows From Operating Activities
Net income (loss)............................................................$ (8,819) $ (68,516)
Adjustments to reconcile net loss to net cash used in
operating activities
Increase in net liabilities of discontinued
operations............................................................ -- 61,200
Expenses paid by related party........................................... 18,754 --
Stock issued for service................................................. 400 --
Forgiveness of debt...................................................... (92,799) --
Changes in assets and liabilities
Decrease in accounts payable......................................... (160,138) --
------------- -------------
Net Cash Used in Operating Activities.................................... (242,602) (7,316)
------------- -------------
Cash Flows From Financing Activities
Increase (decrease) in payable to Tambora Financial
Corporation............................................................... (39,493) 11,516
Decrease in payable to related party......................................... (18,865) --
Proceeds from issuance of common stock....................................... 300,000 --
------------- -------------
Net Cash Provided by Financing Activities......................................... 241,642 11,516
------------- -------------
Net Change in Cash................................................................ (960) 4,200
Cash at Beginning of Period....................................................... 960 1,203
------------- -------------
Cash at End of Period.............................................................$ -- $ 5,403
============= =============
The accompanying notes are an integral part of these financial statements.
4
AMERICAN FINANCIAL HOLDING, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Interim Financial Statements -- These interim financial statements are condensed
and, therefore, do not include all disclosures normally required by accounting
principles generally accepted in the United States. These statements should be
read in conjunction with the annual financial statements included in the
Company's report on Form 10-KSB for the year ended December 31, 2000. In the
opinion of management, all adjustments necessary for a fair presentation have
been included in the accompanying condensed financial statements and consist of
only normal recurring adjustments. The results of operations presented in the
accompanying condensed financial statements are not necessarily indicative of
the results that may be expected for the year ending December 31, 2001.
Business Condition -- The Company has an accumulated deficit of $8,971,888 as of
June 30, 2001. It has had losses from continuing operations and negative cash
flows from operating activities during the six month-periods ended June 30, 2001
and 2000. These conditions raise substantial doubt regarding the Company's
ability to continue as a going concern. Management plans to enter into a
business combination or reorganization with an operating company. There is no
assurance that the Company will be successful in accomplishing management's
plans.
NOTE 2 -- COMMITMENTS AND CONTINGENCIES
SEC Enforcement -- On October 9, 1996, the Company was advised by the
Enforcement Division of the Securities and Exchange Commission (the
"Commission") that it is considering recommending that the Commission bring an
enforcement action, which could include a civil penalty, against the Company in
U.S. District Court for failing to file timely periodic reports in violation of
Section 13(a) of the Securities and Exchange Act of 1934 and the rules
thereunder.
In October 1996, the Company also received a request for the voluntary
production of information to the Enforcement Division of the Commission related
to the resignation of Coopers & Lybrand LLP and the termination of Arthur
Andersen LLP and the appointment of Jones, Jensen & Company as the Company's
independent public accountants and the reasons therefore. In addition, the
Company was requested to provide certain information respecting its previous
sales of securities. The Company cooperated in providing information in response
to these inquiries in early 1997. The Company has not been advised of the
outcome of the foregoing.
NOTE 3 -- STOCK PURCHASE AGREEMENT
On January 22, 2001, the Company entered into a purchase agreement (the
"Purchase Agreement") with three unrelated third parties (the "Purchasers")
whereby the Company issued to an escrow agent 15,000,000 shares of common stock
(pre-split) and issued $150,000 of promissory notes to the Purchasers for a
total of $300,000 in cash. Under the terms of the Purchase Agreement, the cash
held in the escrow account was to have been released on the date of closing upon
the Company meeting the conditions of the Purchase Agreement, which included:
o providing evidence, after the use of the funds received from the
escrow, that all liabilities have been paid or compromised;
o being current in filing periodic reports with the Securities and
Exchange Commission;
o the resumption of quotation of the common stock of the Company on the
over-the-counter electronic bulletin board maintained by the National
Association of Securities Dealers, Inc.;
5
o completion of arrangements satisfactory to the Purchasers respecting
certain contingent liabilities;
o completion of a 21.4-to-1 reverse stock split; and
o delivery of resignations of the incumbent officers and directors.
The Company obtained shareholder approval of a 21.4-to-1 reverse stock split on
April 17, 2001. The reverse stock split resulted in the 4,279,449 shares of
common stock outstanding at December 31, 2000, being consolidated into 199,550
post-split common shares. Upon completion of the reverse stock split and the
closing of the Purchase Agreement, the 15,000,000 pre-split shares of common
stock issued to the Purchasers were consolidated into 700,935 post-split shares
and the $150,000 promissory notes were automatically converted into 2,299,065
post-split shares of common stock, bringing the total interest in the Company
held by the Purchasers to 3,000,000 post-split shares of common stock.
Accordingly, the Purchase Agreement resulted in a change in control of the
Company.
Upon closing of the Purchase Agreement effective June 20, 2001, the Company
issued 400,000 post-split shares of common stock to an individual in
consideration of his services in introducing the Purchasers to the Company.
The creditors of the Company have accepted compromising payments of cash from
escrow or Tambora common stock in full satisfaction of the amounts due.
Accordingly, management paid or compromised all liabilities of the Company at
the date the Purchase Agreement was closed. The Company paid off $218,496 debt
in cash and distributed 300,084 shares of Tambora common stock to former
investors in Triad Financial Corporation, a former subsidiary of the Company, in
satisfaction of their right to convert Triad preferred stock into the Company's
common stock. The distribution of these Tambora shares was accounted for as the
conversion of the following liabilities into additional paid-in capital:
$240,014 payable to Triad Financial Systems, Inc. owners and $123,962 interest
payable to Triad Financial Systems, Inc. Owners. The rest of the debt in the
amount of $92,799 was forgiven by creditors and was accounted for extraordinary
gain on the financial statements.
NOTE 4 -- MUTUAL GENERAL RELEASE AGREEMENT
On December 20, 1999, Robert M. Bridge (Bridge) filed suit against the Company
in the Third District Court in Salt Lake County, Utah, styled Bridge v. American
Financial Holding, Inc., Triad Financial Systems, Inc., Raymond L. Punta and
Kenton L. Stanger (Civil No. 990912544). Mr. Bridge's complaint alleged that he
was entitled to the return of a $100,000 investment made in 1993, in which he
purchased the Company's stock in anticipation of the acquisition of an insurance
company. The complaint alleged claims for breach of contract, fraud and
misrepresentation, and claims for a "guarantee" against Messrs. Punta and
Stanger.
On July 5, 2001, Bridge and the Company, Triad Financial Systems, Inc., Raymond
L. Punta, and Kenton L. Stanger signed a mutual general release. In
consideration of this release, the Company delivered to Bridge $22,000, paid
from escrowed funds under the Purchase Agreement discussed above, and
certificates for 172,680 shares of restricted common stock of Tambora Financial
Corporation to which Bridge was entitled as part of the distribution of an
aggregate of 4,279,449 shares of Tambora stock to the stockholders of the
Company. The parties agreed that they would fully and finally dismiss, with
prejudice, all claims, counterclaims, and third-party claims asserted or which
could be asserted in the lawsuit.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Information
This report contains certain forward-looking statements and information
relating to American Financial Holding, Inc. that are based on the beliefs of
management as well as assumptions made by and information currently available to
management. When used in the document, the words "anticipate," "believe,"
"estimate," "expect," "intend," and similar expressions, as they relate to the
Company or its management, are intended to identify forward-looking statements.
Such statements reflect the current view of the Company respecting future events
and are subject to certain risks, uncertainties, and assumptions, including the
risks and uncertainties noted. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, expected, or intended.
The Company's Ability to Continue as a Going Concern
The Company has extremely limited working capital, no credit lines, and
insufficient revenue to meet its operating requirements. The Company expects
that it will continue to incur operating losses and that its accumulated deficit
will increase. The foregoing raises substantial concerns respecting the ability
of the Company to continue as a going concern.
Income Builders Discontinued Operations
During September 1997, the Company sold its wholly-owned subsidiary,
Income Builders, Inc., to Tambora Financial Corporation, a corporation under
common control. Tambora Financial Corporation purchased Income Builders, Inc. by
paying the Company an aggregate of $500,000 in 1997, 1998 and 1999, and issuing
the Company 4,899,533 shares of Tambora Financial Corporation common stock in
October 2000. The financial statements of the Company reflect Income Builders,
Inc. as discontinued operations.
Results of Operations
The Company had net interest income of $5,057 in the second quarter and
first half of 2001, as compared to $43,243 and $86,485 for the second quarter
and first half, respectively, in the preceding fiscal year. Interest accrued
during the 2000 interim periods related to notes receivable from officers and
directors that had been conveyed to a third party prior to commencement of the
first quarter of 2001.
General and administrative expenses for the second quarter of 2001 were
$36,731, a decrease of $10,512, as compared to $47,243 for the corresponding
period in the preceding fiscal year, principally as a result of limited
activities in the 2001 interim period following completion of the $300,000 in
new investment during January 2001. For the first six months of 2001, general
and administrative costs of $106,675 were $12,875 higher than the same period in
the preceding year due to increased regulatory filings and stockholder
communications. During the second quarter and first half of 2000, the Company
recognized $8,718 and $61,201, respectively, in losses from the discontinued
operations of Income Builders.
Liquidity on Capital Resources
During the six months ended June 30, 2001, the Company used all of its
cash, including net cash of $241,642 provided by financing activities, to fund
its operating activities. In addition to current expenses, these expenditures
related to cash payments in order to compromise liabilities.
7
Capital Requirements and Plan of Operation
The Company has no funds, but will require approximately $30,000 to
$60,000 during the next twelve months to complete required accounting and
auditing work, complete reports to regulatory authorities and stockholders, and
related matters to maintain its corporate good standing. The Company has no
funds with which to pay these amounts, but will depend primarily on the sale of
additional securities for such funding. The Company cannot assure it will be
able to obtain required funding or that it will be able to continue.
The Company plans to seek active operations and related funding, which
will likely result in a recapitalization of the Company and the issuance of
substantial amounts of securities that will dilute the percentage interest in
the Company held by existing stockholders.
The Company entered into an agreement to sell for $300,000 a total of
15.0 million shares of common stock at a price of $0.01 per share, or an
aggregate of $150,000, and $150,000 in principal amount of promissory notes,
automatically convertible into an aggregate of 49.2 million shares of common
stock on the effectiveness of a 21.4-to-1 reverse split of the issued and
outstanding shares. The persons making the $300,000 investment executed a
majority written consent approving the proposed reverse stock split, the
appointment of their designees to the board of directors, and the authorization
of a class of preferred stock. On the effectiveness of the reverse stock split
and related matters, the Company issued 400,000 shares of common stock to a
third party for services. The securities sold by the Company and the
consideration therefor were held pending the Company's completion of its annual
report on Form 10-KSB for the year ended December 31, 2000, an information
statement distributed to the Company's stockholders relating to the matters to
be approved by the majority written consent of its stockholders, and certain
other conditions. After giving effect to the foregoing, the Company had an
aggregate of 3.6 million shares of common stock issued and outstanding. Proceeds
from the sale of the above securities were applied to satisfy certain accrued
obligations.
8
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings except as
noted below, and no such proceedings have been threatened by or, to the best of
its knowledge, against it.
On October 9, 1996, the Company was advised by the Enforcement Division
of the Securities and Exchange Commission (the "Commission") that it is
considering recommending that the Commission bring an enforcement action, which
could include a civil penalty, against the Company in the U.S. District Court
for failing to file timely periodic reports in violation of Section 13(a) of the
Securities Exchange Act of 1934 and the rules promulgated thereunder.
In October 1996, the Company also received a request for the voluntary
production of information to the Enforcement Division of the Commission related
to the resignation of Coopers & Lybrand LLP and the termination of Arthur
Andersen LLP and the appointment of Jones, Jensen & Company as the Company's
independent public accountants and the reasons therefore. In addition, the
Company was requested to provide certain information respecting its previous
sales of securities. The Company cooperated in providing information in response
to these inquiries in early 1997. The Company has not been advised of the
outcome of the foregoing.
On December 20, 1999, Robert M. Bridge filed suit against the Company
in the Third District Court in Salt Lake County, Utah, styled Bridge v. American
Financial Holding, Inc., Triad Financial Systems, Inc., Raymond L. Punta and
Kenton L. Stanger (Civil No. 990912544). Mr. Bridge's complaint alleges that he
is entitled to the return of a $100,000 investment made in 1993, in which he
purchased the Company's stock in anticipation of the acquisition of an insurance
company, costs, attorney's fees, and interest. The complaint alleges claims for
breach of contract, fraud and misrepresentation, and claims for a "guarantee"
against Messrs. Punta and Stanger. The Company answered the complaint, denying
its material allegations and raising several affirmative defenses, including the
applicable statutes of limitation. On July 6, 2001, the parties entered into a
joint stipulation for settlement of the matter and have submitted to the court
for signature an order dismissing the action with prejudice as to all parties.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company entered into an agreement to sell for $300,000 a total of
15.0 million shares of common stock at a price of $0.01 per share, or an
aggregate of $150,000, and $150,000 in principal amount of promissory notes,
automatically convertible into an aggregate of 49.2 million shares of common
stock on the effectiveness of a 21.4-to-1 reverse split of the issued and
outstanding shares. The persons making the $300,000 investment executed a
majority written consent approving the proposed reverse stock split, the
appointment of their designees to the board of directors, and the authorization
of a class of preferred stock. On the effectiveness of the reverse stock split
and related matters, the Company issued 400,000 shares of common stock to a
third party for services. The securities sold by the Company and the
consideration therefor were held pending the Company's completion of its annual
report on Form 10-KSB for the year ended December 31, 2000, an information
statement distributed to the Company's stockholders relating to the matters to
be approved by the majority written consent of its stockholders, and certain
other conditions. After giving effect to the foregoing, the Company had an
aggregate of 3.6 million shares of common stock issued and outstanding. Proceeds
from the sale of the above securities were applied to satisfy certain accrued
obligations.
9
The three investors purchasing $300,000 in securities in the first
quarter of 2001 were accredited investors who were provided with the Company's
periodic reports, acknowledged the risks and suitability for them of the
investment, agreed that the securities issued would constitute "restricted
securities," and that stop transfer instructions would be lodged against such
certificates. No placement commissions were paid. The exemption from
registration provided in Section 4(2) of the Securities Act is relied on for
effecting the foregoing transaction.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
By majority written consent of holders of 15,000,000 shares, or 77.8%,
of the issued and outstanding stock, the stockholders of the Company approved a
21.4-to-one reverse split of the issued and outstanding stock and the
authorization of a class of 5,000,000 shares of preferred stock, par value
$0.001, effective May 30, 2001.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. None
(b) Reports on Form 8-K. During the quarter ended June 30, 2001,
the Company filed the following report on Form 8-K:
Date of Event Reported Item Reported
------------------------- ----------------------------------------
June 21, 2001 Item 1. Change in Control of Registrant
10
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN FINANCIAL HOLDING, INC.
Date: July 16, 2001 By /s/ Jeffrey W. Tomz
-------------------
Jeffrey Tomz, Secretary
(Principal Executive and
Financial Officer)
11