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, 2002.
[ ] 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
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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.)
3430 E. Russell Road, Suite 310, Las Vegas, Nevada 89120
--------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(702) 214-4249
--------------
(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 November 12, 2002, there were 116,422,985 outstanding shares of the
issuer's common stock, par value $0.0001.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION.............................................. 3
ITEM 1. Financial Statements.......................................3
Consolidated Unaudited Financial Statements .............F-1
ITEM 2. Management's Discussion & Analysis of Financial Condition
and Results of Operations..................................4
ITEM 3. Controls and Procedures....................................6
PART II - OTHER INFORMATION..................................................7
ITEM 6. Exhibits and Reports on Form 8-K...........................7
SIGNATURES...................................................................8
CERTIFICATIONS...............................................................9
INDEX TO EXHIBITS...........................................................12
2
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, 2002, 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 periods of the preceding year are attached
hereto beginning on Page F-1 and are incorporated herein by this reference.
The consolidated financial statements for the Company included herein are
unaudited but reflect, in management's opinion, all adjustments, consisting only
of normal recurring adjustments, that are necessary for a fair presentation of
the Company's financial position and the results of its operations for the
interim periods presented. Because of the nature of the Company's business, the
results of operations for the three and nine months ended September 30, 2002 are
not necessarily indicative of the results that may be expected for the full
fiscal year. The financial statements included herein should be read in
conjunction with the financial statements and notes thereto included in the Form
10-KSB for the year ended December 31, 2001.
3
AMERIRESOURCE TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
A S S E T S
September 30, December 31,
2002 2001
------- -----------
Current Assets:
Cash and Cash Equivalents $ 0 $ 0
Account Receivable, Net 68,279 73,699
Notes receivable - other 47,902 74,503
Inventory 220,024 241,293
----------- -----------
Total Current Assets 336,205 389,495
Fixed Assets:
Leasehold Improvements 6,230 6,230
Land 60,000 60,000
Buildings and Other Fixed Assets 184,300 172,900
Accumulated Depreciation (12,666) (12,627)
----------- -----------
Net Fixed Assets 237,864 226,503
Other Assets:
Oil & Gas Property 1,700,000 1,700,000
Investment in Prime Enterprises 0 233,330
Marketable securities 0 16,950
----------- -----------
Total Other Assets 1,700,000 1,950,280
----------- -----------
Total Assets $ 2,274,069 $ 2,566,278
=========== ===========
F-1
AMERIRESOURCE TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statement of Operations
For the quarter ended For the nine months ended
September 30, September 30,
---------------------- -------------------------
2002 2001 2002 2001
--------- ---------- ----------- -----------
Net service income $ 158,830 $ 0 $ 415,075 $ 0
Operating expenses
General and administrative expenses 32,088 53,464 523,148 244,413
Consulting 108,720 71,685 137,620 548,435
Employee Salaries & Bonuses 38,238 0 111,086 4,379
----------- ----------- ----------- ------------
Operating loss 11,872 (125,149) (356,779) (797,227)
Other Income (Expense):
Gain on extinguishment of debt 0 215,379 0 3,581,839
Interest income 0 335 0 3,185
Interest expense (39,863) (12,380) (109,727) (117,194)
Gain (loss) on marketable securities 0 13,431 (172,760) 88,453
----------- ---------- ------------ ------------
Total other income (expense) (39,863) 216,765 (282,487) 3,556,283
Net Income (loss) before income tax 11,872 (125,149) (639,266) 2,759,056
Income Tax Provision 0 0 0 0
----------- ----------- ---------- ----------
Net Income (loss) 11,872 (125,149) (639,266) 2,759,056
=========== =========== ========== ==========
Earnings per share 0.00 (0.01) (0.04) 0.32
=========== =========== ========== ==========
Weighted average common shares 32,463,194 8,504,331 17,390,353 8,504,433
=========== =========== ========== ==========
outstanding
F-2
AMERIRESOURCE TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
L I A B I L I T I E S and S T O C K H O L D E R S' D E F I C I T
September 30 December 31,
2001 2001
------- -----------
Current Liabilities
-------------------
Overdraft Cash Account 43,212 9,464
Accounts payable:
Trade $ 370,095 $ 397,799
Related Party 70,413 70,413
Notes payable -related party 735,835 1,033,630
Notes payable -Other 745,643 613,143
Accrued payroll and related expenses 331,790 431,755
Unearned Income 0 0
Accrued interest:
Related Party 333,450 306,623
Other 395,487 387,182
Income Tax Payable 17,285 17,285
----------- -----------
Total Current Liabilities 3,043,210 3,267,294
Long Term Liabilities:
Notes Payable 745,643 775,335
Less: Current Portion (745,643) (613,143)
----------- ------------
Total Long Term Liabilities 0 162,192
Other Liabilities:
------------------
Convertible debentures 0 0
Commitments and contingencies 105,000 105,000
----------- -----------
Total Other Liabilities 105,000 105,000
----------- -----------
Total Liabilities $ 3,148,210 $ 3,534,486
----------- -----------
Stockholders' deficit
---------------------
$ 2,080 $ 330
3,999 985
Additional paid-in capital 14,297,884 13,744,332
Accumulated deficit (15,178,104) (14,538,838)
Accumulated other comprehensive loss 0 (175,017)
----------- -------------
Total Stockholders' Deficit (874,141) (968,208)
----------- -----------
Total Liabilities and Stockholders 2,274,069 2,566,278
=========== ===========
The accompanying notes are integral part of Consolidated Financial Statements.
F-3
AMERIRESOURCE TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the nine months ended
September 30
-------------------------
2002 2001
---------- -----------
Reconciliation of net loss provided by (used in)
operating activities:
Net income (loss) after extraordinary loss $(639,266) $ 2,759,056
Non-cash items:
Depreciation 39 39
Non-cash services through issuance of stock 114,270 709,757
Gain/(Loss) on sale of marketable securities 172,760 (88,453)
Changes in assets affecting operations (increase) / decrease
Inventory 21,269 0
Account Receivable 5,420 0
Note Receivable 26,601 0
Other receivables 0 5,364
Changes in liabilities affecting operations increase / (decrease)
Accounts payable (27,704) 0.00
Accrued payroll expenses (99,965) 0.00
Accrued interest 35,132 0.00
Other current liabilities 0 (59,828)
---------- -----------
Net cash provided by (used in) operating activities (391,444) 3,325,935
Cash flows from investing activities:
Purchase of Fixed Assets (11,400) (6,230)
Reduction of Investment 233,330 0
Proceeds from sale of marketable securities 9,293 104,751
---------- -----------
Net cash provided by (used in) investing activities 231,223 98,521
Cash flows from financing activities:
Gain on extinguishment of debt 0 (3,565,379)
Proceeds from borrowing 132,500 268,860
Common Stock 55,750 0
Repayment of debt (61,777) (132,500)
---------- -----------
Net cash provided by (used in) financing activities 126,473 (3,429,019)
Increase (decrease) in cash $ (33,748) $ (4,563)
========== ===========
Cash- beginning period $ (9,464) $ 24,007
========== ===========
Cash- end of period $ (43,212) $ 19,444
========== ===========
F-4
Ameriresource Technologies, Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
September 30, 2002
(Unaudited)
NOTE 1 - DESCRIPTION OF DEVELOPMENT STAGE ACTIVITIES
AmeriResource Technologies, Inc., formerly known as KLH Engineering Group, Inc
(the Management Company), a Delaware 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.
On September 26, 2001, the Company acquired all the outstanding stock of Jim
Butler Performance, Inc. (Jim Butler) in exchange for 1,000,000 shares of common
stock valued at $450,000. Jim Butler manufactures custom high end engines for
the racing industry specializing in Pontiac engines and distributes a line of
associated parts.
NOTE 2 - BASIS OF PRESENTATION
The unaudited financial statements included herein have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 301(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The December 31, 2001 Consolidated Balance Sheet was
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. Certain information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations relating to interim consolidated
financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and six months ended September 30, 2002 and 2001
are not necessarily indicative of the results that may be expected for the
fiscal years ended December 31, 2002. For further information, the statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's registration statement on Form 10-KSB.
Principles of consolidation
The consolidated financial statements include the combined accounts of
AmeriResource Technologies, Inc., Jim Butler Performance, Inc., West Texas
Real Estate & Resources, Inc. and Tomahawk Construction Company.
All material inter-company transactions and accounts have been eliminated in
consolidation.
F-5
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
anti-dilutive.
Note 3 - Acquisitions
On September 26, 2001, AmeriResource Technologies, Inc. (the "Company") executed
an acquisition agreement ("Acquisition Agreement") with Wasatch Business
Investors, Inc., a Utah corporation ("WBI") and Covah, LLC, a Utah limited
liability company ("Covah"). Pursuant to the Acquisition Agreement, WBI, as
agent for Covah, agreed to sell and transfer one hundred percent (100%) of Jim
Butler Performance, Inc., a Tennessee corporation ("JBP"), to the Company in
exchange for One Million (1,000,000) shares (the "Shares") of the Company's
common stock, par value $0.0001 ("Common Stock"), with Seven and Fifty Thousand
(750,000) Shares being issued to Covah and the remaining Two Hundred Five
Thousand (250,000) Shares being issued to WBI. The amount of Shares was
determined by the closing trading price of the Common Stock for September 25,
2001. Pursuant to a Stock Option Agreement ("Option Agreement") executed by and
between the Company and WBI on the same date, the Company granted an option to
WBI to purchase Five Hundred Thousand (500,000) shares of Common Stock at an
exercise price equal to the average closing trading price of the Common Stock
for thirty (30) days prior to the date of closing the acquisition of JBP. The
Company executed a promissory note ("Note") on the same date to pay WBI Three
Hundred Fifty Thousand dollars ($350,000) over a term of one year with interest
accruing at the annual rate of seven percent (7%). The promissory note can be
converted to stock upon mutual consent of both parties.
The following table summarizes the estimated fair value of the assets of the
assets acquired and liabilities assumed at the date of acquisition:
Accounts Receivable $ 82,146
Inventory 316,306
Building 172,900
Land 60,000
Goodwill 15,223
Accounts Payable ( 196,575)
-----------
Net Assets Acquired $ 450,000
=========
Of the $15,223 of acquired goodwill, all is being assigned to customer lists and
name identification. The goodwill will be reviewed annually and amortized over
an expected life of between 3 to 5 years.
F-6
NOTE 4 - STOCKHOLDERS' EQUITY
Options
During 2000, the Company issued options to an officer to purchase 30,000 shares
of common stock at $.01 per share in exchange for services. These options expire
on July 1, 2002. During 2001, 100,000 shares were issued as a result of the
exercise of these options.
As part of the acquisition of Jim Butler Inc., the Company issued 500,000
options with an exercise price of 75% of the average closing price over the
preceding 90 days. These options expire on September 25, 2004. The Company also
issued 1,500,000 options with an exercise price of 75% of the average closing
price over the preceding 90 days. The options will be issued for every one
million in gross sales added to the Company's gross revenue WBI would be granted
thirty thousand in option shares. These options expire on September 25, 2004.
Common stock
The Company increased its authorized shares from 500,000,000 to 1,000,000,000
during 1999. In February of 2002, the Company approved a 100 for 1 reverse stock
split. The shares are shown after the reverse stock split. During the third
quarter of 2002, the Company issued the following shares of common stock:
1,800,000 shares of common stock were issued for cash pursuant to a
subscription agreement. These shares were valued at $55,750.
300,000 shares were issued to a debtor in exchange for an extension of the
note until December 31, 2002.
11,152,000 shares were issued to the various consultants in exchange for
services relating to the acquisitions. The shares were valued at $.01 per
share.
Preferred stock
The Company has currently designated 10,000,000 shares of their authorized
preferred stock to Series A Convertible Preferred Stock and an additional
10,000,000 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
F-7
converted in 1998. Dividends are not payable until declared by the Company.
On February 22, 2002, the Company filed a "Certificate of Designation" with the
Secretary of State with the State of Delaware to designate 1,000,000 shares of
its Preferred Stock as "Series C Preferred Stock". Each share of the Series C
Stock shall be convertible into common stock of the Company based on the stated
value of the $2.00 divided by 50% of the average closing price of the Common
Stock on five business days preceding the date of conversion. Each share of the
outstanding Series C Preferred shall be redeemable by the Corporation at any
time at the redemption price. The redemption price shall equal $2.00 per share
with interest of 8% per annum. The holders of the Series C shall be entitled to
receive $2.00 per share before the holders of common stock or any junior
securities receive any amount as a result of liquidation.
On February 22, 2002, the Company filed a "Certificate of Designation" with the
Secretary of State with the State of Delaware to designate 750,000 shares of its
Preferred Stock as "Series D Preferred Stock". Each share of the Series D Stock
shall be convertible into one share of common stock of the Company. Each share
of the outstanding Series D Preferred shall be redeemable by the Corporation at
any time at the redemption price. The redemption price shall equal $.001 per
share with interest of 8% per annum. The holders of the Series D shall be
entitled to receive $.001 per share before the holders of common stock or any
junior securities receive any amount as a result of liquidation.
Delmar Janovec, President & CEO, exchanged the interest owed to him on the
dividends in theapproximate amount of $2,000,000 for the new class of Series C
Preferred Stock that was approved by the Board of Directors on January 31, 2002.
Rod Clawson and Art Malone were issued 500,000 and 250,000 shares of the Series
D Preferred Stock for consulting services relating to their activities as being
directors. The shares are being shown with a value of $75,000. The shares of
Series D Preferred Stock issued to Art Malone were cancelled in the first part
of June 2002 when Malone resigned as a director.
NOTE 5 - NOTES RECEIVABLE
The Company had the following notes receivable:
Notes receivable from Nevstar, bearing interest at 8%, due on 10,961
demand.
Note receivable to Rod Clawson 13,000
Notes receivable from First Americans Mortgage Corp, bearing interest at the
prime rate, principal and interest payments due December 31, starting December
31, 2000 through December 31, 18,000
2004.
------------
Other misc Notes 5,941
F-8
Total Notes Receivable - Other 47,902
Less current portion
(47,902)
------------
$ -
Total Notes Receivable
============
NOTE 6- NOTE PAYABLE
The Company had the following notes payable:
Related Party:
Note payable to an officer, unsecured. Note bears 735,835 interest at 8% and are
due on demand.
----------------
Total notes payable - related parties 735,835
Less current portion (735,835)
----------------
$ -
Long-term portion
================
Others:
Note dated August 2, 2000, payable to American Factors, secured by 300,000
shares of the Company's common stock. The note bears interest at 9% and has
281,000 been modified, verbally, with payments of no less than $20,000 per
month. However, the Company is in discussions with AFG, to renegotiate the
balance and terms of this note.
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
----------------
Total notes payable 745,643
Less current portion (745,643)
----------------
F-9
----------------
Long-term portion $ -
================
Maturities of notes payable at September 30, 2002, are as follows:
2002 $ 585,451
2003 130,000
2004 30,192
2005 --
Thereafter --
----------------
$ 745,643
NOTE 7 - 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.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company, from time to time, may be subject to legal proceedings and claims
that arise in the ordinary course of its business. Currently, the Company is
subject to the legal proceedings or other claims as noted under Part II, Item 1
of the Form 10QSB for the period ended September 30, 2002. Due to the nature of
the Company's business, the Company has historically been able to procure
general liability and workmen's compensation insurance, but there can be no
assurance such insurance will be adequate or that it will be renewable or remain
available in the future. Although there are some contingencies that exist with
the Company and its subsidiaries, there are no new contingencies that have
occurred since the last year-end.
NOTE 8 - SUBSEQUENT EVENTS
On August 26, 2002, the Company executed an exchange agreement with Royal Casino
Holding Corporation, a Florida corporation ("RCH"). The closing of this Exchange
Agreement occurred on October 2, 2002 ("Closing").
RCH has two wholly owned subsidiaries, Royal Casino Entertainment ("RCE") and
Royal Casino Cruises, LLC ("RCC"). RCE owns and operates a gaming boat known as
Royal Casino I, and RCC
F-10
owns the land lease on which the Royal Casino I docks adjacent to the Ambassador
Hotel on the Intercoastal Waterway in Hollywood, Florida. RCH is majority
owned by Mr. Dharmesh Patel.
Pursuant to the Exchange Agreement, RCH and the Company exchanged a majority
interest in RCE and all of RCC for a majority interest in the Company. The
Company received sixty percent (60%) of RCE's outstanding equity and one hundred
percent (100%) of RCC's outstanding equity, and RCH received shares equal to
sixty percent (60%) of the Company's issued and outstanding common stock
("Common Stock"). All of these assets were utilized by RCH in the operation of
the Royal Casino I gaming boat and the Company intends to continue such use.
F-11
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Statements
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. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. These statements relate to future
events or to our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue" or the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. There are a number of factors that could cause the Company's
actual results to differ materially from those indicated by such forward-looking
statements.
This discussion contains forward-looking statements which involve the
acquisition of technology, and the Company's financial position, business
strategy and other plans and objectives for future operations. Although the
Company believes that the expectations reflected in the forward-looking
statements 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. Moreover, the Company does not assume responsibility for the
accuracy and completeness of such statements. The Company is under no duty to
update any of the forward-looking statements after the date of this report to
conform such statements to actual results.
General
The Company's operations for the third quarter of 2002 were conducted
through its wholly owned subsidiaries Jim Butler Performance ("JBP") and West
Texas Real Estate & Resources, Inc. ("WTRER"), although the Company recently
acquired a majority interest in Royal Casino Entertainment Corp. ("RCE") which
owns and operates a day cruise gaming boat known as Royal Casino I. Since the
Company's acquisition of RCE, its primary focus is on the gaming boat and
hospitality industries and the operations of Royal Casino I.
ROYAL CASINO ENTERTAINMENT CORP.
Pursuant to an August 26, 2002 Exchange Agreement which closed on October
2, 2002, the Company and Royal Casino Holdings Corporation ("RCH") agreed to
exchange a majority interest in RCH's subsidiaries, RCE and Royal Casino
Cruises, LLC ("RCC"), for a majority interest in the Company. RCE owns and
operates the day cruise gaming boat, Royal Casino I, and RCC owns the land lease
on which the Royal Casino I docks adjacent to the Ambassador Hotel on the
Intercoastal Waterway in Hollywood, Florida.
Passenger volume for the day cruise industry in southeast Florida was
significantly lower than normal for the month of October and the first half of
November as compared to prior years, which the Company attributes to economic
slowdown, market depreciation, and the U.S. sniper attacks and terrorism in
general. This industry slowdown, combined with unexpected delays that RCE has
encountered in its efforts to obtain required financing, have forced RCE to
cancel scheduled cruises on two recent weekends for lack of working capital, and
has resulted in RCE's delinquency on its November mortgage on the Royal Casino
I. The Royal Casino I was leased to RCE for a monthly lease of approximately
$70,000 per month with approximately 42% of that amount being credited toward
the principal purchase price of $4,250,000. RCE is engaging in a search for
financing, however, it faces possible foreclosure of the Royal Casino I at any
time. The lessor agreed to withdraw $47,000 out of funds held in escrow as
partial payment towards the November lease payment, but RCE is still in default
of the lease. Unless RCH or the Company
4
procures immediate financing, repossession of the Royal Casino I is imminent.
The Company and RCH have agreed to amend the Exchange Agreement by granting the
Company the sole option to rescind the Exchange Agreement in the event RCE does
not procure the requisite financing, which was a requirement of the Agreement.
The Company is presently pursuing financing utilizing the boat as
collateral, which has been appraised at $8.2 million pursuant to a September 5,
2002 survey by A Knot Just Maritime Surveyors, Inc. The Company has been advised
that it has been approved for financing for approximately $5.7 million involving
approximately a 70% loan to value ratio. This financing is expected to close
within the next ten (10) days. A majority of this financing, $4.2 million, would
be used by the Company to purchase the Royal Casino I, with the remaining funds
being directed towards working capital requirements and general corporate
obligations. In the event the Company is unable to obtain this financing within
the next ten (10) days, there is a substantial risk that the Royal Casino I will
be foreclosed and repossessed, in which case the Exchange Agreement will be
rescinded by RCH and the Company.
JIM BUTLER PERFORMANCE
JBP's operations concentrated on its core business of manufacturing high
end racing engines and the research for the development of potential new product
lines as well as expanding the functionality of its existing website,
www.jbp-pontiac.com, which is still under minor construction. The website will
have a link to a full inventory of parts that can be purchased on line, as well
as a calendar of upcoming events and a technical section that will allow JBP's
management to answer questions from the car enthusiasts and/or hobbyists. The
link for the website should be completed within the next thirty (30) days. The
Company is currently exploring options by which to divest JBP since the Company
intends to primarily focus on the gaming and hospitality industry.
WEST TEXAS REAL ESTATE AND RESOURCES, INC.
WTRER's business operations in the third quarter consisted primarily of
analyzing the viability of drilling additional wells and deepening the existing
wells on its oil, gas and mineral lease in Pecos County, Texas.
The Company continues to search for viable business operations to acquire
or merge with in order to increase the Company's revenues and profitability. The
Company has received unsolicited offers concerning the sale of its subsidiaries
and although it has not received an offer on any of its subsidiaries which the
Company deems acceptable, it will continue to entertain offers to sell some or
all of its subsidiaries in an attempt to generate profitability.
Results of Operations
The following discussion should be read in conjunction with the audited
financial statements and notes thereto included in our annual report on Form
10-KSB for the fiscal year ended December 31, 2001, and should further be read
in conjunction with the financial statements included in this report.
Comparisons made between reporting periods herein are for the nine month period
ended September 30, 2002 as compared to that period in 2001, and for the three
month period ended September 30, 2002 as compared to the same period in 2001.
Revenue from the operations of the Company's wholly owned subsidiary, JBP,
of $158,830 was realized during the third quarter of 2002. JBP's revenues for
the nine month period ended
5
September 30, 2002 were $415,075. The Company did not generate any revenue
during the three or nine months ended September 30, 2001 because the Company had
not yet acquired JBP.
General and administrative expenses decreased from $53,464 for the quarter
ended September 30, 2001 to $32,088 for the same period in 2002, although
consulting expenses as well as employee salaries and bonuses, primarily related
to the operations of JBP, increased in the third quarter of 2002. However, when
JBP's operating expenses are netted from JBP's revenues, the Company's total
operating loss for the quarter ended September 30, 2002 decreased to $20,216
from $125,149 for the quarter ended September 30, 2001.
General and administrative expenses for the nine months ended September
30, 2002 increased to $523,148 from $244,413 for the same period in 2001, and
employee salaries and bonuses increased by $106,707. However, consulting
expenses decreased significantly from $548,435 for the nine months ended
September 30, 2001 to $137,620 for the same period in 2002. As a result, the
total operating loss for the nine month period ended September 30, 2002
decreased to $365,779 from $797,227 for the nine months ended September 30,
2001.
The Company experienced a net loss of $60,079 for the three months ended
September 30, 2002, as compared to net income of $91,616 for the same period in
2001. The majority of the net income realized in the third quarter of 2001 was
attributable to a gain on extinguishment of debt in the amount of $215,379.
A net loss of $639,266 was experienced by the Company for the nine month
period ended September 30, 2002 as compared to net income of $2,759,056 for the
same period in 2001. As a result, the earnings per share decreased from $0.32
per share for the nine months ended September 30, 2001 to a net loss of $0.04
per share for the nine months ended September 30, 2002. Again, the majority of
the net income realized in the first nine months of 2001 was attributable to a
gain on extinguishment of debt in the amount of $3,581,839.
Liquidity and Capital Resources
Net cash provided by operating activities for the nine months ended
September 30, 2002 decreased to $391,444 from $3,325,935 for the same period in
2001. There was $126,473 used in, or provided by, financing activities for the
first nine months of 2002 as compared to $3,429,019 used in the same period in
2001.
The Company has relied upon its chief executive officer for its capital
requirements and liquidity. The Company's recurring losses and the financial
instability of RCH which may necessitate a recission of the Exchange Agreement
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans with respect to these matters include raising
additional working capital through equity or debt financing and ultimately
achieving profitable operations. The accompanying financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue as a going concern.
ITEM 3. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures
6
pursuant to Exchange Act Rule 13a-14. Based upon the evaluation, the Company's
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls are effective in timely alerting them to material
information relating to the Company (including its consolidated subsidiaries)
required to be included in the Company's periodic SEC filings. There have been
no significant changes in the Company's internal controls or in other factors
which could significantly affect internal controls subsequent to the date the
Company conducted its evaluation.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be attached by Item 601 of Regulation S-B are
listed in the Index to Exhibits beginning on page 12 of this Form
10-QSB, which is incorporated herein by reference.
(b) A report on Form 8-K was filed by the Company on September 6, 2002
reporting the execution of an Exchange Agreement with Royal Casino
Holding Corporation on August 26, 2002.
..
(c) A report on an Amended Form 8-K/A was filed by the Company on
October 3, 2002 reporting the closing of this Exchange Agreement
with Royal Casino Holding Corporation on October 2, 2002.
7
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
------------------
Chairman of the Board of Directors
and Chief Executive Officer
Dated: November 19, 2002
8
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Certification Pursuant to 18 U.S.C., Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
In connection with the Quarterly Report of AmeriResource Technologies,
Inc. (the "Company") on Form 10- QSB for the quarter ended September 30, 2002
(the "Report"), as filed with the Securities and Exchange Commission, on the
date hereof (the "Report), the undersigned, Delmar Janovec, Chief Executive
Officer and the person performing functions similar to that of a Chief Financial
Officer of the Company, hereby certifies, pursuant to 18 U.S.C. 1350, as adopted
pursuant to 18 U.S.C., Section 1350, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Dated: November 19, 2002 /s/ Delmar Janovec
-------------------
Delmar Janovec
Chief Executive Officer
9
CERTIFICATIONS
I, Delmar Janovec, as Chief Executive Officer and the person performing
functions similar to that of a Chief Financial Officer of AmeriResource
Technologies, Inc. (the "Company"), certify that:
1. I have reviewed this quarterly report on Form 10-QSB of the Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Company as of, and for, the periods presented in this quarterly report;
4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Company and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Company's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Company's auditors and the audit committee of
Company's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for the
Company's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal controls;
and
10
6. The Company's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 19, 2002
/s/ Delmar Janovec
---------------------------------------
Delmar Janovec, Chief Executive Officer
11
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.
10.1 13 Addendum to Exchange Agreement executed by and between
The Company and Royal Casino Holdings Corporation on
November 19, 2002.
12
Addendum to EXCHANGE AGREEMENT
THIS Addendum to EXCHANGE AGREEMENT (the "Addendum") is entered into
effective this 19th day of November 2002, (the "Effective Date") by and between
AmeriResource Technologies, Inc., a Delaware corporation with offices at 3430 E.
Russell Road, Suite 310, Las Vegas, Nevada 89120 ("ARES"), and Royal Casino
Holding Corporation, a Florida corporation with offices at 4000 South Ocean
Drive, Suite 100, Hollywood, Florida 33019 ("RCH"). (ARES and RCH may
hereinafter be referred to individually as a "Party" or collectively as the
"Parties").
Recitals
WHEREAS, on October 2, 2002, the Parties closed an August 26, 2002
Exchange Agreement (the "Agreement") whereby RCH sold 60% of Royal Casino
Entertainment, a Florida corporation ("RCE"), and 100% of Royal Casino Cruises,
LLC, a Florida limited liability company ("RCC"), in exchange for 60% of ARES;
and
WHEREAS, the Parties acknowledge that the primary delay in closing the
Agreement was RCH's procurement of sufficient working capital, which RCH
believed to have resolved through the sale of certain property in Colorado;
however, RCH acknowledges that it has not yet obtained the working capital it
envisioned at closing of the Agreement, although it may be able to obtain such
financing within the next ten (10) days.
WHEREAS, RCH agrees to provide ARES with an option to rescind the
Agreement effective on the day of this Addendum as a remedy to RCH's inability
to maintain working capital sufficient to facilitate the operations of RCE and
RCC.
Agreement
NOW, THEREFORE, in consideration of the promises, representations, and
covenants described herein, and in consideration of the recitals above, which
are incorporated herein by reference, and for other good and valuable
consideration, the receipt and sufficiency of which the Parties hereby
acknowledge, the Parties hereby agree as follows:
Article 1
Option to Rescind
1.1 RCH does hereby acknowledge it has not been able to maintain or obtain
sufficient working capital to operate RCE and RCC as normal business
ventures, which constitutes a breach of Section 2.1 of the Agreement.
1.2 As a remedy for the breach set forth in Section 1.1, RCH hereby grants to
ARES the sole option to rescind, ab initio, the August 26, 2002 Exchange
Agreement, as if the Parties never entered therein ("Option").
1.3 ARES shall possess this Option to rescind unless and until RCH provides
RCE and RCC
13
with sufficient working capital, as shall be reasonably determined by the
Parties.
1.4 Because the lack of working capital has left ARES in an ongoing
compromising situation, the Option may be invoked by ARES at any time with
written notice provided to RCH.
Article 2
Return of Consideration
2.1 The Parties agree that in the event ARES invokes the Option as set forth
in Section 1.2, both Parties will return any and all consideration
exchanged on October 2, 2002, including the sixty percent (60%) of RCE,
the one hundred percent (100%) of RCC, and the sixty percent (60%) of
ARES.
2.2 The Parties represent that they have the full, unencumbered right and
ability to return all consideration exchanged pursuant to the Agreement,
and both Parties hereby agree to maintain all such consideration in an
unencumbered manner that will facilitate the free and unfettered return of
such if and when ARES invokes the Option set forth in Section 1.2
Article 3
Continuing Indemnification
3.1 The Parties agree that Article 9 of the Agreement and the sections
thereunder shall be fully incorporated herein and continue and survive
this Addendum.
Article 4
Miscellaneous
4.1 Survival of Agreement. This Addendum in no way is intended to modify any
terms of the Agreement not expressly addressed herein and such other
provisions shall remain in full force and effect.
In Witness Whereof, the signatures of the Parties below evidence their
approval, acceptance and acknowledgment of the terms contained in this Addendum.
"ARES"- AmeriResource Technologies, Inc. "RCH"- Royal Casino Holding Corporation
/s/ Delmar Janovec /s/ Dharmesh Patel
-------------------------------------- ----------------------------------
By: Delmar Janovec, President By: Dharmesh Patel, President
14