UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 2004.
[ ] 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 Identification No.)
incorporation or organization)
3430 E. Russell Road, Suite 317, Las Vegas, Nevada 89120
(Address of Principal Executive Offices)
(702) 214-4249
(Issuer's Telephone Number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
On August 13, 2004, there were 724,846,485 outstanding shares of the
issuer's common stock, par value $0.0001.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION 3
ITEM 1. Financial Statements F-1
ITEM 2. Management's Discussion & Analysis or Plan of Operations 4
ITEM 3. Controls and Procedures 7
PART II - OTHER INFORMATION 7
ITEM 6. Exhibits and Reports on Form 8-K 7
SIGNATURES 9
INDEX TO EXHIBITS 10
CERTIFICATIONS 27
2
PART 1-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to AmeriResource Technologies
Inc., a Delaware corporation, and its subsidairies and predecessors, unless
otherwise indicated. Consolidated, unedited, condensed interim financial
statements including a balance sheet for the Company as of the quarter ended
June 30, 2004, statement of operations and statement of cash flows for the
interim period up to the date of such balance sheet and the comparable periods
of the preceeding 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 option, 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 fot the
interim periods presented. Because of the nature of the Company's business,
the results of operations for the six months ended June 30, 2004 are not
necessarily indicative of the results that may be expected for the full fiscal
year. The financial statements included herein should read in conjunction with
the financial statements and notes thereto included in the Form 10-KSB for the
year ended December 31, 2003.
3
AMERIRESOURCE TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
Unaudited
A S S E T S
-------------
June 30 December 31,
2004 2003
----------- ---------------
Current Assets:
-----------------
Cash and Cash Equivalents $39,966 $34,090
Notes receivable 46,065 52,436
----------- ----------------
Total Current Assets 86,031 86,526
Investments: 210,000
------------
Fixed Assets:
--------------
Leasehold Improvements 6,230 6,230
Accumulated Depreciation (156) (130)
----------- ----------------
Net Fixed Assets 6,074 6,100
Other Assets:
-------------
Oil & Gas Properties 1,700,000 1,700,000
POS Software 137,500 -
Marketable securities 621 621
------------ ----------------
Total Other Assets 1,838,121 1,700,621
------------ ----------------
Total Assets $2,140,226 $1,793,247
============ ================
The accompanying notes are integral part of Consolidated Financial Statements.
F-1
AMERIRESOURCE TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
Unaudited
L I A B I L I T I E S and S T O C K H O L D E R S' E Q U I T Y
--------------------------------------------------------------
June 30 December 31,
2004 2003
------------- -------------
Current Liabilities
---------------------
Accrued Expenses 59,000 -
Notes payable-current portion 350,000 350,000
------------- -----------
Total Current Liabilities 409,000 350,000
Non-Current Liabilities:
--------------------------
Commitments and contingencies 105,000 105,000
------------- -----------
Total Other Liabilities 105,000 105,000
------------- -----------
Total Liabilities $514,000 $455,000
------------- -----------
Stockholders' Equity
-----------------------
Preferred stock, $.001 par value; authorized,
10,000,000 shares; Class A, issued and
outstanding, 131,275 shares 131 131
Preferred stock, $.001 par value; authorized,
10,000,000 shares; Class B, issued and
outstanding, 177,012 shares 177 177
Preferred stock, $.001 par value; authorized,
1,000,000 shares; Class C, issued and
outstanding, 1,000,000 shares 1,000 1,000
Preferred stock, $.001 par value; authorized,
750,000 shares; Class D, issued and
outstanding, 250,000 shares - -
Common Stock, $.0001 par value; authorized,
1,000,000,000 shares; issued and outstanding,
533,176,533 shares and 313,154,169 shares 53,317 31,315
Comprehensive loss on marketable securities (3,108) (3,108)
Additional paid in capital 17,089,375 16,080,426
Retained earnings (15,514,666) (14,771,694)
------------- ------------
Total stockholder' equity 1,626,226 1,338,247
------------- ------------
Total Liabilities and Stockholder's equity $2,140,226 $1,793,247
============= ============
The accompanying notes are integral part of Consolidated Financial Statements.
F-2
AMERIRESOURCE TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statement of Operations
For the three For the six
months ended months ended
June 30 June 30
--------------------------- -------------------------
2004 2003 2004 2003
------------ ----------- ---------- -----------
Net Service Income $ - $510,900 $ - $869,445
Consulting Income 15,000 - 40,000 -
------------ ----------- ---------- -----------
Revenues $15,000 510,900 $40,000 869,445
Cost of Goods Sold - 313,459 - 573,623
------------ ----------- ---------- -----------
Gross Profit 15,000 197,441 40,000 295,822
Operating expenses
-------------------
General and administrative expenses 8,364 113,618 42,729 208,207
Salaries 25,000 51,680 50,000 127,572
Legal & Professional 47,341 257,395 94,210 385,642
Consulting 423,283 33,440 494,701 110,204
------------ ----------- ---------- ------------
Operating loss (488,988) (258,692) (641,640) (535,803)
Other Income (Expense):
-----------------------
Interest expense - (26,671) - (53,342)
Loss on marketable securities/Investments - - (101,332) (165,884)
------------ ----------- ---------- ------------
Total other income (expense) - (26,671) (101,332) (219,226)
Net Income (loss) before income tax (488,988) (285,363) (742,972) (755,029)
Income Tax Provision (Note 7) - - - -
------------ ----------- --------- -----------
Net Income (loss) (488,988) (285,363) (742,972) (755,029)
============ ============ ========== ===========
Earnings per share (0.00) (0.00) (0.00) (0.01)
============= ============ ========== ===========
Weighted average common shares 462,909,851 109,896,869 407,904,260 84,530,542
outstanding ============= ============= ============= ============
The accompanying notes are integral part of Consolidated Financial Statements.
F-3
AMERIRESOURCE TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Unaudited
For the six
months ended
June 30
----------------------
2004 2003
------------ ---------
Reconciliation of net loss provided by (used in)
operating activities:
Net income (loss) $(742,972) $(755,029)
Non-cash items:
Depreciation 26 5,048
Non-cash services through issuance of stock 578,451 375,638
Changes in assets affecting operations (increase)/decrease
Accounts Receivable - 21,194
Inventory - 76,025
Notes Receivables 46,065 101,665
Changes in liabilities affecting operations increase/(decrease)
Accounts Payable - (8,742)
Accrued Payroll and related expenses 59,000 62,882
Accrued Interest - 44,496
Other current liabilities - 48,623
----------- -----------
Net cash provided by (used in) operating activities (99,124) (28,200)
Cash flows from investing activities:
Purchase of Fixed Assets - (426)
Proceeds from sale of marketable securities - -
----------- -----------
Net cash provided by (used in) investing activities - (426)
Cash flows from financing activities:
Proceeds from common stock 105,000 -
Proceeds from borrowing - 28,419
----------- -----------
Net cash provided by (used in) financing activities 105,000 28,419
Increase (decrease) in cash $5,876 $(207)
=========== ===========
Cash-beginning period $34,090 $9,583
=========== ===========
Cash-end of period $39,966 $9,376
=========== ===========
The accompanying notes are integral part of Consolidated Financial Statements.
F-4
Ameriresource Technologies, Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
June 30, 2004
(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 17, 1996, the Company changed its name to
AmeriResource Technologies, Inc.
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. 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 ending June 30,
2004 and 2003 are not necessarily indicative of the results that may be expected
for the fiscal years ending December 31, 2004. 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., Self-Serve Technologies, Inc., West Texas
Real Estate & Resources', Inc. and Tomahawk Construction Company. All material
intercompany transactions and accounts have been eliminated in consolidation.
Loss per common share
Loss per common share is based on the weighted average number of common shares
outstanding during the period.
NOTE 3 - INVESTMENT
A Stock Exchange Agreement was executed and made effective on January 27, 2004
whereby the Company acquired a 40% interest in 449 Corporation ("449") and WDHQ
Corporation ("WDHQ") for 3,000,000 shares of the Company's common stock and
$60,000 cash. The Company paid $30,000 with the signing of the revised Stock
Exchange Agreement with the balance to be paid on or before July 31, 2004. 449
and WDHQ operate a business located in San Diego California as EagleRider. Eagle
Rider provides rental of Harley Davidson motorcycles and recreational
equipment. This investment is being accounted for as an non-marketable equity
investment by the Company.
A Purchase Agreement was executed on May 18, 2004 whereby the Company acquired
from Curtis Chambers, a POS software and hardware system, Self-Serve
Applications, and all rights for the intellectual properties including
trademarks and copyrights, in exhcange for 25,000,000 shares of ARES restricted
stock. The POS software is intended to be used in the fast food industry to
allow customers to place their own orders and also offers a variety of
management tools to provide specialized inventory reports and labor reports for
the business owner. The product is exiting the development stage and will be
marketable over the next few months.
F-5
Ameriresource Technologies, Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
NOTE 4 - STOCKHOLDERS' EQUITY
Common stock
In February of 2002, the Company approved a 100 for 1 reverse stock
split. All share figures included in this report are shown after the
reverse stock split. During the second quarter of 2004, the Company
issued a total of 140,533,364 shares of common stock, as follows:
102,203,079 shares of common stock were issued for consulting services
valued at $306,609. These shares were valued at $.005 per share and are
restricted as to resale.
11,380,285 shares of common stock were issued for legal services valued
at $34,141. These shares were valued at $.005 per share and are
restricted as to resale.
1,950,000 shares of common stock were issued for the extension of a
note payable and are restricted to resale.
25,000,000 shares of common stock were issued pursuant to the
acquisition of the acqisition of POS Software and are restricted to
resale.
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 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
2003. Dividends are not payable until declared by the Company.
F-6
Ameriresource Technologies, Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
NOTE 4 - STOCKHOLDERS' EQUITY (con't)
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 a redemption price of $2.00 per share with interest of 8% per annum.
The holders of the Series C also posses liquidation rights of $2.00 per share
superior in priority to holders of common stock or any junior securities.
On February 22, 2002, the Company filed a "Certificate of Designation" with the
Secretary of State of 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
the redemption price of $.001 per share with interest of 8% per annum. The
holders of the Series D also posses liquidation right of $.001 per share
superior in priority to holders of common stock or any junior securities.
Delmar Janovec, President & CEO, exchanged the interest owed to him on the
dividends relating to Series A and B Preferred Stock in the approximate 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.
NOTE 5- NOTE PAYABLE
The Company had the following notes payable outstanding as of
June 30, 2004:
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 15%. 350,000
Total notes payable 350,000
Less current portion (350,000)
----------------------
Long-term portion $ -
======================
Maturities of notes payable at June 30,
2004, are as follows:
2003 $ 350,000
2004
2005 --
Thereafter --
----------------------
$ 350,000
======================
F-7
Ameriresource Technologies, Inc. and Subsidiaries
NOTES TO FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
NOTE 6 - 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 7 - 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. The Company believes it is
currently covered adequately for workmen's compensation, auto and property
casualty insurance and business owners insurance, meeting the standard limits
that are customary in the industry. The Company does not presently have a
general liability policy in effect however, there are no operations performed
by the Company that presently requires such insurance.
On March 19, 2004, AmeriResource Technologies, Inc. (the "Company") rescinded,
ab intitio, a September 25, 2001 Acquisition Agreement (the "Agreement")entered
into with Wasatch Business Investors, Inc., a Utah corporation ("WBI") and
Covah, LLC, a Utah limited liability company ("Covah"). Pursuant to the
Agreement, WBI, as agent for Covah, was to sell and transfer one hundred
percent (100%) of Jim Butler Performance, Inc., a Tennessee corporation ("JBP"),
to the Company in exchange for one hundred million (100,000,000) shares of the
Company's stock, with seventy-five million (75,000,000) shares being issued to
Covah and twenty-five million shares being issued to WBI. The Company rescinded
the Acquisition Agreement because JBP was to be tendered free and clear of any
liens and encumbrances at the closing of the Acquisition Agreement and the
Company has been informed that a five hundred fifty thousand dollar ($550,000)
promissory note has been placed on JBP's real property with a lien securing such
debt.
Additionally, since the Agreement between the Company, WBI and Covah for the
purchase of JBP provided that JBP's assets be free and clear of any liens and
encumbrances, the Company considers the promissory note to WBI in the amount of
$350,000 to be invalid and unenforceable. Therefore, the promissory note has
also been noted as a contingent liability.
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.
F-8
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-looking Information
This quarterly report contains forward-looking statements. 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 the Company's future financial performance. In some cases,
you can identify forward-looking statements by terminology such as "may",
"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.
Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, it cannot guarantee future results,
levels of activity, performance, or achievements. Although all such
forward-looking statements are accurate and consequently do not assume
responsibility for the ultimate accuracy and completeness of such
forward-looking statements after the dare of this report to confirm such
statements to actual results.
General
The Company's operations for the 2nd Quarter of 2004 were conducted
through its wholly owned subsidiaries, West Texas Real Estate and Resources,
Inc. ("WTRER") and through its ownership of 40% of 449 Corporation ("449") and
WDHQ, Inc. ("WDHQ") and S.S.T.I. The Company continues to seek viable business
entities that are compatible to the Company's overall strategic plans, are
interested in going public for an exit strategy for their employees, and/or just
becoming an operating subsidiary of a public company. In furtherance of this
goal, subsequent to quarter ended June 30, 2004, the Company settled a material
portion of its liabilities through the settlement of debt.
POS SYSTEM-SELF-SERVE TECHNOLOGIES, INC.
On May 18, 2004, the Company purchased a Point of Sales (POS) software
and hardware system, Self-Serve applications with all rights for the
intellectual properties, to include all trademarks and copyrights from Curtis
Chambers, a software engineer, owner and developer of the POS system, for
Twenty-five Million (25,000,000) shares of R-144 restricted stock. The POS
software and hardware system has been in commercial use for the last three & 1/2
years in southern California in a full service restaurant. The POS system offers
a fully integrated system that includes all accounting features with management
tools/menus that offer various specialized reports for inventory and labor
control.
4
The POS Self-Serve system is a specialized application accessible by
restaurant customers from a kiosk. The self serve nature of the software allows
management the flexibility of reducing staffing requirements thus lowers the
labor expenses for the restaurant. This application also allows the customer to
order the food as well as pay in a much faster time period and lessens the
possibility of having an incorrect order being made.
Curtis Chambers, the engineer and developer of our POS Self Serve
Software, has assumed the positions of Lead Developer with Self-Serve
Technologies, Inc., our wholly-owned subsidiary and is currently completing add
on features to the software which should be ready for commercial use within the
next 60 days.
449 and WDHQ CORPORATIONS
On September 17, 2003, the Company executed a stock for stock like
exchange agreement, ("Agreement"), with Donald Herborn ("Herborn"), a 40% owner
of two, operating franchises of EagleRider, Inc. These franchises known as 449
and WDHQ are engaged in the business of providing rentals of Harley Davidson
motorcycles and recreational equipment. Pursuant to the Agreement, the Company
issued three million (3,000,000) shares of its restricted common stock equal to
a value of $150,000 as a stipulated value of $.05 cents to Herborn and/or his
assignees in exchange for Herborn's 40% equity in 449 and WDHQ. The Company
further agreed to guarantee seventy-five percent (75%) of the shares at the
stipulated value of $0.05 for a period of one year from the date of closing
based on the 60 day moving average prior to the anniversary of Closing. If this
60 day average is less than the stipulated value the Company will issue
additional common stock, but in no event shall the Company be required to issue
more than additional seven million shares to Herborn for a maximum total of Ten
Million (10,000,000) shares of restricted common stock. Pursuant to the
Agreement, the Company is also required to payoff corporate debts of 449 and
WDHQ, totaling no more than $60,000 to various vendors. In the first quarter of
2004, the Company executed an Addendum to the stock for stock like exchange with
Donald Herborn and was allowed to make an initial payment at closing of $30,000
with the remaining $30,000 due on or before July 31, 2004 in lieu of this
$60,000 debt payment. On February 7, 2004, the Company closed on the Herborn
stock for stock like exchange agreement with stock being issued and the first
payment of $30,000 being conveyed to Donald Herborn for the 40% equity in 449 &
WDHQ Corporations. The Company made its second and final payment of $30,000 to
Donald Herborn on or about July 30, 2004,.
On September 17, 2003, the Company executed a Letter of Intent with Don
and Charlene Swedo ("Swedos"), the majority owners (approximately 58%) of 449 &
WDHQ, setting forth in principle the terms by which the Swedos would sell their
ownership interests in 449 and WDHQ Corporations to the Company through a stock
for stock like exchange agreement similar to the Herborn's Agreement.
Additionally, pursuant to the Letter of Intent, the Company would provide an
additionally $340,000 for the purpose of eliminating the debt of 449 and WDHQ
and funding the expansion of one rental location. The Company continues to own
40% of 449 and WDHQ Corporations and are still in discussions with the Swedos
regarding their majority ownership position. The Company also is in discussions
with EagleRider, Inc. corporate office for other viable EagleRider franchise
locations that maybe available for purchase.
5
WEST TEXAS REAL ESTATE AND RESOURCES, INC.
WTRER's business operations for the second quarter consisted primarily
of discussions with potential joint-venture partners in the oil and gas industry
to potential develop the existing wells bringing them to production stage.
The Company continues to search for viable business operations to
acquire or merge with in order to increase the Company's revenues, assets and
profitability. The Company continues to receive unsolicited offers concerning
the sale of its subsidiaries and has not received any acceptable offers on any
of its subsidiaries. The Company will continue to entertain offers to sell some
or all of its subsidiaries in an attempt to reach a level of 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, 2003 and should further be read in
conjunction with the financial statements included in this report. Comparisons
made between reporting periods herein are for the three and six-month period
ended June 30, 2004 as compared to the same period in 2003.
Revenues for the second quarter ended June 30, 2004 decreased to $0
from $510,900 in revenues for 2003. The operating loss increased to $488,988 as
compared to $258,692 in 2003.
The Company's net loss for the quarter ended June 30, 2004 increased to
$488,988 from $285,363 in 2003. The Company's expenses for the second quarter
ended June 30, 2004 as compared to 2003, are set forth below:
------------------------------------------------------- --------------- -------------
Expenses Quarter ended Quarter
6/30/2004 ended
6/30/2003
------------------------------------------------------- --------------- -------------
------------------------------------------------------- --------------- -------------
General and Administrative 8,364 113,618
------------------------------------------------------- --------------- -------------
------------------------------------------------------- --------------- -------------
Consulting 423,283 33,440
------------------------------------------------------- --------------- -------------
------------------------------------------------------- --------------- -------------
Employee Salaries and Bonuses 25,000 51,680
------------------------------------------------------- --------------- -------------
------------------------------------------------------- --------------- -------------
Interest Expense 0 (26,671)
------------------------------------------------------- --------------- -------------
------------------------------------------------------- --------------- -------------
Legal and Professional 47,341 257,395
------------------------------------------------------- --------------- -------------
------------------------------------------------------- --------------- -------------
Total Expenses 503,988 429,462
------------------------------------------------------- --------------- -------------
The increase in these expenses for the second quarter of 2004 as
related to the same period for 2003 is primarily related to an increase in
non-cash services of $202,813.
6
Liquidity and Capital Resources
The Company's net cash provided by operating activities for the
six-months ended June 30, 2004 increased to $5,876 from net cash used in
operations of $28,200 for the same period in 2003. This increase is mainly
attributable to an increase in expense from non-cash services through the
issuance of stock to $578,451 for the six months of 2004 from $375,638 for the
six months of 2003, and a decrease in notes receivable from $101,665 for the six
months ended June 30, 2003 to $46,065 for the six months ended June 30, 2004.
There was $0 in cash flow from investing activities for the second
quarter of 2004 and $(426) for the same period in 2003.
There was $0 in cash flow from financing activities for the second
quarter of 2004 as compared to $28,419 for the same period in 2003.
The Company has relied upon its chief executive officer for its capital
requirements and liquidity. The Company's recurring losses, lack of cash flow
and lack of cash on hand 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
acquisitions of ongoing concerns, which generate profits, ultimately allowing
the Company to achieve consistent 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
the person performing functions similar to that of a Principal Financial Officer
of the Company, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-15. Based upon the evaluation, the Company's Chief Executive Officer and the
person performing functions similar to that of a Principal Financial Officer of
the Company 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 10 of
this Form 10-QSB, which is incorporated herein by reference.
7
(b) Reports on Form 8-K. No reports were filed on Form 8-K during
the second quarter of 2004.
8
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AMERIRESOURCE TECHNOLOGIES, INC.
/s/ Delmar Janovec
--------------------------------------
Delmar Janovec, Chief Executive Officer and
Principal Financial Officer
Dated: August 20, 2004
9
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
3(i) * Articles of Incorporation of the Company.
(Incorporated by reference from the Company's Form
S-4, file number 33-44104, effective on February
11, 1992.).
3(ii) * Bylaws of the Company. (Incorporated by reference
from the Company's Form S-4, file number 33-44104,
effective on February 11, 1992.)
10 (i) 11 Purchase Agreement dated May 18, 2004 by and
between the Company and Curtis Chambers.
10 (ii) 24 Lead Developer & Management Consulting Agreement
dated May 18, 2004 by and between the Company and
Curtis Chambers.
31(i) 27 Certification of Chief Executive Officer and
Principal Financial Officer under Section
302 of the Sarbanes-Oxley Act of 2002.
32(i) 28 Certification of Chief Executive Officer and
Principal Financial Officer Pursuant to 18
U.S.C.ss.1350
* Previously filed as indicated and incorporated herein by reference from the
referenced filings previously made by the Company.
10
EXHIBIT 10(i)
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the 18 th day of May 2004, by and between the following:
AMERIRESOURCE TECHNOLOGIES, INC., a Delaware corporation
(hereinafter "ARES"); and Curtis Chambers, a US citizen and an individual,
residing in the State of California (hereinafter "CHAMBERS").
WITNESSETH
WHEREAS, subject to the terms and conditions of this Agreement,
ARES and CHAMBERS desire for ARES to purchase from CHAMBERS and for CHAMBERS to
sell to ARES certain assets owned by CHAMBERS, as described in Paragraph 2.1
of this Agreement (the "CHAMBERS Assets"); and
WHEREAS, the Board of Directors of ARES deems it desirable and in the
best interests of ARES and its stockholders that ARES purchase the CHAMBERS
Assets in consideration of the issuance by ARES in favor of CHAMBERS of Twenty
Five Million (25,000,000) shares of ARES Common Restricted Stock
(the "ARES Shares") with provisions as described in Paragraph 2.1.(b); and
WHEREAS, CHAMBERS deems it desirable and in the best interests of
CHAMBERS to sell the CHAMBERS Assets to ARES; and
WHEREAS, ARES and CHAMBERS desire to provide for certain
undertakings, conditions, representations, warranties, and covenants in
connection with the transactions contemplated by this Agreement; and
WHEREAS, the parties of ARES and CHAMBERS have approved and adopted
this Agreement, subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto do hereby
agree as follows:
11
SECTION 1
DEFINITIONS
1.1 "Agreement," "ARES" and "CHAMBERS," respectively, shall have the
meanings defined in the foregoing preamble and recitals to this Agreement.
1.2 "Closing Date" shall mean 10:00 a.m., local time, on May 19th, 2004,
at the offices of ARES located at 3430 E. Russell Rd., Suite 317, Las Vegas,
Nevada 89120, the date on which the parties hereto shall close the transactions
contemplated herein; provided that the parties can change the Closing Date
and place of Closing to such other time and place as the parties shall
mutually agree, in writing. As of the Closing Date, all Exhibits to this
Agreement shall be complete and attached to this Agreement.
SECTION 2
AGREEMENT FOR PURCHASE AND SALE OF CHAMBERS ASSETS
2.1 Substantive Terms of the Purchase and Sale of CHAMBERS Assets.
(a) CHAMBERS shall sell and deliver to ARES free and clear title
to all of the assets, described as follows: Point of Sale software code,
system and intellectual property related thereto including but not
limited to research and development information, proto type software and
hardware, whether in actual use by a third party and/or in a research stage,
any and all products or derivative products developed, to date, or that will
be developed in relation to the Point of Sales software and hardware and its use
in the food industry, particularly in the food services segment, and/or any
other industry.
(b) ARES shall sell and deliver to CHAMBERS the ARES Shares,
consisting of 25,000,000 shares of Common Stock of ARES. The ARES Shares
shall be issued pursuant to an exemption from registration under the
Securities Act of 1933 (the "1933 Act") and from registration under any and
applicable state securities laws. The certificates representing the
ARES Shares shall bear the restrictive legend set forth in Rule 144 of the
Rules and Regulation of the 1933 Act and any appropriate legend required
under applicable state securities laws. It is ARES' intent to resell the
CHAMBERS assets to a second publicly traded corporation. In the event that
this occurs, CHAMBERS will return Twelve Million Five Hundred Thousand
(12,500,000) shares of ARES stock to ARES and receive Five Million (5,000,000)
shares in the second publicly traded corporation.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF ARES
ARES, in order to induce CHAMBERS to execute this Agreement and to
consummate the transactions contemplated herein, represents and warrants to
CHAMBERS as follows:
3.1 Organization and Qualification. ARES is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Delaware, with all requisite power and authority to own its property and
to carry on its business as it is now being conducted. ARES is duly qualified
as a foreign corporation and in good standing in each jurisdiction where the
ownership, lease, or operation of property or the conduct of business
requires such qualification, except where the failure to be in good standing
or so qualified would not have a material, adverse effect on the financial
condition or business of ARES.
12
3.2 Authorization and Validity. ARES has the requisite power and
is duly authorized to execute and deliver and to carry out the terms of this
Agreement. The board of directors and stockholders of ARES have taken all action
required by law, its Articles of Incorporation and Bylaws, or otherwise to
authorize the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, subject to the satisfaction or
waiver of the conditions precedent set forth in Section 8 of this Agreement.
Assuming this Agreement has been approved by all action necessary on the part
of CHAMBERS, this Agreement is a valid and binding agreement of ARES.
3.3 No Defaults. ARES is not in default under or in violation
of any provision of its Articles of Incorporation or Bylaws. ARES is not in
violation of any statute, law, ordinance, order, judgment, rule, regulation,
permit, franchise, or other approval or authorization of any court or
governmental agency or body having jurisdiction over it or any of its
properties which, if enforced, would have a material, adverse effect on the
financial condition or business of ARES other than what has been previously
disclosed in the most recent 10KSB financial statement. Neither the execution
and delivery of this Agreement, nor the consummation of the transactions
contemplated herein, will conflict with or result in a breach of or
constitute a default under any of the foregoing or result in the creation of
any lien, mortgage, pledge, charge, or encumbrance upon any asset of ARES
and no consents or waivers thereunder are required to be obtained in connection
therewith in order to consummate the transactions contemplated by this
Agreement.
3.4 SEC Documents; Financial Statements. As of the Closing,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Securities and Exchange
Commission ("SEC") pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") (all of the foregoing filed
prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein being hereinafter referred to as the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared in
substantial accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may
exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company as of
the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). No other information provided by or on behalf
of the Company to Sellers which is not included in the SEC Documents, including,
without limitation, contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or were made,
not misleading. Neither the Company nor any of its officers, directors,
employees or agents have provided Sellers with any material, nonpublic
information.
13
3.5 Absence of Certain Changes. Since the most recent filing by
the Company with the SEC, there has been no material adverse change and no
material adverse development in the business, properties, operations,
financial condition, results of operations or prospects of the Company.
The Company has not taken any steps, and does not currently expect to take
any steps, to seek protection pursuant to any bankruptcy law nor does the
Company have any knowledge or reason to believe that its creditors intend to
initiate involuntary bankruptcy proceedings.
3.6 Litigation. Other than what has been previously disclosed
in the ARES financial reports and the Company's most recent 10-KSB, as seen
in Attachment A, there are no actions, suits, proceedings, orders,
investigations, or claims pending or, to the knowledge of ARES threatened
against or affecting ARES at law or in equity, or before or by any
governmental department, commission, board, bureau, agency, or
instrumentality, which, if adversely determined, would materially and adversely
affect the financial condition of ARES, or which seek to prohibit, restrict,
or delay the consummation of the transactions contemplated hereby. ARES is not
operating under or subject to, or in default with respect to, any order, writ,
injunction, or decree of any court or federal, state, municipal, or other
governmental department, commission, board, agency, or instrumentality.
3.7 Documents. The copies of all agreements and other
instruments that have been delivered by ARES to CHAMBERS are true, correct,
and complete copies of such agreements and instruments and include all
amendments thereto.
3.8 Disclosure. The representations and warranties made by ARES
herein and in any schedule, statement, certificate, or document furnished
or to be furnished by ARES to CHAMBERS pursuant to the provisions hereof or in
connection with the transactions contemplated hereby, taken as a whole,
do not and will not as of their respective dates contain any untrue statements
of a material fact, or omit to state a material fact necessary to make the
statements made not misleading.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF CHAMBERS
CHAMBERS, in order to induce ARES to execute this Agreement and to
consummate the transactions contemplated herein, represents and warrants to
ARES as follows:
4.1 Organization. CHAMBERS is a US citizen and individual in good
standing under the laws of the state of California with all requisite power and
authority to own his property and assets and to carry on his business as it is
now being conducted and is qualified and is in good standing in each
jurisdiction where the ownership, lease, or operation of property or the conduct
of his business requires such qualification except where the failure to be
in good standing or so qualified would not have a material, adverse effect on
the financial condition and business of CHAMBERS.
14
4.2 Ownership of CHAMBERS Assets. CHAMBERS is the sole owner of
the CHAMBERS assets and, as of the Closing Date, will be able to deliver to
ARES legal and equitable title to the CHAMBERS assets, free and clear of
any encumbrances of any kind whatsoever as described in Article 2.1-(a).
4.3 Validity. CHAMBERS has the requisite power to execute and
deliver and to carry out the terms of this Agreement. Assuming this Agreement
has been approved by all actions necessary on the part of ARES, this
Agreement is a valid and binding agreement of CHAMBERS.
4.4 Contracts and Leases. Except as listed in Exhibit 4.6
hereto, CHAMBERS is not a party to any written or oral leases, commitments,
or any other agreements concerning the CHAMBERS Assets. On the Closing
Date, CHAMBERS shall have paid or performed in all material respects all
obligations required to be paid or performed by it to such date with respect to
the CHAMBERS Assets and will not be in default under any document, contract,
agreement, lease, or other commitment to which it is a party.
4.5 Liabilities. The CHAMBERS Assets do not have any liabilities,
liens or any claims whatsoever assessable against them.
4.6 Infringement Rights. CHAMBERS warrantees the Point of Sales
software and/or hardware and its application thereof, does not violate any
copy write laws or patents and that its use is authorized for retail and
commercial applications in all industries.
4.7 Litigation. There are no actions, suits, proceedings, orders,
investigations, or claims pending against or affecting the CHAMBERS Assets
at law or in equity or before or by any federal, state, municipal, or other
governmental department, commission, board, agency, or instrumentality,
domestic or foreign, nor has any such action, suit, proceeding, or investigation
been pending or threatened in writing during the 12-month period preceding
the date hereof, which, if adversely determined, would materially and
adversely affect the financial condition of CHAMBERS Assets. The CHAMBERS
Assets are not operating under or subject to, or in default with respect to,
any order, writ, injunction, or decree of any court or federal, state,
municipal, or other governmental department, commission, board, agency, or
instrumentality.
4.8 Taxes. At the Closing Date, all taxes assessable to the
CHAMBERS Assets which are then due shall have been paid in full.
4.9 Material Change. There has been no material change in the
condition, financial or otherwise, of the CHAMBERS Assets, except changes
occurring in the ordinary course of business, which changes have not materially,
adversely affected their condition.
15
4.10 Documents. The copies of all agreements and other instruments
that have been delivered by CHAMBERS to ARES are true, correct, and complete
copies of such agreements and instruments and include all amendments thereto.
4.11 Disclosure. The representations and warranties made by
CHAMBERS herein and in any schedule, statement, certificate, or document
furnished or to be furnished by CHAMBERS to ARES pursuant to the provisions
hereof or in connection with the transactions contemplated hereby taken as a
whole do not and will not as of their respective dates contain any untrue
statements of a material fact, or omit to state a material fact necessary to
make the statements made not misleading.
SECTION 5
INVESTIGATION; PRESS RELEASE
5.1 Investigation. Subsequent to the execution of this
Agreement of, ARES may complete its own independent investigation of the
CHAMBERS Asset to confirm, among other things, the assets, liabilities, title,
liens, operability, and status of business of the CHAMBERS Assets. In the event
that this Agreement is terminated for any reason, ARES will return to CHAMBERS
all documents, work papers, and other materials and all copies thereof
obtained by ARES, or on its behalf, from CHAMBERS, whether obtained before
or after the execution hereof, will not use, directly or indirectly, any
confidential information obtained from CHAMBERS hereunder or in connection
herewith, and will keep all such information confidential and not used in any
way detrimental to CHAMBERS except to the extent the same is publicly disclosed
by CHAMBERS.
(b) CHAMBERS acknowledges that it has made an investigation of
ARES, which has included, among other things, the opportunity of discussions
with executive officers of ARES, and its accountants, investment bankers, and
counsel. In the event of termination of this Agreement for any reason, CHAMBERS
will deliver to ARES all documents, work papers, and other materials and all
copies thereof obtained by it, or on its behalf, from ARES, whether obtained
before or after the execution hereof and will not use, directly or indirectly,
any confidential information obtained from ARES hereunder or in connection
herewith, and will keep all such information confidential and not used in any
way detrimental to ARES, except to the extent the same is publicly disclosed by
ARES.
5.2 Press Release. ARES and CHAMBERS shall agree with each other as to
the form and substance of any press releases and the filing of any documents
with any federal or state agency related to this Agreement and the transactions
contemplated hereby and shall consult with each other as to the form and
substance of other public disclosures related thereto; provided, however,
that nothing contained herein shall prohibit either party from making any
disclosure that her or its counsel deems necessary.
15
SECTION 6
BROKERAGE; OTHER COSTS
6.1 Brokers and Finders. Except as set forth in Exhibit 6.1,
neither ARES nor CHAMBERS, or any of their respective officers, directors,
employees, or agents, has employed any broker, finder, or financial advisor or
incurred any liability for any fee or commissions in connection with
initiating the transactions contemplated herein. Each party hereto agrees to
indemnify and hold the other party harmless against or in respect of any
commissions, finder's fees, or brokerage fees incurred or alleged to have been
incurred with respect to initiating the transactions contemplated herein as a
result of any action of the indemnifying party.
6.2 Other Costs. The parties agree that each party shall bear its
own expenses incurred with in connection with this Agreement and the
transaction provided for herein, including, but not limited to, fees of
attorneys, accountants and other fees.
SECTION 7
CLOSING AGREEMENTS AND POST-CLOSING
7.1 Closing Agreements. On the Closing Date, the following
activities shall occur, the following agreements shall be executed and
delivered, and the respective parties thereto shall have performed all acts
that are required by the terms of such activities and agreements to have been
performed simultaneously with the execution and delivery thereof as of the
Closing Date:
(a) CHAMBERS shall have executed and delivered documents to
ARES sufficient then and there to transfer legal and equitable title to the
CHAMBERS Assets to ARES;
(b) ARES shall have delivered to CHAMBERS the ARES Shares,
consisting of an aggregate of Twenty Five Million (25,000,000) shares of
ARES Common Stock in certificate denominations as presented by ARES, as defined
in Section 2-Article 2.1-(b).
SECTION 8
CONDITIONS PRECEDENT TO ARES'S OBLIGATIONS TO CLOSE
The obligations of ARES to consummate this Agreement are subject to
satisfaction on or prior to the Closing Date of the following conditions:
8.1 Representations and Warranties. The representations and
warranties of CHAMBERS contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date, and CHAMBERS shall have
performed in all material respects all of its obligations hereunder theretofore
to be performed.
8.2 Other. The joint conditions precedent in Section 10 hereof
shall have been satisfied and all documents required for Closing shall be
acceptable to Counsel for ARES.
17
SECTION 9
CONDITIONS PRECEDENT TO ARES'S OBLIGATIONS TO CLOSE
___________________________________________________
The obligation of CHAMBERS to consummate this Agreement is subject
to the satisfaction on or prior to the Closing Date of the following
conditions:
9.1 Representations and Warranties. The representations
and warranties of ARES contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date, and ARES shall have
performed in all material respects all of its obligations hereunder theretofore
to be performed.
9.2 Other. The joint conditions precedent in Section 10 hereof
shall have been satisfied.
SECTION 10
JOINT CONDITIONS PRECEDENT
The obligations of ARES and CHAMBERS to consummate this Agreement
shall be subject to satisfaction or waiver in writing by all parties of each
and all of the following additional conditions precedent at or prior to the
Closing Date:
10.1 Other Agreements. All of the agreements contemplated by
Section 7.1 of this Agreement shall have been executed and delivered, and all
acts required to be performed thereunder as of the Closing Date shall have been
duly performed, including, without limitation, completion of all exhibits
to this Agreement.
10.2 Absence of Litigation. At the Closing Date, there shall be
no action, suit, or proceeding pending or threatened against any of the
parties hereto by any person, governmental agency, or subdivision thereof,
nor shall there be pending or threatened any action in any court or
administrative tribunal, which would have the effect of inhibiting the
consummation of the transactions contemplated herein.
SECTION 11
CONFIDENTIALITY
11.1 ARES acknowledges that its directors, executive officers,
employees, consultants, and affiliates have, and will, acquire information and
materials from CHAMBERS concerning knowledge about the technology, business,
products, strategies, customers, clients and suppliers of the CHAMBERS Assets
and that all such information, materials and knowledge acquired, are and will
be trade secrets and confidential and proprietary information of CHAMBERS,
such acquired information, materials, and knowledge are hereinafter referred
to as "Confidential Information." ARES, itself, and behalf of its directors,
executive officers, employees, consultants, and affiliates, covenant to hold
such Confidential Information in strict confidence, not to disclose it to
others or use it in any way, commercially or otherwise, except in connection
with the transactions contemplated by this Agreement and not to allow any
unauthorized person access to such Confidential Information. Similarly,
CHAMBERS acknowledges that its directors, executive officers, employees,
consultants, and affiliates have, and will, acquire information and materials
from ARES concerning knowledge about the technology, business, products,
strategies, customers, clients and suppliers of ARES and that all such
information, materials and knowledge acquired, are and will be trade secrets
and confidential and proprietary information of ARES. CHAMBERS covenants
to hold such Confidential Information in strict confidence, not to disclose it
to others or use it in any way, commercially or otherwise, except in connection
with the transactions contemplated by this Agreement and not to allow any
unauthorized person access to such Confidential Information.
18
11.2 The Confidential Information disclosed by the one party to the
other shall remain the property of the disclosing party.
11.3 ARES and CHAMBERS, and their respective directors, executive
officers, employees, consultants, and affiliates, shall maintain in secrecy all
Confidential Information disclosed to them by the party other using not less
than reasonable care. ARES and CHAMBERS, and their respective directors,
executive officers, employees, consultants, and affiliates shall not use or
disclose in any manner to any third party any Confidential Information without
the express written consent of the chief executive officer of the other party
unless or until the Confidential Information is:
(a) publicly available or otherwise in the public domain; or
(b) rightfully obtained by any third party without restriction; or
(c) disclosed by the other party without restriction pursuant to
judicial action, or government regulations or other requirements.
11.4 The obligations of under Sections 11.1, 11.2, and 11.3 of
this Agreement shall expire one year from the date hereof.
SECTION 12
CONDITIONS SUBSEQUENT
12.1 Audit. The parties acknowledge that pursuant to the rules
and regulations of the SEC, it may be required that an audit of the financial
statements of CHAMBERS for his prior two fiscal years (the "CHAMBERS Audit")
must be completed by an auditor acceptableto ARES and filed with the SEC within
sixty-five (65) days following the Closing. The Sellers agree that CHAMBERS will
cooperate and provide all needed information to complete the CHAMBERS Audit.
If the CHAMBERS Audit is not completed in a timely manner to allow for filing
of same with the SEC within the 65-day period, this Agreement will be mutually
rescinded by the parties.
19
12.2 Management Contract. The parties agree that following the
Closing, Curtis Chambers; will then be employed by ARES as its Lead Developer,
or other applicable title, as defined in the Consulting and/or Employment
Agreement.
12.3 Project Financing. For a period of twelve months, ARES
agrees to provide up to $11,500.00 per month in project financing for the
continued development of the Point of Sale software and related products.
All financing must be approved by ARES on a month-to-month basis, dependent
upon CHAMBERS' performance and successful progression of the Point of Sales
software and/or project development.
SECTION 13
TERMINATION AND WAIVER
13.1 Termination. This Agreement may be terminated and abandoned
on or before the Closing Date by:
(a) the mutual consent in writing of the parties hereto;
(b) ARES, if the conditions precedent in Sections 8 and 10 of this
Agreement have not been satisfied or waived by the Closing Date; and
(c) CHAMBERS, if the conditions precedent in Sections 9 and 10
of this Agreement have not been satisfied or waived by the Closing Date.
If this Agreement is terminated pursuant to Section 13.1, the parties
hereto shall not have any further obligations under this Agreement, and each
party shall bear all costs and expenses incurred by it.
SECTION 14
NATURE AND SURVIVAL OF REPRESENTATIONS, ETC.
14.1 Nature and Survival. All statements contained in any
certificate or other instrument delivered by or on behalf of ARES or CHAMBERS
pursuant to this Agreement or in connection with the transactions
contemplated hereby shall be deemed representations and warranties by such
party. All representations and warranties and agreements made by ARES or
CHAMBERS in this Agreement or pursuant hereto shall survive the Closing Date
hereunder until the expiration of the 12th month following the Closing Date.
20
SECTION 15
MISCELLANEOUS
15.1 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if written and delivered in
person or sent by registered mail, postage prepaid, addressed as follows:
to CHAMBERS: Curtis Chambers
3893 Camino Lindo
San Diego, CA 92122
To ARES: AmeriResource Technologies, Inc.
Attention: Delmar Janovec
3430 E. Russell Road
Suite 317
Las Vegas, NV 89120
or such other address as shall be furnished in writing by the appropriate
person, and any such notice or communication shall be deemed to have been given
as of the date so mailed.
15.2 Time of the Essence. Time shall be of the essence of this
Agreement.
15.3 Costs. Each party will bear the costs and expenses incurred
by it in connection with this Agreement and the transactions contemplated
hereby.
15.4 Entire Agreement and Amendment. This Agreement, all Exhibits
hereto, and documents delivered at the Closing Date hereunder contain the
entire agreement between the parties hereto with respect to the transactions
contemplated by this Agreement and supersedes all other agreements,
written or oral, with respect thereto. This Agreement may be amended or
modified in whole or in part, and any rights hereunder may be waived,
only by an agreement in writing, duly and validly executed in the same manner
as this Agreement or by the party against whom the waiver would be asserted.
The waiver of any right hereunder shall be effective only with respect to the
matter specifically waived and shall not act as a continuing waiver unless it so
states by its terms.
15.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original and
shall become effective when one or more counterparts have been signed by
each party hereto and delivered to the other party.
15.6 Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of Nevada.
15.7 Attorneys' Fees and Costs. In the event any party to this
Agreement shall be required to initiate legal proceedings to enforce performance
of any term or condition of this Agreement, including, but not limited to, the
interpretation of any term or provision hereof, the payment of moneys or the
enjoining of any action prohibited hereunder, the prevailing party shall be
entitled to recover such sums, in addition to any other damages or
compensation received, as will reimburse the prevailing party for
reasonable attorneys' fees and court costs incurred on account thereof
(including, without limitation, the costs of any appeal) notwithstanding the
nature of the claim or cause of action asserted by the prevailing party.
21
15.8 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, personal representatives, successors, and assigns, as the case may
be.
15.9 Captions. The captions appearing in this Agreement are
inserted for convenience of reference only and shall not affect the
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Purchase
Agreement as of the day and year first above written.
AmeriResource Technologies, Inc.
A Delaware corporation
By: /s/ Delmar Janovec
-------------------------------
Delmar Janovec, President & CEO
CURTIS CHAMBERS
An individual
By: /s/ Curtis Chambers
-------------------
Curtis Chambers
22
Attachment A - Legal Proceedings From ARES 10-K SB Filed 4/14/04
ITEM 3. LEGAL PROCEEDINGS
The following are pending material cases involving the Company and its
subsidiaries.
Orix Real Estate Capital Markets, LLC, as the Special Servicer for Finova
Realty Capital, Inc. v. Magnolia Manors Properties, LLC, et al., Case No.
CV-01-3086-SH, was filed in the Montgomery Circuit Court in Montgomery County,
Alabama in May 2000 by Orix Real Estate Capital Markets, LLC ("Orix") as the
Special Servicer for Finova Realty Capital, Inc. alleging that Magnolia Manors
Properties, LLC defaulted on the provisions of a promissory note to Finova
Realty Capital, Inc. by which it promised to repay $9,280,000. This lawsuit
alleged that because the Company had been, between December 23, 1999 and
February 27, 2001, in negotiations to merge or acquire the assets of Magnolia
Manors Properties, LLC that it has bound itself to certain provisions of these
loan documents. On January 25, 2002, the Company and Delmar Janovec filed a
Motion for Summary Judgment asking the Court to enter an order granting judgment
in their favor on all claims asserted against them. The Circuit Court granted
summary judgment in favor of the Company and Delmar Janovec on March 29, 2002.
Orix appealed this judgment to the Alabama Supreme Court on June 26, 2002. The
Circuit Court's summary judgment was affirmed by the Alabama Supreme Court on
January 14, 2003.
American Factors Group, L.L.C. vs. AmeriResource Technologies, Inc., et al.
This case was filed in the United States District Court, District of New Jersey,
Case Number 3:97cv01094(GEB).
In February 2000, the parties stipulated to the dismissal of certain claims
in this suit with prejudice. This stipulation dismissed all of the claims in
this suit except for the claims against defendants Rod Clawson, Michael
Cederstrom and Tim Masters. These remaining claims were resolved pursuant to a
Settlement Agreement which has been subsequently amended.
The Settlement Agreement provided for the payment by the Company and Delmar
Janovec ("Janovec") of certain obligations and judgments entered against the
defendants. An Addendum dated August 10, 2000 was executed to modify certain
terms of the repayment schedule. As the Company and Janovec were unable to meet
the terms of repayment set forth in the Addendum, a Second Addendum was
executed in the first quarter of 2002 to modify the repayment conditions as
follows:
1. the interest rate and all other penalties and late charges assessed on the
outstanding obligation of $308,692.08 owed by Janovec and the Company shall be
fifteen percent (15%) until the obligation is paid in full on or before
March 31, 2002;
2. the repayment schedule shall be weekly payments of not less than $2,500,
with repayments increasing in the event the price of the Company's Common Stock
increases;
3. to the extent the Company secures a line of credit through VSource 1 and
receives any investor monies, American Factors Group, L.L.C. ("AFG") shall
receive fifty percent (50%) of any such monies; and
4. The Company shall issue to AFG ten million (10,000,000) shares of the
Company's Common Stock in consideration of the modification of the repayment
conditions.
As the Company's Common Stock reaches the specific prices stated in the
repayment schedule, Delmar Janovec, the Company's president, has agreed to sell
his personal shares of the Company's Common Stock to make the scheduled payment.
In the event the obligation was not paid in full by March 31, 2002, AFG would be
entitled to proceed with any available proper legal action to collect on its
judgment. AFG and the Company have extended the terms of the Second Addendum
until December 27, 2003. The terms of the Second Addendum have been met.
Internal Revenue Service Issue. The IRS and the Company have been trying to
resolve outstanding issues since 2000 for unpaid payroll taxes created by the
previous engineering subsidiaries during the close down phases of the offices
and was not successful in reaching a resolution with the IRS. On or about
January 16, 2001, the IRS notified Rod Clawson, a director of the Company and
the former President of the engineering subsidiaries, that the IRS was filing a
lien against him, individually, for the payment of taxes. Subsequently, several
meetings were held and an agreement was reached on or about March 22, 2001 with
the IRS whereby Clawson will pay $50,000 per month until approximately $282,000,
constituting principal and interest, is paid off in its entirety. Mr. Clawson
has made payments in excess of $115,000 to date.
23
EXHIBIT 10(ii)
LEAD DEVELOPER & MANAGEMENT CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is entered into and effective
as of this 18th Day of May 2004, by and between Curtis Chambers
(the "Consultant"), and AmeriResource Technologies, Inc., a Delaware
corporation, (the "Company").
W I T N E S E T H:
The parties agree as follows:
1. The Company hereby agrees to employ the Consultant to
render services to the Company during the Consulting Period, as that term
is hereinafter defined, to serve as the Lead Developer and Management
Consultant to certain of the Company's subsidiary, specifically, the Point
of Sale Software division. The Consultant agrees to be employed on a
full-time basis by the Company in such capacity and agrees that
throughout the Consulting Period he will perform all such duties as shall
be necessary for him to perform consistent with his positions or as shall
be assigned to him. The Consultant further agrees to devote his best
efforts to the performance and discharge of his duties and responsibilities.
In such capacity, the Consultant shall not have the power, without prior
approval of the Board of Directors of the Company (the "Board"), to incur
on behalf of Company any business expenses.
2. The Company agrees to pay Consultant, as full compensation
for the services to be rendered by the Consultant hereunder, and the Consultant
agrees to accept as full compensation the compensation package as outlined below
in paragraph (a) and (b). Consultant will be responsible for Federal,
state and local income taxes, FICA, FUTA and other legally required taxes and
contributions. It is agreed that the Company's various subsidiaries are
additionally bound by all provisions of this agreement, and shall be fully
liable to pay any and all amounts due as noted in this agreement.
(a) A salary during the Consulting Period at an annualized rate of
$102,000.00, which compensation shall be payable in arrears
in equal monthly installments of $8,500.
(b) No benefits will be provided.
3. Consulting Period.
(a) The "Consulting Period" hereunder shall commence on the date
hereof and shall terminate twelve months (12) from this date.
(b) Notwithstanding paragraph 3(a), the Consulting Period,
and the Consultant's employment hereunder, shall terminate
on such earlier date on which any of the following
events occurs:
(i) the death of the Consultant,
(ii) the resignation of the Consultant,
(iii) the termination by the Board of the Consultant's
employment with the Company for disability
(as hereinafter defined in (c),
or
(iv) the termination by the Board of the Consultant's
employment with the Company, upon fifteen (15) days'
prior written notice to the Consultant hereunder, for
cause (as hereafter defined in (d).
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(c) The term "disability," as used herein with respect to
the termination of the Consultant's employment with the Company, shall
mean the Consultant's inability to perform effectively the substantial
portion of his duties hereunder because of physical or mental disability for
a cumulative period of 180 days in any consecutive twelve month period
during the Consulting Period.
(d) The term "cause," as used herein with respect to the
termination of the Consultant's employment with the Company, shall mean any
of the following: (i) willful and persistent failure or refusal to perform
material, significant and appropriate obligations under this Agreement,
with proper written notice having been given and time to make corrections;
(ii) the conviction of the Consultant for any felony; any other action of the
Consultant that is reported in the general or trade press or otherwise
achieves a general notoriety, involving conduct that is illegal, immoral
or scandalous, and that materially reduces the value of the Consultant's
services and significantly discredits the Consultant and the Company's business.
4. All notices and other communications hereunder shall
be given in writing by hand delivery or by registered or certified mail,
return receipt requested, postage prepaid, addressed to the party to receive
the same at its respective address set forth below, or at such other address as
may from time to time be designated by either party to the other hereunder
in accordance with this Section:
If to the Consultant: Curtis Chambers
3893 Camino Lindo
San Diego, CA 92122
TEL: (619) 886-7390
FACSMILE: (619) 886-7390
If to the Company: AmeriResource Technologies, Inc.
3430 E. Russell Rd., Suite 317
Las Vegas, Nevada 89120
TEL: (702) 214-4249
FACSMILE: (702) 214-4221
All such notices and communications hereunder shall be effective and
deemed given, if mailed, when delivered, as evidenced by the acknowledgment
of receipt issued with respect thereto by the applicable postal
authorities, and, if delivered by hand, when received, as evidenced by the
signed acknowledgment of receipt of the person to whom such notice or
communication shall have been addressed.
5. This Agreement constitutes the entire agreement of the
parties hereto with respect to the Consultant's employment by the Company
and supersedes and terminates all prior agreements, arrangements and
policies between the Consultant and the Company, as well as all of it's
majority owned subsidiaries, with respect to the subject matter hereof.
25
6. No failure by either party hereto to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any right hereunder by either party
preclude any other or future exercise of that right or any other right
hereunder by that party.
7. In case any one or more of the provisions of this Agreement
should be found to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
8. This Agreement, and the respective rights, duties and
obligations of the parties hereunder, shall be governed by and construed in
accordance with the laws of the State of California.
9. The rights and benefits of this Agreement shall
inure to the benefit of, and be enforceable by, the Company's successors
and assigns. The rights and obligations of the Consultant under this
Agreement may only be assigned with the prior written consent of the Company.
10. This Agreement may not be amended, terminated or
superseded except by an agreement in writing, executed by the Company
and the Consultant.
11. The Consultant hereby acknowledges that, in connection
with his review of the terms and conditions of this Agreement, including,
without limitation, the undertakings, restrictions and waivers set forth
herein, he has had the opportunity to consult with and be represented by his
own counsel, who may advise him concerning the execution and delivery of
this Agreement by him.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be Duly executed on the date first above written.
AMERIRESOURCE TECHNOLOGIES, INC.
By: /s/ Delmar Janovec
-----------------------------
Delmar Janovec-President & CEO
CONSULTANT
/s/ Curtis Chambers
-------------------
By: Curtis Chambers
26
EXHIBIT 31(i)
CERTIFICATION
I, Delmar Janovec, as Chief Executive Officer and the person performing
functions similar to that of a Principal 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 annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
small business issuer as of, and for, the periods presented in this annual
report;
4. The small business issuer's other certifying officer(s) and I am responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the small business issuer and have:
(a) designed such disclosure controls and procedures or caused such
disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the small business
issuer, including its consolidated subsidiaries, is made known to
myself by others within those entities, particularly during the period
in which this annual report is being prepared;
(b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report my conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(d) disclosed in this report any change in the small business issuer's
internal controls over financial reporting that occurred during the
small business issuer's most recent fiscal year that has materially
affected, or is reasonably likely to materially effect, the small
business issuer's internal controls over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer's auditors and the audit committee of
the small business issuer's board of directors;
(a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonable likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial information;
and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting
Date: August 20, 2004
/s/ Delmar Janovec
---------------------------
Delmar Janovec
Chief Executive Officer and
Principal Financial Officer
27
EXHIBIT 32 (i)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTIONS 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACTS 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 June 30, 2004 (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 Principal 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: August 20, 2004 /s/ Delmar Janovec
--------------------------
Delmar Janovec
Chief Executive Officer and Principal
Financial Officer
28