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 April 1, 2004 to June 30, 2004
Commission file number: 333-98651*
AmeriFirst Fund I, LLC
(Exact name of small business issuer as specified in its charter)
Florida 16-1628-844
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1712-H Osborne Rd.
St. Marys, Georgia 31558
(Address of principal executive offices)
(912) 673-9100
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: There were no units of membership
interest of the registrant outstanding as of August 12, 2004.
Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|
*(Registration Statement on Form S-1 was first declared effective on
May 14, 2003)
AMERIFIRST FUND I, LLC
(A Development Stage Company)
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheet as of June 30, 2004 (Unaudited) 1
Condensed Statements of Operations and Member's Equity (Deficiency)
(Unaudited) for the Three and Six Months Ended June 30, 2004 and 2003
and Cumulative from April 22, 2002 (Inception) through June 30, 2004 2
Condensed Statements of Cash Flows (Unaudited)
for the Six Months Ended June 30, 2004 and 2003
and Cumulative from April 22, 2002 (inception) through June 30, 2004 3
Notes To Condensed Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis or Plan of Operation 5
Item 3. Controls and Procedures 6
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 6
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
Exhibits
31 Certification of the Chief Executive Officer and Chief Financial
Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32 Certification of the Chief Executive Officer and Chief Financial
Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C.
1350.
i
AMERIFIRST FUND I LLC.
(A Development Stage Company)
CONDENSED BALANCE SHEET
June 30, 2004 (Unaudited)
ASSETS
Cash $ 474
Deferred offering costs 342,661
--------
TOTAL ASSETS $343,135
========
LIABILITIES AND MEMBER'S EQUITY
Accrued expenses $ 46,856
--------
TOTAL LIABILITIES 46,856
COMMITMENTS AND CONTINGENCIES
MEMBER'S EQUITY ACCUMULATED DURING
THE DEVELOPMENT STAGE 296,279
--------
TOTAL LIABILITIES AND MEMBER'S EQUITY $343,135
========
See notes to condensed financial statements.
1
AMERIFIRST FUND I LLC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
AND MEMBER'S EQUITY (DEFICIENCY)
(UNAUDITED)
Cumulative
from
April 22,
Three Three Six Six 2002
Months Months Months Months (Inception)
Ended Ended Ended Ended through
June 30, June 30, June 30, June 30, June 30,
2004 2003 2004 2003 2004
------------------------------------------------------------------------
REVENUES -- -- -- -- --
EXPENSES (Incurred Exp. - Deferred Cost) 23,793 14,892 59,331 40,895 183,965
------- ------- ------- ------- -------
NET LOSS (23,793) (14,892) (59,331) (40,895) (183,965)
MEMBER'S EQUITY - Beginning 295,022 208,718 315,434 (34,382) --
Contributions of Capital 25,050 78,772 40,176 347,875 480,244
------- ------- ------- ------- -------
MEMBER'S EQUITY - Ending 296,279 272,598 296,279 272,598 296,279
======= ======= ======= ======= =======
See notes to condensed financial statements.
2
AMERIFIRST FUND I LLC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative
From
April 22,
Six Six 2002
Months Months (Inception)
Ended Ended through
June 30, June 30, June 30,
2004 2003 2004
--------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(59,331) $ (40,895) $(183,965)
Changes in operating asset and liabilities accrued
expenses 35,781 -- 46,856
-------- --------- ---------
NET CASH USED IN OPERATING
ACTIVITIES (23,550) (40,895) (137,109)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution of Capital 40,176 129,775 480,244
Deferred offering costs (16,152) (88,880) (342,661)
-------- --------- ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 24,024 40,895 137,583
-------- --------- ---------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 474 -- 474
CASH AND CASH EQUIVALENTS - Beginning -- -- --
-------- --------- ---------
CASH AND CASH EQUIVALENTS - Ending $ 474 $ -- $ 474
======== ========= =========
Non Cash Investing and Financing Activities
On February 13, 2003 the Fund converted $218,100 due to a related party to
contributed capital pursuant to an expense agreement (See Note 2).
See notes to condensed financial statements.
3
NOTES TO CONDENSED FINANCIALS STATEMENTS (UNAUDITED)
NOTE 1 - Formation, Nature of Business, and Management Plans
AmeriFirst Fund I, LLC (the "Fund") was organized on April 22, 2002 to offer
units in a securitized pool of life insurance policies. The Fund will provide
living benefits to terminally ill and chronically ill persons of all ages and
senior citizens, age 65 and older with life expectancies based solely on
actuarial tables in exchange for ownership of their life insurance policies. A
life settlement is the payment of cash in return for an assignment of ownership
or beneficial interest in, and the right to receive the face value of a life
insurance policy. The Fund will purchase life insurance policies from AmeriFirst
Funding Group, Inc. (the "Provider"), a related party. The Provider will assign
and/or transfer beneficial interest to the Fund.
The Provider will originate policy purchases directly from the insured if
licensed as a broker, through other providers, or through an unaffiliated broker
network and transfer ownership or irrevocable beneficial interest to the Fund.
In addition, the Fund's principal offices will be located at the principal
offices of the Provider.
The Fund's Manager, AmeriFirst Financial Services, Inc. (the "Manager"), along
with the Provider or other licensed providers, will determine the amount paid
for an insurance policy based on various factors, including the estimated life
expectancy of the insured, the estimated premiums payable under the policy over
the expected life of the insured and certain other costs of the life settlement.
The Fund's existence ends on December 31, 2027, unless liquidated sooner.
On February 9, 2004 the Fund changed its fiscal year end from September 30th to
December 31st.
The Fund has not commenced principal operations as of August 12, 2004. The Fund
will be offering and selling to the public a minimum of 2,500 units and up to a
maximum of 100,000 units at $1,000 per unit, with an initial minimum investment
of 100 units (the "Offering"). The units are being distributed on a "best
efforts" basis by AmeriFirst Capital Corp., an affiliate of the Manager and
Provider. The proceeds of the Offering will be held in escrow with a bank until
the $2,500,000 minimum amount is received. If the minimum amount is not received
by October 17, 2004, except if extended for an additional six months until April
17, 2005, then all subscription amounts (including interest), will be returned
to all subscribers. These factors raise substantial doubt as to the Fund's
ability to continue as a going concern. The ability of the Fund to continue as a
going concern is dependent upon the success of the Fund to raise the $2,500,000
minimum subscription amount needed within the specified time pursuant to the
Fund's operating agreement. The financial statements do not include any
adjustments that might be necessary should the Fund be unable to continue as a
going concern.
NOTE 2 - Related Party Transactions
On February 13, 2003, the Fund and AmeriFirst, Inc. ("AmeriFirst") entered into
an expense agreement, as restated on December 23, 2003 (the "Agreement"). Such
Agreement provides that the Fund is not required to repay amounts due to
AmeriFirst arising from expenses incurred on its behalf by AmeriFirst, or for
services rendered by AmeriFirst to the Fund through the date of the Agreement.
In addition, AmeriFirst will not charge the Fund for expenses incurred on its
behalf by AmeriFirst for services rendered to the Fund subsequent to
February 13, 2003.
The Fund recorded the cumulative effect of this Agreement as a contribution to
capital in the amount of $480,244 through June 30, 2004. During the three months
ended June 30, 2004, the Fund received $25,050 of contribution from AmeriFirst
for organizational, offering expenses and deferred offering costs incurred by
the Fund. The Fund recorded the monies received as contributed capital.
NOTE 3 - Basis of Presentation
Our accompanying unaudited condensed financial statements reflect all
adjustments, which are, in the opinion of management, necessary to a fair
statement of the results of the interim periods presented. All such adjustments
are of a normal recurring nature. The results of operations for the three months
ended June 30, 2004 are not necessarily indicative of the results that may be
expected for any other interim period or the full year. The condensed financial
statements should be read in conjunction with the notes to the financial
statements and in conjunction with the Fund's audited financial statements for
the year ended September 30, 2003, which are included in the Fund's annual
report on Form 10K-SB for the year ended September 30, 2003. The accounting
policies used to prepare the condensed financial statements are consistent with
those described in the September 30, 2003 financial statements.
4
Item 2. Management's Discussion and Analysis or Plan of Operation.
Forward Looking Statements
Statements in this Item 2 "Management's Discussion and Analysis or Plan of
Operation" and elsewhere in this Report are certain statements which are not
historical or current fact and constitute "forward-looking statements" within
the meaning of such term in Section 27A of the Securities Act of l933 and
Section 21E of the Securities Act of l934. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that could
cause the actual financial or operating results of AmeriFirst Fund I, LLC to be
materially different from the historical results or from any future results
expressed or implied by such forward-looking statements. Such forward looking
statements are based on our best estimates of future results, performance or
achievements, based on current conditions and our most recent results. In
addition to statements which explicitly describe such risks and uncertainties,
readers are urged to consider statements labeled with the terms "may," "will",
"potential," "opportunity," "believes," "belief," "expects," "intends,"
"estimates," "anticipates" or "plans" to be uncertain and forward- looking. The
forward-looking statements contained herein are also subject generally to other
risks and uncertainties that are described from time to time in the reports and
registration statements filed with the Securities and Exchange Commission of
AmeriFirst Fund I, LLC.
Background
AmeriFirst Fund I, LLC (the "Fund", "we" or "our") was formed in the State of
Delaware in April 2002 and reincorporated in Florida in September 2002 as a
Florida limited liability company. The Fund was formed solely for the
restricted, limited purpose of purchasing life insurance policies at a discount
to face value from terminally ill and chronically ill persons of all ages and
senior citizens, age 65 and older, with estimated life expectancies based solely
on actuarial tables, to create a pool of life insurance policies. The Fund
intends to offer a minimum of 2,500 units and up to a maximum of 100,000 units
at $1,000 per unit (the "Offering"). Each member of the Fund is entitled to his
or her proportionate beneficial interest in the income to be generated from the
life insurance policies. The Fund has not yet commenced its principal
operations. Accordingly, set forth below is the Fund's plan of operation for the
next twelve months in lieu of a discussion and analysis of the financial
condition and results of operations of the Fund.
Twelve Month Plan of Operation
As of June 30, 2004, the Fund had $343,135 of assets consisting primarily almost
all of which are deferred offering costs. Total liabilities of $218,100 as of
September 30, 2002, owed by the Fund for organizational and offering expenses to
AmeriFirst, Inc. ("AmeriFirst"), the holding company controlled by John Tooke,
were forgiven by AmeriFirst on February 13, 2003, and recorded as contributed
capital. This occurred pursuant to the Expense Agreement under which AmeriFirst
agreed to pay at its own expense, all organizational and offering expenses of
the Offering including without limitation, legal and accounting expenses,
photocopy costs, selling expenses, and filing fees paid to the SEC and state
securities commissions. Accordingly, the Fund will receive all proceeds from the
Offering. The Fund had total liabilities of $46,856 as of June 30, 2004,
primarily consisting of accrued legal and accounting expenses. As a result of
the foregoing, the Fund had total liabilities and members' equity of $343,135 at
June 30, 2004. Total contributed capital from April 22, 2002 (Inception) through
June 30, 2004, was $480,244. During the next 12 months, if we raise at least
$2,500,000, we plan to purchase a pool of life insurance policies, created by
the purchase of insurance policies at a discount from the face amount of the
policies from terminally ill and chronically ill persons of all ages and senior
citizens, age 65 and older, with estimated life expectancies based solely on
actuarial tables. Upon raising $2.5 million and the release of such funds from
escrow, our manager, AmeriFirst Financial Services, Inc. ("Manager"), will
create a pool of life insurance policies.
Our auditors have included an explanatory paragraph in their report dated
November 26, 2003, a copy which is included in the Fund's Annual Report on Form
10-KSB for its fiscal year ended September 30, 2003, as there is substantial
doubt as to the Fund's ability to continue as a going concern. The ability of
the Fund to continue as a going concern is dependent upon the success of the
Fund to raise the $2,500,000 minimum subscription needed within the specified
time pursuant to the Fund's operating agreement. The financial statements do not
include any disclosures that might be necessary should the Fund be unable to
continue as a going concern.
John Tooke, Chief Executive Officer and controlling shareholder of our Manager,
our provider, AmeriFirst Funding Group, Inc. ("Provider"), and our underwriter,
AmeriFirst Capital Corp. ("Underwriter"), has extensive experience in investment
banking and selling mortgage backed securities. Although he has no actual
experience in purchasing life settlement policies, he has researched the life
settlements industry since at least April 2001 and conducted all organizational
activities necessary for the Fund. Our Manager intends to service the insurance
policies with experienced employees it has hired, as described below. However,
our Manager may outsource any or all of the non-financial services of servicing
the life insurance policies to an unaffiliated third party servicer to assist us
in reviewing each policy, closing the purchases of such policies, monitoring
life status of the insureds and filing death benefit claims. Our Manager has
entered into agreements with four unaffiliated organizations to conduct its
medical due diligence review to determine estimated life expectancies and with
one of such companies to track the status of the insured. Neither the Fund nor
our Manager, Provider or Underwriter has entered into any other arrangements,
agreements or understandings with any third parties to act as our servicer. If
it did enter into such an agreement, the Fund would be dependent upon the
services of third parties for its overall success.
5
We do not anticipate hiring any employees or acquiring any fixed assets like
office equipment or furniture, or incurring material office expenses during the
next twelve (12) months because we will be utilizing the personnel and office
equipment of our Manager, Provider and their affiliate, AmeriFirst. As of August
12, 2004, our Manager, provider and their affiliate, AmeriFirst, employed a
total of 16 persons, including John Tooke, a senior software architect, in-house
legal staff, accounting staff, insurance review, insurance analyst, medical
review, policy administration, computer and data processing personnel, customer
service, medical administration and administrative assistants. There is an
overlap in employees among certain of the above mentioned entities. For example,
John Tooke is an employee of each of our Manager, Provider and AmeriFirst and
has been regarded as one employee for purposes of calculating the foregoing
number of aggregate employees of our Manager, Provider and AmeriFirst. Our
Manager occupies approximately 8,112 square feet of office space in Florida, and
also occupies space at an office in St. Mary's, Georgia. This facility is
equipped with office furniture, telephones, fax machines, photo copiers,
multiple computers in a server system and whatever else will be needed to
operate. The fees which we will pay our Manager as compensation will be in lieu
of all other payments for operating expenses.
The Fund has not committed itself to purchase any life insurance policies, and
has not entered into any arrangements or other transactions other than with our
Underwriter of the Offering and other affiliates, and four unaffiliated medical
review service companies, the latter of which are terminable without penalty
after 90 days. We do not intend to incur any indebtedness at the commencement of
our operations, although we may later establish a line of credit for future use.
On February 9, 2004, the Fund changed its fiscal year end from September 30th to
December 31st.
Critical Accounting Policy
Recognition For Purchased Life Insurance Policies
We will record our investment in life insurance policies pursuant to Financial
Accounting Standards Board Technical Bulletin 85-4 "Accounting for Purchases of
Life Insurance" ("FTB 85-4"). FTB 85-4 requires the amount to be realized (the
policy's cash surrender value) under the insurance contract to be recorded as an
asset. The change in cash surrender value during the period will be recorded as
an adjustment of premiums paid in determining the expense or income to be
recognized for the period.
The purchase price for life insurance policies (which includes all related
acquisition costs) is expected to be higher than the cash surrender value. We
will record the cash surrender value of the policy as an asset and not the
amount of cash invested in such policy. This accounting policy will have a
negative effect on our balance sheet and an operating loss will be recorded on
the initial purchase of the policy. We expect operating losses during the early
life of the Fund until the benefits under such policies become payable. This
accounting policy should have no effect on the Fund's cash flows and estimated
rate of return per individual insurance policy.
Item 3. Controls and Procedures
As of the end of the period covered by this report, the Fund's management,
including the Fund's Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design of the Fund's disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and
the Chief Financial Officer concluded that the Fund's disclosure controls and
procedures were effective, in all material respects, to ensure that the
information required to be disclosed in the reports the Fund files and submits
under the Exchange Act is recorded, processed, summarized and reported as and
when required.
There have been no significant changes (including corrective actions with
regards to significant deficiencies and material weaknesses) in the Fund's
internal controls or in other factors subsequent to the date the Fund carried
out its evaluation that could significantly affect these controls.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On May 14, 2003, our Registration Statement on Form S-1 (Registration No.:
333-98651), as amended, was initially declared effective with the Securities and
Exchange Commission ("SEC") for the initial public offering of up to a maximum
of 100,000 units of ownership interest in the Fund at $1,000 per unit for an
aggregate purchase price of $100,000,000. The Offering commenced on or about May
14, 2003. On May 4, 2004, Post-Effective Amendment No. 4 to the Registration
Statement was declared effective with the SEC and the Offering is being made
pursuant to the final Prospectus dated May 4, 2004. Our Underwriter, AmeriFirst
Capital Corp., an NASD licensed broker-dealer, who is also an affiliate of our
Manager, is offering and selling the units, but it may also engage other NASD
broker-dealers and foreign dealers not licensed with the NASD, provided such
foreign dealers are in compliance with their respective country's laws, to sell
our units. As of August 12, 2004, no units have been sold.
6
The proceeds of the Offering will be held in an interest bearing escrow account
with SouthTrust Bank until we raise a minimum of $2,500,000. We must receive the
$2,500,000 minimum offering by October 17, 2004, unless extended until April 17,
2005, before we can commence our principal operations and purchase life
insurance policies. The gross proceeds of the Offering will be used to: purchase
life insurance policies for less than the face amount of the policy, pay the
referring broker's fee, establish a premium escrow account to make premium
payments on the policies and the balance to pay for all services required in
connection with the policies, including all related fees and all sales
commissions on the units offered in the Offering. Funds that have not yet been
used to make or acquire life insurance policies will be deposited in an
interest-bearing operating escrow account. Investors will be entitled to a
pro-rata share of the short-term interest earned in the operating escrow
account.
AmeriFirst, Inc., the holding company controlled by John Tooke, has agreed
pursuant to an Expense Agreement dated February 13, 2003, as restated on
December 23, 2003, to pay at its own expense all organizational and offering
expenses of the Offering including without limitation, legal and accounting
expenses, photocopy costs, selling expenses, and filing fees paid to the
Securities and Exchange Commission and state securities commissions.
From May 14, 2003, the initial effective date of the registration statement, to
June 30, 2004, an aggregate of approximately $166,000 in expenses were incurred
on the account of the Fund in connection with the registration statement for the
sale of the units.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit Number Description
- -------------- -----------
31* Certification of the Chief Executive Officer and Chief
Financial Officer required by Rule 13a-14(a) or Rule
15d-14(a).
32* Certification of the Chief Executive Officer and Chief
Financial Officer required by Rule 13a-14(b) or Rule
15d-14(b) and 18 U.S.C. 1350.
- --------------
* Filed with this report
(b) Reports on Form 8-K.
None.
7
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: August 12, 2004 AmeriFirst Fund I, LLC
By: AmeriFirst Financial Services, Inc., its Manager
/s/ John Tooke
------------------------------------------------
John Tooke, Chief Executive Officer
(Principal Executive Officer and
Principal Accounting Officer)
8