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: March 31, 2005
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 333-98651*
AmeriFirst Fund I, LLC
(Exact name of small business issuer as specified in its charter)
Florida 16-1628844
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2015-A Osborne Rd.
St. Marys, Georgia 31558
(Address of principal executive offices)
(912) 882-8851
(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 May 16, 2005.
Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|
*(Registration Statement on Form S-1 was first declared effective on May 14,
2003, as amended by Post-Effective Amendment No. 4, which was declared on May 4,
2004)
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 March 31, 2005 (Unaudited) 1
Condensed Statements of Operations and Member's
(Deficiency) Equity (Unaudited) for the Three Months Ended
March 31, 2005 and 2004 and Cumulative from April 22, 2002
(Inception) through March 31, 2005 2
Condensed Statements of Cash Flows (Unaudited) for the Three
Months Ended March 31, 2005 and 2004 and Cumulative from
April 22, 2002 (Inception) through March 31, 2005 3
Notes to Condensed Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis or Plan of Operation 6
Item 3. Controls and Procedures 8
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 8
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
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
March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Cash $ 271
TOTAL ASSETS $ 271
========
LIABILITIES AND MEMBER'S DEFICIENCY
Accrued expenses $ 17,004
--------
COMMITMENTS AND CONTINGENCIES
Member's Deficiency
Accumulated Deficit During the Development Stage $(16,733)
--------
TOTAL LIABILITIES AND MEMBER'S DEFICIENCY
$ 271
========
See notes to condensed financial statements.
1
AMERIFIRST FUND I LLC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
AND MEMBER'S (DEFICIENCY) EQUITY
(UNAUDITED)
- --------------------------------------------------------------------------------
Cumulative
Three Months Three Months from April 22, 2002
Ended Ended (Inception) through
March 31, 2005 March 31, 2004 March 31, 2005
-------------- -------------- --------------
Revenues from Policies Held in Trust $ -- $ -- $ --
Expenses $ (898) $ 35,538 $ 215,440
Impairment Charge $ -- $ $ 342,661
--------- --------- ---------
NET INCOME/LOSS $ 898 $ (35,538) $(558,101)
MEMBER'S (DEFICIENCY) EQUITY
- ----------------------------
- - Beginning, January 1, 2005 $ (43,255) $ 315,434 $ --
Contributions of Capital $ 26,944 $ 15,126 $ 542,688
--------- --------- ---------
MEMBER'S (DEFICIENCY) EQUITY
- ----------------------------
- - Ending, March 31, 2005 $ (15,413) $ 295,022 $ (15,413)
========= ========= =========
See notes to condensed financial statements.
2
AMERIFIRST FUND I LLC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------------
Cumulative
Three Months Three Months from April 22, 2002
Ended Ended (Inception) through
March 31, 2005 March 31, 2004 March 31, 2005
-------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/Loss $ 898 $ (35,538) $(558,101)
Changes in operating asset and liabilities:
Accrued Expenses $ (27,825) $ 32,326 $ 15,684
--------- --------- ---------
NET CASH FROM OPERATING ACTIVITIES $ (26,927) $ (3,212) $(542,417)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Contributions of Capital $ 26,944 $ 15,126 $ 542,688
Deferred offering costs $ -- $ (11,916) $ --
--------- --------- ---------
NET CASH PROVIDED FROM FINANCING ACTIVITIES
$ 26,944 $ 3,210 $ 542,688
NET INCREASE IN CASH AND CASH
EQUIVALENTS $ 17 $ -- $ 271
CASH - Beginning $ 254 $ -- $ --
--------- --------- ---------
CASH - Ending $ 271 $ -- $ 271
========= ========= =========
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
AMERIFIRST FUND I LLC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL 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 medically impaired 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.
The Fund has not commenced principal operations as of May 16, 2005. 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, 2005, except if extended for an additional six months until April
17, 2006, 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, Inc.") 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, Inc. arising from expenses incurred on its behalf by AmeriFirst,
Inc., or for services rendered by AmeriFirst, Inc. to the Fund through the date
of the Agreement. In addition, AmeriFirst, Inc. will not charge the Fund for
expenses incurred on its behalf by AmeriFirst, Inc. 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 $542,688 through March 31, 2005. During the three
months ended March 31, 2005, the Fund received $26,944 of contribution from
AmeriFirst, Inc. for organizational costs, offering expenses and deferred
offering costs incurred by the Fund. The Fund recorded the monies received as
contributed capital.
4
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 March 31, 2005 are not necessarily indicative of the results that may be
expected for any other interim period of 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 December 31, 2004, which are included in the Fund's annual report
on Form 10-KSB for the year ended December 31, 2004. The accounting policies
used to prepare the condensed financial statements are consistent with those
described in the December 31, 2004 financial statements.
5
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 (the
"Fund") 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 of the Fund filed with the Securities
and Exchange Commission.
Background
AmeriFirst Fund I, LLC ("we", "us", "our" or the "Fund") 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 medically impaired 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. We are offering 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. As of May 16, 2005, the Fund has not begun its operations. 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 March 31, 2005, the Fund had $271 of assets. At December 31, 2004, the
Fund determined that the deferred offering costs of $342,661 had no future
benefit and accordingly, the Fund wrote off the deferred financing costs, which
is shown as an impairment on the statement of operations in the Fund's Annual
Report on Form 10-KSB for its fiscal year ended December 31, 2004.
Total liabilities of $218,100 as of September 30, 2002, owed by the Fund for
organizational and offering expenses to AmeriFirst, Inc. ("AmeriFirst, Inc"),
the holding company controlled by John Tooke, were forgiven by AmeriFirst, Inc.
on February 13, 2003, and recorded as contributed capital. This occurred
pursuant to the Expense Agreement under which AmeriFirst, Inc. 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 $17,004 as of March 31, 2005, primarily
consisting of professional fees. As a result of the foregoing, the Fund had
total liabilities and member's deficiency of $271 at March 31, 2005. Total
contributed capital from April 22, 2002 (Inception) through March 31, 2005, was
$542,688. 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 medically
impaired 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 will purchase a
pool of life insurance policies.
6
Our auditors have included an explanatory paragraph in their report dated April
5, 2005, a copy which is included in the Fund's Annual Report on Form 10-KSB for
its fiscal year ended December 31, 2004, which disclosed that 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,
AmeriFirst Financial Services, Inc. (the "Manager") and our underwriter,
AmeriFirst Capital Corp. (the "Underwriter") and also controlling shareholder of
our provider, AmeriFirst Funding Group, Inc. (the "Provider") 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.
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, Inc. As of
May 16, 2005, our Manager, Provider and their affiliate, AmeriFirst, Inc.,
employed a total of 12 persons, including John Tooke, a senior software
architect, in-house legal staff, accounting staff, insurance review, insurance
analyst, policy administration, computer and data personnel, customer service,
medical administration and administrative assistants. For purposes of
calculating the foregoing number of aggregate employees of our Manager and
AmeriFirst, Inc., John Tooke, an employee of each of our Manager and AmeriFirst,
Inc., was regarded as one employee.
Our Manager, Provider, Underwriter and AmeriFirst, Inc., together, occupy
approximately 4,726 square feet of office space 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 is 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.
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" ("FTB85-4"). 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.
7
The change in cash surrender value during the period will be recorded as an
adjustment of premiums paid in determining the expenses 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 May 16, 2005, no units have been sold.
The proceeds of the Offering will be held in an interest bearing escrow account
with Wachovia Bank, National Association until we raise a minimum of $2,500,000.
We must receive the $2,500,000 minimum offering by October 17, 2005, unless
extended until April 17, 2006, 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.
8
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
March 31, 2005, 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.
(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
9
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: May 16, 2005 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