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, 2003
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _________ to __________
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 13, 2003.
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)
CONTENTS
- --------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Page
----
Condensed Balance Sheets as of June 30, 2003 (Unaudited)
and September 30, 2002 2
Condensed Statements of Operations and Member's Equity (Unaudited)
for the Three and Nine Months Ended June 30, 2003,
the Period from April 22, 2002 (inception) through
June 30, 2002 and Cumulative from April 22, 2002 (Inception)
through June 30, 2003 3
Condensed Statements of Cash Flows (Unaudited) for the Nine Months
Ended June 30, 2003, the Period from April 22, 2002
(inception) through June 2002 and Cumulative from April 22, 2002
(Inception) through June 30, 2003 4
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 5-6
Item 2. Management's Discussion and Analysis or Plan of Operation 7-9
Item 3. Controls and Procedures 9
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 10
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit
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.
1
AMERIFIRST FUND I LLC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS
June 30, 2003 (Unaudited) and September 30, 2002
- --------------------------------------------------------------------------------
ASSETS
June 30, September 30,
2003 2002
-------- ------------
Current assets $ -- $ --
Deferred offering costs 272,598 183,718
-------- ---------
TOTAL ASSETS $272,598 $ 183,718
======== =========
LIABILITIES AND MEMBER'S EQUITY (DEFICIT)
Due to related party $ -- $ 218,100
-------- ---------
TOTAL LIABILITIES -- 218,100
COMMITMENTS AND CONTINGENCIES
MEMBER'S EQUITY (DEFICIT) ACCUMULATED DURING
THE DEVELOPMENT STAGE 272,598 (34,382)
-------- ---------
TOTAL LIABILITIES AND MEMBER'S EQUITY $272,598 $ 183,718
======== =========
2
AMERIFIRST FUND I LLC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS AND MEMBER'S EQUITY
(UNAUDITED)
For the Three and Nine Months Ended June 30, 2003 and the Period
April 22, 2002 (inception) through June 30, 2002 and Cumulative
From April 22, 2002 (Inception) through June 30, 2003
- --------------------------------------------------------------------------------
Cumulative
Period Period From
April 22 2002 April 22 2002 April 22 2002
Three (inception) Nine (inception) (inception)
Months Ended through Months Ended through through
June 30, June 30, June 30, June 30, June 30,
2003 2002 2003 2002 2003
--------------------------------------------------------------------------
REVENUES FROM
POLICIES HELD IN TRUST $ -- $ -- $ -- $ -- $ --
EXPENSES 14,892 -- 40,895 -- 75,277
--------- ---------- --------- ------------- ---------
NET LOSS (14,892) -- (40,895) -- (75,277)
MEMBER'S EQUITY
(DEFICIT) - Beginning 208,718 -- (34,382) -- --
Contribution of Capital 78,772 -- 347,875 -- 347,875
--------- ---------- --------- ------------- ---------
MEMBER'S EQUITY - Ending $ 272,598 $ -- $ 272,598 $ -- $ 272,598
========= ========== ========= ============= =========
3
AMERIFIRST FUND I LLC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months Ended June 30, 2003 and the Period April 22, 2002
(inception) through June 30, 2002 and Cumulative From
April 22, 2002 (Inception) through June 30, 2003
- --------------------------------------------------------------------------------
Cumulative
Period, From
April 22 2002 April 22, 2002
Nine (inception) (inception)
Months Ended through through
June 30, June 30, June 30,
2003 2002 2003
-----------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (40,895) $ -- $ (75,277)
--------- ----------- ---------
Net Cash used in Operating Activities (40,895) -- (75,277)
--------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
--------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution of Capital 129,775 -- 347,875
Deferred offering costs (88,880) -- (272,598)
--------- ----------- ---------
Net Cash Provided by Financing
Activities 40,895 -- 75,277
--------- ----------- ---------
NET INCREASE IN CASH AND
CASH EQUIVALENTS -- -- --
CASH AND CASH EQUIVALENTS - Beginning -- -- --
--------- ----------- ---------
CASH AND CASH EQUIVALENTS - Ending $ -- $ -- $ --
========= =========== =========
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).
4
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.
The Fund has not commenced principal operations as of August 1,
2003. 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
being distributed on a "best efforts" basis by AmeriFirst Capital Corp.,
an affiliate of the Manager and Provider. The proceeds of this 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 within six months from the
effective date of the Offering, 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
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.
5
NOTE 2 - Related Party Contract
On February 13, 2003, the Fund and AmeriFirst, Inc. ("AmeriFirst") entered
into an expense agreement (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 $347,875 from February 13, 2003
through June 30, 2003.
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 and nine months ended 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 period April 22, 2002
(Inception) through September 30, 2002 which are included in the Fund's
prospectus (Registration No. 333-98651) dated May 14, 2003, as amended, as
filed with the Securities and Exchange Commission on May 20, 2003. The
accounting policies used to prepare the condensed financial statements are
consistent with those described in the September 30, 2002 financial
statements.
NOTE 4 - Subsequent Events
Between July 4 and August 4, 2003, the Fund received approximately $47,500
of contributions from AmeriFirst for expenses and deferred financing costs
incurred by the Fund. The Fund recorded the monies received as contributed
capital.
6
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. We intend 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 unitholder is entitled to his or her
proportionate beneficial interest in the income to be generated from the life
insurance policies.
Twelve Month Plan of Operation
As of June 30, 2003, the Fund had $272,598 of assets consisting of
deferred financing costs and had not commenced operations. On February 13, 2003,
the Fund and AmeriFirst, Inc. ("AmeriFirst") entered into an expense agreement
(the "Agreement"). The 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 deferred
offering costs and expenses incurred on the Fund's behalf for services rendered
to the Fund subsequent to February 13, 2003. Accordingly, the Fund reclassified
as contributed capital $218,100 of liabilities at December 31, 2002 and $129,775
of advances from AmeriFirst during the nine months ended June 30, 2003.
7
We must raise a minimum of $2,500,000 in the Offering before we can
commence operations and purchase life insurance policies. The proceeds of this
offering will be held in an interest bearing escrow account with SouthTrust Bank
until we raise the $2,500,000 minimum. If the minimum amount is not received
within six months of the effective date of the Offering, 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 needed within
the specified time pursuant to the Fund's operating agreement. During the next
12 months, if we raise the $2,500,000 minimum, our manager, AmeriFirst Financial
Services, Inc. ("Manager"), will select life insurance policies for the Fund to
purchase and will also assist the Fund by servicing such life insurance
policies, although it may decide to outsource any or all non-financial services
to third parties. Our provider, AmeriFirst Funding Group, Inc. ("Provider") will
originate policy purchases either directly from the insured, when it is licensed
or not required to be licensed, from other providers or from a broker network.
Our Provider has agreed in writing to assign all polices which it purchases to
the Fund, except those it may sell on a non-securitized basis to unaffiliated
third parties. We believe that we will have an adequate number of opportunities
to invest in life insurance policies in the United States when funds raised in
the Offering are made available to the Fund.
John Tooke, chief executive officer and controlling shareholder of our
Manager, Provider and 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 life 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 the Fund in reviewing
each policy, closing the purchases of such policies, monitoring life status of
the insured 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
such as office equipment or furniture, or incurring material office expenses
during the next twelve months because we will be utilizing our Manager's and its
affiliate's personnel and office equipment. As of July 21, 2003, our Manager,
Provider and their affiliates employed 21 persons, including John Tooke, chief
executive officer, 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. Our Manager occupies
approximately 7,349 square feet of office space in Florida, and also occupies
space at the Fund's offices in St. Marys, Georgia. This facility is equipped
with office furniture, telephones, fax machines, photo copiers, multiple
computers in a server system and
8
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
the underwriter of our initial public 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" ("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
Within the 90 days prior to the filing of 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-14(c) and 15d-14(c) 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.
9
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 declared effective with the Securities and Exchange
Commission 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. Our Underwriter, 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 who agree to abide by
the NASD rules to sell our units. As of August 1, 2003, no units have been sold.
The proceeds of this 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 before we can commence 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, 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.
During the three months ended June 30, 2003, an aggregate of approximately
$79,000 in expenses were incurred on the account of the Fund in connection with
the registration statement for the sale of the units.
10
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.
11
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 13, 2003 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)
12