UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
(Mark One)
|_| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: ________________
|X| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from October 1, 2003 to December 31, 2003
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 February 13, 2004.
Transitional Small Business Disclosure Format (Check one): Yes |X| No |_|
*(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
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Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of December 31, 2003 (Unaudited)
and September 30, 2003 (Audited) 2
Condensed Statements of Operations and Member's Equity Deficiency (Unaudited)
for the Three Months Ended December 31, 2003 and 2002
and Cumulative from April 22, 2002 (Inception) through December 31, 2003 3
Condensed Statements of Cash Flows (Unaudited)
for the Three Months Ended December 31, 2003 and 2002
and Cumulative from April 22, 2002 (inception) through December 31, 2003 4
Notes To Condensed Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis or Plan of Operation 7
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
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.
1
AMERIFIRST FUND I, LLC
(A Development Stage Company)
CONDENSED BALANCE SHEETS
- --------------------------------------------------------------------------------
ASSETS
December 31, September 30,
2003 2003
---------------------------
(Unaudited)
Current assets $ -- $ --
Deferred offering costs 326,509 326,509
-------- --------
TOTAL ASSETS $326,509 $326,509
======== ========
LIABILITIES AND MEMBER'S EQUITY (DEFICIT)
Accrued expenses $ 11,075 $ 13,159
-------- --------
TOTAL LIABILITIES 11,075 13,159
COMMITMENTS AND CONTINGENCIES
MEMBER'S EQUITY ACCUMULATED DURING
THE DEVELOPMENT STAGE 315,434 313,350
-------- --------
TOTAL LIABILITIES AND MEMBER'S EQUITY $326,509 $326,509
======== ========
See notes to condensed financial statements.
2
AMERIFIRST FUND I, LLC
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
AND MEMBER'S EQUITY (DEFICIENCY)
(UNAUDITED)
- --------------------------------------------------------------------------------
Cumulative
From
April 22,
2002
Three Months Three Months (Inception)
Ended Ended through
December 31, December 31, December 31,
2003 2002 2003
-------------------------------------------
REVENUES FROM POLICIES
HELD IN TRUST $ -- $ -- $ --
EXPENSES 32,485 -- 113,559
--------- --------- ---------
NET LOSS (32,485) -- (113,559)
MEMBER'S EQUITY (DEFICIENCY) -
Beginning 313,350 (34,382) --
Contribution of Capital 34,569 -- 440,068
--------- --------- ---------
MEMBER'S EQUITY (DEFICIENCY) -
Ending $ 315,434 $ (34,382) $ 326,509
========= ========= =========
See notes to condensed financial statements.
3
AMERIFIRST FUND I, LLC
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------------
Cumulative
From
April 22,
Three Three 2002
Months Months (Inception)
Ended Ended through
December 31, December 31, December 31,
2003 2002 2003
--------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (32,485) $ (34,382) $(113,559)
Changes in operating asset and liabilities accrued
expenses (2,084) -- --
--------- --------- ---------
NET CASH USED IN OPERATING
ACTIVITIES (34,569) (34,382) (113,559)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution of Capital 34,569 218,100 440,068
Deferred offering costs -- (183,718) (326,509)
--------- --------- ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 34,569 34,582 113,559
--------- --------- ---------
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).
See notes to condensed financial statements.
4
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 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 February 6, 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 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 (October 17, 2003) of the Offering
except if extended for an additional six months until October 17, 2004, 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
AMERIFIRST FUND I, LLC
(A Development Stage Company)
CONTINUED--NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
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 $440,068 through December 31, 2003. Subsequent to
December 31, 2003, the Fund received $5,126.10 of contribution from AmeriFirst
for organizational, offering expenses and deferred financing cost incurred by
the Fund. The Fund recorded the monies received from AmeriFirst 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 December 31, 2003 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 10-KSB 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.
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. 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 only recently began its operations in October
2003, and since such time, it has not had any revenues from 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 December 31, 2003, the Fund had $326,509 of assets consisting of
deferred financing costs and had not commenced operations. 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.
7
The Fund had total liabilities of $11,075 as of December 31, 2003, consisting of
accrued expenses. As a result of the foregoing, the Fund had total liabilities
and members' equity of $326,509 at December 31, 2003. Total contributed capital
from April 22, 2002 (Inception) through December 31, 2003, was $440,068. 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 qualified 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.
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 our Manager's and its
affiliate's personnel and office equipment. As of February 13, 2003, our Manager
and its affiliate, AmeriFirst, employed 18 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. For purposes of calculating the foregoing number of
aggregate employees of our Manager and AmeriFirst, John Tooke, an employee of
each of our Manager and AmeriFirst, was regarded as one employee. Our Manager
occupies approximately 7,349 square feet of office space in Florida,
8
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 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
Within 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-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.
9
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 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, 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 who agree to abide by the NASD rules to sell our units. As of February
13, 2004, 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.
From May 14, 2003, the initial effective date of the registration
statement, to December 31, 2003, an aggregate of approximately $164,715 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: February 13, 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)
12