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, 2006.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from __________ to __________.
COMMISSION FILE NUMBER: 0-20033
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AMERIRESOURCE TECHNOLOGIES, INC.
--------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 84-1084784
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3440 E. Russell Road, Suite 217, Las Vegas, Nevada 89120
--------------------------------------------------------
(Address of principal executive offices)
(702) 214-4249
--------------
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
On August 18, 2006, there were 250,794,408 outstanding shares of the
issuer's common stock, par value $0.0001.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION................................................3
ITEM 1. Financial Statements..........................................3
ITEM 2. Management's Discussion & Analysis of Financial Condition
& Results of Operations.......................................4
ITEM 3. Controls and Procedures.......................................9
PART II - OTHER INFORMATION .................................................10
ITEM 6. Exhibits and Reports on Form 8-K ............................10
SIGNATURES ...................................................................10
INDEX TO EXHIBITS.............................................................11
CERTIFICATIONS................................................................12
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to AmeriResource Technologies,
Inc., a Delaware corporation, and its subsidiaries and predecessors, unless
otherwise indicated. Consolidated, unaudited, condensed interim financial
statements including a balance sheet for the Company as of the quarter ended
June 30, 2006, statement of operations and statement of cash flows for the
interim period up to the date of such balance sheet and the comparable periods
of the preceding year are attached hereto beginning on Page F-1 and are
incorporated herein by this reference.
The consolidated financial statements for the Company included herein are
unaudited but reflect, in management's opinion, all adjustments, consisting
only of normal recurring adjustments that are necessary for a fair presentation
of the Company's financial position and the results of its operations for the
interim periods presented. Because of the nature of the Company's business, the
results of operations for the three months ended June 30, 2006 are not
necessarily indicative of the results that may be expected for the full fiscal
year. The financial statements included herein should be read in conjunction
with the financial statements and notes thereto included in the Form 10-KSB for
the year ended December 31, 2005.
3
AMERIRESOURCE TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
Unaudited
A S S E T S
June 30, December 31,
2006 2005
---- ----
Current Assets:
Cash and cash equivalents 97,195 109,357
Inventory 51,244 3,122
Accounts receivable 1,129
Notes receivable 6,065 6,286
---------------- -------------------
---------------- -------------------
Total Current Assets 155,633 118,765
Fixed Assets:
Fixed assets at cost 199,850 169,141
Accumulated depreciation (39,901) (21,313)
---------------- -------------------
---------------- -------------------
Net Fixed Assets 159,949 147,828
Other Assets:
Intangible assets - net of accumulated
amortization 666,544 354,439
Deposits 8,880 8,880
---------------- -------------------
---------------- -------------------
Total Other Assets 675,424 363,319
---------------- -------------------
---------------- -------------------
Total Assets 991,006 629,912
================ ===================
================ ===================
The accompanying notes are integral part of Consolidated Financial Statements.
F-1
AMERIRESOURCE TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
Unaudited
L I A B I L I T I E S and S T O C K H O L D E R S' E Q U I T Y
June 30 December 31,
2006 2005
---- ----
Current Liabilities
Accrued Expenses 101,239 50,896
Accounts Payable 180,572 68,330
Note payable - related party 179,013 53,317
Notes payable -current portion 566,200 759,513
---------------- --------------
---------------- --------------
Total Current Liabilities 1,027,024 932,056
Non-Current Liabilities:
Commitments and contingencies 200,571 105,000
Notes payable 175,000
---------------- --------------
Total Other Liabilities 375,571 105,000
---------------- --------------
Total Liabilities 1,402,595 1,037,056
---------------- --------------
Stockholders' Deficit
Preferred stock, $.001 par value;
authorized, 10,000,000 shares; Class A,
issued and outstanding, 131,275 shares 131 131
Preferred stock, $.001 par value;
authorized, 10,000,000 shares; Class B,
issued and outstanding, 177,012 shares 177 177
Preferred stock, $.001 par value;
authorized, 1,000,000 shares; Class C,
issued and outstanding, 1,000,000 shares 1,000 1,000
Preferred stock, $.001 par value;
authorized, 750,000 shares; Class D,
none issued and outstanding 250 250
Common Stock, $.0001 par value;
authorized, 3,000,000,000 shares; issued
and outstanding, 153,474,626 shares and
103,692,656, shares 22,938 10,369
Comprehensive loss on marketable securities (3,108) (3,108)
Additional paid in capital 19,170,297 18,226,505
Retained earnings (20,282,409) (19,327,806)
Minority interest 679,135 685,338
---------------- --------------
---------------- --------------
Total stockholder' deficit (411,589) (407,144)
---------------- --------------
---------------- --------------
Total Liabilities and Stockholder's deficit 991,006 $ 629,912
-------------------------------------------
================ ==============
The accompanying notes are integral part of Consolidated Financial Statements.
F-2
AMERIRESOURCE TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statement of Operations
Unaudited
For the three months ended For the six months ended
June 30 June 30
2006 2005 2006 2005
----------------- -------------- ----------------- --------------
----------------- -------------- ----------------- --------------
Net Service Income $ 204,968 $ 300 $313,186 $ 3,085
Consulting Income 1,912 12,549 1,912 12,549
----------------- -------------- ----------------- --------------
Revenues $206,880 12,849 $315,098 15,634
Cost of Goods Sold 149,048 62,554 219,218 64,852
----------------- -------------- ----------------- --------------
Gross Profit 57,832 (49,705) 95,880 (49,218)
Operating expenses
General and administrative expenses 135,651 104,478 281,767 194,459
Salaries 25,000 35,000 50,000 60,000
Legal & Professional 108,720 85,425 226,775 153,663
Consulting 555,841 388,102 1,102,936 576,303
Depreciation 14,807 28,266
Research and development 50,468 87,426
----------------- -------------- ----------------- --------------
Operating loss (782,187) (713,178) (1,598,364) (1,121,069)
Other Income (Expense):
-----------------------
Interest expense - net (11,707) (27,740) (16,420) (43,508)
Loan extension expense (8,000)
Gain on extinguishment of debt 232,067
Loss on marketable securities/Investments - - - (16,500)
----------------- -------------- ----------------- --------------
----------------- -------------- ----------------- --------------
Total other income (expense) (11,707) (27,740) 215,647 (68,008)
Minority interest 227,149 131,339 380,523 200,067
Net Income (loss) before income tax (566,745) (609,579) (1,002,189) (989,010)
Income Tax Provision (Note 7) - - - -
----------------- -------------- ----------------- --------------
Net Income (loss) (566,745) (609,579) (1,002,189) (989,010)
================= ============== ================= ==============
Earnings per share (0.004) (0.01) (0.01) (0.02)
================= ============== ================= ==============
Weighted average common shares 191,429,081 52,122,168 160,006,361 48,071,924
outstanding
================= ============== ================= ==============
================= ============== ================= ==============
================= ============== ================= ==============
The accompanying notes are integral part of Consolidated Financial Statements.
F-3
AMERIRESOURCE TECHNOLOGIES, INC.
AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Unaudited
For the six months ended
June 30,
2006 2005
Reconciliation of net loss provided by (used in) operating activities:
Net income (loss) (1,002,189) $ (989,010)
Non-cash items:
Depreciation 28,266 7,459
Non-cash services through issuance of stock 1,006,777 585,582
Write-down of investment 16,500
Relief of debt income (232,067)
Minority interest (380,523)
Changes in assets affecting operations (increase) / decrease
Accounts Receivable (1,129) (2,211)
Inventory (48,122) 0
Prepaid expenses - (6,553)
Deposits (6,111)
Notes Receivables 221 10,870
Changes in liabilities affecting operations increase / (decrease)
Accounts Payable 112,242 22,611
Accrued Payroll and related expenses 25,000 60,000
Accrued expenses 50,343 41,515
Note payable - related party 125,696 (14,136)
-------------- --------------------
-------------- --------------------
Net cash provided by (used in) operating activities (315,485) (273,484)
-------------- --------------------
-------------- --------------------
Cash flows from investing activities:
Purchase of Fixed Assets (58,975) (58,358)
Purchase Intangible Assets (149,248) (49,156)
Purchase subsidiary (168,254) (80,000)
-------------- --------------------
-------------- --------------------
Net cash provided by (used in) investing activities (376,477) (187,514)
-------------- --------------------
-------------- --------------------
Cash flows from financing activities:
Net increase in Notes payable 329,800 256,000
Proceeds from issuance of stock 350,000 481,033
-------------- --------------------
-------------- --------------------
Net cash provided by (used in) financing activities 679,800 737,033
-------------- --------------------
-------------- --------------------
Increase (decrease) in cash (12,162) $ 276,035
Cash-beginning period 109,357 8,029
-------------- --------------------
-------------- --------------------
Cash-end of period 97,195 $ 284,064
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F-4
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
NOTE 1 - DESCRIPTION OF DEVELOPMENT STAGE ACTIVITIES
AmeriResource Technologies, Inc., formerly known as KLH Engineering Group, Inc
(the Management Company), a Delaware corporation, was incorporated March 3, 1989
for the purpose of providing diversified civil engineering services throughout
the United States, to be accomplished through acquisitions of small to mid-size
engineering firms. On July 16, 1996, the Company changed its name to
AmeriResource Technologies, Inc.
NOTE 2 - BASIS OF PRESENTATION
The unaudited financial statements included herein have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310 (b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended June 30, 2006 and June
30, 2005 are not necessarily indicative of the results that may be expected for
the fiscal year ended December 31, 2006. For further information, the statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2005.
Principles of consolidation
The consolidated financial statements include the combined accounts of
AmeriResource Technologies, Inc., West Texas Real Estate & Resources', Inc.,
RoboServer Systems, Inc., Self-Serve Technologies, Inc. Net2Auction, Inc.,
Net2Auction Corporation, Auction Wagon Inc., VoIPCOM USA, Inc., Kootenai Corp.,
now called BizAuctions, Inc., and BizAuctions Corp. All material intercompany
transactions and accounts have been eliminated in consolidation.
Loss per common share
Loss per common share is based on the weighted average number of common shares
outstanding during the period. Options, warrants and convertible debt
outstanding are not included in the computation because the effect would be
antidilutive.
F-5
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
NOTE 3 - STOCKHOLDERS' EQUITY
Common stock
In December of 2004, the Company approved a 40 for 1 reverse stock split. The
shares are shown after the reverse stock split. During the second quarter of
2006, the Company issued a total of 75,908,909 shares of common stock as
follows:
68,984,459 shares of common stock were issued for consulting services at an
average price per share of $0.0064 for a total value of $442,933.
6,924,310 shares of common stock were issued for legal and professional services
at an average per share price of $0.006 for a total value of $41,362.
Preferred stock
The Company has currently designated 10,000,000 shares of their authorized
preferred stock to Series A Convertible Preferred Stock and an additional
10,000,000 shares to Series B Convertible Preferred Stock.
Both Series A and B preferred stock bear a cumulative $.125 per share per annum
dividend, payable quarterly. The shareholders have a liquidation preference of
$1.25 per share, and in addition, all unpaid accumulated dividends are to be
paid before any distributions are made to common share- holders. These shares
are subject to redemption by the Company, at any time after the second
anniversary of the issue dates (ranging from August 1990 through December 1995)
of such shares and at a price of $1.25 plus all unpaid accumulated dividends.
Each preferred share is convertible, at any time prior to a notified redemption
date, to one common share. The preferred shares have equal voting rights with
common shares and no shares were converted in 2005. Dividends are not payable
until declared by the Company.
On February 22, 2002, the Company filed a "Certificate of Designation" with the
Secretary of State with the State of Delaware to designate 1,000,000 shares of
its Preferred Stock as "Series C Preferred Stock". Each share of the Series C
Stock shall be convertible into common stock of the Company based on the stated
value of the $2.00 divided by 50% of the average closing price of the Common
Stock on five business days preceding the date of conversion. Each share of the
outstanding Series C Preferred shall be redeemable by the Corporation at any
time at the redemption price. The redemption price shall equal $2.00 per share
with interest of 8% per annum. The holders of the Series C is entitled to
receive $2.00 per share before the holders of common stock or any junior
securities receive any amount as a result of liquidation.
F-6
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
NOTE 3 - STOCKHOLDERS' EQUITY (continued)
On February 22, 2002, the Company filed a "Certificate of Designation" with the
Secretary of State of the State of Delaware to designate 750,000 shares of its
Preferred Stock as "Series D Preferred Stock". Each share of the Series D Stock
shall be convertible into one share of common stock of the Company. Each share
of the outstanding Series D Preferred is redeemable by the Corporation at any
time at the redemption price. The redemption price shall equal $.001 per share
with interest of 8% per annum. The holders of the Series D is entitled to
receive $.001 per share before the holders of common stock or any junior
securities receive any amount as a result of liquidation.
On December 19, 2005, the Company filed a "Certificate of Designation" with the
Secretary of State of the State of Delaware to designate 1,000,000 shares of the
Preferred Stock as "Series E Preferred Stock". Each share of the outstanding
Series E Preferred shall be convertible into common stock of the Company based
on the stated value of the $0.50 divided by 50% of the average closing price of
the Common Stock on five business days preceding the date of conversion. Each
share of the outstanding Series C Preferred shall be redeemable by the
Corporation at any time at the redemption price. The redemption price shall
equal $0.50 per share with interest of 8% per annum. The holders of the Series E
is entitled to receive $0.50 per share before the holders of common stock or any
junior securities receive any amount as a result of liquidation.
Delmar Janovec, President & CEO, exchanged the interest owed to him on the
dividends in the approximate amount of $1,600,000 for the new class of Series C
Preferred Stock that was approved by the Board of Directors on January 31, 2002.
F-7
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
NOTE 4- NOTE PAYABLE
The Company had the following notes payable as of 6/30/06.
Note dated April 12, 2005, interest is prime plus 3%
originally due on November 12, 2005, extended through
November 4, 2006, convertible into 20,000,000 million
shares of VoIPCOM USA, Inc. common stock.
$80,000
Note dated February 2005, interest is prime plus 3% due
on demand. Convertible into RoboServer common stock based
upon 50% of the bid on a five day trading average.
$35,000
Note dated in 2002 is non-interest bearing and due on demand.
Note dated August 31, 1998, and amended in the fourth quarter $50,000
of 2004, first quarter of 2005, and first quarter of 2006.
Payable to American Factors, in the original amount of
$430,000, secured by 300,000 shares of the Company's common $200,000
stock. The note bears interest at 15%.
Note dated January 2006, interest is 1% per month with a 3% $50,000
origination charge
Note payable to an officer due on demand with interest at 12% $150,000
annum.
Note dated May 12, 2006, interest is 10% per annum and due on $171,000
May 12, 2008 with conversion rights into Net2Auction common
stock.
Note dated June 28, 2006, interest is 10% per annum and due on
June 28, 2008 with conversion rights into BizAuction common $125,000
stock.
Total notes payable $861,000
F-8
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
NOTE 4- NOTE PAYABLE (continued)
Less current portion (565,000)
-----------------------
-----------------------
Long-term portion $296,000
=======================
Maturities of notes payable at June 30, 2006, are as follows:
2006 $ 565,000
2007 $ -0-
2008 $ 296,000
Thereafter ---
---------------------
$ 565,000
NOTE 5 - GOING CONCERN UNCERTAINTY
The accompanying financial statements have been prepared in conformity with
principles of accounting applicable to a going concern, which contemplates the
realization of assets and the liquidation of liabilities in the normal course of
business. The Company has incurred continuing losses and has not yet generated
sufficient working capital to support its operations. The Company's ability to
continue as a going concern is dependent, among other things, on its ability to
reduce certain costs, obtain new contracts and additional financing and
eventually, attaining a profitable level of operations.
It is management's opinion that the going concern basis of reporting its
financial condition and results of operations is appropriate at this time. The
Company plans to increase cash flows and take steps towards achieving profitable
operations through the sale or closure of unprofitable operations, and through
the merger with or acquisition of profitable operations.
F-9
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company, from time to time, may be subject to legal proceedings and claims
that arise in the ordinary course of its business. The Company is currently
covered adequately for workmen's compensation, business property & casualty
insurance, and general liability meeting the standard limits which are customary
in the industry.
On March 28, 2006, the Company and Delmar Janovec, individually, and AFG entered
into a Settlement Agreement for full settlement of the existing debt including
interest and penalties totaling approximately $646,312. The settlement called
for a cash payment of $350,000, pursuant to the following terms:
(a) AFG received a cash payment of $50,000 from the Company and/or Janovec
wired within 48 hours of both parties signing this agreement; and
(b) AFG is to receive a cash payment of $200,000 from the Company and/or
Janovec thirty (30) days from March 27, 2006; and
(c) AFG is to receive a cash payment of $100,000 from the Company and/or
Janovec sixty (60) days from March 27, 2006; and
(d) AFG is to receive 1,244,620 shares of the Company's common stock.
The Company intends to pay the above amounts without the assistance of Janovec.
In exchange for the above payments, AFG agreed to release and forever discharge
AMRE and Janovec any liability connected to the debt, and will cause the
judgments and/or liens against AMRE and Janovec. If AMRE fails to make the
payments above, then the agreement will become void, and any payments will go to
reduce the original note.
The Company is in discussions with AFG to amend the terms of the Agreement. AFG
has been paid $150,000 to date by an officer of the Company.
F-10
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
NOTE 6 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
On March 28, 2006, the Company received notice that a complaint had been filed
in Superior Court of California, San Diego County, Case No. 862855, against the
Company, et al., for breach of contract, fraud, promise made without intent to
perform, conspiracy, and breach of implied covenant of good faith and fair
dealing, misrepresentation, negligent misrepresentation of fact relating to
compensation earned by Stark under a consulting agreement entered into between
Stark and the Company. Stark sought injunctive relief and compensatory,
punitive, and general damages against the Company.
The Company denied all allegations in the complaint with the complaint being
settled on or about May 27, 2006 between the Company, Delmar Janovec, and the
Plaintiff.
The Company purchased an existing company, Bizauctions, Inc. during the quarter.
That company has contingencies totaling $95,571.
F-11
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
This quarterly report contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward looking statements. These statements relate to
future events or to the Company's future financial performance. In some cases,
you can identify forward-looking statements by terminology such as "may,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," or "continue" or the negative of such terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. There are a number of factors that could cause
the Company's actual results to differ materially from those indicated by such
forward-looking statements.
Although the Company believes the expectations reflected in the
forward-looking statements are reasonable, it cannot guarantee future results,
levels of activity, performance, or achievements. Although all such
forward-looking statements are accurate and consequently do not assume
responsibility for the ultimate accuracy and completeness of such
forward-looking statements. The Company is under no duty to update any of the
forward-looking statements after the date of this report to confirm such
statements to actual results.
GENERAL
AmeriResource Technologies, Inc. (the "Company") conducts operations
primarily through its subsidiaries, including RoboServer Systems Corp. ("RBSY"),
Self-Serve Technologies, Inc. ("SSTI"), Net2Auction, Inc. ("NAUC"), Net2Auction
Corporation ("N2AC"), AuctionWagon Inc. ("AWI"), Auction Boulevard ("AB")
BizAuctions Corp. ("BAC"), and BizAuctions, Inc. ("BAI"). As of August 1, 2006,
the Company owned approximately 38.7% of NAUC common stock or 69.6% of NAUC
common shares if the Company were to convert its SuperVoting Preferred. NAUC
owns 100% of the outstanding shares of both N2AC and AWI. NAUC is publicly
traded on the Pink Sheets under the stock symbol "NAUC." As of August 1, 2006,
the Company owned approximately 47.15% of RBSY's common stock or 79.6% of RBSY's
shares if the Company were to convert its RBSY SuperVoting Preferred Stock. RBSY
owns 100% of the outstanding common stock of SSTI. RBSY is publicly traded on
the Pink Sheets under the symbol "RBSY." As of August 1, 2006, the Company's
subsidiary, NAUC owns approximately 70% of BAI's common stock. BAI's changed its
name from Kootenai Corp. to BizAuctions, Inc. as of August 17, 2006, and is
publicly traded on the Pink Sheets under the symbol "BZCN." BAC is a
wholly-owned subsidiary of BAI. The Company continues to search for viable
business operations to acquire or merge with in order to increase the Company's
revenues, asset base, and to achieve profitability.
4
NET2AUCTION
NAUC is an operator of online auction drop-off locations and develops
relationships with independently owned and/or franchised pack and ship centers.
We believe NAUC is ideal for people who want hassle-free selling of their used
goods online using eBay internet auction site. In addition to the millions of
people who trade on eBay, we believe there is a large population of people who
would like to participate on eBay, but lack the skills, time or inclination to
sell online directly. NAUC serves this population by extending the reach of
eBay.
NAUC handles of all aspects of selling goods on eBay for its customers,
including photographing the goods to be sold, posting a picture of the goods on
eBay, drafting the product description for eBay, handling inquiries from
potential purchasers, selling the goods, processing payments for the goods, and
taking care of shipping the goods to the final purchaser. A customer of NAUC
gets a majority of the proceeds from the sale of the goods and NAUC does all the
work.
As of June 30, 2006, NAUC operates forty-seven (47) drop-off locations, in
addition to the twenty-three (23) affiliate locations that were acquired in our
acquisition of AWI on September 30, 2005. During the second quarter of 2006,
NAUC developed numerous business commercial accounts with several top
retailers-wholesalers within the USA. NAUC liquidates the excess inventory
and/or returned merchandise of such accounts on eBay. NAUC has obtained such
commercial accounts in a wide variety of business industries or segments,
including golf products, electronics-computer items, shoes for both men and
woman and clothing for men, women, and children. NAUC continues to receive a
customer satisfaction rating on eBay exceeding 99%. NAUC is listed as a "eBay
Trading Assistant," which allows NAUC to reach millions of potential buyers for
our customers' unwanted goods or products. To learn more, please visit our
website at www.net2auction.com.
AUCTION WAGON
AWI was incorporated in September of 2003 and became the first eBay
consignment store in the Los Angeles market. AWI is the first company to qualify
as both an eBay certified developer and an eBay Trading Post. AWI is a
frontrunner in both the retail and software segments of the industry, being
featured in Entrepreneur, the New York Times, and the Wall Street Journal. AWI
currently markets its consignment software to drop-off stores, and maintains a
national affiliate network of drop-off locations.
AWI's software, Store Manager Pro G2, performs virtually all of the
functions needed by an eBay consignment store, from printing contracts,
barcodes, and inventory labels to managing its inventory, payment, shipping, and
check writing as well as integrating photo editing. The Store Manager Pro offers
multiple levels of software supporting different business requirements and
charges both a monthly fee and an initial fee. The fees range from $99 to $330
per month per customer. Since January 1, 2006 AWI has added approximately 94 new
customer accounts. AWI's software continues to be a widely used by commercial
business users doing business on eBay. To learn more, please visit our website
at www.auctionwagon.com.
5
AUCTION BOULEVARD
On September 14, 2005, NAUC acquired assets from AB. AB is an operator of
online auction drop-off locations. Among the assets acquired by NAUC were all
rights to the AB name, all of AB intellectual property, and all eBay accounts
opened by AB. Additionally, AB assigned to NAUC the lease to AB's principle
place of business, located in Encino, California.
AB is a Trading Assistant, as determined by e-Bay, with operations and
drop-off store located at 17412 Ventura Boulevard, Encino, CA (northern Los
Angeles area). Auction Boulevard has accumulated in excess of 2,000 positive
feedbacks on eBay and has a 99% positive feedback. To learn more, please visit
our website at www.auctionboulevard.com.
ROBOSERVER
RBSY is a provider of self-service technologies to the restaurant industry.
RBSY's self-serve systems are designed to work like ATM machines, allowing
customers to quickly and easily place orders and pay for menu items. Industry
estimates and market observations show that self-serve technologies can cut
customer waiting time by as much as 33%.
RBSY can install its kiosks in any restaurant located in the United States.
RBSY also provides custom software to allow customers to operate the RBSY kiosks
with optimum efficiency. To provide this custom software to its customers, RBSY
has partnered with St. Clair Interactive Systems, a leading kiosk software
development company. St. Clair provides RBSY's customers with leading edge
technology and online monitoring systems. In order to provide this highest
quality product, RBSY has also partnered with Renasiance Systems, a leading
technology company. Our partnership with Renasiance allows RBSY to undertake
any and all customer projects regardless of the size and scope.
RBSY kiosks are manufactured by KIS Kiosks. RBSY's partnership with KIS
allows us to offer the competitive pricing and top quality hardware products
available. We believe the market for RBSY's point-of-sale and self-serve
technologies is increasing rapidly. Business owners are seeking out self-serve
kiosks to allow such owners to provide more efficient service to their customers
as well as reduce labor costs.
RBSY has installed two pilot RoboServer self-serve units in two (2)
different fast-food franchisees, with the first installation at Angelo's Burgers
in Encinitas, CA and the second installation at Dairy Queen in Oceanside, CA.
The Angelo's Burgers installation was completed in the fall of 2005, and the
Dairy Queen in the spring of 2006. RBSY continues to receive numerous inquiries
from some of the leading fast-food chains for the RBSY self-serve kiosks. SSTI
is a wholly-owned subsidiary of RBSY and is the entity that has performed all of
the research, development, and modifications since the POS software and
self-serve technologies were acquired on or about May 15, 2004. To learn more,
please visit our website at www.roboservercorp.com.
6
BIZAUCTIONS, INC.
On June 27, 2006, NAUC acquired control of Kootenai Corp. through the
purchase of Fifty Million (50,000,000) shares of common stock from the
majority shareholder of Kootenai Corp. for One Hundred Seventy Thousand
($170,000) dollars. Kootenai Corp. later acquired BAC from NAUC, for the
issuance of Fifty Million (50,000,000) shares of common stock and Twelve
Million (12,000,000) shares of preferred stock. Subsequent to the
acquisition of BAC, Kootenai Corp. changed its name to BAI. BAC, is a
wholly-owned subsidiary of BAI. BAI is a publicly traded company which trades on
the Pink Sheets under the symbol "BZCN."
BAI is a prime provider of commercial eBay liquidation services for excess
inventory, overstock items, and merchandise that has been returned. BAI clients
include some of the leading retailer in the United States. To learn more,
please visit our website at www.bizauctions.com
RESULTS OF OPERATIONS
Results of Operations
Three Months Ended June 30, 2006 Compared with Three Months Ended June 30, 2005
The following discussion should be read in conjunction with the audited
financial statements and notes thereto included in our annual report on Form
10-KSB for the fiscal year ended December 31, 2005, and should further be read
in conjunction with the financial statements included in this report.
Comparisons made between reporting periods herein are for the three-month period
ended June 30, 2006 as compared to the same period in 2005.
Net Service Income for the second quarter ended June 30, 2006 increased
to $204,968 from $300 for the same period in 2005 as a result of an increase in
the options of NAUC. The operating loss increased to $933,380 for the quarter
ended June 30, 2006, as compared to an operating loss of $713,178 for the same
period in 2005.
The Company's net loss for the quarter ended June 30, 2006 increased
to $717,938, as compared to a net loss of $609,579
for the same period in 2005.This increase is due to an increase in
administration expenses, research and development expenses, and in legal
expenses. The Company's expenses for the second quarter ended June 30, 2006 as
compared to the same period in 2005 are set forth below:
--------------------------------------------- --------------- -------------
Expenses 2006 2005
--------------------------------------------- --------------- -------------
--------------------------------------------- --------------- -------------
General and Administrative 135,651 104,478
--------------------------------------------- --------------- -------------
--------------------------------------------- --------------- -------------
Consulting 709,284 388,102
--------------------------------------------- --------------- -------------
--------------------------------------------- --------------- -------------
Employee Salaries and Bonuses 25,000 35,000
--------------------------------------------- --------------- -------------
--------------------------------------------- --------------- -------------
Interest Expense 11,707 27,740
--------------------------------------------- --------------- -------------
--------------------------------------------- --------------- -------------
Legal and Professional 106,470 85,425
--------------------------------------------- --------------- -------------
--------------------------------------------- --------------- -------------
R & D -0- 50,468
--------------------------------------------- --------------- -------------
--------------------------------------------- --------------- -------------
7
The increase in these expenses for the second quarter of 2006 as related to
the same period for 2005, is due mostly to the increased operations of the
Company's subsidiaries. Net service income increased significantly for the
quarter ended June 30, 2006. The operating loss increased primarily due to the
increased business activities of its subsidiaries, NAUC, AWI and RBSY.
Six Months Ended June 30, 2006 Compared with Six Months Ended June 30, 2006
The following discussion should be read in conjunction with the audited
financial statements and notes thereto included in our annual report on Form
10-KSB for the fiscal year ended December 31, 2005, and should further be read
in conjunction with the financial statements included in this report.
Comparisons made between reporting periods herein are for the six month period
ended June 30, 2006 as compared to the same period in 2005.
Net Service Income for the six months ended June 30, 2006 increased to
$313,186 from $3,085 for the same period in 2005 due to the emergence of
Net2Auction's operations. The operating loss increased to $1,749,557 for the
six months ended June 30, 2006, as compared to an operating loss of $1,121,069
for the same period in 2005.
The Company's net loss for the six months ended June 30, 2006 increased
significantly to a net loss of $1,153,382, as compared to a net loss of $989,010
for the same period in 2005.This increase is due to an increase in consulting
expenses, general and administrative expenses, and legal expenses. The Company's
expenses for the six months ended June 30, 2006 as compared to the same period
in 2005 are set forth below:
---------------------------------------------- --------------- -------------
Expenses 2006 2005
---------------------------------------------- --------------- -------------
---------------------------------------------- --------------- -------------
General and Administrative 281,767 194,459
---------------------------------------------- --------------- -------------
---------------------------------------------- --------------- -------------
Consulting 229,025 153,663
---------------------------------------------- --------------- -------------
---------------------------------------------- --------------- -------------
Employee Salaries and Bonuses 50,000 60,000
---------------------------------------------- --------------- -------------
---------------------------------------------- --------------- -------------
Interest Expense 16,420 43,508
---------------------------------------------- --------------- -------------
---------------------------------------------- --------------- -------------
Legal and Professional 229,025 153,663
---------------------------------------------- --------------- -------------
---------------------------------------------- --------------- -------------
R & D -0- 87,426
---------------------------------------------- --------------- -------------
---------------------------------------------- --------------- -------------
8
The increase in these expenses for the six months of 2006 as related to
the same period for 2005, is due mostly to the increased operations of the
Company's subsidiaries. Net service income increased significantly for the
quarter ended June 30, 2006. The operating loss increased primarily due to the
increased business activities of its subsidiaries, NAUC, AWI, and RBSY.
Liquidity and Capital Resources
The Company's net cash used in operating activities for the quarter
ended June 30, 2006 increased to $315,485 as compared to cash used in
operations of $273,484 for the same period in 2005. The Company's cash flow used
in investing activities was $376,477 during the second quarter of 2006, as
compared to $187,514 for the same period in 2005. This increase is due to
purchase of intangible assets and a subsidiary. The Company's cash flow provided
by financing activities was $679,800 during the second quarter of 2006, as
compared to $737,033 for the same period in 2005. This decrease occurred as we
received only $350,000 from sale of stock in 2006, versus $481,033 in 2005 and
despite an increase in financing activities from Notes Payable, which increased
from $256,000 in 2005 to $329,800 in 2006.
The Company has relied upon its chief executive officer for its capital
requirements and liquidity. The Company's recurring losses, lack of cash flow
and lack of cash on hand raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans with respect to these matters
include raising additional working capital through equity or debt financing and
acquisitions of ongoing concerns, which generate profits, ultimately allowing
the Company to achieve consistent profitable operations. The accompanying
financial statements do not include any adjustments that might be necessary
should the Company be unable to continue as a going concern.
OFF-BALANCE SHEET ARRANGEMENTS
We do not participate in transactions that generate relationships with
unconsolidated entities or financial partnerships, such as entities often
referred to as structure finance or special purpose entities ("SPEs"), which
would have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes as part of our
ongoing business. As of June 30, 2006, we were not involved in any
unconsolidated SPE transactions.
ITEM 3. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
the person performing functions similar to that of a Principal Financial Officer
of the Company, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-15. Based upon the evaluation, the Company's Chief Executive Officer and the
person performing functions similar to that of a Principal Financial Officer of
the Company concluded that the Company's disclosure controls are effective in
timely alerting them to material information relating to the Company (including
its consolidated subsidiaries) required to be included in the Company's periodic
SEC filings. There have been no significant changes in the Company's internal
controls or in other factors which could significantly affect internal controls
subsequent to the date the Company conducted its evaluation.
9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 28, 2006, the Company received notice that a complaint had been filed
in Superior Court of California, San Diego County, Case No. 862855, against the
Company, et al., for breach of contract, fraud, promise made without intent to
perform, conspiracy, and breach of implied covenant of good faith and fair
dealing, misrepresentation, negligent misrepresentation of fact relating to
compensation earned by Stark under a consulting agreement entered into between
Stark and the Company. Stark sought injunctive relief and compensatory,
punitive, and general damages against the Company.
The Company denied all allegations in the complaint with the complaint being
settled on or about May 27, 2006 between the Company, Delmar Janovec, and the
Plaintiff.
ITEM 5. OTHER INFORMATION
On July 14, 2006, NAUC entered into a Lease Agreement ("Lease") with
Mars Enterprises, Inc. for the premises located at 1510 Corporate Center Drive,
San Diego California. The Lease term is three (3) years and three (3) months and
the Lease will terminate on October 17, 2009. The premise governed by the Lease
is freestanding industrial warehouse space consisting of approximately 20,193
square feet. Rent under the lease is $12,155.60 per month. The Lease was
personally guaranteed by Delmar Janovec and Brent Crouch.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be attached by Item 601 of Regulation S-B are
listed in the Index to Exhibits beginning on page 10 of this
Form 10-QSB, which is incorporated herein by reference.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AMERIRESOURCE TECHNOLOGIES, INC.
/S/ Delmar Janovec
---------------------------------------
Delmar Janovec, Chief Executive Officer
Dated: August 21, 2006
10
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
3.1 Articles of Incorporation of the Company. (Incorporated by reference
from the Company's Form S-4, file number 33-44104, effective on
February 11, 1992.).
3.2 Bylaws of the Company. (Incorporated by reference from the Company's
Form S-4, file number 33-44104, effective on February 11, 1992.)
10.1 Settlement Agreement, dated March 27, 2006, by and between American
Factors Group, LLC, AmeriResource Technologies, Inc., and
Delmar Janovec.
10.2 Acquisition and Asset Purchase Agreement between Net2Auction and
AuctionBoulevard, Inc. dated September 27, 2005. (filed as Exhibit 10.1
to the Company's Current Report on Form 8-K filed on October 5, 2005,
and incorporated herein by reference).
10.3 Acquisition and Stock Exchange Agreement between Net2Auction and
AuctionWagon Inc., dated September 30, 2005. (filed as Exhibit 10 to the
Company's Current Report on Form 8-K filed on October 12, 2005, and
incorporated herein by reference).
10.4 Acquisition and Stock Exchange Agreement between the Company and
Roboserver Systems Corp. dated August 26, 2004 (filed as Exhibit 10(i)
to the Company's Current Report on Form 10-KSB filed on April 15, 2005,
and incorporated herein by reference).
10.5 Acquisition and Stock Exchange Agreement between the Company and
Net2Auction, Inc. dated December 2, 2004. (filed as Exhibit 10(ii) to
the Company's Current Report on Form 10-KSB filed on April 15, 2005, and
incorporated herein by reference).
10.6 Fourth Addendum Settlement and Release Agreement between the Company
and American Factors Group, LLC dated February 28, 2005. (filed as
Exhibit 10(iii) to the Company's Current Report on Form 10-KSB filed on
April 15, 2005, and incorporated herein by reference).
10.7 Share Purchase Agreement, dated as of April 15, 2005, by and between
AmeriResource Technologies, Inc. and BBG, Inc. (filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K filed on August 19, 2005, and
incorporated herein by reference).
10.8 Promissory Note, dated as of April 12, 2005. (filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K filed on August 19, 2005, and
incorporated herein by reference).
14 Code of Ethics adopted by the Company. (filed as Exhibit 14 to the
Company's Form 10-K filed on April 18 2006, and incorporated herein by
reference).
21 Subsidiaries of Registrant (filed as Exhibit 21 to the Company's Form
10-K filed on April 18, 2006, and incorporated herein by reference).
31.1 Certification of Chief Executive Officer under Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer of AmeriResource Technologies,
Inc. Pursuant to 18 U.S.C. ss.1350
11
EXHIBIT 31(i)
CERTIFICATION
I, Delmar Janovec, as Chief Executive Officer and the person performing
functions similar to that of a Principal Financial Officer of AmeriResource
Technologies, Inc. (the "Company"), certify that:
1. I have reviewed this report on Form 10-QSB for the quarter ended June
30, 2006 of the Company;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the small business issuer as of, and for, the periods
presented in this annual report;
4. The small business issuer's other certifying officer(s) and I am
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and
have:
(a) designed such disclosure controls and procedures or caused such
disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the small business
issuer, including its consolidated subsidiaries, is made known to
myself by others within those entities, particularly during the period
in which this annual report is being prepared;
(b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) evaluated the effectiveness of the small business issuer's disclosure
controls and
procedures and presented in this report my conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the small business issuer's
internal controls over financial reporting that occurred during the
small business issuer's most recent fiscal year that has materially
affected, or is reasonably likely to materially effect, the small
business issuer's internal controls over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the
audit committee of the small business issuer's board of directors;
(a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonable likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial information;
and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting
Date: August 21, 2006
/s/ Delmar Janovec
------------------------
Delmar Janovec
Chief Executive Officer and
Principal Financial Officer
12
EXHIBIT 32 (i)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTIONS 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACTS OF 2002
Certification Pursuant to 18 U.S.C., Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
In connection with the Quarterly Report of AmeriResource Technologies,
Inc. (the "Company") on Form 10-QSB for the quarter ended June 30, 2006 (the
"Report"), as filed with the Securities and Exchange Commission, on the date
hereof (the "Report), the undersigned, Delmar Janovec, Chief Executive Officer
and the person performing functions similar to that of a Principal Financial
Officer of the Company, hereby certifies, pursuant to 18 U.S.C. 1350, as adopted
pursuant to 18 U.S.C., Section 1350, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Dated: August 21, 2006
/s/ Delmar Janovec
--------------------------
Delmar Janovec
Chief Executive Officer and Principal
Financial Officer
13