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EX-2 - CERTIFICATION - AMERICAN FIRST FINANCIAL INC | afrs_ex2.htm |
EX-1 - CERTIFICATION - AMERICAN FIRST FINANCIAL INC | afrs_ex1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
———————
FORM
10-Q
Amendment
No 1
———————
o |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended: December 31, 2009
|
|
or
|
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from:
|
Commission
File Number: 000-53578
AMERICAN FIRST FINANCIAL, INC. |
(Exact name of registrant as specified in its charter) |
Florida
|
59-3707569
|
|
(State
or other jurisdiction
|
(Federal
|
|
of incorporation or
organization)
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Identification
No.)
|
12900
Vonn Road Suite B102 Largo, FL 33774
(Address
of Principal Executive Office) (Zip Code)
Phone
727-595-0975 Email:
americanfirst09@yahoo.com
(Former
name, former address and former fiscal year, if changed since last
report)
———————
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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.
|
||||||||
o |
Yes
|
þ
|
No
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|||||
Indicate
by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and
post such files).
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o |
Yes
|
o |
No
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|||||
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
|
||||||||
Large
accelerated filer
|
o |
Accelerated
filer
|
o |
Non-accelerated
filer
(Do
not check if a smaller reporting
company)
|
o |
Smaller
reporting company
|
þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
|
||||||||
o |
Yes
|
þ
|
No
|
|||||
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date. The number of shares of the
issuer’s common stock, par value $.05 per share, outstanding as of
February 11, 2010 was 22,582,205
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APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
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||||||||
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
|
||||||||
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan
confirmed by
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||||||||
a
court.
|
o |
Yes
|
þ |
No
|
Form
10-Q
Amendment
No. 1
Explanatory
Note
---------------------------------
The
purpose of this amendment is to correct and clarifying information originally
reported in the financial statement of our three and nine month period ended
December 31, 2009, filed on Form 10-Q om February 16,
2010. Correction has been made of the originally reported
balance of the demand note payable to a related party. Additionally
there our report includes changes for the purpose of informative disclosure,
including, but not limited to related party disclosures.
PART
I – FINANCIAL INFORMATION
ITEM
1.
|
FINANCIAL
STATEMENTS.
|
American
First Financial, Inc.
As
of December 31, 2009 (unaudited) and March 31, 2009 (audited)
and
for the three and nine months ended December 31, 2009 and 2008
Contents:
Financial
Statements:
|
3 | |||
Balance
Sheet
|
4 | |||
Statements
of Operations
|
5 | |||
Statements
of Cash Flows
|
6 | |||
Notes
to Financial Statements
|
7 |
3
American
First Financial, Inc.
|
||||||||
Balance
Sheet
|
||||||||
December
31, 2009
|
March
31, 2009
|
|||||||
(unaudited)
|
(audited)
|
|||||||
Assets
|
||||||||
Current
assets
|
||||||||
Cash
|
$
|
4,830
|
$
|
1,037
|
||||
Total
current assets
|
4,830
|
1,037
|
||||||
Property
& equipment, net of accumulated
|
||||||||
depreciation
of $7,754 and $6,503, respectively
|
3,919
|
5,170
|
||||||
Loans
to shareholder (Mr. Stirling)
|
-
|
52,287
|
||||||
Investment
in property
|
-
|
60,000
|
||||||
Total
Assets
|
$
|
8,749
|
$
|
118,494
|
||||
Liabilities
and Stockholders' (Deficit)
Equity
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued expenses
|
$
|
8,200
|
$
|
8,200
|
||||
Demand
notes payable to related party (Toni Behr former
Director)
|
60,030
|
69,030
|
||||||
Total
current liabilities
|
68,230
|
77,230
|
||||||
Stockholders'
Equity
|
||||||||
Common
Stock, $.05 par value, 50,000,000 shares
|
||||||||
authorized;
22,882,205 and 21,082,205 shares
|
||||||||
issued
and outstanding, respectively
|
1,144,110
|
1,054,110
|
||||||
Additional
paid-in capital
|
(27,667
|
) |
128,392
|
|||||
Accumulated
Deficit
|
(1,175,924
|
) |
(1,141,238
|
) | ||||
Total
stockholders' (deficit) equity
|
(59,481
|
) |
41,264
|
|||||
Total
Liabilities and Stockholders' (Deficit)
Equity
|
$
|
8,749
|
$
|
118,494
|
The
notes are an integral part of these financial statements.
4
American
First Financial, Inc.
|
Statement
of Operations
|
(unaudited)
|
For
the Three Months Ended
|
For
the Nine Months Ended
|
|||||||||||||||
December
31, 2009
|
December
31, 2009
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Origination
Fees
|
$ | 3,048 | $ | 9,693 | $ | 13,377 | $ | 32,193 | ||||||||
Commissions
and closing costs
|
2,154 | 3,705 | 7,981 | 12,305 | ||||||||||||
Gross
Margin
|
894 | 5,988 | 5,396 | 19,888 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Selling
|
- | 284 | - | 1,770 | ||||||||||||
General
and administrative
|
1,836 | 16,149 | 7,730 | 43,726 | ||||||||||||
Professional
expenses
|
1,028 | 1,000 | 2,028 | 7,700 | ||||||||||||
Rents,
to related party (Mr. stirling)
|
900 | 300 | 900 | 900 | ||||||||||||
Depreciation
|
417 | 417 | 1,251 | 1,251 | ||||||||||||
Interest
expenses
|
50 | 75 | 210 | 245 | ||||||||||||
Loss
on sale of property
|
- | - | 27,963 | - | ||||||||||||
Total
operating expenses
|
3,331 | 18,225 | 40,082 | 55,592 | ||||||||||||
Net
income (loss)
|
$ | (2,437 | ) | $ | (12,237 | ) | $ | (34,686 | ) | $ | (35,704 | ) | ||||
Earnings
(loss) per share,
|
||||||||||||||||
primary
and dilutive
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
Weighted
average shares outstanding
|
||||||||||||||||
primary
and dilutive
|
21,649,328 | 17,353,712 | 21,275,356 | 14,218,575 |
The
notes are an integral part of these financial statements.
5
American
First Financial, Inc.
|
Statement
of Cash Flows
|
(unaudited)
|
For
the Nine Months Ended
|
||||||||
December
31,
|
||||||||
2009
|
2008
|
|||||||
Cash
Flows from Financing Activities:
|
||||||||
Net
loss
|
$ | (34,686 | ) | $ | (35,704 | ) | ||
Adjustment
to reconcile Net Income to net
|
||||||||
cash
provided by operations:
|
||||||||
Depreciation
|
1,251 | 1,251 | ||||||
Loss
on sale of property
|
27,963 | |||||||
Changes
in assets and liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
- | 7,500 | ||||||
Net
Cash (Used) Provided by Operating Activities
|
(5,472 | ) | (26,953 | ) | ||||
Cash
Flows from Financing Activities:
|
||||||||
Proceeds
from sale of property
|
32,037 | |||||||
Proceeds
from issuance of common stock
|
22,500 | - | ||||||
Payments on demand note payable (Toni Behr former
Director)
|
(9,000 | ) | - | |||||
Net
(loans to) repayment of stockholder loans (Mr.
Stirling)
|
(36,272 | ) | 17,669 | |||||
Net
Cash (Used) Provided by Financing
Activities
|
9,265 | 17,669 | ||||||
Net
decrease in Cash
|
3,793 | (9,284 | ) | |||||
Cash
at beginning of period
|
1,037 | 10,192 | ||||||
Cash
at end of period
|
$ | 4,830 | $ | 908 | ||||
Supplemental
cash flow information:
|
||||||||
Interest
paid
|
$ | 210 | $ | 245 | ||||
Taxes
paid
|
$ | - | $ | - | ||||
Non-cash
transactions:
|
||||||||
Receivable
from shareholder reclassified to equity (Mr. Stirling)
|
$ | 103,772 |
The
notes are an integral part of these financial statements.
6
American
First Financial, Inc.
Notes
to the Financial Statements
As
of December 31, 2009
Note
1 Organization, Business Operations and Summary of Significant Accounting
Policies
Organization
and Business Operations
American
First Financial, Inc. (“AFF”) is a Florida corporation formed in March, 2001.
AFF only acts as a broker agent for mortgage loans. We close loans as an
originator, primarily with a line of credit of a lender (Global Lending Group).
We do not hold notes for any period of time. There is no credit risk. At the
time of a loan closing the note and mortgage become the property of Global
Lending Group, or one of their Investors that may have closed and funded the
loan directly. As a result, AFF has no legal recourse on any loans.
Summary
of Significant Accounting Policies
Basis
of Presentation
The
Company prepares its financial statements in conformity with generally accepted
accounting principles in the United States of America. These principles require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Management believes that these estimates
are reasonable and have been discussed with the Board of Directors; however,
actual results could differ from those estimates.
In the
opinion of management, all adjustments consisting of normal recurring
adjustments necessary for a fair statement of (a) the result of operations for
the year ended March 31, 2009 and 2008; (b) the financial position at March 31,
2009, and (c) cash flows for the year ended March 31, 2009 and 2008 have been
made.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair
Value Information
The
carrying amounts of the Company’s assets and liabilities, which qualify as
financial instruments under the FASB Accounting Standards Codification
Section No. 825, “Financial Instruments,” (820-10-50) approximates
their fair value represented in the accompanying balance sheets. The carrying
amounts of current assets and current liabilities approximate their fair value
due to the relatively short period of time between the origination of these
instruments and their expected realization. The carrying values of the note
payable to stockholder approximates fair value based on borrowing
rates currently available to the Company for instruments with similar terms and
remaining maturities.
Cash
and Cash Equivalents
The
majority of cash is maintained with a major financial institution in the United
States. Deposits with this bank may exceed the amount of insurance
provided on such deposits. Generally, these deposits may be redeemed
on demand and, therefore, bear minimal risk. The Company considers
all highly liquid investments purchased with an original maturity of six months
or less to be cash equivalents.
Revenue
Recognition
AFF
receives origination fees for the origination of loans and recognizes these when
the earnings process has been completed and documented through filings with
local governmental agencies, generally at closing.
Mortgages,
Loan Loss Reserves and Capitalization
AFF does
not hold mortgages for investment and thereby does not calculate loan loss
reserves and is not subject to any minimum capital requirements by the State or
any regulatory agency. AFF utilizes the licenses of Global Lending
Group, a related party (see Related Party note), for closing and funding any
loans that need funding until their sale. These loans are the
property of Global Lending Group at closing and as such, are not reflected on
the financial statements of AFF.
7
American
First Financial, Inc.
Notes
to the Financial Statements
As
of December 31, 2009
Property
and equipment
Property
and Equipment is stated at cost. Depreciation is computed by the
straight-line method over estimated useful lives. The carrying
amount of all long-lived assets is evaluated periodically to determine if
adjustment to the depreciation and amortization period or the unamortized
balance is warranted. Based upon its most recent analysis, the Company believes
that no impairment of property and equipment exists at the balance sheet dates
presented.
Advertising
The costs
of advertising are expensed as incurred. Advertising expenses were $0
and $1,347 for the years ended March 31, 2009 and 2008,
respectively. Advertising expenses are included in the Company’s
selling operating expenses.
Income
Taxes
Effective
January 1, 2007, the Company adopted the provisions of the Accounting
Codification Standards, Topic No. 740 “Income Taxes” (ASC 740) which
requires use of the liability method. Deferred tax assets and liabilities are
recorded based on the differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purpose, referred
to as temporary differences. Deferred tax assets and liabilities at the end of
each period are determined using the currently enacted tax rates applied to
taxable income in the periods in which the deferred tax assets and liabilities
are expected to be settled or realized.
Earnings
(Loss) Per Share
The
Company follows Accounting Codification Standards, Topic
No. 260. Basic earnings (loss) per share calculations are
determined by dividing net income (loss) by the weighted average number of
shares outstanding during the year. Diluted earnings (loss) per share
calculations are determined by dividing net income (loss) by the weighted
average number of shares. There are no share equivalents and, thus,
anti-dilution issues are not applicable.
Subsequent
Events
These
interim financial statements were approved by management and were issued on
February 11, 2010. Subsequent events have been evaluated through this
date.
Recently
Issued Accounting Pronouncements
We have
reviewed the FASB issued Accounting Standards Update (“ASU”) accounting
pronouncements and interpretations thereof that have effectiveness dates during
the periods reported and in future periods. The Company has carefully considered
the new pronouncements that alter previous generally accepted accounting
principles and does not believe that any new or modified principles will have a
material impact on the corporation’s reported financial position or operations
in the near term. The applicability of any standard is subject to the
formal review of our financial management and certain standards are under
consideration.
Note
2 Going Concern
The
accompanying unaudited financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which assumes the realization of assets and satisfaction of liabilities in the
normal course of business, for the Company to continue as a going
concern.
8
American
First Financial, Inc.
Notes
to the Financial Statements
As
of December 31, 2009
As shown
in the accompanying financial statements, AFF incurred operating loss for the
nine month periods ended December 31, 2009 and 2008. The Company has accumulated
deficit and a working capital deficit at December 31, 2009 (unaudited) and March
31, 2009 (audited). AFF has limited financial resources with
which to satisfy any future cash requirements and until such time as AFF is able
to raise additional capital or generate positive cash flow from operations,
these conditions raise substantial doubt about the Company’s ability to continue
as a going concern. AFF’s ability to achieve and maintain profitability and
positive cash flow is dependent upon AFF's ability to generate mortgages and
thereby origination fees at a rate sufficient to meet obligations and costs.
Management plans to fund its future operations by obtaining additional financing
and continuing to grow the mortgage origination base. However, there is no
assurance that AFF will be able to grow the business or to obtain additional
financing from investors or private lenders and, if available, such financing
may not be on commercial terms acceptable to AFF or its
shareholders. The key factors that are not within the Company's
control and that may have a direct bearing on operating results include, but are
not limited to, acceptance of the Company's business plan, the ability to raise
capital in the future, the ability to expand its customer base, and the ability
to hire key employees to provide services. There may be other risks
and circumstances that management may be unable to predict.
The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
Note
3 Property and Equipment
Property
and equipment, as of December 31, 2009 and March 31, 2009 consist
of:
December
31, 2009
|
March
31, 2009
|
|||||||
Equipment
|
$ | 11,673 | $ | 11,673 | ||||
Less
accumulated depreciation
|
7,754 | 6,503 | ||||||
$ | 3,919 | $ | 5,170 |
Depreciation
of property and equipment was $417, $417, $1,251 and $1,251 for the three and
nine month periods ended December 31, 2009 and 2008, respectively.
Note
4 Sale of Property
In 2005,
the Company acquired a single family residence located in South Carolina upon a
borrower’s default on a note AFF had sold to an affiliate with
recourse. AFF took back the note and the property when the borrower
defaulted. The property was recorded at the property’s net realizable
fair value, which considered the property market value less expected costs to
sell, at the time it was acquired. The asset was sold in 2009
for net proceeds, after commission and closing costs, of
$32,037. The unimpaired carrying value of $60,000 resulted in
recognizing a loss of $27,963 in the current year.
The
Company does not have any further exposure to loans with recourse, as it has
discontinued the practice, due to the economic uncertainty and the inability to
finance such defaults.
Note
5 Income Taxes
The
Company has not recognized any deferred tax assets in association with net
operating losses and capital losses incurred from marketable equity securities
transactions, due to tax limitations and uncertainties concerning its ability to
generate taxable income in future periods. The tax benefit for the
periods presented is offset by a valuation allowance (100%) established against
deferred tax assets arising from the securities capital losses and other
temporary differences, the realization of which could not be considered more
likely than not. In future periods, tax benefits and related deferred
tax assets will be recognized when management considers realization of such
amounts to be more likely than not.
As of
March 31, 2009, the Company has unused net long-term capital losses of
approximately $410,000 and unused Net Operating Loss carry-forwards of
approximately $56,000 which begins to expire in
2028. Differences in financial statement accumulated deficit
and taxable losses resulting in Net Operating Losses are due to permanent
non-deductible stock transactions.
9
American
First Financial, Inc.
Notes
to the Financial Statements
As
of December 31, 2009
Note 6 Equity
Common
Stock
Common
Stock includes 50,000,000 shares authorized at a par value of
$0.05. The holders of Common Stock and the equivalent Preferred
Stock, voting together, shall appoint the members of the Board of the
Directors. Each share of Common Stock is entitled to one vote. There
are currently 22,882,205 shares of common stock outstanding. There are no
outstanding shares of preferred stock.
Note
7 Earnings per Share
Due to
the net operating loss, all options and conversions are considered anti-dilutive
and therefore only basic calculation is provided. Basic weighted
average per share excludes items that would have been included in the
fully-diluted weighted average shares. Shares that would be included
would be, if exercised, options held by Officers and Directors (2,300,000 common
share equivalents).
Note
8 Related Party Transactions
As of
March 31, 2009, the Company has a Demand Promissory Note in the amount of
$69,030 with a former member of the Board of
Directors. The note pays interest at the rate of twelve percent and is
callable at any time. The purpose for the additional debt was in used for
operating cash flow requirements. Subsequent to March 31, 2009, the loan was
called and subsequent to September 30, 2009, the principle amount of the note
was reduced by $9,000. Repayment negotiations are currently in
process.
The
Company collected interest and principal on a mortgage note that was purchased
by a member of its Board of Directors. The Company received no income
from this servicing for the years ended March 31, 2009 and the agreement was
concluded as of March 31, 2009.
Through
an agreement, in exchange for shares that were given to Global Lending Group,
AFF utilizes the licenses of Global Lending GroupGlobal
Lending Group for loan origination and funding. At funding the
loans become the property of Global Lending GroupGlobal Lending Group . There
is no recourse to loans and AFF acts solely as a mortgage broker on loans
originated.
The
Company has had limited need for use of office space or
equipment. Currently our office is being provided by the majority
shareholder for a fair market value of comparable rentals. Rents
charges to general and administrative expense totaled $900 and $900 for the nine
months ended December 31, 2009 and 2008, respectively. The Board
of Directors approved the forgiveness of loans receivable from a shareholder
(Mr. Stirling), in the amount of $98,459 in consideration of past uncompensated
services. The amount forgiven was recognized as a reduction to
additional paid in capital.
The
amounts and terms of the above transactions may not necessarily be indicative of
the amounts and terms that would have been incurred had comparable transactions
been entered into with independent third parties.
Note
9 Equity
During
the quarter ended September 30, 2009, the Board of Directors approved the
forgiveness of loans receivable from a shareholder (Mr. Stirling), in the amount
of $98,459 in consideration of past uncompensated services. The
amount forgiven was recognized as a reduction to additional paid in
capital.
Prior
period losses resulting from investments, in the amount of $410,615, had
previously been reported as accumulated other comprehensive income within
stockholders’ equity. This amount has been reclassified to
accumulated deficit. This reclassification, retroactively applied,
has no effect on the financial position or results f operations.
In 2006
the Company issued option awards under the employee incentive stock option plan
(“EISOP”) to Officers and Directors. Options granted under the
EISOP, in prior years, were issued for past performance and therefore vested
immediately at the date the options were granted. A total 2,300,000
options were issued with a strike price of $.05 expiring in ten year from issue
date (expires June 2016).
10
American
First Financial, Inc.
Notes
to the Financial Statements
As
of December 31, 2009
Note
10 Commitments and Contingencies
The Company has limited needs for office space and currently uses facilities available through a shareholder (Mr. Stirling). The Company has not entered into any lease arrangement plan. AFF has no known future financial commitments .
From time
to time the Company may be a party to litigation matters involving claims
against the Company. Currently the Company has been named as a
defendant in a lawsuit for unsolicited advertisement. Management does
not believe the merits of the claim of $500 with possible treble damages
assessment up to $1,500. Due to the uncertainty of outcome, the
Company has not accrued any potential liability. The Company does not
believe this matter or any other unasserted claims that may exist would have a
materially adverse effect on the Company’s financial position or results of
operations.
11
ITEM 2. MANAGEMENT'S DISCUSSION
AND ANLAYSIS FO FINANCIAL CONDITION AND RESULT OF OPERATIONS.
The
following discussion of our results of operations, consolidated financial
condition and capital resources and liquidity should be read in conjunction with
our Financial Statements and the related notes included in this
report.
Forward-Looking
Statements
The
following discussion of our financial condition and results of operations should
be read in conjunction with the financial statements and the related notes. This
report contains certain forward-looking statements and our future operating
results could differ materially from those discussed herein. Certain statements
contained in this discussion, including, without limitation, statements
containing the words "believes", "anticipates," "expects" and the like,
constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Given these
uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements. We disclaim any obligation to update any such
factors or to announce publicly the results of any revisions of the
forward-looking statements contained herein to reflect future events or
developments.
General
American
First Financial, Inc. (“AFF”) is a Florida corporation formed in March, 2001. As
part of our recent financial statements our auditor has expressed an opinion
that based on our financial condition at the time “there is substantial doubt
about the company’s ability to continue as a going concern”. Our current fiscal
year assets are $ 8,749 and our liabilities are
$ 68 ,230. We show a net loss through nine months of our current fiscal year of $ 34,686 . Where that financial condition does not look
promising, in actually it is not as bad as it looks from the stand point of
continuing as a going concern. (see discussion of improvement in item 2. Summary section
below). AFF’S operations are primarily the acceptance of loan
submissions from mortgage brokers and then finding a lender that will accept them. In the past AFF operated as the lender in
that they underwrote broker loan submissions, closed them with lines of credit
and then resold those loans to banks and other lending institutions that then
usually retained the mortgages for servicing. Some smaller, private lenders such
as Eastern Savings Bank would resell those same mortgages to other lenders. AFF
no longer acts as a lender, nor do we buy or sell loans. For quite some time now
and in to the foreseeable future, AFF will take those same broker loan
submissions and will then send them to Global Lending Group, Inc. (shareholder
with 500,000 AFF common shares), or directly to the lender contacts of Global,
For underwriting, closing, and funding of those loans. AFF is totally dependant
on Global for any and all revenues. We send them one hundred percent of our loan
referrals. Global is not obligated to fund any of the loans we send them.
However, a Global rejection of a loan is rare. For the current fiscal year and
at least the two previous ones, Global has funded one hundred percent of the
loans sent to them for the full amounts requested. Compensation on a loan may
consist of percentage points charged to the borrower, percentage points paid by
Global and processing fees, all of which are negotiated prior to the processing
of the loan. After the loan closing, AFF receives the gross amount of all
compensation associated with the loan and then pays the originating broker a
referral fee equal to 2% of the loan amount. AFF then keeps all other
compensation. Global is a licensed mortgage lender. Global has national
approvals to originate and sell loans including direct FHA and VA and
agreements to sell loans to major Fannie Mae and Freddie Mac lenders. Global is
licensed in the states of Florida, Tennessee, California, and Michigan. In
addition, the states of Alabama, Alaska, Colorado, Indiana, Montana,
Nevada, Ohio, Oregon, South Carolina and Wyoming have no licensing requirements
for a lender and Global is exempt from licensing in Arkansas and
Georgia to do non-owner (investment) loans. AFF does not have a designated
market area. As a branch of Global Lending, AFF is capable of doing a loan in
any of the states mentioned above. As an example: we might get a loan from
Alabama this week and never get another one. Currently, AFF is concentrating
marketing efforts in the state of Florida because the average loan value is
larger than a lot of other states. Also there is a lot of investment and second
home loans that can be done in Florida compared to other states and we still
have good loan products for those loans.
12
Overall
economic conditions have certainly contributed to the decline in income for AFF.
However, we do not monitor statistics such as unemployment rates, foreclosures,
building permits, price of homes and bankruptcy filings because we believe that
none of our operations would be changed by monitoring any of them. As an
example: the price of homes in Florida has dropped an average of 45% in the last
two years. Knowing that statistic means nothing to us and would not change
anything we do other than to make us think of employee layoffs which is an
automatic result of declining business. The majority of loans we do (sub-prime
and non-conforming) are not effected by these statistics other than as a part of
a general business decline. The largest factor contributing to the decline in
the mortgage business is the deletion of mortgage products. We do not consider
any of those market conditions pertinent to our forward business plan which is
creating more originations by acquisitions of small mortgage
brokers.
AFF has
what a “Net Branch Agreement” with Global Lending Group, Inc. that allows AFF to
take loan originations from mortgage brokers and submit those loans to Global
for underwriting and funding. Under that agreement AFF is allowed to act as a
branch of Global’s but, is allowed to keep all fees or profits
of any kind from the closing of a loan. We have operated as a branch of Global’s
since the signing of the agreement and intend to continue to do so. The
agreement can only be cancelled by AFF. The agreement allows us to use Global’s
licensing and therefore we need no licenses of our own. There are no legal
ramifications for AFF acting as a branch of Global’s except as required by the
agreement. One hundred percent of our loan business is done through Global.
Global owns approximately 2% of the outstanding shares of AFF common stock. The
main reason that AFF was able to negotiate such a favorable agreement with
Global, is that AFF’S principle Mr. Stirling started the principle of Global in
the mortgage business and they have remained good friends.
We market
for loans to mortgage brokers around the country by way of faxing out a product
list once a month and belonging to an Internet mortgage referral service called
“Lender Lab”. Brokers looking for a particular loan product can go to their
website, put in the loan details and receive a list of the mortgage companies
that would do that loan. This service is free to AFF. Loans are given to Global
for underwriting and approval. When approved they are closed and funded in
Global’s name. AFF assumes no risk. All loans are closed and funded through
Global, with their funds or lines of credit or directly by their lender
Investors. AFF has not directly purchased any loans within the last three years
and does not intend to do so in the future.
AFF
markets loan products to mortgage brokers and small lenders who are too small,
or do not have the required net worth to get approval to submit loans directly
to the major lenders. The list of loan products consists of non-conforming and
conforming loans. A non-conforming loan is a loan that fails to meet Fannie Mae
or Freddie Mac criteria for funding. Reasons include the loan amount is higher
than the conforming loan limits of Fannie Mae or Freddie Mac, lack of sufficient
credit, the unorthodox nature of the use of funds, or the collateral backing
it.
AFF can
offer non-conforming loans (loans that are credit worthy but, don’t meet other
Fannie Mae or Freddie Mac requirements such as loan size, property type, or debt
ratios above 45%), on primary, secondary and investment properties.
Credit score requirements for non-conforming and conforming loans are the same,
above 600. The current maximum loan to value (LTV) for non-conforming loans is
80%. It is 95% for conforming loans. In addition, we will offer sub-prime loans
to borrowers who would be considered poor credit risks, with credit scores below
600, a recent bankruptcy or loan default experience. On these types of loans
most lenders won’t go above a seventy percent loan to value. This is an area
that AFF is most competitive do to the lender contacts or Investors that Global
Lending Group has, AFF can offer up to eighty percent loan to value. Collateral
requirements for all of the above mentioned loans is real property. AFF does not
consider it important to keep exact records of the type or number of loans we
do. We do not have the summary information on the number of loans or the
individual loan by loan information. To get this information we would have to go
back through the closed loan files for a given period but, we know from the type
of marketing we do that approximately seventy percent of the loans we do are
sub-prime, twenty percent non-conforming and the rest conforming loans. In the
last six months ending 9/30/09 we submitted and funded a total of seven loans
with an aggregate dollar amount of $630,000. Global Lending has allocated at
least $1,000,000 a month from its lines of credit for AFF loans if funded by
Global. If the loans are funded directly by Global Investors, the funds are
unlimited. AFF does not have any foreclosure or debt collecting or
responsibilities. Any such efforts would be undertaken by Global. Also AFF has
no recourse provisions or responsibilities attached to any loans that they process through Global.
13
Summary
AFF
intends to attract investor dollars and grow the mortgage business through
acquisitions to the point of positive cash flow. We currently do not have cash
for acquisitions but, intend to use only stock for acquisitions. Management
believes that there are numerous small mortgage brokers around the country that
will welcome a chance to be acquired by a company they can send all of their
sub-prime and non-conforming loans. Any acquired broker will also have the
availability of conforming, FHA and VA loan products as well due to a branch
agreement that AFF has with a lender named Global Lending Group,
Inc. Management also believes that there will be a number of new loan
products introduced in the next twelve months such as “stated income” loans
coming back for self employed borrowers, which will significantly increase
business. The stock that an acquired broker will receive, will just be “added
benefit”. Acquisitions like this are not a new idea. Most of the large mortgage
lenders in the country have grown in just this manner.
Results of
Operations
For
the Three Months Ended December 31, 2009
|
||||||||
2009
|
2008
|
|||||||
Origination
Fees
|
$ | 3,048 | $ | 9,693 | ||||
Commissions
and closing costs
|
2,154 | 3,705 | ||||||
Gross
Margin
|
894 | 5,988 | ||||||
Operating
expenses:
|
3,331 | 18,225 | ||||||
Net
income (loss)
|
$ | (2,437 | ) | $ | (12,237 | ) | ||
For
the Nine Months Ended December 31, 2009
|
||||||||
2009 | 2008 | |||||||
Origination
Fees
|
$ | 13,377 | $ | 32,193 | ||||
Commissions
and closing costs
|
7,981 | 12,305 | ||||||
Gross
Margin
|
5,396 | 19,888 | ||||||
Operating
expenses:
|
40,082 | 55,592 | ||||||
Net
income (loss)
|
$ | (34,686 | ) | $ | (35,704 | ) |
Revenues
For the
three months and nine months ended December 31, 2009 and 2008 revenues were
$3,048, $9,693, $13,377 and $32,193, respectively .
Revenue decreased in the current quarter due to general economic
conditions and a further deterioration in the mortgage
market. Gross margin decreased in the current quarter,
based on the decrease in volume. The recent trends in the mortgage
business are towards lower numbers in all areas including number of loans, size
of loans, gross margins and commissions thereby drastically reducing income for
the above mentioned periods and for the foreseeable future. The
number and type of available mortgage products has been greatly reduced. Also,
the credit requirements for borrowers have been vastly increased. Going forward,
it has been determined that the best way for AFF to increase volume and income
is through acquisitions of other originators. The current funding dollar
commitment to AFF (up to $1,000,000 a month), is more than adequate for a
considerable increase in loan closings and Global is capable of increasing
funding sources as needed.
14
Operating
Expenses
Operating
expenses were incurred in the amount of $ 3,331 ,
$18,225, $ 40,082 and $55,592 for the three and nine
month periods ended December 31, 2009 and 2008, respectively . The overall, change was due to a decrease in
general and administrative expenses, particularly professional expenses and
other administrative task areas.
Net Loss
The
Company incurred a net operating loss for the three and nine month period ended
December 31, 2009 and 2008 in the amount of $ 2,437 , $12,237, $ 34,686 and
$35,704. The change in the year earnings is directly related to the decrease in
sales and gross margin.
Liquidity and Capital
Resources
The
following summary data is presented for the period ended December 31, 2009
(unaudited) and for the year ended March 31, 2009 (audited):
December
31, 2009
|
March
31, 2009
|
|||||||
(unaudited)
|
(audited)
|
|||||||
Current
assets
|
$ | 4,830 | $ | 1,037 | ||||
Total
Assets
|
8,749 | 118,494 | ||||||
Total
current liabilities
|
68,230 | 77,230 | ||||||
Total
liabilities
|
68,230 | 77,230 | ||||||
Total
stockholders' equity
|
(59,481 | ) | 41,264 | |||||
Working
Capital
|
(72,400 | ) | (76,193 | ) | ||||
Net
Cash (Used) Provided by Operating Activities
|
(4,572 | ) | (26,953 | ) |
The
current economic conditions have negatively affected our business model. There
is an abundance of demand for refinancing, however the credit markets do not
offer the supply of loan products with which to fund these requests, therefore
mortgage financing has decreased, as has our closings on mortgages.
Additionally, there has been a decrease in the overall number of housing sales
and real estate values further reducing the number of transactions requiring
mortgage financing and the amounts of those mortgages.
Cash used
in operations had significantly decreased, primarily for the reduction of
expenses incurred in administrative operations, including legal and professional
fees related to the public filings. These requirements have decreased
significantly and we anticipate being able to fund any amounts needed in the
next twelve months.
As
reflected in the unaudited financial statements, as of December 31, 2009, we
have an accumulated deficit of $1,175,924 and negative working capital of
$63,400. For the nine month period ended December 31, 2009 and 2008
we incurred negative cash used in operations in the amount of $5,472 and
$26,953, respectively. These issues raise substantial doubt about its
ability to continue as a going concern. The ability of the Company to continue
as a going concern is dependent on the Company's ability to maintain
profitability and or attain funding through additional share sale or
debt
We were
financing our operations primarily through operating activities. Those
activities have not always been adequate for the cash requirements of the
business. From time to time it is necessary for the company to
increase cash through the sale of stock through private investors or through
temporary loans from and by the majority shareholder. We believe we can
currently satisfy our cash requirements for the next twelve months with our
current cash and expected revenues from operations. We cannot assure investors
that adequate revenues will be generated. Even without sufficient revenues, due
to the current economic conditions, in the next twelve months, we anticipate
that proceeds received from securities sales and or, the attainment of proceeds
from temporary debt financing will enable AFF to continue with
operations.
In an
effort to sustain our liquidity, during the nine months ended December 31,
2009, we liquidated our investment of property located in South
Carolina. Due to market conditions, we liquidated this property
at below estimated market value, however, management considered the liquidation
to be necessary for the purposes of cash flow. The sale resulted in
approximately $32,000 of operating cash after closing expenses.
As
reflected in the unaudited financial statements, as of December 31, 2009,
we have an accumulated deficits and negative working capital of
$72,400. For the nine month period ended December 31, 2009 we
incurred negative cash used in operations in the amount of
$4,572. These issues raise substantial doubt about its ability to
continue as a going concern. The ability of the Company to continue as a going
concern is dependent on the Company's ability to maintain profitability and or
attain funding through additional share sale or debt financing. The
unaudited financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
At
December 31, 2009 the Company had minimal cash to meet current
obligations. The Company may rely upon the issuance of common stock
and additional capital contributions from shareholders to fund any operating
shortfall.
Off-Balance Sheet
Arrangements
We have
no off balance sheet arrangements.
Significant Accounting
Policies and Recent Accounting Developments
For
additional information regarding significant accounting policies and other
recent accounting pronouncements, see Note 1 to our Interim Financial Statements
and Note 1 to our Audited Financial Statements.
ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not
required for smaller reporting company.
ITEM 4. CONTROLS AND
PROCEDURES.
(a)
Management’s Conclusions Regarding Effectiveness of Disclosure
Controls and Procedures.
|
The
management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting. The Company’s internal
control over financial reporting is a process designed under the supervision of
the Company’s Chief Executive Officer to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of the Company’s
financial statements for external purposes in accordance with U.S. generally
accepted accounting principles.
With
respect to the period ending December 31, 2009, under the supervision and with
the participation of our management, we conducted an evaluation of the
effectiveness of the design and operations of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated
under the Securities Exchange Act of 1934 and based on the criteria for
effective internal control described in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
Based
upon our evaluation regarding the period ending December 31, 2009, the Company’s
management, including its Chief Executive Officer has concluded that its
disclosure controls and procedures were not effective due to the Company’s
limited internal resources and lack of ability to have multiple levels of
transaction review. Through the use of external consultants and the
review process, management believes that the financial statements and other
information presented herewith are materially correct.
The
Company’s disclosure controls and procedures are designed to provide reasonable
assurance of achieving their objectives. However, the Company’s
management, including its Chief Executive Officer does not expect that its
disclosure controls and procedures will prevent all error and all
fraud. A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefit of
controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected.
(b)
Changes in Internal Controls.
There
have been no changes in the Company’s internal control over financial reporting
during the period ended December 31, 2009 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal controls over
financial reporting.
15
ITEM
1.
|
LEGAL
PROCEEDINGS.
|
None for period. | |
ITEM 1A. | RISK FACTORS. |
Not required for smaller reporting company. | |
ITEM 2 |
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|
There was none for the period. | |
ITEM 3. |
DEFAULTS UPON SENIOR
SECURITIES.
|
There was none for the period. | |
ITEM 4. |
SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS.
|
There was none for the period. | |
ITEM 5. |
OTHER
INFORMATIONS.
|
ITEM 6. | EXHIBITS. |
Certifications:
EXHIBIT
1
EXHIBIT
2
16
SIGNATURES
American First Financial, Inc.ame | |||
Date:
May 12 , 2010
|
|
||
By: | /s/ J. R. Stirling | ||
J. R. Stirling, President | |||
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
17