Item 1. DESCRIPTION OF BUSINESS
GENERAL
America's Senior Financial Services, Inc. ("AMSE") along with its wholly-owned subsidiaries, Dow Guarantee Corp. ("Dow") and Jupiter Mortgage Corporation ("Jupiter"), is a licensed mortgage lender that originates, processes, and closes forward and reverse mortgage loans secured by single- family residences that are subsequently funded by financial institutions or independent investors. AMSE, Dow and Jupiter are collectively referred to herein as the Company. The Company conducts business on a retail and wholesale basis. All significant inter-company transactions are eliminated in consolidation.
We receive income from several sources. Under certain circumstances we may charge certain non-refundable mortgage application fees. We may also charge origination points. Upon closing a loan, we may receive additional fees payable by the borrower or investor, which fees are based upon a percentage of the loan and/or the interest rates charged. Finally, we derive income from our secondary marketing efforts.
Our executive offices are located at 10800 Biscayne Blvd., Suite 500, Miami, Florida 33161 and our telephone number is (305) 751-3232. We are a Florida corporation, which was incorporated in 1990.
BUSINESS DEVELOPMENTS
The Company's Jupiter Mortgage Corporation subsidiary originated in excess of $390 million dollars of gross loan originations for the year ended December 31, 2002, and funded approximately $312 million dollars.
The Company's Reverse Mortgage operations provided another $10 million dollars in gross loan originations, and funded another $2.5 million dollars. Combined with the forward operations named above and certain other commercial mortgage transactions, the company achieved slightly over $400 million dollars in gross loan originations, and funded $315 million dollars in loans.
Asset Purchase regarding Dupont Mortgage Corporation, Inc.
Jupiter Mortgage Corporation purchased certain assets of Dupont Mortgage Group, Inc. ("Dupont") consisting of its mortgage wholesale lending relationships and certain furniture, equipment, and the assumption of a suitable office lease in Tampa, Florida where Dupont formerly conducted such business. The agreement called for the Company to pay Dupont a total of $200,000 for the assets. The effective date on this transaction was December 31, 2001. Jupiter did not assume any liabilities of Dupont or purchase any stock of Dupont or any of its affiliates. Jupiter subsequently utilized these assets to form its own wholesale operation. The operations were at a start-up level through the first half of 2002. During 2002 the Company further developed the acquired operations and fully integrated the systems toward the end of 2002 and in early 2003.
The Company is currently working with several advisors to identify potential acquisition candidates for potential expansion. While there are several candidates under consideration, there can be no assurances that any additional acquisitions will occur in the immediate future.
OPERATIONS
During 2002, the company remained focused on building its core business while developing its newly formed wholesale operation.
The company's combined forward mortgage loan originations constitute over 95% of our total loan originations. Previous to 2002, our forward business was primarily retail based. In 2002, our wholesale operation made a significant contribution to our total loan originations. Since the company does very little forward mortgage retail advertising, our refinance business is less than the industry average. Because our business is not based on refinances, we are not overly interest rate sensitive. Of the retail forward mortgage loan origination, we estimate that 47% are government products (FHA and VA), 36% are conforming products (FNMA and FHLMC), 8% are Jumbo products (large loans exceeding FHMA limits) and the balance of 9% is non-conforming and sub prime customers. Of the wholesale mortgage loan origination, 100% is government products.
The FHA "HECM" dominates our reverse mortgage sales program, accounting for almost 90% of our reverse mortgage production. The balance of our reverse mortgage loans are FNMA "Home Keepers". During 1999 through 2001, we worked to develop a third product, a private reverse mortgage that would offer greater flexibility and ease of use to a wider base of seniors. As of December 31, 2002, we had not secured the facility necessary to fund and warehouse the product. However the present model is viable and AMSE continues to search for a credit facility to launch the product. While searching for financing, the company continues to expand its correspondent database for this product. The company has numerous correspondents in several states waiting for us to launch the product.
COMPETITION
We face intense competition in the business of originating mortgage loans. Our competitors in the industry include consumer finance companies, mortgage banking companies, savings banks, commercial banks, credit unions, thrift institutions, credit card issuers and insurance companies. Many of these competitors are substantially larger and have considerably greater financial and marketing resources than the Company. In addition, many financial services organizations that are much larger than the Company have formed national loan origination networks or purchased home equity lenders. Competition among industry participants can take many forms, including convenience in obtaining a loan, customer service, marketing and distribution channels, amount and term of the loan, loan origination fees and interest rates.
To the extent any of these competitors significantly expand their activities in our market, our business could be materially adversely affected. Fluctuations in interest rates and general economic conditions may also affect our competition and us. During periods of rising rates, competitors that have locked in lower rates to potential borrowers may have a competitive advantage.
We believe our competitive strengths include superior customer service and experience, and emphasizing customer education to attract borrowers for reverse mortgages.
SALES AND MARKETING
As an independent mortgage originator, we seek to identify persons who are seeking mortgage loan funding. Currently, we do a small amount of advertising in local newspapers, yellow page telephone directories, Internet websites, and direct mail. We market through national trade association participation, senior oriented direct mail, participation in senior events, free video tapes given to potential clients, state level trade shows, and HUD/Fannie Mae focus group activities.
For the fiscal years ended December 31, 2002, 2001, 2000, 1999 and 1998, we expended approximately $39,000, $27,000, $66,000, $393,000 and $155,000, respectively for sales and marketing activities. In 1999 we expanded marketing activities to consistently include nationwide advertising of its reverse mortgage effort. In 2002 and 2001, marketing and advertising expenses were reduced from the previous year as we continued to limit our advertising to select venues in Florida only and further develop our wholesale relationships with correspondent brokers who then deliver loans to us without any material marketing or advertising expense to the company.
REGULATORY AGENCIES
Our operations are subject to extensive regulation, supervision and licensing by federal, state and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of its operations. Our consumer lending activities are subject to the Federal Truth-in-Lending Act and Regulation Z (including the Home Ownership and Equity Protection Act of 1994), the Federal Equal Credit Opportunity Act, as amended, and Regulation B, the Fair Credit Reporting Act of 1970, as amended, the Federal Real Estate Settlement Procedures Act and Regulation X, the Home Mortgage Disclosure Act, the Federal Debt Collection Practices Act and the National Housing Act of 1934, as well as other federal and state statutes and regulations affecting our activities.
We are also subject to the rules and regulations of, and examinations by, state regulatory authorities with respect to originating and processing loans. These rules and regulations, among other things, impose licensing obligations, establish eligibility criteria for mortgage loans, prohibit discrimination, govern inspections and appraisals of properties and credit reports on loan applicants, regulate assessment, collection, foreclosure and claims handling, investment and interest payments on escrow balances and payment features, mandate certain disclosures and notices to borrowers and, in some cases, fix maximum interest rates, fees and mortgage loan amounts. Failure to comply with these requirements can lead to loss of approved status, certain rights of rescission for mortgage loans, class action lawsuits and administrative enforcement action.
EMPLOYEES
As of March 30, 2003 the company employed approximately 100 persons. The Company believes it has satisfactory relationships with all of its employees.
ENVIRONMENTAL MATTERS
None.
FACTORS AFFECTING THE COMPANY'S BUSINESS AND PROSPECTS
OUR BUSINESS DEPENDS ON THE AVAILABILITY OF MORTGAGES AT REASONABLE RATES.
The success of our mortgage origination business is dependent upon the availability of mortgage funding at reasonable rates. Although there has been no limitation on the availability of mortgage funding in the last few years, there can be no assurance that mortgages at attractive rates will continue to be available.
OUR BUSINESS IS SUBJECT TO COMPETITION FROM MANY SOURCES.
There are many sources of mortgages available to potential borrowers today. These sources include consumer finance companies, mortgage banking companies, savings banks, commercial banks, credit unions, thrift institutions, credit card issuers and insurance companies. Many of these alternative sources are substantially larger and have considerably greater financial, technical and marketing resources than we do. Additionally, many financial services organizations against whom we compete for business have formed national loan origination networks or have purchased home equity lenders. We compete for mortgage loan business in several ways, including convenience in obtaining a loan, customer service, marketing and distribution channels, amount and term of the loan, loan origination fees and interest rates. If any of these competitors significantly expand their activities in our market, our business could be materially adversely affected. Changes in interest rates and general economic conditions may also affect our business and our competitors. During periods of rising interest rates, competitors who have locked into lower rates with potential borrowers may have a competitive advantage.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY
All of the operations of the Company are conducted from premises leased from independent landlords by Jupiter Mortgage Corporation. The corporate offices of America's Senior Financial Services, Inc. are in the Miami location listed below.
The following table sets forth information concerning these facilities:
LOCATION APPROX. LEASE EXPIRATION MONTHLY SIZE RENT - -------- ------------ -------
10800 Biscayne Blvd. 2,200 sf Month to Month $2,200 Miami Shores, FL 33138
2737 E. Oakland Park Blvd 175 sf Month to Month $ 329 Oakland Park, FL 33306
1070 E. Indiantown Road 5,500 sf November 2004 $8,247 Jupiter, FL 33477
11398 Okeechobee Blvd., Ste. 2 1,500 sf October 2003 $2,117 Royal Palm Beach, FL 33411
1874 S.E. Port St. Lucie Blvd. 1,800 sf Feb. 2008 $2,780 Port St. Lucie, FL 34952
1000 S. Federal Hwy. 500 sf Month to Month $1,000 Stuart, FL 34994
1100 W. Littleton Boulevard 1,762sf April 2004 $1,825 Suite 350 Littleton, CO. 80120
106 E. Janeaux 200sf Month to Month $ 200 Lewistown, Montana 59457
103 US Highway 1 250sf Dec. 2003 $ 600 Jupiter, FL. 33477
2137 S. US One 250sf July 2003 $ 600 Jupiter, FL. 33477
129 Center Street 500sf Dec. 2003 $1,060 Jupiter, FL. 33458
1408 N. Westshore Blvd., Ste. 1004 5,500sf Dec. 2004 $6,050 Tampa, FL.
Leases may provide for rent escalations tied to increases in operating expenses or fluctuations in the consumer price index.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
In December of 1998 we advanced $250,000 to Home Care America, Inc. (HCAI), an acquisition candidate, pursuant to a promissory note. The purpose of the note was for HCAI to use as working capital. There is no affiliation between ourselves and HCAI.
In April 1999 we sued HCAI and Robert G. Williams in the Circuit Court of the 11th Judicial Circuit, Miami-Dade County, Florida for repayment of the $250,000 promissory note.
During 2002 the Company wrote off the $250,000 note The Company retains collateral in the form of 2.4 million free trading marketable securities which were valued at $48,239 as of December 31, 2002. The Company recorded bad debt net of the collateral in the amount of $201,761. As of March 31, 2003 no settlement or judgment has been made pursuant to this litigation. No assurances can be given as to the final outcome of this matter.
On April 9, 2001 a legal action was filed in the Eleventh Circuit Court in Dade County by Michael Shelley, a former director of the company who was removed from his position by a majority vote of the shareholders on November 30, 2000. The former director sued the Company and Company's Chairman, Nelson A. Locke, in a derivative action alleging mismanagement and other matters. The Company's Board of Directors investigated these allegations. After an investigation described below, the Company's Board determined these allegations to be without merit. To respond as completely as possible, the Board formed an Investigative Committee that consisted of directors deemed independent of the controversy, and the Committee researched all of the former director's complaints. An investigative report was compiled by the Committee and filed with the Court in January 2002. The Company has petitioned the Court to dismiss the suit and award the appropriate costs and damages. However, management believes that a settlement is in the best interest of the Company's shareholders and all parties involved in the litigation. Management has met with the former director's counsel to discuss a mutually acceptable settlement to all matters open between the parties that would result in the full dismissal of all legal actions. Negotiations are ongoing and management expects to conclude them during the second quarter of 2003.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On March 6, 2002 a proposal to increase the number of authorized common shares to 100,000,000 was submitted to a vote of the security holders of the Company. The Company filed a related pre 14-C on February 13, 2002.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our Common Stock has been trading on the over-the-counter market since February 20, 1998. The following sets forth the range of high and low bid quotations for the periods indicated as reported by National Quotation Bureau, Inc. Such quotations reflect prices between dealers, without retail mark-up, markdown or commission and may not represent actual transactions.
HIGH BID LOW BID -------- -------
January 1, 2001 through March 31, 2001 0.4062 0.125 April 1, 2001 through June 30, 2001 0.22 0.125 July 1, 2001 through September 30, 2001 0.47 0.18 October 1, 2001 through December 31, 2001 0.7969 0.4681
January 1, 2002 through March 31, 2002 0.15 0.06 April 1, 2002 through June 30, 2002 0.14 0.07 July 1, 2002 through September 30, 2002 0.09 0.02 October 1, 2002 through December 31, 2002 0.12 0.02
As of March 31, 2003, there were approximately 1,200 holders of record of our common stock.
DIVIDENDS
We have not previously paid any dividends to our shareholders and we do not anticipate that any dividends will be paid in the foreseeable future. The Board of Directors intends to follow a policy of using retained earnings, if any, to finance the growth of the company. The declaration and payment of dividends in the future will be determined by the Board of Directors in light of conditions then existing, including the company's earnings, financial condition, capital requirements and other factors.
SALES OF UNREGISTERED SECURITIES
The following provides information concerning all sales of securities In 2002 which were not registered under the Securities Act of 1933.
On January 2, 2002 50,000 shares of Preferred Class A shares were issued to Thomas Sherman, attorney, for legal services. (Sophisticated investor)
On February 1, 2002 200,000 shares of common stock and 200,000 shares of Preferred Class B stock were issued to George Bennett in a legal settlement. (Sophisticated investor)
On February 1, 2002 333,333 shares of common stock and 666,667 shares of Preferred Class A stock were issued to Joseph Telese in partial payment on a note related to an acquisition of assets and operations of a business. (Sophisticated investor)
On February 1, 2002 100,000 shares of were issued to Darla Koch for employee retention. (Sophisticated investor)
On February 4, 2002 1,500 shares were issued to Goldy Lowry for employee retention. (Sophisticated investor)
On February 11, 2002 25,000 shares were issued to Douglas Avella and 10,000 shares were issued to Jeffrey Avella in anticipation of a legal settlement; on May 31, 2002 these shares were cancelled. (Sophisticated investor)
On April 9, 2002 200,000 common shares were issued to Paula Police in a conversion in which Michael Pollis cancelled 200,000 shares of Preferred B shares. As part of this transaction, 26,000 common shares issued to Meadows Owens Collier were cancelled. (Sophisticated investor)
On May 1, 2002 250,000 shares were issued to Palmun Associates for consulting services. (Nelson A. Locke, Chairman, provided Palmun 250,000 shares from his personal portfolio to be kept by Palmun as a deposit until future services had been rendered. On October 15, 2002 250,000 shares of Preferred Class A stock was issued to Mr. Locke to reimburse him for his personal shares provided in the transaction.)
On May 1, 2002 100,000 shares were issued to Alan Soloman for investment consulting services. (Sophisticated investor)
On May 20, 2002 200,000 shares of common stock were issued to George Pollis in a conversion in which 200,000 shares of his Preferred Class B shares were cancelled. (Sophisticated investor)
On July 2, 2002 200,000 shares of Preferred Class A shares of Brickell Equity were cancelled as part of a contract re-negotiation. (Sophisticated investor)
On October 15, 2002 250,000 shares of Preferred Class A stock were issued to Nelson A. Locke, Chairman, in reimbursement of 250,000 shares of his personal stock he provided as a deposit to Palmun Associates (See May 1, 2002). (Sophisticated investor)
All of the securities listed in the charts above were issued pursuant to individual subscription agreements provided by each purchaser, or were issued pursuant to a services contract relationship between the shareholder and the Company. Each purchaser has represented that they are sophisticated investors, as documented in their subscription agreement or other documents. All of the individuals listed upon proper request were given access to all documents, financial statements, stockholder records, minute books and all other records of the company in which they desired. These individuals also had the opportunity upon proper request to meet with and ask questions of the officers of the Company.
None of the securities discussed above were registered under the Securities Act of 1933, exemption being claimed in each case pursuant to Regulation D or Section 4(2) thereof. All shares were issued with restrictive legend and stop transfer orders. No general advertising or solicitation was utilized in connection with any such sales. All investors were offered upon proper request access to the Company's books and records and the opportunity to meet with officers of the Company.
ITEM 6.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS: YEAR 2002
Total revenues for the year ended December 31, 2002 were $8,232,953, an increase of $578,985 or 7.6% from prior year revenues of $7,653,968. The primary reason for the overall growth was the additional sales of $1,299,000 derived from the new wholesale division offset by a decrease of approximately $720,000 in retail sales due largely to a continued decline in retail loan origination in the Company's Miami office, and the effect of a reorganization of the Company's Port St. Lucie office.
Total operating expenses for the year ended December 31, 2002 were $9,021,444, a decrease of $336,335 or 3.6% over the prior year operating expenses of $9,357,779. Included in the decrease was an increase in payroll and related expenses of $253,524 due to the increase in commissions related to the increase in sales, a decrease of $351,137 in administrative, processing and occupancy expense due to management achieving certain new efficiencies, and an increase in depreciation of $24,170 due primarily to adjustment to accelerate depreciation on certain assets.
Operating expenses include bad debt expense of $201,761 from write off of a Promissory note receivable established in 1998 of $250,000 net of $48,239 collateral as detailed under Item 3, Legal Proceedings.
Total interest expense was $397,256 for the year ended December 31, 2002, an increase of $241,398 over the prior year expense of $155,858. The increase was primarily due to interest expense of $199,925 in the new wholesale division and interest expense of $37,500 associated with a note executed in May 2002.
Net loss before taxes and extraordinary item for the year ended December 31, 2002 was $1,185,747 which was a $673,922 (36.2%) decrease in loss over the prior year loss before taxes and extraordinary item of $1,859,669. In the prior year there was an extraordinary income item of $989,690 resulting from settlement of debt on debentures; there was no extraordinary item in the year 2002. Adjusted for the extraordinary gain that occurred in 2001, the Company's net loss for 2002 was $1,185,747 compared to $869,979 in 2001.
The reduction in loss in 2002 compared to 2001 is attributed in part to the establishment of the profitable wholesale operation, which was in a start-up mode as of the second half of 2002.
RESULTS OF OPERATIONS: YEAR 2001
Total revenues for the year ended December 31, 2001 increased 32% to $8,643,658 from $6,559,976 for the Year Ended December 31, 2000. Included in the revenues for the year ended December 31, 2001 there was a one-time gain in the amount of $989,690 as a result of the settlement of the debenture lawsuit.
Revenues from loan operations increased by 17% to $7,653,968. This growth in revenues was attributable to the contributions of the forward mortgage aspect of the business whose revenues totaled $7,600,753 in 2001, compared to $6,179,246 in 2000. The reverse mortgage platform decreased in 2001 to $53,215 from $380,730 in 2000 as a result of the restructuring of this business sector. This was discussed in greater detail in the Operations Section of Part One above.
Our forward mortgage origination platform experienced a sales increase in 2001 directly benefiting from demand created by declining interest rates and from our internal focus on better execution. We believe that these results demonstrated our ability to capture greater sales from existing branch offices while continuing to execute our strategy for "organic growth".
During 2001, several aspects of the Company's business were restructured in order to maximize future potential and eliminate duplicative services. Dow Guarantee Mortgage consolidated its entire back office operation into the Jupiter unit. Jupiter modified Dow's lending practices to fit into the Jupiter model. Dow now operates as a branch of Jupiter Mortgage Corporation.
During 2001, we worked to improve our reverse mortgage platform. We signed a contract with a Florida based insurance provider to assist in marketing reverse mortgage products to Florida seniors. During 2001 we trained over 150 of the new senior advisors. Results were not as expected, and the project was reduced in scope during 2002.
Total Expenses for the year ended December 31, 2001 compared to the year ended December 31, 2000 increased 8% to $9,357,779 from $8,651,738. This increase in expenses was primarily due to the additional commission costs associated with the increased revenue production.
Included in the above expenses were AMSE corporate office expenses of $1,997,298. These are from accruals and other operational costs not directly attributable to the Company's loan production, of which $1,081,954 was non- cash. The majority of these expenses were related to the amortization of marketing and advisor contracts that dated back into 2000 and 1999.
During 2000 the Company paid off several outstanding lines of credit, retiring $210,000 in short term debt. The Company executed a $259,000 secured convertible demand promissory note with a third party, which retired the above-mentioned lines of credit and provided the Company with additional working capital. The Company also funded certain types of loans through such third party's mortgage subsidiary. Prior to this filing, the $259,000 note referenced above has been paid off from working capital, and the creditor has returned the collateral to the Company. The third party ceased operations and this affected the Company's ability to recover fees due to the Company from the third party's mortgage subsidiary. The results for the full year of 2001 included a loss of $306,208 related to the third party's apparent breach of contract and the subsequent collapse of their business units. The company has sued to recover as much as possible. The litigation is ongoing.
Operational costs decreased in relationship to revenues produced on a full year. This improvement in expenses was partially attributable to the ongoing consolidation strategy that ultimately resulted in the company combining all its back office and production processes into its Jupiter Mortgage Corporation subsidiary. This strategy was completed in December 2001.
By the end of the 4th quarter 2001 all duplicated functions were eliminated. Certain branch office processing functions were preserved. However, the Company's loan operations, accounting, personnel, and certain marketing functions have been centralized.
Total Other Expenses for the year ended December 31, 2001 compared to the year ended December 31, 2000 increased to $155,859 from $84,934. This increase in expenses was primarily due to interest payments on debt instruments.
LIQUIDITY AND CAPITAL RESOURCES
Management believes that liquidity and capital resources are sufficient to support operations at the present level. On an ongoing basis management reviews options and opportunities which may provide favorable debt restructure, financing for acquisitions, and working capital.
During 2002 cash provided by operating activities was $356,767, an increase of $351,039 from the prior year amount of $5,728. This increase consisted of an increase of $248,351 in operating loss net of non-cash items added back and a net increase of $102,088 resulting from net increases and decreases in operating assets and liabilities. The non-cash items include depreciation and amortization, non-cash gains, and expenses paid with common stock given for services.
Net cash used in investing activities was $134,356 compared to $340,275 in the prior year, a decrease of $205,919. The decrease was due to a decrease of $122,287 in the net of mortgage loans held for sale and warehouse lines of credit, decrease in other assets of $255,850 in 2001, and a decrease in purchase of property and equipment of $72,356 in 2002 compared to 2001.
Net cash used in financing activities was $386,554, an increased use of $678,904 over the prior year in which net cash provided by financing activities was $292,350. The increase in use was due primarily for reduction of lines of credit in 2002 compared to a net increase in 2001.
ITEM 7.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company required by Item 310(a) of Regulation S-B are attached to this Report. Reference is made to page of this Report for an index to the financial statements and financial statement schedules.
ITEM 8.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
MANAGEMENT
The directors and executive officers of the Company are:
NAME AGE POSITION - ---- --- ------- Nelson A. Locke 52 Chairman of the Board, CEO / Director
Michael J. Buono 38 President/COO/Director
Dean J. Girard 43 Director
Cheryl D. Locke 45 Director/ Secretary
Thomas G. Sherman, Esq. 52 Director
Charles M. Kluck 58 Director
Robert F. Kendall 54 Vice President/ Treasurer/ Chief Financial Officer
Nelson A. Locke and Cheryl D. Locke are married.
Our directors serve staggered terms. The terms of Cheryl D. Locke and Dean Girard extend to the 2002 annual meeting of shareholders, the terms of Thomas G. Sherman and Nelson A. Locke extend until the 2003 annual meeting of Shareholders and the terms of Michael J. Buono and Charles M. Kluck extend until the 2004 annual meeting of shareholders.
Nelson A. Locke founded the Company in 1990 and served as its President until September 2001 and Chairman since 1990 and Director since 1990. In 2001 he was appointed to chair the company's Executive Committee. He is the architect of the Company's business model. He is the past President of the Florida Association of Mortgage Brokers-Miami Chapter and the current President-Elect of the Florida Association of Mortgage Brokers, State. He has earned the NAMB's Certified Residential Mortgage Lender designation. In 1997 he was named FAMB's 'Broker of the Year', and in 1998 was awarded the prestigious FAMB 'President's Award' for his public relations efforts on behalf of the Florida Mortgage Brokerage Industry. In 1999, he was elected by his 2,000 FAMB peers to serve on the association's Executive Committee. He is a founding member of the National Reverse Mortgage Lenders Association. Mr. Locke is a Marine Corps veteran (non commissioned officer) and holds a B.A. from California State University. Mr. Locke also completed certain graduate studies in Law at Western State College of Law in San Diego, California.
Cheryl D. Locke has been the Secretary and a member of the Board of Directors since 1998. She joined the Company in 1990 on a part time basis, as a loan officer. By 1994, she had risen to senior loan officer. From 1995 to 1998, she directly supervised all loan production and closing. In January 1998, she was appointed Executive Vice President and elected to the Company's Board of Directors. She served as Executive Vice President until July 2000 when she assumed her current duties as corporate Secretary and Director. During 2002, she continued to serve as corporate secretary and director.
Michael J. Buono was elected to the Board of Directors in 2000. He was elected as corporate Chief Operating Officer in November 2000 and appointed corporate President in September 2001. Mr. Buono was a co-owner and CEO of Jupiter Mortgage since March of 1995. In 1999 he was named the Palm Beach FAMB's Broker of the Year. He serves on the FAMB Board of Directors. He is a member of Mensa. He is Chairman of the corporate Audit Committee. In 2001, he was also appointed to the company's Executive Committee.
Dean J. Girard was elected to the Board of Directors in September 2001. He was the Chief Financial Officer of America's Senior Financial Services from November 2000 through August 2002 and currently is an independent director. Prior to joining America's Senior, he was the Chief Financial Officer for Jupiter Mortgage from August 1999 to November 2000.
Thomas J. Sherman has been an attorney in private practice in Coral Gables, Florida since 1980. He is also President and owner of Union Title Services, Inc., a full service title insurance agency. There are no ownership ties between Union Title and the Company. Mr. Sherman is a graduate of the University of Miami School of Law. Since 1990, Mr. Sherman has served as the Company's general counsel. He became a director in January 1998. He also serves on the Compensation Committee.
Charles M. Kluck has been the President of Dow Guarantee Corp. since its founding in 1985. Dow was acquired by the Company on July 31, 1998. He continues to serve in that capacity. He became a director in July 1998. In May 2000, he was appointed to the Company's Compensation Committee. In 2001, he was also appointed to the company's Executive Committee.
BOARD COMMITTEES
The Board of Directors has established an Audit Committee and a Compensation Committee. The Audit Committee, consisting of Michael Buono, reviews the adequacy of internal controls and results and scope of the audit and other services provided by the Company's independent auditors. The Board is seeking additional members of the Committee. The Compensation Committee, consisting of Thomas Sherman and Charles Kluck, establishes and recommends salaries, incentives and other forms of Compensation for officers and other key employees.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon review of the information furnished to the Company Mr. Sherman was late in filing of Form 4 for 50,000 shares of Preferred A received January 1, 2002 and 72,000 shares of common received on March 19, 2002. Mr. Sherman. promptly filed upon discovery of the error.
ITEM 10.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid to the Company's chief executive officer for the last three completed fiscal years.
NAME AND OTHER ANNUAL PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION ------------------ ---- ------ ----- ------------ Nelson A. Locke 2002 $200,000 -0- -0- Chairman/ CEO 2001 $200,000 -0- -0- 2000 $ 14,653 -0- $213,054
Michael J. Buono 2002 $150,000 -0- -0- President/COO/Director/ 2001 $125,000 -0- -0- CEO-Jupiter Mortgage Corp.2000 $135,500 -0- -0-
NAME AND RESTRICTED SECURITIES OTHER ALL STOCK UNDERLYING LTIP OTHER PRINCIPAL POSITION YEAR AWARDS OPTIONS/SARS PAYOUTS COMPENSATION ------------------ ---- ------ ----- ---------- ------------ Nelson A. Locke 2002 $ -0- -0- -0- $ 1,000 (2) Chairman/CEO 2001 $ -0- -0- -0- 2,842 2000 $ -0- -0- -0- -0-
Michael J. Buono 2002 $ -0- -0- -0- -0- President/COO/ 2001 -0- -0- -0- -0- Director 2000 -0- -0- -0- -0-
(1) During 2002 Mr. Locke received direct salary in the amount of $131,250. As of year end he entered into a settlement agreement in which he received 687,500 shares of stock valued at $68,750 in lieu of unpaid wages of the same amount.
(2) During 2002 life insurance premiums paid for Mr. Locke were in the approximate amount of $1,000.
DIRECTOR COMPENSATION
No material fees were paid for director services.
EXECUTIVE EMPLOYMENT AGREEMENTS
In July 1998 the Company entered into a five (5) year employment agreement with Nelson A. Locke. Originally, Mr. Locke was employed as President and Chairman at an annual salary of $70,000 and such additional compensation as he determines. The agreement provided certain health, life and disability insurance, and autos to Mr. Locke. The agreement provided for a discretionary bonus not to exceed $50,000. The Agreement provided for the establishment of an "Executive Performance Bonus Pool" described below, which Mr. Locke could also share in under certain conditions. In addition, the agreement provided that in any calendar year when the Company's stock price increased by at least 20%, that he shall be eligible for stock options equal to 5% of his total common stock holdings at the end of the calendar year which may be exercised at $1.00 per share and may be paid for by interest-free promissory note. Mr. Locke waived these options for 1998 and 1999 as this event may have been harmful to future business and investor prospects. He did not qualify for this bonus in 2000, 2001 and 2002.
In December 1998 the Company revised Mr. and Mrs. Locke's employment contracts, essentially combining the economic benefits into one document that serves as Mr. Locke's basic contract. Subsequently, in October 1999 the Board of Directors approved a change in Mr. Locke's annual base salary to $200,000. The Locke's health, life, disability insurance, discretionary bonuses, option plan, and auto allowances remained the same. As part of this revision, Mrs. Locke agreed to eliminate her separate salary or basic contract. During 2000 and most of 2001 cash flow circumstances were such that Mr. Locke was unable to collect his cash salary and had to defer most of the cash payments related to his other benefits. In 2000, Mr. Locke settled the matter by accepting additional preferred stock at $0.50 a share, at a time when the stock was trading at less than $0.10. This action benefited the Company. At year end 2001, Mr. Locke was owed an estimated $160,239. Mr. Locke settled this amount for 700,000 shares of common stock valued $0.25 a share. This action also benefited the Company. At year end 2002, Mr. Locke was owed $68,750. Mr. Locke accepted 687,500 shares of common stock at a value of $.10 per share in lieu of payment in cash.
In January 1998 the Company entered into a five-year employment agreement with Cheryl D. Locke. Mrs. Locke was employed as Executive Vice President, Secretary and Director at an annual salary of $50,000. The agreement provided certain health, life and disability insurance, an auto to Mrs. Locke, and a cash bonus of up to $25,000 to be paid at the discretion of the President. She was entitled to commission on loan originations for which she was submitting loan officer. The agreement provided that in any calendar year when the Company's loan origination's increase by at least 20%, that she would be eligible for stock options equal to 5% of her total common stock holdings at the end of the calendar year which may be exercised at $1.00 per share and may be paid for by interest-free promissory note. Mrs. Locke waived these options for 1998, 1999, 2000, 2001, and again in 2002. In January 2000, the cash portions of Mrs. Locke's salary were incorporated into Mr. Locke's contract, consistent with the intent of the changes made to Mr. Locke's contract when it was revised in October of 1999. Subsequently in 2000, 2001, and 2002 Mrs. Locke did not receive any material amount of cash compensation.
In July 1998 the Company's subsidiary, Dow Guarantee Corp., entered into an employment agreement with Charles M. Kluck for a term of five years, under which Mr. Kluck would have been paid an annual salary of $110,000. During 2001 this contract was reduced to $75,000 a year and to date, due to cash flow circumstances, the cash portion has not been paid. The company accrued this liability. At year-end 2002, Mr. Kluck was owed approximately $144,000. Mr. Kluck has accepted 500,000 shares of stock valued at $.10 a share in lieu of cash payment of $50,000 of this liability.
In August of 1999 the Company's subsidiary, Jupiter Mortgage Corp., entered into an employment agreement with Michael J. Buono for a term of five years, under which Mr. Buono will be paid an annual salary of $150,000, subject to annual review and inclusive of certain health, life, and auto benefits. At year-end 2002, Mr. Buono was owed $84,215 for unpaid salaries and reimbursable expenses. Mr. Buono has accepted 842,147 shares of stock valued at $.10 a share in lieu of cash payment of this liability.
STOCK OPTION PLANS
In April 2000 Nelson and Cheryl Locke were issued an option to acquire 300,000 shares of common stock jointly for $.50 per share. See Exhibit 9.0.
On April 12, 2000 the Board of Directors granted options pursuant to two special option plans which have been designated Form A & B. Form A was developed as an anti-dilution full ratchet option plan to protect the Company in the event of any takeover attempt. Format B was developed to recognize certain shareholders who had supported the Company with cash and/or significant personal efforts during the prior twenty-four months.
Any shares issued under this option agreement will be deemed "restricted shares" under the Act, and the public sale thereof even after the expiration of the lock up period absent registration of such securities under the Act may only be made in compliance with Rule 144 promulgated under the Act. The shares will bear an appropriate restrictive legend reflecting the foregoing. The lock up period is for 24 months.
Format "A" is to be used in relation to any options exercised by Directors and Officers and Format "B" relates to all of the other optionees. All options are exercisable for 50 cents per share, which was the closing price of the stock as of April 18, 2000.
The following options were granted as a result of the action taken by the Board on April 12, 2000. Each option expires on April 12, 2003. However, certain of these options may be extended at the discretion of the company's Executive Committee, where the options relate to financing agreements or were given in lieu of wages or for services that have been performed.
Format A Name # of Options Granted - ---- --------------------
Locke, Cheryl and Nelson 300,000 Shelley, Michael 75,000 Sherman, Thomas 75,000 Kluck, Charles 75,000 Kluck, Linda 75,000 Buono, Michael 50,000 Anderson, Dee 25,000 Hetzel, Lori 15,000 Girard, Dean 10,000 -------- Total 700,000
Format B Name # of Options Granted - ---- -------------------- Brickell Equity Group 200,000 Palmun Associates 150,000 Rosen Kenneth 25,000 Kahn, Mark 20,000 Kahn, A 10,000 Hoffberger, Robert 30,000 Aurelia Partners 20,000 Schnelder Trust 20,000 Biondo, Jane 10,000 Donahue, Edwin 15,000 -------- Total 500,000
In addition, by accepting these options, the optionees agreed to grant voting rights on the underlying shares to the Company. This assignment of voting rights expires upon arm's length sale of the underlying shares into the market. None of these options have been exercised as of the date of this prospectus.
EXECUTIVE PERFORMANCE BONUS POOL
The Company's plan provides that ten percent (10%) of the Company's pre-tax net income for 1998 through 2002 in excess of the pre-tax net income for December 31, 1997 shall be contributed to an annual bonus pool for the benefit of the key management employees of the Company. The allocation of any bonus is to be made by the Compensation Committee.
No bonus was allocated for 1998, 1999, 2000, 2001 or 2002.
INCENTIVE STOCK OPTION PLAN
The Company's Board of Directors and shareholders have adopted two stock option plans. Pursuant to the Incentive Stock Option Plan (the "ISO Plan"), options to acquire a maximum of 2,000,000 shares, but not more than eight percent (8%) of the total authorized shares of the Company, may be granted to directors, officers, employees, consultants and other independent contractors and persons who performed services relating to the Company, including wholly or partially owned subsidiaries.
The plan is administered by the Compensation Committee consisting of two non-employee directors or in the absence of such a committee, the Board of Directors.
Pursuant to the ISO Plan, the Company may grant Incentive Stock Options as defined in ss.422(b) of the Internal Revenue Code of 1986 and non-qualified stock options not intended to qualify under such section. The price at which the Company's common stock may be purchased upon exercise of Incentive Stock Options granted under the Plan will be required to be at least equal to the fair market value of the common stock on the date of grant. Non-qualified stock options may be at any price designated by the Committee on the date of grant. Options granted under the Plan may have maximum terms of not more than ten (10) Years and are not transferable except by will or the laws of descent and distribution. No Incentive Stock Options under the Plan may be granted to an individual owning more than ten percent (10%) of the total combined voting power of all classes of stock issued by the Company unless the purchase price of the common stock under such option is at least one hundred ten percent (110%) of the Fair Market Value of the shares issuable on exercise of the option at the date of grant and such option is not exercisable more than five years from the date of grant.
Generally, options granted under the Plan terminate upon the grantee's employment or affiliation with the Company, but the Committee may authorize an expiration date of up to ninety days following such termination. If termination was due to death or disability, the options expire one year after such termination or the termination date set forth in the option, whichever is earlier. If termination is due to retirement the option expires ninety days after termination or the termination date set forth in the option, whichever is earlier.
If the Change of Control takes place, the Board may vote to immediately terminate all outstanding options or may vote to accelerate the expiration of options to the tenth day after the effective date of the Change of Control. If the Board votes to immediately terminate the options, it shall make a cash payment to the grantees equal to the difference between the exercise price and the Fair Market Value of the shares that would have been subject to the terminated option on the date of the Change of Control. A Change of Control of the Company is generally deemed to occur when any person becomes the beneficial owner of or acquires voting control with respect forty percent (40%) or more of the total voting shares of the Company, the Company is merged into any other company, or substantially all of its assets are acquired by another company, or three or more directors nominated by the Board to serve as a director, each having agreed to serve in such capacity, failed to be elected in a contested election of directors.
Incentive Stock Options granted under the Plan are subject to the restriction of the aggregate Fair Market Value as of the date of grant of options which first become exercisable in any calendar year cannot exceed $100,000.
The Plan provides for appropriate adjustments in the number and type of shares covered by the Plan and options granted thereunder in the event of any reorganization, merger, recapitalization or certain other transactions involving the Company.
Until the closing of an underwritten public offering by the Company, pursuant to a registration statement filed and declared effective under the Securities Act of 1933 covering offer and sale of the Company's common stock for the account of the Company, the Company has the right of first refusal to acquire any shares which were acquired pursuant to the exercise of options under the Plan at the Fair Market Value on the date of the shareholder's notice to the Company and the Company shall have the right to repurchase any option shares following holder's termination of service or affiliation with the Company for any reason at the original exercise price of the option.
No options have been issued under this plan.
NON-QUALIFIED STOCK OPTION PLAN.
Pursuant to the Non-Qualified Stock Option Plan (the "Non-ISO Plan"), options to acquire a maximum of two percent (2%) of the total authorized shares of the Company may be granted to any person who performed services for the Company and its subsidiaries.
Non-qualified stock options may be at any price designated by the Committee on the date of grant. Options granted under the Plan may have maximum terms of not more than ten (10) years and are not transferable except by will or the laws of descent in distribution.
Generally, options granted under the Plan terminate thirty days after termination of the grantee's employment or affiliation with the Company. If termination was due to death or disability, the options expire one year after such termination or the termination date set forth in the option, whichever is earlier.
Any conditions or restrictions on exercise lapse on a Change of Control unless otherwise set forth in the Option Agreement.
The Plan is administered by a Stock Option Committee consisting of two or more non-employee directors or in the absence of such a committee, the Board of Directors.
The Plan provides for appropriate adjustments in the number and type of shares covered by the Plan and options granted there under in the event of any reorganization, merger, re-capitalization or certain other transactions involving the Company.
Until the closing of an underwritten public offering by the Company, pursuant to a registration, filed and declared effective under the Securities Act of 1933 covering offer and sale of the Company's common stock for the account of the Company, the Company has the right of first refusal to acquire any shares which were acquired pursuant to the exercise of options under the Plan. At the Fair Market Value on the date of the shareholder's notice to the Company and the Company shall have the right to repurchase any option shares following holder's termination of service or affiliation with the Company for any reason at the original exercise price of the option.
No options have been issued under this plan.
NON-PLAN STOCK INCENTIVES.
In 1998, the Company issued 74,400 shares of its common stock to employees as incentive compensation. These shares vest at three years. There is no prorated vesting schedule. During 2001, 2000 and 1999 we issued an additional 377,350, 12,600 and 151,300 shares respectively to employees as incentive compensation. In this number Dean Girard was issued 50,000 shares in 2001 and Michael Buono was issued 300,000 shares.
ITEM 11.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.AND RELATED STOCKHOLDER MATTERS
DESCRIPTION OF SECURITIES
The following table sets forth, as of March 31, 2003, the beneficial Ownership of the Company's 23,912,934 outstanding shares of Common Stock by (1) the only persons who own of record or are known to own, beneficially, more than 5% of the Company's Common Stock, all of whom can be contacted at 1070 E. Indiantown Road, Suite 410, Jupiter, Florida 33411; (2) each director and executive officer of the Company; and (3) all directors and officers as a group.
NUMBER OF NAME COMMON SHARES PERCENT(1) - ---- ------------- ---------------- Nelson A. Locke(2)(4) 4,279,432 17.9%
Cheryl D. Locke(2)(4) 4,279,434 17.9%
Charles M. Kluck(3)(4) 2,823,895 11.8%
Michael J. Buono(4) 2,250,679 9.4%
Thomas G. Sherman, Esq.(4) 307,000 1.3%
Dean J. Girard (4) 138,408 0.6%
Robert F. Kendall - -
All officers and directors as a group(7 persons) 9,799,414 41.0% - ---------- (1) Based upon 23,912,934 shares outstanding as of March 31, 2003 and additional shares which may be acquired pursuant to options and conversion of preferred stock.
(2) Nelson A. Locke and Cheryl D. Locke own such shares as joint tenants.
(3) Includes 61,776 owned by his sister, Linda Kluck.
(4) Includes options to acquire shares under Form A Stock Option Plan as follows: Cheryl and Nelson Locke 300,000 shares, Charles Kluck 75,000 shares, Michael Buono 50,000 shares, Thomas Sherman 75,000 shares Dean Girard 10,000 shares.
(5) Includes common stock which may be issued on conversion of Convertible Preferred shares as follows: Cheryl and Nelson Locke 2,026,108 shares, Charles Kluck 858,895 shares, Michael Buono 1,016,500.shares.
The following table sets forth, as of March 31, 2003, the beneficial Ownership of the Company's 5,701,336 outstanding shares of Preferred Stock by (1) the only persons who own of record or are known to own, beneficially, more than 5% of the Company's preferred stock, all of whom can be contacted at 1070 E. Indiantown Road, Suite 410, Jupiter, Florida 33411; (2) each director and executive officer of the Company; and (3) all directors and officers as a group.
NUMBER OF NAME PREFERRED SHARES PERCENT(1) - ---- ------------- ---------------- Nelson A. Locke(2) 2,026,108 35.5%
Cheryl D. Locke(2) 2,026,108 35.5%
Charles M. Kluck(3) 858,895 15.1%
Michael Buono 1,016,500 17.8%
Thomas G. Sherman, Esq 50,000 0.9%
Dean J. Girard -0- -0-
Robert F. Kendall -0- -0-
All officers and directors as a group (6 persons) 3,951,503 69.3% - ---------- (1) Based upon 5,701,336 shares outstanding as of March 31, 2003.
(2) Nelson A. Locke and Cheryl D. Locke own such shares as joint tenants.
(3) Includes 138,224 owned by his sister, Linda Kluck. Restricted Stock Awards
EQUITY COMPENSATION PLANS
During 2001, a total of 377,350 restricted shares of the Company's common stock were granted to certain employees with a market value of $377,350. There were no such issuances during 2002. These amounts were recorded as unearned compensation, restricted stock and are shown as a separate component of stockholder's equity. Unearned compensation is being amortized to expense over the three-year vesting period and, net of forfeitures, amounted to $106,907 in 2001. In 2002 the restricted balance was adjusted for forfeitures and no additional amount was amortized.
Stock Option Plan
On March 15, 1999, the shareholders of the Company approved the adoption of a stock option plan. The plan calls for a maximum of 2,000,000 incentive stock options and 500,000 non-qualified stock options to be issued, at the discretion of the Board of Directors, over the next ten years.
Terms of the options, when issued, are as follows: (a) for non-qualified options, the term of the option may exceed ten years, the options may be granted to any eligible person with the remaining terms to be determined by the designated Board Committee; and (b) for incentive options, the term of the option may not exceed ten years, the exercise price may not be less than the fair market value of the optioned share on the date of grant, the option may contain vesting provisions, and the option may contain other terms to be determined by the designated Board Committee. When options are granted under this plan, the company will account for such options under SFAS No. 123 which requires entities that account for awards of stock-based compensation to employees in accordance with APB 25 to present pro forma disclosures of results of operations and earnings per share. This pro forma disclosure presents the results of operations as if compensation cost was measured at the date of grant based on the fair value of the award. The fair value for options will be estimated, at the date of grant, using a Black-Scholes option- pricing model. The Black-Scholes option pricing model uses the following weighted-average assumptions, (a) a risk-free interest rate, (b) a dividend yield, (c) a volatility factor of the expected market price of the Company's common stock and (d) the weighted-average expected life of the options. The Black Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility.
Non-Qualified Stock Option Plan
Pursuant to the Non-Qualified Plan (the "Non-ISO Plan"), options to acquire a maximum of 500,000 shares, but not more than two percent (2%) of the total authorized shares of the Company may be granted to any person who performed services for the Company and its subsidiaries. Non-qualified stock options may be at any price designated by the Committee on the date of grant. Options granted under the Plan may have maximum terms of not more than ten (10) years and are not transferable except by will or the laws of descent in distribution.
Directors. The Plan provides for appropriate adjustments in the number and type of shares covered by the Plan and options granted thereunder in the event of any reorganization, merger, recapitalization or certain other transactions involving the Company.
Generally, options granted under the Plan terminate thirty (30) days after termination of the grantee's employment or affiliation with the Company. If termination was due to death or disability, the options expire one (1) year after such termination or the termination date set forth in the option, whichever is earlier. Any conditions or restrictions on exercise lapse on a Change of Control unless otherwise set forth in the Option Agreement. The Plan is administered by a Stock Option Committee consisting of two or more non-employee directors or in the absence of such a committee, the Board of
Until the closing of an underwritten public offering by the Company pursuant to a registration, filed and declared effective under the Securities Act of 1933 covering the offer and sale of the Company's common stock for the account of the Company, the Company has the right of first refusal to acquire any shares which were required pursuant to the exercise of options to the Company and the Company shall have the right to repurchase any option shares following holder's termination of services or affiliation with the Company for any reason at the original exercise price of the option.
Other Option Plans
In April 2000, the Board of Directors granted options pursuant to two special option plans which have been designated Form A & B. Form A was developed as an anti-dilution option plan to protect the Company in the event of any takeover attempt. Format B was developed to recognize certain shareholders who had supported the Company with cash and/or significant personal efforts during the past two years.
All shares issued pursuant to these two formats will be restricted shares. The restrictions call for volume limitations that state that a person or persons whose shares are aggregated may not sell within any three month period a number of shares which exceeds the greater of 1% of the then outstanding shares of the Company's Common Stock or the average weekly trading value during the four calendar weeks prior to such sale.
The Board of Directors authorized the issuance of Form A options to acquire 700,000 shares and Form B options to acquire 500,000 shares at $.50 per share. All options, regardless of format, will convert into restricted shares under Rule 144. In addition, by accepting these options, the optionees agree to grant voting rights on the underlying shares to the Company. This assignment of voting rights expires upon arm's length sale of underlying shares into the market.
The following table summarizes the Company's stock option activity:
Exercise Shares Price
Outstanding at beginning of period - -
Granted in 2000 Format A 700,000 $ .50 Format B 500,000 $ .50 Granted in 2001 and 2002 - -
Exercised - -
Expired - - ________ ___ Outstanding and exercisable at end of period 1,200,000 $ .50
EQUITY COMPENSATION PLAN INFORMATION
See notes below (a) (b) (c)
PLAN CATEGORY Equity Compensation 2,000,000 Priced at 2,000,000 Plans approved time of plus 2% of By Security Holders grant outstanding shares
Equity Compensation Plans Not approved By Security Holders 1,200,000 $0.50 share None.
Total 3,200,000 2,000,000
(a) Number of securities to be issued upon exercise of outstanding options, warrants, and rights (b) Weighted average exercise price of outstanding options, warrants and rights (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
ITEM 12.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During 2000, with full Board authorization, the Company's CEO, Nelson Locke exchanged 1,000,000 shares of common stock (par value $1,000) for 1,000,000 shares of preferred stock A (par value $1,000). In addition he exchanged $213,054 of unpaid deferred salary and other unpaid expense reimbursements he made to the Company for 426,108 shares of preferred stock. In April 2000, the Board of Directors authorized the issuance of an option for the CEO Nelson Locke to acquire 300,000 shares of common stock for $.50 per share under the same terms and conditions as the Form A stock option plan. During 2002 the Company issued 704,856 shares of common stock in lieu of cash payment for a loan from officer of $71,249.from 2001 and 687,500 shares in lieu of cash payment for deferred compensation. The Company issued 250,000 shares of Preferred Class A shares to reimburse Mr. Locke for 250,000 shares of common stock of his personal stock he contributed in a corporate transaction.
During 2002 the Company's president, Michael Buono, received 200,000 shares of common stock for employee retention and accepted 842,147 shares of common stock in lieu of cash payment of $84,215 in cash for salary and reimbursable expenses.
During the year a director, Charles Kluck, received 200,000 shares of common stock for employee retention and accepted 500,000 shares of common stock in lieu of cash payment for salary of $50,000. His sister, Linda Kluck, accepted 340,000 shares in lieu of cash payment for salary of $34,000.
During the year a director, Thomas Sherman, received 72,000 shares of common stock for employee retention and 50,000 shares of preferred stock.
During the year Dean Girard received 60,000 shares of common stock for employee retention.
During the year an officer of Jupiter Mortgage Corporation, Deanne Anderson, Received 120,000 shares of common stock for employee retention and accepted 640,000 shares of common stock in lieu of cash payment for salary of $64,000.
During the year an officer of Jupiter Mortgage Corporation, Lori Hetzel, received 60,000 shares of common stock for employee retention. PART IV
ITEM 13.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
The following Exhibits are incorporated by reference to the Exhibits of the same number filed with the Company's Registration Statement on Form 10-SB filed April 16, 1999:
EXHIBIT NO. DESCRIPTION ------------ ----------- 2(a) Articles of Incorporation of the Registrant
2(b) Articles of Amendment to Articles of Incorporation
2(c) By-Laws of the Registrant
2(d) Incentive Stock Option Plan
2(e) Non-Qualified Stock Option Plan
6(a) Employment Agreement as of January 2, 1998 between Registrant and Nelson A. Locke
6(b) Employment Agreement as of January 2, 1998 between Registrant and Cheryl D. Locke
6(c) Employment Agreement as of July 31, 1998 between Registrant and Dow Guarantee Corp. and Charles M.Kluck
6(d) Employment Agreement as of July 31, 1998 between Registrant and Dow Guarantee Corp. and Linda C. Kluck
6(e) Employment Agreement as of August 10, 1998 between Registrant and Vistra Growth Partners, Inc.
6(f) Agreement for purchase of Dow Guarantee Corp.
6(g) Agreement for purchase of Capital Funding of South Florida, Inc.
6(h) Consulting Agreement with Vistra Growth Partners, Inc.
22 Subsidiaries
The following Exhibits are incorporated by reference to Exhibit 10.1 filed on Form 8-K on September 11, 1999:
6(i) Agreement for purchase of Jupiter Mortgage Corporation
The following Exhibits are incorporated by reference to the Exhibits of the same number filed with the Company's Form SB-2 filed on November 16, 2000:
9.0 Other Option Plan*
10.0 Consulting Agreement dated September 20, 2000 with 21st Equity Partners L.L.C.*
The following Exhibits are incorporated by reference to the Exhibits of the same number filed with the Company's Form SB-2A filed on December 15, 2000:
10.1 Financial Advisory Agreement Consulting Agreement dated February 2, 2000 with Capital Link, L.L.C.
10.2 Consulting Agreement dated January 1, 2000 with Brickell Equity Group, Inc.
10.3 Investor Relations Agreement dated January 7, 2000 with Charterbridge Financial Group
10.4 Investor Banking Agreement dated January 7, 2000 with Charterbridge
10.5 Consulting Agreement with Speight and Associates, Inc.
The following Exhibits are incorporated by reference to the Exhibits of the same number filed with the Company's Form SB-2 filed on December 21, 2001:
10.7 Equity Agreement with JJ&T L.L.C.
10.8 Warrant Agreement with First Montauk Securities
10.9 Agreement with The Investor Online
The following Exhibit is incorporated by reference to the Exhibit of the same number filed with the Company's Form 8-K filed on February 12, 2002:
15.0 Dupont Mortgage Group, Inc. Acquisition Agreement
The following Exhibits are filed herewith:
21 Subsidiaries
99.1 Certification of CEO
99.2 Certification of CFO
(b) Reports on Form 8-K:
One report on Form 8-K was filed during the last quarter for the period covered by this report. This was filed to disclose a radio interview with the Chairman of the Board discussing the future of the company.
ITEM 14
ITEM 14 CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Within 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 Company's Chief Financial Officer, of the effectiveness of the design and operation of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, the Company's disclosure controls and procedures were effective.
There have been no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation.
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets 2-3
Consolidated Statements of Operations 4
Consolidated Statements of Changes in Stockholders' Equity 5-6
Consolidated Statements of Cash Flows 7-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9-22
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of America's Senior Financial Services, Inc.
We have audited the accompanying consolidated balance sheets of America's Senior Financial Services, Inc. and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of America's Senior Financial Services, Inc. and subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ HOLYFIELD AND THOMAS, LLC
HOLYFIELD AND THOMAS, LLC
West Palm Beach, Florida March 31, 2002)
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2002 AND 2001 ASSETS 2002 2001 CURRENT ASSETS: Cash and cash equivalents $ 256,738 $ 420,881 Cash, restricted 1,050,898 895,525 Brokerage fees receivable 516,901 144,877 Employee loans 6,000 16,837 Mortgage loans held for sale 13,260,174 2,991,322 Prepaid expenses 78,449 324,483
TOTAL CURRENT ASSETS 15,169,160 4,793,925
PROPERTY AND EQUIPMENT, net 253,992 359,538
OTHER ASSETS Goodwill, net 4,836,911 4,836,911 Notes receivable - 250,000 Other assets 109,127 70,216
TOTAL OTHER ASSETS 4,946,038 5,157,127
TOTAL ASSETS $20,369,190 $10,310,590
LIABILITIES
CURRENT LIABILITIES: Current portion of capital lease obligations $ 5,000 $ 2,734 Lines of credit 101,618 421,476 Warehouse lines of credit 13,104,392 2,966,795 Accounts payable 491,935 593,457 Accrued expenses 1,890,812 1,470,083 Escrow payable 1,050,898 895,525
TOTAL CURRENT LIABILITIES 16,644,655 6,350,070
CAPITAL LEASE OBLIGATIONS, less current portion 6,000 -
TOTAL LIABILITIES $16,650,655 $ 6,350,070
(Continued)
See notes to consolidated financial statements.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS, continued DECEMBER 31, 2002 AND 2001
(Continued)
STOCKHOLDERS' EQUITY:
Preferred stock: Series A Convertible, $0.001 par value; 8,100,000 shares authorized, 5,334,670 and 4,468,003 shares issued and out- standing in 2002 and 2001, respectively 5,335 4,468 Series B Convertible, $0.001 par value; 1,000,000 shares authorized, 366,666 and 566,666 shares issued and outstanding in 2002 and 2001, respectively 366 567 Series C Convertible, $0.001 par value; 900,000 shares authorized, none issued - -
Common stock, $0.001 par value; 100,000,000 shares authorized, 23,912,934 and 17,006,150 shares issued and outstanding in 2002 and 2001, respectively 23,913 17,006
Additional paid in capital 16,181,016 15,567,887
Retained earnings (deficit) (12,451,706) (11,265,959)
Unearned compensation, restricted stock ( 40,389) ( 363,449)
TOTAL STOCKHOLDERS' EQUITY 3,718,535 3,960,520
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 20,369,190 $ 10,310,590
See notes to consolidated financial statements.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002 2001
REVENUES $ 8,232,953 $7,653,968
EXPENSES: Payroll and related expense 6,021,744 5,768,220 Administrative, processing, and occupancy 2,891,053 3,247,190 Depreciation 108,647 84,477 Goodwill amortization - 257,892
TOTAL EXPENSES 9,021,444 9,357,779
LOSS FROM OPERATIONS ( 788,491) (1,703,811)
OTHER
Interest expense 397,256 155,858
Total other, net 397,256 155,858
LOSS BEFORE EXTRAORDINARY ITEM AND INCOME TAXES (1,185,747) (1,859,669)
EXTRAORDINARY ITEM Gain on settlement of Debentures - 989,690 (No applicable income tax)
PROVISION FOR INCOME TAXES - -
NET LOSS (1,185,747) (869,979)
RETAINED EARNINGS, BEGINNING OF THE YEAR (11,265,959) (10,395,980)
RETAINED EARNINGS, END OF THE YEAR $(12,451,706)$(11,265,959)
LOSS PER COMMON SHARE: Basic $ (.062) $ (.069)
Diluted $ (.062) $ (.069)
Weighted average common shares outstanding 18,985,228 12,568,000
See notes to consolidated financial statements.
AMERICA'S SENIOR FINANCIAL SERVICES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2001
PREFERRED COMMON PREFERRED COMMON STOCK STOCK STOCK AT STOCK AT # OF SHARES # OF SHARES PAR VALUE PAR VALUE
STOCKHOLDERS' EQUITY, January 1, 2001 4,118,003 9,406,326 $ 4,118 $ 9,406
Stock issued pursuant to debenture conversions 1,375,000 1,375 Issuances of preferred stock for cash 166,666 167 Stock issued for services 100,000 4,249,040 100 4,249 Restricted stock issued to employees, net of stock earned 650,000 1,975,784 650 1,976 Net loss for the year ended December 31, 2001
STOCKHOLDERS' EQUITY, December 30, 2001 5,034,669 17,006,150 $ 5,035 $ 17,006
ADDITIONAL TOTAL PAID-IN RESTRICTED STOCKHOLDER CAPITAL STOCK DEFICIT EQUITY
STOCKHOLDERS' EQUITY, January 1, 2001 $14,086,285 $(93,006) $(10,395,979) $3,610,824
Stock issued pursuant to debenture conversions 170,500 171,875 Issuances of preferred stock for cash 29,833 30,000 Stock issued for services 832,457 836,806 Restricted stock issued to employees, net of stock earned 448,812 (270,443) 180,995 Net loss for the year ended December 31, 2001 (869,980) (869,980)
STOCKHOLDERS' EQUITY, December 31, 2001 $15,567,887 $(363,449) $(11,265,959) $3,960,520
See notes to consolidated financial statements.
AMERICA'S SENIOR FINANCIAL SERVICES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2002
PREFERRED COMMON PREFERRED COMMON STOCK STOCK STOCK AT STOCK AT # OF SHARES # OF SHARES PAR VALUE PAR VALUE STOCKHOLDERS' EQUITY, January 1, 2002 5,034,669 17,006,150 $5,035 $17,006
Issuances of common stock for cash 300,000 300 Stock issued for services 150,000 5,340,270 150 5,341 Stock issued in payment of note for acquisition 666,667 333,333 666 334 Restricted stock cancellation of terminated employees (171,675) ( 172) Stock issued in settlement of officer loans 704,856 704 Stock issued as deposit on toward future services 250,000 250 Conversion of common stock to preferred stock (400,000) 400,000 (400) 400 Treasury stock purchase Net loss for the year ended December 31, 2002 STOCKHOLDERS' EQUITY, December 31, 2002 5,701,336 23,912,934 $5,701 $23,913
ADDITIONAL TOTAL PAID-IN RESTRICTED STOCKHOLDER CAPITAL STOCK DEFICIT EQUITY STOCKHOLDERS' EQUITY, January 1, 2002 $15,567,887 $(363,449) $(11,265,959) $3,960,520
Issuances of common stock for cash 29,700 30,000 Stock issued for services 694,514 700,005 Stock issued in payment of note for acquisition 120,000 121,000 Restricted stock cancellation of terminated employees (322,888) 323,060 - Stock issued in settlement of officer loans 71,249 71,953 Stock issued as deposit on toward future services 22,250 22,500 Conversion of common stock to preferred stock Treasury stock purchased (1,696) (1,696) Net loss for the year ended December 31, 2002 (1,185,747) (1,185,747) STOCKHOLDERS' EQUITY, December 31, 2002 $16,181,016 $( 40,389) $(12,451,706) $3,718,535
See notes to consolidated financial statements.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
CASH FLOWS FROM OPERATING ACTIVITIES 2002 2001
Net loss $(1,185,747) $ ( 869,979)
Adjustments to reconcile net loss to net cash Provided by operating activities: Depreciation and amortization 108,647 342,369 Gain on forgiveness of debt (121,053) - Extraordinary item settlement of debentures - (986,690) Common stock issued for services 700,005 1,017,801 Write off of note receivable 250,000 - Changes in operating assets and liabilities (Increase) decrease in operating assets: Brokerage fee receivable (372,024) 145,014 Employee loans 10,837 (15,537) Prepaid expenses 246,034 22,078 Other assets (16,411) 3,369 Increase (decrease) in operating liabilities: Accounts payable and accrued liabilities 736,479 347,303
NET CASH PROVIDED BY OPERATING ACTIVITIES 356,767 5,728
CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (3,101) (75,457) Changes in other assets - (255,850) Decrease in net mortgage loans held for sale over warehouse lines of credit (131,255) ( 8,968)
NET CASH USED IN INVESTING ACTIVITIES (134,356) (340,275)
CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of stock, net 30,000 30,000 Payments on note, acquisition ( 95,000) - Net borrowings (payments) under lines of credit (319,858) 272,385 Payments on long-term capital lease obligations - (32,600) Other - 22,565 Purchase of treasury stock ( 1,696) -
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES(386,554) 292,350
NET DECREASE IN CASH AND CASH EQUIVALENTS (164,143) ( 42,197)
CASH AND CASH EQUIVALENTS, beginning of period 420,881 463,078
CASH AND CASH EQUIVALENTS, end of period $ 256,738 $ 420,881
(Continued)
See notes to consolidated financial statements.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
(Continued)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid in cash during the period $ 386,943 $ 147,338 Income taxes paid in cash during the period none none
NON-CASH INVESTING AND FINANCING ACTIVITIES: Conversion of debentures payable for stock - $1,136,000 Issuance of restricted stock to employees - $377,350 Issuance of stock in settlement of officer loans $ 71,953 - Issuance of common stock and preferred stock in payment on note for acquisition $121,000 - Issuance of preferred stock as deposit $ 22,500 -
See notes to consolidated financial statements.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
America's Senior Financial Services, Inc. ("AMSE") was incorporated on February 26, 1990. On July 31, 1998, AMSE acquired Dow Guarantee Corp. ("DOW"), on January 29, 1999, AMSE acquired Capital Funding of South Florida, Inc. ("Capital Funding") and on August 18, 1999, AMSE acquired Jupiter Mortgage Corp. ("Jupiter"). On September 30, 1999, Capital Funding and Jupiter were merged and Jupiter was the surviving corporation. On December 31, 2001, Jupiter acquired the assets of Dupont Mortgage Group, Inc. (Dupont). AMSE and its subsidiaries are collectively referred to as "the Company". All significant intercompany balances and transactions are eliminated in consolidation.
The Company is engaged in originating, processing, and concurrently funding mortgage loans. In addition to providing traditional (or forward) mortgage loan services, the Company also arranges reverse mortgages specifically developed to serve the special needs of the senior citizen community, and has generated a substantial portion of the reverse mortgages originated in Florida. The Company sells its closed loans to investors for resale into the secondary market.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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.
Revenue Recognition and Credit Risks
The Company, as a licensed mortgage company, derives its revenues primarily from mortgage application fees paid by potential borrowers, by brokerage and processing fees, and service release premiums payable by the borrower and others at the time of closing. The brokerage and processing fees are recognized as revenue at the time the loans are closed.
The Company operates in the mortgage banking industry; therefore, it is highly dependent on the status of the economy and interest rates.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Property and Equipment
Property and equipment is recorded at cost and depreciated using the straight- line method over the estimated useful lives of the assets, typically seven years. Expenditures for routine maintenance and repairs are charged to expense as incurred.
Intangible Assets
Until an accounting change which the Company adopted as of January 1, 2002, the excess of investment cost over the fair value of net assets acquired (goodwill) was amortized using the straight-line method over a period of 20 years. As detailed below under "Recent Accounting Changes," there was no amortization expense taken in 2002. Amortization of goodwill for the year ended December 31, 2001 was approximately $257,892. The valuation of goodwill is reviewed on an ongoing basis and adjusted accordingly.
Advertising
The costs of advertising, promotion and marketing programs are generally charges to operations in the year incurred. Total advertising expense was approximately $38,812 and $26,576 for the years ended December 31, 2002 and 2001, respectively.
Income Taxes
The Company accounts for income taxes in accordance with the Statement of Financial Accounting Standards No. 109 (SFASS No. 109), "Accounting for Income Taxes." Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences, operating loss carryforwards, and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. State minimum taxes are expensed as paid.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Net Loss Per Common Share
The Company has adopted SFAS No. 128, "Earnings Per Share." SFAS 128 requires companies with complex capital structures or common stock equivalents to present both basic and diluted earnings per share ("EPS") on the face of the income statement. Basic EPS is calculated as the income or loss available to stockholders divided by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated using the "if converted" method for convertible securities and the treasury stock method for options and warrants as previously prescribed by Accounting Principles Board Opinion No. 15, "Earnings Per Share." The effect of common shares issuable under the terms of the Company's preferred stock outstanding are excluded from the calculation of diluted EPS since the effect is antidilutive. The adoption of SFAS 128 did not have an impact on the Company's reported results.
Stock Based Compensation
In October 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 encourages, but does not require, companies to record compensation plans at fair value. The Company has chosen, in accordance with the provision of SFAS No. 123, to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued Employees" (APB 25) for its stock plans. Under APB 25, if the exercise price of the Company's stock options is less than the market price of the underlying stock on the date of grant, the Company must recognize compensation expense. SFAS No. 123 will be adopted for disclosure only and will not impact the Company's financial position, annual operating results, or cash flows.
For transactions with other than employees in which services were performed in exchange for stock, the transactions were recorded on the basis of the fair value of the services received or the fair value of the issued equity instrument, whichever was more readily measurable.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments purchased with an original maturity of three months or less. The Company occasionally maintains cash balances in financial institutions in excess of the federally insured limits.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Fair Value of Financial Instruments
Cash, receivables, mortgage loans held for sale, accounts payable and accrued expenses are reflected in the financial statements at fair value due to the short-term nature of these instruments. The fair value of the Company's obligations under credit agreements, as disclosed in Note 3, are the same as the recorded amounts because the rates and terms approximate current market.
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS 141, "Business Combinations." SFAS 141 supersedes APB 16, "Business Combinations," and SFAS 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." SFAS 141 requires the purchase method of accounting for all business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. AMSE does not expect the adoption of SFAS 141 to have a material effect on its financial condition or results of operations.
In July 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible Assets." SFAS 142 supersedes APB 17, "Intangible Assets," and requires the discontinuance of goodwill amortization. In addition, SFAS 142 includes provisions regarding the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the testing for impairment of existing goodwill and other intangibles. SFAS 142 is required to be applied for fiscal years beginning after December 15, 2001, with certain early adoption permitted. AMSE adopted SFAS 142 as of January 1, 2002 and does not expect the adoption to have a material effect on its financial condition or results of operations. The Company expects that a substantial amount of its intangible assets will no longer be amortized.
In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which supersedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS 144 addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. However, SFAS 144 retains the fundamental provisions of SFAS 121 for: 1) recognition and measurement of the impairment of long-lived assets to be held and used; and 2) measurement of long-lived assets to be disposed of by sale. SFAS 144 is effective for fiscal years beginning after December 15, 2001. AMSE adopted SFAS 144 in 2002 and that adoption has not had material impact on its consolidated results of operations and financial position.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Statement of Comprehensive Income
A statement of comprehensive income has not been included, per SFAS No. 130, "Reporting Comprehensive Income," as the Company has no items of other comprehensive income.
Segment Information
The Company adopted SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," effective January 1, 1999. SFAS No. 131 establishes standards for the way that public companies report selected information about operating segments in annual and interim financial reports to shareholders. It also establishes standards for related disclosers about an enterprise's business segments, products, services, geographic areas and major customers. The Company operates its business as a single segment. As a result, no additional disclosure was required.
Reclassification
Certain 2001 amounts have been reclassified to conform with 2002 classifications. Such classifications had no effect on net income.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
2002 2001
Office equipment $ 397,547 $ 394,446 Furniture and fixtures 260,787 260,787 Leasehold improvements 52,890 52,890 Vehicles - 47,098
Total cost 711,224 755,221
Less accumulated depreciation (457,232) (395,683)
Property and equipment, net $ 253,992 $ 359,538
Depreciation expense for the years ended December 31, 2002 and 2001 was approximately $108,647 and $84,477, respectively.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
3. CREDIT AGREEMENTS
Lines of Credit
The Company maintains several lines of credit with different financial institutions. Interest rates vary, and include prime and prime plus 3%. As of December 31, 2002 and 2001, the total amounts outstanding under these lines of credit was approximately $102,000 and $421,000, respectively.
Mortgage Warehouse Agreements
The Company maintains warehouse facilities with several financial institutions to assist the Company in originating and closing mortgages. The Company is liable under these agreements only if defaults occur during a mortgage closing process. As of December 31, 2002, there was approximately $13,100,000 outstanding bearing interest at prime with a floor of 6%.
4. ESCROW OF ASSETS
Under an agreement for the purchase of certain assets and operations that now constitute the wholesale division, a credit line available to the Buyer was established as of December 31, 2002 and 2001. The credit line was established to ensure credit was available to the Buyer during the start-up phase of the new operations. Advances were at the sole discretion of the seller and have been repaid as of year end. Balances of escrowed assets were $1,050,897 and $895,525 as of December 31, 2002 and December 31, 2001, respectively.
5. INCOME TAXES
A summary of income taxes for the years ended December 31st, are as follows:
2002 2001 Currently payable Federal $ - $ - State - - Deferred tax benefit 460,000 295,000 Income tax benefit 460,000 295,000 Valuation allowance (460,000) (295,000)
Net income tax provision	 - -
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
5. INCOME TAXES, continued
Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities that give rise to net deferred income tax assets at December 31, 2002 and 2001 relate to the following:
2002 2001
Net operating loss carryforward $ 2,856,000 $ 2,380,000
Valuation allowance	 (2,856,000) (2,380,000)
Net deferred income tax asset $ - $ -
There are no significant deferred tax liabilities. The Company has used a combined estimated federal and state tax rate of approximately 35% for all deferred tax computations. The tax benefit prior to the allowance differs from the Federal statutory rate of 34% because of non-deductible expenses (primarily resulting from the goodwill amortization and impairment charges) and the effect of state income taxes.
The Company has recorded a valuation allowance in accordance with the provisions of SFAS No. 109 to reflect the estimated amount of deferred tax assets that may not be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation future taxable income during the periods in which temporary differences and/or carryforward losses become deductible.
The Company has available tax net operating loss carryovers ("NOLS") as of December 31, 2002 of approximately $8,400,000. The NOLs will begin to expire in the year 2022. Certain provisions of the tax law may limit the net operating loss carryforwards available for use in any given year in the event of a significant change in ownership interest. There have been significant changes in stock ownership; however, management believes that an ownership change has not yet occurred which would cause the net operating loss carryover to be significantly limited.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
6. RELATED PARTY TRANSACTIONS
At year end the Company entered into an agreement with certain officers to pay off $300,965 of salaries and reimbursable expenses payable with 3,009,647 shares of common stock.
7. STOCKHOLDER'S EQUITY
Common Stock
The Company has authorized 100,000,000 shares of $0.001 par value Common Stock (the "Common Stock"). The holders of the Common Stock are entitled to one vote per share and have non-cumulative voting rights. The holders are also entitled to receive dividends when, as, and if declared by the Board of Directors. Additionally, the holders of the Common Stock do not have any preemptive right to subscribe for, or purchase, any shares of any class of stock.
Preferred Stock
On March 23, 1999, the Company amended its Articles of Incorporation to authorize up to 10,000,000 shares of $0.001 par value Preferred Stock (the "Preferred Stock"). The shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors is authorized to fix the number of shares in each series, the designation thereof and the related rights, preferences and limitations of each series. Specifically the Board of Directors is authorized to fix with respect to each series (a) the dividend rate; (b) redeemable features, if any; (c) rights upon liquidation; (d) whether or not the shares of such series shall be subject to a purchase, retirement or sinking fund provision, (e) whether or not the shares of such series shall be convertible into or exchangeable for shares of any other class and, if so, the rate of conversion or exchange; (f) restriction, if any, upon the payment of dividends on commons stock; g) restrictions, if any, upon the creation of indebtedness; (h) voting powers, if any, of the shares of each series; and (i) such other rights, preferences and limitations as shall not be inconsistent with the laws of the state of Florida.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
7. SHAREHOLDERS' EQUITY (Continued)
Series A Convertible Preferred Stock
On October 24, 2000, the Board of Directors authorized the Series A Convertible Preferred Stock consisting of 8,100,000 shares, par value $0.001 per share, such series ranking superior to any other class or series of capital stock of the corporation. The Series A Convertible Preferred Stock is not entitled to receive any dividend. The shares are convertible into common stock on a one for one basis. Each holder of Series A stock shall be entitled to three times the number of votes as the common stock. During the year 2000, 1,000,000 Series A shares were issued to the Company's President in exchange for 1,000,000 shares of common stock, 426,108 Series A shares were issued to the President on a conversion of loans he made to the Company (including deferred salary), 1,433,000 Series A shares were issued to the former owners of Jupiter Mortgage to finalize the purchase of that subsidiary, and 858,895 Series A shares were issued to the former owners of Dow Guarantee Corp. In 2001, 300,000 shares were issued to the COO and 350,000 shares were issued to the Chairman of the Board. In 2002 666,667 shares were issued in conjunction with an acquisition, 250,000 shares were issued to the Chairman of the Board to replace his personal common shares used in a corporate transaction, and 50,000 shares were issued to a Director.
Series B Convertible Preferred Stock
On October 24, 2000 the Board of Directors authorized the Series B Convertible Preferred Stock, consisting of 1,000,000 shares, par value $0.001 per share, such series ranking junior to the Series A Preferred. The Series B Convertible Preferred Stock is not entitled to receive any dividends. The shares are convertible into common stock on a one for one basis. This special series has no voting rights as preferred stock. Upon conversion into common stock the holders shall be entitled to vote. During the year 2000, 400,000 Series B Preferred Stock were issued to the former owners of Capital Funding to finalize the purchase of that subsidiary. In 2001, 166,666 shares were issued to employees. In 2002, 400,000 shares were exchanged for common and 200,000 shares were issued for services rendered.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
7. STOCKHOLDER'S EQUITY, continued
Series C Convertible Preferred Stock
On October 24, 2000 the Board of Directors authorized the Series C Convertible Preferred Stock, consisting of 900,000 shares, par value $0.001 per share, such series ranking junior to the Series A and Series B Preferred. The Series C Convertible Preferred Stock is not entitled to receive any dividends. In the event of liquidation, the Series C stockholders are entitled to an amount per share equal to $.3281 and no more. The shares are convertible into common stock on a one for one basis. This series has no voting rights as preferred stock. Upon conversion into common stock, the holders shall be entitled to vote. No Series C shares have been issued.
Dow, Capital Funding and Jupiter Acquisitions
In conjunction with the acquisition of Dow, Capital Funding and Jupiter, the Company agreed to an aggregate value guarantee for the shares of the Company's common stock issued in those transactions. The Company issued 2,691,895 shares of Series A Preferred Stock pursuant to these provisions during 2000. No additional shares will be issued in connection with these acquisitions.
Stock Purchase Agreement, Debentures, and Warrants
The Company entered into a Securities Purchase Agreement, pursuant to which the Company issued $2,500,000 of 3% convertible debentures, and common stock purchase warrants for 34,383 shares at $8.70 per share, which expire on May 31, 2004. Warrants were also issued to placement agents involved in this transaction in the aggregate of 17,241 warrants with an exercise price of $8.70 and an expiration date of May 31, 2004.
During the year 2000, $614,000 of the principal of the debenture was converted by the debenture holder into 368,671 shares of the Company common stock. During the year 2001, the remainder of the debentures were converted into 1,250,000 shares of common stock. An additional 125,000 shares were issued for professional fees in connection with this transaction.
Restricted Stock Awards
During 2001, a total of 377,350 restricted shares of the Company's common stock were granted to certain employees with a market value of $377,350. There were no such issuances during 2002. These amounts were recorded as unearned compensation, restricted stock and are shown as a separate component of stockholder's equity. Unearned compensation is being amortized to expense over the three-year vesting period and, net of forfeitures, amounted to $106,907 in 2001. In 2002 the restricted balance was adjusted for forfeitures and no additional amount was amortized.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
7. STOCKHOLDER'S EQUITY, continued
Stock Option Plan
On March 15, 1999, the shareholders of the Company approved the adoption of a stock option plan. The plan calls for a maximum of 2,000,000 incentive stock options and 500,000 non-qualified stock options to be issued, at the discretion of the Board of Directors, over the next ten years.
Terms of the options, when issued, are as follows: (a) for non-qualified options, the term of the option may exceed ten years, the options may be granted to any eligible person with the remaining terms to be determined by the designated Board Committee; and (b) for incentive options, the term of the option may not exceed ten years, the exercise price may not be less than the fair market value of the optioned share on the date of grant, the option may contain vesting provisions, and the option may contain other terms to be determined by the designated Board Committee. When options are granted under this plan, the company will account for such options under SFAS No. 123 which requires entities that account for awards of stock-based compensation to employees in accordance with APB 25 to present pro forma disclosures of results of operations and earnings per share. This pro forma disclosure presents the results of operations as if compensation cost was measured at the date of grant based on the fair value of the award. The fair value for options will be estimated, at the date of grant, using a Black-Scholes option- pricing model. The Black-Scholes option pricing model uses the following weighted-average assumptions, (a) a risk-free interest rate, (b) a dividend yield, (c) a volatility factor of the expected market price of the Company's common stock and (d) the weighted-average expected life of the options. The Black Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility.
Non-Qualified Stock Option Plan
Pursuant to the Non-Qualified Plan (the "Non-ISO Plan"), options to acquire a maximum of 500,000 shares, but not more than two percent (2%) of the total authorized shares of the Company may be granted to any person who performed services for the Company and its subsidiaries. Non-qualified stock options may be at any price designated by the Committee on the date of grant. Options granted under the Plan may have maximum terms of not more than ten (10) years and are not transferable except by will or the laws of descent in distribution.
Directors. The Plan provides for appropriate adjustments in the number and type of shares covered by the Plan and options granted thereunder in the event of any reorganization, merger, recapitalization or certain other transactions involving the Company.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
7. STOCKHOLDER'S EQUITY, continued
Non-Qualified Stock Option Plan, continued
Generally, options granted under the Plan terminate thirty (30) days after termination of the grantee's employment or affiliation with the Company. If termination was due to death or disability, the options expire one (1) year after such termination or the termination date set forth in the option, whichever is earlier. Any conditions or restrictions on exercise lapse on a Change of Control unless otherwise set forth in the Option Agreement. The Plan is administered by a Stock Option Committee consisting of two or more non-employee directors or in the absence of such a committee, the Board of
Until the closing of an underwritten public offering by the Company pursuant to a registration, filed and declared effective under the Securities Act of 1933 covering the offer and sale of the Company's common stock for the account of the Company, the Company has the right of first refusal to acquire any shares which were required pursuant to the exercise of options to the Company and the Company shall have the right to repurchase any option shares following holder's termination of services or affiliation with the Company for any reason at the original exercise price of the option.
Other Option Plans
In April 2000, the Board of Directors granted options pursuant to two special option plans which have been designated Form A & B. Form A was developed as an anti-dilution option plan to protect the Company in the event of any takeover attempt. Format B was developed to recognize certain shareholders who had supported the Company with cash and/or significant personal efforts during the past two years.
All shares issued pursuant to these two formats will be restricted shares. The restrictions call for volume limitations that state that a person or persons whose shares are aggregated may not sell within any three month period a number of shares which exceeds the greater of 1% of the then outstanding shares of the Company's Common Stock or the average weekly trading value during the four calendar weeks prior to such sale.
The Board of Directors authorized the issuance of Form A options to acquire 700,000 shares and Form B options to acquire 500,000 shares at $.50 per share. All options, regardless of format, will convert into restricted shares under Rule 144. In addition, by accepting these options, the optionees agree to grant voting rights on the underlying shares to the Company. This assignment of voting rights expires upon arm's length sale of underlying shares into the market.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
7. STOCKHOLDER'S EQUITY, continued
Other Option Plans, continued
The following table summarizes the Company's stock option activity:
Exercise Shares Price
Outstanding at beginning of period - -
Granted in 2000 Format A 700,000 $ .50 Format B 500,000 $ .50 Granted in 2001 and 2002 - -
Exercised - -
Expired - - ________ ___ Outstanding and exercisable at end of period 1,200,000 $ .50
Investment Agreement
On November 16, 2001, the Company entered into an investment agreement entitling it to issue and sell common stock for up to an aggregate of $15 million from time to time during a three-year period beginning on the date that the stock is registered for trading. Each election by the Company to sell stock under this agreement is referred to as a "put right."
The Company entered into an agreement with a placement agent for the investment agreement. Under such agreement, the Company will pay a placement fee of 3% of the purchase price of each sale of stock under the investment agreement.
In connection with the investment agreement, the Company issued 750,000 common stock purchase warrants. Such warrants may be exercised for three years following the effective date of a registration covering resale of such shares. These warrants can be exercised at the lower of (i)110% of the closing bid price on the date the agreement was signed (.18) or (ii)110% of the closing bid price on the date the registration becomes effective.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases office space in various locations as well as certain office equipment. Future minimum lease payments subsequent to December 31, 2002 under these operating leases are as follows: $39,017 in 2003, $29,038 in 2004, $23,739 in 2005 and $19,310 in 2006. Rent expense for the years ended December 31, 2002 and 2001 was $368,595 and $354,069, respectively.
Litigation
From time to time, the Company is exposed to claims, regulatory, and legal actions in the normal course of business, some of which are initiated by the Company. At December 31, 2002, management believes that any such outstanding issues will be resolved without significantly impairing the financial condition of the Company.
9. NET LOSS PER SHARE
For the year ended December 31, 2002 and 2001, basic and diluted weighted average common shares include only common shares outstanding. The inclusion of common share equivalents would be anit-dilutive and, as such, they are not included. However, the common stock equivalents, if converted, would have increased common shares outstanding at December 31, 2002 and 2001 by 7,702,960 and 7,036,293 shares, respectively. The December 31, 2002 equivalents are comprised of 5,701,536 preferred shares, 1,200,000 related to the stock option plan and 801,624 shares applicable to warrants.
A reconciliation of the number of shares shown as outstanding in the consolidated financial statements with the number of shares used in the computation of weighted average common shares outstanding is shown below: (Preferred) (Common) Shares outstanding at December 31, 2002 5,701,336 23,912,934 Effect of weighting (94,338) ( 4,927,706)
Weighted average shares outstanding 5,606,998 18,985,228
Shares outstanding at December 31, 2001 5,034,669 17,006,150 Effect of weighting (386,986) (4,438,253)
Weighted average shares outstanding 4,647,683 12,567,897
Exhibit 21.
Subsidiaries of America's Senior Financial Services, Inc. As of December 31, 2001
Organized Percentages Under of Voting Laws of: Power ---------- ----------- America's Senior Financial Service's Inc. Subsidiaries:
Jupiter Mortgage Corporation Florida 100 Dow Guarantee Mortgage Florida 100
EXHIBIT 99.1
CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO rule 13 A-14 Under the Securities Exchange Act of 1934
In connection with the annual report of America's Senior Financial Services, Inc. (the "Company") on Form 10-QSB for the year ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Nelson A. Locke, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) I have reviewed this annual report on Form 10-KSB of America's Senior Financial Services, Inc.;
(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 registrant as of, and for, the year presented in this annual report;
(4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for registrant and have:
a.) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b.) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c.) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation to the registrant's auditors and the audit committee of registrant's board of directors:
a.) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b.) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
March 31, 2003 s/Nelson A. Locke_______________________ Nelson A. Locke Chief Executive Officer
Exhibit 99.2
CERTIFICATION BY CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14 Under the Securities Exchange Act of 1934
In connection with the annual report of America's Senior Financial Services, Inc. (the "Company") on Form 10-QSB for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert F. Kendall, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
(1) I have reviewed this annual report on Form 10-QSB of America's Senior Financial Services, Inc.;
(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 registrant as of, and for, the periods presented in this annual report;
(4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for registrant and have:
a.) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b.) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c.) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation to the registrant's auditors and the audit committee of registrant's board of directors:
a.) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b.) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
March 31, 2003
s/Robert F. Kendall Robert F. Kendall Chief Financial Officer
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jupiter, Florida, on April 11, 2003
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
/s/ Nelson A. Locke Chief Executive Officer/ Chairman of the Board April 11, 2003 CEO / Director
Chairman of the Board Nelson A. Locke
/s/ Michael J. Buono President / COO April 11, 2003
Director/ President Michael J. Buono
/s/ Dean J. Girard Director April 11, 2003
Director Dean J. Girard
/s/ Cheryl D. Locke Secretary / Director April 11, 2003
Secretary Directory Cheryl D. Locke
/s/ Thomas Sherman Esq. Director April 11, 2003
Director Thomas Sherman
/s/ Charles M. Kluck Director April 11, 2003
Director Charles M. Kluck
Chief Financial Officer Robert F. Kendall
/s/ Robert F. Kendall Chief Financial Officer April 11, 2003
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350
The undersigned, Nelson A. Locke, the Chief Executive Officer of America's Senior Financial Services, Inc., a Florida corporation (the "Company"), pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, hereby certifies that:
(1) the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002 (the "Report") fully complies with the requirements of Section 13(a) 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.
/s/Nelson A. Locke Chief Executive Officer Dated April 11, 2003
This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes Oxley Act and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350
The undersigned, Robert F. Kendall, the Chief Executive Officer of America's Senior Financial Services, Inc., a Florida corporation (the "Company"), pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, hereby certifies that:
(1) the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002 (the "Report") fully complies with the requirements of Section 13(a) 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.
/s/Robert F. Kendall Chief Financial Officer Dated April 11, 2003
This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes Oxley Act and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.