Edgar Filing: AMERICAN FINANCIAL HOLDING INC /DE

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2000

Commission file number 0-12666

American Financial Holding, Inc.
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(Exact name of small business issuer as specified in charter)

Delaware 87-0458888
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

914 Rio Virgin Drive St. George, UT 84790
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(Address of principal executive offices)

(435) 674-1181
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(Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ ] No [X]

APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 19,279,449 shares of common stock,
par value $.01 per share, issued and outstanding as of February 21, 2001.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

AMERICAN FINANCIAL HOLDING, INC.
FORM 10-QSB

TABLE OF CONTENTS

Item Description Page
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Part I. Financial Information

1. Condensed Consolidated Balance Sheets--September 30,
2000 and December 31, 1999 (unaudited)..................... 2

1. Condensed Consolidated Statements of Operations for
the Three and Nine Months Ended September 30, 2000
and 1999 (unaudited)....................................... 3

1. Condensed Consolidated Statement of Cash Flows
for the Nine Months Ended September 30, 2000
and 1999 (unaudited)....................................... 4

1. Notes to Condensed Consolidated Financial Statements
(unaudited)................................................ 5

2. Management's Discussion and Analysis or Plan of
Operations................................................. 7

Part II. Other Information

1. Legal Proceedings............................................ 9
6. Exhibits and Reports on Form 8-K............................. 10
-- Signatures................................................... 11

PART I - FINANCIAL INFORMATION

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ITEM 1. FINANCIAL STATEMENTS
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SPECIAL NOTE

This report on Form 10-QSB for the interim period ended September 30,
2000, of American Financial Holding, Inc. (the "Company"), is being filed in
February 2001, substantially after its due date. This report should be read in
conjunction with other periodic reports reporting events occurring after
December 31, 1999. Such other periodic reports and the information set forth
therein should be read in conjunction with the Company's annual report on Form
10-KSB, which contains information as of December 31, 1999, and this quarterly
report on Form 10-QSB, unless otherwise indicated.

The consolidated condensed financial statements included herein have
been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. However, in the opinion of management, all adjustments (which include
only normal recurring accruals) necessary to present fairly the financial
position and results of operations for the periods presented have been made.
These consolidated condensed financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's annual
report on Form 10-KSB for the year ended December 31, 1999.

AMERICAN FINANCIAL HOLDING, INC.
AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

September 30, December 31,
2000 1999
---------------- ----------------
ASSETS

Current Assets
Cash .................................................................. $ 254 $ 1,203
---------------- ----------------
Total Current Assets................................................... 254 1,203
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Property and Equipment
Equipment.................................................................. 14,334 14,334
Furniture and fixtures..................................................... 16,000 16,000
---------------- ----------------
30,334 30,334

Less accumulated depreciation................................................... (30,334) (30,123)
---------------- ----------------
Net Property and Equipment............................................. -- 211
---------------- ----------------

Total Assets .................................................................. $ 254 $ 1,414
================ ================

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
Accounts payable........................................................... $ 211,350 $ 204,483
Accrued rent payable to officers........................................... 168,000 168,000
Payable to Tambora Financial Corporation................................... 690,196 677,380
Interest payable to Tambora Financial Corporation.......................... 15,964 15,964
Payable to Triad Financial Systems, Inc. owners............................ 240,014 240,014
Interest payable to Triad Financial Systems, Inc. owners................... 123,962 123,962
Payable to officers........................................................ 18,865 18,865
Net liabilities of discontinued operations................................. 120,458 125,763
---------------- ----------------
Total Current Liabilities.............................................. 1,588,809 1,574,431
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STOCKHOLDERS' DEFICIT

Common stock - $0.01 par value; 20,000,000 shares authorized;
4,279,449 shares issued and outstanding........................................ 42,794 42,794
Additional paid-in capital...................................................... 7,431,326 7,431,326
Receivable from stockholders, net of reserve of $2,788,402 and
$2,701,917, respectively...................................................... (168,000) (168,000)
Accumulated deficit............................................................. (8,894,675) (8,879,137)
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Total Stockholders' Deficit................................................ (1,588,555) (1,573,017)
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Total Liabilities and Stockholders' Deficit..................................... $ 254 $ 1,414
================ ================

The accompanying notes are an integral part of these condensed
consolidated financial statements.

AMERICAN FINANCIAL HOLDING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
----------- ----------- ------------ -----------

Revenue .............................................................$ - $ - $ - $ -

General and Administrative Expenses................................... (56,770) (108,540) (150,570) (325,620)
----------- ----------- ------------ -----------

Loss From Operations.................................................. (56,770) (108,540) (150,570) (325,620)
----------- ----------- ------------ -----------

Other Income (Expense)
Interest income.................................................. 43,242 38,126 129,727 114,378
Interest expense................................................. - (12,585) - (37,755)
----------- ----------- ------------ -----------
Other Income, Net................................................ 43,242 25,541 129,727 76,623
----------- ----------- ------------ -----------

Loss From Continuing Operations....................................... (13,528) (82,999) (20,843) (248,997)

Income (Loss) From Discontinued Income Builders' Operations........... 55,897 (26,716) (5,304) (91,052)
----------- ----------- ------------- -----------

Net Income (Loss).....................................................$ 42,369 $ (109,715) $ (26,147) $ (340,049)
=========== =========== ============ ===========

Basic and Diluted Loss Per Share......................................
Loss From Continuing Operations Per Share........................$ - $ (0.02) $ (0.01) $ (0.06)
Income (Loss) From Discontinued Operations Per Share............. 0.01 (0.01) - (0.02)
----------- ----------- ------------ -----------
Net Income (Loss) Per Share......................................$ 0.01 $ (0.03) $ (0.01) $ (0.08)
=========== =========== ============ ===========

Weighted-Average Number of Common Shares Outstanding.................. 4,279,449 4,279,449 4,279,449 4,279,449
=========== =========== ============ ===========

The accompanying notes are an integral part of these condensed
consolidated financial statements.

AMERICAN FINANCIAL HOLDING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

For the Nine Months
Ended September 30,
2000 1999
---------------- ----------------

Cash Flows From Operating Activities

Net loss.......................................................................... $ (26,147) $ (340,049)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation................................................................. 211 372
Decrease in net liabilities of discontinued operations....................... 5,305 91,052
Changes in assets and liabilities
Increase in accounts payable................................................. 6,866 7,722
Decrease in stockholders' receivable......................................... -- (36,000)
Increase in interest payable to related party................................ -- 11,973
Increase in accrued rent payable to officers................................. -- 36,000
Increase in interest payable to Triad Financial Systems, Inc.
owners .................................................................... -- 25,782
---------------- ----------------
Net Cash Used in Operating Activities.................................... (13,765) (203,148)
---------------- ----------------
Cash Flows From Financing Activities
Increase in payable to Tambora Financial Corporation......................... 12,816 202,245
Cash received from payable to officers....................................... -- 1,182
---------------- ----------------

Net Cash Provided by Financing Activities......................................... 12,816 203,427
---------------- ----------------
Net Increase in Cash.............................................................. (949) 279

Cash at Beginning of Period....................................................... 1,203 834
---------------- ----------------

Cash at End of Period............................................................. $ 254 $ 1,113
================ ================

The accompanying notes are an integral part of these condensed
consolidated financial statements.

AMERICAN FINANCIAL HOLDING, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Condensed Financial Statements -- The accompanying unaudited condensed
consolidated financial statements include the accounts of American Financial
Holding, Inc. and include the accounts of its wholly-owned subsidiary, Income
Builders Inc., which are shown as discontinued operations. These financial
statements are condensed and, therefore, do not include all disclosures normally
required by generally accepted accounting principles. These statements should be
read in conjunction with the annual financial statements included in the
Company's report on Form 10-KSB for the year ended December 31, 1999. In the
opinion of management, all adjustments necessary for a fair presentation have
been included in the accompanying condensed financial statements and consist of
only normal recurring adjustments. The results of operations presented in the
accompanying condensed financial statements are not necessarily indicative of
the results that may be expected for the full year ending December 31, 2000.

Business Condition -- The Company has an accumulated deficit of $8,894,675 as of
September 30, 2000. It has had losses from operations and negative cash flows
from operating activities during the nine month-periods ended September 30, 2000
and 1999. These conditions raise substantial doubt regarding the Company's
ability to continue as a going concern. Management plans include the issuance of
common stock to provide financing for payment of the Company's liabilities. The
Company's investment in Income Builders, Inc. was transferred to Tambora
Financial Corporation in October 2000. The transfer resulted in a $799,688
reduction of liabilities. Management further plans to distribute a portion of
the Tambora Financial Corporation stock, received in the transfer of Income
Builders, Inc., to certain creditors in satisfaction of approximately $363,972
of liabilities. There is no assurance that the Company will be successful in
issuing stock for cash or that the proceeds therefrom, if issued, will be
sufficient to pay the Company's remaining obligations in full.

NOTE 2 -- COMMITMENTS AND CONTINGENCIES

SEC Enforcement -- On October 9, 1996, the Company was advised by the
Enforcement Division of the Securities and Exchange Commission (the
"Commission") that it is considering recommending that the Commission bring an
enforcement action, which could include a civil penalty, against the Company in
the U.S. District Court for failing to file timely periodic reports in violation
of Section 13(a) of the Securities and Exchange Act of 1934 and the rules
thereunder.

In October 1996, the Company also received a request for the voluntary
production of information to the Enforcement Division of the Commission related
to the resignation of Coopers & Lybrand LLP and the termination of Arthur
Andersen LLP and the appointment of Jones, Jensen & Company as the Company's
independent public accountants and the reasons therefore. In addition, the
Company was requested to provide certain information respecting its previous
sales of securities. The Company cooperated in providing information in response
to these inquiries in early 1997. The Company has not been advised of the
outcome of the foregoing.

Legal Proceedings -- On December 20, 1999, Robert M. Bridge filed suit against
the Company in the Third District Court in Salt Lake County, Utah, styled Bridge
v. American Financial Holding, Inc., Triad Financial Systems, Inc., Raymond L.
Punta and Kenton L. Stanger (Civil No. 990912544). Mr. Bridge's complaint
alleges that he is entitled to the return of a $100,000 investment made in 1993,
in which he purchased the Company's stock in anticipation of the acquisition of
an insurance company. The

complaint alleges claims for breach of contract, fraud and misrepresentation,
and claims for a "guarantee" against Messrs. Punta and Stanger. The Company has
answered the complaint, denying its material allegations and raising several
affirmative defenses, including the applicable statutes of limitation. The
Company intends to vigorously defend this matter, asserting, among other
defenses, that at times the plaintiff could have sold his stock at a multiple of
his purchase price. Discovery has commenced but is in its early stages. No trial
date has been set.

NOTE 3 -- SUBSEQUENT EVENT

The Company has entered into an agreement to sell for $300,000 a total of 15.0
million shares of common stock at a price of $0.01 per share, or an aggregate of
$150,000, and $150,000 in principal amount of promissory notes, automatically
convertible into an aggregate of 49.2 million shares of common stock on the
effectiveness of a 21.4-to-1 reverse split of the issued and outstanding shares.
The persons making the $300,000 investment have agreed to execute a majority
written consent approving the proposed reverse stock split, the appointment of
their designees to the board of directors and the authorization of a class of
preferred stock. On the effectiveness of the reverse stock split and related
matters, the Company will issue 400,000 shares of common stock to a third party
for services. The securities sold by the Company and the consideration therefor
are being held pending the Company's completion of its annual report on Form
10-KSB for the year ended December 31, 2000, an information statement to be
distributed to the Company's stockholders relating to the matters to be approved
by the majority written consent of its stockholders and certain other
conditions. After giving effect to the foregoing, the Company will have an
aggregate of 3.6 million shares of common stock issued and outstanding. Proceeds
from the sale of the above securities will be applied to satisfy certain accrued
obligations.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
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The Company's Ability to Continue as a Going Concern

The Company has extremely limited working capital, no credit lines and
insufficient revenue to meet its operating requirements. The Company expects
that it will continue to incur operating losses and that its accumulated deficit
will increase. The foregoing raises substantial concerns respecting the ability
of the Company to continue as a going concern.

Income Builders Discontinued Operations

During September 1997, the Company sold its wholly-owned subsidiary,
Income Builders, Inc., to Tambora Financial Corporation, a corporation under
common control. Tambora Financial Corporation purchased Income Builders, Inc. by
paying the Company an aggregate of $500,000 in 1997, 1998 and 1999, and issuing
the Company 4,899,533 shares of Tambora Financial Corporation common stock in
October 2000. The financial statements of the Company reflect Income Builders,
Inc. as discontinued operations.

Results of Operations

The Company had no revenue during either the third quarter or the first
nine months of 2000 or 1999. General and administrative expenses declined during
the third quarter and the first nine months of 2000, as compared to the
corresponding periods in the preceding fiscal year, principally as a result of
reduced executive compensation and other administrative expenses during 2000.
Net interest income resulting from notes receivable from stockholders increased
in the third quarter and first nine months of 2000, as compared to the
corresponding periods in preceding fiscal year, as a result of the larger
principal balances outstanding during 2000.

Liquidity on Capital Resources

The Company was entirely dependent on advances of $12,816 from Tambora
Financial Corporation and a net decrease in cash of $949 for its capital
requirements of $13,765] used in operating activities during the first nine
months of 2000. Cash requirements were substantially less in 2000 than in 1999,
due to the discontinuation of the Company's Income Builders, Inc. operations.

The Company had no assured source of required additional capital
resources, although it expected that Tambora Financial Corporation would
continue with additional advances as minimally required for the Company to
maintain its corporate existence.

Capital Requirements and Plan of Operation

Net liabilities of discontinued operations of $120,458 and $500,000 of
the payable to a related party were relieved in October 2000, upon the transfer
of Income Builders to Tambora Financial Corporation. The Company plans to settle
the payable to Triad owners and related interest totaling $363,976 by the
distribution of 300,084 shares of Triad common stock to the Triad owners.

In January 2001, the Company assigned accounts receivable from
officers, directors and others, with aggregate principal and accrued interest of
$3,042,887, before offsets totaling $168,000, to Debt

Reduction Trust in consideration of such trust's assumption of any and all
liabilities for withholding taxes or other payroll burdens due federal or state
authorities relating to the characterization of any of the amounts paid to the
obligors as compensation and such trust's agreement to indemnify the Company and
hold it harmless from and against any related loss. Debt Reduction Trust is an
irrevocable trust created by Kenton L. Stanger. The sole trustee of the Debt
Reduction Trust is currently Chelton Feeny, a director, and the beneficiary is
Mr. Stanger's wife or estate. Other than the obligations assigned to Debt
Reduction Trust as noted above, the trust's only assets consist of 25,000 shares
of the Company's common stock.

In addition to funds required to satisfy past due accounts payable, the
Company will require at least $50,000 to $100,000 during the next twelve months
to complete required accounting and auditing work, complete reports to
regulatory authorities and stockholders, defend pending litigation and related
matters to maintain its corporate good standing. Additional amounts would be
required if the pending litigation results in an award or settlement in favor of
the plaintiff. The Company has no funds with which to pay these amounts, but
will depend primarily on the sale of additional securities for such funding. The
Company cannot assure it will be able to obtain required funding or that it will
be able to continue. The Company does not believe that its principal, nonliquid
assets, its stock in Tambora to be distributed to the Company's stockholders and
others and its notes receivable from officers, directors and others are readily
convertible to cash to satisfy claims of creditors.

The Company plans to seek active operations and related funding, which
will likely result in a recapitalization of the Company and the issuance of
substantial amounts of securities that will dilute the percentage interest in
the Company held by existing stockholders.

Sale of Securities to New Investors

The Company has entered into an agreement to sell for $300,000 a total
of 15.0 million shares of common stock at a price of $0.01 per share, or an
aggregate of $150,000, and $150,000 in principal amount of promissory notes,
automatically convertible into an aggregate of 49.2 million shares of common
stock on the effectiveness of a 21.4-to-1 reverse split of the issued and
outstanding shares. The persons making the $300,000 investment have agreed to
execute a majority written consent approving the proposed reverse stock split,
the appointment of their designees to the board of directors and the
authorization of a class of preferred stock. On the effectiveness of the reverse
stock split and related matters, the Company will issue 400,000 shares of common
stock to a third party for services. The securities sold by the Company and the
consideration therefor are being held pending the Company's completion of its
annual report on Form 10-KSB for the year ended December 31, 2000, an
information statement to be distributed to the Company's stockholders relating
to the matters to be approved by the majority written consent of its
stockholders and certain other conditions. After giving effect to the foregoing,
the Company will have an aggregate of 3.6 million shares of common stock issued
and outstanding.

Proceeds from the sale of the above securities will be applied to
satisfy certain accrued obligations. Therefore, the Company will still require
additional funds to meet future requirements, including any requirements for any
new activities.

PART II--OTHER INFORMATION

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ITEM 1. LEGAL PROCEEDINGS
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The Company is not a party to any material legal proceedings except as
noted below, and no such proceedings have been threatened by or, to the best of
its knowledge, against it.

On October 9, 1996, the Company was advised by the Enforcement Division
of the Securities and Exchange Commission (the "Commission") that it is
considering recommending that the Commission bring an enforcement action, which
could include a civil penalty, against the Company in the U.S. District Court
for failing to file timely periodic reports in violation of Section 13(a) of the
Securities Exchange Act of 1934 and the rules promulgated thereunder.

On December 20, 1999, Robert M. Bridge filed suit against the Company
in the Third District Court in Salt Lake County, Utah, styled Bridge v. American
Financial Holding, Inc., Triad Financial Systems, Inc., Raymond L. Punta and
Kenton L. Stanger (Civil No. 990912544). Mr. Bridge's complaint alleges that he
is entitled to the return of a $100,000 investment made in 1993, in which he
purchased the Company's stock in anticipation of the acquisition of an insurance
company, costs, attorney's fees, and interest. The complaint alleges claims for
breach of contract, fraud and misrepresentation, and claims for a "guarantee"
against Messrs. Punta and Stanger. The Company has answered the complaint,
denying its material allegations and raising several affirmative defenses,
including the applicable statutes of limitation. The Company intends to
vigorously defend this matter, asserting, among other defenses, that at times
the plaintiff could have sold his stock at a multiple of his purchase price.
Discovery has commenced but is in its early stages. No trial date has been set.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits. None

(b) Reports on Form 8-K. During the quarter ended September 30,
2000, the Company did not file any reports on Form 8-K.

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SIGNATURES
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In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

AMERICAN FINANCIAL HOLDING, INC.
(Registrant)

Dated: February 28, 2001 By /s/ Kenton L. Stanger
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Kenton L. Stanger, President
(Principal Financial and
Chief Accounting Officer)