FORWARD-LOOKING INFORMATION
This quarterly report contains forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward looking statements. These statements relate to future events or to the Company's future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. There are a number of factors that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements.
Although the Company believes the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance, or achievements. Although all such forward-looking statements are accurate and consequently do not assume responsibility for the ultimate accuracy and completeness of such forward-looking statements. The Company is under no duty to update any of the forward-looking statements after the date of this report to confirm such statements to actual results.
GENERAL
AmeriResource Technologies, Inc. (the "Company") conducts operations primarily through its subsidiaries, including RoboServer Systems Corp. ("RBSY"), Self-Serve Technologies, Inc. ("SSTI"), Net2Auction, Inc. ("NAUC"), Net2Auction Corporation ("N2AC"), AuctionWagon Inc. ("AWI"), Auction Boulevard ("AB") BizAuctions Corp. ("BAC"), and BizAuctions, Inc. ("BAI"). As of August 1, 2006, the Company owned approximately 38.7% of NAUC common stock or 69.6% of NAUC common shares if the Company were to convert its SuperVoting Preferred. NAUC owns 100% of the outstanding shares of both N2AC and AWI. NAUC is publicly traded on the Pink Sheets under the stock symbol "NAUC." As of August 1, 2006, the Company owned approximately 47.15% of RBSY's common stock or 79.6% of RBSY's shares if the Company were to convert its RBSY SuperVoting Preferred Stock. RBSY owns 100% of the outstanding common stock of SSTI. RBSY is publicly traded on the Pink Sheets under the symbol "RBSY." As of August 1, 2006, the Company's subsidiary, NAUC owns approximately 70% of BAI's common stock. BAI's changed its name from Kootenai Corp. to BizAuctions, Inc. as of August 17, 2006, and is publicly traded on the Pink Sheets under the symbol "BZCN." BAC is a wholly-owned subsidiary of BAI. The Company continues to search for viable business operations to acquire or merge with in order to increase the Company's revenues, asset base, and to achieve profitability.
NET2AUCTION
NAUC is an operator of online auction drop-off locations and develops relationships with independently owned and/or franchised pack and ship centers. We believe NAUC is ideal for people who want hassle-free selling of their used goods online using eBay internet auction site. In addition to the millions of people who trade on eBay, we believe there is a large population of people who would like to participate on eBay, but lack the skills, time or inclination to sell online directly. NAUC serves this population by extending the reach of eBay.
NAUC handles of all aspects of selling goods on eBay for its customers, including photographing the goods to be sold, posting a picture of the goods on eBay, drafting the product description for eBay, handling inquiries from potential purchasers, selling the goods, processing payments for the goods, and taking care of shipping the goods to the final purchaser. A customer of NAUC gets a majority of the proceeds from the sale of the goods and NAUC does all the work.
As of June 30, 2006, NAUC operates forty-seven (47) drop-off locations, in addition to the twenty-three (23) affiliate locations that were acquired in our acquisition of AWI on September 30, 2005. During the second quarter of 2006, NAUC developed numerous business commercial accounts with several top retailers-wholesalers within the USA. NAUC liquidates the excess inventory and/or returned merchandise of such accounts on eBay. NAUC has obtained such commercial accounts in a wide variety of business industries or segments, including golf products, electronics-computer items, shoes for both men and woman and clothing for men, women, and children. NAUC continues to receive a customer satisfaction rating on eBay exceeding 99%. NAUC is listed as a "eBay Trading Assistant," which allows NAUC to reach millions of potential buyers for our customers' unwanted goods or products. To learn more, please visit our website at www.net2auction.com.
AUCTION WAGON
AWI was incorporated in September of 2003 and became the first eBay consignment store in the Los Angeles market. AWI is the first company to qualify as both an eBay certified developer and an eBay Trading Post. AWI is a frontrunner in both the retail and software segments of the industry, being featured in Entrepreneur, the New York Times, and the Wall Street Journal. AWI currently markets its consignment software to drop-off stores, and maintains a national affiliate network of drop-off locations.
AWI's software, Store Manager Pro G2, performs virtually all of the functions needed by an eBay consignment store, from printing contracts, barcodes, and inventory labels to managing its inventory, payment, shipping, and check writing as well as integrating photo editing. The Store Manager Pro offers multiple levels of software supporting different business requirements and charges both a monthly fee and an initial fee. The fees range from $99 to $330 per month per customer. Since January 1, 2006 AWI has added approximately 94 new customer accounts. AWI's software continues to be a widely used by commercial business users doing business on eBay. To learn more, please visit our website at www.auctionwagon.com.
AUCTION BOULEVARD
On September 14, 2005, NAUC acquired assets from AB. AB is an operator of online auction drop-off locations. Among the assets acquired by NAUC were all rights to the AB name, all of AB intellectual property, and all eBay accounts opened by AB. Additionally, AB assigned to NAUC the lease to AB's principle place of business, located in Encino, California.
AB is a Trading Assistant, as determined by e-Bay, with operations and drop-off store located at 17412 Ventura Boulevard, Encino, CA (northern Los Angeles area). Auction Boulevard has accumulated in excess of 2,000 positive feedbacks on eBay and has a 99% positive feedback. To learn more, please visit our website at www.auctionboulevard.com.
ROBOSERVER
RBSY is a provider of self-service technologies to the restaurant industry. RBSY's self-serve systems are designed to work like ATM machines, allowing customers to quickly and easily place orders and pay for menu items. Industry estimates and market observations show that self-serve technologies can cut customer waiting time by as much as 33%.
RBSY can install its kiosks in any restaurant located in the United States. RBSY also provides custom software to allow customers to operate the RBSY kiosks with optimum efficiency. To provide this custom software to its customers, RBSY has partnered with St. Clair Interactive Systems, a leading kiosk software development company. St. Clair provides RBSY's customers with leading edge technology and online monitoring systems. In order to provide this highest quality product, RBSY has also partnered with Renasiance Systems, a leading technology company. Our partnership with Renasiance allows RBSY to undertake any and all customer projects regardless of the size and scope.
RBSY kiosks are manufactured by KIS Kiosks. RBSY's partnership with KIS allows us to offer the competitive pricing and top quality hardware products available. We believe the market for RBSY's point-of-sale and self-serve technologies is increasing rapidly. Business owners are seeking out self-serve kiosks to allow such owners to provide more efficient service to their customers as well as reduce labor costs.
RBSY has installed two pilot RoboServer self-serve units in two (2) different fast-food franchisees, with the first installation at Angelo's Burgers in Encinitas, CA and the second installation at Dairy Queen in Oceanside, CA. The Angelo's Burgers installation was completed in the fall of 2005, and the Dairy Queen in the spring of 2006. RBSY continues to receive numerous inquiries from some of the leading fast-food chains for the RBSY self-serve kiosks. SSTI is a wholly-owned subsidiary of RBSY and is the entity that has performed all of the research, development, and modifications since the POS software and self-serve technologies were acquired on or about May 15, 2004. To learn more, please visit our website at www.roboservercorp.com.
BIZAUCTIONS, INC.
On June 27, 2006, NAUC acquired control of Kootenai Corp. through the purchase of Fifty Million (50,000,000) shares of common stock from the majority shareholder of Kootenai Corp. for One Hundred Seventy Thousand ($170,000) dollars. Kootenai Corp. later acquired BAC from NAUC, for the issuance of Fifty Million (50,000,000) shares of common stock and Twelve Million (12,000,000) shares of preferred stock. Subsequent to the acquisition of BAC, Kootenai Corp. changed its name to BAI. BAC, is a wholly-owned subsidiary of BAI. BAI is a publicly traded company which trades on the Pink Sheets under the symbol "BZCN."
BAI is a prime provider of commercial eBay liquidation services for excess inventory, overstock items, and merchandise that has been returned. BAI clients include some of the leading retailer in the United States. To learn more, please visit our website at www.bizauctions.com.
RESULTS OF OPERATIONS
Results of Operations
Three Months Ended June 30, 2006 Compared with Three Months Ended June 30, 2005
The following discussion should be read in conjunction with the audited financial statements and notes thereto included in our annual report on Form 10-KSB for the fiscal year ended December 31, 2005, and should further be read in conjunction with the financial statements included in this report. Comparisons made between reporting periods herein are for the three-month period ended June 30, 2006 as compared to the same period in 2005.
Net Service Income for the second quarter ended June 30, 2006 increased to $204,968 from $300 for the same period in 2005 as a result of an increase in the options of NAUC. The operating loss increased to $933,380 for the quarter ended June 30, 2006, as compared to an operating loss of $713,178 for the same period in 2005.
The Company's net loss for the quarter ended June 30, 2006 increased to $717,938, as compared to a net loss of $609,579 for the same period in 2005.This increase is due to an increase in administration expenses, research and development expenses, and in legal expenses. The Company's expenses for the second quarter ended June 30, 2006 as compared to the same period in 2005 are set forth below:
The increase in these expenses for the second quarter of 2006 as related to the same period for 2005, is due mostly to the increased operations of the Company's subsidiaries. Net service income increased significantly for the quarter ended June 30, 2006. The operating loss increased primarily due to the increased business activities of its subsidiaries, NAUC, AWI and RBSY.
Six Months Ended June 30, 2006 Compared with Six Months Ended June 30, 2006
The following discussion should be read in conjunction with the audited financial statements and notes thereto included in our annual report on Form 10-KSB for the fiscal year ended December 31, 2005, and should further be read in conjunction with the financial statements included in this report. Comparisons made between reporting periods herein are for the six month period ended June 30, 2006 as compared to the same period in 2005.
Net Service Income for the six months ended June 30, 2006 increased to $313,186 from $3,085 for the same period in 2005 due to the emergence of Net2Auction's operations. The operating loss increased to $1,749,557 for the six months ended June 30, 2006, as compared to an operating loss of $1,121,069 for the same period in 2005.
The Company's net loss for the six months ended June 30, 2006 increased significantly to a net loss of $1,153,382, as compared to a net loss of $989,010 for the same period in 2005.This increase is due to an increase in consulting expenses, general and administrative expenses, and legal expenses. The Company's expenses for the six months ended June 30, 2006 as compared to the same period in 2005 are set forth below:
The increase in these expenses for the six months of 2006 as related to the same period for 2005, is due mostly to the increased operations of the Company's subsidiaries. Net service income increased significantly for the quarter ended June 30, 2006. The operating loss increased primarily due to the increased business activities of its subsidiaries, NAUC, AWI, and RBSY.
Liquidity and Capital Resources
The Company's net cash used in operating activities for the quarter ended June 30, 2006 increased to $315,485 as compared to cash used in operations of $273,484 for the same period in 2005. The Company's cash flow used in investing activities was $376,477 during the second quarter of 2006, as compared to $187,514 for the same period in 2005. This increase is due to purchase of intangible assets and a subsidiary. The Company's cash flow provided by financing activities was $679,800 during the second quarter of 2006, as compared to $737,033 for the same period in 2005. This decrease occurred as we received only $350,000 from sale of stock in 2006, versus $481,033 in 2005 and despite an increase in financing activities from Notes Payable, which increased from $256,000 in 2005 to $329,800 in 2006.
The Company has relied upon its chief executive officer for its capital requirements and liquidity. The Company's recurring losses, lack of cash flow and lack of cash on hand raise substantial doubt about the Company's ability to continue as a going concern. Management's plans with respect to these matters include raising additional working capital through equity or debt financing and acquisitions of ongoing concerns, which generate profits, ultimately allowing the Company to achieve consistent profitable operations. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
OFF-BALANCE SHEET ARRANGEMENTS
We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structure finance or special purpose entities ("SPEs"), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes as part of our ongoing business. As of June 30, 2006, we were not involved in any unconsolidated SPE transactions.