SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 2000.
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from -------------- to
-------------- .
Commission file number: I-9418
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CYBERAMERICA CORPORATION
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(Exact name of small business issuer as specified in its charter)
Nevada 87-0509512
-------- ------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
268 West 400 South, Salt Lake City, Utah 84101
---------------------------------------------------------
(Address of principal executive office) (Zip Code)
(801) 575-8073
------------------------------
(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 XX No
-- ----
The number of outstanding shares of the issuer's common stock, $0.001 par value
(the only class of voting stock), as of November 12, 2000 was 2,991,794.
1
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS..................................4
PART II
ITEM 1. LEGAL PROCEEDINGS....................................................10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................12
SIGNATURES....................................................................13
INDEX TO EXHIBITS.............................................................14
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2
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to CyberAmerica Corporation, a Nevada
corporation, and its subsidiaries and predecessors unless otherwise indicated.
Consolidated, unaudited, condensed interim financial statements including a
balance sheet for the Company as of the quarter ended September 30, 2000 and
statements of operations, and statements of cash flows for the interim period up
to the date of such balance sheet and the comparable period of the preceding
year are attached hereto as Pages F-1 through F-8 and are incorporated herein by
this reference.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
3
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
PAGE
Consolidated Unaudited Condensed Balance Sheet September 30, 2000 ...........F-2
Consolidated Unaudited Condensed Statements of Operations for the
Three and Nine Months Ended September 30, 2000 and 1999.....................F-4
Consolidated Unaudited Condensed Statements of Cash Flows for the
Nine Months Ended September 30, 2000 and 1999...............................F-5
Notes to Consolidated Unaudited Condensed Financial Statements
September 30, 2000..........................................................F-6
F-1
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEET
September 30, 2000
ASSETS
CURRENT ASSETS
Cash $ 372,513
Accounts receivable - Trade 438,246
Accounts receivable - Related Parties 54,936
Note receivable - Current Portion 392,398
Prepaid expenses 12,221
Securities available for sale 6,947,491
--------------
TOTAL CURRENT ASSETS 8,217,805
PROPERTY AND EQUIPMENT (net) 7,004,180
OTHER ASSETS
Investment securities at cost 234,575
Notes receivable - net of current portion 208,701
Investments - other 184,725
-------------
TOTAL OTHER ASSETS 628,001
TOTAL ASSETS $ 15,849,986
============
See notes to consolidated unaudited condensed financial statements.
F-2
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEET (Continued)
September 30, 2000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 101,403
Accrued liabilities
Interest 1,190
Real estate taxes and assessments 46,439
Payroll and related taxes payable 6,732
Refundable deposits 55,815
Other 41,297
Notes payable -
Current portion of long-term debt 222,304
Current portion of IEPA liabilities 67,212
-------------
TOTAL CURRENT LIABILITIES 542,392
LONG-TERM LIABILITIES
Long-term debt (net of current portion) 5,129,800
IEPA laibility (net of current portion) 155,885
--------------
TOTAL LONG-TERM LIABILITIES 5,285,685
MINORITY INTEREST 959,844
SHAREHOLDERS' EQUITY
Preferred stock par value $.001; 20,000,000
shares authorized; No shares issued -
Common stock par value $.001; 20,000,000
shares authorized; 2,991,794 shares issued 2,992
Additional paid-in capital 15,574,610
Accumulated deficit (5,436,806)
Treasury stock, 441,730 shares common at cost (662,595)
Unrealized gain/(loss) on securities available for sale (416,136)
------------
TOTAL SHAREHOLDERS' EQUITY 9,062,065
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 15,849,986
============
See notes to consolidated unaudited condensed financial statements.
F-3
CYBERAMERICA CORPORATION
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2000 and 1999
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
------------- ------------- ------------- -------------
Revenue
Sale of property $ 2,126,479 $ - $ 2,126,479 $ 1,440,000
Revenue deferred - - - -
Additional gain recognition 30,000 13,765 92,235 36,207
Consulting revenue 545,074 539,293 1,703,526 1,476,762
Rental revenue 269,493 217,462 713,614 644,854
------------- ------------- ------------- -------------
Total Revenue 2,971,046 770,520 4,635,854 3,597,823
Costs of Revenue
Cost of sales of property 1,470,287 - 1,470,287 936,808
Costs associated with consulting revenue 342,505 209,984 1,209,884 618,746
Costs associated with rental revenue 48,793 180,239 415,659 544,716
Interest cost associated with rental revenue 5,927 70,246 44,530 212,014
------------- ------------- ------------- -------------
Total Costs of Revenue 1,867,512 460,469 3,140,360 2,312,284
Gross Profit 1,103,534 310,051 1,495,494 1,285,539
Selling, General & Administrative
Expense 615,175 138,256 1,315,848 676,718
Operating Profit (Loss) 488,359 171,795 179,646 608,821
Other Income (Expense)
Interest Income 94,343 87,356 359,928 241,254
Interest Expense (102,479) (73,109) (294,793) (224,835)
Gain (Loss) from sale of assets - - -
Gain (Loss) from investment securities 251,466 324,396 2,931,732 946,875
Gain (Loss) on foreclosure - - - 256,742
Other income (expense) (109,815) - 86,487 4,869
------------- ------------- ------------- -------------
Total Other Income (Expense) 133,515 338,643 3,083,354 1,224,905
Income (Loss) Before Minority Interest 621,874 510,438 3,263,000 1,833,726
Minority Interest in (Gain) Loss (61,202) 10,876 (269,103) (89,748)
------------- ------------- ------------- -------------
Net Profit (Loss) $ 560,672 $ 521,314 $ 2,993,897 $ 1,743,978
Income (Loss) Per Comon Share
Income (loss) before minority interest $ 0.21 $ 0.16 $ 1.06 $ 0.60
Minority interest in gain (0.02) 0.00 (0.09) (0.03)
------------- ------------- ------------- -------------
Net income (loss) per weighted average
common share outstanding
$ 0.19 $ 0.16 $ 0.97 $ 0.57
============= ============= ============= =============
Weighted Average common shares
outstanding
2,991,794 3,227,238 2,795,508 3,073,222
============= ============= ============= =============
See notes to consolidated unaudited condensed financial statements.
F-4
CYBERAMERICA CORPORATION
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Three and Nine Months Ended September 30, 2000 and 1999
Nine Months Ended
September 30
2000 1999
----------------- ------------------
Cash Flows From Operating Activites
Net Income (Loss) $ 2,993,897 $ 1,917,963
Adjustments to reconcile net income (loss) to net cash
provided (used):
(Gain) loss from sale of investments 116,022 (946,875)
Loss (gain) on foreclosure - (256,742)
Minority interest in gain (loss) 269,103 89,748
Depreciation & amortization 175,661 265,821
Common stock issued for assets and debt 146,286 294
Services paid in common stock - -
Decrease (increase) in assets:
Accounts & notes receivable 1,140,354 63,065
Prepaid expenses (7,407) -
Securities (3,093,068) -
Other current assets - (1,685)
Increase (decrease) in liabilities
Accounts & notes payable (410,792) (298,618)
Accrued liabilities (253,769) (894,190)
Current portion of long-term debt (981,364) (611,053)
----------------- ------------------
Net Cash Provided (Used) by Operating Activities $ 94,923 $ (862,644)
Activites
Cash Flows From Investing Activities
Capital expenditures (72,588) (549,485)
Decrease (increase) in Long-term notes 46,299 -
Payment of dividends (116,022)
Elimination of unrealized gain (846,270) -
Purchase of investments (155,742) -
Proceeds from sale of investments 4,080,943 1,419,751
----------------- ------------------
Net Cash Provided (Used) by Investing Activities $ 2,936,620 $ 870,266
Cash Flows from Financing Activites
Purchase of treasury stock (663,027) -
Sale of common stock for cash 73,440 13,335
Increase (reduction) in long-term debt (non-current) (2,087,757) (118,955)
----------------- ------------------
Net Cash Provided (Used) by Financing Activities $ (2,677,344) $ (105,620)
Increase (Decrease) in Cash 354,199 (97,998)
Cash at Beginning of Period 18,314 146,744
Cash at End of Period $ 372,513 $ 48,746
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2000
1. Basis of Presentation
The accompanying consolidated unaudited condensed financial statements have been
prepared by management in accordance with the instructions in Form 10-QSB and,
therefore, do not include all information and footnotes required by generally
accepted accounting principles and should, therefore, be read in conjunction
with the Company's Annual Report to Shareholders on Form 10-KSB for the fiscal
year ended December 31, 1999. These statements do include all normal recurring
adjustments which the Company believes necessary for a fair presentation of the
statements. The interim operations results are not necessarily indicative of the
results for the full year ended December 31, 2000.
2. Grant of Stock Options
On July 6, 2000, the Company entered into Advisory Agreements with Ron and Reid
Freidman. Under the terms of the Advisory Agreements Ron and Reid were granted a
total 50,000 options to purchase shares of the Company's restricted common stock
for $.40 per share in exchange for services rendered. Both Ron and Reid
exercised their option during the quarter ended September 30, 2000.
On August 8, 2000, the board of directors granted 20,000 options to purchase
shares of its common stock to Ed Haidenthaller, the Chief Financial Officer,
pursuant to the Company's 2000 Stock Option Plan of the Company. The exercise
price of the options is $.9688 per share. Of the 20,000 options, 10,000 options
are vested and 10,000 options vest on May 1, 2001. The options expire if Mr.
Haidenthaller's employment is terminated for any reason prior to exercising the
options. Upon vesting, the options may be exercised prior to May 1, 2005. For
more information on The 2000 Stock Option Plan, see the Company's Form S- 8
filed on September 18, 2000.
On September 26, 2000, the board of directors granted a total of 352,000 options
to purchase shares of its common stock pursuant to the Company's 2000 Stock
Option Plan to 14 of its employees and directors. The exercise price of the
options is $.9688 per share. Of the 352,000 shares 137,000 were fully vested on
September 26, 2000 and 215,000 become fully vested on or after September 26,
2001. However, all rights to 37,000 of the fully vested options terminate if the
employee is terminated for any reason prior to the exercise of the options.
Likewise, all rights to 115,000 of the non-vested options terminate if the
employee is terminated for any reason prior to the exercise of the those
options. All options terminate 5 years from the date of the Stock Option
Agreements, September 26, 2005. For more information on The 2000 Stock Option
Plan, see the Company's Form S-8 filed on September 18, 2000.
3. Purchase of additional 20% interest in Wasatch Capital Corporation (WCC)
On September 22, 2000, the Company entered into a Stock Purchase Agreement with
John R. Chapman for the purchase of 200,000 shares or 20% of WCC. The Company
paid 146,286 shares of its restricted common stock, forgave $12,951.40 in
accrued rents owed and transferred a minority interest in several of its
consolidated subsidiaries in exchange for the 200,000 shares in WCC. The Company
now owns a total of 400,000 shares or a 40% interest in WCC. WCC's sole asset is
the Wallace-Bennett building located at
F-5
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2000
55-65 West 100 South, Salt Lake City, Utah. The Company to date has loaned
$603,557 to WCC. The Company filed a lien against the property for this amount
to secure its loan. The Company values its 40% interest in WCC at $164,246. For
more information the Wallace-Bennett building, please "Item 2. Description of
Property" in the Company's December 31, 1999, Form 10KSB.
4. Sale of Land
The Company entered into an agreement on July 18, 2000, wherein World Alliance
Consulting, Inc. exchanged 2,850,000 restricted shares of the common stock of
Chattown.com Network, Inc. for all of the Company's or its subsidiaries
interests in the following corporations: Oasis International Corporation, Adobe
Hills Ranch II, LLC, Diversified Holdings II, Inc., Diversified Holdings III,
Inc., Diversified Holdings V, Inc., Diversified Land and Cattle Co., Great Basin
Water Corporation, Lexington 3 Mile East Terrace Mountain Estates, Inc.,
Lexington 4 Mile East Terrace Mountain Estates, Inc., and Lexington One Mile
East Little Pigeon Mountain Estates, Inc. These corporations all hold title to
raw land in either Elko County, Nevada or Box Elder County, Utah. The Company's
net equity in these real estate holdings, the primary assets of the corporations
being transferred, was determined by the Company to be $857,870 or 9.7% of the
net book of the Company. For more information on the these companies and the
real property they own, see "Item 2. Description of Property" in the Company's
December 31, 1999 Form 10KSB.
The Company estimates that it will reduce negative cash flows associated with
these parcels of real estate in the annual amount of $332,500. The Company's
estimated interest expense will decrease by $207,000 over the next twelve
months. The Company's board of directors has determined that it is in the best
interest of the Company to shift its cash resources into purchasing additional
improved properties or using the cash resources to invest in its improved
properties that have a relatively short term potential to generate positive cash
flows.
The Company accepted shares of Chattown.com which are restricted shares of
common stock, at the market price on the date of the transaction of $0.53125 per
share, or a total valuation for 2,850,000 shares of $1,514,062. As a result of
the restricted nature of the shares and the currently thinly traded market for
the Chattown.com shares, there is no guarantee of their ultimate value at a time
when the Company may be able to liquidate the shares.
In a separate transaction with the same purpose as the above land sale
transaction, on August 10th, 2000, the Company's subsidiary Oasis International
Hotel & Casino, Inc. (OIHC) entered into a Real Estate Purchase Agreement with
A-Z Professional Consultants, Inc. Retirement Trust for the sale of
approximately 27.81 acres of land in Oasis, Nevada. OIHC accepted 500,000 shares
of restricted common stock of Freedom Surf, Inc. (OTCBB: FRSH) in consideration
for the sale of the land. On August 10, 2000, the date of the transaction,
Freedom Surf shares were quoted on the OTCBB at $16.25. Nonetheless, the Company
valued the transaction at $612,416.06. The Company significantly discounted the
value of the shares based upon their restrictions on resale, thin trading and
over all financial condition of Freedom Surf, Inc. and recorded no gain on the
sale of the property.
F-6
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2000
5. Reduction of Debt
As a result of the above noted land sales, the Company's outstanding debt
schedule has changed significantly since the filing of the 10KSB for the period
ended December 31, 1999. At the time of the 10KSB filing, the Company had
outstanding debts of $8,406,614 with $1,033,172 of that debt being listed as
current. With the sale of the above noted properties and their respective debts,
the outstanding debts of the Company has been reduced to $5,575,202 with
$289,561 being listed as current portion of the debt.
6. Payment of Dividends
During the quarter the Company completed a payment of dividends to shareholders
of 1 restricted share of Professional Wrestling Alliance (PWAA) common stock for
every two shares of Company stock held as of the record date. This transaction
was valued at $116,022 and retained earnings have been reduced accordingly.
7. Additional footnotes included by reference
Except as indicated in Notes above, there have been no other material changes in
the information disclosed in the notes to the financial statements included in
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1999.
Therefore, those footnotes are included herein by reference.
F-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The Company's operations consist primarily of two different areas of focus. The
Company's primary operations involve the acquisition, lease and sale of real
estate holdings. The Company also provides financial consulting services.
Real Estate Operations
The Company's objective with respect to its real estate operations is to
acquire, through its subsidiaries, properties throughout the country which the
Company's management believes to be undervalued and which the Company is able to
acquire through the expenditure of limited amounts of cash. The Company attempts
to acquire such properties by assuming existing favorable financing and paying
the balance of the price with nominal cash payments or through the issuance of
shares of the Company's Common Stock. Once such properties are acquired, the
Company leases them to primarily commercial tenants. The Company also makes
limited investments in improvements to the properties with the objective of
increasing occupancy and improving cash flows. The Company believes that with
minor improvements and effective management, properties can be liquidated at a
profit within a relatively short period of time.
As part of management's attempts to streamline operations and eliminate cash
draining operations, the Company entered into an agreement on July 18, 2000,
wherein World Alliance Consulting, Inc. exchanged 2,850,000 restricted shares of
the common stock of Chattown.com Network, Inc. all of CyberAmerica's or its
subsidiaries interests in the following corporations: Oasis International
Corporation, Adobe Hills Ranch II, LLC, Diversified Holdings II, Inc.,
Diversified Holdings III, Inc., Diversified Holdings V, Inc., Diversified Land
and Cattle Co., Great Basin Water Corporation, Lexington 3 Mile East Terrace
Mountain Estates, Inc., Lexington 4 Mile East Terrace Mountain Estates, Inc.,
and Lexington One Mile East Little Pigeon Mountain Estates, Inc. For more
information on this transaction, see the Company's Form 8-K filed July 25, 2000.
In a separate transaction with the same purpose as the above land sale
transaction, on August 10th, 2000, the Company's subsidiary Oasis International
Hotel & Casino, Inc. (OIHC) entered into a Real Estate Purchase Agreement with
A-Z Professional Consultants, Inc. Retirement Trust for the sale of
approximately 27.81 acres of land in Oasis, Nevada. OIHC accepted 500,000 shares
of restricted common stock of Freedom Surf, Inc. (OTCBB: FRSH). The Company
significantly discounted the value of the shares based upon their restrictions
on resale, thin trading and over all financial condition of Freedom Surf, Inc.
and recorded no gain on the sale of the property.
The Company decided to divest itself of these properties in an effort to improve
its cash flow position. As a result of transferring these properties, the
Company estimates that it will reduce negative cash flows associated with these
parcels of real estate in the annual amount of $332,500.35. The Company's
estimated interest expense will decrease by $207,000 over the next twelve
months. The Company's board of directors has determined that it is in the best
interest of the Company to shift its cash resources into purchasing additional
improved properties or using the cash resources to invest in its currently owned
improved properties that have a relatively short term potential to generate
positive cash flows.
4
The Company recorded rental revenues of $269,493 for the quarter ended September
30, 2000 as compared to $217,462 for the quarter ended September 30, 1999. This
increase in revenues was largely attributable to an increase in occupancy rates.
Currently, the Company has positive cash flows from real estate operations of
$214,773 for the quarter ended September 30, 2000 compared to a negative cash
flow of $33,023 for the quarter ended September 30, 1999. This is attributable
to a drop in rental associated costs as well as a reduction in interest costs
associated with real estate properties.
The Company will continue its attempts to improve profitability and cash flow by
working to increase occupancy and rental income from those properties of the
Company which have a high vacancy rate. The Company also intends to continue to
primarily purchase real estate for appreciation purposes. Accordingly, the
Company hopes to not only minimize any real estate cash flow deficit, but also
generate sufficient cash to record a substantial profit upon property
disposition.
Consulting Operations
The Company, through its wholly owned subsidiaries Canton Financial Services
Corporation and Hudson Consulting Group, Inc., provides a variety of financial
consulting services to a wide range of clients. The primary service performed by
the Company involves assisting clients in structuring mergers and acquisitions.
This includes locating entities suitable to be merged with or acquired by the
Company's clients, as well as providing general advice related to the
structuring of mergers or acquisitions. The Company also assists clients in
restructuring their capital formation, advises with respect to general corporate
problem solving and provides shareholder relations services designed to expose
its clients to the broker dealer community.
The Company's consulting subsidiaries generate revenues through consulting fees
payable in the client's equity securities, cash, other assets or some
combination of the three. The primary form of compensation received is the
equity securities of clients. When payment is made in the form of equity, the
number of shares to be paid is usually dependent upon the price of the client's
common stock (if such price is available) and the extent of consulting services
to be provided. The typical value used to determine the number of shares to be
paid is one- half or less of the stock's bid price, which accounts for the fact
that most of the equity received as payment by the Company is restricted as to
resale. The Company accepts equity with the expectation that its services will
assist in the stock's appreciation, thus allowing the Company to be compensated
and to make a return on the payments for its services.
The Company generates cash flow, in part, by liquidating non-cash assets (equity
securities) received as fees for consulting services. As most fees are paid in
the form of equity, the revenues and cash flows realized by the Company are
somewhat tied to the price of its clients' securities and the Company's ability
to sell such securities. A decline in the market price of a client's stock can
affect the total asset value of the Company's balance sheet and can result in
the Company incurring substantial losses on its income statement. The Company
generally books securities that it accepts as payment at a 25% to 75% discount
of the current market value at the time the Company accepts the securities due
to illiquidity of the securities because of restrictions on resale.
The Company's portfolio consists primarily of restricted and unrestricted shares
of common stock in micro to small cap publicly traded companies. This portfolio
currently consists of shares of common stock in over 122
5
different companies whose operations range from that of high-tech Internet
operations to oil and gas companies. The Company believes that the diversity of
its current holdings is such that the overall volatility of its portfolio is
significantly less than in prior years of operation. Nonetheless, the Company's
portfolio is considered extremely volatile.
Revenues from the Company's financial consulting operations increased for the
quarter ended September 30, 2000 as compared to the same quarter in 1999. The
Company recorded $545,074 in revenues for the quarter ended September 30, 2000,
from its financial consulting operations as compared to $539,293 for the same
period of 1999. This increase was primarily due to an increase in consulting
activities.
During the quarter ended September 30, 2000 the Company sold investment
securities owned by the Company and its subsidiaries. The bulk of the securities
sold were securities that the Company and its majority owned subsidiaries
acquired in past years for services rendered to clients by the Company's
consulting subsidiaries. During the quarter ended September 30, 2000, the
Company and its subsidiaries sold $560,561 in investment securities. The
Company's basis in the securities was approximately $309,095.
Company Operations as a Whole
Revenues
Gross revenues for the three and nine month periods ended September 30, 2000
were $2,917,046 and $4,635,854 respectively, as compared to $770,520 and
$3,597,823 for the same periods in 1999. Gross revenues for the quarter ended
September 30, 2000 increased 279 % over September 30, 1999. Gross revenues for
the nine months ended September 30, 2000 increased 29 % over the same period in
1999. The increase in revenues in the quarter ended September 30, 2000, when
compared to the same period in 1999, is due to a $5,781 increase in financial
consulting, a $52,030 increase in rental revenues, a $2,126,479 increase in sale
of property, and an $16,235 increase in gain recognition in the quarter ended
September 30, 2000 as compared to the quarter ended September 30, 1999.
Profits
The Company recorded operating profits of $488,359 and $179,646 respectively for
the three and nine month periods ended September 30, 2000 as compared to
operating profits of $171,795 and $608,821 for the comparable periods in 1999.
The Company recorded net profits of $560,672 and $2,993,897 for the three and
nine months ended September 30, 2000 compared to net profits of $521,314 and
$1,743,978 for the comparable periods in 1999. The Company's increase in net
profitability for nine month period ended September 30, 2000, as compared to the
same period in 1999, was mainly the result of gains from sale of investment
securities.
The Company's increase in operating profitability in the three month period
ended September 30, 2000, as compared to the same period in 1999 is attributable
to revenues from property sales. The Company realized gains from the sale of
investment securities of $251,466 and $2,931,732 in the three and nine months
ended September 30, 2000 as compared to gains from the sale of investment
securities of only $324,396 and $946,875 in the comparable periods in 1999.
The Company expects to continue to operate at a profit through fiscal 2000.
However, there can be no
6
assurance that the Company will continue to maintain profitability or that its
revenue growth can be sustained in the future.
Expenses
General and administrative expenses for the three and nine months ended
September 30, 2000 were $615,175 and $1,315,848, respectively, as compared to
$138,256 and $676,718 for the same periods in 1999. The reason for the increase
is due to a change in the classification of expenses in this category from the
previous year to the current year. Amounts now classified as general and
administrative expenses were previously classified as operating expenses in
either the rental operation or consulting operation expense categories.
Depreciation and amortization expenses for the nine months ended September 30,
2000 and September 30, 1999 were $175,661 and $265,821, respectively. The
decrease was due to a disposition of assets during 2000.
The Company expects expenses to level off or decrease through the balance of the
fiscal year 2000 as a result of elimination of the need to service debt on raw
land sold by the Company on July 18, 2000 (See Form 8-K filed July 25, 2000) and
the ongoing attempts by management to evaluate and streamline the Company's
operations.
Capital Resources and Liquidity
At the quarter ended September 30, 2000, the Company had current assets of
$8,217,805 and total assets of $15,849,986 as compared to $6,019,507 and
$17,726,261, respectively at the year ended December 31, 1999. The Company had
net working capital of $7,675,413 at the quarter ended September 30, 2000
compared to net working capital of $3,901,190 at the year ended December 31,
1999. The decrease in total assets is attributable to the sale of fixed assets.
The major contributing factor to the change in working capital is the sale of
land (non current assets) for securities (current assets).
Net stockholders' equity in the Company was $9,062,065 as of September 30, 2000,
compared to $7,473,761 as of December 31, 1999. This large increase is also
attributable to the sale of land which carried large debts for securities which
are unencumbered and thus increased shareholder's equity.
Net Cash flow used by operating activities was $137,121 for the nine months
ended September 30, 2000, compared to cash flow used by operating activities of
$862,644 for the quarter ended September 30, 1999. Cash flows used in operating
activities for the nine months ended September 30, 2000 are primarily
attributable to an increase in marketable securities combined with a decrease in
accounts and notes receivable.
Cash flow provided from investing activities was $3,168,664 for the nine months
ended September 30, 2000, compared to $870,266 for the same period in 1999. The
increase is largely due to the increase in proceeds from the sale of investment
securities.
Cash flow used in financing activities was $2,677,344 for the nine months ended
September 30, 2000, compared to cash flows used in financing activities of
$105,620 for the nine months ended September 30, 1999. The increase was largely
due to the buyback of treasury stock combined with the large reduction in
long-term debt.
7
Due to the Company's debt service on real estate holdings, willingness to
acquire properties with negative cash flow shortages and acceptance of non-cash
assets for consulting services, the Company may experience occasional cash flow
shortages.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations
over the past three years. The Company believes that it can offset inflationary
increases in the cost of materials and labor by increasing sales and improving
operating efficiencies.
Known Trends, Events, or Uncertainties
General Real Estate Investment Risks
The Company's investments are subject to varying degrees of risk generally
incident to the ownership of real property. Real estate values and income from
the Company's current properties may be adversely affected by changes in
national or local economic conditions and neighborhood characteristics, changes
in interest rates and in the availability, cost and terms of mortgage funds, the
impact of present or future environmental legislation and compliance with
environmental laws, the ongoing need for capital improvements, changes in
governmental rules and fiscal policies, civil unrest, acts of God, including
earthquakes and other natural disasters which may result in uninsured losses,
acts of war, adverse changes in zoning laws and other factors which are beyond
the control of the Company.
Value and Illiquidity of Real Estate
Real estate investments are relatively illiquid. The ability of the Company to
vary its ownership of real estate property in response to changes in economic
and other conditions is limited. If the Company must sell an investment, there
can be no assurance that the Company will be able to dispose of it in the time
period it desires or that the sales price of any investment will recoup the
amount of the Company's investment.
Property Taxes
The Company's real property is subject to real property taxes. The real property
taxes on this property may increase or decrease as property tax rates change and
as the property is assessed or reassessed by taxing authorities. If property
taxes increase, the Company's operations could be adversely affected.
Forward Looking Statements
The information herein contains certain forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Investors are cautioned that all
forward looking statements involve risks and uncertainty, including, without
limitation, the ability of the Company to continue its expansion strategy,
changes in the real estate markets, labor and employee benefits, as well as
general market conditions, competition, and pricing. Although the Company
believes that the assumptions underlying the forward looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward looking statements
included in the Form
8
10QSB will prove to be accurate. In view of the significant uncertainties
inherent in the forward looking statements included herein, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the objectives and plans of the Company will be achieved
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PART II
ITEM 1. LEGAL PROCEEDINGS
During the third quarter of 2000, no material developments occurred regarding
the Company's legal proceedings. For more information please see the Company's
Form 10-KSB for the year ended December 31, 1999, and Form 10-QSB for the
quarter ended June 30, 2000.
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES
On June 28, 2000, the Company issued 3,000 shares of common stock to John Fry as
payment for services rendered. The 3,000 shares were valued at $4,406. These
shares were issued pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. The Company made this offering based
on the following factors: (1) the issuance was an isolated private transaction
by the Company which did not involve a public offering; (2) there was only one
offeree who was issued stock for services as a consultant of the Company; (3)
the offeree stated an intention not to resell the stock and has continued to
hold it since it was acquired; (4) there were no subsequent or contemporaneous
public offerings of the stock; (5) the stock was not broken down into smaller
denominations; and (6) the negotiations for the sale of the stock took place
directly between the offeree and the Company.
On August 24, 2000, the Company issued 25,000 shares of common stock to Ron
Friedman and 25,000 shares to Reid Friedman pursuant to their exercise of
options issued to them on July 6, 2000, for services rendered to the Company.
The exercise price for the options was $0.40 per share. These options, and the
shares issued pursuant thereto, were issued pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. The Company
made this offering based on the following factors: (1) the issuance was an
isolated private transaction by the Company which did not involve a public
offering; (2) there was only one offeree who was issued stock for services as a
consultant of the Company; (3) the offeree stated an intention not to resell the
stock and has continued to hold it since it was acquired; (4) there were no
subsequent or contemporaneous public offerings of the stock; (5) the stock was
not broken down into smaller denominations; and (6) the negotiations for the
sale of the stock took place directly between the offeree and the Company.
On September 14, 2000, the Company issued 1,200 shares of common stock to John
Fry for services rendered. The shares were valued at $1,200. These shares were
issued pursuant to the exemption from registration provided by Section 4(2) of
the Securities Act of 1933. The Company made this offering based on the
following factors: (1) the issuance was an isolated private transaction by the
Company which did not involve a public offering; (2) there was only one offeree
who was issued stock for services as a consultant of the Company; (3) the
offeree stated an intention not to resell the stock and has continued to hold it
since it was acquired; (4) there were no subsequent or contemporaneous public
offerings of the stock; (5) the stock was not broken down into smaller
denominations; and (6) the negotiations for the sale of the stock took place
directly between the offeree and the Company.
On September 22, 2000, the Company issued 146,286 shares of common stock to John
R. Chapman as partial consideration for the purchase of 200,000 shares of
Wasatch Capital Corporation. The 146,286 shares were valued at $ 146,286. These
shares were issued pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act of 1933. The Company made this offering based
on the following factors: (1) the
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issuance was an isolated private transaction by the Company which did not
involve a public offering; (2) there was only one offeree who was issued stock
for services as a consultant of the Company; (3) the offeree stated an intention
not to resell the stock and has continued to hold it since it was acquired; (4)
there were no subsequent or contemporaneous public offerings of the stock; (5)
the stock was not broken down into smaller denominations; and (6) the
negotiations for the sale of the stock took place directly between the offeree
and the Company.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B are
listed in the Index to Exhibits on page 13 of this Form 10-QSB, and are
incorporated herein by this reference.
(b) Reports on Form 8-K. The Company filed three reports on Form 8-K during the
quarter for which this report is filed.
(1) On July 26, 2000, the Company filed a Form 8K
describing the buy back of its common stock from
Allen Z. Wolfson and/or entities controlled by him.
(2) On July 25, 2000, the Company filed a Form 8K
disclosing the sale of certain subsidiaries whose
holdings consisted of primarily raw land to World
Alliance Consulting, Inc. in exchange for 2,850,000
shares of Chattown.com, Inc.
(3) On August 29, 2000, the Company filed a Form 8K
because of a change on auditors from Crouch, Bierwolf
& Chisolm to Mantyla McReynolds.
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12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 14th day of November, 2000.
CYBERAMERICA CORPORATION
/s/ Richard D. Surber
- -------------------------
Richard D. Surber November 14, 2000
President, Chief Executive Officer and Director
/s/ Ed Haidenthaller November 14, 2000
- -------------------------
Ed Haidenthaller
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT PAGE DESCRIPTION
NO. NO.
3(i) * Articles of Incorporation of the Company (note that these
were amended by the Articles of Merger constituting Exhibit
2 to this Form 10-KSB) (incorporated herein by reference
from Exhibit No. 3(i) to the Company's Form 10-KSB for the
year ended December 31, 1993).
3(ii) * Bylaws of the Company, as amended (incorporated herein by
reference from Exhibit 3(ii) of the Company's Form 10 KSB
for the year ended December 31, 1995).
10(i)(a) 15 Stock Purchase Agreement dated September 22, 2000 between
the Company and John R. Chapman for the purchase of 200,000
shares of common stock of Wasatch Capital Corporation in
exchange for 146,286 shares of common stock of the Company
and other consideration.
10(i)(b) 21 Real Estate Purchase Agreement dated August 10, 2000 between
Oasis International Hotel & Casino, Inc., a subsidiary of
the Company and A-Z Professional Consultants, Inc.
Retirement Trust. for the purchase of two parcels of land in
Elko County, Nevada in exchange for 125,000 shares of the
common stock of Freedon Surf, Inc. as full and fair
consideration for the purchase of the said parcels of real
property.
10(i)(c) * Stock Purchase Agreement dated June 29, 2000 between the
Company and A-Z Professional Consultants, Inc. for the
purchase of 441,730 shares of the common stock in exchange
for a forgiveness and satisfaction of loans and obligations
owed to the Company (incorporated herein by reference from
the Company's Form 8-K filed on July 13, 2000).
10(i)(d) * Stock Purchase Agreement dated July 18, 2000 between the
Company and World Alliance Consulting, Inc. for the purchase
of 2,850,000 shares of the common stock of Chattown.com
Network Inc., in exchange for the transfer of 100 percent of
the Company's stock in holdings in the following
corporations: Oasis International Corporation, Adobe Hills
Ranch II, LLC, Diversified Holdings II, Inc., Diversified
Holdings III, Inc., Diversified Holdings V, Inc.,
Diversified Land & Cattle Co., Great Basin Water
Corporation, Lexington 3 Mile East Terrace Mountain Estates,
Inc., and East Little Pigeon Mountain Estates.
Inc.,(incorporated herein by reference from the Company's
Form 8-K filed on July 25, 2000)
27 25 Financial Data Schedule "CE"
* Previously filed as indicated and incorporated herein by
reference from the referenced filings previously made by the
Company.
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