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 March 31, 1997.
[ ] 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
CYBERAMERICA CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada 87-0509512
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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 May 12, 1997 was 10,384,213.
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS .............................................. 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS .............................. 3
PART II
ITEM 1. LEGAL PROCEEDINGS ................................................. 6
ITEM 5. OTHER INFORMATION ................................................. 7
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K .................................. 7
SIGNATURES ................................................................. 8
INDEX TO EXHIBITS .......................................................... 9
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
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 March 31, 1997
and statements of operations, statements of shareholders equity 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-7 and are incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
PAGE
Consolidated Unaudited Condensed
Balance Sheet March 31, 1997 ............................................. F-2
Consolidated Unaudited Condensed
Statements of Operations March 31, 1997 and 1996 ........................ F-4
Consolidated Unaudited Condensed
Statements of Shareholder's Equity March 31, 1997 ....................... F-5
Consolidated Unaudited Condensed
Statements of Cash Flows March 31, 1997 and 1996 ........................ F-6
Notes to Consolidated Unaudited Condensed
Financial Statements March 31, 1997 ..................................... F-7
F-1
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS
March 31, 1997
ASSETS
CURRENT ASSETS
Cash ..................................................... $ 27,212
Accounts receivable - trade .............................. 411,054
(Net of allowance for bad debt of $189,097)
Accounts receivable - related parties .................... 439,361
Accounts receivable - other .............................. 125,960
------------
Note receivable - current ................................ 12,000
Prepaid expenses ......................................... 39,065
Securities available for sale ............................ 591,322
------------
TOTAL CURRENT ASSETS ........................................ 1,645,974
PROPERTY AND EQUIPMENT
Buildings and structures ................................. 3,675,374
Land ..................................................... 3,792,227
Leasehold improvement .................................... 47,604
Machinery and Equipment .................................. 619,785
Furniture and Fixtures ................................... 330,837
Less: accumulated depreciation ........................... (1,013,462)
------------
NET PROPERTY AND EQUIPMENT .................................. 7,452,365
OTHER ASSETS
Investment securities at cost ............................ 466,559
Notes receivable - net of current ........................ 36,000
Investments - other ...................................... 227,681
Deposits ................................................. 41,728
Trade credits ............................................ 193,180
- ------------------------------------------------------------- ------------
TOTAL OTHER ASSETS .......................................... 965,148
TOTAL ASSETS ................................................ $ 10,063,487
============
F-2
See notes to consolidated unaudited condensed financial statements.
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS(Continued)
March 31, 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade .................................. $ 407,287
Accounts payable - related parties ........................ 61,974
Accrued liabilities
Interest ................................................ 44,504
Real estate taxes and assessments ....................... 373,098
Payroll and related taxes payable ....................... 141,056
EPA liabilities ......................................... 325,398
Refundable deposits ..................................... 32,556
Refund to investors ..................................... 122,117
Other ................................................... 216,453
Debenture payable ......................................... 280,000
Current maturities of long-term debt ...................... 1,401,764
Current maturities of capitalized lease ................... 20,106
------------
TOTAL CURRENT LIABILITIES .................................... 3,426,313
LONG-TERM LIABILITIES
Long-term debt, less current portion ...................... 3,141,979
Long-term capitalized lease, less current portion ......... 352,671
TOTAL LONG-TERM LIABILITIES .................................. 3,494,650
CONTINGENCIES ................................................ --
MINORITY INTEREST ............................................ 322,991
SHAREHOLDERS' EQUITY
Preferred stock par value $.001; 20,000,000
shares authorized; No shares issued
Common stock par value $.001; 200,000,000
shares authorized; 9,780,649 shares issued .............. 9,781
Additional paid-in capital ................................ 14,116,706
Accumulated deficit ....................................... (10,764,143)
Unrealized loss from securities available for sale ........ (542,811)
------------
TOTAL SHAREHOLDERS' EQUITY ................................... 2,819,533
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................... $ 10,063,487
============
F-3
See notes to consolidated unaudited condensed financial statements.
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For The Three Months Ended March 31, 1997 and 1996
1997 1996
--------------- ---------
REVENUE
Consulting revenue ............................. $ 84,632 $ 765,628
Rental revenue ................................. 143,980 105,218
Other revenue .................................. -- 59,792
---------- ----------
TOTAL REVENUE ..................................... 228,612 930,638
COSTS OF REVENUE
Costs associated with consulting revenue ....... 44,265 342,162
Costs associated with rental revenue ........... 91,986 102,337
Interest expenses associated with rental revenue 45,916 27,482
Costs associated with other revenue ............ -- 40,247
----------- ----------
TOTAL COSTS OF REVENUE ............................ 182,167 512,228
----------- ----------
GROSS PROFIT ...................................... 46,445 418,410
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ...... 445,367 336,379
Computer development costs ..................... 121,720 --
Environmental cleanup .......................... -- 20,000
----------- ----------
TOTAL SELLING, GENERAL AND ADMINISTRATIVE ......... 567,087 356,379
OPERATING INCOME (LOSS) ........................... (520,642) 62,031
----------- ----------
OTHER INCOME (EXPENSE):
Interest income ................................ -- 554
Interest expense ............................... (78,004) (44,377)
Gain (loss) from investment securities ......... (59,309) 116,873
Other income (expense) ......................... (17.960) 20,388
----------- ----------
TOTAL OTHER INCOME (EXPENSES) ..................... (155,273) 93,438
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES,
EXTRAORDINARY ITEMS, AND MINORITY INTEREST ....... (675,915) 155,469
MINORITY INTEREST IN LOSS ......................... 24,932 18,536
----------- ----------
NET INCOME (LOSS) ................................. $ (650,983) $ 174,005
=========== ==========
INCOME (LOSS) PER COMMON SHARE
Income before minority interest ................ $ (.07) $ .03
Minority interest in loss ...................... .00 .00
----------- ----------
Net income (loss) per weighted average
common share outstanding ..................... $ (.07) $ .03
=========== ==========
Weighted average number of common
shares outstanding ........................... 9,746,712 5,902,546
=========== ==========
F-4
See notes to consolidated unaudited condensed financial statements.
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
For The Three Months Ended March 31, 1997
Net
Unrealized loss Total
Common Stock Paid-in On securities Shareholders'
Shares Amount Capital Deficit Available for Sale Equity
BALANCES AT DECEMBER 31, 1996 .................. $ 9,484,557 $ 9,485 $ 14,058,256 $(10,113,160) $(606,234) $3,348,347
Common Stock Activity:
Issued for services .......................... 130,162 130 35,136 -- -- 35,266
Issued for debts ............................. 65,930 66 8,414 -- -- 8,480
Issued for assets ............................ 100,000 100 14,900 -- -- 15,000
Realized loss on securities available for sale -- -- -- -- 63,423 63,423
Net loss for the period ended March 31, 1997 . -- -- -- (650,983) -- (650,983)
---------------- ------------ ----------- ------------- --------- ---------
BALANCES AT MARCH 31, 1997 ..................... $ 9,780,649 $ 9,781 $ 14,116,706 $(10,764,143) $ (542,811) $2,819,533
F-5
See notes to consolidated unaudited condensed financial statements.
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For Three Months Ended March 31, 1997 and 1996
1997 1996
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) .............................. $ (650,983) $ 174,005
Adjustments to reconcile net income (loss)
to net cash provided
(Gain) loss from sale of investments ......... 59,309 (116,873)
Minority interest in loss .................... (24,973) (18,536)
Depreciation and Amortization ................ 50,043 54,337
Services paid with common stock .............. 35,266 30,611
Common stock issued for assets and debt ...... 23,480 --
Decrease (increase) in assets:
Receivables ................................ 632,458 (504,234)
Inventories ................................ -- 36,371
Prepaid expenses and other ................. (16,589) 16,218
Investments - other ........................ 27,972 (22,980)
Increase (decrease) in liabilities:
Accounts and notes payable ................. 91,283 513,351
Accrued liabilities ........................ (7,596) 44,706
Deferred income ............................ -- (5,991)
-----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES . $ 219,670 $ 200,985
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ......................... (719,211) (1,143,184)
Proceeds from sales of investments ........... 179,673 194,187
Minority interest in subsidiary .............. -- 825,000
----------- -----------
NET CASH FLOWS (USED) IN INVESTING ACTIVITIES .... $ (539,538) $ (123,997)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long term debt .................... 627,413 --
Reduction of long term debt ................... (358,701) (65,237)
- -------------------------------------------------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ........ $ 268,712 $ (65,237)
----------- -----------
INCREASE (DECREASE) IN CASH ...................... $ (51,156) $ 11,751
CASH AT BEGINNING OF YEAR ........................ 78,368 18,605
-----------
CASH AT END OF YEAR .............................. $ 27,212 $ 30,356
=========== ===========
F-6
See notes to consolidated unaudited condensed financial statements.
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 on Form 10-KSB for the fiscal year
ended December 31, 1996. 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, 1997.
2. Refund to Investors
During the second and third quarter of 1996, CyberConnect, Inc. ("CC")
and CyberDimensions, Inc. ("CD"), both majority owned subsidiaries of the
Company, conducted offerings of their common stock in the amount of $269,704.
The Company later became aware that these offerings might have been conducted
outside the requirements of the offerings. As a result, CC and CD began to
rescind the offerings starting fourth quarter of 1996 and agreed to refund the
investments made by the shareholders by January 15, 1997; however, due to cash
shortages, CC and CD were unable to repay each individual investor in full. CC
and CD then agreed to refund 10% of the investments plus accrued interest to
each investor every 45 days until the debts are paid in full. As of March 31,
1997, CC and CD were indebted to their investors in the amount of $122,117.
3. Termination of the business of CyberMalls, Inc.
CyberMalls, Inc., a Nevada corporation, was incorporated by the Company
on February 15, 1996, for the purpose of preparing, developing, and marketing
Internet virtual malls. On February 25, 1997, the Company decided to permanently
discontinue the operations of CyberMalls. Please see the Company's Form 10-KSB
for the fiscal year ended December 31, 1996 for more detail on this decision.
The Company recorded a loss of $121,720 on its financial statements for the
quarter ended March 31, 1997 to account for its investment in CyberMalls.
4. Reacquisition of Ownership in Certain Subsidiaries
On February 19, 1997, the Company reacquired stock ownership in its
majority-owned subsidiaries, including 294,000 shares of common stock in
Canton's Commercial Carpet Corporation, 294,000 shares in Canton Industrial
Properties Management Corporation of Salt Lake City, and 475,750 shares in
Canton Industrial Corporation of Salt Lake City, from an unaffiliated
corporation. The Company also acquired 57,250 shares in Oasis International
Hotel & Casino I, Inc., an affiliate of the Company. In exchange for the stock
ownership in the subsidiaries and the affiliate, the Company transferred
investment securities in another entity that it had owned to the unaffiliated
corporation.
5. Additional footnotes included by reference
Except as indicated in Notes 1-5 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, 1996. Therefore, those footnotes are included herein by
reference.
F-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company has two main divisions of operations. Through its wholly
owned subsidiaries Canton Financial Services Corporation and Hudson Consulting
Group, Inc., the Company provides a variety of financial consulting services to
various clients. These services primarily involve assisting clients in the
preparation of corporate documentation including private placement offering
documentation, corporate business plans and paperwork necessary to effect
mergers and acquisitions. The remainder of the Company's operations involve the
acquisition, management, lease and sale of real estate holdings. During the
first quarter the Company discontinued the operations of a third business
division related to the development and sale of Internet virtual malls. For more
information on this division and its discontinuation, see the Company's Form
10-KSB for fiscal year ended December 31, 1996.
Financial Consulting
The Company's consulting subsidiaries generate revenues through
consulting fees payable in the client's equity, 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 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 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.
Revenues from the Company's financial consulting operations decreased
during the quarter ended March 31, 1997. The Company recorded quarterly revenues
of $84,632 from its financial consulting operations as compared to $765,628 for
the same period of 1996. This substantial decline was largely attributable to
the cancellation of consulting contracts by several of the Company's clients
during the first quarter and the Company's decision to focus its operations
primarily on real estate activities during the quarter.
One of the services rendered by the Company's financial consulting
subsidiaries involves assisting corporations in effecting stock offerings
pursuant to certain statutory exemptions. Such offerings require strict
adherence to the statutory exemptions upon which the offerings are premised. The
Company notifies its clients of the restrictions and provisions specified in the
exemptions and relies upon the clients to ensure compliance with the exemptions.
Because the Company cannot control the actions of its clients, it is possible
that in the event an offering is conducted outside the requirements of
appropriate exemptions, the Company could be included in claims by investors.
CyberConnect, Inc. ("CC") and CyberDimensions, Inc. ("CD") are majority owned
subsidiaries of the Company that conducted offerings of their common stock
during the second and third quarters of 1996. The Company has become aware that
problems may exist with the manner of these offerings which may require the
rescission of the entire offerings. CC and CD have begun to rescind these
offerings and are in the process of refunding investments made by shareholders
pursuant to these offerings. Approximately $122,117 remained to be paid to those
investors as of March 31, 1997.
The Company has made limited advancements to CC and CD, which are no
longer operating entities, to help those subsidiaries rescind their previously
conducted offerings and settle any potential claims which the shareholders of CC
and CD may have against those companies. It will continue to assist these
subsidiaries to the extent that it has the cash resources to do so. In addition,
the Company has engaged a consultant to assist in refunding investments to CC's
and CD's shareholders. To facilitate this process, the Company transferred
$68,988 in investment securities to the consultant for purposes of settling
potential claims. If a determination is made that the offerings were conducted
outside the parameters of the appropriate offering exemptions, CC and CD could
face potential liability. A possibility exists that the Company could be obliged
to cover such shortfalls if CC and CD cannot cover the expenses.
This potential uncertainty could have a material effect upon the Company's
liquidity.
Real Estate Holdings
The Company owns and manages properties in Utah, Nevada, West Virginia,
Virginia, Florida, Illinois, and Arizona. The Company's goal has been to locate
and acquire undervalued real estate with little or no cash expenditure. The
Company looks for property that can be purchased by assuming the existing
financing or by paying the balance of the purchase price with nominal cash
expenditures and/or the issuance of shares of the Company's common stock. The
amount the Company is willing to pay for a property is determined by management.
The criteria for purchasing properties are broad and management's determination
of value and the terms of financing are the main factors weighed by management
in making a decision to invest in a property.
The Company leases its properties to commercial tenants and applies the
rental income toward its fixed obligations on the properties. Currently, there
are insufficient rental revenues to cover the debt service and other expenses
related to the Company's real estate operations, and the Company therefore has
to use capital from other sources to fund this deficit. The deficit has been
primarily attributable to the Company's recent investments in raw land and
vacancies in the Company's commercial properties. The Company seeks to decrease
vacancies in its commercial properties to eliminate losses from real estate
operations. However, the Company's primary objective is to acquire real estate
which will substantially appreciate in value and for which the Company can
realize a substantial gain upon disposition. Accordingly, the Company has
continued to invest in real estate holdings despite negative cash flows.
The Company recorded rental revenues of $143,980 from its real estate
operations for the first quarter as compared to $105,218 for the same period of
1996. This was largely due to an increase in the number of properties and
decrease in the percentage of vacancies in those properties.
During the first quarter of 1997, two subsidiaries of the Company
executed separate contracts to sell commercial real estate holdings to
unaffiliated purchasers. In February 1997, TAC Inc., a consolidated subsidiary
of the Company, executed a contract to sell its 60,000 square foot commercial
warehouse located at 5280 West Wells Park Road in West Jordan, Utah. On May 1,
1997 and subsequent to the end of the first quarter, TAC closed on the sale of
the warehouse. TAC sold the warehouse for $1.335 million, $200,000 of which was
paid in cash and the remainder of which will be seller financed for a period of
90 days after closing. TAC previously acquired the warehouse in June 1996
through its exercise of an option to purchase the property by paying $293,394 in
cash and assuming a mortgage of $306,456. For more information on the TAC
Warehouse see the Company's Form 10-KSB for the fiscal year ended December 31,
1996.
In January 1997, Canton Industrial Properties Management Corporation of
Salt Lake City ("CIPMC"), a consolidated subsidiary of the Company, executed a
contract to sell its 18,000 square office building located at 202 West 400
South, Salt Lake City, Utah. The sale price of the property under the contract,
as amended, is $950,000 which is to be delivered in cash at the July 10, 1997
closing date. Pursuant to the contract, the purchaser loaned $150,000 to CIPMC,
interest-free, until closing. The sale is subject to the completion of due
diligence by the purchaser and no earnest money was paid. For more information
on this property see the Company's Form 10-KSB for the fiscal year ended
December 31, 1996.
On May 9, 1997 and subsequent to the end of the first quarter, Oasis
International Hotel & Casino, Inc. and Oasis International Corporation, both
wholly owned subsidiaries of the Company, executed a real estate purchase
agreement for the sale of real property located in Oasis, Nevada. The agreement
was executed with Cimarron Enterprises, Inc., an unaffiliated purchaser. The
Oasis property consists of 49.96 acres and all improvements thereupon including
a service station and a small retail and food service operation. The total
purchase price of the property is $1,250,000 to be paid in cash at the time of
closing. Closing is scheduled for August 7, 1997 and may be extended for an
additional 90 days. Cimarron is required to make a deposit of $85,000, none of
which shall be at risk for the first 90 days. After the first 90 days, the
deposit shall become non-refundable incrementally and shall be 100%
non-refundable 60 days after August 7, 1997. The transaction is contingent upon
the purchaser's completion of a due diligence investigation.
The agreement also provides that Cimarron will be granted options to
purchase a total of 1,076 additional acres of nearby real estate for a minimum
of $25,000 per acre through December 1999 with a potential for extension of the
option date through December 2001. The options contain a provision that 160
acres of such property may be purchased at $10,000 per acre if such property is
designated for development of a golf course. These options are effective only
after the sale of the initial 49.96 acres is closed. All of the property subject
to the sales agreement and the options is presently on the books of the
Company's two subsidiaries for an aggregate of $1,682,535. For more information
on the Oasis property see the Company's Form 10-KSB for the fiscal year ended
December 31, 1996.
The Company executed these transactions because the aforementioned
properties had appreciated significantly since they were acquired by the
Company's subsidiaries, and the Company believed that the prices offered by
potential purchasers represented the high end of the market value for each
property. As discussed above, the Company is generally compensated for its
consulting services through the issuance of its clients' equity, much of which
is restricted as to resale. The Company therefore experiences occasional cash
flow shortages and needs to raise capital to meet the debt obligations on its
properties. While the Company generally does not sell real estate holdings to
meet these needs, it believed that these transactions were in the Company's best
interest based upon current real estate market conditions. Accordingly, it chose
to use a portion of the proceeds generated from the sale of the properties to
meet short term obligations in lieu of obtaining financing. The Company does not
intend to rely upon sales of real estate holdings to meet future cash needs but
will instead likely satisfy its cash requirements with debt or equity financing
in addition to its cash flow from operations.
The Company intends to sell further real estate holdings on a case by
case basis provided that it believes that local market conditions make such
sales in the best interest of the Company and its subsidiaries. At the same
time, the Company is continually searching for additional properties which
management believes have appreciation potential.
During the first quarter of 1997, two subsidiaries of the Company
acquired either title to, or the right to acquire title to, substantial amounts
of undeveloped land in Box Elder County, Utah. In February 1997, Diversified
Land and Cattle Corporation, a Nevada corporation and wholly owned subsidiary of
the Company ("DLCC"), acquired 1,280 acres for a total purchase price of
$104,200. DLCC paid $10,560 at closing with the remainder represented by a
$89,612 trust deed note executed in favor of the seller and two additional notes
of $2,084. Also in February 1997, DLCC acquired an additional 2,240 acres for a
total purchase price of $156,800. DLCC paid $15,755 at closing for this latter
property with the remainder represented by a $127,080 trust deed note executed
in favor of the seller and two additional notes of $7,060.
In March 1997, Canton Properties I, Inc., a Utah corporation and wholly
owned subsidiary of the Company ("CPI"), executed an agreement pursuant to which
it acquired an option to purchase approximately 45,000 acres of additional
undeveloped land in Box Elder County, Utah at a price of $41 per acre. Included
in the option were all of the oil, gas and other mineral rights to the property.
As consideration for the option, CPI agreed to pay $3,000 upon the execution of
the agreement, an additional $10,000 within one month of the execution and ten
monthly instalments of $3,000. The Company acquired this raw land with the
intention of either developing such property or selling to a developer
interested in improving the land or extracting the land's natural resources.
Results of Operations
Gross revenues for the quarter ended March 31, 1997 were $228,612
compared to $930,638 for the same period in 1996, a decline of 75%. This
dramatic decrease is attributable to the decline in consulting revenues, which
were $84,632 during the first quarter of 1997 compared to $756,628 for the same
period in 1996. Rental revenue, on the other hand, improved by 37% from $105,218
during the quarter ended March 31, 1996 to $143,980 for the comparable period in
1997.
Costs of revenues were $182,167 for the first quarter of 1997 compared
to $512,228 for the quarter ended March 31, 1996. The decrease in the costs of
revenues is primarily due to the fact that the Company significantly reduced
personnel providing consulting services during the fourth quarter of 1996.
Gross profit was $46,445 for the first three months of 1997 and
$418,410 for the quarter ended March 31, 1996. Gross profit as a percentage of
revenues was 20% and 45%. This deterioration is primarily attributable to the
Company's salary expenses incurred for its consulting services division, which
remained relatively fixed despite the drop in its consulting revenue.
Selling, general, and administrative expenses were $567,087 for the
first quarter of 1997 and $356,379 for the period ending March 31, 1996. During
the first three months of 1997, the Company incurred computer development costs
associated with CyberMalls' operations in the amount of $121,720 and salary
expenses in the amount of $177,058. In addition, consulting, depreciation and
amortization, and building lease expenses collectively accounted for $193,556.
Operating loss was $520,642 during the first quarter of 1997 compared
to an operating gain of $89,513 for the three months ending March 31, 1996. The
deterioration is the result of significantly lower revenues combined with a high
level of selling, general, and administrative expenses. The Company is presently
working to reduce selling, general, and administrative expenses.
During the quarter ended March 31, 1996, the Company realized other
income in the amount of $65,956; however, during the same period in 1997, the
Company incurred other expenses in the amount of $155,273. The major difference
is in the gain (loss) from investment securities account. The Company recognized
$116,873 in gain from investment securities during the first quarter of 1996
compared to $59,309 in loss from investment securities in 1997. The primary
factor behind this loss is the fact that some of Company's equity investments
were sold during the first quarter of 1997 for substantial losses.
Capital Resources and Liquidity
The Company had a net working capital deficiency of $1,780,339 as of
March 31, 1997, compared to $924,310 at the end of March 1996. The main reason
behind this increase in deficiency is the fact that the Company has three
mortgage payables totaling $1,055,770 maturing within a year. The Company is
currently working on refinancing these mortgages with long-term loans.
Net stockholders' equity in the Company was $3,575,430 at the end of
March 1996 compared to $2,819,533 at the end of March 1997. The major factor
behind the decrease is the net loss between April 1, 1996 and March 31, 1997 in
the amount of $2,874,401. This loss was partially mitigated by the increase in
common stock and additional paid in capital through the issuance of stock for
debt, assets, services, and cash during the same period.
PART II
ITEM 1. LEGAL PROCEEDINGS
CyberAmerica Corporation vs. MJMC, Inc., Lanco International, Inc. and
Mi-Jack Products, Inc. - Suit was filed by the Company in the United States
District Court, Central District of Utah, Civil Case Number 2:95 CV 651S on July
14, 1995. The Utah court dismissed the case based upon jurisdictional issues. A
suit seeking the same recovery was filed on January 10, 1997 in the Circuit
Court of Cook County, Law Division as file no. 97L 000369. The claim is based
upon Canton Tire Recycling Corporation's contractual relationship related to the
lease of tire shredding equipment from the defendants which the Company believes
did not perform according to the warranties and representations made by the
defendants at the time. Canton Tire was a wholly owned subsidiary of the Company
which assigned its cause of action to the Company in July of 1995. The complaint
seeks damages for (1) breach of contract, (2) intentional misrepresentation, (3)
negligent misrepresentation, (4) breach of express warranty and (5) breach of
implied warranty. The Company is seeking damages in an amount of not less than
$1 million. Defendant has filed a motion to dismiss and memorandum in support
thereof and the Company's response is due May 28, 1997.
Canton Financial Services Corporation v. Pacific Stock Transfer
Company. Suit has been filed by CFSC against Pacific Stock Transfer in the
District Court of Clark County, Nevada, Case Number A365081. CFSC seeks to
secure the lifting of the restrictive legend on 325,214 shares of stock in Air
Vegas Enterprises, Inc. Pacific has responded contending that the shares were
previously canceled by the unilateral action of the board of directors of Air
Vegas. CFSC seeks relief under ss.104.8403(2) of the Nevada statutes and all
fees and costs incurred in the suit. Local counsel has been retained in Las
Vegas and a motion for summary judgment has been prepared for submission to the
trial court.
Canton Financial Services Corporation v. The Renno Group, Inc. Suit has
been filed by CFSC in the United States District Court for the Middle District
of Florida, Tampa Division, Case Number 96-2367-CIV-T-24-E. CFSC seeks recovery
of funds and stock due to CFSC pursuant to the terms of a consulting agreement
between the parties. The agreement sought the services of CFSC in the merger of
a third party with an existing corporation. This merger was completed and Renno
refused to convey to CFSC the $15,000 cash and 355,029 shares of the common
stock of Network Systems International, Inc. the surviving corporation after the
merger, as required under the agreement. Shares in Network were trading at $1.25
a share on March 5, 1997. Pre-trial mediation ordered by the trial court
resulted in an award to CFSC in the amount of $192,500, but Renno has requested
that this award be set aside and that a trial on the merits be conducted.
Renno's request has been granted and pre-trial discovery is proceeding.
CyberAmerica Corporation v. Steven A. Christensen. This action was
filed by the company on April 7, 1997 in the United States District Court of
Utah, Central Division as Case Number 2:97 CV 0258J. This action seeks the
recovery of $13,123.22 in short swing profits realized by Christensen in sales
of the companies stock within six months of leaving his position as President of
the Company. After service, Christensen filed a counterclaim seeking $250,000 in
damages and unpaid compensation. The company intends to contest the claim and
seek recovery of the short swing profits under ss.16b of the Exchange Act.
ITEM 5. OTHER INFORMATION
In January 1997, the Company accepted the resignation of Susan Waldrop
as its secretary-treasurer and chief financial officer. Ms. Waldrop resigned for
personal reasons and did not express any disagreements with the management or
policies of the Company at the time of her resignation.
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 9 of this Form 10-QSB, and
are incorporated herein by this reference.
(b) Reports on Form 8-K. On March 12, 1997, the Company filed a Form 8-K
disclosing its decision to discontinue the operations of its wholly
owned subsidiary CyberMalls, Inc.
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 20TH day of May 1997.
CYBERAMERICA CORPORATION
/s/ Richard Surber May 20, 1997
------------------
Richard Surber
President, Chief Executive Officer and Director
/s/ Wayne Newton May 20, 1997
----------------
Wayne Newton
Controller
INDEX TO EXHIBITS
EXHIBIT NO. PAGE NO. DESCRIPTION
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) * By-Laws 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.) MATERIAL
CONTRACTS
10(i)(a) * Real Estate Purchase Contract dated January
28, 1997, between the Company and Durband
Properties, LC. (Incorporated herein by
reference from Exhibit No 10(i)(a) to the
Company's Form 10 KSB for the year ended
December 31, 1996.
10(i)(b) * Real Estate Purchase Agreement, dated February
7, 1997, between the Company and ANA
Development, LC. (Incorporated herein by
reference from Exhibit No. 10(i)(b) to the
Company's Form 10 KSB for the year ended
December 31, 1996.
10(i)(c) 10 Option Agreement, dated March 25, 1997,
between Canton Properties, a Nevada
corporation and one of the Company's wholly
owned subsidiaries and Chournos Land &
Livestock.
10(i)(d) 19 Real Estate Purchase Agreement dated May 9,
1997, between the Company's wholly owned
subsidiary Oasis International Hotel & Casino,
a Nevada corporation and Cimarron Enterprises,
Inc.