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 June 30, 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 August 15, 1997 was
11,967,452.
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 June 30, 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-8 and are incorporated herein by this reference.
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 (Unaudited) and December 31, 1996
ASSETS June 30
1997
CURRENT ASSETS
Cash ....................................................... $ 14,477
Accounts receivable - trade ................................ 465,608
(Net of allowance for bad debt of $89,097)
Accounts receivable - related parties ...................... 404,997
Accounts receivable - other ................................ 125,960
Receivable - brokerage account ............................. --
Notes receivable - current portion ......................... 1,303,408
Prepaid expenses ........................................... 40,654
Securities available for sale .............................. 398,218
-----------
TOTAL CURRENT ASSETS ......................................... 2,753,322
PROPERTY AND EQUIPMENT ....................................... 7,058,807
OTHER ASSETS
Investment securities at cost ............................. 402,448
Notes receivable - net of current portion ................. 24,000
Investments - other ....................................... 218,421
Deposits .................................................. 92,147
Trade credits ............................................. 180,951
Other assets .............................................. 8,208
-----------
TOTAL OTHER ASSETS ........................................... 926,175
-----------
TOTAL ASSETS ................................................. $10,738,304
===========
See notes to consolidated unaudited financial statements.
F-1
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
June 30, 1997 (Unaudited) and December 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY June 30
1997
CURRENT LIABILITIES
Accounts payable - trade .................................. 387,545
Accounts payable - related parties ........................ 98,912
Accrued liabilities
Interest ................................................ 37,672
Real estate taxes and assessments ....................... 361,531
Payroll and related taxes payable ....................... 235,769
EPA liabilities ......................................... 325,398
Refundable deposits ..................................... 30,334
Refund to investors ..................................... 89,224
Other ................................................... 11,572
Debenture payable ......................................... 280,000
Current maturities of long-term debt ...................... 1,452,874
Current maturities of capitalized lease ................... 18,421
TOTAL CURRENT LIABILITIES .................................... 3,329,252
LONG-TERM LIABILITIES
Long-term debt, less current portion ...................... 3,560,301
Long-term capitalized lease, less current portion ......... 349,504
TOTAL LONG-TERM LIABILITIES .................................. 3,909,805
CONTINGENCIES
MINORITY INTEREST ............................................ 390,306
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; 11,253,925 and 9,484,557
shares issued ........................................... 11,254
Additional paid-in capital ................................ 14,182,272
Accumulated deficit ....................................... (10,735,500)
Unrealized loss from securities available for sale ........ (349,085)
------------
TOTAL SHAREHOLDERS' EQUITY ................................... 3,108,941
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................... $ 10,738,304
============
See notes to consolidated unaudited financial statements.
F-2
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
(Unaudited) (Unaudited)
---------------------------- ------------------------
1997 1996 1997 1996
----------------------------- ------------------------
REVENUE
Sale of building ........................................ $ 1,335,000 $ -- $ 1,335,000 $ --
Consulting revenue ...................................... 41,142 791,812 125,774 1,557,440
Rental revenue .......................................... 118,890 117,871 261,870 223,089
Other revenue ........................................... 3,401 3,442 3,401 63,234
----------- ----------- -----------
TOTAL REVENUE .............................................. 1,498,433 913,125 1,726,045 1,843,763
COSTS OF REVENUE
Cost of sale of building ................................ 666,570 -- 666,570 --
Costs associated with consulting revenue ................ 61,356 359,306 105,621 701,468
Costs associated with rental revenue .................... 87,395 143,782 179,381 246,119
Interest expenses associated with rental revenue ........ 47,803 51,427 93,719 101,687
Cost associated with other revenue ...................... -- 3,921 -- 44,168
----------- ----------- -----------
TOTAL COSTS OF REVENUE ..................................... 863,124 558,436 1,045,291 1,093,442
GROSS PROFIT (LOSS) ........................................ 635,309 354,689 680,754 750,321
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ............... 416,628 372,885 860,995 709,264
Computer development costs .............................. -- -- 121,720 20,000
-----------
TOTAL SELLING, GENERAL AND ................................. 416,628 372,885 982,715 729,264
ADMINISTRATIVE EXPENSES
OPERATING PROFIT (LOSS) .................................... 218,681 (18,196) (301,961) 21,057
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income ......................................... 19,994 10,466 19,994 11,020
Interest expense ........................................ (96,860) (48,176) (174,864) (69,775)
Gain (loss) from sale of assets ......................... (11,540) -- (11,540) --
Gain (loss) from investment securities .................. (275,950) (43,807) (335,259) 73,066
Gain from recoveries of bad debts ....................... 151,200 -- 151,200 --
Gain from disposal of subsidiary ........................ 90,681 -- 90,681 --
Other income ............................................ 3,477 17,102 (14,483) 37,490
----------- ----------- -----------
TOTAL OTHER INCOME (EXPENSE) ............................... (118,998) (64,415) (274,271) 51,801
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST .................................... 99,683 (82,611) (576,232) 72,858
----------- ----------- ----------- -----------
Minority interest in loss (gain) ........................... (71,040) 31,827 (46,108) 50,363
----------- ----------- -----------
Net income (Loss) .......................................... $ 28,643 $ (50,784) $ (622,340) $ 123,221
=========== =========== =========== ===========
See notes to consolidated unaudited financial statements.
F-3
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
Three Months Ended Six Months Ended
June 30, June 30,
(Unaudited) (Unaudited)
1997 1996 1997 1996
----------------------------------------------------------------------------
Income (Loss) per common share
Income (loss) before minority interest ........ $ 0.01 $ (0.01) $ (0.06) $ 0.01
Minority interest in loss (gain) .............. (0.01) 0.00 (0.00) 0.01
-------------- ------------- -------------- -------------
Net income (loss) per weighted average
common share outstanding ................... $ 0.00 $ (0.01) (0.06) $ 0.02
Weighted average number of common
shares outstanding ......................... 10,388,999 6,820,487 10,054,060 6,361,516
============== ============= ============== =============
See notes to consolidated unaudited financial statements.
F-4
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF SHAREHOLDERS' EQUITY
For Six Months Ended June 30, 1997
Net Unrealized
Additional loss on securities Total
Common Stock Paid-in Accumulated available Shareholders'
Shares Amount Capital Deficit 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
========= ============ ============ ============ ============ ============
Common stock activity:
Issued for services ................. 1,413,276 1,413 57,526 -- -- 58,939
Issued for debts owed by
related parties .................... 30,000 30 4,020 -- -- 4,050
Issued for assets ................... 30,000 30 4,020 -- -- 4,050
Realized loss on securities
available for sale ................. -- -- -- -- 193,726 193,726
Net loss for the period
ended June 30, 1997 ................ -- -- -- 28,643 -- 28,643
---------- ----------- ------------ ------------ ------------ ------------
BALANCES AT JUNE 30, 1997 .............. 11,253,925 $ 11,254 $ 14,182,272 $(10,735,500) $ (349,085) $ 3,108,941
========== ============ ============ ============ ============ ============
See notes to consolidated unaudited financial statements.
F-5
CYBERAMERICA CORPORATION FORMERLY KNOWN AS
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
Unaudited
1997 1996
------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) .............................. $ (622,340) $ 123,221
Adjustments to reconcile net income (loss)
to net cash provided:
(Gain) loss from sale of investments ........ 335,259 (73,066)
(Gain) from sale of assets .................. 11,540 --
(Gain) from sale of subsidiary .............. (90,681) --
Minority interest in (gain) loss ............ (46,108) 50,363
Depreciation and Amortization ............... 114,181 111,204
Services paid with common stock ............. 94,205 397,621
Common stock issued for assets and debt ..... 31,580 309,000
Bad debt recoveries ......................... (151,200) --
Decrease (increase) in assets:
Receivables ............................... (505,076) (478,862)
Receivables - related party ............... (174,064) (393,853)
Other current assets ...................... 329,633 (322,973)
Increase (decrease) in liabilities:
Accounts and notes payable ................. 82,658 70,281
Payables - related parties ................. 12,821 157,534
Accrued liabilities ........................ 143,914 54,525
Current portion of long-term debt .......... 23,248 146,042
Deferred income ............................ -- 7,173
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ (410,430) $ 160,732
CASH FLOWS FROM INVESTING ACTIVITIES
Minority interest in subsidiary ............. -- 825,000
Purchase of assets .......................... (586,146) (2,891,719)
----------- -----------
NET CASH FLOWS (USED) IN INVESTING ACTIVITIES ... $ (586,146) $(2,066,719)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock for cash ............... -- 2,180,445
Proceeds from borrowing receivable .......... 982,691 1,012,372
Stock subscription .......................... -- (1,194,712)
Payment on debt ............................. (50,006) (95,685)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ........ $ 932,685 $ 1,902,420
INCREASE (DECREASE) IN CASH ..................... (63,891) (3,567)
CASH AT BEGINNING OF PERIOD ...................... 78,368 18,605
----------- -----------
CASH AT END OF PERIOD ............................ $ 14,477 $ 15,038
=========== ===========
See notes to consolidated unaudited financial statements.
F-6
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS 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 to Shareholders 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. Sale and Acquisition of Real Estate Holdings
On May 5, 1997, the Company's majority-owned subsidiary, TAC, Inc. sold
its commercial warehouse for $1,335,000. $200,000 of the proceeds was paid in
cash and the remainder was seller financed for a period of 90 days after
closing. The Company realized a gain in the amount of $668,430 from this
transaction.
During the second quarter of 1997, the Company, through its
subsidiaries, purchased two pieces of real estate properties for a total of
$320,000. The Company acquired the properties by paying $40,000 at closing and
assuming promissory notes that are secured by deeds of trust. Monthly payments
on the promissory notes total $2,171 per month.
During the second quarter of 1997, the Company purchased 3,840 acres of
land located in Box Elder County, Utah for a total purchase price of $261,000.
The Company has an option to purchase an additional 47,000 acres of land in that
area.
3. Changes in accounting presentation
During the first quarter of 1997, the Company significantly curtailed
the scope of its financial consulting services and decided to focus its
operations on acquisition, management, lease and sale of real estate properties.
As a result of this decision, the Company determined that sales proceeds from
TAC Warehouse should be included in operating revenues (Please see Note 2 for
more detail on this transaction.) Correspondingly, costs associated with the TAC
warehouse are also included in costs of revenues.
4. Recovery of bad debts
During the 1996 fiscal year, CyberConnect, Inc. and CyberDimensions,
Inc., both consolidated subsidiaries of the Company, each acquired a promissory
note with a face value of $75,600 from Homes For America Holdings, Inc. The
notes were due in full on November 12, 1996. Because Homes for America failed to
make any payments on either note, the promissory notes have been in default
since November 12, 1996. Due to the questionable collectability of the notes,
CyberConnect and CyberDimensions reserved 100% of the face value of the notes as
allowance for bad debts. During 1997, CyberConnect and CyberDimensions reached
an agreement with Homes for America to extend the payment date on both
promissory notes to January 31, 1998, when $82,500 will be due on each note. As
a result of this agreement, CyberConnect and CyberDimensions recorded a gain
from recovery of bad debts in the amount of $75,600 each.
F-7
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
5. Subsequent Event
On July 15, 1997, Canton Industrial Properties Management Corporation
of Salt Lake City ("CIPMC"), a consolidated subsidiary of the Company, closed on
the sale of its 18,000 square foot 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 was paid in cash on the closing date. Pursuant to
the contract, the purchaser loaned $150,000 to CIPMC, interest-free. The
principal on that loan was deducted from the proceeds of the closing.
6. 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-8
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. During the first quarter of 1997, the Company
significantly curtailed the scope of its financial consulting services and this
trend continued in the second quarter of 1997. The remainder of the Company's
operations involve the acquisition, management, lease and sale of real estate
holdings.
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 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 June 30, 1997. The Company recorded quarterly revenues
of $41,192 from its financial consulting operations as compared to $791,812 for
the same period of 1996. This substantial decline was largely attributable to
the Company's decision to focus its operations primarily on real estate
activities during the second quarter of 1997.
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 $89,224 remained to be paid to those
investors as of June 30, 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. 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.
During the first quarter of 1997, the Company sought to diversify its
consulting services. The Company formed a wholly owned subsidiary called
NetInvesting.com, Inc. for the purpose of assisting clients with the
dissemination of information about their operations and capital stock.
NetInvesting.com offered a public relations package to its clients which
included publishing regular quotations of clients in national financial
publications and programming corporate information pages on the World Wide Web.
NetInvesting.com's operations were introduced on a limited basis so that the
Company's management could determine the commercial viability of these services.
During the second quarter, the Company discontinued the operations of
NetInvesting.com because it determined that NetInvesting.com could not sustain
long term profitability.
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.
There is a risk that the Company will lose control over some of its
properties through foreclosure if enough funds are not raised to cover the
deficiency between rental revenues and the cost of debt service and maintenance
of the properties. During the next two years, the Company has a significant
balloon payment which comes due and an option which will expire. On December 27,
1997, a $300,000 promissory note secured by the Oasis, Nevada property will
become due and payable. On March 25, 1998, the Company's option to purchase
approximately 47,000 acres of undeveloped land in Box Elder County, Utah for $41
per acre will expire if not exercised on or before that date. Accordingly, the
Company will need to pay approximately $2,227,000 in the next eight months in
order to avoid losing some or all of its beneficial interest in these
properties.
The Company recorded rental revenues of $118,890 from its real estate
operations for the second quarter as compared to $117,871 for the same period of
1996. This number remained substantially unchanged from 1996 notwithstanding a
decrease in vacancies in the Company's commercial properties because of the
Company's disposition of the TAC Warehouse (see below), a property which
previously generated a significant portion of the Company's rental revenues.
On May 5, 1997, TAC, Inc., a consolidated subsidiary of the Company,
closed on the sale of a 60,000 square foot commercial warehouse located at 5280
West Wells Park Road in West Jordan, Utah. TAC sold the warehouse for
$1,335,000, $200,000 of which was paid in cash and the remainder of which was
seller financed for a period of 90 days after closing. In July, 1997, the
purchaser exercised its right to extend the financing for an additional 30 days.
As consideration for this extension, TAC received $11,350 from the purchaser.
The purchaser has an additional option to extend the financing for an additional
six months upon payment of $50,000. 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. The Company recorded a gain of $668,430 on its quarterly
financial statements as a result of the sale of the TAC Warehouse.
On May 9, 1997, 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 under the real
estate purchase agreement was $1,250,000 to be paid in cash at the time of
closing, which was originally scheduled for August 9, 1997. The transaction was
contingent upon the purchaser obtaining financing and successfully completing a
due diligence investigation. On August 7, 1997, the purchaser indicated that it
would not be closing on the sale as called for in the agreement due to its
inability to obtain suitable financing. The purchaser also exercised its right
to reclaim the $85,000 deposit made pursuant to the real estate purchase
agreement. While none of the parties have terminated the real estate purchase
agreement, the purchaser has indicated that it does not intend to purchase the
Oasis, Nevada property according to the terms of the original contract. Oasis
International Hotel & Casino, Inc. and Oasis International Corporation are
currently negotiating with the purchaser to reach another agreement for the sale
of the property.
On July 15, 1997 and subsequent to the end of the second quarter,
Canton Industrial Properties Management Corporation of Salt Lake City ("CIPMC"),
a consolidated subsidiary of the Company, closed on the sale of its 18,000
square foot 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
was paid in cash on the closing date. Pursuant to the contract, the purchaser
loaned $150,000 to CIPMC, interest-free. The principal on that loan was deducted
from the proceeds of the closing. The Company initially purchased this building
in November 1993 for $398,125. For more information on this property see the
Company's Form 10-KSB for the fiscal year ended December 31, 1996.
The Company executed contracts to sell the aforementioned properties
because those 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
financial 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. 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 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.
On April 30, 1997, Cyber Lacrosse, a consolidated subsidiary of the
Company, purchased an 8,000 square foot building located at 26 South Main
Street, Nephi, Utah. The building is leased to an individual who operates a
tavern and Cyber Lacrosse assumed the lease upon purchase of the building.
Included with the building were all furniture, inventory and supplies associated
with the operation of the tavern. The building was purchased for a total
purchase price of $200,000, $20,000 was paid at the closing and the remainder of
which was paid in the form of a 7% promissory note. The note is secured by a
deed of trust on the property. The promissory note requires Cyber Lacrosse to
make monthly payments of $1,272 until 2012, when the remaining principal and
accrued interest are due in full.
During the second quarter, the Company also made substantial
investments in undeveloped land located in Box Elder County, Utah. This land was
acquired through several transactions. The Company, through several
subsidiaries, purchased a total of 3,840 acres of land during the second quarter
for a total price of $261,000, or an average price of $68 per acre. Subsidiaries
of the Company had previously purchased 1,920 acres of land in Box Elder County
and has an option to purchase an additional 47,000 acres of land in that area.
The Company acquired raw land in Box Elder County with the intention of either
developing such property or reselling to a developer interested in improving the
land or extracting the land's natural resources.
On July 2, 1997, Taylor's Landing, Inc., a consolidated subsidiary of
the Company, purchased an 8,000 square foot building located at 390 South Main
in Nephi, Utah. Included with the building were all equipment, furniture and
supplies used in the operation of a cafe. This property was purchased for a
total purchase price of $120,000, $20,000 of which was paid at closing. The
remaining $100,000 was paid in the form of a 7% promissory note. The note is
secured by a deed of trust on the property. The promissory note requires
Taylor's Landing to make monthly payments of $898.83 until January 1, 1999, when
the remaining principal and accrued interest are due in full.
Results of Operations
Gross revenues for the quarter ended June 30, 1997 were $1,498,433
compared to $913,125 for the same period in 1996, an increase of 64%. During the
second quarter of 1997, the Company sold a piece of real estate property located
in West Jordan, Utah and realized $1,335,000 in sale proceeds. Consulting
revenues declined to $41,142 during the second quarter of 1997 from $791,812
during the same period in 1996. This substantial decline was largely due to the
Company's decision to curtail its consulting services operations and focus on
its real estate operations instead. As a result of this decision, rental revenue
increased by 1% from $117,871 during the quarter ended June 30, 1996 to $118,890
for the comparable period in 1997 despite the disposition of the real estate
property, which generated approximately $17,000 in monthly rental revenue.
Costs of revenues were $863,124 for the second quarter of 1997 compared
to $558,436 for the quarter ended June 30, 1996. Gross profit was $635,309 for
the second quarter of 1997 and $354,689 for the quarter ended June 30, 1996.
Gross profit as a percentage of revenues was 42% and 39%, respectively.
Selling, general, and administrative expenses were $416,628 for the
second quarter of 1997 and $372,885 for the quarter ending June 30, 1996.
Operating income was $218,681 during the second quarter of 1997 compared to a
net operating loss of $18,196 for the three months ending June 30, 1996. This
improvement was primarily due to the sale of the same real estate property, from
which the Company recorded a gain in the amount of $668,430.
During the quarter ended June 30, 1997, the Company incurred other
expenses in the amount of $118,998 compared to $64,415 during the same period in
1997. Loss from investment securities was $275,950 for the second quarter of
1997 compared to $43,807 for the same period in 1996. The significant loss in
1997 was due to the fact that the Company sold equity investments at prices that
were substantially below the costs.
Capital Resources and Liquidity
The Company had a net working capital deficiency of $575,930 as of June
30, 1997 compared to $81,696 at the end of June 30, 1996. The main reason behind
this increase in deficiency is the fact that the current portion of notes
payables was $1,452,874 as of June 30, 1997 compared to $352,594 as of June 30,
1996. the Company has four mortgage payables totaling $1,355,848 maturing within
a year. The Company is currently working on refinancing these mortgages with
long-term loans.
Net stockholders' equity in the Company was $5,186,389 at the end of
June 1996 compared to $3,108,941 at the end of June 1997. The major factor
behind the decrease is the net loss between July 1, 1996 and March 31 1997 in
the amount of $2,823,617. 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. During the second
quarter of 1997, the Company issued 1,473,276 shares of its Common Stock valued
at $67,039 for consulting services rendered, debt settlement, and assets.
PART II
ITEM 1. LEGAL PROCEEDINGS
CyberAmerica Corporation vs. MJMC, Inc., Lanco International, Inc. and
Mi-Jack Products, Inc. - In response to the suit filed on January 10, 1997 in
the Circuit Court of Cook County, Law Division as File Number 97L 000369 seeking
recovery of damages suffered by Canton Tire Recycling Corporation based upon the
company's belief that tire shredding equipment did not perform according to
warranties and representations made by defendants. The defendants filed a motion
to dismiss the complaint which was granted on August 19, 1997, The Company has
until October 10, 1997 to replead its complaint. The Company has stated that the
total damages for which it seeks recovery is in an amount of not less than $1
million.
Key L.C. Corporation vs. Paragon Capital Corporation, Allen Z. Wolfson,
CyberAmerica Corporation and Robert J. D'Aleo - Key L.C. filed suit in Federal
District Court of Utah, Central Division on December 18, 1996, Case Number 2:96
CV 1054B, alleging that each of the named defendants violated the Securities
Exchange Act of 1934 in the sale of CyberAmerica stock to Key. The Company filed
a motion to dismiss alleging that the complaint failed to meet the pleading
requirements imposed by the Private Securities Litigation Reform Act and this
motion was denied by the Court in an Order filed on July 7, 1997. The company
has filed an answer denying any liability for the claims of the Plaintiff and a
cross-claim as to the other named defendants in the event that Plaintiff is
found to be entitled to any recovery. The court and the parties are expected to
agree upon a plan for discovery and the future conduct of the litigation in the
near future.
Canton Financial Service Corporation v. The Renno Group, Inc. - CFSC's
claim is pending before the United States District Court for the Middle District
of Florida, Tampa Division, Case Number 96-2367-CIV-T-24-E. The complaint seeks
payment of consulting fees and the delivery of shares to which CFSC is entitled
as a result of services CFSC provided with respect to a merger between the
Defendant and a third party. Cash in the amount of $15,000 is sought plus
delivery of 355,029 shares of the common stock of Network Systems International,
Inc. Shares of Network have traded at times at more than $3.00 per share in
1997. Renno has filed a motion for summary judgment seeking to have the court
rule that Renno is not liable for the delivery of shares of Network to CFSC. A
response to the motion for Summary Judgment is expected to be prepared and filed
with the court opposing the entry of such a finding.
ITEM 5. OTHER INFORMATION
On August 6, 1997, a fire engulfed a 1,290,336 square foot
manufacturing and warehousing facility located at 200 East Elm Street in Canton,
Illinois and owned by Thistle Holdings, Inc., a wholly-owned subsidiary of the
Company. The facility was previously used for tire recycling operations and has
been almost entirely vacant for the past year. The fire destroyed over 800,000
square feet of the buildings located at the facility. Preliminary reports from
investigating government agencies indicate that arson was the cause of the fire.
CyberAmerica has recorded the value of the buildings and land located
on the facility at approximately $378,000 on its consolidated financial
statements. Prior to the fire, portions of the facility were in disrepair and
required substantial remodeling before they were suitable for commercial
purposes. The buildings which were destroyed were not insured against fire
damage because the Company believed that the cost of insurance premiums for such
coverage was prohibitively high given the age, condition and value of the
buildings. The Company does not believe that the loss of the buildings will have
a material effect on the Company given the limited commercial use of the
buildings prior to the fire. However, the Company will likely be responsible for
the costs to clean up the remnants of the fire, including costs to demolish
remaining structures and remove rubble from the site. The Company cannot
reasonably forecast the nature or extent of such costs.
As of the end of the fiscal year ended December 31, 1996, the Company
was indebted to its president, Richard Surber, in the amount of $49,801. This
debt was the result of a promissory note the Company executed in favor of Mr.
Surber on May 4, 1996. During the first six months of 1997, this debt was
increased to $56,438 as a result of periodic advancements which Mr. Surber has
made to the Company.
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 April 30, 1997, the Company filed a Form 8-K
disclosing its plan to purchase up to 500,000 shares of its common
stock on the open market.
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 August 1997.
CYBERAMERICA CORPORATION
/s/Richard Surber August 20, 1997
-----------------
Richard Surber
President, Chief Executive Officer and Director
/s/Wayne Newton August 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) 11 Real Estate Purchase Contract between the
Company's wholly owned subsidiary and Nevada
corporation, Cyber Lacrosse, Inc. and James
Hansen, a private individual regarding the
Company's acquisition of real property.
10(i)(b) 15 Real Estate Purchase Contract between the
Company's wholly owned subsidiary and Utah
corporation, Taylor's Landing, Inc., B. Sydney
Colley and Cassandra Colley, both private
individuals regarding the Company's
acquisition of real property.
10(i)(c) * Real Estate Purchase Contract between Canton
Industrial Properties Management Corporation
of Salt Lake City , a consolidated subsidiary
of the Company and Durbano Properties, L.C.
(Incorporated herein by reference from Exhibit
10(i)(a) of the Company's report on Form
10-KSB for the year ended December 31, 1996.)
10(i)(d) * Real Estate Purchase Contract dated February
7, 1997, between TAC, Inc, a consolidated
subsidiary of the Company and ANA Enterprises.
(Incorporated herein by reference from Exhibit
10(i)Ib) of the Company's report on Form
10-KSB for the year ended December 31, 1996.)
10(i)(e) * 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. (Incorporated herein by
reference from Exhibit 10(i)(d) of the
Company's report on Form 10-QSB for the
quarter ending March 31, 1997.)