UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
Form 10-Q
---------------------
/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2000 or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period from __________ to ___________
Commission file number 0-21555
______________________
AMASYS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 54-1812385
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4900 Seminary Road
Suite 600
Alexandria, Virginia 22311
(Address of principal executive offices)
Registrant's Telephone number including area code
(703) 797-8111
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes / / No /X/
As of June 22, 2001, 2,207,350 shares of the Common Stock of the
registrant were outstanding.
AMASYS CORPORATION
TABLE OF CONTENTS
Part I Financial Information: Page No.
Item 1. Financial Statements
Balance Sheets 3
at September 30, 2000
and June 30, 2000
Statements of Operations 4
for the Three Months Ended
September 30, 2000 and 1999
Statements of Cash Flows 5
for the Three Months Ended
September 30, 2000 and 1999
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis 9
of Financial Condition and Results
of Operations
Part II Other Information:
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES
11
AMASYS Corporation
Balance Sheets
September 30 June 30
2000 2000
------------- ------------
Assets
Current assets:
Cash and cash equivalents $ 121,176 $ 41,732
Interest receivable - 8,225
------------- -------------
Total current assets 121,176 49,957
Note receivable 980,954 986,954
Investments in common stock 1,089,550 946,160
Reorganization value, net 33,356 41,696
------------- -------------
Total assets $ 2,225,036 $ 2,024,767
============= =============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 60,502 $ 12,506
------------- -------------
Total current liabilities 60,502 12,506
Note payable 2,133,152 2,133,152
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; 196,000 Series A shares issued and
outstanding 1,960 1,960
Common stock, $.01 par value; 20,000,000 shares
authorized; 2,207,350 shares issued and outstanding 22,073 22,073
Other comprehensive income (loss) 29,705 (8,308)
Retained earnings (deficit) (22,356) (136,616)
------------- -------------
Total stockholders' equity (deficit) 31,382 (120,891)
------------- -------------
Total liabilities and stockholders' equity $ 2,225,036 $ 2,024,767
============= =============
See accompanying notes.
AMASYS Corporation
Statements of Operations
Three months ended
September 30
2000 1999
----------- -----------
Revenue:
Equity in earnings $ 105,377 $ 39,574
Interest income 24,599 23,438
Miscellaneous income 58,203 -
----------- -----------
Total revenue 188,179 63,012
----------- -----------
Costs and expenses:
Professional services 10,127 1,219
General and administrative 7,456 1,016
Amortization 8,340 8,340
----------- -----------
Total costs and expenses 25,923 10,575
----------- -----------
Operating income $ 162,256 $ 52,437
Interest expense 47,996 43,951
----------- -----------
Income (loss) before income taxes 114,260 8,486
Provision for income taxes - -
----------- -----------
Net income (loss) $ 114,260 $ 8,486
=========== ===========
Per share data:
Net income (loss) per share:
Basic $ 0.05 $ 0.004
========== ===========
Diluted $ 0.02 $ 0.002
=========== ===========
Weighted average number of shares:
Basic 2,207,350 2,207,350
=========== ===========
Diluted 5,117,350 5,117,350
=========== ===========
See accompanying notes.
AMASYS Corporation
Statements of Cash Flows
Three months ended September 30
2000 1999
----------------------------------
Operating activities
Net income (loss) $ 114,260 $ 8,486
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Equity in earnings (105,377) (39,574)
Accrued interest on note payable 47,996 43,951
Amortization 8,340 8,340
Changes in operating assets and liabilities:
Note receivable 6,000 -
Interest receivable and other current assets 8,225 1,923
-------------- --------------
Net cash provided by (used in) operating activities 79,444 23,126
-------------- --------------
Net increase (decrease) in cash and cash equivalents 79,444 23,126
Cash and cash equivalents at beginning of period 41,732 736
-------------- --------------
Cash and cash equivalents at end of period $ 121,176 $ 23,862
============== ==============
See accompanying notes.
AMASYS CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2000
1. Basis of Presentation
The accompanying interim financial statements of AMASYS
Corporation (the "Company" or "AMASYS") are unaudited, but in
the opinion of management reflect all adjustments (consisting
only of normal recurring accruals) necessary for a fair
presentation of the results for such periods. The results of
operations for any interim period are not necessarily
indicative of results for the full year. The balance sheet at
June 30, 2000 has been derived from the audited financial
statements at that date but does not include all of the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. These financial statements should be read in
conjunction with the audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 2000 ("2000 Form 10-K"),
filed with the Securities and Exchange Commission on July 2,
2001.
2. Note Payable
The Company entered into a Note Payable Agreement dated June
21, 1996 with the Pension Benefit Guaranty Corporation
("PBGC"). The note accrues interest at the rate of 9% per
annum compounded semi-annually. The note is to be paid prior
to its maturity on December 31, 2006 from any proceeds received
by the Company from PBGC's pro-rata share of the proceeds of
any and all sales of the Company's stock positions in COMTEX
News Network, Inc. ("COMTEX") and Hadron, Inc. ("Hadron") and
value received from the 10% Senior Subordinated Note issued by
COMTEX to the Company on May 16, 1995. If neither of the above
two events occurs prior to December 31, 2006, the note will be
considered cancelled. In addition, PBGC has the unilateral
right, through December 31, 2001, to require the Company to use
its best efforts to liquidate PBGC's pro-rata positions in
COMTEX and Hadron through secondary offerings and private
sales.
The Note was issued pursuant to the Third Joint Plan of
Reorganization of Infotechnology, Inc. and Questech Capital
Corporation dated January 26, 1994, which was confirmed by
order of the United States Bankruptcy Court dated June 24,
1994.
3. Net Income per Share
The following table sets forth the computation of basic and
diluted earnings per share:
Three months ended
September 30
2000 1999
----------- ------------
Numerator:
Net income $ 114,260 $ 8,486
=========== ============
Denominator:
Denominator for basic earnings
per share - weighted average
Shares 2,207,350 2,207,350
Effect of dilutive securities:
Stock options 950,000 950,000
Convertible preferred stock 1,960,000 1,960,000
----------- -----------
Denominator for diluted earnings per share 5,117,350 5,117,350
=========== ============
Basic earnings per share $ .05 $ .004
Diluted earnings per share $ .02 $ .002
4. Investments in Common Stock
The following information presents condensed balance sheet
information as of September 30, 2000 and June 30, 2000 and
condensed income statement information for each of the three
months ended September 30, 2000 and 1999 for Comtex:
September 30 June 30
2000 2000
-------------------------
(in thousands)
Current assets $ 3,592 $ 3,928
Other assets 2,496 2,049
Current liabilities 2,602 2,612
Long-term liabilities 981 987
4. Investments in Common Stock (continued)
Three months ended September 30
2000 1999
----------------------------------
(in thousands)
Revenues $ 4,161 $ 2,409
Gross profit 3,001 1,609
Net income 488 277
5. Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of the following:
Three months ended September 30
2000 1999
------------ ------------
Net loss $ 114,260 $ 8,486
Unrealized gain on investment 38,013 -
------------ ------------
$ 152,273 $ 8,486
------------ ------------
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
REVENUE SOURCES AND REVENUE RECOGNITION
- ---------------------------------------
The Company's revenues are derived from equity in earnings and
interest income related to investments in COMTEX and Hadron. The
Company accounts for its investment in COMTEX using the equity
method, whereby the Company records its share of income or loss
reported by COMTEX based on its ownership interest. The Company
also has a note receivable from COMTEX, which bears interest at
10%. The Company's investment in Hadron was accounted for using
the equity method through March 2000. Due to a change in control
at Hadron in March 2000, in which a group of investors assumed
control of Hadron, the investment has since been accounted for
pursuant to SFAS 115 Accounting for Certain Investments in Debt
and Equity Securities. The Hadron investment balance at each
reporting period is reported based on the stock's trading value
with any increases or decreases being presented as unrealized
gains or losses in the statement of stockholders' equity. No
investments have been made since the initial acquisition of
interests of COMTEX and Hadron in 1996, nor has there been any
sale of interests nor dividends received.
RESULTS OF OPERATIONS
- ---------------------
Comparison of the three months ended September 30, 2000 to the
three months ended September 30, 1999
- ---------------------------------------------------------------
The Company earned net income of $114,000 during the three months
ended September 30, 2000 compared to $8,000 during the three
months ended September 30, 1999. The increase in net income is
due to an increase in revenues of $125,000 (198.6%) offset by an
increase in operating costs and expenses of $15,000 (145.1%) and
interest expense of $4,000 (9.2%).
Revenue. Revenues increased to $188,000 during the three months
ended September 30, 2000 compared to revenues of $63,000 during
the three months ended September 30, 1999, due to an increase in
equity in earnings and miscellaneous income. Equity in earnings
increased $66,000 (166.3%) due primarily to the increase in the
Company's share of earnings of COMTEX, which reported increased
net income of $488,000 during the three months ended September
30, 2000 compared to $277,000 during the same period ended 1999.
The Company also recorded $58,000 in miscellaneous income related
to the United Press International (UPI) bankruptcy settlement.
The Company had previously written off all amounts associated
with UPI.
Operating costs and expenses. Operating costs and expenses
increased $15,000 (145.1%) to $26,000 during the three months
ended September 30, 2000 due to an increase in professional
services and general and administrative expenses. Professional
services increased $9,000 primarily due to increased accounting
fees associated with an audit of the Company's financial
statements. General and administrative expenses increased $6,000
due to an increase in professional expenses associated with an
overall increase in activity.
Interest expense. Interest expense increased due to an increase
in the note payable balance resulting from compounded interest
during the year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company had net working capital of $61,000 at September 30,
2000, including cash and cash equivalents of $121,000. The
Company has had minimal operating activity since commencing
operations in 1996 and has not had any other uses of funds.
Accordingly, the Company has not required any funding sources.
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
- -----------------------------------------------------------
Except for the historical information contained herein, the
matters discussed in this Form 10-Q include forward-looking
statements within the meaning of Section 21E of the Securities
and Exchange Act of 1934. These forward-looking statements may
be identified by reference to a future period or by use of
forward-looking terminology such as "anticipate", "expect",
"could", "may" or other words of a similar nature. Forward-
looking statements, which the Company believes to be reasonable
and are made in good faith, are subject to certain risks and
uncertainties that could cause actual results to differ
materially from those expressed in any forward-looking statement
made by, or on behalf of, the Company.
Part II. Other Information
Items 1 - 5. None.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned there unto duly authorized.
AMASYS CORPORATION
(Registrant)
Dated: July 2, 2001 By: /S/C.W. GILLULY
---------------------------------
C.W. Gilluly, Ed.D.
President and Chief Executive Officer
(Principal Executive Officer and
Principal Financial and
Accounting Officer)