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, 2000.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to . ------------ --------------
Commission file number: I-9418
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CYBERAMERICA CORPORATION
------------------------
(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 July 20, 2000 was 2,795,508.
1
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS..................................4
PART II
ITEM 1. LEGAL PROCEEDINGS.....................................................7
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................8
SIGNATURES.....................................................................9
INDEX TO EXHIBITS.............................................................10
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2
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to CyberAmerica Corporation,
a Nevada corporation, and its subsidiaries and predecessors unless otherwise
indicated. Consolidated, unaudited, condensed interim financial statements
including a balance sheet for the Company as of the quarter ended June 30, 2000
and statements of operations, and statements of cash flows for the interim
period up to the date of such balance sheet and the comparable period of the
preceding year are attached hereto as Pages F-1 through F-6 and are incorporated
herein by this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
3
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
PAGE
Consolidated Unaudited Condensed Balance Sheet June 30, 2000 ................F-2
Consolidated Unaudited Condensed Statements of Operations for the Three
and Six Months Ended June 30, 2000 and 1999..........................F-4
Consolidated Unaudited Condensed Statements of Cash Flows for the Six
Months Ended June 30, 2000 and 1999.................................F-5
Notes to Consolidated Unaudited Condensed Financial Statements
June 30, 2000.......................................................F-6
F-1
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS
June 30, 2000
ASSETS
CURRENT ASSETS
Cash $ 745,217
Accounts receivable - Trade 289,690
Accounts receivable - Related Parties 40,187
Note receivable - Current Portion 285,000
Prepaid expenses 23,704
Securities available for sale 5,423,325
-------------
TOTAL CURRENT ASSETS 6,807,123
PROPERTY AND EQUIPMENT (net) 11,439,264
OTHER ASSETS
Investment securities at cost 192,704
Notes receivable - net of current portion 492,000
Investments - other 184,725
------------
TOTAL OTHER ASSETS 869,429
TOTAL ASSETS $ 19,115,816
===========
See notes to consolidated unaudited condensed financial statements.
F-2
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS (Continued)
June 30, 2000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 27,449
Accounts payable - Related Parties 126,516
Accrued liabilities
Interest 63,668
Real estate taxes and assessments 21,608
Payroll and related taxes payable 58,737
Refundable deposits 19,368
Refund to investors -
Other 18,094
Notes payable -
Current portion of long-term debt 962,223
Current portion of IEPA liabilities 65,417
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TOTAL CURRENT LIABILITIES 1,363,080
LONG-TERM LIABILITIES
Long-term debt (net of current portion) 7,818,981
IEPA laibility (net of current portion) 219,980
--------------
TOTAL LONG-TERM LIABILITIES 8,038,961
MINORITY INTEREST 898,642
SHAREHOLDERS' EQUITY
Preferred stock par value $.001; 20,000,000
shares authorized; No shares issued -
Common stock par value $.001; 20,000,000
shares authorized; 2,795,508 shares issued 2,796
Additional paid-in capital 15,355,080
Accumulated deficit (5,880,148)
Treasury stock, 441,730 shares common at cost (662,595)
Unrealized gain/(loss) on securities available for sale -
--------------
TOTAL SHAREHOLDERS' EQUITY 8,815,133
--------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 19,115,816
==============
See notes to consolidated unaudited condensed financial statements.
F-3
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June
30, 2000 and 1999
Three Months Ended Six Months Ended
June 30 June 30
2000 1999 2000 1999
-------------- ------------- ------------- -------------
Revenue
Sale of property $ - $ 840,000 $ - $ 1,440,000
Revenue deferred - - - -
Additional gain recognition 45,442 12,050 62,235 22,442
Consulting revenue 348,978 640,594 1,158,452 937,469
Rental revenue 197,722 275,151 444,120 427,392
-------------- ------------- ------------- -------------
Total Revenue 592,142 1,767,795 1,664,807 2,827,303
Costs of Revenue
Cost of sales of property - 717,310 - 936,808
Costs associated with consulting revenue 357,204 207,020 867,379 408,762
Costs associated with rental revenue 192,758 255,736 366,866 364,477
Interest cost associated with rental
revenue 24,075 84,883 38,603 141,768
-------------- ------------- ------------- -------------
Total Costs of Revenue 574,037 1,264,949 1,272,848 1,851,815
-------------- ------------- ------------- -------------
Gross Profit 18,105 502,846 391,960 975,488
Selling, General & Administrative
Expense 397,036 321,752 700,672 538,462
Operating Profit (Loss) (378,931) 181,094 (308,713) 437,026
Other Income (Expense)
Interest Income 183,801 52,631 265,585 153,898
Interest Expense (63,680) (51,864) (192,314) (151,726)
Gain from sale of investment securities 771,712 576,201 2,681,575 622,479
Gain (Loss) on foreclosure - 256,742 - 256,742
Other income (expense) 147,787 2,004 196,302 4,869
-------------- ------------- ------------- -------------
Total Other Income (Expense) 1,039,621 835,714 2,951,147 886,262
Income (Loss) Before Minority Interest 660,690 1,016,808 2,642,435 1,323,288
Minority Interest in Loss (30,121) (117,471) (207,902) (100,624)
============= ============= ============ =============
Net Profit (Loss) $ 630,569 $ 899,337 $ 2,434,533 $ 1,222,664
Income (Loss) Per Comon Share
Income (loss) before minority interest $ 0.24 $ 0.33 $ 0.85 $ 0.44
Minority interest in gain (0.01) (0.04) (0.07) (0.03)
-------------- ------------- ------------- -------------
Net income (loss) per weighted average
common share outstanding $ 0.23 $ 0.29 $ 0.79 $ 0.41
============= ============= ============ =============
Weighted Average common shares
outstanding 2,795,508 3,124,431 3,016,411 2,996,214
========= ========= ========= =========
CYBERAMERICA CORPORATION SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
Six Months Ended
June 30
Unaudited
-----------------------------
2000 1999
------------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 2,434,533 $ 1,222,664
Adjustments to reconcile net income (loss)
to net cash provided:
(Gain) loss from sale of investments (2,681,575) (622,479)
Loss (Gain) on foreclosure - (256,742)
Minority interest in gain (loss) 207,901 (100,624)
Depreciation and Amortization 155,060 176,428
Common stock issued for assets and debt - 294
Decrease (increase) in assets:
Accounts and notes receivable 1,042,283 193,449
Prepaid Expenses (18,890) -
Securities (2,074,509) -
Increase (decrease) in liabilities:
Accounts and notes payable (595,938) (268,979)
Accrued liabilities (223,768) 736,418
Current portion of long-term debt - (486,053)
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ (1,754,903) $ 880,181
CASH FLOWS FROM INVESTING ACTIVITIES
Minority interest in subsidiary acquired - -
Capital expenditures - (48,756)
Elimination of unrealized gain (430,314) -
Purchase of investments (1,082,637) -
Proceeds from sale of investments 3,329,238 1,009,947
------------ -----------
NET CASH FLOWS (USED) IN INVESTING ACTIVITIES $ 1,816,287 $ 916,191
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock for cash - 13,335
Increase in long term debt 665,519 600,000
Reduction of long-term debt - (589,451)
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 665,519 $ 10,549
INCREASE (DECREASE) IN CASH 726,903 91,559
CASH AT BEGINNING OF PERIOD 18,314 146,744
----------- ------------
CASH AT END OF PERIOD $ 745,217 $ 238,303
=========== ============
See notes to consolidated unaudited condensed financial statements.
F-4
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2000
1. Basis of Presentation
The accompanying consolidated unaudited condensed financial statements have
been prepared by management in accordance with the instructions in Form 10-QSB
and, therefore, do not include all information and footnotes required by
generally accepted accounting principles and should, therefore, be read in
conjunction with the Company's Annual Report to Shareholders on Form 10-KSB for
the fiscal year ended December 31, 1999. These statements do include all normal
recurring adjustments which the Company believes necessary for a fair
presentation of the statements. The interim operations results are not
necessarily indicative of the results for the full year ended December 31, 2000.
2. Stock buyback details
On June 26, 2000 the Company signed an agreement to buyback in a private
transaction 441,730 shares of common stock from Allen Wolfson and his controlled
entities in exchange for forgiveness of debt owed to the Company by Wolfson and
his controlled entities. The details of the exchange are included in form 8-K
filed on July 11, 2000, but are shown here for disclosure purposes.
Reduction in Related Party - Accounts receivables $(662,595)
Establishment of Contra-liability (treasury stock) $ 662,595
The stock was valued at $1.50 per share which was the closing price on the
day of transaction. The net impact is to reduce the issued and outstanding
common shares by 441,730 to 2,795,508 which in turn increases shareholder's
equity per share book value to $3.48 from $3.01.
3. Additional footnotes included by reference
Except as indicated in Notes above, there have been no other material
changes in the information disclosed in the notes to the financial statements
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999. Therefore, those footnotes are included herein by reference.
See notes to consolidated unaudited condensed financial statements.
F-5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The Company's operations consist primarily of two different areas of focus. The
Company's primary operations involve the acquisition, lease and sale of real
estate holdings. The Company also provides financial consulting services.
Real Estate Operations
The Company's objective with respect to its real estate operations is to
acquire, through its subsidiaries, properties throughout the country which the
Company's management believes to be undervalued and which the Company is able to
acquire through the expenditure of limited amounts of cash. The Company attempts
to acquire such properties by assuming existing favorable financing and paying
the balance of the price with nominal cash payments or through the issuance of
shares of the Company's Common Stock. Once such properties are acquired, the
Company leases them to primarily commercial tenants. The Company also makes
limited investments in improvements to the properties with the objective of
increasing occupancy and improving cash flows. The Company believes that with
minor improvements and effective management, properties can be liquidated at a
profit within a relatively short period of time.
The Company recorded rental revenues of $197,722 for the quarter ended June 30,
2000 as compared to $275,151 for the quarter ended June 30, 1999. This decrease
in revenues was largely attributable to a decrease in occupancy of the Company's
commercial properties.
Currently, the Company has negative cash flows from rental operations of $19,111
for the quarter ended June 30, 2000 compared to a negative cash flow of $65,468
for the quarter ended June 30, 1999. This is attributable to a decrease in
overall expenses.
As part of management's attempts to streamline operations and eliminate cash
draining operations, the Company entered into an agreement on July 18, 2000,
wherein World Alliance Consulting, Inc. exchanged 2,850,000 restricted shares of
the common stock of Chattown.com Network, Inc. all of CyberAmerica's or its
subsidiaries interests in the following corporations: Oasis International
Corporation, Adobe Hills Ranch II, LLC, Diversified Holdings II, Inc.,
Diversified Holdings III, Inc., Diversified Holdings V, Inc., Diversified Land
and Cattle Co., Great Basin Water Corporation, Lexington 3 Mile East Terrace
Mountain Estates, Inc., Lexington 4 Mile East Terrace Mountain Estates, Inc.,
and Lexington One Mile East Little Pigeon Mountain Estates, Inc. For more
information on this transaction, see the Company's Form 8-K filed July 25, 2000.
The Company decided to divest itself of these properties in an effort to improve
its cash flow position. As a result of transferring these properties, the
Company estimates that it will reduce negative cash flows associated with these
parcels of real estate in the annual amount of $332,500.35. The Company's
estimated interest expense will decrease by $207,000 over the next twelve
months. The Company's board of directors has determined that it is in the best
interest of the Company to shift its cash resources into purchasing additional
improved properties or using the cash resources to invest in its currently owned
improved properties that have a relatively short term potential to generate
positive cash flows.
4
The Company will continue to eliminate the losses by increasing occupancy and
rental income from those properties of the Company which have a high vacancy
rate. The Company also intends to continue to primarily purchase real estate for
appreciation purposes. Accordingly, the Company hopes to not only minimize and
reverse its real estate cash flow deficit, but also generate sufficient cash to
record a substantial profit upon property disposition.
Consulting Operations
The Company, through its wholly owned subsidiaries Canton Financial Services
Corporation and Hudson Consulting Group, Inc., provides a variety of financial
consulting services to a wide range of clients. The primary service performed by
the Company involves assisting clients in structuring mergers and acquisitions.
This includes locating entities suitable to be merged with or acquired by the
Company's clients, as well as providing general advice related to the
structuring of mergers or acquisitions. The Company also assists clients in
restructuring their capital formation, advises with respect to general corporate
problem solving and provides shareholder relations services designed to expose
its clients to the broker dealer community.
The Company's consulting subsidiaries generate revenues through consulting fees
payable in the client's equity, cash, other assets or some combination of the
three. The primary form of compensation received is the equity securities of
clients. When payment is made in the form of equity, the number of shares to be
paid is usually dependent upon the price of the client's common stock (if such
price is available) and the extent of consulting services to be provided. The
typical value used to determine the number of shares to be paid is one-half or
less of the stock's bid price, which accounts for the fact that most of the
equity received as payment by the Company is restricted as to resale. The
Company accepts equity with the expectation that its services will assist in the
stock's appreciation, thus allowing the Company to be compensated and to make a
return on the payments for its services.
The Company generates cash flow, in part, by liquidating non-cash assets (equity
securities) received as fees for consulting services. As most fees are paid in
the form of equity, the revenues and cash flows realized by the Company are
somewhat tied to the price of its clients' securities and the Company's ability
to sell such securities. A decline in the market price of a client's stock can
affect the total asset value of the Company's balance sheet and can result in
the Company incurring substantial losses on its income statement. The Company
generally books securities that it accepts as payment at a 25% to 75% discount
of the current market value at the time the Company accepts the securities due
to illiquidity of the securities because of restrictions on resale.
The Company's portfolio consists primarily of restricted and unrestricted shares
of common stock in micro to small cap publicly traded companies. This portfolio
currently consists of shares of common in over 70 different companies whose
operations range from that of high-tech Internet operations to oil and gas
companies. The Company believes that the diversity of its current holdings is
such that the overall volatility of its portfolio is significantly less than in
prior years of operations. Nonetheless, the Company's portfolio is considered
extremely valuable.
Revenues from the Company's financial consulting operations decreased for the
quarter ended June 30, 2000 as compared to the same quarter in 1999. The Company
recorded $348,978 in revenues for the quarter ended June 30, 2000, from its
financial consulting operations as compared to $640,594 for the same period of
1999. This decrease was primarily due to a decrease in consulting activities.
5
During the quarter ended June 30, 2000 the Company sold investment securities
owned by the Company and its subsidiaries. The bulk of the securities sold were
securities that the Company and its majority owned subsidiaries acquired in past
years for services rendered to clients by the Company's consulting subsidiaries.
During the quarter ended June 30, 2000, the Company and its subsidiaries sold
$1,149,643 in investment securities. The Company's basis in the securities was
approximately $380,514.
Company Operations as a Whole
Revenues
Gross revenues for the three and six month periods ended June 30, 2000 were
$592,142 and $1,664,807 respectively, as compared to $1,767,795 and $2,827,303
for the same periods in 1999. Gross revenues for the quarter ended June 30, 2000
decreased 66.5% over June 30, 1999. Gross revenues for the six months ended June
30, 2000 decreased 41.1% over the same period in 1999. The decrease in revenues
in the quarter ended June 30, 2000, when compared to the same period in 1999, is
due to a $291,616 decrease in financial consulting, a $77,429 decrease in rental
revenues, a $840,000 decrease in sale of property, and an $33,392 increase in
gain recognition in the quarter ended June 30, 2000 as compared to the quarter
ended June 30, 1999.
Profits
The Company recorded operating losses of $378,931and $308,713 respectively for
the three and six month periods ended June 30, 2000 as compared to operating
profits of $181,094 and $437,026 for the comparable periods in 1999. However,
the net profit as a percentage of revenue increased by 209% for the quarter
ended June 30, 2000 over the quarter ended June 30, 1999. The Company recorded
net profits of $630,569 and $2,434,533 for the three and six months ended June
30, 2000 compared to net profits of $899,337 and $1,222,664 for the comparable
periods in 1999. The Company's increase in operating profitability for six month
period ended June 30, 2000, as compared to the same period in 1999, was the
result of gains from sale of investment securities.
The Company's decline in operating profitability in the three month period ended
June 30, 2000, as compared to the same period in 1999 is attributable to no
revenues from property sales. The Company realized gains from the sale of
investment securities of $771,712 and $2,681,575 in the three and six months
ended June 30, 2000 as compared to gains from the sale of investment securities
of only $576,201 and $662,479 in the comparable periods in 1999.
The Company expects to continue to operate at a profit through fiscal 2000.
However, there can be no assurance that the Company will continue to maintain
profitability or that its revenue growth can be sustained in the future.
Expenses
General and administrative expenses for the three and six months ended June 30,
2000 were $397,036 and $700,672, respectively, as compared to $321,752 and
$538,462 for the same periods in 1999. The reason for the increase is primarily
attributable to an increase in the number of employees.
Depreciation and amortization expenses for the six months ended June 30, 2000
and June 30, 1999 were $155,060 and $176,428, respectively. The decrease was due
to disposition of assets during late 1999.
6
The Company expects expenses to level off or decrease through the balance of the
fiscal year 2000 as a result of elimination of the need to service debt on raw
land sold by the Company on July 18, 2000 (See Form 8-K Filed July 25, 2000) and
the ongoing attempts by management to evaluate and streamline the Company's
operations.
Capital Resources and Liquidity
At the quarter ended June 30, 2000, the Company had current assets of $6,807,123
and total assets of $19,115,816 as compared to $6,019,507 and $17,726,261,
respectively at the year ended December 31, 1999. The Company had net working
capital of $5,444,043 at the quarter ended June 30, 2000 compared to net working
capital of $3,901,190 at the year ended December 31, 1999.
Net stockholders' equity in the Company was $8,815,133 as of June 30, 2000,
compared to $7,473,761 as of December 31, 1999. Due to the Company's stock
buyback of 441,730 shares (See Form 8-K filed July 13, 2000), the number of the
Company's outstanding shares has been reduced causing the per share book value
to increase significantly.
Cash flow used by operations was $1,754,903 for the six months ended June 30,
2000, compared to cash flow provided by operations of $880,181 for the quarter
ended June 30, 1999. Cash flows used in operating activities the six months
ended June 30, 2000 are primarily attributable to investment related activities.
Cash flow provided from investing activities was $1,816,287 for the six months
ended June 30, 2000, compared to $916,191 for the same period in 1999. The
increase is largely due to the increase in proceeds from the sale of investment
securities.
Cash flow provided in financing activities was $665,519 for the six months ended
June 30, 2000, compared to $10,549 for the six months ended June 30, 1999. The
$654,970 increase resulted from purchases by Company subsidiaries of raw land in
Box Elder County, Utah. The Company subsequently sold the subsidiaries which
owned the land. See Item 5, "Other Information."
Due to the Company's debt service on real estate holdings, willingness to
acquire properties with negative cash flow shortages and acceptance of non-cash
assets for consulting services, the Company experiences occasional cash flow
shortages.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations
over the past three years. The Company believes that it can offset inflationary
increases in the cost of materials and labor by increasing sales and improving
operating efficiencies.
Known Trends, Events, or Uncertainties
General Real Estate Investment Risks
The Company's investments are subject to varying degrees of risk generally
incident to the ownership of real property. Real estate values and income from
the Company's current properties may be adversely affected by
7
changes in national or local economic conditions and neighborhood
characteristics, changes in interest rates and in the availability, cost and
terms of mortgage funds, the impact of present or future environmental
legislation and compliance with environmental laws, the ongoing need for capital
improvements, changes in governmental rules and fiscal policies, civil unrest,
acts of God, including earthquakes and other natural disasters which may result
in uninsured losses, acts of war, adverse changes in zoning laws and other
factors which are beyond the control of the Company.
Value and Illiquidity of Real Estate
Real estate investments are relatively illiquid. The ability of the Company to
vary its ownership of real estate property in response to changes in economic
and other conditions is limited. If the Company must sell an investment, there
can be no assurance that the Company will be able to dispose of it in the time
period it desires or that the sales price of any investment will recoup the
amount of the Company's investment.
Property Taxes
The Company's real property is subject to real property taxes. The real property
taxes on this property may increase or decrease as property tax rates change and
as the property is assessed or reassessed by taxing authorities. If property
taxes increase, the Company's operations could be adversely affected.
Year 2000 Compliance
As of July 25, 2000, the Company has not experienced any Y2K problems.
Forward Looking Statements
The forward looking statements contained in this Item 2 and elsewhere in this
Form 10-QSB are made pursuant to the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
involve a number of risks and uncertainties, including the timely development,
and market acceptance of products and technologies, competitive market
conditions, successful integration of acquisitions and the ability to secure
additional sources of financing. The actual results that the Company may achieve
may differ materially from any forward-looking statements due to such risks and
uncertainties.
PART II
ITEM 1. LEGAL PROCEEDINGS
During the second quarter of 2000, no material developments occurred regarding
the Company's legal proceedings. For more information please see the Company's
Form 10-KSB for the year ended December 31, 1999, and Form 10-QSB for the
quarter ended March 31, 2000.
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES
8
On April 6, 2000, the Company issued 10,000 shares of common stock to Adrienne
Bernstein for services rendered. These shares were issued pursuant to the
exemption from registration provided by Section 4(2) of the Securities Act of
1933. The Company made this offering based on the following factors: (1) the
issuance was an isolated private transaction by the Company which did not
involve a public offering; (2) there was only one offeree who was issued stock
for services as a consultant of the Company; (3) the offeree stated an intention
not to resell the stock and has continued to hold it since it was acquired; (4)
there were no subsequent or contemporaneous public offerings of the stock; (5)
the stock was not broken down into smaller denominations; and (6) the
negotiations for the sale of the stock took place directly between the offeree
and the Company.
ITEM 5. OTHER INFORMATION
On June 26, 2000, the Company purchased 441,730 of its shares of common stock
from entities related to Allen Z. Wolfson or in which he has a controlling
interest ("Wolfson Entities"). In exchange, the Company forgave debt owed to it
by the Wolfson Entities. The Company purchased the shares based upon the closing
price of $1.50 per share as of June 26, 2000. The total purchase price was
$662,595. All notes payable between the Wolfson Entities and the Company were
eliminated as a result of the stock buy back.
The buy back of the 441,730 shares of stock at $1.50 was significantly below the
reported book value per share of $2.73, as disclosed in the company's Form
10-QSB for the quarter ended March 31, 2000. The transaction has been recognized
for the quarter ended June 30, 2000 and had the effect of increasing the
Company's book value of common stock approximately $0.47 per share for the
period.
The Company bought back the stock for the primary purpose of decreasing Mr.
Wolfson's direct or indirect shareholdings in The Company's common stock below
the 10% level. The board of directors has determined that it would be in the
best interest of The Company to eliminate Mr. Wolfson as a control person of the
company because of certain charges brought against him originating out of the
Southern District of New York ("the New York Indictment").
The term "control" is defined in Rule 12b-2 of the Securities Exchange Act of
1934 as "the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract or otherwise."
Accordingly, a significant factor in determining "control" is the ownership of a
significant amount of voting securities. The board of directors believes that
the buy back of the 441,730 shares will significantly reduce Mr. Wolfson's
influence on management and is the first step toward eliminating Mr. Wolfson as
a control person.
Due to the indictment of Allen Wolfson, the Company has decided that for public
relations reasons, the Company should minimize the dealings between Mr. Wolfson
and the Company. The stock purchase described above was carried out, in part,
for this reason. The New York Indictment charges improper dealings by Mr.
Wolfson and others in the shares of five publically traded companies. The
Company has determined that it has, from time to time, performed consulting
services for four of the named companies. These companies are Learner's World,
Inc. Rollerball, Inc., Healthwatch, Inc., and Hytk Industries, Inc. The Company
has received shares of stock from said companies in payment for consulting
services rendered to the companies and some of the shares have been sold by the
Company. Mr. Wolfson has been involved in referring business to the Company and
has consulted with the Company on the Company's purchase and sale of shares in
the four above
9
listed companies. To the knowledge of the Company, it is not a target of the
investigation which resulted in the indictment of Mr. Wolfson and the Company
has not been charged with any wrongdoing. However, in the event that Mr. Wolfson
is convicted of the charges set forth in the New York Indictment, his prior
involvement with the Company might result in claims being made against the
Company at some future time.
The Company entered into an agreement on July 18, 2000, wherein World Alliance
Consulting, Inc. exchanged 2,850,000 restricted shares of the common stock of
Chattown.com Network, Inc. all of The Company's or its subsidiaries interests in
the following corporations: Oasis International Corporation, Adobe Hills Ranch
II, LLC, Diversified Holdings II, Inc., Diversified Holdings III, Inc.,
Diversified Holdings V, Inc., Diversified Land and Cattle Co., Great Basin Water
Corporation, Lexington 3 Mile East Terrace Mountain Estates, Inc., Lexington 4
Mile East Terrace Mountain Estates, Inc., and Lexington One Mile East Little
Pigeon Mountain Estates, Inc. These corporations all hold title to raw land in
either Elko County, Nevada or Box Elder County, Utah. The Company's net equity
in these real estate holdings, the primary assets of the corporations being
transferred, was determined by the Company to be $857,912 or 9.7% of the net
book of the Company. For more information on the these companies and the real
property they own, see "Item 2. Description of Property" in the Company's
December 31, 1999 Form 10KSB.
World Alliance Consulting, Inc. is a Utah corporation that is 100% owned by
Allen Wolfson. Mr. Wolfson was expected to play a material role in the
development of the raw land. In light of the Company's current intentions to
discontinue its plans to develop raw land and its ongoing efforts to remove Mr.
Wolfson as a control person, terminate his employee status and substantially
limit his role as a consultant, the Company believes that the disposition of
these properties will further these initiatives.
The Company decided to divest itself of these properties in an effort to improve
its cash flow position. As a result of transferring these properties, the
Company estimates that it will reduce negative cash flows associated with these
parcels of real estate in the annual amount of $332,500.35. The Company's
estimated interest expense will decrease by $207,000 over the next twelve
months. The Company's board of directors has determined that it is in the best
of the Company to shift its cash resources into purchasing additional improved
properties or using the cash resources to invest in its improved properties that
have a relatively short term potential to generate positive cash flows.
The Company accepted shares of Chattown.com which are restricted shares of
common stock, at the market price on the date of the transaction of $0.53125 per
share, or a total valuation for 2,850,000 shares of $1,514,062. As a result of
the restricted nature of the shares and the currently thinly traded market for
the Chattown.com shares, there is no guarantee of their ultimate value at a time
when the Company may be able to liquidate the shares. The Company may discount
the value of these shares because their value may be impaired as a result of
their illiquid status.
10
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 10 of this Form 10-QSB, and
are incorporated herein by this reference.
(b) Reports on Form 8-K. The Company filed no reports on Form 8-K during
the quarter for which this report is filed.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
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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 11th day of August, 2000.
CYBERAMERICA CORPORATION
/s/Richard D. Surber
- ------------------------------
Richard D. Surber August 11, 2000
President, Chief Executive Officer and Director
/s/Ed Haidenthaller August 11, 2000
- ------------------------------
Ed Haidenthaller
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT PAGE DESCRIPTION
NO. NO.
3(i) * Articles of Incorporation of the Company (note that these
were amended by the Articles of Merger constituting Exhibit
2 to this Form 10-KSB) (incorporated herein by reference
from Exhibit No. 3(i) to the Company's Form 10-KSB for the
year ended December 31, 1993).
3(ii) * Bylaws of the Company, as amended (incorporated herein by
reference from Exhibit 3(ii) of the Company's Form 10 KSB
for the year ended December 31, 1995).
MATERIAL CONTRACTS
10(i)(a) * Acquisition Agreement between the Company's majority owned
subsidiary Innovative Property Development Corp. and
Diversified Holdings - I, Inc., dated April 2, 1999
(incorporated herein by reference from Exhibit No. 10(i)(a)
to the Company's Form 10KSB for the period ended December
31, 1998).
27 Financial Data Schedule "CE"
* Previously filed as indicated and incorporated herein by reference from
the referenced filings previously made by the Company.
13