U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to __________
Commission File Number: 0-26073
INVESTAMERICA, INC.
(Name of Small Business Issuer in its Charter)
Nevada 87-0400797
------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1330 Portside Way
Salt Lake City, Utah 84123
(Address of principal executive offices)
Registrant's telephone numbers: 801-808-6096 (Telephone)
485-658-4833 (Fax)
Indicate by checkmark 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 ]
Indicate the number of shares outstanding for each of the issuer's
classes of Common Stock as of the last practical date:
Common Stock, $0.001 par value per share, 50,000,000 shares authorized,
30,522,703 issued and outstanding as of December 31, 1999. Preferred
Non-Voting Stock, $0.001 par value per share, 5,000,000 shares
authorized, none issued nor outstanding as of December 31, 1999.
Transactional Small Business Disclosure Format
Yes [ ] No [ X ]
1
INVESTAMERICA, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................. 2
Balance Sheet (unaudited)............................ 3
Statements of Operations (unaudited)................. 4
Statements of Cash Flows (unaudited)................. 5
Notes to Financial Statements........................ 6-8
Item 2. Management's Discussion and Analysis of Plan
of Operation........................................ 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 11
Item 2. Changes in Securities and Use of Proceeds............ 11
Item 3. Defaults upon Senior Securities...................... 11
Item 4. Submission of Matters to a Vote
of Security Holders................................. 11
Item 5. Other Information..................................... 11
Item 6. Exhibits and Reports on Form 8-K...................... 11
Signatures...................................................... 12
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
(Financial Statements Commence on Following Page)
2
INVESTAMERICA,INC.
BALANCE SHEET
as at December 31, 1999
as at September 30, 1999
BALANCE SHEET
ASSETS
Audited
Unaudited Year Ended
Dec. 31, 1999 Dec 31, 1998 Sept 30, 1999
------------- ------------ -------------
CURRENT ASSETS:
Cash $ 512,688 $ 0
TOTAL ASSETS $ 512,688 $ 0
=========================================
LIABILITIES AND STOCKHOLDERS'
EQUITY (Deficiency)
CURRENT LIABILITIES
Accounts Payable and
Accrued Expenses $ - 674,954 801,036
Judgement Payable 7,372,894
Notes Payable $ 319,956
------------------------------------------
TOTAL CURRENT LIABILITIES $ - $ 994,910 $8,182,930
------------------------------------------
STOCKHOLDERS' EQUITY:
Preferred Shares, par value $.001
per share
Authorized Shares 5,000,000
Outstanding Shares None
Common Shares, par value $0.001 30,493 9,791 9,791
Per share
Authorized 50,000,000
Outstanding Shares
9,790,443 - 1998
30,522,703 - 1999
Additional Paid - In Capital 9,854,530 1,989,840 1,989,840
Accumulated Deficit (9,372,355) (2,994,541) (10,182,561)
------------------------------------------
Total Stockholders
(Deficiency) (512,688) (994,910) (8,182,930)
------------------------------------------
Total Liabilities and
Stockholders (Deficiency) $ 512,688 $ - $ -
==========================================
The accompanying notes are an integral part of these financial statements.
3
INVESTAMERICA,INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
STATEMENTS OF INCOME
Unaudited Audited
For the Quarter For Fiscal Year
Ended December 31 Ended Sept, 1999
1999 1998
Revenue $ - $ - $ -
Operating Expenses - 60,193 $ 256,865
---------------------------------------------
Loss before other items (60,193) (256,865)
Judgment Against Company - Net
Forgiveness of Indebtedness 810,206 -
---------------------------------------------
Income Before Provision for
Federal Income Taxes 810,206 -
Provision for Federal
Income Taxes 275,687 -
Tax Benefit from Net Operating
Loss Carry Forward (275,687) -
Judgement Against Company 6,991,348
--------------------------------------------
Net Income (Loss) $810,206 $ (60,193) $ (7,248,213)
============================================
Weighted average
number of common
shares outstanding 20,091,573 9,790,443 9,790,443
-------------------------------------------
Net loss per common share $ .04 $ (0.01) $ (0.74)
-------------------------------------------
The accompanying notes are an integral part of these financial statements
4
INVESTAMERICA,INC.
STATEMENT OF CASH FLOWS
STATEMENT OF CASH FLOWS
Unaudited Audited
For the Quarter For Fiscal Year
Ended December, 31 Ended Sept, 1999
1999 1998
- ----------------------------------------------------------------------------
Cash Flow From (TO)
Operating Activities
Net Income (Loss) $ 810,206 $ (60,193) $(7,248,213)
Adjustment to reconcile
net loss to net cash
provided by operating
activities: 9,399
(Decrease) Increase in
Judgement Payable (7,372,894) 7,372,894
(Decrease) Increase in notes (810,066) 7,805 (312,181)
payable
(Decrease) Increase in accounts
payable and accrued expenses) - 52,388 187,500
-------------------------------------------
Net cash used by operating
Activities: (7,372,754) - -
-------------------------------------------
Cash Flows from Financing
Activities:
Proceeds from issuance of
Common stock 7,885,422 - -
--------------------------------------------
Net cash flow from financing
Activities 7,885,422 -
--------------------------------------------
Increase (Decrease) in Cash 512,668 0 0
Cash at Beginning of Year 0 0 0
-------------------------------------------
Cash at End of Year $ 512,668 $ 0 0
===========================================
The accompanying notes are an integral part of these financial statements.
5
InvestAmerica, Inc. and Subsidiary
- ---------------------------------------------------------
Notes to Financial Statements
- ---------------------------------------------------------
December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Balboa Investments, Inc. (Parent) was organized under the
Laws of the State of Utah on October 20, 1983. The Company changed its
Domicile from the State of Utah to the State of Nevada on December 18, 1986.
This change in domicile was accomplished by merging the Company into a Nevada
corporation created solely for this purpose. In connection with the
change in domicile, the Company changed its corporate name from Technology
Research Inc., to Balboa Investments, Inc. effective December 18, 1986. The
Company has not commenced planned principal operations and is considered a
development stage company as defined in SFAS No. 7.
On December 29, 1992, Balboa Investments, Inc. changed its name to
Progressive Polymerics International, Inc., (Parent) and acquired all of
the issued and outstanding common stock of Progressive Polymerics, Inc.,
(Subsidiary).
In April of 1997, the Board of Directors of the Company approved a Plan
Of Reorganization, including a partial liquidation of the Company's current
assets to a Liquidating Trust in order to effectuate the partial
liquidation portion of the Plan. The Liquidating Trust received a transfer
of all the assets of the Company subject to the assumption by the Trust of
all the Company's liabilities and those being incurred in the Reorganization.
The Trust exists solely for the purpose of liquidating the Trust Estate and
distributing the proceeds of liquidation to the Shareholders. The Trust
served as a temporary vehicle for the maintenance and operation of the
Trust Estate, with a view to its liquidation and not the conduct of a
continuing business.
On April 17, 1997, the Company reverse-split its Common Stock twenty
(20) old shares for one (1) new share.
On April 17, 1997, the Company acquired 100% of the issued and
outstanding capital stock of InvestAmerica, Inc., thereby making it a
wholly-owned subsidiary.
On May 14, 1997, the stockholders of the Company approved the merger of
InvestAmerica, Inc., a wholly-owned subsidiary, with and into the
Company, the survivor of the merger. A change of the Company's name to
InvestAmerica, Inc., was also approved.
Principles of Consolidation - The consolidated financial statements
Include the accounts of the Company and its wholly-owned subsidiary. All
Significant intercompany transactions between the parent and the
subsidiary have been eliminated in consolidation.
Cash and Cash Equivalents - For purposes of the statements of cash flow,
cash and cash equivalents are defined as demand deposits at banks.
6
InvestAmerica, Inc. and Subsidiary
- ---------------------------------------------------------
Notes to Financial Statements
- ---------------------------------------------------------
December 31, 1999 and 1998
NOTE 2 - NOTES PAYABLE
Demand notes payable were issued for services and expenses. These
Notes carry an interest rate of 10% per annum. Accrued interest has
Been added to principal balance on notes annually. The Notes were
not paid when due, however, they were satisfied by the Company under a
settlement agreement with the note holder. See "Note 5--Settlement."
NOTE 3 - INCOME TAXES
Income tax expense, if applicable, includes state taxes currently payable.
There are no deferred taxes or benefits arising from timing differences
between financial statement and tax a basis income. For the period
presented the Company was able to utilize net operating loss carry overs to
reduce Federal taxes.
NOTE 4 - STOCK OPTIONS
The Company granted stock options to purchase 6,150,000 shares of Common
Stock to Officers, Directors and key personnel. The options were granted
On November 24, 1999, and have a five (5) year term, vest monthly over
twenty-five (25) months, and have at an exercise price of $1.20 per share.
NOTE 5 - SETTLEMENT
The Company and Mr. Daniel Tepper, a shareholder and former consultant of the
Company, entered into a settlement agreement pursuant to which the Company
issued 4,740,000 shares of the Company's common stock to Mr. Tepper in
exchange for the
satisfaction of certain judgments totaling $7,372,894 obtained by Mr.
Tepper against the Company. The judgments related to claims which arose
prior to current management obtaining control of the Company, including
claims for money due under notes payable and for services rendered to this
Company. The settlement agreement included mutual releases.
7
InvestAmerica, Inc. and Subsidiary
- ---------------------------------------------------------
Notes to Financial Statements
- ---------------------------------------------------------
December 31, 1999 and 1998
NOTE 6 - ACQUISITIONS AND INVESTMENTS
During the Quarter, the Company signed an Agreement to purchase Oakbay
Trading Limited, a BVI corporation ("Oakbay"),which is the sole stockholder
of Optica Communications, Inc. a British Columbia corporation, ("Optica
Canada") and Optica Communications, Inc., a Nevada corporation ("Optica USA").
Optica Canada and Optica USA are start-up companies that are endeavoring to
become a leading supplier of managed dark fiber and innovative band-with
services on a global basis. Under the terms of the Agreement, Oakbay will
become a wholly-owned subsidiary of the Company and the current stockholders of
Oakbay Limited will acquire control of the Company through the issuance of
Preferred Stock that is convertible into common stock of the Company.
The Company has entered into an agreement to invest $5,000,000 for 833,333
Preferred shares of Omnigon International, Inc., ("Omnigon"). Omnigon, a
private company, is constructing an advanced global network to offer
proprietary value added communications services.
The Company has signed a letter of intent to acquire through a newly formed
wholly-owned subsidiary all of the issued and outstanding shares of Zed Data
Systems Corp., a British Columbia corporation ("Zed"), for a cash payment of
$5,000,000 and the issue of shares of the subsidiary exchangeable for
15,000,000 common shares of the Company. Douglas Smith, President of the
Company, is the sole owner and President of Zed. Zed is a value added
reseller of data communications equipment. It sells products and services
for equipment supplied by several manufacturers, including Cisco Systems
and Fore Systems. During the quarter ended November 30, 1999, Zed had sales
of approximately $3,750,000 and income from operations before taxes of
approximately $225,000.
NOTE 7 - SHAREHOLDER'S EQUITY
SHAREHOLDER'S EQUITY
Common Stock Additional
------------ paid-in
Accumulated
Shares Amount Capital Deficit
------ ------ ---------- -------
Balances,
September 30, 1998 9,790,443 $ 9,791 $1,989,840 $ (2,934,348)
Net(Loss) For the Quarter
Ended Dec. 31, 1998 (60,193)
-------------------------------------------------
9,790,443 $ 9,791 $1,989,840 $ (2,994,541)
=================================================
Balances,
September 30, 1999 9,790,443 $ 9,791 $1,989,840 $(10,182,561)
(A) Sale and Issuance of
Common Stock in a Private
Placement 15,992,260 15,962 496,566 -
Stock Issued in Lieu of Cash
Payment on Judgement
Against the Company 4,740,000 4,740 7,368,154 -
Net Income For the Quarter
Ended Dec 31, 1999 800,637
-------------------------------------------------
Balances, Dec 31, 1999 30,522,703 $30,523 $9,854,530 $ (9,372,355)
=================================================
(A) During the Quarter, the Company sold and issued 15,992,260 shares for
$512,528 (avg. $.032 per share)
NOTE 8 - SUBSEQUENT EVENT
In order to further capitalize the Company, a Private Placement stock
offering was made, subsequent to December 31, 1999, in reliance upon an
exemption from registration requirements, pursuant to Section 4(2) of the
Securities Act of 1933, as amended and Regulation D of the Act. The Company
raised approximately three million ($3,000,000) dollars through this Private
Placement from approximately four (4) individuals. The terms of this Private
Placement was as follows: Approximately, six hundred twenty-five thousand
(625,000) shares of common stock were issued at a twenty percent discount to
the company's stock price of $6.00 per share, i.e., $4.80 per share with one
warrant per share issued. These warrants have a one (1) year term and have an
exercise price of $3.00 per share. Additionally, to further capitalize
the Company, the Company borrowed the sum of two million ($2,000,000) dollars
from private sources (one of whom is an affiliate of the Company), with the
interest payable at twelve (12) percent per year. The Note has a five year
term, and is payable in five equal annual installments.
In February, 2000, Optica entered into employment agreements with three (3)
individuals under which, among other things, each individual has been granted
an option to acquire one million (1,000,000) shares of the Company's common
stock and will be issued one hundred thousand (100,000) shares of the Company's
common stock. The options have a five year term, an exercise price of $5.25
per share, and vest in monthly installments over two years.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
InvestAmerica, Inc. (the "Company") was originally incorporated on October
20, 1983 as Balboa Investments, Inc. under the laws of the State of Utah to
engage in any lawful corporate activity, including, but not limited to,
selected mergers and acquisitions. After a number of name changes
as described in " Business Development, Organization and Acquisition
Activities," on or about May 14, 1997, the Company changed its name to
InvestAmerica, Inc.
The Company has been in the developmental stage since inception and has
no principal operations to date. Other than issuing shares to its
shareholders, the Company never commenced any operational activities.
As such, the Company's sole purpose during the past six months was to
locate a merger or acquisition opportunity with a private entity. The Board
of Directors of the Company has elected to commence implementation of the
Company's principal business purpose described below under "Item 2 - Plan
of Operation."
The Company has no operations and in accordance with SFAS #7, is
considered a development stage company.
Going Concern - The Company experienced operating losses for the period
ended December 31, 1999. The financial statements have been prepared assuming
the Company will continue to operate as a going concern which contemplates
the realization of assets and the settlement of liabilities in the normal
course of business. No adjustment has been made to the recorded amount of
assets or the recorded amount or classification of liabilities which would be
required if the Company were unable to continue its operations.
Unclassified Balance Sheet - In accordance with the provisions of SFAS
No. 53, the Company has elected to present an unclassified balance sheet.
Loss Per Share - The Company adopted the provisions of Statement
Of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share"
that established standards for the computation, presentation and disclosure
of earnings per share ("EPS"), replacing the presentation of Primary EPS
with a presentation of Basic EPS. It also requires dual presentation of Basic
EPS and Diluted EPS on the face of the income statement for entities
With complex capital structures. The Company did not present Diluted EPS
since it has a simple capital structure.
During the quarter, the Company signed an Agreement to purchase Oakbay Trading
Limited, a BVI corporation ("Oakbay"),which is the sole stockholder of Optica
Communications, Inc. a British Columbia corporation ("Optica Canada"), and
Optica Communications, Inc., a Nevada corporation ("Optica USA"). Optica
Canada and Optica USA are start-up companies that are endeavoring to become a
leading supplier of managed dark fiber and innovative band-with services on a
global basis. Under the terms of the Agreement, Oakbay will become a wholly-
owned subsidiary of the Company and the current stockholders of Oakbay Limited
will acquire control of the Company through the issuance of Preferred Stock,
that is convertible into common stock of the Company.
Results of Operations
As of December 31, 1999, the Company has yet to generate any revenues. In
addition, the Company does not expect to generate any material revenues over
the next twelve (12) months, unless it consummates the acquisitions described
under "Plan of Operation" below. Due to a Forgiveness of Indebtedness, the
Company showed net income for the Quarter of $810,206. This represented
a net income of $0.04 per common share.
9
Plan of Operation
On November 22, 1999 the Company signed an Agreement with Oakbay Trading
Limited, a BVI corporation ("Oakbay"), which is the sole stockholder of
Optica Communications, Inc., a British Columbia corporation ("Optica Canada")
and Optica Communications, Inc., a Nevada corporation ("Optica USA"). The
term "Optica" as used herein shall mean collectively Oakbay, Optica
Canada and Optica USA. Optica is endeavoring to become a leading supplier
of managed dark fiber and innovative band-with servies on a global basis.
The Company has entered into an agreement to invest $5,000,000 for 833,333
Preferred shares of Omnigon International, Inc., ("Omnigon"). Omnigon, a
private company, is constructing an advanced global network to offer
proprietary value added communications services.
The Company has signed a letter of intent to acquire through a newly formed
wholly-owned subsidiary all of the issued and outstanding shares of Zed Data
Systems Corp., a British Columbia corporation ("Zed"), for a cash payment of
$5,000,000 and the issue of shares of the subsidiary exchangeable for
15,000,000 common shares of the Company. Douglas Smith, President of the
Company, is the sole owner and President of Zed. Zed is a value added
reseller of data communications equipment. It sells products and services
for equipment supplied by several manufacturers, including Cisco Systems
and Fore Systems. During the quarter ended November 30, 1999, Zed had sales
of approximately $3,750,000 and income from operations before taxes of
approximately $225,000.
In order to further capitalize the Company, a Private Placement stock
offering was made, subsequent to December 31, 1999, in reliance upon an
exemption from registration requirements, pursuant to Section 4(2) of the
Securities Act of 1933, as amended and Regulation D of the Act. The Company
raised approximately three million ($3,000,000) dollars through this Private
Placement from approximately four (4) individuals. The terms of this Private
Placement was as follows: Approximately, six hundred twenty-five thousand
(625,000) shares of common stock were issued at a twenty percent discount to
the company's stock price of $6.00 per share, i.e., $4.80 per share with one
warrant per share issued. These warrants have a one (1) year term and have an
exercise price of $3.00 per share. Additionally, to further capitalize
the Company, the Company borrowed the sum of two million ($2,000,000) dollars
from private sources (one of whom is an affiliate of the Company), with the
interest payable at twelve (12) percent per year. The Company has five (5)
years to repay this Note.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION.
This Report contains forward-looking statements, which are generally
identified by words such as "may", "should", "seeks", "believes",
"expects", "intends", "estimates", "projects", "strategy" and similar
expressions. Those statements may include statements regarding
the intent, belief, expectation, strategies or projections of the
registrant and its management at the time. Forward-looking statements are
subject to a number of known and unknown risks and uncertainties that
could cause actual results to differ materially from those projected,
expressed or implied in the forward-looking statements. These risks and
uncertainties, many of which are not within the registrant's control,
include, but are not limited to, the uncertainty of potential manufacturing
difficulties, the dependence on key personnel, the possible impact of
competitive products and pricing, the registrant's continued ability
to finance its operations, general economic conditions and the achievement
and maintenance of profitable operations and positive cash flow.
We caution readers that these forward-looking statements speak only as of
the date hereof. We hereby expressly disclaim any obligation or undertaking
to release publicly any updates or revisions to any such statements to
reflect any changes in our expectations or any change in events, conditions or
circumstances on which such statement is based.
10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
See "Note 5--Settlement."
ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Defaults upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1999, no matters were submitted to the
Company's security holders.
ITEM 5. Other Information
See Exhibit 10.1, InvestAmerica, Inc., 1999 Stock Option Plan.
11
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
InvestAmerica, Inc.
/s/ Douglas E. Smith
- -----------------------
Douglas E. Smith
President and Chairman
Date: February 15, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
InvestAmerica, Inc.
/s/ Brian A. Kitts
- ------------------------
Brian A. Kitts, Secretary
Date: February 15, 2000
12