<PAGE>
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 the Quarterly Period Ended March 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 0-10909
AMERICAN ATM CORP.
(Exact name of registrant as specified in its charter)
Florida 65-0656168
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5061 North Dixie Highway
Boca Raton, Florida 33431
(Address of principal executive office) (zip code)
Registrant's telephone number, including area code: 561-367-8433
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
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 X No
--- ---
2,883,750 shares, $.001 par value, as of March 31, 1999
(Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date)
Page 1 of 22
<PAGE>
AMERICAN ATM CORP.
INDEX TO FINANCIAL STATEMENTS
Page No.
--------
Part I - Financial Information:
Item 1. Financial Statements:
Balance Sheets as at March 31, 1999 (Unaudited)
and June 30, 1998 ...................................... 3
Statements of Operations For the Nine Months
Ended March 31, 1999 and 1998 (Unaudited) and
For the Three Months Ended March 31, 1999
and 1998 (Unaudited) ................................... 4
Statements of Stockholders' Equity For the
Nine Months Ended March 31, 1999 (Unaudited) and
For the Year Ended June 30, 1998 ....................... 5
Statements of Cash Flows For the Nine Months
Ended March 31, 1999 and 1998 (Unaudited) .............. 6
Notes to Consolidated Financial Statements ............. 7-16
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .......... 15-17
Part II - Other Information:
Item 3 Through Item 9 - Not Applicable.................. 18
Signatures.............................................. 19
Page 2 of 22
<PAGE>
AMERICAN ATM CORP.
BALANCE SHEETS
(Note 1)
<TABLE>
<CAPTION>
A S S E T S
-----------
March 31, June 30,
--------- --------
1999 1998
--------- --------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 207,617 $ 171,958
Accounts receivable 15,003 16,818
Prepaid expenses and other current assets 32,143 13,851
---------- ----------
Total current assets 254,763 202,627
---------- ----------
Property assets:
Furniture and equipment 290,702 290,702
Software 8,693 8,693
Leasehold improvements 830 830
---------- ----------
300,225 300,225
Less: Accumulated depreciation ( 131,907) ( 85,899)
---------- ----------
Net property assets 168,318 214,326
---------- ----------
Deferred offering costs - 69,682
---------- ----------
Other assets 2,154 2,711
---------- ----------
$ 425,235 $ 489,346
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
---------------------------------------------------------
Current liabilities:
Lines of credit payable $ 260,000 $ 260,000
Current portion of long-term debt 90,000 -
Accounts payable 79,742 22,824
Taxes payable 3,390 6,339
Accrued expenses 106,825 49,230
---------- ----------
Total current liabilities 539,957 338,393
---------- ----------
Long-term debt - 110,000
---------- ----------
Deferred rent 1,000 1,000
---------- ----------
Stockholders' equity (capital deficiency):
Preferred stock, $10.00 par value,
authorized and unissued - 100,000 shares
Common stock $.001 par value, authorized
10,000,000 shares, issued and outstanding
2,883,750 and 2,816,250 shares, respectively 2,884 2,816
Additional paid-in capital 1,790,332 1,718,400
Accumulated deficit ( 1,908,938) ( 1,681,263)
---------- ----------
Total stockholders' equity (capital deficiency) ( 115,722) 39,953
---------- ----------
$ 425,235 $ 489,346
========== ==========
</TABLE>
See notes to financial statements.
Page 3 of 22
<PAGE>
AMERICAN ATM CORP.
STATEMENTS OF OPERATIONS
(Note 1)
<TABLE>
<CAPTION>
For the Nine For the Three
Months Ended Months Ended
March 31, March 31,
---------------------------- ----------------------------
1999 1998 1999 1998
--------- -------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Fee income $283,900 $233,498 $ 91,999 $101,886
-------- -------- -------- --------
Direct costs:
Location expenses 170,405 212,461 71,760 103,369
Financing costs 53,335 42,793 22,021 15,002
-------- -------- -------- --------
Total direct costs 223,740 255,254 93,781 118,371
-------- -------- -------- --------
Gross income (loss) 60,160 ( 21,756) ( 1,782) ( 16,485)
-------- -------- -------- --------
Operating expenses:
Selling 91,082 80,881 34,041 25,522
General and administrative 185,630 348,356 60,738 108,423
-------- -------- -------- --------
Total operating expenses 276,712 429,237 94,779 133,945
-------- -------- -------- --------
Loss from operations ( 216,552) ( 450,993) ( 96,561) ( 150,430)
-------- -------- -------- --------
Other income (deductions):
Interest expense ( 9,900) ( 7,000) ( 3,300) ( 7,000)
Interest income 1,777 12,179 402 2,273
-------- -------- -------- --------
Total other income (deductions) ( 8,123) 5,179 ( 2,898) ( 4,727)
-------- -------- -------- --------
Loss before income taxes ( 224,675) ( 445,814) ( 99,459) ( 155,157)
Provision for income taxes 3,000 3,000 1,000 1,000
-------- -------- -------- --------
Net loss ($227,675) ($448,814) ($100,459) ($156,157)
======== ======== ======== ========
Net loss per share ($0.08) ($0.16) ($0.04) ($0.06)
===== ===== ===== =====
Weighted average
share outstanding 2,828,140 2,816,250 2,851,420 2,816,250
========= ========= ========= =========
</TABLE>
See notes to financial statements.
Page 4 of 22
<PAGE>
AMERICAN ATM CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1999 (Unaudited)
AND FOR THE YEAR ENDED JUNE 30, 1998
(Note 1)
<TABLE>
<CAPTION>
$.001 Par Value $10 Par Value Additional
Common Stock Preferred Stock Paid-In
Shares Amount Shares Amount Capital
--------- ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C>
Balance - June 30, 1997 2,816,250 $2,816 - $ - $1,676,400
Stockholder's wavier of salary -
contributed to capital - - - - 42,000
Net loss for the year ended June 30, 1998 - - - - -
--------- ------ ------ ------ ----------
Balance - June 30, 1998 2,816,250 2,816 - - 1,718,400
Net loss for the nine months ended
March 31, 1999 (Unaudited) - - - - -
Sale of common stock net of offering costs 67,500 68 - - 71,932
--------- ------ ------ ------ ----------
Balance - March 31, 1999 (Unaudited) 2,883,750 $2,884 - $ - $1,790,332
========= ====== ====== ====== ==========
</TABLE>
<TABLE>
<CAPTION>
Total
Deferred Accumulated Stockholders'
Compensation Deficit Equity
------------ ----------- -------------
<S> <C> <C> <C>
Balance - June 30, 1997 ($200,000) ($ 854,846) $624,370
Stockholder's wavier of salary -
contributed to capital - - 42,000
Net loss for the year ended June 30, 1998 200,000 ( 826,417) ( 626,417)
-------- ---------- --------
Balance - June 30, 1998 - ( 1,681,263) 39,953
Net loss for the nine months ended
March 31, 1999 (Unaudited) - ( 227,675) ( 227,675)
Sale of common stock net of offering costs - - 72,000
-------- ---------- --------
Balance - March 31, 1999 (Unaudited) $ - ($1,908,938) ($115,722)
======== ========== ========
</TABLE>
See notes to financial statements.
Page 5 of 22
<PAGE>
AMERICAN ATM CORP.
STATEMENTS OF CASH FLOWS
(Note 1)
<TABLE>
<CAPTION>
For the Nine
Months Ended
March 31,
----------------------------
1999 1998
---------- ----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ($227,675) ($448,814)
-------- --------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 46,008 72,885
Amortization of deferred compensation - 150,000
Increase (decrease) in cash flows as
a result of changes in asset and liability account balances:
Accounts receivable 1,815 ( 23,195)
Prepaid expenses and other current assets ( 18,292) ( 6,835)
Other assets 557 58
Accounts payable 56,918 922
Accrued expenses and other current liabilities 54,646 ( 827)
-------- --------
Total adjustments 141,652 193,008
-------- --------
Net cash used in operating activities ( 86,023) ( 255,806)
-------- --------
Cash flows from investing activities:
Acquisition of property assets - ( 6,603)
Note receivable - 125,200
-------- --------
Net cash provided by investing activities - 118,597
-------- --------
Cash flows from financing activities:
Proceeds from advances - 75,313
Proceeds from (payments of) affiliates' notes payable ( 20,000) 300,000
Deferred offering costs ( 20,318) -
Proceeds from sale of stock 162,000 -
-------- --------
Net cash provided by financing activities 121,682 375,313
-------- --------
Net increase cash and cash equivalents 35,659 238,104
Cash and cash equivalents at beginning of period 171,958 259,143
-------- --------
Cash and cash equivalents at end of period $207,617 $497,247
======== ========
Supplemental Schedules of Noncash Financing Activities:
Offering costs written to additional paid-in capital $ 90,000 $ -
======== ========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 48,338 $ 42,793
======== ========
Taxes paid $ 915 $ -
======== ========
</TABLE>
See notes to financial statements.
Page 6 of 22
<PAGE>
AMERICAN ATM CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND
THE THREE MONTHS ENDED MARCH 31, 1999
NOTE 1 - GOING CONCERN.
The Company was incorporated in Florida in March 1996 as a
development stage company. The Company left the development stage in
September 1996 when it commenced operations of its business which is
independent owner and operator of automatic teller machines (ATMs) at
leased locations. The ATMs provide individuals with credit or debit
cards the ability to obtain on the spot cash from their bank accounts.
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern. The Company
has sustained substantial losses from operations since inception
through March 31, 1999 of $1,908,938 of which $94,114 was incurred
while the Company was in the development stage. The accompanying
financial statements reflect a working capital deficiency of $285,194
at March 31, 1999. The Company's source of funds have been the proceeds
from the sale of its common stock, its lines of credit and notes to
stockholders. The Company presently has a rental agreement with a bank
for the use of the bank's cash in its ATMs which replaced a funding
agreement with a private lender.
Management in December 1998 registered with the Securities and
Exchange Commission 3,562,500 shares of the Company's common stock all
of which underlie common stock purchase warrants (warrants). If all
warrant holders exercise, the Company will receive approximately
$8,550,000 in cash proceeds. Through March 31, 1999, the Company has
received $162,000 from the exercise of warrants for 67,500 shares of
common stock. Management's plan is to use these funds to expand its
business and operations which will result in significant revenue
increases and reductions in financing and other operating costs which
will result in the Company being able to meet its obligations as they
become due.
These conditions, among others, raise substantial doubt about
the Company's ability to continue as a going concern. The accompanying
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the
amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
Page 7 of 22
<PAGE>
NOTE 1 - GOING CONCERN. (Continued)
The financial statements as at March 31, 1999 and for the nine
and three months ended March 31, 1999 and 1998 have not been audited.
In the opinion of management, the unaudited interim financial
statements reflect all adjustments and accruals, consisting only of
normal recurring adjustments and accruals, necessary to present fairly
the financial position of the Company as at March 31, 1999 and the
results of its operations for the three and nine months ended March 31,
1999, changes in stockholders' equity and cash flows for the nine
months ended March 31, 1999 and 1998. The results for the nine and
three months ended March 31, 1999 and 1998 are not necessarily
indicative of the results to be expected for the full year.
NOTE 2 - BASIS OF PRESENTATION.
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions for Form
10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, the statements contain all adjustments
(consisting only of normal recurring accruals) necessary to present
fairly the financial position as of March 31, 1999 and 1998 and the
results of operations and cash flows for the three and nine months
ended March 31, 1999 and 1998. The results of operations for the three
and nine months ended March 31, 1999 and 1998 are not necessarily
indicative of the results to be expected for the full year.
The June 30, 1998 balance sheet has been derived from the
audited financial statements at that date included in the Company's
Registration Statement on Form S-B2. These unaudited financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Registration Statement on
Form SB-2.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
(a) Use of Estimates:
The presentation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities or assets
at the date of the financial statements and the amounts of revenues or
expenses during the reporting period.
Page 8 of 22
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(b) Concentration of Risk and Revenue Recognition:
The fee income from ATM machines represents 100% of the
Company's operating revenues. The Company records its fees on a daily
basis from the service charges it assesses directly to the user for
monetary transactions. In addition, the Company recognizes its
proportionate share of the transaction fees charged by the national
network to its participating banks reported to the Company by its
electronic reporting vendor. Fee income from ATM processing is limited
by the hours of operation at the sites leased by the Company. In some
states, the amount and nature of fees charged is limited or restricted
by regulation, and in some states private ATM machines are not
permissible.
The Company deposits the majority of its cash in commercial
banks and with a national brokerage firm in money market accounts. From
time to time, cash balances in the commercial banks exceed federally
insured limits. To date, the Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit
risk on its cash and equivalents.
(c) Cash and Equivalents:
The Company considers all highly-liquid, short-term
investments with an original maturity of three months or less to be
cash equivalents. Cash equivalents at March 31, 1999 and 1998 and June
30, 1998 were $98,228, $79,000 and $76,253, respectively.
(d) Property Assets:
Property assets are stated at cost. Repairs or maintenance,
which do not extend the useful life of the assets, are charged to
expense as incurred. As the equipment is retired or otherwise disposed
of, the asset and the related accumulated depreciation are removed from
the accounts and any resulting profit or loss is reflected in income.
The Company expenses its site acquisition costs to operations as they
are incurred due to the short length of the site leased and the
parties' unilateral ability to terminate the lease with minimal notice.
Depreciation is provided primarily over the estimated useful
lives of the assets using the straight-line method. The estimated
useful lives of the assets are seven years for machinery and equipment
and five years for furniture and fixtures. Leasehold improvements are
being amortized over the life of the lease. Depreciation charged to
operations in the nine and three months ended March 31, 1999 and 1998
was $45,935, $15,265, $72,822 and $24,504, respectively.
Page 9 of 22
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(e) Organization Costs:
Organization costs which are included in other assets were
$153 net of accumulated amortization of $230 at March 31, 1999 and are
being amortized over a sixty months period. Amortization charged to
operations was $19 in each of the three months ended March 31, 1999 and
1998 and $63 in the nine months ended March 31, 1999 and 1998.
(f) Deferred Offering Costs:
The Company incurred $90,000 of costs associated with the
registration of 3,562,500 shares of its common stock underlying
purchase warrants. Upon the successful completion of the registration
these costs were charged to additional paid-in capital.
(g) Advertising:
The Company expenses advertising costs as incurred.
Advertising charged to operations was $6,682, $5,982, $ 41,602 and $602
in the nine and three months ended March 31, 1999 and 1998,
respectively.
(h) Income Taxes:
The Company adopted Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes" at its
inception. Under SFAS 109, the deferred tax provision is determined
under the liability method. Under this method, deferred tax assets and
liabilities are recognized based on differences between the financial
statement carrying amount and the tax basis of assets and liabilities
using presently enacted tax rates.
The Company has net operating loss carryforwards available of
approximately $1,700,000 at March 31, 1999 and $1,514,000 at June 30,
1998 expiring through 2013 which upon recognition may result in future
tax benefits of approximately $585,000 and $520,000, respectively. At
March 31, 1999 and June 30, 1998, management is unable to determine if
the utilization of the future tax benefit was more likely than not and,
accordingly, the asset has been fully reserved.
(i) Fair Value of Financial Instruments:
The Company at its inception adopted Statement of Financial
Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of". The statement requires that the Company recognize and
measure impairment losses of long-lived assets, certain identifiable
intangibles, value long-lived assets to be disposed of and long-term
liabilities.
Page 10 of 22
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(i) Fair Value of Financial Instruments: (Continued)
The Company reviews long-lived assets and certain identifiable
intangibles held and used for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. In January 1998, management determined that 20
ATMs became obsolete and restoration costs were not fiscally feasible.
The ATMs were sold in February 1998, essentially for the cost to remove
them from their various locations which sale resulted in a charge to
operations of $206,119 in the fourth quarter of the year ended June 30,
1998.
At March 31, 1999 and June 30, 1998, the carrying values of
the Company's other assets and liabilities approximate their estimated
fair values.
(j) Per Share Data:
Net loss per share was computed by the weighted average number
of shares outstanding during each year. On December 11, 1997 the Board
of Directors approved a stock split of five (5) common shares for each
four (4) common shares outstanding for shareholders of record on
December 22, 1997. The accompanying financial statements and the
computation of net loss per share retroactively reflect the December
1997 stock split as if it had occurred on July 1, 1997.
(k) Recently Issued Accounting Pronouncements:
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 - "Reporting Comprehensive
Income", No. 131 - "Disclosures about Segments of an Enterprise and
Related Information", No. 132 - "Employer's Disclosures about Pension
and Other Postretirement Benefits" and No. 133 - "Accounting for
Derivative Instruments and Hedging Activities". Management does not
believe that the effect of implementing these new standards will be
material to the Company's financial position, results of operations
and cash flows.
NOTE 4 - FINANCING.
In June 1996, the Company entered into a financing agreement
with a private lender, whereby the lender agreed to advance funds to
the Company under a line of credit with a minimum of $350,000 to a
maximum of $1,000,000 in advances. The funds were for the sole purpose
of the cash needs used in the operation of the Company's ATMs. Interest
on the used and unused portion of the line of credit was 12% subject to
a reduction for the amount of income the lender earned on investing the
unused portion of the line. The lender had a lien on all cash in the
ATM's. Interest at 12% charged to operations in the nine months ended
March 31, 1998 under this facility was $25,700.
Page 11 of 22
<PAGE>
NOTE 4 - FINANCING. (Continued)
In January 1998, the Company terminated the agreement with
this lender and entered into a rental agreement with a commercial bank.
The rental agreement as memorialized on August 18, 1998 provides for
the Company to rent from the bank the cash that is used in the
operation of the Company's ATMs. The monthly rental charge for the cash
varies and is determined by the amount of cash utilized in the machines
at a rate of 2% over the bank's prime lending rate. The lessor bank
also earns a portion of the transaction fees that each ATM transaction
generates. The Company is responsible to maintain insurance with the
bank as loss payee for loss or theft of the machine cash. Although the
Company controls the location of each ATM and determines the amount of
cash in each ATM, the Company may not handle the rented cash. Only
armored transport service carriers under the bank's direct control may
handle the rented cash. The maximum amount of cash rented under the
present lease agreement was $418,000 and the average cash rented was
$235,000. During the nine and three months ended March 31, 1999, the
maximum amount of cash rented was $280,000 and the average rented cash
balance was approximately $220,000. Rent for the cash charged to
operations was $20,000 and $6,000 in the nine and three months ended
March 31, 1999. At March 31, 1999 and June 30, 1998 the amount of
rented cash in the Company's ATM's was $200,000 and $259,000,
respectively. The Company is contingently liable for any loss of the
rented cash for which it has adequate insurance coverage.
The Company entered into a funding agreement on December 30,
1997 for $260,000 with a corporation whose president is a stockholder
of the Company. The funding agreement, as amended on June 1, 1998,
requires interest at 10% to be paid monthly. The agreement has no
termination date and accordingly is classified as a current liability.
The loan is collateralized by the Company's ATMs whose undepreciated
cost was $138,000 at March 31, 1999 and $205,000 at June 30, 1998. The
Company's CEO has personally guaranteed 25% of this obligation. The
maximum and average borrowings outstanding under this line of credit
was $260,000 and interest charged to operations in the nine and three
months ended March 31, 1999 was $25,896 and $8,632, respectively.
Commencing in December 1997 through May 1998, the Company
borrowed $110,000 from two stockholders. The original terms of the 12%
interest bearing notes were approximately seven months. The
stockholders subsequently extended the due dates of all the notes to
December 31, 1999 and accordingly such indebtedness is included in
long-term debt at June 30, 1998. Interest charged to operations and
paid to these stockholders was $9,900, $3,300, $6,600 and $3,300,
respectively, in the nine and three months ended March 31, 1999 and
1998.
Page 12 of 22
<PAGE>
NOTE 5 - STOCKHOLDERS' EQUITY.
(a) Sale of Securities:
In 1997, the Company completed its sale of 875,000 shares of
its common stock and 2,500,000 warrants (as adjusted for the December
11, 1997 stock split) to accredited investors for $689,216 (net of
offering costs).
In January 1997, the Company issued 75,000 shares of its
common stock in satisfaction of a $180,000 capital lease obligation for
machinery.
(b) Contribution of Capital:
The Company's CEO waived $42,000 of his annual $60,000 salary
in 1998 and such wavier was recorded as a contribution to additional
paid-in capital.
(c) Warrants:
In connection with the sale of securities in 1996 and 1997,
the Company sold warrants at $0.008 each to acquire 2,500,000 shares of
the Company's common stock (as adjusted for the December 1997 stock
split) at $2.40 per share.
Effective December 28, 1996, five consultants received
warrants to purchase an aggregate of 1,062,500 shares of the Company's
common stock at $2.40 per share (as adjusted for the December 1997
stock split) for services previously rendered. The fair value of the
warrants issued and the services rendered (as determined by the Board
of Directors and the consultants) was $85,000 which was charged to
operations as public relations costs.
(d) Registration of Securities:
The Company has filed with the Securities and Exchange
Commission a registration statement on Form SB-2 registering 3,562,500
shares of its common stock all of which underlie warrants to acquire a
like number of common shares at $2.40 per share. The registration
statement became effective on January 6, 1999. Through March 31, 1999,
holders of warrants converted warrants into 67,500 common shares for
gross proceeds of $162,000. Deferred offering costs of $90,000 were
charged to additional paid-in capital. The additional proceeds to be
received by the Company, if all of the remaining warrants are
exercised, would be $8,388,000.
(e) Common Stock Split:
The Company's Board of Directors approved a split of its
outstanding common shares of five (5) shares for each four (4) shares
outstanding on December 11, 1997.
Page 13 of 22
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY. (Continued)
(f) Stock Options:
The Board of Directors adopted the American ATM Corp. 1996
Stock Option Plan ("Plan") on December 16, 1996 which the shareholders
subsequently approved. The Plan provides for the total issuance of an
aggregate of 687,500 common shares under non-qualified and qualified
grants. Qualified options are intended to comply with Section 422 of
the Internal Revenue Service Code of 1986, as amended. To date all
options granted under the Plan have been non-qualified.
On December 16, 1996, the Company's outside directors and an
officer were granted options to acquire an aggregate of 100,000 common
shares (as adjusted for the December 11, 1997 stock split) at an
exercise price of $0.80 per share which was the common stock's fair
value on the date of grant. The directors options were originally
exercisable in full at any time through December 15, 2000. The
officer's option vest pro rata over its life. On March 21, 1997, the
Board of Directors reduced the exercise period of these options to
March 25, 2000 for the directors and May 1, 1999 for the officer.
Effective March 31, 1999, pursuant to resolutions adopted by the Board
of Directors on February 11, 1999, the Company amended the options to
extend the exercise period to March 24, 2007.
Also on March 21, 1997, the outside directors were issued
additional options to acquire an aggregate (as adjusted for the
December 1997 stock split) of 62,500 common shares for $0.80 per share.
The Company's Chairman and CEO was granted options to acquire 250,000
common shares at $0.88 per share, as adjusted for the December 1997
stock split. On February 11, 1999, the term of all of these options was
extended from three (3) years to ten (10) years.
The outside directors options were issued as partial payment
for their services pursuant to the Company's directors compensation
policy which was approved by the Board of Directors in December 1996.
The CEO's options were granted in recognition of his services in 1997
and 1998 and for his decision to forego $40,000 in salary for calendar
1996. The waiver of the salary was reflected in the accompanying
financial statements as a charge to operations and a credit to
additional paid-in capital of $40,000 during fiscal 1997.
The excess of the fair value of the common stock at March 25,
1997 ($2.40 per share as adjusted for the December 1997 stock split)
over the option exercised prices which aggregated $400,000 was
classified in the accompanying financial statement as deferred
compensation with a corresponding increase to additional paid-in
capital. The deferred compensation was charged to operations in the
periods that the Chairman and the other directors rendered their
services resulting in a $50,000 charge to operations in the three
months ended March 31, 1998 and a $150,000 charge in the nine months
ended March 31, 1998.
Pursuant to the Plan, each of the non-employee directors of
the Company is to receive yearly an option to acquire 10,000 shares of
the Company's common stock for the next fiscal year. On March 31, 1999,
the five directors were issued options to acquire 10,000 common shares
at $2.875 per share which was the fair value of the shares on the date
of grant. The options are exercisable immediately and expire on March
Page 14 of 22
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY. (Continued)
(f) Stock Options: (Continued)
31, 2009. Additionally, three officers and employees of the company
were granted options aggregating 115,000 common shares on March 31,
1999 at terms and prices identical to the directors options.
At March 31, 1999,the Company had options for 577,500 common
shares issued and unexercised at exercise prices ranging from $0.80 to
$2.875 per share. At June 30, 1998 and June 30, 1997, the Company had
options for 412,500 common shares issued and unexercised at exercise
prices ranging from $.80 to $.88. At March 31, 1999 and June 30, 1998,
respectively, 567,500 and 400,000 shares under options were exercisable
at prices ranging from $.80 to $2.875 per share.
Assuming the fair market value of the stock at the date of
grant to be $.80 per share for the December 1996, $2.40 per share for
the March 1997, and $2.875 per share for March 1999 grants, the life of
the 1996 options to be three years and the 1997 and 1999 options to be
10 years, the expected volatility at 200% for all, expected dividends
of none, and the risk-free interest rate of 10%, the Company would have
recorded compensation expense of $92,500 and $33,604 in the nine and
three month periods ended March 31, 1999 and $ $88,344 and $29,448 in
the nine and three month periods ended March 31, 1998 as calculated by
the Black-Scholes option pricing model. As such, pro-forma net loss and
loss per share would be as follows:
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
March 31, March 31,
------------------------ ---------------------
1999 1998 1999 1998
-------- -------- ---------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Net loss as reported ($100,459) ($156,157) ($227,675) ($448,814)
======== ======== ======== ========
Additional compensation $ 33,604 $ 29,448 $ 92,500 $ 88,344
======== ======== ======== ========
Adjusted net loss ($134,063) ($185,605) ($319,675 ($537,158)
======== ======== ======== ========
Loss per share
as reported ($0.04) ($0.06) ($0.08) ($0.16)
===== ===== ===== =====
Adjusted loss per share ($0.05) ($0.07) ($0.11) ($0.19)
===== ===== ===== =====
</TABLE>
NOTE 6 - YEAR 2000.
The Company recognizes the need to ensure its operation will
not be adversely affected by Year 2000 software failures. The Company
is communicating with suppliers, customers and others with which it
does business to coordinate Year 2000 conversion. The cost of achieving
compliance is estimated to be a minor increase over the cost of normal
software upgrades and replacements.
Page 15 of 22
<PAGE>
NOTE 7 - COMMITMENTS AND CONTINGENCIES.
(a) Contingencies:
The Company is contingently liable for cash in the machines
which it rents from a bank. The amount of rented cash at March 31, 1999
was $200,000.
(b) Leases:
The Company is a lessee under a operating real property lease
for office space which expires on June 30, 1999. Rent expense charged
to operations in the six and three months ended March 31, 1999 and 1998
was $8,000, $13,000, $3,000 and $3,000, respectively.
The Company also leases space for its ATMs under operating
leases. Although the stated term of each lease is from one to five
years, either party may cancel the lease with minimal notice. Rent
charged to operations in the nine and three months ended March 31, 1999
and 1998 was $36,000, $45,000, $17,000 and $17,000, respectively.
Additionally, the Company has agreements with electronic transaction
reporting and transfer system service providers which are a crucial
component of the Company's operations. These agreements typically
require payment based upon the number of transactions processed by the
provider.
(c) Consulting and Employment Agreements:
The Board of Directors authorized compensation for the
Company's CEO and Chairman at $60,000 per year plus 2% of defined
operating profits commencing January 1, 1997. During the second half
June 30, 1998 this officer waived payment of $42,000 of his salary
which was reflected as a contribution to additional paid-in capital.
The Company has a three year agreement with a consultant for public
relations and financial services. The consultant will receive $96,000
over the term of the agreement which expires in 1999.
Page 16 of 22
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto contained elsewhere in this Form
10-QSB. Certain statements under this caption "Management's Discussion and
Analysis of Financial Conditions and Results of Operations," constitute
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. See "Risk Factors-Forward Looking Statements."
PLAN OF OPERATION
The Company's plan of operation for the balance of fiscal 1999 and the
fiscal year thereafter will principally involve the acquisition of additional
ATMs and leased sites. The Company anticipates, with the net proceeds of this
offering, together with funds previously raised by the Company, that it will be
able to have approximately 50 ATMs in operation by September 30, 1999 with an
additional 100 ATMs in operation by the end of fiscal 2000. In addition, the
Company has applied for a license to operate ATMs in the Commonwealth of
Massachusetts which, if granted, should enable the Company to obtain another 10
to 25 locations in that state. The Company will also seek to acquire other
privately held companies in the ATM, banking and related industries. To date, no
such companies have been identified.
The Company's primary source of funding its plan is the proceeds from
the conversion of the Company's outstanding 495,000 warrants into a like number
of the Company's common share at an exercise price of $2.40 per warrant.
Assuming all of the Warrants are exercised, of which no assurance can be
given, the net proceeds will be approximately $8,460,000. The Company believes
the minimum proceeds required from the warrants of approximately $1,700,000 will
be sufficient for it to meet its cash requirements to fund and operate its
business on an ongoing basis. Through March 31, 1999, 67,500 warrants were
converted into a like number of common shares, resulting in the Company
receiving cash of $72,000 net of offering costs of $90,000.
RESULTS OF OPERATIONS
The Company derives its revenues from fees charged for the operation of
ATMs which dispense cash to the customer who uses his/her bank ATM debit or
credit card. These machines are located in high traffic retail areas and
selected convenience stores. The Company has signed 25 of these locations to
date and expects to sign at least an additional 25 to 30 before the end of
fiscal 1999. The Company currently has 25 machines installed and operating.
Generally, the Company has more machines signed than actually installed and in
operation because it is always in the process of changing machine locations in
an ongoing effort to optimize usage. The Company had non-binding agreements with
suppliers for additional machines.
Nine months ended March 31, 1999 vs. March 31, 1998
Fee Income:
For the nine months ended March 31, 1999, the Company had gross income
of $284,000 compared with $233,000 for the nine months ended March 31, 1999. The
$51,000 (21.9%) increase was the result of having more equipment in place and
all installed equipment beginning to generate fee income in fiscal 1999.
Additionally, the Company was in the development stage through September 1996
during which time the Company had de minimis revenues.
Page 17 of 22
<PAGE>
Nine months ended March 31, 1999 vs. March 31, 1998
Direct Costs:
The Company's direct costs in the current period associated with its
ATMs operations were $224,000 (78.9% of revenues) as compared with $255,000
(109.4% of revenues) for 1999. The decrease in direct costs of $21,000 (8.2%) is
the result of lower maintenance costs in the current period. The decrease in
gross loss from $22,000 in 1998 (9.4% of revenues) to gross income of $60,000 in
1999 (21% of revenues) is attributable to the generation of higher fee income
from ATMs installed in the prior year and fees from machines installed in 1998
while fixed direct costs remained relatively stable. Variable direct costs
increased in relation to the increased number of new machines. Installation,
relocation and maintenance costs increased in 1998 due to the decision to
dispose of certain machines whose operating maintenance costs were so
prohibitively high as to render the machines virtually valueless. These machines
were replaced with more user friendly machines whose operating and maintenance
costs are considerably lower.
Selling Expenses:
The Company's selling expenses increased $10,000 (12.3%) in the current
year to $91,000 (32.0% of revenues) from $81,000 (34.8% of revenues) in 1998.
The increase is attributable to increased and advertising and marketing costs in
the current period.
General and Administrative Expenses:
The $162,000 (46.6%) decrease in general and administrative expenses to
$186,000 (65.5% of revenues) in the current year from $348,000 (149.4% of
revenues) in the prior year resulted primarily from the amortization of $150,000
in deferred compensation in 1998.
Interest:
Interest expense in 1999 was $55,000 of which $45,000 was included in
direct costs in the accompanying financial statements. Interest which was
included as a direct cost in 1998 aggregated $40,000. The increase of $7,000 is
attributable to the Company's debt financing from related parties obtained in
December 1997. Interest income decreased $10,000 (83.3%) to $2,000 in 1999 as a
result of the repayment of a loan receivable from a stockholder in fiscal 1999.
Net Loss:
The net loss decreased $221,000 (49.6%) to $228,000 in 1999 from
$449,000 in 1998 as per the above analysis.
Three months ended March 31, 1999 vs. March 31, 1998
Fee Income:
For the three months ended March 31, 1999, the Company had gross income
of $92,000 compared with $102,000 for the three months ended March 31, 1998 The
$10,000 (9.8%) decrease was the result of reduced usage by customers.
Page 18 of 22
<PAGE>
Three months ended March 31, 1999 vs. March 31, 1998 (Continued)
Direct Costs:
The Company's direct costs associated with its ATMs operations were
$94,000 (102.2% of revenues) in 1999 as compared with $118,000 (115.7% of
revenues) for 1998. The decrease in direct costs of $24,000 (20.3%) is
attributable to higher start-up and other variable costs incurred in 1998 of
$31,000 offset by an increase in finance costs of $7,000 in the current period.
The change in gross loss from ($16,000) in 1998 (15.7% of revenues) to
($1,000) in 1999 (1.1% of revenues) is attributable to the reduction in fixed
and variable costs in the current period.
Selling Expenses:
The Company's selling expenses increased $8,000 (30.8%) to $34,000
(37.0% of revenues) in the current period from $26,000 (22.0% of revenues) in
1998. The increase is attributable to higher advertising and marketing costs in
the current period.
General and Administrative Expenses:
The $39,000 (29.1%) decrease in general and administrative expenses to
$95,000 (103.3% of revenues) in the current period from $134,000 (113.6% of
revenues) resulted primarily from the amortization of $50,000 in deferred
compensation in 1998.
Interest:
Interest expense in 1999 was $17,000 of which $14,000 was included in
direct costs in the accompanying financial statements. Interest incurred in 1998
of $9,000 is included as a direct cost. Interest expense increased from loans
from related parties of $3,000 in 1998 and 1999.
Interest income decreased $2,000 (100.0%) in 1998 as the result of the
repayment by a stockholder of a loan to the Company during fiscal 1999.
Net Loss:
The net loss decreased $56,000 (36.0%) to $100,000 in 1999 from $156,000
in 1998 as per the above analysis.
FINANCIAL CONDITION
March 31, 1999 compared to June 30, 1998
The Company's cash position at March 31, 1999 increased $36,000 to
$208,000. The increase is attributable to the cash received from the conversion
of warrants into common stock less the payment of stockholders notes of $20,000
and the net cash used in operating activities of $86,000.
Stockholders' equity decreased from $40,000 at June 30, 1998 to a
capital deficiency of $116,000 at March 31, 1999 resulting from the loss for the
nine months ended March 31, 9999 of $228,000 as partially offset by the addition
of $72,000 in net proceeds from the conversion of warrants into common stock.
Page 19 of 22
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficiency of $285,000 and $136,000 at
March 31, 1999 and June 30, 1998, respectively. The Company's primary sources of
working capital have been (i) the proceeds from its lines of credit, (ii)
proceeds from related party indebtedness, (iii) the rental cash agreement, and,
(iv) the issuance of its securities for cash, as payment for debt and as payment
for services rendered. Currently, the Company's cash requirements include (i)
the funding for its existing and new machines, (ii) the costs associated with
opening, maintaining and operating machines at new locations, and, (iii) ongoing
selling, general, administrative and other operating expenses. Management
believes that the Company's cash liquidity position will be enhanced primarily
from the additional realization of the proceeds from the exercise of all of the
currently outstanding warrants. The Company presently has warrants outstanding
to acquire 3,495,000 shares of its common stock at $2.40 per share. Management
believes that the minimum proceeds from the Warrants exercise required for the
Company to meet its obligations as they mature to be approximately $1,000,000.
Management believes that it must receive an additional $700,000 from the
warrants proceeds in order for the Company to initially undertake its plan of
operation for the remaining three months of fiscal 1999 and for fiscal 2000. If
the Company is not successful in its attempt to have the warrant holders
exercise, the Company will not be able to generate sufficient cash funds from
its operations to meet its obligations as they mature. These conditions, among
others, raise substantial doubt about the Company's ability to continue as a
going concern. Even if the Company is successful (or partially successful) in
its effort to convert the warrants into common shares for at least $1,000,000 up
to the entire $8,460,000 in cash, the Company may need additional financing
thereafter. There can be no assurance that the Company will be able to obtain
financing on a favorable or timely basis. The type, timing and terms of
financing elected by the Company will depend upon its cash needs, the
availability of other financing sources and the prevailing conditions in the
financial markets. Moreover, any statement regarding the Company's ability to
fund its operations from expected cash flows is speculative in nature and
inherently subject to risks and uncertainties, some of which cannot be predicted
or quantified.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issue Statement of Financial
Accounting Standards No. 130 - "Reporting Comprehensive Income", No. 131
"Disclosures about Segments of an Enterprise and Related Information", No. 132 -
"Employer's Disclosure about Pension and Other Postretirement Benefits", and No.
133 - "Accounting for Derivative Instruments and Hedging Activities". Adoption
of these standards, which is required in fiscal years beginning after December
15, 1997, is not expected to have an effect on the Company's financial
statements, financial position or results of operations. The Company has
reviewed all other recently issued accounting pronouncements to determine their
effects, if any, on the results of operations or financial position of the
Company. Based on that review, the Company believes that none of these
pronouncements will have a significant effect on the Company's current or future
earnings or operations.
Page 20 of 22
<PAGE>
YEAR 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Management of
the Company does not anticipate that any significant modification or replacement
of the Company's software will be necessary for its computer systems to properly
utilize dates beyond December 31, 1999 or that the Company will incur
significant operating expenses to make any such computer system improvements.
The Company has commenced requesting data concerning Year 2000 compliance from
its suppliers, lenders, service providers and others. The Company is not able to
determine, however, whether any of its suppliers, lenders, or service providers
will need to make any such modifications or replacements. Although it is
management's belief that the failure by such entities to make requires software
corrections could have an adverse material effect on the Company's operations or
financial condition, management is not able to estimate the amount of such
adverse effects, if any.
INFLATION
Inflation has not had a significant effect on the Company's operations or
financial position and management believes that the future effects of inflation
on the Company's operations and financial position will be insignificant.
Page 21 of 22
<PAGE>
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 thereunto duly authorized.
AMERICAN ATM CORP.
(Registrant)
By /s/ Wayne Kight
-------------------------------------
Wayne Kight, Chairman,
CEO, Presidnet and Treasurer
Date: July 16, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the interim
financial statements of American ATM Corp. as at and for the nine months ended
March 31, 1999 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 207,617
<SECURITIES> 0
<RECEIVABLES> 15,003
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 254,763
<PP&E> 300,225
<DEPRECIATION> 131,907
<TOTAL-ASSETS> 425,325
<CURRENT-LIABILITIES> 539,957
<BONDS> 0
0
0
<COMMON> 2,884
<OTHER-SE> (118,606)
<TOTAL-LIABILITY-AND-EQUITY> 425,235
<SALES> 0
<TOTAL-REVENUES> 283,900
<CGS> 223,740
<TOTAL-COSTS> 500,452
<OTHER-EXPENSES> 276,712
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,900
<INCOME-PRETAX> (224,675)
<INCOME-TAX> 3,000
<INCOME-CONTINUING> (227,675)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (227,675)
<EPS-BASIC> (.08)
<EPS-DILUTED> (.08)
</TABLE>
