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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999
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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 __________________
American ATM Corp.
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
Florida
___________________________________ _____________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5061 North Dixie Highway, Boca Raton, Florida 33431
________________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 367-8433
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock
________________________________________________________________________________
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_.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based on the $0.4375 last sales price reported by Standard &
Poor's Comstock on America Online on September 21, 1999, was $1,118,359.81.
As of September 16, 1999 the registrant had issued and outstanding
2,908,751 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, or indicated portions thereof, have been
incorporated herein by reference:
(1) Information in the Registrant's definitive proxy material for its 1999
Annual Meeting of Stockholders is incorporated by reference as Part III hereof,
which definitive proxy material shall be filed not later than 120 days after
the Registrant's fiscal year ended June 30, 1999.
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PART I
Item 1. Business
General
The Company is an independent owner and operator of automatic teller
machines ("ATM") which provides individuals the mechanism to use their bank
debit card, MasterCard, Visa, Discover, Diners, American Express Card or other
cards to obtain on-the-spot cash from their bank savings or checking accounts
for a fee. The Company presently owns and operates 18 ATMs. Generally, the
Company has more machines signed than actually installed because it is always
in the process of changing machine locations in an ongoing effort to optimize
usage. This differential varies from time to time so it is difficult to
quantify accurately. In addition, the Company is actively pursuing additional
locations. The Company plans to select locations in regional and local shopping
malls, grocery and convenience stores, and other high traffic retail locations.
The Company's ATMs and lease contracts are concentrated in the states of
Florida, New York, New Jersey and Maine.
The Company provides its services and places its ATMs in locations,
pursuant to agreements with the owners of businesses. The Company provides a
benefit to business operators and their customers in that ATMs increase traffic
by causing customers to enter a location with the potential of increasing
sales. In addition, cash eliminates the risk of check acceptance and the cost
of check guard services and credit card discounts. Offering in-store service of
electronic banking may give merchants a powerful differentiator with respect to
competitors. Also, replacing credit cards and checks with cash at the register
speeds up the checkout process and provides lower labor cost per customer
transaction and happier customers.
ATMs also provide convenience to their users. Consumers can access their
cash from more locations while shopping and in-store locations provide customer
with additional security.
The Company's growth strategy is to increase the number of ATMs it
operates to approximately 50 by June 2000. The Company intends to expand to
other geographic locations. The Company may need additional financing in order
to achieve its growth strategy, and there can be no assurance that such
additional financing will be available or, if available, will be on favorable
terms. Moreover, if the Company is able to obtain such financing and increases
its operations in accordance with its growth strategy, there can be no
assurance that the additional ATMs will be sufficiently profitable to sustain
their continued operation in the sites in which they are located.
Types of ATM Systems
There are two types of ATM systems, off-line and on-line. If the system is
off-line, the transaction is recorded on a tape and then transported by courier
from the machine, once a day to be processed, and the customers' account is
updated within one day. If the ATM system is on-line, the transaction is
processed immediately and the customer's account is updated and credited for a
deposit or debited for a cash withdrawal. All of the Company's ATMs are on-line
machines.
Lease Agreements with Business Operators
The Company provides its services and places ATMs at locations pursuant to
agreements with the owners of business premises. Such agreements typically have
initial terms of five years, with renewal clauses. These agreements also
provide that the Company may cancel the agreement if the ATMs fail to meet
minimum income expectation levels. There can be no assurance that any of the
agreements will be renewed after their initial terms. These owners typically
receive a rental fee based on a percentage of cash dispensed transactions and
such fee increases as the number of transactions increase.
Services Offered
Most ATM transactions are cash withdrawals from the customer's bank
checking account, particularly in a retail location. ATMs perform a wide range
of banking services, including deposits, withdrawals, payments to creditors and
access to bank accounts. The Company's ATMs currently permit a user to withdraw
cash of up to $200 per transaction, provide bank balances and receipts.
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The Company provides a system whereby retail customers may use their bank
debit card, to obtain cash advances. In a typical credit card transaction, the
amount of the cash advance together with a service fee is charged to the
individual's bank debit card, MasterCard, Visa, Discover, Diners, American
Express Card or other debit card. Upon authorization of the transaction by
either the bank who issued the credit card, the credit card company or a
designated agent, the ATM machine dispenses the amount of cash requested and
approved. The customer is guided through the process by instructions and
messages that appear on the LCD display. Such messages prompt an identification
number, the amount of the advance requested and informs the customer of the
status of the customer's request, and the approval or disapproval of the
transaction by the credit card company or bank. If approved, the proper amount
of cash is dispensed by the ATM to the customer. The customer then takes the
cash, credit card and receipt and leaves. Total elapsed time is usually under
one minute per customer.
The Company also offers a 24 hour telephone support system to provide
assistance to customers and to report problems of any machine at any location.
The communications system is made up of a network of long distance telephone
lines, as well as a number of dedicated telephone circuits. The Company is
highly dependent upon the proper functioning of its telecommunications and
computer equipment. While management strives to provide reasonable backup
provisions, there can be no assurance that certain events caused by outside
parties, such as telephone companies, credit card processors and banks, which
are beyond the reasonable control of the Company, will not initially disrupt
the Company's business.
Service and Maintenance
The ATM machines are currently serviced and kept in good working order by
Independent Field Service, Mosler, Inc. and CR Corp. under service contracts.
The service contractors clean and maintain the ATMs and respond to "trouble"
calls made by business owners and ATM users. The ATM technicians are not
responsible for cash replenishment.
The Company utilizes custom software that continuously monitors the ATM
transactions from each ATM as well as the expenses relating to that ATM,
including commissions payable to business owners. This software permits the
Company to generate detailed financial information by ATM location allowing the
Company to monitor the profitability of each location.
Cash Replenishment
The Company's ATMs are replenished with funds from Lynk Systems, Inc. as
well as through private funding sources and its own working capital. The
Agreement with Lynk Systems, Inc. allows the Company to replenish its ATM cash
through a Cash Management Agreement with Lynk Systems, Inc., at a rate of prime
plus 2% of the amount of cash leased. The Company plans to transfer all of its
funding to Lynk Systems, Inc. at a cost savings. Each machine holds anywhere
from $5,000 to $40,000 and are replenished with funds either weekly or biweekly,
as needed.
The Company has retained the services of several armored car service
corporations to transport the funds to the ATMs; replace the currency dispensed
by the ATMs; return leftover currency from the ATMs to the Company; reconcile
the ATM dispensed currency totals with leftover currency in the ATM and totals
recorded by the ATM and/or the Company's records; and repair and restore an ATM
to its proper operating mode, exclusive of hardware maintenance or repair. The
Company pays approximately $325 per ATM per month assuming 4.3 calls per month
and approximately $55 for each additional call. However, these prices will
fluctuate with different locations.
"Fit cash" is used to refer to cash which is loaded into cassettes and
placed in the ATM machines. Fit cash is high quality cash which is "fit" for
dispensing in a mechanical cassette. "Average fit cash" refers to the average
amount of cash in the machines during any given time period.
Competition
The ATM business is and can be expected to remain highly competitive.
While the Company's principal competition comes from national and regional
banks, the Company also competes with independent ATM companies. All of these
competitors offer services similar to or substantially the same as those
offered by the Company. Most of these competitors are larger, more established
and have greater financial and other resources than
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the Company. Such competition could prevent the Company from obtaining or
maintaining desirable locations for its machines or could cause the Company to
reduce its user fees generated by its ATMs or could cause the Company's profits
to decline. The independent ATM business has become increasingly competitive
since entities other than banks have entered the market and relatively few
barriers exist to entry.
Government Regulation
The Company is subject to potential regulation by the Federal Banking
Acts. In the event that the Company develops nationwide operations, it may be
subject to regulations of state authorities in those states in which it
operates. In some states, the amount and nature of fees charged is limited or
restrited by regulation, and in some states private ATM machines are not
permissible.
Employees
The Company currently employs two persons on a full time basis. It is
anticipated that the Company's personnel requirements will not grow
substantially in either the administrative or service areas. The Company
contracts with independent contractors to install and service its ATM's.
Properties
The Company currently has a lease for approximately 1,050 square feet of
office space at 5061 North Dixie Highway, Boca Raton, Florida 33431. The
original term of the lease was for three years and expired on June 30, 1999.
The lease automatically renews for periods of one year on each anniversary
date, absent notice of termination by either party. The Company believes that
this facility is adequate to satisfy its needs for the foreseeable future.
Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended June 30, 1999.
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PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
In October 1996, the company completed an offering of 2,500,000 Warrants
and 700,000 shares of Common Stock pursuant to Rule 504 under the Securities
Act. These securities are traded on the over-the-counter Bulletin Board and the
over-the-counter market "pink sheets" under the symbols ATM and AATMW,
respectively. Over-the-counter quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions and may not represent actual
transactions. The following table sets forth the range of high and low bid
information for the quarterly periods indicated, as provided by Prophet
Information Services, Inc. through America On-line and/or the National
Quotation Bureau, LLC.
High Low
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1997:
September 30 ..................................... $ 7 1/8 $ 4
December 31 ...................................... 16 3/8 5
1998:
March 31 ......................................... 12 5 1/4
June 30 .......................................... 5 3/4 2
September ........................................ 4 3/4 1 3/4
December 31 ...................................... 4 1/8 2 9/16
1999:
March 31 ......................................... 3 7/8 2.8125
June 30 .......................................... 2.8125 1
Dividend Policy
The Company does not anticipate paying any cash dividends on its common
stock in the foreseeable future because it intends to retain its earnings to
finance the expansion of its business. Thereafter, declaration of any dividends
will be determined by the Board of Directors in light of the conditions then
existing, including, without limitation, the Company's financial condition,
capital requirements and business conditions.
As of September 16,1999 there were 18 record holders of the Company's
Common stock.
Item 6. Selected Financial Data
The selected financial data for the three years ended June 30, 1999 is
qualified by and should be read in conjunction with the Company's combined
financial statements and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
herein.
<TABLE>
<CAPTION>
For the year ended June 30,
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1999 1998 1997
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<S> <C> <C> <C>
Operating Data:
Fee income ..................................................... $ 366,926 $ 323,100 $ 118,852
Direct costs (including interest of 26,642 and 68,247) ......... 350,414 443,014 $ 407,473
Selling, general and administrative expenses ................... 289,867 498,701 $ 548,783
Loss on disposal of equipment .................................. 109,985 206,119 --
Interest expense ............................................... (18,250) (18,921) --
Provision for income taxes ..................................... 3,000 3,000 1,000
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Net loss ....................................................... 402,746 (826,417) (815,590)
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Net (loss) income per common share ............................. $ (0.14) $ (0.29) $ (0.35)
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Average number of shares outstanding ........................... 2,800,869 2,816,250 2,342,160
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</TABLE>
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<TABLE>
<CAPTION>
As at June 30,
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1999 1998 1997
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<S> <C> <C> <C>
Balance Sheet Data:
Working Capital (deficiency) ......... $ (314,156) $ (135,766) $ 142,388
Current assets ....................... 198,531 202,627 397,193
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Total assets ......................... 231,931 489,346 881,175
Long term debt ....................... -- 111,000 2,000
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Total liabilities .................... 512,687 449,393 256,805
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Accumulated deficit .................. (280,756) (1,681,263) (854,846)
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Stockholders equity .................. (280,756) 39,953 624,370
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</TABLE>
Item 7. 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
Prospectus. 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 coming year 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 June 30, 2000. 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.
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 18 of these locations to
date with ATMs installed and operating and expects to sign at least an
additional 25 to 30 before March 31, 2000. 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.
Year Ended June 30, 1999 vs. June 30, 1998
Fee Income
For the year ended June 30, 1999, the Company had gross fee income of $366,062
compared with $323,100 for the year ended June 30, 1998. The $42,962 (13.3%)
increase was the result of having more equipment in place.
Direct Costs
The Company's direct costs associated with its ATMs operations were
$350,414 (95.7% of income) as compared with $443,014 (137% of income) for
fiscal 1998. The decrease in direct costs of $92,600 (20.9%) is attributable to
a decrease in overall maintenance costs of the locations, the reduction in the
cost of fit cash and changes in subcontractors who provide services to the
machines.
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Gross Loss
The Company's operations resulted in a gross profit of $15,648 in fiscal
1999, compared with a gross loss of $119,914 in 1998. This change is
attributable to the generation of higher fee income from ATMs installed and fees
from machines installed in 1998 while fixed direct costs declined. In fiscal
1998, variable direct costs had increased in relation to an increased number of
new machines. Installation relocation and maintenance costs were higher 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.
General and Administrative Expenses
The $114,615 (28.3%) decrease in general and administrative costs from
$404,000 (125.1% of revenues) in fiscal 1998 to $289,866 (79.2% of revenues) in
fiscal 1999 resulted primarily from overall reduction in professional fees,
administrative personnel and general expenses.
Loss on Disposal of Equipment
In analyzing its ongoing operations management in the second quarter
became aware that certain of its machines required an inordinate amount of
maintenance and other operating direct costs than its newer and more
technologically advanced ATMs. Additionally, these older machines were
discontinued by their manufacturer and spare/replacement parts were becoming
difficult to obtain. Coupled with its review of its operating costs of these
machines, management also reviewed its poorer performing locations and
determined to dispose of these high cost machines and close the poorer
performing sites. The Company disposed of the machines essentially for the cost
of removing the sites from the canceled locations resulting in a loss of
$206,119 in fiscal 1998 and $109,985 in fiscal 1999.
Interest
Interest expense in fiscal 1999 was $18,250 which was interest payable on
a note to two stockholders. This does not include financing costs relating to
the operation of the Company's ATM machines, which totaled $61,488 in fiscal
1999. In fiscal 1998, interest expense was $18,921, exclusive of $51,404 in
financing costs to operate the ATM machines which was included in direct costs.
Both interest expense and financing costs remained relatively stable over the
two fiscal years.
Net Loss
The net loss decreased $423,671 (51.3%) to $402,746 in 1999 from $826,417
in 1998 for reasons discussed in the above analysis.
Year Ended June 30, 1998 vs. June 30, 1997
Fee Income
For the year ended June 30, 1998, the Company had gross income of $323,000
compared with $119,000 for the year ended June 30, 1997. The $204,000 (171.9%)
increase was the result of having more equipment in place and all installed
equipment beginning to generate fee income in 1998. Additionally, the Company
was in the development stage through September 1997 during which time the
Company had de minimis revenues.
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Direct Costs
The Company's direct costs associated with its ATMs operations were,
$443,000 (137.1% of revenues) as compared with $407,000 (342.8% of revenues)
for 1997. The increase in direct costs of $36,000 (8.8%) is attributable to
installations at new locations, The decrease in gross loss from $289,000 in
1997 (242.8% of revenues) to $120,000 (37.1% 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 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 decreased $88,000 (48.2%) in the current
year to $94,000 (29.2% of revenues) from $182,000 (153.0% of revenues) in
fiscal 1997. The decrease is largely attributable to a non-cash charge to
operations for public relations services of $85,000 rendered by consultants
during the second quarter of fiscal 1997.
General and Administrative Expenses
The $37,000 (10.1%) increase in general and administrative costs to
$404,000 (125.1% of revenues) in the current year from $367,000 (308.8% of
revenues) in the prior year resulted primarily from an increase in personnel
costs of $22,000 as well as an increase in occupancy and office costs of
$16,000. These costs increased because of the increased number of machines in
operation during 1998 and because the Company was operating in the development
stage during the first quarter of 1997 in which such expenses incurred were
less.
Loss on Disposal of Equipment
In analyzing it on going operations management in the second quarter
became aware that certain of its machines required an inordinate amount of
maintenance and other operating direct costs than its newer and more
technologically advanced ATMs. Additionally, these older machines were
discontinued by their manufacturer and spare/replacement parts were becoming
difficult to obtain. Coupled with its review of its operating costs of these
machines, management also reviewed its poorer performing locations and
determined to dispose of these high cost machines and close the poorer
performing sites. The Company disposed of the machines essentially for the cost
of removing the sites from the canceled locations resulting in a loss of
$206,000.
Interest
Interest expense in 1998 was $45,000 of which $26,000 was included in
direct costs in the accompanying financial statements. Interest which was
included as a direct cost in 1997 aggregated $68,000. The decrease of $23,000
(34.7%) is attributable to the Company's commencement of the use of rented cash
in the second half of 1998 and the termination of its line of credit which was
in effect in 1997. This resulted in a reduction of direct interest expenses of
$42,000. This interest reduction was offset by rent expense on the rented cash
of $26,000 in 1998 and interest of $19,000 on $370,000 in debt financing from
related parties obtained in December 1997. Interest income in both years
remained relatively constant.
Net Loss
The net loss decreased $424,000 (52.0%) to $826,000 in 1998 from $816,000
as per the above analysis. As the Company was not an operating entity from its
inception on March 11, 1996 through June 30, 1996, any discussion and analysis
of the results of operations between fiscal 1997 and 1996 would not be
meaningful.
Financial Condition
June 30, 1999 vs. June 30, 1998
The Company's free cash position at June 30, 1999 decreased $16,405 to
$155,553 over $171,958 at June 30, 1998. The decrease is essentially
attributable to the loss from operations.
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The Company had an operating cash flow deficit of $130,424 in 1999 and
$272,220 in 1998 which is a decrease of 141,796 (52.1%). These cash flow
deficits result from the Company's policy of expanding its business which
entails incurring costs without the generation of sufficient immediate revenues
to offset operating costs and expenditures. The placement of a machine at a
location may take up to six months to generate enough revenues to cover all of
its direct costs. The decrease from fiscal 1998 to fiscal 1999 resulted
primarily from the stability of the existing sites and the lack of need to
install or reinstall equipment at new sites. The Company expects this negative
cash flow trend from operating activities to continue as long as it is in the
process of expanding its business.
Accounts payable, accrued expenses and other current liabilities totaled
$142,687 at June 30, 1999 compared with $78,000 at June 30, 1998 due to
pressure on the Company's free cash position resulting from its loss from
operations.
Stockholder's equity decreased from $39,953 at June 30, 1998 to $(280,756)
at June 30, 1999 resulting from the loss from operations.
June 30, 1998 vs. June 30, 1997
The Company's free cash position at June 30, 1998 increased approximately
$121,000 to approximately $172,000 from approximately $51,000 at June 30, 1997.
The increase was essentially attributable to the receipt of approximately
$370,000 in debt financing from related parties plus the receipt of
approximately $125,000 in notes receivable as offset by the acquisition of
property and other assets of approximately $92,000 and the cash used in
operating activities of approximately $272,000. Restricted cash of
approximately $208,000 at June 30, 1997 was used to repay the terminated line
of credit liability in December 1997.
The Company had an operating cash flow deficit of approximately $272,000
in 1998 and approximately $397,000 in 1997 which is a decrease of 31.5%. These
cash flow deficits result from the Company's policy of expanding its business
which entails incurring costs without the generation of sufficient immediate
revenues to offset operating costs and expenditures. The placement of a machine
at a location may take up to six months to generate enough revenues to cover
all of its direct costs.
Accounts payable, accrued expenses and other current liabilities increased
approximately $41,000 (110.8%) to approximately $78,000 at June 30, 1998 due to
the incurrence of approximately $30,000 in legal and accounting costs
associated with the proposed registration statement.
Stockholder's equity decreased from approximately $624,000 at June 30,
1997 to approximately $40,000 at June 30, 1998 resulting from the loss in 1998
of approximately $826,000 as offset by the contribution to capital of
approximately $42,000 in salary by the Company's CEO and amortization of
deferred compensation of approximately $200,000.
Liquidity and Capital Resources
The Company had a working capital deficit of $136,000 at June 30, 1999 and
had working capital of $314,156. 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. The Company from its inception in March 1996 through
December 1996 issued 2,741,250 shares of its common stock and 2,500,000
warrants for $1,161,500 in cash (before costs associated therewith). In
December 1996 the Company issued 1,062,500 warrants to acquire a like number of
shares of its common stock at $2.40 per share as payment for $85,000 in
consulting fees. In January 1997, the Company issued 75,000 shares of its
common stock as payment for $180,000 in capital lease obligations. In March
1997 the Company issued to its Chairman options to acquire 250,000 shares of
its common stock at $0.88 per share partially as incentive and partially as
payment of $40,000 in salary waived by this officer. Additionally, the Company
issued options to its five non-employee directors for an aggregate of 62,500
shares at $0.80 per share. The variance between the fair market value of the
shares under options issued to the directors and the exercise prices of these
options was $400,000 which was reflected as deferred compensation and fully
charged to operations by June 30, 1998.
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
realization of the estimated net proceeds of $8,460,000 from
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the exercise of all of the currently outstanding warrants. The Company
presently has warrants outstanding to acquire 3,562,000 shares of its common
stock at $2.40 per share. In October 1996, the Company conducted an
unregistered Offering under Rule 504, in which the Company sold Warrants to
purchase 2,500,000 shares of Common Stock. The Company has also issued Warrants
to purchase 1,062,500 shares of common stock in the aggregate in exchange for
independent public relations services to the Company in August and December of
1997 and January and March of 1998, respectively. Each such Warrant expires
three (3) years from the date thereof, and is exercisable for one share of the
Company's common stock at an exercise price of $2.40 per share. The Warrants
are exercisable at the earlier of (i) one (1) year from the date of the last
sale of the Warrants in the offering in which the Warrants issued or (ii) upon
the effectiveness of a Registration Statement under the Securities Act in which
the Shares underlying the Warrants are registered. The exercise price and
number of shares deliverable upon exercise of the Warrants are subject to
anti-dilution adjustments under certain circumstances.
During fiscal 1999, the Company filed a registration statement with the
Securities and Exchange Commission, which became effective on January 6, 1999,
in order to permit holders of its common stock purchase warrants to exercise
these warrants. The Company has relied to a significant extent upon the
exercise of these warrants to generate cash to fund the Company's expansion.
Since January 6, 1999, warrants to purchase 67,500 shares of common stock have
been exercised, yielding $132,037 in proceeds to the Company, net of offering
costs of $129,963.
The Company cannot be certain that any additional warrants will be
exercised. This, among other conditions, raises 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 have additional warrants
exercised into common shares, the Company will 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.
Year 2000 Concerns
The Year 2000 computer problem 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 is not able to determine, however, whether any of its
suppliers, lenders, or service providers will need to make any such
modifications or replacements or whether the failure to make such software
corrections will have a material adverse effect on the Company's operations or
financial condition. Although it is management's belief that the failure by
such entities to make required software corrections could have a material
adverse 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.
Item 8. Financial Statements and Supplementary Data
See Item 14, Exhibits, Financial Statement Schedules, and Reports on Form 8K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
9
<PAGE>
PART III
Incorporated by reference to the Company's Proxy Statement for its Annual
Meeting to be held on November 11, 1999.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
The following documents are being filed as a part of this report:
(a) (1) Financial Statements
(2) Financial Statement Schedules
All other schedules are omitted since the required information is either
not present or not present in amounts sufficient to require submission
of the schedule
(b) Exhibits
3.1 Certificate of Incorporation is hereby incorporated by reference to the
Company's Registration Statement, which was filed with the SEC on March
13, 1998.
3.2 By-laws are hereby incorporated by reference to the Company's
Registration Statement, which was filed with the SEC on March 13, 1998.
4.1 Specimen Certificate for shares of common Stock is hereby incorporated
by reference to Amendment No. 3 to the Company's Registration
Statement, which was filed with the SEC on December 10, 1998.
4.2 Director and Officer 1996 Stock Option Compensation Plan is hereby
incorporated by reference to Amendment No. 3 to the Company's
Registration Statement, which was filed with the SEC on December 10,
1998.
4.3 Warrant Agreement, dated March 18, 1997, by and between the Company and
American Securities Transfer & Trust Inc.is hereby incorporated by
reference to Amendment No. 3 to the Company's Registration Statement,
which was filed with the SEC on December 10, 1998.
4.4 Specimen Certificate for Common Stock Purchase Warrants is hereby
incorporated by reference to Amendment No. 3 to the Company's
Registration Statement, which was filed with the SEC on December 10,
1998.
10.1 Lease by and between the Company and Cinderella Properties is hereby
incorporated by reference to Amendment No. 1 to the Company's
Registration Statement, which was filed with the SEC on July 10, 1998.
10.2 ATM Funding Agreement, by and between the Company and Wells Fargo (now
known as Loomis Fargo), dated August 19, 1996, together with Addendum
thereto dated September 8, 1997 is hereby incorporated by reference to
the Company's Registration Statement, which was filed with the SEC on
March 13, 1998.
10.3 Strategic Partnership Joint Effort Agreement by and between the Company
and Atlantic International Entertainment, Ltd. dated September 30, 1997
is hereby incorporated by reference to the Company's Registration
Statement, which was filed with the SEC on March 13, 1998.
10.4 Automated Teller Machine Contract, by and between the Company and Wells
Fargo (now known as Loomis Fargo) dated August 19, 1996, together with
Addendum thereto dated September 8, 1997 is hereby incorporated by
reference to Amendment No. 1 to the Company's Registration Statement,
which was filed with the SEC on July 10, 1998.
10
<PAGE>
10.5 Employment Agreement, by and between the Company and Mori Aaron
Schweitzer, dated March 16, 1996 is hereby incorporated by reference to
Amendment No. 2 to the Company's Registration Statement, which was filed
with the SEC on October 9, 1998.
10.6 Contract, dated December 30, 1997, by and between the Company and ATM
Site Locators, Inc.is hereby incorporated by reference to Amendment No.
3 to the Company's Registration Statement, which was filed with the SEC
on December 10, 1998.
10.7 Agreement, dated August 22, 1997, by and between the Company and Rajiv
Vohra is hereby incorporated by reference to Amendment No. 3 to the
Company's Registration Statement, which was filed with the SEC on
December 10, 1998.
27.1 Financial Data Schedule
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ Wayne B. Kight
-------------------------------------
Wayne B. Kight
Chief Executive Officer
Date: October 20, 1999
Pursuant to the requirements of the securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Sondra Parker Vice President, Secretary and October 20, 1999
- ----------------------- Director
Sondra Parker
/s/ Wayne B. Kight Chairman, Chief Executive October 20, 1999
- ----------------------- Officer, President and Treasurer
Wayne B. Kight and Director
/s/ Carmen Panizzi Vice President ATM October 20, 1999
- ----------------------- Operations
Carmen Panizzi
/s/ Barry J. Haberman Director October 20, 1999
- -----------------------
Barry J. Haberman
12
<PAGE>
AMERICAN ATM CORP.
FINANCIAL STATEMENTS
JUNE 30, 1999
<PAGE>
AMERICAN ATM CORP.
JUNE 30, 1999
INDEX
Page No.
--------
INDEPENDENT AUDITORS' REPORT ..................................... F-1
FINANCIAL STATEMENTS:
Balance Sheets as at June 30, 1999 and 1998 ..................... F-2
Statements of Operations
For the Years Ended June 30, 1999 and 1998 ..................... F-3
Statements of Cash Flows
For the Years Ended June 30, 1999 and 1998 ..................... F-4 -- F-5
Statements of Stockholders' Equity
For the Years Ended June 30, 1999 and 1998 ...................... F-6
NOTES TO FINANCIAL STATEMENTS .................................... F-7 -- F-17
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are not applicable and have therefore been omitted or
the required information is shown in the Financial Statements or the Notes
thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
American ATM Corp.
We have audited the accompanying consolidated balance sheets of American ATM
Corp. as at June 30, 1999 and 1998, and the related statements of operations,
cash flows, and stockholders' equity (capital deficiency) for the two years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American ATM
Corp. as at June 30, 1999 and 1998, and the results of their operations and
their cash flows for each of the two years ended June 30, 1999, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has a working capital deficiency of $314,156 and liabilities exceed
assets by $280,756 at June 30, 1999 and in addition the Company has incurred
losses since inception. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
[GRAPHIC OMITTED]
New York, N. Y.
September 9, 1999, except for Note 1 as
to which the date is October 8, 1999
<PAGE>
AMERICAN ATM CORP.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30,
---------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Current assets:
Cash and equivalents .............................................. $ 155,553 $ 171,958
Restricted cash ................................................... 10,000 --
Accounts receivable - trade ....................................... 13,478 16,818
Due from affiliates ............................................... 2,700 --
Assets held for resale ............................................ 11,500 --
Prepaid expense and other current assets .......................... 5,300 13,851
------------ ------------
Total current assets ............................................ 198,531 202,627
------------ ------------
Property assets:
Furniture and equipment ........................................... 182,759 290,702
Software .......................................................... 8,693 8,693
Leasehold improvements ............................................ 830 830
------------ ------------
192,282 300,225
Less: Accumulated depreciation .................................... 161,525 85,899
------------ ------------
Net property assets ............................................. 30,757 214,326
------------ ------------
Deferred offering costs ............................................ -- 69,682
------------ ------------
Other assets ....................................................... 2,643 2,711
------------ ------------
$ 231,931 $ 489,346
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
Current liabilities:
Lines of credit payable ........................................... $ 260,000 $ 260,000
Current maturities of long-term debt .............................. 110,000 --
Accounts payable .................................................. 13,375 22,824
Taxes payable ..................................................... 8,344 6,339
Accrued expenses and other current liabilities .................... 115,968 49,230
Due to stockholder ................................................ 5,000 --
------------ ------------
Total current liabilities ....................................... 512,687 338,393
------------ ------------
Long-term debt ..................................................... -- 110,000
------------ ------------
Deferred rent ...................................................... -- 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 - 2,908,750 and 2,816,250 shares ......... 2,909 2,816
Additional paid-in capital ........................................ 1,800,344 1,718,400
Accumulated deficit ............................................... (2,084,009) (1,681,263)
------------ ------------
Total stockholders' equity (capital deficiency) ................. (280,756) 39,953
------------ ------------
$ 231,931 $ 489,346
============ ============
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
AMERICAN ATM CORP.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended
June 30,
-----------------------------
1999 1998
------------- -------------
<S> <C> <C>
Fee income ............................................ $ 366,062 $ 323,100
--------- ---------
Direct costs:
Location expenses .................................... 301,676 391,610
Financing costs ...................................... 61,488 51,404
--------- ---------
Total direct costs .................................... 363,164 443,014
--------- ---------
Gross profit (loss) ................................... 2,898 (119,914)
--------- ---------
Operating expenses:
Selling .............................................. 89,288 94,220
General and administrative ........................... 187,829 404,481
Loss on disposal of equipment ........................ 109,985 206,119
--------- ---------
Total operating expenses .............................. 387,102 704,820
--------- ---------
Loss from operations .................................. (384,204) (824,734)
--------- ---------
Other income (deduction):
Interest expense ..................................... (18,250) (18,921)
Interest income ...................................... 2,708 20,238
--------- ---------
Total other income (deduction) ........................ (15,542) 1,317
--------- ---------
Loss before income taxes .............................. (399,746) (823,417)
Provision for income taxes ............................ 3,000 3,000
--------- ---------
Net loss .............................................. ($ 402,746) ($ 826,417)
========= =========
Net loss per share .................................... $ 0.14) $ 0.29)
========= =========
Weighted average number of shares outstanding ......... 2,880,869 2,816,250
========= =========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
AMERICAN ATM CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended
June 30,
---------------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................................... ($402,746) ($826,417)
-------- ---------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation ............................................................. 62,161 82,661
Amortization of deferred compensation .................................... -- 200,000
Loss on disposal of equipment ............................................ 109,985 206,119
Contribution to capital of stockholders' salary .......................... 30,000 42,000
Deferred rent ............................................................ (1,000) (1,000)
Increase (decrease) in cash flows as a result of changes in assets and
liability account balances:
Accounts receivable ..................................................... 3,340 ( 13,426)
Prepaid expenses and current assets ..................................... 8,551 ( 4,393)
Other assets ............................................................ (9) 1,000
Accounts payable ........................................................ (9,449) 8,352
Accrued expenses and current liabilities ................................ 68,743 32,884
--------- ---------
Total adjustments .......................................................... 272,322 554,197
--------- ---------
Net cash used in operating activities ....................................... (130,424) (272,220)
--------- ---------
Cash flows from investing activities:
Acquisition of property assets ............................................. -- (22,835)
Restricted cash ............................................................ (10,000) 207,800
Due from affiliates ........................................................ 2,300 --
Note receivable ............................................................ -- 125,200
--------- ---------
Net cash provided by (used in) investing activities ......................... (7,700) 310,165
--------- ---------
Cash flows from financing activities:
Proceeds from sale of securities, net of costs ........................... 121,719 (69,682)
Proceeds from stockholders' notes payable ................................ -- 110,000
Proceeds from lines of credit ............................................ -- 42,352
--------- ---------
Net cash provided by financing activities ................................... 121,719 82,670
--------- ---------
Net increase (decrease) in cash and equivalents ............................. (16,405) 120,615
Cash and equivalents at beginning of year ................................... 171,958 51,343
--------- ---------
Cash and equivalents at end of year ......................................... $ 155,553 $171,958
========= =========
Supplemental Schedules of Noncash Operating and Financing Activities:
Stockholder/officer's waived salary contributed to capital ............... $ 30,000 $ 42,000
========= =========
Assets held for resale ................................................... $ 11,500 $ --
========= =========
Supplemental Disclosures of Cash Flow Information:
Interest paid ............................................................ $ 26,000 $ 35,223
========= =========
Taxes paid ............................................................... $ 357 $ 549
========= ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
AMERICAN ATM CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
$.001 Par Value $10 Par Value
Common Stock Preferred Stock
--------------------- ------------------
Shares Amount Shares Amount
----------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance -- July 1, 1997 2,816,250 $2,816 -- $ --
Stockholders' waiver of
salary-contributed to capital -- -- -- --
Net loss for the year ended
June 30, 1998 -- -- -- --
--------- ------ ----- -----
Balance -- June 30, 1998 2,816,250 2,816 -- --
Stockholders' waiver of
salary-contributed to capital -- -- -- --
Net proceeds from the
conversion of warrants to
common stock 67,500 68 -- --
Net proceeds from the exer-
cise of stock options 25,000 25 -- --
Net loss for the year ended
June 30, 1999 -- -- -- --
--------- ------ ----- -----
2,908,750 $2,909 -- $ --
========= ====== ===== =====
<CAPTION>
Total
Stockholders'
Additional Equity
Paid-In Deferred Accumulated (Capital
Capital Compensation Deficit Deficiency)
------------ -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Balance -- July 1, 1997 $1,676,400 ($ 200,000) ($ 854,846) $624,370
Stockholders' waiver of
salary-contributed to capital 42,000 -- -- 42,000
Net loss for the year ended
June 30, 1998 -- 200,000 (826,417) (626,417)
---------- --------- ----------- --------
Balance -- June 30, 1998 1,718,400 -- (1,681,263) 39,953
Stockholders' waiver of
salary-contributed to capital 30,000 -- -- 30,000
Net proceeds from the
conversion of warrants to
common stock 31,969 -- -- 32,037
Net proceeds from the exer-
cise of stock options 19,975 -- -- 20,000
Net loss for the year ended
June 30, 1999 -- -- (402,746) (402,746)
---------- --------- ----------- --------
$1,800,344 $ -- ($ 2,084,009) ($280,756)
========== ========= =========== =========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
AMERICAN ATM CORP.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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 an independent owner and operator
of automatic teller machines (ATMs) at leased locations. The ATMs provide
individuals with credit or debt 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 June 30, 1993 aggregating $2,084,009 of
which $94,114 was incurred while the Company was in the development stage. The
accompanying financial statements reflect a working capital deficiency of
$314,156 and liabilities exceed assets by $280,756 at June 30, 1999. The
Company's source of funds have been the proceeds from the sale of its
securities, 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. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Management 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). Upon the completion of the registration of
the shares, holders of warrants for 67,500 common shares converted their
warrants resulting in $32,037 in cash, net of offering costs of $129,963
through June 30, 1999. The Company can not be certain that any additional
warrants will be converted. Through October 8, 1999 no additional warrant
holders converted their warrants into common shares. If any present warrant
holders desire to convert their warrants into registered common shares in the
future, the Company must file an amendment to the registration statement or
file a new registration statement. Management's plan was 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.
NOTE 2 -- 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.
(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 operations 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.
F-6
<PAGE>
AMERICAN ATM CORP.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 -- (Continued)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. -- (Continued)
(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 June 30, 1999 and 1998 were $24,095 and $46,558, respectively.
(d) Property Assets:
Property assets are stated at cost. Repairs and 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 expense charged to operations was $62,088 and $82,584 in
the years ended June 30, 1999 and 1998, respectively. Additionally, management
in June 1999 determined that certain of its ATMs value had been impaired due to
new technology. In September 1999, 10 machines were sold for $11,500 resulting
in a loss of $42,985 which was charged to operations in fiscal 1999 along with
a charge for $67,000 reflecting management's estimate of the impairment to some
of its remaining property assets which were not sold and remain in operation.
(e) Organization Costs:
Organization costs which are included in other assets were $134 net of
accumulated amortization of $249 at June 30, 1999 and are being amortized over
a sixty months period. Amortization charged to operations was $77 in each of
the years ended June 30, 1999 and 1998.
(f) Deferred Offering Costs:
The Company incurred $129,963 of costs associated with the registration of
3,562,500 shares of its common stock underlying purchase warrants of which
$69,682 were incurred in 1998. These costs were charged to additional paid-in
capital upon the successful completion of the registration.
(g) Advertising:
The Company expenses advertising costs as incurred. Advertising charged to
operations was $6,682 and $3,302 in the years ended June 30, 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 rate.
(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.
F-7
<PAGE>
AMERICAN ATM CORP.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 -- (Continued)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. -- (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 year
ended June 30, 1998. All of the Company's ATMs were functional at June 30,
1999, but did not possess the state of the art software and hardware styling
which some of the Company's customers desired. Management attempted to replace
its ATMs with new machines and in September 1999 sold 10 machines for $11,250
resulting in a loss of $42,985. Management estimated that is remaining ATMs'
value has been impaired by an additional $67,000. The entire loss of $109,985
has been charged to operations in fiscal 1999.
At June 30, 1999 and 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.
NOTE 3 -- 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
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. Interest is
classified in the accompanying financial statement as a direct cost of fee
income. The weighted average interest rate as at and during the year ended June
30, 1998 as 12%. The Company's average and highest month-end outstanding
balance under its financing agreement in 1998 was $141,151 and $244,580,
respectively. Interest at 12% charged to operations in 1998 under this facility
was $25,700.
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. In May 1999, the
Company terminated the first rental agreement replaced it with another cash
rental agreement. The condition of both rental agreements are essentially the
same except that under the current agreement the lessor is responsible for any
loss due to theft, vandalism, or other non-operational losses. 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 lease agreement in 1998 was
$418,119 and the average cash rented was $234,088. During 1999, the maximum
cash rented was $421,333 and the average was $356,000. Rent for the cash
charged to operations was $25,752 in fiscal 1998 and $35,488 in 1999. At June
30, 1999 and 1998, the amount of rented cash in the Company's ATM's was
$290,120 and $258,520.
F-8
<PAGE>
AMERICAN ATM CORP.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 -- (Continued)
NOTE 3 -- FINANCING. -- (Continued)
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 estimated fair market value was $24,865 and whose undepreciated cost
was $204,316 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 fiscal 1999
and 1998 was $26,000 (10.0%) and $13,521 (10.0%), respectively.
NOTE 4 -- LONG-TERM DEBT.
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 and as a current
liability at June 30, 1999. Interest charged to operations and paid to these
stockholders was $18,250 and $5,400 in the years ended June 30, 1999 and 1998.
NOTE 5 -- INCOME TAXES.
The Company has net operating loss carryforwards available of
approximately $1,886,000 and $1,514,000 at June 30, 1999 and 1998 expiring
through 2014 which upon recognition may result in future federal and state and
local income tax benefits of approximately $744,000 and $520,000, respectively.
At June 30, 1999 and 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.
The Company's income tax provision consists of the following:
For the Years Ended June 30,
----------------------------
1999 1998
-------- ---------
Federal ............................... $ -- $ --
State and local taxes ................. 3,000 3,000
------ ------
Income tax provision .................. $3,000 $3,000
====== ======
A reconciliation of the statutory income tax effect rate is as follow:
<TABLE>
<CAPTION>
For the Years Ended June 30,
-------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Federal statutory rate .............................. ($ 136,000) (34.0%) ($ 280,000) (34.0%)
State and local, net of federal tax benefit ......... 2,000 .5 2,000 .5
Non-deductible expenses ............................. 11,000 2.4 15,000 2.4
Reserve for net operating loss carryforward tax asset 126,000 31.5 266,000 31.8
--------- ------ --------- ------
$ 3,000 .8% $ 3,000 .5%
========= ====== ========= ======
</TABLE>
NOTE 6 -- 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).
F-9
<PAGE>
AMERICAN ATM CORP.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 -- (Continued)
NOTE 6 -- STOCKHOLDERS' EQUITY. -- (Continued)
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
waived $30,000 of his accrued salary in 1999. Such waviers were recorded as
contribution to additional paid-in capital in the accompanying financial
statements in the year of waiver.
(c) Warrants:
In connection with the sale of securities in 1996 and 1997, the Company
sold warrants 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 to the consultant 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.
The Company filed with the Securities and Exchange Commission a
registration statement on Form SB-2 to register 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 proceeds received by the Company through June 30, 1999
from the conversion of warrants into 67,500 common shares were $132,037 before
offering costs of $129,963. If the additional 3,495,000 warrants at June 30,
1999 were exercised, then the Company would receive an additional $8,388,000.
(d) Common Stock Split:
The Company's Board of Directors approved a split of its outstanding
common shares of five (5) shares of each four (4) shares outstanding on
December 11, 1997.
(e) Stock Options:
The Board of Directors adopted the American ATM Corp. 1996 Stock Option
Plan ("1996 Plan") on December 16, 1996 which the shareholders subsequently
approved. The 1996 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 options granted under the 1996 Plan to
acquire 165,000 common shares have been qualified grants and options to acquire
412,500 common shares have been non-qualified grants.
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 vests 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.
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. The CEO's options were granted in recognition of his decision to forego
$40,000 in salary for calendar 1996. The wavier 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.
F-10
<PAGE>
AMERICAN ATM CORP.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 -- (Continued)
NOTE 6 -- STOCKHOLDERS' EQUITY. -- (Continued)
Also on March 25, 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 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 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
exercise prices aggregated $400,000 which 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 $200,000 charge to operations in the years ended June
30, 1998 and 1997.
In October 1998, a former director exercised options to acquire 25,000
common shares at $.80 per share for an aggregate of $20,000 for which the
director remitted $25,000 to the Company. The overpayment of $5,000 is
reflected as a current obligation in the accompanying financial statements.
On March 31, 1999, the Company issued options aggregating 165,000 shares
to officers, employees and directors. The excerise price of the options is the
$2.875 per share which is the fair market value at the date of the grant. The
options are exercisable at any time through March 31, 2009.
At June 30, 1999 and 1998, the Company had options for 552,500 and 412,500
common shares issued and unexercised under the 1996 Plan at exercise prices
ranging from $.80 to $2.875. At June 30, 1999 and 1998, 552,500 and 400,000
shares under options were exercisable at prices ranging from $.80 to $2.875 per
share.
Pursuant to the 1996 Plan, each of the non-employee directors of the
Company is to receive yearly -- at the conclusion of the stockholders' annual
meeting -- an option to acquire 10,000 shares of the Company's common stock for
the next fiscal year. Since the Company had not has its annual meeting for
1999, the five non-employee directors were not granted their options for fiscal
1999. Upon the conclusion of the 1999 annual stockholders' meeting, the
directors will receive options to acquire an aggregate of 50,000 common shares.
On December 31, 1998,the Company adopted the 1999 Stock Option Plan ("1999
Plan"). The 1999 Plan provides for the total issuance of an aggregate of
500,000 common shares under non-qualified and qualified grants. No options have
been granted under the 1999 Plan.
Assuming the fair market value of the stock at the date of grant to be
$.80 per share in December 1996 and $2.40 per share in March 1997 and $2.875 at
March 31, 1999, the life of the options to be from three to ten years, the
expected volatility at 200%, expected dividends are none, and the risk-free
interest rate of 10%, the Company would have recorded compensation expense of
$162,355 and $117,792, respectively, for the years ended June 30, 1999 and
1998, as calculated by the Black-Scholes option pricing model. As such,
pro-forma net loss and loss per share would be as follows:
<TABLE>
<CAPTION>
For the Years Ended June 30,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Net loss as reported ............... ($ 402,746) ($ 826,417)
Additional compensation ............ $ 162,355 $ 117,792
Adjusted net loss .................. ($ 565,101) ($ 944,209)
Loss per share as reported ......... ($ 0.14) ($ 0.29)
Adjusted loss per share ............ ($ 0.20) ($ 0.34)
</TABLE>
F-11
<PAGE>
AMERICAN ATM CORP.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 -- (Continued)
NOTE 7 -- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130 -- "Reporting Comprehensive Income," No. 131 --
"Employer's 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 8 -- 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.
NOTE 9 -- 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 June 30, 1999 was $290,120.
(b) Leases:
The Company is a lessee under an operating real property lease for office
space which expired on June 30, 1999. The lease was automatically renewed for
one year at an annual rental of $12,000. The Company sublets space to two
entities whose stockholders are officer/Director of the Company under verbal
month-to-month leases. At June 30, 1999, the entities are indebted to the
Company for $2,700.
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
years ended June 30, 1999 and 1998 was $50,581 and $52,801, 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 year ended June 30, 1998 this officer waived
payment of $42,000 of his salary which was reflected as a contribution to
additional paid-in capital. In February 1999, this officer resigned and waived
the $30,000 in unpaid salary which was also reflected as a contribution to
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 October 1999.
NOTE 10 -- ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES.
Accrued expenses and other current liabilities consist of the following:
For the Years Ended June 30,
----------------------------
1999 1998
----------- ----------
Professional fees ................. $ 69,760 $49,230
Interest .......................... 18,250 --
Sundry ............................ 27,958 --
-------- -------
$115,968 $49,230
======== =======
F-12
<PAGE>
Cash Management Agreement
This Agreement ("Agreement") is made and entered into this 6th day of
May, 1999 between American ATM Corp ("ATM Owner"), a Florida corporation
(corporation/partnership/sole partnership) whose principal place of business is
located at 5061 North Dixie Highway, Boca Raton, FL 33431 and Lynk Systems,
Inc., a Georgia corporation, with principal offices at 600 Morgan Falls Road,
Suite 260, Atlanta, GA 30350 ("Operator").
WHEREAS, ATM Owner is the owner of the Automated Teller Machine
equipment ("ATM's); and
WHEREAS, ATM Owner desires Operator to provide cash management services
that include cash ("Rent Cash") and other related services to one or more ATM's
set forth in Exhibit A;
NOW, THEREFORE, in consideration of the premises, the premises set
forth below, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1
Definitions
The following term shall have the following meanings when used herein:
1. "Regulation E" shall mean Regulation E governing Electronic
Funds Transfers, as promulgated by the Board of Governors of
the Federal Reserve System and as found at 12 DGR Section
205.1 et seq,
2. "Funding Bank" is the bank responsible for providing Rent Cash
for the ATM's owned by ATM Owner and whose cash requirements
are to be managed by Operator.
3. "Correspondent Bank Account" shall mean the account(s)
maintained solely by Funding Bank through which Rent Cash is
disbursed to bonded cash transfer service organizations
("Armored Services") in accordance with written instructions
from Operator under this Agreement and into which returned
cash is deposited by the contract Armored Services.
4. "Prime Rate" shall mean the current prime rate as reported in
the Wall Street Journal as set forth on the first business day
of the month following the Funding Month, as hereinafter
defined.
5. "Cash Management Expenses", as defined further in Section 4
below, shall mean any fees earned by Operator in accordance
with this Agreement and expenses paid by Operator on behalf of
ATM Owner to third parties.
<PAGE>
SECTION 2
Duties of the ATM Owner
2.1 Compliance with Applicable Rules and Regulations. ATM Owner shall at
all times abide by, operate in accordance with and comply with all
applicable network rules and regulations and all applicable banking
laws and regulation, including Regulation E, as well as rules and
stipulations of this Agreement and Funding Bank.
2.2 Liability of ATM Owner to Funding Bank. ATM Owner acknowledges and
agrees that it is reasonable for any and all obligations which are
imposed upon Funding Bank relating to the funding of ATM's whether by
Network Armored Service or others under applicable laws and
regulations.
2.3 Relocation of ATM's. In the event that ATM Owner determines in its sole
discretion that one or more ATM's are not generating adequate volume to
support continued operation in a location, ATM Owner may, upon prior
written notice to Operator and payment of a processing termination fee
set forth in Exhibit B, relocate ATM's to another location of its
choice. Relocation of ATM's shall e treated as a new installation in
accordance with Exhibit B.
2.4 Insure Hardware. ATM Owner will provide insurance on ATM hardware.
2.5 Escrow Account. ATM Owner agrees to establish and fund a non-interest
bearing Escrow Account which at all times hereafter shall have a
minimum monthly balance equal to the greater of $10,000 or one (1)
month's projected Cash Management Expenses as described in Exhibit B
and Addendums attached hereto ("Escrow Account"). In the event ATM
Owner fails to pay invoices as required under this Agreement. Operator
may terminate this Agreement and deduct outstanding invoices incurred
by Operator on behalf of ATM Owner. Operator has the right to review
the Cash Management Expenses on a quarterly basis and may require ATM
Owner to increase or decrease the amount of the Escrow Account,
depending upon Cash Management Expenses incurred by Operator. If at any
time the Escrow Account fails to __________ less than fifty percent
(50%) of the amount specified in Exhibit B. ATM Owner shall promptly
restore the amount of the Escrow Account to the full amount. If AMT
Owner fails to restore such amount within fifteen (15) days of receipt
of notice thereof from Operator, Operator may immediately terminate
this Agreement. Within sixty (60) days of any termination of this
Agreement , Operator will reimburse ATM Owner the amount that remains
in the Escrow Account less any outstanding invoices and expenses
incurred by Operator on behalf of ATM Owner.
-2-
<PAGE>
SECTION 3
Duties of Operator
3.1 Cash Management of ATM's. Operator will provide the following services
to ATM owner either directly or indirectly through third party
agreement(s).
(a) Operator will contract with a Funding Bank to provide Rent
Cash
(b) Operator or Funding Bank will provide insurance on Rent
Cash.Such insurance shall include all risk of loss or damage
to the Rent Cash, excluding that caused by ATM Owner or the
Armored Services provider contracted by Operator. The
deductible shall be as set forth in Exhibit B.
(c) Operator or Funding Bank will establish Correspondent Bank
Accounts at locations within the proximity to ATM's owned by
ATM Owner.
(d) Operator will establish and maintain contracts for Armored
Services and first line maintenance for ATM Owner.
(e) Operator will order Rent Cash, schedule replenishment, contact
Armored Services, first line or second line companies for
unscheduled visits and return surplus cash as needed.
3.2 Processing of ATM Transactions. Under a separate Processing Agreement,
Operator will process transactions for all of the ATM's covered for
services hereunder.
3.3 Establishment of Services. Upon receipt of all _______ information
provided in Exhibit A from ATM Owner, Operator has up to forty-five
(45) days to establish contracts with third party vendors and bring the
ATM into operation with Rent Cash.
3.4 Handling of Physical Cash. Excluding the maintenance services provided
by ATM Owner, Operator shall at all times have sole and complete
control of and over the Rent Cash and may determine who and under what
circumstances other persons or entities may have access to the Rent
Cash.
SECTION 4
Expenses
Cash Management Expenses earned directly by Operator or paid by
Operator on behalf of ATM Owner include but are not limited to:
4.1 Armored Services. ATM Owner shall be responsible for and reimburse
Operator for all expenses incurred by Operator for Armored Services
provided at ATM's. Included in these expenses are charges for emergency
cash replenishment.
4.2 First Line Maintenance. ATM Owner shall be responsible for and
reimburse Operator for all expenses incurred by Operator relating to
the contract with the provider of first line maintenance, which
services include, but shall not be limited to clearing paper and bills
-3-
<PAGE>
jams , supply replenishment and services required to return ATM's to
operational status.
4.3 Cash Management Fees. ATM Owner agrees to pay Operator the monthly
per-ATM fees assessed by Operator in accordance with Exhibit B. The
Cash Management Fee includes overhead to Operator for its activities
hereunder, including managing, overseeing and being responsible for any
subcontracted services and service providers.
4.4 Funding Fee. ATM Owner shall be responsible for and reimburse Operator
for all expenses incurred by Operator for Rent Cash ("Funding Fees"),
which shall be calculated as follows: the average daily balance of all
Rent Cash provided by Funding Bank to ATM's during the month shall be
multiplied by the number of days in the Funding Month, which result is
then divided by 365. The Funding Fee will begin accruing the day the
Funding Bank initiates a wire to replenish ATM's and will end on (and
include) the day the Funding Bank receives Rent Cash removed from
ATM's.
4.5 Correspondent Bank Account(s). ATM Owner shall be responsible for and
reimburse Operator for all expenses incurred by Operator related to the
maintenance of all Correspondent Bank Account(s). ATM Owner
acknowledges and agrees that these fees are not fixed and may vary from
month to month depending on the activity on the account.
4.6 Rent Cash Insurance. ATM Owner shall be responsible for and reimburse
Operator for all expenses incurred by Operator for all insurance
premiums paid by Operator on behalf of ATM Owner. In the event of a
loss or claim, ATM Owner shall be responsible for any deductibles on
the ATM funding related to the claim. See Exhibit B for deductible
amount.
4.7 Payment of Expenses. ATM Owner authorizes Operator to set off
accumulated monthly Cash Management Expenses against Residuals due ATM
Owner from Network Interchange revenues collected by Operator per the
ATM Processing Agreement. Any shortage of revenue to cover expenses
will result in Operator submitting an invoice to ATM Owner. Such
invoice shall be payable net ten (10) days from receipt of invoice. Any
revenue surplus will be mailed in the form of a check to ATM Owner
within fifteen (15) business days. If at any time ATM Owner fails to
pay for Cash Management Expenses detailed in invoices produced by
Operator, or if Agreement is terminated for cause, Operator reserves
the right to deduct invoice amounts from Escrow Account.
-4-
<PAGE>
SECTION 5
Indemnification
5.1 Indemnification by ATM Owner. ATM Owner agrees to indemnify, defend and
hold harmless Operator, its officers, directors, employees, agents,
affiliates and assigns from and against any and all losses, cost,
claims, damages, fines, penalties, expenses (including attorney's fees)
or liabilities that may occur as a result of (i) any failure of ATM
Owner, or of any entity owner or controlled by ATM Owner or with whom
ATM Owner contracts to fulfil any of ATM Owner's duties or obligations
under this Agreement or under the Bylaws and Operating Regulations;
(ii) ATM Owner's compliance with the terms of or its duties under this
Agreement, including contracting with third; (iii) any failure to
comply with applicable laws, rules or regulations; or (iv) otherwise in
respect of or resulting from Operator's funding of ATM's Owner's ATM's.
5.2 Indemnification by Operation. Operator agrees to indemnify and hold
harmless ATM Owner and its officers, directors, employees, agents,
affiliates and permitted assigns from and against any al all losses,
costs, claims, damages, fines, penalties, expenses (including
attorney's fees) or liabilities they may incur arising out of any
breach by Operator of its obligations under this Agreement.
SECTION 6
Term and Termination
6.1 Term. Except as otherwise provided herein, the term of this Agreement
shall be five (5) years from date of execution by both parties
("Term"), which Term shall automatically renew for successive periods
of five (5) years unless terminated in writing by either party at least
sixty (60) days prior to the expiration of the then-current five
(5)-year term.
6.2 Right to Terminate Upon Breach. Either Party to this Agreement may
terminate this Agreement upon a breach of any of its terms, which
breach may include, but shall not be limited to any of the following:
(a) The failure of either Party to this Agreement to cure a breach
within thirty (30) days of receipt from the non-breaching
party of written notice thereof;
(b) If either Party (i) becomes insolvent; (ii) fails to pay its
debts or perform its obligations in the ordinary course of
business as they mature; or (ii) becomes this subject of any
voluntary or involuntary proceeding in bankruptcy,
liquidation, dissolution, receivership, attachment or
composition for the benefit of creditors, and the Party
terminating this Agreement provides written notice thereof to
such other Party.
(c) ATM Owner or its representative accesses the vault section of
an ATM for services or maintenance in the absent of a
representative of the Armored Service providing services to
the ATM.
-5-
<PAGE>
Upon occurrence of a breach, all Rented Cash will be removed from the
ATM's immediately.
6.3 Right to Terminate by Funding Bank. Notwithstanding anything to the
contrary contained herein, Funding Bank shall have the right to
terminate the agreement with Operator, upon which occurrence Operator
may terminate this Agreement with ATM Owner, in the event (a) any
federal or state regulatory agency with authority over Funding Bank
requires or requests, in writing, that Funding Bank terminate the
Agreement; (b) the Board of Directors of Funding Bank, its parent
holding company or any federal or state regulatory agency with
authority over Funding Bank, determines that Funding Bank's continued
performance under the terms of this Agreement would constitute an
unsafe or unsound banking practice, and so certifies to ATM Owner in
writing, or (c) the President of Funding Bank determines in his sole
discretion, that Funding Bank could be exposed to potential financial
risks or (d) the armored car service violates or does not comply with
the ARMORED CAR SERVICE ADDENDUM. Termination shall become effective
under Subsection (a) three (3) months after written notice unless, in
the event of a "required" termination, the regulatory agency requiring
or requesting termination specifies a termination date less than three
(3) months after written notice, in which event termination shall
become effective as required or requested by the agency. Termination
shall become effective under Subsections (b) and (c) thirty (30) days
after written notice to ATM Owner.
6.4 Right to Terminate for Non-Payment. If ATM Owner fails to pay any
unpaid fees or other amounts due Operator after fifteen (15) days'
written demand, Operator may terminate this Agreement without further
notice.
6.5 Effect of Termination. Notwithstanding anything to the contrary
contained herein, in the event of any termination of this Agreement.,
the obligations of ATM Owner under Section 4 and 5 of this Agreement
for fees, expenses or other obligations incurred prior to the effective
date of termination, shall survive termination of this Agreement. ATM
Owner shall also be responsible for all post-termination fees resulting
from retrieval of Rented Cash from ATM's.
SECTION 7
General Provisions
7.1 Notices. Notices to either party shall be considered delivered when
mailed registered or certified mail, return receipt requested, to the
address below; or to such other address specified by each of the
parties from time to time:
If to Lynk Systems:
Lynk Systems, Inc.
600 Morgan Falls Road, Suite 260
Atlanta, GA 30350
-6-
<PAGE>
Attn: Steve Stevenson
If to ATM Owner:
American ATM Corp.
5061 North Dixie Highway
Boca Raton, FL 33431
7.2 Assignment. ATM Owner agrees that an assignment of this Agreement may
not occur without the prior notification and written consent of
Operator, such consent not to be reasonably withheld.
7.3 Entire Agreement. This Agreement together with any other documents
referred to herein, constitutes the entire agreement between the
parties relating to the subject matter hereof, and may not be changed
orally but only by a written instrument signed by an authorized officer
of each party.
7.4 Modification. This Agreement may not be modified or amended except by
an instrument in writing executed by each of the parties hereto.
7.5 Waivers. One or more waivers of any covenant by Merchant of Operator
hereunder shall not be construed as a waiver of a subsequent breach of
the same or any other covenant or condition herein. The waiver or
exercises of any legal right hereunder shall not be construed as waiver
of any other action or right Merchant or Operator may have pursuant to
the terms of this Agreement or otherwise.
7.6 Headings. The descriptive section headings in this Agreement are for
purposes of reference only and shall not limit or affect ant of the
terms herein.
7.7 Force Malcum. Notwithstanding any other provision of this Agreement,
the requirement that a party perform any act or fulfill any requirement
of this Agreement by a time certain hereunder may be fulfilled at a
subsequent time if the delay arises out of any of the following causes
beyond the control and without the fault or negligence of the party
(the "Relying Party") otherwise chargeable with the delay, an act of
civil or military authority, fire, lock-out or other labor dispute,
flood, war, riot, theft, earthquake, natural disaster, default of
common carrier, or other cause beyond the control of the Relying Party,
provided however that the Relying Party shall notify the other party
promptly of the delay and its cause.
7.8 Governing Laws Consent for Jurisdiction. This Agreement shall be
governed by, interpreted and construed in all respects in accordance
with and under the laws of the State of Georgia. The Parties hereto
irrevocably consent to the jurisdiction of the state and federal courts
located in Atlanta, Georgia, and agree that any action, suit or
proceeding (except actions for injunctive relief, which actions may be
brought in any applicable jurisdiction) by or between the Parties
hereto shall be brought in any court in Atlanta, Georgeia, waiving any
objection which the party may now or hereafter have to
-7-
<PAGE>
the choice of forum whether such objection is based upon lack of
personal jurisdiction, improper forum, forum non conveniens or any
other ground.
7.9 Each of the Parties hereto hereby irrevocably consents to the service
of process outside of the territorial jurisdiction of said counts by
mailing copies hereof by registered or certified mail, postage prepaid
to such Party's last known address with the same effect as if the Party
were a resident, of the State of Georgia and had been lawfully served
in such State. Nothing in this Agreement shall affect the right to
service of process in any other manner permitted by law. Each of the
Parties hereto further agrees that the final judgment against it in any
such action or proceeding shall be conclusive and may be enforced in
any other jurisdiction within or outside the State of Georgia by suit
on the judgment, a certified or examplified copy of which constituting
conclusive evidence of he fact and the amount of such judgment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
LYNK SYSTEMS, INC. AMERICAN ATM CORP.
Operator ATM Owner
By: /s/ [illegible] By: /s/ Carmen Panizzi
------------------------------- ------------------------------
Name: MP Stevenson Name: Carmen Panizzi
------------------------------ ---------------------------
Title: CFO Title: V.P. ATM Operations
----------------------------- --------------------------
Date: 5-7-99 Date: 5/6/99
----------------------------- ---------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of American ATM Corp., as at and for the year ended June
30, 1999 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-20-1999
<CASH> $155,553
<SECURITIES> 0
<RECEIVABLES> 13,478
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 198,531
<PP&E> 192,282
<DEPRECIATION> 161,525
<TOTAL-ASSETS> 231,931
<CURRENT-LIABILITIES> 512,687
<BONDS> 0
0
0
<COMMON> 2,909
<OTHER-SE> (283,665)
<TOTAL-LIABILITY-AND-EQUITY> 231,931
<SALES> 0
<TOTAL-REVENUES> 366,062
<CGS> 363,164
<TOTAL-COSTS> 750,266
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,250
<INCOME-PRETAX> (399,746)
<INCOME-TAX> 3,000
<INCOME-CONTINUING> (402,746)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (402,746)
<EPS-BASIC> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
