<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from __________________ to _____________________
Commission file number 0-10909
AMERICAN ATM CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
FLORIDA 65-0656168
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5061 NORTH DIXIE HIGHWAY
BOCA RATON, FLORIDA 33431
(Address of principal executive office) (zip code)
</TABLE>
Registrant's telephone number, including area code: 561-367-8433
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
--- ---
2,816,250 SHARES, $.001 PAR VALUE, AS OF DECEMBER 31, 1998
(Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date)
Page 1
<PAGE>
<PAGE>
AMERICAN ATM CORP.
BALANCE SHEETS
(Note 1)
A S S E T S
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
----------- --------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents $ 45,631 $ 171,958
Accounts receivable 10,129 16,818
Prepaid expenses and other current assets 25,445 13,851
---------- ----------
Total current assets 81,205 202,627
---------- ----------
Property assets:
Furniture and equipment 290,702 290,702
Software 8,693 8,693
Leasehold improvements 830 830
---------- ----------
300,225 300,225
Less: Accumulated depreciation ( 116,569) ( 85,899)
---------- ----------
Net property assets 183,656 214,326
---------- ----------
Deferred offering costs - 69,682
---------- ----------
Other assets 1,919 2,711
---------- ----------
$ 266,780 $ 489,346
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
Current liabilities:
Lines of credit payable $ 260,000 $ 260,000
Accounts payable 30,370 22,824
Taxes payable 4,855 6,339
Accrued professional fees 57,500 49,230
---------- ----------
Total current liabilities 352,725 338,393
---------- ----------
Long-term debt 90,000 110,000
---------- ----------
Deferred rent 1,000 1,000
---------- ----------
Stockholders' equity (capital deficiency):
Preferred stock, $10.00 par value,
authorized and unissued - 100,000 shares
Common stock $.001 par value, authorized
10,000,000 shares, issued and outstanding -
2,816,250 shares 2,816 2,816
Additional paid-in capital 1,628,718 1,718,400
Accumulated deficit ( 1,808,479) ( 1,681,263)
---------- ----------
Total stockholders' equity
(capital deficiency) ( 176,945) 39,953
---------- ----------
$ 266,780 $ 489,346
========== ==========
</TABLE>
See notes to financial statements.
2
<PAGE>
<PAGE>
AMERICAN ATM CORP.
STATEMENTS OF OPERATIONS
(Note 1)
<TABLE>
<CAPTION>
For the Six For the Three
Months Ended Months Ended
December 31, December 31,
-------------------------- --------------------------
1998 1997 1998 1997
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Fee income $191,901 $131,612 $ 84,668 $ 70,897
-------- -------- -------- --------
Direct costs:
Location expenses 98,645 109,092 29,009 25,895
Financing costs 31,314 27,791 14,772 7,091
-------- -------- -------- --------
Total direct costs 129,959 136,883 43,781 32,986
-------- -------- -------- --------
Gross income (loss) 61,942 ( 5,271) 40,887 37,911
-------- -------- -------- --------
Operating expenses:
Selling 57,041 55,359 24,992 24,790
General and administrative 124,892 239,933 100,308 151,969
-------- -------- -------- --------
Total operating expenses 181,933 295,292 125,300 176,759
-------- -------- -------- --------
Loss from operations ( 119,991) ( 300,563) ( 84,413) ( 138,848)
-------- -------- -------- --------
Other income (deductions):
Interest expense ( 6,600) - ( 3,300) -
Interest income 1,375 9,906 454 4,315
-------- -------- -------- --------
Total other income (deductions) ( 5,225) 9,906 ( 2,846) 4,315
-------- -------- -------- --------
Loss before income taxes ( 125,216) ( 290,657) ( 87,259) (134,533)
Provision for income taxes
(Notes 2 and 5) 2,000 2,000 1,000 1,000
-------- -------- -------- --------
Net loss ($127,216) ($292,657) ($ 88,259) ($135,533)
======== ======== ======== ========
Net loss per share ($0.05) ($0.10) ($0.03) ($0.05)
===== ===== ===== =====
Weighted average share outstanding 2,816,250 2,816,250 2,816,250 2,816,250
========= ========= ========= =========
</TABLE>
See notes to financial statements.
3
<PAGE>
<PAGE>
AMERICAN ATM CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(Unaudited)
FOR THE YEAR ENDED JUNE 30, 1998
(Note 1)
<TABLE>
<CAPTION>
$.001 Par Value $10 Par Value
Common Stock Preferred Stock Additional Total
------------------ ---------------- Paid-In Deferred Accumulated Stockholders'
Shares Amount Shares Amount Capital Compensation Deficit Equity
-------- ------ ------ ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - June 30, 1997 2,816,250 $2,816 - $ - $1,676,400 ($200,000) ($ 854,846) $624,370
Stockholder's wavier 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 2,816,250 2,816 - - 1,718,400 - ( 1,681,263) 39,953
Net loss for the six months
ended December 31, 1998
(Unaudited) - - - - - - ( 127,216) ( 127,216)
Write-off of deferred
offering costs - - - - ( 89,682) - - ( 89,682)
--------- ------ ------ ------ ---------- -------- ---------- --------
Balance - December 31, 1998
(Unaudited) 2,816,250 $2,816 - $ - $1,628,718 $ - ($1,808,479) ($176,945)
========= ====== ====== ====== ========== ======== ========== ========
</TABLE>
See notes to financial statements.
4
<PAGE>
<PAGE>
AMERICAN ATM CORP.
STATEMENTS OF CASH FLOWS
(Note 1)
<TABLE>
<CAPTION>
For the Six
Months Ended
December 31,
------------------------
1998 1997
------ ------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ($127,216) ($292,657)
-------- --------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 30,714 48,356
Amortization of deferred compensation - 100,000
Increase (decrease) in cash flows as
a result of changes in asset and liability account balances:
Accounts receivable 6,689 ( 47,775)
Prepaid expenses and other current assets ( 11,594) ( 2,437)
Other assets 748 -
Accounts payable 7,546 2,714
Accrued expenses and other current liabilities 6,786 342
-------- --------
Total adjustments 40,889 101,200
-------- --------
Net cash used in operating activities ( 86,327) ( 191,457)
-------- --------
Cash flows from investing activities:
Acquisition of property assets - ( 6,603)
Note receivable - 121,799
-------- --------
Net cash provided by investing activities - 115,196
-------- --------
Cash flows from financing activities:
Proceeds from advances - 177,160
Proceeds from (payments of) stockholders' notes payable ( 20,000) 25,000
Repayments of funding from lines of credit - ( 3,700)
Deferred offering costs ( 20,000) -
-------- --------
Net cash provided by (used in) financing activities ( 40,000) 198,460
-------- --------
Net increase (decrease) in cash and cash equivalents ( 126,327) 122,199
Cash and cash equivalents at beginning of year 171,958 259,143
-------- --------
Cash and cash equivalents at end of year $ 45,631 $381,342
======== ========
Supplemental Schedules of Noncash Financing Activities:
Offering costs written to additional paid-in capital $ 89,682 $ -
======== ========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 26,314 $ 27,791
======== ========
Taxes paid $ - $ -
======== ========
</TABLE>
See notes to financial statements.
5
<PAGE>
<PAGE>
AMERICAN ATM CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND
THE THREE MONTHS ENDED DECEMBER 31, 1998
NOTE 1 - GOING CONCERN.
The Company was incorporated in Florida in March 1996 as a
development stage company. The Company left the development stage in
September 1996 when it commenced operations of its business which is
independent owner and operator of automatic teller machines (ATMs) at
leased locations. The ATMs provide individuals with credit or debit
cards the ability to obtain on the spot cash from their bank accounts.
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern. The
Company has sustained substantial losses from operations since
inception through December 31, 1998 of $1,808,479 of which $94,114 was
incurred while the Company was in the development stage. The
accompanying financial statements reflect a working capital deficiency
of $271,520 at December 31, 1998. The Company's source of funds have
been the proceeds from the sale of its common stock, its lines of
credit and notes to stockholders. The Company presently has a rental
agreement with a bank for the use of the bank's cash in its ATMs which
replaced a funding agreement with a private lender.
Management in December 1998 registered with the Securities and
Exchange Commission 3,562,500 shares of the Company's common stock all
of which underlie common stock purchase warrants (warrants). If all
warrant holders exercise, the Company will receive approximately
$8,550,000 in cash proceeds. Management's plan is to use these funds
to expand its business and operations which will result in significant
revenue increases and reductions in financing and other operating
costs which will result in the Company being able to meet its
obligations as they become due.
These conditions, among others, raise substantial doubt about the
Company's ability to continue as a going concern. The accompanying
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the
amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
6
<PAGE>
<PAGE>
NOTE 1 - GOING CONCERN. (Continued)
The financial statements as at December 31, 1998 and for the six
and three months ended December 31, 1998 and 1997 have not been
audited. In the opinion of management, the unaudited interim financial
statements reflect all adjustments and accruals, consisting only of
normal recurring adjustments and accruals, necessary to present fairly
the financial position of the Company as at December 31, 1998 and the
results of its operations for the three and six months ended December
31, 1998 and 1997, changes in stockholders' equity and cash flows for
the six months ended December 31, 1998 and 1997. The results for the
six and three months ended December 31, 1998 and 1997 are not
necessarily indicative of the results to be expected for the full
year.
NOTE 2 - BASIS OF PRESENTATION.
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions for Form
10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, the statements contain all adjustments
(consisting only of normal recurring accruals) necessary to present
fairly the financial position as of December 31, 1998 and 1997 and the
results of operations and cash flows for the three and six months
ended December 31, 1998 and 1997. The results of operations for the
three and six months ended December 31, 1998 and 1997 are not
necessarily indicative of the results to be expected for the full
year.
The June 30, 1998 balance sheet has been derived from the audited
financial statements at that date included in the Company's
Registration Statement on Form S-B2. These unaudited financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Registration Statement on
Form SB-2.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
(a) Use of Estimates:
The presentation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities or assets
at the date of the financial statements and the amounts of revenues or
expenses during the reporting period.
7
<PAGE>
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(b) Concentration of Risk and Revenue Recognition:
The fee income from ATM machines represents 100% of the Company's
operating revenues. The Company records its fees on a daily basis from
the service charges it assesses directly to the user for monetary
transactions. In addition, the Company recognizes its proportionate
share of the transaction fees charged by the national network to its
participating banks reported to the Company by its electronic
reporting vendor. Fee income from ATM processing is limited by the
hours of operation at the sites leased by the Company. In some states,
the amount and nature of fees charged is limited or restricted by
regulation, and in some states private ATM machines are not
permissible.
The Company deposits the majority of its cash in commercial banks
and with a national brokerage firm in money market accounts. From time
to time, cash balances in the commercial banks exceed federally
insured limits. To date, the Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit
risk on its cash and equivalents.
(c) Cash and Equivalents:
The Company considers all highly-liquid, short-term investments
with an original maturity of three months or less to be cash
equivalents. Cash equivalents at December 31, 1998 and 1997 and June
30, 1998 were $20,901, $104,000 and $76,253, respectively.
(d) Property Assets:
Property assets are stated at cost. Repairs or maintenance, which
do not extend the useful life of the assets, are charged to expense as
incurred. As the equipment is retired or otherwise disposed of, the
asset and the related accumulated depreciation are removed from the
accounts and any resulting profit or loss is reflected in income. The
Company expenses its site acquisition costs to operations as they are
incurred due to the short length of the site leased and the parties'
unilateral ability to terminate the lease with minimal notice.
Depreciation is provided primarily over the estimated useful
lives of the assets using the straight-line method. The estimated
useful lives of the assets are seven years for machinery and equipment
and five years for furniture and fixtures. Leasehold improvements are
being amortized over the life of the lease. Depreciation charged to
operations in the six and three months ended December 31, 1998 and
1997 was $30,670, $15,332, $48,318 and $41,439, respectively.
8
<PAGE>
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(e) Organization Costs:
Organization costs which are included in other assets were $167
net of accumulated amortization of $235 at December 31, 1998 and are
being amortized over a sixty months period. Amortization charged to
operations was $19 in each of the three months ended December 31, 1998
and 1997 and $44 in the six months ended December 31, 1998 and 1997.
(f) Deferred Offering Costs:
The Company incurred $89,862 of costs associated with the
registration of 3,562,500 shares of its common stock underlying
purchase warrants. Upon the successful completion of the registration
these costs were charged to additional paid-in capital.
(g) Advertising:
The Company expenses advertising costs as incurred. Advertising
charged to operations was $700, $-0-, $1,000 and $169 in the six and
three months ended December 31, 1998 and 1997, respectively.
(h) Income Taxes:
The Company adopted Statement of Financial Accounting Standards
No. 109 ("SFAS 109"), "Accounting for Income Taxes" at its inception.
Under SFAS 109, the deferred tax provision is determined under the
liability method. Under this method, deferred tax assets and
liabilities are recognized based on differences between the financial
statement carrying amount and the tax basis of assets and liabilities
using presently enacted tax rates.
The Company has net operating loss carryforwards available of
approximately $1,660,000 at December 31, 1998 and $1,514,000 at June
30, 1998 expiring through 2013 which upon recognition may result in
future tax benefits of approximately $575,000 and $520,000,
respectively. At December 31, 1998 and June 30, 1998, management is
unable to determine if the utilization of the future tax benefit was
more likely than not and, accordingly, the asset has been fully
reserved.
(i) Fair Value of Financial Instruments:
The Company at its inception adopted Statement of Financial
Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of". The statement requires that the Company recognize and
measure impairment losses of long-lived assets, certain identifiable
intangibles, value long-lived assets to be disposed of and long-term
liabilities.
9
<PAGE>
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(i) Fair Value of Financial Instruments: (Continued)
The Company reviews long-lived assets and certain identifiable
intangibles held and used for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. In January 1998, management determined that 20
ATMs became obsolete and restoration costs were not fiscally feasible.
The ATMs were sold in February 1998, essentially for the cost to
remove them from their various locations which sale resulted in a
charge to operations of $206,119 in the year ended June 30, 1998.
At December 31, 1998 and June 30, 1998, the carrying values of
the Company's other assets and liabilities approximate their estimated
fair values.
(j) Per Share Data:
Net loss per share was computed by the weighted average number of
shares outstanding during each year. On December 11, 1997 the Board of
Directors approved a stock split of five (5) common shares for each
four (4) common shares outstanding for shareholders of record on
December 22, 1997. The accompanying financial statements and the
computation of net loss per share retroactively reflect the December
1997 stock split as if it had occurred on July 1, 1997.
(k) Recently Issued Accounting Pronouncements:
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 - "Reporting Comprehensive
Income", No. 131 - "Disclosures about Segments of an Enterprise and
Related Information", No. 132 - "Employer's Disclosures about Pension
and Other Postretirement Benefits" and No. 133 - "Accounting for
Derivative Instruments and Hedging Activities". Management does not
believe that the effect of implementing these new standards will be
material to the Company's financial position, results of opera- tions
and cash flows.
NOTE 4 - FINANCING.
In June 1996, the Company entered into a financing agreement with
a private lender, whereby the lender agreed to advance funds to the
Company under a line of credit with a minimum of $350,000 to a maximum
of $1,000,000 in advances. The funds were for the sole purpose of the
cash needs used in the operation of the Company's ATMs. Interest on
the used and unused portion of the line of credit was 12% subject to a
reduction for the amount of income the lender earned on investing the
unused portion of the line. The lender had a lien on all cash in the
ATM's. Interest at 12% charged to operations in the six months ended
December 31, 1997 under this facility was $25,700.
10
<PAGE>
<PAGE>
NOTE 4 - FINANCING. (Continued)
In January 1998, the Company terminated the agreement with this
lender and entered into a rental agreement with a commercial bank. The
rental agreement as memorialized on August 18, 1998 provides for the
Company to rent from the bank the cash that is used in the operation
of the Company's ATMs. The monthly rental charge for the cash varies
and is determined by the amount of cash utilized in the machines at a
rate of 2% over the bank's prime lending rate. The lessor bank also
earns a portion of the transaction fees that each ATM transaction
generates. The Company is responsible to maintain insurance with the
bank as loss payee for loss or theft of the machine cash. Although the
Company controls the location of each ATM and determines the amount of
cash in each ATM, the Company may not handle the rented cash. Only
armored transport service carriers under the bank's direct control may
handle the rented cash. The maximum amount of cash rented under the
present lease agreement was $418,119 and the average cash rented was
$234,088. During the six and three months ended December 31, 1998, the
maximum amount of cash rented was $280,000 and the average rented cash
balance was approximately $240,000. Rent for the cash charged to
operations was $14,050 and $6,140 in the six and three months ended
December 31, 1998. At December 31, 1998 and June 30, 1998 the amount
of rented cash in the Company's ATM's was $241,320 and $258,520,
respectively. The Company is contingently liable for any loss of the
rented cash for which it has adequate insurance coverage.
The Company entered into a funding agreement on December 30, 1997
for $260,000 with a corporation whose president is a stockholder of
the Company. The funding agreement, as amended on June 1, 1998,
requires interest at 10% to be paid monthly. The agreement has no
termination date and accordingly is classified as a current liability.
The loan is collateralized by the Company's ATMs whose undepreciated
cost was $160,000 at December 31, 1998 and $205,000 at June 30, 1998.
The Company's CEO has personally guaranteed 25% of this obligation.
The maximum and average borrowings outstanding under this line of
credit was $260,000 and interest charged to operations in the six and
three months ended December 31, 1998 was $17,264 and $8,632,
respectively.
Commencing in December 1997 through May 1998, the Company
borrowed $110,000 from two stockholders. The original terms of the 12%
interest bearing notes were approximately seven months. The
stockholders subsequently extended the due dates of all the notes to
December 31, 1999 and accordingly such indebtedness is included in
long-term debt at June 30, 1998 and December 31, 1998. Interest
charged to operations and paid to these stockholders was $3,300 in the
six and three months ended December 31, 1998.
11
<PAGE>
<PAGE>
NOTE 5 - STOCKHOLDERS' EQUITY.
(a) Sale of Securities:
In 1997, the Company completed its sale of 875,000 shares of its
common stock and 2,500,000 warrants (as adjusted for the December 11,
1997 stock split) to accredited investors for $689,216 (net of
offering costs).
In January 1997, the Company issued 75,000 shares of its common
stock in satisfaction of a $180,000 capital lease obligation for
machinery.
(b) Contribution of Capital:
The Company's CEO waived $42,000 of his annual $60,000 salary in
1998 and such wavier was recorded as a contribution to additional
paid-in capital.
(c) Warrants:
In connection with the sale of securities in 1996 and 1997, the
Company sold warrants at $0.008 each to acquire 2,500,000 shares of
the Company's common stock (as adjusted for the December 1997 stock
split) at $2.40 per share.
Effective December 28, 1996, five consultants received warrants
to purchase an aggregate of 1,062,500 shares of the Company's common
stock at $2.40 per share (as adjusted for the December 1997 stock
split) for services previously rendered. The fair value of the
warrants issued and the services rendered (as determined by the Board
of Directors and the consultants) was $85,000 which was charged to
operations as public relations costs.
(d) Registration of Securities:
The Company intends to file with the Securities and Exchange
Commission a registration statement on Form SB-2 registering 3,562,500
shares of its common stock all of which underlie warrants to acquire a
like number of common shares at $2.40 per share. The Company intends
to call the warrants as soon as practicable after The registration
statement became effective in December 1998. The proceeds to be
received by the Company, if all of the warrants are exercised, would
be $8,550,000. Deferred offering costs $89,682 were charged to
additional paid-in capital upon the successful completion of the
registration statement.
(e) Common Stock Split:
The Company's Board of Directors approved a split of its
outstanding common shares of five (5) shares for each four (4) shares
outstanding on December 11, 1997.
12
<PAGE>
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY. (Continued)
(f) Stock Options:
The Board of Directors adopted the American ATM Corp. 1996 Stock
Option Plan ("Plan") on December 16, 1996 which the shareholders
subsequently approved. The Plan provides for the total issuance of an
aggregate of 687,500 common shares under non-qualified and qualified
grants. Qualified options are intended to comply with Section 422 of
the Internal Revenue Service Code of 1986, as amended. To date all
options granted under the Plan have been non-qualified.
On December 16, 1996, the Company's outside directors and an
officer were granted options to acquire and aggregate of 100,000
common shares (as adjusted for the December 11, 1997 stock split) at
an exercise price of $0.80 per share which was the common stock's fair
value on the date of grant. The directors options were originally
exercisable in full at any time through December 15, 2000. The
officer's option vest pro rata over its life. On March 21, 1997, the
Board of Directors reduced the exercise period of these options to
March 25, 2000 for the directors and May 1, 1999 for the officer.
Also on March 21, 1997, the outside directors were issued
additional options to acquire an aggregate (as adjusted for the
December 1997 stock split) of 62,500 common shares for $0.80 per
share. The Company's Chairman and CEO was granted options to acquire
250,000 common shares at $0.88 per share, as adjusted for the December
1997 stock split.
The outside directors options were issued as partial payment for
their services pursuant to the Company's directors compensation policy
which was approved by the Board of Directors in December 1996. The
CEO's options were granted in recognition of his services in 1997 and
1998 and for his decision to forego $40,000 in salary for calendar
1996. The waiver of the salary was reflected in the accompanying
financial statements as a charge to operations and a credit to
additional paid-in capital of $40,000 during fiscal 1997.
The excess of the fair value of the common stock at March 25,
1997 ($2.40 per share as adjusted for the December 1997 stock split)
over the option excerise prices which aggregated $400,000 was
classified in the accompanying financial statement as deferred
compensation with a corresponding increase to additional paid-in
capital. The deferred compensation was charged to operations in the
periods that the Chairman and the other directors rendered their
services resulting in a $50,000 charge to operations in the three
months ended December 31, 1998 and 1997 and a $100,000 charge in the
six months ended December 31, 1998 and 1997.
Pursuant to the Plan, each of the non-employee directors of the
Company is to receive yearly - at the conclusion of the stock-holders'
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 had
its annual meeting, the present 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.
13
<PAGE>
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY. (Continued)
(f) Stock Options: (Continued)
At September 30, 1998, June 30, 1998 and June 30, 1997, the
Company had options for 412,500 common shares issued and unexercised
at exercise prices ranging from $.80 to $.88. At December 31, 1998 and
June 30, 1998 400,000 shares under options were exercisable at prices
ranging from $.80 to $.88 per share.
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, the life of the options to be three years, the expected
volatility at 200%, expected dividends of none, and the risk-free
interest rate of 10%, the Company would have recorded compensation
expense of $58,896 and $29,448 in each of the six and three month
periods ended December 31, 1998 and 1997 as calculated by the
Black-Scholes option pricing model. As such, pro-forma net loss and
loss per share would be as follows:
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
December 31, June 30,
------------------------ ---------------------------
1998 1997 1998 1997
-------- -------- ---------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Net loss as reported ($ 88,259) ($135,533) ($127,216) ($292,657)
======== ======== ======== ========
Additional compensation $ 29,448 $ 29,448 $ 58,896 $ 58,896
======== ======== ======== ========
Adjusted net loss ($117,707) ($164,981) ($186,112 ($351,553)
======== ======== ======== ========
Loss per share
as reported ($0.03) ($0.05) ($0.05) ($0.10)
===== ===== ===== =====
Adjusted loss per share ($0.04) ($0.06) ($0.07) ($0.12)
===== ===== ===== =====
</TABLE>
NOTE 6 - YEAR 2000.
The Company recognizes the need to ensure its operation will not
be adversely affected by Year 2000 software failures. The Company is
communicating with suppliers, customers and others with which it does
business to coordinate Year 2000 conversion. The cost of achieving
compliance is estimated to be a minor increase over the cost of normal
software upgrades and replacements.
14
<PAGE>
<PAGE>
NOTE 7 - COMMITMENTS AND CONTINGENCIES.
(a) Contingencies:
The Company is contingently liable for cash in the machines which
it rents from a bank. The amount of rented cash at December 31, 1998
was $241,320.
(b) Leases:
The Company is a lessee under a operating real property lease for
office space which expires on June 30, 1999. Rent expense charged to
operations in the six and three months ended December 31, 1998 and
1997 was $5,049, $9,950, $2,249 and $7,200, respectively.
The Company also leases space for its ATMs under operating
leases. Although the stated term of each lease is from one to five
years, either party may cancel the lease with minimal notice. Rent
charged to operations in the six and three months ended December 31,
30, 1998 and 1997 was $19,467, $28,031, $7,455 and $17,031,
respectively. Additionally, the Company has agreements with electronic
transaction reporting and transfer system service providers which are
a crucial component of the Company's operations. These agreements
typically require payment based upon the number of transactions
processed by the provider.
(c) Consulting and Employment Agreements:
The Board of Directors authorized compensation for the Company's
CEO and Chairman at $60,000 per year plus 2% of defined operating
profits commencing January 1, 1997. During the second half June 30,
1998 this officer waived payment of $42,000 of his salary which was
reflected as a contribution to additional paid-in capital. The Company
has a three year agreement with a consultant for public relations and
financial services. The consultant will receive $96,000 over the term
of the agreement which expires in 1999.
15
<PAGE>
<PAGE>
Item 2.
ATM CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto contained elsewhere in this Form
10-QSB. Certain statements under this caption "Management's Discussion and
Analysis of Financial Conditions and Results of Operations," constitute
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995.
PLAN OF OPERATION
The Company's plan of operation for the balance of fiscal 1999 and the
fiscal year thereafter will principally involve the acquisition of additional
ATMs and leased sites. The Company anticipates, with the net proceeds of
exercise of its warrants to purchase common stock, together with funds
previously raised by the Company, that it will be able to have approximately
50 ATMs in operation by March 31, 1999 with an additional 100 ATMs in operation
by the end of fiscal 1999. In addition, the Company has applied for a license to
operate ATMs in the Commonwealth of Massachusetts which, if granted, should
enable the Company to obtain another 10 to 25 locations in that state. The
Company will also seek to acquire other privately held companies in the ATM,
banking and related industries. To date, no such companies have been identified.
Assuming all of the Company's common stock purchase warrants are
exercised, of which no assurance can be given, the net proceeds will be
approximately $8,460,000. The Company believes the minimum proceeds required
from the warrants of approximately $1,700,000 will be sufficient for it to
meet its cash requirements to fund and operate its business on an ongoing basis.
RESULTS OF OPERATIONS
The Company derives its revenues from fees charged for the operation of
ATMs which dispense cash to the customer who uses his/her bank ATM debit or
credit card. These machines are located in high traffic retail areas and
selected convenience stores. The Company has signed 25 of these locations to
date and expects to sign at least an additional 25 to 30 before the end of
March 1999. The Company currently has 25 machines installed and operating.
Generally, the Company has more machines signed than actually installed and in
operation because it is always in the process of changing machine locations in
an ongoing effort to optimize usage. The Company had non-binding agreements with
suppliers for additional machines.
SIX MONTHS ENDED DECEMBER 31, 1998 VS. DECEMBER 31, 1997
Fee Income:
For the six months ended December 31, 1998, the Company had gross income
of $192,000 compared with $132,000 for the six months ended December 31, 1997.
The $60,000 (45.5%) 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 1996
during which time the Company had de minimis revenues.
16
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<PAGE>
SIX MONTHS ENDED DECEMBER 31, 1998 VS. DECEMBER 31, 1997
Direct Costs:
The Company's direct costs associated with its ATMs operations were
$130,000 (67.7% of revenues) as compared with $137,000 (103.8% of revenues) for
1997. The decrease in direct costs of $7,000 (5.1%) is comparable. The decrease
in gross loss from $5,000 in 1997 (3.5% of revenues) to gross income of $62,000
in 1998 (32.3% 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 decreased. Variable direct costs
increased in relation to the increased number of new machines. Installation,
relocation and maintenance costs increased in 1998 due to the decision to
dispose of certain machines whose operating maintenance costs were so
prohibitively high as to render the machines virtually valueless. These machines
were replaced with more user friendly machines whose operating and maintenance
costs are considerably lower.
Selling Expenses:
The Company's selling expenses increased $2,000 (3.6%) in the current
year to $57,000 (29.7% of revenues) from $55,000 (41.7% of revenues) in 1997.
General and Administrative Expenses:
The $115,000 (47.9%) decrease in general and administrative expenses to
$125,000 (65.1% of revenues) in the current year from $240,000 (181.8% of
revenues) in the prior year resulted primarily from the amortization of $100,000
in deferred compensation in 1997.
Interest:
Interest expense in 1998 was $38,000 of which $31,000 was included in
direct costs in the accompanying financial statements. Interest which was
included as a direct cost in 1997 aggregated $28,000. The increase of $10,000
(32.3%) is attributable to the Company's debt financing from related parties
obtained in December 1997. Interest income in both years remained relatively
constant.
Net Loss:
The net loss decreased $166,000 (56.7%) to $127,000 in 1998 from
$293,000 as per the above analysis.
THREE MONTHS ENDED DECEMBER 31, 1998 VS. DECEMBER 31, 1997
Fee Income:
For the three months ended December 31, 1998, the Company had gross
income of $85,000 compared with $71,000 for the three months ended December 31,
1997. The $14,000 (19.7%) increase was the result of placing more equipment in
sites and previously installed equipment generating increased fee income in
1998.
17
<PAGE>
<PAGE>
THREE MONTHS ENDED DECEMBER 31, 1998 VS. DECEMBER 31, 1997 (CONTINUED)
Direct Costs:
The Company's direct costs associated with its ATMs operations were
$44,000 (51.8% of revenues) in 1998 as compared with $33,000 (46.5% of revenues)
for 1997. The increase in direct costs of $11,000 (33.3%) is attributable to
higher start-up costs incurred in 1997 of $8,000 and an increase in finance
costs of $3,000 in the current period.
The change in gross income from ($38,000) in 1997 (53.5% of revenues) to
gross income of $41,000 in 1998 (48.2% 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 and
variable direct costs declined.
Selling Expenses:
The Company's selling expenses remained relatively constant at $25,000
in both periods and 29.4% and 35.2% as percent of revenues, respectively.
General and Administrative Expenses:
The $52,000 (34.2%) decrease in general and administrative expenses to
$100,000 (117.6% of revenues) in the current period from $88,000 (144.3% of
sales) resulted primarily from the amortization of $50,000 in deferred
compensation in 1997.
Interest:
Interest expense in 1998 was $13,000 of which $10,000 was included in
direct costs in the accompanying financial statements. Interest incurred in 1997
of $7,000 is included as a direct cost in 1997. Interest expense increased from
loans from related parties was $3,000 in 1998.
Interest income decreased $4,000 (80.0%) in 1998 to $1,000 (1.2% of
revenues) from $5,000 (7.0% of revenues) in 1997. The decrease is the result of
the repayment by a stockholder of a loan to the Company during fiscal 1998.
Net Loss:
The net loss decreased $48,000 (35.3%) to $88,000 in 1998 from $136,000
in 1997 as per the above analysis.
FINANCIAL CONDITION
December 31, 1998 compared to June 30, 1998
The Company's cash position at December 31, 1998 decreased $126,000 to
$46,000. The decrease is attributable to additional deferred offering costs of
$20,000, payment of stockholders' notes of $20,000 and by net cash used in
operating activities of $86,000.
Stockholders' equity decreased from $40,000 at June 30, 1998 to a
capital deficiency of $117,000 at December 31, 1998 resulting from the loss for
the six months ended September 30, 1998 of $127,000 and the write-off of
deferred offering costs of $90,000.
18
<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficiency of $272,000 and $136,000 at
December 31, 1998 and June 30, 1998, respectively. The Company's primary sources
of working capital have been (i) the proceeds from its lines of credit, (ii)
proceeds from related party indebtedness, (iii) the rental cash agreement, and,
(iv) the issuance of its securities for cash, as payment for debt and as payment
for services rendered. 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 excerise prices of these options was $400,000 which was
reflected as deferred compensation on the date of the grant. The deferred
compensation was 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 the exercise of all
of the currently outstanding warrants. The Company presently has warrants
outstanding to acquire 3,562,500 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 date of the last sale of the Warrants in the offering in which the
Warrants were 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.
The Company intends to call the warrants as soon as practicable after
the registration statement becomes effective. The proceeds to be received by the
Company, if all of the warrants are exercised, would be $8,550,000 before
estimated offering costs of $90,000. Management believes that the minimum
proceeds from the Warrants' exercise required for the Company to meet its
obligations as they mature to be approximately $1,000,000. Management believes
that if must receive an additional $700,000 from the warrants proceeds in order
for the Company to initially undertake its plan of operation for the remaining
six months of fiscal 1999 and for fiscal 2000. If the Company is not successful
in its attempt to have the warrant holders exercise, the Company will not be
able to generate sufficient cash funds from its operations
19
<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
to meet its obligations as they mature. These conditions, among others, raise
substantial doubt about the Company's ability to continue as a going concern.
Even if the Company is successful (or partially successful) in its effort to
convert the warrants into common shares for at least $1,000,000 up to the entire
$8,460,000 in cash, the Company may need additional financing thereafter. There
can be no assurance that the Company will be able to obtain financing on a
favorable or timely basis. The type, timing and terms of financing elected by
the Company will depend upon its cash needs, the availability of other financing
sources and the prevailing conditions in the financial markets. Moreover, any
statement regarding the Company's ability to fund its operations from expected
cash flows is speculative in nature and inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issue Statement of Financial
Accounting Standards No. 130 - "Reporting Comprehensive Income", No. 131
"Disclosures about Segments of an Enterprise and Related Information", No. 132 -
"Employer's Disclosure about Pension and Other Postretirement Benefits", and No.
133 - "Accounting for Derivative Instruments and Hedging Activities". Adoption
of these standards, which is required in fiscal years beginning after December
15, 1997, is not expected to have an effect on the Company's financial
statements, financial position or results of operations. The Company has
reviewed all other recently issued accounting pronouncements to determine their
effects, if any, on the results of operations or financial position of the
Company. Based on that review, the Company believes that none of these
pronouncements will have a significant effect on the Company's current or future
earnings or operations.
YEAR 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Management of
the Company does not anticipate that any significant modification or replacement
of the Company's software will be necessary for its computer systems to properly
utilize dates beyond December 31, 1999 or that the Company will incur
significant operating expenses to make any such computer system improvements.
The Company has commenced requesting data concerning Year 2000 compliance from
its suppliers, lenders, service providers and others. The Company is not able to
determine, however, whether any of its suppliers, lenders, or service providers
will need to make any such modifications or replacements. Although it is
management's belief that the failure by such entities to make required software
corrections could have an adverse material effect on the Company's operations or
financial condition, management is not able to estimate the amount of such
adverse effects, if any.
INFLATION
Inflation has not had a significant effect on the Company's operations or
financial position and management believes that the future effects of inflation
on the Company's operations and financial position will be insignificant.
20
<PAGE>
<PAGE>
Part II
OTHER INFORMATION
Item 5. Other Information
The Company's Common Stock has been approved for listing on the Berlin
Stock Exchange.
The Board of Directors has elected Mr. Wayne Kight as the Company's new
President and Treasurer.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
American ATM Corp.
By: /s/ Wayne Kight
---------------------------------
Wayne Kight,
President and Treasurer
(Principal Accounting Officer)
Dated: March 2, 1999
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the interim
financial statements of American ATM Corp. as at and for the three months ended
September 30, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 45,631
<SECURITIES> 0
<RECEIVABLES> 10,129
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 81,205
<PP&E> 300,225
<DEPRECIATION> 116,569
<TOTAL-ASSETS> 266,780
<CURRENT-LIABILITIES> 352,725
<BONDS> 0
<COMMON> 2,816
0
0
<OTHER-SE> (179,761)
<TOTAL-LIABILITY-AND-EQUITY> 266,780
<SALES> 0
<TOTAL-REVENUES> 191,901
<CGS> 0
<TOTAL-COSTS> 129,959
<OTHER-EXPENSES> 181,933
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,600
<INCOME-PRETAX> (125,216)
<INCOME-TAX> 2,000
<INCOME-CONTINUING> (127,216)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (127,216)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
