<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, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ___________________ to __________________________
Commission file number 0-10909
AMERICAN ATM CORP.
(Exact name of registrant as specified in its charter)
Florida 65-0656168
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
5061 North Dixie Highway 33431
Boca Raton, Florida (zip code)
(Address of principal executive office)
Registrant's telephone number, including areas code: 561-367-8433
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
175,675 shares (reflective of the December 31, 1999
reverse split 50 common shares into 1 common share),
$.001 par value, as of February 24, 2000.
(Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date)
Page 1 of 22
<PAGE>
AMERICAN ATM CORP.
DECEMBER 31, 1999
I N D E X
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I - Financial Information:
Item 1. Financial Statements:
Balance Sheets as at December 31, 1999
(Unaudited) and June 30, 1999 ................................................. 3
Statements of Operations For the Six and Three Months
Ended December 31, 1999 and 1998 (Unaudited) .................................. 4
Statements of Stockholders' Equity (Capital
Deficiency) For the Six Months Ended
December 31, 1999 (Unaudited) and For the
Year Ended June 30, 1999 ...................................................... 5
Statements of Cash Flows For the Six Months
Ended December 31, 1999 and 1998 (Unaudited) .................................. 6
Notes to Financial Statements ................................................. 7-15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ................................. 16-20
PART II - Other Information:
Item 3 Through Item 9 - Not Applicable ........................................ 21
Signatures .................................................................... 22
</TABLE>
Page 2 of 22
<PAGE>
AMERICAN ATM CORP.
BALANCE SHEETS
(Note 1)
<TABLE>
<CAPTION>
ASSETS
December 31, June 30,
1999 1999
------------ ---------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents $ 97,525 $ 155,553
Restricted cash 10,000 10,000
Accounts receivable - trade 16,111 13,478
Advances receivable 125,000 -
Due from affiliates 21,950 2,700
Assets held for resale - 11,500
Prepaid expense and other current assets 8,500 5,300
--------- ---------
Total current assets 279,086 198,531
--------- ---------
Property assets:
Furniture and equipment 182,759 182,759
Software 8,693 8,693
Leasehold improvements 830 830
--------- ---------
192,282 192,282
Less: Accumulated depreciation 180,877 161,525
--------- ---------
Net property assets 11,405 30,757
--------- ---------
Other assets 2,606 2,643
--------- ---------
$ 293,097 $ 231,931
========= =========
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Lines of credit payable $ 260,000 $ 260,000
Notes and loans payable - stockholders 20,000 110,000
Accounts payable 5,277 13,375
Taxes payable 8,215 8,344
Accrued expenses and other current liabilities 116,768 115,968
Due to stockholder - 5,000
--------- ---------
Total current liabilities 410,260 512,687
--------- ---------
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 - 175,675 shares and
58,175 shares, respectively 176 58
Additional paid-in capital 2,038,077 1,803,195
Accumulated deficit (2,155,416) (2,084,009)
--------- ---------
Total capital deficiency (117,163) (280,756)
--------- ---------
$ 293,097 $ 231,931
========= =========
</TABLE>
Page 3 of 22
<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,
-------------------------------- ------------------------------
1999 1998 1999 1998
---------- --------- ---------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Fee income $192,094 $191,901 $ 87,707 $ 84,668
-------- -------- -------- --------
Direct costs:
Location expenses 113,870 98,645 64,714 29,009
Financing costs 31,316 31,314 15,900 14,772
-------- -------- -------- --------
Total direct costs 145,186 129,959 80,614 43,781
-------- -------- -------- --------
Gross profit 46,908 61,942 7,093 40,887
-------- -------- -------- --------
Operating expenses:
Selling 50,844 57,041 23,964 24,992
General and administrative 66,327 124,892 17,999 100,308
-------- -------- -------- --------
Total operating expenses 117,171 181,933 41,963 125,300
-------- -------- -------- --------
Loss from operations (70,263) (119,991) (34,870) (84,413)
-------- -------- -------- --------
Other income (deductions):
Interest expense - (6,600) - (3,300)
Interest income 856 1,375 576 454
-------- -------- -------- --------
Total other income (deductions) 856 (5,225) 576 (2,846)
-------- -------- -------- --------
Loss before income taxes (69,407) (125,216) (34,294) (87,259)
Provision for income taxes 2,000 2,000 1,000 1,000
-------- -------- -------- --------
Net loss ($71,407) ($127,216) ($35,294) ($88,259)
======== ======== ======== ========
Net loss per share ($0.86) ($2.26) ($0.23) ($1,57)
======== ======== ======== ========
Weighted average share outstanding 82,654 56,325 156,092 56,325
======== ======== ======== ========
</TABLE>
Page 4 of 22
<PAGE>
AMERICAN ATM CORP.
STATEMENT OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
FOR THE YEAR ENDED JUNE 30, 1999 AND
THE SIX MONTHS ENDED DECEMBER 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
$.001 Par Value $10 Par Value
Common Stock * Preferred Stock Additional
--------------------- -------------------- Paid-In Deferred
Shares Amount Shares Amount Capital Compensation
------- ------- ------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance - July 1, 1998 56,325 $ 56 - $ - $1,721,160 $ -
Stockholders' waiver of
salary-contributed to
capital - - - - 30,000 -
Net proceeds from the
conversion of warrants
to common stock 1,350 1 - - 32,036 -
Net proceeds from the
exercise of stock option 500 1 - - 19,999 -
Net loss for the year
ended June 30, 1999 - - - - - -
------- ----- ---- ---- ---------- ----
Balance June 30, 1999 58,175 58 - - 1,803,195 -
Conversion of notes
payable - stockholders
into common stock 117,500 118 - - 234,882 -
Net loss for the six
months ended
December 31, 1999
(Unaudited) - - - - - -
------- ----- ---- ---- ---------- ----
Balance December 31, 1999
(Unaudited) 175,675 $ 176 - $ - $2,038,077 $ -
======= ===== ==== ==== ========== ====
</TABLE>
[RESTUB]
<TABLE>
<CAPTION>
Total
Stockholders'
Equity
Accumulated (Capital
Deficit Deficiency)
----------- -------------
<S> <C> <C>
Balance - July 1, 1998 ($1,681,263) $ 39,953
Stockholders' waiver of
salary-contributed to
capital - 30,000
Net proceeds from the
conversion of warrants
to common stock - 32,037
Net proceeds from the
exercise of stock option - 20,000
Net loss for the year
ended June 30, 1999 (402,746) (402,746)
---------- --------
Balance June 30, 1999 (2,084,009) (280,756)
Conversion of notes
payable - stockholders
into common stock - 235,000
Net loss for the six
months ended
December 31, 1999
(Unaudited) (71,407) (71,407)
---------- --------
Balance December 31, 1999
(Unaudited) ($2,155,416) ($117,163)
========== ========
</TABLE>
*Gives effect to a 50 to 1 reverse stock split.
See notes to financial statements.
Page 5 of 22
<PAGE>
AMERICAN ATM CORP.
STATEMENTS OF CASH FLOWS
(Note 1)
<TABLE>
<CAPTION>
For the Six
Months Ended
December 31,
--------------------------------
1999 1998
---------- ----------
(Unaudited)
<S> <C> <C>
Cash flow from operating activities:
Net loss ($ 71,407) ($127,216)
--------- ---------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 19,389 30,714
Increase (decrease) in cash flows as
a result of changes in asset and
liability account balances:
Accounts receivable (2,633) 6,689
Assets held for resale 11,500 -
Prepaid expenses and other current assets (3,200) (11,594)
Other assets - 748
Accounts payable (8,098) 7,546
Accrued expenses and other current liabilities 671 6,786
--------- ---------
Total adjustments 17,629 40,889
--------- ---------
Net cash used in operating activities (53,778) (86,327)
--------- ---------
Cash flows from investing activities:
Advances receivable (125,000) -
Due from affiliates (19,250) -
--------- ---------
Net cash used in investing activities (144,250) -
--------- ---------
Cash flows from financing activities:
Deferred offering costs - (20,000)
Proceeds from (payments of) stockholder
notes and loans 140,000 (20,000)
--------- ---------
Net cash provided by (used in) financing activities 140,000 (40,000)
--------- ---------
Net decrease in cash and cash equivalents (58,028) (126,327)
Cash and cash equivalents at beginning of period 155,553 171,958
--------- ---------
Cash and cash equivalents at end of period $ 97,525 $ 45,631
========= =========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 31,316 $ 26,314
========= =========
Taxes paid $ - $ -
========= =========
Supplemental Schedules of Noncash Financing Activities:
Offering costs written off to additional paid-in capital $ - $ 89,682
========= =========
Conversion of stockholders' notes payable
into common stock $235,000 $ -
========= =========
</TABLE>
See notes to financial statements.
Page 6 of 22
<PAGE>
AMERICAN ATM CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
NOTE 1 - GOING CONCERN.
The Company was incorporated in Florida in March 1996
as a development stage company. The Company left the development
stage in September 1996 when it commenced operations of its
business, which is independent owner and operator of automatic
teller machines (ATMs) at leased locations. The ATMs provide
individuals with credit or debit cards the ability to obtain on
the spot cash from their bank accounts.
The accompanying financial statements have been
prepared in conformity with generally accepted accounting
principles, which contemplate continuation of the Company as a
going concern. The Company has sustained substantial losses from
operations since inception through December 31, 1999 of
$2,154,666 of which $94,114 was incurred while the Company was
in the development stage. The accompanying financial statements
reflect a working capital deficiency of $110,424 at December 31,
1999. The Company's source of funds have been the proceeds from
the sale of its common stock, its lines of credit and notes to
stockholders. The Company presently has a rental agreement with
a bank for the use of the bank's cash in its ATMs, which
replaced a funding agreement with a private lender.
Management in December 1998 registered with the
Securities and Exchange Commission 3,562,500 shares of the
Company's common stock, all of which underlie common stock
purchase warrants (warrants). If all warrant holders exercise,
the Company will receive approximately $8,550,000 in cash
proceeds. Through December 31, 1999, the Company has received
$162,000 from the exercise of warrants for 67,500 shares of
common stock. Management's plan is to continue its present ATM
operations and to pursue diversification into other industries.
The Company in December 1999 began preliminary exploratory
discussions with a start-up entity in the telecommunications
industry. The Board of Directors in October 1999 authorized
management to sell in a private placement to accredited
investors up to $750,000 of the Company's common stock for
working capital. There can be no assurance that the sale of the
securities will be successful.
These conditions, among others, raise substantial
doubt about the Company's ability to continue as a going
concern. The accompanying financial statements do not include
any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and
classification of liabilities that might result should the
Company be unable to continue as a going concern.
Page 7 of 22
<PAGE>
NOTE 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, 1999 and the results of
operations and cash flows for the six months ended December 31,
1999 and 1998. The results of operations for the six months
ended December 31, 1999 and 1998 are not necessarily indicative
of the results to be expected for the full year.
The June 30, 1999 balance sheet has been derived from
the audited financial statements at that date included in the
Company's annual report on Form 10-KSB. These unaudited
financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's
annual report on Form 10-KSB.
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.
(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.
Page 8 of 22
<PAGE>
NOTE 3 - 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 December 31, 1999 and
1998 and June 30, 1999 were $5,790, $20,901 and $24,095,
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. 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 are included in other assets net of
accumulated amortization.
(f) 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 $1,956,000 at December 31, 1999 and
$1,886,000 at June 30, 1999 expiring through 2013 which upon
recognition may result in future tax benefits of approximately
$763,000 and $744,000, respectively. At December 31, 1999 and
June 30, 1999, 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.
Page 9 of 22
<PAGE>
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(g) 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.
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. All of the
Company's ATMs were functional at June 30, 1999, although did
not possess the state of the art software and hardware styling
which some of the Company's customers desired. Management
attempted to replace these ATMs with new machines and in
September 1999 sold 10 machines for $11,500 resulting in a loss
of $42,985. Management estimated that its remaining ATMs' value
has been impaired by an additional $67,000. The entire loss of
$109,985 was charged to operations in fourth quarter of fiscal
1999.
At December 31, 1999 and June 30, 1999, the carrying
values of the Company's other assets and liabilities approximate
their estimated fair values.
(h) Per Share Data:
Net loss per share was computed by the weighted
average number of shares outstanding during each year.
NOTE 4 - FINANCING.
In January 1998, the Company 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 conditions 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 respon sible 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.
Page 10 of 22
<PAGE>
NOTE 4 - 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. The Company's Chairman has
personally guaranteed 25% of this obligation.
NOTE 5 - LOANS PAYABLE - STOCKHOLDERS.
Commencing in December 1997, through May 1998, the
Company borrowed $110,00 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. In September another
stockholder loaned the Company $125,000. In October 1999, all of
the loans were converted into 117,500 shares, as adjusted for
the December 15, 1999 stock split, of the Company's common stock
at $2.00 per share, which was the fair market value at the time
of conversion.
NOTE 6 - STOCKHOLDERS' EQUITY ADJUSTED FOR THE DECEMBER 15, 1999, 50
TO 1 REVERSE STOCK SPLIT.
(a) Sale of Securities:
In 1997, the Company completed its sale of 17,500
shares of its common stock and 50,000 warrants to accredited
investors for $689,216 (net of offering costs).
In January 1997, the Company issued 1,500 shares of
its common stock in satisfaction of a $180,000 capital lease
obligation of machinery.
In October 1999, three stockholders agreed to accept
117,500 shares of the Company's common stock as payment of loans
payable to them aggregating $235,000.
Through March 1999, warrants to acquire 1,350 common
stock were converted for $132,037 before offering costs of
$129,963.
(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 waivers were recorded as contribution to additional paid-in
capital in the accompanying financial statements in the year of
waiver.
Page 11 of 22
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY. (Continued)
(c) Warrants:
In connection with the sale of securities in 1996 and
1997, the Company sold warrants to acquire 50,000 shares of the
Company's common stock (as adjusted for the December 1997 and
1999 stock splits) at $120 per share. Effective December 28,
1996, five consultants received warrants to purchase an
aggregate of 21,250 shares of the Company's common stock at $120
per share 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 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
71,250 shares of its common stock all of which underlie warrants
to acquire a like number of common shares at $120 per share. The
proceeds received by the Company through December 31, 1999 from
the conversion of warrants into 1,350 common shares were
$132,037 before offering costs of $129,963.
(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. On December 15,
1999, the Board of Directors authorized a reverse split of the
Company's common stock at a rate fifty 50) common shares
outstanding into one (1) common share, which has been
effectuated for all periods presented.
(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 13,750 common shares
under nonqualified 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 3,300 common shares have been qualified
grants and options to acquire 8,240 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
2,000 common shares at an exercise price of $40 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.
Page 12 of 22
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY. (Continued)
(e) Stock Options: (Continued)
The Company's Chairman and CEO was granted options to
acquire 5,000 common shares at $44 per share, as adjusted for
the December 1997 and 1999 stock splits. 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.
Also on March 25, 1997, the outside directors were
issued additional options to acquire an aggregate of 1,250
common shares for $40 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 ($120 per share after the December 15, 1999
reverse 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 500 common shares at $40 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 3,300 shares to officers, employees and directors.
The excerise price of the options is $143.75 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.
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 200 shares of the Company's common stock for the next
fiscal year. Since the Company had not had 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 1,000 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 10,000 common shares under
non-qualified and qualified grants. No options have been granted
under the 1999 plan.
Page 13 of 22
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY. (Continued)
(e) Stock Options: (Continued)
At December 31, 1999 and June 30, 1999, the Company
had options for 11,050 common shares issued and unexercised at
exercise prices ranging from $40 to $143.75. At December 31,
1999 and June 30, 1999, 11,050 shares under options were
exercisable at prices ranging from $40 to $143.75 per share.
Assuming the fair market value of the stock at the
date of grant to be $40 per share in December 1996, $120 per
share in March 1997 and $143.75 per share in March 1999, the
life of the options to be three years to ten 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 $74,011 and $29,448 in each of the six
and three month periods ended December 31, 1999 and 1998 as
calculated by the Black-Scholes option pricing model. As such,
proforma net loss and loss per share would be as follows:
For the Three For the Six
Months Ended Months Ended
December 31, December 31,
---------------------- -----------------------
1999 1998 1999 1998
--------- --------- ---------- ----------
(Unaudited) (Unaudited)
Net loss as reported ($ 34,544) $ 88,259 ($ 70,657) ($127,216)
========= ======== ========= =========
Additional compensation $ 74,011 $ 29,448 $148,022 $ 58,896
========= ======== ========= =========
Adjusted net loss ($108,555) ($117,707) ($218,679) ($186,112)
========= ======== ========= =========
Loss per share as reported ($0.22) ($1.57) ($0.85) ($2.26)
========= ======== ========= =========
Adjusted loss per share ($1.44) ($2.09) ($2.65) ($3.30)
========= ======== ========= =========
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, 1999 was $272,940.
(b) Leases:
The Company is a lessee under an operating real
property lease for office space which expired on June 30, 1999.
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 months
ended December 31, 1999 and 1998 was $3,609 and $9,950,
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.
Page 14 of 22
<PAGE>
NOTE 7 - COMMITMENTS AND CONTINGENCIES. (Continued)
(c) Consulting the 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. In
February 1999, this officer resigned and waived the $30,000 in
unpaid salary, which was 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 8 - 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 not to have made their
required software corrections could have adverse material effect
on the Company's operations or financial condition, the Company
has not experienced any adverse effects in its operations
through February 24, 2000.
NOTE 9 - 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 net standards will be material to
the Company's financial position, results of operations and cash
flows.
Page 15 of 22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERAITONS
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto contained elsewhere in this Form 10-QSB.
Certain statements under this caption "Management's Discussion and Analysis of
Financial Conditions and Results of Operations," constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995. See
"Risk Factors - Forward Looking Statements."
Plan of Operation
The Company's plan of operation for the next six months of fiscal 2000
and the fiscal year thereafter will be to continue to maintain its profitable
ATM's and possibly expand to additional locations. Management is currently
exploring the feasibility of entering into other industries. Management believes
that the ATM industry might be subjected to possible additional governmental
scrutiny - possibly regulations - in the future. This possibility could have an
adverse effect on the Company's operations. Management has had preliminary
exploratory discussions with an entity in the telecommunications industry
concerning starting up a venture and/or other working arrangement.
Assuming that the Company will be able to maintain or increase its
ATM's in operation, there is no guarantee that cash funds from such operations
will be sufficient for it to meet its cash requirements to fund and operate its
business on an ongoing basis. The Board of Directors in October 1999 authorized
management to issue up to $750,000 in capital through the sale of its securities
in private placements to accredited investors. There can be no guarantee that
such sale will be successful or that the cash proceeds from such sale, if any,
will be sufficient for the Company to meet its obligations as they mature.
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 20 ATMs at these locations to date.
Six months ended December 31, 1999 vs. December 31, 1999
Fee Income and Direct Costs:
For the six months ended December 31, 1999 and 1998 the Company's fee
income remained the same at $192,000. Location expenses increased $15,000
(15.2%) to $114,000 in the current period (59.4%) of fee income) from $99,000
(51.6% of fee income) in 1998. Financing costs remained constant at $31,000. The
location expense increase is attributable to additional machine costs and
armored car service fees.
Page 16 of 22
<PAGE>
Six months ended December 31, 1999 vs. December 31, 1999 (Continued)
Operating Expenses:
Selling expenses decreased $6,000 (10.5%) to $51,000 (26.6% of fee
income) in the six months ended December 31, 1999 from $57,000 (29.7% of fee
income) in the comparable prior period. The reduction is attributable to reduced
advertising, travel and entertainment expenditures in the current period.
General and administrative expenses decreased $59,000 (47.2%) to
$66,000 (34.4% of fee income) in the six months ended December 31, 1999 from
$125,000 (65.1% of fee income) in the comparable prior period.
The decrease is attributable to decreased professional and consulting
fees in the current period.
Interest expense decreased because of the conversion of debt to common
stock of the Company.
The net loss for the current period decreased $56,000 (44.8%) to
$71,000 from the prior year's net loss for the six months of $127,000. The
reduction in the loss is attributable to the reduced operating expenses offset
by increased direct costs as described above.
Three months ended December 31, 1999 vs. December 31, 1998
Fee Income and Direct Costs:
During the current quarter fee income increased $3,000 (3.4%) to
$88,000 while direct costs increased $37,000 (84.1%) to $81,000, resulting in
gross profit decreasing $34,000 (82.9%) to $7,000 in the current period (8.0% of
fee income) from $41,000 (48.2% of fee income) in 1998. The decrease in the
gross profit in the current quarter is the result of additional machine costs
and armored car service fees.
Operating Expenses:
Selling expenses decreased $1,000 (4.0%) to $24,000 (23.3% of fee
income) in the three months ended December 31, 1999 from $25,000 (29.4% of fee
income) in the comparable prior period. The reduction is attributable to reduced
advertising, travel and entertainment expenditures in the current period.
General and administrative expenses decreased $82,000 (82.0%) to
$18,000 (20.5% of fee income) during the current quarter from $100,000 (117.6%
of fee income) in the prior period. The decrease is attributable to decreased
professional and consulting fees in the current period.
Interest income and the provision for taxes remained relatively
constant in both periods. Interest expense decreased due to the conversion of
debt to common stock of the Company.
The net loss for the current period decreased $53,000 (60.2%) to
$35,000 from the prior year's net loss for the quarter of $88,000. The reduction
in the loss is attributable to the reduced operating expenses which were offset
by the increased direct costs as described above.
Page 17 of 22
<PAGE>
Financial Condition
December 31, 1999 Compared to June 30, 1999:
The Company's working capital deficiency decreased from $314,000 at
June 30, 1999 to $131,000 at December 31, 1999 through the proceeds of $140,000
notes and loans from stockholders. This loan as well as $115,000 in loans to
other stockholders were converted into common stock in October 1999.
The capital deficiency decreased $164,000 to $117,000 at December 31,
1999 because of the net loss incurred in the period offset by the conversion of
debt to common stock.
Liquidity and Capital Resources
The Company had a working capital deficiency of $131,000 and $314,000
at December 31, 1999 and June 30, 1999, respectively. The Company's primary
sources of working capital have been (i) the proceeds from its lines of credit,
(ii) proceeds from related party indebtedness, (iii) the rental cash agreement,
and, (iv) the issuance of its securities for cash, as payment for debt and as
payment for services rendered. Currently, the Company's cash requirements
include (i) the funding for its existing and new machines, (ii) the costs
associated with opening, maintaining and operating machines at new locations,
and, (iii) ongoing selling, general, administrative and other operating
expenses. Management believes that the Company's cash liquidity position will be
enhanced primarily from its efforts to sell its securities in a private
placement. Management does not believe that any significant additional warrant
holders will exercise in the immediate future because of the unfavorable
variances between the market price of the common stock and the exercise price of
the warrants. If the Company is not successful in its efforts to generate cash
funds from the sale of its securities, the Company will not be able to generate
sufficient cash funds from its operations to meet its obligations as they
mature. These conditions, among others, raise substantial doubt about the
Company's ability to continue as a going concern. Even, if the Company is
successful (or partially successful) in its effort to convert the warrants into
common shares for cash or in the sale of its securities, 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 Boards 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
effect, if any, on the results of operations or financial position of the
Company. Based on that review, the Company believes that none of these
pronouncements will have a significant effect on the Company's current or future
earnings or operations.
Page 18 of 22
<PAGE>
Year 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Management of
the Company does not anticipate that any significant modification or replacement
of the Company's software will be necessary for its computer systems to properly
utilize dates beyond December 31, 1999 or that the Company will incur
significant operating expenses to make any such computer system improvements.
The Company has commenced requesting data concerning Year 2000 compliance from
its suppliers, lenders, service providers and others. The Company is not able to
determine, however, whether any of its suppliers, lenders, or service providers
will need to make any such modifications or replacements. Although it is
management's belief that the failure by such entities not to have made their
required software corrections could have adverse material effect on the
Company's operations or financial condition, the Company has not experienced any
adverse effect in its operations through February 24, 2000.
Inflation
Inflation has not had a significant effect on the Company's or
financial position, and management believes that the future effects of inflation
on the Company's operations and financial position will be insignificant.
Page 19 of 22
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable
Item 2. CHANGES IN SECURITIES
Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
Item 5. OTHER INFORMATION
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable.
Page 20 of 22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN ATM CORP.
(Registrant)
___________________________
Wayne Kight, President
Date: February 4, 2000
Page 21 of 22
<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 six months ended
December 31, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 97,525
<SECURITIES> 0
<RECEIVABLES> 16,111
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 279,086
<PP&E> 192,282
<DEPRECIATION> 180,877
<TOTAL-ASSETS> 293,097
<CURRENT-LIABILITIES> 410,260
<BONDS> 0
0
0
<COMMON> 176
<OTHER-SE> (117,339)
<TOTAL-LIABILITY-AND-EQUITY> 293,097
<SALES> 192,094
<TOTAL-REVENUES> 192,094
<CGS> 145,186
<TOTAL-COSTS> 117,171
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 69,407
<INCOME-TAX> 2,000
<INCOME-CONTINUING> (71,407)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (71,407)
<EPS-BASIC> (0.86)
<EPS-DILUTED> (0.86)
</TABLE>
