<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 September 30, 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 No X
175,675 shares (reflective of the December 15, 1999
reserve split 50 common shares into 1 common share),
$.001 par value, as of February 1, 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.
SEPTEMBER 30, 1999
I N D E X
Page No.
--------
Part I - Financial Information:
Item 1. Financial Statements:
Balance Sheets as at September 30, 1999
(Unaudited) and June 30, 1999 ....................... 3
Statements of Operations For the Three Months
Ended September 30, 1999 and 1998 (Unaudited) ....... 4
Statements of Stockholders' Equity (Capital
Deficiency) For the Three Months Ended
September 30, 1999 (Unaudited) and For the
Year Ended June 30, 1999 ............................ 5
Statements of Cash Flows For the Three Months
Ended September 30, 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
Page 2 of 22
<PAGE>
AMERICAN ATM CORP.
BALANCE SHEETS
(Note 1)
<TABLE>
<CAPTION>
ASSETS
------
September 30, June 30,
1999 1999
------------- --------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents $ 249,076 $ 155,553
Restricted cash 10,000 10,000
Accounts receivable - trade 10,260 13,478
Due from affiliates 2,700 2,700
Assets held for resale - 11,500
Prepaid expense and other current assets 7,000 5,300
---------- ----------
Total current assets 279,036 198,531
---------- ----------
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 171,201 161,525
---------- ----------
Net property assets 21,081 30,757
---------- ----------
Other assets 2,644 2,643
---------- ----------
$ 302,761 $ 231,931
========== ==========
LIABILITIES AND CAPITAL DEFICIENCY
----------------------------------
Current liabilities:
Lines of credit payable $ 260,000 $ 260,000
Notes payable - stockholders - 110,000
Accounts payable - 13,375
Taxes payable 9,362 8,344
Accrued expenses and other current liabilities 103,768 115,968
Due to stockholder 11,500 5,000
---------- ----------
Total current liabilities 384,630 512,687
---------- ----------
Note payable - stockholders 235,000 -
---------- ----------
Capital deficiency:
Preferred stock, $10.00 par value
Authorized and unissued - 100,000 shares
Common stock, $.001 par value
Authorized - 10,000,000 shares
Issued and outstanding - 2,908,750 shares 2,909 2,909
Additional paid-in capital 1,800,344 1,800,344
Accumulated deficit (2,120,122) (2,084,009)
---------- ----------
Total capital deficiency (316,869) (280,756)
---------- ---------
$ 302,761 $ 231,931
========== ==========
</TABLE>
See notes to financial statements.
Page 3 of 22
<PAGE>
AMERICAN ATM CORP.
STATEMENTS OF OPERATIONS
(Note 1)
<TABLE>
<CAPTION>
For the Three
Months Ended
September 30,
----------------------------
1999 1998
--------- ----------
(Unaudited)
<S> <C> <C>
Fee income $ 104,387 $ 107,233
--------- ---------
Direct costs:
Location expenses 49,156 69,636
Financing costs 15,416 16,542
--------- ---------
Total direct costs 64,572 86,178
--------- ---------
Gross profit 39,815 21,055
--------- ---------
Operating expenses:
Selling 26,880 32,049
General and administrative 44,828 24,584
--------- ---------
Total operating expenses 71,708 56,633
--------- ---------
Loss from operations (31,893) (35,578)
--------- ---------
Other income (deductions):
Interest expense (3,500) (3,300)
Interest income 280 921
--------- ---------
Total other income (deductions) (3,220) (2,379)
--------- ---------
Loss before income taxes (35,113) (37,957)
Provision for income taxes 1,000 1,000
--------- ---------
Net loss $ 36,113) ($38,957)
========= =========
Net loss per share ($0.01) ($0.01)
========= =========
Weighted average share outstanding 2,908,750 2,816,250
========= =========
</TABLE>
See notes to financial statements.
Page 4 of 22
<PAGE>
AMERICAN ATM CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
FOR THE YEAR ENDED JUNE 30, 1999 AND
THE THREE MONTHS ENDED SEPTEMBER 30, 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>
Balance - July 1, 1998 2,816,250 $2,816 - $ - $1,718,400 $ -
Stockholders' waiver of
salary-contributed to
capital - - - - 30,000 -
Net proceeds from the
conversion of warrants
to common stock 67,500 68 - - 31,969 -
Net proceeds from the
exercise of stock option 25,000 25 - - 19,975 -
Net loss for the year
ended June 30, 1999 - - - - - -
--------- ------ ------ ------ ------------ ------
Balance June 30, 1999 2,908,750 2,909 - - 1,800,344 -
Net loss for the three
months ended
September 30, 1999 - - - - - -
--------- ------ ------ ------ ------------ ------
Balance September 30, 1999 2,908,750 $2,909 - $ - $1,800,344 $ -
========= ====== ====== ====== ============ ======
</TABLE>
<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)
Net loss for the three
months ended
September 30, 1999 (36,113) (36,113)
----------- ---------
Balance September 30, 1999 ($2,120,122) ($316,869)
=========== =========
</TABLE>
See notes to financial statements.
Page 5 of 22
<PAGE>
AMERICAN ATM CORP.
STATEMENT OF CASH FLOWS
(Note 1)
<TABLE>
<CAPTION>
For the Three
Months Ended
September 30,
--------------------------
1999 1998
---------- ----------
(Unaudited)
<S> <C> <C>
Cash flow from operating activities:
Net loss ($ 36,113) ($ 38,957)
--------- ---------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 9,676 15,357
Increase (decrease) in cash flows as
a result of changes in asset and
liability account balances:
Accounts receivable 3,218 7,569
Assets held for resale 11,500 -
Prepaid expenses and other current assets (1,700) 2,822
Other assets (1) 500
Accounts payable (13,375) 30,248
Accrued expenses and other current liabilities (4,682) (11,980)
--------- ---------
Total adjustments 4,636 44,516
--------- ---------
Net cash provided by (used in) operating activities (31,477) 5,559
--------- ---------
Cash flows from financing activities:
Deferred offering costs - ( 20,000)
Proceeds from stockholder loan 125,000 -
--------- ---------
Net cash provided by (used in) financing activities 125,000 (20,000)
--------- ---------
Net increase (decrease) in cash and cash equivalents 93,523 (14,441)
Cash and cash equivalents at beginning of period 155,553 171,958
--------- ---------
Cash and cash equivalents at end of period $249,076 $157,517
======== ========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ - $ 11,932
======== ========
Taxes paid $ 356 $ 250
======== ========
</TABLE>
See notes to financial statements.
Page 6 of 22
<PAGE>
AMERICAN ATM CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
NOTE 1 - GOING CONCERN.
The Company was incorporated in Florida in March 1996 as a
development stage company. The Company left the development stage in
September 1996 when it commenced operations of its business, which is
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 September 30, 1999 of $2,120,122 of which $94,114
was incurred while the Company was in the development stage. The
accompanying financial statements reflect a working capital deficiency
of $105,594 at September 30, 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 September 30, 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 September 30, 1999 and 1998 and
the results of operations and cash flows for the three months then
ended. The results of operations for the three months ended September
30, 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 September 30, 1999 and 1998 and June
30, 1999 were $130,375, $46,588 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 $1,922,000 at September 30, 1999 and $1,886,000 at June
30, 1999 expiring through 2013 which upon recognition may result in
future tax benefits of approximately $755,000 and $744,000,
respectively. At September 30, 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 September 30, 1999 and 1998, 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.
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.
Page 10 of 22
<PAGE>
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
5,875,000 shares of the Company's common stock at $0.04 per share,
which was the fair market value at the time of conversion.
NOTE 6 - STOCKHOLDERS' EQUITY.
(a) Sale of Securities:
In 1997, the Company completed its sale of 875,000 shares of its
common stock and 2,500,000 warrants (as adjusted for the December 11,
1997 stock split) to accredited investors for $689,216 (net of
offering costs).
In January 1997, the Company issued 75,000 shares of its common
stock in satisfaction of a $180,000 capital lease obligation of
machinery.
In October 1999, three stockholders agreed to accept 5,875,000
shares of the Company's common stock as payment of loans payable to
them aggregating $235,000.
Through March 1999, warrants to acquire 67,500 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 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 (prior to the December 15, 1999
reverse split) for services previously rendered. The fair value of the
warrants issued to the consultant and the services rendered (as
determined by the Board of Directors and consultants) was $85,000
which was charged to operations as public relations costs.
The Company filed with the Securities and Exchange Commission a
registration statement on Form SB-2 to register 3,562,500 shares of
its common stock all of which underlie warrants to acquire a like
number of common shares at $2.40 per share. The proceeds received by
the Company through September 30, 1999 from the conversion of warrants
into 67,500 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.
(e) Stock Options:
The Board of Directors adopted the American ATM Corp. 1996 Stock
Option Plan ("1996 Plan") on December 16, 1996 which the shareholders
subsequently approved. The 1996 Plan provides for the total issuance
of an aggregate of 687,500 common shares under 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 165,000 common
shares have been qualified grants and options to acquire 412,000
common shares have been non-qualified grants.
On December 16, 1996, the Company's outside directors and an
officer were granted options to acquire an aggregate of 100,000 common
shares (prior to the December 15, 1999 reverse split) at an exercise
price of $0.80 per share which was the common stock's fair value on
the date of grant. The directors options were originally exercisable
in full at any time through December 15, 2000. The officer's option
vests pro rata over its life. On March 21, 1997, the Board of
Directors reduced the exercise period of these options to March 25,
2000 for the directors and May 1, 1999 for the officer.
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
250,000 common shares at $0.88 per share, as adjusted for the December
1997 stock split. The CEO's options were granted in recognition of his
decision to forego $40,000 in salary for calendar 1996. The wavier of
the salary was reflected in the accompanying financial statements as a
charge to operations and a credit to additional paid-in capital of
$40,000 during fiscal 1997.
Also on March 25, 1997, the outside directors were issued
additional options to acquire an aggregate (prior to the December 15,
1999 reverse split) of 62,500 common shares for $0.80 per share. The
outside directors' options were issued as partial payment for their
services pursuant to the Company's directors compensation policy which
was approved by the Board of Directors in December 1996.
The excess of the fair value of the common stock at March 25,
1997 ($2.40 per share prior to 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
25,000 common shares at $.80 per share for an aggregate of $20,000 for
which the director remitted $25,000 to the Company. The overpayment of
$5,000 is reflected as a current obligation in the accompanying
financial statements.
On March 31, 1999, the Company issued options aggregating 165,000
shares to officers, employees and directors. The excerise price of the
options is $2.875 per share which is the fair market value at the date
of the grant. The options are exercisable at any time through March
31, 2009.
Pursuant to the 1996 Plan, each of the non-employee directors of
the Company is to receive yearly - at the conclusion of the
stockholders' annual meeting - an option to acquire 10,000 shares of
the Company's common stock for the next fiscal year. Since the Company
had not 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 50,000 common shares.
On December 31, 1998, the Company adopted the 1999 Stock Option
Plan ("1999 Plan"). The 1999 Plan provides for the total issuance of
an aggregate of 500,000 common shares under non-qualified and
qualified grants. No options have been granted under the 1999 plan.
Page 13 of 22
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY. (Continued)
(e) Stock Options: (Continued)
At September 30, 1999 and June 30, 1999, the Company had options
for 552,500 common shares issued and unexercised at exercise prices
ranging from $.80 to $2.875. At September 30, 1999 and June 30, 1999,
552,500 shares under options were exercisable at prices ranging from
$.80 to $2.875 per share.
Assuming the fair market value of the stock at the date of grant
to be $.80 per share in December 1996, $2.40 per share in March 1997
and $2.875 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 $29,448 in
each of the three month periods ended September 30, 1999 and 1998 as
calculated by the Black-Scholes option pricing model. As such,
pro-forma net loss and loss per share would be as follows:
For the Three
Months Ended
September 30,
--------------------------
1999 1998
---------- ----------
Net loss as reported ($ 36,113) ($ 38,957)
========= =========
Additional compensation $ 74,011 $ 29,448
========= =========
Adjusted net loss ($110,124) ($ 68,405)
========= =========
Loss per share as reported ($0.01) ($0.01)
========= =========
Adjusted loss per share ($0.03) ($0.02)
========= =========
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 1999 was
$188,560.
(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 three months ended September 30, 1999 and
1998 was $7,000 and $53,000, respectively. Additionally, the Company
has agreements with electronic transaction reporting and transfer
system service providers, which are a crucial component of the
Company's operations. These agreements typically require payment based
upon the number of transactions processed by the provider.
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 1, 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 nine months of fiscal 2000
and the fiscal year thereafter will 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 he/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.
Three months ended September 30, 1999 vs. September 30, 1998
Fee Income and Direct Cost:
During the current quote fee income decreased $3,000 (2.8%) to $104,000
while direct costs decreased $21,000 (24.4%) to $65,000, resulting in gross
profit increasing $19,000 (90.5%) to $40,000 in the current period (38.5% of fee
income) from $21,000 (19.6% of fee income) in 1998. The improvement in the gross
profit in the current quarter is the result of generating 97.2% of the prior
periods revenues from ten (10) fewer machines which were sold and not replaced.
The reduction in machines utilized resulted in significant reductions in
variable machine costs such as depreciation, rent and armored car service fees
while financing costs remained constant.
Operating Expenses:
Selling expenses decreased $5,000 (15.6%) as $27,000 (26.0% of fee
income) in the three months ended September 30, 1999 from $32,000 (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.
Page 16 of 22
<PAGE>
General and administrative cost increased $20,000 (80.0%) to $45,000
(43.3% of fee income) during the current quarter from $25,000 (23.4% of fee
income) in the prior period. The increase is attributable to increased
professional and consulting fees in the current period.
Interest income, interest expense and the provision for taxes remained
relatively constant in both periods.
The net loss for the current period decreased $3,000 (7.7%) to $36,000
from the prior years' net loss for the quarter of $39,000. The reduction in the
loss is attributable to the reduced direct costs which were offset by the
increased operating expenses as described above.
Three Months Ended September 30, 1998 vs. September 30, 1997
Fee income:
For the three months ended September 30, 1998, the Company had gross
income of $107,000 compared with $61,000 for the three months ended September
30, 1997. The $46,000 (75.4%) increase was the result of placing more equipment
in sites and previously installed equipment generating increased fee income in
1998.
Direct Costs:
The Company's direct costs associated with its ATMs operations were
$86,000 (80.4% of revenues) in 1998 as compared with $104,000 (171.1% of
revenues) for 1997. The decrease in direct costs of $18,000 (17.3%) is
attributable to higher start-up costs incurred in 1997 of $14,000 and a
reduction in finance costs of $4,000 in the current period.
The change in gross loss from ($43,000) in 1997 (70.5% of revenues) to
gross profit of $21,000 in 1998 (19.6% 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 increased $2,000 (6.7%) in the current
period to $32,000 (29.9% of revenues) from $30,000 (49.2%) of revenues) in the
prior period. The increase is largely attributable to costs associated with
developing net sites.
Page 17 of 22
<PAGE>
Three Months Ended September 30, 1998 vs. September 30, 1997 (Continued)
General and Administrative Expenses:
The $63,000 (71.6%) decrease in general and administrative expenses to
$25,000 (23.4% 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 $12,000 of which $9,000 was included in
direct costs in the accompanying financial statements. Interest incurred in 1997
of $20,700 is included as a direct cost in 1997. Interest expense increased from
loans from related parties was $12,000 in 1998.
Interest income decreased $5,000 (83.3%) in 1998 to $1,000 (1.0% of
revenues) from $6,000 (10.0% of revenues) in 1997. The decrease is the credit of
the repayment by a stockholder of a loan to the Company during fiscal 1998.
Net Loss:
The net loss decreased $118,000 (75.6%) to $39,000 in 1998 from
$157,000 in 1997 as per the above analysis.
Financial Condition
September 30, 1999 Compared to June 30, 1999:
The Company's working capital deficiency decreased from $313,000 at
June 30, 1999 to $106,000 at September 30, 1999 through the proceeds of a
$125,000 loan from a stockholder. This loan as well as $110,000 in loans to
other stockholders are classified as long-term debt at September 30, 199 due to
the loans being converted into common stock in October 1999,
The capital deficiency increased $36,000 to $317,000 at September 30,
1999 because of the net loss incurred in the period.
September 30, 1998 Compared to June 30, 1998:
The Company's cash position at September 30, 1998 decreased $14,000 to
$158,000. The decrease is attributable to additional deferred offering costs of
$20,000 offset by net cash provided by operating activities of $6,000.
Stockholders' equity decreased from $40,000 at June 30, 1998 to $1,000
at September 30, 1998 resulting from the loss for the three months ended
September 30, 1998 of $39,000.
Page 18 of 22
<PAGE>
Liquidity and Capital Resources
The Company had a working capital deficiency of $106,000 and $313,000
at September 30, 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 19 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 1, 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>
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 21 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 22 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 year ended three
months ended September 30, 1999 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> $249,076
<SECURITIES> 0
<RECEIVABLES> 10,260
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 279,036
<PP&E> 192,282
<DEPRECIATION> 171,201
<TOTAL-ASSETS> 302,761
<CURRENT-LIABILITIES> 384,630
<BONDS> 0
0
0
<COMMON> 2,909
<OTHER-SE> (319,778)
<TOTAL-LIABILITY-AND-EQUITY> (316,859)
<SALES> 104,387
<TOTAL-REVENUES> 104,387
<CGS> 64,572
<TOTAL-COSTS> 136,280
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,500
<INCOME-PRETAX> (35,113)
<INCOME-TAX> 1,000
<INCOME-CONTINUING> (36,113)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (36,113)
<EPS-BASIC> ($0.01)
<EPS-DILUTED> ($0.01)
</TABLE>
