Form 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
[ X ] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000
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 No. 1-15383
USURF America, Inc.
(Exact Name of Small Business Issuer
as Specified in its Charter)
NEVADA 72-1346591
(State or Other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8748 Quarters Lake Road, Baton Rouge, Louisiana 70809
(Address of Principal Executive Offices,
including Zip Code)
(225) 922-7744
(Issuer's telephone number, including area code)
Indicate by check mark whether 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
Registrant as required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:
Class Outstanding as of 8-18-00
Common Stock,
$.0001 par value 13,631,848
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
USURF America, Inc.
Consolidated Balance Sheets as of June 30,
2000 (unaudited), and December 31, 1999
Consolidated Statements of Operations for
the Six Months Ended June 30, 2000 and
1999 (unaudited), and the Six Months Ended
June 30, 2000 and 1999 (unaudited)
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 2000 and
1999 (unaudited)
Notes to Consolidated Financial Statements
<PAGE>
USURF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
12/31/99 6/30/00
(audited) (unaudited)
ASSETS
CURRENT ASSETS
Cash and cash
equivalents $ 75,313 $ 42,588
Accounts receivable
- net 59,098 31,920
Inventory 21,207 18,828
Prepaid expenses and
other current assets 5,500 8,799
---------- ----------
Total current
assets 161,118 102,135
PROPERTY AND EQUIPMENT,
Cost 1,501,233 1,725,239
Less: accumulated
depreciation (421,786) (542,877)
---------- ----------
1,079,447 1,182,362
---------- ----------
INVESTMENTS 68,029 68,029
---------- ----------
OTHER ASSETS
Acquired customer
base - net 11,764,650 9,234,005
Goodwill - net 5,681,992 4,540,803
Other intangibles
- net 782,580 1,008,182
Other assets 7,353 7,853
---------- ----------
18,236,575 14,790,843
---------- ----------
Total assets $19,545,169 $16,143,369
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable -
current portion 5,910 0
Accounts payable 363,665 695,085
Accrued payroll 118,157 186,186
Other current liabilities 216,650 199,821
Property dividends
payable 43,750 43,750
Accrued interest to
stockholder 29,741 51,128
Notes payable to
stockholder 356,239 809,045
Deferred revenue 87,538 102,026
---------- ----------
Total current
liabilities 1,221,650 2,087,041
LONG-TERM LIABILITIES
Deferred income tax 3,883,210 3,173,729
---------- ----------
Total
liabilities 5,104,860 5,260,770
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $.0001
par value; Authorized:
100,000,000; Issued
and Outstanding:
12,786,116 shares at
December 31, 1999,
and 13,278,679 shares
at June 30, 2000 1,279 1,328
Additional paid-in
capital 28,918,638 31,379,621
Accumulated deficit (12,616,830) (18,323,323)
Subscriptions
receivable (860) (5,860)
Deferred consulting (1,861,918) (2,169,167)
---------- ----------
14,440,309 10,882,599
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $19,545,169 $16,143,369
<PAGE>
USURF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
(unaudited) (unaudited)
REVENUES
Internet
access
and web
site
devel-
opment
revenues $ 625,321 $ 730,028 $ 1,222,713 $1,266,082
Internet
access
costs and
cost of
goods sold (400,164) (270,274) (669,300) (471,874)
---------- --------- ---------- ---------
Gross
profit 225,157 459,754 553,413 794,208
---------- --------- ---------- ---------
OPERATING EXPENSES
Depre-
ciation
and amor-
tization 2,280,883 2,023,294 4,519,427 3,347,322
Profes-
sional fees 826,657 429,648 1,216,695 830,487
Rent 67,728 34,394 129,298 52,917
Salary
and
commis-
sions 411,531 376,716 810,889 610,015
Contract
services 0 0 0 20,696
Advertising 3,816 36,937 18,995 53,249
Other 247,385 90,953 496,915 168,515
---------- --------- ---------- ---------
Total
Oper-
ating
Expen-
ses 3,838,000 2,991,942 7,192,219 5,083,201
---------- --------- ---------- ---------
LOSS
FROM
OPERATIONS (3,612,843) (2,532,188) (6,638,806) (4,288,993)
OTHER
INCOME
(EXPENSE)
Other
income-net (6,065) 0 553 0
Interest
expense (11,662) (5,505) (21,432) (6,033)
---------- ---------- ---------- ---------
LOSS BEFORE
INCOME TAX (3,630,570) (2,537,693) (6,659,685) (4,295,026)
INCOME TAX
BENEFIT 481,673 442,110 953,192 734,371
---------- ---------- ---------- ---------
NET
LOSS (3,148,897) (2,095,583) (5,706,493) (3,560,655)
Net loss
per
common
share (0.24) (0.19) (0.44) (0.33)
Weighted
average
number of
shares
outstand-
ing 13,277,058 11,135,666 13,107,279 10,650,657
<PAGE>
USURF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended Six Months Ended
6/30/00 6/30/99
(unaudited) (unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(5,706,493) $(3,560,655)
Adjustment to
reconcile net loss
to net cash used
in operating
activities
Depreciation and
amortization 4,519,427 3,347,322
Consulting fees
recognized 1,099,032 756,979
Compensation expense 48,000 0
Deferred income
taxes (953,192) (734,370)
Changes in operating
assets and liabilities:
Due from affiliate 0 (1,614)
Loss on disposal 0 280
Accounts receivable 27,178 (17,004)
Inventory 2,379 (3,225)
Other assets and
liabilities 29,288 (29,037)
Deferred revenue 14,488 6,990
Accounts payable 331,420 (107,253)
Prepaid expenses (3,299) (8,655)
Accrued payroll 68,029 0
Other current
liabilities (16,829) 0
Accrued expenses 0 56,518
Customer deposits 0 1,787
Taxes payable 0 731
---------- ----------
Net cash used
in operating
activities (540,572) (291,206)
---------- ----------
CASH FLOWS FROM
INVESTING ACTIVITIES
Proceeds on disposal
of fixed assets 0 15,090
Cash acquired in
acquisitions 7,704 180,812
Capital expenditures (186,754) (389,822)
---------- ----------
Net cash used
in investing
activities (179,050) (193,920)
---------- ----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Payments on notes
payable and capital
lease obligations (5,910) (47,070)
Proceeds from sub-
scriptions receivable 240,000 0
Proceeds from note
payable to stockholder 463,900 0
Issuance of common
stock for cash 0 395,000
Warrants exercised 0 310,000
Payment on note
payable to stockholder (11,093) 0
---------- ----------
Net cash provided
by financing
activities 686,897 657,930
---------- ----------
Net increase
(decrease)
in cash and
cash equivalents (32,725) 172,804
Cash and cash equi-
valents, beginning
of period 75,313 7,232
Cash and cash equi-
valents, end of period 42,588 180,036
<PAGE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND OTHER CASH FLOW INFORMATION
Six Months Ended June 30, 2000:
- In January 2000, the Company entered into a one-year
legal and business consulting services agreement, by
issuing 100,000 shares of stock valued at $300,000.
- In January 2000, the Company entered into a one-year
business and communications consulting services
agreement, by issuing 60,000 shares of stock valued at
$180,000.
- In February 2000, the Company acquired all of the stock
of The Spinning Wheel, Inc., by issuing 81,063 shares
of stock valued at $324,252. This acquisition was
accounted for as a purchase business combination.
- In February 2000, the Company acquired all of the
ownership interests of Internet Innovations, L.L.C.,
by issuing 50,000 shares of stock valued at $437,500.
This acquisition was accounted for as a purchase
business combination.
- In April 2000, the Company issued a total of 60,000 shares
of stock under two separate consulting agreements, which
shares were valued at $210,000.
- In April 2000, the issued 100,000 shares of stock
under a consulting agreement, which shares were valued
at $725,000.
Six Months Ended June 30, 1999:
- In January 1999, the Company acquired all of the stock
of CyberHighway, Inc. by issuing 2,000,000 shares of
stock valued at approximately $16,000,000. In
addition, 325,000 shares were issued in payment of a
finder's fee arising out of this acquisition, which
shares were valued at approximately $2,600,000. This
acquisition was accounted for as a purchase business
combination.
- In June 1999, the Company acquired all of the stock of
Santa Fe Trail Internet Plus, Inc. by issuing 100,000
shares of stock valued at $400,000. This acquisition
was accounted for as a purchase business combination.
<PAGE>
USURF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2000
(Unaudited)
Note 1. Nature of Business, Organization and
Basis of Presentation
Basis of Presentation
USURF America, Inc. (USURF), formerly Internet Media Corporation, was
incorporated as Media Entertainment, Inc. in the State of Nevada on
November 1, 1996. USURF currently operates as an internet service provider
(ISP), in the inter-mountain west region of the United States, with primary
operations in Boise, Idaho. USURF's original purpose was to operate as a
holding company in the wireless cable television and community (low power)
television industries, as well as other segments of the communications
industry. Until January 1999, USURF was in the development stage. In 1998,
USURF changed its focus to concentrate in the wireless Internet
communications industry. USURF later ceased efforts to develop the
wireless cable and low power television business areas and assigned all of
its assets from the low power television activities to New Wave Media Corp.
in exchange for a 15% ownership interest in New Wave Media Corp.
Effective December 31, 1996, USURF acquired all of the outstanding common
stock of Winter Entertainment, Inc., a Delaware corporation incorporated on
December 28, 1995 (WEI), and Missouri Cable TV Corp., a Louisiana
corporation incorporated on October 9, 1996 (MCTV). WEI operates a
community television station in Baton Rouge, Louisiana; MCTV owns wireless
cable television channels in Poplar Bluff, Missouri, which system has been
constructed and is ready for operation, and Lebanon, Missouri. Effective
October 8, 1998, USURF formed Santa Fe Wireless Internet, Inc. (Santa Fe),
a New Mexico corporation, to hold the assets acquired from Desert Rain
Internet Services. Santa Fe was organized to provide wireless Internet
access. The acquisition of WEI and MCTV by USURF was accounted for as a
reorganization of companies under common control. The assets and
liabilities acquired were recorded at historical cost in a manner similar
to a pooling of interests. The acquisition of Santa Fe was accounted for
as a purchase whereby cost is allocated to the assets acquired.
On January 29, 1999, USURF acquired all the stock of CyberHighway, Inc., a
Boise, Idaho-based ISP, by issuing 2,000,000 shares of stock valued at
approximately $15,940,000. In addition, 325,000 shares of common stock
were issued in payment of a finder's fee arising out of this acquisition.
This acquisition fundamentally altered USURF's outlook, providing USURF
with an extensive dial-up customer base, as well as
technologically-advanced operations facilities and immediate access to
customers in internet services markets dominated by CyberHighway-owned or
affiliate Internet service providers. This acquisition was accounted for
as a purchase business combination
In June 1999, USURF acquired all the stock of Santa Fe Trail Internet Plus,
Inc. ("Trail"), a Santa Fe, New Mexico-based ISP, by issuing 100,000 shares
of stock valued at approximately $400,000. This acquisition was accounted
for as a purchase business combination.
In July 1999, USURF acquired all of the stock of Premier Internet Services,
Inc. ("PISI"), an Idaho-based ISP, by issuing 127,000 shares of stock
valued at approximately $508,000. This acquisition was accounted for as a
purchase business combination.
In August 1999, USURF acquired the www.usurf.com domain by issuing 150,000
shares of stock valued at approximately $863,000. This acquisition was
accounted for as a purchase business combination.
In November 1999, USURF acquired the customer base of Cyber Mountain, Inc.
("CMI"), a Denver, Colorado-based ISP, by issuing 25,000 shares of stock
valued at approximately $100,000. This acquisition was accounted for as a
purchase business combination.
In December 1999, USURF acquired a portion of the ISP-related equipment and
customer base of Cyber Highway of North Georgia, Inc. ("CHGA"), a Demorest,
Georgia-based ISP, by issuing 53,000 shares of stock valued at
approximately $212,000. This acquisition was accounted for as a purchase
business combination.
In February 2000, USURF acquired all of the stock of The Spinning Wheel,
Inc. ("Wheel"), an Idaho-based ISP, by issuing 81,63 shares of stock valued
at approximately $324,252. This acquisition was accounted for as a
purchase business combination.
In February 2000, USURF acquired all of the ownership interests of Internet
Innovations, L.L.C. ("IILLC"), a Louisiana-based Internet design firm, by
issuing 50,000 shares of stock valued at approximately $437,500. This
acquisition was accounted for as a purchase business combination.
Principles of Consolidation
The accompanying consolidated financial statements include all the accounts
of USURF and all wholly owned subsidiaries. Intercompany transactions and
balances have been eliminated in the consolidation.
Loss Per Common Share
Basic loss per common share has been computed by dividing the net loss by
the weighted average number of shares of common stock outstanding
throughout the period.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets, primarily acquired customer bases,
are stated on the basis of cost and are amortized, principally on a
straight-line basis, over the estimated future periods to be benefited
(generally 3 years). Goodwill and other intangible assets are periodically
reviewed for impairment to ensure they are appropriately valued. Conditions
which may indicate an impairment issue exists include a negative economic
downturn or a change in the assessment of future operations. In the event
that a condition is identified which may indicate an impairment issue
exists, an assessment is performed using a variety of methodologies,
including cash flow analysis, estimates of sales proceeds and independent
appraisals. Where applicable, an appropriate interest rate is utilized,
based on location specific economic factors.
Note 2. Interim Consolidated Financial Statements
In the opinion of management, the accompanying consolidated financial
statements for the six months ended June 30, 2000 and 1999, reflect all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial condition, results of operations and cash
flows of USURF, including subsidiaries, and include the accounts of USURF
and all of its subsidiaries. All material inter-company transactions and
balances are eliminated.
The financial statements included herein have been prepared by USURF,
without audit, pursuant to the rules and regulations of the SEC. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these unaudited financial statements be
read in conjunction with the financial statements and notes thereto
included in USURF's Annual Report on Form 10-KSB for the year ended
December 31, 1999, as filed with the SEC. Certain reclassifications and
adjustments may have been made to the financial statements for the
comparative period of the prior fiscal year to conform with the 2000
presentation. The results of operations for the interim periods are not
necessarily indicative of the results to be obtained for the entire year.
Note 3. Net 1, Inc. Acquisition
On August 23, 1999, the Company acquired Net 1, Inc. (Net 1) in a business
combination accounted for as a purchase. Net 1 is primarily engaged as an
ISP in Alabama. In September, 1999 the Company tendered the shares of
capital stock obtained in the acquisition of Net 1 for rescission of the
transaction (see Note 7). However, legally, USURF is still the owner of the
outstanding shares of Net 1 and is required by generally accepted
accounting principles to record Net 1 as a wholly-owned subsidiary from the
date of acquisition.
The financial statements of Net 1 have not been available to USURF from
September 1, 1999, through June 30, 2000; therefore, the revenues and
expenses of Net 1 are not included in the accompanying statement of
operations for the three months ended June 30, 2000, nor were they included
in USURF's statement of operations for the year ended December 31, 1999.
This is considered a departure from generally accepted accounting
principles, of which the effects on USURF have not been determined.
The total cost of the acquisition was $1,164,561, which exceeded fair value
of the net assets of Net 1 by $1,164,561. The excess was deemed to be
impaired at June 30, 2000, and at December 31, 1999, due to the change in
the operating environment and was recorded in the accompanying financial
statements as an impairment loss.
Note 4. Acquisitions
Effective December 31, 1996, USURF acquired WEI and MCTV by issuing
2,157,239 shares of common stock in exchange for all the common stock of
each company. The majority shareholder of USURF was also the sole
shareholder of WEI and the majority shareholder of MCTV. Therefore, the
acquisitions have been accounted for at historical cost in a manner similar
to a pooling of interests. The consolidated statement of operations
includes USURF and its predecessors WEI and MCTV from inception of WEI.
Effective January 29, 1999, USURF acquired CyberHighway, which acquisition
has been accounted for as a purchase and not as a pooling of interests.
Effective June 2, 1999, USURF acquired Trail, which acquisition has been
accounted for as a purchase and not as a pooling of interests.
Effective August 14, 1999, USURF acquired usurf.com, which acquisition has
been accounted for as a purchase and not as a pooling of interests.
Effective August 20, 1999, USURF acquired Net 1. Because USURF has
tendered the stock of Net 1 for rescission of the acquisition transaction,
none of the operating data or balance sheet data associated with Net 1 is
presented. USURF is involved in arbitration of its demand for rescission.
(See Notes 2 and 7).
Effective August 30, 1999, USURF acquired PISI, which acquisition has been
accounted for as a purchase and not as a pooling of interests.
Effective November 2, 1999, the Company acquired the customer base of CMI,
which acquisition has been accounted for as a purchase and not as a pooling
of interests.
Effective December 20, 1999, USURF acquired a portion of the ISP-related
equipment and customer base of CHGA, which acquisition has been accounted
for as a purchase and not as a pooling of interests.
Effective February 1, 2000, USURF acquired all of the stock of Wheel, which
acquisition has been accounted for as a purchase and not as a pooling of
interests.
Effective February 16, 2000, USURF acquired all of the ownership interests
of IILLC, which acquisition has been accounted for as a purchase and not as
a pooling of interests.
Note 5. Notes Payable to Shareholder
June 30, 2000
(unaudited)
Notes payable to majority
stockholder, interest
accrues at 8%, due on
demand and unsecured $809,045
Note 6. Stock Issuances
During the six months ended June 30, 2000, USURF issued shares of common
stock, as follows:
A. In February 2000, 100,000 shares were issued pursuant to a Legal and
Consulting Services Agreement, which shares were valued at a price of $3.00
per share, or $300,000 in the aggregate.
B. In February 2000, 60,000 shares were issued pursuant to a Business and
Communications Consulting Agreement, which shares were valued at $3.00 per
share, or $180,000 in the aggregate.
C. In February 2000, 81,063 shares were issued in the acquisition of
Wheel, which shares were valued at $4.00 per share, or $324,252, in the
aggregate.
D. In February 2000, 50,000 shares were issued in the acquisition of
IILLC, which shares were valued at $8.75 per share, or $437,500, in the
aggregate.
E. In April 2000, the Company issued a total of 160,000 shares under three
separate consulting agreements. 60,000 of these shares were valued at
$3.50 per share, or $210,000, in the aggregate, while 100,000 of these
shares were valued at $7.25 per share, or $725,000, in the aggregate.
These shares were issued in April 2000.
F. In March 2000, the Company completed a private offering of units of its
securities, each unit consisting of one share of common stock and one
warrant. In March 2000, the Company received subscriptions for 65,000
shares, which shares were sold for $5.00 per share, a total of $325,000.
Funds in payment of these subscriptions were received by the Company during
March and April 2000. 65,000 warrants, exercisable at $7.50 per share,
were issued to the purchasers of these shares. These securities were
issued in April 2000.
Note 7. Commitments and Contingencies
In September l999, USURF tendered the shares of capital stock obtained in
the acquisition of Net 1 (see Note 2) for rescission of the transaction.
USURF had intended to commence arbitration to pursue its rescission claim.
However, one of the former owners of Net 1, has instituted arbitration,
through the American Arbitration Association, and is seeking to enforce
certain registration rights associated with a portion of the shares of
USURF's common stock received by him in the acquisition transaction.
USURF has asserted the rescission claim as a counterclaim in the pending
arbitration proceeding. The counterclaim was made against Net 1 and its
former owners, wherein USURF seeks to rescind the acquisition transaction
that occurred in August 1999, and recover the 250,000 shares of common
stock issued. Although USURF believes it will be successful in this
arbitration proceeding, no prediction in this regard can be made.
Note 8. Subsequent Events
A. In July 2000, the Company issued 250,000 shares under an investment
banking agreement. These shares were valued at $1.50 per share, or
$375,000, in the aggregate.
B. In August 2000, the Company issued 250,000 under an employment
agreement with its vice president of technology. These shares were valued
at approximately $2.00 per share, or approximately $500,000.
C. In August 2000, the Company's president and founder, David M. Loflin,
converted all indebtedness owed to him, including accrued interest, into a
total of 774,162 shares of the Company's common stock. The total amount of
indebtedness converted to common stock was $967,703. Mr. Loflin received
one share for each $1.25 of indebtedness converted - $1.25 was the low sale
price for our common stock on the American Stock Exchange on August 18,
2000. Until converted, all of the loans from Mr. Loflin were payable on
demand, with interest accruing at 8% per annum.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Business Focus and Recent Developments
In October 1999, our management determined to commit, for the foreseeable
future, all available capital to the commercial exploitation of our
Quick-Cell wireless Internet access products. We intend to continue to
pursue acquisitions of businesses complimentary to our core Internet access
business.
In May 2000, in connection with our hiring of Robert A. Hart IV as vice
president of technology, we began marketing our turn-key Quick-Cell
wireless Internet access systems to the thousands of Competitive Local
Exchange Carriers (CLECs), independent and other telcos, DSL providers and
Internet service providers. This strategy was designed to serve two
purposes: (1) to get our Quick-Cell wireless Internet access products in
the hands of consumers, so as to begin to establish product name
recognition; and (2) to provide needed funding with which we would be able
to establish and operate our own Quick-Cell systems. To date, we have sold
three Quick-Cell systems and have indications of interests from many other
telecommunications firms. We cannot assure you that these Quick-Cell
system sales will be at a level that will provide capital sufficient to
allow us to establish our own Quick-Cell systems.
In July 2000, we entered into an investment banking agreement with Gruntal
& Co., L.L.C. We anticipate that Gruntal will be successful in securing
needed funding with which we would be able to establish and operate
Quick-Cell systems on a wide-scale basis. However, we cannot offer any
assurance that we will be able to obtain needed capital through the efforts
of Gruntal.
The results of operations discussed below reflect, on the whole, our
operating results based on our old business model. Our new business model
focuses primarily on the exploitation of our Quick-Cell products. Because
our Quick-Cell wireless Internet access business permits us to operate on
significantly improved margins, as compared to operating margins in the
dial-up Internet access business, we expect our operating results,
beginning near the end of the fourth quarter of Fiscal 2000, to show
significant improvement. The level of improved operating results cannot be
predicted, however, and will not improve significantly unless and until
needed capital is obtained. We remain in need of expansion capital to
achieve our aggressive growth strategy.
Background
In July 1999, we changed our name to "USURF America, Inc.", from "Internet
Media Corporation". We were incorporated on November 1, 1996, under the
name "Media Entertainment, Inc.", to act as a holding company in the
wireless cable and community (low power) television industries. Our
initial capitalization transaction included the purchase of Winter
Entertainment, Inc. and Missouri Cable TV Corp. Because USURF America,
Winter Entertainment and Missouri Cable TV were combined in a
reorganization of entities under common control, the presentation contained
in our consolidated financial statements, as they relate to Winter
Entertainment and Missouri Cable TV, have been prepared in a manner similar
to the pooling-of-interests method.
Due to existing market conditions in the wireless cable industry, we have
abandoned our efforts to develop these wireless cable properties.
Nevertheless, in the opinion of our management, the licenses relating to
the various wireless cable frequencies continue to be of substantial future
value for use in our wireless Internet access business. We will be able to
utilize these frequencies at such time as the FCC approves two-way
communication on the wireless cable frequencies. Our management believes
this FCC approval of two-way communication to be imminent. However, our
wireless cable assets will become impaired, should the expected FCC
approval not be forthcoming. We can make no prediction with respect to the
FCC's actions in this regard.
In furtherance of our plan to focus on the exploitation of our Quick-Cell
wireless Internet access products and expansion of our other Internet
services, effective July 1, 1999, we assigned all of our community (low
power) television properties to New Wave Media Corp., in exchange for a 15%
ownership interest in New Wave common stock. Our board of directors has
declared a dividend with respect to all of the New Wave shares. These
shares of New Wave will be distributed to our shareholders, upon New Wave's
completion of a Securities Act registration of the distribution
transaction. This discussion includes the operations of our community
television segment for the first two quarters of 1999.
Since our initial capitalization transactions, we have made the
acquisitions described below. Each of these acquisitions has been
accounted for as a purchase, not as a pooling of interests, with their
respective operating results being included in this discussion from the
various dates of acquisition:
- September 1998: we acquired the assets and going business of Desert Rain
Internet Services, a Santa Fe, New Mexico-based ISP, for $25,000 in cash.
- January 1999: we acquired CyberHighway, Inc., a Boise, Idaho-based ISP
for 2,000,000 shares of our common stock.
- June 1999: we acquired Santa Fe Trail Internet Plus, Inc., another Santa
Fe, New Mexico-based ISP, for 100,000 shares of our common stock.
- August 1999: we acquired the going business known as www.usurf.com, for
150,000 shares of our common stock.
- August 1999: we acquired Premier Internet Services, Inc., an Idaho-based
ISP, for 127,000 shares of our common stock.
- August 1999: we acquired Net 1, Inc., an Alabama-based ISP, for 250,000
shares of our common stock. In September 1999, we tendered the stock of
Net 1 for rescission of the acquisition transaction. The financial
statements of Net 1 have not been available to us since September 1, 1999;
therefore, the revenues and expenses of Net 1 are not included in this
discussion, nor are they included in our statement of operations for the
three months ended March 31, 2000. Please refer to Notes 3 and 7 to our
financial statements appearing elsewhere in this Quarterly Report. Also,
please see the discussion below under "Item 1. Legal Proceedings" of "Part
II - Other Information".
- November 1999: we acquired the customer base of Cyber Mountain, Inc., a
Denver, Colorado-based ISP, for 25,000 shares of our common stock.
- December 1999: we acquired a portion of the ISP-related equipment and
customer base of CyberHighway of North Georgia, Inc., a Demorest,
Georgia-based ISP, for 53,000 shares of our common stock.
- February 2000: we acquired The Spinning Wheel, Inc., an Idaho-based ISP,
for 81,063 shares of our common stock.
- February 2000: we acquired Internet Innovations, L.L.C., a Baton Rouge,
Louisiana-based web design firm, for 50,000 shares of our common stock.
The acquisition of CyberHighway fundamentally altered our outlook. With
the acquisition of CyberHighway, not only did we acquire approximately
27,000 dial-up customers and a state-of-the-art network operations center,
we also gained immediate visibility as a large regional ISP.
Shareholder Loans - Conversion to Equity
Since our inception, our president, David M. Loflin, has made numerous
loans to us. At December 31, 1999, we owed Mr. Loflin a total of $356,239.
During the first half of 2000, Mr. Loflin loaned us an additional
$452,806. From June 30, 2000, to August 18, 2000, Mr. Loflin made further
loans to us totaling $107,000. On August 18, 2000, Mr. Loflin agreed to
convert the entire amount owed to him, including accrued interest, into a
total of 774,162 shares of our common stock. The total amount of
indebtedness converted to common stock was $967,703. Mr. Loflin received
one share for each $1.25 of indebtedness converted by him - $1.25 was the
low sale price for our common stock on the American Stock Exchange on
August 18, 2000. Until converted, all of the loans from Mr. Loflin were
payable on demand, with interest accruing at 8% per annum. The funds
loaned to us during 2000 were used primarily for operating expenses, as
well as for the purchase of network equipment. Unless we secure
substantial capital from an outside source, it is probable that Mr. Loflin
will loan us additional funds during the third and fourth quarters of 2000,
although the amount and timing of any such loans cannot be predicted.
Without Mr. Loflin's loans, we would have become substantially insolvent.
Restructuring and Personnel Reductions
In July 1999, sweeping changes were made to the management of
CyberHighway. These changes included completely replacing the board of
directors and officers of CyberHighway, as well as a significant workforce
reduction. Additional personnel reductions have been made. Certain
business functions, including customer support services, have been moved
from the Boise network operations center to our Santa Fe, New Mexico,
point-of-presence. The changes in the management of CyberHighway were made
due to differing managerial philosophies. Under the prior management,
CyberHighway had, during May 1999, begun to sustain operating losses,
primarily due to the addition of numerous salaried salespersons, who failed
to produce sales revenues. The new management of CyberHighway instituted
the restructuring and personnel reductions as the only means by which it
could return CyberHighway to a positive cash flow position. While
CyberHighway's cash flow returned, for a brief time, to a positive status,
in line with its 1998 cash flow results, during the first half of 2000,
CyberHighway operated at a loss of approximately $60,000 per month. Near
the end of June 2000, we again significantly reduced the number of
employees at CyberHighway, in an effort to substantially eliminate the
operating losses. These most recent personnel reductions resulted in
monthly savings of approximately $50,000.
Settlement Agreement
On November 30, 1999, we entered into a settlement agreement and mutual
release, which settled certain legal proceedings in which USURF America and
CyberHighway had been involved. The parties to the settlement agreement
were: USURF America, CyberHighway, Julius W. Basham, II, our former chief
operating officer and a current director, William Kim Stimpson and David W.
Brown. Messrs. Stimpson and Brown are former owner-employees of CyberHighway.
Pursuant to this settlement agreement, certain legal proceedings were
settled in full and we delivered to Messrs. Basham, Stimpson and Brown a
total of 340,000 shares of our common stock. During the first half of
2000, we finished paying a total sum of $43,325 for reimbursement of
attorneys' fees paid by Messrs. Basham, Stimpson and Brown. However, these
attorneys' fees, as well as the value of the shares issued in the
settlement ($913,750), were charged against our 1999 earnings.
Results of Operations
General. Prior to 1999, substantially all of our revenues were generated
by our now-defunct community television segment. During the first half of
1999 and the first half of 2000, all of our revenues were generated by our
Internet segment. Our revenues are derived primarily from monthly customer
payments for dial-up access, which average approximately $18.00 per
customer. Also, we derive revenue from per-customer royalty payments from
our CyberHighway affiliate-ISPs, which average approximately $1.75 per
customer. Minimal revenues are derived from web hosting and other
Internet-related valued-added services.
Beginning toward the end of March 2000, we began generating revenues from
our Quick-Cell wireless Internet access operations. These initial
operations are occurring in Santa Fe, New Mexico. As of the date of this
report, we had approximately 150 Quick-Cell customers. The growth of our
wireless Internet access business will continue at a slow rate, unless and
until we obtain significant capital - at least $1,000,000.
At the end of May 2000, we began marketing our turn-key Quick-Cell
wireless Internet access 1system to the thousands of Competitive Local
Exchange Carriers (CLECs), independent and other telcos, DSL providers and
Internet service providers. To date, we have sold three Quick-Cell
systems, and have indications of interests from numerous other
telecommunications firms. We expect Quick-Cell system sales to continue
and to increase going forward. With the development of our wireless
Internet access business, in our future periodic reports, we expect to
provide dial-up and wireless Internet access segment information.
Six Months Ended June 30, 2000, versus Six Months Ended June 30, 1999. Our
operating results for the six months ended June 30, 2000 and 1999, are
summarized in the following table:
Six Months Ended June 30,
2000 1999
(unaudited) (audited)
Revenues $1,222,713 $1,266,082
Internet access costs
and cost of goods sold 669,300 471,874
Gross Profit 553,413 794,208
Operating Expenses 7,192,219 5,083,201
Loss from Operations 6,638,806 4,288,993
Net Loss 5,706,493 3,560,655
Our net loss for the six months ended June 30, 2000 ($5,706,493),
increased 60% from our net loss for the same period of 1999 ($3,560,655).
The greater net loss during the 2000 period is primarily attributable to a
$197,426 increase in internet access costs and costs of goods sold, a 46%
increase in professional fees ($1,216,695 versus $830,487), a $200,874
increase in salary and commissions, and a $1,172,105 increase in
depreciation and amortization of acquired customer bases, goodwill and
other intangibles, from $3,347,322 to $4,519,427. Also, "other" operating
expenses tripled, from $168,515 to $496,915, in the current period. Our
rent increased $76,381 from 1999 to 2000, due to our ISP acquisitions and
larger operations in Santa Fe, New Mexico. Due to our lack of capital, we
spend about one-third as much on advertising during the current period,
$18,995 versus $53,249. Substantially all of the professional fees paid
during the current period we paid with shares of our common stock.
We expect that our operating results for the period ending September 30,
2000, will be similar to those of the first six months of 2000, and that
our results for the year to end December 31, 2000, will also reflect
similar operating results.
During the six months ended 2000, we issued 160,000 shares of common stock
under two separate consulting agreements; these shares have been valued for
financial accounting purposes at $480,000, in the aggregate. This amount
will be expensed in equal monthly amounts during 2000. Subsequent to June
30, 2000, we issued an additional 160,000 shares under three separate
consulting agreements; these shares have been valued for financial
accounting purposes at $625,000, in the aggregate, and will be expenses in
monthly amounts over the respective terms of the agreements pursuant to
which they were issued - two are four-month agreements and one is a
six-month agreement.
Subsequent to June 30, 2000, we issued 250,000 shares to Gruntal, under
our investment banking agreement, which were valued at $375,000 by our
board of directors. Also, we issued 250,000 shares to our new vice
president of technology, as a bonus under his employment agreement. These
shares were valued at approximately $500,000.
For the six months ended June 30, 2000 and 1999, our statements of
operations reflect an income tax benefit of $953,192 and $734,371,
respectively, resulting from the difference in the bases of our acquired
customer bases for book versus tax purposes.
Internet Segment. Our Internet segment generated all of our revenues
during the current and prior periods ended June 30, 2000. During 1999
period, this segment operated at a modest loss, while during the 2000
period, this segment suffered a loss of approximately $500,000. This
segment's increased operating loss is due to higher operating costs,
particularly telephone line charges under contracts negotiated by
CyberHighway's former management, as well as other network related costs.
To stem our losses, near the end of June 2000, we significantly reduced
the number of employees at CyberHighway. Our remaining CyberHighway staff
has been able to continue to provide the necessary customer and other
services at acceptable levels. This reductions in personnel substantially
reduced our ongoing losses. Now, our monthly loss at CyberHighway is
approximately $10,000.
Community Television Segment. This segment had no revenues during the
1999 period. As discussed above, effective July 1, 1999, we assigned all
of our community television properties to New Wave Media Corp. Thus, our
2000 operations do not include this segment.
Wireless Cable Segment. As described above, we have ceased, for the
foreseeable future, our wireless cable activities.
Liquidity and Capital Resources
June 30, 2000. Historically, we have had a significant working capital
deficit. At June 30, 2000, our working capital deficit was $1,984,906,
which is a larger deficit than our $1,060,532 deficit at December 31, 1999.
The increase in our deficit arose due to increases in our accounts
payable, accrued payroll and notes payable to a shareholder, our president.
The following table sets forth our current assets and current liabilities
at June 30, 2000, and December 31, 1999:
6/30/00 12/31/99
(unaudited) (audited)
Current Assets Cash $42,588 $75,313
Accounts
Receivable 31,920 59,098
Inventory 18,828 21,207
Prepaids 8,799 5,500
Current Liabilities
Notes payable
- current
portion $ 0 $ 5,910
Accounts payable 695,085 363,665
Accrued payroll 186,186 118,157
Other current
liabilities 199,821 216,650
Property dividends
payable 43,750 43,750
Accrued interest
to stockholder 51,128 29,741
Notes payable to
stockholder 809,045 356,239
Deferred revenue 102,026 87,538
The increase in our accounts payable is attributable to our increasing
operating costs, primarily telephone line charges and other network-related
expenses, coupled with our determination to defer payment of nearly all of
our accounts payable for a short, as-yet undetermined, period of time, due
our lack of working capital. To date, we have not suffered, and do not
expect to suffer, any adverse consequences from our vendors.
Our accrued payroll at June 30, 2000, as well as at December 31, 1999, is
attributable to accrued salary of our president and two of our vice
presidents.
The increase in notes payable to stockholder, from $356,239 at December
31, 1999, to $809,045 at June 30, 2000, represents loans made to us by our
president, David M. Loflin. From June 30, 2000, to August 18, 2000, Mr.
Loflin made further loans to us totaling $107,000. On August 18, 2000, Mr.
Loflin agreed to convert the entire amount owed to him, including accrued
interest, into a total of 774,162 shares of our common stock. The total
amount of indebtedness converted to common stock was $967,703. Mr. Loflin
received one share for each $1.25 owed him - $1.25 was the low sale price
for our common stock on the American Stock Exchange on August 18, 2000.
Until converted, all of the loans from Mr. Loflin were payable on demand,
with interest accruing at 8% per annum. The funds loaned during 2000 were
used primarily for operating expenses and the roll-out of our Quick-Cell
wireless Internet access products, particularly in Santa Fe, New Mexico.
Without outside funding, it is probable that Mr. Loflin will loan us
additional funds, though no assurance or prediction can be made in this
regard.
In addition to Mr. Loflin's loans, during the first half of 2000, we
obtained funds from private sales of our securities. In March and April
2000, we received cash of $325,000 from this private offering.
We remain in need of more capital to provide full funding of our
aggressive growth plan. We cannot assure you that we will obtain this
level of capital. Our failure to do so would, more likely than not,
prevent us from improving our future operating results.
We expect that, during the last quarter of 2000, certain common stock
purchase warrants, representing an additional approximately $1,800,000,
will be exercised. However, we cannot assure you that these warrants will
be exercised or, if exercised, that the timing of their exercise would
significantly improve our financial position.
Without substantial additional investment, we will continue to experience
a working capital deficit and be unable to implement our aggressive growth
plan. We are seeking additional investments for this purpose, but we
cannot assure you that we will be successful in our efforts.
Commitment to Wireless Internet Business. In October 1999, our management
determined to apply, for the foreseeable future, all available capital to
the exploitation of our Quick-Cell wireless Internet access products.
However, we cannot assure you that we will obtain sufficient capital with
which to implement fully our growth plan.
Growth Strategy; Proposed Acquisitions. During the past year, as we
refined our growth strategy, we have determined that, as a purveyor of
Internet access, for us to achieve the greatest growth and economies of
scale, it is necessary for us to offer traditional dial-up Internet access
and our Quick-Cell wireless Internet access products. Thus, to reach more
Internet users, we will continue to provide high quality dial-up Internet
access service as we continue to deploy our Quick-Cell wireless Internet
access products. However, all available capital will be applied to the
development of our wireless Internet access business.
We will also seek acquisitions of businesses that complement our core
business. We have not agreed to any acquisition of this nature, and we
cannot assure you that we will ever acquire another business.
Quick-Cell Wireless Internet Strategy. We are attempting to implement a
plan designed to establish our Quick-Cell wireless Internet access products
in 110 U.S. cities by the end of 2000. We have reached an tentative
agreement with US West that would provide us with an extremely
cost-effective connection to the Internet in our chosen markets, into which
our Quick-Cell wireless Internet access systems would connect. We lack the
capital needed to implement completely our growth plan and we cannot assure
you that we will be successful in obtaining any capital.
As a result of lack of capital and in connection with the hiring of a new
vice president of technology, in May 2000, we implemented a strategy
whereby we are marketing our turn-key Quick-Cell wireless Internet access
systems to the thousands of Competitive Local Exchange Carriers (CLECs),
independent and other telcos, DSL providers and Internet service providers.
This strategy is designed to serve two purposes: (1) to get our Quick-Cell
wireless Internet access products in the hands of consumers, so as to begin
to establish product name recognition; and (2) to provide needed funding
with which we would be able to establish and operate our own Quick-Cell
systems. To date, we have sold three Quick-Cell systems, and have
indications of interests from many other telecommunications firms. We
cannot assure you that these Quick-Cell system sales will be at a level
that will allow us to establish our own Quick-Cell systems.
USURF America National Reseller Program. During the last quarter of 1999,
we announced and launched our "USURF America" high-quality dial-up Internet
access service. The marketing of this dial-up access service was to be
accomplished by resellers, through our national reseller program. This
program was never implemented on a full-scale basis, due to our lack of
capital. During the second quarter of 2000, we determined to abandon this
program, in favor of our wireless Internet access business.
Community Television Stations. In furtherance of our plan to focus on the
exploitation of our Quick-Cell wireless Internet access products, we
assigned all of our community (low power) television properties to New Wave
Media Corp., in exchange for 1,500,000 shares of New Wave common stock.
Our board of directors declared a dividend with respect to all 1,500,000
New Wave shares.
Cash Flows from Operating Activities. During the six months ended June
30, 2000, our operations used $540,572 in cash compared to cash used of
$291,206 during the same period of 1999. In both periods, the use of cash
in operations was a direct result of the lack of revenues compared to our
operating expenses, particularly our Internet access costs and salary and
commissions. We believe our recent personnel reductions will be sufficient
to bring our operations close to a break-even level, for cash flow
purposes. The effects of these actions will not be realized until the
third quarter of 2000. However, we cannot predict the actual results of
these personnel reductions.
For the six months ended June 30, 2000, our operations would have used
approximately $300,000 more in cash, had we not determined to defer payment
of nearly all of our accounts payable for a short, as-yet undetermined,
period of time, due our lack of working capital. To date, we have not
suffered, and do not expect to suffer, any adverse consequences from our
vendors.
Cash Flows from Investing Activities. During the six months ended June
30, 2000, our investing activities used cash of $179,050 compared to
$193,920 in the same period of 1999. During the 2000 period, in our
investing activities, purchases of equipment used cash; however, in the
1999 period, our equipment purchases were offset, to some degree, by cash
acquired in acquisitions of $180,817. Because we lack working capital, we
cannot predict our cash flows from investing activities for the remainder
of 2000.
Cash Flows from Financing Activities. For the 2000 period, our financing
activities provided $686,897 in cash. Of this amount, $463,900 is
attributable to loans from our president and $325,000 is attributable to
private sales of securities. For the 1999 period, our financing activities
provided $657,930 in cash, all of which is attributable to private sales of
our securities. We continue to seek capital and cannot, therefore, predict
future levels of cash flows from financing activities.
In March and April 2000, we received $325,000 in private sales of our
securities. 65,000 units of securities consisting of one share of our
common stock and one common stock purchase warrant [exercisable at $7.50
per share] were sold for $5.00 per unit.
Non-Cash Investing and Financing Activities. During the six months ended
June 30, 2000, we issued a total of 320,000 shares of common stock under
consulting agreements; these shares have been valued at $1,105,000, in the
aggregate. Also during the first half of 2000, we issued a total of
131,063 shares of common stock in acquisitions, which shares were valued at
$524,252, in the aggregate.
Subsequent to June 30, 2000, in July 2000, we we entered into an
investment banking agreement with Gruntal & Co., L.L.C., under which we
issued 250,000 shares of our common stock.
During the 1999 period, non-cash investing and financing activities
included the issuance of 2,350,000 shares of our common stock issued in the
acquisition of CyberHighway.
Management's Plans Relating to Future Liquidity
We continue to seek additional capital with which to operate and implement
our aggressive growth plan. In March and April 2000, we obtained a total
of $325,000 in a private offering of our securities. Even with this
capital, we remain substantially illiquid. We require approximately
$1,000,000 to become relatively liquid and to pursue aggressively the
installation and marketing of our Quick-Cell wireless Internet access systems.
We expect that, during the last quarter of 2000, warrants representing an
additional approximately $1,800,000 will be exercised. We cannot assure
you that any of these warrants will ever be exercised.
Our current operations will not be sufficient, on their own, to provide
operating capital and to provide capital with which to pursue our growth
strategy. We continue to seek capital with which to implement our growth
strategy. We cannot assure you that we will ever secure capital necessary
for our growth strategy to be implemented.
Capital Expenditures
During the first half of 2000, we made $186,754 in equipment purchases,
approximately 25% for wireless Internet equipment and approximately 75% for
needed equipment in our network operations center. Currently, we lack
capital to make any significant capital expenditures. However, during the
remainder of 2000, we expect to apply substantially all of our available
capital, if any, to (1) the purchase of Quick-Cell wireless Internet
equipment and the construction of local Quick-Cell wireless Internet access
systems and/or (2) the acquisition of one or more businesses that
compliment our core business. We continue our aggressive pursuit of
capital with which to implement our growth strategy. In this regard, we
have retained the investment baking services of Gruntal & Co., L.L.C. We
anticipate that Gruntal will be successful in securing needed funding with
which we would be able to establish and operate Quick-Cell systems on a
wide-scale basis. However, we cannot offer any assurance that we will be
able to obtain needed capital through the efforts of Gruntal or at all.
We have filed a registration statement on Form S-1, with respect to
2,000,000 shares of our common stock. These shares are designated for use
in as-yet unidentified acquisitions. We cannot predict if and when any of
these shares would be used in any acquisition. In completing any such
acquisition, we expect that little or no cash would be used by us.
Year 2000 Issues
We experienced no problems related to Year 2000 issues. During our
efforts to become completely Year 2000 compliant, we incurred expenses of
approximately $75,000.
CERTAIN STATEMENTS CONTAINED IN THIS "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" ARE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995 AND ARE, THUS, PROSPECTIVE. THESE FORWARD-LOOKING STATEMENTS
ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM FUTURE RESULTS EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE MOST SIGNIFICANT OF SUCH
RISKS, UNCERTAINTIES AND OTHER FACTORS IS OUR ABILITY TO OBTAIN CAPITAL IN
AMOUNTS NECESSARY FOR US TO ACCOMPLISH OUR PLAN FOR THE EXPLOITATION OF OUR
QUICK-CELL WIRELESS INTERNET ACCESS PRODUCTS, AS WELL AS CONSUMER
ACCEPTANCE OF THESE PRODUCTS.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
In September 1999, we tendered the acquired shares of capital stock of Net
1, Inc. for rescission. We made this tender of rescission, due to numerous
and material misrepresentations made by Net 1 and its principals. We had
intended to commence arbitration to pursue its rescission claim. However,
one of the former owners of Net 1, Knud Nielsen, III, has instituted
arbitration, through the American Arbitration Association, and is seeking
to enforce certain registration rights associated with a portion of the
shares of our common stock received by him in the acquisition transaction.
Now, we have presented the rescission claim as a counterclaim in the
pending arbitration proceeding. The counterclaim will be made against Net
1 and its former owners, including Mr. Nielsen, wherein we seek to rescind
the acquisition transaction that occurred in August 1999, and recover the
250,000 shares of common stock issued in connection with the acquisition.
We have alleged fraud and the failure to make statements necessary to make
statements made not misleading. Although we believe we will be successful
in this arbitration proceeding, no prediction in this regard can be made.
Some time during the next two months, we expect to enter into arbitration
proceedings with Commonwealth Associates. The dispute revolves around
Commonwealth's claim that we owe it approximately 127,000 shares of our
common stock. We do not believe Commonwealth is entitled to any shares and
will vigorously defend our position in arbitration. We cannot predict the
outcome of this arbitration proceeding.
Item 2. Changes in Securities.
During the three months ended June 30, 2000, we issued securities as follows:
1.(a) Securities Sold. In April 2000, we issued 65,000 shares of
Common Stock and 65,000 warrants to purchase shares of Common Stock.
(b) Underwriters and Other Purchasers. Such shares were issued to
nine separate investors.
(c) Consideration. Such shares were sold for cash in the amount of
$5.00 per share.
(d) Exemption from Registration Claimed. These securities are
exempt from registration under the Securities Act of 1933, as amended,
pursuant to the provision of Section 4(2) thereof, as a transaction not
involving a public offering.
(e) Terms of Conversion or Exercise. The warrants may be exercised
for a period of two years from their date of issue at an exercise price of
$7.50 per share. Such warrants are redeemable by the Company at any time
that the price for the Company's Common Stock has closed at a price in
excess of $10.00 for five consecutive trading days.
2.(a) Securities Sold. In April 2000, we issued 30,000 shares of
Common Stock.
(b) Underwriters and Other Purchasers. Such shares were issued to
Peter Rochow.
(c) Consideration. Such shares were issued under a consulting
agreement, and were valued at $3.00 per share.
(d) Exemption from Registration Claimed. These securities are
exempt from registration under the Securities Act of 1933, as amended,
pursuant to the provision of Section 4(2) thereof, as a transaction not
involving a public offering.
(e) Terms of Conversion or Exercise. Not applicable.
3.(a) Securities Sold. In April 2000, we issued 30,000 shares of
Common Stock.
(b) Underwriters and Other Purchasers. Such shares were issued to
N/F Partners.
(c) Consideration. Such shares were issued under a consulting
agreement, and were valued at $3.75 per share.
(d) Exemption from Registration Claimed. These securities are
exempt from registration under the Securities Act of 1933, as amended,
pursuant to the provision of Section 4(2) thereof, as a transaction not
involving a public offering.
(e) Terms of Conversion or Exercise. Not applicable.
4.(a) Securities Sold. In April 2000, we issued 100,000 shares of
Common Stock.
(b) Underwriters and Other Purchasers. Such shares were issued to
Fair Market, Inc.
(c) Consideration. Such shares were issued under a consulting
agreement, and were valued at $4.00 per share pursuant to the terms of such
agreement.
(d) Exemption from Registration Claimed. These securities are
exempt from registration under the Securities Act of 1933, as amended,
pursuant to the provision of Section 4(2) thereof, as a transaction not
involving a public offering.
(e) Terms of Conversion or Exercise. Not applicable.
5.(a) Securities Sold. In May 2000, we issued 10,000 shares of Common
Stock.
(b) Underwriters and Other Purchasers. Such shares were issued to
Marcus, Merrick & Montgomery, Attorneys at Law.
(c) Consideration. Such shares were issued in payment of legal
services rendered and were valued at $2.00 per share.
(d) Exemption from Registration Claimed. These securities are
exempt from registration under the Securities Act of 1933, as amended,
pursuant to the provision of Section 4(2) thereof, as a transaction not
involving a public offering.
(e) Terms of Conversion or Exercise. Not applicable.
Subsequent to June 30, 2000, the Company has issued unregistered
securities, as follows:
1.(a) Securities Sold. In July 2000, we issued 250,000 shares of
Common Stock.
(b) Underwriters and Other Purchasers. Such shares were issued to
Gruntal & Co., L.L.C.
(c) Consideration. Such shares were issued under an investment
banking letter agreement, and were valued by our board of directors at
$1.50 per share.
(d) Exemption from Registration Claimed. These securities are
exempt from registration under the Securities Act of 1933, as amended,
pursuant to the provision of Section 4(2) thereof, as a transaction not
involving a public offering.
(e) Terms of Conversion or Exercise. Not applicable.
2.(a) Securities Sold. In August 2000, we issued 250,000 shares of
Common Stock.
(b) Underwriters and Other Purchasers. Such shares were issued to
Robert A. Hart IV.
(c) Consideration. Such shares were issued under an employment
agreement, and were valued at $2.00 per share.
(d) Exemption from Registration Claimed. These securities are
exempt from registration under the Securities Act of 1933, as amended,
pursuant to the provision of Section 4(2) thereof, as a transaction not
involving a public offering.
(e) Terms of Conversion or Exercise. Not applicable.
3.(a) Securities Sold. In August 2000, we issued 5,880 shares of
Common Stock.
(b) Underwriters and Other Purchasers. Such shares were issued to
Ryan D. Thibodeaux.
(c) Consideration. Such shares were issued under an employment
agreement, and were valued at prices ranging from $2.06 per share to $9.44
per share.
(d) Exemption from Registration Claimed. These securities are
exempt from registration under the Securities Act of 1933, as amended,
pursuant to the provision of Section 4(2) thereof, as a transaction not
involving a public offering.
(e) Terms of Conversion or Exercise. Not applicable.
4.(a) Securities Sold. In August 2000, we issued 5,880 shares of
Common Stock.
(b) Underwriters and Other Purchasers. Such shares were issued to
Ryan G. Campanile.
(c) Consideration. Such shares were issued under an employment
agreement, and were valued at prices ranging from $2.06 per share to $9.44
per share.
(d) Exemption from Registration Claimed. These securities are
exempt from registration under the Securities Act of 1933, as amended,
pursuant to the provision of Section 4(2) thereof, as a transaction not
involving a public offering.
(e) Terms of Conversion or Exercise. Not applicable.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote
of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on From 8-K.
During the three months ended June 30, 2000, on
or about April 4, 2000, we filed a Current
Report on Form 8-K in which we reported the
resignation of one of our directors.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 21, 2000.
USURF AMERICA, INC.
By: /s/ Christopher L. Wiebelt
Christopher L. Wiebelt
Chief Financial Officer
