SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
February 8, 1999
Date of Report
(Date of Earliest Event Reported)
AMERICOM USA, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-23769 52-2068322
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1303 Grand Avenue
Arroyo Grande, California 93420
(Address of principal executive offices)
805/542-6700
Registrant's telephone number
CHATSWORTH ACQUISITION CORPORATION
1504 R Street, N.W.
Washington, D.C. 20009
Former name and former address
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 8, 1999, AmeriCom USA, Inc. (the
"Registrant" or the "Company") effected the agreement and plan of
reorganization by and among the Company, KSI Acquisition, Inc. (now
Kiosk Acquisition, Inc.), Kiosk Software, Inc., a California
company, and Lori Fisher, the principal shareholder of Kiosk
Software, Inc.
Pursuant to the terms of the merger, Kiosk Software,
Inc. was merged with and into Kiosk Acquisition Corporation and
shares of the Company's common stock were issued to the shareholders
of Kiosk Software, Inc. based on the following formula: (i) an
exchange ratio computed by dividing 1,000,000 by the quantity of
outstanding Kiosk Software, Inc. outstanding shares just prior to
the merger, and (ii) the number of shares to be issued to Kiosk
Software, Inc. shareholders to be equal to the product of the number
of shares owned by such shareholder times the exchange ratio. The
number of Kiosk Software, Inc. shares outstanding prior to the
merger was 1,000,000 and the exchange ratio was one-for-one. The
Company has issued 1,000,000 shares of common stock to date pursuant
to the merger.
For a period of 180 days following the closing of the
merger, the exchange ratio is subject to adjustment if during that
180 day period the Company sells any shares of its common stock in
its Regulation S offering for a sales price of less than $2.00 per
share. The Company's Regulation S offering closed January 29, 1999
and it does not anticipate that the adjustment provisions of the
agreement will be activated.
The merger agreement also provided that outstanding
options to purchase shares of common stock of Kiosk Software, Inc.
would be exchanged for options to purchase shares of the Company,
with the price and number of option shares subject to the exchange
ratio. Pursuant to the Company's Qualified Stock Option Plan, an
option for the purchase of 248,834 shares of the Company's common
stock at a purchase price of $.40 per share was granted and options
for the purchase of an aggregate of 231,266 shares of the Company's
common stock at a purchase price of $1.30 were granted.
The Company has advanced Kiosk Software, Inc. an
aggregate amount of $629,950 to pay its outstanding liabilities.
The merger was completed on February 8, 1999.
Lori Fisher, the principal shareholder of Kiosk
Software, Inc., was appointed a director, president and chief
operating officer of the Company's subsidiary, Kiosk Acquisition,
Inc. at an annual compensation of $100,000.
Kiosk Software, Inc. was founded in January, 1994, in
California as Supermarket Kiosks, Inc., to market retail kiosk
called The RecipeCenter. The RecipeCenter is a custom designed
kiosk cabinet containing a computer, thermal printer, touchscreen
monitor, and proprietary shopper-friendly software program. The
RecipeCenter displays and prints recipes, dispenses coupons, gives
general store information, wine recommendations, and other
information.
In April, 1997, Supermarket Kiosks, Inc. changed its
name to Kiosk Software, Inc. to expand the distribution of its kiosk
products across a broader range of industries. Kiosk Software, Inc.
provides complete kiosk development services from design through
delivery. It specializes in multi-media software development in
addition to full kiosk integration and support including graphics
for effective user interface, custom cabinet design, multimedia
software development and development of custom applications for
education, retail and tourist environments. Kiosk Software, Inc.
uses its proprietary software to manage and update remote systems
from a central location. Kiosk Software, Inc. has thirteen employees
and revenues for 1998 of $457,307 with a net loss of $35,680.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
Not applicable.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
Not applicable.
ITEM 7. FINANCIAL STATEMENTS
The audited financial statements for Kiosk Software, Inc. for
the years ending December 31, 1997 and December 31, 1998 are filed herewith.
ITEM 8. CHANGE IN FISCAL YEAR
On April 14, 1999, the Board of Directors of the Company adopted and
approved the change of the Company's fiscal year to July 1 through June 30
of the following year. The Company intends to file a transitional report
on Form 10-KSB for the period January 1, 1999 to June 30, 1999.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S
Not applicable.
EXHIBITS
10.1* Agreement and Plan of Reorganization by and among AmeriCom
USA, Inc., KSI Acquisition, Inc., Kiosk Software, Inc., and
Lori Fisher dated January 24, 1999
10.2* First Amendment to Agreement and Plan of Reorganization
23.1 Consent of Accountants
_____________
Previously filed.
KIOSK SOFTWARE, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
KIOSK SOFTWARE, INC.
CONTENTS
PAGE 1 - INDEPENDENT AUDITORS' REPORT
PAGE 2 - BALANCE SHEETS AS OF DECEMBER 31, 1998
AND 1997
PAGE 3 - STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
PAGE 4 - STATEMENT OF CHANGES IN STOCKHOLDERS'
DEFICIENCY FOR THE YEARS ENDED DECEMBER 31,
1998 AND 1997
PAGE 5 - STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
PAGES 6 - 17 - NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER
31, 1998 AND 1997
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
AmeriCom USA, Inc.
We have audited the accompanying balance sheets of Kiosk Software,
Inc. as of December 31, 1998 and 1997 and the related statements of
operations, changes in stockholders' deficiency and cash flows for
the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Kiosk
Software, Inc. as of December 31, 1998 and 1997 and the results of
their operations and their cash flows for the two years then ended
in conformity with generally accepted accounting principles.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
April 23, 1999
KIOSK SOFTWARE, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
CURRENT ASSETS
Cash $ 5,195 $ 784
Accounts receivable - net 27,008 24,367
Total Current Assets 32,203 25,151
PROPERTY AND EQUIPMENT
Furniture and equipment 163,007 157,905
Less: Accumulated depreciation (147,923) (112,759)
Total Property and Equipment 15,084 45,146
OTHER ASSETS
Computer software costs - net 174,868 -
Startup costs - net 1,156 8,391
Organization costs - net 32 232
Total Other Assets 176,056 8,623
TOTAL ASSETS $ 223,343 $ 78,920
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Loans payable
under bank line of credit $ 29,400 $ 45,013
Current maturity of long-term debt 20,387 -
Obligation under capital lease-current 10,057 12,481
Accounts payable and accrued expenses 76,681 29,337
Loans payable - nonrelated parties 39,358 29,267
Loans payable - related parties 1,693 1,604
Royalties received in advance - 150,000
Total Current Liabilities 177,576 267,702
LONG-TERM LIABILITIES
Long-term debt - bank loan 118,664 -
Loans payable - related parties 301,600 139,978
Obligation under capital lease - 10,057
Total Long-term Liabilities 420,264 150,035
Total Liabilities 597,840 417,737
STOCKHOLDERS' DEFICIENCY
Common stock, no par value;
1,000,000 shares authorized;
160,750 shares issued and
outstanding 441,159 441,159
Accumulated deficit (815,656) (779,976)
Total Stockholders' Deficiency (374,497) (338,817)
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 223,343 $ 78,920
See accompanying notes to financial statements.
2
KIOSK SOFTWARE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
NET SALES $ 457,307 $ 235,230
COST OF SALES 36,432 1,661
GROSS PROFIT 420,875 233,569
OPERATING EXPENSES
Salaries 187,174 232,516
Advertising/Promotion 2,719 458
Amortization expense 17,721 7,435
Depreciation expense 27,465 30,660
Provision for doubtful accounts 17,150 -
Auto expenses 2,583 2,542
Commissions 90 -
Contract services 62,304 102,992
Bank charges and fees 11,520 2,256
Insurance 5,560 5,169
Internet provider expense 1,037 1,079
Legal and professional services 6,927 22,663
Miscellaneous hardware/software 5,145 14,672
Miscellaneous expense 1,690 3,323
Postage and shipping 3,039 1,587
Equipment leases 3,986 749
Office rent 19,200 1,800
Reference books 1,537 377
Repair equipment 290 549
Supplies 1,980 3,329
Taxes and licenses 2,281 471
Telephone expense 13,884 8,104
Travel, meals, and entertainment 12,273 5,712
Utilities 3,376 -
Total Operating Expenses 410,931 448,443
INCOME (LOSS) FROM OPERATIONS 9,944 (214,874)
OTHER (EXPENSE)
Interest expense (37,925) (26,946)
Loss on impairment
of long-lived assets (7,699) -
Total Other Expense (45,624) (26,946)
NET LOSS $ (35,680) $(241,820)
NET LOSS PER COMMON SHARE $ (0.2220) $ (1.5278)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 160,750 158,284
See accompanying notes to financial statements.
3
KIOSK SOFTWARE, INC.
STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Total
Common Accumulated Stockholders'
Stock Deficit Deficiency
Balance,
December 31, 1996 $ 376,159 $ (538,156) $ (161,997)
Net loss 1997 - (241,820) (241,820)
Common stock issued
for cash 30,011 - 30,011
Common stock issued in
exchange for debt to
related party 34,989 - 34,989
Balance,
December 31, 1997 441,159 (779,976) (338,817)
Net loss 1998 - (35,680) (35,680)
BALANCE,
DECEMBER 31, 1998 $ 441,159 $ (815,656) $ (374,497)
See accompanying notes to financial statements.
4
KIOSK SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (35,680) $(241,820)
Adjustments to reconcile net loss
to net cash used in
operating activities:
Depreciation and amortization 45,186 38,095
Loss on impairment of long-lived assets 7,699 -
Provision for doubtful accounts 17,150 -
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable (19,791) (42,639)
Increase (decrease) in:
Accounts payable and accrued expenses 47,344 (21,299)
Royalties received in advance (150,000) 150,000
Net cash used in operating activities (88,092) (117,663)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,102) (7,978)
Capitalization of computer software costs (185,154) -
Net cash used in investing
activities (190,256) (7,978)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt-bank loan 139,051 -
Increase in loans payable-related parties 161,711 93,854
Increase (decrease) in loans payable -
nonrelated parties 10,091 (39,198)
Increase (decrease) in loans payable-bank (15,613) 45,013
(Decrease) in capital lease obligation (12,481) (13,134)
Proceeds from sale of common stock - 30,011
Net cash provided by financing
activities 282,759 116,546
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 4,411 (9,095)
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR 784 9,879
CASH AND CASH EQUIVALENTS -
END OF YEAR $ 5,195 $ 784
Cash paid during the year
for:
Interest $ 16,009 $ 5,753
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
In 1997 5,363 shares of common stock were issued to the principal
shareholder of the Company upon the conversion of debt of $34,989.
See accompanying notes to financial statements.
5
KIOSK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
ORGANIZATION
(A) Description of Business
Kiosk Software, Inc. (the Company) is a California corporation
specializing in complete kiosk development services including custom
cabinet design and multimedia software development for a wide variety
of applications using its proprietary Kiosk Operating Suite.
On February 8, 1999 one hundred percent of the Company's common stock
was acquired by a subsidiary of AmeriCom USA, Inc. ("AmeriCom") an
unrelated publicly held company. (See Note 12)
(B) Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reported
period. Actual results could differ from those estimates.
(C) Cash and Cash Equivalents
For purpose of the cash flow statements, the Company considers all
highly liquid investments with original maturities of three months or
less at time of purchase to be cash equivalents.
(D) Property and Equipment
Property and equipment are stated at cost, less accumulated
depreciation. Expenditures from maintenance and repairs are charged to
expense as incurred. Depreciation is provided using the straight-line
method over the estimated useful life of the assets from five to seven
years.
(E) Organization and Start-up Costs
Organization and start-up costs, which are included in other assets,
are being amortized over 60 months on a straight line basis.
Amortization expense for each of the years ended December 31, 1998 and
1997 was $7,435.
(F) Computer Software Costs
The Company accounts for the research and development costs and
production costs of computer software in accordance with Statement of
Financial Accounting Standards No. 86 "Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed"
("Statement No.86").
6
KIOSK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
ORGANIZATION - (CONT'D)
Under Statement No. 86 all costs incurred to establish the
technological feasibility of a computer software product to be sold,
leased, or otherwise marketed are considered research and development
expenses that are expensed as incurred. Costs of producing product
masters which include coding and testing performed subsequent to
establishing technological feasibility but before the product is
available for general release to customers are capitalized and amortized.
(G) Income taxes
The Company accounts for income taxes under the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109.
"Accounting for Income Taxes" ("Statement No.109"). Under Statement No.
109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those assets or liabilities are expected to be recovered
or settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. The available deferred tax
asset arising from the Company's net operating loss carryforwards has
been offset by a deferred tax valuation allowance on the entire amount.
(H) Revenue Recognition
The Company sells its Kiosk Operating Suite as a stand alone product or
under development contracts with customers whereby the Company develops
customized software applications or turnkey systems which include
software, hardware, and custom cabinets. The contracts generally
contain multiple elements with specified milestones and delivery dates
and stipulated fees for each element. The time to completion and
delivery of the development portion of the contracts generally does not
exceed three to six months.
The Company recognizes revenue under its development contracts in
accordance with the Accounting Standards Executive Committee Statement
of Position 97-2 "Software Revenue Recognition" ("SOP 97-2"). Under SOP
97-2 the Company recognizes revenue from the sale of stand alone
products upon delivery and recognizes revenue for each element under
development contracts at the time of delivery of that functioning element.
7
KIOSK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
ORGANIZATION - (CONT'D)
(I) Cost of Sales
The Company purchases hardware for specific customer requirements under
development contracts for turnkey systems. Hardware purchases are
recorded as cost of sales. The Company did not maintain inventory at
December 31, 1998 and 1997. During 1998 the Company incurred cost of
sales primarily under two customer contracts for turnkey systems.
During 1997 the Company did not have any turnkey systems development
contracts and cost of sales represented sales of miscellaneous spare
parts.
(I) Earnings Per Share Data
Net loss per common share for the years ended December 31, 1998 and
1997 is computed by dividing net loss by the weighted average common
shares outstanding during the year as defined by Statement of Financial
Accounting Standards, No. 128, "Earnings Per Share". The assumed
exercise of common share equivalents was not utilized since the effect
was anti-dilutive.
(J) Stock Options
The Company accounts for Stock Options under Accounting Principles
Board Opinion No. 25 "(APB Opinion No. 25)" and related interpretations.
NOTE 2 - ACCOUNTS RECEIVABLE
During 1998 93% of net sales was derived from three customers and
during 1997 90% of net sales was derived from one customer.
At December 31, 1998, 85% of accounts receivable was due from two
customers. At December 31, 1997, 96% of accounts receivable was due
from one customer.
Accounts receivable were as follows at December 31:
1998 1997
Accounts receivable $ 44,158 $ 24,367
Allowance for doubtful accounts (17,150) -
$ 27,008 $ 24,367
8
KIOSK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment at December 31 consisted of the following:
1998 1997
Office equipment $ 10,442 $ 10,442
Office furniture 3,414 3,414
Computer equipment 34,212 29,110
Computer software 5,377 5,377
Demonstration units 16,497 16,497
Kiosk equipment 32,040 32,040
Kiosk equipment under
capital lease 61,025 61,025
Less accumulated depreciation (147,923) (112,759)
$ 15,084 $ 45,146
Depreciation expense for the years ended December 31, 1998 and 1997 was
$27,465 and $30,660, respectively.
The Company applies Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". In evaluating the potential impairment of
Property & Equipment as of December 31, 1998 the Company determined
that their Kiosk equipment and Kiosk equipment under capital lease had
no current use in its business plan and could not be sold and therefore
had a net realizable value of zero. Accordingly the Company has written
down the remaining net carrying value of these assets of $7,699 which
has been included in Other expenses.
NOTE 4 - COMPUTER SOFTWARE COSTS
The Company accounts for Computer software costs in accordance with
Statement No. 86. Computer software costs are reported at the lower of
unamortized costs or net realizable value. Commencing upon initial
product release, these costs are amortized based on the straight-line
method over the estimated life, generally three years. Although
technology is subject to change, the Company believes that based on its
projections the computer software costs are stated at net realizable
value and fully recoverable. During 1998 the Company recorded
amortization of Computer software costs of $10,286.
Computer software costs at December 31 1998 were as follows:
Computer software costs $ 185,154
Less accumulated amortization (10,286)
$ 174,868
NOTE 5 - LOANS PAYABLE - BANK
The Company currently maintains a line of credit with a bank for
$30,000. Outstanding balances under the line of credit accrue interest
at a rate of 13.75% per annum with principal and accrued
9
KIOSK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 5 - LOANS PAYABLE - BANK - (CONT'D)
interest due on demand. Indebtedness under this line of credit is
guaranteed by the primary shareholder of the Company. The outstanding
balance as of December 31, 1998 totaled $29,400.
As of December 31, 1997 the Company maintained a line of credit with
another bank for $50,000. Outstanding balances under the line of credit
accrued interest at a rate of 15% per annum with principal and accrued
interest due on demand. Outstanding amounts under the line of credit
were personally guaranteed by the principal shareholder of the Company.
In January 1998 the credit limit under the line of credit was increased
to $100,000. Shortly thereafter this line of credit was canceled and
replaced by the long-term debt (See Note 6). The outstanding balance as
of December 31, 1997 totaled $45,013.
NOTE 6 - LONG-TERM DEBT
In December 1997 the Company entered into a loan agreement with a bank
with an original principal of $150,000, at an initial interest rate of
10.75% per annum, and a continuing interest rate of prime plus 2.75%
beginning in the second month after the initial disbursement. The loan
was funded in early 1998. Monthly principal and interest payments are
$2,548.69 and the full unpaid balance of principal and interest is due
seven years from the date of the loan. The loan is secured by a
guarantee of the primary shareholder as well as a security interest in
the Company's assets. The outstanding balance as of December 31, 1998
is $139,051.
1998
Long-term debt $139,051
Less: Current maturities 20,387
LONG TERM DEBT - LESS CURRENT
MATURITIES $118,664
The aggregate amount of Long-term debt maturing in each of the five
years subsequent to December 31, 1998 and thereafter is as follows:
For the year ending December 31, 1999 $ 20,387
2000 18,443
2001 20,577
2002 22,958
2003 25,614
Thereafter 31,072
$139,051
In February 1999 the remaining balance of the long term debt was paid
in full with funds advanced from AmeriCom (See Note 12).
NOTE 7 - LOANS PAYABLE-NONRELATED PARTIES
The following schedule reflects loans payable to nonrelated parties at
December 31:
10
KIOSK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 7 - LOANS PAYABLE-NONRELATED PARTIES - (CONT'D)
1998 1997
Note payable, interest at 12%
per annum, due on demand,
unsecured, $ 14,197 $ 15,262
Loan payable, interest at 8%
per annum, due on demand,
unsecured 12,975 14,005
Loan payable, interest at 8%
per annum, due on demand,
unsecured 5,880 -
Loan payable, interest at 8%
per annum, due on demand,
unsecured 6,306 -
$ 39,358 $ 29,267
In February 1999 the remaining balances of loans payable nonrelated
parties was paid in full with funds advanced from AmeriCom (See Note 12).
NOTE 8 - LOANS PAYABLE RELATED PARTIES
The following schedule reflects loans payable to related parties at
December 31:
1998 1997
Note payable to related party
interest at 10% per annum,
due on December 31, 2001,
unsecured, $ 291,521 $ 139,978
Note payable to related party
interest at 10% per annum,
due on demand, unsecured 10,079 -
Note payable to related party
interest at 6% per annum,
due December 31, 1997,
unsecured 341 323
Note payable to related party
interest at 6% per annum,
due December 31, 1997,
unsecured 924 875
Note payable to related party
interest at 6% per annum,
due December 31, 1997,
unsecured 214 203
11
KIOSK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 8 - LOANS PAYABLE RELATED PARTIES - (CONT'D)
Note payable to related party
interest at 6% per annum,
due December 31, 1997,
unsecured 214 203
303,293 141,582
Less current maturities 1,693 1,604
LOAN PAYABLE - RELATED PARTIES
LESS CURRENT MATURITIES $ 301,600 $ 139,978
In February 1999 the remaining balances of loans payable - related
parties were paid in full with funds advanced from AmeriCom (See Note 12).
NOTE 9 - COMMITMENTS AND CONTINGENCIES
(A) Year 2000 Issues
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (year 2000) approaches.
The "year 2000" problem is pervasive and complex as virtually every
computer operation will be affected in some way by the rollover of the
two-digit year to 00. The issue is whether computer systems will
properly recognize date-sensitive information when the year changes to
2000. Systems that do not properly recognize such information could
generate erroneous data or cause a system to fail.
The Company uses a standard off the shelf accounting software package
for all of its accounting requirements. Management has contacted the
software vendor and confirmed that the accounting software is Year 2000
compliant. Management has contacted its critical vendors, suppliers,
data-exchange partners, and clients to determine their own Year 2000
efforts and has not identified any Year 2000 compliance issues with
those parties. The Company also warrants that their software developed
for sale is Year 2000 compliant when used with recommended Year 2000
compliant hardware and third party operating systems. Costs of
investigating Year 2000 compliance issues have not been material to
date. As a result, management believes that the effect of investigating
and resolving Year 2000 compliance issues will not have a material
effect on the Company's future financial position or results of
operations.
(B) Capital Lease Agreement
The Company leases "Kiosk equipment" (See Note 3) under a lease
agreement dated May 26, 1994.
Future minimum lease payments under the capital lease are as follows at
December 31, 1998:
12
KIOSK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 9 - COMMITMENTS AND CONTINGENCIES - (CONT'D)
1999 Minimum lease payments $ 10,699
Less: interest (642)
Obligation under capital
lease - current $ 10,057
(C) Operating Lease Agreement
The Company leases corporate office space under an operating lease
entered into in December 1997. The lease has a remaining term until
December 31, 1999 with a renewal option for an additional year at the
same rate.
Future minimum lease payments for the operating lease are as follows at
December 31, 1998:
1999 $ 19,200
The Company leased office space during 1997 from its primary
shareholder under a lease agreement dated January 24, 1994 with monthly
lease payments of $150.
(D) Agreements with Customers
The Company enters into agreements with certain systems integrator
customers whereby the customer is appointed as an Authorized Kiosk
Software, Inc. Solution Partner for an initial term of 18 months,
continuing on a month to month basis, thereafter. Such customers
integrate the Company's products into a total system for end users.
Under the agreements, the Company agrees to provide to the customers
its (i) hardware and software products (ii) End-User License Agreements
(iii) technical support and maintenance including software upgrades and
(iv) marketing support. The customer agrees to purchase from the
Company an Authorized Solution Partner Starter Kit and provide (i)
marketing to end-users (ii) application software development, (iii)
setup, configuration and operational support to end-users,(iv) software
licensing to end-users and (v) various other support services to
end-users. The Company retains all ownership rights, title and
interest in and to all current and future revisions of or modifications
to the licensed software.
(E) Employment Agreements
The Company enters into employment agreements with its technical
employees. The agreements contain the following primary clauses to
protect the Company: (i) avoidance of conflicts of interest, (ii)
Company ownership of employee developments, (iii) confidentiality of
Company sensitive or proprietary information, (iv) return of materials
upon termination of employment , and (v) restrictions on competition.
The agreements stipulate that employment may be terminated at any time
and do not stipulate the consideration to be paid to the employee.
13
KIOSK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 9 - COMMITMENTS AND CONTINGENCIES - (CONT'D)
(F) Consulting Agreement
The Company entered into a consulting agreement effective on January 6,
1997. The agreement is established for a term of one year from the
effective date and thereafter continues on a yearly basis until either
the consultant or the Company agrees to terminate. The services
provided by the consultant comprise application programming, hardware
maintenance, and development project management. As consideration for
the services provided, the Company pays consultant fees in the amount
of $4,500 per month.
(G) Royalty Agreement
On January 28, 1994 the Company entered into a Royalty Agreement (the
"Agreement") with its principal shareholder and president to pay
royalties on "The RecipeCenter" product at (a) Five percent (5%) of
"net sales proceeds", as defined in the Agreement, or (b) $12,000
for each twelve months the Agreement is in effect. The Agreement may
be terminated by either party upon (a) default by the other party for a
period exceeding 30 days or (b) the other party becoming insolvent or
filing for bankruptcy. There were no sales related to "The
RecipeCenter" product after 1996 and accordingly, no royalties expense
was incurred during 1997 and 1998. Total accrued royalties and related
accrued interest at December 31, 1998 and 1997 were $14,255 and
$12,959, respectively.
NOTE 10 - DEVELOPMENT AND MARKETING AGREEMENT
On February 12, 1997 (the "Effective date") the Company entered into a
Development and Marketing Agreement (the "Agreement") with a
telecommunications company (the "Customer"). Under the terms of the
Agreement, the Company was to be paid a non-refundable software license
fee of $100,000, refundable prepaid royalties of $150,000 during the
five month period after the effective date, and other consulting fees
as incurred. A royalties clause under the Agreement allowed the Company
to earn royalties based upon the Customer's sale of the product
developed under the Agreement to which the Company retained the
ownership rights. The Agreement also contained a termination clause
which stipulated a $150,000 termination fee be paid to the Company if
the Customer voluntarily or involuntarily terminates the Agreement. The
termination fee was to be paid first from the unexhausted prepaid
royalties, if any. The $100,000 license fee and $150,000 prepaid
royalty was received by the Company during 1997. The $150,000 prepaid
royalty is reflected as an advance royalties liability at December 31,
1997.
In May 1998, the Customer terminated the Agreement and the entire
advance royalties liability totaling $150,000 was recorded as income by
the Company in accordance with the Agreement.
14
KIOSK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 11 - STOCK OPTION PLAN
On January 17, 1998 the Board of Directors adopted a Stock Incentive
Plan (the "Plan"). The Plan was ratified by the shareholders on April
25, 1998. The plan was developed to provide a means whereby directors
and selected employees, officers, agents, consultants, and independent
contractors of the Company may be granted stock options to purchase
common stock of the Company.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its plan. Accordingly, no compensation cost has been
recognized for options issued under the plan as of December 31, 1998.
Had compensation cost for the Company's stock-based compensation plan
been determined on the fair value at the grant dates for awards under
that plan, consistent with Statement of Accounting Standards No 123,
"Accounting for Stock Based Compensation",(Statement No. 123) the
Company's net loss for the year ended December 31, 1998 would have been
increased to the pro-forma amounts indicated below.
Net loss As reported $ (35,680)
Pro forma $ (70,586)
Net loss per share As reported $ (0.2220)
Pro forma $ (0.4391)
The effect of applying Statement No. 123 is not likely to be
representative of the effects on reported net income (loss) for future
years due to, among other things, the effects of vesting.
The Stock Option Plan authorizes options up to an aggregate of 500,000
shares of the Company's Common Stock. The Company grants nonqualified
and incentive stock options. Nonqualified options are generally granted
to employees of the Company or any affiliate thereof at an exercise
price equal to the fair market value of the common stock at the time of
the grant although the final exercise price may also be established by
the plan administrator. With regard to incentive options, which may be
granted to any director, employee, officer, agent consultant or
independent contractor of the Company or any affiliate thereof the
exercise price established by the plan administrator may not be less
than 100% of the fair market value of the common stock at the time of
grant and may not be less than 110% of the fair market value of the
common stock at the time of grant if granted to employees owning more
than ten percent of the total voting power. The stock options vest over
a period of up to four years. The term is established by the plan
administrator and shall be ten years from the date of grant if not
established. In the case of incentive stock options the term may in no
event exceed 10 years, and may not exceed five years if granted to
employees owning more than ten percent of the total voting power.
15
KIOSK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 11 - STOCK OPTION PLAN - (CONT'D)
For financial statement disclosure purposes the fair market value of
each stock option grant is estimated on the date of grant using the
minimum value method in accordance with Statement No. 123 using the
following weighted-average assumptions: expected dividend yield 0%,
risk-free interest rate of 4.75%, and expected term of four years.
A summary of the Company's Stock Option Plan as of December 31, 1998
and changes during the year is presented below:
Weighted-
Number of Average
Shares Exercise Price
Stock Options
Balance at beginning of
period - -
Granted 76,649 $ 4.45
Exercised - -
Forfeited - -
Balance at end of period 76,649 $ 4.45
Options exercisable at end
of period - $ -
Weighted average fair value
of options granted during
the period $ 4.15
The following table summarizes information about options outstanding at
December 31, 1998:
Options Outstanding Options Exercisable
Weighted-
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at December Contractual Exercise At December Exercise
Price 31, 1998 Life Price 31, 1998 Price
$ 2.20 40,000 9.33 Years $ 2.20 - $ -
$ 6.50 15,389 9.98 Years $ 6.50 - $ -
$ 7.20 21,260 7.63 Years $ 7.20 - $ -
76,649 8.99 Years $ 4.45 - $ -
On February 8, 1999 one hundred percent of the Company's common stock
was acquired by a subsidiary of AmeriCom. As part of the transaction,
any unexercised options of the Company at the effective date of the
merger were also converted to options of AmeriCom at a similar ratio as
the common stock exchange. (See Note 12)
16
KIOSK SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 12 - SUBSEQUENT EVENTS
(A) Merger of the Company
On February 8, 1999 (the "closing date") the Company consummated an
Agreement and Plan of Reorganization (the "Agreement") entered into on
January 24, 1999 (the "effective date") by and among the Company, the
principal shareholder of the Company (the "Shareholder"), Kiosk
Acquisition, Inc. (the "Acquirer"), and AmeriComUSA, Inc. ("AmeriCom").
Kiosk Acquisition, Inc. is a wholly owned subsidiary of AmeriCom formed
specifically for the purpose of acquiring the Company. Under the
terms of the Agreement, the Acquirer acquired one hundred percent of
the issued and outstanding common stock of the Company in exchange for
common stock of AmeriCom based on an exchange ratio formula as follows:
(1) the exchange ratio was computed by dividing 1,000,000 by the
quantity of outstanding Kiosk common shares just prior to the merger;
(2) the number of shares issued to Kiosk shareholders was equal to the
product of the number of shares of Kiosk owned times the ratio computed
in (1) above. The 1,000,000 numerator of the exchange ratio shall be
adjusted, as defined in the agreement, based on any stock sales
taking place between the effective date of the Agreement and 180
days after the closing date of the Agreement, at a price below the
$2.00 offering price of the AmeriCom Regulation S Private Placement.
Any unexercised options of the Company at the effective date of the
merger (See Note 11) were also converted to options of AmeriCom at a
similar ratio as the common stock exchange discussed above. At
completion of the merger, all shares of the Company were retired, the
corporate existence of the Company was terminated, and Kiosk
Acquisition, Inc.'s name was changed to Kiosk Software, Inc.
Under the Agreement, the principal shareholder of the Company shall be
employed by the Acquirer subsequent to the merger, as its President and
Chief Operating Officer at an annual salary of $100,000 and as a
director of such corporation.
In contemplation of the merger, AmeriCom had advanced funds totaling
$50,000 to the Company. Such advances are evidenced by two promissory
notes in the amounts of $15,000 and $35,000 dated January 4, 1999 and
January 19, 1999, respectively. The notes bear interest at 8% per
annum with principal and accrued interest due on or before December 31,
1999. On the closing date of February 8, 1999, additional funds
totaling approximately $605,000 were advanced to the Company to pay off
substantially all of its liabilities.
AmeriCom develops and markets software technology products that provide
advertisers, web site owners, sponsors and affiliates with advanced
Internet technology, revenue sharing, commercial efficiency, commercial
effectiveness and operating savings. AmeriCom positions itself in the
marketplace as an Internet Advertising Service Provider.
17
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 hereunto duly authorized.
AMERICOM USA, INC.
By /s/ Robert M. Cezar
Chief Executive Officer
Director
Date: April 26, 1999
WEINBERG & COMPANY, PA
Town Executive Center
6100 Glades Road, Suite 314
Boca Raton, Florida 33434
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in the Form 8-K Current Report, as
amended, dated April 26, 1999, of Americom USA, Inc. our
our report as of December 31, 1998 and 1997, dated April
23, 19999 relating to the financial statements of Kiosk
Software, Inc. which appear in such Form 8-K.
WEINBERG & COMPANY PA
Certified Public Accountants
Boca Raton, Florida
April 23, 1999
