SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A#1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
December 4, 1998
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
(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
(a) Pursuant to an Agreement and Plan of Merger (the
"Agreement") between AmeriCom USA, Inc., a Delaware corporation, and
Chatsworth Acquisition Corporation (hereinafter referred to either
as the "Registrant" or the "Company"), AmeriCom USA, Inc.
("AmeriCom") was merged with and into the Registrant on December 4,
1998 (the "Merger"). The Agreement was adopted by the unanimous
consent of the Board of Directors of the Registrant and approved by
the unanimous consent of the shareholders of the Registrant on
December 3, 1998. The Agreement was adopted by the unanimous
consent of the Board of Directors of AmeriCom and by the written
consent of a majority of the shareholders of AmeriCom on December 4,
1998.
Prior to the Merger, the Registrant had 5,000,000 shares of
common stock outstanding. Pursuant to the Agreement, the Registrant
redeemed and retired 4,650,000 shares of its outstanding common
stock and issued 29,650,000 shares of its common stock, subject to
adjustments for fractional and dissenting shares, including
27,550,000 shares to the holders of all the outstanding common stock
of AmeriCom on a pro rata basis and additional 2,100,000 shares
resulting in a total of 30,000,000 shares of its common stock then
outstanding.
Immediately following the merger as of December 4, 1998, the
former shareholders of AmeriCom held 91.83%of the then 30,000,000
outstanding shares of the common stock of the Registrant. The sole
source of consideration from the shareholders of AmeriCom for the
acquisition of their respective interests in the Registrant was the
exchange of their outstanding common stock of AmeriCom. As of
February 8, 1999, there are currently 32,246,528 shares of common
stock outstanding.
On the effective date of the Merger, the officer and director
of Chatsworth Acquisition Corporation resigned and the officers and
directors of AmeriCom became the officers and directors of the
Registrant. See "Management" below.
Effective as of the date of the Merger, the Registrant changed
its name to "AmeriCom USA, Inc."
Chatsworth Acquisition Corporation was formed to provide a
method for a foreign or domestic private company to become a
reporting company whose securities would be qualified for trading in
the United States secondary market. Chatsworth Acquisition
Corporation had no operations, revenues or liabilities.
A copy of the Certificate of Merger has been filed as an
exhibit to the original Form 8-K and is incorporated in its entirety
herein. The foregoing description is modified by such reference.
(b) The following table contains information regarding the
shareholdings of the Registrant's current directors and executive
officers and those persons or entities who beneficially own more
than 5% of the Registrant's common stock:
Amount of Common Percent of
Stock Beneficially Common Stock
Name Owned (1) Beneficially Owned
Robert Cezar (2) 17,336,054 53.7%
Chief Executive Officer, Director
124 South Halcyon Road
Arroyo Grande, California 93420
David Loomis 2,260,684 7%
President, Chief Operating Officer,
Acting Chief Financial Officer
124 South Halcyon Road
Arroyo Grande, California 93420
Helen Cooper (3) 963,919 2.9%
Vice President of Administration, Secretary
124 South Halcyon Road
Arroyo Grande, California 93420
Gary Hogue 0 0%
Executive Vice President
1303 Grand Avenue, Suite 221
Arroyo Grande, California 93420
Craig Machado, Director 434,845 1.3%
21 La Gaviota
Pismo Beach, California 93449
All directors and 20,995,502 65.1%
executive officers as
a group (5 persons)
(1) Based upon 32,246,528 outstanding shares of common stock.
(2) Of which 6,835,946 is held in the Robert M. Cezar trust.
(3) Of which 665,690 is held in the Helen E. Cooper trust.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) The consideration exchanged pursuant to the Agreement was
negotiated between the Registrant and AmeriCom. Prior to the
Merger, no relationship existed between any officer or director of
the Registrant or any officer, director or shareholder of AmeriCom.
The former shareholders and sole director of the Registrant had no
direct or indirect interest in AmeriCom. In evaluating AmeriCom as
a candidate for such merger, the Registrant used criteria such as
value of the assets of the Registrant and value of the assets of
AmeriCom, the business operations of AmeriCom, the business
potential of AmeriCom, and the benefit to the Registrant of such
Merger. The Registrant determined that the consideration for the
exchange was reasonable.
(b) The Registrant intends to continue the business
operations formerly conducted by AmeriCom.
BUSINESS
The information provided in this current report on Form 8-K
refers to AmeriCom USA, Inc. and its affiliates prior and
subsequent to the Merger, and not to Chatsworth Acquisition
Corporation unless stated or required by the context.
Overview. The Company is engaged in providing systems for the
delivery of advertisements and merchandising on Internet Web sites
through its proprietary technology systems, AdCast(R) and
TrueManagement(R). The AdCast system is the primary product offered
by the Company. The AdCast system is an advertising delivery system
which delivers to host Web sites non-scrollable advertisement frames
("billboards") in which two types of advertisements can be placed:
(i) animated ads lasting from 15 to 90 seconds in length with audio,
video and pop-up frame capability as well as hot links to other Web
sites or (ii) logo icon ads (referred to as sponsorship program ads)
which continuously display an advertiser's logo on the bottom of the
host Web site page for the entire duration of a Web site visitor's
stay and provide a "clickable" link to the advertiser's own Web
site.
The AdCast advertisement space appears on a host Web site each
time a visitor to the Web site logs on. The ad appears as an
outlined frame in which an advertisement with audio and video
capabilities is run. Because the AdCast frame does not scroll,
complete viewing of the advertisement is likely despite the typical
paging and scrolling that occurs during a Web site visit.
The TrueManagement system provides management tools,
analytical reports, and operating control data pertaining to
advertising on the Internet for users of the AdCast system.
The Company contracts with Web site hosts to allow placement
of the AdCast billboards on the host Web sites and the Company sells
the billboard space to advertisers and sponsors. The host Web site
owners will receive a fee based on the number of visitors to the Web
site as well as participation in a program to earn advertising
credits to promote their Web site on other AdCast host Web sites.
The pricing structure for the AdCast advertising rates is
based on spot minute increments, similar to spot pricing on
television. Similar to television, billboard ads can vary in
length. Unlike television, however, AdCast billboard ads play only
when a viewer is watching e.g. a Web site visitor has logged on.
The billboard ad delivery is initiated by the act of visiting the
Web site.
The Company currently has 32 host Web sites to receive the
AdCast system and has obtained 10 advertisers for the billboard ads.
The Company has obtained one company sponsor in its sponsorship
program.
Background. The Company was incorporated in Delaware in 1994
to market, MyLine, a telecommunication system developed under
contract by RMC Diversified Associates International, Ltd. ("DAI"),
a California company under contract to Americom Ltd., a Turks and
Caicos corporation. DAI was owned by Robert Cezar, Chief Executive
Officer and a director of the Company. In April, 1996, Americom
Ltd. sold the technology to Enhanced Service Providers LLC ("ESP"),
a Massachusetts corporation. As part of the transaction the Company
was required to release its international marketing rights to the
MyLine technology to Americom Ltd. As consideration, the Company
received 161,000 shares of ESP common stock. Following the sale of
the marketing rights to the MyLine technology, the Company was
inactive until July, 1998, when it acquired, as a wholly-owned
subsidiary, DAI, which had developed the AdCast and TrueManagement
technologies. Since the acquisition of DAI, the Company has
concentrated, through its subsidiary DAI, on enhancement of these
technologies.
During 1997and 1998, the Company (and its subsidiary, DAI)
operated at a loss and financed its operations almost entirely from
the sale of convertible promissory notes and other debt instruments,
some of which notes have been converted into shares of the Company's
common stock. As of September 30, 1998, the Company had outstanding
short-term promissory notes aggregating $885,206. The Company's
operations have consisted primarily of organizational activities and
research and enhancement of the AdCast and TrueManagement systems.
There is no assurance that the Company will not continue to operate
at a loss and that it will be able to continue its operations.
The Company currently has four subsidiaries: DAI, AdCast,
Inc., TeleSpace Inc., and Kiosk Acquisition, Inc. AdCast, Inc. is a
newly-formed wholly-owned subsidiary responsible for marketing and
sales of the AdCast and TrueManagement technologies and TeleSpace
Inc. is a newly-formed wholly-owned subsidiary designed to enter
into the long distance and enhanced services telephone business.
Kiosk Acquisition, Inc. is a newly-formed wholly-owned subsidiary
which effected a merger with Kiosk Software, Inc. on February 8,
1999, as discussed hereinbelow.
Through Asia Pacific Finance Group, Ltd., a British Virgin
Island corporation, on January 29, 1999, the Company completed an
offering of 2,350,000 shares of its common stock for an aggregate
sales price of $3,687,500 to investors located outside the United
States.
CURRENT TECHNOLOGY
AdCast. The AdCast system delivers to host Web sites
non-scrollable billboards in which either animated ads of 15 to 90
seconds in length with audio, video and pop-up frame capability or
logo icon ads from company sponsor advertisers may be placed. The
AdCast system also provides various audience measurements tools to
the host Web site owner and to the advertiser immediately
("real-time"). Measurements provided include such items as number
of click-throughs, number of times an advertisement is viewed, time
of day an advertisement is viewed, duration of stay on a Web site
and visitor type. This data is provided to both the advertiser and
the Web site host allowing them to make adjustments to their
advertisement or Web site to increase effectiveness.
TrueManagement. The TrueManagement system works in support of
the AdCast system.
For the AdCast host Web site owner, TrueManagement provides a
series of management tools that enable such site owner to maintain
interaction between the AdCast system and their Web site, such as
setting background colors, site titles, etc. In addition, host Web
site owners can use the TrueManagement system to manage their own
advertising campaigns, analyze specific billboard advertisement
performance, obtain real-time reports displaying new (and repeat)
visits to their site, by hour, day, month, or for the entire
advertisement campaign.
For the advertiser, TrueManagement provides a system to manage
all aspects of their advertisement campaign, including, among other
features, setting the advertisement length, selecting the number of
times advertisement(s) are shown to a new visitor to the site, per
day, per month and or for the entire ad campaign. Advertisers can
monitor the results of their advertisements on a real-time basis and
can easily make adjustments to the ad itself or to the timing of its
display.
Benefits of the AdCast and TrueManagement Systems. The
Company believes that what differentiates the AdCast system from
other Internet advertising delivery systems is its ability to allow
advertisers to eliminate waste in advertising dollars by setting the
precise number of advertisements and click-throughs per visitor, on
a per day, per month, and/or per campaign basis. AdCast offers all
of the traditional features of existing Internet ad delivery systems
while offering real-time accountability presenting advertisers, site
owners and sponsors with detailed information concerning the
performance of advertising campaigns.
The benefits of the AdCast system include:
* Non-scrolling billboard ads which can be
set for durations from 15 to 90 seconds
featuring audio, video, pop-up animation
frames and hot links.
* Non-scrolling billboard company logo icon
ads appearing at the bottom of the Web
site page during a Web site visitor's
entire stay with a clickable link to that
company's Web site.
* Specified number of times that ads are
shown to each specific visitor, per day,
per month or for the entire ad campaign.
* Ability to provide hot-links to on-line
ordering, coupon printing, special offers
and more capabilities.
The TrueManagement system contains a series of tools
that enables host Web site owners and advertisers to control,
review, and manage certain standard features. Data capture occurs
every thirty seconds and can be viewed in real time (e.g.
concurrently) or by the hour, day, week or total ad campaign. Some
of the benefits of the TrueManagement system include:
* Reliable audience measurement in real time
as well as collecting historical data for
analysis and review.
* Free and easy access to the information
generated by TrueManagement and to AdCast
on-line to advertisers and Web site hosts.
* Ability of advertisers to easily change or
perfect their ad.
* Real-time information including total
number of new viewers, number of repeat
viewers, day's total of viewers,
cumulative repeat viewers, cumulated total
viewers.
MARKETING AND OPERATIONS
The Company is marketing the AdCast system through its
wholly-owned subsidiary AdCast, Inc. to domestic and foreign
businesses involved in publishing and commerce over the Internet.
Domestic and international marketing operations are handled through
the Company's California headquarters.
The Company has entered into a joint-development
agreement with Systeam, SpA, an Italian information technology
company. Systeam is participating in the development, enhancement
and expansion of the Company's products. The terms of the agreement
with Systeam provide that Systeam will receive an 8% royalty on the
net revenues of the Company with a minimum royalty for 1999 of
$250,000.
The Company entered into an agreement and plan of
reorganization by and among the Company, Kiosk Acquisition
Corporation, a newly-formed wholly-owned Delaware subsidiary of the
Company, Kiosk Software, Inc., a California company, and 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, or are to be issued, to the shareholders of Kiosk
Software, Inc. based on the following formula: (i) an exchange ratio
shall be computed by dividing 1,000,000 by the quantity of
outstanding Kiosk Software, Inc. outstanding shares just prior to
the merger; (ii) the number of shares to be issued to Kiosk
Software, Inc. shareholders shall be equal to the product of the
number of shares owned by such shareholder times the exchange ratio.
The 1,000,000 share numerator of the exchange ratio shall be
adjusted 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$2.00 per the Company's Regulation S
offering which closed January 29, 1999. In addition, 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. Kiosk Software,
Inc. has developed a proprietary kiosk operating system and
specializes in complete kiosk development services including custom
cabinet design and multimedia software development. 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 and the Company intends to file a Form 8-K therefor if
required.
The Company intends to target manufacturers and
suppliers of products, goods and services that utilize the Internet
for dissemination and sales of their products. The Company intends
to participate in up to four major trade shows in 1999 at which it
can directly promote to its target audience. The Company has
targeted an E-mail campaign to obtain advertisers in the sponsorship
(company logo icon ad) program.
The Company anticipates that the sponsorship program
will appeal to larger organizations that already have name and logo
recognition. A participant in the sponsorship program will receive
several host Web sites on which its logo will be placed. These Web
sites will be selected based on compatibility of interests from the
Company's pool of Web sites. The sponsor will compensate the
Company either on a commission basis based on the amount of sales
generated from viewers clicking on the sponsor's logo on a host Web
site or through advertising referral guarantees.
RESEARCH AND DEVELOPMENT
The Company has begun development of additional
products. There is no assurance that such products will ever become
viable products or that the Company will be able to market such
products. E-CommPlus is designed for the small and medium sized
business as a low-cost electronic commerce software program that
enables such business to take on-line orders for their products from
retailers and/or individual consumers.
PATENTS, TRADEMARKS AND COPYRIGHTS
The AdCast and TrueManagement technology is owned by
the Company's wholly-owned subsidiary, DAI. DAI does not have
patent or trademark protection for any of its proprietary
technology. The Company intends to apply for such protection but
there can be no assurance that it will be able to obtain patent or
trademark protection for any of its products or technologies.
PROPERTY
The Company maintains its offices in three locations.
The executive offices are located at 1303 Grand Avenue, Arroyo
Grande, California pursuant to a one-year lease at $1,627 per month
for approximately 1,550 square feet. The offices of the AdCast, DAI
and TeleSpace subsidiaries are located at 124 South Halcyon Road,
Arroyo Grande, California under a monthly lease of $2,600 per month
for approximately 3,500 square feet. The Kiosk Acquisition, Inc.
offices are located at 3534-A Empleo Street, San Luis Obispo,
California pursuant to a monthly lease of $1,600 for approximately
2,400 square feet.
MANAGEMENT
Name Age Title
Robert M. Cezar 56 Director, Chief Executive Officer
David H. Loomis 60 Director, President, Chief Operating
Officer, Treasurer, Vice President
of Finance
Greg M. Hogue 58 Executive Vice President
Helen E. Cooper 58 Secretary; Vice President for
Administration
Craig D. Machado 52 Director
Winston Lee 44 Vice President, International
Corporate Development
ROBERT M. CEZAR, 56, serves as Chief Executive Officer
and a director of the Company. Since 1993, Mr. Cezar has served as
a director, chief executive officer and president of Diversified
Associates International, now a wholly-owned subsidiary of the
Company. From 1994 to 1996, Mr. Cezar was chief executive officer,
director and chief engineering officer of AmeriCom USA, Inc. From
1996 to 1998, Mr. Cezar was vice president of engineering for
Enhanced Service Providers, a telecommunications company. In May
1998, Mr. Cezar joined the Company as its Chief Executive Officer.
DAVID H. LOOMIS, 60, serves as President, Chief
Operating Officer, Acting Chief Financial Officer, Vice President of
Finance and a director of the Company. From 1963 to 1991, Mr.
Loomis served in various positions at Loomix, a $23 million
agri-business company culminating as chief financial officer and a
director. From 1994 to 1996, Mr. Loomis served as chief financial
officer and a director of AmeriCom USA. From 1996 to 1998, Mr.
Loomis served as chief financial officer and a director of
Diversified Associates International, now a wholly-owned subsidiary
of the Company. In April, 1998, Mr. Loomis joined the Company as
its Chief Financial Officer, Treasurer, and Vice President for
Finance and in January, 1999, assumed the positions of President and
Chief Operating Officer. Mr. Loomis received his Bachelor of
Science degree in Social Science from California State Polytechnic
University in 1961.
GARY M. HOGUE, 58, serves as Executive Vice President of the
Company. From 1994 to 1998, Mr. Hogue was the Administrative
Manager for Torch Operating Company, Santa Maria District, an oil
production operating company for facilities both offshore and
onshore California. From 1969 to 1992, Mr. Hogue served in a number
of positions with Atlantic Richfield Co. (ARCO), the last of which
was Personnel Director for ARCO Oil and Gas, Western District. Mr.
Hogue received his Bachelor of Science degree in Economics from
Sonoma State College in 1972 and mis Masters of Business
Administration in 1982 from Pepperdine University, Malibu, California.
HELEN E. COOPER, 58, serves as Secretary and Vice President
for Administration of the Company. From 1993 to 1994, Ms. Cooper
served as a director, corporate secretary and vice president for
administration of Diversified Associates International. From 1994
to 1996, Ms. Cooper was director, corporate secretary and vice
president for administration of AmeriCom USA, Inc. From 1996 to
1998, Ms. Cooper served as an administrative assistant at Enhanced
Service Providers. Since April 1998, Ms. Cooper has been employed
by the Company. Ms. Cooper received her teaching degree in 1962
from Oxford University and Froebel Institute, United Kingdom.
CRAIG D. MACHADO, 52, serves as a director of the Company.
From 1991 to 1995, Mr. Machado served as vice president, marketing
and merchandising at Calgene Fresh, Inc., a genetically engineered
fresh tomato company. Since 1995, Mr. Machado has been the director
of marketing for APIO, Inc., an agro distribution and processing
company located in Guadalupe, California. Mr. Machado has served as
president of the Northern California Produce Council in 1976 and
1977 and was recognized by the Sacramento Bee as the Creative
Advertiser of the Year for 1987. Mr. Machado received his Bachelor
of Science degree in Architectural Engineering from California State
University, Sacramento, California in 1966.
WINSTON LEE, 44, serves as Vice President of International
Corporate Development. In 1987 Mr. Lee founded Gateway
Communications Limited, Taipei, Taiwan, an international direct dial
rate arbitrage company which developed an automatic aggregation
system. From 1994 to 1998, Mr. Lee was managing director of Strait
Venture Inc., Taiwan, which company represents several large
telecommunications company in the Far East, including China. Mr.
Lee received his Bachelor of Architecture degree in 1977 from Rice
University and his Master of Business Administration from New York
University in 1982. In October, 1998, Mr. Lee joined the Company as
its Vice President for International Corporate Development.
TRADING SYMBOL
On December 23, 1998, the Company applied to NASD Regulation,
Inc. for quotation of the Company's common stock on the NASD OTC
Bulletin Board. On January 30,1999 the Company received from NASD
Regulation, Inc. the trading symbol AMUS. Trading has not yet been
cleared by NASD Regulation, Inc. pending review of certain
additional documents which the Company has furnished to it.
RISK FACTORS
GOING CONCERN QUESTION; OPERATING LOSSES AND ACCUMULATED DEFICIT;
UNCERTAINTY OF FUTURE PROFITABILITY
The Company had accumulated losses of $2,525,175 at December
31, 1998, and will be required to make significant additional
expenditures in connection with the development and marketing of the
AdCast system. At December 31, 1998, the Company had short-term
promissory notes outstanding aggregating $931,445. The Company's
ability to continue its operations is dependent upon its receiving
funds through its current offering of securities or such other
equity or debt financing that the Company may be able to arrange.
The Company recently sold 2,350,000 shares of its common stock for
an aggregate subscription price of $3,687,500. There is no
assurance that the Company will receive any additional subscriptions
for its shares of common stock or will be able to raise any
additional capital through such placement of its securities or from
any other debt or equity financing. If the Company is not able to
raise such financing or to obtain alternative sources of funding,
management will be required to curtail operations and there is no
assurance that the Company will be able to continue to operate.
NO SIGNIFICANT REVENUES
The Company has not received any significant revenues to date
and there is no assurance that it will be able to increase its
revenues in the future. The Company currently has only one sponsor
under contract. Currently the Company displays this sponsor's ads
on the Company's Web site, but intends to obtain additional AdCast
host Web sites and additional advertisers. There can be no
assurance that the Company will be able to obtain additional host
Web sites. In order to receive revenues, the Company must obtain
advertisers to run advertisements on the AdCast billboards and the
Company must obtain Web sites consenting to act as host Web sites
for the AdCast billboards. There is no assurance that the Company
will be able to obtain any additional advertisers; and if able to
obtain advertisers, there is no assurance that the Company will be
able to obtain AdCast host Web sites.
INTELLECTUAL PROPERTY PROTECTION
The AdCast and TrueManagement technology is owned by the
Company's wholly-owned subsidiary, DAI. DAI does not have any
copyrights, trademarks, patents or service marks for its technology
systems. The Company intends to apply for trademark and/or patent
protection for the technology and trade names from the United States
Patent and Trademark Office, but there is no assurance that such
protection will be granted or that such products or similar products
are not already in use and/or protected by United States patents or
trade marks or the trade mark laws of another country. There is no
assurance that any of the Company's rights in protecting the
technology or trade names will be enforceable even if registered
against any prior users of a similar name or competitors of the
Company who seek to utilize similar technology or names in areas
where the Company operates. The Company intends to enforce all
rights regarding such trademarks, patents and service marks in
regard to usage by others. There is no assurance that a challenge
to the Company's use of such marks will not result in adverse
consequences, including a judgment that would entail damages and/or
the discontinuation of the Company's use of the marks.
The failure to enforce any of the Company's rights could
have the effect of reducing the Company's ability to market the
technology and develop its operations if such technology becomes
available in the market through other sources. It is also possible
that the Company will encounter claims from prior users of a similar
technology and names in areas where the Company operates thereby
causing the Company to pay damages to a prior user.
COMPUTER SYSTEMS REDESIGNED FOR YEAR 2000
Many existing computer programs use only two digits to
identify a year in such program's date field. These programs were
designed and developed without consideration of the impact of the
change in the century for which four digits will be required to
accurately report the date. If not corrected, many computer
applications could fail or create erroneous results by or following
the year 2000 (the "Year 2000 problem"). Many of the computer
programs containing such date language problems have been corrected
by the companies or governments operating such programs. The
Company's operations are dependent upon the operations and computer
systems of its suppliers, Web site hosts, Internet users, Internet
providers, advertisers and sponsors. The Company does not know what
steps, if any, have been taken by any of these companies or any
governments in the countries in which the Company intends to
operate. The Company's operations will be severally curtailed if
one or more of these companies were to suffer Year 2000 problems.
Furthermore, it is impossible to predict how the Internet system
itself will survive the Year 2000 problem.
COMPETITION
The Internet advertising industry is highly competitive and
includes numerous competitors that have substantially greater
financial and marketing resources than the Company and may be better
able to attract and maintain customers. The computer business,
including Internet services and uses, software, hardware and
technology is characterized by rapid technology changes. Success of
the Company depends upon its ability to develop new and innovative
products and services and to update its AdCast system and other
systems to incorporate new technological advances.
DEPENDENCE ON THIRD-PARTY PROVIDERS
The Company is dependent upon the visitor's Internet
provider and server and the advertiser's and the Web site host's
Internet provider and server in order to generate a billboard or
sponsorship ad. Connections to the Internet will be supplied by
third-party network servers. The Company has no control over such
Internet providers or network servers and their ability to effect
the Internet connections on demand. Delay or failure of such
servers or providers to make correct and efficient connections could
result in the failure to display an advertiser's sponsorship logo or
billboard ad. Furthermore, continual or repeated delays or failures
could result in a loss of visitors to AdCast host Web sites and a
reduction in the number of AdCast host Web sites.
DEPENDENCE ON NETWORK INFRASTRUCTURE
The Company will be required to expand and improve its
network infrastructure as the number of its customers and the amount
and type of their advertisements over the Internet increases. Such
expansion and improvement may require substantial financial,
operational and managerial resources. There can be no assurance that
the Company will be able to expand or improve its network
infrastructure to meet any additional demand or changing customer
requirements on a timely basis or at a commercially reasonable cost,
if at all.
If the Company does not maintain sufficient capacity in its
network connections, customers will experience a general slowing of
all services on the Internet. Any of these events could cause
customers to terminate use of the Company's services. Accordingly,
any failure of the Company to expand or enhance its network
infrastructure on a timely basis, or to adapt it to an expanding
customer base, changing customer requirements or evolving industry
standards, could have a material adverse effect on the Company.
The Company engages in regular maintenance of its network
infrastructure to prevent security breaches and problems caused by
computer viruses and other attacks against the system. However, in
the event the entrance of such viruses or other similar disruptive
problems into the network infrastructure, whether caused by the
Company's customers, other Internet users or other third parties,
could lead to interruptions, delays in or cessation of service to
the Company's customers, as well as corruption of the Company's or
its customers' computer systems. Inappropriate use of the Internet
by third parties could also potentially jeopardize the security of
confidential information stored in the computer systems of the
Company or those of its customers, which may cause losses to the
Company or its customers, or deter certain persons from using the
Company's services. The Company expects that its customers may
increasingly use the Internet for commercial transactions in the
future. Any network malfunction or security breach could cause
these transactions to be delayed, not completed or completed with
compromised security. Alleviating problems caused by computer
viruses or other inappropriate uses or security breaches may cause
interruptions, delays or cessation in service to the Company's
customers, which could have a material adverse effect on the
Company.
DEPENDENCE ON TELECOMMUNICATIONS CARRIERS AND OTHER SUPPLIERS
The Company relies on local telephone companies and other
companies to provide data communications capacity via local
telecommunications lines and leased long distance lines. The
Company is subject to potential disruptions in these
telecommunications services and may have no means of replacing these
services, on a timely basis or at all, in the event of such
disruption. Any such disruptions could have a material adverse
effect on the Company.
UNCERTAIN ACCEPTANCE OF THE INTERNET
The Company's operations will depend largely on the
widespread acceptance and use of the Internet as a source of
multimedia information and entertainment and as a vehicle for
commerce in goods and services. The Internet may not be accepted as
a viable commercial medium for broadcasting multimedia content, if
at all, for a number of reasons, including (i) potentially
inadequate development of the necessary infrastructure, (ii)
inadequate development of enabling technologies, (iii) lack of
acceptance of the Internet as a medium for distributing content and
(iv) inadequate commercial support for Internet-based advertising.
To the extent that the Internet continues to experience an
increase in users, an increase in frequency of use or an increase in
the bandwidth requirements of users, there is no assurance that the
Internet infrastructure will be able to support the demands placed
upon it, specifically the demands of delivering high-quality audio
content. In addition, the Internet could lose its viability as a
commercial medium due to delays in the development or adoption of
new standards and protocols required to handle increased levels of
Internet activity, or due to increased government regulation.
Changes in or insufficient availability of telecommunications
services to support the Internet also could result in unacceptable
response times and could adversely affect use of the Internet
generally and of the Company Web site in particular. If use of the
Internet does not continue to grow or grows more slowly than
expected, or if the Internet infrastructure does not effectively
support the growth that may occur, the Company's business, results
of operations and financial condition could be materially adversely
affected.
ACCEPTANCE OF THE INTERNET AS AN ADVERTISING MEDIUM
The market for Internet advertising has only recently begun
to develop, is rapidly evolving and is characterized by an
increasing number of market entrants, although Internet advertising
continues to be dominated by the larger Web sites. It remains
unclear as to the success or popularity of Internet advertising or
the increased use of the Internet by potential purchasers. The
Company's ability to generate advertising revenue will depend on
many factors over which it has no control including: the continued
development of the Internet for personal and business use, the
acceptance of the Internet as an advertising medium, and pricing of
advertising on other Web sites.
There is no assurance that advertisers or advertising
agencies will be persuaded to allocate or continue to allocate
portions of their budgets to Internet-based advertising or, if so
persuaded, that they will find such advertising to be effective for
promoting their products and services relative to traditional print
and broadcast media.
No standards have yet been widely accepted for the
measurement of the effectiveness of Internet-based advertising, and
there is no assurance that such standards will develop sufficiently
to enable Internet-based advertising to become a significant
advertising medium. Acceptance of the Internet among advertisers and
advertising agencies will also depend, to a large extent, on the
level of use of the Internet by consumers and upon growth in the
commercial use of the Internet. If widespread commercial use of the
Internet does not develop, or if the Internet does not develop as an
effective and measurable medium for advertising, the Company's
business, results of operations and financial condition would be
materially adversely affected.
COMPANY'S SUCCESS DEPENDENT ON NUMBER OF INTERNET USERS
The Company's anticipated arrangements with advertisers call
for compensation based solely and directly on the number of
"impressions" recorded as Web site visitors call up a Web site page
on which the advertising is included or the number and duration of
ads delivered by the Company. The Company does not receive
compensation simply for providing the advertising space.
Accordingly, its revenues from advertising are entirely dependent on
the number of visitors accessing AdCast host Web sites, the time
spent by such visitors, and the number of advertisers using the
AdCast system. A reduction in the number of Internet users and
therefore in the number of visitors to AdCast host Web sites would
have a substantive negative impact on the Company's proposed
operations.
DEPENDENCE ON ADVERTISERS
The Company's advertising revenues will be derived from
short-term contracts from a limited number of advertisers. The
Company's advertising customers will be able to discontinue the
Company's services site quickly and without penalty. There is no
assurance that the Company will be able to secure advertising
contracts from existing or future customers at attractive rates or
at all. Any failure of the Company to achieve sufficient advertising
revenue could have a material adverse effect on its business,
results of operations and financial condition.
PRODUCT DEVELOPMENT AND TECHNOLOGICAL OBSOLESCENCE
The market for Internet information delivery is
characterized by extensive research and development and rapid
technological change, frequent new product introductions and
technological innovation, resulting in short product life cycles and
evolving industry standards. Development by others of new or
improved products, processes or technology may render the Company's
products and services less competitive or obsolete. The emerging
character of these products and services and their rapid evolution
will require the Company to effectively use leading technologies,
continue to develop its technological expertise, enhance its current
services and continue to improve the performance, features and
reliability of its network infrastructure.
Changes in network infrastructure, transmission and content
delivery methods and underlying software platforms and the emergence
of new technologies could dramatically change the structure and
competitive dynamics of the market for the Company's products and
services. There is no assurance that the Company will be successful
in responding quickly, cost effectively and sufficiently to these or
other such developments. In addition, the widespread adoption of new
Internet technologies or standards could require substantial
expenditures by the Company to modify or adapt its Web site and
services. A failure by the Company to rapidly respond to
technological developments could have a material adverse effect on
its business, results of operations and financial condition.
DEPENDENCE ON CONTENT PROVIDERS
The Company's future success depends in large part upon its
ability to obtain rights to and deliver content of sufficient
interest to users of the Internet. The Company does not create its
own content. The Company relies on third party content providers,
such as Web site publishers, news and financial information services
and music publishers for the content it makes available to users
visiting its host Web sites. The Company's ability to maintain its
existing relationships with such content providers and to build new
relationships with additional content providers is critical to the
success of its business. The Company's inability to secure content
providers or the termination of a significant number of content
provider agreements would decrease the availability of content that
the Company can offer users.
ISSUANCE OF FUTURE SHARES MAY DILUTE INVESTORS SHARE VALUE
The Certificate of Incorporation of the Company authorizes the
issuance of a maximum of 100,000,000 shares of common stock and
20,000,000 shares of preferred stock. The future issuance of all or
part of the remaining authorized common stock may result in
substantial dilution in the percentage of the Company's common stock
held by the Company's then existing shareholders. Moreover, any
common stock issued in the future may be valued on an arbitrary
basis by the Company. The issuance of the Company's shares for
future services or acquisitions or other corporate actions may have
the effect of diluting the value of the shares held by investors,
and might have an adverse effect on any trading market, should a
trading market develop for the Company's common stock.
POTENTIAL ADVERSE EFFECTS OF AUTHORIZATION OF PREFERRED STOCK
The Company may, without further action or vote by
shareholders of the Company, designate and issue shares of preferred
stock. The terms of any series of preferred stock, which may
include priority claims to assets and dividends and special voting
rights, could adversely affect the rights of holders of the common
stock and thereby reduce the value of the common stock. The
designation and issuance of preferred stock favorable to current
management or shareholders could make the possible takeover of the
Company or the removal of management of the Company more difficult
and discourage hostile bids for control of the Company which bids
might have provided shareholders with premiums for their shares.
NO CURRENT TRADING MARKET FOR THE COMPANY'S SECURITIES
On January 30, 1999 the Company received from NASD Regulation,
Inc. the trading symbol AMUS for quotation on the NASD OTC Bulletin
Board. Trading has not yet been cleared by NASD Regulation, Inc.
pending review of certain additional documents which the Company has
furnished to it. No assurance can be given that an active trading
market in the Company's securities will develop or, if developed,
that it will be sustained. If and when qualified, the Company
intends to apply for admission to quotation on the Nasdaq SmallCap
Market. There can be no assurance that a regular trading market for
the common stock will develop or that, if developed, it will be
sustained. Various factors, such as the Company's operating
results, changes in laws, rules or regulations, general market
fluctuations, changes in financial estimates by securities analysts
and other factors may have a significant impact on the market price
of the Company's securities. The market price for the securities of
public companies often experience wide fluctuations which are not
necessarily related to the operating performance of such public
companies such as high interest rates or impact of overseas markets.
PENNY STOCK REGULATION
Upon commencement of trading in the Company's stock, if such
occurs (of which there can be no assurance) the Company's common
stock may be deemed a penny stock. Penny stocks generally are
equity securities with a price of less than $5.00 per share other
than securities registered on certain national securities exchanges
or quoted on the Nasdaq Stock Market, provided that current price
and volume information with respect to transactions in such
securities is provided by the exchange or system. The Company's
securities may be subject to "penny stock rules" that impose
additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and
accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 together
with their spouse). For transactions covered by these rules, the
broker-dealer must make a special suitability determination for the
purchase of such securities and have received the purchaser's
written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless
exempt, the "penny stock rules" require the delivery, prior to the
transaction, of a disclosure schedule prescribed by the Commission
relating to the penny stock market. The broker-dealer also must
disclose the commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities.
Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. Consequently,
the "penny stock rules" may restrict the ability of broker-dealers
to sell the Company's securities. The foregoing required penny
stock restrictions will not apply to the Company's securities if
such securities maintain a market price of $5.00 or greater. There
can be no assurance that the price of the Company's securities will
reach or maintain such a level.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
As a result of the Merger and as of the date thereof,
December 4, 1998, the accountant to the Registrant was replaced with
the accountant for AmeriCom USA, Inc. The financial statements for
the Registrant since inception and prior to the change in such
accountants have not contained any adverse opinion or disclaimer or
were modified as to any uncertainty, audit scope or accounting
principles and there were not any disagreements or "reportable
events" with such former accountant.
ITEM 5. OTHER EVENTS
Not applicable.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
Pursuant to the Agreement, upon effectiveness of the Merger,
the sole director and officer of the Registrant resigned and the
officers and directors of AmeriCom USA, Inc. were designated to
serve in their same capacities for the Registrant until the next
annual meeting of stockholders and until their respective successors
are elected and qualified or until their prior resignation or
termination.
ITEM 7. FINANCIAL STATEMENTS
The audited financial statements for two years ended June 30,
1998 prepared for the Company by Weinberg & Company, certified
public accountants, are included herein. The unaudited financial
statements as of and for the six month period ended December 31,
1998 was prepared by the Company and is included herein.
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S
On January 29, 1999, the Company completed an offering of
2,350,000 shares of its common stock to non-United States residents
for an aggregate subscription price of $3,687,500. The Company has
received 75.02% of the subscription price and issued 90.13% of the
subscribed shares. The remaining amount of the subscription price
will be received by the Company, and the remaining shares issued by
the Company, upon notification of acceptance for quotation on the
NASD OTC Bulletin Board.
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL, LTD.
COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
AMERICOM USA, INC. AND
RMC DIVERSIFIED ASSOCIATES INTERNATIONAL, LTD
CONTENTS
PAGE 1 - REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
PAGE 2 - COMBINED BALANCE SHEETS AS OF JUNE 30, 1998
1997
PAGE 3 - COMBINED STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED JUNE 30, 1998 AND 1997
PAGE 4 - COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS'
DEFICIENCY FOR THE YEARS ENDED JUNE 30, 1998
AND 1997
PAGE 5 - 6 - COMBINED STATEMENTS OF CASH FLOWS FOR THE
YEARS ENDED JUNE 30, 1998 AND 1997
PAGE 7 - 17 - NOTES TO COMBINED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of:
AmeriCom USA, Inc. and RMC Diversified
Associates International, Ltd.
We have audited the accompanying combined balance sheets of AmeriCom
USA, Inc. and RMC Diversified Associates International, Ltd. as of
June 30, 1998 and 1997 and the related combined 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 combined financial statements based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. 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 audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of
AmeriCom USA, Inc. and RMC Diversified Associates International,
Ltd. as of June 30, 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
January 29, 1999 (except for Note 13(e) and Note 4 as to which the
dates are February 8, 1999 and February 10, 1999, respectively.)
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL, LTD.
COMBINED BALANCE SHEETS
AS OF JUNE 30, 1998 AND 1997
ASSETS
1998 1997
CURRENT ASSETS
Cash and cash equivalents $ 28,767 $ 199
Accounts receivable - 638
Due from officer 6,767 8,546
Other assets 1,200 -
Total Current Assets 36,734 9,383
PROPERTY AND EQUIPMENT, NET 14,379 3,486
OTHER ASSETS 455 1,410
TOTAL ASSETS $ 51,568 $ 14,279
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued
expenses $ 217,318 $ 164,251
Payroll taxes payable 53,614 41,498
Accrued salaries and wages 565,742 425,421
Notes and loans payable 105,408 80,408
Notes and loans payable -
related parties 798,529 756,675
Convertible promissory notes 37,500 -
Total Current Liabilities 1,778,111 1,468,253
TOTAL LIABILITIES 1,778,111 1,468,253
Commitments and contingencies
STOCKHOLDERS' DEFICIENCY
Common stock 14,500 14,500
Additional paid-in capital 133,007 133,007
Accumulated deficit (1,874,050) (1,601,481)
Total Stockholders' Deficiency (1,726,543) (1,453,974)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ 51,568 $ 14,279
See accompanying notes to combined financial statements.
2
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL, LTD.
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
1998 1997
REVENUES $ - $ 14,275
Total Revenues - 14,275
EXPENSES
Salaries and wages 163,289 206,199
Payroll tax 2,570 3,300
Advertising - 1,078
Amortization expense 455 455
Bad debt expense - 68,533
Building rent 2,318 27,863
Consulting expense 2,000 2,220
Depreciation expense 4,738 1,698
Insurance 11,995 19,190
Legal 28,100 30,111
Other general and
administrative expenses 6,283 25,580
Research and development 3,774 -
Telephone expense 12,176 7,328
TOTAL EXPENSES 237,698 393,555
OPERATING LOSS (237,698) (379,280)
OTHER INCOME (EXPENSE)
Gain on debt forgiveness 8,938 -
Gain on sale of investment - 45,095
Interest expense (37,154) (5,821)
Vendor finance charges (2,553) -
Payroll tax penalties and
interest (4,102) (53,859)
NET OTHER EXPENSE (34,871) (14,585)
NET LOSS $(272,569) $(393,865)
Weighted average number
of shares outstanding
during period 9,500,000 9,499,926
Net loss per common
share and equivalents ($0.0287) ($0.0415)
See accompanying notes to combined financial statements.
3
AMERICOM USA, INC. AND RMC DIVERSIFIED ASSOCIATES INTERNATIONAL, LTD.
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
AMERICOM USA, INC RMC DIVERSIFIED
ASSOCIATES INTER-
NATIONAL, LTD AMERICOM
COMMON STOCK USA, INC.
------------------- --------------- ADDITIONAL
NUMBER NUMBER ACCUMU-
OF OF PAID-IN LATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
BALANCE,
JUNE 30,
1996 3,883,250 $3,883 10,000 $10,000 $ 71,117 $(1,207,616)
$(1,122,616)
Issuance of
common stock
in exchange
for debt 30,861 31 - - 61,890 - 61,921
Issuance of
common stock
as compen-
sation 585,889 586 - - - - 586
Net loss 1997 - - - - - (393,865)(393,865)
--------- ---- ------ ------ ------- -------- ------
BALANCE,
JUNE 30,
1997 4,500,000 $4,500 10,000 $10,000 $133,007 $(1,601,481)
$(1,453,974)
Net loss
1998 - - - - - (272,569)(272,569)
--------- ------ ----- ------- ------- -------- -------
BALANCE,
JUNE 30,
1998 4,500,000 $4,500 10,000 $10,000 $133,007 $(1,874,050)
$(1,726,543)
See accompanying notes to combined financial statements.
4
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL, LTD.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
1998 1997
Cash flows from operating
activities:
Net loss $(272,569) $(393,865)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation 4,738 1,698
Amortization 455 455
Loss on disposal of assets - 6,691
Provision for losses on receivables - 68,533
Compensation expense recorded under
employee stock issuances - 586
Changes in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable 638 414,079
Employee receivable 1,779 750
Due from officer - 9,332
Other assets (1,200) 19,415
Investment in stock - 4,905
Increase (decrease)in:
Accounts payable and accrued
expenses 53,067 (20,204)
Payroll taxes payable 12,116 (222,768)
Accrued salaries and wages 140,321 148,086
Net cash (used in) provided by
operating activities (60,655) 37,693
Cash flows from investing
activities:
Purchase of property and equipment (8,014) -
Proceeds from return of deposits 498 -
Increase in other assets - (499)
Net cash used in investing
activities (7,516) (499)
Cash flows from financing
activities:
Notes and loans payable 59,239 (38,482)
Promissory note 37,500 -
Net cash provided by (used in)
financing activities 96,739 (38,482)
5
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL, LTD.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1998 AND 1997
Net increase (decrease) in cash 28,568 (1,288)
Cash and cash equivalents at
beginning of year 199 1,487
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 28,767 $ 199
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
During 1997 the Company issued 30,660 and 201 shares of common stock in
exchange for notes and loans payable of $61,320 and $603, respectively.
During 1997 the Company issued 585,889 shares of common stock to
certain officers and employees as compensation.
During 1998 the Company purchased certain property and equipment for
$7,615 from a related party in exchange for a note payable.
See accompanying notes to combined financial statements.
6
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
AmeriCom USA, Inc. ("AmeriCom") is a Delaware corporation
chartered on May 4, 1994. RMC Diversified Associates
International, Ltd. ("Diversified") is a California corporation
chartered on December 26, 1989. Diversified has developed
proprietary technologies known as Adcast, e-CommPlus,
TrueManagement, and My-Channel. In July 1998, AmeriCom acquired
all the issued and outstanding common stock of Diversified
making Diversified a wholly owned subsidiary of AmeriCom (See
Note 13). AmeriCom and Diversified (hereinafter jointly
referred to as "the Company") develop and market 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.
The Company is not operating as a development stage company
since they received revenues from research and development
contracts and license sales relating to previously owned
technology rights in years prior to 1997.
AmeriCom and Diversified have been combined herein due to
common management control since inception of both companies.
Principles of Combination
The combined financial statements include the accounts of
AmeriCom and Diversified. All significant intercompany balances
and transactions have been eliminated in combination.
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.
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.
7
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONT'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's of
the assets from three to five years.
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 measured using enacted tax
rates 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. At June 30, 1998 AmeriCom and
Diversified had approximately $160,000 and $800,000,
respectively, of net operating loss carryforwards, which expire
beginning in years 2010 and 2005, respectively. A one hundred
percent valuation allowance has been established against any
resulting deferred tax asset at June 30, 1998 and 1997.
Per Share Data
Net loss per common share for the year ended June 30, 1998 and
1997 is computed by dividing net loss by the weighted average
common shares outstanding during the year as defined by
Financial Accounting Standards, No. 128, "Earnings per Share".
The assumed exercise of common share equivalents was not
utilized since the effect was anti-dilutive. For purposes of
the net loss per common share computation only, the acquisition
of Diversified (see Note 13) and related exchange of shares was
applied retroactively as if it occurred on July 1, 1996.
8
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONT'D)
Long-Lived Assets
During 1995, Statement of Financial Accounting Standards
No.121, "Accounting for the Impairment of Long-lived Assets and
for Long-lived Assets to be Disposed Of" ("SFAS 121"), was
issued. SFAS 121 requires the Company to review long-lived
assets and certain identifiable assets related to those assets
for impairment whenever circumstances and situations change
such that there is an indication that the carrying amounts may
not be recoverable. If the undiscounted future cash flows of
the enterprise are less than their carrying amounts, their
carrying amounts are reduced to fair value and an impairment
loss is recognized. The adoption of this pronouncement did not
have a significant impact on the Company's financial statements
as of June 30, 1998 and 1997.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at June 30 consisted of the following:
1998 1997
Computers and equipment 19,206 4,680
Software 2,805 1,699
22,011 6,379
Less accumulated depreciation 7,632 2,893
$ 14,379 $ 3,486
Depreciation expense was $4,738 and $1,698 in 1998 and 1997,
respectively.
NOTE 3 - SALARIES AND WAGES PAYABLE
Salaries and wages payable represent current and prior years
salaries from September 1994 through June 1998. The following
schedule reflects salaries payable at June 30:
Officers Employees Total
1997 237,369 188,052 425,421
1998 371,369 194,373 565,742
In January 1999 $490,742 of accrued salaries existing at that
date were paid in cash with funds received from a private
placement (See Note 13).
9
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 4 - PAYROLL TAXES PAYABLE
At June 30, 1998 and 1997 the Company owed $45,545 and $41,442,
respectively, in payroll taxes, interest and penalties for
prior tax periods ended September 30, 1995. Such amounts were
accrued in payroll taxes payable at June 30, 1998 and 1997. On
February 10, 1999, the Company paid the full amount of $45,545
to the Internal Revenue Service.
NOTE 5 - NOTES AND LOANS PAYABLE
The following schedule reflects notes and loans payable to
non-related parties at June 30:
1998 1997
Note payable, interest at 10%
per annum, due on demand,
unsecured, 1997 $ 18,506 $ 18,506
Note payable, interest at 10%
per annum, due on demand,
unsecured 10,000 10,000
Note payable, interest at 10%
per annum, due on demand,
unsecured 6,821 6,821
Note payable to unrelated party
issued in exchange for forgive-
ness of debt of $19,457 from a
related party reduced by a $5,000
payment interest at 10% per annum,
due on demand, unsecured 14,457 14,457
Note payable dated June 3, 1998
interest at 10% per annum, due
June 3, 1999, unsecured 25,000 -
Note payable, non-interest bearing
due on demand, unsecured 25,624 25,624
Note payable, non-interest bearing
due on demand, unsecured 5,000 5,000
$105,408 $ 80,408
The following schedule reflects notes and loans payable to related
parties at June 30:
1998 1997
Note payable dated May 15, 1998
to related party interest
at 18% per annum, due July
1, 1998, unsecured $9,610 $ -
10
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 5 - NOTES AND LOANS PAYABLE (CONT'D)
1998 1997
Note payable to related party
interest at 14% per annum,
due on demand, unsecured 4,801 4,801
Note payable to related party
interest at 10% per annum,
due on demand, unsecured 2,546 -
Note payable to officer,
interest at 10% per annum,
due on demand, unsecured 7,034 -
Note payable to officer,
interest at 10% per annum,
due on demand, unsecured 12,556 1,274
Note payable to officer,
interest at 10% per annum,
due on demand, unsecured 3,844 600
Note payable to officer, non-
interest bearing through March
26, 1998, interest at 10% per
annum from March 27, 1998, due
on March 27, 1999, unsecured 750,000 750,000
Loan payable to related party
non-interest bearing, due
on demand, unsecured 8,138 -
$ 798,529 $ 756,675
Accrued interest on the notes and loans payable has been
included in accrued expenses.
NOTE 6 - CONVERTIBLE PROMISSORY NOTES
In June 1998 the Company issued convertible promissory notes to
three investors, one of whom is related to the Chief Financial
Officer of the Company. Each note was for $12,500 and bears
interest at 20% per annum. The holders could convert the
amounts due (including interest calculated to the conversion
date) to common stock of AmeriCom at 50% of the then market
price of AmeriCom common stock. The holders could convert the
stock at any time during the term of the note subject to the
ability to determine the fair market value of such stock. The
notes were converted in October 1998. (See Note 13).
11
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 7 - RELATED PARTIES
Certain notes and salaries are owed to related parties at June
30, 1998 and 1997 (See Notes 3 and 5). Certain related parties
took part in the acquisition of Diversified (see Note 13).
At June 30, 1998 and 1997 the director and CEO of the Company
beneficially held approximately 63.5% and 64%, respectively, of
the common stock of AmeriCom USA, Inc. and 75% and 80%,
respectively, of the common stock of RMC Diversified Associates
International, Ltd. Just after completion of the merger and
recapitalization (See Note 13), the same director and CEO of
the company held approximately 58.1% of the surviving entity.
As discussed in the supplemental disclosure to the combined
cash flow statements, and Note 10, certain non-cash issuances
of common stock to related parties occurred during 1997.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
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.
Although management believes that none of the Company's systems
are affected by this problem, the Company could be impacted by
the failure of other companies to timely correct their computer
systems. The Company's operations are dependent on the world
wide telecommunications networks including computer systems,
telephone systems, and delivery systems. If any of these
systems become inoperational, the Company will be directly and
significantly effected. Management has not assessed the
potential effect on the Company's earnings.
NOTE 9 - STOCKHOLDERS' EQUITY
In September 1998 AmeriCom filed with the state of Delaware, an
amendment to its articles of incorporation to increase the
authorized shares of its Class A common stock to 15,000,000
from 30,000, and to change the par value of all classes of
common and preferred stock to $0.001 from $0.01. The effect of
these changes is shown retroactively in the financial
statements for the years ended June 30, 1998 and 1997.
12
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTE 9 - STOCKHOLDERS' EQUITY (CONT'D)
AmeriCom has authorized 15,000,000 shares of Class A common
stock, par value $0.001, 10,000 shares of Class B non-voting
common stock, par value $0.001, and 10,000 shares of preferred
stock, par value $0.001. At June 30, 1998 and 1997, AmeriCom
had 5,000,000 shares of Class A common stock issued and
outstanding of which 500,000 was owned by Diversified and is
eliminated in the combined financial statements. No Class B
common stock or preferred stock has ever been issued. The
preferred stock may be issued from time to time in one or more
series, each such series to have such distinctive designation
or title as may be fixed by the Board of Directors. Preferred
stockholders have preference over common stockholders as to
cash dividends and liquidations.
Diversified has authorized 100,000 shares of common stock, no
par. At June 30, 1998 and 1997 Diversified had 10,000 shares of
its common stock issued and outstanding.
NOTE 10 - STOCK ISSUED AS COMPENSATION
Although the Company has not yet established any formal stock
compensation plans, during 1997 AmeriCom issued under what
would be considered a nonvariable compensatory stock issuance,
585,889 shares of common stock to certain key officers and
employees. The fair market value of the stock was considered to
be equal to the par value and accordingly $586 was recorded as
compensation expense in 1997.
NOTE 11 - GAIN ON SALE OF INVESTMENT
During 1997 the Company sold an investment in common stock for
gross proceeds of $50,000. The investment was recorded at its
original cost of $4,905 resulting in a gain on sale of
investment of $45,095.
NOTES 12 - OPERATING AGREEMENTS
(A) Agreement with Internet Store
On September 3, 1998 the Company entered into a non-binding
memorandum of understanding (the "memorandum") with a large
chain storefront and internet retailer of sporting goods (the
"Store"). The memorandum stipulates that the Company shall
receive 30% of the Store's net margin on sales as defined in
the agreement, generated by consumers who have "clicked"
through to the Store's Web site from the Company internet
billboards. In addition, the Company leases billboard space,
paid on a per visitor basis, on the Store's Web site. The
Company has also agreed to allow the Store to be the preferred
sponsor on all of its customer's sports and school related Web
sites and all of its customer's Web sites where the Store's
vendors advertise.
13
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTES 12 - OPERATING AGREEMENTS (CONT'D)
(B) Business Services Agreement
On September 8, 1998 the Company entered into a twelve month
agreement, subject to renewal, with a British Virgin Islands
Corporation (the "Corporation") for services generally related
to financial and management advisory services for the
arrangement of a U.S. stock market listing through a reverse
acquisition with a U.S. publicly held company and for assisting
the Company in connection with a private placement offering
(See Note 13). Under terms of the agreement, the Company shall
pay to the corporation: (i) five percent management success
fees for the services of the private placement upon the
execution of each subscription agreement (see below), (ii) four
percent of the Company's common stock payable for the
services of the U.S. stock market listing transactions, payable
upon execution of the reverse merger with a U.S. publicly held
company.
Per management of the Company, the five percent fee as noted in
(i) above was verbally amended to ten percent. The Company has
been paying the ten percent fees to the corporation as new
subscription agreements are received. Upon closing of the
reverse merger (See Note 13) the corporation was issued
1,200,000 shares of the Company's common stock equivalent to
four percent of the total outstanding common stock of the Company.
(C) Software Development Agreement
In August of 1998 the Company entered into an agreement with
Systeam Spa (the "Developer"), an Italian company engaged in
information technology, consulting, software development,
software support and related matters. Under the terms of the
agreement Systeam has contracted to provide continued, ongoing
development and support of the Company's AdCast, e-CommPlus,
TrueManagement, and My-Channel technology ("Technology"). In
consideration the Company has agreed to pay an annual royalty
equal to eight per cent (8%) of the world-wide net revenues of
the Company for a period of ten (10) years, renewable for
successive ten (10) year terms provided the Developer continues
to develop, implement, support and upgrade the Technology and
Licensed Software during such periods. The Company has agreed
to guarantee a minimum royalty payment in the amount of
$250,000 in the first calendar year, subsequent to the
completion of the development of Phase I of the Licensed
Software which is contemplated to occur in April, 1999.
14
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTES 12 - OPERATING AGREEMENTS (CONT'D)
(D) Consulting Agreement
On January 8, 1999 the Company entered into a consulting
agreement with a Canadian corporation (the "Consultant")
whereby the Consultant will head American Web-site customer
acquisition efforts. Under the Agreement, the initial term is
from January 1, 1999 through April 30, 1999 and the amount
budgeted for the Consultant's fees and expenses during this
initial term is approximately $100,000, subject to ongoing
audit and review by the Company of the Consultant's performance
in obtaining the stipulated Web sites. The Company agreed to
pay an advance fee of $30,000 to the Consultant on a bi-weekly
basis from January 1, 1999 through April 30, 1999. The
agreement shall be extended contingent on the Consultant
meeting certain stipulated goals and the agreement may be
canceled at any time by the Company.
NOTE 13 - SUBSEQUENT EVENTS
(A) Acquisition of Diversified
On July 15, 1998 the Board of Directors of Diversified and
AmeriCom elected to execute a stock swap, whereby six
stockholders, three of whom were related parties at that date,
representing 100% of the outstanding stock of Diversified,
exchanged their common stock for common stock of AmeriCom at a
ratio of 500 for 1. Diversified then issued 10,000 shares of
its common stock to AmeriCom resulting in Diversified becoming
a wholly owned subsidiary of AmeriCom. Since both entities were
under common control the exchange was accounted for at
historical cost in a manner similar to that in a pooling of
interests.
(B) Conversion of Promissory Notes
At June 30, 1998 there were three convertible promissory notes
outstanding for $12,500 each (See Note 6). In August and
September 1998 three new convertible promissory notes were
issued in the amounts of $12,500 each under the same terms as
the previous notes. In October 1998 all six of the convertible
promissory notes were converted to common stock of the
Company at a price of $1.00 per share. The shares issued
aggregated 78,455 including 3,455 shares issued for accrued
interest.
15
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTES 13 - SUBSEQUENT EVENTS (CONT'D)
(C) Merger and Recapitalization
On November 23, 1998 AmeriCom USA, Inc. entered into an
Agreement and Plan of Merger (the "Agreement") with Chatsworth
Acquisition Corporation, a public shell ("Chatsworth") whereby
all of the stockholders of AmeriCom USA, Inc. exchanged all of
their common stock in AmeriCom USA, Inc. for 27,550,000 shares
or 91.83% of the common stock of Chatsworth. The merger was
effective on December 4, 1998 and Chatsworth changed its name
to AmeriCom USA, Inc. Under Generally Accepted Accounting
Principles, a company whose stockholders receive over fifty
percent of the stock of the surviving entity in a business
combination is considered the acquirer for accounting purposes.
Accordingly, the transaction is accounted for as an
acquisition of Chatsworth by AmeriCom USA, Inc. and a
recapitalization of AmeriCom USA, Inc. The financial
statements subsequent to the acquisition will include the
following: (1) the balance sheet will consist of the net assets
of Chatsworth at historical costs and the net assets of the
Company at historical costs; (2) the statement of operations
will consist of the operations of the Company for the entire
fiscal year and the operations of Chatsworth from the
acquisition date. As a result of the merger, 2,100,000 shares
of common stock of the surviving entity were issued to certain
parties who were not previously stockholders of Chatsworth or
the Company (See Note 12), and 350,000 shares were issued to
the prior shareholders of Chatsworth, resulting in of a total
30,000,000 common shares issued and outstanding, just
subsequent to consummation of the merger.
(D) Private Placements
In December 1998 the Company issued a Private Placement
Memorandum, pursuant to Regulation S of the Securities Act of
1933, as amended, to offer 152 units each consisting of 10,000
shares of the Company's Class A Common Stock at a purchase
price of $20,000 per unit or $2.00 per share. A discount of
$0.50 per share was offered to subscribers who paid 100% with
their subscription agreement. In January 1999 the Company
amended such Private Placement Memorandum to increase the units
offered to 452. As of January 29, 1999 the Company has
received subscriptions for approximately 2,350,000 shares
aggregating approximately $3,687,500, at which point the
offering was closed. The Company's net proceeds after placement
discount and commissions but before offering expenses are
estimated to be 90% of the amount raised.
16
AMERICOM USA, INC. AND RMC DIVERSIFIED
ASSOCIATES INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND 1997
NOTES 13 - SUBSEQUENT EVENTS (CONT'D)
(E) Acquisition of Software Company
On January 24, 1999, the effective date, the Company entered
into an Agreement and Plan of Reorganization (the "Agreement")
by and among the Company, Kiosk Acquisition, Inc. ("KAI"),
Kiosk Software, Inc.("Kiosk") and the principal shareholder of
Kiosk (the "Kiosk shareholder"). KAI Acquisition, Inc. is a
wholly owned subsidiary of the Company formed specifically for
the purpose of acquiring Kiosk. Under the terms of the
Agreement, which shall close on or before February 15, 1999,
the Company shall acquire one hundred percent of the issued and
outstanding common stock of Kiosk by issuing shares of the
Company's common stock based on an exchange ratio formula as
follows: (1) the exchange ratio shall be 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 shall be 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 Regulation S Private
Placement (see Note 13). Any unexercised options of Kiosk at
the effective date of the merger shall also be converted to
options of the Company at a similar ratio as the common stock
exchange discussed above. At completion of the merger, all
shares of Kiosk shall be retired and the corporate existence of
Kiosk shall be terminated. On February 8, 1999 the acquisition
was closed.
The principal shareholder of Kiosk shall be employed by KAI
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.
Kiosk specializes in complete kiosk development services
including custom cabinet design and multimedia software
development for a wide variety of applications using its
proprietary Kiosk Operating System.
In contemplation of the merger, the Company has advanced funds
totaling $50,000 to Kiosk. 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, funds were advanced to Kiosk to pay
off its liabilities.
17
AMERICOM USA, INC. AND SUBSIDIARY
INTERIM CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 111,606
Accounts Receivable 33,164
Other Current Assets 8,081
---------
Total Current Assets 152,851
PROPERTY AND EQUIPMENT, NET 49,298
OTHER ASSETS 455
---------
TOTAL ASSETS $ 202,604
---------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts Payable & Accrued Expenses $ 197,100
Payroll Taxes Payable 84,662
Accrued Salaries and Wages 549,317
Franchise Tax Payable 800
Notes & Loans Payable - Related Parties 826,434
Notes & Loans Payable 105,011
---------
Total Current Liabilities 1,763,324
STOCKHOLDERS' DEFICIENCY:
Preferred Stock, $.0001 par value,
20,000,000 shares authorized,
none issued and outstanding
Common Stock, $.0001 par value,
100,000,000 shares authorized,
30,115,000 shares issued and
outstanding 3,011
Common Stock Subscribed,
2,130,000 shares 213
Paid-in Capital 4,240,231
Accumulated Deficit (2,525,175)
-----------
Sub-Total 1,718,280
Less Subscriptions Receivable (3,279,000)
-----------
Total Stockholders' Deficiency (1,560,720)
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ 202,604
---------
See accompanying notes to interim consolidated financial statements.
AMERICOM USA, INC. AND SUBSIDIARY
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(651,125)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 3,197
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (26,397)
Other current assets (6,881)
Increase (decrease) in:
Accounts payable and accrued expenses (19,418)
Payroll taxes payable 31,048
Accrued salaries and wages (16,425)
--------
NET CASH (USED IN) PROVIDED
BY OPERATING ACTIVITIES (686,001)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (38,116)
---------
NET CASH USED IN INVESTING ACTIVITIES (38,116)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 779,448
Increase (decrease) in notes payable 27,508
-------
NET CASH PROVIDED BY FINANCING ACTIVITIES 806,956
-------
NET INCREASE (DECREASE) IN CASH 82,839
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,767
------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 111,606
----------
See accompanying notes to interim consolidated financial statements.
AMERICOM USA, INC. AND SUBSIDIARY
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
REVENUES $ -
----------
TOTAL REVENUES -
----------
EXPENSES:
Salaries & Wages $228,190
Payroll Taxes 21,301
Advertising 800
Audit & Accounting 10,520
Building Rent 12,600
Consulting expense 79,114
Depreciation expense 3,197
Insurance 16,135
Legal 77,364
Other general and administrative expenses 38,886
Outside Services 55,840
Telephone expense 21,802
Travel expense 38,398
-------
TOTAL EXPENSES 604,147
---------
OPERATING LOSS (604,147)
----------
OTHER INCOME (EXPENSE):
California Franchise Tax (1,600)
Interest expense (42,421)
Vendor finance charges (1,236)
Payroll & Franchise Tax penalties and interest (1,731)
NET OTHER EXPENSE (46,978)
--------
NET LOSS $(651,125)
See accompanying notes to interim consolidated financial statements.
AMERICOM USA, INC. AND SUBSIDIARY
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
June 30,
1998 4,500,000 $4,500 - $ - 10,000 $10,000 $133,007 $(1,874,050) $ - $(1,560,720)
Acquisition
of DAI
by AmeriCom
USA 5,000,000 5,000 - - (10,000) (10,000) 5,000 - - 0
Conversion
of promis-
sory notes
into common
stock 78,4555 78 - - - - 78,377 - - 78,455
Stock sold
prior to
merger 631,000 631 - - - - 538,530 - - 539,161
Reverse merger
with Chats-
worth Acqui-
sition Cor-
poration 19,790,545 (7,209) - - - - 8,042 - - 833
Stock sold
after
merger 115,000 11 - - - - 182,488 - - 182,499
Stock
subscribed - - 2,130,000 213 - - 3,294,787 - (3,279,000) 16,000
Net Loss,
7/1/98-
12/31/98 - - - - - - - (651,125)
Balance,
December 31,
1998 30,115,000 $3,011 2,130,000 $213 - $- $4,240,231 $(2,525,175) $(3,279,000) $(1,560,720)
See accompanying notes to interim consolidated financial statements.
AMERICOMUSA, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles and the rules and regulations of
the Securities and Exchange Commission for interim financial
information. Accordingly, they do not include all the
information and footnotes necessary for a comprehensive
presentation of financial position and results of operations.
It is managements's opinion, however, that all
material adjustments (consisting of normal recurring
adjustments) have been made which are necessary for a fair
financial statements presentation. The results for the interim
period are not necessarily indicative of the results to be
expected for the year.
For further information, refer to the combined
financial statements and footnotes included in the
company's December 4, 1998 Form 8-K, as amended, for
the years ended June 30, 1998 and 1997.
NOTE 2 ACQUISITION OF RMC DIVERSIFIED ASSOCIATES
INTERNATIONAL, LTD.
On July 15, 1998, the Board of Directors of RMC
Diversified Associates International, Ltd.
("Diversifed") and AmeriComUSA, Inc. ("AmeriCom")
elected to execute a stock swap, whereby six
stockholders, three of whom were related parties at
that date, representing 100% of the outstanding stock
of Diversified, exchanged their common stock for
common stock of AmeriCom at a ratio of 500 to 1.
Diversified then issued 10,000 shares of its common
stock to AmeriCom, resulting in Diversified becoming a
wholly owned subsidiary of AmeriCom. Since both
parties were under common control, the exchange was
accounted for at historical cost in a manner similar
to that in a pooling of interests.
NOTE 3 CONVERSION OF PROMISSORY NOTES
At June 30, 1998, there were three convertible
promissory notes outstanding for $12,500 each. In
August and September, 1998, three new convertible
promissory notes were issued in the amounts of $12,500
each under the same terms as the previous notes. In
October, 1998, all six of the convertible promissory
notes were converted to common stock of the Company at
a price of $1.00 per share. The shares issued
aggregated 78,455 including 3,455 shares issued for
accrued interest.
NOTE 4 MERGER AND RECAPITALIZATION
On November 23, 1998, AmeriComUSA, Inc.
("AmeriCom") entered into an Agreement and Plan of
Merger (the "Agreement") with Chatsworth Acquisition
Corporation, a public shell ("Chatsworth") whereby
all of the stockholders of AmeriCom exchanged all of
their common stock in AmeriCom for 27,550,000 shares,
or 91.83%, of the common stock of Chatsworth. The
merger was effective on December 4, 1998, and
Chatsworth changed its name to AmeriComUSA, Inc.
Under Generally Accepted Accounting Principles, a
company whose stockholders receive over fifty percent
of the stock of the surviving entity in a business
combination is considered the acquirer for accounting
purposes. Accordingly, the transaction is accounted
for as an acquisition of Chatsworth by AmeriCom and a
recapitalization of AmeriCom. The financial
statements subsequent to the acquisition include the
following: (1) the balance sheet consists of the net
assets of Chatsworth at historical costs and the net
assets of the Company at historical costs; (2) the
statement of operations consists of the operations of
the Company for the six months starting July 1, 1998,
and the operations of Chatsworth from the acquisition
date, December 4, 1998. As a result of the merger,
2,100,000 shares of common stock of the surviving
entity were issued to certain parties who were not
previously stockholders of Chatsworth or the Company,
and 350,000 shares were issued to the prior
shareholders of Chatsworth, resulting in a total of
30,000,000 common shares issued and outstanding, just
subsequent to consummation of the merger.
NOTE 5 PRIVATE PLACEMENTS
In December, 1998, the Company issued a Private
Placement Memorandum, pursuant to Regulation S of the
Securities Act of 1933, as amended, to offer 152 units
each consisting of 10,000 shares of the Company's
Class A Common Stock at a purchase price of $20,000
per unit or $2.00 per share. A discount of $0.50 per
share was offered to subscribers who
paid 100% with their subscription agreement. In
January, 1999, the Company amended such Private
Placement Memorandum to increase the units offered to
452. As of January 29, 1999, the Company had received
subscriptions for approximately 2,350,000 shares
aggregating $3,687,500, at which point the offering
was closed. The Company's net proceeds after
placement discount and commissions but before offering
expenses are estimated to be 90% of the amount raised.
NOTE 6 SUBSEQUENT EVENT
Acquisition of Software Company
On January 24, 1999, the effective date, the
Company entered into an Agreement and Plan of
Reorganization (the "Agreement") by and among the
Company, Kiosk Acquisition, Inc. ("KAI") , Kiosk
Software, Inc. ("Kiosk") and the principal
shareholder of Kiosk (the "Kiosk shareholder"). KAI
is a wholly owned subsidiary of the company formed
specifically for the purpose of acquiring Kiosk.
Under the terms of the Agreement, which closed on
February 8, 1999, the Company acquired one hundred
percent of the issued and outstanding common stock of
Kiosk by issuing shares of the Company's common stock
based on an exchange ratio formula as follows: (1)
the exchange ratio shall be 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 shall be 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 Regulation S Private Placement (see Note
5). Any unexercised options of Kiosk at the effective
date of the merger shall also be converted to options
of the Company at a similar ratio as the common stock
exchange discussed above. At completion of the
merger, all shares of Kiosk shall be retired and the
corporate existence of Kiosk shall be terminated.
The principal shareholder of Kiosk has been
employed by KAI 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.
Kiosk specializes in complete kiosk development
services including custom cabinet design and
multimedia software development for a wide variety of
applications using its proprietary Kiosk Operating
System.
In contemplation of the merger, the Company had
advanced funds totaling $50,000 to Kiosk. On the
closing date, February 8, 1999, the Company advanced
funds totaling $579,950 to Kiosk so that Kiosk could
pay off all its outstanding liabilities.
EXHIBITS
1.1* Certificate of Merger filed December 18, 1998,
with Securities and Exchange Commission as
exhibit to Form 8-K.
10.1 Software development agreement between AMERICOM
USA, INC., a company incorporated under the laws
of Delaware (the "Company") and SYSTEAM SPA.
16.1* Accountant's Letter filed December 18,
1998, with Securities and Exchange
Commission as exhibit to Form 8-K.
23.1 Consent of Accountant
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 Cezar
Chief Executive Officer,
Director
Date: February 18, 1999
</TABLE>
This software development agreement made this 7th day of August,
1998 between AMERICOM USA, INC., a company incorporated under the
laws of Delaware (the "Company") and SYSTEAM SPA, a Developer with
head office in Rome, via degli Eroi di Cefalonla, 37 registered
under the laws of Italy, represented by Nicola Di Tomaso (the
"Developer").
Whereas:
1. The Company has developed certain technology (hereinafter
described as the "Technology") as described in Schedule A" hereof
and including without limiting the generality of the foregoing
(i) All source code and object code comprising any part of or in any
way used in any software applications or modules (collectively, the
"Software") forming the basis of or otherwise used in connection
with the Technology together with all tapes, disks, printouts and
other media on which the Software is stored. (ii) To the extent
reduced to written or other tangible form (including but not limited
to electronic media), all drawings, designs, plans, manuals,
research, specifications, formulae, processes, know-how, technology,
trade secrets and other confidential or proprietary information and
other data and information pertaining in any way to the Technology
or the Software or contemplated improvements, supplements, additions
to the Technology or the Software;
2. The Developer is engaged in information technology
consulting, software development, marketing, licensing and support
of certain software;
3. The Company has requested Developer to continue the
development of the Technology as described in Schedule "A" annexed
hereto;
4. Developer is prepared to undertake such development under
the terms and conditions specified in this Agreement for the
consideration specified in Schedule "B";
In consideration of the premises and mutual covenants herein set
forth and provided for, the parties hereto covenant and agree as
follows:
1. DEFINITIONS
The following words and terms shall have the following meanings
when used herein and such definitions shall apply to both the
singular and plural forms of any such words and terms:
(a) "Acceptance Date" means the date on which the
Software has passed all acceptance tests in accordance
with the provisions of clause 4(2) or has otherwise been
accepted by the Company under clause 4(3).
(b) "Agreement" means this agreement including all
schedules.
(c) "Business Day" means each of Monday, Tuesday,
Wednesday, Thursday and Friday except where any such day
occurs on any federal or provincial statutory holiday
observed in the Province of Ontario.
(d) "Charges" means the Royalty to be paid by Company to
Developer as set out in Schedule "B".
(e) "Commencement Date" means the date
within one year of the execution of this Agreement by the
parties whereinwhich the parties commence the preparation
of the Functional Specifications and on the occurrence
thereof each party shall within two (2) days thereof
confirm same has occurred to the other in writing.
(f) "Detailed Specifications" has the meaning given in
clause 2 and refers to Phase 2 and includes any amended
Detailed Specifications referred to in that clause.
(g) "Functional Specifications" means those capabilities
and functions to be met by the Software in Phase 2.
(h) "Implementation Schedule" means the schedule of
events leading to the implementation of the Software for
Phase 2.
(i) "Licensed Materials" means the Detailed
Specifications, the Software and the System Documentation.
(j) "Licensed Software" means those software programs
conforming to the Functional Specifications to be developed
by Developer and owned by the Company pursuant to the terms
and conditions of this Agreement.
(k) "Party" or "Parties" means either Developer or Company
if used in the singular and both Developer and Company if
used in the plural.
(l) Phase 1" means the preliminary work to be completed
pursuant to an oral agreement between the parties and which
oral agreement is amalgamated and merged with and forms
part of this Agreement.
(m) "Phase 2" means the work to be completed under the
terms of this Agreement.
(n) "Royalty Period" means that period set forth in
Schedule "B" whereinwhich the Developer is paid royalties
as therein set forth for their work.
(o) "System Documentation" means all documents,
flowcharts, printout specifications, file specifications,
test data, screen layouts, data dictionaries, report
layouts and all manuals which collectively contain a
complete description and definition of all operating
conditions of the Licensed Software, together with the
source code listings of the Licensed Software and all
operating and technical reference manuals describing the
operation and management of the Licensed Software.
2. It is agreed and understood that the Developer has completed
some of and will complete the balance of following matters relating
to Phase 1 of the project:
a) make the porting of existing database
(developed in Access) in a SQL Server 7.0 B3 Database;
b) rewrite or change several parts of the code
to increase the performance of the existing software.
c) develop the procedure inside the Database to
increase the performance and the security and consistency
of the data.
d) Redefine several functions/utilities to
increase the performance.
e) Redefine the logic of same systems to increase
the performance and rationalise the functions and data
access.
f) Define and configure the Server farm
3. DEVELOPMENT OF PHASE 2 DETAILED SPECIFICATIONS:
(1) On the Commencement Date, the Company together with the
Developer will commence preparation of the Functional
Specification for Phase 2.
(2) Upon delivery of Functional Specification, Developer
will commence preparation of detailed Licensed Software
design specifications, time lines and acceptance test
criteria (the "Detailed Specifications"). The Detailed
Specifications shall be prepared in accordance with and shall
be consistent with the Functional Specifications.
(3) The Detailed Specifications shall be delivered to the
Company for approval, within 20 Business Days of the
Commencement Date. Upon delivery of the Detailed
Specifications to the Company, the Company shall have 10
Business Days to approve the Detailed Specifications, to
reject that portion of the Detailed Specifications dealing
with acceptance test criteria, to reject the Detailed
Specifications as a whole (specifying in reasonable detail
the manner in which the Detailed Specifications are not in
accordance with the Functional Specifications or the
requirements of this Agreement), or to request specific
clarifications, additions or modifications to the Detailed
Specifications. Such approval, disapproval or request shall
be given in writing within the time period aforesaid, and if
not so given, the Company shall be deemed to have accepted
the Detailed Specifications.
(4) If the Detailed Specifications are rejected in whole or
in part by the Company, or if the Company requests specific
clarification, additions or modifications to the Detailed
Specifications, then Developer shall have a further period of
20 Business Days, or such longer period of time as the
Parties may in writing agree upon, in which to deliver to the
Company amended Detailed Specifications, for approval. Upon
delivery of such amended Detailed Specifications to the
Company, the Company shall have 5 Business Days to approve
the Detailed Specifications, to reject that portion of the
Detailed Specifications dealing with acceptance test criteria
or to reject the Detailed Specifications as a whole,
specifying in reasonable detail the manner in which the
Detailed Specifications are not in accordance with the
Functional Specifications or the requirements of this
Agreement. Such approval or disapproval shall be given in
writing within the time period aforesaid, and if not so
given, the Company shall be deemed to have accepted the
Detailed Specifications.
(5) If the Company accepts or is deemed to have accepted the
Detailed Specifications, or if the Company has rejected only
that portion of the amended Detailed Specifications which
deals with acceptance test criteria, then the Detailed
Specifications (other than such rejected part) shall be
deemed to be incorporated into and shall form a part of the
Functional Specifications. If there is a conflict between the
Detailed Specifications as incorporated and the Functional
Specifications prior to such incorporation, then the Detailed
Specifications shall govern.
(6) If the Company rejects that portion of the amended
Detailed Specifications dealing with acceptance test
criteria, then the Company shall be solely responsible at its
own expense for developing Licensed Software acceptance test
criteria for use as provided in clause 4.
(7) If the Company rejects the amended Detailed
Specifications as a whole, or if Developer fails to deliver
the Detailed Specifications to the Company within 30 Business
Days after the delivery of Functional Specification, or fails
to deliver the amended Detailed Specifications to the Company
as provided in clause 3(3), then the Company may terminate
its obligations under this Agreement, in accordance with the
provisions of clause 6.
3. DEVELOPMENT OF LICENSED SOFTWARE
(1) Following acceptance by the Company of the Detailed
Specifications, Developer shall proceed with the coding and
debugging of the Licensed Software and the development of the System
Documentation, all in accordance with the Implementation Schedule.
In connection therewith, Developer shall provide the services of
such personnel as may be necessary in order to efficiently complete
the foregoing.
(2) The Licensed Software shall at all times remain the
property of the Company it being recognised between the parties that
the Developer is simply expanding on the Technology developed by the
Company.
4. DEVELOPMENT OF TEST DATA AND ACCEPTANCE TESTING
(1) Following the Commencement Date and prior to the
developer starting the activities for the Detailed
specifications, Company, in cooperation with Developer,
shall prepare and provide a complete and comprehensive set
of test data (the "Test Data") for the purpose of testing
the Licensed Software.
(2) Following delivery of the Licensed Software, the
Licensed Software shall be subjected to a series of
acceptance tests, using the test data and/or the acceptance
test criteria accepted by the Company as part of the
Detailed Specifications, or prepared by the Company under
clause 4(1), as the case may be. The Licensed Software shall
be deemed to have passed such series of tests if and when,
the Licensed Software has succesfully passed the acceptance
tests.
(3) The acceptance tests referred to in clause 4(2) shall
be deemed to have been successfully completed if the Company
does not notify Developer in writing of any failure within
fifteen (15) Business Days of the date on which the failure
occurred. If the Company does so notify Developer, Developer
shall forthwith correct the Licensed Software and the
related System Documentation, at no charge to the Company,
and such acceptance test and the appropriate regression test
will be executed and the remaining tests will be continued,
until the test is successfully passed. Upon successful
completion of all acceptance tests, the Company shall so
notify Developer in writing within fifteen (15) days from
the end of tests.
(4) The acceptance date under clause 4(2) shall be deemed
to have occurred on the date upon which the specified
functions have been completed, and in the case of clause
4(3), upon the earlier of expiration of the fifteen (15)
Business Days and that date upon which Company provides
written notice of the acceptance of the Software to Developer.
5. IMPLEMENTATION SCHEDULE
(1) The development of the System Documentation, and the
coding, debugging and acceptance testing of the Licensed
Software shall be done in accordance with the timing set
forth in the Detailed Specifications.
(2) Developer and the Company shall report to each other
at meetings held at regular intervals as to the progress
being made by each of them in relation to the various events
set forth in the Implementation Schedule, and the delays
encountered and the action being taken to recover from such
delays. In connection therewith the Company and Developer
shall each designate one trained and competent person to act
as its liaison contact, with one alternate if desired. No
liaison person shall be changed without the prior written
notice to the other Party.
6. TERMINATION
(1) If either party shall default in the performance of any
of the terms and conditions of this agreement; or shall fail
to do any acts or things by it herein agreed to be done at
the time and in the manner herein provided, or shall do any
act or thing prohibited under the terms of this agreement,
or as hereinafter set forth, provided that in such case, if
such breach or default is curable, the party shall first
have the opportunity to cure any alleged default or breach
within thirty (30) days after receipt of written notice
thereof from the other and thereafter if such breach is not
cured the other party may on written notice terminate this
agreement;
(2) If Developer does not deliver the Detailed
Specifications to the company within the time periods set
out in clause 2(2);
(3) If the Company rejects as a whole the amended Detailed
Specifications. If the Company gives notice of termination,
the Developer shall deliver to the Company a complete set of
the Detailed Specifications, the System Documentation and
the Licensed Software (or such of the same as has then been
created), all working papers, computer files and output then
in its possession and which are applicable to the Licensed
Software, and shall return to the Company all files and
other materials belonging to the Company. The Company shall
thereafter be entitled to use all such material.
a) In the event of the occurance of such an event the
Company shall pay to the Developer an amount equal to
the reasonable billable time expended by the
Developer,at the Developer's commercial rates to the
date of termination.
(5) If the Licensed Software has
not passed all acceptance tests pursuant to
paragraph 4 hereof, within 20 Business Days or
such other time as defined in the test data
after the delivery of the Software by the
Developer, as a result of causes solely
attributable to Developer or to the
functionality of the Licensed Software, then
the Company may by written notice to Developer
either:
(a) accept the Licensed Software
at its then level of performance, or
(b) permit acceptance testing of
the Licensed Software to be
continued for such period as the
Company may designate in the notice.
During such period of time,
Developer shall, at no cost to the
Company, correct the Licensed
Software, following which the
Licensed Software shall again be
subjected to the applicable
acceptance tests or any portion
thereof not previously completed. If
acceptance testing cannot be
completed successfully within the
period set forth in the Company's
written notice, then the Company may
again choose to avail itself of (a)
and (b) of this clause, and so on
from time to time.
(6) The Developer shall have the right to
terminate this agreement subject to paragraph
6(1) hereof if:
(c) The Company does not pay or create
any royalties payable to the Developer
for any 3 consecutive quarters
commencing with the quarter beginning
April 1, 1999;
(d) The Company does not pay any
invoice for royalties owing to the
developer within 90 days of the end of
the quarter for which such royalties
are payable;
(e) If either party shall be
adjudicated a bankrupt or become
insolvent, goes into liquidation either
voluntarily or compulsorily, makes an
assignment or enters into any
composition or scheme or arrangement
for the benefit of its creditors,
discontinues its operations for any
reasons whatsoever, or if a receiver,
whether permanent or temporary, for all
or any part of the its respective
property, shall be appointed by any
Court of competent jurisdiction,
benefit of its creditors, or shall make
a proposal under any bankruptcy or
insolvency legislation, or commence any
proceedings to wind-up or liquidate or
dissolve;
(7) In addition to and without prejudice to the
rights and remedies to terminate this
agreement, the parties shall have the right to
seek judicial enforcement of their rights and
remedies including, and not by way of
limitation, injunctive relief, damages or
specific performance.
(8) No failure or delay on the part of either
party to exercise their respective rights of
termination or cancellation hereunder nor any
default by either party shall be construed to
prejudice the party's right of termination or
cancellation for any subsequent defaults.
7. PROPRIETARY AND TRADE SECRET INFORMATION
(1) Developer acknowledges and agrees to
protect the confidential nature of the
Licensed Materials and any other material
provided to Developer or obtained by
Developer as a result of this Agreement.
(2) Developer acknowledges that the
Licensed Materials are the exclusive
property of the Company and that they
contain proprietary and confidential
information and trade secrets of Company.
Developer agrees that its rights to use the
Licensed Materials are only as set out in
this Agreement. Developer shall not copy,
assign, lend, sell, lease or otherwise
dispose of or transfer to any third party
the Licensed Materials without the prior
written approval of Company except as
necessary for the execution of this agreement.
(3) Developer agrees to keep the
Licensed Materials in a secure manner and
location.
(4) In the event that Developer breaches
any of the foregoing provisions, Developer
agrees to indemnify and hold Company
harmless from all costs, losses or damages
suffered or incurred by Company as a result
of such breach. Developer further
acknowledges that in the event of a breach
of any of the provisions of this section,
damages will not be an adequate remedy, and
that the Company shall be entitled to
equitable relief including an injunction.
(5) The obligations of Developer and the
Company under this section shall survive
termination or expiration of this Agreement
for a period of three (3) years following
termination of this Agreement or any
renewal thereof.
8. TRAINING
Developer shall provide to the
Company, all necessary instruction in
respect of the use and support of the
Licensed Software. The Company may
designate any number of its personnel to
attend such training (not in excess of 5).
Those sessions at which training is to be
provided shall be scheduled at times
mutually agreed upon by Developer and the
Company and shall be conducted at the
Company's offices. The Company shall ensure
that all persons designated by it for
training are available at the times
scheduled for training sessions. Developer
shall ensure that any parts of the System
Documentation required for proper training
of the Company's personnel is delivered to
the Company at least 20 Business Days prior
to commencement of training.
9. SOFTWARE SUPPORT
(1) Developer agrees to provide
to the Company ongoing support of
the Licensed Software and the System
Documentation, for a period equal to
the Royalty Period from the
Acceptance Date.
(2) Support for the Licensed
Software includes:
(a) ongoing correction of
programming errors, so that
the Licensed Software will
at all times conform to the
System Documentation, and if
required, correction of the
System Documentation. To the
extent possible, correction
of programming errors will
be done via on-line
communication between
terminals at Developer's
offices and a terminal at
the Company's offices;
(b) problem
identification and
resolution services
available from qualified
personnel of Developer via
telephone;
(c) the development of
all revisions, enhancements
and upgrades to the Licensed
Software as may from time to
time be required to be made
to the Software by the
Company in accordance with
specifications agreed
between the Parties, and
(d) such other Software
maintenance and support
services as the parties
agree time to time.
10. WARRANTIES, EXCLUSIONS AND LIMITATIONS
(1) Warranties of Developer -- Developer warrants
to Company as follows:
(a) Compliance with Functional
Specifications -- The Licensed
Software will operate and perform in
accordance with the Functional
Specifications.
(b) Limited Product Warranty --
For a period of one year from the
Acceptance Date, the Licensed
Software will be substantially free
of programming errors, logic errors
and other defects in workmanship
attribuatble to work performed by
the Developer, provided that no
modifications are made to the
Licensed Software by persons other
than Developer, its employees or
persons approved by Developer. If
any such defect occurs within the
warranty period, Developer will
promptly correct such defect without
cost or expense to the Company.
11. CONFIDENTIALITY
(1) Definition:
(a) "Confidential Material of
Company" means:
(i) any
information of a
proprietary or
confidential nature,
including but not
limited to financial
and business
information relating
to Company which is
communicated to
Developer at any time;
(ii) any business
systems,
methodologies or
computer programs of
Company of which
Developer may acquire
knowledge in
connection with or
while performing its
obligations under
this Agreement, and
(iii) any other
information or data
received by Developer
from Company that is
identified as
proprietary or
confidential
including the
Technology.
(2) Confidentiality
Obligations -- Developer
acknowledges that the
Confidential Material of Company
(the "Confidential Material") is
confidential and constitutes a
valuable asset of Company. The
Company acknowledges that the
Confidential Material of the
Developer ie., the technology,
techniques and standard used in the
development of the Licensed Software
by the Developer herein is
confidential and constitutes a
valuable asset of the Developer and
as such the Company grants to the
Developer and includes within the
Confidential Material such
technology, techniques and standard
used in the development of the
Licensed Software by the Developer;
(3) Unless otherwise provided
under this Agreement, Developer and
Company shall as applicable:
(a) treat the
Confidential Material
as confidential;
(b) exercise at
care and discretion
with respect to the
Confidential;
(c) take all
necessary steps
including but not
limited to
instruction of
employees and agents
of Developer, to
ensure that the
confidentiality of
the Confidential
Material is maintained;
(d) not disclose,
publish, display or
otherwise make
available to other
persons any of the
Confidential Material
of the other, or
copies thereof except
as necessary for the
execution of this
agreement;
(e) except to the
extent authorized
hereunder in respect
of the Licensed
Software not
duplicate, copy or
reproduce any of the
Confidential Material
without the prior
written consent of
the Company except as
necessary for the
execution of this
agreement;
(3) This clause does not apply to:
(a) information that is in the
public domain or enters the public
domain through no breach of
confidence by Company or by Developer;
(b) information that is available
to one Party from some source other
than the other Party without a
breach of confidence with the other
Party;
(c) general computer technology,
ideas, concepts or tools;
(d) information that is or
becomes a part of the public domain
through no act or omission of the
other Party, or
(e) was in the other Party's
lawful possession prior to the
disclosure and had not been obtained
by the other Party either directly
or indirectly from the disclosing
Party; or
(f) is lawfully disclosed to the
other party by a third party without
restriction on disclosure;
(g) information which has been
provided in the first instance to
someone other than Company or
Developer or their respective
employees;
(h) information disclosed seven
years after the date of this
Agreement, and
(i) any disclosure as may be
required to be made by a court of
competent jurisdiction.
12. COPYRIGHTS, TRADE MARK NOTICES, LEGENDS AND LOGOS
(1) Developer will defend the Company against a
claim that the Licensed Software used as authorised
under this Agreement infringes any patent,
copyright or other proprietary right but restricted
to those parts of the Licensed Software developed
by the Developer.. Developer will indemnify the
Company against all costs, damages and legal fees
finally awarded, on the condition that;
(a) the Company promptly
notified Developer in writing of
the claim, and
(b) Developer has sole control
of the defence and all related
settlement negotiations
(2)If the Licensed Software becomes, or in
Developer's opinion is likely to become, the
subject of a claim or infringement, Developer
shall, at its option and expense, either procure
for the Company the right to continue using the
Licensed Software or replace or modify the Licensed
Software so that it becomes non-infringing. If
neither of the foregoing alternatives is reasonably
available, the Company agrees, on one month's
written notice from Developer, to return the
original copy and all other copies of the Licensed
Software to Developer.
(3) Clauses 12(1) and (2) shall not apply to any
claim based upon:
(a) use of other than a current
unaltered release of the Licensed
Software if the infringement would
have been avoided by the use of a
current unaltered release of the
Licensed Software;
(b) the combination, operation or
use of any Licensed Software with
non-Developer software or data if
the infringement would have been
avoided by the combination,
operation or use of the Licensed
Software with other software or
data, or
(c) the use of the Licensed
Software in other than the operating
environment specified for it by
Developer if the infringement would
have been avoided by use in the
operating environment specified by
Developer.
(4) The same warranties and duties
regarding the full rights to use the Company's
Technology by the Developer are given by the
Company to the Developer.
13. RELEVANT LAW
This Agreement shall be construed and its
interpretation shall be governed exclusively, in all
respects, by the laws of the State of California, U.S.A.
14. GOOD FAITH
Each of the Parties acknowledge to one another that
each respectively intends to perform its obligations as
specified in this Agreement and to proceed in good faith
to the successful conclusion of the project.
15. PARTIES TO ACT REASONABLY
The Parties agree to act reasonably in exercising
any discretion, judgment, approval, or extension of time
which may be required to effect the purpose and intent of
this Agreement.
16. PREVIOUS AGREEMENT
This Agreement shall be deemed to supersede any
prior or collateral undertakings, warranties or
Agreements, whether oral or written, but shall amalgamate
and merge herein the oral agreement between the parties
relating to the completion of Phase 1 which all parties
herby acknowledge as completed.
17. NOTICES
Unless otherwise provided in this Agreement, any
notice under this Agreement shall be in writing and shall
be sufficiently given if delivered personally or mailed by
prepaid registered post to Company or Developer at their
respective addresses set forth below or at such other then
current address as is specified by notice. During a period
of actual or threatened postal disruption or dispute in
the country in which the notice is to be mailed or
received, any such notice may not be mailed, but must be
delivered personally. If notice is given by prepaid post
in accordance with this section, it shall be deemed to
have been received on the third Business Day following the
day of mailing. Notice may also be delivered by fax to the
addressee at the fax number noted below provided that it
shall be deemed to have been received on the next Business
Day following the date of transmission and further
provided that the original notice shall on or before the
next Business Day be delivered personally or mailed by
prepaid registered post to the addressee.
To Developer:
Attention: The President Nicola Di Tomaso
Rome, via degli Eroi di Cefalonla, 37
Italy 00128
To Company:
Robert Cezar
d/b/a TeleSpace
124 South Halcyon Road
Arroyo Grande, California 93420
18. NON-ASSIGNMENT
This Agreement is personal to Company, and Company
may not assign, sublicense or transfer any of its rights
or obligations under this Agreement without the prior
written consent of Developer.
19. HEADINGS
The headings in this Agreement have been inserted
for convenience only, and are not to affect the
interpretation of this Agreement.
20. SEVERABILITY
If any provision of this Agreement is held invalid
under an applicable statute or rule of law, such
invalidity shall not affect other provisions of this
Agreement which can be given effect without the invalid
provisions, and to this end the provisions of this
Agreement are declared to be severable. Notwithstanding
the above, such invalid provision shall be construed, to
the extent possible, in accordance with the original
intent of the Parties.
21. DISPUTE RESOLUTION
Any controversy or claim arising out of or relating to
this contract shall be determined by arbitration in
accordance with the International Arbitration Rules of the
International Chambre of Commerce and to be held in Paris
France.
22. NON-WAIVER
Failure by either Party to enforce any term of this
Agreement shall not be deemed a waiver of enforcement of
that term or any other term.
23. SUCCESSORS AND ASSIGNS
This Agreement shall ensure to the benefit of and
be binding upon the Parties and their respective
successors and assigns.
24. CURRENCY OF CONTRACT
All payments and amounts referred to in this
Agreement shall be in United States currency.
25. CONFLICTS AND GOVERNING LAW
If any of the provisions of this Agreement are
invalid under any applicable statute or rule of law, they
are, to that extent, deemed omitted. This Agreement shall
be governed by the laws of the State of California, U.S.A.
and shall be read with all changes in gender and number as
may be required by the context.
In witness whereof the Parties have signed this
Agreement on the dates as noted below.
Signed, sealed and delivered
in the presence of:
AMERICOM USA, INC.,
Per:_______________
SYSTEAM SPA,
Per:_______________
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 December 4, 1998, of AmeriCom USA, Inc. of our report
as of June 30, 1998, and 1997, dated January 28, 1999 (except for
Note 4 as to which the date is February 10, 1999) relating to the
combined financial statements of AmeriCom USA, Inc. and RMC
Diversified Associates International, Ltd. which appear in such Form
8-K.
WEINBERG & COMPANY PA
Certified Public Accountants
Boca Raton, Florida
February 17, 1999
