SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Pursuant to section 13 or 15 (d) of the
Securities Exchange Act
Americom USA, Inc.
(Exact Name 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, CA 93420
(Address of principal executive offices)
805/542-6700
Registrant's telephone number
CHATSWORTH ACQUISITION CORPORATION
1504 R Street, N.W.
Washington, D.C. 20009
Former name and former address
Check whether the issuer (1) filed all
reports required to be filed
by Section 13 or 15(d) of the Exchange Act
during the last 12 months
(or for such shorter period that the
registrant was required to file
such reports), and (2) has been subject to
such filing requirements
for the past 90 days. Yes X
State the number of shares outstanding of
each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at March 31, 1999
Common Stock, par value $0.0001 32,985,000
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICOM USA, INC. SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1999 (UNAUDITED)
CONTENTS
PAGE 1 - CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
PAGE 2 - CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE
THREE AND NINE MONTH
PERIODS ENDED MARCH 31, 1999
PAGE 3 - CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS'
EQUITY FOR THE NINE MONTHS
ENDED MARCH 31, 1999
PAGE 4 - CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE
THREE AND NINE MONTH
PERIODS ENDED
PAGE 5 - 8 - NOTES TO COMBINED
FINANCIAL STATEMENTS
AmeriComUSA, Inc. and Subsidiaries
Interim Consolidated Balance Sheet
As of March 31, 1999
ASSETS
Current Assets:
Cash $32,067
Accounts Receivable 78,886
Advances Receivable 60,000
Other Current Assets 21,810
Total Current Assets 192,763
Property and Equipment, Net 375,646
Other Assets:
Software 1,580,599
Goodwill 404,447
Total Other Assets 1,985,046
TOTAL ASSETS $2,553,455
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $295,967
Payroll Taxes Payable 2,563
Stock Subscriptions
Refunds Payable 26,000
Accrued Salaries and Wages 172,555
Franchise Tax Payable 800
Notes & Loans Payable -
Related Parties 553,887
Convertible Promissory Notes 478,500
Notes & Loans Payable 51,519
Total Current Liabilities 1,581,791
Stockholders' Equity:
Preferred Stock, $.0001 par value,
20,000,000 shares
authorized, none issued and
outstanding -
Common Stock, $.0001 par value,
100,000,000 shares
authorized, 32,985,000 shares
issued and outstanding 3,299
Common Stock Subscribed, $,0001 par
value 235,000 shares 24
Additional Paid-in Capital 5,199,503
Accumulated Deficit (3,808,162)
Sub-Total 1,394,664
Less Subscriptions Receivable (423,000)
Total Stockholders' Equity 971,664
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,553,455
See accompanying notes to interim consolidated financial statements.
AmeriComUSA, Inc. and Subsidiaries
Interim Consolidated States of Operations for
Three and Nine Month Periods Ended March 31, 1999
As of March 31, 1999
Quarter Year-to-Date
Revenues $6,879 $6,879
Total Revenues 6,879 6,879
Cost of Sales 8,119 8,119
Total Cost of Sales 8,119 8,119
Gross Profit (Loss) (1,240) (1,240)
Expenses:
Salaries & Wages 366,814 595,004
Payroll Taxes 52,429 73,730
Advertising 10,929 11,729
Amortization 107,378 107,378
Audit & Accounting 62,342 72,862
Building Rent 14,688 27,288
Consulting expense 93,638 172,752
Depreciation expense 20,134 23,331
Insurance 12,807 28,942
Legal 91,146 168,510
Other general and
administrative expenses 108,399 147,285
Outside Services 202,997 258,837
Telephone expense 35,012 56,814
Travel expense 74,707 113,105
Total Expenses 1,253,420 1,857,567
Operating Loss (1,254,660) (1,858,807)
Other Income (Expense):
California Franchise Tax (800) (2,400)
Interest expense (21,032) (63,453)
Vendor finance charges (120) (1,356)
Payroll & Franchise Tax
penalties and interest (6,375) (8,096)
Net Other Expense (28,327) (75,305)
Net Loss $(1,282,987) $(1,934,112)
See accompanying notes to interim consolidated financial statements.
AmeriComUSA, Inc. and Subsidiaries
Interim Consolidated Statement of Changes in Stockholders' Equity
As of March 31, 1999
<TABLE>
RMC Diver-
sified Asso-
ciates Inter
AmeriComUSA, Inc. tional, Ltd.
--------------------------------- -------------
Common Stock Common Stock Common Stock Addi- Subscrip-
Issued Subscribed tional Accum- ions
Number Number Number Paid-in ulated Receiv-
Of Shares Amount Shares Amount Shares Amount Capital Deficit able Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
June 30,
1998 4,500,000 $4,500 0 $0 10,000 10,000 $133,007 $(1,874,050) $0 $(1,726,543)
Acquisition
of Diversified
Associates
by AmeriCom
USA, Inc. 5,000,000 5,000 0 0 (10,000) (10,000) 5,000 - - 0
Conversion of
promissory notes
into common
stock 78,455 78 0 0 0 0 78,377 - - 78,455
Stock sold
prior to
merger 631,000 631 0 0 0 0 538,530 0 0 539,161
Reverse merger
with Chatsworth
Acquisition
Corp. 19,790,545 (7,209) 0 0 0 0 8,042 0 0 833
Stock sold
after
merger 1,805,000 181 0 0 0 0 2,466,689 0 0 2,466,870
Acquisition
of Kiosk
Software,
Inc.by
AmeriComUSA,
Inc. 1,000,000 100 1,499,900 1,500,000
Issuance of
common
stock as
compen-
sation 180,000 18 (18) 0
Stock
subscribed 0 0 235,000 24 0 0 469,976 0 (423,000) 47,000
Net Loss,
7/1/98-
3/31/99 0 0 0 0 0 0 0 (1,934,112) 0 (1,934,112)
Balance,
March 31,
1999 32,985,000 $3,299 235,000 $24 0 $0 $5,199,503 $(3,808,162) $(423,000) $971,664
</TABLE>
See accompanying notes to interim consolidated financial statements.
AmeriComUSA, Inc. and Subsidiaries
Interim Consolidated Statement of Cash Flows
As of March 31, 1999
Quarter Year - to-Date
Cash flows from operating activities:
Net Loss $(1,282,987) $(1,934,112)
Adjustments to reconcile net loss
to net cash
used in operating activities:
Amortization 107,378 107,378
Depreciation 20,134 23,331
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (45,722) (72,119)
Advances receivable (60,000) (60,000)
Other current assets (13,729) (20,610)
Increase (decrease) in:
Accounts payable and accrued expenses 98,867 79,449
Payroll taxes payable (82,099) (51,051)
Accrued salaries and wages (376,762) (393,187)
Net cash (used in) provided by
operating activities (1,634,920) (2,320,921)
Cash flows from investing activities:
Purchase of property and equipment (346,482) (384,598)
Net cash used in investing activities (346,482) (384,598)
Cash flows from financing activities:
Sale of common stock 1,749,402 2,528,850
Increase (decrease) in notes payable 152,461 179,969
Net cash provided by financing activities 1,901,863 2,708,819
Net increase (decrease) in cash (79,539) 3,300
Cash and cash equivalents at
beginning of period 111,606 28,767
Cash and cash equivalents at end of period $32,067 $32,067
Supplemental Disclosure of Non-Cash Financing Activities:
In February, 1999, the company issued 1,000,000 shares
of its common stock in exchange for one hundred
percent of the issued and outstanding common stock of
Kiosk Software, Inc. (See note 6)
See accompanying notes to interim consolidated financial statements.
AmeriComUSA, Inc. and Subsidiaries
Notes to Interim Consolidated Financial Statements
As of March 31, 1999
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 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 of AmeriComUSA, Inc. and RMC
Diversified Associates International, Ltd. included in the
company's December 31, 1998 Form 10-KSB for the years ended June
30, 1998 and 1997, and the financial statements and footnotes of
Kiosk Software, Inc. included in the company's April 26, 1999
Form 8-K Current Report, as amended, for the years ended
December 31, 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.
AmeriComUSA, Inc. and Subsidiaries
Notes to Interim Consolidated Financial Statements
As of March 31, 1999
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
nine 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. As of May 6, 1999, subscribers had cancelled 310,000
shares aggregating $500,000. As of May 6, 1999, the Company had
received $2,764,500 of the remaining $3,187,500. The Company's
net proceeds after placement discount and commissions but before
offering expenses are estimated to be 90% of the amount raised.
AmeriComUSA, Inc. and Subsidiaries
Notes to Interim Consolidated Financial Statements
As of March 31, 1999
NOTE 6 ACQUISITION OF KIOSK SOFTWARE, INC.
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, KAI acquired one hundred percent of the
issued and outstanding common stock of Kiosk through the
issuance of 1,000,000 shares of the Company's common stock based
on an exchange ratio formula as follows: (1) the exchange
ratio was computed by dividing 1,000,000 by the quantity of
outstanding Kiosk common shares just prior to the merger; (2)
the number of shares issued to Kiosk shareholders was equal to
the product of the number of shares of Kiosk owned times the
ratio computed in (1) above. The 1,000,000 numerator of the
exchange ratio shall be adjusted, as defined in the agreement,
based on any stock sales taking place between the effective date
of the Agreement and 180 days after the closing date of the
Agreement, at a price below the $2.00 offering price of the
Regulation S Private Placement (see Note 5). Any unexercised
options of Kiosk at the effective date of the merger were also
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 were retired, the corporate
existence of Kiosk was terminated, and Kiosk Acquisition, Inc.'s
name was changed to Kiosk Software, Inc.
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 Suite.
In contemplation of the merger, the Company had advanced funds
totaling $50,000 to Kiosk. On the closing date, February 8,
1999, additional funds totaling approximately $605,000 were
advanced to Kiosk by the Company so that Kiosk could pay off
substantially all of its outstanding liabilities.
Note 7 CONVERTIBLE PROMISSORY NOTES
On February 12, 1999, the Board of Directors of the Company
authorized issuance of up to $1,500,000 of Convertible
Subordinated Promissory Notes for the purpose of raising liquid
funds for working capital. At a meeting on April 12, 1999 the
Board of Directors approved an increase in the aggregate value
of notes to be issued to $5,000,000. As of May 7, 1999,
$758,500 had been invested by way of purchases of these
promissory notes by individuals who qualify as accredited
investors as defined by the Securities and Exchange Commission.
These notes, payable in full two years after their issuance,
with annual interest of 6%, bear the right to convert to shares
of the Company's common stock at a conversion price of $2.00 for
one share of common stock.
AmeriComUSA, Inc. and Subsidiaries
Notes to Interim Consolidated Financial Statements
As of March 31, 1999
Note 8 STOCK OPTION PLAN
At a meeting of the Board of Directors of the Company held March
26, 1999, the Board adopted a Stock Option Plan to be utilized
for employees and such others as the Board deems necessary and
appropriate. The Plan provides for the issue and distribution of
9,500,000 shares. The Plan is extremely flexible and allows for
custom tailoring for each individual through the issue of
individual Incentive Stock Option Agreements. To date the
Company has issued options totaling 9,371,721 shares. Each
Incentive Stock Option Agreement provides for different vesting
periods.
Note 9 INVESTMENT IN AFFILIATE
On February 26th, 1999 DAI, a wholly owned subsidiary of the
Company, entered into an agreement and plan of reorganization
with Jim and Jon Tech, a California company, to acquire certain
technology. The agreement, and amendment thereto, provides for
DAI to acquire all of the assets of Jim and Jon Tech for
consideration of (i) a total of 200,000 shares of common stock
of the Company to be divided pro rata between the two
shareholders in accordance with their original shareholdings in
Jim and Jon Tech, (ii) options for each of the two shareholders
to purchase 300,000 shares of the common stock of the Company
at an exercise price of $2.00 per share, (iii) $100,000 for
each of the two shareholders in cash, payable in installments,
and (iv) Jon Iverson will serve as president of DAI and Jim
Heintz will serve as chief technological officer of DAI. The
agreement is subject to certain contingencies which have not yet
been met and there is no assurance that the transaction will be
closed. As of March 31, 1999, advances totaling $60,000 had
been paid to Iverson and Heintz.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS:
At a meeting of the Board of Directors held on April 14,
1999 it was resolved that the registrant's fiscal year shall
commence on July 1 each year and finish on June 30 the following
year. Accordingly, all references to fiscal year in this
discussion relate to the present fiscal year ending June 30, 1999.
In the three month period ended March 31, 1999 the
registrant generated revenue of $6,879 from business operations.
This revenue was generated almost entirely by the registrant's
Kiosk Software, Inc. subsidiary. Kiosk was acquired effective
February 8, 1999 and its income and expenses are consolidated
with the registrant's from that date. The ongoing operations of
the registrant, other than Kiosk Software, Inc., generated only
insignificant revenue. During the period under review the
registrant incurred substantial administrative costs and costs
arising from the development of its Adcast advertising billboard
service, which did not however reach the stage of revenue
generation. During the period following its acquisition by the
registrant, Kiosk Software, Inc. incurred continuing operational
and administrative expenses associated with its pre-existing
business.
Future prospects for the registrant's financial condition
and results of operations will be overwhelmingly dependent on
future developments which were not relevant during the period
ended March 31, 1999. In particular, the operational rollout
of the AdCast advertising billboard service, which had not
commenced as of March 31, 1999, anticipates generating revenues
commencing at the end of the fourth quarter of fiscal 1999 or
the beginning of the following quarter.
Similarly, future expenses will increase to reflect the
operational rollout of Adcast while costs associated with
technical enhancement of the service continue. The registrant's
profitability will also be impacted by the revenues and expenses
of Kiosk Software, Inc., a subsidiary company acquired in
February 1999, which is engaged in the development of software
for public access computer terminals. To date Kiosk Software
has incurred operating losses but anticipates growing revenues
in the last quarter of fiscal 1999 and beyond.
The Company's operations in future periods will be
dependent upon the availability of adequate liquid funds for capital
expenditures and to meet income deficits associated with the
operational roll-out of the Adcast advertising service. In
order to meet its need for sufficient liquid funds, the Company has made the
following arrangements.
First, on January 29, 1999, the Company completed its
offering of 2,350,000 shares of its common stock to non-United
States residents for an aggregate subscription price of $3,687,500,
pursuant to Regulation S. As a result of the delays in getting
NASD Regulation approval to begin trading the Company's securities on
the OTC Bulletin Board, certain Regulation S investors have
withdrawn their stock subscriptions pursuant to the agreement with them
resulting in an aggregate of 2,040,000 shares sold for an aggregate
subscription price of $3,187,500. Of the total subscribed, $423,000 of the
subscription price has not yet been received in cash and is
receivable within 10 days of the Company's clearance for trading of
its common stock on the NASD OTC Bulletin Board.
Second, the Company has authorized the issuance of up
to $5 million of convertible subordinated promissory notes to
individuals who qualify as accredited investors as defined by the
Securities and Exchange Commission. These notes, which are payable
in full after two years, and which bear interest at 6% per annum,
bear the right to convert to shares of the Company's common
stock at a conversion price of $2.00 for one share of common stock ($.0001
par value). To date, $758,500 has been received by way of sales of
these promissory notes.
The Company considers that existing commitments of
equity and debenture financing will be adequate to meet the
Company's operational funding requirements for the next 12
months. However, there can be no guarantee that these sources
of funding will be realized, nor that internally generated funds
will be developed sufficiently quickly to meet the registrant's
needs when externally generated funds are exhausted.
The Company's income will be heavily dependent upon
sales of advertising inventory on Adcast billboards and the successful
delivery of that advertising. The Company has not sold or
delivered paid advertising through its Adcast billboard service but now
anticipates sales in the final quarter of fiscal 1999. However,
there is no assurance that such sales will be realized.
Prospective sales of Adcast advertising are dependent upon both the ability of
the Company to sell and deliver Adcast services and the continued
development of the overall market for Internet advertising services
and Internet related commerce.
During the comparable three month period of fiscal 1998 the
registrant earned no revenue and was not engaged in similar
activities. Therefore, no meaningful comparison can be made for
the operating results of the registrant between the two subject
periods, nor between the first nine months of fiscal 1998 and
the first nine months of fiscal 1999.
SUBSEQUENT EVENTS
On April 30, 1999 the Company acquired sole title to the
technology known as MyLine and InstAccount, pursuant to the
Agreement of Purchase and Sale and Exclusive Licensing of
Technology with Americom, Ltd. dated March 11, 1999.
The Agreement provides for the Company to pay aggregate
consideration of (i) $538,000 in cash over a two year term, (ii)
500,000 shares of common stock of the Company and (iii)
re-conveyance of all shares held in Enhanced Service Providers,
LLC. In exchange, Americom Ltd. has conveyed all right title
and interest to the MyLine and InstAccount technology, including
worldwide marketing rights, and assigned all trademarks and
contracts relating to MyLine and InstAccount, to the Company.
The Company has assumed certain continuing obligations relating
to the assigned contracts. Americom Ltd. has also undertaken
not to compete with the Company in communications business or
solicit existing MyLine customers.
MyLine is an enhanced, feature rich, remotely programmable
personal telecommunications system. InstAccount is a real time
communications accounting and management tool.
PART II OTHER INFORMATION
Items 1 through 5.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b)Reports on Form 8-K
Form 8-K/A filed February 18, 1999 incorporating combined
financial statements of AmericomUSA and RMC Diversified
Associates International, Ltd. as of June 30, 1997 and 1998, and
unaudited financial statements of AmericomUSA, Inc. and
subsidiary as of December 31, 1998.
Form 8-K filed February 23, 1999 reporting acquisition of Kiosk
Software, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AMERICOM USA, INC.
By: /s/ Robert Cezar
Chief Executive Officer
By: /s/ David Loomis
Chief Financial Officer
Dated: May 15, 1999
