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 December 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 0-023769 52-2068322
(State or other Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
5900 Hollis Street, Suite R-1
Emeryville, CA 94608
------------------------------------------
(Address of principal executive offices)
805/542-6700
-----------------------------
Registrant's telephone number
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 No _____
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 January 31,2000:
Common Stock, $0.0001 par value 42,059,434
<PAGE>2
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION PAGE NO.
Item 1: Financial Statements:
Unaudited Consolidated Balance Sheets-
December 31, 1999 and June 30, 1999 3
Unaudited Consolidated Statements of Operations -
Three and six months ended December 31, 1999
and December 31, 1998 4
Unaudited Consolidated Statement of Changes
in Stockholders' Equity for the Six
Months ended December 31, 1999 5
Unaudited Consolidated Statements of Cash
Flows-Six months ended December 31, 1999
and December 31, 1998 6
Notes to Unaudited Consolidated Financial Statement 7-9
Pro Forma Condensed Consolidated Balance Sheet
as of December 31, 1999 10
Pro Forma Condensed Consolidated Statement of
Operations for the Three Months ended December
31, 1999 11
Notes to ProForma Consolidated Financial Statements 12
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-16
PART II. OTHER INFORMATION
Item 5: Other Information 17
Item 6: Exhibits and Reports on Form 8-K 18
Signature 19
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<PAGE>3
AmeriComUSA, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
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December 31,1999 June 30,1999
ASSETS unaudited unaudited
----------------- ---------------
Current Assets:
Cash $ 99,528 $ 5,497
Accounts Receivable 1,024,570 87,749
Other Current Assets 986,511 10,338
--------------- -------------
Total Current Assets 2,110,609 103,584
Property and Equipment, Net 583,426 537,223
Other Assets
Goodwill and Other Intangibles, Net 3,300,116 3,817,752
--------------- -------------
$ 5,994,151 $ 4,458,559
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Short Term Debt $ 189,211 $ 1,124,096
Accounts Payable 1,208,488 1,522,420
Accrued Liabilities 1,156,018 233,620
--------------- -------------
Total Current Liabilities 2,553,717 2,880,136
Long-Term Debt 1,903,580 200,000
--------------- -------------
Total Liabilities 4,457,297 3,080,136
Stockholders' Equity (Deficit):
Preferred stock, $.0001 par value; Authorized 10,000,000 shares
no shares issued or outstanding
Common stock, $.0001 par value; 100,000,000 shares authorized 3,697 3,457
36,970,000 and 34,569,284 shares issued and outstanding at December 31, 1999
and June 30, 1999, respectively
Additional Paid-In Capital 15,365,437 10,950,015
Accumulated Deficit (13,832,280) (9,575,049)
--------------- -------------
Total Stockholders' Equity (Deficit) 1,536,854 1,378,423
--------------- -------------
$ 5,994,151 $ 4,458,559
=============== =============
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<PAGE>4
AmeriComUSA, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations
(Unaudited)
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Three Months Ended Six Months Ended
December 31 December 31 December December
1999 1998 1999 1998
----------------- ----------------- ------------------ ------------------
Revenues: $ 391,518 $ 656,273
Total Revenues 391,518 656,273
------------------ ----------------- ------------------ ------------------
Costs and Expenses:
Cost of sales-- 154,538 828 376,829 828
Selling, general and administrative 1,802,659 445,807 3,840,515 623,011
Amortization of Goodwill/other intangibles 323,190 2,715 641,557 3,197
------------------ ----------------- ------------------ ------------------
Operating Loss (1,888,869) (449,350) (4,202,628) (627,036)
Interest Expense (31,782) (2,958) (54,271) (9,689)
Loss before Income Taxes (1,920,651) (452,308) (4,256,899) (636,725)
------------------ ----------------- ------------------ ------------------
Net Loss $(1,920,651) $ (452,308) $(4,256,899) $ (636,725)
================== ================= ================== ==================
Net loss per share--basic and diluted (0.05) N/A (0.12) N/A
================== ================= ================== ==================
Shares used in per share computations-- 36,393,800 36,268,800
basic and diluted `
================== ================= ================== ==================
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<PAGE>5
AmeriComUSA, Inc. and Subsidiaries
Interim Consolidated Statement of Changes in Stockholders' Equity
For the Six Months Ended December 31, 1999
(Unaudited)
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AmeriComUSA, Inc.
Common Stock Additional Total
Issued Paid-in Accumulated Stockholders
Shares Amount Capital Deficit Equity
------------------ --------- ------------- ---------------- --------------
Balance, September 30, 1999 35,716,217 $ 3,572 $12,960,683 $ (11,911,629) $ 1,052,626
Issuance of common stock for cash 1,191,045 119 2,279,278 $ 2,279,397
Issuance of common stock for services 62,738 125,476 $ 125,482
Net Loss, three months ended 12/31/99 (1,920,651) (1,920,651)
---------------- -------- ------------- --------------- ---------------
Balance, December 31, 1999 36,970,000 $ 3,691 $15,365,437 $ (13,832,280) $ 1,536,854
================ ======== ============= =============== ===============
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<PAGE>6
AmeriComUSA, Inc. and Subsidiaries
Condensed and Consolidated Statement of Cash Flow
(Unaudited)
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SIX MONTHS ENDED
-------------------------------
December 31 December 31
1999 1998
-------------- -------------
Cash Flows From Operating Activities
Net loss (4,256,899) (636,725)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 641,557 3,197
Changes in assets and liabilities:
Accounts receivable (1,134,811) (26,397)
Other current assets (73,552) (7,981)
Accounts payable & Accrued liabilities 613,863 70,047
----------- -----------
Net cash used in operating activities (4,209,842) (597,859)
----------- -----------
Cash Flows From Investing Activities
Purchases of property and equipment (583,426) (49,298)
----------- -----------
Net cash used in operating activities (583,426) (49,298)
----------- -----------
Cash Flows From Financing Activities
Proceeds from sale of common stock 4,118,604 732,274
Proceeds from (repayment of) borrowings 768,695 (2,203)
----------- -----------
Net cash provided by financing activities 4,887,299 730,071
----------- -----------
Net increase in cash 94,031 82,914
----------- -----------
Cash and cash equivalents at beginning of period 5,497 28,591
----------- -----------
Cash and cash equivalents at end of period 99,528 111,505
=========== ===========
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<PAGE>7
AmeriComUSA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
As of December 31, 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed 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 management's opinion, however, that all 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 consolidated financial statements and
footnotes included in the company's Form 10-KSB for the year ended June 30,
1999.
NOTE 2 - SUBSCRIPTION AGREEMENT
On July 29, 1999 the Company entered into a subscription agreement for the sale
of 1,250,000 shares of the Company's common stock for total proceeds of
$2,500,000. The Agreement provided for the sales price to be held in escrow, and
conditioned release of the funds and completion of the sale upon the Company'
stock being listed for trading on the NASD OTC Bulletin Board.
NOTE 3 - ACQUISITION OR DISPOSITION OF ASSETS
On September 27, 1999 AmeriComUSA, Inc. (`the Company') executed an amended
Merger and Recapitalization Agreement and Plan of Reorganization with
digiCities, Incorporated (`the Agreement'). The Agreement was initially entered
into on August 2, 1999 but subsequently re-negotiated and amended. The Agreement
was concluded pursuant to the Memorandum of Understanding reached with
digiCities on July 2, 1999 and previously reported on Form 8-K.
The Agreement provides for the Company to acquire all of digiCities' issued and
outstanding common stock in exchange for 3,500,014 shares of AmeriComUSA's Class
A common stock. In addition, AmeriComUSA will allocate options to purchase
1,500,000 shares of its Class A common stock to digiCities employees, pursuant
to AmeriComUSA's employee stock option plan. Following completion of the
acquisition, digiCities, Inc. will cease to exist as an independent entity.
<PAGE>8
AmeriComUSA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
As of December 31, 1999
Completion of the merger is contingent upon satisfaction of certain conditions
detailed in the Agreement, including the obtaining of a Fairness Order and
permit qualification for the merger from the California Department of
Corporations.
The Agreement also provides for the Company's authorized capital stock to be
increased to 120,000,000 shares of which 99,000,000 shares will be designated as
Class A Common Stock, $0.0001 par value, 1,000,000 will be designated as Class B
Common Stock, $0.0001 par value and 20,000,000 will be designated as Preferred
Stock, $0.0001 par value. The Class A Common Stock shall have all the rights,
preferences ad privileges granted to common stock under the General Delaware
Corporations Law while the Class B Common Stock and Preferred Stock shall have
such rights, preferences and privileges and shall be issued in such numbers as
the Company's Board of Directors may determine from time to time.
Simultaneously with the merger with digiCities, all the outstanding shares of
the Company's Common Stock will be converted and exchanged to shares of Class A
Common Stock, $0.0001 par value on a one-for-one basis.
NOTE 4 - SUBSCRIPTION AGREEMENT
On October 29, 1999 the Company entered into a subscription agreement for an
aggregate amount of 500,000 shares of the Company's Common Stock, at an offering
price of $2.00 per share.
NOTE 5 - CONVERTIBLE PROMISSORY NOTE
On December 6, 1999 the Company entered into an agreement to pay One Million
Dollars ($1,000,000), together with interest. Holder shall have the right at any
time to convert the entire outstanding indebtedness hereunder in whole into
fully paid nonassessable shares of Class A Common Stock at $2.00 per share.
NOTE 6 - STOCKHOLDERS' EQUITY
(A) Issuance of Common Stock for cash
During the three months ended December 31,1999 stock was sold and issued for
cash. The shares were issued aggregating $2,279,278. The total aggregated shares
issued were 1,191,045.
<PAGE>9
AmeriComUSA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
As of December 31, 1999
(B) Issuance of Common Stock for Services
During the three months ended December 31, 1999 stock was issued for services.
The shares were issued aggregating $125,479. The total aggregated shares issued
were 62,738.
<PAGE>10
AMERICOM USA, INC. AND SUBSIDIARIES
PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEETS
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Pro Forma
December 31 June 30
ASSETS 1999 1999
------ ----------------- --------------
Current Assets:
Cash $ 88,913 $ 5,497
Accounts Receivable 1,684,399 87,749
Other Current Assets 990,138 10,338
----------------- --------------
Total Current Assets 2,763,450 103,584
Property and Equipment, Net 713,730 537,223
Other Assets
Goodwill and Other Intangibles, Net 10,099,445 3,817,752
----------------- --------------
$ 13,576,625 $ 4,458,559
================= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Short Term Debt $ 287,000 $ 1,124,096
Accounts Payable 1,268,476 1,522,420
Accrued Liabilities 1,722,811 233,620
----------------- --------------
Total Current Liabilities 3,278,287 2,880,136
Long-Term Debt 1,903,580 200,000
----------------- --------------
Total Liabilities 5,181,867 3,080,136
Stockholders' Equity (Deficit):
Preferred stock, $.0001 par value; Authorized 10,000,000 shares
no shares issued or outstanding
Common stock, $.0001 par value; 100,000,000 shares authorized 4,047 3,457
40,047,014 and 34,569,254 shares issued and outstanding at
December 31, 1999 and June 30, 1999, respectively
Additional Paid-In Capital 22,394,181 10,950,015
Accumulated Deficit (14,003,470) (9,575,049)
----------------- --------------
Total Stockholders' Equity (Deficit) 8,394,758 1,378,423
----------------- --------------
$ 13,576,625 $ 4,458,559
================= ==============
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<PAGE>11
AmeriComUSA, Inc. and Subsidiaries
Pro Forma
Condensed Consolidated Statement of Operations
(Unaudited)
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Three Months Ended Six Months Ended
-------------------------------------- ---------------------------------------
December 31 December 31 December 31 December 31
1999 1998 1999 1998
------------------ ----------------- ------------------ ------------------
Revenues: $ 817,300 $ 2,309,775
Total Revenues 817,300 2,309,775
------------------ ----------------- ------------------ ------------------
Costs and Expenses:
Cost of sales 171,752 828 474,115 828
Selling, general and administrative 2,246,319 445,807 4,733,952 623,011
Amortization of Goodwill/other intangibles 685,088 2,715 1,365,361 3,197
------------------ ----------------- ------------------ ------------------
Operating Loss (2,285,859) (449,350) (4,263,653) (627,036)
Interest Expense (31,782) (2,958) (54,271) (9,689)
Loss before Income Taxes (2,317,641) (452,308) (4,317,924) (636,725)
------------------ ----------------- ------------------ ------------------
Net Loss $(2,317,641) $ (452,308) $(4,317,924) $ (636,725)
================== ================= ================== ==================
Net loss per share--basic and diluted (0.06) N/A (0.11) N/A
================== ================= ================== ==================
Shares used in per share computations--
basic and diluted 39,893,800 39,768,800
================== ================= ================== ==================
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<PAGE>12
AMERICOM USA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) The pro forma adjustments to the consolidated balance sheet give effect
to the merger as if it occurred on December 31, 1999. The purchase
price has been computed using a $2.00 per share fair market value of
the 3,500,014 AmeriCom USA, Inc. common stock shares to be issued to
the digiCities, Inc. stockholders. The $2.00 value is based upon recent
issuances of AmeriCom USA, Inc. common stock for cash pursuant to
private placements.
The purchase price differential which was set at 6/30/99 is computed as
follows:
Purchase price $7,000,028
digiCities, Inc. stockholders' deficiency 238,019
------------
Purchase price differential $7,238,047
==========
Since the merger has not yet closed, the Company has allocated the
purchase price based on the assumption that the historical costs of the
recorded assets and liabilities to be acquired approximate the fair
market value of those assets and liabilities at the merger date.
Accordingly, the purchase price differential of $7,238,047 has been
allocated on a preliminary basis to goodwill pending the development of
additional fair market value data of the acquiree's customer base
intangible asset. The goodwill will be amortized over a period of five
years using the straight-line method.
(2) Amortization of acquired goodwill is based on the assumption that the
acquisition occurred on October 30, 1998, the inception date of
digiCities, Inc.
The pro forma effect of amortization of acquired goodwill over the next
five years is as follows:
2000 $1,447,609
2001 1,447,609
2002 1,447,609
2003 1,447,609
2004 485,382
-----------
$6,272,974
==========
<PAGE>13
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
This discussion, other than the historical financial information, may
consist of forward-looking statements that involve risks and uncertainties,
including quarterly fluctuations in results, the timely availability of new
products and internet services, the impact of competitive products and pricing,
and the other risks set forth from time to time in the Company's SEC reports,
including this report on Form 10-QSB for the quarter ended December 31, 1999 and
the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30,
1999. Actual results may vary significantly.
RESULTS OF OPERATIONS
In the three-month period ended December 31, 1999 the Company generated
revenue of $391,518 from business operations. Approximately 15% of this revenue
was generated by the Company's Kiosk Software, Inc. subsidiary and 85% by its
AdCast operations. A net loss of $1,920,651 was realized. During the comparable
three-month period of 1998, the Company had not yet commenced generating
revenues and its Kiosk Software subsidiary was not acquired until February 1999;
therefore, only a limited comparison with the prior period is possible. During
the quarter ended December 31, 1998, the Company realized no revenues and a net
loss of $452,308.
During the quarter ended December 31, 1999, the Company incurred
substantial administrative expenses and costs arising from the continuing
development of its Adcast advertising billboard service and costs incurred in
anticipation of the merger with digiCities, which was completed on January 1,
2000. Kiosk Software, Inc. also incurred continuing operational and
administrative expenses associated with its pre-existing business.
Sales and marketing expenses increased to $275,459 in the quarter ended
December 31, 1999 compared with $68,069 in the comparable three months of 1998
as the Company rolled out its AdCast advertising service.
The Company does not differentiate research and development expenses
from its other administrative expenses, since the Company as a whole has to date
been oriented to the development of its AdCast and associated technologies.
Comparing the six-month period ended December 31, 1999 with the same
period of 1998, revenues in 1999 were $656,273 reflecting the first six months'
revenues from the AdCast service, whereas no revenues were realized in the six
month period ended December 31, 1998. A net loss of $4,256,899 was realized in
the six months ending December 31, 1999, compared with a smaller loss of
$636,725 in the comparable period of 1998.
During the six months ended December 31, 1999 expenses totaled
$4,858,901 reflecting significantly higher administrative costs associated with
the operational roll out of AdCast and Kiosk related products; neither of which
existed in the first six months of 1998 when expenses totaled only $627,036.
Sales and marketing costs rose from $91,134 in the six months ended December 31,
1998 (when these expenditures were limited to preliminary branding and product
formulation work only), to $505,171 in the six months ended December 31, 1999
when the Company was fully engaged in promoting the sale of its AdCast and
related products.
Future prospects for the Company's financial condition and results of
operations will be dependent on the speed of adoption and success of the AdCast
advertising billboard service, which commenced in July 1999. It is anticipated
that AdCast will generate growing revenues during the last two quarters of
fiscal 2000. Similarly, revenues from the Company's Kiosk and digiCities related
products are expected to grow in the remaining two quarters of fiscal 2000.
<PAGE>14
Future expenses will increase to reflect the operational rollout of
Adcast while costs associated with technical enhancement of the service, sales
channel and branding development are expected to accelerate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations in future periods will be dependent upon the
availability of adequate operating funds for capital expenditures and to meet
income deficits associated with the continued operational roll-out of the Adcast
advertising service and to a lesser extent, the digiCities service. In order to
meet its need for sufficient operating funds, the Company has made the following
arrangements.
On October 29, 1999 the Company entered into an agreement with Synapse
Capital, LLC ("Synapse") for the purchase by Synapse's Fund I of 500,000 shares
of the Company's common stock at a price of $2.00 per share. Synapse also
received an option to purchase 50,000 shares of common stock at $2.00 per share
within the next ten years. In addition Synapse has advanced an additional $1
million to the Company in the form of a loan, convertible to 500,000 shares of
the Company's Class A common stock.
In addition, during the quarter ended December 31, 1999, the Company
accepted subscriptions for a further 691,045 shares of common stock for a total
consideration of $1,279,278 from non-U.S. persons and accredited investors
pursuant to regulations S and D of the Securities Act, respectively.
The Company considers that existing commitments of equity and loan
financing together with anticipated additional cash investments, combined with
revenues, 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 quickly enough to meet the Company's needs if externally
generated funds are exhausted or become unavailable.
FACTORS AFFECTING FUTURE OPERATING RESULTS
The Company's results in future periods will be substantially affected
by the Company's acquisition of digiCities, Inc., a company involved in the
production, hosting and mass marketing of commercial web sites. Following
execution of a memorandum of understanding with digiCities on July 2, 1999, the
Company entered into a formal Merger and Recapitalization Agreement And Plan of
Reorganization with digiCities on September 27, 1999. The merger was conditioned
upon shareholder approval, the holding of a Fairness Hearing and obtaining a
qualification permit from the California Department of Corporations.
The hearing took place on December 21, 1999 resulting in the Fairness
Order and qualification permit being granted by the California Department of
Corporations, and shareholder approval for the merger was obtained on December
22, 1999. Consequently the merger was completed on January 1, 2000. Following
the merger, digiCities was merged into the Company and ceased to exist as a
separate entity. Also as a consequence of the completion of the merger and
recpitalization, all outstanding common stock of the Company is being exchanged
on a one-for-one basis for shares of the Company's newly created Class A common
stock and becomes free trading, pursuant to an exemption from registration
provided by the Securities Act 1933, as amended. The free trading status of the
Company's common stock is necessary for obtaining Over-The-Counter trading
status on the National Association of Securities Dealers' OTC-Bulletin Board
system. An application for the Class A common stock to be traded on the
<PAGE>15
OTC-Bulletin Board was submitted on February 8, 2000.
Pro forma, unaudited, interim consolidated financial statements showing
the condition of the Company and digiCities, Inc., as if the acquisition had
become effective as of the quarter ended December 31, 1999, are included with
this filing.
The Company's income will be heavily dependent upon increased sales of
advertising inventory on Adcast billboards and the successful delivery of that
advertising. The Company only sold and delivered paid advertising through its
Adcast billboard service starting in July 1999. There is no assurance that
increased sales of AdCast advertising sales will be realized or sustained, or
successfully completed. 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.
Similarly, following the acquisition of digiCities, Inc., the Company's
future operating results will be heavily dependent upon the ability of the
digiCities operation to sell and effectively deliver web site design and hosting
services. Although digiCities has to date successfully developed and increased
its sales within a short time period, there is no guarantee that such sales will
continue or accelerate.
On October 28, 1999 the Company agreed to issue 400,000 shares of its
common stock to Americom, Ltd. (a Turks and Caicos corporation) in substitution
for its promissory note for $400,000. The Note was originally issued to
Americom, Ltd. as part of the consideration for the re-acquisition by the
Company of the My-Line technology, pursuant to an agreement dated March 11,
1999. As a consequence of the elimination of the $400,000 note liability, the
Company only remains liable for payment of $50,000 pursuant to the re-purchase
agreement. Payment of the remaining $50,000 was rescheduled for payment by
January 26, 1999 by agreement between the parties but has not yet been effected.
IMPACT OF THE YEAR 2000 ISSUE
Overview. Currently installed computer systems and software products
are coded to accept or recognize only two digit entries in the date code field.
These systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result computer
systems and/or software used by many companies and governmental agencies may
need to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
State of readiness. The Company has substantially completed its initial
assessment of the Year 2000 readiness of its information technology ("IT")
systems, including the hardware and software that enable it to provide and
deliver its solutions, and its non-IT systems. AmeriCom's assessment plan
consists of (i) quality assurance testing of its internally developed
proprietary software incorporated in its solutions ("Solutions Software"); (ii)
contacting third-party vendors and licensors of material hardware, software and
services that are both directly and indirectly related to the delivery of The
Company's solutions to its Web publisher and advertiser customers; (iii)
contacting vendors of material non-IT systems; (iv) assessment of repair or
replacement requirements; (v) repair or replacement; (vi) implementation; (vi)
implementation of contingency plans in the event of Year 2000 failures which
include backup systems for both on and off site locations, 24 hour watch using
various software and trained personnel, and ensuring proper emergency procedures
are in place for handling situations we have no control over such as loss of
utility services.
The Company is conducting quality assurance testing to ensure Year 2000
compliance of all new internally developed proprietary code incorporated into
its Solutions Software. The Company plans to perform a Year 2000 simulation on
its Solutions Software during the fourth quarter of 1999, following the
<PAGE>16
implementation of revisions to the Solutions Software planned for the third
quarter of 1999. Based on the results of its Year 2000 simulation test, the
Company intends to revise the code of its Solutions Software as necessary to
improve the Year 2000 compliance of its Solutions Software.
The Company has been informed by many of its vendors of material
hardware and software components of its IT systems that the products used by the
Company are currently Year 2000 compliant. The Company is in the process of
requiring vendors of the other material hardware and software components in its
IT systems to provide written assurances of their Year 2000 compliance. The
Company plans to complete this process during the second half of 1999. The
Company has completed an assessment of the materiality of its non-IT systems and
is in the process of seeking written assurances of Year 2000 compliance from
providers of its material non-IT systems. The Company is also dependent on the
continued functioning of basic services such as electrical utilities, telephony,
mail delivery and transportation in order to conduct its business. While The
Company is taking steps to ensure that the third parties on which it is reliant
are Year 2000 compliant, it cannot predict the probability of such compliance
nor the costs to the Company of non-compliance by those third parties or of
securing alternate services from Year 2000 compliant parties.
Pending completion of its planned Year 2000 simulation test of its
Solutions Software and its program of requesting Year 2000 assurances from
vendors and licensors of material IT and non-IT systems, The Company has not yet
completed its Year 2000 compliance repair or replacement analysis, or its
contingency plans. The Company plans to complete all Year 2000 planning and
analysis before the end of the fourth quarter.
Costs. The Company has not incurred any material expenditures in
connection with identifying or evaluating Year 2000 compliance issues. Most of
its expenses have related to, and are expected to include, the operating costs
associated with time spent by employees in the evaluation process and Year 2000
compliance matters generally. The Company does not now possess the information
necessary to estimate the potential costs of revisions to its Solutions Software
should such revisions be required or the replacement of third-party software,
hardware or services that are determined not to be Year 2000 compliant. Although
The Company does not anticipate that such expenses will be material, such
expenses, if higher than estimated, could have a material adverse effect on the
Company's business, results of operations and financial condition.
Risks. The Company believes that it has established an effective
program to resolve material Year 2000 issues in its sole control in a timely
manner. As aforementioned, however, the Company has not yet completed all phases
of its program and is dependent on third parties whose progress is not within
its control. The failure by such third parties to be Year 2000 compliant could
result in a systematic failure beyond the control of The Company from delivering
its services to its customers, decrease the use of the Internet or prevent users
from accessing the Web sites of its Web publisher customers, which could have
material adverse effect on the Company's business, results of operations and
financial condition. There can also be no assurance that The Company will not
discover Year 2000 compliance problems in our Solutions Software that will
require substantial revisions which could be costly and time-consuming to
remedy. If the Company does not complete any of its currently planned additional
remediation prior to the Year 2000, the Company could experience significant
difficulty in producing and delivering solutions and conducting its business in
the Year 2000 as it has in the past, which could result in lost revenues,
increased operating costs, loss of customers and other business interruptions,
any of which could have a material adverse effect on The Company's business,
results of operations and financial condition. Moreover, the failure to
adequately solve Year 2000 compliance issues could result in claims of
mismanagement, misrepresentation or breach of contract and related litigation,
which could be costly to defend. This potential liability and lost revenue can
not be reasonably estimated at this time.
Contingency Plan. As aforementioned The Company is engaged in an
ongoing Year 2000 assessment and has not yet developed any contingency plans.
The results of the Company's Year 2000 simulation testing and the responses
received from third party vendors and service providers will be taken into
account in determining the nature and extent of any contingency plans.
<PAGE>17
Forward-Looking Statements. The foregoing Year 2000 discussion and the
information contained herein is provided as a "Year 2000 Readiness Disclosure"
as defined in the Year 2000 Information and Readiness Disclosure Act of 1998
(Public Law 105-271, 112 Stat. 2386) enacted on October 19, 1998 and contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements, including without limitation,
anticipated costs and the dates by which The Company expects to complete certain
actions, are based on management's best current estimates, which were made using
assumptions about future events, including the continued availability of certain
resources, third party representations and other factors. However, there can be
no guarantee or assurance that these estimates will be achieved, and actual
results could differ materially. Specific factors that could cause such material
differences include, but are not limited to, the ability to identify and
remediate all relevant systems; results of Year 2000 testing; adequate
resolution of Year 2000 issues by governmental agencies, businesses and other
third parties who are outsourcing service providers, suppliers and vendors of
the Company; unanticipated system costs; and the adequacy of and ability to
implement contingency plans. The "forward-looking statements" made in the
foregoing Year 2000 discussion speak only to the date on which such statements
were made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement was made or to reflect the occurrence of unanticipated
events.
Outcome of the Year 2000 issue. The Company suffered no perceivable
disruption of its business or systems as a consequence of the transition to the
year 2000, and no disruption is expected in future. No significant disruption of
the business partners or shared systems on which the Company's business is
reliant was experienced. It is possible that negative consequences may become
apparent at a future date, but the probability of this is considered remote.
PART II - OTHER INFORMATION
ITEM 1
Not applicable.
ITEM 2
During the three months ended December 31,1999 the Company conducted the
following securities transactions which were deemed exempt from registration
under the 1933 Act:
1,191,045 shares were sold for cash consideration aggregating $2,279,278 to
non-U.S. persons and accredited investors pursuant to Regulations S and D of the
Securities Act, respectively.
ITEM 3
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders of the Company, held December 14, 1999 in
San Luis Obispo, California, the stockholders elected five directors to serve on
the Company's Board of Directors.
The vote for nominated directors was as follows:
<TABLE>
<S> <C> <C> <C>
Nominee For Against Abstain
------------------- ---------- ------- -------
Robert Cezar 25,853,473 0 0
Kenneth Barnett 25,853,473 0 0
Tom Hopfensperger 25,853,473 0 0
Henri Tchen 25,853,473 0 0
Christopher Thomas 25,853,473 0 0
</TABLE>
<PAGE>18
The vote to approve the Company's 1999 Stock Option Plan was as follows:
For Against Abstain
---------- ------- -------
25,853,473 0 0
The vote for ratifying the appointment of Weinberg & Company as the Company's
independent accountants was as follows:
For Against Abstain
---------- ------- -------
25,853,473 0 0
ITEM 5 OTHER INFORMATION
On October 15, 1999, Mr. Tom Hopfensperger (previously with the AdCast Division)
became the Company's President and Chief Operating Officer.
On November 3, 1999, Mr. Tom Seykora agreed to join the Company as its Chief
Financial Officer. Mr. Seykora joined the Company on November 16, 1999.
Subsequent to the end of the quarter, Mr. Seykora resigned from his position as
Chief Financial Officer. Mr. Seykora's duties were assumed by Mr. Hopfensperger.
On December 14, 1999, following the Stockholders' meeting, Tom Seykora and Craig
Machado were appointed to the Company's Board of Directors.
Subsequent to the end of the quarter, Messrs. Barnett, Seykora and Tchen
resigned from the Board of Directors. Messrs. Barnett and Tchen resigned from
the Board because of conflicting personal commitments. Mr. Seykora resigned from
the Board in conjunction with his leaving the Company's employment.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
Form 8-K filed October 11, 1999 reported the signing of the definitive Merger
and Recapitalization Agreement and Plan of Reorganization between the Company
and digiCities, Incorporated.
Form 8-K/Amended filed October 18, 1999 incorporated audited financial
statements for digiCities, Inc. and pro forma, condensed, consolidated financial
statements for the Company and digiCities, Inc.
Form 8-K filed January 14, 2000 reporting the consummation of the merger of the
Company and digiCities, Inc. (Item 2 event dated December 31, 1999) and the
recapitalization of the Company (Item 5 event dated December 31, 1999).
<PAGE>19
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.
Dated: February 14, 2000 By: /s/ TOM HOPFENSPERGER
-----------------------------
Tom Hopfensperger
President and Interim Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10-QSB
FOR THE PERIOD ENDED DECEMBER 31, 1999 FOR AMERICOM USA, INC. AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Jun-30-1999
<PERIOD-END> Dec-31-1999
<CASH> 99,528
<SECURITIES> 0
<RECEIVABLES> 1,024,570
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 986,511
<PP&E> 3,883,542
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,994,151
<CURRENT-LIABILITIES> 2,553,717
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0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 5,994,151
<SALES> 656,273
<TOTAL-REVENUES> 656,273
<CGS> 376,829
<TOTAL-COSTS> 4,482,072
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,271
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<NET-INCOME> (4,256,899)
<EPS-BASIC> (.12)
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