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, 2000
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
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(Address of principal executive offices)
888/542-6700
-----------------------------
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 May 8, 2000:
Class A Common Stock, $0.0001 par value 42,146,746 shares
<PAGE>2
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION PAGE NO.
Item 1: Financial Statements:
Unaudited Condensed Consolidated Balance Sheets-
March 31, 2000 and June 30, 1999 3
Unaudited Condensed Consolidated Statements of Operations Three and
nine months ended March 31, 2000
and March 31, 1999 4
Unaudited Condensed Consolidated Statements of Cash Flows-Three and
nine months ended March 31, 2000
and March 31, 1999 5
Notes to Unaudited Condensed Consolidated Financial Statement 6-7
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
Item 5: Other Information 10
Item 6: Exhibits and Reports on Form 8-K 11
Signature 12
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<PAGE>3
AmeriComUSA, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
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March 31, 2000 June 30,1999
ASSETS unaudited
------------------- -------------------
Current Assets:
Cash $ 514,181 $ 5,497
Accounts and other Receivables 2,032,779 87,749
Other Current Assets 596,064 10,338
------------------- -------------------
Total Current Assets 3,143,024 103,584
Property and Equipment, Net 726,013 537,223
Other Assets
Goodwill and Other Intangibles, Net 9,238,072 3,817,752
------------------- -------------------
$ 13,107,109 $ 4,458,559
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Cash Over Draft $ 108,270 $
Short Term Debt 292,670 1,124,096
Accounts Payable 2,033,387 1,522,420
Accrued Liabilities 1,057,759 233,620
------------------- -------------------
Total Current Liabilities 3,492,086 2,880,136
Long-Term Debt 2,125,782 200,000
------------------- -------------------
Total Liabilities 5,617,868 3,080,136
Refundable Common Stock:
Common Stock; net -- 2,534,064
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 4,207 3,252
42,066,465 and 32,519,284 shares issued and outstanding at
March 31, 2000 and June 30, 1999, respectively
Additional Paid-In Capital 25,414,555 8,416,156
Accumulated Deficit (17,929,521) (9,575,049)
------------------- -------------------
Total Stockholders' Equity (Deficit) 7,489,241 (1,155,641)
------------------- -------------------
$ 13,107,109 $ 4,458,559
=================== ===================
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE>4
AmeriComUSA, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations
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Three Months Ended Nine Months Ended
March 31 March 31 March 31 March 31
2000 1999 2000 1999
------------------- ----------------- ------------------ ----------------
Revenues: $ 282,186 $ 6,879 $ 938,459 $ 6,879
------------------- ----------------- ------------------ ----------------
Total Revenues 282,186 6,879 938,459 6,879
------------------- ----------------- ------------------ ----------------
Costs and Expenses:
Cost of sales-- 320,345 8,119 697,174 8,119
Selling, general and administrative 3,228,723 1,146,043 7,172,951 1,750,189
Amortization of Goodwill/other intangibles 703,550 107,378 1,363,988 107,378
------------------- ----------------- ------------------ ----------------
Operating Loss (3,970,432) (1,254,661) (8,295,654) (1,858,807)
Interest Expense (43,806) (28,327) (58,818) (75,305)
Loss before Income Taxes (4,014,238) (1,282,988) (8,354,472) (1,934,112)
------------------- ----------------- ------------------ ----------------
Net Loss $ (4,014,238) $ (1,282,988) $ (8,354,472) $ (1,934,112)
=================== ================= ================== ================
Net loss per share--basic and diluted (0.10) (0.04) (0.22) (0.07)
=================== ================= ================== ================
Shares used in per share computations-- 41,259,468 31,594,817 37,417,808 28,047,340
basic and diluted
=================== ================= ================== ================
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See accompanying notes to condensed consolidated financial statements
<PAGE>5
AmeriComUSA, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
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Nine Months Ended
-----------------------------
March 31 March 31
2000 1999
------------ -------------
Cash Flows From Operating Activities
Net loss (8,354,472) (1,934,112)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for bad debt 977,508 -
Depreciation and amortization 1,465,550 130,709
Expense incurred on issuance of Common Stock for Services 125,482 -
Changes in assets and liabilities:
Accounts and other receivables (2,922,538) (132,119)
Other current assets (585,726) (20,610)
Accounts payable & Accrued liabilities 1,982,536 (364,789)
------------ -------------
Net cash used in operating activities (7,311,660) (2,320,921)
------------ -------------
Cash Flows From Investing Activities
Purchases of property and equipment (726,013) (384,598)
------------ -------------
Net cash used in operating activities (726,013) (384,598)
------------ -------------
Cash Flows From Financing Activities
Proceeds from sale of common stock 7,991,161 2,528,850
Proceeds from (repayment of) borrowings 555,196 179,969
------------ -------------
Net cash provided by financing activities 8,546,357 2,708,819
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Net increase in cash 508,684 3,300
------------ -------------
Cash and cash equivalents at beginning of period 5,497 28,767
------------ -------------
Cash and cash equivalents at end of period 514,181 32,067
============ =============
Supplemental Information:
Issued 3,500,014 shares of Common Stock for Acquisition of digiCities 7,000,028 -
============ =============
Cash paid for Interest: - -
============ =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>6
AmeriComUSA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
As of March 31, 2000
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's
stock being listed for trading on the NASD OTC Bulletin Board. The Agreement was
extended on December 31, 1999. The conditional release of funds was waived and
the final cash consideration was received on February 16, 2000.
On March 27, 2000 the Company entered into a subscription agreement for the sale
of 100,000 shares of the Company's common stock for total proceeds of $500,000.
NOTE 3 - ACQUISITION OR DISPOSITION OF ASSETS
On January 1, 2000 AmeriComUSA, Inc. (`the Company') consummated 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. digiCities has
subsequently ceased to exist as an independent entity and the Company's
digiCities division now carries on its operations.
The Agreement provided for acquisition of all digiCities issued and outstanding
common stock by the Company in exchange for 3,500,014 shares of AmeriComUSA's
Class A common stock. Additionally, AmeriComUSA allocated options to purchase
1,500,000 shares of its Class A common stock to digiCities employees, pursuant
to AmeriComUSA's Employee Stock Option Plan.
The purchase price has been computed using a $2.00 per share fair market value
of the 3,500,014 AmeriComUSA, Inc. common stock shares to be issued to the
digiCities, Inc. stockholders. The $2.00 value is based upon recent issuances of
AmeriComUSA, Inc. common stock for cash pursuant to private placements.
<PAGE>7
The purchase price differential is computed as follows:
Purchase price $7,000,028
Accounts Receivable (1,105,021)
Property and Equipment (130,304)
Other Assets (4,084)
Current Liabilities 1,204,152
-----------
Purchase price differential $6,964,771
The goodwill will be amortized over a period of five years using the
straight-line method.
Completion of the merger was contingent upon satisfaction of certain conditions
detailed in the Agreement. These included the procurement of a Fairness Order
and permit qualification for the merger from the California Department of
Corporations.
The Agreement also provided for the increase of the Company's authorized capital
stock to 120,000,000 shares of which 99,000,000 shares were designated as Class
A Common Stock, 1,000,000 were designated as Class B Common Stock and 20,000,000
were designated as Preferred Stock. The shares of all three classes have a
$0.0001 par value. The Class A Common Stock has all the rights, preferences and
privileges granted to common stock under the General Delaware Corporations Law.
The Class B Common Stock and Preferred Stock have such rights, preferences and
privileges and will be issued in such numbers as the Company's Board of
Directors may determine from time to time.
Concurrently, in the merger with digiCities, all the outstanding shares of the
Company's Common Stock is converted and exchanged to shares of Class A Common
Stock, $0.0001 par value on a one-for-one basis.
NOTE 4 - CONVERTIBLE PROMISSORY NOTE
On December 6, 1999 the Company executed a promissory note for One Million
Dollars ($1,000,000), together with interest. Holder has the right at any time
to convert the entire outstanding indebtedness thereunder in whole into fully
paid shares of Class A Common Stock at $2.00 per share.
<PAGE>8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
In the three-month period ended March 31, 2000 the Company generated
revenue of $282,186 from business operations. A net loss of $4,014,238 was
realized. During the comparable three-month period of 1999, the Company had not
yet commenced generating revenues and its Kiosk Software and digiCities
subsidiaries were not acquired until February 1999 and January 2000,
respectively; therefore, only a limited comparison with the prior period is
possible. During the quarter ended March 31, 1999, the Company realized $6,879
in revenues and a net loss of $1,282,897.
During the quarter ended March 31, 2000, the Company incurred
substantial administrative expenses arising from the marketing of its Adcast
advertising billboard service and costs incurred in the development of its new
merger of digiCities, Inc. that was completed on January 1, 2000. Kiosk
Software, Inc. also incurred continuing operational and administrative expenses
associated with its pre-existing business.
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 nine-month period ended March 31, 2000 with the same
period of 1999; revenues in 2000 were $938,459 compared to $6,879 in revenues
realized in the nine month period ended March 31, 1999. A net loss of $8,354,472
was realized in the period ending March 31, 2000, compared with a smaller loss
of $1,934,112 in the comparable period of 1999.
During the nine months ended March 31, 2000 selling, general and
administrative expenses totaled $7,172,951 reflecting much higher administrative
costs associated with the development of the digiCities division, which was not
a factor in the comparable nine months of fiscal 1999 when selling, general and
administrative expenses totaled only $1,750,189.
Future prospects for the Company's financial condition and results of
operations will be dependent on the continued adoption and success of the AdCast
advertising billboard service and successful roll-out of its digiCities products
which commenced in January 2000. It is anticipated that AdCast will generate
growing revenues during the last quarter of fiscal 2000. Similarly, revenues
from the Company's Kiosk and digiCities related products are expected to grow in
the remaining quarter of fiscal 2000.
Future expenses will increase to reflect the operational rollout of
Adcast, Kiosk and digiCities products and services 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.
<PAGE>9
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's
stock being listed for trading on the NASD OTC Bulletin Board. The Agreement was
extended on December 31, 1999. The conditional release of funds was waived and
the final cash consideration was received on February 16, 2000.
On March 27, 2000 the Company entered into a subscription agreement for the sale
of 100,000 shares at $5.00 per share of the Company's common stock for total
proceeds of $500,000.
During the quarter ended March 31, 2000, the Company accepted
subscriptions for 1,596,451 shares of common stock for a total consideration of
$3,872,557 from non-U.S. persons and accredited investors pursuant to
Regulations S and D of the Securities Act, respectively. This dollar amount
includes the stock sale of 1,250,000 shares of the Company's common stock for
total proceeds of $2,500,000.
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 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, 2000 by agreement between the parties. A payment of $20,000 was made
on March 2, 2000. The balance remaining is $30,000.
<PAGE>10
PART II - OTHER INFORMATION
ITEM 1
Not applicable.
ITEM 2
During the three months ended March 31, 2000 the Company conducted the following
securities transactions which were deemed exempt from registration under the
1933 Act:
Date of Sale Number of Shares Consideration
- ------------ ---------------- -------------
1-00 246,451 $ 872,557
2-00 1,250,000 $2,500,000
3-00 100,000 $ 500,000
A total of 1,596,451 shares of Class A Common Stock were sold for cash
consideration aggregating $3,872,557 to non-U.S. persons and accredited
investors pursuant to Regulations S and D of the Securities Act, respectively.
Proceeds were used for working capital.
ITEM 3
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Non submitted.
ITEM 5 OTHER INFORMATION
On April 4, 2000 Mr. Tom Hopfensperger assumed the role of Chief Executive
Officer of the Company. Mr. Hopfensperger was formerly President of the Company
and remains a Director of the Company. Mr. Robert M. Cezar, previously Chief
Executive Officer, remains Chairman of the Board of Directors.
<PAGE>11
Simultaneously, Mr. Trone L. Miller has succeeded Mr. Hopfensperger as President
and Chief Operating Officer. Mr. Miller was previously the Company's Vice
President of Business Development.
Subsequent to the end of the quarter Mr. Christopher Thomas resigned from the
Board because of conflicting personal commitments.
On February 29, 2000 Mr. Giacomo Torrente was appointed to the Board of
Directors of the Company. Mr. Torrente serves as Chairman of the Corporate
Advisory Committee of the Board of Directors.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
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).
Form 8-K filed April 14, 2000 announcing the appointments of Mr. Tom
Hopfensperger as Chief Executive Officer and Trone Miller as President and Chief
Operating Officer.
Form 8-K filed May 5, 2000 announcing the investment of $500,000 by D-Brain
Capital Limited.
<PAGE>12
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: May 12, 2000 By: /s/ TOM HOPFENSPERGER
------------------------------
Tom Hopfensperger
Chief Executive Officer and
Interim Chief Financial
Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10-QSB
FOR THE PERIOD ENDED MARCH 31, 2000 FOR AMERICOM USA, INC. AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Jun-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 514,181
<SECURITIES> 0
<RECEIVABLES> 2,032,779
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 596,064
<PP&E> 9,964,085
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,107,109
<CURRENT-LIABILITIES> 3,492,086
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,107,109
<SALES> 938,459
<TOTAL-REVENUES> 938,459
<CGS> 697,174
<TOTAL-COSTS> 8,536,939
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,818
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<NET-INCOME> (8,354,472)
<EPS-BASIC> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
