SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-13338
INFOAMERICA, INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 84-0853869
(State of other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
5 Clover Leaf Court
Tehachapi, California 93561
(Address of principal executive offices)
(661) 821-6018
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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: Common Stock, $.025 par value per
share - 23,721,598 shares outstanding as of September 30, 2000.
<PAGE>
INFOAMERICA, INC.
FORM 10-QSB
FOR THE QUARTER ENDED September 30, 2000
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C> <C>
Item 1. Financial Statements.
Consolidated Condensed Balance Sheets as of September 30, 2000
and December 31, 1999 3
Consolidated Condensed Statements of Operations for the Nine
Months ended September 30, 2000 and September 30, 1999 and the
Three Months ended September 30, 2000 and September 30, 1999 4
Consolidated Condensed Statements of Shareholders' Equity 5
Consolidated Condensed Statements of Cash Flows for the Nine
Months ended September 30, 2000 and September 30, 1999. 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds. 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holder 11
Item 5. Other Information. 11
Item 6. Exhibits and Reports on Form 8-K. 11
</TABLE>
2
<PAGE>
INFOAMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------------ -----------------
(unaudited) (audited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 2,684,007 $ 9,438
Accounts Receivable - net of
allowance for doubtful accounts of $ 5,000 in 2000 and 1999
71,796 69,454
Supplies
31,000 31,000
Prepaid expenses
16,749 -
------------------ -----------------
TOTAL CURRENT ASSETS 2,803,552 109,892
DEFERRED CHARGES
Investment Banking Services 636,667
PROPERTY AND EQUIPMENT - net of accumulated
depreciation 1,477,595 1,637,595
------------------ -----------------
TOTAL $ 4,917,814 $1,747,487
================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 167,419 $ 280,991
Revenue billed in advance 51,023 51,125
Franchise fees payable 41,791 96,787
Customer deposits 5,200 5,200
------------------ -----------------
TOTAL CURRENT LIABILITIES 265,433 434,103
------------------ -----------------
SHAREHOLDERS' EQUITY
Preferred stock, $1 par value; 5,000,000 shares authorized,
none issued
Common stock, $.025 par value; 900,000,000 shares authorized, 23,721,598 and
19,048,521 shares issued and outstanding
in June 30, 2000 and December 31, 1999 593,040 476,213
Additional paid-in capital 5,751,169 1,484,314
Accumulated deficit (1,691,828) (647,143)
------------------ -----------------
Total Shareholders' Equity 4,652,381 1,313,384
------------------ -----------------
TOTAL $ 4,917,814 $1,747,487
================== =================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE>
INFOAMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
----------------- ------------------ ----------------- ------------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 479,262 $ 458,601 $ 157,319 $ 150,669
EXPENSES
Programming content 255,855 95,638 60,684 40,342
Cable operating 183,899 114,326 64,405 30,635
General and administrative 904,193 224,068 578,246 45,875
Depreciation 180,000 180,000 60,000 60,000
----------------- ------------------ ----------------- ------------------
TOTAL EXPENSES 1,523,947 614,032 763,335 176,852
----------------- ------------------ ----------------- ------------------
LOSS BEFORE OTHER EXPENSE (1,044,685) (155,431) (606,016) (26,183)
Other expense - (23,190) - -
----------------- ------------------ ----------------- ------------------
NET LOSS $(1,044,685) $ (178,621) $ (606,016) $ (26,183)
================= ================== ================= ==================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 20,822,788 19,048,521 23,721,598 19,048,521
================= ================== ================= ==================
BASIC LOSS PER SHARE $ (0.050) $ (0.009) $ (0.020) $ (0.001)
================= ================== ================= ==================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE>
INFOAMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
--------------------------- Additional
Amount Paid in Capital Accumulated
Shares (par value) (net of par Deficit Total
value)
-------------- ---------------------------------------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 (audited) $19,048,521 $476,213 $ 1,484,314 $ (647,143) $1,313,384
Net proceeds from sale of common stock 4,673,077 116,827 3,370,405 3,487,232
Fair value of common stock issued for
services 126,000 126,000
Warrants issued for services 770,450 770,450
Net loss (918,685) (918,685)
-------------- ----------- ----------------- ---------------- --------------
Balance, September 30, 2000 23,721,598 $593,040 $ 5,751,169 $(1,691,828) $4,652,381
(unaudited)
============== =========== ================= ================ ==============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
5
<PAGE>
INFOAMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
2000 1999
----------------- ------------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $(1,044,685) $ (178,621)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation 180,000 180,000
Fair value of warrants issued to non-employees
for services 770,450 -
Fair value of common stock issued to non-employees
for services 126,000 -
Changes in operating assets and liabilities:
Accounts receivable (2,342) (22,271)
Accounts payable and accrued expenses (113,572) (11,338)
Prepaid expenses (16,749) -
Deferred Charges - investment banking services (636,667)
Revenue billed in advance (102) (1,701)
Franchise fee payable (54,996) (13,794)
----------------- ------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES (792,663) (47,725)
----------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (20,000) -
----------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock 3,487,232 -
----------------- ------------------
NET INCREASE IN CASH 2,674,569 (47,725)
CASH AND CASH EQUIVALENT, BEGINNING OF PERIOD 9,438 4,658
----------------- ------------------
CASH AND CASH EQUIVALENT, END OF PERIOD $ 2,684,007 $ (43,067)
================= ==================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
6
<PAGE>
INFOAMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The interim financial statements presented have been prepared by
InfoAmerica, Inc. (the "Company") without audit and, in the opinion of
the management, reflect all adjustments of a normal recurring nature
necessary for a fair statement of (a) the results of operations for the
nine and three months ended September 30, 2000 and 1999, (b) the
financial position at September 30, 2000 and December 31, 1999, and (c)
the cash flows for the nine months ended September 30, 2000 and 1999.
Interim results are not necessarily indicative of results for a full
year.
The balance sheet presented as of December 31, 1999 has been derived
from the financial statements that have been audited by the Company's
independent public accountants. The financial statements and notes are
condensed as permitted by Form 10-QSB and do not contain certain
information included in the annual financial statements and notes of
the Company. The financial statements and notes included herein should
be read in conjunction with the audited financial statements and notes
for the years ended December 31, 1999 and 1998 included in the
Company's Annual Report on Form 10-KSB.
Effective June 8, 1999, pursuant to a Merger Agreement and Plan of
Reorganization (the "Merger Agreement"), InfoAmerica, Inc. acquired DDD
Cablevision Ltd., a limited liability partnership, resulting in the
partners and management of DDD Cablevision Ltd. having actual and
effective control of InfoAmerica, Inc., the surviving corporation. For
accounting purposes, the transaction was treated as an acquisition of
InfoAmerica, Inc. by DDD Cablevision Ltd. and as a recapitalization of
DDD Cablevision Ltd. The historical financial statements prior to the
acquisition became those of DDD Cablevision Ltd. even though they were
labeled as those of InfoAmerica, Inc. In the recapitalization,
historical partners' equity of DDD Cablevision Ltd., prior to the
merger, was retroactively restated for the equivalent number of shares
received in the merger with an offset to paid-in capital. Operations
prior to the merger were those of DDD Cablevision, Ltd. Basic loss per
share prior to the merger were restated to reflect the number of
equivalent shares received by partners of DDD Cablevision Ltd.
2. SHAREHOLDERS' EQUITY
As described under Basis of Presentation in Note 1, the historical
partners' equity of DDD Cablevision Ltd., prior to the merger, was
retroactively restated for the equivalent number of shares received in
the merger as a credit to common stock and the remaining balance of
partners' equity as a credit to paid-in capital. At the time of merger,
DDD Cablevision's partners received an aggregate of 13,834,000
unregistered "restricted" shares with par value of $.025 per share.
Prior to the merger, InfoAmerica, Inc. had 5,214,521 shares of common
stock outstanding. Total issued and outstanding shares of common stock
immediately after the merger was 19,048,521.
In March, the Company received net proceeds of $1,237,346 from the
private placement of 2,750,000 restricted shares of the Company's
$0.025 par value common stock at $0.50 per share.
In July, the Company received net proceeds of $2,249,886 from the
private placement of 1,923,077 restricted shares of the Company's
$0.025 par value common stock at $1.30 per share. Total issued and
outstanding shares of common stock as of September 30, 2000 was
23,721,598.
On August 15, 2000, a shareholder of the Company transferred 100,000
shares of the Company's common stock to one of the Company's investment
bankers for investment banking services. The fair market value of these
shares on this transaction was $1.26 per share. During the nine months
ended September 30, 2000, the Company recognized $126,000 costs related
to this transaction, which were charged to operations.
7
<PAGE>
During the third quarter ended September 30, 2000, the Company issued
warrants for the purchase of up to an aggregate of 1,305,000 shares
(the "Warrants") of the Company's common stock, par value $0.025 per
share ("Common Stock").
On July 1, 2000, Warrants to purchase 625,000 shares of Common Stock
were issued as commissions earned for services rendered for the Company
in connection with a round of equity financing. The exercise prices of
these Warrants are as follows: 300,000 shares at $0.50 per share;
150,000 shares at $2.00 per share; 150,000 shares at $2.00 per share;
and 25,000 shares at $2.00 per share. These Warrants have an exercise
period of three years from the date of issue.
On July 1, 2000, Warrants to purchase 5,000 shares of Common Stock were
issued as consideration for consulting services rendered. The exercise
price of this Warrant is $0.50 per share and the exercise period is
three years from the date of issue.
On July 1, 2000, Warrants to purchase 75,000 shares of Common Stock
were issued as additional consideration in connection with an equity
investment made to the Company during the third quarter. The exercise
price of this Warrant is $2.00 per share and the exercise period is
three years from the date of issue.
On August 1, 2000, Warrants to purchase 600,000 shares of Common Stock
were issued in connection with prospective investment banking services
to be rendered to the Company. The exercise prices of these Warrants
are as follows: 200,000 shares at $2.50 per share; 200,000 shares at
$3.50 per share; and 200,000 shares at $4.50 per share. The exercise
period for each of these Warrants are three years from the date of
issue.
The Company accounts for stock options and warrants granted to
non-employees in accordance with Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation", which
establishes a fair value method of accounting for stock based
compensation plans for transactions in which an entity acquires goods
or services in exchange for equity instruments. The Company calculates
the fair value of the stock options and warrants issued on the date of
grant using the Black-Sholes option pricing model, and charges the fair
value to operations over the expected period of benefit. During the
nine months ended September 30, 2000, the Company recognized $199,092
of such costs, which were charged to operations.
3. SUBSEQUENT EVENTS
In October, the Company received proceeds of approximately $500,000
from the private placement of 666,667 restricted shares of the
Company's $0.025 par value common stock at $0.75 per share. These
shares have not yet been issued.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
------------
The Company was incorporated under the laws of the state of Colorado on
June 8, 1991 and is the surviving corporation of a merger on June 8, 1999
between it and DDD Cablevision, Inc., a Delaware corporation.
The Company, through its wholly-owned subsidiary DDD Cablevision, Inc.
d/b/a Country Cable ("Country Cable") operates a cable television system in Kern
County, California. Country Cable serves approximately 2,000 cable television
subscribers in the unincorporated areas of Kern County, California. The Company
was issued a fifteen (15) year Cable Television Franchise License in 1991 by the
County of Kern, California. To date, the Company has installed approximately 175
miles of coaxial and feeder cable throughout the Kern County area. The Company
transmits its programming with a spectrum energy of 450 megahertz (MHz).
The Company maintains an existing cable telecommunications
infrastructure of a three stage microwave satellite receiver and transmit system
which interconnects into areas of the 175 miles of cable plants. The Company has
been issued a second cable franchise in the City of Tehachapi, California. It is
the intention of the Company, subject to securing sufficient financing, to
upgrade its present cable infrastructure and construct an additional 135 miles
of cable and plant facilities, all of which will be in the form of fibre optical
cable. This would allow the Company to have the availability to serve a
potential market of over 12,000 homes, which includes the present 2,000
subscribers. The result would be a communications network providing 120 channels
of programming, business to business carriage data network and high speed
Internet access to its subscribers.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At September 30, 2000, the Company's cash and cash equivalents amounted
to $2,684,007. This was an increase of $2,674,569 from $9,438 for the fiscal
year ended December 31, 1999. Operating activities used net cash in the amount
$792,663 to fund the Company's cash loss from operations of $604,902 (net of
non-cash expense of $180,000 for depreciation, $133,783 for warrants issued to
non-employees and 126,000 for stock issued to non-employees). Net cash of
$185,317 was used by changes in operating assets and liabilities primarily to
fund the increase in accounts payable and accrued expenses of $102,234, the
increase in franchise fees payable of $41,202 and the increase in prepaid
expenses of $16,749. The Company experienced a decrease in accounts receivable
of $19,929. Financing activities provided net proceeds in the amount of
$3,487,232 from the issuance of stock in a private placement in March and in
July. The Company believes that its present cash and cash flow generated from
operations, as well as additional future financing from outside sources, will be
sufficient to meet its operational needs.
RESULTS OF OPERATIONS
---------------------
Revenue increased by $20,661 from $458,601 for the nine month period
ended September 30, 1999 to $479,262 for the nine month period ended September
30, 2000. Revenues increased by $6,650 from $150,669 for the three month period
ended September 30, 1999 to $157,319 for the three month period ended September
30, 2000. The increase in revenue is the result of lower operating costs and
better collection of subscriber revenues.
9
<PAGE>
Programming content expenses increased by $160,217 from $95,638 for the
nine month period ended September 30, 1999 as compared to $255,855 for the nine
month period ended September 30, 2000. Programming content expenses increased by
$20,342 from $40,342 for the three month period ended September 30, 1999 to
$60,864 for the three month period ended September 30, 2000. The increase in
these expenses is the result of an increase in the costs associated with
obtaining programming from the content providers.
Cable operating expenses increased by $69,573 from $114,326 for the
nine months ended September 30, 1999 to $183,899 for the nine months ended
September 30, 2000. Cable operating costs increased by $33,770 from $30,635 for
the three months ended September 30, 1999 to $64,405 for the three months ended
September 30, 2000. The increase in cable operating expenses was the result of
upgrading the equipment used in the cable telecommunications infrastructure and
the head end parts.
General and administrative expenses increased by $680,125 from $224,068
for the nine months ended September 30, 1999 to $904,193 for the nine months
ended September 30, 2000. General and administrative expenses increased by
$532,371 from $45,875, for the three months ended September 30, 1999, to
$578,246 for the three months ended September 30, 2000. The increase in these
fees is primarily the result of continued expenses in connection with start-up
operations in Mexico and the expense to the Company of issuing warrants as is
further described in Item 2.
The Company's net loss of $791,352 for the nine months ended September
30, 2000 was an increase of $612,731 from the net loss of $178,621 for the nine
months ended September 30, 1999. The Company's net loss of $352,683 for the
three months ended September 30, 2000 was an increase of $326,500 from the net
loss of $26,183 for the three months ended September 30, 1999. The increase in
net loss for the nine months ended September 30, 2000 and the three months ended
September 30, 2000 can be attributed to the factors as discussed above.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
None.
Item 2. Changes in Securities and Use of Proceeds.
------------------------------------------
During the third quarter ended September 30, 2000, the Company
issued warrants for the purchase of up to an aggregate of 1,305,000
shares (the "Warrants") of the Company's common stock, par value $0.025
per share ("Common Stock").
On July 1, 2000, Warrants to purchase 625,000 shares of Common
Stock were issued as commissions earned for services rendered for the
Company in connection with a round of equity financing. The exercise
prices of these Warrants are as follows: 300,000 shares at $0.50 per
share; 150,000 shares at $2.00 per share; 150,000 shares at $2.00 per
share; and 25,000 shares at $2.00 per share. These Warrants have an
exercise period of three years from the date of issue.
On July 1, 2000, Warrants to purchase 5,000 shares of Common
Stock were issued as consideration for consulting services rendered.
The exercise price of this Warrant is $0.50 per share and the exercise
period is three years from the date of issue.
On July 1, 2000, Warrants to purchase 75,000 shares of Common
Stock were issued as additional consideration in connection with an
equity investment made to the Company during the third quarter. The
exercise price of this Warrant is $2.00 per share and the exercise
period is three years from the date of issue.
On August 1, 2000, Warrants to purchase 600,000 shares of
Common Stock were issued in connection with prospective investment
banking services to be rendered to the Company. The exercise prices of
these Warrants are as follows: 200,000 shares at $2.50 per share;
200,000 shares at $3.50 per share; and 200,000 shares at $4.50 per
share. The exercise period for each of these Warrants are three years
from the date of issue.
Item 3. Defaults Upon Senior Securities.
--------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
None.
Item 5. Other Information.
------------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
None.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: November 20, 2000
InfoAmerica, Inc.
By: /s/ Richard G. Lubic
---------------------------------
Name: Richard G. Lubic
Title: President and Chief
Executive Officer
12
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
27 Financial Data Schedule
13
