SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1996.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to . ------------ --
Commission file number: I-9418
CYBERAMERICA CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada 87-0509512
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
268 West 400 South, Salt Lake City, Utah 84101
(Address of principal executive office) (Zip Code)
(801) 575-8073
(Issuer'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 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 XX No
The number of outstanding shares of the issuer's common stock, $0.001 par
value (the only class of voting stock), as of July 31, 1996 was 8,290,472.
<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS..................................5
PART II
ITEM 1. LEGAL PROCEEDINGS....................................................10
ITEM 5. OTHER INFORMATION....................................................11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................12
SIGNATURES....................................................................13
INDEX TO EXHIBITS.............................................................14
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets..................................................F-1
Consolidated Statements of Operations........................................F-3
Consolidated Statements of Stockholders' Equity..............................F-4
Consolidated Statements of Cash Flows........................................F-5
Condensed Notes to Consolidated Financial Statements.........................F-6
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1996 (Unaudited) and December 31, 1995
ASSETS
June 30 December 31
1996 1995
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash ........................................... $ 15,038 $ 18,605
Receivable - brokerage account ................. 815 3,337
Accounts receivable - trade .................... 726,991 248,129
Accounts receivable - related parties .......... 593,870 200,017
Accounts receivable - other .................... 185,396 --
Note receivable - current portion .............. 12,458 12,000
Inventories .................................... -- 36,371
Prepaid expenses ............................... 210,167 36,677
----------- -----------
TOTAL CURRENT ASSETS ............................. 1,744,735 555,136
----------- -----------
PROPERTY AND EQUIPMENT ........................... 7,159,712 4,860,260
----------- -----------
OTHER ASSETS
Investment - securities ....................... 1,169,610 968,396
Mortgages receivable .......................... 353,000 353,000
Notes receivable - net of current portion ..... 734,525 653,027
Investments - other ........................... 221,341 244,321
Deposits ...................................... 46,187 16,345
Media and other credits ....................... 252,443 223,885
-----------
TOTAL OTHER ASSETS ............................... 2,777,106 2,458,974
----------- -----------
$11,681,553 $ 7,874,370
=========== ===========
</TABLE>
See notes to consolidated unaudited financial statements.
F-1
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
June 30, 1996 (Unaudited) and December 31, 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30 December 31
1996 1995
-------- ---------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable ............................... $ -- $ 57,493
Current maturities of long-term debt ........ 352,594 149,059
Accounts payable ............................ 399,032 328,751
Accounts payable - related parties .......... 174,947 17,413
Accrued liabilities ......................... 172,589 160,000
Interest .................................. 23,246 19,330
Real estate taxes ......................... 361,244 317,751
Payroll and related taxes payable ......... 137,727 143,200
Deferred income ............................. 33,152 25,979
Deposit - real estate sales ................. 171,900 171,900
------------ ------------
TOTAL CURRENT LIABILITIES ...................... 1,826,431 1,390,876
------------ ------------
LONG-TERM LIABILITIES
Long-term debt, less current portion ........ 3,519,400 2,764,757
------------
MINORITY INTEREST .............................. 1,149,333 347,923
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock par value $.001; 20,000,000
shares authorized; No shares issued
Common stock par value $.001; 200,000,000
shares authorized; 8,206,618 and 5,886,799
shares issued ............................. 8,207 5,887
Additional paid-in capital .................. 14,313,420 11,428,674
Stock subscriptions receivable .............. (1,194,712) --
Accumulated deficit ......................... (7,940,526) (8,063,747)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY ..................... 5,186,389 3,370,814
------------
$ 11,681,553 $ 7,874,370
============ ============
</TABLE>
See notes to consolidated unaudited financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
(Unaudited) (Unaudited)
---------------------------- -----------------------
1996 1995 1996 1995
---------------------------- ------------------------
<S> <C> <C> <C> <C>
Revenue
Consulting ............................................. $ 791,812 $ 136,026 $ 1,557,440 $ 681,721
Rentals ................................................ 117,871 42,678 223,089 98,264
Other .................................................. 3,442 1,470 63,234 10,081
----------- ----------- ----------- ---------
Total Revenue ..................................... 913,125 180,174 1,843,763 790,066
Cost of Revenue
Consulting ............................................. 359,306 245,865 701,468 478,263
Rentals ................................................ 143,782 96,548 246,119 154,481
Other .................................................. 3,921 1,813 44,168 5,037
----------- ----------- ----------- ---------
Total Cost of Revenue ............................. 507,009 344,226 991,775 637,781
Gross Profit (Loss) ............... 406,116 (164,052) 852,008 152,285
Selling, general and administrative expenses .............. 372,885 269,784 709,264 152,285
Environmental Clean-up ................................. -- -- 20,000 --
----------- ---------- ---------- ----------
Total Selling, general and administrative expenses 372,885 269,784 729,264 506,025
Operating Profit (Loss) ............... 33,231 (433,836) 122,744 (353,740)
----------- ----------- ----------- -----------
Other income (expense):
Interest income ........................................ 10,466 12,958 11,020 28,838
Interest expense ....................................... (99,603) (45,796) (171,462) (75,201)
Gain (Loss) from sale of assets ........................ -- 71,660 -- 71,660
Gain (Loss) from investments ........................... (43,807) 33,812 73,066 142,562
Loss on foreclosure - related party .................... -- (519,342) -- (519,342)
Other income (expense) ................................. 17,102 66,870 37,490 71,490
----------- ----------- ----------- -----------
Total Other Income (Expense) ............... (115,842) (379,838) (49,886) (279,993)
Income (Loss) Before Discontinued Operations .............. (82,611) (813,674) 72,858 (633,733)
----------- ----------- ----------- -----------
Gain (Loss) from Discontinued Operations ............... -- 28,525 -- 28,525
----------- ----------- ----------- -----------
Minority Interest in Loss ................................. 31,827 -- 50,363 --
----------- ----------- ----------- -----------
Net Income (Loss) ............... $ (50,784) $ (785,149) $ 123,221 $ (605,208)
============ =========== =========== ===========
Income (loss) per share:
Income (loss) before discontinued operations ........... $ (0.01) $ (0.23) $ 0.01 (0.20)
Gain (loss) from discontinued operations ............... 0.00 0.01 0.00 0.01
Minority Interest in loss .............................. 0.00 0.00 0.01 0.00
------------ ---------- ----------- -----------
Net Income (loss) ............... $ (0.01) $ (0.22) $ 0.02 $ (0.19)
=========== =========== =========== ===========
Weighted average number of shares outstanding .......... 6,820,487 3,511,133 6,361,516 3,114,071
See notes to consolidated unaudited financial statements
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For Six Months Ended June 30, 1996 (Unaudited)
Additional Stock Total
Common Stock Paid-in Subscriptions Accumulated Shareholders'
Shares Amount Capital Receivable Deficit Equity
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1995 ... 5,886,799$ 5, 887 $11,428,674 $ -- $ (8,063,747) $ 3,370,814
Common Stock Activity:
Issued for services ......... 794,818 795 396,613 -- -- 397,621
Issued for assets ........... 225,000 225 308,775 -- -- 309,000
Issued for cash ............. 1,300,001 1,300 2,179,145 -- -- 2,180,445
Stock Subscription Receivable -- -- -- (1,194,712) -- (1,194,712)
Net Profit for period ........... -- -- -- -- 123,221 123,221
------------ ---------- ----------- ----------- ----------- ----------
BALANCES AT JUNE 30, 1996 ....... 8,206,618 $ 8,207 $ 14,313,420 $(1,194,712) $(7,940,526) $ 5,186,389
=========== =========== =========== ============ =========== ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION FORMERLY KNOWN AS
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
Unaudited
1996 1995
------------ ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ....................................... $ 123,221 $ (605,208)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and Amortization ...................... 111,204 88,500
Stock issued for assets and debt ................... 309,000 62,886
Loss (gain) on foreclosure - related party ......... -- 519,342
Loss (gain) on investments ......................... (73,066) (142,562)
Stock issued for services and expenses ............. 397,621 99,784
Minority Interest in loss .......................... 50,363 --
(Increase) decrease in:
Accounts receivable - trade ......................... (478,862) (82,117)
Receivable - related parties ........................ (393,853) 52,402
Other current assets ................................ (322,973) (50)
Increase (decrease) in:
Accounts payable .................................... 70,281 23,086
Payables - related parties .......................... 157,534 79,428
Accrued liabilities ................................. 54,525 (2,040)
Current portion of long-term debt ................... 146,042 (44,636)
Deferred income ..................................... 7,173 (137,324)
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 160,732 $ (88,509)
CASH FLOWS FROM INVESTING ACTIVITIES
Cost of land sold ..................................... -- 77,840
Minority Interest in Subsidiary ....................... 825,000 --
Purchase of assets .................................... (2,891,719) (113,852)
----------- -----------
NET CASH FLOWS (USED) IN INVESTING ACTIVITIES .. $(2,066,719) $ (36,012)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issued for cash .................................. 2,180,445 283,941
Stock subscription receivable .......................... (1,194,712) --
Proceeds from borrowing ................................ 1,012,372 --
Payment on debt ........................................ (95,685) (50,348)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ...... $ 1,902,420 $ 233,593
NET INCREASE (DECREASE) IN CASH ........................... (3,567) 109,072
CASH AT BEGINNING OF PERIOD ............................... 18,605 29,009
----------- -----------
CASH AT END OF PERIOD ..................................... $ 15,038 $ 138,081
=========== ===========
See notes to consolidated unaudited financial statements
F-5
</TABLE>
<PAGE>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 1996
NOTE 1: Basis of Presentation
The accompanying consolidated unaudited condensed financial statements have
been prepared by management in accordance with the instructions for Form 10-QSB
and therefore, do not include all information and footnotes required by
generally accepted accounting principles and should therefore, be read in
conjunction with the Company's Annual Report to Shareholders on Form 10-KSB for
fiscal year ended December 31, 1995.
In management's opinion, the accompanying consolidated unaudited condensed
financial statements contain all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of the results for the
interim periods presented. The interim operation results are not necessarily
indicative of the results for the fiscal year ending December 31, 1996.
Certain prior year amounts have been reclassified to conform to the 1996
classification.
NOTE 2: Revenue Recognition
Revenue from the sales of Internet mall sites is generally tied to certain
contingencies relating to product development and sales of the clients'
securities. As such, recognition of any revenue is postponed until those
contingencies are met. The contracts for the Internet mall sites also provide
for the client's payment of costs associated with the development and service of
the mall site. Revenue from these sources is generally recognized as the related
costs are incurred.
NOTE 3: Stock Option Plans and Agreement
On January 18, 1996 the Company established a new stock option plan for its
employees and consultants ("The 1996 Stock Option Plan of The Canton Industrial
Corporation"). Each option issued under the plan has a term of one year and an
exercise price of ninety percent (90%) of the bid price on the day of exercise.,
unless otherwise established by the Board of Directors. Under the plan, up to
one million (1,000,000) shares can be issued.
During the quarter ended June 30, 1996, the Company granted options under
the plan for 561,605 shares, of which 343,261 shares were exercised in the same
quarter.
As of June 30, 1996 no options had been exercised pursuant to the Stock
Option Agreements with AZ Professional Consultants ("AZ") and Investment
Sanctuary Corporation ("ISC") which were entered into on December 22, 1995.
Under the agreements, the Company granted options giving AZ and ISC the right to
purchase a quantity of shares of the Company's common stock equivalent to
twenty-six percent (26%) and twenty-five percent (25%), respectively, of the
issued and outstanding shares of the Company's common stock on the exercise
date, with an established price of $0.59 per share.
NOTE 4: Contingencies
In March 1995, Xeta Corporation filed suit against the Company seeking
recovery of $116,500 which Xeta contends was fraudulently transferred to the
Company by ATC, a client of the Company's subsidiary Canton Financial Services
Corporation, in order to avoid payment of a judgment held by Xeta against ATC.
On April 16, 1996 the Court granted Summary Judgment against the Company. An
objection to the entry of such a judgment has been filed and the Company
continues to dispute the allegations.
<PAGE>
CYBERAMERICA CORPORATION FORMERLY KNOWN AS
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 1996
NOTE 4: Contingencies (continued)
KMC Foods, Inc. ("KMC"), a subsidiary of the Company, received a claim from
the Division of Revenue of the Department of Finance for the State of Delaware
in excess of $300,000. The claim is for alleged taxes due based upon the gross
revenues of KMC for the tax period April 1, 1989 through March 31, 1992. This
tax period is prior to the purchase of KMC by the Company. Prior management has
assured the Company that the tax does not apply as all sales of products were
outside the State of Delaware, and thus the Delaware tax is not due. The Company
has retained an attorney in Delaware to resolve the liability issue.
In March 1994, the State of Illinois filed an action against the Company
seeking cleanup of tires and toxic paint drums at its Canton, Illinois warehouse
site. The Court issued an Interim Order requiring the deposit of $140,000 into
an escrow account and required the complete removal of the tires by December 31,
1995. The Company did not deposit the required funds. In August 1995, the
Company began removal of the tires from the facility. In September 1995, the
Company was informed by the Illinois Environmental Protection Agency ("IEPA")
that it had rejected the Company's proposed plan for removal and was proceeding
with its own removal plan. The Company sought relief in Court from this
decision, but was not successful. The State concluded work in the first quarter
of 1996 believing all waste tires had been removed from the site.
In April 1996, the State informed the Company of its intent to seek
recovery of its estimated cost of $325,000 incurred in the removal of tires. The
Company believes the ultimate intent of the Interim Order, the complete removal
of the tires, has been met because the tires had been completely removed or
reduced to the IEPA's control but not within the Court's exact specifications.
The State has filed a complaint with the Illinois Pollution Control Board
seeking recovery of these funds. The Company and the State are currently
attempting to resolve a dispute about the number of tires actually removed from
the site.
On July 1, 1996, Steven A. Christensen, the former president of the
Company, filed suit against the Company seeking recovery of wages, benefits,
bonuses, and other items. The Company believes that it has no further obligation
to Christensen and that he has been justly and completely compensated for his
term as an employee and an officer. The Company intends to defend the suit and
will deny any liability.
The Company believes that the ultimate outcome of all pending litigation
matters should not have a material adverse effect on the financial position of
the Company; however it is possible that the results of operations or cash flows
of the Company in any particular quarterly or annual periods or the financial
condition of the Company could be materially affected by the ultimate outcome of
certain pending litigation matters. Management is unable to derive a meaningful
estimate of the amount or range of any possible loss in any particular quarterly
or annual period or in the aggregate.
NOTE 5: Stockholders' Equity
During the quarter ended June 30, 1996, the Company issued 727,527 shares
of its common stock in exchange for services provided to the Company by
employees and consultants; 225,000 shares where exchanged for assets; and
1,300,001 were issued under Regulation S for cash and pursuant to promissory
notes. At June 30, 1996, the Company is owed $1,194,526 under the promissory
notes by the various entities for the 1,300,001 shares of the Company's common
stock that they purchased.
On May 15, 1996, the Company paid a property dividend in the form of common
stock of Oasis Hotel, Resort & Casino I, Inc. ("OHRCI") and Oasis Hotel, Resort
& Casino II, Inc. ("OHRCII"). The dividend declared March 4, 1996 was one share
in each OHRCI and OHRCII for every 100 shares of the common stock of the Company
owned by each shareholder of record on March 27, 1996.
<PAGE>
CYBERAMERICA CORPORATION FORMERLY KNOWN AS
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 1996
NOTE 5: Stockholders' Equity (continued)
On June 1, 1996, the Company paid a property dividend in the form of common
stock of Zahav, Inc. ("Zahav") and Cyber Information, Inc. ("CI"). The dividend
declared March 21, 1996 was one share in each Zahav and CI for every 100 shares
of common stock of the Company owned by each shareholder of record on April 23,
1996.
On June 14, 1996, the Company declared a property dividend in the form of
common stock of INFOTECH International, Inc. The dividend declared was one share
in INFOTECH for every 100 shares of common stock of the Company owned by each
shareholder of record on June 24, 1996.
NOTE 6: Additional footnotes included by reference
Except as indicated in the footnotes above there has been no other material
change in the information disclosed in the notes to the financial statements
included in the Company Annual Report on Form 10-KSB for the year ended December
31, 1995. Therefore those footnotes are included herein be reference.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
As used herein, the term "Company" refers to CyberAmerica Corporation, a
Nevada corporation f/k/a The Canton Industrial Corporation, its subsidiaries and
predecessors, unless otherwise indicated. The Company's name changed in the
second quarter of 1996 pursuant to its annual meeting of shareholders, held on
June 18, 1996. For more information on the meeting, see "Part II, Item 4
Submission of Matters to a Vote of Security Holders."
The Company provides a variety of Internet-related products and services ,
financial consulting services, and invests in real estate. The Company employs
professionals with expertise in law, accounting, finance, the Internet, public
and investor relations, and real estate. Typically, the Company provides
services and support functions that include: advice relating to regulatory
compliance; document preparation; capital formation; financial analysis;
promotional campaign; debt settlement; and general corporate problem solving.
The Company recorded a net profit for the six months ended June 30, 1996,
$123,221, although it recorded a net loss of $50,784 for the three months ended
June 30, 1996. The Company believes its overall financial condition continued to
improve during the second quarter of 1996.
INTERNET SERVICES
In the first six months of fiscal 1996, the Company began focusing on
providing Internet services through a wholly owned subsidiary, CyberMalls, Inc.
Through CyberMalls, the Company is involved in the preparation, development and
sales of Internet virtual malls within which organizations can advertise their
products and services on individual Internet locations or malls. An Internet
virtual mall is similar to a real-world shopping mall because they are both
collections of retail and informational shops, but virtual malls are accessible
via a computer. Each shop within a virtual mall has its own home page and
catalog of sales and promotional information on its goods and services.
Companies involved in the same business or industry often group their home pages
together for synergistic results.
The Company is attempting to assert its niche and gain market position
within this rapidly growing industry through its development of a revolutionary
new search engine called "Web SafariTM"surrounding a collective association of
retailers. This type of engine, as opposed to others currently on the market,
will allow people to enter a single query and have the engine search from shop
to shop and mall to mall to locate the specific item sought, and make all
purchases together. Although the Company expects this search engine to be
initially usable by the end of September 1996, no assurances can be given that
it will ever perform as described or generate any profits for the Company.
Continued sales from Internet services are expected to constitute a
substantial portion of future cash flow, although no such assurances can be
given. The reason behind the Company's name change, to CyberAmerica Corporation
from The Canton Industrial Corporation, was to reflect its entry into the
Internet and electronic commerce market.
Internet Product and Service Development
The Company is currently developing a number of products and services for
the use on the Internet, including "virtual malls." These malls will allow
individual businesses to congregate and sell their products and services. These
businesses pay "rent" for space to advertise and sell their products on the
Internet and pay for the initiation and maintenance of their information. The
Company provides both the space for this information and the technical support,
maintenance and service for these individual businesses, thus generating
revenues upon the initial sale of the malls as well as related support
functions.
As of August 12, 1996, there were 25 employees working on the Company's
Internet products and services. This number of Internet personnel represents an
increase from March 31, 1996 of approximately 20 persons. To meet anticipated
demand the Company estimates that it will need to hire additional personnel as
follows: seven computer programmers; six graphic artists; two writers; five
advertisers/marketers; and five customer service representatives. In the event
the Company is unsuccessful in hiring and keeping competent personnel, it may
experience problems in meeting clients' deadlines which could result in reduced
revenues.
The Company is in the process of attempting to secure protection for its
intellectual property, including trademarks on product names, computer and
software protocols as well as copyrights on promotional, sales and other
informative materials. A patent attorney has been retained to explore the
possibility of securing protection for these assets. A patent application
relating to the process surrounding the Company's search engine, Web SafariTM,
will most likely be made upon the completion of the engine. However, no
assurances can be given that this application will be submitted or approved at
any time in the future.
As part of the sales price for the virtual malls, the Company customizes
each mall area to the purchaser's desires. This includes ongoing modifications
and the incorporation of any technological advances. For example, the virtual
mall software is being designed to contain encryption technology that will make
the malls a safer haven for the conduct of business. Any advancements in this
procedure would be immediately passed on to the mall customers.
Each virtual mall can house up to 10,000 different vendors. The Company is
currently selling entire virtual malls that are under construction as well as
sites within various virtual malls to vendors. Many of the Company's malls are
being developed with specific themes (i.e., music, baseball, travel) which the
Company believes will provide synergistic and complementary effects for vendors.
Some of the virtual malls developed are and will continue to be wholly owned by
the Company. As of August 12, 1996, approximately 17 vendors had purchased sites
within several malls.
Shopping on the Internet for goods and services requires the use of a type
of search engine that will enable them to change location as their interest
desires. This is the reason behind the Company's focus on creating Web SafariTM.
As of August 12, 1996, this search engine was successfully tested in its first,
or alpha version and is expected to be ready for initial public use by the end
of September 1996. However, due to increasing competition in the search engine
arena, no assurances can be given that, even if Web SafariTM does operate as
planned, it will be accepted by the public or yield profits.
The Company expects to benefit from Web SafariTM both directly and
indirectly. In order to be included in the search engine's database, individual
business and mall owners will pay a yearly subscription or membership fee
averaging $15,000. Additional revenue may be generated by selling advertising
space on the "home page" to the search engine. It is also anticipated that the
search engine will generate increased sales of its virtual malls because they
will revolve around a search engine that has more practical applications and
thus be more attractive to individual businesses and to prospective mall site
owners than existing search engines.
The Company has plans to develop hundreds of virtual malls each of which
would be capable of handling hundreds of home pages. The development of these
plans hinges largely on procurement of substantial additions of technology and
personnel.
During the first six months of fiscal 1996 which were also the first six
months of CyberMalls' operations, five new clients were obtained. These clients
represent different industries, such as music, sports, health and travel. The
long-term goal of the Company's Internet division is to continue to expand its
client base to achieve substantial future cash flows.
A typical agreement between CyberMalls and a mall purchaser involves
CyberMalls representation and agreement to design and produce a virtual mall to
the satisfaction of the purchaser. Such an agreement also involves CyberMalls'
agreement to provide ongoing support and maintenance services for the mall for
as long as CyberMalls' believes the mall is not self sufficient. The mall
purchaser has the option of choosing among three alternative maintenance plans,
differing primarily in terms of complexity of the mall site, maintenance and
price of such production and support. CyberMalls is compensated for these
services by receiving either cash, equity, promissory notes secured by equity,
or some combination of these. For each mall, the total amounts to be paid to
CyberMalls over several years, based to a large extent on each mall's
performance and on arbitrary stock values range anywhere from $6 to $15 million
(see "Part I, Item 1 - Financial Statements - Notes to Consolidated Unaudited
Condensed Financial Statements Note 2: Revenue Recognition" for more information
about the accounting treatment of these sales)
Distribution
Providing Internet services is dependent to a large extent on the supply of
data communications from Sprint. The Internet is essentially based on the
interconnection of computers and networks which require telecommunication
services. Sprint is the organization the Company employs for this connection and
to the Company's knowledge is also the carrier for approximately 75% of the
Internet market. In the event this connection with Sprint is interrupted, the
Company would either seek another direct connection with a competitor of Sprint,
such as MCI or AT&T, or seek indirect connections. In either event, the
connection could be completed without a drastic interruption in its services,
however, the connection would then be, in the Company's opinion, less dependable
than Sprint.
Trends, Events or Uncertainties in the Internet Industry & the Regulation of the
Internet
The Internet and its multimedia enabled subset, the Web, have evolved from
a worldwide collection of thousands of interconnected computer networks into a
mass communications medium which allows consumers to interact electronically.
Originally a government-sponsored public network, the Internet has swiftly grown
into a cultural and economic phenomenon. Technological advances improving access
to the Web have enabled millions of consumers and businesses to use the Web as a
new vehicle for communicating, marketing, selling, buying, educating and
entertaining.
The commercial use of the Internet is still very new. Technology relating
to the Internet is developing extremely rapidly and its structure is very
complex. Although not currently subject to governmental regulations, the
possibility exists that governmental intervention will occur and regulate the
content, quantity, type of access providers, and other aspects of the Internet.
This underlying uncertainty renders an analysis of future trends unreliable and
requires strong warnings to investors that no assurances can be given that the
Company's Internet goals will be achieved or if they are, that they will benefit
the Company in any manner.
The Company has expended approximately $300,000 toward the research and
development of the Company's Internet products and services, as of June 30,
1996. The majority of these costs are being incorporated into the prices being
charged for the Company's malls. A small portion of these expenses, roughly 10%,
will be charged to the vendors within the malls.
Expenses for the research, development and sales of the Company's Internet
products and services are expected to increase in the immediate future.
Estimations of such expenses are very difficult to make because the amount of
expenses incurred will relate directly to the amount of business generated by
the Company's Internet division, which the Company cannot guarantee. The
Company's best estimate is that the Internet expenses should approximately
double before the end of the fiscal year 1996.
CONSULTING SERVICES
The types of consulting services the Company performs for its clients
include: document preparation; capital formation; financial analysis; debt
settlement; and general corporate problem solving. The Company has also begun
assisting private organizations in need of capital by preparing limited private
placement offering documentation, although the Company does not actively assist
in the actual placement (i.e., the selling of shares) of the offering.
Acceptable payments and the size of payments the Company charges for its
services vary with the volatility of the clients' securities, the amount and
nature of work involved, and the expenses related to the services being
rendered. The Company accepts consulting fees that range, in order of frequency,
from the clients' equity, to cash, to other assets. When payment is made in
equity, the number of shares to be paid is dependent on the price of the
clients' equity, when available. The Company accepts equity with the expectation
that its services will assist in the stock's appreciation, thus allowing the
Company to be paid and make a return on the payments for its services.
The number of the Company's clients, the nature of services being rendered
and the type of compensation received from clients vary greatly. At a given
time, the Company may be actively providing consulting services to more than 35
clients. Therefore, projecting the revenues that could be produced by the
Company's performance of these services is very difficult. The difficulty of
such projections is further enhanced because the Company receives a majority of
its compensation in the form of equity payments which cannot be readily resold,
thereby limiting its cash flow and reducing its liquidity. The Company estimates
that it will be able to obtain at least two additional clients per quarter for a
term of no less than one year.
During the second quarter of 1996, the Company continued efforts to expand
its client base through the addition of new clients who will utilize the
Company's consulting services. However, the Company cannot give any assurances
that its client base will continue to expand. In addition, because the number of
clients, the financial strength of clients, the types of payments and the range
of services provided can vary greatly from quarter to quarter, it is difficult
for the Company to project the revenue that can or is likely to be produced by
performing these services.
The Company generates a substantial portion of its cash flow by liquidating
the non-cash assets received as fees for consulting services. As most fees are
paid in the form of equity, the Company's ability to generate cash flows is
somewhat tied to the price of its clients' equity. Therefore, material
fluctuations in the price of clients' equity may significantly impact both the
short-term and long-term liquidity of the Company.
REAL ESTATE HOLDINGS
Part of the Company's business operations include the acquisition,
management, lease and sale of real estate. The Company has acquired a variety of
commercial properties. While most of the Company's real estate holdings are in
Utah, the Company also owns several properties in other parts of the United
States. The Company hopes to increase revenues generated from these properties
and obtain additional real estate holdings. A key to the Company's success is
the ability of management to locate and acquire real estate with little or no
cash down and turn such properties into profitable assets.
The Company manages its real estate holdings in-house and plans to fill
vacancies for the Company's property holdings in Salt Lake City, Utah. The
Company, as of June 30, 1996, had approximately 37% of its commercial space
vacant, generated approximately $39,000 in gross monthly rents, and operated at
a loss of approximately $8,600 per month as compared to a loss of approximately
$17,900 for the same period in 1995. These real estate operations are continued
despite the losses for two reasons. First, the Company hopes to eliminate the
losses by increasing the rental income from the property. Second, these
operations are pursued primarily for appreciation purposes. Thus, while the
Company seeks to minimize and reverse its real estate operating losses, its long
term goal is to generate a capital gain upon disposition that it sufficient to
offset any previous losses, although no such assurances can be given. Many of
these properties have MAI appraisals valuing them at twice the current book
value, although no assurances can be given that the values of such properties
will be maintained.
There is a risk that the Company may lose control of the properties, (e.g.,
through foreclosure), if enough funds are not derived from the rental income for
both the financing obligations and ongoing operations. Currently, due to
expanded acquisition activity and deficiencies in rental income from the
properties acquired, the Company does not have sufficient rental revenues to
service the debt and cover operating costs of all properties. The Company
currently has to use capital from other sources to fund this deficit. Although
management's goal is to increase the occupancy and rental rates and thus
increase the rental income so that such income will cover both operating costs
and debt service, no such assurances can be made. The Company's primary reason
for acquiring most of its real estate is for potential appreciation.
A wholly owned subsidiary of the Company, Cyber Real Estate, Inc., a Nevada
corporation ("CRE"), purchased a dormitory building located at 830 Edgebrook
Drive, in DeKalb, Illinois, on February 20, 1996. The property was purchased by
CRE on that date for a purchase price of $1,100,000. The purchase price was paid
by CRE's issuance of its preferred stock valued at $825,000 and a $275,000
Mortgage evidenced by a Uniform Real Estate Contract, with an interest rate of
6% per annum payable to the seller. Payments of interest only are due quarterly
with the entire balance due on or before February 20, 1997, with no penalties
for prepayment. As of August 12, 1996, CRE had located a prospective purchaser
and was in the process of negotiating a sale for the dormitory in DeKalb,
Illinois.
TAC, Inc., a Utah corporation ("TAC"), was a wholly-owned subsidiary of the
Company until the fourth quarter of 1995 when the subsidiary sold additional
shares of its common stock in a private placement offering pursuant to Rule 504.
This offering effectively diluted the Company's ownership to 51%. The sole asset
of TAC is, and has been since its inception, a warehouse is located at 5320 West
Wells Park Road, West Jordan, Utah. The building had been leased since June 1993
by TAC, Inc. ("TAC"). The Company purchased this building on June 28, 1996, for
$599,850. An existing mortgage of $306,456 was assumed and $293,394 in principal
was paid. The building has approximately 60,000 sq. ft. of interior space of
which approximately 90% is leased to eight tenants at an average of $0.25 per
sq. ft. There is currently a shortage of industrial and warehouse space in the
Salt Lake Valley and the Company feels the occupancy rate will remain high,
although no such assurances can be given.
The Company purchased an option to purchase 47,000 acres of mostly raw land
in Northwest Utah for $10,000 on June 11, 1996. The option price on this land
varies from $39-41 per acre, depending on when the closing of the purchase
occurs. As of August 12, 1996, the Company is unable to state if it will attempt
to exercise this option due to many variables surrounding the land.
During August 1996, one of the Company's wholly owned subsidiaries, KMC
Foods, Inc., a Delaware corporation, began the process of foreclosing on
property located in Cheriton, Virginia. For more information on this property
and the foreclosure proceeding, see "Part II, Item 1 - Legal Proceedings."
RESULTS OF OPERATIONS
Consulting
Revenue from consulting services for the quarter ended June 30, 1996, was
$791,812 compared to $136,026 for the second quarter of 1995. Revenue from
consulting services for the six months ended June 30, 1996 more than doubled
over the same period in 1995. The increase is attributable to an increase in the
number of clients for which the Company provides services. The costs of
providing consulting services for the second quarter of 1996 increased over the
costs of providing services for the second quarter of 1995 by $113,441. The
costs of providing consulting services for the six months ended June 30, 1996
increase by $223,205 over the same period in 1995. The increase in the costs of
providing consulting services is due to an increase in personnel expense
resulting from the addition of new employees hired to meet the needs of the
Company's expanded client base. Gross profit from consulting services during the
second quarter of 1996 was $432,506 compared with a gross loss of $109,839 for
the second quarter of 1995. Gross profit from consulting services for the six
months ended June 30, 1996 increased by $652,514 over the same period in 1995.
Rental Properties
Revenue from rental of the Company's properties in the second quarter of
1996 increased to $117,871 from $42,678 for the same period of 1995. Revenue
from rental of the Company's properties for the six months ended June 30, 1996
increased by $124,825 over the same period in 1995. This increase is primarily
due to an increase in the number of properties under the Company's control. This
is also the reason for the increase in cost of rental revenue from $96,548 for
the second quarter of 1995 to $143,782 for the second quarter of 1996.
Other Revenue
Other revenue was $3,442 for the quarter ended June 30, 1996, compared with
$1,470 for the same period of 1995. Other revenue for the six months ended June
30, 1996 was $63,234 compared with $10,081 for the same period of 1995. This
increase of $52,153 is primarily due to the Company's operation of a retail
complex in Oasis, Nevada until March 9, 1996. The Company has leased this retail
operation on a month to month basis to an operator and therefore revenue from
this source will not continue, although the Company will receive rental revenue
from this lease.
Net income for the first six months ended June 30, 1996, was $123,221
compared with a net loss of $605,208 in the first six months of 1995. Higher
revenues, resulting from an expanded client base and an increase in services
provided, and a corresponding reduction of the costs of revenue as a percentage
of revenue had led to the increase in income.
During the first two quarters of fiscal 1996, the Company expended
significant costs in developing its Internet division. For more information on
this division, please see "Part I, Item 2 - Management's Discussion and Analysis
or Plan of Operation - Internet Services." The Company expects this increase in
Internet expenses to continue.
CAPITAL RESOURCES AND LIQUIDITY
The deficiency in working capital decreased from $835,740 on June 30, 1995,
to a deficit of $81,696 at June 30, 1996. This decrease is primarily due to an
increase in receivables resulting from an expanded client base. The Company had
slightly negative cash flows during the first six months of 1996. Operating cash
flows are closely aligned with consulting revenue and the cost of providing
consulting services. The most significant cost of providing consulting service
is the payroll for the Company's approximately 80 employees. The Company expects
to increase payroll expenses if its consulting services division is increased as
a result of a substantial influx of clients.
During the quarter ended June 30, 1996, the Company issued 727,527 shares
of its common stock in exchange for services provided to the Company by
employees and consultants; 225,000 shares where exchanged for assets; and
1,300,001 were issued under Regulation S for cash and pursuant to promissory
notes. At June 30, 1996 the Company is owed $1,194,526 under the promissory
notes by the various entities for the 1,300,001 shares of the Company's common
stock that they purchased.
On May 15, 1996, the Company paid a property dividend in the form of common
stock of Oasis Hotel, Resort & Casino I, Inc. ("OHRCI") and Oasis Hotel, Resort
& Casino II, Inc. ("OHRCII"). The dividend declared March 4, 1996 was one share
in each OHRCI and OHRCII for every 100 shares of the common stock of the Company
owned by each shareholder of record on March 27, 1996.
On June 1, 1996, The Company paid a property dividend in the form of common
stock of Zahav, Inc. ("Zahav") and Cyber Information, Inc. ("CI"). The dividend
declared March 21, 1996 was one share in each Zahav and CI for every 100 shares
of common stock of the Company owned by each shareholder of record on April 23,
1996.
On June 14, 1996, the Company declared a non-cash dividend of INFOTECH
International, Inc. ("INFOTECH") or the cash equivalent of this stock. The
dividend rate was declared to be one share in INFOTECH per 100 shares of the
Company's Common Stock held of record, with the record date being June 24, 1996.
The board of directors also valued this dividend at $0.01 per 100 shares of
Common Stock held by shareholders of record. The Company expects to commence
this distribution within 30 days.
During the quarter ended June 30, 1996, the Company, through its wholly
owned subsidiary, Canton Financial Services Corporation ("CFSC"), acquired a 50%
ownership interest in Terrace Auto SuperCenter, a Florida corporation located in
Tampa, Florida ("Terrace"). In exchange for CFSC's assistance in obtaining
capital needed to satisfy one of Terrace's judgments, CFSC received 50% of
Terrace. Terrace owns a shopping mall exclusive to automotive needs. Ownership
of the mall is subject to a $1.4 million mortgage.
PART II
ITEM 1. LEGAL PROCEEDINGS
The following are legal proceedings that had material developments during
the second quarter of 1996. Other material legal proceedings are pending,
however, no developments occurred during the second quarter of 1996. (For
further information, see "Part I, Item 3 - Legal Proceedings" in the Company's
Annual Report on Form 10-KSB/A for the year ended December 31, 1995).
KMC Foods, Inc. vs. Potomac Engineering Management Systems Co. (PEMSCO) -
KMC Foods, Inc., a subsidiary of the Company, filed a Motion for Relief from the
Automatic Stay in PEMSCO's Chapter 11 bankruptcy case filed in the United States
Bankruptcy Court for the Eastern District of Virginia, Norfolk Division, Case
No. 95-23691-DHA. PEMSCO owed KMC $600,000 for full satisfaction of KMC's
secured interest in the property. However, PEMSCO did not pay this amount, and
with the Bankruptcy Court's permission, KMC is in the process of foreclosing on
the property.
Xeta Corporation vs. The Canton Industrial Corporation. Xeta originally
filed suit in the Northern District of Oklahoma. The suit was later dismissed
based on a lack of jurisdiction. The same suit was refiled on March 8, 1995, in
the United States District Court, in the Central District of Utah, Case Number
95CV-218G. Xeta seeks to recover $116,500 which it contends was fraudulently
transferred to the Company by ATC II, Inc., a client of the Company's subsidiary
Canton Financial Services ("CFS"), in order to avoid payment of a judgment held
by Xeta against ATC II. Richard Surber and Gerald Curtis, both former officers
of ATC II, are also named as individual defendants. The Company has responded to
the claims of Xeta by stating that CFS provided bona fide services to ATC II,
and that the bulk of the funds were used for operating expenditures of ATC II. A
Motion for Summary Judgment was filed by Xeta and, after a hearing by the Court,
was granted as to the Company only on April 16, 1996. An objection to the entry
of such a judgment was filed and the Company continues to dispute the
allegations.
The Canton Industrial Corporation and Canton Industrial of Salt Lake City
vs. Delmar A. Janovec and KLH Engineering Group, Inc. - Filed by the Company on
April 19, 1995, in the United States District Court, in the Central District of
Utah, Civil Case No. 2:95 CV 363G. The Company sought enforcement of the August
31, 1994 Settlement Agreement and Mutual Release to which the Company, Janovec
and KLH were parties. In the first quarter of 1996, court ordered mediation
yielded a settlement agreement involving the Company's retaining approximately
9.5 million shares of KLH common stock.
Steven A. Christensen v. The Canton Industrial Corporation, Canton
Personnel, Inc. and Allen Z. Wolfson. Suit was filed on July 1, 1996 in the
Third Judicial District Court of Salt Lake County, State of Utah Civil Action
No. 96-0904584CV, by Christensen, former President of the Company. The suit
seeks recovery of wages, benefits, bonuses, and other items. Allegations as
contained in the suit are so general at this time as to deny the Company an
adequate opportunity to respond. A motion to compel a full disclosure of the
basis upon which Christensen seeks to proceed has been filed with the court. The
Company does not believe that it has any further obligation to Christensen and
that he has been justly and completely compensated for his term as an employee
and an officer. The Company intends to defend the suit and will deny any
liability.
Possible Actions by Governmental Authorities
State of Illinois vs. The Canton Industrial Corporation - This action is
pending in the Ninth Judicial Circuit, State of Illinois, County of Fulton, Case
No. 93MR45, filed in September of 1993 and amended on January 28, 1994. The
State of Illinois sought the cleanup of tires and toxic paint drums at the site.
The State has raised an issue that drums are still located on the site and is
requesting certification of their contents and proper disposal. An Interim Order
for the cleanup of the property was entered and approved by the Court on March
8, 1994. Pursuant to the Interim Order, the sum of $140,000 was to be deposited
in an escrow account within the State of Illinois by May 15, 1994, to insure the
complete removal of the tires. The Interim Order also required the cleanup to be
completed no later than December 31, 1995. The Company entered into an agreement
for the removal of all tires with Gardens, Inc., who then subcontracted with
Eco-Systems Inc. Work began to bale the waste tires into blocks for disposal and
use by Eco-Systems, Inc. in August 1995. On September 28, 1995, the Company was
informed by the IEPA that it had rejected the Company's proposed plan for
removal and had hired its own contractor to remove the tires from the site. The
Company sought relief from this decision from the Circuit Court in Fulton
County. The Court denied the Company any relief at a hearing on October 10,
1995. On October 16, 1995, the Company filed an appeal with the Director of the
IEPA, which was also denied. Currently, the State has concluded work believing
that all waste tires have been removed from the site. In April 1996, the State
informed the Company of its intent to seek recovery of its estimated costs of
$325,000 incurred in removal of the tires. The Company believes that the
ultimate intent of the Interim Order, the complete removal of the tires, has
been met because either the tires had been completely removed or reduced to the
IEPA's control but not within the Court's exact specifications. The IEPA and the
Company are currently attempting to resolve a dispute as to the amount of tires
removed from the site. A complaint has been filed with the Illinois Pollution
Control Board seeking recovery of the State's costs related to the removal of
tires.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Company's shareholders was held on June 18, 1996.
The record date for this meeting was May 27, 1996, and 6,616,782 shares were
issued and outstanding on this date. The holders of a majority of the Company's
outstanding shares of common stock, $0.001 par value ("Common Stock"), were
presented with and approved the following actions: a change the Company's name
from The Canton Industrial Corporation to CyberAmerica Corporation ("Proposal
1"); a proposal to reelect three directors (Richard Surber, Philip Lamb, & Lorin
Pace) to the board ("Proposal 2"); a proposal to ratify the selection of
Andersen, Andersen & Strong, L.C. as the Company's independent auditors for the
fiscal year ending December 31, 1996 ("Proposal 3"); and any other matters
properly raised (none of which were raised) ("Proposal 4").
No persons other than those elected at the meeting serve as directors of
the Company.
The change in the Company's name stems from its expanded involvement in
providing a variety of Internet related services. For more information on these
services, see "Part I, Item 2 - Management's Discussion and Analysis."
The table below states the number of votes cast for, against, and withheld,
as well as the number of abstentions and broker non-votes as to each matter:
Voting Results For Against Abstain
Proposal 1 4,371,696 38,392 15,439
Proposal 2
Richard Surber 4,337,271 22,329 11,727
Lorin Pace 4,337,266 22,329 11,727
Philip Lamb 4,337,471 22,329 11,727
4,286,484 18,488 66,555
Proposal 4,254,090 15,364 102,073
ITEM 5 OTHER INFORMATION
In 1986, Allen Z. Wolfson, a control person of the Company, was convicted
of violating 18 U.S.C. ss.ss.1001 and 1002; and 18 U.S.C. ss.ss.1014 and 1002 in
the U. S. District Court for the Middle District of Florida (the "Florida
Court"). Mr. Wolfson was on probation for these violations until May 1995. In
February 1995, a complaint was filed with the Court alleging that Mr. Wolfson
had violated the terms of the probation. The Florida Court changed jurisdiction
to the U. S. District Court for the District of Utah, Central Division (the
"Utah Court"). The Utah Court heard the matter in August 1995 and on October 20,
1995, Bruce S. Jenkins, Senior U. S. District Court Judge, ruled that a
violation of the original terms of the probation had occurred. This finding
effectively revoked Mr. Wolfson's probation. On January 25, 1996, a sentencing
hearing was held before the Utah Court. At this hearing the Utah Court imposed a
three-year sentence, suspended, pursuant to additional terms of probation. On
April 11, 1996, the judge of the Utah Court signed a written order containing
new probation terms that are effective for three years. Mr. Wolfson has filed an
objection seeking clarification of the probation terms, which is presently
before the Utah Court. (For further information on Mr. Wolfson, see "Part II,
Item 12 - Certain Relationships and Related Transactions," in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1995).
Change in Control
A change in the control of the Company occurred on May 6, 1996, when Steven
A. Christensen was discharged from his position as president of the Company by
the board of directors. The board of directors believed that this change in
control was in the best interest of the Company as it was not satisfied with Mr.
Christensen's general performance. On May 6, 1996, the Company's board of
directors appointed Richard D. Surber as the president of the Company, a
position he had held until Mr. Christensen's appointment in August 1995. Mr.
Surber is also a director and the chief executive officer of the Company and the
nephew of Allen Z. Wolfson.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of
Regulation S-B are listed in the Index to Exhibits on page 14 of
this Form 10-QSB, and are incorporated herein by this reference.
(b) Reports on Form 8-K. The Company filed one report on Form 8-K
during the quarter ended June 30, 1996. On June 20, 1996, a Form
8-K was filed reporting under Item 5 that the Company's name had
changed to CyberAmerica Corporation from The Canton Industrial
Corporation.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 14th day of August 1996.
CYBERAMERICA CORPORATION
Date: August 14, 1996 By: /s/ Richard D. Surber
--------------------------
Name : Richard D. Surber
Title: President
Date: August 14, 1996 By: /s/ Susan S. Waldrop
-----------------------
Name: Susan S. Waldrop
Title: Chief Financial Officer, Secretary/Treasurer
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION OF EXHIBIT
3(i) * Articles of Incorporation are incorporated
herein by reference.
(3)(ii) * Bylaws are incorporated herein by reference.
10i(c)a 22 Agreement of Exchange of Stock signed on
April 9, 1996, by and between CyberAmerica
Corporation and Terrace AutoSupercenter.
27 25 Order of the Court involving Plaintiffs,
Canton Industrial Corporation and, Canton
Industrial Corporation of Salt Lake City and
Defendants, KLH Engineering, signed by Judge
Tena Campbell and effective July 23, 1996.
10i(b)b 28 Development and Purchase Agreement by and
between Canton Financial Services
Corporation (through its subsidiary,
CyberMall)and Bust-It Records regarding the
development and sale of a Mall site on the
Internet, effective June 13, 1996.
10i(c)c 39 Guaranty and Assumption, Modification and
Extension Agreement by and between Canton
Financial Services Corporation and The
Canada Life Assurance Company regarding the
purchase of the TAC Warehouse Building
effective June 28, 1996.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of this 9th day
of April, 1996, by and among Canton Financial Services Corporation, a Nevada
Corporation ("Canton") and Terrace Auto Supercenter Inc., a Florida Corporation
(Terrace").
PREMISES
WHEREAS, Terrace is in need of capital for its operations and
settlement of debt and is willing to exchange free-trading shares of its
authorized common stock in exchange for such consideration and assistance; and
WHEREAS, Canton is able and desires to provide Terrace with such funds
and assistance as of this date in exchange for free-trading shares of Terrace's
common stock.
AGREEMENT
IN CONSIDERATION of the mutual promises contained herein, the benefits
to be derived by each party hereunder and other good and valuable consideration,
the sufficiency of which is hereby expressly acknowledged, and the above
provisions being incorporated herein, Canton and Terrace agree as follows:
1. SALE OF STOCK. Upon the terms and conditions herein contained,
Canton agrees to acquire from Terrace Fifty Percent (50%) of Terrace's
authorized common stock (the "Stock") in exchange for Canton providing Terrace
with the sum of not less than $50,000. The Stock shall be "free-trading" stock,
immediately transferrable by Canton.
2. DELIVERY AT CLOSING. Upon execution hereof ("Closing"), the
certificates for the shares of Stock to be issued hereunder shall be delivered
to Canton not later than 14 days thereafter.
3. REPRESENTATIONS AND WARRANTIES OF CANTON. Canton hereby represents
and warrants to Terrace that:
A. AUTHORITY. This Agreement has been duly executed by Canton and the
execution and performance of this Agreement will not violate or result in a
breach of; or constitute a default in any agreement, instrument, judgment, order
or decree to which Canton is a party or to which Terrace is a subject.
B. ACCESS TO INFORMATION. Canton (I) has received and reviewed this
Agreement, (ii) has reviewed this Agreement with its attorney, accountants or
other agents, and has been given access to all other information relating
thereto that it has requested; (iii) in evaluating the suitability of an
investment in Terrace, Canton has not relied upon any representation or other
information (whether oral or written) other than as set forth in this Agreement;
and (iv) Canton has been offered the opportunity to discuss this investment with
representatives of Terrace and to ask questions of them.
<PAGE>
C. KNOWLEDGE OF RISKS. Canton recognizes that this investment in
Terrace involves certain risks and it has taken full cognizance of; and
understands all of, the risks related to the acquisition of the Stock.
4. REPRESENTATION AND WARRANTIES OF TERRACE. Terrace hereby represents
and warrants to Canton that:
A AUTHORITY. The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein have been duly authorized
by Terrace.
B.SECURITIES COMPLIANCE. The Stock is being acquired by Canton in
reliance upon Terrace's representation that such shares are freely transferable
by Canton. Terrace ftirther represents and warrants that this issuance is not
pursuant to a public offering, that this issuance is a private offering and
sale, and that the issuance is upon an applicable exemption from the federal and
state securities laws.
C. DILUTION PREVENTION. Terrace will not issue shares of common stock
to any other person without the issuance of flirther shares to Canton to prevent
dilution of Canton's 50% ownership position. Terrace will issue to Canton that
number of shares that equals 50% of the shares issued to the new shareholder.
The 50% described above does not include any other shares of Terrace acquired by
Canton, Canton's employees, consultants, affiliates, control persons or
subsidiaries pursuant to other agreements or transactions.
5. MISCELLANEOUS
A. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding between the parties hereto regarding the transactions set forth
herein and no other prior written or oral statement or agreement shall be
recognized or enforced.
B. SEVERABILITY. If a court of competent jurisdiction determines that
any clause or provision of this Agreement is invalid, illegal or unenforceable,
the other clauses and provisions of the Agreement shall remain in flill force
and effect and the clauses and provision which are determined to be void,
illegal or unenforceable shall be limited so that they shall remain in effect to
the extent permissible by law.
C. ASSIGNMENT. Neither party may assign this Agreement without the
express written consent of the other party, however, any such Assignment shall
be binding on and inure to the benefit of such successors of any party.
D. APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Utah.
E. VENUE & JURISDICTION. The parties agree to the personal and subject
matter jurisdiction, and venue in the federal and state courts in Salt Lake
County, Utah with respect to all such disputes arising from the Agreement to the
extent legally permissible. This provision is being agreed upon because of the
parties mutual desire to remove uncertainty as to such matters and the location
in Salt Lake County of one of the parties.
<PAGE>
F. ATTORNEY'S FEES. If any legal action or other proceeding (non
exclusively including arbitration) is brought for the enforcement of or to
declare any right or obligation under this Agreement or as a result of a breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, or otherwise because of a dispute among the parties hereto, any
successful or prevailing party will be entitled to recover reasonable attorney's
fees (including for appeals and collection) and other expenses incurred in such
action or proceedings, in addition to any other relief to which such party may
be entitled.
G. COUNTERPARTS. It is understood and agreed that this Agreement may
be executed in any number of identical counterparts, each of which may be deemed
an original for all purposes.
H. FACSIMILE COUNTERPARTS. If a party signs this Agreement and
transmits an electronic facsimile of the signature page to the other party, the
party who receives the facsimile transmission may rely upon the electronic
facsimile as a signed original of this Agreement.
I. NOTICES. Any notice or other communication required or permitted by
this Agreement must be in writing and shall be deemed to be properly given when
delivered to an officer of either party when deposited in the United States
mails for transmittal by certified, registered or express mail, postage prepaid,
or when sent by facsimile transmission, provided that the communication is
addressed:
(I) if to Canton: Canton Financial Services Corporation
268 West 400 South, Suite 301
Salt Lake City, Utah 84101
(ii) if to Terrace: Terrace Auto Supercenter, Inc.
4422 Kelly Road
Tampa, Florida 33615
or to such other person or address as designated by the parties to receive
notice.
J. MUTUAL COOPERATION. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement and shall execute such other and
tirther documents and take such other and further actions as may be necessary or
convenient to effect the transactions described herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
Canton Financial Services Corporation Terrace Auto Supercenter Incorporated
a Utah Corporation a Florida Corporation
BY /S/ STEVEN CHRISTENSEN BY: /S / R. STEWART
President President
MICHAEL GOLIGHTLY (6735)
Attorney for the Plaintiff
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Tel: (801) 575-8073
Fax: (801) 575-8092
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
CANTON INDUSTRIAL CORPORATION, )
A Nevada Corporation; and ) ORDER
CANTON INDUSTRIAL CORPORATION )
OF SALT LAKE CITY, a Utah Corporation )
) Civil No.: 2:95CV 363
Plaintiffs, )
)
vs. )
)
DELMAR A. JANOVEC, an individual, )
and KLH ENGINEERING GROUP, INC., ) Judge: Tena Campbell
a Delaware Corporation )
)
Defendants )
Plaintiffs Canton Industrial Corporation and Canton Industrial
Corporation of Salt Lake City (collectively herein "CANTON") and Defendants
Delmar A. Janovec and KLH Engineering Group, Inc. engaged in a Mediation
Conference on June 14, 1996 in order to resolve all disputes between them in the
above-entitled action. The parties agreed to the following terms in open court,
and the court now orders Plaintiffs and Defendants to comply with those terms as
set forth:
<PAGE>
1. That Delmar Janovec will transfer 9.5 Million (9,500,000) shares of
KLH restricted Common Stock to CANTON within ten days of filing of this
settlement order. Removal of Rule 144 restriction of said shares shall be
subject to the opinion of an independent counsel located in Salt Lake City, who
is to be selected by mutual agreement of the above-named parties. Said counsel
is to represent CANTON. KLH agrees to pay any fees for this opinion in excess of
Five Hundred Dollars ($500.00). Both parties agree to accept and abide by the
final opinion submitted in writing by said counsel.
2. That August 31, 1994 is the date KLH issued and authorized the
shares Janovec is to transfer to CANTON.
3. That Defendants will retain Eighty shares of Series B Preferred
Stock of Global Strategies Group, Inc.
4. That CANTON will inform Interwest Transfer Company, Inc. within ten
days of filing this settlement order that it has no claim to shares in KLH
Engineering Group, Inc. represented by stock certificates which were in the
physical possession of Interwest Transfer Company, Inc. on June 14, 1996.
5. That CANTON will indemnify Defendants for all claims of damage that
may arise from the cancellation of shares in KLH Engineering Group, Inc.
represented by stock certificates which were in the physical possession of
Interwest Transfer Company, Inc. on June 14, 1996.
6. That Defendants will retain Title to Lot 39 and Lot 81 as set forth
on the Sweetbriar Estates plat map recorded in the County of Johnson, State of
Kansas
7. That in consideration of the agreements set forth herein, each of
the parties, for itself and for its heirs, personal representatives, successors
and assigns, hereby releases the other from any and all liability or causes of
action whatsoever, known or unknown, contingent or matured, which each had or
has against the other from the beginning of time until the date of this
instrument and particularly, but not by way of limitation of the foregoing,
arising out of the transactions made the basis of the suit set out herein above
and agree and stipulate to the dismissal of all causes of action asserted by any
and all parties hereto.
THEREFORE, it is hereby ordered and decreed that all causes of action
asserted by all parties are herby dismissed, each party to bear its own costs.
SO ORDERED this 23rd day of July, 1996.
/s/ Tena Campbell
JUDGE TENA CAMPBELL
U.S. District Judge
<PAGE>
MAILING CERTIFICATE OF CLERK
United States District Court
for the
District of Utah
July 19,1996
Re: 2:95-CV-00363
True and correct copies of the attached were mailed by the clerk to the
following:
Michael Labertew
Eight East Broadway #735
Salt Lake City, Utah 84111
Michael Golightly
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
DEVELOPMENT AND PURCHASE AGREEMENT
504
This Agreement ("Agreement") is made effective this 13th day of June,
1996 by and between Canton Financial Services Corporation, (hereinafter referred
to as "Canton"), a Nevada corporation with offices at 268 West 400 South, Suite
310, Salt Lake City, Utah 84101 and, Bust-It Records, a California corporation
(hereinafter referred to as "Client"), with an address as described below under
Item 18(e)(iv) with respect to the following:
RECITALS
WHEREAS, Canton , among other things, and through its subsidiary,
CyberMall, Inc. is in the business of building and selling Mall sites on the
internet and providing necessary support and maintenance services to and for
companies that desire to market and/or promote their products or services on the
Internet;
WHEREAS, Client is in the business of marketing and promoting products
and services relating to the music business;
WHEREAS, Client desires that Canton, through its subsidiary, CyberMall,
Inc., develop and sell to Client, a Mall site on the Internet to promote and
market products and services associated with its business; and
WHEREAS, for the purposes of this Agreement, "Client" shall also mean
to include entities and individuals owned, affiliated with or represented by
Client as listed in Exhibit "A" attached hereto, if applicable.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, Client and Canton agree
as follows:
1. Sale and purchase
Canton agrees to sell to Client and Client agrees to purchase from
Canton, a wholly owned subsidiary of Canton Financial Services Corporation,
knows as (A Cyber Company to named, Inc. ("CY"), which among other things, shall
include a Mall site on the Internet which Canton will develop and tailor to meet
Bust-It Records' specific needs. Said mall shall include, but not be limited to
the following:
a. Use of Canton's T-1 access line; use of computer hardware and
software; use of a graphic design team; use of a copy writing and
editing team; use of computer programmers; use of scanning
systems, facsimile systems, photocopiers; and use of Canton's
proprietary search engine and shopping cart when such products
become available. All of the above are specifically for the
purpose of developing and servicing CY.
b. Canton shall supply CY with the necessary vendor contracts and
forms.
<PAGE>
c. Within 15 days of this Agreement, Canton shall provide Client and
CY a detailed list of the conditions pursuant to item 1 (a) as
well as a list of additional services that it will provide
pursuant to the development and servicing of this mall.
2. Purchase Price.
The purchase price for said subsidiary and Mall site shall be Fifteen
Million Dollars ($15,000,000).
3. Terms of Sale
a. Pursuant to a Consulting Agreement between Canton and Client
dated June 13th, a copy of --------- which is attached hereto as
exhibit "B" ("CONSULTING AGREEMENT"), Canton shall assist client
with, among other things, forming a new Nevada corporation
("NEWCO") and preparing the documents for raising capital through
a public offering(s) of NEWCO's stock pursuant to Rule 504 of
Regulation D ("OFFERING(s)"). Pursuant to Item 2 (d) of the
CONSULTING AGREEMENT, Canton shall receive the first Seventy-Five
Thousand Dollars ($75,000) cash raised from the OFFERING(s) as
compensation for other services provided by Canton to Client
under CONSULTING AGREEMENT.
i. Under the terms of this DEVELOPMENT and PURCHASE
AGREEMENT herein, Canton shall receive the next One
Hundred and Fifty Thousand Dollars ($150,000) cash
raised from the aforementioned OFFERING(s).
ii. Canton shall further receive Five Hundred Thousand
(500,000) free-trading shares of NEWCO, under the
OFFERING(s). For the purpose of this Agreement, Said
shares shall be valued at One Million Three Hundred
Thousand Fifty Dollars ($1,350,000).
b. The balance of Thirteen Million Five Hundred Thousand Dollars
($13,500,000) shall be paid as follows:
i. Client shall execute a Promissory Note for Thirteen
Million Five Hundred Thousand Dollars ($13,500,000)
in favor of Canton ("Note"). This Note shall be
secured by the CY corporate stock (which shall remain
in the possession of Canton until said Note has been
paid in full) and shall be due and payable in full
within three years form the date of this Agreement.
After the end of three (3) years form the date of
this Agreement, Canton may, at its option, convert
any unpaid balance into 29% of CY's common stock in
lieu of full payment.
<PAGE>
ii. As an incentive for early payment in full on this
Note, Client may pay to Canton Eight Million Dollars
($8,000,000) cash within the first twelve months
from the date of this Agreement, Or, Client may pay
Ten Million Dollars ($10,000,000) cash within the
twenty-four months from the date of this Agreement
which amount shall represent payment in full on this
Note. Additionally, any amount paid in the first
twelve months shall be applied pro-rata towards the
($10,000,000) to be paid within the twenty-four
month period. Additionally, any amount paid in the
first twenty-four months shall be applied pro-rata
towards the ($13,500,000) to be paid within the
three year period.
c. Further, Canton shall receive 2% of the gross quarterly revenues
of Cy, in perpetuity, which is to be disbursed on a quarterly
basis.
d. Once $9 million in gross revenues have been achieved from CY,
Client shall issue an additional 100,000 shares of free trading
stock of NEWCO to Canto or designees pursuant to a Form S-8 under
the Securities Exchange Act of 1933, as amended, for services
rendered.
e. Before each issuance of stock , or exchange of stock pursuant to
this Agreement, Canton shall provide Client with a list of
designees ("List of Designees") specifying which entities will
provide or have provided services under this Agreement, and the
amount of stock each is to be compensated. Such list must bear
the notarized signature of an officer of Canton to be valid. All
shares issued pursuant to this Agreement shall be issued pursuant
to Canton's instruction.
4. Expenses.
a. Client shall be responsible for all costs associated with the
development and service of CY. Consultant shall provide Client
monthly itemized invoices and statements of all costs it has
incurred on behalf of CY. Client shall have the option to pay
expenses in cash or with NEWCO stock. In the event that Client
chooses to pay in stock, said payment shall be made in free
trading stock of NEWCO and subject to Item 3(e) above. In the
event Client chooses to pay in cash, it shall receive a
Twenty-Five Percent (25%) discount from the amount of invoice
paid in cash.
b. All time spent on each matter by any independent employee of
CyberMall or any of its subsidiaries, is recorded and charged at
an hourly rate and is subject to periodic review based on the
status of the person performing the work. In the event there are
any unpaid compensation or expenses, they shall bear interest at
the annual rate of 18%, compounded annually; any invoice unpaid
after thirty (30) days shall bear interest as indicated above and
may be settled by the issuance of additional shares of the common
stock of Clients' of equivalent value, at the option of Canton.
c. For a period of sixty-days from the date of this Agreement,
Consultant shall waive development expenses for Client. However,
Consultant shall provide Client with an accounting of its costs
for Client's review so client may have the opportunity to
ascertain the level of quality of Consultant's work and the
fairness of Consultant's billings. Any dispute shall be subject
to Item 4 (d) below.
<PAGE>
d. In the event of a dispute over expenses to be paid by Client to
Consultant, Client shall present to Consultant, in writing, the
nature of the dispute. Consultant and Client shall first attempt
to resolve the matter among themselves. If, after 30 days from
the date of Client's dispute letter, the matter has not been
resolved in writing and signed by both parties, it shall next be
submitted to arbitrations. Each party shall select a member to
represent them on the board of arbitration. The two chosen
arbitrators shall then select a third member. Any resolution
provided under arbitration shall be final and binding.
5. Nondisclosure of Confidential Information
a. In consideration for the Client entering into this Agreement,
Canton agrees that the following items used in the Client's
business are secret, confidential, unique and valuable, were
developed by Client at great cost and over a long period of time,
and disclosure of any of the items to anyone other than Client's
officers, agents, or authorized employees will cause Client
irreparable injury:
(i) non-public financial information, accounting
information, plan of operations, possible mergers or
acquisitions prior to the public announcement;
(ii) customer lists, call lists, and other confidential
customer data;
(iii) memoranda, notes, records concerning the technical
processes conducted by Client;
(iv) sketches, plans, drawings and other confidential
research and development data; or
(v) manufacturing processes, chemical formulae, and/or
the composition of Client's products.
b. Canton shall have no liability to the Client with respect to the
use or disclosure to others not party to this Agreement, of such
information as Canton can establish to:
(i) have been publicly known;
(ii) have become known, without fault on the part of
Canton, subsequent to disclosure by Client of such
information to Canton;
(iii) have been otherwise known by Canton prior to
communication by the Client to Canton of such
information; or
(iv) have been received by Canton at any time from a
source other than Client lawfully having possession
of such information.
<PAGE>
6. Term of Service and Development:
Notwithstanding any early termination pursuant to Section 7, Canton
shall be obligated to provide all services necessary to achieve the development
of CY to Client's specifications for a period of one year form the date of this
agreement. After this period, this Agreement can be extended on a month to month
basis (the "Extension Period") by mutual agreement of the parties executed in
writing specifying the compensation for the Extension Period. Such notice of
either extension or termination shall be in writing and shall be delivered via
U.S. certified mail, when applicable, effective ten (10) days after delivery to
the other party.
7. Termination of Agreement by Either Party
a. Either party retains the right to terminate this Agreement if in
the judgment of the Board of Directors of either part, the other
party's actions or conduct make it unreasonable to perform under
this Agreement. Such acts include, but are not limited to,
engaging in or threatening to engage in illegal or unethical
activities.
c. Either party retains the right to terminate this Agreement if the
other party misrepresents its corporate standing, its power to
enter and bind itself to this Agreement, its guarantees as
indicated below, or any other material fact which would decrease
the binding effect of this Agreement.
d. Either party retains the right to terminate this Agreement if an
unanticipated material change in federal or state laws and/or
regulations makes continued performance under this Agreement
unreasonable.
e. Canton retains the right to terminate this Agreement upon
Client's lack of payment pursuant to Item 4, if such delinquency
continues for thirty (30) days after due hereunder.
f. Notwithstanding the termination of this Agreement by either
party, Canton shall be entitled to receipt of the charges for the
work actually performed at its normal consulting rates, and shall
retain or continue to be entitled to any stock either issued or
authorized to be issued to Canton or its designees. Canton shall
also be entitled to reimbursement of any expenses incurred.
8. Non-Circumvention
Client agrees that it will not enter into any transaction involving a
business opportunity introduced to Client by Canton, without compensating Canton
pursuant to this Agreement. Neither will Client terminate this Agreement solely
as a means to avoid paying Canton compensation earned or to be earned, or in any
other way attempt to circumvent Canton or this Consulting Agreement.
9. Due Diligence
Client shall supply and deliver to Canton all information relating to
its business as may be reasonable requested by Canton to enable Canton to make
an investigation of Client and its business prospects, and Client shall make
available to Canton names, addresses and telephone numbers as Canton may need to
verify or substantiate any such information provided. Client shall be under an
affirmative obligation to update Canton of any potentially material changes it
experiences.
<PAGE>
10. Best Efforts Basis
Canton agrees that it will at all times faithfully, to the best of its
experience, ability and talents, perform all the duties that may be required of
and form Canton pursuant to the terms of this Agreement. Canton does not
guarantee that its efforts will have any impact on Client's business or that any
subsequent financial improvement will result form Canton's efforts. Client
understands and acknowledges that the success or failure of Canton's efforts
will be predicated on Client's assets and operating results. 11. Canton's
Employees
11. Canton's Employees
Client is put on notice that agreements presently exist between Canton
and certain employees of Canton prohibiting future employment with clients in
general. Client agrees not to circumvent or frustrate the obligations of the
parties to these agreements.
12. Client's Representations
Client represents, warrants and covenants to Canton that each of the
following are true and complete as of the date of this Agreement:
a. Corporate Existence. Client is a corporation duly organized,
validly existing, and in good standing under the laws of the
state of its incorporation, with full corporate power and
authority and all necessary governmental authorization to own,
lease and operate property and carry on its business as it is now
being conducted. Client is duly qualified to do business in and
is in good standing in every jurisdiction in which the nature of
its business or the property owned or leased by it makes such
qualifications necessary.
b. Client's Authority for Agreement. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by the Client. This
Agreement has been duly executed and delivered by Client and
constitutes the valid and legally binding obligation of Client
enforceable in accordance with its terms, except to the extent
that enforceability may be subject to or limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditor rights generally. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated herein will not conflict with or result in the
violation of any provision of Client's Articles of Incorporation
or Bylaws. To the best of Client's knowledge, after due inquiry,
the execution and delivery of this Agreement and the consummation
of the transactions contemplated herein will not conflict with
any mortgage, indenture, lease, contract commitment, agreement,
or other instrument, permit, concession, grant, franchise,
license, judgement, order, decree, statute, law, ordinance, rule
or regulation applicable to Client or any of its properties or
assets.
c. Consents and Authorizations. Any consent, approval order or
authorization of, or registration, declaration, compliance with
or filing with any governmental or regulatory authority required
in connection with the execution and delivery of this Agreement
to permit the consummation by Client and Canton of the
transactions contemplated herein shall be accomplished in a
timely manner and in accordance with federal and/or state laws
where applicable. Client herein guarantees that at the time and
at the date of trade, should its stock fall below the value as
previously established at the time and on the date this Agreement
was consummated, that Client will correct any difference to
Canton so that Canton would have been put in the same position
should the stock have been trading at the same value when this
Agreement was consummated.
<PAGE>
d. Litigation. There are no judicial or administrative actions,
suits, proceedings or investigations pending or, to the knowledge
of Client, threatened which may result in any liability on the
part of Client other than what has already been disclosed to
Canton.
e. Involvement in Proceedings or Investigations by Securities
Regulatory Authorities. Client, its officers, 10% of
shareholders, and any entity which Client or its affiliates or
officers control, has not been previously involved in any
litigation, investigations or proceedings with the SEC or any
other State of Foreign Securities Regulatory organization, and is
not presently indicted and/or was never convicted of fraud or any
similar crime involving any allegation of dishonesty or theft,
nor found guilty or is currently involved in legal proceedings of
such conduct in a civil context, other than as disclosed and with
full and complete details attached hereto.
f. Minute Books. The minute books of Client contain full and
complete minutes of all annual, special and other meetings (or
written consents in lieu thereof) of the directors and committees
of directors and shareholders of Client; the signatures on such
minutes and written consents are the true signatures of the
persons purporting to have signed them; and the stock ledger of
Client with respect to shares of Client's common stock issued or
transferred is complete and no documentary stamp taxes are
required to be affixed and canceled in connection with the
transfer of issuance of the shares.
g. Disclosure Documents. Client has or will cause to be delivered,
concurrent with the execution of this Agreement, copies of its
entity records as requested to effectuate any transaction
contemplated herein. Documents which Client agrees to provide to
Canton shall include but not be limited to audited financial
statements for the past three years of Client's operations or as
long as Client has been in operation, whichever is less, which
have been audited by a SEC peer approved financial auditor, any
entity resolutions and any and all other documents which may in
any way relate to the transactions contemplated in this
Agreement.
h. Nature of Representations. No representation or warranty made by
Client in this Agreement, nor any document or information
furnished or to be furnished by Client to the Canton in
connection with this Agreement, contains or will contain any
untrue statement of material fact, or omits or will omit to state
any material fact necessary to make the statements contained
therein not misleading, or omits to state any material fact
relevant to the transactions contemplated by this Agreement.
i. Independent Legal and Financial Advice. Canton is not a law firm;
neither is it an accounting firm. Canton does, however, employ
professionals in those capacities to better enable Canton to
provide consulting services. Client represents that it has not
nor will it construe any of Canton's representations to be
statements of law. Client has and will continue to seek the
independent advice of legal and financial counsel regarding all
material aspects of the transactions contemplated by this
Agreement, including the review of all documents provided by
Canton to Client and all opportunities Canton introduces to
Client. Client acknowledges that no representation or warranty
has been given to Client by Canto as to any legal, tax,
accounting, financial or other aspect of the transactions
contemplated by this Agreement.
<PAGE>
13. Canton's Disclosure
Canton makes no warranties or representations with respect to the value or
potential value or earnings potential, of the proposed Mall site. 14. All prior
Agreements Terminated
14. All Prior Agreements Terminated
This Agreement comprises the entire agreement and understanding between the
parties hereto at the date of this Agreement as to the subject matter hereof and
supersedes and replaces all proposals, prior negotiations and agreements,
whether oral or written, between the parties hereto in connection with the
subject matter hereof. None of the parties hereto shall be bound by any
conditions, definitions, warranties or representations with respect to the
subject matter of this Agreement other than as expressly provided in this
Agreement unless the parties hereto subsequently agree to vary this Agreement in
writing, duly signed by authorized representatives of the parties hereto.
15. Canton is not an Agent or Employee of Client
Canton's obligations under this Agreement consist solely of the
Consulting Services described herein. In no event shall Canton be considered to
act as an employee or agent of Client or otherwise represent or bind Client. For
the purpose of this Agreement, Canton is an independent contractor. All final
decisions with respect to acts of Client whether or not made pursuant to or in
reliance on information or advice furnished by Canton hereunder, shall be those
of Client or its affiliates and Canton, its employees or agents shall under no
circumstances be liable for any expense incurred or loss suffered by Client as a
consequence of such action or decisions.
16. Utilization of Attorneys
Canton utilizes attorneys to assist it in preparing the documentation
required to effectuate the transactions contemplated by this Agreement. The
attorneys utilized by Canton represent only Canton, and Canton's interest in
providing consulting services and do not in anyway represent the interests of
any party to this Agreement other than Canton's. Client is advised, and has
represented, that it will seek independent legal counsel to review all
documentation provided to Client by Canton.
17. Continue Operations in Substantially Same Manner
Client will not transfer, sell or hypothecate, assign or distribute any
of the assets currently in its possession except upon the written agreement of
the parties to this Agreement, and will continue operations in substantially the
same manner as it is presently functioning, until this agreement has been
consummated.
18. Miscellaneous
a. Authority. The execution and performance of this Agreement have
been duly authorized by all requisite corporate action. This
Agreement constitutes a valid and binding obligation of the
parties hereto.
b. Amendment. This Agreement may be amended or modified only by an
instrument in writing executed by the parties hereto.
c. Waiver. No term of this Agreement shall be considered waived and
no breach excused by either party unless made in writing. No
consent waiver or excuse by either party, express or implied
shall constitute a subsequent consent, waiver or excuse.
<PAGE>
d. Assignment
(i) The rights and obligations of the Canton under this
Agreement shall inure to the benefit of and shall be
binding upon its successors and assigns. There shall
be no rights of transfer or assignment of this
Agreement by Client except with the prior written
consent of the Canton.
(ii) Nothing in this Agreement, expressed or implied, is
intended to confer upon any person other than the
parties and their successors, any rights or remedies
under this Agreement.
e. Notices. Any notice or other communication required or permitted
by this Agreement must be in writing and shall be deemed to be
properly given when delivered in person to an officer of the
other party, when deposited in the United States mails for
transmittal by certified or registered mail, postage prepaid, or
when deposited with a public telegraph Corporation for
transmittal or when sent by facsimile transmission, charges
prepaid provided that the communication is addressed:
(i) In the case of Canton to:
Canton Financial Services Corporation
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
(801) 575-8073
(801) 575-8092 (fax)
Attention: Richard Surber, President
(ii) In the case of Client to:
Bust-It Records
P.O. Box 2165
Oakland, CA 94621
510-535-7010
510-535-7015 (fax)
or to such other person or address designated by Client in
writing to receive notice.
<PAGE>
f. Headings and Captions. The headings of paragraphs are included
solely for convenience. If a conflict exists between any heading
and the text of this Agreement, the text shall control.
g. Entire Agreement. This instrument and the exhibits to this
instrument contain the entire agreement between the parties with
respect to the transaction contemplated by the Agreement. It may
be executed in any number of counterparts but the aggregate of
the counterparts together constitute only one and the same
instrument.
h. Effect of Partial Invalidity. In the event that any one or more
of the provisions contained in this Agreement shall for any
reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality or unenforceability shall
not affect any other provisions of this Agreement, but his
Agreement shall be constructed as if it never contained any such
invalid, illegal or unenforceable provisions.
i. Controlling Law. The validity, interpretation, and performance of
this Agreement shall be governed by the laws of the State of Utah
without regard to its law on the conflict of laws. Any dispute
arising out of this Agreement shall be brought in a court of
competent jurisdiction in Salt Lake County, Utah. The parties
exclude any and all statutes, law and treaties which would allow
or require any dispute to be decided in another forum or by other
rules of decision than provided in this Agreement.
j. Attorney's Fees. If any action at law or in equity, including an
action for declaratory relief, is brought to enforce or interpret
the provisions of this Agreement the prevailing party shall be
entitled to recover actual attorney's fees court costs, and other
costs incurred in proceeding with the action from the other
party. The attorney's fees, court costs or other costs, may be
ordered by the court in its decision of any action described in
this paragraph or may be enforced in a separate action brought
for determining attorney's fees, court costs, or other costs.
Should either party be represented by in-house counsel all
parties agree that party may recover attorney's fees incurred by
that in-house counsel in an amount equal to that attorney's
normal fees for similar matters, or, should that attorney not
normally charge a fee, by the prevailing rate charged by
attorney's with similar background in that legal community.
k. Time is of the Essence. Time is of the essence of this Agreement
and of each and every provision hereof.
l. Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement, and shall execute
such other and further documents and take such other and further
actions as may be necessary or convenient to effect the
transactions described herein.
m. Indemnification. Client and Canton agree to indemnify, hold
harmless and, at the party seeking indemnification's sole option,
defend the other form and against all demands, claims, actions,
losses, damages, liabilities, costs and expenses, including
without limitation, interest, penalties, court fees, and
attorney's fees and expenses asserted against or imposed or
incurred by either party by reason of or resulting from a breach
of any representation, warranty, covenant condition or agreement
of the other party to this Agreement. Neither party shall be
responsible to the other party for any consequential or punitive
damages.
<PAGE>
n. No Third Party Beneficiary. Nothing in this Agreement, expressed
or implied, is intended to confer upon any person, other than the
parties hereto and their successors, any rights or remedies under
or by reason of this Agreement, unless this Agreement
specifically states such intent.
o. Facsimile Counterparts. If a party signs this Agreement and
transmits an electronic facsimile of the signature page to the
other party, the party who receives the transmission may rely
upon the electronic facsimile as a signed original of this
Agreement. Further, this Agreement may be executed in
counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement ono the date
herein above written.
Canton Financial Services Corporation Bust-It Records
/s/ Richard Surber /s/Louis K. Burrell
Richard Surber, President Louis K. Burrell, President
GUARANTY
THIS GUARANTY is made this 28th day of June, 1996 (this "Guaranty") by
Canton Financial Services Corporation, a Nevada corporation ("Guarantor"), in
favor of The Canada life Assurance Company, a Canadian corporation ("Lender").
RECITALS:
Lender intends to loan $306,455.57 U.S. (the "Loan") to TAC, Inc., a
Utah corporation ("Borrower"), which will be evidenced by Borrower's assumption
of that certain Promissory Note dated December 30, 1992 (the "Note") executed by
Lewis DeLyle Billings and Arlene S. Billings in favor of Lender in the original
principal amount of $410,000.00 U.S. and bearing interest and being payable as
provided therein and as modified by that certain Assumption, Modification and
Extension Agreement of even date herewith (the "Assumption Agreement"). The
payment and performance of Borrower's obligation under the Note are secured by
that certain Deed of Trust, Security Agreement and Financing Statement dated as
of the date of the note (the "Mortgage"), and that certain Assignment of Rents
and Leases dated as to the date of the Note between Borrower and Lender (the
"Assignment of Rents and Leases"), each encumbering certain property therein
referred to as the Mortgage Estate, and that certain Indemnity Agreement dated
as of the date of the Note(the "Indemnity").
Guaranty's execution and delivery of the Guaranty is a principal and
material part of the consideration for Lender allowing Borrower to assume the
Loan, and Lender is not willing to allow and assumption of the Note unless this
Guaranty is executed and delivered. Guarantor is willing to execute and deliver
this Guaranty because of its affiliated relationship with Borrower. The Note,
the Mortgage, the Assignment of Rents and Leases, the Indemnity, the Assumption
Agreement, this Guaranty, the other documents executed and delivered at or prior
to the closing by Borrower, and any other instruments made to or with Lender to
evidence or further secure the payment and performance of the several
obligations secured by the Mortgage and the Assignment of Rents and Leases are
hereafter referred to as the "Loan Documents."
AGREEMENT:
NOW, THEREFORE, in consideration of the premises, and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Guarantor agrees with Lender as follows:
Section 1. Guaranty. Guarantor unconditionally and irrevocably, jointly
and severally, guarantees (i) the payment and performance by Borrower of all its
obligations, covenants, agreements, terms and conditions under the Loan
Documents and (ii) the prompt payment of all sums which may become payable by
Borrower pursuant to any of the Loan Documents in full when die in accordance
with the provisions thereof. This Guaranty is irrevocable, unconditional and
absolute.
<PAGE>
If for any reason any sums shall not be paid by Borrower promptly, when
due (after delivery of such notice as may be required by the Loan Documents and
prior to the expiration of any applicable grace period) or any such agreement,
covenant, term or condition is not performed or observed by Borrower in
accordance with the Loan Documents, Guarantor promptly after notice thereof will
pay the same to the person entitled thereto pursuant to the provisions of any
such Loan Document and will promptly perform and observe the same or cause the
same promptly to be performed or observed, in any case regardless of (a) any
defenses or rights of set-off or counterclaims that Borrower may have or assert,
(b) any limitation on the liability of Borrower contained in the Note or other
Loan Documents, and (c) whether Lender shall have taken any steps to enforce any
rights against Borrower or any other remedy thereunder as a result of the
default of Borrower thereunder.
Guarantor also agrees to pay to Lender such further reasonable and
actual amounts as shall be sufficient to cover the cost and expense actually
incurred in collecting such sums, or any part thereof, or in otherwise enforcing
this Guaranty, including, without limitation, reasonable attorney's fees and
disbursements and costs and fees of appeal. This Guaranty is a guaranty of
payment and performance and not of collection. If this Guaranty is signed by
more than one Guarantor, the obligations are joint and several.
Any amount received by Lender from whatever source and applied by it
toward the payment of Secured Obligations (as defined in the Mortgage) shall be
applied in such order of application as Lender may from time to time elect. If
claim is ever made upon Lender for repayment or recovery of any amount or
amounts received by Lender in payment of any of the Secured Obligations and
Lender repays all or part of such amount, Guarantor shall be and remain
obligated to Lender hereunder for the amount so repaid or recovered to the same
extent as if such amount had never originally been received by Lender.
Section 2. Unconditional Obligation. The obligations, covenants,
agreements and duties of Guarantor under this Guaranty shall in no way be
affected or impaired by reason of the happening from time to time of any of the
following (except to the extent, if any, expressly granted or waived with
respect to Guarantor), although without notice to or the further consent of
Guarantor:
(a) the waiver by Lender of the performance or observance by Borrower,
Guarantor, or any other party of any of the agreements, covenants, terms or
conditions contained in any of the Loan Documents;
(b) the extension, in whole or in part, of the time for payment by
Borrower of Guarantor of any sums owing or payable under any of the Loan
Documents;
(c) any leasing or subletting of the Mortgaged Estate or any part
thereof;
(d) the modification or amendment, whether material or otherwise,
of any of the obligations of Borrower under the Loan Documents, whether the same
be in the form of a new agreement of the modification or amendment of an
existing Loan Document or of Guarantor under this Guaranty (any of the foregoing
being a "Modification"); provided, however, that, unless such Modification is
required by law or on account of bankruptcy or insolvency, no Modification that
has the effect of materially increasing the obligations of Guarantor hereunder
shall be effective against Guarantor to the extent of such material increase
unless Guarantor shall be a party to, or consent to, such Modification, which
consent Guarantor agrees shall not be unreasonably withheld or delayed;
provided, further, that if any Modification is made without such consent of
Guarantor, such Modification shall be ineffective as against Guarantor only to
the extent the same shall materially increase the obligations of Guarantor under
this Guaranty, it being expressly agreed that , even if such Modification has
the effect of increasing the likelihood of o default by Borrower under the Loan
Documents, Guarantor shall remain liable to the full extent of the Guaranty as
if such Modification had not been made;
<PAGE>
(e) the doing or the omission of any of the acts referred to in
the Loan Documents;
(f) any failure, omission or delay on the part of Lender to
enforce, assert or exercise any right, power or remedy conferred on or available
to Lender in or by any of the Loan Documents or any action on the part of Lender
granting indulgence or extension in any form whatsoever;
(g) the voluntary or involuntary liquidation, dissolution, sale
of all or substantially all of the assets, marshaling of assets and liabilities,
receivership, conservatorship, custodianship, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, composition or
readjustment of, or other similar proceeding affecting Borrower or Guarantor or
any of their assets;
(h) the inability of Lender or Borrower, respectively, to enforce
any provision of the Loan Documents;
(i) any change in the relationship between Borrower and Guarantor
or any termination of such relationship;
(j) the inability of Borrower to perform, or the release of
Borrower or Guarantor from the performance of any obligation, agreement,
covenant, term or condition of Borrower under any of the Loan Documents by
reason of any law, regulation or decree, now or hereafter in effect; or
(k) any action or inaction by Lender that results in any
impairment or destruction of any subrogation rights of Guarantor or any rights
of Guarantor to proceed against Borrower for reimbursement.
Section 3. Acceptance of Performance; Right of Subrogation. Lender will
accept performance by Guarantor of any of the obligations guaranteed under the
Loan Documents as if such performance had been made by Borrower; provided,
however, that the foregoing shall not be deemed to be an agreement by Lender to
allow access to the Mortgaged Estate in order to cure any default, it being
acknowledged that any such right of access shall be obtained by Guarantor
pursuant to a separate agreement with Borrower, and Lender agrees to recognize
any such rights of access which are so granted, provided that Lender shall have
received appropriate written notice thereof.
<PAGE>
Guarantor covenants and agrees with Lender that if, and so long as, any
default by Borrower under the covenants and conditions in the Loan Documents on
Borrower's part to be performed and observed exists uncured by Borrower or
Guarantor, Guarantor's subordinates any right of subrogation against Borrower by
reason of any payments or acts or performance by Guarantor herewith or any right
to enforce any remedy which Guarantor may have against Borrower by reason of any
such payment or performance to the rights of Lender against Borrower.
Section 4. Waiver; Independent Obligations. Guarantor waives any right
they may have (a) to require Lender to proceed against Borrower or against any
other party or (b) to require Lender to pursue any remedy within the power of
Lender, and Guarantor agrees that all of Guarantor's obligations under this
Guaranty are independent of the obligations of Borrower under the Loan Documents
or under any other instrument or agreement, and that a separate action may be
brought against Guarantor whether or not an action is commenced against Borrower
under any such Loan Document or other instrument or agreement.
Section 5. Merger, Consolidation or Transfer. Guarantor shall not
permit Borrower of its sole general partner, directly or indirectly, without the
express written consent of Lender, which shall not be unreasonably withheld by
Lender, (i) merge into or consolidate with any other corporation, partnership or
any other entity, ("Person") or permit any other Person to merge into or
consolidated with Borrower or its sole general partner; (ii) sell, lease,
transfer, encumber, abandon or otherwise dispose of Borrower's properties or
assets, or (iii) sell or offer for sale any ownership interest in Borrower of
its sole general partner.
Section 6. Assignments. Guarantor hereby consents to, and no further
consent by Guarantor shall be required for, any assignment of rights or interest
of Lender hereunder, in whole or in part. Lender will give notice to Guarantor
of any such assignment, but failure to do so will not result in any liability on
Lender, and will not affect in any manner the enforceability of the Guaranty,
the rights and remedies of Lender hereunder or the obligations of Guarantor
hereunder.
Section 7. Severability. In case any one or more of the provisions
hereof or of the Loan Documents shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof and this Guaranty shall be construed
as if such invalid, illegal or unenforceable provision had never been contained
herein.
<PAGE>
Section 8. Notice. All notices hereunder shall be in writing and shall
be deemed to have been given if sent by hand delivery, overnight courier or
certified mail, postage prepaid, addressed to the following addresses:
If to Guarantor:
Canton Financial Services Corporation
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
If to Lender:
The Canada Life Assurance Company
30 University Avenue
Toronto, Canada M5G1R8
Attention: Mortgage Administration
With a copy to:
Republic Mortgage Commercial, L.C.
4516 South 700 East
Salt Lake City, Utah 84107
Attention: Commercial Loan Department
Lender or Guarantor may at any time change their address for such notices by
delivering to the other, as aforesaid, a notice of such change.
Section 9. Waiver. Notice of acceptance of this Guaranty and notice of
any obligations or liabilities contracted or incurred by Borrower under any of
the Loan Documents are hereby waived by Guarantor.
Section 10. Governing Law. This Guaranty shall be governed and
construed in accordance with the laws of the State of Utah.
Section 11. Modification. This Guaranty may not be modified,
supplemented or amended except by written agreement duly executed by Guarantor
and the written consent of Lender.
Section 12. Binding Effect. This Guaranty shall be binding upon, and
inure to the benefit of and be enforceable by, the parties hereto and their
respective heirs, successors and assigns.
Section 13. Captions. The captions herein are for ease of reference
only and shall in no way define or limit the provisions hereof.
GUARANTOR:
Canton Financial Services Corporation,
a Nevada corporation
By: /s/ Richard Surber
Its: President
<PAGE>
ASSUMPTION, MODIFICATION AND EXTENSION AGREEMENT
This Assumption, Modification and Extension Agreement ("Agreement") is
entered into this 28th day of June, 1996. to be effective as of July 1, 1996, by
and Between TAC, a Utah corporation ("Borrower"), Canton Financial Services
Corporation, a Nevada corporation ("Canton"), and The Canada Life Assurance
Company, a Canadian corporation ("Lender").
RECITALS
A. This Agreement is being entered into for the purposes of documenting
the assumption by Borrower of, and modifying and extending, that certain
Promissory Note dated December 30, 11992 in the original principal amount of
$410,000.00 (the "Note"), in which Note Lewis DeLyle Billings and Arlene S.
Billings (collectively "Billings") appear as the original makers and borrowers.
The Note is secured by that certain Deed of Trust, Security Agreement and
Financing Statement (the "Trust Deed") dated December 30, 1992 and recorded
December 31, 1992 with the Salt Lake County Recorder as Entry No. 5406312, in
Book 6582, beginning at Page 2411.
B. Concurrently herewith Borrower has acquired from Billings, as
trustees, the real property ("Property") described in the Trust Deed, which
Property is located in Salt Lake County, Utah and is specifically described in
Exhibit "A" attached hereto. Borrower desires to assume the Note and Borrower
and Lender desire to extend and modify the terms of the Note, ass as ser forth
herein.
C. Canton is a party to this Agreement only for the purpose of
granting the indemnities described in paragraph 3 below.
AGREEMENT
Based upon the mutual covenants and promises hereinafter set forth, and
for good and valuable consideration, the receipt of which is hereby acknowledged
by each party hereto, the parties agree as follows:
1. Assumption. Borrower hereby assumes and agrees and covenants to pay
and perform each and every obligation of the Borrower under the Note, Trust
Deed, and all other documents and instruments entered into in connection with or
related to the loan evidenced by the Note, including without limitation that
certain Indemnity Agreement dated December 30, 1992 (the "Indemnity Agreement"),
that certain Assignment of Rents and Leases dated December 30, 1992 and that
certain UCC-1 Financing Statement filed with the Utah Division of Corporations
and Commercial Code on December 31, 1992 with File No. 346598 (collectively
referred to herein as the "Loan Document"), and to faithfully perform each and
every obligation thereunder as if Borrower executed each and every one of the
Loan Documents as of the dated hereof as the original maker, Trustor and
borrower thereunder. Further, Borrower agrees to abide by and be bound by all of
the agreements, provisions and terms of all of the Loan Documents, except as
modified by this Agreement. In the event of any default by Borrower under any of
the terms of the Loan Documents, Lender shall be entitled to and may exercise
all of its rights and remedies available to it under the terms and provisions of
the Loan Documents and by law.
<PAGE>
2. Lender's Consent. Lender hereby consents to the transfer and sale
of the Property to Borrower, and consents to the assumption by Borrower of the
Note and the obligations of the maker, trustor, and borrower under the Loan
Documents.
3. Indemnity. Canton hereby assumes, covenants and agrees to perform
and discharge, jointly and severally with Borrower, each and every covenant,
obligation and agreement of Borrower under the Indemnity Agreement as if it were
the Borrower thereunder, and Canton agrees to be bound by the Indemnity
Agreement as if it executed the same on the date hereof as the Borrower
thereunder.
4. Note Paydown, Extension and Modification. Prior to or on execution
of this Agreement, Borrower shall pay to Lender sufficient funds so as to reduce
the principal owing under the Note to $306,455.57. The maturity of the Note
shall be extended to July 1, 2001, and the monthly payment (any required
payments for taxes and insurance) shall be modified to be $6,388.76 beginning
with the payment due August 1, 1996 and continuing thereafter on the first day
of each month until maturity. Said monthly payment is calculated by amortizing
the principal balance of the Note as of July 1. 1996 of $306,455.57 over a five
year period at the interest rate described in the Note.
5. Environmental Requirements. Prior to the execution of this
Agreement, Borrower has caused to be provided to Lender a Phase I Environmental
Assessment Report, and pursuant to this Agreement, Borrower has assumed the
Indemnity Agreement. Borrower agrees that any requirements with respect to
environmental due diligence and investigation, and the providing of any
environmental indemnities in connection with the loan evidenced by the Note, are
strictly the requirements of Lender made solely for its loan underwriting and
environmental due diligence purposes. Borrower agrees that he may not rely on
any such requirements, or the Lender's environmental due diligence, or any
environmental reports submitted to Lender, and that Borrower's environmental due
diligence activities are independent of any of those performed by Lender.
6. Payments. Simultaneously with or prior to the execution of this
Agreement, Borrower shall pay to Lender an amount sufficient to pay any amounts
owing under that certain commitment letter dated June 26, 1996 between Lender
and Borrower.
7. Title Policy Endorsement. Prior to or upon execution of this
Agreement, Borrower shall provide Lender with a satisfactory commitment for an
endorsement to Lender's Policy of Title Insurance committing to insure that,
notwithstanding the assumption and modification of the Loan Documents set forth
in this Agreement, Lender's Trust Deed constitutes and continues to constitute a
first and prior lien on the Property that is not junior to any exceptions or
exclusions other than those shown on the Lender's original Policy of Title
Insurance issued by Stewart Title Guaranty Company at the time the Note was
executed, which Policy is dated December 31, 1993 and has Policy No.
M-9982-595629. As soon as possible, and in no event exceeding ten days after
execution of this Agreement, Borrower shall provide Lender with said title
insurance endorsement.
<PAGE>
8. Costs. All costs and expenses incurred in connection with this
assumption and modification transaction, including but not limited to, title
insurance costs, Lender's attorney's fees, and recording costs, will be paid by
Borrower at the time of execution of this Agreement.
9. Conflicts. Notwithstanding anything to the contrary, if the terms
and provisions contained in any of the Loan Documents in any way conflict or are
inconsistent with the terms and provisions of this Agreement, the terms and
provisions of this Agreement shall govern and supersede. However, it is
specifically agreed that all terms and provisions contained in any of the Loan
Documents which do not conflict with or are not inconsistent with this Agreement
shall remain in full force and effect without any change or modification. If any
term or condition of this Agreement conflicts with applicable law or is held to
be invalid or unenforceable by a court of competent jurisdiction, the other
terms and conditions of this Agreement shall remain in full force and effect.
10. Release. Lender hereby releases Billings, effective on July 1,
1996, from any liability or obligation under the Loan Documents arising after
said date.
11. Miscellaneous. This Agreement shall be binding upon the heirs,
personal representatives, successors and assigns of the respective parties
hereto. This Agreement shall be governed by and construed in accordance with the
laws of the State of Utah.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written. BORROWER:
TAC, Inc., a Utah corporation
By: /s/ Richard Surber
Its: President
CANTON:
Canton Financial Services Corporation
By: /s/ Richard Surber
Its: President
LENDER:
The Canada Life Assurance Company
By:
Its:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S
JUNE 30, 1996 QUARTERLY REPORT ON FORM 10 QSB AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCC BY REFERENCE TO SUCH (Replace this text with the legend FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000788738
<NAME> CyberAmerica Corporation
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Jun-30-1996
<EXCHANGE-RATE> 1
<CASH> 15,038
<SECURITIES> 0
<RECEIVABLES> 1,519,530
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,744,735
<PP&E> 7,923,905
<DEPRECIATION> 764,193
<TOTAL-ASSETS> 11,681,553
<CURRENT-LIABILITIES> 1,826,431
<BONDS> 0
0
0
<COMMON> 8,207
<OTHER-SE> 5,178,182
<TOTAL-LIABILITY-AND-EQUITY> 11,681,553
<SALES> 0
<TOTAL-REVENUES> 1,843,763
<CGS> 0
<TOTAL-COSTS> 991,775
<OTHER-EXPENSES> 729,264
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 171,462
<INCOME-PRETAX> 72,858
<INCOME-TAX> 0
<INCOME-CONTINUING> 72,858
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123,221
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
