UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1996
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required) for the transition period from
______________to________________.
Commission file number: I-9418
CyberAmerica Corporation
(Name of Small Business Issuer in Its Charter)
Nevada 87-0509512
(State or Other Jurisdiction of (I.R.S. Employer
Incorpororation or Organization) Identification No.)
268 West 400 South, Suite 300, Salt Lake City, Utah 84101
(Address of Principal Executive Offices) (Zip Code)
(801) 575-8073
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of each Exchange on Which Registered
Common Stock ($0.001 Par Value) Boston Stock Exchange
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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer's total consolidated revenues for the year ended December 31, 1996,
were $2,655,482.
The aggregate market value of the registrant's Common Stock, $0.001 par value
(the only class of voting stock), held by non-affiliates was approximately
$1,789,147 based on the average closing bid and asked prices for the Common
Stock on March 31, 1997.
At March 31, 1997, the number of shares outstanding of the registrant's Common
Stock, $0.001 par value (the only class of voting stock), was 9,725,389.
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TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business......................................1
Item 2. Description of Property......................................3
Item 3. Legal Proceedings............................................8
Item 4. Submission of Matters to a Vote of Security-Holders......... 11
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.....11
Item 6. Management's Discussion and Analysis or Plan of Operation....12
Item 7. Financial Statements.........................................18
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.........................................19
PART III
Item 9. Directors and Executive Officers.............................20
Item 10. Executive Compensation.......................................21
Item 11. Security Ownership of Certain Beneficial
Owners and Management........................................22
Item 12. Certain Relationships and Related Transactions...............24
Item 13. Exhibits, List and Reports on Form 8-K.......................26
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
As used herein, the term "Company" refers to CyberAmerica Corporation, a
Nevada corporation, and its subsidiaries and predecessors, unless the context
indicates otherwise. Originally incorporated on July 10, 1984 in Ohio as The
Canton Corporation, the Company adopted its present name in June 1996. In
September 1984, the Company acquired substantially all of the assets of a
manufacturing plant located in Canton, Illinois (the "Canton Plant"). Under the
direction of prior management, the Company filed a voluntary petition for relief
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Central District of Illinois on February 22, 1988. The
Company changed its domicile to Nevada on March 9, 1993 through a merger with a
Nevada corporation bearing the exact name as the Company. Current management led
the Company's exit from bankruptcy on November 7, 1994 pursuant to the
Bankruptcy Court's order of the same date.
Current management obtained controlling ownership of the Company in the
second quarter of 1992. Soon after control changed, the Company formed a wholly
owned subsidiary, Canton Tire Recycling Corporation, an Illinois corporation
("CTR"), to engage in tire recycling operations at the Canton Plant. CTR began
operations on November 5, 1992. During the third quarter of 1993, CTR ceased its
tire recycling operations because the recycling process did not achieve the
planned level of productivity and profitability. This was in large part due to
problems with the tire shredding equipment which did not perform to manufacturer
specifications. The Company ceased payment on the shredding equipment which was
then reclaimed by the manufacturer. The Company has filed a complaint seeking
damages against the manufacturer of this equipment. For more information on this
legal proceeding, see "Item 3 - Legal Proceedings." In 1993, the Company changed
its operational focus to providing financial consulting services and to
acquiring, managing and selling distressed real estate.
During fiscal year 1996, the Company developed a new division of operations
related to the preparation, development and marketing of Internet virtual malls.
These operations were conducted through a wholly owned subsidiary known as
CyberMalls, Inc. ("CyberMalls"). An Internet virtual mall is similar to a
traditional shopping mall in that it is a central location for marketing goods
and services which seeks to maintain a specific mixture of vendors or to develop
a centralized theme. Unlike a traditional shopping mall, an Internet virtual
mall is accessible via personal computer and consists of the linked home pages
of several different business entities, all of which can be accessed through a
centralized address on the Internet. The Company made significant expenditures
toward the development of CyberMalls including purchasing considerable amounts
of computer equipment and hiring a staff of approximately 25 individuals.
However, CyberMalls failed to generate any significant revenues and the Company
lacked the ability to provide CyberMalls with the cash infusion necessary to
successfully operate. On February 25, 1997, the Company discontinued
substantially all of CyberMalls' operations. For more information on the
development of CyberMalls, its business plan and the Company's decision to
terminate CyberMalls' operations, see "Item 6 - Management's Discussion and
Analysis of Financial Condition and Results of Operations." With the cessation
of CyberMalls' operations, the Company's primary focus continues to be centered
around providing financial consulting services and acquiring and managing
distressed real estate properties, the Company's primary business activities
since 1993.
Business of Issuer
Through its wholly owned subsidiaries Canton Financial Services Corporation
and Hudson Consulting Group, Inc., the Company provides a variety of financial
consulting services to a wide range of clients. As used herein, the term Company
will encompass one or both of these subsidiaries. One of the primary services
performed by the Company involves assisting clients in the preparation of
corporate documentation. This consists primarily of the drafting of private
placement offering documentation for start-up corporations or other private
entities in need of capital. The Company also assists clients in the drafting of
corporate business plans and documentation necessary to effect mergers and
acquisitions. Additionally, the Company helps clients restructure their capital
formation and assists with general corporate problem solving.
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Beginning the first half of 1997, the Company will seek to expand its
consulting services. Through its wholly owned subsidiary Netinvesting.com, Inc.,
the Company will attempt to assist publicly-traded corporate clients in
disseminating information about their operations and capital stock. The Company
intends to offer a public relations package including publishing regular
quotations of its clients in national financial publications and designing home
pages on the World Wide Web through which clients can publicly disseminate
corporate information, press releases and periodic reports filed under the
Securities Exchange Act of 1934. Netinvesting.com has retained some of the
Company's existing clients and is currently seeking new clients interested in
its services.
Prospective clients for the Company's consulting services are located by
the Company's Acquisition Department as well as through advertising and
referrals. This department researches various databases and identifies public
companies interested in the Company's services. The Company also advertises its
services to private entities seeking to raise capital or become public
corporations. Referrals by current and previous clients have provided the
Company with additional clients. The Company is currently providing consulting
services to approximately eight clients. The Company is not dependent upon any
one client to generate revenue.
The Company charges clients monthly or other fees that vary in both amount
and form. Acceptable payments include cash, securities of the client
corporation, other assets or some combination of the three. This payment
arrangement allows many organizations, especially start-up ventures and those
experiencing financial difficulties, to obtain the Company's services without
the use of valuable cash flows. However, accepting stock as compensation
occasionally impairs the Company's cash flow. 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.
Entities from many different industries employ the Company's consulting
services and the Company strives to maintain this diversity. The Company
primarily targets distressed public companies and private companies seeking to
become publicly owned. The decision of accepting a prospective client depends on
its financial stability, the type of services needed and the compensation
format. A key to the Company's success is management's ability to improve and
maintain its client base and successfully liquidate its compensation.
The remainder of the Company's operations involve the acquisition,
management, lease and sale of real estate holdings. Over the past four years,
the Company has acquired a wide variety of commercial and residential
properties. The Company owns several real estate holdings in Utah and also owns
properties in other parts of the United States. The Company seeks to locate and
acquire undervalued real estate (which is primarily commercial) with little or
no cash down. Once acquired, the Company's real estate holdings are leased.
While the Company seeks to generate and maximize rental income through the
management and lease of the property, the Company's primary goal is to acquire
real estate which will substantially appreciate in value and for which the
Company can realize a substantial gain upon disposition. During the 1996 fiscal
year and the first fiscal quarter of 1997, the Company or its subsidiaries sold
or contracted to sell four real estate holdings. For further information on the
Company's real estate holdings, see "Item 2 - Description of Property" and "Item
6 - Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company has one legal proceeding pending which involves the
investigation of the Company's compliance with local and state environmental
laws and is potentially subject to two other environmental claims by state
authorities. The cost and effect of these matters are dependent upon the outcome
of the proceedings and investigations which are currently pending with local and
state agencies. For further information see "Item 3 - Legal Proceedings." The
Company is unable to forecast and can give no assurance as to the outcome and
resulting cost of these proceedings and investigations, if any, and the effect
they may have on the Company.
The Company had a total of 29 employees, 25 of whom were full time
employees, on March 31, 1997.
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns or leases industrial, commercial, warehouse, office, and
undeveloped commercial real estate. The acquisition of properties has not been
limited to any specific geographic area, but has been dictated by the perceived
appreciation potential and terms of financing. Regardless of the type of
property, future acquisitions will not be limited to any specific geographic
area. At the end of the fiscal year 1996, the Company owned, leased, or had
interests in property in Utah, Illinois, Virginia, West Virginia, Arizona,
Nevada and Florida.
The Company's policy is to actively pursue the acquisition of real estate
for investment income and appreciation in property value. During the past year,
the Company has continued to place an emphasis on acquiring property which
management feels is undervalued. Rather than limiting itself to specific types
of real estate, the Company's policy has been to focus primarily on terms of
financing. The Company generally looks for properties that can be purchased by
assuming the existing financing or by paying the balance of the purchase price
with a nominal cash expenditure and/or the issuance of shares of the Company's
common stock, par value $0.001 ("Common Stock"). The Company has been successful
in acquiring several properties in this fashion. The Company does not plan to
enter into the business of originating, servicing or warehousing mortgages or
deeds of trust, except as may be incidental to its primary purpose of acquiring
real estate.
There is a risk that the Company may lose control of the properties
through foreclosure if enough funds are not derived from the rental income for
both the financing and 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 cover the debt service and
operating costs of all properties. The Company currently has to use capital from
other sources to fund this deficit. Although management hopes to increase the
occupancy rates and thus increase the rental income so that such income will
cover both operations and debt service, no such assurances can be made. Of the
Company's properties, only the Oasis, Nevada property has a book value amounting
to ten percent (10%) or more of the total assets of the Company.
Oasis, Nevada Property
The Oasis, Nevada property consists of 1,126 acres of mostly vacant land
located in Elko County, Nevada. The property was purchased by the Company on
December 27, 1995. The purchase also included improvements to the property
consisting of a service station, small retail and food service operation, and a
mobile home park. Also purchased were the water rights of over sixteen hundred
acre feet of water per year. For additional information on this acquisition, see
the Company's Form 8-K filed with the Securities and Exchange Commission on
January 11, 1996.
The property is subject to a trust deed provided by the seller with a
current principal balance of $900,000 and a $300,000 promissory note payable to
an individual. Under the terms and conditions of the trust deed, during the
first three years an interest only payment of $15,750 (7% per annum) is due
quarterly. After the third year, the amount of the quarterly payments increases
to $31,475 which includes both interest payments and principal reductions. The
entire unpaid principal balance and accrued interest become due and payable on
January 1, 2006. There are no pre-payment penalties and the contract provides
for the payoff and reconveyance of specific tracts of land within the parcels
covered by the deed. The $300,000 promissory note requires only interest
payments at eighteen percent (18%) per annum until the note matures on December
27, 1997. The promissory note contains no penalty for prepayment.
Other than property taxes that will become due and payable, there are no
encumbrances on the property.
The Company intends to develop the property in the future if additional
financing can be obtained.
The federal tax basis of the property is $1,681,325. The facilities are
being depreciated by straight line method over a period of 31.5 years. The
realty tax rate is .024204 and the annual realty taxes for 1996 were $2,085. The
Company is of the opinion that this property is adequately covered by insurance.
<PAGE>
OTHER PROPERTIES
The Wallace-Bennett Building, Salt Lake City, Utah
The Wallace-Bennett Building is located at 55-65 West 100 South, Salt Lake
City, Utah. The property was purchased by Wasatch Capital Corporation
("Wasatch") on November 29, 1994. The Company owns twenty percent (20%) of the
common stock of Wasatch. For additional information on the Company's involvement
in Wasatch, see "Item 12 - Certain Relationships and Related Transactions." The
building is a 24,000 square foot, turn-of-the-century multi-story office
building. Currently, only a portion of the ground floor is rented. The building
is adequate for its current uses, but the additional stories above the ground
floor cannot be used until they have been remodeled and rehabilitated.
The property is subject to a promissory note secured by a first trust deed
with a principal balance (as of December 31, 1996) of $522,536 and bearing ten
percent (10%) interest per annum. Total monthly principal and interest payments
are $7,929. The note matures on November 29, 1999 and there are no prepayment
provisions. Other than property taxes that will become due and payable, there
are no other encumbrances on this property.
Wasatch has tentative plans to remodel the second, third and fourth floors
as either offices or residential condominiums. The cost for either project is
estimated to be around $1,000,000 and no financing for this project has been
obtained. Salt Lake County has recently completed a new convention center at a
cost of over $80,000,000 on the block just to the west of this property. The
demand for office and retail space in the downtown Salt Lake City area has
increased significantly over the past few years and the new convention center
could make the vacant space in the Wallace-Bennett Building more marketable.
The Company is of the opinion that this property is adequately covered by
insurance.
The current occupancy rate for the rentable ground-level space is 100%. A
restaurant occupies 2,584 square feet of the building and a retail store
occupies 912 square feet of the building. The tenants are responsible for all of
their own utilities, except water and sewer. Tenants also pay their pro-rata
share of all other operating expenses as well as maintenance, janitorial
services, insurance and property taxes. The average effective rental is $9.58
per square foot. Both leases will expire within the next two years. The expiring
leases represent $25,980 in annual revenue. It is presently expected that all of
the leases will either be renewed or replaced with new tenants.
The federal tax basis of the property is $766,794. The building is being
depreciated by the straight-line method depreciation over a period of 31.5
years. The realty tax rate is .016387 and realty taxes for 1996 totaled $7,934
which were paid in December 1996.
The Plandome Building, Salt Lake City, Utah
The Plandome Building is located at 69-75 East 400 South, Salt Lake City,
Utah. On October 12, 1993, the building was acquired by Canton Industrial
Corporation of Salt Lake City ("CICSLC"), a consolidated subsidiary of the
Company. This historic three-story building constructed in 1904 contains 15,300
square feet of office and retail space and is eligible to be listed on the
National Register of Historic Places. The building is zoned C-3, a commercial
use consistent with its current use.
The property is subject to a first deed of trust with a principal balance
of $585,000 as of December 31, 1996. The note secured by the first deed of trust
bears interest at nine percent (9%) per annum. Total monthly principal and
interest payments are $4,783. The note matures on October 9, 1999 and can be
prepaid any time, without penalty. The property is also subject to a second deed
of trust with a current principal balance of $100,000, providing for interest at
an annual rate of five percent (5%). If there is no prepayment, the amount due
on the maturity date (October 1, 1998) will be $100,000 plus accrued interest.
The note can be prepaid any time, without penalty. The only other encumbrances
on the property are the unpaid 1996 property taxes of $9,238 and unpaid property
assessments of $44,242 (portions of which are delinquent as far back as 1991).
<PAGE>
In 1990, the building was substantially renovated to retain its original
style. No need for additional renovation or restoration is foreseen and there
are no plans to do so at this time. Directly across the street from the Plandome
Building, the State of Utah started construction on a new $65 million Court
Complex in October 1995. The demand for office and retail space in the downtown
Salt Lake City area has increased significantly over the past few years and the
opening of the Court Complex should increase demand for office space in the
vicinity of the Plandome Building even further. The Company is of the opinion
that this property is adequately covered by insurance.
The present occupancy rate is sixty-nine percent (69%). Two restaurants
each occupy more than 10% of the square footage in the building. The major
tenants are responsible for all of their utilities except water and sewer. The
office space is rented to professional organizations. The average effective
annual rental is $7.16 per square foot. All of the leases will expire within the
next two years, representing $108,676 in annual revenue. It is presently
expected that all of the leases will either be renewed or replaced with new
tenants.
The federal tax basis of the property is $751,962. The building is being
depreciated by the straight-line method depreciation over a period of 31.5
years. The realty tax rate is .015448 and realty taxes for 1996 totaled $9,238.
The Parkersburg Terminal, Parkersburg, West Virginia
The Parkersburg Terminal is located at 516 Camden Street, Parkersburg, West
Virginia. The terminal is a former fuel transfer station. The property consists
of 4.5 acres on a tributary of the Ohio River and includes a former oil storage
facility and a warehouse with office space. The Parkersburg Terminal was
purchased by Canton Tire Recycling of West Virginia, Inc. on May 15, 1993 for
$808,750. Other than delinquent property taxes of $853, there are no
encumbrances on the property. The property has been vacant and unused since its
acquisition. The Company is subject to competition in finding tenants or buyers
for the property, and there is a substantial likelihood that the property will
remain vacant for some time. The Company is of the opinion that this property is
adequately covered by insurance.
The Company has received notices from the West Virginia Division of
Environmental Protection (the "WVDEP") indicating that above ground storage
tanks and related hardware on the property were leaking unidentified contents
into the nearby river. Testing performed on the site indicates that all
remaining storage tank contents are crude oil remnants. The test results have
been submitted to the WVDEP and the WVDEP has demanded additional testing be
conducted with respect to the containment and removal of all waste materials
remaining on the site.
The Canton Plant, Canton, Illinois
The Canton Plant is located at 200 East Elm Street, Canton, Illinois. The
Canton Plant was acquired by the Company in 1984. In 1994, the Company sold the
Canton Plant for an $825,000 note. No payments were ever made on the note and in
May 1995, the Company reacquired the Canton Plant through a mutual release
executed with the purchaser. For more information on this transaction see "Item
2 - Description of Property" in the Company's Form 10-KSB for fiscal year ended
December 31, 1995. The Canton Plant is a manufacturing and warehousing facility
formerly owned by the plow division of International Harvester. Located on the
property are brick, steel and glass constructed buildings with 1,290,366 square
feet of interior space, including 1,001,472 square feet of industrial space,
236,248 square feet of warehouse space and 52,646 square feet of office space.
Portions of the buildings are in disrepair and the property is currently vacant.
The site is zoned for industrial use.
The only encumbrances are accumulated property taxes, penalties, and
assessments totaling approximately $286,000 of which portions are delinquent as
far back as 1988. The Company is subject to a proceeding with the State of
Illinois over the cleanup of tires and toxic paint drums on the property (see
"Item 3 - Legal Proceedings"). The Company is exploring a variety of alternative
uses for the property. The Company is of the opinion that this property is
adequately covered by insurance.
<PAGE>
The Canton Building, Salt Lake City, Utah
The Canton Building is located at 202 West 400 South, Salt Lake City, Utah.
In November 1993, the Canton Building was acquired by Canton Industrial Property
Management Corporation of Salt Lake City ("CIPMC"), a consolidated subsidiary of
the Company. The building is an 18,264 square foot office building, consisting
of two stories of interior rentable space with covered ground level parking. The
building is constructed of concrete and glass and is suitable for office use.
The Canton Building is zoned C-3, a commercial use classification consistent
with its current use.
The property is subject to a first trust deed with a balance (as of
December 31, 1996) of $163,874. Interest accrues at an annual rate of nine
percent (9%). Monthly principal and interest payments are $1,575. The note
matures on November 1, 2003 and can be prepaid at any time without penalty. The
property is also subject to a second trust deed with a principal balance of
$140,489, providing for interest at an annual rate of nine percent (9%). Total
monthly principal and interest payments are $1,350. This note matures on
November 1, 2003 and can be prepaid at any time, without penalty. The property
is additionally subject to a third trust deed with a current balance of
$166,480, providing for interest at an annual rate of eighteen percent (18%).
Monthly payments of principal and interest of $5,000 are due on the third trust
deed until April 1997 when the monthly payments increase to $10,000 until the
note is paid in full. Property taxes and assessments of $7,296 remain unpaid for
1996. The Company is of the opinion that this property is adequately covered by
insurance.
The property is currently subject to a contract of sale. The sale price for
the property is $950,000. Closing was originally scheduled for April 1997 but
has been extended until July 10, 1997. The sale is contingent upon the buyer
acquiring financing and the completion of a due diligence investigation. For
more information on the contract for sale, see "Item 6 - Management's Discussion
and Analysis of Financial Condition and Results of Operations."
268 West 400 South, Salt Lake City, Utah
The building at 268 West 400 South is currently leased as the Company's
headquarters and principal offices. The building has been leased since May 1994
by Canton's Commercial Carpet Corporation ("CCCC"), a consolidated subsidiary of
the Company. The lease contains an option to purchase the building for $415,000
which expires May 23, 2004. The Company's monthly lease payments on this
building are $4,596. A portion of the current lease payments apply towards the
purchase price of the property. As of December 31, 1996, approximately $37,990
in past lease payments may be applied toward the exercise of the option. The
15,600 square foot office building has two stories of office space with ground
level parking underneath. The building is constructed of brick and cinder block
construction and is suitable for office use. The current use of the building is
consistent with its C-3 commercial use zoning classification. The Company
occupies 80% of the building with the remaining 20% subleased to an investment
company and a communications company. Improvements have been made to the
property including carpeting, painting and remodeling the second and third
floors. The Company is of the opinion that this property is adequately covered
by insurance.
TAC Warehouse, West Jordan, Utah
The TAC Warehouse is located at 5320 West Wells Park Road, West Jordan,
Utah. The building has been leased since June 1993 by TAC, Inc. ("TAC"), a
consolidated subsidiary of the Company. The lease contained an option to
purchase the entire building for $596,000. TAC exercised the option on June 30,
1996. The building has approximately 60,000 square feet of interior space.
Portions of the warehouse lack electricity, heating and other amenities, but are
adequate for general warehousing purposes. One hundred percent of the warehouse
is currently subleased to other tenants. There is a shortage of industrial and
warehouse space in the Salt Lake Valley and the Company feels the occupancy rate
will remain high. The Company is of the opinion that this property is adequately
covered by insurance.
<PAGE>
On February 7, 1997, TAC executed a Real Estate Purchase Contract proposing
the sale of TAC Warehouse for proceeds totaling $1.35 million. Under the
Contract, TAC is to receive $200,000 in cash at the closing date with the
remaining balance to be paid 90 days after closing. Closing of the Contract was
originally scheduled for March 21, 1997, but has been extended until April 18,
1997. Closing is contingent upon the completion of a due diligence investigation
by the buyer.
Glendale Plaza, Salt Lake City, Utah
The Glendale Plaza is located at 1100 South Glendale Drive, Salt Lake City,
Utah. The Company currently leases the retail shopping plaza and has an option
to purchase the property for $799,000. The option expires August 31, 1998. The
monthly lease payments on the Glendale Plaza are $5,663. The Company is entitled
to deduct the lease payments from the option price. The Company also may extend
the lease for an additional three years. The property contains 76,831 square
feet of rentable retail space and approximately 51% is subleased to tenants. One
tenant leases more than 10% of the rentable space. The Glendale Plaza generates
approximately $91,443 in annual rental income and all but one sublease contract
will expire within two years. Present plans are to continue to operate the
building as a retail shopping plaza and to increase the occupancy rate. No major
renovations, improvements or development plans have been made for this property.
Property taxes and assessments of $7,660 remain unpaid for 1996. The Company is
of the opinion that this property is adequately covered by insurance.
KMC Plant, Cheriton, Virginia
The former KMC food plant and warehouse ("KMC Plant") is located in the
vicinity of Cheriton, Virginia. In 1993, the Company acquired all of the
outstanding capital stock of KMC Foods, Inc. At that time, KMC Foods owned a
note in the amount of $353,000 bearing interest at twelve percent (12%) secured
by a deed of trust on the KMC Plant and a second note receivable in the amount
of $122,000. Payment on the notes was not made and KMC Foods therefore
foreclosed on the property. The property was purchased by Diversified Holdings
XIX, Inc., a wholly owned subsidiary of the Company on August 2, 1996.
The KMC Plant is located on approximately 65 acres and has railroad spur
access with the Penn Central Railroad. The property has structures for the
manufacture, storage and distribution of food products. The property is zoned
for industrial use. The KMC Plant has been vacant and unused since the note was
acquired and is in disrepair. The property is subject to an environmental impact
investigation by the Virginia State Water Control Board and related agencies
(see "Item 3. Legal Proceedings - Possible Actions by Governmental
Authorities"). Aside from potential environmental claims, there are no known
encumbrances on the property.
The Company does not plan to renovate, restore or improve the property and
intends to attempt to lease or sell the property as is. There appears to be
limited market demand for this property, so there is a substantial likelihood
that the property will remain vacant for some time. The Company is of the
opinion that the property is adequately insured.
Canton's Wild Horse Ranch II, Inc. Tucson, Arizona
In August 1994 the Company acquired 13.22 acres of raw, unimproved land
located in Pima County, Tuscon, Arizona. The property is subject to a Deed of
Trust with a current balance of $53,868, providing for interest at an annual
rate of eight percent (8%). Total monthly principal and interest payments are
$825. A balloon payment of approximately $41,785 plus accrued interest is due in
March 1999. The only other encumbrances on the property are the unpaid 1996
property taxes of $1,811 and restrictive covenants placed upon any future
development of the land pertaining to the number of dwellings and the style of
the buildings. The Company is of the opinion that this property is adequately
covered by insurance.
<PAGE>
Box Elder County, Utah Property
In August 1996, the Company purchased 1,920 acres of raw land located in
Box Elder County, Utah. The property is subject to a trust deed in the amount of
50,000 which provides for interest at a rate of seven percent (7%) with monthly
payments of $471. The note is due November 2004. There are no other encumbrances
on the property.
Brian Head, Utah Condominiums
In August 1996, the Company purchased two condominium units located at a
ski resort in Southern Utah. The first unit was purchased for $35,500 and is
subject to trust deed in the amount of $32,151 bearing an interest rate of nine
and one-half percent (9.5%) . The second unit was purchased for $40,500 and is
subject to a trust deed in the amount of $34,873 bearing an interest rate of
eight and one-quarter percent (8.25%). Monthly payments on the first unit are
$309 and monthly payments on the second unit are $389. There are no prepayment
penalties. Other than the trust deeds, there are no encumbrances on the
properties. The Company has contracted with a management firm who rents the
units on a short-term basis.
Venice Automall, Sarasota County, Florida
In July 1996, the Company purchased 100% of the outstanding stock of Venice
Automall, Inc., a Florida corporation which owns and operates an auto mall
facility in Sarasota County, Florida. The mall consists of two buildings which
total 7,241 square feet and the property is 60% leased. The property is subject
to a trust deed payable to bank of $423,213 which bears interest at a rate of
9.625% per annum and provides for payments of $4,367 per month. The trust deed
is due in July 1997 and the Company is currently in the process of refinancing
the property.
ITEM 3. LEGAL PROCEEDINGS
The following are material pending cases involving the Company:
Keck, Mahin & Cate vs. The Canton Industrial Corporation - Keck, Mahin &
Cate ("Keck") filed an action in the Tenth Judicial Circuit, State of Illinois,
Peoria County on July 16, 1991. The action was for the recovery of attorney fees
incurred in representing the Company in bankruptcy proceedings. On January 13,
1992, the Court entered a judgment against the Company for $85,791. The judgment
remains unsatisfied.
State of Illinois vs. The Canton Industrial Corporation - This action was
filed in the Ninth Judicial Circuit, State of Illinois, County of Fulton, Case
Number 93MR45, in September 1993. The action sought environmental cleanup of the
Company's Canton Plant in Canton, Illinois, including the removal of accumulated
tires and paint drums. For more information on the Canton Plant, see "Item 2 -
Description of Property" and "Item 1 - Description of Business." All tires have
since been removed from the site by contractors hired by both the Company and
the Illinois Environmental Protection Agency ("IEPA"). However, paint drums
remain on the site and the State is claiming that additional cleanup work
remains to be done. The State filed a motion to enter a final order closing the
case upon the Company's payment of existing fines of $14,000 within 60 days, but
the State has since withdrawn the motion. The State has filed a separate action
before the Illinois Pollution Control Board (PCB Number 97-8, Enforcement)
seeking to recover $325,398 as the costs allegedly incurred to remove the tires
plus an additional $325,398 as punitive damages. A hearing before the Pollution
Control Board was held on March 12, 1997 to determine the extent of the
Company's liability. Briefing deadlines indicate that a decision will not be
reached before May 1997.
<PAGE>
Xeta Corporation vs. The Canton Industrial Corporation - A suit was
originally filed in the Northern District of Oklahoma but that matter was
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 recovery of $116,500 that it contends ATC II, Inc.,
a Delaware corporation, fraudulently transferred to the Company to avoid payment
of a judgment held by Xeta against ATC II. Canton Financial Services Corporation
("CFSC"), a wholly owned subsidiary of the Company, was providing consulting
services to ATC II at the time of the transfers attacked by Xeta. Richard Surber
and Gerald Curtis, both former officers of ATC II, are also named as individual
defendants. The Company has responded that it provided bona fide services to ATC
II and that the bulk of the funds were used for operating expenditures of ATC
II. It is also believed that the expenditures were all incurred in the best
business interest of ATC II. Xeta's Motion for Summary Judgment has been granted
as to CyberAmerica awarding judgment to Xeta in the amount of $116,500. Xeta's
Motion for Summary Judgment was denied as to the individual defendants, Surber
and Curtis. This judgment as to the Company has been finalized and an appeal
thereof is pending before the Tenth Circuit Court of Appeals.
The Canton Industrial Corporation and Canton Industrial of Salt Lake City
vs. Delamr A. Janovec and KLH Engineering Group, Inc. - This suit was filed on
April 19, 1995 in the United States District Court, in the Central District of
Utah, Civil Case Number 2:95 CV 363G. The Company filed suit seeking enforcement
of the August 31, 1994 Settlement Agreement and Mutual Release to which the
Company, Janovec and KLH were parties. Court ordered pre-trial mediation
resulted in an agreement between the parties. Pursuant to the agreement, 9.5
million shares of the stock of Ameriresources Technologies Inc. (the new name of
KLH) were delivered to the Company as settlement of the litigation.
Vincent Liotta vs. Joseph Roberts & Co., et al. - A complaint was filed by
Liotta in the United States District Court for the Eastern District of New York,
Civil Case Number CV-95-1659. The allegations relate to Mr. Liotta's purchase
the common stock of ATC II, Inc. from his broker-dealer and allege damages of
$46,000. The Company is named as a defendant based upon consulting work
performed on behalf of ATC II by CFSC which Liotta alleges was instrumental in
his purchase of the stock. Also named as defendants are CFSC, ATC II, Inc.,
Allen Wolfson (a control person of the Company) and John Does 1-9. Answers have
been filed on behalf of the Company and CFSC that deny any involvement in the
underlying transactions. The court granted approval allowing the plaintiff to
take the case to an arbitration hearing before a board appointed by the NASD.
This Board heard Liotta's case as to the Company and CFSC on March 20, 1997. No
decision has yet been announced to the parties.
CyberAmerica Corporation vs. MJMC, Inc., Lanco International, Inc. and
Mi-Jack Products, Inc. - Suit was filed by the Company in the United States
District Court, Central District of Utah, Civil Case Number 2:95 CV 651S on July
14, 1995. The Utah court dismissed the case based upon Jurisdictional issues. A
suit seeking the same recovery was filed on January 10, 1997 in the Circuit
Court of Cook County, Law Division as File Number 97L 000369. The claim is based
upon Canton Tire Recycling Corporation's contractual relationship related to the
lease of tire shredding equipment from the defendants which the Company believes
did not perform according to the warranties and representations made by the
defendants at the time. Canton Tire was a wholly owned subsidiary of the Company
which assigned its cause of action to the Company in July 1995. The complaint
seeks damages for (1) breach of contract, (2) intentional misrepresentation, (3)
negligent misrepresentation, (4) breach of express warranty and (5) breach of
implied warranty. The Company is seeking damages in an amount of not less than
$1 million. The defendants filed a Motion to Dismiss the Complaint and the
Motion is set for hearing in June 1997.
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
Number 95-23691-DHA. The Court granted the Motion and in August 1996, KMC
foreclosed its secured interest in real property located in Cheriton, Virginia
which was owned by PEMSCO. The rights to the property were taken by Diversified
Holdings XIX, Inc., a wholly owned subsidiary of the Company, in the foreclosure
sale. Past due taxes and costs of the sale were paid in March 1997 and the deed
is expected to be recorded within thirty days.
Key L.C. Corporation vs. Paragon Capital Corporation, Allen Z. Wolfson,
CyberAmerica Corporation and Robert J. D'Aleo - On December 18, 1996, Key L. C.,
a Utah limited liability company, filed suit in the Federal District Court for
the Central Division of the State of Utah, Case Number 2:96 CV 1054B. The
Complaint alleges that each of the named defendants violated the Securities
Exchange Act of 1934 in the sale of stock in CyberAmerica to the plaintiff.
Paragon is a broker dealer, D'Aleo is the individual broker who handled Key's
account and Wolfson is alleged to have been acting as an agent for CyberAmerica.
Damages are alleged in the amount of $291,682, the purchase price of 214,900
shares of CyberAmerica stock purchased between September 4, 1996 and October 3,
1996. CyberAmerica has filed a Motion to Dismiss the Complaint for failure to
state a cause of action as to CyberAmerica under the Exchange Act of 1934 and
the Private Securities Litigation Reform Act. This Motion is pending before the
trial court. All parties have made an appearance.
<PAGE>
Canton Financial Services Corporation vs. Pacific Stock Transfer Company -
Suit was filed by CFSC against Pacific Stock Transfer in the District Court of
Clark County, Nevada, Case Number A365081. CFSC seeks to secure the lifting of
the restrictive legend on 325,214 shares of stock in Air Vegas Enterprises, Inc.
Pacific has responded contending that the shares were previously canceled by the
unilateral action of the board of directors of Air Vegas. CFSC seeks relief
under ss.104.8403(2) of the Nevada statutes and all fees and costs incurred in
the suit. Local counsel has been retained in Las Vegas and the process of
pre-trial discovery and motions is ongoing.
Canton Financial Services Corporation vs. The Renno Group, Inc. - Suit was
filed by CFSC in the United States District Court for the Middle District of
Florida, Tampa Division, Case Number 96-2367-CIV-T-24-E. CFSC seeks recovery of
funds and stock due to CFSC pursuant to the terms of a consulting agreement
between the parties. By means of the agreement, the defendant retained the
services of CFSC to assist in the merger of defendant and a third party. This
merger was completed and Renno refused to convey to CFSC the $15,000 cash and
355,029 shares of the common stock of Network Systems International, Inc. (the
surviving corporation after the merger) as required under the agreement. Shares
in Network were trading at $1.25 a share on March 5, 1997. Pre-trial mediation
ordered by the trial court resulted in an award to CFSC in the amount of
$192,500. The defendant has appealed this order for a trial by the Court.
Jardine Petroleum Company vs. Oasis Property Management Services
Corporation - Action has been filed by Jardine Petroleum in the Third Judicial
District Court of Salt Lake County, State of Utah, Case Number 970901787CV,
against Oasis Property Management Services Corporation, a consolidated
subsidiary of the Company ("OPMSC"), for the collection of $41,000 in billings
for delivered gasoline. OPMSC was the initial manager of a gas station and
convenience store located on the Oasis, Nevada property. The gas station was
subsequently leased to and operated by a Tenant of OPMSC. OPMSC had previously
executed a credit application that was not released at the time the tenant began
operating the gas station. Jardine has asserted full liability on the part of
OPMSC and indicated a willingness to discuss terms of repayment. Efforts are
being made by OPMSC to resolve the matter.
State of Delaware vs. KMC Foods, Inc. - The Division of Revenue of the
Department of Finance for the State of Delaware has sent a claim in excess of
$300,000 for taxes allegedly due based upon the gross revenues of KMC Foods,
Inc., a subsidiary of the Company, for the tax period of April 1, 1989 through
March 31, 1992. This entire period is prior to the purchase of KMC by the
Company. Prior management has assured the Company that the Delaware tax does not
apply as all sales of products were outside of the state of Delaware. A protest
of the tax has been filed and a Motion for Summary Judgment has been filed with
the Tax Appeal Board on behalf of KMC by local counsel.
Possible Actions by Governmental Authorities
Virginia Property - Prior to its purchase by the Company, KMC Foods, Inc.
operated a food processing plant in Cheriton Virginia. For a full description of
this property, see "Item 2 - Description of Property." KMC sold the property to
Potomac Engineering Management Systems Co. ("PEMSCO") and retained a secured
interest in the property. During August 1996, KMC foreclosed on the property and
title was purchased by Diversified Holdings XIX, Inc., a wholly owned subsidiary
of the Company. The Virginia State Water Control Board has required the
preparation of a Site Characterization Report on the site involving alleged
contamination from underground storage tanks. KMC did not have possession or
control of the property from the time of its conveyance to PEMSCO and was unable
to conduct the testing requested by the State of Virginia. Diversified Holdings
XIX, Inc., a wholly owned subsidiary of the Company, holds title to the property
and will be required to respond to the State's requests regarding the property.
<PAGE>
West Virginia Property - Title to the property located in the city of
Parkersburg, West Virginia is held by Canton Tire Recycling of West Virginia,
Inc., a wholly owned subsidiary of the Company. For a description of this
property, see "Item 2 - Description of Property." The West Virginia Division of
Environmental Protection has sent the Company notices alleging violations
regarding the tanks and related hardware leaking unidentified contents onto the
ground and into the nearby river. Testing on the site indicates that all
remaining tank contents are crude oil remnants and those test results have been
submitted to the state authorities. Additional testing and work to remove waste
from the site is pending cost analysis and approval of state authorities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal year 1996, the Company did not submit
any matters to a vote of security holders through the solicitation of proxies or
otherwise.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Boston Stock Exchange under the
symbol "CYA" and on the OTC Bulletin Board under the symbol "CYAA." The
following table sets forth the high and low sales prices for the Company's
Common Stock as reported on the Boston Stock Exchange for each quarter of 1995
and 1996, and the first quarter of 1997:
Quarter High Low
------- ---- ---
1995 First $0.53 $0.34
----
Second $0.65 $0.60
Third $0.51 $0.42
Fourth $2.31 $0.50
Quarter High Low
------- ---- ---
1996 First $2.44 $0.94
----
Second $4.25 $1.06
Third $2.37 $1.06
Fourth $1.37 $0.12
Quarter High Low
------- ---- ---
1997 First $0.41 $0.15
----
On March 31, 1997, the closing bid and ask price for the Common Stock was
$0.19 and $0.26, respectively.
<PAGE>
On October 12, 1992, the Company effected a 1:4 reverse split of the
outstanding shares of its common stock, par value $0.001 per share ("Common
Stock"), pursuant to a special meeting of the Company's shareholders. On April
28, 1993, the Company's shareholders and board of directors voted to increase
the number of shares of Common Stock authorized for issuance to 100,000,000
shares and further authorized the issuance of 20,000,000 preferred shares, par
value $0.001 per share. On May 24, 1994, the Company's shareholders approved a
proposal to increase the number of shares of Common Stock authorized for
issuance from 100,000,000 to 200,000,000 shares as well as a proposal to effect
a 1:10 reverse split of the Common Stock. The increase in authorized shares
became effective on or about July 26, 1994, while the 1:10 reverse stock split
was effective on August 1, 1994.
Shareholders
As of March 31, 1997 there were approximately 810 shareholders of record
holding a total of 9,725,389 shares of Common Stock.
Dividends
There are no restrictions that currently limit the Company's ability to pay
dividends on its Common Stock other than those generally imposed by applicable
state law.
On March 4, 1996, the Company declared a property dividend consisting of
one share of the common stock of both Oasis Hotel, Resort & Casino I, Inc. and
Oasis Hotel, Resort & Casino II, Inc. for every 100 shares of the Company's
common stock owned as of the March 27, 1996 record date. The dividend was paid
on May 15, 1996. Every entity owning less than 100 shares of the Company's
Common Stock as of the record date received one share of common stock in each
corporation.
On March 21, 1996, the Company declared a property dividend consisting of
one share of the common stock of both Zahav, Inc. and Cyber Information, Inc.
for every 100 shares of the Company's common stock owned as of the April 23,
1996 record date. This dividend was paid on June 1, 1996. Every entity owning
less than 100 shares of the Company's Common Stock as of the record date
received one share of each corporation's common stock. The Company has requested
its shareholders who received the Cyber Information dividend to return their
respective stock certificates so that a restrictive legend could be affixed. The
Company also gave their shareholders the right to receive the cash equivalent of
$0.02 per share of Cyber Information in lieu of retaining the certificate.
On June 14, 1996, the Company declared a property dividend consisting of
one share of the common stock of INFOTECH International, Inc., or the cash
equivalent of such stock, for every 100 shares of the Company's Common Stock
owned as of the June 24, 1996 record date. On October 25, 1996, the Company
restated the dividend's terms. A dividend of $0.02 for every 100 shares of the
Company's Common Stock shall be paid to each shareholder of record as of June
24, 1996 in lieu of the shares of stock previously declared. Shareholders owning
less than 100 shares of Common Stock shall also receive a $0.02 dividend. The
Company has not yet declared the payable date for distribution. This dividend
represents the only cash dividend declared on the Common Stock in the last two
fiscal years and the Company does not anticipate the payment of future
dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company recorded a net loss of $2,049,413 for the fiscal year ended
December 31, 1996. This significant loss was partially attributable to capital
expenditures and salary costs incurred with respect to the Company's wholly
owned subsidiary, CyberMalls, Inc. CyberMalls was incorporated by the Company in
1996 to design, develop, and market Internet virtual malls. As discussed in
"Item 1 - Description of Business," a virtual mall is a central address on the
Internet used to market the goods and services of vendors which consists of the
inter-linked home pages of several different business entities. CyberMalls'
business plan consisted of soliciting entities interested in owning, managing
and marketing Internet virtual malls with a specific theme or industry niche.
CyberMalls would develop ideas for the Internet marketing of products and
services with a common theme. CyberMalls would then transfer to its customers a
corporation owning a name and Uniform Resource Locator Number (more commonly
known as an Internet address) indicating the theme mall the purchaser was to
develop. CyberMalls would also transfer to the purchaser a contract obligating
CyberMalls to provide the ongoing support and maintenance necessary for the
purchaser to establish a viable Internet virtual mall including the use of
CyberMalls' computer programmers, graphic artists, and writers. The purchaser of
the mall was to be responsible for marketing and leasing the space on the
Internet virtual mall to providers of retail products and services.
<PAGE>
CyberMalls also planned to develop a search engine on the Internet and
related proprietary software known as WebSafariTM. WebSafariTM, which was to be
used in connection with the development and marketing of the Company's Internet
virtual malls, was designed to be a search engine specifically limited to
databases involving the sale of products or services over the Internet.
CyberMalls intended to market WebSafariTM to purchasers and potential purchasers
of its Internet virtual malls.
Since CyberMalls was a start-up venture with limited capitalization, the
Company advanced most of the expenses necessary to commence CyberMalls'
operations. The Company incurred expenses of $526,160 related to the development
of its CyberMalls division, including the development of WebSafariTM. Fifteen
percent (15%) of this amount involved capital expenditures for computer
hardware, software and data connection lines. Sixty-seven percent (67%) of this
total represented salaries of the 20 to 25 employees CyberMalls employed to
effect its business plan. The remaining 18% were selling and miscellaneous
general and administrative expenses.
During the 1996 fiscal year, CyberMalls sold five Internet virtual malls to
purchasers involved in industries such as sports, music, health and travel. The
consideration for the sale of each Internet virtual mall involved some
combination of the following: proceeds of equity financing to be subsequently
obtained by the purchaser; a fixed percentage of the revenues ultimately
generated by the purchaser's Internet virtual mall; shares of the purchaser's
common stock; and unsecured promissory notes.
As of the fourth fiscal quarter of 1996, none of the purchasers of the
Company's Internet virtual malls had taken material steps toward obtaining
equity financing or developing the malls as viable entities. Accordingly,
CyberMalls had been unable to realize any cash from its sale of Internet virtual
malls. CyberMalls was in need of an immediate cash infusion to sustain its
operations and to continue to provide services to the purchasers of its malls.
At the same time, the Company was experiencing its own cash flow shortfalls
resulting from the Company's operating losses and its inability to raise
sufficient capital through private equity offerings. This impaired the Company's
ability to advance further funds to CyberMalls. In late October 1996, CyberMalls
began downsizing its staff as a cost reducing measure. By December 31, 1996,
CyberMalls staff had been reduced to seven employees.
On February 25, 1997, the Company's board of directors decided to
permanently discontinue the operations of CyberMalls. The Company's management
made this decision based on its belief that the expenditures necessary to
continue competing in the highly competitive market of Internet commerce would
earn a higher rate of return if invested in other segments of the Company's
business. The Company is attempting to liquidate CyberMalls' assets in an effort
to mitigate losses incurred as a result of advancements made to CyberMalls. This
includes selling proprietary information related to the development of
WebSafariTM and equipment or software purchased by CyberMalls. The Company is
currently leasing some of the equipment previously purchased by CyberMalls to
another corporation. The Company recorded a loss of $526,160 on its financial
statements for the fiscal year ended December 31, 1996 to account for its
investment in CyberMalls.
The Company is in the process of terminating the contracts pursuant to
which it sold Internet virtual malls based on non-performance by the respective
purchasers. The Company is currently investigating whether or not it has any
claims against those entities for breaching the payment terms of the respective
contracts. The Company will pursue any such claims to the extent its management
determines that such action is in the Company's best interest.
<PAGE>
With the discontinuation of CyberMalls' operations, the Company's primary
focus continues to be centered around providing financial consulting services
and investing in undervalued real estate. Consulting services are provided
through the Company's subsidiaries, Canton Financial Services Corporation and
Hudson Consulting Group, Inc. As used in this Item and unless the context
indicates otherwise, the term "Company" shall also incorporate one or both of
these subsidiaries. The types of consulting services the Company provides for
its clients include: document preparation, capital formation, financial
analysis, debt settlement and general corporate problem solving. The Company
targets distressed public corporations and private corporations seeking to
become publicly owned.
The Company generates revenues through consulting fees payable in the
client's equity, cash, other assets or some combination of the three. The
primary form of compensation received by the Company involves the equity
securities of its clients. When payment is made in the form of equity, the
number of shares to be paid is dependent upon the price of the client's common
stock (if such price is available) and the consulting services to be provided.
The typical value used to determine the number of shares to be paid is one-half
of the stock's bid price, which accounts for the fact that most of the equity
received as payment by the Company is restricted as to resale. The Company
accepts equity with the expectation that its services will assist in the stock's
appreciation, thus allowing the Company to be compensated and to make a return
on the payments for its services.
The Company generates a substantial portion of its cash flow by liquidating
non-cash assets received as fees for consulting services. As most fees are paid
in the form of equity, the revenues and cash flows realized by the Company are
closely tied to the price of its clients' securities. A decline in the market
price of a client's stock can greatly effect the total asset value of the
Company's balance sheet and can result in the Company incurring substantial
losses on its income statement. A significant part of the Company's net loss
during the fiscal year ended December 31, 1996 is attributable to a market value
decline in several investment securities previously issued to the Company as
consulting fees. The Company recorded $447,513 as an expense to reflect
permanent declines in the value of the Company's investment securities. The
Company has additional, unrealized losses from investment securities available
for sale of $606,234 which are reflected in the Company's Shareholders' Equity.
Since the Company is generally paid for its consulting services through the
issuance of its clients' equity, much of which is restricted as to resale, the
Company experiences occasional cash flow shortages. To satisfy its cash
requirements, including the debt service on its real estate holdings, the
Company must periodically raise funds from external sources. This often involves
the Company conducting exempt offerings of its equity securities.
On May 31, 1996, the Company sold a total of 550,000 shares of Common Stock
pursuant to Regulation S ("Regulation S") under the Securities Act of 1933, as
amended (the "Act"). Two hundred and fifty thousand shares of Common Stock were
sold to East West Trading Corporation, a corporation organized under the laws of
the British Virgin Islands, in exchange for a cash payment of $310,000. The
remaining 300,000 shares were sold to Gordon Heywood, a resident of Great
Britain, in exchange for a cash payment of $372,000. The Company issued an
additional 162,000 pursuant to Regulation S to Prenn Chow Sau Har, a Hong Kong
resident, for ongoing consulting services involving locating business
opportunities for the Company. Based upon the market price for Common Stock on
the day these shares were issued, the Company valued such services at $200,880.
On September 17, 1996, the Company issued a 6.0% Convertible Debenture with
a face amount of $300,000 (the "Debenture") to Legong Investments, N.V., a
corporation organized under the laws of Curacao, Netherlands Antilles
("Legong"). The Debenture was issued pursuant to an Offshore Securities
Subscription Agreement. As consideration for issuing the Debenture, the Company
received a cash payment of $258,000 from Legong. The Debenture can be converted
into the Company's Common Stock at any time prior to maturity at the option of
Legong. The conversion price of the Debenture is seventy percent (70%) of the
average closing bid prices for the Common Stock during the five days immediately
preceding conversion. The Debenture matures on September 16, 1997. At maturity,
the Company has the option of paying the face amount of the Debenture plus
accrued interest in either cash or shares of Common Stock in accordance with the
conversion price set forth above. Interest is payable only at maturity or upon
conversion. Interest paid upon conversion only accrues as to the face amount
being converted. All Common Stock to be issued either upon conversion or
maturity is to be issued pursuant to Regulation S. As of March 31, 1997, $20,000
of the Debenture's face amount has been converted into Common Stock. The
remaining $280,000 face amount of the Debenture is convertible into 1,893,944
shares of Common Stock based upon the average closing bid prices on the Common
Stock for the five days immediately preceding March 31, 1997. Accordingly,
Legong is deemed to have a 13.1% beneficial ownership interest in the Company.
For more information on this matter, see "Item 11 - Security Ownership of
Certain Beneficial Owners and Management."
<PAGE>
During the fourth fiscal quarter of 1995, four of the Company's wholly
owned subsidiaries conducted private placement offerings of common stock
pursuant to Rule 504 of Regulation D as promulgated under the Act. The four
subsidiaries were: TAC, Inc.; Canton Industrial Property Management Corporation
of Salt Lake City ("CIPMC"); Canton's Commercial Carpet Corporation ("CCCC");
and Canton Industrial Corporation of Salt Lake City ("CICSLC"). Each
subsidiary's business surrounded the ownership, management, lease and sale of
real estate. The motivation behind these offerings was to allow each subsidiary
to raise funds sufficient for their financial independence. The offerings were
made to a limited number of accredited investors and to employees and
consultants of the Company. In the first fiscal quarter of 1997, the Company
reacquired the majority of the shares issued pursuant to the offerings conducted
by CIPMC, CCCC and CICSLC and plans to cancel the remaining outstanding shares.
Accordingly, these three companies will likely resume their status as
wholly-owned subsidiaries of the Company.
During the 1996 fiscal year, the Company also continued issuing shares of
its Common Stock pursuant to Section 4(2) of the Act and restricted pursuant to
Rule 144 promulgated under the Act. Shares of Common Stock were sold to various
investors at prices discounted from prevailing market prices to account for
resale restrictions. The proceeds of such sales were utilized to help the
Company meet short-term financial obligations. The Company issued 1,121,045
restricted shares of its Common Stock during 1996 for cash payments totaling
$1,707,384. The Company also issued 1,050,253 restricted shares of its Common
Stock during 1996 in exchange for services rendered by various entities.
During the fourth fiscal quarter of 1996, the price of the Company's Common
Stock dropped precipitously. This has impaired the Company's ability to raise
capital through exempt offerings of its securities. As a result, the Company
entered contracts to sell certain real estate holdings in an effort to satisfy
obligations arising from legal proceedings and to meet other significant cash
requirements. For more information on the sale of such properties, see "Item 2 -
Description of Property." The Company's management attributes some portion of
the decrease in the price of the Company's Common Stock to negative, national
publicity the Company received as a result of civil and criminal complaints
filed against Allen Wolfson, a consultant and control person of the Company
during the 1996 fiscal year. For information on these proceedings, see "Item 9 -
Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act."
The Company also underwent a substantial downsizing of its personnel during
the fourth fiscal quarter of 1996. Between October 10, 1996 and December 31,
1996, the Company reduced its staff from approximately 70 individuals to
approximately 35 individuals. The downsizing was employed as a cost saving
measure which allowed the Company to substantially reduce payroll expenses and
address its cash flow shortages. The staff reduction also reflected the winding
down of the Company's Internet mall services division. As of March 31, 1997, the
Company employed 29 individuals.
One of the services rendered by the Company's financial consulting
subsidiaries involves assisting corporations in effecting stock offerings
pursuant to certain statutory exemptions. Such offerings require strict
adherence to the statutory exemptions upon which the offerings are premised. The
Company notifies its clients of the restrictions and provisions specified in the
exemptions and relies upon the clients to ensure compliance with the exemptions.
Because the Company cannot control the actions of its clients, it is possible
that in the event an offering is conducted outside the requirements of
appropriate exemptions, the Company could be included in claims by investors.
CyberConnect, Inc., a Nevada corporation ("CC"), and CyberDimensions, Inc., a
Nevada corporation ("CD"), are majority owned subsidiaries of the Company that
conducted offerings of their common stock during the second and third quarters
of 1996. The Company has become aware that problems may exist with the manner of
these offerings which may require the rescission of the entire offerings. CC and
CD have begun to rescind these offerings and are in the process of refunding
investments made by shareholders pursuant to these offerings. Approximately
$122,117 remains to be paid to those investors as of March 31, 1997.
<PAGE>
The Company has made limited advancements to CC and CD, which are no longer
operating entities, to help those subsidiaries rescind their previously
conducted offerings and to settle any potential claims which the shareholders of
CC and CD may have against those companies. It will continue to assist these
subsidiaries to the extent that it has the cash resources to do so. If a
determination is made that the offerings were conducted outside the parameters
of the appropriate offering exemptions, CC and CD could face potential
liability. A possibility exists that the Company could be obliged to cover such
shortfalls if CC and CD cannot cover the expenses. This potential uncertainty
could have a material effect upon both the short-term and long-term liquidity of
the Company.
There are four pending legal proceedings that could also potentially have a
material effect upon the Company's liquidity. The State of Illinois has filed an
administrative action against the Company seeking recovery of $325,398 which the
State asserts was expended to remove tires from the site of the Company's former
tire recycling subsidiary and an identical amount in punitive damages. This
administrative proceeding is currently pending. In a separate proceeding, Xeta
Corporation has been awarded a $116,500 judgment against the Company as damages
for an alleged fraudulent transfer received by the Company from a creditor of
Xeta. The Company is currently appealing the United States District Court,
District of Utah's grant of Summary Judgment in favor of Xeta. In addition, Key
L.C. Corporation has filed a complaint seeking $291,882 in damages against the
Company based upon violations of the Securities Exchange Act of 1934. This case
is currently pending. Finally, the State of Delaware has assessed a tax in
excess of $300,000 upon one of the Company's subsidiaries. The Company is
currently appealing this assessment. If the Company is ultimately found liable
for damages or payment in any of the above proceedings, it could have a material
effect upon the Company's liquidity. For more information on these proceedings,
see "Item 3 - Legal Proceedings."
Real Estate Holdings
The Company manages its real estate holdings in-house and plans to fill
vacancies for those holdings. The Company, as of December 31, 1996, had
approximately 29% of its commercial space vacant, generated approximately
$89,800 in monthly rents, and operated at a gross profit of $4,000 per month.
While currently showing a profit on rental operations, the Company still has a
negative cash flow due to principal payments on mortgages. The Company continues
its real estate operations despite the negative cash flow for two reasons.
First, the Company hopes to eliminate the losses by increasing the rental income
from the property. Second, the Company purchases real estate primarily for
appreciation purposes. Thus, while the Company seeks to minimize and reverse its
real estate cash flow deficit, its goal is that cash sufficient to offset such
deficit will be generated upon property disposition, although no such assurances
can be given.
During the 1996 fiscal year and first fiscal quarter of 1997, four
consolidated subsidiaries of the Company sold (or entered into real estate
contract to sell) parcels of real estate as a means of generating cash flow and
settling liabilities.
On July 2, 1996, CFSC entered into a Stock Purchase Agreement with Premier
Sales Corporation ("PSC"), a foreign corporation, pursuant to which CFSC sold
PSC its 100% interest in the outstanding capital stock of Cyber Real Estate in
exchange for a $1 million promissory note dated that day. The note is due July
2, 1998 and does not bear interest provided that the full $1 million is paid
when due. If the full amount is not paid by July 2, 1998, the unpaid principal
shall accrue interest at 9% per annum. The note is secured by investment
securities pledged by the purchaser. Cyber Real Estate's sole asset consists of
a dormitory facility located in Dekalb, Illinois. Cyber Real Estate originally
acquired the Dekalb property on February 20, 1996 by issuing 825,000 shares of
its preferred stock and assuming a $275,000 mortgage on the property.
<PAGE>
On November 20, 1996, Investment Sanctuary Corporation, a Utah corporation
("ISC") and consolidated subsidiary of the Company, sold its 50% interest in the
sixth floor of a commercial building located at 68 South Main Street, Salt Lake
City, Utah and known as the McIntyre Building. ISC received a cash payment of
$91,270 from this transaction. The Company had acquired all of the outstanding
capital stock of ISC pursuant to a Stock Exchange Agreement it executed with
Richard Surber, who previously owned 100% of ISC. Mr. Surber is also the
Company's president, chief executive officer and director. For more information
on this Stock Exchange Agreement, see "Item 12 - Certain Relationships and
Related Transactions." The interest in the sixth floor of the McIntyre Building
represented the only asset owned by ISC at the time it was acquired by the
Company. The Company recorded a gain of $49,575 on its consolidated financial
statements as a result of this transaction.
On February 7, 1997, TAC, Inc., a consolidated subsidiary of the Company,
executed a Real Estate Purchase Contract proposing the sale its 60,000 square
foot commercial warehouse and underlying 3.5 acres of real estate located at
5280 West Wells Park Road, Salt Lake City, Utah. Under the Contract, TAC is to
receive proceeds totaling $1.35 million and net cash proceeds of approximately
$632,000. TAC is to receive $200,000 in cash at the closing with the remaining
balance to be paid 90 days after closing. TAC acquired the TAC Warehouse on June
28, 1996 through its exercise of an option under the terms of a lease. TAC
exercised this option though the payment of $293,394 and the assumption of a
$306,456 mortgage on the property.
On February 11, 1997, Canton Industrial Properties Management Corporation
of Salt Lake City ("CIPMC"), a consolidated subsidiary of the Company, executed
a Real Estate Purchase Contract. The Contract covers the proposed sale of real
property located at 202 West 400 South, Salt Lake City, Utah and consisting of
an 18,000 square foot office building and covered parking lot. The sale price
for the property is $950,000 and upon sale CIPMC should receive net cash
proceeds of approximately $431,000. Closing was originally scheduled for April
1997 but has been extended until July 10, 1997. The sale is contingent upon the
buyer acquiring financing and the completion of a due diligence investigation.
The Company is continually searching for additional properties. The amount
the Company is willing to pay for a property is determined by management. The
criteria for purchasing properties is broad. Management's determination of value
and the terms of financing are critical factors in the Company's decision to
purchase properties. The Company generally searches for properties that it
believes are undervalued and can be financed by assuming an existing mortgage
along with the issuance of equity securities or a nominal amount of cash as the
down payment. This method of financing real estate purchases has been utilized
to preserve the Company's cash flows. The Company has been successful in
acquiring several properties using this method of financing.
Results of Operations
Revenues for 1996 were $2,655,482 compared to $2,049,068, an increase of
30%. This increase was primarily due to the expansion of the Financial
Consulting Division and the Real Estate Division whose revenues went up 11% and
71%, respectively. During 1996, the Company actively sought to increase the
occupancy rates of its real estate holdings, and event which contributed to the
substantial increase in rental revenue.
Costs of revenues soared 69% from $1,255,374 in 1995 to $2,120,837 in 1996.
The Company incurred $1,562,936 in payroll and payroll related taxes, of which
CyberMalls' payroll expenses accounted for $351,178. Costs of revenue from the
real estate operations accounted for $502,125. As a result of the dramatic
increase in costs of revenue, costs of revenue as a percentage of sales was 80%
for 1996 compared to 61% in 1995. Gross Profit was $534,645 for 1996 compared to
$794,594 for 1995.
Selling, general, and administrative expenses for 1996 increased to
$2,444,400 from 1,300,226 for 1995. One of the factors behind this increase is
the bad debt expenses in the amount of $233,261 during 1996 compared to zero
during 1995. This was primarily attributable to separate promissory notes of
$75,600 held by two of the Company's subsidiaries. The Company now believes that
these notes may be uncollectible and is investigating its legal rights with
respect to collecting on the notes. In addition, the Company incurred $781,797
in consulting expenses during 1996 through issuance of Common Stock and cash.
Property taxes, depreciation expenses, rental expenses, investor/public
relations expenses, and office supplies accounted for another $793,529.
<PAGE>
Operating losses were 1,909,755 and $505,632 for the years ended December
31, 1996 and 1995, respectively.
Interest income dropped precipitously from $86,565 in 1995 to $4,663 in
1996. The collection of an interest-bearing note receivable during the first
quarter of 1996 accounted for the majority of this decline. Interest expenses
were $213,141 for 1996 compared to $123,137 for 1995. During 1996, the Company
purchased additional property by assuming mortgages payable on the property. As
a result, interest expenses increased substantially.
The Company incurred a gain from investment securities in the amount of
$59,355 during 1996. During 1995, the Company realized $73,425 in gain from
investment securities. In 1996, permanent decline in value of the Company's
investment securities was $447,513..
In 1996, the Company realized a gain from the issuance of shares by
subsidiaries in the amount of $272,848 compared to $151,966 in 1995.
Capital Resources and Liquidity
The Company continued to suffer from a working capital deficiency, which
increased to $962,296 as of December 31, 1996 from $834,294 at the end of 1995.
The increase is primarily due to the following factors: (1) the write-off of
uncollectible consulting fees; (2) significant investments in CyberMalls which
drained the Company's resources; (3) the write-down of investment securities
that suffered permanent decline during fiscal year ended December 31, 1996.
Total stockholders' equity decreased slightly from $3,370,814 as of
December 31, 1995 to $3,348,347 as of December 31, 1996. Net loss during 1996 is
offset by the increase in additional paid-in capital from issuance of the Common
Stock to employees and consultants for services rendered and to investors for
cash and promissory notes
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements for the fiscal year ended December 31,
1996 are attached hereto as pages F-1 through F-25.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE
Independent Auditors' Report.................................................F-2
Consolidated Balance Sheet December 31, 1996.................................F-3
Consolidated Statements of Operations December 31, 1996 and 1995.............F-5
Consolidated Statements of Shareholder's Equity December 31, 1996 and 1995...F-7
Consolidated Statements of Cash Flows December 31, 1996 and 1995.............F-8
Notes to Consolidated Financial Statements December 31, 1996 and 1995........F-9
Independent Auditors' Report on Other Information...........................F-24
Schedules
V Property, Plant and Equipment......................................F-25
VI Accumulated Depreciation of Property, Plant and Equipment..........F-26
<PAGE>
ANDERSEN ANDERSEN & STRONG, L. C.
- ------------------------------------- 941 East 3300 South, Suite 202
Certified Public Accountants and Business Consultants Salt Lake City, UT 84106
Member SEC Practice Section of the AICPA Telephone: (801)486-0096
Fax: (801)486-0098
E-Mail: K Anderson @msn.com
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
CyberAmerica Corporation
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheets of CyberAmerica
Corporation and Subsidiaries as of December 31, 1996 and the related
consolidated statements of operations, shareholder's equity, and cash flows for
the years ended December 31, 1996 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CyberAmerica
Corporation and Subsidiaries as of December 31, 1996, and the consolidated
results of their operations, shareholders' equity, and cash flows for the years
ended December 31, 1996 and 1995, in conformity with generally accepted
accounting principles.
/s/ Anderson, Anderson & Strong
Salt Lake City, Utah
April 14, 1997
A member of ACF International with affiliated offices worldwide
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996
ASSETS
CURRENT ASSETS
<S> <C>
Cash ...................................................... $ 78,368
Accounts receivable - trade
(Net of allowance for bad debt of $189,097) ........... 1,039,807
Accounts receivable - related parties ..................... 230,933
Accounts receivable - other ............................... 337,508
-----------
Receivable - brokerage account ............................ 585
Note receivable - current (Note 12) ....................... 12,000
Prepaid expenses .......................................... 55,654
Securities available for sale (Note 11) ................... 649,460
-----------
TOTAL CURRENT ASSETS ......................................... 2,404,315
PROPERTY AND EQUIPMENT
Schedules V and VI ........................................ 7,170,312
OTHER ASSETS
Investment securities at cost (Note 11) ................... 176,910
Notes receivable - net of current (Note 12) ............... 36,000
Investments - other ....................................... 255,653
Deposits .................................................. 35,162
Trade credits ............................................. 170,961
-----------
Other assets .............................................. 9,304
-----------
TOTAL OTHER ASSETS ........................................... 683,990
TOTAL ASSETS ................................................. $10,258,617
===========
See notes to consolidated financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS(Continued)
December 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C>
Accounts payable-trade ...................................... $ 294,887
Accounts payable - related parties .......................... 86,091
Accrued liabilities
Interest .................................................. 19,788
Real estate taxes and assessments (Note 8) ................ 368,957
Payroll and related taxes payable ......................... 165,616
EPA liabilities ........................................... 325,398
Refundable deposits ....................................... 31,006
Refund to investors ....................................... 177,614
Other ..................................................... 159,207
Debenture payable (Note 9) .................................. 290,000
Current maturities of long-term debt (Note 5) ............... 1,430,456
Current maturities of capitalized lease (Note 6) ............ 17,591
------------
TOTAL CURRENT LIABILITIES ...................................... 3,366,611
LONG-TERM LIABILITIES
Long-term debt, less current portion (Note 5) ............... 2,840,342
------------
Long-term capitalized lease, less current portion (Note 6) .. 359,419
------------
TOTAL LONG-TERM LIABILITIES .................................... 3,199,761
CONTINGENCIES (Note 14) ........................................ --
MINORITY INTEREST .............................................. 343,898
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; 9,484,557 shares issued ................ 9,485
Additional paid-in capital .................................. 14,058,256
Accumulated deficit ......................................... (10,113,160)
Unrealized loss from securities available for sale .......... (606,234)
------------
TOTAL SHAREHOLDERS' EQUITY ..................................... 3,348,347
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..................... $ 10,258,617
============
See notes to consolidated financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1996 and 1995
1996 1995
------------- ---------
REVENUE
<S> <C> <C>
Consulting revenue ............................ $ 1,927,224 $ 1,742,679
Rental revenue ................................ 492,513 287,215
Other revenue ................................. 235,745 26,074
----------- -----------
TOTAL REVENUE .................................... 2,655,482 2,049,968
COSTS OF REVENUE
Costs associated with consulting revenue ...... 1,562,936 940,280
Costs associated with rental revenue .......... 502,125 302,612
Costs associated with other revenue ........... 55,776 12,482
----------- -----------
TOTAL COSTS OF REVENUE ........................... 2,120,837 1,255,374
----------- -----------
GROSS PROFIT (LOSS) .............................. 534,645 794,594
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ..... 2,424,400 1,167,383
Environmental cleanup ......................... 20,000 132,843
----------- -----------
TOTAL SELLING, GENERAL AND ADMINISTRATIVE ........ 2,444,400 1,300,226
OPERATING LOSS ................................... $(1,909,755) $ (505,632)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income ............................... 4,663 86,565
Interest expense .............................. (213,141) (123,137)
Gain (loss) from sale of assets ............... 15,652 71,660
Gain (loss) from investment securities ........ 59,335 73,425
Gain from issuance of shares by subsidiary .... 272,848 151,966
Unrealized loss from securities ............... (447,513) --
Gain from disposal of subsidiary .............. -- 70,544
Other income (expenses) ....................... 31,857 217,420
----------- -----------
TOTAL OTHER INCOME (EXPENSES) .................... (276,299) 548,443
----------- -----------
INCOME (LOSS) BEFORE DISCONTINUED
OPERATIONS AND OTHER ITEMS ..................... (2,186,054) 42,811
DISCONTINUED OPERATIONS:
Gain from discontinued operations ............. -- 23,912
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES,
EXTRAORDINARY ITEMS, AND MINORITY INTEREST ...... (2,186,054) 66,723
PROVISION FOR INCOME TAXES ...................... -- --
----------- -----------
See notes to consolidated financial statements.
F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
Years Ended December 31, 1996 and 1995
<S> <C> <C>
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS ......... (2,186,054) 66,723
AND MINORITY INTEREST:
Gain from extinguishment of debt .............. -- 13,454
Loss on foreclosure (Note 17) ................. -- (562,406)
----------- -----------
NET INCOME (LOSS) BEFORE MINORITY INTEREST ....... (2,186,054) (482,229)
-----------
MINORITY INTEREST IN LOSS ........................ 136,641 63,500
----------- -----------
NET INCOME (LOSS) ................................ $(2,049,413) $ (418,729)
=========== ===========
INCOME (LOSS) PER COMMON SHARE
Gain (loss) before discontinued operations
and other items ............................. $ (.28) $ .01
Gain from discontinued operations ............. -- .01
Extraordinary items ........................... -- (.14)
Minority interest in loss ..................... .01 .01
----------- -----------
Net income (loss) per weighted average
common share outstanding .................... $ (.27) $ (.11)
=========== ===========
Weighted average number of common
shares outstanding (Note 2) ................. 7,715,173 3,825,264
=========== ===========
See notes to consolidated financial statements.
F-7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1996 and 1995
Net
Stock Unrealized loss Total
Common Stock Paid-in Subscription On securities Shareholders'
Shares Amount Capital Deficit Receivable Available for Sale Equity
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1994 ......... 2,832,864 $ 2,833 $ 10,268,120 $ (7,645,018) -- -- $ 2,625,935
Common stock activity:
Issued
for debt ............................ 241,743 242 82,073 -- -- -- 82,315
Issued
for assets .......................... 420,000 420 267,330 -- -- -- 267,750
Issued
for services
- related parties .................... 407,000 407 148,045 -- -- -- 148,452
Issued
for services ........................ 390,451 390 83,260 -- -- -- 83,650
Issued
for cash ............................ 1,594,741 1,595 579,846 -- -- -- 581,441
Net loss
for year ............................. -- -- -- (418,729) -- -- (481,729)
BALANCES AT DECEMBER 31, 1995 ......... 5,886,799 $ 5,887 $ 11,428,674 $ (8,063,747) $ -- -- $ 3,370,814
------- ------- ------------ ------------ --------- ----------- -----------
Common stock activity:
Issued
for debt ............................ 95,460 96 11,839 -- -- -- 11,935
Issued
for assets ......................... 1,325,000 1,325 357,175 -- -- -- 358,500
Issued
for services
- related parties .................... 320,000 320 128,575 -- -- -- 128,895
Issued
for services ........................ 730,253 730 427,686 -- -- -- 428,416
Issued
for cash ........................... 1,127,045 1,127 1,706,257 -- -- -- 1,707,384
Stock
subscription
receivable (Note 13) ................ 750,001 750 870,832 -- (871,582) -- --
Cancellation stock
subscription
receivable (Note 13) ................ (750,001) (750) (870,832) -- 871,582 -- --
Dividends
paid ............................... -- -- (1,950) -- -- -- (1,950)
Unrealized
loss from
securities
available for sale ................... -- -- -- -- -- (606,234) (606,234)
Net loss
for year ............................ -- -- -- (2,049,413) -- -- (2,049,413)
BALANCES AT DECEMBER 31, 1996 ......... 9,484,557 $ 9,485 $ 14,058,256 $(10,113,160) $ -- (606,234) $ 3,348,347
========== ======= ============ ============ ========= =========== ===========
See notes to consolidated financial statements.
F-8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996 and 1995
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) ................................... $(2,049,413) $ (418,729)
Adjustments to reconcile net income (loss)
to net cash provided
Gain from debt settlements ........................ -- (13,454)
(Gain) loss from sale of investments .............. (59,335) (73,425)
(Gain) from sales to related party (Note 9, Item 3) -- --
Permanent decline in investments .................. 447,513 94,295
(Gain) from sale of assets ........................ 15,652 (71,660)
(Gain) from sale of subsidiary .................... -- (70,544)
(Gain) from issuance of shares of subsidiary ...... -- (151,966)
(Gain) from discontinued operations ............... -- (23,912)
Loss on foreclosure ............................... -- 562,406
Minority interest ................................. (136,641) (63,500)
Depreciation and Amortization ..................... 247,399 205,937
Services paid with common stock ................... 557,312 232,102
Common stock issued for assets and debt ........... 11,935 82,315
Bad debt provisions ............................... 201,097 --
Decrease (increase) in assets:
Receivables ..................................... (1,346,447) (301,967)
Inventories ..................................... 36,371 (36,371)
Prepaid expenses and other ...................... (47,783) (63,747)
Investments - other ............................. -- (74,125)
Increase (decrease) in liabilities:
Accounts and notes payable ...................... 74,085 (8,807)
Accrued liabilities ............................. 195,458 381,429
Deferred income ................................. (171,900) 51,615
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES ...... $(2,024,697) $ 237,892
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures .............................. (584,453) (223,220)
Proceeds from sales of investments ................ 286,004 258,901
Purchase of non-current security investments ...... (213,336) (1,018,691)
----------- -----------
NET CASH FLOWS (USED) IN INVESTING ACTIVITIES ......... $ (511,485) $ (983,010)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of common stock for cash ..................... 1,707,385 981,441
Increase in long term debt ......................... 867,439 218,000
Loans from investors ............................... 177,614 --
Cash disbursements to stockholders ................. (1,950) --
Reduction of long term debt ........................ (154,243) (464,727)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ............. $ 2,596,245 $ 734,714
----------- -----------
INCREASE (DECREASE) IN CASH ........................... $ 59,763 $ (10,404)
CASH AT BEGINNING OF YEAR ............................. 18,605 29,009
---------- -----------
CASH AT END OF YEAR ................................... $ 78,368 $ 18,605
See Note 3 for supplemental disclosures =========== ===========
See notes to consolidated financial statements.
F-9
</TABLE>
<PAGE>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1: ORGANIZATION AND OPERATIONS
Organization
CyberAmerica Corporation (the "Company") was incorporated in the State of Ohio
on July 10, 1984 as The Canton Corporation and adopted its present name in June
1996. Effective May 3, 1993, the Company's domicile was changed to Nevada.
Operations
The Company provides financial consulting services and invests in undervalued
property. The Company provides services and support functions to its clients
including advice relating to regulatory compliance, document preparation,
capital formation, financial analysis, promotional campaigns, debt settlement,
and general corporate problem solving. Part of the Company's business operations
includes the acquisition, management, leasing and sale of real estate.
During 1996, the Company was involved in the preparation, development and
marketing of Internet virtual malls. These operations were conducted through
CyberMalls, Inc., a wholly-owned subsidiary of the Company ("CyberMalls"). The
Company invested a substantial amount in computer equipment and personnel. In
February 1997, the Company decided to permanently discontinue CyberMalls'
operations based on its belief that future expenditures in this division would
earn a higher return if invested in the Company's other operations.
During the second and third quarter of 1996, CyberConnect, Inc.("CC") and
CyberDimensions, Inc. ("CD"), both majority-owned subsidiaries of the Company,
conducted offerings pursuant to Rule 504 of the Regulation D of the Securities
Act of 1933 ("504 exemption"). The Company later became aware that these
offerings might have been conducted outside the requirements of 504 exemption.
As a result, CC and CD began to rescind the offerings starting fourth quarter of
1996 and agreed to refund the investments made by the shareholders by January
15, 1997; however, due to cash shortages, CC and CD were unable to repay each
individual investor in full. CC and CD then agreed to refund 10% of the
investments plus accrued interest to each investor every 45 days until the debts
are paid in full. As of December 31, 1996, CC and CD were indebted to their
investors in the amount of $177,614. During1997, the Company advanced CC and CD,
who paid $55,497 in principal and $20,569 in accrued interest.
Reorganization
On February 22, 1988, the Company filed a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Code. On November 7, 1994, the
bankruptcy was discharged.
Basis of Financial Statement Presentation
The Company's financial statements have been presented on the basis that it is a
going concern which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.
Company Plans
The Company was discharged from bankruptcy in 1994 and no longer has to allocate
time and resources in this area. Also, a number of unprofitable operations have
been discontinued. This will save time and resources which the Company is now
devoting to profitable activities.
The Company hopes to generate sufficient cash flow to cover operating expenses,
to meet its obligations and to generate revenues for expansion as set forth
below:
<PAGE>
NOTE 1: ORGANIZATION AND OPERATIONS (CONTINUED)
1. The Company's primary source of revenue is through providing
consulting services. The Company plans to increase its client
base by broadening the type and number of clients. The Company
currently targets public companies who are interested in the
Company's services and private entities seeking to raise
capital or to become a public corporation. The Company has
extended its client base to include large individual estates,
nonprofit and religious organizations. In addition, the
Company plans to expand its range of consulting services
provided to include dissemination of financial information.
The Company intends to achieve this goal by publishing regular
quotations of its clients in national financial publications
and designing home pages on the World Wide Web through which
clients can publicly distribute corporate information, press
releases and periodic reports filed under the Securities Act
of 1934.
2. The Company is expanding its real estate holdings to include a
wide variety of commercial and residential properties. The
Company hopes to increase the revenues generated from these
properties by increasing the occupancy of available rentable
space and has engaged various companies and individuals to
help lease and manage the real estate it owns. Real estate
holdings are also available for sale at prices which will
provide a reasonable return to the Company. Indications are
that the commercial real estate market is continuing to
improve and that there is a strong demand for commercial
rental space.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's accounting policies reflect current accounting practices and
conform to generally accepted accounting principles. The policies considered to
be significant are as follows:
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
CyberAmerica Corporation and its subsidiaries as summarized in Note 4.
All significant intercompany accounts and transactions have been eliminated in
the consolidation.
Accounting Method
The accompanying financial statements have been prepared on the accrual method
using generally accepted accounting principles applicable to a going concern
which contemplates the realization of assets and the liquidation of liabilities
in the normal course of business. All assets are listed at historical cost.
Income Taxes
The Company reports income and losses for financial reporting and income tax
purposes on the accrual method of accounting in accordance with Financial
Accounting Standards ("FAS") No. 109 with the cumulative effects reflected in
the year ended December 31, 1993. FAS 109 requires deferred tax balances to be
adjusted to reflect the tax rates in effect when those amounts are expected to
become payable or refundable.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. Depreciation
expenses for 1996 and 1995 were $247,397 and $202,368, respectively. The cost of
assets sold or retired and the related amounts of accumulated depreciation are
removed from the accounts in the year of disposal. Any resulting gain or loss is
reflected in current operations.
Expenditures for maintenance and repairs are expended as incurred; additions and
improvements are capitalized.
<PAGE>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Sales of Undeveloped Land
The Company uses the deposit method for reporting sales of certain undeveloped
land. Under this method the effective date of sale is deferred until substantial
cash is collected. Until that time all cash received is accounted for as a
deposit.
Sales of Internet Mall Sites
Revenue from the sales of Internet mall sites is generally tied to certain
contingencies relating to product development and to sale of the clients'
securities. As a result, 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.
Investment Securities
Marketable equity securities are stated at market value in accordance with
Financial Accounting Standards ("FAS") No. 115. Valuation of other security
investments is based on acquisition costs. Markdowns are made to reflect
significant (permanent) impairment in values. During 1996, unrealized loss from
investment securities available for sale was recorded as $606,234 and permanent
decline in value of investment securities acquired at cost was $447,513.
Common Shares and Income (Loss) Per Common Share
Income (loss) per common share is computed using the weighted average number of
common shares outstanding (7,715,173 shares in 1996 and 3,825,264 shares in
1995).
Income or Loss Per Share
Income or loss per share of common stock is computed based on the weighted
average number of common shares outstanding during the periods shown. The
Company had common stock equivalents (CSEs) outstanding at December 31, 1996 and
1995 in the form of stock purchase options. The options are held by present and
former employees. The inclusion of the outstanding options would not affect the
income or loss per share in 1996 or 1995 and therefore such options have not
been included in the weighted average number of common shares. If all
outstanding options were exercised, the total proceeds would be approximately
$493,856. The Company's outstanding common stock purchase options at December
31, 1996 are as summarized as follows:
Expiration Exercise No. of Shares
Issue Date Date Price Subject to Options
10/21/93 10/30/98 $4.44 98,472
09/08/93 09/30/98 $4.44 6,000
11/19/96 11/19/06 $0.60 50,000
Total 154,472
=======
Issuance of Common Stock
The Company frequently issues shares of its common stock to acquire assets,
retire debt and pay for services. When stock is issued for services, the value
of the stock and related services is determined by the Board of Directors. In
the case of settling debt, the market value of the stock, the type and age of
the debt and any other related factors are considered. In the case of assets
acquired, the value is negotiated based on a combination of factors including,
but not limited to:
The significance of the assets to the Company; The liquidity
of the assets; The trading price and volume of the assets (if
a security).
Final approval of the basis for issuance of capital stock is made by the Board
of Directors.
<PAGE>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Environmental Compliance and Remediation
Environmental expenditures are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations and
that do not have future economic benefit are expensed. Expenditures which extend
the life of the related property or mitigate or prevent future environmental
contamination are capitalized. The Company determines its liability on a site by
site basis and records a liability at the time when it is probable and can be
reasonably estimated.
NOTE 3: SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The following are supplemental disclosures of cash flow information:
1. Cash paid for interest was $370,284 in 1996 and $256,457 in 1995.
2. Common stock was issued for the following purposes:
Shares Amounts
---------------- -----------
95,460 Issued for debt $ 11,935
1,325,000 Issued for other assets 358,500
320,000 Issued for services - related party 128,895
730,253 Issued for services 428,416
-------------- --------------
2,470,713 $ 927,746
============== =================
1995
Shares Amounts
---------------- --------------
241,743 Issued for debt $ 82,315
420,000 Issued for other assets 267,750
407,000 Issued for services - related party 148,452
390,451 Issued for services 83,650
-------------- -------------
1,459,194 $ 582,167
============== ==============
During 1996, the Company acquired the following assets:
Real estate purchased $ 776.659
Debts incurred (425,442)
-----------
Cash paid 351,217
Real estate acquired through foreclosure 497,593
Debt settled (475,000)
Debt incurred (18,472)
---------------
Cash paid 4,121
Total cash paid $ 355,338
=========
During 1995, the Company incurred mortgage debt of $1,200,000 in connection with
a land acquisition.
<PAGE>
NOTE 4: SUBSIDIARIES
Canton Financial Services Corporation
Canton Financial Services Corporation, a Utah corporation, ("CFS"), was formed
by the Company on June 8, 1994. CFS, a wholly-owned subsidiary of the Company,
provides a wide range of consulting services, primarily for public companies.
Canton Personnel, Inc.
Canton Personnel, Inc., a Utah corporation ("CPI"), was incorporated by the
Company on January 21, 1994 for the purpose of managing the various personnel
and payroll operations of the Company and its subsidiaries. CPI, a wholly-owned
subsidiary, does not currently have any tangible assets.
Canton Properties I, Inc.
Canton Properties I, Inc., a Utah corporation ("CPII"), was incorporated by the
Company on May 4, 1994 for the purpose of acquiring, owning and managing the
property it acquires. On June 21, 1994, CPII, a wholly-owned subsidiary of the
Company, purchased a two-thirds undivided interest in the land located at 238
West 400 South, Salt Lake City, Utah. On May 26, 1995, CPII sold its interest in
the property and recorded a gain on the sale of assets of $71,660.
Canton Tire Recycling of West Virginia
Canton Tire Recycling of West Virginia, Inc. ("CTRWV") was incorporated by the
Company on February 25, 1993 for the purpose of acquiring, owning and managing
the Parkersburg Terminal. CTRWV, a wholly-owned subsidiary of the Company,
purchased the Parkersburg Terminal on May 15, 1993.
Canton's Wild Horse Ranch, Inc.
Canton's Wild Horse Ranch, Inc., an Arizona corporation ("CWHR"), was
incorporated by the Company on November 10, 1993 for the purpose of leasing,
acquiring, owning and managing property related to the Wild Horse Ranch. CWHR, a
wholly-owned subsidiary of the Company, has ceased operations due to a lack of
profitability.
Canton's Wild Horse Ranch, II
Canton's Wild Horse Ranch, II, an Arizona corporation ("CWHRII"), was
incorporated by the Company on February 3, 1994, for the purpose of expanding
Canton's Wild Horse Ranch. On February 16, 1994 CWHRII, a wholly-owned
subsidiary of the Company, acquired ten acres of raw, unimproved land adjacent
to the Ranch suitable for expansion of the Ranch.
West Jordan Real Estate Holdings, Inc.
West Jordan Real Estate Holding, Inc., a Utah corporation ("WJREH"), was
incorporated by the Company on June 7, 1994 for the purpose of acquiring, owning
and managing a specific property. On August 31, 1995, WJREH, a wholly-owned
subsidiary of the Company, entered into a lease with an option to purchase a
retail shopping plaza in Salt Lake City, Utah.
Oasis International, Inc.
Oasis International, Inc., a Nevada corporation ("Oasis"), was incorporated by
the Company on November 20, 1995 for the purpose of acquiring, owning and
managing a specific property. On December 27, 1995, Oasis, a wholly-owned
subsidiary of the Company, purchased 1,126 acres of land in Elko County, Nevada.
Oasis International Hotel & Casino, Inc.
Oasis International Hotel & Casino, Inc., a Nevada corporation ("OIHC"), was
incorporated by the Company on November 20, 1995 for the purpose of acquiring,
owning and managing a specific property. On December 27, OIHC, a wholly-owned
subsidiary of the Company, purchased land in Elko County, Nevada.
Oasis Property Management Services, Inc.
Oasis Property Management Services, Inc., a Nevada corporation ("OPMS"), was
incorporated by the Company on November 20, 1995 for the purpose of operating
the facilities in Elko County, Nevada. On December 27, 1995, OPMS, a
wholly-owned subsidiary of the Company, commenced operation of the facilities in
Elko County, Nevada.
<PAGE>
NOTE 4: SUBSIDIARIES (CONTINUED)
KMC Foods, Incorporated
KMC Foods, Incorporated ("KMC") was incorporated on April 12, 1988 under the
laws of the Commonwealth of Virginia. KMC was purchased by the Company in 1993.
KMC held a note secured by a deed of trust on the KMC Foods Plant upon which it
foreclosed during the third quarter of 1996.
Canton Industrial Properties Management Corporation of Salt Lake City
Canton Industrial Properties Management of Salt Lake City, a Utah corporation
("CIPMC"), was incorporated by the Company on October 30, 1994 for the purpose
of acquiring, owning and managing property. On October 9, 1993, CIPMC purchased
an office building at 202 West 400 South in downtown Salt Lake City. The
property is a 18,000 sq. ft. office building with two stories of interior
rentable space and above ground level parking. CIPMC was a wholly-owned
subsidiary of the Company until the fourth quarter of 1995 when the subsidiary
sold shares to accredited investors and issued shares to employees and
consultants in a private placement offering pursuant to a Regulation D, 504
Offering. During the first quarter of 1997, the Company reacquired a majority of
the shares sold and plans to cancel the remaining shares.
Canton Industrial Corporation of Salt Lake City
Canton Industrial Corporation of Salt Lake City, a Utah corporation ("CICSLC"),
was incorporated by the Company on September 29, 1993 for the purpose of
acquiring, owning and managing the Plandome Building. On September 30, 1993,
CICSLC acquired the Plandome Building located at 69-75 East 400 South, Salt Lake
City, Utah. CICSLC was a wholly-owned subsidiary of the Company until the fourth
quarter of 1995 when the subsidiary sold shares to accredited investors and
issued shares to employees and consultants in a private placement offering
pursuant to a Regulation D, 504 Offering. During the first quarter of 1997, the
Company reacquired a majority of the shares sold and plans to cancel the
remaining shares.
Canton Commercial Carpet Corporation
Canton Commercial Carpet Corporation, a Utah corporation ("CCCC"), was
incorporated by the Company on January 21, 1994 for the purposes of distributing
and wholesaling commercial carpet. On May 23, 1994, CCCC entered into a lease
with an option to purchase real property located at 268 West 400 South in Salt
Lake City, Utah. On February 1, 1995, the Company relocated its corporate
headquarters to this Building. CICSLC was a wholly-owned subsidiary of the
Company until the fourth quarter of 1995 when the subsidiary sold shares to
accredited investors and issued shares to employees and consultants in a private
placement offering pursuant to a Regulation D, 504 Offering. During the first
quarter of 1997, the Company reacquired a majority of the shares sold and plans
to cancel the remaining shares.
TAC, Inc.
TAC, Inc., a Utah corporation ("TAC"), was formed by Logos International, Inc.
("Logos"), an affiliate of the Company, on August 27, 1992. TAC was acquired
from Logos on December 30, 1994 pursuant to a Settlement Agreement. TAC was a
wholly-owned subsidiary of the Company until the fourth quarter of 1995 when the
subsidiary sold additional shares in a private placement offering pursuant to a
Regulation D, 504 Offering and diluted the Company's ownership to just over
fifty percent. In June 1996, TAC exercised its option on a warehouse facility
consisting of approximately 60,000 square ft. located in West Jordan, Utah.
During 1996, the Company advanced TAC funds to purchase the warehouse in
exchange for shares of common stock in TAC, which brought its ownership to over
80%.
Wasatch Capital Corporation
Wasatch Capital Corporation, a Utah corporation ("Wasatch") was incorporated on
June 10, 1991. The Company acquired a 20% interest in Wasatch on December 30,
1994 in exchange for the Company advancing monies to exercise an option to
purchase real estate located at 55-57, 61-65 West 100 South, Salt Lake City,
Utah (the "Bennett Building"). Wasatch is consolidated because the Company,
through its officers, directors and affiliates, exercises significant control
over the decisions and operations of Wasatch. The Company's investment is
secured by the Bennett Building and Wasatch is not allowed to dilute the
Company's interest in Wasatch or lease, sell, exchange, or encumber the property
in any way unless the Company approves.
<PAGE>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 4: SUBSIDIARIES (CONTINUED)
Thistle Properties, Inc.
Thistle Properties, Inc., an Illinois corporation ("Thistle") was acquired by
the Company on May 12, 1995 as a result of a Mutual Release Agreement between
the Company, ATC II and Thistle (Please see Note 10 for additional information
on this transaction). Thistle holds title to the Canton Plant in Canton,
Illinois.
CyberMalls, Inc.
CyberMalls, Inc., a Nevada corporation, was incorporated by the Company on
February 15, 1996, for the purpose of preparing, developing, and marketing
Internet virtual malls. On February 25, 1997, the Company decided to permanently
discontinue the operations of CyberMalls. Accordingly, CyberMalls is no longer
an operating entity.
CyberConnect, Inc.
CyberConnect, Inc., a Nevada corporation, was incorporated by the Company on
February 15, 1996, for the purpose of developing and marketing an Internet
virtual mall.
CyberDimensions, Inc.
CyberDimensions, Inc., a Nevada corporation, was incorporated by the Company on
February 15, 1996, for the purpose of developing and marketing an Internet
virtual mall.
Diversified Holdings XIII, Inc.
Diversified Holdings XIII, Inc., a Nevada corporation, was incorporated by the
Company on April 16, 1996, for the purpose of providing business consulting
services. On March 5, 1997, Diversified Holdings XIII, Inc. changed its name to
Hudson Consulting Group.
Diversified Holdings XIX, Inc.
Diversified Holdings XIX, Inc., a Nevada corporation, was incorporated by the
Company on April 29, 1996, for the purpose of acquiring, owning, and managing
certain real estate property. On August 2, 1996, Diversified Holdings XIX
purchased land located in Cheriton, Virginia in a foreclosure sale. For more
information on this property, see "Item 2 - Description of Properties."
Investment Sanctuary Corporation
Investment Sanctuary Corporation, a Utah corporation ("ISC"), was incorporated
on April 23, 1993 as a Subchapter S Corporation pursuant to Internal Revenue
Service Code. On October 31, 1996, ISC became a wholly-owned subsidiary of the
Company and its Subchapter S Corporation status was terminated.
42 Exchange Place Inc. - Disposition
42 Exchange Place, Inc., a Utah corporation, was incorporated by the Company on
April 21, 1994 for the purpose of acquiring, owning and managing a specific
property. On September 28, 1994, 42 Exchange Place Inc., a wholly owned
subsidiary of the Company, purchased property located at 42 Exchange Place, Salt
Lake City, Utah. On August 4, 1995, the Company sold the corporation and
realized a gain of $70,544.
<PAGE>
NOTE 5: LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1996:
1996
Mortgage payable, BP&G (10%), monthly payments
of $7,929, due 11/99 $ 522,555
Mortgage payable, Rich Bennion, (9%) monthly
payments of $4,780, due 10/99 585,000
Mortgage payable, Rick Lucas Keogh (9%)
monthly payments of $1,575, due 11/03 163,874
Mortgage payable, Mark Cummings (9%)
monthly payments of $1,350, due 11/03 140,489
Mortgage payable, Title Security Agency (8%),
monthly payments of $825, due 02/99 53,868
Note payable, Paul R. Rubey (5%), due 10/98 100,000
Mortgage payable, Solar Logos Foundation,(7%), quarterly
payments of interest only until 1/99, due 07/04 900,000
Mortgage payable, Howard Bernstein, (18%), monthly payments
of interest only, due 12/97 300,000
Note payable to The Capital Company, (18%), monthly payments
of interest only until 4/97, $5,000 monthly thereafter
until paid in full 166,480
Mortgage payable to Zions Mortgage, (9.5%), monthly payments
of $309, due 04/15 32,151
Mortgage payable to First American Title, (8.25%),
monthly payments of $298, due 10/01 34,873
Mortgage payable to Republic Mortgage, (9.18%),
monthly payments of $6,389, due 285,922
Mortgage payable to The Capital Company, (15%), due 06/97 332,557
Mortgage payable to Barnett Bank, (9.63%), monthly payments
of $4,367, due 07/97 423,213
Mortgage payable to Tucker, (10%), monthly payments of
$471, due 11/04 50,514
Notes payable, Alexander Senkovski Trust (5%) 71,936
Notes payable, David Michael Trust (5%) 92,366
Notes payable, AZ Professional (5%) 15,000
------------
Total 4,270,798
Current portion 1,430,456
Long-term portion $ 2,840,342
==========
Scheduled principal reductions are as follows:
December 31, 1997 $ 1,430,475
December 31, 1998 312,188
December 31, 1999 1,196,247
December 31, 2000 153,344
Thereafter 1,178,544
---------------
$ 4,270,798
<PAGE>
NOTE 6: CAPITALIZED LEASE OBLIGATIONS
The Company leases space for its corporate offices in Salt Lake City for $4,596
per month. The lease is for 10 years and expires May 2004. The Company paid
$15,000 for an option to purchase the building at the end of the lease for
$415,000. A portion of the lease payments apply to the purchase price. The lease
is being treated as a capital lease. Scheduled annual minimum rental commitments
under the capital lease are as follows:
1997 $ 55,158
1998 55,158
1999 55,158
2000 55,158
2001 55,158
Thereafter 325,500
-------------
Total $ 601,290
Less: amounts representing interest (224,280)
-------------
Present value of future minimum
Capital lease payments 377,010
Less: current obligations under
Capital lease (17,591)
-----------------
Long-term capital lease obligation $ 359,419
NOTE 7: FEDERAL INCOME TAXES
At December 31, 1996, the Company had net operating loss carryovers of
approximately $5,290,000. The net operating loss carryovers expire as follows:
Expiration
Loss Year Date Amount
12/31/91 12/31/2006 $ 1,248,000
12/31/92 12/31/2007 229,000
12/31/93 12/31/2008 1,616,000
12/31/94 12/31/2009 71,000
12/31/95 12/31/2010 256,000
12/31/96 12/31/2011 1,870,000
---------
$ 5,290,000
At December 31, 1996, the Company has a capital loss carryover of approximately
$1,150,000, $977,400 of which expires in 1998 and $172,600 expires in 1999..
No benefit resulting from loss carry forwards have been reported in the
financial statements because the Company believes there is at least a fifty
percent (50%) chance that the carry forwards will expire unused. Accordingly,
the tax benefit of the loss carry forward has been offset by a valuation
allowance of the same amount. The expected tax benefit resulting from applying
federal statutory tax rate to the pretax loss differs from amounts reported in
the financial statements because of the increase in valuation allowance. Certain
provisions of the tax law may limit the net operating loss and capital loss
carryovers in the event of a significant change in ownership of the Company.
NOTE 8: REAL ESTATE TAXES PAYABLE
The Company owes real estate taxes and assessments of approximately $368,957
(including penalties and interest) as of December 31, 1996.
Unpaid property taxes and assessments consist of the following:
Canton Plant - Canton, Illinois $ 285,942
202 West 400 South Property - Salt Lake City, Utah 7,296
Pima County Property - Tuscon, Arizona 1,811
Plandome Building - Salt Lake City, Utah 53,665
Glendale Plaza - Salt Lake City, Utah 7,660
Parkersburg Terminal - Parkersburg, West Virginia 853
TAC warehouse 9,952
Other 1.778
$ 368,957
====================
<PAGE>
NOTE 9: DEBENTURES PAYABLE
On September 17, 1996, the Company issued a 6.0% Convertible Debenture with a
face amount of $300,000 (the "Debenture") to Legong Investments, N.V., a
corporation organized under the laws of Curacao, Netherlands Antilles
("Legong"). The Debenture matures on September 17, 1997. The Debenture can be
converted into the Company's Common Stock at any time prior to maturity at the
option of Legong. The conversion price of the Debenture is 70% of the closing
bid prices for the Common Stock during the five days immediately preceding
conversion. At maturity, the Company has the option of paying the face amount of
the Debenture plus accrued interest in either cash or shares of Common Stock in
accordance with the conversion price set forth above. On December 17, 1996,
Legong converted $10,000 of the principal plus accrued interest into 87,220
shares of the Company's Common Stock.
NOTE 10: RELATED PARTY TRANSACTIONS
1. A-Z Professional Consultants, Inc.
During1995 and 1996, the Company completed several transactions with A-Z
Professional Consultants, Inc. ("A-Z"), a beneficial owner of more than 5%
of the Company's common stock. A-Z's sole owner is Allen Wolfson, a control
person of the Company.
Since 1992, A-Z has served as a financial consultant to the Company to
discover and introduce the Company to business opportunities. On May 1,
1995, the Company and A-Z entered into a Settlement Agreement to settle the
unpaid fees and expenses earned by A-Z. Pursuant to this Settlement
Agreement, the Company issued Allen Wolfson, personally, 80,000 shares of
its Common Stock.
On August 30, 1995, the Company and A-Z entered into a one year Consulting
Agreement whereby the Company agreed to again retain A-Z as one of its
primary consultants. Pursuant to this Agreement, the Company issued A-Z
40,000 restricted shares of its Common Stock to A-Z monthly, or a total of
480,000 shares of Common Stock. The 1995 Consulting Agreement expired
according to its own terms on August 31, 1996.
On December 22, 1995, the Company entered into a Stock Option Agreement
with A-Z. Pursuant to the Agreement, the Company granted an option to A-Z
giving A-Z the right to purchase a quantity of shares of the Company's
Common Stock equivalent to 26% of the issued and outstanding shares on the
exercise date. The exercise price of the option is $0.59 per share. The
option was granted to compensate Mr. Wolfson and A-Z for consulting
services rendered to the Company and to provide them an incentive to
perform such services in the future. The granting of the option gives
substantial, indirect control of the Company to Mr. Wolfson.
2. Richard Surber
On September 30, 1994, the Company retained Investment Sanctuary
Corporation, a Utah corporation ("ISC") owned 100% by Richard Surber ("Mr.
Surber"), to provide consulting services. The agreement called for the
Company to pay ISC $20,000 per month effective January 1, 1995, either in
cash or shares of the Company's restricted common stock valued at one-half
of the average between the low bid and ask price to be paid on quarterly
basis. On May 4, 1995 the Company issued 167,000 shares of its common stock
under the Company's 1994 Stock Option Plan as payment under the agreement.
Mr. Surber entered into several Consulting Agreements to provide various
consulting services to clients, with the assistance of the Company's
consultants and certain employees. Payments were made in shares of the
clients' stock, which were later sold providing income to the Company
valued at $134,500.
On December 22, 1995, the Company entered into a Stock Option Agreement
with ISC. Pursuant to the agreement, the Company granted options giving the
right to purchase a quantity of shares of the Company's common stock
equivalent to 25% of the issued and outstanding shares on the exercise
date, with an established exercise price of $0.59 per share. Effective
October 31, 1996, the Company executed a Stock Exchange Agreement with ISC
and Richard Surber pursuant to which the Company acquired 100% outstanding
capital stock of ISC. In addition, ISC's option to purchase 25% of the
Company's Common Stock was canceled. As consideration for the transfer of
ISC and the cancellation of the option, the Company issued to Mr. Surber
1.1 million restricted shares of the Company's Common Stock.
3. Thistle Properties, Inc. - Foreclosure on Canton Property
On August 23, 1994, but effective June 20, 1994, the company entered into a
Real Estate Sales Agreement ("RESA") with Thistle Properties, Inc.
("Thistle"). On the effective date of both the RESA and an amended
<PAGE>
NOTE 10: RELATED PARTY TRANSACTIONS (CONTINUED)
RESA, Richard Surber was an executive officer of Thistle's parent company,
ATC II, Inc.; however, at the time the agreements were actually executed,
Mr. Surber was not an officer or director of ATC II, Inc. and did not have
any authority to approve or disapprove any transactions being contemplated
by ATC II, Inc. or any of its subsidiaries.
On May 4, 1995, the Company served Thistle with a Notice of Default of the
Real Estate Lien Note entered into pursuant to the amended RESA. The
Company subsequently executed a Mutual Release with ATC II and Thistle
effective May 12, 1995. The net effect of the Mutual Release is that
Thistle, which holds title to the Canton Plant, became a wholly-owned
subsidiary of the Company. This resulted in a loss of $562,406. A gain on
the sale of $752,467 had been previously recorded by the Company during the
third quarter of 1994.
NOTE 11: INVESTMENT SECURITIES
Company Shares Amount
ATC II 964,223 $ 1,001
Air Vegas 325,214 1,000
Alaska Glacier 190 1,000
Alpha Solarco 150,000 1,000
AmeriResource Technology 8,113,149 162,263
Applied Technology 97,573 1,400
Area Investment and Development 222,477 1,000
Banyan Mgmt LPU-I 2,000 0
Banyan Mgmt LPU-II 2,000 108
Baseball Properties 20,000 2,600
Basic Natural Resources 600,000 1,000
BRIA Communications 1,614,721 124,637
China Basic 206,000 51,500
Cyber Information 6,668 67
Educational Entertainment 1,000,000 10,000
Elegant Illusions 59,666 122.912
Eurotronics Holdings 112,000 105,280
Global 86,900 1,000
Financial Communications 2,000,000 1,000
Homes for America Holdings 4,030,382 1,200
Hull 1,000,000 1,000
Imperial Casino Resort 1,440,000 1,000
Infotech International 700,000 7,000
Juniper 23,000 2,070
Logos (nka OMAP) 331,394 21,222
NobelTek Products, Inc. 2,500,000 1,000
Novamed 120,000 1,000
Porton 20,000 5,000
Sterling AKG 200 1,000
Terrace Auto 1,000 5,000
Tianrong 932,547 182,840
Topguard 150,000 1,000
United Entertainment 378,100 1,000
Vu Data 4,000 520
Zahav 938,000 5,750
--------------
Total $ 826,370
============
Minus: securities available for sale (649,460)
------------
Investment securities at cost 176,910
<PAGE>
NOTE 11: INVESTMENT SECURITIES (CONTINUED)
Investments in equity securities that have readily determinable fair values are
stated at their market value in accordance with Financial Accounting Standards
("FAS") No. 115. Valuation of other equity security investments is based on
acquisition costs. Markdowns are made to reflect significant impairment in
values. During 1996, unrealized loss from investment securities available for
sale was recorded as $606,234 and permanent decline in value of investment
securities at cost was $447,513.
NOTE 12: NOTES RECEIVABLE
Associated Technologies
On March 23, 1995, the Company entered into an Agreement of Purchase and Sale
with Associated Technologies, Inc. relating to certain equipment. Under the
agreement, Associated Technologies is required to pay the Company $60,000 over a
5 year period. Each $12,000 payment is due on or before March 1 of each year,
with the final payment due in the year 2000. In April 1996, Associated
Technologies made its first payment in the amount of $12,000.
The above receivable is included in the financial statements as follows:
Notes receivable:
Associated Technologies 48,000
$ 48,000
------------
Less current portion 12,000
$ 36,000
===========
NOTE 13: STOCK SUBSCRIPTION RECEIVABLE
On May 31, 1996, the Company entered into a Stock Subscription Agreement with
two offshore entities. The Agreements provided for the offshore entities to
purchase 750,001 shares of the Company's Common Stock for a total of $871,582 in
cash. The Agreements were later canceled due to the fact that the offshore
entities failed to remit payment for the shares. As a result, the Company had no
stock subscription receivable as of December 31, 1996.
NOTE 14: CONTINGENT LIABILITIES
1. Canton, Illinois Property - environmental cleanup
A legal action was filed in September 1993 against the Company seeking the
cleanup of tires and toxic paint drums at the plant in Canton, Illinois. On
September 28, 1995, Illinois Environmental Protection Agency informed the
Company it was rejecting the proposed plan of the Company for tire cleanup
and would send its own contractor to remove the remaining waste tires. The
Company sought relief from this decision from the Circuit Court in Fulton
County. After a hearing on October 10, 1995, the District Court denied any
relief to the Company. Both the Company and the IEPA contractors removed
tires. The State has filed an action before the Illinois Pollution Control
Board seeking to recover $325,398 as the costs incurred to remove the
tires, plus an equal amount as punitive damages. The Company's balance
sheet at December 31, 1996 included an accrued liability in the amount of
$325,398 representing the potential liability associated with this lawsuit.
The Company does not believe that it will be liable for the punitive
damages.
2. Xeta Corporation
Xeta is seeking recovery of funds alleged to have been improperly
transferred to the Company by ATC II, Inc. ("ATC") The amount sought by
Xeta is $116,500, an amount equal to the funds transferred by ATC to the
Company for consulting services and other expenses incurred for the benefit
of ATC. Xeta's Motion for Summary Judgment has been granted and the Company
is required to pay Xeta $116,500, which has been accrued on the Company's
Balance Sheet as of December 31, 1996. The Company is in the process of
appealing this case before the Tenth Circuit Court of Appeals.
<PAGE>
NOTE 14: CONTINGENT LIABILITIES (CONTINUED)
3. Key L.C. Corporation
Key L.C. Corporation ("Key") alleges that the Company violated the Exchange
Act of 1934 in the sale of the Company's Common Stock to Key. Damages are
sought in the amount of $291,682, the purchase price of 214,900 shares of
the Company's Common Stock. The Company has filed a Motion to Dismiss the
Complaint for failure to state a cause of action under the Exchange Act of
1934 and the Private Securities Litigation Reform Act. As a result, the
Company does not believe that it will be liable for the damages sought.
NOTE 15: OPERATING LEASE COMMITMENTS
The Company is obligated under an operating leaseto pay $5,663 per month on the
one building it rents. The lease is for three years expiring August 1998. The
Company has an option to purchase the building at the end of the lease term.
Scheduled rent payments are as follows:
December 31, 1997 $ 67,956
December 31, 1998 45,304
-----------
$ 113,260
NOTE 16: STOCK OPTION PLANS AND AGREEMENTS
During 1994, the Company established a new stock option plan for its employees
and consultants. Each option issued under the plan has a term of five years and
an exercise price of either the average of the closing bid and ask price for the
Stock over the 20 day trading period immediately prior to the date of grant or
the bid price on the date of grant as determined by the Board of Directors or an
Authorized Committee. Under the plan, up to 500,000 shares can be issued. In
1994, 203,584 shares were issued under the plan. In 1995, the Company issued the
balance of the shares under the plan.
On December 22, 1995, the Company entered into a Stock Option Agreement with A-Z
Professional Consultants. Pursuant to the agreement, the Company granted options
giving the right to purchase a quantity of shares of the Company's common stock
equivalent to 26% of the issued and outstanding shares on the exercise date,
with an established exercise price of $0.59 per share.
On December 22, 1995, the Company entered into a Stock Option Agreement with
Investment Sanctuary Corporation ("ISC"). Pursuant to the agreement, the Company
granted an option giving the right to purchase a quantity of shares of the
Company's common stock equivalent to 25% of the issued and outstanding shares on
the exercise date, with an established exercise price of $0.59 per share. The
option was canceled on October 31, 1996,when the Company executed a Stock
Exchange Agreement with ISC and Richard Surber. Pursuant to the Agreement, the
Company acquired 100% outstanding capital stock of ISC and issued 1.1 million
shares of the Company's Common Stock to Richard Surber.
In January 1996, the Company established a Stock Option Plan (the "1996 Plan")
for its employees and consultants. The 1996 Plan was registered with the SEC
pursuant to a Form S-8 Registration Statement. Under the 1996 Plan, options to
purchase 1,000,000 shares of the Company's Common Stock may be granted. The 1996
Plan was designed to provide compensation and incentive bonuses to the Company's
employees and consultants who, due to current financial constraints of the
Company, cannot be adequately compensated in cash. The Company has granted
options to purchase all shares registered under the 1996 Plan.
The following table summarizes information about fixed stock options to a
consultant outstanding at December 31, 1996:
<PAGE>
<TABLE>
<CAPTION>
NOTE 16: STOCK OPTION PLANS AND AGREEMENTS (CONTINUED)
Outstanding Options Exercisable Options
Number Weighted- Number Weighted-average
Outstanding Remaining Average Exercisable Exercise
Exercise Price at 12/31/96 Contractual Life Exercise Price at 12/31/96 Price
- -------------- ------------ ---------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$.60 50,000 10 years $ .60 50,000 $ .60
$4.44 104,472 2 years $4.44 104,472 $4.44
-------
Total 154,472
</TABLE>
If the Company had used the fair value based method of accounting for its stock
option plan, as prescribed by Statement of Financial Accounting Standards No.
123, compensation cost in net loss for the year ended December 31, 1996 would
not have changed.
NOTE 17: LOSS ON FORECLOSURE
On August 23, 1994, but effective June 20, 1994, the Company entered into a Real
Estate Sales Agreement ("RESA") with Thistle Properties, Inc. ("Thistle"). On
the effective date of both the RESA and an amended RESA, Richard Surber was an
executive officer of Thistle's parent company, ATC II, Inc., although at the
time the agreements were actually executed, Mr. Surber was not an officer or
director of ATC II, Inc. and did not have any authority to approve or disapprove
any transactions being contemplated by ATC II, Inc. or any of its subsidiaries.
On May 4, 1995 the Company served Thistle with a Notice of Default of the Real
Estate Lien Note entered into pursuant to the amended RESA. The Company
subsequently executed a Mutual Release with ATC II and Thistle effective May 12,
1995. The net effect of the Mutual Release is that Thistle, which holds title to
the Canton Plant, is now a wholly-owned subsidiary of the Company. This resulted
in a loss of $562,406. A gain on the sale of $752,467 had been previously
recorded by the Company during the third quarter of 1994.
ANDERSEN ANDERSEN & STRONG, L. C.
Certified Public Accountants and Business Consultants
941 East 3300 South, Suite 202
Salt Lake City, UT 84106
Member SEC Practice Section of the AICPA
Telephone: (801)486-0096
Fax: (801)486-0098
E-Mail: K Andersen @msn.com
Board of Directors and Shareholders
CyberAmerica Corporation
Salt Lake City, Utah
Our examinations of the basic financial statements presented in the preceding
section of this report were made primarily to form an opinion on such financial
statements taken as a whole. The additional information, contained in the
following pages, is not considered essential for the fair presentation of the
financial position of CyberAmerica Corporation and Subsidiaries, the results of
their operations or cash flows in conformity with generally accepted accounting
principles. The following information consisting of Schedule V and Schedule VI
is included to comply with reporting requirements of the Securities and Exchange
Commission. Such data was subjected to the audit procedures applied in the
examination of the basis financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ Andersen Andersen & Strong
Salt Lake City, Utah
April 14, 1997
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Balance at Balance
Beginning Additions at the end
of Period at Cost Retirement of Period
Year ended December 31, 1995:
<S> <C> <C> <C> <C>
Land $ 617,190 $ 1,734,150 $ 104,840 $ 2,246,500
Leasehold improvements 26,698 - 0 - - 0 - 26,698
Building and Structures 2,233,401 399,078 114,155 2,518,324
Machinery and Equipment 500,000 98,374 - 0 - 598,374
Furniture and Fixtures 93,786 26,728 2,401 118,113
---------------- ----------------- ---------------- ------------------
$ 3,471,075 $ 2,258,330 $ 221,396 $ 5,508,009
=============== ================ =============== =================
Year ended December 31, 1996:
Land $ 2,246,500 $ 1,219,018 $ - 0 - $ 3,465,518
Leasehold improvements 26,698 20,589 - 0 - 47,287
Building and Structures 2,518,324 1,157,040 - 0 - 3,675,364
Machinery and Equipment 598,374 26,845 - 0 - 625,219
Furniture and Fixtures 118,112 207,549 - 0 - 325,661
---------------- ----------------- ------------------ ------------------
$ 5,508,008 $ 2,631,047 $ - 0 - $ 8,139,049
=============== ================ ================= =================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VI - ACCUMULATED DEPRECIATION OF
PROPERTY, PLANT AND EQUIPMENT
Balance at Balance
Beginning Additions at the end
of Period at Cost Retirement of Period
Year ended December 31, 1995:
<S> <C> <C> <C> <C>
Land $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Leasehold Improvements 3,949 (1) 4,428 - 0 - 8,377
Building and Structures 150,943 (2) 262,827 906 412,864
Machinery and Equipment 113,750 (3) 88,580 - 0 - 202,330
Furniture and Fixtures 9,655 14,895 372 24,178
---------------- ----------------- ---------------- ------------------
$ 278,297 $ 370,730 $ 1,278 $ 647,749
=============== ================ =============== =================
Includes amounts acquired from subsidiary:
(1) $154,943
(2) 13,339
(3) 80
$168,362
Year ended December 31, 1996:
Land $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Leasehold Improvements 8,377 (1) 4,763 - 0 - 13,140
Building and Structures 412,864 (2) 178,003 - 0 - 590,867
Machinery and Equipment 202,330 (3) 95,591 - 0 - 297,921
Furniture and Fixtures 24,178 42,631 - 0 - 66,809
---------------- ----------------- ------------------ ------------------
$ 647,749 $ 320,988 $ - 0 - $ 968,737
=============== ================ ================= =================
Included amounts acquired from subsidiary:
(1) $65,759
(2) 7,832
$73,591
</TABLE>
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On December 30, 1995, the Company received the resignation of its
independent auditor Smith & Company.
Neither of Smith & Company's reports on the Company's financial statements
for the past two years contained an adverse opinion or disclaimer of opinion,
nor were they modified as to uncertainty, audit scope or accounting principles.
However, the auditor's report prepared by Smith & Company included a single
sentence expressing Smith & Company's doubt as to the Company's ability to
continue as a going concern.
There were no disagreements between Smith & Company and the Company on any
matter of accounting principles, financial statement disclosure or auditing
scope or procedure during the two most recent fiscal years and any subsequent
period.
On January 2, 1996, the Company's board of directors engaged Andersen,
Andersen & Strong, L.C. to serve as the Company's new independent auditors.
Andersen, Andersen & Strong is located at:
Andersen, Andersen & Strong, L.C.
Certified Public Accountants and Business Consultants
941 East 3300 South, Suite 202
Salt Lake City, Utah 84106
There were no consultations with the newly engaged accountant during the
last two fiscal years or subsequent interim period regarding any of the
information in Items 304(a)(2)(i) or 304(a)(2)(ii).
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
-------------------------------------------------------------------------------
Directors, Executive Officers and Control Persons
-------------------------------------------------------------------------------
Name Age Position(s) and Office(s)
---------------------------- ------- ------------------------------------------
Richard D. Surber 24 President, Chief Executive Officer
and Director
---------------------------- ------- ------------------------------------------
Philip Lamb 38 Director
--------------------------- ------- ------------------------------------------
Adrienne Bernstein 52 Director
--------------------------- ------- -------------------------------------------
Allen Wolfson 51 Control Person
---------------------------- ------- -----------------------------------------
Richard D. Surber was appointed to the Company's board of directors in June
1992 and was appointed as its chief executive officer in March 1994. He was
appointed as the Company's president on May 6, 1996 and served a prior term as
the Company's president from March 1994 to August 1995. Mr. Surber was the
Company's secretary from June 1992 to March 1994. Since 1991, Mr. Surber has
been a professional consultant for various public and private companies. Mr.
Surber is a graduate of the University of Utah with B.S. in Finance and is
currently attending the University of Utah, College of Law. Mr. Surber is also
the President and sole director of A-Z Professional Consultants, Inc., a
significant beneficial owner of the Company's Common Stock ("A-Z"), and the
nephew of Allen Wolfson, a control person of the Company. Mr. Surber is a
director of several private corporations. For more information on Mr. Surber,
see "Item 12 - Certain Relationships and Related Transactions."
<PAGE>
Philip Lamb was appointed to the board of directors in January 1995. From
October 1994 until January 1995, Mr. Lamb was an employee of the Company who was
responsible for obtaining financing for new purchases and other funding needed
by clients of the Company. Since January 1995, Mr. Lamb has been employed with
Green-Tree Financial Services as the market representative for Utah. From 1993
to 1994, Mr. Lamb worked as a Loan Officer for Pacific Rim Financial Services.
Prior to joining Pacific Rim, Mr. Lamb had been a Branch Area Manager for Zions
First National Bank in Salt Lake City, Utah. His duties included managing a
group of branches for the bank, supervising all lending operations at his branch
and managing day to day operations of the bank. Mr. Lamb is also the owner of
Mountain West Management, a rental property management firm in Orem, Utah.
Adrienne Bernstein was appointed to the board of directors in September
1996. From 1988 to 1994, Ms. Bernstein was the assistant director of the human
resources department for the Love Stores, a chain of retail health and beauty
stores. In this capacity, Ms. Bernstein was responsible for hiring and training
all employees and for preparing management and employee seminars. Prior to her
position with the Love Stores, Ms. Bernstein served as a vice president for
Leucadia National Corporation, a publicly traded company specializing in
finance, insurance, and manufacturing. In this capacity, Ms. Bernstein's primary
emphasis involved real estate management and sales activities.
Allen Wolfson has never been named as an officer or director of the
Company. He does, however, have significant influence and "control" (as defined
in Rule 12b-2 of the Securities Exchange Act of 1934) over the affairs of the
Company and is the sole owner of A-Z. A-Z is the holder of an option to purchase
a quantity of shares of the Company's Common Stock equivalent to 26% of the
total number issued and outstanding on the date of exercise. For more
information on this option, see "Item 12 - Certain Relationships and Related
Transactions." Mr. Wolfson is the uncle of Richard Surber, the Company's chief
executive officer, president and director.
Mr. Wolfson obtained a B.S. in Marketing from the University of Southern
Florida in 1968 and in 1970 he graduated with an M.A. in Distributive Vocational
Education. Mr. Wolfson has worked 59 credit hours toward an M.B.A. from Troy
State University in Montgomery, Alabama. He has also been a licensed general
contractor and a real estate agent and developer. Mr. Wolfson has been the sole
owner of A-Z Professional Consultants, Inc. since April 11, 1990 and has been a
professional consultant for various public and private companies for 20 years.
In 1986, Mr. Wolfson was convicted of violating 18 U.S.C. ss.371; 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, Tampa Division (the "Florida Court").
Mr. Wolfson was on probation for these offenses until May 1995. In February
1995, a complaint was filed with the Florida Court alleging that Mr. Wolfson had
violated the terms of the probation. The Florida Court changed the jurisdiction
of the matter 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, Senior U.S. District Court Judge Bruce S. Jenkins 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 prison sentence, suspended pursuant to additional
terms of probation. On April 11, 1996, the Utah Court Judge signed a written
order containing new probation terms that are effective for three years. For
more information on Mr. Wolfson, see "Item 12 - Certain Relationships and
Related Transactions."
On October 9, 1996, Allen Wolfson was charged with securities law
violations. This criminal matter was filed in the U.S. District Court for the
Southern District of New York. The complaint alleges that Mr. Wolfson violated
Section 10b of the Securities Exchange Act of 1934 by making payment to an
undercover agent of the Federal Bureau of Investigation, who was posing as a
broker, for the purchase of stock in an unaffiliated corporation. As of the date
of this filing, no court date has been set with respect to the criminal charges.
On October 10, 1996, the Securities and Exchange Commission initiated
administrative proceedings against Wolfson. This administrative action is
premised upon the same allegations contained in the complaint pending in the
Southern District of New York. An administrative hearing has been scheduled for
May 12, 1997. The Company has been informed that Mr. Wolfson denies these
allegations and intends to vigorously defend against both these actions. The
Company had a consulting agreement with A-Z Professional Consultants, Inc., a
consulting entity owned and controlled by Mr. Wolfson. The agreement expired in
August 1996 and has not yet been renewed. Mr. Wolfson's relationship with the
Company, aside from his ownership of an option to purchase 26% of the Company's
Common Stock, is therefore currently informal.
<PAGE>
<TABLE>
<CAPTION>
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company,
the Company is not aware of any person who at any time during the fiscal year
ended December 31, 1996 was a director, officer, or beneficial owner of more
than ten percent of the Common Stock of the Company, and who failed to file, on
a timely basis, reports required by Section 16(a) of the Securities Exchange Act
of 1934 during such fiscal year except as specified below. Adrienne Bernstein
failed to file a Form 3 within 10 days of being appointed as an officer and
director of the Company. The Company has received notification that Ms.
Bernstein is currently in the process of filing this form.
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation
No compensation in excess of $100,000 was awarded to, earned by, or paid to
any executive officer of the Company during the years 1994 to 1996. The
following two tables and the accompanying notes provide summary information for
each of the last three fiscal years concerning cash and non-cash compensation
paid or accrued by the Company to Alan D. Hansen, the Company's Chief Executive
Officer until the February 1994, and Richard Surber, the Company's chief
executive officer from March 1994 to present.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Year Salary Bonus Compensation Award(s) Options payouts Compensation
Position ($) ($) ($) ($) SARs(#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard Surber 1996 36,923 - - - - - -
Current CEO 1995 30,000 - - - - - 41,677(1)
1994 21,000 - - 50,000 - - -
Alan D. Hansen 1994 - - - 54,000 15,000 - -
Former President
</TABLE>
(1) This compensation was paid to Mr. Surber, personally, in the form of
87,000 shares of Common Stock as consideration for consulting services
rendered by Mr. Surber pursuant to a consulting agreement between the
Company and Investment Sanctuary Corporation, a Utah corporation, of
which Mr. Surber is president and sole director and shareholder. The
shares issued to Mr. Surber were issued pursuant to a Form S-8
Registration Statement and Reoffer Prospectus filed with the Securities
and Exchange Commission on May 9, 1995. For more information, see "Item
12 - Certain Relationships and Related Transactions."
____________________________________
On December 22, 1995, the Company executed a Stock Option Agreement with
Investment Sanctuary Corporation ("ISC"), a Utah corporation whose president,
director and sole shareholder is Richard Surber, the Company's chief executive
officer. Pursuant to the Stock Option Agreement, ISC received an option to
purchase a quantity of the Company's Common Stock sufficient to give ISC a 25%
ownership interest in the total Common Stock issued and outstanding on the date
of exercise. The exercise price of the options was $0.59 per share payable in
either a certified or bank check payable to the Company, or other consideration
deemed acceptable by the Company's board of directors. Effective October 31,
1996, the Company executed an agreement with ISC and Richard Surber pursuant to
which the Company acquired 100% of the outstanding capital stock of ISC. As
further consideration, ISC agreed to surrender the option to purchase 25% of the
Company's Common Stock. Accordingly, neither Mr. Surber nor ISC directly own any
options to purchase shares of Common Stock.
<PAGE>
<TABLE>
<CAPTION>
On December 22, 1995, the Company also executed a Stock Option Agreement
with A-Z Professional Consultants, Inc. ("A-Z"), a Utah corporation whose sole
officer and director is Richard Surber, the Company's chief executive officer.
A-Z is wholly owned by Allen Wolfson, a control person of the Company and the
uncle of Mr. Surber. Pursuant to the Stock Option Agreement, A-Z received an
option to purchase a quantity of the Company's Common Stock sufficient to give
A-Z a 26% ownership interest in the total Common Stock issued and outstanding on
the date of exercise. The exercise price of the option is $0.59 per share
payable in either a certified or bank check payable to the Company, or other
consideration deemed acceptable by the Company's board of directors. The
following table discloses the value of this option, which has not yet been
exercised, as of the end of the fiscal year 1996. On December 31, 1996, the
market price of the Company's Common Stock was below the $0.59 exercise price of
the option. A-Z is included as a Named Executive Officer by virtue of Mr.
Surber's positions as an officer and director of A-Z. However, Mr. Surber
disclaims beneficial ownership of the shares represented by this option.
Number of securities Value of unexercised
Shares acquired underlying unexercised in the money options
Name on exercise of Value realized option at fiscal year at fiscal year end
---- ------------ -------------- ---------------------- ---------------
option end
------ ---
<S> <C> <C> <C> <C>
A-Z Professional Consultants, Inc. -0- -0- 4,302,776 -0-
</TABLE>
During the fiscal year ended December 31, 1993, the Company established a
Stock Option Plan ("the 1993 Plan") for its employees and consultants. Under the
1993 Plan, options to purchase 6,000,000 shares of Common Stock were allowed to
be granted. The 1993 Plan was registered with the Securities and Exchange
Commission ("SEC") pursuant to a Form S-8 Registration Statement. During the
year ended December 31, 1994, the Company established a Stock Option Plan ("the
1994 Plan") for its employees and consultants. The 1994 Plan was registered with
the SEC pursuant to a Form S-8 Registration Statement. Under the 1994 Plan,
options to purchase 500,000 shares of Common Stock were allowed to be granted.
Richard Surber was granted options to purchase 87,000 shares of Common Stock
under the 1994 Plan. For more information on this grant, see Note 1 accompanying
the Summary Compensation Table above. All shares included in the 1993 and 1994
Plans have been issued.
In January 1996, the Company established a Stock Option Plan (the "1996
Plan") for its employees and consultants. The 1996 Plan was registered with the
SEC pursuant to a Form S-8 Registration Statement. Under the 1996 Plan, options
to purchase 1,000,000 shares of the Company's Common Stock were granted. The
1996 Plan was designed to provide compensation and incentive bonuses to the
Company's employees and consultants who, due to financial constraints of the
Company, could not be adequately compensated in cash. The Company has granted
options to purchase all shares registered under the 1996 Plan. No options to
purchase Common Stock were granted to Named Executive Officers under the 1996
Plan.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the ownership
of the Company's Common Stock as of March 31, 1997, with respect to (i) each
person known to the Company to be the beneficial owner of more than five percent
of the Company's Common Stock; (ii) all directors; and (iii) directors and
executive officers of the Company as a group. For purposes of determining the
beneficial owners of more than five percent of the Common stock, as well as the
Percent of Class column below, the Company has assumed that 15,701,801 shares of
Common Stock were issued and outstanding on March 31, 1997. This number reflects
the 9,725,389 shares of Common Stock actually issued and outstanding on March
31, 1997, the 4,082,468 shares deemed to be beneficially owned by A-Z
Professional Consultants as a result of a December 22, 1995 Stock Option
Agreement (see Note 1 below) and the 1,893,944 shares deemed to be beneficially
owned by Legong Investments as a result of a 6.0% Convertible Debenture issued
by the Company (see Note 2 below). The notes accompanying the information in the
table below are necessary for a complete understanding of the figures provided
below.
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of
Title of Class Name and Address of Beneficial Owner Beneficial Ownership Percent of class
<S> <C> <C> <C>
Common Stock A-Z Professional Consultants, Inc. 4,082,468(1) 26.0%
($0.001 par value) 268 West 400 South, Suite 306
Salt Lake City, Utah 84101
Common Stock Legong Investments N.V. 2,055,344(2) 13.1%
($0.001) par value International Trade Center
RM 126 Piscadera Bay
Curacao. Netherlands Antilles
Common Stock Philip Lamb, Director 267 *
($0.001) par value 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Common Stock Adrienne Bernstein, Director 37,037 0.2%
($0.001) par value 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Common Stock Richard D. Surber, Director 5,182,468(3) 33.0%
($0.001) par value 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Common Stock Directors and Executive Officers as 5,219,772(3) 33.2%
($0.001) par value a Group (3 individuals)
</TABLE>
* Ownership represents less than 0.1% of the Common Stock.
(1) Includes 360,000 shares currently registered in the name of A-Z Professional
Consultants. Includes an additional 3,722,468 shares considered to be
beneficially owned by A-Z as a result of the terms of a Stock Option Agreement
dated December 22, 1995. Pursuant to this Agreement, A-Z was granted an option
to purchase a quantity of shares equivalent to 26% of the Company's issued and
outstanding Common Stock on the date the option is exercised. The number of
shares appearing above represents the number of shares A-Z would have received
upon exercise of this option on March 31, 1997. The number also assumes that
Legong Investments had fully converted its Convertible Debenture (see Note 2
below) for purposes of determining the number of shares necessary to give A-Z a
26% ownership interest in the Company.
(2) On September 17, 1996, the Company issued a 6.0% Convertible Debenture with
a face amount of $300,000 (the "Debenture") to Legong Investments pursuant to an
Offshore Securities Subscription Agreement. The Debenture can be converted into
the Company's Common Stock at any time prior to maturity at the option of
Legong. The conversion price of the Debenture is seventy percent (70%) of the
average closing bid prices for the Common Stock during the five days immediately
proceeding conversion. The Debenture matures on September 16, 1997. At maturity,
the Company has the option of paying the face amount of the Debenture, plus
accrued interest, in either cash or by issuing shares of Common Stock in
accordance with the conversion price set forth above. As of March 31, Legong had
converted $20,000 of the face amount of the debenture into 161,390 shares of
Common Stock. The number shown above includes these 161,390 shares, as well as
the number of shares Legong would have received if it fully converted the
Debenture on March 31, 1997.
(3) Includes 1,100,000 shares registered in the name of Mr. Surber. Also
includes 4,082,468 shares deemed to be beneficially owned by A-Z Professional
Consultants. Mr. Surber is the president and sole director of A-Z. Mr. Surber
disclaims beneficial ownership of these shares.
__________________________________
Changes in Control
On December 22, 1995, the Company entered into a Stock Option Agreement
with A-Z Professional Consultants, Inc., a Utah corporation ("A-Z"). A-Z's sole
shareholder is Allen Wolfson, a control person of the Company. A-Z's sole
officer and director is Richard Surber, the Company's chief executive officer,
president and director. For more information on these individuals, see "Item 9 -
Directors, Executive Officers, Promoters, and Control Persons; Compliance with
Section 16(a) of the Exchange Act." Pursuant to the Agreement, the Company
granted an option to A-Z giving A-Z the right to purchase a quantity of shares
of the Company's Common Stock equivalent to 26% of the issued and outstanding
shares on the exercise date. The option can be exercised in full or in part in
accordance with the terms of the Agreement and any Stock Option Plan the Company
may have in effect at the time of exercise. The exercise price of the option is
$0.59. The Option was granted to compensate Allen Wolfson and A-Z for consulting
services rendered to the Company as well as to provide incentive for them to
continue to perform such services for the Company. While A-Z and Mr. Surber may
already be deemed to possess a controlling interest the Company, the exercise of
the option may result in further a shift of control in the Company to those
entitites.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Allen Wolfson
During the last two years, the Company has completed several transactions
with A-Z Professional Consultants, Inc., a Utah corporation whose sole
shareholder is Allen Wolfson ("A-Z"). Mr. Wolfson is deemed to be a "control
person" of the Company (as that term is defined in Rule 12b-2 promulgated under
the Securities Exchange Act of 1934) by virtue of his indirect ownership of an
option to purchase a quantity of shares sufficient to give Mr. Wolfson a 26%
interest in the Company on the day such option is exercised. For more
information on Mr. Wolfson, see "Item 9 - Directors, Executive Officers,
Promoters and Control Persons; Compliance with Section 16(a) of the Exchange
Act." Richard Surber, the Company's chief executive officer, president and
director, is also the president and sole director of A-Z. Mr. Surber is the
nephew of Allen Wolfson. By virtue of his positions with A-Z, Mr. Surber may be
deemed to have an indirect interest in transactions with A-Z.
Since 1992, A-Z has served as a financial consultant to the Company whose
primary role has been to discover for and introduce the Company to business
opportunities. On May 1, 1995, the Company and A-Z entered into a Settlement
Agreement to settle the fees and expenses earned and incurred by A-Z as a result
of an Amended Management & Consulting Contract executed between the Company and
A-Z on June 1, 1994. For information on the Amended Management & Consulting
Contract, see the Company's Form 10-KSB for fiscal year ended December 31, 1995.
Pursuant to this Settlement Agreement, the Company issued Allen Wolfson,
personally, 80,000 shares of its Common Stock. On August 30, 1995, the Company
and A-Z entered into a one year Consulting Agreement whereby the Company agreed
to again retain A-Z as one of its primary consultants. Pursuant to the 1995
Agreement, the Company issued 40,000 restricted shares of its Common Stock to
A-Z monthly, or a total of 480,000 shares of Common Stock. The 1995 Consulting
Agreement expired according to its own terms on August 31, 1996 and has not been
renewed.
On December 22, 1995, the Company entered into a Stock Option Agreement
with A-Z. Pursuant to the Agreement, the Company granted an option to A-Z giving
A-Z the right to purchase a quantity of shares of Common Stock equivalent to 26%
of the issued and outstanding shares on the exercise date. The exercise price of
the option is $0.59 per share. The option can be exercised in full or in part in
accordance with the terms of the Agreements and any Stock Option Plan the
Company may have in effect at the time of exercise. Notice must be delivered to
the Company setting forth the number of shares to be optioned together with
either: (a) a certified check or bank check payable to the Company; or (b) other
consideration acceptable to the Company, which consideration shall be approved
by the board of directors of the Company, with the exclusion of a promissory
note, which shall not be acceptable. The option was granted to compensate Mr.
Wolfson and A-Z for consulting services rendered to the Company and to provide
them an incentive to perform such services in the future. The granting of the
option gives substantial, indirect control of the Company to Mr. Wolfson.
During the fiscal year ended December 31, 1996, Mr. Wolfson advanced a
total of $191,512 to the Company pursuant to an unsecured demand note bearing an
interest rate of 24% per annum. The Company repaid a total of $40,000 during the
fiscal year. Advances made by Mr. Wolfson during the fiscal year ended December
31, 1995 totaled $9,000.
A-Z also owns a 60% interest in Wasatch Capital Corporation, a Utah
corporation whose president and sole director is Richard Surber. On December 30,
1994, the Company entered into a Stock Purchase and Debt Settlement Agreement
pursuant to which the Company advanced $208,702 to Wasatch. The funds advanced
to Wasatch enabled the latter to exercise an option to purchase real estate
located at 55-57, 61-65 West 100 South, Salt Lake City, Utah (the
"Wallace-Bennett Building"). For more information on the Wallace-Bennett
Building, see "Item 2 - Description of Properties." Throughout 1995, the Company
advanced an additional $67,849 to Wasatch toward improvements to be made on the
Wallace-Bennett Building. In exchange for its advancements, the Company accepted
a 20% interest in Wasatch. The Company's investment is secured by the
Wallace-Bennett Building and Wasatch is not allowed to dilute the Company's
interest in Wasatch. Wasatch is further prohibited from leasing, exchanging or
encumbering the Bennett Building in any way without the Company's express
approval. By virtue of A-Z's ownership of 60% of Wasatch, Mr. Wolfson is deemed
to have a material, beneficial interest in these transactions. By virtue of his
position as an officer and director of Wasatch, Mr. Surber may also be deemed to
have a material, beneficial interest in these transactions.
<PAGE>
Transactions involving Richard Surber
Until October 31, 1996, Investment Sanctuary Corporation, a Utah
corporation ("ISC"), was a Subchapter S Corporation (as that term is defined in
ss. 1371 of the Internal Revenue Code of 1986, as amended) whose sole
shareholder, officer and director was Richard Surber, the Company's president,
chief executive officer and director. ISC has served as a consultant to the
Company for approximately the past three years. Because of Mr. Surber's position
as an officer and director of both the Company and ISC, Mr. Surber is deemed to
have had a material, beneficial interest in the following transactions.
On September 30, 1994, the Company retained ISC to provide consulting
services for the Company. The Consulting Agreement called for the Company to pay
ISC $20,000 per month either in cash or shares of the Company's restricted
Common Stock, valued at one-half of the average bid and ask prices. On May 4,
1995 the Company, A-Z, ISC, Richard D. Surber and Allen Z. Wolfson entered into
an Assignment and Acknowledgment (the "Assignment"). The Assignment related to
services ISC had rendered to the Company between January and April 1995 pursuant
to the September 30, 1994 Agreement. ISC assigned all rights to fees from the
Company to Richard Surber and Allen Z. Wolfson, the primary consultants who had
performed consulting services for the Company on behalf of ISC, personally.
Pursuant to the Assignment, the Company agreed to issue 167,000 shares of its
Common Stock under the Company's 1994 Stock Option Plan. On May 9, 1995, the
Company issued Mr. Surber 87,000 shares and Mr. Wolfson 80,000 shares. The
Assignment settled all fees payable to Mr. Surber under the September 30, 1994
Consulting Agreement and that Agreement was thereby terminated.
On December 22, 1995, the Company entered into a Stock Option Agreement
with ISC pursuant to which the Company granted ISC an option to purchase a
quantity of Common Stock sufficient to give ISC a 25% ownership interest in
Common Stock on the date the option was to be exercised. The exercise price of
the option was set at $0.59 per share. This option was to be exercised in full
or in part in accordance with the terms of the Agreement any stock option plan
in effect at the time of exercise. The option was granted to compensate Mr.
Surber and ISC for consulting services rendered to the Company and to encourage
them to continue to perform such services in the future.
Effective October 31, 1996, the Company executed a Stock Exchange Agreement
with ISC and Richard Surber pursuant to which the Company acquired 100% of the
outstanding capital stock of ISC. Pursuant to the Agreement, ISC's option to
purchase 25% of the Company's Common Stock was also canceled. As consideration
for the transfer of ISC and the cancellation of the option, the Company issued
to Mr. Surber 1.1 million restricted shares of the Company's Common Stock. At
the time of the Agreement, the only asset of ISC was a 50% ownership interest in
the sixth floor of a building located at 68 South Main Street, Salt Lake City,
Utah known as the McIntyre Building. On November 20, 1996, ISC, then wholly
owned by the Company, sold its interest in the McIntyre Building to an
unaffiliated purchaser for $91,270. Based upon the net equity in ISC prior to
the Stock Exchange Agreement and the price of the Company's Common Stock on
October 21, 1996, the Company valued the transaction with Mr. Surber at $49,500.
The Company's disinterested directors approved this transaction.
<PAGE>
On May 4, 1996, Mr. Surber advanced $81,000 to the Company evidenced by a
promissory note in the amount of 85,844.78. Under the note, the Company was
required to repay the principal and interest due under the note by December 31,
1996. On March 25, 1997, Mr. Surber agreed to extend the payment date on the
note until May 15, 1997. Interest accrues under the note at a rate of 10%. As of
December 31, 1996, $49,801 of principal and interest remained due under the
note.
ITEM 13. 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 beginning on page 28 of this
Form 10-KSB, which is incorporated herein by reference.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ended December 31, 1996. However, on March 12, 1997, the
Company filed a Form 8-K disclosing the Company's decision to
discontinue the operations of its wholly-owned subsidiary, CyberMalls,
Inc.
[THIS SPACE LEFT INTENTIONALLY BLANK]
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 15th day of April 1997.
CyberAmerica Corporation
/s/ Richard D. Surber
Richard D. Surber, President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
/s/ Richard D. Surber President, Chief Executive Officer April 15, 1997
- --------------------- and Director
Richard D. Surber
/s/ Susan S. Waldrop Manager of Accounting Department April 15, 1997
- --------------------
Susan S. Waldrop
/s/ Philip Lamb
- ---------------------- Director April 15, 1997
Philip Lamb
/s/ Adrienne Bernstein
- ----------------------- Director April 15, 1997
Adrienne Bernstein
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE DESCRIPTION
NO. NO.
2 * Articles of Merger of The Canton Industrial Corporation
(an Ohio corporation) into The Canton Industrial
Corporation (a Nevada corporation), filed in Nevada on
May 3, 1993 (Incorporated by reference from Exhibit No.
2 of the Company's Form 10-KSB for the year ended
December 31, 1993).
3(i) * Articles of Incorporation of the Company (note that
these were amended by the Articles of Merger
constituting Exhibit 2 to this Form 10-KSB).
(Incorporated herein by reference from Exhibit No. 3(i)
to the Company's Form 10-KSB for the year ended December
31, 1993).
3(ii) * By-Laws of the Company, as amended. (Incorporated herein
by reference from Exhibit 3(ii) of the Company's Form 10
KSB for the year ended December 31, 1995.)
4(a) * Form of certificate evidencing shares of "Common Stock"
in the Company. (Incorporated from Exhibit 4(a) to the
Company's Annual Report on Form 10-KSB for the year
ended December 31, 1994).
4(b) * Form of certificate evidencing shares of "Preferred"
stock in the Company. (Incorporated herein by reference
from Exhibit No. 4(b) to the Company's Form 10-KSB for
the year ended December 31, 1993).
MATERIAL CONTRACTS
10(i)(a) 59 Real Estate Purchase Contract dated January 28, 1997,
between the Company and Durband Properties, LC.
10(i)(b) 66 Real Estate Purchase Agreement, dated February 7, 1997,
between the Company and ANA Development, LC.
10(i)(c) 75 Stock Exchange Agreement dated October 31, 1996, between
the Company and Investment Sanctuary Corporation, a Utah
corporation and Richard D. Surber, an individual.
10(i)(d) * Lease Agreement dated March 9, 1996, between the Oasis
Services Management Corporation and William and Pamela
Wiegand. (Incorporated herein by reference from Exhibit
No. 10(i)(a) to the Company's Form 10 QSB for the period
ended March 31, 1996.)
10(i)(e) * Security Agreement dated March 9, 1996, between Oasis
Services Management Corporation and William and Pamela
Wiegand. (Incorporated herein by reference from Exhibit
No. 10(i)(b) to the Company's Form 10 QSB for the period
ended March 31, 1996.)
<PAGE>
10(i)(f) * Promissory Note dated March 9, 1996, made by William and
Pamela Wiegand in favor of Oasis Services Management
Corporation. (Incorporated herein by reference from
Exhibit No. 10(i)(c) to the Company's Form 10 QSB for
the period ended March 31, 1996.)
10(i)(g) * Agreement of Exchange of Stock signed on April 9, 1996,
by and between CyberAmerica Corporation and Terrace Auto
Supercenter. (Incorporated herein by reference from
Exhibit No. 10(i)(c)a to the Company's Form 10 QSB for
the period ended June 30, 1996.)
10(i)(h) * Order of the Court involving Plaintiffs, Canton
Industrial Corporation and Canton Industrial Corporation
of Salt Lake City and Defendants, KLH Engineering sign
by Judge Tena Campbell and effective July 23, 1996.
(Incorporated herein by reference from Exhibit No. 27 to
the Company's Form 10 QSB for the period ended June 30,
1996.)
10(i)(i) * Development and Purchase Agreement by and between Canton
Financial Services Corporation (through its subsidiary,
CyberMalls) and Bust-it Records regarding the
development and sale of a Mall site on the Internet,
effective June 13, 1996. (Incorporated herein by
reference from Exhibit No. 10(i)(bb) to the Company's
Form 10 QSB for the period ended June 30, 1996.)
10(i)(j) * 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. (Incorporated herein by
reference from Exhibit No. 10(i)(cc) to the Company's
Form 10 QSB for the period ended June 30, 1996.)
10(i)(k) * Offshore Securities Subscription Agreement for a 6.0%
Convertible Debenture sold to Legong Investments on
September 16, 1996. (Incorporated herein by reference
from Exhibit No. 10(i)(a) to the Company's Form 10 QSB
for the period ended September 30, 1996.)
10(i)(l) * May 22, 1996, Stock Purchase Agreement by which the
Company sold its wholly owned subsidiary, Cyber Real
Estate, Inc. to Premier Sales Corporation, Ltd.
(Incorporated herein by reference from the Company's
Form 10 QSB for the period ended September 30, 1996.)
10(i)(m) * Mutual Release of All Claims dated May 12, 1995, between
the Company, ATC II, Inc. and Thistle Properties.
(Incorporated herein by reference from the Company's
Form 10 KSB for the period ended December 31, 1995.)
10(i)(n) * Agreement of Sale and Purchase dated March 23, 1995,
between the Company and Associated Technologies, Inc.
(Incorporated herein by reference from the Company's
Form 10 KSB for the period ended December 31, 1995.)
10(i)(o) * Settlement Agreement dated May 1, 1995, between the
Company, A-Z Professional Consultants, Inc. and Allen
Wolfson. (Incorporated herein by reference from the
Company's Form 10 KSB for the period ended December 31,
1995.)
10(i)(p) * Assignment and Acknowledgment dated May 4, 1995, between
the Company, Investment Sanctuary, Allen Wolfson and
Richard Surber. (Incorporated herein by reference from
the Company's Form 10 KSB for the period ended December
31, 1995.)
10(i)(q) * Purchase Agreement dated May 23, 1995, between Canton
Properties I, Inc., a subsidiary of the Company, and
Asset Recovery, Inc. (Incorporated herein by reference
from the Company's Form 10 KSB for the period ended
December 31, 1995.)
10(i)(r) * Settlement Agreement dated December 12, 1995, between
TAC, Inc., a subsidiary of the Company, Ozora
Corporation and Mark C. Hungerford. (Incorporated herein
by reference from the Company's Form 10 KSB for the
period ended December 31, 1995.)
<PAGE>
10(i)(s) * Real Estate Sales Contract dated December 14, 1995,
between the Solar Logos Foundation and Oasis
International Hotel & Casino, Inc., jointly with Oasis
International Corporation. (Incorporated from Exhibit
10(i)(a) to the Company's Current Report on Form 8-K
filed with the Commission on January 11, 1996).
10(i)(s) * Agreement relating to water rights dated December 14,
1995, between the Solar Logos Foundation and Oasis
International Hotel and Casino and Oasis International
Corporation. (Incorporated from Exhibit 10(i)(b) to the
Company's Current Report on Form 8-K filed with the
Commission on January 11, 1996).
10(i)(t) * Promissory Note dated December 27, 1995, between Oasis
International Corporation and the Solar Logos
Foundation. (Incorporated from Exhibit 10(i)(c) to the
Company's Current Report on Form 8-K filed with the
Commission on January 11, 1996).
10(i)(u) * Trust Deed Note dated December 27, 1995, between Oasis
International Hotel and Casino, Inc. and Howard
Bernstein. (Incorporated from Exhibit 10(i)(d) to the
Company's Current Report on Form 8-K filed with the
Commission on January 11, 1996).
10(i)(v) * Stock Option Agreement dated December 22, 1995, between
the Company and A-Z Professional Consultants, Inc.
(Incorporated from Exhibit 10(i)(b) to the Company's
Current Report on Form 8-K filed with the Commission on
January 3, 1996).
10(i)(w) * Stock Option Agreement dated December 22, 1995, between
the Company and Investment Sanctuary Corporation.
(Incorporated from Exhibit 10(i)(c) to the Company's
Current Report on Form 8-K filed with the Commission on
January 3, 1996).
MANAGEMENT CONTRACTS & COMPENSATORY PLANS/ARRANGEMENTS
10(ii)(a) * Employment Agreement dated December 5, 1995, but
effective August 30, 1995, between the Company and
Steven A. Christensen. (Incorporated herein by reference
from Exhibit No. 10(ii)(e) to the Company's Form 10 KSB
for the period ended December 31, 1995.)
10(ii)(b) * Employment Agreement dated December 5, 1995, but
effective August 30, 1995, between the Company and Kevin
S. Woltjen. (Incorporated herein by reference from
Exhibit No. 10(ii)(f) to the Company's Form 10 KSB for
the period ended December 31, 1995.)
10(ii)(c) * Employment Agreement dated November 10, 1995, but
effective October 4, 1995, between the Company and Susan
S. Waldrop. (Incorporated from Exhibit 10(i)(a) to the
Company's Quarterly Report on Form 10-QSB for the period
ended September 30, 1995).
10(ii)(d) * Stock Option Agreement dated December 22, 1995, between
the Company and A-Z Professional Consultants, Inc.
(Incorporated from Exhibit 10(i)(b) to the Company's
Current Report on Form 8-K filed with the Commission on
January 3, 1996).
<PAGE>
10(ii)(e) * Stock Option Agreement dated December 22, 1995, between
the Company and Investment Sanctuary Corporation.
(Incorporated from Exhibit 10(i)(c) to the Company's
Current Report on Form 8-K filed with the Commission on
January 3, 1996).
99 * ORDER allowing MOTION FOR FINAL DECREE in the Company's
voluntary bankruptcy petition dated November 8, 1994,
but effective November 7, 1994. (Incorporated from
Exhibit of like number from the Company's Annual Report
on Form 10 KSB for the year ended December 31, 1994).
99(a) * ORDER dated March 4, 1995, from the West Virginia
Division of Environmental Protection. (Incorporated from
Exhibit of like number from the Company's Annual Report
on Form 10 KSB for the year ended December 31, 1995.)
99(b) * CONTEMPT ORDER dated May 31, 1995, from the Circuit
Court for the Ninth Judicial Circuit, Fulton County,
Illinois. (Incorporated from Exhibit of like number from
the Company's Annual Report on Form 10 KSB for the year
ended December 31, 1995.)
* Previously filed as indicated and incorporated herein by reference.
COMMERCIAL - INDUSTRIAL - INVESTMENT
REAL ESTATE PURCHASE CONTRACT
This is a legally binding Contract. It has been
prepared by the Utah Association of REALTORS for the use of its members only,
in their transactions with clients or customers.
Parties to this contract may agree, in writing, to alter or
delete provisions of this contract.
Seek advice from your attorney or tax advisor
before entering into a binding contract.
EARNEST MONEY RECEIPT
The Buyer Durband Properties, LC offers to purchase the Property described below
and delivers as Earnest Money Deposit $ 15,000 in the form of a Check to:
[x] the Brokerage, to be deposited within three business days after Acceptance
of this Offer to Purchase by all parties.
[ ] the Title/Escrow Company identified below.
Brokerage or Title/Escrow Company Barlow Nielson Associates Address 77 West 200
South, Salt Lake City, UT 84101 Received by Glenn A. McKay On 1/28/97 (date)
Phone Number 801/539-1914 (If Title/Escrow Company) for deposit no later than
(date)__________
[ ]_______________________________________________________________
OFFER TO PURCHASE
1. PROPERTY: Canton Office Building Address 202 West 400 South City Salt Lake
County Salt Lake State Utah
For legal description, see: [ ] attached addendum #____________ [ x ]
preliminary title report when available as provided below.
1.1 INCLUDED ITEMS. Unless excluded herein, this sale shall include all
fixtures presently attached to the Property. The following personal property
shall also be included in this sale and conveyed under separate Bill of Sale
with warranties as to title: NONE
1.2 EXCLUDED ITEMS. These items are excluded from this sale: NONE
2. PURCHASE PRICE AND FINANCING. Buyer agrees to pay for the Property as
follows:
$ 15,000 Earnest Money Deposit
$ Loan Proceeds:
[ ] Representing the liability to be assumed by Buyer under an
existing assumable loan ( [ ] with [ ] without Seller being
released of liability) in this approximate amount with [ ] Buyer
[ ] Seller agreeing to pay any loan transfer and assumption fees.
Any net differences between the approximate balance of the loan
shown above and the actual balance at closing shall be then
adjusted in [ ] cash [ ] other _______________.
[ ] From now institutional financing on terms no less favorable to
the Buyer than the following: (interest rate for first period
prior to adjustment, if any); (amortization period); (term). Other
than these, the loan terms shall be the best obtainable under the
loan for which the Buyer applies below.
[ ] From seller-held financing, as described in the attached
Seller Financing Addendum.
$ Other:
$ 970,000 Balance of purchase price in cash at Closing
--------
$ 985,000 TOTAL PURCHASE PRICE
- ---------
3. Closing. This transaction shall be Closed on or before 4/30/97 . Closing
shall occur when: (a) Buyer and Seller have signed and delivered to each other
(or to the escrow/title company), all documents required by this Contract, by
the Lender, by written escrow instructions signed by the Buyer and the Seller,
and by applicable law; (b) the monies required to be paid under thee documents
have been delivered to the escrow/title company in the form of collected or
cleared funds; and (c ) the deed which the Seller has agreed to deliver under
Section 6 has been recorded, Seller and Buyer shall each pay one-half of the
escrow Closing fee, unless otherwise agreed by the parties in writing. Taxes and
assessments for the current year, rents, and interest on assumed obligations
shall be prorated as set forth in this Section. All deposits on tenancies shall
be transferred to Buyer at Closing. Prorations set forth in this Section shall
be made as of [ x ] date of Closing; [ ] date of possession; [ ] other_______ .
4. POSSESSION. Seller shall deliver possession to Buyer within One hours after
at Closing.
5. CONFIRMATION OF AGENCY DISCLOSURE. At the signing of this Contract the
listing agent Glenn A. McKay represents [ ] Seller [ x ] Buyer, and the selling
agent Vasilios Priskos represents [ x] Seller [ ] Buyer. Buyer and Seller
confirm that prior to signing this Contract written disclosure of the agency
relationship was provided to him/her. ( ) Buyer's initials ( ) Seller's
initials.
6. TITLE TO PROPERTY AND TITLE INSURANCE. (a) Seller has, or shall have at
Closing, fee title to the Property and agrees to convey such title to Buyer by [
x ] general [ ] special warranty deed, free of financial incumbrance as
warranted under Section 10.6; (b) Seller agrees to pay for, and furnish Buyer at
Closing with, a current standard form owner's policy of title insurance in the
amount of the TOTAL PURCHASE PRICE; (c ) the title policy shall conform with
Seller's obligations under subsections (a) and (b). Unless otherwise agreed
under section 8.4, the commitment shall conform with the title insurance
commitment provided under Section 7.1 [ x ] The Buyer elects to obtain a full
coverage extended ALTA policy of title insurance under 5(b). The costs of this
coverage above that of a standard owner's policy shall be paid for by the [ ]
Buyer [ x ] Seller. Also the cost of a full coverage ALTA survey shall be paid
for by the [ x ]Buyer [ ]Seller.
7. SPECIFIC UNDERTAKINGS OF SELLER AND BUYER.
7.1 SELLER DISCLOSURES. The Seller will deliver to the buyer the following
Seller Disclosures no later than the number of calendar days indicated below
which shall be after Acceptance:
(days)
[x] (a ) a Seller Property condition disclosure for the
Property, signed and dated by Seller; 15
[x] (b ) a commitment for the policy of title insurance
required under Section 6, to be issued by the title
insurance company chosen by Seller, including
copies of all documents listed as Exceptions on the
Commitment. 15
[x] (c ) a copy of all loan documents relating to any
loan now existing which will encumber the Property
after Closing; 15
[x] (d ) a copy of all leases and rental agreements now
in effect with regard to the Property together with
a current rent roll; 15
[x] (e) operating statements of the Property for its
last 2 full fiscal years of operations plus the
current fiscal year through 1996 , certified by the
Seller or by an independent auditor; 15
[x] (f) tenant estoppel agreements. 30
Seller agrees to pay any charge for cancellation of the title commitment
provided under subsection (b).
If Seller does not provide any of the Seller Disclosures within the time
periods agreed above, the buyer may either waive the particular Seller
Disclosure requirement by taking no timely action or the buyer may notify the
Seller in writing within 3 calendar days after the expiration of the particular
disclosure time period that the Seller is in Default under this Contract and
that the remedies under Section 16 are at the Buyer's disposal. The holder of
the Earnest Money Deposit shall, upon receipt of a copy of Buyer's written
notice, return to the Buyer the Earnest Money Deposit without the requirement of
further written authorization from the Seller.
7.2 BUYER UNDERTAKINGS. The Buyer agrees to:
[x] (a) Apply for approval of the assumption or funding of the loan
proceeds described in Section 2 by completing, signing and delivering to the
Lender the initial loan application and documentation required by the lender and
by paying all fees required by the lender (including appraisal fee) no later
than 30 calendar days after Acceptance; and
[ ] (b) No later than calendar ___ days after Acceptance, obtain from the lender
to whom application is made under subsection
(a) a written commitment to approve the assumption of the existing loan or to
fund the new loan subject only to changes of conditions in Buyer's credit
worthiness and to normal loan closing procedures; or, if Buyer elects, provide
the Seller with absolute assurance within the same time frame that the proceeds
required for funding the Total Purchase price are available.
These Buyer Undertakings are at the sole expense of the buyer and are material
elements of this Contract for the benefit of both the Buyer and the Seller.
If Buyer does not initiate any Buyer Undertakings and provide Seller with
written confirmation in the time agreed above, the Seller may either waive the
particular Buyer Undertakings requirement by taking no timely action or the
Seller may notify the buyer in writing within 3 calendar days of the expiration
of the particular undertaking time period that the Buyer is in Default under
this Contract and that the remedies under Section 16 are at the Seller's
disposal. The holder of the Earnest Money Deposit shall, upon receipt of a copy
of Seller's written notice, deliver to the Seller the Earnest Money Deposit
without the requirement of further written authorization from the Buyer.
<PAGE>
7.3 ADDITIONAL DUE DILIGENCE. The Buyer shall undertake the following additional
due diligence elements at its own expense and for its own benefit for the
purpose of complying with the contingencies under Section 8:
[x] (a) Ordering and obtaining an appraisal of the Property if one is
not otherwise required under Section 7.2;
[x] (b) Ordering and obtaining a survey of the Property if one is not
otherwise required under Section 6;
[x] (c ) Ordering and obtaining any environmentally related study of
the Property;
[x] (d) Ordering and obtaining a physical inspection report regarding,
and completing a personal inspection of, the Property;
[x] (e) Requesting and obtaining verification that the Property
complies with all applicable federal, state and local laws, ordinances
and regulations with regard to zoning and permissible use of the
Property.
Seller agrees to cooperate fully with Buyer's completing these Due Diligence
matters and to make the Property available as reasonable and necessary for the
same.
8. CONTINGENCIES. This offer is subject to the Buyer's approving in it sole
discretion the Seller Disclosures, the Buyer Undertakings and Additional Due
Diligence matters in Section 7. However, the Buyer's discretion in approving the
terms of the loan under subsection 7.2(b) is subject to Buyer's covenant with
regard to minimally acceptable financing terms under Section 2.
8.1 Buyer shall have 15 calendar days after the times specified in
Section 7.1 and 7.2 for receipt of Seller Disclosures and for completion of
Buyer Undertakings to review the content of the disclosures and the outcome of
the undertakings. The latest applicable date under Section 7.1 and 7.2 applies
for completing a review of Additional Due Diligence matters under Section 7.3.
8.2 If Buyer does not deliver a written objection to Seller regarding a
Seller Disclosure, Buyer Undertaking or Due Diligence matter within the time
provided in Section 8.1, that item will be deemed approved by Buyer.
8.3 If Buyer objects, Buyer and Seller shall have 3 calendar days after
receipt of the objections to resolve Buyer's objections. Seller may, but shall
not be required to, resolve Buyer's objections. Likewise, the Buyer is under no
obligation to accept any resolution proposed by the Seller. If Buyer's
objections are not resolved within the stated time, Buyer may void this Contract
by providing written notice to Seller within the same stated time. The holder of
the Earnest Money Deposit shall, upon receipt of a copy of Buyer's written
notice, return to Buyer the Earnest Money Deposit without the requirement of any
further written authorization from Seller. If this Contract is not voided by
Buyer, Buyer's objections deemed to have been waived. However, this waiver does
not affect warranties under Section 10.
8.4 Resolution of Buyer's objections under Section 8.3 shall be in
writing and shall be come part of this Contract.
9. SPECIAL CONTINGENCIES. This offer is made subject to:(See Addendum #1)
The terms of attached Addendum # 1 are incorporated into this Contract by
this reference.
10. SELLER'S LIMITED WARRANTIES. Seller's warranties to Buyer regarding the
Property are limited to the following:
10.1 When seller delivers possession of the Property to Buyer, it will
be broom-clean and free of debris and personal belongings;
10.2 Seller will deliver possession of the Property to Buyer with the
plumbing, plumbed fixtures, heating, cooling, ventilating, electrical and
sprinkler (indoor and outdoor) systems, appliances and fireplaces in working
order;
10.3 Seller will deliver possession of the Property to Buyer with the
roof and foundation free of leaks known to Seller;
10.4 Seller will deliver possession of the Property to Buyer with any
private well or septic tank serving the Property in working order and in
compliance with governmental regulations;
10.5 Seller will be responsible for repairing any of Seller's
moving-related damage to the Property;
10.6 At Closing, Seller will bring current all financial obligations
encumbering the Property which are assumed in writing by Buyer and will
discharge all such obligations which Buyer has not so assumed;
10.7 As of Closing, Seller has no knowledge of any claim or notice of
an environmental, building or zoning code violation regarding the Property which
has not been resolved.
11. VERIFICATION OF WARRANTED AND INCLUDED ITEMS. After all contingencies have
been removed and before Closing, the buyer may conduct a "walk-through"
inspection of the Property to determine whether or not items warranted by Seller
in Section 10.1, 10.2, 10.3 and 10.4 are in the warranted condition and to
verify that items included in Section 1.1 are presently on the Property. If nay
item is not in the warranted condition, Seller will correct, repair or replace
it as necessary or, with the consent of Buyer and (if required) Lender, escrow
an amount at Closing to provide for such repair or replacement. The buyer's
failure to conduct a "walk-through" inspection or to Claim during the
"walk-through" inspection that the Property does not include all items
referenced in Section 1.1 or is not in the condition warranted in Section 10,
shall constitute a waiver of Buyer's rights under section 1.1 and of the
warranties contained in Section 10.
12. CHANGES DURING TRANSACTION. Seller agrees that no changes in any existing
leases shall be made, no new leases entered into, and no substantial alterations
or improvements to the Property shall be undertaken without the written consent
of the Buyer.
13. AUTHORITY OF SIGNERS. If Buyer or Seller is a corporation, partnership,
trust, estate or other entity, the person signing this Contract on its behalf
warrants his or her authority to do so and to bind Buyer or Seller and their
heirs or successors in interest to Buyer of Seller. If the Seller is not the
vested owner of the Property but has control over the vested owner's disposition
of the Property, the Seller agrees to exercise this control and deliver title
under this Contract as if it had been signed by the vested owner.
14. COMPLETE CONTRACT. This instrument (together with this addenda, any attached
exhibits, and Seller Disclosures) constitutes the entire Contract between the
parties and supersedes all prior dealings between the parties. This Contract
cannot be changed except by written agreement of the parties.
15. DISPUTE RESOLUTION. The parties agree that any dispute or Claim relating to
this Contract, including but not limited to the disposition of the Earnest Money
Deposit and the breach or termination of this Contract, shall first be submitted
to mediation in accordance e with the Utah Real Estate Buyer/Seller Mediation
Rules of the American Arbitration Association. Each party agrees to bear its own
costs of mediation. Any agreement signed by the parties pursuant to the
mediation shall be binding. If mediation fails, the procedures applicable and
remedies available under this Contract shall apply. Nothing in this Section
shall prohibit the Buyer form seeking specific performance by the Seller by
filing a complaint with the court, serving it on the Seller by means of summons
or as otherwise permitted by law, and recording a lis pendens with regard to the
action provided that the buyer permits the Seller to refrain from answering the
complaint pending mediation. Also the parties may agree in writing to waive
mediation.
16. DEFAULT. If Buyer defaults, Seller may elect to either retain the Earnest
Money Deposit as liquidated damages or to return the Earnest Money Deposit and
sue Buyer to enforce Seller's rights. If Seller defaults, in addition to return
of the Earnest Money Deposit, Buyer may elect to either accept from Seller as
liquidated damages a sum equal to the Earnest Money Deposit or sue Seller for
specific performance and/or damages. If Buyer elects to accept the liquidated
damages, Seller agrees to pay the liquidated damages to buyer upon demand. Where
a Section of this Contract provides a specific remedy, the parties intend that
the remedy shall be exclusive regardless of rights which might otherwise be
available under common law.
17. ATTORNEY'S FEES. In any action arising out of this Contract, the prevailing
party shall be entitled to costs and reasonable attorney's fees.
18. DISPOSITION OF EARNEST MONEY. The Earnest Money Deposit shall not be
released unless it is authorized by: (a) Sections 7.1, 7.2 and 8.3; (b) separate
written agreement of the parties including an agreements under Section 15 if (a)
does not apply; or (c ) court order.
19. ABROGATION. Except for express warranties made in this Contract, the
provisions of this Contract shall no apply after Closing.
20. RISK OF LOSS. All risk of loss or damage to the Property shall be borne by
Seller until Closing.
21. TIME IS OF THE ESSENCE. Time is of the essence regarding the dates set forth
in this transaction. Extensions must be agreed to in writing by all parties.
Performance under each section of this Contract which references a date shall be
required absolutely by 5:00 P.M., Mountain Time on the stated date.
22. COUNTERPARTS AND FACSIMILE (FAX) DOCUMENTS. This contract may be signed in
counterparts, and each counterpart bearing an original signature. Also facsimile
transmission of any singed original document and retransmission of any signed
facsimile transmission shall be the same as delivery of an original.
23. ACCEPTANCE. Acceptance occurs when Seller or Buyer, responding to an offer
or counteroffer of the other; (a) signs the offer or counteroffer where noted to
indicate acceptance; and (b) communicates to the other party or the other
party's agent that the offer or counteroffer has been signed as required.
24. OFFER AND TIME FOR ACCEPTANCE. Buyer offers to purchase the Property on the
above terms and conditions. If Seller does not accept his offer by [ ] AM [x] PM
Mountain Time, January 3, 1997 this offer shall lapse; and the holder of the
Earnest Money Deposit shall return it to the Buyer. DURBAND PROPERTIES, L.C. By:
/s/Douglas M. Durband 1/28/97
- ----------------------------- ----------------
(Buyer's Signature) (Offer Reference Date)
<PAGE>
DOUGLAS M. DURBAND 1 801 621-4111
Buyer's Name (Please print) (Phone)
ACCEPTANCE/REJECTION/COUNTER OFFER
[ ] Acceptance of Offer to Purchase: Seller Accepts the foregoing offer on the
terms and conditions specified above.
- -------------------------- ---------------- ------------------
(Seller's Signature) (Date) (Time)
- --------------------------------------
Seller's Name (Please Print)
- -------------------------------------- ----------------
(Notice Address) (Phone)
[ ] Rejection: Seller rejects the foregoing offer.
__________________________(Seller's initials)________________________
__________________________(Date)_____________________(Time)
[ ] Counteroffer: Seller presents for Buyer's Acceptance the terms of Buyer's
offer subject to the exceptions or modifications as specified in the attached
Counter ----- Offer # . ------------------
DOCUMENT RECEIPT
State Law requires Broker to furnish Buyer and Seller with copies of this
Contract bearing all signatures. (One of the following alternatives must
therefore be completed).
A. [ ] I acknowledge receipt of a final copy of the foregoing Contract
bearing all signatures.
SIGNATURE OF SELLER
___________________ Date __________________________ Date
_____________________ Date ____________________________ Date
B. [ ] I personally caused a final copy of the foregoing contract bearing all
signatures to be mailed on ___________________ , 19__ by certified mail and
return receipt attached hereto to the [ ]Seller [ ]Buyer, sent
by____________________________
Seller's Initials ( ) Date_________________ Buyer's Initials ( ) Date__________
<PAGE>
ADDENDUM/COUNTER OFFER
NO. 1
TO
REAL ESTATE PURCHASE CONTRACT
THIS IS AN [ ]ADDENDUM [ ]COUNTER OFFER to that REAL ESTATE PURCHASE CONTRACT
(the "REPC") with an Offer Reference Date of January 28 , 1997, between Durband
Properties, L.C. , as Buyer, and as Seller. The following terms are hereby
incorporated as part of the REPC, and to the extent that they modify or conflict
with any provisions of the REPC, including all prior addenda and counter offers,
these terms shall control. All other terms of the REPC, including all prior
addenda and counter offers, not modified shall remain the same:
Subject To: 1. Getting main user as a tenant for the building
2. Buyer to request an additional 30 days but $15,000 of
earnest money to go hard.
3. Buyer to be able to use the building for buyers intended use
[x] Seller [ ] Buyer shall have until 5:00 [ ]AM [x] PM Mountain Time January 31
,1997 to accept the terms of this ADDENDUM/COUNTER OFFER in accordance with the
provisions of Section 23 of the REPC. Unless so accepted, the offer as set forth
in this ADDENDUM/COUNTER OFFER shall lapse.
DURBAND PROPERTIES, L.C.
/s/ Douglas M. Durband 1/28/97 7:00 p.m.
- -----------------------
[x ]Buyer [ ]Seller Signature Date Time
- ------------------------
[x ]Buyer [ ]Seller Signature Date Time
[ ] REJECTION: [ ] Seller [ ] Buyer rejects the foregoing offer ADDENDUM/COUNTER
OFFER (Initials)______________ (Date)_______________ (Time)___________ [ ]
COUNTEROFFER: [ ]Seller [ ] Buyer presents as a counter offer the terms set
forth on the attached Counter Offer # .
<PAGE>
ADDENDUM NO. 2
TO
REAL ESTATE PURCHASE CONTRACT
THIS IS AN [ ]ADDENDUM [x ]COUNTER OFFER to that REAL ESTATE PURCHASE CONTRACT
(the "REPC") with an Offer Reference Date of January 28 , 19 97, including all
prior addenda and counteroffers between Duband Properties, L.C. , as Buyer, and
Canton Industrial as Seller, regarding the Property located at 202 West 400
South
The following terms are hereby incorporated as part of the REPC:
1- Buyer to have 30 days to remove all contingencies (except #2 below) from
acceptance date. If Buyer at that time updates this contract all tests, reports,
appraisals,etc. was pleted by the Buyer will be given to the Seller at no cost
for the Seller.
2- Buyer to have 45 days from acceptance to remove the contingency regarding the
tenancy of the building. If a deal is not consumated with the porposed tenant to
the Seller and Seller will be free to pursue the tenant.
3- The $15,000 in earnest money will be non-refundable after 45 days of
acceptance.
4- Purchasing price to be $1,050,000
5- #2 and #3 of addendum #1 are void and of no effect
6- Closing to be on or before April 11, 1997
To the extent the terms of this ADDENDUM modify or conflict with any provisions
of the REPC, including all prior addenda and counter offers, these terms shall
control. All other terms of the REPC, including all prior addenda and
counteroffers, not modified by this ADDENDUM shall remain the same [ ] Seller [
] Buyer shall have until 5 [ ] AM [ ] PM Mountain Time February 8 , 19 97 , to
accept the terms of this ADDENDUM in accordance with the provisions of Section
23 of the REPC. Unless so accepted, the offer set forth in this ADDENDUM shall
lapse.
_______________________________________________________________ _____________
[ ]Buyer [ ]Seller Signature Date Time [ ]Buyer [ ]Seller Signature Date Time
ACCEPTANCE/REJECTION/COUNTER OFFER/REJECTION
CHECK ONE:
[ ]ACCEPTANCE [ ] Seller [ ]Buyer hereby accepts the terms of this ADDENDUM.
[ ]COUNTEROFFER: [ ] Seller [ ]Buyer presents as a counteroffer the terms of
attached ADDENDUM NO.
______________________________________________________________________________
Signature Date Time Signature Date Time
[ ]REJECTION: [ ]Seller [ ]Buyer rejects the foregoing ADDENDUM.
______________________________________________________________________________
Signature Date Time Signature Date Time
THIS FORM APPROVED BY THE UTAH REAL ESTATE COMMISSION AND THE OFFICE OF THE UTAH
ATTORNEY GENERAL. EFFECTIVE JUNE 12, 1996. IT REPLACES AND SUPERSEDES ALL
PREVIOUSLY APPROVED VERSIONS OF THIS FORM.
COMMERCIAL - INDUSTRIAL - INVESTMENT
REAL ESTATE PURCHASE CONTRACT
This is a legally binding Contract. It has been prepared for the use of its
members only by the UTAH ASSOCIATION OF REALTORS in transactions involving
members' clients or customers. As such the Contract is intended to represent a
reasonable effort to balance the interests of Buyer and Seller. Nonetheless, the
Buyer and the Seller may legally agree in writing to alter or delete provisions
of this form. Seek legal or tax advice from your attorney or tax advisor before
entering into a binding contract.
EARNEST MONEY RECEIPT
The Buyer ANA Development, LC offers to purchase the Property described
below and delivers as Earnest Money Deposit $ 1,000 in the form of a Check to be
deposited within tree business days after Acceptance of this offer to purchase
by all parties:
[x] the Brokerage
[ ] the Title/Escrow Company identified below.
Brokerage or Title/Escrow Company Metro National Title Address 111 East
Broadway, Suite 111, Salt Lake, UT 84111 Received by Brenden C. Faber On
(date)___________ Phone Number 801/363-6633 (If Title/Escrow Company) for
deposit no later than (date) ______________
[ ]____________________________________________________________________________
OFFER TO PURCHASE
1. PROPERTY: Approx. 60,000 sq. Ft. on approx. 3.5 acres as shown on Exhibit "A"
which be reference is made a pert hereof. Address 5280 West Wells Park Road City
Salt Lake County Salt Lake State Utah For legal description, see: [ ] attached
addendum # [ x ] preliminary title report when available as provided below.
1.1 Included Items. Unless excluded herein, this sale shall include all
fixtures presently attached to the Property. The following personal Property
shall also be included in this sale and conveyed under separate Bill of Sale
with warranties as to title:
1.2 Excluded items. These items are excluded from this sale: None
2. PURCHASE PRICE AND FINANCING. Buyer agrees to pay for the Property as
follows:
$1,000 Earnest Money Deposit
$959,000 Loan Proceeds:
[ ] Representing the liability to be assumed by Buyer under an existing
assumable loan [ ] with [ ] without Seller being released of liability
Any net differences between the approximate balance of the loan shown
above and the actual balance at closing shall be then adjusted in [ ]
cash [ ] other.
[X] From new institutional financing on terms no less favorable to the
Buyer than the following: 9/14 (Interest rate for first period prior to
adjustment, if any); 20 yr. (amortization period); 7 yr. (term). Other
than these, the loan terms shall be the best obtainable under the loan
for which the Buyer applies below.
[ ] From seller-held financing, as described in the attached Seller
Financing Addendum.
$ 540,000 Other: Real Property located at approx. 1300 No. Highway 89, East
Layton, Utah (See Exhibit "B") $ Balance of purchase price in cash at Closing
$1,500,000 TOTAL PURCHASE PRICE
3. Closing. This transaction shall be Closed on or before March 21, 1997 .
Closing shall occur when: (a) Buyer and Seller have signed and delivered to each
other (or to the escrow/title company), all documents required by this Contract,
by the Lender, by written escrow instructions signed by the Buyer and the
Seller, and by applicable law; (b) the monies required to be paid under thee
documents have been delivered to the escrow/title company in the form of
collected or cleared funds; and (C) the deed which the Seller has agreed to
deliver under Section 6 has been recorded, Seller and Buyer shall each pay
one-half of the escrow Closing fee, unless otherwise agreed by the parties in
writing. Taxes and assessments for the current year, rents, and interest on
assumed obligations shall be prorated as set forth in this Section. All deposits
on tenancies shall be transferred to Buyer at Closing. Prorations set forth in
this Section shall be made as of [ x ] date of Closing; [ ] date of possession;
[ ] other____________ .
4. POSSESSION. Seller shall deliver possession to Buyer at Closing.
5. CONFIRMATION OF AGENCY DISCLOSURE. At the signing of this Contract the
listing agent Vasilios Priskos/Internet Properties represents [ x ] general [ ]
Buyer, and the selling agent CRG/Dell Nichols, Tom Kirk & Jason Nichols
represents [ ] Seller [ x ] Buyer. Buyer and Seller confirm that prior to
signing this Contract written disclosure of the agency relationship was provided
to him/her. (/s/DN) Buyer's initials ( /s/RDS ) Seller's initials.
6. TITLE TO Property AND TITLE INSURANCE. (a) Seller has, or shall have at
Closing, fee title to the Property and agrees to convey such title to Buyer by [
x ] general [ ] special warranty deed, free of financial incumbrance as
warranted under Section 10.6; (b) Seller agrees to pay for, and furnish Buyer at
Closing with, a current standard form owner's policy of title insurance in the
amount of the TOTAL PURCHASE PRICE; (C) the title policy shall conform with
Seller's obligations under subsections (a) and (b). Unless otherwise agreed
under subsection 8.4, the commitment shall conform with the title insurance
commitment provided under Section 7.1
7. SPECIFIC UNDERTAKINGS OF SELLER AND BUYER.
7.1 SELLER DISCLOSURES. The Seller will deliver to the buyer the following
Seller Disclosures no later than the number of calendar days indicated below
which shall be after Acceptance:
(Days)
[x] (a) a Seller Property condition
disclosure for the Property, signed and
dated by Seller; 10
[x] (b) a commitment for the policy of title
insurance required under Section 6, to be
issued by the title insurance company,
including copies of all documents listed
as Exceptions on the Commitment. 10
[ ] (c) a copy of all loan documents
relating to any loan now existing which
will encumber the Property after Closing;
[x] (d) a copy of all leases and rental
agreements now in effect with regard to
the Property together with a current rent
roll; 10
[x] (e) operating statements of the Property
for its last 1 full fiscal years of
operations plus the current fiscal year
through January, 1997, certified by the
Seller or by an independent auditor; 10
[x] (f) tenant estoppel agreements. Ten days
prior to Closing
<PAGE>
Seller agrees to pay any charge for cancellation of the title commitment
provided under subsection (b).
If Seller does not provide any of the Seller Disclosures within the
time periods agreed above, the buyer may either waive the particular Seller
Disclosure requirement by taking no timely action or the buyer may notify the
Seller in writing within 35 calendar days after the expiration of the particular
disclosure time period that the Seller is in Default under this Contract and
that the remedies under Section 16 are at the Buyer's disposal. The holder of
the Earnest Money Deposit shall, upon receipt of a copy of Buyer's written
notice, return to the Buyer the Earnest Money Deposit without the requirement of
further written authorization from the Seller.
7.3 ADDITIONAL DUE DILIGENCE. The Buyer shall undertake the following additional
due diligence elements at its own expense and for its own benefit for the
purpose of complying with the contingencies under Section 8:
[x] (a) Ordering and obtaining an appraisal of the Property if one is not
otherwise required under Section 7.2 (a);
[x] (b) Ordering and obtaining a survey of the Property if one is not
otherwise required under Section 6;
[x] (c) Ordering and obtaining any environmentally related study of the
Property;
[x] (d) Ordering and obtaining a physical inspection report regarding, and
completing a personal inspection of, the Property;
[x] (e) Requesting and obtaining verification that the Property complies with
all applicable federal, state and local laws, ordinances and regulations
with regard to zoning and permissible use of the Property.
Seller agrees to cooperate fully with Buyer's completing these due diligence
matters and to make the Property available as reasonable and necessary for the
same.
8. CONTINGENCIES. This offer is subject to the Buyer's approving in it sole
discretion the Seller Disclosures, the Buyer Undertakings and Additional Due
Diligence matters in Section 7.
8.2 If Buyer does not deliver a written objection to Seller regarding
a Seller Disclosure, Buyer Undertaking or Due Diligence matter within the review
period of Addendum #1 hereto, that item will be deemed approved by Buyer.
8.3 If Buyer objects, Buyer and Seller shall have 20 calendar days
after receipt of the objections to resolve Buyer's objections. Seller may, but
shall not be required to, resolve Buyer's objections. Likewise, the Buyer is
under no obligation to accept any resolution proposed by the Seller. If Buyer's
objections are not resolved within the stated time, Buyer may void this Contract
by providing written notice to Seller within the same stated time. The holder of
the Earnest Money Deposit shall, upon receipt of a copy of Buyer's written
notice, return to Buyer the Earnest Money Deposit without the requirement of any
further written authorization from Seller. If this Contract is not voided by
Buyer, Buyer's objections deemed to have been waived. However, this waiver does
not affect warranties under Section 10.
8.3 Resolution of Buyer's objections under Section 8.2 shall be in
writing and shall be come part of this Contract.
9. SPECIAL CONTINGENCIES. This offer is made subject to: terms and conditions of
attached Addendum #1 The terms of attached Addendum #1 are incorporated into
this Contract by this reference.
10. SELLER'S LIMITED WARRANTIES. Seller's warranties to Buyer regarding the
Property are limited to the following:
10.1 When seller delivers possession of the Property to Buyer, it will
be broom-clean and free of debris and personal belongings;
10.2 Seller will deliver possession of the Property to Buyer with the
plumbing, plumbed fixtures, heating, cooling, ventilating, electrical and
sprinkler (indoor and outdoor) systems, appliances and fireplaces in working
order;
10.3 Seller will deliver possession of the Property to Buyer with the
roof and foundation free of leaks known to Seller;
10.4 Seller will deliver possession of the Property to Buyer with any
private well or septic tank serving the Property in working order and in
compliance with governmental regulations;
10.5 Seller will be responsible for repairing any of Seller's
moving-related damage to the Property;
10.6 At Closing, Seller will bring current all financial obligations
encumbering the Property which are assumed in writing by Buyer and will
discharge all such obligations which Buyer has not so assumed;
10.7 As of Closing, Seller has no knowledge of any claim or notice of
an environmental, building or zoning code violation regarding the Property which
has not been resolved.
11. VERIFICATION OF WARRANTED AND INCLUDED ITEMS. After all contingencies have
been removed and before Closing, the buyer may conduct a "walk-through"
inspection of the Property to determine whether or not items warranted by Seller
in Section 10.1, 10.2, 10.3 and 10.4 are in the warranted condition and to
verify that items included in Section 1.1 are presently on the Property. If nay
item is not in the warranted condition, Seller will correct, repair or replace
it as necessary or, with the consent of Buyer and (if required) Lender, escrow
an amount at Closing to provide for such repair or replacement. The buyer's
failure to conduct a "walk-through" inspection or to Claim during the
"walk-through" inspection that the Property does not include all items
referenced in Section 1.1 or is not in the condition warranted in Section 10,
shall constitute a waiver of Buyer's rights under section 1.1 and of the
warranties contained in Section 10.
12. CHANGES DURING TRANSACTION. Seller agrees that no changes in any existing
leases shall be made, no new leases entered into, and no substantial alterations
or improvements to the Property shall be undertaken without the written consent
of the Buyer.
13. AUTHORITY OF SIGNERS. If Buyer or Seller is a corporation, partnership,
trust, estate or other entity, the person signing this Contract on its behalf
warrants his or her authority to do so and to bind Buyer or Seller and their
heirs or successors in interest to Buyer of Seller. If the Seller is not the
vested owner of the Property but has control over the vested owner's disposition
of the Property, the Seller agrees to exercise this control and deliver title
under this Contract as if it had been signed by the vested owner.
14. COMPLETE CONTRACT. This instrument (together with this addenda, any attached
exhibits, and Seller Disclosures) constitutes the entire Contract between the
parties and supersedes all prior dealings between the parties. This Contract
cannot be changed except by written agreement of the parties.
15. DISPUTE RESOLUTION. The parties agree that any dispute or Claim relating to
this Contract, including but not limited to the disposition of the Earnest Money
Deposit and the breach or termination of this Contract, shall first be submitted
to mediation in accordance e with the Utah Real Estate Buyer/Seller Mediation
Rules of the American Arbitration Association. Each party agrees to bear its own
costs of mediation. Any agreement signed by the parties pursuant to the
mediation shall be binding. If mediation fails, the procedures applicable and
remedies available under this Contract shall apply. Nothing in this Section
shall prohibit the Buyer form seeking specific performance by the Seller by
filing a complaint with the court, serving it on the Seller by means of summons
or as otherwise permitted by law, and recording a lis pendens with regard to the
action provided that the buyer permits the Seller to refrain from answering the
complaint pending mediation. Also the parties may agree in writing to waive
mediation.
16. DEFAULT. If Buyer defaults, Seller may elect to either retain the Earnest
Money Deposit as liquidated damages or to return the Earnest Money Deposit and
sue Buyer to enforce Seller's rights. If Seller defaults, in addition to return
of the Earnest Money Deposit, Buyer may elect to either accept from Seller as
liquidated damages a sum equal to the Earnest Money Deposit or sue Seller for
specific performance and/or damages. If Buyer elects to accept the liquidated
damages, Seller agrees to pay the liquidated damages to buyer upon demand. Where
a Section of this Contract provides a specific remedy, the parties intend that
the remedy shall be exclusive regardless of rights which might otherwise be
available under common law.
17. ATTORNEY'S FEES. In any action arising out of this Contract, the prevailing
party shall be entitled to costs and reasonable attorney's fees.
18. DISPOSITION OF EARNEST MONEY. The Earnest Money Deposit shall not be
released unless it is authorized by: (a) Sections 7.1, 7.2 and 8.3; (b) separate
written agreement of the parties including an agreements under Section 15 if (a)
does not apply; or (C) court order.
19. ABROGATION. Except for express warranties made in this Contract, the
provisions of this Contract shall no apply after Closing.
20. RISK OF LOSS. All risk of loss or damage to the Property shall be borne by
Seller until Closing.
21. TIME IS OF THE ESSENCE. Time is of the essence regarding the dates set forth
in this transaction. Extensions must be agreed to in writing by all parties.
Performance under each section of this Contract which references a date shall be
required absolutely by 5:00 P.M., Mountain Time on the stated date.
22. COUNTERPARTS AND FACSIMILE (FAX) DOCUMENTS. This contract may be signed in
counterparts, and each counterpart bearing an original signature. Also facsimile
transmission of any singed original document and retransmission of any signed
facsimile transmission shall be the same as delivery of an original.
23. ACCEPTANCE. Acceptance occurs when Seller or Buyer, responding to an offer
or counteroffer of the other; (a) signs the offer or counteroffer where noted to
indicate acceptance; and (b) communicates to the other party or the other
party's agent that the offer or counteroffer has been signed as required.
24. OFFER AND TIME FOR ACCEPTANCE. Buyer offers to purchase the Property on the
above terms and conditions. If Seller does not accept his offer by 5:00 [ ] AM
[x] PM Mountain Time, February 10, 1997 this offer shall lapse; and the holder
of the Earnest Money Deposit shall return it to the Buyer.
ANA Development, LC By: /s/Dell S. Nichols February 5, 1997
---------------------------- --------------------
(Buyer's Signature) Its: Member (Offer Reference Date)
- -------------------------------------------------------------------------------
(Notice Address) (Phone)
ACCEPTANCE/REJECTION/COUNTER OFFER
TAC, INC.
[X ] Acceptance of Offer to Purchase: Seller Accepts the foregoing offer on
the terms and conditions specified above.
/s/Richard Surber, President 2/7/97
- -------------------------- --------- -------
(Seller's Signature) (Date) (Time)
- -------------------------------------------------------------------------------
(Notice Address) (Phone)
[ ] Rejection: Seller rejects the foregoing offer.
_________________________ (Seller's initials)________________(Date)_______(Time)
[ ] Counteroffer: Seller presents for Buyer's Acceptance the terms of
Buyer's offer subject to the exceptions or modifications as specified in the
attached Counter Offer #_________________.
<PAGE>
ADDENDUM # 1 / COUNTER OFFER #
REAL ESTATE PURCHASE CONTRACT
This is an ADDENDUM/COUNTER OFFER to that REAL ESTATE PURCHASE CONTRACT (the
"REPC") with an Offer Referenced Date of February 5, 1997, including addenda and
counter offers between ANA Development, L.C., as Buyer and TAC, Inc. as Seller.
The following terms are hereby incorporated as part of the REPC, and to the
extent these terms modify or conflict with any provisions of the REPC, these
terms shall control. All other terms of the REPC not modified shall remain the
same.
1. The Buyer's performance under the terms of this offer are contingent
upon and subject to the following items:
a. Buyer's review and approval of a Buyer provided ALTA,
Topographical & Utility Survey;
b. Buyer's review and approval of a Buyer provided Level 1
Environmental report. Seller shall be responsible for all costs
and expenses associated with the REMEDIATION of any environmental
problems that may exist on the subject real property;
c. Buyers satisfactory completion of an inspection of this subject
real Property; and, d. Buyer's completion of all due diligence
items associated with its contemplated use of the site.
2. Buyer shall have until March 10, 1997 to conclude its review of the
Seller provided items and its due diligence efforts. This period and
the Closing date shall be extended by the amount of delay of any
Seller provided item beyond a date 10 days of Sellers acceptance of
this offer.
3. Seller represents that there are no outstanding leases or rental
agreements covering any portion of the subject real Property other
than disclosed to Buyer.
4. Buyer hereby discloses that Dell S. Nichols and Thomas Kirk are
licensed real estate agents in the State of Utah, and are member of
ANA Development, LC.
5. This offer is subject to the review and approval of the members of ANA
Development, LC., and the receipt of acceptable financing by March 10,
1997.
6. Title and escrow services to be provided by Brenden Faber, Esq. of
Metro National Title Company at 111 East Broadway, Suite 111, Salt
Lake City, Utah, 84111.
7. Each party shall provide one another with any existing surveys, plats,
environmental reports or other studies currently in its possession
concerning the subject real properties.
8. Upon removal of Buyer's contingencies, the Buyer shall deposit an
additional $9,000 earnest money into escrow. At that time the entire
earnest money deposit ($10,000) shall be non-refundable to Buyer
except in the event that the transaction fails to close due to a
default in the part of the Seller.
9. Seller shall have until February 28, 1997 , to accept the East Layton
property. (RDS)
[x] Seller [ ] Buyer shall have until 5:00 [ ]AM [x] PM Mountain Time, February
10, 1997, to accept these terms in accordance with Section 23 of the REPC.
Unless so accepted, this offer shall lapse.
ANA Development, LC
By:
/s/Dell S. Nichols 2/7/97
[ ]Buyer [ ]Seller Signature Date
[ ]Buyer [ ]Seller Signature Date
TAC, Inc. ACCEPTANCE/REJECTION/COUNTER OFFER
CHECK ONE:
[X]Acceptance [ ] Seller [ ]Buyer hereby accepts these terms.
/s/Richard Surber, President 2/7/97
[ ]Buyer [ ]Seller Signature Date Time
[ ]Buyer [ ]Seller Signature Date Time
[ ]Rejection: [ ]Seller [ ]Buyer rejects these terms
(initials) (Date) (Time)
[ ]Counter Offer: [ ]Seller [ ]Buyer presents as a counter offer the terms set
forth on the
<PAGE>
Attached as Exhibit "A" to this Agreement is a plat map highlighting the
section of property located at 5300 W Wells Park Road, 128-002
<PAGE>
Attached as Exhibit "B" to this Agreement is a plat map highlighting the
section of property located off Old Mountain Road and previously owned by the
Seller.
EXHIBIT A
STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (the "Agreement"), is made effective the 31st
day of October, 1996, between CyberAmerica Corporation, a Nevada corporation
with principal offices at 268 West 400 South, Salt Lake City, Utah 84101
("CyberAmerica") and Investment Sanctuary Corporation, a Utah corporation whose
principal address is 1448 South Roberta Street, Salt Lake City, Utah 84115
("Investment Sanctuary"), and Richard D. Surber, an individual.
RECITALS
WHEREAS, Investment Sanctuary represents that it is a Subchapter S
corporation as that term is defined in ss. 1371 et seq. of the Internal Revenue
Code of 1986, as amended;
WHEREAS, Richard D. Surber is the sole legal and beneficial owner of 100%
of the Capital Stock of Investment Sanctuary ("Capital Stock");
WHEREAS, Investment Sanctuary represents that it is the legal and
beneficial owner of a 50% interest in the sixth floor of a commercial building
located in Salt Lake City, Utah, with address at 68 South Main Street Salt Lake
City, Utah, and otherwise known as the McIntyre Building ("McIntyre Building");
WHEREAS, Richard D. Surber represents that he is the legal holder of a
floating option to purchase 25% of all of the issued and outstanding shares of
CyberAmerica ("Option");
WHEREAS, CyberAmerica, Investment Sanctuary and Richard D. Surber desire to
exchange 100% of the capital stock of Investment Sanctuary, including its
ownership interest in the McIntyre Building together with liabilities of
Investment Sanctuary not to exceed ten thousand dollars ($10,000), as well as
the cancellation of the Option, in exchange for one million one hundred thousand
(1,100,000) shares of CyberAmerica, on the terms and conditions hereinafter set
forth in such a manner that the exchange will constitute a tax-free
reorganization pursuant to the provisions of ss. 368(1)(B) of the Internal
Revenue Code of 1986, as amended;
WHEREAS, in conjunction with this Agreement, CyberAmerica and Investment
Sanctuary acknowledge that all outstanding debts owed to Richard D. Surber from
Investment Sanctuary shall be satisfied in full prior to the Closing of this
Agreement by transferring the assets outlined in Schedule A, attached hereto and
incorporated by reference, to Richard D. Surber.
<PAGE>
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, CyberAmerica and
Richard D. Surber agree as follows:
1. Transfer of ownership interest in the McIntyre Building, liabilities and
cancellation of Option. Upon the terms and subject to the conditions set
forth in this Agreement, Investment Sanctuary agrees to transfer and
deliver to CyberAmerica, and CyberAmerica agrees to acquire, 100% of the
capital stock of Investment Sanctuary ("Capital Stock"), par value $0.001,
including its ownership interest in the McIntyre Building together with the
liabilities of Investment Sanctuary (not to exceed $10,000). Furthermore,
upon the terms and subject to the conditions set forth in this Agreement,
Richard D. Surber agrees to cancel his Option to purchase shares of
CyberAmerica.
2. Consideration for Transfer of Shares, Ownership Interest in the McIntyre
Building, and Cancellation of Option. Upon the terms and subject to the
conditions set forth in this Agreement, CyberAmerica agrees to deliver to
Investment Sanctuary and Richard D. Surber, in full consideration of and in
exchange for said shares of Capital Stock of Investment Sanctuary,
including its ownership interest in the McIntyre Building, together with
the liabilities of Investment Sanctuary (not to exceed $10,000), as well as
the cancellation of the Option, 1,100,000 shares of Common Stock $0.001 par
value, ("Common Stock") of CyberAmerica, to be delivered upon execution of
this Agreement. Said shares of CyberAmerica Common Stock shall be issued to
Richard D. Surber pursuant to Rule 144 under the Securities Act of 1933, as
amended.
3. Effect of Re-Organization. The re-organization as contemplated by this
Agreement shall revoke in total the classification of Investment Sanctuary
as a Subchapter S Corporation.
4. Access to Books and Records. Except as hereinafter provided, CyberAmerica
and its officers, employees and agents, shall have full access at all
reasonable times from and after the date hereof to the plants, facilities,
books and records of Investment Sanctuary and Investment Sanctuary shall
cooperate fully with CyberAmerica to the end that it may become familiar
with the ownership interest in the McIntyre Building and associated
transactions, and any existing liabilities of Investment Sanctuary.
CyberAmerica agrees to treat any information which is disclosed to
CyberAmerica by Investment Sanctuary as proprietary or confidential
information, and in the event the closing does not take place, all
documents will be returned to Investment Sanctuary and CyberAmerica and
will not make or retain copies of any documents or make use of any
confidential information disclosed to it in the conduct of its business.
5. Closing. The Closing of the exchange provided for herein shall take place
at CyberAmerica's office at 268 West 400 South, Suite 300, Salt Lake City,
Utah 84101 on the 17th day of December, 1996, or at such other time and
place as may be mutually agreed upon by the parties, such time and date
referred to as the "Closing Date." Pursuant to such Closing, Investment
Sanctuary shall deliver to CyberAmerica all certificates, assignments, and
other instruments which may be necessary, desirable, or appropriate in
order to transfer to CyberAmerica 100% of the capital stock of Investment
Sanctuary, including any documents representing ownership interests or
other transactions associated with the McIntyre Building, as well as any
instruments evidencing existing liabilities, together with documents
canceling the Option, all in form and substance reasonably satisfactory to
counsel for CyberAmerica. Pursuant to such Closing, CyberAmerica shall
deliver to Richard D. Surber certificates evidencing the shares of Common
Stock of CyberAmerica to be delivered to Richard D. Surber, together with
such other instruments which may be necessary, desirable, or appropriate to
accomplish such transfers, all in form and substance satisfactory to
counsel for Investment Sanctuary and Richard D. Surber.
<PAGE>
6. Representations and Warranties of Investment Sanctuary. Investment
Sanctuary represents and warrants to and agrees with CyberAmerica as
follows: a. Organization and Standing . Investment Sanctuary is a
Subchapter S corporation duly organized, validly existing and in good
standing under the laws of the State of Utah, with full corporate power to
carry on its business as now being conducted and to own and operate the
property and assets now owned and operated by it, and is duly qualified to
transact business and in good standing in each jurisdiction where the
ownership of its properties or the conduct of its business requires it to
be licensed or qualified to do business. Pursuant to this Agreement,
CyberAmerica shall receive a copy of Investment Sanctuary's Articles of
Incorporation and all amendments thereto, certified by the appropriate
official from the State of Utah, and a copy of Investment Sanctuary's
By-Laws as amended, certified by the Secretary, which documents are
complete and correct as of the date of this Agreement.
b. Subsidiaries, Etc. Investment Sanctuary has no subsidiaries and is not
party to any partnership, joint venture or similar agreement.
c. McIntyre Building. Pursuant to this Agreement, CyberAmerica shall
receive all documents, agreements and other instruments as related to
the ownership interest in the McIntyre Building and any existing
liabilities of Investment Sanctuary.
d. Litigation . Except as identified in a complete and accurate schedule,
identified by reference to this subparagraph and delivered to
CyberAmerica, Investment Sanctuary is not engaged in or threatened
with any legal action or other proceeding before any court or
administrative agency. Investment Sanctuary has not violated any laws,
regulations or order applicable to its business or activities, and the
conduct of the present business of Investment Sanctuary at the present
location is in conformity with all zoning and building code
requirements.
e. Title to Capital Stock . Investment Sanctuary represents and warrants
that this Agreement has been duly executed and delivered and is a
valid agreement binding in accordance with its terms; that Richard D.
Suber, as President of Investment Sanctuary has valid title to the
shares of Capital Stock of Investment Sanctuary, with full right,
power and authority to transfer, sell and deliver such shares pursuant
to this Agreement; and that, upon delivery of the shares pursuant to
this Agreement, CyberAmerica will receive valid and marketable title
to the shares of Capital Stock, free and clear of all voting or other
trust arrangements, liens, encumbrances, restrictions, and adverse
claims, whether existing or contingent.
7. Representations and Warranties of CyberAmerica. CyberAmerica represents and
warrants to and agrees with Investment Sanctuary as follows:
a. Organization and Standing. CyberAmerica is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada, with full corporate power to carry on its business as
now being conducted and to own and operate the property and assets now
owned and operated by it, and is duly qualified to transact business
and in good standing in each jurisdiction where the ownership of its
properties or the conduct of its business requires it to be licensed
or qualified to do business.
b. Capital Stock. The authorized capital stock of CyberAmerica consists
of: 20,000,000 shares of Preferred Stock, $0.001 par value,
200,000,000 shares of Common Stock, $0.001 par value. 8,587,934 shares
of Common Stock were issued and outstanding at the close of business
on November 1, 1996. All of said outstanding shares are validly
issued, fully paid and non-assessable.
<PAGE>
c. Validity of Shares. The shares of Common Stock to be delivered by
CyberAmerica pursuant to this Agreement will, when so delivered, be
validly issued and outstanding, fully paid and non-assessable.
d. Changes, Dividends, Etc. Prior to the closing hereunder, CyberAmerica
will not split, combine or otherwise change or reclassify its
outstanding Common Stock or declare or distribute any cash or stock
dividend upon such Common Stock.
e. Authorization of Agreement. The execution, delivery and performance of
this Agreement has been duly authorized by all requisite corporate
action, and will not result in any breach of or violate or constitute
a default under its Articles of Incorporation or By-Laws or any
indenture, mortgage or other agreement or instrument to which it is a
party.
f. No Violation of Law, Etc. Neither the execution nor the delivery of
this Agreement by CyberAmerica, nor the performance of any of its
obligations hereunder will result in a breach or violation of any law,
order, rule, regulation, writ, injunction or decree or any
governmental instrumentality or court having jurisdiction over
CyberAmerica or any of its assets or rights, or result in the creation
or imposition of any lien, charge or encumbrance of any kind whatever
on any of such assets or rights.
g. Financial Statements. CyberAmerica has delivered to the Company its
reports on Forms 10-QSB and 10-KSB for the past two years which
contain a consolidated balance sheet as of September 30, 1996, and the
related statement of consolidated income for the year then ended. Such
financial statements are complete, have been prepared in accordance
with generally accepted accounting principles consistently applied and
fairly present the consolidated financial position of CyberAmerica at
such date, and the results of its operations for the period therein
specified.
8. Conditions to Obligations of CyberAmerica. The obligations of CyberAmerica
under this Agreement are subject to the fulfillment, at or prior to the
Closing Date, of the following conditions precedent:
a. All representations and warranties of Investment Sanctuary and Richard
D. Surber contained herein and in any certificate or other investment
delivered pursuant to the provisions hereof, or in connection with the
transactions contemplated hereby, shall be true on the Closing Date
with the same force and effect as though such representations and
warranties had been made on the Closing Date.
b. Investment Sanctuary and Richard D. Surber shall have performed and
complied with all of the terms, covenants and conditions of this
Agreement to be performed or complied with by them, respectively, on
or before the Closing Date.
c. Richard D. Surber, as the President and sole Director of Investment
Sanctuary has taken all necessary action to authorize the execution
and performance of this Agreement.
<PAGE>
9. Conditions to Obligations of Investment Sanctuary and Richard D. Surber.
The obligations of Investment Sanctuary and Richard D. Surber under this
Agreement are subject to the fulfillment, on or before the Closing Date, of
the following conditions:
a. All representations and warranties of CyberAmerica contained
herein and in any certificate or other instrument delivered
pursuant to the provisions hereof, or in connection with the
transactions contemplated hereby, shall be true on the Closing
Date with the same force and effect as though such
representations and warranties had been made on the Closing Date.
b. CyberAmerica shall have performed and complied with all of the
terms, covenants and conditions of this Agreement to be performed
or complied with by it on or before the Closing Date.
c. The Board of Directors of CyberAmerica shall have taken all
necessary action to authorize the execution and performance of
this Agreement, including the delivery of shares of Common Stock
of CyberAmerica to Richard D. Surber in accordance with this
Agreement, and CyberAmerica shall have delivered to Richard D.
Surber true and complete copies of resolutions of its Board of
Directors evidencing such action.
10. Survival of Representations and Warranties; Indemnification.
a. Survival. All representations, warranties and agreements contained in
this Agreement shall survive the Closing notwithstanding any
investigation conducted with respect thereto; however, a party shall
have no liability with respect to a representation and warranty, or an
agreement to be performed or complied with prior to the Closing Date,
to the extent that the inaccuracy of such representation and warranty
or the failure to perform and comply with such agreement was not
intentional and was disclosed in a schedule delivered pursuant to this
Agreement.
b. Indemnification by Investment Sanctuary . Investment Sanctuary and
Richard D. Surber shall indemnify and hold harmless CyberAmerica, and
shall reimburse CyberAmerica for any loss, liability, claim, damage,
expense (including, but not limited to, costs of investigation and
defense and reasonable attorneys' fees) or diminution of value
(collectively "Damages") arising from or in connection with (a) any
inaccuracy in any of the representations and warranties of Investment
Sanctuary or Richard D. Surber in this Agreement, or any actions,
omissions or state of facts inconsistent with any such representation
or warranty, (b) any failure by Investment Sanctuary or Richard D.
Surber to perform or comply with any agreement in this Agreement.
c. Indemnification by CyberAmerica . CyberAmerica shall indemnify and
hold harmless Investment Sanctuary and Richard D. Surber, and shall
reimburse Investment Sanctuary for, any damages arising from or in
connection with (a) any inaccuracy in any of the representations and
warranties of CyberAmerica in this Agreement, or any actions,
omissions or state of acts inconsistent with any such representation
or warranty, (b) any failure by CyberAmerica to perform or comply with
any agreement in this Agreement.
11. Investment Representation. Richard D. Surber acknowledges his understanding
that the shares of CyberAmerica Common Stock to be delivered pursuant to
this Agreement will not be registered pursuant to the Securities Act of
1933, as amended and he further represents to and agrees with CyberAmerica
as follows:
<PAGE>
a. He is acquiring the shares of CyberAmerica Common Stock pursuant to
this Agreement for his own private personal investment account and
with no present intention of reselling or distributing such shares or
any portion thereof to others.
b. He fully comprehends that in connection with the issuance of shares of
CyberAmerica Common Stock pursuant to this Agreement, CyberAmerica is
relying to a material degree on the representations, warranties and
covenants contained herein, and with such realization he authorizes
CyberAmerica to act as it may see fit in full reliance hereon.
c. He agrees that none of such shares will be transferred or distributed
unless (i) they are covered by an effective Registration Statement
prepared in accordance with the Securities Act of 1933, as amended and
are distributed in a manner complying with such Act and with the Rules
and Regulations promulgated thereunder; or (ii) they may be
transferred in accordance with Rule 144 under the Securities Act of
1933, as amended (or such similar rules as may be applicable to such
shares at the time of transfer) so long as such transfer strictly
complies with said Rule 144 and with such procedures as CyberAmerica
may reasonably establish in connection therewith; or (iii) there is
first delivered to CyberAmerica the written legal opinion of legal
counsel in form and substance reasonably satisfactory to
CyberAmerica's legal counsel to the effect that such transfer or
distribution shall not result in a violation of the Securities Act of
1933, as amended. In the event such legal opinion is based upon the
exemption now contained in Section 4(2) of the 1933 Act, the person
acquiring the shares or some portion thereof shall execute and deliver
to CyberAmerica a letter agreement complying with the Securities Act
of 1933, as amended and the Rules and Regulations promulgated
thereunder.
d. He hereby agrees that the certificate(s) representing such shares may
bear a legend, as set forth below, setting forth the restrictions upon
transfer which are contained in the foregoing subparagraph (c) and
that CyberAmerica may deliver to its transfer agent a "stop transfer
order" directing the transfer agents not to effect any transfer of
such shares without having received the permission of CyberAmerica and
evidence of compliance with applicable provisions of the 1933 Act and
the terms of this Agreement.
The shares represented by this certificate have not
been registered under the Securities Act of 1933 (the
"Act") and are "restricted securities" as that term is
defined in Rule 144 under the Act. The shares may not
be offered for sale, sold or otherwise transferred
except pursuant to an effective Registration Statement
under the Act or pursuant to an exemption from
registration under the Act, the availability of which
is to be established to the satisfaction of
CyberAmerica.
e. He hereby agrees to indemnify CyberAmerica against and hold it
harmless from all losses, liabilities, costs and expenses (including
reasonable attorneys' fees) which shall arise as a result of a sale or
distribution by him of such shares or any portion thereof in violation
of the 1933 Act or the terms of this Agreement.
12. Brokers and Finders. Investment Sanctuary and Richard D. Surber represent
to CyberAmerica and CyberAmerica represent to Investment Sanctuary and
Richard D. Surber, that no person, firm or corporation has been requested,
authorized or employed by CyberAmerica or Investment Sanctuary or Richard
D. Surber to act as finder, broker or agent in connection with the subject
matter of this Agreement or negotiations leading thereto.
13. Further Assurances.
a. At the request of CyberAmerica, and without further consideration,
Investment Sanctuary and Richard D. Surber will execute and deliver
such additional instruments of transfer and will take such other
action as CyberAmerica reasonably may request in order more
effectively to transfer to CyberAmerica full ownership and control of
Investment Sanctuary, and specifically, its ownership interest in the
McIntyre Building, together with instruments evidencing the existing
liabilities of Investment Sanctuary, as well as the cancellation of
the Option.
b. At the request of Richard D. Surber, and without further
consideration, CyberAmerica will execute and deliver such additional
instruments and will take such other actions as Richard D. Surber may
reasonably request in order more effectively to carry out the
transaction contemplated by this Agreement.
14. Expenses. CyberAmerica shall bear all out-of-pocket expenses arising from
this Agreement, including but not limited to, travel, lodging, filing fees,
printing, postage, delivery, shipping, copying, telephone calls, overnight
packages, facsimiles, and other related expenses.
15. Other Matters.
a. No Other Agreements. All terms and conditions of this Agreement are
set forth herein, and there are no warranties, agreements or
understandings, express or implied, except those expressly set forth
herein.
b. Amendment. This Agreement may be amended only by a written instrument
signed by CyberAmerica and Richard D. Surber.
c. Notices. Any notice or other communication required or permitted to be
given hereunder shall be deemed properly given if personally delivered
or deposited in the United States mail, registered or certified and
postage prepaid, addressed to Richard D. Surber at 1448 South Roberta
Street, Salt Lake City, Utah 84115 or to CyberAmerica at 268 West 400
South, Suite 300, Salt Lake City, Utah 84101, or at such other
addresses as may from time to time be designated by the respective
parties in writing.
d. Specific Performance . The parties acknowledge that the subject matter
of this Agreement (i.e., the ownership interest of Investment
Sanctuary in the McIntyre Building ) is unique and that no adequate
remedy of law would be available for breach of this Agreement.
Accordingly, each party agrees that the other parties will be entitled
to an appropriate decree of specific performance or other equitable
remedies to enforce this Agreement (without any bond or other security
being required) and each party waives the defense in any action or
proceeding brought to enforce this Agreement that there exists an
adequate remedy at law.
e. Assignment . The rights and obligations of the parties shall inure to
the benefit of and shall be binding upon their successors and assigns.
<PAGE>
f. No Third Party Beneficiaries. 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 or by reason of
this Agreement.
g. Paragraphs and Other Headings. Paragraphs or other headings contained
in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
h. No Waiver. The failure of any party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a
waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement. Any
waiver must be in writing.
i. Choice of Law. It is the intention of the parties that the laws of the
State of Utah should govern the validity of this Agreement, the
construction of its terms and the interpretation of the rights and
duties of the parties.
j. Severability. 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, the same shall not affect any other
provisions of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provisions had never been
contained herein.
k. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
written below to be effective as of October 31, 1996.
CyberAmerica Corporation
By:/s/ Susan Waldrop Date: December 30, 1996
Susan Waldrop, Chief Financial Officer
Investment Sanctuary
By:/s/ Richard D. Surber Date: December 30, 1996
Richard D. Surber, President
By: /s/ Richard D. Surber Date: December 30, 1996
Richard D. Surber, an Individual
<PAGE>
SCHEDULE A
The following represents the assets of Investment Sanctuary transferred to
Richard D. Surber in full satisfaction of any and all debt owed to Richard D.
Surber by Investment Sanctuary:
1. The balance of cash in Investment Sanctuary's savings account with the
Key Bank of Utah, account number 440589058245 ($7,407.96);
2. 1993 Volkswagon Corrado SLC; vehicle number WVWED4508PK004290. Richard
D. Surber shall assume the current note on the vehicle held by Key
Bank of Utah, loan number 009-000000000002450412, and release
Investment Sanctuary from such obligation;
3. 1984 190E Mercedes; vehicle number WDBDA24A5EA078433;
4. $15,000 cash from proceeds of the sale of the McIntyre Building;
5. Any and all right, title and interest in stock held in the Gruntel &
Co., Inc. brokerage account, account number 404-15384;
6. Any and all right, title and interest in stock held in the Canaccord
Capital Corporation brokerage account, account number 241201-B;
7. Any and all right, title and interest in any stock registered or
issued in the name of Richard D. Surber, which was issued or assigned
prior to October 31, 1996 as consideration for any services provided
by Investment Sanctuary.
<PAGE>
EXHIBIT B
AGREEMENT
THIS AGREEMENT ("Agreement") is entered into by and between Richard D.
Surber, an individual, and Investment Sanctuary Corporation ("Investment
Sanctuary"), a Utah corporation, on this 3rd day of January, 1996.
PREMISE
WHEREAS, Richard D. Surber is required to file Schedule 13D and
Investment Sanctuary is required to file an amendment to Schedule 13D as
promulgated under the Securities Act of 1933 ("Schedule 13D/A") due to their
respective ownership of common stock of CyberAmerica Corporation.
AGREEMENT
NOW, THEREFORE, based on the foregoing premises, which are incorporated
herein by this reference, and for and in consideration of the mutual covenants
and agreements contained herein, and in reliance on the representations and
warranties set forth in this Agreement, the benefits to be derived herein and
for other valuable consideration, the sufficiency of which is hereby expressly
acknowledged, the Parties agree as follows:
1. Richard D. Surber and Investment Sanctuary acknowledge that each
other is required to file with the Securities and Exchange Commission a
Schedule 13D and an amendment to a Schedule 13D, respectively, as a
result of Richard D. Surber's individual acquisition of Common Stock of
CyberAmerica and Investment Sanctuary's cancellation of an option to
purchase 25% of the issued and outstanding shares of Common Stock of
CyberAmerica, and, in the interest of consolidation and efficiency,
desire to file a single statement pursuant to Rule 13d-1(f) of the
Securities Exchange Act of 1934.
2. Richard D. Surber and Investment Sanctuary hereby consent to have a
single Schedule 13D/A filed pursuant to Rule 13d-1(f) as fulfillment of
the individual obligation of Richard D. Surber and the individual
obligation of Investment Sanctuary to file such a schedule in a joint
manner.
IN WITNESS WHEREOF, the signatures of the parties hereto evidence their
mutual assent and acceptance of this Agreement as of the date first set forth
above.
Richard D. Surber, an individual Investment Sanctuary, Corporation
/s/ Richard Surber /s/ Richard D. Surber
Richard Surber, President Richard D. Surber, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S DECEMBER 31,
1996 ANNUAL REPORT ON FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 78,368
<SECURITIES> 649,460
<RECEIVABLES> 1,809,930
<ALLOWANCES> 189,097
<INVENTORY> 0
<CURRENT-ASSETS> 2,404,315
<PP&E> 8,139,049
<DEPRECIATION> 968,737
<TOTAL-ASSETS> 10,258,617
<CURRENT-LIABILITIES> 3,366,611
<BONDS> 0
0
0
<COMMON> 9,485
<OTHER-SE> 3,338,862
<TOTAL-LIABILITY-AND-EQUITY> 10,258,617
<SALES> 0
<TOTAL-REVENUES> 2,655,482
<CGS> 0
<TOTAL-COSTS> 2,120,837
<OTHER-EXPENSES> 2,444,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 213,141
<INCOME-PRETAX> (2,186,054)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,186,054)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,049,413)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
