SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended September 30, 1998.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
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Commission file number: I-9418
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CYBERAMERICA CORPORATION
---------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 87-0509512
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
268 West 400 South, Salt Lake City, Utah 84101
--------------------------------------------------
(Address of principal executive office) (Zip Code)
(801) 575-8073
---------------
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes XX No
---- ----
The number of outstanding shares of the issuer's common stock, $0.001
par value (the only class of voting stock), as of November 1, 1998 was
2,832,064.
<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS..................................4
PART II
ITEM 1. LEGAL PROCEEDINGS.....................................................7
ITEM 5. OTHER INFORMATION.....................................................7
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................7
SIGNATURES.....................................................................8
INDEX TO EXHIBITS..............................................................9
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
2
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ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to CyberAmerica Corporation,
a Nevada corporation, and its subsidiaries and predecessors unless otherwise
indicated. Consolidated, unaudited, condensed interim financial statements
including a balance sheet for the Company as of the quarter ended September 30,
1998 and statements of operations, and statements of cash flows for the interim
period up to the date of such balance sheet and the comparable period of the
preceding year are attached hereto as pages F-1 through F-7 and are incorporated
herein by this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
- -----------------------------
PAGE
Consolidated Unaudited Condensed Balance Sheet September 30, 1998............F-2
Consolidated Unaudited Condensed Statements of Operations
September 30, 1998 and 1997.................................................F-4
Consolidated Unaudited Condensed Statements of Cash Flows
September 30, 1998 and 1997.................................................F-6
Notes to Consolidated Unaudited Condensed Financial Statements
September 30, 1998..........................................................F-7
F-1
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS
September 30, 1998
ASSETS
- ------
CURRENT ASSETS
Cash $ 71,753
Accounts receivable - trade 198,886
(Net of allowance for bad debt of $89,097)
Accounts receivable - related parties 290,742
Accounts receivable - other 58,349
Note receivable - current 88,645
Prepaid expenses 13,202
Securities available for sale 378,463
--------------
TOTAL CURRENT ASSETS 1,100,040
--------------
PROPERTY AND EQUIPMENT - NET 10,224,065
OTHER ASSETS
Investment securities at cost 1,082,318
Notes receivable - net of current 12,000
Investments - other 241,966
Trade credits 161,742
--------------
TOTAL OTHER ASSETS 1,498,026
--------------
TOTAL ASSETS $ 12,822,131
==============
See notes to consolidated unaudited condensed financial statements.
F-2
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS (Continued)
September 30, 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable - trade $ 320,615
Accrued liabilities
Interest 37,221
Real estate taxes and assessments 438,351
Payroll and related taxes payable 124,612
EPA liabilities 325,398
Refundable deposits 24,471
Refund to investors 54,746
Other 1,500
Debenture payable 260,000
Current maturities of long-term debt 687,492
--------------
TOTAL CURRENT LIABILITIES 2,274,406
--------------
LONG-TERM LIABILITIES
Long-term debt, less current portion 6,279,387
--------------
MINORITY INTEREST 1,352,431
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; 2,832,064 shares issued 2,832
Additional paid-in capital 15,058,172
Accumulated deficit (11,698,597)
Unrealized loss from securities available for sale (446,500)
--------------
TOTAL SHAREHOLDERS' EQUITY 2,915,907
--------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,822,131
==============
See notes to consolidated unaudited condensed financial statements.
F-3
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
REVENUE
Sale of property $ 200,161 $ 950,000 $ 655,892 $ 2,285,000
Consulting revenue 364,921 88,608 743,586 214,382
Rental revenue 183,927 110,428 541,567 372,298
Other revenue -- -- -- 3,401
------------ ------------ ------------ -----------
TOTAL REVENUE 749,009 1,149,036 1,941,045 2,875,081
COSTS OF REVENUE
Cost of sale of property 22,801 404,652 47,638 1,071,222
Costs associated with consulting revenue 110,970 39,410 200,645 145,031
Costs associated with rental revenue 118,582 87,817 305,381 267,198
Interest expenses associated with rental revenue 106,384 57,763 254,956 151,482
Cost associated with other revenue -- -- -- --
------------ ------------ ------------ -----------
TOTAL COSTS OF REVENUE 358,737 589,642 808,620 1,634,933
------------ ------------ ------------ -----------
GROSS PROFIT 390,272 559,394 1,132,425 1,240,148
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 328,480 150,021 934,980 1,011,016
Computer development costs -- -- -- 121,720
------------ ------------ ------------ -----------
TOTAL SELLING, GENERAL
AND ADMINISTRATIVE 328,480 150,021 934,980 1,132,736
OPERATING INCOME (LOSS) 61,792 409,373 197,445 107,412
------------ ------------ ------------ -----------
OTHER INCOME (EXPENSE):
Interest income 95,402 38,647 160,727 58,641
Interest expense (101,085) (64,718) (205,254) (239,582)
Gain (loss) from sale of assets 23,250 -- 23,250 (11,540)
Gain (loss) from investment securities 209,727 (143,183) 562,422 (478,442)
Gain from recoveries of bad debts -- -- -- 151,200
Gain from disposal of subsidiary -- -- -- 90,681
Loss on foreclosure -- -- (274,220) --
Other income 38,252 -- 39,030 (14,483)
------------ ------------ ------------ -----------
TOTAL OTHER INCOME (EXPENSES) 265,546 (169,254) 305,955 (443,525)
------------ ------------ ------------ -----------
INCOME (LOSS) BEFORE INCOME TAXES,
AND MINORITY INTEREST 327,338 240,119 503,400 (336,113)
EXTRAORDINARY LOSS FROM FIRE -- (32,735) -- (32,735)
------------ ------------ ------------ -----------
See notes to consolidated unaudited condensed financial statements.
F-4
<PAGE>
INCOME (LOSS) BEFORE
MINORITY INTEREST 327,338 207,384 503,400 (368,848)
MINORITY INTEREST IN LOSS (GAIN) 92,782 2,438 145,735 (43,670)
------------ ------------ ------------ -----------
NET INCOME (LOSS) $ 420,120 $ 209,822 $ 649,135 $ (412,518)
============ ============ ============ ===========
INCOME (LOSS) PER COMMON SHARE
Income (loss) before extraordinary item $ 0.12 $ 0.28 $ 0.18 $ (0.48)
Extraordinary item -- (0.03) -- (0.04)
------------ ------------ ------------ -----------
Income (loss) before minority interest $ 0.12 $ 0.25 $ 0.18 $ (0.52)
Minority interest in loss (gain) 0.03 0.00 0.05 (0.06)
------------ ------------ ------------ -----------
Net income (loss) per weighted average
common share outstanding $ 0.15 $ 0.25 $ 0.23 $ (0.58)
============ ============ ============ ===========
Weighted average number of common
shares outstanding 2,832,064 850,086 2,798,664 706,658
============ ============ ============ ===========
</TABLE>
See notes to consolidated unaudited condensed financial statements.
F-5
<PAGE>
CYBERAMERICA CORPORATION SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
Unaudited
--------------------------
1998 1997
------------ ------------
<TABLE>
<CAPTION>
<S> <C> <C>
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 649,135 $ (412,518)
Adjustments to reconcile net income (loss)
to net cash provided:
(Gain) loss from sale of investments (562,422) 478,442
(Gain) from sale of assets (23,250) 11,540
(Gain) from sale of subsidiary -- (90,681)
Loss of foreclosure 274,220 --
Minority interest in (gain) loss 145,735 43,670
Depreciation and Amortization 152,250 159,373
Services paid with common stock 29,764 68,617
Common stock issued for assets and debt 39,231 146,230
Bad debt recoveries -- --
Decrease (increase) in assets:
Receivables 1,108,809 (438,345)
Receivables - related party 109,377 (194,669)
Other current assets (206,402) 23,946
Increase (decrease) in liabilities:
Accounts and notes payable (75,414) (101,870)
Payables - related parties (142,573) (19,730)
Accrued liabilities (374,537) 66,096
Current portion of long-term debt (626,541) 159,335
------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 497,382 $ (100,564)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cost of property sold 47,638 1,071,222
Minority interest in subsidiary 774,231 --
Purchase of assets (3,518,520) (2,461,556)
------------ ------------
NET CASH FLOWS (USED) IN INVESTING ACTIVITIES $(2,696,651) $(1,390,334)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock for cash 21,520 --
Increase in long term debt 2,871,078 2,004,000
Payment on debt (627,462) (587,320)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 2,265,116 $ 1,416,680
INCREASE (DECREASE) IN CASH 65,847 (74,218)
CASH AT BEGINNING OF PERIOD 5,906 78,368
------------ ------------
CASH AT END OF PERIOD $ 71,753 $ 4,150
============ ============
</TABLE>
See notes to consolidated unaudited condensed financial statements.
F-6
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 1998
1. Basis of Presentation
The accompanying consolidated unaudited condensed financial statements
have been prepared by management in accordance with the instructions in Form
10-QSB and, therefore, do not include all information and footnotes required by
generally accepted accounting principles and should, therefore, be read in
conjunction with the Company's Annual Report to Shareholders on Form 10-KSB for
the fiscal year ended December 31, 1997. These statements do include all normal
recurring adjustments which the Company believes necessary for a fair
presentation of the statements. The interim operations results are not
necessarily indicative of the results for the full year ended December 31, 1998.
2. Sale of Land
On May 1, 1998 The Company's wholly owned subsidiary, Oasis Hotel &
Casino, Inc., sold a 20 acre parcel of land located in northern Nevada to Oasis
Hotel, Resort & Casino-III, Inc. a wholly owned subsidiary of Flexweight, Inc.
The Company received 1,025,000 shares of common stock of Flexweight, Inc., a
Trust Deed note in the amount of $3,425,000 and with interest at 9% per annum
and monthly payment of $27,558 until April, 2008 when the balance is due. The
purchaser assumed a note due of $550,000. Revenue from this transaction is
reported using the installment method.
3. Purchase of Subsidiary
On April 30, 1998 the Company through its majority owned subsidiary,
TAC Inc., purchased a controlling interest in Golden Opportunity Development,
Inc. ("Golden"), in a business combination accounted for as a purchase. Golden
owns and operates a motel and rents other real property located in Baton Rouge,
Louisiana. The results of operations of Golden is included in the accompanying
financial statements since the date of acquisition. The total cost of the
acquisition was $800,000 and was equal to the fair market value at the date of
purchase. Golden has assets of approximately $3,600,000 debt of $1,900,000 and
equity of $1,600,000.
4. Loss on Foreclosure
On May 13, 1998 there was a Trustee's sale for property held in the
name of Vale Terrace Corporation, a wholly-owned subsidiary of TAC, Inc. a
majority owned subsidiary of the company. The Company recorded a loss of
$274,220 during the second quarter as a result of this foreclosure.
5. Additional footnotes included by reference
Except as indicated in Notes above, there have been no other material
changes in the information disclosed in the notes to the financial statements
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997. Therefore, those footnotes are included herein by reference.
F-7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Real Estate Divisions
The Company's operations primarily involve the acquisition, management,
lease and sale of real estate holdings. Over the past five 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
primarily commercial real estate which is believed to be undervalued with little
or no cash down. The Company acquires real estate with a view to resell at
substantial profits upon making improvements to the properties. While the
Company is making improvements to the properties, it generally enters into short
term leases to generate rental income.
The types of properties that the Company generally purchases include
Class C commercial buildings and raw land. The commercial space generally needs
a nominal to substantial amount of renovation to obtain market rents.
Accordingly, the typical result of purchasing such properties is that the
Company usually has insufficient cash flows from rental revenues to cover the
debt service and other expenses related to the Company's real estate because of
below market rents, short term financing arrangements and no rental revenues
from raw land. However, upon sale of such properties the Company has typically
realized substantial gains. To cover cash shortages, the Company generally uses
capital generated from its consulting division to cover deficits or the Company
will issue its common stock to raise additional capital. The Company's plans to
eliminate cash shortages and losses related to its real estate holdings include
plans to develop or sell portions of its raw land, increase occupancies, and
sell certain properties that operate at a loss.
Significant Real Estate Transactions and Developments
1. General Lafayette Hotel Located in Baton Rouge, Louisiana (the
"Hotel").
The Company's majority owned subsidiary, Innovative Property
Development Corp. f/k/a Tac, Inc. ("IPDC"), through its majority owned
subsidiary Golden Opportunity Development Corporation ("GODC"), retained the
services of an architectural firm in Baton Rouge, Louisiana to begin renovation
plans on the Hotel.
GODC retained the services of the architectural firm in its effort to
comply with requirements of becoming a Days Inn Franchise. On October 15, 1998,
GODC signed a License Agreement with Days Inn. In order for GODC to successfully
obtain the Days Inn franchise, GODC must obtain adequate financing to comply
with renovation requirements as set forth by Days Inn. The estimated cost of
renovation is expected to be approximately $1.2 million. Upon completion of the
necessary renovations, the Hotel will have an estimated value of $6.2 million
according to an MIA appraisal report prepared for various lending institutions
who may have an interest in financing the renovation. The completion of
renovations and the successful retention of the Days Inn franchise will
significantly increase the Hotel's rental revenues.
During the quarter the Company expended approximately $45,364 in
improvements and other expenses relating to the operation of the Hotel. The
Hotel is expected to operate at a loss until the renovations can be completed.
The Company's prospects for increasing value and realizing a profit on the Hotel
are primarily contingent upon GODC's ability to obtain adequate financing to
renovate the Hotel. Upon completion of the renovations to the Hotel, management
believes that the Hotel has the potential to operate at a substantial profit.
However, there is no guarantee that adequate financing will be secured or that
the Hotel will obtain profitability.
2. Purchase of the New Brigham Apartment Complex in Ogden, Utah
CyberState, Inc. ("CyberState"), a wholly owned subsidiary of the
Company, acquired a two-story 18 unit apartment building that includes 7,500
square foot of commercial space located at 2402 Wall Avenue in Ogden, Utah. The
total purchase price was $850,000. CyberState put $5,000 down and financed the
rest of the purchase price by obtaining a first mortgage of $125,000 at an
annual interest rate of 13% for a 12-month period and a second mortgage from the
4
<PAGE>
seller for $50,000 amortized over a 12-month period with an annual interest rate
of 10%. These two loans are secured by four units. The $670,000 balance is being
financed by the seller with payments that are based upon a 20-year amortization
with an interest rate of 7% for the first two years, which escalates to 9% for
the remaining term with the balance to be paid in full on or before 6 years from
the date of inception with no prepayment penalty. The $670,000 loan is secured
by the entire apartment complex excepting the four units mentioned above.
The two Real Estate Purchase Contracts ("REPC") signed between Richard
Surber ( the Company's president), Allen Wolfson (a control person of the
Company) and CyberState for the purchase of several units located in the New
Brigham Building were mutually rescinded. The REPC's were rescinded as a result
of CyberState's ability to close the transaction without the monies originally
anticipated from the contemplated sales to Mr. Surber and Mr. Wolfson which
CyberState intended to be used for the purchase of the apartment complex. (For
more information regarding this transaction See "Item 12. Certain Relationships
and Related Transactions" in the Company's Form 10-KSB for the year ended
December 31, 1997. Also see, the Company's Form 10-QSB for the quarter ended
March 31, 1998.)
3. Industrial Property in Cheriton, Virginia.
On June 22, 1998, Diversified Holdings XIX, Inc. ("Diversified"), a
wholly-owned subsidiary of IPDC, entered into a Lease with T and S Associates, a
Virginia limited partnership, ("T&S") that gives T&S the option to purchase the
Cheriton, Virginia from Diversified. The term of the lease was for 12 months
commencing on August 1, 1998, with an automatic extension for an additional 12
months. The lease payment was $10,000 per month. In addition, T&S had the option
to purchase the Cheriton property for $700,000 at any time up to September 1,
2000, with all the lease payments being applied towards the purchase price.
Diversified received $20,000 for first and last month's rent on June 22, 1998.
On September 30, 1998, T&S informed Diversified that its position was
that contingencies 1 and 3 of the lease agreement were not satisfied.
Accordingly, T&S' position is that they are no longer bound by the terms of the
lease. Diversified has not yet confirmed or disconfirmed T&S' allegations. (For
more information See "Item 2. Management's Discussion and Analysis or Plan of
Operation" in the Company's Form 10-QSB for the quarter ended June 30, 1998.)
The Company recorded rental revenues of $183,927 from its real estate
operations for the third quarter compared to $110,428 for the same period of
1997. This increase was due to the acquisition of the Hotel whose revenues are
consolidated with the Company's. The Hotel generated approximately $70,471 in
revenues and is expected to increase substantially upon completion of the
necessary renovations.
Financial Consulting Divisions
The Company through its wholly owned subsidiaries Canton Financial
Services Corporation and Hudson Consulting Group, Inc. provides a variety of
financial consulting services to a wide range of clients. The primary service
performed by the Company involves assisting clients in structuring mergers and
acquisitions. This includes locating entities suitable to be merged with or
acquired by the Company's clients, as well as providing general advice related
to the structuring of mergers or acquisitions. The Company also assists clients
in restructuring their capital formation and advises with respect to general
corporate problem solving.
The Company has reduced the scope and extent of the financial
consulting services it provides. Although the Company continues to provide
financial consulting services, this is done on a significantly smaller scale
than in past years. The Company has made an effort to limit the types of
consulting services it performs to those which have historically been the most
profitable and to reduce the number of clients retaining the Company's services.
The Company's consulting subsidiaries generate 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 is the
equity securities of 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 extent of 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.
5
<PAGE>
The Company generates 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 somewhat tied to the
price of its clients' securities. A decline in the market price of a client's
stock can affect the total asset value of the Company's balance sheet and can
result in the Company incurring substantial losses on its income statement.
Revenues from the Company's financial consulting operations increased
during the quarter ended September 30, 1998. The Company recorded quarterly
revenues of $364,921 from its financial consulting operations as compared to
$88,608 for the same period of 1997. This increase was due to payments made to
the Company from three clients during the quarter.
Results of Operations
- ---------------------
Gross revenues for the quarter ended September 30, 1998 were $749,009
compared to $1,149,036 for the same period in 1997, a decline of 35%. The gross
revenues for September 30, 1997 were higher than the comparable quarter in 1998
due to the sale of an office building located at 202 West 400 South in Salt Lake
City, Utah for $950,000. In contrast, the revenues from sale of real estate
during the quarter ending September 30, 1998, totaled $200,161. Rental revenues
increased by 67% from $110,428 during the quarter ended September 30, 1997, to
$183,927 for the comparable period in 1998. This increase is attributable to an
increase in occupancies and the revenues generated by the General Lafayette
Hotel which was acquired in the second quarter of 1998.
Costs of revenues were $358,737 for the quarter ended on September 30,
1998, compared to $589,642 for the comparable period in 1997. The decrease in
the costs of revenues is primarily due to the Company's reduced staff.
Additionally, the cost basis in the sale of the 202 West 400 South office
building was $404,652.
Gross profit was $390,272 for the quarter ended on September 30, 1998
and $559,364 for the comparable quarter in 1997. Gross profit as a percentage of
revenues was 52% and 49%, respectively.
Selling, general, and administrative expenses were $328,480 for the
quarter ended on September 30,1998 and $150,021 for the comparable period in
1997, an increase of $178,549.
Operating income was $61,792 during the quarter ended on September 30,
1998, compared to an operating gain of $409,373 for the comparable quarter in
1997. In 1997 the Company's operating gain was primarily attributable to the
sale of the 202 West 400 South office building from which the Company recorded a
$545,348 profit.
During the quarter ended September 30, 1998, the Company realized other
income in the amount of $265,546. During the comparable period in 1997, the
Company incurred other expenses in the amount of $169,254. The primary reason
for the difference is a $209,727 gain from the sale of investment securities as
opposed to a $143,183 loss from the sal e of investment securities.
Capital Resources and Liquidity
- -------------------------------
The Company had a net working capital deficiency of $1,174,366 for the
quarter ended September 30, 1998, as compared to $574,118 at the end of
September 30, 1997. The largest component of the Company's working capital
deficit is approximately $650,000 in short term debt used to purchase the
Company's office building located at 268 West 400 South in Salt Lake City, Utah.
The Company is currently working on plans to refinance the debt.
Net stockholder's equity in the Company was $2,915,907 as of September
30, 1998, compared to $3,407,825 as of September 30, 1997. The decrease in net
stockholder's equity is primarily due to a recorded loss of $1,930,000 for the
year ended December 31, 1997.
Due to the Company's debt service on real estate holdings, willingness
to acquire properties with negative cash flows and acceptance of non-cash assets
for consulting services, 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.
6
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
State of West Virginia vs. Canton Tire Recycling West Virginia, Inc.,
Canton Industrial Corporation and CyberAmerica Corporation - Suit was filed on
August 14, 1998 in the Circuit Court of Wood County, Parkersburg, West Virginia
as file no. 98 C 354 seeking the completion of clean up procedures for property
owned by Canton Tire Recycling West Virginia, located in the city of
Parkersburg. The state contends that certain waste material is still present on
the site and that any remaining material needs to be removed from tanks and an
oil/water separator located on the property. The Complaint requests that the
court award the state civil damages in an amount to be determined at the time of
trial. Local counsel has been retained and efforts to work toward resolution of
the claims asserted is ongoing.
No other material developments occurred in the third quarter regarding
the Company's legal proceedings. For more information please see the Company's
Form 10-KSB for the year ended December 31, 1997.
ITEM 5. OTHER INFORMATION
Subsequent to September 30, 1998, the Companys president and general
counsel visited the Companys warehouse property in Canton, Illinois which was
destroyed by fire on August 6, 1997. The purpose of the visit was to meet with
several parties including the United States Environmental Protection Agency, the
contractor retained to remove asbestos containing materials from the site and
the qualified site clean up designer. The contractor appears to have made
substantial progress in the removal of scrap materials including the removal of
asbestos containing materials. However, the contractor has only been able to
work about three months since being retained by the Companys wholly owned
subsidiary Thistle Holdings, Inc. (Thistle) in late 1997 due to problems with
the site plan to clean up the property. The Company has recently been informed
that the problems with the site plan have been rectified and that the contractor
has commenced operations.
To date the contractor, claims that he has expended $239,099 in
removing the debris from the former 1,290,360 square foot facility. The
contractor has obtained funding for the clean up from the proceeds received from
selling scrap metals, bricks, wood and other materials. Of the $239,099 claimed
to have been expended, $162,198 is attributable to Thistle for its portion of
funds raised in the sale of the scrap material. It is managements belief that it
is possible that the proceeds from the scrap material will be able to fund the
entire surface clean up based upon its conversations with the contractor.
However, the current contractual arrangement between the Company, Thistle and
the contractor is unsettled based upon the state of the current written
agreement and various oral representations made by the contractor. The Company
intends to clarify the contractual arrangement before the end of the fourth
quarter.
While management's opinion concerning the surface clean up is
relatively optimistic, management has serious concerns about potential ground
contamination. The Company has not obtained any reports concerning potential
ground contamination. Nonetheless, the Illinois Environmental Protection Agency
has required the Company to test the ground for potential contamination.
Management is uncertain as to whether the ground is significantly contaminated.
However, given the history of the plant as former International Harvester Plant,
which is believed to have been operated from the late 1800's to 1984, it is
likely that some ground contamination is present. The degree of ground
contamination is unknown. The potential for liability attributable to the
Company is also unknown.
In the event ground contamination is discovered and the Company is
required to clean up such contamination, the Companys plan is to pursue Navistar
International Corporation, formerly known as International Harvester, for any
predecessor liability they may have for polluting the site.
For more information on the Companys Canton, Illinois property see Item
2. Description of Property and Item 3. Legal Proceedings in the Companys Form
10-KSB for the year ended December 31, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
---------
Exhibits required to be attached by Item 601 of Regulation S-B are
listed in the Index to Exhibits on page 9 of this Form 10-QSB, and are
incorporated herein by this reference.
(b) Reports on Form 8-K.
--------------------
No reports were filed on Form 8-K during the quarter.
7
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 13th day of November, 1998.
CYBERAMERICA CORPORATION
/s/ Richard Surber
------------------------
Richard Surber November 25 , 1998
President, Chief Executive Officer and Director
/s/ Wayne Newton
------------------------
Wayne Newton November 25 , 1998
Controller
8
<PAGE>
INDEX TO EXHIBITS
Exhibits marked with an asterik have been previously filed and are
incorporated herein by reference.
EXHIBIT PAGE DESCRIPTION
NO. NO.
- ------- ----
3(i) * Articles of Incorporation of the Company
(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.)
MATERIAL CONTRACTS
10(i)(a) * Real Estate Purchase Agreement, dated July
14, 1997, between the Company's wholly owned
subsidiary, CyberState, Inc., and James
Stacy. (Incorporate herein by reference from
Exhibit No. 10(i)(b) of the Company's Form
10-KSB for the period ended December 31,
1997.)
10(i)(b) * Real Estate Purchase Agreement, dated
October 10, 1997, between the Company's
wholly owned subsidiary, CyberState, Inc.,
and Richard Surber. (Incorporate herein by
reference from Exhibit No. 10(i)(c) of the
Company's Form 10-KSB for the period ended
December 31, 1997.)
10(i)(c) * Real Estate Purchase Agreement, dated
October 10, 1997, between the Company's
wholly owned subsidiary, CyberState, Inc.,
and Allen Wolfson. (Incorporate herein by
reference from Exhibit No. 10(i)(d) of the
Company's Form 10-KSB for the period ended
December 31, 1997.)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S SEPTEMBER 30,
1998, QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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