SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 1998.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
Commission file number: I-9418
CyberAmerica Corporation
(Exact name of small business issuer as specified in its charter)
Nevada 87-0509512
(State or other jurisdiction of (I.R.S. Employer 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 May 15, 1998 was 2,988,166.
1
<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.....................................................6
ITEM 5. OTHER INFORMATION.....................................................7
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................8
SIGNATURES.....................................................................9
INDEX TO EXHIBITS.............................................................10
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
2
<PAGE>
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 March 31, 1998
and statements of operations, statements of shareholders equity 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-6 and are incorporated herein by this reference.
This space intentionally left blank.
3
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
Consolidated Unaudited Condensed Balance Sheet March 31, 1998 F-2
Consolidated Unaudited Condensed Statements of Shareholder's
Equity March 31, 1998 F-3
Consolidated Unaudited Condensed Statements of Operations
March 31, 1998 and 1997 F-4
Consolidated Unaudited Condensed Statements of Cash Flows
March 31, 1998 and 1997 F-5
Notes to Consolidated Unaudited Condensed
Financial Statements March 31, 1998 F-6
This space intentionally left blank.
F-1
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS
March 31, 1998
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS
<S> <C>
Cash ...................................................... $ 6,078
Accounts receivable - trade ............................... 287,066
(Net of allowance for bad debt of $89,097)
Accounts receivable - related parties ..................... 424,980
Accounts receivable - other ............................... 58,250
-----------
Note receivable - current ................................. 1,138,645
Prepaid expenses .......................................... 40,668
Securities available for sale ............................. 122,626
-----------
TOTAL CURRENT ASSETS ......................................... 2,078,313
-----------
PROPERTY AND EQUIPMENT - NET ................................. 7,717,260
OTHER ASSETS
Investment securities at cost ............................. 48,426
Notes receivable - net of current ......................... 24,000
Investments - other ....................................... 221,694
Deposits .................................................. 10,000
Trade credits ............................................. 212,811
Prepaid Interest .......................................... 98,000
- -------------------------------------------------------------- -----------
TOTAL OTHER ASSETS ........................................... 614,931
TOTAL ASSETS ................................................. $10,410,504
===========
</TABLE>
See notes to consolidated unaudited condensed financial statements.
F-2
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENT OF SHAREHOLDER'S EQUITY
March 31, 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C>
Accounts payable - trade .................................. $ 437,656
Accounts payable - related parties ........................ 128,481
Accrued liabilities
Interest ................................................ 19,744
Real estate taxes and assessments ....................... 415,552
Payroll and related taxes payable ....................... 382,572
EPA liabilities ......................................... 325,398
Refundable deposits ..................................... 14,580
Refund to investors ..................................... 67,485
Other ................................................... 1,300
Debenture payable ......................................... 240,000
Current maturities of long-term debt ...................... 1,608,726
TOTAL CURRENT LIABILITIES .................................... 3,641,494
LONG-TERM LIABILITIES
Long-term debt, less current portion ...................... 4,220,885
TOTAL LONG-TERM LIABILITIES .................................. 4,220,885
CONTINGENCIES
MINORITY INTEREST ............................................ 683,112
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; 2,190,064 shares issued .............. 2,190
Additional paid-in capital ................................ 14,991,814
Accumulated deficit ....................................... (12,682,491)
Unrealized loss from securities available for sale ........ (446,500)
TOTAL SHAREHOLDERS' EQUITY ................................... 1,865,013
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................... $ 10,410,504
============
</TABLE>
See notes to consolidated unaudited condensed financial statements.
F-3
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For The Three Months Ended March 31, 1998 and 1997
1998 1997
------ ------
<TABLE>
<CAPTION>
REVENUE
<S> <C> <C>
Consulting revenue ............................. $ 41,724 $ 84,632
Rental revenue ................................. 116,540 143,980
----------- --------
TOTAL REVENUE ..................................... 158,264 228,612
COSTS OF REVENUE
Costs associated with consulting revenue ....... 28,764 44,265
Costs associated with rental revenue ........... 35,471 91,986
Interest expenses associated with rental revenue 64,786 45,916
----------- -------
TOTAL COSTS OF REVENUE ............................ 129,291 182,167
----------- -------
GROSS PROFIT ...................................... 28,973 46,445
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ...... 383,171 445,367
Computer development costs ..................... -- 121,720
----------- -------
TOTAL SELLING, GENERAL AND ADMINISTRATIVE ......... 383,171 567,087
OPERATING INCOME (LOSS) ........................... (354,198) (520,642)
---------
OTHER INCOME (EXPENSE):
Interest income ................................ 39,069 --
Interest expense ............................... (46,570) (78,004)
Gain (loss) from investment securities ......... -- (59,309)
Other income (expense) ......................... (4,114) (17,960)
---------- --------
TOTAL OTHER INCOME (EXPENSES) ..................... (11,615) 155,273)
---------- --------
INCOME (LOSS) BEFORE INCOME TAXES,
AND MINORITY INTEREST ............................ (365,813) (675,915)
MINORITY INTEREST IN LOSS ......................... 31,054 24,932
----------- --------
NET INCOME (LOSS) ................................. $ (334,759) $ (650,983)
=========== =========
INCOME (LOSS) PER COMMON SHARE
Income before minority interest ................ $ (.17) $ (.69)
Minority interest in loss ...................... .01 .02
----------- ------
Net income (loss) per weighted average
common share outstanding ..................... $ (.16) $ (.67)
=========== ========
Weighted average number of common
shares outstanding ........................... 2,180,564 974,671
=========== ========
</TABLE>
See notes to consolidated unaudited condensed financial statements.
F-4
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For Three Months Ended March 31, 1998 and 1997
1998 1997
------------------
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) ................................ $(334,759) $(650,983)
Adjustments to reconcile net income (loss)
to net cash provided
(Gain) loss from sale of investments ........... -- 59,309
Minority interest in loss ...................... (31,054) (24,973)
Depreciation and Amortization .................. 55,613 50,043
Services paid with common stock ................ 2,190 35,266
Common stock issued for assets and debt ........ -- 23,480
Decrease (increase) in assets:
Receivables .................................. 126,133 632,458
Prepaid expenses and other ................... 1,468 (16,589)
Investments - other .......................... 213 27,972
Increase (decrease) in liabilities:
Accounts and notes payable ................... 7,535 91,283
Accrued liabilities .......................... (152,505) (7,596)
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES ... $(325,166) $ 219,670
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ........................... (30,706) (719,211)
Proceeds from sales of investments ............. 75,463 179,673
--------- ---------
NET CASH FLOWS (USED) IN INVESTING ACTIVITIES ...... $ 447,537 $(539,538)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long term debt ...................... 640,000 627,413
Reduction of long term debt ..................... (359,419) (358,701)
- ---------------------------------------------------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES .......... $ 280,581 $ 268,712
--------- ---------
INCREASE (DECREASE) IN CASH ........................ $ 172 $ (51,156)
CASH AT BEGINNING OF YEAR .......................... 5,906 78,368
---------
CASH AT END OF YEAR ................................ $ 6,078 $ 27,212
========= =========
</TABLE>
See notes to consolidated unaudited condensed financial statements.
F-5
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
March 31, 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. Purchase of Building
In March 1998, Canton's Commercial Carpet Corporation purchased a
building formerly reported as a capitalized lease property for $381,000 and
incurred mortgage debt of $640,000.
3. Additional footnotes included by reference
Except as indicated in Notes 1-2 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-6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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
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.
Through its wholly owned subsidiaries Canton Financial Services
Corporation and Hudson Consulting Group, Inc., the Company also provides a
variety of financial consulting services to a wide range of clients. As used in
this Item, the term Company will encompass one or both of these subsidiaries.
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.
Real Estate Holdings
The Company's objective with respect to its real estate operations is
to acquire, through its subsidiaries, properties throughout the country which
the Company's management believes to be undervalued and which the Company is
able to acquire with limited amounts of cash. The Company attempts to acquire
such properties by assuming existing favorable financing and paying the balance
of the price with nominal cash payments or through the issuance of the Company's
common stock. The Company also makes limited investments in improvements to the
properties with the objective of increasing occupancy and improving cash flows.
During the first quarter of 1998, the Company purchased one commercial
property. On March 6, 1998, Canton's Commercial Carpet Corporation ("CCCC"), a
consolidated subsidiary of the Company exercised its option to purchase a
two-story 16,000 square foot building located at 268 West 400 South, Salt Lake
City, Utah. CCCC obtained the necessary financing to purchase the building for
$418,762, which amount includes fees and commissions. CCCC has leased the
building since May 1994 and the building has served as the Company's principal
executive offices for the past two years. CCCC borrowed an additional sum of
$222,489 which is secured by the property.
Subsequent to the first quarter, TAC, Inc., a consolidated subsidiary
of the Company acquired a hotel property in Baton Rouge, LA. For more
information regarding this transaction see " Item 5 - Other Information."
While the Company does lease a majority of its commercial properties,
its primary objective is to acquire real estate which will substantially
appreciate in value and for which the Company can realize a substantial gain
upon disposition. The Company intends to sell further real estate holdings on a
case by case basis provided that it believes that local market conditions make
such sales in the best interest of the company and its subsidiaries. The Company
did not sell any properties during the quarter ended March 31, 1998.
However, on April 9, 1998, the Company did enter into a real estate
purchase agreement for the sale of property in Oasis, Nevada. For more
information on this transaction see "Item 5 - Other Information."
4
<PAGE>
Once such properties are acquired, the Company leases them to primarily
commercial tenants. The Company will also make limited investments in
improvements to the properties with the objective of increasing the occupancy
and improving cash flows. The Company leases its properties to commercial
tenants and applies the rental income toward its fixed obligations on the
properties. Currently, there are insufficient rental revenues to cover the debt
service and other expenses related to the Company's real estate operations, and
the Company therefore has to use capital from other sources to fund this
deficit.
This deficit has been primarily attributable to the Company's recent
investments in raw land and vacancies in the Company's commercial properties. To
eliminate these real estate operational losses the Company is attempting to
decrease the vacancies in its commercial properties, as well as, improve its raw
land for development and/or sale.
The Company recorded rental revenues of $116,540 from its real estate
operations for the first quarter as compared to $143,980 for the same period of
1997. This decrease over the past year was largely due to the sale of two
buildings during 1997 which decreased the available rental property.
There are five large balloon payments totaling $1,492,577 which come
due during 1998. All of these debts are secured by the Company's consolidated
real estate holdings. The Company intends to either fully satisfy or refinance
two of these obligations. The first, is a $100,000 note secured by the Plandome
building, plus $45,000 in accrued interest, which comes due in October, 1998.
The second, is a $315,000 note secured by the Company's principal executive
office building, which comes due in November, 1988. These obligations will have
a material effect on the Company's liquidity. Furthermore, there is a risk that
the Company may lose these properties to foreclosure if it is not able to meet
these obligations.
The third obligation is a $300,000 note secured by approximately 50 acres
of the Oasis, Nevada property. This note came due in March of 1998. However, at
the time of filing, there are current negotiations with respect to this note and
the sale of Oasis Nevada property, see "Item 5 - Other Information." The Holder
of this note has agreed to a reconveyance of his deed of trust, in exchange for
a new note from the purchaser, secured only by the 20 acres to be sold in the
transaction, common stock of the purchaser and 100,000 shares of the Company's
common stock.
The fourth obligation, a $400,000 note secured by the Vista, California
property was scheduled to become due in July 1988. However, in February of 1998,
the Company received notice that the office building located at 956 Vale Terrace
Drive, Vista, California was in default. On May 13, 1998 a Trustee's sale was
held and the Vale Terrace Property was sold. The $400,000 note secured by a
first deed of trust was satisfied in full. The sale also resulted in surplus
funds of approximately $59,942 which the trust deed company is required by law
to distribute to the rightful junior lien holders. It is the Company's intention
to pursue its rights with respect to this surplus of funds. The Company is also
considering its legal rights with respect to the initial purchase agreements.
The company believes that the seller failed to comply with the conditions
required by its agreements with TAC and Vale Terrace. These breaches are
believed to be the primary cause of the delinquency with regards to the first
mortgage on the property. For a more detailed description of the property and
the underlying transaction see the Company's Form 10-KSB for the fiscal year
ended December 31, 1997.
Finally, on May 24, 1998, a $332,577 note comes due on a 60,000 square
foot commercial warehouse in West Jordan, Utah. In May of 1997, TAC, Inc., a
consolidated subsidiary of the Company, closed on the sale of this property.
However, the purchaser has not paid the remaining principal and interest of
$985,000 which was due on April 15, 1998. The Company intended to utilize the
proceeds from this sale to satisfy this note, as well as another note secured by
the same property. The Company has sent the purchaser notice that the promissory
note and deed of trust are in default and is awaiting payment from them. For
more information on the TAC Warehouse see the Company's Form 10-KSB for the
fiscal year ended December 31, 1997.
Financial Consulting
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.
5
<PAGE>
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.
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 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.
Revenues from the Company's financial consulting operations decreased
during the quarter ended March 31, 1998. The Company recorded quarterly revenues
of $41,724 from its financial consulting operations as compared to $84,632 for
the same period of 1997. This decline was attributable to the Company's decision
to focus its operations primarily on real estate activities during the quarter.
For more information on this see the Company's Form 10-KSB for the fiscal year
ended December 31, 1997.
Results of Operations
Gross revenues for the quarter ended March 31, 1998 were $158,264
compared to $228,612 for the same period in 1997, a decline of 30%. This
decrease is attributable to the decline in consulting revenues, which were
$41,724 during the first quarter of 1998 compared to $84,632 for the same period
in 1997. Rental revenue decreased by 37% from $143,980 during the quarter ended
March 31, 1997 to $116,540 for the comparable period in 1998.
Costs of revenues were $129,291 for the first quarter of 1998 compared
to $182,167 for the quarter ended March 31, 1997. The decrease in the costs of
revenues is primarily due to the fact that the Company continued to reduce
personnel providing consulting services during 1997.
Gross profit was $28,973 for the first three months of 1998 and $46,445
for the quarter ended March 31, 1997. Gross profit as a percentage of revenues
was 18% and 20%.
Selling, general, and administrative expenses were $383,171 for the
first quarter of 1998 and $567,087 for the period ending March 31, 1997, a
decrease of $183,916. The primary reason for the decrease is that during the
first three months of 1997, the Company incurred $121,720 of computer
development costs associated with CyberMalls' operations, which did not exist in
1998.
Operating loss was $354,198 during the first quarter of 1998 compared
to an operating loss of $520,642 for the three months ending March 31, 1997.
This represented an improvement of $166,444 primarily because of reductions in
expenses due to personnel reductions and discontinuance of the CyberMalls
operations.
During the quarter ended March 31, 1997, the Company incurred other
expenses in the amount of $155,273. During the same period in 1998, the Company
incurred other expenses in the amount of $11,615. The major difference is in the
gain (loss) from investment securities together with a decrease of interest
expenses.
Capital Resources and Liquidity
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.
On September 17, 1996, the Company issued a 6.0% Convertible Debenture
with a face amount of $300,000
6
<PAGE>
(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 was scheduled to mature on September 16, 1997, but the parties
mutually agreed to extend the Debenture until December 17, 1997. Since that
time, the parties have verbally agreed to extend the Debenture on a quarterly
basis.
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. During the
fourth fiscal quarter of 1996, the price of the Company's Common Stock dropped
precipitously which had the effect of greatly increasing the number of shares
issuable to the holder pursuant to conversion or maturity of the Debenture.
As of March 31, 1998, $60,000 of the Debenture's face amount has been
converted into Common Stock. The remaining $240,000 face amount of the Debenture
is convertible into 2,272,590 shares of Common Stock based upon the average
closing bid prices on the Common Stock for the five days immediately preceding
March 31, 1998. Accordingly, Legong may be deemed to have a 40% beneficial
ownership interest in the Company. The Company is currently in negotiations to
reacquire the Debenture or otherwise settle the outstanding obligation on the
Debenture without issuing a larger percentage of the Company's Common Stock to
the holder. However, there is a significant risk that the Company will be
required to either issue a substantial amount of Common Stock or pay a
significant percentage of the principal in order to settle this liability. This
risk could greatly affect the Company's future liquidity and capital structure.
The Company had a net working capital deficiency of $1,563,181 as of
March 31, 1998, compared to $1,447,494 at the end of December 1997. This
deficiency is primarily due to the fact that the Company has several mortgages
maturing within a year. In addition, the Company purchased a building utilizing
short-term debt during this quarter. The Company is presently negotiating for
suitable long-term financing on some of these properties.
Net shareholders' equity in the Company was $2,819,533 at the end of
March 1997 compared to $1,865,013 at the end of March 1998, a net decrease of
$954,520 for the twelve month period. The reason for the decrease during this
period is that the Company recorded a net loss of $1,930,000. This is offset by
the Company's issuance of common stock for $867,517 and a decrease in the
unrealized loss from securities available for sale of $96,311.
PART II
ITEM 1. LEGAL PROCEEDINGS
CyberAmerica Corporation vs. MJMC, Inc., Lanco International, Inc. and
Mi-Jack Products, Inc. - A complaint was filed on January 10, 1997 in the
Circuit Court of Cook County, Law Division as File Number 97L 000369 seeking
recovery of damages suffered by Canton Tire Recycling Corporation, a subsidiary
of the Company which assigned this cause of action to the Company. The complaint
sets forth several causes of action involving the lease of tire shredding
equipment which did not perform according to warranties and representations made
by defendants. Defendants' motions to dismiss the complaint have been granted in
part and the company has filed a final amended complaint in response to the
Court's orders. Pre-trial discovery has commenced and the court will consider
the new amended complaint and new motions by Defendants before the end of May
1998. The amended complaint seeks total damages in an amount of not less than $1
million.
State of Illinois vs. The Canton Industrial Corporation (n/k/a
CyberAmerica Corporation) - This action has been pending in the Ninth Judicial
Circuit, State of Illinois, County of Fulton, Case Number 93MR45, since
September 1993. The action seeks environmental cleanup of the Canton Plant site
located in Canton, Illinois in compliance with federal and state requirements
and in cooperation with the Illinois Environmental Protection Agency. For more
information on the Canton Plant, see "Item 2 Description of Property." This
action sought the removal of
7
<PAGE>
accumulated tires which remained on the site after the Company discontinued its
tire recycling operations in 1993, as well as the removal of suspected hazardous
material from the property. By the first quarter of 1996 all tires had been
removed. The State continues to seek the removal of suspected hazardous material
from the site and the additional cleanup and testing required at the site. There
is a status hearing set for May 29, 1998.
State of Illinois v. The Canton Industrial Corporation (n/k/a
CyberAmerica Corporation) - The State of Illinois filed a separate action before
the Illinois Pollution Control Board, PCB Case Number 97-8, Enforcement, in July
1996. This action seeks recovery of $325,398 in costs that were allegedly
incurred by the State to remove waste tires from the Canton Plant site located
in Canton, Illinois. In a decision adopted on March 5, 1998, the Board denied
all punitive damages and ordered the Company to pay $326,154 into the State's
Used Tire Management Fund. This amount was determined to be the amount expended
by the state to remove tires from the Canton Plant. The State has filed a motion
requesting that the Board reconsider its denial of punitive damages, to which
the Company has filed a responsive pleading.
Xeta Corporation vs. The Canton Industrial Corporation (n/k/a
CyberAmerica Corporation) - Suit was filed in the United States District Court,
in the Central District of Utah, Case Number 95CV218G on March 8, 1995. Xeta
alleged that $116,500 was fraudulently transferred to the Company by ATC, II,
Inc. a Delaware corporation. Richard Surber, the Company's president, was also
named as a defendant in the cause of action based upon his position as an
officer of ATC II and alleged insider in the transaction. The Court granted
Xeta's motion for summary judgment against the Company, and an appeal of that
decision was sustained by the Tenth Circuit Court of Appeals. Xeta has sought
satisfaction of its $116,500 judgment through service of a writ of execution
pursuant to which it seeks to compel the Company's sale of the restricted
securities of an affiliate of the Company in an amount sufficient to satisfy the
judgment. Xeta has filed a motion seeking damages based upon an allegation that
the Company has improperly delayed its collection activity.
Canton Financial Services Corporation vs. Pacific Stock Transfer
Company - A complaint 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 is seeking 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. The case was not reached on its May 4, 1998 trial setting and pre-trial
discovery is ongoing.
ITEM 5. OTHER INFORMATION
Events Subsequent to the End of the First Quarter
On May 13, 1998 a Trustee's sale was held and the office building located
at 956 Vale Terrace Drive, Vista CA was sold. The $400,000 note secured by a
first deed of trust was satisfied in full. The sale also resulted in surplus
funds of approximately $59,942 which the trust deed company is required by law
to distribute to the rightful junior lien holders. It is the Company's intention
to pursue its rights with respect to this surplus of funds. The Company is
considering its legal rights with respect to the initial purchase agreements.
The company believes that the seller failed to comply with the conditions
required by its agreements with TAC and Vale Terrace. These breaches are
believed to be the primary cause of the delinquency with regards to the first
mortgage on the property.
This particular property was acquired by TAC Inc., a consolidated
subsidiary of the Company, in September of 1997. For a more detailed description
of the property and the underlying transaction see the Company's Form 10-KSB for
the fiscal year ended December 31, 1997.
Subsequent to the first quarter, TAC, Inc., a consolidated subsidiary
of the Company, acquired, through a Stock Acquisition Agreement ( the
"Agreement"), 51% of the shares of common stock of a Louisiana Corporation known
as Golden Opportunity Development Corporation ("Golden"). Golden's sole asset is
the General Lafayette Inn, a 134 unit hotel and restaurant, and four adjacent
office/retail buildings, in Baton Rouge, LA. This property is located next to
the Mississippi River, three blocks from a river boat dock, at 427 Lafayette
Street, Baton Rouge, LA 70802. The hotel and surrounding property is subject to
a $1,900,000 note.
8
<PAGE>
In exchange for the Golden stock, TAC agreed to advance the sum of
$15,810 for current operating deficiencies related to the General Lafayette Inn
and to transfer, within 30 days of execution of the agreement, restricted stock
in a company of TAC's choosing valued at $800,000. In addition, TAC agreed to
offer consulting services to Golden, as well as work with current ownership and
management to renovate the hotel. TAC acquired the Golden stock from the Smith
Trust and San Pedro Securities, Ltd.
The Promissory Note on the General Lafayette Inn property has a
principal amount of $1,900,000. Principal and interest on the first mortgage are
payable in monthly installments of $11,391.46 until July 1, 2027, when the
remaining principal and interest are due in full.
On April 9, 1998, the Company entered into a Real Estate Purchase
Agreement (the "Agreement") for the sale of real property in Oasis, Nevada. The
Agreement is between Oasis International Hotel & Casino, Inc. ("Oasis
International"), a wholly owned subsidiary of the Company, and Oasis Hotel,
Resort & Casino III, Inc. ("Oasis III"), in which the Company owns a beneficial
interest. The property consists of 20 acres and all improvements thereupon
including a nonoperating service station and a nonoperating retail and food
service operation. Closing is scheduled for July 1998 but may be extended by
agreement of the parties. The total sale price of the property is $5,000,000.
The current agreement requires a $1,000,000 payment in cash at closing with
credit given for a deposit to be made with common stock of the purchaser. The
Agreement has not closed, and the parties are currently renegotiating the terms
of the Agreement, including the $1,000,000 cash payment due at closing. The
Company is considering taking common stock from the purchaser in lieu of some of
the cash payment.
In addition, the Holder of the $300,000 note, secured by 50 acres of the
Oasis, Nevada property, has agreed to a reconveyance of his deed of trust. The
Holder agreed to this reconveyance in exchange for a new note from the
purchaser, Oasis III, secured only by the 20 acres to be sold in the
transaction, common stock of the purchaser and 100,000 shares of the Company's
common stock. After completion of the transaction, the title to the remaining 30
acres of Oasis property the Company owns will be clear of all liens.
The sale of the property is considered a high risk transaction based
upon the lack of credit worthiness of the purchaser. The Company's success in
realizing the purchase price is solely contingent upon the business plans and
managerial skills of Oasis III's officers and directors. Accordingly, there is a
high level of risk. However, the Company believes that the transaction is still
in the best interest of its shareholders for several reasons. First, the
transaction enabled the Company to renegotiate the terms of financing concerning
all of the Oasis property. Second, the Company has confidence in the skills of
Oasis III's management in constructing and operating casinos. Based upon these
skills and experience, the Company believes that the risk involved in the sale
based upon the purchase price and the Company's interest in the surrounding land
may ultimately inure to the benefit of the Company and its shareholders.
Subsequent to the first quarter of 1998, the Company sold a total of
272,000 shares of Common Stock pursuant to Regulation S ("Regulation S") under
the Securities Act of 1933, as amended (the "Act") to Pienne Chow, an individual
and resident of Hong Kong, in exchange for an investment of $17,000 in the
Company pursuant to an April 17, 1998 transaction. For more information on this
transaction, see the Form 8-K filed by the Company on January 13, 1998.
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 10 of this Form 10-QSB, and
are incorporated herein by this reference.
(b) Reports on Form 8-K. On January 15, 1998 the Company filed a report on
Form 8-K disclosing the issuance of 111,113 shares of Common Stock
pursuant to Regulation S. Subsequent to the end of the first quarter,
the Company filed two additional reports on Form 8-K. On April 6, 1998
the Company filed a Form 8-K disclosing the resignation of its
independent auditor Andersen, Andersen & Strong, L.C. Disclosed on the
same Form 8-K was the engagement of Crouch, Bierwolf & Chisholm as the
Company's new independent auditor. On May 8, 1998 the Company filed a
Form 8-K disclosing the issuance of 272,000 shares of Common Stock
pursuant to Regulation S.
9
<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 20TH day of May 1998.
CYBERAMERICA CORPORATION
/s/Richard Surber May 20, 1998
Richard Surber
President, Chief Executive Officer and Director
/s/Wayne Newton May 20, 1998
Wayne Newton
Controller
10
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
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) * Bylaws 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) 12 Stock Acquisition Agreement between TAC, Inc. and
Golden Opportunity Development Corporation
regarding the acquisition of the General Lafayette
Inn in Baton Rouge, LA.
10(i)(b) 13 Real Estate Purchase Agreement between Oasis Hotel,
Resort & Casino III, Inc. and Oasis International
Hotel & Casino, Inc. regarding the purchase of
twenty acres in Oasis, NV.
10(i)(c) * Lease Agreement between the Company's wholly owned
subsidiary, Canton Financial Services Corporation,
and Richard Surber, dated August 29, 1997, pursuant
to which the Company's subsidiary has leased a
condominium unit from Mr. Surber (incorporated
herein by reference from Exhibit 10(i)(a) of the
Company's Form 10-KSB for the period ended December
31, 1997).
10(i)(d) * Real Estate Purchase contract between the Company's
wholly owned subsidiary, Cyberstate, Inc., and
James Stacy, dated July 14, 1997, pursuant to which
Cyberstate contracted to acquire the New Brigham
Building (incorporated herein by reference from
Exhibit 10(i)(b) of the Company's Form 10-KSB for
the period ended December 31, 1997).
10(i)(e) * Real Estate Purchase Contract between the Company's
wholly owned subsidiary, Cyberstate, Inc., and
Richard Surber, dated October 10, 1997, pursuant to
which Cyberstate will sell a condominium unit in
the New Brigham Building subject to closing of
Cyberstate's purchase and successful application to
convert the New Brigham Building into condominium
units (incorporated herein by reference from
Exhibit 10(i)(c) of the Company's Form 10-KSB for
the period ended December 31, 1997).
10(i)(f) * Real Estate Purchase Contract between the Company's
wholly owned subsidiary, Cyberstate, Inc., and
Allen Wolfson, dated October 10, 1997, pursuant to
which Cyberstate will sell a condominium unit in
the New Brigham Building subject to closing of
Cyberstate's purchase and successful application to
convert the New Brigham Building into condominium
units (incorporated herein by reference from
Exhibit 10(i)(d) of the Company's Form 10-KSB for
the period ended December 31, 1997).
10(i)(g) * Promissory Note executed by the Company in favor of
Richard Surber, dated March 25, 1998 with a
principal amount of $47,295 and accruing interest
at 22% (incorporated herein by reference from
Exhibit 10(i)(e) of the Company's Form 10-KSB for
the period ended December 31, 1997).
11
<PAGE>
10(i)(h) * Convertible Promissory Note executed by the Company
in favor of A-Z Professional Consultants Inc.,
dated March 31, 1998, with a principal amount of
$150,000 and bearing interest at a rate of 10%
(incorporated herein by reference from Exhibit
10(i)(f) of the Company's Form 10-KSB for the
period ended December 31, 1997).
10(i)(i) * Real Estate Purchase Contract between the Company's
wholly owned subsidiary, Taylor's Landing, Inc.,
and Loa Jean Carter and Jeffrey Dee Carter
regarding the acquisition of the Tiara Cafe
(incorporated herein by reference from Exhibit
Number 10(i)(b) of the Company's Form 10-QSB for
the period ended September 30, 1997).
10(i)(j) * Stock Purchase Agreement between TAC, Inc., a
consolidated subsidiary of the Company, and Chelsea
Capital Corporation, dated September 19, 1997,
pursuant to which the Company acquired all
outstanding capital stock of Vale Terrace
Corporation (incorporated herein by reference from
Exhibit Number 10(i)(d) of the Company's Form
10-QSB for the period ended September 30, 1997).
10(i)(k) * Lease Agreement between TAC, Inc., a consolidated
subsidiary of the Company, and Chelsea Capital
Corporation, dated September 23, 1997, pursuant to
which TAC has leased back the Vale Terrace property
to Chelsea Capital Corporation (incorporated herein
by reference from Exhibit Number 10(i)(e) of the
Company's Form 10-QSB for the period ended
September 30, 1997).
10(i)(l) * Real Estate Purchase Contract between the Company's
wholly owned subsidiary, Cyber LaCrosse, Inc., and
James Hansen regarding the acquisition of real
property in Nephi, Utah (incorporated herein by
reference from Exhibit Number 10(i)(a) of the
Company's Form 10-QSB for the period ended June 30,
1997).
10(i)(m) * Real Estate Purchase Contract between the Company's
wholly owned subsidiary, Taylor's Landing, Inc.,
Sydnie Colley and Cassandra Colley regarding the
acquisition of real property in Nephi, Utah
(incorporated herein by reference from Exhibit
Number 10(i)(b) of the Company's Form 10-QSB for
the period ended June 30, 1997).
10(i)(n) * Option Agreement, dated March 25, 1997, between the
Company's wholly owned subsidiary, Canton
Properties, and Chournos Land & Livestock
(incorporated herein by reference from Exhibit
Number 10(i)(c) of the Company's Form 10-QSB for
the period ended March 31, 1997).
10(i)(o) * Real Estate Purchase Contract dated January 28,
1997, between the Company and Durbano Properties,
LC (incorporated herein by reference from Exhibit
Number 10(i)(a) to the Company's Form 10-KSB for
the fiscal year ended December 31, 1996).
10(i)(p) * Real Estate Purchase Agreement, dated February 7,
1997, between the Company and ANA Development, LC
(incorporated herein by reference from Exhibit
Number 10(i)(a) to the Company's Form 10-KSB for
the fiscal year ended December 31, 1996).
10(i)(q) * Stock Exchange Agreement dated October 31, 1996,
between the Company and Investment Sanctuary
Corporation, a Utah corporation and Richard D.
Surber (incorporated herein by reference from
Exhibit Number 10(i)(a) to the Company's Form
10-KSB for the fiscal year ended December 31,
1996).
10(i)(r) * 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
12
<PAGE>
(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)(s) * 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)(t) * 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).
* Previously filed as indicated and incorporated herein by reference from
the referenced filings previously made by the Company.
13
STOCK ACQUISITION AGREEMENT
This Stock Acquisition Agreement ("Agreement") is made effective this
day of April, 1998 by and between, TAC, Inc. ("TAC"), a Utah corporation, and
Golden Opportunity Development Corporation, a Louisiana Corporation, ("Golden"),
Smith Trust, ("Smith") and San Pedro Securities, Ltd. ("San Pedro") , with
respect to the following:
RECITALS
WHEREAS, TAC is in the business of investing in and acquiring real
estate properties and motel/hotel properties that are privately held or publicly
held by corporations; and
WHEREAS, Golden, Smith and San Pedro desires to obtain investment in
Golden Opportunity Corporation in exchange for transfer of 51% of the shares of
common stock in Golden to TAC and to obtain advice relative to corporate affairs
and operations and seek to resolve various corporate obligations through
utilizing TAC's business consulting services.
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, the parties agree as
follows:
1. Engagement of TAC
TAC agrees to the following investments in Golden and to assist Golden
in the following manner:
a. Advance the sum of $15,810 for current operating deficiencies
of Golden's operation of The General Lafayette Inn in Baton
Rouge, LA.
b. Within 30 days of the execution hereof, transfer to Smith and
San Pedro restricted stock in a company of its own choosing
valued at $800,000 (Eight hundred Thousand Dollars) based on
its bid price as of the date of issuance as listed on the
NASDAQ Bulletin Board. No representation is made as to the
future value of the shares.
c. Nominate persons to serve as officers and directors of Golden,
Golden shall remove from any and all of its bank account the
current authorized signers and substitute the persons
nominated to serves as the new officers of Golden;
d. Assist and consult with regard to developing Golden and its
common stock, work with current ownership and management for
the renovation of The General Lafayette Inn and other projects
as agreed between the parties.
2. Compensation
Smith and San Pedro shall compensate TAC for its investment and
services rendered pursuant to this Agreement as follows:
1
<PAGE>
a. Upon execution hereof 51% of the common stock of Golden shall
be transferred into the name of TAC.
b. In addition to the above, Golden shall pay TAC a fee of one
and one-half percent per month of any amount paid or advanced
by TAC for the operating expenses of Golden until said sums
are repaid in full.
c. Any shares issued pursuant to this Agreement shall be
delivered in compliance with the rules and regulations of the
Act, as amended.
d. Golden, Smith and San Pedro shall at TAC's request appoint new
officers and directors of Golden as designated by TAC.
e. Within 10 days of the execution hereof, Smith and San Pedro
shall deliver the stated number of shares, with all signatures
and documents necessary to complete the transfer thereof.
3. Expenses.
a. Golden agrees to assume and promptly pay all costs associated
with the completion of the transfers and payment of
compensation contemplated herein.
4. Nondisclosure of Confidential Information
a. In consideration for entering into this Agreement, the parties
herein mutually agree that the following items used in the
parties' respective businesses are secret, confidential,
unique, and valuable, and were developed by the parties at
great cost and over a long period of time, and disclosure of
any of the items to anyone other than officers, agents, or
authorized employees of the Parties which may result in
irreparable injury:
i. non-public financial information, accounting information,
plans of operations, possible mergers, or acquisitions
prior to the public announcement;
ii. customer lists, call lists, and other confidential
customer data;
iii. memoranda, notes, records concerning technical processes
conducted by either party;
iv. sketches, plans, drawings, and other confidential research
and development data;
v. manufacturing processes, chemical formula, and/or the
composition of products; or
vi. any and all technology and/or computer generated programs,
including, but not limited to, hardware or software.
b. TAC shall have no liability to Golden, Smith or San Pedro with
respect to the use or disclosure to others not party to this
Agreement, of such information as TAC can establish to:
i. have been publicly known;
2
<PAGE>
ii. have become known, without fault on the part of TAC,
subsequent to disclosure by Client of such information to
the parties hereto;
iii. have been otherwise known by TAC prior to communication by
the Parties to TAC of such information; or
iv. have been received by TAC at any time from a source other
than the Parties hereto lawfully having possession of such
information.
5. Term of Agreement
The parties agree that the transfers contemplated herein shall take
place within 30 days of the execution of this Agreement. Extensions hereof shall
be by the mutual consent of the parties and shall be in writing.
6. Non-Circumvention
The Parties may not terminate this Agreement solely as a means to avoid
paying compensation earned or to be earned, or in any other way attempt to
circumvent this Stock Acquisition Agreement.
7. Due Diligence
Golden shall supply and deliver to TAC all information as may be
reasonably requested, including business plans, officer questionnaires and due
diligence questionnaires to enable TAC to make an investigation of Golden and
its business prospects, and they shall make available to TAC names, addresses,
and telephone numbers as TAC may need to verify or substantiate any such
information provided.
8. Golden's, Smith's and San Pedro's Representations
Golden, Smith and San Pedro represents, warrants, and covenants to TAC
that each of the following are true and complete as of the date of this
Agreement:
a. Corporate Existence. Golden is a corporation duly organized,
validly existing, and in good standing under the laws of the
state of its incorporation, with full corporate power and
authority and all necessary governmental authorization to own,
lease and operate property, and carry on its business as it is
now being conducted. Golden is duly qualified to do business
in and is in good standing in every jurisdiction in which the
nature of its business or the property owned or leased by it
makes such qualifications necessary.
b. Golden's, Smith's and San Pedro's Authority for Agreement. The
execution and delivery of this Agreement and the consummation
of the transactions contemplated herein have been duly
authorized by all necessary persons and parties. This
Agreement has been duly executed and delivered by the Parties,
and constitutes the valid and legally binding obligation of
the parties enforceable in accordance with its terms, except
to the extent that enforceability may be subject to or limited
by bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting creditor rights generally. The
execution and delivery of this Agreement and the consummation
of the transactions contemplated herein will not conflict with
or result in any violation of any provision of Golden's
Articles of Incorporation or Bylaws. To the best of the
Parties knowledge, after
3
<PAGE>
due inquiry, the execution and delivery of this Agreement and
the consummation of the transactions contemplated herein will
not conflict with any mortgage, indenture, lease, contract,
commitment, agreement, or other instrument, permit,
concession, grant, franchise, license, judgement, order,
decree, statute, law, ordinance, rule, or regulation
applicable to Golden or any of its properties or assets.
c. Consents and Authorizations. Any consent, approval, order or
authorization of, or registration, declaration, compliance
with or filing with any governmental or regulatory authority
required in connection with the execution and delivery of this
Agreement to permit the consummation by the Parties of the
transactions contemplated herein shall be accomplished in a
timely manner and in accordance with federal and/or state laws
where applicable.
d. Litigation There are no judicial or administrative actions,
suits, proceedings or investigations pending, or to the
knowledge of Golden, Smith or San Pedro, threatened which may
result in any liability on the part of Golden other than what
has already been disclosed to TAC.
e. Involvement in Proceedings or Investigations by Securities
Regulatory Authorities Golden, its officers, 10% shareholders,
and any entity which Golden or its affiliates or officers
control, has not been previously involved in any litigation,
investigations or proceedings with the SEC or any other State
or Foreign Securities Regulatory organization, and is not
presently indicted and/or was never convicted of fraud or any
similar crime involving any allegation of dishonesty or theft,
nor found guilty or is currently involved in legal proceedings
of such conduct in a civil context, other than as disclosed
and with full and complete details attached hereto.
f. Minute Books. The minute books of Golden contain full and
complete minutes of all annual, special and other meetings (or
written consents in lieu thereof) of the directors and
committees of directors and shareholders of Golden; the
signatures on such minutes and written consents are the true
signatures of the persons purporting to have signed them; and
the stock ledger of Golden with respect to shares of Golden's
common stock issued or transferred is complete and no
documentary stamp taxes are required to be affixed and
canceled in connection with the transfer or issuance of the
shares.
g. Disclosure Documents. Golden has or will cause to be
delivered, concurrent with the execution of this Agreement,
copies of its entity records as requested to effectuate any
transaction contemplated herein. Documents which the Parties
agrees to provide to TAC shall include but not be limited to
audited financial statements for the past three years of
Golden's operations or as long as Golden has been in
operation, whichever is less, which have been audited by a SEC
peer approved financial auditor, any entity resolutions and
any and all other documents which may in any way relate to the
transactions contemplated in this Agreement.
h. Nature of Representations. No representation or warranty made
by Client in this Agreement, nor any document or information
furnished or to be furnished by the Parties to TAC in
connection with this Agreement, contains or will contain any
4
<PAGE>
untrue statement of material fact, or omits or will omit to
state any material fact necessary to make the statements
contained therein not misleading, or omits to state any
material fact relevant to the transactions contemplated by
this Agreement.
i. Limitation of Corporate Obligations. Golden shall not have
financial obligations, except for the mortgage on the General
Lafayette Inn, in excess of $40,000 as of the date of
execution hereof. Breach of this representation will allow TAC
to rescind and void the other provisions hereof.
9. Independent Legal and Financial Advice
TAC is not a law firm; neither is it an accounting firm. TAC does,
however, affiliate with professionals in those capacities for its sole benefit.
The parties represent that they have not nor will they construe any of TAC's
representations to be statements of law. Each entity has and will continue to
seek the independent advice of legal and financial counsel regarding all
material aspects of the transactions contemplated by this Agreement, including
the review of all documents provided by TAC to Golden and all opportunities TAC
introduces to Golden. Further, TAC is not a broker/dealer, and does not
represent itself to be such. All advice given, all filings and all other
services provided to Golden by TAC shall be complete, timely and in compliance
with current applicable Federal and State laws, rules and regulations.
10. All Prior Agreements Terminated
This Agreement comprises the entire agreement and understanding between
the parties hereto at the date of this Agreement as to the subject matter hereof
and supersedes and replaces all proposals, prior negotiations and agreements,
whether oral or written, between the parties hereto in connection with the
subject matter hereof. None of the parties hereto shall be bound by any
conditions, definitions, warranties or representations with respect to the
subject matter of this Agreement other than as expressly provided in this
Agreement unless the parties hereto subsequently agree to vary this Agreement in
writing, duly signed by authorized representatives of the parties hereto.
11. TAC is not an Agent or Employee of Golden, Smith or San Pedro.
Obligations of TAC under this Agreement consist solely of the
statements made herein. In no event shall TAC be considered to act as an
employee or agent of Golden or otherwise represent or bind Golden. For the
purposes of this Agreement, TAC is an independent contractor. All final
decisions with respect to acts of Golden whether or not made pursuant to or in
reliance on information or advice furnished by TAC hereunder, shall be those of
Golden or its affiliates and TAC, its employees or agents shall under no
circumstances be liable for any expense incurred or loss suffered by Golden,
Smith or San Pedro as a consequence of such action or decisions.
12. Miscellaneous
a. Authority. The execution and performance of this Agreement
have been duly authorized by all requisite corporate action.
This Agreement constitutes a valid and binding obligation of
the parties hereto.
5
<PAGE>
b. Amendment. This Agreement may be amended or modified only by
an instrument in writing executed by the parties hereto.
c. Waiver. No term of this Agreement shall be considered waived
and no breach excused by either party unless made in writing.
No consent waiver or excuse by either party, express or
implied shall constitute a subsequent consent, waiver or
excuse.
e. Assignment.
i. The rights and obligations of TAC under this
Agreement shall inure to the benefit of and shall be
binding upon its successors and assigns. There shall
be no rights of transfer or assignment of this
Agreement by Golden, Smith and San Pedro except with
the prior written consent of TAC.
ii. Nothing in this Agreement, expressed or implied, is
intended to confer upon any person other than the
parties and their successors, any rights or remedies
under this Agreement.
d. Notices. Any notice or other communication required or
permitted by this Agreement must be in writing and shall be
deemed to be properly given when delivered in person to an
officer of the other party, when deposited in the United
States mails for transmittal by certified or registered mail,
postage prepaid, or when deposited with a public telegraph
Corporation for transmittal or when sent by facsimile
transmission, charges prepaid provided that the communication
is addressed:
i. In the case of TAC to:
TAC, Inc.
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
(801) 575-8073
(801) 575-8092 (fax)
Attention: Richard Surber, President
ii. In the case of Golden to:
Golden Opportunity Development Corporation
FAX:
Attention:
iii. In the case of Smith to:
Smith Trust
FAX:
Attention: Brad Smith
6
<PAGE>
iv. In the case of San Pedro to:
San Pedro Securities, Ltd.
Fax:
Attention:
or to such other person or address designated by the parties in writing to
receive notice.
f. Headings and Captions. The headings of paragraphs are included
solely for convenience. If a conflict exists between any
heading and the text of this Agreement, the text shall
control.
g. Entire Agreement. This instrument and the exhibits to this
instrument contain the entire agreement between the parties
with respect to the transaction contemplated by the Agreement.
It may be executed in any number of counterparts but the
aggregate of the counterparts together constitute only one and
the same instrument.
h. Effect of Partial Invalidity. In the event that any one or
more of the provisions contained in this Agreement shall for
any reason be held to be invalid, illegal, or unenforceable in
any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but
this Agreement shall be constructed as if it never contained
any such invalid, illegal or unenforceable provisions.
i. Controlling Law. The validity, interpretation, and performance
of this Agreement shall be governed by the laws of the State
of Utah without regard to its law on the conflict of laws. Any
dispute arising out of this Agreement shall be brought in a
court of competent jurisdiction. The parties exclude any and
all statutes, law and treaties which would allow or require
any dispute to be decided in another forum or by other rules
of decision than provided in this Agreement.
j. Attorney Fees. If any action at law or in equity, including an
action for declaratory relief, is brought to enforce or
interpret the provisions of this Agreement, the prevailing
party shall be entitled to recover reasonable attorney fees,
court costs, and other costs incurred in proceeding with the
action from the other party. The attorney fees, court costs or
other costs, may be ordered by the court in its decision of
any action described in this paragraph or may be enforced in a
separate action brought for determining attorney fees, court
costs, or other costs. Should either party be represented by
in-house counsel all parties agree that party may recover
attorney fees incurred by that in-house counsel in an amount
equal to that attorney's reasonable fees for similar matters,
or, should that attorney not normally charge a fee, by the
reasonable rate charged by attorneys with similar background
in that legal community, considering all relevant factors
including but not limited to the specialty or specializations,
if any, of the legal subjects required.
k. Time is of the Essence. Time is of the essence of this
Agreement and of each and every provision hereof.
7
<PAGE>
l. Mutual Cooperation. The parties hereto shall cooperate with
each other to achieve the purpose of this Agreement, and shall
execute such other and further documents and take such other
and further actions as may be necessary or convenient to
effect the transactions described herein.
m. Indemnification. Golden, Smith and San Pedro agree to
indemnify, hold harmless and defend TAC from and against all
demands, claims, actions, losses, damages, liabilities, costs
and expenses, including without limitation, interest,
penalties, court fees, and attorney fees and expenses asserted
against or imposed or incurred by either party by reason of or
resulting from a breach of any representation, warranty,
covenant condition or agreement of the other party to this
Agreement. Neither party shall be responsible to the other
party for any consequential or punitive damages.
n. No Third Party Beneficiary. Nothing in this Agreement,
expressed or implied, is intended to confer upon any person,
other than the parties hereto and their successors, any rights
or remedies under or by reason of this Agreement, unless this
Agreement specifically states such intent.
o. Facsimile Counterparts. If a party signs this Agreement and
transmits an electronic facsimile of the signature page to the
other party, the party who receives the transmission may rely
upon the electronic facsimile as a signed original of this
Agreement. Further, this Agreement may be executed in
counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates indicated below.
TAC, Inc.
____________________________________ Date: ______________________
By:
Golden Opportunity Development Corporation
Date:
By:
Smith Trust
____________________________________ Date: ______________________
By:
San Pedro Securities, Ltd.
____________________________________ Date: ______________________
By:
8
REAL ESTATE PURCHASE AGREEMENT
PARTIES: Oasis Hotel, Resort & Casino III, Inc. - Buyer, a Nevada
Corporation with its principal officers located at 1946
Plateau Way, Wendover, Nevada.
Oasis International Hotel & Casino, Inc. - Seller, a Nevada
corporation with its offices located at 268 West 400 South,
Suite 300, Salt Lake City, Utah 84101.
PROPERTY: Twenty acres of real property, including all improvements
located thereon, located at the Northeast corner of the
intersection of I-80 and Nevada state Highway 233 in the
county of Elko, State of Nevada and commonly known as Oasis,
the twenty acres to be taken from a parcel consisting of 49.96
acres more or less and more specifically described in the
legal description as attached hereto and labeled as Exhibit
"A." The specific twenty acres to be designated by a survey,
subject to the mutual agreement of the parties.
Unless excluded herein, this sale shall include all fixtures presently
attached to the Property: plumbing, heating, air-conditioning and venting
fixtures and equipment, water heater, built-in appliances, light fixtures and
bulbs, bathroom fixtures, curtains and draperies and rods, window and door
screens, storm doors, window blinds, awning, installed television antenna,
satellite dishes and systems, wall-to-wall carpets, fences, trees and shrubs,
inventory, trade fixtures, permits, and licenses, if any such are present on the
property, No items have been specifically represented to be present on the
property. Buyer will grant to Seller an easement for free access to Seller's
property, the easement to be determined during Buyer's due diligence period and
is moveable at the mutual agreement of the parties. No water rights are to be
granted by the sale. Seller agrees to provide water as shall be determined
during Buyer's due diligence.
Seller agrees to sell to Buyer and Buyer agrees to buy from Seller the
property as set forth above upon the following terms and conditions:
Deposit: 250,000 shares, valued at $0.10 each, of common stock,
issued pursuant to regulation 504, in the buyer to be
delivered to seller within 5 business days of acceptance
hereof. The deposit shall be fully earned by Seller upon
delivery thereof.
Price: Total purchase price shall be $5,000,000 for the property
as described herein above, to which the deposit may be
applied, the purchase price to be paid as provided for at
the time of closing.
Payment: The purchase price of $5,000,000 is to be paid with
$1,000,000 in cash at closing, credit for the deposit, the
balance to be seller financed and secured by the property.
Seller will allow for payments under the terms of repayment
to be made with cash or stock in the buyer corporation at
50% of the bid price for the stock but only so long as the
stock is quoted. Seller further agrees, upon written
request, to subordinate its secured position in the
property, to loans used in the construction of a hotel or
casino on the property.
DEPOSIT: Within 90 calendar days of this agreement, both parties shall deposit
with an agreed and designated Escrow Holder, all funds and instruments necessary
to complete the sale in accordance with the terms hereof. Escrow fees to be paid
by Buyer.
<PAGE>
CLOSING: This transaction shall be closed on or before 91 days from the date
hereof, or thereafter if extended by the agreement of both parties hereto.
Closing shall occur when: (a) Buyer and Seller have signed and delivered to an
escrow/title company all documents required by this Contract, by written escrow
instructions and by applicable law; and (b) the monies required to be paid under
these documents, have been delivered to the escrow/title company in the form of
cashier's check, collected or cleared funds. Seller and Buyer shall each pay
one-half (1/2) of the escrow Closing fees. Taxes and assessments for the current
year, rents, and interest on assumed obligations shall be prorated as set forth
in this Section. Unearned deposits on tenancies shall be transferred to Buyer at
Closing. Prorations set forth in this Section shall be made as of the date of
Closing.
POSSESSION: Seller shall deliver possession to Buyer upon closing.
BROKER & AGENT: Each party shall be responsible for any commissions to agents or
brokers that it has contracted with.
EVIDENCE OF TITLE: (a) Seller has, or shall gave at Closing, fee title to the
Property and agrees to convey such title to Buyer by general warranty deed, free
of financial encumbrances as warranted herein; (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 purchase price; (c) the tikle policy shall
conform with Seller's obligations under (a) and (b) above.
SELLER'S DISCLOSURES: Seller will deliver to Buyer the following Seller
Disclosures; (a) a commitment for the policy of title insurance to be issued by
the title company chosen by Seller, including copies of all documents listed as
Exceptions on the Commitment; (b) a copy of all loan documents relating to any
loan now existing which will encumber the Property after closing; and (c) a copy
of all leases affecting the Property not expiring prior to Closing. Seller
agrees to pay any title commitment cancellation charges.
GENERAL CONTINGENCIES: Buyer's approval of the content of items referenced in
Seller's Disclosures and Buyer's inspection of the Property, Any inspection
shall be paid for by Buyer and shall be conducted by an individual/company of
Buyer's choice. Seller agrees to fully cooperate with such inspection and a
walk-through inspection of the Property as reasonably requested by the Buyer.
Buyer shall have 30 days after receipt of the content of Seller's
Disclosures to determine, if, in Buyer's sole discretion, the content of all
Seller Disclosures is acceptable.
If Buyer does not deliver a written objection to Seller regarding a
Seller Disclosure ot the Property Inspection within the time provided above,
that document or inspection will be deemed approved or waived by Buyer.
If Buyer objects, buyer and Seller shall have 21 calendar days after
receipt of the objections to resolve Buyer's objections. Seller may, but shall
not be required to, resolve Buyer's objections. If Buyer's objections are not
resolved within the 21 calendar days, Buyer may void this Contract by providing
written notice to Seller within the same 21 calendar days. If this contract is
not voided by Buyer, Buyer's objection is deemed to have been waived. However,
this waiver does not affect any other matters warranted by Seller.
CHANGES DURING TRANSACTIONS: 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 made or undertaken without the written
consent of the Buyer.
<PAGE>
AUTHORITY OF SIGNERS: The persons executing this Contract on behalf of the Buyer
and the Seller warrant that each has the authority to do so and to bind the
named Buyer and Seller corporations.
COMPLETE CONTRACT: This instrument together with its addenda, any attached
exhibits, and Disclosures constitute the entire Contract between the parties and
supersedes and replaces any and all prior negotiations, representations,
warranties, understandings, term sheets or contracts between the parties. This
Contact cannot be changed except by written agreement of the parties.
DISPUTE RESOLUTION: The parties agree that any dispute or claim relating to this
Contract, including but not limited to the disposition of the Deposit, the
breach of termination of this Contract or the services related to this
transaction, shall first be submitted to mediation in accordance with the Rules
of the American Arbitration Association. Disputes shall include representations
made by the parties, any broker or other person or entity in connection with the
sale, purchase, financing, condition or other aspect of the Property to which
this Contract pertains, including without limitation, allegations of
concealment, misrepresentation, negligence and/or fraud. 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
paragraph shall prohibit any party from seeking emergency equitable relief
pending mediation. The parties agree that mediation under this paragraph is not
mandatory, but is optional upon agreement of all parties.
DEFAULT: If Buyer defaults, Seller may elect to either retain the Deposit as
liquidated damages or to return the Deposit and sue Buyer to enforce Seller's
rights. If Seller defaults, buyer is entitled to the return of the Deposit or to
sue Seller to enforce Buyer's rights. 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.
ATTORNEYS FEES: In any action arising out of this Contract, the prevailing party
shall be entitled to costs and reasonable attorney's fees.
APPLICABLE LAW AND VENUE DESIGNATION: The parties agree that the Law of the
State of Nevada shall apply to any issue arising under this Agreement and the
parties further agree and stipulate that the Courts located in the County of
Elko, Nevada have jurisdiction to hear and rule upon any dispute arising under
this Agreement.
ABROGATION: Except for express warranties made in this Contract, the provisions
of this Contract shall not apply after Closing.
RISK OF LOSS: All risk of loss or damage to the Property shall be borne by
Seller until Closing.
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 and by all parties.
Performance under eaach section and paragraph of this Contract which references
a date shall be required absolutely by 5:00 p.m. Pacific Time on the stated
date.
ZONING: The parties agree to cooperate in the zoning of any of the property,
including the development of a master plan for the area in support of any
application by either party for zoning change applications.
HEADINGS AND CAPTIONS: The headings or captions of paragraphs are included
solely for convenience. If a conflict exists between any heading or caption and
the text of this Agreement, the text shall control.
<PAGE>
SEVERABILITY: If any of the terms or provisions of this Agreement are determined
to be invalid, such invalid term or provision shall not affect or impair the
remainder of this Agreement, but such remainder shall continue in full force and
effect to the same extent as though the invalid term or provision were not
contained herein.
EXECUTION IN COUNTERPARTS: This Agreement may be executed in two or more
counterparts, each of which may be executed by one of the parties, with the same
force and effect as though all of the parties executing such counterparts have
executed but one instrument.
FACSIMILE (FAX) DOCUMENTS: Facsimile transmission of any sighed original
document, and retransmission of any signed facsimile transmission, shall be the
same as delivery of an original.
SUCCESSORS AND ASSIGNS: This Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, legal representatives,
successors and permitted assigns.
ACCEPTANCE: Acceptance occurs when Seller or Buyer, responding to any offer or
counteroffer, (if any) (a) signs the offer or counter 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.
Oasis Hotel, Resort & Casino III, Inc.
BUYER'S SIGNATURE: /s/Walter Sanders 4-9-98
By: Walter Sanders, President
OASIS INTERNATIONAL HOTEL & CASINO, INC.
SELLER'S SIGNATURE:/s/Richard Surber 4-9-98
By: Richard Surber, President
<PAGE>
REAL PROPERTY DESCRIPTION
Twenty acres of real property located in the County of Elko, State of
Nevada, to be designated by survey from the following parcel described as
follows:
TRACT ONE:
A parcel of land located in Sections 2 and 3, T 36 N, R 66 E, MDB &
Elko County, Nevada, more particularly described as follows:
Beginning at the South 1/4 corner of said Section 2, a point begin
corner no. 1, the true point of beginning.
Thence N 88 deg. 56 min. 46 sec. W, 624.62 feet along the South line of
said Section 2, to corner no. 2, a point being on the Northeasterly
Right of Way of Interstate Route 80,
thence N 02 deg. 47 min. 03 sec. W, 661.90 feet along the North line of
the said East line the SW 1/4 of the SW 14 of Section 2 to corner no.
4, a point being the Northeast corner of the said SW 1/4 of the SW 1/4
of Section 2,
thence N 89 deg. 26 min. 47 sec. W, 1041.89 feet along the North line
of the said Sw 1/4 of the SW 1/4 of Section w to corner no. 5, a point
on the said Northeasterly Right of Way of Interstate Route 80,
thence from a tangent bearing N 45 deg. 17 min. 44 sec. W on a curve to
the right with a radius 4018.00 feet through a central angle of 02 deg.
50 min 36 sec. For an arc length of 199.39 feet along the said
Northeasterly Right of Way of Interstate Route 80 to corner no. 6,
thence N 42 deg. 27 min 08 sec. W, 233.99 feet along the said
Northeasterly Right of Way of Interstate Route 80 to corner no. 7, a
point also being on the West line of said Section 2,
thence N 02 deg. 59 min. 54 sec. W, 118.81 feet along the said West
line of Section 2 to corner no. 8,
thence N 38 deg. 15 min 31 sec. W, 268.12 feet to corner no. 9, a point
also being on the
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S MARCH 31,
1998, QUARTERLY REPORT ON FORM 10-QSB 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 6,078
<SECURITIES> 171,652
<RECEIVABLES> 1,998,038
<ALLOWANCES> 89,097
<INVENTORY> 0
<CURRENT-ASSETS> 2,078,313
<PP&E> 8,687,267
<DEPRECIATION> 970,007
<TOTAL-ASSETS> 10,410,504
<CURRENT-LIABILITIES> 3,641,494
<BONDS> 0
0
0
<COMMON> 2,190
<OTHER-SE> 1,862,823
<TOTAL-LIABILITY-AND-EQUITY> 10,410,504
<SALES> 0
<TOTAL-REVENUES> 158,264
<CGS> 129,291
<TOTAL-COSTS> 129,291
<OTHER-EXPENSES> 354,198
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (46,570)
<INCOME-PRETAX> (334,759)
<INCOME-TAX> 0
<INCOME-CONTINUING> (334,759)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (334,759)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
