UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 1997
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required) for the transition period from to
Commission file number: I-9418
CyberAmerica Corporation
(Name of Small Business Issuer in Its Charter)
Nevada 87-0509512
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
268 West 400 South, Suite 300, Salt Lake City, Utah 84101
(Address of Principal Executive Offices) (Zip Code)
(801) 575-8073
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of each Exchange on Which Registered
Common Stock ($0.001 Par Value) Boston Stock Exchange
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ X ].
The issuer's total consolidated revenues for the year ended December 31, 1997,
were $2,969,519.
The aggregate market value of the registrant's Common Stock, $0.001 par value
(the only class of voting stock), held by non-affiliates was approximately
$233,031.63 based on the average closing bid and asked prices for the Common
Stock on March 31, 1998.
At March 31, 1998, the number of shares outstanding of the registrant's Common
Stock, $0.001 par value (the only class of voting stock), was 2,366,166.
Total Number of Sequentially Numbered Pages ___29__
Exhibit Index on Page ___29__
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TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business.............................................1
Item 2. Description of Property.............................................2
Item 3. Legal Proceedings..................................................10
Item 4. Submission of Matters to a Vote of Security-Holders................12
PART II
Item 5. Market for Common Equity and Related Stockholder Matters............12
Item 6. Management's Discussion and Analysis or Plan of Operation...........13
Item 7. Financial Statements................................................19
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure................................................19
PART III
Item 9. Directors and Executive Officers....................................19
Item 10. Executive Compensation..............................................21
Item 11. Security Ownership of Certain Beneficial Owners and Management......21
Item 12. Certain Relationships and Related Transactions......................23
Item 13. Exhibits List and Reports on Form 8-K...............................27
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
As used herein, the term "Company" refers to CyberAmerica Corporation, a
Nevada corporation, and its subsidiaries and predecessors, unless the context
indicates otherwise. Originally incorporated on July 10, 1984 in Ohio as The
Canton Corporation, the Company adopted its present name in June 1996. Current
management obtained controlling ownership of the Company in the second quarter
of 1992. The Company changed its domicile to Nevada on March 9, 1993 through a
merger with a Nevada corporation bearing the exact name as the Company. Since
1992, the Company has concentrated its operations primarily on the acquisition,
management, sale and lease of real estate holdings and on providing financial
consulting services.
In addition to its current operations, the Company has engaged in two other
areas of operation in its recent history. In 1993, the Company formed Canton
Tire Recycling Corporation, an Illinois corporation ("CTR"), to engage in tire
recycling operations at its Canton Plant. CTR operated for a period of
approximately nine months, when CTR was discontinued as a result of problems
with the tire shredding equipment which did not perform to promised
specifications. The Company ceased payment on the shredding equipment which was
then reclaimed by the manufacturer. The Company has filed a complaint seeking
damages against the lessor of the equipment. For more information on this legal
proceeding, see "Item 3 - Legal Proceedings."
In 1996, the Company developed a new division of operations related to the
preparation, development and marketing of Internet virtual malls. These
operations were conducted through a wholly owned subsidiary known as CyberMalls,
Inc. ("CyberMalls"). The Company made significant expenditures toward the
development of CyberMalls including purchasing considerable amounts of computer
equipment and hiring a staff of approximately 25 individuals. However,
CyberMalls failed to generate any significant revenues and the Company lacked
the ability to provide CyberMalls with the cash infusion necessary to
successfully operate. On February 25, 1997, the Company discontinued
substantially all of CyberMalls' operations. For more information on the
development of CyberMalls, its business plan and the Company's decision to
terminate CyberMalls' operations, see "Item 6 Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Under the direction of prior management, the Company filed a voluntary
petition for relief under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Central District of Illinois on February
22, 1988. Current management led the Company's exit from bankruptcy on November
7, 1994 pursuant to the Bankruptcy Court's order of the same date.
Business of Issuer
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. For further information on the
Company's real estate holdings, see "Item 2 - Description of Property" and "Item
6 - Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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
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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.
Prospective clients for the Company's consulting services are located by
the Company through advertising and referrals. The Company researches various
databases and identifies public companies potentially interested in the
Company's services. The Company also advertises its services to targeted
corporations. Referrals by current and previous clients have provided the
Company with additional clients. The Company is currently providing consulting
services to approximately seven clients.
The Company charges clients monthly or other fees which vary in both amount
and form. Acceptable payments include cash, securities of the client
corporation, other assets or some combination of the three. This payment
arrangement allows many organizations, especially start-up ventures and those
experiencing financial difficulties, to obtain the Company's services without
the use of valuable cash flows. However, accepting stock as compensation
occasionally impairs the Company's cash flow. Acceptable payments and the size
of payments the Company charges for its services vary with the volatility of the
clients' securities, the amount and nature of work involved, and the expenses
related to the services being rendered.
Entities from many different industries employ the Company's consulting
services. The Company primarily targets distressed public companies and private
companies seeking to become publicly owned. The decision of accepting a
prospective client depends on its financial stability, the type of services
needed and the compensation format. A key to the Company's success is
management's ability to improve and maintain its client base and successfully
liquidate its compensation.
The Company has one legal proceeding pending which involves an
investigation of the Company's compliance with local and state environmental
laws and is potentially subject to two other environmental claims by state
authorities. The cost and effect of these matters are dependent upon the outcome
of the proceedings and investigations which are currently pending with local and
state agencies. For further information see "Item 3 - Legal Proceedings." The
Company is unable to forecast and can give no assurance as to the outcome and
resulting cost of these proceedings and investigations, if any, and the effect
they may have on the Company.
The Company had a total of 17 employees, 14 of whom were full time
employees, on March 31, 1998.
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns or leases industrial, commercial, warehouse, office and
undeveloped commercial real estate. The acquisition of properties has not been
limited to any specific geographic area, but has been dictated by the perceived
appreciation potential and terms of financing. Regardless of the type of
property, future acquisitions will not be limited to any specific geographic
area. At the end of 1997, the Company owned, leased, or had interests in
properties in Utah, California, Illinois, Virginia, West Virginia, Arizona and
Nevada.
The Company's policy is to actively pursue the acquisition of real estate
for investment income and appreciation in property value. During the past year,
the Company has continued to place an emphasis on acquiring property which
management feels is undervalued. Rather than limiting itself to specific types
of real estate, the Company's policy has been to focus primarily on terms of
financing. The Company generally looks for properties that can be purchased by
assuming the existing financing or by paying the balance of the purchase price
with a nominal cash
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expenditure and/or the issuance of shares of the Company's common stock, par
value $0.001 ("Common Stock").1 The Company has been successful in acquiring
several properties in this fashion. The Company does not plan to enter into the
business of originating, servicing or warehousing mortgages or deeds of trust,
except as may be incidental to its primary purpose of acquiring real estate.
There is a risk that the Company may lose control of its properties
through foreclosure if enough funds are not derived from the rental income for
both the financing and operations. Currently, due to expanded acquisition
activity and deficiencies in rental income from the properties acquired, the
Company does not have sufficient rental revenues to cover the debt service and
operating costs of all properties. The Company currently has to use capital from
other sources to fund this deficit. Although management hopes to increase the
occupancy rates and thus increase the rental income so that such income will
cover both operations and debt service, no such assurances can be made.
Below is a list of the properties owned by the Company and/or its
consolidated subsidiaries as of December 31, 1997. Also included are any changes
in the ownership status of such properties which have occurred between the end
of 1997 and the filing of this Form 10-KSB. Of the Company's properties, only
the Oasis, Nevada property has a book value amounting to ten percent (10%) or
more of the total assets of the Company. All reference to current principal
balances of encumbrances against the properties are as of December 31, 1997
only.
Oasis, Nevada Property
The Oasis, Nevada property consists of 1,126 acres of mostly raw land
located in Elko County, Nevada. The property was purchased by the Company on
December 27, 1995. The purchase also included improvements to the property
consisting of a service station, small retail and food service operation and a
mobile home park. Also purchased were the water rights to over sixteen hundred
acre feet of water per year.
The property is subject to a $900,000 note executed in favor of the seller
and secured by a first deed of trust, as well as a $300,000 promissory note
payable to an individual and secured by a second deed of trust. Under the terms
and conditions of the first note, interest only payments of $15,750 (7% per
annum) are due quarterly during the first three years. In January 1999, the
amount of the quarterly payments increases to $31,475 which includes both
interest payments and principal reductions. The entire $506,171 in remaining
unpaid principal and accrued interest become due and payable on January 1, 2006.
There are no pre-payment penalties and the contract provides for the payoff and
reconveyance of specific tracts of land within the parcels covered by the deed.
The $300,000 promissory note requires interest only payments at 18% per annum
until the note matures. The second note was originally scheduled to mature on
December 27, 1997, but was extended until March 27, 1998 in return for a sum of
$10,000. At the time of filing, the note was technically in default. However,
the parties have agreed verbally to extend the note on a month to month basis.
The promissory note contains no penalty for prepayment. Other than property
taxes that will become due and payable, there are no encumbrances on the
property.
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(1) All references to quantities of Common Stock made throughout this Form
10-KSB have been adjusted to reflect the 1-for-10 reverse stock split the
Company effected on October 31, 1997. Accordingly, any references to Common
Stock on dates prior to October 31, 1997 have been reduced to one-tenth of their
prior amount. For more information on the reverse stock split, see "Item 5 -
Market for Common Equity and Related Stockholder Matters" and Footnote 3 of the
accompanying audited financial statements.
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OTHER PROPERTIES
The Company intends to develop the property in the future if additional
financing can be obtained. Potential development would potentially include a
small hotel and casino and related business. The Company has entered into a
tentative purchase agreement to sell 20 acres of this Oasis property.
The federal tax basis of the property is $1,682,535. The facilities are
being depreciated by straight line method over a period of 31.5 years. The
realty tax rate is .00196 and the annual realty taxes for 1997 were $3319. The
Company is of the opinion that this property is adequately covered by insurance.
The Wallace-Bennett Building - Salt Lake City, Utah
The Wallace-Bennett Building is located at 55-65 West 100 South, Salt Lake
City, Utah. The property was purchased by Wasatch Capital Corporation
("Wasatch") on November 29, 1994. The Company owns twenty percent (20%) of the
captital stock of Wasatch. The building is a 36,797 square foot,
turn-of-the-century multi-story office building. Currently, only a portion of
the ground floor is rented. The rentable ground space in the building is
adequate for its current uses, but the additional stories above the ground floor
cannot be used until they have been remodeled and rehabilitated.
The property is subject to a promissory note secured by a first trust deed
with a current principal balance of $477,620 and bearing 10% interest per annum.
Total monthly principal and interest payments are $7,930. The note matures in
November 1999, when the remaining $381,113 in principal and interest comes due.
Other than property taxes that will become due and payable, there are no other
encumbrances on this property.
Wasatch has tentative plans to remodel the second, third and fourth floors
as either offices or residential condominiums. The cost for either project is
estimated to be around $1,000,000 and no financing for this project has been
obtained. Salt Lake County has recently completed a new convention center on the
block just to the west of this property. The demand for office and retail space
in the downtown Salt Lake City area has increased significantly over the past
few years and the new convention center could make the vacant space in the
Wallace-Bennett Building more marketable. The Company is of the opinion that
this property is adequately covered by insurance.
The current occupancy rate for the rentable ground level space is 100%. A
restaurant occupies 2,584 square feet of the building and a retail store
occupies 912 square feet of the building. The tenants are responsible for all of
their own utilities, except water and sewer. Tenants also pay their pro-rata
share of all other operating expenses as well as maintenance, janitorial
services, insurance and property taxes. The average annual effective rental for
the rentable ground level space is $10.87 per square foot. The lease for the
retail store will expire within the next year, representing $1,065 in annual
revenue. It is presently expected that the expiring lease will either be renewed
or replaced with a new tenant.
The Plandome Building - Salt Lake City, Utah
The Plandome Building is located at 69-75 East 400 South, Salt Lake City,
Utah. In October 1993, the building was acquired by Canton Industrial
Corporation of Salt Lake City ("CICSLC"), a consolidated subsidiary of the
Company. This historic three-story building constructed in 1904 contains 15,300
square feet of office and retail space and is eligible to be listed on the
National Register of Historic Places.
The property is subject to a 9% note with a current principal balance of
$551,404 The note is secured by the first deed of trust and requires total
monthly principal and interest payments of $4,783. The note matures in October
1999, when a balloon payment of $540,768 comes due in full. The property is also
subject to another note secured by a second deed of trust. The latter note has a
current principal balance of $100,000 and provides for interest at an annual
rate of five percent (5%). No payments of principal or interest are due on the
second note until October 1, 1998 when the full principal and accrued interest
are due and payable. Either of these notes can be prepaid any time, without
penalty.
In 1990, the building was substantially renovated to retain its original
style. No need for additional renovation or restoration is foreseen and there
are no plans to do so at this time. Directly across the street from the Plandome
Building, the State of Utah recently finished construction on a new court
complex. The demand for office and retail space in the downtown Salt Lake City
area has increased significantly over the past few years and the opening of the
Court Complex should increase demand for office space in the vicinity of the
Plandome Building even further. The Company is of the opinion that this property
is adequately covered by insurance.
The present occupancy rate is 81%. Two restaurants and one Internet service
provider each occupy more than 10% of the square footage in the building. The
major tenants are responsible for all of their utilities except water and
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sewer. The remaining office space is rented to professional organizations. The
average effective annual rental revenue is $7.50 per square foot. Two of three
major leases will expire within the next two years, representing $42,000 in
annual revenue. It is presently expected that all of the leases will either be
renewed or replaced with new tenants.
CyberAmerica Corporate Office Building - Salt Lake City, Utah
Canton's Commercial Carpet Corporation, a consolidated subsidiary of the
Company, owns a building located at 268 West 400 South in Salt Lake City, Utah
which is currently used as the Company's headquarters and principal offices. The
Company leased the building from May 1994 until March 1998, when Canton's
Commercial Carpet exercised its option to purchase the building through the
payment of $418,762. The 15,600 square foot office building has two stories of
office space and is suitable for office use. The Company occupies 70% of the
building with the remaining 30% subleased to an investment company and a
telemarketing company. Total annual rents from the unrelated tenants equal
$48,096, or $10.15 per square foot, and both leases will expire in the next two
years. Improvements have been made to the property including carpeting, painting
and remodeling the second and third floors. The Company is of the opinion that
this property is adequately covered by insurance.
The property is subject to a 13% note with a total principal amount of
$325,000 which requires monthly interest only payments of $3,520 until March
2000 when the full remaining balance is due. The note is secured by a first deed
of trust. The property is also subject to a 15% note with a total principal
amount of $315,000 and which requires monthly interest only payments of $3,937
until November 1998 when the full remaining balance is due. This latter note is
secured by a second deed of trust.
Vale Terrace Property - Vista, California
TAC Inc., a consolidated subsidiary of the Company, owns an interest in a
28,800 square foot two-story office building located at 956 Vale Terrace Drive
in Vista, California. TAC acquired the building in September 1997. TAC's
interest is subject to a 10%, $400,000 note secured by a first deed of trust and
a 7%, $560,000 note secured by a second deed of trust.
The $400,000 note bears interest at 10% per annum and requires monthly
interest only payments of $3,334 until July 29, 1998 when the full principal is
due and payable. The second note bears 7% per annum interest. The interest on
the second note has been prepaid until August 23, 2001.
Under the terms of the Vale Terrace purchase agreement, the seller was to
lease the Vale Terrace building from September 1997 until July 1998 and continue
making monthly interest payments on the note. However, in February 1998, TAC
received notice from the holder of the first deed of trust, that the monthly
interest payments had not been paid and that the note was in default. On April
13, 1998, the total amount in default on the ground lease, deed of trust and
unpaid property taxes was $53,667.31. Since that time, the note has remained in
default and TAC has received notice of a Trustee's sale set for May 13, 1998. At
the time of initial publication of the Notice of Sale, the unpaid balance of the
obligation secured by the property together with reasonable costs and expenses
was $411,048.43. The Company is currently considering whether to refinance the
property or to pursue its legal rights under the purchase agreement. For more
detailed information regarding these two alternatives, see "Item 6 -
Management's Discussion and Analysis or Plan of Operation."
The Vale Terrace building consists of eight suites and has been leased
primarily as office space. Currently the building is vacant. During the end of
1997, several lessees, including the building's largest tenant, vacated the
premises. TAC believes that the Vale Terrace building requires approximately
$500,000 in improvements to make the building more attractive to potential
tenants. Necessary improvements include roof repair, installation of new
fixtures, carpet repair and other cosmetic work. TAC is attempting to refinance
the building in order to fund these improvements. For more information on the
Company's plans for the Vale Terrace Property, see "Item 6 - Management's
Discussion and analysis or Plan of Operation." The Company is of the opinion
that the property is adequately insured.
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Nephi, Utah Properties
Two wholly owned subsidiaries of the Company own a total of three
commercial properties in Nephi, Utah. These subsidiaries will be collectively
referred to as the Company for purposes of this description. The first property
is a 4,696 square foot building located at 26 South Main Street, Nephi, Utah
which is designed for use as a small tavern. The Company acquired the building,
as well as furniture, inventory and supplies associated with the operation of
the tavern, in April 1997. The building is subject to a 7% note secured by a
deed of trust on the property. The note has a current principal balance of
$182,878 and requires monthly payments of $1,305 until May 2004, when the full
$161,206 in remaining principal and accrued interest are due in full. The entire
building is leased to one tenant who operates a tavern in the building. The
lease requires the tenant to pay annual rent of $12,000, or $2.50 per square
foot. The lease expires February 1999, but the tenant has an option to extend
the term until February 2005.
The second piece of commercial property in Nephi, Utah is a 2,200 square
foot building located at 390 South Main in Nephi and which is designed for use
as a cafe (the "Tiara Cafe"). The Company acquired the Tiara Cafe, as well as
all equipment, furniture and supplies used in the operation of the cafe, in July
1997. The Tiara Cafe is subject to a 7% note secured by a deed of trust on the
property. The note has a current principal balance of $98,824 and requires the
Company to make monthly payments of $899 until January 1, 1999, when the $96,475
of remaining principal and interest is due in full. The entire Tiara Cafe is
leased to one tenant who operates a restaurant on the premises. The lease
requires the tenant to pay annual rent of $11,000, or $5.00 per square foot. The
lease expires in September 1998, but the tenant has the option to extend the
term until September 2004.
The third piece of commercial property in Nephi, Utah is a 4,000 square
foot building located at 65 South Main in Nephi (the "Celebrations Cafe") and
which is also designed for use as a cafe (the "Celebrations Cafe"). The Company
acquired the Celebrations Cafe, along with all equipment, furniture and supplies
used in the operation of the cafe, in April 1997. The Celebrations Cafe is
subject to a 15% note with a principal amount of $56,000. Interest only payments
on the note are payable in monthly installments of $700 until August 1, 2002,
when the $56,000 in principal is due in full. The Celebrations Cafe is also
subject to a second note of $70,000 bearing an interest rate of 6% per annum.
Interest only payments on the second note are due in monthly installments of
$350 until August 1, 1999, when the full $70,000 in remaining principal is due.
The Celebrations Cafe is currently vacant and the Company is seeking to lease
the premises to a tenant for purposes of operating a restaurant or similar
business. The Company believes that this property is suitable for this purpose
and does not intend to make any renovations thereto. The Company is of the
opinion that all of these properties are adequately insured.
Glendale Plaza - Salt Lake City, Utah
The Glendale Plaza is located at 1100 South Glendale Drive, Salt Lake City,
Utah. West Jordan Real Estate Holdings, Inc., the Company's wholly owned
subsidiary, currently leases the retail shopping plaza and has an option to
purchase the property for $787,000 (as of December 31, 1997). The option
expires, as does the lease, August 31, 1998 and originally contained an exercise
price of $799,000. The monthly lease payments on the Glendale Plaza are $5,663
and the option price is reduced each month by the lease payments. The property
contains 76,831 square feet of rentable retail space and approximately 86% is
subleased to tenants. A retail market occupies 13,200 square feet of the
building and a sports-fitness club an additional 27,225 square feet. These are
the only tenants of the Glendale Plaza which occupy more than ten percent of the
premises. The Glendale Plaza generates approximately $142,104 in annual rental
income, or $1.85 per square foot, and neither of the two most significant leases
will expire in the next two years. Present plans are to continue to operate the
building as a retail shopping plaza and to increase the occupancy rate. No major
renovations, improvements or development plans have been made for this property.
Property taxes and assessments totaling $21,075 remain unpaid the property, some
of which date back as far as 1994. The Company is of the opinion that this
property is adequately covered by insurance.
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Brian Head Condominiums - Brian Head, Utah
Canton Financial Services Corporation, a wholly owned subsidiary of the
Company, owns three condominium units located in close proximity to Brian Head
Ski Resort and the surrounding resort town in Southern Utah. CFSC has acquired
the condominium units for investment purposes and has contracted with a
management firm who rents the units on a short-term basis. The first unit is
subject to a note with a current principal balance of $31,468 and bearing an
interest rate of 9.5% per annum. Monthly payments on the first unit are $363,
with the principal and interest amortized over a period of 17 years. The second
unit is subject to a note with a current principal balance of $34,109 and
bearing an interest rate of 8.25% per annum. Monthly payments on the second unit
are $302 until October 2001 when the remaining $30,976 comes due in full. The
third unit is subject to a note with a current principal balance of $40,629 and
bearing an interest rate of 8.75% per annum. Monthly payments on the third unit
are $362 until July 2002 when the remaining $36,570 comes due in full. There are
no prepayment penalties on any of the units.
CFSC has an option to purchase a fourth condominium in the Brian Head area
pursuant to a lease option agreement it executed with Richard Surber, the
Company's president, director and chief executive officer, in August 1997. Mr.
Surber owns the condominium subject to a note on the property secured by a deed
of trust. CFSC leases the condominium for $900 per month, almost all of which is
applied to the monthly obligations on the first note. CFSC has an option to
purchase the building through payment of $84,814, which is reduced monthly by
the extent to which CFSC's monthly rental payments decrease the principal
balance due on the note. The lease option also contains an alternative option
price in the event the unit appreciates dramatically during the term of the
lease. CFSC is also required to pay all taxes, condominium fees, maintenance and
repair expenses and other charges on the property. CFSC has the ability to
manage, control and sell the condominium unit during the term of lease. For more
information on this lease, see "Item 12 - Certain Relationships and Related
Transactions."
The Parkersburg Terminal - Parkersburg, West Virginia
The Parkersburg Terminal is located at 516 Camden Street, Parkersburg, West
Virginia. The terminal is a former fuel transfer station. The property consists
of 4.5 acres on a tributary of the Ohio River and includes a former oil storage
facility and a warehouse with office space. The Parkersburg Terminal was
purchased by Canton Tire Recycling of West Virginia, Inc. on May 15, 1993. Other
than delinquent property taxes totaling $1,745, there are no encumbrances on the
property. The property has been vacant and unused since its acquisition. The
Company is subject to competition in finding tenants or buyers for the property,
and there is a substantial likelihood that the property will remain vacant for
some time. The Company is of the opinion that this property is adequately
covered by insurance.
The Company has received notices from the West Virginia Division of
Environmental Protection (the "WVDEP") indicating that above ground storage
tanks and related hardware on the property were leaking unidentified contents
into the nearby river. Testing performed on the site indicates that all
remaining storage tank contents are crude oil remnants. The test results have
been submitted to the WVDEP and the WVDEP has demanded additional testing be
conducted with respect to the containment and removal of all waste materials
remaining on the site.
The Canton Plant, Canton, Illinois
The Canton Plant is located at 200 East Elm Street in Canton, Illinois. The
Canton Plant was acquired by the Company in 1984 and title to the property is
held in the name of Thistle Holdings, Inc., a wholly owned subsidiary of the
Company. The Canton Plant was a manufacturing and warehousing facility formerly
owned by the plow division of International Harvester. Prior to August 1997, the
facility consisted of brick, steel and glass constructed buildings with over
1,290,366 feet of interior space, portions of which were in disrepair.
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On August 6, 1997, a fire engulfed the facility and destroyed over 800,000
square feet of the buildings located at the Canton Plant. The fire destroyed the
warehouse and office space comprising the largest portion of the square footage
of the Canton Plant. The remaining buildings at the Canton Plant consist
primarily of open-air manufacturing facilities, some of which sustained smoke
damage from the fire.
Preliminary testing indicated that asbestos containing materials were
included in the debris of the fire and the Company retained a qualified site
designer to test the site for asbestos contaminants and develop a plan for the
removal of asbestos containing materials. The Company has retained a local
contractor to remove debris from the site in compliance with the plan that has
been devised. Removal of the debris resulting from the fire has commenced. The
Company has been informed by federal authorities investigating the incident that
the cause of the fire was arson.
The Canton Plant had been previously used by the Company for tire recycling
operations, but had been almost entirely vacant for the past year and had
limited commercial use prior to the fire. The buildings which remain after the
fire are suitable only for limited manufacturing use and the Company will likely
need to substantially renovate or develop the property in order to make it
commercially viable. The Company is currently researching potential future
options with respect to the property, but no future development plans have been
made as of the filing of this Form 10-KSB.
The Canton Plant is currently vacant. The only current encumbrances on the
property are accumulated property taxes, penalties, and assessments totaling
approximately $304,000 of which portions are delinquent as far back as 1988.
However, this property is also the subject to two separate pending proceedings
with the State of Illinois. The first of these proceedings was filed in the
Ninth Judicial Circuit for the State of Illinois and was brought to enforce
environmental cleanup in compliance with federal and state required
environmental laws, rules and regulations. The second proceeding was filed with
the Illinois Pollution Control Board which involves reimbursement of expenses
incurred by the State of Illinois in the removal of waste tires from the Canton,
Illinois property. On March 5, 1998, the Company was ordered to pay $326,154 in
reimbursement costs. See "Item 3 - Legal Proceedings" for more information on
these proceedings.
KMC Plant - Cheriton, Virginia
The former KMC food plant and warehouse ("KMC Plant") is located in the
vicinity of Cheriton, Virginia. In 1993, the Company acquired all of the
outstanding capital stock of KMC Foods, Inc. At that time, KMC Foods owned a
note in the amount of $353,000 bearing interest at twelve percent (12%) secured
by a deed of trust on the KMC Plant and a second note receivable in the amount
of $122,000. Payment on the notes was not made and KMC Foods therefore
foreclosed on the property. The property was purchased by Diversified Holdings
XIX, Inc., a wholly owned subsidiary of the Company on August 2, 1996.
The KMC Plant is located on approximately 65 acres and has railroad spur
access with the Penn Central Railroad. The property has structures for the
manufacture, storage and distribution of food products. The property is zoned
for industrial use. The KMC Plant has been vacant and unused since the note was
acquired and is in disrepair. The property is subject to an environmental impact
investigation by the Virginia State Water Control Board and related agencies
(see "Item 3. Legal Proceedings - Possible Actions by Governmental
Authorities"). Aside from potential environmental claims, there are no known
encumbrances on the property.
The Company does not plan to renovate, restore or improve the property and
intends to attempt to lease or sell the property as is. There appears to be
limited market demand for this property, so there is a substantial likelihood
that the property will remain vacant for some time. The Company is of the
opinion that the property is adequately insured.
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Investments in Raw Land
Through several subsidiaries, the Company owns a total of approximately
6,915 acres raw, unimproved land located in undeveloped regions of Box Elder
County, Utah. These subsidiaries will be collectively referred to as the Company
for purposes of this description. The Company purchased this land through
several different transactions beginning in August 1996 and continuing
throughout 1997. Of the total acreage, approximately 1,975 acres are subject to
three separate notes with a combined principal balance of $45,000 and secured by
separate deeds of trust. The notes on these 1,975 acres each accrue interest at
a rate of 7% per annum and provide for monthly payments totaling $498. The notes
mature in November of 2004 when the remaining $20,515 in principal balance is
due in full.
The total acreage also includes an additional 1,280 acres which are subject
to two separate note with a total current principal balance of $79,383 and
secured by two separate deeds of trust. The notes on these 1,280 acres accrue
interest at a rate of 8.25% per annum and provide for monthly payments totaling
$599. The notes mature in July of 2007 when the remaining $70,818 in collective
principal balance is due.
The Company also owns a separate parcel totaling 1,280 acres subject to a
note with a current principal balance of $82,383 and secured by a deed of trust.
The note on these 1,280 acres accrues interest at a variable rate (currently at
5% per annum) and provides for annual payments of $8,962. All principal and
interest on the note will be paid in December 2012. There are no balloon
payments due on the note.
An additional 2,240 acres of the total are subject to a note with a current
principal balance of $115,220 and secured by a deed of trust. The note on these
2,240 acres accrues interest at a rate of 8% per annum and provides for annual
payments of $12,708. The note matures in December of 2001 when the remaining
$113,694 in principal balance is due.
Finally, the total acreage includes 140 acres of raw land subject to a note
with a current principal balance of $5,183 and secured by a deed of trust. The
note on these 140 acres accrues interest at 6.5% and requires monthly payments
of $61. The note matures in August of 2004 when the remaining $2,028 in
principal balance is due.
The Company also holds an option to purchase an additional 596 acres of raw
land in Box Elder County for $100 per acre or a total of $59,600. The option
expires in November 1998 and the Company is allowed to finance the payment of
the option price for a period of three years after exercise. The Company paid
$2,000 for this option.
Since August 1994, the Company has owned 13.22 acres of raw, unimproved
land located in Pima County, Arizona near the City of Tuscon. The property is
subject to a Deed of Trust with a current balance of $48,068, providing for
interest at an annual rate of 8%. Total monthly principal and interest payments
are $825. A balloon payment of approximately $41,785 plus accrued interest is
due in March 1999. The only other encumbrances on the property are unpaid
property taxes and mineral assessments of $6,396 and restrictive covenants
placed upon any future development of the land pertaining to the number of
dwellings and the style of the buildings.
The Company acquired its interests in the aforementioned raw land for
investment purposes and with the intention of developing the property or
reselling the property to a developer interested in improving the land or
extracting natural resources from the land. The Company believes that the
significant development of areas surrounding the Company's investment holdings
will ultimately increase the value of the Company's raw land. However, the
Company has no specific plan for developing these properties in the foreseeable
future and cannot reasonably estimate the extent of future development costs.
The Company is of the opinion that its investments in raw land are adequately
insured. There are no prepayment penalties regarding the financing on any of the
Company's investments in raw land.
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ITEM 3. LEGAL PROCEEDINGS
The following are material pending cases involving the Company:
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 it is expected that the
court will consider the final amended complaint and any new motions by
Defendants before the end of April 1998. The amended complaint seeks total
damages in an amount of not less than $1 million.
Key L.C. Corporation vs. Paragon Capital Corporation, Allen Z. Wolfson,
CyberAmerica Corporation and Robert J. D'Aleo. - Key L.C. filed suit in Federal
District Court of Utah, Central Division on December 18, 1996, Case Number 2:96
CV 1054B, alleging that each of the named defendants violated the Securities
Exchange Act of 1934 in the sale of CyberAmerica stock to Key. The Company filed
an answer denying any liability for the claims of the Plaintiff and a
cross-claim as to the other named defendants in the event that Plaintiff was
found to be entitled to any recovery. In February 1998, all claims were settled
and the various parties executed mutual releases. Pursuant to the settlement,
the Company agreed to pay an agreed sum to Key L.C. While the Company continues
to deny any wrongdoing, it considered the amount to be paid in settlement
reasonable and favorable in light of expected costs of litigation.
Canton Financial Service Corporation v. The Renno Group, Inc. - A complaint
was filed in the United States District Court for the Middle District of
Florida, Tampa Division, Case Number 96-2367-CIV-T-24-E, by Canton Financial
Services Corporation, a subsidiary of the Company ("CFSC"). CFSC alleges that
defendant failed to pay for services CFSC performed on behalf of defendant with
respect to the merger of a third party, Network Systems International, Inc.
("Network Systems"). The complaint seeks damages in the amount of $15,000 plus
delivery of 355,029 shares of the common stock of Network Systems to CFSC.
Shares of Network have traded at times at more than $3.00 per share in 1997.
Renno filed a motion for summary judgment seeking to have the court rule that
Renno is not liable for the delivery of shares of Network to CFSC, but that
motion was denied. Renno filed for Chapter 7 bankruptcy protection prior to
trial. The Company has also filed a separate suit against Network Systems in the
Thirteenth Judicial Circuit Court of Hillsborough County, State of Florida. This
latter suit seeks identical damages and is premised upon the same set of facts.
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 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.
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.
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
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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.
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. Trial date has been set for May 4, 1998 and pre-trial discovery is
ongoing.
State of Delaware vs. KMC Foods, Inc. - The Division of Revenue of the
Department of Finance for the State of Delaware has made a claim in excess of
$300,000 for taxes allegedly due based upon the gross revenues of KMC, a
subsidiary of the Company, for the tax period of April 1, 1989 through March 31,
1992. This tax period for which this amount has been assessed is prior to the
Company's affiliation with KMC. Prior management of KMC has assured the Company
that the Delaware tax does not apply as all sales of products were outside of
the state of Delaware.
Possible Actions by Governmental Authorities
Virginia Property - Prior to its acquisition by the Company, KMC Foods,
Inc. operated a food processing plant near Cheriton Virginia. For a Full
description of this property, see "Item 2 - Description of Property." KMC had
previously sold this property to Potomac Engineering Management Systems Co.
("PEMSCO") retaining a secured interest. The secured interest was the only asset
of KMC at the time it was acquired by the Company. In August 1996, KMC
foreclosed on the property and sold it to Diversified Holdings XIX, Inc.,
another subsidiary of the Company ("Diversified Holdings"). The Virginia State
Water Control Board has requested the preparation of a Site Characterization
Report on the property to determine the extent of environmental contamination
resulting from underground storage tanks. Diversified Holdings has entered into
negotiations with local governmental officials to complete required testing on
the property.
West Virginia Property - Title to the property located in the city of
Parkersburg, West Virginia is held by Canton Tire Recycling of West Virginia,
Inc., a wholly owned subsidiary of the Company. For a description of this
property, see "Item 2 - Description of Property ". The West Virginia Division of
Environmental Protection has sent the Company notices alleging that tanks and
related hardware located on the property were leaking unidentified contents onto
the ground and into a nearby river; actions were taken to prevent such leaking.
Testing on the site indicates that all remaining tank contents are crude oil
remnants and those results have been submitted to the state authority. Final
cleanup and removal of the remnants are pending final approval by the State and
additional funding.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal year 1997, the Company did not submit
any matters to a vote of security holders through the solicitation of proxies or
otherwise.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Boston Stock Exchange under the
symbol "CYA" and on the OTC Bulletin Board under the symbol "CYAA." The
following table sets forth the high and low sales prices for the Company's
Common Stock as reported on the Boston Stock Exchange for each quarter of 1996
and 1997, and the first quarter of 1998:
Quarter High Low
------- ---- ---
1996 First $2.44 $0.94
- ----
Second $4.25 $1.06
Third $2.37 $1.06
Fourth $1.37 $0.12
Quarter High Low
------- ---- ---
1997 First $0.41 $0.13
- ----
Second $0.32 $0.12
Third $0.20 $0.07
Fourth $2.00* $0.37*
Quarter High Low
------- ---- ---
1998 First $0.75* $0.13*
- ----
- --------------------------------------------------------------------------------
*On October 31, 1997, the Company effected a 1-for-10 reverse split of its
Common Stock, par value $0.001. The reverse split affected both the outstanding
shares and the shares authorized for issuance by the Company, reducing the total
authorized shares of Common Stock to 20 million. All fractional shares resulting
from the reverse split were rounded up to the nearest whole share. All
references to quantities of Common Stock throughout this Form 10-KSB have been
adjusted to reflect quantities remaining after the reverse stock split. However,
the high and low stock prices appearing in the table above have not been
adjusted to account for the reverse and the higher prices during the fourth
quarter of 1997 and first quarter of 1998 are attributable to the reverse stock
split and not an increase in share price.
Shareholders
As of March 31, 1997 there were approximately 831 shareholders of record
holding a total of 2,366,166 shares of Common Stock.
Dividends
There are no restrictions that currently limit the Company's ability to pay
dividends on its Common Stock other than those generally imposed by applicable
state law. On June 14, 1996, the Company declared a property dividend consisting
of one share of the common stock of INFOTECH International, Inc., or the cash
equivalent of such stock, for every 100 shares of the Company's Common Stock
owned as of the June 24, 1996 record date. On October 25, 1996, the Company
restated the dividend's terms. A dividend of $0.02 for every 100 shares of the
Company's Common Stock shall be paid to each shareholder of record as of June
24, 1996 in lieu of the shares of stock previously declared. Shareholders owning
less than 100 shares of Common Stock shall also receive a $0.02 dividend. The
Company has not yet declared the payable date for distribution. This dividend
represents the only cash dividend declared on the Common Stock in the last two
fiscal years and the Company does not anticipate the payment of future
dividends.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Real Estate Operations
The Company's operations consist primarily of two different areas of focus.
The Company's primary operations involve the acquisition, lease and sale of real
estate holdings. The Company also provides financial consulting services,
although the Company has significantly curtailed the extent of these operations
over the past year. The Company's real estate operations have therefore assumed
a greater relative importance with respect to the Company's overall financial
position.
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 through the expenditure of 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
shares of the Company's Common Stock. Once such properties are acquired, the
Company leases them to primarily commercial tenants. The Company also makes
limited investments in improvements to the properties with the objective of
increasing occupancy and improving cash flows. The Company believes that with
minor improvements and effective management, properties can be liquidated at a
profit within a relatively short period of time.
Because of the expanded relative importance of the Company's real estate
operations and because the Company's real estate operations primarily involve
the acquisition and disposition of real estate holdings, the Company has
determined that its financial statements would more fairly represent the
financial position of the Company if proceeds from the sale of its real estate
holdings, as well as the costs associated with such sales, were included in the
Company's operating revenue and costs of revenues, respectively. Accordingly,
two substantial sales of real estate holdings significantly impacted the
Company's results of operations for 1997.
On May 5, 1997, TAC, Inc., a consolidated subsidiary of the Company, closed
on the sale of a 60,000 square foot commercial warehouse located at 5280 West
Wells Park Road in West Jordan, Utah. TAC sold the warehouse for $1,335,000,
$200,000 of which was paid in cash and the remainder of which was seller
financed for a period of 90 days after closing. In July, 1997, the purchaser
exercised its right to extend the financing for an additional 30 days. As
consideration for this extension, TAC received $11,350 from the purchaser. The
purchaser also exercised an additional option to extend the financing until
March 1, 1998 with the payment of an additional $50,000. As of the date of this
Form 10-KSB, the purchaser has $1,015,000 in remaining principal and interest
due on the note. The Company further extended the date for payment of this
balance until April 15, 1998, however, the Purchaser once again failed to pay
the amount due on time. On April 21, 1998, the Company sent the purchaser notice
that the promissory note and deed of trust were in default. A late charge of 5%
of the payment becomes due 15 days after the due date. The note will bear an
additional 2% interest over the 13% interest rate on the current note effective
from the 16th of April until the note is brought current. Both the Note and the
Deed of Trust are presently in Default. TAC previously acquired the warehouse in
June 1996 through its exercise of an option to purchase the property by paying
$293,394 in cash and assuming a mortgage of $306,456. For more information on
the TAC Warehouse see the Company's Form 10-KSB for the fiscal year ended
December 31, 1996.
On July 15, 1997, Canton Industrial Properties Management Corporation of
Salt Lake City ("CIPMC"), a consolidated subsidiary of the Company, closed on
the sale of its 18,000 square foot office building located at 202 West 400
South, Salt Lake City, Utah. The sale price of the property was $950,000 which
was paid in cash on the closing date.
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The Company recorded 1997 revenues totaling $2,285,000 as a result of the
sale of these buildings, as compared to revenues of $91,270 for 1996, when the
Company realized revenue only from the sale of a small interest in a commercial
building in Salt Lake City. Costs attributed to the sale of the buildings were
$1,122,146 for 1997 as compared to $41,695 for 1996, resulting in respective
gross profits from real estate sales of $1,162,854 and $49,575.
The Company sold these two properties in 1997 because both had appreciated
significantly since their acquisition by the Company and the Company believed
that the prices offered represented the high end of the market value for each
property. The proceeds of these two sales account for a significant majority of
the revenues realized by the Company during 1997 and therefore affect the
comparative revenues significantly. The Company intends to sell additional
properties on a case by case basis provided local market conditions make such
sales in the best interest of the Company and its subsidiaries. The Company can
provide no assurances that it will be able to continue to generate significant
revenue through the sale of real estate holdings. The ability to generate
revenue in this manner will be largely dependent on, among other factors, the
condition of the real estate markets in which the properties are located, the
Company's continued ability to acquire properties which can be resold and the
Company's ability to improve properties which it has acquired.
The Company recorded rental revenues of $471,262 for 1997 as compared to
$492,513 for 1996. This slight decline was largely attributable to the mid-year
sale of the commercial warehouse located in West Jordan (see above) which, prior
to the sale, generated approximately $204,000 in annual rental revenue. During
1997, the Company took steps to decrease the overall vacancy rate of its
consolidated real estate holdings including aggressively marketing its holdings
to potential tenants through commissioned real estate agents and making
cost-effective improvements to the holdings to increase occupancy. This allowed
the Company to maintain relatively consistent year to year rental revenues
despite the fact that the May sale of the commercial warehouse resulted in the
loss of approximately $100,000 in 1997 rental revenues.
Currently, the Company has negative cash flows from its real estate
operations due to principal and interest payments due on the Company's various
real estate holdings. This is attributable to both vacancies in the Company's
real estate holdings and substantial investments the Company has made in raw
land. The Company continues its real estate operations despite the negative cash
flow for two reasons. First, the Company is attempting to eliminate the losses
by increasing occupancy and rental income from those properties of the Company
which have a high current vacancy rate. Second, the Company purchases real
estate primarily for appreciation purposes. Thus, while the Company seeks to
minimize and reverse its real estate cash flow deficit, its goal is that cash
sufficient to offset such deficit will be generated upon property disposition.
There are four large balloon payments which come due during 1998 and which
are secured by the Company's consolidated real estate holdings. While the
Company intends to either fully satisfy or refinance the amounts which mature in
the next year, the $1,160,000 in debt which will come due will likely have a
material effect on the Company's liquidity, and there is a risk that the Company
may lose some of its properties to foreclosure if it is not able to meet these
obligations. In March, a $300,000 note secured by the Oasis, Nevada property
comes due in full. At the time of filing, the note was technically in default.
However, the parties have agreed verbally to extend the note on a month to month
basis. In July, a $400,000 note secured by the Vista, California property comes
due. However, in February 1998, the Company received notice from the holder of
the first Deed of Trust, that the monthly interest payments had not been
received and that the Note was in default. A Trustee's sale has been scheduled
for May 13, 1998. At the time of initial publication of the Notice of Sale, the
unpaid balance of the obligation secured by the property together with
reasonable costs and expenses was $411,048.43. In October, a $100,000 note
secured by the Plandome Building, plus $45,000 in accrued interest, comes due.
Finally, in November, a $315,000 note secured by the CyberAmerica Corporate
Office Building comes due.
The Company, through its subsidiaries, continued to acquire additional
properties during 1997, including three properties located in Nephi, Utah, which
lies approximately 100 miles south of Salt Lake City, and one property located
in Vista, California, which lies in the vicinity of San Diego.
On April 30, 1997, Cyber LaCrosse, a consolidated subsidiary of the
Company, purchased an 4,696 square foot building located at 26 South Main
Street, Nephi, Utah and all furniture, inventory and supplies associated with
the operation of the tavern. The building was purchased for a total purchase
price of $200,000. $20,000 was paid at the closing and the remainder was paid in
the form of a 7% note. On July 2, 1997, Taylor's Landing, Inc., a consolidated
subsidiary of the Company, purchased an 2,200 square foot building located at
390 South Main in Nephi, Utah and all equipment, furniture and supplies used in
the operation of a cafe. The purchase price was $120,000, $20,000 of which was
paid at closing. The remaining $100,000 was paid in the form of a 7% note. On
August 1, 1997, Taylor's Landing purchased a separate 4,000 square foot building
located at 65 South Main in Nephi (the "Celebrations Cafe") for a total purchase
price of $126,703. Of this amount, $56,000 was paid through the execution of a
15% note and an additional $70,000 was paid through the execution of a 6% note.
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The Company acquired the three properties in Nephi because the properties
required the expenditure of relatively small amounts of cash. The Company also
believes that large, recent increases in the population of the Salt Lake Valley
will have a spillover effect on surrounding areas and will result in
appreciation in the value of these three investments. The Company is currently
leasing 100% of the tavern and one of the restaurants. The Celebrations Cafe is
currently vacant and the Company is attempting to locate potential tenants for
that building. For more information on the three Nephi, Utah properties, see
"Item 2 - Description of Property."
On September 19, 1997, TAC Inc., a consolidated subsidiary of the Company,
acquired all outstanding capital stock of a Delaware corporation known as Vale
Terrace Corporation, making Vale Terrace Corporation a subsidiary of TAC. Vale
Terrace's sole asset is a 28,888 square foot office building located at 956 Vale
Terrace Drive in Vista, California. TAC acquired the capital stock of Vale
Terrace by assuming the $400,000 first note on the property, issuing shares of
TAC's common stock and executing a note of $560,000 to the seller secured by a
second deed of trust on the property.
Vale Terrace Corporation does not own the real property underlying the
building. The underlying real estate is subject to a ground lease from a third
party which expires December 23, 2037. This ground lease requires Vale Terrace
Corporation to make monthly payments of $3,300 which are periodically increased
to account for inflation.
As part of the transaction through which TAC acquired Vale Terrace
Corporation, TAC also executed a lease agreement pursuant to which it would
lease the property back to the seller until July 1998. This leaseback
arrangement called for the seller to continue paying debt service on the first
note secured by the property, taxes, maintenance, utilities and all other
charges exclusive of capital improvements. The leaseback also required the
seller to continue paying the monthly ground lease payments during the period of
the lease.
During the first quarter of 1998, the Company received notice that the
seller-lessee of the Vale Terrace property had stopped making payments on the
$400,000 note and the ground lease and that the note was in default. The total
amount in default on the property, including amounts due on the ground lease,
was $53,667.31 as of April 13, 1998. However, the default has not been cured and
TAC has received notice of a Trustee's sale to be held on May 13, 1998. At the
time of initial publication of the Notice of Sale, the unpaid balance of the
obligation secured by the property together with reasonable costs and expenses
was $411,048.43. While TAC is currently pursuing its options with regards to
this property, the current default creates a risk that the property may be lost
to foreclosure.
The Vale Terrace property is currently completely vacant. The building
requires substantial improvements which the Company estimates to be as high as
$500,000. The Company is currently considering two alternatives with regards to
the Vale Terrace Property. The Vale Terrace Corporation is currently seeking
bank financing in an amount sufficient to pay the full $400,000 balance of the
first note and to make the improvements deemed necessary to make the property
attractive to potential tenants. The Company believes that Vale Terrace
Corporation's ability to obtain at least $900,000 in financing on the building
is necessary to reverse current cash flow losses on the property, and that
potential inability to obtain such financing presents a material risk to the
Company's future liquidity and consolidated financial position.
Alternatively, 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.
On August 6, 1997, a fire destroyed approximately 800,000 square feet of
the 1,290,336 square foot manufacturing and warehousing facility located at 200
East Elm Street in Canton, Illinois and owned by Thistle Holdings, Inc., a
wholly owned subsidiary of the Company. The facility was previously used for
tire recycling operations and has been almost entirely vacant for the past year.
The Company believes that the buildings destroyed in the fire were worthless or
of nominal value prior to their destruction by the fire. The company recorded a
loss of $32,475 during 1997 as a result of the fire.
In December 1997, the Company allowed its option to purchase 47,000 acres
of raw land in Box Elder County, Utah to expire. The Company had paid a total of
$71,000 to acquire the option to purchase this property for $41 per acre. The
acquisition of the option was part of a larger plan to acquire significant
acreage in the area for investment
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purposes. See "Item 2 - Description of Property" for more information on the
other land the Company owns in this area. The Company allowed the option to
expire because the Company believed the expenditure of approximately $1,927,000
toward the exercise of the option would not be appropriate given the fact that
the raw land has little short-term income potential and would therefore likely
put an unnecessary strain on the Company's liquidity.
Financial Consulting Operations
During the fourth quarter of 1996, the Company determined that its
resources would be better utilized if applied toward real estate investment
activities. Accordingly, the Company reduced the scope and extent of the
financial consulting services. Although the Company continues to provide
financial consulting services, this is done on a significantly smaller scale
than in past years. During 1997, 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. This change in focus of operations is largely responsible for
significant differences in comparative results from 1996 to 1997.
During 1997, the Company had approximately seven financial consulting
clients, a significant reduction in comparison to its high of approximately 20
clients during the third quarter of 1996. Revenues from financial consulting for
1997 decreased to $209,856, as compared to 1996 revenues of $1,927,224. Costs of
consulting revenue also decreased significantly from $1,211,758 in 1996 to
$170,971 in 1997. The main component to the decrease in these costs was the
significant reduction in the size of the Company's staff from 1996 to 1997.
Between October and December 1996, the Company's staff was reduced from 70 to 35
individuals. During 1997, the Company further reduced its staff to its current
level of 17 employees. A significant percentage of this downsizing is
attributable to the Company's financial consulting division.
The Company generates revenues through consulting fees payable in the
client's equity, cash, other assets or some combination of the three. The
primary form of compensation received by the Company has historically been the
equity securities of its clients. When payment is made in the form of equity,
the number of shares to be paid is dependent upon the price of the client's
common stock and the consulting services to be provided, with discounts applied
to account for the resale restriction generally imposed upon such securities.
The Company accepts equity with the expectation that its services will assist in
the stock's appreciation, thus allowing the Company to be compensated and to
make a return on the payments for its services.
The Company generates a substantial portion of its cash flow by liquidating
non-cash assets received as fees for consulting services. As most fees are paid
in the form of equity, the revenues and cash flows realized by the Company are
closely tied to the price of its clients' securities. A decline in the market
price of a client's stock can greatly effect the total asset value of the
Company's balance sheet and can result in the Company incurring substantial
losses on its income statement. During 1997, the Company incurred losses
attributable to a market value decline in several investment securities
previously issued to the Company as consulting fees. The Company recorded a loss
of $890,770 resulting from the sale of investment securities. The Company has
additional, unrealized losses from investment securities available for sale of
$446,500 which are reflected in the Company's Shareholders' Equity.
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.
During 1997, the Company sold a total of 161,113 shares of Common Stock
pursuant to Regulation S ("Regulation S") under the Securities Act of 1933, as
amended (the "Act") for a total of $45,000. Of this total, 111,113 shares of
Common Stock were sold to Karston Electronics, a corporation organized in the
British Virgin
16
<PAGE>
Islands, East West Trading Corporation, a corporation organized in Nevis, West
Indies, and Leeward Consulting Group, LLC, a corporation organized in Nevis,
West Indies, pursuant to transactions occurring on December 18, 1997. In
exchange for these securities, the Company received a total investment of
$25,000. For more information on these transactions, see the Form 8-K filed by
the Company on January 13, 1998. The remaining 50,000 shares of Common Stock
were sold to Pienne Chow, an individual and resident of Hong Kong, in exchange
for an investment of $20,000 in the Company pursuant to an October 22, 1997
transaction.
The Company issued an additional 300,000 shares of Common Stock during
1997 to serve as collateral for note agreements the Company executed with five
separate offshore lenders. The Company issued 60,000 shares to Cellini
Investments, SA, 60,000 shares to Heathfield Investments Limited, 60,000 shares
to Sheffield Holdings Limited, 60,000 shares to Sevenoaks Holdings Limited and
an additional 60,000 shares to Chalford Investments, Limited. All five of these
entities are organized and authorized under the laws of the Bahama Islands. The
note agreements provide for advancements to the Company of up to $100,000 and
the advancements made pursuant to the note agreements were evidenced by
promissory notes. During 1997, the Company borrowed $42,000 pursuant to the note
agreements. Each of the loans acquired by the Company pursuant to these note
agreements bears a floating interest rate of 5% above the prime rate and each
loan matures in November 2000.
The Company also issued Common Stock pursuant to Regulation S in order to
settle potential claims against the Company. In August 1997, the Company issued
112,439 shares of Common Stock to East-West Trading Corporation in order to
settle claims which East-West may have had against the Company stemming from a
private offering of the common stock of one of the Company's subsidiaries. The
Company estimated the value of this potential claim at $114,650. For more
information on this transaction, see the Form 8-K filed by the Company on August
18, 1997. In November 1997, the Company issued 192,000 shares of Common Stock to
Leeward Consulting Group to reacquire investment securities which the Company
had previously sold to Leeward pursuant to an stock purchase agreement
subsequently breached by the Company.
On September 17, 1996, the Company issued a 6.0% Convertible Debenture with
a face amount of $300,000 (the "Debenture") to Legong Investments, N.V., a
corporation organized under the laws of Curacao, Netherlands Antilles
("Legong"). The Debenture was issued pursuant to an Offshore Securities
Subscription Agreement. As consideration for issuing the Debenture, the Company
received a cash payment of $258,000 from Legong. The Debenture can be converted
into the Company's Common Stock at any time prior to maturity at the option of
Legong. The conversion price of the Debenture is seventy percent (70%) of the
average closing bid prices for the Common Stock during the five days immediately
preceding conversion. The Debenture 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.
17
<PAGE>
During the 1997 fiscal year, the Company also continued issuing shares of
its Common Stock pursuant to Section 4(2) of the Act and restricted pursuant to
Rule 144 promulgated under the Act. Shares of Common Stock were sold to various
investors at prices discounted from prevailing market prices to account for
resale restrictions. The proceeds of such sales were utilized to help the
Company meet short-term financial obligations. The Company issued 78,750
restricted shares of its Common Stock during 1997 for cash payments totaling
$35,000. The Company also issued 404,584 restricted shares of its Common Stock
during 1997 in exchange for services rendered. By comparison, during 1996 the
Company issued 112,105 restricted shares in exchange for cash payments totaling
$1,707,384 and issued 105,026 restricted shares in exchange for services.
Results of Operations
The Company recorded an operating loss of $1,410,951 for 1997 as compared
to an operating loss of $1,866,528 for 1996, and a net loss of $2,246,274 for
1997 as compared to a net loss of $2,049,413 for 1996. The significant
discrepancies from year to year are largely attributable to a substantial loss
incurred during 1996 and stemming from the Company's investment in its
CyberMalls subsidiary. CyberMalls was formed in 1996 to design, develop, and
market Internet virtual malls. CyberMalls' was to solicit entities interested in
owning, managing and marketing Internet virtual malls with a specific theme or
industry niche and then develop ideas for the Internet marketing of products and
services with a common theme.
Since CyberMalls was a start-up venture with limited capitalization, the
Company advanced most of the expenses necessary to commence CyberMalls'
operations. The Company incurred expenses of $526,160 related to the development
of its CyberMalls division. Fifteen percent (15%) of this amount involved
capital expenditures for computer hardware, software and data connection lines.
Sixty-seven percent (67%) of this total represented salaries of the 20 to 25
employees CyberMalls employed to effect its business plan. The remaining 18%
were selling and miscellaneous general and administrative expenses. While
CyberMalls entered contracts to sell five Internet virtual malls during 1996,
the selling prices corresponded to the future success of the ventures. The
projects with which CyberMalls was involved were never adequately financed and
CyberMalls was unable to realize any cash flow from its sales of Internet malls.
On February 25, 1997, the Company's board of directors decided to
permanently discontinue the operations of CyberMalls. The Company's management
made this decision based on its belief that the expenditures necessary to
continue competing in the highly competitive market of Internet commerce would
earn a higher rate of return if invested in other segments of the Company's
business. CyberMalls had not begun to generate revenue prior to the
discontinuation of its operations. Accordingly, the Company recorded a loss of
$526,160, the full amount of computer division development costs incurred during
1996, on its financial statements for 1996 to account for its investment in
CyberMalls. For a more full description of the CyberMalls investment, see the
Company's Form 10- KSB for the fiscal year ended December 31, 1996.
Events Subsequent to End of Fiscal Year
On March 6, 1998, the Canton's Commercial Carpet Corporation, 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. The building was purchased through the payment of $418,762, which
amount includes fees and commissions. Canton's Commercial Carpet has leased the
building since May 1994 and the building has served as the Company's principal
executive offices for the past two years. Canton's Commercial Carpet borrowed an
additional sum of $222,489 which is secured by the property.
In February of 1998, the Company received notice that the Vale Terrace
property was in default. Since that time, the Company has also received notice
of a Trustee's Sale to be held on May 13, 1998. For more detailed information
see "Item 6 - Management's discussion and Analysis or Plan of Operation."
The Company's financial statements for the fiscal year ended December 31,
1997 are attached hereto as pages F-1 through F-29.
18
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
CROUCH, BIERWOLF & CHISHOLM
A Partnership of Certified Public Accountants Office (801) 363-1173
Professional Corporations 50 West Broadway, Suite 1130 Fax (801) 363-0615
Brent E. Crouch CPA, PC Salt Lake City, Utah 84101
Nephi J Bierwolf CPA, PC
Todd D. Chisholm, CPA, PC
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
CyberAmerica Corporation
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheet of CyberAmerica
Corporation and subsidiaries as of December 31, 1997 and the related
consolidated statement of operations, stockholders' equity and cash flows for
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit. The consolidated
financial statements for the year ended December 31, 1996 were audited by other
accountants, who expressed an unqualified opinion on their report dated April
14, 1997.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CyberAmerica
Corporation and subsidiaries as of December 31, 1997 and the results of its
operations and cash flows for the year then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 19, the Company's
recurring operating losses and lack of working capital raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to those matters are also described in Note 19. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
April 23, 1998
F-1
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS
<S> <C>
Cash ....................................................... $ 5,906
Accounts receivable - trade ................................ 342,729
(Net of allowance for bad debt of $89,097)
Accounts receivable - related parties ...................... 400,119
Accounts receivable - other ................................ 17,960
Notes receivable - current portion ......................... 1,094,000
Prepaid expenses ........................................... 39,200
Securities available for sale .............................. 146,063
TOTAL CURRENT ASSETS ......................................... 2,045,977
PROPERTY AND EQUIPMENT ....................................... 7,707,843
OTHER ASSETS
Investment securities at cost ............................. 38,426
Notes receivable - net of current portion ................. 152,797
Investments - other ....................................... 242,313
Trade credits ............................................. 179,190
Other assets .............................................. 3,415
Prepaid interest .......................................... 107,800
TOTAL OTHER ASSETS ........................................... 723,941
TOTAL ASSETS ................................................. $10,477,761
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
December 31, 1997
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C>
Accounts payable - trade .................................. $ 396,029
Accounts payable - related parties ........................ 142,573
Accrued liabilities
Interest ................................................ 54,695
Real estate taxes and assessments ....................... 408,173
Payroll and related taxes payable ....................... 356,736
EPA liabilities ......................................... 325,398
Refundable deposits ..................................... 20,395
Refund to investors ..................................... 75,729
Other ................................................... 139,710
Debenture payable ......................................... 260,000
Current maturities of long-term debt ...................... 1,294,565
Current maturities of capitalized lease ................... 19,468
TOTAL CURRENT LIABILITIES .................................... 3,493,471
LONG-TERM LIABILITIES
Long-term debt, less current portion ...................... 3,732,396
Long-term capitalized lease, less current portion ......... 339,951
TOTAL LONG-TERM LIABILITIES .................................. 4,072,347
MINORITY INTEREST ............................................ 714,166
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; 2,175,814 shares issued .............. 2,176
Additional paid-in capital ................................ 14,989,833
Accumulated deficit ....................................... (12,347,732)
Unrealized loss from securities available for sale ........ (446,500)
TOTAL SHAREHOLDERS' EQUITY ................................... 2,197,777
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................... $ 10,477,761
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
REVENUE
<S> <C> <C>
Sale of building ............................... $ 2,285,000 $ 91,270
Consulting revenue ............................. 209,856 1,927,224
Rental revenue ................................. 471,262 492,513
Other revenue .................................. 3,401 235,745
TOTAL REVENUE ..................................... 2,969,519 2,746,752
COSTS OF REVENUE
Cost of sale of building ....................... 1,122,146 41,695
Costs associated with consulting revenue ....... 170,971 1,211,758
Costs associated with rental revenue ........... 241,500 348,815
Interest expenses associated with rental revenue 162,554 157,701
Cost associated with other revenue ............. -- 55,776
TOTAL COSTS OF REVENUE ............................ 1,697,171 1,815,745
GROSS PROFIT (LOSS) ............................... 1,272,348 931,007
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ...... 2,561,579 2,201,375
Environmental cleanup .......................... -- 20,000
Computer development costs ..................... 121,720 576,160
TOTAL SELLING, GENERAL AND ADMINISTRATIVE ......... 2,683,299 2,797,535
OPERATING PROFIT (LOSS) ........................... $(1,410,951) $(1,866,528)
OTHER INCOME (EXPENSE):
Interest income ................................ 71,519 4,663
Interest expense ............................... (296,802) (213,141)
Gain (loss) from sale of assets ................ (11,214) (33,096)
Gain (loss) from investment securities ......... (890,770) 46,014
Unrealized loss from securities ................ -- (447,513)
Gain from issuance of shares by Subsidiary ..... 196,251 272,848
Gain from debt settlement ...................... 27,305 --
Gain from disposal of subsidiary ............... 90,681 --
Other income (expense) ......................... (62,115) 50,699
TOTAL OTHER INCOME (EXPENSES) ..................... (875,145) (319,526)
INCOME (LOSS) BEFORE MINORITY INTEREST ............ (2,286,096) (2,186,054)
MINORITY INTEREST IN LOSS (GAIN) .................. 39,822 136,641
NET INCOME (LOSS) ................................. $(2,246,274) $(2,049,413)
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
INCOME (LOSS) PER COMMON SHARE
<S> <C> <C>
Income (loss) before minority interest $ (1.80) $ (2.83)
Minority interest in loss (gain) ..... .03 .17
Net income (loss) per weighted average
common share outstanding ........... $ (1.77) $ (2.66)
Weighted average number of common
shares outstanding ................. 1,266,828 771,517
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) ............................. $(2,246,274) $(2,049,413)
Adjustments to reconcile net income (loss) to net cash provided:
Gain from debt settlements ................. (27,305) --
(Gain) loss from sale of investments ....... 890,770 (46,014)
Permanent decline in investments ........... 11,214 447,513
(Gain) from sale of assets ................. (90,681) (16,479)
(Gain) from sale of subsidiary ............. (196,251) --
(Gain) from issuance of shares of subsidiary --
Minority interest .......................... (39,822) (136,641)
Depreciation and Amortization .............. 286,326 247,399
Services paid with common stock ............ 619,378 557,312
Common stock issued for assets and debt .... 200,841 11,935
Bad debt provisions ........................ 177,078 201,097
Decrease (increase) in assets:
Receivables .............................. (233,975) (1,346,447)
Inventories .............................. -- 36,371
Prepaid expenses and other ............... 16,454 (47,783)
Increase (decrease) in liabilities:
Accounts and notes payable ................ (6,390) 74,085
Accrued liabilities ....................... (133,250) 195,458
Deferred income ........................... -- (171,900)
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (771,887) (2,043,507)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ....................... (1,676,450) (584,453)
Proceeds from sales of investments ......... 517,895 315,618
Purchase of security investments ........... (60,721) (257,586)
NET CASH FLOWS (USED) IN INVESTING ACTIVITIES .. (1,219,576) (526,421)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock for cash .............. 159,734 1,707,385
Increase in long term debt ................. 2,171,120 890,925
Loan from investors ........................ 269,704
Cash disbursements to stockholders ......... -- (1,950)
Reduction of long term debt ................ (411,853) (236,373)
NET CASH PROVIDED BY FINANCING ACTIVITIES ....... 1,919,001 2,629,691
INCREASE (DECREASE) IN CASH .................... (72,462) 59,763
CASH AT BEGINNING OF YEAR ....................... 78,368 18,605
CASH AT END OF YEAR ............................. $ 5,906 $ 78,368
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1997 and 1996
Net
Stock Unrealized loss Total
Common Stock Paid-in Subscription On securities Shareholders'
Shares Amount Capital Deficit Receivable Available for Sale Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1995 .......... 5,886,799 $ 5,887 $ 11,428,674 $(8,063,747) $ -- -- $ 3,370,814
Adjustment for
1 for 10 reverse stock split ...... (5,298,119) (5,298) 5,298 -- -- -- --
Fractional shares issued ............ 366 -- -- -- -- -- --
Adjusted Total ........................ 589,046 589 11,433,972 $(8,063,747) -- -- 3,370,814
Common stock activity:
Issued for debt ..................... 9,546 10 11,925 -- -- -- 11,935
Issued for assets ................... 132,500 133 358,368 -- -- -- 358,500
Issued for services
- related parties ................ 32,000 32 128,863 -- -- -- 128,895
Issued for services ................. 40,020 40 428,376 -- -- -- 428,416
Issued for cash ..................... 145,710 146 1,707,238 -- -- -- 1,707,384
Stock subscription receivable ....... 75,000 75 871,507 -- (871,582) -- --
Cancellation stock
subscription receivable .......... (75,000) (75) (871,507) -- 871,582 -- --
Dividends paid ...................... -- -- (1,950) -- -- -- (1,950)
Unrealized loss from
securities available ............. -- -- -- -- -- (606,234) (606,234)
Net loss for year .................... -- -- -- $ (2,049,413) -- -- (2,049,413)
BALANCES AT DECEMBER 31, 1996 .......... 948,822 $ 948 $ 14,066,792 $(10,113,160) $ -- $(606,234) $ 3,348,347
Common stock activity:
Issued for debt ..................... 157,068 157 161,009 -- -- -- 161,166
Issued for assets ................... 54,250 54 39,621 -- -- -- 39,675
Issued for services ................. 730,727 731 618,647 -- -- -- 619,378
Issued for cash ..................... 284,947 286 103,764 -- -- -- 104,050
Unrealized loss from
securities available for sale -- -- -- -- -- 159,734 159,734
Net loss for year ..................... -- -- -- (2,246,274) -- -- (2,246,274)
Prior period loss
on subsidiary discontinued ....... -- -- -- 11,702 -- -- 11,702
BALANCES AT DECEMBER 31, 1997 .......... 2,175,814 $ 2,176 $ 14,989,833 $(12,347,732) $ -- $(446,500) $2,197,778
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1: ORGANIZATION AND OPERATIONS
Organization
CyberAmerica Corporation (the "Company") was incorporated in the State of Ohio
on July 10, 1984 as The Canton Industrial Corporation and adopted its present
name in June 1996. Effective May 3, 1993, the Company's domicile was changed to
Nevada.
Operations
The Company provides financial consulting services and invests in undervalued
property. The Company provides services and support functions to its clients
including advice relating to regulatory compliance, document preparation,
capital formation, financial analysis, promotional campaigns, debt settlement,
and general corporate problem solving. Part of the Company's business operations
includes the acquisition, management, leasing and sale of real estate.
During 1996, the Company was involved in the preparation, development and
marketing of Internet virtual malls. These operations were conducted through
CyberMalls, Inc., a wholly-owned subsidiary of the Company ("CyberMalls"). The
Company invested a substantial amount in computer equipment and personnel. In
February 1997, the Company decided to permanently discontinue CyberMalls'
operations based on its belief that future expenditures would earn a higher
return if invested in the Company's other operations.
During the second and third quarter of 1996, CyberConnect, Inc.("CC") and Cyber
Dimensions, Inc. ("CD"), both majority-owned subsidiaries of the Company,
conducted offerings pursuant to Rule 504 of the Regulation D of the Securities
Act of 1933 ("504 exemption") in the amount of $269,704. The Company later
became aware that these offerings might have been conducted outside the
requirements of 504 exemption. As a result, CC and CD began to rescind the
offerings starting in the fourth quarter of 1996 and agreed to refund the
investments made by the shareholders by January 15, 1997. However, due to cash
shortages, CC and CD were unable to repay individual investors in full. CC and
CD then agreed to refund 10% of the investments plus accrued interest to each
investor every 45 days until the debts are paid in full. As of December 31,
1997, CC and CD were indebted to their investors in the amount of $75,729.
Reorganization
On February 22, 1988, the Company filed a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Code. On November 7, 1994, the
bankruptcy was discharged.
Basis of Financial Statement Presentation
The Company's financial statements have been presented on the basis that it is a
going concern which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business (See note 19).
F-8
<PAGE>
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's accounting policies reflect current accounting practices and
conform to generally accepted accounting principles. The policies considered to
be significant are as follows:
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
CyberAmerica Corporation and its subsidiaries as summarized in Note 4.
All significant intercompany accounts and transactions have been eliminated in
the consolidation.
Accounting Method
The accompanying financial statements have been prepared on the accrual method
using generally accepted accounting principles applicable to a going concern
which contemplates the realization of assets and the liquidation of liabilities
in the normal course of business.
Income Taxes
The Company reports income and losses for financial reporting and income tax
purposes on the accrual method of accounting in accordance with Financial
Accounting Standards ("FAS") No. 109 with the cumulative effects reflected in
the year ended December 31, 1993. FAS 109 requires deferred tax balances to be
adjusted to reflect the tax rates in effect when those amounts are expected to
become payable or refundable.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting period. In these financial statements assets and
liabilities involve extensive reliance on management's estimates. Actual results
could differ from those estimates.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets, generally
estimated as follows: buildings, 20 to 39 years, equipment, 5 to 10 years, and
computers, 3 years. Depreciation expenses for 1997 and 1996 were $286,326 and
$247,397, respectively. The cost of assets sold or retired and the related
amounts of accumulated depreciation are removed from the accounts in the year of
disposal. Any resulting gain or loss is reflected in current operations.
Expenditures for maintenance and repairs are expended as incurred; additions and
improvements are capitalized.
Sales of Undeveloped Land
The Company uses the deposit method for reporting sales of certain undeveloped
land. Under this method the effective date of sale is deferred until substantial
cash is collected. Until that time all cash received is accounted for as a
deposit.
Sales of Internet Mall Sites
Revenue from the sales of Internet mall sites is generally tied to certain
contingencies relating to product development and to the sale of the clients'
securities. As a result, recognition of any revenue is postponed until those
contingencies are met. The contracts for the Internet mall sites also provide
for the client's payment of costs associated with the development and service of
the mall site. Revenue from these sources is generally recognized as the related
costs are incurred.
Investment Securities
Marketable equity securities are stated at market value in accordance with
Financial Accounting Standards ("FAS") No. 115. Valuation of other security
investments is based on acquisition costs. Markdowns are made to reflect
significant (permanent) impairment in values. Gains and losses on sale of
securities available for sale are determined using a first-in first-out method.
F-9
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Common Shares and Income (Loss) Per Common Share
Income (loss) per common share is computed using the weighted average number of
common shares outstanding (1,226,828 shares in 1997 and 771,517 shares in 1996).
Income or Loss Per Share
Income or loss per share of common stock is computed based on the weighted
average number of common shares outstanding during the periods shown. The
Company had common stock equivalents (CSEs) outstanding at December 31, 1997 and
1996 in the form of stock purchase options. The options are held by present and
former employees. The inclusion of the outstanding options would not affect the
income or loss per share in 1997 or 1996 and therefore such options have not
been included in the weighted average number of common shares. If all
outstanding options were exercised, the total proceeds would be approximately
$493,856. The Company's outstanding common stock purchase options at December
31, 1997 are as summarized as follows:
Expiration Exercise No. of Shares
Issue Date Date Price Subject to Options
---------- --------------- ---------------------------------
10/21/93 10/30/98 $4.44 9,847
09/08/93 09/30/98 $4.44 600
11/19/96 11/19/06 $0.60 5,000
----------
Total 15,447
Issuance of Common Stock
The Company frequently issues shares of its common stock to acquire assets,
retire debt and pay for services. When stock is issued for services, the value
of the stock and related services is determined by the Board of Directors. In
the case of settling debt, the market value of the stock, the type and age of
the debt and any other related factors are considered. In the case of assets
acquired, the value is negotiated based on a combination of factors including,
but not limited to:
The significance of the assets to the Company;
The liquidity of the assets;
The trading price and volume of the assets (if a security).
Final approval of the basis for issuance of capital stock is made by the Board
of Directors.
Environmental Compliance and Remediation
Environmental expenditures are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations and
that do not have future economic benefit are expensed. Expenditures which extend
the life of the related property or mitigate or prevent future environmental
contamination are capitalized. The Company determines its liability on a site by
site basis and records a liability at the time when it is probable and can be
reasonably estimated.
F-10
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Research and Development Costs
The Company expenses research and development costs related to software
development that has not reached technological feasibility and started
production for sale. Capitalized costs are amortized over a maximum of five
years or expected life of the product, whichever is less. Computer research and
development costs for 1997 and 1996 of $121,720 and $576,160 respectively, have
been expensed.
Advertising
The Company follows the policy of charging the costs of advertising to expense
as incurred. Advertising expense was $6,977 and $32,921 for the years ended
December 31, 1997 and 1996 respectively.
Concentration of Business and Credit Risk
Financial instruments which potentially subject the Company to concentration of
credit risk consist primarily of cash, receivables and investments. The Company
places its cash with high quality institutions. The Company monitors its
exposure for credit losses and maintains allowances for anticipated losses on
receivables. Collateral is not generally required to support customer
receivables. The Company's six largest clients accounts for approximately 72% of
consulting revenue in 1996 and approximately 96% of accounts receivable at
December 31, 1997. The Company follows Statement of Financial Accounting
Standards No. 115 as it applies to investments in equity securities.
All references to common shares are reflected as adjusted for the 1 for 10
reverse stock split approved on October 31, 1997. Certain accounts have been
reclassified for comparison purposes.
NOTE 3: SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The following are supplemental disclosures of cash flow information:
1. Cash paid for interest was $429,044 in 1997 and $370,284 in 1996.
2. Common stock was issued for the following purposes:
1996 1997
------------------------- -------------------
<TABLE>
<CAPTION>
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Issued for debt ........... 95,460 $ 11,935 157,068 $ 161,166
Issued for other assets ... 1,325,000 358,500 428,328 143,725
Issued for services
related party ....... 320,000 128,895 -- --
Issued for services ....... 730,253 428,416 730,727 619,378
----------
2,470,713 $ 927,746 1,226,992 $ 924,269
==========
The Company acquired the following assets during: 1996 1997
------------ ----------
Real estate purchased $ 776.659 $ 1,676,450
Debts incurred (425,442) (1,587,319)
-------------------------------
Cash paid 351,217 89,131
Real estate acquired through
foreclosure 497,593 -
Debt settled (475,000) -
Debt incurred (18,472) -
-------------------------------
Cash paid 4,121
Total cash paid $ 355,338 $ 89,131
============= =============
</TABLE>
F-11
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 4: SUBSIDIARIES
Canton Financial Services Corporation
Canton Financial Services Corporation, a Utah corporation, ("CFS"), was formed
by the Company on June 8, 1994. CFS, a wholly-owned subsidiary of the Company,
provides a wide range of consulting services, primarily for public companies.
Canton Personnel, Inc.
Canton Personnel, Inc., a Utah corporation ("CPI"), was incorporated by the
Company on January 21, 1994 for the purpose of managing the various personnel
and payroll operations of the Company and its subsidiaries. CPI, a wholly-owned
subsidiary, does not currently have any tangible assets.
Canton Properties I, Inc.
Canton Properties I, Inc., a Utah corporation ("CPII"), was incorporated by the
Company on May 4, 1994 for the purpose of acquiring, owning and managing the
property it acquires. On June 21, 1994, CPII, a wholly-owned subsidiary of the
Company, purchased a two-thirds undivided interest in the land located at 238
West 400 South, Salt Lake City, Utah. On May 26, 1995, CPII sold its interest in
the property and recorded a gain on the sale of assets of $71,660.
Canton Tire Recycling of West Virginia
Canton Tire Recycling of West Virginia, Inc. ("CTRWV") was incorporated by the
Company on February 25, 1993 for the purpose of acquiring, owning and managing
the Parkersburg Terminal. CTRWV, a wholly-owned subsidiary of the Company,
purchased the Parkersburg Terminal on May 15, 1993.
Canton's Wild Horse Ranch, Inc.
Canton's Wild Horse Ranch, Inc., an Arizona corporation ("CWHR"), was
incorporated by the Company on November 10, 1993 for the purpose of leasing,
acquiring, owning and managing property related to the Wild Horse Ranch. CWHR, a
wholly-owned subsidiary of the Company, has ceased operations due to a lack of
profitability.
Canton's Wild Horse Ranch, II
Canton's Wild Horse Ranch, II, an Arizona corporation ("CWHRII"), was
incorporated by the Company on February 3, 1994, for the purpose of expanding
Canton's Wild Horse Ranch. On February 16, 1994 CWHRII, a wholly-owned
subsidiary of the Company, acquired ten acres of raw, unimproved land adjacent
to the Ranch suitable for expansion of the Ranch.
West Jordan Real Estate Holdings, Inc.
West Jordan Real Estate Holding, Inc., a Utah corporation ("WJREH"), was
incorporated by the Company on June 7, 1994 for the purpose of acquiring, owning
and managing a specific property. On August 31, 1995, WJREH, a wholly-owned
subsidiary of the Company, entered into a lease with an option to purchase a
retail shopping plaza in Salt Lake City, Utah.
Oasis International, Inc.
Oasis International, Inc., a Nevada corporation ("Oasis"), was incorporated by
the Company on November 20, 1995 for the purpose of acquiring, owning and
managing a specific property. On December 27, 1995, Oasis, a wholly-owned
subsidiary of the Company, purchased 1,126 acres of land in Elko County, Nevada.
Oasis International Hotel & Casino, Inc.
Oasis International Hotel & Casino, Inc., a Nevada corporation ("OIHC"), was
incorporated by the Company on November 20, 1995 for the purpose of acquiring,
owning and managing a specific property. On December 27, OIHC, a wholly-owned
subsidiary of the Company, purchased land in Elko County, Nevada.
F-12
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 4: SUBSIDIARIES (continued)
Oasis Property Management Services, Inc.
Oasis Property Management Services, Inc., a Nevada corporation ("OPMS"), was
incorporated by the Company on November 20, 1995 for the purpose of operating
the facilities in Elko County, Nevada. On December 27, 1995, OPMS, a
wholly-owned subsidiary of the Company, commenced operation of the facilities in
Elko County, Nevada.
KMC Foods, Incorporated
KMC Foods, Incorporated ("KMC") was incorporated on April 12, 1988 under the
laws of the Commonwealth of Virginia. KMC was purchased by the Company in 1993.
KMC held a note secured by a deed of trust on the KMC Foods Plant upon which it
foreclosed during the third quarter of 1996.
Canton Industrial Properties Management Corporation of Salt Lake City
Canton Industrial Properties Management of Salt Lake City, a Utah corporation
("CIPMC"), was incorporated by the Company on October 30, 1994 for the purpose
of acquiring, owning and managing property. On October 9, 1993, CIPMC purchased
an office building at 202 West 400 South in downtown Salt Lake City. The
property is a 18,000 sq. ft. office building with two stories of interior
rentable space and above ground level parking. CIPMC was a wholly-owned
subsidiary of the Company until the fourth quarter of 1995 when the subsidiary
sold shares to accredited investors and issued shares to employees and
consultants in a private placement offering pursuant to a Regulation D, 504
Offering. During the first quarter of 1997, the Company reacquired a majority of
the shares sold.
Canton Industrial Corporation of Salt Lake City
Canton Industrial Corporation of Salt Lake City, a Utah corporation ("CICSLC"),
was incorporated by the Company on September 29, 1993 for the purpose of
acquiring, owning and managing the Plandome Building. On September 30, 1993,
CICSLC acquired the Plandome Building located at 69-75 East 400 South, Salt Lake
City, Utah. CICSLC was a wholly-owned subsidiary of the Company until the fourth
quarter of 1995 when the subsidiary sold shares to accredited investors and
issued shares to employees and consultants in a private placement offering
pursuant to a Regulation D, 504 Offering. During the first quarter of 1997, the
Company reacquired a majority of the shares sold.
Canton Commercial Carpet Corporation
Canton Commercial Carpet Corporation, a Utah corporation ("CCCC"), was
incorporated by the Company on January 21, 1994 for the purposes of distributing
and wholesaling commercial carpet. On May 23, 1994, CCCC entered into a lease
with an option to purchase real property located at 268 West 400 South in Salt
Lake City, Utah. On February 1, 1995, the Company relocated its corporate
headquarters to this Building. CICSLC was a wholly-owned subsidiary of the
Company until the fourth quarter of 1995 when the subsidiary sold shares to
accredited investors and issued shares to employees and consultants in a private
placement offering pursuant to a Regulation D, 504 Offering. During the first
quarter of 1997, the Company reacquired a majority of the shares sold.
TAC, Inc.
TAC, Inc., a Utah corporation ("TAC"), was formed by Logos International, Inc.
("Logos"), an affiliate of the Company, on August 27, 1992. TAC was acquired
from Logos on December 30, 1994 pursuant to a Settlement Agreement. TAC was a
wholly-owned subsidiary of the Company until the fourth quarter of 1995 when the
subsidiary sold additional shares in a private placement offering pursuant to a
Regulation D, 504 Offering and diluted the Company's ownership to just over
fifty percent. In June 1996, TAC exercised its option on a warehouse facility
consisting of approximately 60,000 square ft. located in West Jordan, Utah.
During 1996, the Company advanced TAC funds to purchase the warehouse in
exchange for shares of common stock in TAC, which brought its ownership to over
80%. During 1997, additional common stock of TAC, Inc. was issued in conjunction
with the acquisition of property and reduced the Company's ownership to
approximately 55% as of December 31, 1997.
F-13
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 4: SUBSIDIARIES (continued)
Wasatch Capital Corporation
Wasatch Capital Corporation, a Utah corporation ("Wasatch") was incorporated on
June 10, 1991. The Company acquired a 20% interest in Wasatch on December 30,
1994 in exchange for the Company advancing monies to exercise an option to
purchase real estate located at 55-57, 61-65 West 100 South, Salt Lake City,
Utah (the "Bennett Building"). Wasatch is consolidated because the Company,
through its officers, directors and affiliates, exercises significant control
over the decisions and operations of Wasatch. The Company's investment is
secured by the Bennett Building and Wasatch is not allowed to dilute the
Company's interest in Wasatch or lease, sell, exchange, or encumber the property
in any way unless the Company approves.
Thistle Properties, Inc.
Thistle Properties, Inc., an Illinois corporation ("Thistle") was acquired by
the Company on May 12, 1995 as a result of a Mutual Release Agreement between
the Company, ATC II and Thistle (Please see Note 10 for additional information
on this transaction). Thistle holds title to the Canton Plant in Canton,
Illinois.
CyberMalls, Inc.
CyberMalls, Inc., a Nevada corporation, was incorporated by the Company on
February 15, 1996, for the purpose of preparing, developing, and marketing
Internet virtual malls. On February 25, 1997, the Company decided to permanently
discontinue the operations of CyberMalls. Accordingly, CyberMalls is no longer
an operating entity.
CyberConnect, Inc.
CyberConnect, Inc., a Nevada corporation, was incorporated by the Company on
February 15, 1996, for the purpose of developing and marketing an Internet
virtual mall.
Cyber Dimensions, Inc.
CyberDimensions, Inc., a Nevada corporation, was incorporated by the Company on
February 15, 1996, for the purpose of developing and marketing an Internet
virtual mall.
Diversified Holdings XIII, Inc.
Diversified Holdings XIII, Inc., a Nevada corporation, was incorporated by the
Company on April 16, 1996, for the purpose of providing business consulting
services. On March 5, 1997, Diversified Holdings XIII, Inc. changed its name to
Hudson Consulting Group.
Diversified Holdings XIX, Inc.
Diversified Holdings XIX, Inc., a Nevada corporation, was incorporated by the
Company on April 29, 1996, for the purpose of acquiring, owning, and managing
certain real estate property. On August 2, 1996, Diversified Holdings XIX
purchased land located in Cheriton, Virginia in a foreclosure sale. For more
information on this property, see "Item 2 - Description of Properties." In July
1997 this Subsidiary was transferred to TAC, Inc.
Investment Sanctuary Corporation
Investment Sanctuary Corporation, a Utah corporation ("ISC"), was incorporated
on April 23, 1993 as a Subchapter S Corporation pursuant to Internal Revenue
Service Code. On October 31, 1996, ISC became a wholly-owned subsidiary of the
Company and its Subchapter S Corporation status was terminated.
NetInvesting.com, Inc.
Cyber Vein, Inc. was incorporated by the Company in Nevada on February 15, 1996
for the purpose of developing promotional services for undervalued companies
including websites and print media. On January 21, 1997, Cyber Vein changed its
name to NetInvesting.com, Inc. ("NI").
F-14
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 5: LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997:
Mortgage payable to BP&G (10%), monthly payments of $7,929, due
11/99, secured by first trust deed on land and building. $ 465,484
Mortgage payable to Rich Bennion (9%), monthly payments of $4,780,
due 10/99, secured by first trust deed on land and building. 585,000
Note payable to Paul R. Rubey (5%), due 10/98. 100,000
Mortgage payable to Solar Logos Foundation (7%),
quarterly payments of interest only until 1/99,
due 7/04, secured by first trust deed on land. 900,000
Mortgage payable to Howard Bernstein (18%),
monthly payments of interest only, due 12/97,
secured by first trust deed on land building. 300,000
Mortgage payable to Zions Mortgage (9.5%), monthly payments
of $309, due 4/15, secured by first trust deed on building. 31,527
Mortgage payable to First American Title (8.25%), monthly payments
of $298, due 10/01, secured by first trust deed on building. 33,880
Mortgage payable to The Capital Company (15%), due 5/98, secured
by second trust deed on land and building. 332,557
Mortgage payable to Tucker (10%), monthly payments of
$471, due 11/04, secured by first trust deed on land. 49,932
Mortgage payable to Prisbrey Investment Company (13%), monthly
interest payments of $3,304, due 8/99, secured by first trust deed
on land and building. 305,000
Mortgage payable to Escrow Specialists (6%), monthly interest
payments of $350, due 8/99, secured by first trust deed on land. 70,000
Mortgage payable to Steven D. Crowther (0% first 6 months,
3% second six months, 5% for years 2 and 3, and 7% thereafter),
annual interest payment of at least $8,961, due
secured by first trust deed on land. 89,612
Mortgage payable to Chester F. Blanthorn (8.25%), monthly payments
of $299, due 7/07, secured by first trust deed on land. 39,820
Mortgage payable to Wanda Charlotte Blanthorn (8.25%), monthly
payments of $299, due 7/07, secured by first trust deed on land. 39,820
Mortgage payable to Andworth (0% first year,
variable thereafter, not to exceed 8%),
annual payments of at least $12,708 and
quarterly interest payments, due 12/01,
secured by first trust deed on land. 127,080
Mortgage payable to Jensen Realty and Investment (0% first year,
variable thereafter, not to exceed 8%), annual payments of at least
$706 and quarterly interest payments, due 12/01, secured by first
trust deed on land. 9,144
Mortgage payable to Powell Real Estate (0% first year, variable
thereafter, not to exceed 8%), annual payments of at least $706
and quarterly interest payments, due 12/01, secured by first trust
deed on land. 9,144
F-15
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 5: LONG-TERM DEBT (continued)
Mortgage payable to Escrow Specialists (7%), monthly payments
of $899, due 1/99, secured by first trust deed on land. 100,000
Mortgage payable to James D. Hansen (7%), monthly payments
of $1,304, due 5/04, secured by first trust deed on land. 183,813
Mortgage payable to Christopher M. Curran (6.5%), monthly
payments of $60, due 8/04, secured by first trust deed on land. 5,310
Mortgage payable to Melvin D. Call (8.75%), monthly
payments of $362, due 7/02, secured by first trust deed on land. 40,694
Mortgage payable to Arieb (7%), monthly interest payments
of $362, due 7/99, secured by first trust deed on land. 29,400
Mortgage payable to Title Security (8%), monthly payments of $825,
due 2/99, secured by first trust deed on land. 48,569
Mortgage payable to Lucas Trust (15%), monthly payments of $700,
due 8/02, secured by a second trust deed on land and building. 56,000
Mortgage payable to Chelsea Capital (10%), monthly interest payments
of $3,333, due 7/98, secured by first trust deed on land. 400,000
Note payable commissions (0%), due 1998 30,100
Mortgage payable to Chelsea Capital (7%), interest is
prepaid for 4 years, due 9/04, secured by first
trust deed on land. 560,000
Total debt 5,026,961
Current portion (1,294,565)
Long-term portion $ 3,732,396
============
Scheduled principal reductions are as follows:
December 31, 1998 $ 1,294,565
December 31, 1999 1,604,619
December 31, 2000 91,660
December 31, 2001 231,625
December 31, 2002 181,507
Thereafter 1,622,985
---------------
$ 5,009,551
F-16
<PAGE>
NOTE 6: CAPITALIZED LEASE OBLIGATIONS
The Company leases space for its corporate offices in Salt Lake City for $4,596
per month. The lease is for 10 years and expires May 2004. The Company paid
$15,000 for an option to purchase the building at the end of the lease for
$415,000. A portion of the lease payments apply to the purchase price. The lease
is being treated as a capital lease. The leased property under Capital lease as
of December 31, 1997 has a cost of $430,000 including land, accumulated
amortization of $33,010 and a net book value $399,627. Amortization of leased
property is included in depreciation expense. Scheduled annual minimum rental
commitments under the capital lease are as follows:
1998 $ 63,777
1999 55,158
2000 55,158
2001 55,158
2002 55,158
Thereafter 325,500
-------------
Total $ 554,751
Less: amounts representing interest 195,332
Present value of future minimum
Capital lease payments 359,419
Less: current obligations under
Capital lease 19,468
Long-term capital lease obligation $ 339,951
NOTE 7: FEDERAL INCOME TAXES
At December 31, 1997, the Company had net operating loss carryovers of
approximately $5,290,000. The net operating loss carryovers expire as follows:
Expiration
Loss Year Date Amount
12/31/91 12/31/2006 $ 1,248,000
12/31/92 12/31/2007 229,000
12/31/93 12/31/2008 1,616,000
12/31/94 12/31/2009 71,000
12/31/95 12/31/2010 256,000
12/31/96 12/31/2011 1,870,000
12/31/97 12/31/2012 2,086,000
---------
$ 7,376,000
=================
At December 31, 1997, the Company has a capital loss carryover of approximately
$985,000, $810,000 of which expires in 1998 and $175,000 expires in 1999.
No benefit resulting from loss carry forwards have been reported in the
financial statements because the Company believes there is at least a fifty
percent (50%) chance that the carry forwards will expire unused. Accordingly,
the tax benefit of the loss carry forward has been offset by a valuation
allowance of the same amount. The expected tax benefit resulting from applying
federal statutory tax rate to the pretax loss differs from amounts reported in
the financial statements because of the increase in valuation allowance. Certain
provisions of the tax law may limit the net operating loss and capital loss
carryovers in the event of a significant change in ownership of the Company.
NOTE 8: REAL ESTATE TAXES PAYABLE
The Company owes real estate taxes and assessments of approximately $408,173
(including penalties and interest) as of December 31, 1997.
Unpaid property taxes and assessments consist of the following:
Canton Plant - Canton, Illinois $ 304,481
202 West 400 South Property - Salt Lake City, Utah 7,683
Pima County Property - Tuscon, Arizona 6,396
Plandome Building - Salt Lake City, Utah 63,165
Glendale Plaza - Salt Lake City, Utah 21,074
Parkersburg Terminal - Parkersburg, West Virginia 1,745
Other 3,629
-----
Total $ 408,173
==============
F-17
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 9: DEBENTURES PAYABLE
On September 17, 1996, the Company issued a 6.0% Convertible Debenture with a
face amount of $300,000 (the "Debenture") to Legong Investments, N.V., a
corporation organized under the laws of Curacao, Netherlands Antilles
("Legong"). The Debenture matured on September 17, 1997 and the Company is in
the process of negotiating an extension. The Debenture can be converted into the
Company's Common Stock at any time prior to maturity at the option of Legong.
The conversion price of the Debenture is 70% of the closing bid prices for the
Common Stock during the five days immediately preceding conversion. At maturity,
the Company has the option of paying the face amount of the Debenture plus
accrued interest in either cash or shares of Common Stock in accordance with the
conversion price set forth above. On December 17, 1996, Legong converted $10,000
of the principal plus accrued interest into 87,220 shares of the Company's
Common Stock. In 1997 Legong converted $20,000 of the principal plus accrued
interest into 45,453 shares of the Company's common stock.
NOTE 10: RELATED PARTY TRANSACTIONS
1. A-Z Professional Consultants, Inc.
During 1996 and 1997, the Company completed several transactions with A-Z
Professional Consultants, Inc. ("A-Z"), a beneficial owner of more than 5%
of the Company's common stock. A-Z's sole owner is Allen Wolfson, a control
person of the Company.
Since 1992, A-Z has served as a financial consultant to the Company to
discover and introduce the Company to business opportunities. On May 1,
1995, the Company and A-Z entered into a Settlement Agreement to settle the
unpaid fees and expenses earned by A-Z. Pursuant to this Settlement
Agreement, the Company issued Allen Wolfson, personally, 80,000 shares of
its Common Stock.
On August 30, 1995, the Company and A-Z entered into a one year Consulting
Agreement whereby the Company agreed to again retain A-Z as one of its
primary consultants. Pursuant to this Agreement, the Company issued A-Z
40,000 restricted shares of its Common Stock to A-Z monthly, or a total of
480,000 shares of Common Stock. The 1995 Consulting Agreement expired
according to its own terms on August 31, 1996.
On December 22, 1995, the Company entered into a Stock Option Agreement
with A-Z. Pursuant to the Agreement, the Company granted an option to A-Z
giving A-Z the right to purchase a quantity of shares of the Company's
Common Stock equivalent to 26% of the issued and outstanding shares on the
exercise date. The exercise price of the option is $0.59 per share. The
option was granted to compensate Mr. Wolfson and A-Z for consulting
services rendered to the Company and to provide them an incentive to
perform such services in the future. The granting of the option gives
substantial, indirect control of the Company to Mr. Wolfson. This option
was canceled in 1998.
During 1997, the Company issued a convertible 8% Demand Note to A-Z in the
amount of $134,844. The note is convertible into common stock at $0.125 per
share at the option of the Company. The services performed by A-Z assisted
the Company in the purchase of their office building. the $134,844 was
capitalized to that building.
2. Richard Surber
On September 30, 1994, the Company retained Investment Sanctuary
Corporation, a Utah corporation ("ISC") owned 100% by Richard Surber ("Mr.
Surber") president of the company, to provide consulting services.
Mr. Surber entered into several Consulting Agreements to provide various
consulting services to clients.
On December 22, 1995, the Company entered into a Stock Option Agreement
with ISC. Pursuant to the agreement, the Company granted options giving the
right to purchase a quantity of shares of the Company's common stock
equivalent of 25% of the issued and outstanding shares on the exercise
date, with an established exercise price of $0.59 per share. Effective
October 31, 1996, the Company executed a Stock Exchange Agreement with ISC
and Richard Surber pursuant to which the Company acquired 100% outstanding
capital stock of ISC. In addition, ISC's option to purchase 25% of the
Company's Common Stock was canceled. As consideration for the transfer of
ISC and the cancellation of the option, the Company issued to Mr. Surber
110,000 restricted shares of the Company's Common Stock.
F-18
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
RELATED PARTY TRANSACTIONS
3. Thistle Properties, Inc. - Foreclosure on Canton Property
On August 23, 1994, but effective June 20, 1994, the company entered into a
Real Estate Sales Agreement ("RESA") with Thistle Properties, Inc.
("Thistle"). On the effective date of both the RESA and an amended RESA,
Richard Surber was an executive officer of Thistle's parent company, ATC
II, Inc.; however, at the time the agreements were actually executed, Mr.
Surber was not an officer or director of ATC II, Inc. and did not have any
authority to approve or disapprove any transactions being contemplated by
ATC II, Inc. or any of its subsidiaries.
On May 4, 1995, the Company served Thistle with a Notice of Default of the
Real Estate Lien Note entered into pursuant to the amended RESA. The
Company subsequently executed a Mutual Release with ATC II and Thistle
effective May 12, 1995. The net effect of the Mutual Release is that
Thistle, which holds title to the Canton Plant, became a wholly-owned
subsidiary of the Company. This resulted in a loss of $562,406. A gain on
the sale of $752,467 had been previously recorded by the Company during the
third quarter of 1994.
<PAGE>
NOTE 11: MARKETABLE SECURITIES
The cost and approximate market value of securities available for sale at
December 31, 1997 are as follows:
Gross Unrealized Market
Cost Gains Losses Value
Marketable equity 592,563 - - -
Securities $ 1,255,694 $ - $ 446,500 $ 146,063
=========== ===== ========= =========
Other equities securities in the amount of $38,426 are carried at cost. There is
no readily available market for these securities or they are restricted.
Securities carried at cost are marked down to reflect impairment in values.
During 1997 impairment mark-downs were $200,362.
During 1997 proceeds from sales of securities were $517,895. Gross gains of
$101,187 were realized on those sales. Gross losses realized were $991,957.
NOTE 12: NOTES RECEIVABLE
The above receivable is included in the financial statements as follows:
Notes receivable:
Sale of building (ANA, LLC) 1,085,000
Other 125,797
Associated Technologies 36,000
------------
Total $ 1,246,797
Less current portion 1,094,000
Long-term portion $ 152,797
=============
F-19
<PAGE>
NOTE 13: STOCK SUBSCRIPTION RECEIVABLE
On May 31, 1996, the Company entered into a Stock Subscription Agreement with
two offshore entities. The Agreements provided for the offshore entities to
purchase 750,001 shares of the Company's Common Stock for a total of $871,582 in
cash. The Agreements were later canceled due to the fact that the offshore
entities failed to remit payment for the shares. As a result, the Company had no
stock subscription receivable as of December 31, 1996 or 1997.
NOTE 14: CONTINGENT LIABILITIES
1. Canton, Illinois Property - environmental cleanup
A legal action was filed in September 1993 against the Company seeking the
cleanup of tires and toxic paint drums at the plant in Canton, Illinois. On
September 28, 1995, Illinois Environmental Protection Agency informed the
Company it was rejecting the proposed plan of the Company for tire cleanup
and would send its own contractor to remove the remaining waste tires. The
Company sought relief from this decision from the Circuit Court in Fulton
County. After a hearing on October 10, 1995, the District Court denied any
relief to the Company. Both the Company and the IEPA contractors removed
tires. The State has filed an action before the Illinois Pollution Control
Board seeking to recover $325,398 as the costs incurred to remove the
tires, plus an equal amount as punitive damages. The Company's balance
sheet at December 31, 1997 included an accrued liability in the amount of
$325,398 representing the potential liability associated with this lawsuit.
The Company does not believe that it will be liable for the punitive
damages.
2. Xeta Corporation
Xeta is seeking recovery of funds alleged to have been improperly
transferred to the Company by ATC II, Inc. ("ATC") The amount sought by
Xeta is $116,500, an amount equal to the funds transferred by ATC to the
Company for consulting services and other expenses incurred for the benefit
of ATC. Xeta's Motion for Summary Judgment has been granted and the Company
is required to pay Xeta $116,500, which has been accrued on the Company's
Balance Sheet as of December 31, 1997.
3. Key L.C. Corporation
Key L.C. Corporation ("Key") alleges that the Company violated the Exchange
Act of 1934 in the sale of the Company's Common Stock to Key. Damages are
sought in the amount of $291,682, the purchase price of 214,900 shares of
the Company's Common Stock. The Company has filed a Motion to Dismiss the
Complaint for failure to state a cause of action under the Exchange Act of
1934 and the Private Securities Litigation Reform Act. The Company entered
into a settlement agreement with Key but is prohibited from reporting the
amount of the settlement by the terms of the agreement.
NOTE 15: OPERATING LEASE COMMITMENTS
The Company is obligated under an operating lease to pay $5,663 per month on the
one building it rents. The lease is for three years expiring August 1998. The
Company has an option to purchase the building at the end of the lease term.
Scheduled rent payments are as follows:
December 31, 1998 45,304
The Company incurred rent expense under operating leases of $105,335 in 1997 and
$148,423 in 1996.
The Company receives rents on lease of buildings under operating leases.
Additional information is included as follows:
Cost of real estate under lease $ 2,540,000
Accumulated depreciation (217,000)
-------------
Net carrying amount $ 2,323,000
===========
Future minimum rentals on noncancellable leases are as follows:
1998 $ 300,000
1999 145,000
2000 95,000
2001 24,000
2002 8,000
Thereafter -
------------
$ 572,000
F-20
<PAGE>
NOTE 16: STOCK OPTION PLANS AND AGREEMENTS
During 1994, the Company established a new stock option plan for its employees
and consultants. Each option issued under the plan has a term of five years and
an exercise price of either the average of the closing bid and ask price for the
Stock over the 20 day trading period immediately prior to the date of grant or
the bid price on the date of grant as determined by the Board of Directors or an
Authorized Committee. Under the plan, up to 500,000 shares can be issued. In
1994, 203,584 shares were issued under the plan. In 1995, the Company issued the
balance of the shares under the plan.
On December 22, 1995, the Company entered into a Stock Option Agreement with A-Z
Professional Consultants. Pursuant to the agreement, the Company granted options
giving the right to purchase a quantity of shares of the Company's common stock
equivalent to 26% of the issued and outstanding shares on the exercise date,
with an established exercise price of $0.59 per share.
On December 22, 1995, the Company entered into a Stock Option Agreement with
Investment Sanctuary Corporation ("ISC"). Pursuant to the agreement, the Company
granted an option giving the right to purchase a quantity of shares of the
Company's common stock equivalent to 25% of the issued and outstanding shares on
the exercise date, with an established exercise price of $0.59 per share. This
option was canceled in 1996.
A summary of the status of the Company's Stock Option Plan as of December 31,
1997 and the changes due the year ending December 31, 1997 as presented below:
Options Shares Weighted Average Exercise Plan
------------------------------------------------------------------------------
January 1, 1997 15,447 $ 3.20
Granted, 1/1/97 3,650 $ 15.00
Exercised, 11/7/97 193,340 $ 1.50
Canceled (15,447) $ 3.20
------------------------------------------
196,990
The following table summarizes information about fixed stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
Outstanding Options Exercisable Options
Number Weighted- Number Weighted-average
Outstanding Remaining Average Exercisable Exercise
Exercise Price at 12/31/97 Contractual Life Exercise Price at 12/31/97 Price
- -------------- ------------ ---------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
$ .60 3,650 10 years $ 15.00 3,650 $ 15.00
$ 4.44 193,340 2 years $ 1.50 193,346 $ 1.50
-----------
Total 196,990
</TABLE>
If the Company had used the fair value based method of accounting for its stock
option plan, as prescribed by Statement of Financial Accounting Standards No.
123, compensation cost in net loss for the year ended December 31, 1997 would
have increased by $9,000 resulting in a net loss of $2,255,274.
NOTE 17: BUSINESS ACQUISITIONS
On September 19, 1997 TAC acquired 100% of the outstanding stock of Vale Terrace
Corporation in exchange for 1,000,000 shares of common stock valued at $140,000.
The purchase price was allocated to net assets acquired based on their estimated
fair value. The consolidated statements of operations reflect the operating
results of Vale Terrace Corporation since the date of acquisition.
F-21
<PAGE>
NOTE 18: GOING CONCERN
The accompanying financial statements are prepared assuming the company will
continue as a going concern. The Company's recurring operating losses and lack
of working capital raises substantial doubt about its ability to continue as a
going concern. The Company is expanding its real estate holdings to include a
wide variety of commercial and residential properties. The Company hopes to
increase the revenues generated from these properties by increasing the
occupancy of available rentable space and has engaged various companies and
individuals to help lease and manage the real estate it owns. Real estate
holdings are also available for sale at prices which will provide a reasonable
return to the Company. Indications are that the commercial real estate market is
continuing to improve and that there is a strong demand for commercial rental
space.
The financial statements do not include any adjustments that might result form
the outcome of this uncertainty.
NOTE 19: FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company estimates that the fair value of all financial instruments at
December 31, 1997 does not differ materially from the aggregate carrying values
of its financial instruments recorded in the accompanying balance sheet. The
estimated fair value amounts have been determined by the Company using available
market information and appropriate valuation methodologies. Considerable
judgment is necessarily required in interpreting market date to develop the
estimates of fair value and accordingly, the estimates are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange.
F-22
<PAGE>
Board of Directors and Shareholders
CyberAmerica Corporation
Salt Lake City, Utah
Our examinations of the basic financial statements presented in the preceding
section of this report were made primarily to form an opinion on such financial
statements taken as a whole. The additional information, contained in the
following pages, is not considered essential for the fair presentation of the
financial position of CyberAmerica Corporation and Subsidiaries, the results of
their operations or cash flows in conformity with generally accepted accounting
principles. The following information consisting of Schedule V and Schedule VI
is included to comply with reporting requirements of the Securities and Exchange
Commission. Such data was subjected to the audit procedures applied in the
examination of the basis financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
Salt Lake City, Utah
April 15, 1998
F-23
<PAGE>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Balance at Balance
Beginning Additions at the end
of Period at Cost Retirement of Period
Year ended December 31, 1996:
<S> <C> <C> <C> <C> <C>
Land ................... $2,246,500 $1,219,018 $ - 0 - $3,465,518
Leasehold improvements . 26,698 20,589 - 0 - 47,287
Building and Structures 2,518,324 1,157,040 - 0 - 3,675,364
Machinery and Equipment 598,374 26,845 - 0 - 625,219
Furniture and Fixtures . 118,112 207,549 - 0 - 325,661
---------- ----------- --------- ----------
$5,508,008 $2,631,047 $ - 0 - $8,139,049
========== ========== ========= ==========
Year ended December 31, 1997:
Land ................... $3,465,518 $ 485,882 $ 132,838 $3,818,562
Leasehold improvements . 47,287 - 0 - 8,557 38,730
Building and Structures 3,675,364 1,299,701 883,234 4,091,831
Machinery and Equipment 625,219 - 0 - - 0 - 625,219
Furniture and Fixtures . 325,661 - 0 - - 0 - 325,661
---------- ----------- --------- ---------
$8,139,049 $ 1,785,583 $1,024,629 $8,900,003
========== =========== ========== ==========
</TABLE>
F-24
<PAGE>
SCHEDULE VI - ACCUMULATED DEPRECIATION OF
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Balance at Balance
Beginning Additions at the end
of Period at Cost Retirement of Period
Year ended December 31, 1996:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Land $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Leasehold Improvements 8,377 (1) 4,763 - 0 - 13,140
Building and Structures 412,864 (2) 178,003 - 0 - 590,867
Machinery and Equipment 202,330 (3) 95,591 - 0 - 297,921
Furniture and Fixtures 24,178 42,631 - 0 - 66,809
------------ --------- ---------- ----------
$ 647,749 $ 320,988 $- 0 - $ 968,737
=========== ============ ========== ==========
Included amounts acquired from subsidiary:
(1) $65,759
(2) 7,832
-----------
$73,591
=======
Year ended December 31, 1997:
Land $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Leasehold Improvements 13,140 1,846 3,675 11,311
Building and Structures 590,867 176,258 59,228 707,897
Machinery and Equipment 297,921 75,591 - 0 - 373,512
Furniture and Fixtures 66,809 32,631 - 0 - 99,440
------------ ---------- ---------- -----------
$ 968,737 $ 286,326 $ 62,903 $1,192,160
=========== ========== ========== ==========
</TABLE>
F-25
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On March 31, 1998, CyberAmerica Corporation (the "Company") received a
resignation notice of its independent auditor Andersen, Andersen & Strong, L.C.
Neither of Andersen, Andersen & Strong's reports on the financial
statements for the past two years contained an adverse opinion or disclaimer of
opinion, or was modified as to uncertainty, audit scope or accounting
principles.
There were no disagreements between Andersen, Andersen & Strong and the
Company on any matter of accounting principles, financial statement disclosure
or auditing scope or procedure during the two most recent fiscal years and
subsequent period. In addition, there were no instances that are reportable
under Item 304(a)(1)(iv) of Regulation S-B.
On April 1, 1998, the Company's Board engaged Crouch, Bierwolf & Chisholm
to serve as the Company's new independent auditors. Crouch, Bierwolf & Chisholm
are located at:
Crouch, Bierwolf & Chisholm
Certified Public Accountants
50 W. Broadway, Suite 1130
Salt Lake City, UT 84101
There were no consultations with the newly engaged accountant during the
last two fiscal years or subsequent interim period regarding any of the
information in Item 304(a)(2)(i) or 304(a)(2)(ii).
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors, Executive Officers and Control Persons
Name Age Position(s) and Office(s)
Richard Surber 25 President, Chief Executive Officer
and Director
Philip Lamb 39 Director
Adrienne Bernstein 53 Director
Allen Wolfson 52 Control Person
Richard Surber was appointed to the Company's board of directors in June
1992 and was appointed as its chief executive officer in March 1994. He was
appointed as the Company's president on May 6, 1996 and served a prior term as
the Company's president from March 1994 to August 1995. Mr. Surber was the
Company's secretary from June 1992 to March 1994. Since 1991, Mr. Surber has
been a professional consultant for various public and private companies. Mr.
Surber is a graduate of the University of Utah with B.S. in Finance and is
currently attending the University of Utah, College of Law. Mr. Surber was,
prior to December, 1997, the President and sole director of A- Z Professional
Consultants, Inc., a significant beneficial owner of the Company's Common Stock
under the control of Allen Wolfson. Mr. Surber is also a director of several
private corporations. For more information on Mr. Surber, see "Item 12 - Certain
Relationships and Related Transactions."
19
<PAGE>
Philip Lamb was appointed to the board of directors in January 1995. From
October 1994 until January 1995, Mr. Lamb was an employee of the Company who was
responsible for obtaining financing for new purchases and other funding needed
by clients of the Company. Since January 1995, Mr. Lamb has been employed with
Green- Tree Financial Services as the market representative for Utah. From 1993
to 1994, Mr. Lamb worked as a Loan Officer for Pacific Rim Financial Services.
Prior to joining Pacific Rim, Mr. Lamb had been a Branch Area Manager for Zions
First National Bank in Salt Lake City, Utah. His duties included managing a
group of branches for the bank, supervising all lending operations at his branch
and managing day to day operations of the bank. Mr. Lamb is also the owner of
Mountain West Management, a rental property management firm in Orem, Utah.
Adrienne Bernstein was appointed to the board of directors in September
1996. Ms. Bernstein is also an employee of the Company who has been responsible
for managing the Company's East Coast real estate holdings for over the past two
years. From 1988 to 1994, Ms. Bernstein was the assistant director of the human
resources department for the Love Stores, a chain of retail health and beauty
stores. In this capacity, Ms. Bernstein was responsible for hiring and training
all employees and for preparing management and employee seminars. Prior to her
position with the Love Stores, Ms. Bernstein served as a vice president for
Leucadia National Corporation, a publicly traded company specializing in
finance, insurance, and manufacturing. In this capacity, Ms. Bernstein's primary
emphasis involved real estate management and sales activities.
Allen Wolfson has never been named as an officer or director of the
Company. He does, however, have significant influence and "control" (as defined
in Rule 12b-2 of the Securities Exchange Act of 1934) over the affairs of the
Company by virtue of Mr. Wolfson's beneficial ownership of over 5% of the
Company's Common Stock and the potential influence Mr. Wolfson has with respect
to the Company's day to day operations in his role as the primary finder of
potential transactions for the Company and primary business consultant to the
Company. For more information on Mr. Wolfson, see "Item 12 - Certain
Relationships and Related Transactions."
Mr. Wolfson is the uncle of Richard Surber, the Company's chief executive
officer, president and director. Mr. Wolfson obtained a B.S. in Marketing from
the University of Southern Florida in 1968 and in 1970 he graduated with an M.A.
in Distributive Vocational Education. Mr. Wolfson has worked 59 credit hours
toward an M.B.A. from Troy State University in Montgomery, Alabama. He has also
been a licensed general contractor and a real estate agent and developer. Mr.
Wolfson has been the sole owner of A-Z Professional Consultants, Inc. since
April 11, 1990 and has been a professional consultant for various public and
private companies for 20 years. A-Z has been a consultant to the Company since
1992 and has been a significant beneficial owner of the Company's Common Stock
since that time. A-Z locates potential business opportunities, primarily related
to real estate transactions, on behalf of the Company and advises the Company's
board of directors with respect to long term corporate objectives. A-Z also
advises the Company with respect to its day to day operations including issues
involving personnel, financing, corporate structure and management. While Mr.
Wolfson has no formal authority to act on behalf of the Company, the influence
he exerts on the Company through this consulting arrangement gives Mr. Wolfson
potential control over the Company's operations.
In 1986, Mr. Wolfson was convicted of violating 18 U.S.C. ss.371; 18 U.S.C.
ss.ss.1001 and 1002; and 18 U.S.C. ss.ss.1014 and 1002 in the U.S. District
Court for the Middle District of Florida, Tampa Division (the "Florida Court").
Mr. Wolfson was on probation for these offenses until May 1995. In February
1995, a complaint was filed with the Florida Court alleging that Mr. Wolfson had
violated the terms of the probation, and on April 11, 1996 a written order was
signed containing new probation terms that are effective for three years. A
motion for early termination of Mr. Wolfson's probation is currently pending.
For more information on Mr. Wolfson, see "Item 12 - Certain Relationships and
Related Transactions."
On October 9, 1996, Allen Wolfson was charged with violating Section 10b of
the Securities Exchange Act of 1934 in the Southern District of New York. The
allegations involved a payment allegedly made to an undercover agent of the
Federal Bureau of Investigation, who was posing as a broker, for the purchase of
stock in an unaffiliated corporation. On October 10, 1996, the Securities and
Exchange Commission initiated administrative proceedings against Wolfson
premised upon the same allegations contained in the criminal complaint. In
September 1997, the criminal complaint against Mr. Wolfson was dismissed without
prejudice in the Southern District of New York. The administrative matter is
still pending, but no material developments have occurred since it was filed in
October 1996.
20
<PAGE>
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company,
the Company is not aware of any person who at any time during the fiscal year
ended December 31, 1996 was a director, officer, or beneficial owner of more
than ten percent of the Common Stock of the Company, and who failed to file, on
a timely basis, reports required by Section 16(a) of the Securities Exchange Act
of 1934 during such fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation
No compensation in excess of $100,000 was awarded to, earned by, or paid to
any executive officer of the Company during the years 1995 to 1997. The
following table and the accompanying notes provide summary information for each
of the last three fiscal years concerning cash and non-cash compensation paid or
accrued by Richard Surber, the Company's chief executive officer for the past
three years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Year Salary Bonus Compensation Award(s) Options payouts Compensation
Position
<S> <C> <C> <C> <C> <C> <C> <C>
($) ($) ($) ($) SARs(#) ($) ($)
Richard Surber 1997 38,000 1,787 -- -- -- -- --
Chief 1996 36,923 -- -- -- -- -- --
Executive 1995 71,677(1) -- -- -- -- -- --
Officer
(1) Of this amount, $47,677 was paid to Mr. Surber, personally, in the form of 87,000 shares of Common Stock as consideration for
consulting services rendered by Mr. Surber pursuant to a consulting agreement between the Company and Investment Sanctuary
Corporation, a Utah corporation, of which Mr. Surber is president and sole director and shareholder. The shares issued to Mr.
Surber were issued pursuant to a Form S-8 Registration Statement and Reoffer Prospectus filed with the Securities and Exchange
Commission on May 9, 1995. For more information, see "Item 12 - Certain Relationships and Related Transactions."
</TABLE>
- --------------------------------------------
Compensation of Directors
The Company's directors are each compensated through the payment of $300
for each meeting the board of directors which they attend. This constitutes the
sole consideration paid to the Company's directors for their services as
directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the ownership
of the Company's Common Stock as of March 31, 1998, with respect to: (i) each
person known to the Company to be the beneficial owner of more than five percent
of the Company's Common Stock; (ii) all directors; and (iii) directors and
executive officers of the Company as a group. The notes accompanying the
information in the table below are necessary for a complete understanding of the
figures provided below. As of March 31, 1998, there were 2,366,166 shares of
Common Stock issued and outstanding.
21
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of
Title of Class Name and Address of Beneficial Owner Beneficial Ownership Percent of class
<S> <C> <C> <C>
Common Stock A-Z Professional Consultants, Inc. 121,250 5.8%
($0.001 par value) 268 West 400 South, Suite 306
Salt Lake City, Utah 84101
Common Stock Legong Investments N.V. 2,326,765(1) 40%
($0.001) par value International Trade Center
RM 126 Piscadera Bay
Curacao. Netherlands Antilles
Common Stock Philip Lamb, Director 27 *
($0.001) par value 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Common Stock Adrienne Bernstein, Director 3,704 *
($0.001) par value 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Common Stock Richard D. Surber, Director 195,364 8.3%
($0.001) par value 268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Common Stock Directors and Executive Officers as a 199,095 8.4%
($0.001) par value Group (3 individuals)
* Ownership represents less than 0.1% of the Common Stock ..........
(1) On September 17, 1996, the Company issued a 6.0% Convertible Debenture with a face amount of $300,000 (the "Debenture") to
Legong Investments pursuant to an Offshore Securities Subscription Agreement. The Debenture can be converted into the Company's
Common Stock at any time prior to maturity at the option of Legong. The conversion price of the Debenture is seventy percent (70%)
of the average closing bid prices for the Common Stock during the five days immediately proceeding conversion. The Debenture matured
on September 16, 1997 but has since been extended by the parties. At maturity, the Company has the option of paying the face amount
of the Debenture, plus accrued interest, in either cash or by issuing shares of Common Stock in accordance with the conversion price
set forth above. As of March 31, 1998, Legong had converted $40,000 of the face amount of the debenture into 54,175 shares of Common
Stock. The number shown above includes these 54,175 shares, as well as the number of shares Legong would have received if it fully
converted the Debenture on March 31, 1998. For purposes of determining the Percent of Class column, the Company used the total
number of shares which would be outstanding if the Debenture were fully converted.
</TABLE>
- --------------------------------------------
Changes in Control
As described in the final note to the preceding table, the Company has
currently outstanding a 6% Convertible Debenture with a current face amount of
$260,000 held by a foreign corporation called Legong Investments, N.V. The
Debenture is convertible into shares of the Company's Common Stock at a
conversion price equal to 70% of average the bid price for the Common Stock on
five days prior to maturity or conversion. As of March 1998, the debenture is
convertible into approximately 40% of the total shares of Common Stock which
would be outstanding after the conversion. The Debenture was originally
scheduled to mature in September 1997 maturity was extended by agreement between
the parties. The Debenture is immediately convertible at the option of Legong.
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, conversion of
the Debenture prior to any settlement could result in a change of control in the
ownership of the Company's Common Stock.
22
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Allen Wolfson
During the last two years, the Company has had an ongoing business
relationship with A-Z Professional Consultants, Inc., a Utah corporation ("A-Z")
whose sole shareholder is Allen Wolfson. Mr. Wolfson may be deemed to be a
"control person" of the Company (as that term is defined in Rule 12b-2
promulgated under the Securities Exchange Act of 1934) by virtue of Mr.
Wolfson's beneficial ownership of over 5% of the Company's Common Stock and the
potential influence Mr. Wolfson has with respect to the Company's day to day
operations in his role as the primary finder of potential transactions for the
Company and primary business consultant to the Company. Mr. Wolfson is also the
uncle of Richard Surber, the Company's president, chief executive officer and
director. Richard Surber was also the president and director of A-Z until
December 1997. Because of the nature of Mr. Wolfson's relationship with the
Company, the following transactions may be considered related party
transactions. For more information on Mr. Wolfson, see "Item 9 - Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Exchange Act."
A-Z works as an independent consultant to the Company whose primary
function is to locate potential transactions on the Company's behalf and to
present them to the Company's management. A-Z has served the Company in this
capacity since 1992. During 1997, A-Z performed services on the Company's behalf
primarily involving locating potential transactions for the purchase and sale of
the Company's real estate holdings.
On August 30, 1995, the Company executed a consulting agreement with A-Z
with a term of one year. The agreement was executed to serve as the base monthly
compensation paid to A-Z in exchange for the ongoing consulting services
received by the Company. The agreement had a one-year term and provided for the
monthly issuance of 4,000 (after adjustment for the October 31, 1997 1-for-10
reverse split) restricted shares of Common Stock to A-Z, or a total of 48,000
shares. This consulting agreement with Mr. Wolfson expired and has not been
renewed.
On December 22, 1995, the Company entered into a stock option agreement
with A-Z. Pursuant to that agreement, the Company granted an option to A-Z
giving A-Z the right to purchase a quantity of shares of Common Stock necessary
to give A-Z up to, but not more than, 26% of the issued and outstanding shares
on the exercise date. The exercise price of the option was $0.59 per share. The
option was granted to compensate Mr. Wolfson and A-Z for consulting services
rendered to the Company and to provide them an incentive to perform such
services in the future. The granting of the option gave substantial, indirect
control of the Company to Mr. Wolfson as of December 1995. However, the option
was voluntarily relinquished in its entirety by A-Z subsequent to the end of
1997.
The Company does not currently have any formal consulting arrangement with
A-Z, aside from providing A-Z with office space. The Company has, instead,
agreed to further compensate A-Z on a transaction by transaction basis. During
1997, A-Z was instrumental in several transactions involving the purchase, sale
and financing of real estate holdings by the Company and its subsidiaries. The
Company accrued a total of $196,000 in consulting expenses for the services
performed by A-Z with respect to these transactions, of which $46,000 were paid
to A-Z during the year. The Company executed a promissory note in favor of A-Z
to evidence the remaining $150,000 in accrued liability. This note is
convertible, at the Company's option, into shares of the Company's Common Stock
at $0.125 per share, for a total of 1,200,000 shares of Common Stock.
In addition to services performed on behalf of the Company, A-Z provides
consulting services to other clients, some of whom are also financial consulting
clients of the Company. The Company has allowed this arrangement to occur
because the Company has generated much of its business as a result of clients
introduced to it by A-Z and because the services performed by A-Z are often
different from and supplementary to the financial consulting services performed
by the Company. During 1997, A-Z generated approximately $87,000 in revenues
from the Company's clients. The transactions pursuant to which A-Z generated
such revenues were either authorized or ratified by a disinterested majority of
the Company's board of directors.
In October 1997, Cyberstate Inc., a wholly owned subsidiary of the Company,
executed an agreement to purchase an 18-unit apartment complex located in Ogden,
Utah and known as the New Brigham Building. Cyberstate has agreed to purchase
the apartment complex for a total of $850,000 with an $150,000 downpayment due
at closing and the remaining $700,000 to be financed at 10% for a period of 20
years. Cyberstate has entered the
23
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agreement to acquire the apartment complex with the intention of converting the
18 units into condominiums which will be sold to the public. Cyberstate has
filed condominium conversion documents with the appropriate state agency in
March 1998 and the Company expects a response to this filing in April or May of
1998.
The acquisition of this purchase has not closed and the closing is
contingent upon approval of the condominium documents. At closing, Cyberstate
will be required to deliver the required $150,000 downpayment. In order to
finance the required downpayment, Cyberstate has signed contracts to sell three
of the condominium units. The sale of such units is contingent upon conversion
of the apartment complex and the sale is to occur simultaneously with
Cyberstate's acquisition of the New Brigham Building. Cyberstate intends to use
the proceeds of these sales to make the downpayment on the New Brigham Building.
Cyberstate executed a contract to sell one of these condominium units to
Allen Wolfson for a price of $65,000 on October 10, 1997. A disinterested
majority of the Company's board of directors authorized this transaction with
Mr. Wolfson based upon its belief that this was the only manner pursuant to
which the acquisition of the New Brigham Building could be effected. Cyberstate
believes this to be a fair price for the unit being offered to Mr. Wolfson based
on the market for condominiums in the area, but there are no comparable sale
prices in the New Brigham Building itself because the condominium conversion has
not yet been approved.
Transactions involving Richard Surber
Until October 31, 1996, Investment Sanctuary Corporation, a Utah
corporation ("ISC"), was owned by Richard Surber. ISC served as a consultant to
the Company from 1994 to 1997. Because of the nature of Mr. Surber's
relationship with both the Company and/or ISC, the following transactions are
related party transactions.
On December 22, 1995, the Company entered into a Stock Option Agreement
with ISC pursuant to which the Company granted ISC an option to purchase a
quantity of Common Stock sufficient to give ISC a 25% ownership interest in
Common Stock on the date the option was to be exercised. The exercise price of
the option was set at $0.59 per share, exercisable in full or in part in
accordance with the terms of the Agreement and any stock option plan in effect
at the time of exercise. The option was granted to compensate Mr. Surber for his
services to the Company and to encourage him to continue performing such
services in the future.
Effective October 31, 1996, the Company executed a Stock Exchange Agreement
with ISC and Richard Surber pursuant to which the Company acquired 100% of the
outstanding capital stock of ISC. Pursuant to the Agreement, ISC's option to
purchase 25% of the Company's Common Stock was also canceled. As consideration
for the transfer of ISC and the cancellation of the option, the Company issued
to Mr. Surber 110,000 restricted shares of the Company's Common Stock. At the
time of the Agreement, the primary asset of ISC was a 50% ownership interest in
the sixth floor of a building located at 68 South Main Street, Salt Lake City,
Utah known as the McIntyre Building. On November 20, 1996, ISC, then wholly
owned by the Company, sold its interest in the McIntyre Building to an
unaffiliated purchaser for $91,270. Based upon the net equity in ISC prior to
the Stock Exchange Agreement, the Company valued the transaction with Mr. Surber
at $49,500. The Company's disinterested directors approved this transaction.
Effective August 1997, Canton Financial Services Corporation, a wholly
owned subsidiary of the Company, executed a lease agreement with Mr. Surber
pursuant to which Mr. Surber is leasing an interest in a condominium project to
the Company. The condominium is located in Brian Head, Utah, in close proximity
to other condominiums owned by the Company's subsidiaries. The lease has a term
of five years which expires on August 29, 2003. Mr. Surber purchased the
condominium in August 1997 by assuming existing financing on the building with a
then-current principal balance of $74,814. The lease provides for monthly rental
and related payments of $900, of which $857 are paid directly on the note
assumed by Mr. Surber. CFSC has an option to purchase the condominium for a
price of $84,814 which is reduced monthly to the extent that lease payments made
by CFSC have reduced the total principal due on the note assumed by Mr. Surber.
However, in the event that the value of the condominium appreciates and CFSC has
a arranged a sale of the condominium prior to exercise of the option, then
24
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the option price shall be the greater of $84,814 or 10% of the total sales price
for the transaction CFSC has arranged.
CFSC entered this lease-option arrangement because it was unable to obtain
sufficient financing to acquire the condominium at the time the unit was
available. This arrangement allowed CFSC to obtain beneficial ownership of the
condominium through a capital lease. CFSC provided Mr. Surber with financial
incentives to enter this arrangement in order compensate him for assuming
personal liability on the financing. Mr. Surber's interest in this transaction
is two-fold. First, Mr. Surber receives a monthly fee of $43, which equals the
amount by which monthly payments due to Mr. Surber exceed the amounts due under
the note on the property. Second, Mr. Surber will receive a lump sum of not less
than $10,000 in the event that the option on the condominium is exercised by
CFSC. Because Mr. Surber is the only officer and director of CFSC, a
disinterested majority of the Company's board of directors authorized the
formation and execution of this lease agreement.
On October 10, 1997, Cyberstate Inc., a wholly owned subsidiary of the
Company, executed a real estate purchase agreement to sell a condominium unit in
an apartment building which Cyberstate has contracted to acquire. For more
information on Cyberstate, see the preceding disclosure pertaining to Allen
Wolfson in this Item. Cyberstate has contracted to sell this unit to Mr. Surber
for $75,000. Cyberstate believes this to be a fair price for the unit being
offered to Mr. Surber based on the market for condominiums in the area, but
there are no comparable sale prices in the New Brigham Building itself because
the condominium conversion has not yet been approved. Cyberstate offered this
condominium unit to Mr. Surber in order to finance the downpayment required to
close the acquisition of the New Brigham Building. The sale is contingent upon
approval of the condominium conversion of the New Brigham Building and upon Mr.
Surber securing appropriate financing. A disinterested majority of the Company's
board of directors authorized this transaction with Mr. Surber based upon its
belief that this was the only manner pursuant to which the acquisition of the
New Brigham Building could be effected.
During the time period between January 1996 and December 1997, the Company
received periodic cash advances totaling $47,294.55 from Mr. Surber. On March
31,1998 the Company executed a promissory note for $47,294.55. The note bears
simple interest at a rate of 22 per centum per annum. The entire unpaid
principle balance and accrued interest thereto, if any, shall become immediately
payable on demand but no later than March 31, 2003. The company's disinterested
directors approved this transaction.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. Exhibits required to be attached by Item 601 of Regulation S-B
are listed in the Index to Exhibits beginning on page 30 of this Form
10-KSB, which is incorporated herein by reference.
(b) Reports on Form 8-K. On October 27, 1997, the Company filed a report on
Form 8-K disclosing the board of directors' approval of a 1-for-10 reverse
split of the Company's Common Stock, the extension of the Company's
outstanding $300,000 convertible debenture, and the issuance of 112,439
(post-reverse) shares of Common Stock pursuant to Regulation S. On January
15, 1998 and subsequent to the end of the fiscal year, the Company filed a
Form 8-K disclosing the issuance of 111,113 shares of Common Stock pursuant
to Regulation S. On April 6, 1998, and subsequent to the end of the fiscal
year, 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.
25
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this ___th day of April 1998
CyberAmerica Corporation
/s/ Richard Surber
Richard Surber, President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
/s/Richard Surber President, Chief Executive April __, 1998
- ------------------------------ Officer and Director
Richard Surber
/s/ Wayne Newton Controller April __, 1998
Wayne Newton
/s/ Philip Lamb Director April __, 1998
Philip Lamb
/s/ Adrienne Bernstein Director April __, 1998
Adrienne Bernstein
26
<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) 33 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.
10(i)(b) 38 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.
10(i)(c) 45 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.
10(i)(d) 53 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.
10(i)(e) 61 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%.
27
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10(i)(f) 62 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%.
10(i)(g) * 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)(h) * 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)(i) * 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)(j) * 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)(k) * 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)(l) * 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)(m) * 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)(n) * 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)(o) * 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)(p) * 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
28
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(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)(q) * 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)(r) * 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.
29
LEASE AGREEMENT
THIS LEASE is entered into this 29th day of August, 1997, by and
between RICHARD SURBER, an Individual, (Landlord) and Canton Financial Services
Corporation, a Nevada Corporation (Tenant)
WITNESSETH:
1. Premises. In consideration of the rents, covenants and agreement
contained herein, Landlord demises and leases to Tenant, and Tenant leases from
Landlord, the following premises consisting of a portion of a building and
proportionate shares use of common areas and parking. The address of the
building or portion thereof is Unit 38 of the GIANT STEP CONDOMINIUM PROJECT, an
expandable condominium project in Brian Head, Iron County, Utah.
2. Acceptance. Tenant is familiar with the premises, has inspected the
same and accepts the same in its present condition as satisfactory for Tenant's
purposes.
3. Term. The term of this Lease shall be for 10 (ten) years commencing
on August 29, 1997, and ending on August 31, 2007.
4. Rent. Tenant agrees to pay, as minimum rental to Landlord at such
place as Landlord may designate without prior demand and without any deduction
or set off, an amount equal to the mortgage payments, including principal,
interest and reserve for taxes on the subject property, as of the date of this
lease that amount is $856.27 per month.
At any time during the lease period, the Tenant decided to terminate
the lease and vacate the premises, it may do so upon giving the
Landlord, six (6) months written prior notice.
In addition to the payment of the monthly rental, Tenant shall pay all
charges for common area maintenance, including lighting costs, exterior
painting, snow removal costs, and costs of maintaining the common area in a
clean, attractive, sanitary condition, and other charges legally and properly
charged by the condominium association. Tenant shall bear all costs of insuring
the premises.
5. Authorized Use. Tenant shall be allowed any use authorized by the
condominium rules and regulations in effect at any time during the term of this
lease.
6. Increasing Insurance Risk. Tenant will not use or permit said leased
premises to be used for any purpose which would increase the risk or render the
insurance thereon void or cause cancellation thereof or the insurance risk more
hazardous or increase the insurance premiums in effect at the time of the
commencement of the term of this Lease. Tenant will not keep, use or sell, or
allow to be kept, used or sold in or about the leased premises, any article or
material which is prohibited by law or by standard fire insurance policies of
the kind customarily in force with respect to premises of the same general type
as those covered by this Lease.
7. Repair and Care of Building by Tenant. Tenant will not commit any
waste on the leased premises, nor shall Tenant use or permit the use of the
premises in violation of any present or future law of the United States or of
the State of Utah in which said premises are located, or in violation of any
municipal ordinance or regulation applicable thereto. Tenant may, with the prior
written consent of Landlord, but at Tenant's own cost and expense, in a good and
workmanlike manner, make such alterations and repairs to the building as Tenant
may desire without, however, materially altering the basic character of the
building or improvements
<PAGE>
or weakening the structure of the demised premises. Tenant agrees to keep the
interior of the building, including repairs to the windows and glass, furnace
and heating and air conditioning systems, electrical wiring and plumbing
systems, and to clean and paint the interior of the leased premises as the same
may or might be necessary in order to maintain said premises in a clean,
attractive, sanitary condition and good state of repair. Any alterations,
improvements or additions to the leased premises shall become the property of
the Landlord at the expiration or sooner termination of the Lease. Tenant agrees
to abide by and perform all rules and restrictions relating to common areas.
Tenant has no right or authority to cause mechanic's liens to arise against the
property.
8. Glass. Tenant agrees to repair and replace all windows and glass
broken or damaged during the term of this Lease with glass of the same quality
as that broken or damaged.
9. Right of Entry by Landlord. Tenant, at any time during the term,
shall permit inspection of the leased premised during reasonable hours by
Landlord or Landlord's agents or representatives for the purpose of ascertaining
the condition of the leased premises and in order that Landlord may make such
repairs as may be required to be make by Landlord under the terms of this Lease.
Sixty (60) days prior to the expiration of this Lease, Landlord may post
suitable notice on the leased premises that the same are "To Let" or "For Rent"
and may show the premises to prospective tenants at reasonable times. Landlord
shall not, however, unnecessarily interfere with the use of the leased premises
by Tenant.
10. Payment of Utilities. Tenant shall pay all charges for water, heat,
gas, electricity and other utilities used on the leased premises, including any
which are separately metered and billed to Tenant by utility companies.
11. Payment of Taxes and Other Assessments. Tenant shall pay all taxes
and assessments, license fees and charges during the term of this Lease.
12. Assignment and Subletting. Any interest herein may be assigned or
transferred by Tenant whether voluntarily or by operation of law, and part or
all of the leased premises may be sublet by Tenant without the prior written
consent of Landlord.
13. Damage or Destruction. If the leased premises or any part thereof
shall be damaged or destroyed by fire or other casualty, Landlord shall promptly
repair all such damage and restore the demised premises without expense to
Tenant, subject to delays due to adjustments of insurance claims, strikes and
other causes beyond Landlord's control. If such damage or destruction shall
render the premises untenantable in whole or in part, the rent shall be abated
wholly or proportionately, as the case may be, until the damage shall be
repaired and the premises restored,. If the damage or destruction shall be so
extensive as to require the substantial rebuilding (i.e. expenditure of fifty
percent (50%) or more of replacement cost) of the building or buildings on the
leased premises, Landlord may elect to terminate this Lease by written notice to
Tenant within thirty (30) days after the occurrence of such damage or
destruction.
14. Indemnity and Insurance. Tenant agrees to indemnify and hold
harmless Landlord from any and all claims, loss or liability or any and every
kind and nature arising from the Tenant's use of the leased premises during the
term thereof, and Tenant hereby waives all claims against Landlord for damage to
goods, wares or merchandise or for injury to persons in and upon the premises
form any cause whatsoever, except such as might result from the negligence of
the Landlord or Landlord's representatives or from failure of the Landlord to
perform Landlord's obligations hereunder within a reasonable time after notice,
in writing, by Tenant requiring such performance by Landlord.
<PAGE>
15. Surrender or Premises. Tenant agrees to surrender the leased
premises at the expiration or sooner termination of this Lease or any extension
thereof, in the same condition or as altered, pursuant to the provisions of this
Lease, ordinary wear, tear and damage by the elements expected.
16. Holdover. Should Tenant hold over the leased premises or any part
thereof, after the expiration of the term or terms of this Lease, unless
otherwise agreed in writing, such holding over shall constitute a tenancy from
month-to-month only, and Tenant shall pay, as monthly rental, the same monthly
rent regularly due for the last month under this lease. Rent is due the 1st day
of each month and a 10% late penalty is imposed on the 25th of each month.
17. Purchase Option. Landlord hereby grants Tenant an irrevocable
option to purchase the premises. The option granted hereby shall be binding on
the parties, their heirs and assigns, and legal representatives. Tenant may
exercise the Option at any time up to and including August 31, 2007.
The option price for the premises shall be eighty four thousand eight
hundred thirteen and 05/100 dollars ($84,813.05). From this Option Price shall
be credited any amounts owed by Landlord under its purchase contract for the
premises as of the date Tenant exercises the Option. Tenant shall also be
credited against the Option Price for the amount of Landlord's purchase contract
principal balance which is paid off (amortized) from the inception date of this
Lease until the date of the exercise of the Option. Landlord shall be obligated
to make the payments due under is purchase contract in a timely manner, such
that is any payments are not made when due, Tenant shall still be credited
against the Option Price as if such payments were made on a timely manner.
Upon exercise of the Option and payment of the Option Price, Landlord
shall deliver to Tenant, (I) a duly executed and acknowledged warranty deed
conveying to Tenant the fee simple interest in all portions of the Premises that
consist of real property, and all rights appurtenant thereto, (ii) a bill or
bills of sale, or assignments, as the case may be, transferring to Tenant
Landlord's entire interests in all portions of the Premises consisting of
personal property, and (iii) any other documents reasonably necessary to
transfer the entire Premises to Tenant. Landlord shall provide a policy of title
insurance covering the entire interest in the premises as of the exercise of the
Option. The costs of the title insurance shall be borne by Landlord.
18. Quiet Enjoyment. If and so long as Tenant pays the rent and other
payments required by this Lease and performs and observes all the covenants and
provisions hereof, Tenant shall quietly enjoy the leased premises, subject,
however, to the terms of this Lease, and Landlord will warrant and defend Tenant
in the enjoyment and peaceful possession of the leased premises throughout the
term of this Lease.
19. Landlord Liable Only for Negligence. Except where caused by
Landlord's affirmative act of negligence, Landlord shall not be liable to Tenant
for any act or omission or for any failure of water supply, gas or electric
current; or for any injury or damage to person or property caused by others or
by gasoline, oil, steam, gas or electricity or hurricane, tornado, flood, wind
or similar storms or disturbances or water, rain or snow which may leak or flow
from the street, sewer, gas mains, or any subsurface area or from any part of
the building or buildings; or for any interference with light or air.
20. Waiver of Covenants. It is agreed that the waiving of any of the
covenants of this Lease Agreements by either party shall be limited to the
particular instance and shall not be deemed to waive any other breaches of such
covenant or any other provision of this Lease.
21. Default. If Tenant shall default in fulfillment of any of the
covenants and conditions hereof, except default in payment of rent, Landlord
may, at Landlord's option after thirty (30) day prior notice to Tenant, make
performance for Tenant and for the purposes advance such amount as may be
necessary. Any amounts
<PAGE>
so advanced or expenses incurred or sum of money paid by landlord by reason of
the failure of Tenant to comply with any covenant, agreement, obligation or
provision of this Lease or in defending any action to which Landlord may be
subjected by reason of any failure or default under this Lease shall be deemed
to be additional rent for the leased premises and shall be due and payable to
Landlord on demand. Any such amount not paid on demand shall bear interest of
ten percent (10%) per annum from date of such demand. The receipt by Landlord of
any installment of the fixed rent or of any additional rent hereunder shall not
be a waiver of any other rent then due.
If Tenant shall make default in fulfillment of any of the covenants or
condition of this lease (other than the covenants for the payment of rent or
other amounts) and any such defaults shall continue for a period of ninety (90)
days after notice, then Landlord may, at its option, terminate this Lease by
giving Tenant notice of such termination and, thereupon, this Lease shall expire
as fully and completely as if that were the date definitely fixed for the
expiration of the term of this Lease, and the Tenant shall then quit and
surrender the leased premises. If such default cannot be remedied within the
period of ninety (90) days by the use of reasonable diligence, then such
additional time shall be granted as may be necessary, provided Tenant takes
immediate action on receipt of the notice and proceeds diligently to remedy the
default. Any such termination shall not relieve Tenant of its obligation to pay
damages.
22. Default in Rent, Insolvency of Tenant. If Tenant shall default in
the payment of the rent reserved hereunder, or any part thereof, or in making
any other payment herein provided for, and any such default shall continue for a
period of twenty (20) days, or if the leased premises or any part thereof shall
be abandoned or vacated, or if Tenant shall be dispossessed therefrom by or
under any authority other than Landlord, or if Tenant shall file a voluntary
petition in bankruptcy, or if Tenant shall file a petition or institute any
proceeding under any solvency or bankruptcy act (or any amendment thereto
hereafter made) seeking to effect its reorganization or a composition with its
creditors, or if (in any proceedings based on the insolvency of Tenant or
relating to bankruptcy proceedings) a receiver or trustee shall be appointed for
Tenant or the leased premises and not be discharged within ninety (90) days, or
if any proceeding shall be commenced for the reorganization of Tenant and be not
dismissed within ninety (90) days, or if the leasehold estate credited hereby
shall be taken on execution or by any process of law, or if Tenant shall admit,
in writing, its inability to pay its obligations generally as they become due,
then the Landlord may, at Landlord's option, terminate this Lease upon three (3)
days' written notice, and Landlord or Landlord's agents and servants may
immediately or at any time thereafter re-enter the leased premises and remove
all persons and property therefrom (by legal proceedings or by force or
otherwise) without being liable to indictment, prosecution or damage therefor.
Landlord may, in addition to any other remedy provided by law or permitted
herein, at its option, re-let said premises on behalf of Tenant, applying any
monies collected, first, to the payment of expenses of resuming or obtaining
possession and, second, to the payment of costs of placing the leased premises
in rentable condition and, third, to the payment of rent due hereunder, and any
other charges due to Landlord. Any surplus remaining thereafter shall be paid to
Tenant, and Tenant shall remain liable for any deficiency in rental which shall
be paid upon demand therefor to Landlord. In the event either party shall
enforce the terms of this Lease by written notice, by suit or otherwise, the
party at fault shall pay the cost and expense thereof, including a reasonable
attorney's fee. Tenant agrees that the terms of this Lease are sufficient notice
of payments to be make and that no other notice is required. Tenant also agrees
that Landlord shall have a lien on Tenant's personal property on the premises in
the event of any default by Tenant, and Tenant shall not remove any personal
property while any default exists.
23. Failure to Perform Covenant. Any failure on the part of either
party to this Lease to perform any obligation hereunder, and any delay in doing
any act required hereby, shall be excused if such failure or delay is caused by
any strike, lockout, governmental restriction or any similar cause beyond the
control of the party so failing to perform, to the extent and for the period
that such cause continues, save and except the provisions
<PAGE>
of this paragraph shall not excuse a non-payment or rent and other sums due
hereunder.
24. Rights of Successors and Assigns. The covenants and agreements
contained in this Lease shall inure to the benefit of and be binding upon the
parties hereto and upon their respective successors in interest and legal
representatives, except as expressly otherwise hereinbefore provided.
25. Time. Time is of the essence of this Lease and every term, covenant
and conditions herein contained.
26. Liens. Tenant agrees not to permit any lien for monies owing by
Tenant to arise against the leased premises. Should such lien be filed, Landlord
may, at Landlord's option (but without any obligation so to do), pay or
discharge any lien and may likewise pay and discharge any taxes, assessments or
other charges against the leased premises which Tenant is obligated hereunder to
pay and which may or might become a lien on said premises. Tenant agrees to
repay any sums so paid by the Landlord upon demand therefor, together with
interest at the rate of twelve percent (12%) per annum from the date any such
payment is made.
27. Condemnation. If the whole of the premises is taken by condemnation
proceedings, this Lease shall terminate on the date of the transfer of title in
such proceedings. If only part of the premises is taken by condemnation, this
Lease shall continue in effect as to the remainder of the premises, except that
the minimum rent shall be reduced proportionately, provided, however, that if
the amount of space not taken is insufficient to allow Tenant to continue
Tenant's use, then in such case this Lease shall terminate. Tenant waives all
claims to any portion of the condemnation amount awarded for such taking.
28. Notices. Any notice required or permitted to be given hereunder
shall be deemed sufficient if given by a communication in writing, by United
States mail, postage prepaid and registered and addressed as follows:
LANDLORD: Richard Surber
268 West 400 South, Suite #300,
Salt Lake City, Utah 84101
TENANT: Canton Financial Services Corporation
268 West 400 South, Suite #300
Salt Lake City, Utah 84101
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed the day and year first above written.
LANDLORD:
Richard Surber
/s/ Richard Surber
TENANT: Canton Financial Services Corporation
By: /s/ Wayne Newton
Its: Agent
COMMERCIAL - INDUSTRIAL - INVESTMENT
REAL ESTATE PURCHASE CONTRACT
This is a legally binding contract. It hat been prepared by the Utah
Association of REALTORS for the use of its members only, in their transactions
with clients and customers. Parties to this contract may agree, in writing, to
alter or delete provisions of this contact. Seek advice from your attorney or
tax advisor before entering into a binding contract.
EARNEST MONEY RECEIPT
The Buyer Cyberstate, Inc Nevada Corp., or Assignee offers to purchase the
Property described below and delivers as Earnest Money Deposit $ $2,500 In the
form of Check to: [X] the Brokerage, to be deposited within three business days
after Acceptance of this Offer to Purchase by all parties. [ ]the Title/Escrow
Company identified below. Brokerage or Title/Escrow Company: Wardley B H & G
Address: 2909 Washington Blvd Received by: N/A on 7-14-97 (date) Phone Number
627-4663 [ ](if Title/Escrow Company) for deposit no later than (date) .
OFFER TO PURCHASE
1. PROPERTY: 01-019-0017
Address: 2402 Wall Avenue City: Ogden County: Weber State: Utah For legal
description, see attached Addendum # preliminary title report when available as
provided below.
1.1 INCLUDED ITEMS: Unless excluded herein, this sale shall include all
fixtures presently attached to the Property. The following personal property
shall also be included in this sale and conveyed under separate Bill of Sale
with warranties as to title: See Addendum #1
1.2 EXCLUDED ITEMS: These items are excluded from this sale:
2. PURCHASE PRICE AND FINANCING. Buyer agrees to pay for the Property as
follows:
$ 2,500 Earnest Money Deposit
$750,000 Loan proceeds: Representing the liability to be assumed by Buyer
under an existing assumable loan ( with without Seller being
release of liability) in this approximate amount with Buyer Seller
agreeing to pay any loan transfer and assumption fees. Any net
differences between the approximate balance of the loan shown above
and the actual balance at Closing shall then be adjusted in cash
other . From new institutional financing on terms no less favorable
to the Buyer than the following: N/A (interest rate for first
period prior to adjustment, if any);___N/A____ (amortization
period); N/A (term). Other than these, the loan terms shall be the
best obtainable under the loan for which the Buyer applies below.
From Seller-held financing, as described in the attached Seller
Financing Addendum.
$ 0 Other:
$ 97,500 Balance of Purchase Price in cash at closing.
$850,000 TOTAL PURCHASE PRICE
3. CLOSING. This transaction shall be closed on or before Per Add. . Closing
shall occur when: (a) Buyer and Seller have signed and delivered to each other
(or to the escrow/title company),all documents required by this Contract, by the
Lender, by written escrow instructions signed by the Buyer and the Seller, and
by applicable law; (b) the moneys required to be paid under these documents have
been delivered to the escrow / title company in the form of collected or cleared
funds; and (c) the deed which the Seller has agreed to deliver under Section 6
had been recorded. Seller and Buyer shall each pay one-half of the escrow
Closing fee, unless otherwise agreed by the parties in writing. Taxes and
assessments for the current year, rents, and interest on assumed obligations
shall be prorated as set forth in this Section. All deposits on tenancies shall
be transferred to Buyer at Closing. Prorations set forth in this Section shall
be made as of [x] date of Closing; [ ] date of possession; [ ]other
____________.
4. POSSESSION. Seller shall deliver possession to Buyer within 0 hours after
Closing.
5. CONFIRMATION OF AGENCY DISCLOSURE. At the signing of this Contract the
Listing Agent G. Norman George Represents [x] Seller [ ] Buyer, and the Selling
Agent G. Norman George Represents [ ] Seller [x] Buyer. Buyer and Seller confirm
that prior to signing this Contract written disclosure of the agency
relationship was provided to him/her. ( /s/ ) Buyer's initials ( /s/ ) Seller's
initials.
6. TITLE TO PROPERTY AND TITLE INSURANCE. (a) Seller has, or shall have at
Closing, free title to the Property and agrees to convey such title to Buyer by
[ ] general [ x ] special warranty deed, free of financial encumbrances as
warranted under Section 10.6; (b) Seller agrees to pay for, and furnish Buyer at
Closing with, a current standard form Owner's policy of title insurance in the
amount of the Total Purchase Price; (c) the title policy shall conform with
Seller's obligations under subsections(a) and (b). Unless otherwise agreed under
Section 8.4, the commitment shall conform with the title insurance commitment
provided under Section 7.1. [ x ] The Buyer elects to obtain a full - coverage
extended ALTA policy of title insurance under 6 ( b ). The cost of this
coverage, above that of a standard Owner's policy, shall be paid for by the [ ]
Buyer [ x ] Seller. Also, the cost of a full-coverage ALTA survey, shall be paid
for by the [ ] Buyer [ x ]Seller.
7. SPECIFIC UNDERTAKINGS OF SELLER AND BUYER.
7.1 SELLER DISCLOSURES. The Seller will deliver to the Buyer the following
Seller Disclosures no later than the number of calendar days indicated below
which shall be days after Acceptance: (days)
[X] (a) a Seller Property Condition Disclosure for the Property,
signed and dated by Seller: 7
[X] (b) a commitment for the policy of title insurance
required under Section 6, to be issued by the title insurance
company chosen by Seller, including copies of all documents
listed as Exceptions on the Commitment: 10
[X] (c) a copy of all loan documents relating to any loan now
existing which will encumber the Property after Closing: 7
[X] (d) a copy of all leases and rental agreements now in effect
with regard to the Property together with a current rent roll: 7
[X] (e) operating statements of the Property for its last 3
full fiscal years of operation plus the current fiscal year. 10
through JUNE 1997 , certified by the Seller or by an independent
auditor: N/A
[ ] (f) tenant Estoppel agreement:
Seller agrees to pay any charge for cancellation of the title commitment
provided under subsection (b).
If Seller does not provide any of the Seller Disclosures within the time periods
agreed above, the Buyer may either waive the particular Seller Disclosure
requirement by taking no timely action or the Buyer may notify the Seller in
writing within 3 calendar days after the expiration of the particular disclosure
time period that the Seller is in Default under this Contract and that the
remedies under Section 16 are at the Buyer's disposal. The holder of the Earnest
Money Deposit shall,
<PAGE>
upon receipt of a copy of Buyer's written notice, return to the Buyer the
Earnest Money Deposit without the requirement of further written authorization
from the Seller.
7.2 BUYER UNDERTAKINGS. The Buyer agrees to: I II
[ ] (a) Apply for approval of the assumption or funding
of the loan proceeds described in Section 2 by completing,
signing, and delivering to the Lender the initial loan application
and documentation required by the Lender and by paying all
fees as required by the Lender (including appraisal fee) no
late than calendar days after Acceptance; and N/A N/A
[ ] (b) No later than N/A calendar days after Acceptance,
obtain from the Lender to whom application is made under
subsection (a) a written commitment to approve the
assumption of the existing loan or to fund the new loan subject
only to changes of conditions in Buyer's credit worthiness
and to normal loan closing procedures; or, if Buyer elects,
providing the Seller with absolute assurance, within
the same time frame, that the proceeds required for funding
the Total Purchase Price are available. N/A N/A
These Buyer Undertakings are at the sole expense of the Buyer and are material
elements of this Contract for the benefit of both the Buyer and the Seller. If
Buyer does not initiate any Buyer Undertaking and provide Seller with written
confirmation in the time agreed above, the Seller may either waive the
particular Buyer Undertaking requirement by taking no timely action or the
Seller may notify the Buyer in writing within 10 calendar days of the expiration
of the particular undertaking time period that the Buyer is in Default under
this Contract and that the remedies under Section 16 are at the Seller's
disposal. The holder of the Earnest Money Deposit shall, upon receipt of a copy
of Seller's written notice, deliver to the Seller the Earnest Money Deposit
without the requirement of further written authorization from the Buyer.
7.3 ADDITIONAL DUE DILIGENCE. The Buyer shall undertake the following Additional
Due Diligence elements at its own expense and for its own benefit for the
purpose of complying with the Contingencies under Section 8:
[X] (a) Ordering and obtaining an appraisal of the Property if one is not
otherwise required under Section 7.2;
[X](b) Ordering and obtaining a survey of the Property if one is not
otherwise required under Section 6;
[X](c) Ordering and obtaining any environmentally related study of the
Property;
[X](d) Ordering and obtaining a physical inspection report regarding, and
completing a personal inspection of, the Property;
[X](e) Requesting and obtaining verification that the Property complies
with all applicable federal, state, and local laws, ordinances, and
regulations with regard to zoning and permissible use of the Property.
Liquor license to be transferrable est. (60 days) Seller agrees to
cooperate fully with Buyer's completing these Due Diligence matters and to
make the Property available as reasonable and necessary for the same.
8. CONTINGENCIES. This offer is subject to the Buyer's approving in its sole
discretion the Seller Disclosures, the Buyer Undertakings, and Additional Due
Diligence matters in Section 7. However, the Buyer's discretion in approving the
terms of the loan under subsection 7.2(b) is subject to Buyer's covenant with
regard to minimally acceptable financing terms under Section 2.
8.1 Buyer shall have 30 Calendar days after the times specified in Section
7.1 and 7.2 for receipt of Seller Disclosures, and for completion of Buyer
Undertakings to review the content of the disclosures and the outcome of
the undertakings. The latest applicable date under Section 7.1 and 7.2
applies for completing a review of Additional Due Diligence matters under
Section 7.3.
8.2 If Buyer does not deliver a written objection to Seller regarding a
Seller Disclosure, Buyer Undertaking, or due Diligence matter within the
time provided in Section 8.1, that term will be deemed approved by Buyer.
8.3 If Buyer objects, Buyer and Seller shall have 30 Calendar days after
receipt of the objections to resolve Buyer's objections. Seller my, but
shall not be required to, resolve Buyer's objections. Likewise, the Buyer
is under no obligation to accept any resolution proposed by the Seller. If
Buyer's objections are not resolved within the stated time Buyer may void
this Contract by providing written notice to Seller within the same stated
time. The holder of the Earnest Money Deposit shall, upon receipt of a copy
of Buyer's written notice, return to Buyer the Earnest Money Deposit
without the requirement of any further written authorization from Seller.
If this Contract is not voided by Buyer, Buyer's objection is deemed to
have been waived. However, this waiver does not affect warranties under
Section 10.
8.4 Resolution of Buyer's objections under Section 8.3 shall be in writing
and shall become part of this Contract.
9. SPECIAL CONTINGENCIES. This offer is made subject to: The terms of attached
Addendum # 1 Are incorporated into this Contract by this reference.
10. SELLER'S LIMITED WARRANTIES. Seller's warranties to Buyer regarding the
Property are limited to the following:
10.1 When Seller delivers possession of the Property to Buyer, it will be
broom-clean and free of debris and personal belongings;
10.2 Seller will deliver possession of the Property to Buyer with the
plumbing, plumbed fixtures, heating, cooling, ventilating, electrical and
sprinkler (indoor and outdoor) systems, appliances, and fireplaces in
working order;
10.3 Seller will deliver possession of the Property to Buyer with the roof
and foundation free of leaks known to Seller;
10.4 Seller will deliver possession of the Property to Buyer with any
private well or septic tank serving the Property in working order and in
compliance with governmental regulations;
10.5 Seller will be responsible for repairing any of Seller's
moving-related damage to the Property.
10.6 At Closing, Seller will bring current all financial obligations
encumbering the Property which are assumed in writing by Buyer and will
discharge all such obligations which Buyer has not so assumed;
10.7 As of Closing, Seller has no knowledge of any claim or notice of an
environmental, building, or zoning code violation regarding the Property
which has not been resolved.
11. VERIFICATION OF WARRANTED AND INCLUDED ITEMS. After all contingencies have
been removed and before Closing, the Buyer may conduct a "walk-through"
inspection of the Property to determine whether or not items warranted by Seller
in Section 10.1, 10.2, 10.3 and 10.4 are in the warranted condition and to
verify that items included in Section 1.1 are presently on the Property. If any
item is not in the warranted condition, Seller will correct, repair or replace
it as necessary or, with the consent of Buyer and (if required) Lender, escrow
an amount at Closing to provide for such repair or replacement. The Buyer's
failure to conduct a "walk-through" inspection or to claim during the
"walk-through" inspection that the Property does not include all items
referenced on Section 1.1 or is not in the condition warranted in Section 10 ,
shall constitute a waiver of Buyer's rights under Section 1.1 and of the
warranties contained in Section 10.
12. Changes during Transaction. Seller agrees that no changes in any existing
leases shall be made, no new leases entered into, and no substantial alterations
or improvements to the Property shall be undertaken without the written consent
of the Buyer.
13. AUTHORITY OF SIGNERS. If Buyer or Seller is a corporation, partnership,
trust, estate, or other entity, the person signing this Contract on its behalf
warrants his or her authority to do so and to bind Buyer or Seller and the heirs
or successors in interest to Buyer or Seller . If the Seller is not the vested
Owner of the Property but has control over the vested Owner's disposition of the
Property, the Seller agrees to exercise this control and deliver title under
this Contract as if it had been signed by the vested Owner.
14. COMPLETE CONTRACT. This instrument (together with its Addenda, any attached
Exhibits, and Seller Disclosure) constitutes the entire Contract between the
parties and supersedes all prior dealings between the parties. This Contract
cannot be changed except by written agreement of the parties.
15. DISPUTE RESOLUTION. The parties agree that any dispute or claim relating to
this Contract, including but not limited to the disposition of the Earnest Money
Deposit and the breach or termination of this Contract, shall first be submitted
to mediation in accordance with the Utah Real Estate Buyer/Seller Mediation
Rules of the American Arbitration Association. Each party agrees to bear its own
costs of mediation. Any Agreement signed by the parties pursuant to the
mediation shall be binding. If mediation fails, the procedures applicable and
remedies available under this Contract shall apply. Nothing in this Section
shall prohibit the Buyer
<PAGE>
from seeking specific performance be the Seller by filing a complaint with the
court, serving it on the Seller by means of summons or as otherwise permitted by
law, and recording a lis pendens with regard to the action provided that the
Buyer permits the Seller to refrain from answering the complaint pending
mediation. Also, the parties may agree in writing to waive mediation.
16. DEFAULT. If Buyer defaults, Seller may elect to either retain the Earnest
Money Deposit as liquidated damages or to return the Earnest Money Deposit and
sue Buyer to enforce Seller's rights. If Seller defaults, in addition to return
of the Earnest Money Deposit, Buyer nay elect to either accept from Seller as
liquidated damages a sum equal to the Earnest Money Deposit or sue Seller for
specific performance and/or damages. If Buyer elects to accept the liquidated
damages, Seller agrees to pay the liquidated damages to Buyer upon demand. Where
a Section of this Contract provides a specific remedy, the parties intend that
the remedy shall be exclusive regardless of rights which might otherwise
available under common law.
17. ATTORNEY'S FEES. In any action arising out of this Contract, the prevailing
party shall be entitled to costs and reasonable attorney's fees.
18. DISPOSITION OF EARNEST MONEY. The Earnest Money Deposit shall nor be
released unless it is authorized by: (a) Section 7.1, 7.2 and 8.3; (b) separate
written agreement of the parties, including an agreement under Section 15 if (a)
does not apply; or (c) court order.
19. ABROGATION. Except for express warranties made in this Contract, the
provisions of this Contract, shall not apply after Closing.
20. RISK OF LOSS. All risk of loss or damage to the Property shall be borne by
Seller until Closing.
21. TIME IS OF THE ESSENCE. Time is of the essence regarding the dates set forth
in this transaction. Extensions must be agreed to in writing by all parties.
Performance under each Section of this Contract which references a date shall be
required absolutely by 5:00 P.M., Mountain Time on the stated date.
22. COUNTERPARTS AND FACSIMILE (FAX) DOCUMENTS. This Contract may be signed in
counterparts, and each counterpart bearing an original signature shall be
considered one document with all others bearing original signature. Also,
facsimile transmission of any singed original document and re-transmission of
any signed facsimile transmission shall be the same as delivery of an original.
23. ACCEPTANCE. Acceptance occurs when Seller or Buyer, responding to an offer
or counteroffer of the other; (a) signs the offer or counteroffer where noted to
indicate acceptance; and (b) communicates to the other party or the other
party's agent that the offer or counteroffer has been signed as required.
24. OFFER AND TIME FOR ACCEPTANCE. Buyer offers to purchase the Property on the
above terms and conditions. If Seller does not accept this offer by [ ] AM [ x ]
PM Mountain Time, 5:00, 7-18-97 , , this offer shall lapse; and the holder of
the Earnest Money Deposit shall return it to the Buyer.
/s/ BonnieJean Tippets
(Buyer's Signature) (Offer Reference Date)
BonnieJean Tippets
Buyer's Name (please print)
- -------------------------------------- ---------
(Notice Address) (Phone)
<PAGE>
- --------------------------------------------------------------------------------
ACCEPTANCE/REJECTION/COUNTEROFFER
Acceptance of Offer to Purchase: Seller Accepts the foregoing offer on the terms
and conditions specified above.
- --------------------------------------
(Seller's Signature) (Date) (Time)
- --------------------------------------
Seller's Name (please print)
- ------------------------------------------ ----------------
(Notice Address) (Phone)
Rejection: Seller Rejects the foregoing offer.
____________ (Seller's initials) __________________(Date) ________________(Time)
[ x ] Counter Offer: Seller presents for Buyer's Acceptance the terms of Buyer's
offer subject to the exceptions or modifications as specified in the attached
Counter Offer #_____1______.
- --------------------------------------------------------------------------------
DOCUMENT RECEIPT
State Law requires Broker to furnish Buyer and Seller with copies of this
Contract bearing all signatures. (One of the following alternatives must
therefore be completed).
A. [ ] I acknowledge receipt of a final copy of the foregoing Contract
bearing all signatures:
SIGNATURE OF SELLER SIGNATURE OF BUYER
- ---------------------------- --------- ---------------------- ---------
Date Date
- ---------------------------- --------- ---------------------- ---------
Date Date
B. [ ] I personally caused a final copy of the foregoing contract bearing
all signatures to be mailed on _____________, 19______ by certified Mail and
return receipt attached hereto to the [ ] Seller [ ] Buyer, Sent by
_______________
Seller's Initials ( ) Date __________ Buyer's Initials ( ) Date _______________
<PAGE>
ADDENDUM NO. 3
TO
REAL ESTATE PURCHASE CONTRACT
THIS IS AN [ ] ADDENDUM [ X ] COUNTEROFFER to that REAL ESTATE PURCHASE CONTRACT
(the "REPC") with and Offer Reference Date of 7-14-97 , 19 , including all prior
addenda and counteroffers, between Cyberstate Inc., Nevada Corp. as Buyer, and
James Stacey as Seller, regarding the Property located at 2402 Wall Avenue,
Ogden . The following terms are hereby incorporated as part of the REPC:
#1 10% on 20 years for $700,000
- --------------------------------------
#2 $150,000 down
-----------------
#4 Closing Seller Release Unit # 301 #302 #303
-------------------------------------------------
#5 Subject to America 1st approval
----------------------------------
To the extent the terms of this ADDENDUM modify or conflict with any provisions
of the REPC, including all prior addenda and counteroffers, these terms shall
control. All other terms of the REPC, including all prior addenda and
counteroffers, not modified by this ADDENDUM shall remain in the same. [ ]
Seller [ ] Buyer shall have until _________ [ ] AM [ ] PM Mountain Time , 19 ,
to accept the terms of this ADDENDUM in accordance with the provisions of
Section 23 of the REPC. Unless so accepted, the offer as set forth in this
ADDENDUM shall lapse.
/s/ James W. Stacey
-------------------
[ ] Buyer [ X ] Seller Signature Date Time
_______________________________________________________
[ ] Buyer [ ] Seller Signature Date Time
ACCEPTANCE/COUNTEROFFER/REJECTION
CHECK ONE:
[ X ] ACCEPTANCE: [ ] Seller [ ] Buyer hereby accepts the terms of this
ADDENDUM.
[ ] COUNTEROFFER: [ ] Seller [ ] Buyer presents as a counteroffer the terms of
attached ADDENDUM NO. .
/s/ BonnieJean Tippets (Pres)
(Signature) (Date) (Time)
_______________________________________
(Signature) (Date) (Time)
[ ] REJECTION: [ ] Seller [ ] Buyer rejects the foregoing ADDENDUM.
_______________________________________
(Signature) (Date) (Time)
_______________________________________
(Signature) (Date) (Time)
THIS FORM APPROVED BY THE UTAH REAL ESTATE COMMISSION AND THE OFFICE OF THE UTAH
ATTORNEY GENERAL, EFFECTIVE JUNE 12, 1996. IT REPLACES AND SUPERSEDES ALL
PREVIOUSLY APPROVED VERSIONS OF THIS FORM
REAL ESTATE PURCHASE CONTRACT
This is a legally binding Contract. Utah State Law requires that licensed real
estate agents use this form, but the Buyer and the Seller may legally agree in
writing to alter or delete provisions of this form. If you desire legal or tax
advice, consult your attorney or tax advisor.
EARNEST MONEY RECEIPT
The Buyer Richard D. Surber offers to purchase the Property described below
and delivers to Brokerage, as Earnest Money Deposit $ 0 In the form of N/A to be
deposited within three business days after Acceptance of this Offer to Purchase
by all parties.
______________________________ Received by: _______ _____________________
Brokerage Phone Number
OFFER TO PURCHASE
1. PROPERTY: The New Brigham Building, 2402 Wall Ave.#303
City: Ogden County: Weber , Utah
1.1 INCLUDED ITEMS: 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, awnings, installed television
antenna, satellite dishes and system, wall-to-wall carpets, automatic garage
door opener and transmitter(s), fencing, trees and shrubs. The following
personal property shall also be included in this sale and conveyed under
separate Bill of Sale with warranties as to title: N/A
1.2 EXCLUDED ITEMS: These items are excluded from this sale:
2. PURCHASE PRICE AND FINANCING. Buyer agrees to pay for the Property as
follows:
$ 0 Earnest Money Deposit
$ 0 Existing Loan : Buyer agrees to assume and pay an existing
loan in this approximate amount presently payable at $ ___________ per
month including principal, interest, (presently at ___ % per annum), [
] real estate taxes, [ ] property insurance premium and [ ] mortgage
insurance premium. Buyer agrees to pay any transfer and assumption
fees. Seller [ ] shall [ ] shall not be released from liability on
said loan. Any net differences between the approximate balance of the
loan shown above and the actual balance at Closing shall be adjusted
in [ ] Cash [ ] Other ____________________________ .
$ 56,000 Proceeds form New Loan: Buyer reserves the right to
apply for any of the following loans under the terms described below.
[ ] Conventional [ ] FHA [ ] VA [ ] Other _____________________ .
Seller agrees to pay $ - 0 - Toward Discount Points and Buyer's other
loan and closing costs, to be allocated at Buyer's discretion. [ ] For
a fixed rate loan: Amortized and payable over _______ years, interest
shall not exceed _____ % per annum; monthly principal and interest
payment shall not exceed $ ___________ , or [ ] For an Adjustable Rate
Mortgage (ARM): Amortized and payable over ______ years; initial
interest rate shall not exceed _____ % per annum; initial monthly
principal and interest payments shall not exceed $ _______________ .
Maximum Life Term interest shall not exceed ________ % per annum.
$ 14,000 Seller Financing: (See attached Seller Financing Addendum)
$ 0 Other:________________________________
$ 0 Balance of Purchase Price in cash at closing.
$ 70,000 TOTAL PURCHASE PRICE
2.1 Existing/New Loan Application. Buyer agrees to make
application for a loan specified above within 20 Calendar days
(Application Date) after Acceptance. Buyer will have made Loan
Application only when Buyer has: (a) completed, signed, and delivered
to the Lender the initial loan application and documentation required
by the Lender; and (b) paid all loan application fees as required by
the Lender. Buyer will continue to provide the Lender with any
additional documentation as required by the Lender. If, within seven
calendar days after receipt of written request from Seller, Buyer
fails to provide to Seller written evidence that Buyer has made Loan
Application by the Application Date, then Seller may, prior to the
Qualification Date, the Property, in its current condition and for
seller's exclusive remedy, the Earnest Money Deposit without the
requirement of any further written authorization from Buyer.
2.2 Qualification. Buyer and the Property must qualify for a loan
for which application has been made under section 2.1 within 90
calendar days (Qualification Date) after Acceptance . The Property is
deemed qualified if, on or before the Qualification Date, the
Property, in its current condition and for the Buyer's intended use,
has appraised at a value not less than the Total Purchase Price. Buyer
is deemed qualified if, on or before the Qualification Date , the
Lender verifies in writing that Buyer has been approved as of the
verification date.
2.3 Qualification Contingency. If Seller has not previously voided this
Contract as provided in Section 2.1, and either the Property or Buyer has failed
to qualify on or before the Qualification Date , either party may cancel this
Contract by providing written notice to the other party within three calendar
days after the Qualification Date, otherwise Buyer and the Property are deemed
qualified. The Brokerage, upon receipt of a copy of such written notice, shall
return to Buyer the Earnest Money Deposit without the requirement of any further
written authorization of Seller.
3. CLOSING. This transaction shall be closed on or before 30 days following
condo conversion approval . Closing shall occur when: (a) Buyer and Seller have
signed and delivered to each other (or to the escrow/title company), all
documents required by this Contract, by the Lender, by written escrow
instructions and by applicable law; (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 of the escrow Closing fee, unless otherwise agreed by the parties in
writing. Taxes and assessments for the current year, rents, and interest on
assumed obligations shall be prorated as set forth in this Section. Unearned
deposits on tenancies shall be transferred to Buyer at Closing. Prorations set
forth in this Section shall be made as of [x] date of Closing; [ ] date of
possession; [ ]other ____________________________________________.
4. POSSESSION. Unless otherwise agreed in writing by the parties, Seller
shall deliver possession to Buyer within 48 hours after Closing.
5. CONFIRMATION OF AGENCY DISCLOSURE. At the signing of this Contract the
Listing Agent Represents [x] Seller [ ] Buyer, and the Selling Agent Represents
[ ] Seller [x] Buyer. Buyer and Seller confirm that prior to signing this
Contract written disclosure of the agency relationship(s) was provided to
him/her.
( /s/ ) Buyer's initials ( /s/ ) Seller's initials.
6. TITLE TO PROPERTY AND TITLE INSURANCE. (a) Seller has, or shall have at
Closing, free title to the Property and agrees to convey such title to Buyer by
general warranty deed, free of financial encumbrances as warranted under Section
10.6; (b) Seller agrees to pay for, and furnish Buyer at Closing with, a current
standard form Owner's policy of title insurance in the amount of the Total
Purchase Price; (c) the title policy shall conform with Seller's obligations
under subsections (a)and(b).Unless otherwise agreed under Section 8.4, the
commitment shall conform with the title insurance commitment provided under
Section 7.
7 SELLER DISCLOSURES. No later than __________ calendar days after
Acceptance, the Seller will deliver to the Buyer the following Seller
Disclosures: (a) a Seller Property Condition Disclosure for the Property, signed
and dated by Seller; (b) a commitment for the policy of title insurance required
under Section 6, to be issued by the title insurance company chosen by Seller,
including copies of all documents listed as Exceptions on the Commitment; (c) a
copy of all loan documents relating to any loan now existing which will encumber
the Property after Closing; and, (d) a copy of all leases affecting the Property
not expiring prior to Closing. Seller agrees to pay any title commitment
cancellation charge under subsection (b).
8. CONTINGENCIES. In addition to Qualification under Section 2.2 this offer
is: (a)subject to Buyer's approval of the content of each of the items
referenced in Section 7 above; and (b) [ X ] is [ ] is not subject to Buyer's
approval of an inspection of the Property. The inspection shall be paid for by
Buyer under Section 11 and to make the Property available for the same.
8.1 Buyer shall have 90 Calendar days after Acceptance in which to
review the content of Seller Disclosures, and, if the inspection contingency
applies, to complete and evaluate the inspection of the Property, and to
determine, if, in Buyer's sole discretion, the content of all Seller Disclosures
(including the Property Inspection ) is acceptable.
8.2 If Buyer does not deliver a written objection to Seller regarding a
Seller Disclosure, or the Property Inspection within the time provided in
subsection 8.1 above, that document or inspection will be deemed approved or
waived by Buyer.
<PAGE>
8.3 If Buyer objects, Buyer and Seller shall have seven Calendar days
after receipt of the objections to resolve Buyer's objections. Seller my, but
shall not be required to, resolve Buyer's objections. If Buyer's objections are
not resolved within the seven calendar days, Buyer may void this Contract by
providing written notice to Seller within the same seven calendar days. The
Brokerage, upon receipt of a copy of Buyer's written notice, shall return to
Buyer the Earnest Money Deposit without the requirement of any further written
authorization from Seller. If this Contract is not voided by Buyer, Buyer's
objection is deemed to have been waived. However, this waiver does not affect
warranties under Section 11.
8.4 Resolution of Buyer's objections under Section 8.3 shall be in writing
and shall be specifically enforceable as covenants of this Contract.
9. SPECIAL CONTINGENCIES. This offer is made subject to: The terms of
attached Addendum # Are incorporated into this Contract by this reference.
10. SELLER'S LIMITED WARRANTIES. Seller's warranties to Buyer regarding the
Property are limited to the following:
10.1 When Seller delivers possession of the Property to Buyer, it will
be broom-clean and free of debris and personal belongings;
10.2 Seller will deliver possession of the Property to Buyer with the
plumbing, plumbed fixtures, heating, cooling, ventilating, electrical and
sprinkler (indoor and outdoor) systems, appliances, and fireplaces in working
order;
10.3 Seller will deliver possession of the Property to Buyer with the
roof and foundation free of leaks known to Seller;
10.4 Seller will deliver possession of the Property to Buyer with any
private well or septic tank serving the Property in working order and in
compliance with governmental regulations;
10.5 Seller will be responsible for repairing any of Seller's
moving-related damage to the Property.
10.6 At Closing, Seller will bring current all financial obligations
encumbering the Property which are assumed in writing by Buyer and will
discharge all such obligations which Buyer has not so assumed;
10.7 As of Closing, Seller has no knowledge of any claim or notice of
an environmental, building, or zoning code violation regarding the Property
which has not been resolved.
11. VERIFICATION OF WARRANTED AND INCLUDED ITEMS. After all contingencies
have been removed and before Closing, the Buyer may conduct a "walk-through"
inspection of the Property to determine whether or not items warranted by Seller
in Section 10.1, 10.2, 10.3 and 10.4 are in the warranted condition and to
verify that items included in Section 1.1 are presently on the Property. If any
item is not in the warranted condition, Seller will correct, repair or replace
it as necessary or, with the consent of Buyer and (if required) Lender, escrow
an amount at Closing to provide for such repair or replacement. The Buyer's
failure to conduct a "walk-through" inspection or to claim during the
"walk-through" inspection that the Property does not include all items
referenced on Section 1.1 or is not in the condition warranted in Section 10 ,
shall constitute a waiver of Buyer's rights under Section 1.1 and of the
warranties contained in Section 10.
12. Changes during Transaction. Seller agrees that no changes in any
existing leases shall be made, no new leases entered into, and no substantial
alterations or improvements to the Property shall be undertaken without the
written consent of the Buyer.
13. AUTHORITY OF SIGNERS. If Buyer or Seller is a corporation, partnership,
trust, estate, or other entity, the person executing this Contract on its behalf
warrants his or her authority to do so and to bind Buyer or Seller.
14. COMPLETE CONTRACT. This instrument, together with its Addenda, any
attached Exhibits, and Seller Disclosures constitute the entire Contract between
the parties and supersedes all prior negotiations, warranties, understandings or
contract between the parties. This Contract cannot be changed except by written
agreement of the parties.
15. DISPUTE RESOLUTION. The parties agree that any dispute or claim
relating to this Contract, including but not limited to the disposition of the
Earnest Money Deposit and the breach or termination of this Contract, shall
first be submitted to mediation in accordance with the Utah Real Estate
Buyer/Seller Mediation 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
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 Section 15 shall prohibit any party from seeking emergency
equitable relief pending mediation. By marking this box[ X ], and adding their
initials, the Buyer ( ), and the Seller ( ), agree that mediation under this
Section 15 is not mandatory, but is optional upon agreement of all parties.
<PAGE>
16. DEFAULT. If Buyer defaults, Seller may elect to either retain the
Earnest Money Deposit as liquidated damages or to return the Earnest Money
Deposit and sue Buyer to enforce Seller's rights. If Seller defaults, in
addition to return of the Earnest Money Deposit, Buyer nay elect to either
accept from Seller as liquidated damages a sum equal to the Earnest Money
Deposit or sue Seller for specific performance and/or damages. If Buyer elects
to accept the liquidated damages, Seller agrees to pay the liquidated damages to
Buyer upon demand. Where a Section of this Contract provides a specific remedy,
the parties intend that the remedy shall be exclusive regardless of rights which
might otherwise available under common law.
17. ATTORNEY'S FEES. In any action arising out of this Contract, the
prevailing party shall be entitled to costs and reasonable attorney's fees.
18. DISPOSITION OF EARNEST MONEY. The Earnest Money Deposit shall not be
released unless it is authorized by: (a) Section 2, Section 8.3 or Section 15;
(b) separate written agreement of the parties; or (c) court order.
19. ABROGATION. Except for express warranties made in this Contract, the
provisions of this Contract, shall not apply after Closing.
20. RISK OF LOSS. All risk of loss or damage to the Property shall be borne
by Seller until Closing.
21. TIME IS OF THE ESSENCE. Time is of the essence regarding the dates set
forth in this transaction. Extensions must be agreed to in writing by all
parties. Performance under each Section of this Contract which references a date
shall be required absolutely by 5:00 P.M., Mountain Time on the stated date.
22. FACSIMILE (FAX) DOCUMENTS. Facsimile transmission of any singed
original document, and re-transmission of any signed facsimile transmission,
shall be the same as delivery of an original. If the transaction involves
multiple buyers or Sellers, facsimile transmissions may be executed in
counterparts.
23. ACCEPTANCE. Acceptance occurs when Seller or Buyer, responding to an
offer or counteroffer of the other; (a) signs the offer or counteroffer where
noted
to indicate acceptance; and (b) communicates to the other party or the other
party's agent that the offer or counteroffer has been signed as required.
24. OFFER AND TIME FOR ACCEPTANCE. Buyer offers to purchase the Property on
the above terms and conditions. If Seller does not accept this offer by [ ] AM [
] PM Mountain Time, , , this offer shall lapse; and the holder of the Earnest
Money Deposit shall return it to the Buyer.
/s/ Richard Surber
(Buyer's Signature) (Offer Reference Date)
Richard Surber
Buyer's Name (please print)
- ------------------------------------------------ ----------------
(Notice Address) (Phone)
- -------------------------------------------------------------------------------
ACCEPTANCE/REJECTION/COUNTEROFFER
Acceptance of Offer to Purchase: Seller Accepts the foregoing offer on the
terms and conditions specified above.
/s/ BonnieJean Tippets 10-10-97
(Seller's Signature) Cyberstate, Inc (Date) (Time)
- ------------------------------------------------
Seller's Name (please print)
------------------------------------------------ ----------------
(Notice Address) (Phone)
Rejection: Seller Rejects the foregoing offer.
_________________ (Seller's initials) _______________(Date) ______________(Time)
[x] Counter Offer: Seller presents for Buyer's Acceptance the terms of
Buyer's offer subject to the exceptions or modifications as specified in the
attached Counter Offer #_____1______.
- -------------------------------------------------------------------------------
DOCUMENT RECEIPT
State Law requires Broker to furnish Buyer and Seller with copies of this
Contract bearing all signatures. (One of the following alternatives must
therefore be completed).
A. [ ] I acknowledge receipt of a final copy of the foregoing Contract
bearing all signatures:
SIGNATURE OF SELLER SIGNATURE OF BUYER
- -------------------------- ------- ----------------------------- ---------
Date Date
- -------------------------- ------- ----------------------------- ---------
Date Date
B. [ ] I personally caused a final copy of the foregoing contract bearing
all signatures to be mailed on _____________, 19______ by certified Mail and
return receipt attached hereto to the [ ] Seller [ ] Buyer, Sent by
_______________
Seller's Initials ( ) Date __________ Buyer's Initials ( ) Date _______________
<PAGE>
SELLER FINANCING ADDENDUM TO
REAL ESTATE PURCHASE CONTRACT
This is a legally binding Contract. Utah state law requires that licensed real
estate agents use this form, but the Buyer and the Seller may legally agree in
writing to alter or delete provisions of this form. If you desire legal or tax
advice, consult your attorney or tax advisor.
THIS SELLER FINANCING ADDENDUM is made a part of that REAL ESTATE PURCHASE
CONTRACT (the "REPC") with an Offer Reference Date of October 10 , 19 97 ,
between Richard Surber as Buyer, and Cyberstate, Inc. as Seller. The terms of
this ADDENDUM are hereby incorporated as part of the REPC, and to the extent
these terms conflict with or modify any provisions of the REPC, the terms of
this Addendum shall control. All other terms of REPC not modified by this
Addendum shall remain the same:. 1.CREDIT DOCUMENTS: Seller's extension of
credit to Buyer shall be evidenced by: (X) Note and Deed of Trust ( ) Note and
All-Inclusive Deed of Trust ( )Other:__________________________________________
2. CREDIT TERMS: The terms of the credit documents referred to in Section 1
above are as follows: $ 14,000 principle amount of the note (the "Note");
interest at 7 % per annum; payable at approximately $ $ N/A per N/A. The entire
unpaid balance of principle plus interest is dune in N/A months from date of the
Note. First payment due 30 days after close. Additional principal payments
balloon payments or other terms as follows:
Term of note shall be the same as buyers new loan term, Payments based on a 30
year amortization.
The credit documents referenced in Section 1 of the ADDENDUM will contain a
due-on-sale clause in favor of Seller. Buyer [ ] will [ ] will not provide
Seller at Closing with a lender's title policy insuring Seller in the amount of
the Note. Seller agrees to provide to Buyer at Settlement: (a) an amortization
schedule based on the above terms; (b) a written disclosure of the total
interest Buyer will pay to maturity of the Note.
3. TAXES AND ASSESSMENTS. In addition to the payments referenced in Section 2
above, Buyer shall also be responsible for: (i) property taxes; (ii) homeowners
association dues; (iii) special assessments; and (iv) hazard insurance premiums
on the Property. These obligations will be paid. ( ) directly to Seller/Escrow
Agent on a monthly basis (X ) directly to the applicable county treasurer;
association; and insurance company as required by those entities.
4.PAYMENT. Buyer's payments under Section 2 and 3 above will be made to: (X)
Seller ( ) an ESCROW AGENT. If an Escrow Agent N/A will act as Escrow Agent and
will be responsible for disbursing payments on any underlying mortgage or deed
of trust ( the "underlying mortgage") and to the Seller. Cost of setting up the
escrow account shall be paid by: ( ) Buyer ( ) Seller ( ) split evenly between
the parties.
5. LATE PAYMENT/PREPAYMENT. Any payment not made within 30 days after it is due
is subject to a late charge of $ 25.00 or --5--% of the installment due. Amounts
in default shall bear interest at a rate of 14 % per annum. All or part of the
principal balance on the Note may be paid prior to maturity without penalty.
6. DUE-ON-SALE. This transaction is subject to Buyer's approval of the terms of
any underlying loan as provided in Section 8 of the REPC. Buyer acknowledges
that any underlying loan on the Property may contain a due-on-sale clause which
requires the lender's consent to this transaction If the lender does not consent
to this transaction and calls the loan immediately due, Buyer agrees to
discharge the underlying loan as required by the lender. In such event, Seller's
remaining equity shall be paid as provided in the credit documents.
7. BUYER DISCLOSURES. Buyer has provided to Seller, as a required part of this
ADDENDUM, the attached Buyer Financial Information Sheet - Part B. Buyer ( )
WILL ( X ) WILL NOT provide Seller with copies of IRS returns for the two
preceding tax years. Buyer acknowledges that Seller may contact Buyer's current
employer for verification of employment as represented by Buyer in the Buyer
Financial Information Sheet.
8. SELLER APPROVAL. Within the time referenced in Section 7 of the REPC, Buyer
shall provide to Seller, at Buyer's expense, a current credit report on Buyer
from a consumer credit reporting agency. Seller may use the credit report and
the information contained in the credit report and the information referenced in
Section 7 of this Addendum (collectively referred to as the "Buyer Disclosures")
to evaluate the credit-worthiness of Buyer. Seller agrees to maintain
confidential all information contained in the Buyer disclosures.
8.1 Seller Review. Within the time period allowed in Section 8.1 of the REPC,
Seller shall review the credit report and Buyer Disclosures to determine if, in
Seller's sole discretion, the content of the credit report, and the Buyer
Disclosures, is acceptable. If the content of the credit report or the Buyer
Disclosures is not acceptable to Seller, Seller may elect to either: (i) provide
written objections to Buyer as provided in Section 8.2 of this Addendum; or (ii)
immediately void the REPC by providing written notice to Buyer within the time
referenced in Section 8.1 of the REPC. The Brokerage , upon receipt of a copy of
Seller's written notice of cancellation, shall return to Buyer the Earnest Money
Deposit without the requirement of any further written authorization from
Seller.
<PAGE>
8.2 Seller Objections. If Seller does not immediately void the REPC as
provided above, Seller may within the time period allowed in Section 8.1 of the
REPC, provide Buyer with written objections. Buyer and Seller shall have seven
calendar days after Buyer's receipt of the objections to resolve Seller's
objections. Buyer may, but shall not be required to, resolve Seller's
objections. If Seller's objections are not resolved within the seven calendar
days, Seller may void the REPC by providing written notice to Buyer within the
same seven calendar days. The Brokerage, upon receipt of a copy of Seller's
written notice of cancellation, shall return to Buyer the Earnest Money Deposit
without the requirement of any further written authorization from Seller.
8.3 Failure to Object. If Seller does not deliver a written objection to
Buyer regarding the credit report or a Buyer Disclosure within the time period
allowed in Section 8.1 of the REPC, or if Seller does not void the REPC as
provided in Sections 8.1 and 8.2 of this Addendum, any objection to the credit
report and Buyer Disclosures will be deemed approved or waived by Seller. [ X ]
Seller [ ] Buyer shall have until ________ [ ] A.M. [ ] P.M. Mountain Time
_______________ , 19 ___ to accept these terms in accordance with Section 23 of
the REPC. Unless so accepted, this offer shall lapse.
/s/ Richard Surber 10-10-97
[ X] Buyer [ ] Seller Signature Date
[ ] Buyer [ ] Seller Signature Date
ACCEPTANCE/REJECTION/COUNTEROFFER
CHECK ONE:
[ ] ACCEPTANCE: [ ] Buyer [ X ] Seller hereby accepts these terms.
/s/ BonnieJean Tippets 10-10-97
[ ] Buyer [ X ] Seller Signature Date Time
[ ] Buyer [ ] Seller Signature Date Time
[ ] REJECTION: [ ] Seller [ ] Buyer rejects these terms.
(Initials) (Date) (Time) [ ] COUNTEROFFER: [ ] Seller [ ] Buyer presents as a
counter offer the terms set forth on the attached Counter Offer # ______.
<PAGE>
ADDENDUM NO. 1
TO
REAL ESTATE PURCHASE CONTRACT
PAGE 1 OF 1
THIS IS AN [ ] ADDENDUM [ X ] COUNTEROFFER to that REAL ESTATE PURCHASE CONTRACT
(the "REPC") with and Offer Reference Date of October 10 , 19 97 , including all
prior addenda and counteroffers, between Richard Surber as Buyer, and
Cyberstate, Inc. as Seller, regarding the Property located at 2302 Wall Avenue,
Unit# 303, Ogden, Utah . The following terms are hereby incorporated as part of
the REPC:
#1 Purchase price increased to $75,000
#2 Seller carry back is $26,250 amortized over 15 years at 9%.
- --------------------------------------------------------------------------------
/s/ Richard Surber 3/19/98
[ X ] Buyer [ ] Seller Signature Date Time
3/18/98
[ ] Buyer [ X ] Seller Signature Date Time
REAL ESTATE PURCHASE CONTRACT
This is a legally binding Contract. Utah State Law requires that licensed real
estate agents use this form, but the Buyer and the Seller may legally agree in
writing to alter or delete provisions of this form. If you desire legal or tax
advice, consult your attorney or tax advisor.
EARNEST MONEY RECEIPT
The Buyer Allen Z. Wolfson offers to purchase the Property described below and
delivers to Brokerage, N/A as Earnest Money Deposit $- 0 - in the form of N/A to
be deposited within three business day after Acceptance of this Offer to
Purchase by all parties.
_________________________________ Received by: _______ ___________________
Brokerage Phone Number
OFFER TO PURCHASE
1. PROPERTY: The New Brigham Building, 2402 Wall Ave. #302
City: Ogden County: Weber , Utah
1.1 INCLUDED ITEMS: 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, awnings, installed television
antenna, satellite dishes and system, wall-to-wall carpets, automatic garage
door opener and transmitter(s), fencing, trees and shrubs. The following
personal property shall also be included in this sale and conveyed under
separate Bill of Sale with warranties as to title: N/A
1.2 EXCLUDED ITEMS: These items are excluded from this sale:
2. PURCHASE PRICE AND FINANCING. Buyer agrees to pay for the Property as
follows:
$ 0 Earnest Money Deposit
$ 0 Existing Loan : Buyer agrees to assume and pay an existing loan
in this approximate amount presently payable at $ ___________ per
month including principal, interest,(presently at ___ % per annum),
[ ] real estate taxes, [ ] property insurance premium and [ ]
mortgage insurance premium. Buyer agrees to pay any transfer and
assumption fees. Seller [ ] shall [ ] shall not be released from
liability on said loan. Any net differences between the approximate
balance of the loan shown above and the actual balance at Closing
shall be adjusted in [ ] Cash [ ] Other
____________________________ .
$ 48,000 Proceeds form New Loan: Buyer reserves the right to apply for any
of the following loans under the terms described below. [ ]
Conventional [ ] FHA [ ] VA [ ] Other _____________________ .
Seller agrees to pay $ - 0 - Toward Discount Points and Buyer's
other loan and closing costs, to be allocated at Buyer's
discretion. [ ] For a fixed rate loan: Amortized and payable over
_______ years, interest shall not exceed _____ % per annum; monthly
principal and interest payment shall not exceed $ ___________ , or
[ ] For an Adjustable Rate Mortgage (ARM): Amortized and payable
over ______ years; initial interest rate shall not exceed _____ %
per annum; initial monthly principal and interest payments shall
not exceed $ _______________ . Maximum Life Term interest shall not
exceed ________ % per annum.
$ 12,000 Seller Financing: (See attached Seller Financing Addendum)
$ 0 Other:
$ 0 Balance of Purchase Price in cash at closing.
$ 60,000 TOTAL PURCHASE PRICE
2.1 Existing/New Loan Application. Buyer agrees to make application for a loan
specified above within 20 Calendar days (Application Date) after Acceptance.
Buyer will have made Loan Application only when Buyer has: (a) completed,
signed, and delivered to the Lender the initial loan application and
documentation required by the Lender; and (b) paid all loan application fees as
required by the Lender. Buyer will continue to provide the Lender with any
additional documentation as required by the Lender. If, within seven calendar
days after receipt of written request from Seller, Buyer fails to provide to
Seller written evidence that Buyer has made Loan Application by the Application
Date, then Seller may, prior to the Qualification Date, the Property, in its
current condition and for seller's exclusive remedy, the Earnest Money Deposit
without the requirement of any further written authorization from Buyer.
2.2 Qualification. Buyer and the Property must qualify for a loan for which
application has been made under section 2.1 within 90 calendar days
(Qualification Date) after Acceptance . The Property is deemed qualified if, on
or before the Qualification Date, the Property, in its current condition and for
the Buyer's intended use, has appraised at a value not less than the Total
Purchase Price. Buyer is deemed qualified if, on or before the Qualification
Date , the Lender verifies in writing that Buyer has been approved as of the
verification date.
2.3 Qualification Contingency. If Seller has not previously voided this Contract
as provided in Section 2.1, and either the Property or Buyer has failed to
qualify on or before the Qualification Date , either party may cancel this
Contract by providing written notice to the other party within three calendar
days after the Qualification Date, otherwise Buyer and the Property are deemed
qualified. The Brokerage, upon receipt of a copy of such written notice, shall
return to Buyer the Earnest Money Deposit without the requirement of any further
written authorization of Seller.
3. CLOSING. This transaction shall be closed on or before 30 days following
condo conversion approval . Closing shall occur when: (a) Buyer and Seller have
signed and delivered to each other (or to the escrow/title company),all
documents required by this Contract, by the Lender, by written escrow
instructions and by applicable law; (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 of the escrow Closing fee, unless otherwise agreed by the parties in
writing. Taxes and assessments for the current year, rents, and interest on
assumed obligations shall be prorated as set forth in this Section. Unearned
deposits on tenancies shall be transferred to Buyer at Closing. Prorations set
forth in this Section shall be made as of [x] date of Closing; [ ] date of
possession; [ ]other ____________________________________________.
4. POSSESSION. Unless otherwise agreed in writing by the parties, Seller shall
deliver possession to Buyer within 48 hours after Closing.
5. CONFIRMATION OF AGENCY DISCLOSURE. At the signing of this Contract the
Listing Agent Represents [x] Seller [ ] Buyer, and the Selling Agent Represents
[ ] Seller [x] Buyer. Buyer and Seller confirm that prior to signing this
Contract written disclosure of the agency relationship(s) was provided to
him/her.
6. TITLE TO PROPERTY AND TITLE INSURANCE. (a) Seller has, or shall have at
Closing, free title to the Property and agrees to convey such title to Buyer by
general warranty deed, free of financial encumbrances as warranted under Section
10.6; (b) Seller agrees to pay for, and furnish Buyer at Closing with, a current
standard form Owner's policy of title insurance in the amount of the Total
Purchase Price; (c) the title policy shall conform with Seller's obligations
under subsections (a)and(b).Unless otherwise agreed under Section 8.4, the
commitment shall conform with the title insurance commitment provided under
Section 7.
7 SELLER DISCLOSURES. No later than __________ calendar days after Acceptance,
the Seller will deliver to the Buyer the following Seller Disclosures: (a) a
Seller Property Condition Disclosure for the Property, signed and dated by
Seller; (b) a commitment for the policy of title insurance required under
Section 6, to be issued by the title insurance company chosen by Seller,
including copies of all documents listed as Exceptions on the Commitment; (c) a
copy of all loan documents relating to any loan now existing which will encumber
the Property after Closing; and, (d) a copy of all leases affecting the Property
not expiring prior to Closing. Seller agrees to pay any title commitment
cancellation charge under subsection (b).
8. CONTINGENCIES. In addition to Qualification under Section 2.2 this offer is:
(a)subject to Buyer's approval of the content of each of the items referenced in
Section 7 above; and (b) [ X ] is [ ] is not subject to Buyer's approval of an
inspection of the Property. The inspection shall be paid for by Buyer under
Section 11 and to make the Property available for the same.
8.1 Buyer shall have 90 Calendar days after Acceptance in which to
review the content of Seller Disclosures, and, if the inspection contingency
applies, to complete and evaluate the inspection of the Property, and to
determine, if, in Buyer's sole discretion, the content of all Seller Disclosures
(including the Property Inspection ) is acceptable.
8.2 If Buyer does not deliver a written objection to Seller regarding a
Seller Disclosure, or the Property Inspection within the time provided in
subsection 8.1 above, that document or inspection will be deemed approved or
waived by Buyer.
8.3 If Buyer objects, Buyer and Seller shall have seven Calendar days
after receipt of the objections to resolve Buyer's objections. Seller my, but
shall not be required to, resolve Buyer's objections. If Buyer's objections are
not resolved within the seven calendar days, Buyer may void this Contract by
providing written notice to Seller within the same seven calendar days. The
Brokerage, upon receipt of a copy of Buyer's written notice, shall return to
Buyer the Earnest Money Deposit without the requirement of any further written
authorization from Seller. If this Contract is not voided by Buyer, Buyer's
objection is deemed to have been waived. However, this waiver does not affect
warranties under Section 11.
8.4 Resolution of Buyer's objections under Section 8.3 shall be in writing and
shall be specifically enforceable as covenants of this Contract.
<PAGE>
9. SPECIAL CONTINGENCIES. This offer is made subject to: The terms of attached
Addendum # Are incorporated into this Contract by this reference.
10. SELLER'S LIMITED WARRANTIES. Seller's warranties to Buyer regarding the
Property are limited to the following:
10.1 When Seller delivers possession of the Property to Buyer, it will
be broom-clean and free of debris and personal belongings;
10.2 Seller will deliver possession of the Property to Buyer with the
plumbing, plumbed fixtures, heating, cooling, ventilating, electrical and
sprinkler (indoor and outdoor) systems, appliances, and fireplaces in working
order;
10.3 Seller will deliver possession of the Property to Buyer with the
roof and foundation free of leaks known to Seller;
10.4 Seller will deliver possession of the Property to Buyer with any
private well or septic tank serving the Property in working order and in
compliance with governmental regulations;
10.5 Seller will be responsible for repairing any of Seller's
moving-related damage to the Property.
10.6 At Closing, Seller will bring current all financial obligations
encumbering the Property which are assumed in writing by Buyer and will
discharge all such obligations which Buyer has not so assumed;
10.7 As of Closing, Seller has no knowledge of any claim or notice of
an environmental, building, or zoning code violation regarding the Property
which has not been resolved.
11. VERIFICATION OF WARRANTED AND INCLUDED ITEMS. After all contingencies have
been removed and before Closing, the Buyer may conduct a "walk-through"
inspection of the Property to determine whether or not items warranted by Seller
in Section 10.1, 10.2, 10.3 and 10.4 are in the warranted condition and to
verify that items included in Section 1.1 are presently on the Property. If any
item is not in the warranted condition, Seller will correct, repair or replace
it as necessary or, with the consent of Buyer and (if required) Lender, escrow
an amount at Closing to provide for such repair or replacement. The Buyer's
failure to conduct a "walk-through" inspection or to claim during the
"walk-through" inspection that the Property does not include all items
referenced on Section 1.1 or is not in the condition warranted in Section 10 ,
shall constitute a waiver of Buyer's rights under Section 1.1 and of the
warranties contained in Section 10.
12. Changes during Transaction. Seller agrees that no changes in any existing
leases shall be made, no new leases entered into, and no substantial alterations
or improvements to the Property shall be undertaken without the written consent
of the Buyer.
13. AUTHORITY OF SIGNERS. If Buyer or Seller is a corporation, partnership,
trust, estate, or other entity, the person executing this Contract on its behalf
warrants his or her authority to do so and to bind Buyer or Seller.
14. COMPLETE CONTRACT. This instrument,together with its Addenda, any attached
Exhibits, and Seller Disclosures constitute the entire Contract between the
parties and supersedes all prior negotiations, warranties, understandings or
contract between the parties. This Contract cannot be changed except by written
agreement of the parties.
15. DISPUTE RESOLUTION. The parties agree that any dispute or claim relating to
this Contract, including but not limited to the disposition of the Earnest Money
Deposit and the breach or termination of this Contract, shall first be submitted
to mediation in accordance with the Utah Real Estate Buyer/Seller Mediation
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 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 Section
15 shall prohibit any party from seeking emergency equitable relief pending
mediation. By marking this box[ X ], and adding their initials, the Buyer ( ),
and the Seller ( ), agree that mediation under this Section 15 is not mandatory,
but is optional upon agreement of all parties.
16. DEFAULT. If Buyer defaults, Seller may elect to either retain the Earnest
Money Deposit as liquidated damages or to return the Earnest Money Deposit and
sue Buyer to enforce Seller's rights. If Seller defaults, in addition to return
of the Earnest Money Deposit, Buyer nay elect to either accept from Seller as
liquidated damages a sum equal to the Earnest Money Deposit or sue Seller for
specific performance and/or damages. If Buyer elects to accept the liquidated
damages, Seller agrees to pay the liquidated damages to Buyer upon demand. Where
a Section of this Contract provides a specific remedy, the parties intend that
the remedy shall be exclusive regardless of rights which might otherwise
available under common law.
<PAGE>
17. ATTORNEY'S FEES. In any action arising out of this Contract, the prevailing
party shall be entitled to costs and reasonable attorney's fees.
18. DISPOSITION OF EARNEST MONEY. The Earnest Money Deposit shall not be
released unless it is authorized by: (a) Section 2, Section 8.3 or Section 15;
(b) separate written agreement of the parties; or (c) court order.
19. ABROGATION. Except for express warranties made in this Contract, the
provisions of this Contract, shall not apply after Closing.
20. RISK OF LOSS. All risk of loss or damage to the Property shall be borne by
Seller until Closing.
21. TIME IS OF THE ESSENCE. Time is of the essence regarding the dates set forth
in this transaction. Extensions must be agreed to in writing by all parties.
Performance under each Section of this Contract which references a date shall be
required absolutely by 5:00 P.M., Mountain Time on the stated date.
22. FACSIMILE (FAX) DOCUMENTS. Facsimile transmission of any singed original
document, and re-transmission of any signed facsimile transmission, shall be the
same as delivery of an original. If the transaction involves multiple buyers or
Sellers, facsimile transmissions may be executed in counterparts.
23. ACCEPTANCE. Acceptance occurs when Seller or Buyer, responding to an offer
or counteroffer of the other; (a) signs the offer or counteroffer where noted
to indicate acceptance; and (b) communicates to the other party or the other
party's agent that the offer or counteroffer has been signed as required.
24. OFFER AND TIME FOR ACCEPTANCE. Buyer offers to purchase the Property on the
above terms and conditions. If Seller does not accept this offer by [ ] AM [ ]
PM Mountain Time, , , this offer shall lapse; and the holder of the Earnest
Money Deposit shall return it to the Buyer.
/s/ Allen Wolfson 10-10-97
(Buyer's Signature) (Offer Date)
- ---------------------------------------- ----------------
(Notice Address) (Phone)
- --------------------------------------------------------------------------------
ACCEPTANCE/REJECTION/COUNTEROFFER
Acceptance of Offer to Purchase: Seller Accepts the foregoing offer on the terms
and conditions specified above:
__/s/ BonnieJean Tippets 10-10-97
(Seller's Signature) Cyberstate, Inc (Date) (Time)
- ------------------------------------------------ ----------------
(Notice Address) (Phone)
Rejection: Seller Rejects the foregoing offer.
________________ (Seller's initials) ____________ (Date) _________________(Time)
[ ] Counter Offer: Seller presents for Buyer's Acceptance the terms of Buyer's
offer subject to the exceptions or modifications as specified in the attached
Counter Offer #_____1______.
- -------------------------------------------------------------------------------
DOCUMENT RECEIPT
State Law requires Broker to furnish Buyer and Seller with copies of this
Contract bearing all signatures. (One of the following alternatives must
therefore be completed).
A. [ ] I acknowledge receipt of a final copy of the foregoing Contract bearing
all signatures:
SIGNATURE OF SELLER SIGNATURE OF BUYER
- ----------------------------- ------- ------------------------- ---------
Date Date
- ----------------------------- ------- ------------------------- ---------
Date Date
B. [ ] I personally caused a final copy of the foregoing contract bearing all
signatures to be mailed on _____________, 19______ by certified Mail and return
receipt attached hereto to the [ ] Seller [ ] Buyer, Sent by _______________
Seller's Initials ( ) Date __________ Buyer's Initials ( ) Date _____________
<PAGE>
SELLER FINANCING ADDENDUM TO
REAL ESTATE PURCHASE CONTRACT
This is a legally binding Contract. Utah state law requires that licensed real
estate agents use this form, but the Buyer and the Seller may legally agree in
writing to alter or delete provisions of this form. If you desire legal or tax
advice, consult your attorney or tax advisor.
THIS SELLER FINANCING ADDENDUM is made a part of that REAL ESTATE PURCHASE
CONTRACT (the "REPC") with an Offer Reference Date of October 10 , 1997 ,
between Allen Z. Wolfson as Buyer, and Cyberstate, Inc. as Seller. The terms of
this ADDENDUM are hereby incorporated as part of the REPC, and to the extent
these terms conflict with or modify any provisions of the REPC, the terms of
this Addendum shall control. All other terms of REPC not modified by this
Addendum shall remain the same:
1.CREDIT DOCUMENTS: Seller's extension of credit to Buyer shall be evidenced by:
(X) Note and Deed of Trust ( ) Note and All-Inclusive Deed of Trust ( )
Other:__________________________________________________
2. CREDIT TERMS: The terms of the credit documents referred to in Section 1
above are as follows: $ 12,000 principle amount of the note (the "Note");
interest at 7 % per annum; payable at approximately $ $ N/A per N/A. The entire
unpaid balance of principle plus interest is dune in N/A months from date of the
Note. First payment due 30 days after close. Additional principal payments
balloon payments or other terms as follows:
Term of note shall be the same as buyers new loan term,
Payments based on a 30 year amortization.
The credit documents referenced in Section 1 of the ADDENDUM will contain a
due-on-sale clause in favor of Seller. Buyer [ ] will [ ] will not provide
Seller at Closing with a lender's title policy insuring Seller in the amount of
the Note. Seller agrees to provide to Buyer at Settlement: (a) an amortization
schedule based on the above terms; (b) a written disclosure of the total
interest Buyer will pay to maturity of the Note.
3. TAXES AND ASSESSMENTS. In addition to the payments referenced in Section 2
above, Buyer shall also be responsible for: (i) property taxes; (ii) homeowners
association dues; (iii) special assessments; and (iv) hazard insurance premiums
on the Property. These obligations will be paid. ( ) directly to Seller/Escrow
Agent on a monthly basis (X ) directly to the applicable county treasurer;
association; and insurance company as required by those entities.
4.PAYMENT. Buyer's payments under Section 2 and 3 above will be made to: (X)
Seller ( ) an ESCROW AGENT. If an Escrow Agent N/A will act as Escrow Agent and
will be responsible for disbursing payments on any underlying mortgage or deed
of trust ( the "underlying mortgage") and to the Seller. Cost of setting up the
escrow account shall be paid by: ( ) Buyer ( ) Seller ( ) split evenly between
the parties.
5. LATE PAYMENT/PREPAYMENT. Any payment not made within 30 days after it is due
is subject to a late charge of $ 25.00 or --5--% of the installment due. Amounts
in default shall bear interest at a rate of 14 % per annum. All or part of the
principal balance on the Note may be paid prior to maturity without penalty.
6. DUE-ON-SALE. This transaction is subject to Buyer's approval of the terms of
any underlying loan as provided in Section 8 of the REPC. Buyer acknowledges
that any underlying loan on the Property may contain a due-on-sale clause which
requires the lender's consent to this transaction If the lender does not consent
to this transaction and calls the loan immediately due, Buyer agrees to
discharge the underlying loan as required by the lender. In such event, Seller's
remaining equity shall be paid as provided in the credit documents.
7. BUYER DISCLOSURES. Buyer has provided to Seller, as a required part of this
ADDENDUM, the attached Buyer Financial Information Sheet Part B. Buyer ( ) WILL
( X ) WILL NOT provide Seller with copies of IRS returns for the two preceding
tax years. Buyer acknowledges that Seller may contact Buyer's current employer
for verification of employment as represented by Buyer in the Buyer Financial
Information Sheet.
8. SELLER APPROVAL. Within the time referenced in Section 7 of the REPC, Buyer
shall provide to Seller, at Buyer's expense, a current credit report on Buyer
from a consumer credit reporting agency. Seller may use the credit report and
the information contained in the credit report and the information referenced in
Section 7 of this Addendum (collectively referred to as the "Buyer Disclosures")
to evaluate the credit-worthiness of Buyer.
Seller agrees to maintain confidential all information contained in the Buyer
disclosures.
8.1 Seller Review. Within the time period allowed in Section 8.1 of the REPC,
Seller shall review the credit report and Buyer Disclosures to determine if, in
Seller's sole discretion, the content of the credit report, and the Buyer
Disclosures, is acceptable. If the content of the credit report or the Buyer
Disclosures is not acceptable to Seller, Seller may elect to either: (i) provide
written objections to Buyer as provided in Section 8.2 of this Addendum; or (ii)
immediately void the REPC by providing written notice to Buyer within the time
referenced in Section 8.1 of the REPC. The Brokerage , upon receipt of a copy of
Seller's written notice of cancellation, shall return to Buyer the Earnest Money
Deposit without the requirement of any further written authorization from
Seller.
8.2 Seller Objections. If Seller does not immediately void the REPC as
provided above, Seller may within the time period allowed in Section 8.1 of the
REPC, provide Buyer with written objections. Buyer and Seller shall have seven
calendar days after Buyer's receipt of the objections to resolve Seller's
objections. Buyer may, but shall not be required to, resolve Seller's
objections. If Seller's objections are not resolved within the seven calendar
days, Seller may void the REPC by providing written notice to Buyer within the
same seven calendar days. The Brokerage, upon receipt of a copy of Seller's
written notice of cancellation, shall return to Buyer the Earnest Money Deposit
without the requirement of any further written authorization from Seller.
8.3 Failure to Object. If Seller does not deliver a written objection to
Buyer regarding the credit report or a Buyer Disclosure within the time period
allowed in Section 8.1 of the REPC, or if Seller does not void the REPC as
provided in Sections 8.1 and 8.2 of this Addendum, any objection to the credit
report and Buyer Disclosures will be deemed approved or waived by Seller. [ X ]
Seller [ ] Buyer shall have until ________ [ ] A.M. [ ] P.M. Mountain Time
_______________ , 19 ___ to accept these terms in accordance with Section 23 of
the REPC. Unless so accepted, this offer shall lapse.
/s/ Allen Wolfson 10-10-97
[ X] Buyer [ ] Seller Signature Date
[ ] Buyer [ ] Seller Signature Date
ACCEPTANCE/REJECTION/COUNTEROFFER
CHECK ONE:
[X ] ACCEPTANCE: [ ] Buyer [ X ] Seller hereby accepts these terms.
/s/ BonnieJean Tippets 10-10-97
[ ] Buyer [ X ] Seller Signature Date Time
[ ] Buyer [ ] Seller Signature Date Time
[ ] REJECTION: [ ] Seller [ ] Buyer rejects these terms.
(Initials) (Date) (Time)
[ ] COUNTEROFFER: [ ] Seller [ ] Buyer presents as a counter offer the terms set
forth on the attached Counter Offer # ______.
<PAGE>
ADDENDUM NO. 1
TO
REAL ESTATE PURCHASE CONTRACT
PAGE 1 OF 1
THIS IS AN [ ] ADDENDUM [ X ] COUNTEROFFER to that REAL ESTATE PURCHASE CONTRACT
(the "REPC") with and Offer Reference Date of October 10 , 1997 , including all
prior addenda and counteroffers, between Allen Wolfson as Buyer, and Cyberstate,
Inc. as Seller, regarding the Property located at 2302 Wall Avenue, Unit# 302,
Ogden, Utah . The following terms are hereby incorporated as part of the REPC:
#1 Purchase price increased to $65,000
#2 Seller carry back is $22,250 amortized over 15 years at 9%.
- --------------------------------------------------------------------------------
/s/ Allen Wolfson 3/18/98
[ X ] Buyer [ ] Seller Signature Date Time
/s/ BonnieJean C. Tippets 3/18/98
[ ] Buyer [ X ] Seller Signature Date Time
<PAGE>
Addendum #1 A to Real-estate Purchase Contract dated 10-10-97 between
Cyberstate, Inc. (Seller) and Allen Wolfson (Buyer)
This refers to financing only.
The sales price will remain. The Carry back will 15% of the sale price or
$9,000.00. Balance of Purchase price in Cash at Closing will be $6,000.
/s/ BonnieJean C. Tippets 11-20-97 /s/ Allen Wolfson 11/20/97
Seller Date Buyer Date
CyberAmerica Corporation
Promissory Note
Principle Amount: $47,294.55 Date: March 31, 1998
CyberAmerica Corporation, a corporation duly organized and validly
existing under the laws of the State of Nevada (herein called the "Company"),
for value received hereby promises to pay to Richard D. Surber ("Holder"), or
order, the principle sum of forty seven thousand two hundred ninety four dollars
and fifty five cents ($47,294.55).
1. Payments. The Company acknowledges that between January 1996 and
December 1997 it received periodic cash advances with an outstanding balance of
$47,294.55 from Holder. The Company hereby promises to repay this balance in
full, including the interest outlined in Paragraph 2. The entire unpaid
principal balance and accrued interest thereon, if any, shall become immediately
due and payable on demand but no later than March 31, 2003.
2. Interest. The obligation shall bear simple interest which shall be
at the rate of 22% per annum commencing on March 31, 1998, payable in full on
the date of maturity.
3. Type and Place of Payments. Payments of principal and interest shall
be made in lawful money of the United States of America to the above-named
Holder at the principle office CyberAmerica Corporation, 268 West 400 South,
Suite 300, Salt Lake City, Utah 84101, or at such other place as the holder
hereof may from time to time designate in writing.
4. Prepayment. Advance payment or payments may be made on the
principal, without penalty or forfeiture. There shall be no premium or penalty
for any prepayment.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.
Dated: March 31, 1998 CyberAmerica Corporation
By: /s/ Wayne Newton
_____________________________
Wayne Newton
Authorized Representative
STATE OF ____UTAH_______ )
): ss
COUNTY OF __SALT LAKE__ )
Before me, a Notary Public of said State, on the 31st day of March, 1998,
personally appeared, Wayne Newton, to me known to be the person who signed the
foregoing Promissory Note the Authorized Representative of CyberAmerica
Corporation, a Nevada Corporation, who being duly sworn, acknowledged that they
signed the same individually by voluntary act and deed, for the uses and
purposes therein expressed, and that the facts stated therein are true.
WITNESSETH MY HAND AND OFFICIAL SEAL
/s/ Steven A. Mallery
---------------------------
Notary Public
CyberAmerica Corporation
8% Convertible Demand Note
Principle Amount: $134,843.75
Date: March 31, 1998
CyberAmerica Corporation, a corporation duly organized and validly
existing under the laws of the State of Nevada (herein called the "Company"),
for value received hereby promises to pay to A-Z Professional Consultants, Inc.,
a corporation duly organized and validly existing under the laws of the State of
Utah ("Holder"), or order, the principle sum of one hundred thirty four thousand
eight hundred forty three dollars and seventy five cents ($134,843.75).
1. Payments. The Company acknowledges that during the fiscal year of
1997 A-Z Professional Consultants, Inc. performed consulting services for the
Company which resulted in $134,843.75 in earned fees. The Company hereby
promises to pay for these services in full, including the interest outlined in
Paragraph 2. The entire unpaid principal and accrued interest thereon, if any,
shall become immediately due and payable on demand but no later than March 31,
2003.
2. Interest. The obligation shall bear simple interest which shall be
at the rate of 8% per annum commencing on March 31, 1998, payable in full on the
date of maturity.
3. Type and Place of Payments. Payments of principal and interest shall
be made in lawful money of the United States of America to the above-named
Holder at the principle office CyberAmerica Corporation, 268 West 400 South,
Suite 300, Salt Lake City, Utah 84101, or at such other place as the holder
hereof may from time to time designate in writing.
4. Stock Conversion. The Company has the right, at its option, at any
time after the original issuance of the Note and prior to the close of business
on March 31, 2003, to convert the principal hereof or any portion of such
principal into the number of shares of Company's Common Stock, as said shares
shall be constituted at the date of conversion, obtained by dividing the
principle amount of this Note or portion thereof to be converted by the
Conversion Price of $ 0.125. No adjustment in respect of interest or dividends
will be made upon any conversion. No fractional shares will be issued upon any
conversion, but an adjustment in cash will be made in respect of any fraction of
a share which would otherwise by issuable upon the surrender of the Note for
conversion.
This right is exclusive to the Company.
5. Prepayment. Advance payment or payments may be made on the
principal, without penalty or forfeiture. There shall be no premium or penalty
for any prepayment. This Note may be prepaid in whole or in part at any time
without premium or penalty.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed under
its corporate seal.
Dated: March 31, 1998 CyberAmerica Corporation
By: /s/ Richard Surber
Richard D. Surber, President
STATE OF UTAH )
) : ss
COUNTY OF SALT LAKE )
Before me, a Notary Public of said State, on the 31st day of March, 1998,
personally appeared, to me known to be the person who signed the foregoing
Promissory Note the President of CyberAmerica Corporation, a Nevada Corporation,
who being duly sworn, acknowledged that they signed the same individually by
voluntary act and deed, for the uses and purposes therein expressed, and that
the facts stated therein are true.
WITNESSETH MY HAND AND OFFICIAL SEAL
/s/ Steven A. Mallery
---------------------------
Notary Public
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S DECEMBER 31,
1995 ANNUAL REPORT ON FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 5,906
<SECURITIES> 146,063
<RECEIVABLES> 1,876,786
<ALLOWANCES> 89,697
<INVENTORY> 0
<CURRENT-ASSETS> 2,045,977
<PP&E> 8,900,003
<DEPRECIATION> 1,192,160
<TOTAL-ASSETS> 10,477,761
<CURRENT-LIABILITIES> 3,493,471
<BONDS> 0
<COMMON> 2,176
0
0
<OTHER-SE> 2,197,777
<TOTAL-LIABILITY-AND-EQUITY> 10,477,761
<SALES> 0
<TOTAL-REVENUES> 2,969,519
<CGS> 0
<TOTAL-COSTS> 1,534,617
<OTHER-EXPENSES> 2,683,299
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 459,356
<INCOME-PRETAX> (2,246,096)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,246,096)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,246,096
<EPS-PRIMARY> (1.77)
<EPS-DILUTED> (1.77)
</TABLE>
