SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended June 30, 1998.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
Commission file number: I-9418
CYBERAMERICA CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada 87-0509512
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
268 West 400 South, Salt Lake City, Utah 84101
(Address of principal executive office) (Zip Code)
(801) 575-8073
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes XX No
The number of outstanding shares of the issuer's common stock, $0.001
par value (the only class of voting stock), as of August 18, 1998 was 2,832,064.
1
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TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS..................................4
PART II
ITEM 1. LEGAL PROCEEDINGS.....................................................8
ITEM 5. OTHER INFORMATION.....................................................8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................8
SIGNATURES.....................................................................9
INDEX TO EXHIBITS.............................................................10
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
2
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ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to CyberAmerica Corporation,
a Nevada corporation, and its subsidiaries and predecessors unless otherwise
indicated. Consolidated, unaudited, condensed interim financial statements
including a balance sheet for the Company as of the quarter ended June 30, 1998
and statements of operations, statements of shareholders equity and statements
of cash flows for the interim period up to the date of such balance sheet and
the comparable period of the preceding year are attached hereto as Pages F-1
through F-7 and are incorporated herein by this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
3
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ITEM 7. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
PAGE
Consolidated Unaudited Condensed Balance Sheet June 30, 1998 F-2
Consolidated Unaudited Condensed Statements of Operations
June 30, 1998 and 1997 F-4
Consolidated Unaudited Condensed Statements of Cash Flows
June 30, 1998 and 1997 F-5
Notes to Consolidated Unaudited Condensed Financial
Statements June 30, 1998 F-6
F-1
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS
June 30, 1998
ASSETS
CURRENT ASSETS
Cash $ 32,739
Accounts receivable - trade 202,740
(Net of allowance for bad debt of $89,097)
Accounts receivable - related parties 375,862
Accounts receivable - other 88,277
-----
Note receivable - current 101,645
Prepaid expenses -
Securities available for sale 327,850
--------
TOTAL CURRENT ASSETS 1,129,113
---------
PROPERTY AND EQUIPMENT - NET 9,753,054
OTHER ASSETS
Investment securities at cost 1,135,516
Notes receivable - net of current 15,800
Investments - other 241,966
Trade credits 179,190
--------
TOTAL OTHER ASSETS 1,572,472
TOTAL ASSETS $ 12,454,639
================
See notes to consolidated unaudited condensed financial
statements.
F-2
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS (Continued)
June 30, 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 425,679
Accounts payable - related parties 133,571
Accrued liabilities
Interest 37,251
Real estate taxes and assessments 376,944
Payroll and related taxes payable 240,425
EPA liabilities 325,398
Refundable deposits 22,508
Refund to investors 63,876
Other
Debenture payable 260,000
Current maturities of long-term debt 652,558
TOTAL CURRENT LIABILITIES 2,538,210
LONG-TERM LIABILITIES
Long-term debt, less current portion 5,975,429
MINORITY INTEREST 1,445,213
SHAREHOLDERS' EQUITY
Preferred stock par value $.001; 20,000,000
shares authorized; No shares issued -
Common stock par value $.001; 200,000,000
shares authorized; 2,832,064 shares issued 2,832
Additional paid-in capital 15,058,172
Accumulated deficit (12,118,717)
Unrealized loss from securities available for sale (446,500)
---------------
TOTAL SHAREHOLDERS' EQUITY 2,495,787
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,454,639
See notes to consolidated unaudited condensed financial statements.
F-3
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------- ----------- -------- ----------
<S> <C> <C> <C> <C>
REVENUE
Sale of property ................................. $ 455,731 $ 1,335,000 $ 455,731 $ 1,335,000
Consulting revenue ............................... 336,941 41,142 378,665 125,744
Rental revenue ................................... 241,100 118,890 357,640 261,870
Other revenue .................................... -- 3,401 -- 3,401
---------- ---------- ---------- ----------
TOTAL REVENUE ....................................... 1,033,772 1,498,433 1,192,036 1,726,045
COSTS OF REVENUE
Cost of sale of property ......................... 24,837 666,570 24,837 666,570
Costs associated with consulting revenue ......... 60,911 61,356 89,675 105,621
Costs associated with rental revenue ............. 151,058 87,395 186,799 179,381
Interest expenses associated with rental revenue . 83,786 47,803 148,572 93,719
Cost associated with other revenue ............... -- -- -- --
----------- ----------- ----------- -------
TOTAL COSTS OF REVENUE .............................. 320,592 863,124 449,883 1,045,291
----------- ----------- ----------- ---------
GROSS PROFIT ........................................ 713,180 635,309 742,153 680,754
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ............................ 223,329 416,628 606,500 860,995
Computer development costs ....................... -- -- -- 121,720
----------- ----------- ----------- --------
TOTAL SELLING, GENERAL
AND ADMINISTRATIVE ................................ 223,329 416,628 606,500 982,715
OPERATING INCOME (LOSS) ............................. 489,851 218,681 135,653 (301,961)
----------- -------- ------- ----------
OTHER INCOME (EXPENSE):
Interest income .................................. 76,256 19,994 65,325 19,994
Interest expense ................................. (57,599) (96,860) (104,169) (174,864)
Gain (loss) from sale of assets .................. -- (11,540) -- (11,540)
Gain (loss) from investment securities ........... 352,695 (275,950) 352,695 (335,259
Gain from recoveries of bad debts ................ -- 151,200 -- 151,200
Gain from disposal of subsidiary ................. -- 90,681 -- 90,681
Loss on foreclosure .............................. (274,220) (274,220)
Other income ..................................... 4,892 3,477 778 (14,483)
----------- ----------- --------- --------
TOTAL OTHER INCOME (EXPENSES) ....................... 52,024 (118,998) 40,409 (274,271)
----------- ----------- ------- ---------
INCOME (LOSS) BEFORE INCOME TAXES,
AND MINORITY INTEREST .............................. 541,875 99,683 176,062 (576,232)
MINORITY INTEREST IN LOSS (GAIN) .................... 21,899 (71,040) 52,953 (46,108)
----------- ----------- ------- --------
NET INCOME (LOSS) ................................... $ 563,774 $ 28,643 $ 229,015 $(622,340)
=========== =========== ========= =========
INCOME (LOSS) PER COMMON SHARE
Income before minority interest .................. $ 0.22 $ 0.10 $ 0.08 $ (0.57)
Minority interest in loss ........................ 0.01 (0.07) 0.02 (0.05)
----------- ------------ ------- ---------
Net income (loss) per weighted average
common share outstanding ....................... $ 0.23 $ 0.03 $ 0.10 (0.62)
=========== ============ ======== =========
Weighted average number of common
shares outstanding ............................. 2,404,064 1,038,900 2,292,314 1,005,406
=========== =========== ========== =========
</TABLE>
See notes to consolidated unaudited condensed financial statements.
F-4
<PAGE>
CYBERAMERICA CORPORATION SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
Unaudited
1998 1997
<TABLE>
<CAPTION>
<S> <C> <C>
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) .............................. $ 229,015 $ (622,340)
Adjustments to reconcile net income (loss)
to net cash provided:
(Gain) loss from sale of investments ........ 352,695 335,259
(Gain) from sale of assets .................. -- 11,540
(Gain) from sale of subsidiary .............. -- (90,681)
Loss of foreclosure ......................... 274,220 --
Minority interest in (gain) loss ............ 52,953 (46,108)
Depreciation and Amortization ............... 107,462 114,181
Services paid with common stock ............. 29,764 94,205
Common stock issued for assets and debt ..... 39,231 31,580
Bad debt recoveries ......................... -- (151,200)
Decrease (increase) in assets:
Receivables ............................... 69,672 (505,076)
Receivables - related party ............... 24,257 (174,064)
Other current assets ...................... (142,587) 329,633
Increase (decrease) in liabilities:
Accounts and notes payable ................. 20,648 82,658
Payables - related parties ................. (9,002) 12,821
Accrued liabilities ........................ -- 143,914
Current portion of long-term debt .......... (661,475) 23,248
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 386,853 $ (410,430)
CASH FLOWS FROM INVESTING ACTIVITIES
Minority interest in subsidiary ............. 784,000 --
Purchase of assets .......................... (3,088,834)
-----------
(586,146)
NET CASH FLOWS (USED) IN INVESTING ACTIVITIES ... $(2,304,834) $ (586,146)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock for cash ............... 41,732 --
Increase in long term debt .................. 1,921,000 --
Proceeds from borrowing receivable .......... -- 982,691
Payment on debt ............................. (17,918) (50,006)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ........ $ 1,944,814 $ 932,685
INCREASE (DECREASE) IN CASH ..................... 26,833 (63,891)
CASH AT BEGINNING OF PERIOD ...................... 5,906 73,368
----------- -----------
CASH AT END OF PERIOD ............................ $ 32,739 $ 14,477
=========== ===========
</TABLE>
F-5
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 1998
1. Basis of Presentation
The accompanying consolidated unaudited condensed financial statements
have been prepared by management in accordance with the instructions in Form
10-QSB and, therefore, do not include all information and footnotes required by
generally accepted accounting principles and should, therefore, be read in
conjunction with the Company's Annual Report to Shareholders on Form 10-KSB for
the fiscal year ended December 31, 1997. These statements do include all normal
recurring adjustments which the Company believes necessary for a fair
presentation of the statements. The interim operations results are not
necessarily indicative of the results for the full year ended December 31, 1998.
2. Sale of Land
On May 1, 1998 the Company's wholly owned subsidiary, Oasis Hotel & Casino,
Inc., sold a 20 acre parcel of land located in northern Nevada to Oasis Hotel,
Resort & Casino-III, Inc. a wholly owned subsidiary of Flexweight, Inc. The
Company received 1,025,000 shares of common stock of Flexweight, Inc., a Trust
Deed note in the amount of $3,425,000 The trust deed note bears interest at 9%
per annum with monthly payments of $27,558 until April, 2008 when the balance is
due. The purchaser also assumed a note due of $550,000. Revenue from this
transaction is reported using the installment method.
3. Purchase of Subsidiary
On April 30, 1998, the Company, through its majority owned subsidiary, TAC
Inc., purchased a controlling interest in Golden Opportunity Development, Inc.
("Golden"), in a business combination accounted for as a purchase. Golden owns
and operates a motel and rents other real property located in Baton Rouge,
Louisiana. The results of operations of Golden is included in the accompanying
financial statements since the date of acquisition. The total cost of the
acquisition was $800,000 and was equal to the fair market value of the interest
by the Company at the date of purchase. Golden has assets of approximately
$3,500,000 debt of $1,900,000 and equity of $1,600,000.
4. Loss on Foreclosure
On May 13, 1998 there was a Trustee's sale for property held in the
name of Vale Terrace Corporation, a wholly-owned subsidiary of TAC, Inc. a
majoriaty owned subsidiary of the company. The Company recorded a loss of
$274,220 during the quarter as a result of this foreclosure.
5. Additional footnotes included by reference
Except as indicated in Notes above, there have been no other material
changes in the information disclosed in the notes to the financial statements
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997. Therefore, those footnotes are included herein by reference.
F-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Real Estate Divisions
The Company's operations primarily involve the acquisition, management,
lease and sale of real estate holdings. Over the past five years, the Company
has acquired a wide variety of commercial and residential properties. The
Company owns several real estate holdings in Utah and also owns properties in
other parts of the United States. The Company seeks to locate and acquire
primarily commercial real estate which is believed to be undervalued with little
or no cash down. The Company acquires real estate with a view to resell at
substantial profits upon making improvements to the properties. While the
Company is making improvements to the properties, it generally enters into short
term leases to generate rental income.
The types of properties that the Company generally purchases
includes Class C commercial buildings and raw land. The commercial space
generally needs a nominal to substantial amount of renovation to obtain market
rents. Accordingly, the typical result of purchasing such properties is that the
Company usually has insufficient cash flows from rental revenues to cover the
debt service and other expenses related to the Company's real estate because of
below market rents, short term financing arrangements and no rental revenues
from raw land. However, upon sale of such properties the Company has typically
realized substantial gains. To cover interim cash shortages, the Company
generally uses capital generated from its consulting division to cover deficits,
or the Company will issue its common stock to raise additional capital. In order
to eliminate cash shortages and losses related to its real estate holdings, the
Company plans to develop or sell portions of its raw land as well as improved
properties, at a profit, and increase occupancy rates.
In accordance with these plans, the Company, through its wholly owned
subsidiaries, entered into several agreements, including: (1) a Real Estate
Purchase Contract ("REPC")selling 20 acres of property in Oasis, Nevada, (2) a
Contract to Subdivide 58 acres of its Oasis, Nevada property and (3) a Lease
with an Option to purchase its Cheriton, Virginia property.
On April 9, 1998, the Company's wholly owned subsidiary Oasis
International Hotel & Casino, Inc. ("OIH") entered into a REPC with Oasis Hotel,
Resort & Casino-III, Inc., a Nevada corporation (Oasis") for the sale of 20
acres of property with improvements. The terms of the REPC call for a purchase
price of $5,000,000 and a deposit of Oasis shares in the amount of 250,000
shares of its restricted common stock under ss.4(2) of the Securities Act of
1933, which was valued at $25,000 and applied towards the purchase price. In
addition, Oasis was to pay $1,000,000 in cash at closing or in stock of Oasis at
50% of the bid price. However, OIH agreed to modify the terms of the REPC to
allow for payments in cash or stock of Oasis's parents stock, Flexweight
Corporation ("Flex"). Oasis closed on the property on May 7, 1998, by
transferring 1,000,000 Flex shares to OIH and assuming the underlying debt of
$550,000 on the property.
Oasis' assumption of the $550,000 in debt had the effect of releasing
30 acres debt free back to OIH. The Company paid the underlying debt holder
100,000 shares of its common stock as an inducement to release the 30 acres of
property to OIH. In addition, OIH agreed to accept a Second Deed of Trust in the
amount of $3,425,000. The term of the Second Deed of Trust is for 30 years with
an interest rate of 9% with payments being made monthly. To date, Oasis has made
all the required payments under the terms of the Second Deed of Trust.
Nonetheless, the Company is aware that Oasis' ability to pay pursuant to the
terms of the REPC is contingent upon Oasis or Flex's ability to generate
revenues as a start up venture with no operating history or present ability to
pay based upon revenues. Consequently, Oasis is considered a high credit risk.
During the quarter, the Company began its plans to subdivide a 58 acre
parcel of undeveloped land in Oasis, Nevada. On July 1, 1998, OIH entered into a
Contract for Engineering Services with High Desert Engineering ("Engineering").
Engineering has been engaged to provide professional engineering services for
the purpose of designing and preparing a tentative subdivision map for the 58
acre parcel. OIH plans to sell lots for approximately $38,000 each. OIH plans
will include a total of 217 lots. The cost to design and prepare the map is
estimated to be $17,000. The cost to actually subdivide is estimated at $15,000
a lot or $3,255,000 for the entire project. OIH's development of its plans are
contingent upon obtaining adequate financing.
4
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On June 22, 1998, the Company's wholly owned subsidiary Diversified
XIX, Inc. ("Diversified") entered into a Lease with T and S Associates, a
Virginia limited partnership, ("T&S") that gives T&S the option to purchase the
Cheriton, Virginia property from Diversified. The term of the lease is for 12
months commencing on August 1, 1998, with an automatic extension for an
additional 12 months. The lease payment is $10,000 per month. In addition, T&S
has the option to purchase the Cheriton property for $700,000 at any time up to
September 1, 2000, with all the lease payments being applied towards the
purchase price. Diversified has received $20,000 for first and last months rent.
During the quarter the Company acquired a substantial interest in the
ownership of the General Lafayette Inn (the "Hotel"), a hotel with 134 rooms, a
restaurant, and four adjacent office/retail buildings located next to the
Mississippi River. The Hotel is located within walking distance of the state
capitol, the down town district, and river docks at 427 Lafayette Street, Baton
Rouge, LA 70802. The Company acquired its interest in the Hotel through its
majority owned subsidiary TAC, Inc. ("TAC").
On April 30, 1998, TAC entered into a Stock Acquisition Agreement
("SAA") with Golden Opportunity Development Corporation, Smith Trust and San
Pedro Securities, Ltd. Pursuant to the SAA, TAC acquired a 51% interest in the
Golden Opportunity Corporation, a Louisiana corporation, whose sole asset is the
Hotel. TAC advanced $15,810 to cover operating deficiencies upon signing the SAA
and subsequently transferred 118,520 shares in Flex stock that its sibling
corporation OIH acquired pursuant to the sale of a 20 acre parcel of land in
Oasis, Nevada, as more fully described above. The Hotel and the surrounding
structure are subject to a mortgage of $1,900,000, with interest at 6% per
annum. The principal and interest on the first mortgage are payable in monthly
installments of $11,391.46 until July 1, 2027, when the remaining principal and
interest is due in full.
During the quarter the Company was able to satisfy several short term
obligations through the sale of properties. TAC also received $985,000 as
payment in full on the sale of its 60,000 square foot warehouse. A portion of
these proceeds were applied to $332,577 note that came due on the warehouse on
May 24, 1998 and $305,000 was used to satisfy an additional note secured by the
warehouse. For more information on the TAC Warehouse see the Company's Form
10-KSB for the fiscal year ended December 31, 1997. As anticipated in the
Company's March 31, 1998, Form 10 QSB OIH was also able to satisfy a $300,000
note secured by 50 acres of land in Oasis, Nevada that came due in March of
1998. OIH satisfied the note through the sale of 20 acres of the 50 acres that
secured the note, as more fully described above. The Company compensated the
note holder with 100,000 shares of its common stock in conjunction with
satisfying the note as contemplated in the Company's March 31, 1998, Form 10
QSB.
Although the Company made arrangements to satisfy several major short
term obligations, the Company decided not to advance sufficient funds to cure a
default on a property held in the name of Vale Terrace Corporation ("VTC") (VTC
is a wholly owned subsidiary of TAC a majority owned subsidiary of the Company).
VTC was in default on a $400,000 note that was secured by an office building
located at 956 Vale Terrace Drive, Vista, California. VTC was unable to cure the
default. As a result, a Trustee's sale was held on May 13, 1998 and the 956
Terrace Drive property was sold. The $400,000 note secured by a first deed of
trust was satisfied in full.
The Company believes that the seller failed to comply with the
conditions required pursuant to the agreements made with TAC and VTC. For
instance, the seller never obtained permission for the assignment of the ground
lease and did not make the required payments pursuant to a lease back of the
Vale Terrace property. For a more detailed description of the property and the
underlying transaction see the Company's Form 10-KSB for the fiscal year ended
December 31, 1997.
The Company recorded rental revenues of $241,100 from its real estate
operations for the second quarter compared to $118,890 for the same period of
1997. This increase was due to the acquisition of the Hotel whose revenues are
consolidated with the Company's. The Hotel generated approximately $80,000 in
gross revenues and the Hotel's revenues are expected to increase substantially
over the course of the year
Financial Consulting Divisions
The Company, through its wholly owned subsidiaries Canton Financial
Services Corporation and Hudson Consulting Group, Inc., provides a variety of
financial consulting services to a wide range of clients. The primary service
performed by the Company involves assisting clients in structuring mergers and
acquisitions. This includes
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locating entities suitable to be merged with or acquired by the Company's
clients, as well as providing general advice related to the structuring of
mergers or acquisitions. The Company also assists clients in restructuring their
capital formation and advises with respect to general corporate problem solving.
The Company has reduced the scope and extent of the financial
consulting services it provides. Although the Company continues to provide
financial consulting services, this is done on a significantly smaller scale
than in past years. The Company has made an effort to limit the types of
consulting services it performs to those which have historically been the most
profitable and to reduce the number of clients retaining the Company's services.
The Company's consulting subsidiaries generate revenues through
consulting fees payable in the client's equity, cash, other assets or some
combination of the three. The primary form of compensation received is the
equity securities of clients. When payment is made in the form of equity, the
number of shares to be paid is dependent upon the price of the client's common
stock (if such price is available) and the extent of consulting services to be
provided. The typical value used to determine the number of shares to be paid is
one-half of the stock's bid price, which accounts for the fact that most of the
equity received as payment by the Company is restricted as to resale. The
Company accepts equity with the expectation that its services will assist in the
stock's appreciation. Thus, the Company, in some instances is not only
compensated but is also able to realize an additional return for its services.
The opposite also holds true, if the clients stock price falls, the Company's
level of compensation is decreased.
The Company generates cash flow by liquidating non-cash assets received
as fees for consulting services. As most fees are paid in the form of equity,
the revenues and cash flows realized by the Company are somewhat tied to the
price of its clients' securities. A decline in the market price of a client's
stock can effect the total asset value of the Company's balance sheet and can
result in the Company incurring substantial losses on its income statement.
Revenues from the Company's financial consulting operations increased
during the quarter ended June 30, 1998. The Company recorded quarterly revenues
of $336,941 from its financial consulting operations as compared to $41,142 for
the same period of 1997. This was attributable to the Company's retention of
additional clients. For more information on this see the Company's Form 10-KSB
for the fiscal year ended December 31, 1997.
Other Transactions
The Company sold 272,000 shares of Common Stock pursuant to Regulation
S ("Regulation S") under the Securities Act of 1933, as amended (the "Act") to
Pienne Chow, an individual and resident of Hong Kong, in exchange for an
investment of $17,000 in the Company pursuant to an April 17, 1998 transaction.
For more information on this transaction, see the Form 8-K filed by the Company
on January 13, 1998.
On July 6, 1998, the Company entered into a Stock Purchase and sold
11,364 shares of its common stock pursuant to Rule 144 under the Act to Mark
Olson for $2,500.
On April 30, 1998, the Board of Directors approved the issuance of
100,000 shares of the Company's common stock, restricted pursuant to Rule 144 of
the Securities Act of 1933 to Howard Bernstein. The stock was issued to Mr.
Bernstein as an inducement to extend the due date of a Promissory Note which he
held.
On April 29, 1998, the Company issued 50,000 shares of its common
stock, restricted pursuant to Rule 144 of the Securities Act of 1933 to Melvin
Fields as satisfaction of a portion of an agreement previously executed with Mr.
Fields wherein he would receive these shares as an inducement for his continued
support as a source for future loans.
On April 17, 1998 the Company issued 200,000 shares of its common
stock, restricted pursuant to Rule 144 of the Securities Act of 1933 to Allen
Notowitz pursuant to a Stock Purchase Agreement wherein the Company
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agreed to exchange the stock, at $0.10 per share, for $20,000 which Mr. Notowitz
delivered as payment for the stock.
Results of Operations
Gross revenues for the quarter ended June 30, 1998, were $1,033,772
compared to $1,498,433 for the same period in 1997, a decline of 31%. This
decrease is attributable to the sale of TAC building in the second quarter of
1997. Rental revenue increased by 104.5 % from $117,891 during the quarter ended
June 30, 1997, to $241,100 for the comparable period in 1998. This increase was
due to increased occupancy rates and the acquisition of the General Lafayette
Hotel.
Costs of revenues were $ 320,592 for the quarter ended on June 30,
1998, compared to $863,124 for the comparable period in 1997. The decrease in
the costs of revenues is a result of the sale of TAC building in May of 1997,
which had a cost basis of $166,570.
Gross profit was $ 713,180 for the quarter ended on June 30, 1998 and
$635,309 for the comparable quarter in 1997. This increase is attributable to
increased consulting and rental revenues and the sale of the Oasis property.
Selling, general, and administrative expenses were $ 223,329 for the
quarter ended on June 30,1998 and $416,628 for the comparable period in 1997, a
decrease of $193,299 . The primary reason for the decrease was the fact that the
Company continues its efforts to reduce costs relating to its consulting
operations.
Operating gain was $489,851 during the quarter ended on June 30, 1998,
compared to an operating gain of $218,681 for the comparable quarter in 1997.
The Company's operating gain in the second quarter of 1997 was primarily
attributable to the sale of real estate from which the Company recorded a
$668,430 gain. The gain for the second quarter of 1998 is due to an increase in
consulting and rental revenues, as well as the sale of its Oasis property.
During the quarter ended June 30, 1998, the Company incurred other
income in the amount of $52,024. During the comparable period in 1997, the
Company incurred other expenses in the amount of $ 118,998. The major difference
is from a gain on investment securities as opposed to a loss on investment
securities in the second quarter of 1997.
Capital Resources and Liquidity
The Company had a net working capital deficiency of $ 1,409,097 as of
June 30, 1998, compared to $575,903 at the end of June 30, 1997. This increase
in the Company's net working capital deficiency was primarily due to the
purchase of its office building located at 268 West 400 South in Salt Lake City
with short-term financing. The company anticipates obtaining log term financing
of this property by end of the year.
Net stockholders' equity in the Company was $ 2,495,787 as of June 30,
1998, compared to $3,108,941 as of June 30, 1997. The decrease is due to
substantial losses incurred during the last two quarters of 1997in the amount of
$1,623,934.
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 leads the Company to conduct exempt offerings of its equity securities.
The Company issued a total 642,000 shares of its common stock for cash and
services to cover its cash shortages.
The Company has still not satisfied its 6.0% Convertible Debenture with a
face amount of $300,000 (the
7
<PAGE>
"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. The method of
conversion past the written agreements to extend is uncertain. The parties have
verbally agreed to extend the Debenture on a quarterly basis. No arrangement for
any extensions have been made as of the date of filing. At maturity, the Company
had 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. The Company's present intentions are to pay off the Debenture with
cash generated from future revenues.
Accordingly, the Company's current position regarding the Debenture is
that it owes $260,000 in cash plus interest at 6%. The Company has no present
intentions to allow the Debenture to be converted into shares of common stock of
the Company. The Company has taken this position based upon the length of time
that has elapsed since the scheduled date of maturity and an inability to
determine when and at what price the conversion would be based upon. As of June
30 1998, $60,000 of the Debenture's face amount has been converted into common
stock. The Company currently owes $240,000 plus interest at 6% annually.
PART II
ITEM 1. LEGAL PROCEEDINGS
No material developments occurred in the second quarter regarding the
Company's legal proceedings. For more information please see the Company's Form
10-QSB for the quarter ending on March 31, 1998 and Form 10- KSB for the year
ending December 31, 1997.
ITEM 5. OTHER INFORMATION
Subsequent to the end of the second quarter, CyberState, Inc.
("CyberState"), a wholly owned subsidiary of CyberAmerica Corporation ("CYAA")
acquired a two story 18 unit apartment building that includes 7,500 sq. ft. of
commercial space located at 2402 Wall Avenue in Ogden, Utah. The total purchase
price was $850,000. CyberState financed the purchase price by obtaining a first
mortgage of $125,000 at an annual interest rate of 13%, for a 12 month period
and a second mortgage from the seller for $50,000 amortized over a 10 month
period with an annual interest rate of 10%. These two loans are secured by four
units. The $670,000 balance is being financed by the seller, payments are based
on a 20 year amortization at an interest rate of 7% for the first 2 years which
escalates to 9% for the remaining term with the balance to be paid in full on or
before 6 years from the date of inception with no prepayment penalty. The
$670,000 loan is secured by the entire apartment complex with the exception of
the four units mentioned above.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B
are listed in the Index to Exhibits on page 10 of this Form 10-QSB, and
are incorporated herein by this reference.
(b) Reports on Form 8-K. On May 29, 1998 the Company filed a Form 8-K
disclosing the suspension of trading of the Company's common stock on
the Boston Stock Exchange ("BSE") effective upon the close of trading
on May 28, 1998. The suspension and coincidental request for delisting
by the exchange were a result of insufficient trading volume of the
Company's stock to meet BSE's market float requirement of at least
$500,000.
8
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 19th day of August 1998.
CYBERAMERICA CORPORATION
/s/Richar Surber
Richard Surber August 19 , 1998
President, Chief Executive Officer and Director
/s/Wayne R. Newton August 19 , 1998
Wayne Newton
Controller
9
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE DESCRIPTION
NO. NO.
3(i) * Articles of Incorporation of the Company
(Incorporated herein by reference from
Exhibit No. 3(i) to the Company's Form
10-KSB for the year ended December 31,
1993).
3(ii) * By-Laws of the Company, as amended.
(Incorporated herein by reference from
Exhibit 3(ii) of the Company's Form 10 KSB
for the year ended December 31, 1995.)
MATERIAL CONTRACTS
10(i)(a) 11 Lease Agreement between Diversified Holdings
XIX, Inc., a Nevada corporation, and T and S
Associates, a Virginia Limited Partnership,
with respect to the property located in
Cheriton, VA in the Eastville District,
Northampton County.
10
THIS LEASE AGREEMENT, made this 22nd day of June, 1998, by and
between DIVERSIFIED HOLDINGS XIX, INC., a Nevada corporation, Grantor
herein referred to as "Landlord", whose address is 2689 West 400 South,
Suite 300, Salt Lake City, Utah 84101, ad T AND S ASSOCIATES, a
Virginia limited partnership, Grantee, herein referred to as "Tenant",
whose address is 508 Indian River Road, Norfolk, Virginia 23523.
WITNESSETH:
WHEREAS, Diversified Holdings XIX, Inc., is the sole owner of
the following described real estate, to-wit:
See Schedule A attached (the "Premises")
WHEREAS, T AND S Associates desires to lease the premises for
th purpose of conducting its business as a manufacturer of various
products and commodities, including a soil amendment product
manufactured from certain construction and demolition material;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein the parties hereby agree as follows:
DESCRIPTION OF THE LEASED PREMISES
Landlord agrees to lease and Tenant agrees to rent the
Premises.
TERMS OF LEASE
Tenant agrees to lease the above described premises for a
period of twelve (12) months commencing on the 1st day of August, 1998.
At the end of such twelve month period the lease shall be renewed for
another twelve month period upon the same terms and conditions, unless
thirty (30) days prior to the end of such initial twelve month period,
Tenant delivers to Landlord by certified mail, a written notice of its
intention not to renew its lease.
COMMENCEMENT DATE AND IMPROVEMENTS
Landlord agrees to lease the Premises in substantially the
same condition as exists as of the date of execution of this lease.
Landlord has advised Tenant and Tenant acknowledges that it
has been informed of the current environmental condition of the
premises as set forth in the following reparts:
(a) Level I and II, Environmental Assessments of KMC
Foods, Inc., Cheriton Station, Virginia, for
Northampton County, Project No. 911240, August
<PAGE>
30, 1991, prepared by Talbot & Associates, Ltd.;
(b) Site Characterization Report for Former KMC Foods
Plant, Cheriton, Virginia, prepared for: Pemsco
Corporation, prepared by Davis Engineering
Association, P.C. dated October 1, 1993; and
(c) Letter from Robert E. Guarni, Brownfields Technical
Coordinator, United States Environmental Protection
Agency to Thomas E. Harris, County Administrator,
dated December 29, 1997, with Report of Roy F.
Weston, Inc. dated December 29, 1997 (TDD No.
9712-01).
Tenant may enter upon the Premises and make such repairs,
alterations and improvements as may be appropriate for the conduct of
its business. Any such improvements shall become the Property of
Landlord; provided, however, that any machinery and equipment installed
in or upon the Property shall remain the property of Tenant and may be
removed by Tenant at the conclusion of this lease.
RENT
Tenant agrees to pay to Landlord at 268 West 400 south, Suite
300, Salt Lake City, Utah 84101, the sum of Ten Thousand Dollars
($10,000.00) per month for the lease of the premises, to be due and
payable on the 1st day of each moth beginning on the 1st day of August,
1998. Upon execution of this lease by Landlord, Tenant shall pay to
Landlord the sum of Twenty Thousand Dollars ($20,000) said sum to cover
the first month's rent and the last month's rent to be held as security
for the future performance of the lease terms.
REAL ESTATE TAXES
During the term of this lease, Tenant shall pay all real
estate, personal property and business taxes and assessments imposed on
the demised real estate by the state, county, or other lawful
governmental authority.
USE OF PREMISES
The parties expressly agree that this Lease is executed in
order that Tenant may conduct a manufacturing business or businesses
upon the premises.
SERVICES
During the term of this Lease, Tenant shall be responsible for
providing heat and electricity to the demised premises.
<PAGE>
ASSIGNMENT AND SUBLEASE
This Lease may not be assigned or transferred, and the
premises may not be sublet, either in whole or in part, by Tenant
without Landlord's prior written consent, which consent shall not be
unreasonably withheld.
RIGHT OF ENTRY TO REPAIR
Landlord reserves the right for itself, its agents and
employees to enter upon the premises at any reasonable time to make
repairs, alterations, or improvements; provided, however, that such
repairs, alterations, or improvements shall not unreasonably interfere
with Tenant's business operations. Such right to enter shall also
include the right to enter upon the Premises for the purposes of
inspection.
INSURANCE
Tenant shall be responsible for insuring its personal
property. Tenant shall maintain a comprehensive public liability
insurance policy in effect on the Premises and its activities thereon
with limits of not less than One Million Dollars ($1,000,000.00) and
shall cause the Landlord to be named as an additional insured on such
policy. During the term of this lease, Tenant shall also maintain a
fire insurance policy on the premises in the amount of One Million
Dollars ($1,000,000.00).
BANKRUPTCY OR INSOLVENCY
It is expressly agreed that if at any time during the term of
this lease, Tenant shall be adjudged bankrupt or insolvent by any
Federal or State Court of competent jurisdiction, Landlord may, at its
option, declare this lease to be terminated and canceled, and may take
possession of the demised premises. In the event of the such bankruptcy
or insolvency of the Landlord, or in the event the premises are sold,
Tenant may elect to terminate this lease, but it will not be required
to do so.
DAMAGE OR DESTRUCTION BY FIRE OR NATURAL CAUSES
If, during the term of this lease, any of the buildings on the
demised premises which are in use by Tenant are destroyed by fire,
natural causes, or other casualty, or so damaged thereby that they
cannot be repaired with reasonable diligence within sixty (60) days,
this lease may be terminated by Tenant as of the date of such damage or
destruction. However, if said buildings can with reasonable diligence
be repaired within sixty (60) days, said buildings shall be, by
Landlord, repaired as quickly as is reasonably possible, and this lease
shall remain in full force and effect; provided, however, rent shall be
abated for any part of said building which is rendered unfit for
occupancy for the period that such unfitness continues.
<PAGE>
SIGNS
Tenant may display signs and shingles advertising its place of
business without the prior consent of the Landlord.
OPTION TO PURCHASE
In further consideration of the sum of One Dollar ($1.00) cash
in hand paid, the receipt and sufficiency of which is hereby
acknowledged by Landlord, Landlord hereby rants to Tenant, its
successors and assigns, the exclusive option to purchase the Premises
upon the following terms and conditions:
(a) The purchase price for the Premises is Seven Hundred
Thousand Dollars ($700,000.00), to which all rental
payments shall be applied. Teh balance shall be paid
in cash at closing.
(b) This option may be exercised at any time from the
date of this lease until 5:00 P.M. on the 31st day of
July 2000, by written notice sent by certified mail,
return receipt requested, to Landlord at 268 West 400
South, Suite 300, Salt Lake City, Utah 84101. Tenant
shall not be in default under the terms and
provisions of the Lease at the time the option is
exercised. In the event of exercise of the option,
then the lease shall continue in full force and
effect until closing.
(c) In further consideration for the sum paid for this
option, the owners, herein designated as Landlord,
shall not sell, convey, or further encumber the
Premises during the period of the option without
Tenant's prior written consent; however, this shall
not effect the Landlord's right and ability, without
Tenant's consent, to refinance existing debt so long
as the amount of the new debt does not exceed eighty
(80) percent of the amount of the purchase price,
reduced by payments made thereon.
(d) delivery of the deed and the balance of the purchase
price and the possession of the Premises will take
place within ten (10) days of all contingencies in
the Lease being fulfilled; provided, however, that
the closing shall take place no later than the 1st
day of September, 2000, with settlement at the law
offices of the Tenant's attorney in Northampton
County, Virginia. Possession, free and clear of all
leases and licenses, shall be given at closing,
unless otherwise agreed in writing by the parties.
Real estate taxes, and all other assessments against
the real estate shall be prorated between the
Landlord and the Tenant as of the closing date.
(e) At Settlement, Landlord shall convey to Tenant good
and marketable fee simple title to the Premises by
deed of General Warranty containing
<PAGE>
English Covenants of Title, free of all liens,
defects, tenancies, encumbrances and encroachments,
except as otherwise indicated herein, and subject
only to such restrictions and easements as shall then
be of record which do not affect the use of the
Premises for Tenant';s intended use or render the
title unmarketable. If a defect is found which can be
remedied by legal action within a reasonable time,
Landlord shall, at Landlord's expense, promptly take
such action as is necessary to cure the defect. If
Landlord, acting in good faith, is unable to have
such defect corrected within sixty (60) days after
notice of such defect is given to Landlord, then this
Lease may be terminated by Tenant at the expiration
of such sixty (60) day period. Tenant may extend the
date for Settlement to the extent necessary for
Landlord to comply with this paragraph.
Landlord agrees to pay the expense of preparing the
deed, certificates of nonforeign status and Form
1099-S and the recordation tax applicable to
grantors. Landlord shall pay when due all sums due to
realtor(s) employed by Landlord in connection with
the sale of the Premises.
Except as otherwise agreed herein, all other expenses
incurred by Tenant in connection with this purchase,
including without limitation, surveys, title
examination, insurance premiums, recording costs,
loan document preparation costs, and fees of Tenant's
attorney, shall be borne by Tenant.
(f) Landlord warrants that Landlord is the fee simple
owner of the Premises and has all necessary authority
to sell the Premises. There are no other Leases for
sale of options involving the Premises, and no other
pary has any right, title of interest in the
Premises.
Landlord warrants that there are no eminent domain or
condemnation proceedings pending against the
Premises, and Landlord has o knowledge of such
proceedings or of any intentions or plans definite or
tentative that such proceedings might be instituted.
Landlord warrants that there are no actions or suits
in law or equity or proceedings by any governmental
agency now pending or, to the knowledge of Landlord,
threatened against Landlord in connection with the
Premises. In addition, Landlord warrants that there
is no outstanding order, writ, injunction or decree
of any court or governmental agency affecting the
Premises.
Landlord warrants that there has bot been made and
will not be made, without Tenant's consent, any
proffers or other commitments to any stat, county,
federal or local governmental or quasi-governmental
authority, utility or service company, or any public
or private organization or individual relating to the
Premises, which would impose any obligation on
<PAGE>
Tenant, or its assigns, after Settlement, to make any
contributions of money or dedications of land, or to
construct, install or maintain any improvements of a
public or private nature on or off the Premises.
Landlord warrants that it has not received any notice
from any governmental or private agency with regard
to the necessity of remediating the Premises because
of the existence of an Hazardous Materials, toxic
chemicals or similar substances. This paragraph shall
survive closing and shall not merge with the Deed;
except as disclosed under section "Commencement Date
and Improvements", subsections (a) - (k).
Landlord warrants that Landlord know of no materially
adverse fact affecting or threatening to affect the
Premises which has not been disclosed to Tenant in
writing.
The representations and warranties of Landlord set
forth in this Agreement shall be true and correct on
and as of the Closing Date as though such
representations and warranties were made on and as of
that date. Notwithstanding that certain of Landlords
representations and warranties may be limited to the
extent of actual knowledge by Landlord and/or
Landlord's agents of the facts stated therein, it
shall be a condition precedent to Tenant's obligation
to go to settlement that the facts stated in all such
representations and warranties shall be correct as of
teh time of the closing.
(g) Landlord warrants and represents to Tenant the
following matters and agrees to indemnify, defend,
and hold harmless the Tenant from any loss or
liability therefrom;
(i) Landlord has not received any
notices issued by any municipal or
other public authority with regard
to any work or improvements done or
ordered by such authority to be done
either before or after the date of
this Lease. The Landlord has no
reason to believe that any such
notice will be issued between the
date hereof and the closing date.
(ii) Landlord is the sole holder of legal
title to the Premises in fee simple
and the Premises is not subject to
any outstanding lease or to any
other estate or to any outstanding
option, lease, or agreement of sale.
Landlord has the full power and
authority to execute, deliver, and
perform under this Lease and all
agreements and documents referred to
herein.
(iii) There is no condemnation proceeding
pending with regard
<PAGE>
to any portion of the Premises and
the Landlord does not know of or
have reason to know of any proposed
condemnation proceedings with regard
to any protion of the Premises.
(iv) To the best of Landlord's knowledge
and belief, the Premises in not
subject to any "Superfund" or
similar lien or any claim by any
government regulatory agency or
third party relating to the release
or threatened release of any
hazardous or toxic substance,
material, or waste.
CONTINGENCIES
This Lease is contingent upon the following:
1. No restrictions on the real estate prohibiting
Tenant's aforesaid use of the real estate for the
manufacturing or certain commodities by Tenant.
2. No existing easements, covenants, restrictions or
rights in the real estate prohibiting or interfering
with Tenant's aforesaid intended use of the real
estate.
3. Tenant obtaining from Northampton County approval for
the use of the Premises as aforesaid.
Landlord agrees to cooperate with Tenant on any
applications required to obtain the Northampton County
approval outlined above, but all costs of same shall be the
Tenant's sole responsibility. Landlord shall sign any
applications and such other documents as may be necessary for
the successful approval of the subject real estate for its
intended use as outlined above.
Tenant may void this Lease if any one or more of the
above contingencies and/or conditions set forth herein are not
fulfilled to Tenant's satisfaction. If voided by Tenant due to
the failure of any contingency, and deposits shall be returned
to the Tenant.
Prior to the closing, the Tenant and Tenant's
designated agents and employees shall have full access to the
Premises for the purpose of making engineering, topographical
and such additional studies as Tenant deems appropriate.
Tenant shall not undertake any studies which damage the
Prmises.
Landlord agrees to provide to Tenant, at no cost,
within five (5) days after Landlord's acceptance of this
Lease, any surveys, environmental assessment information, soil
studies, and other agreements affecting the Premises.
<PAGE>
BINDING EFFECT
The parties, having read and understood the
provisions of this lease, agree for themselves, their hers,
administrators, personal representatives, executors, and
assigns to be bound thereby.
In Witness Whereof, the parties have executed this
lease on the ___ day of ______________ , 1998.
DIVERSIFIED HOLDINGS XIX, INC.
By: /s/ Richard Surber
Its: President
T AND S ASSOCIATES
By: G.Elliott Schaubach, Jr.
Its: General Partner
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S MARCH 31,
1998, QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 32,739
<SECURITIES> 327,850
<RECEIVABLES> 857,621
<ALLOWANCES> 89,097
<INVENTORY> 0
<CURRENT-ASSETS> 1,129,113
<PP&E> 10,765,516
<DEPRECIATION> 1,012,462
<TOTAL-ASSETS> 12,454,639
<CURRENT-LIABILITIES> 2,538,210
<BONDS> 0
0
0
<COMMON> 2,832
<OTHER-SE> 2,492,955
<TOTAL-LIABILITY-AND-EQUITY> 12,454,639
<SALES> 0
<TOTAL-REVENUES> 1,033,772
<CGS> 320,592
<TOTAL-COSTS> 320,592
<OTHER-EXPENSES> 207,005
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,599
<INCOME-PRETAX> 563,774
<INCOME-TAX> 0
<INCOME-CONTINUING> 563,774
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 563,774
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>
