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, 1999.
[ ] 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 9, 1999 was 3,227,238.
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.....................................................7
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................8
SIGNATURES.....................................................................9
INDEX TO EXHIBITS.............................................................10
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
2
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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, 1999
and statements of operations, and statements of cash flows for the interim
period up to the date of such balance sheet and the comparable period of the
preceding year are attached hereto as Pages F-1 through F-8 and are incorporated
herein by this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
3
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ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
PAGE
Consolidated Unaudited Condensed Balance Sheet June 30, 1999 ................F-2
Consolidated Unaudited Condensed Statements of Operations
June 30, 1999 and 1998....................................................F-4
Consolidated Unaudited Condensed Statements of Cash Flows
June 30,1999 and 1998......................................................F-6
Consolidated Unaudited Condensed Statement of Shareholders' Equity
June 30, 1999 .............................................................F-7
Notes to Consolidated Unaudited Condensed Financial Statements
June 30, 1999..............................................................F-8
F-1
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS
June 30, 1999
ASSETS
CURRENT ASSETS
Cash $ 238,303
Accounts receivable - Trade 445,768
Accounts receivable - Related Parties 322,785
Note receivable - Current Portion 1,173,261
Prepaid expenses 12,874
Securities available for sale 865,468
--------------
TOTAL CURRENT ASSETS 3,058,459
PROPERTY AND EQUIPMENT 8,127,466
OTHER ASSETS
Investment securities at cost 348,150
Notes receivable - net of current portion 965,000
Investments - other 309,166
-------------
TOTAL OTHER ASSETS 1,662,316
TOTAL ASSETS $ 12,808,241
============
See notes to consolidated unaudited condensed financial statements.
F-2
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CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS (Continued)
June 30, 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 222,738
Accounts payable - Related Parties 99,865
Accrued liabilities
Interest 67,271
Real estate taxes and assessments 175,438
Payroll and related taxes payable 79,986
EPA liabilities 325,398
Refundable deposits 29,742
Refund to investors 43,678
Other 153,827
Debenture payable 253,849
Current maturities of long-term debt 1,038,205
TOTAL CURRENT LIABILITIES 2,489,997
LONG-TERM LIABILITIES
Long-term debt, net of current portion 5,259,283
TOTAL LONG-TERM LIABILITIES 5,259,283
MINORITY INTEREST 441,484
SHAREHOLDERS' EQUITY
Preferred stock par value $.001; 20,000,000
shares authorized; No shares issued -
Common stock par value $.001; 20,000,000
shares authorized; 3,227,238 shares issued 3,228
Additional paid-in capital 15,355,080
Accumulated deficit (10,716,084)
Unrealized loss from securities available for sale (24,747)
-------------
TOTAL SHAREHOLDERS' EQUITY 4,617,477
---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,808,241
=============
See notes to consolidated unaudited condensed financial statements.
F-3
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<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 1999 and 1998
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenue
Sale of property $ 840,000 $ 4,475,000 $ 1,440,000 $ 4,475,000
Revenue deferred - (4,019,269) - (4,019,269)
Additional gain recognition 12,050 - 22,442 -
Consulting revenue 640,594 336,941 937,469 378,665
Rental revenue 275,151 241,100 427,392 357,640
---------------- ---------------- ---------------- ----------------
Total Revenue 1,767,795 1,033,772 2,827,303 1,192,036
Costs of Revenue
Cost of sales of property 717,310 24,837 936,808 24,837
Costs associated with
consulting revenue 207,020 60,911 408,762 89,675
Costs associated with rental
revenue 255,736 151,058 364,477 186,799
Interest expenses associated
with rental revenue 84,883 83,786 141,768 148,572
---------------- ---------------- ---------------- ----------------
Total Costs of Revenue 1,264,949 320,592 1,851,815 449,883
Gross Profit 502,846 713,180 975,488 742,153
Selling, General and
Administrative Expenses 321,752 223,329 538,462 606,500
Operating Profit (Loss) 181,094 489,851 437,026 135,653
Other Income (Expense)
Interest Income 52,631 26,256 153,898 65,325
Interest Expense (51,864) (57,599) (151,726) (104,169)
Gain from sale of investment
securities 576,201 352,695 622,479 352,695
Gain (Loss) on foreclosure 256,742 (274,220) 256,742 (274,220)
Other income (expense) 2,004 4,892 4,869 778
---------------- ---------------- ---------------- ----------------
Total Other Income (Expense) 835,714 52,024 886,262 40,409
Income (Loss) Before Minority
Interest 1,016,808 541,875 1,323,288 176,062
Minority Interest in Loss (117,471) 21,899 (100,624) 52,953
---------------- ---------------- ---------------- ----------------
Net Profit (Loss) $ 899,337 $ 563,774 $ 1,222,664 $ 229,015
</TABLE>
See notes to consolidated unaudited condensed financial statements.
F-4
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<TABLE>
<S> <C> <C> <C> <C>
Income (Loss) Per Comon Share
Income (loss) before
minority interest $ 0.33 $ 0.23 $ 0.44 $ .08
Minority interest in loss (0.04) 0.01 (0.03) 0.02
---------------- ---------------- ---------------- ----------------
Net income (loss) per
weighted average common
share outstanding
$ 0.29 $ 0.23 $ 0.41 $ 0.10
================= ================= ================== =================
Weighted Average number
of common shares
outstanding
3,124,431 2,404,064 2,996,214 2,292,314
============= ============= ============= =============
</TABLE>
See notes to consolidated unaudited condensed financial statements.
F-5
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<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Three Months Ended June 30, 1999 and 1998
Six Months Ended
June 30
Unaudited
1999 1998
-------------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,222,664 $ 229,015
Adjustments to reconcile net income (loss)
to net cash provided:
(Gain) loss from sale of investments (622,479) 352,695
Loss (Gain) on foreclosure (256,742) 274,220
Minority interest in (gain) loss (100,624) 52,953
Depreciation and Amortization 176,428 107,462
Common stock issued for assets and debt 294 39,231
Services paid with common stock - 29,764
Decrease (increase) in assets:
Receivables 193,449 93,929
Prepaid Expenses and (1,721) (142,587)
Increase (decrease) in liabilities:
Accounts and notes payable (268,979) 20,648
Accrued liabilities 736,418 (9,002)
Current portion of long-term debt (486,053) (661,475)
------------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 880,181 $ 386,853
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Minority interest in subsidiary acquired - 784,000
Capital expenditures (48,756) (3,088,834)
Proceeds from sale of investments 1,009,947 -
-------------- -------------
NET CASH FLOWS (USED) IN INVESTING ACTIVITIES $ 916,191 $ (2,304,834)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock for cash 13,335 41,732
Increase in long term debt 600,000 1,921,000
Reduction of long-term debt (589,451) (17,918)
-------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 10,549 $ 1,944,814
INCREASE (DECREASE) IN CASH 91,559 26,833
CASH AT BEGINNING OF PERIOD 146,744 5,906
--------------- --------------
CASH AT END OF PERIOD $ 238,303 $ 32,739
================ ==============
</TABLE>
See notes to consolidated unaudited condensed financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1998 and 1997
and the Six months ednded June 30, 1999
Total Loss on Securities Net Unrealized
Common Stock Paid-in Available for Shareholders'
Shares Amount Capital Deficit Sale Equity
<S> <C> <C> <C> <C> <C> <C>
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,
DECEMBER 31, 1997 2,175,814 2,176 14,989,833 (12,347,732) (446,500) 2,197,778
--------- ---------- ----------- ------------ ------------ ------------
Common Stock Activity:
Issued for assets 100,000 100 17,547 - - 17,647
Issued for services 107,000 108 18,290 - - 18,398
Issued for cash 483,364 483 39,017 - - 39,500
Unrealized loss/Gain from securities - - - - 421,753 421,753
Net profit for year - - - 736,813 - 736,813
--------- ---------- ------------ ------------ ------------- ------------
BALANCES AT
DECEMBER 31, 1998 2,866,571 $ 2,867 $ 15,064,687 $ (11,610,919) $ (24,747) 3,431,889
Issued for Infotech Stock 294,000 294 - - - 294
Issued for Cash-John Fry 66,667 67 13,268 - 13,335
Net Income for Period 1,222,664 1,222,664
--------- --------- -------------- ------------ ---------- ----------
Balance March 31, 1999 3,227,238 3,228 15,077,955 $ (10,388,255) $ (24,747) $ 4,668,182
</TABLE>
See notes to consolidated unaudited condensed financial statements.
F-7
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 1999
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, 1998. 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, 1999.
2. Year 2000 Compliance
The Year 2000 problem is a result of computer programs being written
using two digits to define the applicable year. If not corrected, any program or
equipment that have time sensitive components could fail or create erroneous
results. The Company has completed a review of its existing systems and has
upgraded approximately 90% of its existing system with hardware and software
that purports to be Year 2000 compliant.
The majority of the Company's other software and hardware is not
believed to be Year 2000 compliant. However, the Company has already ordered the
necessary software and hardware to fully upgrade its computer systems to be Year
2000 compliant. The Company is expected to be fully compliant by September 30,
1999. The cost associated with completion of updating the Company's computer
systems is not expected to have a material impact on the financial condition of
the Company. Nonetheless, there can be no assurance that this will be the case.
The Company currently has limited information concerning the Year 2000
compliance status of its clients and associates. However, even if the Company's
clients are not Year 2000 compliant, the Company does not anticipate that such
noncompliance will have a material adverse effect on the Company's business,
financial condition, results of operations or cash flow.
3. Gain on Foreclosure
In June 1999, the Company allowed the Canton, Illinois property to be
foreclosed upon for the property taxes due on the property. The property taxes
due were $555,127 and the Company's depreciated basis was $298,385. This
foreclosure resulted in a gain during the quarter of $256,742.
4. 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, 1998. Therefore, those footnotes are included herein by reference.
See notes to consolidated unaudited condensed financial statements.
F-8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
During the second quarter of 1999, CyberAmerica Corporation, a Nevada
corporation and its subsidiaries (hereinafter the "Company" unless the context
indicates otherwise) continued to improve its financial condition. The Company
through its real estate and consulting operations increased its rental and
consulting revenues over the comparable quarter in 1998. As a direct result of
increased revenues for the for the six months ended June 30, 1999 and the year
ended December 31, 1998, the Company's overall financial health significantly
improved.
On April 15, 1999, the Company underwent a reorganization pursuant to
the terms of an Acquisition Agreement between two of the Company's consolidated
subsidiaries: ChinaMallUSA.com, Inc. ("CHML" f.k.a. Innovative Property
Development Corporation) and Diversified Holdings, I, Inc., a Nevada corporation
("DHI"). Pursuant to the terms of this Acquisition Agreement, CHML divested
itself of all of its subsidiaries in exchange for 982,528 shares of CHML common
stock which was previously owned by the Company, and 222,220 shares of DHI. The
effect of this transaction was that the Company owns 90% of DHI and DHI owns at
least a majority interest in the following entities excepting Wasatch Capital
Corporation of which DHI owns a 20% interest: Canton Commercial Carpet
Corporation, Canton Industrial Corporation of Salt Lake City, Wasatch Capital
Corporation, Oasis International Hotel & Casino, Inc., Oasis International
Corporation, West Jordan Real Estate Holdings, Inc.,Canton Financial Services
Corporation, Hudson Consulting Group, Inc., Canton's Wild Horse Ranch II,
Inc.,CyberLacrosse, Inc., Cyberstudio, Inc., Diversified Holdings XIX, Inc.,
Diversified Land & Cattle Company, Golden Opportunity Corporation, Great Basin
Water Corp., Lexington Three Mile East Terrace Mountain Estates, Inc.,
Lexington, Four Mile East Terrace Mountain Estates, Inc., Lexington One Mile
East Little Pigeon Mountain Estates, Inc. and Taylor's Landing, Inc.
The purpose of the transaction was to enhance shareholder value for
holders of CHML stock by allowing CHML to acquire other unrelated operations. On
June 1, 1999, CHML acquired a majority interest in ChinaMall, Inc. an Internet
commerce site that is tailored to promote trade between the United States and
China. The Company's shareholder interest in CHML was reduced to approximately
453,550 shares or less than 5% of CHML's issued and outstanding shares of common
stock.
Real Estate Divisions
The Company's operations primarily involve the acquisition, management,
lease and sale of real estate holdings. Over the past six 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 cash shortages, the Company generally uses
capital generated from its consulting division to cover deficits or the Company
will issue its common stock to raise additional capital. The Company's plans to
eliminate cash shortages and losses related to its real estate holdings includes
plans to develop or sell portions of it raw land, increase occupancies, and sell
certain properties that operate at a loss.
4
<PAGE>
The Company made no significant acquisitions of real property during
the quarter ended June 30, 1999. However, the Company disposed of its property
in Cheriton, Virginia.
On May 18, 1999, Diversified Holdings XIX, Inc., a consolidated
subsidiary of the Company, closed on a sale of its real property located near
the town of Cheriton, in Northampton County, Virginia. The property consists
of several buildings and approximately 65 acres. The property was sold to
Eastern Shore Composites, L.L.C. for a total purchase price of $700,000. The
terms of the sale provide for an initial cash payment of $45,000 being credited
to the purchase price, a promissory note, secured by a deed of trust, in the
amount of $655,000 bearing interest at the rate of 9% per annum with monthly
payments of principal and interest, with a balloon payment requiring the balance
of the note to be paid in full on May 18, 2002. The new owner has and continues
to work to resolve all environmental issues related to the property without
further participation by the Company. For more information on this property,
please "Item 2. Description of Property" in the Company's Form 10KSB for the
year ended December 31, 1998.
The Company recorded revenues of $12,050 for payments received pursuant
to a note issued on the sale of the Oasis, Nevada property sold to Oasis Resorts
International, Inc. on May 11, 1998. For more information on the Oasis, Nevada
property, please "Item 2. Description of Property" in the Company's Form 10KSB
for the year ended December 31, 1998.
The Company recorded rental revenues of $275,151 from its real estate
operations for the second quarter of 1999 compared to $241,100 for the same
period of 1998. This increase was primarily due to a decrease in vacancies.. The
General Lafyette Hotel generated approximately $185,000 in revenues and is
expected to increase substantially upon completion of the necessary renovations.
Financial Consulting Divisions
The Company through its wholly owned subsidiaries Canton Financial
Services Corporation and Hudson Consulting Group, Inc. provides a variety of
financial consulting services to a wide range of clients. The primary service
performed by the Company involves assisting clients in structuring mergers and
acquisitions. This includes locating entities suitable to be merged with or
acquired by the Company's clients, as well as providing general advice related
to the structuring of mergers or acquisitions. The Company also assists clients
in restructuring their capital formation, advises with respect to general
corporate problem solving and provide shareholder relations services designed to
expose it clients to the broker dealer community.
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.
The Company's consulting subsidiaries generate revenues through
consulting fees payable in the client's equity, cash, other assets or some
combination of the three. The primary form of compensation received is the
equity securities of clients. When payment is made in the form of equity, the
number of shares to be paid is dependent upon the price of the client's common
stock (if such price is available) and the extent of consulting services to be
provided. The typical value used to determine the number of shares to be paid is
one-half of the stock's bid price, which accounts for the fact that most of the
equity received as payment by the Company is restricted as to resale. The
Company accepts equity with the expectation that its services will assist in the
stock's appreciation, thus allowing the Company to be compensated and to make a
return on the payments for its services.
The Company generates cash flow by liquidating non-cash assets received
as fees for consulting services. As most fees are paid in the form of equity,
the revenues and cash flows realized by the Company are 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
5
<PAGE>
Revenues from the Company's financial consulting operations increased
during the quarter ended June 30, 1999. The Company recorded $640,594 in
revenues for the quarter ended June 30, 1999 from its financial consulting
operations as compared to $336,941 for the same period of 1998. This increase
was due to an increase in the number of clients that retained the Company during
the quarter.
Results of Operations
Gross revenues for the quarter ended June 30, 1999 were $1,767,795
compared to $1,033,772 for the same period in 1998, an increase of $734,023. The
gross revenues for June 30, 1999, were higher than the comparable quarter in
1998 due to sale of property in Cheriton, Virginia and a significant increase in
consulting revenues. The revenues from the sale of real estate during June 30,
1998 totaled $455,731 compared to $840,000 during the quarter ended June 30,
1999. Rental revenues increased by 14 % to $275,151 during the quarter ended
June 30, 1999, from $241,100 for the comparable period in 1998. This increase
is attributable to a decrease in vacancy rates and an increase in rents.
Costs of revenues were $1,264,949 for the quarter ended on June 30,
1999 compared to $320,592for the comparable period in 1998. The increase in the
costs of revenues is primarily due to the Company's sale of its Cheriton
Virginia property whose cost basis was $498,000. In addition, the Company
retained several new employees as well as additional costs relating to the
hiring of new employees.
Gross profit was $502,846 for the quarter ended on June 30, 1999 and
$713,180 for the comparable quarter in 1998. Gross profit as a percentage of
revenues was 28 % and 69 %, respectively.
Selling, general, and administrative expenses were $321,752 for the
quarter ended on June 30, 1999 and $223,329 for the comparable period in 1998,
an increase of $98,423. The primary reason for the increase as due to an
increase in payroll and professional expenses.
Operating income for the Quarter ending June 30, 1999 decreased from
$713,180 to 181,094 in 1999. The decrease was due to the sale of property in
1998 in which the Company had a very low cost, (i.e. decrease in gross profit
percentage).
During the quarter ended June 30, 1999, the Company earned other income
in the amount of $835,714 compared to $52,024 for the same period in 1998. The
primary reason for the difference is attributable to a $256,742 gain on the
foreclosure of the Canton, Illinois plant compared to a loss on the foreclosure
of property in 1998 and an increase in gains from sales of investments.
Capital Resources and Liquidity
The Company had a net working capital surplus of $568,462 for the
quarter ended June 30, 1999, as compared to a $1,409,097 deficit at the end of
June 30, 1998. The Company during the quarter improved its working capital
position by obtaining long term financing on the Wallace-Bennett building held
by its consolidated subsidiary Wasatch Capital Corporation. The Company
refinanced approximately $401,000 in short term debt and eliminated $555,000 in
property taxes on the Canton, Illinois plant by allowing the property to be
foreclosed upon. The Company will continue its efforts to locate better
financing terms for its properties.
Net stockholders' equity in the Company was $4,617,477 as of June 30,
1999, compared to $2,495,787 as of June 30, 1998. The increase in net
stockholder's equity is primarily due to a return to profitability during the
last 12 months in which the Company generated $2,121,690 in net income.
During the six months ended June 30, 1999, the Company issued a total
of 360,667 shares of common stock as result of 3 Stock Exchange Agreements and
the exercise of 66,667 options held by an outside consultant.
6
<PAGE>
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.
Year 2000 Compliance
The Year 2000 problem is a result of computer programs being written
using two digits to define the applicable year. If not corrected, any programs
or equipment that have time sensitive components could fail or create erroneous
results. The Company has completed a review of its existing systems and has
upgraded approximately 90% of its existing system with hardware and software
that purports to be Year 2000 compliant.
The majority of the Company's other software and hardware is not
believed to be Year 2000 compliant. However, the Company has already ordered the
necessary software and hardware to fully upgrade its computer systems to be Year
2000 compliant. The Company now expects to be fully compliant by August 1, 1999.
The cost associated with completion of updating the Company's computer systems
is not expected to have a material impact on the financial condition of the
Company. Nonetheless, there can be no assurance that this will be the case
The Company currently has limited information concerning the Year 2000
compliance status of its clients and associates. However, even if the Company's
clients are not Year 2000 complaint the Company does not anticipate that such
noncompliance will have a material adverse effect on the Company's business,
financial condition, results of operations or cash flows.
Forward Looking Statements
The information herein contains certain forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Investors are cautioned that all
forward looking statements involve risks and uncertainty, including, without
limitation, the ability of the Company to continue its expansion strategy,
changes in the real estate markets, labor and employee benefits, as well as
general market conditions, competition, and pricing. Although the Company
believes that the assumptions underlying the forward looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward looking statements
included in the Form 10QSB will prove to be accurate. In view of the significant
uncertainties inherent in the forward looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved
PART II
ITEM 1. LEGAL PROCEEDINGS
During the second quarter of 1999, the following material developments
occurred regarding the Company's legal proceedings. For more information please
see the Company's Form 10KSB for the year ended December 31, 1998.
State of Illinois vs. CyberAmerica Corporation - The State of Illinois
filed a separate action before the Illinois Pollution Control Board, Case Number
97-8, Enforcement, in July 1996. This action sought 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,
7
<PAGE>
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
site. The State's motion requesting that the Board reconsider its denial of
punitive damages was rejected by the Board. On or about December 23, 1998 the
state filed a civil action in the Fulton County Circuit Court, Case No. 98-CH-57
seeking payment of the $325,398 award made by the Pollution Control Board and
the imposition of fines or sanctions for the failure to pay this award. A
request for the entry of summary judgment by the State is set for hearing on
August 31, 1999.
State of West Virginia vs. Canton Tire Recycling Wext Virginia, Inc.,
Canton Industrial Corporation and CyberAmerica Corporation - Suit was filed on
August 14, 1998 in the Circuit Court of Wood County, Parkersburg, West Virginia
as file no. 98 C 354 seeking the completion of clean up procedures for property
owned by Canton Tire Recycling West Virginia, located in the city of
Parkersburg. The state contends that certain waste material is still present on
the site and that any remaining material needs to be removed from tanks and an
oil/water separator located on the property. The Complaint requests that the
court award the state civil damages in an amount to be determined at the time of
trial. Agreement has been reached on the clean-up process and consent decree
entered with the trial court, including provisions for the payment of a fine in
the amount of $88,000 payable over four years. Estimated costs for the clean-up
are $150,000. The clean up is expected to be completed by September 30, 1999.
Canton Plant Property Taxes. On or about May 17, 1999 the local taxing
authority, lead by the County of Fulton, conducted a tax sale of the property
for the unpaid accumulated property taxes, penalties, and assessments in a total
amount of approximately $555,000 Fulton County was the purchaser at the tax sale
and has taken title to the property pursuant to the taxing procedures. The
Company has no plan to attempt to redeem the property through Thistle Holdings,
Inc. the title holder for the property.
Potential Litigation. Jackal Scrap Company is a salvage and recycling
company that performed clean-up work on the asbestos removal and scrap removal
at the Canon Plant site. Jackal has indicated through a collection agency that
it believes that it is entitled to payment of $365,000 for clean-up work done on
the site. Despite requests for invoices or supporting documentation to support
such a claim none have been produced. Suit has not been filed and no contact has
been made by a legal representative of Jackal Scrap. The company does not
believe that it has any obligation to Jackal Scrap and disputes the claim
entirely.
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. No reports were filed on Form 8-K during the quarter.
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 13th day of August 1999.
CYBERAMERICA CORPORATION
/S/ Richard D. Surber
- ------------------------------
Richard D. Surber August 13, 1999
President, Chief Executive Officer and Director
/S/ Wayne Newton
- ------------------------------
Wayne Newton August 13, 1999
Controller
9
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE DESCRIPTION
NO. NO.
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).
MATERIAL CONTRACTS
10(i)(a) * Acquisition Agreement between the Company's majority
owned subsidiary Innovative Property Development
Corp. And Diversified Holdings - I, Inc., dated April
2, 1999 (incorporated herein by reference from
Exhibit No. 10(i)(a) to the Company's Form 10KSB for
the period ended December 31, 1998).
* Previously filed as indicated and incorporated herein by reference from the
referenced filings previously made by the Company.
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S JUNE 30,
1999, QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 238,303
<SECURITIES> 865,468
<RECEIVABLES> 1,262,665
<ALLOWANCES> 89,402
<INVENTORY> 0
<CURRENT-ASSETS> 3,058,459
<PP&E> 8,948,928
<DEPRECIATION> (821,462)
<TOTAL-ASSETS> 12,808,241
<CURRENT-LIABILITIES> 2,489,997
<BONDS> 0
0
0
<COMMON> 3,228
<OTHER-SE> 4,614,249
<TOTAL-LIABILITY-AND-EQUITY> 12,808,241
<SALES> 2,827,303
<TOTAL-REVENUES> 2,827,303
<CGS> 1,851,815
<TOTAL-COSTS> 2,390,277
<OTHER-EXPENSES> (734,536)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151,726
<INCOME-PRETAX> 1,222,664
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