UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(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, 1999
[ ] 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
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CyberAmerica Corporation
----------------------------
(Name of Small Business Issuer in Its Charter)
Nevada 87-0509512
-------- -----------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of 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) None
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, 1999,
were $6,858,784.
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
$6,703,166 based on the average closing bid and asked prices for the Common
Stock on March 31, 2000.
At April 14, 2000, the number of shares outstanding of the registrant's Common
Stock, $0.001 par value (the only class of voting stock), was 3,227,238.
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TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business..........................................1
Item 2. Description of Property..........................................4
Item 3. Legal Proceedings...............................................18
Item 4. Submission of Matters to a Vote of Security-Holders.............20
PART II
Item 5. Market for Common Equity and Related Stockholder Matters........20
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operation........................21
Item 7. Financial Statements............................................27
Item 8. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure....................28
PART III
Item 9. Directors and Executive Officers................................28
Item 10. Executive Compensation..........................................30
Item 11. Security Ownership of Certain Beneficial Owners ................30
and Management
Item 12. Certain Relationships and Related Transactions..................32
Item 13. Exhibits, List and Reports on Form 8-K..........................34
Signatures....................................................................35
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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. The Company was originally incorporated on July 10, 1984 in Ohio as
The Canton Corporation. In May 1985, the Company changed its name to The Canton
Industrial Corporation. The Company changed its state of incorporation to Nevada
on March 9, 1993. The Company changed its name from The Canton Industrial
Corporation to CyberAmerica Corporation in June of 1996.
The Company was originally involved in the manufacturing business. 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 obtained controlling
ownership of the Company in the second quarter of 1992. Current management
completed the Company's exit from bankruptcy on November 7, 1994 pursuant to the
Bankruptcy Court's order of the same date. Since 1992, the Company has been a
holding company whose subsidiaries' operations consist primarily of the
acquisition, management, sale and lease of real estate holdings and providing
financial consulting services.
On October 30, 1998, the Company decided to restructure its ownership interest
in certain subsidiaries by entering into an Acquisition Agreement with
Innovative Property Development Corporation, a Nevada corporation ("IPDC"), a
majority owned subsidiary of the Company. The Company owned 55% of IPDC's issued
and outstanding shares of common stock prior to the consummation of the
Acquisition Agreement. Pursuant to the terms of the Acquisition Agreement the
Company transferred ownership of its shares in several of its subsidiaries to
IPDC in exchange for 1,382,528 shares of restricted stock of IPDC. Specifically,
the Company transferred all of its shareholdings in: 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., and Canton's Wild Horse Ranch II,
Inc. The purpose of this transaction was to eventually create several real
estate divisions that specialized in particular segments of the real estate
industry. As a result of the consummation of the Acquisition Agreement, the
Company increased its ownership in IPDC to 78.5%.
Subsequently, IPDC was introduced to an Internet company, China Mall, Inc., a
Delaware corporation ("China Mall"). China Mall was interested in being acquired
by IPDC. China Mall is an Internet company that provides: Internet marketing,
selling, information, and web leasing designed in part to facilitate trade
between the United States and China
In order to facilitate IPDC's acquisition of China Mall, IPDC sold all of its
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assets to Diversified Holdings I, Inc., a Nevada Corporation ("DHI"), a 90%
owned subsidiary of the Company. The Acquisition Agreement between IPDC and DHI
was consummated on April 2, 1999, and the Acquisition of China Mall, Inc. by
IPDC was consummated on June 1, 1999. IPDC 's name was changed to
ChinaMallUSA.com, Inc. The Company's shareholder interest in CHML was reduced to
approximately four hundred fifty three thousand five hundred fifty (453,550)
shares, or less than 5 % of CHML's issued and outstanding shares of common stock
after its acquisition of China Mall, Inc. The Company liquidated its position in
CHML for $612,790 during the last half of 1999. The Company currently has no
ownership interest in CHML.
Organization
The following chart shows the subsidiaries currently owned by the Company and
the companies that are owned by Diversified Holdings I, Inc., a subsidiary of
the Company.
[GRAPHICS OMITTED]
CYBERAMERICA CORPORATION
---------------------------
[GRAPHICS OMITTED]
[Companies owned by the Company] Diversified
Holdings I, Inc.
Adobe Hills ----------------
Ranch II, LLC [Companies owned by Diversified
------------- Holdings I, Inc. a subsidiary of the Company]
A-Z South State, Inc. Hudson Consulting Canton Financial
--------------------- Group, Inc. Services Corporation
------------------ ---------------------
Canton Tire Recycling
of West Virginia Oasis International Golden Opportunity
--------------------- Hotel & Casino, Inc. Development
--------------------- Corporation
Cyber LaCrosse, Inc. -------------------
-------------------- Oasis
International, Inc. Canton Industrial
Cyber Studio, Inc. -------------------- Corporation of SLC
-------------------- ------------------
Wasatch Capital
Diversified Holdings Corporation Canton Wild
II, Inc. ---------------- Horse Ranch II
------------------- ----------------
West Jordan
Diversified Real Estate Holdings, Canton Commercial
Holdings XIX, Inc. Inc. Carpet Corp
------------------- --------------------- -----------------
Diversified Land &
Cattle Co.
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Great Basin Water
Corp
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Lexington 4 Mile East
-----------------------
Lexington 3 Mile East
----------------------
Lexington One Mile
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Taylor's Landing, Inc.
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The Company also has a substantial interest in approximately 20 shell companies.
The Company intends to provide assistance in finding operations for these
companies through reverse mergers with operating companies. The value of these
companies cannot be determined at this time in light of the fact that 1) no
substantial assets are currently in the companies; 2) the Company has identified
no business opportunities for these companies and 3) the Companies' shareholding
in these entities are illiquid in light of recent rule changes on the resale of
securities in blank check companies. The Company and the companies' president
have assisted in filing Form 10-SB's to cause these companies to become fully
reporting under the Securities Exchange Act of 1934. The Company's president now
holds a majority interest in these entities.
Business of Issuer
Real Estate Investment
The Company's operations primarily involve the acquisition, management, lease
and sale of real estate holdings. Over the past seven 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."
Financial Consulting
Through it subsidiaries Hudson Consulting Group, Inc. and Canton Financial
Services Corporation, the Company also provides a variety of financial
consulting services to a wide range of clients. As used in this discussion, 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 also 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.
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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.
Employees
The Company is a holding company. As of March 31, 2000, the Company's
subsidiaries had a total of 44 employees, 30 of whom were full time employees
and 14 of whom were part time employees.
Reports to Security Holders
The Company is not required to deliver an annual report to security holders and
will not voluntarily deliver a copy of the annual report to the security
holders. If the Company should choose to create an annual report, it will
contain audited financial statements. The Company intends to file all of its
required information with the Securities and Exchange Commission ("SEC"). The
Company plans to file its 10KSB, 10QSB and all other forms that are or may
become applicable to the Company with the SEC.
The public may read and copy any materials that are filed by the Company with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The statements
and forms filed by the Company with the SEC have been filed electronically and
are available for viewing or copy on the SEC maintained Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The Internet address
for this site can be found at http://www.sec.gov. Additional information may be
found at the Company's websites: www.cyaa.com and www.hudsonconsult.com.
ITEM 2. DESCRIPTION OF PROPERTY
Location and Description
The Company owns or leases industrial, commercial, warehouse, office and
undeveloped commercial and residential 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.
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Regardless of the type of property, future acquisitions will not be limited to
any specific geographic area. At the end of 1999, the Company owned, leased, or
had interests in properties in Utah, Louisiana, Virginia, West Virginia, Arizona
and Nevada.
Investment Policies
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 and potential return on capital. 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 expenditure and/or the
issuance of shares of the Company's common stock ("Common Stock"). The Company
has been successful in acquiring several properties in this fashion.
The Company has no present intention to invest in First or Second Mortgages,
interests in Real Estate Investment Trusts or Real Estate Limited Partnerships.
However, the Company's Board of Directors is not precluded in the future from
considering or participating in such investments
The Company currently has no limitations on the percentage of assets which may
be invested in any one investment, or the type of securities or investment in
which it may invest. However, the board of directors in its discretion may set
policies without a vote of the Company's securities holders regarding the
percentage of assets which may be invested in any one investment, or type of
investment. The Company's current policy is to evaluate each investment based
upon its potential capital return to the Company on a relatively short term
basis. Furthermore, 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 operation of its properties. 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.
Description of Real Estate and Operating Data
Below is a list of the properties owned by the Company and/or its consolidated
subsidiaries as of December 31, 1999. Also included are any changes in the
ownership status of such properties which have occurred between the end of 1999
and the filing of this Form 10-KSB. Of the Company's properties, the General
Lafayette Motel in Baton Rouge, Louisiana and Adobe Hills Ranch in Elko County,
Nevada, each have a book value amounting to ten percent (10%) or more of the
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total assets of the Company. All reference to current principal balances of
encumbrances against the properties are as of December 31, 1999 only.
Golden Opportunity Development Corporation ("GODC")
The Company, through its former majority owned subsidiary, Innovative Property
Development Corporation ("IPDC"), obtained a majority interest in Golden
Opportunity Development Corporation ("GODC"), a Louisiana corporation, pursuant
to a Stock Purchase Agreement dated April 30, 1998. On April 2, 1999, IPDC sold
all of its assets (including its majority interest in GODC) to Diversified
Holdings I, Inc., a 90% owned subsidiary of the Company.
GODC's sole asset is the General Lafayette Inn, a 134 unit Motel and restaurant,
and four adjacent office/retail buildings, in Baton Rouge, Louisiana (the
"Motel"). The Motel is located next to the Mississippi River, three blocks from
a river boat dock, at 427 Lafayette Street, Baton Rouge, Louisiana 70802
The Motel is subject to a thirty (30) year mortgage in the principal amount of
$1,900,000.00. Under the terms of the note GODC is required to make monthly
payments in the amount of $11,391.46 until July 1, 2027. Mortgage payments are
current on this obligation. The balance owing on December 31, 1999 was
$1,838,944.
GODC presently plans to affiliate the Motel as a Villager Lodge franchise, but
must renovate within the franchiser's standards to achieve this status. GODC
intends to finance the renovations necessary to become a Villager Lodge
franchise through operating cash flows on a room by room basis. The initial cost
of such renovations is estimated at $250,000. GODC intends to finance the
renovations necessary to become a Villager Lodge franchise by finding bank or
institutional financing, equity offerings and/or private placements. Currently,
GODC is financing the renovations with operating cash flows on a room by room
basis. GODC has received a letter from Villager Lodge informing them of a
default in their franchise agreement. The default relates to the failure to
complete renovations on the Motel on the timetable agreed to upon the signing of
the Franchise Agreement. GODC is currently in negotiations to cure the default.
The Motel generates average monthly rental revenues of Twenty-Six Thousand Seven
Hundred Sixty- Six Dollars ($26,766) and Three Thousand Two Hundred Sixty
Dollars ($3,260) are generated from leases on other property. The Motel
currently has an occupancy rate of approximately 57% of its rentable rooms.
However, GODC expects this rate to increase once the renovations are complete
and the Motel becomes a Villager Lodge. The Motel's current occupancy rate,
based upon the number of available rooms, is approximately 57%. The current
number of available rooms fluctuates between 80 and 84. The Motel's low
occupancy rate is due in part to the fact that the Motel is in need of
substantial repairs including repairs to approximately fifty(50) rooms that are
not rentable. If these approximately fifty (50) unrentable rooms are added into
the calculation of the Motel's occupancy rate, the Motel would have an occupancy
rate of approximately 37%. GODC is in the process of renovating approximately
one room a month until it obtains sufficient financing to renovate the entire
Motel. At the time the Company acquired the Motel, approximately 40 rooms were
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rentable out of a total of 134 rooms. The neighborhood in which the Motel is
located was considered economically depressed prior to GODC's acquisition of the
Motel. However, the neighborhood over the last couple of years has been in the
process of being revitalized. GODC suspects that the Motel's poor condition was
the result of the Motel's prior inability to generate sufficient revenues to
make the necessary upgrades, repair and improvements to properly maintain the
property. The Motel's inability to generate sufficient revenues historically was
most likely the result of the formerly depressed local economy. To date, GODC
has been unable to find adequate financing to fully renovate the Motel.
The property upon which the Motel sits also contains approximately 15,000 square
feet of leaseable commercial space of which approximately 33 % is currently
occupied by tenants. GODC currently leases approximately 5,067 square feet of
this commercial space to the Culinary Arts Institute of Louisiana, Inc. for
$3,260 per month on a month to month basis, which may be canceled by either
party with 30 days notice. The annual rental rate of the commercial space leased
to the Culinary Arts Institute of Louisiana is approximately $8.00 per square
foot. The Motel's average room rental rate on a daily basis is $46.00 per night.
The Motel also rents rooms on a weekly or monthly basis for an average daily
rate of approximately $17.00.
The federal tax basis for the Motel is Two Million Five Hundred Ninety-Nine
Thousand Eight Hundred Forty-Six dollars ($2,599,846). The realty tax rate is
.627 and the annual realty taxes for 1999 were $21,755. GODC is depreciating the
property over a 39 year period and uses the straight line method of accounting
for depreciation purposes. GODC is of the opinion that the Motel and property
are adequately covered by insurance.
Adobe Hills Ranch II, LLC ("Adobe")
The Company, through its wholly owned subsidiary, Adobe Hills Ranch II, LLC, a
Nevada Limited Liability Company, purchased, on December 19, 1999, approximately
9,422 acres of mostly raw ground, known as the Adobe Hills Ranch, located in
Elko County, Nevada on December 19, 1999. The purchase price was $1,500,000 with
$300,000 being paid down and the balance of $1,200,000 being financed by the
seller. The terms of the note require interest at 8% per annum over the period
of the note with annual payments of principal and accrued interest in the sum of
$106,592.92 being due on December 15 of each year beginning with the year 2000.
The entire remaining amount of principal and accrued interest in the amount of
$1,212,074 is due and payable on December 15, 2006. The principal balance owing
on the note at December 31, 1999 was $1,200,000. Allen Wolfson, an affiliate of
the Company, has personally guaranteed the first payment due on the note on
December 15, 2000. For more information on this transaction, see "Item 12,
Certain Relationships and Related Transactions."
The Adobe Hills Ranch is comprised of two main areas that include bottom land
consisting of approximately 622 acres and pasture land containing approximately
8,800 acres that surrounds the Adobe Hills mountain range and the Sherman Points
range. The 8,800 acre parcel lies about 4 miles north and east of Elko City,
Nevada and is accessible off of State Road Mountain City Highway. The bottom
land, where the ranch headquarters is located, lies approximately 4 miles east
of downtown Elko City off Canyon Road #40 in the Osino Canyon Valley.
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Adobe has leased back to the seller, for a two year period ending December 15,
2001, all of the property except acreage in Section 35 T 35 R 54, which Adobe
may subdivide or fence during the lease term. The seller has agreed to pay the
sum of $20,000 per year for the lease. The lease also provides that the
seller/lessee may go upon the property until May 1, 2002 for the purpose of
harvesting any hay growing on the premises.
Adobe's future plans for the land include the possibility of subdividing a
portion of the 8,800 acres into subdivision lots. The property was acquired for
investment purposes. The property competes with other undeveloped property in
the area of Elko City, Nevada. It is the opinion of Adobe that the property is
adequately insured.
OTHER PROPERTIES
Commercial Properties
The Company's subsidiaries own interests in the eight commercial properties
described below.
Canton's Commercial Carpet Corporation ("CCCC")
CCCC 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 ("Office
Property"). The Office Property is a two story building with 14,347 net rentable
square feet of office space. CCCC purchased the building on March 6, 1998, by
exercising its option to purchase the building through the payment of $418,762.
CCCC financed the purchase price and borrowed an additional sum of $222,489
which is secured by the Office Property.
The Company currently occupies approximately 50% of the building with the
remaining 50% subleased to an investment company, a mortgage company and a
telemarketing company. Total annual rents from the unrelated tenants equal
$68,175, or $12.11 per square foot. Improvements have been made to the property
including carpeting, painting and remodeling the second and third floors. There
are no current plans for further renovation. CCCC is of the opinion that this
property is adequately covered by insurance. The available space in the building
is 100% occupied at this time. The office space in the building, when available
for lease, competes with other available office space in the downtown area of
Salt Lake City.
Diversified Holdings I, Inc. ("DHI")
DHI owns 20% of the capital Stock of Wasatch Capital Corporation ("Wasatch").
Wasatch owns the Wallace-Bennett Building, located at 55-65 West 100 South, Salt
Lake City, Utah. The building is a 36,797 square foot, turn-of-the-century
multi-story office building. Currently, only a portion (approximately 35%) of
the ground floor is rented. The rentable ground floor space in the building is
adequate for its current uses, but the additional stories above the ground floor
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cannot be used until they have been remodeled and rehabilitated. Wasatch is
seeking additional tenants for the ground floor space. This building competes
for tenants to occupy its rentable space with other office buildings in the
downtown area of Salt Lake City.
The property was refinanced in June of 1999, the amount of the new loan was
$600,000, with interest at 12% per annum. Total monthly payments of principal
and interest are $6,172 with a final payment of $6157 due on July 1, 2029. The
balance due on the note on December 31, 1999 was $598,944. A subsequent lien was
placed against the property in favor of Paul Rubey, in exchange for financing
used by the property owner in the amount of $107,899, bearing interest at the
rate of 12% per annum, with monthly payments of principal and interest in the
amount of $5,000 and amortizing on February 1, 2001. There are no prepayment
penalties on these notes.
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.
The rentable ground level space is leased to a restaurant (2,584 square feet)
and a retail store (912 square feet). 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. Wasatch is of the
opinion that this property is adequately covered by insurance.
A-Z South State Corporation ("A-Z South")
A-Z South owns a one story retail building located at 1374 South State Street,
Salt Lake City, Utah which it purchased on December 1, 1999 for $535,000. An
all-inclusive trust deed in the amount of $400,000 was placed on the property
requiring monthly payments of $4,231.38 with interest at 9.725% per annum. The
balance owing at December 31, 1999 was $400,000. A balloon payment of $356,937
comes due on December 1, 2002. The Seller took back a second mortgage in the
amount of $75,000. This note, which does not bear interest, is due on September
1, 2000. The balance due on this note on December 31, 1999 was $75,000. There
are no prepayment penalties on these notes. The building was fully occupied by
two tenants at the time of purchase but one tenant has defaulted on its rent and
abandoned half of the building. The other half remains occupied, pursuant to a
lease, with a tenant that is current on all of its obligations. The lease runs
through January 30, 2004 and calls for payment of a monthly rental of $3,800 per
month ($45,600 per year) for approximately 4,500 square feet of space ($10.13
per square foot). A-Z South is currently seeking a new tenant for the empty
space. A-Z South believes the property is adequately insured. A-Z South has no
present plans to renovate or improve the property. The rental area in the
building competes for tenants with other retail space on State Street which is a
commercial zone for over one mile in each direction from the property.
CyberStudio, Inc. ("CyberStudio")
CyberStudio holds two leases, with options to purchase, on two office buildings
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located on West Sams Boulevard in Kearns, Utah. The two buildings each contain
approximately 11,709 total floor space in a single story. The first building was
leased for a three year period on November 1, 1997, with an option to purchase
through November 1, 2000. The terms of the option to purchase allow the Company
to purchase the building for $750,000. The option may be exercised by giving
notice on or before May 1, 2000. If the option is exercised, terms of purchase
shall be 30% down with seller financing the remaining 70% over 30 years at 1.5%
over prime. Monthly rent is $3,000 per month.
The second building was leased for a three year period on November 1, 1999, with
an option to purchase through October 31, 2002. The terms of the option to
purchase allow the Company to purchase the building for $600,000, if closed
before October 1, 2000, $625,000 if closed before October 31, 2001, and $650,000
if closed before October 1, 2002. Rent paid by CyberStudio on the second
building is tied to the percentage of the building that is rented. Rent is
currently $2,000 per month and increases from that figure by the percentage of
the building that is occupied (i.e. 20% increase in rent for 20% occupancy
rate).
The first building is leased to two major tenants, generating monthly rentals of
$6,569 at an average rate of $10.59 per square foot. The second building is
presently unoccupied. Efforts to find tenants for the second building are
ongoing. Management believes that the buildings are adequately covered by
insurance. CyberStudio has no present plans to renovate or improve the
buildings. The buildings compete for tenants with other office space in the
Kearns area.
West Jordan Real Estate Holdings, Inc. ("West Jordan")
West Jordan owns the Glendale Plaza, a retail shopping plaza located at 1100
South Glendale Drive, Salt Lake City, Utah. West Jordan currently leases the
retail shopping plaza and has an option, until August 31, 2001, to purchase the
property for $799,000. The monthly lease payments on the Glendale Plaza are
$5,663 and the option price is reduced each month by the amount of the lease
payment.
On August 20, 1999, West Jordan sent a letter to the property owners exercising
its right to purchase the property, subject to the removal of all clouds on
title, including tax liens asserted against the owners by the I.R.S., for a
price after off sets of $60,932. These offsets include the mortgage held by US
Bank and the reduction in that mortgage by West Jordan. West Jordan is a primary
obligor on the present mortgage held by US Bank dated March 10, 1999 in the
principal sum of $477,186.84 with interest at 10% per annum. Monthly payments of
principal and interest are in the amount of $5,662.56, the balance on this
obligation was $462,468 as of December 31, 1999. The remaining balance of
$301,128 is due and payable on April 10, 2002. The offer to the owners has been
included in an Offer in Compromise that the owners have presented to the I.R.S.
for complete release from the subject liens. No response has yet been made to
this offer by the I.R.S. and the owners report that efforts are ongoing to
conclude these matters. The monthly payments are continuing to be made and are
reducing the ultimate amount that will need to be paid at any closing of the
purchase of the property.
The property contains 72,256 square feet of rentable retail space and
approximately 100% is subleased to tenants. A retail furniture store occupies
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10,700 square feet of the building and a market 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 $225,350
in annual rental income, or approximately $3.12 per square foot. Present plans
are to continue to operate the building as a retail shopping plaza and to
increase the rental rate. Property taxes and assessments have been paid in full
on the property. West Jordan is of the opinion that this property is adequately
covered by insurance. West Jordan has no present plans to renovate or improve
the plaza.
Cyber LaCrosse, Inc. (Cyber LaCrosse")
Cyber LaCrosse owns a 4,696 square foot building located at 26 South Main
Street, Nephi, Utah which is designed for use as a small tavern. The building is
subject to a 7% note secured by a deed of trust on the property. The note has a
principal balance of $177,040 as of December 31, 1999, and requires monthly
payments of $1,545 until May 2004, when the full $143,320 in remaining principal
and accrued interest are due. There is no prepayment penalty on this note. The
building is presently unoccupied. Cyber LaCrosse is currently seeking a tenant
to occupy the premises.
Taylor's Landing, Inc. ("Taylor's")
Taylor's owns a 2,200 square foot building located at 390 South Main in Nephi
which is designed for use as a cafe. The property is subject to a 7% note
secured by a deed of trust on the property. The note came due in January 1,
1999; however, Taylor's has received an extension until April 15, 2001. Pursuant
to the terms of the extension, Taylor's is paying $1,500 dollars per month on
the note. The full balance of approximately $41,739 of remaining principal and
interest must be paid by April 15, 2001 or the property may be foreclosed upon.
The principal balance on December 31, 1999 was $55,146. There is no prepayment
penalty on this note. Taylor's is currently seeking alternative financing. In
the event that Taylor's does not obtain financing, Taylor's may purchase the
property with cash. Taylor's has no present plans to renovate or improve the
building. Taylor's believes the property is adequately insured. The entire
property is leased to one tenant who operates a restaurant (Mi Rancherita) on
the premises. The lease, dated June 8, 1999, requires the tenant to pay annual
rent of $15,600, or $7.09 per square foot. The lease expires on June 31 [sic],
2003.
Taylor's owns a 4,000 square foot building located at 65 South Main in Nephi
which is also designed for use as a cafe. The property 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 property is also subject to a second note of
$70,000. In August 1999, this note was modified and extended to provide for a
maturity date of August 1, 2001. The interest rate is 8% per annum. Interest
only payments based on the 8% interest rate began on September 1, 1999. A
payment of $5,000 in reduction of principal is due August 1, 2000. The balance
of the note in the amount of $43,315 is due on August 1, 2001. The principal
balance on December 31, 1999 was $54,993. There are no prepayment penalties on
these notes. The property is currently without a tenant. Taylor's is currently
seeking a tenant to occupy the premises.
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These three properties, described above, are located in the old Main Street area
of Nephi, Utah which area is in decline and somewhat economically depressed. The
properties compete with other available commercial restaurant space in the area.
The owners have no present plans to renovate or improve the buildings. The
Companies believe the properties are adequately insured.
Residential Properties
Two of the Company's subsidiaries own interests in the residential properties
described below.
Canton's Commercial Carpet Corporation ("CCCC")
CCCC purchased a two-story 18 unit apartment building, located at 2402 Wall
Avenue in Ogden, Utah, on July 23, 1998. The property includes 7,500 square feet
of commercial space. The total purchase price was $850,000. CCCC put $5,000 down
and financed the balance. CCCC obtained 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 12-month period with an annual interest rate
of 10%. These two loans were secured by four units in the apartment complex.
These two mortgages were paid off in 1999. The $670,000 balance is being
financed by the seller on a promissory note dated July 23, 1998, with payments
that are based upon a 20-year amortization with an interest rate of 7% for the
first two years, which escalates to 9% beginning with the September 1, 2000
payment for the remainder of the term with the balance of $577,361.01 due on
August 1, 2003. There is no prepayment penalty. The balance owed at December 31,
1999 was $645,526. The $670,000 loan is secured by the entire apartment complex
excepting the four units mentioned above.
CCCC obtained the necessary licenses and has completed the conversion of the
apartments to condominiums. CCCC had planned to sell the 18 condominiums.
However, to date, no sales have been consummated, and plans to sell the units as
condominiums have been put on hold. Pending a decision by CCCC on the sale of
the units as condominiums, CCCC is renting the units on a short term basis. CCCC
is also actively searching for a commercial tenant to occupy the 7,500 square
feet of commercial space. CCCC is of the opinion that this property is
adequately covered by insurance. This facility competes with other rental units
in the downtown Ogden area. CCCC has no current plans for additional renovation
of the building. Ongoing maintenance and repairs are carried out as needed.
Canton Financial Services Corporation ("CFSC")
CFSC 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 $29,852 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 $32,749 and bearing an interest rate
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of 8.25% per annum. Monthly payments on the second unit are $301 until October,
2001, when the remaining $30,677 comes due in full. The third unit is subject to
a note with a current principal balance of $38,914 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.
CFSC also has an option to purchase a fourth condominium in the Brian Head area
pursuant to a lease option agreement it executed with Richard Surber, CFSC'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 condominium through a payment of $82,100, 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 right 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."
CFSC is of the opinion that these properties are adequately covered by
insurance. CFSC has no present plans to renovate or improve the units.
Industrial Properties
Three of the Company's subsidiaries own interests in the industrial properties
described below.
Canton Tire Recycling West Virginia, Inc. ("CTR")
CTR owns the Parkersburg Terminal, 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. There are no encumbrances on
the property. The property has been vacant and unused since its acquisition. CTR
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. CTR is of the opinion that this property is adequately covered by
insurance. CTR has no present plans to renovate or improve the property.
The West Virginia Division of Environmental Protection has filed suit against
CTR and the Company seeking the completion of environmental clean up procedures
at the site. For more information on the suit filed against CTR and the Company
and for more information on Parkersburg properties, see "Item 3, Legal
Proceedings."
Thistle Holdings, Inc. ("Thistle")
Thistle owned the Canton Plant, located at 200 East Elm Street in Canton,
Illinois. The plant was acquired by Thistle in 1994. 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. The property was
substantially destroyed in a 1997 fire.
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The State of Illinois has filed suit against the Company seeking environmental
cleanup costs at the Canton Plant. For more information on the Canton Plant, see
"Item 3, Legal Proceedings."
Property taxes, penalties, and assessments totaling approximately $543,276 were
owed on the property, of which portions were delinquent as far back as 1988.
There were no other encumbrances on the property. The property taxes, penalties
and assessments had to be paid by May 17, 1999. Thistle did not pay the taxes
and assessments and the property was sold at a tax sale. Thistle has no plans to
redeem the property. The Company recognized a gain on the foreclosure of
$222,958 during 1999 as the liabilities exceeded the basis in the property.
Diversified Holdings XIX, Inc. ("DHXIX")
DHXIX owned the former KMC food plant and warehouse located in the vicinity of
Cheriton, Virginia. The property was purchased by DHXIX on August 2, 1996. This
property was sold on the 18th day of May 1999 to Eastern Shore Composites,
L.L.C. a Virginia limited liability company for the price of $680,000. The
purchase price was paid in cash and with a promissory note in the sum of
$655,000, interest at the rate of 9% per annum, and monthly payments of
principal and interest in the amount of $5,893. On March 29, 2000 DHXIX received
a final payment of $647,218 in cash that paid the outstanding balanced owed on
the purchase of this property. A release of the note and deed of trust have been
provided to the purchaser, releasing all claims of DHXIX to the property.
Investments in Raw Land
Eleven of the Company's subsidiaries own interests in raw land in the States of
Nevada, Utah and Arizona as described below.
Nevada
Oasis International Corporation ("OIC")
OIC owns approximately 1,076 acres of mostly raw land ("OIC Property") located
at the junction of Interstate 80 and State Road 233 in Elko County, Nevada. The
1,076 acres held by OIC are subject to a $900,000 note executed in favor of the
seller and secured by a first deed of trust (the "Note"). The Note requires
quarterly payments of $31,475 which includes both interest payments and
principal reductions. The entire $343,942 in remaining unpaid principal and
accrued interest becomes due and payable on January 1, 2006. The balance on
December 31, 1999 was $835,430. 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. Other than accrued property taxes, there
are currently no other encumbrances on the OIC Property.
OIC currently operates a 48 unit mobile home park on approximately 60 acres of
the OIC Property. The current occupancy rate is 90%. Mobile home spaces are
rented for $175 per month. The mobile home park generates approximately $7,000
in monthly gross rental revenues.
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OIC has developed preliminary plans to subdivide a 58 acre parcel of undeveloped
land in Oasis, Nevada. OIC has 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. OIC plans to sell lots for
approximately $38,000 each. OIC plans will include a total of 217 lots. The
costs in 1999 to design, prepare and seek approval of the map were $22,000. The
cost to actually subdivide is estimated at $15,000 a lot or $3,255,000 for the
entire project. OIC's development of its plans are contingent upon obtaining
adequate financing. OIC is currently seeking financing from banks and other
sources. No guarantees can be given that OIC will be successful in obtaining
financing.
The federal tax basis of the Oasis Property is $1,018,435. The realty tax rate
is .024204 and the annual realty taxes for 1999 were $4,452. OIC is of the
opinion that this property is adequately covered by insurance.
Oasis International Hotel and Casino, Inc. ("OIHC")
OIHC owns approximately 25 acres of mostly raw land contiguous to the OIC
Property. The 25 acres held by OIHC are not subject to any liens or mortgages.
In 1998, OIHC sold 18.289 acres (OIHC originally held approximately 50 acres
which were acquired on December 27, 1995) to Oasis Hotel, Resort & Casino - III,
Inc.("Oasis III") for $5,000,000 with the terms specified below. The 18.289
acres of land, sold to Oasis III, included a truck stop facility which consisted
of a small motel, a gas station, a small restaurant and office space.
The terms of purchase included: (1) the payment of One Million (1,000,000)
shares of restricted stock in Oasis Resorts International, Inc., a publicly
traded company on the OTC bulletin board (OAIC); (2) the assumption of a
$550,000 first deed of trust; and (3) acceptance of a $3,425,000 second deed of
trust with a term of 30 years, bearing interest at 9% annually, with payments
due monthly. OIHC originally held approximately 50 acres of land in Oasis,
Nevada subject to a $300,000 promissory note. As a result of the sale of 18.289
acres to Oasis III, the promissory note holder agreed to release OIHC from the
$300,000 note in exchange for 100,000 shares of the Company's restricted common
stock and Oasis III's assumption of a $550,000 deed of trust on the 18.289
acres. One of the ancillary effects of the sale of the 18.289 acres to Oasis
III, was that OIHC obtained title to its remaining parcels of land free and
clear of all liens.
Although OIHC believes that the sale of the 18.289 acres was in the best
interest of OIHC, OIHC is aware that Oasis III's ability to pay pursuant to the
terms of the second deed of trust is contingent upon Oasis III's ability to
generate revenues as a start up venture with no operating history or present
ability to pay based upon a lack of revenues. Consequently, Oasis III is
considered a high credit risk and there is a substantial possibility that Oasis
III could default. However, Oasis III was current as of December 31, 1999 in its
note obligations, through the acceptance by OIHC of investment securities as
payment instead of cash payments. The balance due on the sale to Oasis III as of
December 31, 1999 was $3,386,957.
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On January 11, 1999, OIHC consummated the sale of a1/2interest in 1.450 acres of
land to Pienne Chow Sau Har in exchange for: (1) 31,250 shares of Oasis Hotel,
Resort & Casino - I, Inc., (2) 31,250 shares of common stock of Oasis Hotel,
Resort & Casino - II, Inc. (3) a secured promissory note in the amount of
$160,000, dated February 1, 1996, held by Ms. Chow. The maker of the $160,000
promissory note, China Food & Beverage Company, has been in default since
October 1, 1997. OIHC has enforced its rights under the promissory note to
foreclose on the collateral of the note. Ms. Chow has agreed to deed this
property back to OIHC in exchange for payment of $285,000. The last instalment
on the $285,000 was received by OIHC on April 11, 2000, and paid to Ms. Chow.
The property has been deeded back to OIHC by Ms. Chow.
On January 11, 1999, OIHC consummated the sale of 2.145 acres to Oasis Fields,
L.L.C. for $120,000 cash and the execution of a promissory note in the amount of
$480,000. The terms of the promissory note call for the payment of $480,000 plus
accrued interest at a rate of 7% annually due and payable on January 11, 2000.
The note is secured by the 2.145 acres. OIHC has released its secured interest
in this property in exchange for 1,200,000 shares of the common stock of
Professional Wrestling Alliance Corporation, a Delaware corporation (OTC:BB,
PWAA).
On October 19, 1999, OIHC sold a 1.38 acre parcel of this property to Williams
Communications, Inc. for the construction of a relay system. The purchase price
for this parcel of land was $300,000, which was paid in cash at the time of
closing. The local county planning commission required the posting of a bond by
OIHC to insure the construction of a road through the remaining OIHC property to
the new Williams Communication parcel, this bond is in the amount of $235,494
and only insures the construction of the said roadway within one year.
Utah
Through the other nine subsidiaries, the Company owns a total of approximately
6,915 acres of raw, unimproved land located in undeveloped regions of western
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 1999. Of the total acreage, approximately 1,975 acres are subject to
three separate notes with a combined principal balance of $39,131 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 $25,226 in principal balance is
due in full.
The total acreage also includes an additional 1,280 acres which are subject to
two separate notes with a total current principal balance of $78,298 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 $74,078 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 $89,612 and secured by a deed of trust. The
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note on these 1,280 acres accrues interest at a variable rate (currently at 5%
per annum) and provides for annual payments of $8,961. All principal and
interest on the note will be paid in December 2008. 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 $102,564 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
principal payments of $12,708. The note matures in December of 2001 when the
remaining $90,486 in principal balance is due.
On December 21, 1999, the Company through its subsidiaries, Diversified Holdings
II, III & V, all Nevada corporations, acquired a total of 21 total additional
parcels of raw land in western Box Elder County for $495,070. The property
owners financed $444,600 of the purchase price .The properties are financed on
ten year notes at 7% per annum interest. Annual payments totaling $63,303 are
due and payable on December 20, starting in the year 2000.
Finally, the total acreage includes 140 acres of raw land subject to a note with
a current principal balance of $4,701 and secured by a deed of trust. The note
on these 140 acres accrues interest at 6.5% and requires monthly payments of
$60. The note matures in August of 2004 when the remaining $2,028 in principal
balance is due.
Arizona
Since August, 1994, the Company has owned 13.22 acres of raw, unimproved land
located in Pima County, Arizona near the City of Tucson. The property was
subject to a Deed of Trust with a balance of approximately $41,785, and
providing for interest at an annual rate of 8%. Total monthly principal and
interest payments were $825. A balloon payment of approximately $40,689 plus
accrued interest was due in March, 1999. The Company sold its interest in the
property for $1,700 to avoid the need to make the balloon payment.
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. Attempts by the Company to sell any or all of the raw land would put the
Company in competition with other potential sellers of raw land in the vicinity
of the property.
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ITEM 3. LEGAL PROCEEDINGS
The following cases may have a material impact on the Company:
CyberAmerica Corporation vs. MJMC, Inc., Lanco International, Inc. and Mi-Jack
Products, Inc. - Suit was filed on January 10, 1997 in the Circuit Court of Cook
County, Illinois, Law Division as file no. 97L 000369 seeking recovery of
damages suffered by Canton Tire Recycling Corporation based upon the Company's
belief that tire shredding equipment did not perform according to warranties and
representations made by defendants. The Company has filed a Third Amended
Complaint in the case. Discovery is ongoing with trial of the matter to be
scheduled upon the completion of discovery. The Defendant has filed a
counterclaim for damages, seeking recovery of lease payments for the tire
shredding equipment. The Company has stated that the total damages for which it
seeks recovery is in an amount of not less than $1 million.
Canton Financial Service Corporation v. Network Systems International, Inc.
- -Canton Financial Services Corporation ("CFSC") has a claim pending before the
Circuit Court for the Thirteenth Judicial Circuit, in and for Hillsborough
County, State of Florida, Civil Division, Case Number 98- 657-A. The complaint
seeks payment of consulting fees and the delivery of shares, an obligation
created in the merger of a third party with an existing corporation and the
services of CFSC in bringing that event to pass. Cash in the amount of $15,000
is sought plus delivery of 355,029 shares of the common stock of Network Systems
International, Inc. Network filed a motion for summary judgment seeking to have
the court rule that it is not liable for the delivery of shares of Network to
CFSC, the Court denied this motion. A trial setting is expected from the Court
during this year.
State of Illinois vs. The Canton Industrial 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. 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. On August
6, 1997, a fire engulfed the facility and destroyed over 800,000 square feet of
the buildings located at the Canton Plant. Following the fire, preliminary
testing indicated that asbestos containing materials were included in the debris
of the fire.
Clean up and removal of the debris from the fire includes the removal of any
asbestos containing material on the site. Ownership of the site was transferred
to the City of Canton at a tax sale for unpaid property taxes owed on the site.
The City of Canton and the Federal EPA are currently working to remove all
remaining hazardous material from the site. (See Possible Actions by
Governmental Authorities.) The State of Illinois filed in February 2000, a
Motion for Voluntary Dismissal, entry of the Order granting this Motion has not
yet been confirmed.
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, respecting cleanup of waste tires at the Canton Plant
site. The Canton Plant had been previously used by the Company for tire
recycling operations. This action sought recovery of $325,398 in costs that were
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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 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 $326,154 award made by the Pollution Control Board and the imposition of
fines or sanctions for the failure to pay this award. On August 31, 1999 an
agreed Summary Judgment Order was entered in this matter, the order provides
that the Company shall pay the sum of $326,153.74 for tire removal costs from
the prior Board order, with interest, through quarterly payments of $20,000 and
denied all fines and penalties. The State subsequently filed a Motion for
Voluntary Dismissal, to dismiss all causes of action except as set forth in the
August 31, 1999 Order, the Court signed an order granting this dismissal on
February 7, 2000.
State of West Virginia vs. Canton Tire Recycling West Virginia, Inc., Canton
Industrial Corporation and CyberAmerica Corporation - Suit was filed on August
14, 1998 in the Circuit Court of Wood County, Parkersburg, West Virginia as file
no. 98 C 354 seeking the completion of clean up procedures for property owned by
Canton Tire Recycling West Virginia, located in the city of Parkersburg. The
State is requesting that certain waste material present on the site and any
remaining material in the on site storage tanks be removed and that an oil/water
separator located on the property be cleaned out. The Company and the State of
West Virginia entered into a Consent Decree by which the Company agreed to
submit and complete a Remediation and Sampling Work Plan and the payment of
$88,000 in fines and penalties ($8,000 has been paid, $20,000 is payable each
May, 31, from the year 2000 through 2003.) The work required by the Remediation
and Sampling Work Plan has been completed and submitted to the State. Local
counsel and local environmental engineers are awaiting confirmation from the
State of completion of the work and any subsequent work that may be required by
the state based upon test results indicating that soil contamination testing
required by the Plan reported contamination exceeding state guidelines. The
nature and cost of further testing or clean up cannot be determined at this
time, pending further instructions from the State of West Virginia. The
liability of prior owners is also being explored for any potential additional
costs for clean up of soil contamination that took place prior to the Company's
acquisition of the property.
Legong Investments N.V., a Netherlands Antilles corporation v. CyberAmerica
Corporation On November 12, 1999 this plaintiff filed suit against the Company
in the Third Judicial District Court, for Salt Lake County, State of Utah, Civil
No. 990911427. The suit seeks recovery under the Company's convertible debenture
issued to the Plaintiff with a date of September 17, 1996 and a principal face
amount of $300,000. The debenture originally had a maturity date of September
16, 1997, which was extended by the parties in an agreement dated October 16,
1997. Plaintiff has demanded full payment of the outstanding balance due and the
suit makes a demand in the amount of $543,997, plus costs and reasonable
attorney fees or the issuance of 583,090 shares of free trading CyberAmerica
common stock. The Company has acknowledged that some amount is due and tendered
to the Plaintiff a check in the amount of $20,000 on October 25, 1999 as a
partial satisfaction of the debenture. The Company has filed a response to suit
and responded to discovery submitted by the Plaintiff disputing the alleged
amount. Settlement offers have been made and discussions continue in an attempt
to resolve this matter short of going through a trial.
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Possible Actions by Governmental Authorities
Canton Illinois Property. In January, 2000, the United States Environmental
Protection Agency forwarded to the Company and to Thistle Holdings Inc.
informing each corporation that the EPA has identified them as potentially
responsible parties, as former owners or operators of the property, for
reimbursement of all costs incurred by the EPA for actions taken pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CERCLA). Both corporations responded that they are not current owners nor
operators of the property (the City of Canton having taken title to the
property) and that the materials identified as requiring removal, friable
asbestos and asbestos-containing material, were placed on the site by owners
prior to the acquisition of the property by either of these corporations. The
levels of asbestos materials found to exist on the site are several times higher
than those allowed by federal guidelines. The Company declined to involve itself
in the clean up process, no response has been made by the EPA as of this date.
The Company cannot determine at this time the extent of possible liability.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During 1999, 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 was traded on the Boston Stock Exchange ("Exchange")
under the symbol "CYA" until the close of business on May 28, 1998, when the
Company was delisted for failure to meet the Exchange's minimum market value
float requirements of at least $500,000. For more information on this
transaction, see the Form 8-K filed by the Company on June 1, 1998. The
Company's stock is now traded on the OTC Bulletin Board under the symbol "CYAA."
The table below sets forth the high and low sales prices for the Company's
Common Stock for each quarter of 1998 and 1999. The quotations below reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions:
Quarter ending High Low
-------------- ---- ---
1998 March 31 $0.75 $0.19
- ----
June 30 $0.41 $0.06
September 30 $0.65 $0.35
December 31 $0.56 $0.28
20
<PAGE>
1999 March 31 $0.62 $0.36
June 30 $2.75 $0.31
September 30 $1.37 $0.75
December 31 $1.31 $0.89
2000 March 31 $4.00 $1.19
Shareholders
As of April 14, 2000 there were approximately 826 shareholders of record holding
a total of 3,227,238 shares of Common Stock.
Dividends
The Company has not declared any cash dividends since inception. The payment of
dividends is within the discretion of the Board of Directors and will depend on
the Company's earnings, capital requirements, financial condition, and other
relevant factors. 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.
The Company has announced that it intends, in the near future, to pay a dividend
in stock of Professional Wrestling Alliance Corp. (OTC BB:PWAA). The proposed
dividend would be as follows: 1 restricted share of PWAA stock for every 2
shares of the Company's stock held of record on January 28, 2000. No payable
date has yet been set. The payment of the dividend is pending receipt by the
Company of legal opinions and assurances from qualified securities counsel that
the Company can legally distribute shares of Professional Wrestling Alliance
Corp. in compliance with all applicable state and federal securities laws.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
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.
21
<PAGE>
Real Estate Operations
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.
The Company recorded 1999 revenues totaling $1,791,952 as a result of the sale
of properties, as compared to revenues of $2,462,450 for 1998. Costs attributed
to the sale of the properties were $635,312 for 1999 as compared to $1,366,714
for 1998, resulting in respective gross profits from real estate sales of
$1,156,640 for 1999 and $1,095,736 for 1998. The Company sold four properties in
1999 because they had appreciated significantly since their acquisition by the
Company and the Company believed that the prices offered represented a
reasonable market value for each property. The proceeds of these sales account
for 26% of the revenues realized by the Company during 1999. The Company intends
to sell further 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 revenues 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 $965,755 for 1999 as compared to
$730,737 for 1998. This increase was largely attributable to increased
occupancy. During 1999, the Company took steps to decrease the overall vacancy
rate of its consolidated real estate holdings including marketing its holdings
to potential tenants through commissioned real estate agents and making
cost-effective improvements to the holdings to increase occupancy.
Currently, the Company has negative cash flows from rental operations of $55,525
for the year ended December 31, 1999 compared to $88,910 for the year ended
December 31, 1998. 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.
22
<PAGE>
The Company had six balloon payments on its properties come due in 1999. All of
the payments were either paid, extended to the year 2001 or beyond, or
refinanced. The Company paid a total of $171,436 in 1999 to pay off ($156,436)
or obtain extensions ($15,000) on balloon payments. For more information on
these transactions, see "Item 2, Description of Property."
The Company, through its subsidiaries, continued to acquire property during
1999, including property located in Salt Lake City, Utah. For more information
on these transactions see "Item 2. Description of Property."
Consulting Operations
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 provides shareholder relations services designed to expose
its clients to the broker dealer community.
While over the past year, the Company has reduced the scope and extent of the
financial consulting services it provides, the amount of consulting services
provided has grown. The Company has made an effort to limit the types of
consulting services (as discussed above) it performs to those which have
historically been the most profitable. The Company believes that over time this
will provide greater benefit to the Company.
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 usually 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 or
less 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, in part, by liquidating non-cash assets (equity
securities) 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 and the Company's ability
to sell such securities. A decline in the market price of a client's stock can
affect the total asset value of the Company's balance sheet and can result in
the Company incurring substantial losses on its income statement. The Company
23
<PAGE>
generally books securities that it accepts as payment at a 25% to 75% discount
of the current market value at the time the Company accepts the securities due
to illiquidity of the securities because of restrictions on resale.
The Company's portfolio consists primarily of restricted and unrestricted shares
of common stock in micro to small cap publicly traded companies. This portfolio
currently consists of shares of common in over 70 different companies whose
operations range from that of high-tech Internet operations to oil and gas
companies. The Company believes that the diversity of its current holdings is
such that the overall volatility of its portfolio is significantly less than in
prior years of operations.
Revenues from the Company's financial consulting operations increased for the
year ended December 31, 1999. The Company recorded $3,822,117 in revenues for
the year ended December 31, 1999, from its financial consulting operations as
compared to $996,447 for the same period of 1998. This increase was due to an
increase in the number of clients that retained the Company during the year
ended December 31, 1999.
Company Operations as a Whole
Revenues
Gross revenues for December 31, 1999 and 1998 were $6,858,784 and $4,189,634
respectively. Gross revenues for the year ended December 31, 1999 increased 64%
over December 31, 1998. This is due to a $2,825,670 increase in financial
consulting and a $235,018 increase in rental revenues in 1999 as compared to
1998.
Profits
The Company recorded an operating profit of $2,557,461 as compared to an
operating profit of $3,101 for December 31, 1999 and 1998, respectively. The net
profit as a percentage increased by 786% for December 31, 1999 over December 31,
1998. The Company recorded a net profit of $3,624,067 compared to a net profit
of $408,984 for December 31, 1999 and 1998, respectively. The Company's
improvement in profitability is largely attributable to the increase in
consulting. Additionally, the Company realized a gain from the sale of
investment securities of $698,759 in 1999 as compared to gain from the sale of
investment securities of $375,323 in 1998.
The Company expects to continue to operate at a profit through fiscal 2000.
However, there can be no assurance that the Company will continue to maintain
profitability or that its revenue growth can be sustained in the future.
Expenses
General and administrative expenses for December 31, 1999 and 1998 were
$1,605,879 and $1,454,549, respectively. The reason for the $151,330 increase is
primarily attributable to an increase in the number of employees.
24
<PAGE>
Depreciation and amortization expenses for the years ended December 31, 1999 and
December 31, 1998 were $300,198 and $348,569, respectively. The decrease was due
to foreclosure on Canton Illinois property.
The Company expects increases in expenses through 2000 as the Company steps up
its effort to acquire additional properties and continues to grow its consulting
businesses.
Capital Resources and Liquidity
At December 31, 1999, the Company had current assets of $6,019,507 and total
assets of $17,726,261 as compared to $2,777,442 and $12,594,655, respectively at
December 31, 1998. The Company had net working capital of $3,831,190 at December
31, 1999 compared to a working capital deficit of $1,410,156 at December 31,
1998.
Net stockholders' equity in the Company was $7,473,761 as of December 31, 1999,
compared to $3,381,184 as of December 31, 1998.
Cash flow provided by operations was $1,327,886 for the year ended December 31,
1999, compared to cash flow provided by operations of $814,275 for the year
ended December 31, 1998. Cash flows provided from operating activities for the
year ended December 31, 1999 are primarily attributable to an increase in
consulting and rental revenues.
Cash flow provided in financing activities was $3,089,033 for the year ended
December 31, 1999, compared to net cash provided of $910,983 for the year ended
December 31, 1998. The Company had positive cash flow for the year ended
December 31, 1999 as a result of an increase in long-term debt associated with
purchases of fixed assets.
Due to the Company's debt service on real estate holdings, willingness to
acquire properties with negative cash flow shortages 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 the year ended December 31, 1999, the Company issued a total of 360,667
shares of common stock as result of three agreements for the exchange of stock,
and the exercise of 66,667 options held by an outside consultant.
Capital Expenditures
The Company expended $4,545,349 and $3,091,768 in capital expenditures on
property and equipment for the years ended December 31, 1999 and 1998,
respectively.
25
<PAGE>
Income Tax Expense (Benefit)
The Company has an income tax benefit resulting from net operating losses to
offset future operating profit.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations
over the past three years. The Company believes that it can offset inflationary
increases in the cost of materials and labor by increasing sales and improving
operating efficiencies.
Known Trends, Events, or Uncertainties
General Real Estate Investment Risks
The Company's investments are subject to varying degrees of risk generally
incident to the ownership of real property. Real estate values and income from
the Company's current properties may be adversely affected by changes in
national or local economic conditions and neighborhood characteristics, changes
in interest rates and in the availability, cost and terms of mortgage funds, the
impact of present or future environmental legislation and compliance with
environmental laws, the ongoing need for capital improvements, changes in
governmental rules and fiscal policies, civil unrest, acts of God, including
earthquakes and other natural disasters which may result in uninsured losses,
acts of war, adverse changes in zoning laws and other factors which are beyond
the control of the Company.
Value and Illiquidity of Real Estate
Real estate investments are relatively illiquid. The ability of the Company to
vary its ownership of real estate property in response to changes in economic
and other conditions is limited. If the Company must sell an investment, there
can be no assurance that the Company will be able to dispose of it in the time
period it desires or that the sales price of any investment will recoup the
amount of the Company's investment.
Property Taxes
The Company's real property is subject to real property taxes. The real property
taxes on this property may increase or decrease as property tax rates change and
as the property is assessed or reassessed by taxing authorities. If property
taxes increase, the Company's operations could be adversely affected.
Year 2000 Compliance
As of March 31, 2000, the Company has not experienced any Y2K problems.
26
<PAGE>
Events Subsequent to End of Fiscal Year
During the first quarter of 2000 the Company sold investment securities owned by
the Company and its subsidiaries. The bulk of the securities sold were
securities that the Company and its majority owned subsidiaries acquired in past
years for services rendered to clients by the Company's consulting subsidiaries.
During the period January 1, 2000 through March 31, 2000, the Company and its
subsidiaries sold $2,175,991 in investment securities. The Company's basis in
the securities was approximately $469,781. Accordingly, the Company expects to
record a gain on investment securities of $1,706,210 for the quarter ended March
31, 2000 compared to a gain of $46,278 on investment securities for the
comparable period in 1999.
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements for the fiscal year ended December
31, 1999 are attached hereto as pages F-1 through F-23.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
27
<PAGE>
[Letterhead of]
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholder
CyberAmerica Corporation
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheet of CyberAmerica
Corporation and subsidiaries as of December 31, 1999 and the related statement
of operation, stockholders' equity and cash flows for the years ended December
31, 1999 and 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 statement. 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 audits provide 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, 1999 and the results of its
operations and cash flows for the years ended December 31, 1999 and 1998 in
conformity with generally accepted accounting principles.
/s/ Crouch Bierwolf & Chisholm
Crouch Bierwolf & Chisholm
May 2, 2000
<PAGE>
<TABLE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Years Ended December 31, 1999 and 1998
<CAPTION>
1999 1998
-------------- -------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 18,314 $ 146,744
Accounts receivable -trade 346,500 446,325
Accounts receivable -related parties 377,682 371,293
Notes receivable - current portion 1,301,752 664,645
Prepaid expenses 4,814 11,153
Securities available for sale 3,970,445 937,282
------------ --------------
TOTAL CURRENT ASSETS 6,019,507 2,777,442
------------ --------------
PROPERTY AND EQUIPMENT (NET) 11,188,196 9,313,191
------------ --------------
OTHER ASSETS
Investment securities at cost 78,833 82,856
Notes receivable- net of current portion 255,000 312,000
Investments- other 184,725 309,166
------------ --------------
TOTAL OTHER ASSETS 518,558 704,022
------------- -------------
TOTAL ASSETS $ 17,726,261 $ 12,594,655
============ ============
</TABLE>
See notes to consolidated financial statements
F-1
<PAGE>
<TABLE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
Years Ended December 31, 1999 and 1998
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
1999 1998
-------------- --------------
CURRENT LIABILITIES
<S> <C> <C>
Accounts Payable-Trade $ 224,732 $ 505,391
Accounts Payable- Related Parties 287,463 86,191
Accrued Liabilities:
Interest 63,668 81,284
Real Estate Taxes and Assessments 102,727 665,284
Payroll and Related Taxes Payable 85,678 189,035
IEPA Liabilities - 325,398
Refundable Deposits 42,985 148,453
Refund to Investors 27,348 47,986
Other 82,836 154,463
Debenture Payable 237,708 260,000
Current Maturities of Long-Term Debt 976,993 1,524,258
Current Maturities of IEPA Liability 56,179 -
-------------- -------------
TOTAL CURRENT LIABILITIES 2,188,317 3,987,598
LONG-TERM LIABILITIES
Long-term Debt, less Current Portion 7,153,723 4,733,605
IEPA Liability Long-term Portion 219,719 -
-------------- --------------
TOTAL LONG-TERM LIABILITIES 7,373,442 4,733,605
MINORITY INTEREST 690,741 492,268
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; 3,227,238 shares issued 3,228 2,867
Additional Paid-in Capital 15,355,080 15,341,812
Accumulated Deficit (8,314,681) (11,938,748)
Unrealized gain on securities available for sale 430,134 (24,747)
--------------- --------------
TOTAL SHAREHOLDERS' EQUITY 7,473,761 3,381,184
--------------- --------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 17,726,261 $ 12,594,655
=============== ==============
</TABLE>
See notes to consolidated financial statements
F-2
<PAGE>
<TABLE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1999 and 1998
<CAPTION>
REVENUE 1999 1998
---------- ---------
<S> <C> <C>
Sale of property $ 1,791,952 $ 5,675,000
Revenue deferred - (3,312,316)
Additional gain recognition 278,960 99,766
Consulting revenue 3,822,117 996,447
Rental revenue 965,755 730,737
----------- -----------
TOTAL REVENUE 6,858,784 4,189,634
COSTS OF REVENUE
Costs of sale of property 635,312 1,366,714
Costs associated with consulting revenue 1,037,852 545,626
Costs associated with rental revenue 684,748 544,174
Interest expenses associated with rental revenue 337,532 275,473
------------ -----------
TOTAL COSTS OF REVENUE 2,695,444 2,731,987
GROSS PROFIT 4,163,340 1,457,647
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,605,879 1,454,546
----------- -----------
OPERATING PROFIT (LOSS) 2,557,461 3,101
OTHER INCOME (EXPENSE):
Interest income 415,761 244,095
Interest expense (182,957) (374,501)
Gain (loss) from sale of investment securities 698,759 375,323
Other income (expense) 4,185 47,397
Gain (Loss) on Foreclosure 222,958 (272,220)
----------- -----------
TOTAL OTHER INCOME (EXPENSE) 1,158,706 20,094
INCOME (LOSS) BEFORE MINORITY INTEREST 3,716,167 23,195
MINORITY INTEREST IN LOSS (GAIN) (92,100) 385,789
------------ -----------
NET PROFIT (LOSS) 3,624,067 408,984
------------ -----------
PROVISION FOR INCOME TAXES
NET INCOME 3,624,067 $ 408,984
=========== ===========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
<TABLE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1999 and 1998
(continued)
<CAPTION>
Income (Loss) Per Common Share
<S> <C> <C>
Income (Loss) Before Minority Interest $ 1.17 $ 0.01
Minority Interest in Loss (0.03) 0.14
------------- ------------
Net income (loss) per weighted average common
share outstanding $ 1.14 $ 0.15
============= ============
Weighted average number of common shares
outstanding 3,175,835 2,689,767
============= ============
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
<TABLE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years December 31, 1999 and 1998
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998
------------- -------------
<S> <C> <C>
Net income (loss) $ 3,624,067 $ 408,984
Adjustments to reconcile net income (loss)
to net cash provided:
(Gain) loss from sale of investments (698,759) (375,323)
Loss (Gain) on foreclosure (222,958) 272,220
Minority interest in (gain) loss 92,100 (385,789)
Depreciation and amortization 300,198 348,569
Common stock issued for services - 18,398
Common stock issued for assets and debt 294 17,647
Permanent decline in investments - 421,753
Receivables (343,671) (198,371)
Prepaid expenses and other 6,339 28,047
Increase (decrease) in liabilities:
Accounts and notes payable (223,208) 52,980
Accrued liabilities (1,206,516) 205,160
------------- -------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,327,886 814,275
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (4,545,349) (3,091,768)
Proceeds from sales of investments - 1,593,109
Purchase of security investment - (85,761)
------------- -------------
NET CASH FLOWS (USED) IN INVESTING ACTIVITIES (4,545,349) (1,584,420)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock for cash 13,335 39,500
Increase in long-term debt 3,851,761 3,198,250
Reduction of long-term debt (776,063) (2,326,767)
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,089,033 910,983
INCREASE (DECREASE) IN CASH (128,430) 140,838
CASH AT BEGINNING OF YEAR 146,744 5,906
------------- -------------
CASH AT END OF PERIOD $ 18,314 $ 146,744
============= =============
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
<TABLE>
CYBERAMERICA CORPORATION
(FORMERLY KNOWN AS THE CANTON INDUSTRIAL CORPORATION)
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
For The Years ended December 31, 1999 and 1998
<CAPTION>
Net Unrealized
Loss of
Securities Total
Common Stock Paid Available Shareholders'
Shares Amount Capital Deficit for Sale Equity
------------ ----------- ------------ ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT 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 107,393 108 18,290 18,398
Issued for cash 483,364 483 39,017 39,500
Unrealized loss/Gain from securities 421,753 421,753
Increase from issuance of subsidiary stock 277,125 277,125
Net profit for year - - - 408,984 - 408,984
----------- --------- --------------- ---------------- ---------- -------------
BALANCES, DECEMBER 31, 1998 2,866,571 $ 2,867 $ 15,341,812 $ (11,938,748) $ (24,747) $ 3,381,185
Common Stock Activity:
Issued for assets 294,000 294 - - - 294
Issued for cash 66,667 67 13,268 13,335
Unrealized loss/gain from securities 454,881 454,881
Net profit for year - - - 3,624,067 - 3,624,067
----------- --------- --------------- ---------------- --------- -------------
BALANCES, DECEMBER 31, 1999 3,227,238 $ 3,228 $ 15,355,080 $ (8,314,681) 430,134 7,473,761
=========== ========= =============== ================ ========= =============
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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 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 Rule 504. 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, 1999, CC and CD were
indebted to their investors in the amount of $27,348. All investors were paid in
full in February, 2000.
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.
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.
F-7
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Change in Presentation
The Company has presented comprehensive income as a separate column in the
Statement of Stockholders' Equity. The Company has changed the presentation of
their 1998 financial statements to be consistent with this presentation.
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 1999 and 1998 were $300,198 and
$348,569, 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 Real Estate
The Company uses the deposit method or the installment method for reporting
sales of certain real estate. Under the deposit 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. Under the installment method gross
profit on sales are reported as a percentage of the sales profit as they are
received.
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-8
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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 3,175,835 shares in 1999 and 2,689,767shares in 1998.
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, 1999 and
1998 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 1999 or 1998 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
$3,000. The Company's outstanding common stock purchase options during 1999 are
summarized as follows:
Number of Shares
Issue Date Expiration Date Exercise Price Subject to Options
---------- --------------- -------------- -----------------
11/19/96 11/19/06 $6.00 5,000
-----------------
TOTAL 5,000
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.
Advertising
The Company follows the policy of charging the costs of advertising to expense
as incurred. Advertising expense was $108,848 and $5,794 for the years ended
December 31, 1999 and 1998 respectively.
F-9
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 1999 and approximately 96% of accounts receivable at
December 31, 1999. 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 $520,489 in 1999 and $649,974 in 1998.
2. Common stock was issued for the following purposes:
<TABLE>
<CAPTION>
1998 1999
-------------------------------- ------------------
Shares Amount Shares Amount
------------ ---------- ---------- --------
<S> <C> <C> <C> <C>
Issued for debt 157,068 $ 161,166 -0- $ -0-
Issued for other assets 428,328 143,725 360,667 13,629
Issued for services 730,727 619,378 -0- -0-
------- ----------- ----------- -----------
1,226,992 $ 924,269 360,667 $ 13,629
</TABLE>
<TABLE>
<CAPTION>
The Company acquired the following assets during: 1998 1999
-------------- ---------------
<S> <C> <C>
Real estate purchased $ 1,676,450 $ 4,545,349
Debts incurred (1,587,319) (3,851,761)
----------- -----------
Total cash paid $ 89,131 $ 693,588
</TABLE>
NOTE 4: SUBSIDIARIES
Diversified Holdings I, Inc.
Diversified Holdings I, Inc., a Nevada corporation, (DHI), a 90% owned
subsidiary of the Company was formed by the Company March 22, 1996. DHI is a
holding company in which the following subsidiaries were transferred to DHI's
ownership from IPDC on April 2, 1999:
F-10
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 4: SUBSIDIARIES (continued)
Canton Financial Services Corporation
Canton Financial Services Corporation, a Nevada corporation, ("CFS"),
was formed by the Company on June 8, 1994. CFS, a subsidiary of the
Company, provides a wide range of consulting services, primarily for
public companies.
Hudson Consulting Group, Inc. (formerly 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, Inc.
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 consolidated subsidiary of the Company, purchased land in Elko
County, Nevada. Oasis sold approximately 20 acres of property during
1998 and still owns approximately 30 acres. For more information, see
"Item 2 - Description of Property," page 15.
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 subsidiary of the Company, purchased 1,126 acres of land
in Elko County, Nevada. For more information, see "Item 2 - Description
of Property," page 14.
Golden Opportunity Development Corporation
Golden Opportunity Development Corporation, a Louisiana corporation, was
obtained by the Company through its former majority owned subsidiary,
Innovative Property Development Corporation ("IPDC"), which had obtained
a majority interest in Golden Opportunity Development Corporation
("GODC"), pursuant to a Stock Purchase Agreement dated April 30, 1998.
For more information, see "Item 2 - Description of Property," page 6.
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. The building was sold during
the fourth quarter of 1998. CICSLC currently holds a promissory note in
the amount of $255,000.
F-11
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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. For more information,
see "Item 2 - Description of Property," page 8.
Canton's Wild Horse Ranch II, Inc.
Canton's Wild Horse Ranch II, Inc., 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
consolidated subsidiary of the Company, acquired thirteen acres of raw,
unimproved land adjacent to the Ranch suitable for expansion of the
Ranch. The Company sold its interest in the land for $1,700 and
assumption of all liabilities in 1999. CWRHII currently has no tangible
assets. For more information, see "Item 2 - Description of Property,"
page 17.
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 subsidiary of the Company, entered into a lease with an option
to purchase a retail shopping plaza in Salt Lake City, Utah. For more
information, see "Item 2 - Description of Property," page 10.
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. During
1998, CCCC purchased the New Brigham Building in Ogden, Utah. For more
information, see "Item 2 - Description of Property," pages 8 and 12.
The following subsidiaries are wholly owned by the Company:
Adobe Hills Ranch II, LLC
Adobe Hills II, LLC, is a Nevada limited liability company ("Adobe Hills"),
established by the Company in December of 1999. It is a consolidated subsidiary
which owns undeveloped land in Elko County, Nevada. For more information, see
"Item 2 - Description of Property," page 7.
F-12
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 4: SUBSIDIARIES (continued)
AZ South State Corporation
AZ South State Corporation, a Utah corporation ("AZ South") was incorporated by
the Company on November 30, 1999. It is a consolidated subsidiary which owns
land and building in Salt Lake City, Utah. For more information, see "Item 2 -
Description of Property," page 9.
Canton Tire Recycling of West Virginia, Inc.
Canton Tire Recycling of West Virginia, Inc., a West Virginia corporation
("CTRWV"), was incorporated by the Company on February 25, 1993 for the purpose
of acquiring, owning and managing the Parkersburg Terminal. CTRWV, a subsidiary
of the Company, purchased the Parkersburg Terminal on May 15, 1993. For more
information, see "Item 2 - Description of Property," page 13.
Cyber LaCrosse, Inc.
Cyber LaCrosse, Inc., a Nevada corporation, was incorporated June 3, 1996. It is
a consolidated subsidiary which owns property in Nephi, Utah. For more
information, see "Item 2 - Description of Property," page 11.
Cyber Studio, Inc.
Cyber Studio, Inc., a Nevada corporation, was incorporated February 16, 1996. It
is a consolidated subsidiary which leases two properties with options to buy in
Kearns, Utah. For more information, see "Item 2 - Description of Property," page
9.
Diversified Holdings II, Inc.
Diversified Holdings II, Inc., a Nevada corporation, was incorporated by the
Company on April 16, 1996. It is a consolidated subsidiary which owns
undeveloped land in Box Elder County, Utah. For more information, see "Item 2 -
Description of Property".
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, see "Item 2 - Description of Property," page 14.
Diversified Land and Cattle Co.
Diversified Land and Cattle Co., a Nevada corporation ("DLC"), was incorporated
by the Company on March 1, 1996, DLC is a consolidated subsidiary which owns
undeveloped land in Box Elder County, Utah. For more information, see "Item 2 -
Description of Property," page 16.
Great Basin Water Corporation
Great Basin Water Corporation, a Utah corporation, was originally incorporated
by the Company as Canton International Timber Corporation on July 20, 1994. Its
name was changed to Great Basin Water Corporation on May 15, 1995. It is a
consolidated subsidiary which owns undeveloped land in Box Elder County, Utah.
For more information, see "Item 2 - Description of Property," page 16.
F-13
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 4: SUBSIDIARIES (continued)
Lexington 3 Mile East Terrace Mountain Estates, Inc.
Lexington 3 Mile East Terrace Mountain Estates, Inc., a Utah corporation, was
incorporated on November 17, 1994. It is a consolidated subsidiary which owns
undeveloped land in Box Elder County, Utah. For more information, see "Item 2 -
Description of Property," page 16.
Lexington 4 Mile East Terrace Mountain Estates, Inc.
Lexington 4 Mile East Terrace Mountain Estates, Inc., a Utah corporation, was
incorporated on November 17, 1994. It is a consolidated subsidiary which owns
undeveloped land in Box Elder County, Utah. For more information, see "Item 2 -
Description of Property," page 16.
Lexington One Mile East Little Pigeon Mountain Estates, Inc.
Lexington One Mile East Little Pigeon Mountain Estates, Inc., a Utah
corporation, was incorporated on November 17, 1994. It is a consolidated
subsidiary which owns undeveloped land in Box Elder County, Utah. For more
information, see "Item 2 - Description of Property," page 16.
Taylor's Landing, Inc.
Taylor's Landing, Inc., a Utah corporation ("TLI"), was incorporated by the
Company as Canton Properties VII, Inc. on January 10, 1996. Its name was changed
to Taylor's Landing, Inc. on May 3, 1996. TLI is a consolidated subsidiary which
owns property in Nephi, Utah. For more information, see "Item 2 - Description of
Property," page 11.
Innovative Properties Development Corporation (formerly TAC, Inc.)
Innovative Properties Development Corporation (formerly TAC, Inc.) a Utah
corporation ("IPDC"), was formed by Logos International, Inc. ("Logos"), former
affiliate of the Company, on August 27, 1992. IPDC was acquired from Logos on
December 30, 1994 pursuant to a Settlement Agreement. In December 1998, IPDC
acquired several of the Company's subsidiaries for 1,382,528 shares of IPDC
Stock. In 1999, IPDC was introduced to an Internet company, China Mall, Inc., a
Delaware corporation ("China Mall"). China Mall was interested in being acquired
by IPDC.
In order to facilitate IPDC's acquisition of China Mall, IPDC sold all of its
assets to Diversified Holdings I, Inc. The Acquisition Agreement between IPDC
and DHI was consummated on April 2, 1999, and the acquisition of China Mall,
Inc. by IPDC was consummated on June 1, 1999. IPDC 's name was changed to
ChinaMallUSA.com, Inc. The Company's shareholder interest in CHML was reduced to
approximately four hundred fifty three thousand five hundred fifty (453,550)
shares, or less than 5 % of CHML's issued and outstanding shares of common stock
after its acquisition of China Mall, Inc. The Company liquidated its position in
CHML for $612,790 during the last half of 1999. The Company currently has no
ownership interest in CHML.
F-14
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 4: SUBSIDIARIES (continued)
The following consolidated subsidiaries were dissolved during 1999:
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.
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.
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"). The Company is no longer active.
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.
NOTE 5: LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1999:
Mortgage payable to Home Credit Bank (12%), monthly payments
of $6,157, due 6/04, secured by first trust deed on land
and building. $ 598,944
Note payable to Paul Rubey (5%), due 1/01 62,546
Mortgage payable to Solar Logos Foundation (7%), quarterly
payments of $31,475 commencing 1/99, due 1/06, secured
by first trust deed on land. 835,430
Mortgage payable to PNC (9.5%), monthly payments
of $363, due 8/15, secured by first trust deed on building. 29,852
Mortgage payable to First American Title (8.25%), monthly payments
of $301, due 10/01, secured by first trust deed on building. 32,749
F-15
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 5: LONG-TERM DEBT (continued)
Mortgage payable to Franklin Financial (15%) monthly payment $1,130,
due 1/01, secured by second trust deed on land and building. 66,721
Mortgage payable to Tucker (7%), monthly payments of
$497, due 11/04, secured by first trust deed on land. 39,131
Mortgage payable to Escrow Specialists (6%), monthly interest
payments of $1500, due 1/03, secured by first trust deed on land. 55,146
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 12/08 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. 39,149
Mortgage payable to Wanda Charlotte Blanthorn (8.25%), monthly
payments of $299, due 7/07, secured by first trust deed on land. 39,149
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.
102,564
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. 6,324
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. 6,324
Mortgage payable to Escrow Specialists (8%), monthly payments
of $903, due 8/04, secured by first trust deed on land. 54,992
Mortgage payable to James D. Hansen (7%), monthly payments
of $1,545, due 5/04, secured by first trust deed on land. 177,040
Mortgage payable to Christopher M. Curran (6.5%), monthly
payments of $60, due 8/04, secured by first trust deed on land. 4,701
Note payable to IOS Capital (8%), monthly payments of $988.50,
due 7/04, secured by copier. 43,107
Note payable to First Security Bank (9.35%), monthly payments
of $1,187 due 12/04, secured by vehicle. 55,759
F-16
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 5: LONG-TERM DEBT (continued)
Note payable to First Security Bank (9.35%), monthly
payments of $970 due 12/04, secured by vehicle. 45,574
Mortgage payable to Melvin D. Call (8.75%), monthly
payments of $362, due 7/02, secured by first trust
deed on land. 38,914
Mortgage payable to James Stacey (7%), monthly payments
of $5,582, due 8/00, secured by first trust deed on land
and building. 645,526
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 Wilshire Credit (7.70%), monthly
payments of $4,194, due 1/29, secured by first trust
deed on land and building. 584,449
Mortgage payable to Samuel Layton, (8%), annual
payments of $106,593, due 12/06, secured by first
trust deed on land. 1,200,000
Mortgage payable to Abdul Rashid Afridi, (9.725%),
monthly payments of $4,231, due12/02, secured
by first trust deed on land. 475,000
Mortgage payable to Thom (6%), monthly payments of
$11,391, due 1/27, secured by first trust deed
on land and building. 1,838,944
Trust Deeds payable to the sellers at (7%), with annual
payments of $63,303 beginning 12/00 due 12/09. 444,600
Mortgage payable to US Bank (8%), monthly payments
of $5,662, due 12/08, secured by first deed of trust
on land. 462,468
Total debt 8,130,716
Current portion 976,993
---------
Long-term portion $ 7,153,723
Scheduled principal reductions are as follows:
December 31, 2000 $ 976,993
December 31, 2001 549,842
December 31, 2002 748,724
December 31, 2003 280,370
December 31, 2004 1,029,513
Thereafter 4,545,274
--------------
$ 8,130,716
F-17
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 6: FEDERAL INCOME TAXES
At December 31, 1999, the Company had net operating loss carryovers of
approximately $3,212,000. The net operating loss carryovers begin to expire in
2011.
No benefit resulting from loss carry forwards have been reported in the
financial statements because the Company can not reasonably determine the amount
of future income. 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 the 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.
Tax Benefit $1,250,000
Valuation allowance (1,250,000)
-----------
Net $ 0
===========
NOTE 7: REAL ESTATE TAXES PAYABLE
The Company owes real estate taxes and assessments of approximately $102,727
(including penalties and interest) as of December 31, 1999.
Unpaid property taxes and assessments consist of the following:
Canton Commercial Carpet Corporation $ 19,365
Golden Opportunity Development Corporation 27,666
Glendale Plaza - Salt Lake City, Utah 8,245
Parkersburg Terminal - Parkersburg, West Virginia 4,915
Wallace Bennett Building 7,885
Other 34,651
---------------
Total $ 102,727
==============
NOTE 8: 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 Company and Legong are currently involved in litigation over the
amount due to Legong and rights to conversion into common stock of the Company
contained in the Debenture. Prior to the litigation Legong converted $10,000 of
the principal plus accrued interest into 87,220 shares during 1996 and during
1997 Legong converted $30,000 of the principal plus accrued interest into
112,206 shares. During 1998 and 1999 the Company made cash payments in the sum
of $58,000 as further reductions to the principal and accrued interest on the
Debenture. The Company contends that it presently owes a balance of $237,708,
including principal and interest as of March 15, 2000, Legong is currently
requesting $180,414 in cash and 310,623 free trading shares.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
F-18
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 9: RELATED PARTY TRANSACTIONS
Transactions with Allen Wolfson
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. 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 1999, 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.
The Company does not currently have any formal consulting arrangement with A-Z,
aside from providing A-Z with office space, support staff assistance, access to
office equipment and phones. The Company has, instead, agreed to further
compensate A-Z on a transaction by transaction basis. During 1999, A-Z was
instrumental in several transactions involving the development, purchase, sale
or financing of real estate holdings by the Company and its subsidiaries. The
Company also provided various consulting services to A-Z in addition to the
staff and support items set forth above. The Company and A-Z agreed upon the sum
of $418,117 as the net amount that services and goods provided to A-Z exceed
those provided to the Company by A-Z, this amount was settled with the transfer
of investment securities to the Company.
At various times during the year the Company has loaned cash to A-Z or related
parties. These loans include, $95,000 loaned to The Great Saltair, LLC, a
company owned by Allen Wolfson and $377,117 that has been loaned to A-Z.
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 1999, A-Z generated substantial 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.
On February 1, 1999, Allen Z. Wolfson entered into a Consulting Agreement with
AmeriResource Technologies, Inc.("ARET") to provide various consulting services.
ARET was a client of Hudson Consulting Group, Inc., a consolidated subsidiary of
the Company. Pursuant to the Consulting Agreement, Mr. Wolfson received
20,000,000 shares ARET valued at approximately $0.005 a share or $100,000. Mr.
Wolfson disclosed this transaction to the disinterested members of the board and
obtained their prior approval.
Transactions involving Richard Surber
Since August of 1997, Canton Financial Services Corporation, a consolidated
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
F-19
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 9: RELATED PARTY TRANSACTIONS (continued)
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 the
original price of $84,814 which has been 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 arranged a sale of the condominium prior to exercise of
the option, then 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 into this arrangement in order to 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 February 1, 1999, Richard Surber entered into a Consulting Agreement with
AmeriResource Technologies, Inc.("ARET") to provide various consulting services.
ARET was a client of Hudson Consulting Group, Inc., a consolidated subsidiary of
the Company. Pursuant to the Consulting Agreement, Mr. Surber received
20,000,000 shares of ARET valued at approximately $0.005 a share or $100,000.
Mr. Surber disclosed this transaction to the disinterested members of the board
and obtained the board of directors prior approval.
On April 1, 1999, Mr. Surber signed an Advisory Agreement with the Company in
exchange for fees paid in the amount of $250,000. The agreement provided for
services, including the work of staff of the Company on various projects or work
of Mr. Surber during the calendar year of 1999 and was paid in full at the time
of execution. This agreement was further approved by the disinterested members
of the Board of Directors.
During 1999, loans were made by Mr. Surber to the Company for temporary
operating needs. The majority of these were short term and as of December 31,
1999, the Company was indebted to Mr. Surber in the amount of $27,116.
Subsequent to the end of the year the remaining balance owed to Mr. Surber has
been reduced to $3,889 by subsequent payments made to Mr. Surber by the Company.
Mr. Surber has at various times been appointed to serve as an officer or
director for some clients of the Company. These appointments have been disclosed
to the disinterested members of the board and the approval of the board of
directors has been granted in each of these cases. For services provided to
these corporations Mr. Surber has from time to time received securities of those
corporations as payment for his services, and these transactions have been
disclosed to the board of directors in each case.
The board of directors was informed that during 1999 Mr. Surber became a
licensed attorney in the State of California. The board was further made aware
of, and approved, Mr. Surber's request to undertake projects and clients
utilizing his law license.
During 1999 the Company has compensated Mr. Surber with securities that have
been received from clients of the Company. The disinterested members of the
board of directors have reviewed these payments and approved them. For more
information, see Item 10, Executive Compensation.
F-20
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 9: RELATED PARTY TRANSACTIONS (continued)
1. Transfer of ownership
In April 1999, the following subsidiaries were transferred to
Diversified Holdings I, Inc.
The Companies are as follows:
Canton's 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.
NOTE 10: MARKETABLE SECURITIES
The cost and approximate market value of securities available for sale at
December 31, 1999 are as follows:
Gross Unrealized
----------------- Market
Cost Gains Losses Value
---------------------------------------------------------
Marketable equity - - - -
Securities $3,539,311 $455,881 $24,747 $3,970,445
Other equities securities in the amount of $78,833 are carried at cost. There is
no readily available market for these securities or they are restricted.
During 1999 proceeds from sales of securities were $2,197,449. Gross gains of
$1,181,677 were realized on those sales. Gross losses realized were $510,347.
NOTE 11: NOTES RECEIVABLE
The above receivable is included in the financial statements as follows:
Notes receivable:
Sale of land and building 1,544,752
Other 12,000
-----------
Total $ 1,556,752
Less current portion 1,301,752
------------
Long-term portion $ 255,000
F-21
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 12: 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 potentially toxic paint drums at the plant in
Canton, Illinois. On September 28, 1995, the Illinois Environmental
Protection Agency ("IEPA") 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 tires. The Company sought relief from
this decision from the Circuit Court in Fulton County, Illinois. After a
hearing on October 10, 1995, the Circuit Court denied any relief to the
Company. Both the Company and the IEPA contractor removed tires. The
State filed an action before the Illinois Pollution Control Board
seeking to recover $325,398 as the costs incurred to remove the tires
and an equal amount as punitive damages. An award for costs of $325,398
was entered against the Company and all other relief was denied. On
August 25, 1999 the Company entered into an agreement whereby the award
is to be paid in quarterly installments of $20,000 and will fully
amortize after a period of 5 years. The Company is current in making the
agreed upon quarterly payments. The Company's balance sheet at December
31, 1999, included the remaining balance of this liability in the amount
of $275,898.
2. Parkersburg West Virginia
As part of the cleanup process related to this site required by the West
Virginia Division of Environmental Protection included the testing of
soil located on the site. These testing results were submitted to the
state of West Virginia as part of the final report on the tank cleanup
completed on the site. These soil tests reported soil contaminations in
excess of state limits. Any action and cost related to the results of
these test is still pending before the West Virginia Division of
Environmental Protection.
NOTE 13: OPERATING LEASE COMMITMENTS
The Company is obligated under operating leases to pay $5,000 per month on the
two buildings it rents. The leases expire August 2001. The Company has an option
to purchase the buildings at the end of the lease terms. Scheduled rent payments
are as follows:
December 31, 1999 $ 60,000
December 31, 2000 $ 60,000
December 31, 2001 $ 60,000
The Company incurred rent expense under operating leases of $41,000 in 1999 and
$100,956 in 1998.
The Company receives rents on lease of buildings under operating leases.
Additional information is included as follows:
Cost of real estate under lease $ 3,562,468
Accumulated depreciation (249,476)
-------------
Net carrying amount $ 3,311,996
F-22
<PAGE>
CYBERAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 13: OPERATING LEASE COMMITMENTS (continued)
Future minimum rentals on noncancellable leases are as follows:
2000 $ 474,612
2001 328,065
2002 308,574
2003 301,344
2004 180,035
Thereafter 101,508
-------
$ 1,694,138
---------
NOTE 14: BUSINESS ACQUISITIONS
On April 30, 1998, The Company acquired 51% of Golden Opportunity Development
Corporation, a company that owns and operates a Hotel in Baton Rouge, LA. The
results of operations from May 1, 1998 are included in the companies financial
statements since that date.
NOTE 15: FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company estimates that the fair value of all financial instruments at
December 31, 1999 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
judgement 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.
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, "Disclosure about Fair
Value of Financial Instruments". The carrying amounts and fair value of the
Company's financial instruments at December 31, 1999 and 1998 are as follows:
December 31, 1999 December 31, 1998
Carrying Fair Carrying Fair
Amounts Values Amounts Values
Cash and cash equivalents $ 18,314 $ 18,314 $ 146,744 $146,744
The following methods and assumptions were used by the Company in estimating its
fair value discloures of financial instruments.
Cash and Cash Equivalents
----------------------------
The carrying amounts reported on the balance sheet for cash and cash
equivalents approximate their fair value.
F-23
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements between the Company and
its accountants
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)
--------------------------------------------
Richard Surber 27 President, Chief Executive Officer and Director
Gerald Einhorn 60 Vice-President, Secretary and Director
Adrienne Bernstein 54 Director
Allen Wolfson 53 Control Person
Richard D. Surber was appointed to the Company's board of directors in June 1992
and was appointed 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. Mr. Surber graduated from the University of Utah
with a Bachelor of Science degree in Finance and then with a Juris Doctorate
with an emphasis in corporate law; including securities, taxation, and
bankruptcy.
He has been an officer and director of several public companies which include:
Chattown.com Network (f.k.a.Vaxcel, Inc.), which is unrelated to the Company
(president and director form June, 1999 to April 10, 2000); Chattown.com
Network, Inc. is an internet company; Kelly's Coffee Group, Inc., a shell
company whose plan is to acquire an unidentified company (president and director
from May, 1999 to the present); Innovative Property Development Corporation
(n.k.a. ChinaMallUSA.com., Inc.) a former subsidiary of the Company; currently a
non-reporting Chinese Internet company (president and director from 1992 to
June, 1999); Eurotronics Corporation, f.k.a. Hamilton Exploration, Inc., a shell
company which is currently unrelated to the Company; its current operations, if
any, are not known (president and director 1994-1996); Area Investment
Development Company ("AIDC"), a shell company unrelated to the Company
(president and director 1994-1996), AIDC has recently acquired an Internet
company whose content revolves around religious events; Youthline USA, Inc.,
(f.k.a. Ult-i-Med Health Centers, Inc.), a non-reporting shell company that
acquired an educational company which distributes education newspapers to
children in grades K-12 (secretary and director from April 6, 1999 to July
29,1999); Power Exploration, Inc. an oil and gas company (director January 28,
2000 to present) the Company has a minority interest in Power; Premier Brands,
Inc., a shell company (president and director April, 1998 - September, 1998);
and Golden Opportunity Development Corporation ("GODC"), a majority owned
subsidiary of the Company, (president and director from September, 1999 to
present). GODC's operations consist of operating a 124 room motel in Baton
28
<PAGE>
Rouge, Louisiana. Mr. Surber is also the President and a Director of several
private shell companies, in which the Company has significant ownership
interests, that intend to become fully reporting public companies.
Gerald Einhorn was appointed in October 1998 as a Director, Vice-President and
Secretary of the Company. He has been employed by the Company in its legal
department since February 1996 as an attorney, working in the areas of real
estate, corporate and securities matters. Prior to that time Mr. Einhorn was
self employed for more than 20 years in Long Island, New York as a wholesale
distributor of fresh produce and frozen foods to retail and institutional end
users. He is a member of the New York Bar and practiced law in New York State
for a period of 10 years before entering the food distribution business.
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 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 Mr. Wolfson is a key consultant to the Company. He is not an
Officer or Director of the Company. 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 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. ("A-Z")
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 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. Mr. Wolfson may be deemed to be
an affiliate of the Company as that term is defined in Rule 12b-2 of the
Securities Exchange Act of 1934. Mr. Wolfson is the uncle of Richard Surber, the
Company's chief executive officer, president and director. For more information
on Mr. Wolfson, see "Item 12. Certain Relationships and Related Transactions."
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
29
<PAGE>
December 31, 1999 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 $100,000 was awarded to, earned by, or paid to any
executive officer or employee of the Company, other than Richard Surber, during
the years 1997 through 1999. The following table and the accompanying notes
provide summary information for each of the last three fiscal years concerning
cash and non-cash compensation paid or accrued by Richard Surber, the Company's
chief executive officer for the past three years.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
Awards Payouts
Restricted Securities
Name and Other Stock Underlying LTIP
Principal Year Salary Bonus Annual Award(s) Options payouts All Other
Position ($) ($) Compen ($) SARs(#) ($) Compensation
sation ($)
($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard 1999 79,855 68,743(1) - - - - -
Surber 1998 45,008 500 - - - - -
Chief 1997 38,000 1,787 - - - - -
Executive
Officer
</TABLE>
Compensation of Directors
The Company's directors are each compensated through the payment of $300 for
each meeting of 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 April 14, 1999, 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
- --------
(1)Richard Surber received shares of stock in various client companies
during 1999. These were shares of client companies for which consulting work was
done by subsidiaries of the Company. The shares were paid to Mr. Surber as part
of his overall compensation from the Company in 1999. The shares were received
by the Company's subsidiaries for services rendered to the client companies.
30
<PAGE>
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 April 14, 2000, there were 3,227,238 shares of
Common Stock issued and outstanding.
<TABLE>
<CAPTION>
Title of Class Name and Address of Amount and Nature of
-------------- Beneficial Owner Beneficial Ownership Percent of class
------------------- -------------------- ----------------
<S> <C> <C> <C>
Common Stock Allen Wolfson 402,746(2) 13.17%
($0.001 par value) 268 West 400 South, Suite
306
Salt Lake City, Utah 84101
Common Stock Gerald Einhorn, Director 0 0.0000%
($0.001) par value 268 West 400 South, Suite
300
Salt Lake City, Utah 84101
Common Stock Adrienne Bernstein, Director 3,704 0.1%
($0.001) par value 268 West 400 South, Suite
300
Salt Lake City, Utah 84101
Common Stock Richard D. Surber, Director 198,364 6.5%
($0.001) par value 268 West 400 South, Suite
300
Salt Lake City, Utah 84101
Common Stock David Michael Wolfson 285,600(3) 9.34%
($0.001) par value 268 West 400 South, Suite
300
Salt Lake City, Utah 84101
Common Stock Directors and Executive 202,068 6.6%
($0.001) par value Officers as a Group (3
individuals)
</TABLE>
- --------
(2)This amount includes shares attributed to Allen Wolfson which are owned
by A-Z Professional Consultants, Inc ("A-Z")., a Utah corporation, whose sole
shareholder is Allen Wolfson and A-Z's retirement fund; and shares owned by A-Z
Oil, LLC, a Utah Limited Liability Company owned by Allen Wolfson.
(3) Shares are attributed to David Wolfson as follows: 217,600 owned by
David Michael, LLC, ( 100% of stock owned by David Wolfson); and 68,000 owned by
the Irrevocable Children's Trust, of which David Wolfson is a beneficiary. David
Wolfson is the son of Allen Wolfson.
31
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Allen Wolfson
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. 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 1999, 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.
The Company does not currently have any formal consulting arrangement with A-Z,
aside from providing A-Z with office space, support staff assistance, access to
office equipment and phones. The Company has, instead, agreed to further
compensate A-Z on a transaction by transaction basis. During 1999, A-Z was
instrumental in several transactions involving the development, purchase, sale
or financing of real estate holdings by the Company and its subsidiaries. The
Company also provided various consulting services to A-Z in addition to the
staff and support items set forth above. The Company and A-Z agreed upon the sum
of $418,117 as the net amount that services and goods provided to A-Z exceed
those provided to the Company by A-Z, this amount was settled with the transfer
of investment securities to the Company.
At various times during the year the Company has loaned cash to A-Z or related
parties. These loans include, $95,000 loaned to The Great Saltair, LLC, a
company owned by Allen Wolfson and $377,117 that has been loaned to A-Z.
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 1999, A-Z generated substantial 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.
32
<PAGE>
On February 1, 1999, Allen Z. Wolfson entered into a Consulting Agreement with
AmeriResource Technologies, Inc.("ARET") to provide various consulting services.
ARET was a client of Hudson Consulting Group, Inc., a consolidated subsidiary of
the Company. Pursuant to the Consulting Agreement, Mr. Wolfson received
20,000,000 shares ARET valued at approximately $0.005 a share or $100,000. Mr.
Wolfson disclosed this transaction to the disinterested members of the board and
obtained their prior approval.
Transactions involving Richard Surber
Since August of 1997, Canton Financial Services Corporation, a consolidated
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 the
original price of $84,814 which has been 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 arranged a sale of the condominium prior to exercise of
the option, then 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 into this arrangement in order to 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 February 1, 1999, Richard Surber entered into a Consulting Agreement with
AmeriResource Technologies, Inc.("ARET") to provide various consulting services.
ARET was a client of Hudson Consulting Group, Inc., a consolidated subsidiary of
the Company. Pursuant to the Consulting Agreement, Mr. Surber received
20,000,000 shares of ARET valued at approximately $0.005 a share or $100,000.
Mr. Surber disclosed this transaction to the disinterested members of the board
and obtained the board of directors prior approval.
On April 1, 1999, Mr. Surber signed an Advisory Agreement with the Company in
exchange for fees paid in the amount of $250,000. The agreement provided for
33
<PAGE>
services, including the work of staff of the Company on various projects or work
of Mr. Surber during the calendar year of 1999 and was paid in full at the time
of execution. This agreement was further approved by the disinterested members
of the Board of Directors.
During 1999, loans were made by Mr. Surber to the Company for temporary
operating needs. The majority of these were short term and as of December 31,
1999, the Company was indebted to Mr. Surber in the amount of $27,116.
Subsequent to the end of the year the remaining balance owed to Mr. Surber has
been reduced to $3,889 by subsequent payments made to Mr. Surber by the Company.
Mr. Surber has at various times been appointed to serve as an officer or
director for some clients of the Company. These appointments have been disclosed
to the disinterested members of the board and the approval of the board of
directors has been granted in each of these cases. For services provided to
these corporations Mr. Surber has from time to time received securities of those
corporations as payment for his services, and these transactions have been
disclosed to the board of directors in each case.
The board of directors was informed that during 1999 Mr. Surber became a
licensed attorney in the State of California. The board was further made aware
of, and approved, Mr. Surber's request to undertake projects and clients
utilizing his law license.
During 1999 the Company has compensated Mr. Surber with securities that have
been received from clients of the Company. The disinterested members of the
board of directors have reviewed these payments and approved them. For more
information, see Item 10, Executive Compensation.
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 36 of this Form
10-KSB, which is incorporated herein by reference.
(b) Reports on Form 8-K.
-------------------
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
34
<PAGE>
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 24th day of May, 2000
CyberAmerica Corporation
/s/ Richard D. Surber
Richard D. 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
President, Chief Executive
/s/ Richard D. Surber Officer and Director May 24, 2000
- ------------------------------
Richard D. Surber
/s/ Wayne Newton Controller May 24, 2000
- ------------------------------
Wayne Newton
/s/ Gerald Einhorn Vice-President, Director May 24, 2000
- -------------------------------
Gerald Einhron
/s/ Adrienne Bernstein Director May 24, 2000
- ------------------------------
Adrienne Bernstein
35
<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) * 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 10-KSB
for the year ended December 31, 1998).
10(i)(b) * Real Estate Purchase Agreement between Oasis International Hotel
& Casino, Inc., a consolidated subsidiary of the Company, and
Pienne Chow Sau Har, dated December 21, 1998, regarding the sale
of a one-half interest in 1.45 acres in Oasis,
Nevada.(incorporated herein by reference from Exhibit No.
10(i)(b) to the Company's Form 10-KSB for the year ended December
31, 1998).
10(i)(c) * Real Estate Purchase Agreement between Oasis International Hotel
& Casino, Inc., a consolidated subsidiary of the Company, and
Oasis Fields, L.L.C. regarding the sale of 2.45 acres in Oasis,
Nevada.(incorporated herein by reference from Exhibit No.
10(i)(c) to the Company's Form 10-KSB for the year ended December
31, 1998).
10(i)(d) * Acquisition Agreement between the Company and Innovative Property
Development
36
<PAGE>
Corp., dated October 30, 1998.(incorporated herein by reference
from Exhibit No. 10(i)(d) to the Company's Form 10-KSB for the
year ended December 31, 1998).
10(i)(e) * Assignment of Real Estate Purchase Contract between CyberState,
Inc., a consolidated subsidiary of the Company, and Canton's
Commercial Carpet Corporation, a consolidated subsidiary of the
Company, regarding the acquisition of the New Brigham Apartment
Complex in Ogden, Utah.(incorporated herein by reference from
Exhibit No. 10(i)(e) to the Company's Form 10-KSB for the year
ended December 31, 1998).
10(i)(f) * Consulting Agreement between Allen Wolfson and AmeriResource
Technologies, Inc.(incorporated herein by reference from Exhibit
No. 10(i)(f) to the Company's Form 10-KSB for the year ended
December 31, 1998).
10(i)(g) * Consulting Agreement between Richard Surber and AmeriResource
Technologies, Inc.(incorporated herein by reference from Exhibit
No. 10(i)(g) to the Company's Form 10-KSB for the year ended
December 31, 1998).
10(i)(h) * Stock Acquisition Agreement between TAC, Inc., a consolidated
subsidiary of the Company, and Golden Opportunity Development
Corporation regarding the acquisition of the General Lafayette
Inn in Baton Rouge, Louisiana (incorporated herein by reference
from Exhibit No. 10(i)(a) to the Company's Form 10-QSB for the
period ended March 31, 1998).
10(i)(i) * Real Estate Purchase Agreement between Oasis International Hotel
& Casino, Inc., a consolidated subsidiary of the Company, and
Oasis Hotel, Resort & Casino - III, Inc. regarding the sale of
18.289 acres in Oasis, Nevada (incorporated herein by reference
from Exhibit No. 10(i)(b) to the Company's Form 10-QSB for the
period ended March 31, 1998).
10(i)(j) * Lease Agreement between the Company's consolidated subsidiary,
Canton Financial Services Corporation, and Richard Surber, dated
August 29, 1997, pursuant to which the Company's subsidiary has
leased a condominium unit from Mr. Surber (incorporated herein by
reference from Exhibit Number 10(i)(a) of the Company's Form
10-KSB for the period ended December 31, 1997).
10(i)(k) * Real Estate Purchase Contract between the Company's wholly owned
subsidiary, Cyberstate, Inc., and Richard Surber, dated October
10, 1997, pursuant to which Cyberstate will sell a condominium
unit in the New Brigham Building subject to closing of
Cyberstate's purchase and successful application to convert the
New Brigham Building into condominium units (incorporated herein
by reference from Exhibit Number 10(i)(c) of the Company's Form
10-KSB for the period ended December 31, 1997).
10(i)(l) * Promissory Note executed by the Company in favor of Richard
Surber, dated March 25, 1998 (incorporated herein by reference
from Exhibit Number 10(i)(c) of the Company's Form 10-KSB for the
period ended December 31, 1997).
37
<PAGE>
10(i)(m) * 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).
10(i)(n) 39 Advisory Agreement between the Company and Richard Surber, dated
April 1, 1999.
23 44 Consent of Auditor
27 Financial Data Schedule "CE"
* Previously filed as indicated and incorporated
herein by reference from the referenced filings
previously made by the Company.
38
Exhibit 10
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT ( the "Agreement") is made this 1st day of
April 1999, by and between CyberAmerica Corporation ("Advisor") and Richard D.
Surber (the "Client").
WHEREAS, the Client desires to retain Advisor to advise and assist the
Client in financial and corporate consulting on the terms and conditions set
forth below.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Client and Advisor
agree as follows:
1. Engagement
The Client hereby retains Advisor, effective as of the date hereof (
the "Effective Date") and continuing until termination, as provided
herein, to assist the Client with performing general corporate tasks
and other items that the Client needs assistance with, the Advisor will
additionally provide advice in dealing with corporate and client issues
(the "Services"). The Services are to be provided on a "best efforts"
basis directly and through Advisor's officers or others employed or
retained and under the direction of Advisor ("Advisor's Personnel").
2. Term
This Agreement shall have an initial term of nine (9) months (the
"Primary Term"), commencing with the Effective Date.
3. Time and Effort of Advisor
Advisor shall allocate time and Advisor's Personnel as it deems
necessary to provide the Services. The particular amount of time may
vary from day to day or week to week. Except as otherwise agreed,
Advisor's monthly statement identifying, in general, tasks performed
for the Client shall be conclusive evidence that the Services have been
performed. Additionally, in the absence of willful misfeasance, bad
faith, negligence or reckless disregard for the obligations or duties
hereunder by Advisor, neither Advisor nor Advisor's Personnel shall be
liable to the Client for any act or omission in the course of or
connected with rendering the Services, including but not limited to
losses that may be sustained in any corporate act in any subsequent
Business Opportunity (as defined herein) undertaken by the Client as a
result of advice provided by Advisor or Advisors's Personnel.
4. Compensation
The Client agrees to pay Advisor a fee for the Services ("Advisory
Fee") of Two Hundred Fifty Thousand Dollars ($250,000).
5. Place of Services
39
<PAGE>
The Services provided by Advisor or Advisor's Personnel hereunder will
be performed at Advisor's offices except as otherwise mutually agreed
by Advisor and the Client.
6. Independent Contractor
Advisor and Advisor's Personnel will act as an independent contractor
in the performance of its duties under this Agreement. Accordingly,
Advisor will be responsible for payment of all federal, state, and
local taxes on compensation paid under this Agreement, including income
and social security taxes, unemployment insurance, and any other taxes
due relative to Advisor's Personnel, and any and all business license
fees as may be required. This Agreement neither expressly nor impliedly
creates a relationship of principal and agent, or employee and
employer, between Advisor's Personnel and the Client. Neither Advisor
nor Advisor's Personnel are authorized to enter into any agreements on
behalf of the Client. The Client expressly retains the right to
approve, in its sole discretion, each Asset Opportunity or Business
Opportunity introduced by Advisor, and to make all final decisions with
respect to effecting a transaction on any Business Opportunity.
7. No Agency Express or Implied
This Agreement neither expressly nor impliedly creates a relationship
of principal and agent between the Client and Advisor, or employee and
employer as between Advisor's Personnel and the Client.
8. Termination
The Client and Advisor may terminate this Agreement prior to the
expiration of the Primary Term upon thirty (30) days written notice
with mutual written consent. Failing to have mutual consent, without
prejudice to any other remedy to which the terminating party may be
entitled, if any, either party may terminate this Agreement with thirty
(30) days written notice under the following conditions:
(A) By the Client.
-------------
(i) If during the Primary Term of this Agreement or any
Extension Period, Advisor is unable to provide the Services
as set forth herein for thirty (30) consecutive business
days because of illness, accident, or other incapacity of
Advisor's Personnel; or,
(ii) If Advisor willfully breaches or neglects the duties
required to be performed hereunder; or,
(B) By Advisor.
-----------
(i) If the Client breaches this Agreement or fails to make any
payments or provide information required hereunder; or,
(ii) If the Client ceases business or, other than in an Initial
Merger, sells a controlling interest to a third party, or
agrees to a consolidation or merger of itself with or into
another corporation, or enters into such a transaction
outside of the scope of this
40
<PAGE>
Agreement, or sells substantially all of its assets to
another corporation, entity or individual outside of the
scope of this Agreement; or,
(iii)If the Client subsequent to the execution hereof has a
receiver appointed for its business or assets, or otherwise
becomes insolvent or unable to timely satisfy its
obligations in the ordinary course of business, including
but not limited to the obligation to pay the Initial Fee,
the Transaction fee, or the Advisory Fee; or,
(iv) If the Client subsequent to the execution hereof institutes,
makes a general assignment for the benefit of creditors, has
instituted against it any bankruptcy proceeding for
reorganization or rearrangement of its financial affairs,
files a petition in a court of bankruptcy, or is adjudicated
a bankrupt; or,
(v) If any of the disclosures made herein or subsequent hereto
by the Client to Advisor is determined to be materially
false or misleading.
In the event Advisor elects to terminate without cause or this
Agreement is terminated prior to the expiration of the Primary Term or
any Extension Period by mutual written agreement, or by the Client for
the reasons set forth in A(i) and (ii) above, the Client shall only be
responsible to pay Advisor for unreimbursed expenses, Advisory Fee and
Transaction Fee accrued up to and including the effective date of
termination. If this Agreement is terminated by the Client for any
other reason, or by Advisor for reasons set forth in B(i) through (v)
above, Advisor shall be entitled to any outstanding unpaid portion of
reimbursable expenses, Transaction Fee, if any, and the balance of the
Advisory Fee for the remainder of the unexpired portion of the
applicable term (Primary Term or Extension Period) of the Agreement.
9. Indemnification
Subject to the provisions herein, the Client and Advisor agree to
indemnify, defend and hold each other harmless from and against all
demands, claims, actions, losses, damages, liabilities, costs and
expenses, including without limitation, interest, penalties and
attorneys' fees and expenses asserted against or imposed or incurred by
either party by reason of or resulting from any action or a breach of
any representation, warranty, covenant, condition, or agreement of the
other party to this Agreement.
10. Remedies
Advisor and the Client acknowledge that in the event of a breach of
this Agreement by either party, money damages would be inadequate and
the non-breaching party would have no adequate remedy at law.
Accordingly, in the event of any controversy concerning the rights or
obligations under this Agreement, such rights or obligations shall be
enforceable in a court of equity by a decree of specific performance.
Such remedy, however, shall be cumulative and nonexclusive and shall be
in addition to any other remedy to which the parties may be entitled.
11. Miscellaneous
(A) Subsequent Events. Advisor and the Client each agree to notify
the other party if, subsequent to the date of this Agreement,
either party incurs obligations which could compromise its
efforts and obligations under this Agreement.
41
<PAGE>
(B) Amendment. This Agreement may be amended or modified at any
time and in any manner only by an instrument in writing
executed by the parties hereto.
(C) Further Actions and Assurances. At any time and from time to
time, each party agrees, at its or their expense, to take
actions and to execute and deliver documents as may be
reasonably necessary to effectuate the purposes of this
Agreement.
(D) Waiver. Any failure of any party to this Agreement to comply
with any of its obligations, agreements, or conditions
hereunder may be waived in writing by the party to whom such
compliance is owed. The failure of any party to this Agreement
to enforce at any time any of the provisions of this Agreement
shall in no way be construed to be a waiver of any such
provision or a waiver of the right of such party thereafter to
enforce each and every such provision. No waiver of any breach
of or noncompliance with this Agreement shall be held to be a
waiver of any other or subsequent breach or noncompliance.
(E) Assignment. Neither this Agreement nor any right created by it
shall be assignable by either party without the prior written
consent of the other.
(F) Notices. Any notice or other communication required or
permitted by this Agreement must be in writing and shall be
deemed to be properly given when delivered in person to an
officer of the other party, when deposited in the United
States mails for transmittal by certified or registered mail,
postage prepaid, or when deposited with a public telegraph
company for transmittal, or when sent by facsimile
transmission charges prepaid, provided that the communication
is addressed:
(i) In the case of the Client:
Richard D. Surber
268 West 400 South
Suite 300
Salt Lake City, Utah 84101
Telephone: (801) 575-8073
Telefax: (801) 575-8092
(ii) In the case of Advisor:
CyberAmerica Corporation
268 West 400 South
Suite 300
Salt Lake City, Utah 84101
Telephone: (801) 575-8073
Telefax: (801) 575-8092
Attention: Gerald Einhorn, Vice President
or to such other person or address designated in writing by the Client
or Advisor to receive notice.
42
<PAGE>
(G) Headings. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
(H) Governing Law. This Agreement was negotiated and is being
contracted for in Utah, and shall be governed by the laws of the
State of Utah, and the United States of America, notwithstanding
any conflict-of-law provision to the contrary.
(I) Binding Effect. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective
heirs, administrators, executors, successors, and assigns.
(J) Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior
agreements, arrangements, or understandings between the parties
relating to the subject matter of this Agreement. No oral
understandings, statements, promises, or inducements contrary to
the terms of this Agreement exist. No representations,
warranties, covenants, or conditions, express or implied, other
than as set forth herein, have been made by any party.
(K) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full
force and effect.
(L) Counterparts. A facsimile, telecopy, or other reproduction of
this Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument,
by one or more parties hereto and such executed copy may be
delivered by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on
behalf of such party can be seen. In this event, such execution
and delivery shall be considered valid, binding and effective for
all purposes. At the request of any party hereto, all parties
agree to execute an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof.
(M) Time is of the Essence. Time is of the essence of this Agreement
and of each and every provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date above written.
The "Client" "Advisor"
Richard D. Surber CyberAmerica Corporation
By: /s/ Richard D. Surber By: /s/ Gerald Einhorn
------------------------ ---------------------
Name: Gerald Einhorn
Title: Vice President
43
Exhibit 23
[Letterhead of]
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
We hereby consent to the use of our audit report of CyberAmerica Corporation and
subsidiaries dated May 2, 2000 for the year ended December 31, 1999 in the Form
10-KSB.
/S/ Crouch Bierwolf & Chisholm
May 4, 2000
Salt Lake City, Utah
44
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED AUDITED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S
DECEMBER 31, 1999 ANNUAL REPORT ON FORM 10-KSB AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000788738
<NAME> CyberAmerica Corporation
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<EXCHANGE-RATE> 1
<CASH> 18,314
<SECURITIES> 3,970,445
<RECEIVABLES> 2,230,748
<ALLOWANCES> (200,000)
<INVENTORY> 0
<CURRENT-ASSETS> 6,019,507
<PP&E> 13,234,954
<DEPRECIATION> (2,046,759)
<TOTAL-ASSETS> 17,726,261
<CURRENT-LIABILITIES> 2,188,317
<BONDS> 0
0
0
<COMMON> 3,228
<OTHER-SE> 7,470,533
<TOTAL-LIABILITY-AND-EQUITY> 17,726,261
<SALES> 6,858,784
<TOTAL-REVENUES> 6,858,784
<CGS> 2,695,444
<TOTAL-COSTS> 4,201,323
<OTHER-EXPENSES> 875,749
<LOSS-PROVISION> 100,000
<INTEREST-EXPENSE> (182,957
<INCOME-PRETAX> 3,624,067
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,624,067
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,624,406
<EPS-BASIC> 1.14
<EPS-DILUTED> 1.14
</TABLE>
