U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 33-11324-LA
NETUSA, INC.
------------
(Name of small business issuer in its charter)
Colorado 84-1035751
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification
Number)
201 San Antonio Cir., C250, Mountain View, CA 94040
---------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number: (650) 948-6200
---------------
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on
--------------------- which registered
----------------------------
Common Over the Counter Bulletin Board (OTCBB)
------ ---------------------------------------
Securities registered under Section 12(g) of the Exchange Act: 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 --- No X
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B 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_
<PAGE>
PART I
ITEM 1: DESCRIPTION OF BUSINESS
(a) Business Development
NetUSA, Inc. (hereinafter NetUSA, or "the company") was formed when Technology
Management and Marketing, Inc. (hereinafter TMMI) acquired the Mountain View,
Calif.-based Pacific Microelectronics, Inc. (hereinafter Pacific Micro) in
February, 1996, wherein the shareholders of Pacific Micro relinquished control
of the company in exchange for NetUSA stock. NetUSA thus is a successor of
TMMI. TMMI was formed in 1985, and subsequently transferred all its assets
and liabilities to GeoTrans Technology, Inc. of Delaware, in 1990, and ceased
operations; at the time of TMMI's merger with Pacific Micro, TMMI had been out
of operation for 6 years.
NetUSA has never been involved in any bankruptcy, receivership or similar
proceedings, and to the best knowledge of the drafter of this document,
neither has its predecessor TMMI.
(b) Business of Issuer
NetUSA has three principal divisions: Telecommunications, Web Services, and
Software.
(1) In General
NetUSA currently serves as its own distributor for most services and directly
deal with customers. Recently, NetUSA has opened a store named the NetUSA
Internet Center in Mountain View, Calif. NetUSA is currently marketing its
services and software via the store, and plans to franchise the concept in the
future. The software division has additional methods of distribution (see
below).
Due to the nature of NetUSA's business, the company is not dependent on major
customers. NetUSA pursues its intellectual property rights mostly through
copyrighting and registering trademarks. NetUSA currently has 19 employees,
16 of whom are full-time employees.
(2) Telecommunications
The Telecommunications Division of NetUSA currently markets two main services:
Internet dial-up service, and Internet fax service (hereinafter Interfax).
The Internet dial-up service allows users to connect to the Internet using
their personal computers and modems, to receive and send electronic mail, and
to access the World Wide Web. Interfax allows users to
send facsimiles through the Internet at cost that is significantly lower than
the phone rate the users would otherwise have needed to pay, particularly if
the faxes were to be sent to international destinations.
The division plans to launch a new service within the next two months: Voice
Over the Internet (hereinafter VON). VON uses similar technology to Interfax,
but rather than sending fax signals, VON allows users to talk on the phone
over the Internet. NetUSA currently plans to launch services between the
United States, Taiwan, and Hong Kong, with future plans to expand to Japan and
China. VON is currently in testing, and NetUSA expects to be able to launch
VON within the current timetable.
As is common knowledge, Internet dial-up service is a highly-competitive area
of business. NetUSA plans to compete by offering friendly service with
easy-to-reach customer service, but does not foresee the dial-up service to be
a substantial source of revenue. Rather, the telecommunications division will
derive most of its revenue from Interfax and VON. NetUSA is not aware of any
currently significant competitors for Interfax or VON.
There are no current or expected governmental regulations that should
significantly affect most of NetUSA's telecommunications services. However,
the Taiwanese parliament (the Legislative Yuan) is currently drafting laws
that would officially legitimize VON. Current Taiwanese statutes are silent
on whether if VON is legal, although NetUSA's consultants believe that VON
does not violate Taiwanese law.
(3) Web Services
The web services division of NetUSA has two main services: Software Center and
web design/hosting. Software Center is a World Wide Web database maintained
by NetUSA of major commercial software and hardware products. Users access
the database freely and may search for the products that they require. They
can then order the products through NetUSA, which requires a surcharge on the
orders. Web design/hosting includes customized services ranging from
designing World Wide Web documents for clients to hosting the clients'
documents on NetUSA's computers to allow World Wide Web users to access the
clients' documents. NetUSA charges the client based on its need.
NetUSA is aware of some web sites that indirectly compete with Software
Center. Software Center emphasizes commercial products and orders the
products for the customers, while most similar web sites concentrate on
Shareware (software that is downloadable for free but which requires
registration afterwards if the customer is satisfied), and therefore NetUSA do
not see those sites as true competitors. There are large numbers of companies
offering similar services to NetUSA's web design/hosting services.
NetUSA plans to compete by offering personalized
services that allow the client to fit the service as he or she wishes and by
tendering high-quality service difficult to find elsewhere.
(4) Software
NetUSA's software division, using the trade name Pacific Micro, currently
offers a number of utility software programs. NetUSA's flagship software
product, Mac-In-DOS, allows users to exchange files between Apple Computers,
Inc.'s MacOS file system and Microsoft's Windows 95 and NT ("Windows") file
systems. Other major NetUSA software products include Common-Link, which
allows users to exchange files between MacOS, Windows, and UNIX file systems,
and SuperCut, which allows users to capture screen displays for publication
purposes.
NetUSA plans to launch a new software product, tentatively named DiskAnalyst,
that would allow users to edit portions of their disks and have greater
controls in managing the file structure without having to leave Windows.
NetUSA tentatively plans to release DiskAnalyst in February 1998.
Other than the direct distribution mentioned above, NetUSA also distributes
its software through retail vendors and catalogues.
All of NetUSA's software products have competing products on the market.
NetUSA plans to compete with these products by offering programs that are
superior in ease of use and provide greater capabilities than competing
products, by frequently updating the software to take advantage of new
advances in software and hardware technology, as well as strategically pricing
the products.
ITEM 2: DESCRIPTION OF PROPERTY
NetUSA does not own any real property.
ITEM 3: LEGAL PROCEEDINGS
NetUSA is not currently involved in any legal proceedings, either as plaintiff
or defendant, and is not aware of any pending actions on its behalf or against
it.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year, there was no matter submitted to
a vote by the security holders.
PART II
ITEM 5: MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
During the fiscal year covered by this report, NetUSA did not sell any
unregistered securities which were made in reliance on Regulation S.
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
In general, NetUSA's cash supply has been steadily used for research and
development purposes, to build the telecommunications and software divisions,
within the past fiscal year. However, the company still has a sizable cash
reserve (see below, Item 7). At the same time, the revenues from the three
divisions have been fairly consistent through the quarters of this fiscal
year, so the company does not foresee significant financial difficulties
within the coming year.
NetUSA's liquidity will at least partially depend on the success of VON (see
above, Item 1). Due to the lack of competition and the desire of the test
market to see lower international long distance rates, NetUSA believes that
when VON is launched, it will receive a substantial cash infusion from users.
Further, for the first 3-6 months of VON service, NetUSA does not foresee
substantial expenditures necessary to add to its VON capacity. However, such
liquidity might not surface if international long distance phone companies
reduce their phone rates to make VON less attractive, but NetUSA believes
those actions are unlikely.
NetUSA is also currently undergoing a major overhauling of Software Center
(see above, Item 1) that the company hopes will attract large amounts of
advertisement revenue. If that comes to fruition, NetUSA will have much more
liquidity than before, and even if does not, since this renovation of Software
Center does not require significant additional expenditure, the company's
financial situation should not be adversely impacted.
One event that may decrease the company's liquidity would be involve changes
in Macintosh users' operating system. Currently, NetUSA estimates that 5%-10%
of MacOS users would switch to Rhapsody, Apple Computers' new high-end
operating system. If this estimate is correct, Mac-In-DOS sales will not be
significantly impacted. However, if in actually 50% or more of MacOS users
switch to Rhapsody, Mac-In-DOS sales may suffer a setback until Mac-In-DOS is
revised to account for Rhapsody. NetUSA does not foresee a high likelihood
for that event to happen, though.
ITEM 7: FINANCIAL STATEMENTS
The audited financial statements of Registrant, for the twelve months ended
September 30, 1997, prepared by Samuel H. Wong & Co. LLP, Independent
Certified Public Accountants immediately follow:
INDENPENDENT AUDITOR'S REPORT
==============================
To the Board of Directors and Stockholders of NetUSA, Inc.:
We have audited the accompanying balance sheet of NetUSA, Inc. as of
September 30, 1997 and the related statements of income, retained earnings,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as welll as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of NetUSA, Inc. as of
September 30, 1997 and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
/s/Samuel H. Wong & Co. LLP
Certified Public Accountants
Dated: November 12, 1997
at San Francisco, California
<PAGE>
<TABLE>
<CAPTION>
Net USA, Inc.
Condensed Consolidated Financial Statements
For the Twelve Months Ended September 30,1997 and
the Seven Months Ended September 30, 1996
Balance Sheet
=========
<S> <C> <C>
ASSETS
======
Current Assets 1997 1996
------------ -------- ---------
Cash 246,062.54 772,088.71
Accounts Receivable 372,554.86 424,123.50
Inventory 4,051.74 7,073.00
Prepaid Exp 18,840.84 17,040.00
Deferred Income Tax Asset 14,679.00 0.00
----------- ------------
Total Current Assets 656,188.98 1,220,325.21
Property & Equipment (Notes 2 & 3)
---------------------------------
At Cost 273,214.71 228,461.07
Less: Accum Depr. (185,941.70) (157,850.00)
------------ ------------
Net Property & Equip. 87,273.01 70,611.07
Long-Term Assets
----------------
Def. Income Taxes - LT (Note 4) 918,173.00 0.00
Other Assets
------------
Note Receivable (Note 5) 80,000.00 0.00
Investment at cost (Note 6) 100,000.00 50,000.00
R&D Cost and Other (Note 7) 661,680.22 15,965.97
----------- ----------
Total Other Assets 841,680.22 65,965.97
----------- ----------
TOTAL ASSETS $2,503,315.21 $1,356,902.25
============= =============
<FN>
The accompanying notes are an integral part of these fmancial statements
See Accountants' Report
<PAGE>
Balance Sheet
==========
LIABILITIES
==========
Current Liabilities 9/30/97 9/30/96
-------------------- ------ -------
Accounts Payable $ 338,196.39 $ 51,169.87
Payroll Payable 10,510.38 7,826.25
State Income Tax Payable 0.00 0.00
Lease Obligation-Current (Note 8) 7,556.19 25,080.00
Accrued Liabilities 8,193.60 0.00
-------------- ------------
364,456.56 84,076.12
Long Term Liabilities
-----------------------
Lease Oblig. - LT (Note 8) 13,969.42 0.00
Note Payable (Note 10) 219,708.13 191,893.52
Loan from Shareholders 0.00 1,947.66
---------------- ------------
233,677.55 193,841.18
STOCKHOLDERS' EQUITY
=====================
Common Stock (Note 11) $ 4,455.92 4,227.92
Add.Paid-In Capital(Note 11) 3,766,562.82 3,897,606.71
Divided Paid 0.00 0.00
Current Deficit 957,012.04 (400,783.85)
Retained Deficit (2,822,849.68) (2,422,065.83)
Total SH Equity 1,905,181.10 1,078,984.95
---------------- ----------------
TOTAL S/H and LIAB. $2,503,315.21 $1,356,902.25
========== ============
<FN>
The accompanying notes are an integral part of these fmancial statements
See Accountants' Report
<PAGE>
Statement of Income
for the year ended September 30, 1997
Revenue 1997 1996
---------- ---- ----
Sales $ 2,104,432.00 $1,000,964.18
Cost of Sales (911,079.00) (374,653.96)
Operating Income 1,193,353.00 626,310.22
Other Income 58,412.00 26,009.96
------------- ------------
Total Revenue 1,251,765.00 652,320.18
Operating Expenses
--------------------
Salaries and Wages (216,519.00) (205,600.67)
Employee Benefits ( 95,139.00) (59,076.18)
------------- -------------
(311,658.00) (264,676.85)
Administrative &
General Expenses (460,266.00) (328,531.85)
Depreciation & Amortization (21,233.00) 0.00
Marketing Expense (349,303.00) (113,574.39)
Interest Expense (31,422.00) (18,766.85)
Financial Expense (553.00) (354.47)
------------ -------------
Total Operating Expenses (1,174,425.00) (725,904.41)
Income (Loss) before Taxes (77,340.00) (73,584.23)
Income Tax Benefit 932,052.00 0.00
Provision for Current Year's
Income Tax (Note 4) (800.00) 0.00
Income Tax Benefit (Note 4) 932,852.00 0.00
----------- ------------
Net Income (Loss) for
the year after Tax $1,009,392.00 $ (73,584.23)
Weighted Average Number of
Shares Outstanding 4,455,918 4,269,509
Earnings per common share $ .23 $ (.02)
The accompanying notes are an integral part of these fmancial statements
See Accountants' Report
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NetUSA, Inc.
Statement of Stockholders' Equity
For the year ended September 30, 1997
<S> <C> <C> <C> <C> <C>
Common Stock Addl. Retained
# of Paid Deficit Total
Shares Amount In
-------------- ----- ------- -----
Balances at
October 1, 1996 4,269,509 $4,269 $3,782,066($2,875,230) $911,105
Reverse 10 for 1
Stock Split on
October 1, 1996 (3,841,891)(3,842) 3,842 - -
---------- ------ --------- ----------- --------
Balances after
Stock Split 427,618 427 3,785,908 (2,875,230) 911,105
Common Stock
Issuance as
Compensation 3,653,400 3,654 - - 3,654
Sale of Common
Stock 645,200 645 106,000 - 106,645
Cancellation of
Common Stock (270,400) (270) (125,345) - (125,615)
Net Income
After Tax - - - 1,009,392 1,009,392
---------- ------- --------- --------- ---------
Balances at
9/30/97 4,455,918 $4,456 $3,766,563 ($1,865,838) $1,905,181
======== ====== ========= ========== ==========
<FN>
The accompanying notes are an integral part of these fmancial statements
See Accountants' Report
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NetUSA, Inc.
Statement of Cash Flows
for the year ended September 30, 1997
Increase (Decrease) in Cash and Cash Equivalents
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 2,098,260
Cash paid to suppliers and employees (1,786,106)
Miscellaneous Income received 33,044
Interest received from banks 25,368
Interest Paid (313422)
Income Tax Paid (800)
------------
Net cash provided by operating activities $ 338,344
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Property and Equipment (37,885)
Issuance of Note Receivable (80,000)
Increase of Investment (50,000)
Research and Development Cost (582,922)
Security Deposits (6,400)
Advances Paid (51,406)
Organization Cost (1,937)
-----------
Net cash (used in) investing activities $ (810,550)
CASH FLOWS FROM FINANCING ACTWITIES:
Repayment of Note Payable $ (31,900)
Repayment of Equipment Leases (3,555)
Net Return of Common Stock/Additional Paid-in Capital (15,316)
Net cash (used in) financing activities (50,771)
------------
Net Increase in Cash and Cash Equivalents at
end of year $ (522,977)
Cash and Cash Equivalents at beginning of year $ 769,039
------------
Cash and Cash Equivalents at end of year $ 246,062
------------
<FN>
The accompanying notes are an integral part of these financial statements
See Accountants' Report
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NetUSA, Inc.
Reconciliation Statement of Net Income to Net Cash (Used In)/Provided
by
Operating Activities for the year ended September 30, 1997
<S> <C>
Net Income for the year $1,009,392
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and Amortization 21,223
Bad Debts and Recoveries (50,424)
Decrease/(Increase) in Accounts Receivables ( 6,172)
Decrease/(Increase) in Inventory 3,021
Decrease/(Increase) in Prepaid Expenses (1,801)
Decrease/(Increase) in Deferred Income Tax (932,852)
Increasel(Decrease) in Accounts Payable 285,079
Increase/(Decrease) in Payroll Tax Payable 2,684
Increase/(Decrease) in Accrued Liabilities 8,194
---------
Net Cash provided by Operating Activities $ 338,344
<FN>
The accompanying notes are an integral part of these financial statements.
See Accountants' Report
</TABLE>
NetUSA, Inc.
Notes to Financial Statements
for the year ended September 30, 1997
1. The Company
------------
NetUSA, Inc., previously named as Teclmology Management
and Marketing Inc., was incorporated under the laws of the State of Colorado
on December 31, 1985. The Company was engaged principally in organizational
activities until its public offering of securities in 1987.
The Company was the exclusive licensee of Temple University for a
diagnostic test for the detection of gonorrhea, known as the GONOSTAT.
During the period May 1990 to December 31, 1995 the Company was
inactive. The Company did not file any SEC reports, Federal or State income
tax returns.
On February 26, 1996, the Company acquired 100% of the issued and
outstanding shares of Pacific Microelectronics, Inc., a company incorporated
in the State of California on July 1, 1987.
The Company's main business in recent years is merchandising
software products primarily
The Company's main business in recent years is merchandising software
products primarily through distributors and direct sales to consumers. The
Company also provides a newly developed telecommunication system for offering
Internet web site services and facilitating the fax function worldwide.
2. Summary of Significant Accounting Polices
---------- --------------------------------
The Company maintains its general ledger and journals with
the accrual method of accounting both for financial reporting and income tax
reporting purposes. Accordingly, the accompanying financial statements have
been prepared on the accrual basis of accounting. A summary of significant
accounting policies is outlined below:-
(A) Property and Equipment
Property and Equipment are stated at cost. Repairs and maintenance to these
assets are charged to expense as incurred; major improvements enhancing the
function and/or useful life are capitalized. When items are sold or retired,
the related cost and accumulated depreciation are removed from the accounts
and any gains or losses arising from such transactions are recognized.
Property and Equipment are depreciated over their estimated useful lives of 5
years by the straight line method.
(B) Inventory
Inventory is stated at the lower of cost or market value.
(C) Investment
The Company's non-controlled investments in other entities are carried at
cost.
(D) Income Taxes
The Company uses the accrual method of accounting to determine and report its
taxable income and uses the flow through method to account for tax credits
which are reflected as a reduction of income taxes for the year in which they
are available.
Income tax liabilities computed according to the Federal, California, and
Colorado tax laws are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the basis of fixed assets and
intangible assets for financial and tax reporting. The deferred tax assets and
liabilities represent the future tax return consequences of those differences,
which will either be taxable or deductible when the assets and liabilities are
recovered or seffled. Deferred taxes also are recognized for operating losses
that are available to offset future taxable income and tax credits that are
available to offset future federal and state income taxes.
(E) Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents.
Property and Equipment
- ------------- ---------
<TABLE>
<CAPTION>
Property and Equipment as of September 30, 1997 was as follows:
<S> <C> <C> <C>
Accumulated Net
9/30/96 At Cost Depreciation Value
--------- --------- ------------ -------
Building Improvement $ 2,928 $ - $ 2,928
Furniture and Fixtures 7,201 (3,541) 3,660
Computers and Equipment 263,086 (182,401) 80,685
--------- ----------- -----------
$ 273,215 ($ 185,942) $ 87,273
</TABLE>
4. Deferred Income Taxes
-----------------------
Deferred Income Taxes as of September 30, 1997 were comprised of the following
components:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Components Federal California Total
- ---------- --------- ------------ ------
Temporary Differences
in Depreciation and
Amortization $ (9,134) $ (2,498) $ (11,632)
Net Operating Losses
Carryforward 941,057 3,427 944,484
-------- ---------- -----------
Total Deferred Tax Assets $931,923 $ 929 $ 932,852
Less: Current Portion (13,750) (929) (14,679)
---------- ---------- ----------
Long Term Portion $918,173 $ - $918,173
</TABLE>
5. Note Receivable
----------------
NetUSA, Inc. granted two loans to Terrie Lloyd on February 28, 1996 and
October 28,1996 in the amount of $30,000 and $50,000 respectively. The note
was payable on demand and non-interest bearing.
6. Investments
-----------
The investment represents cash paid to Net Japan, a Japan enterprise, in
exchange for one-sixth ownership interest, and for a minimal ownership
interest in Linc Media, Inc., a Japan enterprise. The investees have not
provided financial information to the Company so as to enable management to
determine the proper carrying values.
7. Other Assets
------------
<TABLE>
<CAPTION>
Other Assets as of September 30, 1997 were as follows:
<S> <C>
Research and Development Costs $582,922
Security Deposits 6,400
Other Receivable 10,046
Organizational Cost 1,937
Advances Paid 60,375
--------
$661,680
</TABLE>
8. Lease Obligations
-----------------
(A) Capital Lease Obligations as of September 30, 1997 were as follows:
<TABLE>
<S> <C> <C>
Lessor Amount Leased Property
------ ------ ---------------
Graybar Financial Services $ 5,726 1996 Phone system
and accessories
Xerox Corporation $15,800 Copier Machine #DC20
-------
$21,526
Less: Current Maturities (7,557)
-------
$13,969
=======
</TABLE>
The lease of a 1996 Phone System from Graybar Financial Services is for a
term of 36 months from January 18, 1996 through December 18, 1998, at a
monthly lease payment of $380.87. No security deposit is required. The
minimum lease payment for the next 15 months is $5,713.
The lease of a copier from the Xerox Corporation (Lease #070936403) is for
a term of 48 months from July 28, 1997 through June 28, 2001 at a monthly
lease payment of $465.89. No security deposit is required. The minimum
lease payments for the next 45 months is $20,965.
Future minimum lease payments for the next three years will be:
<TABLE>
<S> <C>
Year ended September 30 Lease Payment
----------------------- --------------
1998 $ 10,162
1999 6,733
2000 5,590
2001 4,193
-----------
$ 26,678
</TABLE>
9. Lease Commitments
------------------
(A) The Company entered into a lease on May 3, 1994 for an office space
at 201 San Antonio Circle, Suite 250 and 145, City of Mountain View, County of
Santa Clara, CA 94040 for a term of 36 months commencing on June 1, 1994 and
expiring on May 31, 1997. The Company exercised the option to renew the
existing lease on July 23, 1997 with 12 months extension of the lease which
will expire on July 31, 1998 and the following two years lease is under option
agreement.
Rent for the term of the lease from August 1, 1997 to January 31, 1998 is
$2,958.80 per month. Rent for the period from February 1, 1998 to July 31,
1998 will increase to $3,414.00 per month.
Under the option agreement, rent for the year from August 1, 1998 to July 31,
1999 will increase to $3,869.20. Rent for the remaining year of the option
from August 1, 1999 to July 31, 2000 will increase to 4,096.80. No security
deposit is required to be placed with the lessor.
There was an amount of $8,194 for back rent due to Jack Dymond Associates.
This matter is under negotiation process.
(B) The Company entered into a lease on March 14, 1997 for a commercial
store at 285 Castro Street, Mountain View, CA 94040 for a term of 12 months
commencing on April 1, 1997 to March 31, 1998 with four year renewal option.
Rent for the term of the lease is $3,000.00 per month through out the whole
year. A security deposit of $6,000.00 has been placed with the lessor for due
performance of the obligation.
Future minimum rent payments for the next year will be:
<TABLE>
<CAPTION>
<S> <C>
Year ended September 30 Rent Payment
----------------------- -----------------
1998 $47,319
</TABLE>
10. NotePayable
-----------
On July 14, 1995, the Company was granted a loan by Associates Commercial
Corporation of Delaware in the form of a variable interest rate bearing note
in the sum of $250,000. The interest shall increase or decrease to two and
three quarter percent (2.75%) above the prime rate in effect on the first
business day of the month as published in the Money Rates Section of The Wall
Street Journal. The loan will be fully paid off by 110 monthly installments ,
including principal and interest, until September 26, 2004.
11. Common Stock
-------------
The Company is authorized by its Articles of Incorporation to issue a total of
50,000,000 shares of common stock at $0.001 par value, of which 4,455,918
shares were issued and outstanding on September 30, 1997.
On October 1, 1996, the Company consolidated its shares on the basis of a
reverse 10 for 1 stock split. The issued and outstanding shares of 4,269,509,
then became 427,618 issued and outstanding shares. The par value remained as
$0.001 per share.
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
In the past two fiscal years, NetUSA's accountant has neither resigned nor
been dismissed.
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
(a) Directors/Executive Officers
DR. WUN C. CHIOU, Chief Executive Officer/Sole Director:
Dr. Chiou has been CEO and Director ever since the TMMI/Pacific Micro merger
in February, 1996. From the time 5 years before this form's filing up to
February, 1996, he had been the CEO and sole Director of Pacific Micro and
held all actual and nominal responsibilities associated with those offices.
He does not hold a director position in any other reporting company.
(b) Significant Employees
MR. LOUIS DUPUIS, Director of Marketing:
Mr. DuPuis has served as the chief of NetUSA's marketing since March,
1997. For the five years before this report, he has served in similar
capacities in several software firms.
MR. LEO XIA, Chief Engineer:
Mr. Xia has served as the chief engineer for NetUSA since February, 1996.
Prior to that, he had been working as an electrical engineer. He is the key
architect behind NetUSA's utility software projects.
MR. NELSON LU, Special Assistant to CEO:
Mr. Lu has been serving as the special assistant to CEO since August,
1997, and is expected to serve as the company's counsel when he is admitted to
the California Bar. For the five years before this report, he had been
studying computer science and law.
(c) Family Relationships
There are no family relationships among the directors, officers, and employees
disclosed above.
(d) Involvement in Certain Legal Proceedings
To the best knowledge of the drafter of this document, there are no
outstanding legal proceedings that are required to be disclosed under this
item against any person listed above.
ITEM 10: EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
==========================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
Annual Long-Term All Other
Compensation Compensation Compensation
Awards Payouts
---------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
(1) CEO '97 96 0 0 0 0 0 0
'96 56 0 0 0 0 0 0
- ----------------------------------------------------------------------------
<FN>
All figures are in thousands of US$.
Key:
(1) Dr. Wun Chiou, President and CEO
(a) Position held in company
(b) Fiscal year; '97 is October, 1996, through September, 1997; '96 is
October, 1995 through September, 1996.
(c) Annual Salary
(d) Bonus
(e) Other annual compensation
(f) Restricted stock awards
(g) Securities underlying options/SARs
(h) LTIP payouts
(i) All other compensation
</TABLE>
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
<TABLE>
<CAPTION>
<S> <C> <C> <C>
--------------------------------------------------------------------------
Title of Name/Address of Amount/Nature Percent of
Class Beneficial Owner of Beneficial Class
Ownership
--------------------------------------------------------------------------
Common Dr. Wun C. Chiou 3,000,000 69%
(Directly owned)
</TABLE>
(b) Security Ownership of Management
See above, subitem (a).
(c) Changes in Control
There is no arrangement currently outstanding which may result in a change of
control.
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There was no relevant transaction during the relevant period.
ITEM 13: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
There are no exhibits to be attached to this form.
(b) Reports on Form 8-K
No Form 8-K was filed during this fiscal year.
SIGNATURES
================
Pursuant to the Requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: May 4, 1998 NetUSA, Inc.
By: /s/ Wun C. Chiou, Sr., President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
Date: May 4, 1998 By: /s/ Wun C. Chiou, Sr., President,
Chief Financial Officer and Director
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 246,063
<SECURITIES> 0
<RECEIVABLES> 372,555
<ALLOWANCES> 0
<INVENTORY> 4,052
<CURRENT-ASSETS> 656,189
<PP&E> 273,215
<DEPRECIATION> 185,942
<TOTAL-ASSETS> 2,503,315
<CURRENT-LIABILITIES> 364,457
<BONDS> 233,678
0
0
<COMMON> 4,456
<OTHER-SE> 3,766,563
<TOTAL-LIABILITY-AND-EQUITY> 2,503,315
<SALES> 2,104,432
<TOTAL-REVENUES> 1,251,765
<CGS> 911,079
<TOTAL-COSTS> 911,079
<OTHER-EXPENSES> 1,174,425
<LOSS-PROVISION> (800)
<INTEREST-EXPENSE> 31,422
<INCOME-PRETAX> (77,340)
<INCOME-TAX> (932,852)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,009,392
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
