U.S. Securities and Exchange Commission
Washington, DC 20549
Form 10-QSB
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal quarter ended June 30, 1998
[ ] 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
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
Part I - Financial Information
Item 1: Financial Statements
(Note: unaudited, as permissible under Item 310(b) of Regulation S-B.)
Balance Sheet
1998 1997
Current Assets
Cash (24,309) 463,795
A/R 299,728 312,304
Inventory 35,529 3,987
Prepaid Expenses 16,465 13,000
Deferred Income Tax Asset 14,679 -
______________ _____________
Total Current Assets 342,091 793,086
Property & Equipment
At Cost 304,290 265,343
Less: Accumulated Depre. (204,682) (180,035)
______________ ______________
Net Property & Equipment 99,428 85,309
Long-Term Assets
Def. IX Assets - LT 918,173 811,749
Other Assets
Notes Receivable 80,000 80,000
Investment at Cost 100,000 100,000
R&D Cost and Other 805,495 525,071
Goodwill 190,000 -
______________ ______________
Total Other Assets 1,175,495 705,071
TOTAL ASSETS 2,535,187 2,395,216
Current Liabilities
Accounts Payable 227,759 199,980
Payroll Payable 1,806 10,873
State Income Tax Payable - 22,761
Lease Obligation - Current 5,526 8,238
Accrued Liabilities 11,736 8,194
______________ ______________
Total Current Liabilities 316,828 216,411
Long-Term Liabilities
Lease Obligation - LT 13,969 15,489
Note Payable 241,604 224,754
______________ ______________
Total Long-Term Liabilities 255,573 240,243
Stockholders' Equity
Common Stock 4,686 4,456
Add. Paid-In Capital 3,972,718 3,766,563
Treasury Stock (10) -
Add. Paid-In Cap. (Trea. Stock) 16,234 -
Current Deficit (165,004) 990,392
Retained Deficit (1,856,637) (2,822,850)
______________ ______________
Total Stockholders' Equity 1,962,786 1,938,561
TOTAL S/H AND LIABILITIES 2,535,187 2,395,216
0.00 0.00
Statements of Operations for the Nine Months Ended Jun. 30, 1998 and 1997
Nine Months Ended Nine Months Ended
Jun. 30, 1998 Jun. 30, 1997
Sales 1,149,133 2,466,406
Cost of Sales (715,457) (809,359)
______________ ______________
Operating Income 433,677 1,657,047
Other Income 5,368 96,363
______________ ______________
Total Revenue 439,315 1,753,410
Salaries and Wages (120,410) (328,129)
Employee Benefits (63,987) (143,847)
______________ ______________
Total Salary and Benefits (184,397) (340,636)
Administrative
& General Expenses (309,766) (634,431)
Depreciation & Amortization (31,511) (20,978)
Marketing Expense (60,094) (514,333)
Interest Expense (18,551) (34,674)
Financial Expense - (354)
______________ ______________
Total Operating Expenses (604,319) (1,676,746)
______________ ______________
Income (Loss) before Taxes (165,004) 76,663
Provision for Current
Year's Income Tax - 788,188
______________ ______________
Net Income (Loss) for the
Year after Tax (165,004) 864,851
Weighted Average of Shares
Outstanding 4,458,468 4,458,468
Profit (Loss) Per Share (0.04) 0.19
Item 2: Management's Discussion and Analysis or Plan of Operation
(1) The Company
NetUSA, Inc., previously named Technology Management and
Marketing, Inc., was incorporated under the laws of the State of
Colorado on Dec. 31, 1985. During the period May 1990 to December 31,
1995 the Company was inactive.
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 through distributors and direct sales to
consumers. The Company also provides a newly developed
telecommunications system for offering Internet web site services and
facilitating fax and telephone service worldwide. Over the past
quarter, the Company has been working to expand its web services, in the
form of its Software Center website, which retails software products
from many software companies.
The Company plans to launch a personal computer (PC) integration
service, to be named PC Service Center, in the near future as well.
Pursuant to this plan, the Company acquired Recomex, Inc. (hereinafter
Recomex), of San Diego, California, on April 1.
Recomex is a company that distributes various kinds of computer
peripherals, including monitors. The Company believes that Recomex's
product line will fit in well with the planned PC integration service.
The Company believes that since Recomex can supply the Company
internally with much of the goods necessary for PC Service Center, that
the cost necessary to launch PC Service Center will be highly reduced,
leading to increased profitability.
(2) Results of Operations
Revenues for the nine months ended June 30, 1998, were $439,315,
compared to $1,753,410 for the same period ended June 30, 1997. The
$1,314,095 decrease was due primarily to Internet fax traffic decrease
and due to higher cost of telephone service. NetUSA has since then
changed its long distance telephone carrier and expect to see the
traffic increase and the cost decrease.
Operating expenses were $604,319 for the nine months ended June
30, 1998, compared to $1,676,746 for the same period ended June 30,
1997, a decrease of $1,072,427. This is partly due to cost-saving
measures by the Company and partly due to the reduced cost due to
reduced sales.
Marketing expenses decreased $454,239 due to termination and
reduction of advertising that is not cost effective.
During this period, substantial expenditures were made to test and
improve the Company's experimental Internet phone service between the
United States, Japan, Hong Kong, and Taiwan. The company is continuing
the testing, and this will require additional expenditures in the coming
two quarters. The Company believes that the service will become
commercially feasible within the year. There are also expenditures made
to enhance the Company's Software Center website, and to integrate
Recomex into the Company's operations.
Part II: Other Information
Item 1: Legal Proceedings
NetUSA, Inc. and its relevant affiliates were not involved in any
reportable legal proceedings during this quarter.
Item 2: Changes in Securities
There were no changes in the relevant security instruments during
this quarter.
Item 3: Defaults Upon Senior Securities
There were no defaults upon senior securities during this quarter.
Item 4: Submission of Matters to a Vote of Security Holders
There was no matter submitted to a vote of security holders during
this quarter.
Item 5: Other Information
There is no relevant other information to be reported for this
quarter.
Item 6: Exhibits and Reports on Form 8-K
There are no exhibits to be attached for this form, and no Form 8-
K was filed during this quarter.
SIGNATURES
In accordance with the requirements of the Exchange Act, Registrant has
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NetUSA, Inc.
Dated: May 12, 1998 /s/ Wun C. Chiou, President
and Chairman of the Board
