U.S. Securities and Exchange Commission
Washington, DC 20549
Form 1O-KSB/A
Amendment No. 1
(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, 1996
[ I TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1933
Commission File Number: 33-11324-LA
NETUSA, INC.
(Formerly Known As Technology Management and Marketing Inc.)
(Name of small business issuer in its charter)
Colorado
(State or other jurisdiction of incorporation or organization)
201 San Antonio Cir., C250, Mountain View, CA 94040
(Address of principal executive offices)
Issuer's telephone number: (650) 948-6200
84-1035751
(I.R.S. Employer Identification Number)
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
The Registrant hereby amends the following item for the Annual Report on Form
10-KSB for the fiscal year which ended on Sep. 30, 1998:
PART I
======
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. Note: after further review, it
was ruled by the Internal Revenue Service that certain deferred tax assets
claimed previously by the company are not qualified for deduction, requiring an
adjustment to these statement. The note from the independent auditor follows
immediately after the original independent auditor's report, and following the
note are the amended financial statements.
INDEPENDENT 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
INDEPENDENT AUDITOR'S NOTE ON AMENDED FINANCIAL STATEMENTS
==========================================================
Subsequent to the report date of November 12, 1997 for the audit report of
NetUSA, Inc. as of September 30, 1997, we observed that NetUSA, Inc., after
ownership change on February 26, 1996, have not continued the existing business
of the old company during the 2-year testing period. This triggered Code Sec.
382(c) which imposed limitation of utilization of pre-change losses to be zero.
Portion of deferred tax assets previously provided are therefore not qualified
for deduction.
We now have pleasure in enclosing two revised copies of audited financial
statements of NetUSA, Inc. as of September 30, 1997 with our report therein
duly completed.
/s/ Samuel H. Wong & Co., LLP, Certified Public Accountants
Dated: January 8, 1999 at San Francisco, California
Net USA, Inc.
Condensed Consolidated Financial Statements
For the Twelve Months Ended September 30, 1997 and
the Seven Months Ended September 30, 1996
NetUSA, Inc.
Balance Sheet
September 30, 1997
Assets
Current Assets
Cash $ 246,062
Accounts Receivable 372,555
Inventory 4,052
Prepaid Expenses 18,841
Deferred Income Tax Assets - Current 48,524
_________
Total Current Assets 690,034
Property and Equipment (Note 2 & 3)
At Cost 273,215
Less: Accumulated Depreciation (185,942)
_________
Net Property and Equipment 87,273
Long-Term Assets
Deferred Income Taxes - Long Term (Note 4b) 932,852
Less: Deferred Tax Valuation Allowance (932,852)
________
---
Other Assets
Note Receivable (Note 5) 80,000
Investment at cost (Note 6) 100,000
Research/Development Cost (Note 7) 661,680
and Other
_________
Total Other Assets 841,680
_________
Total Assets $1,618,987
NetUSA, Inc.
Balance Sheet
September 30, 1997
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 338,196
Payroll Tax Payable 10,510
Income Tax Payable 20,151
Lease Obligations - Current (Note 8) 7,557
Accrued Liabilities 8,194
__________
Total Current Liabilities 384,608
Long Term Liabilities
Lease Obligations - Long Term (Note 8) 13,969
Note Payable (Note 10) 219,708
__________
Total Long Term Liabilities 233,677
Stockholders' Equity
Common Stock (Note 11) 4,456
Additional Paid-In Capital (Note 11) 3,766,563
Retained Deficit (2,770,317)
__________
Total Shareholders' Equity 1,000,702
__________
Total Liabilities and Shareholders' Equity $ 1,618,987
NetUSA, Inc.
Statement of Income
for the year ended September 30, 1997
Revenue
Sales $ 2,104,432
Cost of Goods Sold (911,079)
__________
Operating Income 1,193,353
Other Income 58,412
__________
Total Revenue 1,251,765
Operating Expenses
Salaries and Wages 216,519
Employee Benefits 95,139
__________
311,658
Administrative and General Expenses 460,468
Depreciation and Amortization Expenses 21,223
Marketing Expense 349,303
Interest Expense 31,422
Financial Expense 553
__________
Total Operating Expenses 1,174,627
__________
Net Income Before Tax 77,138
Current Income Tax (Note 4 a) (20,749)
Deferred Income Tax (Note 4 b) 48,524
__________
Net Income for the year after Tax $ 104,913
Weighted average number of shares outstanding 4,455,918
Earning per common share $0.02
NetUSA, Inc.
Statement of Stockholders' Equity
For the year ended September 30, 1997
Common Stock Additional
Number of Paid-In Retained
Shares Amount Capital Deficit Total
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 3,653,500 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 --- --- --- 104,913 104,913
__________ _______ ____________ __________ _________
Balances at September 30, 1997 4,455,918 $4,456 $3,766,563 ($2,770,317)
$1,000,702
NetUSA, Inc.
Statement of Cash Flows
for the year ended September 30, 1997
Increase (Decrease) in Cash and Cash Equivalents
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 (31,422)
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 ACTIVITIES:
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
NetUSA, Inc.
Reconciliation Statement of Net Income to Net Cash
(Used In)/Provided by Operating Activities
for the year ended September 30, 1997
Net Income for the year $104,913
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 Benefit (48,524)
Increase/(Decrease) in Accounts Payable 285,079
Increase/(Decrease) in Payroll Tax Payable 2,684
Increase/(Decrease) in Income Tax Payable 20,151
Increase/(Decrease) in Accrued Liabilities 8,194
__________
Net cash provided by operating activities $338,344
NetUSA, Inc.
Notes to Financial Statements
for the year ended September 30, 1997
1. The Company
NetUSA, Inc., previously named as Technology Management and Marketing Inc.,
(TMMI) 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 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 settled. 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.
3. Property and Equipment
Property and Equipment as of September 30, 1997 was as follows:-
Accumulated Net
9/30/97 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
4 (a). Current Income Taxes
Income Taxes were provided for the Company's taxable income for the year
ended September 30, 1997.
Federal Income Tax $ 12,618
State Income Tax 8,131
________
$ 20,749
4 (b). Deferred Income Taxes
Deferred Income Taxes as of September 30, 1997 were comprised of the
following components:
Components Federal California Total
Temporary Differences in
Depreciation and Amortization $ (9,134) $ (2,498) $ (11,632)
Net Operating Losses
Carryforward from TMMI 941,057 3,427 944,484
Net Operating Losses
Carryforward after acquisition 35,956 12,568 48,524
________ ________ ________
Total Deferred Tax Assets 967,879 13,497 981,376
Less: Valuation Allowance (931,923) (929) (932,852)
________ ________ ________
Total $ 35,956 $ 12,568 $ 48,524
A valuation allowance has been established due to the Code Sec. 382(c)
limitation on net operating loss carryforward. The Code cited that the
utilization of net operating losses carryforward terminates if the new
corporation does not continue the business enterprise of the old loss
corporation at all times during the 2-year period beginning on the change
date. The new company (NetUSA, Inc.) has been conducting the software
merchandise and developing telecommunication system since acquisition date
of February 26, 1996, whereas the old company (Technology Management and
Marketing Inc.) was engaged in medical research activities. Since the new
corporation does not continue the business enterprise of the old corporation,
no net operating losses carryforward was allowed.
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. Investment
The investment represents cash paid to Net Japan, a Japan enterprise, in
exchange for a 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
Other Assets as of September 30, 1997 was as follows:-
Research and Development Cost $582,922
Security Deposit 6,400
Other Receivable 10,046
Organizational Cost 1,937
Advances Paid 60,375
________
$661,680
8. Lease Obligations
(A) Capital Lease Obligations as of September 30, 1997 were as follows:-
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
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 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:-
Year ended September 30 Lease Payment
1998 $10,162
1999 6,733
2000 5,590
2001 4,193
_______
$26,678
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:-
Year ended September 30 Rent Payment
1998 $47,319
10. Note Payable
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.
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: January 18, 1999 /s/ Wun C. Chiou, President
and Chairman of the Board
The accompanying notes are an integral part of these financial statements
See Accountants' Report
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