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)
103 Hammond Ave., Fremont, CA 94539
(Address of principal executive offices)
Issuer's telephone number: (510) 580-9800
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 X No
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, 1999:
PART I
======
ITEM 7: FINANCIAL STATEMENTS
(The below is a transcript from the Independent Auditor's Report filed
by the company's accountants, Samuel H. Wong & Co. LLP of San
Francisco, Calif.)
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of NetUSA, Inc.
We have audited the accompanying consolidated balance sheet of NetUSA,
Inc. (a Colorado corporation) and subsidiaries as of September 30, 1999
and the related consolidated statements of income, retained earnings,
and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. 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 our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
NetUSA, Inc. and subsidiaries as of September 30, 1999 and the results
of its operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
Samuel H. Wong & Co. LLP
Certified Public Accountants
San Francisco, California
February 18, 2000
NetUSA, Inc.
Conslidated Balance Sheet
September 30, 1999
Assets
Current Assets
Cash 71,125
Accounts Receivable 494,768
Inventory 56,256
Prepaid Expenses 1,990
Deferred Income Tax Asset - Current (Note 4) ---
______
Total Current Assets 624,139
Property and Equipment (Notes 2 & 3)
At Cost 609,168
Less: Accumulated Depreciation (417,514)
______
Net Property and Equipment 191,654
Investments (Note 5)
At Cost 1,137,000
Other Assets
Security Deposits 43,556
Intangible Assets (Note 6)
At Cost 1,716,998
Less: Accumulated Amortization (19,175)
_______
Net Intangible Assets 1,697,823
Total Assets 3,694,172
NetUSA, Inc.
Consolidated Balance Sheet
September 30, 1999
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable 479,613
Notes Payable (Note 9) 616,257
Lease Obligations - Current (Note 7) 4,146
Tax Payable 7,846
Accrued Liabilities 58,860
Customers Deposits 29,664
Unearned Phone Revenue 73,996
_______
1,270,382
Long-Term Liabilities
Lease Obligations - Long Term (Note 7) 8,698
Lease Commitments (Note 8) ---
Total Liabilities 1,279,080
Stockholders' Equity
Common Stock (Note 10) 10,365
Additional Paid-In Capital - Common (Note 10) 8,645,589
Treasury Stock (14)
Additional Paid-In Capital - Treasury (12,064)
Retained Deficit (6,228,784)
_______
Total Shareholder's Equity 2,415,092
Total Liabilities and Shareholders' Equity 3,694,172
NetUSA, Inc.
Conslidated Statement of Income
For the year ended September 30, 1999
Revenue
Sales 2,897,366
Cost of Goods Sold (2,458,438)
_______
438,928
Operating Expenses
Salaries and Wages 571,010
Employee Benefits 108,159
______
679,169
Administrative and General Expenses 1,587,263
Depreciation and Amortization Expenses 52,343
Marketing Expense 293,996
Interest Expense 19,853
Financial Expense 2,317
_______
2,634,941
Loss from Operations (2,196,013)
Other Income 148,542
Loss on Investments (39,575)
Net Loss Before Tax (2,087,046)
Income Tax (3,200)
Net Loss for the Year after Tax (2,090,246)
Weighted Average of Shares Outstanding 6,999,640
Loss per Common Share (0.335)
NetUSA, Inc.
Consolidated Statement of Stockholders' Equity
For the year ended September 30, 1999
(Row 1 stands for the balances at Oct. 1, 1998; Row 2 stands for the
issuance of common stock during the year; Row 3 stands for the treasury
stock; Row 4 stands for the Net (Loss)/Income after tax; Row 5 stands
for the balances at Sep. 30, 1999; Column 1 stands for the number of
shares of common stock; Column 2 stands for the amount of par value;
Column 3 stands for the additional paid-in capital; Column 4 stands for
the retained deficit. olumn 5 stands for the totals for the respective
rows or columns.)
(Column 1) (Column 2) (Column 3) (Column 4) (Column 5)
(Row 1) 5,429,198 $5,416 $3,978,915 ($4,138,538) ($154,207)
(Row 2) 3,154,534 4,949 4,666,674 --- 4,671,623
(Row 3) (13,650) (14) (12,064) --- (12,078)
(Row 4) --- --- --- (2,090,246) (2,090,246)
(Row 5) 8,570,082 $10,351 $8,633,525 ($6,228,784) $2,415,092
NetUSA, Inc.
Consolidated Statement of Cash Flows
For the year ended September 30, 1999
Cash Flows from Operating Activities
Cash received from customers 2,484,378
Cash paid to suppliers and employees (4,718,633)
Miscellaneous Income received 143,138
Interest received from banks 5,404
Interest paid (19,985)
Income tax paid (1,600)
_______
Net cash (used in) operating activities (2,107,298)
Cash Flows from Investing Activites
Purchases of Property and Equipment (69,891)
Sale Proceeds of Equipment 300
Security Deposit (28,300)
Marketing Rights, City Maps (50,000)
Sale of Investment 50,000
_______
Net cash (used in) investing activities (97,891)
Cash Flows from Financing Activities
Proceeds from Notes Payable 289,218
Common Stock/Additional Paid-In Capital 1,952,123
Servicing of Lease Obligations (1,126)
_______
Net cash provided by financing activities 2,240,215
Net Incase in Cash and Cash Equivalents at end of year 35,026
Cash and Cash Equivalents at beginning of year 36,099
Cash and Cash Equivalents at end of year 71,125
NetUSA, Inc.
Reconciliation of Conslidated Statement of Net Income/(Loss)
To Net Cash (Used In)/Provided by Operating Activities
For the year ended September 30, 1999
Net Loss for the year (2,090,246)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Loss on Investment 39,576
Loss on Disposal of Equipment 8,755
Depreciation and Amortization 51,561
Bad Debts 99,941
Increase in Accounts Receivable (408,658)
Increase in Inventory (43,060)
Decrease in Prepaid Expenses 3,873
Increase in Other Assets (1,820)
Increase in Accounts Payable 153,018
Increase in Other Liabilities 1,810
Increase in Accrued Liabilities 3,955
Increase in Unearned Revenue 73,997
_______
(2,107,298)
NetUSA, Inc.
Notes to Financial Statements
For the year ended September 30, 1999
1(a). 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.
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
customers. During the year, the Company has started publishing Silicon
Valley High Tech Magazine, and organizing BIZNET U.S. Business
Directory as advertising media for subscribers. The Company has also
developed Internet service with domain names targeting various Asian
countries.
1(b). Consolidation
On April 1, 1998, the Company acquired 100% interest of Recomex,
Inc., a California corporation incorporated on January 14, 1997, whose
buisness is wholesale of computer hardware and related products. The
purchase consideration was settled by cash and issuance of NetUSA
common stock to the shareholders of Recomex. Accordingly, the
acquisition was accounted for under the purchase method of accounting.
On April 1, 1999, the Company acquired 100% interest of Globalcom
Teleservices Inc., a California corporation incorporated on Septebmer
13, 1993 whose buiness is telecommunications dealing in prepaid phone
cards, Internet phone and fax as well as other telecommunication
services. The purchase consideration was settled by the issuance of
NetUSA common stock to the shareholders of Globalcom. Accordingly, the
acquisition was accounted for under the purchase of accounting.
NetUSA, Inc. is the ultimate holding company and therefore
consolidates it with the above wholly owned subsidiaries.
2. Summary of Significant Accounting Policies
This summary of significant accounting policies of NetUSA, Inc.
(the Company) is presented to assist in understanding the Company's
financial statements. The financial statements and notes are
representations of the Company's management who is responsible for
their integrity and objectivity. These accounting policies conform to
generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
(A) Basis of Reporting
The accompanying financial statements have been prepared on the
accrual basis of accounting.
(B) Sales
Sales net of discounts and returns represent the invoiced value
of goods and services received by customers.
(C) Bad Debts
The Company's credit policy empowers management to write off
accounts receivable and charge such loss against the income statement
in the accounting period in which the debt is written off. Management
determines which accounts will become uncollectible, based on an
evaluation of the collectibiility of receivables and prior loss
experience. The evaluation takes into consideration such factors as
changes in the nature and volume of the receivable, overall customer
quality, review of specific problems, and current economic conditions
that may affect the customers' ability to pay.
(D) Goodwill
Goodwill is stated at cost.
(E) Other Intangible Assets
Patents/Copyrights, Software, Internet Setup, and Marketing
Rights are stated at cost and are being amortized over their respective
economic lives where applicable.
(F) Property and Equipment
Property and Equipment are stated at cost. Repairs and
maintenance to those 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 Equipement are depreciated over their estimated
useful lives by the straight-line method.
(G) Inventory
Inventory is stated at the lower of cost or market value.
(H) Investments
Trade Investments are stated at cost. Any diminution in value of
the investments due to investees' net operating loss, is provided for
and reduced from the cost so as to reflect the fair value.
(I) 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.
(J) Cash Equivalents
For the purpose of 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.
(K) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
3. Property and Equipment
Property and Equipment as of September 30, 1999 was as follows:
At Cost Accumulated Net
Depreciation Value
Building Improvement 23,223 (829) 22,394
Furniture and Fixtures 25,725 (6,717) 19,008
Computers/Equipment 548,220 (406,368) 141,852
Automobile - Truck 12,000 (3,600) 8,400
Totals 609,168 (417,514) 191,654
4. Deferred Income Taxes
Deferred income taxes as of September 30, 1999 were comprised of
the following components:
Federal California Total
Net Operating Losses
Carryforward 1,485,813 156,566 1,642,379
Less: Valuation
Allowance (1,485,813) (156,566) (1,642,379)
Totals --- --- ---
A valuation allowance has been estalbished due to the uncertainty
associated with Internal Revenue Code Section 382 restriction to the
utilization of Net Operating Loss originated from Pacific
Microelectronics, Inc. as well as the probable net income made in the
near future.
5. Investments
The investments as of September 30, 1999 were comprised of The Candy
Professional Inc. (a North Carolina Corporation) at a cost of
$1,137,000.
Management of the Company mislaid information on this acquisition. The
investee has not provided any financial information to investor to
permit determination of the fair value as well as investment income
therefrom if any.
6. Intangible Assets
Intangible Assets as of September 30, 1999 were as follows:
Cost Accumulated Net
Amortization
Patents/Copyright 9,000 3,150 5,850
Software - Billmaster 4,346 3,691 655
Internet Setup 1,000 801 199
Goodwill - Globalcom 32,951 11,533 21,418
(prior to acquistion) _____ _____ _____
47,297 19,175 28,122
Goodwill - NetUSA 20,000 - 20,000
(Silicon Valley
Hi-Tech Magazine)
Goodwill - Globalcom 1,456,576 - 1,456,576
(upon acquisition)
Goodwill - Recomex 143,125 - 143,125
(upon acquisition)
Marketing Rights - 50,000 - 50,000
City Maps and
Yellow Pages
_______ _______ _______
1,716,998 19,175 1,697,823
7. Lease Obligations
Capital Lease Obligations as of September 30, 1999 were as
follows:
1999 Leased Property
Xerox Corporation 12,844 Copier Machine
#DC20
Less: Current Maturities (4,146)
Totals 8,698
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 21 months is $9,783.69.
Future minimum lease payments for the next three years until
termination will be $5,591 for year ended September 30, 2000 and $4,193
for the year ended September 30, 2001, for a total of $9,784.
8. Lease Commitments
(A)
The Company entered a lease on March 17, 1999 for an office space
at 103 Hammond Ave., City of Fremont, County of Alameda, State of
California for a term of 36 months commencing on May 1, 1999 and
expiring on April 30, 2002.
Rent for the term of the lease from May 1, 1999 to April 30, 2000
is $8,707.07 per month. Rent for the year from May 1, 2000 to April
30, 2001 will be increased to $9,166.00 per month. Rent for the
remaining year of the lease is $9,624.30 per month. A security deposit
of $30,000 has been placed with the lessor for due performance of the
obligation.
Future minimum rent payment for the next three years until
termination will be $60,950 for the year ended September 30, 2000;
$109,992 for the year ended September 30, 2001; and $115,492 for the
year ended September 30, 2002, for a total of $286,434.
(B)
The Subsidiary (Recomex, Inc.) entered into a lease on July 6,
1998 for a facility at 8148 Miramar Road, San Diego, CA 92126 for a
term of 36 months from August 15, 1998 to August 14, 2001.
Rent for the period from August 15, 1998 to August 31, 1999 is
$2,176.00 per month. Rent for the period from September 1, 1999 to
August 31, 2000 will be increased to $2,263.00 per month. Rent for the
remaining period from September 1, 2000 to August 14, 20001 will be
increased to $2,354.00 per month. A security deposit of $2,17.00 has
been placed with the lessor for due performance of the obligation.
Future minimum rent payments for the next two years until
termination will be $68,124 for the year ended September 30, 2000 and
$27,071 for the year ended September 30, 2001, for a total of $95,195.
9. Notes Payable
On July 14, 1995, the Company was granted an unsecured 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 shall be serviced by monthly payment (principal and interest) of
$3,790.00 over a period of 110 months maturing September 26, 2004. The
oustanding principal balance as of September 30, 1999 was $172,810.
The Company was granted non-interest bearing unsecured loans by
shareholders which had a total balance of $443,447 at September 30,
1999.
10. Common Stock
The Company is authorized by its Amended Articles of
Incorporation to issue a total of 50,000,000 shares of common stock at
$0.001 par value, of which 8,570,082 shares (as adjusted) were issued
and outstanding according to the outside transfer agent, American
Securities Transfer and Turst, Inc. 13,650 shares were held as
Treasury Stock as of September 30, 1999.
11. Legal Uncertainty
Since September 30, 1998, there existed a dispute between the
Company and its attorney on the unpaid legal charges of $50,717.78 in
respect of certain legal work performed by the attorney relating to
Internet Offering and Private Placement Investment Projects. The
Company rejected the $50,000 legal charges on contingency grounds.
There has been no development since the disagreement. Therefore, the
outcome of this dispute was unknown at the time of this audit report.
As of September 30, 1999, the Companyw as the defendant of two
litigation cases.
(A) One dispute involved John Soden, an investment banking
consultants who claimed outstanding remuneration due to him
for services rendered in the amount of 60,000 shares of
NetUSA common stock. On January 25, 2000, after the
hearing, the Court issued a ruling to attach NetUSA assets
in the amount of $144,000. However, during the Motion for
Write of Attachment hearing, the Court accepted defendant's
argument to compute plaintiff's damages at $3.00 to $4.125
per share and thus the exposure of this case will be in the
range of $180,000 to $250,000.
(B) The other dispute was with William Yuan, President of KPY,
the computer consulting company that was once a part of
NetUSA. Plaintiff made three claims for breach of contract
as a result of the withdrawal of a merger between KPY and
NetUSA. The plaintiff sought $64,632.83 plus interests,
attorney fees and cost. The Company has been negotiating
for a settlement to avoid trial. The probable exposure of
this case is estimated to be around $95,000.
12. Stock Options/Warrants
Since December 31, 1993 when the old employee stock option plan
expired leaving no outstanding stock option exercisable, the Company
has not established any new employee or other stock option plans
although stocks were issued to employees and other parties. During the
year ended September 30, 1999, the Company issued a total of 3,154,534
shares at management's discretion comprising of the following types of
issuance:
(a) Employee Stock Options 110,333
(b) Investment Bankers, Financial Consultants, etc. 1,252,750
(c) Acquisitions of Subsidiary and Businesses 735,000
(d) Purchasers for Cash 1,056,451
As of September 30, 1999, there were stock options/warrants
outstanding as a result of the Company's acquisition of a subsidiary
and other services:
(1) Recomex, Inc. (acquisition)
Granted to management and employees 180,000
(2) John Soden (under litigation)
Already issued and kept by NetUSA 24,000 shares 60,000
(3) William Yuan (under litigation)
Already issued and kept by NetUSA 10,000 shares 10,000
(4) National Capital Market Group Limited
Warrants to purchase within two years expiring
February 1, 2001 100,000
(5) Janda & Garrington (a California corporation)
Warrants to purchase within three years
Expiring October 30, 2001 1,100,000 shares
Deduct: already exercised 980,000 shares 120,000
(6) McKenna, Delaney & Sullivan, Inc.
(Investor Relation Services)
Warrants to purchase contingent upon successful
movement of NetUSA stock 150,000
The Company's board of directors confirmed that, except for the
six items disclosed above, no other stock options/warrants were granted
and outstanding as of September 30, 1999 and through the date of this
audit report.
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: February 22, 2000 /s/ James Yu, President
and Chairman of the Board
The accompanying notes are an integral part of these financial statements
See Accountants' Report
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