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, 1999
[ ] 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)
103 Hammond Ave., Fremont, CA 94539
(Address of principal executive offices)
Issuer's telephone number: (510) 580-9800
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
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.
On Apr. 1, 1999, NetUSA acquired GlobalCom Teleservices, a company
based in Fremont, Calif. NetUSA subsequently moved its headquarters
from Mountain View, Calif., to Fremont, to consolidate the operations
with GlobalCom.
NetUSA has never been involved in any bankruptcy, receivership or
similar proceedings, and to the best knowledge of NetUSA, neither has
its predecessor TMMI.
(b) Business of Issuer
NetUSA has four principal divisions: Telecommunications, Web
Services, Software, and Peripherals.
(1) In General
NetUSA currently serves as its own distributor for most services
and directly deal with customers. The web services division, in
particular, directly interacts with customers and in fact serves as
conduit for other companies' products with customers (see below). 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 16 employees, 13 of whom are full-time employees.
(2) Telecommunications
The Telecommunications Division of NetUSA, operating under the
name GlobalCom Teleservices, offers traditional and Internet-based
telephone services at a discount to consumers. Currently, the main form
of distribution is via calling cards that the customers may use to make
international long distance phone calls.
This area of business, of course, is under heavy competition, but
NetUSA's prices are sufficiently competitive to maintain the client
base, which consists mostly of Chinese speakers but includes many other
ethnic groups.
There are no current or expected governmental regulations that
should significantly affect most of NetUSA's telecommunications
services.
(3) Web Services
The web services division of NetUSA currently has four main
services: SoftwareCenter (http://www.softwarecenter.com), Silicon Valley
High Tech magazine, BizNet USA Business Directories, and web
design/hosting. SoftwareCenter is a fast growing leading online
software information and reseller center for downloadable commercial
software; shareware and publications geared to consumers, small business
and large enterprise. SoftwareCenter.com is securing a leading position
in the explosive e-commerce market, and becoming economically successful
by capturing royalties, promotion and advertising revenues in this
exciting market place. Through SoftwareCenter.com, the Company offers
customers a comprehensive selection of software product and
publications, quality customer service and competitive pricing.
SoftwareCenter.com's business strategy also fits in the emerging
Electronic Commerce outsourcing model, which allows software development
companies to concentrate on creating technologies and cutting edge
products, and grow the sales through vast channels like
SoftwareCenter.com. This is nothing new to software development
companies since they have been doing this through traditional physical
distribution channels and retail stores. Now software companies can
reach customer's world wide in a reliable and cost effective way by
listing and resell their product through SoftwareCenter.com.
The company believes that SoftwareCenter.com is one of the most
widely known and used sites on the World Wide Web for information and
purchasing of software product. The Company fulfills a customer
purchase through secured downloading system. The company believes it
provides superior value to its customers by offering one of the largest
selections of brand-name, high quality software available online and the
convenience of shopping globally available 24 hours a day and 7 days a
week.
SoftwareCenter.com's owns and operates a large database with
automated system to permit the sale, order processing and delivery of
software with limited human intervention. This approach, combined with
significant operational experience, enables the Company to address the
complex process of real time online ordering. The Company has developed
relationships with many leading software publishers, who have signed up
agreement with the Company to distribute software.
SoftwareCenter.com is also considering and formulating a business
model to build a turnkey solution customized for on-line retail stores.
The turnkey solution package to be sold will include all necessary
hardware, software, applications, Web page templates, Internet
connections, product listing and support. While the on-line retail
stores will be owned and operated independently, SoftwareCenter.com will
be the main distributor for the on-line retail stores.
NetUSA's Silicon Valley High Tech magazine is a Chinese-language
magazine dealing with high technology issues that the company publishes
both online (at http://www.svhightech.com) and in paper form. The
magazine seeks to report high technology news as they occur to the
Chinese community.
NetUSA's BizNet USA business directory is a Chinese-language
business directory that is published both online (at
http://www.biznetusa.com) and in paper form. The directory seeks to
provide quick access to Chinese speakers of businesses interested in
conducting business in the Chinese community. The paper edition also
includes maps authorized by Thomas Brothers Maps, Inc., to further
enhance the usability of the directory.
NetUSA's Web design/hosting services 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 offering similar or equivalent
service to SoftwareCenter. NetUSA plans to compete with these services
by aligning itself with key strategic partners in the software industry,
and also offer competitive pricing on the products offered by
SoftwareCenter and friendly service.
NetUSA is not currently aware of direct competitors for Silicon
Valley High Tech or BizNet USA, although there are technology journals
published in both Taiwan and China which can perhaps be considered
competitors for Silicon Valley High Tech. Silicon Valley High Tech's
advantage over those competitors would be NetUSA's location and
knowledge of the Silicon Valley and ability to receive information about
North American technology development much sooner than publications in
Taiwan or China.
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 Mac OS file system and Microsoft's
Windows 95/98 and NT ("Windows") file systems. Other major NetUSA
software products include Common-Link, which allows users to exchange
files between Mac OS, Windows, and UNIX file systems, and SuperCut,
which allows users to capture screen displays for publication purposes.
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
markets. 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.
(5) Peripherals
NetUSA's peripherals division, using the trade name Recomex (see
also above) offers a number of different computer peripheral products.
The main products of the division are monitors, although other devices,
such as scanners and modems, are also featured.
There are numerous manufacturers for each of the peripherals that
NetUSA offers. NetUSA competes in two different ways. First, NetUSA
explores specialty markets, including local small businesses needed
integrated solutions, and ethnic groups requiring service in specific
languages. Second, NetUSA distributes some niche products difficult to
find elsewhere on the market, such as 8-inch and 10-inch monitors, which
many businesses require due to space constraints but cannot find easily
on the market. NetUSA also believes that the prices offered by NetUSA
are competitive with market prices, although NetUSA does not plan to
make price a major key to its marketing strategy.
Item 2: Description of Property
NetUSA does not own any real property.
Item 3: Legal Proceedings
NetUSA is not currently involved in litigation which is required
to be disclosed by Regulation S-B.
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
(a) (not applicable for this company)
(b) Management's Discussion and Analysis of Financial Condition
and Results of Operations
In general, NetUSA's cash supply has been steadily used for
research and development purposes, to reform the web services division
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.
Item 7: Financial Statements
NetUSA, Inc.
Conslidated Balance Sheet
September 30, 1999
Assets
Current Assets
Cash 71,125
Accounts Receivable 149,908
Inventory 81,906
Prepaid Expenses 1,990
Deferred Income Tax Asset - Current (Note 4) ---
______
Total Current Assets 304,929
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 1,176,575
Other Assets
Security Deposits 43,556
Intangible Assets (Note 6)
At Cost 1,696,998
Less: Accumulated Amortization (19,175)
_______
Net Intangible Assets 1,677,823
Total Assets 3,394,537
NetUSA, Inc.
Consolidated Balance Sheet
September 30, 1999
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable 332,424
Notes Payable (Note 9) 626,976
Lease Obligations - Current (Note 7) 4,146
Tax Payable 10,155
Accrued Liabilities 68,860
Customers Deposits 29,664
_______
1,072,225
Long-Term Liabilities
Lease Obligations - Long Term (Note 7) 8,698
Lease Commitments (Note 8) ---
Total Liabilities 1,080,923
Stockholders' Equity
Common Stock (Note 10) 8,906
Additional Paid-In Capital - Common (Note 10) 7,763,598
Treasury Stock (14)
Additional Paid-In Capital - Treasury (12,064)
Retained Deficit (5,446,812)
_______
Total Shareholder's Equity 2,313,614
Total Liabilities and Shareholders' Equity 3,394,537
NetUSA, Inc.
Conslidated Statement of Income
For the year ended September 30, 1999
Revenue
Sales 2,765,133
Cost of Goods Sold (2,323,400)
_______
441,733
Operating Expenses
Salaries and Wages 570,839
Employee Benefits 108,893
______
679,732
Administrative and General Expenses 847,108
Depreciation and Amortization Expenses 52,343
Marketing Expense 293,996
Interest Expense 19,853
Financial Expense 2,317
_______
1,895,349
Loss from Operations (1,453,616)
Other Income 148,542
Net Loss Before Tax (1,305,074)
Income Tax (3,200)
Net Loss for the Year after Tax (1,308,274)
Weighted Average of Shares Outstanding 7,801,815
Loss per Common Share (0.17)
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) 5,401,898 $5,402 $3,966,851 ($4,138,538) ($166,285)
(Row 2) 3,517,252 3,504 3,796,747 --- 3,800,251
(Row 3) (13,650) (14) (12,064) --- (12,078)
(Row 4) --- --- --- (1,308,274) (1,308,274)
(Row 5) 8,905,500 $8,892 $7,751,534 ($5,446,812) $2,313,614
NetUSA, Inc.
Consolidated Statement of Cash Flows
For the year ended September 30, 1999
Cash Flows from Operating Activities
Cash received from customers 2,673,399
Cash paid to suppliers and employees (4,039,809)
Miscellaneous Income received 143,189
Interest received from banks 5,353
Interest paid (19,853)
Income tax paid (1,600)
_______
Net cash (used in) operating activities (1,239,321)
Cash Flows from Investing Activites
Purchases of Property and Equipment (61,617)
Security Deposit (41,386)
Marketing Rights, etc. (38,740)
_______
Net cash (used in) investing activities (141,737)
Cash Flows from Financing Activities
Proceeds from and repayment of note payable (net) 277,411
Common Stock/Additional Paid-In Capital 1,138,673
_______
Net cash provided by financing activities 1,416,084
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 (1,308,274)
Adjustments to reconcile net loss to net cash:
Depreciation and Amortization 52,342
Bad Debts 99,941
Increase in Accounts Receivable (91,733)
Increase in Inventory (68,709)
Decrease in Prepaid Expenses 3,873
Decrease in Other Assets 29,336
Increase in Accounts Payable 44,709
Decrease in Payroll Tax Payable (806)
_______
(1,239,321)
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.
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.
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 1,825,961 252,824 2,078,785
Less: Valuation
Allowance (1,825,961) (252,824) (2,078,785)
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
Investments at September 30, 1999 were comprised of:
Investee At Cost
The Candy Professionals, Inc. (a North Carolina
Corporation) 1,137,000
Linc Media, Inc., Japan (5% ownership) 50,000
Less: Allowance for Loss (35,425)
_____
14,575
Avirnex Communication Group (50,000 shares of 25,000
Series A Preferred Stock)
Totals 1,176,575
Management of the Company did not have details on the acquisition
of The Candy Professionals, Inc. None of the above investees provided
any financial information ot the investor to permit determination of the
fair carrying value as well as investment income derived therefore 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 - Globalcom 1,456,576 - 1,456,576
(upon acquisition)
Goodwill - Recomex 143,125 - 143,125
(upon acquisition)
_______ _______ _______
1,646,998 19,175 1,627,823
Marketing Rights -
City Maps 50,000 --- 50,000
Totals 1,696,998 19,175 1,677,823
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.
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.
(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.
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 $454,166 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 10,188,082 shares 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. However, the Company did not record 2,632,000 shares during the
year through 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. One dispute involved John Soden, an investment
banking consultants who claimed outstanding remuneration due to him for
services rendered. The other dispute was with William Yuan, President
of KPY, the computer consulting company that was once a part of NetUSA.
He also claimed outstanding remuneration due to him resulting from the
withdrawal of a merger between the two companies. The outcomes of the
two cases have yet to be determined. However, there is a substantial
probability that both cases may turn out unfavorably to the Company
thereby exposing to a loss of $100,000 per case, i.e. a total of
$200,000.
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
Mr. James Yu, Chairman of the Board/President/Chief Executive Officer:
Mr. Yu has served as the President and Chief Executive Officer of
NetUSA, Inc. and the Chairman of the Board since March 1999, when the
former President/CEO/Chairman Dr. Wun C. Chiou retired and appointed him
to those positions. For the five years before this report, Mr. Yu has
been involved in the management of various high technology corporations.
Mr. Ben Hsu, Director:
Mr. Hsu has served as a Director since March 1999. For the five
years before this report, Mr. Hsu has been managed import/export
operations for his own company.
Mr. Michael Morrison, Director:
Mr. Morrison has served as a Director since March 1999. For the
five years before this report, Mr. Morrison has been practicing law at
his private practice.
Mr. Nelson Lu, Secretary:
Mr. Lu had served as the special assistant to CEO from August,
1997, to March, 1998, when he also assumed the post of secretary. He
also serves as the company's counsel. For the five years before this
report, he had been studying computer science and law.
(b) Significant Employees
Mr. Wei-Ling Soong, Executive Vice President:
Mr. Soong has served as the Company's Executive Vice President
since April 1999, when NetUSA purchased Globalcom. For the five years
before this report, he had been serving as Globalcom's President.
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.
(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
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
Awards Payout All Other
Compensation
(a) (b) (c) (d) (e) (f) (g) (h) (i)
(1) CEO '99 96 0 0 (n1) 0 0 0
'98 56 0 0 0 0 0 0
(2) CEO '99 96 0 0 0 0 0 0
All figures are in thousands of US$.
Key:
(1) Dr. Wun Chiou
(2) Mr. James Yu
(a) Position held in company
(b) Fiscal year; '99 is October, 1998, through September, 1999; '98 is
October, 1997, through September, 1998.
(c) Salary
(d) Bonus
(e) Other annual compensation
(f) Restricted stock awards
(g) Securities underlying options/SARs
(h) LTIP payouts
(i) All other compensation
(n1) Dr. Chiou was awarded 300,000 shares of restricted shares on Dec.
31, 1998.
Item 11: Security Ownership of Certain Beneficial Owners and
Management
(a) Security Ownership of Certain Beneficial Owners
(1) (2) (3) (4)
Title of Name/Address of Beneficial Amount and Nature Percent of
Class Owner of Beneficial Class
Owner
Common Mr. James Yu 450,000 4.4%
(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 the final quarter of the fiscal year.
