<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 1 ON FORM 10Q/A
TO FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Commission file No. 33-17679
NORTH AMERICAN DATACOM, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1067694
(State of incorporation) (I.R.S. Employer Identification
Number)
751 County Road 989, Building 1000, Iuka, MS 38852
(Address of principal executive offices) (Zip Code)
(662) 424-5050
(Registrant's Telephone Number)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the proceeding 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 [ ]
As of November 10, 2000, the Company had approximately 98,645,067
outstanding shares of common stock.
1
<PAGE> 2
Amendment No. 1 on Form 10Q/A to Quarterly Report on Form 10Q for the Quarterly
Period Ended September 30, 2000.
Explanatory Note
On November 20, 2000, North American DataCom, Inc. (the "Company")
filed Form 10-Q for the Quarterly Period Ended September 30, 2000 (the "10Q
Report"). In the unaudited consolidated balance sheet as of September 30, 2000
and Notes 7 and 9 to the financial statements included in the 10Q Report, the
Company had valued its acquisition of 12 miles of right-of-way from Tishomingo
Railroad at $2,000,000 which was the stated value of the acquisition as set
forth in the acquisition agreement. However, the Company has subsequently
determined that the transaction with Tishomingo Railroad may be viewed as a
non-monetary transaction with shareholders, given the familial relationship
between the owners of Tishomingo Railroad and the Company's controlling
shareholder. While the Company believes that based on similar third party
transactions there is substantial value to the right-of-way that was acquired,
since an independent appraisal of the right-of-way has not yet been performed,
the more conservative valuation for the transaction is $0 which is the
historical carryover cost basis of such right-of-way by Tishomingo Railroad.
Accordingly, the Company is revising its unaudited consolidated balance sheet as
of September 30, 2000 to reflect the $2,000,000 adjustment as follows: Conduit
and Optic Fiber assets set forth in the balance sheet will be revised to
$14,432,996 from $16,432,996; with a corresponding adjustment to Net Property
and Equipment which will be revised to $15,678,038 from $17,678,038; and
corresponding adjustment to Total Assets which will be revised to $16,739,383
from $18,739,383. The item entitled Minority Interest in Net Assets of
Subsidiary, previously reflecting a $2,000,000 interest, has been deleted from
the balance sheet, and Total Liabilities and Stockholders' Equity is revised to
$16,739,383 from $18,739,383. With respect to the aforementioned adjustments,
Total Stockholder's Equity as of September 30, 2000 will not be affected and
will remain at $1,475,343. Note 7 and Note 9 to the Financial Statements will be
revised to reflect the foregoing adjustment.
No other changes to the 10Q Report, including the Financial Statements
set forth therein, are necessary in connection with the foregoing adjustment,
and the results reflected in the Company's unaudited consolidated statements of
operations and consolidated statement of cash flows for the three month periods
ended September 30, 2000 and September 30, 1999, respectively, will not be
affected.
The Financial Statements and Notes to Consolidated Financial Statements
in this filing have been accordingly revised and the following items are amended
as follows:
Part I, Item I Financial Statements
Part II, Item 6 Exhibits and Reports on Form 8-K
2
<PAGE> 3
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - CONDENSED FINANCIAL INFORMATION
Item 1. Unaudited Condensed Financial Information
Condensed Consolidated Balance Sheets ............................. 4
Condensed Consolidated Statements of Operations ................... 5
Condensed Consolidated Statement of Comprehensive Loss ............ 6
Condensed Consolidated Statement of Changes in Stockholders' Equity 7
Condensed Consolidated Statements of Cash Flows ................... 8
Notes to Condensed Consolidated Financial Statements .............. 9
PART II - OTHER INFORMATION
Item 6. Exhibits ...................................................... 13
Signatures ........................................................ 14
</TABLE>
3
<PAGE> 4
NORTH AMERICAN DATACOM, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, JUNE 30,
2000 2000
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Equivalents $ 176,823 $ 20,948
Accounts Receivable, Net of allowance of $2,400 at
September 30 and June 30, 2000 37,905 37,848
Notes Receivable, net of Long-term maturites 2,920 2,920
Advance to Affiliate (Note 5) 200,000 --
Inventories 1,988 438
Employee Advances 2,555 102,555
------------ ------------
Total Current Assets 422,191 164,709
------------ ------------
Investments (Note 3) 60,000 90,000
------------ ------------
Property and Equipment:
Leasehold Property and Improvements 15,960 15,880
Computers and Equipment 722,156 717,416
Communications Equipment and Wireless Towers 470,560 371,688
Conduit and Optic Fiber (Notes 4 and 7) 14,432,996 14,396,891
Other Equipment 81,458 77,278
Office Furniture 3,231 3,231
------------ ------------
Total Property and Equipment 15,726,361 15,582,384
Less Accumulated Depreciation and Amortization (48,323) (35,945)
------------ ------------
Net Property and Equipment 15,678,038 15,546,439
------------ ------------
Other Assets (Note 6) 579,154 449,832
------------ ------------
Total Assets $ 16,739,383 $ 16,250,980
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade Notes Payable, net of unamortized discount (Note 4) $ 14,759,436 $ 15,152,173
Accounts Payable 235,277 24,034
Accrued Expenses 245,410 275,552
------------ ------------
Total Current Liabilities 15,240,123 15,451,759
------------ ------------
Payable to Director 23,917 23,917
------------ ------------
Total Liabilities 15,264,040 15,475,676
------------ ------------
Commitments and Contingencies
Stockholders' Equity
Convertible Preferred Stock, No Par Value; 400,000 shares
Authorized -- --
Series B Convertible Preferred Stock, $.0001 Par Value; 6%
Cumulative; 5,000 shares authorized; 800 shares issued and
outstanding as of September 30, 2000 (Note 8) 800,000 300,000
Common Stock, $.0001 Par Value; 150,000,000 Shares Authorized;
98,588,223 and 97,992,758 Shares Issued and Outstanding
Note 8) 9,858 9,798
Additional Paid in Capital 3,766,632 2,667,567
Other accumulated comprehensive income (129,200) (99,200)
Accumulated Deficit (2,971,947) (2,102,861)
------------ ------------
Total Stockholders' Equity 1,475,343 775,304
------------ ------------
Total Liabilities and Stockholders' Equity $ 16,739,383 $ 16,250,980
============ ============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
4
<PAGE> 5
NORTH AMERICAN DATACOM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
------------ ------------
<S> <C> <C>
Net Service Revenues $ 69,432 $ 23,995
Cost of Services 48,014 10,378
------------ ------------
Gross Profit 21,418 13,617
Selling, General and Administrative Expenses 715,864 197,179
------------ ------------
Operating Loss (694,446) (183,562)
Other Income (Expense), Net (174,640) 3,823
------------ ------------
Loss before income tax expense (benefit) (869,086) (179,739)
Income tax expense (benefit) -- --
------------ ------------
Net Loss $ (869,086) $ (179,739)
------------ ------------
Basic and Diluted Loss per Common Share (Note 1) $ (0.01) $ 0.00
============ ============
Weighted Average Number of Common Shares
Outstanding - Basic and Diluted (Note 1) 91,393,141 46,515,268
============ ============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
5
<PAGE> 6
NORTH AMERICAN DATACOM, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
UNAUDITED
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
------------ ------------
<S> <C> <C>
Net loss $ (869,086) $ (179,739)
Net unrealized loss on investments (Note 4) (30,000) --
------------ ------------
Comprehensive loss $ (899,086) $ (179,739)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
6
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NORTH AMERICAN DATACOM, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Series B Convertible
Preferred Stock Preferred Stock Common Stock
---------------- ------------------ -------------------- Additional
Shares Amount Shares Amount Shares Par Value PIC
------ --------- ------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, JUNE 30, 1999 -- $ -- 51,212 $ 512,120 4,030,000 $4,030 $ 790,221
=== ========= ====== ========= ========== ====== ==========
BALANCES, SEPTEMBER 30, 1999 -- $ -- 51,212 $ 512,120 4,030,000 $4,030 $ 790,221
=== ========= ====== ========= ========== ====== ==========
BALANCES, JUNE 30, 2000 300 $ 300,000 -- $ -- 97,992,758 $9,798 $2,667,567
=== ========= ====== ========= ========== ====== ==========
Issuance of Series B preferred
stock 500 500,000 -- -- -- -- --
Sale of common stock -- -- -- -- 317,500 32 634,968
Sale of common stock -- -- -- -- 150,000 15 442,110
Exercise of stock options
to acquire common stock -- -- -- -- 11,542 1 9,999
Exercise of stock options
to acquire common stock -- -- -- -- 115,423 12 9,988
Issuance of shares for services -- -- -- -- 1,000 -- 2,000
Net unrealized loss from
investments -- -- -- -- -- -- --
Net loss for the period ended
September 30, 2000 -- -- -- -- -- -- --
--- --------- ------ --------- ---------- ------ ----------
BALANCES, SEPTEMBER 30, 2000 800 $ 800,000 -- $ -- 98,588,223 $9,858 $3,766,632
=== ========= ====== ========= ========== ====== ==========
</TABLE>
<TABLE>
<CAPTION>
Net
Unrealized
Gain (Loss)
Accumulated On Stockholders'
Deficit Investments Equity
------- ----------- ------
<S> <C> <C> <C>
BALANCES, JUNE 30, 1999 $ (297,100) $ 46,500 $ 1,055,771
Net loss for the period
ended September 30, 1999 (179,739) -- (179,739)
----------- --------- -----------
BALANCES, SEPTEMBER 30, 1999 $ (476,839) $ 46,500 $ 876,032
=========== ========= ===========
BALANCES, JUNE 30, 2000 $(2,102,861) $ (99,200) $ 775,304
=========== ========= ===========
Issuance of Series B preferred
stock -- -- 500,000
Sale of common stock -- -- 635,000
Sale of common stock -- -- 442,125
Exercise of stock options
to acquire common stock -- -- 10,000
Exercise of stock options
to acquire common stock -- -- 10,000
Issuance of shares for services -- -- 2,000
Net unrealized loss from
investments -- (30,000) (30,000)
Net loss for the period ended
September 30, 2000 (869,086) -- (869,086)
----------- --------- -----------
BALANCES, SEPTEMBER 30, 2000 $(2,971,947) $(129,200) $ 1,475,343
=========== ========= ===========
</TABLE>
7
<PAGE> 8
NORTH AMERICAN DATACOM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (869,086) $(179,739)
Adjustments to reconcile net loss to cash provided by
operations:
Depreciation and amortization 18,545 --
Noncash interest charge 182,263 --
Noncash promotional expense charge 2,000 --
Changes in operating assets and liabilities, net of acquisitions:
Inventory (1,550) --
(Increase) decrease in accounts receivable and trade receivables 99,943 990
(Increase) decrease in other assets (135,489) (27,416)
Increase (decrease) in accounts payable and accrued expenses 181,101 4,604
----------- ---------
Net cash used in operations (522,273) (201,561)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Due from broker -- 700,000
Purchase of property and equipment (143,977) (18,177)
Investment in NYRR -- (111)
Advance to Affiliate-Turkey (200,000) --
----------- ---------
Net cash provided by (used in) investing activities (343,977) 681,712
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 1,097,125 --
Proceeds from sale of preferred stock 500,000 --
Proceeds from issuance of convertible notes -- (133)
Proceeds (payments) from notes payable (575,000) 53,155
----------- ---------
Net cash provided by financing activities 1,022,125 53,022
----------- ---------
INCREASE IN CASH for the period (Note 8) 155,875 533,173
Cash and cash equivalents, beginning of period 20,948 13,353
----------- ---------
Cash and cash equivalents, end of period $ 176,823 $ 546,526
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In management's opinion, the information and amounts furnished in this report
reflect all adjustments which are necessary for the fair presentation of the
financial position and results of operations for the periods presented. All
accruals are of a normal and recurring nature. These financial statements should
be read in conjunctions with the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2000.
NATURE OF BUSINESS
The Company intends to provide communications and information technology
services with an emphasis on wideband fiber optic and wireless
telecommunications services that support enterprise data storage solutions,
primary for customers in southern United States.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All material intercompany accounts and transactions are
eliminated.
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 and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain estimates used by management are particularly susceptible to significant
changes in the economic environment. These include estimates of the realization
of long-lived assets and deferred tax assets. Each of these estimates, as well
as the related amounts reported in the financial statements, are sensitive to
near term changes in the factors used to determine them. A significant change in
any one of those factors could result in the determination of amounts different
from those reported in the consolidated financial statements and the effect of
such differences could be material.
INVESTMENTS
Investments are classified as available-for-sale and are reported at estimated
market value, with unrealized gains and losses, net of taxes, reported as a
separate component of stockholders' equity.
Realized gains and losses, and declines in value judged to be other than
temporary, are included in other income. The cost of securities sold is based on
the specific identification method and interest earned is included in other
income.
REVENUE RECOGNITION
Revenue is recognized when services are rendered.
9
<PAGE> 10
TAXES ON INCOME
Income taxes are calculated using the liability method specified by Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS
109"). Under SFAS 109, the Company provides for estimated income taxes payable
or refundable on current year income tax returns as well as the estimated future
tax effects attributable to temporary differences and carryforwards. Measurement
of deferred income taxes is based upon enacted tax laws and tax rates, with the
measurement of deferred income tax assets reduced by estimated amounts of tax
benefits not likely to be realized.
EARNINGS PER SHARE
Basic and diluted loss per share of common stock have been computed based upon
the weighted average number of shares outstanding during the quarter ending
September 30, 2000 and, after giving effect to the merger stock split, the
quarter ending September 30, 1999. Common stock equivalents consisting of stock
options, convertible notes and warrants were not considered in either period, as
their effect would be anti-dilutive.
The following details the Company's common stock equivalents (in post-merger
shares):
<TABLE>
<CAPTION>
QUARTER QUARTER
ENDING ENDING
SEPT. 30, SEPT. 30,
2000 1999
---------- ----------
<S> <C> <C>
Stock options 14,611,178 11,659,966
Convertible notes -- 1,903,130
Warrants -- 80,000
Convertible Preferred stock 400,000 23,318,779
---------- ----------
15,011,178 36,961,875
========== ==========
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Major renewals and
improvements are capitalized, while maintenance and repairs are expensed when
incurred. Depreciation is computed over the estimated useful lives of
depreciable assets using the straight-line method. Useful lives for property and
equipment are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Conduit and optic fiber 25
Communications equipment and wireless towers 3-10
Computers 5
Other Equipment 3-10
Leasehold improvements 10 years
</TABLE>
The carrying values of long-lived assets are periodically reviewed by the
Company and impairments would be recognized if the expected future operating
non-discounted cash flows derived from an asset were less than its carrying
value.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, consisting of cash
and cash equivalents, notes and accounts receivable, accounts payable, trade
notes payable and payable to director approximate their respective fair values.
BUSINESS LINES
Fiber Optic and Broadband Wireless Network: The Company is building a fiber
optic and broadband wireless communications network, which will allow for the
high-speed transmission of large amounts of data. It is expected that
businesses, government agencies and institutions will use the Company network as
a preferred alternative to existing telephone and satellite data transmission
systems.
Internet Access: As of September 30, 2000 the Company provides Internet service
in Mississippi, Tennessee and Alabama. Internet services provided by the Company
include basic dial-up access to the Internet through standard computer modems,
high speed Internet access, and the design and hosting of websites for
customers.
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<PAGE> 11
Remote Data Storage: During fiscal 2000 the Company took delivery of equipment
that will allow third parties to store and access data stored in digital form on
computer systems maintained and operated by the Company in its facility in Iuka,
Mississippi. As of September 30, 2000, the Company did not have any agreements
with any third parties regarding the storage of computer data.
Telecommunication Projects and Consulting: The Company plans to assist
corporations, government agencies and institutions in the design and
installation of their own internal telecommunications networks. The Company
plans to use state-of-the-art technology, which will enable its clients to
transfer and receive large amounts of data at high speed between both internal
and external sources.
At present, the Company operates in one segment, paging and internet access to
consumers and small businesses.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS
133 requires companies to recognize all derivatives contracts as either assets
or liabilities in the balance sheet and to measure them at fair value. If
certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognition of (I) the changes in the fair
value of the hedged asset or liability that are attributable to the hedged risk
or (ii) the earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change.
SFAS 133 is effective for the financial statements for periods beginning after
June 15, 2000. The Company has not entered into derivatives contracts either to
hedge existing risk or for speculative purposes. Accordingly, the Company's
adoption of the new standard on July 1, 2000 did not have a material effect on
its financial statements.
The Financial Accounting Standards Board issued Interpretation
("Interpretation") No. 44, "Accounting for Certain Transactions involving Stock
Compensation, an Interpretation of APB Opinion No. 25" which is effective July
1, 2000. Interpretation No. 44 clarifies (a) the definition of employee for
purposes of applying Opinion 25, (b) the criteria for determining whether a
stock compensation plan qualifies as a noncompensatory plan, (c) the accounting
consequence of various modifications to the terms of a previously fixed stock
option or award, and (d) the accounting for an exchange of stock compensation
awards in a business combination. Adoption of the provisions of the
Interpretation has not had a significant impact on our financial statements.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101, --
Revenue Recognition, which outlines the basic criteria that must be met to
recognize revenue and provides guidance for presentation of revenue and for
disclosure related to revenue recognition policies in financial statements filed
with the Securities and Exchange Commission. We believe that adopting the
provisions of SAB No. 101 has not had a material impact on our financial
position or results of operations.
In September 2000, the Financial Accounting Standards Board issued SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities ("SFAS 140"). SFAS 140 revises the standards for accounting for
Securitizations and other transfers of financial assets and collateral and is
effective for fiscal years ending December 15, 2000. We believe that adopting
SFAS 140 will not have a material impact on our financial position or results of
operations.
3. INVESTMENTS:
The Company's investments are classified as available-for-sale. The amortized
cost, gross unrealized gains (losses) and estimated fair value, less the option
price of $.12 per share, for these investments were as follows at September 30,
2000 and June 30, 2000:
<TABLE>
<CAPTION>
Gross
Cost Unrealized Estimated
September 30, 2000 Basis Gains (Losses) Fair Value
------------------ ----- -------------- ----------
<S> <C> <C> <C>
New York Regional
Rail Corporation
Stock Options $250,000 $(190,000) $60,000
June 30, 2000
New York Regional
Rail Corporation
Stock Options $250,000 $(160,000) $90,000
</TABLE>
11
<PAGE> 12
4. PROPERTY, PLANT AND EQUIPMENT:
In March 2000, the Company acquired 504 miles of fiber optic conduit for $15.12
million from Qwest. The purchase price was to be paid over a 12 month period
ending March 31, 2001 and, accordingly, imputed interest of $723,109 was
recorded as a discount which is being amortized as an interest charge over the
term of the payable. For the quarterly period ending September 30, 2000 the
interest charge associated with this payable was $182,263. The Company currently
is past due in its payments on this obligation by approximately $9,000,000 and
is actively negotiating with the vendor for modifications to the repayment
terms.
On August 15, 2000, the Company entered into an agreement with a third-party
contractor to lay fiber optic conduit between Atlanta, Georgia and Chattanooga,
Tennessee and from Chattanooga to Memphis, Tennessee. The agreement calls for
payments of approximately $29 million over the course of the agreement,
approximately $2.9 million of which was due on October 15, 2000 with the balance
due in specified installments as the conduit is installed. The Company has
received a notice of default under this contract, as they have not made this
payment. If they are not able to obtain financing or raise funds to satisfy
these obligations. They may lose the ability to continue to lay fiber optic
cable and be subject to claims for contract breach.
5. ADVANCES TO AFFILIATES
In July, the Company advanced $200,000 to Global Fiber Optic and Wireless
Communications, Ltd. ("Global") in anticipation of developing a joint venture to
develop internet and information technology services for Turkey. The Company and
Global plan to each have a fifty percent interest in any joint venture formed.
The Company will be required to provide electronic and communications
technologies, while Global will provide rights-of-way and other real estate as
needed in Turkey.
6. OTHER ASSETS
Other assets consist of the following items as of:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
2000 2000
-------- --------
<S> <C> <C>
FCC License, net of amortization
of $20,556 and $14,389, respectively $349,444 $355,611
Prepaid expenses 164,582 29,093
Deferred income tax asset 61,790 61,790
Notes Receivable, net of current maturities 3,338 3,338
-------- --------
Total $579,154 $449,832
======== ========
</TABLE>
7. MINORITY INTEREST IN NET ASSETS OF SUBSIDIARY
In July 2000, the Company acquired 12 miles of right-of-way from the Tishomingo
Railroad, a company owned by the son of the President of NADC, for an
acquisition price consisting of a two percent ownership interest in North
American InfoTech, LLC ("NAIT"), a subsidiary of the Company valued at $-0-,
which is the historical carryover cost basis. NAIT had no significant operations
during the quarter ended September 30, 2000.
8. STOCKHOLDERS' EQUITY:
In May 2000, the Board authorized 500,000 shares of Series B Preferred Stock. In
June 2000, the Company authorized the sale of up to 5,000 shares of Series B
convertible preferred stock for $1,000 per share to a principal shareholder.
Each share is convertible into 500 shares of Rule 144 restricted common stock of
the Company. Each share carries a $60 dividend payable in July annually with
these dividends accumulating if not paid and has a right upon liquidation to be
redeemed before any common shareholders. If dividends are not current the
holders will have 500 voting rights for each share held. There are no redemption
rights for retiring this issue. In September 2000, the Company sold 500 shares
of Series B Preferred Stock to a principal shareholder for $500,000.
In July 2000, $10,000 of stock options were exercised for 11,542 shares of
common stock.
In July 2000, the Company awarded 1,000 shares of its common stock to three
individuals for non-cash prize from a logo contest held for local-area students.
In August 2000, the Company sold 317,500 shares of common stock to an investor
for $635,000.
12
<PAGE> 13
In August 2000, $10,000 of stock options were exercised for 115,423 shares of
common stock.
In September 2000, the Company sold 150,000 shares of its common stock to a
group of investors for $442,125.
9. SUBSEQUENT EVENTS:
In October, November and December, 2000, the Company issued 20,225 shares of
common stock to a group of investors pursuant to the terms of an agreement
previously entered into by the Company and such investors. No additional
consideration was paid to the Company for such shares.
During October 2000, the Company issued 30,000 shares of common stock to an
investor for costs associated with a previous sale of securities to such
investor. Also, in October 2000, the Company issued 3,000 shares of common stock
valued at $8,850 for a placement fee arising from previous sale of common stock
by the Company.
10. LIQUIDITY:
The accompanying financial statements have been prepared on a going concern
basis, which contemplates continuity of operations and realization of assets and
satisfaction of liabilities in the normal course of business. At September 30,
2000, the Company has negative working capital with obligations totaling
$15,240,123 due within one year of which approximately $9,000,000 is past due
(Note 6). In addition, losses totaling $2,971,947 have been generated since
inception. These matters raise substantial doubt about the company's ability to
continue on as a going concern. The continuation of the Company as a going
concern is dependent upon the Company raising additional capital, and attaining
and maintaining profitable operations. The Company has identified potential
sources of capital and potential joint venture and/or strategic partners and
believes that they will be able to secure the necessary capital to put their
business plan into operation.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Index to Exhibits:
27.1 Financial Date Schedule (for SEC use only)
Current Reports on Form 8-K:
No current reports on Form 8-K were filed by the Company during the quarter
ended September 30, 2000.
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<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NORTH AMERICAN DATACOM, INC.
(Registrant)
DATE: December 8, 2000
/s/ Robert R. Crawford
--------------------------------------------
Robert R. Crawford
President
Chief Executive Officer
/s/ David A. Cray
--------------------------------------------
David A. Cray, Vice President
Corporate Treasurer
14
