SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended: June 30, 1997
Commission File Number: 33-38511-FW
CHEQUEMATE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Utah 76-0279816
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
57 West 200 South, Suite 350; Salt Lake City, Utah 84101
(Address of principal executive offices)
(801) 322-1111
(Issuer's telephone number)
AUTOMATED COMPLIANCE & TRAINING, INC.
(Former Name, former address and former fiscal year, if changed since last
report)
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
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date: 13,307,341
Transitional Small Business Disclosure Format: YES NO X
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements. PAGE
ACCOUNTANTS' REPORT 6
UNAUDITED CONSOLIDATED BALANCE SHEETS 7
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS 9
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS 10
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 12
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
GENERAL INFORMATION 18
LIQUIDITY AND CAPITAL RESOURCES 19
RESULTS OF OPERATIONS 20
PART II - OTHER INFORMATION
ITEM 5. Other Information 20
ITEM 6. Exhibits and Reports on Form 8-K 23
<PAGE>
<PAGE>
CHEQUEMATE INTERNATIONAL, INC.
Consolidated Financial Statements
June 30, 1997 and March 31, 1997<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Chequemate International, Inc,
Salt Lake City, Utah 84101
The accompanying consolidated balance sheets of Chequemate International Inc. ,
and it's subsidiaries as of June 30, 1997 and the related consolidated
statements of operations, changes in stockholders'
equity, and cash flows for the three months ended June 30, 1997 and 1996
were not audited by us and accordingly, we do not express an opinion on them.
The accompanying balance sheet as of March 31, 1997 was audited by us and we
expressed an unqualified opinion on it in our report dated June 14, 1997.
The financial statements presented were prepared in compliance with regulation
S-X for form 10-QSB for the Securities and Exchange Commission and contain
selected footnote disclosures. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements.
Jones, Jensen & Company
Salt Lake City, Utah
August 11, 1997<PAGE>
CHEQUEMATE INTERNATIONAL, INC.
Consolidated Balance Sheets
ASSETS
June 30, March 31,
1997 1997
(Unaudited)
CURRENT ASSETS
Cash $ 1,714,112 $ 165,536
Accounts receivable - net of allowances
of $5,710 and $7,520 34,450 38,852
Prepaid expenses 125,253 8,503
Inventory 1,238,799 185,518
Total Current Assets 3,112,614 398,409
PROPERTY AND EQUIPMENT 583,841 454,174
OTHER ASSETS
Rights to software product 562,913 603,367
Organization costs (Note 1) 17,261 17,261
Product license rights 6,000,000 -
Less: Accumulated amortization (269,169) (205,018 )
Note receivable 7,310 7,514
Refundable deposits 8,054 8,053
Investments in subsidiaries 103,000 3,000
Total Other Assets 6,429,369 434,177
TOTAL ASSETS $ 10,125,824 $ 1,286,760
CHEQUEMATE INTERNATIONAL, INC.
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, March 31,
1997 1997
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 744,450 $ 174,865
Accounts payable related party - 19,413
Short-term debt 275,000 300,000
Accrued expenses 98,586 103,552
Income tax payable - 400
Accrued interest related party 65,903 65,903
Current portion related party (Note 3) - -
Current portion long-term debt 33,533 33,533
Current portion capital lease obligations 6,604 6,004
Total Current Liabilities 1,224,076 703,670
LONG-TERM LIABILITIES
Long-term related party notes
payable (Note 3) 80,000 90,000
Long-term debt 38,699 46,834
Capital lease obligations 5,110 8,805
Total Liabilities 1,347,885 849,309
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value (Note 2) 1,350 1,312
Subscribed stock (Note 2) 2,475,000 270,000
Minority Interest 100,000 100,000
Capital in excess of par 14,326,960 7,235,501
Retained deficit (8,125,371) (7,169,362 )
Total Stockholders' Equity 8,777,939 437,451
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 10,125,824 $ 1,286,760
CHEQUEMATE INTERNATIONAL INC.
Consolidated Statements of Operations
For the Three Months Ended
June 30,
1997 1996
REVENUES $ 222,948 $ 119,544
COST OF SALES 67,094 58,819
GROSS PROFIT 155,854 60,725
EXPENSES
Selling expenses 305,949 75,444
General and administrative 813,745 305,783
Total Expenses 1,119,694 381,227
OTHER INCOME (EXPENSE)
Interest income 3,851 -
Interest expense (5,146) (6,465)
Net Other Expense (1,295) (6,465)
NET (LOSS) BEFORE INCOME TAXES (965,135) (326,967)
INCOME TAX PROVISION - -
NET (LOSS) $ (965,135) $ (326,967)
(LOSS) PER SHARE (.07) (.03)
AVERAGE NUMBER OF SHARES OUTSTANDING 13,307,341 12,666,100
CHEQUEMATE INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
For the Three Months Ended
June 30, June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (965,135) $ (326,967)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 118,360 20,867
(Increase) decrease in accounts receivable 4,402 18,070
(Increase) decrease in inventory (1,053,281) (8,421)
(Increase) decrease in prepaid expense (116,750) 498
(Increase) decrease in deposits - 2,861
Increase (decrease) in accounts payable 569,585 (11,036)
Increase (decrease) short-term debt (25,000) -
Increase (decrease) in accrued expenses (4,966) (14,374)
Increase (decrease) in accrued interest - -
Increase (decrease) in income taxes payable 400 -
NET CASH (USED) BY OPERATING ACTIVITIES (1,472,385) (318,502)
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment purchase (154,309) (5,621)
Investment in subsidiary (100,000) -
NET CASH (USED) BY INVESTING ACTIVITIES (254,309) (5,621)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock - -
Proceeds from subscribed stock 3,296,500 350,000
Payments of capital leases (3,095) -
Payments of long-term debt (18,135) (5,572)
Payment on office lease obligations - (1,958)
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,275,270 342,470
CHEQUEMATE INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
For the Three Months Ended
June 30,
1997 1996
NET INCREASE IN CASH $ 1,548,576 $ 18,347
CASH AT BEGINNING PERIOD 165,536 30,378
CASH AT END OF PERIOD $ 1,714,112 $ 48,725
CHEQUEMATE INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
June 30, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's accounting policies reflect practices of the software sales and
services industry and conform to generally accepted accounting principles.
The following policies are considered to be significant:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries Families in Focus, Inc., AC&T Direct, AC&T and Chequemate
Tele-Services,Inc. All significant intercompany accounts and transactions
have been eliminated.
Revenue recognition
Revenue is recognized upon an accrual basis upon deliver of the
software of product. Revenue consists of software and product sales,
license fees, and monthly service fees.
Inventories
Inventories are stated at the lower cost or market. Cost is
determined by using the first-in, first-out method.
Organization and reproduction costs
Organization and production costs have been capitalized and amortized
over five years using a straight line method. The total amortization
of organizational and production costs for the three months ended June
30, 1997 and 1996 amounted to $102,656 and
$14,440, respectively.
Property and equipment
Property and equipment are stated at cost with depreciation and amortization
computed on the straight line method. Property and equipment are depreciated
over the following estimated useful lives:
Years
Office equipment 5
Office furniture 5-7
Machinery and equipment 5
Leasehold improvements 3-5
Capital leases 3-5
Depreciation for the three months ended June 30, 1997 and 1996 amounted to
$15,704 and $8,281, respectively.
CHEQUEMATE INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
June 30, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings per share
Earnings per share, which is calculated using a weighted average for common
stock and common stock equivalents, has been retroactively restated to
reflect the business combination between the Company and CHequemate
International, Inc.
Cash flows
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand and cash on deposit with banks.
Income taxes
The Company's tax basis is the same as the Company's financial statement basis.
The Company has net operating loss (NOL) carryforwards to offset future taxable
income. The Company has not recorded a tax benefit attributable to the
carryforwards because realization of such benefit cannot be assured.
Computer software costs
The Company classifies the costs of planing, designing and establishing the
technological feasibility of a computer software product as software development
costs and charges those costs to expense when incurred. Costs incurred for
duplicating computer software from product masters, documentation and
training materials and packaging costs are capitalized as inventory and
charged to cost of sales when revenue is recognized. Costs of maintenance
and customer support are charged to expense when costs are incurred.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principals 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 and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - STOCKHOLDERS' EQUITY
The Company is authorized to issue 500,000,000 shares of common stock, par value
$.0001. At June 30, 1997 and 1996 the Company has issued 13,496,841 and
12,666,100 shares of common stock, respectively.
The Company continued the placement of Regulation S stock to non U.S. persons.
As part of the placement, the Company received $2,475,000 for the purchase of
common stock which has not been issued. The Company has accounted for the
transaction as subscribed stock until the stock could be issued.
CHEQUEMATE INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
June 30, 1997 and 1996
NOTE 3 - RELATED PARTIES
Notes payable from related parties as of June 30, 1997 and 1996 are detailed in
the following summary:
1997 1996
Note payable to CEO; due in monthly
interest installments of $930 with an
interest rate of 12%; due December 31,
1998; unsecured. $ 80,000 $ 93,000
Total related party notes payable 80,000 93,000
Less: current portion - -
Long-term portion $ 80,000 $ 93,000
Maturities of the related party notes payable are as follows:
Period ending June 30, 1998 $ -
1999 80,000
Total $ 80,000
NOTE 4 - COMMON STOCK OPTIONS
The Company granted several stock options to various individuals for service
performed or for future services. The option price for the services
performed was stated at $5.00 per share on 14,000 shares. The option price
granted on future services was the lower
of the bid price or $7.50 per share on 100,000 shares.
NOTE 5 - ACQUISITIONS
On February 27, 1997, the Company established Chequemate Tele-Services, Inc.
(CTS) along with another individual and received fifty-one percent (51%) of
the company. CTS then entered into an asset purchase agreement to acquire
all of the assets of Quality Products Distribution, Inc. The assets
consisted mainly of credit card processing software and certain intangibles.
NOTE 6 - COMMON STOCK OPTIONS
Effective May 17, 1995 the stockholders approved in Incentive Stock Option Plan
granting to key employees options to purchase Company common stock over a ten
year period, at the fair market value at time of grant. The aggregate number
of common shares of the Company which may be granted under the plan is
800,000 shares. The plan expires on March 23, 2004.
CHEQUEMATE INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
June 30, 1997 and 1996
NOTE 7- ACQUISITION OF LICENSE AGREEMENT
In May of 1997 the Company received the exclusive rights to the Realeyes
Intellectual Property product. In exchange for these exclusive rights the
Company granted stock options to various individuals. The stock options
grant the individuals the option to purchase 2,000,000 shares of the
Company's common stock at $0.01 per share. The options have a term of ten
years.
In addition, the agreement provides for the payment of royalties associated with
this product. The Company shall pay $400,000 following the sale and receipt
of funds associated with the first 10,000 units. Thereafter the Company
would pay a 2% royalty on the gross profits of the product in any month where
the units sold that month where the units sold that month exceeded 2,500 units.
The license rights have been valued based upon the difference between the
exercise price of the options ($0.01) and the trading price of the common
stock ($3.00). Due to the nature of the stock options it is assumed all
options will be exercised. The Company has just begun production of the
product and based upon current projections the value of the assets appears
not to be impaired. Future actual results if different than current
projections may impair the carrying value of the license rights.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
For more detailed financial information, please refer to the Unaudited Financial
Statements for the periods of June 30, 1997 and March 31, 1997. A copy of these
Financial Statements is attached to this Report.
The Company and its subsidiaries have faced a variety of opportunities and
challenges during fiscal 1997, including congressional and federal budget
reforms, marketing opportunities, and product enhancements. The Company
has continued to research various marketing strategies to market its products
and to effectively implement the information gained from its pilot programs.
As a result of the pilot and the test marketing programs of several
marketing strategies in fiscal year 1997, the Company has refined its approach
to its main markets of Small Businesses and Independent Contractors.
The Company discovered a need for small business owners and independent
contractors to accept credit cards to compete with more established retail
and wholesale outlets. In order to meet the needs of the market, CMI
purchased QPD and the rights to the Telecharge program. The Telecharge
program allows small businesses and independent contractors easy access to
credit card processing without meeting stringent and overburdensome
restrictions and regulations. As a result of a strong focus on customer
satisfaction, QPD has maintained an industry low one third of one percent as
a charge back rate.
The purchase of QPD and the Telecharge product brought new clients,
associations and direct marketing companies as customers. As a result of
the purchase, it became necessary for the Company to contract with an outside
processor to provide the backend processing for the Telecharge program.
In April 1997, CMI became a registered agent of Cardservice International,
Inc. a partner of First Data Corporation. The transfer over to Cardservice
has now taken place and the Telecharge program is gaining acceptance in new
markets previously unavailable. The current financial statements of the
Company reflect the purchase price and operating expenses associated with QPD
and Telecharge.
In order to provide additional products and services to independent
financial advisors, the Company expanded its debt eliminator program to
include its money management system, debt restructuring and a bill paying
system. This new program, called the Chequemate Financial Manager, created
a unique combination of products to eliminate a client's debt, manage income
and expenses, and increase savings. For the fourth quarter of fiscal 1997
and the first quarter of fiscal 1998, the Company has invested capital in
the development of the CFM program. During the first quarter of fiscal 1998,
the Company began to market the CFM program through a network of independent
representatives and agents of the Company.
The Company has also developed the Web Dynamics product to provide
the financial advisor with a tool that will enable the participating
financial advisor an interactive resource to enhance financial analysis,
client recruitment, product advertising, and event planning and advertising.
This product required initial capital from the Company for hardware
components and software programs to develop the interactive capabilities and
rapid expansion.
During the second quarter of fiscal 1998, the Company concluded its
purchase of the worldwide license to the Realeyes 3D product. The developers
of the technology had perfected a prototype unit, but were unable to fund
further development and manufacturing of the product. CMI was positioned to
provide capital to fund the purchase and initial manufacturing of the product.
The Company raised $3,000,000 to fund initial production of the units and
issued restricted stock to the members of the ATG, LLC for the license of
the intellectual property and worldwide rights to manufacture and market
the Realeyes 3D product and other related technologies. The Company was
succesful in taking the prototype through the pre-production stage, and
through initial manufactoring of the Realeyes product. Currently, the Company
is producing marketable units and preparing to meet expected demand. The
Company anticipates the need for additional capital to fund rapid growth and
manufacturing and additional advancement of 3D technology.
Liquidity and Capital Resources
The unaudited fiancial statements, as of June 30, 1997, reflect current assets
of $3,112,614 with current liabilities of $1,224,076. This represents positive
working capital of $1,888,538. The current ratio for the three month period
ended June 30, 1997, of current assets to current liabilities was 2.54 compared
to .57 as of March 31, 1997. The increase in working capital is primarily due
to the receipt of cash from sale of capital stock for the production of the
Realeyes 3D product.
At June 30, 1997, long term liabilities were $123,809 compared to $145,639 as
of March 31, 1997. This reduction reflects payments on related party notes
payable and long term debt. These numbers reflect that the Company does not
carry long term debt to fund business operations.
Stockholders equity as of June 30, 1997 has increased by $8,340,488 over the
three month period from March 31, 1997 to June 30, 1997. The increase reflects
the Capital contributions to fund pre-production runs and the initial inventory
build-up requirements of the Realeyes 3D product.
Results of Operations
The unaudited financial statements, as of June 30, 1997, reflect the
consolidated financial position of the Company and its subsidiary entities.
March 31, 1997 totals have also been consolidated. As of June 30, 1997 the
Company shows total gross revenue of $222,948 compared to $119,544 for the
previous three month period ended June 30, 1996; an increase in gross revenue
of $103,404.
Total expenses for the three month period ended June 30, 1997 increased by
$738,467 when compared to the three month period ended June 30, 1996. The
combination of increased revenue and increased expenses resulted in a net
loss of $965,135 for the period ended June 30, 1997.
The loss for this three month period is mainly attributed to the inventory build
up and pre-production expenses associated with the 3D product and purchase of
the Realeyes product. The Company invested over $1,000,000 in inventory for
the three month period ended June 30, 1997, and expects
inventory expenses to increase through the initial inventory build-up of the
Realeyes product.
Part II - Other Information
Item 5. Other Information.
At the regular scheduled Annual Shareholder's Meeting held August 9,
1996 at the Registrant's corporate headquarters in Salt Lake City, Utah,
an Amendment to the Articles of Incorporation of the Registrant to change
the name Automated Compliance & Training, Inc., to Chequemate International,
Inc. was presented for a vote with an affirmative vote of at least a majority
needed to effect the Amendment. The Amendment was passed with an effective
date of September 1, 1996 on the affirmative vote of 9,147,042 shares or
72.2% of outstanding stock of the Registrant.
Current market analysis and feedback has shown that the Chequemate
System has application in a wide range of market segments ranging from large
corporations to banks and all areas of the financial community. Therefore,
the name change was recommended to capitalize on the potential of the
Chequemate patented system. The new corporate structure will increase market
penetration and enhance market name recognition.
Sales of Equity Securities Pursuant to Regulation S.
The following table shows sales of securities of the Registrant sold in
the last three years pursuant to Regulation S. The sales transactions were
generally completed pursuant to written subscription agreements. The
subscription agreements were executed in reliance upon the transaction
exemption afforded by Regulation S. The facts relied upon to satisfy the
exemption were as follows:
(a) The Regulation S stock purchasers (the "Purchasers") were not U.S.
persons as that term is defined under Regulation S.
(b) At the time the buy order was originated, Purchasers were outside
the U.S. and were outside the U.S. as of the date of the execution and
delivery of the subscription agreements.
(c) Purchasers purchased the shares for their own accounts and not on
behalf of any U.S. person; the sales had not been pre-arranged with a
purchaser in the U.S.; and all offers and resales of the securities were
only made in compliance with the provisions of Regulation S.
(d) The Purchasers were not entities organized under foreign law by a
U.S.person, as defined in Regulation S Rule 902(o), for the purpose of
investing in unregistered securities, unless the Purchasers were
organized and owned by accredited investors, as defined in Regulation D,
Rule 501(a), who are not natural persons, estates or trusts.
(e) The transactions were not purchases pursuant to a fiduciary account
where a U.S. person, as defined in Regulation S Rule 902(o), had
discretion to make investment decisions for the account.
(f) To the knowledge of the Registrant, all offers and sales of the
Regulation S shares by Purchasers prior to the expiration of a 40-day
restricted period were only to be made in compliance with the safe
harbor contained in Regulation S, pursuant to registration of securities
under the 1933 Act, or pursuant to an exemption from registration.
All offers and sales after the expiration of the restricted period were
to be made only pursuant to such a registration or to such exemption
from registration. The restricted period referred to herein began on
the closing of the offering or upon the completion of the distribution
of the offering, as announced by the Registrant to all purchasers under
the offering.
(g) All offering documents received by Purchasers included statements
to the effect that the shares had not been registered under the 1933
Act and may not be offered or sold in the United States or to U.S.
persons unless the shares are registered under the Securities Act of
1933 or an exemption from the registration requirements was available.
(h) The Purchasers acknowledged that the purchase of the shares
involved a high degree of risk and further acknowledged that they could
bear the economic risk of the purchase of the shares, including the
total loss of their investment.
(I) The Purchasers understood that the shares were being offered and
sold to them in reliance on specific exemptions from the registration
requirements of United States Federal and State securities laws and
that the Registrant was relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of the Purchasers set forth in the subscription agreements
in order to determine the applicability of such exemptions and the
suitability of the Purchasers to acquire shares.
Date of Sale Title of Security Amnt of Securities Offering Price
Nov-07-1994 Common Stock 40,000 $2.50
Nov-22-1994 Common Stock 20,000 $2.50
Dec-01-1994 Common Stock 40,000 $2.50
Dec-21-1994 Common Stock 40,000 $2.50
Dec-21-1994 Common Stock 20,000 $2.50
Jan-06-1995 Common Stock 60,000 $2.50
Feb-02-1995 Common Stock 54,545 $2.75
Mar-02-1995 Common Stock 60,000 $2.50
Apr-04-1995 Common Stock 44,444 $3.375
May-11-1995 Common Stock 42,857 $3.50
Jun-06-1995 Common Stock 41,379 $3.625
Jun-29-1995 Common Stock 41,379 $3.625
Aug-10-1995 Common Stock 110,345 $3.625
Sep-06-1995 Common Stock 160,000 $3.75
Dec-28-1995 Common Stock 28,571 $3.50
Jan-16-1996 Common Stock 14,285 $3.50
Jan-30-1996 Common Stock 29,070 $3.44
Feb-23-1996 Common Stock 27,548 $3.63
Mar-12-1996 Common Stock 27,548 $3.63
Apr-02-1996 Common Stock 27,548 $3.63
May-01-1996 Common Stock 41,322 $3.63
May-31-1996 Common Stock 28,571 $3.50
Jul-01-1996 Common Stock 28,571 $3.50
Aug-01-1996 Common Stock 29,630 $3.38
Aug-08-1996 Common Stock 20,000 $3.25
2,500 $3.25
17,500 $3.25
Sep-04-96 Common Stock 29,091 $3.44
Oct-02-96 Common Stock 28,571 $3.50
Nov-13-1996 Common Stock 29,586 $3.38
Nov-26-1996 Common Stock 57,692 $3.38
Nov-29-1996 Common Stock 73,964 $3.38
Jan-14-1997 Common Stock 8,000 $2.50
Feb-14-1997 Common Stock 100,000 $2.50
Apr-07-1997 Common Stock 40,000 $2.50
Apr-22-1997 Common Stock 200,000 $2.50
May-06-1997 Common Stock 60,000 $2.50
May-28-1997 Common Stock 180,000 $2.50
Jun-10-1997 Common Stock 285,714 $3.50
Jun-16-1997 Common Stock 296,296 $3.375
P.T. Dolok Permai and Oxford International Asset Management, Inc.
purchased substantial portions of the Regulation S stock for their own
account. Such entities may have acted as underwriters with regard to other
portions of the Regulation S shares which were sold as reflected in the
foregoing table.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(21) Subsidiaries of the Registrant
AC&T Direct, Inc. : Organized in the State of Utah
Families in Focus, Inc. : Organized in the State of Utah
Chequemate Teleservices, Inc.: Organized in the State of Utah
Chequeamte Third Dimension, Inc.: Organized in the state of Utah
(b) Reports on Form 8-K -- None
On May 16, 1997 the registrant executed an agreement (the "ATG
Agreement") to acquire the exclusive, worldwide and perpetual license to
certain proprietary three dimensional video technology which has been
developed under the name of Realeyes 3D Video (the "Realeyes
Intellectual Property"). A copy of the ATG Agreement, excluding
confidential or proprietary definitions and schedules, is attached as an
Exhibit to this report. The Realeyes Intellectual Property is owned and
licensed by Applied Technology Group, LC, a Utah limited liability
company (hereafter "ATG"). The negotiation of the ATG transaction was
approved by the Board of Directors of the registrant on March 7, 1997.
Chequemate has formed a new wholly-owned subsidiary called
Chequemate Third Dimension, Inc., which will manufacture and market
the Realeyes product that incorporates the Realeyes Intellectual Property.
The principal place of business of the new Chequemate subsidiary is at 57
West 200 South, Suite 350, Salt Lake City, Utah 84101. Its telephone
number at this location is: (801) 322-1111.
The revolutionary Realeyes product consists of a small VCR-size
unit which digitizes a TV signal and converts it to 3-D. It can be used
with any television in combination with signals from satellite receivers,
cable feed, VCRs, laser disc players or video games. The Chequemate 3-D
system can convert any TV signal to 3-D in either the NTSC format
used in the United States, or the PAL format used abroad.
A definitive license agreement setting forth the terms and
conditions of the license is to be entered into by the June 16, 1997
closing date of the ATG transaction. The principle terms of the license
agreement and of the other agreements of this transaction are included in
the May 16th agreement. The parties have agreed to formalize by June
16th certain proprietary information agreements and complete the details
of the transaction as provided in paragraphs 12 and 13 of the ATG
Agreement. The execution of these agreements is a precondition to the
closing. No assurance can be given that all definitive agreements will be
entered into. Further, the ATG Agreement grants Chequemate a due
diligence period during which the registrant may rescind the transaction at
its election. This due diligence period expires on July 26, 1997.
Notwithstanding these contingencies, the management of Chequemate is
optimistic that all necessary documentation of the transaction will be
completed and conditions satisfied. Manufacture of a pre-production run
of units by CTD has already begun.
The ATG Agreement provides for the employment of Bert Alvey,
the principal manager of ATG, and of Amber Davidson, the design
engineer of the Realeyes product. As of the closing, the balance of the
ATG owners will enter into consulting agreements with CTD. The
assistance of the owners of ATG is deemed to be critical to the
development and the marketing of the Realeyes product. At the closing,
options for 2,000,020 shares of the registrant's common stock will be
granted to the employees and consultants under the referenced
agreements. The registrant will concurrently file a Form S-8 to register
the options and any shares of stock issued pursuant to the options. The
terms of the employment and consulting agreements also provide for
lockup provisions that preclude each of the shareholders from selling
more than twenty-five percent of their shares in any of the first four six-
month periods following the closing. These agreements further provide
for the grant of performance options. These options will vest as certain
sales levels of the Realeyes products are achieved (see the vesting
schedule set forth in paragraph 3.3.1.2 of the ATG Agreement, at page 11
of 28 hereof).<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: August 19, 1997 By: /s/ Greg L. Popp
Greg L. Popp, Secretary/VP Operations
Dated: August 19, 1997 By: /s/ John Garrett
John Garrett, C.F.O.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1997
<PERIOD-END> JUN-30-1997 MAR-31-1997
<CASH> 1,714,112 165,536
<SECURITIES> 0 0
<RECEIVABLES> 34,450 38,852
<ALLOWANCES> 0 0
<INVENTORY> 1,238,799 185,518
<CURRENT-ASSETS> 3,112,614 398,409
<PP&E> 583,841 454,174
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 10,125,824 1,286,760
<CURRENT-LIABILITIES> 1,224,076 703,670
<BONDS> 0 0
<COMMON> 1,350 1,312
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 10,125,824 1,286,760
<SALES> 222,948<F1> 119,544<F1>
<TOTAL-REVENUES> 222,948 119,544
<CGS> 67,094 58,819
<TOTAL-COSTS> 1,119,694 381,227
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (1,295) (6,465)
<INCOME-PRETAX> (965,135) (326,967)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (965,135) (326,967)
<EPS-PRIMARY> (.07) (.03)
<EPS-DILUTED> 0 0
<FN>
<F1>These numbers reflect the Consolidated Statement of Operations for the Three
Months Ended June 30, 1997 and June 30, 1996
</FN>
</TABLE>
