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: September 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: 13,655,412
Transitional Small Business Disclosure Format: YES NO X
TABLE OF CONTENTS
PART I: FINANCIAL STATEMENTS
ITEM 1. Financial Statements PAGE
ACCOUNTANTS' REPORT 6
UNAUDITED CONSOLIDATED BALANCE SHEETS 7
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS 8
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS 9
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 11
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
GENERAL INFORMATION 15
LIQUIDITY AND CAPITAL RESOURCES 16
RESULTS OF OPERATIONS 17
PART II - OTHER INFORMATION
ITEM 5. Other Information 17
ITEM 6. Exhibits and Reports on Form 8-K 22
CHEQUEMATE INTERNATIONAL, INC.
Consolidated Financial Statements
September 30, 1997 and March 31, 1997
C O N T E N T S
Independent Auditors' Report 3
Unaudited Consolidated Balance Sheets 4
Unaudited Consolidated Statements of Operations 6
Unaudited Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 9
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 September 30, 1997 and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the six months ended September 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
November 11, 1997
CHEQUEMATE INTERNATIONAL, INC.
Consolidated Balance Sheets
ASSETS
September 30, March 31,
1997 1997
(Unaudited)
CURRENT ASSETS
Cash $ 740,351 $ 165,536
Accounts receivable - net of allowances
of $69,525 and $7,520 33,049 38,852
Prepaid expenses 130,549 8,503
Inventory 2,864,848 185,518
Total Current Assets 3,768,797 398,409
PROPERTY AND EQUIPMENT 626,050 454,174
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 (402,374) (205,018)
Note receivable - 7,514
Refundable deposits 8,054 8,053
Investments in subsidiaries 103,000 3,000
Total Other Assets 6,288,854 434,177
TOTAL ASSETS $ 10,683,701 $1,286,760
CHEQUEMATE INTERNATIONAL, INC.
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, March 31,
1997 1997
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 1,396,692 $ 174,865
Accounts payable-related party - 19,413
Short-term debt 225,000 300,000
Accrued expenses 76,473 103,552
Income tax payable - 400
Accrued interest related party 65,903 65,903
Current portion related party (Note 3) - -
Current portion long-term debt 8,499 33,533
Current portion capital lease obligation 4,808 6,004
Total Current Liabilities 1,777,375 703,670
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 1,901,184 849,309
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value (Note 2) 1,366 1,312
Subscribed stock (Note 2) 3,473,000 270,000
Minority Interest 100,000 100,000
Capital in excess of par 14,392,836 7,235,501
Retained deficit (9,184,685) (7,169,362)
Total Stockholders' Equity 8,782,517 437,451
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 10,683,701 $ 1,286,760
CHEQUEMATE INTERNATIONAL, INC.
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended For the Six Months Ended
September 30, September 30,
1997 1996 1997 1996
REVENUES $ 371,144 $ 128,037 $ 594,093 $ 247,581
COST OF SALES 131,725 78,734 198,819 137,553
GROSS PROFIT 239,419 49,303 395,274 110,028
EXPENSES
Selling expenses 380,897 118,944 686,846 194,388
General and administrative 849,519 311,493 1,663,264 617,276
Total Expenses 1,230,416 430,437 2,350,110 811,664
OTHER INCOME (EXPENSE)
Interest expense (6,378) (4,939) (11,524) (11,404)
Interest income 9,062 950 12,913 950
Net Other Expense 2,684 (3,989) 1,389 (10,454)
NET (LOSS) BEFORE
INCOME TAXES (988,313) (385,123) (1,953,447) (712,090)
INCOME TAX PROVISION - 200 - 200
NET (LOSS) $ (988,313) $ (385,323)$(1,953,447) $ (712,290)
(LOSS) PER SHARE (.07) (.03) (.14) (.06)
AVERAGE NUMBER OF
SHARES OUTSTANDING 13,655,412 12,777,403 13,655,412 12,777,403
CHEQUEMATE INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended
September 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (1,953,447) $ (641,290)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 273,736 43,817
Non-cash expense - 292
Allowance for obsolete inventory - -
(Increase) decrease in accounts receivable 5,803 (6,265)
(Increase) decrease in inventory (2,679,330) (26,919 )
(Increase) decrease in prepaid expense (122,046) 3,644
(Increase) decrease in deposits - 2,862
Increase (decrease) in accounts payable 1,221,827 22,917
Increase (decrease) short-term debt (75,000) (9,976)
Increase (decrease) in accrued expenses (27,079) -
Increase (decrease) in income taxes payable (400) -
Increase (decrease) in notes receivable 7,514 -
NET CASH (USED) BY OPERATING ACTIVITIES (3,348,422) (610,918)
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment purchase (189,038) (9,956)
Investments in subsidiaries (100,000) -
Product License rights (6,000,000) -
NET CASH (USED) BY INVESTING ACTIVITIES (6,289,038) (9,956)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 7,057,335 500,000
Proceeds from subscribed stock 3,203,000 301,000
Payments of capital leases (4,891) -
Payments of long-term debt (43,169) (27,124)
Payment on office lease obligations - (1,958)
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,212,275 771,918
CHEQUEMATE INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended
September 30,
1997 1996
NET INCREASE IN CASH $ 574,815 $ 151,044
CASH AT BEGINNING PERIOD 165,536 30,380
CASH AT END OF PERIOD $ 740,351 $ 181,424
CHEQUEMATE INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 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 ofConsolidation
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 six months ended September
30, 1997 and 1996 amounted to $233,077 and $28,880, 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 six months ended September 30, 1997 and 1996 amounted
to $40,659 and $14,937, respectively.
CHEQUEMATE INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 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 September 30, 1997 and 1996 the Company has issued
13,655,412 and 12,805,953 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 $3,473,000 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
September 30, 1997 and 1996
NOTE 3 - RELATED PARTIES
Notes payable from related parties as of September 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
September 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.
PART I - FINANCIAL INFORMATION
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 September 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. The acquisition of the world wide license to
the C-3D product, and the overwhelming initial response to the product has
caused the Company to re-evaluate the strategic plans and mission. The
following summary outlines the new focus of the Company on its developing
competency in computer technologies, and emphasis on the initial marketing
and promotion of the C-3D Imaging System, the Chequemate Financial Manager
and the Web Dynamics product.
Executive Summary
The Mission
"To take workable ideas in the fields of finance, communications and
entertainment and transform them into viable market opportunities through
the use of state-of-the-art computer technologies."
The Industries
Finance, Communications & Technology
The Products
C-3D Digital Imaging System - Entertainment Industry
Chequemate Financial Manager - Financial Industry
Web Dynamics - Communications Industry
Company Profile
Chequemate International, Inc. (CMI) imagined a world where state-of-the-art
computer technologies could create breakthrough products in the fields of
finance, communications and entertainment - and then set about making it a
reality. Every product produced, every service provided, reflects that
vision. What began as a vision of new technology, has developed into state-
of-the-art financial tools, Internet web sites and 3-D television. As a
result, CMI is one of the most promising businesses in today's market
Product Profile
Entertainment: C-3D Imaging System.
With the acquisition of Advanced Technology Group, LLC. (ATG) in April 1997,
CMI established Chequemate Technologies, Inc., a wholly owned subsidiary
dedicated to the commercialization of breakthrough technologies in the
entertainment industry. ATG was the developer of two dimensional to three
dimensional conversion and enhancements to 3-D television, which is currently
being manufactured and marketed under the name C-3D.
C-3D's digital image offset process yields several remarkable results. First,
C-3D adds depth to normally flat two dimensional television images by converting
them from 2-D to 3-D all in real time. Depth turns the two-dimensional
television screen into a three-dimensional window, allowing for a more true-to-
life viewing experience. Additionally, C-3D sharpens and enhances a
television's original picture by digitizing the analog signal. Perhaps,
the most exciting result of CMI's C-3D unit is the ability 3-D images
(images shot with two cameras) actually "jumping out" of the television screen.
This revolutionary product may be connected to any television and is capable
of receiving signals from any source, including cable TV, satellite
receivers, VCR's, laser disc players and video games.
Finance: Chequemate Financial Manager (CFM)
The Company bases its financial programs on The Four T's - track, target, trim
and train. Through its patented FastrakTM System, the Company provides a
method to quickly and easily track spending and income, generating monthly
financial reports that pinpoint exactly all sources of income and where each
penny was spent. Targets, or goals, are then set based on actual spending
information, providing the means and motivation to trim unnecessary
expenditures. Finally, the Company offers educational and training seminars
that build positive spending and money-management habits, a necessity for
long-term financial success.
The Chequemate Financial Manager (CFM) program combines the Fastrak System,
a third party bill paying source and a customized financial analysis. CFM
represents a means to not only get out of debt (in less than 10 years in
most cases, including a mortgage), but to stay out of debt permanently.
The CFM program provides simple, but powerful tools to assist individuals
and families in achieving freedom from debt, establishment of financial
goals, control of financial resources, and realization of financial freedom.
Communication: Web Dynamics.
In a joint venture with HoliCow, Inc., CMI, doing business as Web Dynamics,
designs and develops interactive Internet web sites for the financial
professional. This venture provides an interactive dynamic web presence
that is updated daily and that changes content each time the site is
accessed. Content includes a series of financial calculators, weekly
NASD-approved articles on financial topics, Internet links tailored to
customers' interests, and customized services offered by the business
professional. The Web Dyanmics program allows the professional to maintain
constant communication with customers by enticing them to visit the site
again and again.
Customer Profile
Entertainment - C-3D Digital Imaging System
The C-3D Digital Imaging System has a national client base of distributors,
wholesalers and retailers. The national distributor base consists of fifteen
companies stationed in geographical areas across the United States.
Distributors are also in place for Singapore, South America and Canada.
Current negotiations with distributors will open channels in Europe and
other Asian countries as well as Mexico and Australia.
Finance - CFM
The CFM program is distributed through a network of CMI independent
representatives, Financial Planners, CPA's, Independent Insurance Agents,
and over the CMI website. Currently, CMI representatives are located in
19 States ranging from Hawaii to Florida, and number more than 275. The
CFM program is also represented on a weekly radio show called Principles
with Promise.
National Insurance and financial services firms such as ORBA Financial,
Comprehensive, and Bell Fidelity also represent the CFM program. Agents
of these national firms can market and represent the CFM program as part
of alliance agreements between Chequemate and these organizations. These
firms represent clients such as the California State Small Business
Association, the California State Fraternal Order of Police, and various
railroad companies located in the Western United States.
Communications - Web Dynamics
The financial planning firms listed above are currently representing the
Web Dynamics product to their base of over 3,000 independent financial
planners and insurance agents. The Web Dynamics product is filling an
industry need to create a paperless system.
The Web Dynamics program was featured at the technology forum for the IAFP
(International Association of Financial Planners), and several national
firms are discussing development contracts for the creation of Internet and
Extranet programs.
Establishing and Sustaining a Competitive Advantage
CMI has developed core competencies in computer technologies. Through state-
of-the-art digital, Internet, Intranet and money management programming, CMI
has produced products that push the edge of computer technology to a new level.
Looking ahead, we see great opportunities as we focus on our core
competencies. Our challenge will be to execute well on our strategies in
each of the three industries of focus, with timely delivery of innovative,
high-quality products, services, and technologies to our customers.
Chequemate anticipates forming strategic alliances with key corporations in
the three industries of focus to handle continued research and development
and implementation of marketing plans and sales. At the same time, CMI will
invest in increasing our name and market awareness, as we did this year,
through national media and print advertising.
Liquidity and Capital Resources
The unaudited financial statements, as of September 30, 1997, reflect current
assets of $3,768,797 with current liabilities of $1,777,375. This represents
positive working capital of $1,991,422. The current ratio for the six month
period ended September 30, 1997, of current assets to current liabilities was
2.12 compared to .65 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 C-3D product and from the result
At September 30, 1997, long-term liabilities were $123,809 compared to
$145,639 as of March 31, 1997. This reduction reflects continued 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 September 30, 1997 has increased to $8,782,571
over the six month period from March 31, 1997 to September 30, 1997. The
increase reflects the Capital contributions to fund pre-production runs and
the initial inventory build-up requirements of the C-3D product.
Results of Operations
The unaudited financial statements, as of September 30, 1997, reflect the
consolidated financial position of the Company and its subsidiary entities.
March 31, 1997 totals have also been consolidated. For the six month period
ending September 30, 1997, the Company shows total gross revenue of $594,093
compared to $247,581 for the previous six month period ended
September 30, 1996; an increase in gross revenue of $346,512.
Total expenses for the six month period ended September 30, 1997 increased
to $2,350,110. The increase in expense is attributed to the increase in the
marketing and national ad campaign for the C-3D product. The combination of
increased revenue and increased expenses resulted in a net loss of $988,313
for the period ended September 30, 1997.
The loss for this six month period is mainly attributed to the
pre-production, national ad campaign and promotional expenses associated
with the C-3D product and purchase of the world wide license. The Company
invested over $1,000,000 in pre-production, marketing, ad campaign and
promotional activities for the six month period ended September 30, 1997,
and expects these expenses to continue to increase through the early adopters
stage of the C-3D 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.
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 resells 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
(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 1933 Act 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 a
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
2,500
17,500
$3.25
$3.25
$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
Chequemate Third Dimension, Inc.: Organized in the state of Utah
(b) Reports on Form 8-K
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
C-3D Video (the "C-3D Intellectual Property"). A copy of the ATG Agreement,
excluding confidential or proprietary definitions and schedules, is attached
as an Exhibit to this report. The C-3D Intellectual Property is owned and
licensed by Applied Technology Group, LC, a Utah
Chequemate has formed a new wholly-owned subsidiary called Chequemate Third
Dimension, Inc., which will manufacture and market the C-3D product that
incorporates the C-3D 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 C3-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 was entered into on 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 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 those a
The ATG Agreement provides for the employment of Bert Alvey, the principal
manager of ATG, and of Amber Davidson, the design engineer of the C3-D
product. The balance of the ATG owners entered into consulting agreements
with CTD which expired October 1997. The assistance of the owners of ATG is
deemed to be critical to the development and the marketing of the C-3D
product. Options for 2,000,020 shares of the registrant's common stock were
granted to the employees and consultants under the referenced agre
ued 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 a grant
of performance options, which as of this date have not been issued. These
options will vest as certain sales levels of the C-3D products are achieved
(see the vesting schedule set forth in paragraph 3.3.1.2 of the ATG
Agreement, at page 11of 28).
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: November 14, 1997 By:
Greg L. Popp, Secretary
Dated: November 14, 1997 By:
John Garrett, C.F.O.
See the accompanying notes and accountants' report.
25
11
12
15
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 740,351 165,536
<SECURITIES> 0 0
<RECEIVABLES> 33,049<F1> 38,852<F1>
<ALLOWANCES> 0 0
<INVENTORY> 2,864,848 185,518
<CURRENT-ASSETS> 3,768,797 398,409
<PP&E> 626,050 454,174
<DEPRECIATION> (402,374) (205,018)
<TOTAL-ASSETS> 10,683,701 1,286,760
<CURRENT-LIABILITIES> 1,777,375 703,670
<BONDS> 0 0
<COMMON> 1,366 1,312
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 10,683,701 1,286,760
<SALES> 594,093 247,581
<TOTAL-REVENUES> 594,093 247,581
<CGS> 198,819 137,553
<TOTAL-COSTS> 2,350,110 811,664
<OTHER-EXPENSES> 1,389 (10,454)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (11,524) (11,404)
<INCOME-PRETAX> (1,953,447) (712,090)
<INCOME-TAX> 0 200
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,953,447) (712,290)
<EPS-PRIMARY> (.14) (.06)
<EPS-DILUTED> 0 0
<FN>
<F1>Accounts Receivable - are net allowances of $69,525 and $7,520 respectively
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