FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
Date of Report (Date of earliest event reported) March 31, 1997.
DCI Telecommunications, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 2-96976-D 84-1155-41
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
611 Access Road, Stratford, CT 06615
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(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 380-0910
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(Former name or former address, if changed since last report.)
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
In connection with the acquisition of Edge Communications, Inc.
(previously reported on Form 8K), attached are the audited financial
statements for the years ending March 31, 1998 and 1997.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
DCI Telecommunications, Inc.
Joseph J. Murphy
__________________________
Joseph J. Murphy
President
Date: August 17, 1998
Edge Communications, Inc.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
March 31, 1998 AND 1997
Bond Beebe
Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Edge Communications, Inc.
19225 Orbit Drive
Gaithersburg, Maryland 20879
We have audited the accompanying balance sheet of Edge
Communications, Inc. as of March 31, 1998 and 1997 and the related
statements of income and retained earnings, and cash flows for the
years then ended. These financial statements are the responsibility
of the Corporation's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Edge
Communications, Inc. as of March 31, 1998 and 1997 and the results of
its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Bond Beebe
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A Professional Corporation
June 11, 1998
5301 Wisconsin Avenue, NW
Washington, DC 20015
202/244-6500
Fax: 202/244-6506
EDGE COMMUNICATIONS, INC.
BALANCE SHEETMARCH 31, 1998 AND 1997
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Exhibit A
ASSETS
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1998 1997
CURRENT ASSETS ------------ -----------
Cash and cash equivalents $ 21,878 $ 89,536
Certificate of deposit 300,000 400,000
Accounts receivable - net of allowance
of $24,199 and $28,207 685,050 138,212
Current portion of lease receivables 24,526 --
Loan receivable - related party 23,824 136,114
Inventory 107,979 7,164
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TOTAL CURRENT ASSETS $ 1,163,257 $ 771,026
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FIXED ASSETS
Furniture and telephone system 8,903 236
Data processing 35,036 12,811
Vending machines 80,520 317,195
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124,459 330,242
Accumulated depreciation (24,851) (35,204)
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99,608 295,038
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OTHER ASSETS
Long-term portion of
lease receivables 17,474 --
Investment - First Regional
Telecom, LLC 20,000 --
Start-up costs - net of amortization 20,615 28,345
Security deposits 16,806 1,880
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74,895 30,225
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TOTAL ASSETS $ 1,337,760 $ 1,096,289
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
Accounts payable $1,287,920 $ 253,000
Vendor deposits 10,000 --
NationsBank - line of credit 100,000 232,800
Loans payable - related party -- 745,000
Loan payable - DCP Holdings, LLC 95,841 --
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TOTAL CURRENT LIABILITIES 1,493,761 1,230,800
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STOCKHOLDERS' EQUITY
Common stock - par value $1 per
share, authorized 1,000 shares,
issued 1,000 shares 1,000 1,000
Additional paid-in capital 250,000 --
Retained earnings (deficit) (407,001) (135,511)
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TOTAL STOCKHOLDERS'EQUITY (156,001) (134,511)
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,337,760 $ 1,096,289
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See Notes to Financial Statements
EDGE COMMUNICATIONS, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED MARCH 31,1998 AND 1997
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EXHIBIT B
1998 1997
INCOME ------------ -----------
Gross sales $ 13,979,806 $ 1,571,383
Discounts (5,199,275) (506,411)
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8,780,531 1,064,972
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DIRECT COSTS
Purchases 8,106,015 832,336
Freight and delivery net 1,197 5,861
Printing and packaging 162,793 37,401
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8,270,005 875,598
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GROSS PROFIT 510,526 189,374
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OPERATING EXPENSES
Advertising 5,850 9,306
Auto 3,725 7,503
Bad debt 48,837 31,401
Business meals and entertainment 14,647 5,510
Commissions 23,499 9,153
Consulting 6,923 --
Depreciation and amortization 35,296 24,353
Dues and subscriptions 2,142 1,659
Equipment rental 25,423 17,760
Insurance 17,303 8,837
Interest 40,194 29,195
Legal and accounting 21,751 8,760
Office and supplies 11,739 5,769
Rent 9,450 4,050
Repair and maintenance 4,090 15,471
Taxes 27,094 9,175
Telephone 41,630 9,544
Travel 16,733 12,444
Show fees -- 5,526
Utilities 3,450 1,519
Wages 288,790 55,505
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TOTAL OPERATING EXPENSES 648,566 272,079
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TOTAL OPERATING LOSS (138,040) (82,705)
OTHER INCOME (EXPENSE)
Interest 39,088 21,074
Loss on sales-type lease of
vending machines (46,700) --
Loss on disposition of vending machines (99,838) --
Write-off of investment in U-Dial, LLC (26,000) --
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NET LOSS (271,490) (61,631)
RETAINED EARNINGS (DEFICIT) AT
BEGINNING OF YEAR (135,511) (73,880)
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RETAINED EARNINGS (DEFICIT) AT
END OF YEAR $ (407,001) $ (135,511)
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See Notes to Financial Statements
EDGE COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
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EXHIBIT C
CASH FLOWS FROM OPERATING ACTIVITIES 1998 1997
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Net loss $ (271,490) $ (61,631)
Adjustments to reconcile net loss to
net cash provided by operating activities
Depreciation and amortization 35,296 24,353
Bad debt expense 48,837 31,040
Loss on write-off of investment
U-Dial, LLC 26,000 --
Loss on sales-type lease of
vending machines 46,700 --
Loss on disposition of
vending machines 99,838 --
(Increase) decrease in
Accounts receivable (595,675) (140,068)
Inventory (100,815) (2,831)
Security deposits (14,926) 3,715
Increase (decrease) in
Accounts payable 1,034,920 242,068
Vendor deposits 10,000 --
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318,685 96,646
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CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) decrease in loans
receivable - related party (21,869) 136,114
Proceeds from disposition of
vending machines 12,000 --
Increase in property and equipment (32,674) (2,742)
Decrease in certificate of deposit 100,000 --
Increase in investment - First
Regional Telecom, LLC (20,000) --
Increase in investment - U-Dial, LLC (26,000) --
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11,457 133,372
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CASH FLOWS FROM FINANCING ACTIVITIES
Payment on line of credit (132,800) (15,200)
Payments on loans payable
related party (265,000) (20,193)
Transfers during recapitalization (net) -- (106,986)
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(397,800) (142,379)
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INCREASE IN CASH AND CASH EQUIVALENTS (67,658) 87,639
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 89,536 1,897
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CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 21,878 $ 89,536
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SUPPLEMENTAL INFORMATION
Cash paid for interest $ 40,194 $ 29,195
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NON-CASH INVESTING AND FINANCING ACTIVITY
During 1998, the Corporation converted some of its loans payable -
other to capital in the amount of $250,000
See Notes to Financial Statements
EDGE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31,1998 AND 1997
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NOTE 1: ORGANIZATION
Edge Communications, Inc. (the Corporation) is a wholesale provider
of prepaid phone cards. The Corporation was originally formed on
July 1, 1995 as a limited liability corporation using the name Edge
Communications, LLC. On September 5, 1996, the limited liability
company transferred substantially all of its assets and liabilities
to a newly formed corporation, Edge Communications, Inc. A
combination of the operating results and cash flows of these two
entities has been presented for the year ended March 31, 1997, in
order to present comparative operations of the Edge Companies. The
Corporation is located in Gaithersburg, Maryland.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
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The accompanying financial statements have been prepared on the
accrual basis of accounting, in accordance with generally accepted
accounting principles.
Accounting Estimates
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The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and contingencies, if any, at the date of the financial
statements, and income and expenses during the reporting period.
Actual results could differ from these estimates.
Cash and Cash Equivalents
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All highly liquid debt instruments with an original maturity of three
months or less are considered cash equivalents.
Inventory
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Inventory is stated at lower of cost or market.
Fixed Assets
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The Corporation's fixed assets are stated at cost and depreciated
over the estimated service lives of the assets at various accelerated
and straight-line rates.
Start-Up Costs
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Start-up costs were capitalized and will be amortized ratably over a
60-month period.
Investments
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Investments held by the Corporation consist of interests in U-Dial,
LLC (U-Dial) and First Regional Telecom, LLC (First Regional). These
investments are both start-up companies and are accounted for on the
cost method as the Company has less than a 20% interest in these
entities. Dividends received from the companies are included in
other income. As of March 31, 1998, the Corporation deemed its
investment in U-Dial to be worthless and therefore wrote off their
investment in this entity.
Income Taxes
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The Corporation is qualified as an S Corporation under the Internal
Revenue Code and applicable state statutes. Under an S Corporation
election, the income of the Corporation flows through to the
stockholders, to be taxed at the individual level rather than the
corporate level.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Bad Debts
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Management recognizes bad debt expense in an amount deemed
appropriate based on a review of the accounts.
NOTE 3: CONCENTRATIONS OF CREDIT RISK
Financial instruments that subject the Corporation to concentrations
of credit risk include cash and certificates of deposit, which are
invested with financial institutions. While the Corporation attempts
to limit its financial exposure, its deposit balances with financial
institutions may, at times, exceed the limits insured by agencies of
the U.S. government. The Corporation has not experienced any losses
on such deposits.
NOTE 4: RELATED PARTY TRANSACTIONS
The Corporation has a loan payable to DCP Holdings, LLC (DCP) with
interest accruing at a rate of 8% per annum. All members of DCP are
shareholders in the Corporation.
In addition, the Corporation has had various loans receivable and
payable from related parties as shown on Exhibit A.
NOTE 5: NOTES PAYABLE
The Corporation has a revolving loan note with NationsBank which may,
at the bank's sole and absolute discretion, lend to the Corporation
such sums of money as may be requested up to, but not exceeding in
the aggregate at any one time outstanding, the face amount of
$300,000. The sums advanced are payable to the bank on demand, plus
interest equal to the prime rate. The note is secured by a
certificate of deposit for $300,000. At March 31, 1998 and 1997, the
outstanding loan amounts were $100,000 and $232,800, respectively.
NOTE 6: LEASE COMMITMENTS
The Corporation has a three year lease for office space in
Gaithersburg, Maryland, with monthly payments of $2,453 until August
31, 2000. As of March 31, 1998, minimum lease payments required for
the years ending March 31 are as follows:
1999 $29,440
2000 29,440
2001 12,267
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$71,147
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The Corporation also leases two automobiles. The monthly lease
payments of $832 expire within one year and amount to $5,190 for the
year 1999.
NOTE 7: SUBSEQUENT EVENT
On April 1, 1998, the Corporation agreed to be acquired by DCI
Telecommunications, Inc. (DCI) a telecommunications company based in
Stratford, Connecticut. Subsequent to year end, DCI filed a
registration statement in connection with this transaction with the
Securities and Exchange Commission. It is expected that the
acquisition will be accounted for as a pooling of interests. As a
result of the acquisition, Edge will become a subsidiary of DCI.