1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From to
Commission File Number: 0-24138
UNITED PAYPHONE SERVICES, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada
88-0232816
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
105 E. Ellis Drive, Tempe, Arizona 85282
(Address of Principal Executive Offices)
(602) 839-9968
(Registrant's telephone number, including area code)
N/A
(Former name, former address and formal fiscal year,
if changed since last report)
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 preceding 12 months and, (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of April 30, 1997, United Payphone Services, Inc. Registrant had 4,666,099
shares of its $0.001 par value common stock outstanding.
2
FORM 10-Q
THIRD QUARTER 1997
UNITED PAYPHONE SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Balance Sheets - March 31, 1997 and June 30, 1996 . .. . . 3 - 4
Statements of Operations for the Three and Nine Months
Ended March 31, 1997 and 1996 . . . . . . . . . . . . . . 5
Statement of Cash Flows - for the Nine Months
Ended March 31, 1997 and 1996 . . . . . . . . . . . . . . 6 - 7
Notes to Financial Statements . . . . . . . . . . . . . 8
Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . 17
3
UNITED PAYPHONE SERVICES, INC.
Balance Sheets
ASSETS
March 31, June 30,
1997 1996
(Unaudited) (Audited)
CURRENT ASSETS
Cash $ 1,584,435 $ 694,293
Receivables
Trade accounts, net of
allowance for doubtful
accounts of $0 at March
31, 1997 and June 30, 1996 42,908 29,524
Interest receivable 24,337 -
Prepaid expenses - 5,000
Note receivable - current portion 257,017 -
Total Current Assets 1,908,697 728,817
PROPERTY AND EQUIPMENT 20,803 707,204
OTHER ASSETS
Deposits 4,070 2,106
Notes receivable 697,524 -
Total Other Assets 701,594 2,106
$ 2,631,094 $1,438,127
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UNITED PAYPHONE SERVICES, INC.
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
1997 1996
CURRENT LIABILITIES
Accounts payable $ 11,765 $ 106,997
Accrued expenses 30,572 32,212
Accrued preferred dividends 166,759 84,967
Current portion - long term debt - 770
Total Current Liabilities 209,096 224,946
LONG TERM DEBT
Notes Payable-related party 169,443 173,201
Total Liabilities 378,539 398,147
COMMITMENTS AND CONTINGENCIES 132,442 132,442
STOCKHOLDERS' EQUITY
Convertible preferred stock,
$.001 par, 6% cumulative,
non-voting, class A; 100,000
shares authorized; 727 shares
issued and outstanding 1,817,591 1,817,591
Common stock, $.001 par value;
50,000,000 shares authorized;
4,666,099 and 5,277,099 shares
issued and outstanding,
respectively 4,666 5,277
Additional paid-in capital 2,582,282 3,039,921
Accumulated deficit (2,284,426) (3,955,251)
Total Stockholders' Equity 2,120,113 907,538
$ 2,631,094 $ 1,438,127
5
UNITED PAYPHONE SERVICES, INC.
Statements of Income
(Unaudited)
For Three Months Ended For the Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
Net sales $ - $ - $ - $ -
COST OF SALES - - - -
GROSS PROFIT - - - -
Selling, general and
administrative expenses 115,719 - 166,340 -
Operating income or
(loss) (115,719) - (166,340) -
Other income and
(expenses), net 36,927 6,188 63,089 7,253
Discontinued operations - 13,032 (1,117) (125,701)
Gain on sale of assets -
discontinued operations - - 1,856,985 3,625
Net income (loss)
before income taxes (78,792) 19,220 1,752,617 (114,823)
Provision for income
taxes (Note 4) - - - -
NET INCOME( LOSS) BEFORE
PREFERRED DIVIDENDS $(78,792) $ 19,220 $1,752,617 $(114,823)
Preferred dividends (27,264) (27,264) (81,792) (81,791)
NET INCOMES( LOSS)
ATTRIBUTABLE
TO COMMON STOCK $(106,056) $ (8,044)$1,670,825 $(196,614)
NET INCOME (LOSS)
PER COMMON SHARE $ (.02) $ (.002)$ .32 $ (.042)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 4,666,099 4,666,099 5,073,432 4,666,099
6
UNITED PAYPHONE SERVICES, INC.
Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ 1,670,825 $ (196,614)
Adjustments to reconcile net loss to
net cash used in operating activities:
Bad debt - 1,000
Gain on disposal of improvement - (3,625)
Gain on sale of equipment (1,856,985) -
Depreciation and amortization 81,306 265,076
Changes in operating assets
and liabilities
(Increase) decrease in
Receivables - trade and other (57,434) 12,697
Prepaid expenses and other 3,657 (2,403)
Increase (decrease) in
Accounts payable (95,232) (23,408)
Accrued liabilities 80,152 84,791
Net Cash Used in Operating Activities (173,711) 137,514
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from note receivable and deposits - 1,110
Purchase of property and equipment (45,610) (107,752)
Cash paid for notes receivable (143,291) (21,000)
Proceeds from sale of assets 1,711,250 7,500
Net Cash Provided by Investing
Activities $ 1,522,349 $ (120,142)
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UNITED PAYPHONE SERVICES, INC.
Statements of Cash Flows (Continued)
(Unaudited)
For the Nine Months Ended
March 31,
1997 1996
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable $ (246) $ (15,703)
Proceeds from debt financing - -
Proceeds of SB2 offering returned
to shareholders (458,250) -
Net Cash Provided (Used) by
Financing Activities (458,496) (15,703)
INCREASE (DECREASE) IN CASH 890,142 1,669
CASH, BEGINNING OF PERIOD 694,293 184,999
CASH, END OF PERIOD $1,584,435 $ 186,668
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid for interest $ 178 $ 83
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UNITED PAYPHONE SERVICES, INC.
March 31, 1997
NOTE 1 -SIGNIFICANT ACCOUNTING POLICIES
The Company's accounting policies conform to generally accepted
accounting principles. The following policies are considered to be
significant:
Nature of Operations
United Payphone Services, Inc. operates private pay telephones in the
Phoenix and Tucson, Arizona areas. The Company was incorporated on July 24,
1987 as a Nevada corporation under the name KTA Corporation. In February,
1989 the Company began operating pay telephones in the Reno, Nevada area. On
September 25, 1989 the Company changed its name to United Payphone Services,
Inc. Since that time operations have been moved to Arizona. Prior to May,
1996 the controlling shareholder was Oak Holdings, Inc. Because of the May,
1996 stock offering, Oak Holdings' interest fell below 50%. On November 15,
1996, the Company sold the phone base and equipment and most of the office
furniture and equipment to Tru-Tel Communications, L.L.C. for $2,522,500. The
Company retained minimal office furniture, assigned the office lease and moved
the corporate office to another location in Tempe, Arizona. For the sale of the
phone base, the Company received $1,711,250 in cash and a note receivable for
$811,250. The Company is currently seeking a new business opportunity.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements,
and revenues and expenses during the reporting period. In these financial
statements, assets, liabilities, and earnings involve extensive reliance on
management's estimates. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include all cash balances and highly liquid
investments with original maturities of less than three months.
Accounts Receivable
Accounts receivable balances considered uncollectible are written off
and bad debt expense is recognized using the direct write-off method. No
allowance for uncollectible accounts is recognized. The difference between the
direct write-off method and the allowance method is not considered material.
Revenue Recognition
Revenue is recognized upon receipt of coin and rendering of telephone
service.
Depreciation
Depreciation expense is computed using the straight-line method in
amounts sufficient to write off the cost of depreciable assets over their
estimated useful lives.
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UNITED PAYPHONE SERVICES, INC.
March 31, 1997
NOTE 1 -SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation (continued)
Normal maintenance and repair items are charged to costs and expenses as
incurred. The cost and accumulated depreciation of property and equipment sold
or otherwise retired are removed from the accounts and gain or loss on
disposition is reflected in net income in the period of disposition.
Income Taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of income taxes currently due plus
deferred income tax charges and credits. Deferred tax assets are evaluated for
their potential future benefit to the Company and valuation allowances are
established based on such analysis.
Net Loss Per Common Share
Net loss per common share is calculated by dividing net loss attributable
to common stock (net loss adjusted by preferred dividends) by the weighted
average number of common shares outstanding. The calculation of fully diluted
net loss per share was antidilutive in each period presented, and therefore, the
same as primary loss per share.
NOTE 2 -CASH AND CASH EQUIVALENTS
The Company maintains cash balances at banks in Arizona and Utah.
Accounts are insured by the Federal Deposit Insurance Corporation up to
$100,000. At March 31, 1997 and June 30, 1996, the Company's uninsured bank
balances total $1,360,935 and $358,550 ($0 for 1995).
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UNITED PAYPHONE SERVICES, INC.
March 31, 1997
NOTE 3 -PROPERTY AND EQUIPMENT
Property and equipment as of March 31, 1997, June 30, 1996 and 1995 are
detailed in the following summary:
Accumulated Net Book
1996 Cost Depreciation Value
Furniture and fixtures $ 22,544 $ 11,569 $ 10,975
Office equipment 92,536 59,578 32,958
Automobiles 64,804 37,785 27,019
Payphones 1,650,865 1,559,959 90,906
Payphone accessories 379,002 179,842 199,160
Payphone installations 475,554 161,004 314,550
Property improvements 32,121 5,084 27,037
Equipment under capital leases 5,410 811 4,599
$ 2,722,836 $ 2,015,632 $ 707,204
Accumulated Net Book
1995 Cost Depreciation Value
Furniture and fixtures $ 21,337 $ 8,497 $ 12,840
Office equipment 87,728 51,349 36,379
Automobiles 56,101 31,279 24,822
Payphones 1,633,846 1,429,808 204,038
Payphone accessories 337,201 118,885 218,316
Payphone installations 407,506 56,295 351,211
Property improvements 31,743 2,372 29,371
$ 2,575,462 $ 1,698,485 $ 876,977
Accumulated Net Book
December 31, 1996 Cost Depreciation Value
(unaudited)
Furniture and fixtures $ 21,368 $ 7,827 $ 13,541
Office equipment 7,367 2,078 5,289
Automobiles 2,192 219 1,973
$ 30,927 $ 10,124 $ 20,803
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UNITED PAYPHONE SERVICES, INC.
March 31, 1997
NOTE 4 - LONG-TERM LIABILITIES
March 31, June 30,
1997 1996 1995
(unaudited)
Note payable to related party,
principal and interest due
September, 1997, bearing
interest at 8%, unsecured $ 55,683 $ 55,683 $ 55,683
Note payable to related party,
principal and interest due
September, 1997, bearing
interest at 8%, unsecured 113,760 113,760 113,760
Capital lease payable to
vendor in monthly installments
of $106, due December, 2001,
bearing interest at 12%, secured
by equipment - 4,528 -
169,443 173,971 169,443
Less current portion - (770) -
Long-term portion $ 169,443 $ 173,201 $ 169,443
Maturities of long-term liabilities over the next five years are as
follows:
March 31,
1997
1997 $ - $ 770
1998 169,443 170,311
1999 - 978
2000 - 1,102
2001 - 810
Thereafter - -
Total long-term
liabilities $ 169,443 $ 173,971
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UNITED PAYPHONE SERVICES, INC.
March 31, 1997
NOTE 4 - LONG TERM LIABILITIES (CONTINUED)
Future minimum lease payments under capital leases together with the
present value of the net minimum payments as of June 30, 1996 are as follows:
March 31,
1997
(unaudited)
1997 $ - $ 1,272
1998 - 1,272
1999 - 1,272
2000 - 1,272
2001 - 848
Total minimum lease
payments - 5,936
Less amount
representing interest - (1,408)
Present value of
net minimum lease
payments (current
portion of $770) $ - $ 4,528
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Contingent liability
In March, 1993, the Arizona Department of Revenue assessed a sales tax
deficiency of $73,680 against the Company for the period from January 1, 1990
through January 31, 1993 with respect to coin revenues from privately operated
payphones. A timely protest was filed with the Department of Revenue seeking
abatement of the entire assessment.
At issue is the taxability of the coin revenue under the classification
of telecommunications. Under Arizona law, telecommunications is defined as the
transmitting of a signal. Since the Company's pay telephones use the signal of
the local exchange carrier, legal counsel believes that the Company's operations
do not constitute intrastate telecommunication services and therefore are not
subject to sales tax as such.
The Company's protest has been consolidated with those of seven other
private pay telephone operators. At the first administrative hearing the
hearing officer ruled in favor of the taxpayers. Upon review the Director of
the Department of Revenue reversed the decision of the hearing officer. An
appeal was made before the Arizona State Board of Tax Appeals in October, 1995.
The Board of Appeals has not yet issued a decision. The Department of Revenue
has abated the penalties assessed in connection with the original deficiency
assessment. Management believes that a compromise will ultimately be reached
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UNITED PAYPHONE SERVICES, INC.
March 31, 1997
NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
and that the accrued contingent liability of $132,442 will be sufficient
to settle the matter.
Operating lease
The Company has entered into a long-term operating lease for its
corporate headquarters and operations facility in Tempe, Arizona. The lease
calls for monthly lease payments of $3,030. The minimum lease obligation over
the next five years is summarized below:
On November 15, 1996, the lease was assumed by Tru-Tel Communications,
therefore, no base exists at March 31.
March 31, June 30,
1997 1996
(unaudited)
1997 $ - $ 36,365
1998 - 36,365
1999 - 30,304
2000 - -
2001 - -
Consulting Agreement
A long-term consulting agreement has been entered into with an
individual. The agreement calls for the payment of a monthly consulting fee of
$5,000. The agreement runs through April, 1998.
Finders Agreement
The Company has entered into a finders agreement with a corporation,
which provides a fee if the advisor locates a new business venture for the
Company. The agreement terms extend for six months.
NOTE 6 - CAPITAL STOCK
Preferred Stock
The Company has outstanding 727 shares of cumulative, convertible,
preferred stock at March 31, 1997, June 30, 1996 and 1995. Cumulative
dividends at 6% are payable annually. Dividends are in arrears to the amount of
$166,758 and $84,967 at March 31, 1997 and June 30, 1996 respectively. Each
share of preferred stock is convertible at the option of the holder at a rate
equal to 75% of the average bid price of the common shares for the ten days
prior to the conversion date. The preferred stock is redeemable by the Company
at the cash price paid for the shares plus the amount of any dividends
accumulated and unpaid as of the date of redemption.
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UNITED PAYPHONE SERVICES, INC.
December 31, 1996
NOTE 6 - CAPITAL STOCK (CONTINUED)
Return of SB-2 Capital Offering
During the quarter, the Company returned all funds received from the
SB-2 offering received in May, 1996. All shares of stock were returned and
canceled (611,000 shares) along with the warrants attached. $458,250 were
returned to the investors, which equaled their original investments. The funds
were returned because the Company had sold the payphone base and the capital
could no longer be used for its intended purpose. Therefore, the Company was
required to return the funds to the investors.
NOTE 7 - INCOME TAXES
The Company used an asset and liability approach to financial
accounting and reporting for income taxes. The difference between the financial
statement and income tax bases for assets and liabilities is determined
annually. Deferred income tax assets and liabilities are computed for those
differences that have future income tax consequences using the currently
enacted tax laws and rates that apply to the periods in which they are expected
to affect taxable income. Valuation allowances are established, if necessary,
to reduce the deferred income tax asset to the amount that will more likely than
not be realized. Income tax expense is the current tax payable or refundable for
the period plus or minus the net change in the deferred tax assets and
liabilities.
Income taxes payable as of March 31, 1997, June 30, 1996 and 1995 are
detailed in the following summary:
December 31, June 30,
1996 1996 1995
(unaudited)
Currently payable $ - $ 50 $ 50
Deferred income tax liability $ - $ - $ -
Deferred income tax asset 366,170 1,257,000 -
Valuation allowance (366,170) (1,257,000) -
Net deferred income tax asset - - -
Net deferred income tax liability $ - $ - $ -
The deferred tax assets result from net operating loss carryforwards
available.
At June 30, 1996, the Company had net operating loss carryforwards
available to offset future income taxes totaling $2,805,251 expiring from 2003
and 2011.
15
UNITED PAYPHONE SERVICES, INC.
March 31, 1997
NOTE 7 - INCOME TAXES (CONTINUED)
The Company's income tax expense differed from the statutory federal
rate of 34% due to state income taxes, and carryfowards of prior year net
operating losses.
At March 31, 1997 the Company has a net operating loss of approximately
$1,076,970 available to offset future taxable income.
NOTE 8 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosure about Fair Value of Financial Instruments". The carrying amounts
and fair value of the Company's financial instruments at March 31, 1997 and June
30, 1996 are as follows:
March 31, 1997 June 30, 1996
Carrying Fair Carrying Fair
Amounts Values Amounts Values
(unaudited) (unaudited)
Cash and cash equivalents $ 1,584,435 $ 1,584,435 $ 694,293 $ 694,293
Long-term debt including
current maturities 169,443 174,736 173,971 179,264
Preferred stock 1,817,591 2,536,744 1,817,591 2,536,744
Warrants, Class A - - - 3,055
Warrants, Class B - - - 3,055
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.
Cash and Cash Equivalents
The carrying amounts reported on the balance sheet for cash and cash
equivalents approximate their fair value.
Long-term Debt
The fair values of long-term debt are estimated using discounted cash
flow analyses based on the Company's incremental borrowing rate as the discount
rate.
Preferred Stock
The Company's preferred stock is not publicly traded and therefore a
fair value is not readily available. Based on the conversion ratio of the
preferred stock and the current market value of the common stock, a fair value
estimate was determined.
16
UNITED PAYPHONE SERVICES, INC.
March 31, 1997
NOTE 8 - FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
Warrants
The fair value of the stock purchase warrants was estimated based on
the redemption value of the warrants. During the first 30 days after the
issuance of the warrants the Company had the right to redeem the warrants at
$.01 per warrant. This is the basis of the fair value estimate.
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company has entered into an agreement with C & N, Inc., to provide
management services for $3,000 per month. C & N, Inc., is a related party by
virtue of the ownership of C & N, Inc. being Officers and Directors of the
Company. On November 15, 1996, upon the sale of the assets and assignments of
the facilities, the C & N agreement was terminated.
As described in Note 4, the Company has notes payable to a related
party. The related party is Teletek, Inc., who is a significant shareholder in
the Company.
As described in Note 5, the Company has entered into a consulting
agreement with an individual. The individual is a related party by virtue of
stock ownership in the Company.
During July, 1995 the Company loaned $20,000 to the Company's president.
The amount was subsequently repaid with interest in December, 1995.
NOTE 10 - NOTE RECEIVABLE
The Company received a note from Tru-Tel in connection with the sale
of the phone base. The note bears interest at 8%, monthly payments of $14,000
commence in February 1997, through December 2001 with the remaining balance due
January 2002.
During this quarter, the Company lent $143,291 to an unrelated
corporation as a short term bridge loan. Interest accrues at 15% with interest
and principal due April 15, 1997.
NOTE 11 - UNAUDITED PRESENTATION
The financial statements for the six months ended December 31, 1996
were taken from the books and records of the Company without audit. However,
such information reflects all adjustments which are, in the opinion of
management, necessary to properly reflect the results of the interim period
presented. The information presented is not necessarily indicative of the
results from operations expected for the full fiscal year.
17
UNITED PAYPHONE SERVICES, INC.
March 31, 1997
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources of the Company
As reported in the notes to the financial statements the Company sold it's
telephone base during the second quarter of fiscal 1997. The Company received
$1,711,250 in cash from the sale of the assets. A note receivable of $811,250
was received in connection with the sale, but no payments have been made and the
note is in default. The Company has begun legal proceedings to collect on this
note. The current portion of the note receivable is $114,000, with monthly
payments due of $14,000. The Company also advanced $143,291 to a corporation
on a short term bridge loan secured by construction equipment. The note is due
April 15, 1997. Approximately $21,000 has been received subsequent to the
quarter end with the remaining amount expected before June 1, 1997. The
Company received no proceeds from debt financing during this quarter. United
has cash in excess of $1,584,000 as of March 31, 1997. The cash received from
the SB-2 public offering early in 1996, totaling approximately $458,000, has
been returned to the shareholders because the Company has sold its phone base
and these funds which were to be used solely for the expansion of the phone
business, could not be used for their intended purpose. Approximately $1,700,000
is available to management to invest or acquire new business operations.
Results of Operations
Interest income has become the only source of revenue subsequent to the sale
of the phone base, and amounted to $36,927 for the third quarter 1997, as
compared to Revenues of $565,124 for the third quarter of 1996. The Company
generated losses from continuing operations of $(78,742). The net loss for the
quarter totaled $(106,056) as compared to the same quarter fiscal 1996 of
$(8,044).
Selling, general and administrative expenses were $115,719 for the third
quarter 1997 a decrease of $185,000 over the same period last year, for the
obvious reasons of the change in operations.
Management believes that gross interest income will remain constant until new
operations commence. Management anticipates that general selling and
administrative expenses will slightly decrease due to a decreased in attorney
fees incurred during the quarter in connection with the sale of the assets and
the recission agreement. Other general and administrative expenses will remain
constant until new operating activities commence.
18
UNITED PAYPHONE SERVICES, INC.
March 31, 1997
There are no seasonal aspects of the Company's business which had, or are
expected to have, a material effect on the financial conditions or results of
operations.
Plan of Operations
United's goal for 1997 is to find new businesses in which to invest or
acquire to generate the necessary income to be able to increase the value of
the shareholders investments and or provide a return on those investments. The
Company has engaged consultants, and signed finders agreements, to assist
management in locating opportunities to achieve their goals. Management is
currently reviewing a couple of possible opportunities and hopes to secure
operations in the near future.
Item 5. Legal Proceedings
United Payphone Services, Inc. v. Tru-Tel Communications, L.L.C., et al.,
Case No. A 371146 District Court, Clark County, Nevada was filed on March 18,
1997, Upay brought action against Tru-Tel and its guarantors for breach and
repudiation of an Asset Purchase Agreement by which Tru-Tel purchased the
assets of Upay. Upay also joined as a defendant, Finova Capital Corporation.
The cause of action against Finova claimed fraudulent misrepresentation for the
failure of Finova to adequately determine that Tru- Tel's principal, Quaid
Quadri, was not creditworthy and was accused of and admitted to acts of
dishonesty, including theft, fraud and embezzlement. Upay is asking damages
totaling approximately $847,000.00 and for subordination of Finova's creditor
status to Tru- Tel, to that of Upay.
The defendants answered and counterclaimed on April 23, 1997. Tru-Tel, et al.
counterclaimed with breach of contract, tortious interference and
indemnification causes of action against Upay. Tru-Tel also attempted to join
David Westfere, the President of Upay, claiming intentional misrepresentation.
Tru-Tel, et al. claimed some $900,000.00 in compensatory damages, plus exemplary
damages. Finova answered and counterclaimed against Upay for intentional and
negligent representation, claiming compensatory and punitive damages. Upay's
answer is due on or about May 12, 1997.
19
UNITED PAYPHONE SERVICES, INC.
March 31, 1997
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 thereunto duly authorized.
Date: May 15, 1997
UNITED PAYPHONE SERVICES, INC.
By: /S/ David Westfere
David Westfere, CEO and
Principal Financial Officer