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, 1996
____ 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
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(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1725 West Third Street, Tempe, Arizona 85281
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(Address of Principal Executive Offices)
(602) 829-8777
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(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, 1996, United Payphone Services, Inc. Registrant had
4,666,099 shares of its $0.001 par value common stock outstanding.
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FORM 10-Q
THIRD QUARTER 1996
UNITED PAYPHONE SERVICES, INC.
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INDEX
PART I. FINANCIAL INFORMATION
PAGE
---------
Balance Sheets - March 31, 1996 and June 30, 1995............3 - 4
Statements of Operations for the Three and Nine
Months Ended March 31, 1996 and 1995............................5
Statement of Cash Flows - for the Nine Months
Ended March 31, 1996 and 1995............................... 6 - 7
Notes to Financial Statements................................... 8
Management's Discussion and Analysis of Financial
Condition and Results of Operation.............................. 9
3
UNITED PAYPHONE SERVICES, INC.
Balance Sheets
ASSETS
----------------------------------------
March 31, June 30,
1996 1995
--------------- ------------
(Unaudited) (Audited)
CURRENT ASSETS
Cash $ 186,668 $ 184,999
Receivables
Trade accounts, net of allowance
for doubtful accounts of $0 at
March 31, 1996 and June 30, 1995 40,613 53,310
Related party 20,000 -
Prepaid expenses 10,618 8,216
----------------- -------------
Total Current Assets 257,899 246,525
---------------- -------------
PROPERTY AND EQUIPMENT 721,190 876,977
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OTHER ASSETS
Deposits 2,106 3,216
----------------- ---------------
Total Other Assets 2,106 3,216
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$ 981,195 $ 1,126,718
================= ==============
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UNITED PAYPHONE SERVICES, INC.
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
1996 1995
-------------- -----------
CURRENT LIABILITIES
Accounts payable $ 128,575 $ 151,982
Accrued expenses 29,066 16,978
Accrued preferred dividends 72,703 -
Current portion of LTD 748 -
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Total Current Liabilities 231,092 168,960
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LONG TERM DEBT
Notes Payable-related party 154,443 169,443
Capital lease obligation 3,959 -
--------------- -------------
Total Liabilities 389,494 338,403
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, $.001 par value;
50,000,000 shares authorized;
4,666,099 shares issued and
outstanding 4,666 4,666
Additional paid-in capital 2,587,282 2,587,282
Accumulated deficit (3,950,280) (3,753,666)
---------------- --------------
Total Stockholders' Equity 459,259 655,873
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$ 981,195 $ 1,126,718
=============== ==============
5
UNITED PAYPHONE SERVICES, INC.
Statements of Income
(Unaudited)
For Three Months Ended For the Nine Months Ended
March 31, March 31,
1996 1995 199 1995
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Net sales $ 565,124 $ 506,556 $ 1,562,913 $ 1,541,886
COST OF SALES 252,068 223,106 721,355 776,695
GROSS PROFIT 313,056 283,450 841,558 765,191
Selling, general and
administrative expenses 300,024 321,656 967,259 919,955
Operating income or (loss) 13,032 (38,206) (125,701) (154,764)
Other income and (expenses),
net 6,188 1,045 7,253 3,135
Gain on sale of assets - 13,154 3,625 88,212
-------- -------- --------- ---------
Net income (loss) before
income taxes 19,220 (24,007) (114,823) (63,417)
Provision for income
taxes (Note 4) - - - -
NET INCOME (LOSS) BEFORE
PREFERRED DIVIDENDS $ 19,220 $ (24,007) $ (114,823) $ (63,417)
Preferred dividends (27,264) (27,264) (81,791) (82,015)
NET LOSS ATTRIBUTABLE
TO COMMON STOCK $ (8,044) $ (51,271) $ (196,614) $ (145,432)
NET LOSS PER COMMON SHARE $ (.002) $ (.011) $ (.042) $ (.031)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 4,666,099 4,666,099 4,666,099 4,666,099
6
UNITED PAYPHONE SERVICES, INC.
Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
March 31,
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (196,614) $ (145,432)
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 - (88,212)
Depreciation and amortization 265,076 326,275
Changes in operating assets and liabilities
(Increase) decrease in
Receivables - trade and other 12,697 (4,091)
Prepaid expenses and other (2,403) 50,283
Increase (decrease) in
Accounts payable (23,408) 5,427
Accrued liabilities 84,791 85,557
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Net Cash Used in Operating Activities 137,514 229,807
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from note receivable and deposits 1,110 5,000
Purchase of property and equipment (107,752) (335,400)
Cash paid for notes receivable (21,000) -
Proceeds from sale of assets 7,500 88,754
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Net Cash Provided by Investing Activities $ (120,142) $ (201,646)
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UNITED PAYPHONE SERVICES, INC.
Statements of Cash Flows (Continued)
(Unaudited)
For the Nine Months Ended
March 31,
1996 1995
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable $ (15,703) $ (13,496)
Proceeds from debt financing - 50,862
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Net Cash Provided (Used) by
Financing Activities (15,703) 37,366
INCREASE (DECREASE) IN CASH 1,669 65,527
CASH, BEGINNING OF PERIOD 184,999 205,874
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CASH, END OF PERIOD $ 186,668 $ 271,401
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SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid for interest $ 83 $ 1,548
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UNITED PAYPHONE SERVICES, INC.
March 31, 1996
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
GENERAL
United PAYPHONE Services, Inc. (the "Company") has elected to omit
substantially all footnotes to the financial statements for the nine months
ended March 31, 1996 since there have been no material changes (other
than indicated in other footnotes) to the information previously reported
by the Company in their Annual Report filed on Form 10-KSB for the
Fiscal year ended June 30, 1995.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and records of
the Company without audit. However, such information reflects all adjustment
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.
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UNITED PAYPHONE SERVICES, INC.
March 31, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources of the Company
During the third quarter of fiscal 1996, the Company increased it's cash by
$11,591 from operations. The Company received no proceeds from debt
financing during this quarter. United has cash in excess of $185,000 as of
March 31, 1996, a portion of which management intends to designate for
the expansion of United's pay telephone base.
Results of Operations
Revenues of $565,124 for the third quarter of 1996 increased $58,568
from the same period last year. The gross profit margin decreased slightly
from 55.9% in the third quarter fiscal 95 to 55.3% for the third quarter fiscal
1996, resulting in an increase in profit margin of $29,906. The year to date
profit margin has increased from 49.6% through March of 1995 to 53.7% through
March of 1996. The year to date revenues for fiscal 1996 are higher than fiscal
1995 by $18,027, and the gross profit is higher by $73,367. Management
believes that the increase in revenues and increase in profit margin is a
result of relocating the Las Vegas base to the Phoenix and Tucson, Arizona,
areas and the increase in phones installed. The telephone bills and commissions
in the Las Vegas area were higher than that in Arizona, therefore, management
believes that this trend will continue. Also uring the third quarter 1996,
the Company entered into a service contract with another payphone
company in Phoenix, AZ, whereby the Company will collect and maintain
their phones for a flat fee. This has increased revenue in the third quarter
1996 by $18,867.
Selling, general and administrative expenses were $300,024 for the third
quarter 1996 a decrease of $21,632 over the same period last year. Selling,
G&A expenses of the nine month period of fiscal 1996 increased $47,304,
primarily due to legal, accounting and other service fees incurred by the
Company in it's efforts to register securities for a public offering. The
company has also incurred additional legal and accounting fees in connection
with the SEC subpoena and investigation as described in the recent 10KSB.
Management was successful in holding other general and administrative costs
constant. Management believes that gross revenues will increase during fiscal
year 1996 due to the increased number of pay telephones being placed in
service. The Company has a current inventory of phones that could be placed
in service, bringing the total phones in service to over 1,000.
Management anticipates that general selling and administrative expenses
will continue to remain constant or slightly increase through the remaining
quarter of the fiscal year while gross profit will continue to increase by 10%
to 15% as compared to the same time periods of the prior fiscal year.
The Company incurred a loss of $(8,044) for the third quarter 1996
compared to a loss of $(51,271) for the same timely period a year ago.
Thus operating results increased by $43,227 as compared to this period last
year. Non-cash depreciation continues to be high, but has decreased during
this quarter $61,200 as many of the original payphones have become fully
depreciated. The Company believes that it is possible that it will report
it's first quarterly profit sometime this current fiscal year.
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 1996 is to find high grossing phone locations for its
existing phone inventory currently not in service, and to increase it's
payphone base to over 1,000. Its operating costs are expected to also
go up from the increase in operations. United intends to aggressively market
its payphones in the Arizona market and greatly expand its telephone base in
spite of the increased competition from other private pay phone companies.
The Company has recently made a public offering effective and is currently
working on raising additional capital to expand its payphone base
through an agressive marketing plan or through the acquisition of an
existing phone base.
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UNITED PAYPHONE SERVICES, INC.
March 31, 1996
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 13, 1996
UNITED PAYPHONE SERVICES, INC.
By: /s/ David Westfere
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David Westfere, CEO and
Principal Financial Officer