U.S. Securities and Exchange Commission
Washington, DC 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 September 30, 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: 0-28398
Communications/USA, Inc.
.................................................................
Exact Name of Registrant as specified in its charter)
Florida
.................................................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
324 Datura Street, Suite 150, West Palm Beach, Florida 33401
.................................................................
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, (561) 832-8832
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 (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 No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS;
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 4,634,464 shares outstanding
as of September 30, 1996.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS - ATTACHED TO BACK OF DOCUMENT
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Through Communications/USA's wholly owned subsidiary CommTel/USA, Inc.,
("CommTel") it owns and operates Voice-Tel franchises which comprises the West
Coast of Florida from Tampa Bay to Naples, and the East Coast of Florida from
Cocoa to Stuart.
Voice-Tel Enterprises, the franchisor, is in the interactive voice
messaging industry and sells its services through independently owned
franchises, such as CommTel/USA, to local customers as well as National
Accounts. CommTel expects to provide in excess of $1,000,000 in interactive
voice messaging services to these accounts.
The national accounts comprise approximately 60% of the Company's
revenues. A typical account in this category is a multi-level marketing
company. The largest national account, Amway, purchases a block of telephone
numbers from the Company
and then re-sells them to its independent distributors. All the incidentals of
billing and collections are handled by Amway, with the Company receiving its
revenues on a monthly basis. Service issues are handled by the Company. The
other national accounts
are handled in the same manner as the Company's corporate/retail accounts.
The corporate/retail accounts are typically comprised of corporations or
individuals who desire interactive voice messaging. An example would be a
local real estate broker who desires to be able to communicate with his/her
agents through this medium. The other major target market is for companies
with a field sales and service force.
Liquidity:
The Company's liquidity is based on the cash flow of its subsidiaries,
plus any funds that may be raised from time to time through the selling of its
securities. Management feels that its cash flow is adequate to meet its
operating needs for the next
fiscal year.
In February 1996, CommTel obtained a rate adjustment from its local
telephone provider to more closely match the rates enjoyed by paging
companies. Due to this favorable rate adjustment, the Company will experience
a substantial reduction in telecommunications costs for 19996, as well as
improved cash flow. Currently this company has an approximate cash flow of
$1,000,000 per annum.
Capital Commitment
Presently, the Company does not expect to make any significant capital
expenditures, although some are necessary to take full advantage of the
expected reduced telecommunications costs. At this time, however, no final
plans have been made
for these expenditures. During the nine months ended September 30, 1996,
approximately $126,000 of capital equipment has been purchased and paid out of
cash flow.
In order to accomplish its sales goals, the Company may be required to
add sales employees. Management anticipates approximately two new sales
positions to be created during the next fiscal year.
Results of Operations:
The Company experienced a profit of $249,185 or $.054 per common share
and $6,557 or $.001 for the three and nine month periods ended September 30,
1996. This income was due to a one time debt forgiveness of $225,000.
Since the acquisition of the operating companies took place late in the
previous fiscal year, there are no comparisons between quarters. Comparisons
with the historical financial information of the acquired companies does,
however, show a growth in revenues of 32% ($776,000 vs. $591,000) and 25%
($269,000 vs. $215,000) for the nine months and three months ended September
30, 1996 vis a vis the same period in 1995.
Management expects this growth to continue throughout fiscal 1997.
PART II - OTHER INFORMATION
Item 5. Other Information
(a) Business Development.
Communications/USA, Inc. ("Comm/USA"), a Florida corporation, was
incorporated in December, 1992. In May, 1995, Comm/USA executed a contract to
acquire all of the issued and outstanding shares of Gulf Coast Communications,
Inc. ("Gulf Coast") d/b/a Voice-Tel of West Florida, a Florida corporation.
The transaction closed on November 28, 1995. In October, 1995, Comm/USA
assigned all of its right, title and interest in the Gulf Coast contract to
CommTel/USA, Inc. ("Comm/Tel"), a Florida corporation, Comm/USA's wholly owned
subsidiary. Gulf Coast was organized in June, 1989 and Comm/Tel was organized
in August, 1995. In October, 1995, Comm/Tel executed an agreement to acquire
all of the assets of Feiman & Holliday, Inc., a Florida corporation d/b/a
Voice-Tel of Southwest Florida ("Voice-Tel SWF") and closed on the transaction
on November 28, 1995.
Additionally, in October, 1995, Comm/Tel executed a contract with the owner of
forty-five percent (45%) of the common shares of Holt & Feiman, Inc., d/b/a
Voice-Tel of Tallahassee, Inc. ("Voice-Tel TAL"), a Florida corporation, to
purchase forty-five percent (45%) of Voice-Tel TAL.
Comm/USA acquired 100% of the issued and outstanding shares of common
stock of Gulf Coast on November 28, 1995, pursuant to a stock purchase
agreement dated May 24, 1995, between Comm/USA and the two stockholders of
record of Gulf Coast. In October 1995, Comm/USA assigned all of its rights,
title and interest in the Gulf Coast stock purchase agreement to Comm/Tel.
The agreement, as amended, provides for a purchase price of $550,000, with
(i) $325,000 in cash payable on or before November 29, 1995; (ii)
a $75,000 promissory note payable on or before February 27, 1996; and (iii) a
$150,000 promissory note payable on February 27, 2001, with a holder's option
for a balloon payment of the entire amount on February 27, 1998. The $325,000
cash payment was made at Closing and the $75,000 note was paid on February 27,
1996. In
addition to the above-mentioned promissory notes, the former Gulf Coast
Stockholders have the right to receive an aggregate of 125,000 shares of
Comm/USA's common stock, par value $.01 ("Common Stock") or 2.5% of Comm/USA's
then issued and outstanding shares of Common Stock, whichever is greater, upon
completion of their first year of employment, and an additional 125,000 shares
of Common Stock or 2.5% of Comm/USA's then issued and outstanding Common
Stock, whichever is greater, upon completion of their second year of
employment.
Comm/Tel acquired the assets of Voice-Tel SWF pursuant to an asset
purchase agreement dated October 23, 1995, between Comm/Tel and Voice-Tel SWF.
The asset purchase agreement provides for Comm/Tel's acquisition of certain
assets of Voice-Tel SWF, including Voice-Tel SWF's rights under its franchise
agreement with Voice-Tel Enterprises, Inc. ("Voice-Tel"),telecommunications
equipment, and a rebate of certain telecommunications cost from Voice-Tel in
the amount of $6,000. In exchange, Comm/Tel (i) assumed approximately
$235,000 of Voice-Tel SWF's liabilities, (ii) transferred $30,000 in cash to
certain stockholders of Voice-Tel SWF, and (iii) transferred 312,500 shares
of Common Stock to the shareholders of Voice-Tel SWF.
On October 22, 1995, Comm/Tel entered into a stock purchase agreement
with Robert Feiman, a forty-five percent (45%) owner of Voice-Tel TAL, to
acquire forty-five percent (45%) of the issued and outstanding shares of
common stock of Voice-Tel TAL in exchange for (i) a one time payment by
Comm/Tel to Robert Feiman of $15,000 in cash; and (ii) for Comm/Tel's best
efforts to repay approximately $50,000 in loans made to Voice-Tel TAL by
Robert and Roberta Feiman. The transaction is contingent upon approval of the
transaction by the majority shareholder of Voice-Tel TAL, and as of the date
of this registration statement, such approval has not yet been obtained.
The term "the Company" that is used throughout this section includes
Comm/USA, Comm/Tel, Gulf Coast, and Voice-Tel SWF.
Business of the Company
The Company owns and operates interactive voice messaging franchises in
the Voice-Tel system. Voice-Tel is the most widespread interactive voice
messaging company in the United States, operating a digital telecommunications
network through
independently owned franchisees. The network covers the greatest geographic
area in the industry, and includes approximately 3,500 cities. The system
operates on proprietary software which was created by Centigram Communications
Corporation.
The Company operates in the following sales territories: (i) the cities
of Tampa, St. Petersburg, Clearwater, Largo, Bradenton, and Sarasota; and (ii)
the Metropolitan Statistical Areas of Lakeland-Winter Haven,
Melbourne-Titusville-Palm Bay, Fort Pierce, Fort Myers-Cape Coral, and
Naples. The Company is also negotiating various contracts to acquire
additional territories in Florida.
Products, Services and Markets
Interactive Voice Messaging
Interactive voice messaging is a service which allows users to talk back
and forth to each other and to send messages to one or hundreds of people with
just one telephone call. The messages can be saved and/or forwarded to other
users. Voice messaging services are accessed world-wide, wherever touch-tone
telephone service is available. The service has flexible interactive answering
and broadcast capabilities that management believes
makes the system more accessible than e-mail, more personal and
powerful than voice mail machines, and more detailed and informative than
pagers. As a result, the Company believes that the system is more practical
and user-friendly for the increasingly mobile executive who relies more and
more on voice messaging services.
Approximately 60% of the Company's revenue is derived from Voice-Tel's
national accounts. One of the largest user groups of Voice-Tel services is
the Amway Corporation ("Amway") through its independent distributors.
Voice-Tel messaging service is marketed under the name "Amvox" to Amway
distributors. In addition, more than one million Amway distributors are
authorized to resell Voice-Tel services to their customer bases. Voice-Tel
also has a national account agreement with Century 21 Real Estate to provide
voice messaging services to real estate brokers across the nation that are
affiliated with Century 21. Additionally, Voice-Tel has national account
agreements with other large companies including Mailboxes, Etc., Primerica
Financial Services, Discovery Toys, Norwest Mortgage, Centigram Communications
Corporation, Val Pak,
Inc., National Safety Associates ("NSA"), Traveler's Insurance Company, and
Excel Telecommunications, Inc.
Approximately 39% of the Company's revenue is derived from
corporate/retail accounts. The corporate accounts are corporations or
individuals who desire interactive messaging. Typically, these accounts
consist of local business persons such as real estate brokers or other
professionals who desire to communicate with their agents through this
medium. Primary targets for the service include companies with field sales
and service forces.
The Company believes that in certain areas various industries tend to
become interdependent on the Voice-Tel system, which causes related parties to
join the system. For example, many Realtors use the system. The addition of
local mortgage brokers, banks, real estate lawyers, title companies, surveyors
and local zoning agencies could enhance the business of all of these
customers.
The Voice-Tel System
The Company owns franchises granted by Voice-Tel Enterprises, Inc.
("Voice-Tel or VTE"). VTE is a privately-owned company and was incorporated in
1986. VTE started operations as a franchise organization in the Ohio area.
The franchisees, using Centigram platforms, operated local area voice mail
service bureaus selling mailboxes to business accounts. The organization grew
in the eastern states, reaching about 30 locations by 1990.
By early 1990, Voice-Tel wanted to expand its coverage to include the
western states. Voice-Tel acquired Amvox in 1990. At that time, Amvox had a
presence in over 50 major metropolitan cities; over 100 cities including
suburban coverage. Amvox had begun construction on a digital network and had
about 15 cities linked together, allowing customers to exchange messages from
one city to another.
Management believes that the acquisition of Amvox was attractive to
Voice-Tel for many reasons including (i) Amvox used Centigram platforms
exclusively; (ii) Amvox had significant coverage in the western two thirds of
the country; (iii) Amvox locations tripled VoiceTel's city coverage; and (iv)
Amvox had a business alliance with Amway Corporation. The Company believes
that the business alliance with Amway was significant for three reasons: (i)
Amway had a significant investment in Amvox; (i)
Amway distributors bought Amvox mailboxes for their own use; and (iii) Amway
distributors sold Amvox mailboxes.
The Amway affiliation has continued with Voice-Tel. Amway distributors
represent more than a third of Voice-Tel's total customer base; Amway
Corporation also has a minority interest ownership in Voice-Tel. Management
believes that one of the major advantages of the relationship is the
"built-in" customer base when a new location is opened. The Amway
distributors are given advance knowledge of the new service and are ready to
sign-up. Amway distributors communicate with their superior and subordinate
distributors (multi-level marketing) via voice messaging. Originally, Amway
distributors exchanged messages locally (on the same platform), and as the
digital network gradually expanded, messaging became nationwide. Amway
distributors have a greater presence in suburban and rural areas than in
most major metropolitan cities. Amway distributors are also encouraged to
sell Amvox voice mailboxes.
The digital network was completed in 1991, allowing nationwide messaging on
the Centigram platforms.
Unlike Voice-Tel, the other two major competitors in the industry, Octel
Network Services and VoiceCom, market principally to large, multi-location
corporate accounts. To highlight some of the differences, Voice-Tel service
offers: (i) Simplicity; (ii) Inexpensive and competitive services in
comparison with RBOC services; (iii) Direct inward dial (DID); (iv) Local
access - no need for 800 usage charges; Toll savers; (v) Local sales and
local customer support; (vi) Nationwide and international messaging with
local access available; and (vii) Many individual accounts. Options include:
Pager activation; Outdial message notification; 800 service for customers who
feel they need it for their customers; and Revert to operator.
From the beginning, Voice-Tel has marketed a service that the Company
believes is simple to learn and use, and is free of complicated and expensive
"bells and whistles." Voice-Tel, (and Amway/Amvox) mailboxes are DID numbers.
The customer is assigned a seven-digit local DID telephone number. The
customer can have a white page listing in their name even though Voice-Tel is
the customer of record for a DID number. This is possible under the provisions
of the RBOC joint user group tariffs.
The mailboxes can provide: (i) Voice messaging; (ii) Call answering;
(iii) Alternate telephone numbers; (iii) Menu boxes (directing callers to
appropriate mailbox); (iv) Broadcasting; and (v) Audiotex.
Unlike users of the RBOCs' voice mail services, Voice-Tel customers are
classified neither as residential nor business accounts because the DID
mailboxes are not associated with the customers' existing telephone numbers.
The Amway distributors can be considered hybrid customers in that they
typically work from their homes on residential lines. The Voice-Tel corporate
accounts more closely resemble RBOC business customers, except that Voice-Tel
customers need to receive and send messages to other locations.
Historically, the Voice-Tel franchisees have had the greatest success
selling to small and medium-size service accounts, such as real estate
offices, and financial services. The sales emphasis is on network-based
messaging rather than simple call answering.
The Voice-Tel franchisees have targeted small to mid-size accounts
because of the need to sell within their territory. At year-end 1994,
Voice-Tel had local access in 3,485 cities in the US (46 states), and 15
cities in Puerto Rico, Canada, Australia and New Zealand.
Voice-Tel currently has local access in approximately 3,500 domestic
cities. In these terms, Voice-Tel is the closest to having a ubiquitous
network. However, by using Centigram platforms exclusively, a caller using a
different platform cannot now message with a Voice-Tel customer, or vice
versa.
A universal network, with ubiquitous access and inter-machine
operability, would offer a powerful asset for securing national accounts and
augmenting the Amway individual mailbox sales and messaging revenues.
Voice-Tel has concentrated on expansion for the past several years both
domestically and internationally. It is unknown whether or not Voice-Tel will
invest in the research and development of the necessary software to implement
inter-machine functionality.
Long Distance Telephone Service
Debit cards enable a caller to make long distance toll charge calls from
any touch tone telephone at lower rates than many alternatives, and assists
users in budgeting their telephone usage. Additionally, debit cards have
instructions in various languages, and loss or theft amount is limited to the
value remaining on the debit card.
Traditional users of debit cards include military personnel, college
students and their parents, foreign exchange students, foreign visitors,
tourists, Inner-city residents, Ship employees-crew members, sales personnel,
hospital employees and patients, migrant workers, truck drivers, nursing home
patients, and business travelers.
In the United States, this segment of the industry is in its infancy and
is growing rapidly. Industry sources estimate that more than 500 companies are
making and selling debit cards, including companies such as MCI and Sprint.
Sales of the cards was approximately $65 million in 1993 and $325 million in
1994. By the first quarter of 1996, industry experts expect sales to reach the
annual rate of at least $1 billion. In 1994, the international debit card
business was estimated at $4 billion. The Japanese telephone debit card
business was estimated to be $2.5 billion in 1994. The Company anticipates
entering this market in 1996.
Other Services
Presently, the Company offers paging services of third party vendors that
it resells to its customers. The pagers are connected to the customer's voice
mailbox, so that when messages are deposited in a customer's box, they are
routed to the pager and their pager alerts them to call their voice mailbox.
Competition
General
The voice messaging market, which includes voice mail and other voice
processing services, and the debit card market is fragmented, but highly
competitive due principally to the number of providers of telecommunications
services, certain of which have greater financial resources and more
experience than the Company. The costs and features of voice processing
equipment vary widely and the Company believes that the primary factor
governing the acceptance of a system is the ease of use or "user
friendliness" of the system.
Competition among National Network-Based Voice Message
Service Providers
The Company views the voice processing industry as presently divided into
two segments. The first segment consists of companies that are voice
processing service providers of national and international network based voice
messaging services. The second segment consists of the Regional Bell
Operating Companies voice mail (call coverage) services. The first segment is
considered by the Company as its primary competition at the present time.
The Company views three entities as the national voice messaging service
providers, Octel (ONS), VoiceCom, and Voice-Tel Enterprises, Inc. (VTE). ONS
and VoiceCom have historically targeted multi-location business accounts.
Many, if not most, of their customers have a CPE voice mail platform (or a CPE
PBX with a voice mail option) at their headquarters. These size companies use
their CPE voice mail for call answering, intra-office messaging and, perhaps,
use automated attendant features. VTE's customer base does not fit the above
description in that it has many single mailbox customers in addition to
corporate accounts. Voice-Tel has not historically targeted the very large,
multi-location accounts as have the other nationals.
The nationals' typical business customer has branch offices and/or field
personnel. The cost to purchase a voice mail platform can not easily be cost
justified for small branch offices. Cost aside, local branch voice mail
systems do not permit voice messaging with the home office. The nationals
have sold to large users as well as smaller to mid-size accounts. A smaller
account may not have branch offices but, rather field personnel dispersed
around the country. Some or many of the field personnel may work from their
homes.
The convenience of 800 access is apparent to field sales, service and
work-at-home personnel, and traveling executives. Local access (with telco
local calling charges) is generally less expensive than 800 usage, but
requires change at public pay phones, calling cards and/or increased charges
on phone bills in areas that do not offer flat charge calling programs. The
disadvantage of 800 access is additional cost and variable monthly usage
charges.
The Company believes that the power of the network-based message services
is the ability to message and exchange information from one location to
another regardless of time zones and other field conditions. Sales personnel
can determine inventory availability, report sales, or inquire if an order has
been shipped. Service personnel can report service problems, or request
replacement parts. Executives can receive and dispense important and timely
information with a single call.
The nationals' service offerings can be used as call answering by
forwarding callers on "busy" or "no answer" conditions from small offices or
home numbers. As for the alternative, local RBOC voice mail can be used for
simple call answering. The shortcoming of using RBOC call answering for the
mid-size to large customer is the inability to pass an important message to
headquarters for follow-up; a simple task on a network-based message service.
The ability to create a message and have it delivered to many people at
several locations, and to answer a message (perhaps attaching additional
comments to it and passing it on to other users on the network) are not
possible on today's RBOC call answering voice mail services. Prior to the new
Telecom law, the RBOCs were prohibited from message transport outside of
their local service area.
The recently passed telecom legislation in Congress will allow the RBOCs
into long-distance services. The Company expects the RBOCs, either through
the landline networks or through their wireless ventures to initiate
nationwide messaging services.
ONS, (previously Tigon), and VoiceCom have added many features and
capabilities to enhance the value of the basic voice mail services offered to
businesses. Voice-Tel has taken a different approach by offering a no frills,
easy to use, voice mail network with local access in all major metropolitan
areas throughout the contiguous United States. Voice-Tel is also the
exception to the other nationals in that the company has many single mailbox
customers. In RBOC terms, these single mailbox customers would be called
residential customers. A large percentage of Voice-Tel's customers are Amway
distributors who commonly work from their homes. Amway distributors can sell
a voice mail product called Amvox through a distribution agreement
between Voice-Tel and Amway. Voice-Tel also has many multi-location
business accounts sold by he local franchisees such as the Company.
Limitations on Today's Voice Messaging Systems
The existing voice mail message networks all have limited access.
Voice-Tel currently has the greatest local access coverage with approximately
3,500 cities in the United States. However, what remains to be developed is
a truly ubiquitous network. This would include two key elements, as is the
case with fax machines: (1) Local access from any telephone number (to avoid
costly 800 usage); and (2) The ability to exchange messages from one voice
mail platform to any other voice mail platform.
Item 6. Exhibits and Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended September 30,
1996.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
Communications/USA, Inc.
............................................................................
(Registrant)
Date: November 19, 1996 BY: /s/Raul E. Balsera
Raul E. Balsera, Chief
Executive Officer
FINANCIAL STATEMENTS
[CAPTION]
COMMUNICATIONS/USA,INC.
CONSOLIDATED BALANCE SHEETS
Sep.30.96 Dec. 31, 96
(Unaudited) (Audited)
Assets:
Current Assets:
Cash and Cash Equivalents $ 50,453 $ 94,120
Accounts Receivable 40,777 94,942
Receivable from Affiliate Company 88,284 -
Other Current Assets 1,400 1,400
Total Current Assets 180,914 190,462
Property and Equipment-Net 314,861 225,667
Intangible Assets-Net 2,866,401 2,975,495
$ 3,362,176 $ 3,391,624
Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable and Accrued Expenses $ 82,674 $ 54,692
Obligation under capital leases 108,191 112,982
Long Term Debt 183,629 350,348
Notes Payable to Shareholders 175,349 286,640
Total Liabilities 549,843 804,662
Preferred Stock: 14% cumulative,convertible
$3.75 par value,5,000,000 authorized, 23,750
shares issued and outstanding 89,062 89,062
Common Stock: $.01 par value, 50,000,000
authorized, 4,634,464 shares issued and
oustanding 46,344 46,011
Additional paid-in-Capital 2,836,186 2,608,452
Retained Earnings(Loss) (159,259) (156,563)
Total Shareholders'Equity 2,812,333 2,586,962
Total Liabilities and Equity $ 3,362,176 $ 3,391,624
ITEM 1-FINANCIAL STATEMENTS-CONTINUED
COMMUNICATIONS/USA, INC.
STATEMENT OF INCOME , RETAINED EARNINGS
AND INCOME PER COMMON SHARE
For the Nine Months Ended
Sep. 30, 96 Sep.30, 95
Net Sales $ 776,414 $ -
Cost of Sales 79,172 -
Gross Margin 697,242 -
General and Administrative Expenses 674,576 87,596
Depreciation Expense 36,470 -
Amortization of Intangibles 109,095 -
Operating Income (Loss) (122,899) (87,596)
Other Income 225,000 -
Interest Expense 95,544 17,469
Net Income (Loss) $ 6,557 $ (105,065)
Retained Earnings (Loss) 12/31/95 (156,563) -
Preferred Stock Dividend-9/30/96 (9,253) -
Retained Earnings(Loss)- 9/30/96 (159,259) $ (105,065)
Income(Loss) per Common Share $ 0.001 $ (0.025)
Average number of shares outstanding
during the period 4,630,621 4,219,952
ITEM 1-FINANCIAL STATEMENTS-CONTINUED
COMMUNICATIONS/USA, INC.
STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 1996
Cash Flows from Operating Activities
Net Income (Loss) $ 6,557
Adjustments to Reconcile net loss to net cash
(used for ) provided by operating activities:
Depreciation 36,470
Income from debt assumption by affiliate (225,000)
Amortizations 109,095
Change in operating assets and liabilities
Decrease in Accounts receivable 54,165
(Increase) in Affiliate Receivable (88,284)
Increase in Accounts Payable and Accrued Expenses 27,982
Net cash provided(used)by operations (79,015)
Cash Flows from Investing Activities
Equipment Purchases (125,662)
Cash Flows from Financing activities
Proceeds from Long Term Debt-Net 58,201
Payment of Shareholders Notes (111,291)
Payment of Capital Lease Obligations-Net (4,791)
Proceeds from sale of common stock-net 218,891
Net cash provided(used) by financing activities 161,010
Net Change in cash (43,667)
Cash at beginning of Period 94,120
Cash at end of Period $ 50,453
ITEM 1-FINANCIAL STATEMENTS-CONTINUED
COMMUNICATIONS/USA, INC.
STATEMENT OF INCOME, AND INCOME (LOSS) PER COMMON SHARE
For the Three Months Ended
Sep. 30, 96 Sep. 30, 96
Net Sales $ 269,460 $ -
Cost of Sales 19,945 -
Gross Margin 249,515 -
General and Administrative Expenses 156,796 87,596
Depreciation Expense 12,150 -
Amortization of Intangibles 12,991 -
Operating Income (Loss) 67,578 (87,596)
Other Income 225,000 -
Interest Expense 43,393 17,469
$ 249,185 $ (105,065)
Income Per Common Share $ 0.054 $ (0.025)
Average number of shares outstanding
during the period 4,634,564 4,219,952
NOTES TO FINANCIAL STATEMENTS
Communications/ USA, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 1996
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Purpose- Communications/USA, Inc.(the Company)was organized
under the laws of the State of Florida in 1992. It was inactive until May of
1995 when it began to market its stock and negotiate to purchase interactive
voice messaging franchises and related companies.
Principles of Consolidation- The consolidated financial statements include
the accounts of the company's wholly-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation.
Interim adjustments- The condensed financial statements herein presented
include all adjustments necessary to make them conform to generally accepted
accounting principles, consistently applied with prior periods.
Property, Equipment and Intangible Assets-Property and Equipment are recorded
at cost. Depreciation is recorded based on the estimated useful lives of the
assets.
The Intangible assets arise from the consideration given by the company for
the acquisition of franchise rights and customer lists. The allocation of
cost was determined by applying present value techniques to expected cash flows
over the life of the franchise agreements(20 years). Amortization is computed
over the life of the franchise agreements.
Earnings(loss) per common share- Was determined by dividing net income (loss)
applicable to common stock by the weighted average number of common shares
outstanding during the period.
B. Acquisitions
On June 5, 1995, the company acquired all of the assets of two Florida
partnerships. The partnerships were in the business of acquiring licenses
from the Federal Communications Commission(FCC) to purchase air time to
provide interactive video and data services to the public. The company
exchanged 213,652 shares of its common stock for
all of the assets of the partnership. The total consideration aggregated
$341,843.
The company acquired all the common stock of Gulf Coast Communications,
Inc.(GCC) for an aggregate price of $1,487,500($550,000 in cash and notes,
and 250,000 shares of common stock).The transaction was recorded as a purchase.
GCC is in the business of providing interactive voice messaging to a broad
customer base, through its Voice-Tel franchise.
The company also acquired the assets, including the Voice-Tel franchise
rights, of another company in a transaction valued at $1,405,000.In exchange
for the assets the company issued 312,500 shares of common stock and assumed
approximately $232,000 of debt.
In January of 1996, the company's majority shareholder exchanged his common
stock(approximately 55% of the company's stock)for approximately 83% of the
common stock of an inactive public company.
C. Debt.
Obligations under capital leases are primarily for telephone and computer
equipment, with maturities of approximately 36 months. The effective interest
rates for these leases are between 13%-22%.
Notes Payable to Shareholders are related to the acquisitions of the
company's subsidiaries and Voice-Tel franchises. These notes mature from one
to five years and have interest rates ranging from 7-10% per annum.
Long Term Debt consists of bank debt associated with the purchase of the
Voice-Tel franchises, have maturities of five years with interest rates
ranging from 7-10% per annum.
D. COMMITMENTS
The company leases various office space for its main office and subsidiary
locations. The company also leases office space where the telephone and
computer equipment, needed to operate its Voice-Tel franchises, are located.
The aggregate annual rental payments are as follows:
1996 $29,585
1997 19,403
1998 10,695
1999 8,291
2000 4,400
E. Employee Stock Option Plan
The 1995 Employee Stock Option Plan(the Plan) was adopted by the Board of
Directors of the Company on May 4, 1995 and was approved by the shareholders
on May 10, 1995.The Plan provides for the granting of options to purchase an
aggregate of 250,000 shares of the company's common stock to officers and
other employees of the company. As of the dte of the balance sheet options to
purchase 50,000 common shares have been granted. To date none have been
exercised.