UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended November 30, 2000
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-27773
CALLMATE TELECOM INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Florida 59-3134518
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Wilton Street
Bradford, England BD5 OAX
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(Address of principal executive offices) (Zip Code)
44 127 4301 500 (Registrant's telephone number, including area code)
---------------
Check 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 |_|
The number of shares outstanding of the registrant's Common Stock, $.001
Par Value, on February 1, 2001 was 26,315,893 shares.
CALLMATE TELECOM INTERNATIONAL INC.
NOVEMBER 30, 2000 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page Number
Item 1. Financial Statements
Consolidated Balance Sheet as of November 30, 2000 ............................................... 1
Consolidated Statements of Income
for the three months ended November 30, 2000 and 1999........................................ 2
Consolidated Statements of Cash Flows
for the three months ended November 30, and 1999............................................. 3
Consolidated Statement of Changes in Stockholders' Deficit
for the three months ended November 30, 2000................................................. 4
Notes to Consolidated Financial Statements........................................................ 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................................ 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk........................................ 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................................................. 10
Item 2. Changes in Securities and Use of Proceeds......................................................... 10
Item 3. Defaults Upon Senior Securities................................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders............................................... 10
Item 5. Other Information................................................................................. 10
Item 6. Exhibits and Reports on Form 8-K.................................................................. 10
Signatures........................................................................................ 11
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Callmate Telecom International, Inc.
Consolidated Financial Statements
Three Months Ended November 30, 2000 and 1999 (Unaudited)
Contents
Consolidated Financial Statements:
Consolidated Balance Sheet............................................................................... 1
Consolidated Statements of Operations.................................................................... 2
Consolidated Statements of Changes in Stockholders' Deficit.............................................. 3
Consolidated Statements of Cash Flows.................................................................... 4
Notes to Consolidated Financial Statements............................................................... 5-6
Callmate Telecom International, Inc.
Consolidated Balance Sheet
November 30, 2000 (Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 294,986
Restricted cash and cash equivalents 453,570
Accounts receivable, trade 755,591
Accounts receivable, related parties 67,706
Accounts receivable, other 307,723
Notes receivable, including related party of $70,420 220,420
Restitution receivable 415,934
Prepaid expenses and other current assets 578,626
--------------
Total current assets 3,094,556
==============
Property and equipment, net of accumulated depreciation 1,421,081
--------------
Other assets:
Investments, at equity 465,626
Other 100,937
--------------
Total other assets 566,563
--------------
$ 5,082,200
==============
Liabilities and Stockholders' Deficit
-------------------------------------
Current liabilities:
Accounts payable, trade $ 6,857,541
Advances from stockholders 229,902
Accrued expenses 1,048,326
Current portion of obligations under capital leases 9,325
Notes payable 88,442
Deferred revenue 1,227,577
--------------
Total current liabilities 9,461,113
--------------
Long-term liabilities:
Obligations under capital leases, net of current portion 22,229
--------------
Stockholders' deficit:
Common stock; $.001 par value; 50,000,000 shares authorized;
26,315,893 shares issued and outstanding 26,316
Additional paid-in capital 1,461,270
Accumulated deficit (6,345,085)
Accumulated other comprehensive income 456,357
--------------
Total stockholders' deficit (4,401,142)
--------------
$ 5,082,200
==============
The accompanying notes are an integral part of the consolidated financial
statements. 1
Callmate Telecom International, Inc.
Consolidated Statements of Operations
Three Months Ended
--------------------------------------
November 30, November 30,
2000 1999
--------------------------------------
(Unaudited) (Unaudited)
Revenues $ 3,902,758 $ 2,697,538
Cost of revenues 3,592,055 1,738,097
-------------------------------------
Gross profit 310,703 959,441
Selling, general and administrative expense 1,197,072 789,016
-------------------------------------
(Loss) income from operations (886,369) 170,425
Other (expense) income (5,252) 17,225
-------------------------------------
Net (loss) income $ (891,621) $ 187,650
=====================================
Net (loss) income per common share $ (.03) $ .01
=====================================
Weighted average number of common shares outstanding 26,315,893 26,200,000
=====================================
The accompanying notes are an integral part of the consolidated financial
statements. 2
Callmate Telecom International, Inc.
Consolidated Statements of Changes in Stockholders' Deficit
Three Months Ended November 30, 2000 (Unaudited)
Accumulated
Common Stock Additional Other
------------ Paid-In Accumulated Comprehensive
Shares Amount Capital Deficit Income Total
------------------------------------------------------------------------------------
Balance, August 31, 2000, as previously
reported 14,315,893 $14,316 $1,252,310 $(5,110,239) $339,000 (3,504,613)
Adjustment in connection with pooling of
interests (unaudited) 12,000,000 12,000 208,960 (343,225) (122,265)
------------------------------------------------------------------------------------
Balance, August 31, 2000, as restated
(unaudited) 26,315,893 26,316 1,461,270 (5,453,464) $339,000 (3,626,878)
Components of comprehensive loss:
Foreign currency translation adjustment
(unaudited) 117,357 117,357
Net loss for the period (unaudited) (891,621) (891,621)
-----------
Total comprehensive loss (774,264)
------------------------------------------------------------------------------------
Balance, November 30, 2000 (unaudited) 26,315,893 $26,316 $1,461,270 $(6,345,085) $456,357 (4,401,142)
====================================================================================
The accompanying notes are an integral part of the consolidated financial
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statements. 3
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Callmate Telecom International, Inc.
Consolidated Statements of Cash Flows
Three Months Ended
---------------------------------------
November 30, November 30,
2000 1999
---------------------------------------
(unaudited) (unaudited)
Operating activities
Net (loss) income $ (891,621) $ 187,650
--------------------------------------
Adjustments to reconcile net (loss) income to net
cash used by operating activities:
Depreciation 306,040 66,802
Increase in:
Accounts receivable (467,235) (179,978)
Other assets (10,191) (146,650)
Increase (decrease) in:
Accounts payable 479,608 (92,207)
Accrued expenses 414,564 (17,089)
Deferred revenue (104,757) (4,739)
--------------------------------------
Total adjustments 638,411 (373,861)
--------------------------------------
Net cash used by operating activities (253,210) (186,211)
--------------------------------------
Investing activities
Change in restricted cash (3,147)
Cash held in trust 11,289 (353,107)
Deposit on stock purchase and exchange agreement (500,000)
Acquisition of property and equipment (231,314) (58,078)
Acquisition of investments (135,000)
Funds received on notes receivable 60,529
Funds received from (advanced to) related parties 208,378 (67,146)
--------------------------------------
Net cash provided (used) by investing activities 48,882 (1,116,478)
--------------------------------------
Financing activities
Payments on capital lease obligations (2,369)
Decrease in checks drawn in excess of bank balance (144,033)
Proceeds from stockholder advances 15,084 981,125
--------------------------------------
Net cash (used) provided by financing activities (131,318) 981,125
--------------------------------------
Effect of exchange rate changes on cash and cash equivalents (1,760) (11,933)
--------------------------------------
Net decrease in cash and cash equivalents (337,406) (333,497)
Cash and cash equivalents, beginning of period 632,392 2,259,735
--------------------------------------
Cash and cash equivalents, end of period $ 294,986 $ 1,926,238
======================================
The accompanying notes are an integral part of the consolidated financial
- -------------------------------------------------------------------------
statements. 4
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Callmate Telecom International, Inc.
Notes to Consolidated Financial Statements
Three Months Ended November 30, 2000 and 1999 (Unaudited)
1. Financial Statements
In the opinion of management, all adjustments consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three-month periods ended November 30, 2000 and 1999, (b) the
financial position at November 30, 2000, and (c) cash flows for the three-month
periods ended November 30, 2000 and 1999, have been made. The results of
operations for the three-month period ended November 30, 2000 are not
necessarily indicative of those to be expected for the entire year.
The unaudited consolidated financial statements and notes are presented as
permitted by Form 10-QSB. Accordingly, certain information and note disclosures
normally included in consolidated financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been omitted. The accompanying consolidated financial statements should be
read in conjunction with the audited consolidated financial statements of the
Company for the fiscal year ended August 31, 2000.
2. Going Concern
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. However, the Company has
sustained substantial losses for the three months ended November 30, 2000 and
the year ended August 31, 2000. In addition, the Company has negative working
capital of approximately $6,367,000 at November 30, 2000 and its liabilities
exceed its assets by approximately $4,401,000 at November 30, 2000. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. These consolidated financial statements do not include any
adjustments relating to the recoverability and classification of recorded assets
or the amounts and classification of liabilities that might be necessary in the
event the Company cannot continue in existence. Management of the Company is
currently seeking additional revenue sources, expanding their customer base, and
seeking additional equity capital to mitigate the above factors.
5
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Callmate Telecom International, Inc.
Notes to Consolidated Financial Statements
Three Months Ended November 30, 2000 and 1999 (Unaudited)
3. Business Acquisition
On November 23, 2000, the Company acquired Webengine Technologies International,
Inc. ("Webengine") in a business combination accounted for as a pooling of
interests. Webengine, which through its wholly owned subsidiary Cyberstation
Computers & Support Inc., engages in the provision of software solutions and
services to facilitate e-commerce transactions, became a wholly owned subsidiary
of the Company through the exchange of 12,000,000 shares of the Company's common
stock for all of the outstanding stock of Webengine. The accompanying
consolidated financial statements for the three months ended November 30, 2000
are based on the assumption that the companies were combined for the full
period, and the consolidated financial statements for the three months ended
November 30, 1999 have been restated to give effect to the combination.
Summarized results of operations of the separate companies from September 1,
2000 through November 30, 2000 (which is not materially different from November
23, 2000), are as follows:
Callmate Webengine
--------------------------------
Revenues $ 3,742,728 $ 160,030
================================
Net (loss) income $ (920,596) $ 28,975
================================
Following is a reconciliation of the amounts of revenues and net income
previously reported for the three months ended November 30, 1999 with restated
amounts:
Revenues:
As previously reported $ 2,502,010
Webengine 195,528
-----------
As restated $ 2,697,538
===========
Net income:
As previously reported $ 147,427
Webengine 40,223
-----------
$ 187,650
===========
4. Change in Accounting Estimate
During the three-month period ended November 30, 2000, the Company reduced its
estimate of the useful lives of certain machinery and equipment to reflect
technological changes. This change had the effect of increasing net loss for
the three months ended November 30, 2000 by $190,622 ($.007 per share).
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and related notes included elsewhere in this
Form 10-QSB.
This filing contains forward-looking statements. The words "anticipated,"
"believe," "expect," "plan," "intend," "seek," "estimate," "project," "will,"
"could," "may," and similar expressions are intended to identify forward-looking
statements. These statements include, among others, information regarding future
operations, future capital expenditures, and future net cash flow. Such
statements reflect the Company's current views with respect to future events and
financial performance and involve risks and uncertainties, including, without
limitation, general economic and business conditions, changes in foreign,
political, social, and economic conditions, regulatory initiatives and
compliance with governmental regulations, the ability to achieve further market
penetration and additional customers, and various other matters, many of which
are beyond the Company's control, including, without limitation, the risks
described under the caption "business." Should one or more of these risks or
uncertainties occur, or should underlying assumptions prove to be incorrect,
actual results may vary materially and adversely from those anticipated,
believed, estimated, or otherwise indicated. Consequently, all of the
forward-looking statements made in this FILING are qualified by these cautionary
statements and there can be no assurance of the actual results or developments.
Callmate Telecom International, Inc. cautions readers that in addition to
important factors described elsewhere, the following important facts, among
others, sometimes have affected, and in the future could affect, the Company's
actual results, and could cause the Company's actual results during 2000 and
beyond, to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, Callmate Telecom International, Inc.
INCOME STATEMENT DATA
Three Months Ended
---------------------------------
November 30, November 30,
2000 1999
---------------------------------
Total revenue $ 3,902,758 $ 2,697,538
=================================
Net (loss) income $ (891,621) $ 187,650
=================================
Net (loss) income per common share $ (.03) $ .01
=================================
Weighted average number of common shares outstanding 26,315,893 26,200,000
=================================
BALANCE SHEET DATA
November 30,
2000
============
Total assets $ 5,082,200
============
Working capital $ (6,366,557)
============
Long-term debt $ 22,229
============
Stockholders' deficit $ (4,401,142)
============
7
RESULTS OF OPERATIONS
Revenues
Revenues for the three-month period ended November 30, 2000 totaled $3,902,758,
an increase of 45 percent from the $2,697,538 of revenues for the comparable
period in 1999. This decrease is attributable to increasing marketing activities
by the company.
Cost of Revenues
For the three months ended November 30, 2000, the cost of revenues increased to
$3,592,055 from the $1,738,097 of costs for the three months ended November 30,
1999. This increase is mainly due to increased prices from suppliers and
increased competition.
Gross profit margin decreased 28 percent for the three months ended November 30,
2000 to a gross profit margin of 8 percent from an overall gross profit margin
of 36 percent for the three months ended November 30, 1999. This is principally
attributable to increased competition and other competitive industry pressures.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended November
30, 2000 were $1,197,072 as compared to $789,016 for the similar period last
year. This 52 percent increase of selling, general and administrative expenses
is principally attributable to increased competition which required increased
spending on marketing, sales, and advertising.
Income Taxes
Due to the Company's history of operating losses, management has established a
valuation allowance in the full amount of the deferred tax assets arising from
these losses because management believes it is more likely than not that the
Company will not generate sufficient taxable income within the appropriate
period to offset these operating loss carryforwards.
Net Income
Net loss for the three months ended November 30, 2000 amounted to $891,621 as
compared to net income of $187,650 for the three months ended November 30, 1999.
This increase in net loss is principally attributable to increased competitive
pressures and the costs associated with these.
Earnings Per Share
For the three months ended November 30, 2000, basic and diluted loss per share
amounted to $(.03). For the comparable period in 1999, basic and diluted income
per share amounted to $.01. The increase in loss per share is due principally to
the increase in net loss of $1,079,271.
8
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
For the three months ended November 30, 2000, net cash used by operating
activities amounted to $253,210, an increase from the net cash used by operating
activities of $186,211 for the comparable period in 1999. The increase in cash
used is primarily the result of competitive pressures requiring additional
spending on marketing, sales and advertising.
Investment Activities
The Company's investment activities include equipment purchases, deposits for
stock purchases, investments, and net changes in restricted cash.
Net cash provided by investing activities for the three months ended November
30, 2000 was $48,882 as compared to net cash used by investing activities of
$1,116,478 for the comparable period in 1999. The decrease in cash expended for
investing activities is due primarily to deposits on stock purchase agreements
and investment acquisitions totaling $635,000 during the three months ended
November 30, 1999.
Financing Activities
The Company's financing activities include proceeds from stockholder advances.
Net cash of $131,318 was used by financing activities for the three months ended
November 30, 2000 as compared to net cash provided of $981,125 by financing
activities for the three months ended November 30, 1999. The decrease in cash
provided by financing activities results from proceeds on stockholder advances
in the prior period.
CAPITAL RESOURCES
At November 30, 2000, the Company does not have any material commitments for
capital expenditures other than for those expenditures incurred in the ordinary
course of business.
The Company believes that its current operations and cash balances, combined
with management seeking additional revenue sources, expanding their customer
base, and seeking additional equity funding, will be sufficient to satisfy its
currently anticipated cash requirements for the next 12 months; however, no
assurances can be given. Additional capital could be required in excess of the
Company's liquidity, requiring it to raise additional capital through an equity
offering, secured or unsecured debt financing. The availability of additional
capital resources will depend on prevailing market conditions, interest rates,
and the existing financial position and results of operations of the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is currently the plaintiff in a lawsuit filed against a former
employee. The lawsuit, entitled Callmate Telecom International, Inc. vs. Selwyn
Wilson, filed by the Company with the County Court Circular, alleges that the
former employee embezzled an unspecified amount from the Company in March
through June 1999. The trial date is scheduled for May 22, 2000. The outcome of
the lawsuit is uncertain.
The Company was recently successful in this suit and was awarded a
judgement in the amount of approximately $340,000 plus interest.
Other than the above the Company is not subject to any material legal
proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS IN SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the three month
period ended September 30, 2000.
(c) Exhibits.
27 Financial Data Schedule
10
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Callmate Telecom International Inc.
Dated: February 2, 2001 By: /s/ Mahmoud Hashmi
--------------------------------
Mahmoud Hashmi
Chief Executive Officer
EXHIBIT INDEX
27 Financial Data Schedule