U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2001
OR
[ ] 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: 000-09358
ONE TOUCH TOTAL COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
Nevada 91-1933601
(State or jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1630 South Sunkist Street, Suite K, Anaheim, California 92806
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number: (714) 456-0874
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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) been subject to such filing requirements for the past 90 days.
Yes X No .
As of September 30, 2001, the Registrant had 14,778,399 shares of
common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEET
AS OF SEPTEMBER 30, 2001 3
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000 4
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 9
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 9
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
ITEM 5. OTHER INFORMATION 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURE 10
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCAL STATEMENTS.
ONE TOUCH TOTAL COMMUNICATIONS, INC.
BALANCE SHEET
September 30, 2001
(Unaudited)
ASSETS
Current assets
Cash $ 29,835
Accounts receivable, net 84,755
Employee advances 4,529
Inventory 216,121
Total current assets 335,240
Fixed assets, net 24,519
Other assets
Deposits 7,882
Deferred tax asset 164,476
Intangible assets, net 565,094
737,452
Total assets $ 1,097,211
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 315,160
Accrued liabilities 109,721
Due to consultant 107,611
Income tax payable 12,071
Note payable - related party 17,259
Total current liabilities 561,822
Total liabilities 561,822
Commitments and contingencies -
Stockholders' equity
Common stock ($0.001 par value, 200,000,000 shares
authorized, 14,778,399 shares issued and outstanding) 14,778
Additional paid-in capital 1,371,748
Accumulated deficit (851,137)
Total stockholders' equity 535,389
Total liabilities and stockholders' equity 1,097,211
See Accompanying Notes to Financial Statements
ONE TOUCH TOTAL COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the three For the nine
months ended months ended
September 30 September 30
2001 2000 2001 2000
Revenues $ 640,627 $ 716,723 $ 2,101,056 $ 2,186,372
Costs of revenues 615,899 346,458 1,480,320 1,283,968
Gross profit 24,728 370,265 620,736 902,404
Operating expenses
Selling, general and
administrative 289,144 243,726 991,396 785,927
Depreciation and
amortization 30,713 31,213 91,139 93,640
Total operating expenses 319,857 274,939 1,082,535 879,567
Income (loss) from
operations (295,129) 95,326 (461,799) 22,837
Other expense
Interest expense 687 1,306 2,006 3,917
Income (loss) before
provision for income tax (295,816) 94,020 (463,805) 18,920
Provision for income tax
expense - 31,967 (27,914) 6,433
Net income (loss) (295,816) 62,053 (435,891) 12,487
Basic and diluted income
(loss) per common share (0.02) - (0.03) -
Basic and diluted weighted
average common shares
outstanding 14,778,399 14,342,400 14,778,399 14,342,400
See Accompanying Notes to Financial Statements
ONE TOUCH TOTAL COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended
September
2001 2000
Cash flows from operating activities:
Net income (loss) $ (435,891) $ 12,487
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciations and amortization 91,139 93,640
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 45,084 (227,114)
Increase in employee advances (4,529) -
Decrease in inventory 80,975 8,385
Increase in other assets (925) (335)
Increase in accounts payable 177,373 81,980
Decrease in deferred tax liability (27,914) -
Increase in accrued liabilities 133,305 18,547
Net cash provided (used) by operating activities 58,617 (12,410)
Cash flows from investing activities
Purchase of fixed assets - (8,378)
Net cash used by financing activities - (8,378)
Cash flows from financing activities
Principal payments on note payable (30,810) -
Net cash used by financing activities (30,810) -
Net increase (decrease) in cash 27,807 (20,788)
Cash, beginning of period 2,028 23,866
Cash, end of period 29,835 3,078
Supplemental disclosure of cash flow:
Cash paid for interest 2,006 -
Cash paid for income taxes - -
See Accompanying Notes to Financial Statements
ONE TOUCH TOTAL COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with Securities and Exchange Commission requirements for interim
financial statements. Therefore, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The financial
statements should be read in conjunction with the annual financial
statements for the year ended December 31, 2000 of One Touch Total
Communications, Inc. ("the Company") as reported on Form SB-2.
The results of operations for the interim periods shown in this report
are not necessarily indicative of results to be expected for the full
year. In the opinion of management, the information contained herein
reflects all adjustments necessary to make the results of operations
for the interim periods a fair statement of such operation. All such
adjustments are of a normal recurring nature.
2. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following at September 30, 2001:
Accounts receivable $98,105
Allowance for doubtful accounts (13,350)
$84,755
The Company has a factoring arrangement with Summit Financial
Resources under which it sells a substantial portion of its trade
receivables. The proceeds from the factored of trade receivables were
approximately $388,000 for the nine months ended September 30, 2001.
The outstanding factored receivables with recourse at September 30,
2001 were approximately $32,000.
3. STOCKHOLDERS' EQUITY
In December 1999, the Company entered into a 48 month consulting
agreement with Rio Telecom, Inc. ("Rio") whereby Rio is to receive
$5,260 per month for 48 months and 100,000 shares of the Company's
common stock per month for ten months both beginning in January 2000.
As of September 30, 2001, 200,000 of the 1,000,000 shares of the
Company's common stock has been issued to Rio leaving 800,000 shares
due to Rio as of September 30, 2001. Rio has earned 400,000 shares,
leaving 200,000 shares as a liability as of September 30, 2001. For
the purposes of this transaction the stock has been valued at $0.4531
per common share using an 11 day average (5 days before and 5 days
after the date of the agreement) of the closing price of the Company's
common stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements of the Registrant and notes thereto contained
elsewhere in this report.
Results Of Operations.
Comparison of three and nine month periods ended September 30, 2001 and 2000.
(a) Revenues. Revenues for the three months ended September 30,
2001 were $640,627, a decrease of approximately 11% from revenues of
$716,723 in the same period in 2000. Revenues for the nine months
ended September 30, 2001 were $2,101,056, a decrease of approximately
4% from revenues of $2,186,372 in the same period in 2000. Net loss
for the three months ended September 30, 2001 was $295,816 as compared
with a net profit of $62,053 for the same period in 2000. Net loss
for the nine months ended September 30, 2001 was $435,891 as compared
with a net profit of $12,487 for the same period in 2000. The decline
in revenues for three months ended September 30, 2001 and the
increased loss were primarily due to the weakening U.S. economy and
continued slow demand for telecommunications equipment. As of the
September 30, 2001, the Registrant sees no improvement in the demand
for telecommunications equipment and services.
(b) Cost of Revenues. Cost of revenues increased approximately
78% from $346,458 for the three months ended September 30, 2000 to
$615,899 for the same period in 2001. Cost of revenues increased
approximately 15% from $1,283,968 for the nine months ended September
30, 2000 to $1,480,320 for the same period in 2001. These increases
are primarily the result of sales of inventory with high historical
costs (i.e., PBX systems and older software) at near the recorded cost
of such inventory items. Additionally, the Registrant had discounted
the selling price of certain inventory items in order to compete with
the declining prices for telecommunications equipment and services,
and provide movement of such inventory during the third quarter of 2001.
(c) Selling, General and Administrative. Selling, general and
administrative expenses increased approximately 19% from $243,726 for
the three months ended September 30, 2000 to $289,144 for the same
period in 2001. Such expenses increased approximately 26% from
$785,927 for the nine months ended September 30, 2000 to $991,396 for
the same period in 2001. These increases are primarily due to needed
professional services approximating $61,000 during third quarter of
2001. Professional expenses incurred primarily related to accounting
and legal services as a result of the Registrant's Form SB-2
registration statement filed and amended with the Securities and
Exchange Commission during the second and third quarter of 2001. The
Registrant believes professional fees incurred for the Form SB-2
registration statement during the three months ended September 30,
2001 are non-recurring in nature, exclusive of the fees associated
with the quarterly and annual reports required by the SEC.
Liquidity and Capital Resources
Comparison of nine month period ended September 30, 2001 and fiscal
year ended December 31, 2000.
As of September 30, 2001, the Registrant had a working capital
deficit of $226,582 compared to a working capital of $147,814 at
December 31, 2000. The Registrant's current ratio was a negative
1.68:1 at September 30, 2001 as compared with a current ratio of
1.53:1 at December 31, 2000. The decrease in working capital was
substantially due to an net losses incurred in the 2001.
The Registrant has historically relied upon cash flow from
operations to provide for its capital requirements. For the nine
months ended September 30, 2001, the Registrant generated a cash flow
surplus of $58,617 from its operating activities compared with a cash
flow deficit of $73,442 for the fiscal year ended December 31, 2000.
The increase cash flow is primarily related to a reduction in accounts
receivable of approximately $45,000 and an increase in accounts
payable and accrued liabilities of approximately $283,000.
The Registrant's growth strategy for the 2001 and 2002 fiscal
years will be its continued effort to increase revenues from the sale
of new and refurbished equipment. However, there will be challenges
ahead in light of the on-going and duration of weakness in the U.S.
economy. The continued slowdown in demand for telecommunications
equipment shows no sign of bottoming and has been exasperated by the
tragic events of September 11, 2001. The Registrant has initiated
cost cutting measures during the third quarter of 2001 that include
payroll reductions, lay-offs of three in-house technicians and the
elimination of medical and insurance benefits. The Registrant
believes that cash generated from operations, together with cash on
hand at September 30, 2001, will be sufficient to provide for its
capital requirements to sustain currently expected operations for at
least the next 12 months. The Registrant also intends to grow its
revenues through acquisition of other telecom companies which
integrate into the companies overall business plan. The Registrant
plans to accomplish these acquisitions through issuance of its common stock.
The Registrant is also exploring additional sources of financing
including new credit facilities and sale of common shares. There can
be no assurance that the Registrant will be able to obtain any
additional financing.
Forward Looking Statements.
The foregoing Management's Discussion and Analysis of Financial
Condition and Results of Operation contains "forward looking
statements" within the meaning of Rule 175 of the Securities Act of
1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as
amended, including statements regarding, among other items, the
Registrant's business strategies, continued growth in the Registrant's
markets, projections, and anticipated trends in the Registrant's
business and the industry in which it operates. The words "believe,"
"expect," "anticipate," "intends," "forecast," "project," and similar
expressions identify forward-looking statements. These forward-
looking statements are based largely on the Registrant's expectations
and are subject to a number of risks and uncertainties, certain of
which are beyond the Registrant's control. The Registrant cautions
that these statements are further qualified by important factors that
could cause actual results to differ materially from those in the
forward looking statements, including, among others, the following:
reduced or lack of increase in demand for the Registrant's products,
competitive pricing pressures, changes in the market price of
ingredients used in the Registrant's products and the level of
expenses incurred in the Registrant's operations. In light of these
risks and uncertainties, there can be no assurance that the forward-
looking information contained herein will in fact transpire or prove
to be accurate. The Registrant disclaims any intent or obligation to
update "forward looking statements."
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Registrant is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by or
against the Registrant has been threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
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.
Exhibits.
Exhibits included or incorporated by reference herein are set
forth in the attached Exhibit Index.
Reports on Form 8-K.
No reports on Form 8-K were filed during the third quarter of the
fiscal year covered by this Form 10-QSB.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
One Touch Total Communications, Inc.
Dated: November 12, 2001 By: /s/ C. Jay Smith
C. Jay Smith, President
EXHIBIT INDEX
Number Description
2 Agreement for Exchange of Common Stock between One Touch and
California Telephone Company, Inc., dated August 6, 1999
(incorporated by reference to Exhibit 2 of the Form SB-2/A
filed on September 18, 2001).
3.1 Articles of Incorporation, dated May 9, 1986 (incorporated
by reference to Exhibit 3.1 of the Form SB-2/A filed on
September 18, 2001).
3.2 Certificate of Amendment of Articles of Incorporation,
dated July 30, 1986 (incorporated by reference to Exhibit
3.2 of the Form SB-2/A filed on September 18, 2001).
3.3 Amended Articles of Incorporation, dated June 27, 1989
(incorporated by reference to Exhibit 3.3 of the Form SB-
2/A filed on September 18, 2001).
3.4 Certificate of Amendment of Articles of Incorporation, dated
December 3, 1990 (incorporated by reference to Exhibit 3.4
of the Form SB-2/A filed on September 18, 2001).
3.5 Amended Articles of Incorporation, dated May 24, 1999
(incorporated by reference to Exhibit 3.5 of the Form SB-
2/A filed on September 18, 2001).
3.6 Articles of Merger (including a name change), dated
September 22, 1999 (incorporated by reference to Exhibit 3.6
of the Form SB-2/A filed on September 18, 2001).
3.7 Certificate of Amendment to Articles of Incorporation, dated
February 28, 2001 (incorporated by reference to Exhibit 3.7
of the Form SB-2/A filed on September 18, 2001).
3.8 Bylaws, dated October 25, 1999 (incorporated by reference
to Exhibit 3.8 of the Form SB-2/A filed on September 18, 2001).
10.1 Employment Agreement between One Touch and C. Jay Smith,
dated September 1, 1998 (incorporated by reference to
Exhibit 10.1 of the Form SB-2/A filed on September 18, 2001).
10.2 Electronic Commerce Architecture Project between One Touch
and MFSNet.Com, dated May 1, 1999 (incorporated by reference
to Exhibit 10.2 of the Form SB-2/A filed on September 18, 2001).
10.3 Employment Agreement between One Touch and Richard G. Luna,
dated December 6, 1999 (incorporated by reference to Exhibit
10.3 of the Form SB-2/A filed on September 18, 2001).
16 Letter on change in certifying accountant (incorporated by
reference to Exhibit 16 of the Form SB-2/A filed on
September 18, 2001).