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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d))
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1998
COMMISSION FILE NO. 333-25521
_________________
UNIFI COMMUNICATIONS, INC.
--------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-3097640
------------------------ --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
900 CHELMSFORD STREET
LOWELL, MASSACHUSETTS 01851
----------------------------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (978) 551-7500
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 has required to file such reports), and 2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [_]
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
3,871,882 SHARES OF COMMON STOCK, $0.01 PAR VALUE, OUTSTANDING MAY 1, 1998.
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UNIFI COMMUNICATIONS, INC.
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION: ----
Consolidated Condensed Balance Sheets................. 1-2
Consolidated Condensed Statements of Operations....... 3
Consolidated Condensed Statement of Cash Flows........ 4-5
Notes to Consolidated Condensed Financial Statements.. 6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 8-14
PART II. OTHER INFORMATION:
Item 2: Changes in Securities........................ 15
Item 5: Other Information............................ 15
Item 6: Exhibits and Reports on Form 8-K............. 17
Signatures...................................................... 20
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PART I. FINANCIAL INFORMATION
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, December 31,
1998 1997
------------------ ------------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 33,280 $ 50,687
Short-term restricted cash 24,593 23,911
Accounts receivable, net 8,689 7,966
Prepaid expenses and other current assets 2,194 1,059
------------------ ------------------
Total current assets 68,756 83,623
------------------ ------------------
Property and equipment, net 25,830 25,452
------------------ ------------------
Restricted cash - long-term - 11,891
Deferred financing costs, net 7,991 8,319
Other assets, net 1,299 1,217
------------------ ------------------
Total assets $ 103,876 $ 130,502
================== ==================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS.
1
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UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------------ ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED)
<S> <C> <C>
Current Liabilities:
Current portion of notes payable and capital lease obligations $ 5,048 $ 5,340
Advances from principal stockholder - 312
Accounts payable 2,835 4,615
Accrued expenses 15,901 20,099
------------------ -------------------
Total current liabilities 23,784 30,366
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Long-Term Debt:
Senior notes payable 165,735 165,506
Notes payable and capital lease obligations, net of current portion 47,096 46,540
------------------ -------------------
Total long-term debt 212,831 212,046
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Stockholders' Equity (Deficit)
Convertible preferred stock, $1.00 par value, 24,715,500
shares authorized; 13,515,030 issued and outstanding
in 1998 and 1997 13,515 13,515
Common stock, $0.01 par value, 50,000,000 shares
authorized; 3,871,681 and 3,862,021 issued and
outstanding in 1998 and 1997, respectively 39 39
Additional paid in capital 35,885 35,877
Accumulated deficit (182,388) (161,120)
Cumulative translation adjustment 210 (221)
------------------ -------------------
Total stockholders' equity (deficit) (132,739) (111,910)
------------------ -------------------
Total liabilities and stockholders' equity $ 103,876 $ 130,502
================== ===================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS.
2
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UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------
1998 1997
------------------ ------------------
<S> <C> <C>
Revenues $ 13,136 $ 9,237
------------------ ------------------
Cost of revenues 11,202 8,149
Cost of revenues depreciation 1,387 1,042
------------------ ------------------
Total cost of revenues 12,589 9,191
Gross margin 547 46
Operating expenses:
Selling, general and administrative 10,316 10,101
Research and development 3,477 2,177
Depreciation and amortization 1,384 1,107
------------------ ------------------
Total operating expenses 15,177 13,385
Loss from operations (14,630) (13,339)
Interest Income 1,001 830
Interest Expense (7,638) (4,278)
------------------ ------------------
Net loss $ (21,267) $ (16,787)
================== ==================
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (5.50) $ (4.43)
================== ==================
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,867 3,790
================== ==================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS.
3
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UNIFI Communications, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (21,267) $ (16,787)
Adjustments to reconcile net loss to net cash used in
Operating activities:
Depreciation and amortization 2,789 2,346
Amortization of financing costs and warrants 619 109
(Gain)/Loss on disposal of property, plant, and equipment (2) 161
Changes in assets and liabilities:
Accounts receivable (669) (434)
Prepaid expenses and other current assets (823) (87)
Accounts payable (1,795) (10,015)
Accrued expenses (2,679) 2,235
Advances from stockholder (312) 4,820
---------------- ----------------
Net cash used in operating activities (24,139) (17,652)
---------------- ----------------
INVESTING ACTIVITIES:
Purchases of property and equipment (3,886) (762)
Proceeds from sale of property and equipment 68 105
Maturities of short-term investments 11,891 -
Net increase in other assets (55) (521)
---------------- ----------------
Net cash provided by (used in) investing activities 8,018 (1,178)
---------------- ----------------
FINANCING ACTIVITIES:
Proceeds (payments) on notes payable and capital leases (812) 717
Net proceeds from issuance of Senior Notes - 163,496
Proceeds from exercise of stock options and warrants 8 9
---------------- ----------------
Net cash provided by (used in) financing activities (804) 164,222
EFFECTS OF EXCHANGE RATES ON CASH 200 (154)
NET INCREASE IN RESTRICTED CASH (682) -
---------------- ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (17,407) 145,238
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 50,687 5,660
---------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 33,280 $ 150,898
================ ================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS.
4
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UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (IN THOUSANDS):
Cash paid for March 31, 1998 March 31, 1997
-------------- --------------
Interest $ 12,300 $ 600
Income Taxes $ --- $ ---
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS.
5
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UNIFI COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FORM 10-Q, MARCH 31, 1998
(UNAUDITED)
NOTE 1: INTERIM FINANCIALS
The accompanying consolidated condensed financial statements have been prepared
by UNIFI Communications (together with its consolidated subsidiaries, the
"Company") in accordance with generally accepted accounting principles for
interim financial statements and with the instructions to Form 10-Q and
Regulation S-X pertaining to interim financial statements. Accordingly, these
interim financial statements do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. The financial statements reflect all adjustments and accruals which
management considers necessary for a fair presentation of the Company's
financial position as of March 31, 1998 and results of operations for the three
months ended March 31, 1998 and March 31, 1997. The results for the interim
periods presented are not necessarily indicative of results to be expected for
any future period. The financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report Form on 10K for the year ended December 31, 1997.
NOTE 2: NET LOSS PER COMMON SHARE
The Company adopted SFAS No. 128, Earnings per share, which requires disclosure
about computing and presenting earnings per share. Basic net loss per common
share is computed based upon the net loss available to common stockholders and
the weighted average number of common shares outstanding during the period.
Diluted net loss per share is the same as basic net loss per common share since
the shares of stock issuable pursuant to stock options, warrants and upon the
conversion of the preferred stock are not considered as their effect would be
antidilutive. The Company had 3,459,377 shares of stock options and 7,749,219 of
warrants that were excluded from the net loss per common share computation at
March 31, 1998.
NOTE 3: COMPREHENSIVE INCOME
The Company adopted SFAS No. 130, Reporting Comprehensive Income, which requires
reporting comprehensive income separately between net income and other
comprehensive income. Other comprehensive income includes such classifications
as: foreign currency items, minimum pension liability adjustments, and
unrealized gains and losses on certain investments in debt and equity
securities. The Company's component of other comprehensive income is reported
below (in thousands):
<TABLE>
<CAPTION>
MARCH 30, December 31,
1998 1997
------------------ ------------------
<S> <C> <C>
Foreign Currency Translation
Beginning balance $ (221) $ 562
Current-period change 431 (783)
------------------ ------------------
Ending balance $ 210 $ (221)
================== ==================
</TABLE>
Note 4: New Accounting Standards
In June 1997, FASB issued SFAS No. 131, Disclosure about Segments of an
Enterprise and Related Information, which is effective for fiscal year beginning
after December 15, 1997 and early adoption, is encouraged. The Company is not
required to adopt SFAS No. 131 for interim financial statements in the initial
year of its application. Unless impracticable, the Company will be required to
restate prior period information upon adoption.
6
<PAGE>
UNIFI COMMUNICATIN, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FORM 10-Q, MARCH 31, 1998
(UNAUDITED)
NOTE: 5: SALE OF SERIES G CONVERTIBLE PREFERRED STOCK
On March 14, 1998, SingTel Global, the largest stockholder of the Company sold
all of its stock held in the Company consisting of 8,570,000 shares of the
Series G Convertible Preferred Stock of the Company to Douglas J. Ranalli,
Chairman of the Board of Directors and Chief Executive Officer of the Company,
for an aggregate purchase price of $8,570. The Series G Shares represented all
of the issued and outstanding shares of Series G Convertible Preferred Stock of
the Company and were originally purchased by SingTel Global from the Company in
April 1995 for an aggregate purchase price of approximately $30,000,000. In
connection with the sale of the Series G Convertible Preferred Stock, Mr.
Ranalli, SingTel Global and the Company agreed to terminate the Series G
Convertible Preferred Stock Agreement and Stockholders Agreement dated April 10,
1995, as amended.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORM 10-Q, MARCH 31, 1998
CAUTIONARY STATEMENTS WITH RESPECT TO FORWARD LOOKING STATEMENTS
This Quarterly Report contains "forward -looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the Company believes that
its plans, intentions and expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such plans, intentions
or expectations will be achieved. Important factors that could cause actual
results to differ materially from the Company's forward-looking statements are
described herein and in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
OVERVIEW
- --------
UNIFI Communications, Inc. ("UNIFI" or the "Company") believes that it is a
leading provider of international enhanced facsimile transmission and delivery
services. The Company has developed the Intelligent Delivery Network or IDN, a
system that combines highly efficient store-and-forward network technology with
a proprietary Delivery Expert System and a 24-hour multi-lingual fax delivery
staff. The Intelligent Delivery Network provides business customers with an
international point-to-point facsimile delivery service that is secure, easy to
use, more efficient, and more reliable than the direct dial services provided by
the world's conventional long-distance carriers. In many cases, the Company's
Intelligent Delivery Network services are also less expensive than traditional
direct-dial long distance services.
The Company commenced operations in April 1992, offering international enhanced
fax document delivery services between the United States and Japan. From April
1992 to the present, the Company has continued to expand its Intelligent
Delivery Network and its telecommunications service operations with funds
received in numerous equity and debt financings and from operations. As of
March 31, 1998, UNIFI, either directly (including through wholly-owned
subsidiaries) or through affiliates, offered its international enhanced fax
document delivery services and broadcast fax services in the United States,
Canada, United Kingdom, France, Germany, Hong Kong, the Republic of Korea (South
Korea), Japan, Australia, Singapore, the Republic of China (Taiwan). In
addition, the Company as of such date offered domestic unenhanced fax services
in the United States, the United Kingdom and Australia, and private voice resale
services to a single customer in the United States.
With respect to its core international enhanced fax service (FI-Direct), the
Company derives its revenues primarily from monthly customer charges based on
the actual number of minutes (or fractions thereof) of fax document
transmissions made by customers. The Company also charges its customers a
monthly network access charge (and in some markets sells FaxLinks) for the use
of each FaxLink installed at the customers' offices. The Company's principal
operating costs with respect to all of its services are sales and customer
service personnel, third party telecommunications transmission costs, and
research and development expense. There are two broad categories of
transmission cost: on-net costs, which are the costs of transmission and
delivery to countries in which the Company has installed a network node, and
(ii) off-net costs, which are the costs of transmission and delivery to
countries where the Company has no network facilities. Typically, at certain
volume levels, off-net transmission and delivery costs are higher than on-net
costs. As the Company continues to expand its Intelligent Delivery Network, the
Company expects to experience improvements in gross margins by reducing the
percentage of its international fax document traffic that is off-net. Certain of
the Company's services--namely, its domestic unenhanced fax services and its
private voice resale services--are provided outside of the IDN on a resale basis
by means of third-party transmission facilities. The Company's gross margins
from these services are a function of the difference between the cost to the
Company of such third party facilities and the price the Company is able to
charge its customers for providing the services. The Company believes that its
gross margins from its non-IDN services will improve as the volume of customer
transmissions increases, although the Company does not expect such services will
ever result in gross margins above approximately 15% due to competition among
providers of resale services.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORM 10-Q, MARCH 31, 1998
OVERVIEW (CONTINUED)
- --------------------
As disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, the report of the Company's independent public accountants on
the Company's consolidated 1997 financial statements contains an explanatory
fourth paragraph expressing substantial doubt about the Company's ability to
continue as a going concern. The Company will require substantial additional
debt and/or equity financing prior to the end of August 1998 in order to
continue operations beyond such date. The Company is presently seeking such
additional financing, but there can be no assurance that the Company will obtain
additional financing either in the amount required or by the date required, on
favorable terms or at all. Failure of the Company to obtain such additional
financing would have a material adverse effect on the Company's financial
condition and could result in the insolvency of the Company. Moreover, if the
Company's current projections of revenues, costs of revenues and/or gross
margins associated with revenues are inaccurate in any material respect the date
by which the Company requires additional financing could be prior to the end of
August 1998.
OPERATING RESULTS
- -----------------
Revenues. Revenues increased to $13.1 million for the
- --------
three months ended March 31, 1998 from $9.2 million for the comparable period
in 1997. This increase is due primarily to revenues from the Company's
broadcast fax services and private voice resale services, which were
commercially introduced in the third and fourth quarter of 1997, respectively,
and to increases in customer FI-Direct transmissions.
Revenues derived from the Company's foreign subsidiaries in international
markets were approximately $6.9 million for the three months ended March 31,
1998, compared to $5.4 million for the comparable period in 1997.
During the three months ended March 31, 1998, the Company derived ten percent or
more of its consolidated revenues from operations in North America (excluding
Canada), Japan, and Hong Kong, and from the operations of the Company's
Singapore affiliate, as follows:
Revenues as Percentage of
Total Consolidated Revenues for
Three Months Ended March 31,
UNIFI CI Unit 1998 1997
------------- ---- ----
North America 35.6% 30.3%
Japan 14.8% 19.8%
Hong Kong 11.0% 10.8%
Singapore 11.4% 10.9%
The Company expects that revenues from its North America operations will
continue to represent ten percent or more of the Company's total consolidated
revenues for the foreseeable future, primarily because of the significant size
of the market for telecommunications services in North America, and because the
Company's planned desktop computer-based fax service, which is expected for
commercial release in September 1998, will be deployed initially and, the
Company believes, the most comprehensively, in North America. The Company
cannot presently project which other geographic markets, if any, will represent
ten percent or more of the Company's consolidated revenues in future periods,
due to the uncertainty surrounding the effects of the Company's change in
business strategy for 1998 and thereafter as described in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997. There can be no
assurance that adverse political, regulatory or market conditions in any of the
Company's geographic markets will not develop and adversely affect the Company's
revenues derived from such markets. Moreover, following deployment of the
Company's desktop-computer-based fax service, the Company
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORM 10-Q, MARCH 31, 1998
OPERATING RESULTS (CONTINUED)
- -----------------------------
believes that the percentages of its total revenues derived from Asian markets
may decline relative to percentages of total revenues derived from North
American and European markets, as customers in Asian markets are expected to
adopt such new service at a slower rate than customers in North America and
Europe.
Revenues from the Company's core FI-Direct service were approximately $9.7
million for the three months ended March 31, 1998 compared to $8.4 million in
the comparable period in 1997. FI-Direct service revenues as a percentage of
total revenues was 74% for the three months ended March 31, 1998 compared to 91%
in the comparable period in 1997. The decline in FI-Direct revenues as a
percentage of total revenues for the first quarter of 1998 is attributable to
the revenues received from the Company's broadcast fax service and private voice
resale service during such quarter, which were not offered by the Company during
the first quarter of 1997. The number of active customers increased to
approximately 12,813 at March 31, 1998, as compared to 10,519 at March 31, 1997.
During the first quarter of 1998, the Company recognized $1.9 million in
revenues from its private voice resale service, amounting to 15% of the
Company's total consolidated revenues in such period. The Company has applied
for authority under Section 214 of the Communications Act of 1934, as amended,
to offer voice resale services to the public within the United States, and
expects to receive such authority during the second quarter of 1998. From and
after receipt of Section 214 authority, and prior to the commercial release and
market acceptance of its desktop computer-based fax service, the Company expects
that revenues from its voice resale services will continue to increase as a
percentage of its total revenues. However, there can be no assurance that the
Company's application for Section 214 authority will be approved by the Federal
Communications Commission (the "FCC") during the second quarter of 1998 or at
all. Failure of the Company to obtain Section 214 authority from the FCC on a
timely basis or at all would have a material adverse effect on the Company's
expectations for total consolidated 1998 revenues. Moreover, the Company will
be subject to regulatory requirements in markets outside of the United States
governing the provision of voice resale services, and there can be no assurance
that the Company and/or its subsidiaries will be able to obtain the required
authority to offer such services to customers outside of the United States. In
addition, the market for voice resale services is extremely competitive. There
can be no assurance that the Company, even if it receives Section 214 authority,
will be able to obtain sufficient customers or transmissions from customers to
result in expected revenues, or that the prices the Company is able to charge
for such services will be sufficient to result in significant revenues. Nor can
there be any assurance that the Company will be able to negotiate resale
agreements with underlying carriers that will enable the Company to realize
favorable gross margins from such services.
Cost of Revenues. Cost of revenues increased by 37% to $12.6 million for
- ----------------
the three months ended March 31, 1998 compared to $9.2 million for the
comparable periods in 1997. This increase in cost of revenues is due primarily
to increases in the third-party transmission and delivery costs incurred by the
Company for off-net transmissions and the Company's continued expansion of its
Intelligent Delivery Network. The Company's third party transmission and
delivery costs for off-net customer faxes increased even though the Company's
on-net to off-net traffic ratio improved, because the total volume of customer
fax transmissions increased by 66% in the first quarter of 1998 compared to the
first quarter of 1997. Cost of revenues as a percentage of revenues decreased to
96.2% for the three months ended March 31, 1998, compared to 100% for the
comparable period in 1997. The Company believes that its ongoing efforts to
reduce these off-net costs through least-cost routing techniques, negotiation of
favorable rates with telecommunications service providers and other means,
combined with the Company's continued expansion of its network, the
corresponding reduction in the percentage of customer transmissions that are
off-net and the use of new technology to increase efficiencies in data
transmission, will result in a continued decline in cost of revenues as a
percentage of revenues. However, there can be no assurance that changes in
customer transmission patterns will not result in greater than expected
transmissions to off-net
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORM 10-Q, MARCH 31, 1998
OPERATING RESULTS (CONTINUED)
- -----------------------------
destinations, thereby increasing the Company's off-net transmission costs beyond
current expectations, or that the Company will be able to install and operate
network facilities in countries that are currently off-net, or that the Company
will be able to continue to operate its network facilities in countries that are
currently on-net. Moreover, as the Company continues to introduce new service
offerings, such as voice resale service, broadcast fax services, and its
desktop-computer-based fax services currently under development, the Company
expects cost of revenues as a percentage of revenue to decline on a consolidated
basis. However, there can be no assurance that the Company's costs of revenue
associated with its newer services will not be higher than costs of revenue
associated with its core service, and consequently that as the percentage of
total revenue contributed by such newer services increases, the Company's costs
of revenue on a consolidated basis will not increase.
Gross Margin. Gross margin as a percentage of revenues improved to 4.2%
- ------------
for the three months ended March 31, 1998, compared to 0.5% for the comparable
period in 1997. The positive improvement in gross margin is due primarily to the
Company's ongoing cost reduction efforts as well as to increases in the
percentage of the Company's total fax document traffic that is delivered on-net,
made possible by the Company's continued expansion of its network in new
geographical markets. The Company's on-net/off-net traffic ratio improved to
approximately 79% in the month of March, 1998 as compared to approximately 63.1%
in the month of March, 1997. The improvement in the Company's on-net to off-net
ratio between March 1998 and March 1997 is due primarily to the continued
installation of network nodes by the Company in additional countries during such
period. The number of network nodes increased from 23 at March 31, 1997 to 33 at
March 31, 1998.
The improvement to the Company's gross margin for the three months ended March
31, 1998 occurred despite the fact that the Company's average net revenue per
minute of FI-Direct fax traffic decreased by 10.3% to $0.61 per minute at March
31, 1998 from $0.68 per minute at March 31, 1997. The Company anticipates
further declines in its average net revenue per minute of FI-Direct fax traffic
as worldwide telecommunications prices continue to decline as a result of the
WTO Agreement and deregulation of telecommunications markets, requiring the
Company to further lower its per minute transmission charges to customers in
order to remain competitive. As described in the Company's Annual Report on Form
10-K for the year ended December 31, 1997, this trend has led the Company to
conclude that it must focus its business growth efforts on services other than
FI-Direct, primarily its broadcast fax service, its voice resale service, and
its desktop computer-based fax service scheduled for commercial release in
September 1998. The Company believes that its prices for broadcast fax service
and desktop computer-based fax service will not be as sensitive to further
declines in worldwide basic telecommunications rates as is the Company's FI-
Direct service, and that, as a result, the Company's gross margins from such
services will improve relative to FI-Direct gross margins. However, there can be
no assurance that the Company's expectations in this regard will prove correct.
In addition, the Company does not expect that its gross margins from revenues in
its different geographic markets will be uniform. To the extent that the Company
derives higher than expected revenues from operations in geographic markets
where gross margins are lower than in other markets, the Company's consolidated
gross margin could be adversely affected. The Company also expects that gross
margins from revenues associated with its voice resale services will contribute
toward improving the Company's total consolidated gross margins during 1998,
although there can be no assurance to that effect.
Selling, General and Administrative expenses. Selling, general and
- --------------------------------------------
administrative expenses increased to $10.3 million for the three months ended
March 31, 1998, compared to $10.1 million for the comparable period in 1997.
Included in general, selling and administrative expenses are related sales and
customer service expense which decreased to $6.6 million for the three months
ended March 31, 1998, compared to $8.1 million for the comparable period in
1997. The decrease in sales and customer service
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORM 10-Q, MARCH 31, 1998
OPERATING RESULTS (CONTINUED)
- -----------------------------
expense was due primarily to the decrease to sales and customer service
personnel from approximately 361 at March 31, 1997 to approximately 283 at March
31, 1998. During the first quarter of 1998, the Company reduced its sales and
customer service personnel, as part of the Company's strategy to refocus the
Company's business development efforts away from the marketing, sale and
provision of FI-Direct service toward the marketing, sale and provision of the
Company's desktop computer-based fax service (currently under development) and
its broadcast service. General and administrative expenses increased to $3.7
million for the three months ended March 31, 1998, compared to $2.0 million in
the comparable period in 1997. This increase is due primarily to approximately
$0.7 million in restructuring expenses related to the refocus of the Company's
strategy. In addition, the Company incurred approximately $0.6 million in
payroll and related contract services expenses for world-wide information
support and approximately $0.3 million in facilities related expenses for rent.
Selling, general and administrative expenses as a percentage of revenues
decreased to 78.6% for the three months ended March 31, 1998 as compared to
109.8% in the comparable periods in 1997. The Company expects selling, general
and administrative expenses to continue to decline as a percentage of revenues
as revenue growth occurs. However, if the Company's total revenues do not
continue to grow significantly or decline during 1998, or if the Company is
required to increase the absolute levels of sales and customer support expenses
in 1998 to support its anticipated release of new desktop computer-based fax
services, then selling, general and administrative expenses could increase as a
percentage of total 1998 revenues as compared to 1997.
Research and development expenses. Research and development expenses increased
- ---------------------------------
to $3.5 million for the three months ended March 31, 1998, compared to $2.2
million for the comparable period in 1997. The number of research and
development personnel increased from approximately 77 at March 31, 1997 to
approximately 113 at March 31, 1998. Research and development expenses as a
percentage of revenue increased to 26.7% for the three months ended March 31,
1998, compared to 23.9% for the comparable period in 1997. The Company's
research and development expenditures are made for the purpose of developing new
services as well as maintaining and enhancing existing services. The most
substantial component of research and development expense is personnel,
including full-time employees and independent contractors. The Company expects
that its actual research and development expenses will remain at present levels
or increase slightly until the Company completes development and initial
deployment of its desktop-computer-based fax services. As the Company's total
consolidated revenue increases, the Company expects research and development
expenses as a percentage of revenue to decline.
However, there can be no assurance that problems or delays encountered in
developing, deploying or supporting the Company's desktop-computer-based fax
services, or its development of new services the Company determines are required
in order to remain competitive, will not result in an increase in research and
development expenses beyond the Company's current expectations.
Interest income and expense. Interest income increased to $1.0 million
- ---------------------------
for the three months ended March 31, 1998, compared to $0.8 million in the
comparable period in 1997. Interest income in the comparable periods is related
primarily to the result of interest earned on net proceeds received from the
sale of Units by the Company on February 21, 1997. See "Liquidity and Capital
Resources". The Company expects interest income to decrease as it continues to
utilize non-restricted cash for operations and as it begins to pay down interest
due on its debt financing.
Interest expense increased to $7.6 million for the three months ended March 31,
1998, compared to $4.3 million for the comparable period in 1997. The increase
was primarily the result of borrowings by the Company evidenced by the Senior
Notes. Interest expense relating to the Senior Notes totaled $6.1 million for
the three months ended March 31, 1998. The Company made its second interest
payment of $12.2 million on the Senior Notes from its escrow account in the
first quarter of 1998.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORM 10-Q, MARCH 31, 1998
OPERATING RESULTS (CONTINUED)
- -----------------------------
EBITDA. Gross margin EBITDA (revenues less cost of revenues, excluding
- ------
$1.9 million for the three months ended March 31, 1998, compared to $1.1 million
for the comparable periods in 1997. EBITDA gross margin percentage increased to
14.5% for the three months ended March 31, 1998 compared to 11.9% for the
comparable period in 1997. The improvement in the Company's gross margin EBITDA
between reported periods is due to the increase in revenues as well as the
Company's ongoing cost reduction efforts.
EBITDA (earnings before interest expense, taxes, depreciation and amortization)
declined by 3.8% to approximately $(10.8) million for the three months ended
March 31, 1998, compared to approximately $(10.4) million for the comparable
period in 1997. The decline in EBITDA between the comparable three month periods
is due largely to normal operating expenses and restructuring expenses
incurred in the first quarter of 1998.
There can be no assurance that the Company's gross margin EBITDA and/or EBITDA
will not be materially adversely affected by other factors beyond the Company's
control, particularly third-party transmission and delivery costs incurred by
the Company in connection with its off-net delivery of international faxes and
its domestic delivery of faxes by users of the Company's broadcast and desktop-
computer-based fax services. In addition, gross margin EBITDA and/or EBITDA
could be materially adversely affected if the Company is required to lower its
per-minute transmission charges to customers faster or more steeply than
currently anticipated due to faster or more steep declines in worldwide
telecommunications prices. Failure by the Company to sustain improvements to
its gross margin EBITDA and EBITDA would have a material adverse effect on the
Company's operations and could cause the Company to default on its payment
obligations under the Senior Notes after the final disbursement of the escrowed
interest payments.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company has historically financed its cash requirements for operations and
investments primarily through private sales of equity and debt securities as
well as equipment financing arrangements and other borrowings. Most recently,
on February 21, 1997, the Company sold units ("Units") consisting of 14% Senior
Notes due 2004 ("Senior Notes") and warrants ("Warrants") to purchase an
aggregate of 4,816,818 shares ("Warrant Shares") of the Company's Common Stock
for an aggregate price of $175,000,000. Cash and equivalents decreased to $33.3
million at March 31, 1998 compared to $50.7 million at December 31, 1997 and
$150.9 million at March 31, 1997. This decrease is due primarily to the
Company continuing to fund its operating and capital requirements with the net
proceeds received from the sale of the Units. Under the Escrow Agreement
entered in connection with the sale of the Units, the Company was required to
place the first four interest payments on the Senior Notes in an escrow account
as restricted cash. The Company made its second interest payment from the escrow
account of approximately $12.2 million in the first quarter of 1998. The Company
has restricted cash and investments of $24.6 million at March 31, 1998 compared
to $35.8 million at December 31, 1997. The Company's current ratio including
restricted cash at March 31, 1998 increased to 2.89 from 2.75 at December 31,
1997 and decreased from 4.7 at March 31, 1997.
Increases in accounts receivable, attributable to the growth in revenue used
cash of $0.7 million and increases in other current assets used cash of $0.8
million for the three months ended March 31, 1998. The average age of the
Company's accounts receivable increased by approximately two days from 58 at
March 31, 1997 to 60 at March 31, 1998, primarily as a result of longer payment
cycles in certain of the Company's European markets.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORM 10-Q, MARCH 31, 1998
LIQUIDITY AND SOURCES OF CAPITAL
(CONTINUED)
- --------------------------------------------
Net cash provided by investing activities was $8 million in the three months
ended March 31, 1998. These investing activities relate primarily to purchases
of property and equipment and the maturity of restricted investments. Property
and equipment expenditures for the three months ended March 31, 1998 of $3.9
million were offset by $0.07 million of proceeds generated from the sale of
property and equipment. Additions to property and equipment were primarily for
network hardware equipment, business office hardware and software, and equipment
used in the Company's private voice resale service.
Net cash used in financing activities was $0.8 million in the three months ended
March 31, 1998. These financing activities relate primarily to the paydown of
the Company's notes payable and capital lease commitments.
As disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, the report of the Company's independent public accountants on
the Company's consolidated 1997 financial statements contains an explanatory
fourth paragraph expressing substantial doubt about the Company's ability to
continue as a going concern. The Company will require substantial additional
debt and/or equity financing prior to the end of August 1998 in order to
continue operations beyond such date. The Company is presently seeking such
additional financing, but there can be no assurance that the Company will obtain
additional financing either in the amount required or by the date required, on
favorable terms or at all. Failure of the Company to obtain such additional
financing would have a material adverse effect on the Company. Moreover, if the
Company's current projections of revenues, costs of revenues and/or gross
margins associated with revenues are inaccurate in any material respect the date
by which the Company requires additional financing could be prior to the end of
August 1998.
The Company does not have a significant source of liquidity other than the
remaining net proceeds (less the amount placed in escrow) received from the sale
of the Units. The Company will require substantial additional debt and/or
equity financing prior to the end of August 1998 in order to continue business
operations as presently conducted beyond such date. Failure of the Company to
obtain such additional financing by such date would have a material adverse
effect on the Company and could result in its insolvency. Moreover, the
projected date by which the Company requires such additional financing is based
upon its current projections as to revenues, costs of revenues and cash flows
associated with revenues prior to such date. If such projections prove to be
inaccurate in any material respect, the date by which the Company requires
additional financing could be earlier than the end of August 1998. The
Company's Senior Notes Indenture contains certain restrictions on the Company's
ability to incur additional indebtedness and its ability to obtain additional
financing generally. There can be no assurance that the Company will be able to
obtain the required additional financing in accordance with such restrictions,
or otherwise on terms favorable to the Company or at all, or by the date
required. The Company may be required to seek waivers of, or amendments to,
certain provisions of its Senior Notes Indenture in order to secure such
financing, and there can be no assurance that the Company will be able to obtain
such waivers and/or amendments, if required, on a timely basis or at all.
14
<PAGE>
PART II: OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES
- ------------------------------
(C) UNREGISTERED SALES OF EQUITY SECURITIES DURING THE QUARTER ENDED
MARCH 31, 1998
During the three months ended March 31, 1998, the Company issued shares of
Common Stock to employees, contractors and/or consultants of the Company in
unregistered sales pursuant to such persons' exercises of stock options granted
under the Company's Amended and Restated 1993 Stock Option Plan, as follows:
<TABLE>
<CAPTION>
Number of Shares Aggregate Cash
Date of Sale of Common Stock Exercise Price
- ------------ ---------------- --------------
<S> <C> <C>
1/21/98 1,712 $ 599.20
1/30/98 242 520.30
2/2/98 472 495.60
2/3/98 5,234 5,160.70
</TABLE>
All of the foregoing sales by the Company were made pursuant to the exemption
from registration set forth in Section 4 (2) of the Securities Act of 1933, as
amended.
ITEM 5: OTHER INFORMATION
- --------------------------
Certain Changes in the Board of Directors, Management and Stock Ownership.
-------------------------------------------------------------------------
On March 13, 1998, two of the Company's directors--Mr. Lim Eng and Ms. Chua Sock
Koong--resigned from such positions. Mr. Lim also resigned from his position as
Vice President and Chief Operating Officer of the Company. On March 14, 1998,
SingTel Global Services Pte. Ltd., a principal stockholder of the Company and a
wholly-owned subsidiary of Singapore Telecommunications Limited, sold all of its
Series G Convertible Preferred Stock of the Company to Douglas J. Ranalli,
Chairman of the Board of Directors and Chief Executive Officer of the Company.
As a result of this transaction, Douglas J. Ranalli owns approximately 63% of
the total issued and outstanding voting capital stock of the Company (as of May
1, 1998), and approximately 41% of the total voting capital stock of the Company
on a fully-diluted basis as of such date (including all warrants and options to
purchase capital stock of the Company exercisable within 60 days).
On March 16, 1998, the Board of Directors elected Mark F. Ranalli, a Vice
President of the Company (prior to March 17, 1998) and the brother of Douglas J.
Ranalli, the Company's Chairman, President (prior to March 17, 1998) and Chief
Executive Officer, as a director.
On March 17, 1998, John B. Beinecke resigned as a director of the Company.
Also on such date, the Board of Directors designated Mark F. Ranalli as the
President of the Company, and Timothy J. Martel as the Executive Vice President
and Chief Operating Officer of the Company. Douglas J. Ranalli continues to be
the Chairman of the Board of Directors, Chief Executive Officer, Acting Chief
Financial Officer and Acting Vice President of Research and Development of the
Company.
15
<PAGE>
Default under Warrant Shares Registration Rights Agreement. The Company
----------------------------------------------------------
presently is in default of its obligations under the Warrant Shares Registration
Rights Agreement executed in connection with the Company's sale of the Units.
The Warrant Shares Registration Rights Agreement required the Company to have
filed a registration statement pursuant to the Securities Act of 1933, as
amended, with the Securities and Exchange Commission relating to the issuance of
the Warrant Shares by the Company upon exercise of the Warrants and to have
caused such registration statement to become effective on or before March 1,
1998. The Company has not as of the date of this Quarterly Report Form 10-Q
filed such required registration statement, primarily because the Company is
still re-evaluating its business and growth strategy and its liquidity and
capital resource needs for 1998 and thereafter, and believed that it could not
make the disclosures required in such registration statement in compliance with
the requirements of federal securities laws until the conclusion of such re-
evaluation. The Company has not received notice from any Warrant holders that
is in default under the Warrant Shares Registration Rights Agreement, nor has it
sought a waiver from the Warrant holders of such default. The Warrant Shares
Registration Rights Agreement provides that, in the event of such a default by
the Company, in addition to other remedies the Warrant holders may have, the
Company is liable for liquidated damages in the amount of $.001 per week per
Warrant for the first 90 day period of such default, which amount shall increase
by an additional $.001 per week per Warrant for each successive 90-day period
during which such default continues, up to a maximum of $.005 per week per
Warrant. If the Company files the required registration statement and causes it
to become effective no later than May 30, 1998, the Company will be liable for a
maximum liquidated damages amount of $2,275. If the Company files such
registration statement and causes it to become effective after May 30, 1998 but
prior to August 29, 1998, the Company will be liable for a maximum liquidated
damages amount of $6,825. The Company intends either to file the required
registration statement and use its best efforts to cause it to become effective
as soon thereafter as possible, or to seek a waiver from the Warrant holders
with respect to such required filing, as soon after the date hereof as
practicable. The Company does not believe that its default under the Warrant
Shares Registration Rights Agreement will have a material adverse effect on the
Company's business or financial condition, but there can be no assurance to that
effect.
16
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(A) The following exhibits are filed herewith:
Exhibit No. Description
----------- -----------
+3.1 Certificate of Incorporation, as amended, of
UNIFI Communications, Inc.
+3.2 By-Laws of UNIFI Communications, Inc.
+4.1 Indenture, dated as of February 21, 1997,
between UNIFI Communications,
Inc. and Fleet National Bank, as trustee,
relating to $175,000,000 in
aggregate principal amount of 14% Senior
Notes due 2004.
+4.2 Specimen Certificate of 14% Senior Notes due
2004 (the "Private Notes")
(included in Exhibit 4.1).
+4.3 Specimen Certificate of 14% Senior Notes due
2004 (the "Exchange
Notes") (included in Exhibit 4.1).
+4.4 Registration Rights Agreement, dated as of
February 21, 1997, between
UNIFI Communications, Inc. and Smith Barney Inc.
+4.5 Unit Agreement, dated as of February 21, 1997,
between UNIFI Communications, Inc. and Fleet National
Bank, as unit agent.
+4.6 Escrow Agreement, dated as of February 21, 1997,
between UNIFI Communications, Inc. and Fleet National
Bank, as escrow agent.
+10.1 Credit Agreement, dated as of April 10,
1995, among UNIFI Communications, Inc. and
SingTel (Netherlands Antilles) Pte N.V.
+10.2 Amendment, dated as of February 21, 1997, to the Credit
Agreement, dated as of April 10, 1995, among UNIFI
Communications, Inc. and SingTel (Netherlands
Antilles) Pte. N.V.
+10.3 Term Loan Agreement-Equipment, dated as of April 10,
1995 among
UNIFI Communications, Inc. and SingTel (Netherlands
Antilles) Pte. N.V.
+10.4 Amendment, dated as of February 21, 1997, to the Term
Loan Agreement-Eqipment, dated as of April 10, 1995,
among UNIFI Communications, Inc. and SingTel
(Netherlands Antilles) Pte. N.V.
+10.5 Intercompany Operating Agreement, dated as of April 10,
1995, between UNIFI Communications, Inc. and Singapore
Telecommunications Limited, as amended by Amendment No.
1 dated as of September 30, 1996 (the "Intercompany
Operating Agreement").
+10.6 Amendment No. 1 to the Intercompany Operating Agreement
dated September 30, 1996 between UNIFI Communications,
Inc. and Singapore Telecommunications Limited.
+10.7 Amendment, dated as of February 21, 1997, to the
Intercompany Operating Agreement dated April 10, 1995,
among UNIFI Communications, Inc. and Singapore
Telecommunications Limited.
+10.8 Series G Convertible Preferred Stock Purchase Agreement,
dated as of April 10, 1995, among UNIFI Communications,
Inc. SingTel Global Services Pte Ltd.
+10.9 First Amendment, dated as of February 5, 1997, of the
Series G Convertible Preferred Stock Purchase Agreement,
dated as of April 10, 1995, among UNIFI Communications,
Inc. SingTel Global Services Pte Ltd, as amended .
+10.10 Second Amendment, dated as of February 21, 1997, of the
Series G Convertible Preferred Stock Purchase Agreement,
dated as of April 10, 1995, between UNIFI
Communications, Inc., SingTel Global Services Pte Ltd,
as amended.
+10.11 Amended Restated Registration Rights Agreement, dated as
of April 10, 1995 among UNIFI Communications, Inc. and
various investors named therein.
+10.12 Amended, dated as of February 21, 1997, of the Amended
and Restated Registration Rights Agreement, dated as of
April 10, 1995 among UNIFI Communications, Inc. and
various investors named therein.
17
<PAGE>
+10.13 Consent and Waiver, dated as of February 20, 1997, of
the Amended and Restated Registration Rights Agreement,
dated as of April 10, 1995 among UNIFI Communications,
Inc. and various investors named therein.
+10.14 Stockholders Agreement, dated as of April 10, 1995,
among UNIFI Communications, Inc. and the stockholders
named therein.
+10.15 First Amendment to the Stockholders Agreement, dated
February 21, 1997, among UNIFI Communications, Inc.,
SingTel Global
Services Pte. Ltd and certain stockholders named therein
+10.16 Employment Agreement, dated as of April 10, 1995, among
UNIFI Communications, Inc. and Douglas J. Ranalli.
+10.17 Warrant to purchase 2,000,000 shares of the Company's
Common Stock, issued to SingTel Global Services Pte.
Ltd, dated February 21, 1997
+10.18 Warrant Agreement, dated as of February 21, 1997,
between UNIFI Communications, Inc. and Fleet National
Bank, as warrant agent.
+10.19 Specimen Warrant Certificate (included in Exhibit
10.25).
+10.20 Warrant Shares Registration Rights Agreement, dated as
of February 21, 1997, between UNIFI Communications, Inc.
and Smith Barney, Inc.
+10.21 Lease dated August 2, 1996 between UNIFI Communications,
Inc. and Cross Point Limited Partnership.
+10.22 Agreement dated August 2, 1996 between UNIFI
Communications, Inc. and Cross Point Limited Partnership
(included in exhibit 10.21 hereto).
+10.23 Subordination Agreement dated August 2, 1996 between
UNIFI Communications, Inc., Cross Point Limited
Partnership and SingTel (Netherland Antilles) Pte N.V.
(included in Exhibit 10.21).
+10.24 Software License and Services Agreement dated September
20, 1996 between UNIFI Communications, Inc. and Control
Data Systems, Inc.
+10.25 $2,049,315 Convertible Term Note, dated as of April 1,
1997, of UNIFI Communications, Inc. dated as of April 1,
1997, issued to Control Data Systems, Inc.
+10.26 Warrant to purchase up to 50,406 shares of Common Stock
of UNIFI Communications, Inc., dated as of April 1,
1997, issued to Control Data Systems, Inc.
+10.27 Share Sale Agreement (Fax International Australia Pty.
Limited) dated as of September 29, 1997 among UNIFI
Communications, Inc., Graham Bruce Darley and Sin Hang
Boon.
+10.28 Agreement for Sale of Business dated as of March 31,
1998 between SingCom (Australia) Pty. Limited and Fax
International Australia Pty. Limited.
+10.29 First Amendment to Lease, dated as of June 25, 1997,
between UNIFI Communications, Inc. and Cross Point
Limited Partnership.
+10.30 Second Amendment to Lease, dated as of October 21, 1997,
between UNIFI Communications, Inc. and Cross Point
Limited Partnership.
++10.31 Third Amendment, dated as of March 14, 1998, to Series G
Convertible Preferred Stock Purchase Agreement dated as
of April 10, 1995, as amended, among UNIFI
Communications, Inc., SingTel Global Services Pte. Ltd.
and Douglas J. Ranalli.
++10.32 Second Amendment, dated as of March 14, 1998, to
Stockholders Agreement
18
<PAGE>
dated as of April 10, 1995, as amended, among UNIFI
Communications, Inc., SingTel Global Services Pte. Ltd.,
Douglas J. Ranalli and Shelly Ranalli.
++10.33 Second Amendment, dated as of March 14, 1998, to Credit
Agreement dated as of April 10, 1995, as amended, among
UNIFI Communications, Inc. and SingTel (Netherlands
Antilles) Pte. N.V.
++10.34 Second Amendment, dated as of March 14, 1998, to Term
Loan Agreement--Equipment dated as of April 10, 1995, as
amended, among UNIFI Communications, Inc. and SingTel
(Netherlands Antilles) Pte. N.V.
*11.0 Statement re: Computation of Net Loss per Common Shares
*27.0 Financial Data Schedule.
- ----------------------------
*Filed herewith
+Previously filed with registrant's Registration Statement on Form S-4
(Registration No. 333-25521) and incorporated herein by reference.
++Previously filed with registrant's Annual Report on Form 10-K for the year
ended December 31, 1997 and incorporated herein by reference.
(B) There were no reports on Form 8-K filed during the quarter ended
March 31, 1998.
19
<PAGE>
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.
UNIFI Communications, Inc.
By: /s/ Douglas J. Ranalli
_____________________
Douglas J. Ranalli
Chief Executive Officer
(Principal Executive Officer)
and Acting Chief Financial Officer
(Principal Financial Officer)
Date: May 14, 1998
20
<PAGE>
EXHIBIT 11.0
UNIFI COMMUNICATIONS, INC.
COMPUTATION OF NET LOSS PER SHARE (1)
FORM 10-Q, MARCH 31, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------------
1998 1997
------------------ ------------------
<S> <C> <C>
Net loss $ (21,267) $ (16,787)
================== ==================
Weighted average number of common shares outstanding
during period 3,867 3,790
================== ==================
Basic net loss per common share $ (5.50) $ (4.43)
================== ==================
(1) Primary and fully diluted net loss per share has not been separately presented, as the amounts would not
be meaningful.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 FOR UNIFI COMMUNICATIONS
INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 57,873
<SECURITIES> 0
<RECEIVABLES> 9,586
<ALLOWANCES> 897
<INVENTORY> 0
<CURRENT-ASSETS> 68,756
<PP&E> 47,114
<DEPRECIATION> 21,284
<TOTAL-ASSETS> 103,876
<CURRENT-LIABILITIES> 23,784
<BONDS> 0
0
13,515
<COMMON> 39
<OTHER-SE> (182,178)
<TOTAL-LIABILITY-AND-EQUITY> 103,876
<SALES> 13,136
<TOTAL-REVENUES> 13,136
<CGS> 11,202
<TOTAL-COSTS> 12,589
<OTHER-EXPENSES> 15,177
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,638)
<INCOME-PRETAX> (21,267)
<INCOME-TAX> 0
<INCOME-CONTINUING> (21,267)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,267)
<EPS-PRIMARY> (5.50)
<EPS-DILUTED> 0
</TABLE>
