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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 SEPTEMBER 30, 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.
3,878,327 SHARES OF COMMON STOCK, $0.01 PAR VALUE, OUTSTANDING
NOVEMBER 12, 1998.
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<PAGE>
UNIFI COMMUNICATIONS, INC.
TABLE OF CONTENTS
Page
----
RECENT DEVELOPMENTS................................................. i
PART I. FINANCIAL INFORMATION:
Consolidated Condensed Balance Sheets...................... 1-2
Consolidated Condensed Statements of Operations............ 3
Consolidated Condensed Statements 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 5: Other Information................................. 15
Item 6: Exhibits and Reports on Form 8-K.................. 16
Signatures................................................. 19
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
RECENT DEVELOPMENTS
FORM 10-Q, SEPTEMBER 30, 1998
RECENT DEVELOPMENTS
- -------------------
NEED FOR ADDITIONAL FINANCING
Previously, the Company had disclosed that it would 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.
However, due to cost control measures employed by the Company during the second
and third quarters of 1998, primarily the deferral of certain planned capital
expenditures, and payment deferral agreements with certain vendors, the Company
believes that its existing unrestricted cash will sustain operations until the
end of December 1998. However, there can be no assurance that unforeseen
expenditures will not result in exhaustion of the Company's cash prior to such
date. In addition, the Company is currently pursuing short-term asset-based debt
financing in the amount of $2 million to $4 million. If the Company succeeds in
obtaining such financing, then the Company could continue operations through the
end of January 1999. There can be no assurance that the Company will be able to
obtain such short-term financing on terms favorable to the Company or at all.
The Company believes that it requires between $40 and $60 million in additional
equity and long-term debt financing ("permanent financing") in order to complete
development of its new services and achieve cash-flow positive operations. The
Company's senior management has been actively seeking such permanent financing,
but as of the date of this Quarterly Report, has not secured a commitment from
any source to provide any such financing. The Company has engaged two (2)
independent investment advisors to assist the Company in its long-term financing
efforts, and is currently discussing a potential long-term investment with five
sources. The failure or inability of the Company to secure such new long-term
financing, on terms favorable to the Company or at all, prior to the exhaustion
of its cash resources (including the proceeds from any short-term asset based
funding received by the Company) will result in the Company's insolvency and
require it to seek relief under federal bankruptcy laws.
Management believes that a condition to obtaining new permanent financing will
be a restructuring of the Company's existing debt and equity arrangements.
Should the Company obtain a commitment for new permanent financing prior to
exhausting its cash resources, the Company may seek reorganization under Chapter
11 of the US Bankruptcy Code (the "Code"), or may seek a sale of its assets
under the Code or other procedures. The Company has retained the services of
KPMG Peat Marwick LLP to provide advice relating to any reorganization
activities. Successful implementation of any plan of reorganization proposed by
the Company under Chapter 11 will require the approval of certain of the
Company's creditors, and there can be no assurance that such approvals will be
obtained on a timely basis or at all. Effecting a sale of the Company's assets
under the Code or otherwise will depend in part upon certain conditions outside
of the Company's control. Therefore, even if the Company is successful in
obtaining a commitment for new permanent financing prior to the exhaustion of
its cash (including the proceeds from any short-term financing) if the Company
proposes a plan of reorganization under Chapter 11 and is not able to timely
obtain the required creditor approvals, or if the Company is unable to effect a
sale of its assets under the Code or otherwise, then the Company will be
required to file a petition for liquidation under Chapter 7 of the Code.
The Company presently intends to continue business operations until exhaustion
of its cash resources (including the proceeds from any short-term financing) and
to continue seeking new permanent financing until such time.
TRADING OF SENIOR NOTES
The Company believes that its 14% Senior Notes due 2004 have traded recently at
prices substantially below face value, in the range of $0.055 to $0.07 per $1.00
of face amount. The Company believes that the recent Senior Notes trading at
such a substantial discount reflects the judgment of the parties to such trades
that the Company is likely to seek some form of financial restructuring in order
to continue its business operations.
i
<PAGE>
PART I. FINANCIAL INFORMATION
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------------ ------------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 11,635 $ 50,687
Short-term restricted investments 13,092 23,911
Accounts receivable, net 7,565 7,966
Prepaid expenses and other current assets 1,937 1,059
------------------ ------------------
Total current assets 34,229 83,623
------------------ ------------------
Property and equipment, net 23,168 25,452
------------------ ------------------
Long-term restricted investments - 11,891
Deferred financing costs, net 7,314 8,319
Other assets, net 1,462 1,217
------------------ ------------------
Total assets $ 66,173 $ 130,502
================== ==================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS.
1
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------------ -------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED)
<S> <C> <C>
Current Liabilities:
Current portion of notes payable and
capital lease obligations $ 3,611 $ 5,340
Accounts payable 3,705 4,615
Accrued expenses 11,520 20,411
------------------ -------------------
Total current liabilities 18,836 30,366
------------------ -------------------
Long-Term Debt:
Senior notes payable 166,223 165,506
Notes payable and capital lease obligations,
net of current portion 48,779 46,540
------------------ -------------------
Total long-term debt 215,002 212,046
------------------ -------------------
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; 3,878,327 and 3,862,021 issued and
Outstanding in 1998 and 1997, respectively 39 39
Additional paid in capital 35,892 35,877
Accumulated deficit (217,807) (161,120)
Cumulative translation adjustment 696 (221)
------------------ -------------------
Total stockholders' equity (deficit) (167,665) (111,910)
------------------ -------------------
Total liabilities and stockholders' equity $ 66,173 $ 130,502
================== ===================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS.
2
<PAGE>
UNIFI COMMUNICATIONS INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 10,888 $ 11,722 $ 36,619 $ 32,173
------------ ------------ ------------ ------------
Cost of revenues 7,008 9,647 26,740 27,426
Cost of revenues depreciation 1,422 1,075 4,914 3,035
------------ ------------ ------------ ------------
Total cost of revenues 8,430 10,722 31,654 30,461
Gross margin 2,458 1,000 4,965 1,712
Operating expenses:
Selling, general and administrative 6,630 9,267 25,580 29,885
Research and development 3,928 3,624 11,244 9,018
Depreciation and amortization 1,480 1,266 4,251 3,556
------------ ------------ ------------ ------------
Total operating expenses 12,038 14,157 41,075 42,459
Loss from operations (9,580) (13,157) (36,110) (40,747)
Interest Income 506 1,432 2,207 4,176
Interest Expense (7,940) (8,204) (23,479) (20,367)
------------ ------------ ------------ ------------
Loss before extraordinary gain (17,014) (19,929) (57,382) (56,938)
Extraordinary gain on extinguishment of debt - - 695 -
------------ ------------ ------------ ------------
Net loss $ (17,014) $ (19,929) $ (56,687) $ (56,938)
============ ============ ============ ============
Net loss per common share
Basic and diluted loss before extraordinary
gain $ (4.39) $ (5.22) $ (14.81) $ (14.99)
============ ============ ============ ============
Basic and diluted extraordinary gain $ - $ - $ 0.18 $ -
============ ============ ============ ============
Basic and diluted net loss $ (4.39) $ (5.22) $ (14.63) $ (14.99)
============ ============ ============ ============
Basic and diluted weighted average common
shares used in computing per share amounts 3,878 3,818 3,874 3,799
============ ============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS.
3
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------
1998 1997
-------------------- --------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (56,687) $ (56,938)
Adjustments to reconcile net loss to net cash used in
Operating activities:
Depreciation and amortization 10,892 6,990
Amortization of financing costs and warrants 903 981
Compensation expense related to options 113
Extraordinary gain on early extinguishment of debt (696)
Loss on disposal of property, plant, and equipment 258 163
Write-off of minority interest 410
Changes in assets and liabilities:
Accounts receivable 471 (3,390)
Prepaid expenses and other current assets (885) (111)
Accounts payable (912) (10,179)
Accrued expenses (6,230) 4,091
-------------------- --------------------
Net cash used in operating activities (52,886) (57,870)
-------------------- --------------------
INVESTING ACTIVITIES:
Purchases of property and equipment (7,748) (5,221)
Proceeds from sale of property and equipment 102 (261)
Maturities of short-term investments 11,891 -
Net increase in other assets (253) (820)
-------------------- --------------------
Net cash provided by (used in) investing
activities 3,992 (6,302)
-------------------- --------------------
FINANCING ACTIVITIES:
Proceeds from (payments on) notes payable
and capital leases (1,527) 847
Net proceeds from issuance of Senior Notes - 163,276
Proceeds from exercise of stock options and warrants 14 148
-------------------- --------------------
Net cash (used in) provided by financing activities (1,513) 164,271
EFFECTS OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS 536 (99)
NET (INCREASE) DECREASE IN RESTRICTED CASH 10,819 (34,731)
-------------------- --------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (39,052) 65,269
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 50,687 4,538
-------------------- --------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,635 $ 69,807
==================== ====================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS.
4
<PAGE>
UNIFI COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (IN THOUSANDS):
Cash paid for September 30, 1998 September 30, 1997
------------------ ------------------
Interest $ 24,634 $ 13,854
Income Taxes $ --- $ ---
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS.
5
<PAGE>
UNIFI COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-Q, SEPTEMBER 30, 1998
(UNAUDITED)
NOTE 1: INTERIM FINANCIALS
The accompanying consolidated condensed financial statements have been prepared
by UNIFI Communications, Inc. (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 September 30, 1998 and results of operations for the
three and nine months ended September 30, 1998 and 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 on Form 10-K for the year ended December 31, 1997.
NOTE 2: NET LOSS PER COMMON SHARE
The Company computed net loss per share in accordance with 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. Basic net loss per common share
for the three and nine months ended September 30, 1998 and 1997 was computed as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
Basic Net Loss Per Share Calculation 1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Loss before extraordinary item (17,014) (19,929) (57,382) (56,938)
Extraordinary item - - 695 -
------------ ------------ ------------ ------------
Net loss $ (17,014) $ (19,929) $ (56,687) $ (56,938)
============ ============ ============ ============
Weighted average common shares
outstanding 3,878 3,818 3,874 3,799
============ ============ ============ ============
Basic Net Loss Per Share
Loss before extraordinary item (4.39) (5.22) (14.81) (14.99)
Extraordinary gain - - 0.18 -
------------ ------------ ------------ ------------
Net loss $ (4.39) $ (5.22) $ (14.63) $ (14.99)
============ ============ ============ ============
</TABLE>
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 2,856,026 and 3,296,718 of stock options at
September 30, 1998 and 1997, respectively, and 7,749,219 of warrants at
September 30, 1998 and 1997 that were excluded from the net loss per common
share computation.
6
<PAGE>
UNIFI COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-Q, SEPTEMBER 30, 1998
(UNAUDITED)
NOTE 3: COMPREHENSIVE INCOME
The Company adopted SFAS No. 130, Reporting Comprehensive Income, effective
January 1, 1998, 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>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------------ ------------------
Foreign Currency Translation
<S> <C> <C>
Beginning balance $ (221) $ 562
Current-period change 917 (783)
------------------ ------------------
Ending balance $ 696 $ (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.
In April 1998, AICPA issued Statement of Position 98-5, Reporting on the Costs
of Start-up Activities, which is effective for fiscal year beginning after
December 15, 1998 and early adoption is encouraged. SOP 98-5 requires costs
related to start-up activities, such as organization costs, be expensed when
incurred. The Company does not expect the adoption of this standard to have a
material effect on the financial statements.
In June 1998, FASB issued SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, which is effective for fiscal years beginning after June
15, 1999 and early adoption is allowed for interim periods beginning after
issuance. The Company does not expect the adoption of this standard to have a
material effect on the financial statements.
Note 5: DISCLOSURE ABOUT THE FAIR VALUE OF SENIOR NOTES PAYABLE
The Company's Senior Notes Payable, of $175,000,000 in original principal, had a
carrying value of approximately $166,000,000 at December 31, 1997 and September
30, 1998. In accordance with SFAS No. 107, Disclosure about Fair Value of
Financial Instruments, the Company has determined the fair value of the Senior
Notes Payable, based on the current trading prices, to be approximately
$22,000,000 at September 30, 1998.
NOTE 6: RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the current
year presentation.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORM 10-Q, SEPTEMBER 30, 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
September 30, 1998, UNIFI, either directly (including through wholly-owned and
majority-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 and Taiwan. In addition, the
Company as of such date offered domestic unenhanced fax services in the United
States, the United Kingdom and Australia.
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: (i) 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. The Company's domestic un-enhanced fax 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
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, SEPTEMBER 30, 1998
OPERATING RESULTS
- -----------------
Revenues. Revenues decreased to $10.9 million and increased to $36.6 million
- --------
for the three and nine months ended September 30, 1998, respectively, from $11.7
million and $32.2 million, respectively for the comparable periods in 1997. The
decrease in revenues for the three months ended September 30, 1998 over 1997 is
due primarily to an approximately $1.7 million decrease in FI-Direct revenue.
The increase in revenues for the nine months ended September 30, 1998 over 1997
is due primarily to revenue growth in the Company's broadcast and private voice
resale service of approximately $2.2 million and $2.9 million, respectively.
Revenues derived from the Company's foreign subsidiaries in international
markets were approximately $9.2 million and $26.7 million for the three and nine
months ended September 30, 1998, respectively, compared to $8.7 million and
$23.2 million, respectively for the comparable periods in 1997.
During the three and nine months ended September 30, 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 September 30, Nine Months Ended September 30,
UNIFI CI Unit 1998 1997 1998 1997
------------- ---- ---- ---- ----
North America 27.2% 25.7% 27.0% 27.6%
Japan 15.7% 18.7% 16.0% 18.9%
Hong Kong 14.5% 12.1% 13.7% 11.6%
Singapore 10.6% 11.9% 11.5% 11.1%
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 the fourth quarter of 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 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 $8.9
million and $28.4 million for the three and nine months ended September 30,
1998, respectively, as compared to $10.6 million and $29.3 million,
respectively, for the comparable periods in 1997. FI-Direct service revenues
as a percentage of total revenues were 81.7% and 77.6% for the three and nine
months ended September 30, 1998, respectively, as compared to 90.8% and 91.2%,
respectively, for the comparable periods in 1997. The decline in absolute FI-
Direct revenues between the comparable three and nine month periods is due to
the Company's cessation of active marketing of FI-Direct service in the first
quarter of 1998, consistent with the Company's change in business strategy as
described in its Annual Report on Form 10-K for the
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORM 10-Q, SEPTEMBER 30, 1998
OPERATING RESULTS (CONTINUED)
- -----------------------------
year ended December 31, 1997. The decline in FI-Direct revenues as a percentage
of total revenues for the three and nine months ended September 30, 1998 is
attributable to the revenues received from the Company's broadcast fax service
and private voice resale service, which was not offered in 1997, during such
periods. The number of active customers decreased to approximately 10,834 at
September 30, 1998, as compared to 11,714 at September 30, 1997. This decrease
is due primarily to the Company's shift from pursuing FI-Direct customers to
focusing on growing the customer base for the Company's new service offerings.
During the three and nine months ended September 30, 1998, the Company
recognized $1.5 million and $3.6 million, respectively, in revenues from its
broadcast service. Revenues from such service accounted for 13% and 10% of the
Company's total consolidated revenues in such respective periods. The Company
expects the percentage of revenues from the broadcast service to remain at
similar levels during the fourth quarter of 1998. As reported in the second
quarter of 1998, the Company decided not to expand its private voice resale
service due to a change in strategy. During the third quarter of 1998, the
Company received minimal revenues from such service and does not expect any
additional revenue from the private voice resale service during the fourth 1998.
Cost of Revenues. Cost of revenues decreased to $8.4 million and increased to
- ----------------
$31.7 million for the three and nine months ended September 30, 1998,
respectively, from $10.7 million and $30.5 million, respectively, for the
comparable periods in 1997. The decrease during the three months ended September
30, 1998 in cost of revenues is due primarily to decreases in the third-party
transmission and delivery costs incurred by the Company for on-net and off-net
transmissions. Additionally, the Company made significant efforts towards
reducing its network overhead costs, such as network housing costs and network
monitoring costs, associated with its Intelligent Delivery Network. The number
of network nodes decreased from 32 at September 30, 1997 to 19 at September 30,
1998. The increase in cost of revenues during the nine months ended September
30, 1998 over 1997 is due primarily to a $1.4 million increase in depreciation
expense associated with the prior year's expansion of the Company's network.
Cost of revenues as a percentage of revenues decreased to 77.4% and 86.4% for
the three and nine months ended September 30, 1998, respectively, compared to
91.5% and 94.7% respectively, for the comparable periods in 1997. The Company
believes that its ongoing efforts to reduce off-net costs through least-cost
routing techniques, negotiation of favorable rates with telecommunications
service providers and other means, combined with the Company's newer service
offerings which utilizes the Company's network to a greater degree than its
older service, 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 destinations, thereby increasing the Company's
off-net transmission costs beyond current expectations, or that the Company will
be able to operate network facilities in countries that are currently off-net.
Moreover, as the Company continues to introduce new service offerings, such as
its broadcast fax services and 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 22.5% and
- ------------
13.6% for the three and nine months ended September 30, 1998, respectively, from
8.5% and 5.3%, respectively, for the comparable periods in 1997. The positive
improvement in gross margin is due primarily to the Company's ongoing cost
reduction efforts as well as the increases in the percentage of the Company's
total fax document traffic that is delivered on-net. The Company's on-net/off-
net traffic ratio improved to
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORM 10-Q, SEPTEMBER 30, 1998
OPERATING RESULTS (CONTINUED)
- -----------------------------
approximately 81% in September, 1998 as compared to approximately 65% in
September, 1997. The improvement in the Company's on-net to off-net ratio
between September 1998 and September 1997 is due primarily to the continued
growth in Company's broadcast fax service that has an on-net to off-net ratio of
approximately 99%. The improvement to the Company's gross margin for the three
and nine months ended September 30, 1998 occurred despite the fact that the
Company's average net revenue per minute of FI-Direct fax traffic decreased by
6% to $0.62 per minute at September 30, 1998 from $0.66 per minute at September
30, 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 and its desktop computer-based fax service, which is
scheduled for commercial release in the fourth quarter of 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.
Selling, General and Administrative expenses. Selling, general and
- --------------------------------------------
administrative expenses decreased to $6.6 million and $25.6 million for the
three and nine months ended September 30, 1998, respectively, from $9.3 million
and $29.9 million, respectively, for the comparable periods in 1997. Included
in selling, general and administrative expenses are related sales and customer
service expense which decreased to $4.1 million and $16.5 million for the three
and nine months ended September 30, 1998, respectively, from $6.5 million and
$22.4 million, respectively, for the comparable periods in 1997. The decrease
in sales and customer service expense was due primarily to the 38% decrease in
sales personnel from approximately 298 at September 30, 1997 to approximately
186 at September 30, 1998. During the first three quarters 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 and towards 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 decreased to $2.5 million and increased $9.1 million for
the three and nine months ended September 30, 1998, respectively, from $2.8
million and $7.5 million, respectively, in the comparable periods in 1997. The
overall fluctuations during the three and nine months ended September 30, 1998
over the comparable periods in 1997 is due primarily to restructuring expenses
related to the refocus of the Company's strategy. Selling, general and
administrative expenses as a percentage of revenues decreased to 60.9% and 69.9%
for the three and nine months ended September 30, 1998, respectively, from 79.1%
and 92.9%, respectively, in the comparable periods in 1997, primarily due to
revenue growth exceeding expense increases. 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.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORM 10-Q, SEPTEMBER 30, 1998
OPERATING RESULTS (CONTINUED)
- -----------------------------
Research and development expenses. Research and development expenses increased
- ---------------------------------
to $3.9 million and $11.2 million for the three and nine months ended September
30, 1998, respectively, from $3.6 million and $9.0 million, respectively, for
the comparable periods in 1997. The number of research and development personnel
increased from approximately 107 at September 30, 1997 to approximately 112 at
September 30, 1998. Research and development expenses as a percentage of revenue
increased to 36.1% and 30.7% for the three and nine months ended September 30,
1998, respectively, from 30.9% and 28.0%, respectively, for the comparable
periods 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 reduce slightly as the Company completes the
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 decreased to $0.5 million
- ---------------------------
and $2.2 million for the three and nine months ended September 30, 1998,
respectively, from $1.4 million and $4.2 million, respectively, in the
comparable periods in 1997. This decrease is due primarily to the decrease on
interest earned on an escrow account as a result of the quarterly interest
payments made on the Senior Notes from the escrow account. Interest income in
the comparable period in 1997 is related primarily to the result of interest
earned on net proceeds received from the sale of the Senior Notes 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 decreased to $7.9 and increased to $23.5 million for the three
and nine months ended September 30, 1998, respectively, as compared to $8.2
million and $20.4 million, respectively, for the comparable periods in 1997.
The increase during the nine months ended September 30, 1998 over 1997 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 and $18.4
million for the three and nine months ended September 30, 1998, respectively.
The interest payments made on the Senior Notes, from the Company's escrow
account, for the three and nine months ended September 30, 1998 were $12.2
million and $24.4 million, respectively.
EBITDA. Gross margin EBITDA (revenues less cost of revenues, excluding
- ------
depreciation associated with cost of revenues) increased to $3.9 million and
$9.9 million for the three and nine months ended September 30, 1998,
respectively, from $2.1 million and $4.7 million, respectively, for the
comparable periods in 1997. EBITDA gross margin percentage increased to 35.6%
and 27.0% for the three and nine months ended September 30, 1998, respectively,
from 17.7% and 14.8%, respectively, for the comparable periods in 1997. The
improvement in the Company's gross margin EBITDA between reported periods is due
to the Company's ongoing cost reduction efforts. In addition, the Company
changed its estimated useful life of certain assets and recorded additional
depreciation expense associated with cost of revenues of approximately $0.7
million for the second quarter of 1998.
EBITDA (earnings before interest expense, taxes, depreciation and amortization)
improved to approximately $(6.2) million and $(24.0) million for the three and
nine months ended September 30, 1998,
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORM 10-Q, SEPTEMBER 30, 1998
OPERATING RESULTS (CONTINUED)
- -----------------------------
respectively, from approximately $(9.4) million and $(30.0) million,
respectively, for the comparable periods in 1997. The improved in EBITDA between
the comparable periods is due largely to normal operating expenses and
restructuring expenses incurred in the first and second quarters 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. The last
financing activity occurred on February 21, 1997 when 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 $11.6 million at September 30, 1998 compared to $50.7
million at December 31, 1997 and $69.8 million at September 30, 1997. This
decrease is due primarily to the Company continuing to fund its operating and
capital requirements from existing cash and equivalents. 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 third interest payment
from the escrow account of approximately $12.2 million in the third quarter of
1998. The Company has restricted cash and investments of $13.1 million at
September 30, 1998 compared to $35.8 million at December 31, 1997. The
Company's current ratio, including restricted cash, at September 30, 1998
decreased to 1.82 from 2.75 at December 31, 1997 and 4.27 at September 30, 1997.
Net cash used in operating activities was $52.9 million in the nine months ended
September 30, 1998. Cash used for operating activities was primarily used to
fund operating losses. Decreases in accounts receivable, attributable to
aggressive collections provided cash of approximately $0.5 million and increases
in other current assets used cash of approximately $0.9 million for the nine
months ended September 30, 1998. The aggressive collection efforts, which
occurred in the month of September, did not have a significant impact on the
average aged receivables at September 30, 1998. The average age of the
Company's accounts receivable increased by approximately twelve days from 53 at
September 30, 1997 to 65 at September 30, 1998, primarily as a result of longer
payment cycles in certain of the Company's European markets. The Company
expects to see an improvement in the average age of it's accounts receivable
during the fourth quarter of 1998. Current liabilities used cash of
approximately $7.4 million during the nine months ended September 30, 1998 as a
result of normal timing of payments under current operations.
Net cash provided by investing activities was $4.0 million in the nine months
ended September 30, 1998. These investing activities relate primarily to
purchases of property and equipment and the maturity of restricted investments.
Property and equipment expenditures for the nine months ended September 30, 1998
of $7.7 million were offset by $0.1 million of proceeds generated from the sale
of property and
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORM 10-Q, SEPTEMBER 30, 1998
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
- --------------------------------------------
equipment. Additions to property and equipment were primarily for network
hardware equipment, business office hardware and software, and equipment.
Net cash used in financing activities was $1.5 million in the nine months ended
September 30, 1998. These financing activities relate primarily to the paydown
of the Company's notes payable and capital lease commitments.
At November 12, 1998, the amount of unrestricted cash available to the Company
was approximately $8.1 million, of which $2.6 million resided in the Company's
subsidiaries. The Company will require additional financing to continue
business operations as presently conducted beyond the end of December 1998.
(See "Recent Developments") While the Company's senior management has been
actively seeking such additional financing, as of the date of this Quarterly
Report the Company has not obtained a commitment from any source to provide any
such financing. Any such financing provided to the Company prior to its filing
a petition for relief under federal bankruptcy laws would be subject to certain
limitations set forth in the Company's Senior Notes Indenture, and the Company
may be required to seek waivers of, or amendments to, such Indenture in order to
receive any such financing. There can be no assurance that the Company would
obtain any such required waivers or amendments in a timely fashion or at all.
If the Company is unable to obtain at least short-term debt financing prior to
the date on which its current cash resources are exhausted, the Company will be
forced to seek relief under federal bankruptcy laws.
14
<PAGE>
PART II: OTHER INFORMATION
ITEM 5: OTHER INFORMATION
- --------------------------
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. In light of the Company's present financial condition and the
imminence of the Company's insolvency and petition for relief under federal
bankruptcy laws, the Company does not intend to file such registration
statement. The Company expects that the Warrants and the Warrant Shares
Registration Rights Agreement will be rejected in a bankruptcy proceeding. In
the event that the Company is able to restructure its indebtedness outside of a
bankruptcy proceeding, the Company intends to seek a termination of, or
modifications to, the Warrant Share Registration Rights Agreement.
15
<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-Equipment, 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.
16
<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 named 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 September 30,
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.
17
<PAGE>
++10.32 Second Amendment, dated as of March 14, 1998, to
Stockholders Agreement 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.
*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
September 30, 1998.
18
<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:
-------------------------------
Steve Darrington
Executive Vice President, Finance
and Chief Financial Officer
(Principal Financial Officer)
Date: November 12, 1998
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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> SEP-30-1998
<CASH> 24,727
<SECURITIES> 0
<RECEIVABLES> 7,866
<ALLOWANCES> 301
<INVENTORY> 0
<CURRENT-ASSETS> 34,229
<PP&E> 46,630
<DEPRECIATION> 23,462
<TOTAL-ASSETS> 66,173
<CURRENT-LIABILITIES> 18,836
<BONDS> 166,223
0
13,515
<COMMON> 39
<OTHER-SE> (181,216)
<TOTAL-LIABILITY-AND-EQUITY> (167,665)
<SALES> 10,888
<TOTAL-REVENUES> 10,888
<CGS> 7,008
<TOTAL-COSTS> 8,430
<OTHER-EXPENSES> 12,038
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,940)
<INCOME-PRETAX> (17,014)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,014)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,014)
<EPS-PRIMARY> (4.39)
<EPS-DILUTED> (4.39)
</TABLE>
