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UNITED STATES
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-23351
LET'S TALK CELLULAR & WIRELESS, INC.
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(Exact Name of Registrant as Specified in its Charter)
FLORIDA 65-0292891
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
800 BRICKELL AVE., STE. 400
MIAMI, FL 33131 33131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 358-8255
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(Former name, former address and fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]
The number of shares outstanding of the registrant's common stock is 8,199,762
(as of January 6, 1998).
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LET'S TALK CELLULAR & WIRELESS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of October 31, 1997 (Unaudited)
and July 31, 1997.......................................................................... 3
Condensed Consolidated Statements of Operations for the Three Months Ended
October 31, 1997 and October 31, 1996 (Unaudited).......................................... 4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended
October 31, 1997 and October 31, 1996 (Unaudited).......................................... 5
Notes to Condensed Consolidated Financial Statements (Unaudited)........................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................................. 7
PART II - OTHER INFORMATION......................................................................... 12
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
In connection with the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"), the Company is
hereby providing cautionary statements identifying important factors that could
cause the Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) of the
Company made by or on behalf of the Company herein or which are made orally,
whether in presentations, in response to questions or otherwise. Any statements
that express, or involve discussions as to expectations, beliefs, plans,
objectives, assumptions or future events or performance (often, but not always,
through the use of words or phrases such as "will result," "are expected to,"
"will continue," "is anticipated," "plans," "intends," "estimated," projection"
and "outlook") are not historical facts and may be forward-looking and,
accordingly, such statements involve estimates, assumptions, risks and
uncertainties which could cause actual results to differ materially from those
expressed in the forward-looking statements. Such risks include, among others,
the risks associated with rapid growth, competition, dependence on cellular and
PCS carriers, customer turnover, technological change and inventory
obsolescence.
The Company cautions that the risks described above could cause actual
results or outcomes to differ materially from those expressed in any
forward-looking statement of the Company made by or on behalf of the Company.
Any forward-looking statement speaks only as of the date on which such statement
is made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrences of unanticipated
events. New factors emerge from time to time and it is not possible for
management to predict all of such factors. Further, management cannot assess the
effect of each such factor on the Company's business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements.
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1997 1997
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(UNAUDITED)
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ASSETS
Current assets:
Cash and cash equivalents.................................................. $ 1,080,014 $ 378,903
Accounts receivable, net................................................... 5,706,983 7,249,966
Inventories................................................................ 5,712,420 7,447,947
Prepaid expenses........................................................... 265,859 275,182
Income taxes receivable.................................................... 291,099 225,541
Other current assets....................................................... 600,385 1,464,293
Deferred tax asset......................................................... 475,245 880,696
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Total current assets............................................... 14,132,005 17,922,528
Property and equipment, net.................................................. 5,296,743 6,541,056
Other assets, net............................................................ 1,353,097 1,384,788
Intangible assets, net....................................................... 13,755,696 13,138,969
----------- -----------
Total assets....................................................... $34,537,541 $38,987,341
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable..................................................... $ 6,583,542 $ 8,405,893
Bank lines of credit....................................................... 1,023,285 3,890,051
Accrued expenses........................................................... 3,120,493 3,628,583
Loans payable to shareholders and officers................................. 258,100 258,100
Current portion of bank term loans and obligations under capital leases.... 732,195 868,070
Deferred revenues.......................................................... 693,038 695,349
Customer deposits.......................................................... 108,673 70,675
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Total current liabilities.......................................... 12,519,326 17,816,721
Bank term loans, less current portion........................................ 12,350,000 12,075,000
Loans payable to shareholders and officers................................... 2,000,000 2,000,000
Obligation under capital lease, less current portion......................... 32,859 32,859
Other liabilities............................................................ 72,808 396,466
Deferred tax liability....................................................... 952,596 780,949
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued
and outstanding.......................................................... -- --
Common stock, $.01 par value, 50,000,000 shares authorized, 6,093,166 shares
issued and outstanding................................................... 60,932 60,932
Additional paid-in capital................................................... 6,166,474 6,166,474
Retained earnings (accumulated deficit)...................................... 382,546 (342,060)
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Total common shareholders' equity.................................. 6,609,952 5,885,346
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Total liabilities and shareholders' equity......................... $34,537,541 $38,987,341
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</TABLE>
See accompanying notes.
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LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 31,
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1996 1997
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Net revenues:
Retail sales.......................................................... $2,097,959 $5,748,532
Activation commissions................................................ 1,542,336 5,650,684
Residual income....................................................... 323,352 2,417,896
Wholesale sales....................................................... -- 8,098,778
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Total net revenues............................................ 3,963,647 21,915,890
Cost of sales........................................................... 1,740,443 13,819,040
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Gross profit............................................................ 2,223,204 8,096,850
Operating expenses:
Selling, general and administrative................................... 2,088,243 7,847,382
Depreciation and amortization......................................... 69,719 264,032
Amortization of intangible assets..................................... 40,000 616,726
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Total operating expenses...................................... 2,197,962 8,728,140
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Income (loss) from operations........................................... 25,242 (631,290)
Interest expense, net................................................... 38,557 498,713
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Loss before benefit for income taxes.................................... (13,315) (1,130,003)
Benefit for income taxes................................................ (4,260) (405,451)
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Net loss...................................................... (9,055) (724,552)
Accretion of Series A Preferred Stock to redemption value .... 15,660 --
---------- ----------
Net loss applicable to common shareholders.................... $(24,715) $(724,552)
========== ==========
Net loss per share applicable to common shareholders.......... $(0.00) $(.12)
========== ==========
Weighted average shares outstanding..................................... 6,093,168 6,093,168
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</TABLE>
See accompanying notes.
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LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 31,
---------------------------------
1996 1997
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OPERATING ACTIVITIES
Net loss................................................................. $(9,055) $(724,552)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization......................................... 69,719 264,032
Amortization of intangible assets..................................... 40,000 616,726
Amortization of deferred financing costs.............................. 2,157 48,046
Provision for activation adjustments and cancellation losses.......... 25,000 60,735
Deferred income taxes................................................. -- (577,098)
Changes in operating assets and liabilities
Accounts receivable................................................ (281,736) (1,603,718)
Inventories........................................................ (1,446,666) (1,735,527)
Prepaid expenses................................................... (30,789) (9,323)
Other assets....................................................... 10,449 (943,699)
Income tax receivable.............................................. -- 65,558
Trade accounts payable............................................. 706,866 1,822,351
Accrued expenses................................................... 86,176 831,748
Income taxes payable............................................... (51,906) --
Customer deposits.................................................. (28,312) (37,998)
Deferred revenues.................................................. 10,096 2,311
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Net cash used in operating activities................................... (898,001) (1,920,408)
INVESTING ACTIVITIES
Acquisition of Northpoint Cellular....................................... (850,000) --
Purchases of property and equipment...................................... (870,515) (1,508,344)
Increase in cash held in escrow.......................................... 1,000,000 --
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Net cash used in investing activities.................................... (720,515) (1,508,344)
FINANCING ACTIVITIES
Net borrowings under bank lines of credit................................ -- 2,866,766
Proceeds from bank term loan............................................. 568,333 --
Payments on bank term loan and capital leases............................ (36,996) (139,125)
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Net cash provided by financing activities................................ 531,337 2,727,641
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Net decrease in cash and cash equivalents................................ (1,087,179) (701,111)
Cash and cash equivalents at beginning of period......................... 1,357,172 1,080,014
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Cash and cash equivalents at end of period............................... $269,993 $378,903
============ ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest................................................... $44,192 $443,125
============ ==========
Cash paid for income taxes............................................... $63,675 $85,693
============ ==========
</TABLE>
See accompanying notes.
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LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997
(UNAUDITED)
1-SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements
of Let's Talk Cellular & Wireless, Inc. and subsidiaries (the "Company") have
been prepared in accordance with the instructions to Form 10-Q and, therefore,
omit or condense certain footnotes and other information normally included in
financial statements prepared in accordance with generally accepted accounting
principles. The accounting policies followed for interim financial reporting are
the same as those disclosed in Note 2 of the Notes to Consolidated Financial
Statements included in the Company's audited financial statements for the fiscal
year ended July 31, 1997 which are included in the Registration Statement on
Form S-1 (Registration No. 333-34595) which became effective on November 24,
1997. In the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the financial
information for the interim periods reported have been made. Results of
operations for the three months ended October 31, 1997 are not necessarily
indicative of the results to be expected for the entire fiscal year ending July
31, 1998.
The Company's stores have historically experienced, and the Company
expects its stores to continue to experience, seasonal fluctuations in revenues
with a larger percentage of revenues typically being realized in the second
fiscal quarter during the holiday season. In addition, the Company's results
during any fiscal period can be significantly affected by the timing of store
openings and acquisitions and the integration of new and acquired stores into
the Company's operations.
Fiscal year references are to the respective fiscal year ended July 31.
2-LOSS PER SHARE APPLICABLE TO COMMON SHAREHOLDERS
Net loss per share applicable to common shareholders is calculated
using the weighted average number of common and common equivalent shares
outstanding during the respective periods.
If the Company were required to calculate earnings per share under
Statement of Financial Accounting Standards No. 128, which is effective for
periods after December 15, 1997, earnings per share for the first quarter of
1997 and 1998, respectively, would not have been materially different than the
earnings per share reported in the accompanying condensed consolidated
statements of operations.
3-SUBSEQUENT EVENTS
On December 1, 1997, the Company completed an initial public offering
("IPO") of its common stock. Prior to the closing of the IPO, and after giving
effect to a stock split of 3.289 for 1 effected on October 20, 1997, the Company
had outstanding 6,093,166 shares of common stock, exclusive of 106,596 shares
issued immediately prior to the IPO upon exercise of warrants held by the bank
lender to the Company.
During the IPO, 2,337,245 shares of common stock were sold of which
2,000,000 shares were sold by the Company and 337,245 shares were sold by
selling shareholders. The Company's net proceeds from the IPO were used to repay
the bank term loans, reduce borrowings outstanding under the
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bank lines of credit, repay shareholders loans and fund the acquisitions of
Cellular Unlimited Corp. and Cellular USA, Inc. As a result of the repayment of
the bank term loans during the second quarter of fiscal 1998, the Company
incurred a non-recurring charge to earnings of approximately $400,000, net of
taxes.
On December 1, 1997, the Company acquired substantially all of the
assets of Cellular Unlimited Corp. for a cash purchase price of $2,055,000 and
up to $225,000 in certain contingent payments in each of the six-month periods
ending July 31, 1998, January 31, 1999 and July 31, 1999.
Additionally, on December 17, 1997, the Company acquired all of the
outstanding capital stock of Cellular USA, Inc. for a cash purchase price of
$1,625,000 and up to an aggregate of $175,000 in certain contingent payments in
1998 and 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is the largest independent specialty retailer of cellular
and wireless products, services and accessories in the United States, with 111
stores located in 13 states, the District of Columbia and Puerto Rico as of
October 31, 1997. The Company's stores, located predominantly in regional
shopping malls, seek to offer one-stop shopping for consumers to purchase
cellular, personal communication systems ("PCS"), paging, internet, satellite,
and other wireless products and services and related accessories. The Company is
also a leading wholesaler of cellular and wireless products and accessories to
more than 1,000 accounts, consisting primarily of distributors, carriers and
small independent retailers. The Company's business strategy is to offer the
most extensive assortment of wireless products and services at everyday low
prices supported by knowledgeable customer service, through conveniently located
and attractively designed stores.
Since its inception in 1989 through June 1996, the Company had limited
capital and opened 25 stores. In June 1996, the Company issued $3.3 million of
Series A Preferred Stock to HIG (which has been converted into Common Stock) and
accelerated its store expansion. During fiscal 1997, the Company added a net
total of 68 stores, including five stores acquired from Peachtree Mobility in
the Atlanta metropolitan area, and 19 stores from Telephone Warehouse, Inc., one
of the largest AT&T cellular agents in the Southwest. During the three months
ended October 31, 1997, the Company opened 18 stores.
The Company presently plans to open a total of 65 to 75 new stores in
fiscal 1998 and 80 to 100 new stores in fiscal 1999. To prepare for this
expansion, during the past year management has been building the infrastructure
necessary to support a rapidly growing chain of stores. The Company hired senior
management, established a field structure of district managers, developed
employee training programs, enhanced its financial controls and procedures and
finalized standards of store design and visual presentation. The Company plans
to continue its infrastructure investments, which could result in a material
reduction in income from operations in the first half of fiscal 1998 compared
with pro forma income from operations for the corresponding period in fiscal
1997. As the Company continues to expand through new store openings and
acquisitions, it expects to leverage these investments and improve margins
through economies of scale.
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The Company's revenues are generated principally from four sources:
(I) RETAIL SALES. The Company sells cellular and wireless
products, such as phones, pagers and related accessories in the
Company's retail outlets.
(II) ACTIVATION INCOME. The Company receives an activation
commission from the applicable cellular carrier when a customer
initially subscribes for the cellular carrier's service. The amount of
the activation commission paid by cellular carriers is based upon
various service plans offered by the carriers and is recognized by the
Company at the time of sale. New subscription activation commissions
are fully refundable if the subscriber cancels its subscription prior
to completion of a minimum period of continuous active service
(generally 180 days). Customers generally sign a service agreement with
the Company that requires a customer deposit that is forfeited in the
event of early cancellation. The Company then applies the customer's
deposit to reduce or offset its resulting deactivation loss owed to the
carrier. The Company accrues for estimated deactivation losses, net of
cancellation fees, by creating a reserve against carrier accounts
receivable.
(III) RESIDUAL INCOME. The Company receives monthly payments
made by certain cellular carriers and pager customers. Cellular
residual payments are based upon a percentage (usually 4-6%) of the
customers' monthly service charges and are recognized as income when
received. Pager residual payments are received on a monthly basis
directly from pager customers for the pager airtime that the Company
buys wholesale from paging carriers and then resells to individuals and
small businesses.
(IV) WHOLESALE SALES. The Company began to wholesale cellular
and wireless products when it acquired Telephone Warehouse in June
1997. The wholesale business typically has higher volumes and lower
margins than the retail business, but provides the Company with greater
purchasing power and additional distribution capabilities.
Comparable stores sales include only stores owned and operated by the
Company for at least 12 full months and are comprised of retail sales and
activation commissions, as residual income is not allocated among stores.
Historically, retail sales have accounted for most of the Company's net
revenues. As sales of discounted and "free" cellular phones designed to attract
new subscribers have increased significantly, the number of activations has
increased and activation commissions have become increasingly significant to the
Company's net revenues. The Company has recently made a strategic decision to
accept increased activation commissions in connection with certain new carrier
agreements in lieu of monthly residual payments to optimize cash flow and to
facilitate the Company's growth strategy. As a result, management believes that
activation commissions may account for an increased share of the Company's
future net revenues relative to residual income.
To date, the cost of wireless products has gradually decreased over
time. With such lower costs, the Company typically has offered lower prices to
attract more subscribers, which has increased its total activation commissions
and contributed to gross profit improvements. Consequently, the Company believes
that as prices of wireless products decrease they become more affordable to
consumers, expanding the wireless communications market and creating an
opportunity to attract new subscribers and increase activation income.
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The Company has developed two distinct mall-based store formats,
free-standing kiosks and traditional "in-line" stores. The average capital
expenditures for new kiosk and in-line locations approximate $34,000 and
$94,000, respectively. The initial inventory for a new store approximates
$32,000 for a kiosk and $47,000 for an in-line store. Management believes that
the flexibility of the Company's kiosk and in-line store formats permits the
Company to take advantage of the best available locations across a broad range
of market areas. Pre-opening costs for new stores such as travel and the hiring
and training of new employees are expensed as incurred and typically average
$3,000 per store. In fiscal 1997, comparable stores generated average annual
sales of approximately $500,000 (excluding two stores that generate
substantially higher sales than other stores). Generally, the Company's new
store sales reach normal operating levels after three months of operations.
In connection with the offering and the repayment of bank indebtedness
with a portion of the proceeds of the offering, the Company incurred a
non-recurring charge to earnings of approximately $400,000, net of tax.
In June 1997, the Company more than doubled the amount of its assets
and previous twelve months' total net revenues by acquiring Telephone Warehouse.
The accelerated amortization applied to the value of the residual income
acquired in connection with the Telephone Warehouse acquisition is expected to
have a significantly negative effect on net income for the next two fiscal
years.
RESULTS OF OPERATIONS
QUARTER ENDED OCTOBER 31, 1997 COMPARED TO QUARTER ENDED OCTOBER 31, 1996
TOTAL NET REVENUES increased $17.9 million to $21.9 million in the
first quarter of fiscal 1998 from $4.0 million in the first quarter of fiscal
1997 due to increases in retail sales, activation commissions and residual
income, and to the acquisition of Telephone Warehouse, Inc., and National
Cellular Incorporated ("Telephone Warehouse"), on June 30, 1997 and the
resulting inclusion of Telephone Warehouse's operations in the Company's
consolidated revenues for the first quarter of fiscal 1998. Retail sales
increased to $5.7 million from $2.1 million, activation commissions increased to
$5.7 million from $1.5 million and residual income increased $2.1 million to
$2.4 million from $320,000. Comparable store sales increased 10.6% and accounted
for $382,000 or 2.2% of the increase in total net revenues. Sales relating to 52
new stores opened, 19 stores acquired since October 31, 1996 and the stores that
were not yet open for 12 full months accounted for $7.4 million or 41.1% of the
increase in total net revenues. The comparable stores sales growth was primarily
attributable to increased advertising, Company-sponsored airtime promotions and
the growth of cellular subscribers in the wireless industry overall. Wholesale
sales increased $8.1 million as a result of the acquisition of Telephone
Warehouse on June 30, 1997. The increase in residual income was due to the
inclusion of Telephone Warehouse's residual income ($2.2 million for the first
quarter of fiscal 1998), the increase in the number of cellular activations
(20,593 in first quarter of fiscal 1998 as compared to 5,335 for the first
quarter of fiscal 1997), and the Company's store expansion. The Company had 111
stores open at October 31, 1997 as compared to 40 at October 31, 1996.
GROSS PROFIT increased $5.9 million to $8.1 million in the first
quarter of fiscal 1998 from $2.2 million for the first quarter of fiscal 1997.
As a percentage of total net revenues, gross profit decreased
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to 36.9% from 56.1% primarily due to the inclusion of Telephone Warehouse's
wholesale operations, which have lower margins than the Company's retail sales.
SELLING, GENERAL AND ADMINISTRATIVE expenses increased $5.8 million to
$7.8 million for the first quarter of fiscal 1998 from $2.1 million in the first
quarter of fiscal 1997 as a result of higher personnel, rent and related costs
associated with the net addition of 52 new stores and the inclusion of Telephone
Warehouse's operations for the first quarter of fiscal 1998. As a percentage of
total net revenues, selling, general and administrative expenses decreased to
35.8% during the first quarter of fiscal 1998 from 52.7% in the first quarter of
fiscal 1997.
AMORTIZATION OF INTANGIBLES consisted of (i) $557,000 associated with
the amortization of goodwill and acquired residual income resulting from the
acquisition of Telephone Warehouse on June 30, 1997, and (ii) $60,000 associated
with the thirty month noncompete agreement entered into in August 1996 in
connection with the acquisition of Peachtree Mobility.
INCOME FROM OPERATIONS decreased $657,000 to a loss from operations of
$631,000 in the first quarter of fiscal 1998 from income of $25,000 in the first
quarter of fiscal 1997 primarily as a result of increased depreciation and
amortization.
INTEREST EXPENSE, NET increased $460,000 to $499,000 in the first
quarter of fiscal 1998 from $39,000 in the first quarter of fiscal 1997
primarily due to increased bank borrowings incurred in connection with the
acquisition of Telephone Warehouse.
BENEFITS FOR INCOME TAX was $405,000 in the first quarter of fiscal
1998 as compared to $4,000 in the first quarter of fiscal 1997 primarily as a
result of a $1.1 million increase in loss before benefit for income taxes.
NET LOSS was $725,000 in first the quarter of fiscal 1998 compared to
$9,000 in the first quarter of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements have been primarily to support its
increased inventory requirements and build-out costs for new store expansion and
to fund acquisitions. The Company has historically financed its liquidity needs
through a combination of bank borrowings, capital contributions, loans from
shareholders and cash provided by operations.
The Company's credit facility as of October 31, 1997 was comprised
of a $9.0 million revolving loan and $12.8 million in term loans. The Company
used a portion of the proceeds of its initial public offering of common stock to
repay all of the term loans and reduce the balance outstanding under the
revolving loan to $1.6 million as of January 6, 1998. The credit facility
expires in January 2004 and is secured by substantially all of the Company's
assets. The revolving credit facility's availability is based on a formula of
eligible receivables and inventories, and as of January 6, 1998, the Company has
an additional $7.4 million available for borrowing. Advances under the revolving
credit line bear interest at 3.75% above the commercial paper rate. The Company
anticipates that borrowings under existing or future credit facilities will be
sufficient to meet currently foreseeable liquidity requirements.
The Company's working capital decreased $1.5 million to $106,000 at
October 31, 1997 from $1.6 million at July 31, 1997. Accounts receivable and
inventory increased $3.3 million to $14.7 million at October 31, 1997 from $11.4
million at July 31, 1997. This increase was partially offset by an
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increase in accounts payable of $1.8 million to $8.4 million at October 31, 1997
from $6.6 million at July 31, 1997.
The Company's net cash used in operating activities increased to $1.9
million for the first quarter of fiscal 1998 compared to $898,000 for the first
quarter of fiscal 1997. The increase in net cash used in operating activities
resulted primarily from an increase in inventories and accounts receivable
partially offset by an increase in current liabilities reflecting the growth in
the Company's operations.
The Company's net cash used in investing activities increased to $1.5
million for the first quarter of fiscal 1998 from $720,000 in the first quarter
of 1997. The increase in cash used in investing activities was primarily
attributable to capital expenditures for new stores.
The Company's net cash provided by financing activities increased to
$2.7 million in the first quarter of fiscal 1998 from $531,000 in the first
quarter of fiscal 1997 primarily as a result of additional borrowings on the
bank lines of credit.
SEASONALITY
The Company's stores have historically experienced, and the Company
expects its stores to continue to experience, seasonal fluctuations in revenues
with a larger percentage of revenues typically being realized in the second
fiscal quarter during the holiday season. In addition, the Company's quarterly
results can be significantly affected by the timing of store openings and
acquisitions and the integration of new and acquired stores into the Company's
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
See Note 3 to the Condensed Consolidated Financial Statements for a
discussion of the Company's 3.289 for 1 stock split effected October 20, 1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the first quarter of fiscal 1998 and prior to the consummation
of the Company's IPO on December 1, 1997, the shareholders of the Company
approved by unanimous written consent the following:
(i) the adoption of the Amended and Restated Articles of
Incorporation of the Company (the "Articles"),
(ii) the adoption of the Amended and Restated Bylaws,
(iii) the IPO and related transactions, including the sale of Common
Stock in the IPO by certain shareholders,
(iv) an increase in the par value of the Common Stock from $.001 to
$.01 per share,
(v) the election of directors to the staggered Board provided for
in the Articles as follows: (A) Douglas Berman, John Bolduc and
Allan Sorensen to serve as Class I directors, to hold office
until the 1998 annual shareholders meeting, (B) Sami Mnaymneh and
Anthony Tamer to serve as Class II directors, to hold office
until the 1999 annual shareholders meeting, and (C) Nicolas
Molina and Brett Beveridge to serve as Class III directors, to
hold office until the 2000 annual shareholders meeting.
(vi) the establishment of a Compensation Committee and the appointment
of Allan Sorensen to serve as the initial member,
(vii) payment to each non-employee director of an annual fee of
$10,000,
(viii) the adoption of the 1997 Executive Incentive Compensation Plan,
(ix) the form of Indemnification Agreements for the Company's
executive officers and directors,
(x) the ratification of the grant of options to purchase 91,174
shares of Common Stock at an exercise price of $20.04 to each of
Nicolas Molina and Brett Beveridge,
(xi) the appointment of the following officers:
Chief Executive Officer Nicolas Molina
Chairman of the Board and President Brett Beveridge
Chief Financial Officer and Treasurer Anne Gozlan
-12-
<PAGE> 13
Vice President - Sales Richard Berglund
Director of Information Systems Fernando Perez
Director of Construction and Design Chris Howard
General Counsel and Secretary Lazarus Rothstein
President - Telephone Warehouse, Inc. Ronald Koonsman
and National Cellular Incorporated
(xii) the 3.289 for 1 stock split described in Note 3 to the
Condensed Consolidated Financial Statements.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits-
27.1 Financial Data Schedule
(b) The Company did not file a form 8-K during the first quarter of
fiscal 1998.
-13-
<PAGE> 14
SIGNATURES
Pursuant to the requirement 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.
LET'S TALK CELLULAR & WIRELESS, INC.
January 6, 1998 By: /s/ NICOLAS MOLINA
------------------------------------------
NICOLAS MOLINA
Chief Executive Officer
and Director (principal executive officer)
January 6, 1998 By: /s/ ANNE GOZLAN
------------------------------------------
ANNE GOZLAN
Chief Financial Officer
(principal accounting officer)
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 378,903
<SECURITIES> 0
<RECEIVABLES> 7,249,966
<ALLOWANCES> 749,873
<INVENTORY> 7,447,947
<CURRENT-ASSETS> 17,922,528
<PP&E> 6,541,056
<DEPRECIATION> 1,065,277
<TOTAL-ASSETS> 38,987,341
<CURRENT-LIABILITIES> 17,816,721
<BONDS> 0
0
0
<COMMON> 60,932
<OTHER-SE> 5,824,414
<TOTAL-LIABILITY-AND-EQUITY> 38,987,341
<SALES> 21,915,890
<TOTAL-REVENUES> 21,915,890
<CGS> 13,819,040
<TOTAL-COSTS> 13,819,040
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 60,735
<INTEREST-EXPENSE> 498,713
<INCOME-PRETAX> (1,130,003)
<INCOME-TAX> (405,451)
<INCOME-CONTINUING> (724,552)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (724,552)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
