<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
- --- of 1934
For the quarterly period ended June 30, 1999.
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
------------- ----------------
Commission file number 33375885
-----------------------
Teltran International Group, Ltd.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 11-3172507
- -------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
One Penn Plaza, Suite 4632, New York, New York, 10119
-----------------------------------------------------
(Address of Principal Executive Offices)
(212) 643-1283
--------------
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, $.001 par value - 12,879,183 shares as of July 16, 1999
- - -----------------------------------------------------------------------
Transitional Small Business Disclosure Format (check one):
Yes No
--- --
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
INDEX
PAGE NO.
Part I Financial Information
Consolidated Balance Sheet at June 30, 1999 and December 31, 1998 1
Consolidated Statement of Operations for the six months
ended June 30, 1999 and 1998 2
Consolidated Statement of Operations for the three months
ended June 30, 1999 and 1998 3
Consolidated Statement of Cash Flows for the six months
ended June 30, 1999 and 1998 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial Condition
and Results of Operations #####
Part II Other Information
ITEM 1 - LEGAL PROCEEDINGS #####
ITEM 6 - EXHIBITS & REPORTS ON FORM 8-K - NONE FILED
<PAGE>
PART I FINANCIAL INFORMATION
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
Current Assets: (Unaudited)
<S> <C> <C>
Cash $ 958,354 $ 5,389
Accounts receivable 466,311 94,296
Investment 6,000,000 --
Prepaid expenses 110,563 --
Deferred financing costs - net of amortization -- 19,797
------------ ------------
Total current assets 7,535,228 119,482
------------ ------------
Fixed Assets:
Machinery & Equipment, net of accumulated depreciation 29,138 --
------------ ------------
Other Assets:
Goodwill - net of amortization 222,662 37,588
Organization expense - net of amortization 38 98
------------ ------------
Total other assets 222,700 37,686
------------ ------------
Total assets $ 7,787,066 $ 157,168
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Convertible debentures payable $ -- $ 180,488
Loan payable 50,000 50,000
Accounts payable, accrued expenses and taxes payable 307,433 104,581
Due to factor -- 65,193
Corporation taxes payable -- 100
------------ ------------
Total current liabilities 357,433 400,362
------------ ------------
Long-Term Liabilities:
Loans payable - stockholders' 1,245 1,245
------------ ------------
Total long-term liabilities 1,245 1,245
------------ ------------
Total liabilities 358,678 401,607
------------ ------------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $.001 par value per share, 5,000,000 shares
authorized and -0- issued and outstanding
Common stock, $.001 par value per share, 50,000,000 shares
authorized and 12,695,827 and 7,697,295 issued
and outstanding, respectively 12,696 7,697
Additional paid in capital in excess of par value 15,855,916 2,002,359
Deficit (8,440,224) (2,254,495)
------------ ------------
Total stockholders' equity (deficit) 7,428,388 (244,439)
------------ ------------
Total liabilities and stockholders' equity $ 7,787,066 $ 157,168
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
1
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the six months ended June 30,
<TABLE>
<CAPTION>
Revenues: 1999 1998
--------- ---------
<S> <C> <C>
Sales $ 540,179 $ 128,855
Miscellaneous 1,457 --
--------- ---------
541,636 128,855
Cost of Sales:
Purchases 377,142 79,179
--------- ---------
Gross profit 164,494 49,676
--------- ---------
Expenses:
Salaries 240,587 --
Outside services 40,170 118,858
Professional fees 72,789 7,000
Fees - other 70,039 --
Payroll taxes 10,213 --
Leasing expense 4,277 6,110
Travel 24,379 54,234
Insurance 19,131 12,004
Rent 61,495 3,398
Office expense 4,206 4,780
Miscellaneous 10,798 --
Telephone 11,724 2,673
Contributions 1,200 --
Advertising -- 567
Amortization expense 1,851 60
--------- ---------
Total expenses 572,859 209,684
--------- ---------
Loss from operations (408,365) (160,008)
Interest expense 36,753 --
--------- ---------
Loss before provision for income taxes (445,118) (160,008)
Provision for income taxes 780 388
--------- ---------
Net loss $(445,898) $(160,396)
========= =========
Net loss per share of common stock based upon 11,378,377
and 915,637 (weighted average) shares issued, respectively $ (0.04) $ (0.17)
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
2
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the three months ended June 30,
<TABLE>
<CAPTION>
Revenues: 1999 1998
--------- ---------
<S> <C> <C>
Sales $ 456,720 $ 87,165
Miscellaneous 1,457 --
--------- ---------
458,177 87,165
Cost of Sales:
Purchases 254,831 79,179
--------- ---------
Gross profit 203,346 7,986
--------- ---------
Expenses:
Salaries 127,286 --
Outside services 8,400 41,253
Professional fees 40,829 3,000
Fees - other 6,551 --
Payroll taxes (97) --
Leasing expense (503) 6,110
Travel 5,738 46,475
Insurance 6,122 4,814
Rent 15,145 --
Office expense 2,704 (730)
Miscellaneous 10,199 --
Telephone 5,241 (48,010)
Contributions 200 --
Advertising -- 567
Amortization expense 1,120 60
--------- ---------
Total expenses 228,935 53,539
--------- ---------
Loss from operations (25,589) (45,553)
Interest expense 1,521 --
--------- ---------
Loss before provision for income taxes (27,110) (45,553)
Provision for income taxes -- --
--------- ---------
Net loss $ (27,110) $ (45,553)
========= =========
Net loss per share of common stock based upon 11,378,377 and 915,637
(weighted average) shares issued, respectively $ (0.00) $ (0.04)
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the six months ended June 30,
<TABLE>
<CAPTION>
Cash Flows from Operating Activities: 1999 1998
----------- -----------
<S> <C> <C>
Net loss $ (445,898) $ (160,396)
Adjustment to reconcile net loss to net cash
(used in) operating activities:
Amortization expense 1,851 60
(Increase) in accounts receivable (363,220) (54,665)
(Increase) in prepaid expenses (110,623) (9,978)
Decrease in deferred financing costs 19,797 --
Cash repayments to factor (65,193) --
Increase in customer deposits -- 14,932
(Increase) in investments (6,000,000)
Increase in accounts payable, accrued expenses
and taxes payable 196,152 32,583
----------- -----------
Net cash (used in) operating activities (6,767,134) (177,464)
----------- -----------
Cash Flows from Investing Activities:
Purchase of fixed assets (29,138) --
----------- -----------
Cash Flows from Financing Activities:
(Decrease) of convertible debentures payable (180,488) --
Cash advances from factor -- 35,000
Loans from stockholders and others -- 81,761
Conversion of convertible debenture - stock issued 676,319 --
Exercise of warrants 244,937 --
Private placement 1,008,469 --
Investment 6,000,000 --
Cash received as advances from investors -- 68,500
----------- -----------
Net cash provided by financing activities 7,749,237 185,261
----------- -----------
Net increase in cash 952,965 7,797
Cash - January 1, 5,389 3,646
----------- -----------
Cash - June 30, $ 958,354 $ 11,443
=========== ===========
Supplemental Disclosures:
Income tax -- --
=========== ===========
Interest paid $ 36,753 --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1999
Note 1--Basis of Presentation:
The financial information included herein is unaudited; however,
such information reflects all adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the
interim periods.
The results of operations for the three and six month periods ended
June 30, 1999 are not necessarily indicative of the results to be
expected for the full year.
Note 2--Material Events:
During the quarter ended June 30, 1999, the following events
occurred:
a. The Company issued 2,000,000 shares of its common stock as an
investment to a related party whereby each owns 50% of a joint
venture.
b. The Company received $1,154,969 representing the issuance of
278,999 shares of common stock in a private placement and
37,500 shares exercised from warrants previously issued.
c. 585,000 common shares representing a previously declared stock
dividend were issued during the quarter ended June 30, 1999.
d. In a transaction effective June 1, 1999, the Company issued
94,500 common shares to acquire 100% of Channel Net, Ltd.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Prior to April 1998 we were essentially a start-up venture. During 1998
most of our revenues were derived from acting as an OzEmail refile hub in the
United States. During 1999 these revenues were diminishing and we devoted our
efforts to promoting our affiliate arrangements with OzEmail as well as
establishing businesses for our web portal. Therefore comparisons between 1998
and 1999 will be of limited value.
During the balance of 1999 and early 2000 our Plan of Operation is to:
o enter into and implement arrangements to provide wholesale
customers in the United States with Internet telephony over the OzEmail
system. We have already entered into three agreements to provide such
services, two of which commenced in June and the third is scheduled to
commence in July 1999. We are negotiating additional similar
arrangements. Each of these arrangements requires us to expend money for
equipment purchases and the payment of various fees.
o seek to enter into arrangements to become an affiliate of OzEmail
in additional countries. This, among other things, will enable us to
provide economic services from the United States to those countries and
participate in revenues on both ends of a call. We have received
OzEmail's permission to establish affiliates in Bangladesh, Pakistan and
Israel. We are seeking to finalize our arrangement in Pakistan. We have
also acquired an entity in England which will enable us to become an
affiliate in the United Kingdom and Ireland.
o develop our portal and provide other related businesses utilizing
our portal. These including offering advertising on the Internet
developing additional sales affiliate arrangements on the Internet. We
also plan through our joint venture to operate a website for the sale
of music.
o continue to augment other aspects of our telecommunications
business as well.
We cannot assure you that we will be able to successfully implement our
plan.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
Our revenues were approximately $541,636 for the first six months of 1999
while the Company had revenues of approximately $128,855 in the comparable
period in 1998. This increase was due to our generation of additional sales of
our newly aquired entity in England.
In spite of increased sales, we incurred net losses of ($445,898) in the
first (six months) of 1999 which was an increase from the net loss of
($160,396) in the first six months of 1998. The increase was primarily due to an
increase in cost of sales, salaries, professional fees and other expenses
which were associated with the purchase of the new entity in England.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Our revenues were approximately $458,177 for 1999 while we received
$87,165 in the comparable period in 1998. Over 70% of our revenues in 1998 were
derived from OzEmail for acting as a refile hub. Revenues derived from this
activity have declined in 1999. The increase in sales was primarily due to the
revenues from the new entity in England.
Our operating expenses during the second quarter of 1999 were $228,935
compared to $53,539 during the comparable period in 1998. The increased expenses
were primarily attributable to the expenses incurred by our entity in England.
6
<PAGE>
The year 1999 will be the first full year of operations and that our
revenues will be derived from businesses not conducted in 1998.
We expect that our monthly charges for the balance of the year under new
agreements will exceed all our revenues earned in 1998. Based on these
agreements and other activities we believe that we will have substantially
increased revenues in 1999 from our voice telephony operations.
LIQUIDITY
We had a working capital of approximately $7,718,000 as at June 30, 1999
compared to a negative working capital of approximately ($92,000) as at June
30, 1998. The increase was attributable to the investment in Antra as well as
proceeds from private placements and exercising of warrants.
At the present time we are aware of only two possible substantial capital
expenditures. We may have to purchase VINs at $9,000 per VIN to enable us to
perform future affiliate arrangements. All affiliate arrangements require us
to pay fees to connect various segments of the call.
Additional funds may be required when we form joint ventures to establish
foreign OzEmail affiliations and to pay for salaries under employment
agreements with management. We believe funds obtained and to be obtained from
the sale of shares and cash flow from operations will be sufficient for
working capital purposes until June 30, 1999.
7
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
LEGAL PROCEEDINGS
In June 1999 an action was commenced against us in the United States
District Court for the Southern District of New York. The plaintiffs claim
that they suffered damages as a result of alleged fraudulent and negligent
misrepresentations made in 1996 concerning the Company's prospects. We did not
believe we have any liability to the plaintiffs and will vigorously defend
this action. Our Company is not aware of any additional legal proceedings, or
pending legal proceedings, to which we are party or to which our property is
subject. A claim however has been made by a corporation for $304,000
representing amounts advanced on our behalf to a potential reseller of
telecommunications time to us. Such amount was to be held in escrow until
commencement of the contract between ourselves and the reseller by an agent
appointed by the potential reseller. The contract was aborted and the escrow
agent failed to return the escrow funds. The claimant has requested the payment
of the amount advanced with interest and alternately a participation in revenues
which it believed arose from the relationship with the reseller. The claimant
has failed to respond to our communications for the past several months.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Teltran International Group, Ltd.
---------------------------------
(Registrant)
Date: July 16, 1999 /s/Byron R. Lerner
--------------- --------------------------------------------------
Byron R. Lerner, President Chief Executive Officer
Principal Financial and Accounting Officer
