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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 March 31, 2000
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to ___________
Commission file number 33376885
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Teltran International Group, Ltd.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 11-3172507
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
One Penn Plaza, Suite 4430, New York, New York 10119
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(Address of Principal Executive Offices)
(212) 643-1283
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(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 X No
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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.
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Yes No X
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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 - 17,966,529 shares as of March 31, 2000
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Transitional Small Business Disclosure Format (check one):
Yes No X
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TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
INDEX
PAGE NO.
Part I Financial Information
Consolidated Balance Sheet at March 31, 2000 1
Consolidated Statements of Operations for the three months
ended March 31, 2000 and 1999 2
Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 3
Notes to Consolidated Financial Statements 4
Managements Discussion and Analysis of Financial Condition
and Results of Operations 5 - 6
Part II Other Information
Item 6, Exhibits and Reports on Form 8-K 7
Signatures 8
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TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
Unaudited
<TABLE>
<CAPTION>
March 31,
Current Assets: 2000
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<S> <C>
Cash $ 801,217
Accounts receivable 1,669,219
Prepaid expenses and other current assets 404,699
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Total current assets 2,875,135
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Property and Equipment
Machinery & Equipment, net of accumulated depreciation 1,611,279
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Other Assets:
Investment (Cost method) 4,000,000
Software and development costs 4,382,070
Security deposits 50,705
Goodwill - net of amortization 209,821
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Total other assets 8,642,596
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Total Assets $ 13,129,010
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Loan payable $ 4,342,666
Accounts payable, accrued expenses and taxes payable 1,665,456
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Total current liabilities 6,008,122
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Long-Term Liabilities:
Loans payable - stockholders' 1,245
Long term debt 72,767
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Total long-term liabilities 74,012
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Total liabilities 6,082,134
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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 17,110,980 and 7,697,295 issued
and outstanding, respectively 17,967
Additional paid in capital in excess of par value 26,016,055
Note receivable (2,220,803)
Stock subscription receivable (318,937)
Deficit (16,422,395)
Translation adjustment (5,011)
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Total stockholders' equity 7,046,876
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Total liabilities and stockholders' equity $ 13,129,010
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</TABLE>
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TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31,
Unaudited
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
Revenues:
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Sales $ 1,200,137 $ 83,459
Cost of Sales:
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Purchases 526,438 122,311
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Gross profit 673,699 (38,852)
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Expenses:
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Salaries 485,745 113,301
Outside services 273,599 31,770
Professional fees 72,915 31,960
Bad debts 51,744 -
Fees - other 24,100 63,488
Payroll taxes 20,993 10,310
Leasing expense 51,795 4,780
Travel 93,259 18,641
Insurance 15,221 13,009
Rent 29,853 46,350
Office expense 16,236 1,502
Miscellaneous 12,857 599
Maintenance costs 748 -
Printing 10,818 -
Depreciation 157,049 -
Taxes - other 8,044 -
Business development 103,184 -
Telephone 87,201 6,483
Contributions 2,300 1,000
Advertising 135,159 -
Amortization expense 12,689 20,498
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Total expenses 1,665,509 363,691
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(Loss) from operations (991,811) (402,543)
Interest expense (income) - net (80,012) 15,465
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(Loss) before other expense and
provision for income taxes (911,799) (418,008)
Other expense:
(Loss) from joint venture (103,126) -
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(Loss) before provision for income taxes (1,014,925) (418,008)
Provision for income taxes 16,404 780
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Net (loss) $ (1,031,329) $ (418,788)
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Net (loss) per share of common stock based upon 16,758,986
and 8,955,146 (weighted average) shares issued, respectively $ (0.06) $ (0.05)
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</TABLE>
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TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31,
Unaudited
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) $ (1,031,329) $ (418,788)
Adjustment to reconcile net (loss) to net cash
(used in) operating activities:
Depreciation and amortization expense 169,738 20,498
Loss on joint venture 103,126 -
(Increase) decrease in accounts receivable (691,182) 40,693
(Increase) in prepaid expenses and other current assets (212,233) (4,982)
(Increase) in software and development costs (4,382,070) -
Cash (repayments) received - factor - (65,193)
Increase (Decrease) in accounts payable, accrued expenses
and taxes payable (420,190) 759
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Net cash (used in) operating activities (6,464,139) (427,013)
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Cash Flows from Investing Activities:
Purchase of property and equipment (669,279) -
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Cash Flows from Financing Activities:
(Decrease) of convertible debentures payable - (180,488)
(Decrease) in notes payable - (550,000)
Conversion of convertible debenture - stock issued - 550,000
Common Stock issued for Notes 1,800,335 -
Decrease in loan payable 4,164,041 -
Cash received as advances from investors - 774,756
(Increase) in notes receivable (1,853,209) -
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Net cash provided by financing activities 4,111,167 594,268
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Net increase (decrease) in cash (3,022,251) 167,255
Cash - January 1, 3,823,468 5,389
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Cash - March 31, $ 801,217 $ 172,644
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Supplemental Disclosures:
Income tax $ - -
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Interest paid $ 4,046 749
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Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Non-cash issuance of common stock $3,284,205 $ -
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</TABLE>
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TELTRAN INTERNATIONAL GROUP, LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
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 period.
The results of operations for the three months ended March 31, 2000 are
not necessarily indicative of the results to be expected for the full
year.
Note 2 - Material Events:
On January 2, 2000, the Company received 800,000 additional shares of
Antra's common stock. The additional shares were received in accordance
with the exchange agreement for the original 2,000,000 shares that an
adjustment would be made for a disparity in the relative market value of
the common shares between the companies.
On January 3rd and February 9, 2000, the Company issued 71,666 and
410,000 shares respectively of common stock to employees who exercised
their stock options. The employees who received these shares gave
promissory notes to the Company in the amount of $1,800,335.
On March 14, 2000, the Company issued 208,331 additional shares of common
stock to the November 1999 private placement investors. The Company
originally sold 625,000 shares at $8.00 per share. A price adjustment to
$6.00 per share required the issuance of the shares to maintain the
original private placement price of $5,000,000.
On March 15, 2000 the Company acquired all of the assets of the network
business conducted by the Web Factory, Ltd., a United Kingdom affiliate
of Datatec Ltd. (a South African Company). The acquisition included
financial software, customer contracts and network/computer assets for a
purchase price of approximately $4,800,000. The Company made a payment of
approximately $1,200,000 and is obligated to pay an additional $1,200,000
April 30, 2000, August 31, 2000 and December 31, 2000. The April 30, 2000
payment has not yet been made.
Note 3 - Subsequent Events:
On March 29, 2000 the Company declared a 5% stock dividend payable April
14, 2000 to holders of record March 31, 2000.
On April 25, 2000, the Company received loans of $50,000 each from two
officer/shareholders. Repayment was made in May 2000 with interest at 10%
per annum.
On May 8, 2000, the Company received a short term loan of $300,000 from a
non-related party. Terms of repayment are 7% interest on the due date of
October 15, 2000. Payment may be effected by the conversion of warrants
issued as part of the note at $2.50 per share or regular repayment.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and related notes contained elsewhere in this
prospectus.
GENERAL
Forward Looking Statements
Certain statements contained herein may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements are subject to various known and
unknown risks and uncertainties and Teltran cautions you that any
forward-looking information provided by or on behalf of Teltran is not a
guarantee of future performance. Our actual results could differ from those
anticipated by such forward-looking statements due to a number of factors, some
of which are beyond Teltran's control, including (i) the volatile and
competitive nature of the telecommunications and internet industry, (ii) changes
in domestic and foreign economic and market conditions, (iii) the effect of
federal, state and foreign regulation on Teltran's business in general and in
the telecommunications and internet industries, (iv) changes in technology, (v)
reduced telecommunication rates, (vi) delays of third parties in commencing
service, (vii) the impact of recent and future acquisitions on Teltran's
business and financial condition. Teltran does not undertake any obligation to
publicly update any forward-looking statement to reflect events or circumstances
after the date on which any statement is made or to reflect the occurrence of
unanticipated events, and (viii) ability to obtain financing.
Plan of Operations
During the balance of 2000 our Plan of Operations is to:
o enter into and implement arrangements to provide wholesale customers
throughout the world with Internet telephony. We are negotiating arrangements
which, if implemented, would require us to expend money for equipment purchases
and the payment of various fees.
o seek to enter into arrangements to provide Internet telephony in additional
countries that will enable us to participate in revenues on both ends of a call.
o established a network facility and expand the services offered including "Fax
Over IP" and direct voice over IP to different countries.
o develop marketing strategies with Norweb, a national telecom network operator
in the UK, and utilize our alliance with them to expand our Internet telephony
network.
o enhance our portal by providing additional related business services. These
including offering banner ads, sponsorship agreements and other types of
advertising. We will also seeks to develop additional sales affiliate
arrangements on our portal and continue to run live Internet.
o jointly operate RecordsToGo.com, for the sale of music. The venture has
entered into arrangements for the sale of records through the Internet.
o integrate Internet Protocols Ltd., Teltran Web Factory, Ltd. our newly
acquired subsidiaries in the United Kingdom with our recently created holding
company.
o promote and market our new Internet service provider service through our web
portal, www.Teltran.com. The service will be competitively priced and will offer
unlimited Internet access, free e-mail and free home pages to all users.
o expand our sales staff for our UniDial services to solicit commercial
accounts. UniDial operates as an independent network of telecommunications
resellers. UniDial services will also be marketed to individuals via our
www.Teltran.com web portal.
o hire new employees as needed because of increased activity.
o continue to augment other aspects of our telecommunications business.
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We cannot assure you that we will be able to successfully implement our plan.
Results of Operations
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
During the first quarter of 1999 most of our revenues of $83,459 were derived
from acting as an OzEmail hub in the United States. Since such period we have
provided new services including internet telephony and made several UK
acquisitions of companies engaged in various aspects of the telecommunications
industry. We no longer derive any significant revenues as an OzEmail hub
therefore comparisons between these quarters will be of limited value.
Our revenues were approximately $1,200,000 for the first quarter of 2000 while
the Company had revenues of $83,459 in the comparable quarter in 1999. This
increase was due in significant part to the generation of additional telephony
and premium rate revenues from our United Kingdom subsidiaries.
Our operating expenses during the three months ended March 31, 2000 were
approximately $1,600,000 compared to approximately $363,000 during the
comparable period in 1999. The increased expenses were primarily attributable to
an increase in salary expense, advertising and business development. Salary and
payroll expenses increased by approximately $372,000 which was due to increased
remuneration to existing officers and payments to employees of our newly
acquired United Kingdom subsidiary.
LIQUIDITY
We had a working capital of approximately negative $3,100,000 as of March 31,
2000 compared to working capital of $75,789 as of March 31, 1999. This was due
to a reduction in cash and an increase in short term liabilities in connection
with the acquisition of webfactory assets. We have financed our operations
primarily out of private financing. In June 1999 we completed a private
placement of shares of common stock and received approximately $1,240,000. We
completed an additional private placement in December 1999 and received
approximately $5,550,000. Upon effectiveness of our registration statement on
Form SB-2 and in the absence of adverse changes, these purchasers may pay us
another $400,000 for additional shares.
The Company anticipates substantial capital and other expenditures during the
year 2000. The Company will require additional funds for equipment in connection
with the establishment of a network center in New York. It believes a portion of
these costs may be satisfied by leasing arrangements. While our vendors may
provide additional equipment without charge for calls originating over their
networks, the Company may have to purchase additional equipment to complete
calls. If it initiates additional types of telecommunications services or
establishes joint ventures or other arrangements in foreign countries, we may be
required to obtain additional equipment. The Company is required to make
additional payments of over $3,700,000 (including a payment presently due) to
complete the purchase of Web Factory assets, funding its United Kingdom
operations, funding up to an additional $65,000 for Recordstogo and $500,000 for
officer salaries. We also will expend in excess of $350,000, net, in connection
with a new dial around operation. Subsequent to March 31, 2000, we have received
$400,000 in short-term notes of which $100,000 was borrowed from officers and
repaid. The Company cannot finance these costs from operations and will be
required to obtain additional financing. We are presently exploring ways to
obtain this financing. There is no assurance we will be able to obtain funding
on terms favorable to us, if at all. If we cannot obtain additional financing,
we may have to curtail some activities.
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Part II -- Other Information
(b) Reports on Form 8-K
Current Report on Form 8-K dated March 15, 2000 reflecting the
acquisition of certain assets of the Web Factory.
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Signature
In accordance with 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.
Date: May 15, 2000
By:
/s/
Byron Lerner
President and Chief Executive Officer
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