<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
_______________________________________
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended: JULY 31, 1997
[ ] Transition period under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________.
Commission file number: 0-13652
_______________________________________
COMMUNICATIONS WORLD INTERNATIONAL, INC.
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(Name of Small Business Issuer in Its Charter)
Colorado 84-0917382
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6025 South Quebec, Suite 300, Englewood, Colorado 80111
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(Address of principal executive offices) (Zip Code)
(303) 721-8200
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Issuer's Telephone Number, Including Area Code
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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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As of August 16, 1997, the issuer had 1,620,571 shares of its no par value
Common Stock issued and outstanding.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Attached.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Company reported net income of $93,000 for the three months ended July 31,
1997 compared to net income of $31,000 for the three months ended July 31, 1996.
Earnings before interest , taxes, depreciation and amortization (EBITDA) for the
current quarter was $274,000 compared to $211,000 for the quarter ended July 31,
1996. Gross profit on all sources of revenue was about $26,000 lower in the
quarter ended July 31, 1997 than in the quarter ended July 31, 1996. The
increase in net income was the result of lower selling, general and
administrative expenses.
Revenue from direct equipment and service sales for the three months ended July
31, 1997 was $1,988,000, a decrease of $91,000 or 4.4% from the three months
ended July 31, 1996. The gross margin on this revenue decreased from $1,009,000
to $888,000. The gross margin percentage on this revenue decreased from 48.5%
for the quarter ended July 31, 1996 to 44.7 % for the quarter ended July 31,
1997.
Revenue from equipment and related service sales to franchises decreased for the
quarter ended July 31, 1997 by $134,000. The decrease was offset by an increase
in the gross margin on this revenue from 12.5% for the quarter ended July 31,
1996 to 22.7% for the quarter ended July 31, 1997. The increase in gross margin
on this revenue was $121,000. Contributing to the improved gross margin for the
current quarter was a discount of $127,000 related to the agreement of Toshiba
America Information Systems, Inc., the Company's principal supplier, to treat as
non interest bearing a note payable to it in the amount of $1,086,000. Interest
in the amount of $19,000 was imputed on the discounted note during the current
quarter. Without the additional discount, the gross margin percentage for the
current quarter would have been 13.2%, an increase of .7% from the same quarter
in the prior year.
General and administrative expenses for the quarter ended July 31, 1997
decreased from the quarter ended July 31, 1996 by $72,000 or 8.2%. Management
continues to assess these expenses and take action to reduce them, when
necessary and appropriate.
There is no provision for income taxes for either of the quarters ended July 31,
1997 or 1996 because of the Company's net operating loss carry forward.
2
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ITEM 5. OTHER INFORMATION
The Company's common stock is traded on the Nasdaq Small Cap Market.
On August 25, 1997 the Nasdaq Stock Market announced changes to further
strengthen both the quantitative and qualitative standards of issuers listing on
Nasdaq. Among other things, a company must have Net Tangible Assets of $2
million or a Market Capitalization of $35 million or Net Income of $500,000 in
the latest fiscal year to maintain its listing. The Company does not currently
meet any of these requirements. Companies failing to satisfy the new continued
listing requirements will be allowed six months to meet the new requirements.
The Company desires to maintain its listing and is exploring potential means to
achieve compliance with the new requirements within the time period allowed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K
The Company filed a Report on Form 8-K dated May 5, 1997. Information
was reported in Item 4, "Change in Registrant's Certifying Accountants".
No financial statements were included with this filing.
3
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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.
Communications World International, Inc.
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(Registrant)
Date: August 20, 1997 /s/ Richard D. Olson
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Richard D. Olson, President, Chief
Executive Officer
Date: August 20, 1997 /s/ Scott E. Harris
- ---------------------- ----------------------
Scott E. Harris, Executive Vice President,
Chief Financial Officer
4
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COMMUNICATIONS WORLD INTERNATIONAL, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEET
JULY 31, 1997
(UNAUDITED)
ASSETS
- ------
Current assets:
Cash $ 17,364
Trade accounts and current portion
of notes receivable, less allowance
for doubtful accounts of $241,647 1,844,393
Inventories 974,856
Prepaid expenses 84,800
Deferred tax asset 100,240
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Total current assets 3,021,653
Property and equipment, net 354,494
Deposits and other assets 40,894
Notes receivable 71,442
Intangible assets, net 1,238,198
Deferred tax asset 284,760
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$ 5,011,441
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Trade accounts payable $ 1,468,824
Revolving line of credit 793,873
Current portion of notes and
contract payable, including amounts
due to related parties of $63,570 372,839
Accrued expenses 200,560
Current portion of capital lease
obligations 10,100
Deposits and other current liabilities 164,387
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Total current liabilities 3,010,583
Capital lease obligations and deferred revenue 33,103
Notes and contract payable, including
amounts due to related parties of $ 106,700 685,038
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Total liabilities 3,728,724
Stockholders' equity:
Preferred stock, cumulative, convertible.
$1.00 par value, 3,000,000 shares
authorized, Series B - 80,088 issued
and outstanding, Series C - 436,679
issued and outstanding, Series F-
357,818 issued and outstanding,
Series G - 83,500 issued and outstanding 958,085
Common stock, no par value,
2,000,000 shares authorized,
shares issued and outstanding; 1,620,571 4,224,512
Additional paid-in capital 458,009
Accumulated deficit (4,357,889)
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Total stockholders' equity 1,282,717
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$ 5,011,441
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See accompanying notes to interim consolidated financial statements
5
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COMMUNICATIONS WORLD INTERNATIONAL, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 1997 AND 1996
(UNAUDITED)
-----------
1997 1996
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Revenue:
Equipment and related service revenue $1,341,278 $1,477,881
Direct equipment and service sales 1,992,783 2,079,261
Royalty fees 59,612 52,295
Initial franchise fees - 12,500
Other revenue 89,977 120,883
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Total revenue 3,483,650 3,742,820
Costs and expenses:
Cost of equipment and related
service revenue 1,039,318 1,293,867
Cost of direct equipment and
service sales 1,099,983 1,070,325
Cost of other revenue 41,194 46,641
Selling 185,293 218,741
General and administrative 813,818 874,926
Depreciation and Amortization 103,883 103,837
Interest Expense 77,580 76,129
Provisions for bad debts 30,000 27,000
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Total cost and expenses 3,391,069 3,711,466
Net income 92,581 31,354
Cumulative dividend on preferred stock 18,962 10,219
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Net income applicable to common
stock $ 73,619 $ 21,135
========== ==========
Weighted average number of shares
outstanding 1,620,571 1,546,038
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Income per common share $.05 $.01
========== ==========
See accompanying notes to interim consolidated financial statements
6
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COMMUNICATIONS WORLD INTERNATIONAL, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JULY 31, 1997 AND 1996
(UNAUDITED)
-----------
1997 1996
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Cash flows from operating activities:
Net income (loss) $ 92,580 $ 31,354
Adjustments to reconcile to net cash
(used) provided by operating
activities:
Depreciation and amortization 103,883 103,837
Provision for bad debt on 30,000 27,000
accounts and notes receivable
Changes in operating assets
and liabilities:
Trade accounts and notes 767,342 (606,830)
receivable
Inventories (27,305) 33,869
Other current assets (13,583) (25,025)
Trade accounts payable (670,341) 402,517
Accrued expenses and 94,695 108,359
other liabilities --------- ---------
Net cash (used) provided 377,271 75,081
by operating activities --------- ---------
Cash flows from investing activities:
Capital expenditures (5,271) (12,375)
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Net cash used for (5,271) (12,375)
investing activities --------- ---------
Cash flows from financing activities:
Net (repayment) borrowings on notes (215,364) (75,969)
and contracts payable
Net (repayments) borrowings under (208,018) (73,344)
line-of-credit
Repayment of capital leases (11,814) (6,599)
obligations --------- ---------
Net cash provided (used) (435,196) (155,912)
for financing activities --------- ---------
Net (decrease) increase in cash and (63,196) (93,206)
cash equivalents
Cash and cash equivalents at beginning 80,560 103,748
of period --------- ---------
Cash and cash equivalents at end of $ 17,364 $ 10,542
period ========= =========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 77,580 $ 76,129
Non-cash investing activities:
Issuance of warrants for 11,000
investment banking services
Issuance of preferred stock as 10,000
bonus compensation
See accompanying notes to interim consolidated financial statements
7
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COMMUNICATIONS WORLD INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
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The interim consolidated financial statements presented are those of
Communications World International, Inc. ("Company" or "CommWorld") and its
subsidiaries, CommWorld of Phoenix, Inc. CommWorld of Seattle, Inc., Digital
Telecom, Inc. (dba CommWorld NationWide) and CommWorld National Capitol Area,
Inc. All significant intercompany balances and transactions have been
eliminated.
The accompanying unaudited interim financial statements reflect, in the opinion
of management, all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation. The accounting policies followed by the
Company are set forth in Note 1 to the Company's financial statements in the
Company's report on Form 10-KSB for the period ended April 30, 1997. Operating
results for the three months ended July 31, 1997 are not necessarily indicative
of the results that may be expected for the year ending April 30, 1998.
8
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<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 17,364
<SECURITIES> 0
<RECEIVABLES> 1,844,393
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<PP&E> 354,494
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958,085
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