<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
Commission file number: 0-25940
VIEW TECH, INC.
(Exact name of small business issuer as specified in its charter)
CALIFORNIA 77-0312442
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
950 FLYNN ROAD
CAMARILLO, CA 93012
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (805) 482-8277
N/A
(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
--- ---
The number of shares of the registrant's Common Stock outstanding, as of
November 11, 1996 was 3,395,938.
Transitional Small Business Disclosure Format (Check one): Yes ___ No X
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VIEW TECH, INC.
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE REFERENCE
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<S> <C>
PART I FINANCIAL INFORMATION
Balance Sheets
September 30, 1996 (unaudited) and June 30, 1996 1
Statements of Operations
Three Months Ended September 30, 1996 and 1995 (unaudited) 2
Statements of Cash Flows (unaudited)
Three Months Ended September 30, 1996 and 1995 3
Notes to Financial Statements (unaudited) 4
Management's Discussion and Analysis or Plan of Operations 7
PART II OTHER INFORMATION
Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
i
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIEW TECH, INC.
BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
------------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,155,565 $ 1,463,199
Accounts receivable (net allowance for doubtful
accounts of $29,756 and $23,756, respectively) 6,141,682 4,720,262
Notes receivable 1,008,722 --
Inventory 1,264,398 1,104,577
Prepaid and other current assets 1,096,692 709,671
----------- -----------
Total Current Assets 10,667,059 7,997,709
Property and equipment, net 946,251 820,411
Deferred charge - goodwill (net of accumulated
amortization of $11,121) 1,654,203 --
Other assets 101,343 31,001
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$13,368,856 $ 8,849,121
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,664,593 $ 3,254,527
Note payable 220,000 --
Other current liabilities 576,703 501,406
----------- -----------
Total Current Liabilities 5,461,296 3,755,933
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Long-Term Liabilities 223,181 242,283
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Stockholders' Equity:
Preferred stock, par value $.01, authorized
5,000,000 shares, none issued or outstanding -- --
Common stock, par value $.01, authorized
10,000,000 shares, issued and outstanding
3,093,157 and 2,890,200 shares at September
30, 1996 and June 30, 1996, respectively 30,931 28,902
Common stock subscribed, net 1,390,102 --
Paid-in capital 6,768,921 5,253,234
Retained deficit (505,575) (431,231)
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7,684,379 4,850,905
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$13,368,856 $ 8,849,121
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</TABLE>
See accompanying notes to financial statements
1
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VIEW TECH, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
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<S> <C> <C>
Revenues $ 5,364,952 $ 1,689,673
Cost of Revenues 3,786,229 1,160,358
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Gross Profit 1,578,723 529,315
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Operating Expenses:
Selling expenses 660,931 245,496
General and administrative expenses 1,054,291 585,993
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1,715,222 831,489
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Loss from Operations (136,499) (302,174)
Other Income 14,120 56,216
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Loss Before Income Taxes (122,379) (245,958)
Provision for Income Taxes 48,036 90,607
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Net Loss $ (74,343) $ (155,351)
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Loss Per Share $ (.03) $ (.05)
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Weighted Average Shares Outstanding 2,959,248 2,858,750
----------- -----------
</TABLE>
See accompanying notes to financial statements
2
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VIEW TECH, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (74,343) $ (155,351)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation and amortization 68,739 20,455
Provision for bad debts 6,000 --
Changes in assets and liabilities net
of effects of acquisitions:
Accounts receivable (815,435) (136,973)
Inventory (159,821) (537,784)
Prepaids and other assets (326,136) (305,166)
Accounts payable 885,702 751,405
Other accrued liabilities 20,769 (328,803)
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Net cash used by operating
activities (394,525) (692,217)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (134,795) (59,231)
Term loan to USTeleCenters, Inc. (1,000,000) --
Acquisitions of VistaTel and GroupNet (149,313) --
---------- ----------
Net cash used by investing
activities (1,284,108) (59,231)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment on capital lease
obligations (19,103) (16,841)
Repayment of long-term debt -- (331,466)
Issuance of common stock -- 1,625
Additional costs for initial public
offering of common stock -- (43,430)
Common stock subscribed for private
placement offering, net 1,390,102 --
---------- ----------
Net cash provided (used) by
financing activities 1,370,999 (390,112)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (307,634) (1,141,560)
CASH AND CASH EQUIVALENTS, beginning
of period 1,463,199 4,987,939
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CASH AND CASH EQUIVALENTS, end of
period $1,155,565 $3,846,379
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SUPPLEMENTAL DISCLOSURES:
Operating activities reflect:
Interest paid $ 9,446 $ 8,799
---------- ----------
Income taxes paid $ 600 $ 255,300
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</TABLE>
See accompanying notes to financial statements
3
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VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - GENERAL
- ----------------
View Tech, Inc. markets and installs video communications systems and
provides continuing services related to installed systems.
The information for the three months ended September 30, 1996 and 1995 has
not been audited by independent accountants, but includes all adjustments
(consisting of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the results for such periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to the rules of the Securities and Exchange
Commission, although the Company believes that the disclosures included in these
financial statements are adequate to make the information not misleading. The
financial statements presented herein should be read in conjunction with the
audited financial statements and notes thereto included in the Company's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1996.
NOTE 2 - NET INCOME PER SHARE
- -----------------------------
Net income per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period,
including common stock options and common stock purchase warrants when dilutive.
NOTE 3 - LINE OF CREDIT
- -----------------------
The Company maintains a $500,000 credit facility (the "Note") to meet its
working capital needs, if required. Although the Note expired on November 1,
1996, the Company is presently working with the bank to renew the Note at a
greater amount through November 1, 1997. The Note provides for interest at the
prime rate plus one and one-half percent per year. Funds available under the
Note are reduced by certain outstanding standby letters of credit issued on
behalf of the Company. No amounts were outstanding under the Note at September
30, 1996, although the Company has as of September 30, 1996, five outstanding
standby letters of credits aggregating $274,000 of which four were issued in
favor of one leasing company in connection with certain capital lease
transactions relating to the purchase of computer equipment and furniture and
one was issued to a surety company in connection with its issuance of a
performance bond on behalf of the Company. The letter of credit holders may
draw against the letters of credit if the Company fails to make timely payments
or meet certain other conditions. As a result of issuing the five standby
letters of credit, the balance available under the Note has been reduced to
$226,000.
4
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VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - COMMITMENTS
- --------------------
The Company executed a new office lease agreement on October 11, 1996 for
approximately 5,946 square feet to house its Atlanta operations. The lease
provides for monthly rental payments of $10,653, plus its portion of building
operating expenses. The lease will commence on December 1, 1996 for a term of
three years. The office space previously occupied by the Company will be sub-
let.
NOTE 5 - ACQUISITIONS
- ---------------------
VISTATEL INTERNATIONAL, INC.
- ----------------------------
Effective July 1, 1996, the Company acquired the net assets of VistaTel
International, Inc., ("VistaTel") a private company, based in Boca Raton,
Florida, which was a supplier of video conferencing products and services within
the State of Florida and was one of PictureTel's national re-sellers. The
acquisition was accounted for using the purchase method of accounting and
accordingly, acquisition costs have been allocated to the assets acquired and
liabilities assumed based upon their fair values at the date of acquisition.
View Tech issued 52,857 shares of common stock, valued at $7.00 per share, to
the sole shareholders of VistaTel. The excess of the acquisition costs over the
net assets acquired of $354,919 is accounted for as goodwill and is being
amortized over 15 years. The fair value of the assets acquired, excluding
goodwill, and the liabilities assumed was $322,846 and $284,227, respectively.
GROUPNET, INC.
- --------------
Pursuant to a merger agreement dated August 30, 1996, View Tech acquired
GroupNet, Inc. ("GroupNet") for cash and View Tech common stock valued at $1.380
million. The purchase price consisted of 150,000 shares of common stock valued
at $7.00 per share and $330,000 in cash, of which, $110,000 was paid on August
30, 1996 in connection with the execution of the agreement, and $220,000 is
payable in equal installments of $110,000 due on November 15, 1996 and January
15, 1997, respectively. The acquisition was accounted for using the purchase
method of accounting and accordingly, acquisition costs have been allocated to
the assets acquired and liabilities assumed based upon their fair values at the
date of acquisition. The excess of acquisition costs over the net assets
acquired of $1.310 million is accounted for as goodwill and is being amortized
over 15 years. The fair value of the assets acquired, excluding goodwill, and
the liabilities assumed was $380,036 and $289,667, respectively. GroupNet, based
in Boston, Massachusetts, was an authorized PictureTel dealer in the
northeastern United States. GroupNet merged into View Tech, which will continue
to operate GroupNet's Boston and New York offices.
Following is summarized pro forma operating results assuming that the
Company had acquired GroupNet on July 1, 1995.
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
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<S> <C> <C>
Revenues $ 5,587,711 $ 1,867,604
Loss before income taxes (173,031) (224,008)
Net loss (104,734) (142,181)
Net loss per share (.03) (.05)
Weighted average shares outstanding 3,109,248 3,008,750
</TABLE>
The summarized pro forma operating results include the historical operating
results for GroupNet for the two months ended August 30, 1996 and the three
months ended September 30, 1995. GroupNet was an S Corporation prior to its
acquisition by the Company, as such, GroupNet was not generally subject to
federal income taxes. Therefore, the pro forma operating results for GroupNet
include a pro forma tax provision at an effective rate of 40%. The summarized
pro forma information may not be indicative of the results of operations that
would have occurred if the acquisition had been concluded on July 1, 1996 or
1995 or which may be achieved in the future.
USTELECENTERS, INC.
- -------------------
On September 5, 1996, View Tech announced that it entered into a definitive
agreement of merger with USTeleCenters, Inc. ("USTeleCenters"), who is an
authorized sales agent for several of the regional bell operating companies.
The merger is valued at $18.500 million and is subject to the approval by View
Tech's and USTeleCenters' shareholders as well as satisfactory completion of due
diligence and certain conditions precedent. USTeleCenters currently owes its
primary lender (and such lender's affiliate) approximately $2.500 million which
is to be paid in full or appropriately refinanced at the close of such merger.
The transaction will be accounted for as a pooling of interests in which
USTeleCenters' shareholders will exchange all of their outstanding USTeleCenters
shares and options for View Tech common stock and options, respectively. The
transaction is expected to be completed on
5
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VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - ACQUISITIONS (CONT.)
- -----------------------------
or about November 30, 1996. It is anticipated that USTeleCenters' shareholders
and optionholders (upon exercise of their options) will receive up to 2.500
million shares of View Tech common stock.
During July and August 1996, the Company advanced an aggregate of $1.000
million to USTeleCenters for working capital purposes and in order for
USTeleCenters to repay certain bank debt due on September 1, 1996. The $1.000
million advanced is evidenced by a note which is subordinated to USTeleCenters'
debt obligations to its primary lender (and such lender's affiliates). The
promissory note evidencing USTeleCenters' indebtedness provides for interest at
10%, payable quarterly commencing on September 30, 1996. The principal and
accrued interest are due on June 15, 1997.
The Company is currently seeking bank financing, private debt and/or equity
financing for purposes of meeting anticipated cash needs related to the merger
with USTeleCenters. The Company is required to either refinance or repay
certain debt and lease obligations aggregating approximately $2.500 million
payable to USTeleCenters' primary lender (and such lender's affiliate) and is
required to pay certain merger costs of approximately $1.800 million, primarily
consisting of advisory fees and legal and accounting costs. In addition, the
Company will require additional working capital to efficiently operate the
combined companies during the months following the business combination.
Exclusive of the cash required in connection with the merger with
USTeleCenters, the Company believes that its existing cash balances, combined
with the proceeds from its private placement of common stock, anticipated
operating cash flow and borrowings under existing and anticipated credit
facilities will be adequate to meet the Company's on-going cash needs for the
next twelve months. There can be no assurance that the Company will be able to
raise additional financing on favorable terms, if at all, or that it will be
able to do so on a timely basis. Inability to obtain required additional
financing could limit the Company's ability to complete its business combination
with USTeleCenters and/or to efficiently operate the combined companies.
PRIVATE PLACEMENT
- -----------------
At September 30, 1996, the Company had received common stock subscriptions
for equity capital of approximately $1.500 million through the private placement
of 300,281 shares of common stock. The private placement was terminated on
October 31, 1996 with the Company realizing net proceeds of approximately $1.390
million. The Company is using the net proceeds for general working capital
purposes and to replenish its cash loaned to USTeleCenters in connection with
the proposed merger.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and the notes thereto appearing elsewhere in this Form 10-QSB.
Certain statements contained in this Form 10-QSB that are not related to
historical results, including, without limitation, statements regarding View
Tech's business strategy and objectives, future financial position, and
estimated cost savings, are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 and involve risks and uncertainties. Although View Tech
believes that the assumptions on which these forward-looking statements are
based are reasonable, there can be no assurance that such assumptions will prove
to be accurate and actual results could differ materially from those discussed
in the forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed herein. All
forward-looking statements contained in this Form 10-QSB are qualified in their
entirety by this cautionary statement.
GENERAL
The Company markets and installs video communications systems and provides
continuing services relating to installed systems. Revenue from the sale of
equipment is recognized when title passes to the customer. Revenue from
services is derived primarily from engineering, installation, training, and
warranty services. Service revenue is recognized at the time of installation,
when rendered in connection with sales of new systems, and at the time the
majority of such services are rendered, when related to previously installed
equipment. The Company establishes reserves for the estimated future costs of
the warranty portion of the services.
The Company also earns commission income with respect to sales of systems
to its domestic customers for delivery at locations outside the United States.
Upon completion of its initial public offering of common stock in June
1995, the Company began utilizing the funds raised in the offering, in part, to
finance its growth in existing markets and to expand its operations into new
geographical regions. Since September 1995, the Company has expanded its sales
and service operations to 23 states and has opened five new offices either
through expansion or acquisition, of which two offices are full service offices
staffed with sales, technical and administrative personnel and three are sales
offices. In addition, the Company's headcount increased from 32 to 64 employees
at September 30, 1995 and 1996, respectively.
The Company's 218% increase in revenues for the quarter ended September 30,
1996 compared to fiscal 1995 was primarily related to increased marketing
efforts, including expansion of the sales force to 21 representatives compared
to 12 people at September 30, 1995 and the opening of three regional and two
sales offices since September 30, 1995. In addition, overall operating costs
and expenses have increased 106% from $831,489 in 1995 to $1.715 million in
1996. Loss from operations improved from a loss of $302,174 for 1995 to a loss
of $136,499 in 1996. Such operating losses relate primarily to the Company's
rapid expansion activities whereby expenses have been incurred in advance of
revenues, particularly, in the new expanded territories.
7
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The Company intends to continue its expansion activities in fiscal 1997.
Since June 30, 1996, the Company has opened offices in Phoenix, Arizona and Salt
Lake City, Utah. In addition, the Company has expanded its operations into the
State of Florida and into the northeastern United States in connection with its
acquisitions of VistaTel International, Inc. and GroupNet, Inc., respectively.
The Company also has signed a definitive agreement to merge with USTeleCenters,
Inc., which is headquartered in Boston, Massachusetts. Although management
anticipates that the revenues generated by its existing offices, as well as
offices acquired through acquisition or expansion, will exceed such operating
costs for the year ending June 30, 1997, there can be no assurance that such
results will be achieved. To the extent that such costs exceed such revenues,
the Company's operating income will be adversely affected.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
derived from the Company's financial statements expressed as a percentage of the
Company's revenues:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
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<S> <C> <C>
Revenues.......................................... 100.0% 100.0%
Cost of revenues.................................. 70.6 68.7
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Gross profit...................................... 29.4 31.3
----- -----
Operating expenses:
Selling expenses................................ 12.3 14.5
General and administrative expenses............. 19.6 34.7
----- -----
Total operating expenses.......................... 31.9 49.2
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Loss from operations.............................. (2.5) (17.9)
Other income (expense)............................ 0.2 3.3
----- -----
Loss before income taxes.......................... (2.3) (14.6)
Provision for income taxes........................ 0.9 5.4
----- -----
Net loss.......................................... (1.4)% (9.2)%
----- -----
</TABLE>
Three Months Ended September 30, 1996 Compared to Three Months Ended September
30, 1995
Revenues for 1996 increased $3.675 million or 217.5% to $5.365 million
from $1.690 million in 1995. The increase in revenues was primarily related to
increased marketing efforts, relating to the Company's nationwide expansion
including increasing its sales force to 21 representatives compared to 12 at
September 30, 1995, an increase in installation and maintenance revenues of
$410,644, and an increase of $78,712 in bridging revenues. The Company launched
its bridging services in the third quarter of 1996.
Gross profit for 1996 increased $1.049 million or 198.3% to $1.579 million
from $529,315 in 1995. Gross profits as a percentage of revenues, or gross
margin, decreased to 29.4% in 1996 from 31.3% in 1995. The decrease in gross
margin is directly related to increases in salaries and related expenses of
$231,598 for technical services personnel for 1996. The technical services
staff increased
8
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from 10 at September 30, 1995 to 24 at September 30, 1996. Service revenues, as
a percentage of total revenues, decreased from 20% in 1995 to 16% in 1996.
However, the costs of the technical services group, as a result of the Company's
expansion program, increased at a greater rate than service revenues, contibuted
to a lower gross margin in 1996 compared to 1995.
Selling expenses increased $415,434 or 169.2% to $660,931 in 1996 from
$245,496 in 1995. Selling expenses as a percentage of revenues decreased to
12.3% in 1996 from 14.5% in 1995. The dollar increase in selling expenses is
primarily due to the increase in the number of sales personnel from 12 at
September 30, 1995 to 21 at September 30, 1996, resulting in increased salary
and commission expenses associated with higher levels of sales. Selling
expenses decreased as a percentage of revenues because the rate of increase in
such expenses was less than the rate of increase in revenues.
General and administrative expenses increased $468,298 or 79.9% to $1.054
million in 1996 from $585,993 in 1995. General and administrative expenses as a
percentage of total revenues decreased to 19.6% for 1996 compared to 34.7% for
1995. The dollar increase in general and administrative expenses was primarily
attributable to increases in administrative salaries and related costs of
$158,988, telephone and electronic communication costs of $127,526, depreciation
and amortization of $48,284, office rents of $44,931, and an overall increase in
other general office expenses, primarily related to the Company's expansion
program. These expenses decreased as a percentage of revenues because the rate
of increase in such expenses was less than the rate of increase in revenues.
Loss from operations decreased $165,675 to a loss of $ 136,499 in 1996
compared to a loss of $302,174 in 1995. Loss from operations as a percentage
of revenues decreased to (2.5)% for 1996 compared to (17.9)% for 1995. The
overall improvement in operating results for 1996 compared to 1995 is primarily
attributable to the Company's increased revenues.
Other income decreased $42,096 to $14,120 in 1996 from $56,216 in 1995.
The decrease was primarily due to a decrease in interest income of $35,247
related to the decrease in cash available for investments in short term
securities during 1996.
Provision for income taxes decreased $42,571 to a tax benefit of $48,036 in
1996 from a tax benefit of $90,607 for 1995. The decrease in income tax benefit
relates to the decrease of $123,579 in the pre-tax loss for 1996. The Company
expects to fully realize the $48,036 tax benefit in future periods.
The Company's net loss decreased $81,008 to a loss of $74,343 in 1996 from
a loss of $155,351 for 1995. Net income as a percentage of revenues decreased
to a loss of (1.4)% for 1996 compared to a loss of (9.2)% for 1995. Net income
per share decreased to a loss of $(0.03) for 1996 compared to a loss of $(0.05)
for 1995. The weighted average number of shares outstanding increased to
2,959,248 in 1996 from 2,858,750 for 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and expansion activities during the
past year primarily with the proceeds from its initial public offering in June
1995 and vendor credit arrangements.
9
<PAGE>
Net cash used for operating activities in 1996 was $394,525. The primary
uses of cash in 1996 were increases in accounts receivable, inventories, and
prepaids and other assets of $815,435, $159,821, and $326,136, respectively.
The uses of cash reflect the Company's higher sales volume and funds used to
expand the Company's operations for the quarter ended September 30, 1996.
Sources of cash from operating activities were related to an increase in
accounts payable of $885,702.
Net cash used for investing activities in 1996 was $1,284,108, relating to
the purchase of office furniture and computer equipment for $134,795, a short-
term working capital loan of $1.000 million to USTeleCenters, and payment of
acquisition costs of $149,313 in connection with the acquisitions of VistaTel
and GroupNet The Company presently anticipates that its capital expenditures
for fiscal 1997 range from $400,000 to $500,000, for office furniture and
equipment.
Net cash provided by financing activities in 1996 was $1,370,999, primarily
representing the net proceeds of $1.390 million, offset by repayments on capital
lease obligations of $19,103, in connection with the private placement of common
stock. At September 30, 1996, the Company had received common stock
subscriptions for equity capital of approximately $1.500 million through the
private placement of 300,281 shares of common stock. The private placement was
terminated on October 31, 1996 with the Company realizing net proceeds of
approximately $1.390 million. The Company is using the net proceeds for general
working capital purposes and to replenish its cash loaned to USTeleCenters in
connection with the proposed merger.
The Company maintains a $500,000 credit facility (the "Note") to meet its
working capital needs, if required. Although the Note expired on November 1,
1996, the Company is presently working with the bank to renew the Note at a
greater amount through November 1, 1997. The Note provides for interest at the
prime rate plus one and one-half percent per year. Funds available under the
Note are reduced by certain outstanding standby letters of credit issued on
behalf of the Company. No amounts were outstanding under the Note at September
30, 1996, although the Company has as of September 30, 1996, five outstanding
standby letters of credits aggregating $274,000 of which four were issued in
favor of one leasing company in connection with certain capital lease
transactions relating to the purchase of computer equipment and furniture and
one was issued to a surety company in connection with its issuance of a
performance bond on behalf of the Company. The letter of credit holders may
draw against the letters of credit if the Company fails to make timely payments
or meet certain other conditions. As a result of issuing the five standby
letters of credit, the balance available under the Note has been reduced to
$226,000.
The Company's primary supplier, PictureTel, provides the Company with a
purchasing line of credit and requires the Company to maintain a letter of
credit for $250,000 in favor of PictureTel in connection with this arrangement.
The $250,000 letter of credit is collateralized by cash deposits of $150,000 and
the assets of the Company.
During July and August 1996, the Company advanced an aggregate of $1.000
million to USTeleCenters for working capital purposes and in order for
USTeleCenters to repay certain bank debt due on September 1, 1996. The $1.000
million advanced is evidenced by a note which is subordinated to USTeleCenters'
debt obligations to its primary lender (and such lender's affiliate). The
promissory
10
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note evidencing USTeleCenters' indebtedness provides for interest at 10%,
payable quarterly commencing on September 30, 1996. The principal and accrued
interest are due on June 15, 1997.
The Company is currently seeking bank financing, private debt and /or
equity financing for purposes of meeting anticipated cash needs related to the
merger with USTeleCenters. The Company is required to either refinance or repay
certain debt and lease obligations aggregating approximately $2.500 million
payable to USTeleCenters' primary lender (and such lender's affiliate) and is
required to pay certain merger costs of approximately $1.800 million, primarily
consisting of advisory fees and legal and accounting costs. In addition, the
Company will require additional working capital to efficiently operate the
combined companies during the months following the business combination.
Exclusive of the cash required in connection with the merger with
USTeleCenters, the Company believes that its existing cash balances, combined
with the proceeds from its private placement of common stock, anticipated
operating cash flow and borrowings under existing and anticipated credit
facilities will be adequate to meet the Company's on-going cash needs for the
next twelve months. There can be no assurance that the Company will be able to
raise additional financing on favorable terms, if at all, or that it will be
able to do so on a timely basis. Inability to obtain required additional
financing could limit the Company's ability to complete its business combination
with USTeleCenters and/or to efficiently operate the combined companies.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
Report on Form 8-K, filed September 24, 1996, concerning the
completion of the acquisition of GroupNet, Inc., on September 24, 1996.
11
<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.
VIEW TECH, INC.
Date: November 13, 1996 By: \s\ William M. McKay
---------------------------------
William M. McKay
Chief Financial Officer
(Principal Financial and
Accounting Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10 QSB
FOR 09/30/96 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,155,565
<SECURITIES> 0
<RECEIVABLES> 6,171,438
<ALLOWANCES> (29,756)
<INVENTORY> 1,264,398
<CURRENT-ASSETS> 10,667,059
<PP&E> 1,267,384
<DEPRECIATION> (321,133)
<TOTAL-ASSETS> 13,368,856
<CURRENT-LIABILITIES> 5,461,296
<BONDS> 0
0
0
<COMMON> 30,931
<OTHER-SE> 7,653,448
<TOTAL-LIABILITY-AND-EQUITY> 13,368,856
<SALES> 5,364,952
<TOTAL-REVENUES> 5,364,952
<CGS> 3,786,229
<TOTAL-COSTS> 3,786,229
<OTHER-EXPENSES> 1,715,222
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,446
<INCOME-PRETAX> (122,379)
<INCOME-TAX> 48,036
<INCOME-CONTINUING> (74,343)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74,343)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
