<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 November 30, 1996.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ________________ to _______________.
Commission File Number 0-15482
WAVETECH INC.
(Exact name of small business issuer as specified in its charter)
NEW JERSEY 22-2726569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5210 E. WILLIAMS CIRCLE, SUITE 200
TUCSON, ARIZONA 85711
(Address of principal executive offices)
(520) 750-9093
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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.
[X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: January 6, 1997.
<TABLE>
<CAPTION>
Class No. Of Shares Outstanding
<S> <C>
Common Stock. Par Value $.001 14,114,441
- ----------------------------- ----------
</TABLE>
Transitional Small Business Disclosure Format (Check One): [ ] Yes [X] No
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INDEX
WAVETECH INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
----
<S> <C>
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
November 30, 1996 (unaudited) and August 31, 1996
(audited)..................................................... 3
Condensed Consolidated Statements of Operations -
Three Months Ended November 30, 1996 and November 30, 1995
(unaudited)................................................... 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended November 30, 1996 and November 30, 1995
(unaudited)................................................... 5
Notes to Condensed Consolidated Financial Statements -
November 30, 1996 and November 30, 1995
(unaudited)................................................... 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 7
PART II. OTHER INFORMATION
ITEM 5. Other Information............................................. 8
ITEM 6. Exhibits and Reports on Form 8 - K............................ 8
SIGNATURES........................................................................ 9
</TABLE>
2
<PAGE> 3
WAVETECH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1996 (UNAUDITED) AND AUGUST 31, 1996 (AUDITED)
<TABLE>
<CAPTION>
ASSETS
NOVEMBER 30 AUGUST 31
1996 1996
==============================
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 350,915 $ 857,488
License Fee Receivable 200,000 200,000
Inventory Deposit 244,459 241,037
Other Current Assets 65,558 82,388
----------- -----------
Total Current Assets 860,932 1,380,913
Property and Equipment, net 499,654 539,528
Other Assets:
Deposits 35,633 35,633
Non-current Portion of License Fee Receivable 300,000 300,000
Investment in Switch Telecommunications 2,316,165 2,316,165
Other Assets 7,400 8,000
----------- -----------
Total Other Assets 2,659,198 2,659,798
----------- -----------
Total Assets $ 4,019,784 $ 4,580,239
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and Accrued Expenses $ 60,728 $ 130,715
Unearned Revenue 499,985 499,985
Notes Payable, Current Portion 53,639 53,639
Capital Leases Payable, Current Portion 31,091 31,091
----------- -----------
Total Current Liabilities 645,443 715,430
Other Liabilities:
Capital Leases Payable 50,330 55,099
Unearned Revenue - License Fee 300,000 300,000
----------- -----------
Total Other Liabilities 350,330 355,099
----------- -----------
Total Liabilities 995,773 1,070,529
Stockholders' Equity:
Common Stock, par value 14,114 14,114
$.001 per share; 50,000,000 shares
authorized, 14,114,441 and 14,114,441 shares
issued and outstanding
Additional paid in capital 6,752,969 6,747,967
Retained Earnings (accumulated deficit) (3,743,072) (3,252,371)
----------- -----------
Total Stockholders' Equity 3,024,011 3,509,710
----------- -----------
Total Liabilities and Stockholders' Equity $ 4,019,784 $ 4,580,239
=========== ===========
</TABLE>
3
<PAGE> 4
WAVETECH, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH PERIODS ENDED NOVEMBER 30, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Revenues: $ 8,399 $ 4,992
Cost of Sales:
Direct costs 51,230 29,628
------------ ------------
Gross Profit (loss) (42,831) (24,636)
Other costs
Development and Administrative Expenses 452,115 265,097
------------ ------------
Loss before other income (expenses) $ (494,946) $ (289,733)
------------ ------------
Other income (expense)
Interest income 6,549 2,367
Interest expense (2,300) --
------------ ------------
Total other income (expense) 4,249 2,367
------------ ------------
Net loss $ (490,697) $ (287,366)
============ ============
Per share data
Net loss per share (0.0348) (0.0277)
Weighted average number of shares outstanding 14,114,441 10,365,053
============ ============
</TABLE>
4
<PAGE> 5
WAVETECH, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED NOVEMBER 30, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net Loss $(490,697) $ (287,366)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 48,740 5,356
Changes in assets and liabilities:
(Increase) decrease in accounts receivable and other current assets 14,029 (8,382)
(Increase) in inventory deposit (3,422) --
(Decrease) in accounts payable and accrued expenses (69,987) (152,437)
(Decrease) in accrued interest payable -- (39,327)
--------- -----------
Total Adjustments (10,640) (194,790)
--------- -----------
Net cash used in operating activities (501,337) (482,156)
Cash flows from investing activities:
Purchase of property and equipment (8,266) 159,654
Increase in deposits and other assets -- (25,000)
Decrease in notes receivable 2,797 --
--------- -----------
Net cash used in investing activities (5,469) 134,654
Cash flows from financing activities:
Payment of notes payable -- (306,600)
Payments on capital lease payable (4,769) --
Proceeds from common stock issued 5,002 1,200,614
--------- -----------
Net cash provided by financing activities 233 894,014
Net increase (decrease) in cash (506,573) 546,512
Cash and cash equivalents, beginning of period 857,488 285,793
--------- -----------
Cash and cash equivalents, end of period $ 350,915 $ 832,305
========= ===========
</TABLE>
5
<PAGE> 6
WAVETECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operation results for the three month period
ended November 30, 1996 are not necessarily indicative of the results that may
be expected for the fiscal year ending August 31, 1997. For further information,
refer to the Company's financial statements for the year ended August 31, 1996
included in its Form 10-KSB.
The consolidated financial statements include the accounts of Wavetech,
Inc. (the Company) and its wholly owned subsidiary, Interpretel, Inc.
(Interpretel). All material intercompany balances and transactions have been
eliminated. As of November 30, 1996, and for the previous three years, the
Company had little or no operations other than its investment in Interpretel
which was made on March 8, 1995.
On March 8, 1995, the Company entered into a Plan and Agreement of
Reorganization for the Exchange of Stock ("Acquisition") with the shareholders
under the laws of the State of Arizona to develop, market, and provide
interactive telecommunication systems and services to business and individual
customers. The systems incorporate interactive call processing,
computer-telephony integration, card production/fulfillment, billing services,
marketing, sales support, and customer service to provide features and services,
including but not limited to long distance dialing, voice/fax messaging,
voice/fax broadcast, language interpretation/translation, information,
retrieval, interface to existing databases, and product promotion services. Each
Interpretel system is developed to reflect or target the needs of an identified
(target) market, with services provided to individual customers via a calling
card product incorporating the use of certain trade secrets, trade marks,
service marks, and materials related thereto.
In accordance with Accounting Principles Board Opinion No. 16 "Business
Combinations," the Acquisition has been accounted for as a reverse acquisition
with Interpretel deemed to be the acquiring entity. Accordingly, the
consolidated financial statements include the accounts of Interpretel, Inc. from
the earliest period presented. The accounts of the Company are included in the
financial statements from the date of the Acquisition, March 8, 1995 to November
30, 1996.
NOTE 2 - PER SHARE DATA
Per share data is based on the weighted average number of shares
outstanding throughout the periods. The assumed exercise of stock options
outstanding would not have a dilutive effect on the computation.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OPERATIONS OVERVIEW
The Company specializes in creating interactive communication systems
through the application of "intelligent" call processing technology and
proprietary software to reflect or target the needs of an identified audience.
These systems are often used as privatized networks for organizations and their
members, companies and their suppliers and/or customers and special purpose
groups. During 1994, 1995, and 1996, the Company has remained focused on the
development of the software infrastructure for its call processing and data
management systems. Beta sites and limited operations commenced in late 1995.
During 1996, the Company signed a licensing agreement with Switch Pty Ltd in
Australia. The equipment has been delivered and is in Beta test. In Canada and
the USA the Company is finalizing software for specific privatized networks.
REVENUES
Revenues for fiscal 1996 and the first quarter of fiscal 1997 are the
results of a limited number of focus and beta groups and interest income. The
Company believes that revenues will increase in future periods as privatized
interactive communication systems are finalized and placed in service. The
Company is concentrating on the marketing and sales of the interactive
communications systems.
COST AND EXPENSES
Expenses increased to $505,645 for the three month period ended November
30, 1996 from $294,725 for the three month period ended November 30, 1995. This
increase was due to additional expenses that were incurred in connection with
the development and implementation of the Interpretel system, the hiring of
additional personnel, the expansion of the Company's facilities, and marketing
initiative costs such as printing, plastic cards, instructional manuals, mailing
lists, and creative design.
LIQUIDITY AND CAPITAL RESOURCES
As of November 30, 1996, the Company had working capital of $215,489
compared with working capital of $665,483 at August 31, 1996. The Company has
utilized proceeds from equity financing to generate positive working capital
balances. The Company expects that working capital will increase as the Company
generates cash from operations and external funding.
INFLATION
Although the Company's operations are influenced by general economic trends
and technology advances in the telecommunications industry, the Company does not
believe that inflation has a material effect on its operations.
7
<PAGE> 8
PART II
ITEMS 1-5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
a) Exhibits.
None.
b) Reports on Form 8-K
None.
8
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
undersigned has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: January 14, 1997 WAVETECH, INC.
By: /s/ Gerald I. Quinn
-----------------------------------------
Gerald I. Quinn
President and Chief Executive Officer
By: /s/ Lydia M. Montoya
-----------------------------------------
Lydia M. Montoya
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 350,915
<SECURITIES> 0
<RECEIVABLES> 265,558
<ALLOWANCES> 0
<INVENTORY> 244,459
<CURRENT-ASSETS> 860,932
<PP&E> 717,356
<DEPRECIATION> (217,702)
<TOTAL-ASSETS> 4,019,784
<CURRENT-LIABILITIES> 645,443
<BONDS> 0
0
0
<COMMON> 14,114
<OTHER-SE> 3,009,897
<TOTAL-LIABILITY-AND-EQUITY> 4,019,784
<SALES> 8,399
<TOTAL-REVENUES> 8,399
<CGS> 51,230
<TOTAL-COSTS> 51,230
<OTHER-EXPENSES> 452,115
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,300
<INCOME-PRETAX> (490,697)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (490,697)
<EPS-PRIMARY> (0.035)
<EPS-DILUTED> 0
</TABLE>
