|
|
|
|
|
|
|
|
|
|
Previous: FONE AMERICA INC, 10QSB, 1997-08-18 |
Next: PROFESSIONALLY MANAGED PORTFOLIOS, 485BPOS, 1997-08-18 |
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 June 30, 1997
OR
_ TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT OF 1934.
Commission File Number 33-3746-LA
FONE AMERICA, INC.
(Name of small business issuer in its charter)
NEVADA 91-1355620
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12323 SW 66TH AVENUE PORTLAND, OREGON 97223
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (503) 620-2400
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 __
As of July 31, 1997 there were 17,332,164 shares of Common Stock
($0.01 par value) outstanding.
page 1
INDEX
Page
Part I Financial Information
Item 1. Financial Statements
Condensed Balance Sheets as of 3
June 30, 1997 (Unaudited) and
September 30, 1996
Condensed Statements of Operations 4
(Unaudited) for the Three Months and
Nine Months Ended June 30, 1997 and
1996
Condensed Statements of Cash Flows 5
(Unaudited) for the Nine Months Ended
June 30, 1997 and 1996
Notes to Condensed Financial 6
Statements
Item 2. Management's Discussion and Analysis 7
of Financial Condition and Results of
Operations
Part II. Other Information
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of 8
Security Holders
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
page 2
Fone America, Inc.
Condensed Balance Sheets
Thosands of dollars, except share amounts
June 30, September 30,
Assets 1997 1996
(unaudited)
Current Assets:
Cash and cash equivalents $ - $ 1,653
Accounts receivable, net 1,247 679
Deposits and other 263 416
Total currents assets 1,510 2,747
Plant, property and equipment, net 3,972 4,736
Notes receivable 457 72
Other assets 20 20
Total assets $ 5,959 $ 7,575
Liabilities and shareholders' equity (deficit)
Current liabilities:
Checks issued in excess of bank $ 31 $ -
Notes payable 498 580
Accounts payable 4,502 3,756
Other accrued liabilities 1,046 1,037
Current portion of long-term obligation 500 791
Total current liabilities 6,577 6,164
Long-term obligations, net of current portion 4,695 4,704
Net deferred tax liabilities 428 428
Shareholders' equity (deficit):
Common stock, $.001 par value, authorized 17 15
shares; issued and outstanding 17,332,164 ;
(14,540,000 at September 30, 1996)
Additional paid-in capital 1319 1,043
Retained deficit (7,078) (4,779)
Total shareholders' deficit (5,741) (3,721)
Total liabilities and shareholders' equity $ 5,959 $ 7,575
Notes to the financial statements as of September 30, 1996 substantially apply
to the June 30, 1997 interim financial statements and are not repeated here in
their entirety.
page 3
Fone America, Inc.
Condensed Statements of Operations
(Unaudited)
Three months Nine months
ended June 30, ended June 30,
Thousands of dollars, except share data 1997 1996 1997 1996
Revenues $ 229 $ 4,702 $ 3,480 $ 15,075
Cost of revenues 265 3,591 3,332 12,233
Gross margin (36) 1,111 148 2,842
Operating expenses:
Sales, general & administra 485 898 1,847 2,296
Non-recurring write-down of
reorganization value - 1,850 - 1,850
Non-recurring contract
termination - - 297 -
New product introduction 124 - 205 -
Income (loss) from continuing
operations (645) (1,636) (2,201) (1,304)
Other income (expense):
Interest expense (18) (206) (242) (650)
Gain (loss) on sale of assets - - 143 -
Net loss from continuing operations (663) (1,842) (2,299) (1,954)
Net income (loss) from
discountinued operations $ - $ (4) $ - $ (10)
Net loss (663) (1,847) (2,299) (1,964)
Net loss per share ($0.0404) ($0.1228) ($0.1516) ($0.1306)
Weighted average shares outstanding14,540,000 15,040,000 14,540,000 15,040,000
Notes to the financial statements as of September 30, 1996 substantially apply
to the June 30, 1997 interim financial statements and are not repeated here in
their entirety.
page 4
FONE AMERICA, INC.
Condensed Statements of Cash Flows
(Unaudited)
thousands of dollars nine months ended June 30,
1997 1996
Cash flows from operating activities:
Net loss from continuing operatio (2,299) (1,954)
Net cash used for discontinued operations - 65
Adjustments to reconcile net loss to net cash
(used for) provided by operating activities:
Depreciation and amortization 609 1,160
Amortization of reorganization value 0 109
Non-recurring write-down of reorganization value 1,850
Non-recurring non cash gain on sale of assets (143) -
Changes in assets and liabilities:
Notes receivable (55) -
Accounts receivable, net (568) (806)
Accounts payable 745 233
Deposits and other 152 6
Other accrued liabilities 9 510
Net cash (used for) provided by operating activities (1,550) 1,173
Cash flows from investing activities:
Equipment purchases (16) (92)
Changes in other assets - (172)
Net cash used for investing activities (16) (264)
Cash flows from financing activities:
Proceeds from notes payable 134 5
Repayments of notes payable (66) (137)
Repayments of long-term debt (25) (152)
Repayments of capitalized lease obligations (291) (1,109)
Proceeds from issuance of common stock 130 60
Net cash used for financing activities (118) (1,333)
Decrease in cash and cash equivalents (1,684) (424)
Cash and cash equivalents at beginning of period 1,653 1,960
Cash and cash equivalents at end of period (31) 1,536
Supplemental disclosure of cash flow information:
Cash paid for interest 159 629
Notes to the financial statements as of September 30, 1996 substantially apply
to the June 30, 1997 interim financial statements and are not repeated here in
their entirety.
page 5
ITEM 1. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Basis of Presentation The accounting and reporting
policies of Fone America, Inc. conform to generally accepted
accounting principles. The condensed consolidated financial
statements for the six months ended March 31, 1997 are unaudited
and do not include all information or footnotes necessary for a
complete presentation of financial condition, results of
operations and cash flows. The interim financial statements
include all adjustments, consisting only of normal recurring
accruals, which in the opinion of management are necessary in
order to make the financial statements not misleading. These
financial statements should be read in conjunction with the
company's September 30, 1996 audited financial statements which
are included in the Company's Registration Statement on Form SB-2
dated February 7, 1997. The results of operations for the six
months ended March 31, 1997 are not necessarily indicative of the
results to be expected for the entire year ending September 30,
1997.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General The Company's revenues through June
30, 1997 were generated through the sales and
use of prepaid cellular telephones and
prepaid telephone calling cards
("telecards".)
Most telecards are sold through vending
machines placed in convenience stores,
colleges, and other similar locations.
Certain brands of telecards are designed for
sales to specific markets such as the
Mensajara card for the Hispanic market.
Prepaid cellular phones are sold through
retail locations, most of which are found in
the states of Oregon, Hawaii, and Washington.
After purchasing a phone the consumer buys
additional time for the phone as the need
arises resulting in additional revenue for
the Company.
Results of Operations Revenue for the three
months ended June 30, 1997 declined
significantly (down 95%) from the similar
period in the prior year due to the end of
the DriveLine telecard contract in October
1996. The decline in revenue for the nine
month period was 77.3% from the prior year.
This decline was anticipated and the Company
has been working to develop new products such
as the prepaid cellular telephone and prepaid
pager to compensate for this loss of revenue.
Sales of the cellular phones were hurt when
the new phones scheduled by the manufacturer
to arrive in early May were repeatedly
delayed into August. This resulted in
retailers running out of inventory and being
unable to fill customer demand for the
product.
In the meantime, management retained much of
the Company staff anticipating the arrival of
the phones which drove up the direct cost of
customer service and other expenses causing a
negative margin for the three month period.
Similarly, the telecommunications expenses of
the prepaid telecards was increased due to
the loss of volume connected to the end of
the DriveLine contract. With lower volume
levels, the cost per minute of transmission
was higher due to contractual volume gates.
This too contributed to the negative margins
during the period, especially on
international calls.
The overall result of these events was that
there was an net loss of $663 thousand for
the three month period compared to a loss of
$1,636 thousand for the same period in the
prior year. The major contributing factor to
the prior year results for the period was a
one-time charge of $1,850 thousand associated
with the write off of Reorganization Value as
reported previously.
Liquidity and Capital Resources The Company
has experienced a severe cash shortfall due
to the decline in business and the delays of
having new products to sell. This has
resulted in an increase in payables which
created significant pressures on management
to resolve the short term cash crisis.
Management has sought outside financing from
a variety of sources, but has not been
successful in raising external capital.
To satisfy certain critical payments,
officers have advanced funds to the Company
or paid corporate obligations from personal
monies. In addition, the Company sold its
telecard business to a former officer in July
and will continue to receive a percentage of
the revenue from this business. Similarly,
some of the retail cell phone accounts were
sold under similar terms and conditions.
While this allows the Company to both
concentrate on new products with more profit
potential and receive a continuing revenue
stream into the future on the old business,
there are negative cash flow consequences of
these actions in the short term.
Management will continue to seek external
capital while at the same time attempting to
meet the daily cash needs; however, there is
no assurance that management will be
successful in its efforts.
7
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Prospectus (Form SB-2) dated
February 7, 1997 for a complete discussion of its legal
proceedings.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
RESIGNATION OF DIRECTOR AND OFFICER
On June 18, 1997 Mr. Howard M. Higa resigned his seat on the
Fone America, Inc. Board of Directors and his position as
Chairman. Mr. Peter H. Jacobs was named Chairman of the
Board June 23, 1997. Mr. Joseph J. Joseph resigned his position
as Vice President of Operations on June 30, 1997.
8
Signatures
In accordance with the requirements of the Securities Exchange
Act of 1934, as amended, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
Fone America, Inc.
Date: August 14, 1997
James L. Forney
/s/ James L. Forney
As Chief Financial Officer on behalf of
of Registrant, and as Registrant's Principal
Financial & Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS FOR THE YEAR(S) ENDED 09/30/95 AND 09/30/96 AND COMPANY
PREPARED FINANCIAL STATEMENTS FOR THE PERIODS ENDED 06/30/96 AND 06/30/97 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000809928
<NAME> FONE AMERICA, INC.
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1996 SEP-30-1996 SEP-30-1995
<PERIOD-END> JUN-30-1997 JUN-30-1996 SEP-30-1996 SEP-30-1995
<CASH> 0 1,536,335 1,652,717 1,959,569
<SECURITIES> 0 0 0 0
<RECEIVABLES> 1,247,042 1,641,219 678,819 832,574
<ALLOWANCES> 0 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 1,509,954 3,718,734 2,747,079 3,339,173
<PP&E> 7,684,807 8,017,691 7,995,975 7,449,238
<DEPRECIATION> 3,712,784 2,826,429 3,260,035 1,628,372
<TOTAL-ASSETS> 5,927,565 9,540,180 7,575,310 12,853,078
<CURRENT-LIABILITIES> 6,938,580 5,841,466 6,164,227 6,318,793
<BONDS> 4,694,742 4,872,294 4,704,407 4,963,675
0 0 0 0
0 0 0 0
<COMMON> 17,332 15,040 14,540 14,040
<OTHER-SE> (5,758,723) (1,549,453) (3,735,920) 1,556,570
<TOTAL-LIABILITY-AND-EQUITY> 5,927,564 9,540,180 7,575,310 12,853,078
<SALES> 3,480,461 15,074,722 18,562,162 18,552,711
<TOTAL-REVENUES> 3,623,747 15,074,722 18,562,162 18,552,711
<CGS> 3,590,740 12,232,966 15,395,035 15,011,915
<TOTAL-COSTS> 5,681,444 16,378,448 21,838,671 17,008,343
<OTHER-EXPENSES> 0 0 (63,448) 70,670
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 241,558 649,646 1,277,603 510,584
<INCOME-PRETAX> (2,299,255) (1,953,372) (4,490,664) 963,114
<INCOME-TAX> 0 0 767,089 (65,494)
<INCOME-CONTINUING> (2,299,255) (1,953,372) (5,257,753) 1,028,608
<DISCONTINUED> 0 (10,237) (94,237) (439,604)
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (2,299,255) (1,963,609) (5,351,990) 589,004
<EPS-PRIMARY> (.152) (.131) (.362) .045
<EPS-DILUTED> (.152) (.131) (.362) .027
<F1>
<FN>
<F1>Notes to the financial statements as of September 30, 1996 substantially
apply to the June 30, 1997 interim financial statements and are not
repeated here in their entirety.
</FN>
</TABLE>
|
|