U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 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 33-20252-NY
TRANSWORLD TELECOMMUNICATIONS, INC.
(Exact name of small business issuer as specified in its charter)
Pennsylvania 52-1546434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 West 500 South, Suite 320 84101
Salt Lake City, Utah (Zip Code)
(Address of Principal Executive Offices)
(801) 328-5618
(Issuer's telephone number)
Not Applicable
(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 [ ]
As of June 10, 1996, 28,564,228 shares of the issuers common stock, par
value $.001 per share, were outstanding.
<PAGE> 2
PART I : FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS REQUIRED BY FORM 10-QSB
The accompanying unaudited consolidated financial statements have
been prepared by Transworld Telecommunications, Inc. (the Company)
pursuant to the rules and regulations of the Securities and Exchange
Commission. 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 entries) necessary for the fair
presentation of the Company's results of operations, financial position
and changes therein for the periods presented have been included.
TRANSWORLD TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
April 30, October 31,
1996 1995
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 19,193 $ 94,391
Receivable from investee company 6,454 3,672
Other current assets 15,215 15,215
------------- -------------
Total current assets 40,862 113,278
Furniture and equipment, at cost, less
accumulated depreciation 28,636 33,259
Deposits and other assets 10,107 7,666
Investment in and advances to investee
companies 807,493 1,457,642
------------- -------------
Total Assets $ 887,098 $ 1,611,845
============= =============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued liabilities $ 632,771 $ 584,487
Note payable - related party 150,000 150,000
Net current liabilities of
discontinued operation 805,109 825,178
------------- -------------
Total current liabilities 1,587,880 1,559,665
Stockholders' Equity (Deficit):
Common stock 28,564 28,564
Additional paid-in capital 12,964,990 12,964,990
Accumulated deficit (13,694,336) (12,941,374)
------------- -------------
Total stockholders' equity (deficit) (700,782) 52,180
------------- -------------
Total Liabilities and
Stockholders' Equity (Deficit) $ 887,098 $ 1,611,845
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 3
TRANSWORLD TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED APRIL 30, 1996 AND 1995
<TABLE>
<CAPTION>
April 30, April 30,
1996 1995
<S> <C> <C>
Net revenue $ - $ -
Operating expenses:
Administrative expenses 84,137 77,715
Salaries and related benefits 196,585 187,238
Professional fees and contract services 192,369 268,955
Channel rights and programming fees - 100
Depreciation and amortization 2,311 39,811
Other 6,655 5,561
------------ ------------
Total operating expense 482,057 579,380
------------ ------------
Operating loss (482,057) (579,380)
Other income (expense):
Interest income - 207,852
Other income 16,888 -
Interest expense (5,172) (4,590)
Equity in net loss of investee companies (131,434) (1,311,200)
------------ ------------
Total other income (expense) (119,718) (1,107,938)
------------ ------------
Loss from continuing operations (601,775) (1,687,318)
Income from discontinued operations,
net of tax of $17,754 in 1996 and
$31,027 in 1995 278,134 486,093
------------ ------------
Net Loss $ (323,641) $(1,201,225)
============ ============
Loss per common share:
Continued operations $ (0.02) $ (0.06)
Discontinued operations 0.01 0.02
------------ ------------
Net loss per common share $ (0.01) $ (0.04)
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 4
TRANSWORLD TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE SIX MONTHS ENDED APRIL 30, 1996 AND 1995
<TABLE>
<CAPTION>
April 30, April 30,
1996 1995
<S> <C> <C>
Net revenue $ - $ -
Operating expenses:
Administrative expenses 158,424 153,530
Salaries and related benefits 406,399 373,808
Professional fees and contract services 230,488 484,974
Channel rights and programming fees - 100,100
Depreciation and amortization 4,622 79,622
Other 20,549 8,726
------------ ------------
Total operating expense 820,482 1,200,760
------------ ------------
Operating loss (820,482) (1,200,760)
------------ ------------
Other income (expense):
Interest income - 207,852
Other income 41,293 12,568
Interest expense (10,193) (9,435)
Equity in net loss of investee companies (650,149) (2,331,900)
------------ ------------
Total other income (expense) (619,049) (2,120,915)
------------ ------------
Loss from continuing operations (1,439,531) (3,321,675)
Income from discontinued operations,
net of tax of $43,824 in 1996 and
$65,567 in 1995 686,569 1,027,218
------------ ------------
Net Loss $ (752,962) $(2,294,457)
============ ============
Loss per common share:
Continued operations $ (0.05) $ (0.12)
Discontinued operations 0.02 0.04
------------ ------------
Net loss per common share $ (0.03) $ (0.08)
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 5
TRANSWORLD TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE SIX MONTHS ENDED APRIL 30, 1996 AND 1995
<TABLE>
<CAPTION>
April 30, April 30,
1996 1995
<S> <C> <C>
Cash flows from continuing operating activities:
Loss from continuing operations $(1,439,531) $(3,321,675)
Adjustments to reconcile net loss to net cash
used in continuing operating activities:
Depreciation and amortization 4,622 79,622
Equity in net loss of investee companies 650,149 2,331,900
Common stock issued for services - 50,000
Interest income charged to notes receivable - (207,852)
Changes in assets and liabilities:
Receivable from investee company (2,782) 57,388
Other current assets (2,440) 52,370
Accounts payable and accrued liabilities 48,284 (279,327)
------------- ------------
Net cash used in continuing
operating activities (741,698) (1,237,574)
Cash flows from discontinued operating
activities: 686,569 1,027,218
Income from discontinued operations
Change in net liabilities of discontinued
operations (20,069) 82,782
------------- ------------
Net cash provided by discontinued
operating activities 666,500 1,110,000
Decrease in cash (75,198) (127,574)
Cash at beginning of the period 94,391 265,462
------------ ------------
Cash at end of the period $ 19,193 $ 137,888
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 6
TRANSWORLD TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1996
(Unaudited)
1. Presentation
The consolidated financial statements include the accounts of Transworld
Telecommunications, Inc. (the Company) and its wholly owned subsidiaries,
including Carolina Communications, Inc. (CCI), a discontinued operation.
All significant intercompany accounts and transactions have been eliminated
in consolidation. The Company accounts for its 50 percent interest in
Wireless Holdings, Inc. (WHI) and its 20 percent interest in Videotron (Bay
Area), Inc. (Videotron Tampa Bay) on the equity method.
2. Investments in and advances to investee companies
Summary financial information as of and for the three and six months ended
February 29, 1996 and February 28, 1995 (the fiscal quarter ends for WHI and
Videotron Tampa Bay) and for the Company's investment in WHI and Videotron
Tampa Bay is presented as follows:
<TABLE>
<CAPTION>
Videotron Tampa Bay: February 29, February 28,
1996 1995
-------------- --------------
<S> <C> <C>
Current assets $ 1,397,906 $ 344,497
Current liabilities (2,393,469) (718,945)
-------------- --------------
Working capital (995,563) (374,448)
Property and equipment, net 8,011,553 3,312,986
Intangible assets, net 10,879,689 11,571,513
Deferred income taxes 452,938 (1,861,531)
Long-term debt (13,742,635) (5,364,662)
Stockholders' equity $ 4,605,982 $ 7,283,858
</TABLE>
Three Months Ended February 29, 1996 and February 28, 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Total revenues $ 685,570 223,320
Net loss (657,172) (543,028)
Company's equity in net loss (131,434) (108,606)
</TABLE>
Six Months Ended February 29, 1996 and February 28, 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Total revenues $ 1,182,992 444,169
Net loss (1,543,672) (1,039,624)
Company's equity in net loss (308,734) (207,925)
</TABLE>
<PAGE> 7
2. Business combination (continued)
<TABLE>
<CAPTION>
February 29, February 28,
1996 1995
WHI:
<S> <C> <C>
Current assets $ 1,203,000 $ 974,000
Current liabilities (5,124,000) (4,613,000)
-------------- -------------
Working capital (3,921,000) (3,639,000)
Property and equipment, net 12,265,000 8,835,000
Intangible assets, net 28,535,000 27,124,000
Long-term debt (46,296,000) (29,922,000)
Other - (2,000)
Stockholders' equity $ (9,417,000) $ 2,396,000
</TABLE>
Three Months Ended February 29, 1996 and February 28, 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Total revenues $ 1,200,000 $ 1,096,000
Net loss (2,561,000) (2,502,000)
Company's equity in net loss (1,280,500) (1,251,000)
</TABLE>
Six Months Ended February 29, 1996 and February 28, 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Total revenues $ 2,300,000 $ 2,163,000
Net loss (5,351,000) (4,407,000)
Company's equity in net loss (341,414) (2,203,500)
</TABLE>
The Company recognizes equity in net loss of investee companies to the extent
of investment in and advances to investee companies. As of the beginning of
the fiscal year, the Company had $341,414 of investment in WHI available for
offsetting losses. During the six months ended February 29, 1996, the Company
completely offset the remaining $341,414 of investment in WHI with its portion
of losses in WHI. Therefore, the Company has discontinued reporting its share
of future losses in WHI on its financial statements. The Company's
unrecognized cumulative portion of loss from its investment in WHI totals
$2,334,086 at February 29, 1996.
<PAGE> 8
3. Discontinued operations
A summary of operating results for the three and six months ended April 30,
1996 and 1995 and net liabilities of discontinued operations as of April 30,
1996 and October 31, 1995 is as follows:
<TABLE>
<CAPTION>
Three months ended April 30, Six months ended April 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 614,013 $ 985,991 $ 1,366,218 $ 2,034,403
=========== =========== ============= =============
Income before
income tax expense $ 295,888 $ 517,120 $ 730,393 $ 1,092,785
Income tax expense (17,754) (31,027) (43,824) (65,567)
----------- ----------- ------------- -------------
Net income $ 278,134 $ 486,093 $ 686,569 $ 1,027,218
=========== =========== ============= =============
</TABLE>
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
<S> <C> <C>
Current assets $ 264,337 $ 222,179
Other 22,444 29,535
Accounts payable and accrued liabilities (1,091,890) (1,076,892)
-------------- -------------
Net current liabilities of
discontinued operation $ (805,109) $ (825,178)
</TABLE>
4. Net loss per share
Net loss per share was computed based upon the weighted average number of
shares of common stock outstanding.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
A. MATERIAL CHANGES IN FINANCIAL CONDITION
At April 30, 1996, the Company had current assets of $40,862, compared
to $113,278 at October 31, 1995, for a decrease of $72,416. Cash decreased by
$75,198 from $94,391 to $19,193 during the six-month period, primarily as a
result of the Company's payment of accounts payable and accrued liabilities.
Current liabilities as of April 30, 1996, were $1,587,880, compared to
$1,559,665 as of October 31, 1995, for an increase of $28,215. The increase
in current liabilities exceeded the amount of cash that was used to pay a
portion of current liabilities.
At April 30, 1996, total assets were $887,098, compared to $1,611,845
as of October 31, 1995, for a decrease of $724,747. The decrease in total
assets is attributable to the equity in net loss of WHI and Videotron Tampa
Bay, totaling $650,149 for the six month period (which reduces the investment
in and advances to investee companies balance sheet account) and a decrease
in cash which was primarily used to reduce accounts payable and accrued
liabilities. Total stockholders' equity (deficit) decreased by $752,962
from $52,180 at October 31, 1995, to ($700,782) at April 30, 1996.
<PAGE> 9
B. MATERIAL CHANGES IN RESULTS OF OPERATIONS
The Company did not have operating revenues for either of the six months
ended April 30, 1995 or 1996. However, in the same period, the Company's
discontinued operations generated revenue of $2,034,403 and $1,366,218 during
1995 and 1996, respectively. The revenue from discontinued operations
decreased $668,185, primarily because of new regulations imposed on the
audiotex industry which restrict the number of phone lines available for the
business. During the six months ending April 30, 1996, total operating
expenses (and operating loss) were $820,482, compared to $1,200,760 for the
same six-month period a year earlier, for a decrease of $380,278. The decrease
in operating loss is a result of the decrease in professional fees, which were
higher in 1995 due to the expenses incurred by the Company for reviewing the
possibility of obtaining additional equity financing, and a decrease in channel
rights and amortization associated with the assets which were transferred to a
separate corporation in August, 1995.
During the six months ending April 30, 1996, the Company had a net loss
of $752,962, compared to a net loss of $2,294,457 for the same period a year
earlier for a decrease of $1,541,495. The decrease in net loss primarily is
a result of the decrease in the equity in the net loss of WHI and professional
fees, offset by a decrease in income from discontinued operations. The equity
in the net loss of WHI was lower because the Company has completely written
off its investment in WHI, and, therefore, will not continue to record WHI
losses. However, a portion of the equity in the WHI net loss decrease was
offset by a decrease in the income from discontinued operations. The decrease
in the income from discontinued operations was offset partially by a decrease
in operating expenses. The decrease in operating expenses was primarily due
to changing the clearing house parameters to screen fraudulent callers which
reduced chargeback expenses. For the six months ended April 30, 1996 there
was a net loss per share of $(0.03), compared to a net loss per share of
$(0.08) for the same period a year earlier.
C. LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1996, the Company's current liabilities exceeded its
current assets by $1,547,018. Of this amount, $175,887 is payable to related
parties and is due January 1, 1997, and $43,173 is due officers for accrued
salary and bonus. The Company believes it will satisfy the net liabilities
of discontinued operations at April 30, 1996, in the amount of $805,109, upon
the disposal of the assets comprising those operations.
Currently, the Company's discontinued operations provide all of the
Company's cash flow. In February 1994, the Company adopted a formal plan to
discontinue CCI's operations. Additionally, the Company and Videotron have
agreed to sell their stock in WHI and Videotron Bay Area as more particularly
described in the section entitled "Other Information," set forth in the
Company's quarterly report on Form 10-QSB for the period ended January 31,
1996, which is incorporated herein by this reference. Therefore, the Company
expects to satisfy these liabilities through the sale of its stock in WHI and
Videotron Tampa Bay, the sale of CCI and/or by exercising an option in favor
of the Company which, if exercised, would require Videotron to purchase the
Company's twenty percent interest in Videotron Tampa Bay at the greater of
$2.6 million or its fair market value.
<PAGE> 10
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to two legal proceedings:
Viernow Litigation.
The Company is a party to an action that was filed in the state court
of Texas in January, 1995. This proceeding is more particularly described in
the section entitled "Legal Proceedings," set forth in the Company's quarterly
report on Form 10-QSB for the period ended January 31, 1996, which is
incorporated herein by this reference. The Company filed a motion for
summary judgement in February 1996, which is pending before the court.
Videotron Litigation.
On March 1, 1996, the Company filed a complaint against Videotron asking
for the appointment of a custodian to resolve a critical management issue for
WHI. This proceeding is more particularly described in the section entitled
"Other Information," set forth in the Company's quarterly report on Form
10-QSB for the period ended January 31, 1996, which is incorporated herein
by this reference. On April 25, 1996, the court held a hearing on the
Company's petition for a custodian. The matter is currently under advisement
by the court.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MATTERS SUBMITTED TO A VOTE OF THE COMPANY'S SHAREHOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
A. EXHIBITS.
None
B. REPORTS ON FORM 8-K
None
<PAGE> 11
SIGNATURES
Pursuant to 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.
TRANSWORLD TELECOMMUNICATIONS, INC.
Date: June 10, 1996
BY: /s/ TROY D'AMBROSIO
Troy D'Ambrosio
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> OCT-31-1996 OCT-31-1996
<PERIOD-END> APR-30-1996 APR-30-1996
<CASH> 19,193 19,193
<SECURITIES> 0 0
<RECEIVABLES> 21,669 21,669
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 40,862 40,862
<PP&E> 46,223 46,223
<DEPRECIATION> (17,587) (17,587)
<TOTAL-ASSETS> 887,098 887,098
<CURRENT-LIABILITIES> 1,587,880 1,587,880
<BONDS> 0 0
0 0
0 0
<COMMON> 28,564 28,564
<OTHER-SE> (729,246) (729,246)
<TOTAL-LIABILITY-AND-EQUITY> 887,098 887,098
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 482,087 820,482
<OTHER-EXPENSES> (114,546) (608,856)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,172 10,193
<INCOME-PRETAX> (601,775) (1,439,531)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 278,134 686,569
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (263,641) (752,962)
<EPS-PRIMARY> 0.01 (0.03)
<EPS-DILUTED> 0.01 (0.03)
</TABLE>
