U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSBA
QUARTERLY REPORT UNDER SECTION 12 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 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
Salt Lake City, Utah 84101
(Address of Principal Executive Offices) (Zip Code)
<PAGE>
(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 September 16, 1996, 26,564,228 shares of the issuers common stock, par
value $.001 per share, were outstanding.
<PAGE>
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)
July 31, October 31,
1996 1995
ASSETS
Current Assets:
<S> <C> <C>
Cash $1,027,203 $ 94,391
Receivable from investee company 14,711 3,672
Other current assets 161,048 15,215
Total current assets 1,202,962 113,278
Furniture and equipment, at cost,
less accumulated depreciation 26,325 33,259
Deposits and other assets 6,198 7,666
Investment in and advances to investee companies 462,428 1,457,642
Total Assets $ 1,697,913 $ 1,611,845
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued liabilities $360,445 $584,487
Note payable - related party - 150,000
Net current liabilities of
discontinued operation - 825,178
Total current liabilities 360,445 1,559,665
Note Payable 2,500,000 -
Total liabilities 2,860,445 1,559,665
Stockholders' Equity (Deficit):
Common stock 26,564 28,564
Additional paid-in capital 13,853,881 12,964,990
Accumulated deficit (15,042,977) (12,941,374)
Total stockholders' equity (deficit) (1,162,532) 52,180
Total Liabilities and Stockholders'
Equity (Deficit) $ 1,697,913 $ 1,611,845
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
TRANSWORLD TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED JULY 31, 1996 AND 1995
<TABLE>
<CAPTION>
July 31, July 31,
1996 1995
<S> <C> <C>
Net revenue $ - $ -
Operating expenses:
Administrative expenses 212,264 84,264
Salaries and related benefits 191,018 174,964
Professional fees and contract services 847,623 26,473
Channel rights and programming fees - 73,087
Depreciation and amortization 2,312 36,061
Other 2,755 2,930
Total operating expense 1,255,972 397,779
Operating loss (1,255,972) (397,779)
Other income (expense):
Interest income 3,614 -
Other income 130,730 -
Interest expense (33,165) (4,769)
Equity in net loss of investee companies (345,065) (1,533,700)
Total other income (expense) (243,886) (1,538,469)
Loss from continuing operations (1,499,858) (1,936,248)
Income from discontinued operations, net of tax of
$9,652 in 1996 and $37,715 in 1995 151,217 512,528
Net Loss $ (1,348,641) $ (1,423,720)
$ (1,348,641) $ (1,423,720)
Loss per common share:
Continued operations $ (0.05) $ (0.07)
Discontinued operations 0.01 0.01
Net loss per common share $ (0.04) $ (0.06)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
TRANSWORLD TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND 1995
<TABLE>
<CAPTION>
July 31, July 31,
1996 1995
<S> <C> <C>
Net revenue $ - $ -
Operating expenses:
Administrative expenses 370,688 298,489
Salaries and related benefits 597,417 548,772
Professional fees and contract services 1,078,111 431,358
Channel rights and programming fees - 173,187
Depreciation and amortization 6,934 110,174
Other 23,304 10,037
Total operating expense 2,076,454 1,572,017
Operating loss (2,076,454) (1,572,017)
Other income (expense):
Interest income 3,614 207,852
Other income 172,023 12,568
Interest expense (43,358) (14,204)
Equity in net loss of investee companies (995,214) (3,965,200)
Total other income (expense) (862,935) (3,758,984)
Loss from continuing operations (2,939,389) (5,331,001)
Income from discontinued operations, net of tax of
$53,476 in 1996 and $98,282 in 1995 837,786 1,539,746
Net Loss $(2,101,603) $(3,791,255)
Loss per common share:
Continued operations $ (0.10) $ (0.19)
Discontinued operations 0.03 0.05
Net loss per common share $ (0.07) $ (0.14)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
TRANSWORLD TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND 1995
<TABLE>
<CAPTION>
July 31, July 31,
1996 1995
Cash flows from continuing operating activities:
<S> <C> <C>
Loss from continuing operations $(2,939,389) $(5,331,001)
Adjustments to reconcile net loss to net cash used in
continuing operating activities:
Depreciation and amortization 6,934 110,174
Equity in net loss of investee companies 995,214 3,965,200
Issuance of stock options - 7,500
Common stock issued for services - 50,000
Interest income charged to notes receivable - (207,852)
Changes in assets and liabilities:
Receivable from investee company (11,039) 69,559
Other current assets (144,365) 51,179
Accounts payable and accrued liabilities (224,042) (284,272)
Net cash used in continuing
operating activities (2,316,687) (1,569,513)
Cash flows from discontinued operating activities:
Income from discontinued operations 837,786 1,539,746
Change in net liabilities of discontinued operations 61,713 (59,746)
Net cash provided by discontinued
operating activities 899,499 1,480,000
Cash flows from financing activities:
Proceeds from note payable 2,500,000 -
Payment of note payable - related party (150,000) -
Net cash provided by financing activities 2,350,000 -
Increase (decrease) in cash 932,812 (89,513)
Cash at beginning of the period 94,391 265,462
Cash at end of the period $ 1,027,203 $ 175,949
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
TRANSWORLD TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 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, which was disposed of by the Company on July 1,
1996 (see Item 5 below). 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 periods indicated below
for the Company's investment in WHI and Videotron Tampa Bay is
presented as follows:
<TABLE>
<CAPTION>
Videotron Tampa Bay May 31, August 31,
1996 1995
<S> <C> <C>
Current assets $ 1,170,000 $ 1,272,000
Current liabilities (17,415,000) (11,414,000)
Working capital (16,245,000) (10,142,000)
Property and equipment, net 8,400,000 5,565,000
Intangible assets, net 10,726,000 11,221,000
Deferred income taxes - (494,000)
Stockholders' equity 2,881,000 6,150,000
Three Months Ended May 31, 1996 and 1995
1996 1995
<S> <C> <C>
Total revenues $ 780,000 $ 219,000
Net loss (1,725,328) (191,376)
Company's equity in net loss (345,066) (38,275)
Nine Months Ended May 31, 1996 and 1995
1996 1995
<S> <C> <C>
Total revenues $ 1,964,000 $ 664,000
Net loss (3,269,000) (1,231,000)
Company's equity in net loss (653,800) (392,200)
</TABLE>
<PAGE>
2. Business combination (continued)
<TABLE>
<CAPTION>
WHI: May 31, August 31,
1996 1995
<S> <C> <C>
Current assets $ 611,000 $ 1,574,000
Current liabilities (54,618,000) (46,121,000)
Working capital (54,007,000) (44,547,000)
Property and equipment, net 12,527,000 11,113,000
Intangible assets, net 28,906,000 29,420,000
Minority Interest 124,000 (54,000)
Stockholders' equity (12,450,000) (4,068,000)
Three Months Ended May 31, 1996 and 1995
1996 1995
<S> <C> <C>
Total revenues $ 1,299,000 $ 1,047,000
Net loss (2,387,000) (2,739,000)
Company's equity in net loss -0- (1,369,500)
Nine Months Ended May 31, 1996 and 1995
1996 1995
<S> <C> <C>
Total revenues $ 3,599,000 $ 3,210,000
Net loss (8,383,000) (7,146,000)
Company's equity in net loss 341,414) (3,573,000)
</TABLE>
The financial statements of WHI and Videotron Tampa Bay disclose
certain uncertainties related to the possible sale of the companies, a
related arbitration proceeding, and reliance on Videotron USA, Inc.,
the other principal investor of these companies, and its ultimate
parent, Le Groupe Videotron Ltee, to fund the day to day operations of
these companies. These financial statements do not include any
adjustments relating to the recoverability and classification of
recorded asset amounts of the amounts and classification of liabilities
that might be necessary should these investee companies be unable to
continue as going concerns. The financial statements of WHI and
Videotron Tampa Bay also disclose that continuation as going concerns
is dependent upon the ability of these companies to generate sufficient
cash flow to meet their obligations on a timely basis, to obtain
additional financing or refinancing, and ultimately to attain
successful operations.
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 nine months ended May
31, 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 totaled $3,850,086 at May 31, 1996.
<PAGE>
3. Discontinued operations
A summary of operating results for the three and nine months ended July
31, 1996 and 1995 and net liabilities of discontinued operations as of
July 31, 1996 and October 31, 1995 is as follows:
<TABLE>
<CAPTION>
Three months ended July 31, Nine months ended July 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 350,310 $ 906,531 $ 1,716,528 $ 2,940,934
Income before
income tax expense $ 160,869 $ 545,243 $ 891,262 $ 1,638,028
Income tax expense (9,652) (32,715) (53,476) (98,282)
Net income $ 151,217 $ 512,528 $ 837,786 $ 1,539,746
July 31, October 31,
1996 1995
<S> <C> <C>
Current assets $ - $ 275,816
Other - 33,081
Accounts payable and accrued
liabilities - (758,282)
Amounts payable to related party - (336,146)
Net current liabilities of
discontinued operation $ - $ (785,531)
</TABLE>
The results for the three and nine months ended July 31, 1996 contain
activity through June 30, 1996 at which time these operations were
transferred to the Company's largest shareholder in redemption of
2,000,000 shares of the Company's common stock.
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 July 31, 1996, the Company had current assets of $1,202,962, compared to
$113,278 at October 31, 1995, for an increase of $1,089,684. Cash increased by
$932,812 from $94,391 to $1,027,203 during the nine-month period, primarily as a
result of the Company obtaining a $2,500,000 loan from the Pacific Mezzanine
Fund ("Pacific Loan") for the purposes of facilitating the payment of expenses
associated with completing its proposed liquidation and distribution in
conjunction with the Pacific Telesis Group transaction (see Item 5 below). A
portion of the net loan proceeds was used to pay accounts payable, accrued
liabilities, a related party note payable and to fund a loan commitment to
Wireless Cable & Communications, Inc., ("WCCI"). This loan commitment is more
particularly described in the section entitled "Auckland and Park City Asset
Spin-Off" in the Company's report on Form 10-QSB for the period ended July 31,
1995, which is incorporated herein by this reference. Current
<PAGE>
liabilities as ofJuly 31, 1996, were $360,445, compared to $1,559,665 as of
October 31, 1995, for a decrease of $1,199,220.
At July 31, 1996, total assets were $1,697,913, compared to $1,611,845
as of October 31, 1995, for an increase of $86,068. The increase in total assets
was due to the receipt by the Company of the net proceeds from the Pacific Loan
described above and partially offset by a decrease attributable to the equity in
net loss of WHI and Videotron Tampa Bay, totaling $995,214 for the nine month
period (which reduces investment in and advances to investee companies account)
and a decrease in cash which was primarily used to reduce accounts payable and
accrued liabilities. Total stockholders' equity (deficit) decreased by
$1,214,712 from $52,180 at October 31, 1995, to ($1,162,532) at July 31, 1996.
B. MATERIAL CHANGES IN RESULTS OF OPERATIONS
The Company did not have operating revenues for either of the nine
months ended July 31, 1995 or 1996. However, in the same period, the Company's
discontinued operations generated revenue of $2,940,934 and $1,716,528 during
1995 and 1996, respectively. The revenue from discontinued operations decreased
$1,224,406, in large part because of new regulations imposed on the audiotex
industry which restrict the number of phone lines available for the business and
because 1996 results are through June 30, 1996 at which time the Company
disposed of its discontinued operations (see Item 5 below). During the nine
months ending July 31, 1996, total operating expenses (and operating loss) were
$2,076,454, compared to $1,572,017 for the same nine-month period a year
earlier, for an increase of $504,437. The increase in operating loss is a result
of an increase in administrative expenses and professional fees due to the
expenses incurred by the Company in conjunction with the Pacific Telesis Group
transaction and the expenses associated with the Pacific Loan. This increase was
offset by a decrease in channel rights and amortization associated with the
assets which the Company transferred to WCCI.
During the nine months ending July 31, 1996, the Company had a net loss
of $2,101,603, compared to a net loss of $3,791,255 for the same period a year
earlier, for a decrease of $1,689,652. The decrease in net loss is primarily a
result of the decrease in the equity in the net loss of WHI, offset by a
decrease in income from discontinued operations and the increase in
administrative expenses and professional fees. The equity in the net loss of WHI
was lower because the Company has completely written off its investment in and
advances to investee companies in WHI, and, therefore, will not continue to
record WHI losses. The decrease in the income from discontinued operations was
offset partially by a decrease in operating expenses primarily due to changing
the clearing house parameters to screen fraudulent callers which reduced
chargeback expenses. For the nine months ended July 31, 1996, there was a net
loss per share of $(0.07), compared to a net loss per share of $(0.14) for the
same period a year earlier.
C. LIQUIDITY AND CAPITAL RESOURCES
At July 31, 1996, the Company's current assets exceeded its current
liabilities by $842,517. The Company, subject to approval by the Company's
shareholders, 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 all liabilities with its current cash
and the funds it anticipates receiving as a result of the Pacific Telesis Group
transaction.
<PAGE>
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: October 25, 1996 BY
/s/ ANTHONY SANSONE
Anthony Sansone
Chief Accounting Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUL-31-1995
<CASH> 1,027,203
<SECURITIES> 0
<RECEIVABLES> 14,711
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,202,962
<PP&E> 46,223
<DEPRECIATION> 19,898
<TOTAL-ASSETS> 1,697,913
<CURRENT-LIABILITIES> 360,445
<BONDS> 0
0
0
<COMMON> 23,564
<OTHER-SE> (1,189,096)
<TOTAL-LIABILITY-AND-EQUITY> 1,697,913
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,076,454
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,358
<INCOME-PRETAX> (2,939,389)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,939,389)
<DISCONTINUED> 837,786
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,101,603)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
