<PAGE>
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 ending September 30, 1998 Commission
File Number 333-
Long Distance Direct Holdings, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 33-0323376
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
20 Squadron Blvd., Ste. 210, New City, NY 10956
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Issuer's telephone number: 845-639-0600
1 Blue Hill Plaza, Pearl River, NY 10965
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(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 No X
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the issuer's common equity, as of
September 30, 1998 is approximately 10,600,000.
Transitional small business disclosure Format (check one):
Yes No X
--- ---
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Financial Statements and the notes thereto appearing herein. This report
contains forward-looking statements which involve risks and uncertainties. The
Company's actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth in this discussion and analysis and elsewhere in this report. Factors that
could have or did cause actual results to differ were: the Company's ability to
obtain sufficient funds to finance near term and long term working capital
needs; the Company's ability to satisfy its past due obligation to MCI; the
Company's ability to satisfy its past due obligation to AT&T; the Company's
ability to collect its outstanding receivables; competition in the long distance
telecommunications industry; ability of the Company's marketing strategies to
develop sufficient levels of revenue to sustain growth; customer attrition;
federal and state regulation of the telecommunications industry; the Company's
ability to manage its information systems for rapid growth; and retention of key
personnel.
In the third quarter of 1998, Long Distance Direct Holdings, Inc.(LDDH)
became a shareholder in a new business, incorporated as PowerChannel, Inc.
PowerChannel was formed to provide a unique worldwide program of free or
near-free Internet access utilizing the television. As of November 15, 1998,
some of the risk factors associated with this venture were expected to be as
follows: PowerChannel's ability to obtain sufficient funds to finance near term
and long term working capital needs; competition in the Internet and TV-based
personal computer services industry; ability of PowerChannel's marketing
strategy to develop sufficient levels of revenue to sustain growth; customer
attrition; federal and state regulation of the Internet industry; retention of
key personnel.
GENERAL
Long Distance Direct, Inc. (LDDI), a subsidiary of Long Distance Direct
Holdings, Inc., (LDDH) is a specialty marketer of telephone, teleconferencing,
cellular long distance, voice mail, Internet and prepaid phone cards to small
and medium sized commercial as well as residential customers. The Company has
pursued non-traditional marketing channels such as infomercials and strategic
partnering with large well-established firms and organizations to compete in the
telecommunications industry and differentiate itself among competitors. All of
the services sold by the Company through September 30, 1998 were provided by MCI
Telecommunications Corporation("MCI"), AT&T Corporation ("AT&T") and Cable and
Wireless, Inc. ("Cable and Wireless") through its 1998 agreement with IDT
Corporation ("IDT").
The Company has experienced a reduction in its business operation due
to the inability of the Company's various marketing programs to generate
sufficient revenues.
In the third quarter of 1998, Long Distance Direct Holdings, Inc.(LDDH)
became a shareholder in a new business, incorporated as PowerChannel, Inc..
PowerChannel was formed to provide a unique worldwide program of Internet access
utilizing the television. The technology will employ a set-top box, infrared
remote control keyboard, and a regular remote control. PowerChannel signed an
agreement with American Interactive Media, Inc. ("AIM") to purchase set-top
Internet access devices, supported by AIM's proprietary webPassport (TM)
Internet access service, which provides subscribers with full access to the
Internet through their existing television sets without the need for a computer.
It was intended that the underlying Internet access would be supplied to
PowerChannel by LDDH on arm's length terms through its previously announced
agreement with IDT Corporation, a major national Internet backbone supplier,
under which LDDH became an ISP (Internet Service Provider). PowerChannel's
unique combination of set-top box and proprietary services is expected to allow
households free or near-free use of the Internet without the need of a personal
computer. PowerChannel also intends to offer a video phone option, with flat
rate telephony services. PowerChannel hopes to commence installation of the
devices in the fourth quarter of 1998, with a full rollout scheduled for the
second quarter of 1999. In addition to supplying PowerChannel with its Internet
access, LDDH expected to supply the telephony service for the video phone option
and will market its long-distance telephone service to those of PowerChannel's
subscribers who do not take the video phone option. As a result of the Company's
subsequent financial difficulties and PowerChannel's dispute with
<PAGE>
AIM, PowerChannel delayed the roll-out of its service. As of the date of filing
of this report, such roll-out had not yet commenced in the United States.
In light of the reduction in its business operations, the Company
signed a twelve month agreement with PowerChannel, Inc. in August, 1998 to
provide a proportion, not exceeding 50%, of certain of its employees'
professional time and received, in consideration, a warrant to purchase an
additional 2,000,000 shares of PowerChannel's stock at 10 cents per share.
In October, 1998, the Company entered into an agreement with DMS
Telecom Services. This agreement was entered into because of the problems which
arose due to the termination by MCI of the Company's service and the
unsuccessful attempt of IDT to provision the Company's dedicated customer base
described below. The purpose of the agreement was to provide for the smooth
transition of the customers to another carrier. The Company agreed to continue
to provide billing services with regard to the customers and to pay MCI for
related carrier costs during the transition period.
In July, 1998, the Company signed a Carrier Service Agreement with
IDT designed to enable the Company to provide to its customers both dial-up and
Dedicated Internet Access. In July, 1998, the Company also signed a Loan and
Services Agreement with IDT whereby IDT loaned the Company $300,000 at an
interest rate of 12% per annum. This loan was payable together with all accrued
interest on the first anniversary date of the agreement. In addition, IDT agreed
to make additional loans of $50,000 each at various times during the term of the
agreement. Each of these loans also bore interest at a rate of 12% per annum and
was payable with all accrued interest on the six month anniversary of the date
that the loan is made to the Company. As of October 29, 1998, only one of these
additional loans had been made. IDT had the option to convert any unpaid
principal or interest balance into shares of the Company's common stock at a
conversion rate of $1.00 per share.
IDT's obligation to make loans to the Company was conditioned upon the
Company entering into an agreement with IDT to provide standard carrier services
and Internet services to the Company's end users. However, due to IDT's
inability to successfully provision the Company's dedicated customer base on a
timely basis, the Company lost a large majority of its dedicated customers and
related revenue and, consequently, its marketing partnership with DMS Telecom
Services.
In 1997 and 1998, LDDI did not meet its minimum purchase requirements
under its contract with MCI. The Company believes that it was prevented from
meeting its minimum purchase obligation in 1997 principally because up to 20,000
new customers acquired by the Company since January 1, 1997 and processed
through MCI were confirmed to LDDI's service but, due to software problems at
MCI, were not, in practice, activated onto the Company's network.
In June 1998, MCI and LDDI reached an arrangement under which the
Company, in order to avoid being forced out of business, agreed to forgo the
benefit of its 1997 unbilled revenue from the new customers MCI failed to
activate onto the Company's network (approximately $1,800,000 of unbilled
revenue was recorded in the first nine months of 1997) in return for, (i) the
waiver by MCI of the entire amount of the Company's liability for
underutilization charges of approximately $736,000 and $929,000 as of December
31, 1997 and May 31, 1998, respectively, under its existing minimum purchase
obligations, (ii) a material reduction in the Company's minimum purchase
obligations for the first nine months of the new agreement, (iii) certain
performance credits under the new minimum purchase obligations, (iv) reductions
in prices charged to the Company by MCI for telephone services which the Company
could not otherwise expect to achieve without an increase in its minimum
purchase obligations and (v) the issuance by the Company of a three-year
promissory note in the amount of $4,200,000 to MCI, which is guaranteed by two
of the Company's officers and principal shareholders. The note bears interest at
9.5% and requires semi-monthly payments of principal and interest. Should the
Company default on the note, MCI has the right to demand payment of the entire
principal due and any accrued interest.
The Company failed to meet its obligations to MCI under this new
contract for either the note payments nor current usage payments. In order to
reduce the current usage payments, the Company took steps to switch a
significant proportion of its customers to a new carrier - Cable and Wireless,
Inc. (through its previously mentioned agreement with IDT Corporation). MCI
exercised its contractual right and suspended the Company's service due to
<PAGE>
default on its obligations under the new contract. Management believes that a
majority in number of the Company's customers utilizing switched services were
migrated to Cable and Wireless before MCI suspended its service. However, due to
IDT's inability to successfully provision the Company's dedicated customer base
on a timely basis, the Company lost a large majority of its dedicated customers
and related revenue and, consequently, its marketing partnership with DMS
Telecom Services (see above for discussion of October 1998 agreement with DMS).
The Company approached MCI to determine whether the arrangements
entered into in June, 1998 could be restructured to accommodate the Company's
cash position and allow LDDI to recommence using MCI's service upon a
recapitalization of the Company. If such discussions are not successful, there
can be no assurance that MCI will not seek to enforce its lien on LDDI's
receivables and other assets. In the event that MCI does so seek, the Company
will vigorously contest MCI's action and will assert in law its claims against
MCI for damages sustained in 1997 in the circumstances described above. As a
result of the Company's subsequent financial difficulties, the arrangements with
MCI were not restructured; there was no recapitalization of the Company; and the
Company did not recommence using MCI's service. As of the date of filing of this
report, MCI has not enforced its lien on LDDI's receivables and other assets.
In April, 1998, LDDI requested that AT&T terminate its contract and
AT&T agreed to release LDDI from its contractual obligations and to waive all
shortfall penalties and termination liabilities upon discharge of LDDI's
outstanding liability to AT&T of approximately $850,000 at August 31, 1998. As
of November 15, 1998, LDDI was in the process of negotiating with AT&T to pay
the $850,000 liability through a payment plan pursuant to a non-interest bearing
promissory note. There can be no assurance that LDDI will be able to make timely
payments on its proposed promissory note to AT&T. Should LDDI fail to make
timely payments on its promissory note to AT&T or otherwise be in default under
its arrangement with AT&T, LDDI may also be liable for the entire amount of all
shortfall penalties proposed to be waived by AT&T. In December, 1999, legal
counsel for AT&T notified the Company of its outstanding balance of $1,037,684
and threatened legal action against the Company in the event this claim is not
resolved. As of the date of filing of this report, the Company is unaware of any
legal action subsequently filed by AT&T against the Company.
Both MCI and AT&T have a security interest in LDDI's receivables and
assets in lieu of security deposits.
In the first quarter of 1998, the Company concluded a debt financing
arrangement whereby approximately $1,000,000 was raised for working capital
purposes. The debt bears interest at 15% and each debtholder was granted
warrants to purchase the Company's common stock at specified prices. With
respect to a portion of this debt, the Company may elect to satisfy its interest
payments by the issue of shares of its common stock.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AS COMPARED
TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997.
Gross revenues for the nine months ended September 30, 1998 were
$6,382,595 as compared to $7,659,350 for the nine months ended September
30,1997. For the nine months ended 9/30/98, the Company recorded then reversed
$4.5 million in revenue which was principally generated from its psychic
marketing partnership initiated in 1998. The revenue was reversed as a result of
the Company's inability to collect on the great majority of this revenue,
although the Company incurred significant carrier costs in relation to this
revenue.
Gross revenues for the period ended September 30, 1997 included a
significant volume of unbilled revenue in respect of certain new customers which
were acquired by LDDI since January 1, 1997 and processed through MCI and which
formed a large portion of the customers who were generated from the Company's
televised marketing program. The accounts in question were confirmed to LDDI's
service but, due to software problems at MCI, the Company had not received the
benefit of these billings at September 30, 1997. MCI and the Company reached an
arrangement in June, 1998 under which the Company, in order to avoid being
forced out of business, agreed to forgo the benefit of such unbilled revenue in
return for various accommodations described above. Since the Company was not
able to meet its obligations under the new agreement, it has migrated a majority
in number of its customer base to a new carrier - Cable and Wireless - through
its aboved-mentioned relationship with IDT.
<PAGE>
The Company had a gross profit of $ (2,313,973) and $1,667,561 for the
nine months ended September 30, 1998 and 1997, respectively. The absence of
profit at 9/30/98 is largely attributable to the fact that carrier costs were
incurred but no revenue was recognized with regard to its psychic marketing
partnership as mentioned previously. For the nine months ended September 30,
1997, the Company incurred a loss of approximately $331,000 with respect to the
sale of marketing kits sold through the Company's televised marketing program.
No such loss was recorded for the nine months ended September 30, 1998 but the
benefit of this was offset by lower profit margins related to two of the
Company's marketing arrangements.
Sales and marketing expenses were $730,468 and $416,669 for the nine
months ended September 30, 1998 and 1997, respectively. In the third quarter of
1998, the Company charged approximately $291,000 to sales and marketing expense
in order to write off prepaid marketing costs in relation to its televised
marketing program. In addition, $128,000 was charged to commission expense when
shares of the Company's stock were issued as payment for commission due to DMS
Telecom.
General and administrative expenses were $ 6,095,048 and $3,353,028 for
the nine months ended September 30, 1998, and 1997, respectively. For the nine
months ended 9/30/98 the following charges were recorded: a $200,000 accrual for
legal proceedings against the Company; approximately $500,000 in legal,
consulting, and public relations expense when shares of the Company's stock were
issued as payment for services rendered; a $495,000 provision against officers'
loans receivable although such receivable has not been written off; $450,000 of
depreciation expense to reduce the carrying value of fixed assets to their
realizable value; and $350,000 to write off unamortized assets. Other factors
which contributed to the increase in general and administrative expenses are
mainly related to the Company's expansion of its resources in 1998 in
anticipation of increased levels of sales, including payroll and related
administrative costs. Additional billing costs were incurred in 1998 to meet the
needs of the Company's new marketing strategies particularly the psychic
marketing partnership. Since the Company's marketing plans did not produce the
anticipated level of revenue, the Company has taken steps to reduce expenses by
laying off personnel in the third quarter.
Interest expense consists of amounts charged with respect to the
following debt: the 1998 debt financing; the MCI note and the note due a
related party. In addition, approximately $250,000 was accrued for interest and
penalties on sales and federal excise tax liabilites.
The Company incurred a net loss of $ 9,666,377 for the nine months
ended September 30, 1998 compared to a net loss of $2,110,323 for the nine
months ended September 30, 1997. This increase is mainly attributable to the
material charges to the profit and loss statement mentioned above.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AS COMPARED
TO THE THREE MONTHS ENDED SEPTEMBER 30, 1997.
Gross revenues for the three months ended September 30, 1998 were
$(3,183,774) as compared to $2,930,037 for the three months ended September
30,1997. The quarterly loss is largely attributable to the reversal of $4.5
million in revenue which was principally generated from its psychic marketing
partnership initiated in 1998. The revenue was reversed as a result of the
Company's inability to collect on the great majority of this revenue, although
the Company incurred significant carrier costs in relation to this revenue.
Gross profit was $(4,333,075) and $689,149 for the three months ended
September 30, 1998 and 1997, respectively. The absence of gross profit for the
third quarter of 1998 is largely attributable to the $4.5 million reversal of
revenue mentioned previously.
Sales and marketing expenses were $550,191 and $168,547 for the three
months ended September 30, 1998 and 1997, respectively. In the third quarter of
1998, the Company charged approximately $291,000 to sales and marketing expense
in order to write off prepaid marketing costs in relation to its televised
marketing program. In addition, $128,000 was charged to commission expense when
shares of the Company's stock were issued as payment for commission due to DMS
Telecom.
<PAGE>
General and administrative expenses were $2,607,323 and $1,196,254 for
the three months ended September 30, 1998, and 1997, respectively. For the three
months ended 9/30/98, the following charges were recorded: a $200,000 accrual
for legal proceedings against the Company; approximately $500,000 in legal,
consulting, and public relations expense when shares of the Company's stock were
issued as payment for services rendered; a $495,000 provision against officers'
loans receivable although such receivable has not been written off; $450,000 of
depreciation expense to reduce the carrying value of fixed assets to their
realizable value; and $350,000 to write off unamortized assets. Since the
Company's marketing plans did not produce the anticipated level of revenue, the
Company has taken steps to reduce expenses by laying off personnel in the third
quarter.
The Company incurred a net loss of $ 7,987,406 for the three months
ended September 30, 1998 compared to a net loss of $682,675 for the three months
ended September 30, 1997. The increase is mainly attributable to the material
charges recorded in the third quarter of 1998 mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
The Company completed a debt financing in a private offering that was
not registered under the Securities Act of 1933 in order to meet short term
capital requirements. The Company sought to raise up to $1,500,000 from a
limited group of selected accredited investors and successfully raised
approximately $1,000,000 since the private offering commenced in February, 1998.
The proceeds of the debt financing were used to fund the Company's marketing
ventures and for working capital purposes. The debt is repayable on the first
anniversary of the agreement; bears an interest rate of 15% per annum; and
entitles the holder to a warrant to purchase the Company's common stock -
exercisable within three years - at a specified price. With respect to $310,000
of this debt, the Company may elect to satisfy its interest payments by the
issue of shares of its common stock. As of the date of filing of this report, a
settlement has been reached with respect to $525,000 of this debt, and the
balance remains outstanding.
In June of 1998, a shareholder in the Company sold shares and utilized
the proceeds to make a loan to the Company in the amount of $270,000.
In July, 1998, the Company signed a Loan and Services Agreement with
IDT whereby IDT loaned the Company $300,000 at an interest rate of 12% per
annum. This loan was payable together with all accrued interest on the first
anniversary date of the agreement. In addition, IDT agreed to make additional
loans of $50,000 each at various times during the term of the agreement. Each of
these loans also bore interest at a rate of 12% per annum and is payable with
all accrued interest on the six month anniversary of the date that the loan is
made to the Company. As of October 29, 1998, only one of these additional loans
had been made. IDT has the option to convert any unpaid principal or interest
balance into shares of LDDI's common stock at a conversion rate of $1.00 per
share.
In the third quarter of 1998, Long Distance Direct Holdings,
Inc.(LDDH) became a shareholder in a new business, incorporated as PowerChannel,
Inc. PowerChannel was formed to provide a unique worldwide program of Internet
access utilizing the television. PowerChannel plans to raise capital utilizing
individual investors and/or strategic partners and as of November 15, 1998 was
engaged in a Private Placement of shares under Rule 506 of Regulation D of the
Securities Act of 1933. PowerChannel expects negative cash flow from operations
as it expands its technical, marketing, sales and administrative capabilities.
PowerChannel believes that the resources raised through this financing will
provide adequate liquidity to meet its needs in respect of testing the program
and establishing its base operations and its marketing methods. There can be no
assurance that sufficient funding will be raised to provide this liquidity nor
that this venture will cease to result in negative cash flow from operations.
LDDI (the Company's existing telecommunications business) has sustained
operating losses for each year of its existence due to a lack of working capital
to finance adequate levels of marketing expenditure, insufficient revenues and
other reasons. Since its inception, the Company has financed its operational
losses through debt and equity placements and will need to continue to do so
until revenues reach such levels that enough working capital is generated from
its operations. There can be no assurance that the Company will realize this
level of revenue.
<PAGE>
The Company's trend of incurring operating losses is likely to
continue until its revenues reach certain levels materially higher than any
achieved to date. There can be no assurance that the Company will not continue
to experience operating losses in the future or that the Company's revenues will
reach such levels.
Until the Company's revenues reach certain levels materially higher
than any achieved to date, as to which there can be no assurance, the Company
will be required to raise substantial additional amounts of capital from the
sale of its securities or through debt financing arrangements to finance its
operations. There can be no assurance that additional financing will be
available on acceptable terms, if at all.
<PAGE>
LONG DISTANCE DIRECT HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
30-Sep
1998 December 31,
ASSETS (unaudited) 1997
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<S> <C> <C>
CURRENT ASSETS
Cash $ (22,156) $ 50,447
Accounts receivable (net of allowance for doubtful accounts) 1,074,984 1,725,556
Other current assets - 220,050
---------------------------------
Total Current Assets 1,052,828 1,996,053
---------------------------------
PROPERTY AND EQUIPMENT
Furniture and equipment 210,736 208,819
Computer equipment and software 557,804 516,579
Leasehold improvements 127,335 127,335
---------------------------------
895,875 852,733
Less: accumulated and accelerated depreciation 895,875 312,495
---------------------------------
- 540,238
---------------------------------
Other Assets - 100,213
Officers' Loans - net of allowance of $494,739 at 9/30/98 - 563,598
Prepaid marketing costs - 262,744
---------------------------------
$ 1,052,828 $ 3,462,846
=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable - current $ 885,500 $ -
Notes payable - related party 780,088 309,929
Accounts payable 4,607,477 4,138,448
Accrued expenses 1,050,830 273,356
Taxes payable 1,739,493 418,944
---------------------------------
Total Current Liabilities 9,063,388 5,140,677
---------------------------------
LONG TERM LIABIITIES 2,653,894
STOCKHOLDERS' EQUITY
Common stock - par value $.001 per share;
authorized 30,000,000 shares; issued
and outstanding 10,600,000 shares 10,600 8,967
Additional paid in capital 11,602,969 10,924,848
Accumulated deficit (22,278,023) (12,611,646)
---------------------------------
Total Stockholders' Equity (10,664,454) (1,677,831)
---------------------------------
$ 1,052,828 $ 3,462,846
=================================
</TABLE>
See notes to Consolidated Financial Statements
<PAGE>
LONG DISTANCE DIRECT HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(UNAUDITED)
Three Months Year to Date Three Months Year to Date
------------ ------------ ------------ ------------
Ended 9/30/98 9/30/98 Ended 9/30/97 9/30/97
------------- ------- ------------- -------
<S> <C> <C> <C> <C>
REVENUES $ (3,183,774) $ 6,382,595 $ 2,930,037 $7,659,350
CUSTOMER REBATES AND REFUNDS 11,774 82,932 3,250 7,213
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NET REVENUES (3,195,548) 6,299,663 2,926,787 7,652,137
COST OF SERVICES 1,137,527 8,613,636 2,237,638 5,984,576
-------------------------------------------------------------------
Gross Profit (4,333,075) (2,313,973) 689,149 1,667,561
-------------------------------------------------------------------
OPERATING EXPENSES
Sales and marketing 550,191 730,468 168,547 416,669
General and administrative 2,607,323 6,095,048 1,196,254 3,353,028
-------------------------------------------------------------------
Total Operating Expenses 3,157,514 6,825,516 1,364,801 3,769,697
-------------------------------------------------------------------
LOSS FROM OPERATIONS (7,490,589) (9,139,489) (675,652) (2,102,136)
OTHER EXPENSES (INCOME)
Interest expense 497,184 521,217 - 1,164
Interest income (367) (367) - -
State income tax - 6,038 7,023 7,023
-------------------------------------------------------------------
Total Other Expenses (Income) 496,817 526,888 7,023 8,187
-------------------------------------------------------------------
NET LOSS $ (7,987,406) $ (9,666,377) $ (682,675) $ (2,110,323)
===================================================================
NET LOSS PER SHARE (0.85) (1.03) (0.08) (0.26)
</TABLE>
<PAGE>
LONG DISTANCE DIRECT HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
30-Sep-98 30-Sep-97
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($9,666,377) ($2,110,323)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 583,380 109,608
Advertising 262,744
Provision for Officers' Loans Receivable 494,739
Provision for doubtful accounts 283,661 529,373
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 366,911 (3,750,295)
(Increase) decrease in other current assets 220,050 211,367
(Increase) decrease in other assets 100,213 (32,304)
Increase (decrease) in accounts payable 469,029 1,647,804
Increase (decrease) in accrued expenses 777,474 659,245
Increase (decrease) in sales and excise taxes payable 1,320,549 (81,223)
Increase (decrease) in long term liabilities 2,653,894 -
------------------------------------------
Total Adjustments to Net Loss 7,532,644 (706,425)
------------------------------------------
Net Cash Used in Operating Activities (2,133,733) (2,816,748)
------------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Acquisition of property and equipment (43,142) (321,201)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (payment) of notes payable 1,355,659 (54,118)
Proceeds (payment) of related party loans 68,859 -
Proceeds from stock issuances 679,754 2,436,287
------------------------------------------
Net Cash Provided by Financing Activities 2,104,272 2,382,169
------------------------------------------
NET INCREASE (DECREASE) IN CASH ($72,603) ($755,780)
------------------------------------------
CASH- Beginning of Period 50,447 962,471
CASH - End of Period (22,156) 206,691
</TABLE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: October 13, 2000 Long Distance Direct Holdings, Inc.
By:/s/ Steven Lampert
------------------------------------
Steven Lampert, President
(Principal Executive Officer)
By:/s/ Michael Preston
------------------------------------
Michael Preston, Chief
Financial Officer (Principal
Accounting Officer)
