<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
to
FORM 10-QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------------- ---------.
Commission File Number 1-5701
NET TELECOMMUNICATIONS, INCORPORATED
(Formerly known as SILVER LEDGE, INC.)
-----------------------------------
(Exact name of small business issuer as specified in its charter)
Montana 87-0297202
------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Convention Center Dr. #P125, Las Vegas, NV 89129
-----------------------------------------------------
(Address of principal executive offices)
Registrant's telephone no., including area code: (801) 773-8607
---------------
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding as of March 31, 1996
--------- ---------------------------------
Common Stock, $.10 par value 45,657,907
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TABLE OF CONTENTS
Heading Page
- ------- ----
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Financial Statements..................................1
Balance Sheets - March 31, 1996 and December 31, 1995..............2
Statements of Operations -- three months ended
March 31, 1996 and 1995...........................................3
Statements of Stockholders' Equity.................................4
Statements of Cash Flows --
three months ended March 31, 1996 and 1995.........................5
Notes to Financial Statements .....................................6
Item 2. Management's Discussion and Analysis and Results of
Operations.....................................................9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................10
Item 2. Changes In Securities.........................................10
Item 3. Defaults Upon Senior Securities...............................10
Item 4. Submission of Matters to a Vote of Securities
Holders.......................................................10
Item 5. Other Information.............................................10
Item 6. Exhibits and Reports on Form 8-K..............................10
SIGNATURES.....................................................11
<PAGE>
<PAGE> PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period ended March
31, 1996, have been prepared by the Company.
SILVER LEDGE, INC.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and December 31, 1995
SILVER LEDGE, INC.
Consolidated Balance Sheets
ASSETS
-------
March 31, December 31,
1996 1995
------------ --------------
(Unaudited)
CURRENT ASSETS
Cash $ - $ 279
Accounts receivable - trade (Note 1) 276,140 305,556
Accounts receivable - related parties (Note 2) 527,744 436,971
Inventory (Note 1) 412,761 547,136
------------ --------------
Total Current Assets 1,216,645 1,289,942
------------ -------------
FIXED ASSETS, net of accumulated
depreciation (Note 1) 44,952 46,794
------------ --------------
TOTAL ASSETS $ 1,261,597 $ 1,336,736
------------ --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
CURRENT LIABILITIES
Cash overdraft $ 73,563 $ 58,044
Accounts payable 174,155 146,908
Accrued expenses 1,100 78,150
Line of credit 234,061 291,902
------------- ------------
Total Current Liabilities 482,879 575,004
------------- ------------
Total Liabilities 482,879 575,004
-------------- ------------
COMMITMENTS AND CONTINGENCIES (Note 3) - -
-------------- ------------
STOCKHOLDERS' EQUITY
Common Stock, par value $0.10 per share,
50,000,000 shares authorized, 45,657,907
shares issued and outstanding 4,565,791 4,565,791
Deficit in capital in excess of par value (2,946,215) (2,946,215)
Accumulated deficit (840,858) (857,844)
-------------- ------------
Total Stockholders' Equity 778,718 761,732
------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,261,597 $ 1,336,736
------------- -----------
The accompanying notes are an integral part of these financial statements.
<PAGE>
SILVER LEDGE, INC.
Consolidated Statements of Operations
For the Three
Months Ended March 31,
-------------------------------
1996 1995
----------- -------------
(Unaudited) Unaudited)
REVENUES
Sales $ 696,119 $ 804,511
Cost of goods sold 515,128 631,428
------------ -------------
Gross Profit 180,991 173,083
------------ -------------
EXPENSES
Depreciation and amortization 1,842 771
General and administrative 162,163 140,482
------------ -------------
Total Expenses 164,005 141,253
------------ -------------
NET INCOME FROM OPERATIONS 16,986 31,830
Income tax expense (Note 1) - -
------------ -------------
NET INCOME (LOSS) $ 16,986 $ 31,830
------------ -------------
INCOME (LOSS)
PER SHARE $ 0.00 $ 0.00
------------ -------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
SILVER LEDGE, INC.
Consolidated Statements of Stockholders' Equity
(Unaudited)
Deficit in
Capital in
Common Stock Excess of Accumulated
Shares Amount Par Value Deficit
--------- ----------- ------------ ------------
Balance,
December 31, 1994 45,657,907 $ 4,565,791 $ (2,946,215) $ (924,185)
Net income for
the year ended
December 31, 1995 - - - 66,341
---------- ----------- ------------- ------------
Balance,
December 31, 1995 45,657,907 4,565,791 (2,946,215) (857,844)
Net income for the
three months ended
March 31, 1996 - - - 16,986
---------- ----------- ------------- ------------
Balance, March 31,1996 45,657,907 $ 4,565,791 $ (2,946,215) $ (840,858)
---------- ----------- ------------- -------------
The Accompanying notes are an integral part of these financial statements.
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<PAGE>
SILVER LEDGE, INC.
Consolidated Statements of Cash Flows
For the Three
Months Ended March 31,
------------------------------
1996 1995
-------------- -------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,986 $ 31,830
Non-cash expenses and revenues
included in income
Depreciation 1,842 771
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable (61,357) (32,570)
(Increase) decrease in inventory 134,375 (83,173)
Increase (decrease) in accounts
payable and accrued expenses (49,803) (124,921)
Increase (decrease) in cash overdraft 15,519 -
------------- --------------
Net Cash (Used) by Operating Activities 57,562 (208,063)
------------ --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets - -
------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of line of credit (57,841) -
Proceeds from line of credit - 227,041
------------- --------------
Net Cash Provided by Financing Activities (57,841) 227,041
------------- --------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (279) 18,978
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 279 3,655
------------- --------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ - $ 22,633
------------- --------------
CASH PAID FOR
Interest $ - $ 17,359
Income taxes - -
The accompanying notes are an integral part of these financial statements.
<PAGE>
SILVER LEDGE, INC.
Notes to the Consolidated Financial Statements
December 31, 1995 and March 31, 1996
NOTE 1 - Summary of Significant Accounting Policies
This summary of significant accounting policies of Silver Ledge, Inc. (the
Company) is presented to assist in understanding these financial statements.
These accounting policies conform to generally accepted accounting principles.
The Company is in the business of manufacturing and selling steel and steel
related products such as wood burning stoves.
a. Property and Equipment
Maintenance and repairs of property and equipment that do not improve or extend
the life of the respective assets are charged to expense as incurred. The
property and equipment are depreciated over their Estimated useful life of 5-7
years.
b. Income Taxes
No provision for income taxes has been made due to operating losses in prior
years. The Company has net operating loss carryovers to future years as
follows:
Expiring
Amount in Year
---------- ---------
$ 379,924 2001
2,523 2004
Total $ 382,447
-----------
c. Dividends
No dividends have been declared or paid since the inception of the Company.
d. Income (Loss) Per Share
Income (loss) per share is computed based on the weighted average number of
shares outstanding during each year.
<PAGE>
SILVER LEDGE, INC.
Notes to the Consolidated Financial Statements
December 31, 1995 and March 31, 1996
NOTE 1 - Summary of Significant Accounting Policies (Continued)
e. Accounts Receivable
Accounts receivable are shown net of any accounts deemed uncollectible by the
Company. The allowance for doubtful accounts for the year ended December 31,
1995 was $12,499.
f. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Silver Ledge, Inc. and its wholly-owned subsidiaries: Heritage Stoves, Inc.,
Clearfield Manufacturing and Clearfield Products. The consolidation was
completed using the pooling of interests method of accounting for business
combinations and all significant inter-company transactions have been
eliminated.
g. Inventory
The inventory consists of raw materials used in the manufacturing processes and
work in process. The inventory is carried at its lower of cost or market value
using the first-in-first-out method.
At December 31, inventories were as follows:
1995
---------
Raw materials and supplies $ 401,959
Work-in-process 18,021
Finished goods 127,156
----------
Total $ 547,136
h. Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
i. Fixed Assets
The Company's fixed assets are recorded at cost:
1995
----------
Equipment $ 53,628
Vehicles 5,000
---------
58,628
Accumulated depreciation (11,834)
---------
Net book value $ 46,794
---------
<PAGE>
SILVER LEDGE, INC.
Notes to the Consolidated Financial Statements
December 31, 1995 and March 31, 1996
NOTE 2 - Related Party Transactions
In 1992 the Company's officers and directors formed a company which assumed
all of the debt on the equipment that the Company then owned. The officers
and directors are leasing the equipment back to the Company. Neither the sale
nor the lease back agreements were negotiated at arms length. The Company was
owed $139,139 and $27,055 from the sale and lease back of the equipment at
December 31, 1995 and March 31, 1996, respectively. The Company paid $198,000
in rent to the related parties in 1995. The Company is renting its buildings
from two major shareholders on a month to month basis. The Company paid
$116,600 to the shareholders in 1995.
In 1994, the Company had approximately $800,000 in sales to companies owned by
a major shareholder. At December 31, 1995 and March 31, 1996, the Company was
owed $436,971 and $500,689 by those companies, respectively.
NOTE 3 - Commitments and Contingencies
The Company is involved in litigation arising in the course of business. It
is not possible to state the ultimate outcome, if any, in these matters. The
following is a summary of those matters:
Matters reduced to judgment against the Company or its subsidiaries, or
otherwise made certain, but still pending because the amount remains unpaid or
no agreement for payment has been reached:
A. MAC JAC DEVELOPMENT vs. SILVER LEDGE, INC. dba CLEARFIELD COMPANIES,
INC.; Superior Court, County of Sacramento, State of California, Case No. 356036
(filed 1987). The claim in the principal sum of $3,000 was for back rent with
a total three-year rental of $64,368 potentially being due (less any amount of
mitigation) and for unlawful detainer pursuant to a written agreement for the
rental of real property. The claim was disputed by Clearfield Companies, Inc.
The amount of the claim was disputed by Silver Ledge, Inc. as possession of the
premises was returned to lessor for re-rental. Judgement was rendered for the
Plaintiff. The judgement remains unpaid.
B .ELLSWORTH (L.J.) CONSTRUCTION, INC. vs. SILVER LEDGE, INC., et al.;
Seventh Judicial District Court, Bingham County, State of Idaho, Case No.
13426 (filed 1987). The claim in the principal sum of $33,871 was for goods
provided and services rendered. Default Judgment was entered, prior to 1990,
for failure to answer. The judgment remains unpaid. The financial statements
have been adjusted to reflect the claim in accounts payable.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following table sets forth the percentage relationship to sales of
principal items contained in the Company's Statements of Operations for the
three month period ended March 31, 1996 and 1995. It should be noted that
percentages discussed throughout this analysis are stated on an approximate
basis.
Three Months Ended
March 31,
--------------------
1996 1995
--------- --------
(Unaudited)
Sales 100 % 100%
Cost of goods sold 74 78
Gross profits 26 22
Total expenses 24 18
Net income from operations 2 4
Net income 2 4
- ----------------------------------
Results of Operations for the Three Months Ended March 31, 1996 and 1995
- ------------------------------------------------------------------------
Total sales of $696,119 for the three months ended March 31, 1995
("first quarter of 1996") represent a decrease of approximately 13% from total
revenue of $804,511 for the three months ended March 31, 1995 ("first quarter
of 1995"), primarily attributed to the decreased sales by the fabricating
division due to the overall decrease in stove sales. As a percentage of total
sales, cost of goods sold decreased from 78% for the first quarter of 1995 to
74% for the first quarter of 1996. Total cost of goods sold decreased 18%
during the first quarter of 1996 compared with the 13% decrease in sales for
the same period. General and administrative expenses increased 15% for the
first quarter of 1995 due the addition of a new salesperson and the lease of
new equipment, and as a percentage of sales, general and administrative
expenses increased from 18% for the first quarter of 1995 to 24% for the
corresponding 1996 period. Net income of $16,986 for the first quarter of
1996 decreased $14,844, or 47%, when compared with the 1995 period primarily
attributed to the 13% decrease in total sales and 15% increase in general and
administrative expenses.
Liquidity and Capital Resources
- --------------------------------
Historically, the Company's working capital needs have been satisfied
primarily by income from operations and by a commercial line of credit.
Working capital at March 31, 1996 was $733,766 compared to $714,938 at
December 31, 1995. This 3% increase in working capital for the first quarter
of 1996 is attributed to the Company's 21% increase in accounts receivables
from related parties due to general business cycles, 99% decrease in accrued
expenses due to the payment of taxes in a lump sum instead of quarterly, and
20% decrease in the Company's line of credit. These results were partially
offset by the 10% decrease in trade accounts receivable and 25% decrease in
inventory due to the decrease in stove sales, and the 27% increase in cash
overdraft. The Company anticipates meeting its working capital needs during
the current fiscal year primarily with revenues from operations, but will use
its available line of credit to supplement working capital as necessary.
Cash provided by operating activities for the first quarter of 1996 was
$57,562 compared with cash used by operating activities of $208,063 for the
corresponding 1995 period. Despite the Company's decrease in net income for
the first quarter of 1996, the Company's cash flow form operations improved
for the period due to the $134,375 decrease in inventory. These results were
partially offset by the $61,357 increase in accounts receivable and $49,803
decrease in accounts payable and accrued expenses.
As of March 31, 1996, the Company had total assets of $1,261,597 and
total stockholders' equity of $778,718. In comparison, as of December 31,
1995, the Company had total assets of $1,336,736 and total stockholders'
equity of $761,732. The decrease of approximately 6% in total assets for the
three month period ended March 31, 1996 is primarily attributed to the
decrease in trade accounts receivable and inventory due to decreased stove
sales.
In the opinion of management, inflation has not had a material effect on
the operations of the Company.
PART II
Item 1. Legal Proceedings
There are presently no material pending legal proceedings to which the
Company or any of its subsidiaries is a party or to which any of its property
is subject and, to the best of its knowledge, no such actions against the
Company are contemplated or threatened.
Item 2. Changes In Securities
This Item is not applicable to the Company.
Item 3. Defaults Upon Senior Securities
This Item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
This Item is not applicable to the Company.
Item 5. Other Information
This Item is not applicable to the Company.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the three month
period ended March 31, 1996.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Net Telecommunications, Incorporated
Date: September 27, 1996 By:/S/ Michael W. Gorts
-------------------------------
Michael W. Gorts, President,
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE SILVER LEDGE, INC. FINANCIAL STATEMENTS FOR THE PERIOD
ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<CASH> 0 279
<SECURITIES> 0 0
<RECEIVABLES> 276,140 305,556<F1>
<ALLOWANCES> 0 0
<INVENTORY> 412,761 547,136<F2>
<CURRENT-ASSETS> 1,216,645 1,289,942
<PP&E> 58,628 58,628<F3>
<DEPRECIATION> 13,676 11,834
<TOTAL-ASSETS> 1,261,597 1,336,736
<CURRENT-LIABILITIES> 482,879 575,004
<BONDS> 0 0
0 0
0 0
<COMMON> 4,565,791 4,565,791
<OTHER-SE> (2,946,215) (2,946,215)
<TOTAL-LIABILITY-AND-EQUITY> 1,261,597 1,336,736
<SALES> 696,119 3,065,581
<TOTAL-REVENUES> 696,119 3,065,581
<CGS> 515,128 2,366,112
<TOTAL-COSTS> 515,128 2,366,112
<OTHER-EXPENSES> 164,005 624,399
<LOSS-PROVISION> 0 12,499
<INTEREST-EXPENSE> 0 8,729
<INCOME-PRETAX> 16,986 66,341
<INCOME-TAX> 0 0<F4>
<INCOME-CONTINUING> 16,986 66,341
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 16,986 66,341
<EPS-PRIMARY> .00 .00
<EPS-DILUTED> .00 .00
<FN>
<F1> ACCOUNTS RECEIVABLE ARE SHOWN NET OF ANY ACCOUNTS DEEMED UNCOLLECTIBLE BY
THE COMPANY. THE ALLOWANCE FOR DOUBTFUL ACCOUNTS FOR THE YEAR ENDED DECEMBER
31, 1995 WAS $12,499.
<F2> THE INVENTORY CONSISTS OF RAW MATERIALS USED IN THE MANUFACTURING
PROCESSES AND WORK IN PROCESS. THE INVENTORY IS CARRIED AT ITS LOWER OF COST
OR MARKET VALUE USING THE FIRST-IN-FIRST-OUT METHOD.
AT DECEMBER 31, INVENTORIES WERE AS FOLLOWS:
1995
------------
RAW MATERIALS AND SUPPLIES $ 401,959
WORK-IN-PROCESS 18,021
FINISHED GOODS 127,156
------------
TOTAL $ 547,136
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<F3> THE COMPANY'S FIXED ASSETS ARE RECORDED AT COST:
1995
-----------
EQUIPMENT $ 53,628
VEHICLES 5,000
------------
58,628
ACCUMULATED DEPRECIATION (11,834)
------------
NET BOOK VALUE $ 46,794
------------
<F4> NO PROVISION FOR INCOME TAXES HAS BEEN MADE DUE TO OPERATING LOSSES IN
PRIOR YEARS. THE COMPANY HAS NET OPERATING LOSS CARRYOVERS TO FUTURE YEARS AS
FOLLOWS:
EXPIRING
AMOUNT IN YEAR
---------- --------
$ 379,924 2001
2,523 2004
---------- ---------
TOTAL $ 382,447
----------
</FN>
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