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, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 33-2279-D
NET TELECOMMUNICATIONS, INCORPORATED
------------------------------------
(Name of Small Business Issuer in its Charter)
NEVADA 87-0297202
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
8170 West Sahara Avenue, Suite 203
Las Vegas, Nevada 89117
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(Address of Principal Executive Offices)
Issuer's Telephone Number: (702) 256-9956
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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.
(1) Yes X No (2) Yes X No
--- --- --- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
June 30, 1996
Common Voting Stock - 8,000,000
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
---------------------
The Financial Statements of the Registrant required to be filed with
this 10-QSB Quarterly Report were prepared by management, and commence on
the following page, together with Related Notes. In the opinion of management,
the Financial Statements fairly present the financial condition of the
Registrant.
<PAGE>
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Balance Sheets
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash in bank $ 26,590 $ 22,380
Accounts receivable 17,230 5,808
Receivable - related party 12,581 5,120
Marketable securities 4,950 -
Prepaid expenses 74 74
Loans receivable, less an allowance of
$8,000 each period - -
Total Current Assets 61,425 33,382
PROPERTY AND EQUIPMENT
Office equipment 10,118 10,118
Less- accumulated depreciation (3,643) (2,024)
Equipment-net 6,475 8,094
TOTAL ASSETS $ 67,900 $41,476
The accompanying notes are an integral part of these financial
statements.
<PAGE>
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Balance Sheets (Continued)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1996 1995
CURRENT LIABILITIES
Accounts payable $5,393 $2,606
Commissions payable 113 452
Payable to company officers 2,053 6,555
Total Current liabilities 7,559 9,613
STOCKHOLDERS' EQUITY
Common stock; par value $0.001; 50,000,000
authorized, 8,000,000 and 7,133,416 issued
and outstanding, respectively 8,000 7,134
Additional paid-in capital 203,000 125,167
Deficit accumulated during the development stage(150,659) (100,438)
Total Stockholders' Equity 60,341 31,863
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 67,900 $ 41,476
The accompanying notes are an integral part of these financial statements.
<PAGE>
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Statements of Operations
(Unaudited)
Cumulative
For the Six Months For the Three Months During the
ended June 30, ended June 30, Development
1996 1995 1996 1995 Stage
REVENUES
Commissions on sale of
telephone service $ 16,051 $ - $ 7,038 $ - $26,797
interest income 1 - - 2
Unrealized gain on
marketable securities 750 - - - 750
Total Revenues 16,802 - 7,038 27,549
EXPENSES
General and administrative 63,829 34,872 38,972 34,872 164,808
Bad debt expense 1,575 - - - 9,757
Depreciation 1,619 - 810 - 3,643
Total Expenses 67,023 34,872 39,782 34,872 178,208
NET INCOME (LOSS) $ (50,221) $(34,872) $(32,744)$(34,872)$(150,659)
EARNINGS (LOSS)
PER SHARE $ (0.00) $ (0.00) $ (0.00) $ (0.00)
The accompanying notes are an integral part of these financial statements.
<PAGE>
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Statements of Stockholders' Equity
(Unaudited)
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
Balance, October 24, 1994 - $ - $ - $ -
Shares issued to initial
stockholders for services
valued at $1,000, October
24, 1994 5,871,447 5,872 (4,872)
Net income (loss) from
inception to December 31,
1994 - - - (1,000)
Balance, December 31, 1994 5,871,447 5,872 (4,872) (1,000)
Issuance of common stock in
exchange for debt November
1995 at an approximate
price of $0.10 per share 588,710 589 59,411 -
Issuance of common stock
for cash at various dates
approximately$0.11 per share 673,259 673 70,628 -
Net income (loss) for the
year ended December 31,
1995 - - - (99,438)
Balance, December 31, 1995 7,133,416 7,134 125,167 (100,438)
Issuance of common stock for
cash at various dates at
approximately $0.17 per
share 466,584 466 78,233 -
Common stock issued in
recapitalization 400,000 400 (400) -
Net income (loss) for the
six months ended
June 30, 1996 - - - (50,221)
Balance, June 30, 1996 8,000,000 $ 8,000 $ 203,000 $(150,659)
The accompanying notes are an integral part of these financial statements.
<PAGE>
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Statements of Cash Flows
(Unaudited)
Cumulative
For the Six Months For the Three Months During the
Ended June 30, Ended June 30, Development
1996 1995 1996 1995 Stage
CASH FLOWS FROM
OPERATING ACTIVITIES
NET INCOME (LOSS) $ (50,221) $(34,872) $(32,744) $(34,872) $ (150,659)
Adjustments to
reconcile net
income (loss) to net
cash provided (used) by
operating activities:
Stock issued for
services - - - - 1,000
Depreciation 1,619 - 810 - 3,643
Bad debt allowances - - - - 8,000
Unrealized gain (750) - - - (750)
Change in assets and liabilities:
Increase in accounts
receivable (11,422) - (7,300) - (17,230)
Increase in receivable
related parties (7,461) - (7,461) - (12,581)
Increase in loans receivable - - - - (8,000)
Increase in prepaid expenses - - - - (74)
Increase in accounts payable 1,245 72,482 (8,267) 72,482 6,505
Increase in commissions
payable (339) - (452) - 113
Increase (decrease) in payable
to office (2,960) 2,802 (1,988) 2,802 941
Total adjustments (20,068) 75,284 (24,658) 75,284 (18,433)
Net Cash Flows (Used) in
Operating Activities (70,289) 40,412 (57,402) 40,412 (169,092)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of marketable
securities (4,200) - - - (4,200)
Purchase of office equipment - (5,124 ) - (5,124) (10,118)
Net Cash Flows (Used) in
Investing Activities $ (4,200) $(5,124) $ ~ $ (5,124) $ (14,318)
The accompanying notes are an integral part of these financial statements.
<PAGE>
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Statements of Cash Flows (Continued)
(Unaudited)
Cumulative
For the Six Months For the Three Months During the
Ended June 30, Ended June 30, Development
1996 1995 1996 1995 Stage
CASH FLOWS FROM
FINANCING ACTIVITIES
Sale of common stock $78,699 $ - $29,368 $ - $ 210,000
Net Cash Flows from
Financing Activities 78,699 - 29,368 - 210,000
NET INCREASE (DECREASE)
IN CASH 4,210 35,288 (28,034) 35,288 26,590
CASH BEGINNING OF
PERIOD 22,380 - 54,624 - -
CASH END OF PERIOD $26,590 $35,288 $26,590 $35,288 $ 26,590
SUPPLEMENTAL INFORMATION
Stock issued for
services $ - $ - $ - $ - $ 1,000
The accompanying notes are an integral part of these financial statements.
<PAGE>
NET TELECOMMUNICATIONS, INC.
(Formerly Silver Ledge, Inc.)
Notes to the Financial Statements
June 30, 1996 and December 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Net Telecommunications, Inc. (formerly Silver Ledge, Inc.) (the Company) was
incorporated under the laws of the State of Nevada. The Company has been in
the business of manufacturing and selling steel and steel related products
such as wood burning stoves. In connection with the reorganization described
below, the Company has disposed of its steel related business and changed its
name to Net Telecommunications, Inc.
Long Distance International (the subsidiary), was incorporated under the laws
of the State of Nevada on October 24, 1984. The subsidiary started its
operations in May of 1995 primarily as a reseller of long distance telephone
services.
The Company issued 6,000,000 shares of common stock in exchange for all the
outstanding shares of the subsidiary and 1,600,000 shares to various
consultants in connection with the exchange. The financial statements have
been prepared as a recapitalization of the subsidiary and all significant
inter-company transactions have been eliminated.
The Company started its operations in May of 1995 primarily as a resaler of
long distance services. The Company Is considered a development stage company
as defined in SFAS No. 7. The Company, has at the present time, not paid any
dividends and any dividends that may be paid in the future will depend upon
the financial requirements of the Company and other relevant factors.
Earnings (loss) Per Share
The computation of earnings (loss) per share of common stock is based on the
weighted average number of shares outstanding during the period presented.
Income Taxes
Due to no net income at June 30, 1996 and December 31, 1995 no provision for
income taxes has been made. There are no deferred income taxes resulting from
income and expense items being reported for financial accounting and tax
reporting purposes in different periods.
Office Equipment
The cost of equipment is depreciated over the estimated useful lives of the
related assets. Depreciation is computed using accelerated methods.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents. During 1995 the Company had a noncash financing activity
in which stock was issued in exchange for $60,000 of debt.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Marketable Securities
Marketable securities are stated at fair value. All marketable securities are
defined as trading securities under the provisions of statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS 115) and unrealized holding gains and losses are
reflected in earnings. Fair value is determined by the most recently traded
price of the security at the balance sheet date.
NOTE 2 - COMMON STOCK TRANSACTIONS
At inception of the Company initial stockholders were issued shares of the
Company's common for services valued at $1,000. On November 23,1994, shares of
common stock of the Company was exchanged for $60,000 of debt.
During 1995 and 1996 the Company sold additional shares of its common stock
for cash. During 1995, shares were sold for $71,301 and during the three
months ended March 31, 1996, additional shares of stock was sold for $49,331.
During the quarter ended June 30, 1996 the Company sold additional shares for
cash of $29,368. The shares described in this paragraph and the above
paragraph were sold for a total of $150,000 cash and a consulting fee of
$9,000 was paid.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company shares office space and employee services with another
organization that is related by management and stock ownership. At June 30,
1996 and December 31, 1995 this same related organization owed the Company
$12,581 and $5,120, respectively.
Certain officers of the Company, one of which is also a stockholder, have paid
expenses on behalf of the organization which were unreimbursed and due to
them at June 30, 1996 and December 31, 1995. The amounts owed were $2,053 at
June 30, 1996 and $6,555 at December 31, 1995, respectively.
NOTE 4 - INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" (SFAS 109). SFAS 109 is an asset and liability
approach that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized
in the Company's financial statements or tax returns. In estimating future tax
consequences, SFAS 109 generally considers all expected future events other
than enactments of changes in the tax law or rates. For tax purposes, the
Company has available at December 31, 1995 a net operating loss carry forward
for Federal Income Tax purposes of approximately $98,023 which will expire as
shown below. A valuation allowance of $33,328 has been established for those
tax credits which are not expected to be realized.
Year Amount
2010 $ 98,023
NOTE 5 - AGREEMENTS
The Company has entered into an agreement with LCI International, Inc. (LCI).
LCI appointed the Company as a non-exclusive representative to promote the
sale of and solicit orders for LCI long distance telephone services. The
Company receives commissions for the sale of the above services at 10% of
monthly Collected Revenue for 12 months. After 12 months the commission rate
varies from 5% to 15% based on various Monthly Collected Revenue levels per
different types of name long distance services as outlined in the agreement
and its amendments.
The Company has also entered into an agreement with Metrocom Corporation
(Metrocom). Metrocom appointed the Company as a non-exclusive representative
to sell and solicit orders for Metrocom long distance telephone services. The
Company also gets commissions on this agreement based on a complicated
commission schedule with rates from 5% to 30% as outlined in the agreement
per certain volume levels of orders obtained. During the six months ended June
30, 1996 and the year ended December 31, 1995, 97% and 100% respectively of
the commission received were from LCI.
The Company has consultant agreements with individuals and other organization
to pay commission of 5% to 6% on billed long distance minus taxes and
discounts.
The Company has agreements with two former employees. Under the agreement
funds advanced to the employees after their termination, were to be treated as
loans and repaid at future dates through payroll deductions when hired again.
The advances were recorded as loans receivable at June 30, 1996 and December
31, 1995 in a total amount of $8,000. Due to the uncertainty as to
collectibility a valuation allowance was applied against the loans in the
balance sheets at June 30, 1996 and December 31, 1995.
NOTE 6 - GOING CONCERN
The Company has experienced losses of $50,221 and $99,438 for the six months
ended June 30, 1996 and the year ended December 31, 1995, respectively. The
Company has yet to generate sales or revenue to cover operations to date, and
it can't be assured that sales will be enough to cover future expenses. In
light of the above circumstances, the ability of the Company to continue as a
going concern is substantially in doubt. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Management believes their plans will provide the Company with the ability to
continue in existence. Management completed a corporate reorganization. The
Company also plans to take steps to reduce expenses and enhance sales. There
can be no assurance, assuming the Company successfully initiates a corporate
reorganization or enters into a business alliance or changes its method to
enhance sales, that the Company will achieve profitability or positive cash
flow.
NOTE 7 - CONTINGENCIES
In connection with the limited offering of the Company's common stock (see
Note 2), an offer was made to a resident of the State of Pennsylvania, without
filing the required Notice with the Pennsylvania Securities Commission to
claim the appropriate exemption. A Rescission Offer was sent to this person.
The person has returned the Rescission Offer and has rejected it.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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None; not applicable.
Item 2. Changes in Securities.
----------------------
None; not applicable.
Item 3. Defaults Upon Senior Securities.
--------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
None; not applicable.
Item 5. Other Information.
------------------
None; not applicable.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits.
Financial Data Schedule.
(b) Reports on Form 8-K.
Current Report on Form 8-K, dated July 5, 1996
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.
NET TELECOMMUNICATIONS, INCORPORATED
Date: 8-20-96 /s/ Michael W. Gorts
--------------------
Michael W. Gorts, President and
Director
Date: 8/20/96 /s/ Robert Briare
-----------------
Robert Briare, Secretary/Treasurer
and Director
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000090357
<NAME> BRANDEN T. BURNINGHAM
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 26,590
<SECURITIES> 4,950
<RECEIVABLES> 29,811
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 61,425
<PP&E> 10,118
<DEPRECIATION> 3,643
<TOTAL-ASSETS> 67,900
<CURRENT-LIABILITIES> 7,559
<BONDS> 0
0
0
<COMMON> 8,000
<OTHER-SE> 52,341
<TOTAL-LIABILITY-AND-EQUITY> 67,900
<SALES> 0
<TOTAL-REVENUES> 16,802
<CGS> 0
<TOTAL-COSTS> 67,023
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (50,221)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (50,221)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
