UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997.
Commission File Number 0-22282.
USCI, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3702647
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6115-A Jimmy Carter Boulevard, Norcross, Georgia 30071
(Address of principal executive offices) (Zip Code)
(770) 840-8888
(Registrant's telephone number including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 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. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's
classes of Common Stock, as of the latest practicable date:
As of November 13, 1997, 10,267,309 shares of $.0001 par value
Common Stock were outstanding.
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USCI, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Part I FINANCIAL INFORMATION PAGE NO.
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as
of September 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of
Operations and Accumulated Deficit for
the Three months ended
September 30, 1997 and September 30, 1996 4
Condensed Consolidated Statements of
Operations and Accumulated Deficit for
the Nine months ended
September 30, 1997 and September 30, 1996 5
Condensed Consolidated Statements of Cash
Flows for the Nine months ended
September 30, 1997 and September 30, 1996 6
Notes to Condensed Consolidated
Financial Statements 7-8
Item 2 Management's Discussion and Analysis of 9-12
Financial Condition and Results of
Operations for the Nine month and Three month
periods ended September 30, 1997 and
September 30, 1996
Item 3. Quantitative and Qualitative Disclosures
About Market Risk - None
PART II OTHER INFORMATION
Item 1 Legal Proceedings - None
Item 2 Changes in Securities and Use of Proceeds - None
Item 3 Defaults Upon Senior Securities - None
Item 4 Submission of Matters to a Vote of
Security Holders - None
Item 5 Other Information - None
Item 6. Exhibits and Reports on Form 8-K
The following exhibit is included herein:
(11) Statements regarding Computation
of Per Share Earnings
Three Months and Nine Months ended
September 30, 1997 and September 30, 1996.
</TABLE>
The Company did not file any reports on Form 8-K during the
three months ended September 30, 1997.
2
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USCI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
1997 1996*
(unaudited)
----------- ------------
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 3,797,405 $15,581,244
Accounts receivable - trade, net of allowances
of $760,000 and $437,000 at September 30, 1997
and December 31, 1996, respectively 2,743,709 2,581,251
Accounts receivable - other 1,102,934 1,680,112
Prepaid expenses 71,135 66,234
Inventory 87,563 351,652
----------- -----------
Total Current Assets 7,802,746 20,260,493
PROPERTY AND EQUIPMENT, NET 4,002,336 4,829,621
Other Assets 1,632,873 1,304,868
----------- -----------
TOTAL ASSETS $13,437,955 $26,394,982
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Commissions payable $ 1,991,919 $ 1,779,733
Accounts payable 1,829,157 2,886,772
Accrued expenses 1,198,240 732,389
Consumer deposits 276,837 283,194
Promotional deposits 1,185,527 1,400,474
----------- ----------
Total Current Liabilities 6,481,680 7,082,562
Stockholders' Equity
Preferred stock, $.01 par value; 5,000
shares authorized; no shares issued and
outstanding 0 0
Common stock, $.0001 par value; 100,000,000
shares authorized; 10,267,309 and 10,225,746
issued and outstanding at September 30, 1997
and December 31, 1996, respectively 1,027 1,023
Additional paid in capital 33,714,625 33,675,423
Accumulated deficit (26,731,327) (14,335,976)
Treasury Stock at cost, 5,000 shares (28,050) (28,050)
------------ ------------
Total Stockholders' Equity 6,956,275 19,312,420
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $13,437,955 $26,394,982
============ ============
</TABLE>
* Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
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<PAGE>
USCI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
ACCUMULATED DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
------------ ------------
<S> <C> <C>
REVENUES
Subscriber Sales $ 1,202,811 $ 0
Agency Activation Commissions 405,883 716,236
Other Operating Revenues 21,794 503,267
------------ ------------
Total Revenues 1,630,488 1,219,503
COST OF SALES:
Cost of Subscriber Services 673,489 0
Agency Commission Expenses 141,926 452,732
------------ ------------
Total Cost of Sales 815,415 452,732
GROSS MARGIN 815,073 776,771
OPERATING EXPENSES
Subscriber acquisition and promotional costs 1,584,441 0
Selling, general and administrative 4,572,856 2,907,049
------------ ------------
OPERATING LOSS (5,342,224) (2,140,278)
Interest Income, net 30,714 254,369
------------ ------------
Loss before income taxes (5,311,510) (1,885,909)
Income Taxes 0 0
------------ ------------
NET LOSS (5,311,510) (1,885,909)
Deficit at beginning of period (21,419,817) (9,657,377)
--------------- ---------------
Deficit at end of period $(26,731,327) $(11,543,286)
=============== ==============
Net Loss Per Common Share $ (0.52) $ (0.19)
=============== ==============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 10,265,481 10,186,267
=============== ==============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
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USCI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
ACCUMULATED DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
------------ ------------
<S> <C> <C>
REVENUES
Subscriber Sales $ 1,854,051 $ 0
Agency Activation Commissions 2,854,292 2,714,971
Other Operating Revenues 232,994 990,251
------------ ------------
Total Revenues 4,932,337 3,705,222
COST OF SALES
Cost of Subscriber Services 964,944 0
Agency Commission Expenses 1,277,684 1,938,864
------------ ------------
Total Cost of Sales 2,242,628 1,938,864
GROSS MARGIN 2,689,709 1,766,358
OPERATING EXPENSES:
Subscriber acquisition and promotional costs 2,633,076 0
Selling, general and administrative 12,815,282 7,532,900
------------ ------------
OPERATING LOSS (12,758,649) (5,766,542)
Interest Income, net 363,298 775,519
------------ ------------
Loss before income taxes (12,395,351) (4,991,023)
Income Taxes 0 0
------------- -------------
NET LOSS (12,395,351) (4,991,023)
Deficit at beginning of period (14,335,976) (6,552,263)
--------------- --------------
Deficit at end of period $(26,731,327) $(11,543,286)
=============== ==============
Net Loss Per Common Share $ (1.21) $ (0.49)
=============== ==============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 10,246,300 10,186,267
=============== ==============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5<PAGE>
<PAGE>
USCI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
------------- ------------
<S> <C> <C>
Net Loss $(12,395,351) $ (4,991,023)
Adjustments to reconcile net loss to
net cash used for operating activities:
Depreciation and amortization 1,486,013 824,056
Loss on Disposal of Fixed Assets 0 74,150
Bad debt allowance 554,139 191,500
Changes in operating assets and liabilities:
Accounts receivable - trade (1,291,596) 161,214
Accounts receivable - other 1,152,178 (783,064)
Prepaids and other assets (68,814) (33,691)
Commissions payable 212,186 (190,893)
Accounts payable and accrued expenses (591,766) 404,455
Deposits payable (6,358) 66,015
Promotional deposits (214,947) 226,650
------------- -------------
Total adjustments 1,231,035 940,391
------------- -------------
Net cash used in operating activities (11,164,316) (4,050,631)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (658,730) (2,533,685)
------------- -------------
Net cash used in investing activities (658,730) (2,533,685)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock,
net of costs 39,207 (76,966)
------------- -------------
Net cash (used in) provided by
financing activities 39,207 (76,966)
NET DECREASE IN CASH (11,783,841) (6,661,282)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 15,581,244 24,928,189
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,797,405 $ 18,226,907
============= =============
INTEREST PAID DURING THE PERIOD $ 238 $ 841
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
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USCI, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 1997
(Unaudited)
Note 1: BASIS OF PRESENTATION
The unaudited financial information furnished herein in the opinion of
management reflects all adjustments which are necessary to fairly state the
Company's financial position, the results of its operations and its cash
flows. Operating results for the nine and three months ended September 30,
1997 are not necessarily indicative of the results that may be expected for
the fiscal year ending December 31, 1997. For further information, refer
to the combined financial statements and footnotes thereto included in the
Company's Form 10-K for the year ended December 31, 1996. Footnote
disclosure which would substantially duplicate the disclosure contained in
those documents has been omitted.
Note 2: MERGER WITH TRINITY SIX INC.
On May 15, 1995, Trinity Six Inc. (Trinity) completed a merger ("Merger")
with U.S. Communications, Inc. Under the terms of the Merger each share of
U.S. Communications Inc. stock was exchanged for approximately 0.79 shares
of Trinity stock. In connection therewith, Trinity issued approximately
3,250,000 shares of its common stock in exchange for all of the issued and
outstanding shares of U.S. Communications, Inc. As a result of the Merger,
U.S. Communications, Inc. became a wholly owned subsidiary of Trinity and
Trinity's Certificate of Incorporation was amended as of the effective date
of the Merger to change Trinity's name to USCI, Inc. (the "Company"). The
Merger has been treated for accounting purposes as a capital transaction,
equivalent to the issuance of common stock by U.S. Communications, Inc. for
the net monetary assets of Trinity, accompanied by a recapitalization of
U.S. Communications, Inc. The net monetary assets realized by U.S.
Communications, Inc., consisting of cash and cash equivalents amounted to
approximately $9,750,000.
All costs incurred in connection with the Merger have been charged to
equity as a reduction of additional paid in capital. Such costs amounted
to approximately $600,000. For the nine months ended September 30, 1996,
the Company incurred $76,967 in costs incurred with the Nasdaq listing and
the exercise of the Company's warrants. These costs have been charged to
equity as a reduction of additional paid in capital.
The common stock issued to U.S. Communications, Inc. stockholders as a
result of the Merger was previously recorded as temporary equity. The
Company was advised of a possible violation of Section 5 of the Securities
Act which would result in these shares constituting temporary equity due to
the right of rescission that may be afforded such stockholders. The
valuation of the temporary equity was based on management's estimate of
USCI's fair market value as of the date of the Merger determined to be
$10,829,484. This amount was determined by dividing Trinity's pre-Merger
equity of $9,996,447 by 48% (Trinity's ownership percentage after the
Merger) and applying 52% (USCI's ownership percentage after the Merger) to
that amount. Since the Merger, 1,276,784 shares of common stock of the
Company with rights of rescission attached were sold by stockholders at
prices above the rescission value of $3.33 per share. These shares have
been recorded as equity as of September 30, 1997.
During the fiscal year ended December 31, 1996, the right of rescission
expired on the remaining shares associated with the Merger. Accordingly,
these shares were reclassified as common stock and additional paid in
capital and are included in equity at September 30, 1997.
7
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<PAGE>
Note 3: LOSS PER SHARE
Net loss per share for the three and nine months ended September 30, 1996
is calculated using the weighted average number of shares of USCI, Inc.
This average comprises both the number of shares subject to rescission and
those shares without any attached rescission rights. For the three and
nine months ended September 30, 1997, all such shares were reclassified as
common stock and additional paid in capital and are included in the
weighted average number of shares.
Common Stock equivalents have not been included in the weighted number of
shares of USCI, Inc. as the effect is anti-dilutive.
During the first quarter of 1997, the Financial Accounting Standards Board
("FASB") issued Statement 128, Earnings Per Share. This statement sets out
new guidelines for the calculation and presentation of earnings per share.
There are no differences between basic and diluted earnings per share as
defined in FASB No. 128 as the impact of the common stock equivalents is
anti-dilutive.
Note 4: RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
8
<PAGE>
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF USCI, INC.
GENERAL
Trinity Six Inc. ("Trinity"), the Company's predecessor, was organized in
September 1992 for the purpose of raising funds to effect a merger,
exchange of capital stock, asset acquisition or other similar business
combination with an operating business. In September 1993, Trinity
completed an initial public offering of equity securities pursuant to which
it received net proceeds of approximately $9,981,000. On May 15, 1995,
Trinity completed a merger (the "Merger") with U.S. Communications, Inc.
pursuant to which U.S. Communications, Inc. became a wholly owned
subsidiary of Trinity, and Trinity changed its name to USCI, Inc. (the
"Company").
U.S. Communications, Inc. was organized in 1991 and did not commence
operations of its cellular activation and processing systems with its first
retail mass merchandiser, OfficeMax, until mid-1993. Prior to that time,
U.S. Communications was principally engaged in organizational activities,
raising capital and in the development of its activation and processing
systems. In November 1996, USCI, through its wholly owned subsidiary,
Ameritel Communications, Inc., began a planned transition from an
activation processing agent for major cellular and paging carriers to a
reseller of cellular and paging services through mass market distribution
channels. This transition has continued throughout 1997 and is expected to
be substantially completed by the first quarter of 1998. Unless the
context indicates otherwise, all references below to the "Company" are
deemed to include U.S. Communications, Inc. prior to completion of the
Merger and USCI, Inc. and its subsidiaries subsequent to the Merger.
RESULTS OF OPERATIONS
Nine Months and Three Months Ended September 30, 1997 and 1996
Revenues
Total revenues for the nine months ended September 30, 1997 ("1997 Nine
Months"), consisting primarily of activation commissions, subscriber sales
and market development funds, were $4,932,337 as compared to $3,705,222 for
the nine months ended September 30, 1996 ("1996 Nine Months"). Total
revenues for the three months ended September 30, 1997 ("1997 Quarter")
were $1,630,488 as compared with $1,219,503 for the three months ended
September 30, 1996 ("1996 Quarter").
The increased revenues for both the 1997 Nine Months and the 1997 Quarter
are attributable to sales of the Company's Ameritel brand cellular and
paging services, which commenced in the fourth quarter of 1996. Cellular
and paging subscriber revenues amounted to $1,202,811 for the 1997 Quarter
and $1,854,051 for the 1997 Nine Months.
Agency activation commissions, which the Company receives from other
wireless carriers for which it performs activation processing services,
increased only slightly for the 1997 Nine Months and decreased by 43% for
the 1997 Quarter. Other operating revenues, which consisted primarily of
market development funds received from these carriers, declined to $21,794
for the 1997 Quarter from $503,267 for the 1996 Quarter. The Company
expects that as it continues its planned transition from activation
processing to reseller operations that agency activation commissions and
market development funds from cellular carriers will not be significant in
future periods.
9
<PAGE>
<PAGE>
Cost of Sales
Costs of subscriber services, which consist of direct charges from cellular
and paging carriers for access, airtime and services resold to the
Company's subscribers, amounted to $964,944 and $673,489 for the 1997 Nine
Months and the 1997 Quarter, respectively. The Company did not begin its
reselling operations until the last quarter of 1996 and thus did not incur
any of these costs in the 1996 Nine Months or the 1996 Quarter. The gross
margin for subscriber sales was $880,107 or 47.7% and $529,322 or 44.0% for
the 1997 Nine Months and 1997 Quarter, respectively.
Agency commission expenses amounted to $1,277,684 and $141,926 for the 1997
Nine Months and 1997 Quarter, respectively, as contrasted with $1,938,864
and $452,732 for the 1996 Nine Months and 1996 Quarter, respectively. Such
expenses consist primarily of commissions paid to the Company's mass market
distribution channels.
Agency commission expenses decreased by 68.7% from the 1996 Quarter to the
1997 Quarter and by 34.1% from the 1996 Nine Months to the 1997 Nine Months
as a result of the change in the mix of cellular and paging activations and
the inclusion of certain of these expenses in 1997 as subscriber
acquisition costs in connection with the Company's transition to reseller
operations.
Operating Expenses
Subscriber acquisition and promotional costs represent the expenses
incurred by the Company in its efforts to acquire new subscribers for its
cellular and paging services. These costs consist primarily of commissions
paid to retailers and outside sales representatives, salaries paid to sales
personnel, below cost discounts granted to customers when purchasing
cellular or paging equipment, rebates issued to subscribers under cash-back
rebate programs and certain advertising costs. Subscriber acquisition and
promotional costs amounted to $2,633,076 for the 1997 Nine Months and
$1,584,441 the 1997 Quarter.
Selling, general and administrative expenses for the 1997 Nine Months
aggregated $12,815,282 as compared to $7,532,900 for the 1996 Nine Months,
reflecting the Company's growth. Salaries and related employee benefits
increased by 81.8% to $4,956,576 for the 1997 Nine Months from $2,726,891
for the 1996 Nine Months, reflecting the Company's expanded hiring of
executive, managerial, customer service and information systems personnel
to support its growth. Legal, accounting and other service fees increased
by 31.9% to $708,323 for the 1997 Nine Months from $537,009 for the 1996
Nine Months due, in substantial part, to the negotiation of contractual
relationships with retail mass merchandisers, direct marketing response
companies and additional cellular and paging carriers. Depreciation and
amortization for the 1997 Nine Months was $1,486,103 as compared to
$824,056 for the 1996 Nine Months as the Company incurred additional
software development costs and purchased and placed into service additional
communications devices, cellular and paging displays, computers, computer
peripherals and other capital equipment. Travel expense for the 1997 Nine
Months was $591,144 as compared to $451,745 for the 1996 Nine Months due to
the increase in employees and expanding markets. Temporary labor expense
increased by $420,260, recruiting and consulting fees increased by $413,852
and telephone expense increased by $342,268 for the 1997 Nine Months in
connection with the Company's growth. Rebate expense increased by $198,411
and promotional and advertising expense increased by $179,334 as the
Company expanded its subscriber base.
Selling, general and administrative expenses for the 1997 Quarter
aggregated $4,572,856 as compared to $2,907,049 for the 1996 Quarter,
reflecting the Company's growth. Salaries and related employee benefits
increased by 66.7% to $1,720,020 for the 1997 Quarter from $1,031,737 for
the 1996 Quarter, reflecting the Company's expanded hiring of executive,
10
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<PAGE>
managerial, customer service and information systems personnel to support
its growth. Legal and accounting fees increased to $268,425 for the 1997
Quarter from $166,878 for the 1996 Quarter due, in substantial part, to the
negotiation of contractual relationships with retail mass merchandisers,
direct marketing response companies and additional cellular and paging
carriers. Depreciation and amortization for the 1997 Quarter was $609,714
as compared to $325,746 for the 1996 Quarter as the Company incurred
additional software development costs and purchased and placed into service
additional communications devices, cellular and paging displays, computers,
computer peripherals and other capital equipment. Travel expense for the
1997 Quarter was $255,510 as compared to $127,941 for the 1996 Quarter.
Recruiting and consulting fees increased by $179,908 to $221,989 for the
1997 Quarter. Rebate expense increased by $213,979 and promotional and
advertising expense increased by $288,534 as the Company expanded its
subscriber base.
Interest income (net of expense) aggregated $363,298 and $30,714 for the
1997 Nine Months and 1997 Quarter, respectively, and $775,519 and $254,369
for the 1996 Nine Months and 1996 Quarter, respectively. The decrease in
interest income during 1997 was due to the Company's use of cash and cash
equivalents to fund the increased operating expenses and capital
expenditures discussed above.
The Company incurred net losses of $12,395,351 and $4,991,023 for the 1997
Nine Months and 1996 Nine Months, respectively, and net losses of
$5,311,510 and $1,885,909 for the 1997 Quarter and 1996 Quarter,
respectively. The Company expects to incur substantial losses for the
balance of 1997 and 1998, principally attributable to the costs of
acquiring additional cellular and paging subscribers and, to a lesser
extent, projected start-up expenses associated with providing cellular
telephone and paging activation services at additional retail locations,
depreciation of computer equipment and software and the hiring of
additional management and staff personnel.
In the opinion of Company management, achieving profitability will be in
large measure dependent upon willingness and ability of the Company's mass
merchandiser customers to significantly increase sales of wireless products
and services through continued chain wide advertising, obtaining new
distribution channels for the Company's services and expanding the
Company's coverage to additional store locations of current customers, and
the continued demand for wireless services. In order to enhance its
national coverage of wireless services the Company is continuing to enter
into reseller agreements with certain cellular carriers, under the terms of
which the Company will act as a non-facilities based provider of cellular
and paging services in markets where the Company does not currently have
agency agreements with carriers.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had working capital of $1,321,065, cash
and cash equivalents of $3,797,405 and total stockholders' equity of
$6,956,275.
The Company incurs an immediate one-time acquisition cost for each
subscriber to its wireless services. The continuation by subscribers of
service with the Company creates an on-going revenue stream as well as
related recurring costs generated from the purchase of access and air time
from carriers and for administrative support. Although the Company imposes
an early cancellation charge, the Company's ability to capture such revenue
streams may be adversely affected by service cancellations before
subscriber acquisition costs are recovered and by losses caused by the
fraudulent use of service which, by law, are not recoverable from
subscribers.
11
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<PAGE>
The Company requires and is seeking bridge financing in the amount of $6
million to fund its operations through the end of 1997. The Company has,
subject to execution of a written agreement, arranged for $4 million of
such financing. The Company has no commitments or arrangements for the
balance of such bridge financing and there is no assurance that such
financing will be available on satisfactory terms, if at all. The failure
to obtain such financing by December 1997 will require the Company to
significantly reduce its operations, seek to restructure its payment
obligations and seek other financing.
The Company will require additional financing in 1998. The Company has
engaged an investment banker to conduct a proposed private placement of
convertible preferred stock to raise between $15 and $25 million to fund
the Company's operations and anticipated growth through the first quarter
of 1998 and to replace the bridge financing described above and up to $3.75
million in letter of credit financing previously made available to the
Company. There can be no assurance that the proposed private offering will
be successfully completed. The Company's failure to complete the private
offering will require it to significantly reduce its operations, seek to
restructure its payment obligations, discontinue adding new subscribers to
its wireless services and seek other financing.
The Company will require substantial additional financing to further expand
its operations beyond the first quarter of 1998. The Company has no
commitments or arrangements for any such additional financing.
Furthermore, should the Company's assumptions underlying its anticipated
growth rate change or prove to be inaccurate, or if the proceeds of the
proposed private offering and actual cash flow from operations prove to be
insufficient to fund operations and expansion requirements (due to
unanticipated expenses, operating difficulties or otherwise) the Company
will require the additional financing sooner than anticipated. There can
be no assurance that any additional financing will be available on
satisfactory terms, if at all. The Company's failure to obtain substantial
additional financing, when needed, will require the Company to reduce its
growth rate and to seek alternative sources of financing.
The foregoing statements in Part II of this Report regarding the Company's
future profitability, its need for additional financing in the anticipated
timeframes and the anticipated completion of its transition to
non-facilities based reselling operations are forward looking statements
made in good faith pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. There are several factors that
could cause actual results to differ materially from those contemplated in
such forward looking statements, including the unwillingness or inability
of the Company's customers to initiate and continue continuous chain wide
advertising and the failure of such advertising to generate sufficiently
increased sales, the availability of any required financing on satisfactory
terms and the adequacy of such financing to finance anticipated growth, the
inability of the Company to hire and retain experienced executives to
operate its non-facilities based sale of wireless communications services
and increased competitive pressures from current and additional suppliers
of wireless communications services and products.
INFLATION
To date, inflation has not had any significant impact on the Company's
business.
12
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FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the
undersigned thereunto duly authorized.
USCI, INC.
/s/ ROBERT J. KOSTRINSKY
---------------------------
Robert J. Kostrinsky,
Executive Vice President;
Chief Financial Officer
Date: November 14, 1997
13
EXHIBIT 11
COMPUTATIONS OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
----------- -----------
<S> <C> <C>
Loss from continuing operations $(5,311,510) $(1,885,909)
Loss from discontinued operations 0 0
----------- ------------
Net Loss $(5,311,510) $(1,885,909)
============ ============
Weighted Shares Outstanding 10,265,481 10,186,267
Net Loss per common share:
Loss from continued operations $ (0.52) $ (0.19)
Loss from discontinued operations 0.00 0.00
----------- -----------
Net Loss $ (0.52) $ (0.19)
=========== ===========
<CAPTION>
Nine Months Ended
September 30,
1997 1996
------------ -------------
<S> <C> <C>
Loss from continuing operations $(12,395,351) $(4,991,023)
Loss from discontinued operations 0 0
------------- ------------
Net Loss $(12,395,351) $(4,991,023)
============= ============
Weighted Shares Outstanding 10,246,300 10,186,267
Net Loss per common share:
Loss from continued operations $ (1.21) $ (0.49)
Loss from discontinued operations 0.00 0.00
----------- -----------
Net Loss $ (1.21) $ (0.49)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000907069
<NAME> USCI, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,797,405
<SECURITIES> 0
<RECEIVABLES> 4,606,643
<ALLOWANCES> 760,000
<INVENTORY> 87,563
<CURRENT-ASSETS> 7,802,746
<PP&E> 7,365,042
<DEPRECIATION> 3,362,706
<TOTAL-ASSETS> 13,437,955
<CURRENT-LIABILITIES> 6,481,680
<BONDS> 0
0
0
<COMMON> 1,027
<OTHER-SE> 6,955,248
<TOTAL-LIABILITY-AND-EQUITY> 13,437,955
<SALES> 0
<TOTAL-REVENUES> 4,932,337
<CGS> 0
<TOTAL-COSTS> 2,242,628
<OTHER-EXPENSES> 15,448,358
<LOSS-PROVISION> 25,000
<INTEREST-EXPENSE> 239
<INCOME-PRETAX> (12,395,351)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,395,351)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,395,351)
<EPS-PRIMARY> (1.21)
<EPS-DILUTED> (1.21)
</TABLE>
