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 June 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 Blvd., Norcross, Georgia 30071
(Address of principal executive offices) (Zip Code)
(770) 840-8888
(Registrant's telephone number including area code)
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 August 14, 1997, 10,266,209 shares of $.0001 par value
Common Stock were outstanding.<PAGE>
<PAGE>
USCI, INC.
FORM 10-Q
INDEX
<TABLE>
<S> <C> <C>
Part I FINANCIAL INFORMATION PAGE NO.
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as
of June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of
Operations and Accumulated Deficit for
the Three month period ended
June 30, 1997 and June 30, 1996 4
Condensed Consolidated Statements of
Operations and Accumulated Deficit for
the Six month period ended
June 30, 1997 and June 30, 1996 5
Condensed Consolidated Statements of Cash
Flows for the Six months ended
Jume 30, 1997 and June 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 Six month and Three
month periods ended June 30, 1997 and
June 30, 1996.
PART II OTHER INFORMATION
Item 1 Legal Proceedings - None
Item 2 Changes in Securities - None
Item 3 Default Upon Senior Securities - None
Item 4 Submission of Matters to a Vote of
Security Holders - 13
Item 5 Other Information - None
Item 6 Exhibits
The following exhibits are included herein:
(11) Statements regarding Computation
of Per Share Earnings
Three Months and Six Months ended
June 30, 1997 and June 30, 1996.
(27) Financial Data Schedule
</TABLE>
The Company did not file any reports on Form 8-K during the
three months ended June 30, 1997.
2
<PAGE>
<PAGE>
USCI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
1997 1996*
(unaudited)
----------- ------------
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 7,505,211 $15,581,244
Accounts receivable - trade, net of allowances
of $550,000 and $437,000 at June 30, 1997
and December 31, 1996, respectively 3,239,829 2,581,251
Accounts receivable - other 1,641,645 1,680,112
Inventory 109,320 351,652
Prepaid expenses 55,859 66,234
----------- -----------
Total Current Assets 12,551,864 20,260,493
PROPERTY AND EQUIPMENT, NET 4,779,651 4,829,621
Other Assets 1,257,872 1,304,868
TOTAL ASSETS $18,589,387 $26,394,982
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Commissions payable $ 1,801,202 $ 1,779,733
Accounts payable 1,881,003 2,886,772
Accrued expenses 1,241,540 732,389
Consumer deposits 315,561 283,194
Promotional deposits 1,085,527 1,400,474
----------- ----------
Total Current Liabilities 6,324,833 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; 10,266,209 and 10,225,746
shares issued and outstanding at June 30,
1997 and December 31, 1996, respectively 1,027 1,023
Additional paid in capital 33,711,394 33,675,423
Accumulated deficit (21,419,817) (14,335,976)
Treasury Stock at cost, 5,000 shares (28,050) (28,050)
------------ ------------
Total Stockholders' Equity 12,264,554 19,312,420
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $18,589,387 $26,394,982
============ ============
</TABLE>
* Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
<PAGE>
USCI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
ACCUMULATED DEFICIT
Three Months Ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
============ ============
<S> <C> <C>
REVENUES
Agency Activation Commissions $ 1,038,191 $ 838,861
Subscriber Sales 488,009 0
Other Operating Revenue 128,579 404,641
------------ ------------
Total Revenues 1,654,779 1,243,502
COST OF SALES:
Agency commission expenses 410,548 598,057
Cost of subscriber services 209,985 0
---------- -----------
Total cost of sales 620,533 598,057
GROSS MARGIN 1,034,246 645,445
OPERATING EXPENSES
Subscriber acquisition costs 948,894 0
Selling, general and administrative 4,200,374 2,436,845
------------ ------------
OPERATING LOSS (4,115,022) (1,791,400)
Interest income, net 147,545 248,813
------------ ------------
Loss before income taxes (3,967,477) (1,542,587)
Income Taxes 0 0
------------ ------------
NET LOSS (3,967,477) (1,542,587)
Deficit at beginning of priod (17,452,340) (8,114,789)
------------ -------------
Deficit at End of Period $(21,419,817) $(9,657,376)
============= ============
Net Loss Per Common Share $ (0.39) $ (0.15)
============ ============
Weighted Average Common Shares Outstanding 10,249,574 10,186,267
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
<PAGE>
<PAGE>
USCI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
ACCUMULATED DEFICIT
Six Months Ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
============ ============
<S> <C> <C>
REVENUES
Agency Activation Commissions $ 2,448,410 $ 1,998,735
Subscriber Sales 642,240 0
Other Operating Revenue 211,199 486,984
------------ ------------
Total Revenues 3,301,849 2,485,719
COST OF SALES
Agency commission expenses 1,135,758 1,486,132
Cost of subscriber services 286,631 0
--------- ---------
Total cost of sales 1,422,389 1,486,132
GROSS MARGIN 1,879,460 999,587
OPERATING EXPENSE
Subscriber acquisition costs 1,041,458 0
Selling, general and administrative 8,229,108 4,625,850
------------ ------------
OPERATING LOSS (7,391,106) (3,626,263)
Interest Income, Net 307,265 521,150
------------ ------------
LOSS BEFORE INCOME TAXES (7,083,841) (3,105,113)
Income Taxes 0 0
------------ ------------
NET LOSS (7,083,841) (3,105,113)
Deficit at Beginning of Period (14,335,976) (6,552,263)
------------ -------------
Deficit at End of Period $(21,419,817) $(9,657,376)
============= ============
Net Loss Per Common Share $ (0.69) $ (0.30)
============= ============
Weighted Average Common Shares Outstanding 10,237,660 10,186,267
============= ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
<PAGE>
<PAGE>
USCI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
============= =============
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(7,083,841) $(3,105,113)
Adjustments to reconcile net loss to
net cash used for operating activities:
Depreciation and amortization 1,114,249 486,650
Loss on disposal of fixed assets 0 74,150
Bad debt allowance 113,452 101,000
Changes in operating assets and liabilities:
Accounts receivable - trade (771,788) 120,382
Accounts receivable - other 38,467 (268,186)
Inventory 242,333
Prepaids and other assets 57,373 (113,626)
Commissions payable 21,469 (411,593)
Accounts payable and accrued expenses (496,860) 419,892
Deposits payable 32,366 74,965
Promotional deposits (314,947) 11,250
----------- -------------
Total adjustments 36,114 494,884
Net cash (used in) operating activities (7,047,727) (2,610,229)
----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,064,281) (1,097,476)
----------- -------------
Net cash (used in) investing activities (1,064,281) (1,097,476)
----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock,
net of costs 35,975 (76,866)
------------ ------------
Net cash (used in) provided by financing
activities 35,975 (76,866)
------------ ------------
NET DECREASE IN CASH (8,076,033) (3,784,571)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 15,581,244 24,928,189
------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,505,211 $21,143,618
============ =============
INTEREST PAID DURING THE PERIOD $ 958 $ 789
============ =============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
<PAGE>
<PAGE>
USCI, INC.
Notes to Condensed Consolidated Financial Statements
June 30, 1997
(Unaudited)
Note 1: BASIS OF PRESENTATION
The unaudited financial information furnished herein in the opinion of
management reflects all adjustments (consisting of normal recurring accruals)
which are necessary to fairly state the Company's financial position, the
results of its operations and its cash flows. Operating results for the six
months and three months ended June 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 (the "Merger")
with U.S. Communications, Inc. Under the terms of the Merger each share of
U.S. Communications Inc. common stock was exchanged for approximately 0.79
shares of Trinity common 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 six months ended June 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 which was 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. During the
fiscal year ended December 31, 1995, 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. Accordingly, these shares were
reclassified as common stock and additional paid in capital and are included
in equity as of June 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 June 30, 1997.
7
<PAGE>
<PAGE>
Note 3: LOSS PER SHARE
Net loss per share for the three and six months ended June 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 six months
ended June 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.
During the last quarter of 1996, the Company commenced operations as a non-
facilities based carrier and began reselling cellular and paging services
through its wholly-owned subsidiary, Ameritel Communications, Inc. 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
Six Months and Three Months Ended June 30, 1997 and 1996
Revenues
Total revenues for the six months ended June 30, 1997 ("1997 Six Months"),
consisting primarily of agency activation commissions, subscriber sales and
market development funds were $3,301,849 as compared to $2,485,719 for the six
months ended June 30, 1996 ("1996 Six Months"). Total revenues for the three
months ended June 30, 1997 ("1997 Quarter") were 1,654,779 as compared to
$1,243,502 for the three months ended June 30, 1996 ("1996 Quarter")
Paging and cellular agency activation commissions increased by 22.5% in the
1997 Quarter compared to the 1996 Quarter. For the 1997 Six Months, agency
commissions increased 23% compared to the 1996 Six Months resulting from a
significant increase in the number of paging activations. Commissions from
agency paging activations, initiated in a pilot program in the third quarter
of 1995, increased to $1,084,420 in the 1997 Six Months compared to $78,598 in
the 1996 Six Months and to $562,007 in the 1997 Quarter compared to $39,480 in
the 1996 Quarter. Commissions from agency cellular activations decreased to
$1,363,990 in the 1997 Six Months compared to $1,920,137 in the 1996 Six
Months and decreased to $476,184 in the 1997 Quarter compared to $779,231 in
the 1996 Quarter.
During the fourth quarter of 1996, the Company began reselling cellular and
paging services through its wholly owned subsidiary, Ameritel Communications,
Inc. Cellular and paging subscriber revenues amounted to $488,009 for the
1997 Quarter and $642,240 for the 1997 Six Months.
9
<PAGE>
<PAGE>
Market development funds, which consist of payments primarily from wireless
communications carriers for promotional expenditures, decreased by 68.2% and
56.6% between the 1997 Quarter and 1996 Quarter and the 1997 Six Months and
1996 Six Months, respectively. The decreases reflect lower levels of funding
from Carriers as the Company continued its transition from an activation agent
to a non-facilities based wireless communications carrier, or reseller.
Cost of Sales
Commission pass through costs amounted to $1,135,758 and $410,548 for the 1997
Six Months and 1997 Quarter, respectively, as compared to $1,486,132 and
$598,057 for the 1996 Six Months and 1996 Quarter, respectively. Such
expenses consist primarily of commissions paid to retail mass merchandisers,
which range between 65% and 80% of the activation fees earned from cellular
carriers.
Commission pass through costs decreased by 31.4% from the 1996 Quarter to the
1997 Quarter and by 23.6% from the 1996 Six Months to the 1997 Six Months as
paging activations, which carry lower pass through commissions, accounted for
a substantially larger portion of total agency activations.
Costs of subscriber services, which consist of direct charges from cellular
and paging carriers for access, airtime and services purchased by the Company
for resale to the Company's subscribers, amounted to $286,631 and $209,985 for
the 1997 Six Months and the 1997 Quarter, respectively. The Company did not
become a non-facilities based carrier until the last quarter of 1996 and,
accordingly, did not incur any costs of subscriber services during the 1996
periods.
Operating Expenses
Subscriber acquisition costs represent the expenses incurred by the Company in
its efforts to acquire new subscribers to its cellular and paging services.
These costs consist primarily of commissions paid to retailers and outside
sales representatives, salaries paid to sales personnel, promotional rates
granted to subscribers when purchasing cellular or paging equipment, rebates
issued to subscribers under the cash-back rebate programs and certain
advertising costs. Subscriber acquisition costs totalled $1,041,458 and
$948,894 for the 1997 Six Months and the 1997 Quarter, respectively.
Selling, general and administrative expenses for the 1997 Six Months
aggregated $8,229,108 as compared to $4,625,850 for the 1996 Six Months,
reflecting the Company's growth. Salaries and related employee benefits
increased by 80.3% to $3,119,170 for the 1997 Six Months from $1,729,536 for
the 1996 Six Months, reflecting the Company's hiring of additional executive,
managerial, customer service and information systems personnel to support its
growth. Legal and accounting fees increased to $399,766 for the 1997 Six
Months from $341,192 for the 1996 Six 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 Six Months was
$1,114,249, as compared to $486,650 for the 1996 Six Months, reflecting
additional software development costs and the purchase of additional
communications devices, cellular and paging displays, computers, computer
peripherals and other capital equipment. Advertising expenses, which consist
of both the Company's contribution to its distribution channels' advertising
costs and advertising initiated directly by the Company, increased $243,907 in
the 1997 Six Months due to substantially increased levels of distribution
10
<PAGE>
<PAGE>
channel advertising. Installation and overhead expenses decreased $53,538 in
the 1997 Six Months due to decreased telephone interconnect expenses incurred
in opening new cellular and paging locations. Travel expense for the 1997 Six
Months was $370,378 as compared to $323,784 for the 1996 Six Months due to
the increase in the number of employees and expanding markets.
Selling, general and administrative expenses for the 1997 Quarter aggregated
$4,200,374 as compared to $2,436,845 for the 1996 Quarter, reflecting the
Company's growth. Salaries and related employee benefits increased by 89.5%
to $1,590,234 for the 1997 Quarter from $839,102 for the 1996 Quarter,
reflecting the Company's hiring of additional executive, managerial, customer
service and information systems personnel to support its growth. Legal and
accounting fees increased to $219,069 for the 1997 Quarter from $186,017 for
the 1996 Quarter due in substantial part to the negotiation of contractual
relationships with the retail mass merchandisers, direct marketing response
companies and additional cellular and paging carriers. Depreciation and
amortization for the 1997 Quarter was $575,620 as compared to $242,562 for the
1996 Quarter, reflecting additional software development costs and the
purchase of additional communications devices, cellular and paging displays,
computers, computer peripherals and other capital equipment. Advertising
expenses, which consist of both the Company's contribution to its distribution
channels' advertising costs and advertising initiated directly by the Company,
increased $339,838 in the 1997 Quarter due to substantially higher levels of
distribution channel advertising. Installation and overhead expenses
increased $40,416 in the 1997 Quarter due to an increase in the number of
active cellular and paging activation centers from the prior year's period.
Travel expense for the 1997 Quarter was $147,725 as compared to $154,299 for
the 1996 Quarter.
Other income and expense consists primarily of interest income (net of
expense) which aggregated $307,265 and $147,545 for the 1997 Six Months and
1997 Quarter, respectively. Other income and expense aggregated $521,150 and
$248,813 for the 1996 Six Months and 1996 Quarter, respectively. The decrease
in interest income during the 1997 periods resulted from the use of cash and
cash equivalents to fund increased operating expenses and capital
expenditures, as discussed above.
The Company incurred net losses of $7,083,841 and $3,105,113 for the 1997 Six
Months and 1996 Six Months, respectively, and net losses of $3,967,477 and
$1,542,587 for the 1997 Quarter and 1996 Quarter, respectively. The Company
expects to incur additional losses for at least the balance of 1997,
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 sales and 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 the Company management, achieving profitability will be in
large measure dependent upon the Company's ability to meet competition from
existing providers of cellular and paging services and the willingness and
ability of the Company's mass merchandiser channels of distribution to
significantly increase the sale of wireless products and services through
continued chain wide advertising. In order to enhance its national coverage
of wireless services the Company is continuing to enter into reseller
agreements with certain cellular and paging carriers, under the terms of which
the Company will act as a non-facilities based provider of cellular and paging
services in additional markets.
11
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had working capital of $6,227,031, cash and cash
equivalents of $7,505,211 and a total stockholders' equity of $12,264,554.
As a consequence of the completion of the Merger with Trinity in May 1995, the
Company received cash and cash equivalents of approximately $9,750,000, of
which $3,450,000 was used to repay debt. In October 1995, the Company issued
a notice of redemption for all of its outstanding Warrants. Upon expiration
of the warrant exercise period, the Company had received net proceeds of
approximately $21,850,000 from the exercise of the Warrants.
Unlike the agency business which generates an immediate activation commission,
the resale of wireless services requires immediate investment in subscriber
acquisition costs as well as on-going costs generated from the purchase of
access and air time from carriers and for administrative support. These costs
are recoverable from the long-term revenue stream created by the continuation
of subscribers' services. 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.
The Company's existing capital resources and anticipated revenues from
operations will not be sufficient to finance its anticipated growth through
the end of 1997. Accordingly, the Company will require additional funds of
approximately $3.0 million to $5.0 million to finance this anticipated growth.
The Company has retained an investment banking firm to assist in obtaining
financing for both its short-term and long-term capital needs. There can be
no assurance that any such financing will be available on satisfactory terms,
if at all. The failure or inability to obtain adequate financing, when
needed, on commercially reasonable terms would require the Company to reduce
its anticipated growth.
The foregoing statements regarding the Company's future profitability, the
adequacy of its financial resources and the expansion of its non-facilities
based carrier 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 contained in such forward looking statements,
including the unwillingness or inability of the Company's channels of
distribution to initiate and continue continuous chain wide advertising and
the failure of such advertising to generate sufficiently increased sales, the
timely availability of required financing on satisfactory terms, the failure
to enter into reseller agreements covering additional markets on competitive
terms, the inability of the Company to hire and retain experienced executives
to operate its non-facilities based wireless carrier business 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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PART II
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The 1997 Annual Meeting of Stockholders of the Company was held
on June 26, 1997.
(b) Not applicable.
(c) Each nominee for director received the following votes:
<TABLE>
<CAPTION>
Votes Votes Broker
Name For Against Abstentions Nonvotes
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bruce A. Hahn 8,629,347 110,775 0 0
Edgar Puthuff 8,479,192 260,930 0 0
Jerome S. Baron 8,492,892 247,230 0 0
Lawrence Burstein 8,595,547 144,575 0 0
Salvatore T. DiMascio 8,480,192 259,930 0 0
</TABLE>
The following table sets forth the other matters voted upon and the
respective number of votes cast for, against, number of absentions and
broker nonvotes.
<TABLE>
<CAPTION>
Matter Votes Votes Broker
Voted Upon For Against Abstentions Nonvotes
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adoption of the Company's
1997 Stock Option Plan 4,620,402 601,055 24,075 3,494,590
To approve selection of
Arthur Andersen LLP as
accountants for the
Company for the fiscal
year ending 12/31/97 8,675,947 48,800 15,375 0
</TABLE>
(d) Not applicable.
13
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<PAGE>
FORM 10-Q FOR THE PERIOD ENDED JUNE 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: August 14, 1997
14
EXHIBIT 11
COMPUTATIONS OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1997 1996
----------- -----------
<S> <C> <C>
Loss from continuing operations $(3,967,477) $(1,542,587)
Loss from discontinued operations 0 0
----------- ------------
Net Loss $(3,967,477) $(1,542,587)
============ ============
Weighted Shares Outstanding 10,249,574 10,186,267
Net Loss per common share:
Loss from continued operations $ (0.39) $ (0.15)
Loss from discontinued operations 0.00 0.00
----------- -----------
Net Loss $ (0.39) $ (0.15)
=========== ===========
<CAPTION>
Six Months Ended
June 30,
1997 1996
----------- -----------
<S> <C> <C>
Loss from continuing operations $(7,083,841) $(3,105,113)
Loss from discontinued operations 0 0
----------- ------------
Net Loss $(7,083,841) $(3,105,113)
============ ============
Weighted Shares Outstanding 10,237,660 10,186,267
Net Loss per common share:
Loss from continued operations $ (0.69) $ (0.30)
Loss from discontinued operations 0.00 0.00
----------- -----------
Net Loss $ (0.69) $ (0.30)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000907069
<NAME> USCI, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,505,211
<SECURITIES> 0
<RECEIVABLES> 5,431,474
<ALLOWANCES> 550,000
<INVENTORY> 109,320
<CURRENT-ASSETS> 12,551,864
<PP&E> 7,770,593
<DEPRECIATION> 2,990,942
<TOTAL-ASSETS> 18,589,387
<CURRENT-LIABILITIES> 6,324,883
<BONDS> 0
0
0
<COMMON> 1,027
<OTHER-SE> 12,263,527
<TOTAL-LIABILITY-AND-EQUITY> 18,589,387
<SALES> 0
<TOTAL-REVENUES> 3,301,849
<CGS> 0
<TOTAL-COSTS> 1,422,389
<OTHER-EXPENSES> 9,270,567
<LOSS-PROVISION> 50,000
<INTEREST-EXPENSE> 2,916
<INCOME-PRETAX> (7,083,841)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,083,841)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,083,841)
<EPS-PRIMARY> (0.69)
<EPS-DILUTED> (0.69)
</TABLE>
