UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
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 0-22282.
USCI, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-3702647
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5555 Triangle Parkway, Norcross, Georgia 30092
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(Address of principal executive offices)(Zip Code)
(678) 268-2300
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(Registrant's telephone number, including area code)
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(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 [ ]
As of November 10, 2000, 98,025,028 shares of $.0001 par value Common Stock
were outstanding.
<PAGE>
USCI, INC.
FORM 10-Q
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 2000 and December 31, 1999............................3
Condensed Consolidated Statements of Operations
and Accumulated Deficit for the Three months
ended September 30, 2000 and 1999...................................4
Condensed Consolidated Statements of Operations
And Accumulated Deficit for the Nine months
ended September 30, 2000 and 1999...................................5
Condensed Consolidated Statements of Cash
Flows for the Nine months ended September 30, 2000
and 1999............................................................6
Notes to Condensed Consolidated Financial Statements................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk...............................................14
PART II OTHER INFORMATION
Item 2 Changes in Securities and Use of Proceeds.................14
Item 6 Exhibits and Reports on Form 8-K..........................14
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
USCI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
September 30, December 31,
2000 199
ASSETS: (unaudited)
-------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents, including restricted
cash of $300,000 in 2000 and 1999 $ 305,919 $ 300,000
Prepaid expenses and other 750 691,017
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Total current assets 306,669 991,017
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PROPERTY AND EQUIPMENT, net 162,685 155,000
OTHER ASSETS 6,474 6,474
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Total Assets $ 475,828 $1,152,491
========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT:
CURRENT LIABILITIES:
Letter-of-credit advances $2,491,982 $2,491,982
Accounts payable and bank overdraft 2,723,356 2,612,152
Commissions payable 225,581 225,571
Accrued expenses and other 562,982 319,520
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Total current liabilities 6,003,901 5,649,225
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Total liabilities 6,003,901 5,649,225
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COMMITMENTS AND CONTINGENCIES
INVESTMENT IN AMERITEL 32,150,974 30,592,037
STOCKHOLDERS' DEFICIT:
Convertible preferred stock, $.01 par value;
5,000 shares authorized, 1,735 shares issued at
September 30, 2000 and December 31, 1999 18 18
Common stock, $.0001 par value; 100,000,000 shares
authorized; 98,025,028 and 93,975,029 shares issued
at September 30, 2000 and December 31, 1999, respectively 9,803 9,398
Additional paid-in capital 66,150,846 66,131,173
Accumulated deficit (103,811,664) (101,201,310)
Treasury stock, at cost, 5,500 shares (28,050) (28,050)
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Total stockholders' deficit (37,679,047) (35,088,771)
------------ -----------
Total liabilities and stockholders' deficit $ 475,828 $ 1,152,491
============ ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
3
<PAGE>
USCI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
ACCUMULATED DEFICIT
Three Months Ended September 30,
-----------------------------------
2000 1999
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OPERATING EXPENSES
Selling, general and administrative $ 128,057 $ 2,625,065
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Total Operating Expenses 128,057 2,625,065
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OPERATING LOSS (128,057) (2,625,065)
OTHER(EXPENSE)INCOME
Interest income 3,883 0
Loss from investment in Ameritel (437,720) (1,345,762)
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Total other expense (433,837) (1,345,762)
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LOSS BEFORE INCOME TAXES (561,894) (3,970,827)
Income Taxes 0 0
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NET LOSS (561,894) (3,970,827)
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Preferred Dividends 0 0
Deficit at Beginning of Period (103,249,770) (89,919,627)
------------ -----------
Deficit at End of Period $(103,811,664) $(93,890,454)
============ ===========
Basic and Diluted Net Loss per Share $ (0.01) $ (0.04)
============ ===========
Basic and Diluted Weighted
Average Shares Outstanding 98,025,028 92,826,873
============ ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements
4
<PAGE>
USCI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
ACCUMULATED DEFICIT
Nine Months Ended September 30,
---------------------------------
2000 1999
-------- ---------
OPERATING EXPENSES
Selling, general and administrative $ 1,053,577 $4,267,292
----------- -----------
Total Operating Expenses 1,053,577 4,267,292
----------- -----------
OPERATING LOSS (1,053,577) (4,267,292)
OTHER(EXPENSE)INCOME
Interest income 11,516 8
Loss from investment in Ameritel (1,568,293) (3,011,901)
----------- -----------
Total other expense (1,556,777) (3,011,901)
----------- -----------
LOSS BEFORE INCOME TAXES (2,610,354) (7,297,193)
Icome Taxes 0 0
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NET LOSS (2,610,354) (7,297,193)
----------- -----------
Preferred Dividends 0 349,893
Deficit at Beginning of Period (101,201,310) (86,261,368)
------------ -----------
Deficit at End of Period $(103,811,664) $(93,890,454)
============ ===========
Basic and Diluted Net Loss per Share $ (0.03) $ (0.13)
============ ===========
Basic and Diluted Weighted
Average Shares Outstanding 96,382,821 58,557,247
============ ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements
5
<PAGE>
USCI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
---------------------------------------
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(2,610,354) $(7,279,173)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 0 969,639
Loss due to asset impairment 0 1,711,923
Loss from investment in subsidiary 1,568,293 3,011,909
Changes in operating assets and liabilities:
Accounts receivable - other 0 11,263
Prepaid expenses and other assets 690,267 1,685,674
Accounts payable and accrued expenses 365,398 198,022
----------- -----------
Total adjustments 2,623,958 7,588,430
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Net cash provided by
operating activities 13,604 309,257
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,685) 0
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Net cash used in
investing activities (7,685) 0
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NET INCREASE (DECREASE) IN CASH 5,919 309,257
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 300,000 (15,755)
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 305,919 $ 293,502
=========== ===========
INTEREST PAID DURING THE PERIOD $ 0 $ 0
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements
6
<PAGE>
USCI, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 2000
(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.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-K for the year ended
December 31, 1999. Footnote disclosure, which would substantially duplicate the
disclosure contained in those documents has been omitted. Operating results for
the nine-month period ended September 30, 2000 are not necessarily indicative of
the results that may be expected for the year ended December 31, 2000.
The accompanying consolidated financial statements of the Company and its
subsidiaries include the assets, liabilities, revenues and expenses of all
majority-owned subsidiaries over which the Company exercises control, and for
which control is other than temporary. Intercompany transactions and balances
are eliminated in consolidation. The Company's subsidiary, Ameritel, filed for
reorganization under Chapter 11 in October 1999, and effectively the Company no
longer exercises control over this subsidiary. Investments in nonconsolidated
affiliates (wholly owned subsidiaries over which the Company does not exercise
control) are accounted for on the equity basis. Accordingly, due to Ameritel's
filing for reorganization under Chapter 11 in October 1999, the Company began
accounting for its investment in Ameritel under the equity method of accounting
retroactively, as of January 1, 1999. As a result, the September 30, 1999
financial information has been retroactively restated.
Note 2: CREDIT FACILITY/REORGANIZATION UNDER BANKRUPTCY PROCEEDINGS
On April 14, 1999, Ameritel Communications, Inc., a wholly owned subsidiary of
the Company ("Ameritel") entered into an Amended and Restated Loan and Security
Agreement with Foothill Capital Corp. ("Foothill") in which the original Loan
and Security Agreement entered into on September 5, 1998 was amended to
restructure the existing credit facility by reducing the total facility to $17.5
million. Additionally, certain of our preferred shareholders and certain other
persons have entered into a Participation Agreement with Foothill in connection
with the restructuring of the our outstanding $20 million credit facility with
Foothill. The participants in the Foothill facility made an aggregate of $7
million available as term loans. Although the limit of the credit facility was
reduced from $20 million to $17.5 million, the $7 million allocated for term
loans was available for working capital upon certain conditions. The $10.5
million limit was structured as part revolver, part term loan and part letter of
credit. Also, there were approximately $1 million in standby letters of credit
outstanding under the line. The Company guaranteed payment of amounts due under
the above Agreement.
7
<PAGE>
On October 29, 1999, (the "filing date"), Ameritel, filed a voluntary petition
under Chapter 11 of U.S.C. Title 11 with the United States Bankruptcy Court for
the Southern District of New York (Case No. 99-11081)(the "Bankruptcy Court").
Since the filing date, Ameritel has operated its business as a
debtor-in-possession subject to the jurisdiction of the Bankruptcy Court. All
claims against Ameritel in existence prior to the filing date are subject to
payment only when and as provided for by an order of the Bankruptcy Court.
Ameritel's reorganization plan, has not been completed and is subject to
approval by the Bankruptcy Court. It is too early to determine the elements of a
proposed plan. However, when the elements are determined, they may result in
additional restructuring charges, as well as the impairment of certain assets.
The plan is expected to have a significant effect upon the value of certain
assets and liabilities included in these financial statements. Subject to
completion and approval of the plan, the Company is unable to predict the
potential financial impact of this matter.
On April 7, 2000, the United States Trustee for the Southern District of New
York filed a motion. This motion, originally to be heard on May 11, 2000 and has
been adjourned until December 11, 2000, in the United Stated Bankruptcy Court,
claims Ameritel's inability to reorganize constitutes cause for dismissal or
conversion of the Chapter 11 case to a Chapter 7 case. The basis for the claim
identified that Ameritel did not appear capable of generating enough funds to
make a distribution to unsecured creditors; Ameritel's financial affairs were
not consistent with Ameritel's early representations in the case regarding the
possibility of reorganization; and Ameritel's inability to meet administrative
obligations as they came due. Management of Ameritel refutes the U.S. Trustee
filed claims and plans to file a plan of reorganization before the December 11,
2000 adjourned date.
On April 28, 2000, a Release of Guaranty and Termination of Security Interests
was reached between Tranche B, Inc. and Foothill. Tranche B, Inc. is owned and
controlled by shareholders that hold a controlling interest in the Company.
Under the terms of the agreement, Foothill agreed to sell, transfer and assign
without recourse, all rights, title and interest in and to claims of Ameritel,
including any and all security interests against Ameritel and guarantees against
the Company, together with their right to receive cash, instruments or other
property issued in connection with the proceedings in the United States
Bankruptcy Court of the Southern District of New York. In addition, the
transaction included the release of all guarantees of that indebtedness by the
Company and its affiliates other than Ameritel. As consideration for the release
and termination, Foothill received 4,000,000 shares of common stock of the
Company. On the eighteenth month anniversary of the agreement date, Tranche B,
Inc. shall also transfer to Foothill, such additional shares of common stock of
the Company to make the aggregate fair market value of the shares in the initial
transfer equal to $4,000,000, based on an agreed upon weighted average formula.
8
<PAGE>
The Company believes that amounts available from operating cash flows and funds
available from its cash collateral financing, expiring on December 11, 2000 will
not be sufficient to meet its expected operating needs through the end of 2000.
Ameritel will seek an extension of the current cash collateral financing and
restructuring of certain debt. Ameritel does not have any commitments with
regard to additional sources of financing and there can be no assurance that any
such commitments will be obtained in the foreseeable future.
Failure to obtain such financing or restructure its debt may compel the Company
and all of its subsidiaries to seek protection under the federal bankruptcy
statutes or otherwise cease operating and wind up its business affairs.
The financial statements as of and for the period ended September 30, 2000 do
not include any effect of the bankruptcy, which was filed on October 29, 1999,
or the proposed reorganization plan.
Note 3: INVESTMENT IN AMERITEL
Summarized financial information of Ameritel as of September 30, 2000 and
December 31, 1999 and for the Nine Months Ended September 30, 2000 and 1999 were
as follows:
<TABLE>
As of: September 30, 2000 December 31,1999
------------------ ----------------
<S> <C> <C>
Total assets $ 1,816,037 $ 2,373,951
Total liabilities 55,832,673 54,822,294
Stockholder's deficit (54,016,636) (52,448,343)
For the Nine Months Ended September 30, 2000 1999
------- --------
Revenues $ 4,048,341 $9,923,425
Costs 5,135,167 10,318,270
Interest expense 481,467 1,271,302
Loss before income taxes (1,568,293) (1,666,147)
</TABLE>
Total liabilities include intercompany payables to USCI, Inc. of $21,561,246 and
$21,856,306 at September 30, 2000 and December 31, 1999, respectively. The
Investment in Ameritel is shown in the accompanying Consolidated Balance Sheets
as of December 31, 1999 as a liability and consists of the intercompany amounts
due to USCI offset by the Stockholder's deficit of Ameritel. No adjustments have
been made to this Investment in Ameritel to reflect the impact that would result
if any adjustments of Ameritel's assets or liabilities are made as part of its
Chapter 11 reorganization case. Therefore, this Investment in Ameritel does not
purport to represent the net liability of USCI in connection with the Bankruptcy
proceedings.
Note 4: RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward-looking statements. Certain factors that might
cause such a difference are discussed herein.
Bankruptcy of Ameritel
During 1999, Ameritel Communications, Inc., our primary operating
subsidiary, substantially downsized its operations, restructured certain loan
provisions, converted certain preferred stock into common stock and filed for
protection under Chapter 11 of the U.S. Bankruptcy Code. As a result of the
bankruptcy filing, operations of Ameritel have been presented under the equity
method and are not included in the consolidated financial statements of USCI.
1999 results have been restated to account for Ameritel under the equity method.
Alteration of Operating Strategy
In the second half of 1999, we substantially altered our operations in an
effort to achieve profitability, including establishing an e-commerce platform
to market services and products, downsizing of staff and facilities and other
cost cutting efforts to reduce overhead and adoption of our IP Telephony
initiative. In the first quarter 2000, our wholly owned subsidiary, Americom
Inc.com, entered into a marketing distribution agreement with Net2Phone, Inc. to
market their IP telephony products and services to and through their specific
mass market channels While we expect that those efforts will position us
favorably to grow revenues, improve operating margins and minimize operating
costs, there can be no assurance that we will be successful in our IP Telephony
marketing activities, growing revenues or operating profitably
TelCollect
Through our subsidiaries, we are engaged in the marketing of such
telecommunications products and services as IP Telephony, wireless telephone and
long distance calling cards. We have recently formed TelCollect, Inc.
(TelCollect), a wholly owned subsidiary of USCI which specializes in accounts
receivable management and the recovery of past due consumer and commercial
debts. TelCollect has been established as an adjunct to the restructuring of
Ameritel. It is anticipated that TelCollect will leverage the knowledge and
experience which the company has gained from collecting Ameritel's
telecommunications accounts as well as its ability and experience in
substantially increasing cash collections to support Ameritel's bankruptcy and
reorganization. While the company continues to collect receivables from the
Ameritel accounts, TelCollect has now positioned itself to transfer its
experience to an entity dedicated to provide accounts receivable management and
debt collection services for other companies.
10
<PAGE>
To support both the TelCollect operations and the Ameritel collections
operations, the company has developed and deployed a proprietary
collection/receivables management software application. This web based
application is capable of handling data in a variety of formats, and combines
the benefits of standard collections systems with advanced employee management
and reporting systems in an integrated package. We have not found this unique
combination in any other collections systems available to the market today.
While TelCollect's initial efforts will be focused on maximizing cash
collections from Ameritel accounts, it has in place agreements with other
clients intent on using TelCollect to remedy issues with their past due
accounts. There can be no assurances that this new business will be successful
or that the formation of this business will in any way enhance or detract from
the performance of the collection of the Ameritel accounts receivable.
Results of Operations
Revenues. With the restatement of the 1999 period operating results to
reflect the use of the equity method to account for Ameritel, we reported no
operating revenues during the three and nine months ended September 30, 2000 and
1999. We expect that operating revenues from the commencement of our IP
Telephony and Telcollect operations will begin during the last quarter of 2000.
There is no assurance that we will be successful in entering the IP Telephony
market or that we will ever realize revenues from IP Telephony.
Selling, general and administrative expenses ("SG&A"). SG&A for the three
and nine months ended September 30, 2000 amounted to $128,057 and $1,053,577
respectively, compared to $2,625,065 and $4,267,292 respectively for the three
and nine months ended September 30, 1999. The primary reason for the decrease in
SG & A expenses for the three and nine months ended September 30, 2000 was a
result of a write down of certain long lived assets during the first nine months
of 1999. The decrease in depreciation expense was approximately $1,267,000.
Loss from Investment in Ameritel. The losses from the investment in
Ameritel for the three and nine months ended September 30, 2000 were $437,720
and $1,568,293 respectively compared to $1,345,762 and $3,011,909 for the same
periods in 1999. Revenues for the three months and nine months ended September
30, 2000 were approximately $991,000 and $4,048,000 respectively compared to
approximately $2,727,000 and $12,627,000 for the corresponding periods in 1999,
attributable to a continued deterioration in the subscriber base. Cost of
subscriber services also continued to decrease to approximately $947,000 and
$1,766,000 for the three and nine months ended September 30, 2000 compared to
approximately $1,287,000 and $5,987,000 for the same periods during 1999.
Operating expenses also continued to decline as a result of the deterioration of
the subscriber base to approximately $856,000 and $2,919,000 for the three and
nine months ended September 30, 2000 compared to approximately $917,000 and
$6,517,000 for the corresponding periods in 1999. Payroll and related personnel
costs decreased to $1,786,000 for the nine months ended September 30, 2000 as
compared to $3,473,000 for the same period in 1999. Also, billing services costs
decreased to $380,000 for the first nine months ended September 30, 2000 as
compared to $1,094,000 for the comparable time period in 1999. Ameritel's
interest expense decreased by approximately $1,264,000 for the nine month period
ended September 30, 2000 primarily due to the cessation of interest accruing on
a vendor note payable in late 1999.
11
<PAGE>
Liquidity and Capital Resources
Working capital deficiency at September 30, 2000 was $5,814,576 compared to
$4,658,208 at December 31, 1999. Ameritel had a working capital deficiency of
$30,663,923 and $30,625,835 at September 30, 2000 and December 31, 1999,
respectively excluding amounts due to USCI and affiliates. Cash and cash
equivalents at September 30, 2000 totaled $305,919 compared to $300,000 at
December 31, 1999 (of which $300,000 was restricted at September 30, 2000 and
December 31, 1999 respectively). Ameritel had a cash balance of $416,572 at
September 30, 2000 compared to $304,161 at December 31, 1999 (of which $50,500
was restricted at September 30, 2000 and December 31, 1999, respectively). The
increase in the working capital deficiency is primarily due to losses suffered
during the first nine months of 2000. We expect to continue to experience
monthly losses for the foreseeable future.
We continue to operate at a loss and have limited capital resources. Our
subsidiary, Ameritel, continues to operate as a debtor-in-possession, under the
jurisdiction of the United States Bankruptcy Court for the Southern District of
New York.
We currently require substantial amounts of capital to fund current
operations, for the settlement and payment of past due obligations, and the
deployment of our new business strategy. Due to recurring losses from
operations, an accumulated deficit, stockholders' deficit, negative working
capital, being in default under the terms of our letters of credit advances,
having significant litigation instituted against us, and our inability to date
to obtain sufficient financing to support current and anticipated levels of
operations, our independent public accountant audit opinion states that these
matters raise substantial doubt about our ability to continue as a going
concern.
Pursuant to the terms of an agreement between Foothill Capital and Tranche
B, Inc., which is controlled by our preferred shareholders, we issued a total of
4,000,000 shares of common stock to Foothill Capital as partial consideration
for the release of guarantees of Ameritel debt by USCI and its subsidiaries,
other than Ameritel. Pursuant to that same agreement, Foothill assigned its
secured debt from USCI to Tranche B, Inc.
Our operations continue to be dependent upon operating cash flow and
funding pursuant to a credit facility originally provided by Foothill Capital
Corporation and, in April 2000, assumed by Tranche B, Inc. At November 1, 2000,
approximately $13 million had been advanced under our credit facility. The term
credit facility is due in September 2002. There is no assurance that we will be
able to pay the credit facility when it comes due or that the credit facility
will be adequate to meet our capital needs for the next 12 months. The amounts
available from operating cash flows and funds available from our credit facility
with Tranche B pursuant to its acquisition of the position of Foothill will not
be sufficient to meet our expected operating needs through the end of 2000. We
are seeking an expansion of the current cash collateral financing and
restructuring of certain debt. We do not have any commitments with regard to
additional sources of financing and there can be no assurance that any such
commitments will be obtained in the foreseeable future.
12
<PAGE>
As of November 1, 2000, lawsuits aggregating approximately $3.2 million had
been filed against the Company and its wholly-owned subsidiaries, Ameritel
Communications, Inc. ("Ameritel"), U.S. Communications, Inc. ("U.S.
Communications") and Wireless Communications Centers, Inc. ("WCCI"). Lawsuits
aggregating approximately $600,000 have been reduced to judgment. If the Company
does not obtain the funding necessary to pay legal fees to defend these
lawsuits, or reach satisfactory settlements of these lawsuits, of which there is
no assurance, additional judgments will be filed against the Company and its
subsidiaries, which may require the Company and its remaining subsidiaries to
join Ameritel in filing for protection under the U.S. Bankruptcy statutes or
otherwise cease operating and wind up their business affairs.
The pending lawsuits at November 1, 2000 reflects the settlement in
September 2000 of the Company's cause of action with Tandy Corporation which was
dismissed pursuant to the terms of a Settlement Agreement and Mutual Release
Agreement which was approved by the United States Bankruptcy Court for the
Southern District of New York. Pursuant to that settlement, the Company agreed
to issue 500,000 shares of common stock to the creditors' committee in the
bankruptcy proceeding.
Ameritel's reorganization plan, which has not been completed and is subject
to approval by the Bankruptcy Court, focuses the Company's resources on the sale
of its consumer accounts receivable and the related subscriber contracts. It is
too early to determine other elements of a proposed plan. However, when other
elements are determined, they may result in additional restructuring charges, as
well as the impairment of certain assets. The plan will have a significant
effect upon the value of certain assets and liabilities included in these
financial statements. Subject to completion and approval of the plan, the
Company is unable to predict the potential financial impact of this matter.
The financial statements as of and for the nine months ended September 30,
2000 do not include any effect of the bankruptcy which was filed on October 29,
1999 or the proposed reorganization plan.
There is no assurance that we will be able to effect a sale of the Ameritel
Assets on a timely basis or that we will be able to use cash collateral as
scheduled for in a Bankruptcy approved budget, obtain an extension or expansion
of the cash collateral order, obtain Debtor in Possession ("DIP") financing or
restructure certain debt. In the event that we are not successful in obtaining
the aforementioned financing, sale of the Ameritel Assets, or debt
restructuring, we may be required to convert the Ameritel Chapter 11 filing to a
liquidation under Chapter 7 of the U.S. Bankruptcy Code or move for a dismissal
of the case, and the Company and all of its subsidiaries may also be required to
join Ameritel in filing for protection under the U.S. Bankruptcy statutes or
otherwise cease operating and wind up their business affairs.
13
<PAGE>
Because the cost of implementing our new e-commerce strategies, which began
in the fourth quarter of 1999 with immaterial operations will depend upon a
variety of factors (including our ability to negotiate additional distribution
agreements, our ability to negotiate favorable wholesale prices with carriers,
the number of new customers and services for which they subscribe, the nature
and penetration of services that we may offer, regulatory changes and changes in
technology), actual costs and revenues will vary from expected amounts, possibly
to a material degree, and such variations will affect our future capital
requirements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In August 2000, the Company issued 500,000 shares of common stock to the
creditors committee of the Company's subsidiary, Ameritel. The shares were
issued as consideration for approval of a settlement of litigation with Tandy
Corporation.. The shares were issued in reliance upon the exemption from
registration for issuances not involving a public offering set forth in Section
4(2) of the Securities Act of 1933, as amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
14
<PAGE>
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.
Date: November 17, 2000 By: /s/ Lee Feist
----------------------------------
Lee Feist, Chief Executive Officer
Date: November 17, 2000 By: /s/ Tim Powers
-----------------------------------
Tim Powers, Chief Financial Officer
15
