SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
_________
[x] QUARTERLY REPORT PURSUANT SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. 33-853963
INTRATEL GROUP, LTD.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 72-1265159
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
28050 U.S. Highway 19 North
Clearwater, Florida 34621
(Address of Principal Executive Offices)
(813) 797-9000
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
------- -------
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at March 31, 1997:
Preferred Stock, $.0001
par value 0
Common Stock, $.0001
par value 1,527,620
<PAGE>
INTRATEL GROUP, LTD.
INDEX TO FORM 10-QSB
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Financial Statements:
Condensed Balance Sheets as of March 31, 1997 and
December 31, 1996 1
Condensed Statements of Operations for the Three Months
Ended March 31, 1997 and 1996 2
Condensed Statement of Stockholders' Equity 3
Condensed Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security-Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
<PAGE>
INTRATEL GROUP, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1997 1996
---------- ----------
ASSETS
Current Assets:
Cash $ 170,448 $ 188,365
Investments 1,180 1,180
Accounts receivable 252,191 308,633
Prepaid expenses 3,750 109
---------- ----------
Total current assets 427,569 498,287
---------- ----------
Property and equipment:
Equipment and furniture 64,529 64,529
Accumulated depreciation (30,520) (27,565)
---------- ----------
Net property and equipment 34,009 36,964
---------- ----------
Other Assets:
Deposits 10,000 10,000
---------- ----------
$ 471,578 $ 545,251
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,449 $ 11,376
Accrued expenses 145,603 199,491
Income tax payable 0 15,000
Current deferred tax liability 25,800 22,500
---------- ----------
Total current liabilities 174,852 248,367
---------- ----------
Deferred tax liability 7,300 10,000
---------- ----------
Total liabilities 182,152 258,367
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $.0001 par value,
25,000,000 shares authorized;
none issued 0 0
Common stock, $.0001 par value,
authorized 100,000,000 shares,
1,527,620 issued and outstanding 153 153
Additional paid-in capital 205,943 205,943
Retained earnings 83,330 80,788
---------- ----------
Total stockholders' equity 289,426 286,884
---------- ----------
$ 471,578 $ 545,251
========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
INTRATEL GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
---------- ----------
Revenues:
Commissions $ 353,205 $ 411,670
Long distance 82,623 4,775
Fees 14,067 55,166
---------- ----------
Total revenues 449,895 471,611
---------- ----------
Cost of sales:
Commission expense 196,405 275,226
Reseller and other costs 74,434 9,344
---------- ----------
Total cost of sales 270,839 284,570
---------- ----------
Gross profit 179,056 187,041
Operating expenses:
Selling and marketing 23,258 29,990
General and administrative 159,063 142,798
---------- ----------
Total operating expenses 182,321 172,788
---------- ----------
Income from operations (3,265) 14,253
---------- ----------
Other income:
Interest income 6,657 1,764
---------- ----------
Total other income 6,657 1,764
---------- ----------
Income before income taxes 3,392 16,017
Income tax provision 850 4,005
---------- ----------
Net income $ 2,542 $ 12,012
========== ==========
Net income per share $ 0.00 $ 0.01
========== ==========
Average common shares outstanding 1,527,620 1,420,687
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
INTRATEL GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON STOCK ADDITIONAL
-------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
-------- --------- --------- ---------
Balance,
December 31, 1996 1,527,620 $ 153 $ 205,943 $ 80,788
Net Income for the Three
Months Ended
March 31, 1997 0 0 0 2,542
--------- --------- --------- ---------
Balance, March 31, 1997 1,527,620 $ 153 $ 205,943 $ 83,330
========= ========= ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
INTRATEL GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
-------- --------
Cash flows from operating activities:
Net income $ 2,542 $ 12,012
Adjustment to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 2,955 2,755
Deferred tax liability 600 (1,095)
Decrease (increase) in
accounts receivable 56,442 (236)
Decrease (increase) in prepaid expenses (3,641) 5,000
Decrease in accounts payable and
accrued liabilities (61,815) (923)
(Decrease) increase in income tax payable (15,000) 5,100
---------- ----------
Net cash (used in) provided by
operating activities (17,917) 22,613
---------- ----------
Cash flows from investing activities:
Acquisition of property and equipment 0 (6,127)
---------- ----------
Net cash used in investing activities 0 (6,127)
---------- ----------
Cash flows from financing activities:
Payments on notes payable - shareholders 0 (5,000)
Payment on note payable 0 (804)
---------- ----------
Net cash used in financing activities 0 (5,804)
---------- ----------
Net (decrease) increase in cash (17,917) 10,682
Cash, beginning of year 188,365 43,639
---------- ----------
Cash, end of year $ 170,448 $ 54,321
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
INTRATEL GROUP, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
1. BASIS OF PRESENTATION:
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments, consisting only of normal recurring
accruals, necessary to present fairly the Company's financial position,
results of operations and cash flows for the periods presented. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year.
The condensed financial statements should be read in conjunction with the
financial statements and the related disclosures contained in the Company's
Form 10-KSB dated May 14, 1997, filed with the Securities and Exchange
Commission.
2. SUBSEQUENT EVENT:
Subsequent to year-end, certain officers and directors ("Selling
Shareholders") entered into a Stock Purchase Agreement with IntraTel
Acquisition Company, Inc. ("IntraTel") pursuant to which the Selling
Shareholders agreed to sell a total of 365,694 shares of the Company's
common stock to IntraTel in consideration of a total of $1,200,000 in cash
and secured promissory notes and certain other contingent consideration.
IntraTel and the Selling Shareholders also entered into a Pledge Agreement
which granted the Selling Shareholders a security interest and lien on the
365,694 shares of the Company's common stock sold to IntraTel. IntraTel
also granted the Selling Shareholders an irrevocable proxy to vote the
shares of the Company's common stock in their sole and absolute discretion
until the remaining payment of the secured promissory notes required by the
Stock Purchase Agreement has been made. To facilitate the merger discussed
below, Telecom Venture & Acquisition Corp., a principal shareholder, for no
consideration, executed a letter of intent dated January 23, 1997 to return
to the Company's treasury 182,847 shares of the Company's common stock.
Simultaneously with the execution of the Stock Pledge Agreement and related
documents between IntraTel and the Selling Shareholders, IntraTel and the
Company entered into an Agreement of Merger (the "Merger Agreement")
effective April 1, 1997, providing for the merger of IntraTel with and into
the Company, and the eventual change of the Company's name to IntraTel
Group, Ltd. The Merger Agreement provides that the issued and outstanding
shares of the Company as of the effective date of the merger will not be
affected, and the current shareholders of IntraTel will surrender their
shares of IntraTel (a total of 1,500 shares) in exchange for 1,631,626
shares of the Company less that number of shares which are required to
satisfy IntraTel's obligations to issue equity to certain investors of
IntraTel. The Merger Agreement was unanimously approved by the Company's
shareholders and the Certificate of Merger was filed with the Delaware
Secretary of State's office on April 1, 1997.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this
report.
The following discussion contains certain forward-looking statements,
within the meaning of the "safe-harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the attainment of which involve
various risks and uncertainties. Forward-looking statements may be
identified by the use of forward-looking terminology such as "may", "will",
"expect", "believe", "estimate", "anticipate", "continue", or similar
terms, variations of those terms or the negative of those terms. The
Company's actual results may differ materially from those described in
these forward-looking statements due to, among other factors, competition
in each of the Company's product areas, dependence on suppliers, the
Company's limited manufacturing experience and the evolving nature of the
Company's fiber optic technology.
Results of Operations
- ---------------------
For the quarter ended March 31, 1997 compared to the quarter
- ------------------------------------------------------------
ended March 31, 1996
- --------------------
Revenue from operations for the quarter ended March 31, 1997 ("1997") was
approximately $450,000, compared to approximately $472,000 for the quarter
ended March 31, 1996 ("1996"). This represents a decrease of 5% or
approximately $22,000 from 1996. This decrease in revenues was mainly
attributable to decreased revenues associated with independent agent
registration fees. This decrease in fee revenue is because of a change in
the independent agent program which removed the initial cost of
registration.
The gross margin remained constant at approximately 39.8% and 39.7% in 1997
and 1996, respectively. Management believes the sales representative
commissions will decrease as a percentage of net revenues in future periods
as a result of revenues being earned more from offering its own long
distance product to end-users.
Selling and Marketing Expenses were approximately $23,000 for the first
quarter of 1997 as compared to approximately $30,000 for the first quarter
of 1996, for a decrease of 23%. This decrease was mainly due to the
release of major changes to the independent agent program.
General and administrative expenses were approximately $159,000 for 1997
compared to approximately $143,000 in 1996, an increase of 11%. Increases
in general and administrative expenses were mainly due to the significant
increases in certain officer salary amounts during 1997. During 1996, the
officers of the Company took minimal salaries which were adjusted to market
rates during 1997.
The Company had net other income of approximately $6,657 for 1997 with
approximately $1,764 for 1996. The 1997 amounts were favorably impacted
due to additional interest earned on higher cash balances maintained during
1997 in interest bearing accounts.
Net income for the first quarter of 1997 was $2,542 as compared to $12,012
for the first quarter of 1996. The decrease in net income was attributable
to additional costs associated with upcoming acquisitions and increased
administrative costs associated with a major change in the independent
contractor program and the associated marketing effort to launch it.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Liquidity and Capital Resources
- -------------------------------
Intelicom's cash position at March 31, 1997 was approximately $170,000 as
compared to $188,000 at December 31, 1996. The Company had net working
capital of approximately $253,000 at March 31, 1997.
The Company believes that available cash, together with funds generated
from operations, will be sufficient to finance the Company's working
capital requirements as well as planned capital additions.
7
<PAGE>
PART II
Item 1. Legal Proceedings
-----------------
Not Applicable
Item 2. Changes in Securities
---------------------
Not Applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
During March 1997, the shareholders voted and approved the
business combination described in Note 2 of the financial
statements contained in this report.
Item 5. Other Information
-----------------
Not Applicable
_______________
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) None
(b) No reports on Form 8-K were filed during the three
months ended March 31, 1997.
8
<PAGE>
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunder duly authorized.
INTRATEL GROUP, LTD.
By: /s/ CHARLES R. BRINK Date: May 15, 1997
--------------------------------------
Charles R. Brink
President
By: /s/ DAVID SPEZZA Date: May 15, 1997
--------------------------------------
David Spezza
Vice President
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 170,448
<SECURITIES> 1,180
<RECEIVABLES> 252,191
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 427,569
<PP&E> 64,529
<DEPRECIATION> (30,520)
<TOTAL-ASSETS> 471,578
<CURRENT-LIABILITIES> 174,852
<BONDS> 0
0
0
<COMMON> 153
<OTHER-SE> 289,273
<TOTAL-LIABILITY-AND-EQUITY> 471,578
<SALES> 0
<TOTAL-REVENUES> 449,895
<CGS> 0
<TOTAL-COSTS> 270,839
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,392
<INCOME-TAX> 850
<INCOME-CONTINUING> 2,542
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,542
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
