SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended: September 30, 1996; or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period _________ to __________
Commission File Number: 0-25632
GUINNESS TELLI*PHONE CORPORATION
---------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 68-0310550
- -------------------------------- ---------------------
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
655 Redwood Highway, #219, Mill Valley, California 94941
- -------------------------------------------------- ----------
Address of principal executive offices) (Zip Code)
(415) 389-9442
---------------------------------------------------
(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 a
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
On September 30, 1996, there were 13,427,480 shares of the registrant's
Common Stock, $.001 par value, outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed financial statements included herein have been prepared by
the Company, without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosure
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading.
In the opinion of the Company, all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the financial position of the
Company as of September 30, 1996 and the results of its operations and changes
in its financial position from inception through September 30, 1996 have been
made. The results of its operations for such interim period is not necessarily
indicative of the results to be expected for the entire year.
Page 2
<PAGE>
GUINNESS TELLI*PHONE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1996 1995
----------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 2,555 $ 97,997
Due from stockholder -- 27,195
TOTAL CURRENT ASSETS 2,555 125,192
-------- ---------
FIXED ASSETS:
Equipment 58,707 25,637
Less accumulated depreciation 28,260 22,663
-------- --------
30,447 2,974
-------- --------
$ 33,002 $ 128,166
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 435,000 $ 435,000
Accounts payable 659,373 659,372
Accrued interest payable 426,270 366,180
Deferred royalty income 125,000 125,000
--------- ---------
TOTAL CURRENT LIABILITIES 1,645,642 1,585,552
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value;
authorized 25,000,000 shares,
issued and outstanding
13,427,480 shares 13,427 13,427
Additional paid-in capital 8,363,766 8,363,766
Deficit accumulated during
development stage (9,989,833) (9,733,329)
---------- ----------
(1,612,640) (1,356,136)
Less stock subscription
receivable -- (101,250)
---------- ----------
(1,612,640) (1,457,386)
---------- ----------
$ 33,002 $ 128,166
========== ==========
</TABLE>
Page 3
<PAGE>
GUINNESS TELLI*PHONE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement Of Operations
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
During Nine Months Three Months
Development Ended September 30, Ended September 30,
Stage 1996 1995 1996 1995
------------ ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
Research and
development .... $4,551,152
Interest expense ... $4,150,989 $ 60,090 $ 54,624 $ 20,030 $ 18,208
Officer's salary ... 314,599 17,293 42,384 5,764 14,128
Rent ............... 306,393 17,540 5,400 7,061 1,800
Other administrative
expense ........... 666,700 161,581 47,256 67,709 15,752
---------- -------- ---------- --------- ----------
NET LOSS $(9,989,833) (256,504) (149,664) (100,564) (49,888)
============ ========= ========== ========== =========
LOSS PER SHARE $ (.02) $ (.01) $ -- $ --
============ ======== ========== ========== ==========
WEIGHTED AVERAGE
SHARES OUTSTANDING 13,427,480 12,592,480 13,427,480 12,592,480
========== ========== ========== ==========
</TABLE>
Page 4
<PAGE>
GUINNESS TELLI*PHONE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement Of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
During Nine Months Three Months
Development Ended September 30, Ended September 30,
Stage 1996 1995 1996 1995
------------ ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
CASH USED IN OPERATIONS:
Net loss ......... $(9,989,269) $(256,504) $(149,664) $(100,564) $(49,888)
Adjustments to reconcile
net loss to cash used in
operations:
Depreciation ....... 28,260 5,597 1,443 2,135 481
Increase in accounts
payable ............ 659,372 84,371 (11,529) 31,199
Increase in accrued
interest .......... 426,270 60,090 54,624 20,030 18,208
---------- --------- --------- -------- --------
(8,875,931) (190,817) (9,226) (89,929) --
---------- --------- --------- -------- --------
CASH USED IN INVESTING ACTIVITIES:
Additions to
fixed assets ....... (58,707) (33,070) ( 8,079)
---------- --------- --------- -------- --------
CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Contributed capital 8,363,766
Sale of stock 13,427
Notes payable 435,000
Stockholder advances 27,195 9,226 27,195
Deferred royalty income 125,000
Collection of stock
subscriptions receivable -- 101,250
---------- --------- --------- -------- --------
8,937,193 128,445 9,226 27,195
---------- --------- --------- -------- --------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS .......... 2,555 (95,442) -- (70,812 --
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR -- 97,997 -- 73,812 --
---------- --------- --------- -------- --------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 2,555 $ 2,555 $ -- $ 2,555 $ --
=========== ========= ======== ========= =======
</TABLE>
Page 5
<PAGE>
GUINNESS TELLI*PHONE CORPORATION AND SUBSIDIARY
(A Development Company)
Note To Consolidated Financial Statements
Note 1. In the opinion of the management of Guinness Telli*Phone
Corporation and Subsidiary, the unaudited financial statements of Guinness
Telli*Phone Corporation and Subsidiary for the interim periods shown include all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation of the financial position at September 30, 1996, and the results of
operations and cash flows for the periods then ended. The results of operations
for the interim periods shown may not be indicative of the results that may be
expected for the fiscal year. These statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Form
10-K for the year December 31, 1995.
Note 2: The prior periods financial statements have been changed to correct
an error relating to the accounting for costs incurred to develop the
Telli*Phone. The Company had been capitalizing development costs through
December 31, 1994, when such costs should have been expensed. The effect of the
correction was to write off the product development cost and increase the
accumulated deficit at January 1, 1995, by $7,777,102. Other corrections
included an adjustment to accrued interest and accumulated depreciation which
reduced the accumulated deficit by a net of $110,876 at January 1, 1995, and
reduced interest expense for the year ended December 31, 1995, by $17,488.
Page 6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources:
- --------------------------------
There have been no significant changes in the Company's liquidity and
capital resources since the Company filed its annual report on Form 10-K for the
year ended December 31, 1995. Reference is made to that document with regard to
these matters.
The Company is currently in discussion with qualified investors for private
financing.
The Company is also in discussion with a major international manufacturer
of computer equipment and peripherals for the manufacture of the Telli*phone.
Results of operation:
- ---------------------
The loss for the six months ended September 30, 1996, was $106,639 more
than the loss for the six months ended September 30, 1995. This change was
principally due to the following:
1. An increase in interest expense of $5,466 on outstanding debt, including
accrued interest.
2. A reduction of $25,092 in officer's salaries as the officer reduced his
salary commensurate with the cash flow of the Company.
3. An increase in rent expense of $12,140 attributable to a rent adjustment
during the first quarter and its carryover to the second quarter.
4. An increase in other administrative expenses of $114,325 as follows:
a. An increase in other compensation of $58,133, none being incurred during
the comparable period in 1995.
b. An increase in professional fees of $29,584 as a result of the
completion of the Telli*Phone and efforts to now bring it to the market place.
c. An increase in general office expense of $22,912.
d. A decrease in travel and promotion of $458.
e. An increase in depreciation expense of $4,154.
The loss for the three months ended September 30, 1996, was $50,676 less
than the loss for the three months ended September 30, 1995. This change was
principally due to the following:
1. An increase in interest expense of $1,822 on outstanding debt, including
accrued interest.
2. A reduction of $8,364 in officer's salaries as the officer reduced his
salary commensurate with the cash flow of the Company.
Page 7
<PAGE>
3. An increase in rent expense of $5,261 attributable to a rent adjustment
during the first quarter.
4. An increase in other administrative expenses of $51,957 as follows:
a. An increase in other compensation of $25,342, none being incurred during
the 1995 quarter.
b. A decrease in professional fees of $10,923.
c. An increase in general office expense of $11,157.
d. A decrease in travel and promotion of $2,881.
e. An increase in depreciation expense of $1,654.
Page 8
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
At the present time there are no legal proceedings against the Company and
the Company is unaware of any unasserted claim or assessment which will have a
material effect on the financial position or future operations of the Company.
Item 2. Changes in Securities.
Not required.
Item 3. Defaults Upon Senior Securities.
Not required.
Item 4. Submission of Matters to a Vote of Security Holders.
Not required.
Item 5. Other Information.
Not required.
Item 6. Exhibits and Reports on Form 8-K.
(a) No exhibits have been filed with this Form 10-Q.
(b) No other reports on Form 8-K were filed during the last quarter of
the period covered.
Page 9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the Undersigned, thereunto duly authorized.
GUINNESS TELLI*PHONE CORPORATION
(Registrant)
Date: December 5, 1996 /S/ Lawrence A. Guinness
--------------------------
By: Lawrence A. Guinness
Its: President
Date: December 5, 1996 /S/ Arthur Korn
--------------------------
By: Arthur Korn
Its: Chief Financial Officer
Page 10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,555
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,555
<PP&E> 58,707
<DEPRECIATION> 28,260
<TOTAL-ASSETS> 33,002
<CURRENT-LIABILITIES> 1,645,642
<BONDS> 0
0
0
<COMMON> 13,427
<OTHER-SE> 8,363,766
<TOTAL-LIABILITY-AND-EQUITY> 1,612,640
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> 0
</TABLE>
