SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1998, 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 #273, Mill Valley, California 94941
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(Address of principal executive offices) (Zip Code)
(415) 389-9442
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(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 twelve months, and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
On November 19, 1998, there were 16,934,910 shares of the issuer's common
stock, $.001 par value, outstanding.
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<PAGE>
GUINNESS TELLI*PHONE CORPORATION
INDEX
PART I. - Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Consolidated Balance Sheet
September 30, 1998 and December 31, 1997 3
Consolidated Statement of Operations
Three Months Ended September 30, 1998 and
1997 and Nine Months Ended September 30,
1998 and 1997 and Cumulative During
Development Stage 4
Consolidated Statement of Cash Flows Three
Months Ended September 30, 1998 and 1997
and Nine Months Ended September 30, 1998
and 1997 and Cumulative During Development
Stage 5
Note to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. - Other Information
Item 1. Legal Proceedings 8
Item 2. Changes in Securities and Use of Proceeds 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 10
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<PAGE>
GUINNESS TELLI*PHONE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
September 30,
1998 December 31,
(Unaudited) 1997
----------- -----------
ASSETS
CURRENT ASSETS:
Cash $ 5,942 $ 87
Prepaid expenses -- 14,587
----------- -----------
TOTAL CURRENT ASSETS 5,942 14,674
----------- -----------
FIXED ASSETS:
Equipment 71,431 66,832
Less accumulated depreciation 48,945 40,995
----------- -----------
22,486 25,837
----------- -----------
$ 28,428 $ 40,511
=========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 450,000 $ 435,000
Accounts payable 738,837 634,597
Accrued interest payable 607,136 534,428
Stockholder advances 36,515 --
Deferred royalty income 125,000 125,000
----------- -----------
TOTAL CURRENT LIABILITIES 1,957,488 1,729,025
----------- -----------
<PAGE>
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value;
authorized 25,000,000 shares;
issued and outstanding
16,634,910 and 14,860,160 shares 16,635 14,860
Additional paid-in capital 9,030,158 8,891,733
Deficit accumulated during
development stage (10,975,853) (10,595,107)
----------- -----------
(1,929,060) (1,688,514)
----------- -----------
$ 28,428 $ 40,511
=========== ===========
See accompanying notes.
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<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 1998 1997 1998 1997
------------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
Research and development $ 4,551,152
Interest expense 4,331,855 $ 72,708 $ 66,096 $ 24,236 $ 20,030
Officer's salary 528,940 24,000 34,017 8,000 5,764
Rent 365,834 20,266 25,152 7,462 7,061
Other administrative
expenses 1,198,072 263,772 191,224 163,521 67,709
------------- ---------- ---------- ---------- ----------
NET LOSS $(10,975,853) $(380,746) $(316,489) $(203,219) $(100,564)
============= ========== ========== ========== ==========
LOSS PER SHARE $ (.02) $ (.02) $ (.01) $ (.01)
========== ---------- ========== ==========
WEIGHTED AVERAGE
SHARES OUTSTANDING 15,527,508 14,092,165 15,735,008 13,427,480
========== ========== ========== ==========
</TABLE>
See accompanying notes.
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<PAGE>
GUINNESS TELLI*PHONE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
During Nine Months Ended Three Months Ended
Development September 30, September 30,
-------------------------- ---------------------------
Stage 1998 1997 1998 1997
------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CASH USED IN OPERATIONS:
Net loss $(10,975,853) $(380,746) $(316,489) $(203,219) $(135,977)
Adjustments to reconcile net loss
to cash used in operations:
Depreciation 48,945 7,950 7,950 2,650 2,650
Decrease in prepaid expenses 14,587 -- --
Increase in accounts payable 738,837 104,240 24,483 68,878
Increase in accrued interest 607,136 72,708 66,096 24,236 22,032
Stock issues for consulting services 162,750 135,250 90,000
Deferred royalty income 125,000 -- -- -- --
------------- --------- ---------- ---------- ----------
(9,293,185) (46,011) (213,960) (17,455) (111,295)
------------- --------- ---------- ---------- ----------
CASH USED IN INVESTING ACTIVITIES:
Additions to fixed assets (71,431) (4,599) (6,715) (2,568) (3,128)
------------- --------- ---------- ---------- ----------
CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Contributed capital 7,543,938
Sale of stock 859,525 4,950 501,900 4,950 178,500
Notes payable 450,000 15,000 15,000
Stockholder advances 359,915 36,515 (250,000) (255) (23,059)
Collection of stock subscriptions
receivable 157,180
------------ --------- --------- --------- ---------
9,370,558 56,465 251,900 19,695 155,441
------------ --------- --------- --------- ----------
<PAGE>
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS 5,942 5,855 31,225 (328) 41,018
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR -- 87 9,805 6,270 12
------------ --------- --------- ---------- ----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 5,942 $ 5,942 $ 41,030 $ 5,942 $ 41,030
============ ========= ========= ========== ==========
</TABLE>
See accompanying notes.
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<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, 1998, 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, 1997.
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<PAGE>
GUINNESS TELLI*PHONE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1998
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, 1997. Reference is made to that document with regard to
these matters.
Results of Operations.
The Company has finalized long term financial arrangements for the
production of Telli Screens, and has also finalized arrangements with a U.S.
manufacturer of consumer products for the production and assembly of Telli
Screens during the Company's early run start up stage. The Company has
negotiated an agreement with Global Tele Services, LLC ("Global"), to
manufacture a minimum of 10,000 telli screens , Model GT100, which when produced
will be leased to the Company for installation in Southern Marin County,
California. Under the terms of the agreement, the Company will pay Global
$237,500 per quarter for a total of $4,750,000, commencing 180 days after the
Company receives the telli screens from Global. Definitive documents will be
filed with the SEC under Form 8-K upon receipt.
The Company's engineer has completed the first stage production
prototype of the Telli Screen and it has been delivered to the manufacturer. A
small run of Telli Screens is being produced initially for a small market test.
By March 1999 the Company plans to have approximately 1,000 Telli Screens
delivered into the marketplace and plans to have at least 10,000 Telli Screens
operating in households in Southern Marin County by July 1999.
This report contains "forward-looking statements" within the meaning of
Section 27A of the 1933 Securities Act and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially, as the result of
such factors as competition in the markets for telephone directories, the
availability of financing at favorable terms, and other factors detailed in the
Company's public filings with the SEC.
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<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 and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
On September 30, 1998, the Company filed a Registration
Statement on Form S-8 (Registration No. 333-65163) to register 4,000,000 shares
of its common stock for issuance under the Guinness Telli*Phone Corporation
Stock Option Plan.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibit No. Description
2.1 Agreement and Plan of Reorganization between CoNetCo
and the Company dated March 15, 1994. (Incorporated
by reference to Exhibit 1 to the Company's Form 10,
filed with the SEC on March 8, 1996, File No.
0-25632.)
2.2 Purchase of Assets, Assumption of Liabilities and
Royalty Agreement between CoNetCo, Guinness
Productions, Guinness Computer Television and
Lawrence A. Guinness and assumed by the Company
dated March 15, 1994. (Incorporated by reference to
Exhibit 5 to the Company's Form 10, filed with the
SEC on March 8, 1996, File No. 0-25632.)
2.3 Purchase of Assets, Assumption of Liabilities and
Royalty Agreement between CoNetCo, Guinness
Productions, Guinness Computer Television and
Lawrence A. Guinness dated February 18, 1990 -
Superceded by Exhibit 5. (Incorporated by reference
to Exhibit 6 to the Company's Form 10, filed with
the SEC on March 8, 1996, File No. 0-25632.)
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<PAGE>
2.4 Agreement and Plan of Reorganization between
Guinness Telli*Phone Corporation and CoNetCo dated
October 4, 1993 - Superceded by Exhibit 1.
(Incorporated by reference to Exhibit 7 to the
Company's Form 10, filed with the SEC on March 8,
1996, File No. 0-25632.)
3.1 Articles of Incorporation, as amended and currently
in effect. (Incorporated by reference to Exhibit 2
to the Company's Form 10, filed with the SEC on
March 8, 1996, File No. 0-25632.)
3.2 Bylaws. (Incorporated by reference to Exhibit 2 to
the Company's Form 10, filed with the SEC on March
8, 1996, File No. 0-25632.)
10.1 Guinness Telli*Phone Corporation Stock Option Plan
adopted by the Company on September 30, 1998.
(Incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form S-8,
Registration No. 333-65163, filed on September 30,
1998.)
27 Financial Data Schedule. (Filed herewith.)
(b) Reports on Form 8-K.
No other reports on Form 8-K were filed during the last
quarter of the period covered.
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<PAGE>
SIGNATURES
Pursuant to the requirements 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: November 19, 1998 /s/ Lawrence A. Guinness
------------------------------------
By: Lawrence A. Guinness
Its: President
Date: November 19, 1998 /s/ Arthur Korn
-----------------------------------
By: Arthur Korn
Its: Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
Exhibit No. Description
2.1 Agreement and Plan of Reorganization between CoNetCo and
the Company dated March 15, 1994. (Incorporated by
reference to Exhibit 1 to the Company's Form 10, filed
with the SEC on March 8, 1996, File No. 0-25632.)
2.2 Purchase of Assets, Assumption of Liabilities and Royalty
Agreement between CoNetCo, Guinness Productions, Guinness
Computer Television and Lawrence A. Guinness and assumed
by the Company dated March 15, 1994. (Incorporated by
reference to Exhibit 5 to the Company's Form 10, filed
with the SEC on March 8, 1996, File No. 0-25632.)
2.3 Purchase of Assets, Assumption of liabilities and Royalty
Agreement between CoNetCo, Guinness Productions, Guinness
Computer Television and Lawrence A. Guinness dated
dated February 18, 1990 - Superceded by Exhibit 5.
(Incorporated by reference to Exhibit 6 to the Company's
Company's Form 10, filed with the SEC on March 8, 1996,
File No. 0-25632.)
2.4 Agreement and Plan of Reorganization between Guinness
Telli*Phone Corporation and CoNetCo dated October 4, 1993
- Superceded by Exhibit 1. (Incorporated by reference to
Exhibit 7 to the Company's Form 10, filed with the
SEC on March 8, 1996, File No. 0-25632.)
3.1 Articles of Incorporation, as amended and currently in
effect. (Incorporated by reference to Exhibit 2 to the
Company's Form 10, filed with the SEC on March 8, 1996,
File No. 0-25632.)
3.2 Bylaws. (Incorporated by reference to Exhibit 2 to the
Company's Form 10, filed with the SEC on March 8, 1996,
File No. 0-25632.)
10.1 Guinness Telli*Phone Corporation Stock Option Plan adopted
by the Company on September 30, 1998. (Incorporated by
reference to Exhibit 10.1 to the Company's Registration
Statement on Form S-8, Registration No. 333-65163, filed
on September 30, 1998.)
27 Financial Data Schedule. (Filed herewith.)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1998, CONSOLIDATED STATEMENTS OF
OPERATIONS AND CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 1998 OF GUINNESS TELLI*PHONE CORPORATION.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 5,942
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,942
<PP&E> 71,431
<DEPRECIATION> 48,945
<TOTAL-ASSETS> 28,428
<CURRENT-LIABILITIES> 1,957,488
<BONDS> 0
0
0
<COMMON> 16,635
<OTHER-SE> (1,945,695)
<TOTAL-LIABILITY-AND-EQUITY> 28,428
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 308,038
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,708
<INCOME-PRETAX> (380,746)
<INCOME-TAX> 0
<INCOME-CONTINUING> (380,746)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (380,746)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
