-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, X1/XSFhyp8OS6QoP4vTNisdnfZ6Gsh4Z1RVNPqJNXRrQ0UI3T49a659lrj1mtWeM Be2HG/4IyAcrzka1fKBdrA== 0000950148-95-000289.txt : 19950531 0000950148-95-000289.hdr.sgml : 19950531 ACCESSION NUMBER: 0000950148-95-000289 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950522 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAY FONE SYSTEMS INC CENTRAL INDEX KEY: 0000076728 STANDARD INDUSTRIAL CLASSIFICATION: 7374 IRS NUMBER: 952660545 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08261 FILM NUMBER: 95541430 BUSINESS ADDRESS: STREET 1: 8100 BALBOA BLVD CITY: VAN NUYS STATE: CA ZIP: 91406 BUSINESS PHONE: 8189970808 MAIL ADDRESS: STREET 1: 8100 BALBOA BLVD CITY: VAN NUYS STATE: CA ZIP: 91406 FORMER COMPANY: FORMER CONFORMED NAME: MOTEL MANGERS TRAINING SCHOOL INC DATE OF NAME CHANGE: 19730911 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended March 31, 1995 Commission File Number 1-8261 PAY-FONE SYSTEMS, INC. (Exact Name of Registrant as Specified in Its Charter) State of Incorporation California IRS Employer ID Number 95-2660545 8100 Balboa Boulevard, Van Nuys, California 91406 (818) 997-0808 (Address and Telephone of Principal Executive Offices) 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 --- --- Number of shares outstanding of common stock: COMMON STOCK $.10 PAR VALUE -- 1,484,233 as of March 31, 1995 2 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 disclosures normally included in Financial Statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is suggested that the condensed Financial Statements included herein be read in conjunction with the Financial Statements and the notes thereto included in the Company's Annual Report for the year ended June 30, 1994. The following condensed Financial Statements for the three (3) and nine (9) months ended March 31, 1995 and 1994 reflect all adjustments which, in the opinion of management, are necessary to present fairly the financial position for the period presented. -2- 3 PAY-FONE SYSTEMS, INC. BALANCE SHEET ASSETS
CURRENT ASSETS: 3/31/95 6/30/94 ----------- ----------- (Unaudited) Cash and cash equivalents $ 399,182 $ 740,734 Short term investments 1,256,941 1,382,203 Accounts receivable, less $8,000 allowance for doubtful accounts 567,429 516,704 Prepaid supplies and other 454,392 347,824 ----------- ----------- TOTAL CURRENT ASSETS 2,677,944 2,987,465 ----------- ----------- PROPERTY AND EQUIPMENT, at Cost: Building 3,001,540 3,001,540 Terminals and computer equipment 2,024,671 2,020,258 Other 1,484,724 1,231,633 ----------- ----------- 6,510,935 6,253,431 Less: Accumulated depreciation and amortization (3,925,789) (3,753,268) ----------- ----------- 2,585,146 2,500,163 ----------- ----------- Intangible assets, net of amortization 131,920 111,920 ----------- ----------- $ 5,395,010 $ 5,599,548 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: 3/31/95 6/30/94 ----------- ----------- (Unaudited) Accounts payable $ 40,560 $ 76,892 Accrued wages and other related costs 138,474 111,152 Other accrued liabilities 141,977 25,118 Customer security deposits 400 35,785 Income taxes payable -- -- ----------- ----------- TOTAL CURRENT LIABILITIES 321,411 248,947 ----------- ----------- DEFERRED INCOME TAXES 143,047 143,047 SHAREHOLDERS' EQUITY: Common stock 92,423 90,781 Additional paid-in capital 2,804,607 2,755,826 Retained earnings 2,073,522 2,360,947 Unrealized loss on debt and equity securities (40,000) -- ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 4,930,552 5,207,554 ----------- ----------- $ 5,395,010 $ 5,599,548 =========== ===========
-3- 4 PAY-FONE SYSTEMS, INC. STATEMENTS OF OPERATION (UNAUDITED)
For the Three Months Ended March 31 1995 1994 ------------ ------------ Revenues $ 1,347,086 $ 1,265,310 Direct costs 636,890 459,958 ------------ ------------ Gross profit 710,196 805,352 Selling, general and administrative expenses 712,431 631,801 Miscellaneous merger costs 117,500 -- ------------ ------------ Income (loss) from operations (119,735) 173,551 Interest income, net 12,331 5,023 ------------ ------------ Income (loss) before income taxes (107,404) 178,574 Income tax expenses (benefit) (38,500) 73,000 ------------ ------------ Net income (loss) $ (80,904) $ 105,574 ============ ============ Net income (loss) per common share * $ (0.05) $ 0.07 ============ ============ For the Nine Months Ended March 31 1995 1995 ------------ ------------ Revenues $ 3,612,130 $ 3,371,475 Direct costs 1,652,861 1,248,252 ------------ ------------ Gross profit 1,959,269 2,123,223 Selling, general and administrative expenses 2,277,914 1,890,318 Miscellaneous merger costs 117,500 -- ------------ ------------ Income (loss) from operations (436,145) 232,905 Interest income, net 53,220 39,535 ------------ ------------ Income (loss) before income taxes (382,925) 272,400 Income tax expense (benefit) (95,500) 105,000 ------------ ------------ Net income (loss) $ (287,425) $ 167,440 ============ ============ Net income (loss) per common share * $ (0.19) $ 0.11 ============ ============
*Net income per common share has been computed based on the weighted average of outstanding shares and common stock equivalents of 1,475,054 and 1,467,813 for the nine months ended March 31, 1995 and March 31, 1994, respectively, and the three months ended March 31, 1995 and March 31, 1994, respectively. -4- 5 PAY-FONE SYSTEMS, INC. STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, 1995 AND 1994 (UNAUDITED)
1995 1994 ----------- ----------- Cash flows from operating activities: Net income $ (287,425) $ 167,440 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 182,522 219,021 Change in assets and liabilities: Accounts receivable (50,725) (72,218) Prepaid supplies and other (106,568) (146,853) Accounts payable (36,332) 12,357 Accrued wages and other related costs 27,322 15,706 Other accrued liabilities 116,859 (11,518) Customer security deposits (35,385) (20,076) Income taxes payable -- 192,401 ----------- ----------- Total adjustments 97,693 188,820 ----------- ----------- Net cash provided by operating activities (189,732) 356,260 ----------- ----------- Cash flows from investing activities: Short term investments 85,262 649,934 Capital expenditures (257,505) (256,375) Payments for acquired company (net of cash acquired) (30,000) -- ----------- ----------- Net cash provided by (used in) investing activities: (202,243) 393,559 ----------- ----------- Cash flows from financing activities: Option exercise 50,423 -- ----------- ----------- Net cash provided financing activities 50,423 -- Net increase (decrease) in cash and cash equivalents (341,552) 749,819 Cash and cash equivalents at beginning of period 740,734 1,116,949 ----------- ----------- Cash and cash equivalents at end of period $ 399,182 $ 1,866,768 =========== =========== Supplemental disclosure of cash flow information Cash paid during the period for: Income taxes paid $ -- $ 33,980 =========== =========== Interest paid $ -- $ -- =========== ===========
NONCASH TRANSACTION (Unaudited) - During the nine months ended March 31, 1995, the Company wrote down its short term investments and recorded an unrealized loss of $40,000. -5- 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements of Pay-Fone contained elsewhere in this Proxy Statement/Prospectus. Results of Operations Three and Nine Months ended March 31, 1995 and 1994. Pay-Fone experienced net losses of $80,904 and $287,425, respectively, for the three and nine months ended March 31, 1995 compared to net income of $105,574 and $167,440, respectively, for the three and nine months ended March 31, 1994. These losses were primarily due to expenditures associated with Pay-Fone's introduction of in-house tax filing services and entrance into the large-employer market as well as approximately $120,000 of expenses in the third quarter of fiscal 1995 attributed to a proposed merger between the Company and Paychex, Inc. Management anticipated that the increased expenditures in these areas and increased marketing expenses would have a negative impact on earnings in the first half of the fiscal year, but that the expenditures would position Pay-Fone for continued revenue growth in fiscal 1995 and beyond. Gross revenues for the three and nine months ended March 31, 1995 increased $81,776 (6.5%) and $240,655 (7.1%), respectively, compared to the three and nine months ended March 31, 1994. This increase in revenues is attributable primarily to Pay-Fone's acquisition of Concentric Computer Corporation in February 1994 and additional revenues generated by Pay-Fone's introduction of in-house tax filing services and entrance into the large-employer market. Direct operating costs as a percentage of revenues increased to 46% in the nine months ended March 31, 1995 as compared to 37% in the same nine months in the prior year due to the costs associated with the establishment of Pay-Fone's second branch located in Northern California and Pay-Fone's introduction of in-house tax filing services and entrance into the large-employer market. Selling, general and administrative expenses as a percentage of revenues increased to 53% and 63% in the three and nine month periods ended March 31, 1995, respectively, as compared to 50% and 56% in the same periods of the prior year. Again, this increase is due to the expenditures related to the introduction of in-house tax filing services and entrance into the large-employer marketing, including increased staffing and marketing expenses. Additionally, Pay-Fone incurred approximately $120,000 of Merger related costs in the third quarter of fiscal 1995. The Company expects to incur additional legal and other costs associated with the Merger during the balance of the fiscal year. Liquidity and Capital Resources Pay-Fone relies on cash flow from operations and working capital to finance its business and operations. Pay-Fone's overall financial position continues to be strong with a current ratio of 8.3 at March 31, 1995. This compares to a current ratio of 12.0 at June 30, 1994 and 7.1 at March 31, 1994. At March 31, 1995, Pay-Fone had $2.4 million in working capital. Pay-Fone has no legal obligation for material capital commitments. In management's opinion, current working capital together with normal positive operating cash flow are sufficient to meet its normal operating requirements. Pay-Fone does not have any long-term debt, lines of credit or other material financing arrangements. -6- 7 PART II - OTHER INFORMATION Item 1. Legal Proceedings There are no lawsuits pending against the Company. Item 2. Change in Securities Inapplicable Item 3. Defaults upon Senior Securities Inapplicable Item 4. Submission of Matters to a Vote of Security Holders Inapplicable Item 5. Other Materially Important Events Inapplicable Item 6. Exhibits and Reports on Form 8-K (a) The following exhibit is filed herewith: 27.1 Financial Data Schedule b) During the period covered by this Report, a Report on Form 8-K was filed to report the Company's entering into an Agreement and Plan of Merger with Paychex, Inc. No financial statements were filed with this report, which was filed on March 17, 1995. -7- 8 SIGNATURE 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 hereunto duly authorized. PAY-FONE SYSTEMS, INC. Date: May 19, 1995 /s/ MARK LEEKLEY --------------------------- Mark Leekley President/Chief Executive Officer Chief Financial Officer -8- EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS JUN-30-1995 MAR-31-1995 399,182 1,256,941 567,429 8,000 454,392 2,677,944 3,001,540 182,522 5,395,010 321,411 0 92,423 0 0 4,838,129 5,395,010 3,612,130 3,612,130 1,652,861 2,277,914 117,500 8,000 53,220 (382,925) (95,500) (287,425) 0 0 0 (287,425) (0.19) (0.19)
-----END PRIVACY-ENHANCED MESSAGE-----