United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended January 31, 2001
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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 0-22636
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DIAL-THRU INTERNATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 75-2461665
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 South Flower, Suite 2950
Los Angeles, California 90017
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(Address of principal executive offices) (Zip Code)
(213) 627-7599
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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 periods 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 March 15, 2001, 10,369,958 shares of common stock, $.001 par value
per share, were outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DIAL-THRU INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, OCTOBER 31,
2001 2000
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(unaudited)
ASSETS
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CURRENT ASSETS
Cash and cash equivalents $ 92,138 $ 73,867
Trade accounts receivable, net of allowance for
doubtful accounts of $930,766 at January 31,
2001 and October 31, 2000, respectively 440,629 455,819
Prepaid expenses and other 97,743 116,785
Investment in marketable securities 446,820 -
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Total current assets 1,077,330 646,471
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PROPERTY AND EQUIPMENT, net 1,438,581 1,539,544
PROPERTY AND EQUIPMENT HELD FOR SALE 320,307 320,307
ADVERTISING CREDITS 2,453,027 2,453,027
OTHER ASSETS 204,483 205,473
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS OF
COMPANY ACQUIRED, net of amortization of
$145,185 and $104,148 at January 31, 2001
and October 31, 2000, respectively 911,290 937,327
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TOTAL ASSETS $ 6,405,018 $ 6,102,149
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES
Current portion of long-term debt, net of debt
discount of none and $315,988 at January 31,
2001 and October 31, 2000, respectively $ 1,000,000 $ 684,012
Note payable to shareholder 646,000 346,000
Current portion of capital lease obligation 79,293 102,472
Trade accounts payable 3,136,028 3,930,315
Accrued Iiabilities 186,598 365,765
Deferred revenue 71,677 47,190
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Total current liabilities 5,119,596 5,475,754
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CAPITAL LEASE OBLIGATION, net of current portion 118,616 118,615
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value, 10,000,000
shares authorized, none issued or outstanding - -
Common stock, 44,169,100 shares authorized; $.001
par value; 9,949,090 shares issued and 9,937,068
outstanding at January 31, 2001 and 9,895,090
shares issued and 9,883,068 outstanding at
October 31, 2000, respectively 9,949 9,895
Additional paid-in capital 31,343,597 31,325,432
Accumulated deficit (30,109,373) (30,750,181)
Accumulated other comprehensive income (5,416) (5,416)
Treasury stock, 12,022 common shares in
2000 at cost (54,870) (54,870)
Subscription receivable - common stock (17,080) (17,080)
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Total shareholders' equity 1,166,807 507,780
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,405,018 $ 6,102,149
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The accompanying notes are an integral part of these consolidated financial
statements.
DIAL-THRU INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
JANUARY 31,
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2001 2000
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REVENUES
Revenues $ 890,620 $ 3,806,767
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Total revenues 890,620 3,806,767
COSTS AND EXPENSES
Cost of revenue 667,006 4,363,673
Settlement of carrier disputes (1,692,187) -
Sales & marketing 202,573 508,214
General & administrative 606,758 940,096
Depreciation and amortization 146,890 115,105
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Total cost and expenses (68,960) 5,927,088
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Operating Income (Loss) 959,579 (2,120,321)
OTHER INCOME (EXPENSES)
Interest and financing costs (323,731) -
Interest income 4,958 36,951
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Total other income (expense) (318,773) 36,951
NET INCOME (LOSS) BEFORE INCOME TAXES 640,807 (2,083,370)
Provision for Income taxes - -
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NET INCOME (LOSS) $ 640,807 $(2,083,370)
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EARNINGS (LOSS) PER SHARE:
Basic $ 0.06 $ (0.26)
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Diluted $ 0.06 $ (0.26)
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SHARES USED IN THE CALCULATION OF PER
SHARE AMOUNTS:
Basic common shares 9,903,709 7,892,030
Dilutive impact of stock options,
warrants and convertible debentures 643,824 -
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Dilutive common shares 10,547,533 7,892,030
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The accompanying notes are an integral part of these consolidated financial
statements.
DIAL-THRU INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
JANUARY 31,
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2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 640,807 $(2,083,370)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Marketable securities received in settlement
of dispute (446,820) -
Financing fees and amortization of debt
discount financing fees 315,988 -
Depreciation and amortization 149,205 114,355
(Increase) decrease in:
Trade accounts receivable 15,190 (1,027,320)
Accounts receivable - other - 1,999
Inventory - (105,246)
Prepaid expenses and other 19,042 39,663
Other assets - (29,705)
Increase (decrease) in:
Trade accounts payable (794,287) 1,774,161
Accrued liabilities (179,167) (109,354)
Deferred revenue 24,487 689,150
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Net cash used in operating activities (255,555) (735,667)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (21,215) (111,048)
Payments on note receivable - 300,000
Cash in DTI at acquisition date - 69,137
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Net cash provided by (used in) investing
activities (21,215) 258,089
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CASH FLOWS FROM FINANCING ACTIVITIES
Payments on note payable - (40,500)
Payments on shareholder note payable - (54,000)
Proceeds from shareholder 300,000 -
Payments on capital leases (23,178) (23,882)
Change in restricted cash - (836)
Issuance of common shares for cash - 29,953
Proceeds from exercise of stock options 18,219 -
Net cash provided by (used in) financing
activities 295,041 (89,265)
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NET INCREASE (DECREASE) IN CASH 18,271 (566,843)
Cash and cash equivalents at beginning of year 73,867 846,141
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Cash and cash equivalents at end of year $ 92,138 $ 279,298
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SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING
AND FINANCING ACTIVITIES
Cash paid for interest $ - $ 15,517
The accompanying notes are an integral part of these consolidated financial
statements.
DIAL-THRU INTERNATIONAL CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The condensed consolidated financial statements of Dial-Thru International
Corporation and its subsidiaries included in this Form 10-Q are unaudited.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation
of the financial position and operating results for the three month periods
ended January 31, 2001 and 2000 have been included. Operating results for
the three-month period ended January 31, 2001 are not necessarily indicative
of the results that may be expected for the year ending October 31, 2001.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended October 31, 2000.
Prior to December 7, 1998, the Company operated in the software and
telecommunications industries. On December 7, 1998, the Company sold its
retail automation software business (the "Software Business") to Affiliated
Computer Services, Inc. ("ACS"). Therefore, the Company no longer
engages in the Software Business, and is now operating only in the
telecommunications industry (the "Telecommunications Business").
On November 2, 1999, the Company acquired substantially all of the business
and assets of Dial-Thru International Corporation, a California corporation,
now known as DTI-LIQCO, Inc., along with the rights to the name "Dial-Thru
International Corporation." On January 19, 2000, the Company changed its
name from ARDIS Telecom & Technologies, Inc. to Dial-Thru International
Corporation("DTI").
During 1998 and 1999, the Company's operations included mainly sales and
distribution of prepaid domestic and international calling cards to
wholesale and retail customers. Starting January 2000, the Company changed
its focus from prepaid calling cards to becoming a full service, facility-
based provider of communication products to small and medium size
businesses, both domestically and internationally. The Company now provides
a variety of international and domestic communication services including
international dial-thru, Internet voice and fax services, e-Commerce
solutions and other value-added communication services, using its Voice over
Internet Protocol, "VoIP", Network to effectively deliver the products to
the end user.
In addition to helping companies achieve significant savings on long-
distance voice and fax calls by routing calls over the Internet, or the
Company's private network, the Company also offers new opportunities for
existing Internet Service Providers who want to expand into voice services,
private corporate networks seeking to lower long-distance costs, and Web-
enabled corporate call centers engaged in electronic commerce.
DTI is also introducing "VoIP" to a new segment of customers by delivering a
high quality, reliable and scaleable solution that uniquely addresses the
needs of the rapidly growing "VoIP" industry.
NOTE B - EARNINGS (LOSS) PER SHARE
The shares issuable upon the exercise of stock options and warrants, and
convertible debentures are included to the extent that they are dilutive in
the respective periods.
NOTE C - REVENUE RECOGNITION AND COSTS OF REVENUES
Revenues from prepaid services sold where the Company operates its own
switch are recognized from customer usage. The Company sells products to
retailers and distributors at a fixed price. When the retailer or
distributor is invoiced, referred revenue is recognized. The Company
recognizes revenue, and reduces the deferred revenue account as the
customer utilizes calling time or upon expiration of cards containing
unused calling time.
Revenues generated by international re-origination and dial-thru services
are based on minutes of customer usage. The Company records payments
received in advance as deferred revenue until such services are provided.
NOTE D - CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
The Company has an outstanding receivable from a customer of approximately
$435,000, which is overdue by approximately one year, of which $435,000 has
been reserved as of January 31, 2001.
NOTE E - ACQUISITION
On November 2, 1999, the Company consummated the acquisition of
substantially all of the assets and business of Dial-Thru International
Corporation (the "Seller"), a California corporation. The acquisition was
effected pursuant to the terms of an Asset Purchase Agreement between the
Company, a wholly owned subsidiary of the Company, the Seller and John
Jenkins, the sole shareholder of the Seller. The Company issued to the
Seller an aggregate of 1,000,000 shares of common stock, recorded a total
purchase price of $937,500 using the Company's common stock price at the
time the acquisition was announced, and agreed to issue an additional
1,000,000 shares of its common stock upon the acquired business achieving
specified revenue and earnings goals. As of January 31, 2001, no additional
shares were as yet earned by the Seller based on revenue and earnings goals.
The acquisition was accounted for as a purchase. Goodwill recorded in the
acquisition will be amortized over a period of 10 years. The results of
operations of the acquired entity are included in the consolidated
operations of the Company from November 1, 1999.
NOTE F - CONVERTIBLE DEBENTURES
In February 2000, the Company executed non-interest bearing convertible note
agreements (the "Agreements") with nine accredited investors, which provided
financing of $1,000,000. The notes were payable on the earlier of one year
from the date of issuance or the Company's consummation of a debt or equity
financing in excess of $5,000,000. If the notes were not repaid within 90
days of issuance, they were convertible into shares of common stock at $4.00
per share while remaining outstanding. The Company recorded financing fees
of approximately $117,000 in February 2000 related to these notes for the
difference in the conversion price of $4.00 and the market price of $4.47 on
the date the notes were approved by the Board of Directors.
The Company also issued to the holders of the notes warrants to acquire an
aggregate of 125,000 shares of common stock at an exercise price of $3.00
per share, which expire five years from the date of issuance. In February
2000, the Company recorded deferred financing fees of approximately
$492,000. This amount represents the Company's estimate of the fair value
of these warrants at the date of grant using the Black-Scholes pricing model
with the following assumptions: applicable risk-free interest rate based on
the current treasury-bill interest rate at the grant date of 6%; dividend
yields of 0%; volatility factors of the expected market price of the
Company's common stock of 1.62; and an expected life of the warrants of
three years. The Company is amortizing these fees over the initial maturity
of these notes of one year. The amount is fully amortized as of January 31,
2001.
Under the terms of the agreement, after six months without repayment of the
notes additional warrants to acquire up to an aggregate of 125,000 shares of
common stock at an exercise price of $2.75 per share were issued to the
holders of the notes.
During March 2001, the terms of the convertible notes were modified and the
debt was converted to equity through the issuance of 400,000 common shares.
Additionally, in connection with the conversion, the warrants to purchase
250,000 shares of common stock were modified to allow for an exercise price
of $0.01 per share and 150,000 additional warrants with as exercise price of
$3.00 per share were issued to the note holders.
NOTE G - RELATED PARTY PAYABLE
In connection with the acquisition of Dial-Thru International Corporation on
November 2, 1999, the Company assumed a related party note payable to the
sole owner of the acquired entity of approximately $400,000. The note bears
interest at 6% per annum, is payable in quarterly installments of $50,000
plus interest beginning November 1, 1999, and matures on August 1, 2001.
The Company is currently in arrears of quarterly payments to the noteholder
and during the three month period ended January 31, 2001 an additional loan
in the amount of $300,000 was provided by the note holder. The outstanding
balance at January 31, 2001 was $646,000, and is classified as a current
liability.
NOTE H - SHAREHOLDERS' EQUITY
COMMON STOCK ISSUANCES
For the three month period ended January 31, 2001, the Company issued 54,000
shares in connection with the exercise of options for $18,219.
Note I - Marketable Securities
Marketable securities include investment in the common stock of Star
Telecommunications, Inc., and are classified as available-for-sale and
carried at market value. Unrealized holding gains and losses are reported
as a separate component of Stockholder's equity until realized. Realized
gains and losses on the sale of investments are based upon specific
identification method and are included in the statement of operations.
Note J - Settlement of Legal/Carrier Disputes
During the quarter the Company settled a pending lawsuit with Star
Telecommunications, Inc. In conjunction with the settlement the Company
received a carrier usage credit in the amount of $780,000 for previous
services and future services comprised of one year of no charge domestic
carrier services for transporting traffic between Los Angeles, New York and
Miami. The Company also received 1,100,000 shares of common stock of Star
Telecommunications which were recorded at fair value. The Company will
record the value of the carrier service credit as used.
The Company also recorded income of $465,000 in connection with the
anticipated settlement of disputes with RSL Communications, Inc. This
amount is included in Settlement of carrier disputes.
NOTE K - SUBSEQUENT EVENTS
Notes in the amount of $1,000,000 shown as a short term liability was
converted to common stock after January 31, 2001. The terms of the notes
were modified to allow for the conversion to common stock at a price of
$2.50 per share. As a condition of this conversion, warrants to acquire
250,000 common shares were repriced to $0.01 per share and additional
warrants to purchase 150,000 common shares at an exercise price of $3.00
were issued.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANAYLYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
With the exception of historical information, the matters discussed in this
quarterly Report on Form 10-Q include "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Forward-looking statements are statements
other than historical information or statements of current condition. Some
forward-looking statements may be identified by the use of such terms as
"expects", "should", "will", "anticipates", "estimates", "believes," "plans"
and words of similar meaning. These forward-looking statements relate to
business plans, programs, trends, results of future operations, satisfaction
of future cash requirements, funding of future growth, acquisition plans and
other matters. In light of the risks and uncertainties inherent in all such
projected matters, the inclusion of forward-looking statements in this Form
10-Q should not be regarded as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved or that
operating expectations will be realized. Revenues and results of operations
are difficult to forecast and could differ materially from those projects in
forward-looking statements contained herein, including without limitation
statements regarding the Company's belief of the sufficiency of capital
resources and its ability to compete in the telecommunications industry.
Actual results could differ from those projected in any forward-looking
statements for, among others, the following reasons: (a) increased
competition from existing and new competitors using Voice over Internet
Protocol ("VoIP") to provide telecommunications services, (b) the relatively
low barriers to entry for start-up companies using VoIP to provide
telecommunications services, (c) the price-sensitive nature of consumer
demand, (d) the Company's dependence upon favorable pricing from its
suppliers to compete in the telecommunications industry, (e) increased
consolidation in the telecommunication industry, which may result in larger
competitors being able to compete more effectively, (f) the failure to
attract or retain key employees, (g) continuing changes in governmental
regulations affecting the telecommunications industry and the Internet, (h)
changing consumer demand, technological development and industry standards
that characterize the industry, and (i) the "Certain Business Factors"
identified in the Company's Annual Report on Form 10-K for the year ended
October 31, 2000. In light of the significant uncertainties inherent in the
forward-looking statements included in this Form 10-Q, you should not
consider the inclusion of such information as a representation by the
Company or anyone else that we will achieve our objectives and plans. The
Company does not undertake to update any forward-looking statements
contained herein. Readers are cautioned not to place undue reliance on the
forward-looking statements made in, or incorporated by reference into, this
Quarterly Report on Form 10-Q or in any document or statement referring to
this Quarterly Report on Form 10-Q.
GENERAL
Dial-Thru International Corporation is a facilities-based, global Internet
Protocol (IP) communications company providing connectivity to international
markets experiencing significant demand for IP enabled services. The
Company provides a variety of international telecommunications services
targeted to small and medium sized enterprises (SME's) that include the
transmission of voice and data traffic and the provision of Web-based and
other communications products and services. The Company utilizes Voice over
Internet Protocol (VoIP) packetized voice technology (and other compression
techniques) to improve both cost and efficiencies of telecommunication
transmission mechanisms, and is developing a private IP Telephony network.
IP Telephony, or Voice over Internet Protocol (VoIP), is voice communication
that has been converted into digital packets and is then addressed,
prioritized, and transmitted over any form of broadband network, utilizing
the same technology that makes the Internet possible. These technologies
allow the Company to transport voice communications with the same high-
density compression as networks initially designed for data transmission,
and at the same time utilize a common network for providing customers with
enhanced Web-based products and services.
The Company's primary focus is in niche markets where competition is not as
keen, thereby giving it opportunities for greater profit margin and market
share. These markets include regions of the world where deregulation of
telecommunications services has begun, or is in early development. The
Company also targets smaller markets that have not attracted large multi-
national providers. Africa, Asia, and parts of South America offer the
greatest abundance of these target markets.
Cooperating with overseas carriers and the incumbent operator, usually
government owned telephone companies, gives the Company a high degree of
leverage to engage in co-branding of jointly marketed products, including IP
based enhancements that it has developed, rather than simply basing a
strategy on pricing arbitrage. As a result, the Company is proactively
invited to participate rather than reactively prevented from entering these
new markets.
Unlike many other wholesale VoIP carriers in the market, the Company is
focused on retail telecommunications sales to business customers which
allows the Company to provide a complete package of communication services,
not just wholesale voice traffic. A portfolio of enhanced offerings provides
the Company with the opportunity for higher profit margins and better
customer loyalty, thus making the Company less susceptible to competitive
forces and market churn.
In tandem with overseas partners, the Company is deploying a "book-end"
strategy targeting markets at both ends of international circuits. As an
example, while cooperating with partners to target the SME market in a
selected foreign region, the Company also targets corresponding expatriates
and foreign owned businesses back in the U.S. By providing these services
in cooperation with the carrier that will ultimately terminate the calls in
the caller's "home" country, the Company enjoys reduced facilities costs,
increased economies of scale, lower customer acquisition costs, and higher
customer retention.
Focusing on cooperation in emerging markets also gives the Company added
benefit of being able to develop and exploit labor cost advantages not found
in industrial markets. For example, the Company plans to develop new and
extremely low-cost call center applications that will tie into and enhance
its new Web and VoIP applications. By relying on VoIP and IP, rather than
traditional voice technology, the Company ensures that its network
infrastructure is extremely cost-effective and state-of-the-art. These are
assets that not only help to build the Company's business, but also make the
Company more attractive as a potential partner to overseas carriers and
incumbent telephone companies.
The following discussion should be read in conjunction with the Company's
Form 10-K and the consolidated financial statements for the years ended
October 31, 2000, 1999, and 1998; the Company's Form 10-Q for the quarter
ending January 31, 2000; and the consolidated financial statements and
related notes for the quarter ended January 31, 2001 found elsewhere in this
report.
RESULTS OF OPERATIONS
REVENUES
Revenues were $891,000 for the quarter ended January 31,2001, compared to
$3,807,000 for the quarter ended January 31, 2000, representing a decrease
of 77% from the prior period. The decrease in revenues for this quarter
compared to the prior year resulted primarily from the Company's change in
business focus away from the prepaid long distance market and toward
providing international communication services for small to medium-size
businesses. Costs associated with the discontinuation of certain
distribution channels have prevented the Company from fully marketing
according to its plans for the redirected business. Now that these costs
have been eliminated and new markets have been opened, the company
anticipates enjoying substantial revenue growth in future periods.
EXPENSES
Costs of revenues were $667,000, or 75% of revenues, for the quarter ended
January 31, 2001, compared to $4,364,000, or 115% of revenues, for the
quarter ended July 31, 2000. By focusing its business on providing
international communication services the Company has been able to
demonstrate the ability to produce positive margins on sales across its
product line.
Settlements with two major carriers over charges in prior periods amounted
to a savings of $1,700,000 to the Company. This is reflected as a credit to
Costs and Expenses on the Consolidated Statements of Operations for the
period.
Sales and marketing costs were $203,000, or 23% of revenues for the quarter
ended January 31, 2001, compared to $508,000, or 13% of revenues, for the
quarter ended January 31, 2000. This represents a 60% decrease in such costs
from the prior period. Sales and marketing costs incurred during the prior
period were primarily associated with the operation of the distribution
channel for the prepaid products. The change in the focus of the Company's
operations has reduced its sales and marketing costs in absolute terms, as
the prepaid calling card business required a large sales and marketing
staff. In the short term, while the Company is opening a number of new
international markets just beginning to produce revenues, sales and
marketing costs as a percentage of revenues have increased. In the long
term, however, when these markets are fully developed, the Company expects
that sales and marketing costs will decline as a percentage of revenue.
General and administrative costs were $607,000, or 68% of revenue, for the
quarter ended January 31, 2001, compared to $940,000, or 25% of revenue, for
the quarter ended January 31, 2000. However this represents in dollar terms
a 35% decrease from the prior period. The change in the focus of the
Company's business has resulted in an overall drop of its general and
administrative expenses, and the Company anticipates a reduction of these
costs as a percentage of revenue in future periods.
During the quarter ended January 31, 2001, the Company reported net interest
expense of $324,000, compared with a net interest income of $37,000 for the
quarter ended January 31, 2000.
As a result of the foregoing, the Company incurred a net loss from
continuing operations of $734,000, or $0.07 per share, for the quarter ended
January 31, 2001, as compared to a net loss from continuing operations of
$2,083,000, or $0.26 per share, for the quarter ended January 31, 2000.
After adjustments, the Company had a net income of $641,000, or $0.06 per
share, for the quarter ended January 31, 2001.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2001, the Company had cash and cash equivalents of $92,000,
an increase of $18,000 from the balance at October 31, 2000.
During the three months ended January 31, 2001, net cash used in operating
activities was $256,000, compared to net cash used in operating activities
of $736,000 for the three months ended January 31, 2000.
Cash used in investing activities was $21,000 for the three months ended
January 31, 2001, compared to cash provided by investing activities of
$258,000 for the three months ended January 31, 2000 primarily attributable
to $300,000 from payment on a note receivable.
Cash provided by financing activities for the three months ended January 31,
2001 totaled $295,000, compared to cash used in financing activities of
$89,000 for the three months ended January 31, 2000. The change in cash
provided by financing activities was due primarily to the proceeds of
$300,000 received from a shareholder in the period ending January 31, 2001
versus payment of %54,000 to a shareholder in the same period in the prior
year.
The Company has recently suffered from liquidity and cash flow constraints.
As of January 31, 2001, the Company had a working capital deficit of
$4,042,000, compared to a working capital deficit of $1,528,000 at January
31, 2000. As of January 31, 2001, the Company's current assets of
$1,077,000 include $440,000 of gross trade accounts receivable and an
investment in securities of $446,000.
To address its cash flow needs, the Company consummated a private placement
of $1,000,000 in principal amount of non-interest bearing convertible notes
in February 2000. The notes were payable on the earlier of one year from the
date of issuance or the closing of equity financing in excess of $5 million.
Following the completion of the first quarter, the notes have become
converted into shares of the Company's common stock at a conversion price of
$2.50 per share. The holders of the notes were also issued warrants to
acquire an aggregate of 250,000 shares of the Company's common stock at an
exercise price of one half at $3.00 per share and one half at $2.75 per
share. As a condition of the conversion of the notes into common stock, the
exercise price of these warrants were repriced to $0.01, and an additional
125,000 warrants were issued with an exercise price of $3.00.
The Company's growth models for its business are scaleable, but the rate of
growth is dependent on the availability of future financing for capital
resources. The Company plans to commit approximately $1.0 million for
capital investments for fiscal 2001, and plans to finance additional
infrastructure development externally through debt and/or equity offerings
and internally through operations. The Company believes that, with
sufficient capital, it can significantly accelerate its growth plan. At its
current and anticipated level of operations through the next twelve-month
period, management believes that it will have to raise significant
additional funds through outside financing activities. The Company's
failure to obtain such financing could significantly delay the Company's
implementations of its business plan and have a material adverse effect on
its business, financial condition and operating results.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
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.
Dial-Thru International Corporation
(Registrant)
DATE: March 19, 2001 /s/ John Jenkins
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John Jenkins
President, Chief Financial Officer
(Principal Financial Officer)