-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BzO6o13D5AVmD27jvtDzG1Et4Ywy4+eHyc6b82YAzG8Bk2DjdJEZvw39lHjCBz5p a23TwTyA/WdumZH+mO4Tlw== 0000939802-99-000024.txt : 19990405 0000939802-99-000024.hdr.sgml : 19990405 ACCESSION NUMBER: 0000939802-99-000024 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVTEL COMMUNICATIONS INC/DE CENTRAL INDEX KEY: 0001005974 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TELEPHONE INTERCONNECT SYSTEMS [7385] IRS NUMBER: 870378021 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-27580 FILM NUMBER: 99586539 BUSINESS ADDRESS: STREET 1: 501 BATH STREET CITY: SANTA BARBARA STATE: CA ZIP: 93101 BUSINESS PHONE: (805) 884- MAIL ADDRESS: STREET 1: 501 BATH STREET CITY: SANTA BARABARA STATE: CA ZIP: 93101 FORMER COMPANY: FORMER CONFORMED NAME: AVTEL COMMUNICATIONS INC/UT DATE OF NAME CHANGE: 19970109 FORMER COMPANY: FORMER CONFORMED NAME: HI TIGER INTERNATIONAL INC DATE OF NAME CHANGE: 19960119 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) March 31, 1999 ----------------- AvTel Communications, Inc. -------------------------- (Exact name of registrant as specified in its charter) Commission File No. 0-27580 --------- Delaware 87-0378021 - -------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 501 Bath Street, Santa Barbara, California 93101 - ------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 805-884-6300 ------------ ============================================================== (Former Name or Former Address, if changed since last report) INFORMATION TO BE INCLUDED IN THE REPORT ITEM 5. OTHER EVENTS On March 31, 1999, Registrant issued a press release announcing its financial results for the year and fourth quarter ended December 31, 1998. Registrant's press release also noted that Registrant had engaged a financial advisor to assist Registrant in arranging up to $15 million in private equity-based financing. The press release is attached as Exhibit 99.1 to this Current Report and is incorporated herein by this reference. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS C. EXHIBITS. Exhibit 99.1 Press Release dated March 31, 1999, regarding (i) Registrant's financial results for the year and fourth quarter ended December 31, 1998, and (ii) Registrant's engagement of a financial advisor in connection with a proposed private placement of equity securities. 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, hereunto duly authorized. AVTEL COMMUNICATIONS, INC. By: /S/ ANTHONY E. PAPA ----------------------------------------- Anthony E. Papa Chief Executive Officer Date: April 1, 1999 EXHIBIT INDEX Exhibit 99.1 Press Release dated March 31, 1999, regarding (i) Registrant's financial results for the year and fourth quarter ended December 31, 1998, and (ii) Registrant's engagement of a financial advisor in connection with a proposed private placement of equity securities. (Begins on Page 5). EX-99 2 EXHIBIT 99.1 FOR IMMEDIATE RELEASE Contact: Mary McCarthy, Investor Relations (714) 914-5495; mccarthy@avtel.com AvTel Reports Year and Fourth Quarter 1998 Results Corporate Data, Voice, and Internet Revenue Increase 69%; Lower Margin Residential Long Distance Revenue Declined - --Signed Engagement Letter to Raise Up to $15 Million of Equity Financing-- SANTA BARBARA, Calif.--(BUSINESS WIRE)--March 31, 1999--AvTel Communications Inc. (NASDAQ: AVCO), a provider of integrated voice, data and Internet services, today announced a net loss of $2.1 million, or $0.22 per share on 10.0 million basic and diluted shares for the three month period ending December 31, 1998 compared to a net loss of $10.2 million or $1.09 per share on approximately 9.4 million basic and diluted shares for the same period of 1997. For the year ended December 31, 1998, AvTel reported a net loss of $7.1 million or $0.74 per share on 9.6 million basic and diluted shares compared to a net loss of $10.2 million or $1.23 per share on approximately 8.3 million basic and diluted shares for the year ended December 31, 1997. "While our strategy to grow our data networking and Internet business as a primary source of revenue continues to demonstrate positive results, top line performance throughout 1998 was negatively impacted by the expected reduction in less profitable residential long distance revenue at the Company's wholly owned subsidiary Matrix Telecom," said Anthony E. Papa, Chairman of the Board and Chief Executive Officer. Revenue for the three-month period and year ended December 31, 1998 were $9.7 million and $44.0 million respectively compared to $12.1 million and $51.4 million for the same periods in 1997. "The decline in total revenue throughout 1998 is attributable to residential long distance telephone service attrition and competitive pricing pressure. Although we experienced this rapid decrease in overall long distance revenue in 1998, our long distance revenue generated by corporate customers grew by 15% and the volume of corporate customer voice minutes of usage grew by 27% in the fourth quarter over the third quarter 1998," added Mr. Papa. Reviewing the year Mr. Papa commented, "We continue to develop our focus on our core business units: Business Markets and Channel Markets. Our Business Markets group provides `integrated enterprise-wide network solutions' to corporate customers and our Channel Markets team sells Internet access bundled with long distance telephone service and other telecom products through distributors and resellers. We began to see the results of this focus in the fourth quarter of 1998. Gross revenue from corporate customers served by our Business Markets group grew by 120% to $2.6 million in fourth quarter over third quarter 1998. The Business Markets group was established to capitalize on data, voice and Internet integration complexities affecting corporate enterprises." "In mid 1998," he continued, "our Matrix Telecom subsidiary was reorganized to form our Channel Markets group. Today, this group is a nationwide provider of Internet access and bundled telecom services through distributors, agents, resellers and affinity organizations. We terminated direct mail and direct telemarketing activities of our residential long distance services in early 1998, including termination of the Company's dial around (1010-XXX) product marketing efforts. These product offerings had attracted significant competition from other telecom industry leaders which has resulted in industry-wide lower pricing, increased customer acquisition costs and increased customer turn-over or churn. We believe our resources are better spent focusing on national Internet access sales with bundled telecom packages through niche-focused distributors, agents, resellers and affinity groups. As a result, our existing base of residential long distance telephone services continued to churn down through the fourth quarter. Retail price reductions, customer churn and minimal retention activity of older, lower margin telemarketing and casual calling customers lead to a 15% reduction in residential voice minutes of usage and a 23% reduction in consecutive quarter residential long distance revenue. These were partially offset by other growing businesses such as Internet sales and corporate data and voice sales." Mr. Papa further commented, "Internet sales activity in the Channel Markets group continues to increase into 1999. We have recently contracted or entered negotiations with several large affinity organizations and distributors that have begun selling bundled Internet and long distance telephone service to their members/customers. Through a new partnership with a Tier 1 Internet carrier, we have expanded our Internet backbone reach with dial-up coverage in more than 600 markets throughout the United States. The availability of our DSLinksm high-speed Internet access service in California now expands from parts of southern Los Angeles County to Lompoc. Every new agent, reseller and affinity group agreement entered into today is for the sale of some sort of Internet and data service bundled together with traditional voice products. Additionally, in the fourth quarter we invested heavily in expanding our marketing/sales teams in both Business Markets and Channel Markets by opening new sales offices and adding personnel." AvTel also announced today that it has engaged a financial advisor to assist AvTel in arranging up to $15 million in equity-based financing. The engagement contemplates the private issuance of $1.5 million of convertible preferred stock and up to an additional $13.5 million in equity financing in the form of an equity line of credit which extends for three years. The completion of the financing is subject to the execution of definitive agreements with investors and to customary closing conditions for this type of transaction. The Company plans to use the financing for the expansion of sales and marketing in 1999, potential acquisition activities and for general working capital purposes. These securities, if issued, will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. AvTel Communications Inc. is a provider of broadband network services integrating voice, data and Internet services for individuals and business customers. The company markets and sells a broad range of telecommunications and advanced network services through independent value-added agents, resellers and affinity groups as well as through internal direct sales professionals. The company targets mid-size corporations, small-office home-office professionals and select niche-focused distributors. The company is fully certified by the FCC and registered in all 48 contiguous states and Hawaii. In addition, the company provides Internet access through more than 600 points-of-presence (POPs) nationally and holds billing agreements with all the regional Bell Operating Companies, GTE and other independent telephone companies. For further information, please visit the company's Web site at: www.avtel.com. ### All statements in this news release other than statements of historical fact are forward-looking statements that involve substantial risks and uncertainties. Reference is made to the company's Annual Report on Form 10-K for the year ended Dec. 31, 1997, and to the company's other reports filed with the Securities and Exchange Commission for a discussion of such risks and uncertainties and other factors that may have material effect on the company's business. ### AvTel Communications, Inc. and Subsidiaries Selected Financial Information (in thousands except for per share data) December 31, 1998 1997 Assets Cash and cash equivalents .......................... $ 911 4,807 Other current assets ............................... 6,228 10,551 Total current assets ......................... 7,139 15,358 Property and equipment, net ........................ 1,685 1,792 Other assets ....................................... 5,810 1,575 Total assets ................................. $14,634 18,725 Liabilities and Stockholders' Equity Current liabilities ................................ 10,162 9,787 Other liabilities .................................. 1,287 1,129 Total liabilities ............................ 11,449 10,916 Stockholders' equity ............................... 3,185 7,809 Total liabilities and stockholders' equity ..................................... $14,634 18,725
Three Months Ended Year Ended December 31, December 31, ------------------ ------------------ 1998 1997 1998 1997 ------------------ ------------------ Revenues ................................ $ 9,684 12,145 44,013 51,389 Gross margin ............................ 2,732 3,222 12,164 15,162 Operating expenses Selling, general and administrative 4,798 4,518 18,481 16,141 Impairment loss ................... -- 9,099 -- 9,099 Depreciation and amortization ..... 301 165 1,107 680 Total operating expenses ..... 5,099 13,782 19,588 25,920 Net operating loss ...................... (2,367) (10,560) (7,424) (10,758) Other income including income taxes ..... 234 361 297 566 Net loss ................................ $(2,133) (10,199) (7,127) (10,192) Net loss per share - basic and diluted .. $ (0.22) (1.09)(a) (0.74) (1.23)(a) Weighted average number of common shares 9,976 9,405 (a) 9,633 8,267 (a)
(a) Amounts are presented on a proforma basis as the reverse acquisition of AvTel by Matrix occurred as January 1, 1997. EX-27 3 FDS 12/31/98
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET OF AVTEL COMMUNICATIONS, INC. AND SUBSIDIARIES AS OF DECEMBER 31, 1998 AND THE RELATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 YEAR DEC-31-1998 DEC-31-1998 911 0 0 0 0 7139 1685 0 14634 10162 0 0 0 0 3185 14634 44013 44013 31849 31849 19588 0 0 0 0 0 0 0 0 (7127) (0.74) (0.74)
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