0000837993-95-000004.txt : 19950821
0000837993-95-000004.hdr.sgml : 19950821
ACCESSION NUMBER: 0000837993-95-000004
CONFORMED SUBMISSION TYPE: 10QSB
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 19950630
FILED AS OF DATE: 19950814
SROS: NONE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: AMERICONNECT INC
CENTRAL INDEX KEY: 0000837993
STANDARD INDUSTRIAL CLASSIFICATION: 4813
IRS NUMBER: 481056927
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10QSB
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-18654
FILM NUMBER: 95563320
BUSINESS ADDRESS:
STREET 1: 6750 W 93RD ST STE 110
CITY: OVERLAND PARK
STATE: KS
ZIP: 66212-1465
BUSINESS PHONE: 9133418888
MAIL ADDRESS:
STREET 1: 6750 W 93RD STREET
STREET 2: STE 110
CITY: OVERLAND PARK
STATE: KS
ZIP: 66212-1465
FORMER COMPANY:
FORMER CONFORMED NAME: AMERIFAX INC /DE/
DATE OF NAME CHANGE: 19920703
10QSB
1
NONE
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-18654
AmeriConnect, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware
(State of other jurisdiction of incorporation or organization)
48-1056927
(I.R.S. Employer Identification No.)
6750 West 93rd Street, Suite 110, Overland Park, KS
(Address of principal executive offices)
66212
(Zip Code)
(913) 341-8888
(Issuers's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 ___
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date
As of August 1, 1995, the Issuer had outstanding 6,211,317 shares of Common
Stock and 705,433 shares of Class A Common Stock.
Transitional Small Business Disclosure Format (Check One):
Yes ___ No X
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICONNECT, INC.
Consolidated
Balance Sheets
ASSETS June 30, December 31,
1995 1994
(Unaudited)
CURRENT ASSETS
Cash $136,857 $405,942
Accounts receivable, net of allowance
of $298,648 at 1995 and $288,614 at 1994 2,659,124 2,378,922
Accounts receivable-trade, with affiliates 12,672 9,869
Notes and accounts receivable - agent
including accrued interest, net of allowance
of $100,000 (Note 6) 256,302 253,064
Notes receivable - director/shareholder
(Note 2) 14,500 11,500
Deferred income taxes (Note 4) 250,000 250,000
Prepaid commissions 13,111 37,278
Other current assets 51,108 37,210
Total current assets 3,393,674 3,383,785
Non-Current Assets
Equipment and software, net of accumulated
depreciation and amortization of $188,752
at 1995 and $154,176 at 1994 162,847 124,632
Deferred income taxes (Note 4) 250,000 250,000
Deposits 19,402 20,039
TOTAL ASSETS $3,825,923 $3,778,456
See accompanying notes to financial statements
AMERICONNECT, INC.
Consolidated
Balance Sheets
June 30, December 31,
1994 1993
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable (Note 3) $2,091,332 $2,090,678
Note Payable (Note 3) 41,802 --
Sales taxes payable 163,358 131,653
Accrued office closing costs 9,385 18,692
Other accrued liabilities 5,835 30,565
Total current liabilities 2,311,712 2,271,588
NON-CURRENT LIABILITIES
Current deposits 14,265 14,265
Deferred Income -- 13,384
Total liabilities 2,325,977 2,299,237
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY (Note 5)
Class A common stock, par value $.00001 per
share; 10,000,000 shares authorized; issued
6,675,433 shares 67 67
Common Stock, par value $.01 per share;
20,000,000 shares authorized; issued
6,391,567 shares 63,916 63,166
Additional paid-in capital 3,643,865 3,642,364
Accumulated deficit (2,206,039) (2,224,515)
Treasury Stock - class A common, at cost;
5,970,000 shares (60) (60)
Treasury Stock - common, at cost; 180,250
shares (1,803) (1,803)
Total stockholders' equity 1,499,946 1,479,219
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,825,923 $3,778,456
See accompanying notes to financial statements
AMERICONNECT, INC.
Statements of Operations
(Unaudited)
For The Three Months For The Six Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
REVENUES
Sales $4,378,878 $4,358,628 $8,890,727 $8,546,771
Sales to affiliates 26,410 14,782 41,534 26,658
Total revenues 4,405,288 4,373,410, 8,932,261 8,573,429
COSTS AND EXPENSES
Direct operating costs 3,360,777 3,280,517 6,805,223 6,335,589
Selling, administrative and
general expenses 1,055,094 966,819 2,082,065 1,866,968
Depreciation and amortization 18,777 9,768 34,576 15,935
Total costs and expense 4,434,648 4,257,104 8,921,864 8,218,492
Operating Income (loss) (29,360) 116,306 10,397 354,937
OTHER INCOME (EXPENSE)
Interest income 5,558 6,961 12,571 8,514
Interest expense (2,498) (6,583) (3,240) (14,920)
Loan Fees -- (820) (1,251) (820)
Total other income (expense) 3,060 (442) 8,080 (7,226)
NET INCOME BEFORE INCOME TAXES (26,300) 115,864 18,477 347,711
Income Tax Expense (Note 9) -- 3,605 -- 5,580
Deferred income taxes (Note 9) -- -- -- --
NET INCOME (LOSS) ($26,300) $112,259 $18,477 $342,131
Net income (loss) per common
and common equivalent share
(Note 1) ($0.004) $0.017 $0.002 $0.05
Weighted average common and
common equivalent shares
outstanding (Note 1 and 10) 7,327,698 6,789,750 7,327,698 6,789,750
See accompanying notes to financial statements
AMERICONNECT, INC.
Statements of Cash Flows
(Unaudited)
For the Six For the Six
Months Ended Months Ended
June 30, 1995 June 30, 1994
Cash flows from operating activities:
Net Income $18,477 $342,131
Adjustments to reconcile net income to
cash provided by/(used in) operating
activities:
Depreciation and amortization 34,576 15,935
Provision for doubtful accounts 162,835 149,085
(Increase) decrease in assets:
Accounts receivable (443,037) (973,158)
Accounts receivable - trade from related
parties (2,803) (1,390)
Other current assets 10,269 (159,165)
Deposits 637 (7,075)
Increase (decrease) in liabilities:
Accounts payable - trade 654 929,952
Sales tax payable 31,705 227,885
Accured office closing costs (9,307) (8,091)
Deferred Income (13,384) 27.603
Other accrued liabilities (24,730) (138,963)
Net cash provided by/(used in) operating
activities (234,108) 404,749
Cash flows from investing activities:
Purchase of equipment and software (72,791) (56,731)
Notes receivable - directors (3,000) --
Notes receivable - agents (20,000) (190,000)
Payments of agents notes receivable 16,762 --
Net cash provided by/(used in) investing
activities (79,029) (246,731)
Cash flows from financing activites:
Sale of stock to officer/director -- 297,000
Proceeds from Bank Loan 1,745,000 --
Payments on Bank Loan (1,703,198) --
Sale of Stock to Employees 2,250 --
Net cash provided by financing activities 44,052 297,000
Net increase (decrease) in cash (269,085) 455,018
Cash at beginning of period 405,942 122,599
Cash at end of period $136,857 $577,617
Supplemental Disclosures of Cash Flow
Information
Cash paid during the period for:
Interest $2,461 $6,406
Income taxes $3,320 $10,496
See accompanying notes to financial statements
AMERICONNECT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY: AmeriConnect, Inc. and its wholly owned subsidiary,
AmeriConnect, Inc. of New Hampshire, (collectively, the "Company") resell
long distance telecommunications services primarily to individuals and small
to medium-sized businesses. AmeriConnect, Inc. of New Hampshire was formed
June 28, 1993, in order to do business in the state of New Hampshire.
The consolidated balance sheet as of June 30, 1995, the consolidated
statements of earnings for the three and six month periods ended June 30, 1995
and 1994, and the consolidated statements of cash flows for the six months
ended June 30, 1995 and 1994 have been prepared by the Company, without audit.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows at June 30, 1995, and for all periods
presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
December 31, 1994 annual report to shareholders. The results of operations for
the periods ended June 30, 1995, and June 30, 1994, are not necessarily
indicative of the operating results for the full year.
NOTE 2 - NOTE RECEIVABLE - DIRECTOR/SHAREHOLDER
During 1994 and early 1995, the Company made loans totalling $14,500
to a director/shareholder. These loans are secured by 19,000 shares of the
Company's common stock. Interest (due at maturity) is charged at 2 1/2% over
the published prime rate found in The Wall Street Journal.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
The Company has a contract with Sprint Communications, L.P. ("Sprint")
to provide telecommunications services for the Company's customers. The
agreement covers the pricing of the services for a term of three years
beginning May 1994. The Company has a monthly minimum usage commitment of
$1,000,000 through April 1997. In the event the Company's customers use less
than the minimum commitment in any month, the difference is due and payable to
Sprint in the following month. The Company was in compliance with the
contractual requirements of the agreement throughout the quarter ended
June 30, 1995. The Company is currently in negotiations with Sprint to
provide the Company with a new contract for telecommunications services that
the Company anticipates would be effective September 1, 1995.
The Company has a contract with WilTel, Inc. ("WilTel") to provide
telecommunications services at discounted rates which will vary based upon the
amount of usage by the Company. The term of this usage commitment is
thirty-nine (39) months. The Company's agreement with Wiltel calls for a
minimum monthly usage commitment of $50,000 through January 1998. In the event
the Company's customers use less than the minimum commitment in any month, the
difference is due and payable to WilTel in the following month. The Company
was in compliance with the contractual requirements of the agreement throughout
the quarter ended June 30, 1995.
The Company has a revolving credit facility which allows for maximum
borrowings by the Company of the lesser of $1,000,000 or 50% of eligible (less
than 61 days old) receivables. Interest is payable monthly at the bank's
prime rate (9% at June 30, 1995) plus 1%. Under the terms of the credit
facility, the Company is required to meet certain financial covenants. The
line is secured by all of the Company's accounts receivable. During the
second quarter of 1995, the Company had used this facility for short term
borrowings and had $41,802 outstanding at the quarter ended June 30, 1995.
NOTE 4 - INCOME TAXES
A valuation allowance was established to reduce the deferred tax asset
to the amount that will more likely than not be realized.
The valuation allowance was adjusted for the six month period ended
June 30, 1995, and the fiscal year ended December 31, 1994, as follows:
June 30, 1995 December 31, 1994
Valuation allowance, beginning of period $591,512 $688,200
Valuation adjustment (31,328) (96,688)
Adjustment in allowance due to change
in circumstances -- --
Valuation allowance, end of period $560,184 $591,512
NOTE 5 - COMMON STOCK, WARRANTS AND OPTIONS
PUBLIC OFFERING: In its initial public offering in 1989, the
Company issued 828,000 units, each of which consisted of five shares of
previously unissued common stock, par value $.01 per share, and five
redeemable Class A Warrants at a price per unit of $5.00. Each of the Class
A Warrants, which were transferable separately immediately upon issuance,
entitled the holder to purchase for $1.00 one share of common stock and one
redeemable Class B common stock purchase warrant ("Class B Warrant"). Each
Class B Warrant entitled the holder to purchase one share of common stock at
$1.50. The Class A Warrants and Class B Warrant expired on May 29, 1994. The
warrants are not common stock equivalents for the purposes of the earnings per
share computations. (See Note 1). In addition, the Company granted the
underwriter and finder options to purchase 57,600 and 14,400 units,
respectively, at $6.00 per unit exercisable over a period of four years
commencing one year from the date of the prospectus.
MISSING STOCK CERTIFICATES: Prior to the Company's initial public
offering, the stockholders of record as of March 29, 1989, executed escrow
agreements which required the placement in escrow of 150,000 shares of
outstanding common stock and 5,970,000 shares of outstanding Class A common
stock pending the achievement of certain earnings objectives. These earnings
objectives were not met and, consequently, all of the shares subject to the
escrow agreement were retired and have been accounted for as treasury stock
since December 31, 1992. In addition, in connection with the execution of a
voting trust agreement in 1989, certificates representing 3,014,751 shares of
Class A common stock were issued in the name of a voting trust in substitution
for the certificates held by some of the stockholder-parties to the voting
trust agreement. This voting trust expired in June of 1992. During the first
quarter of 1992, however, the Company learned that the escrow agent associated
with the escrow agreements asserts that it has never received the stock
certificates representing the shares subject to the escrow agreements. During
the same period, the Company discovered that the certificates representing
2,975,751 of the shares transferred to the voting trust were never delivered
to the Company for cancellation. The Company has been unable to locate
neither the original share certificates nor the certificates issued to the
voting trust. As a result, if a stockholder attempted to transfer any of the
shares subject to the escrow agreements or the voting trust agreement in
violation of such agreements, there can be no assurance that an innocent
transferee could not successfully claim the right to the shares purportedly
transferred to him or her. The Company believes, however, that the legends
affixed to each of the missing certificates, which state that the shares are
subject to the restrictions of the voting trust agreement and the escrow
agreements, respectively, are sufficient to prevent a transferee from
acquiring a valid claim with respect to the shares represented by the missing
certificates. In addition, the Company has obtained affidavits from each
holder of the missing certificates that no such purported transfers have been
made.
STOCK OPTION PLANS: On July 29, 1988, the Company adopted a stock
option plan allowing 300,000 shares of unissued but authorized common stock
for issuance of incentive and/or non-qualified stock options. At June 30,
1995, all options had been granted under the plan, and 22,000 options had been
returned to the company by employees who resigned prior to vesting. Such
returned options are again available for use under the plan.
On May 27, 1994, the Company adopted a second stock option plan
allowing for 500,000 shares of unissued but authorized common stock for
issuance of incentive and/or non-qualified stock options. As of June 30,
1995, 433,000 options under this plan had been granted and 98,000 options had
been returned to the Company by employees who resigned prior to vesting.
Such returned options are again available for use under the plan.
Stock option transactions for the period ended June 30, 1995, are summarized
below:
1988 Plan 1994 Plan Total
Outstanding, beginning of quarter 185,000 211,000 396,000
Granted -- 135,000 135,000
Exercised -- -- --
Cancelled (15,000) (11,000) (26,000)
Outstanding, end of period 170,000 335,000 505,000
Option price per share exercised $0.03 - $0.50 -- $0.03 - $0.50
Price for outstanding options $0.03 - $0.50 $0.375 - $0.75 $0.03 - $0.75
The expiration dates for the options issued under the 1988 Plan range
from May 1998 to December 2003. At June 30, 1995, 22,000 shares were available
for future grants under the 1988 Plan.
The expiration dates for the options issued under the 1994 Plan range
from August 2004 to June 2005. At June 30, 1995, 165,000 shares were available
for future grants under the 1994 Plan.
NOTE 6 - NOTES RECEIVABLE
The Company conducts a portion of its business through agents. Some
of these agents have borrowed from the Company in order to obtain necessary
capital to expand their operations. These borrowings are represented by
short term promissory notes. The terms of the notes permit the Company to
withhold the monthly payments from commissions due the agents, if necessary.
The interest rate for all the notes is 2 1/2% over the prime rate published
by The Wall Street Journal. In addition, accounts receivable resulting from
unpaid charges incurred by a specific agent have been classified with these
notes receivable. At December 31, 1994, the Company recorded $100,000 as an
allowance for bad debt on these notes and related accounts receivable due from
a specific agent whose commissions will not be sufficient to cover these
amounts. This allowance remained unchanged at June 30, 1995.
NOTE 7 - PROFIT SHARING PLAN
The Company adopted a 401(k) savings plan effective January 1, 1994,
covering nearly all eligible employees with at least six months of service.
Under the terms of the plan, employees may contribute up to 15% of their
gross wages. The Company matches 100% of the first 3% contributed by each
employee. The Company's contribution to the plan was $7,888 for the first
six months of 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
General
The Company's financial condition and results of operations for the
six month period ended June 30, 1995, were affected by its conscious decision
to place new sales people in strategic locations throughout the U.S. and its
concentrated efforts to form relationships with a few large agents. Due to
these actions, selling, administrative and general expenses have increased
while sales have remained relatively constant. Management believes that the
benefits of these new agency relationships and the placement of the new sales
personnel will be positively reflected in the future quarters.
Second Quarter Results 1995 Compared to Second Quarter Results 1994
Total Revenues. Total revenues increased from $4,373,410 in the
second quarter 1994 to $4,405,288 in the second quarter 1995, an increase of
$31,878 or approximately 1%. The increase in monthly usage charges resulted
from new long distance customers secured by the Company's non-employee sales
agents and internal sales force during the second quarter of 1995.
Direct Operating Costs. Direct operating costs increased from
$3,280,517 in the second quarter 1994 to $3,360,777 in the second quarter 1995,
an increase of $80,260 or approximately 2%. As a percentage of revenues,
direct operating costs increased from approximately 75% in the second quarter
of 1994 to approximately 76% in the second quarter of 1995.
Selling, Administrative and General Expenses. The Company's selling,
administrative and general expenses increased from $966,819 in the second
quarter 1994 to $1,055,094 in the second quarter 1995, an increase of $88,275
or approximately 9%. As a percentage of revenue, selling, administrative and
general expenses increased from approximately 22% in the second quarter 1994
to approximately 24% in the second quarter 1995. The biggest single increase
in this expense category was in compensation expenses. The remaining increase
is attributable to billing expenses, office occupancy expenses and travel
expenses.
Total compensation expenses for the second quarter increased from
$585,528 in the second quarter 1994 to $647,822 in the second quarter 1995,
an increase of $62,294 or approximately 11%. This increase is attributable
mainly to an increase in the number of sales personnel employed and to agent
commissions. Included in commission expense is the amortization of customer
lists that the Company purchased from various agents during 1994.
Fees for billing expenses increased from $98,871 in the second quarter
1994 to $153,637 in the second quarter 1995, an increase of $54,766 or
approximately 55%. This increase resulted primarily from the fact that a
portion of the billing expenses in the second quarter 1994 were recovered
from an agent that the Company had a special arrangement with in early 1994.
Office occupancy expenses increased from $60,833 in the second quarter
1994 to $98,261 in the second quarter 1995, an increase of $37,428 or
approximately 62%. The Company expanded its leased office space from 5,100
square feet in the second quarter of 1994 to 6,800 square feet in the first
quarter of 1995. The Company also began to lease computer equipment at the
end of the second quarter in 1994. The number of computer workstations leased
by the Company increased from six workstations in the second quarter of 1994
to twenty-five workstations in the second quarter of 1995.
Travel expenses increased from $17,334 in the second quarter 1994 to
$35,601 in the second quarter 1995, an increase of $18,267 or approximately
105%. This increase is due to the fact the Company added Area Sales Directors
(ASDs) in the first quarter of 1995 to work with its agent network throughout
the United States. Each ASD has their own region of the United States they
are covering. Significant travel is required to visit, motivate and train
existing and new agent sales personnel as well as contact large customers
throughout the regions.
Six Month Results 1995 Compared to Six Month Results 1994.
Total Revenue. Total revenues increased from $8,573,429 for the first
six months of 1994 to $8,932,261 for the first six months of 1995, an increase
of 358,832 or approximately 4%.
Direct Operating Costs. Direct operating costs increased from
$6,355,589 for the first six months of 1994 to $6,805,223 for the first six
months of 1995, an increase of 469,634 or approximately 7%. As a percentage
of revenues, direct operating costs increased from approximately 74% for the
first six months of 1994 to 76% for the first six months of 1995. Direct
operating costs for the first six months of 1994 included $150,000 in customer
appreciation credits from one of the Company's carriers. Without the $150,000
credits, direct operating costs for the first six months of 1994 would have
been $6,505,589 or approximately 76% of revenue.
Selling, Administrative and General Expenses. The Company's selling,
administrative and general expenses increased from $1,866,968 for the first
six months of 1994 to $2,082,065 for the first six months of 1995, an increase
of $215,097 or approximately 12%. As a percentage of revenues, selling,
administrative and general expenses increased from approximately 22% during
the first six months of 1994 to 23% during the first six months of 1995.
Liquidity and Capital Resources
On December 31, 1994 and June 30, 1995, the Company had a net worth of
$1,479,219 and $1,499,946, respectively. During the first six months of 1994,
the Company generated $404,749 cash from operations. Contributing to the
cash generated from operations during the six months of 1994 was a $150,000
customer appreciation credit the Company received from one of its carriers.
In the six month period ended June 30, 1995, the Company used $234,108 cash
in operations. While accounts receivable increased by approximately $443,000,
accounts payable remained relatively unchanged. During the first six months
of 1994, the Company changed its payment method with one of its underlying
carriers resulting in an extra one-half month of unpaid invoices at June 30,
1994. At June 30, 1995, the Company was current with this underlying carrier.
The Company has a revolving credit facility which allows for maximum
borrowings by the Company of the lessor of $1,000,000 or 50% of eligible (less
than 61 days old) receivables. Interest is payable monthly at the bank's
prime rate (9% at June 30, 1995) plus 1%. Under the terms of the credit
facility, the Company is required to meet certain financial covenants. The
line is secured by all of the Company's accounts receivable. During the first
six months of 1995, the Company had used this facility for short terms
borrowings and had $41,802 outstanding at June 30, 1995.
The Company has a contract with Sprint to provide telecommunications
services for the Company's customers. The agreement covers the pricing of
the services for a term of three years beginning May 1994. The Company has a
monthly minimum usage commitment of $1,000,000 through April 1997. In the
event the Company's customers use less than the minimum commitment in any
month, the difference is due and payable to Sprint in the following month.
The Company was in compliance with the contractual requirements of the
agreement as of the quarter ended June 30, 1995. The Company is currently in
negotiations with Sprint to provide the Company with a new contract for
telecommunications services that the Company anticipates would be effective
September 1, 1995.
The Company has a contract with WilTel to provide telecommunications
services at discounted rates which will vary based upon the amount of usage
by the Company. The term of this usage commitment is thirty-nine (39) months.
The Company's agreement with WilTel calls for a minimum monthly usage
commitment of $50,000 through January 1998. In the event the Company's
customers use less than the minimum commitment in any month, the difference
is due and payable to WilTel in the following month. The Company was in
compliance with the contractual requirements of the agreement as of the
quarter ended June 30, 1995.
At June 30, 1995, the Company had a ratio of current assets to current
liabilities of 1.47. Working capital at June 30, 1995 was $1,081,962.
In 1994, the Company signed an agreement with an agent representing
more than 25,000 residential customers. In order to facilitate the movement
of these customers, the Company loaned $141,000 to the agent as an advance
against future commissions and paid certain start-up costs on the agent's
behalf. While the Company billed these customers for some long distance usage
during 1994, due to circumstances beyond the Company's control, the payment
performance was well below, and the attrition rate well above, what the
Company typically experiences with respect to small and medium-sized business
customers. As a result, bad debt expense was in excess of the normal expected
rate, and agent commissions were insufficient to pay off the loans which
became due in December 1994. As of June 30, 1995, the total amount due
from the agent, including the loans was approximately $369,000. At December
31, 1994, the Company recorded $100,000 as an allowance against this amount
and is currently negotiating repayment of the loans and advances. This
allowance remained unchanged at June 30, 1995. These residential long
distance users are no longer customers of the Company. The Company is
currently involved in litigation with this agent.
The Company's business as a non-facilities based reseller of long
distance telecommunications services is generally not a capital intensive
business, and at December 31, 1994, the Company had no material commitments
for capital expenditures. The Company anticipates any additional capital
expenditures in the future will be confined to minimal purchases of office
fixtures and equipment.
Currently none of the Company's customers represents more than 2% of
the monthly revenues.
With the availability of the revolving credit facility and anticipated
positive cash flows from operations, the Company believes sufficient funds are
available to meet operating needs for the foreseeable future. The Company also
believes any future inflation will be offset by sales increases and therefore
will not have a material adverse effect on the Company's financial position.
Legal Proceedings
The Company is currently involved in certain disputes that arise in
the ordinary course of business including an action in the Federal District
Court in Massachusetts filed by a former agent against the Company and an
action in the District Court of Johnson County, Kansas filed by the Company
against the former agent and a related entity in connection with an agreement
for the sale of long distance services to residential customers. The Company
is vigorously defending and prosecuting these actions.
PART 2. - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 18, 1995, the Company held an annual meeting of stockholders
(the "Annual Meeting"), in connection with which the Company solicited proxies
pursuant to Regulation 14 under the Securities Exchange Act of 1934, as
amended. In connection with the Annual Meeting, the stockholders voted upon
the following matters: (i) the election of three directors (constituting the
entire board of directors) to the Company's board of directors; (ii) the
ratification and approval of the selection of Grant Thornton as the Company's
independent public accountants for the fiscal year ending December 31, 1995.
With respect to items (i) and (ii) above, the results of the votes
taken at the Annual Meeting were as follows:
(i) Election of Directors
(a) Richard K. Halford - 7,264,060 votes for; 5,000 withheld;
none abstained.
(b) Robert R. Kaemmer - 7,264,060 votes for; 5,000 withheld;
none abstained.
(c) Janet M. Flynn - 7,264,060 votes for; 5,000 withheld;
none abstained.
Messrs. Halford, Kaemmer and Ms. Flynn constitute the
entire board of directors of the Company.
(ii) Ratification of Selection of Grant Thornton - 7,264,060 votes
for; none withheld; 5,000 abstained.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Not Applicable
(b) Reports on 8-K
Not Applicable.
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 thereunto duly authorized (the undersigned being its President).
AMERICONNECT, INC.
Date: August 14, 1995
/s/ Robert R. Kaemmer
Robert R. Kaemmer
President