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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 FORM 10-QSB FILED DECEMBER 11, 1998
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended October 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
2CONNECT EXPRESS, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
FLORIDA 65-0674664
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2055 LAKE AVENUE, S.E., SUITE A, LARGO, FL 33771-3738
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code (813) 584-7902
NOT APPLICABLE
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(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 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 [ ] No [X]
Check whether the issuer filed all documents and reports required to be filed
by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.01 per share, 30,000 shares outstanding as of December
11, 1998.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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This amendment to the Registrant's Form 10-QSB for the fiscal quarter
ended October 31, 1998 filed with the Commission on December 11, 1998 is being
filed to include the required disclosure under Items 2 and 4 of Form 10-QSB
with respect to the Amended and Restated Articles of Incorporation of the
Registrant filed as an Exhibit thereto.
ITEM 2. CHANGES IN SECURITIES
THE FOLLOWING SUMMARY OF THE REGISTRANT'S AMENDED AND RESTATED ARTICLES
AND THE RIGHTS AND PREFERENCES OF THE PREFERRED STOCK AND COMMON STOCK
AUTHORIZED THEREIN SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN ITS
ENTIRETY BY, THE REGISTRANT'S AMENDED AND RESTATED ARTICLES ATTACHED AS AN
EXHIBIT TO THE REGISTRANT'S FORM 10-QSB FILED DECEMBER 11, 1998.
GENERAL
On December 1, 1998, the Registrant filed its Amended and Restated
Articles of Incorporation ("Restated Articles") in anticipation of the proposed
merger ("Merger") with Bobby Allison Cellular Systems of Florida, Inc. ("Bobby
Allison") by which Bobby Allison was to be merged with and into 2Connect
Acquisition Corp. ("Acquisition"), a wholly-owned subsidiary of the Registrant.
Bobby Allison's capital structure included three series of preferred stock and
one class of common stock. The Merger Agreement for the proposed Merger required
that, prior to the Merger, the Registrant file the Restated Articles to
authorize three classes of preferred stock substantially similar to the
preferred stock authorized and issued by Bobby Allison for issuance pursuant to
the Merger. At the time of the filing of the Restated Articles (December 11,
1998) and the Merger (December 31, 1998), Bobby Allison had outstanding 15
shares of 7.5% Series A Convertible Preferred Stock, 50 shares of 7.5% Series B
Convertible Preferred Stock and 4,000 shares of common stock. Bobby Allison also
had authorized shares of 7.5% Series C Convertible Preferred Stock but none
outstanding.
Pursuant to the Merger Agreement, the Registrant filed the Restated
Articles authorizing 20 shares of 7.5% Series A Convertible Preferred Stock of
the Registrant, par value $1.00 per share ("Series A Preferred Stock"), 50
shares of 7.5% Series B Convertible Preferred Stock of the Registrant, par value
$1.00 per share ("Series B Preferred Stock"), 250 shares of 7.5% Series C
Convertible Preferred Stock, par value $1.00 per share ("Series C Preferred
Stock") and 25,000,000 shares of common stock, par value $.01 per share ("Common
Stock"). Hereinafter, the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock shall be collectively referred to as the "Preferred
Stock".
The following paragraphs describe the rights and preferences of the
Preferred Stock. Also, for a description of the Merger, see the Registrant's
Form 8-K filed on January 8, 1999.
DIVIDENDS
The holders of Preferred Stock are entitled to receive, out of funds
legally available therefor, dividends per share at the annual rate of 7.5% based
upon the initial purchase price of each share of Preferred Stock. At the time of
the Merger each of the outstanding shares of Bobby Allison preferred stock were
issued in consideration of the payment of cash or the extinguishment of debt in
the amount of $25,000 per share. Consequently, pursuant to the Merger, the
Registrant now has issued 15 shares of Series A Preferred Stock and 50 shares of
Series B Preferred Stock, each with a face value of $25,000. As a result, the
Registrant is currently obligated to pay, out of legally available fund
therefor, $121,875 in dividend payments. This would be increased by the issuance
of Series C Preferred Stock.
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No dividends shall be paid to holders of Common Stock unless all
accrued dividends on the Preferred Stock have been paid. In the event that there
is insufficient legally available funds to pay all dividends on the Preferred
Stock, then the Registrant shall first pay all accrued dividends pro rata on the
Series A Preferred Stock and Series B Preferred Stock. If there are sufficient
funds to pay all of the dividends on the Series A Preferred Stock and Series B
Preferred Stock, then and remaining funds shall be paid pro rata to the holders
of Series C Preferred Stock.
LIQUIDATION PREFERENCE
Upon any liquidation, dissolution or winding-up of the Registrant,
distribution of the assets of the Registrant shall be made in the following
order: (i) to the holders of Series A Preferred Stock, an amount equal to the
initial purchase price plus accrued but unpaid dividends; (ii) to the holders of
Series B Preferred Stock, an amount equal to the initial purchase price plus
accrued but unpaid dividends; (iii) to the holders of the Series C Preferred
Stock, an amount equal to the initial purchase price plus accrued but unpaid
dividends; and (iv) pro rata to the holders of the Preferred Stock and Common
Stock.
CONVERSION RATIO
Each share of Preferred Stock is convertible into 4,166 shares of
Common Stock ("Conversion Ratio"). Consequently, the conversion price is
dictated by the initial purchase price. With regard to the outstanding Series A
Preferred Stock and Series B Preferred Stock, the initial purchase price was
$25,000 per share which corresponds to a conversion price of $6.00 per share of
Common Stock.
The 15 outstanding shares of Series A Preferred Stock is convertible
into a total of 62,490 shares of Common Stock. The 50 outstanding shares of
Series B Preferred Stock is convertible into a total of 208,300 shares of Common
Stock. There is no outstanding Series C Preferred Stock.
The Restated Articles provide that the Conversion Ratio shall be
adjusted for various corporate actions of the Registrant to protect the holders
of the Preferred Stock against dilution, including, but not limited to, stock
splits, stock dividends, mergers, reorganization and recapitalizations. The
Conversion Ratio shall also be adjusted for the sale of any shares of Common
Stock at a price of less than the conversion price, i.e., $6.00 per share in the
case of the outstanding Series A Preferred Stock and Series B Preferred Stock,
excluding stock options granted before the filing of the Restated Articles
(unless exercise price reduced) or granted pursuant to a duly adopted stock
option plan for which no more than 10% of the outstanding Common Stock shall be
reserved for issuance.
REDEMPTION
To the extent the Registrant has funds legally available therefor, the
Registrant shall redeem each share of Preferred Stock on that date exactly five
(5) years after the issuance of such share of Preferred Stock.
To the extent the Registrant has funds legally available therefor, the
Board of Directors of the Registrant may at any time, in its sole and absolute
discretion, redeem by lot any series or portion of any series of the Preferred
Stock. By lot means that the Registrant may make partial redemptions for
specific groups of the Preferred Stock rather than redeeming pro rata portion of
all of the Preferred Stock or a series of Preferred Stock. For example, the
Registrant could redeem either the Series A Preferred Stock but not any of the
Series B Preferred Stock or Series C Preferred Stock or any specific portion of
a single series of Preferred Stock.
Redeemed shares of Preferred Stock shall revert to the status of
authorized but unissued and may be redesignated and reissued.
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VOTING RIGHTS
The Preferred Stock shall be generally non-voting except as
specifically provided for in the Restated Articles and summarized below:
SERIES A PREFERRED STOCK. The vote of the majority of the Series A
Preferred Stock shall be required for authorization of the following : (i) the
issuance of any securities ranking senior to or in parity with the Series A
Preferred Stock except for commercial debt incurred in the ordinary course of
business; (ii) any amendments, alterations or repeals of any provision of the
Restated Articles affecting the rights or preferences of the Preferred Stock;
(iii) any consolidation or merger (unless the Registrant survives and the
capital is not changed); (iv) any transaction or series of transactions in which
an excess of 50% of the Registrant's voting power is transferred; (v) any
reclassification or recapitalization; (vi) any dissolution, liquidation, or
winding up of the Registrant; (vii) any sale of all or more than 50% of the
assets of the Registrant or (viii) or any agreement to do any of the foregoing.
SERIES B PREFERRED STOCK. The vote of the majority of the Series B
Preferred Stock shall be required for authorization of the following: (i) the
issuance of any securities ranking senior to or in parity with the Series B
Preferred Stock except for commercial debt incurred in the ordinary course of
business; (ii) any amendments, alterations or repeals of any provision of the
Restated Articles affecting the rights or preferences of the Preferred Stock;
(iii) any consolidation or merger (unless the Registrant survives and the
capital is not changed); (iv) any transaction or series of transactions in which
an excess of 50% of the Registrant's voting power is transferred; (v) any
reclassification or recapitalization; (vi) any dissolution, liquidation, or
winding up of the Registrant; (vii) any sale of all or more than 50% of the
assets of the Registrant or (viii) or any agreement to do any of the foregoing.
Also, the Series B Preferred Stock shall have the right to elect 1/3 of the
directors of the Board of Directors.
SERIES C PREFERRED STOCK. The vote of the majority of the Series C
Preferred Stock shall be required for authorization of any securities ranking
senior to or in parity with the Series C Preferred Stock except for commercial
debt incurred in the ordinary course of business.
VOTING AFTER A DEFAULT. In the event that the Registrant defaults on
the payment of any dividend on or redemption of any series of Preferred Stock,
then that series of Preferred Stock shall become fully voting on all matters
submitted to a vote of the shareholders as if fully converted into Common Stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the shareholders during the
quarter ended October 31, 1998; however, the Restated Articles described above
were adopted by unanimous consent of the shareholders of the Registrant on
November 17, 1998.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
2CONNECT EXPRESS, INC.
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(Registrant)
/s/ ROBERT L. MCGINNIS
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Robert L. McGinnis, Chairman of the Board
and Chief Executive Officer
DATE: January 8, 1999
