UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (No Fee Required)
For the fiscal year ended December 31, 1999
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from ____________ to ____________
Commission file number 1-12937
ALL COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-3124655
(State of incorporation) I.R.S. Employer Number
225 Long Avenue, P.O. Box 794, Hillside, New Jersey 07205
(Address of Principal Executive Offices)
973-282-2000
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act
Common Stock, no par value per share
Class A Common Stock Purchase Warrants None
- -------------------------------------- ----
Title of each class Name of each exchange on
which registered
Securities registered pursuant to Section 12(g) of the Act
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the 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 [_]
Indicate by check mark if disclosure of delinquent filers in response to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $23,997,212
Aggregate market value of Common Stock held by nonaffiliates as of March
17, 2000: $80,028,371
The number of shares outstanding of the registrant's Common Stock as of
March 17, 2000 was 6,864,140
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 2000 Annual
Meeting of Stockholders are incorporated by reference to Part III of this
report, which will be filed on or before April 29, 2000
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PART I
The statements contained in Part I and Part II herein, other than historical
information, are or may be deemed to be forward-looking statements, and involve
factors, risks and uncertainties that may cause the actual results of All
Communications Corporation ("ACC" or the "Company") in future periods to differ
materially from such statements. These factors, risks and uncertainties include,
but are not limited to, the relatively short operating history of the Company;
market acceptance and availability of new products; the non-binding and
nonexclusive nature of reseller agreements with manufacturers; rapid
technological change affecting products sold by the Company; the impact of
competitive products and pricing, as well as competition from other resellers;
possible delays in the shipment of new products; the success of pending and
future mergers; the volatility of the price of the Company's stock; the small
number of customers; the continued employment of key executives; and the
availability of sufficient financial resources to enable the Company to expand
its operations.
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
All Communications Corporation, together with its wholly owned
subsidiaries, is a leading provider of voice, video and network communications
solutions to the commercial, medical and educational marketplace as well as
local, state and federal government agencies. ACC incorporates state of the art
technologies with complete life-cycle management to give clients a single source
for all their communications needs. In addition to voice, video and network
services, ACC offers data transmission solutions, video streaming and webcasting
capabilities. The Company was organized as a New Jersey corporation in 1991 and
is headquartered at 225 Long Avenue, Hillside, New Jersey, 07205.
On December 27, 1999, the Company entered into a merger agreement with View
Tech, Inc. ("VTI") pursuant to which, pending approval of VTI's and the
Company's shareholders, the Company will merge into VTI, with VTI as the
surviving corporation. In the merger, the Company's shareholders will receive
3.3 shares of VTI common stock for each share of the Company's common stock they
own, and will own a majority of the outstanding common stock of VTI after the
merger. Immediately following the merger, the surviving corporation will change
its name to Wire One Technologies, Inc. ("Wire One"). The Company's officers and
directors prior to the merger will be the officer and directors of Wire One
following the merger. As a result of the merger, the Company will become a
Delaware corporation.
VTI is a single source provider for the equipment and services required to
meet the video, voice and data communications requirements of its customers. VTI
is a leading remarketer, integrator and service provider of video conferencing
equipment. VTI currently has offices in Camarillo, Irvine, Sacramento and San
Diego, California; New York, New York; Atlanta, Georgia; Baton Rouge, Louisiana;
Chicago, Illinois; Dallas and Houston, Texas; Durham, North Carolina; Englewood,
Colorado; Nashville and Knoxville, Tennessee; Jacksonville, Florida; Salt Lake
City, Utah; Phoenix, Arizona and Chesterfield, Missouri.
INDUSTRY OVERVIEW
VOICE COMMUNICATIONS. Advances in telecommunications technologies have
facilitated the development of increasingly sophisticated telephone systems and
applications. Telecommunications systems have evolved from simple analog
telephones to sophisticated digital systems and applications. Users increasingly
rely upon a variety of applications, including conference calling,
speakerphones, voice processing and automated attendant, to improve
communications within their organizations and with customers and vendors.
Digital technology has facilitated the integration of computing and
telecommunications technologies, which has made possible a number of new
applications that further enhance productivity.
As the telecommunications needs of businesses have become more advanced,
the integration of the different parts of a system has become increasingly
complex. The system integration, service and support capabilities of
telecommunications suppliers have become significant competitive factors. In
order to meet the needs of end users, suppliers such as ACC have been
increasingly required to develop close relationships with their customers.
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VIDEOCONFERENCING. Videoconferencing communications entails the
transmission of video and audio signals and computerized data between two or
more locations through a digital telecommunication network. Videoconferencing
communications systems were first introduced in the late 1970's in the form of
specialized dedicated conference rooms outfitted with expensive electronic
equipment and requiring trained operators. Signals were transmitted over
dedicated transmission lines established between fixed locations. Market
acceptance of early systems was limited because of the low quality of the video
output, as well as the high hardware and transmission costs and limited
availability of transmission facilities.
Technological developments in the 1980's resulted in a dramatic increase in
the quality of video communications, as well as a substantial reduction in its
cost. The proliferation of switched digital networks, which transmit digital, as
opposed to analog signals, eliminated the requirement of dedicated transmission
lines. Advances in data compression and decompression technology, and the
introduction of devices for separating and distributing digital signals over
several channels simultaneously and recombining them after transmission,
resulted in products with substantially improved video and audio quality and
further reduced hardware costs. Competition among telecommunications carriers
during the past decade, together with the expanded use of fiber optic technology
and the development of integrated switched digital networks ("ISDN") have
further contributed to reduced transmission costs.
Further technological developments in the 1990's in videoconferencing
systems resulted in accepted industry standards, which now enables compatibility
among systems made by different manufacturers. These developments have increased
the quality and features available in videoconferencing systems while
significantly decreasing the costs to the customer.
STRUCTURED CABLING SYSTEMS. A cabling or wiring system is a long-term
infrastructure investment for voice and high-speed data transmission. Computer
systems requiring high speed or maximum bandwidth for connectivity options
require structured wiring systems to be in place. These systems can now be
certified to meet connectivity requirements for management information systems
as well as have assurance of handling future modifications. ACC believes that
the demand for structured wiring systems is increasing due to a growing demand
for computer systems and local area networks to run at continually higher
speeds.
OPERATIONS
PRODUCTS AND SERVICES. ACC provides turnkey integrated voice and
videoconferencing solutions to its customers. ACC is a reseller of voice
communications products manufactured by Lucent Technologies, Inc. ("Lucent"),
the Business Telephone System Division of Panasonic Communications and Systems
Company ("Panasonic") and Active Voice Corporation ("Active Voice") and
videoconferencing products manufactured by Polycom, Inc. ("Polycom") and Sony
Electronics Inc. ("Sony"). ACC's business involves the sale, installation and
maintenance of the full line of voice and videoconferencing products
manufactured by these companies.
During the fiscal years ended December 31, 1999 and 1998, approximately 48%
and 54%, respectively, of the Company's total sales were attributable to the
sale of voice communications equipment, and approximately 52% and 46%,
respectively, of the Company's total sales were attributable to the sale of
videoconferencing communications equipment. The Company does not segregate or
manage its operations by business segment.
VOICE COMMUNICATIONS. ACC is a reseller of Lucent and Panasonic digital key
and hybrid telephone systems, private branch exchange (PBX) telephone systems,
voice processing systems and computer telephony integration (CTI) solutions.
Lucent and Panasonic manufacture digital key and hybrid telephone systems which
contain multi-featured fully electronic digital telephones, common control
units, central processing units, and associated common equipment to provide
service in the approximately 2,000 line and under marketplace. ACC distributes
Lucent manufactured PBX systems under the name Definity which has a capacity
expandable up to 25,000 ports. ACC also distributes a Panasonic manufactured PBX
system under the name DBS 576 with a maximum capacity of 576 ports. A key
telephone system provides each telephone with direct access to multiple outside
trunk lines and internal communications through intercom lines. A PBX system,
through a central switching system, permits the connection of internal and
external lines. A hybrid switching systems provides, in a single system, both
key telephone and PBX features. Key telephone equipment may be used with PBX
equipment.
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ACC sells fully integrated voice processing systems manufactured by Lucent,
Panasonic and Active Voice. The systems range from 2 to 64 voice ports and up to
330 hours of message storage. The systems have automated attendant features
which allow for incoming calls to be answered electronically and distributed to
specific extensions without the use of a switchboard operator. The systems can
be interactive with display telephone sets. System users have the ability to
access stored messages from any touch-tone telephone. The systems have the
capability to automatically notify a user outside the system of urgent messages.
The systems have additional features which can be customized to the needs of the
end user.
Several of Lucent and Panasonic systems support open architecture
interfaces that allow external computers to interact and control the systems
through industry standard interfaces. The systems support an RS-232 system level
interface, an RS-232 Hayes based desktop interface and a Windows Dynamic Data
Exchanges (DDE) interface. The systems have Developer Toolkits available that
include the detailed interface specifications, applications notes and
development tools to assist third party software developers to develop vertical
market CTI applications for the products. Applications include database look-up
(which utilizes caller-ID information to retrieve customer information
automatically from a computerized database), automated attendant, interactive
voice response and call accounting (which permits the monitoring of telephone
usage and toll cost). Several of the systems support Microsoft Telephone
Application Programming Interface (TAPI) and Novell Telephony Services
Applications Programming Interface (TSAPI). There are Windows-based interfaces
available for personal computers to facilitate installation, system
configuration and programming.
ACC is involved in the sale, installations and servicing of Panasonic
products throughout the United States both through its own employees and
subcontractors. ACC sells Lucent products through its direct sales force, and
installs and services Lucent products both through its own employees and
nationwide through subcontracting arrangements with Lucent directly and with
other Lucent dealers.
ACC is also involved in the sale, installation, and maintenance of
peripheral equipment and components manufactured by other vendors. Such
equipment and components are readily available through multiple manufacturers
and suppliers.
VIDEOCONFERENCING. The Company began selling videoconferencing products in
1994. ACC provides Sony and Polycom videoconferencing systems for United States
customers on a global basis, with a concentration in the northeastern United
States. ACC customers include business, education, health care and government
agencies. ACC: (i) provides its customers with systems produced by both Sony and
Polycom, worldwide manufacturers of room based videoconferencing equipment, and
ancillary equipment manufactured by others, (ii) selects and integrates those
systems and components into complete systems designed to suit each customer's
particular communications requirements, (iii) develops custom software and
hardware components when necessary and (iv) provides training and other
continuing services designed to insure that its customers fully and efficiently
utilize their systems. In 1999, ACC sold and installed approximately 1,000
videoconferencing systems, as compared to over 300 systems in 1998 and
approximately 100 systems in 1997.
In January 1999, ACC executed an agreement with Sprint Communications
Company LP to act as an authorized sales agent for Sprint's advanced network and
videoconferencing services in Sprint's Video Partners Program. This agreement
enabled ACC to provide a telecommunications network service component to its
overall line of products and services. Under the agreement, ACC receives a
percentage of Sprint's monthly charges billed to ACC's customers for usage of
Sprint's telecommunications network.
STRUCTURED CABLING SYSTEMS. ACC offers structured cabling systems by
NORDX/CDT and Lucent. Structured cabling systems offer state of the art, high
bandwidth, standards based wiring infrastructure with a long life cycle which
support current technologies, and also can support higher speeds for future
technologies. Structured cabling systems can be implemented for a few end users
or up to thousands of end users per installation depending on the needs of the
end user.
RESELLER AGREEMENTS. In November 1997, ACC entered into a two-year
nonexclusive distribution agreement, with renewal options, with Polycom for the
Polycom ViewStation(R) group videoconferencing system and the Polycom
ShowStation(R) IP integrated conference projector. This agreement enabled ACC to
market and sell a full range of Polycom manufactured videoconferencing,
audioconferencing and dataconferencing products.
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In November 1997, ACC signed a one year nonexclusive distribution agreement
with Lucent to sell, install and maintain Lucent Partner, Legend and Definity
telephone systems, voice mail and CTI software as an authorized Lucent dealer.
ACC also has authority to resell, install and maintain Lucent peripheral
products. This agreement has been renewed through March 2001.
ACC has an agreement with Panasonic authorizing ACC to serve as Panasonic's
nonexclusive reseller in the United States. The agreement is automatically
renewable for successive one-year terms unless terminated by either party upon
at least 30 days' prior notice, or immediately by Panasonic upon written notice
to ACC if ACC is in default in the performance of its obligations under the
agreement, or upon the bankruptcy or insolvency of ACC.
MAJOR CUSTOMERS. ACC is dependent upon a few customers for a large portion
of its revenue. ACC sells its telephone and voice processing systems to the real
estate brokerage franchisees of Cendant Corp. (formerly HFS Incorporated)
pursuant to ACC Preferred Vendor Agreement. Sales under this agreement accounted
for 15% and 12% of net revenues for fiscal 1999 and 1998, respectively.
In 1998, ACC established significant customer relationships with Universal
Health Services, Inc., for Lucent and Sony products. Universal Health Services
accounted for 14% and 11% of net revenues for fiscal 1999 and 1998,
respectively.
The loss of one of these customers could have a material effect on the
Company. No other customer accounted for more than 10% of consolidated net
revenues in 1999 or 1998.
SALES AND MARKETING. ACC markets and sells its products and services
directly to customers through a sales and marketing organization supported by
sales, technical and training personnel versed in the specifications and
features of the voice communications and videoconferencing systems sold to
customers. ACC markets both voice communications and videoconferencing systems
through its direct sales force. ACC provides training to its sales force to
maintain the expertise necessary to effectively market and promote the systems.
The manufacturers, which ACC represents, have provided ACC with sales,
advertising and promotional materials, which ACC, in turn, provides to its
existing customers and prospective customers in conjunction with sales promotion
programs of the manufacturers. ACC maintains up to date systems for
demonstration and promotion to customers and potential customers. Technical and
training personnel attend installation and service training sessions offered by
the manufacturers from time to time to enhance their knowledge and expertise in
the installation and maintenance of the systems.
ACC hosts seminars for the purposes of demonstrating videoconferencing
systems to its prospective customers, and to provide prospective customers the
opportunity to learn more about ACC's products and services.
ACC provides customers of both voice communication and videoconferencing
systems with a full complement of services to ensure customer satisfaction and
optimal utilization of the systems. As a preliminary component of a sale to a
customer or prospective customer, ACC provides consulting services in order to
assess the customer's needs and specifications and to determine the most
effective method to achieve those needs. Upon delivery of the system, ACC
employees install and test the equipment to make sure the systems are fully
functional. In situations where a customer is located at a great distance from
ACC's offices, ACC, on an as-needed bases, will engage the services of an
installation subcontractor located in close geographic proximity to the
customer, for the installation and testing of equipment sold by ACC to the
customer. The retention of an installation subcontractor located in close
proximity to a customer benefits the customer through quick and cost-effective
installation of the system. After the equipment is functional, ACC provides
training to all levels of the customer's organization. Training includes
instruction in systems operation and, with respect to videoconferencing systems,
planning and administration of meetings.
ACC maintains a 24-hour toll-free technical support hotline that customers
may call. ACC provides 7 by 24 real-time support for its global
videoconferencing customers. ACC also provides onsite support and maintenance
which includes the repair and/or replacement of equipment.
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EMPLOYEES, CONSULTANTS AND SUBCONTRATORS
As of December 31, 1999, ACC had fifty-four (54) full-time employees, as
well as a network of fifty (50) consultants and installation subcontractors who
are available on an as-needed basis for marketing support and to provide
contract installation. Twenty (20) of the ACC's employees are engaged in
marketing and sales, twenty (20) in installation service and customer support
and fourteen (14) in finance and administration. None of ACC's employees are
represented by a labor union. ACC believes that its employee relations are good.
COMPETITION
The voice and videoconferencing communications industries have been
characterized by pricing pressures and business consolidations. ACC competes
with other resellers, as well as manufacturers of voice communications and
videoconferencing systems, many of which are larger, have greater recognition in
the industry, a longer operating history and greater financial resources than
ACC. ACC's competitors in the voice communications sector include Lucent,
Northern Telecom, Toshiba America, Inc., Siemens Corporation and NEC
Corporation. ACC also competes with other dealers of voice communication
products. ACC's competitors in the videoconferencing communications sector
include Picturetel Corporation, Tandberg Inc., VTEL Corporation, MCI Worldcomm
and other dealers. Existing competitors may continue to broaden their product
lines and expand their retail operations, and potential competitors may enter
into or increase their focus on the voice and/or videoconferencing
communications market, resulting in greater competition for ACC. In particular,
ACC believes that as the demand for videoconferencing communications systems
continues to increase, additional competitors, many of which also will have
greater resources than ACC, will enter the videoconferencing market.
ACC believes that its technical expertise and commitment to customer
service and support allow it to compete favorably. ACC conducts comprehensive
sales and product training for all its sales and marketing personnel. ACC
believes that such training results in its employees having a high level of
product and industry knowledge which makes ACC more attractive to end users. ACC
also strives to provide prompt and efficient installation, customer training and
after sales service which ACC believes results in repeat business as well as new
referrals.
ITEM 2. DESCRIPTION OF PROPERTY
ACC's headquarters are located at 225 Long Avenue, Hillside, New Jersey,
07205. These premises consist of 8,491 square feet of office space, and 13,730
square feet of secured warehouse facilities. The term of this lease is for a
period of five years expiring on May 31, 2002. The base rental for the premises
during the term of the lease is approximately $123,000 per annum. In addition,
ACC is also obligated to pay its share of the Landlord's operating expenses
(i.e., those costs or expenses incurred by the Landlord in connection with the
ownership, operation, management, maintenance, repair and replacement of the
premises, including, among other things, the cost of common area electricity,
operational services and real estate taxes). ACC has an option to renew the
lease for an additional term of five years, provided that ACC is not in default
under the terms of the lease at the time of renewal. The Hillside premises serve
as ACC's headquarters and are utilized for executive, administrative and sales
functions, the demonstration of ACC's voice and videoconferencing systems and
the warehousing of ACC's inventory. At the present time, there is additional
adjoining space in both the office and warehouse areas should the Company seek
to expand this facility.
ACC also leases sales and/or demonstration offices in Trumbull,
Connecticut; Washington, D.C.; Chicago, Illinois; Los Angeles, California; and
Manassas, Virginia. ACC believes that the facilities it presently leases will be
adequate for the foreseeable future and that additional space, if required, can
be located and leased on reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
On July 16, 1998, MaxBase, Inc. filed a Complaint against ACC and one of
its subsidiaries AllComm Products Corp. ("APC") in the Superior Court of New
Jersey, Law Division, in Bergen County. The Complaint alleges that ACC breached
its agreement with MaxBase Inc., for Maxshare 2 units by failing to meet the
required minimum purchase obligations thereunder. The Complaint further alleges
misrepresentation and unfair trade practices. The Complaint also seeks to enjoin
ACC from enforcing any rights ACC has under the agreement. Maxbase claims
damages of $508,200 in lost profits for units not
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purchased and $945,300 in lost profits for units sold to ACC below market price,
as well as unspecified punitive and treble damages. In March 1999, the plaintiff
added claims for defamation and tortious interference. A trial is expected to
occur in May 2000. ACC believes the claims by MaxBase are without merit and
intends to fully defend the suit and assert its rights under the agreement. ACC
has filed a counterclaim for breach of contract, breach of warranty and
rescission based on misrepresentation. ACC does not anticipate that this
proceeding will have a material adverse effect on the financial condition,
results of operation or cash flows of ACC.
On May 20, 1999 the Company settled a legal matter with its former
landlord. Under the terms of the settlement, the Company paid a total of
$120,000 through December 31, 1999 to fully settle this matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of the Company
during the fourth quarter of the year which ended December 31, 1999.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been listed and traded on the OTC Electronic
Bulletin Board since April 28, 1997 under the symbol "ACUC". The following table
sets forth the high and low bid prices of a share of Common Stock for each
quarter as set forth below. Quotations may reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions.
1999 High Low
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1st quarter 1-7/16 3/8
2nd quarter 1-11/16 1-1/16
3rd quarter 1-1/8 1-1/16
4th quarter 1-1/16 1/2
1999 High Low
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1st quarter 2-1/4 11/16
2nd quarter 5-7/8 1-13/16
3rd quarter 5 3-3/8
4th quarter 11-7/8 3-11/16
The Company has not declared or paid any cash or stock dividends on the
Common Stock and is prohibited from doing so under its working capital credit
facility.
As of March 17, 2000, there were 55 holders of record of Common Stock.
Institutions, as holders of record, may hold Common Stock in nominees or street
name accounts on behalf of multiple beneficial owners.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
financial statements and the notes thereto. The discussion of results, causes
and trends should not be construed to imply any conclusion that such results or
trends will necessarily continue in the future.
The statements contained herein, other than historical information, are or
may be deemed to be forward-looking statements and involve factors, risks and
uncertainties that may cause the Company's actual results in future periods to
differ materially from such statements. These factors, risks and uncertainties
include, but are not limited to, the relatively short operating history of the
Company; market acceptance and availability of new products; the non-binding and
nonexclusive nature of reseller agreements with manufacturers; rapid
technological change affecting products sold by the Company; the impact of
competitive products and pricing, as well as competition from other resellers;
possible delays in the shipment of new products; and the availability of
sufficient financial resources to enable the Company to expand its operations.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 ("FISCAL 1999") COMPARED TO YEAR ENDED DECEMBER 31,
1998 ("FISCAL 1998")
NET REVENUES. Net revenues increased in fiscal 1999 by $10,780,000, or 82%,
to $23,997,000, a record level for a twelve-month period, as compared to fiscal
1998 revenues of $13,217,000. Sales were higher with both the voice
communications and videoconferencing customers due to increased demand for
products.
Voice communications - Sales of voice communications products and services
increased in fiscal 1999 by $4,454,000, or 62%, to $11,600,000 as compared to
fiscal 1998 revenues of $7,146,000. The increase was due in part to significant
increases in sales to Universal Health Services, Inc. and sales under the
Company's Preferred Vendor Agreement with Cendant. Sales to Universal Health
Services, Inc. increased by 135% to $3,336,000 in fiscal 1999 compared to
$1,422,000 in fiscal 1998. Sales under the Company's Preferred Vendor Agreement
with Cendant increased by 115% to $3,513,000 in fiscal 1999 compared to
$1,631,000 in fiscal 1998.
Videoconferencing - Sales of videoconferencing systems increased in fiscal
1999 by $6,326,000, or 104%, to $12,397,000 as compared to $6,071,000 in fiscal
1998. During 1999, the Company experienced significant growth in sales to the
federal government and to customers that resell directly to federal government
agencies. Sales to these customers increased in fiscal 1999 by $2,414,000, or
406%, to $3,008,000 as compared to $594,000 in fiscal 1998. The Company
continues to increase its customer base through the addition of new sales
personnel and increased performance from existing sales personnel. During 1999,
the Company opened new offices in California and Illinois.
GROSS MARGINS. Gross margin dollars increased by $3,701,000, or 98%, to
$7,470,000 or 31% of net revenues in fiscal 1999, as compared to $3,769,000, or
29% of net revenues in fiscal 1998. The percentage increase in gross margin is a
result of increased unit orders allowing the Company to obtain more favorable
pricing from its equipment vendors and from the sale of higher margin services
such as maintenance contracts. Cost of revenues consists primarily of net
product, direct labor, insurance, warranty, and allocated depreciation costs.
SELLING. Selling expenses increased by $1,330,000, or 41%, to $4,544,000,
or 19% of net revenues in fiscal 1999, as compared to $3,214,000 or 24% of net
revenues in fiscal 1998. Sales salaries and commissions represent 64% of selling
expenses in 1999 and increased by $960,000, or 49%, to $2,914,000 in fiscal
1999, compared to $1,954,000 in fiscal 1998. The increase in sales salaries is
due to higher commissions related to record revenue growth and to the addition
of four new sales personnel. Other items included in selling expense are
telecommunications, travel and entertainment, postage and delivery, outside
commissions, depreciation of demo equipment, and rent.
GENERAL AND ADMINSTRATIVE. General and administrative expenses increased by
$455,000, or 35%, to $1,765,000, or 7%, of net revenues in fiscal 1999, as
compared to $1,310,000, or 10%, of net revenues in fiscal 1998. The dollar
increase in 1999 was attributable to higher compensation
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costs, professional fees and bad debt write-offs. Compensation costs increased
by $348,000, or 64%, to $891,000 in fiscal 1999 as compared to $543,000 in
fiscal 1998. The increase in compensation costs is due to increases in officers
compensation and costs associated with the issuance of stock options for
services to non employees. Professional fees increased by $84,000, or 41%, to
$288,000 in fiscal 1999 as compared to $204,000 in fiscal 1998. The increase in
professional fees is due to costs related to defending the lawsuit with Maxbase
and with the Company's previous landlord. Bad debt write-offs increased by
$63,000, or 37%, to $232,000 in fiscal 1999 as compared to $169,000 in fiscal
1998. The increase in bad debt write-offs is due to the overall increase in the
Company's customer base and increased revenue growth. General and administrative
expenses declined as a percentage of revenue as sales growth outpaced cost
increases.
OTHER (INCOME) EXPENSES. Fiscal 1999 includes a full year of amortization
of deferred financing costs, $43,000, related to the Company's working capital
credit facility compared to 7 months in 1998 or $20,000. The Company also
reported interest income of $23,000 and $56,000 in 1999 and 1998, respectively.
Interest expense, which amounted to $181,000 and $57,000 in 1999 and 1998,
respectively, increased as the Company increased the use of its credit facility
to fund working capital requirements.
INCOME TAXES. The Company's income tax benefit of $105,000 for fiscal 1999
reflects reductions in the valuation allowance established against deferred tax
assets (principally net operating losses) offset by increases in current federal
and state tax provisions arising from improved operating results. In fiscal
1998, the Company had not recognized any income tax benefits, due to
uncertainties about its ability to generate a sufficient level of taxable income
in the future. In fiscal 1999 based on an assessment of all available evidence,
including 1999 operating results, management believes that it is more likely
than not that deferred tax assets as of December 31, 1999 will be realized. In
the event that the merger with View Tech is consummated, management expects its
Federal income tax provision in future periods to exceed the statutory rate, due
to the effects of nondeductible amortization charges.
NET INCOME (LOSS). The Company reported net income in fiscal 1999 of
$1,065,000, or $.22 and $.17 per share on a basic and diluted basis,
respectively, as compared to a net loss of $777,000 or $.16 per share on a basic
and diluted basis in fiscal 1998.
Liquidity and Capital Resources
At December 31, 1999 the Company had working capital of $4,526,000 compared
to $5,702,000 at December 31, 1998 (a decrease of approximately 21%) and cash
and cash equivalents of $60,000 compared to $326,000 at December 31, 1998.
Net cash provided by operating activities in fiscal 1999 was $314,000
versus cash used by operating activities of $3,849,000 in fiscal 1998. The
improvement in operating cash flow in fiscal 1999 was due to net income of
$1,065,000 in 1999 compared to a net loss of $777,000 in 1998, increased non
cash charges of $261,000, and decreases in cash used to support inventory and
receivable levels of $466,000 and $2,380,000, respectively. These favorable
increases were offset, in part, by decreases in cash provided by operating
liabilities of $261,000 and non cash deferred income tax benefits of $230,000.
Investing activities for fiscal 1999 included purchases of $276,000 for
computer equipment and software, demonstration and loaner/warranty equipment,
and vehicles, compared to $330,000 in fiscal 1998. The Company increased its
transportation fleet in 1999 and continues to increase its pool of demonstration
equipment used to sell both videoconferencing and voice communications
equipment, and loaner equipment used to satisfy warranty and maintenance
requirements.
Cash used in financing activities in fiscal 1999 of $309,000 was the result
of the Company's pay down of its $5,000,000 revolving credit line compared to
net borrowings of $2,403,000 in fiscal 1998.
At December 31, 1999, the Company has a $5,000,000 credit facility with an
asset based lender. Loan availability is based on 75% of eligible accounts
receivable, as defined and 50% of eligible finished goods inventory, with a cap
of $1,200,000 on inventory financing. Outstanding borrowings bear interest at
the lender's base rate plus 1% per annum. The principal balance outstanding as
of December 31, 1999 (approximately $2.4 million) has been classified as a
current liability due to the maturity of the two-year credit agreement in May
2000. The Company has informed the lender of its intent to request renewal of
the facility for another two year period.
At December 31, 1999, the Company had state net operating loss
carryforwards of $465,000 available to offset future taxable income through
2018.
9
<PAGE>
The Company's pending merger partner, View Tech, has incurred significant
working capital deficiencies primarily as a result of recurring operating
losses. Due to these financial difficulties it is likely that View Tech will
require additional financing to assist in the payment of its current and past
due obligations. The Company is conducting a review of View Tech's current
financial condition in an effort to quantify View Tech's need for assistance.
The Company believes, however, that it has sufficient resources to support View
Tech's operations once the merger is completed, and that it will be continuing
that support at least until View Tech's operations have been integrated with the
Company's and projected economies and other cost-saving measures have been fully
realized. The Company estimates the fees and costs associated with its pending
merger with View Tech, Inc, to be $1,650,000. The Company does not presently
have any material commitments for capital expenditures.
On February 10, 2000, the Company announced the redemption of its
outstanding Class A Warrants. Through March 24, 2000, the Company received gross
proceeds of approximately $8,100,000.
Inflation
Management does not believe inflation had a material adverse effect on the
financial statements for the periods presented.
Effect of Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative and
Hedging Activities," which must be adopted for fiscal quarters of years
beginning after June 15, 2000. SFAS No. 133 requires the recognition of all
derivatives as either assets or liabilities in the Company's balance sheet and
measurement of those instruments at fair value. To date, the Company has not
entered into any derivative or hedging activities, and as such, does not expect
that the adoption of SFAS No. 133 will have a material effect on the Company's
financial statements.
Year 2000
The statements under this caption include "Year 2000 readiness disclosure"
within the meaning of the Year 2000 Information and Readiness Disclosure Act.
Many existing computer software programs and operating systems were designed
such that the year 1999 was the maximum date that they would be able to process
accurately. The failure of the Company's computer software programs, operating
systems and product to process the change in calendar year from 1999 to 2000 had
the potential to result in system malfunctions or failures. In the conduct of
operations, the Company relies on equipment and commercial computer software
primarily provided by independent vendors. In anticipation of potential system
malfunctions or failures the Company undertook an assessment of its
vulnerability to the so-called "Year 2000 issue" with respect to equipment,
computer systems and product and with respect to vendors, and other parties with
whom it conducts a substantial amount of business.
To address the Year 2000 issue, management initiated a company-wide program
to prepare the Company's computer systems and applications for the year 2000, as
well as to identify critical third parties and major vendors, such as Lucent,
Panasonic, Sony, and Polycom; major customers, such as Cendant and Universal
Health Services, Inc; and other parties such as Landlords and utility companies,
which the Company relies upon to operate its business to assess their readiness
for the year 2000. The Company's main computer applications include MAS90
accounting software and Top Of Mind customer service software. Individual
desktop computers are running on a Windows 95, 98 or NT operating system and
include desktop applications such as Microsoft Office 97. The Company uses Dell
personal computers on most desktops.
For the year ended December 31, 1999, the Company spent a total of
approximately $15,000 in connection with addressing the Year 2000 problem and
does not anticipate any significant future costs. These costs were largely due
to upgrading software systems and equipment. The Company's policy is to expense
maintenance and modification costs and capitalize hardware and software
purchases and upgrades. The Company funded the foregoing from operating cash
flow.
10
<PAGE>
Since the change in the calendar from 1999 to 2000, the Company has not
experienced any system malfunctions or failures. In addition, the Company has
not experienced any loss in revenues due to the Year 2000 problem. Based on
information to date, the Company is not aware of Third Parties with whom it
conducts a significant amount of business that have experienced a material Year
2000 readiness issue affecting their ability to operate their business or raise
adequate revenue to meet their contractual obligations to us. Although prepared
to commit the necessary resources to enforce its contractual rights in the event
any third parties with whom it conducts business encounter Year 2000 issues, the
Company does not expect to incur any additional amounts to continue to monitor
and prevent Year 2000 malfunctions and failures because it does not expect to
encounter any material Year 2000 issues. Consequently, the Company does not feel
that a contingency plan is necessary.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are filed in this item 7, beginning on page
12 of this Annual Report on Form 10-KSB:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets at December 31, 1999 and 1998
Consolidated Statements of Operations for the years ended December 31, 1999
and 1998.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999 and 1998.
Consolidated Statements of Cash Flows for the years ended December 31, 1999
and 1998.
Notes to Consolidated Financial Statements
11
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and the
Stockholders of All Communications Corporation
We have audited the accompanying consolidated balance sheets of All
Communications Corporation and Subsidiaries as of December 31, 1999 and 1998 and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of All Communications
Corporation and Subsidiaries at December 31, 1999 and 1998, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
BDO Seidman, LLP
Woodbridge, New Jersey
February 29, 2000,
except for Note 15 which
is as of March 24, 2000
12
<PAGE>
ALL COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 60,019 $ 325,915
Accounts receivable (net of allowance for doubtful accounts of
$285,000 and $117,700, respectively) 6,128,221 4,317,853
Inventory 3,602,238 3,540,281
Deferred income taxes 230,083 --
Other current assets 161,947 45,577
------------ ------------
Total current assets 10,182,508 8,229,626
------------ ------------
Furniture, equipment and leasehold improvements-net 621,443 611,518
Deferred financing costs 17,633 43,271
Other assets 45,720 38,214
------------ ------------
Total assets $ 10,867,304 $ 8,922,629
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank loan payable $ 2,138,602 $ --
Accounts payable 2,022,687 1,412,616
Accrued expenses 891,033 844,082
Income taxes payable 124,372 2,860
Deferred revenue 403,524 156,133
Customer deposits 44,919 94,721
Current portion of capital lease obligations 30,905 17,365
------------ ------------
Total current liabilities 5,656,042 2,527,777
------------ ------------
Noncurrent liabilities
Bank loan payable -- 2,403,216
Capital lease obligations, less current portion 17,444 23,221
------------ ------------
Total noncurrent liabilities 17,444 2,426,437
------------ ------------
Total liabilities 5,673,486 4,954,214
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, no par value;
1,000,000 shares authorized, none issued or outstanding -- --
Common Stock, no par value; 100,000,000 authorized;
4,910,000 shares issued and outstanding 5,229,740 5,229,740
Additional paid-in capital 488,759 327,943
Accumulated deficit (524,681) (1,589,268)
------------ ------------
Total stockholders' equity 5,193,818 3,968,415
------------ ------------
Total liabilities and stockholders' equity $ 10,867,304 $ 8,922,629
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
13
<PAGE>
ALL COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended
December 31,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net revenues $ 23,997,212 $ 13,217,083
Cost of revenues 16,527,505 9,447,592
------------ ------------
Gross margin 7,469,707 3,769,491
Operating expenses:
Selling 4,543,873 3,213,965
General and administrative 1,765,411 1,309,577
------------ ------------
Total operating expenses 6,309,284 4,523,542
------------ ------------
Income (loss) from operations 1,160,423 (754,051)
------------ ------------
Other (income) expenses
Amortization of deferred financing costs 43,137 19,669
Interest income (23,189) (56,446)
Interest expense 181,127 57,167
------------ ------------
Total other expenses, net 201,075 20,390
------------ ------------
Income (loss) before income taxes 959,348 (774,441)
Income tax benefit (provision) 105,239 (2,900)
------------ ------------
Net income (loss) $ 1,064,587 $ (777,341)
============ ============
Net income (loss) per share:
Basic $ .22 $ (.16)
============ ============
Diluted $ .17 $ (.16)
============ ============
Weighted average number of common shares and equivalents:
Basic 4,910,000 4,910,000
============ ============
Diluted 6,169,074 4,910,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
14
<PAGE>
ALL COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
------------------------
Shares Amount Capital Deficit Total
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 4,910,000 $ 5,229,740 $ 316,611 $ (811,927) $ 4,734,424
Issuance of stock options for services -- -- 11,332 -- 11,332
Net loss for the year -- -- -- (777,341) (777,341)
--------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 4,910,000 5,229,740 327,943 (1,589,268) 3,968,415
Issuance of stock options for services -- -- 160,816 -- 160,816
Net income for the year -- -- -- 1,064,587 1,064,587
--------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 4,910,000 $ 5,229,740 $ 488,759 $ (524,681) $ 5,193,818
========= =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
15
<PAGE>
ALL COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended
December 31,
--------------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,064,587 $ (777,341)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)operating activities:
Depreciation and amortization 330,902 224,474
Deferred income taxes (230,083) --
Loss on disposal of equipment 8,078 3,209
Non cash compensation 160,816 11,332
Changes in operating assets and liabilities:
Accounts receivable (1,810,368) (2,276,503)
Inventory (61,957) (2,442,398)
Advances to Maxbase, Inc. -- 127,080
Other current assets (116,370) 50,641
Other assets (7,506) (6,855)
Accounts payable 610,071 502,831
Accrued expenses 46,951 520,190
Income taxes payable 121,512 407
Deferred revenue 247,391 156,133
Customer deposits (49,802) 57,669
------------ ------------
Net cash provided by (used in) operating activities 314,222 (3,849,131)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of furniture, equipment and leasehold improvements (275,799) (330,031)
Proceeds from sale of furniture, equipment and leasehold improvements 5,000 --
------------ ------------
Net cash used in investing activities (270,799) (330,031)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Deferred financing costs (17,500) (62,939)
Proceeds from bank loan 18,080,175 2,403,216
Payments on bank loan (18,344,789) --
Payments on capital lease obligations (27,205) (10,426)
------------ ------------
Net cash (used in) provided by financing activities (309,319) 2,329,851
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (265,896) (1,849,311)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 325,915 2,175,226
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 60,019 $ 325,915
============ ============
Supplemental disclosures of cash flow information
Cash paid (received) during the year for:
Interest $ 167,273 $ 45,404
============ ============
Income taxes $ -- $ (52,183)
============ ============
Non cash financing and investing activities:
Equipment with costs totaling $37,747 and $58,844, were acquired under
capital lease arrangements during the years ended December 31, 1999 and
1998, respectively.
</TABLE>
See accompanying notes to consolidated financial statements
16
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS
All Communications Corporation (the "Company") is engaged in the business
of selling, installing and servicing voice, dataconferencing and
videoconferencing communications systems to commercial and institutional
customers located principally within the United States. The Company is
headquartered in Hillside, New Jersey.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of All
Communications Corporation and its wholly owned subsidiaries, AllComm
Products Corporation ("APC") and VTC Resources, Inc. ("VTC"). All
intercompany balances and transactions have been eliminated in
consolidation. During 1999 and 1998, the Company did not segregate or
manage its operations by business segment.
Inventory
Inventory, consisting of finished goods, is valued at the lower of cost
(determined on a first in, first out basis), or market.
Use of estimates
Preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual amounts could differ from the
estimates made. Management periodically evaluates estimates used in the
preparation of the financial statements for continued reasonableness.
Appropriate adjustments, if any, to the estimates used are made
prospectively based upon such periodic evaluation. It is reasonably
possible that changes may occur in the near term that would affect
management's estimates with respect to the allowance for doubtful accounts
receivable, inventory reserve, and warranty reserves.
Revenue recognition
Product revenues are recognized at the time a product is shipped or, if
services such as installation and training are required to be performed, at
the time such services are provided, with reserves established for the
estimated future costs of parts-and-service warranties. Customer
prepayments are deferred until product systems are shipped and the Company
has no significant further obligations to the customer. Revenues from
services not covered by product warranties are recognized at the time the
services are rendered.
Earnings (loss) per share
Basic earnings (loss) per share is calculated by dividing net income (loss)
by the weighted-average number of common shares outstanding during the
period (4,910,000 shares in both 1999 and 1998).
Diluted earnings (loss) per share is calculated by dividing net income
(loss) by the weighted-average number of common shares outstanding plus the
weighted-average number of net shares that would be issued upon exercise of
stock options and warrants using the treasury stock method. Incremental
shares included in the diluted computation were 1,259,074 for 1999. Diluted
loss per share for 1998 is the same as basic loss per share, since the
effects of the calculation were anti-dilutive.
17
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash and cash equivalents
The Company considers all highly liquid debt instruments with a maturity of
three months or less when purchased to be cash equivalents.
Concentration of risks
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash
equivalents and uncollateralized trade accounts receivable. The Company
places its cash and cash equivalents primarily in commercial checking
accounts and money market funds. Commercial bank balances may from time to
time exceed federal insurance limits; money market funds are uninsured.
The Company performs ongoing credit evaluations of its customers. Revenues
generated from an agreement with Cendant Corporation ("Cendant") accounted
for 15% and 12% of net revenues for the years ended December 31, 1999 and
1998, respectively. At December 31, 1999 and 1998, receivables from Cendant
represented approximately 15% and 6% of net accounts receivable,
respectively.
In 1998, the Company established customer relationships with Universal
Health Services, Inc. for Lucent and Sony products. Universal Health
Services accounted for 14 % and 11% of net revenues for the years ended
December 31, 1999 and 1998, respectively. At December 31, 1999 and 1998,
receivables from this customer represented approximately 10% and 6% of net
accounts receivable, respectively.
During the years ended December 31, 1999 and 1998 the Company's allowance
for doubtful accounts was increased by $254,300 and $169,250, respectively
(for bad debt provisions) and was decreased by $87,000 and $112,000,
respectively, for written off balances.
Most of the products sold by the Company are purchased under non-exclusive
dealer agreements with various manufacturers, including Panasonic
Communications & Systems Company ("Panasonic") and Lucent Technologies,
Inc. ("Lucent") for digital business telephone systems and related
products, and with Polycom, Inc. ("Polycom") for dataconferencing and
videoconferencing equipment. The agreements typically specify, among other
things, sales territories, payment terms, purchase quotas and reseller
prices. All of the agreements provide for early termination on short notice
with or without cause. The termination of any of the Company's dealer
agreements, or their renewal on less favorable terms than currently in
effect, could have a material adverse impact on the Company's business.
Depreciation and amortization
Furniture, equipment and leasehold improvements are stated at cost.
Furniture and equipment are depreciated over the estimated useful lives of
the related assets, which range from three to five years. Leasehold
improvements are amortized over the shorter of either the asset's useful
life or the related operating lease term. Depreciation is computed on the
straight-line method for financial reporting purposes and on the modified
accelerated cost recovery system for income tax purposes.
18
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income taxes
The Company uses the liability method to determine its income tax expense
or benefit. Deferred tax assets and liabilities are computed based on
temporary differences between the financial reporting and tax basis of
assets and liabilities (principally certain accrued expenses, reserves,
compensation expenses, and allowances for doubtful accounts), and are
measured using the enacted tax rates that are expected to be in effect when
the differences are expected to reverse.
Prior to 1999, deferred tax assets were reduced by a valuation allowance
since, based on the assessment of available evidence, it was considered
more likely than not that all of the deferred tax assets would not be
realized.
Long-lived assets
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of", the Company evaluates impairment losses on
long-lived assets used in operations, primarily fixed assets, when events
and circumstances indicate that the carrying value of the assets might not
be recoverable. For purposes of evaluating the recoverability of long-lived
assets, the undiscounted cash flows estimated to be generated by those
assets would be compared to the carrying amounts of those assets. There
were no impairment losses recorded in 1999 and 1998.
Stock options and warrants
Under SFAS No. 123, "Accounting for Stock-Based Compensation", the Company
must either recognize in its financial statements costs related to its
employee stock-based compensation plans, such as stock option and stock
purchase plans, using the fair value method, or make pro forma disclosures
of such costs in a footnote to the financial statements. The Company has
elected to continue to use the intrinsic value-based method of APB Opinion
No. 25, as allowed under SFAS No. 123, to account for its employee
stock-based compensation plans, and to include the required pro forma
disclosures based on fair value accounting.
The fair value of warrants issued in return for services rendered by
non-employees are charged to operations over the terms of the underlying
service agreements.
Comprehensive Income
In 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
130, "Reporting Comprehensive Income". This standard establishes
requirements for the reporting and display of comprehensive income and its
components in a full set of general purpose financial statements.
Comprehensive income is the total of net income and all other nonowner
changes in equity. The objective of this statement is to report a measure
of all changes in equity of a company that result from transactions and
other economic events in the period other than transactions with owners.
The Company adopted SFAS No. 130 during the first quarter of fiscal 1998,
and has no comprehensive income components to report in 1999 and 1998.
NOTE 3 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative and
Hedging Activities," which must be adopted for fiscal quarters of fiscal
years beginning after June 15, 2000. SFAS No. 133 requires the recognition
of all derivatives as either assets or liabilities in the Company's balance
sheet and measurement of those instruments at fair value. To date, the
Company has not entered into any derivative or hedging activities, and, as
such does not expect that the adoption of SFAS No.133 will have a material
effect on the Company's financial statements.
19
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of the following:
December 31,
-------------------------------
1999 1998
----------- -----------
Leasehold improvements $ 80,753 $ 85,028
Office furniture 120,402 119,683
Computer equipment and software 273,651 186,244
Demonstration equipment 447,292 301,487
Loaner/Warranty equipment 65,493 39,656
Vehicles 237,581 199,834
----------- -----------
1,225,172 931,932
Less: Accumulated depreciation (603,729) (320,414)
----------- -----------
$ 621,443 $ 611,518
=========== ===========
Depreciation expense was $287,765 and $204,805 for the years ended December
31, 1999 and 1998, respectively, which includes depreciation expense of
$19,318 and $7,846, respectively, on fixed assets subject to capital
leases.
NOTE 5 - ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31,
-------------------------------
1999 1998
-------- --------
Sales tax payable $145,739 $ 92,098
Accrued warranty costs 75,000 75,000
Accrued installation costs 31,500 300,764
Accrued compensation 467,578 205,986
Other 171,216 170,194
-------- --------
$891,033 $844,042
======== ========
NOTE 6 - BANK LOAN PAYABLE AND LONG-TERM DEBT
Bank loan payable
In May 1998, the Company closed on a $5,000,000 working capital credit
facility with an asset-based lender. Loan availability is based on 75% of
eligible accounts receivable, as defined, and 50% of eligible finished
goods inventory, with a cap of $1,200,000 on inventory financing.
Outstanding borrowings bear interest at the lender's base rate plus 1% per
annum (9.5% and 8.75% at December 31, 1999 and 1998, respectively), payable
monthly, and are collateralized by a lien on accounts receivable,
inventories, and intangible assets. The credit facility has an initial term
of two years, with annual renewals thereafter subject to the lender's
review. The credit facility contains certain financial and operational
covenants. At December 31, 1999 the Company was in compliance with all such
covenants. At December 31, 1999, the loan has been classified as a current
liability due to the maturity of the credit agreement in May 2000.
20
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - STOCK OPTIONS
Non-qualified options
The Company issued a total of 495,438 and 179,000 options during 1999 and
1998 respectively, to various employees, directors, and advisors, with
exercise prices ranging from $.50 to $7.94 per share and vesting periods
ranging from immediately to over the course of 24 months. At December 31,
1999, the total outstanding non-qualified options was approximately
1,607,000.
Stock Option Plan
In December 1996, the Board of Directors adopted the Company's Stock Option
Plan (the "Plan") and reserved up to 500,000 shares of Common Stock for
issuance thereunder. In June 1998, the Company's shareholders approved an
amendment to the Plan increasing the amount of shares available under the
plan to 1,500,000. The Plan provides for the granting of options to
officers, directors, employees and advisors of the Company. The exercise
price of incentive stock options ("ISOs") issued to employees who are less
than 10% stockholders shall not be less than the fair market value of the
underlying shares on the date of grant or not less than 110% of the fair
market value of the shares in the case of an employee who is a 10%
stockholder. The exercise price of restricted stock options shall not be
less than the par value of the shares to which the option relates. Options
are not exercisable for a period of one year from the date of grant.
Thereafter, options may be exercised as determined by the Board of
Directors at the date of grant, with maximum terms of ten and five years,
respectively, for ISO's issued to employees who are less than 10%
stockholders and employees who are 10% stockholders. In addition, under the
Plan, no individual will be given the opportunity to exercise ISO's valued
in excess of $100,000, in any calendar year, unless and to the extent the
options have first become exercisable in the preceding year. The maximum
number of shares with respect to which options may be granted to an
individual during any twelve-month period is 100,000. The Plan will
terminate in 2006. Options granted under the Plan in 1999 and 1998 were
844,562 and 217,500, respectively.
A summary of Plan and other options outstanding as of December 31, 1999,
and changes during 1998 and 1999 are presented below:
Weighted Average
Fixed Exercise
Options Price
---------- --------
Options outstanding, January 1, 1998 1,250,000 $4.25
Granted 396,500 1.30
---------- -----
Options outstanding December 31, 1998 1,646,500 3.54
Granted 1,340,000 1.59
Canceled (82,500) 1.93
---------- -----
Options outstanding December 31, 1999 2,904,000 $2.69
========== =====
Shares of common stock available for future
grant under the plan 202,938
==========
21
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Additional information as of December 31, 1999 with respect to all
outstanding options is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- -------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Price Outstanding Life (in years) Price Exercisable Price
--------------------------------- ------------------------------ -------------------------
<S> <C> <C> <C> <C>
$ .50-.94 1,040,000 3.96 $ .91 582,500 $ .89
1.063-1.50 446,500 3.76 1.27 239,167 1.37
2.50-3.85 495,500 4.10 3.49 400,500 3.48
4.00-5.00 914,000 2.67 4.92 824,000 4.95
6.38-7.94 8,000 4.96 7.16 8,000 7.16
------------- ------------
.50-7.94 2,904,000 3.55 2.69 2,054,167 3.10
============== ============
</TABLE>
The Company has elected to use the intrinsic value-based method of APB
Opinion No. 25 to account for all of its employee stock-based compensation
plans. Accordingly, no compensation cost has been recognized in the
accompanying financial statements for stock options issued to employees
because the exercise price of each option equals or exceeds the fair value
of the underlying common stock as of the grant date for each stock option.
The weighted-average grant date fair value of options granted during 1999
and 1998 under the Black-Scholes option pricing model was $.56 and $.37 per
option, respectively.
The fair value of each option granted in 1999 and 1998 is estimated on the
date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions:
1999 1998
---- ----
Risk free interest rates 4.71% 5.56%
Expected option lives 2.82 years 3.46 years
Expected volatility 46.50% 46.50%
Expected dividend yields None None
The Company has adopted the pro forma disclosure provisions of SFAS No.
123. Had compensation cost for all of the Company's stock-based
compensation grants to employees been determined in a manner consistent
with the fair value method prescribed by SFAS No. 123, the Company's net
income (loss) and net income (loss) per share as reported would have been:
1999 1998
------------- -------------
Net income (loss):
As reported $ 1,064,587 $ (777,341)
Adjusted pro forma 895,574 (884,675)
Net income (loss) per share:
Basic, as reported $ .22 $ (.16)
Adjusted pro forma .18 (.18)
Diluted, as reported $ .17 $ (.16)
Adjusted pro forma .15 (.18)
Compensation expense recognized in the Company's Statements of Operations
for options and warrants issued to non-employees totaled $160,816 and
$11,332 in 1999 and 1998, respectively.
22
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - STOCKHOLDERS' EQUITY
Preferred stock
On December 6, 1996 the Company's stockholders approved an amendment to the
Company's Certificate of Incorporation to authorize the issuance of up to
1,000,000 shares of Preferred Stock. The rights and privileges of the
Preferred Stock have not yet been designated.
Class A Warrants
At December 31, 1999, the Company had 2,050,000 outstanding redeemable
Class A Warrants, which were issued in conjunction with its 1997 initial
public offering. The warrants are exercisable through April 27, 2002, at a
price of $4.25 per share. The Company may redeem the warrants at a price of
$.10 per warrant, commencing eighteen months from the effective date of the
offering and continuing for a four-year period, provided the price of the
Company's common stock is at least $10.63 for at least 20 consecutive
trading days prior to issuing a notice of redemption. (See Note 15)
NOTE 9 - INCOME TAXES
The income tax provision (benefit) consists of the following:
Years ended
December 31,
------------------------
1999 1998
--------- ---------
Current:
Federal $ 117,344 $ --
State 7,500 2,900
--------- ---------
Total current 124,844 2,900
--------- ---------
Deferred:
Federal 205,482 (252,791)
State 32,005 (73,582)
Valuation allowance (467,570) 326,373
--------- ---------
Total deferred (230,083) --
--------- ---------
Provision (benefit)for income taxes $(105,239) $ 2,900
========= =========
The Company's effective tax rate differs from the statutory federal tax
rate as shown in the following table:
Years ended
December 31,
----------------------
1999 1998
--------- ---------
U.S. federal income taxes at the statutory rate $ 326,314 $(263,310)
State taxes, net of federal effects 4,950 (41,557)
Non-deductible charges 24,939 --
Change in valuation allowance (467,570) 326,373
Other 6,128 (18,606)
--------- ---------
$(105,239) $ 2,900
========= =========
23
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of the temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of 1999 and 1998 are
presented below:
December 31,
---------------------
1999 1998
--------- ---------
Deferred tax assets:
Reserves and allowances $ 144,000 $ 126,640
Tax benefit of state net operating loss
carryforwards 41,840 349,211
Stock option compensation 75,476 --
Other -- 12,073
--------- ---------
Total deferred tax assets 261,316 487,924
--------- ---------
Deferred tax liabilities:
Depreciation 15,665 20,354
Other 15,568 --
--------- ---------
Total deferred tax liabilities 31,233 20,354
--------- ---------
Subtotal 230,083 467,570
Valuation allowance -- (467,570)
--------- ---------
Net deferred tax assets $ 230,083 $ --
========= =========
In 1999, the Company generated a sufficient level of taxable income to
recognize the benefit of federal tax loss carryforwards and other deferred
tax assets and, accordingly, the valuation allowance established at
December 31, 1998 was reduced. Further, based on its review of 1999
operating results and other evidence, management believes that it is more
likely than not that deferred tax assets recorded as of December 31, 1999
will be realized.
The Company and its subsidiaries file federal returns on a consolidated
basis and separate state tax returns. At December 31, 1999, the Company had
state net operating loss carryforwards of $465,000 available to offset
future taxable income through 2018.
Note 10 - Commitments and Contingencies
Employment Agreements
The Company's board of directors has approved employment agreements for
three of its officers, effective January 1, 1997. The agreement with the
Company's president, as amended in March 1997, has a six-year term and
provides for an annual salary of $133,000 in the first year, increasing to
$170,000 and $205,000 in the second and third years, respectively. In years
four, five, and six the president's base salary will be $205,000, but can
be increased at the discretion of the board of director's compensation
committee. Under the agreement, the Company will secure and pay the
premiums on a $1,000,000 life insurance policy payable to the president's
designated beneficiary or his estate. The agreement further provides for
medical benefits, the use of an automobile, and grants of 750,000
non-qualified stock options, as well as 25,974 incentive stock options and
74,026 non-qualified stock options issuable under the Company's Stock
Option Plan.
The other two agreements each have a three-year term and provide for annual
salaries of $104,000 in the first year increasing by $10,000 each year
thereafter. The agreements further provide for an incentive bonus equal to
1/2 of 1% of net sales payable twice yearly to both officers. Each employee
is also entitled to a monthly automobile allowance. Effective January 11,
1999, both of these employment agreements were amended. In consideration
for extending the term of the agreements for an additional year, through
December 31, 2000, the Company granted additional options to purchase up to
300,000 shares each of Common Stock. The options vest over a twenty three
month period.
24
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Each agreement may be terminated by the employee without cause upon written
notice to the Company.
Operating Leases
In April 1998, the Company entered into a five-year non-cancelable lease
for the use of office space in New York City. The lease provides for annual
base rent of $47,500 plus a proportionate share of operating expenses. The
Company signed a one-year lease for a Virginia sales office in 1998. Base
rent under this lease is $800 per month and continues monthly after
expiration of the initial term.
In October 1999, the Company entered into a twenty six-month non-cancelable
lease for the use of office space in California. The lease provides for
base rent of $47,000 for the first thirteen months and $48,000 for months
fourteen through the expiration date plus a proportionate share of
operating expenses. Also in October 1999, the Company entered into a six
month non-cancelable lease for the use of office space in Illinois. The
lease provides for monthly base rent of $1,700.
During 1999, the Company closed its New York City office and assigned their
rights under a sublease to their landlord. The loss on abandoning this
facility was not material to the Company's 1999 Statement of Operations.
Future minimum rental commitments under all non-cancelable leases are as
follows:
Year ending
December 31,
---------------------
2000 $271,280
2001 260,039
2002 125,030
2003 4,238
--------
$660,587
========
Total rent expense for the years ended December 31, 1999 and 1998 was
$311,909 and $284,630, respectively.
Capital Lease Obligations
The Company leases certain vehicles under non-cancelable lease agreements.
These leases are accounted for as capital leases. The equipment under the
capital leases as of December 31, 1999 had a cost of $96,591, accumulated
depreciation of $27,164, with a net book value of $69,427. Future minimum
lease payments under capital lease obligations at December 31, 1999 are as
follows:
2000 $ 35,925
2001 18,580
--------
Total minimum payments 54,505
Less amount representing interest (6,156)
--------
Total principal 48,349
Less portion due within one year (30,905)
--------
Long-term portion $ 17,444
========
25
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Legal Matters
In September 1997, the Company entered into an exclusive distribution
agreement with Maxbase, Inc., the manufacturer of "MaxShare 2", a patented
bandwidth-on-demand line sharing device. During 1998 the Company purchased
$520,350 of Maxshare 2 units. The Company has identified performance
problems with the MaxShare 2 product in certain applications, and believes
that MaxBase, Inc. has a contractual obligation to correct any technical
defects in the product. Pending resolution of the matter, the Company has
ceased ordering product under its purchase commitment, and has also limited
shipments to distribution partners.
On July 16, 1998, MaxBase, Inc. filed a Complaint against the Company and
APC in the Superior Court of New Jersey, Law Division. The complaint
alleges that the Company breached its agreement with MaxBase Inc., for
Maxshare 2 units by failing to meet the required minimum purchase
obligations thereunder. The complaint further alleges misrepresentation and
unfair trade practices. The complaint also seeks to enjoin the Company from
enforcing any rights the Company has under the agreement. Maxbase claims
damages of $508,200 in lost profits for units not purchased and $945,300 in
lost profits for units sold to the Company below market price, as well as
unspecified punitive and treble damages. In March 1999, Maxbase added
claims for defamation and tortious interference. A trial is expected to
commence in May 2000. The Company believes the claims by MaxBase are
without merit and intends to fully defend the suit and assert its rights
under the agreement. The Company has filed a counterclaim for breach of
contract, breach of warranty and rescission based on misrepresentation. The
Company does not anticipate that the ultimate resolution will have a
material adverse effect on its financial condition, results of operation or
cash flows.
On May 20, 1999 the Company settled a legal matter with its former
landlord. Under the terms of the settlement, the Company paid a total of
$120,000 through December 31, 1999 to fully settle this matter.
NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments reported in the Company's balance sheet consist of
cash, accounts receivable, accounts payable, and bank loan payable, the
carrying values of which all approximate fair value at December 31, 1999
and 1998. The fair value of the financial instruments disclosed therein are
not necessarily representative of the amount that could be realized or
settled, nor does the fair value amount consider the tax consequences of
realization or settlement.
NOTE 12 - PENSION PLAN
On March 1, 1998 the Company adopted a 401(k) Retirement Plan (the "401(k)
Plan") under Section 401(k) of the Internal Revenue Code. The 401(k) Plan
covers substantially all employees who meet minimum age and service
requirements. The 401(k) Plan is non-contributory on the part of the
Company.
NOTE 13 - MERGER WITH VIEW TECH, INC.
On December 27, 1999, the Company entered into an agreement to merge with
View Tech, Inc, (`View Tech") a publicly held California-based
videoconferencing solutions provider, in a transaction that will be
accounted for as a "reverse acquisition" using the purchase method. The
reverse acquisition method will result in the Company being recognized as
the acquirer of View Tech for accounting and financial reporting purposes.
Under the agreement, each All Communications share will be exchanged for a
specified number of shares of View Tech. The merger is subject to certain
conditions, including approval by shareholders and the receipt of opinions
that the merger will be tax-free to All Communications shareholders. The
transaction is expected to close in the second quarter of 2000.
26
<PAGE>
ALL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following summarized, unaudited pro forma information for the year
ended December 31, 1999 assumes that the merger of the Company and View
Tech occurred on January 1, 1999:
Year Ended
December 31,
1999
-------------
Net revenues $ 59,476,819
Operating loss (8,894,803)
Net loss (9,550,867)
Loss per share:
Basic (.40)
Diluted (.40)
The pro forma operating results reflect estimated pro forma adjustments for
the amortization of intangibles ($2,275,000) arising from the merger and
other adjustments. Pro forma results of operations information is not
necessarily indicative of the results of operations that would have
occurred had the acquisition been consummated at the beginning of 1999, or
of future results of the combined entity.
During the year ended December 31, 1999, the Company recognized net
revenues of $431,000 from transactions with View Tech.
NOTE 14 - RELATED PARTY
The landlord for the Company's Hillside, New Jersey office is Vitamin
Realty Associates, L.L.C. of which Eric Friedman, one of the Company's
directors, is a member. The lease term is for five years and expires on May
31, 2002. The base rental for the premises during the term of the lease is
approximately $123,000 per year. In addition, the Company must pay its
share of the landlord's operating expenses (i.e., those costs or expenses
incurred by the landlord in connection with the ownership, operation,
management, maintenance, repair and replacement of the premises, including,
among other things, the cost of common area electricity, operational
services and real estate taxes). For the years ended December 31, 1999 and
1998, rent expense associated with this lease was $135,000 and $119,000,
respectively.
The Company receives financial and tax services from an accounting firm in
which one of the Company's directors, is a partner. Since this Board member
has become a director on September 15, 1999, the Company has incurred fees
of $13,325 on services received from this firm.
NOTE 15 - SUBSEQUENT EVENT
On February 10, 2000, the Company announced its intention to redeem all
outstanding Class A Warrants. Through March 24, 2000, the Company received
gross proceeds of approximately $8,100,000.
27
<PAGE>
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
The Company intends to file with the Securities and Exchange Commission,
within 120 days after the end of the fiscal year covered by this report, a
definitive Proxy Statement (the "Proxy Statement") for use in connection with
the Company's 2000 Annual Meeting of Stockholders. In accordance with General
Instruction E (3) of Form 10-KSB the information required by Items 9, 10, 11,
and 12 below is incorporated herein by reference to the Proxy Statement.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT.
The information required by this Item 9 is incorporated herein by reference
to the sections entitled "Election of Directors", "Executive Officers" and
"Section 16 (a) Beneficial Ownership Reporting Compliance" in the Proxy
Statement.
ITEM 10. EXECUTIVE COMPENSATION.
The information required by this Item 10 is incorporated herein by
reference to the section entitled "Executive Compensation" and "Compensation of
Directors" in the Proxy Statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item 11 is incorporated herein by
reference to the section entitled "Security Ownership of Certain Beneficial
Owners and Management."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item 12 is incorporated herein by
reference to the section entitled "Certain Relationships and Related
Transactions" in the Proxy Statement.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The Following documents are filed as part of this report:
(1) A list of the financial statements filed as part of this report is set
forth in Item 7 and is incorporated herein by reference
(2) Exhibits
The information required by this Item 13(a)(2) is set forth in the
Index to Exhibits and is incorporated herein by reference. Included in
the Index to Exhibits are the following management contracts,
compensatory plans and arrangements:
(i) 10.3 Employment Agreement, effective January 1, 1997, between
the Registrant and Richard Reiss.
(ii) 10.4 Amendment to the Employment Agreement in Exhibit 10.3
above, effective March 21, 1997.
(iii) 10.5 Employment Agreement, effective January 1, 1997, between
the Registrant and Joseph Scotti.
28
<PAGE>
(iv) 10.6 Amendment No. 1 to the Employment Agreement between the
Registrant and Joseph Scotti, effective January 11, 1999.
(v) 10.7 Employment Agreement, effective January 1, 1997, between
the Registrant and Leo Flotron
(vi) 10.8 Amendment No. 1 to the Employment Agreement between the
Registrant and Leo Flotron, effective January 11, 1999.
(vii) 10.12 Registrants Stock Option Plan
(viii) 10.13 Amendment No. 1 to Registrants Stock Option Plan
(ix) 23.1 Consent of BDO Seidman, LLP, Independent Certified Public
Accountants
(b) No reports on Form 8-K were filed by the Company during the fourth quarter
of 1999.
29
<PAGE>
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) 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.
ALL COMMUNICATIONS CORPORATION
Dated: March 29, 2000 By: /s/ RICHARD REISS
--------------------------------
Richard Reiss, Chairman,
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------- --------------------------------------- --------------
<S> <C> <C>
/S/ RICHARD REISS Chairman of the Board of Directors March 29, 2000
- ---------------------------
RICHARD REISS President (Principal Executive Officer)
/S/ SCOTT TANSEY Vice President - Finance March 29, 2000
- ---------------------------
SCOTT TANSEY (Principal Financial and
Accounting Officer)
/S/ ROBERT B. KRONER Director March 29, 2000
- ---------------------------
ROBERT B. KRONER
/S/ ERIC FRIEDMAN Director March 29, 2000
- ---------------------------
ERIC FRIEDMAN
/S/ PETER MALUSO Director March 29, 2000
- ---------------------------
PETER MALUSO
/S/ ANDREA GRASSO Director March 29, 2000
- ---------------------------
ANDREA GRASSO
/S/ DEAN HILTZIK Director March 29, 2000
- ---------------------------
DEAN HILTZIK
/S/ LOUIS CAPOLINO Director March 29, 2000
- ---------------------------
LOUIS CAPOLINO
</TABLE>
30
<PAGE>
INDEX TO EXHIBITS
Exhibit No. DESCRIPTION OF DOCUMENT
3.1 Certificate of Incorporation of the Registrant, as amended. (1)
3.2 By-Laws, as amended. (1)
4.1 Form of Amended Warrant Agreement among the Registrant and
American Stock Transfer & Trust Company, as Warrant Agent. (1)
4.2 Specimen Common Stock Certificate of Registrant. (1)
4.3 Specimen Class A Warrant Certificate of Registrant. (1)
10.1 Agreement dated December 9, 1996 between the Registrant and HFS
Incorporated. (1)
10.2 Dealer Agreement dated May 20, 1992, between the Registrant and
Panasonic Communications & Systems Company. (1)
10.3 Employment Agreement, effective January 1, 1997, between the
Registrant and Richard Reiss. (1)
10.4 Amendment to the Employment Agreement between the Registrant and
Richard Reiss, effective March 21, 1997 (1)
10.5 Employment Agreement, effective January 1, 1997, between the
Registrant and Joseph Scotti. (1)
10.6 Amendment No. 1 to the Employment Agreement between the
Registrant and Joseph Scotti, effective January 11, 1999. (2)
10.7 Employment Agreement, effective January 1, 1997, between the
Registrant and Leo Flotron. (Incorporated herein by reference to
Exhibit No. 10.6 to the Registrant's Registration Statement on
Form SB-2, Registration No. 333-21069).
10.8 Amendment No. 1 to the Employment Agreement between the
Registrant and Leo Flotron, effective January 11, 1999. (2)
10.9 Lease Agreement for premises located at 1450 Route 22,
Mountainside, New Jersey, dated April 13, 1995, between the
Registrant and Mountain Plaza Associates. (Incorporated herein by
reference to Exhibit 10.7 to the Registrant's Registration
Statement on Form SB-2, Registration No. 333-21069).
10.10 First Amendment to Lease Agreement for premises located at 1450
Route 22, Mountainside, New Jersey dated June 27, 1996, between
the Registrant and Mountain Plaza Associates. (Incorporated
herein by reference to Exhibit 10.8 to the Registrant's
Registration Statement on Form SB-2, Registration No. 333-21069).
10.11 Sublease Agreement for premises located at 1130 Connecticut
Avenue, NW, Washington D.C., dated July 1, 1996, between the
Registrant and Charles L. Fishman, P.C. (Incorporated herein by
reference to Exhibit 10.9 to the Registrant's Registration
Statement on Form SB-2, Registration No. 333-21069).
10.12 Registrant's Stock Option Plan. (Incorporated herein by reference
to Exhibit 10.10 to the Registrant's Registration Statement on
Form SB-2, Registration No. 333-21069).
10.13 Amendment No. 1 to Registrant's Stock Option Plan. (2)
10.14 Lease Agreement for premises located at 225 Long Avenue,
Hillside, New Jersey, dated March 20, 1997, between the
Registrant and Vitamin Realty Associates, L.L.C. (Incorporated
herein by reference to Exhibit 10.13 to the Registrant's
Registration Statement on Form SB-2, Registration No. 333-21069).
31
<PAGE>
10.15 Agreement, dated September 10, 1997, between the Company and
Maxbase, Inc. (Incorporated herein by reference to the
Registrant's Current Report on Form 8-K filed September 18, 1997,
Commission File No. 1-12937).
10.16 Reseller Agreement dated November 21, 1997, between Polycom, Inc.
and the Registrant. (Incorporated herein by reference to Exhibit
No. 10.15 to the Registrant's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1997, Commission File No.
1-12937).
10.17 Dealer Agreement, dated November 26, 1997, between Lucent
Technologies, Inc. and the Registrant. (Incorporated herein by
reference to Exhibit No. 10.16 to the Registrant's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1997,
Commission File No. 1-12937).
10.18 Merger Agreement, dated December 27, 1999, between All
Communications Corporation and View Tech, Inc. (3)
*10.19 Amendment No. 1 to Agreement And Plan of Merger between All
Communications and View Tech, Inc.
16.1 Letter re Change in Certifying Accountant. (Incorporated herein
by reference to the Registrant's Current Report on Form 8-K filed
February 20, 1998, Commission File No. 1-12937).
21.1 Subsidiaries of the Registrant. (Incorporated herein by reference
to Exhibit No, 21.1 to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1997, Commission
File No. 1-12937).
*23.1 Consent of BDO Seidman, LLP, Independent Certified Public
Accountants
*27.1 Financial Data Schedule.
________________________
* Filed herewith
(1) Incorporated herein by reference to the corresponding exhibit number to the
Registrant's Registration Statement on Form SB-2, Registration No.
333-21069.
(2) Incorporated herein by reference to the corresponding exhibit number to the
Registrant's Form 10KSB for the fiscal year ended December 31, 1998, filed
on March 31, 1999.
(3) Filed as an exhibit to View Tech, Inc.'s Registration Statement on Form S-4
(Registration No. 333-95145) and incorporated by reference herein.
32
Exhibit No. 10.19
Amendment No. 1 to Agreement And Plan of Merger between All Communications and
View Tech, Inc.
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO.1 TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is
made and entered into as of February 29, 2000, by and between All Communications
Corporation, a New Jersey corporation ("ACC") and View Tech, Inc., a Delaware
corporation ("VTI").
W I T N E S S E T H:
WHEREAS, ACC and VTI have entered into that certain Agreement and Plan of
Merger dated as of December 27, 1999 (the "Merger Agreement") providing for the
merger of ACC with and into VTI (the "Merger") upon the terms and subject to the
conditions set forth therein; and
WHEREAS, ACC and VTI have reinstated and reaffirmed that the Merger
Agreement is in full force and effect; and
WHEREAS, ACC and VTI desire to adjust certain of the terms of the Merger
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and subject to, and on the terms and conditions herein set
forth, the parties hereto agree as follows:
1. Final Termination Date. The definition of "Final Termination Date" set
forth in Article I of the Merger Agreement is amended by deleting the date
"February 29, 2000" and substituting therefor the following "April 30, 2000;
provided, however, that the Final Termination Date shall be 5:00 PM New York
City time on March 6, 2000 if VTI has not received at least $2,000,000 in gross
proceeds from the exercise of outstanding warrants to purchase VTI Common Stock
on or before March 6, 2000"
2. Extension of Escrow Period. The period during which the Escrow Agent
shall hold the Escrow Shares under the Escrow Agreement shall be increased to
eighteen months and Section 3.5(b) of the Merger Agreement is amended by
deleting the number "twelve" in the third sentence thereof and substituting
therefor the number "eighteen."
3. Extension of Closing Date. The Closing or Closing Date referred to in
Section 3.8 of the Merger Agreement shall occur no later than April 30, 2000 and
Section 3.8 of the Merger Agreement is amended by deleting the date "February
29, 2000" and substituting therefor the following "April 30, 2000; provided,
however, that VTI and ACC may, by mutual written consent, extend such date"
4. Removal of Certain Conditions to Obligations of ACC. Section 7.3(g) of
the Merger Agreement relating to a private placement of not less than $4,000,000
of equity securities of the Surviving Corporation as a condition of ACC's
obligation to consummate the transactions contemplated under the Merger
Agreement is hereby deleted in its entirety.
5. VTI Indemnification Obligations. VTI's indemnification obligations under
Section 9.2(a) of the Merger Agreement shall be extended to cover certain risks
in connection with VTI's sale of USTelecenters, Inc. and Vermont Network
Services Corporation to OC Mergerco 4, Inc. on February 18, 2000 and Section
9.2(a) is hereby amended to read in its entirety as follows:
"(a) VTI hereby agrees to indemnify ACC, its successors and assigns, and
the officers, directors, affiliates, employees, controlling persons and agents
of the foregoing (collectively, the "ACC Indemnified Persons"), and hold each of
them harmless against and in respect of any and all debts, obligations and other
liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether known or unknown, or due or to become due or otherwise), monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including without limitation amounts paid in settlement, interest,
court costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation) (collectively, "Damages") incurred or suffered by any of them by
reason of (i) a breach of any of the representations
33
<PAGE>
or warranties made by VTI in this Agreement; (ii) the nonperformance (whether
partial or total) of any covenants or agreements made by VTI in this Agreement;
(iii) the value of the Pentastar Communications, Inc. stock received by VTI in
connection with the sale of USTelecenters, Inc. ("UST") and Vermont Network
Services Corporation ("VNSC") to OC Mergerco 4, Inc. ("OCM") under that certain
Asset Purchase Agreement dated as of December 31, 1999 among UST, VNSC, OCM and
VTI (the "UST/VNSC Purchase Agreement") being less than One Hundred Fifty
Thousand Dollars ($150,000.00) at the Termination Date (as defined in the Escrow
Agreement (based upon the trading price for the five day period ending on the
Termination Date); and (iv) any payments by VTI (or Wire One upon closing of the
Merger Agreement) with respect to any of the Excluded Liabilities (as set forth
under Section 2.3 of the UST/VNSC Purchase Agreement; provided, however, that
VTI shall not have any liability under any of the foregoing clauses (i) and (ii)
unless the aggregate of all Damages relating thereto for which VTI would, but
for this proviso, be liable exceeds on a cumulative basis an amount equal to
$50,000; and provided, further, that for purposes of determining the amount of
Damages under said clauses for the breach of any representation, warranty or
covenant in this Agreement that contains a materiality qualifier, such
representation, warranty or covenant shall be deemed breached where the Damages
relating thereto, individually or in the aggregate, are in excess of $20,000
(which Damages, once such $20,000 threshold has been surpassed, shall be
included in full in determining whether the aggregate amount of Damages exceeds
the $50,000 amount set forth in the next preceding proviso)."
6. Miscellaneous. Capitalized terms not defined herein shall have the
meanings given to such terms in the Merger Agreement. Except as expressly
modified hereby, the Merger Agreement and the other agreements entered into
thereunder or contemplated thereby shall continue in full force and effect. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement. This Agreement shall be deemed to be made in and in all respects
shall be interpreted, construed and governed by and in accordance with the laws
of the State of Delaware without giving effect to any choice of law rule that
would cause the application of the laws of any jurisdiction other than the
internal laws of the State of Delaware to the rights and duties of the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
ALL COMMUNICATIONS CORPORATION
By: /S/ RICHARD REISS
------------------------------
Name: RICHARD REISS
Title: PRESIDENT
VIEW TECH, INC.
By: /S/ S. DOUGLAS HOPKINS
------------------------------
Name: S. DOUGLAS HOPKINS
Title: CHIEF EXECUTIVE OFFICER
By: /S/ DAVID MILLET
------------------------------
Name: DAVID MILLET
Title: Director
34
Exhibit 23.1
Consent of BDO Seidman, LLP, independent certified public accountants
Consent of Independent Certified Public Accountants
The Board of Directors and the
Stockholders of All Communications Corporation
We hereby consent to the incorporation by reference in the Registration
Statement No. 333-77661 of All Communications Corporation on Form S-8, of our
report dated February 29, 2000 relating to the consolidated financial statements
All Communications Corporation appearing in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999.
BDO Seidman, LLP
Woodbridge, New Jersey
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements accompanying the filings of Form 10-KSB and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<CASH> 60,019
<SECURITIES> 0
<RECEIVABLES> 6,413,221
<ALLOWANCES> 285,000
<INVENTORY> 3,602,238
<CURRENT-ASSETS> 10,182,508
<PP&E> 1,225,172
<DEPRECIATION> 603,729
<TOTAL-ASSETS> 10,867,304
<CURRENT-LIABILITIES> 5,656,042
<BONDS> 17,444
0
0
<COMMON> 5,229,740
<OTHER-SE> (35,922)
<TOTAL-LIABILITY-AND-EQUITY> 10,867,304
<SALES> 23,997,212
<TOTAL-REVENUES> 23,997,212
<CGS> 16,527,505
<TOTAL-COSTS> 22,836,789
<OTHER-EXPENSES> 19,948
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 181,127
<INCOME-PRETAX> 959,348
<INCOME-TAX> (105,239)
<INCOME-CONTINUING> 1,064,587
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,064,587
<EPS-BASIC> .22
<EPS-DILUTED> .17
</TABLE>
