U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2000
Commission File Number: 0-25761
LOG ON AMERICA, INC.
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(Exact name of registrant as specified in its charter)
Delaware 05-0496586
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Cookson Place, 6th Floor, Providence, Rhode Island 02903
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(Address of principal executive offices) (Zip Code)
(401) 459-6550
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(Registrant's telephone number, including area code)
3 Regency Plaza, Providence, Rhode Island 02903
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(Former name, former address and former fiscal year,
if changed since last report)
Check mark whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
|X| Yes |_| No
As of August 1, 2000, a total of 8,796,801 shares of the Registrants Common
Stock, $.01 par value, were issued and outstanding.
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LOG ON AMERICA, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of June 30, 2000 and December 31, 1999........... 3
Statements of Operations for the Three Months and Six Months
Ended June 30, 2000 and 1999....................................... 4
Statements of Cash Flows for the Six Months Ended
June 30, 2000 and 1999.......................................... 5
Notes to Financial Statements...................................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation.......... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 12
Item 2. Changes in Securities and Use of Proceeds.......................... 12
Item 3. Defaults in Senior Securities...................................... 12
Item 4. Submission of Matters to a Vote of Security Holders................ 12
Item 5. Other Information.................................................. 12
Item 6. Exhibits and Reports on Form 8-K................................... 12
Signatures................................................................... 13
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Part 1. Financial Information
LOG ON AMERICA, INC.
BALANCE SHEETS
(Unaudited) (Audited)
June 30, December 31,
2000 1999
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............... $ 11,360,979 $ 7,844,860
Available-for-sale securities ........... 8,898,323 11,203,853
Accounts receivable, net of
allowance of $137,584 and
$66,448, respectively ................. 1,012,079 319,915
Notes receivable from officers
and related parties ................... 1,604,950 1,562,757
Other current assets .................... 1,292,583 558,514
------------ ------------
TOTAL CURRENT ASSETS .................. 24,168,914 21,489,899
------------ ------------
PROPERTY & EQUIPMENT, net .................. 15,128,781 4,967,968
OTHER ASSETS
Goodwill and other intangible
assets, net ............................ 11,583,192 10,708,990
Financing costs, net ..................... 691,845 --
Other assets ............................. 100,772 11,558
------------ ------------
TOTAL OTHER ASSETS ....................... 12,375,809 10,720,548
------------ ------------
TOTAL ASSETS ............................... $ 51,673,504 $ 37,178,415
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of capital
lease obligations ...................... $ 474,768 $ 454,954
Accounts payable and accrued
expenses ............................... 4,823,556 2,356,965
Deferred revenue ......................... 1,304,069 1,135,651
------------ ------------
TOTAL CURRENT LIABILITIES ................ 6,602,393 3,947,570
------------ ------------
LONG-TERM LIABILITIES
Borrowings under line of credit .......... 875,000 725,000
Advances under multiple term
advance term loan agreement ............ 6,189,884 1,439,582
Capital lease obligations ................ 431,341 640,179
------------ ------------
TOTAL LONG-TERM LIABILITIES .............. 7,496,225 2,804,761
------------ ------------
TOTAL LIABILITIES .......................... 14,098,618 6,752,331
------------ ------------
Redeemable convertible preferred
stock, $.01 par value; authorized
15,000,000 shares, Series A 15,000
shares issued and outstanding at
June 30, 2000 ............................ 8,383,562 --
Commitments ................................ -- --
STOCKHOLDERS' EQUITY
Common stock, $.01 par value;
authorized 125,000,000 shares,
8,796,801 and 8,289,793 issued
and outstanding at June 30, 2000
and December 31, 1999, respectively .... 87,968 82,898
Additional paid-in capital ............... 43,098,455 36,095,697
Accumulated other comprehensive
(income) loss .......................... 24,900 (38,676)
Accumulated deficit ...................... (14,019,999) (5,713,835)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY .............. 29,191,324 30,426,084
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ................................... $ 51,673,504 $ 37,178,415
============ ============
The accompanying notes are an integral part of these financial statements.
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LOG ON AMERICA, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES ................................................. $ 3,050,941 $ 245,267 $ 5,439,298 $ 483,911
OPERATING EXPENSES
Costs of revenue ....................................... 1,762,031 123,284 2,768,558 243,225
Selling, general and administrative .................... 6,110,307 702,564 9,606,995 990,413
Depreciation and amortization .......................... 1,055,513 23,626 1,920,819 42,964
------------ ------------ ------------ ------------
Total operating expenses .............................. 8,927,851 849,474 14,296,372 1,276,602
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS ..................................... (5,876,910) (604,207) (8,857,074) (792,691)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense ....................................... (103,924) (597) (148,464) (877)
Interest income ........................................ 392,007 145,863 723,868 146,605
Other income (expense) ................................. (7,041) -- (24,494) --
------------ ------------ ------------ ------------
Net other income (expense) ............................. 281,042 145,266 550,910 145,728
------------ ------------ ------------ ------------
NET LOSS ................................................. (5,595,868) (458,941) (8,306,164) (646,963)
Preferred stock dividends .............................. (424,110) -- (424,110) --
Preferred stock accretion .............................. (883,562) -- (883,562) --
------------ ------------ ------------ ------------
Net loss applicable to common stockholders ............... $ (6,903,540) $ (458,941) $ (9,613,836) $ (646,963)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES USED IN
COMPUTING BASIC AND DILUTED LOSS PER SHARE................ 8,720,859 6,390,057 8,511,986 5,575,191
============ ============ ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE .................. (0.79) (0.07) (1.13) (0.12)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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LOG ON AMERICA, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
-----------------------------
2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................... $ (8,306,164) $ (646,963)
Adjustments to reconcile net loss to
net cash used in operating activities:
Notes receivable officers forgiven ....... -- 15,688
Depreciation and amortization ............ 1,920,819 42,964
Bad debt provision ....................... 71,136 8,285
Changes in operating assets and
liabilities, net of effects
of acquisitions:
Accounts receivable .................... (763,300) (62,498)
Other current assets ................... (498,485) (102,443)
Other assets ........................... (89,214) (17,111)
Accounts payable and accrued
expenses ............................. 926,020 233,329
Deferred revenue ....................... 168,418 42,062
------------ ------------
Total adjustments .................... 1,735,394 160,276
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES ........ (6,570,770) (486,687)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment ...... (5,116,475) (494,270)
Issuance of notes receivable ............... (42,193) (200,000)
Sales of available-for-sale securities ..... 2,369,106 --
Acquisitions ............................... (1,614,500) --
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES ........ (4,404,062) (694,270)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock ......... -- 25,300,000
Proceeds from issuance of redeemable
convertible preferred stock and
stock warrants ........................... 15,000,000 --
Issuance costs on common stock ............. -- (3,465,186)
Issuance costs on preferred stock .......... (40,000) --
Issuance costs on long term debt ........... (430,025) --
Borrowings unders line of credit ........... 150,000 --
Payments on notes payable .................. -- (3,029)
Principal payments on capital
lease obligations ........................ (189,024) --
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES .... 14,490,951 21,831,785
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS .... 3,516,119 20,650,828
CASH AND CASH EQUIVALENTS BEGINNING
OF PERIOD .................................. 7,844,860 630,131
------------ ------------
CASH AND CASH EQUIVALENTS END OF PERIOD ...... $ 11,360,979 $ 21,280,959
============ ============
SUPPLEMENTAL SCHEDULES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest ................................... $ 123,459 $ 877
============ ============
Income taxes ............................... $ -- $ --
============ ============
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Details of acquisitions
Fair value of assets acquired .............. $ 208,414 $ --
============ ============
Intangibles established .................... 2,261,586 --
============ ============
Common stock issued ........................ 855,500 --
============ ============
Details of financing activities
Equipment acquired under Nortel
financing agreement ...................... $ 4,750,302 $ --
============ ============
Capital equipment accrued .................. 649,593 --
============ ============
The accompanying notes are an integral part of these financial statements.
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1. Notes to Financial Statements (Unaudited)
June 30, 2000
A. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to form 10-QSB and article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 2000
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on form 10-KSB for the
year ended December 31, 1999.
Certain amounts in the prior period's consolidated financial statements have
been reclassified to conform to the current period presentation.
B. Earnings (Loss) Per Common Share
Basic earnings per common share is computed by dividing income or loss
applicable to common stockholders by the weighted average number of common
shares of the Company's common stock ("Common Stock"), after giving
consideration to common shares subject to repurchase that are outstanding during
the period.
Diluted earnings per common share is determined in the same manner as basic
earnings per common share except that the number of common shares is increased
assuming exercise of dilutive stock options and warrants using the treasury
stock method. The diluted earnings per common share amount has not been reported
because the Company has a net loss and the impact of the assumed exercise of the
stock options and warrants is not dilutive.
C. Acquisitions
During the six months ending June 30, 2000, the Company acquired certain assets
of three Internet service provider businesses and one telephone field service
provider for approximately $2,470,000, including related acquisition costs. The
total purchase price included cash and 64,811 shares of the Company's common
stock. The pro forma impact of these acquisitions has not been presented as the
impact would be considered immaterial.
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D. Comprehensive Loss
Components of comprehensive loss are as follows:
June 30, June 30,
2000 1999
----------- -----------
Net loss $(8,306,164) $ (646,963)
Other comprehensive income (loss) -
Unrealized gains (losses) on marketable
securities 63,576 --
----------- -----------
Comprehensive loss $ (588) $ (646,963)
=========== ===========
Accumulated other comprehensive income (loss) at June 30, 2000 and December 31,
1999 is composed of unrealized gains (losses) on marketable securities amounting
to $24,900 and $(38,676), respectively.
E. Financing
On February 23, 2000 we sold 15,000 shares of Series A Redeemable Convertible
Preferred Stock (The "Preferred Shares") and issued 594,204 common stock
purchase warrants (the "Warrants") for an aggregate consideration of
$15,000,000. Subject to certain conditions, we can sell an additional 20,000
Preferred Shares and related Warrants for an additional $20,000,000. The
proceeds of the Preferred Shares has been allocated between the Warrants
($7,500,000 in Additional Paid-in Capital) and the Preferred Shares based on the
estimate of the fair value of these instruments at the time of the transaction.
The Preferred Shares are redeemable no earlier than February 23, 2003, at a
minimum redemption price of $1,000 per share plus accumulated and unpaid
additional amounts, which accrue at a rate of 8% per annum and are treated as
dividends. Because the fair value of the Preferred Shares was less than the
mandatory redemption amount at issuance, periodic accretions from stockholders'
equity are made so that the carrying amount equals the redemption amount on the
redemption date. Accretions amounted to $883,562 in fiscal year 2000.
Simultaneously, we entered into a Senior Secured Credit Agreement (the "Credit
Agreement") with Nortel Networks, Inc. ("Nortel"). Under the Credit Agreement,
Nortel has committed to an initial advance of up to $30,000,000 and a second
advance of up to an additional $15,000,000 to finance our commitment to
purchase, by December 31, 2001, up to $47,000,000 of equipment and services from
Nortel. Under the Credit Agreement, we will begin repayment of the facility over
a five-year period upon completion of the purchases from Nortel. We have granted
a security interest in substantially all of our assets under the Credit
Agreement. As of June 30, 2000 Nortel has advanced $6,189,884, which has been
considered advances under the Credit Agreement. The Credit Agreement has certain
restrictive financial covenants. Such covenants include minimum EBITDA and
annualized EBITDA with respect to financial ratios. At June 30, 2000, we were
substantially not in compliance with such covenants but have obtained the
necessary waivers from Nortel effective June 30, 2000 and for all future
periods.
Item 2. Management's Discussion and Analysis
Overview
Log On America, Inc. will be the first in the industry to establish a new model
of service delivery for broadband value-added services effectively functioning
as a Solutions LEC (SLEC). We have determined that the traditional CLEC/DLEC
service delivery models do not adequately serve a large portion of the growing
communications marketplace. We also recognize that traditional communications
products do not fulfill the competitive business requirements of many of the
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fastest growing business segments. Some of these segments have not been
addressed nor identified by the existing service providers. Two of these
un-addressed market segments that will be addressed by our highly leveraged,
fully integrated end-to-end solutions based business and management model are:
the Small Office/Home Office (SOHO) Market and the Business Solutions Market.
We will address these two underserved markets with the existing switch-based
co-location broadband infrastructure, delivering high-speed & DSL services. By
expanding into the Business Solutions Market with additional core broadband
infrastructure we will extend our reach into markets outside the limitations of
the co-location facilities. This will allow us to provide broadband access to
the desktop at speeds of 10 mbps with native IP access. This will also allow us
to utilize multiple access technologies to aggregate customer access from office
buildings and multiple dwelling units, over long distances.
We will leverage partnerships with content and Application Service Providers
(ASP's) to enhance the package of services, which can be delivered as bundled
solutions to both the SOHO and Business/Vertical Markets. Through the use of a
Web-based integrated Enterprise Management System portal, we will offer our
customers the ability to select services, submit trouble tickets, view their
invoices, administer their services and speak to Customer Care Associates on
line.
Using this model, we will accelerate our high EBITDA yielding revenue growth,
establish incumbency in the Commercial/Vertical Solutions & SOHO Markets,
precisely build-out our infrastructure, strategically utilize capital and
operations funding, and position ourselves as the smart solutions-based delivery
provider.
As a facilities-based communications solutions provider we have CLEC
certification in Rhode Island, Massachusetts, Maine, Connecticut, New Hampshire
and New York (and expect to be certified as a CLEC in Vermont in the near term).
Upon the completion of our planned build out of 60 Central Offices, we will move
our existing customer traffic over to our own switch which will lead to
increased control over service quality, the ability to offer enhanced high-speed
offerings, and greater per line profitability. The build out will give us the
ability to offer expanded bundled services to our existing customer base,
broaden the geographic reach of our Nortel-powered Integrated Communications
Network, enhance our product portfolio and substantially boost bandwidth
availability for our customers.
Results of Operations
Six Months Ended June 30, 2000
Versus Six Months Ended June 30, 1999
Three Months Ended June 30, 2000
Versus Three Months Ended June 30, 1999
Revenues
Our Data and Telecom services revenue is comprised of monthly recurring charges,
additional features on those lines, usage charges and initial, non-recurring
charges typically derived from installing new lines and services.
Revenues increased by $2,805,674 or 1144% to $3,050,941 for the three months
ended June 30, 2000 as compared to $245,267 for the comparable period in 1999.
Revenues increased by $4,955,387 or 1024% to $5,439,298 for the six months ended
June 30, 2000 as compared to $483,911 for the comparable period in 1999. The
increase in revenue is due primarily to acquisitions, increased direct sales
efforts, increased services offerings, and an aggressive marketing campaign in
both Rhode Island and Maine. As of June 30, 2000, the company has put into
service approximately 9,000 access lines. Telecom sales generated revenues in
target markets that were not in operation prior to June 30, 1999. As of June 30,
2000, we have grown our dial up Internet service to approximately 37,800
subscribers.
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Costs of revenue
Costs of revenues are data and telecommunications expenses comprised primarily
of leased transport charges for facilities connecting our customers to our
network, our network to the Internet, our switch and physical colocations.
Expenses are being incurred to the LEC for customer lines, features on lines and
usage. As part of our strategy to seamlessly move our customers over to our
facilities we anticipate lowering these costs of providing services resulting in
significant margin savings and allowing us to offer additional value added
bundled applications from our network.
Costs of revenue increased by $1,638,747 or 1329%, to $1,762,031 for the three
months ended June 30, 2000 as compared to $123,284 for the comparable period in
1999. Costs of revenue increased by $2,525,333 or 1038%, to $2,768,558 for the
six months ended June 30, 2000 as compared to $243,225 for the comparable period
in 1999. This increase is reflective of the costs associated with the
significant customer base growth achieved year-to-date and the costs associated
with high speed data and telecom network expansion. The Nortel DMS 500 switch
and 10 colocations in Rhode Island have been put into service during the second
quarter of 2000. This will now allow the conversion of our customers to our
facilities based service and allow us to offer enhanced high speed products.
Historically, leasing network versus building your own fiber optic network has
resulted in capital expenditures which we believe are lower than those of
comparable Competitive Local Exchange Carriers. We believe our capital
expenditures are focused and driven by directly identified customer demand. We
believe that a success based approach will yield a more favorable long term
return on investment. In contrast, we will incur higher operating costs for
leased facilities than fiber based Competitive Local Exchange Carriers. We have
not ruled out future fiber expansions where significant margin savings can be
achieved or where success based opportunities arise.
Selling, general and administrative expense
Selling, general and administrative expenses increased by $5,407,743 to
$6,110,307 for the three months ended June 30, 2000 as compared to $702,564 for
the comparable period in 1999. Selling, general and administrative expenses
increased by $8,616,582 to $9,606,995 for the six months ended June 30, 2000 as
compared to $990,413 for the comparable period in 1999. This increase is due
primarily to the salaries and related expenses for the development of our
business, the establishment of our management team and the development of
corporate identification, promotional and advertising materials. This also
includes the corporate activities related to finance, regulatory, legal,
executive, billing, marketing, and other administrative functions. The
significant growth is consistent with the year over year increase in personnel
and related expenses. During the six months ended June 30, 2000 we hired 254
full and part time employees, as compared to 9 hires for the comparable period
in 1999.
Depreciation and amortization
Depreciation and amortization increased by $1,031,887 to $1,055,513 for the
three months ended June 30, 2000 as compared to $23,626 for the comparable
period in 1999. Depreciation and amortization increased by $1,877,855 to
$1,920,819 for the six months ended June 30, 2000 as compared to $42,964 for the
comparable period in 1999. This increase is due primarily to the amortization
expense related to the intangible assets associated with the acquisitions and
the depreciation on the equipment costs associated with the buildout of our ISP
network backbone, switch and collocation buildouts and the internal
infrastructure to accommodate the increased usage of our external and internal
network. It is also reflective of the deployment of $10,656,068 in network
equipment, central office switching equipment and collocate equipment during the
current period.
Other Income
Other income increased by $135,776 to $281,042 for the three months ended June
30, 2000 as compared to $145,266 for the comparable period in 1999. Other income
increased by $405,182 to $550,910 for the six months ended June 30, 2000 as
compared to $145,728 for the comparable period in 1999. This increase is due
primarily to
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the investment income earned on the proceeds from the initial public offering on
April 22, 1999, the equity investment by Nortel on December 12, 1999, and
proceeds from the issuance of Preferred Stock on February 23, 2000.
Liquidity and Capital Resources
The development and expansion of our business requires substantial capital
investment for the procurement, design and construction of our central office,
collocation space improvements and cages, the purchase of telecommunications
equipment and the design and development of our networks. Capital expenditures
were approximately $10,656,068 for the six months ended June 30, 2000. The
Company expects capital expenditures to be significantly higher in future
periods arising primarily from payments of collocation fees and the purchase of
infrastructure equipment necessary for the development and expansion of our
network.
The Company's capital requirements may vary based upon the timing and success of
our rollout and as a result of regulatory, technological, and competitive
developments, or if;
- demand for the Company's services or our anticipated cash flow from
operations is less or more than expected; or
- development plans or projections change or prove to be inaccurate;
or
- the Company engages in any acquisitions; or
- the Company accelerates deployment of our network services or
otherwise alters the schedule or targets of our rollout plan.
During the six months ended June 30, 2000, we had a net loss of $8,306,164 and
cash and cash equivalents and available-for-sale securities of $20,259,302. Net
cash used in operating activities was $6,570,770 and $486,687 for the six months
ended June 30, 2000 and 1999, respectively. The net cash used in operations was
primarily due to net losses, offset in part by increases in depreciation and
amortization expenses, accounts payable and accrued expenses and deferred
revenue for the six months ended June 30, 2000, and by increases in depreciation
and amortization expenses, accounts payable and accrued expenses for the six
months ended June 30, 1999. The net cash used in investing activities was
$4,404,062 for the six months ended June 30, 2000, related primarily to the
acquisitions and purchases of property and equipment correlating to network
buildout and switch installation. The net cash used in investing activities was
$694,270 for the six months ended June 30, 1999. This related to purchases of
property and equipment coinciding with issuance of notes receivable. Net cash
provided by financing activities was $14,490,951 for the six months ended June
30, 2000 and was primarily due to net proceeds from the issuance of Preferred
Stock and common stock warrants and offset in part by issuance costs on the
Senior Secured Credit Agreement with Nortel offset by related principal payments
on capital lease obligations. Net cash provided by financing activities was
$21,831,785 for the six months ended June 30, 1999 and was primarily related to
proceeds from the issuance of Common Stock at the initial public offering on
April 22, 1999 less related issuance costs.
We intend to continue to expand its operations at a rapid pace and expect to
continue to operate at a loss for the foreseeable future, with anticipated
breakeven on a cash flow or EBITDA basis in the third quarter of 2001. The
nature of the expenses contributing to our future losses will include network
and service costs in existing and new markets; legal, marketing, and selling
expenses as we enter each new market; payroll-related expenses as we continue to
add employees; general overhead to support the operational increases; and
interest expense arising from financing our expenditures.
We believe that the existing capital resources will be sufficient to fund our
expansion and operating deficits through 2000. However, we may decide to seek
additional capital earlier than the end of 2000, the timing of which will depend
upon market conditions, among other things. The actual amount and timing of our
future capital requirements may differ materially from our estimates as a result
of, among other things, the demand for our services and regulatory,
technological and competitive developments, including additional market
developments and new opportunities, in our industry. We may also need additional
financing if:
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o We alter the schedule, targets or scope of the network rollout plan;
o Our plans or projections change or prove to be inaccurate; or
o We acquire other companies or businesses. We may obtain additional
financing through commercial bank borrowings, equipment financing or
the private or public sale of equity or debt securities. We may be
unsuccessful in raising sufficient additional capital. In
particular, we may be unable to raise additional capital on terms
that we consider acceptable, that are within the limitations
contained in our financing agreements and that will not impair our
ability to develop its business. If we fail to raise sufficient
funds, we may need to modify, delay or abandon some of the planned
future expansion or expenditures, which could have a material
adverse effect on the business, prospects, financial condition and
results of operations.
We have not paid any cash dividends to our shareholders and do not intend to pay
cash dividends in the foreseeable future.
Special Note Regarding Forward-Looking Statements
Any statements in this Quarterly Report on Form 10-QSB about our expectations,
beliefs, plans, objectives, assumptions or future events or performance are not
historical facts and are forward-looking statements. These statements are often,
but not always, made through the use of words or phrases such as "will," "will
likely result," "expect," "will continue," "anticipate," "estimate," "intend,"
"plan," "projection," "would," "should" and "outlook." Accordingly, these
statements involve estimates, assumptions and uncertainties which could cause
actual results to differ materially from those expressed in them. Any
forward-looking statements are qualified in their entirety by reference to the
factors discussed throughout this Report and our Annual Report on Form 10-KSB,
as amended, for the year ended December 31, 1999. The following cautionary
statements identify important factors that could cause our actual results to
differ materially from those projected in the forward-looking statements made in
this prospectus. Among the key factors that have a direct bearing on our results
of operations are:
o general economic and business conditions; the existence or absence
of adverse publicity; changes in, or failure to comply with,
government regulations; changes in marketing and technology; change
in political, social and economic conditions;
o increased competition in the Internet; Internet capacity; general
risks of the Internet;
o success of acquisitions and operating initiatives; changes in
business strategy or development plans; management of growth;
o availability, terms and deployment of capital;
o construction schedules; costs and other effects of legal and
administrative proceedings;
o dependence on senior management; business abilities and judgment of
personnel; availability of qualified personnel; labor and employee
benefit costs;
o development risks; risks relating to the availability of financing;
and
o other factors referenced in this Report and the Form 10-KSB, as
amended.
Because the risk factors referred to above could cause actual results or
outcomes to differ materially from those expressed in any forward-looking
statements made by us, you should not place undue reliance on any such
forward-
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looking statements. Further, any forward-looking statement speaks only as of the
date on which it is made and we undertake no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not
possible for us to predict which will arise. In addition, we cannot assess the
impact of each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
PART II
OTHER INFORMATION
Item 1: Legal Proceedings
None
Item 2: Changes in Securities and Use of Proceeds
None
Item 3: Defaults in Senior Securities
None
Item 4: Submission of Matters to a Vote of Security Holders
None
Item 5: Other Information
None
Item 6: Exhibits and Reports on Form 8K
(1) Exhibits:
27.1 Financial Data Schedule
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LOG ON AMERICA, INC.
By: /S/ Kenneth M. Cornell
-------------------------------------
Date: August 14, 2000 Kenneth M. Cornell,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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