SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended: March 31, 1997
OR
[ ] 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 No. 0-23172
NETWORK LONG DISTANCE, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 72-1122018
(State or Other Jurisdiction of (I.R.S. Employer Identi-
Incorporation or Organization) fication Number)
11817 Canon Blvd., Suite 600
Newport News, Virginia 23606
(Address of Principal Executive Offices, Including Zip Code)
Registrant's telephone number, including area code: (757) 873-1040
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Yes
Common Stock, .0001 Par Value Per Share
(Title of Class)
Indicate by check mark whether the Registrant (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.
Yes X No
As of June 25, 1997, 13,094,088 shares of common stock were outstanding. The
aggregate market value of the common stock of Network Long Distance, Inc. (the
"Company") held by nonaffiliates as of June 25, 1997 was $48,944,795.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) 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-K or any amendment to this
Form 10-K. [X]
This Form 10-K/A consists of 8 pages.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
<TABLE>
<CAPTION>
Tenure as Officer
Name Age Position of Director
----------------- --------- ---------------- ---------------------------
<S> <C> <C> <C>
John D. Crawford 43 Chairman, Chief Executive Officer and From May 7, 1997
Director to date
Timothy A. Barton 31 President and Director Director From November 15, 1996
to date
President From January 7, 1997
to date
Thomas G. Keefe 47 Chief Financial Officer, Treasurer and From May 7, 1997
Director to date
John V. Leaf 48 Secretary and Director From May 19, 1997
to date
Rusty Page 54 Director From October 26, 1995
to date
Leon Nowalsky 35 Director From May 24, 1995
to date
Albert A. Woodward 56 Director From May 19, 1997
to date
Tim Sledz 28 Director From October 31, 1995
to date
Michael M. Ross 40 Director From December 19, 1990
to date
</TABLE>
JOHN D. CRAWFORD
DIRECTOR, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Mr. Crawford was appointed Chief Executive Officer and Chairman of the Board of
Network Long Distance in May, 1997 after the company he founded, Eastern Telecom
International, was acquired by Network. He brings to Network the experience and
knowledge of more than two decades of entrepreneurship. Mr. Crawford started
Eastern in 1987 as a small pay phone company with fewer than 10 phones. Within
two years, Eastern had grown to the largest independent pay phone concern in
southeast Virginia. To further expand the enterprise, Mr. Crawford began
supplying long distance operator services to hotels nationwide in 1989. In 1993,
he introduced 1+ long distance services primarily to businesses, acquired
switching facilities and sold the maturing pay phone business in 1994. He
rapidly developed and brought to market a broad array of telecommunications
products, including paging, private line and internet services. Under Mr.
Crawford's leadership, Eastern's revenue doubled every year since its inception,
and by the time of its acquisition was generating an annual revenue run rate of
over $26 million.
2
<PAGE>
TIMOTHY A. BARTON
DIRECTOR AND PRESIDENT
Mr. Barton was named President of Network Long Distance in January, 1997. He
became responsible for the Company's mergers and acquisitions program and
quickly completed two sizable mergers, Eastern Telecom International and
National Teleservice, Inc. In addition to M & A, he is also responsible for
legal and regulatory matters, business development, and general administrative
functions. Previously he was president and CEO of United Wats, Inc. (UWI), a
nationwide long distance reseller based in Kansas City, Missouri. Under Mr.
Barton's leadership, UWI grew from under $500,000 in revenues in 1992 to more
than $20,000,000 in annualized revenues when it was merged into Network in
November 1996. Mr. Barton holds a bachelors degree from the University of Kansas
and a masters degree from Louisiana State University.
JOHN V. LEAF
DIRECTOR AND SECRETARY
Mr. Leaf was one of the founders of National Teleservice, Inc. ("NTI") and has
serviced as President and Chief Executive Officer of NTI since its inception in
1984. A graduate of Marquette University, Mr. Leaf's background is primarily
in sales, marketing and operations, with a focus on operational performance.
THOMAS G. KEEFE
DIRECTOR, CHIEF FINANCIAL OFFICER AND TREASURER
Mr. Keefe served as chief financial officer and treasurer of Eastern Telecom
from 1993 until its acquisition by Network in May, 1997, when he assumed his
current positions. At Eastern, Mr. Keefe managed the financial, accounting and
administrative activities of the firm, responsible for obtaining the necessary
capital and contracts to transform the company from a $5 million pay phone
operator in 1993 to a $26 million full service telecom provider in 1997. From
1989 through 1993, Mr. Keefe was Comptroller for Great Atlantic Management
Company, where he controlled $110 million in rental income from real estate
properties throughout the Southeast. For fourteen years prior to that, Mr. Keefe
held increasingly responsible positions at Newport News Shipbuilding, a division
of Tenneco, Inc. These duties included Manager of Government Accounting, where
he was responsible for federal cost accounting standards for a $6 billion
defense backlog, and Controller and Treasurer for the company's industrial
products subsidiary. At Network, he currently has responsibility for financial
accounting, SEC reporting and human resource activities. Mr. Keefe holds a BA
degree in Business Administration from Washington and Lee University and an MBA
from William and Mary. He is a certified public accountant.
ALBERT A. WOODWARD
DIRECTOR
Mr. Woodward was appointed Director in June 1997. He has been a senior partner
in the law firm of Maun & Simon PLC, a Minneapolis-based law firm since 1974
where he practices primarily in the areas of corporate finance and mergers and
acquisitions. Mr. Woodward received a Bachelor of Arts Degree from St. John's
University and a Juris doctorate from the University of Minnesota.
LEON L. NOWALSKY
DIRECTOR
Mr. Nowalsky has served as independent legal counsel to the Company since 1992,
and has been a Director since 1995. Since 1990, he has been a senior partner in
the law firm of Nowalsky & Bronston, LLP, a New Orleans-based law practice
specializing in telecommunications regulatory matters and mergers and
acquisitions and serves as counsel to over 40 independent telecom firms
nationwide. From 1985 to 1986, he served as in-house counsel for a
Louisiana-based long distance company which was acquired by Advanced
Telecommunications Corp. ("ATC"). Mr. Nowalsky served ATC as chief regulatory
counsel with responsibility for all compliance issues in a 15-state region, and
in 1987, he was promoted to interim general counsel of ATC, where he managed the
legal aspects of the company's telecommunications operations. Mr. Nowalsky holds
a bachelors degree from Tulane University in New Orleans and earned his Juris
doctorate from Loyola University
3
<PAGE>
School of Law in New Orleans. He serves on the Boards of Receivables Funding
Corp., an Ohio-based financial concern, and J.C. Dupont, Inc., a Louisiana-based
energy company.
RUSSELL J. (RUSTY) PAGE
DIRECTOR
Mr. Page has served as a Director of the Company since 1995. Since April of
1996, Mr. Page has served as a principal of Capital Markets Access Corp. For the
prior 15 years he served as Senior Vice President of NationsBank Corporation,
the fourth largest U.S. bank holding concern, and a primary lending institution
to a number of telecommunications corporations. Mr. Page joined NationsBank in
1981, where he assisted the bank in fulfilling its growth strategy, primarily
through acquisitions, which resulted in the bank growing from a regional retail
banking business to one of the nation's largest diversified financial
institutions. As Equity Marketing Executive, he has had direct responsibility
for all investor relations for NationsBank. In addition to his role at
NationsBank, Mr. Page has served as an independent equity markets/investor
relations consultant to a number of public companies including United Companies
Financial Corporation. Mr. Page serves on the national Marketing Committee of
The NASDAQ Stock Market, and is a member of the Board of Directors and the
Executive Committee of the National Investor Relations Institute, and he is
Chairman of NIRI's International Committee. He is also a member of the National
Security Traders Association. He is an alumnus of the University of North
Carolina at Charlotte, and has served on the 1994 Charlotte Organizing Committee
Executive Board for the National Collegiate Athletic Association ("NCAA").
TIMOTHY J. SLEDZ
DIRECTOR
Mr. Sledz has served as a Director of the Company since 1995. He is the
President and Chief Operating Officer of Value Tel, Inc., ("Value Tel") a
nationwide diversified telecommunications corporation based in Chicago,
Illinois. Mr. Sledz joined Value Tel's predecessor company, Discount Network
Services, Inc. ("DNS") in 1992 to assist in DNS's aggressive growth and
expansion plan. He served as a Director, Chief Financial Officer and Corporate
Secretary of DNS until its May, 1995 merger into Value Tel, at which time Mr.
Sledz became President of the combined companies. In November, 1995, Value Tel
sold a significant base of its nationwide telecommunications business and long
distance customer base to Network Long Distance, and since that time, Mr. Sledz
has overseen the transition of its previous customer base to Network. In
addition, Mr. Sledz currently oversees all of Value Tel's independent
operational and administrative functions. He is experienced in all areas of
computer and management information systems, including programming, networking,
and telecommunications provisioning and billing. Mr. Sledz is the former
President and Chief Executive Officer of Computer Document Imaging, Inc., a
Chicago-based computer consulting firm.
MICHAEL M. ROSS
FOUNDER, DIRECTOR, FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER
Mr. Ross founded the Company along with Mr. Becker in 1979, and has served as a
Director and Officer of Network and its predecessor company, M.M. Ross, Inc.
Mr. Ross has been active in every facet of the telecommunications industry on
an industry-wide level. Mr. Ross is a former Director of Telecom Management,
Inc. (1984 to 1985) and Direct Communications, Inc., (1985 to 1990) both of
which were merged into Network. He was a charter member in the
Telecommunications Resellers Association ("TRA"). He is a graduate of
Louisiana State University in Baton Rouge.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of the Common Stock,
to file certain reports of ownership and changes in ownership with the SEC.
Officers, directors and persons owning beneficially greater than 10% of the
Company's Common Stock are required by SEC regulations to furnish the Company
with copies of all such reports.
4
<PAGE>
Based solely on its review of the copies of such reports received by the
Company, or written representations from certain reporting persons, the Company
believes that all filing requirements applicable to its officers, directors, and
greater than 10% beneficial owners were complied with during the fiscal year
ended March 31, 1997.
ITEM. 11 EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or accrued by the Company
during the fiscal years 1995, 1996 and 1997 to the chief executive officers and
those of its executive officers whose salaries and other compensation during
1997 exceeded $100,000.
<TABLE>
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Long Term Compensation
----------------------------------------------------
Annual Compensation
Awards Pay-
outs
- -----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Other All
Name Annual Restricted LTIP Other
and Compen- Stock Options/ Pay- Compen-
Principal Salary Bonus sation Awards SARs outs sation
Position Year(1) ($) ($) ($)(2) ($) (#) ($) ($)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Michael M. 1997 $104,035 $0 0 N/A 0 N/A $5867
Ross 1996 $99,386 $0 $221 N/A 0 N/A $9,155
Former 1995 $94,846 $0 $ 2,316 N/A 0 N/A $8,822
President
& CEO
Marc I. Becker 1997 $104,035 $0 0 N/A 0 N/A $5867
Former 1996 $103,073 $0 $221 N/A 0 N/A $5,455
Executive 1995 $99,022 $0 $884 N/A 0 N/A $5,449
Vice President
& COO
===================================================================================================================================
</TABLE>
(1) Periods presented are for the years ended March 31.
(2) Represents a $500 monthly allowance less health insurance. For fiscal
year 1996, the monthly allowance was terminated July 1, 1995.
(3) Represents employer contributions for insurance, disability and a car
allowance.
COMPENSATION OF DIRECTORS
Two (2) non-employee Directors of the Company, Mr. Russell J. Page and Mr. Leon
L. Nowalsky have been authorized Warrants under Directorship Agreements, as
described below. All Directors receive expenses to attend board meetings and
expenses related to board duties assigned.
On April 29, 1995, Mr. Leon L. Nowalsky, in consideration for accepting a
directorship, was authorized to receive warrants to purchase 225,000 shares of
the Company's Common Stock for a ten (10) year period for $7.75 per share.
On October 1, 1995, Mr. Russell J. Page, in consideration for accepting
5
<PAGE>
a directorship, was authorized to receive warrants to purchase 225,000 shares of
the Company's Common Stock for a ten (10) year period for $9.13 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's compensation committee for the fiscal year ended March 31, 1997
consisted of Mr. Page, Mr. Nowalski and Mr. Becker. Mr. Page and Mr. Nowalski
are not officers or employees of the Company. Mr. Becker was an Executive
Vice President and the Chief Operating Officer of the Company, but is no longer
with the Company as an officer, employee or director.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND OF MANAGEMENT
The following table presents information with respect to shares of the Company's
Common Stock beneficially owned by (i) the Company's Directors and executive
officers named in the summary compensation table, (ii) all Directors and
Officers of the Company as a group, and (iii) all other persons known by
management to own beneficially 5 percent (5%) or more of the Company's Common
Stock as of June 25, 1997. Unless otherwise indicated, each of the stockholders
has sole voting and investment power with respect to the shares beneficially
owned.
<TABLE>
<CAPTION>
Amount and Percent of
Name and Address Nature of Beneficial Class Owned
of Beneficial Owner Ownership Beneficially
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John D. Crawford (1) 3,065,768 23.028%
2425 Manion Drive
Williamsburg, VA 23185
Timothy A. Barton 455,556 3.422%
5319 W. 101st Terrace
Overland Park, KS 66207
Thomas G. Keefe (2) 104,524 *
102 Lake Herrin Court
Yorktown, VA 23693
John V. Leaf (3) 1,555,239 11.682%
Leaf Family Partners Ltd.
2300 Main Street, Suite 1100
Kansas City, MO 64106
Rusty Page (4) 225,000 1.690%
822 Queens Road
Charlotte, NC 28207
Albert A. Woodward 0 *
2000 Midwest Plaza Bldg. W, 801 Nicollet Mall
Minneapolis, MN 55402
Tim Sledz (5) 485,333 3.646%
1861 Paddington Avenue
Naperville, IL 60563
Leon Nowalsky (6) 265,000 1.991%
826 Barracks Street
New Orleans, LA 70116
Michael M. Ross 601,691 4.520%
13929 Woodland Ridge
Baton Rouge, LA 70816
O. A. Friend TTEE 1993 Friend FA TR 1,555,239 11.682%
2300 Main Street, Suite 1100
Kansas City, MO 64106
6
<PAGE>
All Directors and Officers 8,768,906 66.968%
as a Group ( 10 Persons)
*Less than 1%
</TABLE>
(1) Includes 55,319 shares of the Company's Common Stock held in escrow
related to the Eastern Telecom Int'l merger.
(2) Includes 1,887 shares of the Company's Common Stock held in escrow
related to the Eastern Telecom Int'l merger.
(3) Mr. Leaf is an indirect beneficial owner of 1,555,239 shares of
Common Stock owned by Leaf Family Partners Ltd. by virtue of Mr.
Leaf being an Officer and Director of National Teleservice, Inc.
(4) Represents options to purchase shares of the Company's Common Stock,
exercisable within the next 60 days.
(5) Includes 370,233 shares of the Company's Common Stock owned by
Value Tel, Inc. of which Mr. Sledz is an officer and director.
(6) Includes options to purchase 225,000 shares of the Company's Common
Stock, exercisable within the next 60 days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
TRANSACTIONS WITH MANAGEMENT
On March 7, 1994, Michael M. Ross and Marc I. Becker each placed 626,691 shares
in escrow, subject to release upon certain objective performance levels or upon
certain merger. In order for the shares to be released, the Company's net income
per share on a fully diluted basis, as defined in the agreement, must have been
as follows:
<TABLE>
<CAPTION>
Fiscal Net Income Per Share Amount of Shares to
Year-End (Fully-Diluted) be Released
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
March 31, 1995 $.375 per share 208,897 shares
March 31, 1996 $0.60 per share 208,897 shares
March 31, 1997 $1.00 per share 208,897 shares
</TABLE>
None of the above net income per share levels were achieved and no applicable
merger transactions occurred. Mr. Becker's shares have been returned to the
Company from the escrow with his agreement. Mr. Ross has instituted litigation
against the Company claiming that his shares should be released to him and not
to the Company. The Company disputes Mr. Ross's claim.
The staff of the Securities and Exchange Commission may view the placement of
shares in escrow similar to a recapitalization by management. The agreement to
release shares upon the achievement of certain objective criteria is presumed to
be a separate compensatory arrangement between the Company and management. The
effect is that the fair value of the shares released from escrow is charged to
income in that period. Accordingly the Company's profitability could be
significantly effected in any period the shares held in escrow are released.
Mr. Leon L. Nowalsky, a Director of the Company, is a partner of Nowalsky &
Bronston, LLP. The law firm performed legal services for the Company during
the last fiscal year and was paid approximately $129,773.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NETWORK LONG DISTANCE, INC.
Dated: June 25, 1997 By:/s/ Thomas G. Keefe
-------------------
Thomas G. Keefe
Chief Financial Officer
8
