U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________________ to
____________________________
Commission file number 0-18654
AMERICONNECT, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 48-1056927
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
6750 West 93rd Street, Suite 110, Overland Park, KS 66212
(Address of principal executive offices) (Zip Code)
(913) 341-8888 (Issuers's telephone number, including area code
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ____
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
As of August 1, 1996, the Issuer had outstanding 6,341,361 shares of
Common Stock and 592,033 shares of Class A Common Stock.
Transitional Small Business Disclosure Format (check one):
Yes No X
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICONNECT, INC.
Consolidated
Balance Sheets
ASSETS
<TABLE>
<S> <C> <C>
June 30, 1996
Unaudited December 31, 1995
CURRENT ASSETS
Cash $ 207,959 $ 293,492
Accounts receivable, net of
allowance of $396,472 at 1996
and $361,260 at 1995 (Note 3) 2,414,849 1,961,815
Accounts receivable-trade,
with affiliates 11,421 6,065
Accounts receivable-agents,
including accrued interest (Note 6) 30,355 1,492
Notes receivable-director/
shareholder (Note 2) -- 14,500
Prepaid commissions 91,057 126,042
Other current assets 93,942 94,251
Total current assets 2,849,583 2,497,657
NON-CURRENT ASSETS
Equipment and software, net
of accumulated depreciation
and amortization of $270,871
at 1996 and $230,868 at 1995 118,527 143,202
Deposits 18,027 19,528
TOTAL ASSETS $2,986,137 $2,660,387
See accompanying notes to financial statements
AMERICONNECT, INC.
Consolidated
Balance Sheets
June 30, 1996
unaudited December 31, 1995
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable (Note 3) $3,005,814 $2,782,432
Sales taxes payable 113,667 97,460
Accrued office closing costs -- 8,539
Other accrued liabilities 1,247 733
Total current liabilities 3,120,728 2,889,164
NON-CURRENT LIABILITIES
Customer deposits 10,265 8,264
Total liabilities 3,130,993 2,897,428
COMMITMENTS AND CONTINGENCIES
(Notes 3 and 5) -- --
STOCKHOLDERS' DEFICIT (Note 5)
Class A common stock, par
value $.00001 per share;
10,000,000 shares authorized;
issued 6,562,033 shares 66 66
Common stock, par value $.01
per share; 20,000,000 shares
authorized; issued 6,521,611
shares 65,216 65,050
Additional paid-in capital 3,647,154 3,642,731
Accumulated deficit (3,855,429) (3,943,025)
Treasury stock - class
A common, at cost;
5,970,000 shares (60) (60)
Treasury stock - common,
at cost; 180,250 shares (1,803) (1,803)
Total stockholders' deficit (144,856) (237,041)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $2,986,137 $2,660,387
</TABLE>
See accompanying notes to financial statements
AMERICONNECT, INC.
Statements of Operations
(Unaudited)
For The Three Months For the Six Months Ended
Ended June 30, June 30,
<TABLE>
<S> <C> <C> <C> <C>
1996 1995 1996 1995
REVENUES
Sales $4,322,276 $4,378,878 $8,565,187 $8,890,727
Sales to affiliates 19,819 26,410 41,510 41,534
Total revenues 4,342,095 4,405,288 8,606,697 8,932,261
COSTS AND EXPENSES
Direct operating
costs 3,169,951 3,360,777 6,372,297 6,805,223
Selling,
administrative and
general expenses 908,305 1,055,094 2,096,879 2,082,065
Depreciation
and amortization 19,797 18,777 40,002 34,576
Total costs and
expenses 4,098,053 4,434,648 8,509,178 8,921,864
Operating income
(loss) 244,042 (29,360) 97,519 10,397
OTHER INCOME (EXPENSE)
Interest income 2,475 5,558 4,479 12,571
Interest expense (4,866) (2,498) (17,292) (3,240)
Other income 2,890 -- 2,890 --
Loan fees -- -- -- (1,251)
Total other income
(expense) 499 3,060 (9,923) 8,080
NET INCOME (LOSS) BEFORE
INCOME TAXES 244,541 (26,300) 87,596 18,477
Income Tax Expense
(Note 4) -- -- -- --
NET INCOME (LOSS) $244,541 ($26,300) $87,596 $18,477
Net income (loss)
per common and common
equivalent share $ 0.033 ($0.004) $ 0.012 $0.002
Weighted average
common and common
equivalent shares
outstanding (Note 5) 7,434,054 7,327,698 7,434,054 7,327,698
</TABLE>
See accompanying notes to financial statements
AMERICONNECT, INC.
Statements of Cash Flows
(Unaudited)
For the Six
Months Ended
<TABLE>
<S> <C> <C>
June 30, 1996 June 30, 1995
Cash flows from operating
activities:
Net income $ 87,596 $ 18,477
Adjustments to reconcile
net income to cash provided
by/(used in) operating
activities:
Depreciation and amortization 40,002 34,576
Provision for doubtful accounts 128,680 162,835
(Increase) decrease in assets:
Accounts receivable (581,714) (443,037)
Accounts receivable -
trade with affiliates (5,356) (2,803)
Prepaid commissions 34,985 --
Other current assets 309 10,269
Deposits 1,501 637
Increase (decrease) in liabilities:
Accounts payable - trade 223,382 654
Sales tax payable 16,207 31,705
Accrued office closing costs (8,539) (9,307)
Deferred Income -- (13,384)
Customer deposits 2,001 --
Other accrued liabilities 515 (24,730)
Net cash used in operating
activities (60,431) (234,108)
Cash flows from investing activities:
Purchase of equipment and software (15,327) (72,791)
Notes receivable -
director/shareholder -- (3,000)
Payments on notes receivable -
director/shareholder 14,500 --
Notes receivable - employees (10,000) --
Notes receivable - agents (20,000) (20,000)
Payments on agents notes receivable 1,137 16,762
Net cash used in investing activities (29,690) (79,029)
Cash flows from financing activities:
Proceeds from bank loan 5,895,000 1,745,000
Payments on bank loan (5,895,000) (1,703,198)
Sale of stock to employees 4,588 2,250
Net cash provided by financing
activities 4,588 44,052
Net decrease in cash (85,533) (269,085)
Cash at beginning of period 293,492 405,942
Cash at end of period $207,959 $136,857
Supplemental disclosures of
cash flow information
Cash paid during the period for:
Interest $ 16,560 $ 2,461
Income taxes $ 2,245 $ 3,320
</TABLE>
See accompanying notes to financial statements
AMERICONNECT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY: AmeriConnect, Inc. and its wholly owned subsidiary,
AmeriConnect, Inc. of New Hampshire (collectively, the "Company") resell
long distance telecommunications services primarily to individuals and
small to medium-sized businesses. AmeriConnect, Inc. of New Hampshire was
formed June 28, 1993, in order to do business in the state of New Hampshire.
The consolidated balance sheets as of June 30, 1996, the consolidated
statements of operations for the six months ended June 30, 1996 and 1995,
and the consolidated statements of cash flows for the six months ended
June 30, 1996 and 1995 have been prepared by the Company, without audit.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows at June 30, 1996, and for all periods
presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's
December 31, 1995 annual report to shareholders. The results of operations
for the periods ended June 30, 1996, and June 30, 1995, are not necessarily
indicative of the operating results for the full year.
NOTE 2 - NOTE RECEIVABLE - DIRECTOR/SHAREHOLDER
During 1994 and early 1995, the Company made loans totaling $14,500 to a
director/shareholder. They were secured by 19,000 shares of the Company's
common stock and bore interest at 2 1/2% over the published prime rate found
in The Wall Street Journal. The loans were paid in full on January 24, 1996.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
The Company has a contract with a firm to provide subscriber statement
processing and billing services. The contract is for a period of three (3)
years and expires in September 1996. The Company has negotiated a month-
to-month arrangement that will begin in October 1996 and continue until
shortly after the merger is consummated. If the merger is
not consummated, the Company intends to negotiate a long term contract.
Terms of the contract provide for a monthly base charge with additional
per unit processing charges.
The Company has a contract with Sprint to provide telecommunications
services for the Company's customers. The Company has negotiated an
amendment to the contract that was retroactive to January 1, 1996.
The amendment covers the pricing of the services for a term of two years
beginning January 1, 1996. The Company has a monthly minimum usage
commitment of $500,000 for each of the months covered by the agreement
with a total minimum commitment of $12,000,000. In the event the
Company's customers use less than the minimum commitment, the difference
is due and payable by the Company to Sprint. Prior to the amendment,
the Company had a minimum monthly commitment of $1,000,000. For the
period September 1, 1995, through December 1, 1995, the Company had an
accumulated shortfall of approximately $719,549 which will be offset
by the amount by which the Company's actual monthly billed usage for
the period beginning on January 1, 1996 exceeds the $500,000 minimum
commitment. As a result of this offset, at June 30, 1996, there was
no accumulated shortfall and the Company was in compliance with the
contractual requirements ofthe agreement. In the event the proposed
merger with Phoenix Network, Inc. occurs (See Note 9), the Company's
amendment to the Sprint contract will terminate on the closing date.
The Company has a contract with WilTel to provide telecommunications
services at discounted rates which will vary based upon the amount of
usage by the Company. The term of this usage commitment is thirty-nine
(39) months. The Company's agreement with WilTel calls for a minimum
monthly usage commitment of $50,000 through January 1998. In
the event the Company's customers use less than the minimum commitment
in any month, the difference is due andpayable by the Company to WilTel
in the following month. On June 21, 1996, the Company executed an
amendment to the contract. The amendment provides for additional
discounts to the Company for the usage months of June, July, August and
September of 1996. In the event the proposed merger with Phoenix Network,
Inc. does not occur (See Note 9), the Company's monthly commitment would
increase to $250,000 beginning with October 1996 usage and continue for
the remainder of the existing term. The Company was in compliance with
the contractual requirements of the agreement throughout the quarter
ended June 30, 1996.
On June 1, 1996, the Company entered into a revolving credit facility
which expires October 1, 1996, and allows for maximum borrowings by the
Company of the lesser of $1,000,000 or 50% of eligible (less than 61 days
old) receivables. Interest is payable monthly at the bank's prime rate
(8.25% at June 30, 1996) plus 2%. Under the terms of the credit facility,
the Company is required to meet certain financial covenants. The line is
secured by all of the Company's accounts receivable. During the second
quarter of 1996, the Company had used this facility for short term
borrowings, but had no outstanding borrowings at quarter end. At June
30, 1996, the Company was in default of certain of these financial
covenants, which defaults are continuing. While the Company currently
does not expect these defaults to impair its ability to utilize this
facility during the remainder of the existing term, it may negatively
impact the Company's ability to renew the credit facility. In the event
the credit facility cannot be renewed or the Company is unable to utilize
the existing facility, the Company would attempt to obtain a comparable
credit facility from an alternative financing source. While the Company
has been able to obtain such facilities in the past, there can be no
assurance that the Company will beable to obtain a credit facility with
comparable terms or at all. The inability to obtain a credit facility
would have a material adverse effect on the Company's financial condition
and business.
In accordance with the terms of the credit facility, the Company purchased
a term life insurance policy on a key employee with a face amount of
$1,750,000 during the year ended December 31, 1994. Annual premiums are
approximately $3,500.
NOTE 4 - INCOME TAXES
A valuation allowance was established to reduce the deferred tax asset to
the amount that will more likely than not be realized.
The valuation allowance was adjusted for three month period ended June 30,
1996, and the year ended December 31, 1995, as follows:
<TABLE>
<S> <C> <C>
June 30, 1996 December 31, 1995
Valuation allowance,
beginning of period $1,667,882 $591,512
Valuation adjustment (51,214) 576,370
Adjustment in allowance
due to change in estimate -- 500,000
Valuation allowance, end
of period $1,616,668 $1,667,882
</TABLE>
NOTE 5 - COMMON STOCK, WARRANTS AND OPTIONS
PUBLIC OFFERING: In its initial public offering in 1989, the Company
issued 828,000 units each of which consisted of five shares of previously
unissued common stock, par value $.01 per share, and five redeemable Class A
Warrants at a price per unit of $5.00. Each of the Class A Warrants,
which was transferable separately immediately upon issuance, entitled
the holder to purchase for $1.00 one share of common stock and one
redeemable Class B common stock purchase warrant ("Class B Warrant").
The Class A Warrants expired on May 29, 1994. Each Class B Warrant
entitled the holder to purchase one share of common stock at $1.50 until
May 29, 1994. The warrants are not common stock equivalents for the
purposes of the earnings per share computations. (See Note 1.) In
addition, the Company granted the underwriter and finder options to
purchase 57,600 and 14,400 units, respectively, at $6.00 per unit
exercisable over a period of four years commencing one year from the date
of the prospectus.
MISSING STOCK CERTIFICATES: Prior to the Company's initial public
offering, the stockholders of record as of March 29, 1989, executed escrow
agreements which required the placement in escrow of 150,000 shares of
outstanding common stock and 5,970,000 shares of outstanding Class A
common stock pending the achievement of certain earnings objectives. These
earnings objectives were not met and, consequently, all of the shares
subject to the escrow agreement were retired and have been accounted for as
treasury stock since December 31, 1992. In addition, in connection with
the execution of a voting trust agreement in 1989, certificates
representing 3,014,751 shares of Class A common stock were issued in the
name of a voting trust in substitution for the certificates held by some of
the stockholder-parties to the voting trust agreement. This voting trust
expired in June of 1992. During the first quarter of 1992, however, the
Company learned that the escrow agent associated with the escrow agreements
asserts that it has never received the stock certificates representing the
shares subject to the escrow agreements. During the same period, the
Company discovered that the certificates representing 2,975,751 of the
shares transferred to the voting trust were never delivered to the Company
for cancellation. The Company has been unable to locate neither the
original share certificates nor the certificates issued to the voting
trust. As a result, if a stockholder attempted to transfer any of the
shares subject to the escrow agreements or the voting trust agreement in
violation of such agreements, there can be no assurance that an innocent
transferee could not successfully claim the right to the shares purportedly
transferred to him or her. The Company believes, however, that the legends
affixed to each of the missing certificates, which state that the shares
are subject to the restrictions of the voting trust agreement and the escrow
agreements, respectively, are sufficient to prevent a transferee from
acquiring a valid claim with respect to the shares represented by the
missing certificates. In addition, the Company has obtained affidavits
from each holder of the missing certificates that no such purported
transfers have been made.
STOCK RIGHTS: The rights and preferences of common stock and Class A
common stock are substantially identical except that each share of common
stock entitles the holder to one vote whereas, each share of Class A common
stock entitles the holder to five votes. Class A common stock
automatically converts into common stock on a one-for-one basis upon sale
or transfer to an entity or individual who was not a holder of Class A
common stock before such sale or transfer, or at any time at the option of
the holder. During each of 1994 and 1995, 113,400 shares of Class A stock
were converted to common stock through private transactions.
STOCK OPTION PLANS: On July 29, 1988, the Company adopted a stock option
plan allowing 300,000 shares of unissued but authorized common stock for
issuance of incentive and/or non-qualified stock options. At June 30,
1996, all options had been granted under the plan, and 23,000 options had
been returned to the Company by employees who resigned prior to vesting.
Such returned options are again available for use under the plan.
On May 27, 1994, the Company adopted a second stock option plan allowing
for 500,000 shares of unissued but authorized common stock for issuance of
incentive and/or non-qualified stock options. As of June 30, 1996, 487,000
options under this plan had been granted and 174,356 options had been
returned to the Company by employees who resigned prior to vesting. Such
returned options are again available for use under the plan.
Stock option transactions for the period ended June 30, 1996, are summarized
below:
<TABLE>
<S> <C> <C> <C>
1988 Plan 1994 Plan Total
Outstanding, beginning
of quarter 166,000 314,000 480,000
Granted -- -- --
Exercised (3,000) -- (3,000)
Cancelled -- (12,000) (12,000)
Outstanding, end of
period 163,000 302,000 465,000
Option price per share
exercised $0.03 - $0.50 -- $0.03 - $0.50
Price for outstanding
options $0.03 - $0.50 $0.26 - $0.75 $0.03 - $0.75
</TABLE>
The expiration dates for the options issued under the 1988 Plan range from
May 1998 to December 2003. At June 30, 1996, 23,000 shares were available
for future grants under the 1988 Plan.
The expiration dates for the options issued under the 1994 Plan range from
August 2004 to December 2005. At June 30, 1996, 187,356 shares were
available for future grants under the 1994 Plan.
NOTE 6 - NOTES RECEIVABLE
The Company conducts a portion of its business through agents. Some of
these agents have borrowed from the Company in order to obtain necessary
capital to expand their operations. These borrowings are represented by
short term promissory notes. The terms of the notes permit the Company to
withhold the monthly payments from commissions due the agents, if
necessary. The interest rate for all the notes is 2 1/2% over the prime
rate published by The Wall Street Journal. At December 31, 1994, a reserve
of $100,000 was established against amounts due from a specific agent whose
receivable, including unpaid charges, aggregated $498,061. During 1995,
the Company and this agent became involved in litigation, and it was
determined that no recovery on the amounts would be made. As a result,
the remaining receivable of $398,061 was written off. The Company has
negotiated a mutual release of all claims with this specific agent. The
Company received a credit in the amount of $300,000 in the second quarter
of 1996 as a partial recovery of the amounts previously written off.
NOTE 7 - PROFIT SHARING PLAN
The Company adopted a 401(k) savings plan effective January 1, 1994,
covering nearly all eligible employees with at least six months of service.
Under the terms of the plan, employees may contribute up to 15% of their
gross wages. The Company matches 100% of the first 3% contributed by each
employee. The Company's contribution to the plan was $9,639 in the first
six months of 1996.
NOTE 8 - ONGOING OPERATIONS
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles. The Company reported a net
income of $87,596 for the six month period ended June 30, 1996. At this
time, liabilities exceed assets by $144,856. Excluding the $300,000
credit, the Company would have reported a net loss of $212,404. In order
to be profitable on an operating basis, the Company must achieve sufficient
volume levels to obtain additional discounts under its existing carrier
contracts or reduce other costs. In addition, the Company may explore
financing and other strategic transactions, such as the proposed merger
(discussed in Note 9 below).
The proposed merger would reduce the Company's direct operating costs
through volume discounts on long-distance pricing from its carriers and
would provide certain economies of scale which management believes would
allow its operations to become profitable and allow it to compete for new
and existing customers. If, for any reason, the proposed merger is not
consummated, the Company plans to increase sales and reduce its costs and
will continue to explore other strategic alternatives (which may include
financings, mergers, acquisitions, joint ventures or other strategic
transactions).
NOTE 9 - SUBSEQUENT EVENT
On January 15, 1996, the Company and Phoenix Network, Inc. ("Phoenix"),
a Golden, Colorado-based long distance reseller and provider of value-added
telecommunications services, signed a letter of intent to merge the two
companies in a stock-for-stock transaction. The parties executed a
definitive merger agreement on June 14, 1996. In connection with the
proposed merger, Phoenix will issue shares of its common stock in exchange
for all of the outstanding shares of the Company. It is currently
anticipated that the closing will take place in October 1996, pending the
obtaining of all necessary regulatory approvals and approval of the
Company's shareholders. There can be no assurance the Company's
shareholders will approve the merger or that the other conditions to the
merger will be satisfied.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THIS REPORT ON
FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE
NOT LIMITED TO, THOSE DISCUSSED IN THE SECTION ENTITLED "FACTORS THAT MAY
AFFECT FUTURE RESULTS OF OPERATIONS," AS WELL AS THOSE DISCUSSED ELSEWHERE
IN THE COMPANY'S REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
General
The Company's financial condition and results of operations continue to be
negatively affected by increasing competition which contributes to lower
profit margins and increasing costs for new sales. While the proposed merger
with Phoenix Network, Inc. will afford the new entity savings via combined
carrier contracts and other economies of scale, there is no assurance that
the proposed merger will be consummated.
Competition. Intense competition in the long distance telecommunications
industry continues in 1996. Major long distance companies like AT&T and
Sprint are continuing to market directly to the Company's primary market -
small to medium-sized businesses. Other existing competitors are
aggressively reducing rates to maintain and build customer base and expand
minute volume. In addition, new competitors continue to emerge targeting the
Company's primary market. Many of these competitors sought to build volume
quickly and, in order to accomplish this goal, sold their long distance
services at rates that, in the Company's opinion, do not reflect the full
costs of doing business. Accordingly, while the Company reduced its rates
and undertook efforts to maintain and build its customer base (as described
below), the Company was unable to match the rates and/or services offered by
many of its competitors, thereby increasing the number of customers lost to
competitors. While the Company continued to acquire new customers,
lost business and rate reductions to existing accounts more than offset new
business. While total minutes billed increased approximately 7% from the
second quarter 1995 to the second quarter 1996, the average revenue per
minute dropped approximately 9%.
Sales Costs. The Company sought to increase its volume by offering
services at rates that were competitive in the market. In addition, the
Company hired Area Sales Directors and other personnel to support its sales
agent program, increased commissions to sales agents to maintain its
relationship with key agents, hired a Kansas City area direct sales
force and promoted aggressive marketing campaigns designed to increase
sales. While the Company believes these actions to be necessary to respond
to the competitive environment, they have the effect of increasing selling,
general and administrative expenses.
Second Quarter Results 1996 Compared to Second Quarter Results 1995
Total Revenues. Total revenues decreased from $4,405,288 in the second
quarter 1995 to $4,342,095 in the second quarter 1996, a decrease of $63,193
or approximately 1%. The decrease is attributable to the decrease in average
revenue per minute as previously discussed.
Direct Operating Costs. Direct operating costs decreased from $3,360,777
in the second quarter 1995 to $3,169,951 in the second quarter 1996, a
decrease of $190,826 or approximately 6%. As a percentage of revenues, direct
operating costs decreased from approximately 76% in the second quarter of
1995 to approximately 73% in the second quarter of 1996. The decrease is
attributable mainly to the execution of an amended contract with one of the
Company's underlying carriers that afforded the Company more competitive
rates. The Company's direct operating costs decreased approximately
$261,000 as a result of the amended contract. Of the $261,000,
approximately $133,000 related to first quarter 1996 usage.
Selling, Administrative and General Expenses. The Company's selling,
administrative and general expenses decreased from $1,055,094 in the second
quarter 1995 to $908,305 in the second quarter 1996, a decrease of $146,789
or approximately 14%. As a percentage of revenue, selling, administrative
and general expenses decreased from approximately 24% in the second quarter
1995 to approximately 21% in the second quarter 1996. The decrease in
selling, administrative and general expenses is due in large part to the
recovery of a bad debt previously written off. The Company received a
credit in the amount of $300,000 related to the bad debt previously written
off. Without the effect of the $300,000 credit, selling, administrative and
general expenses would have increased from $1,055,094 in the second quarter
of 1995 to $1,208,305 in the second quarter of 1996, an increase of $153,211 or
approximately 14%. The biggest single increase in this expense category in
dollars was in compensation expense.
Compensation expenses increased from $601,987 in the second quarter 1995 to
$674,008 in the second quarter 1996, an increase of $72,021 or approximately
12%. Salaries for sales related positions increased from $79,627 to
$115,719, an increase of $36,092 or approximately 45%, which resulted from the
addition of several sales positions
throughout 1996. In-house commissions increased from $8,531 to $27,102, an
increase of $18,571 or approximately 218%. Agent commissions increased from
$361,211 to $373,142, an increase of $11,931 or approximately 3% due to the
introduction in late 1995 of a commission plan designed to attract high
volume agents.
Fees for professional services increased from $49,415 in the second quarter
1995 to $109,196 in the second quarter 1996, an increase of $59,781 or
approximately 121%. This increase resulted primarily from increases in the
costs of legal and accounting services associated with the potential merger
previously mentioned.
Six Month Results 1996 Compared to Six Month Results 1995
Total Revenues. Total revenues decreased from $8,932,261 for the first six
months of 1995 to $8,606,697 for the first six months of 1996, a decrease of
$325,564 or approximately 4%. This decrease in revenues is attributable to
the decrease in average revenue per minute.
Direct Operating Costs. Direct operating costs decreased from $6,805,223 for
the first six months of 1995 to $6,372,297 for the first six months of 1996, a
decrease of $432,926 or approximately 6%. As a percentage of revenues,
direct operating costs decreased from approximately 76% in 1995 to 74% in
1996. The decrease was the result of the execution of a new carrier contract
that was effective September 1, 1995 and an amendment to the new contract that
was effective January 1, 1996. (See Second Quarter Results above.)
Selling, Administrative and General Expenses. The Company's selling,
administrative and general expenses increased from $2,082,065 for the first six
months of 1995 to $2,096,879 for the first six months of 1996, an increase of
$14,814 or approximately 1%. As a percentage of revenue, selling,
administrative and general expenses increased from 23% in 1995 to 24% in 1996.
The increase in selling, administrative and general expenses was
insignificant due in large part to the recovery of a bad debt previously
written off. The Company received a credit in the amount of $300,000
related to the bad debt previously written off. Without the effect of the
$300,000 credit, selling, administrative and general expenses would have
increased from $2,082,065 for the first six months of 1995 to $2,396,879 for
the first six months of 1996, an increase of $314,814 or approximately 28%.
The biggest single increase in this expense category in dollars was in
compensation expense.
Compensation expenses increased from $1,136,816 for the first six months of
1995 to $1,324,579 for the first six months of 1996, an increase of
$187,763 or approximately 16%. Salaries for sales related positions increased
from $135,274 to $221,314, an increase of $86,040 or approximately 64%, which
resulted from the addition of several sales positions throughout 1996.
In-house commissions increased from $19,775 to $51,739, an increase of
$31,964 or approximately 162%. Agent commissions increased from $672,104 to
$727,111, an increase of $55,007 or approximately 8% due to the introduction
in late 1995 of a commission plan designed to attract high volume agents.
Fees for professional services increased from $94,103 for the first six months
of 1995 to $215,714 for the first six months of 1996, an increase of $121,611
or approximately 129%. This increase resulted primarily from increases in
the costs of legal and accounting services associated with the potential
merger previously mentioned.
Liquidity and Capital Resources
On December 31, 1995 and June 30, 1996, the Company had a stockholders'
deficit of $237,041 and $144,856, respectively. During the first six
months of 1995, the Company used $234,108 cash from operations. During the
first six months of 1996, the Company used $60,431 cash in operations.
The Company has a contract with Sprint to provide telecommunications services
for the Company's customers. The Company has negotiated an amendment to the
contract that was retroactive to January 1, 1996. The amendment covers the
pricing of the services for a term of two years beginning January 1, 1996.
The Company has a monthly minimum usage commitment of $500,000 for each of the
months covered by the agreement with a total minimum commitment of
$12,000,000. In the event the Company's customers use less than the minimum
commitment, the difference is due and payable by the Company to Sprint. Prior
to the amendment, the Company had a minimum monthly commitment of
$1,000,000. For the period September 1, 1995, through December 1, 1995, the
Company had an accumulated shortfall of approximately $719,549 which will
be offset by the amount by which the Company's actual monthly billed usage
for the period beginning on January 1, 1996 exceeds the $500,000 minimum
commitment. As a result of this offset, at June 30, 1996, there was no
accumulated shortfall and the Company was in compliance with the
contractual requirements of the agreement. In the event the proposed merger
with Phoenix Network, Inc. occurs (See Note 9), the Company's amendment
to the Sprint contract will terminate on the closing date.
The Company has a contract with WilTel to provide telecommunications services
at discounted rates which will vary based upon the amount of usage by the
Company. The term of this usage commitment is thirty-nine (39) months.
The Company's agreement with WilTel calls for a minimum monthly usage
commitment of $50,000 through January 1998. In the event the Company's
customers use less than the minimum commitment in any month, the difference
is due and payable by the Company to WilTel in the following month. On
June 21, 1996, the Company executed an amendment to the contract. The
amendment provides for additional discounts to the Company for the usage months
of June, July, August and September of 1996. In the event the proposed
merger with Phoenix Network, Inc. does not occur (See Note 9), the Company's
monthly commitment would increase to $250,000 beginning with October 1996 usage
and continue for the remainder of the existing term. The Company was in
compliance with the contractual requirements of the agreement throughout
the quarter ended June 30, 1996.
On June 1, 1996, the Company entered into a revolving credit facility which
expires October 1, 1996, and allows for maximum borrowings by the Company of
the lesser of $1,000,000 or 50% of eligible (less than 61 days old)
receivables. Interest is payable monthly at the bank's prime rate (8.25% at
June 30, 1996) plus 2%. Under the terms of the credit facility, the
Company is required to meet certain financial covenants. The line is secured
by all of the Company's accounts receivable. During the second quarter of
1996, the Company had used this facility for short term borrowings, but
had no outstanding borrowings at quarter end. At June 30, 1996, the Company
was in default of certain of these financial covenants, which defaults are
continuing. While the Company currently does not expect these defaults
to impair its ability to utilize this facility during the remainder of the
existing term, it may negatively impact the Company's ability to renew the
credit facility. In the event the credit facility cannot be renewed or the
Company is unable to utilize the existing facility, the Company would attempt
to obtain a comparable credit facility from an alternative financing source.
While the Company has been able to obtain such facilities in the past, there
can be no assurance that the Company will be able to obtain a credit facility
with comparable terms or at all. The inability to obtain a credit facility
would have a material adverse effect on the Company's financial condition
and business.
In accordance with the terms of the credit facility, the Company purchased a
term life insurance policy on a key employee with a face amount of
$1,750,000 during the year ended December 31, 1994. Annual premiums are
approximately $3,500.
At June 30, 1996, the Company had a ratio of current assets to current
liabilities of 0.91. Working capital deficit at June 30, 1996 was $271,145.
The Company's business as a non-facilities based reseller of long distance
telecommunications services is generally not a capital intensive business,
and at June 30, 1996, the Company had no material commitments for capital
expenditures. The Company anticipates any additional capital expenditures
in the future will be confined to minimal purchases of office fixtures and
equipment.
The proposed merger would reduce the Company's direct operating costs through
volume discounts on long-distance pricing from its carriers and would provide
certain economies of scale that together management believes would allow its
operations to become profitable and allow it to compete for new and existing
customers. If for any reason the proposed merger is not consummated, the
Company plans to increase its sales and reduce its costs and will continue to
explore other strategic alternatives (which may include financings, mergers,
acquisitions, joint ventures or other strategic transactions).
Factors That May Affect Future Results of Operations
Dependence on Service Providers. The Company depends on a continuing and
reliable supply of telecommunications services from facilities-based,
interexchange carriers. Because the Company does not own or lease
switching or transmission facilities, it depends on these providers for the
telecommunications services used by its customers and to provide the
Company with the detailed information on which it bases its customer billings.
The Company's ability to expand its business depends both upon its ability to
select and retain reliable providers and on the willingness of such providers
to continue to make telecommunications services and billing information
available to the Company for its customers on favorable terms and in a timely
manner.
Potential Adverse Effects of Rate Changes. The Company bills its customers
for the costs of the various telecommunications services procured on their
behalf. The total billing to each customer is generally less than telephone
charges for the same service provided by the major carriers. The Company
believes its lower customer bills are an important factor in its ability to
attract and retain customers. To the extent the differential between the
telephone rates offered by the major carriers directly to their customers and
the cost of the bulk-rate telecommunications services procured by the
Company from its underlying carriers decreases, the savings the Company is
able to obtain for its customers could decrease and the Company could lose
customers or face increased difficulty in attracting new customers. If the
Company elected to offset the effect of any such decrease by lowering its
rates, the Company's operating results would also be adversely affected.
Competition. An existing or potential customer of the Company has numerous
other choices available for its telecommunications service needs, including
obtaining services directly from the same carriers whose services the
Company offers. From time to time, the Company's competitors may be able
to provide a range of services comparable to or more extensive than those
available to the Company's customers at rates competitive with, or lower than,
the Company's rates. In addition, most prospective customers of the Company are
already receiving service directly from at least one long distance carrier,
and thus the Company must convince prospective customers to alter these
relationships to generate new business. The Company competes with three
major interexchange carriers, AT&T, MCI and Sprint, other large carriers,
including Frontier and WorldCom, and several hundred smaller carriers.
Additionally, as a result of legislation enacted by the federal government
in February of 1996, the RBOCs and GTOCs will have, upon compliance with
certain regulatory requirements, the right to provide long distance service.
Many of the RBOCs and GTOCs have already announced their intention to enter
the business of providing long distance service. As a consequence, the
telecommunications industry will remain highly competitive and be subject to
rapid technological and regulatory change. Because the tariffs offered by
the major carriers for telecommunications services are not proprietary in
nature, there are no effective barriers to entry into the Company's line of
business. Because of the considerably greater resources of competitors of
the Company, there can be no assurance that the Company will be able to
become or remain competitive in the current telecommunications environment.
Possible Volatility of Stock Price. The market price of the Company's
Common Stock has, in the past, fluctuated substantially over time and may
in the future be highly volatile. Factors such as the announcements of
potential mergers, acquisitions, joint ventures or other strategic
combinations involving the Company. The announcement of the inability to
consummate the proposed merger, rate changes for various carriers,
technological innovation or new products or service offerings by the
Company or its competitors, as well as market conditions in the
telecommunications industry generally and variations in the Company's
operating results, could cause the market price of the Common Stock to
fluctuate substantially. Because the public float for the Company's Common
Stock is small, additional volatility may be experienced.
Control by Officers and Directors. As of June 30, 1996, the Company's
executive officers and directors beneficially owned or controlled
approximately 46.5% of the total voting power represented by the Company's
outstanding capital stock, taking into account that holders of the
Company's Class A Common Stock are entitled to five votes per share of
such stock and assuming the exercise of all outstanding options for the
Company's capital stock which are exercisable within sixty (60) days.
The votes represented by the shares beneficially owned or controlled by the
Company's executive officers and directors would, if they were cast
together, control the election of a majority of the Company's directors and
the outcome of most corporate actions requiring stockholder approval.
Investors who purchase Common Stock of the Company may be subject to
certain risks due to the concentrated ownership of the capital stock of the
Company. Such risks include: (i) the shares beneficially owned or
controlled by the Company's executive officers and directors could, if they
were cast together, delay, defer or prevent a change in control of the
Company, such as an unsolicited takeover, which might be beneficial to the
stockholders, and (ii) due to the substantial ownership or control of
outstanding shares by the Company's executive officers and directors and
the potential adverse impact of such substantial ownership or control on a
change in control of the Company, it is less likely that the prevailing
market price of the outstanding shares of the Company's Common Stock will
reflect a "premium for control" than would be the case if ownership of the
outstanding shares were less concentrated.
Governmental Regulation. As a reseller of long distance telecommunications
services, the Company is subject to many of the same regulatory requirements
as facilities-based interexchange carriers. The intrastate long distance
telecommunications operations of the Company are also subject to various
state laws and regulations, including certification requirements.
Generally, the Company must obtain and maintain certificates of public
convenience and necessity from regulatory authorities in most states where
it offers service, and in some of these jurisdictions it must also file and
obtain prior regulatory approval of tariffs for intrastate offerings. There
can be no assurance that the regulatory authorities in one or more states
or the FCC will not take action having an adverse effect on the business or
financial condition of the Company.
PART 2. - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
1. WilTel Amendment, dated June 11, 1996, by and between Registrant and
WilTel.
2. Mercantile Promissory Note, dated June 1, 1996, by and between Registrant
and Mercantile Bank.
3. Financial Data Schedule
(b) Reports on Form 8-K
On June 20, 1996, the Company filed a report on Form 8-K under Item 5 - Other
Events regarding a press release issued by the Company and Phoenix
announcing that they had executed a definitive merger agreement.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized (the undersigned being its President).
AMERICONNECT, INC.
Date: August 14, 1996
/s/ Robert R. Kaemmer
Robert R. Kaemmer
President
June 11, 1996
Mr. Robert R. Kaemmer
President
AmeriConnect
6750 West 93rd., Suite 110
Overland Park, KS 66212
Dear Bob,
This letter serves to clarify an issue related to the existing WilMAX
Agreement between AmeriConnect and WilTel (TSA#AMC-940627).
Due to a pending "purchase/merger" agreement between AmeriConnect and
Phoenix Network, Inc. and the fact that Phoenix is a current WilTel
customer, WilTel has agreed to give AmeriConnect a 15% discount on all
applicable traffic billed to AmeriConnect's WilMAX accounts. This 15%
replaces the current term/volume discount applied under AmeriConnect's
existing WilMAX Agreement.
This 15% discount applies only to applicable traffic during the months of
June, July, August and September 1996 (i.e., July, August, September and
October, 1996 invoices). All other terms and conditions of AmeriConnect's
WilMAX agreement have not changed and remain in full force and effect.
If, for any reason, the agreement between AmeriConnect and Phoenix is not
consumated by the end of September, 1996, AmeriConnect has agreed to
increase its current $50,000 commitment under its WilMAX agreement to $250,000
beginning with the traffic in the month of October, 1996 and continuing for
the remainder of the existing Service Term.
The discounts applied beginning with October traffic will be as stated in
AmeriConnect's WilMAX Agreement at the
$250,000 level.
Furthermore, should the agreement between AmeriConnect and Phoenix be postponed
beyond September 30, 1996 and completed at a later date, there will be no
retroactive rerating of AmeriConnect's traffic at a discount higher than the
then-current $250,000 level unless AmeriConnect has independently reached a
higher billing level under its WilMAX Agreement.
Bob, if you can think of any other issues that should be included in this
arrangement, please let me know. To show your understanding and acceptance of
this arrangement, please sign below and return an original to me.
Sincerely,
/s/ Mick Mithelavage
Mick Mithelavage
Senior Carrier Executive
WilTel, Inc.
cc: Jerry E. Smith
Denny Pflaum
Michael Bass
I fully understand and accept the arrangement described above.
AmeriConnect, Inc.
/s/ Robert R. Kaemmer June 21, 1996
Robert R. Kaemmer Date
President
PROMISSORY NOTE
$1,000,000.00 Date: June 1, 1996
FOR THE VALUE RECEIVED, the undersigned, AmeriConnect, Inc., a Delaware
corporation ("Borrower") hereby unconditionally promise to pay, to the order
of Mercantile Bank, a Kansas state bank ("Bank")
On October 1, 1996, the principal amount of ONE MILLION AND NO/100 Dollars
($1,000,000), or if less, the aggregate unpaid principal amount of all
advances made by Bank to Borrower and evidenced by this Note. The aggregate
principal amount which Bank shall be committed to have outstanding hereunder
any one time shall not exceed ONE MILLION AND NO/100 Dollars ($1,000,000),
which amount may be borrowed, paid, reborrowed and repaid in whole or in
part. The initial advance, all subsequent advances and all payments made on
account of principal may be endorsed by the holder hereof in its records,
or, at its option, on a schedule attached to this Note which shall be
conclusive evidence of the principal owing and unpaid on this Note.
Borrower further promises to pay to the order ofBank interest on the
principal amount from time to time outstanding hereunder at the rate of
2.0% per annum over the "Prime Rate", adjustable daily. Interest is billed
as of the last day of each month and is payable by the 10th of the following
month, beginning with the payment billed June 30, 1996 and due July 10,
1996, with any remaining accrued interest due at maturity of October 1,
1996.
After maturity, interest shall be payable on demand on the outstanding
principal balance at a rate equal to 2.0% per annum in excess of the
otherwise payable rate. In addition, if Borrower fails to make any payment
of any principal or interest on this Note when due, Borrower promises to pay
to the order of Bank on demand a late fee in an amount not to exceed the
greater of $25.00 or 5.0% of each late payment. All payments received by
Bank shall be applied first to the payment of billed/due and unpaid late
fees and the costs and expenses hereinafter described, next to billed/due
and unpaid interest hereon, and the remainder to principal. For purposes
of this Note the term "Prime rate" shall be the interest rate announced
from time to time by Bank as its "Prime rate" on commercial loans (which
rate shall fluctuate as and when said Prime rate shall change). Interest
shall be computed on the basis of a year consisting of 360 days and paid
for actual days elapsed.
All required payments shall be made in immediately available funds in lawful
money of the United States of America at the office of Bank situated at 4700
W. 50th Place, Roeland Park, Kansas 66205 or at such other place as the holder
may designate in writing. The acceptance by the holder hereof of any principal
or interest due after the date it is due as described above shall not be held
to establish a custom or waive any rights of the holder to enforce prompt
payment of any other principal or interest payments or otherwise.
Bank may record the date and amount of all loans and all payments hereunder
in the records it maintains. Bank's books and records showing the account
between Bank and Borrower shall be conclusive evidence of the outstanding
amounts under this Note.
This Note is referred to in that certain Revolving Loan Agreement dated 6/8/95
by and between Borrower and Bank to which reference is made for a statement
of additional terms and conditions, including, but not limited to,
acceleration, which may affect this Note.
Borrower has the right to prepay this Note in whole or in part at any time
without penalty or premium, provided (1) all billed/due and unpaid interest
shall accompany such prepayment; (2) there is not a default under any of the
terms of this Note at the time of prepayment; and (3) all prepayments shall
be credited and applied to the installments of principal in inverse order of
their stated maturity.
Borrower agrees to pay to Bank, upon demand by Bank, all reasonable costs,
charges and expenses (including, but not limited to, to the extent permitted
by applicable law, the reasonable fees and expenses of any attorney [including,
but not limited to, any attorney employed by Bank or any affiliate of Bank]
retained by Bank) incurred by Bank in connection with (a) the collection or
enforcement of Borrower's liabilities and obligations under this Note, (b)
the collection and enforcement of Bank's right in and to any Collateral
(hereinafter defined), and/or (c) any litigation, contest, dispute or
other proceeding (whether instituted by Bank, Borrower or any other person or
entity) in any way relating to Borrower's liabilities and obligations
hereunder and/or to the "Collateral." Borrower's obligations, as aforesaid,
shall survive payment of this Note. For purposes of this Note, the term
"affiliate of Bank" shall mean any entity which controls, is controlled by or
is under common control with Bank, including, but not limited to, Mercantile
Bancorporation Inc. ("MBI") and any banking or non-banking subsidiary of MBI.
Presentment, demand for payment, protest and notice of dishonor and of protest
are hereby severally waived by all parties hereto, whether as maker, endorser
or guarantor to Bank.
TO INDUCE BANK TO ACCEPT THIS AGREEMENT AND ALL OTHER AGREEMENTS RELATED
HERETO, BORROWER HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO BANK'S SOLE AND
ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT OR ANY AGREEMENT RELATED
HERETO OR ANY COLLATERAL HELD BY BANK IN CONNECTION HEREWITH OR THEREWITH SHALL
BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE STATE OF KANSAS OR STATE OF
MISSOURI. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN EITHER OF SAID JURISDICTIONS.
BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE
OF ANY LITIGATION BROUGHT IN ACCORDANCE WITH THIS SECTION. BORROWER AND
BANK IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY
ACTION IN WHICH BORROWER AND BANK ARE PARTIES.
The liabilities and obligations of Borrower under this Note shall
be secured by (a) Accounts Receivable, Furniture, Fixtures, Equipment,
Software and trade name and Life Insurance and (b) any and all balances,
credits, deposits or monies of or in the name of Borrower now or hereafter
maintained with, and any and all other property of or in name of Borrower
now or hereafter in the possession of Bank; and (c) any and all of Bank's
security interests, liens or encumbrances heretofore, now and/or from time to
time hereafter granted by Borrower and/or any endorser or guarantor to Bank,
including, but not limited to, the security interests granted pursuant to
Security Agreement (Comprehensive) dated June 8, 1995 and Security Agreement
dated June 8, 1995. Borrower hereby grants to Bank a security interest in the
Collateral for the payment of all liabilities and obligations of Borrower
under this Note, and all renewals and extensions thereof and for the payment of
all other present and future obligations to Bank regardless of whether currently
contemplated or agreed upon. In addition to and not in limitation of all
rights of offset that Bank or any other holder of this Note may have under
applicable law, Bank or such other holder of this Note shall have the right
to appropriate and apply to the payment of this Note any and all balances,
credits, deposits, accounts or moneys of the Borrower than or thereafter
with Bank or other holder.
If any of the following events ("Events of Default") shall occur: (a) the
Borrower fails to make any payment on this Note when the same shall become
due and payable, whether under the terms of this Note or under any agreement,
instrument or document heretofore, now or at any time or times hereafter
delivered to Bank by Borrower; (b) a default or an event of default under any
agreement, instrument or document heretofore now or at any time or times
hereafter delivered to Bank by Borrower which is not cured within the time,
if any specified therefore in such agreement, instrument or document then,
and in each such event, Bank or the holder of this Note may, at its option,
declare the entire outstanding principal amount of and all billed/due and
unpaid interest on this Note and all other amounts payable by the Borrower
hereunder to be forthwith due and payable, whereupon all of the unpaid principal
amount, billed/due and unpaid interest and all such other amounts shall be
forthwith due and payable, whereupon all of the unpaid principal amount,
billed/due and unpaid interest and all such other amounts shall become and be
immediately due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower,
and Bank or holder may exercise any and all other rights and remedies which it
may have under this Note or any other agreement, document or instrument
evidencing, security or guaranteeing the payment of this Note or under
applicable law.
Notwithstanding anything contained herein to the contrary, in
no event shall interest accrue under this Note at a rate in excess of the
highest rate permitted by applicable law, and if interest (including, but not
limited to, any charge or fee held to be interest by a court or competent
jurisdiction) in excess thereof shall be paid, the excess shall constitute a
payment of, and be applied to, the principal balance hereof then outstanding,
or at Bank's election, shall be repaid to the undersigned.
The undersigned warrant(s) and represent(s) that all loan proceeds of the
indebtedness evidenced hereby are to be used exclusively for business
purposes and not for personal, family, or household purposes of any of the
undersigned.
All obligations of the Borrower (if more than one) hereunder are joint and
several. This Note shall be governed by and construed in accordance with the
laws of the State of Kansas.
Borrower
AmeriConnect, Inc.
by: /s/ Robert R. Kaemmer
Robert R. Kaemmer, President
Mailing Address
6750 W. 93rd Street, Suite 110
Overland Park, KS 66212
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] 12-31-96
[PERIOD-END] 6-30-96
[CASH] 207,959
[SECURITIES] 0
[RECEIVABLES] 2,853,097
[ALLOWANCES] 396,472
[INVENTORY] 0
[CURRENT-ASSETS] 2,849,583
[PP&E] 389,398
[DEPRECIATION] 270,871
[TOTAL-ASSETS] 2,986,137
[CURRENT-LIABILITIES] 3,120,728
[BONDS] 0
[COMMON] 65,282
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] (210,138)
[TOTAL-LIABILITY-AND-EQUITY] 2,986,137
[SALES] 8,606,697
[TOTAL-REVENUES] 8,606,697
[CGS] 6,372,297
[TOTAL-COSTS] 8,509,178
[OTHER-EXPENSES] (7,369)
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 17,292
[INCOME-PRETAX] 87,596
[INCOME-TAX] 0
[INCOME-CONTINUING] 87,596
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 87,596
[NET-INCOME] 87,596
[EPS-PRIMARY] 0.012
[EPS-DILUTED] 0.012
</TABLE>
