UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission File Number 0-18048
SA Telecommunications, Inc.
(Exact Name of small business issuer as specified in its charter)
Delaware 75-2258519
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1912 Avenue K, Suite 100
Plano, Texas 75074
(Address of principal executive offices) (Zip Code)
(214) 516-0662
(Issuer's telephone number)
SA Holdings, Inc.
(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 [ ]
There were 11,568,590 shares of the registrant's common stock
outstanding as of August 15, 1995.
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of
Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated
Financial Statements
Item 2. - Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. - Legal Proceedings
Item 2. - Change in Securities
Item 3. - Defaults Upon Senior Securities
Item 4. - Submission of Matters to a Vote
of Security Holders
Item 5. - Other Information
Item 6. - Exhibits and Reports on Form 8-K
Part I. Financial Information
Item 1. Financial Statements
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 87,101 $ 331,431
Accounts and notes receivable
Trade, net of allowance for
doubtful accounts of $279,793
and $178,368, respectively 3,674,018 985,174
Other, net of allowance for
doubtful accounts of $46,122
and $48,825, respectively 367,228 142,301
Acquisition financing receivable 1,004,486 -
Inventory 242,863 123,790
Prepaid expenses and other 300,991 341,290
Total current assets 5,676,687 1,923,986
NET ASSETS OF DISCONTINUED TITLE
PLANT SERVICES OPERATIONS 3,444,670 3,537,386
PROPERTY AND EQUIPMENT 5,591,214 979,022
Less accumulated amortization (2,570,140) (187,169)
Net property and equipment 3,021,074 791,853
EXCESS OF COST OVER NET ASSETS
ACQUIRED, net of accumulated
amortization 17,181,806 4,943,494
OTHER ASSETS
Employee note receivable - 195,904
Other 548,227 384,211
Total other assets 548,227 580,115
TOTAL ASSETS $ 29,872,464 $ 11,776,834
</TABLE>
- Continued -
The accompanying notes are an integral part of these consolidated
financial statements.
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable - trade $ 217,211 $ 223,362
Accrued telecommunications expenses 2,162,089 755,669
Other accrued expenses 1,142,593 163,195
Notes payable 619,846 129,610
Current maturities of long-term debt 838,830 90,248
Total current liabilities 4,980,569 1,362,084
LONG-TERM OBLIGATIONS,
less current maturities 10,921,961 430,393
COMMITMENTS AND CONTINGENCIES
SERIES A REDEEMABLE PREFERRED STOCK,
$.00001 par value, 250,000 shares
authorized; 166,667 shares issued
in 1995 1,215,000 -
SHAREHOLDERS' EQUITY
Series B Preferred stock, $.00001
par value, 250,000 shares
authorized; 125,000 shares
issued in 1995 637,874 -
Common stock, $.0001 par value,
50,000,000 shares authorized;
11,751,162 and 10,566,139
issued, respectively 1,175 1,057
Additional paid-in capital 18,964,650 15,629,114
Retained deficit (6,441,846) (5,404,864)
Treasury stock (217,572 shares
and 136,516 shares respectively)
at cost (406,919) (240,950)
Total shareholders' equity 12,754,934 9,984,357
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 29,872,464 $ 11,776,834
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
---------------------- ------------------------
<S> <C> <C> <C> <C>
1995 1994 1995 1994
----------- ----------- ----------- -----------
TELECOMMUNICATIONS REVENUES $ 4,004,348 $ 2,862,105 $ 6,313,575 $ 4,326,767
OPERATING EXPENSES
Cost of revenues 2,818,043 2,494,398 4,630,197 3,730,982
General and administrative 1,387,361 686,812 1,981,381 1,118,758
Depreciation and amortization 243,570 92,717 375,802 148,129
Total operating expenses 4,448,974 3,273,927 6,987,380 4,997,869
LOSS FROM CONTINUING OPERATIONS BEFORE
OTHER INCOME (EXPENSE) (444,626) (411,822) (673,805) (671,102)
OTHER INCOME (EXPENSE)
Interest expense (103,377) (1,000) (118,306) (3,438)
Other 2,585 6,247 5,129 18,899
Total other income (expense) (100,792) 5,247 (113,177) 15,461
LOSS FROM CONTINUING OPERATIONS (545,418) (406,578) (786,982) (655,641)
DISCONTINUED OPERATIONS
Loss from title plant services operations - (108,769) - (223,124)
Provision for operating losses during phase-out period (250,000) - (250,000) -
NET LOSS $ (795,418) $ (515,344) $(1,036,982) $ (878,765)
Loss per weighted average
common share outstanding
Continuing operations $ (.05) $ (.04) $ (.07) $ (.08)
Discontinued operations (.02) (.01) (.02) (.02)
Net loss per share $ (.07) $ (.05) $ (.09) $ (.10)
Weighted average number of common shares outstanding 11,098,947 9,223,613 10,801,218 8,581,202
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<CAPTION>
Series B Additional
Preferred Stock Common Stock Paid-In Retained Treasury
Shares Amount Shares Amount Capital Deficit Stock Total
----------------- --------- ------ ----------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at 7,372,661 $ 737 $ 8,572,764 $(2,957,878) $ (20,000) $ 5,595,623
December 31, 1993
Private placements of 322,317 32 940,436 - - 940,468
common stock
Issuance of common
stock for:
Exercise of options 243,175 25 272,575 - - 272,600
Acquisition of LDN 1,302,086 130 3,749,870 - - 3,750,000
Net loss for the period - - - (668,857) - (668,857)
Balances at June 30, 1994 9,240,239 $ 924 $13,535,645 $(3,626,735) $ (20,000) $ 9,889,834
Balances at December $ - 10,566,139 $1,057 $15,629,114 $(5,404,864) $(240,950) $ 9,984,357
31, 1994
Private placements of 274,792 27 316,025 - - 316,052
common stock
Issuance of common stock for 829,175 91 716,211 (165,969) 550,333
exercise of options
Issuance of Series B 125,000 637,874 637,874
Preferred Stock for
acquisition of USC
Issuance of Common Stock
Purchase Warrants for
acquisition of USC 2,303,300 2,303,300
Net loss for the period - - (1,036,982) - (1,036,982)
Balances at 125,000 $637,874 11,670,106 $1,175 $18,964,650 $(6,441,846) $(406,919) $12,754,934
June 30, 1995
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
-------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (795,418) $ (515,344) $(1,036,982 $ (878,765)
Adjustments to reconcile net loss
to net cash used by operating activities
Loss from discontinued operations 250,000 108,769 250,000 223,124
Depreciation and amortization 243,570 92,717 375,801 148,129
Provision for losses on accounts receivable 46,048 11,910 61,894 14,720
Other (17,666) (894) (1,796) (6,608)
(Increase) decrease
Accounts and notes receivable (1,554,558) 32,002 (1,564,351) 4,253
Stock subscription receivable - 900,000 - -
Prepaid expenses and other 170,564 14,621 102,136 39,665
Other assets 35,594 (17,469) 43,614 (54,556)
Increase (decrease) in
Accounts payable and accrued expenses 99,351 203,140 (186,512) (151,728)
Payable to LDN shareholders - (1,354,660) - -
Net cash used in operating activities (1,522,515) (525,208) (1,956,196) (661,766)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (42,379) (196,381) (45,083) (203,070)
Purchase of USC, net of cash acquired (6,729,203) - (6,729,203) -
Purchase of LDN, net of cash acquired - - - (1,330,397)
Other (14,200) 4,329 (26,108) (1,825)
Net cash used in investing activities (6,785,782) (192,052) (6,800,394) (1,535,292)
CASH FLOWS FROM FINANCING ACTIVITIES
Net changes in short-term loans (27,775) 150,000 117,225 150,000
Increase in long term debt 7,000,000 120,000 7,000,000 120,000
Proceeds from private placement of common stock 157,502 - 307,502 940,468
Proceeds from Series A Preferred Stock 1,000,000 - 1,000,000 -
Proceeds from exercise of options 274,513 55,614 315,142 272,600
Principal payments on long-term obligations (21,311) (586) (46,075) (586)
Net cash provided by financing activities 8,382,929 325,033 8,693,794 1,482,482
NET CASH USED BY DISCONTINUED OPERATIONS (70,957) (164,639) (181,534) (325,294)
DECREASE IN CASH 3,675 (556,866) (244,330) (1,039,870)
Cash at beginning of period 83,426 715,388 331,431 1,198,392
Cash at end of period $ 87,101 $ 158,522 $ 87,101 $ 158,522
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
These interim consolidated financial statements are those of
SA Telecommunications, Inc. and subsidiaries (the Company),
formerly SA Holdings, Inc. These interim consolidated financial
statements are prepared pursuant to the requirements for
reporting on Form 10-QSB. The December 31, 1994 consolidated
balance sheet data was derived from audited consolidated
financial statements but does not include all disclosures
required by generally accepted accounting principles. The
interim consolidated financial statements and notes thereto
should be read in conjunction with the consolidated financial
statements and notes included in the Company's latest annual
report on Form 10-KSB. In the opinion of management, the interim
consolidated financial statements reflect all adjustments of a
normal recurring nature necessary for a fair statement of the
consolidated results of operations for interim periods. The
current period consolidated results of operations are not
necessarily indicative of results which ultimately will be
reported for the full fiscal year ending December 31, 1995.
The accompanying consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries
(unless otherwise indicated) listed below.
U. S. Communications, Inc. (USC) - acquired effective
June 1, 1995
Long Distance Network, Inc. (LDN) - acquired effective
March 1, 1994
North American Telecommunications Corporation (NATC)
Baltic States and CIS Ventures, Inc. (BS/CIS)
CIS Intelligence Information Services, Inc. (CIS)
Western Siberia Telecommunications (USA), Inc. (WST)
47.5%
Intertex Trading Corporation (ITC) 50%
Strategic Abstract and Title Corporation (SATC)
(discontinued operation)
All significant intercompany accounts and transactions have
been eliminated. Certain prior period amounts have been
reclassified for comparative purposes.
NOTE B - ACQUISITION OF U. S. COMMUNICATIONS, INC.
Effective June 1, 1995, the Company acquired all of the
outstanding common stock of U.S. Communications, Inc. (USC), a
domestic interexchange long distance carrier located in
Levelland, Texas. The aggregate purchase price was paid (i) $6.5
million in cash, (ii) $2.75 million in notes bearing 11% interest
per annum, (iii) $1.5 million in a separate group of notes also
bearing interest at 11% per annum, (iv) 125,000 shares of Series
B Preferred Stock of the Company, and (v) 1,050,000 common stock
purchase warrants at $1.25 per common share. The parties placed
$300,000 of the cash portion of the purchase price into escrow at
a bank in order to satisfy claims of the Company of any breach or
nonperformance of representation, warranty, covenant or other
obligation of the sellers. Additionally, the Company has the
right to offset the amounts payable under the $1.5 million notes
for any event which it is entitled to indemnification. The
Company has valued the Series B Preferred Stock and common stock
purchase warrants at their fair value as of the date of issuance.
In order to fund the cash portion of the purchase price, the
Company borrowed an aggregate of $7.0 million from Norwest Bank
Minnesota, N.A. and privately placed 166,667 shares of its Series
A Preferred Stock along with 500,000 common stock purchase
warrants at $1.125 per common share with Jesup & Lamont
Securities Corporation for $1.5 million. The Company has valued
the Series A Preferred Stock and common stock purchase warrants
at their fair value as of the date of issuance.
The acquisition was accounted for as a purchase whereby the
excess purchase price over net assets acquired has been recorded
based upon the fair value of assets acquired and liabilities
assumed. The initial purchase price allocations are based on
current estimates and may be subject to change based on final
determination of fair value. As a result, the final purchase
price allocations may differ from the presented estimates.
A summary of the USC excess of cost over net assets acquired
is as follows:
<TABLE>
<CAPTION>
June 30,
1995 Life
-------- ----
<S> <C> <C>
Goodwill $ 9,183,573 25
Covenants not to compete 2,400,000 5
Customer acquisition costs 864,155 10
12,447,728
Accumulated amortization ( 93,126)
$ 12,354,602
</TABLE>
The following unaudited pro forma combined results of
operations for the Company assume that the acquisition of USC was
completed at the beginning of 1994. These proforma amounts
represent the historical operating results of USC combined with
those of the Company with appropriate adjustments which give
effect for interest expense and amortization. These proforma
amounts are not necessarily indicative of consolidated operating
results which would have occurred had USC been included in the
operations of the Company during the periods presented, or which
may result in the future, because these amounts do not reflect
full transmission and switched service cost optimization, and the
synergistic effect on operating, selling, general and
administrative expenses.
<TABLE>
<CAPTION>
For the six months
ended June 30,
------------------
1995 1994
---- ----
<S> <C> <C>
Revenues $14,185,399 $11,886,967
Net loss (1,502,612) (1,437,521)
Loss per share (.14) (.17)
</TABLE>
NOTE C - DISCONTINUED OPERATIONS
During the first six months of 1995, the Company's
discontinued title plant services subsidiary, SATC, incurred a
net loss of $218,466. At December 31, 1994, a $150,000 reserve
for operating losses during the phase-out period was established.
This reserve has become inadequate due to unforeseen delays in
filing the Form 10-SB registration statement necessary for SATC
to become a publicly traded company prior to the distribution of
the stock dividend to shareholders. As a result, an additional
$250,000 reserve was established for SATC losses until the date
of spinoff.
Revenues of SATC for the six months ended June 30, 1995 and
1994 were $161,596 and $59,863, respectively, and for the three
months ended June 30, 1995 and 1994 were $92,481 and $34,830,
respectively.
NOTE D - NOTES PAYABLE
Six members of the Board of Directors have individually made
loans to the Company aggregating $210,610. The loans bear
interest at 12% per annum. In connection with these loans, each
director was granted an option to purchase one share of common
stock for each $1.75 of principal amount loaned to the Company at
a price of $1.75 per share (market value at date of grant) or an
aggregate of 82,857 shares. The options are exercisable for six
months from June 17, 1995.
The notes payable assumed in the USC acquisition aggregating
approximately $365,500 bear interest at rates ranging from 8% to
12 1/2 % per annum.
NOTE E - LONG TERM OBLIGATIONS
Long term obligations consists of:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
Senior note payable to a bank $7,000,000 $ -
Subordinated notes payable to
former USC shareholders due
on October 1, 1996 with interest
payable quarterly at 11% per annum 2,750,000 -
Subordinated notes payable to
former USC shareholders due $750,000
each on January 31, 1996 and July 31,
1996 with interest payable on
July 31, 1996 at 11% per annum 1,500,000 -
Note payable to a trust (collateral-
ized by land and building) due in
monthly installments of $1,586
including interest at 10% with the
balance due in 2004 111,992 115,796
Note payable to a finance company
(unsecured) due in monthly installments
of $752. including interest at 7.5%
with the balance due in June, 2000 36,225 -
Capital lease obligation 362,574 404,845
11,760,791 520,641
Less current maturities
Long term debt (756,533) (7,801)
Capital lease obligation (82,297) (82,447)
Long term portion $10,921,961 $430,393
</TABLE>
The Company obtained a $10 million senior credit facility
from a bank to facilitate the acquisition of USC of which $7
million was outstanding at June 30, 1995. Additional advances
under the credit facility are dependent upon the Company meeting
certain predetermined levels of operating cash flow. The
borrowings are secured by principally all of the assets of the
Company. Principal payments will be due in quarterly
installments commencing on December 31, 1996 with the balance due
on June 30, 2000.
The borrowings bear interest at a floating rate of from 1%
to 2% above the bank's prime rate depending on the ratio of
senior debt to operating cash flow. At the Company's option, the
interest rate may be fixed at a floating rate of from 3% to 4%
above the London Interbank Offered Rate (LIBOR) also dependant on
the ratio of senior debt to operating cash flow. Interest is
payable quarterly.
The credit facility agreement contains covenants which,
among other matters (I) limit the Company's ability to incur
indebtedness, merge, consolidate and acquire or sell assets, (ii)
require the Company to satisfy certain ratios related to
operating cash flow and senior debt service coverage, and (iii)
limits the payment of interest and principal on subordinated
debt.
NOTE F - PREFERRED STOCK
Each share of Series A Cumulative Convertible Preferred
Stock entitles its holder to receive an annual dividend of $.72
per share, payable at the option of the Company in either cash or
shares of Series A Preferred Stock; to convert it into 8 shares
of Common Stock as adjusted in the event of future dilution from
stock dividends and recapitalizations; to receive up to $9.00 per
share plus accrued and unpaid dividends in the event of
involuntary or voluntary liquidation; and, subject to certain
conditions in loan agreements, may be redeemed at the option of
the Company on or after July 31, 1997, but must mandatorily be
redeemed no later than July 31, 2000 at a price of $9.00 per
share plus accrued and unpaid dividends.
Each share of Series B Cumulative Convertible Preferred
Stock entitles its holder to receive an annual dividend of $.80
per share payable at the option of the Company in either cash or
shares of Series B Preferred Stock; to convert it into 8 shares
of Common Stock, as adjusted in the event of future distribution
from stock dividends and recapitalizations; to receive up to
$10.00 per share plus accrued and unpaid dividends in the event
of involuntary or voluntary liquidation; and, subject to certain
conditions in loan agreements, may be redeemed at the option of
the Company on or after July 31, 1997 at a price of $10.00 per
share plus accrued and unpaid dividends..
NOTE G - STOCK OPTIONS
On January 17, 1995 and May 12, 1995, the Board of Directors
granted options under the 1994 Employee Stock Option Plan to
purchase up to 426,500 shares and 390,250 shares, respectively,
of the Company's common stock to employees at a price of $1.75
per share (market value of the Company's common stock on the date
of grant). After a six month waiting period from the date of
grant, the shares acquired upon exercise may only be sold over
eighteen months for directors, twenty-four months for officers,
and thirty months for employees.
Part I. Financial Information
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The most significant event which impacted the first six months of
1995 and will continue to impact the Company was the acquisition
of U.S. Communications, Inc. (USC) effective June 1, 1995. USC
is a ten-year-old domestic interexchange long-distance carrier
located in Levelland, Texas. In addition to providing
intrastate, interstate, and international service, USC provides a
variety of operator and other services throughout the Southwest.
The Company acquired all of the outstanding capital stock of USC
for an aggregate purchase price consisting of (i) $6.5 million
in cash, (ii) $2.75 million in notes bearing 11% interest per
annum, (iii) $1.5 million in a separate group of notes also
bearing interest at 11% per annum, (iv) 125,000 shares of Series
B Preferred Stock of the Company, and (v) 1,050,000 Common Stock
purchase warrants at $1.25 per common share. The parties placed
$300,000 of the cash portion of the purchase price into escrow at
a bank in order to satisfy claims of the Company of any breach or
nonperformance of representation, warranty, covenant, or other
obligation of the sellers. Additionally, the Company has the
right to offset the amounts payable under the $1.5 million notes
for any event to which it is entitled indemnification.
In order to fund the cash portion of the purchase price, the
Company borrowed an aggregate of $7 million from Norwest Bank
Minnesota, N.A. and privately placed 166,667 shares of its Series
A Preferred Stock along with 500,000 Common Stock purchase
warrants at $1.125 per common share with Jesup & Lamont
Securities Corporation for $1.5 million.
This acquisition was accounted for under the purchase method of
accounting for business combinations and, accordingly, is so
reflected since June 1, 1995 in the Company's consolidated
statements of operations for the three months and six months
ended June 30, 1995. In 1994, USC was profitable on revenues of
$16 million. USC had revenues of $1.7 million for the month
ended June 30, 1995.
USC will be integrated into the core telecommunications
operations comprised of LDN, NATC and the Company. This
integrated organization will provide the infrastructure for
operations and future telecommunications acquisitions and
expansion.
Since the end of the third quarter of 1994, the Company has
suspended the expansion of its international sales organization
through new office openings. Because of the acquisition of USC,
this suspension is expected to stay in effect indefinitely and
all growth is expected to be internally generated through the
efforts of established foreign sales offices.
As part of an overall plan of disposition, on December 28, 1994,
the Board of Directors approved a spinoff of from 55% to 60% of
its title plant services subsidiary, SATC, in the form of a
dividend to shareholders. The Form 10-SB registration statement
required for SATC to become a public company prior to the
distribution to shareholders was filed June 30, 1995, but is not
yet effective.
Results of Operations
The following table sets forth certain items in the Company's
Consolidated Statements of Operations as a percentage of its
operating revenues for the three and six month periods ended June
30, 1995 and 1994.
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
June 30, June 30,
------------- ------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C>
Operating revenue 100% 100% 100% 100%
Cost of revenue 70 87 73 86
General and administrative 35 24 31 26
Depreciation and amortization 6 3 6 3
Loss from continuing
operations before other (11) (14) (10) (15)
Other income (expense) ( 3) - ( 2) -
Loss from continuing (14) (14) (12) (15)
operations
Discontinued operations ( 6) ( 4) ( 4) ( 5)
Net loss (20)% (18)% (16)% (20)%
</TABLE>
Three months ended June 30, 1995, compared to three months ended
June 30, 1994
The Company had revenues from continuing operations of $4,004,348
for the three months ended June 30, 1995 as compared to
$2,862,105 for the same quarter last year. This represents an
overall 40% increase over the like period of last year. Of the
total increase, $1,738,117 is attributable to the increase in
domestic telecommunications revenue from the USC acquisition
effective June 1, 1995. International telecommunications revenue
decreased by $167,498 because of the moratorium on expansion, the
phasing out of agent-run offices in favor of Company-owned
offices, and the termination of a wholesaling arrangement with a
reseller in Brazil which lacked adequate profit margins and
experienced high costs of administration. In addition, revenues
from operator services decreased by $428,376 due to accelerated
competition and reductions in retail prices.
The Company incurred a loss from continuing operations before
other income (expense) of $444,626 for the three months ended
June 30, 1995 versus a $411,822 loss in the second quarter of
1994. Although the losses are comparable, gross profit margins
as a percentage of revenue improved substantially while general
and administrative expense and depreciation and amortization
expense as a percentage of revenue increased.
Cost of revenue (transmission costs, switching costs, and
commissions) increased to $2,818,043 for the three months ended
June 30, 1995 from $2,494,398 in the same quarter of 1994,
principally due to the increased revenue base from the USC
acquisition. However, the gross profit margin increased to 30%
in 1995 from 13% in 1994. This increase is principally due to
the improved mix of call traffic afforded by the USC revenue.
The percentage of direct dial long distance calls, which have a
higher gross profit margin, has increased as compared to the
lower-margin operator service calls.
General and administrative expense increased to $1,387,361 for
the three months ended June 30, 1995 from $686,812 in the second
quarter of 1994, and as a percentage of revenue, increased
between the periods to 35% in 1995, as compared to 24% in 1994.
The increase in total general and administrative expense is
attributable to the USC acquisition. The increase as a
percentage of revenue is indicative of a privately owned, family
run company such as USC prior to the acquisition. The Company
will immediately focus on bringing this percentage in line with
that of the Company.
Depreciation and amortization increased to $243,570 in 1995 from
$92,717 in 1994 and as a percentage of revenue increased to 6% in
1995 from 3% in 1994. The increase resulted from amortization of
intangible assets arising from the acquisition of USC and
increased depreciation from switching equipment acquired in
December, 1994.
The Company had other expenses of $100,792 for the three months
ended June 30, 1995 as compared to other income of $5,247 in the
same quarter of 1994. This is primarily due to an increase in
interest expense related to the increased debt load from the USC
acquisition.
The provision for operating losses of the discontinued operation
during the phase-out period was increased by $250,000 during the
three months ended June 30, 1995. The $150,000 reserve
established at December 31, 1994 became inadequate due to
unforeseen delays in filing the Form 10-SB registration necessary
for SATC to become a public company prior to the distribution of
the stock dividend to shareholders.
The Company incurred a consolidated net loss of $795,418 for the
three months ended June 30, 1995 as compared to $515,344 in the
second quarter of 1994. This increased consolidated net loss is
principally attributable to the increased general and
administrative expense, depreciation and amortization expense,
and provision for discontinued operating losses, offset by
improved gross profit margins. Management expects to bring the
general and administrative expenses at USC under control within
120 to 150 days. The depreciation and amortization expenses and
provision for discontinued operating losses are non-cash charges.
Six months ended June 30, 1995, compared to six months June 30,
1994
The Company had revenues from continuing operations of $6,313,575
for the six months ended June 30, 1995 as compared to $4,326,767
for the same six months last year. This represents an overall
46% increase over the like period of last year. Of the total
increase, $1,738,117 is attributable to the increase in domestic
telecommunications revenue from the USC acquisition effective
June 1, 1995. International telecommunications revenue decreased
by $343,503 because of the moratorium on expansion, the phasing
out of agent-run offices, and the termination a wholesaling
arrangement with a reseller in Brazil which lacked adequate
profit margins and experienced high costs of administration. In
addition, the first six months of 1994 only include four months
of LDN revenue since that acquisition was effective March 1,
1994.
The Company incurred a loss from continuing operations before
other income (expense) of $673,805 for the six months ended June
30, 1995 versus a $671,102 loss in the same period of 1994.
Although the losses are comparable, gross profit margins as a
percentage of revenue improved substantially while general and
administrative expense and depreciation and amortization expense
as a percentage of revenue increased.
Cost of revenue (transmission costs, switching costs, and
commissions) increased to $4,630,197 for the six months ended
June 30, 1995 from $3,730,982 in the same period of 1994,
principally due to the increased revenue base from the USC
acquisition. However, the gross profit margin increased to 27%
in 1995 from 14% in 1994. This increase is principally due to
the improved mix of call traffic afforded by the USC revenue.
The percentage of direct dial long distance calls, which have a
higher gross profit margin, has increased as compared to the
lower margin operator service calls.
General and administrative expense increased to $1,981,381 for
the six months ended June 30, 1995 from $1,118,758 in the first
six months of 1994, and as a percentage of revenue, increased
between the periods to 31% in 1995, as compared to 26% in 1994.
The increase in total general and administrative expense is
attributable to the USC acquisition. The increase as a
percentage of revenue is indicative of the lack of cost
containment being experienced at USC. The Company will
immediately focus on bringing this percentage in line with
revenue levels.
Depreciation and amortization increased to $375,802 in 1995 from
$148,129 in 1994 and as a percentage of revenue increased to 6%
in 1995 from 3% in 1994. The increase resulted from amortization
of intangible assets from the acquisition of USC and increased
depreciation from switching equipment acquired in December, 1994.
The Company had other expenses of $113,177 for the six months
ended June 30, 1995 as compared to other income of $15,461 in the
first six months of 1994. This is primarily due to an increase
in interest expense related to the increased debt load from the
USC acquisition.
The provision for operating losses of the discontinued operation
during the phase-out period was increased by $250,000 during the
six months ended June 30, 1995. The $150,000 reserve established
at December 31, 1994 became inadequate due to unforeseen delays
in obtaining Securities and Exchange Commission approval of the
Form 10-SB registration filed by SATC to become a public company
prior to the distribution of the stock dividend to shareholders.
The Company incurred a consolidated net loss of $1,036,982 for
the six months ended June 30, 1995 as compared to $878,765 in the
same period of 1994. This increased consolidated net loss is
principally attributable to the increased general and
administrative expense, depreciation and amortization expense,
and provision for discontinued operating losses, offset by
improved gross profit margins. Management expects to bring the
general and administrative expenses at USC under control within
120 to 150 days. The depreciation and amortization expenses and
provision for discontinued operating losses are non-cash charges.
Liquidity and Capital Resources
For the three months ended June 30, 1995, the Company experienced
negative cash flow from operations of $1,522,515 as compared to
$525,208 in the like quarter of 1994. For the six months ended
June 30, 1995, the Company experienced negative cash flow from
operations of $1,956,196 as compared to $661,766 for the like
period of 1994. This increase in both instances is caused by the
effective date accounting treatment of the USC acquisition, which
was closed subsequent to June 30, 1995 with an effective date of
June 1, 1995. This creates a large receivable at June 30, 1995
for the funds from the acquisition financing received subsequent
to that date.
The acquisition of USC was funded from a combination of bank
indebtedness and the issuance of preferred stock. Management
believes that future acquisitions can be financed in a similar
manner or, alternatively, by use of private placements of common
stock. A portion of the USC financing will be used for working
capital purposes.
The Company has been successful in financing its operations and
expansion needs from proceeds from private placements of common
stock and the exercise of stock options. Although there are no
assurances that such sources of funds will continue to be
available, management believes that it can continue to raise
funds with this type of financing as the need dictates.
Additionally, management believes that cash flow generated from
operations will improve with the acquisition and integration of
USC into the Company.
At June 30, 1995, continuing operations had cash balances of
$87,101 as compared to $331,431 at December 31, 1994. As of June
30, 1995, continuing operations had working capital of $696,118
and a current ratio of 1.14 to 1, as compared to working capital
of $561,902 and a current ratio of 1.41 to 1 at December 31,
1994. The decline in cash is attributable to payments made to
reduce current liabilities.
Capital Expenditures
There were no significant capital expenditures, other than the
USC acquisition, made in the first six months of 1995.
Additional switching equipment will be required in the next six
months to a year as the network expands. The additional switching
equipment is estimated to cost from $500,000 to $1,000,000,
according to sizing, and is expected to be financed with a
capital lease transaction or bank debt.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
Pursuant to the Certificate of Incorporation of the Company,
the Board of Directors has the authority, without further
shareholder approval, to provide for the issuance of up to
12,500,000 shares of Preferred Stock in one or more series and to
determine the dividend rights, conversion rights, voting rights,
rights and terms of redemption, liquidation preferences, number
of shares constituting any such series and the designation of
such series. The Board of Directors of the Company has created
and issued 166,667 shares of the Series A Cumulative Convertible
Preferred Stock and 125,000 shares of the Series B Cumulative
Convertible Preferred Stock. Certain rights afforded the holders
of the Series A Preferred Stock and the Series B Preferred Stock
are in preference to the rights afforded the holders of the
Common Stock. The Board of Directors has the power to establish
preferences and rights of additional series of Preferred Stock,
and, accordingly, it may afford the holders of any such series of
Preferred Stock preferences, powers and rights (including voting
rights) senior to the rights of the holders of the Common Stock
and/or the existing series of Preferred Stock.
Item 3. Defaults Upon 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 8-K
(a) Exhibits
3.1 Certificate of Incorporation of the Company,
as amended (filed herewith)
3.2 Amended and Restated Bylaws of the Company
(filed herewith)
4.1 Certificate of Designations, Preferences and
Rights of Series A Cumulative Convertible
Preferred Stock (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K dated
July 31, 1995 (the "Form 8-K") and
incorporated herein by reference)
4.2 Share Purchase Agreement, dated July 31,
1995, between SA Holdings, Inc. and Jesup &
Lamont Securities Corporation (filed as
Exhibit 4.2 to the Form 8-K and incorporated
herein by reference)
4.3 Form of Series A Preferred Stock Certificate
(filed as Exhibit 4.3 to the Form 8-K and
incorporated herein by reference)
4.4 Warrant Purchase Agreement, dated July 31,
1995, between SA Holdings, Inc. and Jesup &
Lamont Securities Corporation (filed as
Exhibit 4.4 to the Form 8-K and incorporated
herein by reference)
4.5 Common Stock Purchase Warrant Certificate
issued to Jesup & Lamont Securities
Corporation (filed as Exhibit 4.5 to the Form
8-K and incorporated herein by reference)
4.6 Certificate of Designations, Preferences and
Rights of Series B Cumulative Convertible
Preferred Stock (filed as Exhibit 4.6 to the
Form 8-K and incorporated herein by
reference)
4.7 Form of Purchase Note, issued by SA Holdings,
Inc. and schedule of differences thereto
pursuant to General instruction 2 to Item 601
(filed as Exhibit 4.7 to the Form 8-K and
incorporated herein by reference)
4.8 Form of Offset Note, issued by SA Holdings,
Inc. and schedule of differences thereto
pursuant to General Instruction 2 to Item 601
(filed as Exhibit 4.8 to the Form 8-K and
incorporated herein by reference)
4.9 Form of Note, Preferred Stock & Warrant
Purchase Agreement, dated as of July 31, 1995
between SA Holdings, Inc. and the purchasers
thereof (filed as Exhibit 4.9 to the Form 8-K
and incorporated herein by reference)
4.10 Form of Series B Preferred Stock Certificate
(filed as Exhibit 4.10 to the Form 8-K and
incorporated herein by reference)
4.11 Form of Common Stock Purchase Warrant
Certificate issued to purchasers thereof
(filed as Exhibit 4.11 to the Form 8-K and
incorporated herein by reference)
4.12 Term Credit Agreement dated July 31, 1995
between SA Holdings, Inc. and Norwest Bank-
Minnesota, N.A. and related Security
Agreement and Promissory Note (filed as
Exhibit 4.12 to the Form 8-K and incorporated
herein by reference)
10.1 Stock Purchase Agreement, dated as of June
30, 1995, between SA Holdings, Inc., U.S.
Communications, Inc. and the Shareholders
thereof (the "Stock Purchase Agreement")
(filed as Exhibit 2.1 to the Form 8-K and
incorporated herein by reference)
10.2 Supplemental Agreement to the Stock Purchase
Agreement, dated July 31, 1995 (filed as
Exhibit 2.2 to the Form 8-K and incorporated
herein by reference)
27.1 Financial Data Schedule (filed herewith)
Item 6. Reports on Form 8-K
None.
Pursuant to the requirements of the Securities Exchange Act
of 1934, Registrant has duly caused this report to be signed by
the undersigned thereunto duly authorized.
Date: August 18, 1995 SA Telecommunications, Inc.
By: Jack W. Matz, Jr.
Chief Executive Officer
By: J. David Darnell
Vice President, Finance and
Chief Financial Officer
EXHIBIT INDEX
3.1 Certificate of Incorporation of the Company,
as amended (filed herewith)
3.2 Amended and Restated Bylaws of the Company
(filed herewith)
4.1 Certificate of Designations, Preferences and
Rights of Series A Cumulative Convertible
Preferred Stock (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K dated
July 31, 1995 (the "Form 8-K") and
incorporated herein by reference)
4.2 Share Purchase Agreement, dated July 31,
1995, between SA Holdings, Inc. and Jesup &
Lamont Securities Corporation (filed as
Exhibit 4.2 to the Form 8-K and incorporated
herein by reference)
4.3 Form of Series A Preferred Stock Certificate
(filed as Exhibit 4.3 to the Form 8-K and
incorporated herein by reference)
4.4 Warrant Purchase Agreement, dated July 31,
1995, between SA Holdings, Inc. and Jesup &
Lamont Securities Corporation (filed as
Exhibit 4.4 to the Form 8-K and incorporated
herein by reference)
4.5 Common Stock Purchase Warrant Certificate
issued to Jesup & Lamont Securities
Corporation (filed as Exhibit 4.5 to the Form
8-K and incorporated herein by reference)
4.6 Certificate of Designations, Preferences and
Rights of Series B Cumulative Convertible
Preferred Stock (filed as Exhibit 4.6 to the
Form 8-K and incorporated herein by
reference)
4.7 Form of Purchase Note, issued by SA Holdings,
Inc. and schedule of differences thereto
pursuant to General instruction 2 to Item 601
(filed as Exhibit 4.7 to the Form 8-K and
incorporated herein by reference)
4.8 Form of Offset Note, issued by SA Holdings,
Inc. and schedule of differences thereto
pursuant to General Instruction 2 to Item 601
(filed as Exhibit 4.8 to the Form 8-K and
incorporated herein by reference)
4.9 Form of Note, Preferred Stock & Warrant
Purchase Agreement, dated as of July 31, 1995
between SA Holdings, Inc. and the purchasers
thereof (filed as Exhibit 4.9 to the Form 8-K
and incorporated herein by reference)
4.10 Form of Series B Preferred Stock Certificate
(filed as Exhibit 4.10 to the Form 8-K and
incorporated herein by reference)
4.11 Form of Common Stock Purchase Warrant
Certificate issued to purchasers thereof
(filed as Exhibit 4.11 to the Form 8-K and
incorporated herein by reference)
4.12 Term Credit Agreement dated July 31, 1995
between SA Holdings, Inc. and Norwest Bank-
Minnesota, N.A. and related Security
Agreement and Promissory Note (filed as
Exhibit 4.12 to the Form 8-K and incorporated
herein by reference)
10.1 Stock Purchase Agreement, dated as of June
30, 1995, between SA Holdings, Inc., U.S.
Communications, Inc. and the Shareholders
thereof (the "Stock Purchase Agreement")
(filed as Exhibit 2.1 to the Form 8-K and
incorporated herein by reference)
10.2 Supplemental Agreement to the Stock Purchase
Agreement, dated July 31, 1995 (filed as
Exhibit 2.2 to the Form 8-K and incorporated
herein by reference)
27.1 Financial Data Schedule (filed herewith)
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
COQUINA SEARCH CORP.
1. The Name of the Corporation is:
COQUINA SEARCH CORP.
2. The address of its registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of
New Castle. The name of its registered agent ast such address is
CORPORATION SERVICE COMPANY.
3. The nature of the business or purposes to be conducted or
promoted is:
To engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of
Delaware.
4. The total number of shares of stock which the corporation
shall have authority to issue is Fifty Million (50,000,000) shares,
having a par value of $.0001 per share, an aggregate capital of
$5,000.
5. The name and mailing address of the incorporator is as
follows:
NAME MAILING ADDRESS
Eric Newton 4835 Lyndon B. Johnson Freeway
Suite 825
Dallas, Texas 75244
6. The Corporation is to have perpetual existence.
7. In furtherance of and not in limitation of the powers
conferred by statue, the Board of Directors is expressly
authorized:
To make, alter or repeal the Bylaws of the Corporation.
8. Elections of directors need not be by written ballot
unless the Bylaws of the Corporation shall so provide.
Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision contained in the
statutes) outside the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors or in
the Bylaws of the Corporation.
9. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute. and all rights conferred upon stockholders herein are
granted subject to this reservation.
10. Directors of the Corporation shall not be liable to the
Corporation or its stockholders for damages for breach of fiduciary
duty, unless such breach involves a breach of duty of loyalty, acts
or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law or involve unlawful
payment of dividends or unlawful stock purchases or redemptions, or
involve a transaction from which the director derived an improper
personal benefit.
I, THE UNDERSIGNED, being the incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this certificate,
hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set
my hand this 22nd day of December, 1988.
___________________________________
Eric Newlan
<PAGE>
CERTIFICATE OF MERGER
OF
STRATEGIC ABSTRACT & TITLE CORPORATION INTO COQUINA SEARCH CORP.
The undersigned corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY
FIRST: That the name and state of incorporation of each of
the constituent corporations of the merger is as follows:
Name State of Incorporation
Coquina Search Corp. Delaware
Strategic Abstract & Title
Corporation Texas
SECOND: That a Plan and Agreement of Merger between the
parties to the merger has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations,
in accordance with the requirements contained under Section 251(c)
of the General Corporation Law of the State of Delaware.
THIRD: That the name of the surviving corporation of the
merger is Coquina Search Corp.
FOURTH: That the Certificate of Incorporation of Coquina
Search Corp., a Delaware corporation, shall be the Certificate of
Incorporation of the surviving corporation, except that Article 1
of such Certificate of Incorporation shall be amended to read as
follows:
"1. The name of the corporation is Strategic Abstract & Title
Corporation."
FIFTH: That the executed Plan and Agreement of Merger is on
file at the principal place of business of the surviving
corporation. The address of the principal place of business of the
surviving corporation is 3108 North Big Springs, Suite 105,
Midland, Texas 79705.
SIXTH: That a copy of the Plan and Agreement of Merger will
be furnished by the surviving corporation, on request and without
cost, to any shareholder of either constituent corporation.
Dated: March 28, 1989
Coquina Search Corp.
ATTEST:
By:________________________________
Jeffrey L. Collins
By:_______________________ Chairman of the Board
James A. Rennert
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF
STRATEGIC ABSTRACT & TITLE CORPORATION
Pursuant to the provisions of Title 8, Subchapter VIII,
Section 242 of the General Corporation Law of the State of
Delaware, the undersigned corporation adopts the following Articles
of Amendment to the Articles of Incorporation:
ARTICLE 1
Article 1 of the Certificate of Incorporation shall be amended
to read as follows:
"1. The name of the corporation is SA Holdings, Inc."
The shareholders of the Corporation have adopted and approved
the above amendment by the written consent of not less than the
holders of the outstanding capital stock having not less than the
minimum number of votes necessary to authorize or take such action
pursuant to the provisions of title 8, Subchapter VIII, Section 228
of the General Corporation Law of the State of Delaware. Prompt
notice of the taking of this corporate action has been given to
those shareholders who have not consented in writing pursuant to
the provisions of Title 8, Subchapter VIII, Section 228 of the
General Corporation Law of the State of Delaware.
Dated: February 10, 1992.
STRATEGIC ABSTRACT & TITLE CORPORATION
________________________________________
JACK W. MATZ, JR., PRESIDENT
ATTEST:
________________________________
JEAN STALEY, ASSISTANT SECRETARY
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF
SA HOLDINGS, INC.
Pursuant to the provisions of Title 8, subchapter VIII,
Section 242 of the General Corporation Law of the State of
Delaware, the undersigned corporation adopts the following Articles
of Amendment to the Articles of Incorporation:
ARTICLE I
Article 10 of the Certificate of Incorporation shall be
amended to read as follows:
"10. The Corporation will, to the fullest extent
permitted by the Delaware General Corporation Law, as the
same exists or may hereafter be amended, indemnify any
and all persons who it has power to indemnify under such
law from and against any and all of the expenses,
liabilities or other matters referred to in or covered by
such law. Such indemnification may be provided pursuant
to any Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action
in his director or officer capacity and as to action in
another capacity while holding such office, will continue
as to a person who has ceased to be a director, officer,
employee or agent, and will inure to the benefit of the
heirs, executors and administrators of such a person.
If a claim under the preceding paragraph (a) is not
paid in full by the Corporation within 30 days after a
written claim has been received by the Corporation, the
claimant may at nay time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant will
be entitled to be paid also the expense of prosecuting
such claim. It will be defense to any such action (other
than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any
is required, has been tendered to the Corporation) that
the claimant has not met the standards of conduct that
make it permissible under the laws of the State of
Delaware for the corporation to indemnify the claimant
for the amount claimed, but the burden of proving such
defense will beon the Corporation. Neither the failure
of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such
action that indemnification of the claimant is proper in
the circumstances because he has met the applicable
standard of conduct st forth in the laws of the State of
Delaware nor an actual determination by the Corporation
(including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant has not
met such applicable standard of conduct, will be a
defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
Directors of the Corporation shall not be liable to
the Corporation or its stockholders for damages for
breach of fiduciary duty, unless such breach involves a
breach of duty of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or a
knowing violation of law or involve unlawful payments of
dividends or unlawful stock purchases or redemptions, or
involve a transaction from which the director derived an
improper personal benefit."
A majority of the shareholders of the Corporation have adopted
and approved the above amendment at the annual meeting of
shareholders held in accordance with Section 222 of the General
Corporation Law of the State of Delaware on June 30, 1992. At such
annual meeting, 2,829,547 shareholders voted for the amendment, and
110 shareholders voted against the amendment. There were 3,963,633
shares outstanding and entitled to vote as f the record date for
the shareholders' annual meeting. Therefore, the amendment has
been duly adopted in accordance with Section 242 of the General
Corporation Law of the State of Delaware.
Dated: July 23, 1992.
SA HOLDINGS, INC.
By:________________________________
JACK W. MATZ, JR. PRESIDENT
ATTEST:
________________________________
JEAN STALEY, ASSISTANT SECRETARY
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF
SA HOLDINGS, INC.
Pursuant to the provisions of title 8, Subchapter VIII,
Section 242 of the General Corporation Law of the State of
Delaware, the undersigned corporation adopts the following
Certificate of Amendment to the Certificate of Incorporation:
ARTICLE I
Article 4 of the Certificate of Incorporation shall be amended
to add the following paragraph:
"The Corporation shall also have the authority to
issue 12,500,000 shares of Preferred Stock, par value
$.00001. The Board of Directors is hereby expressly
vested with the authority to adopt a resolution or
resolutions providing for the issue of authorized but
unissued shares of Preferred Stock and to divide the
Preferred Stock into such series as the Board of
Directors designates and to fix and determine the
relative rights and preferences of the shares of any
preferred series established to the full extent permitted
by the laws of the State of Delaware and this Certificate
of Incorporation in respect to, among other things, (a)
the number of shares to constitute a series and the
distinctive designation thereof, (b) the rate and
preference of dividends, if any, the time of payment of
dividends, whether dividends are cumulative and the date
from which any dividends begin accruing, (c) whether
shares may be redeemed and, if so, the redemption price
and the terms and conditions of redemption, (d) the
liquidation preferences payable in the event of
involuntary or voluntary liquidation, (e) sinking fund or
other provisions, if any, for the redemption or purchase
of shares, (f) the terms and conditions upon which shares
may be converted, if convertible, and (g) voting rights,
if any.
The shareholders of the Corporation have adopted and approved
the above amendment by the written consent of not less than the
holders of the outstanding capital stock having not less than the
minimum number of votes necessary to authorize or take such action
pursuant to the provisions of Title 8, subchapter VIII, Section 228
of the General Corporation Law of the State of Delaware. Prompt
notice of the taking of this corporate action has been given to the
shareholders who have not consented in writing pursuant to the
provisions of Title 8, Subchapter VIII, Section 228 of the General
Corporation Law of the State of Delaware.
Dated: September 28, 1992.
SA HOLDINGS, INC.
By:________________________________
JACK W. MATZ, JR., PRESIDENT
ATTEST:
________________________________
JEAN STALEY, ASSISTANT SECRETARY
Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
OF
SA TELECOMMUNICATIONS, INC.
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting
An annual meeting of the stockholders, for the election of
directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the
meeting, shall be held at such place on such date, and at such time
as the Board of Directors shall each year fix, which date shall be
within thirteen months subsequent to the later of the date of
incorporation or the last annual meeting of stockholders.
Section 2. Special Meetings
Special meetings of the stockholders, for any purpose or
purposes prescribed in the notice of the meeting, may be called by
the Board of Directors or the Chief Executive Officer and shall be
held at such place, on such date, and at such time as they or he
shall fix.
Section 3. Notice of Meetings
Written notice of the place, date, and time of all meetings of
the stockholders shall be given, not less than ten nor more than
sixty days before the date on which the meeting is to be held, to
each stockholder entitled to vote at such meeting, except as
otherwise provided herein or required by law (meaning, here and
hereinafter, as required from time to time by the General
Corporation Law of the State of Delaware or the Certificate of
Incorporation).
When a meeting is adjourned to another place, date or time,
written notice need not be given of the adjourned meeting if the
place, date, and time thereof are announced at the meeting at which
the adjournment is taken, provided, however, that if the date of
any adjourned meeting is more than thirty days after the date for
which the meeting was originally noticed, or if a new record date
is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in
conformity herewith. At any adjourned meeting, any business may be
transacted which might have been transacted at the original
meeting.
Section 4. Quorum
At any meeting of the stockholders, the holders of a majority
of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a
larger number may be required by law.
If a quorum shall fail to attend any meeting, the chairman of
the meeting or the holders of a majority of the shares of the stock
entitled to vote who are present, in person or by proxy, may
adjourn the meeting to another place, date, or time.
If a notice of any adjourned special meeting of stockholders
is sent to all stockholders entitled to vote thereat, stating that
it will be held with those present constituting a quorum, then
except as otherwise required by law, those present at such
adjourned meeting shall constitute a quorum, and all matters shall
be determined by a majority of the votes cast at such meeting.
Section 5. Organization
Such person as the Board of Directors may have designated or,
in the absence of such a person, the highest ranking officer of the
corporation who is present shall call to order any meeting of the
stockholders and act as chairman of the meeting. In the absence of
the Secretary of the corporation, the secretary of the meeting
shall be such person as the chairman appoints.
Section 6. Conduct of Business
The chairman of any meeting of stockholders shall determine
the order of business and the procedure at the meeting, including
such regulation of the manner of voting and the conduct of
discussion as seem to him in order.
Section 7. Proxies and Voting
At any meeting of the stockholders, every stockholder entitled
to vote may vote in person or by proxy authorized by an instrument
in writing filed in accordance with the procedure established for
the meeting.
Each stockholder shall have one vote for every share of stock
entitled to vote which is registered in his name on the record date
for the meeting, except as otherwise provided herein or required by
law.
All voting, except on the election of directors and where
otherwise required by law, may be by a voice vote; provided,
however, that upon demand therefor by a stockholder entitled to
vote or his proxy, a stock vote shall be taken. Every stock vote
shall be taken by ballots, each of which shall state the name of
the stockholder or proxy voting and such other information as may
be required under the procedure established for the meeting. Every
vote taken by ballots shall be counted by an inspector or
inspectors appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes
cast, and except as otherwise required by law, all other matters
shall be determined by a majority of the votes cast.
Section 8. Stock List
A complete list of stockholders entitled to vote at any
meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder and
the number of shares registered in his name, shall be open to the
examination of any such stockholder, for any purpose germane to the
meeting, during ordinary business hours for a period of at least
ten (10) days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at
the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting
during the whole time thereof and shall be open to the examination
of any such stockholder who is present. This list shall
presumptively determine the identity of the stockholders entitled
to vote at the meeting and the number of shares held By each of
them.
ARTICLE II - BOARD OF DIRECTORS
Section 1. Number and Term of Office
The number of directors who shall constitute the whole board
shall be such number not less than five nor more than twenty as the
Board of Directors shall at the time have designated. The number
of directors shall be fixed from time to time exclusively by the
Board of Directors pursuant to a resolution adopted by a majority
of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorship at the
time any such resolution is presented to the Board for adoption).
Effective immediately upon the filing of a Certificate of Amendment
to the Certificate of Incorporation effecting same, the directors
shall be divided into three classes, as nearly equal in number as
reasonably possible, with the term of office of the first class to
expire at the 1996 Annual Meeting of Stockholders, the term of
office of the second class to expire at the 1997 Annual Meeting of
Stockholders and the term of office of the third class to expire at
the 1998 Annual Meeting of Stockholders. At each Annual Meeting of
Stockholders following such initial classification and election,
directors elected to succeed those directors whose terms expire
shall be elected for a term of office to expire at the third
succeeding Annual Meeting of Stockholders after their election.
Whenever the authorized number of directors is increased
between annual meetings of the stockholders, a majority of the
directors then in office shall have the power to elect such new
directors for the balance of a term and until their successors are
elected and qualified. Any decrease in the authorized number of
directors shall not become effective until the expiration of the
term of the directors then in office unless, at the time of such
decrease, there shall be vacancies on the board which are being
eliminated by the decrease.
Section 2. Vacancies
If the office of any director becomes vacant by reason of
death, resignation, disqualification, removal or other cause, a
majority of the directors remaining in office, although less than
a quorum, may elect a successor for the unexpired term and until
his successor is elected an qualified.
Section 3. Regular Meetings
Regular meetings of the Board of Directors shall be held at
such place or places, on such date or dates, and at such time or
times as shall have been established by the Board of Directors and
publicized among all directors. A notice of each regular meeting
shall not be required.
Section 4. Special Meetings
Special meetings of the Board of Directors may be called by
one-third of the directors then in office or by the Chief Executive
Officer and shall be held at such place, on such date, and at such
time as they or he shall fix. Notice of the place, date and time
of each such special meeting shall be given each director by whom
it is not waived by mailing written notice not less than three days
before the meeting or by telegraphing the same not less than
eighteen hours before the meeting. Unless otherwise indicated in
the notice thereof, any and all business may be transacted at a
special meeting.
Section 5. Quorum
At any meeting of the Board of Directors, one-third of the
total number of the whole board, but not less than two, shall
constitute a quorum for all purposes. If a quorum shall fail-to
attend any meeting, a majority of those present may adjourn the
meeting to another place, date, or time, without further notice or
waiver thereof.
Section 6. Participation in Meeting by Conference Telephone
Members of the Board of Directors, or of any committee
thereof, may participate in-a meeting of such board or committee by
means of conference telephone or similar communications equipment
that enables all persons participating in the meeting to hear each
other. Such participation shall constitute presence in person at
such meeting.
Section 7. Conduct of Business
At any meeting of the Board of Directors, business shall be
transacted in such order and manner as the board may from time to
time determine, and all matters shall be determined by the vote of
a majority of the directors present, except as otherwise provided
herein or required by law. Action may be taken by the Board of
Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes
of proceedings of the Board of Directors.
Section 8. Powers
The board of Directors may, except as otherwise required by
law, exercise all such powers and do all such acts and things as
may be exercised or done by the corporation, including, without
limiting the generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every
kind, negotiable or non-negotiable, secured or unsecured,
and to do all things necessary in connection therewith;
(4) To remove any officer of the corporation with or without
cause, and from time to time to devolve the powers and
duties of any officer upon any other person for the time
being;
(5) To confer upon any officer of the corporation the power
to appoint, remove and suspend subordinated officers and
agents;
(6) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for
directors, officers and agents of the corporation and its
subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement,
and other benefit plans for directors, officers and
agents of the corporation and its subsidiaries as it may
determine; and
(8) To adopt from time to time regulations, not inconsistent
with these by-laws, for the management of the
corporation's business and affairs.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors
The Board of Directors, by a vote of a majority of the whole
board, may from time to time designate committees of the board,
with such lawfully delegable powers and duties as it thereby
confers, to serve at the pleasure of the board and shall, for those
committees and any others provided for herein, elect a director of
directors to serve as the member or members, designating, if it
desires, other directors as alternative members who may replace any
absent or disqualified member at any meeting of the committee. Any
committee so designated may exercise the power and authority of the
Board of Directors to declare a dividend or to authorize the
issuance of stock if the resolution which designates the committee
or a supplemental resolution of the Board of Directors shall so
provide. In the absence or disqualification of any member of any
committee and any alternate member in his place, the member or
members of the committee present at the meeting and not
disqualified from voting, whether or not he or they constitute a
quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in place of the absent or
disqualified member.
Section 2. Conduct of Business
Each committee may determine the procedural rules for meeting
and conducting its business and shall act in accordance therewith,
except as provided herein or required by law. Adequate provision
shall be made for notice to members of all meetings; one-third of
the members shall constitute a quorum unless the committee shall
consist of one or two members, in which event one member shall
constitute a quorum; and all matters shall be determined by a
majority vote of the members present. Action may be taken by any
committee without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes
of the proceedings of such committee.
ARTICLE IV - OFFICERS
Section 1. Generally
The officers of the corporation shall consist of a Chairman of
the Board, President, one or more Vice-Presidents, a Secretary, a
Treasurer and such other subordinate officers as may from time to
time be appointed by the Board of Directors. Officers shall be
elected by the Board of Directors, which shall consider that
subject at its first meeting after every annual meeting of
stockholders. Each officer shall hold his office until his
successor is elected and qualified or until his earlier resignation
or removal. The Chief Executive Officer shall be a member of the
Board of Directors. Any number of offices may be held by the same
person.
Section 2. Chairman of the Board
The Chairman of the Board, shall preside at all meetings of
the stockholders of the corporation and the Board of Directors and
shall have such other powers and duties as may from time to time be
prescribed by the Board of Directors upon written directions given
to him pursuant to resolutions duly adopted by the Board of
Directors.
Section 3. Chief Executive Officer
The Chief Executive Officer of the Corporation shall have the
powers and duties of supervision and management of the business and
affairs of the corporation relating to, among other things, market
relations, telecommunications acquisitions, corporate finance and
Russian ventures and shall see that all orders and resolutions of
the Board of Directors are carried into effect. He shall preside
at all meetings of the stockholders and at all meetings of the
Board of Directors unless a Chairman of the Board has been elected,
in which event the Chief Executive Officer shall preside at
meetings of the Board of Directors in the absence or disability of
the Chairman of the Board. He shall have power to sign all stock
certificates, contracts and other instruments of the corporation
which are authorized.
Section 4. President
The President shall be the chief operating officer of the
corporation. Subject to the provisions of these by-laws and to the
direction of the Chief Executive Officer and the Board of
Directors, he shall have the responsibility for the general
management and control of the affairs and business of the
corporation and shall perform all duties and have all powers which
are commonly incident to the office of President or which are
delegated to him by the Board of Directors. Except with respect to
the Chief Executive Officer, the President shall have general
supervision and direction of all of the other officers and agents
of the corporation. He shall have power to sign all stock
certificates, contracts and other instruments of the corporation
which are authorized.
Section 5. Vice-President
Each Vice-President shall perform such duties as the Board of
Directors or the President shall prescribe. In the absence or
disability of the President, the Vice-President who has served in
such capacity for the longest time shall perform the duties and
exercise the powers of the President.
Section 6. Treasurer
The Treasurer shall have the custody of all monies and
securities of the corporation and shall keep regular books of
account. He shall make such disbursements of the funds of the
corporation as are proper and shall render from time to time an
account of all such transactions and of the financial condition of
the corporation.
Section 7. Secretary
The Secretary shall issue all authorized notices for, and
shall keep minutes of, all meetings of the stockholders and the
Board of Directors. He shall have charge of the corporate books.
Section 8. Delegation of Authority
The Board of Directors may from time to time delegate the
powers or duties of any officer to any other officers or agents,
notwithstanding any provision hereof.
Section 9. Removal
Any officer of the corporation may be removed at any time,
with or without cause, by the Board of Directors.
Section 10. Action with Respect to Securities of Other
Corporations
Unless otherwise directed by the Board of Directors, the
President shall have power to vote and otherwise act on behalf of
the corporation, in person or by proxy, at any meeting of
stockholders of or with respect to any action of stockholders of
any other corporation in which this corporation may hold securities
and otherwise to exercise any and all rights and powers which this
corporation may possess by reason of its ownership of securities in
such other corporation.
ARTICLE V - RIGHT OF INDEMNIFICATION OF
DIRECTORS, OFFICERS AND OTHERS
Section 1. Right to Indemnification
Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative
("proceeding"), by reason of the fact that he or she or a person
for whom he or she is the legal representative is or was a director
or officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director or officer,
employee or agent of another corporation, or of a partnership,
joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, shall be indemnified and
held harmless by the corporation to the fullest extent authorized
by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only
to the extent such amendment permits the corporation to provide
broader indemnification right than said law permitted the
corporation to provide prior to such amendment) against all
expenses, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person
in connection therewith. Such right shall be a contract right and
shall include the right to be paid by the corporation expense
incurred in defending any such proceeding in advance of its final
disposition; provided, however, that the payment of such expenses
incurred by a director or officer of the corporation in his or her
capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of such
proceeding, shall be made only upon delivery to the corporation of
an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it should be determined ultimately
that such director or officer is not entitled to be indemnified
under this section or otherwise.
Section 2. Right of Claimant to Bring Suit
If a claim under Section 1 is not paid in full by the
corporation within 90 days after a written claim has been received
by the corporation, the claimant may at any time thereafter bring
suit against the corporation to recover the unpaid amount of the
claim, and if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought
to enforce a claim for expense incurred in defending any proceeding
in advance of its final disposition where the required undertaking
has been tendered to the corporation) that the claimant has not met
the standards of conduct which make it permissible under the
Delaware General Corporation Law for the corporation to indemnify
the claimant for the amount claimed, but the burden of proving such
defense shall be on the corporation. Neither the failure of the
corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to
the commencement of such action that indemnification of the
claimant is proper in the circumstances because he or she has met
the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the
corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant had not met such
applicable standard of conduct, shall be a defense to the action or
create a presumption that claimant had not met the applicable
standard of conduct.
Section 3. Non-Exclusivity of Rights
The rights conferred by Sections 1 and 2 shall not be
exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of the Certificate
of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 4. Insurance
The corporation may maintain insurance, at its expense, to
protect itself and any such director, officer, employee or agent of
the corporation or another corporation, partnership, joint venture,
trust or other enterprise against any such expense, liability or
loss, whether.or not the corporation would have the power to
indemnify such person against such expense, liability or loss under
the Delaware General Corporation Law.
ARTICLE VI- STOCK
Section 1. Certificates of Stock
Each stockholder shall be entitled to a certificate signed by,
or in the name of the corporation by, the President or a
vice-president, and by the secretary or an assistant secretary, or
the treasurer or an assistant treasurer, certifying the number of
shares owned by him. Any of or all the signatures on the
certificate may be facsimile.
Section 2. Transfers of Stock
Transfers of stock shall be made only upon the transfer books
of the corporation kept at an office of the corporation or by
transfer agents designated to transfer shares of the stock of the
corporation. Except where a certificate is issued in accordance
with Section 4 of Article VI of these by-laws, an outstanding
certificate for the number of shares involved shall be surrendered
for cancellation before a new certificate is issued therefor.
Section 3. Record Date
The Board of Directors may fix a record date, which shall not
be more than 60 nor less than 10 days before the date of any
meeting of stockholders, nor more than 60 days prior to the time
for the other action hereinafter described, as of which there shall
be determined the stockholders who are entitled: to notice of or to
vote at any meeting of stockholders or any adjournment thereof; to
express consent to corporate action in writing without a meeting;
to receive payment of any dividend or other distribution or
allotment of any rights; or to exercise any rights with respect to
any change, conversion or exchange of stock or with respect to any
other lawful action.
Section 4. Lost, Stolen or Destroyed Certificates
In the event of the loss, theft or destruction of any
certificate of stock, another may be issued in its place pursuant
to such regulations as the Board of Directors may establish
concerning
Section 5. Time Periods
In applying any provision of these by-laws which requires that
an act be done or not done a specified number of days prior to an
event or that an act be done during a period of a specified number
of days prior to an event, calendar days shall be used, the day of
the doing of the act shall be excluded, and the day of the event
shall be included.
ARTICLE IX - AMENDMENTS
These by-laws may be amended or repealed by the Board of
Directors at any meeting or by the stockholders at any meeting.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED FINANCIAL STATEMENTS FOR SA TELECOMMUNICATIONS, INC.
(F/K/A SA HOLDINGS, INC.) FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 87,101
<SECURITIES> 0
<RECEIVABLES> 3,674,018
<ALLOWANCES> 46,122
<INVENTORY> 242,863
<CURRENT-ASSETS> 5,676,687
<PP&E> 5,591,214
<DEPRECIATION> 2,570,140
<TOTAL-ASSETS> 29,872,464
<CURRENT-LIABILITIES> 4,980,569
<BONDS> 0
<COMMON> 1,175
1,215,000
637,874
<OTHER-SE> 12,115,885
<TOTAL-LIABILITY-AND-EQUITY> 29,872,464
<SALES> 0
<TOTAL-REVENUES> 4,004,348
<CGS> 0
<TOTAL-COSTS> 2,818,043
<OTHER-EXPENSES> 2,585
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103,377
<INCOME-PRETAX> (795,418)
<INCOME-TAX> 0
<INCOME-CONTINUING> (545,418)
<DISCONTINUED> (250,000)
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