U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTELY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quartely period ended September 30, 1999
COMMISSION FILE NO. 1-13134
AMERICAN NORTEL COMMUNICATIONS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
WYOMING 87-0507851
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
Incorporation or organization)
7201 EAST CAMELBACK ROAD, SUITE 320
SCOTTSDALE, AZ 85251
(Address of Principal Executive Office)
Issuer's Telephone Number: (480) 945-1266
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes / X / No / /
(2) Yes / X / No / /
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registration filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court.
Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date:
THERE WERE 15,463,785 SHARES OF THE REGISTRANT'S COMMON VOTING STOCK OUTSTANDING
ON NOVEMBER 1, 1999
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
AMERICAN NORTEL COMMUNICATIONS, INC.
COMPARATIVE BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(UNAUDITED)
ASSETS
1999 1998
<S> <C> <C>
CURRENT ASSETS:
Cash in Bank 423,242.16 $ 729,348.46
Prepaid Expenses 273,913.28 322,941.03
Intangible Debt Issue - 16,200.00
Accounts Receivable 3,655,868.40 1,115,716.24
---------------- ----------------
TOTAL CURRENT ASSETS $ 4,353,023.84 $ 2,184,205.73
PROPERTY AND EQUIPMENT:
Telecommunications Property 1,650.00 1,650.00
Equipment & Computer Equipment 77,015.00 61,963.61
Furniture and Fixtures 4,660.00 4,660.00
LESS: Accumulated Depreciation (35,982.00) (14,118.13)
---------------- ----------------
TOTAL PROPERTY AND EQUIPMENT 47,343.00 54,155.48
OTHER ASSETS:
Deferred Tax Asset 1,160,000.00 -
Other Assets 927,512.94 6,666.94
Due from related party 406,390.00 232,919.69
---------------- ----------------
TOTAL OTHER ASSETS 2,493,902.94 239,586.63
---------------- ----------------
TOTAL ASSETS $ 6,894,269.78 $ 2,477,947.84
================ ================
LIABILITIES
CURRENT LIABILITIES:
Trade Accounts Payable 881,960.42 1,051,722.97
Trade Accounts Payable - Other 362,189.00 439,327.00
Federal Payroll Taxes Payable 140,229.75 6,376.35
State Income Taxes Payable 242,900.00 -
Notes Payable 198,500.00 695,000.00
Accrued Interest Payable 45,411.25 396,489.00
---------------- ----------------
TOTAL CURRENT LIABILITIES 1,871,190.42 2,588,915.32
LONG-TERM LIABILITIES:
Converted Debentures - 18,750.00
Unearned Revenues 200,846.00 -
---------------- -
TOTAL LONG-TERM LIABILITIES 200,846.00 18,750.00
---------------- ----------------
TOTAL LIABILITIES 2,072,036.42 2,607,665.32
STOCKHOLDERS' EQUITY
Common Stock 21,939,402.00 21,920,002.00
Treasury Stock (117,000.00) (117,000.00)
Additional Paid In Capital 50,595.00 -
Retained Earnings(Loss) (17,050,763.64) (21,932,719.48)
---------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 4,822,233.36 (129,717.48)
----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,894,269.78 $ 2,477,947.84
================ ================
</TABLE>
See the accompanying notes to these financial statements
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NORTEL COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED SEPTEMBER 30, 1999 AND YEAR END JUNE 30, 1999
(UNAUDITED)
1ST QTR YEAR END 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,343,750.25 4,097,599
Adjustments to reconcile net income to net cash provided by operating
activities.
Depreciation and amortization 3,600.00 983,807
Expenses paid with common stock 27,000.00 82,400
Extraordinary item (736,340)
Bad debt expense 134,942
Deferred tax asset (1,160,000)
Changes in assets and liabilities:
Trade accounts receivable (715,014.40) (2,524,602)
Prepaid expenses 139,728.72 (1,281,271)
Other assets - 16,200
Trade accounts payable (647,314.58) 1,277,504
Income tax payable 110,000
Accrued Interest 5,411.31 44,907
State Income Taxes Payable 132,900.00
Accrued Payroll Taxes 50,829.86 81,586
--------------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 340,891.16 1,126,732
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable equity securities (140,000.00) (636,041)
Advances to control group (30,000.00) (384,966)
Repayment from control group 171,596
Purchases of property and equipment - (33,880)
--------------- -----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (170,000.00) (883,291)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds form the issuance of notes payable 600,000
Payments on convertible debentures (18,750)
Payment on notes payable (465,500.00) (361,000)
Treasury stock sales 67,295
Treasury stock purchaes - (16,700)
--------------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (465,500.00) 270,845
--------------- -----------
NET INCREASE (DECREASE) IN CASH (294,608.84) 514,286
CASH AT BEGINNING OF PERIOD 717,851.00 147,524
--------------- -----------
CASH AT END OF PERIOD $ 423,242.16 661,810
=============== ===========
Cash paid during the year for interest $ - 11,400
--------------- -----------
</TABLE>
See the accompanying notes to these financial statements
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NORTEL COMMUNICATIONS, INC.
COMPARATIVE STATEMENT OF OPERATIONS
FOR THE PERIOD ENDING SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
1999 1998
1ST QUARTER YEAR TO DATE 1ST QUARTER YEAR TO DATE
<S> <C> <C> <C> <C>
INCOME
Airtime Income $6,763,403.95 6,763,403.95 $3,105,225.31 3,105,225.31
COST OF SALES 4,595,305.97 4,595,305.97 2,254,940.12 2,254,940.12
-------------- -------------- -------------- -------------
GROSS PROFIT 2,168,097.98 2,168,097.98 850,285.19 850,285.19
SELLING EXPENSES 363,217.45 363,217.45 84,053.75 84,053.75
GENERAL & ADMINISTRATIVE 326,347.95 326,347.95 191,945.00 191,945.00
-------------- -------------- -------------- -------------
TOTAL EXPENSES 689,565.40 689,565.40 275,998.75 275,998.75
EARNINGS (LOSS) FROM OPERATIONS 1,478,532.58 1,478,532.58 574,286.44 574,286.44
OTHER INCOME (EXPENSE)
Other Income 19,962.00 19,962.00 - -
Interest Income 2,070.92 2,070.92 657.57 657.57
Interest Expense (23,915.25) (23,915.25) (13,500.00) (13,500.00)
-------------- -------------- -------------- -------------
TOTAL OTHER INCOME (1,882.33) (1,882.33) (12,842.43) (12,842.43)
Provision for State Income Taxes (132,900.00) (132,900.00)
NET INCOME (LOSS) $1,343,750.25 $1,343,750.25 561,444.01 561,444.01
============== ============== ============== =============
EARNINGS PER SHARE:
Basic Earnings Per Share $ 0.09 0.04
-------------- --------------
WEIGHTED AVERAGE NUMBER OF COMMON 15,463,785 14,070,890
--------------
SHARES OUTSTANDING
Diluted Earnings Per Share $ 0.09 0.04
-------------- --------------
WEIGHTED AVERAGE NUMBER OF COMMON 15,463,785 14,076,734
--------------
AND COMMON SHARE EQUIVALENTS OUTSTANDING
</TABLE>
See the accompanying notes to these financial statements
<PAGE>
NOTE 1:
- --------
The accompanying unaudited financial statements of American Nortel
Communications, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
the instructions to form 10-QSB. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. 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 for
all periods presented have been made. The results of operations for the
three-month period ended September 30, 1999 are not necessarily indicative of
the operating results that may be expected for the entire year ending June 30,
2000. These financial statements should be read in conjunction with the
Company's June 30, 1999 audited fiscal year-end financial statements and
accompanying notes thereto, which are included in the Company's annual report on
Form 10-K for the Fiscal year ended June 30, 1999.
NOTE 2:
- --------
Earnings per common share and common equivalent share are computed by
dividing net income by the weighted average number of shares of common stock and
common stock equivalents outstanding during the period. The Company's 10%
convertible debentures are considered to be common stock equivalents.
Consequently, the number of shares issuable, assuming full conversion
outstanding of these debentures as of the beginning of the fiscal year, is added
to the number of common shares. A fully diluted earnings per share is computed
assuming conversion of all debentures.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
NONE; NOT APPLICABLE.
ITEM 2. CHANGES IN SECURITIES.
NONE; NOT APPLICABLE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
NONE; NOT APPLICABLE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE; NOT APPLICABLE.
ITEM 5. OTHER INFORMATION.
NONE; NOT APPLICABLE.
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements in this report are forward looking statements that
involve risks and uncertainties. Among the factors that could cause actual
results to differ materially from those described in such forward looking
statements are the following: the Company's ability to manage rapid growth;
litigation; changes in regulations; competition in the long distance
telecommunications market, especially price competition; the Company's ongoing
relationship with its long distance carriers; dependence upon key personnel;
subscriber attrition and the Company's success in marketing its
telecommunication services and programs to new subscribers; the adoption of new,
or changes in, accounting policies, practices, and estimates and the application
of such policies, practices, and estimates; federal and state governmental
regulation of the long distance telecommunications industry; the Company's
ability to develop its own long distance network; the Company's ability to
maintain, operate, and upgrade its information systems; and the Company's
success in offering additional communications products and services.
In the quarter ended September 30, 1999, the Company provided long distance
service as a reseller. The Company's focus on long distance service has become
a profitable business, and continues to provide quality telecommunications
services for its customers. The Company anticipates continued profitability in
this business segment and growth within its other telecommunication segments.
The Company has also been able to target markets that have high volume calls and
international calls. International calling represented 10% of the Company's
revenues. The Company has experienced continued increase, in competition
domestically in market pricing, and continues to seek joint venture and
investment acquisition opportunities to potentially lessen the effects of cost
competition in the domestic telecommunication market.
On July 21, 1999, the Company purchased for investment 1,000,000 shares of
SHC Corporation a/k/a Victor Maxx Technologies, Inc. SHC Corporation is an
OTC:Bulletin Board stock company whose common stock trades under the symbol
VMAX. This company specializing in short-term lending to consumers. The
acquisition price was $140,000, or 14 cents per share.
<PAGE>
Results of Operations
Quarter Ended September 30, 1999 Compared to Quarter Ended September 30, 1998.
Revenues for the quarter ended September 30, 1999 increased to $6,763,403,
or 117.8%, from $3,105,225, during quarter ended September 30, 1998. The
increase in revenue resulted primarily from growth in the volume of calls by
subscribers using the Company's basic 1 Plus and 800 long-distance service. The
Company has purchased new accounts and has increased the size of its customer
base through the use of outside telemarketers. The Company has also increased
its market share in large call volume areas, and has concentrated additional
marketing resources on international calling, which has higher profit margin
that can be achieved in the U.S. domestic long distance market, and which is not
currently being directly affected by the pricing competition, which is very
intense in the domestic calling market. The Company has been better able to
control subscriber attrition ratios, which it attributes to better and more cost
effective service to its customers.
Selling expenses for the quarter ended September 30, 1999 increased 332.1%,
to $363,217 from $84,053 during quarter ended September 30, 1998. The increase
in selling expenses was a result of the increase in marketing costs associated
with telemarketing campaigns. The Company increased its telemarketing campaigns
to build a longer customer base.
General and administrative expenses for quarter ended September 30, 1999
increased 70.0% to $326,347 from $191,945 during quarter ended September 30,
1998. The increase results the Company's payment of salary to the CEO in 1999
as compared to the issuance of stock for CEO services in 1998. The Company has
increased the number of its customer service representatives to provide
bi-lingual assistance to non-English speaking customers. The Local Exchange
Carrier (LEC) has been continually increasing the cost of wholesale traffic
through its long distance switch and the Company anticipates that this trend
will continue. The Company has also increased its customer service
representative staff to provide better services to its customers.
Interest expense for the quarter ended September 30, 1999 increased to
$23,915 from $13,500 during quarter ended September 30, 1998. The increase in
interest expense was a result of higher debt outstanding incurred in connection
with the Company's acquisition of 1,060,069 shares of Daulphin Technology, Inc.
common stock during April 23, 1999. The acquisition was funded through securing
outside financing.
Net earnings for the quarter ended September 30, 1999 were $1,476,650, or
$.10 per diluted share, compared to $561,444, or $.04 per diluted share during
quarter ended September 30, 1998.
Liquidity
The Company has funded its working capital requirements primarily from cash
provided by operating activities. Cash provided by operating activities
increased for the quarter ended September 30, 1999 by $340,891. The principle
source of revenue is generated from sales of long distance service to the
Company's customers.
<PAGE>
Capital Resources
Cash flows used by investing activities was $170,000 for the quarter ended
September 30, 1999. The Company purchased for investment 1,000,000 shares of
the common stock of SHC Corporation during the quarter.
Cash flows used for financing activities was $465,500 in the quarter ended
September 30, 1999. This cash outflow was the payment of $433,000 of loans
secured to purchase for investment 1,060,069 shares of the common stock of
Daulphin Technology, Inc. In addition, the Company has begun to pay down notes
payable to unrelated third parties on terms negotiated with note holders.
During the quarter the Company paid $32,500 under these third party notes. The
notes represent obligations incurred by prior management in 1993, which were
re-negotiated with pay off, default, and maturity provisions more favorable to
the Company than the original note terms.
Year 2000
The Company and its long distance billing and service provider utilize
software that truncates the year to a two-digit field. Accordingly, when the
date passes the year 2000, errors may occur in the calculation and processing of
data significant to the revenue recognition of the Company. The Company has
upgraded its hardware and software to be year 2000 compliant, and the Company's
service providers have advise the Company that they have taken steps to modify
and upgrade equipment and software programs to be prepared for the Year 2000
conversions.
The Year 2000 issue also affects the Company's internal systems
including the Company's information technology (IT) and non -IT systems.
Currently the Company has purchased information systems internally to comply
with the requirements for the Year 2000. Management currently believes that all
material systems are compliant for the year 2000 and the cost to address the
issues is not material. The Company has spent approximately $50,000 over the
past two years to address year 2000 issues. These costs are expensed as
incurred. The Company believes that its systems are year 2000 compliant, and
has not received notice from any of the entities that its systems interface with
that those parties expect material failures in the telecommunications system due
to year 2000 issues. The most significant year 2000 consequence to the Company
would be a failure of the telecommunication system such that the Company's
customers could not successfully complete long - distance calls. Such a failure,
if it existed for any length of time, would have a material adverse effect on
the Company's financial condition and result of operations. It is unclear at
this time what recourse, if any, the Company might have against third parties in
the event of any such failure of the telecommunications systems.
ITEM 7. EXHIBITS
The exhibits filed as part of this report are as follows:
Exhibit 11
Computation of Earnings Per Share
Exhibit 27:
Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on behalf by the undersigned
thereunto duly authorized.
AMERICAN NORTEL COMMUNICATIONS, INC.
Date: November 2, 1999 by: /S/ W.P. Williams, Jr.
W.P. WILLIAMS, JR., Director
Chief Executive Officer
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NORTEL COMMUNICATIONS, INC.
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
1999 1998
1ST QUARTER 1ST QUARTER
<S> <C> <C>
BASIC EARNINGS PER SHARE: (NOTE 2)
Common shares outstanding, beginning of period 15,163,785 13,845,016
Effects of weighting shares:
Weighted common shares issued 300,000 225,874
------------- -----------
Weighted average number of common shares 15,463,785 14,070,890
============= ===========
outstanding
Net Income $1,343,750.25 $561,444.01
============= ===========
Earnings Per Share $ 0.09 $ 0.04
============= ===========
DILUTED EARNINGS PER SHARE: (NOTE 2)
Common shares outstanding, beginning of period 15,163,785 13,845,016
Effects of weighting shares:
Weighted common shares issued 300,000 225,874
10% Convertible Debentures 5,844
-------------
Weighted average number of common shares and
common equivalent shares outstanding 15,463,785 14,076,734
============= ===========
Net Income $1,343,750.25 $561,444.01
============= ===========
Earnings Per Share $ 0.09 $ 0.04
============= ===========
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
AMERICAN NORTEL COMMUNICATIONS, INC. FORM 10-QSB FOR PERIOD ENDING SEPTEMBER 30,
1999 FOR YEAR ENDING JUNE 30, 2000
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 423242
<SECURITIES> 927513
<RECEIVABLES> 3655868
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4353024
<PP&E> 83325
<DEPRECIATION> 35982
<TOTAL-ASSETS> 6894270
<CURRENT-LIABILITIES> 1871190
<BONDS> 0
0
0
<COMMON> 21939402
<OTHER-SE> 50595
<TOTAL-LIABILITY-AND-EQUITY> 6894270
<SALES> 0
<TOTAL-REVENUES> 6763404
<CGS> 0
<TOTAL-COSTS> 4595306
<OTHER-EXPENSES> 689565
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1478533
<INCOME-TAX> 132900
<INCOME-CONTINUING> 1478533
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1343750
<EPS-BASIC> .09
<EPS-DILUTED> .09
</TABLE>
