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 March 31, 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: (602) 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:
APRIL 15, 1999
COMMON VOTING STOCK - 15,545,785
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
AMERICAN NORTEL COMMUNICATIONS, INC.
COMPARATIVE BALANCE SHEET
AS OF MARCH 31, 1999 AND 1998
UNAUDITED
ASSETS
1999 1998
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents . . . . . . . . . . $ 287,832.55 134,114.30
Prepaid Expenses. . . . . . . . . . . . . . . 726,935.25 125,253.88
Intangible Debt Issue . . . . . . . . . . . . 16,200.00 28,400.00
Cable and Wirless . . . . . . . . . . . . . . - 68,638.13
Accounts Receivable . . . . . . . . . . . . . 2,377,714.73 427,681.82
---------------- ---------------
TOTAL CURRENT ASSETS. . . . . . . . . . . . $ 3,408,682.53 784,088.13
PROPERTY AND EQUIPMENT:
Telecommunications Property . . . . . . . . . 1,650.00 1,650.00
Equipment . . . . . . . . . . . . . . . . . . 98,675.18 58,448.50
LESS: Accumulated Depreciation. . . . . . . . . (19,119.13) (16,939.00)
---------------- ---------------
TOTAL PROPERTY AND EQUIPMENT. . . . . . . . 81,206.05 43,159.50
OTHER ASSETS:
Investment Through Barter . . . . . . . . . . - 47,977.94
Other Assets. . . . . . . . . . . . . . . . . 6,666.94 80,448.00
Due to Related Party. . . . . . . . . . . . . 437,114.76 158,669.69
---------------- ---------------
TOTAL OTHER ASSETS. . . . . . . . . . . . . 443,781.70 287,095.63
---------------- ---------------
TOTAL ASSETS. . . . . . . . . . . . . . . . $ 3,933,670.28 1,114,343.26
================ ===============
LIABILITIES
CURRENT LIABILITIES:
Trade Accounts Payable. . . . . . . . . . . . 1,104,380.46 439,488.83
Trade Accounts Payable - Other. . . . . . . . 410,327.00 439,327.00
Payroll Taxes Payable . . . . . . . . . . . . 55,179.32 19,878.52
Notes Payable . . . . . . . . . . . . . . . . 620,000.00 708,191.90
Accrued Interest Payable. . . . . . . . . . . 291,801.50 369,489.00
---------------- ---------------
TOTAL CURRENT LIABILITIES . . . . . . . . . 2,481,688.28 1,976,375.25
LONG-TERM LIABILITIES:
Converted Debentures. . . . . . . . . . . . . 18,750.00 93,750.00
Unearned Phone Card Revenue . . . . . . . . . - 4,429.30
---------------
TOTAL LONG-TERM LIABILITIES . . . . . . . . 18,750.00 98,179.30
---------------- ---------------
TOTAL LIABILITIES . . . . . . . . . . . . . 2,500,438.28 2,074,554.55
STOCKHOLDERS' EQUITY
Common Stock. . . . . . . . . . . . . . . . . 21,920,002.00 21,919,002.00
Treasury Stock. . . . . . . . . . . . . . . . (117,000.00) (270,000.00)
Retained Earnings(Loss) . . . . . . . . . . . (20,369,770.00) (22,609,213.29)
---------------- ---------------
TOTAL STOCKHOLDERS' EQUITY. . . . . . . . . 1,433,232.00 (960,211.29)
---------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. $ 3,933,670.28 1,114,343.26
================ ===============
</TABLE>
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<CAPTION>
AMERICAN NORTEL COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED MARCH 31, 1999 AND DECEMBER 31, 1998
UNAUDITED
3RD QTR 2ND QTR
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 802,208.23 $ 655,616.96
Adjustments to reconcile net income to net cash provided by operating
activities.
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 3,000.00 2,001.00
(Increase) decrease in:
Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . (503,897.91) (1,086,196.60)
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 30,940.38 (432,851.22)
Increase (decrease) in:
Trade accounts payable. . . . . . . . . . . . . . . . . . . . . . . (273,765.75) 865,479.02
Interest payable. . . . . . . . . . . . . . . . . . . . . . . . . . (67,187.50) 13,500.00
Payroll taxes payable . . . . . . . . . . . . . . . . . . . . . . . 41,968.71 6,834.26
------------- ---------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES. . . . . . . . 33,266.16 24,383.42
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment . . . . . . . . . . . . . . . . . (22,078.40) (9,973.17)
------------- ---------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES. . . . . . . . (22,078.40) (9,973.17)
CASH FLOWS FROM FINANCING ACTIVITIES
Gain on maturing note NOTE 3 . . . . . . . . . . . . . . . . . . . . (81,000.00) -
Disposition of debt obligations . . . . . . . . . . . . . . . . . . . (112,006.50) -
Payment on notes payable. . . . . . . . . . . . . . . . . . . . . . . (25,000.00) (45,000.00)
Loans from control group. . . . . . . . . . . . . . . . . . . . . . . (160,157.43) (43,949.99)
------------- ---------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES. . . . . . . . (378,163.93) (88,949.99)
------------- ---------------
NET INCREASE (DECREASE) IN CASH . . . . . . . . . . . . . . . . . (366,976.17) (74,539.74)
CASH AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . 654,808.72 729,348.46
------------- ---------------
CASH AT END OF PERIOD . . . . . . . . . . . . . . . . . . . $ 287,832.55 $ 654,808.72
============= ===============
</TABLE>
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<TABLE>
<CAPTION>
AMERICAN NORTEL COMMUNICATIONS, INC.
COMPARATIVE STATEMENT OF INCOME AND EXPENSE
FOR THE PERIOD ENDING MARCH 31, 1999 AND 1998
UNAUDITED
1999 1998
3RD QUARTER YEAR TO DATE 3RD QUARTER YEAR TO DATE
<S> <C> <C> <C> <C>
INCOME
Airtime Income . . . . . . . . . . $4,622,597.17 11,880,424.06 $1,467,227.38 3,023,336.73
COST OF SALES. . . . . . . . . . . . 3,361,703.14 8,542,558.21 985,196.57 1,982,799.52
GROSS PROFIT . . . . . . . . . . . . 1,260,894.03 3,337,865.85 482,030.81 1,040,537.21
SELLING EXPENSES . . . . . . . . . 371,671.59 694,164.01 32,655.67 86,441.98
GENERAL & ADMINISTRATIVE . . . . . 262,892.19 671,311.54 223,345.75 478,517.07
-------------- -------------- -------------- -------------
TOTAL EXPENSES . . . . . . . . . 634,563.78 1,365,475.55 256,001.42 564,959.05
EARNINGS (LOSS) FROM OPERATIONS. 626,330.25 1,972,390.30 226,029.39 475,578.16
OTHER INCOME (EXPENSE)
Other Income . . . . . . . . . . . 98,006.50 179,225.32 (830.00) (1,260.11)
Gain on Maturing Note NOTE 3. . . 81,000.00
Amortization Expense . . . . . . . - - (19,668.80) (35,245.90)
Interest Expense . . . . . . . . . (13,500.00) (40,500.00) (32,995.99) (87,664.14)
Interest Income. . . . . . . . . . 10,371.48 13,277.87 - -
-------------- -------------- -------------- -------------
TOTAL OTHER INCOME . . . . . . . 175,877.98 152,003.19 (53,494.79) (124,170.15)
NET INCOME (LOSS). . . . . . . . . . $ 802,208.23 2,124,393.49 $ 172,534.60 351,408.01
============== ============== ============== =============
COMMON VOTING SHARES . . . . . . . 15,153,785 14,237,016
</TABLE>
<PAGE>
NOTE 1:
- --------
The accompanying unaudited financial statements 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 ending March 31, 1999 are not necessarily indicative
of the operating results that may be expected for the entire year ending June
30, 1999. These financial statements should be read in conjunction with the
Company's June 30, 1998 financial statements and accompanying notes thereto.
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 10% convertible
debentures are considered to be common stock equivalents. Consequently, the
number of shares issuable, assuming full conversion 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.
NOTE 3:
- --------
It is probable that a gain contingency will result, and the amount of gain
can be reasonably estimated. Management has elected to remove a maturing note
payable to EF Waters Trust and any accrued interest payable.
NOTE 4:
- --------
Management is reevaluating the valuation of the net operating loss
carryforwards generated in prior periods. Management is also in the process of
calculating the deferred tax assets and considering the recording of the
deferred tax assets generated from the net operating loss carryforwards.
<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; the Company's ongoing relationship with its long
distance carriers; dependence upon key personnel; subscriber attrition; 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 March 31, 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 47% of the Company's
revenues. The Company has experienced an increase in competition domestically in
market pricing, and is currently seeking joint venture and investment
acquisition opportunities to curtail the effects of cost competition in the
domestic resale market.
On April 23, 199, the Company has invested and purchased for the
achievement of investment and acquisition goals 1,000,000 shares of Dauphin
Technology, Inc. (DNTK). The acquisition price was $635,000. Dauphin
Technology is a manufacturer of laptop computers and components.
<PAGE>
Results of Operations
Quarter Ended March 31, 1999 Compared to Quarter Ended March 31, 1998.
Revenues for the quarter ended March 31, 1999 increased to $4,622,597 from
$1,467,227 during quarter ended March 31, 1998. The increase in revenue is from
the continued growth of the basic 1 Plus and 800 long distance service. The
Company has purchased new accounts and has increased the Company's customer base
through the use of outside telemarketers, which in turn, has significantly
increased revenues. The Company has also increased its market share in large
call volume areas and has concentrated on international calling which has higher
profit margin which is not being directly affected by the market competition
which is very intense in the domestic calling area.
Selling expenses for the quarter ended March 31, 1999 increased to $371,672
from $32,656 during quarter ended March 31, 1998. The increase in selling
expenses was a result of the increase in marketing costs expended by the Company
through telemarketing. The Company has increased its telemarketing campaign to
build a strong customer base. The marketing costs that were previously
re-negotiated have assisted in stabilizing the cost of marketing.
General and administrative expenses for quarter ended March 31, 1999
increased to $262,892 from $223,345 during quarter ended March 31, 1998. The
increase was a result of payment of salary for the CEO versus the issuance of
stock for services. The Company has increased its customer service base to
provide a bi-lingual assistance to non-English speaking customers. The Local
Exchange Carrier (LEC) has been continually increasing the cost of wholesale
traffic and the Company anticipates that this trend will continue.
Interest expense for the quarter ended March 31, 1999 decreased to $13,500
from $32,996 during quarter ended March 31, 1998. The decrease in interest
expense was a result of lower debt outstanding.
Net earnings for the quarter ended March 31, 1999 was $802,208 for .06 per
diluted shares compared to $172,535 for .02 per diluted shares for quarter ended
March 31, 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 March 31, 1999 by $33,266. The principle source
of revenue is generated from the sales of long distance service to the Company's
customers.
Capital Resources
Cash flows used by investing activities was $22,078 for the quarter ended
March 31, 1999. The Company continues to purchase additional computer equipment
to upgrade and replace incompatible equipment to adhere to internal requirements
for the Year 2000.
Cash flows used for financing activities was $378,164 in the quarter ended
March 31, 1999. This cash outflow was attributable to payment of $160,157 under
loans to the control group. In addition, the Company has begun to pay down
notes payable to unrelated third party on terms negotiated with note holders.
During the quarter the Company paid $218,006 under note terms. The total
amounts of notes negotiated are approximately $405,000. The notes paid
represent pre-bankruptcy obligations from 1993, and were re-negotiated with pay
off, default, and maturity provisions.
<PAGE>
Year 2000
The Company and its service provider utilize software, which 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's management and Integretel
(IGT) service providers 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's service provider IGT is complaint with
Year 2000 readiness and has assured the Company that their information systems
are Year 2000 complaint in all material effects.
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: April 30, 1999 by: /S/ W.P. Williams, Jr.
----------------------------
W.P. WILLIAMS, JR., Director
Chief Executive Officer
<PAGE>
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<CAPTION>
AMERICAN NORTEL COMMUNICATIONS, INC.
COMPUTATION OF EARNINGS PER SHARE
UNAUDITED
1999 1998
3RD QUARTER 3RD QUARTER
<S> <C> <C>
BASIC EARNINGS PER SHARE: NOTE 2
Common shares outstanding, beginning of period 15,153,785 14,237,016
Effects of weighting shares:
Weighted common shares issued . . . . . . . (1,082,627) (3,202,769)
------------- -----------
Weighted average number of common shares . . . 14,071,158 11,034,247
============= ===========
outstanding
Net Income . . . . . . . . . . . . . . . . . . $ 803,208.23 172,534.60
============= ===========
Earnings Per Share . . . . . . . . . . . . . . $ 0.06 0.02
============= ===========
DILUTED EARNINGS PER SHARE: NOTE 2
Common shares outstanding, beginning of period 15,153,785 14,237,016
Effects of weighting shares:
Weighted common shares issued . . . . . . . (1,082,627) (3,202,769)
------------- -----------
10% Convertible Debentures. . . . . . . . . 5,844 314,613
------------- -----------
Weighted average number of common shares and
common equivalent shares outstanding. . . . 14,077,002 11,348,860
============= ===========
Net Income . . . . . . . . . . . . . . . . . . $ 802,208.23 172,534.60
============= ===========
Earnings Per Share . . . . . . . . . . . . . . $ 0.06 0.02
============= ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 287833
<SECURITIES> 0
<RECEIVABLES> 2377715
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3408683
<PP&E> 100325
<DEPRECIATION> 19119
<TOTAL-ASSETS> 3933670
<CURRENT-LIABILITIES> 1861688
<BONDS> 620000
<COMMON> 21920002
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3933670
<SALES> 0
<TOTAL-REVENUES> 4622597
<CGS> 0
<TOTAL-COSTS> 371672
<OTHER-EXPENSES> 262892
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13500
<INCOME-PRETAX> 802208
<INCOME-TAX> 0
<INCOME-CONTINUING> 802208
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 802208
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
