SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended February 29, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to .
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Commission file number 0-4465
eLEC Communications Corp.
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(Exact Name of Registrant as Specified in Its Charter)
New York 13-2511270
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
509 Westport Avenue, Norwalk, Connecticut 06851
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(Address of Principal Executive Offices) (Zip Code)
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Registrant's Telephone Number, Including Area Code 203-750-1000
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ].
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date:
13,324,525 shares of Common Stock, par value $.10 per share, as of April 1,
2000.
<PAGE>
PART 1. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
<TABLE>
<CAPTION>
eLEC Communications Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
Feb. 29, 2000 Nov. 30, 1999
------------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,424,453 $ 591,299
Accounts receivable 2,142,968 1,245,078
Inventory 551,989 876,460
Prepaid expenses 133,073 52,636
Other current assets 234,822 177,680
Land and building held for sale 605,419 596,304
------------ ------------
Total current assets 6,092,724 3,539,457
------------ ------------
Property and equipment at cost 486,846 322,734
Less accumulated depreciation 124,051 111,036
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Net property and equipment 362,795 211,698
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Other assets 124,971 97,108
Investment in and advances to subsidiary 410,021 424,575
Investments under the equity method 1,060,991 --
Investments under cost method 194,929 1,469,929
Goodwill 3,473,938 1,554,370
------------ ------------
5,264,850 3,545,982
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Total assets $ 11,720,369 $ 7,297,137
============ ============
Liabilities and stockholders' equity Current liabilities:
Loans payable to financial institutions and current
maturities of long-term debt $ 457,743 $ 523,695
Due to related parties 22,725 34,725
Accounts payable 1,728,186 1,302,714
Accrued expenses and taxes 1,808,271 1,779,704
------------ ------------
Total current liabilities 4,016,925 3,640,838
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Long-term debt, less current maturities 463,169 197,772
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Stockholders' equity:
Preferred stock, $.10 par value, 1,000,000 shares authorized
Series B issued, 196 shares in 2000 and 1999 20 20
Common stock $.10 par value, 20,000,000 shares authorized,
13,108,414 issued (2000), 11,287,164 issued (1999) 1,310,840 1,128,715
Capital in excess of par value 23,171,070 18,808,397
Retained earnings (deficit) (17,018,988) (16,370,088)
Treasury stock at cost (27,500) (27,500)
Treasury stock held by equity investee (136,688) --
Accumulated other comprehensive income (loss),
accumulated foreign currency translation adjustment (58,479) (81,017)
------------ ------------
Total stockholders' equity 7,240,275 3,458,527
------------ ------------
Total liabilities and stockholders' equity $ 11,720,369 $ 7,297,137
============ ============
</TABLE>
See notes to the condensed financial statements
Note: The balance sheet at November 30, 1999 has been derived from audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles.
2
<PAGE>
<TABLE>
<CAPTION>
eLEC Communications Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended
Feb. 29, 2000 Feb. 28, 1999
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<S> <C> <C>
Revenues:
Telecommunications services $ 1,750,843 $ 362,663
Specialty retail products 475,390 352,247
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Total revenues 2,226,233 714,910
Costs and expenses:
Costs of telecommunication services 1,212,956 322,551
Costs of specialty retail product sales 271,500 203,772
Selling and general and administrative 1,264,358 371,807
Depreciation and amortization 105,365 88,427
Equity in loss of investee 77,321 424,701
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Total costs and expenses 2,931,500 1,411,258
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Loss from operations (705,267) (696,348)
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Other (income) expense:
Interest expense 19,163 680
Interest income (8,251) (33)
Miscellaneous income, net (67,279) --
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(56,367) 647
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Loss from continuing operations (648,900) (696,995)
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Loss from discontinued operations -- (820,978)
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Net loss ($ 648,900) ($1,517,973)
=========== ===========
Basic and diluted loss per share
Continuing operations ($ 0.06) ($ 0.11)
Discontinued operations -- ($ 0.12)
----------- -----------
Net loss
($ 0.06) ($ 0.23)
=========== ===========
Weighted average number of common shares outstanding 11,739,156 6,537,492
=========== ===========
</TABLE>
See notes to the condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
eLEC Communications Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended
Feb. 29, 2000 Feb. 28, 1999
------------- -------------
<S> <C> <C>
Net loss ($ 648,900) ($1,517,973)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 105,365 88,427
Provision for losses in accounts receivable 100,000 33,323
Loss in equity of investee 77,321 424,701
Changes in operating assets and liabilities:
Accounts receivable (997,890) 519,198
Inventory 324,471 (204,266)
Prepaid expenses (80,437) (40,071)
Other current assets (66,257) 49,443
Other assets (27,863) 19,943
Accounts payable and accrued expenses 454,039 425,660
----------- -----------
Net cash used in operating activities: (760,151) (201,615)
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Cash flows from investing activities:
Purchase of property and equipment (164,112) (32,578)
Acquisition of Telecarrier Services Inc. (7,718) --
Proceeds from agreement to sell subsidiary 14,554 --
----------- -----------
Net cash used in investing activities (157,276) (32,578)
----------- -----------
Cash flows from financing activities:
Increase in loans payable to financial institutions
and related parties 187,445 6
Proceed from issuance of preferred stock -- 196,000
Proceeds from exercise of warrants 929,375 --
Proceeds from private placement of common stock 1,379,500 --
Proceeds from exercise of stock options 214,250 4,125
----------- -----------
Net cash provided by financing activities 2,710,570 200,131
----------- -----------
Effect of exchange rate changes on cash 40,011 (128)
----------- -----------
Increase (decrease) in cash and cash equivalents 1,833,154 (34,190)
Cash and cash equivalents at beginning of period 591,299 352,489
----------- -----------
Cash and cash equivalents at the end of period $ 2,424,453 $ 318,299
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest
Continuing operations $ 27,200 $ 680
----------- -----------
Discontinued operations -- $ 80,369
----------- -----------
Income taxes -- --
</TABLE>
See Part II, Item 2., Changes in Securities, for non-cash financing activities
during the three-month period ending February 29, 2000.
See notes to the condensed consolidated financial statements.
4
<PAGE>
eLEC COMMUNICATIONS CORP.
-------------------------
Notes To Condensed Consolidated Financial Statements (Unaudited)
----------------------------------------------------------------
Note 1-Basis of Presentation
- ----------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended February 29,
2000 are not necessarily indicative of the results that may be expected for the
year ended November 30, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended November 30, 1999.
For the three-month periods ending February 29, 2000 and February 28, 1999,
there were no significant non-owner sources of income or expense. Accordingly, a
separate statement of comprehensive income has not been presented herein.
Note 2-Financing Arrangements
- -----------------------------
On March 3, 1999, our subsidiary, Essex Communications, Inc. ("Essex"), entered
into a Receivable Sale Agreement with Receivables Funding Corp. ("RFC") that
provides for Essex to sell up to $500,000 of its eligible receivables to RFC on
a periodic basis and to grant RFC a security interest in the receivables
purchased by RFC. In December 1999, Essex increased the amount of eligible
receivables it can sell to RFC to $1,000,000. The Receivables Sales Agreement
does not transfer the risk of loss to RFC, and has been treated by us as a
financing for financial statement purposes. As of February 29, 2000, Essex was
indebted to RFC for the principal amount of approximately $452,000. Essex
borrows from RFC at approximately five percentage points above the prime rate,
which was 8.75% per annum at February 29, 2000.
The Company's subsidiary, Telecarrier Services Inc. ("Telecarrier"), has a
$150,000 line of credit with a bank. Amounts drawn on the line of credit bear
interest at the rate of 9.75% per annum. The line is payable on demand subject
to sixty (60) days written notice. At February 29, 2000, the entire line was
utilized.
The Company's Canadian subsidiary, Sirco International (Canada) Ltd., has a real
property mortgage with its bank, National Bank of Canada. The mortgage is
payable in monthly installments of approximately $3,300, including interest at
10.25% per annum, with a balloon payment of approximately $300,000 due in June
2000. At February 29, 2000, the mortgage was approximately $307,000.
5
<PAGE>
Note 3-Investment in Subsidiary
- -------------------------------
On January 20, 2000, the Company acquired all the outstanding common stock of
Telecarrier in exchange for 500,000 shares of the Company's common stock and a
cash payment of $44,200 in a transaction valued at approximately $1,669,000.
Additionally, the Company issued 32,000 shares of the Company's common stock to
retire certain indebtedness of Telecarrier. The purchase agreement provides for
additional shares of the Company's common stock to be issued if certain
performance objectives are achieved. Telecarrier is a full service
telecommunications provider for small and mid-sized companies. The acquisition
has been accounted for as a purchase.
Note 4-Discontinued Operations
- ------------------------------
In August 1999, the Company sold certain assets and assigned certain licenses of
its former domestic luggage division to Interbrand L.L.C., a non-related
accessory company, and subsequently discontinued operations of its wholesale
luggage segment.
The operating results of the former wholesale luggage segment have been
accounted for as a discontinued operation and the results of operations have
been excluded from continuing operations in the condensed consolidated
statements of operations for all periods presented, including the prior period
financial statements in which the Company has restated the operating results of
its former wholesale luggage segment as a discontinued operation. Interest
expense relating to borrowings by the former wholesale luggage segment is
included as operating expenses of such discontinued segment. Operating results
of the discontinued operation for the three-month periods ending February 29,
2000 and February 28, 1999 are as follows:
<TABLE>
<CAPTION>
Three Months Ended
February 29, 2000 February 28, 1999
----------------- -----------------
<S> <C> <C>
Net sales $ -- $1,772,000
Cost of sales -- 1,542,000
Operating expenses -- 1,082,000
Other income -- (31,000)
------- ----------
Loss from discontinued operations $ -- ($ 821,000)
------- ----------
</TABLE>
6
<PAGE>
Item 2. Management's Analysis and Discussion of Financial Condition and Result
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of Operations
- ----------------------
The statements contained in this Report that are not historical facts are
"forward-looking statements" which can be identified by the use of
forward-looking terminology, such as "estimates," "projects," "plans,"
"believes," "expects," "anticipates," "intends," or the negative thereof or
other variations thereon, or by discussions of strategy that involve risks and
uncertainties. Management wishes to caution the reader of the forward-looking
statements, that such statements, which are contained in this Report, reflect
management's current beliefs with respect to future events and involve known and
unknown risks, uncertainties and other factors, including, but not limited to,
economic, competitive, regulatory, technological, key employee, and general
business factors affecting the Company's operations, markets, growth, services,
products and other factors discussed in the Company's other filings with the
Securities and Exchange Commission, and that these statements are only estimates
or predictions. No assurances can be given regarding the achievement of future
results, as actual results may differ materially as a result of risks facing the
Company, and actual events may differ from the assumptions underlying statements
that have been made regarding anticipated events. Factors that may cause actual
results, performance or achievements of the Company, or industry results, to
differ materially from those contemplated by such forward-looking statements
include, without limitation: (1) the availability of additional funds to
successfully pursue the Company's business plan; (2) the Company's ability to
maintain, attract and integrate internal management, technical information and
management information systems; (3) the time and expense to construct the
Company's planned network operating center and digital subscriber line network;
(4) the cooperation of incumbent carriers in implementing the unbundled network
elements platform required by the Federal Communications Commission; (5) the
Company's ability to market its services to current and new customers and to
generate customer demand for its products and services in the geographical areas
in which the Company can operate; (6) the Company's success in gaining
regulatory approval to access new markets; (7) the Company's ability to
negotiate and maintain suitable interconnection agreements with incumbent
carriers; (8) the availability and maintenance of suitable vendor relationships,
in a timely manner, at reasonable cost; (9) the impact of changes in
telecommunication laws and regulations; (10) the intensity of competition; and
(11) general economic conditions. All written and oral forward-looking
statements made in connection with this Report that are attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by these cautionary statements. Given the uncertainties that surround
such statements, prospective investors are cautioned not to place undue reliance
on such forward-looking statements.
Three Months Ended February 29, 2000 vs. February 28, 1999
- ----------------------------------------------------------
Continuing operations
Net revenues for the three months ended February 29, 2000 increased by
approximately $1,511,000, or approximately 211%, to approximately $2,226,000 as
compared to approximately $715,000 reported for the three months ended February
28, 1999.
7
<PAGE>
Net revenues of the Company's telecommunications division increased by
approximately $1,388,000, or approximately 382%, to approximately $1,751,000 for
the three-month period ending February 29, 2000 from approximately $363,000
reported in the three-month period ending February 28, 1999. The increase was
attributable to the rapid growth in the number of installed access lines
provisioned by the Company. The Company is certified to resell local telephone
services and value-added products in the states of Connecticut, Florida,
Massachusetts, New Jersey, New York, Rhode Island and Virginia, and is seeking
certification in an additional 23 states. The Company also provides dial-up,
dedicated and high-speed Digital Subscriber Line ("DSL") Internet access, Web
design, hosting and E-commerce development to small and medium-sized businesses.
Net revenues of the Company's specialty retail sales division, consisting of the
operations of Airline Ventures, Inc. ("AVI"), increased for the three-month
period ending February 29, 2000 by approximately $123,000, or approximately 35%,
to approximately $475,000 from approximately $352,000 reported in the
three-month period ending February 28, 1999. AVI operates three retail stores in
Texas for professional airline flight crew members and sells pilot uniforms,
study guides and travel products. Its products are sold on the E-commerce site,
www.avishop.com, and on a Web site, www.tagintl.com.
The Company's gross profit for the three-month period ending February 29, 2000
increased by approximately $553,000 to approximately $742,000 from approximately
$189,000 reported in the three-month period ending February 28, 1999, and the
gross profit percentage increased to 33.3% from 26.4% reported in the prior
fiscal period. The increase in gross profit percentage is primarily attributable
to Company's ability to utilize the unbundled network elements platform
("UNE-P") for customers in New York and Massachusetts. Approximately 70% of the
customers were on the UNE-P service offering as of February 29, 2000, as
compared to no customers at February 28, 1999. The Federal Communications
Commission has mandated this service offering in all 50 states. The Company
anticipates that the nationwide usage of UNE-P will enable it to expand into new
geographical territories and maintain gross margins of over 30%. Management
expects the gross margin of its specialty retail segment to continue at its
current level of over 40%.
Selling, and general and administrative expenses increased by approximately
$892,000, or approximately 240%, to approximately $1,264,000 for the three-month
period ending February 29, 2000 from approximately $372,000 reported in prior
fiscal period. A major portion of this increase was attributable to the labor
and facility expenses incurred by the Company's telecommunications division.
This increase in expense is directly related to the significant increase in
telecommunications revenues in the three-month period ending February 29, 2000
as compared to the prior fiscal period in 1999.
At February 29, 2000, the Company owned approximately 27% of the capital stock
of RiderPoint, Inc. ("RiderPoint"). RiderPoint specializes in the development of
comparative rating insurance software and sells motorcycle insurance through a
wholly-owned subsidiary. As the Company's investment in RiderPoint is accounted
for under the equity of accounting, the Company is required to include its
portion of RiderPoint's net loss in the Company's results of operations. For the
three-month period ending February 29, 2000, the Company has recorded a loss of
approximately $77,000 relating to its investment in RiderPoint. The Company had
no investment in RiderPoint in the prior fiscal period. At February 28, 1999,
the Company was the largest shareholder of Access One Communications Inc.
8
<PAGE>
("Access One"), owning approximately 30.6% of Access One's capital stock. As the
Company's investment in Access One was accounted for under the equity method of
accounting, the Company was required to include its portion of Access One's net
loss in the Company's results of operations. For the three-month period ending
February 28, 1999, the Company recorded a loss of approximately $425,000
relating to its investment in Access One. The Company recorded losses in fiscal
1999 equal to its investment in Access One. As a result, the Company's
investment in Access One has been reduced to zero.
Interest expense for the three-month period ending February 29, 2000 increased
by approximately $18,000 from the amount reported in the three-month period
ending February 28, 1999 primarily due to increased average borrowings.
Miscellaneous income for the three-month period ending February 29, 2000 of
$67,000 resulted primarily from the sale of Access One shares.
Discontinued operations
In August 1999, the Company sold certain assets and assigned certain licenses of
its former domestic luggage division to Interbrand L.L.C., a non-related
accessory company, and subsequently discontinued operations of its wholesale
luggage segment.
The operating results of the former wholesale luggage segment have been
accounted for as a discontinued operation and the results of operations have
been excluded from continuing operations in the condensed consolidated
statements of operations for all periods presented, including the prior period
financial statements in which the Company has restated the operating results of
its former wholesale luggage segment as a discontinued operation. Interest
expense relating to borrowings by the former wholesale luggage segment is
included as operating expenses of such discontinued segment. The Company
reported no results from discontinued operations for the three-month period
ending February 29, 2000 as compared to a loss of approximately $821,000 for the
three-month period ending February 28, 1999.
Liquidity and Capital Resources
- -------------------------------
At February 29, 2000, the Company had cash and cash equivalents available of
approximately $2,424,000, and working capital of approximately $2,076,000 as
compared to cash and cash equivalents available of approximately of $318,000,
and working capital of approximately $321,000 in the prior fiscal period.
Net cash used in operating activities (including discontinued operations in the
first fiscal period of 1999) aggregated approximately $760,000 and $202,000 in
fiscal quarters ended February 29, 2000 and February 28, 1999, respectively. The
increase in net cash used in operating activities of approximately $558,000 is
primarily the result of an increase of approximately $998,000 in accounts
receivable, due to the significant increase in revenues recorded by the
Company's telecommunications division, as compared to the comparable quarterly
period in 1999, for which accounts receivable was a source of cash of
approximately $519,000. This impact of this change in accounts receivable was
partially offset by the decrease in the net loss in the first fiscal quarter of
fiscal 2000 as compared to the prior year period. On March 3, 1999, the
Company's subsidiary, Essex Communications, Inc. ("Essex"), entered into a
Receivable Sale Agreement with Receivables Funding Corp. ("RFC") that provides
9
<PAGE>
for Essex to sell up to $500,000 of its eligible receivables to RFC on a
periodic basis and to grant RFC a security interest in the receivables purchased
by RFC. In December 1999, Essex increased the amount of eligible receivables it
can sell to RFC to $1,000,000. The Receivables Sales Agreement does not transfer
the risk of loss to RFC, and has been treated by the Company as a financing for
financial statement purposes. As of February 29, 2000, Essex was indebted to RFC
for the principal amount of approximately $452,000. Essex borrows from RFC at
approximately five percentage points above the prime rate, which was 8.75% per
annum at February 29, 2000.
Net cash used in investing activities aggregated approximately $157,000 and
$33,000 in fiscal quarters ended February 29, 2000 and February 28, 1999,
respectively. Cash from investing activities was used in the first fiscal
quarter of 2000 for the purchase of fixed assets and the acquisition of
Telecarrier. The source of cash provided from investing activities in the first
fiscal quarter 2000 was the proceeds from the 1992 sale of a subsidiary. Cash
from investing activities was used in the first fiscal quarter of 1999 for the
purchase of fixed assets.
Net cash provided by financing activities aggregated approximately $2,711,000
and $200,000 in fiscal quarters ended February 29, 2000 and February 28, 1999,
respectively. In the first quarter of fiscal 2000, net cash provided by
financing activities resulted primarily from the proceeds of borrowings from
financial institutions of approximately $188,000; the proceeds from the exercise
of warrants of approximately $929,000; the proceeds from a private placement of
common stock of approximately $1,380,000; and the proceeds of the exercise of
stock options of approximately $214,000. In the first quarter of fiscal 1999,
net cash provided by financing activities resulted from the proceeds of the
issuance of preferred stock of approximately $196,000 and the proceeds from the
exercise of stock options of approximately $4,000.
The Company's subsidiary, Telecarrier, has a $150,000 line of credit with a
bank. Amounts drawn on the line of credit bear interest at the rate of 9.75% per
annum. The line is payable on demand subject to sixty (60) days written notice.
At February 29, 2000, the entire line was utilized.
The Company's Canadian subsidiary, Sirco International (Canada) Ltd., has a real
property mortgage with its bank, National Bank of Canada. The mortgage is
payable in monthly installments of approximately $3,300, including interest at
10.25% per annum, with a balloon payment of approximately $300,000 in June 2000.
At February 29, 2000, the mortgage was approximately $307,000.
For the quarter ended February 29, 2000, the Company incurred approximately
$164,000 in capital expenditures. The Company plans to make an additional
$300,000 in capital expenditures in fiscal 2000 in conjunction with the
establishment of a network operations center in Norwalk, Connecticut and with
the planned expansion to become a nationwide Competitive Local Exchange Carrier
("CLEC"). The Company anticipates financing these expenditures through equipment
leases and by using its existing working capital.
As of February 29, 2000, the Company owned approximately 18% of Access One. On
March 24, 2000, Talk.com Inc., a Delaware corporation ("Talk"), Aladdin
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Talk
("Merger Sub"), and Access One, entered into an Agreement and Plan of Merger
(the "Merger Agreement"), which provides, among other things, for the merger
10
<PAGE>
(the "Merger") of Merger Sub with and into Access One. Upon consummation of the
Merger, Access One will become a wholly owned subsidiary of Talk. Under the
terms of the Merger Agreement, Access One stockholders will receive 0.571428
shares of Talk's common stock in exchange for each share of Access One common
stock held by such stockholders at the effective time of the Merger. It is
expected that, as a result of the Merger, shareholders of Access One will
receive an aggregate of approximately 14.3 million shares of Talk's common
stock, of which the Company will receive approximately 2.5 million shares. The
transaction has been approved by the Boards of Directors of each of Talk and
Access One, but is contingent upon, among other things, approvals of both Talk's
and Access One's stockholders, certain regulatory approvals (including approval
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and certain
telecommunications regulatory approvals), and other customary conditions. Under
a Voting Agreement entered into on March 24, 2000, the holders of approximately
67.8% of Access One's outstanding common stock have agreed to vote in favor of
the Merger. In connection with the Merger, Access One has also entered into a
five-year agreement to provide certain telecommunications services to Talk and
its subsidiaries. Access One has the right to terminate that agreement if the
merger with Talk.com is not consummated. Access One shareholders anticipate
receiving Talk common stock that has been registered for resale, subject to an
agreement to not sell the stock until three months after the registration
statement is declared effective, or until October 31, 2000, whichever occurs
sooner.
Management believes that the specialty retail sales division's working capital
and cash flow from operations will be sufficient to meet the cash and capital
requirements for the Company's specialty retail sales division for the next
twelve months. This division operated profitably in the first quarter and
anticipates being able to continue its current rate of growth for the next
several quarters. Management anticipates that the Company has sufficient capital
on hand to meet the operating needs of its telecommunications division over the
next 12 months. In addition to the cash on hand and the shares of Talk that the
Company may receive in conjunction with the Merger between Talk and Access One,
the Company has sent redemption notices requiring the exercise of warrants to
purchase approximately 622,000 shares of eLEC common stock from the Company at a
price of $4.00 per share.
11
<PAGE>
eLEC COMMUNICATIONS CORP.
-------------------------
PART II-OTHER INFORMATION
-------------------------
Item 2. Changes in Securities
- ------- ---------------------
On January 19, 2000, the Company issued to the former member of
WebQuill Internet Services LLC ("WebQuill") 150,000 shares of
common stock of the Company in conjunction with the satisfaction
of certain performance criteria established in connection with
the acquisition of WebQuill. Such transaction was effected
pursuant to Sections 4(2) of the Securities Act of 1933, as
amended.
On January 20, 2000, the Company issued to the former
shareholders of Telecarrier Services Inc. 500,000 shares of
common stock of the Company in conjunction with the purchase of
Telecarrier. Such transaction was effected pursuant to Sections
4(2) of the Securities Act of 1933, as amended.
On January 20, 2000, the Company issued 32,000 shares of common
stock of the Company in conjunction with the retirement of
certain indebtedness of Telecarrier. Such transaction was
effected pursuant to Sections 4(2) of the Securities Act of 1933,
as amended
On February 3 and February 29, 2000, the Company issued an
aggregate of 391,750 shares of common stock of the Company in
conjunction with the exercise of warrants. Such transaction was
effected pursuant to Sections 4(2) of the Securities Act of 1933,
as amended.
On December 28, 1999 and February 29, 2000, the Company issued an
aggregate of 602,000 shares of common stock of the Company in
conjunction with a private placement of stock. Such transaction
was effected pursuant to Sections 4(2) of the Securities Act of
1933, as amended.
12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits.
None
27-- Financial Data Schedule.
(b) Reports on Form 8-K
None.
13
<PAGE>
Signatures
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
eLEC Communications Corp.
April 13, 2000 By: /s/ Paul H. Riss
- -------------------------------------------- ----------------------
Date Paul H. Riss
Chief Executive Officer
(Principal Financial and
Accounting Officer)
14
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EXHIBIT INDEX
No. Description Page No.
- --- ----------- --------
27 Financial Data Schedule. 16
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet and Income Statement and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-2000
<PERIOD-END> FEB-29-2000
<CASH> 2,424,453
<SECURITIES> 0
<RECEIVABLES> 2,590,824
<ALLOWANCES> 447,856
<INVENTORY> 551,989
<CURRENT-ASSETS> 6,092,724
<PP&E> 486,846
<DEPRECIATION> 124,051
<TOTAL-ASSETS> 11,720,369
<CURRENT-LIABILITIES> 3,709,182
<BONDS> 770,912
0
20
<COMMON> 1,310,840
<OTHER-SE> 5,929,415
<TOTAL-LIABILITY-AND-EQUITY> 11,720,369
<SALES> 2,226,233
<TOTAL-REVENUES> 2,293,512
<CGS> 1,484,456
<TOTAL-COSTS> 1,369,723
<OTHER-EXPENSES> 77,321
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,163
<INCOME-PRETAX> (648,900)
<INCOME-TAX> 0
<INCOME-CONTINUING> (648,900)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (648,900)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
