United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-27560
ACT TELECONFERENCING, INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1132665
(State or other jurisdiction of (IRS Employer
incorporated or organization) Identification No.)
1658 Cole Blvd., Suite 162, Golden, Colorado 80401
(Address of principle executive offices) (Zip Code)
303-233-3500 FAX 303-238-0096
(Issuer's telephone number, including area code)
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 ______.
As of November 13, 1996, 3,038,930 shares of the issuer's common stock were
outstanding.
This report contains 12 pages.
ACT TELECONFERENCING, INC.
FORM 10-QSB
Table of Contents
PART I. Financial Information Page No.
--------
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statement of Shareholders' Equity 5
Consolidated Statements of Cash Flow 6
Notes to Consolidated Financial Statements 7
Item 2. Management Discussion and Analysis
of Financial Condition and Results of
Operations 8
PART II.
Item 6. Exhibit Index 10
<TABLE>
<CAPTION>
Item 1. ACT TELECONFERENCING, INC.
CONSOLIDATED BALANCE SHEETS
----------------------------
September 30, December 31,
1996 1995
------------- ------------
ASSETS (unaudited) (note)
- ------
CURRENT ASSETS:
<S> <C> <C>
Cash and Cash Equivalents $ 1,071,999 $ 288,345
Accounts Receivable, net allowance for doubtful
accounts of $125,349 and $6,224 1,357,815 658,722
Inventory 146,596 111,347
Prepaid Expenses and other 151,135 29,968
----------- -----------
Total Current Assets 2,727,545 1,088,382
Equipment:
Furniture and Equipment 2,082,945 1,363,051
Less accumulated depreciation (656,052) (447,886)
----------- -----------
Total 1,426,893 915,165
OTHER ASSETS:
Deferred Offering Costs -- 125,742
Excess of purchase price over fair value of
tangible assets acquired 503,491 533,515
Other 50,000
----------- -----------
Total 553,491 659,257
TOTAL ASSETS $ 4,707,929 $ 2,662,804
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 74,784 $ 75,000
Accounts Payable 930,507 608,282
Accrued Liabilities 427,453 196,180
Deferred income and other liabilities 16,929 3,950
Current portion of long term debt 56,833 53,139
Income tax payable 83,049 127,628
----------- -----------
Total Current Liabilities 1,589,555 1,064,179
LONG-TERM DEBT 373,698 168,272
DEFERRED TAXES 19,367 18,551
MINORITY INTEREST 299,720 213,016
COMMON STOCK SUBJECT TO PUT -- 125,000
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 1,000,000 shares
authorized; none issued -- --
Common stock, no par value; 10,000,000 shares
authorized; 3,038,830 and 2,318,000 shares
issued and outstanding 4,270,473 2,157,940
Accumulated deficit (1,837,522) (1,084,154)
Currency Translation (7,362) --
----------- -----------
Shareholders' equity 2,425,589 1,073,786
----------- -----------
TOTAL Liabilities & Shareholder's Equity $ 4,707,929 $ 2,662,804
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
ACT TELECONFERENCING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Sept. 30, Nine months Ended Sept.30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE:
Conferencing Services $ 1,563,064 $ 882,660 $ 4,288,762 $ 2,477,815
Equipment Sales 16,130 37,150 227,978 64,526
----------- ----------- ----------- -----------
TOTAL REVENUE 1,579,194 919,810 4,516,740 2,542,341
COSTS AND EXPENSES:
Cost of conferencing services 1,012,643 498,511 2,613,214 1,372,532
Cost of equipment sales 19,239 27,671 166,371 45,230
Marketing, general and administration 921,803 442,869 2,361,982 1,104,626
----------- ----------- ----------- -----------
Total costs and expenses 1,953,685 969,051 5,141,567 2,522,388
----------- ----------- ----------- -----------
(Loss) Income before income taxes and
minority interest (374,491) (49,241) (624,827) 19,953
Taxes on income 5,788 35,498 64,838 83,361
----------- ----------- ----------- -----------
(Loss) Income before minority interest (380,279) (84,739) (689,665) (63,408)
Minority interest 15,731 33,080 63,703 77,753
----------- ----------- ----------- -----------
NET LOSS $ (396,010) $ (117,819) $ (753,368) $ (141,161)
=========== =========== =========== ===========
NET LOSS PER SHARE $ (0.13) $ (0.05) $ (0.26) $ (0.07)
=========== =========== =========== ===========
Weighted average shares outstanding 3,038,830 2,211,315 2,865,490 1,991,821
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
ACT TELECONFERENCING, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Common Stock
--------------------------
Accumulated Currency
Shares Amount Deficit Adjustment Total
---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 1,729,050 $ 952,747 $ (660,094) $ - $ 292,653
Shares issued for cash 388,950 830,193 830,193
Shares issued in connection with
acquisition 200,000 375,000 375,000
Net loss (424,060) (424,060)
---------- ----------- ---------- --------- -----------
BALANCE, December 31, 1995 2,318,000 2,157,940 (1,084,154) - 1,073,786
Shares issued for cash 712,497 1,987,533 1,987,533
Shares issued in connection with
acquisition - 125,000 125,000
Shares issued in connection
with employee stock options 8,333 - -
Currency Translation (7,362) (7,362)
Net loss (753,368) (753,368)
---------- ----------- ------------- ---------- -----------
BALANCE, Sept. 30, 1996 3,038,830 $ 4,270,473 ($1,837,522) ($7,362) $ 2,425,589
========== =========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
ACT TELECONFERENCING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Nine Months Ended Sept. 30,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (753,368) $ (141,161)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 238,190 (420,583)
Provision for income taxes (44,579) 20,421
Changes in assets and liabilities:
Increase in accounts receivable (699,093) (316,831)
Increase in other assets (80,674) (71,177)
(Decrease) increase in accounts payable 322,225 43,202
Increase in other liabilities and
deferred income 245,066 74,101
----------- -----------
Net cash used in operating activities (772,233) (812,028)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment purchases (719,892) (454,901)
----------- -----------
Net cash used in investing activities (719,892) (454,901)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and capital leases 279,089 95,919
Payments on notes payable and capital leases (70,185) (2,333)
Net proceeds from issuance of common stock 1,987,533 1,177,693
Increase in minority interests 86,704 77,753
----------- -----------
Net cash provided by financing activities 2,283,141 1,349,032
----------- -----------
Increase in cash and cash equivalents 791,016 82,103
Effect of exchange rates on cash (7,362) --
Cash and cash equivalents, beginning of period 288,345 120,703
----------- -----------
Cash and cash equivalents, end of period $ 1,071,999 $ 202,806
=========== ===========
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
NOTE 1 - BASIS OF PRESENTATION
Reference is made to Note 1 of the Consolidated Financial Statements included in
the Special Financial Report for the year ended December 31, 1995, which
describes the accounting policies of the Company for annual reporting purposes.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the Company's financial position as of
September 30, 1996 and the results of its operations and changes in its
shareholders' equity, and its cash flows for the nine-month periods ended
September 30, 1996 and September 30, 1995.
NOTE 2 - INCOME (LOSS) PER SHARE
Loss per share is based on the weighted average number of common shares
outstanding during each period. Shares issuable upon the exercise of outstanding
warrants and options are not included in the calculation since their inclusion
would be anti-dilutive.
Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net revenues for the third quarter of 1996 were $1,579,194, an increase of
$659,384 or 72% from the comparable quarter of the prior year. Net revenues
increased 78 percent to $4,516,740 for the nine months ended September 30, 1996,
compared to $2,542,341 for the same period in 1995. This increase is primarily
due to higher sales of teleconferencing services, and additional revenue from
the Company's two new business units, ACT VideoConferencing, Inc. and ACT
Teleconferencing B.V. During the three months ended September 30, 1996, domestic
operations accounted for 49 percent of net revenues, compared to 41 percent for
the prior three month period. For the nine months ending September 30, 1996,
domestic operations comprised 51 percent of net revenue, and 44 percent for the
same period in the prior year. Domestic net revenues continue to grow at a
higher rate than foreign net revenues. The difference in revenue growth for
domestic operations compared to foreign operations is primarily due to a new
market segment service being developed by the United States business (currently
comprising of one customer), which represented 17% of consolidated revenues for
the three months ended September 30, 1996 and 15% of consolidated revenues for
the nine months ended September 30, 1996.
Cost of sales for the three months ended September 30, 1996 were $1,031,882 up
96% from the cost of sales for the same period in 1995. Cost of sales increased
96 percent to $2,779,585 for the nine months ended September 30, 1996, compared
to $1,417,762 for the prior period, reflecting commensurate increases in sales
of teleconferencing services and equipment. This increase can be attributed to
one-time development costs of a new market segment service, plus costs from the
Company's two new business units.
Marketing, general, and administrative expenses increased 108% to $921,803 for
the three months ending September 30, 1996 as compared to the same period in
1995. Marketing, general, and administrative expenses for the nine months ended
September 30, 1996 were $2,361,982, or 52 percent of revenue, compared to
$1,104,626, or 43 percent of revenue, for the same period in 1995. This increase
can be attributed to start-up expenses of the Company's two new business units,
additional personnel as well as an increase in allowance for doubtful accounts.
The company has accepted the resignation of Harry Walls, President of the U.S.
audio conferencing services business, and Paul Clifford, General Manager of the
U.S. video business, in connection with a management consolidation and move of
the video business to Colorado.
Loss before taxes and minority interest increased to $374,491 for the three
months ended September 30, 1996, as compared to loss before taxes and minority
interest of $49,241 for the same period in the prior year. Loss before taxes and
minority interest was $624,827 for the nine months ended September 30, 1996,
compared to income before taxes and minority interest of $19,953 for the same
period in 1995. Loss before taxes and minority interest can be attributed to the
start up of ACT VideoConferencing, Inc. and ACT Teleconferencing B.V. These
start-up subsidiaries are expected to continue to incur losses during 1996. ACT
Teleconferencing Services, Inc. experienced a small loss for the three months
ended September 30, 1996 due to the introduction of a new market segment
service.
Net (loss) income for the third quarter was $(396,010), or $(.13) per share,
compared to $(117,819), or $(.05) per share for the third quarter of the prior
year. For the nine months ended September 30, 1996, net (loss) income was
$(753,368), or $(.26) per share, as compared to $(141,161), or $(.07) for the
same period on 1995.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 30, 1996 was $1,137,990, which represents a current
ratio of 1.7 to 1. This compares to working capital of $24,203 at December 31,
1995, a current ratio of 1.0 to 1. The Company believes that funds on hand are
sufficient to support its existing and planned operations for at least the next
six months. During the nine months ended September 30, 1996, cash used in
operating activities was primarily to support an increase in accounts receivable
and fund operating losses. Cash used from investing activities for this same
period was primarily for additional fixed assets and expanded audio and video
bridging capacity in response to increased demand. On August 16, 1996 the Board
of Directors approved the creation of the Stock Option Plan of 1996, and
tentatively reserved 300,000 shares, subject to approval by the shareholders at
a forthcoming annual or special meeting.
Item 6. Exhibits
Exhibit Index
Exhibit No. Description
3.1** Restated Articles of Incorporation of the Company dated April 15,
1996
3.2** Bylaws of the Company, amended as of April 15, 1996
4.1* Form of specimen certificate for Common Stock of the Company
4.2* Form of Unit Purchase Option to be issued by the Company to the
Underwriter
4.3* Impound Agreement
4.4* Lock-up Letter Agreement
10.1* Stock Option Plan of 1992, as amended, authorizing 400,000 shares of
Common Stock for issuance pursuant to the Plan
10.2* Form of Stock Option Agreement
10.3* Form of Common Stock Purchase Warrant
10.4* Form of Placement Agent Warrant
10.5* Denver West Office Building Lease dated April 1, 1993, by and
between Denver West Office Building No. 6 Venture and the Company,
as amended
10.6* Leases for United Kingdom facilities (First floor of Howard House)
dated September 29, 1993 and April 17, 1995, between Garfunkel &
Wanderer Limited and Reichwald Brothers Limited, Landlord, and ACT
Teleconferencing Limited, Tenant
10.7* Letter agreement dated May 31, 1995 with Worldcom regarding lease of
Amsterdam facilities
10.8* Sublease Agreement with Integraf Corporation dated August 1995 for
ACT VideoConferencing, Inc. premises
10.9* Term Loan Agreement dated August 11, 1994, between the Company and
Norwest Bank, N.A., Boulder, Colorado
10.10* Split Dollar Insurance Agreement dated March 1, 1990, between the
Company and Gerald D. Van Eeckhout
10.11* Service Agreement dated April 10, 1992 between David Holden and ACT
Teleconferencing Limited
10.12* Stock Purchase Agreement dated July 13, 1995, between the Company
and Paul Clifford for acquisition of NBS, Inc.
10.13* Employment Agreement dated July 14, 1995, between the Company and
Paul Clifford
10.14* Agreement between Company and Gerald D. Van Eeckhout limiting his
compensation in 1996 and 1997
10.15* Memorandum dated December 22, 1995 from director Seifert amending
Mr. Van Eeckhout's compensation
10.16* Terms of employment of Harry Walls, president-designate of ACT
Teleconferencing Services, Inc. per Company's letter dated December
13, 1995
10.17* Agreement to Exchange Stock between Apogee Robotics, Inc. and
Company
10.18* Agreement between Company and Ronald J. Bach to borrow proceeds from
sale of Apogee Robotics common stock
27.1 Financial Data Schedule
* Exhibit incorporated by reference to the Company's Registration Statement
on Form SB-2, filed with the Securities and Exchange Commission on October
10, 1995, and amendments thereto. Exhibits incorporated by reference carry
exhibit numbers identical to those in the Registration Statement.
** Incorporated by reference to the exhibit of the same number to the
Company's Form 10-QSB for the Quarter ended March 31, 1996, File No.
0-27560.
On July 5, 1996, the Company amended it's report on Form 8-K, dated June 18,
1996, regarding the dismissal of Van Dorn & Bossi as the Company's
independent accountants.
The Company filed a report on Form 8-K, dated July 5, 1996, regarding the
appointment of Ernst & Young LLP as the Company's independent accountants.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ACT Teleconferencing, Inc.
Date: November 13, 1996 by /s/ Pamela S. Van Eeckhout
Pamela S. Van Eeckhout, CFO
Date: November 13, 1996 by /s/ Gerald D. Van Eeckhout
Gerald D. Van Eeckhout, CEO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED SEPTEMBER 30, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 45,941
<SECURITIES> 1,026,058
<RECEIVABLES> 1,483,164
<ALLOWANCES> 125,349
<INVENTORY> 146,596
<CURRENT-ASSETS> 2,727,545
<PP&E> 2,082,945
<DEPRECIATION> (656,052)
<TOTAL-ASSETS> 4,707,929
<CURRENT-LIABILITIES> 1,589,555
<BONDS> 0
0
0
<COMMON> 4,270,473
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,707,929
<SALES> 227,978
<TOTAL-REVENUES> 4,516,740
<CGS> 166,371
<TOTAL-COSTS> 2,779,585
<OTHER-EXPENSES> 2,361,982
<LOSS-PROVISION> 33,500
<INTEREST-EXPENSE> (13,571)
<INCOME-PRETAX> (624,827)
<INCOME-TAX> 64,838
<INCOME-CONTINUING> (753,368)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (753,368)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
