<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
AMENDED
(Mark One)
[X]Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended September 30, 1998
or
[_]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Transition Period From _______________ to
________________.
Commission file number 0-27560
-------
ACT Teleconferencing, Inc.
(Name of small business issuer as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Colorado 84-1132665
- ----------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1658 Cole Blvd., Suite 130, Golden, Colorado 80401
- --------------------------------------------------------------------------------
(Address of principle executive offices) (Zip Code)
(303) 235-9000 (303) 233-0895
- --------------------------------------------------------------------------------
(Issuer's telephone number, including (Issuer's facsimile number,
area code) including area code)
</TABLE>
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 October 31, 1998, 3,641,801 shares of the issuer's common stock were
outstanding.
<PAGE>
ACT TELECONFERENCING, INC.
FORM 10-QSB/A
AMENDED
Table of Contents
PART I. Financial Information Page No.
Item 1. Financial Statements 3
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flow 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7
Item 4. Submission of Matters to a Vote of Security
Holders
PART II. Other Information
Item 6. Exhibit Index 12
SIGNATURES 13
Page 2
<PAGE>
Item 1. FINANCIAL STATEMENTS
ACT Teleconferencing, Inc.
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 586,234 $ 451,434
Accounts receivable (net of allowances for doubtful accounts
of $51,543 and $18,992 in 1998 and 1997 respectively) 4,705,708 2,885,125
Prepaid expenses 358,839 203,673
Inventory 178,105 136,116
Available for sale marketable securities - 50,000
------------------------------------------
Total current assets 5,828,886 3,726,348
Equipment:
Telecommunications equipment 4,264,934 2,651,395
Office equipment 3,781,364 1,910,606
Less: accumulated depreciation (1,700,829) (1,094,938)
------------------------------------------
Total equipment - net 6,345,469 3,467,063
Other Assets:
Goodwill 711,845 736,300
Deferred Items 244,371
------------------------------------------
Total assets $ 13,130,571 $ 7,929,711
==========================================
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 554,754 $ 540,014
Accounts payable 2,510,572 1,349,337
Accrued liabilities 1,264,073 777,526
Current portion of long term debt 330,364 253,251
Income taxes payable 687,623 293,238
------------------------------------------
Total current liabilites 5,347,386 3,213,366
Long-term debt 4,287,686 613,714
Deferred income taxes 123,252 117,454
Minority interest 874,437 607,244
Shareholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized; none issued
Common stock, no par value; 10,000,000 shares authorized
3,641,801 and 3.612,758 shares issued and outstanding
in 1998 and 1997, respectively 6,787,855 6,158,584
Accumulated deficit (4,085,236) (2,729,069)
Currency translation adjustment (204,809) (51,582)
------------------------------------------
Total Shareholders' equity 2,497,810 3,377,933
------------------------------------------
Total liabilities and shareholders' equity $ 13,130,571 $ 7,929,711
------------------------------------------
</TABLE>
Page 3
<PAGE>
ACT Teleconferencing, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1998 1997
--------------- ----------------
<S> <C> <C>
Net revenues $ 4,706,499 $ 2,612,841
Costs and expenses:
Cost of sales (2,594,222) (1,407,336)
Marketing, general and administration expense (2,570,583) (1,208,878)
--------------- ----------------
Total costs and expenses (5,164,805) (2,616,214)
Income (loss) before income taxes and minority interest (458,306) (3,373)
Provision for income taxes (86,644) (105,560)
--------------- ----------------
Income (loss) before minority interest (544,950) (108,933)
Minority interest in earnings of consolidated subsidiary (16,677) (55,076)
--------------- ----------------
Net income (loss) for the quarter $ (561,627) $ (164,009)
=============== ================
Net income (loss) per share $ (0.15) $ (0.05)
=============== ================
Weighted average number of shares outstanding 3,635,952 3,393,001
=============== ================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997
--------------- ----------------
<S> <C> <C>
Net revenues $ 13,565,028 $ 7,235,069
Costs and expenses:
Cost of sales (7,412,783) (3,244,360)
Marketing, general and administration expense (6,857,599) (3,744,355)
--------------- ----------------
Total costs and expenses (14,270,382) (6,988,715)
Income (loss) before income taxes and minority interest (705,354) 246,354
Provision for income taxes (418,151) (219,435)
--------------- ----------------
Income (loss) before minority interest (1,123,505) 26,919
Minority interest in earnings of consolidated subsidiary (232,662) (152,473)
--------------- ----------------
Net income (loss) for the quarter $ (1,356,167) $ (125,554)
=============== ================
Net income (loss) per share $ (0.37) $ (0.04)
=============== ================
Weighted average number of shares outstanding 3,622,785 3,099,087
--------------- ----------------
</TABLE>
Page 4
<PAGE>
ACT Teleconferencing, Inc
Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997
----------------- --------------
<S> <C> <C>
Operating activities
Net income (loss) $ (1,356,167) $ (125,554)
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation 605,891 229,539
Amortization of goodwill 24,455 13,530
Deferred income tax 5,798 (1,656)
Minority interest 267,193 143,569
--------------------------------------
Cash flow before changes in operating assets and liabilities: (452,830) 259,428
Changes in operating assets and liabilities (Net of effect of
business combination):
Accounts receivable (1,747,251) (1,066,671)
Inventory (41,989) (7,515)
Prepaid expenses and other assets (399,537) (186,862)
Accounts payable and accrued liabilities 1,647,780 332,800
Income tax payable 394,384 95,828
--------------------------------------
Net cash used for operating activities (599,443) (572,992)
Investing activities
Property and equipment purchases (3,484,297) (929,097)
Investment in marketable security 50,000
Net cash used for investing activities (3,434,297) (929,097)
--------------------------------------
Financing activities
Net proceeds from issuance (repayment) of debt 3,692,495 197,883
Net proceeds from issuance of common stock 629,272 1,628,712
Net cash provided by financing activities 4,321,767 1,826,595
--------------------------------------
Effect of change in exchange rate on cash (153,227) (149,277)
--------------------------------------
Net (decrease) increase in cash and cash equivalents $ 134,800 $ 175,229
======================================
Cash and cash equivalents, beginning of year $ 451,434 $ 621,742
Cash and cash equivalents, end of year 586,234 796,971
--------------------------------------
Net (decrease) increase in cash $ 134,800 $ 175,229
--------------------------------------
</TABLE>
Page 5
<PAGE>
ACT Teleconferencing, Inc.
Notes to Consolidated Financial Statements
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. 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 of a fair presentation have
been included. Operating results for the nine-month period ending September 30,
1998 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1998. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on Form
10-KSB for the year ended December 31, 1997.
BUSINESS
ACT Teleconferencing, Inc (the Company) is engaged in the business of providing
high-quality audio, data, and video conferencing products and services to
business clients. The Company operates in the United States, Canada, the United
Kingdom, the Netherlands, Belgium, France and Australia.
NET EARNINGS (LOSS) PER SHARE
Net earnings (loss) per share is computed based upon the weighted average number
of shares of common stock outstanding during the period. Options and warrants
are not included in the computations since their effect is presently either
anti-dilutive or not material. In February 1997, the Financial Accounting
Standards Board issued Statement No. 128, Earnings per Share, which was adopted
on December 31, 1997. Under the new requirements for calculating primary
earnings per share, the dilutive effect of stock options has been excluded.
COMPREHENSIVE INCOME (LOSS)
The difference between net loss and comprehensive loss solely relates to foreign
currency translation.
Page 6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Management's Discussion and Analysis section of this report
contains forward-looking statements, which are subject to certain risks
and uncertainties. Certain such statements are repeated at the end of
this Management's Discussion and Analysis section together with
specific cautionary statements identifying factors that could cause
actual results to differ materially from current expectations contained
in each such statement. Forward-looking statements also may be implicit
but not readily identified within the context of other statements. In
general, among the factors that could affect the Company's actual
results and could cause results to differ from those contained in the
forward-looking statements are the continued ability of the Company to
generate revenue growth in audio teleconferencing, the general rate of
development of the market for videoconferencing services, the available
opportunities to explore new international markets and the availability
of financing to support growth. Other factors could also cause actual
results to vary materially from the anticipated results covered in such
forward-looking statements.
Overview
The Company completed another satisfactory quarter in terms of revenue growth.
Third quarter 1998 revenues of $4.7 million grew by 80% over the third quarter
of 1997, reflecting continued growth in the market for audio teleconferencing
services, additional market share gains made by the Company and revenues from
new international operations which grew tenfold over the previous period.
Cumulative revenues for the nine months were $13.5 million (88% growth over 1997
revenues of $7.2 million).
Third quarter net loss after taxes and minority interest amounted to $561,627, a
decline of $397,613 from the third quarter of 1997 but a slight improvement over
second quarter 1998. This decline was due mainly to continued investment and
start up costs absorbed in the Company's new operations based in New York,
Paris, Amsterdam, Sydney, Toronto and Ottawa.
The Company anticipates continued significant forward growth in teleconferencing
revenues in its established operations in North America and the United Kingdom.
Revenues from these operations for the nine-month period grew by 56% while
revenues from new operations grew by tenfold over the same period to $2.6
million. Development expenses incurred in connection with the entry into the
French, Dutch, Canadian and Australian markets as well as the Company's new
Internet and videoconferencing products and technologies; that expense amounted
to approximately $2 million for the nine months to September 30, 1998 up from
$932 thousand for the comparable prior period.
On July 14, 1998, the Company announced a three-year supply agreement with
Concert Global Networks Limited ("Concert"), the British Telecom("BT")/MCI
global services company, for Concert Audioconferencing Service. This service is
scheduled to commence in the fourth quarter of 1998, and will be provided by the
ACT centers in New York, Denver, London, Paris, Amsterdam, Sydney, Toronto and
Ottawa. Following BT's purchase of MCI's interest, Concert is now owned solely
by BT.
Concert, which is based in Reston, Virginia, provides an array of managed voice,
data and Internet services to over 4,300 multinational companies in over 50
countries. Concert Audioconferencing Service, the world's first global virtual
private network-based conference service, offers a flexible, cost-effective
seamless audioconferencing service to multinational companies via over 30
distributors worldwide including British Telecom and MCI.
Market information currently available to ACT indicates that the effect of this
transaction could be to increase ACT's revenues by approximately $40 million
over a three-year period. Actual revenues will depend on customer usage and in-
country penetration. Global presence and commitment to service excellence,
innovation and quality were key factors in Concert's decision to award the
contract to ACT. As a result of the Concert contract, the Company plans to
continue to expand its geographic penetration over the next twelve months.
Page 7
<PAGE>
On September 1, 1998 the Company announced the opening of two offices in Canada,
with the establishment of ACT Teleconferencing Canada Inc. in Toronto, and the
acquisition of Advanced Multi-Point Conferencing based in Ottawa, Canada. In
October the Company appointed Robert Aubry as Managing Director of the Canadian
operations.
On September 22, 1998 the Company announced an agreement with GTE to become its
preferred videoconferencing services provider. This agreement enhances ACT's
worldwide video presence as ACT takes over GTE's existing videoconferencing
bridges and deploys them in the United States, the United Kingdom, France, the
Netherlands and Australia.
On October 22, 1998 ACT announced a videoconferencing distribution agreement
with Toyoda Machinery USA to sell and market Toyoda's Virtual Tech video product
line. This product is a two-way wireless audio and visual communication system
which utilizes high tech video links on an ISDN network to transmit live images
in a remote location to another facility. The Toyoda product boasts varied
functions including remote diagnostics and immediate maintenance, training,
inspections and videoconferencing. Depending upon market penetration. Plans for
implementation are under way, but an immediate impact on revenues is not likely.
COMPONENTS OF REVENUE AND EXPENSE
The Company derives revenues principally from fees charged to clients for audio
and video conference "bridging" services which connect multiple parties to a
conference call, from fees for enhanced services and from the sale of
videoconferencing equipment units.
The costs of teleconferencing services consist of local and long-distance
telephone services, depreciation on equipment, salaries, benefits, and office
expenses of conference operators.
Selling, general and administrative costs consist of salaries, benefits, and
office expenses of the Company's administrative, market development, and sales
organizations.
RESULTS OF OPERATIONS
Quarter Ended September 30, 1998, compared to Quarter Ended September 30, 1997
Net Revenues. Net Revenues increased by 80% to $4.7 million for the quarter
ended September 30, 1998, compared to $2.6 million for the same period in 1997,
primarily due to increased sales of audio teleconferencing services and video
equipment. Revenue growth resulted from repeat sales to established customers,
increased sales of enhanced services, sales to new customers and the impact of
new international operations. Established operations accounted for 83% of the
total revenue and increased by 52% over the quarter ended September 30, 1997.
New operations accounted for 17% of the total revenue and increased more than
tenfold to $700 thousand over the quarter ended September 30,1997.
Cost of Teleconferencing Services. Cost of teleconferencing services increased
by 84% to $2,594,222 for the third quarter, compared to $1,407,336 for the
quarter ended September 30, 1997. Gross profit percentage dropped from 46.1%in
1997 to 44.9% reflecting the impact of the UK move (see below) as well as low
volumes in start up countries and the effect of lower margin video systems
equipment. During the third quarter 1998, the United Kingdom commenced
relocation to premises some three times larger than currently occupied incurring
significant downtimes and reduced revenues.
Selling, General and Administrative Costs. Selling, General and Administrative
expenses for the third quarter were $2,570,583, or 54.6% of revenue, compared to
$1,208,878 or 46% of revenue for the third quarter of 1997. The 113% increase in
such expenses reflects an aggressive marketing focus on audio and video
conferencing sales efforts, as well as development costs for the Company's new
business units in France, Australia and Canada and the entry into internet and
video conferencing.
Page 8
<PAGE>
Income (Loss) Before Taxes and Minority Interest. Loss before taxes and
minority interest amounted to $458,306, compared to a loss of $3,373 for the
third quarter ending September 30, 1997. The increased loss of $454,933 was due
to higher development costs and relocation expenses as described above.
Taxes on Income and Minority Interest. Taxes on income and minority interest
amounted to $103,321 for the quarter ended September 30, 1998, compared to
$160,636 for the quarter ended September 30, 1997. This reduction was primarily
due to lower taxes paid on and minority interest in earnings achieved by the
Company's 60% majority-owned United Kingdom operation. The Company paid no
United States or other international income tax due to net operating losses
incurred in its United States and other international operations in previous
years.
Net income (loss). Net loss amounted to $561,627 for the quarter ended September
30, 1998 compared to $164,009 for the quarter ended September 30, 1997, a
decline of $397,618. This increased loss was due mostly to the cost of
absorbing new and developing international operations amounting to approximately
$600,000 for the quarter as well as the cost of relocating UK operations.
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998, COMPARED TO NINE-MONTH PERIOD ENDED
SEPTEMBER 30, 1997.
Net Revenues. Net revenues increased by 87% to $13.6 million for the nine
months ended September 30, 1998, compared to $7.2 million for the same period in
1997, primarily due to increased sales of audio teleconferencing services as
described above. During this period, established operations accounted for 81%
of net revenues which increased 54%, while new operations accounted for 19% of
net revenues which increased to $2.45 million over the nine month period ended
September 30, 1997. This continued increase is due to the aggressive sales and
marketing stance adopted by the Company, especially in new operations.
Cost of Teleconferencing Services. Cost of teleconferencing services amounted
to $7,412,783 compared to $3,244,360 or an increase of 128% for the nine-month
period. Gross margin percentage (net revenues less costs of conferencing
services divided by net revenues) decreased to 45.3%, compared to 55.2% achieved
during the previous comparable period. As noted above, gross margin has been
affected by the impact of international start ups in France, Canada and
Australia which are still at relatively low volumes in comparison to fixed
operational start up costs. Costs also increased for established operations due
to the one-time charge to upgrade and relocate technical equipment for the
Company's expanded Denver operations in the second quarter and for the expansion
and relocation of UK operations in London in the third quarter.
Selling, General and Administrative Costs. Selling, General and Administrative
expenses increased 83% to $6,857,599 and declined as a percentage of revenue to
50.6%, compared to $3,744,355 or 51.7% of revenue for the period ended September
30, 1997.
Income (Loss) Before Taxes and Minority Interest. Loss before taxes and
minority interest amounted to $705,354, compared to income before taxes and
minority interest of $246,354 for the nine month period ended 1997. The
$951,708 decline was due to higher development costs and relocation expenses as
described above.
Taxes on Income and Minority Interest. Taxes on income and minority interest
amounted to $650,813 for the nine months ended September 30, 1998, compared to
$371,908 for the nine months ended September 30, 1997, primarily due to taxes on
and minority interest in earnings achieved by the Company's 60% majority-owned
United Kingdom subsidiary which pays full tax.
Net Income (Loss). Net loss amounted to ($1,356,167) or an increase in loss of
$1,230,613 compared to nine-month period ended September 30, 1997. As discussed
above, this loss was due to the cost of international start ups in Australia,
France and Canada as well as the effect of relocation charges, the investment in
new and developing products in video and Internet conferencing and the effect of
UK taxation and minority interest.
Page 9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998)
During the nine months ended September 30, 1998, net cash increased by $134,800
from December 31, 1997. At September 30, 1998, the Company had cash and cash
equivalents of $586,234 compared to cash and cash equivalents on hand at
December 31, 1997 of $451,434.
Cash used in operating activities before funding net operating assets amounted
to $452,830 for the nine months ended September 30, 1998, compared to cash
generated of $259,428 for the nine months ended September 30,1997. Cash after
financing operating assets and liabilities amounted to a net outflow of $599,443
reflecting mainly the significant growth in accounts receivable, inventory and
prepaid expenditures.
During the period, the Company invested $3.5 million in additional equipment, to
provide new bridging technology, software and capacity to its United States,
European and Asia Pacific operations. The gross cash outflow of $3.4 million
(after capital investment and before financing arrangements) was funded by a
combination of debt and lease finance amounting to $4.5 million and resulted in
a net cash inflow (before effect of exchange rate changes) of $288,027.
The Company believes that, given the present rate of sales and profit growth in
its core audio teleconferencing business as well as indicated volumes from
certain contractual relationships, it will have access to sufficient cash
resources to meet its needs for the next twelve months. The Company has further
plans to expand capacity and open new operations in new geographic locations and
to develop its videoconferencing and Internet conferencing businesses. These
expansion plans will be financed using a mix of lease financing for capital
equipment, the anticipated conversion of outstanding warrants and bank lines of
credit. The Company is prepared to make other equity capital arrangements to
ensure the Company can continue to build its teleconferencing platform beyond
1999.
On March 31, 1998 the Company raised net proceeds of $2.0 million pursuant to
the completion of a subordinated debt financing arrangement executed with Sirrom
Capital Corporation and Equitas LP based in Nashville, Tennessee. Documentation
was completed during the second quarter. A further $500,000 was available under
this arrangement and was drawn down during the third quarter. This financing has
been used primarily to finance the growth in working capital due to sales
growth.
In 1997 the Company completed a post-effective amendment registration statement
to its initial public offering concerning 712,497 publicly traded warrants,
which are exercisable until February 2, 1999 at $5.00 per share. The gross
proceeds from the above warrants, should they be fully converted, would amount
to approximately $3.5 million which would also be used to fund the geographical
expansion of the business. As the exercise depends on the market price of the
Company's common stock and the ability of the market to absorb additional float,
we are unable to determine the actual degree to which these warrants will be
exercised.
YEAR 2000 COMPLIANCE
As the Year 2000 approaches, many date sensitive computer applications may fail
because they are unable to process dates properly beyond December 31, 1999.
Businesses will be required to devote significant resources to convert their
information systems to meet Year 2000 requirements. We believe that our
internal systems are Year 2000 compliant. However, we are significantly
dependent upon external or third parties including electrical utilities,
telecommunications, banking and financial services, airlines, and governmental
agencies and institutions to provide services to us and to purchase services
from us. Their failure to provide services to us due to Year 2000 problems
could have a material adverse effect on our business, results of operations, and
financial condition. Additionally, as these entities devote financial
resources to comply with Year 2000 requirements, the purchasing patterns of our
customers may be affected as they may have reduced funds available to purchase
our services, which could result in a material adverse effect on our business,
results of operations, and financial condition.
We are continually evaluating all our systems to identify Year 2000 problems.
At this time, we are not aware of any issues that require remediation. We
believe that our internal systems are Year 2000
Page 10
<PAGE>
compliant, and we have not incurred any material costs for remediation for Year
2000 issues. Although we have not yet identified any issues that would require
remediation, we are currently estimating that the future costs to monitor,
control, remediate, remove, and reinstall our systems to be Year 2000 compliant,
to meet changing business conditions, to handle new business opportunities, and
to address Year 2000 issues affecting our vendors and customers that may impact
us will be $500,000 or less in 1999 and an additional $500,000 or less beyond
2000. Our review of potential business interruptions has not identified any
likely interruptions. Such interruptions, if they occur, will depend, in part,
on the handling of Year 2000 issues by our vendors and customers. Accordingly,
we are uncertain at this time as to the monetary value and time period of any
interruption due to Year 2000 problems. We will continue to review and
reevaluate the potential costs of remediation and business interruptions. See
"Business Year 2000 Compliance."
State of Readiness. Our principal information technology ("IT") systems have
- -------------------
been developed intensively only over the last four years (with desktop based
Year 2000 compatible software). From our incorporation in December 1989 to mid
1994, we satisfied our major systems requirements using manual or semi-automated
computer and accounting systems. We are principally dependent on one of the
leading audio conferencing bridge manufacturers, Compunetix, Inc., for our
teleconferencing bridges. This manufacturer utilizes a non-IT system. We have
requested Compunetix to verify and certify that all its embedded systems within
our bridges are Year 2000 compliant. Compunetix has agreed to install Year 2000
compliant software by no later than June 30, 1999. To the best of our knowledge,
we are not presently substantially dependent upon any other significant internal
non-IT and/or embedded system which is not Year 2000 compliant.
Costs to Address Year 2000 Issues. Except as noted above, we believe that our
- ----------------------------------
internal systems are Year 2000 compliant; and we have not incurred any material
costs for remediation for the Year 2000. However, to address the impact of
acquisitions, new facilities, and other contingencies, we estimate that the
future costs to monitor, control, and remediate our systems to be Year 2000
compliant are not likely to exceed either $500,000 in 1999 or an additional
$500,000 beyond 2000.
Risks of Year 2000 Issues. Our dependence upon external or third parties is
- --------------------------
significant. The major areas where a Year 2000 failure could have an effect on
our business would be a failure in one or more of the following major industries
or institutions on which we are dependent either as a supplier to us or as a
customer:
. Electrical Utilities
. Telecommunications
. Banking and Financial Services
. Airlines
. Government Agencies and Institutions
Their failure to provide services to us due to Year 2000 problems could have a
material adverse effect on our business, results of operations, and financial
condition. As these entities devote financial resources to comply with Year 2000
requirements, changes in their customary purchasing patterns could result in a
material adverse effect on our business, results of operations, and financial
condition. The consequences of our dependence on external or third parties and
changes in our customers' purchasing patterns is uncertain. We are formulating
a formal contingency plan further described below to analyze and handle the
uncertainty regarding any Year 2000 issues.
Contingency Plans. Our future formal contingency plan for the Year 2000 will
- ------------------
continue to monitor all major risks for us on a proactive basis. We believe that
we operate in a changing, high growth, volatile, and high risk environment, and
our management will continually assess and address all risks (not only Year 2000
risks). Our market sector is a small niche component of the $700 billion annual
worldwide telecommunications industry. All of our major service providers and
most of our major customers are multinational entities that are substantially
larger than us. We are largely dependent on our major service providers and
customers. We intend to monitor our exposure and also take appropriate measures
to ensure that we are not unduly dependent upon one particular customer or
industry supplier. In anticipation of Year 2000, the following contingency
plans are either being considered or implemented.
Page 11
<PAGE>
. Restrictions will be imposed on travel for personnel on airline flights
between December 15, 1999 and January 31, 2000.
. Our cash in banks will be in reasonable sums in at least two major banks
and in different corresponding banks overseas.
. Uninterrupted power supply will be installed to give additional support
to the operation of our bridges in all our locations.
. A minimum of two telecommunications network providers will be connected
at all major locations.
. Operations centers will be stocked with food, water, and bedding, as
they are currently for snowstorms, hurricanes, severe thunderstorms, and
other natural disasters.
. Vacations will be adjusted to make optimal use of downtime during this
period.
FORWARD-LOOKING STATEMENTS
Statements made above, certain of which are summarized below, are forward-
looking statements that involve risks and uncertainties, and actual results may
be materially different. Factors that could cause actual results to differ
materially from those in the forward-looking statement include (but are not
limited to) the following:
THE COMPANY ANTICIPATES CONTINUED GROWTH IN TELECONFERENCING REVENUES IN ITS
ESTABLISHED OPERATIONS IN NORTH AMERICA AND THE UNITED KINGDOM. A significant
downturn in economic conditions generally or the development of alternative
technologies could render audio teleconferencing less effective and could affect
the rate of growth of teleconferencing revenues.
THE COMPANY BELIEVES THAT, GIVEN THE PRESENT RATE OF SALES AND PROFIT GROWTH IN
ITS CORE AUDIO TELECONFERENCING BUSINESS, IT WILL HAVE ACCESS TO SUFFICIENT CASH
RESOURCES TO MEET ITS FINANCING NEEDS FOR THE NEXT TWELVE MONTHS. Failure to
maintain ongoing profit margins or an increase in costs of expansion, resulting
in a significantly higher level of cash utilization, could result in the Company
deferring other expansion plans or could cause it to seek additional financing
in the capital markets for its future growth plans and working capital needs.
THESE EXPANSION PLANS WILL BE FINANCED USING A MIX OF LEASE FINANCING FOR
CAPITAL EQUIPMENT, THE ANTICIPATED CONVERSION OF OUTSTANDING WARRANTS AND BANK
LINES OF CREDIT. THE COMPANY IS PLANNING TO MAKE OTHER EQUITY CAPITAL
ARRANGEMENTS TO ENSURE THE COMPANY CAN CONTINUE TO BUILD ITS TELECONFERENCING
PLATFORM BEYOND 1999. If the share price of the Company's common stock declines
substantially or some other unforeseen event discourages warrant-holders from
exercising all or a substantial part of these warrants, the Company would seek
other financing for its growth or curtail its growth accordingly.
MARKET INFORMATION CURRENTLY AVAILABLE TO ACT INDICATES THAT THE EFFECT OF THIS
TRANSACTION COULD BE TO INCREASE ACT'S REVENUES BY APPROXIMATELY $40 MILLION
OVER A THREE-YEAR PERIOD. ACTUAL REVENUES WILL DEPEND UPON CUSTOMER USAGE AND
IN-COUNTRY MARKET PENETRATION. AS A RESULT OF THE CONCERT CONTRACT, THE COMPANY
PLANS TO CONTINUE TO EXPAND ITS GEOGRAPHIC PENETRATION OVER THE NEXT TWELVE
MONTHS. The Company's failure or inability to continue its expansion into new
markets will have an adverse impact on its penetration into markets that Concert
services, that are not already served by the Company.
IN 1997 THE COMPANY COMPLETED A POST-EFFECTIVE AMENDMENT REGISTRATION STATEMENT
TO ITS INITIAL PUBLIC OFFERING CONCERNING 712,497 PUBLICLY TRADED WARRANTS,
WHICH ARE EXERCISABLE UNTIL FEBRUARY 2, 1999 AT $5.00 PER SHARE.
Page 12
<PAGE>
THE GROSS PROCEEDS FROM THE ABOVE WARRANTS, SHOULD THEY BE FULLY CONVERTED,
WOULD AMOUNT TO APPROXIMATELY $3.5 MILLION WHICH WOULD ALSO BE USED TO FUND THE
GEOGRAPHICAL EXPANSION OF THE BUSINESS. If the share price of the Company's
common stock declines substantially or some other unforeseen event discourages
warrant-holders from exercising all or a substantial part of these warrants, the
Company would seek other financing for its growth or curtail its growth
accordingly.
Page 13
<PAGE>
PART II -- OTHER INFORMATION
-----------------
<TABLE>
<CAPTION>
Item 6(a). EXHIBITS AND REPORTS ON FORM 10QSB
Exhibit No. Description
<C> <S>
3.1/2/ Restated Articles of Incorporation of the Company dated April 15, 1996
3.2/2/ Bylaws of the Company, amended as of April 15, 1996
4.1/1/ Form of specimen certificate for Common Stock of the Company
4.2/1/ Form of Unit Purchase Option
4.3/1/ Impound Agreement
4.4/1/ Lock-up Letter Agreement
10.1/1/ Stock Option Plan of 1991, as amended, authorizing 400,000 shares of Common Stock for issuance under the Plan
10.2/1/ Form of Stock Option Agreement
10.3/1/ Form of Common Stock Purchase Warrant
10.10/1/ Split Dollar Insurance Agreement dated March 1, 1990, between the Company and Gerald D. Van Eeckhout
10.11/1/ Service Agreement dated April 10, 1992 between David Holden and ACT Teleconferencing Limited
10.19/3/ Stock Option Plan of 1996
10.20/4/ Stock Option Plan of 1996, as amended
10.21/5/ Employee Stock Purchase Plan
10.22/6/ Loan and Security Agreement dated March 31, 1998 and Form of Stock
Purchase Warrant with Sirrom Capital Corporation and Equitas L.P.
10.23/6/ Loan Agreement with Key Bank, N.A.
10.24 Lease Commitment and Warrant with R.C.C. Finance Group Ltd.
10.25 Contract for the Supply of Conferencing Services Design Development and
Information signed July 14, 1998 between ACT Teleconferencing
Services, Inc. and Concert Global Networks Limited
10.26 Agreement for the Supply of Conferencing Services signed July 14, 1998
between ACT Teleconferencing Services, Inc. and Concert Global
Networks Limited
10.27 Agreement for Videoconferencing Equipment and Services (GTE Telephone
Operating Companies) dated October 1, 1998
27.1 Financial Data Schedule
</TABLE>
/1/Incorporated by reference, attached as an exhibit of the same number to our
Registration Statement on Form SB-2, filed with the SEC on October 10, 1995, and
amendments to the Form, SB-2, File No. 33-97908-D.
/2/Incorporated by reference, attached as an exhibit of the same number to the
Company's Form 10-QSB for the Quarter ended March 31, 1996, File No. 0-27560,
filed May 15, 1996.
/3/Incorporated by reference, attached as an exhibit to the Company's Schedule
14A Information filed with the SEC on April 30, 1997, File No. 0-27560.
/4/Incorporated by reference, attached as Exhibit 4.6 to the Company's Form S-8,
File 0-27560, filed July 21, 1998.
/5/Incorporated by reference, attached as an Appendix A to our Schedule 14A
Information filed with the SEC on April 15, 1998, File No. 0-27560.
/6/Incorporated by reference, attached an Exhibit of the same number to our
Amendment No. 1 to Form 10-QSB for the Quarter ended June 30, 1998, File 0-
27560, filed August 24, 1998 (originally filed under cover of Form SE on August
14, 1998).
ITEM 6(B).
On July 17, 1998, the Company filed an 8-K with the Securities and Exchange
Commission reporting its supply agreement with Concert Global Networks, Ltd. to
supply audioconferencing service for Concert Audioconferencing Service. Also on
October 30, 1998 the Company filed an 8-K with the Securities and Exchange
Commission reporting its acquisition of Advanced Multi-Point Conferencing.
Page 14
<PAGE>
SIGNATURES
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: January 31, 1999 By: /s/ Gavin J. Thomson
---------------------
Gavin J. Thomson,
Chief Financial Officer
(Duly authorized officer and
Principal Financial Officer)
Page 15
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- ----- ------------------------------------------------------------------------- ----------------------------
<C> <S> <C>
3.1 Restated Articles of Incorporation of the Company dated April 15, 1996 Incorporated by reference
3.2 Bylaws of the Company, amended as of April 15, 1996 Incorporated by reference
4.1 Form of specimen certificate for Common Stock of the Company Incorporated by reference
4.2 Form of Unit Purchase Option Incorporated by reference
4.3 Impound Agreement Incorporated by reference
4.4 Lock-up Letter Agreement Incorporated by reference
10.1 Stock Option Plan of 1991, as amended, authorizing 400,000 shares of
Common Stock for issuance under the Plan Incorporated by reference
10.2 Form of Stock Option Agreement Incorporated by reference
10.3 Form of Common Stock Purchase Warrant Incorporated by reference
10.10 Split Dollar Insurance Agreement dated March 1, 1990, between the
Company and Gerald D. Van Eeckhout Incorporated by reference
10.11 Service Agreement dated April 10, 1992 between David Holden and ACT
Teleconferencing Limited Incorporated by reference
10.19 Stock Option Plan of 1996 Incorporated by reference
10.20 Stock Option Plan of 1996, as amended Incorporated by reference
10.21 Employee Stock Purchase Plan Incorporated by reference
10.22 Loan and Security Agreement dated March 31, 1998 and Form of Stock Incorporated by reference
Purchase Warrant with Sirrom Capital Corporation and Equitas L.P.
10.23 Loan Agreement with Key Bank, N.A. Incorporated by reference
10.24 Lease Commitment and Warrant with R.C.C. Finance Group Ltd. Filed electronically
10.25 Contract for the Supply of Conferencing Services Design Development and Filed electronically
Information signed July 14, 1998 between ACT Teleconferencing Services,
Inc. and Concert Global Networks Limited
10.26 Agreement for the Supply of Conferencing Services signed July 14, 1998 Filed electronically
between ACT Teleconferencing Services, Inc. and Concert Global Networks
Limited
10.27 Agreement for Videoconferencing Equipment and Services (GTE Telephone Filed electronically
Operating Companies) dated October 1, 1998
27.1 Financial Data Schedule Filed electronically
</TABLE>
Page 16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's unaudited June 30, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 586,234
<SECURITIES> 0
<RECEIVABLES> 4,757,251
<ALLOWANCES> (51,543)
<INVENTORY> 178,105
<CURRENT-ASSETS> 5,828,886
<PP&E> 8,046,298
<DEPRECIATION> (1,700,829)
<TOTAL-ASSETS> 13,130,571
<CURRENT-LIABILITIES> 5,347,386
<BONDS> 0
0
0
<COMMON> 6,787,855
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,130,571
<SALES> 13,565,028
<TOTAL-REVENUES> 13,565,028
<CGS> 7,412,783
<TOTAL-COSTS> 14,270,382
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (705,354)
<INCOME-TAX> (418,151)
<INCOME-CONTINUING> (1,356,167)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,356,167)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> (0.37)
</TABLE>
