<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 2000
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)
Colorado 84-1132665
--------------------------------------------- ---------------------------------
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
1658 Cole Blvd., Suite 130, Golden, Colorado 80401
--------------------------------------------------------------------------------
(Address of principle executive offices, zip code)
(303) 235-9000
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by checkmark 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 issuer's classes
of common stock, as of the latest practicable date: As of September 30, 2000,
5,661,896 shares of the issuer's common stock were outstanding.
This report contains 19 pages
<PAGE>
PART I -- FINANCIAL INFORMATION
---------------------
Item 1. FINANCIAL STATEMENTS
ACT Teleconferencing, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
-----------------------------
Assets (unaudited) (audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,263,067 $ 1,532,551
Accounts receivable (net of allowance for doubtful accounts
of $444,124 and $153,677 in 2000 and 1999 respectively) 7,924,819 6,606,641
Prepaid expenses 1,091,303 847,021
Inventory 130,165 129,519
-----------------------------
Total current assets 11,409,354 9,115,732
Equipment:
Telecommunications equipment 8,886,277 8,254,966
Office equipment 8,815,168 6,383,765
Less: accumulated depreciation (4,691,624) (3,363,484)
-----------------------------
Total equipment - net 13,009,821 11,275,247
Other Assets:
Goodwill (net of accumulated amortization of $404,267 and
$247,980 in 2000 and 1999 respectively) 2,614,418 1,456,944
Deferred loan placement fees 135,175 250,420
Long Term Note Receivable (Related Party) 144,175
-----------------------------
Total assets $27,312,943 $22,098,343
=============================
Liabilities and shareholders' equity
Current liabilities:
Current portion of debt $ 1,497,673 $ 2,313,454
Accounts payable 2,617,086 2,541,822
Accrued liabilities 1,924,273 1,492,382
Capital lease obligations due in one year 562,689 609,076
Income taxes payable 773,260 589,666
-----------------------------
Total current liabilities 7,374,981 7,546,400
Long-term debt 4,092,303 3,778,614
Capital lease obligations due after one year 865,920 1,223,795
Deferred income taxes 292,269 320,112
Minority interest 1,846,007 967,559
Preferred stock, no par value, 1,000,000 shares authorized;
2,000 issued (net of deferred placement cost of $263,517
and $306,944 in 2000 and 1999 respectively) 1,736,383 1,693,006
Shareholders' equity:
Common stock, no par value; 10,000,000 shares authorized
5,661,896 and 4,595,947 shares issued and outstanding
in 2000 and 1999 respectively 15,936,995 11,378,103
Additional paid in capital 119,925 99,900
Accumulated deficit (4,147,423) (4,809,176)
Accumulated other comprehensive loss (804,417) (99,970)
-----------------------------
Total Shareholders' equity 11,105,080 6,568,857
-----------------------------
Total liabilities and shareholders' equity $27,312,943 $22,098,343
=============================
</TABLE>
See notes to consolidated financial statements.
Page 1
<PAGE>
<TABLE>
<CAPTION>
ACT Teleconferencing, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 1998 2000 1999 1998
------------ ------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues $ 9,512,611 $ 7,221,308 $ 4,706,499 $ 26,823,001 $ 20,492,854 $ 13,565,028
Cost of Services (4,643,101) (3,755,941) (2,594,222) (13,251,884) (10,810,457) (7,412,783)
------------ ------------- ------------ ------------- ------------ -------------
Gross Profit 4,869,510 3,465,367 2,112,277 13,571,117 9,682,397 6,152,245
Selling, general and administration
expense (3,695,040) (2,917,718) (2,427,363) (10,625,683) (8,565,988) (6,573,347)
------------ ------------- ------------ ------------- ------------ -------------
Operating Income 1,174,470 547,649 (315,086) 2,945,434 1,116,409 (421,102)
Interest expense (203,797) (242,140) (143,220) (662,965) (692,355) (284,252)
------------ ------------- ------------ ------------- ------------ -------------
Income (loss) before income taxes and
minority interest 970,673 305,509 (458,306) 2,282,469 424,054 (705,354)
Provision for income taxes (315,395) (134,193) (86,644) (792,794) (351,907) (418,151)
------------ ------------- ------------ ------------- ------------ -------------
Income (loss) before minority interest 655,278 171,316 (544,950) 1,489,675 72,147 (1,123,505)
Minority interest in earnings of
consolidated subsidiary (266,005) (84,970) (16,677) (707,923) (217,643) (232,662)
------------ ------------- ------------ ------------- ------------ -------------
Net income (loss) $ 389,273 $ 86,346 $ (561,627) $ 781,752 $ (145,496) $ (1,356,167)
============ ============= ============ ============= ============ =============
Net Income (loss) per share- basic
(see note 3) $ 0.06 $ 0.02 $ (0.15) $ 0.13 $ (0.03) $ (0.37)
============ ============= ============ ============= ============ =============
Net income (loss) per share- fully
diluted (see note 3) $ 0.06 $ 0.02 $ (0.15) $ 0.11 $ (0.03) $ (0.37)
============ ============= ============ ============= ============ =============
Weighted average number of shares
outstanding-basic 5,649,622 4,508,837 3,635,952 5,193,739 4,326,881 3,622,785
============ ============= ============ ============= ============ =============
Weighted average number of shares
outstanding-fully diluted 5,998,461 4,508,837 3,635,952 5,892,800 4,326,881 3,622,785
============ ============= ============ ============= ============ =============
</TABLE>
See notes to consolidated financial statements.
Page 2
<PAGE>
ACT Teleconferencing, Inc.
Consolidated Statements of Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
other
Common Stock Accumulated comprehensive
Shares Value Deficit income (loss) Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 3,612,758 $ 6,158,584 $(2,729,069) $ (51,582) $ 3,377,933
Shares issued in connection with
exercise of warrants 26,893 136,000 136,000
Employee stock option exercise 2,000 6,000 6,000
Issue of warrants in lieu of interest 486,521 486,521
Shares issued for acquisitions 113,982 676,826 676,826
Comprehensive loss
Net loss (2,117,125) (2,117,125)
Other comprehensive loss, net of tax
Foreign currency translation adjustment (61,590) (61,590)
------------
Total comprehensive loss (2,178,715)
-----------------------------------------------------------------============
Balance at December 31, 1998 3,755,633 7,463,931 (4,846,194) (113,172) 2,504,565
Shares issued in connection with
exercise of warrants 562,654 2,619,890 2,619,890
Issuance of private placement shares 109,912 592,505 592,505
Shares issued in connection with
the employee stock purchase plan 12,304 50,990 50,990
Shares issued as payment for
consulting fees 30,500 84,591 84,591
Employee stock option exercise 4,500 12,660 12,660
Exercise of unit purchase option 120,444 553,537 553,537
Additional paid in capital-warrant issue 99,900 99,900
Preferred dividend (44,407) (44,407)
Comprehensive income
Net Income 81,425 81,425
Other comprehensive loss, net of tax
Foreign currency translation adjustment 13,202 13,202
------------
Total comprehensive income 94,627
-----------------------------------------------------------------------------
Balance at December 31, 1999 4,595,947 11,478,003 (4,809,176) (99,970) 6,568,857
Shares issued for acquisitions 120,000 861,408 861,408
Shares issued as payment for
consulting fees 52,000 306,549 306,549
Shares issued in connection with
the employee stock purchase plan 28,887 132,520 132,520
Shares issued in cashless exercise
of warrants 33,650 -
Shares issued in cashless exercise 2,241
of employee stock options
Shares issued in connection with
employee service 2,080 24,375 24,375
Employee stock option exercise 27,091 148,973 148,973
Secondary Public Offering 800,000 3,085,069 3,085,069
Additional paid in capital-warrant issue 20,025 20,025
Preferred dividend (119,999) (119,999)
Comprehensive income
Net Income 781,752 781,752
Other comprehensive loss, net of tax
Foreign currency translation adjustment (704,447) (704,447)
------------
Total comprehensive income 77,305
-----------------------------------------------------------------============
Balance at September 30, 2000 5,661,896 $16,056,920 $(4,147,423) $ (804,417) $ 11,105,080
=============================================================================
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE>
ACT Teleconferencing, Inc
Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 781,752 $ (145,496) $ (1,356,167)
Adjustments to reconcile net income (loss) to net cash used
for operating activities:
Depreciation 1,328,139 1,041,660 605,891
Amortization of goodwill 329,540 55,047 24,455
Amortization of deferred issuance cost of preferred stock 43,377 - -
Amortization of deferred loan issuance costs 43,360 - -
Deferred income tax (27,844) (2,257) 5,798
Minority interest 707,923 208,428 267,193
Shares issued for consulting fees and employee services 330,924 84,591
------------ ------------ ------------
Cash flow before changes in operating assets and liabilities: 3,537,171 1,241,973 (452,830)
Changes in operating assets and liabilities (net of effect of
business combinations):
Accounts receivable (1,440,117) (1,166,361) (1,747,251)
Inventory (646) 88,457 (41,989)
Prepaid expenses and other assets (172,396) (299,260) (155,166)
Accounts payable (44,735) (821,102) 1,161,231
Income tax payable 183,594 347,955 394,385
Accrued liabilities 431,891 (164,697) 486,548
------------ ------------ ------------
Net cash provided by (used) for operating activities 2,494,762 (773,035) (355,072)
Investing activities
Property and equipment purchases (2,903,714) (3,293,229) (3,484,297)
Repayment of short term notes - (33,998) (73,329)
Disposal of marketable securities - - 50,000
Cash paid for acquisitions net of cash acquired (504,527) - -
------------ ------------ ------------
Net cash used for investing activities (3,408,241) (3,327,227) (3,507,626)
Financing activities
Net proceeds (repayment) from debt and capital lease obligations (906,354) 384,153 3,765,824
Net proceeds from issuance of common stock 3,386,261 3,865,808 629,272
Deferred Loan Issuance Costs - (47,590) (244,371)
------------ ------------ ------------
Net cash provided by financing activities 2,479,907 4,202,371 4,150,725
Effect of exchange rate changes on cash (835,912) (97,873) (153,227)
------------ ------------ ------------
Net increase in cash and cash equivalents 730,516 4,236 134,800
Cash and cash equivalents, beginning of year 1,532,551 369,408 451,434
------------ ------------ ------------
Cash and cash equivalents, end of year $ 2,263,067 $ 373,644 $ 586,234
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE>
ACT TELECONFERENCING, INC.
FORM 10-Q
Table of Contents
-----------------
PART I. Financial Information Page No.
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Shareholders' Equity 5
Consolidated Statements of Cash Flow 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. Other Information
Item 2. Changes in Securities and Use of Proceeds 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 17
Page 5
<PAGE>
ACT Teleconferencing, Inc.
--------------------------
Notes to Consolidated Financial Statements
(Unaudited)
Footnote 1-Basis of Presentation and Significant Accounting Policies
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. 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 and nine-month periods ending
September 30, 2000, are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000. For further information, refer
to the financial statements and footnotes included in our annual report on Form
10-KSB for the year ended December 31, 1999, and its amendments and subsequent
filings.
Business
ACT Teleconferencing, Inc is engaged in the business of providing high-
quality audio, data, video and Internet-based conferencing products and services
to business clients. We operate in the United States, Canada, the United
Kingdom, the Netherlands, France, Germany, Australia, and Hong Kong, and have a
sales office in Belgium.
Revenue Recognition
Revenue is recognized upon completion of conferencing services or delivery
of equipment.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Inventories
Video and audio equipment inventories are stated at the lower of cost
or market, on a first-in, first-out ("FIFO") basis. Equipment is priced using
specific unit costs consisting of materials, labor, and related manufacturing
overhead, but exclusive of research and development, selling, and general and
administrative expenses, which are charged to operations as incurred.
Equipment and Depreciation
Equipment is stated at cost. Depreciation is calculated on a straight-
line basis over the estimated useful lives of five years for office furniture
and five or ten years for telecommunications equipment. Depreciation expense
includes capital lease amortization charges.
Goodwill
Page 6
<PAGE>
Goodwill represents the excess of purchase price over tangible assets
acquired less liabilities assumed arising from acquisitions and is being
amortized on a straight-line basis over an estimated useful life of fifteen (15)
years.
Long-Lived Assets
Long-Lived Assets are reviewed for impairment when events indicate
that the carrying amount may not be recoverable. If such events are noted, the
Company estimates the future flows to be generated by those assets. In the event
that the sum of the cash flows is less than the carrying amount of those assets,
the assets would be written down to fair value, which is normally measured by
discounting the estimated future cash flows.
Software development
The Company capitalizes costs of materials, consultants, and payroll and
payroll-related costs which are incurred in developing internal use computer
software, beginning once the application development stage is attained and
continuing until the post implementation /operation stage is achieved. Costs
incurred prior to and after the establishment of the application development
stage are charged to general and administrative expenses. To date the company
has capitalized $84,365 in payroll and payroll related costs.
Foreign Currency Conversion
The financial statements of the Company's foreign subsidiaries have
been translated into United States dollars at the average exchange rate during
the year for the statement of operations and period-end rate for the balance
sheet.
Cash and Cash Equivalents
The Company considers all liquid investments with original maturities
of three months or less when purchased to be cash equivalents.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed based upon the weighted
average number of shares of common stock outstanding during the period. 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 basic and fully diluted earnings per share, the
dilutive effect of stock options and warrants has been included.
Reclassifications
Certain reclassifications have been made to the 1999 quarterly
financial statement presentation in order to conform to the 2000 presentation.
Footnote 2-Related Party Transaction.
The company has advanced $141,000 to an officer of the company in
2000. This loan has a three-year term bearing interest at 7.5% per annum and is
secured by a pledge of certain stock options and other contractual arrangements.
Footnote 3-Acquisition
In July 2000, we announced the acquisition of the teleconferencing
services business of Asia Pacific Business Services Limited based in Hong Kong
for $440,000 financed from a combination of cash and the issuance of $14,000
restricted shares. These shares are restricted and are unable to trade for a
period of one year.
Page 7
<PAGE>
The acquisition was accounted for using the purchase method of accounting.
Results have been included in the Company's operations since the acquisition
date.
Footnote 4-Earnings per Share
The following table sets forth the computation of basic and diluted
earnings per share for the nine months ended September 30, 2000 and three months
ending September 30, 2000:
Page 8
<PAGE>
Nine months ended September 30, 2000
<TABLE>
<S> <C> <C> <C>
2000 1999 1998
Numerator:
Net income $ 781,752 $ (145,496) $(1,356,167)
Preferred Stock Dividends (120,000) (31,927) -
---------- ---------- -----------
Numerator for basic earnings
per Share-income available to
common Stockholders $ 661,752 $ (177,423) $(1,356,167)
========== ========== ===========
Denominator:
Denominator for basic earnings
per Share-weighted-average
shares 5,193,739 4,326,881 3,622,785
Effect of dilutive securities:
Employee Stock options 454,318 - -
Warrants 207,791 - -
Convertible debentures 36,952 - -
---------- ---------- -----------
Dilutive potential common shares 699,061 - -
Denominator for diluted
earnings share-adjusted
weighted-average shares and
assumed conversions 5,892,800 4,326,881 3,622,785
========== ========== ===========
Basic earnings per share $ 0.13 $ (0.03) $ (0.37)
========== ========== ===========
Diluted earnings per share $ 0.11 $ (0.03) $ (0.37)
========== ========== ===========
Three months ending September 30, 2000
2000 1999 1998
Numerator:
Net income $ 389,273 $ 86,346 $ (561,627)
Preferred Stock Dividends (40,000) - -
---------- ---------- ----------
Numerator for basic earnings
per Share-income available to
common Stockholders $ 349,273 $ 86,346 $ (561,627)
========== ========== ==========
Denominator:
Denominator for basic earnings
per Share-weighted-average
shares 5,649,622 4,508,837 3,635,952
Effect of dilutive securities:
Employee Stock options 322,037 - -
Warrants 26,802 - -
Convertible debentures - - -
---------- ---------- ----------
Dilutive potential common shares - - -
Denominator for diluted
earnings share-adjusted
weighted-average shares and
assumed conversions 5,998,461 4,508,837 3,635,952
========== ========== ==========
Basic earnings per share $ 0.06 $ (.02) $ (0.15)
========== ========== ==========
Diluted earnings per share $ 0.06 $ (.02) $ (0.15)
========== ========== ==========
</TABLE>
Page 9
<PAGE>
Options, warrants and the convertible debentures were not used in 1999 and 1998,
as further dilution cannot occur when the numerator is a net loss.
The 9% subordinated convertible note was anti-dilutive in the third quarter and
was therefore not included in the numerator for the year to date diluted
earnings per share calculation.
On May 26, 2000, 800,000 shares of common stock were issued at $5.00 a share
raising $4 million in capital.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Introduction
This quarterly report on Form 10-Q contains certain forward-looking
statements that involve risks and uncertainties. These statements refer to
objectives, expectations, intentions, future events, or our future financial
performance, and involve known and unknown risks, uncertainties, and other
factors that may cause our actual results, level of activity, performance, or
achievements to be materially different from any results expressed or implied by
these forward-looking statements. In some cases, you can identify forward-
looking statements by words such as "may," "will," "should," "could," "expects,"
"anticipates," "intends," "plans," "believe," "estimates," "predicts,"
"potential," and similar expressions. Our actual results could differ materially
from those included in forward-looking statements.
Overview
We achieved continued growth in teleconferencing revenues in all of our
operations worldwide as well as in new enhanced services in video, data, and
Internet conferencing. In addition to satisfactory profit improvements, our
third quarter ending September 30, 2000, included the following third quarter
and year to date highlights.
Third Quarter Highlights
A comparison of the financial results of our third quarter ending September 30,
2000 and the same period last year reveals that:
. Revenues grew by 32%.
. Excluding the sale of video conferencing services and equipment,
growth in our core audio conferencing services business was 31%.
. Video conferencing services grew by 90%.
. Operating efficiencies enabled us to improve gross margin to 51%.
. Operating income improved by 114%.
. Pretax income grew by 218%.
. Net income grew by 351%.
Additionally, we acquired an audio business based in Hong Kong. We signed an
agreement to provide global conferencing on an outsourced basis to one of the
world's largest telecommunications companies.
Page 10
<PAGE>
Year to Date
. Concert. On January 1, 2000, Concert Global Networks Limited
("Concert") became the vehicle for an international joint venture
between AT&T and British Telecom. Our initial services to Concert
involve the delivery of services for Concert's internal
conferencing. Concert conferencing revenue grew strongly during the
third quarter. We are now phasing into the delivery of services to
Concert's customers. Revenues from the Concert agreement will depend
on usage and pricing.
. Gross proceeds of $4 million were raised from an equity placement in
the second quarter of 800,000 shares at $5 per share, thus
strengthening our financial structure.
. Year to date operating income grew by 164%.
. Year to date pretax income grew by 438%.
. Year to date net income grew by 637%.
Components of Revenue and Expense
Revenues. We earn revenues from fees charged to clients for audio,
video, data and Internet-based teleconference bridging services, from charges
for enhanced services, and from rebilling certain long-distance telephone costs.
We also earn revenues from video equipment sales.
Cost of Sales. Cost of sales consists of telephony costs, depreciation
on our teleconferencing bridges and telecommunications equipment, equipment
product costs, operator and operations management salaries and office expenses
for operations staff.
Selling, General, and Administration expense. Selling, general, and
administration expense consist of salaries, benefits, and office expenses of our
selling and administrative organizations.
Cost as a percentage of sales
The following table outlines certain items in our income statement as a
percentage of sales:
<TABLE>
<CAPTION>
3 months ended September 30 9 months ended September 30
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Sales 100% 100% 100% 100% 100% 100%
Cost of sales (49) (52) (55) (49) (53) (55)
---- ---- ---- ----
Gross profit 51 48 45 51 47 45
Selling, general and
administrative expense (39) (41) (52) (40) (42) (48)
---- ---- ---- ---- ---- ----
Operating income 12 7 (7) 11 5 (3)
Interest expense (2) (3) (3) (3) (3) (2)
---- ---- ---- ---- ---- ----
Net income before taxes
and minority interest 10 4 (10) 8 2 (5)
Minority interest and
income taxes (6) (3) (2) (5) (3) (5)
---- ---- ---- ---- ---- ----
Net income (loss) 4 1 (12) 3 (1) (10)
==== ==== ==== ==== ==== ====
</TABLE>
Page 11
<PAGE>
RESULTS OF OPERATIONS
Third quarter ending September 30, 2000 compared to third quarter ending
September 30, 1999.
Net revenues. Net revenues increased 32% to $9.5 million for the third
quarter ending September 30, 2000, compared to $7.2 million for the same period
last year, primarily due to ongoing sales volume growth and new customer base in
our audio conferencing business.
Revenues from videoconferencing services increased by 90% comparing the third
quarter ending September 30, 2000 and the same period last year, which accounted
for 8% of revenues. Video equipment sales, which are being phased down,
declined by 60% comparing the third quarter ending September 30, 2000 to the
same period last year, which accounted for 1% of third quarter revenues.
Gross profit. Gross profit increased by 41% to $4.9 million for the
quarter ending September 30, 2000, compared to $3.5 million for the same period
last year. Gross profit percentage improved from 48% to 51% of sales comparing
the third quarter ending September 30, 2000 and the same period last year mainly
due to continued improved efficiencies and higher traffic volumes over a fixed
cost base. Our audio conferencing product mix is shifting in favor of increased
volume from automated conferencing and conferencing on which we are the
outsourced suppliers, which yield improved margins and higher efficiencies.
Selling, general, and administrative costs. Selling, general, and
administrative costs for the third quarter ending September 30, 2000 were $3.7
million and accounted for 39% of revenue, compared to $2.9 million or 40% of
revenue for the same period last year. The 27% increase in such expenses
resulted from an ongoing increase in sales focus in the United States for new
outsourced channels as well as ongoing marketing efforts in the new
international business units.
Operating income. Operating income improved by 114% from $547,649 for
the third quarter ending September 30, 1999 to $1,174,470 for the third quarter
ending September 30, 2000 due to volume efficiencies over a relatively fixed
base of operations. Operating margin increased from 8% for the third quarter
ending September 30, 1999 to 12% for the third quarter ending September 30,
2000.
Net interest expense. Net interest for the quarter ending September 30,
2000, reduced by 16% to $203,797 compared to $242,140 for the same period last
year. This reduction was due to the effect of investing net cash proceeds from
our $4 million equity placement, which occurred in April 2000.
Net income before taxes and minority interest. Net income before taxes
and minority interest improved by 218% to $970,673 for the third quarter ending
September 30, 2000, compared to $305,509 for the same period last year. As
noted, this improvement was due to revenue growth and operational efficiencies
resulting in higher gross profit margins as well as slower growth in selling,
general, and administrative costs.
Taxes on income and minority interest. Taxes on income and minority
interest amounted to $581,400 for the third quarter ending September 30, 2000,
compared to
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<PAGE>
$219,163 for the same period last year. This increase is due to an increased
contribution to consolidated net income by our 60% majority-owned United Kingdom
operation, which pays full tax.
Net income. Net income reported for the quarter ending September 30,
2000, was $389,273, compared to $86,346 for the same period last year. This
351% improvement can also be attributed to continued revenue growth, improved
operating efficiencies resulting in higher gross profit margins, and slower
growth in selling, general, and administrative expenses.
Earnings (loss) per common share. Fully diluted earnings per share
improved from $0.02 per share for the third quarter ending September 30, 1999,
to $0.06 per share for the third quarter ending September 30, 2000. Earnings
per share data are calculated on the weighted average number of fully diluted
shares outstanding of 5,998,461 and 4,508,837 in 2000 and 1999 respectively. A
quarterly preferred dividend of $40,000 was deducted from net income in order to
calculate earnings per share for 2000.
Nine-month period ending September 30, 2000, compared to nine-month period
ending September 30, 1999
Net revenues. Net revenues increased 31% to $27.0 million for the nine
months ending September 30, 2000, compared to $20.5 million for the same period
last year, primarily due to ongoing sales volume growth and the increase in
company's customer business in our audio conferencing business. Audio
conferencing operations accounted for 92% of the total revenue for the nine-
month period. Video services accounted for 6% and video equipment for 2% of
year to date sales.
Gross profit. Gross Profit amounted to $13.6 million for nine months
ending September 30, 2000 compared to $9.7 million for same period last year, an
increase of 40% for the nine-month period. Gross margin (net revenues less
costs of conferencing services divided by net revenues) increased to 51%,
compared to 47% achieved during the previous comparable period. This
improvement is due to higher traffic volume over a fixed cost base, the
introduction of low cost automated services and improved operating efficiencies.
Selling, general, and administrative costs. Selling, general, and
administrative expenses for the nine months ending September 30, 2000 increased
24% to 10.6 million, but declined as a percent to revenue to 40%, compared to
$8.6 million or 42% of revenue for the same period last year. This favorable
improvement is due to our international business units providing rapid revenue
growth to recover costs as well as the successful efforts of our established
operations to stabilize cost and improving efficiencies through automation and
outsourcing.
Operating income. Operating income for the nine months ending September
30, 2000 increased by 164% to $2.9 million compared to the same period last year
and the
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operating profit margin increased from 5% for the nine months ending September
30, 1999 to 11% for the nine months ending September 30, 2000.
Net interest expense. Net interest expense reduced by 4% to $662,965 for
the nine months ending September 30, 2000 from $692,355 for the same period last
year, which reflects interest earned on the cash proceeds from our $4 million
equity placement.
Income before taxes and minority interest. Income before taxes and minority
interest amounted to $2.3 million for the nine months ending September 30, 2000,
compared to income before taxes and minority interest of $424,054 for the same
period last year. This 438% increase was due to increasing revenue in our
international business units as well as improved cost control and operating
efficiencies.
Taxes on income and minority interest. Taxes on income and minority
interest amounted to $1.5 million for the nine months ending September 30, 2000,
compared to $569,550 for the same period last year. This increase was mainly due
to the net contribution of our 60% majority-owned United Kingdom subsidiary. A
further increase was due to the acquisition of a remaining 20% ownership in our
two 80% majority-owned development subsidiaries which previously reported net
losses. The remaining 20% ownership in these companies was acquired at the
beginning of the year 2000.
Net income. Net income reported for the nine months ending September 30,
2000, was $781,752 compared to a net loss of $145,496 for the same period last
year. This favorable improvement of $927,248 was due to continued revenue
growth, improved operating efficiencies, maturing of development operations, and
stabilized growth in sales, general, and administrative costs.
Earnings (loss) per share. Earnings per share improved from a loss of $0.03
per share during the nine-month period ending September 30, 1999, to earnings of
$0.11 for the nine months ending September 30, 2000. Earnings per share data are
calculated based on the weighted average number of fully diluted shares
outstanding of 5,892,800 and 4,326,881 in 2000 and 1999 respectively. A year-to-
date preferred dividend of $120,000 is deducted from net income in order to
calculate earnings per share for 2000.
Liquidity and capital resources (for the nine months ending September 30, 2000)
As of September 30, 2000, we had $2.2 million in cash and cash equivalents.
We plan to continue to grow our business and will require additional cash to
finance our ongoing revenue growth, major capacity expansions, and new product
introductions.
Net cash provided by operating activities for the nine months ending
September 30, 2000, was $2.0 million. Net cash provided consisted primarily of
profits, depreciation, and profit attributed to minority interest while net cash
used in operating activities consisted primarily of an increase in accounts
receivable.
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Net cash used in investing in capital assets consisted of additions to
telecommunications and bridging equipment as well as various acquisitions and
investments into software amounting to $2.9 million. As a result of capital
expansions, we increased worldwide operating capacity during the year to date by
approximately 30%. Net cash used in investing in capital assets was $3.4
million.
Net cash provided by financing activities was $3.7 million and was obtained
from common stock issued in a public offering during the second quarter, which
amounted to 800,000 shares at $5 per share for gross proceeds of $4 million. We
used part of these proceeds to pay various lines of bank and supplier credit
amounting to $906,354.
We anticipate that our available funds are sufficient to meet our needs for
working capital and capital expenditures in the near term. We will need to raise
additional funds as, for example, we intend to pursue additional acquisitions,
undertake new product developments, and expand capacity. If we raise additional
funds through the issuance of debt or preferred securities, these securities may
have rights, preferences, or privileges senior to those of the rights or our
common stock and our stockholders may experience additional dilution. We cannot
be certain that additional financing will be available to us on favorable terms
when required, or at all.
PART II - Other Information
---------------------------
Item 2. Changes in Securities and Use of Proceeds
On July 31, 2000, we expanded our overseas operations by purchasing the
assets of Asia-Pacific Business Services Limited located in Hong Kong for
$440,000. Part of the $440,000 consisted of our issuance of 14,000 shares of our
common stock valued at $88,000 to Asia-Pacific Business Services Limited. The
agreed upon sale price of the common stock was $6.29 per share. There were no
underwriters involved in the transaction. We issued the shares under Regulation
S of the Securities Act of 1933.
Item 6(a). Exhibits
Exhibit No. Description
----------- -----------
3.1(1) Restated articles of incorporation of ACT April 15, 1996, as
amended October 18, 1999
3.2 (2) Bylaws of ACT, amended as of April 15, 1996
4.1(3) Form of specimen certificate for common stock of ACT
10.1(3) Stock option plan of 1991, as amended, authorizing 400,000 shares
of common stock for issuance under the plan
10.2(3) Form of stock option agreement
10.3(3) Form of common stock purchase warrant
10.10(3) Split dollar insurance agreement dated March 1, 1990, between ACT
and Gerald D. Van Eeckhout
10.11(3) Service agreement dated April 10, 1992 between David Holden and
ACT Teleconferencing Limited
10.19(4) Stock option plan of 1996, as amended
10.20(5) Employee stock purchase plan
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10.22(6) Loan and security agreement dated March 31, 1998 and forms of stock
purchase warrant with Sirrom Capital Corporation and Equitas L.P.
10.23(6) Loan agreement with Key Bank, N.A.
10.24(7) Lease commitment and warrant with R.C.C. Finance Group Ltd.
10.25(7) 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(7) Agreement for the supply of conferencing services signed July 14, 1998
between ACT Teleconferencing Services, Inc. and Concert Global
Networks Limited
10.27(7) Agreement for videoconferencing equipment and services (GTE Telephone
Operating Companies) dated October 1, 1998
10.28(8) Stock option plan of 2000
27.1 Financial data schedule
(1)Incorporated by reference, attached as an exhibit of the same number to our
Form 10-QSB for the quarter ended September 30, 1999, Filed with the
Securities and Exchange Commission on November 12, 1999, File No. 0-27560.
(2)Incorporated by reference, attached as an exhibit of the same number to our
Form 10-QSB for the quarter ended March 31, 1996, Filed with the SEC on May
15, 1996, File No. 0-27560.
(3)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 our Form SB-2, File No. 33-97908-D.
(4)Incorporated by reference, attached as an exhibit to our schedule 14A
Information filed with the SEC on April 30, 1997, File No. 0-27560, and
amended and attached as exhibit 4.6 to our Form S-8, filed on July 2, 1998,
File 333-58403.
(5)Incorporated by reference, attached as an exhibit 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, filed
with the SEC on August 24, 1998 (originally filed under cover of Form SEC on
August 14, 1998) File 0-27560.
(7)Incorporated by reference, attached as an exhibit of the same number to our
Form 10-QSB for the quarter ending September 30, 1998, filed with the SEC on
November 16, 1998, File 0-27560.
(8)Incorporated by reference, attached as appendix A to our Schedule 14A
Information filed with the SEC on May 12, 2000, File No. 0-27560.
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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, 2000 By: /s/ Gavin J. Thomson
----------------------------
Gavin J. Thomson,
Chief Financial Officer
(Duly authorized officer and
Principal Financial Officer)
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Index of Exhibits
All exhibits are filed electronically, unless incorporated by reference.
Exhibit No. Description
----------- -----------
3.1(1) Restated articles of incorporation of ACT April 15, 1996, as
amended October 18, 1999
3.2 (2) Bylaws of ACT, amended as of April 15, 1996
4.1(3) Form of specimen certificate for common stock of ACT
10.1(3) Stock option plan of 1991, as amended, authorizing 400,000 shares
of common stock for issuance under the plan
10.2(3) Form of stock option agreement
10.3(3) Form of common stock purchase warrant
10.10(3) Split dollar insurance agreement dated March 1, 1990, between ACT
and Gerald D. Van Eeckhout
10.11(3) Service agreement dated April 10, 1992 between David Holden and
ACT Teleconferencing Limited
10.19(4) Stock option plan of 1996, as amended
10.20(5) Employee stock purchase plan
10.22(6) Loan and security agreement dated March 31, 1998 and forms of
stock purchase warrant with Sirrom Capital Corporation and Equitas
L.P.
10.23(6) Loan agreement with Key Bank, N.A.
10.24(7) Lease commitment and warrant with R.C.C. Finance Group Ltd.
10.25(7) 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(7) Agreement for the supply of conferencing services signed July 14,
1998 between ACT Teleconferencing Services, Inc. and Concert
Global Networks Limited
10.27(7) Agreement for videoconferencing equipment and services (GTE
Telephone Operating Companies) dated October 1, 1998
10.28(8) Stock option plan of 2000
27.1 Financial data schedule
(1)Incorporated by reference, attached as an exhibit of the same number to our
Form 10-QSB for the quarter ended September 30, 1999, Filed with the
Securities and Exchange Commission on November 12, 1999, File No. 0-27560.
(2)Incorporated by reference, attached as an exhibit of the same number to our
Form 10-QSB for the quarter ended March 31, 1996, Filed with the SEC on May
15, 1996, File No. 0-27560.
(3)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 our Form SB-2, File No. 33-97908-D.
(4)Incorporated by reference, attached as an exhibit to our schedule 14A
Information filed with the SEC on April 30, 1997, File No. 0-27560, and
amended and attached as exhibit 4.6 to our Form S-8, filed on July 2, 1998,
File 333-58403.
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(5)Incorporated by reference, attached as an exhibit 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, filed
with the SEC on August 24, 1998 (originally filed under cover of Form SE on
August 14, 1998) File 0-27560.
(7)Incorporated by reference, attached as an exhibit of the same number to our
Form 10-QSB for the quarter ending September 30, 1998, filed with the SEC on
November 16, 1998, File 0-27560.
(8)Incorporated by reference, attached as appendix A to our Schedule 14A
Information filed with the SEC on May 12, 2000, File No. 0-27560.
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