<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 June 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
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ACT Teleconferencing, Inc.
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(Name of small business issuer as specified in its charter)
Colorado 84-1132665
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1658 Cole Blvd., Suite 130, Golden, Colorado 80401
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(Address of principle executive offices, Zip code)
(303) 235-9000
(Registrant's telephone number, including area cod)
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 June 30, 2000,
5,630,974 shares of the issuer's common stock were outstanding.
This report contains 19 pages.
<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 8
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURE 16
Page 2
<PAGE>
Item 1. FINANCIAL STATEMENTS
ACT Teleconferencing, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30 December 31,
2000 1999
------------------------------------
Assets (unaudited) (audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,784,411 $ 1,532,551
Accounts receivable (net of allowance for doubtful accounts
of $191,452 and $153,677 in 2000 and 1999 respectively) 7,333,929 6,606,641
Prepaid expenses 1,065,784 847,021
Inventory 134,585 129,519
------------------------------------
Total current assets 12,318,709 9,115,732
Equipment:
Telecommunications equipment 8,779,879 8,254,966
Office equipment 7,988,003 6,383,765
Less: accumulated depreciation (4,228,285) (3,363,484)
------------------------------------
Total equipment - net 12,539,597 11,275,247
Other Assets:
Goodwill (net of accumulated amortization of $329,328 and
$247,980 in 2000 and 1999 respectively) 2,366,618 1,456,944
Deferred loan placement fees 149,628 250,420
Long term note receivable (Related party) 148,000 -
------------------------------------
Total assets $ 27,522,552 $ 22,098,343
====================================
Liabilities and shareholders' equity
Current liabilities:
Current portion of debt $ 1,658,015 $ 2,313,454
Accounts payable 2,456,382 2,541,822
Accrued liabilities 2,120,574 1,492,382
Capital lease obligations due in one year 601,124 609,076
Income taxes payable 827,512 589,666
------------------------------------
Total current liabilites 7,663,607 7,546,400
Long-term debt 4,121,305 3,778,614
Capital lease obigations due after one year 1,030,662 1,223,795
Preferred stock, no par value, 1,000,000 shares authorized;
2,000 issued (net of deferred placement cost of $279,923
and 306,944 in 2000 and 1999 respectively) 1,720,077 1,693,006
Deferred income taxes 300,691 320,112
Minority interest 1,625,416 967,559
Shareholders' equity:
Common stock, no par value; 10,000,000 shares authorized
5,630,974 and 4,595,947 shares issued and outstanding
in 2000 and 1999 respectively 15,896,741 11,378,103
Additional paid in capital 119,925 99,900
Accumulated deficit (4,496,696) (4,809,176)
Accumulated other comprehensive loss (459,176) (99,970)
------------------------------------
Total Shareholders' equity 11,060,794 6,568,857
------------------------------------
Total liabilities and shareholders' equity $ 27,522,552 $ 22,098,343
====================================
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE>
ACT Teleconferencing, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
2000 1999 1998
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net revenues $ 9,126,623 $ 6,429,079 $ 4,765,293
Cost of Services (4,537,127) (3,265,622) (2,833,903)
------------------ ------------------ ------------------
Gross Profit 4,589,496 3,163,457 1,931,390
Selling, general and administration expense (3,664,033) (2,943,434) (2,245,725)
------------------ ------------------ ------------------
Operating Income (loss) 925,463 220,023 (314,335)
Interest expense (220,612) (155,085) (49,266)
------------------ ------------------ ------------------
Income (loss) before income taxes and minority interest 704,851 64,938 (363,601)
Provision for income taxes (255,113) (99,772) (163,500)
------------------ ------------------ ------------------
Income (loss) before minority interest 449,738 (34,834) (527,101)
Minority interest in earnings of consolidated subdsidiary (245,183) (70,537) (107,281)
------------------ ------------------ ------------------
Net income (loss) $ 204,555 $ (105,371) $ (634,382)
================== ================== ==================
Net income (loss) per share-basic and fully diluted $ 0.03 $ (0.02) $ (0.18)
================== ================== ==================
Weighted average number of shares outstanding-basic 5,146,172 4,437,646 3,617,271
================== ================== ==================
Weighted average number of shares outstanding-fully diluted 5,706,844 4,437,646 3,617,271
================== ================== ==================
<CAPTION>
Six Months Ended June 30,
2000 1999 1998
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net revenues $ 17,310,390 $ 13,271,546 $ 8,858,529
Cost of Services (8,608,783) (7,054,516) (4,818,561)
------------------ ------------------ ------------------
Gross Profit 8,701,607 6,217,030 4,039,968
Selling, general and administration expense (6,930,643) (5,770,600) (4,200,860)
------------------ ------------------ ------------------
Operating Income (loss) 1,770,964 446,430 (160,892)
Interest expense (459,168) (327,885) (86,156)
------------------ ------------------ ------------------
Income (loss) before income taxes and minority interest 1,311,796 118,545 (247,048)
Provision for income taxes (477,399) (217,714) (331,507)
------------------ ------------------ ------------------
Income (loss) before minority interest 834,397 (99,169) (578,555)
Minority interest in earnings of consolidated subdsidiary (441,918) (132,673) (215,985)
------------------ ------------------ ------------------
Net income (loss) $ 392,479 $ (231,842) $ (794,540)
================== ================== ==================
Net income (loss) per share-basic and fully diluted $ 0.06 $ (0.05) $ (0.22)
================== ================== ==================
Weighted average number of shares outstanding-basic 4,963,292 4,233,783 3,616,205
================== ================== ==================
Weighted average number of shares outstanding-fully diluted 5,839,389 4,233,783 3,616,205
================== ================== ==================
</TABLE>
See notes to consolidated financial statements.
Page 4
<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 106,000 791,694 791,694
Shares issued as payment for
consulting fees 52,000 336,049 336,049
Shares issued in connection with
the employee stock purchase plan 14,756 62,713 62,713
Shares issued in cashless exercise
of warrants 33,650 -
Shares issued in connection with
employee service 1,530 24,375 24,375
Employee stock option exercise 27,091 149,134 149,134
Secondary Public Offering 800,000 3,154,674 3,154,674
Additional paid in capital-warrant issue 20,025 20,025
Preferred dividend (79,999) (79,999)
Comprehensive income
Net Income 392,479 392,479
Other comprehensive loss, net of tax
Foreign currency translation adjustment (359,206) (359,206)
------------
Total comprehensive income $ 33,273
============
---------------------------------------------------------------------------------
Balance at June 30, 2000 5,630,974 $16,016,666 $(4,496,696) $ (459,176) $ 11,060,794
=================================================================================
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE>
ACT Teleconferencing, Inc.
Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999 1998
---------------- ---------------- ---------------
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 392,479 $ (231,842) $ (794,540)
Adjustments to reconcile net income (loss) to net cash used
for operating activities:
Depreciation 864,801 615,015 375,367
Amortization of goodwill 205,142 52,084 20,836
Deferred issuance cost of preferred stock 27,070 - -
Amortization of deferred loan issuance costs 28,907 - -
Deferred income tax (19,421) (14,966) 1,231
Minority interest 355,867 72,177 227,917
---------------- ---------------- ---------------
Cash flow before changes in operating assets and liabilities: 1,854,845 492,468 (169,189)
Changes in operating assets and liabilities (net of effect of
business combinations):
Accounts receivable (744,053) (464,717) (1,599,125)
Inventory (5,067) 86,350 (1,053)
Prepaid expenses and other assets (255,877) (174,651) (126,218)
Accounts payable (165,439) 351,994 711,113
Income tax payable 237,846 196,811 302,541
Accrued liabilities 628,192 (217,654) 429,389
---------------- ---------------- ---------------
Net cash provided by (used) for operating activities 1,550,447 270,601 (452,542)
Investing activities
Property and equipment purchases (2,042,151) (2,663,930) (1,106,496)
Repayment of short term notes - (9,998) (130,151)
Disposal of marketable securities - - 50,000
Cash paid for acquisitions net of cash acquired (130,241) - -
---------------- ---------------- ---------------
Net cash provided by (used) for investing activities (2,172,392) (2,673,928) (1,186,647)
Financing activities
Net proceeds (repayment) of debt and capital lease obligations (513,833) (219,855) 2,331,550
Net proceeds from issuance of common stock 3,746,844 3,301,580 51,915
Deferred Loan Issuance Costs - (2,343) (220,727)
---------------- ---------------- ---------------
Net cash provided by financing activities 3,233,011 3,079,382 2,162,738
Effect of exchange rate changes on cash (359,206) (176,442) (140,941)
---------------- ---------------- ---------------
Net increase in cash and cash equivalents 2,251,860 499,613 382,608
Cash and cash equivalents, beginning of year 1,532,551 369,408 451,434
---------------- ---------------- ---------------
Cash and cash equivalents, end of year $ 3,784,411 $ 869,021 $ 834,042
================ ================ ===============
</TABLE>
See notes to consolidated financial statements.
Page 6
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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 six-month periods ending June 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
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.
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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.
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 year-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.
During the second quarter the company advanced $109,000 to an officer of
the company. 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-Subsequent Events
In July 2000, we announced the successful acquisition of the
teleconferencing services business of Asia Pacific Business Services Limited
based in Hong Kong for $440,000 via a combination of cash and restricted shares.
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
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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 introducing new enhanced services in video,
data, and Internet conferencing. In addition to satisfactory profit
improvements, our second quarter ending June 30, 2000, included the following
highlights:
. Revenues grew by 42% for the second quarter to June 30, 2000.
. Excluding the sale of video conferencing services and equipment, growth
in our core audio conferencing services business was 59% for the first
quarter.
. Video conferencing services grew modestly by 5% during the second
quarter.
. Operating efficiencies enabled us to improve gross margin from 49% to
50%.
. Operating income improved by 321%.
. Continued successful testing and development of a voice over Internet
telephony conferencing product resulted in an agreement with Concert
Global Clearinghouse.
. The introduction of video and data streaming services outsourced to
INTERVU, now Akamai Technologies, Inc. continued on a successful path
with strong growth potential.
. Concert. On January 1, 2000, Concert became the vehicle for an
international joint venture between AT&T and British Telecom. Our
initial services to Concert involved the delivery of services for
Concert's internal conferencing. Concert conferencing revenue grew
strongly during the second quarter. We are now continuing to phase 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 via an equity placement of
800,000 shares at $5 per share, thus strengthening our financial
structure.
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.
Page 9
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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 June 30 6 months ended June 30
---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Sales 100% 100% 100% 100% 100% 100%
Cost of sales (50) (51) (59) (50) (53) (54)
---- ---- ---- ---- ---- ----
Gross profit 50 49 41 50 47 46
Selling, general and
administrative expense (40) (46) (47) (40) (44) (47)
---- ---- ---- ---- ---- ----
Operating income 10 3 (6) 10 3 (1)
Interest expense (3) (2) (1) (3) (3) (1)
---- ---- ---- ---- ---- ----
Net income before taxes
and minority interest 7 1 (7) 7 0 (2)
Minority interest and
income taxes (5) (3) (6) (5) (2) (7)
---- ---- ---- ---- ---- ----
Net income (loss) 2 (2) (13) 2 (2) (9)
==== ==== ==== ==== ==== ====
</TABLE>
RESULTS OF OPERATIONS
Second quarter ending June 30, 2000, compared to second quarter ending June 30,
1999.
Net revenues. Net revenues increased 42% to $9.1 million for the quarter
ending June 30, 2000, compared to $6.4 million for the same period in 1999,
primarily due to ongoing sales volume growth in our audio conferencing business,
which grew by 59%. Audio conferencing operations accounted for 86% of the second
quarter revenue.
Revenues from videoconferencing services increased by 5% and accounted for
8% of revenues. Video equipment sales, which are being phased down, declined by
55% and accounted for 6% of second quarter revenues.
Video and data streaming operations, in partnership with Akamai
Technologies, Inc. have met with strong initial success and appear to have rapid
growth prospects, although revenues are not yet significant. Internet telephony
conferencing services are not yet revenue-generating.
Gross Profit. Gross profit increased by 45% to $4.6 million for the quarter
ending June 30, 2000, compared to $3.2 million for the quarter ending June 30,
1999. Gross profit percentage improved to 50% of sales from 49% for the same
period last year, mainly due to continued improved efficiencies and higher
traffic volumes over a fixed cost base. Our audioconferencing product mix is
shifting in favor of increased automated and outsourced volumes, which yield
improved margins and higher efficiencies.
Selling, general, and administrative costs. Selling, general, and
administrative costs for the second quarter of 2000 were $3.7 million and
accounted for 40% of revenue, compared to $2.9 million or 46% of revenue for the
same period last year. The 25% increase in such expenses resulted from an
ongoing increase in sales focus in the United States as well as ongoing
marketing efforts in the new international business units.
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Operating income (loss). Operating income improved by 321% from $220,023 to
$925,463 due to volume efficiencies gained as well as the 45% growth improvement
in gross profits relative to the 24% increase in selling, general and
administrative costs.
Net interest Expense. Net interest for the quarter ending June 30, 2000,
was $220,612 compared to $155,085 for the same period last year, a 42% increase.
This increase was due to the increase in interest bearing debt taken on in order
to finance our revenue growth, capital expansion, and related working capital
requirements. This debt is carried at various interest rates at a weighted
average cost of approximately 12%.
Net income before taxes and minority interest. Net income before taxes and
minority interest improved by $639,913 to $704,851 for the second quarter of
2000, compared to $64,938 for the previous comparable period. As noted above,
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 $500,296 for the second quarter of 2000, compared to
$170,309 for the first quarter of 1999, a 194% increase. 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 June 30, 2000, was
$204,555, compared to a net loss of $105,371 for the second quarter. This
improvement of $309,926 can 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. Earnings per share improved from a loss
of $0.02 per share during the second quarter in 1999, to earnings of $0.03 per
share for the second quarter in 2000. Earnings per share data are calculated
based on the weighted average number of fully-diluted shares amounting to
5,706,844 shares. A quarterly preferred dividend of $40,000 is deducted from net
income in order to calculate earnings per share.
Six-month period ended June 30, 2000, compared to six-month period ended June
30, 1999
Net Revenues. Net revenues increased 30% to $17.3 million for the six
months ended June 30, 2000, compared to $13.3 million for the same period in
1999, primarily due to ongoing sales volume growth in our audio conferencing
business, which grew by 41%. Audio conferencing operations accounted for 93% of
the total revenue for the six-month period. Total audio revenue increased by 65%
in our developing companies and by 40% in our established operations.
Revenues from videoconferencing services declined by 14% for the year to
date comparison. This decline is expected to be offset by the favorable increase
in sales from our
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Dallas videoconferencing center, which is now servicing streaming operations as
well as video equipment.
Video equipment revenue for the six months was 2% of our total revenue or
$389,760 compared to the same period last year of 6% or $834,792, a decrease of
53%. The decline in this business is due to the phase-out strategy we
implemented the latter part of the previous year.
Cost of Teleconferencing Services. Cost of teleconferencing services amount
to $8.6 million compared to $7.0 million, or an increase of 22% for the six-
month period. Gross margin (net revenues less costs of conferencing services
divided by net revenues) increased to 50%, 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 increased 20% to 6.9 million, but declined as a percent
to revenue to 40%, compared to $5.8 million or 44% of revenue for the period
ended June 30, 1999. This favorable improvement is due to our developing
companies providing revenue growth to recover these costs as well as the
successful efforts of our established operations to stabilize cost while
sustaining revenue growth.
Net interest expense. Net interest expense grew by 40% to $459,168 from
$327,885 reflecting growth in the funding requirement of the company.
Income before taxes and minority interest. Income before taxes and minority
interest amounted to $1.3 million, compared to income before taxes and minority
interest of $118,544 for the six-month period ended 1999. This ten-fold
improvement of $1.2 million is due to the increase of revenue in our developing
companies as well as improved cost control and operating efficiencies.
Taxes on Income and Minority Interest. Taxes on income and minority
interest amounted to $919,317 for the six months ended June 30, 2000, compared
to $350,387 for 1999. This increase was mainly due to the net contribution of
our 60% majority-owned United Kingdom subsidiary which pays full tax. 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 (Loss). Net income reported for the six months ended June 30,
2000, was $392,479 compared to a net loss of $231,842 for 1999. This favorable
improvement of $624,321
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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 $0.05
per share during the six-month period ending June 30, 1999, to earnings of $0.06
for the same period this year. Earnings per share data are calculated based on
the weighted average number of fully diluted or 5,839,389 shares. A year-to-date
preferred dividend of $80,000 is deducted from net income in order to calculate
earnings per share.
Liquidity and capital resources (for the six months ending June 30, 2000)
As of June 30, 2000, we had $3.8 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 six months ended June 30,
2000, was $1.6 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.
Net cash used in investing activities consisted of additions to
telecommunications and bridging equipment as well as various acquisitions and
investments into software. As a result of capital expansions, we increased
worldwide capacity by approximately 30%. Net cash used in investing activities
was $2.2 million.
Net cash provided by financing activities was $3.2 million and was achieved
via a combination of additional common stock issued via a secondary public
offering which amounted to 800,000 shares at $5 per share for gross proceeds of
$4 million, and the net utilization and repayment of various lines of bank and
supplier credit.
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 equity, or equity-related, or debt 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 4. Submission of Matters to a Vote of Security Holders
We held the annual meeting of shareholders on June 15, 2000 at our offices
in Golden, Colorado. The shareholders elected James F. Seifert to the class II
board of directors to serve a
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three year term expiring in the year 2003. The votes for Mr. Seifert were
3,610,605 (100%), and votes against him were 0. There were 12,937 withheld or
abstention votes, and 1,207,847 votes were represented by brokers and
shareholders who did not respond.
The shareholders adopted and approved the Stock Option Plan of 2000. The
votes in favor of the Stock Option Plan were 3,532,276 (98%), and votes against
the plan were 88,429 (2%). There were 2,837 withheld or abstention votes, and
1,207,847 votes were represented by brokers and shareholders who did not
respond.
The shareholders also ratified the appointment of Ernst & Young LLP as
independent accountants for the Company for the year ending December 31, 2000.
Votes for ratification were 3,618,663 (99.93%) and there were 2,379 (.07%) votes
against ratification. There were 2,500 withheld or abstention votes, and
1,207,847 votes were represented by brokers and shareholders who did not
respond.
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
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(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
27.1 Financial data schedule
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(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 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.
Item 6(b). Reports on Form 8-K.
On June 6, 2000, we filed a Form 8-K regarding the completion of our
offering to institutional investors on Form S-1.
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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: August 11, 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 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(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
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.
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