SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended March 31, 2000.
or
/_/ Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
Commission file number 1-12937
ALL COMMUNICATIONS CORPORATION
(Exact Name of Small Business Issuer as Specified in its Charter)
New Jersey 22-3124655
(State or other Jurisdiction of I.R.S. Employer Number
Incorporation or Organization)
225 Long Avenue, Hillside, New Jersey 07205
(Address of Principal Executive Offices)
973-282-2000
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 [_]
The number of shares outstanding of the registrant's Common Stock as of May
12, 2000 was 7,148,147.
Transitional Small Business Disclosure Format:
Yes[_] No [X]
ALL COMMUNICATIONS CORPORATION
Index
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet*
March 31, 2000 and December 31, 1999 1
Consolidated Statement of Operations
For the Three Months ended
March 31, 2000 and 1999 2
Consolidated Statement of Cash Flows
For the Three Months ended March 31, 2000 and 1999 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART II. OTHER INFORMATION
Legal Proceedings 10
Changes in Securities 10
Defaults Upon Senior Securities 10
Submission of Matters to a Vote of Security Holders 10
Other Information 10
Exhibits and Reports on Form 8-K 10
Signatures 11
* The Balance Sheet at December 31, 1999 has been derived from the audited
financial statements at that date. All other financial statements are unaudited.
ALL COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2000 1999
---- ----
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 7,166,978 $ 60,019
Accounts receivable (net of allowance for doubtful accounts of
$355,000 and $285,000, respectively) 4,779,682 6,128,221
Inventory 4,279,518 3,602,238
Deferred income taxes 230,083 230,083
Other current assets 188,488 161,947
------------ ------------
Total current assets 16,644,749 10,182,508
------------ ------------
Furniture, equipment and leasehold improvements-net 631,887 621,443
Deferred financing costs 5,391 17,633
Other assets 145,714 45,720
------------ ------------
Total assets $ 17,427,741 $ 10,867,304
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank loan payable $ -- $ 2,138,602
Accounts payable 2,179,535 2,022,687
Accrued expenses 769,919 891,033
Income taxes payable -- 124,372
Deferred revenue 459,170 403,524
Customer deposits 240,993 44,919
Current portion of capital lease obligations 30,565 30,905
------------ ------------
Total current liabilities 3,680,182 5,656,042
------------ ------------
Noncurrent liabilities
Capital lease obligations, less current portion 8,017 17,444
------------ ------------
Total noncurrent liabilities 8,017 17,444
------------ ------------
Total liabilities 3,688,199 5,673,486
============ ============
STOCKHOLDERS' EQUITY
Preferred stock, no par value;
1,000,000 shares authorized, none issued or outstanding -- --
Common Stock, no par value; authorized 100,000,000 shares;
shares issued and outstanding 7,072,640 and 4,910,000 shares,
respectively 13,796,290 5,229,740
Additional paid-in capital 392,188 488,759
Accumulated deficit (448,936) (524,681)
------------ ------------
Total stockholders' equity 13,739,542 5,193,818
------------ ------------
Total liabilities and stockholders' equity $ 17,427,741 $ 10,867,304
============ ============
See Notes to Consolidated Financial Statements
-1-
ALL COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
2000 1999
---- ----
Net revenues $ 5,983,507 $ 3,911,669
Cost of revenues 3,846,211 2,773,109
----------- -----------
Gross margin 2,137,296 1,138,560
Operating expenses:
Selling 1,418,693 884,667
General and administrative 583,681 307,271
----------- -----------
Total operating expenses 2,002,374 1,191,938
----------- -----------
Income (loss) from operations 134,922 (53,378)
Other (income) expenses
Amortization of deferred financing costs 12,242 7,867
Interest income (29,948) (9,105)
Interest expense 23,483 53,472
----------- -----------
Total other expenses, net 5,777 52,234
----------- -----------
Income (loss) before income taxes 129,145 (105,612)
Income tax provision 53,400 --
----------- -----------
Net income (loss) $ 75,745 $ (105,612)
=========== ===========
Net income (loss) per share:
Basic $ .01 $ (.02)
=========== ===========
Diluted $ .01 $ (.02)
=========== ===========
Weighted average number of common shares and equivalents:
Basic 5,301,503 4,910,000
=========== ===========
Diluted 8,997,654 4,910,000
=========== ===========
See Notes to Consolidated Financial Statements
-2-
ALL COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 75,745 $ (105,612)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 95,413 77,982
Non cash compensation 21,667 24,081
Bad debt provision 70,000 54,250
Changes in operating assets and liabilities:
Accounts receivable 1,278,539 314,955
Inventory (677,280) (41,491)
Other current assets (26,541) 12,315
Other assets (99,994) --
Accounts payable 156,848 470,714
Accrued expenses (121,114) (115,060)
Income taxes payable (124,372) (2,860)
Deferred revenue 55,646 16,424
Customer deposits 196,074 (78,357)
----------- -----------
Net cash provided by operating activities 900,631 627,341
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of furniture, equipment and leasehold improvements (93,614) (29,750)
----------- -----------
Net cash used in investing activities (93,614) (29,750)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITES
Exercise of warrants and options, net 8,395,312 --
Proceeds from bank loan 3,350,000 5,000
Payments on bank loan (5,488,602) --
Tax benefit of exercise of stock options 53,000 --
Payments on capital lease obligations (9,768) (8,858)
----------- -----------
Net cash provided by (used in) financing activities 6,299,942 (3,858)
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 7,106,959 593,733
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 60,019 325,915
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,166,978 $ 919,648
=========== ===========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 23,483 $ 53,472
=========== ===========
Income taxes $ 147,946 $ 3,332
=========== ===========
Acquisition of equipment:
Cost of equipment $ -- $ 37,747
Capital lease payable incurred -- 34,968
----------- -----------
Cash down payment $ -- $ 2,779
=========== ===========
See Notes to Consolidated Financial Statements
-3-
ALL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
MARCH 31, 2000
Note 1 - Basis of Presentation
The accompanying financial statements of All Communications Corporation
("the Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with Item
310(b) of Regulation SB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results and
cash flows for the three months ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ending December
31, 2000. For further information, refer to the financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1999 and the Company's joint
proxy/prospectus included in Form S-4 of View Tech, Inc. ("View Tech") as
filed with the Securities and Exchange Commission.
The consolidated financial statements include the accounts of All
Communications Corporation and its wholly owned subsidiaries, AllComm
Products Corporation ("APC") and VTC Resources, Inc. ("VTC"). All
intercompany balances and transactions have been eliminated in
consolidation. The Company did not segregate or manage its operations by
business segment.
Note 2 - Income (loss) per share
Basic net income (loss) per share is calculated by dividing net income
(loss) by the weighted average number of common shares outstanding during
the period.
Diluted net income per share is calculated by dividing net income by the
weighted-average number of common shares outstanding plus the
weighted-average number of net shares that would be issued upon exercise of
stock options and warrants using the treasury stock method. Incremental
shares included in the 2000 diluted computations were 3,696,151. The
effects of such incremental shares in 1999 were anti-dilutive.
Note 3 - Merger with View Tech, Inc.
On December 27, 1999, the Company entered into an agreement to merge with
View Tech, Inc., a publicly held California based videoconferencing
solutions provider, in a transaction that will be accounted for as a
"reverse acquisition" using the purchase method. The reverse acquisition
method will result in the Company being recognized as the acquirer of View
Tech for accounting and financial reporting purposes. Under the merger
agreement, each share of the Company's common stock will be exchanged for a
specified number of shares of View Tech common stock. The merger is subject
to certain conditions, including approval by stockholders. The transaction
is expected to close in the second quarter of 2000.
-4-
ALL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
MARCH 31, 2000
The following summarized unaudited pro forma information for the year ended
December 31, 1999 and the quarter ended March 31, 2000 assumes that the
merger of the Company and View Tech occurred on January 1, 1999.
Quarter Ended Year Ended
March 31, December 31,
2000 1999
------------------ -----------------
Net revenues $ 15,197,295 $ 59,476,819
Operating loss (1,489,014) (8,894,803)
Net loss (2,235,831) (9,550,867)
Loss per share:
Basic (.09) (.40)
Diluted (.09) (.40)
The unaudited pro forma operating results reflect estimated pro forma
adjustments for the amortization of intangibles ($2,275,000 for the year
ended December 31, 1999 and $569,000 for the quarter ended March 31, 2000)
arising from the merger and other adjustments. Pro forma results of
operations information is not necessarily indicative of the results of
operations that would have occurred had the acquisition been consummated at
the beginning of 1999, or of future results of the combined entity.
The Company recognized net revenues of $431,000 and $1,047,000 for the year
ended December 31, 1999 and the quarter ended March 31, 2000, respectively,
from transactions with View Tech.
Note 4 - Class A Warrants and Options
On February 10, 2000 the Company announced its intention to redeem all
outstanding Class A warrants. Through March 31, 2000, the Company received
net proceeds of approximately $7,949,000 from the exercise of 1,910,640
warrants at $4.25 per warrant. Also during the 2000 period, the Company
received $446,000 from the exercise of stock options.
-5-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the Company's
consolidated financial statements and the notes thereto. The discussion of
results, causes and trends should not be construed to imply any conclusion that
such results or trends will necessarily continue in the future.
The statements contained herein, other than historical information, are or may
be deemed to be forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities and
Exchange Act of 1934, as amended, and involve factors, risks and uncertainties
that may cause the Company's actual results in future periods to differ
materially from such statements. These factors, risks and uncertainties, include
the relatively short operating history of the Company; market acceptance and
availability of new products; the non-binding and nonexclusive nature of
reseller agreements with manufacturers; rapid technological change affecting
products sold by the Company; the impact of competitive products and pricing, as
well as competition from other resellers; possible delays in the shipment of new
products; the success of pending and future mergers; and the availability of
sufficient financial resources to enable the Company to expand its operations.
Results of Operations
Three Months Ended March 31, 2000 ("2000 period") Compared to Three Months Ended
March 31, 1999 ("1999 period").
NET REVENUES. The Company reported net revenues of $5,984,000 for the 2000
period, an increase of $2,072,000, or 53% over revenues reported for the 1999
period of $3,912,000.
Voice communications - Sales of voice communications products and services
increased in the 2000 period by $398,000, or 21%, to $2,290,000, as compared to
$1,892,000 for the 1999 period. Revenues in both the 2000 and 1999 periods were
derived primarily from the sale of Lucent and Panasonic telecommunications
systems and software packages.
During the 2000 period, sales to one customer, Weichert Realtors accounted
for approximately $304,000, or 5% of total sales compared to $581,000, or 15% of
total sales for the 1999 period. Sales under the Company's preferred Vendor
Agreement with Cendant Corporation increased in the 2000 period by $115,000, or
25%, to $566,000, as compared to $451,000 for the 1999 period. Sales to Cendant,
as a percentage of net revenues, accounted for 9% for the 2000 period and 12%
for the 1999 period.
-6-
Videoconferencing - Sales of videoconferencing equipment increased in the
2000 period by $1,674,000, or 83%, to $3,694,000, as compared to $2,020,000 for
the 1999 period. During the 2000 period, sales to the Company's pending merger
partner, View Tech, amounted to $1,047,000, or 17% of net revenues.
GROSS MARGINS. Gross margins increased by 7% in the 2000 period to 36% of
net revenues, as compared to 29% of net revenues in the 1999 period. During the
2000 period the Company received $156,000 of commission income related to the
sale of service contracts and growth rebates totaling $205,000 from Lucent
Technologies. These items contributed 6% to the Company's gross margin. In
addition, the Company continues to benefit from favorable vendor pricing as unit
growth continues and from the sale of higher margin peripheral items and
services.
SELLING. Selling expenses increased by $534,000 to $1,419,000 or 24% of net
revenues in the 2000 period, as compared to $885,000 or 23% of net revenues in
the 1999 period. Sales salaries and commissions represented 62% of selling
expenses in the 2000 period and increased by $349,000, or 65%, to $884,000,
compared to $535,000, or 60% of selling expenses in the 1999 period. The
increase in sales compensation is due to higher commissions related to increases
in revenue and the addition of twelve new employees.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
by $277,000 to $584,000, or 10% of net revenues in the 2000 period, as compared
to $307,000, or 8% of net revenues in the 1999 period. The dollar increase in
the 2000 period was primarily attributable to higher compensation costs and bad
debt expense. Compensation costs increased by $59,000, or 32%, to $243,000 in
the 2000 period as compared to $184,000 in the 1999 period. The increase in
compensation costs is due to increases in officers' compensation and the
addition of one new employee. Bad debt expense increased by $134,000, to
$139,000 in the 2000 period as compared to $5,000 in the 1999 period. The
increase in bad debt expense is due to the overall increase in the Company's
customer base and increased revenue growth.
OTHER (INCOME) EXPENSES. In the 2000 period, this category included $12,000
of amortization of deferred financing costs related to the Company's working
capital credit facility. The Company also reported interest income of $30,000
and $9,000 in the 2000 period and 1999 period, respectively, and interest
expense of $23,000 and $53,000 in the 2000 period and 1999 period, respectively.
The increase in interest income is the result of the Company's investment of
proceeds from the Company's redemption of its outstanding Class A warrants. The
decrease in interest expense is a result of the Company's repayment of debt in
the 2000 period.
-7-
INCOME TAXES. Effective tax rates were 41% and 0% for the 2000 and 1999
periods, respectively. During the 1999 period, the Company maintained a
valuation allowance on deferred tax benefits relating to net operating loss
deductions and other temporary tax differences. These tax benefits were
recognized in subsequent 1999 periods after management determined that they were
realizable. During the 2000 period, income taxes were computed at the expected
combined statutory rate. Upon completion of the merger, View Tech is expected to
contribute substantial deferred tax assets (principally net operating loss
carryovers) for use against future taxable income earned by the merged entity.
The amount and availability of these deferred tax benefits will be determined
once the merger is consummated.
NET INCOME (LOSS). The Company reported net income for the 2000 period of
$75,745 or $.01 per share on a basic and diluted basis, respectively, as
compared to a net loss of $105,612 or $.02 per share on a basic and diluted
basis for the 1999 period.
Liquidity and Capital Resources
At March 31, 2000, the Company had working capital of $12,965,000 compared
to $4,526,000 at December 31, 1999, an increase of approximately 186%. In
addition, the Company had cash and cash equivalents of $7,167,000 compared to
$60,000 at December 31, 1999.
Net cash provided by operating activities for the 2000 period was $901,000
as compared to $627,000 for the 1999 period. The improvement in operating cash
flow in the 2000 period was due to net income of $76,000 in 2000 compared to a
net loss of $106,000 in 1999, higher collections on accounts receivable and
increases in customer deposits. Improvements in operating cash flows in 2000
were offset in part by increases in inventory and payments of accrued
liabilities.
Investing activities for the 2000 period included purchases of $94,000 for
office furniture, demonstration equipment and computer hardware as compared to
$30,000 for the 1999 period.
Financing activities provided cash of $6,300,000 during the 2000 period as
compared to a use of cash of $3,900 during the 1999 period. During the 2000
period, the Company received net proceeds of $7,949,000 from the exercise of
1,910,640 Class A warrants pursuant to a warrant redemption initiated in
February 2000. Also in the 2000 period, the Company received $446,000 from the
exercise of 252,000 common stock options. An additional $98,000 was received in
April from the exercise of 23,007 Class A warrants.
-8-
The Company used a portion of the proceeds of the warrant redemption to
reduce bank borrowings by $2,139,000 during the 2000 period. The Company is
negotiating a new two-year $15,000,000 credit facility with its commercial
lender. The current $5,000,000 lending agreement matures in May 2000. At March
31, 2000 the Company had no borrowings under this agreement.
Merger with View Tech
The Company and View Tech have executed a definitive agreement to merge the
two companies, subject to stockholder approval. The surviving corporation will
change its name to Wire One Technologies, Inc. upon consummation of the merger.
View Tech has incurred significant working capital deficiencies primarily as a
result of recurring operating losses. Due to these financial difficulties it is
likely that View Tech's business will require financial assistance from the
Company to pay certain current and past due obligations. The Company is
continuing to review View Tech's current financial condition in an effort to
quantify View Tech's cash flow requirements. The Company believes, however, that
it has sufficient resources to support View Tech's operations until the combined
companies have integrated their operations. In addition to estimated
professional fees and other costs associated with the pending merger of
$1,650,000, management is continuing to evaluate the costs of business
integration, including the need for more sophisticated management information
systems to manage the combined operations and business growth, and merger exit
costs such as severance pay and office closings.
Inflation
Management does not believe inflation had a material adverse effect on the
financial statements for the periods presented.
-9-
Part II
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the period
for which this report is filed.
-10-
Signatures
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ALL COMMUNICATIONS CORPORATION
Registrant
Date: May 15, 2000 By: /s/ Richard Reiss
-------------------------------------
Richard Reiss,
President and Chief Executive
Officer
Date: May 15, 2000 By: /s/ Scott Tansey
-------------------------------------
Scott Tansey
Vice President - Finance
(principal accounting officer)
-11-
Exhibit Index
Exhibit No. Description
27 Financial Data Schedule
-12-