10-Q/A 1 d99458ae10vqza.txt AMENDMENT NO. 1 TO FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q/A (Amendment No. 1) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended June 30 2002. [ ] 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 0-27683 AMERIVISION COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) OKLAHOMA 73-1378798 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 5900 MOSTELLER DRIVE, SUITE 1600 73112 OKLAHOMA CITY, OKLAHOMA (Zip Code) (Address of principal executive offices) (405) 600-3500 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark 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 [ ] Outstanding shares of the registrant's common stock, par value $0.10 per share, at July 31, 2002: 847,975. EXPLANATORY NOTE This Amendment is being filed to reflect corrections to typographical errors in the Condensed Consolidated Statements of Operations. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERIVISION COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Information at June 30, 2002 is unaudited)

The accompanying notes are an integral part of these financial statements. 2 AMERIVISION COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)

The accompanying notes are an integral part of these financial statements. 3 AMERIVISION COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY (In thousands)

The accompanying notes are an integral part of these financial statements. 4 AMERIVISION COMMUNICATIONS, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

The accompanying notes are an integral part of these financial statements. 5 AMERIVISION COMMUNICATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A--BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements for AmeriVision Communications, Inc. (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. In the opinion of the Company's management, the condensed consolidated financial statements reflect all adjustments, of a normal and recurring nature, that are necessary to present fairly the Company's financial position as of June 30, 2002, and the results of its operations and cash flows for the six months ended June 30, 2001 and 2002. The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. It is recommended that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes as of and for the year ended December 31, 2001. The interim results are not necessarily indicative of the results for a full year. Certain amounts in the condensed consolidated balance sheets as of June 30, 2002, have been reclassified to conform with the classifications used as of December 31, 2001. NOTE B--EARNINGS PER SHARE (share and per share amounts not in thousands) The computation of basic and diluted earnings per share for the three and six months ended June 30, 2001 and 2002, is as follows:

6 The conversion of redeemable stock was not assumed in the computation of diluted earnings (loss) per share for the three months ended June 30, 2001, or the six months ended June 30, 2001, because to do so would have been antidilutive for the periods. The conversion of convertible notes was not assumed in the computation of diluted earnings (loss) per share for the six months ended June 30, 2001 and 2002, because to do so would have been antidilutive for the periods. NOTE C--PRIOR PERIOD ADJUSTMENT Subsequent to December 31, 2001, the Company determined that it had incorrectly computed the amount of common stock subject to rescission by stockholders at December 31, 2000 and prior periods. Specifically, the Company did not correctly apply certain state statutes when it previously reported the amount of common stock subject to rescission. The effects of this error were to increase the stockholders' deficiency (1) from ($27,644) to ($28,427) at January 1, 1999, (2) from ($23,758) to ($24,785) at December 31, 1999, and (3) from ($22,636) to ($23,738) at December 31, 2000. The restatement did not have any affect on the previously reported results of operations or cash flows for the years ended December 31, 1999 and 2000. NOTE D--RELATED PARTY INFORMATION The Company has financial relationships with the following members of its Board of Directors: (a) Mr. Guthrie is the payee of the Company's promissory note, dated February 1, 2001, issued in the principal sum of $50,000, bearing interest at an annual interest rate of 14% (plus a late charge of 5% of any delinquent payment), carrying a maturity date of February, 1, 2002, and current balance of $45,000, (b) Mr. Nestegard is the payee of the Company's promissory note, dated February 1, 2001, issued in the principal sum of $325,000, bearing interest at an annual interest rate of 14% (plus a late charge of 5% of any delinquent payment), carrying a maturity date of February 1, 2002, and current balance of $292,500; (c) Mr. Telling, a former vice-president of the Company, is currently owed the monetary sum of $425,000, payable to him by the Company under the terms of an employment termination agreement entered into in December 1999 and which required an aggregate of $1,359,000 be paid to him over the succeeding four year period; and (d) Mr. Telling is the current chairman and president of Hebron Communications Corporation, a Florida corporation ("Hebron") which owns the building in which the Company's principal offices are located and from which the Company leases approximately 37,000 square feet of occupied space at an annual rental of slightly more than $500,000. Hebron is also the payee of three separate promissory notes, having an original aggregate face value of $3,451,000, issued by the Company in 1999 and 2000 as a consequence of the Company's purchase from that entity of certain telecommunications switching network equipment and Internet service product development assets. The aggregate principal balance currently owing under the notes is approximately $2,352,000, and because of cash disbursement limitations imposed by the Company's principal lender, all are in default and therefore carry annual interest rates of 18%. As of May 26, 2000 (the "Commencement Date"), the Company entered into an amended and restated employment agreement with Stephen Halliday, then the Company's president and chief executive officer and a member of its board of directors (the "CEO Agreement"). That agreement carried an effective initial term of five years, measured from October 1998, and was subject to automatic one year extensions unless either party notified the other of an intention to terminate at the end of the then existing term. Under its principal provision Mr. Halliday was to receive an annual salary of $450,000 which was increased to $600,000 on October 1, 1999, as well as rights to receive and options to acquire shares of the Company's Common Stock. Pursuant thereto, as of July 1, 2000, the Company issued Mr. Halliday 4,549 shares of Common Stock of which 50% were then deemed to be vested and an additional 25% were to be vested on each of the two succeeding anniversary dates of the issuance. Further, Mr. Halliday was entitled to receive a cash bonus equal to whatever additional income tax resulted from the vesting of such shares and the payment of such bonus, as well as two separate options to acquire (a) 27,296 shares of Common Stock at an exercise price of $28.86/share, and (b) 2% of the Common Stock deemed outstanding, on a fully diluted basis, as of May 26, 2003, at an exercise price of $36.075. As a direct consequence of the shareholder action taken in July 2001, 7 Mr. Halliday's status with the Company was modified and he chose to effect a good reason termination of the CEO Agreement. The Company and Mr. Halliday have recently executed Consulting and Settlement Agreement, effective as of January 1, 2002, under which the Company will pay Mr. Halliday the monthly sum of $41,300 from August 2002 through November 2006 and slightly different sums in July 2002 and December 2006, and Mr. Halliday will provide the Company with consulting services and have certain of his expenses, incurred in the performance of such activities, reimbursed by the Company. The agreement also contains non-competition and non solicitation provisions. The Company's monetary obligations under this arrangement have been evidenced by a promissory note, and the Company has recorded the present value of these payments as a current asset and a current liability. As a result of the shareholders' June 2002 election of a new board of directors, a "change of control" occurred under the note so as to place the Company in a state of technical default and Mr. Halliday in a position to demand full payment of the note's current principal balance of approximately $2 million. Mr. Halliday has informed the Company that he has no intention of exercising his demand rights as long as he believes the Company's management to be exercising reasonable and prudent business judgment in its managerial duties, and that no significant business decisions are being made without prior approval of the Company's board of directors or a representative with delegated authority to act for the board. During the three months ended June 30, 2002, the Company recorded long distance telecommunications service revenue from a single customer constituting approximately 18% of its total revenues for the period. In August 2002, the Company was notified by the customer of its intended redirection of its telecommunications service needs to other carriers during the third quarter 2002. NOTE E--LEGAL MATTERS In February 2001, the State of Florida assessed the Company for underpayment of various Florida taxes, including gross receipts taxes and sales and use taxes, covering the periods from September 1993 through August 1998, to the extent of approximately $1,728, including penalties and interest of approximately $847. The Company agreed with $14 of the assessment and subsequently paid that amount. The Company disagrees with the remaining assessment of $1,714, and has asserted that satisfaction of any underpaid taxes was the responsibility of the Company's third-party billing and collection companies. The State of Florida has requested an extension to December 31, 2003 to complete its audit. The Company believes that it will ultimately prevail in its protest of the assessment, and has not recorded a liability as of December 31, 2001 or June 30, 2002. NOTE F--SUBSEQUENT EVENT On August 6, 2002, the Company was notified by Coast Business Credit, a Division of Southern Pacific Bank ("Coast"), the Company's primary lender, of its intention not to renew the Credit Facility following the occurrence of its current maturity date, January 30, 2003. The Company is currently considering available financing options, including an extension of the Coast relationship upon alternative terms. If the Company is not successful in obtaining alternative financing, there could be a material adverse effect on the Company's ability to continue operations at its current levels or to meets its obligations as they come due. 8 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERIVISION COMMUNICATIONS, INC. DATE: September 4, 2002 /s/ John E. Telling -------------------- John E. Telling, President and Chief Executive Officer /s/ Loni Woodley ---------------- Loni Woodley, Treasurer and Chief Financial Officer (Principal Financial Officer)

AMERIVISION COMMUNICATIONS INC 10-Q/A