UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-26624
ALTERNATE MARKETING NETWORKS, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 38-2841197
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
13155 Noel Road, 10th Floor, Dallas, TX 75240
(Address of principal executive offices)
972-720-3500
(Issuer's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
[X]Yes [ ]No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of August 7, 2003,
there were 9,895,878 shares of common stock, par value $0.01 per share, of
the issuer outstanding.
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
FORM 10-QSB
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis or Plan of Operation . .14
Item 3. Controls and Procedures . . . . . . . . . . . . . . . . . . .27
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . .29
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . .29
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . .30
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . .30
Item 4. Submission of Matters to a Vote of Security Holders . . . . .30
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . .30
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . .30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, December 31,
2003 2002
(unaudited)
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 14,491 $ 550,123
Accounts receivable, trade, net of
allowance of $150,000 4,617,721 3,948,567
Prepaid expenses and other assets 119,340 141,130
Refundable federal income tax 130,505 308,282
----------- -----------
Total current assets 4,882,057 4,948,102
Property and equipment, net 155,862 210,727
Goodwill 3,973,681 7,973,681
----------- -----------
Total assets $ 9,011,600 $13,132,510
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, bank and other $ 1,076,028 $ 1,394,508
Current portion of long-term debt 231,219 308,615
Accounts payable, trade 3,866,285 3,012,237
Accounts payable, other 295,848 484,221
Accrued liabilities 852,372 992,425
----------- -----------
Total current liabilities 6,321,752 6,192,006
Long-term debt - less current portion 77,410 940,993
Redeemable common stock put 300,000 --
Shareholders' equity:
Common stock, $.01 par value -11,369,917
and 8,895,878 shares issued at June 30,
2003 and December 31, 2002, respectively 113,699 88,958
Additional paid in capital 13,988,275 13,084,069
Treasury stock, 1,474,039 shares at cost (334,607) --
Accumulated deficit (11,454,929) (7,173,516)
----------- -----------
Total shareholders' equity 2,312,438 5,999,511
----------- -----------
Total liabilities and
shareholders' equity $ 9,011,600 $13,132,510
=========== ===========
See notes to condensed consolidated financial statements.
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
2003 2002 2003 2002
----------- ---------- ----------- ----------
(unaudited) (unaudited)
Net revenues $ 7,510,462 $ 4,236,940 $12,713,046 $ 8,318,485
Cost of revenues 6,038,488 3,325,403 9,891,249 6,497,332
---------- ----------- ----------- -----------
Gross profit 1,471,974 911,537 2,821,797 1,821,153
Selling, general and
administrative expenses 1,408,907 982,203 3,109,380 1,982,373
Goodwill impairment 4,000,000 -- 4,000,000 --
---------- ----------- ----------- -----------
Loss from operations (3,936,933) (70,666) (4,287,583) (161,220)
Other income (expense) 61,449 5,042 6,995 12,856
---------- ----------- ----------- -----------
Loss before income taxes (3,875,484) (65,624) (4,280,588) (148,364)
Income tax expense 825 470 825 2,558
---------- ----------- ----------- -----------
Loss before accounting
change (3,876,309) (66,094) (4,281,413) (150,922)
Cumulative effect of
accounting change (Note 5) -- -- -- (1,204,058)
---------- ----------- ----------- -----------
Net loss $(3,876,309) $ (66,094) $(4,281,413) $(1,354,980)
========== =========== =========== ===========
Net loss per share - basic and diluted:
Loss before accounting
change $ (0.39) $ (.01) $ (0.44) $ (0.03)
Cumulative effect of
accounting change -- -- -- (0.26)
---------- ---------- ----------- -----------
Net loss $ (0.39) $ (.01) $ (0.44) $ (0.29)
========== ========== =========== ===========
Weighted average number of shares
outstanding:
Basic and diluted 9,895,878 4,586,005 9,630,685 4,586,005
========== ========== =========== ===========
See notes to the condensed consolidated financial statements.
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Six months ended
June 30,
--------------------------
2003 2002
------------ ------------
(unaudited)
Operating activities:
Net loss $(4,281,413) $(1,354,980)
Noncash items in net loss:
Cumulative effect of accounting change -- 1,204,058
Depreciation 70,865 16,664
Amortization 6,222 21,506
Goodwill impairment charge 4,000,000 --
Gain/(loss) on the sale of assets 1,050 --
Changes in operating assets and liabilities:
Accounts receivable 669,154 (73,084)
Prepaids and other current assets (199,567) (143,578)
Accounts payable 665,675 (68,516)
Accrued liabilities (140,053) 734
----------- ----------
Net cash used in operating activities (149,341) (397,196)
----------- ----------
Investing activities:
Purchases of property, equipment, and software (22,222) --
Proceeds from sale of equipment 1,050 --
---------- ----------
Net cash used in investing activities (21,172) --
---------- ----------
Financing activities:
Payment of dividends -- (2,293,052)
Increase (decrease) in notes payable, bank (525,000) 165,000
Increase (decrease) in notes payable, other 159,881 --
---------- ----------
Net cash used in financing activities (365,119) (2,128,052)
---------- ----------
Net decrease in cash and cash equivalents (535,632) (2,525,248)
Cash and cash equivalents, beginning of period 550,123 3,783,082
---------- ----------
Cash and cash equivalents, end of period $ 14,491 $1,257,834
========== ==========
See notes to the condensed consolidated financial statements.
ALTERNATE MARKETING NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Summary of Significant Accounting Policies:
The interim financial data is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of financial
position, cash flows, and the results of operations for the interim periods.
The financial statements included herein have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although management believes that the disclosures included
herein are adequate to make the information presented not misleading. The
results of operations for the three months and six months ended June 30, 2003
are not necessarily indicative of the results of operations expected for the
year ending December 31, 2003.
Certain prior year amounts have been reclassified to conform with
current year classifications.
The year-end consolidated balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles. The organization and business of
the Alternate Marketing Network, accounting policies followed by Alternate
Marketing Networks and other information are contained in the notes to the
financial statements filed as part of the Form 10-KSB for the fiscal year
ended December 31, 2002. This quarterly report should be read in conjunction
with the Form 10-KSB.
Recent Accounting Pronouncements
In June 2002 the Financial Accounting Standards Board ("FASB") approved
for issuance SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities." SFAS No. 146 requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. This statement
is effective for fiscal years beginning after December 31, 2002. The
adoption of SFAS No. 146 did not have a material effect on the financial
position or results of operations of Alternate Marketing Networks.
Effective January 1, 2003, we adopted FASB Interpretation No.45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB
Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34"
("FIN No. 45"). The interpretation requires that upon issuance of a
guarantee, the entity must recognize a liability for the fair value of the
obligation it assumes under that guarantee. In addition, FIN No. 45 requires
disclosures about the guarantees that an entity has issued, including a roll
forward of the entity's product warranty liabilities. This interpretation is
intended to improve the comparability of financial reporting by requiring
identical accounting for guarantees issued with separately identified
consideration and guarantees issued without separately identified
consideration. Adoption of this Interpretation had no effect on our
consolidated financial position, consolidated results of operations, or cash
flows.
In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (FIN No. 46), which addresses consolidation by
business enterprises of variable interest entities. FIN No. 46 clarifies the
application of Accounting Research Bulletin No. 51, Consolidated Financial
Statements, to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN No. 46 applies
immediately to variable interest entities created after January 31, 2003, and
to variable interest entities in which an enterprise obtains an interest
after that date. It applies in the first fiscal year or interim period
beginning after June 15, 2003, to variable interest entities in which an
enterprise holds a variable interest that it acquired before February 1,
2003. Alternate Marketing Networks does not expect to identify any variable
interest entities that must be consolidated and thus does not expect the
requirements of FIN No. 46 to have a material impact on its financial
condition or results of operations.
In May 2003, FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity," which
requires issuers to classify certain financial instruments as liabilities (or
assets in some circumstances). SFAS No.150 covers certain financial
instruments that embody an obligation that the issuer can or must settle by
issuing its own equity shares and instruments that require the issuing
company to buy back all or some of its shares in exchange for cash or other
assets. The new standard also requires disclosures about alternative ways to
settle the instruments and the capital structure of entities, all of whose
shares are mandatorily redeemable. The provisions of SFAS No. 150 are
effective for financial instruments entered into or modified after May 31,
2003. Alternate Marketing Networks plans to adopt the new standard beginning
in the third quarter of fiscal 2003 for all financial instruments entered
into prior to May 31, 2003 and does not anticipate that the adoption will
have a material effect on the its consolidated results of operations,
financial position, or cash flows.
2. Net Loss Per Share:
Basic earnings (loss) per share is calculated by dividing net income
(loss) by the weighted average shares of common stock outstanding during the
period. Diluted earnings (loss) per share is calculated by dividing the net
income by the weighted average number of common shares used in the basic
earnings per share calculation plus the number of common shares that would be
issued assuming conversion of all potentially dilutive shares outstanding.
The anti-dilutive effects of all outstanding options for 1,939,600 shares
were excluded from the calculation of the loss per share.
3. Segment Information and Significant Customers:
For evaluation of profitability and allocation of assets and resources,
Alternate Marketing Networks is divided into three operating segments by
product areas: (i) advertising and marketing, which includes newspaper
advertising; (ii) logistics, which includes the delivery of telephone
directories and tracking, verification and transportation services; and (iii)
technology, which includes IT consulting services. Management evaluates the
segments' profitability primarily based on their gross profits.
Substantially all of the revenues of Alternate Marketing Networks are
generated in the United States.
During the six months ended June 30, 2003, the advertising and marketing
segment had three customers that accounted for a total of approximately 49%
of the segment revenues, the logistics segment had one customer that
accounted for approximately 90% of the segment revenues, and the technology
segment had two customers that accounted for a total of approximately 87% of
the segment revenues.
Segment analysis for the three and six months ended June 30, 2003 and
2002 is provided in the tables below.
Segment analysis is provided as follows:
Three months ended Six months ended
June 30, June 30,
---------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ----------- -----------
Revenues:
Advertising and Marketing $4,958,764 $3,320,664 $ 7,798,344 $ 6,613,273
Logistics 692,411 916,276 1,316,953 1,705,212
Technology 1,859,287 -- 3,597,749 --
---------- ---------- ----------- -----------
Total Revenues $7,510,462 $4,236,940 $12,713,046 $ 8,318,485
========== ========== =========== ===========
Gross Profits:
Advertising and Marketing $ 576,494 $ 511,230 $ 1,010,581 $ 1,083,135
Logistics 305,569 400,307 630,403 738,018
Technology 589,911 -- 1,180,813 --
---------- ---------- ----------- -----------
Total Gross Profit 1,471,974 911,537 2,821,797 1,821,153
Selling, general &
administrative expenses 1,408,907 982,203 3,109,380 1,982,373
Goodwill impairment 4,000,000 -- 4,000,000 --
Other income (expense), net 61,449 5,042 6,995 12,856
Income tax expense 825 470 825 2,558
---------- ---------- ---------- ----------
Income (loss) before
accounting change $(3,876,309) $ (66,094) $ (4,281,413) $ (150,922)
========== ========== =========== ==========
Gross Profit Percentages:
Advertising and Marketing 11.6% 15.4% 13.0% 16.4%
Logistics 44.1% 43.7% 47.9% 43.2%
Technology 31.7% -- 32.8% --
---------- ---------- ---------- ----------
Total Gross Profit 19.6% 21.5% 22.2% 21.9%
========== ========== ========== ==========
Accounts receivable and revenues from significant customers represent
the following percentages of net accounts receivable and total revenues Of
Alternate Marketing Networks as follows:
Revenues for the
Accounts Receivable at Six Months Ended
June 30, 2003 June 30, 2003
Customer A 14% 18%
Customer B 12% 15%
Customer C 12% 9%
Customer D 1% 7%
Customer E 12% 6%
Customer F 20% 9%
4. Stock based compensation:
On March 6, 2003, the Board of Directors of Alternate Marketing Networks
increased the number of shares reserved and authorized for issuance under the
1995 Long-Term Incentive Stock Option Plan (the "Incentive Plan") from
1,500,000 to 3,000,000, subject to stockholder approval. This proposal was
approved at the annual shareholder meeting on May 8, 2003.
For all of the stock based compensation plans as of June 30, 2003,
options for 1,939,600 shares were outstanding. During the six months ended
June 30, 2003, options for 1,775,000 shares were granted and options for
5,500 shares expired. Shares of 1,095,400 remain reserved and available for
future grants.
Alternate Marketing Networks applies APB Opinion No. 25 and related
interpretations in accounting for its stock option plans. All options
granted to date were granted with exercise prices not less than the fair
market value of the common stock of Alternate Marketing Networks on the date
of grant. Therefore, no compensation expense for stock options has been
recognized in any year. If compensation cost for the stock based plans had
been determined based on the fair value of the options at the grant dates,
consistent with the method prescribed by SFAS No. 123, "Accounting for Stock
Based Compensation", the net loss and loss per share would have been adjusted
to the pro forma amounts indicated in the following table:
Six months ended
June 30,
2003 2002
---------- ----------
Net Loss
As Reported $(4,281,413) $(1,354,980)
Fair value based compensation expense 12,006 1,632
---------- ---------
Pro Forma $(4,293,419) $(1,356,612)
========== =========
Loss Per Share - basic and diluted
As Reported ($0.44) ($0.29)
Pro Forma ($0.45) ($0.30)
5. Change in Accounting for Goodwill Impairment and Amortization:
In July 2001, the FASB issued SFAS No. 142 "Goodwill and Intangible
Assets," which required the cessation of amortization of goodwill and
"indefinite-lived" intangible assets, and impairment testing and potential
loss recognition, at least annually, for goodwill and non-amortized
intangible assets, effective for the Company as of January 1, 2002.
In connection with the adoption of SFAS No. 142, the Alternate Marketing
Networks allocated goodwill to each of its reporting units and tested this
goodwill for impairment as of January 1, 2002. Alternate Marketing Networks
completed the testing during the second quarter ending June 30, 2002. As a
result, a charge of $1,204,058 was recorded to goodwill assigned to the
Logistics reporting unit. The remaining goodwill of $885,942 at June 30,
2002 was assigned to the Advertising and Marketing reporting unit.
As required under SFAS No. 142, the carrying value of goodwill is
reviewed periodically and at any time when there may be general impairment
indicators present that an impairment may have occurred.
As of June 30, 2003, management reviewed the carrying value of goodwill
assigned to the two reporting units. The review concludes that no adjustment
should be made to the carrying value of goodwill of $885,942 assigned to the
Advertising and Marketing reporting unit. The review of the carrying value
of goodwill of $7,087,039 associated with the Technology reporting unit
indicated that an impairment charge needed to be made. The Technology
reporting unit had performed well below expectations, its obligations
substantially exceed its assets, and the short-term outlook is for continued
difficulty. Therefore, the detailed annual impairment testing required by
SFAS No. 142, which was anticipated to occur as of September 30, 2003, was
accelerated to this period. Based on the results of this review, an
impairment charge of $4,000,000 was recorded to the goodwill associated with
the Technology reporting unit.
6. Acquisition of Hencie, Inc.:
On May 31, 2002, Alternate Marketing Networks entered into an Amended
and Restated Agreement and Plan of Reorganization pursuant to which it
acquired approximately 82% of the common stock of Hencie, Inc., a Delaware
corporation. Hencie is an information technology company offering Oracle
software consulting, implementation, and support services for a broad range
of clients and industry segments. The acquisition was approved at the annual
stockholder meeting held July 23, 2002 and was effective August 1, 2002. In
exchange for approximately 82% of Hencie's common shares, Alternate Marketing
Networks issued 3,982,323 common shares utilizing an exchange ratio of 1
share of its common stock for 3.563 shares of Hencie common stock. The
business of Hencie added a third operating segment to the services of
Alternate Marketing Networks. Costs directly related to this acquisition of
$212,283 are included in the total acquisition price.
As of August 1, 2003, the estimated fair value of the common shares
issued by Alternate Marketing Networks in connection with this acquisition
was approximately $2.5 million ($.646 per share), and Hencie's net
liabilities assumed by the Company were approximately $4.3 million, which
resulted in goodwill and other intangible assets of approximately $7 million.
The Company completed an interim impairment test of the goodwill related to
Hencie as of June 30, 2003 and recorded an impairment charge of $4,000,000.
The unaudited pro forma combined historical results, as if Hencie had
been acquired and the related common shares had been issued at the beginning
of 2002, are provided as follows:
Six months ended June 30,
2003 2002
------------- -------------
(unaudited)
Revenues $12,713,046 $13,000,340
Loss from continuing operations ** (281,413) (1,116,843)
Net loss ** $ (281,413) $(1,116,843)
Basic and diluted loss per share $ (0.03) $ (0.13)
**The 2002 period excludes a charge for the cumulative effect of accounting
change of $1,204,058. The 2003 period excludes a goodwill impairment charge
of $4,000,000.
The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisition had been completed as of the beginning
of 2002, nor are they necessarily indicative of future consolidated results.
7. Drawbridge Note Payable Settlement:
Effective as of January 1, 2003, the Company's CEO contributed 1,474,039
common shares outstanding to the Company. This capital contribution was
accounted for as treasury stock, at the estimated fair value of the shares,
and additional paid in capital of $334,607.
On February 14, 2003 Alternate Marketing Networks granted options to the
CEO to purchase 1,700,000 common shares at $0.50 per share. On February 18,
2003, the Company entered into the Release Agreement by and among the
Company, Hencie, Inc., Hencie Consulting Services, Inc., K2VC LTD., Adil Khan
(CEO), Drawbridge Investment Partners, LLC, and certain directors and
stockholders of the Company. The agreement provided for settlement of the
Drawbridge note payable and accrued interest, $991,734 and $22,606,
respectively, for a cash payment of $120,000 to Drawbridge, issuance of
2,474,039 shares of Common Stock of Alternate Marketing Networks to
Drawbridge, registration rights for such shares, and a contingent obligation
for Alternate Marketing Networks to repurchase $100,000 of the its common
stock, at a minimum price of $0.50 per share, from Drawbridge annually for
three years beginning February 18, 2004 ("redeemable common stock put").
Management estimates the total cash and fair value of the equity
consideration given as follows:
Common stock issued $ 577,245
Common stock options granted 153,295
Redeemable common stock put 163,800
Cash 120,000
----------
$1,014,340
==========
The total maximum cash redemption requirement of the redeemable common
stock put of $300,000 is classified in the balance sheet as temporary equity
at June 30, 2003. This obligation may decrease, contingent on, among other
things, the remaining number of the Company's common shares held by
Drawbridge at the redemption dates in February 2004, 2005 and 2006.
8. Financing and Debt:
The Company has financing agreements for its subsidiaries. National
Home Delivery, Inc., an Illinois corporation and a wholly owned subsidiary of
Alternate Marketing Networks, amended its existing financing agreements with
Fifth Third Bank (the "NHD Credit Facility") on April 29, 2003 to extend the
maturity date under the NHD Credit Facility from May 1, 2003 to May 1, 2004.
The NHD Credit Facility provides for borrowings up to $1,000,000. Borrowings
under the NHD Credit Facility accrue interest at Fifth Third's prime rate
plus 100 basis points (5% as of July 31, 2003). Available borrowings under
the NHD Credit Facility are subject to conditions and restrictions,
including, without limitation, eligible accounts receivable restrictions and
other restrictive financial covenants and performance ratios applicable to
National Home Delivery. In addition, the agreement prohibits any
distribution to Alternate Marketing Networks or its subsidiaries unless the
bank consents to in advance and in writing. The NHD Credit Facility is
secured by substantially all of the assets of Alternate Marketing Networks,
Inc. and National Home Delivery, Inc. As of June 30, 2003, borrowings in the
amount of approximately $600,000 were outstanding and credit in the amount of
approximately $400,000 was available under the NHD Credit Facility.
Alternate Postal Direct, Inc., a Michigan corporation and a wholly owned
subsidiary of Alternate Marketing Networks, entered into a new financing
agreement with Accord Financial, Inc., (the "APD Credit Facility") on April
30, 2003 to replace the financing agreements between Alternate Postal Direct
and Fifth Third Bank that expired on May 1, 2003. The APD Credit Facility
provides for the sale of accounts receivable by Alternate Postal Direct to
Accord at a 1.5% discount. Advances under the APD Credit Facility accrue
interest at the prime commercial rate of interest established from day to day
by Bank of America, Inc. for short term unsecured loans to substantial
borrowers (4% as of July 31, 2003). Sales of accounts receivable and
advances under the APD Credit Facility are subject to conditions and
restrictions, including, without limitation, accounts receivable eligibility
restrictions, verification, and approval. Obligations under the APD Credit
Facility are secured by substantially all of the assets of Alternate Postal
Direct and guaranteed by Alternate Marketing Networks and Hencie Consulting.
As of June 30, 2003, advances of approximately $117,000 were outstanding.
Advances under the APD Credit Facility are made only at the sole discretion
of Accord, even if the accounts receivable offered by Alternate Postal Direct
for sale to Accord satisfy all necessary conditions and restrictions. Accord
is under no obligation to purchase accounts receivable from Alternate Postal
Direct or advance any funds or credit to Alternate Postal Direct under the
APD Credit Facility.
Hencie Consulting amended its existing financing agreement with Accord
(the "HCS Credit Facility") on April 29, 2003, and is currently in
discussions to amend and restate the HCS Credit Facility. The HCS Credit
Facility provides for the sale of accounts receivable by Hencie Consulting to
Accord at a 1.5% discount. Advances under the HCS Credit Facility accrue
interest at the prime commercial rate of interest established from day to day
by Bank of America, Inc. for short term unsecured loans to substantial
borrowers (4% as of July 31, 2003). Sales of accounts receivable and
advances under the HCS Credit Facility are subject to conditions and
restrictions, including, without limitation, accounts receivable eligibility
restrictions, verification, and approval. Obligations under the HCS Credit
Facility are secured by substantially all of the assets of Hencie Consulting
and guaranteed by Alternate Marketing Networks and Alternate Postal Direct.
As of June 30, 2003, advances in the amount of approximately $359,000 were
outstanding. Advances under the HCS Credit Facility are made only at the
sole discretion of Accord, even if the accounts receivable offered by Hencie
Consulting for sale to Accord satisfy all necessary conditions and
restrictions. Accord is under no obligation to purchase accounts receivable
from Hencie Consulting or advance any funds or credit to Hencie Consulting
under the HCS Credit Facility.
Item 2. Management's Discussion and Analysis or Plan of Operation.
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act,
including, without limitation, in the discussions under the captions
"Management's Discussion and Analysis or Plan of Operation" and elsewhere in
this report. Any and all statements contained in this report that are not
statements of historical fact may be deemed forward-looking statements.
Terms such as may, might, will, would, should, could, project, estimate, pro
forma, predict, potential, strategy, anticipate, attempt, develop, plan,
help, believe, continue, intend, expect, future, and similar terms and terms
of similar import (including the negative of any of the foregoing) may be
intended to identify forward-looking statements. However, not all forward-
looking statements may contain one or more of these identifying terms.
Forward-looking statements in this report may include, without limitation,
statements regarding (i) a projection of revenues, income (including
income/loss), earnings (including earnings/loss) per share, capital
expenditures, dividends, capital structure, or other financial items, (ii)
the plans and objectives of management for future operations, including plans
or objectives relating to our products or services, (iii) future economic
performance, including any statement contained in management's discussion and
analysis of our financial condition or in the results of operations included
pursuant to the rules and regulations of the SEC, or (iv) the assumptions
underlying or relating to any statement(s) described in subparagraphs (i),
(ii), or (iii) of this paragraph.
The forward-looking statements are not meant to predict or guarantee
actual results, performance, events, or circumstances and may not be realized
because they are based upon our current projections, plans, objectives,
beliefs, expectations, estimates, and assumptions and are subject to a number
of risks and uncertainties and other influences, many of which we have no
control over. Actual results and the timing of certain events and
circumstances may differ materially from those described by the forward-
looking statements as a result of these risks and uncertainties. Factors
that may influence or contribute to the inaccuracy of the forward-looking
statements or cause actual results to differ materially from expected or
desired results may include, without limitation, inability to obtain adequate
financing, inability to collect accounts receivable, insufficient cash flows
and resulting illiquidity, dependence upon software vendors or significant
customers, loss of any significant customer, dispute with any significant
customer, landlord, or lender, inability to expand our business, lack of
diversification, sales volatility or seasonality, increased competition,
changing customer preferences, results of arbitration and litigation, stock
volatility and illiquidity, failure to implement the business plans or
strategies of Alternate Marketing Networks, failure to attract acquisition
targets, or ineffectiveness of the marketing program to develop and
capitalize on strategic alliances. A description of some of the risks and
uncertainties that could cause actual results to differ materially from those
described by the forward-looking statements in this report appears under the
caption "Risk Factors" in our most recently filed Form 10-KSB and the
registration statement on Form SB-2/A filed by Alternate Marketing Networks
with the SEC on May 7, 2003. Because of the risks and uncertainties related
to these factors and the forward-looking statements, readers of this report
are cautioned not to place undue reliance on the forward-looking statements.
Alternate Marketing Networks disclaims any obligation to update these
forward-looking statements or to announce publicly the results of any
revisions to any of the forward-looking statements contained in this report
to reflect any new information or future events or circumstances or
otherwise.
Readers should read this report and the following discussion and
analysis in conjunction with the discussion under the caption "Risk Factors"
in the most recently filed Form 10-KSB, the registration statement on Form
SB-2/A filed by Alternate Marketing Networks with the SEC on May 7, 2003, the
Condensed Consolidated Financial Statements and the related notes thereto
included in Item 1 of Part I of this report, and other documents filed by
Alternate Marketing Networks from time to time with the SEC.
Overview
Alternate Marketing Networks is a business services company serving
Fortune 500 and middle market companies, through three complementary lines of
business services: software implementation and support services; logistics
process management; and advertising and marketing process management.
Services are provided throughout the United States to clients such as General
Motors, Verizon, Raytheon, and Lone Star Steel.
Our Services
Technology Segment
The technology segment provides software consulting, implementation, and
support services related to Oracle Corporation's suite of products.
Logistics Segment
The logistics segment delivers and tracks and verifies the delivery of
various products, including telephone directories, and provides brokered
transportation of various goods for national and regional companies.
Advertising and Marketing Segment
The advertising and marketing segment forms newspaper advertising
networks and sells and places print advertising and advertising inserts in
suburban newspapers for national advertisers.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Assumptions and estimates of future earnings and cash flow
are used in the periodic analyses of the recoverability of goodwill, deferred
tax assets, and property, plant and equipment. Historical experience and
trends are used to estimate reserves, including reserves for bad debts. To
the extent that future earnings, cash flows and costs and losses are
determined to be different from the assumptions and estimates used,
adjustments may be required.
There have been no significant changes to the critical accounting
policies, estimates and judgments disclosed in the Form 10-KSB for the year
ended December 31, 2002.
Results of Operations for the Three Months Ended June 30, 2003 Compared to
Three Months Ended June 30, 2002.
Summary financial data is provided in the table below:
Three months ended June 30,
2003 2002
---------------- ----------------
Amount % Amount %
Net revenues $7,510,462 100% $4,236,940 100%
Cost of revenues 6,038,488 80% 3,325,403 78%
---------- ----------
Gross profit 1,471,974 20% 911,537 22%
S,G,& A expenses 1,408,907 19% 982,203 23%
Goodwill impairment 4,000,000 53% --
---------- ----------
Operating loss (3,936,933)(52%) (70,666) (1%)
Interest income/(expense) (39,138) (1%) 5,042 0%
Other income 100,587 1% --
---------- ----------
Net loss before taxes and
accounting change $(3,875,484)(52%) $ (65,624) (1%)
========== ==========
Overview of Operating Results
Management realized, during the three months ended June 30, 2003, that
the technology segment was not going to achieve previous expectations. In
order to compensate for the significant revenue shortfalls, management
terminated approximately five employees and eliminated approximately two
vacant employee positions of the technology segment. The technology segment
also renegotiated its lease to reduce the total leased office space, rent,
and other related expenses.
During the same period, the advertising and marketing segment was
appointed by the media-buying agency of a large automotive manufacturer as
the placement agent for approximately 600 small to mid-sized newspapers. We
expect this business to significantly increase the revenue of this segment.
However, this revenue is at a lower than average gross margin and will
require an increase in operating expenses to handle the business, thereby
reducing the net positive effects of the expected revenue increase.
The logistics segment remained consistent with management's expectations
as it continues to operate under its long-term contract with Verizon.
Operating Results
Net revenues for the three months ended June 30, 2003 and 2002, were as
follows:
Three months ended June 30,
2003 2002
---------------- ----------------
Amount % Amount %
Technology $1,859,287 25% $ -- --
Advertising and Marketing 4,958,764 66% 3,320,664 78%
Logistics 692,411 9% 916,276 22%
---------- ---- ---------- ----
Total net revenues $7,510,462 100% $4,236,940 100%
========== ==== ========== ====
Total net revenues increased $3,273,522 (77%) to $7,510,462 for the
three months ended June 30, 2003 from $4,236,545 for the three months ended
June 30, 2002. The technology segment, acquired effective August 1, 2002,
accounted for net revenues of $1,859,287 during this three-month period of
2003. The net revenues of the advertising and marketing segment increased
$1,638,100 (49%) from $3,320,664 for the three months ended June 30, 2002 to
$4,958,764 for the three months ended June 30, 2003 as this segment began
placing ads for a large automotive manufacturer. During the second quarter
of 2003, the media-buying agency for a large automotive manufacturer
appointed the advertising and marketing segment of Alternate Marketing
Networks as the placement agent for approximately 600 small to mid-sized
newspapers. Net revenues of the logistics segment decreased $223,865 (24%)
for the three months ended June 30, 2003 compared to the comparable period of
2002 primarily due to reduced sales of transportation logistics services.
Pricing in the logistics and advertising and marketing segments remained
consistent. We believe that pricing in the technology segment has decreased
from the first quarter of 2003 due to competitive factors, including customer
demand, and the effects of the national economy, such as decreased large
capital expenditure budgets.
Cost of revenues by segment and percentage of total cost of revenues for
the three months ended June, 2003 and 2002 were as follows:
Three months ended June 30,
2003 2002
------------------ ------------------
Amount % Amount %
Technology $1,269,376 21% $ -- --
Advertising and Marketing 4,382,270 73% 2,809,434 84%
Logistics 386,842 6% 515,969 16%
---------- ---- ---------- ----
Total cost of revenues $6,038,488 100% $3,325,403 100%
========== ==== ========== ====
Cost of revenues increased $2,713,085 (82%) for the three months ended
June 30, 2003 compared to the three months ended June 30, 2002. This
increase was attributable to the increase in net revenues from the recently
acquired technology segment as well as the increase in revenues of the
advertising and marketing segment.
Gross profit per segment and percentage of total gross profit for the
three months ended June 30, 2003 and 2002 were as follows:
Three months ended June 30,
2003 2002
----------------- -----------------
Amount % Amount %
Technology $ 589,911 40% $ -- --
Advertising and Marketing 576,494 39% 511,230 56%
Logistics 305,569 21% 400,307 44%
---------- ---- ---------- ----
Total gross profit $1,471,974 100% $ 911,537 100%
========== ==== ========== ====
Gross Profit Percentages by Segment:
2003 2002
------- -------
Technology 31.7% --
Advertising and marketing 11.6% 15.4%
Logistics marketing 44.1% 43.7%
------- -------
Total Gross Profit 19.6% 21.5%
======= =======
Gross profit increased $560,437 (62%) for the three months ended June
30, 2003 compared to the three months ended June 30, 2002. This increase was
primarily attributable to the acquisition of the technology segment, and to a
lesser extent from the increased revenue in the advertising and marketing
segment. The gross profit percentage in the advertising and marketing
segment was affected by the lower gross profit margin under the new
automotive business.
Selling, general, and administrative expenses increased $426,704 (43%)
for the three months ended June 30, 2003 to $1,408,907 from $982,203 for the
three months ended June 30, 2002. This increase was primarily due to the
acquisition of the technology segment and the resulting increased number of
employees, from the three months ended June 30, 2002 compared to the same
period in 2003, as well as related overhead expenses. In addition, Alternate
Marketing Networks incurred significant additional legal and professional
service expenses, primarily due to an increase in these expenses associated
with the technology segment and implementation of the Sarbanes-Oxley Act of
2002.
As of June 30, 2003, a goodwill impairment charge was recorded to the
technology reporting unit as a result of the impairment testing performed by
management. Management felt that indicators were present and upon subsequent
review, recorded an impairment charge of $4,000,000 assigned to the
technology reporting unit.
As a result of the foregoing, operation profits increased $133,733 for
the three months ended June 30, 2003 to $63,067 from a loss of $(70,666) for
the three months ended June 30, 2002.
Interest income for the three months ended June 30, 2003 and 2002 was
$333 and $5,475, respectively. Interest expense for the three months ended
June 30, 2003 and 2002 was $39,471 and $433 respectively. The reduction in
interest income, net of interest expense was due to the decrease in cash
available for investing as well as interest expense attributable to
additional borrowings in 2003.
Other income for the three months ended June 30, 2003 consists of
$99,537 for the gain recognized on a lease renegotiation and abatement of
previously recorded rent expense and $1,050 for a gain from the sale of
assets.
As of January 1, 2002 Alternate Marketing Networks adopted SFAS No. 142,
allocated goodwill of $2,004,447 to each of its reporting units, and tested
this goodwill for impairment. The testing was completed during the second
quarter ending June 30, 2002. As a result, a charge of $1,204,058 was
recorded for the goodwill assigned to the logistics reporting unit as a
cumulative effect of accounting change.
Results of Operations for the Six Months Ended June 30, 2003 Compared to Six
Months Ended June 30, 2002.
Summary financial data is provided in the table below:
Six months ended June 30,
2003 2002
---------------- ----------------
Amount % Amount %
Net revenues $12,713,046 100% $8,318,485 100%
Cost of revenues 9,891,249 78% 6,497,332 78%
----------- ----------
Gross profit 2,821,797 22% 1,821,153 22%
S,G,& A expenses 3,109,380 24% 1,982,373 24%
Goodwill impairment 4,000,000 31% --
----------- ----------
Operating loss (4,287,583)(34%) (161,220) (2%)
Interest income/(expense) (93,592) (1%) 12,856 0%
Other income 100,587 1% --
----------- ----------
Net loss before taxes and
accounting change $(4,280,588)(34%) $ (148,364) (2%)
=========== ==========
Net revenues for the six months ended June 30, 2003 and 2002 were as
follows:
Six Months Ended June 30,
2003 2002
----------------- ----------------
Amount % Amount %
Technology $ 3,597,749 28% $ -- --
Advertising and Marketing 7,798,344 61% 6,613,273 80%
Logistics 1,316,953 11% 1,705,212 20%
----------- ---- ---------- ----
Total net revenues $12,713,046 100% $8,318,485 100%
=========== ==== ========== ====
Total net revenues increased $4,394,561 (53%) from $8,318,485 for the
six months ended June 30, 2002 to $12,713,046 for the six months ended June
30, 2003. The technology segment accounted for net revenues of $3,597,749
during this six-month period in 2003. This segment was acquired in
connection with the acquisition of Hencie, Inc. effective August 1, 2002 and
did not contribute any revenue during the same period in 2002. Net revenues
of the logistics segment decreased $388,259 (23%) for the six months ended
June 30, 2003 compared to the comparable period of 2002 primarily due to
reduced sales of transportation logistics services. Revenues from the
advertising and marketing segment increased $1,185,071 (18%) due to the
segment beginning to place ads for the media-buying agency of a large
automotive manufacturer, beginning in June 2003. Pricing in the logistics
and advertising and marketing segments remained consistent. We believe that
pricing in the technology segment has decreased from the first quarter of
2003 due to competitive factors, including customer demand, and the effects
of the national economy, such as decreased large capital expenditure budgets.
Cost of revenues by segment and percentage of total cost of revenues for
the six months ended June, 2003 and 2002 were as follows:
Six months ended June 30,
2003 2002
------------------ ------------------
Amount % Amount %
Technology $2,416,936 24% $ -- --
Advertising and Marketing 6,787,763 69% 5,530,138 85%
Logistics 686,550 7% 967,194 15%
---------- ---- ---------- ----
Total cost of revenues $9,891,249 100% $6,497,332 100%
========== ==== ========== ====
Cost of revenues increased $3,393,917 (52%) for the six months ended
June 30, 2003 compared to the six months ended June 30, 2002. This increase
was primarily attributable to the increase in net revenues from the recently
acquired technology segment, as well as to the increased revenues from the
advertising and marketing segment.
Gross profit per segment and percentage of total gross profit for the
six months ended June 30, 2003 and 2002 were as follows:
Six months ended June 30,
2003 2002
----------------- -----------------
Amount % Amount %
Technology $1,180,813 42% $ -- --
Advertising and Marketing 1,010,581 36% 1,083,135 59%
Logistics 630,403 22% 738,018 41%
---------- ---- ---------- ----
Total gross profit $2,821,797 100% $1,821,153 100%
========== ==== ========== ====
Gross Profit Percentages by Segment:
2003 2002
------- -------
Technology 32.8% --
Advertising and Marketing 13.0% 16.4%
Logistics 47.9% 43.3%
------- -------
Total Gross Profit 22.2% 21.9%
======= =======
Gross profit increased $1,000,644 (55%) for the six months ended June
30, 2003 compared to the six months ended June 30, 2002. This increase was
attributable to the acquisition of the technology segment. Total gross
profit of the other segments decreased $180,169. The gross profit percentage
in the advertising and marketing segment was affected by the lower gross
profit margin associated with ad placement services for the new automotive
business.
Selling, general, and administrative expenses increased $1,127,007 (57%)
for the six months ended June 30, 2003 to $3,109,380 from $1,982,373 for the
six months ended June 30, 2002. This increase was primarily due to the
acquisition of the technology segment and the resulting increased number of
employees, from the six months ended June 30, 2002 compared to the same
period of 2003, as well as related overhead expenses. In addition, Alternate
Marketing Networks incurred increased legal and professional service
expenses, primarily due to an increase in expenses associated with the
technology segment and implementation of the Sarbanes-Oxley Act of 2002.
A goodwill impairment charge was recorded during the six months ended
June 30, 2003 to the technology reporting unit as a result of the impairment
testing performed by management. Management felt that indicators were
present and upon subsequent review, recorded an impairment charge of
$4,000,000 assigned to the technology reporting unit.
As a result of the foregoing, losses from operations increased $126,363
for the six months ended June 30, 2003 to $(287,583) from $(161,220) for the
six months ended June 30, 2002.
Interest income for the six months ended June 30, 2003 and 2002 was $990
and $13,289, respectively. Interest expense for the six months ended June
30, 2003 and 2002 was $94,582 and $433, respectively. The reduction in
interest income, net of interest expense was due to the decrease in cash
available for investing as well as interest expense attributable to
additional borrowings in 2003.
Other income for the six months ended June 30, 2003 consists of $99,537
for the gain recognized on a lease renegotiation and abatement of previously
recorded rent expense, as well as $1,050 from the gain on the sale of an
asset.
As of January 1, 2002 Alternate Marketing Networks adopted SFAS No. 142,
allocated goodwill of $2,004,447 to each of its reporting units, and tested
this goodwill for impairment. The testing was completed during the second
quarter ending June 30, 2002. As a result, a charge of $1,204,058 was
recorded for the goodwill assigned to the logistics reporting unit as a
cumulative effect of accounting change.
Pro Forma Results of Operations
The unaudited pro forma combined historical results, as if Hencie had
been acquired at the beginning of fiscal year 2002, are provided as follows:
Revenues $12,713,046 $13,000,340
Income (loss) from continuing
operations ** (281,413) (1,116,843)
Net loss ** (281,413) (1,116,843)
Basic and diluted loss per share $ (0.03) $ (0.13)
**The 2002 period excludes a charge for the cumulative effect of accounting
change of $1,204,058. The 2003 period excludes a goodwill impairment charge
of $4,000,000.
The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisition had been completed as of the beginning
of each of the fiscal periods presented, nor are they necessarily indicative
of future consolidated results.
The 2002 pro forma revenues included above from the Hencie acquisition
were $4,681,855 compared to actual Hencie revenues in 2003 of $3,597,749 for
the six-month period ended June 30. This decrease of $1,084,106 (23%) was
largely attributable to an overall spending decrease for capital expenditures
by companies, which purchase Oracle and other enterprise software
applications that Hencie implements, as well as reduced pricing pressures
from the Hencie's customers.
The 2002 pro forma net loss included above from the Hencie acquisition
was $965,921 compared to actual Hencie losses in 2003 of $11,873 for the six-
month periods ended June 30, 2003 and 2003, respectively. This decreased net
loss of $954,048 was largely attributable to management's efforts to reduce
operating expenses in response to lower revenues. In addition, the 2003
period included a gain recognized on a lease renegotiation and abatement of
$99,537. Hencie's operating expenses decreased from $2,615,901 for the six-
month period ended June 30, 2002 to $1,167,974 for the same six-month period
in 2003. These pro forma numbers do not take into consideration any overhead
savings related to the acquisition of Hencie and attributable the other
segments of Alternate Marketing Networks and are related only to Hencie.
Quarterly Fluctuations and Seasonality
Although the logistics segment and the advertising and marketing segment
experience some seasonality in operations corresponding with holiday
advertising, these variations have not historically been material to the
overall results of operations of Alternate Marketing Networks. Revenues from
the delivery of telephone directories also fluctuate quarterly with the
contractual delivery schedules of customers and vary accordingly during a
fiscal year.
Revenues and operating results from the technology segment have
fluctuated significantly in the past. The Oracle implementation services
category of the technology segment's services has historically experienced
greater revenues during the first and second quarters of the fiscal year, and
significantly lower revenues in the third and fourth quarters of the fiscal
year. Consequently, although a comparison of a given fiscal quarter to the
same fiscal quarter of the previous fiscal year may be meaningful, other
period-to-period comparisons, including comparisons of fiscal quarters in the
same fiscal year, of the operating results of the technology segment may not
be meaningful.
This fluctuation between fiscal quarters is attributable to the project
cycles of customers of the technology segment, most of whom have calendar-
based fiscal years and are more likely to start project cycles during the
first half of the fiscal year. Further, because most of the technology
segment's expenses, including expenses associated with its employees, are
relatively fixed in the short-term, several other factors can cause
significant variations in the quarterly operating results of the technology
segment, including:
- fluctuations in the number of customer projects the technology
segment has at any given time;
- cancellations or delays by customers of planned projects;
- employee utilization rate; and
- number of billable days in a given quarter.
Management believes that the technology segment will experience similar
operating and revenue fluctuations in the future. If management is unable to
accurately predict this cyclical customer demand, expenses may be
disproportionate to or exceed revenues of the technology segment.
Liquidity and Capital Resources
Alternate Marketing Networks has historically funded its operations and
working capital needs from operating cash flows and borrowings. During the
six months ended June 30, 2003, cash decreased $535,632. Net cash used in
financing activities was $365,119 for the six months ended June 30, 2003 and
primarily attributable to debt service payments. Net cash used in investing
activities was $21,172 for the six months ended June 30, 2003 for software
and property and equipment purchases. We used working capital to fund
operating losses during this period, with net cash used for operating
activities of $149,341.
Alternate Marketing Networks currently funds its operations and working
capital needs from operating cash flows and borrowings under financing
agreements between its subsidiaries and lenders. As of August 8, 2003, all
of the subsidiaries of Alternate Marketing Networks were in compliance with
these financing agreements. Hencie Consulting is currently in discussions
with Accord Financial to amend and restate its financing agreement and
resolve issues relating to disputes between Hencie Consulting, Accord
Financial, and MEDIACOPY Texas, Inc. (see "Legal Proceedings"). Alternate
Marketing Networks continues to seek additional financing and more cost
effective replacements to the existing subsidiary credit facility agreements.
Alternate Marketing Networks believes the current financing agreements and
estimated operating cash flows will provide sufficient working capital to
continue its operations through June 30, 2004.
National Home Delivery, Inc., an Illinois corporation and a wholly owned
subsidiary of Alternate Marketing Networks, amended its existing financing
agreements with Fifth Third Bank (the "NHD Credit Facility") on April 29,
2003 to extend the maturity date under the NHD Credit Facility from May 1,
2003 to May 1, 2004. The NHD Credit Facility provides for borrowings up to
$1,000,000. Borrowings under the NHD Credit Facility accrue interest at
Fifth Third's prime rate plus 100 basis points (5% as of July 31, 2003).
Available borrowings under the NHD Credit Facility are subject to conditions
and restrictions, including, without limitation, eligible accounts receivable
restrictions and other restrictive financial covenants and performance ratios
applicable to National Home Delivery. In addition, the agreement prohibits
any distribution to Alternate Marketing Networks or its subsidiaries unless
the bank consents to in advance and in writing. The NHD Credit Facility is
secured by substantially all of the assets of Alternate Marketing Networks,
Inc. and National Home Delivery, Inc. As of July 31, 2003, borrowings in the
amount of approximately $600,000 were outstanding and credit in the amount of
approximately $400,000 was available under the NHD Credit Facility.
Alternate Postal Direct, Inc., a Michigan corporation and a wholly owned
subsidiary of Alternate Marketing Networks, entered into a new financing
agreement with Accord Financial, Inc., (the "APD Credit Facility") on April
30, 2003 to replace the financing agreements between Alternate Postal Direct
and Fifth Third Bank that expired on May 1, 2003. The APD Credit Facility
provides for the sale of accounts receivable by Alternate Postal Direct to
Accord at a 1.5% discount. Advances under the APD Credit Facility accrue
interest at the prime commercial rate of interest established from day to day
by Bank of America, Inc. for short term unsecured loans to substantial
borrowers (4% as of July 31, 2003). Sales of accounts receivable and
advances under the APD Credit Facility are subject to conditions and
restrictions, including, without limitation, accounts receivable eligibility
restrictions, verification, and approval. Obligations under the APD Credit
Facility are secured by substantially all of the assets of Alternate Postal
Direct and guaranteed by Alternate Marketing Networks and Hencie Consulting.
As of July 31, 2003, advances of approximately $11,000 were outstanding.
Advances under the APD Credit Facility are made only at the sole discretion
of Accord, even if the accounts receivable offered by Alternate Postal Direct
for sale to Accord satisfy all necessary conditions and restrictions. Accord
is under no obligation to purchase accounts receivable from Alternate Postal
Direct or advance any funds or credit to Alternate Postal Direct under the
APD Credit Facility.
Hencie Consulting amended its existing financing agreement with Accord
(the "HCS Credit Facility") on April 29, 2003, and is currently in
discussions to amend and restate the HCS Credit Facility. The HCS Credit
Facility provides for the sale of accounts receivable by Hencie Consulting to
Accord at a 1.5% discount. Advances under the HCS Credit Facility accrue
interest at the prime commercial rate of interest established from day to day
by Bank of America, Inc. for short term unsecured loans to substantial
borrowers (4% as of July 31, 2003). Sales of accounts receivable and
advances under the HCS Credit Facility are subject to conditions and
restrictions, including, without limitation, accounts receivable eligibility
restrictions, verification, and approval. Obligations under the HCS Credit
Facility are secured by substantially all of the assets of Hencie Consulting
and guaranteed by Alternate Marketing Networks and Alternate Postal Direct.
As of July 31, 2003, advances in the amount of approximately $247,000 were
outstanding. Advances under the HCS Credit Facility are made only at the
sole discretion of Accord, even if the accounts receivable offered by Hencie
Consulting for sale to Accord satisfy all necessary conditions and
restrictions. Accord is under no obligation to purchase accounts receivable
from Hencie Consulting or advance any funds or credit to Hencie Consulting
under the HCS Credit Facility.
Hencie Consulting has been unable to make payments to certain of its
trade and other creditors, in the amounts set forth under accounts payable,
other, and timely and/or full payroll obligations, and has had to rely
substantially on intercompany borrowings to fund its continuing operations
and working capital needs. As of June 30, 2003, Hencie Consulting had past
due payables to accounts payable, other in the amount of $295,848. Discounts
and deferred payment terms have been negotiated and, in some cases, are being
negotiated with certain of these creditors. If Hencie Consulting is unable
to make timely payments or is unable to negotiate favorable discounts and
payment terms, Hencie Consulting's ability to fund it continuing operations
and working capital needs would be jeopardized and the operations, financial
condition, and business of Hencie Consulting and Alternate marketing Networks
may suffer a material adverse affect. Hencie Consulting and Alternate
Marketing networks are currently seeking financing sources in order to secure
financing sufficient to fund Hencie Consulting's outstanding payables and
meet its ongoing trade obligations and has met with several potential
financing sources to explore a long-term solution for Hencie Consulting's
liquidity needs.
The technology segment is currently attempting to improve its overall
liquidity and increase the cash available to this segment through arbitration
with MEDIACOPY Texas, Inc., a customer of the technology segment, to collect
past due account receivables of approximately $630,000. Approximately
$247,000 of these past due account receivable invoices, including account
receivable invoices certified by Mediacopy, have been purchased by Accord
from Hencie Consulting and are owed and payable by Mediacopy to Accord. See
"Legal Proceedings."
On February 18, 2003, Alternate Marketing Networks entered into an
agreement regarding settlement of approximately $1 million of liabilities
owed by Hencie Consulting to Drawbridge. The agreement provided for a cash
payment of $120,000 by Alternate Marketing Networks to Drawbridge, issuance
of 2,474,039 shares of common stock by Alternate Marketing Networks to
Drawbridge, registration rights for the shares, and an obligation for
Alternate Marketing Networks to repurchase $100,000 of the shares, at a
minimum of $0.50 per share, from Drawbridge annually for three years
beginning February 18, 2004.
The following contractual cash obligations of Alternate Marketing
Networks as of June 30, 2003 are presented to update those presented in the
Form 10-KSB for the year ending December 31, 2002:
Cash Obligations Due by Year
Total 2003(*) 2004 2005 2006
Operating leases $ 549,472 $ 150,386 $280,728 $112,620 $ 5,738
Notes payable, bank ** 600,000 600,000 -- -- --
Notes payable, factor ** 476,028 476,028 -- -- --
Long-term debt 308,629 238,321 31,248 31,248 7,812
---------- ---------- -------- -------- --------
$1,934,129 $1,464,735 $311,976 $143,868 $ 13,550
========== ========== ======== ======== ========
(*) The 2003 numbers reflect the amounts due during the balance of 2003.
(**) Notes payable are expected to renew and not become due during 2003.
Our existing and anticipated capital needs are significant. A failure
to comply with the provisions of our existing financing arrangements, an
inability to collect any significant accounts receivable, a loss of any
significant customer, a dispute, arbitration, or litigation with any
significant customer, landlord, or lender, changes in operating plans, the
acceleration or modification of expansion plans, lower than anticipated
revenues, increased expenses, potential acquisitions, failure to meet payroll
obligations, or other events may cause us to seek additional financing sooner
than anticipated, prevent us from achieving our goals and expansion strategy,
force the closure of unprofitable segments or portions of these segments, or
prevent Alternate Marketing from operating profitably. In addition, there can
be no assurance that any additional financing, if needed, will be available on
terms acceptable to Alternate Marketing Networks or at all. If we are unable
to fund our existing capital needs under our existing credit facilities or
otherwise unable to secure additional financing, if necessary, our business
could be materially adversely affected.
In addition, our business plan and acquisition strategies may require
us to obtain additional financing within the next 12 months. We may not be
able to obtain this financing when needed, on favorable terms, or at all. If
we are unable to obtain adequate financing, we may be required to forego
opportunities for growth or obtain funds by entering into financing agreements
on undesirable terms, including agreements requiring us to pledge all of our
assets or containing covenants that restrict our operations and our ability to
incur further indebtedness. An inability to obtain adequate funding may also
force us to curtail or close operations or sell some or all of our assets
including our technology, logistics, and advertising and marketing operating
segments.
The Company believes that its existing financing arrangements and
estimated operating cash flows will be sufficient to fund its operations and
working capital needs for at least the next 12 months. There can be no
assurance, however, that a failure to comply with the provisions of our
existing financing arrangements, a loss of any significant customer(s),
disputes with any significant customer or lender, changes in operating plans,
the acceleration or modification of expansion plans, lower than anticipated
revenues, increased expenses, potential acquisitions, or other events will
not cause the Company to seek additional financing sooner than anticipated,
prevent the Company from achieving the goals of its expansion strategy, force
the closure of unprofitable segments or portions of these segments, or
prevent the Company from operating profitably. In addition, there can be no
assurance that any additional financing, if needed, will be available on
terms acceptable to the Company or at all.
Outlook to the Future
The outlook to the future of Alternate Marketing Networks is based upon
a combination of the individual segments performance.
The technology segment has not been meeting its anticipated revenues and
it does not appear that it will achieve the earlier projections for the
balance of 2003. In response to the reduced revenues, we have attempted to
reduce operating expenses of the technology segment to help mitigate the
impact of the revenue shortfall. In addition, Alternate Marketing Networks
elected to review goodwill allocated to the technology reporting unit due to
the lower revenues, and subsequently recorded an impairment charge.
The advertising and marketing segment expects to significantly increase
revenues as a result of its automotive strategy initiated in the beginning of
2003. However, this revenue is at a lower than average gross margin and will
require an increase in operating expenses to handle the business, thereby
reducing the net positive effects of the expected revenue increase.
The logistics segment is anticipated to perform consistently with
management's expectations based on the renewal of its long-term agreement
with Verizon.
Overall management recognizes it needs to balance the challenges and
unpredictability of the technology segment with the expected growth in the
advertising and marketing segment and the anticipated consistency of the
logistics segment. We are reviewing several options to address these
challenges.
Item 3. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures.
Alternate Marketing Networks maintains disclosure controls and
procedures (as defined in Rule 13a-14(c) and Rule 15d-14(c) of the Exchange
Act) designed to ensure that information required to be disclosed in the
reports of Alternate Marketing Networks filed under the Exchange Act is
recorded, processed, summarized, and reported within the required time
periods. The Chief Executive Officer and Chief Financial Officer of
Alternate Marketing Networks have concluded, based upon their evaluation of
these disclosure controls and procedures as of a date within 90 days of the
filing date of this report, that, as of the date of their evaluation, these
disclosure controls and procedures were effective at ensuring that the
required information will be disclosed on a timely basis in the reports of
Alternate Marketing Networks filed under the Exchange Act.
(b) Changes in Internal Controls.
Alternate Marketing Networks maintains a system of internal controls
that is designed to provide reasonable assurance that the books and records
of Alternate Marketing Networks accurately reflect its transactions and that
the established policies and procedures of Alternate Marketing Networks are
followed. There were no significant changes to the internal controls of
Alternate Marketing Networks or in other factors that could significantly
affect the internal controls subsequent to the date of the evaluation of the
internal controls by the Chief Executive Officer and the Chief Financial
Officer, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In connection with a terminated Statement of Work with MEDIACOPY Texas,
Inc., on July 15, 2003, Hencie Consulting initiated a legal proceeding
against AppShop, Inc. in the District Court of Dallas County, Dallas, Texas
seeking unspecified actual damages, punitive damages, pre and post-judgment
interest, attorneys' fees and court costs, in connection with a breach by
AppShop of that certain agreement dated February 18, 2003 between Hencie
Consulting and AppShop, as well as other claims against AppShop for the theft
of trade secrets, and tortious interference.
On July 28, 2003, Hencie Consulting filed suit against Mediacopy in the
District Court of Dallas County, Dallas, Texas seeking damages in excess of
$600,000, pre and post-judgment interest, attorneys' fees and court costs.
Hencie Consulting may also seek a restraining order to prevent ongoing
violations by Mediacopy of Hencie Consulting's intellectual property rights.
Hencie Consulting has previously demanded payment and is now seeking to
collect past due accounts receivable invoices owed by Mediacopy to Hencie
Consulting under the consulting agreement. Certain past due accounts
receivable invoices, including accounts receivable invoices certified by
Mediacopy, have been purchased by Accord Financial, Inc. from Hencie
Consulting and are owed and payable by Mediacopy to Accord.
On July 30, 2003, MEDIACOPY Texas, Inc., a customer of the technology
segment and Hencie Consulting, initiated an arbitration proceeding in Los
Angeles, California against Hencie Consulting pursuant to that certain
Consulting Services Master Agreement dated May 13, 2002 between Mediacopy and
Hencie Consulting, in accordance with the American Arbitration Association
Commercial Dispute Resolution Procedures. Mediacopy is claiming
approximately $5,000,000 in damages in connection with claims regarding an
alleged breach of the consulting agreement by Hencie Consulting.
Hencie Consulting intends to vigorously defend against and contest the
claims of Mediacopy and pursue litigation against Mediacopy. An outcome
adverse to Hencie Consulting with respect to the pending arbitration or any
related legal proceeding(s) may adversely affect the business, financial
condition, and operations of Hencie Consulting and Alternate Marketing
Networks. No assurance can be given that Hencie Consulting and Alternate
Marketing Networks would not be materially adversely affected by an adverse
outcome with respect to the pending arbitration or any related legal
proceeding(s) or legal fees or expenses related to investigating, contesting,
and defending against these claims (whether or not Hencie Consulting is
successful in defending against these claims), and the diversion of the time
and resources of our management in connection with these claims. In
addition, the inability of Accord to collect from Mediacopy amounts past due
and owed and payable by Mediacopy to Accord in connection with the account
receivable invoices purchased by Accord from Hencie Consulting could
materially adversely affect the ongoing business relationship between Accord
and Hencie Consulting and the willingness of Accord to continue to purchase
account receivable invoices from Hencie Consulting.
From time to time, Alternate Marketing Networks may be subject to
routine litigation and other legal proceedings incidental to its business and
operations. The business, financial condition, and operations of Alternate
Marketing could be materially adversely affected by an outcome that is
adverse to Alternate Marketing with respect to any such litigation or legal
proceeding(s), fees, or expenses related to investigating, contesting, and
defending against the claims related to such litigation or legal
proceeding(s) (whether or not Alternate Marketing is successful in defending
against such claims), and the diversion of the time and resources of
management of Alternate Marketing in connection with such litigation or legal
proceeding(s).
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
Alternate Marketing Networks held its annual stockholder meeting on May
8, 2003. Votes were cast as follows:
Proposal to elect one Class I director for a three-year term expiring at
the 2006 annual meeting of stockholders (R. Phillip Baker, Tom Hiatt, Adil
Khan, and Phillip D. Miller continued as directors of Alternate Marketing
Networks);
FOR WITHHELD
J. Robert Routt 7,971,173 1,050
Proposal to increase the shares reserved for issuance under the 1995
Long-Term Incentive and Stock Option Plan:
BROKER
FOR AGAINST ABSTAIN NOT VOTED
6,715,076 440,851 86,362 729,934
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Description of Exhibit
2.1 Acquisition Agreement dated March 29, 1996 between Alternate
Marketing and National Home Delivery, Inc. (incorporated
by reference from Form 8-K of Alternate Marketing dated
April 11, 1996)
2.2 Asset Purchase Agreement dated February 17, 2000 between
Alternate Marketing, Kevin Powers, and Total Logistics,
Inc. (incorporated by reference from Form 8-K of Alternate
Marketing dated March 1, 2000)
2.3 Consulting Agreement dated February 17, 2000 between Alternate
Marketing, Kevin Powers, and Total Logistics, Inc.
(incorporated by reference from Form 8-K of Alternate Marketing
dated March 1, 2000)
2.4 Amended and Restated Agreement and Plan of Reorganization dated
May 31, 2002 among Alternate Marketing Networks, Inc., a
Michigan corporation, Alternate Marketing Networks, Inc., a
Delaware corporation, ALTM Combination Co., a Delaware
corporation, Hencie, Inc., a Delaware corporation, Adil Khan,
and certain stockholders of Hencie, Inc. (incorporated by
reference from Appendix A to the Definitive Proxy Statement of
Alternate Marketing dated July 23, 2002 and filed June 16, 2002
by Alternate Marketing with the Commission)
3.1 Amended and Restated Certificate of Incorporation (incorporated
by reference from Exhibit 4.1 to the Form 8-K of Alternate
Marketing dated August 1, 2002 and filed August 14, 2002 by
Alternate Marketing with the Commission)
3.2 Amended and Restated Bylaws (incorporated by reference from
Exhibit 4.2 to the Form 8-K of Alternate Marketing dated
August 1, 2002 and filed August 14, 2002 by Alternate Marketing
with the Commission)
4.1 1995 Long-Term Incentive and Stock Option Plan (incorporated
by reference from the Registration Statement on Form SB-2;
Commission File No. 33-95332C)
4.2 1995 Outside Directors and Advisors Stock Option Plan
(incorporated by reference from the Registration Statement
on Form SB-2; Commission File No. 33-95332C)
4.3 Form of Registration Rights Agreement between Alternate Marketing
and certain noteholders of Alternate Marketing (incorporated by
reference from the Registration Statement on Form SB-2;
Commission File No. 33-95332C)
10.1 Form of Distribution Services Contract by and between Alternate
Postal Direct and GTE Directories Distribution Corporation,
Bell Atlantic Yellow Pages Company, and Bell Atlantic Directory
Services, Inc. (incorporated by reference from the Form 10-QSB
for the quarterly period ended September 30, 2002 filed
November 19, 2003 with the Commission)
10.2 Amendment Number One to Agreement Number DSI0112 between
GTE, Bell Atlantic, Verizon Information Services, Inc. and
Alternate Postal Direct, Inc. (incorporated by reference
from the Form 8-K filed July 24, 2003 with the Commission)
10.3 Form of Consulting Services Master Agreement by and between
Hencie and customers of the technology segment (incorporated
by reference from the Form 10-QSB for the quarterly period
ended September 30, 2002 filed November 19, 2003 with the
Commission)
10.4 Employment Agreement dated July 21, 1995 between the
Company and Phillip D. Miller (incorporated by reference
from the Registration Statement on Form SB-2; Commission
File No. 33-95332C)
10.5 Addendum to Employment Agreement dated July 21, 1995 between
Alternate Marketing and Phillip D. Miller dated January 1, 2000
(incorporated by reference from the Form 10-KSB of the
Company for the fiscal year ended December 31, 1999 filed
March 30, 2000 by Alternate Marketing with the Commission)
10.6 Second Addendum dated to Employment Agreement dated July 21,
1995 between Alternate Marketing and Phillip D. Miller
(incorporated by reference from Exhibit 99.2 to the Form 8-K
of Alternate Marketing dated August 1, 2002 and filed August
14, 2002 by Alternate Marketing with the Commission)
10.7 Employment Agreement dated July 1, 2001 between Alternate
Marketing and Sandra J. Smith (incorporated by reference from
the Form 10-KSB of Alternate Marketing for the fiscal year
ended December 31, 2001 filed March 28, 2002 by Alternate
Marketing with the Commission)
10.8 Addendum dated to Employment Agreement dated July 1, 2001
between Alternate Marketing and Sandra J. Smith (incorporated
by reference from Exhibit 99.2 to the Form 8-K of Alternate
Marketing dated August 1, 2002 and filed August 14, 2002 by
Alternate Marketing with the Commission)
10.9 Employment Agreement dated August 1, 2002 between Alternate
Marketing and Adil Khan (incorporated by reference from Exhibit
99.1 to the Form 8-K of Alternate Marketing dated August 1,
2002 and filed August 14, 2002 by Alternate Marketing with the
Commission)
10.10 Loan Agreement (incorporated by reference from the Form 10-KSB
of Alternate Marketing for the fiscal year ended December 31,
2001 filed March 28, 2002 by Alternate Marketing with the
Commission)
10.11 First Amendment to Loan Agreement dated April 29, 2003 among
National Home Delivery, Inc., Alternate Postal Direct, Inc.,
and Fifth Third Bank (incorporated by reference from the Form
SB-2 filed May 7, 2003 with the Commission)
10.12 Amended and Restated Revolving Loan Note dated April 29, 2003
between National Home Delivery, Inc. and Fifth Third Bank
(incorporated by reference from the Form SB-2 filed May 7,
2003 with the Commission)
10.13 Times Mirror Stock Purchase Agreement (incorporated by reference
from the Form 10-QSB of Alternate Marketing for the quarterly
period ended September 30, 1999)
10.14 Contribution Agreement dated January 1, 2003 between Alternate
Marketing, K2 VC LTD., a Texas limited partnership
(incorporated by reference from Exhibit 99.1 to the Form 8-K
of Alternate Marketing dated and filed February 20, 2003 by
Alternate Marketing with the Commission)
10.15 Mutual Release Agreement dated February 18, 2003 between
Alternate Marketing, K2 VC LTD., a Texas limited partnership
(incorporated by reference from Exhibit 99.2 to the Form 8-K
of Alternate Marketing dated and filed February 20, 2003 by
Alternate Marketing with the Commission)
10.16 Non-Qualified Stock Option Agreement dated February 18, 2003
between Alternate Marketing and Adil Khan (incorporated by
reference from Exhibit 99.3 to the Form 8-K of Alternate
Marketing dated and filed February 20, 2003 by Alternate
Marketing with the Commission)
10.17 Release Agreement dated February 18, 2003 between Alternate
Marketing, Hencie, Inc., Hencie Consulting Services, Inc.,
K2 VC LTD., Adil Khan, Drawbridge Investment Partners, LLC,
and certain directors and stockholders of Alternate Marketing
(incorporated by reference from Exhibit 99.4 to the Form 8-K
of Alternate Marketing dated and filed February 20, 2003 by
Alternate Marketing with the Commission)
10.18 Factoring Agreement dated April 9, 1997 between Hencie Consulting
Services, Inc. and Richards Capital Corporation (incorporated
by reference from the Form 10-QSB of Alternate marketing for
the quarterly period ended March 31, 2003)
10.19 Addendum to Master Purchase and Sale Agreement dated April 29,
2003 between Hencie Consulting Services, Inc. and Accord
Financial, Inc. (incorporated by reference from the Form SB-2
filed May 7, 2003 with the Commission)
10.20 Guaranty dated September 27, 2002 between Accord Financial,
Inc., formerly known as JTA Factors, Inc. and Alternate
Marketing Networks, Inc. (filed herewith)
10.21 Guaranty dated May 8, 2003 between Accord Financial, Inc. and
Alternate Postal Direct, Inc. (filed herewith)
10.22 Master Purchase and Sale Agreement dated April 30 ,2003
between Alternate Postal Direct, Inc. and Accord
Financial, Inc. (incorporated by reference from the Form SB-2
filed May 7, 2003 with the Commission)
10.23 Addendum to Master Purchase and Sale Agreement dated April 30,
2003 between Alternate Postal Direct, Inc. and Accord
Financial, Inc. (incorporated by reference from the Form SB-2
filed May 7, 2003 with the Commission)
10.24 Guaranty dated May 8, 2003 between Accord Financial, Inc. and
Alternated Marketing Networks, Inc. (filed herewith)
10.25 Guaranty dated May 12, 2003 between Accord Financial, Inc. and
Hencie Computer Systems, Inc. (filed herewith)
10.26 First Amendment to Office Lease Agreement between
TrizecHahn Tower Three Galleria Management, L.P. and
Hencie Consulting Services, Inc. (incorporated by reference
from the Form 8-K filed July 1, 2003 with the Commission)
10.27 Continuing Lease Guaranty between TrizecHahn Tower Three
Galleria Management, L.P., Alternate Marketing Networks,
Inc., National Home Delivery, Inc., and Alternate Postal
Direct, Inc. (incorporated by reference from the Form 8-K
filed July 1, 2003 with the Commission)
10.28 Amended and Restated Continuing Lease Guaranty between
TrizecHahn Tower Three Galleria Management, L.P. and
Adil Khan (incorporated by reference from the Form 8-K
filed July 1, 2003 with the Commission)
10.29 Promissory Note between TrizecHahn Tower Three Galleria
Management, L.P. and Hencie Consulting Services, Inc.
(incorporated by reference from the Form 8-K filed
July 1, 2003 with the commission)
31.1 Section 302 Certification of Chief Executive Officer (filed
herewith)
31.2 Section 302 Certification of Chief Financial Officer (filed
herewith)
32.1 Section 906 Certification of Chief Executive Officer (filed
herewith)
32.2 Section 906 Certification of Chief Financial Officer (filed
herewith)
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed during the quarter for
which this report is filed:
Form 8-K (Items 4 and 7) filed June 18, 2003.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ALTERNATE MARKETING NETWORKS, INC.
Date: August 13, 2003 By: /s/ Adil Khan
Name: Adil Khan
Title: Chief Executive Officer
Date: August 13, 2003 By: /s/Sandra J. Smith
Name: Sandra J. Smith
Title: Chief Financial Officer
INDEX OF EXHIBITS
Exhibit No. Description of Exhibit
2.1 Acquisition Agreement dated March 29, 1996 between Alternate
Marketing and National Home Delivery, Inc. (incorporated
by reference from Form 8-K of Alternate Marketing dated
April 11, 1996)
2.4 Asset Purchase Agreement dated February 17, 2000 between
Alternate Marketing, Kevin Powers, and Total Logistics,
Inc. (incorporated by reference from Form 8-K of Alternate
Marketing dated March 1, 2000)
2.5 Consulting Agreement dated February 17, 2000 between Alternate
Marketing, Kevin Powers, and Total Logistics, Inc.
(incorporated by reference from Form 8-K of Alternate Marketing
dated March 1, 2000)
2.4 Amended and Restated Agreement and Plan of Reorganization dated
May 31, 2002 among Alternate Marketing Networks, Inc., a
Michigan corporation, Alternate Marketing Networks, Inc., a
Delaware corporation, ALTM Combination Co., a Delaware
corporation, Hencie, Inc., a Delaware corporation, Adil Khan,
and certain stockholders of Hencie, Inc. (incorporated by
reference from Appendix A to the Definitive Proxy Statement of
Alternate Marketing dated July 23, 2002 and filed June 16, 2002
by Alternate Marketing with the Commission)
3.1 Amended and Restated Certificate of Incorporation (incorporated
by reference from Exhibit 4.1 to the Form 8-K of Alternate
Marketing dated August 1, 2002 and filed August 14, 2002 by
Alternate Marketing with the Commission)
3.2 Amended and Restated Bylaws (incorporated by reference from
Exhibit 4.2 to the Form 8-K of Alternate Marketing dated
August 1, 2002 and filed August 14, 2002 by Alternate Marketing
with the Commission)
4.1 1995 Long-Term Incentive and Stock Option Plan (incorporated
by reference from the Registration Statement on Form SB-2;
Commission File No. 33-95332C)
4.2 1995 Outside Directors and Advisors Stock Option Plan
(incorporated by reference from the Registration Statement
on Form SB-2; Commission File No. 33-95332C)
4.4 Form of Registration Rights Agreement between Alternate Marketing
and certain noteholders of Alternate Marketing (incorporated by
reference from the Registration Statement on Form SB-2;
Commission File No. 33-95332C)
10.1 Form of Distribution Services Contract by and between Alternate
Postal Direct and GTE Directories Distribution Corporation,
Bell Atlantic Yellow Pages Company, and Bell Atlantic Directory
Services, Inc. (incorporated by reference from the Form 10-QSB
for the quarterly period ended September 30, 2002 filed
November 19, 2003 with the Commission)
10.2 Amendment Number One to Agreement Number DSI0112 between
GTE, Bell Atlantic, Verizon Information Services, Inc. and
Alternate Postal Direct, Inc. (incorporated by reference
from the Form 8-K filed July 24, 2003 with the Commission)
10.3 Form of Consulting Services Master Agreement by and between
Hencie and customers of the technology segment (incorporated
by reference from the Form 10-QSB for the quarterly period
ended September 30, 2002 filed November 19, 2003 with the
Commission)
10.4 Employment Agreement dated July 21, 1995 between the
Company and Phillip D. Miller (incorporated by reference
from the Registration Statement on Form SB-2; Commission
File No. 33-95332C)
10.5 Addendum to Employment Agreement dated July 21, 1995 between
Alternate Marketing and Phillip D. Miller dated January 1, 2000
(incorporated by reference from the Form 10-KSB of the
Company for the fiscal year ended December 31, 1999 filed
March 30, 2000 by Alternate Marketing with the Commission)
10.6 Second Addendum dated to Employment Agreement dated July 21,
1995 between Alternate Marketing and Phillip D. Miller
(incorporated by reference from Exhibit 99.2 to the Form 8-K
of Alternate Marketing dated August 1, 2002 and filed August
14, 2002 by Alternate Marketing with the Commission)
10.7 Employment Agreement dated July 1, 2001 between Alternate
Marketing and Sandra J. Smith (incorporated by reference from
the Form 10-KSB of Alternate Marketing for the fiscal year
ended December 31, 2001 filed March 28, 2002 by Alternate
Marketing with the Commission)
10.8 Addendum dated to Employment Agreement dated July 1, 2001
between Alternate Marketing and Sandra J. Smith (incorporated
by reference from Exhibit 99.2 to the Form 8-K of Alternate
Marketing dated August 1, 2002 and filed August 14, 2002 by
Alternate Marketing with the Commission)
10.9 Employment Agreement dated August 1, 2002 between Alternate
Marketing and Adil Khan (incorporated by reference from Exhibit
99.1 to the Form 8-K of Alternate Marketing dated August 1,
2002 and filed August 14, 2002 by Alternate Marketing with the
Commission)
10.10 Loan Agreement (incorporated by reference from the Form 10-KSB
of Alternate Marketing for the fiscal year ended December 31,
2001 filed March 28, 2002 by Alternate Marketing with the
Commission)
10.11 First Amendment to Loan Agreement dated April 29, 2003 among
National Home Delivery, Inc., Alternate Postal Direct, Inc.,
and Fifth Third Bank (incorporated by reference from the Form
SB-2 filed May 7, 2003 with the Commission)
10.12 Amended and Restated Revolving Loan Note dated April 29, 2003
between National Home Delivery, Inc. and Fifth Third Bank
(incorporated by reference from the Form SB-2 filed May 7,
2003 with the Commission)
10.13 Times Mirror Stock Purchase Agreement (incorporated by reference
from the Form 10-QSB of Alternate Marketing for the quarterly
period ended September 30, 1999)
10.14 Contribution Agreement dated January 1, 2003 between Alternate
Marketing, K2 VC LTD., a Texas limited partnership
(incorporated by reference from Exhibit 99.1 to the Form 8-K
of Alternate Marketing dated and filed February 20, 2003 by
Alternate Marketing with the Commission)
10.15 Mutual Release Agreement dated February 18, 2003 between
Alternate Marketing, K2 VC LTD., a Texas limited partnership
(incorporated by reference from Exhibit 99.2 to the Form 8-K
of Alternate Marketing dated and filed February 20, 2003 by
Alternate Marketing with the Commission)
10.16 Non-Qualified Stock Option Agreement dated February 18, 2003
between Alternate Marketing and Adil Khan (incorporated by
reference from Exhibit 99.3 to the Form 8-K of Alternate
Marketing dated and filed February 20, 2003 by Alternate
Marketing with the Commission)
10.17 Release Agreement dated February 18, 2003 between Alternate
Marketing, Hencie, Inc., Hencie Consulting Services, Inc.,
K2 VC LTD., Adil Khan, Drawbridge Investment Partners, LLC,
and certain directors and stockholders of Alternate Marketing
(incorporated by reference from Exhibit 99.4 to the Form 8-K
of Alternate Marketing dated and filed February 20, 2003 by
Alternate Marketing with the Commission)
10.18 Factoring Agreement dated April 9, 1997 between Hencie Consulting
Services, Inc. and Richards Capital Corporation (incorporated
by reference from the Form 10-QSB of Alternate marketing for
the quarterly period ended March 31, 2003)
10.19 Addendum to Master Purchase and Sale Agreement dated April 29,
2003 between Hencie Consulting Services, Inc. and Accord
Financial, Inc. (incorporated by reference from the Form SB-2
filed May 7, 2003 with the Commission)
10.20 Guaranty dated September 27, 2002 between Accord Financial,
Inc., formerly known as JTA Factors, Inc. and Alternate
Marketing Networks, Inc. (filed herewith)
10.21 Guaranty dated May 8, 2003 between Accord Financial, Inc. and
Alternate Postal Direct, Inc. (filed herewith)
10.22 Master Purchase and Sale Agreement dated April 30 ,2003
between Alternate Postal Direct, Inc. and Accord
Financial, Inc. (incorporated by reference from the Form SB-2
filed May 7, 2003 with the Commission)
10.23 Addendum to Master Purchase and Sale Agreement dated April 30,
2003 between Alternate Postal Direct, Inc. and Accord
Financial, Inc. (incorporated by reference from the Form SB-2
filed May 7, 2003 with the Commission)
10.24 Guaranty dated May 8, 2003 between Accord Financial, Inc. and
Alternated Marketing Networks, Inc. (filed herewith)
10.25 Guaranty dated May 12, 2003 between Accord Financial, Inc. and
Hencie Computer Systems, Inc. (filed herewith)
10.26 First Amendment to Office Lease Agreement between
TrizecHahn Tower Three Galleria Management, L.P. and
Hencie Consulting Services, Inc. (incorporated by reference
from the Form 8-K filed July 1, 2003 with the Commission)
10.27 Continuing Lease Guaranty between TrizecHahn Tower Three
Galleria Management, L.P., Alternate Marketing Networks,
Inc., National Home Delivery, Inc., and Alternate Postal
Direct, Inc. (incorporated by reference from the Form 8-K
filed July 1, 2003 with the Commission)
10.28 Amended and Restated Continuing Lease Guaranty between
TrizecHahn Tower Three Galleria Management, L.P. and
Adil Khan (incorporated by reference from the Form 8-K
filed July 1, 2003 with the Commission)
10.29 Promissory Note between TrizecHahn Tower Three Galleria
Management, L.P. and Hencie Consulting Services, Inc.
(incorporated by reference from the Form 8-K filed
July 1, 2003 with the commission)
31.1 Section 302 Certification of Chief Executive Officer (filed
herewith)
31.2 Section 302 Certification of Chief Financial Officer (filed
herewith)
32.1 Section 906 Certification of Chief Executive Officer (filed
herewith)
32.2 Section 906 Certification of Chief Financial Officer (filed
herewith)
EXHIBIT 10.20
GUARANTY
This Guaranty ("Guaranty") is executed by and between Accord Financial,
Inc., formerly known as JTA Factors, Inc., a South Carolina corporation
having a mailing address at P.O. Box 6704, Greenville, South Carolina, 29606
(hereinafter referred to as "Factor") and Alternate Marketing Networks, Inc.,
located at One Ionia SW, Suite 520, Grand Rapids, MI 49503 (hereinafter
referred to as ("Guarantor"). Whereas Hencie Consulting Services, Inc., a
Texas corporation ("Company") has applied to Factor for the purchase and sale
of accounts receivable and contract rights of Company by Factor, and for
Factor to provide certain collection services upon request of the Company
with respect to other accounts receivable and contract rights of Company, and
as a condition of providing such service to Company, Factor required the
guaranty of Guarantor.
Guarantor makes this Guaranty for the purpose of providing additional
security to Factor and as an inducement to Factor to purchase accounts
receivable and contract rights, and provide other collection services to
Company.
Therefore, in consideration of Factor purchasing the accounts receivable and
contract rights, and of providing other service to Company, Guarantor agrees
with Factor as follows:
The assumption by Guarantor of his obligations hereunder will result in a
direct financial benefit to Guarantor.
Guarantor hereby guarantees to Factor the full and prompt performance of all
obligations of Company to Factor including but not limited to the obligations
of Company under the Factoring Agreement between Factor and Company. The
obligations of Guarantor shall be absolute and shall remain in full force and
effect so long as Company is selling accounts receivable and receiving
services from Factor, and upon the termination of the Purchase and Sale
Agreement with Factor their guaranty shall remain in full force and effect
until all obligations of Company to Factor are discharged and satisfied in
full.
The obligations of Guarantor shall not be affected by the voluntary
liquidation, dissolution, sale or other disposition of all or substantially
all of the assets of Company or of its insolvency, receivership, bankruptcy,
assignment for the benefit of coeditors, reorganization, arrangement,
composition with creditors, or similar proceedings affecting Company or any
other guarantor of its obligations to Factor, nor by any merger,
consolidation, or other reorganization of any kind involving Company.
The liability of Guarantor hereunder is an absolute, direct, immediate, and
guarantee of payment and not of collectability.
No set-off, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature, which Company may have against Factor, shall
be available hereunder to Guarantor.
Guarantor waives notice of demand of any kind to Guarantor personally and
agrees that notice to Company is notice to Guarantor.
Guarantor authorizes Factor, without notice or demand, and without affecting
Guarantor's liability hereunder, from time to time, to enforce its rights
under the Factoring Agreement. Factor may, without notice or consent, assign
this Guaranty in whole or in part.
Any indebtedness of Company now or hereafter held by Guarantor is hereby
subordinated, unless expressly agreed by Factor, to the obligations of
Company to Factor, and such indebtedness of Company to Guarantor, if Factor
so requests, shall be collected enforced and received by Guarantor as trustee
for Factor and be paid over to factor on account of the obligations of
Company to Factor, but without reducing or affecting in any manner, the
liability of Guarantor under the provisions hereof except to the extent of
such payment. Guarantor shall immediately inform Factor on request of any
indebtedness of Company held by Guarantor.
If Factor retains the services of an attorney to enforce this Guaranty,
Guarantor agrees to pay the attorney's fees and other costs and expenses
incurred by Factor even thought no suit or action is files. If a suit or
action is filed to enforce this Guaranty, Guarantor shall pay to Factor the
costs and expenses and a reasonable attorney's fees to be fixed by the court
in which the suit or action is brought. If any appeal or review is taken,
Guarantor shall pay such further sum to Factor for the costs and expenses
incurred and a reasonable attorney's fee as may be fixed by the Appellate
Court or the lower court.
Upon happening of a default in the obligation of the Company to Factor, then
Factor shall have the right to proceed first and directly against Guarantor
under this Guaranty without proceeding against or exhausting any other
remedies which it may have against Company or any other guarantor of
Company's obligations to Factor and without realizing upon any security held
by Factor.
No remedy herein conferred upon Factor is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Guaranty or now or hereafter existing at law or in equity. No delay or
omission by Factor to exercise any right accruing upon any default or failure
of performance by Company to Factor shall be construed to be a waiver
thereof, but any such right and power may be exercised from time to time and
as often as may be deemed to be expedient by Factor. This Guaranty shall be
binding upon Guarantor's successors and assigns.
The Factor and Guarantor do hereby agree that, notwithstanding anything in
this Guaranty or otherwise to the contrary, this Guaranty shall not in any
way, shape, or form bind, involve or place any additional legal obligation,
duty, responsibility or liability on Fifth Third Bank.
Guarantor and Factor hereby acknowledge that this Guaranty is accepted and
executed in the State of Texas, that this guaranty or any dealings and
relationships between Guarantor and Factor all rights and remedies of the
parties, shall be subject to and governed, as to their validity, enforcement,
construction, and effect, and all other respects, by the laws of the State of
Texas.
Neither Guarantor nor Factor nor any assignee, successor, heir or legal
representative of same shall seek a jury trial in any lawsuit, proceeding,
counterclaim, or any other litigation procedure arising from or based upon
this Guaranty or any other agreement or document evidencing, securing or
relating to this Guaranty or to the dealings or relationship between
Guarantor and Factor.
Neither Guarantor nor Factor shall seek to consolidate any such action, in
which a jury trial has been waived, with any other action in which a jury
trial has not been or cannot be waived.
Guarantor hereby irrevocably submits and consents to the exclusive
jurisdiction of the state and federal courts located in the State of Texas,
county of Dallas. Any such action of proceeding commenced by Guarantor or
Factor will be litigated only in federal court or a state court in the State
of Texas, county of Dallas. Guarantor waives any objection based on forum
non-conveniens and any objection to venue in connection therewith and
authorizes service of any legal process upon the Secretary of State of Texas
as Guarantor's agent.
Dated and Effective: 9-27-02
GUARANTOR
/s/ Adil Khan
Alternate Marketing Networks, Inc.
One Ionia SW, Suite 520
Grand Rapids, MI 49503
NOTARIZATION
STATE OF TX
COUNTY OF DALLAS
The foregoing instrument was acknowledged before me this 27th day of
September 2002 by Adil Khan individually, and who identified himself as same.
He is personally known to me or has produced a Driver's license as
identification and did take an oath. His is the signor of the foregoing
instrument and did acknowledge to me that he executed the same freely and
voluntarily.
Louise J. Brown /s/ Louise J. Brown 3-16-05
Printed Name Public Notary Signature My Commission Expires
EXHIBIT 10.21
GUARANTY
This Guaranty ("Guaranty") is executed by and between Accord Financial,
Inc., a Delaware corporation having a mailing address at P.O. Box 6704,
Greenville, South Carolina, 29606 (hereinafter referred to as "Factor") and
Alternate Postal Direct, Inc., located at 12495 34th Street North, Unit D, St.
Petersburg, FL 33716 (hereinafter referred to as ("Guarantor"). Whereas
Hencie Computer Systems, Inc., a Texas corporation ("Company") has applied to
Factor for the purchase and sale of accounts receivable and contract rights
of Company by Factor, and for Factor to provide certain collection services
with respect to other accounts receivable and contract rights of Company, and
as a condition of providing such service to Company, Factor required the
guaranty of Guarantor.
Guarantor makes this Guaranty for the purpose of providing additional
security to Factor and as an inducement to Factor to purchase accounts
receivable and contract rights, and provide other collection services to
Company.
Therefore, in consideration of Factor purchasing the accounts receivable and
contract rights, and of providing other service to Company, Guarantor
unconditionally agrees with Factor as follows:
The assumption by Guarantor of his obligations hereunder will result in a
direct financial benefit to Guarantor.
Guarantor hereby unconditionally guarantees to Factor the full and prompt
performance of all obligations of Company to Factor including but not limited
to the obligations of Company under the Purchase and Sale Agreement between
Factor and Company. The obligations of Guarantor shall be absolute and
unconditional and shall remain in full force and effect so long as Company is
selling accounts receivable and receiving services from Factor, and upon the
termination of the Purchase and Sale Agreement with Factor their guaranty
shall remain in full force and effect until all obligations of Company to
Factor are discharged and satisfied in full.
The obligations of Guarantor shall not be affected by the voluntary
liquidation, dissolution, sale or other disposition of all or substantially
all of the assets of Company or of its insolvency, receivership, bankruptcy,
assignment for the benefit of coeditors, reorganization, arrangement,
composition with creditors, or similar proceedings affecting Company or any
other guarantor of its obligations to Factor, nor by any merger,
consolidation, or other reorganization of any kind involving Company.
The liability of Guarantor hereunder is an absolute, direct, immediate, and
unconditional guarantee of payment and not of collectability.
No set-off, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature, which Company may have against Factor, shall
be available hereunder to Guarantor.
Guarantor waives notice of demand of any kind to Guarantor personally and
agrees that notice to Company is notice to Guarantor.
Guarantor authorizes Factor, without notice or demand, and without affecting
Guarantor's liability hereunder, from time to time, to: (i) renew,
compromise, extend, accelerate, or otherwise change the terms of the
obligations of Company to Factor or any part thereof: (ii) take and hold or
substitute security for the payment of the Guaranty of the obligations
Company to Factor and exchange, enforce, waive, and release any such security
and; (iii) apply such security and direct the order or manner of sale thereof
as Factor may in it discretion determine. Factor may, without notice or
consent, assign this Guaranty in whole or in part.
Any indebtedness of Company now or hereafter held by Guarantor is hereby
subordinated to the obligations of Company to Factor, and such indebtedness
of company to Guarantor, if Factor so requests, shall be collected enforced
and received by Guarantor as trustee for Factor and be paid over to factor on
account of the obligations of Company to Factor, but without reducing or
affecting in any manner, the liability of Guarantor under the provisions
hereof. Guarantor shall immediately inform Factor on request of any
indebtedness of Company held by Guarantor.
Guarantor waives any claim, right of remedy which Guarantor may now have or
hereafter acquire against Company or any person primarily or contingently
liable for the guaranteed obligations or that arise from the existence or
performance of Guarantor's obligations hereunder, including, without
limitation, any claim, remedy or right or subrogation, reimbursement,
exoneration, contribution, indemnification, or participation in any claim,
right or remedy of Factor against Company or any collateral secrete Factor
now has or hereafter acquires, regardless of how such claim, remedy or right
arises.
If Factor retains the services of an attorney to enforce this Guaranty,
Guarantor agrees to pay the attorney's fees and other costs and expenses
incurred by Factor even thought no suit or action is files. If a suit or
action is filed to enforce this Guaranty, Guarantor shall pay to Factor the
costs and expenses and a reasonable attorney's fees to be fixed by the court
in which the suit or action is brought. If any appeal or review is taken,
Guarantor shall pay such further sum to Factor for the costs and expenses
incurred and a reasonable attorney's fee as may be fixed by the Appellate
Court or the lower court.
Upon happening of a default in the obligation of the Company to Factor, then
Factor shall have the right to proceed first and directly against Guarantor
under this Guaranty without proceeding against or exhausting any other
remedies which it may have against Company or any other guarantor of
Company's obligations to Factor and without realizing upon any security held
by Factor.
No remedy herein conferred upon Factor is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Guaranty or now or hereafter existing at law or in equity. No delay or
omission by Factor to exercise any right accruing upon any default or failure
of performance by Company to Factor shall be construed to be a waiver
thereof, but any such right and power may be exercised from time to time and
as often as may be deemed to be expedient by Factor. This Guaranty shall be
binding upon Guarantor's successors and assigns.
Guarantor and Factor hereby acknowledge that this Guaranty is accepted and
executed in the State of South Carolina, that this guaranty or any dealings
and relationships between Guarantor and Factor all rights and remedies of the
parties, shall be subject to and governed, as to their validity, enforcement,
construction, and effect, and all other respects, by the laws of the State of
South Carolina.
Neither Guarantor nor Factor nor any assignee, successor, heir or legal
representative of same shall seek a jury trial in any lawsuit, proceeding,
counterclaim, or any other litigation procedure arising from or based upon
this Guaranty or any other agreement or document evidencing, securing or
relating to this Guaranty or to the dealings or relationship between
Guarantor and Factor.
Neither Guarantor nor Factor shall seek to consolidate any such action, in
which a jury trial has been waived, with any other action in which a jury
trial has not been or cannot be waived.
Guarantor hereby irrevocably submits and consents to the exclusive
jurisdiction of the state and federal courts located in the State of South
Carolina, county of Greenville. Any such action of proceeding commenced by
Guarantor or Factor will be litigated only in federal court or a state court
in the State of South Carolina, county of Greenville. Guarantor waives any
objection based on forum non-conveniens and any objection to venue in
connection therewith and authorizes service of any legal process upon the
Secretary of State of South Carolina as Guarantor's agent.
Dated and Effective: 5-8-03
GUARANTOR
/s/ Sandra J. Smith, Sec/Treas.
Alternate Postal Direct, Inc.
12495 34th Street North
Unit D, St. Petersburg, FL 33716
NOTARIZATION
STATE OF TX
COUNTY OF DALLAS
The foregoing instrument was acknowledged before me this 8th day of May
2003 by Sandy Smith individually, and who identified himself as same. He is
personally known to me or has produced a Driver's license as identification
and did take an oath. His is the signor of the foregoing instrument and did
acknowledge to me that he executed the same freely and voluntarily.
Louise J. Brown /s/ Louise J. Brown 3-16-05
Printed Name Public Notary Signature My Commission Expires
EXHIBIT 10.24
GUARANTY
This Guaranty ("Guaranty") is executed by and between Accord Financial,
Inc., a Delaware corporation having a mailing address at P.O. Box 6704,
Greenville, South Carolina, 29606 (hereinafter referred to as "Factor") and
Alternate Marketing Networks, Inc., located at One Ionia SW, Suite 520, Grand
Rapids, MI 49503 (hereinafter referred to as ("Guarantor"). Whereas
Alternate Postal Direct, Inc., a Michigan corporation ("Company") located at
12495 34th St., Unit D, St. Petersburg, FL 33716 has applied to Factor for the
purchase and sale of accounts receivable and contract rights of Company by
Factor, and for Factor to provide certain collection services upon request of
the company with respect to other accounts receivable and contract rights of
Company, and as a condition of providing such service to Company, Factor
required the guaranty of Guarantor.
Guarantor makes this Guaranty for the purpose of providing additional
security to Factor and as an inducement to Factor to purchase accounts
receivable and contract rights, and provide other collection services to
Company.
Therefore, in consideration of Factor purchasing the accounts receivable and
contract rights, and of providing other service to Company, Guarantor
unconditionally agrees with Factor as follows:
The assumption by Guarantor of his obligations hereunder will result in a
direct financial benefit to Guarantor.
Guarantor hereby unconditionally guarantees to Factor the full and prompt
performance of all obligations of Company to Factor including but not limited
to the obligations of Company under the Purchase and Sale Agreement between
Factor and Company. The obligations of Guarantor shall be absolute and
unconditional and shall remain in full force and effect so long as Company is
selling accounts receivable and receiving services from Factor, and upon the
termination of the Purchase and Sale Agreement with Factor their guaranty
shall remain in full force and effect until all obligations of Company to
Factor are discharged and satisfied in full.
The obligations of Guarantor shall not be affected by the voluntary
liquidation, dissolution, sale or other disposition of all or substantially
all of the assets of Company or of its insolvency, receivership, bankruptcy,
assignment for the benefit of coeditors, reorganization, arrangement,
composition with creditors, or similar proceedings affecting Company or any
other guarantor of its obligations to Factor, nor by any merger,
consolidation, or other reorganization of any kind involving Company.
The liability of Guarantor hereunder is an absolute, direct, immediate, and
unconditional guarantee of payment and not of collectability.
No set-off, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature, which Company may have against Factor, shall
be available hereunder to Guarantor.
Guarantor waives notice of demand of any kind to Guarantor personally and
agrees that notice to Company is notice to Guarantor.
Guarantor authorizes Factor, without notice or demand, and without affecting
Guarantor's liability hereunder, from time to time, to: (i) renew,
compromise, extend, accelerate, or otherwise change the terms of the
obligations of Company to factor or any part thereof: (ii) take and hold or
substitute security for the payment of the Guaranty of the obligations
Company to Factor and exchange, enforce, waive, and release any such security
and; (iii) apply such security and direct the order or manner of sale thereof
as Factor may in it discretion determine. Factor may, without notice or
consent, assign this Guaranty in whole or in part.
Any indebtedness of Company now or hereafter held by Guarantor is hereby
subordinated to the obligations of Company to Factor, and such indebtedness
of company to Guarantor, if Factor so requests, shall be collected enforced
and received by Guarantor as trustee for Factor and be paid over to factor on
account of the obligations of company to Factor, but without reducing or
affecting in any manner, the liability of Guarantor under the provisions
hereof except to the extent of such payment. Guarantor shall immediately
inform Factor on request of any indebtedness of Company held by Guarantor.
Guarantor waives any claim, right of remedy which Guarantor may now have or
hereafter acquire against Company or any person primarily or contingently
liable for the guaranteed obligations or that arise from the existence or
performance of Guarantor's obligations hereunder, including, without
limitation, any claim, remedy or right or subrogation, reimbursement,
exoneration, contribution, indemnification, or participation in any claim,
right or remedy of Factor against Company or any collateral secrete Factor
now has or hereafter acquires, regardless of how such claim, remedy or right
arises.
If Factor retains the services of an attorney to enforce this Guaranty,
Guarantor agrees to pay the attorney's fees and other costs and expenses
incurred by Factor even thought no suit or action is files. If a suit or
action is filed to enforce this Guaranty, Guarantor shall pay to Factor the
costs and expenses and a reasonable attorney's fees to be fixed by the court
in which the suit or action is brought. If any appeal or review is taken,
Guarantor shall pay such further sum to Factor for the costs and expenses
incurred and a reasonable attorney's fee as may be fixed by the Appellate
Court or the lower court.
Upon happening of a default in the obligation of the Company to Factor, then
Factor shall have the right to proceed first and directly against Guarantor
under this Guaranty without proceeding against or exhausting any other
remedies which it may have against Company or any other guarantor of
Company's obligations to Factor and without realizing upon any security held
by Factor.
No remedy herein conferred upon Factor is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Guaranty or now or hereafter existing at law or in equity. No delay or
omission by Factor to exercise any right accruing upon any default or failure
of performance by Company to Factor shall be construed to be a waiver
thereof, but any such right and power may be exercised from time to time and
as often as may be deemed to be expedient by Factor. This Guaranty shall be
binding upon Guarantor's successors and assigns.
Guarantor and Factor hereby acknowledge that this Guaranty is accepted and
executed in the State of South Carolina, that this guaranty or any dealings
and relationships between Guarantor and Factor all rights and remedies of the
parties, shall be subject to and governed, as to their validity, enforcement,
construction, and effect, and all other respects, by the laws of the State of
South Carolina.
Neither Guarantor nor Factor nor any assignee, successor, heir or legal
representative of same shall seek a jury trial in any lawsuit, proceeding,
counterclaim, or any other litigation procedure arising from or based upon
this Guaranty or any other agreement or document evidencing, securing or
relating to this Guaranty or to the dealings or relationship between
Guarantor and Factor.
Neither Guarantor nor Factor shall seek to consolidate any such action, in
which a jury trial has been waived, with any other action in which a jury
trial has not been or cannot be waived.
Guarantor hereby irrevocably submits and consents to the exclusive
jurisdiction of the state and federal courts located in the State of South
Carolina, county of Greenville. Any such action of proceeding commenced by
Guarantor or Factor will be litigated only in federal court or a state court
in the State of South Carolina, county of Greenville. Guarantor waives any
objection based on forum non-conveniens and any objection to venue in
connection therewith and authorizes service of any legal process upon the
Secretary of State of South Carolina as Guarantor's agent.
Dated and Effective: 5-8-03
GUARANTOR
/s/ Phillip D. Miller-Chairman & President
Alternate Marketing Networks, Inc.
One Ionia SW, Suite 520
Grand Rapids, MI 49503
NOTARIZATION
STATE OF TX
COUNTY OF DALLAS
The foregoing instrument was acknowledged before me this 8th day of May
2003 by Phillip Miller individually, and who identified himself as same. He
is personally known to me or has produced a Driver's license as
identification and did take an oath. His is the signor of the foregoing
instrument and did acknowledge to me that he executed the same freely and
voluntarily.
Louise J. Brown /s/ Louise J. Brown 3-16-05
Printed Name Public Notary Signature My Commission Expires
EXHIBIT 10.25
GUARANTY
This Guaranty ("Guaranty") is executed by and between Accord Financial,
Inc., a Delaware corporation having a mailing address at P.O. Box 6704,
Greenville, South Carolina, 29606 (hereinafter referred to as "Factor") and
Hencie Computer Systems, Inc. located at 13155 Noel Rd, 10th Floor, Dallas, TX
75240 (hereinafter referred to as ("Guarantor"). Whereas Alternate Postal
Direct, Inc., a Michigan corporation ("Company") located at 12495 34th St.,
Unit D, St. Petersburg, FL 33716 has applied to Factor for the purchase and
sale of accounts receivable and contract rights of Company by Factor, and for
Factor to provide certain collection services with respect to other accounts
receivable and contract rights of Company, and as a condition of providing
such service to Company, Factor required the guaranty of Guarantor.
Guarantor makes this Guaranty for the purpose of providing additional
security to Factor and as an inducement to Factor to purchase accounts
receivable and contract rights, and provide other collection services to
Company.
Therefore, in consideration of Factor purchasing the accounts receivable and
contract rights, and of providing other service to Company, Guarantor
unconditionally agrees with Factor as follows:
The assumption by Guarantor of his obligations hereunder will result in a
direct financial benefit to Guarantor.
Guarantor hereby unconditionally guarantees to Factor the full and prompt
performance of all obligations of Company to Factor including but not limited
to the obligations of Company under the Purchase and Sale Agreement between
Factor and Company. The obligations of Guarantor shall be absolute and
unconditional and shall remain in full force and effect so long as Company is
selling accounts receivable and receiving services from Factor, and upon the
termination of the Purchase and Sale Agreement with Factor their guaranty
shall remain in full force and effect until all obligations of Company to
Factor are discharged and satisfied in full.
The obligations of Guarantor shall not be affected by the voluntary
liquidation, dissolution, sale or other disposition of all or substantially
all of the assets of Company or of its insolvency, receivership, bankruptcy,
assignment for the benefit of coeditors, reorganization, arrangement,
composition with creditors, or similar proceedings affecting Company or any
other guarantor of its obligations to Factor, nor by any merger,
consolidation, or other reorganization of any kind involving Company.
The liability of Guarantor hereunder is an absolute, direct, immediate, and
unconditional guarantee of payment and not of collectability.
No set-off, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature, which Company may have against Factor, shall
be available hereunder to Guarantor.
Guarantor waives notice of demand of any kind to Guarantor personally and
agrees that notice to Company is notice to Guarantor.
Guarantor authorizes Factor, without notice or demand, and without affecting
Guarantor's liability hereunder, from time to time, to: (i) renew,
compromise, extend, accelerate, or otherwise change the terms of the
obligations of Company to factor or any part thereof: (ii) take and hold or
substitute security for the payment of the Guaranty of the obligations
Company to Factor and exchange, enforce, waive, and release any such security
and; (iii) apply such security and direct the order or manner of sale thereof
as Factor may in it discretion determine. Factor may, without notice or
consent, assign this Guaranty in whole or in part.
Any indebtedness of Company now or hereafter held by Guarantor is hereby
subordinated to the obligations of Company to Factor, and such indebtedness
of company to Guarantor, if Factor so requests, shall be collected enforced
and received by Guarantor as trustee for Factor and be paid over to factor on
account of the obligations of company to Factor, but without reducing or
affecting in any manner, the liability of Guarantor under the provisions
hereof. Guarantor shall immediately inform Factor on request of any
indebtedness of Company held by Guarantor.
Guarantor waives any claim, right of remedy which Guarantor may now have or
hereafter acquire against Company or any person primarily or contingently
liable for the guaranteed obligations or that arise from the existence or
performance of Guarantor's obligations hereunder, including, without
limitation, any claim, remedy or right or subrogation, reimbursement,
exoneration, contribution, indemnification, or participation in any claim,
right or remedy of Factor against Company or any collateral secrete Factor
now has or hereafter acquires, regardless of how such claim, remedy or right
arises.
If Factor retains the services of an attorney to enforce this Guaranty,
Guarantor agrees to pay the attorney's fees and other costs and expenses
incurred by Factor even thought no suit or action is files. If a suit or
action is filed to enforce this Guaranty, Guarantor shall pay to Factor the
costs and expenses and a reasonable attorney's fees to be fixed by the court
in which the suit or action is brought. If any appeal or review is taken,
Guarantor shall pay such further sum to Factor for the costs and expenses
incurred and a reasonable attorney's fee as may be fixed by the Appellate
Court or the lower court.
Upon happening of a default in the obligation of the Company to Factor, then
Factor shall have the right to proceed first and directly against Guarantor
under this Guaranty without proceeding against or exhausting any other
remedies which it may have against Company or any other guarantor of
Company's obligations to Factor and without realizing upon any security held
by Factor.
No remedy herein conferred upon Factor is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Guaranty or now or hereafter existing at law or in equity. No delay or
omission by Factor to exercise any right accruing upon any default or failure
of performance by Company to Factor shall be construed to be a waiver
thereof, but any such right and power may be exercised from time to time and
as often as may be deemed to be expedient by Factor. This Guaranty shall be
binding upon Guarantor's successors and assigns.
Guarantor and Factor hereby acknowledge that this Guaranty is accepted and
executed in the State of South Carolina, that this guaranty or any dealings
and relationships between Guarantor and Factor all rights and remedies of the
parties, shall be subject to and governed, as to their validity, enforcement,
construction, and effect, and all other respects, by the laws of the State of
South Carolina.
Neither Guarantor nor Factor nor any assignee, successor, heir or legal
representative of same shall seek a jury trial in any lawsuit, proceeding,
counterclaim, or any other litigation procedure arising from or based upon
this Guaranty or any other agreement or document evidencing, securing or
relating to this Guaranty or to the dealings or relationship between
Guarantor and Factor.
Neither Guarantor nor Factor shall seek to consolidate any such action, in
which a jury trial has been waived, with any other action in which a jury
trial has not been or cannot be waived.
Guarantor hereby irrevocably submits and consents to the exclusive
jurisdiction of the state and federal courts located in the State of South
Carolina, county of Greenville. Any such action of proceeding commenced by
Guarantor or Factor will be litigated only in federal court or a state court
in the State of South Carolina, county of Greenville. Guarantor waives any
objection based on forum non-conveniens and any objection to venue in
connection therewith and authorizes service of any legal process upon the
Secretary of State of South Carolina as Guarantor's agent.
Dated and Effective: 5-12-03
GUARANTOR
/s/ Adil Khan
Hencie Computer Systems, Inc.
13155 Noel Rd, 10th Floor
Dallas, TX 75240
NOTARIZATION
STATE OF TX
COUNTY OF DALLAS
The foregoing instrument was acknowledged before me this 12th day of May
2003 by Adil Khan individually, and who identified himself as same. He is
personally known to me or has produced a Driver's license as identification
and did take an oath. His is the signor of the foregoing instrument and did
acknowledge to me that he executed the same freely and voluntarily.
Louise J. Brown /s/ Louise J. Brown 3-16-05
Printed Name Public Notary Signature My Commission Expires
EXHIBIT 31.1
SECTION 302 CERTIFICATION
I, Adil Khan, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Alternate
Marketing Networks, Inc., a Delaware corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we
have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 13, 2003 By: /s/ Adil Khan
Name: Adil Khan
Title: Chief Executive Officer
EXHIBIT 31.2
SECTION 302 CERTIFICATION
I, Sandra J. Smith, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Alternate
Marketing Networks, Inc., a Delaware corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we
have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 13, 2003 By: /s/Sandra J. Smith
Name: Sandra J. Smith
Title: Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Alternate Marketing Networks,
Inc., a Delaware corporation (the "Company"), on Form 10-QSB for the period
ended June 30, 2003 as filed with the Securities and Exchange Commission
(the "Report"), the undersigned Chief Executive Officer of the Company does
hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to the knowledge of the
undersigned:
(1) The Report fully complies with the requirements of Section 13 (a) or
15(d), as applicable, of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company as of the date(s) and for the period(s) indicated.
Date: August 13, 2003 By: /s/Adil Khan
Name: Adil Khan
Title: Chief Executive Officer
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Alternate Marketing Networks,
Inc., a Delaware corporation (the "Company"), on Form 10-QSB for the period
ending June 30, 2003 as filed with the Securities and Exchange Commission
(the "Report"), the undersigned Chief Financial Officer of the Company does
hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to the knowledge of the
undersigned:
(1) The Report fully complies with the requirements of Section 13 (a) or
15(d), as applicable, of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company as of the date(s) and for the period(s) indicated.
Date: August 13, 2003 By: /s/Sandra J. Smith
Name: Sandra J. Smith
Title: Chief Financial Officer