TEXAS
|
86-0778979
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
Number)
|
10930
W. Sam Houston Pkwy., N., Suite 200
|
77064
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨ (Do not check if
a smaller reporting company)
|
Smaller
reporting company x
|
December 31,
|
June 30,
|
|||||||
2009
|
2009
|
|||||||
(unaudited)
|
(audited)
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ | 1,479,158 | $ | 2,421,264 | ||||
Restricted
cash
|
6,432 | 6,432 | ||||||
Accounts
receivable, net of allowance for uncollectible accounts of $5,010 and
$6,824
|
||||||||
(as
of December 31, 2009 and June 30, 2009, respectively)
|
85,896 | 122,128 | ||||||
Inventory
|
269,430 | 255,534 | ||||||
Prepaid
expenses and other current assets
|
470,778 | 542,606 | ||||||
Assets
held for sale
|
11,855 | - | ||||||
Total
current assets
|
2,323,549 | 3,347,964 | ||||||
Property
and equipment—net
|
1,968,087 | 2,150,562 | ||||||
Goodwill—net
|
2,413,127 | 2,413,127 | ||||||
Subscriber
acquisition costs—net
|
494,717 | 744,869 | ||||||
Other
assets—net
|
47,311 | 53,318 | ||||||
TOTAL
ASSETS
|
$ | 7,246,791 | $ | 8,709,840 | ||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Trade
accounts payable
|
$ | 299,770 | $ | 298,903 | ||||
Accrued
liabilities
|
381,892 | 573,013 | ||||||
Deferred
revenue
|
903,161 | 1,029,773 | ||||||
Current
portion of long-term debt
|
735,862 | 613,746 | ||||||
Current
portion of capital lease obligations
|
25,608 | 22,929 | ||||||
Total
current liabilities
|
2,346,293 | 2,538,364 | ||||||
Long-term
debt
|
899,105 | 664,772 | ||||||
Long-term
capital lease obligations
|
17,054 | 30,565 | ||||||
Total
liabilities
|
3,262,452 | 3,233,701 | ||||||
COMMITMENTS
AND CONTINGENCIES
|
- | - | ||||||
SHAREHOLDERS'
EQUITY:
|
||||||||
Preferred
stock $.01 par value: 5,000,000 shares authorized,
2,889,076
|
||||||||
issued
and outstanding as of December 31, 2009 and June 30, 2009
|
28,891 | 28,891 | ||||||
Common
stock, $.01 par value: 40,000,000 shares authorized,
|
||||||||
16,558,914
and 16,857,031 issued and outstanding as of
|
||||||||
December
31, 2009 and June 30, 2009, respectively
|
165,589 | 168,571 | ||||||
Additional
paid-in capital
|
62,975,684 | 63,676,806 | ||||||
Accumulated
deficit
|
(59,185,292 | ) | (58,398,129 | ) | ||||
Total
Internet America, Inc. shareholders' equity
|
3,984,872 | 5,476,139 | ||||||
Noncontrolling
interest in subsidiary
|
(533 | ) | - | |||||
Total
shareholders' equity
|
3,984,339 | 5,476,139 | ||||||
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$ | 7,246,791 | $ | 8,709,840 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
REVENUES:
|
||||||||||||||||
Internet
services
|
$ | 1,793,020 | $ | 1,930,332 | $ | 3,591,437 | $ | 3,885,047 | ||||||||
Other
|
42,629 | 57,585 | 81,035 | 107,723 | ||||||||||||
TOTAL
REVENUES
|
1,835,649 | 1,987,917 | 3,672,472 | 3,992,770 | ||||||||||||
OPERATING
COSTS AND EXPENSES:
|
||||||||||||||||
Connectivity
and operations
|
1,223,064 | 1,339,613 | 2,542,685 | 2,690,791 | ||||||||||||
Sales
and marketing
|
69,287 | 72,832 | 147,746 | 142,845 | ||||||||||||
General
and administrative
|
527,320 | 613,377 | 1,228,004 | 1,201,306 | ||||||||||||
Provision
for (recovery of) bad debt expense
|
843 | (1,152 | ) | (1,815 | ) | (65 | ) | |||||||||
Depreciation
and amortization
|
256,679 | 277,307 | 504,100 | 573,104 | ||||||||||||
TOTAL
OPERATING COSTS AND EXPENSES
|
2,077,193 | 2,301,977 | 4,420,720 | 4,607,981 | ||||||||||||
LOSS
FROM OPERATIONS
|
(241,544 | ) | (314,060 | ) | (748,248 | ) | (615,211 | ) | ||||||||
INTEREST
INCOME
|
2,625 | 11,803 | 6,621 | 27,525 | ||||||||||||
INTEREST
EXPENSE
|
(26,210 | ) | (23,052 | ) | (45,536 | ) | (48,457 | ) | ||||||||
NET
LOSS
|
$ | (265,129 | ) | $ | (325,309 | ) | $ | (787,163 | ) | $ | (636,143 | ) | ||||
LESS:
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
|
$ | (177 | ) | $ | (87 | ) | $ | (533 | ) | $ | (57 | ) | ||||
NET
LOSS ATTRIBUTABLE TO INTERNET AMERICA, INC.
|
$ | (264,952 | ) | $ | (325,222 | ) | $ | (786,630 | ) | $ | (636,086 | ) | ||||
NET
LOSS PER COMMON SHARE:
|
||||||||||||||||
BASIC
AND DILUTED
|
$ | (0.02 | ) | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.04 | ) | ||||
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING:
|
||||||||||||||||
BASIC
AND DILUTED
|
16,558,914 | 16,857,031 | 16,602,659 | 16,857,031 |
Six Months Ended
|
||||||||
December 31,
|
||||||||
2009
|
2008
|
|||||||
OPERATING
ACTIVITIES:
|
||||||||
Net
loss
|
$ | (786,630 | ) | $ | (636,086 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Non-controlling
interest
|
(533 | ) | (57 | ) | ||||
Depreciation
and amortization
|
504,100 | 573,104 | ||||||
Loss
on disposal of fixed assets
|
12,895 | 2,170 | ||||||
Recovery
of bad debt expense
|
(1,815 | ) | (65 | ) | ||||
Non-cash
stock compensation expense
|
41,307 | 44,262 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
38,047 | 27,505 | ||||||
Inventory
|
(13,896 | ) | (15,182 | ) | ||||
Prepaid
expenses and other current assets
|
71,828 | (93,331 | ) | |||||
Other
assets
|
6,007 | 24,569 | ||||||
Accounts
payable and accrued liabilities
|
(190,254 | ) | (212,233 | ) | ||||
Deferred
revenue
|
(126,612 | ) | (153,125 | ) | ||||
Net
cash used in operating activities
|
(445,556 | ) | (438,469 | ) | ||||
INVESTING
ACTIVITIES:
|
||||||||
Purchases
of property and equipment, net
|
(161,913 | ) | (152,086 | ) | ||||
Proceeds
from sale of property and equipment
|
5,520 | 10,934 | ||||||
Net
cash used in investing activities
|
(156,393 | ) | (141,152 | ) | ||||
FINANCING
ACTIVITIES:
|
||||||||
Principal
payments of long-term debt
|
(329,325 | ) | (286,429 | ) | ||||
Principal
payments of capital leases
|
(10,832 | ) | - | |||||
Net
cash used in financing activities
|
(340,157 | ) | (286,429 | ) | ||||
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
(942,106 | ) | (866,050 | ) | ||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
2,421,264 | 3,911,680 | ||||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$ | 1,479,158 | $ | 3,045,630 | ||||
SUPPLEMENTAL
INFORMATION:
|
||||||||
Cash
paid for interest
|
$ | 41,494 | $ | 46,847 | ||||
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Cancellation
of common stock shares for long term debt in connection with
acquisition
|
$ | 745,943 | $ | - | ||||
Debt
issued in connection with canceled common stock, net
|
$ | 685,773 | $ | - | ||||
Non
cash adjustment to intangible assets related to imputed interest on
long-term debt issued for cancellation of common stock
|
$ | 60,170 | $ | - |
1.
|
Basis
of Presentation
|
2.
|
Liquidity
|
3.
|
Basic
and Diluted Net Loss Per Share
|
4.
|
Use
of Estimates
|
5.
|
Goodwill
and Subscriber Acquisition Costs
|
6.
|
Long-Term
Debt
|
December
|
June
30,
|
|||||||
2009
|
2009
|
|||||||
Note
payable due July 19, 2010, payable in quarterly payments of $7,751
with interest imputed at 9% (net of unamortized discount of
$1,003)
|
$ | 22,185 | $ | 36,211 | ||||
Note
payable due January 23, 2011 payable in bi-annual installments of
$13,917 with interest imputed at 8% (net of unamortized discount of
$1,185)
|
23,106 | 23,106 | ||||||
Note
payable due August 08, 2010, payable in monthly installments of $1,033
beginning October 08, 2008 with interest imputed at 5% (net of unamortized
discount of $153)
|
8,114 | 14,025 | ||||||
Note
payable due June 20, 2012, payable in monthly installments of $2,088 with
interest imputed at 9% (net of unamortized discount of
$6,733)
|
55,902 | 65,656 | ||||||
Note
payable due July 20, 2010, payable in monthly installments of $1,818 with
interest imputed at 6.5% (net of unamortized discount of
$271)
|
12,452 | 22,757 | ||||||
Note
payable due July 20, 2010, payable in monthly installments of $1,409 with
interest imputed at 6.5% (net of unamortized discount of
$210)
|
9,651 | 17,637 | ||||||
Note
payable due December 23, 2010, payable in monthly payments of $26,199 with
interest imputed at 5.5% (net of unamortized discount of
$8,761)
|
305,632 | 452,548 | ||||||
Note
payable due July 27, 2014, payable in quarterly payments of $37,297 with
interest imputed at 3.25% (net of unamortized discount of
$54,583)
|
654,062 | - | ||||||
Loan
and Security Agreement with United States Department of Agriculture Rural
Utilities Service
|
543,863 | 646,578 | ||||||
1,634,967 | 1,278,518 | |||||||
Less
current portion
|
(735,862 | ) | (613,746 | ) | ||||
Total
long-term debt
|
$ | 899,105 | $ | 664,772 |
7.
|
Shareholders’
Equity
|
8.
|
Income
Taxes
|
9.
|
Related
Parties
|
Six Months Ended
|
||||||||
December 31,
|
||||||||
2009
|
2008
|
|||||||
Troy
LeMaile Stovall
|
$ | 7,750 | $ | 8,676 | ||||
Justin
McClure
|
7,750 | 8,250 | ||||||
John
Palmer
|
7,750 | 9,073 | ||||||
Steven
Mihaylo
|
8,250 | 8,893 | ||||||
Cindy
Ocker
|
68,495 | 76,834 | ||||||
$ | 99,995 | $ | 111,726 |
10.
|
New
Accounting Pronouncements
|
Three Months Ended December 31,
|
||||||||||||||||
2009
|
% of
Revenues
|
2008
|
% of
Revenues
|
|||||||||||||
STATEMENT OF OPERATIONS DATA:
|
||||||||||||||||
REVENUES:
|
||||||||||||||||
Internet
services
|
$ | 1,793 | 97.7 | % | $ | 1,931 | 97.1 | % | ||||||||
Other
|
43 | 2.3 | % | 58 | 2.9 | % | ||||||||||
TOTAL
REVENUES
|
1,836 | 100.0 | % | 1,989 | 100.0 | % | ||||||||||
OPERATING
COSTS AND EXPENSES:
|
||||||||||||||||
Connectivity
and operations
|
1,223 | 66.6 | % | 1,340 | 67.4 | % | ||||||||||
Sales
and marketing
|
69 | 3.7 | % | 73 | 3.7 | % | ||||||||||
General
and administrative
|
528 | 28.7 | % | 614 | 30.8 | % | ||||||||||
Recovery of
(provision for) bad debt expense
|
1 | 0.1 | % | (1 | ) | (0.1 | )% | |||||||||
Depreciation
and amortization
|
257 | 14.0 | % | 277 | 13.9 | % | ||||||||||
TOTAL
OPERATING COSTS AND EXPENSES
|
2,078 | 113.1 | % | 2,303 | 115.7 | % | ||||||||||
OPERATING
LOSS
|
(242 | ) | (13.1 | )% | (314 | ) | (15.7 | )% | ||||||||
INTEREST
INCOME
|
3 | 0.1 | % | 12 | 0.6 | % | ||||||||||
INTEREST
EXPENSE
|
(26 | ) | (1.4 | )% | (23 | ) | (1.2 | )% | ||||||||
NET
LOSS
|
$ | (265 | ) | (14.4 | )% | $ | (325 | ) | (16.3 | )% | ||||||
LESS:
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
|
$ | (0 | ) | 0.0 | % | $ | (0 | ) | 0.0 | % | ||||||
NET
LOSS ATTRIBUTABLE TO INTERNET AMERICA, INC.
|
$ | (265 | ) | (14.4 | )% | $ | (325 | ) | (16.3 | )% | ||||||
NET
LOSS PER COMMON SHARE:
|
||||||||||||||||
BASIC
AND DILUTED
|
$ | (0.02 | ) | $ | (0.02 | ) | ||||||||||
WEIGHTED
AVERAGE COMMON
|
||||||||||||||||
SHARES
OUTSTANDING:
|
||||||||||||||||
BASIC
AND DILUTED
|
16,558,914 | 16,857,031 | ||||||||||||||
OTHER
DATA:
|
||||||||||||||||
Subscribers
at end of period (1)
|
26,400 | 28,400 | ||||||||||||||
EBITDA
(loss)(2)
|
$ | 15 | $ | (37 | ) | |||||||||||
EBITDA
margin(3)
|
0.8 | % | (1.9 | )% | ||||||||||||
Reconciliation
of net loss to EBITDA (loss):
|
||||||||||||||||
Net
loss
|
$ | (265 | ) | $ | (325 | ) | ||||||||||
Add:
|
||||||||||||||||
Depreciation
and amortization
|
257 | 277 | ||||||||||||||
Interest
income
|
3 | 12 | ||||||||||||||
Interest
expense
|
(26 | ) | (23 | ) | ||||||||||||
EBITDA
(loss)(2)
|
$ | 15 | $ | (37 | ) |
Six Months Ended December 31,
|
||||||||||||||||
2009
|
% of
Revenues
|
2008
|
% of
Revenues
|
|||||||||||||
STATEMENT
OF OPERATIONS DATA:
|
||||||||||||||||
REVENUES:
|
||||||||||||||||
Internet
services
|
$ | 3,591 | 97.8 | % | $ | 3,885 | 97.3 | % | ||||||||
Other
|
81 | 2.2 | % | 108 | 2.7 | % | ||||||||||
TOTAL
REVENUES
|
3,672 | 100.0 | % | 3,993 | 100.0 | % | ||||||||||
OPERATING
COSTS AND EXPENSES:
|
||||||||||||||||
Connectivity
and operations
|
2,543 | 69.3 | % | 2,691 | 67.4 | % | ||||||||||
Sales
and marketing
|
148 | 4.0 | % | 143 | 3.6 | % | ||||||||||
General
and administrative
|
1,228 | 33.4 | % | 1,202 | 30.0 | % | ||||||||||
Recovery of (provision
for) bad debt expense
|
(2 | ) | 0.0 | % | (0 | ) | 0.0 | % | ||||||||
Depreciation
and amortization
|
504 | 13.7 | % | 573 | 14.4 | % | ||||||||||
TOTAL
OPERATING COSTS AND EXPENSES
|
4,421 | 120.4 | % | 4,609 | 115.3 | % | ||||||||||
OPERATING
LOSS
|
(749 | ) | (20.4 | )% | (616 | ) | (15.3 | )% | ||||||||
INTEREST
INCOME
|
7 | 0.2 | % | 28 | 1.3 | % | ||||||||||
INTEREST
EXPENSE
|
(46 | ) | (1.2 | )% | (48 | ) | (1.2 | )% | ||||||||
NET
LOSS
|
$ | (788 | ) | (21.4 | )% | $ | (636 | ) | (16.3 | )% | ||||||
LESS:
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
|
$ | (1 | ) | 0.0 | % | $ | (0 | ) | 0.0 | % | ||||||
NET
LOSS ATTRIBUTABLE TO INTERNET AMERICA, INC.
|
$ | (787 | ) | (21.4 | )% | $ | (636 | ) | (16.3 | )% | ||||||
NET
LOSS PER COMMON SHARE:
|
||||||||||||||||
BASIC
AND DILUTED
|
$ | (0.05 | ) | $ | (0.04 | ) | ||||||||||
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING:
|
||||||||||||||||
BASIC
AND DILUTED
|
16,602,659 | 16,857,031 | ||||||||||||||
OTHER
DATA:
|
||||||||||||||||
Subscribers
at end of period (1)
|
26,400 | 28,400 | ||||||||||||||
EBITDA(loss)(2)
|
$ | (244 | ) | $ | (43 | ) | ||||||||||
EBITDA
margin(3)
|
(6.7 | )% | (1.1 | )% | ||||||||||||
CASH
FLOW DATA:
|
||||||||||||||||
Cash
flow used in operations
|
$ | (446 | ) | $ | (438 | ) | ||||||||||
Cash
flow used in investing activities
|
$ | (156 | ) | $ | (141 | ) | ||||||||||
Cash
flow used in financing activities
|
$ | (340 | ) | $ | (286 | ) | ||||||||||
Reconciliation
of net loss to EBITDA (loss):
|
||||||||||||||||
Net
loss
|
$ | (787 | ) | $ | (636 | ) | ||||||||||
Add:
|
||||||||||||||||
Depreciation
and amortization
|
504 | 573 | ||||||||||||||
Interest
income
|
7 | 28 | ||||||||||||||
Interest
expense
|
(46 | ) | (48 | ) | ||||||||||||
EBITDA
(loss)(2)
|
$ | (244 | ) | $ | (43 | ) |
Exhibit
|
Description
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of William E. Ladin,
Jr.
|
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of Jennifer S.
LeBlanc
|
|
32.1
|
Section
1350 Certification of William E. Ladin, Jr.
|
|
32.2
|
Section
1350 Certification of Jennifer S.
LeBlanc
|
INTERNET
AMERICA, INC.
|
|
(Registrant)
|
|
Date: 02/16/10
|
By:
/s/ William E. Ladin, Jr.
|
William
E. Ladin, Jr.
|
|
Chairman
and Chief Executive Officer
|
|
Date: 02/16/10
|
By:
/s/ Jennifer S. LeBlanc
|
Jennifer
S. LeBlanc
|
|
Chief
Financial and Accounting
Officer
|