PROVIDENCE — In its form 10QSB released Friday, May 18, integrated network service provider Log On America Inc. said it may not have enough funds to continue as an ongoing concern through the end of the year.
The company, which recently sold off its residential voice accounts to United Systems Access, said it has reached an agreement with Nortel to extinguish it debt obligation to that company in exchange for a cash payment of $1.2 million and the return of equipment. Log On America said it also reached a settlement agreement with voice, data and video support service provider Belenos, for which it must pay some $1 million. The suit, filed by Belenos in Suffolk County, Mass. Superior Court, alleged that Log On America owed Belenos compensation for work and equipment, and sought damages for alleged breach of contract.
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The sale of residential voice accounts should save Log On America approximately $150,000 per month in account maintenance and associated costs, the company stated. However, the expenditures related to the Nortel and Belenos agreements have created a situation in which “existing capital resources may not be sufficient to fund our operating deficits through 2001,” the company stated in its form 10QSB.
“If we are unsuccessful in implementing our cost reductions or additional unanticipated costs are incurred, we may not have sufficient funds to continue as a going concern through December 31, 2001. As a result, we may decide to seek additional capital earlier than the end of 2001, the timing of which will depend upon, among other things, market conditions and terms, which are acceptable to us.”
The company also stated that it received notification from Nasdaq that its common stock has failed to maintain “certain continued listing requirements.” The company has until August 7 to respond to the notification, it said, and hopes to maintain its Nasdaq listing.
Log On America stated that it has implemented “various cost reduction programs,” including a reduction of staff, office consolidation and network infrastructure consolidation. It stated that its executive officers have also agreed to defer a portion of their salaries, “which will be paid to them at such a time as the compensation committee approves such payment to be made either in the form of cash or of (our) common stock, which is subject to shareholder approval.”
This afternoon, Log On America’s stock was trading up 8 cents, at 47 cents per share. It has traded as low as 25 cents and as high as $7.41 during the past year. The company stated in its 10QSB that it has not paid any cash dividends to its shareholders and does not intend to do so “in the foreseeable future.”
