From the most recent 10Q (Sept 30, 1997):
<<Results of Operations
Three Months Ended September 30, 1997 Compared To Three Months Ended September
30, 1996
Net Sales. Net sales increased by $35,000, or 17%, from $209,000 in the
three months ended September 30, 1996 to $244,000 in the three months ended
September 30, 1997. The overall increase is due to increased Internet services
revenue, with a reduced demand for wide area network products. Initial demand
for newly introduced hardware products has yet to be established, in that most
sales to date have been to customers for testing and evaluation purposes. The
revenue mix for the three months ended September 30, 1997 consisted of 69%
Internet services revenue and 31% hardware product sales.
Gross Profit. Gross profit decreased as a percentage of net sales to 4% for
the three months ended September 30, 1997, from a gross profit of 21% of net
sales for the corresponding period of 1996. The gross profit percentage decrease
can be attributed to increased manufacturing overhead infrastructure
expenditures, including increased numbers of personnel to support an anticipated
ramp up of sales activity.>>
<<ITEM 1. LEGAL PROCEEDINGS
On July 28, 1997 the Company was named as a defendant in an action brought
by AT&T Corp. ("AT&T") against Connect America, a reseller of "800" number
service, its officers and affiliates, and several Internet Service Providers,
including the Company. The action was brought in the U.S. District Court for the
Central District of California. In general, the complaint alleges that Connect
America and its officers fraudulently acquired 800 numbers from AT&T, failed to
pay for them, and resold them to the Company and the other Internet Service
Providers on a "flat rate" basis, notwithstanding the fact that AT&T's charges
for 800 service are typically based on time utilized. The claims against the
Company and the other Internet Service Providers are based on unjust enrichment,
on the theory that the Company and the other Internet Service Providers knew or
should have known that flat rate 800 service was unavailable. In addition to
injunctive relief against Connect America and its officers, the complaint seeks
damages of $7.4 million, punitive damages and attorneys' fees. The Company has
filed an answer to the complaint denying the material allegations thereof, and
plans to vigorously contest the action. There can be no assurance that the
Company will be successful in its defense of the action. Because of the large
amount sought in the complaint, an adverse outcome would have a material adverse
effect on the Company's financial condition.>>
This company reminds me of RACE
FTEL: $ 5.69b $ 5.812a vol 151,500
VALUESPEC
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