SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10\A - No.1
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12 (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
PICK COMMUNICATIONS CORP.
(Exact name of the registrant as specified in its charter)
NEVADA 75-2107261
(State or other jurisdiction of (I.R.S. employer
Incorporation or Organization) identification no.)
115 Route 46 West, Suite A-2
Mountain Lakes, NJ 07046
(Address of principal executive offices) (Zip code)
Registrant's Telephone number, including area code (201) 334-2929
------------------------
Securities to be registered pursuant to Section 12(b)
of the Act:
Title of each class Names of each exchange on which
to be so registered each class is to be registered
None N/A
Securities to be registered pursuant to Section 12(g)
of the Act:
Common Stock, $.002 Par Value
(Title of Class)
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Item 1: Business
(a) General Development of Business
In July 1995, Prime changed its state of organization from Utah to
Nevada. On September 12, 1995, Prime executed a Stock Purchase Agreement to
exchange 16,500,000 shares of Prime's Common Stock for all of the outstanding
shares of common stock and warrants of Public Info/Comm Kiosk, Inc. ("Pick"),
which made Pick a subsidiary of Prime. Pick was incorporated under the laws of
the State of New Jersey in August 1992. Prime changed its name to Pick
Communications Corp. in December 1995. Unless otherwise indicated, all
references to the "Company" hereinafter include the business and operations of
Pick prior to the September 12, 1995 transaction, and the combined companies
thereafter. The transaction was a reverse acquisition accounted for as a
recapitalization of Pick. The financial statements contained herein represent
the operations of Pick prior to September 12, 1995 and the consolidated
operations of the Company thereafter.
The Company is engaged in the design, development and marketing of
various telecommunications products. To date, the Company's operations have
primarily consisted of sales of prepaid telephone debit cards ("Debit Cards").
Telephone Debit Cards provide users with access to local calls and to long
distance domestic as well as international service through switching facilities
and long distance network arrangements. The major portion of the Company's
operations since January 1, 1994 have involved the issuance and sale of
telephone Debit Cards. In October 1995, the Company purchased the worldwide
rights to a prepaid cellular telephone technology and has since entered into
various marketing arrangements for this telephone technology, as described
below. The Company plans to expand operations into the related areas of resale
of long distance service to carriers and prepaid cellular phone production and
licensing for sales.
(b) Financial Information About Industry Segments
The Company operates in one business segment, the design, development
and sale of telecommunications products.
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(c) Narrative Description of Business
Telephone Debit Card Market Overview
The telephone Debit Card was developed in Italy in 1976, and became
readily available throughout Europe in the mid-1980's. In 1987, the concept was
introduced in the United States where it continues to gain consumer acceptance.
The Company commenced business as a long distance sales agency where it
sold long distance phone service on a commission basis. In 1993, the Company
recognized that the telephone Debit Card concept was a viable product to market
to the many Americans that use public telephones. The Company tested this
concept by issuing a limited number of Communicards, as described below, early
in the year. To commercialize the telephone Debit Card concept, the Company
acquired a working knowledge of the technology available in the public domain.
Accordingly, the Company utilizes such technology and does not own it. The
Company brought the concept to reality in December 1993 with an initial run of a
telephone Debit Card. The card proved to be a technical success and the Company
improved it by developing the COMMUNICASH card which was introduced in August
1994.
The market for telephone Debit Cards (also known as "calling cards")
consists of retail customers, distributor customers, promotional customers and
the collector market. Retailers sell directly to the ultimate consumers, while
distributors serve as middle-men and brokers which sell to chain stores or other
retail sellers. The promotional market consists primarily of corporate customers
who use telephone Debit Cards as premiums to enhance sales of their own products
through more recognition. Many companies are offering consumers free long
distance (through telephone Debit Cards which contain their corporate names) if
they try or purchase a certain product (or amount of products) made by that
company. The collector market consists of cards containing pictures of sports or
entertainment celebrities or commemorating a particular event. Customers of such
cards do not expect to use the telephone time associated with the telephone
Debit Cards, but rather save the telephone Debit Cards for potential sales at
appreciated values to other collectors at future dates.
The Company serves the retail, distributor and promotional markets
through the use of its trademarked line of "COMMUNICASH" and "las Americas"
telephone Debit Cards, as well as with co-branded promotional cards. The Company
has entered the collector market on a very limited basis.
COMMUNICASH
The Company brought its first prepaid telephone Debit Card, Communicard
Phone Money, to market in December 1993 in controlled distribution. During a
seven-month trial period in 1994, the Company learned much information
concerning the product category, the needs of the distribution chain in the
retail environment and the retail market itself, which led to the development
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and introduction of the current COMMUNICASH telephone Debit Card in August 1994.
The Company has taken a comprehensive approach with regard to research,
development, market analysis, production and distribution for its products which
the Company believes is evident in both the product and the point of sale
materials.
COMMUNICASH cards are non-rechargeable, disposable prepaid telephone
Debit Cards (also known as prepaid telephone calling cards) specifically
designed for the retail sales environment. The Company issues COMMUNICASH in
denominations of $5, $10, $20, $50 and $100 which can be used for local, long
distance and international calling from any touch-tone phone in the United
States at any time. An 800 number printed on the back of the COMMUNICASH card
provides the consumer with network access and a Personal Identification Number
("PIN"), also printed on the back of the card, allows the computerized switch to
identify and track card usage. Printed instructions and voice prompts in English
and Spanish provide the consumer with step by step instructions for card use,
information regarding the amount of money remaining on the card and the number
of minutes the consumer can talk to the destination number dialed. Calls in a
series can be made without hanging up and re-dialing, simply by pressing the
pound sign (#) at the conclusion of each call. To assist the consumer further,
the Company has contracted with Telecommunications Service Center, Inc. and
Innovative Telecom Corp., the companies which provide telephone switching
services to the Company, to provide a 24-hour customer service line.
las Americas
The Company's comprehensive approach to research, development and
market analysis for its products has led to the identification of certain ethnic
or niche markets where retail sales are most profitable. The first niche market
targeted is the Hispanic consumer, and to access this market, the Company has
recently introduced the las Americas card. This Spanish-language version of
COMMUNICASH features especially attractive international rates to countries in
Central and South America as well as the Caribbean. The las Americas card is
issued by the Company in $10 and $25 denominations for distribution primarily in
New York, New Jersey, California and Florida.
COMMUNICASH Co-Branded
COMMUNICASH Co-Branded is designed to address the promotional segment
of the market with prepaid calling cards for such clients as Webcraft
Technologies and Value Line. Co-branded cards can also be sold in a retail
environment such as through existing outlets of a corporate sponsor. This
product features the logo of the corporate sponsor or its product(s), as well as
the COMMUNICASH logo. Management believes co-branding also provides
reinforcement to the consumer of the COMMUNICASH retail product since the
Co-Branded product includes the name "COMMUNICASH", both on the packaging and on
the card itself.
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Acquisition of Telephone Time
The Company has entered into interconnect agreements with AT&T, Com
Tech International Corp., and National Telecom Corp., among others, to purchase
800 and long distance services for use with all COMMUNICASH, las Americas, and
COMMUNICASH Co-Branded telephone Debit Cards. These agreements allow the Company
to direct domestic, long distance and international calls over the networks of
these carriers. Calls are routed through the Company's own switching facility
(located in Tampa, Florida and managed by Telecommunications Service Center
Inc.), and as of April 1996, through a switch located in New York City, owned
and managed by Innovative Telecom Corporation. The distribution of time
purchased is determined by the destination of calls placed and based upon the
most favorable rate to each destination.
Sales and Marketing of Telephone Debit Cards
The Company targets sales to retail outlets in two principal ways: by
further developing an experienced direct sales force that is familiar with the
outlets which have the clients that use the Company's telephone Debit Cards and,
by using wholesale distributors that have relationships with many retail outlets
(for a wide variety of products). Two employees of the Company (the President
and the Vice President of Operations) are directly involved in the sales effort
and the management of the brokers, agents and independent contractors who sell
the Company's telephone debit card products, primarily in Florida, New York, New
Jersey, Oklahoma, Texas, Ohio and California. The Company's outside sales force
is comprised of approximately 50 brokers, agents and independent contractors on
both an exclusive and non-exclusive basis. Certain of the Company's
non-exclusive distibutors may market the products of the Company's competitors.
The Company's retail cards are sold in more than 30 retail locations at
Miami International Airport through an arrangement with Sirgany International,
Inc. Other retail outlets include approximately 50 SSP-Circle K stores in
Oklahoma and Texas pursuant to an arrangement with the Southguard Corp. and more
than 2,000 outlets serviced by Blackstone Calling Card Inc. in Florida.
The Company targets large distributors that also provide candy, chewing
gum, tobacco and other sundries to retail outlets. The Company believes that
there has been a decline in recent years in distributors' sales in the cigarette
market, and the Company hopes to take advantage of such distributors' lost sales
by providing an alternate product. Distributors generally possess a relationship
with a large number of retailers and can readily introduce a new product. By
employing a small number of large distributors, the Company is able to deliver
its products into many retail stores, with only one account receivable for each
distributor, rather than thousands for individual retail customers. However, the
loss of any one distributor would be expected to have an adverse impact on the
Company's revenues. During the year ended December 31, 1995, Best Telecom, Inc.
accounted for 39% of the Company's revenues.
The Company mainly sells to large distributors that have an established
network of independent retail outlets such as candy stores and bodegas (Spanish
grocery stores). The
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Company's distributors include Anpesil International Corporation, which has more
than 5,000 customers, primarily bodegas in New York City and New Jersey; North &
South Distributors, which distributes to more than 1,000 stores in South Florida
(Miami), Jetro Cash & Carry Enterprises, Inc., whose customers are approximately
40,000 "mom & pop" small retail stores in New York City (Manhattan, Brooklyn and
Bronx locations), Jersey City, Philadelphia, Miami and Los Angeles and Best
Telecom, Inc., which distributes to 600 locations in New York, New Jersey,
Florida and California.
The Company's COMMUNICASH is also represented by sales organizations
which broker brand name products primarily to large chain grocers and
supermarkets, chain drug and mass merchandisers. The Company has signed
brokerage agreements with two brokers, Hynes Sales Company, Inc. and Pankow
Associates, Inc., to sell COMMUNICASH on an exclusive basis to their existing
retail chain customers on a commission basis.
In January 1996, the Company entered into an agreement with
International Executive Services for the procurement of advertising through
various media. Under the agreement the Company exchanged $420,000 of pre-paid
telephone time for $2,000,000 in advertising. This agreement superseded an
agreement that the Company entered into with an individual whereby the Company
would pay $420,000 for 5,137,000 minutes of United States domestic telephone
time. Under this exchange agreement, the Company continues to pay for the
telephone time at the rate of $35,000 per month. The Company expects to pay for
these minutes out of operating cash flows during 1996.
Manufacturing/Production of COMMUNICASH Cards
All COMMUNICASH, las Americas and COMMUNICASH Co-Branded telephone
Debit Cards have been designed by Roland Gebhardt Design in New York City and
are printed by Webcraft Technologies, Inc. Webcraft has over 35 press lines in
five states capable of unique formatting and product design capabilities for the
production of prepaid telephone calling cards. Webcraft also provides the
highest level of plant and press security along with waste destruction and
finished product security. The Company procures card print runs on a purchase
order basis. No formal contract exists between the Company and Webcraft
Technologies, Inc.
Secure PINs are transmitted by tape from the Company's selected
interconnect carrier to Webcraft prior to press date, and design information is
submitted by Roland Gebhardt Design ("Roland"). During a press run, the
Company's designated Webcraft sales account manager as well as representatives
from the Company and Roland Gebhardt are present in the plant to insure smooth
and effective production.
The Company's collector cards are printed in plastic and manufactured
by Brilliant Color Cards, Inc. in San Rafael, California. Art design and PIN
Submission are the same as with a Webcraft press run. The Company procures card
print runs on a purchase order basis. No formal contract exists between the
Company and Brilliant Color Cards, Inc.
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The Company has an agreement with Players Computer, Inc. ("Players"),
located in New York, for the fulfillment of all orders for the COMMUNICASH and
las Americas products. Players provides a 100% secure storage for all of the
cards and handles the activation process with the switch so that the cards can
be used, receives and ships all orders to customers, performs accounts
receivable functions and provides the Company with weekly reports.
Prepaid Cellular Telephone
In October 1995, the Company entered into an agreement with The Next
Edge, Inc. ("TNE") whereby the Company purchased the worldwide rights to market,
distribute, sell and manufacture a prepaid cellular telephone system. This
agreement has an initial term of five years with an option for an additional
five years. The agreement requires the Company to pay TNE a total of $500,000,
payable at a rate of $25,000 per quarter for a period of five years beginning on
January 1, 1996. These payments are to be secured by an irrevocable letter of
credit. The Company is also required to issue a total of 100,000 shares of its
common stock to TNE in increments of 20,000 shares each year for five years
beginning on January 1, 1996. The agreement also requires the Company to
purchase the circuit chips for the system from TNE, at TNE's cost. The agreement
stipulates that the Company will be recorded as co-owner of the final United
States patent issued relating to this technology for which an application is
pending. The agreement requires the Company to implement the international
patent applications.
The Company's prepaid cellular telephone resulted from the explosion of
the use of cellular telephones on a worldwide basis. Not everyone is
sufficiently credit-worthy to own or lease a cellular telephone. Once a person
has a cellular phone activated, that consumer has an unlimited line of credit.
The Company believes that approximately one-third of all applicants for cellular
service are rejected by the cellular carriers as a result of enforcing stringent
credit requirements. Other consumers whose credit is "borderline" by these
standards are required to pay exorbitant deposits to secure a line.
The Company's prepaid cellular phone brings prepaid debit technology to
cellular phone users and makes it available to practically everyone. The system
works by automatically shutting off a programmed cellular telephone when the
subscriber has reached the limit of prepaid air-time. Additionally, this system
can be used with a variety of cellular telephones.
There are other cellular systems available which promote themselves as
prepaid because the consumer has to actually purchase time with a credit card
prior to using the phone. In these instances, however, access is still limited
to consumers with a level of credit-worthiness which allows them to have a
credit card, calls are limited to outbound only and a special 800 number
(sometimes pre-programmed into the phone) must be dialed before the destination
number can be accessed.
The Company's system is the first integrated system consisting of a
cellular phone with an internal programmable computer chip that allows the phone
to operate only for a prepaid amount of
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time. This tamper resistant security technology provides the highest degree of
protection from fraudulent charges. To date, 500 units have been produced and
successfully tested in both the United States and in South America. Further, the
Company's system allows the consumer to receive calls as well as to place them
and the destination number can be directly dialed. There is no behavioral
difference between the Company's system and a standard cellular phone, but the
Company's system will be available to virtually any consumer who desires
cellular technology anywhere in the world.
A consumer will be able to obtain one of the Company's specially
equipped cellular phones at a convenient retail location by completing a simple
registration form and purchasing a fixed amount of air-time which is loaded into
the phone. When the air-time reaches its limit, the customer can return to any
authorized retail location and buy more. Additionally, the consumer does not
purchase the phone itself so there is no equipment obsolescence; the phone is
essentially disposable. The Company's system also provides the consumer with the
ability to place international calls -- a feature not available in standard
cellular systems -- by using one of the Company's telephone debit cards with the
phone.
In order to commercialize the Company's prepaid cellular telephone
technology, the Company will first be required to extensively test market the
product and develop and test the supporting systems to distribute, bill, collect
and monitor equipment, software and air-time. Once the testing has been
successfully completed, the Company will likely require additional working
capital to bring the product to market. Assuming such capital is available, the
Company expects to begin marketing the product in the latter part of 1996. In
anticipation of bringing the product to market, the Company has entered into
agreements to license the rights to market and distribute the technology on a
worldwide basis.
The Company has granted an exclusive license to market and sell its
prepaid cellular telephone in the United States and Canada to P.C.T. Prepaid
Telephone, Inc. ("PCT"), which recently commenced operations. Upon the full
capitalization of PCT, the Company will maintain a majority ownership of PCT's
stock with the remainder to be owned by Firenze, Ltd. ("Firenze"), as described
below, and other private investors. PCT will purchase the licensed technology
and equipment from the Company on the basis of cost plus ten percent (10%). The
Company and PCT are currently engaged in contract negotiations with AT&T
Wireless Services with regard to the use of that particular cellular telephone
company's network by PCT's end users.
The Company's prepaid cellular telephone system will also be available
for use outside the United States because the Company's technology can interface
with any cellular network without modification. In European cities, where the
use of credit cards is less common than it is in the United States and currency
is the more accepted manner of payment, this system provides an attractive means
for cellular access. The Company has granted exclusive licenses to Firenze,
located in New York, to market and sell its prepaid cellular telephone in
various countries in Europe and to Yakimoto Investment, Ltd. ("Yakimoto"),
located in Nassau, Bahamas, to market and sell its prepaid cellular telephone in
various countries in Europe, as well as, all of Asia, Australia and Africa. On
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October 24, 1995, the Company exchanged 5,000,000 restricted shares of Common
Stock of the Company for 5,000,000 restricted shares of Common Stock of Firenze,
giving the Company a ten percent (10%) ownership in Firenze.
In addition, both Yakimoto and Firenze agreed to purchase the licensed
technology and equipment from the Company on the basis of cost plus ten percent
(10%). They also agreed to pay the Company, on a monthly basis, a royalty fee of
five percent (5%) of all gross sales revenues from equipment and air-time. The
Company has not finalized any long term contracts for the manufacture of the
various components and the assembly of same.
The Company has retained the exclusive rights to market and sell the
prepaid cellular telephones in Mexico, Central America and the Caribbean. The
Company will compete with numerous other companies engaged in the sale and/or
rental of cellular telephones including regional cellular telephone companies.
The Company expects to finance its agreement with The Next Edge, Inc.,
through the use of a letter of credit, initially to be provided by its agreement
with Yakimoto, which provides for a $475,000 letter of credit in exchange for
its license to market the product in South America, and subsequently, out of
operating cash flows. After the initial five-year term of the contract, at the
Company's sole option, the Company may extend the agreement for five additional
periods of five years each, at a cost of $100,000 per year. If the product
proves itself to be commercially viable, the Company will extend the agreement
and make those payments out of operating cash flows. In the event the contract
is not renewed, the Company would be entitled to royalties on the residual sales
made, prior to cancellation of The Next Edge, Inc., contract.
The various companies joining forces to bring the pre-paid cellular
concept to market in the Company include PCT, Firenze, and Yakimoto. The
relationships between these companies are as follows: PCT, is a majority owned
(50.4% ) subsidiary of the Company, which was established as the Company's
licensee for the United States and Canada. Firenze, is a marketing company which
expected to acquire Fonlem, in France, and be able to support the marketing
effort for the prepaid cellular product in Europe, Africa, Asia and Australia.
However, the French Treasury disallowed the acquisition of Fonlem, and it became
apparent to the Company that Firenze, would not be able to raise funds to
support the cellular product marketing in accordance with its license. In an
effort to engage a licensee with more potential to market the product, a
material portion of the licensed territories were transferred to Yakimoto, in
exchange for 500,000 restricted shares of Ultimistics, Inc. ("Ultimistics"). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for information regarding the Company's interest in Ultimistics. As
a result, Firenze, retained only the right to market, sell and distribute the
product in France, Great Britain, Italy, Spain, Germany, Switzerland, Belgium
and Luxembourg. The remainder of Europe, and all of Africa, Asia and Australia
were transferred to Yakimoto. Yakimoto, in a separate agreement with the
Company, obtained the license for South America. No relationship exists between
the Next Edge, Inc. and Firenze, Yakimoto, PCT or Ultimistics, other than as
described above.
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Government Regulations
Long distance telecommunication services are subject to regulation by
the FCC and by state regulatory authorities. Among other things, these
regulatory authorities impose regulations governing the rates, terms and
conditions for interstate and intrastate telecommunication services. The federal
law governing regulation of interstate telecommunications are the Communications
Acts of 1934 and 1996 (the "Communications Acts"), which applies to all "common
carriers," including AT&T, MCI and Sprint, as well as entities, such as the
Company, which resell the transmission services provided through the facilities
of other common carriers. In general, under the Communications Acts, common
carriers are required to charge reasonable rates and are prohibited from
engaging in unreasonable practices in the provision of their services. Common
carriers are also prohibited from engaging in unreasonable discrimination in
their rates, charges and practices.
The Communications Acts require each common carrier to file tariffs
with the FCC. A tariff is a list of services offered, the terms under which the
services are offered, and the rates, or range of rates, charged for services.
Upon filing a tariff, the service provider is required to provide the services
at the rates and under the terms and conditions specified in the tariff. Failure
to file a tariff could result in fines and penalties. The Company believes it
has filed all required tariffs with the FCC.
In addition to federal regulation, resellers of long distance services
may be subject to regulation by the various state regulatory authorities. The
scope of such regulation varies from state to state, with certain states
requiring the filing and regulatory approval of various certifications and state
tariffs. As the Company expands the geographic scope of its long distance
operations, it intends to obtain operating authority as may be required to
provide long distance service.
The Company believes that it is in substantial compliance with all
material laws, rules and regulations governing its operations and has obtained
or is in the process of obtaining all licenses, tariffs and approvals necessary
for the conduct of its business. In the future, legislation enacted by Congress,
court decisions relating to the telecommunications industry, or regulatory
actions taken by the FCC or the states in which the Company operates could
adversely impact the Company's business. Changes in existing laws and
regulations, particularly currently proposed relaxation of existing regulations
resulting in significantly increased price competition, may have a significant
impact on the Company's activities and on the Company's operating results.
Adoption of new statutes and regulations and the Company's expansion into new
geographic markets could require the Company to alter its methods of operations,
at costs which could be substantial, or otherwise limit the types of services
offered by the Company. There can be no assurance that the Company will be able
to comply with additional applicable laws, regulations and licensing
requirements.
Competition
The Company faces intense competition in the marketing and sale of its
prepaid telephone calling card products and services. The Company's telephone
Debit Cards and long distance services
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compete for consumer recognition with other prepaid phone cards, credit calling
cards and long distance telephone services which have achieved significant
international, national and regional consumer loyalty. Many of these products
and services are marketed by companies which are well-established, have
reputations for success in the development and sale of products and services and
have significantly greater financial, marketing, distribution, personnel and
other resources than the Company, thereby permitting such companies to implement
extensive advertising and promotional campaigns, both general and in response to
efforts by additional competitors to enter into new markets and introduce new
products and services. Certain of these competitors, including AT&T, MCI, Sprint
and the "Baby Bells," such as Bell Atlantic and Bell South, dominate the
telecommunications industry and have the financial resources to enable them to
withstand substantial price competition, which is expected to increase
significantly. These and other large telephone companies, as well as retailers,
such as Southland Corp., and companies engaged in the marketing of collectibles,
have also entered or have announced their intention to enter into the telephone
Debit Card segment of the industry. In addition, because the prepaid phone card
segment of the industry has no substantial barriers to entry, competition from
smaller competitors in the Company's target markets is also expected to continue
to increase significantly.
The telecommunications industry is characterized by frequent
introduction of new products and services, and is subject to changing consumer
preferences and industry trends, which may adversely affect the Company's
ability to plan for future design, development and marketing of its products and
services. The markets for telecommunications products and services are also
characterized by rapidly changing technology and evolving industry standards,
often resulting in product obsolescence or short product life cycles. The
proliferation of new telecommunications technologies, including personal
communication services, cellular telephone products and services and telephone
Debit Cards employing alternative technologies, may reduce demand for telephone
Debit Cards generally.
The Company is not presently aware of any competitor offering the same
prepaid cellular telephone technology. Although the product has a patent
pending, larger, more established entities with greater financial and personnel
resources than those of the Company may nevertheless enter into direct
competition with the Company. However, the Company reasonably expects it has a
one or two year lead and will be able to capture a significant market share.
Despite the foregoing, there can be no assurance that the Company will be able
to capture such market share and/or compete effectively.
The Company believes that it competes on the basis of price and
service. The Company's success will depend on the Company's ability to
anticipate and respond to rapid changes in consumer preferences and the
introduction of new products. There can be no assurance that the Company will be
able to compete successfully in its markets.
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Trademarks
The Company has obtained a trademark registration for its "Communicard
by Pick" trademark. The Company has filed the following additional trademark
applications for use in connection with the following telephone Debit Cards:
COMMUNICASH, las Americas and Love Call.
Patents
The Company is a co-owner of a patent (together with The Next Edge,
Inc.) that is pending concerning the technology for a prepaid cellular telephone
system and expects to implement international patent filings and/or
registrations pertaining to such patent during 1996.
Employees
The Company employs a full-time staff of nine, one person on a
part-time basis, and has made arrangements with independent contractors for
various purposes, including selling the Company's telephone Debit Cards on a
commission basis. The Company considers its relations with its employees to be
satisfactory.
Item 2: Financial Information
The following selected financial data should be read in conjunction
with the Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this Registration Statement. The selected data presented for, and as of the
end of, the years ended December 31, 1993, 1994 and 1995 are derived from the
consolidated financial statements of the Company, which financial statements
have been audited by Durland & Company CPAs, P.A., independent certified public
accountants. The consolidated balance sheet as of December 31, 1993, 1994 and
1995, and the consolidated statement of operations for the years ended December
31, 1993 1994 and 1995 and the accountants' reports thereon, are included
elsewhere in this Registration Statement.
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Selected Financial Data:
Statement of Operations Data:
Years Ended December 31
1993 1994 1995
---- ---- ----
Net sales ................... $ 23,301 $ 529,913 $ 1,565,039
Product cost of sales ....... $ 10,067 $ 753,346 $ 1,387,459
Gross profit/(loss) ......... $ 13,234 ($ 223,433) $ 177,580
Operating expenses .......... $ 171,340 $ 1,027,147 $ 1,200,918
Net Profit/(Loss) ........... ($ 158,106) ($ 1,250,580) ($ 1,068,371)
Net Profit/(Loss) per ....... -- -- ($ 0.03)
Share
Weighted average ............ -- -- ($40,130,516)
number of shares
outstanding(1)
Cash ........................ $ 6,453 $ 17,659 $ 110,715
Working Capital ............. ($ 47,129) ($ 1,127,590) ($ 1,074,159)
Total Assets ................ $ 27,492 $ 319,835 $ 2,661,524
Total Liabilities ........... $ 59,598 $ 1,341,521 $ 3,079,923
Minority Interest ........... -- -- $ 215,508
Shareholders Equity ......... ($ 158,106) ($ 1,021,686) ($ 633,907)
(1) - Shares are expressed on a fully diluted basis , as of September 12, 1995,
the date of the Company's recapitalization.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Consolidated
Financial Statements included elsewhere in this Report.
Pick Communications Corp. was incorporated in April 1984 under the laws of
Utah as S.T.V., Inc. ("STV"). STV was formed by Fred L. Sumner, Steven P. Todd,
and Stephen H. Harkness to develop videos for golf instruction and instruction
in other sports skills. In February 1986, STV changed its name to Adolphus
Companies, Inc. ("Adolphus"). Adolphus was engaged in marketing and distributing
various wholesale food products. On December 31, 1987, Adolphus acquired
American Italian Food Processing Co., in a stock for stock exchange. In May
1988, Adolphus changed its name to Prime International Products, Inc. ("Prime").
Prime ceased operations in late 1990.
In July 1995, Prime changed its state of incorporation from Utah to
Nevada. On September 12, 1995, Prime executed a Stock Purchase Agreement to
exchange 16,500,000 shares of the Company's Common Stock for all of the
outstanding shares of common stock and warrants of Public Info/Comm Kiosk, Inc.
("Pick"), which made Pick a subsidiary of Prime. The transaction was a reverse
acquisition accounted for as a recapitalization of Pick, since the management of
Pick retained control of Prime subsequent to the merger. As such, no goodwill
was recognized in the transaction. Prime changed its name to Pick Communications
Corp. (the "Company") in December 1995.
All activities are presented, based on the actual operations of Pick,
for periods prior to September 12, 1995. Pick Communications Corp. and PCT had
no operations during 1993 and 1994. As of December 31, 1995, the Consolidated
Financial Statements include the Company, Pick, and PCT. The Company owns
substantially all of Pick and 50.4% of PCT. Accordingly, Pick and PCT are
included in the Consolidated Financial Statements of the Company.
Results of Operations
Pick generates revenues from sales of prepaid telecommunications,
primarily in the form of prepaid phone cards, otherwise referred to as telephone
Debit Cards. Despite having achieved steadily increasing levels of revenues
since inception, the Company's expenses have exceeded revenues, resulting in
losses of $158,106, $1,250,580, and $1,068,371 for the years ended December 31,
1993, 1994 and 1995 on a consolidated basis, respectively. Losses incurred since
inception have been primarily attributable to start-up costs, costs incurred in
connection with the development and promotion of the Company's products and the
hiring of additional personnel to support the Company's operations. The
Company's primary costs are incurred in connection with telephone air-time and
the design, printing, distribution, sales commissions and advertising expenses
relating to telephone Debit Cards.
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For telephone Debit Card activity, the Company recognizes revenues at
the time the Company expects the services associated with its cards to be used,
based on estimates of air-time usage. While there is no way to ensure that
interpretations of historical usage will continue into the future, the Company
has chosen to recognize approximately 82% of sales in the first twelve months
after sale, with the remaining 18% recognized over the following six months,
totaling an eighteen month life of the cards. To the extent patterns change, the
Company will make the appropriate adjustments to the calculation of revenues
allocated to each month over the eighteen month revenue recognition period. At
the time of initial telephone Debit Card sales to wholesalers and retailers, the
Company recognizes all associated up-front costs, (e.g. design royalties,
printing, fulfillment, shipping, sales commissions, etc.), as well as standard
air-time costs associated with recognized revenues, and establishes liabilities
to vendors. As revenues are recognized in subsequent months, the related
air-time costs are recognized. Card stock purchases are recorded as supplies in
Prepaid Expenses, when purchased and valued at the cost of printing and freight.
The cards are expensed against Prepaid Expenses, as they are issued (sold to
wholesalers). Sales commissions are calculated and accrued to expense, based on
gross billings, prior to the deferrals of revenue, for each sales representative
at the agreed-upon rate. When the commissions are paid, they are charged against
the accrued commissions payable accounts, by sales representative.
At the time actual usage is billed and paid to long distance carriers,
accrued liabilities are relieved. The Company plans to recognize revenue for the
value of unused calling time remaining upon each card's expiration (generally 12
- - 18 months after issuance). At such date, subject to the applicability, if any,
of escheat laws, that recognition will take place, although no such entries have
been recorded, to date.
The Company's revenues were primarily derived from the sale of
telephone Debit Cards for immediate consumption by the ultimate consumers.
Accordingly, Management does not expect a significant amount of unused time
(breakage) to accrue to the Company as a result of card expiration.
The Company depends on its switches to track the time activated on each
card and to properly decrease the amounts assigned to customer calls, based on
the termination points. The Company periodically tests the open balances to
determine if the switches are accurately tracking the appropriate rates and
times, by destination. If shipments of activated cards are lost or stolen prior
to sale to consumers, the Company has the ability to deactivate those cards by
notifying the switch managers and thereby limiting fraudulent use. To the extent
that a customer gives card PIN's (Personal Identification Numbers) to others,
the customers are responsible for unauthorized or fraudulent use of the cards.
Inasmuch as the cards are of relatively small value, normally $25 or less,
management does not consider this to be a major exposure.
The Company acts as a commission based agent for a provider of long
distance telephone services. To the extent that the Company sells such services,
the provider pays the Company a commission for realized sales. The Company
recognizes commission income as reported and paid by the carrier. Concurrently,
the Company accrues sales commission expenses payable to the Company's sales
agents.
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Years ended December 31, 1995 and December 31, 1994:
On a consolidated basis, the Company generated revenues of $1,565,039
and $529,913 for the years ended December 31, 1995 and 1994, respectively. These
revenues (and related costs) primarily represent the activity of Pick, inasmuch
as the parent company Pick Communications Corp., was inactive until the reverse
acquisition on September 12, 1995 and PCT, was established on October 24, 1995
and had no operations in 1995.
The increase in revenues of $1,035,126, or 195.3%, was primarily the
result of an expansion in the Company's customer base. The Company believes that
the growth in its customer base is attributable to the growing acceptance of
telephone debit cards in the United States. The gross profit margin of,
$177,580, was 11.3% of net sales for the year ended December 31, 1995, compared
to a gross margin loss of $223,443 for the year ended December 31, 1994. The
gross margin reflects the deferral of revenues until services are expected to be
rendered and front-loading of all expenses except time, as described previously.
As a result, the 1995 gross margin percentage is 11.3%, while it resulted in a
negative 42.2% in 1994. The improvement in 1995 over 1994 occurred primarily
because significant one-time development expenses associated with the
development of the telephone Debit Card product was charged to cost of sales in
1994. The vast proportion of the sales activity (98.8% in 1995 and 95.7% in
1994) relates to telephone Debit Card sales, and the Company believes the 11%
gross margin rate can be achieved, on a going forward basis. The 44.2% loss rate
in 1994 was attributable to the incurrence of disproportionate start-up costs.
To the extent that the same sales mix continues into the future, the Company
believes the aggregate gross margin rate could remain at the 11% level. The
gross margin rate could change in the future, however, to the extent the long
distance reseller business (which typically produces a slightly lower gross
margin rate) increased in proportion to telephone Debit Card sales, the margin
rate would be expected to be lower. To the extent the cellular licensing,
royalties and sales (which are expected to generate a higher gross margin rate)
increase proportionate to the telephone Debit Card and Long Distance sales, the
margin rate would be expected to rise.
Operating expenses were $1,200,918 (net of minority interest of $37)
and $1,027,147 for the years ended December 31, 1995 and 1994, respectively,
representing an increase of $173,771, or 16.9%. This increase is due to higher
administrative expenses of $443,878, or 104.1%, associated with the
establishment of a staff ($254,135), travel expenses ($99,189) and facility and
communications ($47,215), off-set by reduced sales and marketing expenses of
$316,237, or 55.2%. Sales and marketing expenses were reduced, at the direction
of management, to conserve cash and establish the administrative support. In
connection with the Company's recapitalization in September 1995, the Company
received additional working capital which it used to increase its level of
business activity. As a result, general and administrative expenses increased
substantially in the fourth quarter of 1995.
Operating expenses include depreciation of $30,475 and $11,967 for the
years ending December 31, 1995 and 1994, respectively. They include provisions
for bad debts or $42,650, and $15,028 for the years ended December 31, 1995 and
1994, respectively. The interest expense
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represents an accrual of interest relating to a dispute with a vendor, which was
not settled as of December 31, 1995. The Company expects to settle this matter
in 1996.
For the reasons itemized above, the Company incurred net operating
losses of $1,068,371 for the year ended December 31, 1995, compared to
$1,250,580 for the year ended December 31, 1994, representing an improvement of
$182,209 or 14.6%.
The Company expects that the development of the long distance reseller
business and the prepaid cellular telephone business can generate enough
revenues to provide break-even operations based on sales of $13,400,000,
supported by indirect expenses of $2,000,000, although there can be no assurance
that the Company will, in fact, achieve such results.
This Registration Statement contains certain forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below and
elsewhere in this document. The Assumptions of break-even could differ
materially from those stated above if recognized revenues vary from the
$13,400,000 projection, if the actual gross margin rate differs from the 15%
projection, or if indirect expenses vary from the $2,000,000 projection.
Years ended December 31, 1994 and December 31, 1993 on a consolidated basis:
The Company generated sales of $529,913 for the year ended December 31,
1994, compared to $23,301 for the year ended December 31, 1993, an increase of
$506,612. This significant increase reflects a general development of the
customer base and the introduction of the COMMUNICASH cards in August 1994. A
limited number of cards were available for sale in 1993.
The gross margin loss of $223,433, decreased to 42.2% of net sales for
the year ended December 31, 1994, compared to $13,234 (or 56.8%) for the year
ended December 31, 1993. The gross margin percentage decrease is due to the
switch in emphasis from commission revenue earned long distance sales (with a
higher gross margin), to the telephone Debit Card with significant start-up
costs associated with the product roll-out in August 1994 being charged directly
to the product.
While sales have increased, expenses have exceeded sales, resulting in
losses of $1,250,580 and $158,106 for the years ended December 31, 1994 and
1993, respectively.
Selling and marketing expenses were $573,724 for the year ended
December 31, 1994, compared to $4,903 for 1993 representing an increase of
$568,821 (or 11,601%). This variance is due primarily to the extensive placement
of advertising and promotional expenses in the fourth quarter of 1994 to support
the August 1994 product roll-out and the increase in sales commissions which
vary directly with sales activity. In 1994, the major portion of the operating
expenses were made in the last part of the year, principally, in support of a
major customer that has since developed its own telephone Debit Card.
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Operating expenses include depreciation of $11,967 and $1,669 for the
years ended December 31, 1994 and 1993, respectively. They include provisions
for bad debts of $15,028, and $0 for the years ending December 31, 1994 and
1993, respectively.
For the reasons itemized above, the Company, in a start-up phase,
incurred net operating losses of $1,250,580 for the year ended December 31, 1994
and $158,106 for the year ended December 31, 1993, representing an increase of
$1,092,474, or 691.0%.
The Company owns 4,500,000 shares of Common Stock in Ultimistics.,
which represents approximately 17% of Ultimistics' outstanding shares. The
shares are restricted securities under Rule 144 of the Securities Act of 1933,
as amended, and cannot be sold in the open market until 1997. The Company also
holds 5,000,000 shares of Firenze, Ltd., which also are restricted securities
under Rule 144 cannot be traded in the open market until 1997. The Firenze
shares are valued at $10,000 on the balance sheet of the Company. The Company
owns 22,750,000 shares or (50.4%) PCT which was established in October 1995 to
market and distribute the Company's prepaid cellular technology in the United
States and Canada. The Company intends to hold its investment in PCT Prepaid
Telephone, Inc., as an operating subsidiary for that purpose. No other
significant investment activity has occurred.
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting for Stock
Based Compensation". The Company will have to implement SFAS 123 for the fiscal
year ending December 31, 1996. The Company has not yet had sufficient time to
evaluate the impact, if any, of the provisions of SFAS 123.
Liquidity and Capital Resources
The Company has generated a deficit of $2,143,602 since inception of its
telecommunications activities in 1993. During the current year, it generated a
cash increase $93,056, which resulted primarily from the sale of stock
($1,015,150), offset by the net loss from operations of $1,068,371. The
increases in the Company's operating activities causing revenues and expenses to
rise in tandem, have also increased the associated current assets and
liabilities. Accounts receivable increased by $693,856, prepaid telephone card
inventory increased by $136,991, and the inventory of prepaid telephone time
increased by $485,697, requiring uses of cash. Increases in accruals for direct
cost telephone time of $634,547 and deferred revenue of $479,786 contributed to
cash. In addition, $250,000 was provided by the receipt of third-party debt. The
Company anticipates operating cash flows will primarily arise from the resale of
long distance telephone time to carriers, while cash flows from the telephone
Debit Card business will be marginal, due to heavy competition. In support of
these businesses, additional monthly fixed costs of $25,000 - $75,000 will be
required to increase capacity, but they are expected to be more than off-set by
increased gross margins, once volumes build to expected levels. With respect to
the Company's plans to implement the prepaid cellular telephone business, the
Company will likely require additional working capital
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to bring this product to market. The Company intends to raise this capital
through a combination of prepaid sales, acceptance of cash or letters of credit
as deposits toward equipment purchases and productive expenses, co-ventures
and/or the possible public or private sale of the Company's debt of equity
securities, for none of which does the Company have any agreement, understanding
or commitment.
In April 1996, the Company arranged for the use of an alternate switch
through which it resells telephone time to other carriers. In this connection,
the Company intends to aggregate volumes necessary to obtain more favorable
air-time rates, which will apply to all of its lines of business. The Company
will seek to expand its existing telephone debit card business to selected
target markets which can provide the greatest return on investment.
The Company intends to implement arrangements for the production,
licensing for sale and distribution of prepaid cellular telephones, pursuant to
its agreement with The Next Edge ("TNE"). This is expected to cost $925,000 over
the next five years ($500,000 in cash at $25,000 per quarter, and $425,000 in
stock at the rate of 20,000 shares per year, equal to the bid price at October
24, 1995 of $4.25 multiplied by 100,000 restricted shares of Prime) TNE for the
commercialization of its prepaid cellular telephone control system technology.
In this connection, it intends to solidify initial licensing agreements, obtain
financing and distribute to selected market segments on a controlled basis.
In October 1995, the Company obtained co-ownership in the patent
pending from TNE, for the technology for a prepaid cellular telephone system and
the exclusive rights to manufacture, market, sell and distribute the system
worldwide. To develop the prepaid cellular telephone system, the Company will be
required to procure software, microchips and cellular telephones and establish
the necessary assembly plant and distribution and marketing networks. In this
regard, the Company is the process of, or has:
(a) finalizing the patents, copyrights and trademarks for the prepaid
cellular product;
(b) licensed the rights to market and sell the prepaid telephone in the US
and Canada to PCT for a majority ownership of PCT.
(c) licensing the rights to market and sell the prepaid cellular telephone
in various countries in Europe, as well as all of Asia, Africa and Australia to
Firenze, a non-affiliated company for a 5% royalty on gross sales (micro-chips,
software and air time). In addition, the company, to provide micro-chips and
software to Firenze at 10% over the company's cost of procurement. In the first
quarter of 1996, the company was determined that firenze would not be able to
finance the marketing of the product to its territory. Therefore, a significant
portion of the licensed territories were transferred to Yakimoto, a
non-affiliated company, for the same 5% royalty rate and 10% mark-up over cost.
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(d) licensing the rights to market and sell the prepaid cellular telephone
in South America to Yakimoto, for a 5% royalty fee based on gross sales of
micro-chips, software and air time. In addition, the agreement requires the
Company to provide micro-chips software and air time to Yakimoto, at 10% over
the Company's cost of procurement; and
(e) retain or license exclusive rights to distribute the prepaid cellular
phones in Mexico, Central America, and the Caribbean.
The Company expects to finance the letter of credit in support of the
$500,000 cash payments to TNE, out of operating cash flows. Subsequent to the
initial five-year period, at the Company's sole option, it may extend the
agreement for five additional periods of five years each, at a cost of $100,000
per year. If the product proves to be commercially viable, the Company will
extend the agreement and make those payments out of operating cash flows.
The Company hopes to maintain and expand its telephone Debit Card
business, while simultaneously developing and expanding into the resale of long
distance to other carriers, and prepaid cellular telephone businesses. As a
strategic matter, the Company believes that it is advantageous to operate in
three related lines of business to spread its risk. The Company will direct
resources to those segments, as available, to build the strongest base to
support the Company's long term growth objectives. At this time, while the
Company cannot currently project which segment will take precedence, it sees
potential for growth in all areas.
The Company has entered into commitments to obtain blocks of telephone
air time at favorable rates (amounting to $420,000) over the next twelve months.
Subsequent to year end, the Company exchanged that telephone air time for
$2,000,000 in advertising time that may be used over the next two years. The use
of this advertising will reduce the cash out-flow requirements in the periods
used. In 1996, based upon the actual usage of the advertising time, the Company
expects to recognize income for the advertising time earned, to the extent it
exceeds the cost of the air time given up. The gross value of barter advertising
will be charged to advertising expense in the period, as used.
In January 1996, the Company entered into an agreement to obtain
$3,000,000 of prepaid advertising in exchange for 1,150,000 shares of its stock.
This prepaid advertising may be used for any of the Company's marketing efforts,
including the prepaid cellular business. The Company plans to use the prepaid
advertising extensively, to support both the telephone Debit Card and the
prepaid cellular telephone activities.
During 1995, the Company retained a consultant who received the right
to purchase 1,500,000 shares of the Company's stock as of the September 12, 1995
at a $.055 per share. The consultant declined to exercise that right, at a time
the Company was in need of additional cash. Because the consultant declined to
make the payment, and the Company's President was willing and
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able to provide the operating cash to the Company, the Company's Board of
Directors authorized the President to purchase those shares from the Company.
The Company has no significant commitments for real estate or equipment
purchases. The Company is currently renting its corporate office space in
Mountain Lakes, New Jersey on a month-to-month basis..
The Company is dependent upon receiving the proceeds from the sale of
1,250,000 shares of Common Stock of the Company to two non-affiliated investors.
To date, the Company has received $525,000 and the remaining $725,000 is
expected to be paid during the following twelve months. Such monies are expected
to be used to implement the proposed expansion of the long distance reseller
business. If and when implemented, these products (telephone Debit Cards and
resale of long distance to carriers business) will aggregate to significant
volumes of traffic by which the Company expects to obtain more favorable costs
across those lines of business. In addition, if the Company's telephone Debit
Card is used in conjunction with the prepaid cellular phones, to make
international calls, that traffic will also add to the aggregate minutes of
traffic for volume discount purposes.
The Company plans to spend between $700,000 and $900,000 in capital
expenditures over the next twelve months. These expenditures will be made in
support of the growth of all three lines of business, in the form of computer
equipment and communications, as well as for expanded office space, furniture
and office equipment.
The Company owns 4,500,000 shares of Common Stock of Ultimistics.
Ultimistics is a commercial/residential real estate company in France. As of
December 29, 1995 (Year End) the Ultimistics bid price was $8.00 and $12.00 ask
price. On April 25, 1996 the bid price was $4.25 and the ask price was $5.25.
In accordance with FAS 121, Management anticipates discounting those
shares by 50% when it values the various transactions by which it receives
Ultimistics, stock in 1996. They include:
(a) Exchange of 1,000,000 shares of Foxwedge, Inc., for 500,000 shares of
Ultimistics. As of December 31, 1995, the Company owned 1,000,000 shares of
Foxwedge, Inc., which it acquired at the time on September 12, 1995 in exchange
for 3,000,000 shares of the Company's Common Stock. The Company has valued those
shares nominally, at $6,000, the par value of the Company's shares issued. As of
December 23, 1995, the Company entered into an agreement to exchange the
1,000,000 shares of Foxwedge, Inc., for 500,000 shares of Ultimistics, which
occurred on January 12, 1996. This transaction is expected to be recorded as a
non-taxable exchange of like-kind assets in 1996.
(b) Exchange of 1,250,000 shares of the Company's Common Stock for 500,000
shares of Ultimistics. The Company's Board of Directors authorized this
transaction on January 25, 1996. This transaction will be treated as a
contribution of capital.
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(c) Sale of license to market and distribute the prepaid cellular telephone
technology in various countries in South America to Yakimoto, in exchange for
1,000,000 shares of Ultimistics. The Company's Board of Directors authorized
this transaction on January 25, 1996. This transaction is expected to be treated
as a taxable sale of licenses.
(d) Transfer of license to market and distribute the prepaid cellular
telephone technology in Asia, Africa, Australia and various countries in Europe,
from Firenze, to Yakimoto, in exchange for 500,000 shares of Ultimistics. The
Company's Board of Directors authorized this transaction on January 25, 1996.
This transaction will be treated as a taxable sale of licenses.
(e) Exchange of 5,000,000 shares of Firenze, with an officer of Firenze,
for 2,000,000 shares of Ultimistics. The Company acquired the 5,000,000 shares
of Firenze, for 5,000,000 shares of the Company's Common Stock and granted a
license to Firenze to market the prepaid cellular phone technology in Europe,
Asia, Africa and Australia. The Company has valued the Firenze shares nominally
at $10,000, the par value of the Company's shares issued. As of March 22, 1996,
the Company exchanged 5,000,000 shares of Firenze, for 2,000,000 shares of
Ultimistics, after the Company became concerned about Firenze's ability to
perform under its agreement. The transaction occurred in April 1996. This
transaction is expected to be recorded as a non-taxable exchange of like-kind
assets in 1996.
The Company has acquired a total of 4,500,000 shares of Ultimistics in
1996. Its valuation of those shares, which have a $4.25 bid price and a $5.25
ask price as of April 25, 1996, bear the restrictive legend under Rule 144 of
the Securities Act of 1933, as amended, are thinly traded, and currently
represent approximately 17% of the outstanding shares, will be discounted by
50%. On a consolidated basis, Ultimistics transactions were nil for the years
preceding 1995.
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Statement of Operations Data for Ultimistics, Inc.
Since a substantial portion of the Company's assets include shares of
Ultimistics, the following table sets forth selected financial data of
Ultimistics.
Year Ended
December 31
1995
Total Revenues ........................................... $ 3,384,436
Operating Expenses ....................................... 2,556,527
Income/(Loss) from Operations ............................ 827,909
Interest expense ......................................... 836,791
Net Profit /(Loss) ....................................... 87,149
Loss Before Taxes, Minority Interest &
Pre-Acquisition Costs ............................. (96,031)
Minority Interests
Pre-Acquisition Costs ............................. 1,538
Income taxes ............................................. -0-
Net Loss ................................................. (40,122)
Weighted average number of
shares outstanding ................................ 24,613,915
Cash ..................................................... 524,089
Working Capital .......................................... 1,578,595
Total Assets ............................................. 44,260,267
Total Liabilities ........................................ 11,632,651
Minority Interest ........................................ 823,125
Shareholders' Equity ..................................... 31,804,491
The Company anticipates, based on its current plans and assumptions
relating to its operations, that its cash balances, together with projected cash
flows from operations, will be sufficient to satisfy the Company's contemplated
cash requirements for the next 12 months. In the event that the Company's plans
change, its assumptions change or prove to be inaccurate or cash flows otherwise
prove to be insufficient to fund operations, the Company may be required to seek
financing or curtail its proposed expansion. The Company has no current
arrangements with respect to, or sources of, additional financing, and it is not
anticipated that existing stockholders will provide any portion of the Company's
future financing requirements. There can be no assurance that additional
financing will be available to the Company on commercially reasonable terms, if
at all.
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Item 3: Properties
The Company leases office space in Mountain Lakes, New Jersey on a
month-to- month basis at a monthly rental of $2,255. The Company expects to
obtain new office space for its executive and sales offices at a location which
will have the capacity to house additional employees.
Item 4: Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of the date of this filing, the
number of shares of the Company's outstanding Common Stock, $.002 par value,
beneficially owned (as such term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934) by each director of the Company, by each named executive
officer of the Company, by each beneficial owner of more than 5% of the
Company's Common Stock and by all of the Company's officers and directors as a
group.
Name and Address Amount and Nature of Percentage
of Beneficial Owner Beneficial Ownership (1) of Class (2)
- ------------------- ------------------------ ------------
Diego Leiva ......................... 12,181,500 27.9%
115 Route 46 West, Suite A-2
Mountain Lakes, NJ 07046
Robert Sams ......................... 665,000 1.5%
The Lodge - South Park
Penshurst, Tonbridge
Kent, TN11 8EA
England
Ricardo Maranon ..................... 938,750(4) 2.1%
1400 Stillwater Drive
Miami Beach, FL 33141
Greg Manning ........................ 5,000,000 11.4%
775 Passaic Avenue
West Caldwell, NJ 07006
Raymond M. Brennan .................. 1,011,500 2.3%
115 Route 46 West, Suite A-2
Mountain Lakes, NJ 07046
Karen M. Quinn ...................... 871,250 2.0%
115 Route 46 West, Suite A-2
Mountain Lakes, NJ 07046
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Name and Address Amount and Nature of Percentage
of Beneficial Owner Beneficial Ownership (1) of Class (2)
- ------------------- ------------------------ ------------
Karl R. Petersson ................... 871,250 2.0%
115 Route 46 West, Suite A-2
Mountain Lakes, NJ 07046
Firenze, Ltd. ....................... 5,000,000 11.5%
230 Park Avenue, Suite 1000
New York, NY 10022
All officers and directors as a ..... 21,539,250 46.1%
group (7 persons)
(1) Unless otherwise noted, all shares are beneficially owned and the sole
voting and investment power is held by the person indicated.
(2) Based on 43,192,516 shares outstanding as of the date of this filing. Each
beneficial owner's percentage ownership is determined by assuming that
options or warrants that are held by such person and which are convertible
or exercisable within sixty (60) days of the date hereof (pursuant to Rule
13d-3 under the Securities Exchange Act of 1934) have been converted or
exercised.
(3) Includes 4,290,000 shares beneficially owned by Mr. Leiva's wife, 792,000
shares beneficially owned by a trust for Mr. Leiva's son for which Mr.
Leiva serves as trustee and 792,000 shares beneficially owned by a trust
for Mr. Leiva's daughter for which Mr. Leiva serves as trustee.
(4) Includes options to purchase 500,000 shares of the Company's Common Stock
at a price of $2.75.
(5) Includes 150,000 shares owned by All Florida Advertising, Inc., a company
of which Mr. Maranon is an officer.
(6) These shares are held by Greg Manning Auctions, Inc., a company controlled
by Greg Manning, a director of the Company.
(7) Includes 250,000 shares beneficially owned by Mr. Brennan's wife.
(8) Includes an aggregate of 3,500,000 options held by the Company's directors
and officers to purchase a like number of shares of the Company's Common
Stock at a price of $2.75 per share.
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Item 5: Directors and Executive Officers
Set forth below are the names of all directors and executive officers
of the Company along with certain information relating to the business
experience of each of the listed officers.
Name Age Position
Diego Leiva 45 President, Chief Executive Officer and Chairman
Karl R. Petersson 50 Vice President and Chief Financial Officer
Raymond M. Brennan 58 Vice President, Secretary and Director
Karen M. Quinn 48 Vice President of Corporate Communications and
Operations
Robert R. Sams 57 Director
Ricardo Maranon 51 Director
Greg Manning 49 Director
Directors are elected to serve until the next annual meeting of
stockholders or until their successors are elected and qualified. Officers serve
at the discretion of the Board of Directors subject to any contracts of
employment.
Diego Leiva has been Chief Executive Officer, President and Chairman of
the Company since September 1995. Mr. Leiva founded Pick in August, 1992, and
has been its President, Chief Executive Officer and Chairman since its
inception. From 1989 to July 1992, he was Director of Sales for Apertus
Technologies, Inc., a computer telecommunications sales firm. Prior thereto, he
was Vice president of Marketing and Sales for Market Makers, Inc., Chief
Operating Officer of Silo, Inc., and President of Astroglow Lamps Company.
Karl R. Petersson has been Vice President and Chief Financial Officer of
the Company since September 1995. Since September 1994, Mr. Petersson has served
as Vice President and Chief Financial Officer of Pick. From June 1994 to August
1995, Mr. Petersson was employed by UJA Federation as its Director of Internal
Audit. From November 1991 to May 1994, Mr. Petersson served as Vice President of
Finance and Administration of the Telecommunications Cooperative Network of New
York, Inc. From August 1981 to October 1991, Mr. Petersson served as Vice
President of Finance and Controller of Radio City Music Hall Productions, Inc.,
where he administered both the Accounting and Finance Departments.
Raymond M. Brennan has been Vice President, Secretary and a Director of the
Company since September 1995. Since May 1994, Mr. Brennan has served as Vice
President, Secretary, and General Counsel of Pick. From April 1990 to April
1994, Mr. Brennan served as Executive Vice President and General Counsel of EOL,
Inc., a full service event production and marketing
26
<PAGE>
company. From January 1982 to March 1990, Mr. Brennan served as Vice President
of Business Affairs for Radio City Music Hall Productions, Inc., where he
administered both the Purchasing and Legal Departments.
Karen M. Quinn has been Vice President of Corporate Communications and
Operations of the Company since September 1995. Since December 1992, Ms. Quinn
has been employed at Pick, and was appointed Vice President of Operations in May
1994. From September 1989 to April 1995, Ms. Quinn served as Business Manager
for George M. Glassman, M.D., P.C.
Robert R. Sams has been a Director of the Company since September 1995. Mr.
Sams formed Saicol Limited in 1983, where he engages in merchant banking,
corporate finance, acquisitions and financial advisory services.
Ricardo Maranon has been a Director of the Company since September
1995. Mr. Maranon founded Maranon & Associates Advertising., an advertising
agency based in Miami, Florida, in 1985, and has served as its President since
its incining to the payment of monies to Licensor shall be declared
invalid or unenforceable, Licensor shall have the right, at its option, to
terminate, this Agreement upon giving not less than ten (10) days' written
notice to Licensee.
(c) Except as provided for in this Agreement, all rights of any nature in the
Product licensed hereunder are reserved by Licensor.
(d) This Agreement may not be modified orally; no waiver, amendment or
modification shall be binding effective unless in writing and signed by both
parties.
(e) Paragraph headings used herein are for convenience only and are nor part of
this Agreement and shall not be used in construing it.
(f) This Agreement shall inure to the benefit of and be binding upon Licensor
and its successors and assigns and Licensee and any permitted successors or
assigns.
(g) In the event any payments due Licensor are delayed or prohibited by currency
restrictions or other governmental regulations, Licensor shall be entitle to
designate a local depository in the
<PAGE>
Page 8
territory, in which Licensee, at the direction of Licensor, shall deposit such
monies to the credit of Licensor subject to the laws of the Territory..
(h) In the event of any action, suit or proceeding hereunder the prevailing
party shall be entitled to recover reasonable attorneys' fees in addition to the
costs of said actions, suit or proceeding.
(i) Licensee agrees to comply with local law and, if required by Licensor,
register for copyright, trademark and/or patent protection as applicable, on
behalf of Licensor (or as Licensor otherwise directs) in the Territory for the
Product which is subject to this Agreement.
(j) This Agreement does not (and shall not be construed to) create a partnership
or joint venture between the parties.
(k) This Agreement constitutes the entire understanding between the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the
day and year first set forth above.
PRIME INTERNATIONAL PRODUCTS, INC.
By:/s/ Diego Leiva
Diego Leiva
Title: President & CEO
ACCEPTED & AGREED:
YAKIMOTO INVESTMENT LTD.
By: /s/ Yves Uzan
Yves Uzan
Title: /s/ President
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS OF PICK COMMUNICATIONS CORP. FOR DECEMBER 31, 1993, 1994
AND 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 14060
<NAME> PICK Communications Corp.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C> <C> <C>
<PERIOD-TYPE> Year Year Year
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1994 DEC-31-1995
<PERIOD-START> JAN-01-1993 JAN-01-1994 JAN-01-1995
<PERIOD-END> DEC-31-1993 DEC-31-1994 DEC-31-1995
<EXCHANGE-RATE> 1 1 1
<CASH> 6,453 17,659 110,715
<SECURITIES> 0 0 16,625
<RECEIVABLES> 6,016 148,374 824,463
<ALLOWANCES> 0 15,028 42,650
<INVENTORY> 0 47,898 167,091
<CURRENT-ASSETS> 12,469 213,931 1,605,764
<PP&E> 16,692 119,540 158,246
<DEPRECIATION> 1,669 13,636 44,111
<TOTAL-ASSETS> 27,492 319,835 2,661,524
<CURRENT-LIABILITIES> 59,598 1,341,521 2,679,923
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 126,000 53,545 80,260
<OTHER-SE> (158,106) (1,075,231) (714,167)
<TOTAL-LIABILITY-AND-EQUITY> 27,492 319,835 2,661,524
<SALES> 23,301 529,913 1,565,039
<TOTAL-REVENUES> 23,301 529,913 1,565,039
<CGS> 10,067 753,346 1,387,459
<TOTAL-COSTS> 14,970 1,327,070 1,644,946
<OTHER-EXPENSES> 164,768 426,428 872,726
<LOSS-PROVISION> 0 15,028 42,650
<INTEREST-EXPENSE> 0 0 45,033
<INCOME-PRETAX> (158,106) (1,250,580) (1,070,828)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (158,106) (1,250,580) (1,070,791)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (158,106) (1,250,580) (1,070,791)
<EPS-PRIMARY> 0 0 (0.03)
<EPS-DILUTED> 0 0 (0.03)
</TABLE>
