UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT
For the transition period from ________ to ________
Commission file number 001-13999
HITCOM CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 87-0389677
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
700 North Second Street, Third Floor 63102
St. Louis, Missouri (Zip Code)
(Address of Principal Executive Offices)
Issuer's Telephone Number, Including Area Code (314) 231-1000
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes ( X ) No ( )
State the number of shares outstanding of each of the issuer's common equity,
as of the latest practicable date: As of October 30, 1998 -
Class Shares Outstanding
Common Stock 12,167,296
Traditional Small Business Disclosure Format (check one):
Yes No X
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
September 30, 1998
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . $ 44,334
Accounts receivable-net of allowance
for doubtful accounts of $9,122 . . . . . . . . . . . . . . .447,212
Prepaid expenses and other . . . . . . . . . . . . . . . . 16,255
Total current assets . . . . . . . . . . . . . . . . . . . .507,801
Property and equipment-net . . . . . . . . . . . . . . . . .337,946
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 120,830
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 966,577
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, 1998
Current liabilities:
Current portion of long-term obligations . . . . . . . $ 139,906
Accounts payable and accrued expenses. . . . . . . . . . 878,534
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . .301,702
Total current liabilities. . . . . . . . . . . . . . . . 1,320,142
Long-term obligations, less current portion . . . . . . . 246,180
Stockholders' equity (deficit):
Preferred stock, $.001 par value-5,000,000
authorized; 1,054,443 issued and
outstanding. . . . . . . . . . . . . . . . . . . . . . . . . 1,054
Common stock, $.004 par value-25,000,000
authorized; 12,174,546 issued; 12,167,296
outstanding. . . . . . . . . . . . . . . . . . . . . . . . 48,698
Additional paid in capital . . . . . . . . . . . . . . . . .(985,979)
Retained earnings . . . . . . . . . . . . . . . . . . . . . .356,278
Treasury stock-at cost. . . . . . . . . . . . . . . . . . . .(19,796)
Total stockholders' equity (deficit). . . . . . . . . . . (599,745)
Total . . . . . . . . . . . . . . . . . . . . . . . .$ 966,577
See accompanying notes to financial statements.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
For the Three-month For the Nine-month
Period Ending Period Ending
September 30 September 30
1998 1997 1998 1997
Net revenues. . . . . . . . . . .$928,981 $845,162 $3,089,047 $2,625,720
Cost and expenses:
Cost of sales. . . . . . . . . . 589,076 481,070 1,648,071 1,528,325
Selling, general
and administrative 332,785 381,179 1,140,453 852,807
Total costs and expenses. . . . 921,861 862,249 2,788,524 2,381,132
Operating income (loss)
before interest,
depreciation and amortization . 7,120 (17,087) 300,523 244,588
Interest expense. . . . . . . . . 8,230 4,234 27,625 8,896
Depreciation and amortization . . 25,738 21,213 86,628 59,882
Operating income(loss) . . . . . .(26,848) (42,534) 186,270 175,810
Other (income) expense-net . . . . 9,581 -- 6,214 (52,956)
Loss on discontinued operations. . 25,397 47,523 177,723 71,759
Income (loss) before
income tax expense
and minority interest. . . . . (61,826) (90,057) 2,333 157,007
Income tax expense . . . . . . . -- -- -- --
Income before minority interest . (61,826) (90,057) 2,333 157,007
Minority interest . . . . . . . -- 12,672 20,332 45,418
Net income (loss) . . . . . . . .$(61,826) $(102,729) $(17,999) $ 111,589
See accompanying notes to financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three-month For the Nine-month
Period Ending Period Ending
September 30 September 30
1998 1997 1998 1997
Cash flows from operating activities:
Net income (loss). . . . . . . $ (61,826) $(102,729) $ (17,999) $111,589
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating activities:
Depreciation and amortization . 25,738 21,213 86,628 59,882
Minority interest in earnings
of subsidiaries . . . . . . . -- 12,672 20,345 45,418
Common stock issued for
services rendered . . . . . . -- -- 20,156 --
Foreign currency translation . 1,768 -- 1,768 --
Changes in assets and
liabilities:
Accounts receivable-net . . .(37,402) 127,456 (115,238) (85,044)
Prepaid expenses and other. . 618 23,591 2,670 47,796
Other assets. . . . . . . . . 11,614 (12,534) 50,836 (12,484)
Accounts payable and accrued
expenses . . . . . . . . .(68,764) (101,308) (173,031) (359,927)
Deferred revenue. . . . . . . 7,623 64,448 (127,660) 96,530
Net cash provided by
(used in) operating
activities . . . . . . . (120,631) 32,809 (251,525) (96,240)
Cash flows provided by (used in)
investing activities:
Purchases of property
and equipment . . . . . . . . 2,758 (17,506) (49,563) (53,831)
Net assets acquired . . . . . . -- -- 14,296 1,052
Net cash provided by
(used in)investing
activities . . . . . . . 2,758 (17,506) (35,267) (52,779)
Cash flows provided by (used in)
financing activities:
Borrowings on debt
obligations . . . . . . . . . . 17,407 -- 392,445 --
Payments on debt
obligations . . . . . . . . . . (17,943) -- (181,671) --
Payments on capital leases. . . (9,899) -- (15,901) --
Issuance of common stock . . . -- -- 20,115 --
Costs associated with
equity placement. . . . . . . . -- -- (72,662) --
Repurchase of common stock. . . -- -- -- (9,712)
Shareholder distributions . . . -- -- -- (94,423)
Net cash provided by
(used in) financing
activities. . . . . . . . (10,435) -- 142,326 (104,135)
Net increase (decrease)
in cash and cash equivalents. . (128,308) 15,303 (144,466) (253,154)
Cash and cash equivalents:
Beginning of period . . . . . . 172,642 158,132 188,800 426,589
End of period . . . . . . . . .$ 44,334 $173,435 $ 44,334 $173,435
Supplemental cash flow disclosures:
Cash paid for interest
during the period . . . . . . . $ 8,115 $ 2,337 $ 48,555 $ 7,939
Cash paid for taxes
during the period. . . . . . . . $ -- $ -- $ -- $ --
See accompanying notes to financial statements
FORM 10-QSB - PART I
ITEM 1 - Financial Statements (continued)
HitCom Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September 30, 1998
1. Basis of Presentation
The unaudited consolidated balance sheet of HitCom Corporation and
Subsidiaries (the "Company") as of September 30, 1998, and the related
consolidated statements of earnings and cash flows for the three-month and
nine-month period ending September 30, 1998 and 1997 have been prepared in
accordance with the instructions to Form 10-QSB. Accordingly, certain
information and disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted. These unaudited financial statements should be
read in conjunction with the audited financial statements and notes thereto
for the nine-month period ended December 31, 1997. All amounts presented are
in US dollars.
Effective April 1, 1997, the Company acquired 80% of the outstanding stock of
One Plus Marketing, Inc. (the "Acquisition") for 5,837,503 shares of the
Company's common stock. The Acquisition was accounted for as a reverse
acquisition in accordance with APB No. 16 "Business Combinations." As such,
One Plus Marketing, Inc. ("One Plus") is considered the "accounting
acquiror." The historical financial statements prior to April 1, 1997, are
those of One Plus Marketing, Inc.
Prior to April 1, 1997, One Plus was an S Corporation for tax purposes under
provisions of the Internal Revenue Code which provide that, in lieu of
corporate income taxes, the stockholder is taxed for the company's taxable
income. Therefore, no provision or liability for federal and state income
taxes is reflected in the financial data for periods prior to April 1, 1997.
On August 10, 1998, the Company purchased the remaining 20% minority interest
in One Plus Marketing, Inc. that it did not already own for $1.
On May 28, 1998, the Company acquired 100% of the outstanding stock of
Channel Telecom, Inc., ("Channel") headquartered in Toronto, Canada.
Channel is the fourth largest facility-based provider of prepaid calling
cards in Canada. The transaction had been approved by the Company's Board of
Directors and ratified at the Company's Annual Meeting of Shareholders.
Under the terms of the agreement, the Company exchanged 4,184,810 shares of
Company common stock and $37,500 in cash for all of Channel's outstanding
shares. The effective date of the transaction is January 1, 1998. The
operating results of Channel have been presented in the financial statements
as of January 1, 1998.
In the opinion of the management of the Company, all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of
the financial statements have been included therein. The results of this
interim period are not necessarily indicative of results for the entire year.
2. Earnings per Share
The Company has implemented the provisions of SFAS No. 128, "Earnings per
Share." SFAS No. 128 simplifies the computation of earnings per share
("EPS") by replacing the presentation of primary EPS with a presentation of
basic EPS. Basic EPS is calculated by dividing income or loss available to
common stockholders by the weighted average number of common shares
outstanding during the period. Options, warrants, and other potentially
dilutive securities are excluded from the calculation of basic EPS. Diluted
EPS includes the options, warrants and other potentially dilutive securities
that are excluded from basic EPS.
The details of earnings per share calculations for the quarter ending
September 30, 1998, and 1997 are as follows:
Weighted Per
Average Share
Income Shares Amount
1998
Earnings per share of
common stock - basic $(61,826) 12,174,546 $(0.01)
Stock options,
warrants and preferred stock
equivalents -- n/a n/a
Earnings per share of
common stock - on a fully
diluted basis $(61,826) 12,174,546 $(0.01)
1997
Earnings per share of
common stock - basic $(102,729) 7,920,264 $(0.01)
Stock options,
warrants and preferred stock
equivalents -- n/a n/a
Earnings per share of
common stock - on fully
diluted basis $(102,729) 7,920,264 $(0.01)
The details of earnings per share calculations for the nine-month period
ending September 30, 1998, and 1997 are as follows:
Weighted Per
Average Share
Income Shares Amount
1998
Earnings per share of
common stock - basic $(17,999) 9,827,655 $0.00
Stock options, warrants
and preferred stock equivalents -- n/a n/a
Earnings per share of
common stock - on a fully
diluted basis $(17,999) 9,827,655 $0.00
1997
Earnings per share
of common stock - basic $111,589 5,280,176 $0.02
Stock options, warrants
and preferred stock equivalents -- 313,836 --
Earnings per share
of common stock - on fully
diluted basis $111,589 5,594,012 $0.02
3. Subsequent Event
On October 1, 1998, the Company issued Convertible Debentures totaling
$510,000 in aggregate principal amount with interest at 8% per annum payable
semiannually. The Debentures are scheduled to mature on October 1, 2003.
4. Acquisition of Minority Interest in Subsidiary
On August 10, 1998, the company purchased the remaining 20% minority interest
in One Plus Marketing, Inc. that it did not already own for $1.
5. Pro Forma Effects of Channel Acquisition
On May 28, 1998, the Company acquired 100% of the outstanding stock of
Channel Telecom, Inc., ("Channel") headquartered in Toronto, Canada.
The following condensed financial summary reflects the pro forma effects of
the acquisition effective from January 1, 1998 for the pro forma periods
consistent with the reporting requirements for the quarter ending September
30, 1997 and the nine-month period ending September 30, 1997 (amounts are
stated in US dollars):
For the Three-month For the Nine-month
Period Ending Period Ending
September 30, 1997 September 30, 1997
Revenues. . . . . . . . . . . . . . . $1,344,042 $3,623,928
Cost of sales . . . . . . . . . . . . . .871,915 2,371,645
Selling, general and administrative . . .569,738 1,147,397
Net income. . . . . . . . . . . . . . .$ (97,611) $ 104,886
ITEM 2 - Management's Discussion and Analysis
Results of Operations
The Company principally derives its revenues from the sale of interactive
voice response/voice processing services to Direct Sales Organizations and
the sale of prepaid phone calling cards. The Company offers customized
interactive voice-processing systems allowing each member of a national or
international sales organization a method by which the response from a large
advertising campaign can be handled 24 hours a day and pertinent data
reported to their membership almost instantly. The Company generally
requires its customers to establish a minimum account balance prior to
receiving voice mail service. The Company recognizes revenues as services
are rendered. Account balances in excess of services rendered are recorded
as deferred revenue. Account balances without activity for 180 days are
treated as revenue.
Effective April 1, 1997, the Company acquired 80% of the outstanding stock of
One Plus Marketing, Inc. (the "Acquisition") for 5,837,503 shares of the
Company's common stock. The Acquisition was accounted for as a reverse
acquisition in accordance with APB No. 16 "Business Combinations." As such,
One Plus Marketing, Inc. is considered the "accounting acquiror." The
historical financial statements prior to April 1, 1997 are those of One Plus
Marketing, Inc.
On August 10, 1998, the Company purchased the remaining 20% minority interest
in One Plus Marketing, Inc. that it did not already own for $1.
Prior to April 1, 1997, One Plus was an S Corporation for tax purposes under
provisions of the Internal Revenue Code which provide that, in lieu of
corporate income taxes, the stockholder is taxed for the Company's taxable
income. Therefore, no provision or liability for federal and state income
taxes is reflected in the financial data for periods prior to April 1, 1997.
On May 28, 1998, the Company acquired 100% of the outstanding stock of
Channel Telecom, Inc., ("Channel") headquartered in Toronto, Canada.
Channel is the fourth largest facility-based provider of prepaid calling
cards in Canada. The transaction had been approved by the Company's Board of
Directors and ratified at the Company's Annual Meeting of Shareholders.
Under the terms of the agreement, the Company exchanged 4,184,810 shares of
Company common stock and $37,500 in cash for all of Channel's outstanding
shares. The effective date of the transaction will be January 1, 1998. The
operating results of Channel have been presented in the financial statements
as of January 1, 1998.
QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO SEPTEMBER 30, 1997
NET REVENUES. Net revenues increased $83,819 or 10% from $845,162 for the
quarter ended September 30, 1997. Revenues are primarily generated from the
Company's interactive voice response products and services and prepaid phone
calling cards. The increase in revenue is primarily attributable to the
acquisition of Channel effective January 1, 1998.
COST OF SALES. Cost of sales increased $108,006 or 22% from $481,070 for the
quarter ended September 30, 1997. The cost of sales percentage to net
revenues increased from 57% to 63%, thus gross profit margin decreased
correspondingly. Cost of sales primarily represents the long distance
minutes purchased to service the interactive voice response products and
services along with the prepaid phone calling cards. The Company purchases
long distance minutes from a highly competitive service market.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses decreased $48,394 or 13% from $381,179 for the quarter ended
September 30, 1997. The selling, general and administrative percentage to
net revenues decreased to 36% from 45%. The primary reason for the decrease
is attributable to the reduced costs of administrative support functions.
OPERATING INCOME (LOSS). Operating income (loss) decreased $15,686 or 37% from
$(42,534) for the quarter ended September 30, 1997. Operating income (loss)
before interest, depreciation and amortization decreased $24,207 or 142% from
$(17,087) for the quarter ended September 30, 1997.
OTHER EXPENSE (INCOME), NET. Other expense (income), net increased $9,581
from $0 for the quarter ended September 30, 1997.
LOSS ON DISCONTINUED OPERATIONS. On August 15, 1998 the Company discontinued
the operations of its Internet service division. This division focused on
providing various levels of Internet access to customers in the St. Louis,
Missouri area. The direct expenses (income), net from these operations are
$25,397 and $47,523 for the quarter ended September 30, 1998 and 1997,
respectively.
MINORITY INTEREST. Minority interest expense decreased $12,672 from $12,672
for the quarter ended September 30, 1997. Minority interest represents a 20%
ownership interest in the Company's subsidiary One Plus owned by the major
stockholder of the Company. The minority interest was acquired by the
Company on August 10, 1998 for $1.
NET INCOME. As a result of the foregoing, net loss for the quarter ended
September 30, 1998, decreased by $40,903 or 40% compared to the same period
in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities
During the quarter ending September 30, 1998, the Company used cash flows from
operating activities of $120,631 as compared to $(32,809) during the
comparable three-month period ending 1997. Effective with the "reverse
merger" acquisition of One Plus, the Company assumed an immediate increase in
accounts payable and accrued expenses of $1,150,960. Cash from operations
has been used to reduce these liabilities.
Cash Flows from Investing Activities
During the quarter ending September 30, 1998 and 1997, the Company used
($2,758) and $17,506 for purchases of property and equipment related
principally to support the Company's operating and administrative operations.
The Company's total budgeted capital expenditures, including acquisitions,
are currently anticipated to be approximately $300,000 during 1998 in
connection with the purchase of strategic interactive voice response and
prepaid phone card operations and enhanced phone card computer system
upgrades. The Company expects to fund these expenditures through equity
financing and bank borrowings. Although management anticipates that the
Company will continue to expand, there can be no assurances that the
Company's expansions plans will not be adversely affected by competition,
market conditions, availability of capital or changes in laws or government
regulations affecting telecommunication businesses.
Cash Flows from Financing Activities
During the second quarter 1998, the Company restructured its existing credit
facilities. The Company maintains two separate credit facilities making
available $535,000 with a bank secured by the Company's major stockholder's
stock that bears interest between bank's prime rate plus one-half percent
(prime was 8.5% at September 30, 1998) and 9% and expires on May 1, 2001. At
September 30, 1998, approximately $310,000 of the credit arrangements
available have been used by the Company. The amount drawn from the credit
arrangements were used by the Company to retire current debt obligations,
cash payments for the Channel acquisition and capital expenditures.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO SEPTEMBER 30, 1997
NET REVENUES. Net revenues increased $463,327 or 17% from $2,625,720 for the
nine months ended September 30, 1997. Revenues are primarily generated from
the Company's interactive voice response products and services and prepaid
phone calling cards. The increase in revenue is primarily attributable to the
acquisition of Channel effective January 1, 1998.
COST OF SALES. Cost of sales increased $119,746 or 8% from $1,528,325 for
the nine months ended September 30, 1997. The cost of sales percentage to
net revenues decreased from 58% to 53%, thus gross profit margin increased
correspondingly. Cost of sales primarily represents the long distance
minutes purchased to service the interactive voice response products and
services along with the prepaid phone calling cards. The Company purchases
long distance minutes from a highly competitive service market.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased $287,646 or 34% from $852,807 for the nine months ended
September 30, 1997. The selling, general and administrative percentage to
net revenues increased to 37% from 32%. The primary reason for the increase
is attributable to the additional costs of administrative support functions
to enhance the management of the Company along with the costs associated with
becoming an SEC reporting public company.
OPERATING INCOME (LOSS). Operating income (loss) increased $10,460 or 6% from
$175,810 for the nine months ended September 30, 1997. Operating income (loss)
before interest, depreciation and amortization increased $55,935 or 23% from
$244,588 for the nine months ended September 30, 1997.
OTHER EXPENSE (INCOME), NET. Other expense (income), net decreased $59,170
from income of $52,596 for the nine months ended September 30, 1997. The
primary reason for the decrease was attributable to the forgiveness of
certain payables due by the Company.
LOSS ON DISCONTINUED OPERATIONS. On August 15, 1998 the Company discontinued
the operations of its Internet service division. This division focused on
providing various levels of Internet access to customers in the St. Louis,
Missouri area. The direct expenses (income), net from these operations are
$177,723 and $71,759 for the nine months ended September 30, 1998 and 1997,
respectively.
MINORITY INTEREST. Minority interest expense decreased $25,086 from $45,418
for the nine months ended September 30, 1997. Minority interest represents a
20% ownership interest in the Company's subsidiary One Plus owned by the
major stockholder of the Company. The minority interest was acquired by the
Company on August 10, 1998 for $1.
NET INCOME. As a result of the foregoing, net income for the nine months
ended September 30, 1998, decreased by $129,588 or 116% compared to the same
period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities
During the nine-month period ended September 30, 1998, the Company used cash
flows from operating activities of $251,525 as compared to $96,240 during the
comparable nine-month period ended 1997. Effective with the "reverse merger"
acquisition of One Plus, the Company assumed an immediate increase in
accounts payable and accrued expenses of $1,150,960. Cash from operations
has been used to reduce these liabilities.
Cash Flows from Investing Activities
During the nine-month period ended September 30, 1998 and 1997, the Company
used $49,563 and $53,831 for purchases of property and equipment related
principally to support the Company's operating and administrative operations.
The Company's total budgeted capital expenditures, including acquisitions,
are currently anticipated to be approximately $300,000 during 1998 in
connection with the purchase of strategic interactive voice response and
prepaid phone card operations and enhanced phone card computer system
upgrades. The Company expects to fund these expenditures through equity
financing and bank borrowings. Although management anticipates that the
Company will continue to expand, there can be no assurances that the
Company's expansions plans will not be adversely affected by competition,
market conditions, availability of capital or changes in laws or government
regulations affecting telecommunication businesses.
Cash Flows from Financing Activities
During the second quarter 1998, the Company restructured its existing credit
facilities. The Company maintains two separate credit facilities making
available $535,000 with a bank secured by the Company's major stockholder's
stock that bears interest between bank's prime rate plus one-half percent
(prime was 8.5% at September 30, 1998) and 9% and expires on May 1, 2001.
At September 30, 1998, approximately $310,000 of the credit arrangements
available have been used by the Company. The amount drawn from the credit
arrangements were used by the Company to retire current debt obligations,
cash payments for the Channel acquisition and capital expenditures.
During the first quarter 1998, the Company recognized $72,662 in equity
placement fees as it attempts to secure additional financing to support the
Company's expansion.
IMPACT ON INFLATION
Management believes that the Company's results of operations are not dependent
upon the levels of inflation.
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk
Not applicable
FORM 10-QSB - PART II
Item 1 - Legal Proceedings
The Company is involved in legal proceedings incidental to the conduct of its
business. Management believes that none of these legal proceedings will
result in any material impact on the Company's financial condition or results
of operations.
Item 2 - Changes in Securities and Use of Proceeds
None.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
On August 10, 1998, registrant acquired from Scott A. Beil, its Chairman, the
remaining 20% of the stock of One Plus Marketing, Inc. not already owned by
the Company for $1.00 with the result that One Plus Marketing, Inc. became a
wholly-owned subsidiary of registrant. In connection with that transaction,
Mr. Beil agreed to abstain from voting 1,800,000 shares of the 5,837,012 shares
of registrant's common stock owned by him for a two year period commencing on
August 11, 1998. In a related transaction, Rajan Arora, registrant's
President and a director, and Jeffrey A. Shier, a Vice President and director
of registrant, agreed to forgive aggregate indebtedness of $137,500 owed them
by registrant in connection with the registrant's acquisition from them of the
stock of Channel Telecom, Inc.
Item 6 - Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 10.4 - Letter agreement between the registrant, Rajan Arora and
Jeffrey Shier dated June 30, 1998 regarding forgiveness of indebtedness.
Exhibit 10.5 - Stock Purchase Agreement between Scott A. Beil and registrant
dated August 10, 1998 regarding 20% minority interest in One Plus Marketing,
Inc.
Exhibit 10.6 - Letter agreement between registrant and Scott A. Beil dated
August 11, 1998 regarding voting of stock in registrant.
Exhibit 27.0 - Financial Data Schedule
B. Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
HITCOM CORPORATION
(Registrant)
By: /s/ RAJAN ARORA
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 44,334
<SECURITIES> 00
<RECEIVABLES> 456,334
<ALLOWANCES> 9,122
<INVENTORY> 00
<CURRENT-ASSETS> 507,801
<PP&E> 536,143
<DEPRECIATION> 198,197
<TOTAL-ASSETS> 966,577
<CURRENT-LIABILITIES> 1,320,142
<BONDS> 396,521
00
1,054
<COMMON> 48,698
<OTHER-SE> (649,497)
<TOTAL-LIABILITY-AND-EQUITY> 966,577
<SALES> 3,089,047
<TOTAL-REVENUES> 3,089,047
<CGS> 1,648,071
<TOTAL-COSTS> 2,902,777
<OTHER-EXPENSES> 00
<LOSS-PROVISION> 70,955
<INTEREST-EXPENSE> 00
<INCOME-PRETAX> 186,270
<INCOME-TAX> 00
<INCOME-CONTINUING> 186,270
<DISCONTINUED> (177,723)
<EXTRAORDINARY> 00
<CHANGES> 00
<NET-INCOME> (17,999)
<EPS-PRIMARY> 00
<EPS-DILUTED> 00
</TABLE>
Exhibit 10.4
Letter of Agreement
This letter of Agreement dated June 30, 1998 is between Hitcom Corporation
("Borrower") and Jeffrey Shier and Rajan Arora ("Lenders").
Whereas the Borrower has given the Lenders a Promissory Note dated
May 29, 1998 for $165,000 ("Note"), and the current amount outstanding as of
the date of this agreement is $137,500.
Whereas the Lender desires to forgive the Note in full.
Now Therefore in consideration of good and valuable consideration, the
parties hereto agree as follows:
The Lender forgives the note owing from the Borrower effective the date of
this letter.
In Witness Whereof Borrower had caused this Agreement to be executed by its
duly authorized officer, and Lenders has executed this Agreement, on the date
first above written.
/s/ Scott Beil
Scott A. Beil, Chairman, HITCOM CORPORATION
/s/Rajan Arora /s/Jeffrey Shier
Rajan Arora, Lenders Jeffrey Shier, Lenders
Exhibit 10.5
STOCK PURCHASE AGREEMENT
Between
HITCOM CORPORATION
And
SCOTT A. BEIL
For Purchase of a 20% minority interest in One Plus Marketing, Inc.
Dated August 10, 1998
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT entered into this 10th day of August, 1998,
between Hitcom Corporation, a Delaware corporation ("Buyer"), and Scott A.
Beil, ("Beil") an individual resident in the City of St. Louis, Missouri,
herein called the ("Seller");
WITNESSETH:
WHEREAS, Beil owns 20 common shares, being 20% of One Plus Marketing Inc.
("One Plus"), an Illinois Corporation (the "Company");
WHEREAS Hitcom owns 80 common shares, being 80% of One Plus, and there are
100 shares outstanding of the company constituting all of the issued and
outstanding shares of capital stock of the Company; and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, the Stock in
consideration for the payment to be made as described hereunder;
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the parties hereto agree as follows:
ARTICLE I
Terms of Purchase and Sale
1.1 Upon the terms and subject to the conditions of this Agreement, Seller
sells to Buyer, and Buyer purchases from Seller, the stock for a purchase
price of $1.00.
ARTICLE II
Representation and Warranties of Seller
Seller represents and warrants to Buyer as follows:
2.1 Authority: No conflict. The Agreement constitutes the legal, valid and
binding obligation of Seller enforceable against Seller in accordance with
its terms. Seller has the absolute and unrestricted right, power, authority
and capacity to execute and deliver this Agreement and to perform the
obligations hereunder. The execution and delivery of this Purchase Agreement
by Seller and the consummation of the transactions contemplated will
(a) not violate or conflict with any provision of the Certificate or
Articles of Incorporation or bylaws of the Company.
(b) result in a breach of, or constitute a default under any agreement, (or
with notice or lapse of time or both result in a breach of or constitute a
default under) or otherwise give any person the right to terminate, any
lease, license, contract or other agreement or instrument to which Sellers or
the Company is a party or by which any of them are bound and particularly
Clause 6.5 of the Stock Purchase Agreement between Hitcom Corporation and
Rajan Arora, Jeffrey Shier, the Jeffrey Samuel Shier Family Trust dated
February 18th, 1998.
ARTICLE III
Representations and Warranties of Buyer
Buyer represents and warrants to Seller as follows:
3.1 Authority: No conflict. This Agreement constitutes the legal, valid and
binding obligation of Buyer in accordance with its terms. Buyer has the
absolute and unrestricted right, power, authority and capacity to execute and
deliver this Agreement and to perform the obligations hereunder. The
execution and delivery of this Purchase Agreement by Buyer and the
consummation of the transactions contemplated will
(a) not violate or conflict with any provision of the Certificate or
Articles of Incorporation or Bylaws of the Buyer.
(b) Result in a breach of or constitute a default under any agreement, (or
with notice or lapse of time or both result in a breach of or constitute a
default under) or otherwise give any person the right to terminate, any
lease, license, contract or other agreement or instrument to which Buyer or
the Company is a party or by which any of them are bound and particularly
Clause 6.5 of the Stock Purchase Agreement between Hitcom Corporation and
Rajan Arora, Jeffrey Shier, the Jeffrey Samuel Shier Family Trust dated
February 18th, 1998.
3.2 Investment Intent. Buyer acknowledges that the Stock has not been
registered under the Securities Act of 1933, as amended (the "1933 Act") and
that Seller has disclosed to Buyer that the stock may not be resold absent
such registration or unless an exemption from registration is available.
Buyer is acquiring the shares for its own account, for investment purposes
only and not with a view to distribution thereof within the meaning of
Section 2(11) of the 1933 Act.
ARTICLE IV
Closing
4.1 The closing ("Closing") under this Agreement shall take place concurrent
with the signing of this Agreement at the offices of Hitcom, 700 North Second
Street, Third Floor, St. Louis, MO 63102-2519.
4.2 Delivery by Seller. At the Closing, Seller shall deliver to Buyer (a)
certificate representing the 20 shares of One Plus endorsed in blank or with
stock powers attached; (b) such other further instruments, documents or
certificates as Buyer may reasonably require to carry out effectively the
transactions contemplated hereunder.
4.3 Delivery by Buyer. At the Closing, Buyer shall deliver: (a) certified
resolutions of Buyers Board of Directors authorizing the execution, delivery
and performance of this Agreement by Buyer; (b) US$1.00; and (c) such other
further instruments, documents or certificates as Buyer may reasonably
require to carry out effectively the transactions contemplated hereunder.
ARTICLE V
Miscellaneous
5.1 Notices. All notice given in connection with this Agreement shall be in
writing and shall be delivered by personal delivery at the following addresses:
Seller: Scott A. Beil, Chairman, Hitcom, 700 North Second Street, Third
Floor, St. Louis, MO 63102-2519.
Buyer: Hitcom, 700 North Second Street, Third Floor, St. Louis, MO 63102-2519.
5.2 Further Assurances
The parties hereto agree (i) to furnish upon request to each other such
further information, (ii) to execute and deliver to each other such
documents, and (iii) to do such other acts and things, all as the other party
hereto may at any time reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to herein.
5.3 Entire Agreement and Modification. This Agreement is intended by the
Parties to this Agreement as a final expression of their agreement with
respect to the subject matter hereof, and is intended as a complete and
exclusive statement of the terms and conditions of that agreement. This
Agreement may not be modified, rescinded, or terminated orally, and no
modification, recession, termination or attempted waiver of the provisions
hereof (including this Section) shall be valid unless in writing and signed
by the party against whom the same is sought to be enforced.
5.4 Governing Law. This Agreement shall be governed by, and construed under,
the laws of the State of Missouri without regard to conflicts of laws, all
rights and remedies being governed by such laws.
5.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to
constitute but one and the same agreement.
IN WITNESS WHEREOF Buyer had caused this Agreement to be executed by its duly
authorized officer, and Seller has executed this Agreement, on the date first
above written.
HITCOM CORPORATION
BY
/s/Scott A. Beil /s/Rajan Arora
Scott A. Beil Rajan Arora, President
Exhibit 10.6
August 11, 1998
Scott A. Beil
Chairman
Hitcom Corporation
700 North Second Street, Third Floor
St. Louis, MO 63102-2519
Mr. Rajan Arora
President
Hitcom Corporation
85 Scarsdale Road, Suite 202
Toronto, Ontario, M3B 2R2
Dear Raj,
I am enclosing with this letter the executed Stock Purchase Agreement between
myself and Hitcom for 20% of One Plus Marketing Inc.
I currently own 5,837,012 shares in Hitcom, the certificate is deposited with
Hitcom's lender, and 500,000 shares are pledged as collateral in connection
with Hitcom's corporate loans.
I have previously agreed in connection with the Channel Telecom Stock
Purchase Agreement of February 18, 1998 not to sell or otherwise dispose of
said shares for one year from the Closing Date of that transaction except
pursuant to a registered stock offering.
I now agree to abstain from voting 1,800,000 shares of my 5,837,012 shares of
Hitcom from the date of this letter for 2 years at all special and annual
shareholder meetings of Hitcom.
Yours truly,
/s/Scott Beil
Scott A. Beil
