<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 1999
[ ] Transition Report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________________ to __________________.
Commission File Number: 000-22251
BOBBY ALLISON WIRELESS CORPORATION f/k/a 2CONNECT EXPRESS, INC.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
FLORIDA 65-0674664
----------------------- ------------------
(State of Incorporation (I.R.S. Employer
or Organization) Identification No.)
2055 Lake Avenue, S.E., Suite A, Largo, Florida 33771
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
Check whether the issuer: (1) has 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 Company was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 480,000 shares of Common
Stock, par value $.01 per share, as of August 10, 1999.
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BOBBY ALLISON WIRELESS CORPORATION AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated balance sheets -
June 30, 1999 and December 31, 1998 3
Consolidated statements of operations-
three months and six months ended June 30, 1999 and June 30, 1998 5
Consolidated statements of cash flows-
six months ended June 30, 1999 and June 30, 1998 6
Notes to consolidated financial statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 8
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2. CHANGES IN SECURITIES 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 5. OTHER INFORMATION 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 17
</TABLE>
2
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PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements.
BOBBY ALLISON WIRELESS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
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(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT:
Cash $57,366 $125,155
Accounts receivable, less allowance for doubtful accounts of
$112,699 and $76,144 725,470 684,344
Prepaid expenses 72,861 29,091
Inventories 621,338 645,976
Deferred tax asset 24,000 24,000
---------- ----------
TOTAL CURRENT ASSETS 1,501,035 1,508,566
---------- ----------
LEASEHOLD IMPROVEMENTS AND EQUIPMENT, AT COST: 1,633,647 950,068
Less accumulated depreciation 348,297 265,491
---------- ----------
NET LEASEHOLD IMPROVEMENTS AND EQUIPMENT 1,285,350 684,577
---------- ----------
OTHER ASSETS:
Goodwill and other intangible assets, net of accumulated
amortization of $140,710 and $135,442 332,830 350,397
Deferred tax asset 78,500 156,000
Deposits 62,266 25,038
---------- ----------
TOTAL OTHER ASSETS 473,596 531,435
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$3,259,981 $2,724,578
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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BOBBY ALLISON WIRELESS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS, CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
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(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 573,413 $ 550,156
Accrued expense 343,746 266,624
Deferred income 462,026 315,528
Current maturities of long-term debt 176,949 168,877
Convertible debenture - 125,000
---------- ----------
TOTAL CURRENT LIABILITIES 1,556,134 1,426,185
---------- ----------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 770,682 441,961
---------- ----------
TOTAL LIABILITIES 2,326,816 1,868,146
---------- ----------
PREFERRED STOCK:
Series A convertible preferred stock, $1.00 par, shares
authorized 20; outstanding 15 375,000 375,000
Series B convertible preferred stock, $1.00 par, shares
authorized 50; outstanding 50 1,250,000 1,250,000
---------- ----------
TOTAL PREFERRED STOCK 1,625,000 1,625,000
---------- ----------
CAPITAL DEFICIT:
Common stock, $.01 par; shares authorized 25 million;
outstanding 480,000 4,800 4,800
Additional paid-in capital 100,405 100,405
Deficit (797,040) (873,773)
---------- ----------
TOTAL CAPITAL DEFICIT (691,835) (768,568)
---------- ----------
$3,259,981 $2,724,578
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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BOBBY ALLISON WIRELESS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -----------------------------
1999 1998 1999 1998
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Product sales 1,586,779 971,451 $ 2,823,614 $ 1,195,888
Activation commissions 914,503 729,310 1,644,622 2,007,917
Pager services 219,359 288,454 446,175 316,236
---------- ---------- ----------- -----------
Total revenues 2,720,641 1,989,215 4,914,411 3,520,041
COST OF SALES 935,663 1,120,837 1,740,498 1,998,905
---------- ---------- ----------- -----------
Gross profit 1,784,978 868,378 3,173,913 1,521,136
---------- ---------- ----------- -----------
OPERATING EXPENSES:
Selling, general and administrative expenses 1,492,511 778,839 2,728,416 1,385,480
Depreciating and amortization 81,864 48,957 115,690 100,229
---------- ---------- ----------- -----------
Total operating expenses 1,574,375 827,796 2,844,106 1,485,709
Operating income (loss) 210,603 40,582 329,807 35,427
OTHER INCOME (EXPENSE):
Interest expense (52,312) (68,531) (85,480) (134,142)
Interest income 3,808 4,017 6,046 5,667
Other (17,063) (17,607) (35,999) (31,050)
---------- ---------- ----------- -----------
Total other expense (65,567) (82,121) (115,433) (159,525)
---------- ---------- ----------- -----------
INCOME (LOSS) BEFORE TAXES ON INCOME 145,036 (41,539) 214,374 (124,098)
INCOME TAX (EXPENSE) BENEFIT (51,500) 15,000 (77,500) 45,000
---------- ---------- ----------- -----------
NET INCOME (LOSS) 93,536 (26,539) 136,874 (79,098)
PREFERRED STOCK DIVIDENDS (31,477) -- (60,141) --
---------- ---------- ----------- -----------
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS 62,059 (26,539) $ 76,733 $ (79,098)
========== ========== =========== ===========
EARNINGS (LOSS) PER COMMON SHARE (BASIC AND DILUTED) $ 0.13 $ 0.16
WEIGHTED AVERAGE SHARES OUTSTANDING 480,000 480,000
PRO FORMA EARNINGS (LOSS) PER COMMON SHARE (BASIC AND DILUTED) $ (0.06) $ (0.16)
PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING (BASIC AND DILUTED) 480,000 480,000
</TABLE>
See accompanying notes to consolidated financial statements.
5
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BOBBY ALLISON WIRELESS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 136,874 $ (79,098)
Adjustments to reconcile net income (loss) to net cash provided by (used for)
operating activities:
Depreciation and amortization 115,690 100,229
Loss on disposal of equipment -- 23,396
Cash provided by (used for):
Accounts receivable (41,126) (162,468)
Prepaid expenses (43,770) 7,192
Inventories 24,636 65,000
Deferred Tax Asset 77,500 (45,000)
Accounts payable 23,257 (99,558)
Deferred Revenue 146,499 6,293
Accrued expenses 77,122 24,930
--------- ---------
Net cash provided by (used for) operating activities 516,682 (159,084)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of leasehold improvements and equipment (698,895) --
(Increase) decrease in deposits (37,228) (12,909)
--------- ---------
Net cash used for investing activities (736,123) (12,909)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in long-term debt (116,928) 283,154
Preferred stock dividends (60,141)
Proceeds from line of credit 328,721 --
Cancellation of Treasury Stock -- 6,500
--------- ---------
Net cash provided by financing activities 151,652 289,654
--------- ---------
NET INCREASE (DECREASE) IN CASH: (67,789) 117,661
CASH, beginning of quarter 125,155 (12,010)
--------- ---------
CASH, end of quarter $ 57,366 $ 105,651
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 85,480 $ 134,142
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
6
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BOBBY ALLISON WIRELESS CORPORATION AND SUBSIDIARY
(Notes to Consolidated Financial Statements)
SUMMARY OF SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
BASIS OF PRESENTATION
The unaudited consolidated financial statements have been prepared in
conformity with instructions to Form 10-QSB and therefore, do not include all
the information and footnotes required by generally accepted accounting
principals for complete financial statements. Certain items included in these
statements are based upon management estimates. In the opinion of management,
the accompanying financial statements contain all adjustments (consisting of
normal recurring adjustments) necessary for fair presentation. The results of
operations for the six months ended June 30, 1999 are not necessarily indicative
of the operating results expected for the fiscal year ending December 31, 1999.
These financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1998. See Note 1 to those
financial statements for a discussion of the recapitalization and merger with
Bobby Allison Cellular Systems of Florida, Inc.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Bobby
Allison Wireless Corporation and its wholly-owned subsidiary (the "Company").
All significant intercompany accounts and transactions have been eliminated in
consolidation.
NET INCOME (LOSS) PER COMMON SHARE
Basic EPS is calculated by dividing the income (loss) available to
common shareholders by the weighted average number of common shares outstanding
for the period without consideration for potential common shares. Potential
common shares were not included for the six months ended June 30, 1999 and 1998
since their effects are antidultive under the Treasury stock method for options
and warrants and if-converted method for convertible preferred stock. For 1998,
the Company has presented earnings per share on a pro forma basis as if the
merger, which occurred December 31, 1998, had occurred on January 1, 1998.
STORE PROPERTY AND DEVELOPMENT COSTS
Costs incurred prior to the opening of a store and certain costs
related to the implementation of corporate sales programs are capitalized and
amortized over a period of twelve months starting with the month of commencement
of such programs and new stores.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 122,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS
133 requires companies to recognize all derivatives contracts as either assets
or liabilities in the balance sheet and to measure them at fair value. If
certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognized in income in the period of change.
SFAS 133 is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999.
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Historically, the Company has not entered into derivatives contracts
either to hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standard on January 1, 2000 to
affect its financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward looking statements.
The Company wishes to caution investors that any forward looking statements made
by or on behalf of the Company are subject to uncertainties and other factors
that could cause actual results to differ materially from such statements. The
uncertainties and other factors include, but are not limited to, the factors
listed in the Company's Form 10-K for the year ended December 31, 1998 (many of
which have been discussed in prior SEC filings by the Company.) Though the
Company has attempted to list the factors it believes to be important to its
business the Company wishes to caution investors that other factors may prove to
be important in affecting the Company's results of operations. New factors
emerge from time to time and it is not possible for management to predict all of
such factors, nor can it assess the impact of each such factors, may cause
actual results to differ materially from forward looking statements.
Investors are further cautioned not to place undue reliance on any
forward looking statements as they speak only of the Company's view as of the
date the statement was made. The Company undertakes no obligation to publicly
update or revise any forward looking statements, whether as a result of new
information, future events, or otherwise.
GENERAL
The Company, headquartered in Largo, Florida, is an enclosed regional
mall-based specialty retailer of wireless communications products and services
for the individual and small business customer which, as of August 10, 1999, had
33 sales locations including twenty-six (26) in-line stores, six (6) kiosks and
one (1) direct sales location all of which are located in Central and South
Florida. The Company's products, which range in price up to approximately $699
cover a broad assortment of over two hundred fifty (250) stock-keeping units and
a wide range of service plans offered by six (6) cellular/PCS service providers
and four (4) paging carriers.
The Company is proceeding with the expansion of its operations beyond
the State of Florida. The Company opened its first sales location outside of the
State of Florida in Augusta, Georgia in July of 1999 followed by Atlanta,
Georgia on August 3, 1999. The Company will open an additional two sales
locations in Atlanta, Georgia by August 15, 1999. Futhermore, the Company is
currently negotiating carrier agreements and leases for additional Georgia sales
locations in Atlanta, Augusta, Savannah and Macon as well as sales locations in
North Carolina, South Carolina and Virginia. The Company's continued expansion
plans are dependent, however, upon the success of the Company's current
negotiations for an additional line of credit of up to $1 million and its
current offering of Series C Convertible Preferred Stock for which the Company
has raised $250,000 of its expected $1 million. See Item 5. Consequently, there
is no assurance that the Company will be able to obtain the necessary financing,
or if available, that such financing will be on terms acceptable to the Company.
As a result, the Company may be unable to complete its expansion plans or such
plans may be substantially delayed.
During 1998, the Company planned and implemented a re-structuring which
included:
o the January 12, 1998 filing of a voluntary petition for protection under
Chapter 11 of the U.S. Bankruptcy Code to restructure the business
o significantly reducing corporate overhead
o pursuant to the Chapter 11 proceedings, rejecting the leases and closing
all of its stores except for its one profitable location Coral Square mall
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o settling all claims of creditors and emerging from bankruptcy on
October 27, 1998
o entering into a merger agreement on May 14, 1998 and consummating a merger
with Bobby Allison Cellular Systems of Florida, Inc. on December 31, 1998
SOURCES OF REVENUE
The Company's revenues are generated principally from three sources:
(i) RETAIL SALES. The Company sells cellular and wireless products,
such as phones, pagers and related accessories in the Company's retail outlets.
(ii) ACTIVATION COMMISSIONS. The Company receives an activation
commission from the applicable cellular carrier when a customer initially
subscribes for the cellular carrier's service. The amount of the activation
commission paid by cellular carriers is based upon the service plan offered by
the carrier and is recognized by the Company at the time of sale. New
subscription activation commissions are fully refundable if the subscriber
cancels its subscription prior to completion of a minimum period of continuous
active service (generally 90 days). Customers generally sign a service agreement
with the Company that the customer reimburse the Company for lost activation
commissions in the event of the early cancellation of service. The Company
accrues for estimated deactivation losses, net of cancellation fees, by creating
a reserve against carrier accounts receivable. The reserve is reflective of the
historical cancellation experience.
As stated above, the Company did expand into the State of Georgia in
July 1999 and has begun offering wireless services from a number of cellular and
PCS carriers in Atlanta and Augusta on a non-exclusive basis. AT&T Wireless
Services' activation commissions accounted for approximately 33.5% of net
revenues and 13.3% of the Company's net accounts receivables for the six months
ended June 30, 1999.
(iii) RESIDUAL PAYMENTS. The Company receives monthly payments directly
from customers for the pager airtime that the Company buys wholesale from paging
carriers and then resells to individuals and small businesses.
A change in sales and commissions policies at AT&T Wireless Services
effective in October of 1998 has had a negative effect on the Company's gross
revenues and will continue to have a negative effect on the Company's gross
revenues in 1999 and beyond but has not and is not expected to have any material
effect on the Company's gross profit or net income. Prior to October of 1998,
the Company would pay AT&T Wireless Services a high price for a telephone and
sell the same telephone to the consumer for a substantial loss. A substantial
activation commission paid to the Company by AT&T Wireless Services would
convert this loss into a profit. Effective October 1998, AT&T Wireless Services
has changed its policy. It has substantially reduced the activation commission
previously payable to the Company, but at the same time, has substantially
reduced the price of the wireless telephones it sells to the Company by an
amount approximately equal to the reduction of the activation commission. As a
result, the Company makes a profit rather than incurring a loss on the sale of
the wireless telephones but at the same time receives a lower activation
commission. In summary, AT&T Wireless Services has simply shifted its subsidy
for the cost of the wireless telephones from the activation commission to the
actual sales price of the wireless telephone. As a result, this payment shift
materially decreases both gross revenues and cost of goods sold but has no
material affect on the Company's gross profit or its net income.
The reduction in revenues negatively affects the Company's same store
sales growth which were down approximately 5.5% from the quarter ended June 30,
1998 to the quarter ended June 30, 1999. This decline in same store sales
results is also effected by unusually high sales in the quarter ended June 30,
1998 due to the implementation and accompanying marketing campaign by AT & T
Wireless of its One Rate Plan. Same store sales grew 1.7% from the six months
ended June 30, 1998 to the six months ended June 30, 1999. Same store sales
include only stores owned and operated by the Company for at least 12 full
months and are comprised of retail sales and activation commissions.
Since gross profit represents a greater percentage of revenues, the
Company's gross profit margin increased from approximately 43.2% in the six
months ended June 30, 1998 to approximately 64.6% in the six months ended
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June 30, 1999 (which only reflected this change for a short period of time in
1998). The gross profit margin is expected to be approximately 64% (absent
unexpected changes in market conditions and Company operations) throughout 1999.
To date, the cost of wireless products has gradually decreased over
time. With such lower cost, the Company typically has offered lower prices to
attract more subscribers, which has increased its total activation commissions
and contributed to gross profit improvements. Consequently, the Company believes
that, as prices of wireless products decrease, they become more affordable to
consumers thereby expanding the wireless communications market and creating an
opportunity to attract new subscribers and increase activation commissions.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficit of $55,099 at June 30, 1999
compared to a working capital deficit of $754,377 at June 30, 1998. The increase
in net working capital was due primarily to the issuance of securities, the
proceeds of which were used to increase inventory levels, reduce current
liabilities and build cash reserves. Deferred income increased $146,498 between
December 31, 1998 and June 30, 1999 which related primarily to the receipt of
certain supplier marketing development funds received in January 1999. The
deferred revenue related to supplier development funds will be recognized as
income 50% on November 30,1999 and 50% on November 30, 2000 provided the terms
of the related supplier agreement remain in effect on those dates. Also, on
February 24, 1999, the Company consummated a line of credit with SouthTrust Bank
by which the Company may borrow up to $500,000 for working capital. As of August
10, 1999, the Company has drawn down $500,000 of the line of credit.
The Company's net cash provided by operating activities for the six
months ended June 30, 1999 was $516,682 as compared to net cash used for
operating activities of $159,084 for the six months ended June 30, 1998. The
change in cash from operations was primarily due to a smaller increase in
accounts receivables, a decrease in deferred tax assets and an increase in
deferred revenue. The net cash used in investing activities for the six months
ended June 30, 1999 increased to $736,123 related primarily to the purchase of
leasehold improvements and equipment required to support new store growth. The
net cash provided by financing activities for the six months ended June 30, 1999
was $151,652 as compared to $289,654 for the six months ended June 30, 1998.
The decrease related primarily to the repayment of convertible debt.
The Company expects to satisfy its anticipated demands and commitments
for cash in the next 12 months from internally generated cash, borrowings
through its line of credit and the issuance of additional securities. However,
there is no assurance that the Company will be able to find a purchaser for its
securities or, if a purchaser is found, that an adequate price for the Company's
securities can be obtained or that the Company's shareholders will not be
diluted by any such issuance.
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RESULTS OF OPERATIONS
The following table sets forth certain selected income statement data
of the Company expressed as a percentage of net sales:
<TABLE>
<CAPTION>
For the Three For the Six Months
Months Ended June 30, Ended June 30,
-------------------- ------------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net Sales ........................................ 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Cost of Sales .................................... 34.4% 56.3% 35.4% 56.8%
----- ----- ----- -----
Gross Profit ..................................... 65.6% 43.7% 64.6% 43.2%
----- ----- ----- -----
Selling, General and Administrative Expenses
(Excluding Depreciation).......................... 54.9% 39.2% 55.5% 39.4%
----- ----- ----- -----
Depreciation and Amortization .................... 3.0% 2.5% 2.4% 2.8%
----- ----- ----- -----
Operating Income ................................. 7.7% 2.0% 6.7% 1.0%
----- ----- ----- -----
Other Income (expense) ........................... (2.4)% (4.1)% (2.3)% (4.5)%
----- ----- ----- -----
Provision (Benefit) For Income Taxes ............. 1.9% (0.7)% 1.6% (1.3)%
----- ----- ----- -----
Net Income (loss) ................................ 3.4% (1.4)% 2.8% (2.2)%
===== ===== ===== =====
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1999 TO THE THREE MONTHS ENDED
JUNE 30, 1998
NET SALES. Net sales were $2,720,641 for the three months ended June
30, 1999 as compared to $1,989,215 for the three months ended June 30, 1998 an
increase of $731,426 or approximately 36.8%. This increase reflects the increase
in store count from fourteen (14) to thirty (30) stores. Same store sales for
the three months ended June 30, 1999 were down 5.5% as compared to the three
months ended June 30, 1998. The Company operated thirty (30) stores at June 30,
1999, ten (10) of which had then been owned and operated for at least 12 months.
As stated above, same stores sales include only stores owned and operated by the
Company for at least 12 full months and are effected by the AT&T Wireless
Services payment shift. See "--Sources of Revenue".
GROSS PROFIT. Gross profit was $1,784,978 for the three months ended
June 30, 1999 as compared to $868,378 for the three months ended June 30, 1998
or an increase of $916,600 or approximately 105.6%, largely reflecting the
increase in stores operated during the three months ended June 30, 1999. Gross
profit as a percentage of sales increased from approximately 43.7% in the three
months ended June 30, 1998 to approximately 65.6% in the three months ended June
30, 1999. This increase was due primarily to the decrease in revenue and costs
of goods sold resulting from the shift by AT&T Wireless Services of payments for
activation commissions to a reduction in the price that it sells wireless
telephones to the Company. See "--Sources of Revenue".
OPERATING EXPENSES. Selling, general and administrative expense was
$1,574,375 for the three months end June 30, 1999 as compared to $827,796 for
the three months ended June 30, 1998 or an increase of $746,579 or approximately
90.2%, largely as a result of the Company's store expansion in 1998. Corporate
headquarter's expenses, included therein, increased due primarily to increased
costs necessitated by the Company's growth and anticipated future growth
including, but not limited to, support and training, advertising and marketing
and merchandising and allocation/distribution.
NET INTEREST EXPENSE. Net interest expense was $52,312 for the three
months ended June 30, 1999 as compared to $68,531 for the three months ended
June 30, 1998 or a decrease of $16,219 or approximately 23.7% due to decreased
borrowings associated with the conversion of certain debentures into lower
yielding preferred stock.
NET INCOME/LOSS. The Company had net income of $93,536 for the three
months ended June 30, 1999 as compared to a net loss of $26,539 for the three
months ended June 30, 1998.
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The Company issued preferred stock in 1998 and recorded preferred
dividends of $31,477 during the three months ended June 30, 1999.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1999 TO THE SIX MONTHS ENDED
JUNE 30, 1998
NET SALES. Net sales were $4,914,411 for the six months ended June 30,
1999 as compared to $3,520,041 for the six months ended June 30, 1998 an
increase of $1,394,370 or approximately 39.6%. This increase reflects the
increase in store count from fourteen (14) to thirty (30) stores. Same store
sales for the six months ended June 30, 1999 increased by $37,075 or
approximately 1.7% as compared to the six months ended June 30, 1998. The
Company operated thirty (30) stores at June 30, 1999, ten (10) of which had then
been owned and operated for at least 12 months. As stated above, same stores
sales include only stores owned and operated by the Company for at least 12 full
months and are effected by the AT&T Wireless Services payment shift. See
"--Sources of Revenue".
GROSS PROFIT. Gross profit was $3,173,913 for the six months ended June
30, 1999 as compared to $1,521,136 for the six months ended June 30, 1998 or an
increase of $1,652,777 or approximately 108.7%, largely reflecting the increase
in stores operated during the six months ended June 30, 1999. Gross profit as a
percentage of sales increased from approximately 43.2% in the six months ended
June 30, 1998 to approximately 64.6% in the six months ended June 30, 1999. This
increase was due primarily to the decrease in revenue and costs of goods sold
resulting from the shift by AT&T Wireless Services of payments for activation
commissions to a reduction in the price that it sells wireless telephones to the
Company. See "--Sources of Revenue".
OPERATING EXPENSES. Selling, general and administrative expense was
$2,844,106 for the six months end June 30, 1999 as compared to $1,485,709 for
the six months ended June 30, 1998 or an increase of $1,358,397 or approximately
91.4%, largely as a result of the Company's store expansion in 1998. Corporate
headquarter's expenses, included therein, increased due primarily to increased
costs necessitated by the Company's growth and anticipated future growth
including, but not limited to, support and training, advertising and marketing
and merchandising and allocation/distribution.
NET INTEREST EXPENSE. Net interest expense was $85,480 for the six
months ended June 30, 1999 as compared to $134,142 for the six months ended June
30, 1998 or a decrease of $48,662 or approximately 36.3% due to decreased
borrowings associated with the conversion of certain debentures into lower
yielding preferred stock.
NET INCOME/LOSS. The Company had net income of $136,874 for the six
months ended June 30, 1999 as compared to a net loss of $79,098 for the six
months ended June 30, 1998.
The Company issued preferred stock in 1998 and recorded preferred
dividends of $60,141 during the six months ended June 30, 1999.
EXTRAORDINARY ITEMS FOR 1999 AND 2000
In December 1998, a major vendor forgave debt owed to such vendor by
the Company in the amount of $262,062. As a result, the Company recorded this
debt forgiveness as deferred income because the Company must repay all $262,062
if the Company terminates its relationship with such vendor before December of
1999 and one-half or $131,031 if the Company terminates its relationship with
such vendor before December of 2000. Consequently, the Company will recognize
$131,031 as income in December of 1999 and $131,031 as income in December of
2000.
YEAR 2000 READINESS DISCLOSURE
The Company has conducted a review of its computer systems to identify
the systems that could be affected by the "Year 2000" issue and has developed an
implementation plan to resolve the issue. The Year 2000 issue is the result of
the computer programs being written using two digits rather than four to define
the applicable year. Any of the
12
<PAGE> 13
Company's computer programs that have time/date-sensitive software and hardware
may recognize a date using "00" has the year 1900 rather than the year 2000.
This could result in major system failure or miscalculation. The Company has
updated its computer systems, particularly its point-of-sale systems for a total
cost of approximately $40,000 and, based upon assurances from its software
vendors, believes that it is presently Year 2000 compliant. Consequently, the
Company believes that the Year 2000 issue will not pose significant operations
problems for the Company's computer systems and the Company does not expect to
incur any significant additional cost regarding the Year 2000 issue. The Company
has not and does not plan to develop a contingency plan for the failure of the
equipment or systems. The Company will resort to manual operations in the event
of a failure.
The Year 2000 issue not only creates risk for the Company of unforeseen
problems in its own computer systems but also from third parties on which the
Company relies. In addition, the Company is querying its suppliers as to their
progress in identifying and addressing problems that their computer systems will
face in correctly processing date information as the year 2000 approaches and is
reached. The Company has received such assurances from its vendors, particularly
from AT&T Wireless Services, its sole cellular carrier. However, there are no
assurances that the Company will identify all date-handling problems in its
business systems or that the Company or its vendors will be able to successfully
remedy Year 2000 compliance issues that are discovered. To the extent that the
Company is unable to resolve its Year 2000 issues prior to January 1, 2000,
operating results could be adversely affected. In addition, the Company could be
adversely affected if other entities (e.g., vendors) not affiliated with the
Company do not appropriately address their own year 2000 compliance issues in
advance of their occurrence.
13
<PAGE> 14
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable
ITEM 2. CHANGES IN SECURITIES.
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
(1) Unanimous Consent of the Shareholders dated June 16, 1999.
(a) The unanimous consent was in lieu of a special meeting of the
common shareholders and became effective on June 16, 1999, the
date of the last signed consent. The unanimous consent was
first mailed to the holders of the Company's common stock on
June 15, 1999 along with a definitive Information Statement as
filed with the Commission on the same date. A preliminary
Information Statement was filed with the Commission on June 4,
1999.
(b) The unanimous consent was distributed to the common
shareholders for the purpose of voting to adopt the Third
Amendment To Amended And Restated Articles of Incorporation
("Third Amendment") which amended the Company's Articles of
Incorporation as follows: (i) to amend the dividend rate from
7.5% per annum to that certain percentage per annum as
determined by the resolution of the Board of Directors at the
time of issuance but not to exceed 7.5% and (ii) to eliminate
the 5 Year Mandatory Redemption provision with respect to the
7.5% Series C Convertible Preferred Stock. See the Third
Amendment To Amended And Restated Articles of Incorporation
attached hereto as Exhibit 3.2. The consent was unanimously
adopted by the holders of common stock of the Company. It was
later determined that the Third Amendment should have been
consented to by the holders of the 7.5% Series A Convertible
Preferred Stock ("Series A Preferred stock") and the 7.5%
Series B Convertible Preferred Stock ("Series B Preferred
Stock"), neither classes of which are registered with the
Commission. Each of the Series A Preferred Stock and the
Series B Preferred Stock ratified the Third Amendment by
unanimous consent dated July 28, 1999 and July 27, 1999,
respectively.
(c) The Amendment was filed with the Florida Department of State
on June 28, 1999 effective on July 5, 1999.
(2) Annual Meeting of the Shareholders
(a) The Annual Meeting of the Shareholders was held on Wednesday,
June 23, 1999 at the Wyndham Hotel, 4816 West Kennedy
Boulevard, Tampa, Florida.
(b) The only matter before the meeting was the election of
directors for which (i) proxies were solicited pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended, (ii) there was no solicitation in opposition to the
management's list of nominees as listed in the
14
<PAGE> 15
proxy statement and (iii) all of the directors were
unanimously elected. There were no abstentions or broker
non-votes.
ITEM 5. OTHER INFORMATION.
AMENDMENTS TO THE ARTICLES OF INCORPORATION AND
ISSUANCE OF SERIES C CONVERTIBLE PREFERRED STOCK
GENERAL
In June of 1999, the Company began discussions regarding the need to
raise additional capital to meet its expansion plans. These plans included the
Company's expected expansion into the State of Georgia and possibly the States
of North Carolina and South Carolina as indicated in the Company's 1999 Annual
Report to the Shareholders. The Company's first sales location Georgia opened in
Augusta, Georgia in late July. The Company's first sales location in Atlanta,
Georgia opened at North Dekalb Mall on August 5, 1999 a little over a month
later than predicted in the 1999 Annual Report. The Company expects to open
several more sales locations in Atlanta, Georgia during the remainder of August
and September.
In order to raise the capital needed for its expansion, the Company
decided to seek a line of credit from a commercial bank and issue shares of its
Series C Convertible Preferred Stock ("Series C Preferred Stock"), none of which
had then been issued. Under the Amended and Restated Articles of Incorporation
filed December 1, 1998, the Series C Convertible Preferred Stock had most all of
the same rights as the Series A Preferred Stock and the Series B Preferred
Stock, including, but not limited to, a 7.5% dividend, a five year mandatory
redemption right and the right to convert each share of Series C Preferred Stock
into 4,166 shares of the Company's common stock. The major difference is that
the Series C Preferred Stock was inferior to the Series A Preferred Stock and
the Series B Preferred Stock with respect to liquidation rights.
THIRD AMENDMENT TO AMENDED AND RESTATED ARTICLES OF INCORPORATION
Before issuing any Series C Preferred Stock, the Company first adopted
the Third Amendment which, as stated above, amended the Company's Articles of
Incorporation with respect to the Series C Preferred stock as follows: (i) to
amend the dividend rate from 7.5% per annum to that certain percentage per annum
as later determined by the resolution of the Board of Directors at the time of
issuance but not to exceed 7.5% and (ii) to eliminate the five year mandatory
redemption provision. The reason for eliminating the five year mandatory
redemption was to allow the proceeds of the Series C Preferred Stock to be
reflected as pure equity on the Company's balance sheet. The five year
redemption provision creates a debt-like quality which has required that the
proceeds of the Series A Preferred Stock and Series B Preferred Stock be
reported on the Company's balance sheet in its own category between debt and
equity rather than simply as equity. See the Company's Balance Sheet as of June
30, 1999 in Part I, Item 1 of this Form 10-QSB.
As reported above in Item 4 of this Form 10-QSB, the Company's
shareholders adopted the Third Amendment by the unanimous consent of the holders
of the Company's common stock (and the subsequent ratification by the holders of
Series A Preferred Stock and the Series B Preferred Stock) during the quarter
ended June 30, 1999.
See the Third Amendment To Amended And Restated Articles of
Incorporation attached hereto as Exhibit 3.2.
15
<PAGE> 16
FOURTH AMENDMENT TO AMENDED AND RESTATED ARTICLES OF INCORPORATION
Subsequent to the Third Amendment, the Company determined that it was
necessary to make further amendments to the Series C Preferred Stock as well as
make certain amendments to the Series A Preferred Stock and the Series B
Preferred Stock which were made in the Fourth Amendment To Amended And Restated
Articles of Incorporation ("Fourth Amendment") filed August 2, 1999 and became
effective August 11, 1999. The Fourth Amendment was adopted by the unanimous
consent of the holders of Series A Preferred Stock on July 28, 1999, the
unanimous consent of the holders of Series B Preferred Stock on the July 27,
1999 and the unanimous consent of the holders of common stock on July 27, 1999.
In connection with the consent by the holders of the Company's common stock, the
Company delivered to each holder of the Company's common stock a definitive
Information Statement filed with the Commission on July 22, 1999 after the
filing of a preliminary Information Statement on June 29, 1999, amended on July
12, 1999.
First, the Company decided that rather than adjust the per share
offering price of each share of Series C Preferred Stock, the Company wanted to
continue to sell the Series C Preferred Stock First at a per share price of
$25,000. Therefore, in order to price the conversion rate in accordance with the
market, the Fourth Amendment amended the conversion rights of the Series C
Preferred Stock from 4,166 shares of the Company's common stock to such number
of shares of the Company's common stock to be later determined by resolution of
the Board of Directors. Second, in order to more effectively market the Series C
Preferred Stock, the Fourth Amendment improved the liquidation rights with
respect to the Series C Preferred Stock such that each of the holders of Series
B Preferred Stock and Series C Preferred Stock have equal liquidation rights or
receive distributions in the event of a liquidation ratably without preference
rather than the Series B Preferred Stock having priority over the Series C
Preferred Stock.
The Fourth Amendment further amended certain of the voting rights of
the Series A Preferred Stock and the Series B Preferred Stock allowing
management more flexibility consistent with that of a typical public company.
First, the Fourth Amendment eliminated the preferential voting rights of the
Series A Preferred Stock and the Series B Preferred Stock with respect to the
right to vote on mergers and acquisitions. Second, the Fourth Amendment limited
the voting rights of the Series A Preferred Stock and Series B Preferred Stock
with respect to amendments to the Articles of Incorporation to only amendments
which affect the rights of such series of preferred stock rather than other
amendments. The Fourth Amendment did not affect the right of each series of
preferred stock to approve the issuance of any securities with equal or greater
liquidation preferences other than commercial debt in the ordinary course of
business or the right of the holders of the Series B Preferred Stock to elect
1/3 of the members of the Board of Directors.
See the Fourth Amendment To Amended And Restated Articles of
Incorporation attached hereto as Exhibit 3.3.
FIFTH AMENDMENT TO AMENDED AND RESTATED ARTICLES OF INCORPORATION
On July 29, 1999, the Board of Directors, in accordance with Florida
corporate law and the terms of the Third Amendment and the Fourth Amendment,
unanimously by consent set the dividend rate and the conversion rate of the
Series C Preferred Stock in the Fifth Amendment To Amended And Restated Articles
of Incorporation filed with the Florida Department of State on August 2, 1999 to
be effective August 11, 1999 ("Fifth Amendment"). The Fifth Amendment set the
dividend rate at 7% per annum and the made each share of Series C Preferred
Stock convertible into 2,500 shares of the Company's common stock.
See the Fifth Amendment To Amended And Restated Articles of
Incorporation attached hereto as Exhibit 3.4.
SECOND RESTATED ARTICLES OF INCORPORATION
The Company filed its Second Restated Articles of Incorporation with
the Florida Department of State on August 12, 1999 which incorporates all five
of the amendments to the Amended and Restated Articles of Incorporation into a
single document. See the Second Restated Articles of Incorporation attached
hereto as Exhibit 3.5.
16
<PAGE> 17
COMMERCIAL BANK LINE OF CREDIT AND SERIES C PREFERRED STOCK OFFERING
The Company is negotiating for a new line of credit from a commercial
bank for an amount equal to the amount of Series C Preferred Stock sold up to a
maximum of $1 million. This is addition to the Company's existing term loan in
the amount of $350,000 and line of credit in the amount of $500,000. The Company
commenced its offering of Series C Preferred Stock on August 2, 1999 with the
sale of $250,000 of its Series C Preferred Stock to certain persons affiliated
with Sterne, Agee & Leach, Inc., a principal shareholder of the Company. The
offering is being conducted on a best efforts basis. The Company expects to sell
a total of approximately $1 million of its Series C Preferred Stock commensurate
with the new line of credit. The offering is being made in a private placement
pursuant to the exemptions from registration contained in Rules 505 and 506 of
Regulation D promulgated under the Securities Act of 1933, as amended ("1933
Act"), Section 18 of the 1933 Act and applicable states securities laws. The
Company expects to complete the offering by the end of August 1999.
As stated above, each series of preferred stock has the right to
approve the sale of any securities with equal or greater liquidation preferences
other than commercial debt in the ordinary course of business. As further stated
above, upon the effectiveness of the Fourth Amendment, the Series C Preferred
Stock has the same liquidation rights as the Series B Preferred Stock.
Therefore, the Company had to obtain the approval of the Series B Preferred
Stock before it could issue any Series C Preferred Stock. By unanimous consent
dated July 27, 1999, the holders of the Series B Preferred Stock authorized the
Company to issue up to $2 million of Series C Preferred Stock; however, as
stated above, the Company only expects to issue approximately $1 million of
Series C Preferred Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(1) Exhibits:
3.2 Third Amendment To Amended And Restated Articles of
Incorporation
3.3 Fourth Amendment To Amended And Restated Articles of
Incorporation
3.4 Fifth Amendment To Amended And Restated Articles of
Incorporation
3.5 Second Restated Articles of Incorporation
(2) Reports on Form 8-K:
The Company filed a Form 8-K/A on June 2, 1999 amending its
Form 8-K filed on January 8, 1999 reporting the merger of the Company with Bobby
Allison Cellular Systems of Florida, Inc. effective December 31, 1998. The
amendment included the pro forma financial statements reflecting the merger
which had been omitted from the initial filing on January 8, 1999.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized
Date: June 23, 1999 BOBBY ALLISON WIRELESS CORPORATION
/s/ Robert L. McGinnis
--------------------------------------
Name: Robert L. McGinnis
Title: Chairman of the Board and Chief
Executive Officer
18
<PAGE> 1
Exhibit 3.2
THIRD AMENDMENT TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BOBBY ALLISON WIRELESS CORPORATION
WHEREAS, Bobby Allison Wireless Corporation (the "Corporation"), a
Florida corporation, filed with the Florida Department of State on December 1,
1998 its Amended and Restated Articles of Incorporation (the "Articles"); and
WHEREAS, as permitted by Florida Statute ss.607.1001, the Corporation
reserved the right to amend thE Articles pursuant to Article IX of the Articles;
and
WHEREAS, the Corporation amended the Articles pursuant to its First
Amendment to Amended And Restated Articles of Incorporation filed with the
Florida Department of State on December 28, 1998; and
WHEREAS, the Corporation amended the Articles pursuant to its Second
Amendment to Amended And Restated Articles of Incorporation filed with the
Florida Department of State on March 1, 1999; and
WHEREAS, the Corporation desires to further amend its Articles to amend
certain provisions relating to the 7.5% Series C Convertible Preferred Stock of
the Corporation; and
WHEREAS, the Corporation is owned by both common stockholders and
preferred stockholders, but the Corporation's preferred stockholders are not
entitled to vote with respect to the amendment hereinafter set forth; and
WHEREAS, the amendment hereinafter set forth has been adopted with the
consent of, and has been approved by, all of the Corporation's common
stockholders and all of the Corporation's Board of Directors, on June 23, 1999,
to be effective for all purposes as of July 5, 1999.
NOW, THEREFORE, the Articles are hereby amended as follows:
1. Article IV, Section 4.1(a) shall be amended by deleting any
references to 7.5% with respect to the Series C Convertible Preferred Stock of
the Corporation.
2. Article IV, Section 4.2(b) of the Articles shall be deleted in its
entirety and the following Article IV, Section 4.2(b) shall be inserted in lieu
thereof:
(b) DIVIDENDS. The holders of the Series A Preferred Stock and
Series B Preferred Stock shall be entitled to receive out of funds
legally available therefor, dividends at the annual rate of seven and
one-half percent (7.5%) based on the Series A Initial Purchase Price
and the Series B Initial Purchase Price, as applicable. The holders of
the Series C Preferred Stock shall be entitled to receive out of funds
legally available therefor, dividends at an annual rate based upon the
Series C Initial Purchase Price as set by the Board of Directors of the
Corporation in accordance with Florida Statute 607.0602 which provides
in pertinent part that, prior to the issuance of any Series C Preferred
Stock, the Board of Directors shall (i) determine the dividend rate and
(ii) deliver to the Department of State for filing articles of
amendment reflecting the so determined dividend rate. In no event,
however, may the dividend rate on the Series C Preferred Stock exceed
seven and one-half percent (7.5%) and the dividend rate as set shall be
the same for all shares of Series C Preferred Stock. Dividends on the
Series A Preferred Stock and the Series B Preferred Stock shall accrue
on a daily basis and shall be payable in cash semi-annually on January
1 and July 1 of each year for so long as any Series A Preferred Stock
or Series B Preferred Stock remains outstanding. Dividends on the
Series C Preferred Stock shall accrue on a daily basis and shall be
payable in cash semi-annually on April 1 and October 1 of each year for
so long as any Series C Preferred Stock remains
<PAGE> 2
outstanding. Dividends on the Preferred Stock, including, without limitations,
any accrued and unpaid dividends and liquidating distributions, shall be paid
before any dividends or other distributions shall be declared or paid or set
aside for payment on any Subordinate Stock; provided, further, that any such
dividends shall be paid on the Series A Preferred Stock and Series B Preferred
Stock before any dividends or other distributions shall be declared or paid or
set aside for payment on any Series C Preferred Stock.
3. Article IV, Section 4.2(e)(i) shall be deleted in its entirety, and
the following Article IV, Section 4.2 (e)(i) shall be inserted in lieu thereof:
(i) MANDATORY REDEMPTION. To the extent the Corporation shall
have funds legally available for such payment, the Corporation shall
redeem each share of Series A Preferred Stock and each share of Series
B Preferred Stock on each date which is five (5) years after the Series
A Initial Issue Date and the Series B Initial Issue Date (the
"Mandatory Redemption Date"). Payment shall be made in immediately
available funds payable to the holder on the Mandatory Redemption Date.
Any payment made after the Mandatory Redemption Date shall be at the
Delinquent Redemption Price.
IN WITNESS WHEREOF, the undersigned officers of the Corporation have
executed this Third Amendment to Amended and Restated Articles of Incorporation
on the date or dates set forth below, to be effective for all purposes as of
July 5, 1999.
BOBBY ALLISON WIRELESS CORPORATION
By: /s/ Robert L. McGinnis
----------------------------------------------
Robert L. McGinnis, as its Chief Executive
Officer and Chairman of the Board
Date: 6/23/99
By: /s/ James L. Ralph
----------------------------------------------
James L. Ralph, as its President and Secretary
Date: 6/23/99
<PAGE> 1
Exhibit 3.3
FOURTH AMENDMENT TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BOBBY ALLISON WIRELESS CORPORATION
WHEREAS, Bobby Allison Wireless Corporation (the "Corporation"), a
Florida corporation, filed with the Florida Department of State on December 1,
1998 its Amended and Restated Articles of Incorporation (the "Articles"); and
WHEREAS, as permitted by Florida Statute ss.607.1001, the Corporation
reserved the right to amend the Articles pursuant to Article IX of the Articles;
and
WHEREAS, the Corporation amended the Articles pursuant to its First
Amendment to Amended And Restated Articles of Incorporation filed with the
Florida Department of State on December 28, 1998; and
WHEREAS, the Corporation amended the Articles pursuant to its Second
Amendment to Amended And Restated Articles of Incorporation filed with the
Florida Department of State on March 1, 1999; and
WHEREAS, the Corporation amended the Articles pursuant to its Third
Amendment to Amended And Restated Articles of Incorporation filed with the
Florida Department of State effective July 5, 1999; and
WHEREAS, the Corporation desires to further amend its Articles to amend
certain provisions relating to the Series C Convertible Preferred Stock of the
Corporation; and
WHEREAS, the Corporation is owned by both common stockholders and
preferred stockholders and has been adopted by the unanimous consent of all of
the Corporation's common and preferred stockholders and all of the Corporation's
Board of Directors.
NOW, THEREFORE, the Articles are hereby amended as follows:
1. Article IV, Section 4.2(a) shall be further amended by eliminating
the definition of "REQUIRED CONSENT" in its entirety.
2. Article IV, Section 4.2(a) shall be further amended by eliminating
the definition of SERIES C INITIAL PURCHASE PRICE in its entirety and inserting
the following definition in lieu thereof:
"SERIES C INITIAL PURCHASE PRICE shall mean $25,000 per share
(adjusted for stock dividends, stock splits, reverse stock splits,
combinations and the like).
3. Article IV, Section 4.2(a) shall be amended by eliminating the
definition of SERIES B LIQUIDATION PREFERENCE and SERIES C LIQUIDATION
PREFERENCE in their entirety and inserting the following definition in lieu
thereof:
"SERIES B/C LIQUIDATION PREFERENCE" shall have the meaning set
forth in Section 4.2(c)(iv) hereof.
4. Article IV, Section 4.2(c)(iv) and (v) of the Articles shall be
deleted in their entirety and the following Article IV, Section 4.2(c)(iv) shall
be inserted in lieu thereof:
(iv) In the event of any such Disposition, after the full
amount of the Series A Liquidation Preference has been paid to the
holders of the Series A Preferred Stock and before any payment or
distribution shall be made to the holders of the Common Stock or any
other Subordinate Stock, the holders of Series B Preferred Stock and
Series C Preferred Stock shall be entitled to be paid ratably without
preference out of the Disposition Proceeds in cash, or, if the
1
<PAGE> 2
Corporation does not have sufficient cash on hand to pay such amounts, property
of the Corporation at its fair market value as determined by the Board of
Directors, an amount (the "SERIES B/C LIQUIDATION PREFERENCE") equal to the
Series B Initial Purchase Price and Series C Initial Purchase Price,
respectively, plus any accrued but unpaid dividends. If upon any such
Disposition, the remaining assets of the Corporation available for distribution
to its shareholders shall be insufficient to pay the holders of the Series B
Preferred Stock and Series C Preferred Stock the full amount of the Series B/C
Liquidation Preference, the holders of the Series B Preferred Stock and Series C
Preferred Stock shall share ratably without preference among themselves in any
distribution of the remaining assets and funds of the Corporation in proportion
to the respective amounts that would otherwise be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
5. Article IV, Section 4.2(d)(i)(1) of the Articles shall be deleted in
its entirety and the following Article IV, Section 4.2(d)(i)(1) shall be
inserted in lieu thereof:
(1) The holders of the Preferred Stock shall have the right,
at their option, to convert shares of Preferred Stock into shares of
Common Stock of the Corporation at any time and from time to time,
without the payment of additional consideration, into, with respect to
each share of Series A Preferred Stock and each share of Series B
Preferred Stock, four thousand one hundred sixty-six (4,166) shares of
fully paid and nonassessable shares of Common Stock and, with respect
to each share of Series C Preferred Stock, into such number of shares
of fully paid and nonassessable shares of Common Stock as set by the
Board of Directors of the Corporation in accordance with Florida
Statute ss.607.0602 which provides in pertinent part that prior to the
issuance of any Series C Preferred Stock, the Board of Directors shall
(i) determine such number of shares and (ii) deliver to the Department
of State for filing articles of amendment reflecting the so determined
number of shares for each share of Series C Preferred Stock (the
applicable conversion rate of each of the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock being
hereinafter referred to in each instance as the "CONVERSION RATE"). For
purposes of this Section 4.2, the Conversion Rate shall be subject to
adjustment as provided in Section 4.2(d)(ii)(2) and 4.2(d)(ii)(3)
below.
6. Article IV, Section 4.2(f) of the Articles shall be deleted in its
entirety and the following Article IV, Section 4.2(f) shall be inserted in lieu
thereof:
(f) VOTING RIGHTS. Except as otherwise set forth in this
Section 4.2(f) or as otherwise required by law, no share of Preferred
Stock issued and outstanding shall have the right to vote on any
matters presented to the holders of the Common Stock for vote.
(i) In addition to any vote or consent of
shareholders or directors required by law or these Amended and
Restated Articles of Incorporation, so long as any Preferred
Stock remains outstanding, the consent of the holders of such
Preferred Stock shall be necessary for (a) effecting,
validating or permitting any amendment, alteration or repeal
of any of the provisions of these Amended and Restated
Articles of Incorporation of the Corporation affecting the
rights of such series of Preferred Stock contained herein, or
(b) any agreement to do any of the foregoing.
(ii) The vote of the holders of the Series A
Preferred Stock shall be necessary for validating or
permitting any authorization, issuance, creation or increase
in the authorized shares of any class or series of equity
security of the Corporation ranking senior to or in parity
with the Series A Preferred Stock or the issuance of any debt
securities. Debt securities shall not mean commercial debt
incurred in the ordinary course of business.
2
<PAGE> 3
(iii)(1) The holders of Series B Preferred Stock,
voting as single class, shall have the right to elect
one-third (1/3) of the members of the Board of Directors of
the Corporation (the "SERIES B DIRECTORS") rounded up or down
to the nearest whole number. If any of the Series B Directors
shall cease to serve as a director before his or her term
shall expire, the holders of Series B Preferred Stock, then
outstanding may, at a special meeting of the holders or by the
written consent, elect a successor to hold office for the
unexpired term of the such Series B Director.
(2) The vote of the holders of Series B Preferred Stock shall
be necessary for validating or permitting any authorization,
issuance, creation or increase in the authorized shares of any
class or series of equity security of the Corporation ranking
senior to or in parity with the Series B Preferred Stock or
the issuance of any debt securities. Debt securities shall not
mean commercial debt incurred in the ordinary course of
business.
(iv) The vote of the holders of the Series C
Preferred Stock shall be necessary for validating or
permitting any authorization, issuance, creation or increase
in the authorized shares of any class or series of equity
security of the Corporation ranking senior to or in parity
with the Series C Preferred Stock or the issuance of any debt
securities. Debt securities shall not mean commercial debt
incurred in the ordinary course of business.
(v) The rights of the holders of the Preferred Stock
set forth in this Section 4.2(f) may be exercised by either
the vote at a special meeting of the holders of each series of
Preferred Stock at any annual meeting of stockholders held for
the purpose of electing directors or by the written consent of
the holders of such Preferred Stock, as applicable.
(vi) In the event of the failure of the Corporation
to pay any dividend as required by Section 4.2(b) or any
redemption as required by Section 4.2(e), then such failure
shall cause all of the shares of that series of Preferred
Stock to automatically, and without any action on the part of
any holder of such series of Preferred Stock, become fully
voting Preferred Stock (as if fully converted into Common
Stock) on all matters upon which the Common Stock may vote.
Such Preferred Stock will still have preferential voting
rights on the matters referred to in this Section 4.2(f).
IN WITNESS WHEREOF, the undersigned officers of the Corporation have
executed this Fourth Amendment to Amended and Restated Articles of Incorporation
on the date or dates set forth below, to be effective on August 11, 1999.
BOBBY ALLISON WIRELESS CORPORATION
By: /s/ Robert L. McGinnis
------------------------------------------
Robert L. McGinnis, as its Chairman of the
Board and Chief Executive Officer
Date: 7/29/99
By:/s/ James L. Ralph
------------------------------------------
James L. Ralph, as its President and
Secretary
Date: 7/29/99
3
<PAGE> 1
Exhibit 3.4
FIFTH AMENDMENT TO AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BOBBY ALLISON WIRELESS CORPORATION
WHEREAS, Bobby Allison Wireless Corporation (the "Corporation"), a
Florida corporation, filed with the Florida Department of State on December 1,
1998 its Amended and Restated Articles of Incorporation (the "Articles"); and
WHEREAS, as permitted by Florida Statute ss.607.1001, the Corporation
reserved the right to amend the Articles pursuant to Article IX of the Articles;
and
WHEREAS, the Corporation amended the Articles pursuant to its First
Amendment to Amended And Restated Articles of Incorporation filed with the
Florida Department of State on December 28, 1998; and
WHEREAS, the Corporation amended the Articles pursuant to its Second
Amendment to Amended And Restated Articles of Incorporation filed with the
Florida Department of State on March 1, 1999; and
WHEREAS, the Corporation amended the Articles pursuant to its Third
Amendment to Amended And Restated Articles of Incorporation filed with the
Florida Department of State effective July 5, 1999; and
WHEREAS, the Corporation amended the Articles pursuant to its Fourth
Amendment to Amended And Restated Articles of Incorporation filed with the
Florida Department of State effective August 11, 1999; and
WHEREAS, the Third Amendment to Amended And Restated Articles of
Incorporation and the Fourth Amendment to Amended And Restated Articles of
Incorporation provided, respectively, that the dividend rate and the conversion
rate of the Series C Convertible Preferred Stock of the Corporation should be
set by the Board of Directors of the Corporation in accordance with Florida
Statute ss.607.0602 which provides in pertinent part that prior to the issuance
of any Series C Convertible Preferred Stock, the Board of Directors shall (i)
determine such terms as authorized by the shareholders and (ii) deliver to the
Department of State for filing articles of amendment reflecting the so
determined terms; and
WHEREAS, the Board of Directors has by unanimous consent dated July 29,
1999 and in accordance with Florida Statute ss.607.0602 determined that the
dividend rate of the Series C Convertible Preferred Stock of the Corporation
shall be 7% and that each share of Series C Convertible Preferred Stock of the
Corporation shall be convertible into 2,500 shares of the common stock, par
value $.01 per share, of the Corporation; and
WHEREAS, in accordance with Florida Statute ss.607.0602, the Board of
Directors hereby causes the Corporation to further amend its Articles to amend
certain provisions relating to the Series C Convertible Preferred Stock of the
Corporation; and
WHEREAS, in accordance with Florida Statute ss.607.0602, no approval of
the shareholders is required to effect this amendment.
NOW, THEREFORE, the Articles are hereby amended as follows:
1. Article IV, Section 4.2(b) of the Articles shall be deleted in its entirety
and the following Article IV, Section 4.2(b) shall be inserted in lieu thereof:
(b) DIVIDENDS. The holders of the Series A Preferred Stock and
Series B Preferred Stock shall be entitled to receive out of funds
legally available therefor, dividends at the annual rate of seven and
one-half percent (7.5%) based on the Series A Initial Purchase Price
and the Series B Initial Purchase Price, as applicable. The holders of
the Series C Preferred Stock shall be entitled
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to receive out of funds legally available therefor, dividends at an annual rate
of seven percent (7%) based upon the Series C Initial Purchase Price. Dividends
on the Series A Preferred Stock and the Series B Preferred Stock shall accrue on
a daily basis and shall be payable in cash semi-annually on January 1 and July 1
of each year for so long as any Series A Preferred Stock or Series B Preferred
Stock remains outstanding. Dividends on the Series C Preferred Stock shall
accrue on a daily basis and shall be payable in cash semi-annually on April 1
and October 1 of each year for so long as any Series C Preferred Stock remains
outstanding. Dividends on the Preferred Stock, including, without limitations,
any accrued and unpaid dividends and liquidating distributions, shall be paid
before any dividends or other distributions shall be declared or paid or set
aside for payment on any Subordinate Stock; provided, further, that any such
dividends shall be paid on the Series A Preferred Stock and Series B Preferred
Stock before any dividends or other distributions shall be declared or paid or
set aside for payment on any Series C Preferred Stock.
2. Article IV, Section 4.2(d)(i)(1) of the Articles shall be deleted in its
entirety and the following Article IV, Section 4.2(d)(i)(1) shall be inserted in
lieu thereof:
(1) The holders of the Preferred Stock shall have the right,
at their option, to convert shares of Preferred Stock into shares of
Common Stock of the Corporation at any time and from time to time,
without the payment of additional consideration, into, with respect to
each share of Series A Preferred Stock and each share of Series B
Preferred Stock, four thousand one hundred sixty-six (4,166) shares of
fully paid and nonassessable shares of Common Stock and, with respect
to each share of Series C Preferred Stock, two thousand five hundred
(2,500) shares of fully paid and nonassessable shares of Common Stock
(the applicable conversion rate of each of the Series A Preferred
Stock, the Series B Preferred Stock and the Series C Preferred Stock
being hereinafter referred to in each instance as the "CONVERSION
RATE"). For purposes of this Section 4.2, the Conversion Rate shall be
subject to adjustment as provided in Section 4.2(d)(ii)(2) and
4.2(d)(ii)(3) below.
IN WITNESS WHEREOF, the undersigned officers of the Corporation have
executed this Fourth Amendment to Amended and Restated Articles of Incorporation
on the date or dates set forth below, to be effective on August 11, 1999.
BOBBY ALLISON WIRELESS CORPORATION
By: /s/ Robert L. McGinnis
------------------------------------------
Robert L. McGinnis, as its Chairman of the
Board and Chief Executive Officer
Date: 7/29/99
By:/s/ James L. Ralph
------------------------------------------
James L. Ralph, as its President and
Secretary
Date: 7/29/99
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Exhibit 3.5
SECOND RESTATED
ARTICLES OF INCORPORATION
OF
BOBBY ALLISON WIRELESS CORPORATION
It is hereby certified that:
FIRST: The present name of the corporation is BOBBY ALLISON
WIRELESS CORPORATION (hereinafter called the "Corporation"), which is the name
under which the Corporation was originally incorporated; and the date of filing
of the Corporation's original Articles of Incorporation with the Department of
State of the State of Florida was April 19, 1996. The Articles of Incorporation
were amended and restated on December 1, 1998 and subsequently amended on each
of December 28, 1998, March 1, 1999, July 5, 1999 and August 11, 1999.
SECOND: The provisions of the Articles of Incorporation of the
Corporation are hereby restated and integrated into the single instrument which
is hereinafter set forth, and which is entitled Second Restated Articles of
Incorporation of Bobby Allison Wireless Corporation, which instrument supersedes
the Corporation's original Articles of Incorporation and all amendments thereto.
THIRD: The restatement of the Articles of Incorporation have
been duly adopted in accordance with the provisions of Sections 607.1003,
607.1006 and 607.1007 of the Florida Act.
FOURTH: The Articles of Incorporation are hereby restated as
follows:
<PAGE> 2
SECOND RESTATED
ARTICLES OF INCORPORATION
OF
BOBBY ALLISON WIRELESS CORPORATION
ARTICLE I - NAME
The name of the corporation is Bobby Allison Wireless
Corporation (the "Corporation").
ARTICLE II - DURATION
The Corporation shall have a perpetual existence which
commenced on the date of filing of the Corporation's original Articles of
Incorporation.
ARTICLE III - PURPOSE
The purpose for which the Corporation is organized is to
engage in any lawful act or activity for which corporations may be organized
under the Florida Business Corporation Act.
ARTICLE IV - CAPITALIZATION
4.1 AUTHORIZED CAPITAL.
(a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 25,000,320 shares, consisting of
(a) 320 shares of Preferred Stock, par value $1.00 per share (the "PREFERRED
STOCK"), 20 shares of which are hereby designated as 7.5% Series A Convertible
Preferred Stock (the "SERIES A PREFERRED STOCK"), 50 shares of which are hereby
designated as 7.5% Series B Convertible Preferred Stock ( the "SERIES B
PREFERRED STOCK"), and 250 shares of which are hereby designated as Series C
Convertible Preferred Stock ( the "SERIES C PREFERRED STOCK") and (b) 25,000,000
shares of Common Stock, par value $.01 per share (the "COMMON STOCK").
(b) All capitalized terms used in this Article IV, to the extent not
otherwise defined, shall have the meanings ascribed to them in Section 4.2 of
this Article IV.
(c) The designations, powers, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations and
restrictions of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and the Common Stock are as set forth in this Article IV.
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4.2 SERIES A PREFERRED STOCK, SERIES B PREFERRED STOCK AND
SERIES C PREFERRED STOCK.
(a) CERTAIN DEFINITIONS. Unless the context otherwise requires, for
purposes of this Section 4.2(a), the terms defined in this Section 4.2(a) shall
have the meanings herein specified (with terms defined in the singular having
comparable meanings when used in the plural).
"CONVERSION VALUE" shall mean (i) in the case of Series A
Preferred Stock, the quotient of the Series A Initial Purchase Price
divided by the Series A Conversion Rate; (ii) in the case of Series B
Preferred Stock, the quotient of the Series B Initial Purchase Price
divided by the Series B Conversion Rate; (iii) in the case of Series C
Preferred Stock, the quotient of the Series C Initial Purchase Price
divided by the Series C Conversion Rate; and (iv) in the case of any
other series of preferred stock, the quotient of the initial purchase
price of such series divided by the conversion rate of such series of
preferred stock.
"DELINQUENT REDEMPTION PRICE" shall mean, with respect to each
share of Preferred Stock, the Series A Initial Purchase Price, Series B
Initial Purchase Price, or Series C Initial Purchase Price, as
applicable, plus an amount thereon accruing from the applicable
Mandatory Redemption Date at an annual rate equal to eight percent
(8%).
"DISPOSITION PROCEEDS" shall have the meaning set forth in
Section 4.2 (c)(iii).
"SERIES A INITIAL ISSUE DATE" shall mean, with respect to each
separate certificate issued, the date that such certificate
representing shares of Series A Preferred Stock is issued.
"SERIES B INITIAL ISSUE DATE" shall mean, with respect to each
separate certificate issued, the date that such certificate
representing shares of Series B Preferred Stock is issued.
"SERIES C INITIAL ISSUE DATE" shall mean, with respect to each
separate certificate issued, the date that such certificate
representing shares of Series C Preferred Stock is issued.
"SERIES A INITIAL PURCHASE PRICE" shall mean $25,000 per share
(adjusted for stock dividends, stock splits, reverse stock splits,
combinations and the like).
"SERIES B INITIAL PURCHASE PRICE" shall mean $25,000 per share
(adjusted for stock dividends, stock splits, reverse stock splits,
combinations and the like).
"SERIES C INITIAL PURCHASE PRICE" shall mean $25,000 per share
(adjusted for stock dividends, stock splits, reverse stock splits,
combinations and the like).
"SERIES A LIQUIDATION PREFERENCE" shall have the meaning set
forth in Section 4.2(c)(iii) hereof.
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"SERIES B/C LIQUIDATION PREFERENCE" shall have the meaning set
forth in Section 4.2(c)(iv) hereof.
"SERIES A REDEMPTION PRICE" shall mean, with respect to each
share of Series A Preferred Stock, the Series A Initial Purchase Price
plus any accumulated but unpaid dividends.
"SERIES B REDEMPTION PRICE" shall mean, with respect to each
share of Series B Preferred Stock, the Series B Initial Purchase Price
plus any accumulated but unpaid dividends.
"SERIES C REDEMPTION PRICE" shall mean, with respect to each
share of Series C Preferred Stock, the Series C Initial Purchase Price
plus any accumulated but unpaid dividends.
"SUBORDINATE STOCK" shall mean any class or series of capital
stock of the Corporation, however designated, which is junior in right
to the Series A Preferred Stock, the Series B Preferred Stock and
Series C Preferred Stock, including without limitation the Common Stock
and any preferred stock that is not entitled to receive (i) any
dividends unless all dividends required to have been paid or declared
and set apart for payment on the Series A Preferred Stock, the Series B
Preferred Stock and Series C Preferred Stock shall have been so paid or
declared and set apart for payment; or (ii) any assets upon
liquidation, dissolution or winding up of the affairs of the
Corporation until the Series A Preferred Stock, the Series B Preferred
Stock and Series C Preferred Stock shall have received the entire
amount to which such stock is entitled upon such liquidation,
dissolution or winding up in accordance with Section 4.2(c) below.
(b) DIVIDENDS. The holders of the Series A Preferred Stock and Series B
Preferred Stock shall be entitled to receive out of funds legally available
therefor, dividends at the annual rate of seven and one-half percent (7.5%)
based on the Series A Initial Purchase Price and the Series B Initial Purchase
Price, as applicable. The holders of the Series C Preferred Stock shall be
entitled to receive out of funds legally available therefor, dividends at an
annual rate of seven percent (7%) based upon the Series C Initial Purchase
Price. Dividends on the Series A Preferred Stock and the Series B Preferred
Stock shall accrue on a daily basis and shall be payable in cash semi-annually
on January 1 and July 1 of each year for so long as any Series A Preferred Stock
or Series B Preferred Stock remains outstanding. Dividends on the Series C
Preferred Stock shall accrue on a daily basis and shall be payable in cash
semi-annually on April 1 and October 1 of each year for so long as any Series C
Preferred Stock remains outstanding. Dividends on the Preferred Stock,
including, without limitations, any accrued and unpaid dividends and liquidating
distributions, shall be paid before any dividends or other distributions shall
be declared or paid or set aside for payment on any Subordinate Stock; provided,
further, that any such dividends shall be paid on the Series A Preferred Stock
and Series B Preferred Stock before any dividends or other distributions shall
be declared or paid or set aside for payment on any Series C Preferred Stock.
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(c) DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP.
(i) The Corporation shall deliver to each holder of
Preferred Stock notice of any "DISPOSITION" (as defined in
Section 4.2(c)(ii)) at least 90 days prior to such event,
which notice shall state all material facts and common terms
relating to such Disposition, including, without limitation,
(1) the nature of such Disposition, including, without
limitation, the amount, terms and conditions of payment to the
holders of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock and the holders of Common
Stock in connection with such Disposition; (2) the date on
which such Disposition shall occur; and (3) the procedures
that must be followed (and the latest date that such
procedures must be completed) in order for such holder to
effect a conversion of shares of Preferred Stock into shares
of Common Stock, if such a conversion is so desired.
(ii) The following events shall be considered a
Disposition under this Section 4.2:
(1) any consolidation or merger of the
Corporation with or into any other corporation or other entity
or person, or any other corporate reorganization, in which the
stockholders of the Corporation immediately prior to such
consolidation, merger or reorganization, own less than 50% of
the Corporation's voting power immediately after such
consolidation, merger or reorganization, or any transaction or
series of related transactions in which in excess of 50% of
the Corporation's voting power is transferred;
(2) a sale, lease or other disposition of
all or substantially all of the assets of the Corporation; or
(3) any voluntary or involuntary
liquidation, dissolution or other winding up of the affairs of
the Corporation.
(iii) In the event of any such Disposition, before
any payment or distribution shall be made to the holders of
the Series B Preferred Stock, the Series C Preferred Stock,
the Common Stock or any other Subordinate Stock, the holders
of Series A Preferred Stock shall be entitled to be paid out
of the proceeds of such Disposition received by the
Corporation (the "DISPOSITION PROCEEDS") in cash, or, if the
Corporation does not have sufficient cash on hand to pay such
amounts, property of the Corporation at its fair market value
as determined by the Board of Directors, an amount (the
"SERIES A LIQUIDATION PREFERENCE") equal to the Series A
Initial Purchase Price plus any accrued but unpaid dividends.
If upon any such Disposition, the remaining assets of the
Corporation available for distribution to its shareholders
shall be insufficient to pay the holders of the Series A
Preferred Stock the full amount of the Series A Liquidation
Preference, the holders of the Series A Preferred Stock
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shall share ratably among themselves in any distribution of
the remaining assets and funds of the Corporation in
proportion to the respective amounts that would otherwise be
payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to such
shares were paid in full.
(iv) In the event of any such Disposition, after the
full amount of the Series A Liquidation Preference has been
paid to the holders of the Series A Preferred Stock and before
any payment or distribution shall be made to the holders of
the Common Stock or any other Subordinate Stock, the holders
of Series B Preferred Stock and Series C Preferred Stock shall
be entitled to be paid ratably without preference out of the
Disposition Proceeds in cash, or, if the Corporation does not
have sufficient cash on hand to pay such amounts, property of
the Corporation at its fair market value as determined by the
Board of Directors, an amount (the "SERIES B/C LIQUIDATION
PREFERENCE") equal to the Series B Initial Purchase Price and
Series C Initial Purchase Price, respectively, plus any
accrued but unpaid dividends. If upon any such Disposition,
the remaining assets of the Corporation available for
distribution to its shareholders shall be insufficient to pay
the holders of the Series B Preferred Stock and Series C
Preferred Stock the full amount of the Series B/C Liquidation
Preference, the holders of the Series B Preferred Stock and
Series C Preferred Stock shall share ratably without
preference among themselves in any distribution of the
remaining assets and funds of the Corporation in proportion to
the respective amounts that would otherwise be payable in
respect of the shares held by them upon such distribution if
all amounts payable on or with respect to such shares were
paid in full.
(d) CONVERSION RIGHTS.
(i) CONVERSION AT THE OPTION OF THE HOLDER.
(1) The holders of the Preferred Stock shall
have the right, at their option, to convert shares of
Preferred Stock into shares of Common Stock of the Corporation
at any time and from time to time, without the payment of
additional consideration, into, with respect to each share of
Series A Preferred Stock and each share of Series B Preferred
Stock, four thousand one hundred sixty-six (4,166) shares of
fully paid and nonassessable shares of Common Stock and, with
respect to each share of Series C Preferred Stock, two
thousand five hundred (2,500) shares of fully paid and
nonassessable shares of Common Stock (the applicable
conversion rate of each of the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock
being hereinafter referred to in each instance as the
"CONVERSION RATE"). For purposes of this Section 4.2, the
Conversion Rate shall be subject to adjustment as provided in
Section 4.2(d)(ii)(2) and 4.2(d)(ii)(3) below.
(2) The Corporation shall not issue, in
connection with the conversion of shares of Preferred Stock,
certificates for fractional shares, but in lieu
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thereof shall pay to any person who would otherwise be
entitled thereto an amount of cash equal to such fraction
multiplied by the greater of (i) fair value of one share of
Common Stock, as determined by the Board of Directors, whose
determination shall be conclusive or (ii) the applicable
Conversion Value.
(3) In order for any holder of shares of
Preferred Stock to convert the same into Common Stock, such
holder shall surrender the certificate or certificate
therefor, duly endorsed, at the office of the Corporation and
shall give written notice to the Corporation that such holder
elects to convert all or part of the shares represented by the
certificate or certificates and shall state in writing therein
the name or names in which such holder desires the certificate
or certificates for Common Stock to be issued. The Corporation
shall, as soon as practicable thereafter, issue and deliver to
such holder of shares of Preferred Stock, or to such holder's
nominee or nominees, certificates for the full number of
shares of Common Stock to which such holder shall be entitled
as aforesaid. Shares of Preferred Stock shall be deemed to
have been converted as of the date of the surrender of such
shares for conversion as provided above, and the person or
persons entitled to receive Common Stock issuable upon such
conversion shall be treated for all purposes as the record
holder or holders of such Common Stock on such date.
(4) If a holder converts shares of Preferred
Stock, the Corporation shall pay any documentary stamp tax or
similar issue, excise or transfer tax due on the issue of
shares of Common Stock upon the conversion; PROVIDED, HOWEVER,
that the holder shall pay any such tax that is due because the
shares are issued in a name other than the holder's name
pursuant to Section 4.2(d)(i)(4).
(ii) CERTAIN MATTERS WITH RESPECT TO CONVERSION.
(1) The Corporation has reserved and shall
continue to reserve out of its authorized but unissued Common
Stock or its Common Stock held in treasury sufficient shares
of Common Stock to permit the complete and full conversion
into Common Stock of the outstanding Preferred Stock. All
shares of Common Stock that may be issued upon conversion of
Preferred Stock shall be duly authorized, validly issued,
fully paid and nonassessable.
(2) The Conversion Rate shall be subject to
adjustment as follows:
(a) In case the Corporation shall
(i) pay a dividend or make a distribution on its Common Stock
in shares of Common Stock of the Corporation, (ii) subdivide
or split its outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, the
Conversion Rate following the effective date of such event
shall be such number of shares (calculated to the nearest
whole share) equal to the product of the applicable Conversion
Rate in effect
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immediately prior to such adjustment multiplied by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock outstanding
immediately prior to such event. If the event results in the
Conversion Rate including fractional shares, then such
fractional share shall be paid in cash at the time of
conversion in accordance with Section 4.2(d)(i)(2).
(b) In the event the Corporation at
any time or from time to time shall make or issue, or fix a
record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable
in securities of the Corporation other than shares of Common
Stock, then and in each such event, provision shall be made so
that the holders of Preferred Stock shall receive upon
conversion thereof in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of
the Corporation that they each would have received had the
Preferred Stock been converted into Common Stock on the date
of such event and had they each thereafter, during the period
from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid
during such period, giving application to all adjustments
called for during such period under this Section 4.2 with
respect to the rights of the holders of Preferred Stock;
PROVIDED, HOWEVER, that no such adjustment shall be made if
the holders of Preferred Stock simultaneously receive a
dividend or other distribution of such securities as they
would have received if all outstanding shares of Preferred
Stock had been converted into Common Stock on the date of such
event.
(c) If Common Stock issuable upon
the conversion of Preferred Stock shall be changed into the
same or a different number of shares of any class or classes
of stock, whether by capital reorganization, reclassification,
or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a
reorganization, merger, consolidation, or sale of assets
provided for below), then and in each such event the holder of
each such share of Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of
shares of stock and other securities and property receivable
upon such reorganization, reclassification, or other change,
by holders of the number of shares of Common Stock into which
such share of Preferred Stock might have been converted
immediately prior to such reorganization, reclassification, or
change, all subject to further adjustment as provided herein.
(3) Adjustments to the Conversion Rate also
shall be made for certain dilutive issuances of additional
shares of capital stock by the Corporation as set forth in
this Section 4.2(d)(ii)(3).
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(a) SPECIAL DEFINITIONS. For
purposes of this Section 4.2(d)(ii)(3), the following
definitions shall apply:
(i) "OPTION" shall mean
rights, options, warrants or other securities
convertible into or exchangeable or exercisable for
shares of Common Stock or Preferred Stock.
(ii) "ADDITIONAL SHARES OF
STOCK" shall mean (i) all shares of Common Stock
issued by the Corporation after any Series A Initial
Issue Date, any Series B Initial Issue Date or any
Series C Initial Issue Date for which the
consideration per share (determined pursuant to
Section 4.2(d)(ii)(3)(c) below) is less than the
applicable Conversion Value in effect on the date of,
and immediately prior to, the issuance of such
Additional Shares of Stock, other than shares of
Common Stock issued or issuable:
(A) upon exercise
of any Options outstanding on the date of filing of this
Amended and Restated Articles of Incorporation with the
Florida Secretary of State ("Filing Date"); PROVIDED, HOWEVER,
that if the Corporation, after the Filing Date, amends the
exercise price or the number of shares covered by any Options
outstanding on the Filing Date, then such Options, as so
amended, shall be deemed to have been issued after the Filing
Date;
(B) by reason of a
dividend, stock split, split-up or other distribution on
shares of Common Stock that is covered by Section
4.2(d)(ii)(2)(a) above;
(C) upon exercise
of Options granted to employees or directors of, or
consultants to, the Corporation pursuant to any stock option
plan approved by the Board of Directors of the Corporation and
that, in the aggregate, are not exercisable for more than ten
percent (10%) of the outstanding Common Stock at such time; or
(b) ADJUSTMENT OF CONVERSION RATE
UPON ISSUANCE OF ADDITIONAL SHARES OF STOCK. In the event the
Corporation shall at any time issue one or more Additional
Shares of Stock, then and in such event, the Conversion Rate,
shall be increased, concurrently with such issuance, to such
number of shares of Common Stock (calculated to the nearest
whole share) determined by multiplying the Conversion Rate
then in effect by a fraction:
(i) the denominator of
which shall be (1) the number of shares of Common
Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock that
the aggregate consideration received or to be
received by the Corporation for the total
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number of Additional Shares of Stock so issued would
purchase at the applicable Conversion Value; and
(ii) the numerator of which
shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the
number of such Additional Shares of Stock so issued.
(c) DETERMINATION OF CONSIDERATION.
For purposes of this Section 4.2(d)(ii)(3)(c), the
consideration per share received by the Corporation
for the issue of any Additional Shares of Stock shall
be computed as follows:
(i) in case of the issuance
of shares of Common Stock for cash, the consideration
shall be the amount of such cash, provided that in no
case shall any deduction be made for any commission,
discounts or other expenses incurred by the
Corporation for any underwriting of the issue or
otherwise in connection therewith;
(ii) in the case of the
issuance of shares of Common Stock for a
consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to
be the fair market value thereof as determined by the
Board of Directors in its reasonable judgment
exercised in good faith (irrespective of the
accounting treatment thereof); and
(iii) in the case of the
issuance of Options, the aggregate consideration
received therefor shall be deemed to be the
consideration received by the Corporation for the
issuance of such Options plus the additional minimum
consideration, if any, to be received by the
Corporation upon the conversion or exchange or
exercise thereof (the consideration in each case to
be determined in the same manner as provided in
clauses (i) and (ii) of this Section
4.2(d)(ii)(3)(c)).
(4) Whenever the number of shares of Common
Stock into which each share of Preferred Stock is convertible
is adjusted, the Corporation shall promptly mail to holders of
the Preferred Stock, first class, postage prepaid, a notice of
the adjustment. The Corporation shall file with the transfer
agent, if any, for the Preferred Stock a certificate from the
Corporation's independent public accountants briefly stating
the facts requiring the adjustment and the manner of computing
it. Subject to Section 4.2(d)(ii)(10) below, the certificate
shall be conclusive evidence that the adjustment is correct.
(5) The adjustments herein provided for
shall be made successively when the event giving rise to such
adjustment occurs and shall become effective
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immediately following the record date for any event for which
a record date is designated and on the effective date for any
other event.
(6) Shares of Preferred Stock that have been
converted as provided herein shall revert to the status of
authorized but unissued shares of Preferred Stock.
(7) In any case in which this Section
4.2(d)(ii) shall require that an adjustment as a result of any
event become effective from and after a record date, the
Corporation may elect to defer until after the occurrence of
such event (a) the issuance to the holder of any shares of
Preferred Stock converted after such record date and before
the occurrence of such event of the additional shares of
Common Stock issuable upon such conversion over and above the
shares issuable immediately prior to adjustment; and (b) the
delivery of a check for any remaining fractional shares as
provided in Section 4.2(d)(i)(3) above.
(8) Except as provided in the immediately
following sentence, any determination that the Corporation or
its Board of Directors must make pursuant to this Section
4.2(d)(ii) shall be conclusive. Whenever the Corporation or
its Board of Directors shall be required to make a
determination under this Section 4.2(d)(ii), such
determination shall be made in good faith and may be
challenged in good faith by the holders of a majority of each
affected series of Preferred Stock, as applicable, and any
dispute shall be resolved promptly (and in no event later than
90 days after any challenge), at the Corporation's expense, by
an independent public accounting firm selected by the
Corporation and acceptable to such holders of such Preferred
Stock. Any such determination shall be deemed approved if the
requisite holders have not notified the Corporation of any
challenge within 30 days after receiving notice (including a
statement in reasonable detail of the bases therefor) of such
determination.
(e) REDEMPTION BY THE CORPORATION.
(i) MANDATORY REDEMPTION. To the extent the
Corporation shall have funds legally available for such
payment, the Corporation shall redeem each share of Series A
Preferred Stock and each share of Series B Preferred Stock on
each date which is five (5) years after the Series A Initial
Issue Date and the Series B Initial Issue Date (the "Mandatory
Redemption Date"). Payment shall be made in immediately
available funds payable to the holder on the Mandatory
Redemption Date. Any payment made after the Mandatory
Redemption Date shall be at the Delinquent Redemption Price.
(ii) VOLUNTARY REDEMPTION BY LOT. To the extent the
Corporation shall have funds legally available for such
payment, the Board of Directors, may, in its sole
11
<PAGE> 12
and absolute discretion, at any time and from time to time,
cause the Corporation to redeem BY LOT, or such other
reasonable method as the Board of Directors shall direct, any
one or more series or portion of any series of Preferred
Stock.
(iii) EFFECT OF REDEMPTION. Shares of Preferred Stock
that have been issued and converted or reacquired in any
manner, including as a result of redemption, shall revert to
the status of authorized and unissued shares of Preferred
Stock, and may be redesignated and reissued as part of any
series of Preferred Stock of the Corporation.
(f) VOTING RIGHTS. Except as otherwise set forth in this Section 4.2(f)
or as otherwise required by law, no share of Preferred Stock issued and
outstanding shall have the right to vote on any matters presented to the holders
of the Common Stock for vote.
(i) In addition to any vote or consent of
shareholders or directors required by law or these Amended and
Restated Articles of Incorporation, so long as any Preferred
Stock remains outstanding, the consent of the holders of such
Preferred Stock shall be necessary for (a) effecting,
validating or permitting any amendment, alteration or repeal
of any of the provisions of these Amended and Restated
Articles of Incorporation of the Corporation affecting the
rights of such series of Preferred Stock contained herein, or
(b) any agreement to do any of the foregoing.
(ii) The vote of the holders of the Series A
Preferred Stock shall be necessary for validating or
permitting any authorization, issuance, creation or increase
in the authorized shares of any class or series of equity
security of the Corporation ranking senior to or in parity
with the Series A Preferred Stock or the issuance of any debt
securities. Debt securities shall not mean commercial debt
incurred in the ordinary course of business.
(iii)(1) The holders of Series B Preferred Stock,
voting as single class, shall have the right to elect
one-third (1/3) of the members of the Board of Directors of
the Corporation (the "SERIES B DIRECTORS") rounded up or down
to the nearest whole number. If any of the Series B Directors
shall cease to serve as a director before his or her term
shall expire, the holders of Series B Preferred Stock, then
outstanding may, at a special meeting of the holders or by the
written consent, elect a successor to hold office for the
unexpired term of the such Series B Director.
(2) The vote of the holders of Series B Preferred
Stock shall be necessary for validating or permitting any
authorization, issuance, creation or increase in the
authorized shares of any class or series of equity security of
the Corporation ranking senior to or in parity with the Series
B Preferred Stock or the issuance of any debt securities. Debt
securities shall not mean commercial debt incurred in the
ordinary course of business.
12
<PAGE> 13
(iv) The vote of the holders of the Series C
Preferred Stock shall be necessary for validating or
permitting any authorization, issuance, creation or increase
in the authorized shares of any class or series of equity
security of the Corporation ranking senior to or in parity
with the Series C Preferred Stock or the issuance of any debt
securities. Debt securities shall not mean commercial debt
incurred in the ordinary course of business.
(v) The rights of the holders of the Preferred Stock
set forth in this Section 4.2(f) may be exercised by either
the vote at a special meeting of the holders of each series of
Preferred Stock at any annual meeting of stockholders held for
the purpose of electing directors or by the written consent of
the holders of such Preferred Stock, as applicable.
(vi) In the event of the failure of the Corporation
to pay any dividend as required by Section 4.2(b) or any
redemption as required by Section 4.2(e), then such failure
shall cause all of the shares of that series of Preferred
Stock to automatically, and without any action on the part of
any holder of such series of Preferred Stock, become fully
voting Preferred Stock (as if fully converted into Common
Stock) on all matters upon which the Common Stock may vote.
Such Preferred Stock will still have preferential voting
rights on the matters referred to in this Section 4.2(f).
(g) MISCELLANEOUS.
(i) HEADINGS OF SECTIONS. The headings of the various
subdivisions hereof are for convenience of reference only and
shall not affect the interpretation of any of the provisions
hereof.
(ii) SEVERABILITY OF PROVISIONS. If any voting
powers, preferences and relative, participating, optional and
other special rights of the Preferred Stock and
qualifications, limitations and restrictions thereof set forth
herein (as may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule
of law or public policy, all other voting powers, preferences
and relative, participating, optional and other special rights
of Preferred Stock and qualifications, limitations and
restrictions thereof set forth herein (as so amended) that can
be given effect without the invalid, unlawful or unenforceable
voting powers, preferences and relative, participating,
optional and other special rights of Preferred Stock and
qualifications, limitations and restrictions thereof shall,
nevertheless, remain in full force and effect, and no voting
powers, preferences and relative, participating, optional or
other special rights of Preferred Stock and qualifications,
limitations and restrictions thereof herein set forth shall be
deemed dependent upon any other such voting powers,
preferences and relative, participating, optional or other
special rights of Preferred Stock and qualifications,
limitations and restrictions thereof unless so expressed
herein.
13
<PAGE> 14
4.2 COMMON STOCK.
(a) Each holder of shares of Common Stock shall be entitled to
one vote for each share of Common Stock held on all matters as to which holders
of Common Stock shall be entitled to vote.
(b) Any member of the Board of Directors of the Corporation
selected by the holders of a majority of all classes of stock of the Corporation
entitled to vote thereon may be removed only by the holders of a majority of
such classes of stock of the Corporation voting as a single class. In the event
of a vacancy on the Board of Directors of any of the directors elected by the
holders of a majority of all classes of stock of the Corporation entitled to
vote thereon, the holders of a majority of all classes of stock of the
Corporation voting as a single class will have the immediate right to designate
a successor to fill that vacancy.
(c) Each share of Common Stock issued and outstanding shall be
identical in all respects, one with the other, and no dividends shall be paid on
any shares of Common Stock unless the same dividend is paid on all shares of
Common Stock outstanding at the time of such payment. Except for and subject to
those rights expressly granted to the holders of the Preferred Stock, or except
as may be provided by the laws of the State of Florida, the holders of Common
Stock shall have exclusively all other rights of stockholders including, but not
by way of limitation, (1) the right to receive dividends, when and as declared
by the Board of Directors of the Corporation out of assets lawfully available
therefor, and (2) in the event of any distribution of assets upon liquidation,
dissolution or winding-up of the Corporation or otherwise, the right to receive
pro rata all the assets and funds of the Corporation remaining after the payment
to the holders of the Preferred Stock of the specific amounts which they are
entitled to receive upon such liquidation, dissolution or winding-up of the
Corporation as herein provided.
ARTICLE V - REGISTERED OFFICE AND AGENT AND CORPORATE ADDRESS
The address of the Corporation's registered office in the
State of Florida is 315 South Hyde Park Avenue, Tampa, Florida 33606, and the
name of the Corporation's registered agent at such address is Christopher H.
Norman, Esq. The principal place of business of the Corporation is 2055 Lake
Avenue, S.E., Suite A, Largo, Florida 33771.
ARTICLE VI - BOARD OF DIRECTORS
The affairs of the Corporation shall be managed by a Board of
Directors. The number of directors may be increased from time to time in the
manner provided by the By-Laws, but shall never be less than one nor more than
nine. The election of directors shall be done in accordance with Section
4.2(f)(iii)(1) and Section 4.3 of these Amended and Restated Articles of
Incorporation.
14
<PAGE> 15
ARTICLE VII - BY-LAWS
The By-Laws of the Corporation may be adopted, altered,
amended or repealed by either the stockholders or directors as permitted by the
By-Laws.
ARTICLE VIII - INDEMNIFICATION
The Corporation shall indemnify and hold harmless any
director, officer, employee or agent of the Corporation from and against any and
all expenses and liabilities that may be imposed upon or incurred by him or her
in connection with, or as a result of, any proceeding in which he or she may
become involved, as a party or otherwise, by reason of the fact that he or she
is or was such a director, officer, employee or agent of the Corporation,
whether or not he or she continues to be such at the time such expenses and
liabilities shall have been imposed or incurred, to the extent permitted by the
laws of the State of Florida, as they may be amended from time to time.
ARTICLE IX - AMENDMENT
The Corporation reserves the right to amend or repeal any
provisions contained in these Amended and Restated Articles of Incorporation, in
accordance with the provisions of the General Corporation Act of the State of
Florida.
ARTICLE X - BOOKS, OFFICES AND ELECTIONS
Except as otherwise required by the laws of the State of
Florida, the stockholders and directors shall have the power to hold their
meetings and to keep the books, documents and papers of the corporation outside
of the State of Florida, and the Corporation shall have the power to have one or
more offices within or without the State of Florida, at such places as may be
from time to time designated by the By-laws or by resolution of the stockholders
or directors. Elections of directors need not be by ballot unless the By-laws of
the Corporation shall so provide.
ARTICLE XI - BREACH OF DUTY
Except as otherwise provided by the laws of the State of
Florida, as they may be amended from time to time, a director of the Corporation
shall not have personal liability to the Corporation or to any of the
Corporation's stockholders for monetary damages for breach of fiduciary duty as
a director of the Corporation.
15
<PAGE> 16
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of August, 1999.
/s/ Robert L. McGinnis
-----------------------------
Robert L. McGinnis
Chairman of the Board
Attest:
/s/ James L. Ralph
- -----------------------------
James L. Ralph, Secretary
16
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
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STATEMENTS.
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
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<PP&E> 1,633,647
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<CURRENT-LIABILITIES> 1,556,134
<BONDS> 0
1,625,000
0
<COMMON> 4,800
<OTHER-SE> (696,635)
<TOTAL-LIABILITY-AND-EQUITY> 3,259,981
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<TOTAL-REVENUES> 4,914,411
<CGS> 1,740,498
<TOTAL-COSTS> 1,740,498
<OTHER-EXPENSES> 2,844,106
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