As filed with the Securities and Exchange Commission on October 8, 1997
Registration No. 333-32963
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
FORM SB-2
REGISTRATION STATEMENT
under the
SECURITIES ACT OF 1933
WESTOWER CORPORATION
(Name of small business issuer in its charter)
Washington 1623 91-1825860
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization)Classification Code Number) Identification Number)
Westower Corporation
7001 NE 40th Avenue
Vancouver, Washington 98661
(360) 750-9355
(Address and telephone number of principal
executive offices and principal place of business)
Calvin J. Payne
Westower Corporation
7001 NE 40th Avenue
Vancouver, Washington 98661
(360) 750-9355
(Name, address and telephone number of agent for service)
Copies of all communications to:
Thomas W. Hughes, Esq.
Maurice J. Bates, Esq. Lisa N. Tyson, Esq.
Maurice J. Bates L.L.C. Winstead Sechrest & Minick P.C.
8214 Westchester Drive, Suite 500 1201 Elm Street, Suite 5400
Dallas, Texas 75225 Dallas, Texas 75201
(214) 692-3566 (214) 745-5201
214) 987-2091 FAX (214) 745-5390 FAX
Approximate date of proposed sale to public: As soon as practicable
after the effective date of the Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
<PAGE>
Westower Corporation
Showing Locations in Prospectus of Required Information
Form SB-2 Item and Caption Location in Prospectus
1. Front of Registration Statement
and Outside Front Cover of
Prospectus Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus Inside Front and Outside Back Cover
Pages;
3. Summary Information and
Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page; Underwriting
6. Dilution Dilution
7. Selling Security Holders Principal and Selling Shareholders
8. Plan of Distribution Outside Front Cover Page; Underwriting
9. Legal Proceedings Business
10. Directors, Executive Officers,
Promoters and Control Persons Management
11. Security Ownership of Certain
BeneficialOwners and Management Principal and Selling Shareholders
12. Description of Securities Description of Securities
13. Interest of Named Experts
and Counsel Legal Matters; Experts
14. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities Underwriting
15. Organization Within Last 5 Years *
16. Description of Business Business
17. Management's Discussion and
Analysis or Plan of Operation Management's Discussion and Analysis
or Plan of Operation
18. Description of Property Business
19. Certain Relationships and
Related Transactions Certain Relationships and Related
Transactions
20. Market for Common Equity
and Related Stockholder Matters Risk Factors; Discription of
Securities; Shares Eligible for Future
Sale
21. Executive Compensation Management
22. Financial Statements Financial Statements
23. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure *
24. Imdemnification of Directors
and Officers Management
- ------------
* Not Applicable
<PAGE>
SUBJECT TO COMPLETION, DATED October 8, 1997
PROSPECTUS
Westower Corporation
1,000,000 Units
Consisting of 1,000,000 Shares of Common Stock and
1,000,000 Redeemable Common Stock Purchase Warrants
Westower Corporation (the "Company") is hereby offering 1,000,000
Units, each unit (the "Unit") consisting of one share (the "Shares") of Common
Stock, $0.01 par value (the " Common Stock"), and one Redeemable Common Stock
Purchase Warrant (the "Warrants"). The Units, the Shares and the Warrants
offered hereby are referred to collectively as the "Securities." The Shares and
Warrants included in the Units may not be separately traded until ,1998 [six
months after the date of this Prospectus], unless earlier separated upon ten
days' prior written notice from Tejas Securities Group, Inc. (the
"Representative") to the Company. Each Warrant entitles the holder thereof to
purchase one share of Common Stock at an exercise price of $9.00 per share,
commencing at any time after the Common Stock and Warrants become separately
tradable and until ,2002 [five years from the date of this Prospectus].
Commencing on [six months from the date of this Prospectus], the Warrants are
subject to redemption by the Company at $0.05 per Warrant at any time on thirty
days prior written notice, provided that the closing price quotation for the
Common Stock has equalled or exceeded $15.00 for ten consecutive trading days.
The Warrant exercise price is subject to adjustment under certain circumstances.
See "Description of Securities."
Prior to this offering, there has been no public market for the Securities,
and there can be no assurance that an active market will develop. It is
currently anticipated that the initial public offering price of the Units will
be $7.50 per Unit. See "Underwriting" for information relating to the factors
considered in determining the initial public offering price. The Company has
applied to list the Units, Common Stock and Warrants on the American Stock
Exchange under the symbols "WTWU" ,"WTW" and "WTWW", respectively. The Company
has received a favorable preliminary listing eligibility opinion from the
American Stock Exchange and is in the process of filing a listing application
for approval.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE SECTION ENTITLED "RISK
FACTORS" BEGINNING ON PAGE 6 HEREOF CONCERNING THE COMPANY AND THIS OFFERING.
PROSPECTIVE INVESTORS SHOULD ALSO CONSIDER THE FACT THAT THEIR INVESTMENT WILL
RESULT IN IMMEDIATE SUBSTANTIAL DILUTION. SEE "DILUTION." THESE SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
Per Unit..... $7.50 $0.75 $6.75
Total (2)(3)....... $7,500,000 $750,000 $6,750,000
(1) In addition, the Company has agreed to pay the Representative, a 2.00%
nonaccountable expense allowance and to sell to the Representative warrants
exerciseable for four years commencing one year from the date of this
Prospectus to purchase 100,000 Units at 120% of the public offering price
(the "Underwriters' Warrants"). The Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933 , as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting estimated expenses of $500,000 payable by the Company,
including the Representative's 2.00% nonaccountable expense allowance.
(3) Certain shareholders (the "Selling Shareholders") have granted to the
Underwriters an option, exercisable within 45 days from the date of this
Prospectus, to purchase up to 150,000 Units, on the same terms set forth
above, solely for the purpose of covering over-allotments, if any. The
Shares included in the Units which are subject to the over-allotment option
will be purchased from the Selling Shareholders, and the Company will not
receive any proceeds from the sale of such Shares. The Warrants included in
the Units which are subject to the over-allotment option will be issued by
the Company. If the over-allotment option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions, Proceeds to
Company and Proceeds to Selling Shareholders will be $8,625,000, $862,500,
$6,750,000 and $1,012,500. See "Principal and Selling Shareholders" and
"Underwriting."
<PAGE>
The Securities are being offered, subject to prior sale, when, as and
if delivered to and accepted by the Underwriters and subject to approval of
certain legal matters by counsel and subject to certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify the offering
without notice and to reject any order, in whole or in part. It is expected that
delivery of Common Stock and Warrant certificates will be made against payment
therefor at the offices of the Representative in Austin, Texas on or about ,
1997.
Tejas Securities Group, Inc.
The date of this Prospectus is , 1997.
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation an offer to buy nor shall there be any sale of these securities in
any state in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
<PAGE>
ADDITIONAL INFORMATION
The Company has not previously been subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2, (including any amendments
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act") with respect to the Securities offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Securities, reference is made to
the Registration Statement and the exhibits and schedules thereto. Statements
made in this Prospectus regarding the contents of any contract or document filed
as an exhibit to the Registration Statement are not necessarily complete and, in
each instance, reference is hereby made to the copy of such contract or document
so filed. Each such statement is qualified in its entirety by such reference.
The Registration Statement and the exhibits and the schedules thereto filed with
the Commission may be inspected, without charge, at the office of the Commission
at Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549. Copies of such
materials may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, NW, Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Commission at http://www.sec.gov.
As a result of this offering, the Company will become subject to the
reporting requirements of the Exchange Act, and in accordance therewith will
file periodic reports, proxy statements and other information with the
Commission. The Company will furnish its shareholders with annual reports
containing audited consolidated financial statements certified by independent
public accountants following the end of each fiscal year, proxy statements and
quarterly reports containing unaudited consolidated financial information for
the first three quarters of each fiscal year following the end of such fiscal
quarter.
The Company has applied to list the Securities on the American Stock
Exchange. If the Company's application is accepted, then reports, proxy
statements and other information concerning the Company will be available for
inspection at the principal office of the American Stock Exchange at 86 Trinity
Place, New York, New York, 10006. There is no assurance the Securities will be
accepted for listing.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements (including notes thereto)
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information herein is presented on the basis that the over-allotment option and
the Underwriters' Warrants are not exercised. The Securities offered hereby
involve a high degree of risk. Investors should carefully consider the
information set forth under "Risk Factors."
The Company
Westower Corporation ("Westower" or the "Company") was incorporated in
Washington state in June 1997 for the purpose of acquiring Westower Holdings
Ltd., a Wyoming corporation ("Holdings") which owns all of the outstanding stock
of Westower Communications Ltd., a British Columbia Canada corporation and
Westower Communications Inc., a Washington corporation. Westower and its
wholly-owned subsidiaries are collectively referred to herein as the "Company."
The Company designs, builds and maintains wireless communications transmitting
and receiving facilities for providers of wireless communication services,
including U. S. Cellular, Western Wireless, Cantel, AT&T, Sprint PCS and
Microcell. These facilities are presently constructed for use with microwave,
cellular telephone, pager, and specialized mobile radio technologies. Although
bids for the installation or modification of communications facilities are
normally requested on a fixed price basis, the Company will, if requested,
provide such services on a time and materials basis. A contract for the
installation of cellular transmitting and receiving facilities may require the
Company to develop the location, including roads and grading, to install the
tower antennas and lines, assemble electronic components and test the
installation's equipment. In such instances, the Company subcontracts road or
concrete work required under the contract, performing the balance of the work
with its own employees. The service provider supplies most of the material used
in the installation process, and the Company's major cost is the cost of its
employees and subcontracted labor. Demand for the Company's services often
exceeds its ability to supply those services, and in such situations the Company
subcontracts with smaller enterprises to provide work normally performed by the
Company. Subcontracting permits the Company to evaluate the subcontractor's
quality and review the subcontractor as a potential candidate for acquisition.
The Company commenced business in 1990 as Westower Communications Ltd. and
emphasized design, construction, maintenance and modification of microwave and
cellular towers for telephone, broadcast and utility companies. The Company
continues these activities, but with the advent of cellular telephones and
personal communication systems ("PCS"), now designs and installs rooftop and
other transmission and receiving facilities. A portion of the Company's revenues
is still derived from installation of microwave facilities and the installation
of related electronic equipment. However, the rapid growth of the use of
cellular telephones has resulted in the installation of cellular transmitting
and receiving facilities being an increasingly significant component of
revenues. The Company is also a partner in a limited partnership which owns
communication towers which are leased to a telephone company.
The Company's strategy will be to capitalize on the demand for wireless
infrastructure building and implementation services by continuing to expand its
workforce and geographic presence in the marketplace. To accomplish these
objectives, the Company intends to (i) continue its geographic expansion by
opening new regional offices when demand for the Company's services or
acquisition opportunities make such expansion feasible, (ii) continue to enhance
its indigenous new employee hiring, training and retention programs as a method
for attracting, training and retaining new, highly skilled workers, and (iii)
continue to seek to acquire other companies engaged in the wireless
infrastructure building and implementation services and wireless infrastructure
electrical design and engineering services businesses that have good reputations
for quality service and highly skilled workers.
The Company's principal operations are in Washington, Oregon, Idaho,
British Columbia, Alberta, and Canada's Northern Territories. The Company's
headquarters are located at 7001 NE 40 Avenue, Vancouver, Washington 98661. The
telephone number at that location is (360) 750-9355, and its fax number is (360)
750-9354.
<PAGE>
The Offering
Securities offered hereby................... 1,000,000 Units, each Unit
consisting of one share of Common Stock and one Warrant, each Warrant entitling
the holder to purchase one share of Common Stock at a price of $ 9.00 per share
until _______ , 2002 [5 years after the date of this Prospectus]. See
"Description of Securities."
Description of the Warrants The Warrants are not immediately exercisable and are
not transferable separately from the Shares until _______, 1998 [six months
after the date of this Prospectus]. The Warrants are redeemable by the Company
at $0.05 per Warrant under certain conditions. See "Description of Securities."
Common Stock to be outstanding after the Offering........................
4,000,000 Shares (1)(2)
Warrants to be outstanding after the Offering.......................
1,000,000 Warrants (2)(3)
Use of Proceeds............................. Acquisitions, working capital
and other general corporate purposes. See "Use of Proceeds."
Risk Factors................................ The Securities offered hereby
are speculative and involve a high degree of risk and should not be purchased by
investors who cannot afford the loss of their entire investment. See "Risk
Factors."
Proposed American Stock Exchange Symbols
Units................................... "WTW.U"
Common Stock............................ "WTW"
Warrants................................ "WTW.WS"
(1) Does not include 400,000 shares of Common Stock reserved for issuance under
the Company's 1997 Stock Option Plan (the "Stock Option Plan"). To date
156,000 options have been granted under the Stock Option Plan, none of
which are immediately exercisable. See "Management - Stock Option Plan."
(2) Does not include an aggregate up to 1,350,000 shares issuable upon exercise
of (i) the Warrants (ii) the Underwriter's over-allotment option and (iii)
the Underwriter's Warrants.
(3) Does not include up to 150,000 Warrants issuable upon exercise of the
Underwriter's over-allotment option or the 100,000 Warrants underlying the
Underwriter's Warrants.
<PAGE>
Selected Financial Information
The following selected financial data has been derived from the audited
balance sheet of the Company as of February 28, 1997, audited income statements
for the two years ended February 28, 1997 and unaudited financial statements for
the three months ended May 31, 1997 and 1996. This selected financial data
should be read in conjunction with the financial statements of the Company and
the related notes thereto included elsewhere in this Prospectus. See "Financial
Statements."
Year Ended February 28, Three Months Ended
1996 1997 May 31, 1996 May 31, 1997
---- ---- --------- ----------
Operating Data:
Construction revenues 5,191,314 $11,637,141 $1,881,332 $3,288,173
Costs of construction 3,937,045 8,633,423 1,361,943 2,385,913
General and administrative (1) 915,259 1,879,004 412,567 325,923
------- --------- --------- ----------
Earnings before income tax 339,010 1,124,714 106,822 576,337
Income tax 93,055 422,349 37,000 219,000
---------- ----------- -------- ----------
Net income $245,955 $702,365 $ 69,822 $ 357,337
Earnings per share $0.08 $0.23 $0.02 $0.12
Balance Sheet Data:
February 28, May 31, May 31,
1997 1997 1997 .
---------------- ---------------- ---------------
(unaudited) As Adjusted (3)
Working capital $ (122,362) $ 133,781 $ 5,828,308
Current assets 2,442,889 3,718,892 9,413,419
Current liabilities 2,565,251 3,585,111 3,585,111
Total assets 3,989,871 5,410,663 11,105,190
Total liabilities 3,286,607 4,350,062 3,764,764
Shareholders equity 703,264 1,060,601 7,340,426
Shares outstanding 3,000,000 (2) 3,000,000 (2) 4,000,000
(1) Included in general and administrative expenses are management bonuses
of $117,530 in 1996 and $756,293 in 1997 which were primarily determined for
income tax planning purposes associated with private companies and are not
indicative of future operations.
(2) Assumes retroactive effect to the Company's issue of 3,000,000 shares
and does not include 400,000 shares of Common Stock reserved for issuance under
the Company's Stock Option Plan. To date 156,000 options have been granted Under
the Stock Option Plan, none of which are immediately exercisable. See
"Management - Stock Option Plan."
(3) Adjusted to reflect the sale of the Units offered by this prospectus at
an assumed offering price of $7.50 per Unit and application of the net proceeds
of $6,250,000.
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS IN ADDITION TO THE
OTHER INFORMATION SET FORTH IN THE PROSPECTUS BEFORE PURCHASING THE SECURITIES
OFFERED HEREBY.
Dependence On The Wireless Communications Industry
The Company is dependent on the continued growth, viability and
financial stability of its customers, which are in turn substantially dependent
on the continued growth, viability and financial stability of the wireless
communications industry. The wireless communications industry is highly
competitive and has been characterized by rapid technological and regulatory
change. Examples of recent technological changes include the advent or continued
rapid development of new or enhanced wireless communications technologies such
as PCS, Enhanced Specialized Mobile Radio and satellite-based wireless
communications technologies. These technological changes could reduce, delay or
make unnecessary the expansion or construction of new wireless communications
networks, which in turn could render the Company's products and services
obsolete or noncompetitive or otherwise reduce the demand for such products and
services. An example of regulatory changes affecting the industry include the
enactment of the Telecommunications Act of 1996 which is expected to cause
significant changes in existing regulation of the telecommunications industry
that are intended to promote the competitive development of new services, to
expand public availability of telecommunications services and to streamline
regulation of the industry. In addition, many of the Company's customers are
affected by general economic conditions. Any downturn or other disruption of the
wireless communications industry caused by adverse competitive developments,
technological changes, government regulation or other factors would have a
material adverse affect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Dependence Upon Key Personnel
The business of the Company is substantially dependent on the efforts
of Calvin J. Payne, its President and Chief Executive Officer, and S. Roy
Jeffrey, its Chief Operating Officer. The Company does not have an employment
contract with Mr. Payne or Mr. Jeffrey and the loss of either would have a
material adverse effect on the Company's operations. Although the Company
intends to obtain key-man insurance in the face amount of $3,000,000 on the
lives of Mr. Payne and Mr. Jeffrey, there can be no assurance that it will be
able to obtain such insurance or that such amount will be sufficient to
compensate the Company for the loss of either individual's services. See
"Management." Acquisitions
The Company plans to grow through acquisitions. The success of this
strategy is strongly affected by personnel in the acquired organization
satisfactorily continuing employment with the Company after the acquisition. The
Company plans to utilize employment agreements in connection with acquisitions.
However, there can be no assurance that employees of an acquired enterprise will
remain with the Company or perform satisfactorily as employees of the Company.
At present, the Company is not engaged in the negotiation of any such
acquisitions and there is no assurance and no representation is made that the
Company will be successful in the negotiations of any acquisitions and, if so,
on terms that will be beneficial to the Company.
Employee Turnover
Employees of the Company travel extensively away from home. In
addition, the industry's work requires long hours and often requires working at
heights. These aspects of the industry's work environment contribute to a high
rate of employee turnover, particularly with inexperienced employees. The
Company is developing training programs and additional hiring procedures to
reduce employee turnover. Part of the Company's acquisition program is to
acquire similar businesses and retain their experienced work force that is
familiar with the nature of the industry's work environment. See "Business -
Employees."
<PAGE>
Mobile Communications Health Risk
Recently, certain consumers have alleged that serious health risks have
resulted from the use of portable mobile communications devices. Motorola and
other equipment manufacturers have made public announcements indicating their
belief that no health risks exist from using mobile communications devices and
Motorola has made public certain internal company studies supporting this
position. In addition, there has been recent litigation involving
electromagnetic radiation. However, there has been no convincing evidence to
support the contention that exposure to electromagnetic fields causes
demonstrable health risks. The actual or perceived health risk of mobile
communications devices could adversely affect mobile communications service
providers through reduced subscriber growth rate and reduced network usage per
subscriber, thus reducing the need for the Company's services.
Siting Moratoria
Some local and state regulators have opposed the construction of new
antenna sites citing alleged health risks associated with radio frequency,
aesthetics, or other reasons. Furthermore, some property owners have refused the
installation of antennas on their property because of the potential reaction of
tenants to alleged health risks. Industry sources estimate there are currently
200 proposed antenna sites which are delayed due to local or state moratoria or
delays. The Federal Communications Commission ("FCC") is expected to propose
guidelines in this regard. However, there is no assurance any FCC guidelines
will be effective in removing moratoria or eliminating delays. The moratoria and
delays could adversely affect wireless communication providers which would also
adversely affect the Company's growth.
Competition
Historically, the industry for wireless infrastructure building and
implementation services has been highly competitive but also highly fragmented.
As such, most participants in this industry have been relatively small firms of
three to fifty employees. However, the Company has also faced competition in the
market for wireless infrastructure building and implementation services from
wireless communications equipment manufacturers which provide such services in
conjunction with the sale of wireless communications equipment. While the
industry continues to be comprised predominately of these smaller firms, over
the past two years, the increased demand for wireless infrastructure building
and implementation services has motivated other competitors to enter the market.
These new competitors include, but are not limited to, traditional, non-wireless
engineering and construction companies and non-wireless subcontractors who have
begun to enter the market either alone or in conjunction with wireless equipment
manufacturers. In addition, the Company faces competition in the market for
wireless infrastructure electrical design and engineering services from
stand-alone electrical engineering and design firms, other providers of wireless
infrastructure building and implementation services and wireless communications
equipment manufacturers. Many of these new competitors as well as many of the
Company's historical competitors have significantly greater financial and other
resources than the Company. As demand for wireless infrastructure building and
implementation services increases, the Company expects that more non-traditional
competitors will enter the market and provide increased competition to the
Company. See "Business - Competitive Environment."
Government Regulation
The wireless communications industry is subject to regulation by state
regulatory agencies, the FCC, the Canadian Radio and Telecommunications
Commission, Congress, the courts and other governmental bodies. There can be no
assurance that any of these governmental bodies will not adopt or change
regulations or take other actions that would adversely affect the wireless
communications industry and the Company's business, financial condition and
results of operations.
In addition, the Federal Telecommunications Act of 1996 is expected to
cause significant changes in existing regulation of the telecommunications
industry that are intended to promote the competitive development of new
services, to expand public availability of telecommunications services and to
streamline regulation of the industry. These changes include requirements that
local exchange carriers must: (i) permit other competitive carriers, which may
include many wireless communications service providers, to interconnect to their
networks; (ii) establish reciprocal compensation agreements with competitive
carriers to terminate traffic on each other's networks and (iii) offer resale of
their local loop facilities. The implementation of these requirements by the FCC
and state authorities potentially involves numerous changes in established rules
and policies that could adversely affect the wireless communications industry
and the Company's business, financial condition and results of operations.
<PAGE>
In addition, the construction and installation of wireless transmitting
and receiving facilities are often subject of state or local zoning, land use
and other regulation. Such regulation may include zoning, environmental and
building permit approvals or other state or local certification. The
Telecommunications Act of 1996 provides that state and local authority over the
placement, construction and modification of personal wireless services
(including cellular, and other cellular mobile radio services ("CMRS") and
unlicensed wireless services) shall not prohibit or have the effect of
prohibiting personal wireless services or unreasonably discriminate among
providers of functionally equivalent services. Although state and local zoning
authorities retain their rights over land use, their actions cannot have the
effect of banning wireless services or discriminating among similar wireless
providers.
Changing Technology
Wireless telecommunications generally, and cellular telephone services
and personal communications systems in particular, are relatively new
technologies. Presently cellular telephones are predominately based on analog
technologies. Management expects a transition to digital cellular telephone
technologies will continue to be implemented in the near future. The Company
constructs facilities used in wireless communications, regardless of the
technology implemented, and plans to construct facilities for use in wireless
communications regardless of which new technology emerges. However, there can be
no assurance that the Company will adapt in the future as it has in the past to
new technologies, that any new technology will require the services of the
Company, or that any new technology will not reduce or adversely modify the
services that the Company is able to provide. In addition, new technologies may
require different disciplines or skills than those presently possessed by
existing employees and the costs and delay incurred in training or hiring new
employees may have a material adverse effect on the operations of the Company.
Transactions with Affiliates
The Company regularly purchases goods and services from Western Telecom
Construction Ltd. ("WTCL"), a corporation owned and controlled by the brother of
one of the Company's directors. The Company also regularly sells goods and
services to WTCL. Purchases amounted to $1,822,326, $805,143 and $153,949 in
fiscal years 1997, 1996 and 1995, respectively. Sales amounted to $554,181,
$856,003 and $556,575 in fiscal years 1997, 1996 and 1995 respectively. The
Company also paid $93,500 of consulting fees in fiscal year 1997 to Westower
Consulting Ltd., a corporation owned and controlled by a director and principal
shareholder of the Company. The Company does not expect to pay these consulting
fees in the future. While management believes that the transactions with WTCL
are at prices believed to be reasonable and fair, such transactions could give
rise to preferential treatment. The Company anticipates that transactions with
WTCL will continue, but that in the future, all such transactions will be
approved by the disinterested directors of the Company's Board. See "Certain
Relationships and Related Transactions."
Business Concentration
The Company's customers are concentrated in the wireless communications
industry. Sales to 12 major customers approximated 73% and 84% of total sales
for the 1996 and 1997 fiscal years, respectively. The Company expects that sales
to relatively few customers will continue to account for a high percentage of
its net sales in the foreseeable future and believes that its financial results
will depend, in significant part, upon the success of these few customers.
Although the composition of the group comprising the Company's largest customers
may vary from period to period, the loss of a significant customer or any
reduction in orders by any significant customers, including reductions due to
market, economic or competitive conditions in the wireless communications
industry, may have a material adverse effect on the Company's business,
financial condition and results of operations.
Absence of Prior Public Market - American Stock Exchange Listing
Prior to this offering, there has been no public market for the Common
Stock or the Warrants. The Company has applied to have the Securities listed on
the American Stock Exchange. Such listing, if granted, does not imply that a
meaningful, sustained market for the Common Stock or Warrants will develop.
There can be no assurance that an active trading market for the Units, Common
Stock or Warrants offered hereby will develop or, if it should develop, will
continue. There is no assurance the Company's Securities will be approved for
listing.
Risk of Redemption of Warrants
Commencing six months from the date of this Prospectus, the Company may
redeem the Warrants for $.05 per Warrant, provided that the closing sale price
of the Common Stock on the American Stock Exchange has been at least $15.00 for
ten consecutive trading days ending within fifteen days of the notice of
redemption. Notice of redemption of the Warrants could force the holders
thereof: (i) to exercise the Warrants and pay the exercise price at a time when
it may be disadvantageous or difficult for the holders to do so, (ii) to sell
the Warrants at the current market price when they might otherwise wish to hold
the Warrants, or (iii) to accept the redemption price, which is likely to be
less than the market value of the Warrants at the time of the redemption. See
"Description of Securities - Warrants."
<PAGE>
Investors May Be Unable to Exercise Warrants
For the life of the Warrants, the Company will use its best efforts to
maintain a current effective registration statement with the Commission relating
to the shares of Common Stock issuable upon exercise of the Warrants. If the
Company is unable to maintain a current registration statement the Warrant
holders would be unable to exercise the Warrants and the Warrants may become
valueless. Although the Underwriters have agreed to not knowingly sell the
Warrants in any jurisdiction in which the shares of Common Stock issuable upon
exercise of the Warrants are not registered, exempt from registration or
otherwise qualified, a purchaser of the Warrants may relocate to a jurisdiction
in which the shares of Common Stock underlying the Warrants are not so
registered or qualified. In addition, a purchaser of the Warrants in the open
market may reside in a jurisdiction in which the shares of Common Stock
underlying the Warrants are not registered, exempt or qualified. If the Company
is unable or chooses not to register or qualify or maintain the registration or
qualification of the shares of Common Stock underlying the Warrants for sale in
all of the states in which the Warrantholders reside, the Company would not
permit such Warrants to be exercised and Warrant holders in those states may
have no choice but to either sell their Warrants or let them expire. Prospective
investors and other interested persons who wish to know whether or not shares of
Common Stock may be issued upon the exercise of Warrants by Warrant holders in a
particular state should consult with the securities department of the state in
question or send a written inquiry to the Company.
See "Description of Securities - Warrants."
Arbitrary Determination of Offering Price
The public offering price for the Units offered hereby was determined
by negotiation between the Company and the Representative, and should not be
assumed to bear any relationship to the Company's asset value, net worth or
other generally accepted criteria of value. Recent history relating to the
market prices of newly public companies indicates that the market price of the
Securities following this offering may be highly volatile. See "Underwriting."
Immediate Substantial Dilution
The Company's current shareholders acquired their shares of Common
Stock at a cost substantially below the price at which such shares are being
offered in this offering. In addition, the initial public offering price of the
shares of Common Stock included in the Units being offered in this offering will
be substantially higher than the current book value per share of Common Stock.
Consequently, investors purchasing shares of Common Stock included in the Units
being offered in this offering will incur an immediate and substantial dilution
of their investment insofar as it relates to the resulting book value of Common
Stock after completion of this offering. See "Dilution."
Payment of Dividends
The Company has never paid cash dividends on the Common Stock, and does
not anticipate that it will pay cash dividends in the foreseeable future. The
payment of dividends by the Company will depend on its earnings, financial
condition and such other factors as the Board of Directors of the Company may
consider relevant. The Company currently plans to retain any earnings to provide
for the development and growth of the Company. See "Dividend Policy."
Shares Eligible for Future Sale
Upon completion of this offering, the Company's current shareholders
will own 3,000,000 shares of Common Stock, which will represent 75.0% of the
then issued and outstanding shares of Common Stock (71.3% if the over-allotment
option is exercised in full). 3,000,000 of such restricted securities have been
held for more than two years and will be eligible for resale under Rule 144
under the Securities Act of 1933, as amended (the "Securities Act"), subject to
volume limitations, beginning 90 days after the date of this Prospectus
(2,850,000 if the over-allotment option is exercised in full). Sales of
significant amounts of Common Stock by current shareholders in the public market
after this offering could adversely affect the market price of the Common Stock.
See "Shares Eligible for Future Sale" and "Principal and Selling Shareholders."
<PAGE>
Use of Proceeds for Unspecified Acquisitions
The Company intends to utilize substantially all of the net proceeds of
this offering for the purpose of acquisitions, joint ventures and other similar
business opportunities. Under Washington law, transactions of this nature do not
require shareholder approval except when accomplished through a merger or
consolidation. Accordingly, purchasers in this offering will necessarily rely to
a large degree upon the judgment of management of the Company in the utilization
of the net proceeds of this offering. The Company does not now have any
agreements or commitments with respect to any specific transactions, and
management has not established specific criteria to be used in making the
determination as to how to invest these proceeds. See "Business-Recent
Developments" and "Use of Proceeds."
Substantial Shares of Common Stock Reserved
The Company has reserved 400,000 shares of Common Stock for issuance to
key employees, officers, directors and consultants pursuant to the Company's
Stock Option Plan. To date 156,000 options have been granted under the Stock
Option Plan, none of which are immediately exercisable. The existence of these
options and any other options or warrants may prove to be a hindrance to future
equity financing by the Company. Further, the holders of such options may
exercise them at a time when the Company would otherwise be able to obtain
additional equity capital on terms more favorable to the Company. See "
Management - Stock Option Plan."
Effect of Outstanding Warrants and Underwriters' Warrants.
Until the date five (5) years following the date of this Prospectus,
the holders of the Warrants and Underwriters' Warrants are given an opportunity
to profit from a rise in the market price of the Common Stock, with a resulting
dilution in the interests of the other shareholders. The shares of Common Stock
underlying the Underwriters' Warrants have certain registration rights. Further,
the terms on which the Company might obtain additional financing during that
period may be adversely affected by the existence of the Warrants and
Underwriters' Warrants. The holders of the Warrants and Underwriters' Warrants
may exercise the Warrants and Underwriters' Warrants at a time when the Company
might be able to obtain additional capital through a new offering of securities
on terms more favorable than those provided herein. The Company has agreed that,
under certain circumstances, it will register under federal and state securities
laws the Underwriters' Warrants and/or the securities issuable thereunder.
Exercise of these registration rights could involve substantial expense to the
Company at a time when it could not afford such expenditures and may adversely
affect the terms upon which the Company may obtain financing. See "Description
of Securities" and "Underwriting."
Representative's Influence on the Market
A significant amount of the Securities offered hereby may be sold to
customers of the Representative. Such customers subsequently may engage in
transactions for the sale or purchase of such securities through or with the
Representative. Although it has no obligation to do so, the Representative may
otherwise effect transactions in such Securities. Such market making activity
may be discontinued at any time. If it participates in the market, the
Representative may exert a dominating influence on the market, if one develops,
for the securities described in this Prospectus. The price and the liquidity of
the Common Stock and Warrants may be significantly affected by the degree, if
any, of the Representative's participation in such market.
In addition, the Company has agreed to solicit exercises of the
Warrants solely through the Representative and to pay the Representative certain
compensation in connection therewith. Solicitation of the exercise of the
Warrants by the Representative will not be made during the restricted periods of
Regulation M under the Securities Exchange Act of 1934, as amended. See
"Description of Securities-Warrants" and "Underwriting."
<PAGE>
USE OF PROCEEDS
The net proceeds of this offering to the Company are anticipated to be
$6,250,000, assuming a public offering price of $7.50 per Unit and after
deducting $500,000 of expenses relating to the offering. The over-allotment
option will be fulfilled with shares held by the Selling Shareholders. See
"Principal and Selling Shareholders." The Company intends to use the net
proceeds as follows:
Amount %
Debt and liabilities retirement (1) $ 555,473 9%
Capital assets (2) 400,000 6%
Working capital (3) 5,294,527 85%
----------- -----
$ 6,250,000 100%
- ---------------
(1) $352,000 of such debt has an interest rate of 5%, and the remaining $203,473
is interest free. All $555,473 is owed to officers and directors of the Company.
Of such debt, $100,000 was incurred in February 1997 when bonuses were paid to
management and $100,000 of the bonuses were loaned to the Company for working
capital purposes. See "Certain Relationships and Related Transactions."
(2) The Company intends to use up to $400,000 of the proceeds of this offering
to construct buildings on land it currently owns and intends to open an office
in the Seattle, Washington area.
(3) The Company may also use a portion of the proceeds from this offering to
take advantage of future business opportunities as a part of its expansion
plans, although the Company has not identified any specific businesses it
intends to acquire and has not entered into negotiations with respect to any
acquisitions.
Pending application of the net proceeds of this offering, the Company
may invest the net proceeds from this offering in interest-bearing savings
accounts, United States Government obligations, certificates of deposit or
short-term interest-bearing securities.
DIVIDEND POLICY
The Company does not anticipate paying dividends on the Common Stock at
any time in the foreseeable future. The Company's Board of Directors currently
plans to retain earnings for the development and expansion of the Company's
business. Any future determination as to the payment of dividends will be at the
discretion of the Board of Directors of the Company and will depend on a number
of factors including future earnings, capital requirements, financial conditions
and such other factors as the Board of Directors may deem relevant.
<PAGE>
DILUTION
As of May 31, 1997, the pro forma net tangible book value of the
Company was $7,276,616 or $1.82 per share of Common Stock. The historical net
tangible book value of the Company, giving retroactive effect to the Company's
issuance of 3,000,000 shares, was $1,026,616 or $.34 per share of Common Stock.
The net tangible book value of the Company is the aggregate amount of its
tangible assets less its total liabilities. The net tangible book value per
share represents the total tangible assets of the Company, less total
liabilities of the Company, divided by the number of shares of Common Stock
outstanding. After giving effect to the sale of 1,000,000 Units (1,000,000
shares of Common Stock and 1,000,000 Warrants) at an assumed offering price per
Unit of $7.50, or $7.50 per share of Common Stock (no value assigned to the
Warrants) and the application of the estimated net proceeds therefrom, the pro
forma net tangible book value per share would increase from $0.34 to $1.82. This
represents an immediate increase in net tangible book value of $1.48 per share
to current shareholders and an immediate dilution of $5.68 per share to new
investors or 75.7%, as illustrated in the following table:
Public offering price per Share $ 7.50
Net tangible book value per Share before this offering $ 0.34
Increase per share attributable to new investors 1.48
---------
Adjusted net tangible book value per share after this offering $ 1.82
Dilution per share to new investors $ 5.68
Percentage dilution 75.7%
The following table sets forth as of May 31, 1997, (i) the number of
shares of Common Stock purchased from the Company, the total consideration paid
to the Company and the average price per share paid by the current shareholders,
and (ii) the number of shares of Common Stock included in the Units to be
purchased from the Company and total consideration to be paid by new investors
(before deducting underwriting discounts and other estimated expenses) at an
assumed offering price of $7.50 per share.
Shares Purchased Total Consideration Average Price
Number Percent Amount Percent Per Share
Current shareholders 3,000,000(2) 75.0% $30,000 .4% $ .01
New investors 1,000,000(2) 25.0% 7,500,000 99.6% $ 7.50 (3)
------------- ------- ---------
Total 4,000,000(1) 100.0% $7,530,000(2) 100.0%
============= ====== ============= ======
- --------
(1) Does not include a total of 1,750,000 shares of Common Stock issuable upon
the exercise of: (i) the Warrants or the Underwriters' Warrants, (ii) the
over-allotment option, or (iii) employee stock options. To the extent that
these options and warrants are exercised, there will be further share
dilution to new investors.
(2) Sales by certain Selling Shareholders upon exercise of the over-allotment
option will reduce the number of shares of Common Stock owned by current
shareholders to 2,850,000 or 71.25% of the total number of shares to be
outstanding after the offering and will increase the number of shares held
by new investors to 1,150,000 or 28.75% of the total number of shares to be
outstanding after the offering. See "Principal and Selling Shareholders."
(3) This amount assumes the attribution of the Unit purchase price solely to
the Common Stock included in each Unit. See "Use of Proceeds."
<PAGE>
CAPITALIZATION
The following table sets forth the pro forma short-term debt and
capitalization of the Company as of May 31, 1997 and as adjusted to give effect
to the sale of 1,000,000 Units offered hereby and the application of the
estimated net proceeds therefrom, giving retroactive effect to the Company's
issuance of 3,000,000 shares,. See "Use of Proceeds."
May 31, 1997
(Unaudited) As Adjusted
Short-term debt:
Current portion of notes payable and
capital lease obligations ...................... $ 247,022 $ 247,022
---------- -----------
Total short-term debt......................... $ 247,022 $ 247,022
=========== ===========
Long-term debt:
Notes payable and capital lease obligations ... $ 179,653 $ 179,653
Related party notes payable.................... 585,298 -
----------- -----------
. Total long-term debt...................... 764,951 179,653
Shareholder's equity:
Common Stock, $0.01 par value,
10,000,000 shares authorized, 3,000,000
shares issued and outstanding,
4,000,000 as adjusted (1) (2)................. 175 40,000
Additional paid in capital...................... - 6,240,000
Foreign currency translation adjustment......... 26,777 26,777
Retained earnings.............................1,033,649 1,033,649
Total shareholder's equity..................1,060,601 7,340,426
------------- -------------
Total capitalization ...................$ 1,825,552 $ 7,520,079
============== =============
- -------
(1) Does not include 400,000 shares of Common Stock reserved for issuance under
the Company's Stock Option Plan. See "Management - Stock Option Plan."
(2) Does not include an aggregate of up to 1,350,000 shares issuable upon
exercise of (i) the Warrants, (ii) the over-allotment option and (iii) the
Underwriters' Warrants.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in connection with the Company's
Consolidated Financial Statements, related notes and other financial information
included elsewhere in this Prospectus.
Results of Operations
Over the three years ended February 28, 1997, the Company increased net
revenues by 250% to $11.6 million from $3.3 million, decreased costs of revenues
as a percentage of revenues by 4.2% while selling general and administrative
expenses as a percentage of revenues rose from 14.3% to 16.2%. Until this
offering, the Company was a private corporation and declared large bonuses to
management which were primarily income tax motivated.
The following table presents, as a percentage of net revenues, certain
financial data for the Company for the periods indicated:
Years Ended February Three Months Ended May
1997 1996 1995 1997 1996
Contract revenues 100.0% 100.0% 100.0% 100.0% 100.0%
Costs of revenues 74.2 75.8 78.1 72.6 72.4
Gross profit 25.8 24.2 21.9 27.4 27.6
Selling, general and
administrative expenses 16.2 17.2 14.3 9.5 21.3
Operating income 9.6 7.6 7.7 17.9 6.3
Partnership income 0.3 0.7
Interest expense 0.3 1.2 2.0 0.4 0.6
Income taxes 3.6 1.8 0.9 6.7 2.0
Net income 6.0 4.7 4.7 10.8 3.7
Comparison of Quarters Ended May 31, 1996 and May 31, 1997
Net revenues for the first quarter increased 74.8% or $1,406,841 from
the first quarter in the previous year due to continued buildup of PCS networks.
Gross profit for the quarter ended May 31 increased to $902,260 in
fiscal 1998, a 73.7% increase over $519,389 in the same period in fiscal 1997.
This $382,871 increase is attributable to the 74.8% increase in net sales. Gross
profit margins for the quarter were virtually unchanged (about 27.5% )
reflecting continued strong demand.
Selling, general and administrative expenses for the quarter ended May
31, 1997 decreased by approximately 22.1% or $88,717 to $312,411 in 1997 as
compared to $401,128 for the same quarter in 1996. This decrease reflects
increased staffing to manage the growth in sales offset by a provision for
management bonuses for the first quarter of 1996 of $211,762.
Operating income improved from $106,822 in the first quarter of fiscal
1997 to $576,337 for the same period in 1998. Correspondingly, net income for
the first quarter of 1998 improved by $287,515 from $69,822 in 1997 to $357,337
in 1998. This change in profitability reflects the Company's revenue growth.
Partnership income has been included in revenue, since the amounts are
immaterial.
Comparison of the Years Ended February 29, 1996 and February 28, 1997
Net revenues in 1997 increased 124.2% or $6,445,827 from the previous
fiscal year. This increase is attributable to the buildup of PCS networks in
Oregon, Washington and British Columbia. This increase in net sales is directly
related to the growing demand for wireless communication.
Gross profit for 1997 increased 139.4% over 1996, reflecting the higher
sales volume in 1997. Gross profit margins increased from 24.2% in 1996 to 25.8%
in 1997. This modest increase is attributable to continued strong demand for the
Company's services.
<PAGE>
Selling, general and administrative expenses excluding management
bonuses increased $354,620, or 45.8%, to $1,128,878 for the year ended February
28, 1997. This increase reflects additional expenditures made in personnel to
obtain and sustain higher sales levels in 1997.
Prior to this offering, the Company was privately held. The Company
reduced income by declaring and paying bonuses to its principals. These bonuses
were primarily tax-motivated. Bonuses increased by $638,763 or 543.5% in 1997
compared to 1996, and are included in selling, general and administrative
expenses.
Interest expense decreased by 46.2% from $62,937 in 1996 to $33,841 in
1997, reflecting a decrease in notes payable and capital lease obligations in
1997 and the fact that the Company did not use its operating loan facilities in
1997.
Operating income before interest and management bonuses was $1,874,840
in 1997, an increase of $1,394,829 or 290.6% compared to 1996. The increase is
due to the increase in sales, the modest increase in gross profit percentage,
reduced by an increase in selling, general and administrative expenses.
Comparison of the Years Ended February 28, 1995 and February 29, 1996
Net revenues in 1996 increased 57.1%, or $1,914,213 from the previous
fiscal year. This increase is attributable to the buildup of cellular networks
in Oregon, Washington and British Columbia.
Gross profit for 1996 increased 77.3% over 1995, reflecting the higher
sales volume and an improvement of 2.9% (as a percentage of revenues ) in gross
margin percentage. Gross margin percentage in 1996 was 24.8%; for 1995 it was
21.9%.
Selling, general and administrative expenses excluding management
bonuses increased by $295,947 or 61.8% to $774,258 for the year ended February
29, 1996. As a percentage of revenues, selling, general and administrative
expenses increased slightly, from 14.3% to 16.9%. The increase is due to the
additional staff hired to enable the Company to meet increased demand for its
products and services.
The Company paid management bonuses of $117,530 in 1996 (none in 1995).
These bonuses were primarily tax-motivated, are not indicative of future
operations, and are included in selling, general and administrative expenses.
Interest expense was $67,881 in the 1995 fiscal year and $62,937 in
1996, a decrease of $4,944, or 7.3%. The decrease in 1996 related to the
Company's use of its operating credit facilities in 1995 to fund operations.
Operating income, before interest and management bonuses, was $480,011
in 1996, an increase of $223,033, or 87% compared to 1995. The increase is due
to increased revenues and the improved profit margin, offset by higher selling,
general and administrative expenses.
Liquidity and Capital Resources
The Company has financed its working capital requirements through
borrowings from principal shareholders and through bank debt. The Company
currently generates sufficient cash receipts from its operations to fund its
operating activities.
As of May 31, 1997, the Company had working capital of $133,781.
Included in current liabilities are deferred income taxes of $568,712, however
management does not expect to actually pay the deferred income taxes during the
next 12 months.
Cash from operations for the three months ended May 31, 1997, was
$180,017, compared to cash used in operations of $244,844 for the three months
ended May 31, 1996. The difference results mainly from changes in non-cash
current assets and liabilities.
The Company has a credit facility with a bank, whereby the Company may
borrow $450,000 for working capital requirements as needed. The Company did not
use this facility during 1997 or the first quarter of fiscal 1998.
Cash from operations for the year ended February 28, 1997 was $871,929
compared to $451,311 for the prior year. The increase in cash from operations is
due primarily to increased revenues.
The Company's subsidiary, Westower Communications Ltd. is not in
compliance with debt to equity and working capital ratio requirements contained
in agreements with its bank. Therefore, term debt consisting of three mortgages
and aggregating $324,248 is included as a current liability. The bank has not
demanded payment of the mortgages and has indicated verbally that it will not
demand payment. Management believes that the Company has sufficient cash to
repay the mortgages and to fund continuing planned operations. Management
believes the interest rate of 5.75% is attractive and therefore has not repaid
the debt at this time.
<PAGE>
The Company intends to open an office in the Seattle, Washington area
where three of the largest wireless communication companies are located with a
part of the proceeds of this offering. The Company also intends to pay $555,473
of notes payable to principal shareholders from the proceeds of this offering.
See "Certain Relationships and Related Transactions".
The Company's cash requirements for fiscal 1998 and in the future will
depend upon the level of sales, acquisitions, sales and marketing expenditures,
timing of expansion plans and capital expenditures. The Company believes that
the net proceeds from this offering, interest earned on the proceeds, reduced
interest expense obligations and anticipated revenue from operations should be
adequate for the Company's working capital requirements over the course of the
next twelve months. In the event that the Company's plans or assumptions change
or if its requirements to meet unanticipated changes in business conditions or
the proceeds of this offering prove to be insufficient to fund operations, the
Company could be required to seek additional financing prior to such time.
Accounting Standards
The Financial Accounting Standards Board ("FASB") periodically issues
statements of financial accounting standards. In February 1997, FASB issued
Statement of Financial Accounting Standards (SFAS) No. 128. The new standard
replaces primary and fully diluted earnings per share with basic and diluted
earnings per share. SFAS No. 128 is required to be adopted by the Company in the
year ending February 28, 1998. Had the Company been required to adopt SFAS No.
128 for the periods presented, the adoption would not have impacted reported
earnings per share.
In June 1997, the FASB issued SFAS No. 130 and 131. SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components. SFAS No. 131 establishes standards for reporting about operating
segments, products and services, geographic areas, and major customers. The
standards become effective for fiscal years beginning after December 15, 1997.
Management plans to adopt these standards in the year ending February 28, 1999.
Management believes that provisions of SFAS No. 130 and 131 will not have a
material effect on its financial condition or reported results of operation.
<PAGE>
BUSINESS
General
The Company was organized in June 1997 to acquire all of the
outstanding stock of Holdings from the principal shareholders of Holdings, three
of whom are the officers and directors of the Company.
The Company designs, builds and maintains wireless communications
transmitting and receiving facilities for providers of wireless communication
services, including U. S. Cellular, Western Wireless, Cantel, AT&T, Sprint PCS ,
and Microcell. These facilities are presently constructed for use with
microwave, cellular telephone, pager, and specialized mobile radio technologies.
Although bids for the installation or modification of communications facilities
are normally requested on a fixed price basis, the Company will, if requested,
provide such services on a time and materials basis. A contract for the
installation of cellular transmitting and receiving facilities may require the
Company to develop the location, including roads and grading, to install the
tower antennas and lines, assemble electronic components and to test the
installation's equipment. In such instances, the Company subcontracts road or
concrete work required under the contract, performing the balance of the work
with its own employees. Approximately 50% of the Company's customers supply most
of the material used in the installation process, and the Company's major cost
is the cost of its employees and subcontracted labor. Demand for the Company's
services often exceeds its ability to supply those services, and in such
situations the Company subcontracts with smaller enterprises to provide work
normally performed by the Company. Subcontracting permits the Company to
evaluate the subcontractor's quality and review the subcontractor as a potential
candidate for acquisition.
The Company commenced business in 1990 as Westower Communications Ltd.
and emphasized design, construction, maintenance and modification of microwave
and cellular towers for telephone, broadcast and utility companies. The Company
continues these activities, but with the advent of cellular telephones and
personal communication systems ("PCS"), now designs and installs rooftop and
other transmission and receiving facilities. A portion of the Company's revenues
is still derived from installation of microwave facilities and the installation
of related electronic equipment. However, the rapid growth of the use of
cellular telephones has resulted in the installation of cellular transmitting
and receiving facilities being an increasingly significant component of
revenues. The Company is also a partner in a limited partnership which owns
communication towers which are leased to a telephone company.
The Company's strategy will be to capitalize on the demand for wireless
infrastructure building and implementation services by continuing to expand its
workforce and geographic presence in the marketplace. To accomplish these
objectives, the Company intends to (i) continue its geographic expansion by
opening new regional offices when demand for the Company's services or
acquisition opportunities make such expansion feasible, (ii) continue to enhance
its indigenous new employee hiring, training and retention programs as a method
for attracting, training and retaining new, highly skilled workers, and (iii)
continue to seek to acquire other companies engaged in the wireless
infrastructure building and implementation services and wireless infrastructure
electrical design and engineering services businesses that have good reputations
for quality service and highly skilled workers.
The Company's principal operations are in Washington, Oregon, Idaho,
British Columbia, Alberta, and Canada's Northern Territories. Management
believes that the industry is highly fragmented with many companies performing
similar kinds of work throughout North America and that no single company is
dominant in the industry. The Company intends to increase its market penetration
by acquiring one or more of these businesses and to increase its market
penetration in the Western United States and Canada, ultimately having
operations from California to Alaska.
Recent Developments
Demand for the Company's services continues to be strong. The Company
has a current backlog of approximately $5,000,000.
The Company believes the growth in demand for wireless infrastructure
building and implementation services will continue as the wireless
communications industry continues to expand and develop, fueled in part by the
introduction of new and enhanced wireless communications technologies such as
PCS, ESMR and digita1 cellular. As an example, the Company anticipates that the
1995 and 1996 FCC auctions of the A-, B- and C- Block portions of the radio
spectrum allocated by the FCC for PCS licensees will result in the build out of
significant numbers of new PCS systems over the next five to ten years. This is
due in part to the fact that the FCC has mandated that recipients of PCS
licenses adhere to five-year and 10-year build out requirements. Under both
five- and 10-year build out requirements, all 30 MHZ PCS licensees (which
includes holders of all of the approximately 595 A-, Band C-Block PCS licenses
awarded as of September 1, 1996) must construct facilities necessary to provide
coverage to at least one-third of the population in their service areas within
five years from the date of initial license grants. Service must be provided to
two-thirds of the population within ten (10) years. Violations of these
regulations could result in license revocations, forfeitures or fines.
<PAGE>
The Company also anticipates that implementation of new PCS systems may
create significant wireless infrastructure building activity as new PCS
licensees pay to alter or relocate certain existing communications facilities
operated by holders of fixed microwave licenses that currently operate within
the same frequency ranges as the new PCS licensees. This is because, in an
effort to balance the competing interests of existing microwave users and newly
authorized PCS licensees, the FCC has ruled that for a period of up to five
years after the grant of a PCS license, PCS licensees may be required to share
their radio spectrum with existing fixed microwave licensees operating on the
same frequencies as those of the new PCS licensees. In order to initiate service
within the required time frame, many of these new PCS licensees will arrange and
pay for the relocation of certain of these existing users to alternate spectrum
locations or transmission technologies.
The Industry
The Company's success is tied to the development of wireless
communications. Originally the Company constructed microwave and cellular
transmission facilities, and later expanded to include the installation of
electronic lines and components as part of the Company's services. As microwave
technology evolved and matured, the Company performed a variety of construction
and installation services relating to those new technologies, some of which
still involved microwave technology. For example, the Company upgraded the
transmission devices to accept digital or single side band technology, often
returning to previously built facilities to upgrade the equipment. Although the
Company still performs work related to short and long haul microwave technology,
this technology has diminished in use with the installation of fiber optic
technology by long distance carriers.
Presently, cellular telephones in the United States and Canada rely
predominantly on analog technology. A cellular telephone transmits a radio
signal to the closest cellular communications facility, which contains an
antenna connected by wireline or short haul microwave to a nearby switching
office that processes signals for several cellular facilities. For transmission
to a telephone that is not a mobile phone, the switching office connects the
telephone signal to a local telephone exchange. For a phone call to another
mobile telephone, the switching office locates the receiving cellular
communication facility to which the receiving telephone is connected, and
transmits the signal to that facility, completing the connection. If one or both
of the cellular telephones is moving, such as a car phone, the local switching
station hands the signal off to a different facility as the phone moves from one
area to another.
The Company builds the communication facility and installs the
equipment to handle the radio wave from the cellular telephone to the facility
as well as the short haul microwave equipment connecting the facility to the
local cellular switching office.
Cellular telephones use radio frequencies to transmit to the
facilities. The number of frequencies that are available to transmit to a
facility is finite. In areas with heavy demand for cellular services, these
available frequencies become congested. To increase capacity, the number of
cells is increased, making each cell in the system smaller, covering a smaller
geographic area for the finite number of radio frequencies, but requiring
significantly more facilities.
The Personal Communications Industry Association estimates there are
approximately 44,000,000 cellular subscribers in the United States in 1997 with
projections of approximately 80,000,000 subscribers in the United States by
2001. Industry sources also estimate there is a current need for more than
100,000 new antenna sites in the United States.
Competitive Environment
Presently the industry of constructing wireless and, more generally,
communications transmitting and receiving facilities is highly fragmented. The
industry consists of many small operators, often as few as three or four people
and commonly entailing a dozen or so. Most of the communications facilities in
the United States are installed by such businesses. While an individual provider
of wireless communications could easily develop its own ability to construct the
facilities, management of the Company believes that these enterprises would have
a difficult time establishing the ability on a cost effective basis.
<PAGE>
Management believes that the most efficient manner in which to manage
its business in an expanding and maturing environment is to operate subsidiaries
with a large degree of autonomy. Employees in this industry travel away from
home regularly and extensively and can be moved from one subsidiary's area to
another as needed. Management believes that providers of wireless communications
are generally large and tend to take longer to make decisions. For this reason,
management believes it can provide its services to customers in a more
cost-effective manner than customers could perform the services themselves.
The technology of wireless communications is shifting radically. The
recent history of electronic technology is marked by smaller, faster, less
expensive technologies replacing more cumbersome processes. According to RCR, a
weekly newspaper for the wireless communications industry, there are projections
that certain digital technologies will be up to 20 times more efficient than
existing analog cellular systems, providing superior services and quality such
as Personal Communications Services and Enhanced Specialized Mobile Radio. Some
of these technologies, however, require densely located receivers that may be
located on utility poles.
Proposed satellite technologies, however, could bypass a local radio
transmission device and enable a user to transmit directly to a satellite that
retransmits the signal directly to a user. While this technology could possibly
transmit directly to a satellite, such technology would be required to struggle
with limitations on the number of frequencies available to be transmitted to a
satellite. Management of the Company believes that this technology is not yet
sufficiently defined to assess its effect on the Company.
All of the existing wireless transmission and receiving technologies,
as well as wireless transmission and receiving technologies of which the Company
is aware are being considered in developing nations to supplement or supplant
existing wireline communications techniques. The technology that is implemented
and the method in which the technology is implemented could enhance or diminish
the Company's prospects in these nations, and the Company is uncertain whether
it can exploit the opportunities that are being presented to the Company.
While there are numerous competitors in a fragmented industry, the
demand for those services is presently growing rapidly. New technologies could
alter the way in which those services are delivered and adversely affect the
Company. Other technologies could bypass the need for the Company's services.
Because of the rapid development and evolution of wireless communications, the
future market and its competitive environment cannot be accurately viewed or
perhaps anticipated in a manner that would benefit the Company. These factors
could be replayed in a variety of manners in numerous countries. There are
potential competitors, either providers of the service or traditional
engineering firms, that possess significantly greater resources, either in terms
of personnel, technology, or financial resources, than those possessed by the
Company.
The Company received consulting services from Westower Consulting, an
enterprise under common control with the Company. Charges for these services
were approximately $0 in fiscal year 1996 and $93,500 is fiscal year 1997.
Amounts due to Westower Consulting were $36,500 at February 28, 1997. The
Company expects that payments to Westower Consulting will not continue in fiscal
year 1998 because Company employees and officers will perform the related
services. Westower Consulting charged the Company for services provided by the
Company's employees in an effort to defer income tax. Westower Consulting is
currently inactive.
Government Regulation
The wireless communications industry is subject to regulation by state
regulatory agencies, the Federal Communications Commission (the "FCC"), the
Canadian Radio and Telecommunications Commission, the United State Congress, the
courts and other governmental bodies. There can be no assurance that any of
these governmental bodies will not adopt or change regulations or take other
actions that would adversely affect the wireless communications industry and the
Company's business, financial condition and results of operations.
In addition, the Telecommunications Act of 1996 is expected to continue
to cause significant changes in existing regulation of the telecommunications
industry that are intended to promote the competitive development of new
services, to expand public availability of telecommunications services and to
streamline regulation of the industry. These changes include requirements that
local exchange carriers must:
(i.) Permit other competitive carriers, which may include many wireless
communications service providers, to interconnect to their networks;
(ii.) Establish reciprocal compensation agreements with competitive
carriers to terminate traffic on each other's networks; and
(iii.) Offer resale of their local loop facilities.
<PAGE>
The implementation of these requirements by the FCC and state
authorities potentially involves numerous changes in established rules and
policies that could adversely affect the wireless communications industry and
the Company's business, financial condition and results of operations.
The construction and installation of wireless transmitting and
receiving facilities are often subject to state or local zoning, land use and
other regulation. Such regulation may include zoning, environmental and building
permit approvals or other state or local certification. The Telecommunications
Act of 1996 provides that state and local authority over the placement,
construction and modification of personal wireless services (including cellular
and other CMRS and unlicensed wireless services), shall not prohibit or have the
effect of prohibiting personal wireless services or unreasonably discriminate
among providers of functionally equivalent services. Although state and local
zoning authorities retain their rights over land use, their actions cannot have
the effect of banning wireless services or picking and choosing among similar
wireless providers. However, according to the Personal Communications Industry
Association, 200 proposed antenna sites are currently delayed due to local or
state moratoria or other delays. See "Risk Factors - Siting Moratoria."
Environmental Laws
Management believes environmental laws will have only a minimal impact
on the Company's operations. Changes in environmental laws, as they relate to
the Company's operations, have not had a significant impact since the Company
was founded seven years ago.
The Company, especially in remote and rural areas, follows regulations
concerning the discovery of native artifacts, disposal of fuel and other
substances, disturbing or destroying habitat of endangered or threatened
species, contaminating water bodies, spill recovery and trash removal.
Management is not aware of any environmental laws concerning health
risks allegedly connected to mobile communication devices, but is aware of those
public concerns. See "Risk Factors - Mobile Communications Health Risk."
Business Concentration
The Company's customers are concentrated in the wireless communications
industry. Sales to 12 major customers approximated 73% and 84% of total sales
for the years ended February 29, 1996 and February 28, 1997 respectively.
The Company expects that sales to relatively few customers will
continue to account for a high percentage of its net sales in the foreseeable
future and believes that its financial results depend in significant part upon
the success of these few customers. Although the composition of the group
comprising the Company's largest customers may vary from period to period, the
loss of a significant customer or any reduction in orders by any significant
customers, including reductions due to market, economic or competitive
conditions in the wireless communications industry, may have a material adverse
effect on the Company's business, financial condition and results of operations.
Employees
As of September 15, 1997, the Company had approximately 50 full time
employees. The Company considers its employee relations to be satisfactory. The
Company believes that additional staff will be required for increased marketing,
sales, development, and support functions. None of the Company's employees are
represented by a union.
Legal Proceedings
As of September 15, 1997, the Company was not a party to any legal
proceedings.
Facilities
The Company owns its office and plant facilities in Surrey, British
Columbia. The Company rents office, yard and warehouse space in Vancouver,
Washington for $2,250 per month. Management believes there is an adequate supply
of facilities available for rent on a reasonable basis.
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information regarding the
Company's directors and executive officers:
Name Age Position
Calvin J. Payne 45 Chairman of the Board and Chief Executive Officer
S. Roy Jeffrey 51 Chief Operating Officer and Director
Walter Friesen 45 Senior Vice President and Director
Peter Lucas 43 Senior Vice President and Chief Financial Officer
Calvin J. Payne is a co-founder of the Company. Since inception in
1990, Mr. Payne has managed the Company's growth in his capacity as a director,
officer and chief engineer. Mr. Payne has 22 years of experience in all aspects
of the construction of steel communication towers. He was a construction worker
and rigger in 1975, a field engineer in 1978, a design engineer in 1979,
engineering manager in charge of a tower company's Australian operations in
1983, and chief engineer of the same company's domestic operations in 1988. Mr.
Payne has engineered over 600 towers, including a 1470 foot tower in Florida
designed to withstand hurricane winds. Mr. Payne won a design award for a steel
tower erected on a mountain top site near the Alaskan-Canadian border that was
totally enclosed in fiberglass to protect the tower and antenna from wind and
ice. Mr. Payne has assisted in the writing of design standards for communication
towers in the United States, Canada, and Australia. He is a professional
engineer registered in the United States, Canada and Australia. He received a
degree in civil engineering from the University of British Columbia in 1978 and
an MBA from the University of Western Australia in 1985.
S. Roy Jeffrey is a co-founder of the Company. Since inception in 1990,
Mr. Jeffrey has managed the Company's growth in his capacity as a director,
officer, and Chief Operating Officer. Mr. Jeffrey has 25 years experience in all
aspects of the supply and installation of communication towers and equipment.
Mr. Jeffrey was employed by a privately held communications company from 1972 to
1990, when he left to co-found the Company. He started as a high steel rigger,
was promoted to field supervisor and then promoted to branch manager where he
was responsible for as many as 36 office and field employees. Mr. Jeffrey
supervised or managed the supply and installation of towers in the United
States, Canada, the Caribbean, Australia, and Middle East. Mr. Jeffrey has
managed all aspects of communication site construction including permit
applications, surveys, road-building, foundations, and the supply and
installation of buildings, towers and antennas, and transmission lines. Mr.
Jeffrey has extensive experience in rigging tall towers.
Walter Friesen became Vice President of the Company in March 1994 and
managed Westower Communications Inc. in Vancouver Washington. Mr. Friesen has 21
years experience in the wireless communication industry. In 1976 he was a
broadcast transmitter technician for the Canadian Broadcasting Corporation
responsible for AM, FM, and television transmissions. In 1978, he joined a
privately held communications company where he held positions of increasing
responsibility until 1994, when he left to join the Company. Before leaving, Mr.
Friesen was Vice President of that company's United States eastern field
operation, with responsibility for five branch offices, 150 employees, and
$22,000,000 in annual sales. Mr. Friesen has managed all aspects of tower
construction and operation. Mr. Friesen earned an Honors Diploma in Electronics
Engineering Technology from the Northern Alberta Institute of Technology in
1976.
Peter Lucas became Senior Vice President and Chief Financial Officer of
the Company in April 1997. From August 1995 to April 1997, Mr. Lucas served as
Chief Financial Officer of Cotton Valley Resources Corporation, a Dallas based
public oil and gas company. From May 1992 to July 1995, he served as Chief
Financial Officer of Canmax Inc., a Dallas based public company that develops
software for gas stations and convenience stores. Mr. Lucas is a member of the
Canadian Institute of Chartered Accountants. He received his professional
training at Coopers & Lybrand, which he left in 1984 to form his own tax
practice. Six years later, Mr. Lucas's practice merged with Coopers & Lybrand,
with whom he was a partner until 1992. Mr. Lucas passed the AICPA reciprocity
examination in 1993, and is experienced in domestic taxation, accounting and
securities matters. He received a bachelor of commerce degree from the
University of Alberta in 1978.
<PAGE>
Directors of the Company are elected at each annual meeting of
shareholders. The officers of the Company are elected annually by the Board of
Directors. Officers and directors hold office until their respective successors
are elected and qualified or until their earlier resignation or removal.
Outside Directors
The Company has agreed to appoint two directors who are not officers,
employees or 5% shareholders or related to an officer, employee or 5%
shareholder upon conclusion of the offering. One of those directors will be
appointed by the Representative of the Underwriters. The other director nominee,
Ronald P. Erickson, 53, is principal of GlobalVision, LLC, an international
strategic consulting and corporate finance company, where he has been associated
since 1994. From 1984 to 1994, he was a director of Egghead Software, Inc.,
where he was an original investor. From 1990 to July 1995, Mr. Erickson was a
principal of Rutkowski, Erickson and Scott, a consulting firm which assisted
small emerging growth companies. From 1990 to July 1996, Mr. Erickson was
Chairman of the Board of Digital Data Networks, Inc. Mr. Erickson received his
B.A. in History from Central Washington University, his M.A. in American studies
from the University of Wyoming and his J.D. from the University of Denver.
Compensation of Directors Directors who are employees of the Company will not
receive any remuneration in their capacity as directors. Outside directors will
receive $12,000 annually, and $500 per meeting attended and related travel
expenses. Indemnification and Limitation on Liability If available at reasonable
cost, the Company intends to maintain insurance against any liability incurred
by its officers and directors in defense of any actions to which they are made
parties by any reason of their positions as officers and directors. Executive
Compensation The following table sets forth the compensation paid to the
Company's President Calvin J. Payne and Vice President Walter Friesen (the
"Named Executive Officers") for services rendered to the Company in all
capacities for the fiscal years ended February 28, 1997, 1996, and 1995. Summary
Compensation Table
Name and Annual Compensation All Other
Principal Position Fiscal Year Salary Bonus Compensation
Calvin J. Payne February 28, 1997 $75,000 $437,780 -
February 29, 1996 70,000 92,530 -
February 28, 1995 70,000 - -
Walter Friesen February 28, 1997 $75,000 $298,000 -
February 29, 1996 60,000 25,000 -
February 28, 1995 57,000 - -
Prior to this offering, the Company was a privately held corporation
and distributed much of its income to shareholders by way of bonuses for income
tax planning purposes. In the future, the Company intends to compensate its
officers in accordance with the recommendations of a compensation committee
consisting entirely of outside directors. The base salary for fiscal year ending
February 28, 1998 for each of Messrs. Payne, Jeffrey and Friesen is $75,000 and
for Mr. Lucas is $120,000.
Employment Agreements
The Company has no employment agreements.
<PAGE>
Stock Option Plan
The 1997 Stock Option Plan, as amended (the "Stock Option Plan")
provides for the grant to employees, officers, directors, and consultants to the
Company or any parent, subsidiary or affiliate of the Company of up to 400,000
shares of the Company's Common Stock, subject to adjustment in the event of any
subdivision, combination, or reclassification of shares. The Stock Option Plan
will terminate in 2004. The Stock Option Plan provides for the grant of
incentive stock options ("ISO's") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, and non-qualified options at the
discretion of the Board of Directors or a committee of the Board of Directors
(the "Committee"). The exercise price of any option will not be less than the
fair market value of the shares at the time the option is granted. The options
granted are exercisable within the times or upon the events determined by the
Board or Committee set forth in the grant, but no option is exercisable beyond
ten years from the date of the grant. The Board of Directors or Committee
administering the Stock Option Plan will determine whether each option is to be
an ISO or non-qualified stock option, the number of shares, the exercise price,
the period during which the option may be exercised, and any other terms and
conditions of the option. The holder of an option may pay the option price in
(1) cash, (2) check, (3) other shares of the Company, (4) authorization for the
Company to retain from the total number of shares to be issued that number of
shares having a fair market value on the date of exercise equal to the exercise
price for the total number of shares, (5) irrevocable instructions to a broker
to deliver to the Company the amount of sale or loan proceeds required to pay
the exercise price, (6) delivery of an irrevocable subscription agreement for
the shares which irrevocably obligates the option holder to take and pay for
shares not more than 12 months after the date of the delivery of the
subscription agreement, (7) any combination of the foregoing methods of payment,
or (8) other consideration or method of payment for the issuance of shares as
may be permitted under applicable law. The options are nontransferable except by
will or by the laws of descent and distribution. Upon dissolution, liquidation,
merger, sale of stock or sale of substantially all assets, outstanding options,
notwithstanding the terms of the grant, will become exercisable in full at least
10 days prior to the transaction. The Stock Option Plan is subject to amendment
or termination at any time and from time to time, subject to certain
limitations.
The plan is administered by the Compensation Committee of the Board of
Directors, which is composed entirely of directors who are "disinterested
persons" as defined in Rule 16b-3 of the Securities Exchange Act of 1934, as
amended.
The following table sets forth information regarding exercised options
and the value of unexercised options held by the Named Executive Officers of the
Company as of June 30, 1997. No options were granted prior to March 1, 1997. In
June 1997 the Company granted 132,000 options at an exercise price of $8.25 and
24,000 options at an exercise price of $7.50 to certain key executives.
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
Number of Securities
Underlying Unexercised
Options at June 30, 1997
Shares Acquired Exercisable/
Name on Exercise Value Realized Unexercisable
- ---------------------- ----------- -------------- -------------
Calvin J. Payne - - 0/54,000
S. Roy Jeffrey - - 0/54,000
Walter Friesen - - 0/24,000
Peter Lucas - - 0/24,000
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership as of June 30, 1997 of the Common Stock by (a) each person
known by the Company to be a beneficial owner of more than 5% of the outstanding
shares of Common Stock and by each Selling Shareholder, (b) each director of the
Company, (c) each Named Executive Officer, and (d) all directors and executive
officers of the Company as a group. Unless otherwise noted, each beneficial
owner named below has sole investment and voting power with respect to the
Common Stock shown below as beneficially owned by him.
Shares Owned Shares Owned
Prior to Offering After Offering
Name and Address of Number of Percent Number of Percent
Beneficial Owner Shares Owned Owned Shares Owned Owned
Calvin J. Payne (1) (3) 1,125,000 37.50% 1,125,000 28.13%
5264 Drayton Harbour Road
Blaine, WA 98230
S. Roy Jeffrey (1) (4) 1,125,000 37.50% 1,125,000 28.13%
18375 - 67 Avenue
Surrey, British Columbia V3S 8E7
Walter Friesen(2) (5) 375,000 12.50% 375,000 9.38%
11208 N.E. 32 Avenue
Vancouver, WA 98686
Peter Lucas -- -- -- --
670 South Pekin Road
Woodland, Washington 98674
Valdis V. Rundans(2) (6) 375,000 12.50% 375,000 9.38%
#14 - 26112 Township Road 511
Spruce Grove, Alberta T7Y 1B6
All Executive Officers and Directors 2,625,000 87.50 2,625,000 65.63%
as a group (4 persons) (7)
- -----
(1) If the over-allotment option is exercised in full, holdings would
be 1,068,750 or 26.72%.
(2) If the over-allotment option is exercised in full, holdings would
be 356,250 or 8.91%.
(3) Includes the following shares, beneficial ownership of which is
disclaimed: 100,000 shares held by Mr. Payne's spouse and 925,000 held by the
Calvin J. Payne Family Trust of which Mr. Payne is sole Trustee.
(4) Includes the following shares, beneficial ownership of which is
disclaimed: 100,000 shares held by Mr. Jeffrey's spouse and 925,000 held by the
S. Roy Jeffrey Family Trust of which Mr. Jeffrey is sole Trustee..
(5) Includes the following shares, beneficial ownership of which is
disclaimed: 80,000 shares held by Mr. Friesen's spouse and 215,000 held by the
Walter Friesen Family Trust of which Mr. Friesen is sole Trustee.
(6) Includes the following shares, beneficial ownership of which is
disclaimed: 80,000 shares held by Mr. Rundans' spouse and 215,000 held by the
Valdis V. Rundans Family Trust of which Mr. Rundans is sole Trustee.
(7) If the over-alloment option is exercised in full, holdings would
be 2,493,750 or 62.34%.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company purchases goods and services from Western Telecom
Construction Ltd. ("WTCL"), an Alberta corporation, controlled by Peter Jeffrey,
the brother of S. Roy Jeffrey. The Company also sells goods and services to
WTCL. Purchases amounted to $1,822,326, $805,143 and $153,949 in fiscal years
1997, 1996, and 1995 respectively and sales amounted to $554,181, $856,003 and
$556,575 in fiscal years 1997, 1996, and 1995 respectively.
The Company has a 50% interest in an Alberta limited partnership which
owns six towers which are used by a telephone company under a license granted by
the partnership. The general partner is an Alberta corporation controlled by
Valdis Rundans, who owns more than 5% of the Company's issued stock. Other
partners are an Alberta corporation controlled by Valdis Rundans' spouse and an
Alberta corporation controlled by Peter Jeffrey. The Company receives 50% of the
partnership's income and had no other transactions with the partnership during
the 1997, 1996 or 1995 fiscal years.
Approximately $555,437 of the proceeds of this offering will be used to
repay amounts due to Calvin J. Payne and his spouse, Walter Friesen, and a
corporation controlled by S. Roy Jeffrey. The amount due to Calvin Payne and his
spouse arose when amounts were distributed to them by the Company for tax
planning purposes and then loaned back to the Company in 1993. The amount due to
a corporation controlled by S. Roy Jeffrey was loaned to the Company to assist
the Company in purchasing land in 1993. The amount payable to Walter Friesen
arose in February 1997, when bonuses were distributed and a portion of the
bonuses loaned back to the Company.
In the past, the Company received consulting services from Westower
Consulting, an enterprise under common control with the Company. Charges for
these services were approximately $0 in fiscal year 1996 and $93,500 is fiscal
year 1997. Amounts due to Westower Consulting were $36,500 at February 28, 1997.
The Company expects that payments to Westower Consulting will not continue in
fiscal year 1998 because Company employees and officers will perform the related
services. Westower Consulting charged the Company for services provided by the
Company's employees in an effort to defer income tax. Westower Consulting is
currently inactive.
The Company has extensive experience in costing the services it
provides, and management of the Company believes that its costing to affiliated
entities is consistent with its general costing. Similarly, products or services
received by the Company from affiliated entities have been at substantially the
same rates charged other enterprises. The Company has compared these rates prior
to engagement with independent quotes or with rates charged by other entities.
None of the agreements or arrangements with affiliates are subject to
adjustment.
While there has been no independent determination as to the fairness of
the Company's transactions with affiliated entities, in the future all such
transactions will be approved by the disinterested members of the Board of
Directors. These contract services have been provided at what management
estimates to be market or below market rates.
<PAGE>
DESCRIPTION OF SECURITIES
Units
Each Unit consists of one share of Common Stock and one Warrant. The
Shares and the Warrants included in the Units may not be separately traded for
six months after the date of this Prospectus, unless earlier separated upon
three day's written notice from the Representative to the Company.
Common Stock
The Company is authorized to issue 10,000,000 shares of Common Stock,
$0.01 par value. As of June 30, 1997 there were 3,000,000 shares of Common Stock
issued. There were 4 holders of record of Common Stock, as of June 30, 1997.
The holders of outstanding shares of all classes of Common Stock are
entitled to share ratably in any dividends paid on the Common Stock when, as and
if declared by the Board of Directors out of funds legally available. Each
holder of Common Stock is entitled to one vote for each share held of record.
The Common Stock is not entitled to cumulative voting or preemptive rights and
is not subject to redemption. Upon liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in the net
assets legally available for distribution. All outstanding shares of Common
Stock are fully paid and non-assessable.
Warrants
The Warrants will be issued in registered form under, governed by, and
subject to the terms of a warrant agreement (the "Warrant Agreement") between
the Company and American Stock Transfer & Trust Company as warrant agent (the
"Warrant Agent"). The following statements are brief summaries of certain
provisions of the Warrant Agreement. Copies of the Warrant Agreement may be
obtained from the Company or the Warrant Agent and have been filed with the
Commission as an exhibit to the Registration Statement of which this Prospectus
is a part.
Each Warrant entitles the holder thereof to purchase at any time one
share of Common Stock at an exercise price of $9.00 per share at any time after
the Common Stock and Warrants become separately tradable until [five years from
the date of this Prospectus]. The right to exercise the Warrants will terminate
at the close of business on [five years from the date of this Prospectus]. The
Warrants contain provisions that protect the Warrant holders against dilution by
adjustment of the exercise price in certain events, including but not limited to
stock dividends, stock splits, reclassification or mergers. A Warrant holder
will not possess any rights as a shareholder of the Company. Shares of Common
Stock, when issued upon the exercise of the Warrants in accordance with the
terms thereof, will be fully paid and non-assessable.
Commencing six months after the date of this Prospectus, the Company
may redeem some or all of the Warrants at a call price of $0.05 per Warrant,
upon thirty (30) day's prior written notice if the closing sale price of the
Common Stock on the American Stock Exchange has equaled or exceeded $15.00 for
ten (10) consecutive days.
The Warrants may be exercised only if a current prospectus relating to
the underlying Common Stock is then in effect and only if the shares are
qualified for sale or exempt from registration under the securities laws of the
state or states in which the purchaser resides. So long as the Warrants are
outstanding, the Company has undertaken to file all post-effective amendments to
the Registration Statement required to be filed under the Securities Act, and to
take appropriate action under federal law and the securities laws of those
states where the Warrants were initially offered to permit the issuance and
resale of the Common Stock issuable upon exercise of the Warrants. However,
there can be no assurance that the Company will be in a position to effect such
action, and the failure to do so may cause the exercise of the Warrants and the
resale or other disposition of the Common Stock issued upon such exercise to
become unlawful. The Company may amend the terms of the Warrants, but only by
extending the termination date or lowering the exercise price thereof. The
Company has no present intention of amending such terms. However, there can be
no assurances that the Company will not alter its position in the future with
respect to this matter.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Units, the Common Stock and
the Warrants is American Stock Transfer & Trust Company, 40 Wall Street, New
York, New York 10005.
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 4,000,000
shares of Common Stock outstanding. Of these shares, the 1,000,000 shares sold
in this offering (1,150,000 if the over-allotment option is exercised in full)
will be freely tradable in the public market without restriction under the
Securities Act, except shares purchased by an "affiliate" (as defined in the
Securities Act) of the Company. The remaining 3,000,000 shares (the "Restricted
Shares") (2,850,000 if the over-allotment option is exercised in full) will be
"restricted shares" within the meaning of the Securities Act and may be publicly
sold only if registered under the Securities Act or sold in accordance with an
applicable exemption from registration, such as those provided by Rule 144 under
the Securities Act.
In general, under Rule 144, as currently in effect, a person (or
persons whose shares are aggregated) is entitled to sell Restricted Shares if at
least one year has passed since the later of the date such shares were acquired
from the Company or any affiliate of the Company. Rule 144 provides, however
that within any three-month period such person may only sell up to the greater
of 1% of the then outstanding shares of the Company's Common Stock
(approximately 40,000 shares following the completion of this offering) or the
average weekly trading volume in the Company's Common Stock during the four
calendar weeks immediately preceding the date on which the notice of the sale is
filed with the Commission. Sales pursuant to Rule 144 also are subject to
certain other requirements relating to manner of sale, notice of sale and
availability of current public information. Any person who has not been an
affiliate of the Company for a period of 90 days preceding a sale of Restricted
Shares is entitled to sell such shares under Rule 144 without regard to such
limitations if at least two years have passed since the later of the date such
shares were acquired from the Company or any affiliate of the Company. Shares
held by persons who are deemed to be affiliated with the Company are subject to
such volume limitations regardless of how long they have been owned or how they
were acquired.
Without consideration of contractual restrictions described below, an
aggregate of 3,000,000 shares of Common Stock, representing 75.0% of the
outstanding shares of the Common Stock, or 2,850,000 shares representing 71.3%
if the over-allotment option is exercised in full will be eligible for sale in
the public market pursuant to Rule 144 after the completion of this offering.
The Company is unable to estimate the number of shares that may be sold from
time to time under Rule 144, since such number will depend upon the market price
and trading volume for the Common Stock, the personal circumstances of the
sellers and other factors.
After this offering, executive officers, directors and senior
management will own 2,625,000 shares of the Common Stock (assuming the
Underwriter's over-allotment option is not exercised). The Company's
shareholders and directors have entered into an agreement with the Underwriters
providing that they will not sell or otherwise dispose of any shares of Common
Stock held by them for a period of one year after the date of this Prospectus
without the prior written consent of the Underwriters, except for shares sold
upon exercise of the over-allotment option.
The Company can make no prediction as to the effect, if any, that offer
or sale of these shares would have on the market price of the Common Stock.
Nevertheless, sales of significant amounts of Restricted Shares in the public
markets could adversely affect the fair market price of Common Stock, as well as
impair the ability of the Company to raise capital through the issuance of
additional equity securities.
<PAGE>
UNDERWRITING
Pursuant to the terms and subject to the conditions contained in the
Underwriting Agreement, the Company has agreed to sell to the Underwriters named
below, and each of the Underwriters, for whom Tejas Securities Group, Inc. (the
"Representative") is acting as Representative, has severally agreed to purchase
the number of Units set forth opposite its name in the following table.
Underwriters Number of Units
Tejas Securities Group, Inc..........................
Total................................................ 1,000,000
=========
The Representative has advised the Company that the Underwriters
propose to offer the Units to the public at the initial public offering price
per share set forth on the cover page of this Prospectus and to certain dealers
at such price less a concession of not more than $0.375 per Unit, of which $0.15
may be reallowed to other dealers. After the initial public offering, the public
offering price, concession and reallowance to dealers may be reduced by the
Representative. No such reduction shall change the amount of proceeds to be
received by the Company as set forth on the cover page of this Prospectus.
The Company and the Selling Shareholders have granted to the
Underwriters an option, exercisable during the 45-day period after the date of
this Prospectus, to purchase up to 150,000 additional Units to cover
over-allotments, if any, at the same price per Unit as the Company will receive
for the 1,000,000 Units that the Underwriters have agreed to purchase. To the
extent that the Underwriters exercise such option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage of such
additional Units that the number of Units to be purchased by it shown in the
above table represents as a percentage of the 1,000,000 Units offered hereby. If
purchased, such additional Units will be sold by the Underwriters on the same
terms as those on which the 1,000,000 Units are being sold. All of the shares of
Common Stock included in these Units will be sold to the Underwriters by Selling
Shareholders, and the Company will not receive any proceeds from the sale of
such shares. The Warrants included in these Units will be issued by the Company.
See "Principal and Selling Shareholders."
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Shareholders against certain civil
liabilities, including liabilities under the Securities Act.
The holders of approximately 3,000,000 shares of the Common Stock after
the offering have agreed with the Representative that, until one year after the
date of this Prospectus, subject to certain limited exceptions, they will not
sell, contract to sell, or otherwise dispose of any shares of Common Stock, any
options to purchase shares of Common Stock, or any securities convertible into,
exercisable for or exchangeable for shares of Common Stock, owned directly by
such holders or with respect to which they have the power of disposition,
without the prior written consent of the Representative, except for shares sold
upon exercise of the over-allotment option. Substantially all of such shares
will be eligible for immediate public sale following expiration of the lock-up
periods, subject to the provisions of Rule 144. In addition, the Company has
agreed that until 365 days after the date of this Prospectus, the Company will
not, without the prior written consent of the Representative, subject to certain
limited exceptions, issue, sell, contract to sell, or otherwise dispose of, any
shares of Common Stock, any options to purchase any shares of Common Stock or
any securities convertible into, exercisable for or exchangeable for shares of
Common Stock other than the Company's sales of shares in this offering, the
issuance of Common Stock upon the exercise of outstanding options or warrants or
the issuance of options under its employee stock option plan. See "Shares
Eligible for Future Sale."
The Underwriters have the right to offer the Securities offered hereby
only through licensed securities dealers in the United States who are members of
the National Association of Securities Dealers, Inc. and may allow such dealers
such portion of its ten (10%) percent commission as the Underwriters may
determine.
<PAGE>
The Underwriters will not confirm sales to any discretionary accounts
without the prior written consent of their customers.
The Company has agreed to pay the Representative a non-accountable
expense allowance of 2.00% of the gross amount of the Units sold ($150,000 upon
the sale of the Units offered) at the closing of the offering. The Underwriters'
expenses in excess thereof will be paid by the Representative. To the extent
that the expenses of the underwriting are less than that amount, such excess
shall be deemed to be additional compensation to the Underwriters. In the event
this offering is terminated before its successful completion, the Company may be
obligated to pay the Underwriters a maximum of $25,000 on an accountable basis
for expenses incurred by the Underwriters in connection with this offering.
The Company has agreed that for a period of five years from the closing
of the sale of the Shares offered hereby, it will nominate for election as a
director a person designated by the Representative, and during such time as the
Representative has not exercised such right, the Representative shall have the
right to designate an observer, who shall be entitled to attend all meetings of
the Board and receive all correspondence and communications sent by the Company
to the members of the Board. The Representative has not yet identified to the
Company the person who is to be nominated for election as a director or
designated as an observer.
The Underwriting Agreement provides for indemnification among the
Company, the Selling Shareholders and the Underwriters against certain civil
liabilities, including liabilities under the Securities Act. In addition, the
Underwriters' Warrants provide for indemnification among the Company and the
holders of the Underwriters' Warrants and underlying shares against certain
civil liabilities, including liabilities under the Securities Act, and the
Exchange Act.
Underwriters' Warrants
Upon the closing of this offering, the Company has agreed to sell to
the Underwriters for nominal consideration, the Underwriters' Warrants. The
Underwriters' Warrants are exercisable at 120% of the public offering price for
a four-year period commencing one year from the effective date of this offering.
The Underwriters' Warrants may not be sold, transferred, assigned or
hypothecated for a period of one year from the date of this offering except to
the officers of the Underwriters and their successors and dealers participating
in the offering and/or their partners or officers. The Underwriters' Warrants
will contain antidilution provisions providing for appropriate adjustment of the
number of shares subject to the Warrants under certain circumstances. The
holders of the Underwriters' Warrants have no voting, dividend or other rights
as shareholders of the Company with respect to shares underlying the
Underwriters' Warrants until the Underwriters' Warrants have been exercised.
The Company has agreed, during the four year period commencing one year
from the date of this offering, to give advance notice to the holders of the
Underwriters' Warrants or underlying securities of its intention to file a
registration statement, other than in connection with employee stock options,
mergers, or acquisitions, and in such case the holders of the Underwriters'
Warrants and underlying securities shall have the right to require the Company
to include their securities in such registration statement at the Company's
expense.
For the term of the Underwriters' Warrants, the holders thereof will be
given the opportunity to profit from a rise in the market value of the Company's
shares, with a resulting dilution in the interest of other shareholders. The
holders of the Underwriters' Warrants can be expected to exercise the
Underwriters' Warrants at a time when the Company would, in all likelihood, be
able to obtain needed capital by an offering of its unissued shares on terms
more favorable to the Company than those provided by the Underwriters' Warrants.
Such facts may adversely affect the terms on which the Company can obtain
additional financing. Any profit realized by the Underwriters on the sale of the
Underwriters' Warrants or shares issuable upon exercise of the Underwriters'
Warrants may be deemed additional underwriting compensation.
If the Representative, at its election, at any time one year after the
date of this Prospectus, solicits the exercise of the Warrants, the Company will
be obligated, subject to certain conditions, to pay the Representative a
solicitation fee equal to 5% of the aggregate proceeds received by the Company
as a result of the solicitation. No warrant solicitation fees will be paid
within one year after the date of this Prospectus. No solicitation fee will be
paid if the market price of the Common Stock is lower than the then exercise
price of the Warrants, no solicitation fee will be paid if the Warrants being
exercised are held in a discretionary account at the time of exercise, except
where prior specific approval for exercise is received from the customer
exercising the Warrants, and no solicitation fee will be paid unless the
customer exercising the Warrants states in writing that the exercise was
solicited and designates in writing the Representative or other broker-dealer to
receive compensation in connection with the exercise. The Representative may
reallow a portion of the fee to soliciting broker-dealers.
<PAGE>
Determination of Offering Price
The initial public offering price was determined by negotiations
between the Company and the Representative. The factors considered in
determining the public offering price include the Company's revenue growth since
its organization, the industry in which it operates, the Company's business
potential and earning prospects and the general condition of the securities
markets at the time of the offering. The offering price does not bear any
relationship to the Company's assets, book value, net worth or other recognized
objective criteria of value.
Prior to this offering, there has been no public market for the
Securities, and there can be no assurance than an active market will develop.
American Stock Exchange
The Company has received afavorable preliminary listing eligibility opinion
the American Stock Exchange and is in the process of filing a listing
application for approval. It is anticipated that after the offering, the
Securities will be quoted on the American Stock Exchange. However, there can be
no assurance that the Securities will be listed, that a market for the
Securities will develop or if it does develop that it will be maintained. The
offering is contingent upon the Company obtaining 400 shareholders.
LEGAL MATTERS
The validity of the issuance of the Securities offered hereby will be
passed upon for the Company by Maurice J. Bates L.L.C., Dallas, Texas. Certain
legal matters in connection with the sale of the Securities offered hereby will
be passed upon for the Underwriters by Winstead Sechrest & Minick P. C., Dallas,
Texas.
EXPERTS
The financial statements as of February 28, 1997 and for each of the
two years in the period ended February 28, 1997 included in this Prospectus have
been so included in reliance on the report of Moss Adams LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants F-2
Consolidated Balance Sheet as of February 28, 1997 F-3
Consolidated Statement of Income for the years ended February 29, 1996 F-4
and February 28, 1997
Consolidated Statement of Stockholders' Equity for years ended F-5
February 29, 1996, and February 28, 1997
Consolidated Statement of Cash Flows for the years ended February 29, 1996, F-6
and February 28, 1997
Notes to Consolidated Financial Statements F-7
Consolidated Balance Sheet as of May 31, 1996 and 1997 (unaudited) F-16
Consolidated Statement of Income for the three months ended F-17
May 31, 1996 and 1997 (unaudited)
Consolidated Statement of Cash Flows for the three months ended F-18
May 31, 1996 and 1997(unaudited)
Notes to the Consolidated Financial Statements for the F-19
three months ended May 31, 1996 and 1997
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Westower Holdings Ltd. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Westower Holdings
Ltd. (a British Columbia corporation) and Subsidiaries as of February 28, 1997,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the years ended February 29, 1996 and February 28, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Westower Holdings Ltd. and Subsidiaries as of February 28, 1997, and the results
of its operations and its cash flows for the years ended February 29, 1996 and
February 28, 1997 in conformity with generally accepted accounting principles.
/s/ MOSS ADAMS LLP
MOSS ADAMS LLP
Bellingham, Washington
July 21, 1997
<PAGE>
WESTOWER HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
February 28, 1997
ASSETS
CURRENT ASSETS
Cash $ 451,466
Accounts receivable, net 1,535,734
Costs and estimated earnings in excess of billings on
uncompleted contracts (Note 3) 357,150
Inventory - parts and supplies 94,666
Prepaid expenses 3,873
--------------
Total current assets 2,442,889
PROPERTY AND EQUIPMENT, net (Notes 4 and 5) 1,426,265
INVESTMENT IN PARTNERSHIP (Note 7) 92,998
OTHER ASSETS 27,719
TOTAL ASSETS $ 3,989,871
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable (Note 8) $ 1,326,698
Other current liabilities (Note 11) 251,850
Billings in excess of costs and estimated earnings on
uncompleted contracts (Note 3) 129,644
Current portion of long-term debt 358,662
Income taxes payable (Note 6) 148,685
Deferred income taxes (Note 6) 349,712
-------------
Total current liabilities 2,565,251
LONG-TERM DEBT, excluding current portion 49,145
NOTES PAYABLE TO RELATED PARTIES (Note 8) 672,211
-------------
Total liabilities 3,286,607
------------
COMMITMENTS (Note 12)
STOCKHOLDERS' EQUITY (Note 9)
Common stock of no par value, 10,000 shares authorized,
200 shares issued and outstanding 175
Foreign currency translation adjustment (Note 2) 26,777
Retained earnings 676,312
--------------
Total stockholders' equity 703,264
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,989,871
=============
<PAGE>
WESTOWER HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Years Ended February 29, 1996 and February 28, 1997
<TABLE>
<CAPTION>
1996 1997
----------- --------
<S> <C> <C>
CONTRACT REVENUES EARNED $ 5,191,314 $ 11,637,141
COSTS OF REVENUES EARNED 3,937,045 8,633,423
------------ -----------
Gross profit 1,254,269 3,003,718
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 11) 891,788 1,885,171
OPERATING INCOME 362,481 1,118,547
OTHER INCOME (EXPENSE)
Partnership income (Note 7) 39,466 40,008
Interest expense (62,937) (33,841)
------------ ------------
INCOME BEFORE INCOME TAXES 339,010 1,124,714
INCOME TAXES (Note 6) 93,055 422,349
------------ ------------
NET INCOME $ 245,955 702,365
============ =============
EARNINGS PER SHARE $ 0.08 $ 0.23
============ =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASED UPON CAPITAL STRUCTURE SUBSEQUENT TO
YEAR END (Notes 9 and 10) 3,000,000 3,000,000
============ =============
</TABLE>
<PAGE>
WESTOWER HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended February 29, 1996 and February 28, 1997
<TABLE>
<CAPTION>
Foreign
Retained Currency
Common Stock Earnings Translation
Shares Amount (Deficit) Adjustment Total
<S> <C> <C> <C> <C> <C>
BALANCE, March 1, 1995 200 $ 175 $(276,564) $ 31,333 $(245,056)
Net Income -- -- 245,955 -- 245,955
Translation adjustment -- -- 2,734 (2,734) --
--------- --------- ---------
BALANCE, February 29, 1996 200 175 (27,875) 28,599 899
Net Income -- -- 702,365 -- 702,365
Translation adjustment -- -- 1,822 (1,822) --
--------- --------- ---------
BALANCE, February 28, 1997 200 $ 175 $ 676,312 $ 26,777 $ 703,264
========= ========= ========= ========= =========
</TABLE>
<PAGE>
WESTOWER HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended February 29, 1996 and February 28, 1997
Increase (Decrease) in Cash
1996 1997
CASH FROM OPERATING ACTIVITIES
Net income $ 245,955 $702,365
Adjustments to reconcile net income to
net cash from operating activities
Depreciation 75,184 86,154
Deferred income taxes 60,803 246,126
Income from partnership (39,466) (40,008)
Changes in operating assets and liabilities
Accounts receivable 67,003 (960,177)
Costs and estimated earnings in excess of billings on
uncompleted contracts (77,147) (170,935)
Other current assets 7,550 (96,458)
Other assets (32) (5,539)
Trade accounts payable (1,647) 828,757
Billings in excess of costs and estimated earnings on
uncompleted contracts 50,646 78,998
Other current liabilities 99,241 58,888
Income taxes payable (36,779) 143,758
-------- --------
Net cash flows from operating activities 451,311 871,929
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in partnership -- (45,221)
Sales of property and equipment 155,544 --
Purchase of property and equipment (3,721) (995,367)
----------- -----------
Net cash flows from investing activities 151,823 (1,040,588)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (423,315) (250,614)
Proceeds from debt incurred 65,690 465,480
----------- -----------
Net cash flows from financing activities (357,625) 214,866
----------- -----------
NET INCREASE IN CASH 245,509 46,207
CASH AND CASH EQUIVALENTS, beginning of year 159,750 405,259
----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 405,259 $ 451,466
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Taxes paid $ 69,031 $ 32,465
=========== ===========
Interest paid $ 62,937 $ 33,841
=========== ===========
<PAGE>
WESTOWER HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 29, 1996 and February 28, 1997
NOTE 1 - NATURE OF OPERATIONS
Westower Holdings Ltd. was incorporated in the Province of British Columbia,
Canada, and reincorporated in Wyoming in July 1997.
Westower Holdings Ltd. has two subsidiaries, Payne Holdings Ltd. and Westower
Communications Ltd. (both British Columbia corporations), and Westower
Communications Ltd. has a wholly-owned subsidiary, Westower Communications, Inc.
(a Washington Corporation). Westower Holdings Ltd., and its subsidiaries are
herein referred to as the "Company".
The Company designs, builds, installs, modifies and maintains wireless
communications transmitting and receiving facilities primarily for providers of
wireless communications services. In addition, the Company provides design,
engineering, and testing services (collectively, "wireless infrastructure design
engineering services") and site acquisition and evaluation services ("site
acquisition services") in connection with the installation and relocation of
wireless communications facilities. The Company also manufactures and sells
unmanned communications shelters designed to be located adjacent to wireless
transmitting and receiving facilities to house electrical equipment associated
with such facilities. The Company's customers are located throughout North
America, but predominantly in the western United States and Canada.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Presentation - These financial statements are presented in U.S. currency and
prepared in conformity with U.S. Generally Accepted Accounting Principles.
(b) Principles of Consolidation - The consolidated financial statements include
the financial statements of Westower Holdings Ltd. and its wholly-owned
subsidiaries, Payne Holdings Ltd., Westower Communications Ltd. and Westower
Communications Inc. All significant intercompany balances and transactions have
been eliminated in consolidation.
(c) Investment in Partnership - The Company owns a 50% interest in WTC Leasing
Partnership, an Alberta limited partnership which constructs and licenses
communication towers in western Canada. The Company accounts for its investment
using the equity method whereby the investment is increased for additional
contributions and the Company's pro-rata share of earnings and decreased by
amounts withdrawn and the Company's pro-rata share of losses.
(d) Contract Revenue and Cost Recognition - Revenue from fixed-price
construction contracts is recognized on the percentage-of-completion method.
Revenues from contracts based upon time and materials are recognized based upon
revenues earned for hours worked and materials consumed. Most of the Company's
contracts are short-term and are completed in two to three months. Contract
costs include all direct material and labor costs and those indirect costs
related to contract performance. Selling, general and administrative costs are
charged to expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined.
Costs and estimated earnings in excess of billings on uncompleted contracts
represents revenues recognized in excess of amounts billed. Billings in excess
of costs and estimated earnings on uncompleted contracts represents billings in
excess of revenues earned.
(e) Cash and Cash Equivalents - For purposes of cash flows reporting, cash and
cash equivalents consist of cash in banks and money market investments on
deposit with major Canadian and Northwest financial institutions.
(f) Accounts Receivable - The Company offers short-term credit to its customers.
Accounts receivable are considered fully collectible and are not collateralized.
(g) Inventory - The Company's inventory of parts and supplies is stated at the
lower of cost, computed on a first-in, first-out (FIFO) basis or market.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(h) Property, Equipment and Depreciation - Property and equipment are stated at
cost less accumulated depreciation. Improvements which increase the useful life
of property, and replacements of major components of property are capitalized,
while maintenance, repairs and minor replacements are expensed as incurred.
Depreciation is provided using the straight-line method over the estimated
useful lives of the respective assets. Estimated useful lives by major
depreciable property and equipment category are as follows: furniture, fixtures
and equipment, 3 to 10 years; and vehicles, 5 years. SFAS No. 121 Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstance indicate that the carrying amount of an asset may not be fully
recoverable. The Company has adopted Statement 121 and believes all significant
long-lived assets are fully recoverable. (i) Income Taxes - Income taxes are
provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus the change in deferred taxes.
Deferred taxes are recognized for differences between the basis of assets and
liabilities for financial statement and income tax purposes. The differences
relate primarily to the timing and recognition of depreciation on depreciable
assets and profit on uncompleted contracts. The deferred tax amounts represent
the future tax consequences of those differences, which will either be
deductible or taxable when the assets and liabilities are recovered or settled.
(j) Translation of Foreign Currencies - Assets and liabilities of foreign
operations, where the functional currency is the local currency, are translated
in U.S. dollars at the rate of exchange in effect on the balance sheet date,
except for property and equipment, which is translated at the historical rates
of exchange in effect when the associated assets were purchased. Revenue and
expenses are translated using the average rates of exchange prevailing during
the year. Related translation adjustments are reflected in the stockholders
equity section of the consolidated balance sheet. (k) Use of Estimates - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant estimates subject
to revisions and possibly material adjustment, upon the outcome of future
unknown events include the following:
(1) Contract Revenue and Cost Recognition - A significant portion of
construction revenues and costs are based upon management's estimates
which are in turn based upon past experience, reports from the field
and economic trends and long-term agreements. Actual revenues and costs
are therefore not known until contracts are completed and all revenues
are billed and costs invoiced and accepted.
(2) Depreciation - Depreciation represents an expense allocation
matching asset costs to revenue earned over the estimated lives of
assets owned by the Company. Periodically, the Company re-evaluates
the lives and methods of depreciation applied to its property and
equipment and considers such things as general condition and utility,
technological status and economic viability. Such evaluations may
result in the Company's revision and downward adjustment of asset
carrying values in relatively short-term time periods.
(3) Income Taxes - The Company operates in a number of taxing
jurisdictions and endeavors to comply with all tax laws as applicable,
consistent with minimizing taxes paid by the Company where possible.
To comply with these laws the Company must allocate and prorate
certain items of revenue and expense in addition to establishing
appropriate transfer pricing policies. These allocations and policies
are subject to scrutiny and audit which may result in the Company's
need to adjust its tax accruals and provisions as a result of its
interactions with taxing authorities.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(4) Translation Of Foreign Currencies - The Company's business
operations currently include significant operations in Canada. In
recent history the exchange rates between U.S. and Canadian currencies
have been relatively stable and translation adjustments have not been
significant. Exchange rates are affected by factors outside the
Company's control including political policies and actions and economic
trends and events. Accordingly, the values of assets and liabilities
denominated in the Canadian currency are subject to adjustment based
upon many factors.
(l) New Accounting Standards - In February 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 128. The new standard replaces primary and fully diluted earnings per share
with basic and diluted earnings per share. SFAS No. 128 is required to be
adopted by the Company in the year ending February 28, 1998. Had the Company
been required to adopt SFAS No. 128 for the periods presented, the adoption
would not have impacted reported earnings per share.
In June 1997, the FASB issued SFAS No. 130 and 131. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components.
SFAS No. 131 establishes standards for reporting about operating segments,
products and services, geographic areas, and major customers. The standards
become effective for fiscal years beginning after December 15, 1997. Management
plans to adopt these standards in the year ending February 28, 1999. Management
believes that provisions of SFAS No. 130 and 131 will not have a material effect
on its financial condition or reported results of operation.
NOTE 3 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
The Company's costs, earnings and billings on uncompleted contracts at February
28, 1997 are as follows:
Costs incurred on uncompleted contracts $ 4,081,377
Estimated earnings 361,435
Less billings to date (4,215,306)
------------
Total $ 227,506
=============
Included in the accompanying balance sheet
Costs and estimated earnings in excess of billings on uncompleted
contracts 357,150
Billings in excess of costs and estimated earnings on uncompleted
contracts (129,644)
-------------
Total $ 227,506
============
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at February 28, 1997:
Land $ 804,573
Buildings 185,946
Vehicles 299,424
Furniture and fixtures 151,915
Equipment 188,606
Leasehold improvements 26,341
-------------
1,656,805
Less accumulated depreciation 230,540
$ 1,426,265
Depreciation expense on property, plant and equipment in 1996 and 1997 was
$75,184 and $86,154, respectively.
<PAGE>
NOTE 5 - LONG-TERM DEBT
The Company's long-term debt consists of the following at February 28, 1997:
Note payable to bank, due on demand, in Canadian dollars, monthly principal
payments of $1,764 plus interest at the bank's prime rate (4.75%) plus 1%, and
secured by a mortgage on land and a security agreement on all corporate assets.
$211,700
Note payable to bank, due on demand, in Canadian dollars, monthly principal
payments of $2,172, plus interest at the bank's prime rate (4.75%) plus 1% and
secured by a mortgage on land and buildings, and an assignment of rental income.
112,548
Notes payable to bank, maturing from April 1, 1998 to September 1, 1999, with
interest at rates from 7.5% to 9.99%, monthly payments of $2,573 and secured by
vehicles. 48,580
Vehicle purchase financing with interest at 9.33%, monthly payments of $788 and
secured by a vehicle. 34,979
----------
Total long-term debt 407,807
Less current portion (358,662)
Long-term portion $ 49,145
==========
Long-term debt matures as follows:
Year Ending
February 28,
1998 $ 358,662
1999 21,200
2000 14,862
2001 13,083
------------
$ 407,807
The Company's loan agreements with banks contain covenants requiring a
subsidiary of the Company to maintain a working capital ratio of 1.25:1 and a
debt to equity ratio of 2.5:1. At February 28, 1997, both the Company and a
subsidiary were in breach of these two ratio requirements, as the consolidated
working capital ratio was .95:1 and the consolidated debt to equity ratio was
4.7:1. Under the terms of the agreements, the bank may declare a default and
call the notes if the Company is in violation of these requirements. As of July
21, 1997, the bank has not waived the ratio requirements, and the entire amount
of the bank notes of $324,248 is considered current at February 28, 1997.
NOTE 6 - INCOME TAXES
The provision for income taxes is comprised by the following:
1996 1997
---- ----
Current Canadian taxes $ 32,252 $ 43,399
Deferred Canadian taxes 60,803 248,474
Current U.S. Federal taxes - 118,712
Deferred U.S. Federal taxes (2,348)
Current State taxes - 14,112
-------------- -----------
Total income tax provision $ 93,055 $ 422,349
========== ==========
<PAGE>
NOTE 6 - INCOME TAXES (Continued)
The total tax provision differs from the amount computed using the statutory
Federal and Canadian income tax rates as follows:
<TABLE>
<CAPTION>
Canadian U.S. Total
<S> <C> <C> <C>
Income Income Income
1996
Pretax net income $ 262,258 $ 76,752 $ 339,010
Statutory rates 45% 34% 43%
Tax at statutory rates 118,016 26,096 144,112
Benefit of graduated rates (24,961) -- (24,961)
Effect of net operating loss carryover -- (26,096) (26,096)
Provision for income taxes 93,055 -- 93,055
Effective tax rates 35% 0% 27%
Canadian U.S. Total
Income Income Income
1997
Pretax net income $ 766,586 $ 358,128 $ 1,124,714
Statutory rates 45% 34% 41%
Tax at statutory rates 344,963 121,764 466,727
Benefit of graduated rates (53,090) (602) (53,692)
State income taxes, net of U.S. tax benefit - 9,314 9,314
Provision for income taxes 291,873 130,476 422,349
Effective tax rates 38% 36% 38%
</TABLE>
<TABLE>
<CAPTION>
The significant components of deferred income tax expense are as follows:
<S> <C> <C>
1996 1997
---- ----
Canadian Taxes
Depreciation of property and equipment $1,196 $(5,772)
Revenues recognized on uncompleted contracts 59,607 254,246
---------- -----------
Subtotal deferred income tax expense for foreign taxes 60,803 248,474
Federal taxes
Depreciation of property and equipment - . (2,348)
----------- ------------
Total deferred income tax expense $ 60,803 $ 246,126
========= =========
</TABLE>
<TABLE>
<CAPTION>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax liability are as follows:
<S> <C>
Property and equipment, principally due to depreciation differences $ 1,235
Costs and estimated earnings in excess of billings on uncompleted contracts 547,109
Billings in excess of costs and estimated earnings on uncompleted contracts (198,632)
-----------
Total deferred tax liability $ 349,712
==========
</TABLE>
NOTE 7 - INVESTMENT IN WTC LEASING PARTNERSHIP
(a) Nature of Operation - The Company owns a 50% interest in WTC Leasing, an
Alberta limited partnership (the Partnership). The Partnership constructed six
communication towers in western Canada, and generates substantially all revenues
through license agreements with a single wireless communication service
provider.
(b) Summary Financial Information - The following is summary financial
information for the Partnership as a whole:
<PAGE>
NOTE 7 - INVESTMENT IN WTC LEASING PARTNERSHIP (Continued)
SUMMARY BALANCE SHEET
1997
Assets
Current assets $ 24,572
Property and equipment, net 334,850
--------
Total assets $359,422
========
Liabilities and Equity
Accounts payable $ 18,234
Note payable 155,194
Equity 185,994
--------
Total liabilities and equity $359,422
========
SUMMARY OPERATING RESULTS
1996 1997
---- ----
Revenues $ 151,562 $163,076
-------- --------
Expenses
Operating expenses 41,624 56,538
Depreciation 11,052 11,052
Interest 19,954 15,470
--------- --------
Total expenses 72,630 83,060
--------- --------
Pre-Tax income $ 78,932 $ 80,016
============ ========
(c) Property and Equipment - The Partnership purchased communication towers and
related equipment shelters from the Company and from another related party
entity holding an interest in the Partnership. Property and equipment is
depreciated using the straight-line method, over a twenty-year life for towers
and shelters. Costs and accumulated depreciation for the property and equipment
is as follows:
1996 1997
----- -----
Towers $ 281,340 $ 281,340
Shelters 100,482 89,430
---------- ------------
381,822 370,770
Less accumulated depreciation (42,955) (62,046)
---------- ------------
$ 338,867 $ 308,724
============ =============
The Company periodically evaluates the remaining useful life and recoverability
of such equipment in light of the unexpired term of the Licensing Agreements
discussed in paragraph (d) below. Since the renewal of the Licensing Agreements
through the estimated 20 year life of the equipment is not guaranteed, it is
reasonably possible that the Company's estimate that it will recover the
carrying amount of the equipment from future operations will change in the near
term.
(d) Licensing Agreements - The Partnership derives 100% of its revenues from
licensing agreements, for utilization of space on the Partnership's
communication towers. Substantially all of the agreements are with one customer.
At the expiration of the agreements in 1998 and 1999, the licensee may terminate
the agreements with no further obligation, renew the agreements for a five year
term at rates to be negotiated, or negotiate to purchase the towers on which the
license is held. Management expects the licensee to either renew the agreements
at similar terms, or negotiate to purchase the towers at the expiration of the
agreements. Future minimum license revenues under the agreements are due as
follows:
1998 $ 195,180
1999 151,765
(e) Debt Guarantee - The note payable owed to a bank by the Partnership in the
amount of $155,194 is collateralized by a General Security Agreement on the
assets of Westower Communications Ltd. and guaranteed by personal guarantees of
corporate officers.
<PAGE>
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company receives consulting services from Westower Consulting, an enterprise
under common control with the Company. Charges for these services were
approximately $-0- in fiscal year 1996 and $93,500 in fiscal year 1997. Amounts
due to Westower Consulting were $36,500 at February 28, 1997. The Company
expects that payments to Westower Consulting will not continue in fiscal year
1998 because the related services will be performed by Company employees and
officers.
The Company purchases goods and services from Western Telecom Construction Ltd.,
a corporation owned by a family member of one of the stockholders of the
Company. During the years ended February 29, 1996 and February 28, 1997,
purchases by the Company from Western Telecom Construction Ltd. were $805,143
and $1,822,326, respectively. Trade accounts payable to Western Telecom were
$483,379 at February 28, 1997. The Company also sold goods and services to
Western Telecom Construction, Ltd. in the amount of $856,003 in 1996 and
$554,181 in 1997. Additionally, as discussed in Note 7(c), a portion of the cost
of communication towers was purchased from Western Telecom Construction Ltd. in
1994 for $196,626.
Notes payable to related parties are detailed as follows:
Unsecured notes payable to a member of Company management and his
spouse, in Canadian dollars, with interest at 5% per year, and by
agreement, no principal payments required prior to June 30, 1998,
thereafter due on demand. $ 452,199
Unsecured note payable to a corporation controlled by a director,
in Canadian dollars, without interest and by agreement, no
principal payments required prior to June 30, 1998. 120,012
Unsecured note payable to a director without interest and by
agreement, no principal payments required prior to June 30, 1998. 100,000
----------
$ 672,211
As discussed in Note 9, the Company intends to raise capital through a sale of
securities to the public in 1997, the proceeds of which are intended in part to
be used to retire this existing related party debt.
NOTE 9 - SUBSEQUENT EVENTS
In June 1997, Westower Corporation was incorporated in Washington, and
subsequently acquired all the issued shares of Westower Holdings Ltd., in
exchange for 3,000,000 shares of its common stock. Westower Corporation has
10,000,000 shares of common stock authorized. In July 1997, Westower Holdings
Ltd. renounced its incorporation in British Columbia, and received a Certificate
of Incorporation in the state of Wyoming. The Company intends to raise capital
in the new Company through an underwritten public offering of 1,000,000 shares
of common stock and 1,000,000 Redeemable Common Stock Purchase Warrants
registered with the Securities and Exchange Commission on Form SB-2. Expected
gross proceeds are approximately $7,500,000.
Subsequent to year end, Westower Corporation authorized and implemented a stock
option plan for the purposes of awarding options to employees. Westower
Corporation authorized and reserved 400,000 shares for this purpose. In June
1997, options for 132,000 shares were granted to key executives at an exercise
price of $8.25 per share and 24,000 at an exercise price of $7.50 per share.
One-third of the options will become exercisable in January 1998, with the
second one-third exercisable in January 1999, and the final one-third
exercisable in January 2000.
Earnings per share have been presented by giving retroactive effect to the
Company's issuance of 3,000,000 shares, no shares were deemed outstanding
through stock options as the exercise price of the issued options equals or
exceeds the contemplated initial offering price.
<PAGE>
NOTE 9 - SUBSEQUENT EVENTS (Continued)
On March 31, 1997 the Company obtained a $250,000 line of credit from Hong Kong
Bank of Canada for a six-month period. The agreement contains certain covenants
and restrictions including a limitation on the payment of dividends.
NOTE 10 - EARNINGS PER SHARE
Earnings per common share are computed by dividing net income by the total of
the number of common shares outstanding assuming a retroactive issuance of
3,000,000 shares.
NOTE 11 - RETIREMENT PLAN
The Company's Washington subsidiary, Westower Communications Inc. adopted a
defined contribution retirement plan, effective January 1, 1997. The plan
contains certain participation criteria and allows for both employee and
employer discretionary contributions. The total Company funded discretionary
contribution for 1997 was $46,114.
NOTE 12 - COMMITMENTS
The Company is a guarantor on a bank loan held by WTC Leasing Partnership
(discussed further in Note 7), in the amount of $155,194 at February 28, 1997.
The Company leases office space in Washington under a noncancelable lease
expiring December 31, 1999. The following is a schedule of future minimum
noncancelable lease payments under this agreement:
Year Ending
February 28,
1998 $ 27,000
1999 27,000
2000 22,500
----------
Total $ 76,500
=========
Rent expense for the year ended February 28, 1997 was $27,450.
NOTE 13 - INFORMATION ABOUT CREDIT RISK AND BUSINESS CONCENTRATIONS
Assets for which the Company has credit risk include trade accounts receivable,
which amounted to $1,535,734 at February 28, 1997. The Company's trade customers
are concentrated in the wireless communications industry. Sales to 12 major
customers approximated 73% and 84% of total sales for the years ended February
29, 1996 and February 28, 1997, respectively. Amounts due from four customers
approximated 73% of the total accounts receivable at February 28, 1997.
The Company expects that sales to relatively few customers will continue to
account for a high percentage of its net sales in the foreseeable future and
believes that its financial results depend in significant part upon the success
of these few customers. Although the composition of the group comprising the
Company's largest customers may vary from period to period, the loss of a
significant customer or any reduction in orders by any significant customers,
including reductions due to market, economic or competitive conditions in the
wireless communications industry, may have a material adverse effect on the
Company's business, financial condition and results of operations.
<PAGE>
NOTE 13 - INFORMATION ABOUT CREDIT RISK AND BUSINESS CONCENTRATIONS (Continued)
The following table represents approximate sales and net income (1996 and 1997)
and net assets (1997) related to the geographic regions in which the Company
operates.
1996
Total United States Canada
Sales 100% 30% 70%
=== == ==
Net Income 100% 31% 69%
=== == ==
1997
Total United States Canada
100% 40% 60%
=== == ==
Net Income 100% 32% 68%
=== == ==
Net Assets 100% 31% 69%
=== == ==
NOTE 14 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash, accounts receivable, trade accounts payable and other current liabilities
- - The carrying value amounts reported in the balance sheet for these items
approximate those accounts fair values.
Long-term debt - The fair value of long-term debt approximates its carrying
value of $407,807 (see note 5).
Notes Payable to Related Parties - The Company has notes payable to related
parties in the carrying amount of $672,211 (see note 8), and estimates the fair
value of these obligations at a discounted amount of $656,000. The fair value
was determined by discounting estimated future cash flows, using the stated
terms of the notes, by the Company's incremental borrowing rate.
<PAGE>
WESTOWER HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
May 31, 1996 and 1997
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
1996 1997
---------- ------
<S> <C> <C>
CURRENT ASSETS
Cash $ 67,649 $ 366,334
Contracts receivable, net 1,265,005 2,068,472
Costs and estimated earnings in excess of billings on
uncompleted contracts 297,776 1,062,260
Inventory (note 2) -- 221,826
---------- ----------
1,630,430 3,718,892
PROPERTY AND EQUIPMENT, net 693,465 1,528,155
Investment in Partnership 73,900 99,806
Other assets, net 23,740 63,810
---------- ----------
$2,421,535 $5,410,663
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 911,438 $1,390,309
Billings in excess of costs and estimated earnings on
uncompleted contracts 149,915 997,130
Current portion of long-term debt 155,058 247,022
Bonuses payable 284,762 244,550
Income taxes 7,417 137,388
Deferred income taxes 138,238 568,712
---------- ----------
Total current liabilities 1,646,828 3,585,111
LONG-TERM DEBT 37,533 179,653
NOTES PAYABLE TO RELATED PARTIES 664,631 585,298
---------- ----------
Total liabilities 2,348,992 4,350,062
---------- ----------
STOCKHOLDERS' EQUITY
Capital Stock 175 175
Foreign Currency Translation Adjustment 28,599 26,777
Retained Earnings 43,769 1,033,649
---------- ----------
Total stockholders' equity 72,543 1,060,601
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,421,535 $5,410,663
========== ==========
</TABLE>
<PAGE>
WESTOWER HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED MAY 31, 1996 AND 1997
(Unaudited)
1996 1997
---------- -------
Contract Revenues Earned $ 1,881,332 $ 3,288,173
Costs of Revenues Earned 1,361,943 2,385,913
--------- ---------
Gross Profit 519,389 902,260
Selling, General and Administrative Expenses 401,128 312,411
--------- ---------
Operating Income 118,261 589,849
Interest Expense 11,439 13,512
--------- ---------
Income Before Income Taxes 106,822 576,337
Income Taxes 37,000 219,000
--------- ---------
Net Income $ 69,822 $ 357,337
========= =========
<PAGE>
WESTOWER HOLDINGS LTD
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED MAY 31, 1996 AND 1997
(Unaudited)
1996 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 69,822 $ 357,337
Adjustment to reconcile net earnings to net
cash provided by earnings
Depreciation and amortization 15,411 46,005
Changes in non-cash current assets
and liabilities (net) (330,077) (223,325)
-------- --------
Net cash provided by (used in)
Operating activities (244,844) 180,017
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (87,324) (133,535)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (6,147) (162,029)
-------- --------
NET INCREASE (DECREASE) IN CASH (338,315) (115,547)
CASH - beginning of period 405,964 451,466
-------- --------
CASH - end of period 67,649 $ 366,334
======== ========
SUPPLEMENTAL DISCLOSURE
Interest paid $ 6,564 $ 8,938
======== ========
<PAGE>
WESTOWER HOLDINGS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MAY 31, 1996 AND 1997
(Unaudited)
Notes 1: Basis of Presentation
The notes to the consolidated financial statements do not present all
disclosures required under generally accepted accounting principles but instead,
as permitted by Securities and Exchange Commission regulations, presume that
users of the interim financial statements have read or have access to the
February 28, 1997 audited consolidated financial statements and that the
adequacy of additional disclosure needed for a fair presentation may be
determined in that context.
The financial information included herein reflects all adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management,
necessary to a fair presentation of the results for interim periods. The results
of operations for the three-month period ended May 31, 1996 and 1997
respectively are not necessarily indicative of the results to be expected for
the full year.
Note 2: Inventory
Inventory is stated at the lower of cost and estimated net realizable value
using the first in first out method. Inventory consists of materials purchased
for future construction not associated with specific jobs.
<PAGE>
No person has been authorized to give any information or to make any
representation in connection with this offering other than those contained in
this Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company or any Underwriter.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the securities to which it relates or an
offer to sell or the solicitation of an offer to buy such securities in any
circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstance, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information herein is
correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
PAGE
Additional Information.................... 2
Prospectus Summary........................ 3
Risk Factors.............................. 6
Use of Proceeds........................... 11
Dividend Policy........................... 11
Dilution.................................. 12
Capitalization............................ 13
Management's Discussion and
Analysis of Financial Condition
and Results of Operation................. 14
Business.................................. 17
Management................................ 21
Principal Shareholders.................... 24
Certain Relationships
and Related Transactions............... 25
Description of Securities................. 26
Shares Eligible For Future Sale........... 27
Underwriting.............................. 28
Legal Matters............................. 30
Experts................................... 30
Index to Financial Statements............. F-1
.........Until ____ , 1997 (25 days from the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligations of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
1,000,000 UNITS
Each Unit Consisting of
One Share of Common Stock
and
One Redeemable Common
Stock Purchase Warrant
OFFERING PRICE
$7.50
PER UNIT
Westower
Corporation
Prospectus
, 1997
<PAGE>
II - 5
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Pursuant to Section 23B.08.500 of the Washington Business Corporation
Act, a corporation may indemnify an individual made a party to a proceeding
because the individual is or was a director against liability incurred in his
official capacity with the corporation including expenses and attorneys fees.
Article VII of the Bylaws provides that the Company may indemnify and hold
harmless to the full extent permitted by applicable law each person who was or
is made party to or is threatened to be made a party to or is involved in an
actual or threatened action, suit or other proceeding, civil or criminal, by
reason of the fact that he is or was a director, officer, employee or agent of
the Company against all expenses, liabilities and losses, including attorneys
fees, judgements, fines, and ERISA excise taxes or penalties, actually or
reasonably incurred or suffered by such person in connection with any such
action.
Article VI of Articles of Incorporation provides that any personal
liability of a director to the corporation or its shareholders for monetary
damages for conduct as a director is eliminated, except for any liability for
any acts or omissions that involve intentional misconduct by a director or a
knowing violation of a law by a director, for conduct violating RCW 23B.08.310,
for any transaction from which the director will personally receive a benefit in
money, property, or services to which the director is not legally entitled, or
for any act or omission occurring prior to the date when this Article becomes
effective. If after this Article becomes effective the Washington Business
Corporation Act is amended to authorize further elimination or limitation of
liability of a director, then, upon the effective date of the amendment, the
liability of a director shall be further eliminated and limited without further
act to the fullest extent so authorized. No amendment or repeal of these
Articles of Incorporation shall reduce the extent of any elimination or
limitation of liability of a director existing immediately prior to the
amendment or repeal.
Article VII of the Articles of Incorporation provides for
indemnification of the directors and officers as follows:
ARTICLE VII INDEMNIFICATION OF DIRECTORS AND OFFICERS 7.1 Right to
Indemnification. EACH INDIVIDUAL (including an individual's personal
representative) who was or is made a party or is threatened to be made a party
to, or is otherwise involved (including, without limitation, as a witness) in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, investigative or by or in the right of the
corporation, or otherwise (a "Proceeding") because the individual or another
individual of whom the individual is a personal representative:
(a) is or was a director or officer of the corporation or any predecessor
entity, or
(b) being or having been such a director or officer, is or was serving at the
request of the corporation or any predecessor entity as a director, officer,
partner, trustee, employee, agent, or in any other relationship or capacity
whatsoever, of any other foreign or domestic corporation, partnership, joint
venture, employee benefit plan or trust or other trust, enterprise or other
private or governmental entity, agency, board, commission, body or other unit
whatsoever ( (a) and (b) collectively, an "Indemnitee")
SHALL BE INDEMNIFIED AND HELD HARMLESS by the corporation to the
fullest extent not prohibited by the Washington Business Corporation Act as the
same exists or may hereafter be amended (but, in the case or any amendment, only
to the extent that the amendment does not prohibit the corporation from
providing broader indemnification rights than prior to the amendment) IF the
Indemnitee acted in good faith and reasonably believed the Indemnitee's conduct
was in the corporation's best interests (in the case of conduct in the
Indemnitee's official capacity with the corporation) and (in all other cases)
was at least not opposed to the corporation's best interests and is fairly and
reasonably entitled to indemnification in view of all the relevant circumstances
("Corporation's Standards for Indemnification"), WITHOUT REGARD TO the
limitations in RCW 23B.08.510 through 23B.08.550, AND WHETHER OR NOT the
Indemnitee met the standard of conduct set forth in RCW 23B.08.510 or any other
standard of conduct set forth in RCW 23B.08.500 through RCW 23B.08.580, AGAINST
ALL DIRECT AND INDIRECT EXPENSES, LIABILITIES AND LOSSES (including but not
limited to attorney fees, judgments, settlements, penalties, fines, ERISA and
employee benefit plan and other excise taxes and other taxes and penalties,
environmental and remediation expenses, settlements, penalties and fines, and
other adverse effects) that are actually incurred or suffered by the Indemnitee
in connection with the Proceeding (whether or not the basis of the Proceeding is
alleged conduct, action or inaction in an official capacity as a director,
officer, partner, trustee, employee, agent, or in any other relationship or
capacity whatsoever). The indemnification granted in the Article is a contract
right and includes the right to payment by, and the right to receive
reimbursement from, the corporation of all the Indemnitee's expenses as they are
incurred, including advances in advance of final disposition of the Proceeding.
The term "expenses" as used in this Article includes without limitation all
counsel and attorneys' fees and costs. Notwithstanding the foregoing, an advance
for expenses incurred by an Indemnitee who is a party to a Proceeding because
the Indemnitee is or was a director of the corporation or any predecessor entity
shall be made in advance of final disposition of the Proceeding only upon
receipt by the corporation of (i) a written undertaking (hereinafter an
"undertaking") executed personally or on the Indemnitee's behalf to repay the
advance if and to the extent it is ultimately determined by order of a court
having jurisdiction (which determination shall become final upon expiration of
all rights to appeal, hereinafter a "final adjudication") that the Indemnittee
is not entitled to be indemnified for such expenses under this Article, and (ii)
a written affirmation by the Indemnitee of the Indemnitee's good faith belief
that the Indemnitee has net the Corporation's Standards for Indemnification as
defined in this Article for the amount claimed. The undertaking must be an
unlimited general obligation of the Indemnitee, unsecured and without reference
to financial ability to make repayment. 7.2 Court-Ordered Indemnification or
Advance; Presumption. If any claim for indemnification or advance of expenses
under Section 7.1 of this Article is not paid in full by the corporation within
30 days after a written claim has been received by the corporation, the
Indemnitee may at any time thereafter apply for indemnification or advance of
expenses to the court conducting the Proceeding or to another court of competent
jurisdiction. If the Indemnitee is successful in whole or in part in any such
application, the corporation shall also pay to Indemnitee all the Indemnitee's
expenses in connection with the application. The Indemnitee shall be presumed to
be entitled to indemnification and advances of expenses under this Article upon
the corporation's receipt of Indemnitee's written claim (and in any application
to a court for indemnification or advance of expenses), and thereafter the
corporation shall have the burden of proof to overcome that presumption. Neither
the fact that the corporation (including its board of directors, special legal
counsel or its shareholders under RCW 23B.08.550, or otherwise) did, nor the
fact that the corporation (including its board of directors, special legal
counsel or its shareholders under RCW 23B.08.550, or otherwise) did not, make a
determination that the Indemnitee is or is not entitled to indemnification or
advance of expenses, shall be a defense to the application or create a
presumption that the Indemnitee is not so entitled. If the Indemnitee applies to
a court having jurisdiction for determination of the right to indemnity or
advance of expenses, or amount thereof, the court's determination shall become
final upon expiration of all rights to appeal, and such a final adjudication
shall supersede any other determination made in accordance with RCW 23B.08.550,
or otherwise. 7.3 Nonexclusivity of Rights, Severability. The right to
indemnification (including but not limited to payment, reimbursement and
advances of expenses) granted in this Article is not exclusive of any other
rights that any individual may have or hereafter acquire under any statute,
common law, provision of the Articles of Incorporation or Bylaws of the
corporation, agreement, vote or resolution of shareholders or disinterested
directors, or otherwise. Notwithstanding any amendment to or repeal of this
Article, any Indemnitee shall be entitled to indemnification and advance of
expenses in accordance with the provisions of this Article with respect to any
conduct, acts or omissions of the Indemnitee occurring prior to the amendment or
repeal. If any provision or term of this Article is determined to be void or
unenforceable for any reason, the remaining provisions and terms shall remain in
full force and effect. 7.4 Insurance, Contracts and Funding. The corporation may
purchase and maintain insurance, at its expense, to protect itself and any
individual (including an individual's personal representative) who is or was a
director, officer, employee or agent of the corporation or any predecessor
entity or who being or having been such a director or officer, is or was serving
at the request of the corporation or any predecessor entity as a director,
officer, partner, trustee, employee, agent, or in any other relationship or
capacity whatsoever, of any foreign or domestic corporation, partnership, joint
venture, employee benefit plan or trust or other trust, enterprise or other
private or governmental entity, agency, board, commission, body or other unit
whatsoever, against any expense, liability or loss, whether or not the
corporation would have power to indemnify the individual against the same
expense, liability or loss under the Washington Business Corporation Act, or RCW
23B.08.510 or 23B.08.520, or otherwise. The corporation may grant indemnity, and
may enter into contracts granting indemnity, to any such individual, whether or
not in furtherance of the provisions of this Article, and may create trust
funds, grant security interests and use other means (including, without
limitation, letters of credit) to secure and ensure the payment of
indemnification amounts. 7.5 Partial Indemnification. If an Indemnitee is
entitled to indemnification by the corporation for some or a portion of
expenses, liabilities or losses, but not for the total amount thereof, the
corporation shall nevertheless indemnify the Indemnitee for the portion of the
expenses, liabilities and losses to which the Indemnitee is entitled. 7.6
Successors and Assigns. All obligations of the corporation to indemnify any
Indemnitee: (i) are binding upon all successors and assigns of the corporation
(including any transferee of all or substantially all of its assets and any
successor by merger or otherwise by operation of law), (ii) are binding on and
inure to the benefit of the spouse, heirs, personal representatives and estate
of the Indemnitee, and (iii) shall continue as to an Indemnitee who has ceased
to be a director, officer, partner, trustee, employee, or agent (or other
relationship or capacity) included in the definition of Indemnitee in Section
7.1 of this Article. The corporation shall not effect any sale or other transfer
of substantially all of its assets, merger, consolidation or other
reorganization unless the purchaser, transferee, successor or surviving entity
(as the case may be) agrees in writing to assume all such obligations of the
corporation." Item 25. Other Expenses of Issuance and Distribution Estimated
expenses in connection with the public offering by the Company of the securities
offered hereunder are as follows:
Securities and Exchange Commission Filing Fee $ 6,296
NASD Filing Fee 2,502
Blue Sky Fees and Expenses* 5,000
American Stock Exchange Application and Listing Fee* 35,000
Accounting Fees and Expenses* 50,000
Legal Fees and Expenses* 75,000
Printing* 85,000
Fees of Transfer Agents and Registrar* 5,000
Underwriters' Non-Accountable Expense Allowance 150,000
Miscellaneous* 86,202
-------------
Total* $ 500,000
===========
- ----------------
* Estimated.
Item 26. Recent Sales of Unregistered Securities
The following is a summary of the only transaction by the Registrant
during the last three years involving the sale of securities which were not
registered under the Securities Act:
In June 1997, the Registrant issued 3,000,000 shares of its Common Stock to the
four shareholders of Westower Holdings Ltd. ("Ltd") in exchange for all of the
outstanding shares of Ltd. Three of the four shareholders of Ltd. were officers
and directors of that company and in the transaction became officers and
directors of the Registrant. The fourth shareholder continues as a principal
shareholder of the registrant as he was with Ltd. No underwriter was involved in
the transaction. The transaction was exempt from registration under the
Securities Act pursuant to Section 4 (2) thereunder as a transaction not
involving a public offering.
Item 27. Exhibits
Exhibit No. Item
- ----------- ----
Exhibit 1.1 Form of Underwriting Agreement.(3)
Exhibit 1.2 Form of Underwriters' Warrant Agreement.(3)
Exhibit 1.3 Form of Selected Dealer Agreement.(3)
Exhibit 1.4 Form of Agreement Among Underwriters.(3)
Exhibit 3.1 Articles of Incorporation.(3)
Exhibit 3.2 Bylaws of the Registrant(3)
Exhibit 5.1 Opinion of Maurice J. Bates LLC(3)
Exhibit 10.1 Form of Warrant Agreement.(3)
Exhibit 10.2 1997 Stock Option Plan(3)
Exhibit 10.3 Consent of Outside Director(3)
Exhibit 21.1 Subsidiaries of the Registrant.(3)
Exhibit 23.1 Consent of Moss Adams, LLP Certified Public Accountants.(1)
Exhibit 23.2 Consent of Maurice J. Bates LLC. is contained in his opinion
filed as Exhibit 5.1 to this registration statement.(3)
Exhibit 27.1 Financial Data Schedule (3)
(1) Filed herewith
(2) To be filed by amendment
(3) Previously filed.
Item 28. Undertakings
The undersigned registrant hereby undertakes as follows:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
(2) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to: (i) Include any Prospectus required by Section
10(a)(3) of the Securities Act; (ii) Reflect in the Prospectus
any facts or events which, individually or together,
represent a fundamental change in the information in
the Registration Statement Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation form the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424 (b) if, in the
aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement; and
(iii) Include any additional or changed material information
on the plan of distribution.
(3) For determining any liability under the Securities Act, treat
each post-effective amendment that as a new Registration
Statement of the securities offered, and the offering of the
securities at that time to be deemed to be the initial bona
fide offering
(4) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering..
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised
that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy, as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
shares of the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(7) For determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the small
business issuer under Rule 424(b)(1), or (4) or 497(h) under
the Securities Act as part of this Registration Statement as
of the time the Commission declared it effective.
(8) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of
prospectus s anew registration statement for the securities
offered in the registration statement, and that offering of
the securities at that time as the initial bona fide offering
of those securities.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorizes this Amendment No. 2
to the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Vancouver, State of Washington on
October 8,1997.
Westower Corporation.
By:/s/ Calvin J. Payne
Calvin J. Payne, Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Calvin J. Payne, S. Roy
Jeffrey, and Peter Lucas, and each for them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (until revoked in writing), to sign any and all further amendments to
this Registration Statement (including post-effective amendments), and to file
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents, and each of them, or their substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Calvin J. Payne
Calvin J. Payne Chairman of the Board and October 8, 1997
Chief Executive Officer
(Principal Executive Officer)
/s/ S. Roy Jeffrey
S. Roy Jeffrey Director October 8, 1997
/s/ Walter Friesen
Walter Friesen Director October 8, 1997
/s/ Peter Lucas
Peter Lucas Chief Financial Officer October 8, 1997
(Principal Financial
and Accounting Officer)
INDEPEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders
Westower Holdings Ltd. and Subsidiaries
We consent to the use in this Amemdment No. 2 to Registration Statement No.
333-32963 of Westower Corporation of our report dated July 21, 1997, appearing
in the Prospectus, which is part of such Registration Statement, and to the
reference to us under the headings "Experts" in such Prospectus.
/s/ MOSS ADAMS LLP
MOSS ADAMS LLP
Bellingham, Washington
October 8, 1997
<PAGE>
