<PAGE> 1
EXHIBIT 99.3
TOWER VENTURES II, LLC
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
<PAGE> 2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Pinnacle Holdings Inc.
In our opinion, the accompanying statement of financial position and the
related statements of operations and members' deficit and of cash flows present
fairly, in all material respects, the financial position of Tower Ventures II,
LLC (the "Company") at December 31, 1999, and the results of its operations and
its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States. 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
of these statements in accordance with auditing standards generally accepted in
the United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the financial statements, on June 23, 2000, the
Company sold its tower assets to Pinnacle Towers Inc. for $30,000,000.
PricewaterhouseCoopers LLP
Tampa, Florida
July 18, 2000
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<PAGE> 3
TOWER VENTURES II, LLC
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................... $ 303,747 $ 573,682
Due from related parties, net............................ 473,888 339,452
Accounts receivable...................................... -- 2,865
Prepaid expenses......................................... 129,605 143,775
---------- ----------
Total current assets............................. 907,240 1,059,774
Fixed assets, net of accumulated depreciation of $246,960
and $164,003, respectively............................... 3,813,658 3,794,296
Other assets............................................... 3,741 3,741
---------- ----------
$4,724,639 $4,857,811
========== ==========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.................... $ 171,216 $ 275,679
Deferred revenue......................................... 127,530 172,064
Notes payable, current portion........................... 362,353 355,751
---------- ----------
Total current liabilities........................ 661,099 803,494
Notes payable, long-term................................... 4,690,446 4,782,770
---------- ----------
Total liabilities................................ 5,351,545 5,586,264
---------- ----------
Commitments and contingencies (Note 5)
Members' deficit........................................... (626,906) (728,453)
---------- ----------
$4,724,639 $4,857,811
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 4
TOWER VENTURES II, LLC
STATEMENTS OF OPERATIONS AND MEMBERS' DEFICIT
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED
MARCH 31, MARCH 31, DECEMBER 31,
2000 1999 1999
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenue.................................................. $ 400,535 $ 57,305 $ 643,087
Direct operating expenses, excluding deprecation......... 80,067 53,158 535,848
--------- --------- ---------
Gross margin, excluding depreciation........... 320,468 4,147 107,239
--------- --------- ---------
Other expenses:
General and administrative expenses.................... 37,335 36,032 273,943
Depreciation........................................... 82,957 36,779 147,116
--------- --------- ---------
120,292 72,811 421,059
--------- --------- ---------
Income (loss) from operations............................ 200,176 (68,664) (313,820)
Interest expense......................................... 98,629 11,769 228,671
--------- --------- ---------
Net income (loss) allocable to members................... 101,547 (80,433) (542,491)
Members' deficit, beginning of period.................... (728,453) (184,962) (185,962)
--------- --------- ---------
Members' deficit, end of period.......................... $(626,906) $(265,395) $(728,453)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 5
TOWERS VENTURES II, LLC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED
MARCH 31, MARCH 31, DECEMBER 31,
2000 1999 1999
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................... $ 101,547 $ (80,433) $ (542,491)
--------- ---------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation........................................ 82,957 36,779 147,116
(Increase) decrease in:
Due from affiliates............................... (134,436) (103,104) (406,671)
Accounts receivable............................... 2,865 (3,971) 195
Prepaid expenses and other current assets......... 14,170 19,110 (72,606)
Other assets...................................... -- (2,092) 767
Increase (decrease) in:
Accounts payable and accrued expenses............. (104,463) (89,556) 160,774
Deferred revenue.................................. (44,534) 5,225 150,579
--------- ---------- -----------
Total adjustments.............................. (183,441) (137,609) (19,846)
--------- ---------- -----------
Net cash used in operating activities.................... (81,894) (218,042) (562,337)
--------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................... (102,319) (633,099) (3,207,811)
--------- ---------- -----------
Net cash used in investing activities.................... (102,319) (633,099) (3,207,811)
--------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit........................... -- -- 1,900,000
Repayment of short-term debt........................... (85,722) (116,146) (338,293)
Borrowings under promissory notes...................... -- 1,900,000 2,600,000
--------- ---------- -----------
Net cash (used in) provided by financing activities...... (85,722) 1,783,854 4,161,707
--------- ---------- -----------
Net (decrease) increase in cash.......................... (269,935) 932,713 391,559
Cash at beginning of period.............................. 573,682 182,123 182,123
--------- ---------- -----------
Cash at end of period.................................... $ 303,747 $1,114,836 $ 573,682
========= ========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
Cash paid for interest................................... $ 99,558 $ 31,887 $ 215,004
========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 6
TOWER VENTURES II, LLC
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Tower Ventures II, LLC (the "Company"), a Tennessee limited liability
company, owns telecommunication towers and leases space on its towers to
customers in the wireless communications industries in Arkansas, Mississippi,
Tennessee, South Carolina and North Carolina.
On June 23, 2000, the Company sold its tower assets to Pinnacle Towers Inc.
In accordance with the purchase agreement, the Company received approximately
$30.0 million for thirty-six towers, and related assets.
The March 31, 2000 financial statements are unaudited, but in the opinion
of management include all adjustments, which consist of normal recurring
adjustments, necessary for a fair presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and use
assumptions that affect the reported amounts of assets and liabilities and the
disclosure for contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results may vary from estimates used.
Fixed Assets
Telecommunications assets consist of towers, tower attachments, and
monitoring and safety equipment, which are recorded at cost and depreciated over
the estimated useful lives of the assets, which range from 10 to 15 years.
Betterments, renewals and extraordinary repairs which increase the value or
extend the life of the asset are capitalized. Repairs and maintenance costs are
expensed as incurred.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets whenever
adverse events or changes in business climate indicate that the expected
undiscounted future cash flows from the related asset may be less than
previously anticipated. If the net book value of the related asset exceeds the
undiscounted future cash flows of the asset, the carrying amount would be
reduced to the present value of its expected future cash flows and an impairment
loss would be recognized. As of December 31, 1999, management does not believe
that an impairment reserve is required.
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments at December 31,
1999, which includes accounts receivable, accounts payable, due from affiliate,
and notes payable, approximates fair value due to the short maturity of those
instruments.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the life of the
related lease agreements. Revenue is recorded in the month in which it is due.
Allocation of Expenses
General and administrative expenses were charged by its affiliates based on
expense incurred or service performed by the affiliate on behalf of the Company.
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<PAGE> 7
TOWER VENTURES II, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The Company is a limited liability company and, as such, passes through its
U.S. federal and state taxable income to its members, who are responsible for
income taxes on such taxable income. Therefore, there is no provision of U.S.
tax purposes.
3. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1999
------------
<S> <C>
Telecommunications assets:
Telecommunications tower assets........................... $3,736,744
Fences and gates.......................................... 140,687
Site development.......................................... 80,868
----------
Total telecommunications assets................... 3,958,299
Accumulated depreciation.................................... (164,003)
----------
Fixed assets, net........................................... $3,794,296
==========
</TABLE>
Depreciation expense was $147,116 for the year ended December 31, 1999.
4. NOTES PAYABLE
The Company also entered into a note payable for $100,000 with a fixed
interest rate of 7.25% in 1999. The balance of the note and the accrued interest
was repaid to the financial institution during 1999.
<TABLE>
<CAPTION>
DECEMBER 31,
1999
------------
<S> <C>
Note to financial institution, $2.0 million maximum
available under line of credit, secured by the assignment
of rents and lease of the Company and guaranteed by the
Company. Interest payable monthly at a fixed rate of 8.20%
beginning February 15, 2000............................... $1,900,000
Note to a financial institution, secured by the assignment
of rents and leases of the Company and guaranteed by the
Company, monthly payments of $13,736, including fixed
interest rate of 7.20%. Final payment due August 2,
2003...................................................... 887,474
Note to a financial institution, secured by the assignment
of rents and leases of the Company and guaranteed by the
Company, monthly payments of $24,880, including fixed
interest rate of 7.25%. Final payment due February 4,
2004...................................................... 1,674,683
Note to a financial institution, secured by the assignment
of rents and leases of the Company and guaranteed by the
Company, monthly payments of $9,900, including fixed
interest rate of 8.00%. Final payment due June 1, 2004.... 676,364
Less current maturities..................................... (355,751)
----------
Total............................................. $4,782,770
==========
</TABLE>
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<PAGE> 8
TOWER VENTURES II, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Future maturities of long-term debt as of December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000........................................................ $ 355,751
2001........................................................ 382,903
2002........................................................ 412,130
2003........................................................ 872,997
2004 and thereafter......................................... 3,114,740
----------
$5,138,521
==========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
The Company is obligated under noncancelable leases for land which expire
at various dates through September 2004. The leases have multiple renewal
options for 5 years each. The future minimum lease commitments under these
leases as of December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000........................................................ $232,146
2001........................................................ 232,146
2002........................................................ 232,146
2003........................................................ 181,348
2004........................................................ 40,875
--------
$918,661
========
</TABLE>
Rental expense for the year ended December 31, 1999 was $148,374.
6. TENANT LEASES
The following is a schedule by year of total future rentals to be received
for tower space under noncancelable lease agreements as of December 31, 1999.
<TABLE>
<S> <C>
2000........................................................ $1,636,620
2001........................................................ 1,669,320
2002........................................................ 1,669,320
2003........................................................ 1,296,620
2004 and thereafter......................................... 357,750
----------
$6,629,630
==========
</TABLE>
Principally all leases provide for renewal at varying escalations.
7. RELATED PARTY TRANSACTIONS
During 1999, the Company incurred costs for the acquisition, construction
and maintenance of tower assets on behalf of an affiliate. Total costs incurred
during the year were approximately $474,000. Additionally, the Company loaned
approximately $310,000 to an affiliate for operations and construction of tower
assets. Total amount due from affiliates at December 31, 1999 was approximately
$432,000 and is included in due from related parties on the statement of
financial position.
For the year ended December 31, 1999, general and administrative expenses
of $105,828 were allocated to the Company from affiliates, of which $91,828 was
payable to the affiliate at December 31, 1999. Amounts payable to affiliates for
these allocations have been netted against due from related party on the
statement of financial position.
26
