<PAGE> 1
EXHIBIT 99.2
TUCKER-VALLEY
COMMUNICATIONS
(210 NORTH TUCKER, LLC AND "THE VALLEY BUILDING" --
A CARVE-OUT ENTITY OF FIRST MORGAN, LLC)
COMBINED 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 combined statements of financial position
and the related combined statements of operations and members' deficit and of
cash flows present fairly, in all material respects, the financial position of
Tucker-Valley Communications (210 North Tucker, LLC and "The Valley Building" -
a carve-out entity of First Morgan, 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 the Note 1 to the financial statements, on July 3, 2000,
the Company sold its building assets and business operations to Pinnacle Towers
Inc. for $56 million.
PricewaterhouseCoopers LLP
Tampa, Florida
July 14, 2000
13
<PAGE> 3
TUCKER-VALLEY COMMUNICATIONS
(210 NORTH TUCKER, LLC AND "THE VALLEY BUILDING" --
A CARVE-OUT ENTITY OF FIRST MORGAN, LLC)
COMBINED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 118,978 $ 154,811
Due from First Morgan.................................. 582,680 844,478
Accounts receivable.................................... 34,725 132,199
Other current assets................................... 1,000 1,000
----------- -----------
Total current assets........................... 737,383 1,132,488
Fixed assets, net of accumulated depreciation of $665,645
and $613,349, respectively............................. 6,518,402 6,248,480
----------- -----------
Total assets................................... $ 7,255,785 $ 7,380,968
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 403,099 $ 173,571
Deferred rent revenue.................................. 158,364 196,242
Tenant deposits........................................ 113,410 79,271
Short-term debt........................................ 8,817,723 8,905,703
----------- -----------
Total current liabilities...................... 9,492,596 9,354,787
----------- -----------
Members' deficit......................................... (2,236,811) (1,973,819)
----------- -----------
Total liabilities and members' deficit......... $ 7,255,785 $ 7,380,968
=========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
14
<PAGE> 4
TUCKER-VALLEY COMMUNICATIONS
(210 NORTH TUCKER, LLC AND "THE VALLEY BUILDING" --
A CARVE-OUT ENTITY OF FIRST MORGAN, LLC)
COMBINED 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>
Revenues................................................. $ 888,440 $ 696,540 $ 3,355,772
Direct operating expenses, excluding deprecation......... 696,232 407,412 1,556,354
----------- ----------- -----------
Gross margin, excluding depreciation........... 192,208 289,128 1,799,418
----------- ----------- -----------
Other expenses:
General and administrative expenses.................... 196,725 129,119 624,649
Depreciation........................................... 52,296 51,286 190,754
----------- ----------- -----------
249,021 180,405 815,403
----------- ----------- -----------
(Loss) income from operations............................ (56,813) 108,723 984,015
Interest expense......................................... 206,179 180,904 700,158
----------- ----------- -----------
Net (loss) income........................................ (262,992) (72,181) 283,857
Members' deficit at beginning of period.................. (1,973,819) (2,257,676) (2,257,676)
----------- ----------- -----------
Members' deficit at end of period........................ $(2,236,811) $(2,329,857) $(1,973,819)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
15
<PAGE> 5
TUCKER-VALLEY COMMUNICATIONS
(210 NORTH TUCKER, LLC AND "THE VALLEY BUILDING" --
A CARVE-OUT ENTITY OF FIRST MORGAN, LLC)
COMBINED 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 (loss) income........................................ $(262,992) $ (72,181) $283,857
--------- --------- --------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 52,296 51,286 190,754
(Increase) decrease in:
Due from affiliate.................................. 261,798 461,652 (382,825)
Accounts receivable................................. 97,474 21,028 (99,670)
Accounts payable.................................... 229,528 (231,663) (145,801)
Deferred rent revenue............................... (37,878) (34,114) 110,579
Tenant deposits..................................... 34,139 430 23,135
--------- --------- --------
Total adjustments.............................. 637,357 268,619 (303,828)
--------- --------- --------
Net cash provided by (used in) operating activities...... 374,365 196,438 (19,971)
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................... (322,218) (401,847) (657,746)
--------- --------- --------
Net cash used in investing activities.................... (322,218) (401,847) (657,746)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt...................................... (87,980) (161,460) (358,704)
Net borrowings under line of credit.................... -- -- 500,000
--------- --------- --------
Net cash (used in) provided by financing activities...... (87,980) (161,460) 141,296
--------- --------- --------
Net decrease in cash..................................... (35,833) (366,869) (536,421)
Cash at beginning of period.............................. 154,811 691,232 691,232
--------- --------- --------
Cash at end of period.................................... $ 118,978 $ 324,363 $154,811
========= ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
Cash paid for interest................................... $ 165,098 $ 185,490 $652,304
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
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<PAGE> 6
TUCKER-VALLEY COMMUNICATIONS
(210 NORTH TUCKER, LLC AND "THE VALLEY BUILDING" --
A CARVE-OUT ENTITY OF FIRST MORGAN, LLC)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Nature of Business
On July 3, 2000, Pinnacle Towers Inc. acquired the building assets and
business operations of 210 North Tucker, LLC and "The Valley Building," which is
wholly owned by First Morgan, LLC, for $56 million. Collectively, the acquired
assets and related operations are referred to hereafter as "the Company." The
Company owns telecommunications buildings and leases space in these buildings to
customers in the telecommunications industries in Missouri.
The proceeds from the sale of the Company were used to repay all of the
outstanding balances of the bank loans and line of credit facility in accordance
with the purchase agreement.
Basis of Presentation
The combined financial statements of the Company include the historical
costs and results of operations of 210 North Tucker, LLC and of "The Valley
Building," which is wholly owned by First Morgan, LLC. Both 210 North Tucker,
LLC and First Morgan, LLC are under common control. For purposes of presenting
the combined financial statements of the Company, allocations were required to
be determined for The Valley Building operations, as First Morgan, LLC operated
other building assets that were not acquired by Pinnacle Towers Inc. No
allocations were required for 210 North Tucker, LLC, as all of their building
assets and business operations were acquired by Pinnacle Towers Inc.
All Valley Building rent revenues are collected by First Morgan, LLC on
behalf of the Valley Building operations. Similarly, all direct Valley Building
operating expenses, general and administrative expenses, and interest are paid
by First Morgan, LLC. Accordingly, a net receivable from first Morgan LLC has
been recorded. The historical costs and results of operations of the Valley
Building have been derived from the accounting records of First Morgan, LLC.
Allocation of all direct operating expenses were specifically identified. All
significant intercompany accounts and transactions between 210 North Tucker, LLC
and the Valley building operations have been eliminated.
The March 31, 2000 and 1999 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.
Cash and Cash Equivalents
Cash equivalents include all highly liquid investments with an original
maturity of three months or less.
Fixed Assets
Fixed assets primarily consist of a building, land, related equipment, and
tenant improvements, which are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets, which range
from 10 to 39 years. Improvements, 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.
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<PAGE> 7
TUCKER-VALLEY COMMUNICATIONS
(210 NORTH TUCKER, LLC AND "THE VALLEY BUILDING" --
A CARVE-OUT ENTITY OF FIRST MORGAN, LLC)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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 cash, due from affiliate, accounts receivable, accounts
payable, and short-term debt, 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.
Income Taxes
The Company consists of two Limited Liability Corporations. As such, net
income was not subject to income taxes as the income is taxed directly to their
owners.
3. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
ESTIMATED USEFUL DECEMBER 31,
LIVES IN YEARS 1999
---------------- ------------
<S> <C> <C>
Telecommunications assets:
Land..................................................... -- $ 550,000
Building................................................. 39 5,693,642
Equipment................................................ 10 350,075
Tenant Improvements...................................... 1-10 79,477
----------
6,673,194
Other fixed assets......................................... 3-7 188,635
Accumulated depreciation................................... (613,349)
----------
Fixed assets, net.......................................... $6,248,480
==========
</TABLE>
4. SHORT-TERM DEBT
At December 31, 1999, $8,905,703 was outstanding under four bank loans and
one line of credit, which provided secured borrowings for the purchases of land
and buildings in Missouri. The loans were secured by mortgage deeds of trust on
the land, the building assets and an assignment of rents and leases. The line of
credit provides $2.1 million of financing, of which $1.6 million was available
as of December 31, 1999. The interest rates on all the notes ranged from
approximately 7.00% to 7.50%. The original maturity dates ranged from January
2002 to July 2007. However, the outstanding balance was repaid subsequent to
December 31, 1999 as part of the purchase agreement with Pinnacle Towers Inc.
(see Note 1).
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<PAGE> 8
TUCKER-VALLEY COMMUNICATIONS
(210 NORTH TUCKER, LLC AND "THE VALLEY BUILDING" --
A CARVE-OUT ENTITY OF FIRST MORGAN, LLC)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. 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........................................................ $ 3,068,294
2001........................................................ 3,421,212
2002........................................................ 3,383,904
2003........................................................ 3,381,497
2004 and thereafter......................................... 19,917,281
-----------
$33,172,188
===========
</TABLE>
Principally all leases provide for renewal at varying escalations. Leases with
fixed-rate escalations have been included above.
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