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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 5
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMUNITRONICS OF AMERICA, INC.
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(Name of Small Business Issuer in its charter)
UTAH 86-0285684B
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
27955 HIGHWAY 98, SUITE WWX
DAPHNE, ALABAMA 36526
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(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER: (334) 626-7650
SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT: NOT APPLICABLE
SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE ACT: COMMON STOCK, $.01
PAR VALUE
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PART I
Communitronics of America, Inc. (the " Company") is including the
following cautionary statement regarding any forward-looking statements made
by, or on behalf of, the Company. Forward-looking statements include
statements concerning plans, objectives, goals, strategies, expectations,
future events or performance and underlying assumptions and other statements
which are other than statements of historical facts. Certain statements
contained herein are forward- looking statements and, accordingly, involve
risks and uncertainties which could cause actual results or outcomes to
differ materially from those expressed in the forward-looking statements. The
Company's expectations, beliefs and projections are expressed in good faith
and are believed by the Company to have a reasonable basis, including without
limitations, management's examination of historical operating trends, data
contained in the Company's records and other data available from third
parties, but there can be no assurance that management's expectations,
beliefs or projections will result or be achieved or accomplished. In
addition to other factors and matters discussed elsewhere herein, the
following are important factors that, in the view of the Company, could cause
actual results to differ materially from those discussed in the
forward-looking statements: the ability of the Company to maintain its rights
in its intellectual property; the ability of the Company to obtain acceptable
forms and amounts of financing to fund planned acquisitions and operations,
technology development, marketing and other expansion efforts; and the global
market for its products and communications services. The Company has no
obligation to update or revise these forward-looking statements to reflect
the occurrence of future events or circumstances.
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL BACKGROUND
Communitronics of America, Inc. (formerly called Oneida General
Corporation) (the "Company"), is a Utah corporation incorporated on September
21, 1970. The name of the corporation was changed to Communitronics of America,
Inc. on October 26, 1998, and had been previously changed from Industrial Sales
and Marketing Corporation on February 16, 1979.
In October 1998, the Company acquired 100% of the issued and
outstanding stock of Communitronics Inc. which included its wholly owned
subsidiary, Crescent Paging, Inc. in exchange for 5,500,000 shares of
restricted Common Stock of the Company. In connection with the transaction,
the previous directors and officers of the Company canceled 3,000,000 of
their shares without consideration. Following the acquisition, the
pre-existing shareholders of the Company owned approximately 21.3% of its
issued and outstanding common stock. Following the acquisition, the
directors and officers of the Company completely changed to its present
management, and the Company commenced its current business as a provider of
wireless message paging systems and information delivery systems.
Communitronics, Inc. previously acquired Crescent Paging, Inc. to
expand its operations and market along the Gulf Coast, as well as to acquire
an additional wireless technology carrier service (specialized mobile radio
with telephone interconnect) and associated radio communications systems. The
consideration paid to the stockholders of Crescent Paging, Inc. for this
acquisition was 418,000 shares of Common Stock of Communitronics, Inc. valued
at $3.00 per share for an agreed value of $1,254,000.
Prior to acquiring Communitronics, Inc. and its subsidiary, the
Company had not conducted any material operations since 1985.
Communitronics, Inc. engaged in a reorganization with the Company because the
common stock of the Company was public traded over-the-counter (Electronic
Bulletin Board), and it believed that a public market for its securities
would facilitate raising capital in future securities offerings and
facilitate the acquisition of other companies in the industry.
In December 1998, the Company acquired all of the issued and
outstanding stock of Data Paging, Inc. in exchange for 250,000 shares of
restricted Common Stock of the Company which was valued at $2.00 per share in
the total amount of $500,000.
OPERATIONS
The Company is a provider of wireless message paging and information
delivery services. Wireless message paging is comprised of numeric paging
that permits a pager to register the telephone number of the caller to the
customer. Information delivery systems are primarily comprised of text
messaging services.
The Company has a network of 14 radio towers (one tower is owned by
the Company and 13 towers are leased) to deliver wireless messaging services
in the coastal regions of Alabama, Louisiana, Mississippi and the Florida
panhandle. The Company owns seven Certificates of Public Convenience and
Necessity issued by the Alabama Public Service Commission and 34 frequencies
licensed by the Federal Communications Commission. These certificates and
licenses allow the
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Company to provide wireless messaging services in these geographic areas.
Of the total revenues of $1,156,731 of the Company during its fiscal
year ended December 31, 1998, 69% were comprised of revenues from wireless
messaging paging, 31% were from specialized mobile radio services, and none were
from information delivery services which continue to be in the planning state.
The Company supports its operations from its executive offices in
Daphne, Alabama, and from its operation offices located in Foley, Alabama;
Metaerie, Louisiana; Gulfport, Mississippi; and Pascagoula, Mississippi.
The geographic areas served by the Company covers approximately
10,000,000 persons. In its markets, the Company presently serves
approximately 4,300 subscribers to its message paging and information
delivery services at September 30, 1999.
Historically, the Company has focused on the acquisition and
operation of message paging systems in smaller cities and rural areas in the
southeastern United States. The Company's acquisition of licenses enables it
to significantly expand both its customer base and geographic coverage and to
offer enhanced paging and communications services. The Company's initial
focus with its licenses has been, and will continue to be, to commence
operations in the most densely populated areas within its systems. The
Company believes that it is the optimum technology for rural, less densely
populated areas because they are less susceptible to competition and have
greater capacity for future growth than most major markets because such areas
are generally considered by large competitors to be less desirable than large
metropolitan cities, and that its equipment has the optimum technology for
more densely populated urban areas where analog systems are more expensive to
deploy and face potential capacity constraints. The Company has entered its
markets at a relatively low cost.
On March 20, 1998, Crescent Paging, Inc. (Crescent) and
Communitronics, Inc., which at the time were two privately held corporations,
signed a definitive agreement whereby Communitronics, Inc. would acquire all
of the outstanding shares of stock of Crescent for $1,256,400. The
consideration paid was to be 418,800 shares of Communitronics, Inc. stock,
which the parties mutually agreed to value at $3.00 per share. The price was
based upon the estimated and mutually agreed upon value of the assets and
licenses of Communitronics, Inc. and the percentage of value that the assets
being acquired contributed to the total estimated and mutually agreed upon
value of the post-closing combined companies. The parties further agreed that
when Communitronics, Inc. became a publicly held corporation, the
shareholders of Crescent would exchange their Communitronics, Inc. shares of
stock for shares of the public company, and be subject to resale restrictions
under Rule 144.
Additionally, Communitronics, Inc. "guaranteed" the Crescent selling
shareholders that the 418,800 shares of Communitronics, Inc. would be worth
no less than $3.00 per share at the time of sale after the required holding
period. The agreement also stated that in the event the shareholders of
Crescent Paging, Inc. sold their shares of stock for an amount less than
$3.00 per share, the Company would be required to pay them additional
compensation equal to the actual sales price per share and the agreed upon
basis price of $3.00 per share.
As part of the acquisition of Communitronics, Inc. by Oneida General
Corporation (which subsequently changed its name to Communitronics of
America, Inc.), the Crescent shareholders exchanged their 418,800 shares of
Communitronics, Inc. for 418,800 shares of Communitronics of America, Inc.
and Communitronics of America, Inc. thereby assumed Communitronics, Inc.'s
obligation to the Crescent shareholders with regards to the $3.00 "guarantee."
At one point several months ago, there was a dispute over these
provisions whereby the Crescent selling shareholders asserted that their
shares were available for trading under the agreement, but the stock price
was less than $3.00 per share and they were therefore owed additional
consideration. Communitronics, Inc. asserted that there wasn't an active
market for the stock and the shares could therefore not be traded, hence no
additional consideration was yet due. Communitronics, Inc. also asserted
that the Crescent selling shareholders weren't performing under their
employment agreements which was also a key provision in the stock exchange
agreement. Communitronics, Inc. has seen improvement in the performance of
the Crescent selling shareholders under their employment agreements and
therefore no longer has an issue with this provision.
While there are no assurances that there won't be disputes in the
future, the Company currently believes the issue will be resolved amicably
and that in the worst event, the Company may be required to issue additional
shares of restricted stock to the Crescent shareholders. This could
potentially have a dilutive effect on the Company's earnings per share as a
result of the increased shares outstanding. However, the Company does not
believe that the effect, if any, will be substantial. And, because it is
currently unknown whether the Company will owe additional amounts, if any, no
provision has been made for this matter in the Company's financial statements
except for disclosure in note 9.
In December 1998, the Company acquired all of the issued and
outstanding shares of capital stock of Data Paging, Inc., a Mississippi
corporation, from its sole shareholder in exchange for 250,000 restricted
shares of Common Stock of the Company at an agreed upon value of $500,000.
The selling stockholder retained a security interest in the stock of Data
Paging, Inc. until such time as he sells the Common Stock of the Company for
a minimum of $500,000 ($2.00 per share) in reliance upon Rule 144 under the
Securities Act of 1933 after a one-year holding period or registration of
such securities, whichever first occurs. In the event the stock is sold for
less than $500,000, the Company is obligated to pay the difference in stock to
the former stockholder of Data Paging, Inc. Communitronics of America,
Inc.'s management has addressed the agreement with Ken Smith of Data Paging
and has mutually agreed, should it be necessary, to amend the agreement that
any adjustment would be in the form of restricted common stock.
The Company's operating strategy has been to (i) achieve a critical
time-to-market advantage by rapidly constructing and commencing operations of
tower systems in rural areas within selected markets; (ii) continue to expand
its operations through increased subscriber growth and usage; (iii) utilize its
centralized management and back office functions to support the needs of its
subscribers, thereby further improving operating efficiencies and generating
greater economies of scale; and (iv) selectively acquire paging properties
primarily in contiguous markets. The Company is implementing its strategy by
continuing to build its systems, offer a wide range of products and services at
competitive prices, continually upgrade the quality of its network, establish
strong brand recognition, create a strong sales and marketing program tailored
to local markets and provide a superior level of customer service.
PAGING SERVICES
Wireless communications systems use a variety of radio frequencies to
transmit voice and data. Broadly defined, the wireless communications industry
includes one-way radio applications, such as paging or beeper services, and
two-way radio applications, such as cellular telephone, PCS and Enhanced
Specialized Mobilized Radio ("ESMR") networks. Historically, each application
has been licensed and operates in a distinct radio frequency block.
The Company's paging systems are primarily digital based systems.
Digital technology has been introduced in numerous markets. Analog technology
currently has several limitations, including lack of privacy and limited
capacity. Digital systems convert voice or data signals into a stream of digits
that is compressed before transmission,
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enabling a single radio channel to carry multiple simultaneous signal
transmissions. This enhanced capacity, along with improvements in digital
signaling, allows digital-based wireless technologies to offer new and enhanced
services, such as greater call privacy, and robust data transmission features,
such as "mobile office" applications (including facsimile, electronic mail and
wireless connections to computer/data networks, including the Internet).
The Company competes directly with existing paging and specialized
mobile radio services. The Company's services are not generally offered by
cellular providers, such as data transmissions to and from portable computers,
advanced paging services, e-mail and facsimile services.
The Company, and the wireless communications industry in general, have
historically experienced significant subscriber growth during the fourth
calendar quarter. The Company has historically experienced highest usage and
revenue per subscriber during the fall and winter months. The Company expects
these trends to continue.
OPERATION OF WIRELESS COMMUNICATION SYSTEMS
Wireless communication system service areas are divided into
multiple transmitter sites. Due to the frequencies in which they operate,
transmitter sites generally have a wider transmission radius than PCS cells.
Each transmitter site contains a transmitter, a receiver and signaling
equipment (the "Paging Site"). The Paging Site is connected by microwave or
land line telephone lines to a switch that uses computers to control the
operation of the communications system for the entire service area. The
system controls the transfer of messages as a subscriber's pager travels.
Wireless communications providers establish interconnection agreements with
local exchange carriers and interexchange carriers, thereby integrating their
system with the existing landline communications system.
Pagers are functionally compatible with systems of the same
frequency in all markets within the United States. As a result, pagers may be
used wherever a subscriber is located, as long as a the system is operational
in the area. Paging system operators normally agree to provide service to
subscribers from other paging systems who are temporarily located in or
traveling through their service areas. Agreements among system operators
provide that the carrier that normally provides services to the roaming
subscriber pays the serving carrier at rates prescribed by the serving
carrier.
Although different systems utilize similar technologies and hardware,
they operate on different frequencies and use different technical and network
standards. As a result, it currently is not possible for users of one type of
system to "roam" on a different type of system outside their service area, or to
hand off calls from one type of system to another. This will also be true for
pager subscribers seeking to roam in a service area served by operators using
different frequencies.
PAGING OPERATIONS
The Company owns 100% of each of its frequency licenses. In its
coastal markets, the Company's systems cover large contiguous geographic
areas with multiple Paging Sites, incorporating cost efficient technology.
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The Company's experience is that several inherent attributes of such
markets are attractive. Such attributes include high subscriber growth rates,
population bases of customers with substantial needs for wireless
communications, the ability to cover larger geographic areas with fewer
Paging Sites than is possible in urban areas, less intense competitive
environments and less vulnerability to competition.
PAGING MARKETS AND SYSTEMS
The Company presently owns approximately 60 FCC-licensed
frequencies of which 34 are presently operated by the Company, for its
wireless message paging services in the southeast and Gulf Coastal areas of
the United States. The Company intends to focus on the national frequency of
152.630. However, it also uses several other frequencies wherever necessary
in Alabama, Florida, Louisiana and Mississippi. The 152.630 frequency is a
nationally licensed frequency. The Company intends to expand its operations
in these and other states, and to install new state-of-the-art paging
equipment with e-mail capabilities. The Company recently purchased equipment
with e-mail capabilities at a cost of approximately $150,000 which is being
deployed in its New Orleans and Baton Rouge, Louisiana markets.
The Company also has traffic passing agreements with other paging
companies that own the 152.630 license for Tennessee, and for parts of Alabama
and Mississippi not owned by the Company.
The Company's goal is to achieve significant market penetration by
aggressively marketing competitively priced wireless messaging services under
its proprietary brand names, offering enhanced services not generally provided
by other paging operators and providing superior customer service. In addition,
the Company is structured to be a low-cost provider of paging services by taking
advantage of the existing business infrastructure and business experience
established in connection with its other operations, including centralized
management, marketing, billing and customer service functions, and by focusing
on efficient customer acquisition and retention.
SPECIALIZED MOBILE RADIO LTR TRUNKING
Specialized mobile radio (SMR) transmissions are broadcast over
either 400 MHZ, 800 MHZ or 900 MHZ frequencies. These frequencies have
limited spectrum which means a limited number of customers can be served
using the available frequencies. Because a majority of the 800 MHZ channels
in New Orleans, Louisiana have been acquired by Nextel, Nextel is in a unique
position to control the SMR market and telephone interconnect because of the
limited nature of the remaining frequencies. This limits the number of
customers that can be served by the Company.
During 1998, Nextel announced the discontinuance of providing analog
transmission (5 KHz). For their customers who currently use analog equipment,
this decision will require them to purchase new digital equipment at a
substantial cost and will raise their monthly recurring fee.
The Company has recently acquired eleven 800 MHZ channels. These
channels will allow the Company to provide the best quality in dispatch and
telephone interconnect communications to commercial and industrial users. The
advantage of the 800 MHZ over the newly granted 900 MHZ spectrum is full 5 KHz
deviation versus 2.5 KHz. The difference equates to the quality of the audio
signal being twice as efficient for the 800 MHz which translates into better
quality and increased range. These eleven channels can support approximately
2000 to 2500 users with many options not available in conventional dispatch
systems.
In addition to the 800 MHZ channels, the Company controls eight UHF
(450 MHZ) dispatch channels. These channels are presently conventional, which
means they are push-to-talk and release-to-hear and they are first come, first
serve for that channel. If two customers were trying to use radios on the same
channel at the same time, one customer would get through and the other one
would receive a busy signal and have to wait to use the channel when it is
clear. Over the next 3 to 4 months, the Company will convert these channels
into LTR trunking format which means that if two customers try to use the same
channel at the same time both of them would be successful in using the radio due
to the fact that one of them would be moved automatically to an unused channel.
The conversion will allow the Company to provide existing as well as future
customers with the best quality communication available today.
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The Company plans to exploit these channels in New Orleans by offering
to customers the choice of continuing analog transmission. These customers'
equipment can easily be re-fitted to operate on the Company's channels thereby
eliminating the need to replace equipment. Because of limited spectrum, these
channels become more valuable as time passes.
The principal customers of the Company for its SMR transmission
services are small businesses such as taxi companies, delivery companies,
trade contractors and service companies that have fleets of vehicles.
TWO-WAY RADIO SALES AND SERVICE
The Company is an authorized dealer for Kenwood, ICOM, and
Yeasu/Standard. As a dealer, the Company is authorized to sell and service these
manufacturers two-way radios. The Company targets organizations that have their
own frequencies, such as governmental agencies, hospitals, etc., for two-way
radio sales. In addition, the Company has a fully-staffed service department
that repairs and maintains equipment sold.
MARKETING, SALES AND CUSTOMER SERVICE
The Company's sales and marketing strategy is to generate continued net
subscriber growth and increased subscriber revenues. In addition, the Company
targets a customer base which it believes is likely to generate higher monthly
service revenues, while attempting to achieve a low cost of adding new
subscribers. The Company markets its services under its proprietary brand names,
and sells its products and services through a combination of direct and indirect
distribution channels.
The Company markets its message paging services and products primarily
in the southeastern United States.
Initially, the Company intends to concentrate its marketing efforts
primarily on businesses and individuals "on- the-go", which would benefit from
integrated mobile voice, message and wireless data transmission capabilities,
who would most benefit from enhanced features and services.
SALES
The Company sells its products and services through a combination of
direct and indirect channels. The Company operates four sales offices (which
also serve as retail sales locations). The Company utilizes a direct sales force
of 12 persons based out of these offices, who are trained to educate new
customers on the features of its products. Sales commissions generally are
linked both to subscriber revenue and subscriber retention, as well as
activation levels.
The Company believes that its sales offices provide the physical
presence in local markets necessary to position the Company as a quality local
service provider, and give the Company greater control over both its costs and
the sales process. The Company also intends to utilize indirect sales through a
network of local merchant and specialty retailers. The Company intends to
continue to use a combination of direct and indirect sales channels, with the
mix depending on the demographics of each particular market.
In addition, the Company acts as a retail distributor of pagers and
radios, and maintains inventories.
CUSTOMER SERVICE
Customer service is a significant element of the Company's operating
philosophy. The Company is committed
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to attracting and retaining subscribers by providing consistently superior
customer service. At its headquarters in Daphne, Alabama, the Company maintains
a sophisticated monitoring and control system, a staff of customer service
personnel and a well-trained technical staff to handle both routine and complex
questions as they arise.
The Company believes that it helps manage customer retention and
attrition through an outreach program by its sales force and customer service
personnel. This program not only enhances subscriber loyalty, but also
increases add-on sales and customer referrals. The outreach program allows
the sales staff to check customer satisfaction, as well as to offer
additional services.
SUPPLIERS AND EQUIPMENT VENDORS
The Company does not manufacture any of the pagers or equipment used in
the Company's operations. The high degree of compatibility among different
manufacturer's models of pagers and Paging Site equipment allows the Company to
design, supply and operate its systems without being dependent upon any single
source of such equipment. The pagers and Paging Site equipment used in the
Company's operations are available for purchase from multiple sources, and the
Company anticipates that such equipment will continue to be available in the
foreseeable future. The Company currently purchases pagers primarily from
Motorola, Inc. and Ericsson Inc. The Company currently purchases Paging Site and
switching equipment primarily from Motorola, Inc. and Glenayre, Inc.
COMPETITION
Competition for subscribers among wireless licensees is based
principally upon the services and features offered, the technical quality of the
wireless system, customer service, system coverage, capacity and price.
The Company's business will directly competes with existing service
providers in its markets, many of which have been operational for a longer
period of time and have significantly greater financial technical resources than
those available to the Company and who may upgrade their systems to provide
comparable services in competition with the Company's systems. Among the
Company's competitors are Teletouch Communications, Inc., Arch Paging, Beepers
Unlimited, Metrocall and PageNet.
In the future, in its markets the Company may face increased
competition from entities providing other communications technologies and
services. Although some of these technologies and services are currently
operational, such as mobile phones, telecopy services, and e-mail, other
technologies may be developed in the future.
Continuing technological advances in communications and FCC policies
that encourage the development of new technologies may result in additional
competition.
GOVERNMENTAL REGULATION
The FCC regulates the licensing, construction, operation, acquisition
and sale of message paging systems in the United States pursuant to the
Communications Act of 1934 (the "Communications Act"), as amended from time to
time, and the rules, regulations and policies promulgated by the FCC thereunder.
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All paging licenses will be granted for a 10-year period, at the end of
which they must be renewed.
TRANSFERS AND RENEWALS OF LICENSES
The Communications Act and FCC rules require the FCC's prior
approval of the assignment or transfer of control of a license for a system.
In addition, the FCC has established transfer disclosure requirements that
require licensees who transfer control of or assign a license within the
first three years of their license term to file associated contracts for
sale, option agreements, management agreements or other documents disclosing
the total consideration that the licensee would receive in return for the
transfer or assignment of its license. Non-controlling interests in an entity
that holds a license generally may be bought or sold without FCC approval.
Certain acquisitions or sales by the Company of its interests may also
require the prior approval of federal, state or local regulatory authorities
having competent jurisdiction.
Generally, the FCC has granted most applicants' renewal applications
upon a demonstration of compliance with FCC regulations and adequate service
to the public. The FCC has granted every renewal application that the Company
has filed, and all of the Company's licenses were renewed for a 10-year period
ending April 2008. Although the Company is unaware of any circumstances which
might prevent the grant of any future renewal applications, no assurance can
be given that any of the Company's licenses will be renewed by the FCC.
Furthermore, although revocation and involuntary modification of licenses are
extraordinary regulatory measures, the FCC has the authority to restrict the
operation of licensed facilities or to revoke or modify licenses. None of the
Company's licensees have ever been revoked or modified involuntarily by the
FCC.
The Communications Act requires licensees such as the Company to
obtain prior approval from the FCC for the assignment or transfer of control
of any construction permit or license or any rights thereunder, including in
the context of acquisition of other paging companies by the Company and
transfers by the Company of a controlling interest in any of its licenses or
construction permits or any rights thereunder. In addition, prior FCC
approval would be required in connection with any transfer of control of the
Company or, in certain circumstances, the acquisition of fifty percent (50%)
or more of the equity of the Company by a single entity or two or more
entities under common control. The FCC has approved each acquisition and
transfer of control for which the Company has sought approval in the past.
The Company also regularly applies for FCC authority to use
additional frequencies, modify the technical parameters of existing licenses,
expand its service territory and provide new services under existing FCC
Rules. Although there can be no assurance that future requests for approval
or applications filed by the Company will be approved or acted upon in a
timely manner by the FCC, or that the FCC will grant such requests or
applications, the Company knows of no reason to believe any such requests or
applications will not be approved or granted.
When FCC approval is required, whether in connection with a renewal
application, a transfer of control or assignment of license application or an
application for new or modified CMRS facilities for which prior FCC
authorization is required, any interested party may file a petition to
dismiss or deny the application. Pursuant to the Communications Act, such
application cannot be acted upon until the petition is dismissed or denied by
the FCC or withdrawn or dismissed by the petitioner. Moreover, any such FCC
approval or authorization is subject to the filing of petitions for
reconsideration and other administrative and judicial appeal processes.
Although the Company does not believe that any such petition or appeal will be
granted by the FCC that would result in a material adverse effect on the
Company, the Company can give no assurance that such petitions and/or appeals,
to be filed in the future, may not be granted by the FCC resulting in a
material adverse effect on the Company.
FOREIGN OWNERSHIP
Under existing law, no more than 20% of an FCC licensee's capital stock
may be owned, directly or indirectly, or voted by non-US citizens or their
representatives, by a foreign government or its representatives or by a foreign
corporation. Because the Company itself does not hold any FCC license but
instead controls other companies which themselves hold the licenses (which is
the current and intended structure), up to 25% of the Company's capital stock
may be owned or voted by non-US citizens or their representatives, by a foreign
government or its representatives or by a foreign corporation. Alien ownership
above the 25% level may be allowed should the FCC find such higher levels not
inconsistent with the public interest. If foreign ownership of the Company were
to exceed the 25% level, the FCC could revoke the company's FCC licenses,
although the Company could seek a declaratory ruling from the FCC allowing the
foreign ownership or take other actions to reduce the Company's foreign
ownership percentage in order to avoid the loss of its licenses. The Company has
no knowledge of any percent foreign ownership in violation of these
restrictions.
TELECOMMUNICATIONS ACT OF 1996 AND OTHER INDUSTRY DEVELOPMENTS
On February 8, 1996, the Telecommunications Act of 1996 (the
"Telecommunications Act") was signed into law, substantially revising the
regulation of communications. The goal of the Telecommunications Act is to
enhance competition and remove barriers to market entry, while deregulating the
communications industry to the greatest extent possible. To this end, local and
long-distance communications providers and paging companies will, for the first
time, be able to compete in other's market, and telephone and cable companies
will likewise be able to compete. To facilitate the entry of new carriers into
existing markets, the Telecommunications Act imposes certain interconnection and
equal access requirements on incumbent carriers. Additionally, all
communications carriers providing interstate communications services must
contribute to the federal universal service support mechanisms that the FCC will
establish. The Company cannot predict the outcome of the FCC's rulemaking
proceedings to promulgate regulations to implement the new law or the effect of
the new regulations and there can be no assurance that such regulations will not
adversely affect the Company's business or financial condition.
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At present, cellular providers, other than the regional Bell operating
companies, have the option of using only one designated long distance carrier.
The Telecommunications Act codifies the policy that CMRS providers will not be
required to provide equal access to long distance carriers. The FCC, however,
may require CMRS carriers to offer unblocked access (i.e., implemented by the
subscriber's use of a carrier identification code or other mechanisms at the
time of placing a call) to the long distance provider of a subscriber's choice.
The FCC has terminated its inquiry into the imposition of equal access
requirements on CMRS providers.
On August 1, 1996, the FCC released a Report and Order expanding the
flexibility of cellular, PCS and other CMRS providers to provide fixed as well
as mobile services. Such fixed services include, but need not be limited to,
"Wireless local loop" services, e.g., to apartment and office buildings, and
wireless backup to PVXs and local area networks, to be used in the event of
interruptions due to weather or other emergencies. The FCC has not yet decided
whether such fixed services should be subjected to universal service
obligations, or how they should be regulated, but it has proposed a presumption
that they be regulated as CMRS services.
On August 8, 1996, the FCC released its order implementing the
interconnection provisions of the Telecommunications Act of 1996. The FCC's
decision is lengthy and complex and is subject to petitions for reconsideration
and judicial review (as described below), and its precise impact is difficult to
predict with certainty. However, the FCC's order concludes that CMRS providers
are entitled to reciprocal compensation arrangements with local exchange
carriers ("LECs") and prohibits LECs from charging CMRS providers for
terminating LEC-originated traffic. The FCC's decision gives it broad authority
to regulate on the intrastate level, but states may impose additional
procompetitive rules beyond the minimum federal guidelines. Under these
guidelines, states must set arbitrated rates for interconnection and access to
unbundled elements based upon the LECs' long run incremental costs, plus a
reasonable share of forward-looking joint and common costs. In lieu of such
cost-based rates, the FCC has also established for use by states a benchmark
maximum range of 0.1-0.4 cents per minute for end office termination pending
further cost-based studies, and subject to a possible "true-up" payment later.
The FCC has also permitted states to impose "bill and keep" arrangements, under
which CMRS providers would make no payments for LEC termination of calls where
LECs and CMRS providers have symmetrical termination costs and roughly balanced
traffic flows. However, the FCC has found no evidence that these conditions
presently exist. The relationship of these charges to the payment of access
charges and universal service contributions has not yet been resolved by the
FCC. LECs and state regulators filed appeals of the interconnection order, which
have been consolidated in the US Court of Appeals for the Eight Circuit. The
Court has temporarily stayed the effective date of the pricing rules (including
the benchmark maximum of 0.2-0.4 cents described above) until more permanent
relief can be fashioned.
EMPLOYEES AND LABOR RELATIONS
The Company considers its labor relations to be good and, to the
Company's knowledge, none of its employees is covered by a collective
bargaining agreement. As of September 30, 1999, the Company employed a total
of approximately 17 people in the following areas:
Category Number of Employees
-------- -------------------
Sales and marketing ....................... 10
Engineering ............................... 4
General and administration, including
customer service ..................... 3
9
<PAGE>
PROPERTIES
The Company leases its principal executive offices (consisting of
approximately 3,000 square feet) located in Daphne, Alabama. The Company and its
subsidiaries and affiliates also lease three additional locations for local
operations and inventory storage, switching equipment and local sales and
administrative offices. The Company does not own any real property.
ANTICIPATED ACQUISITIONS
Given the size and highly fragmented composition of the industry,
the Company has identified the potential to acquire other companies and to
integrate their operations, management and marketing into the Company's
systems. Initially, the Company intends to expand its business through
selective, strategic acquisitions of other companies with complementary
businesses in a revenue range of $1 million to $3 million. Management
believes that companies in this range of revenues may be receptive to the
Company's acquisition program since often they are too small to be identified
as acquisition targets of larger public companies or to independently attempt
their own public offering. In particular, the Company intends to focus its
acquisition strategy on candidates which have a proven record of delivering
high-quality technical services and a customer base of mid-sized companies
that could benefit from the Company's access to anticipated sources of
financing and long-term growth strategy.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
You should read the following discussion and analysis of financial
condition and results of operations of the Company together with the
financial statements and the notes to the financial statements which appear
elsewhere in this registration statement.
10
<PAGE>
FORWARD-LOOKING STATEMENTS
This Form 10-SB registration statement includes forward-looking statements. We
have based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject to
risks, uncertainties and assumptions, which include, among other things:
- our need for substantial capital;
- our ability to service debt;
- our history of net operating losses;
- the amortization of our intangible assets;
- our ability to integrate our various acquisitions;
- the risks associated with our ability to implement our
business strategies;
- the impact of competition and technological developments;
- subscriber turnover;
- litigation and regulatory changes;
- dependence on key suppliers; and
- reliance on key personnel.
Other matters set forth in this Form 10-SB registration statement may also cause
actual results to differ materially from those described in the forward-looking
statements. We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this Form 10-SB registration statement may not occur.
OVERVIEW
The Company is a provider of wireless message paging and information delivery
services. Wireless message paging is comprised of numeric paging that permits a
pager to register the telephone number of the caller to the customer.
Information delivery systems is comprised of both numeric paging and text
messaging services.
The Company has a network of 14 radio towers (one tower is owned by the Company
and 13 towers are leased) to deliver wireless messaging services in the coastal
regions of Alabama, Louisiana, Mississippi and
11
<PAGE>
the Florida panhandle. The Company owns seven Certificates of Public Convenience
and Necessity issued by the Alabama Public Service Commission and 34 frequencies
licensed by the Federal Communications Commission. These certificates and
licenses allow the Company to provide wireless messaging services in these
geographic areas.
The Company supports its operations from its executive offices in Daphne,
Alabama, and from its operation offices located in Foley, Alabama; Metairie,
Louisiana; Gulfport, Mississippi; and Pascagoula, Mississippi.
The geographic areas served by the Company covers approximately 10,000,000
persons. In its markets, the Company presently serves approximately 4,500
subscribers to its message paging and information delivery services at September
30, 1999.
The Company derives the majority of its revenues from fixed, periodic (usually
monthly) fees, generally not dependent on usage, charged to subscribers for
paging services. While a subscriber continues to use the Company's services,
operating results benefit from this recurring revenue stream with minimal
requirements for incremental selling expenses or other fixed costs.
The Company's business strategy will be focused on increasing stockholder
value by expanding the subscriber base and increasing revenues, cost
efficiencies and operating cash flow. This focus will include the following:
-- Managing capital requirements and increasing free cash flow
by:
-- increasing revenues and cash flows through sales of
value-added advanced messaging and information
services which generate higher average monthly
revenue per unit (ARPU) than standard messaging or
paging services; and
-- further increasing the utilization of the southeast
network to serve more customers per frequency and
expand presence in existing markets with minimal
capital outlay.
-- Managing and lowering operating costs through cost containment
initiatives;
12
<PAGE>
-- Maximizing internal growth potential by continuing to broaden
the Company's distribution network and expanding target
markets to capitalize on the growing appeal of messaging and
other wireless products; and
-- Completing the integration of the operations of its
acquisitions.
The Company may also continue to expand its operations and subscriber base
through additional industry consolidation. While there are no current
outstanding commitments, potential future consolidation opportunities would be
evaluated on several key operating and financial elements including: geographic
presence and FCC regulatory licenses held; overall valuation of potential
target, including subscriber base and potential synergies; consideration to be
given; potential increase to net income and operating cash flow; and
availability of financing and the ability to reduce the combined companies
long-term debt. Such potential transactions may result in substantial capital
requirements for which additional financing may be required. No assurance can be
given that such additional financing would be available on terms satisfactory to
the Company.
RESULTS OF OPERATIONS
The following table sets forth certain operating information regarding the
Company:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues ....................................................... $ 1,156,731 $ -
Cost of goods sold ............................................. 509,432 -
General and administrative expenses ............................ 610,280 37,719
Depreciation ................................................... 62,019 -
Interest ....................................................... 4,372 -
----------- -----------
Net income (loss) .............................................. $ (29,372) $ (37,719)
=========== ===========
Net income (loss) per share .................................... $ (.01) $ (.01)
NINE MONTHS ENDED
SEPTEMBER 30
------------------------
1999 1998
--------- ---------
(unaudited)
Revenues ....................................................... $ 872,116 $ 867,548
Cost of revenues................................................ 449,063 382,075
General and administrative expenses ............................ 537,443 457,711
Depreciation ................................................... 76,026 46,514
Interest ....................................................... 20,646 3,279
--------- ---------
Net income (loss) .............................................. $(211,062) $ (22,031)
========= =========
Net income (loss) per share .................................... $ (.03) $ (.003)
</TABLE>
The definitions below will be helpful in understanding the discussion of the
Company's results of operations.
-- Service, rent and maintenance revenues include primarily
monthly, quarterly, semi-annually and annually billed
recurring revenue, not generally dependent on usage, charged
to subscribers for paging and related services such as voice
mail and pager repair and replacement.
-- ARPU means average monthly paging revenue per unit. ARPU is
calculated by dividing (a) service, rent and maintenance
revenues for the period by (b) the average number of units in
service for the period.
-- Net revenues include service, rent and maintenance revenues
and sales of pagers less cost
13
<PAGE>
of products sold.
-- Service, rent and maintenance expenses include costs related
to the management, operation and maintenance of the Company's
network systems and customer support centers.
-- General and administrative expenses include executive
management, accounting, office telephone, repairs and
maintenance, management information systems, salaries and
employee benefits.
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH 1997
Total revenues increased approximately $1,157,000, from $ 0 for the year
ended December 31, 1997 ("1997") to $1,157,000 for the year ended December
31, 1998 ("1998"). Net revenues increased approximately $900,000 in 1998. The
increase in net revenues was the result of the Company's acquisitions made
during 1998. From 1985 to the date of these acquisitions, the Company had no
material operations or assets.
Product sales, which consist primarily of sales of paging equipment,
increased approximately $395,000 from $ 0 in 1997 to $395,000 in 1998 and
increased as a percentage of net revenues from 0.0% in 1997 to 43.9% in 1998.
The cost of product sales increased approximately $257,000 from $ 0 in 1997
to $257,000 in 1998 due to the fact that from 1985 to the date of these
acquisitions, the Company had no material operations or assets. Pagers are
classified as inventory when purchased and the cost is included in cost of
product sales when the unit is sold.
Average monthly operating costs per unit in service (operating expenses per
unit before depreciation and amortization) increased by $10.85 per unit in
1998 from $0.00 per unit in 1997 to $10.85 per unit in 1998. Each operating
expense is discussed separately below.
Service, rent and maintenance expenses increased approximately $253,000 from
$0 in 1997 to $253,000 in 1998 and increased as a percentage of net revenues
from 0.0% in 1997 to 28.1% in 1998. This increase was attributable to the
fact that prior to the acquisitions in 1998, the Company has had no material
operations or assets since 1985.
General and administrative expenses increased approximately $610,000 from $0
in 1997 to $610,000 in 1998, and increased as a percentage of net revenues
from 0.0% in 1997 to 67.8% in 1998. The increase in general and
administrative expenses is attributable to the fact that prior to the
acquisitions in 1998, the Company has had no material operations or assets
since 1985. Monthly general and administrative expenses per unit increased by
$10.59 from $0.0 per unit in 1997 to $10.59 per unit in 1998 as a result of
these events.
Depreciation expense increased approximately $62,000 from $0 in 1997 to
$62,000 in 1998. The increase in depreciation expense resulted from the fact
that prior to the acquisitions in 1998, the Company has had no material
operations or assets since 1985.
Interest expense increased approximately $4,000 from $0 in 1997 to $4,000 in
1998. Interest expense increased due to the debt balances outstanding during
1998. Average debt balances were $45,000 greater in 1998 than in 1997 as a
result of debt incurred related to capital expenditures and working capital
requirements.
The Company's net loss increased approximately $29,000 from $0 in 1998 to
$29,000 in 1998. The increase in net loss was primarily the result of the
increase in costs associated with pursuing and consummating these
acquisitions and additional reporting requirements incurred. The Company
expects net losses to decrease in future periods.
EDITDA means earnings before interest, taxes, depreciation and amortization.
While not a measure under generally accepted accounting principles, (GAAP),
EBITDA is a standard measure of financial performance in the paging industry.
EBITDA may not be comparable to similarly titled measures reported by other
companies since all companies do not calculate EBITDA in the same manner.
EBITDA should not be considered in isolation or as an alternative to net
income (loss), income (loss) from operations, cash flows from operating
activities, or any other measure of performance under GAAP. EBITDA as defined
by the Company is used in its acquisition efforts. EBITDA increased
approximately $37,000 from $0 in 1997 to $37,000. As a percentage of net
revenues, EBITDA increased from 0.0% in 1997 to 4.1% in 1998.
14
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH 1998
Total revenues increased approximately $4,000, or approximately 1.0%, from
$868,000 for the nine months ended September 30, 1998 ("1998") to $872,000 for
the nine months ended September 30, 1999 ("1999"). Net revenues decreased
approximately $29,000, or 4.2%, from $675,000 in 1998 to $646,000 in 1999. The
decrease in net revenues was primarily the result of an increase in the cost of
product sales due to an inventory adjustment made at September 30, 1999 which
resulted from an inventory count at that time. The total number of subscribers
decreased by 500 since September 30, 1998. This decrease was due to normal
attrition which was not offset with new pager sales due to a lack of inventory
in 1999 and management's efforts were concentrated on new acquisition
possibilities at that time. The lack of inventory in 1999 was attributable to a
delivery problem with a new vendor. ARPU for Communitronic's paging services
increased $1.87 per unit from $13.23 in 1998 to $15.10 per unit in 1999. The
increase in ARPU was primarily attributable to customers requesting high
premium, value added services as opposed to the previous period and selected
rate increases partially offset by internal growth in the Company's reseller and
strategic alliance indirect distribution channels, which generate lower ARPU
sales and lower operating costs per unit for the Company. Factors that may
adversely affect ARPU in future periods include distribution mix of new
subscribers, competition and new technologies, among others. There can be no
assurance that ARPU will not decline in future periods.
Product sales, which consist primarily of sales of paging equipment, increased
approximately $7,000 or 2.3% from $296,000 in 1998 to $303,000 in 1999 and
increased as a percentage of net revenues from 43.8% in 1998 to 45.8% in 1999.
The cost of product sales increased approximately $33,000 or 17.2% from $193,000
15
<PAGE>
in 1998 to $226,000 in 1999 principally due to the increase in product sales and
an increase in unit costs. Pagers are classified as inventory when purchased and
the cost is included in cost of product sales when the unit is sold.
Average monthly operating costs per unit in increased by $4.49 per unit in 1999
from $14.98 per unit in 1998 to $19.47 per unit in 1999. Each operating expense
is discussed separately below.
Service, rent and maintenance expenses increased approximately $34,000 from
$189,000 in 1998 to $223,000 in 1999 and increased as a percentage of net
revenues from 28.1% in 1998 to 33.8% in 1999. This increase was attributable to
increases in personnel costs and tower site rents offset by a reduction in
telecommunications expenses. Monthly service, rent and maintenance expense per
unit increased $1.24 from $4.53 per unit in 1998 to $5.77 per unit in 1999
primarily as a result of the additional expenses incurred associated with the
operations of acquisitions and the addition of three new antenna sites. The
Company expects its service, rent and maintenance expenses to decrease as a
percentage of revenues and per subscriber unit in future periods as it continues
to renegotiate certain of its telecommunications and third party services
contracts and decommissions redundant transmitter and tower sites. The Company
expects such expense savings to be partially offset by an increase in rental
costs for other transmitter and tower sites as the Company enhances its presence
in the Southeastern United States.
General and administrative expenses increased approximately $79,000 from
$458,000 in 1998 to $537,000 in 1999, and increased as a percentage of net
revenues from 67.8% in 1998 to 83.1% in 1999. The increase in general and
administrative expenses is attributable to costs associated with acquisitions
and additional reporting requirements which require additional personnel costs
and professional fees. Monthly general and administrative expenses per unit
increased by $3.09 from $10.60 per unit in 1998 to $13.69 per unit in 1999 as a
result of these events.
Depreciation expense increased approximately $30,000 from $46,000 in 1998 to
$76,000 in 1999. The increase in depreciation expense resulted primarily from
depreciation expense on subscriber equipment and other capitalized assets
acquired in 1999 through financing.
Interest expense increased approximately $17,000 from $3,000 in 1998 to $20,000
in 1999. Interest expense increased due to higher average debt balances
outstanding during 1999. Average debt balances were $502,000 greater in 1999
than in 1998 as a result of debt incurred related to capital expenditures and
working capital requirements.
The Company's net loss increased approximately $189,000 from $22,000 in 1998 to
$211,000 in 1999. The increase in net loss was primarily the result of the
decrease in subscribers as discussed above and the increase in costs associated
with pursuing and consummating these acquisitions and additional reporting
requirements incurred. The Company expects net losses to decrease in future
periods.
EBITDA means earnings before interest, taxes, depreciation and amortization.
While not a measure under generally accepted accounting principles (GAAP),
EBITDA is a standard measure of financial performance in the paging industry.
EBITDA may not be comparable to similarly titled measures reported by other
companies since all companies do not calculate EBITDA in the same manner. EBITDA
should not be considered in isolation or as an alternative to net income (loss),
income (loss) from operations, cash flows from operating activities, or any
other measure of performance under GAAP. EBITDA as defined by the Company is
used in its acquisition efforts. EBITDA decreased approximately $142,000 from
$28,000 in 1998 to $(114,000). As a percentage of net revenues, EBITDA decreased
from 4.1% in 1998 to 0.0% in 1999.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
The following summary table (unaudited) presents comparative cash flows of
the Company for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30 DECEMBER 30
---------------------- ---------------------
1999 1998 1998 1997
---------- ---------- ---------- ---------
(unaudited)
<S> <C> <C> <C> <C>
Net cash used in operating activities $ (72,241) $(167,700) (223,597) -
Net cash used in investing activities (133,014) (47,418) (68,223) -
Net cash provided by financing activities 173,390 242,764 343,685 -
</TABLE>
For the nine months ended September 30, 1999, the Company's cash used in
operating activities decreased by approximately $96,000 from $168,000 for the
nine months ended September 30, 1998 to $72,000 for the nine months ended
September 30, 1999. The decrease in cash used by operating activities was
primarily the result of a net increase in accounts payable and accrued
expenses as of September 30, 1999 compared to September 30, 1998, which net
increase was a result of higher operating expenses between periods. This
increase in accounts payable and accrued expenses was offset by an increase
in accounts receivable as of September 30, 1999 compared to September 30,
1998, which was the result of higher revenues between periods. For the year
ended December 31, 1998, the Company's cash used in operating activities
increased by approximately $224,000 from $0 for the year ended December 31,
1997 to $224,000 for the year ended December 31, 1998. The increase in cash
used in operating activities was the result of the fact that prior to the
acquisitions in 1998, the Company has had no material operations or assets
since 1985.
Net cash used in investing activities increased approximately $86,000 from
$47,000 for the nine months ended September 30, 1998 to $133,000 for the nine
months ended September 30, 1999. The increase in net cash used for investing
activities was primarily the result of an increase in purchases of property
and equipment. Capital expenditures were approximately $28,000 and $158,000
for the nine months ended September 30, 1998 and 1999, respectively. Capital
expenditures for the nine months ended September 30, 1999 included
approximately $133,000 for transmitter and switch equipment. The balance of
capital expenditures was primarily for network construction and development
and information systems and computer related equipment. Capital expenditures
were approximately $28,000 and $158,000 for the nine months ended September
30, 1998 and 1999, respectively. Net cash used in investing activities
increased approximately $68,000 from $0 for the year ended December 31, 1997
to $68,000 for the year ended December 31, 1998. The increase in net cash
used for investing activities was primarily the result of an increase in
purchases of property and equipment and the fact that the Company had no
operations in 1997. Capital expenditures were approximately $37,000 and $0
for the years ended December 31, 1998 and 1997, respectively. Total capital
expenditures for fiscal year 1999 are expected to approximate $200,000. The
Company expects to finance its capital expenditures for the remainder of
fiscal year 1999 through its operating cash flows. Projected capital
expenditures are subject to change based on the progress of internal growth,
general business and economic conditions and competitive pressures.
Net cash provided by financing activities decreased approximately $70,000
from $243,000 for the nine months ended September 30, 1998 to $173,000 for
the nine months ended September 30, 1999. The decrease was primarily the
result of investment options purchased on possible future acquisitions. Net
cash provided by financing activities increased approximately $324,000 from
$0 for the year ended December 31, 1997 to $324,000 for the year ended
December 31, 1998. The increase was primarily the result of proceeds received
from the sale of common stock after the acquisitions made.
WORKING CAPITAL
At September 30, 1999, the Company's working capital had decreased by
$143,000 to approximately $7,000 from December 31, 1998. The Company has
experienced such decreases in prior periods and believes such decreased are
likely to continue. The Company attempts, whenever possible, to finance its
growth through operating cash flow and available cash balances rather than
incurring additional indebtedness. As a result, purchases of noncurrent
assets, including pagers and other network and transmission equipment, may be
financed with current liabilities, (e.g., accounts payable), causing a
deficit in working capital.
LONG-TERM DEBT
Borrowings and repayments from banks. During the nine months ended September
30, 1999, the Company increased its borrowings from banks by $15,000 from
December 31, 1998. However, the Company did not increase the amount of
borrowings from banks in the three months ended September 30, 1999. The
borrowings were used to purchase equipment. At September 30, 1999, $92,000
was outstanding to various banks.
Stockholder note. During the nine months ended September 30, 1999, the
Company received a stockholder note totaling $290,000 which bears interest at
6.25% and requires a monthly payment of $1,609 through November 2003 and a
final balloon payment of outstanding principal due in December 2003.
Additional principal payments will be made as cash flow becomes available. At
September 30, 1999, there was $266,676 outstanding on this note.
Investment Company note. During the nine months ended September 30, 1999, the
Company received a note for $200,000 from an investment company which
requires an annual payment of 10% of the outstanding principal. At September
30, 1999, there was $200,000 outstanding on this note.
ACCESS TO FUTURE CAPITAL
The Company's ability to access borrowings and generate investments in the
company and to meet its debt service and other obligations will be dependent
upon its future performance and its cash flows from operations, which will be
subject to financial, business and other factors, certain of which are beyond
the Company's control, such as prevailing economic conditions. The Company
cannot assure you that, in the event it was to require additional financing,
such additional financing would be available on terms permitted by agreements
relating to existing indebtedness or otherwise satisfactory to it. The
Company believes that funds generated by its operations, together with those
available under its credit facility, will be sufficient to finance estimated
capital expenditure requirements and to fund its existing operations for the
foreseeable future.
ITEM 3. DESCRIPTION OF PROPERTY.
CORPORATE OFFICES
The Company currently leases its corporate offices located at 27955
Highway 98, Suite WW-X, Daphne, Alabama 36526. The lease agreement is for a five
year term and covers approximately 3,000 square feet. The monthly payments are
$1,650 which will increase 5% during the second and fifth year of the lease.
The Company also leases offices for three operation offices. In Foley,
Alabama, the Company leases approximately 600 square feet at $500 per month for
a two-year term. In Gulfport, Mississippi, the Company leases approximately 900
square feet at $675 per month for a one-year term. In New Metairie, Louisiana,
the Company leases approximately 2,000 square feet at $1,825 per month for a
three-year term.
16
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The total number of shares of Common Stock of the Company beneficially
owned by each of the officers and directors of the Company, and all of such
directors and officers as a group, and their percentage ownership of the
outstanding Common Stock of the Company as of September 30, 1999, are as
follows:
<TABLE>
<CAPTION>
SHARES PERCENT OF
MANAGEMENT BENEFICIALLY COMMON
SHAREHOLDERS(1) OWNED(1) STOCK (1)
--------------- ------------ ----------
<S> <C> <C>
David R. Pressler.................................................. 5,240,500 (2) 66.9%
27955 Highway 98, Suite WW-X
Daphne, Alabama 36526
Samuel Mastrull.................................................... 286,000 (3) 3.7%
1118 Hatteras Circle
West Palm Beach, Florida 33413
James H. Flanagan.................................................. 5,000 .06%
3009 Artimese Avenue
Pascagoula, Mississippi
Charles H. Hillman................................................. 4,000 .01%
7190 Pullman Place
Mobile, Alabama 3669
Directors and officers as a group
(4 persons, including the above)................................ 5,535,500 70.7%
</TABLE>
- --------------------------------------
(1) Except as otherwise noted, it is believed by the Company that all
persons have full voting and investment power with respect to the
shares indicated. Under the rules of the Securities and Exchange
Commission, a person (or group of persons) is deemed to be a
"beneficial owner" of a security if he or she, directly or indirectly,
has or shares the power to vote or to direct the voting of such
security, or the power to dispose of or to direct the disposition of
such security. Accordingly, more than one person may be deemed to be a
beneficial owner of the same security. A person is also deemed to be a
beneficial owner of any security which that person has the right to
acquire within 60 days, such as options or warrants to purchase the
Common Stock of the Company.
(2) Includes 500,000 shares of Common Stock of the Company held by his wife
and his sons.
(3) Includes 1,000 shares of Common Stock of the Company owned by his wife
and 10,000 shares held as custodian for his grandchildren.
17
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to
the beneficial ownership of the Company's Common Stock by each shareholder
who beneficially owns more than five percent (5%) of the Company's Common
Stock, the number of shares beneficially owned by each and the percent of
outstanding Common Stock so owned of record as of September 30, 1999. It is
believed by the Company that all persons listed have sole voting and
investment power with respect to their shares, except as otherwise indicated.
<TABLE>
<CAPTION>
SHARES PERCENT OF
NAME AND ADDRESS BENEFICIALLY OUTSTANDING
OF BENEFICIAL OWNER TITLE OF CLASS OWNED COMMON STOCK
------------------- -------------- ------------ ------------
<S> <C> <C> <C>
David R. Pressler Common Stock 5,240,500 (2) 66.9%
27955 Highway 98, Suite WW-X
Daphne, Alabama 36526
Cede & Co. Common Stock 997,724 12.7%
P.O. Box 222, Bowling Green Station
New York, New York 10274
</TABLE>
- --------------------------------------
(1) Except as otherwise noted, it is believed by the Company that all
persons have full voting and investment power with respect to the
shares indicated. Under the rules of the Securities and Exchange
Commission, a person (or group of persons) is deemed to be a
"beneficial owner" of a security if he or she, directly or indirectly,
has or shares the power to vote or to direct the voting of such
security, or the power to dispose of or to direct the disposition of
such security. Accordingly, more than one person may be deemed to be a
beneficial owner of the same security. A person is also deemed to be a
beneficial owner of any security which that person has the right to
acquire within 60 days, such as options or warrants to purchase the
Common Stock of the Company.
(2) Includes 500,000 shares of Common Stock of the Company held by his wife
and his sons.
(3) Cede & Co. is a nominee holder of shares of Common Stock of the Company
as a depository for brokerage firms and others.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --- --- --------
<S> <C> <C>
David R. Pressler 54 Chairman of the Board, Director, Chief Executive Officer and President
Samuel Mastrull 72 Director, Chief Financial Officer and Secretary
James H. Flanagan 70 Director
Charles H. Hillman 39 Director
</TABLE>
18
<PAGE>
There is no family relationship between or among the above directors
and officers.
Mr. Pressler became Chairman of the Board, Chief Executive Officer,
and President of the Company on October 26, 1998, following the Company's
acquisition of all of the issued and outstanding stock of Communitronics,
Inc. He founded and was the President of Communitronics, Inc. from 1975 until
its acquisition by the Company. Mr. Pressler holds an FCC Master Radio
Engineer Rating with radar endorsement. He is a certified engineer (EI-0216),
and is a senior member of the National Association of Radio and
Telecommunications Engineers.
Mr. Mastrull became a director and the Chief Financial Officer and
Secretary of the Company on October 26, 1998. From 1995 to 1997, he was a
registered representative with the securities firm of Joseph Charles
Investment Bankers. From 1987 to 1995, he was the owner and President of
Compliance Technology, Inc. which assisted companies seeking financing from
lending institutions. From 1976 to 1987, Mr. Mastrull was an ombudsman
employed by the State of News Jersey. From 1962 to 1976, Mr. Mastrull was a
registered representative employed by several securities brokerage firms. Mr.
Mastrull received a business administration degree from Drake College in
1995.
Mr. Flanagan became a director of the Company on October 26, 1998.
He is presently retired. From 1957 to 1997, he was the President and co-owner
of Pascagoula Drug Company, a pharmacy company in Pascagoula, Mississippi.
Mr. Flanagan received a pharmacy degree from the University of Mississippi in
1955.
Mr. Hillman became a director of the Company on October 26, 1998.
From July 1995 to the present, he has been a partner in the law firm of
Ulmer, Hilman, Ballard and Nikolakis, P.G., in Mobile, Alabama. From 1990 to
July 1995, he was an attorney in the law firm of Brown Hudgens P.C. From 1984
to 1990, Mr. Hillman was an attorney in the Judge Advocates General division
of the U.S. Army. Mr. Hillman graduated from Mississippi State University
with a B.S. degree in 1981, and graduated from the University of Mississippi
School of Law in 1984.
ITEM 6. EXECUTIVE COMPENSATION.
No executive officer or director of the Company received compensation
in excess of $100,000 during its fiscal year ended December 31, 1998. David R.
Pressler, the President of the Company, received compensation of approximately
$21,000 in 1998.
The Company does not presently have any pension plan, profit sharing
plan, or similar plans for the benefit of its officers, directors or employees.
However, the Company reserves the right to establish any such plans in the
future.
Directors of the Company who do not serve as officers thereof are not
currently compensated by the Company for meeting attendance or otherwise, but
are entitled to reimbursement for their travel expenses. The Company does not
pay additional amounts for committee participation or special assignments of the
Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In connection with the reorganization of the Company in October 1998
and the acquisition of Communitronics, Inc. and its subsidiaries, David R.
Pressler, a director and President of the Company, received 4,715,500 shares
of Common Stock of the Company, valued at $1.00 per share, for 100% of his
shares of Communitronics, Inc.; and Sam Mastrull, a director and Chief Financial
Officer of the Company, received 116,500 shares of Common Stock of the Company,
valued at $1.00 per share, for 100% of his shares of Communitronics, Inc. The
terms of these transactions were at least as favorable to the Company as you
would expect to negotiate with an unaffiliated third party in a similar
transaction.
In November 1998, Sam Mastrull received 183,500 shares of Common Stock,
valued at $0.10 per share, for consulting services in reliance upon Section 4(2)
of the Securities Act of 1933. The terms of this transaction were at least as
favorable to the Company as you would expect to negotiate with an unaffiliated
third party in a similar transaction.
At September 30, 1999, the Company had a note payable to David R.
Pressler, a director, President and majority stockholder of the Company with
a balance of $266,676. The note bears interest at 6.25% and is due on
December 31, 2003.
19
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
The Company is authorized to issue 50,000,000 shares of Common
Stock, $.01 par value. At September 30, 1999, there were 7,829,936 shares of
Common Stock issued and outstanding.
There were 489 stockholders of record of the Common Stock of the
Company as of September 30, 1999.
COMMON STOCK
Holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors, out of funds legally
available, without any preference. Holders of Common Stock are entitled to
one vote per share. Cumulative voting is not allowed for purposes of the
election of directors. Thus, the holders of more than 50% of the shares
voting for directors can elect all directors. The holders of the Common Stock
of the Company have no preemptive rights to purchase new issues of the
securities of the Company. There are no redemption or conversion features
attached to the Common Stock.
At the present time, the Company does not intend to pay any
dividends on its Common Stock.
Upon liquidation or dissolution of the Company, holders of Common
Stock are entitled to receive pro rata, either in cash or in kind, all of the
assets of the Company after payment of debts.
WARRANTS AND OPTIONS
As of September 30, 1999, there were no outstanding warrants or options
to purchase shares of Common Stock of the Company.
UTAH CORPORATE LAW
The Company is a Utah corporation, and may become subject to the
anti-takeover provisions of the Utah Revised Business Corporation Act (the
"Utah Law"). In general, Utah Law prevents take-over offers to acquire equity
securities of a Utah corporation if the offeror would become a beneficial
owner of more than 20% of any class of outstanding equity securities, and
other similar provisions, subject to certain exceptions such as the written
approval of the board of directors. The existence of these provisions would
be expected to have an anti-takeover effect, including attempts that might
result in a premium over the market price for the shares of Common Stock held
by stockholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock of the Company
is Progressive Transfer Company, 1981 East Murray-Holladay Road, Suite 100,
Salt Lake City, Utah 84117-5126; telephone (801) 272-9294.
20
<PAGE>
REPORTS TO STOCKHOLDERS
The Company will furnish its shareholders with annual reports
containing the consolidated financial statements of the Company examined by
independent certified public accountants. The Company presently intends to
issue unaudited quarterly reports and may distribute other reports to the
stockholders as it deems appropriate.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
GENERAL
The Common Stock of the Company is presently traded in the
pink-sheet over-the-counter market, and is quoted under the symbol BEEP.
MARKET PRICE
When the trading price of the Company's Common Stock is below $5.00
per share, the Common Stock is considered to be "penny stocks" that are
subject to rules promulgated by the Securities and Exchange Commission (Rule
15g-1 through 15g-9) under the Securities Exchange Act of 1934. These rules
impose significant requirements on brokers under these circumstances,
including: (a) delivering to customers the Commission's standardized risk
disclosure document; (b) providing to customers current bid and offers; (c)
disclosing to customers the brokers-dealer and sales representatives
compensation; and (d) providing to customers monthly account statements.
The following table sets forth the range of high and low closing bid
prices per share of the Common Stock of the Company as reported by National
Quotation Bureau, L.L.C. for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31, 1998 High Bid(1) Low Bid(1)
- ---------------------------- -------- -------
<S> <C> <C>
3rd Quarter.......................... Unpriced Unpriced
4th Quarter.......................... $3.0625 $2.00
Year Ended December 31, 1999
- -----------------------------
1st Quarter ......................... $3.00 $1.50
2nd Quarter.......................... $2.75 $.8125
3rd Quarter.......................... $1.875 $.125
4th Quarter.......................... $.75 $.125
Year Ending December 31, 2000
- -----------------------------
1st Quarter.......................... $.64 $.28
</TABLE>
- -------------------------------------------
(1) The Company is unaware of the factors which resulted in the significant
fluctuations in the prices per share during the periods being
presented, although it is aware that there is a thin market for the
Common Stock, that there are frequently few shares being traded and
that any sales activity significantly impacts the market.
The closing bid price of the Common Stock of the Company on
April 20, 2000, was $.75.
21
<PAGE>
DIVIDENDS
The Company has not paid any dividends on its Common Stock and does
not expect to do so in the foreseeable future. The Company intends to apply
its earnings, if any, in expanding its operations and related activities.
The payment of cash dividends in the future will be at the
discretion of the Board of Directors and will depend upon such factors as
earnings levels, capital requirements, the Company's financial condition and
other factors deemed relevant to the Board of Directors. In addition, the
Company's ability to pay dividends may become limited under future loan
agreements of the Company which may restrict or prohibit the payment of
dividends.
ITEM 2. LEGAL PROCEEDINGS.
The Company may become subject to legal proceedings and claims which
arise in the ordinary course of business. The Company's management does not
expect that the results in any of these legal proceedings will have a
material adverse effect on the Company's financial condition or results of
operations.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On June 15, 1997, the Registrant authorized the issuance of 2,000,000
shares of Common Stock to Ken Kurtz, the President and Secretary of the
Registrant, for services in reliance upon Section 4(2) of the Securities Act
of 1933. These shares were canceled by agreement effective October 26, 1998.
Effective November 10, 1997, the Registrant issued 500,000 shares of
Common Stock to Carrie Kurtz, the Vice President of the Registrant, and
500,000 shares to Tammy Gehring, the Secretary and Treasurer of the
Registrant, as compensation for services in reliance upon Section 4(2) of the
Securities Act of 1933. These shares were canceled by agreement effective
October 26, 1998.
In September 1998, the Registrant issued 1,303,500 shares of
Common Stock for $.10 per share in the aggregate amount of $130,350
(including the forgiveness of contract obligations) to three persons in
reliance upon Rule 504 of Regulation D under the Securities Act of 1933.
These three persons were Type Investment Holdings, Ltd. (435,000 shares),
Lexington Sales Corporation Limited (435,000 shares), and Samuel and Carol
Mastrull (433,500 shares).
In October 1998, the Company issued a total of 5,500,000 shares of
its Common Stock in exchange for all of the issued and outstanding common
stock of Communitronics, Inc., an Alabama corporation, which became a wholly
owned subsidiary of the Company. The following stockholders received common
stock of the Company in this stock exchange: David R. Pressler (4,715,500
shares), Ron Scalise (250,000 shares), R. Allen Gallagher (167,200 shares),
Sam and Carol Mastrull (116,500 shares), Clayton Daigle (125,000 shares), and
J. Cody Pressler (125,000 shares). The exchange was made in reliance upon
Section 4(2) of the Securities Act of 1933.
In December 1998, the Company issued 250,000 shares of its
Common Stock to Mr. Kenneth E. Smith, the sole stockholder of Data Paging,
Inc. for all of its issued and outstanding stock and its assets in reliance
upon Section 4(2) of the Securities Act of 1933. Mr. Smith is an experienced
and sophisticated businessman and investor.
In January 1999, the Company issued 150,000 shares of its Common
Stock to Arthur Malone for $15,000 in a limited offering made in reliance
upon Rule 504 of Regulation D under the Securities Act of 1933. The Company
filed Form D with the Securities and Exchange Commission regarding this
transaction.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The provisions of the Utah Revised Business Corporation Act provides
for the indemnification of the directors and officers of the Company. These
provisions generally permit indemnification of directors and officers against
certain costs, liabilities and expenses of any threatened, pending or
completed action, suit or proceeding that any such person may incur by reason
of serving in such positions if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such persona had been
adjudged to be liable to the corporation, unless and only to the extent that
the court in which such action or suit was brought shall determine upon
application
22
<PAGE>
that, despite the adjudication of liability but in view of all the
circumstance of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which a court shall deem proper. Any
determination that indemnification of a director or an officer, unless
ordered by the court, must be made by a majority vote of the directors who
are not parties to such action, suit or proceeding, even though less than a
quorum; or by a committee of such directors designated by majority vote of
such directors even though less than a quorum; or if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion; or by the stockholders.
23
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C> <C>
2............................................................. Reorganization Agreement dated October 1,
1998, between Oneida General Corporation
and Communitronics, Inc. is incorporated
by reference to Exhibit 10(a) to Form 10-SB
Registration Statement of the Registrant
3(i) Articles of Incorporation of the Registrant....... Incorporated by reference to Exhibit 3(i)
of the Form 10-SB Registration Statement of
the Registrant
3(ii) Amendments to Articles of Incorporation........... Incorporated by reference to Exhibit 3(ii)
of the Form 10-SB Registration Statement of
the Registrant
3(iii) By-Laws of the Registrant......................... Incorporated by reference to Exhibit 3(iii)
of the Form 10-SB Registration Statement of
the Registrant
6 Material Contracts
10(a)......................................................... Purchase Agreement dated November 23, 1998,
to acquire Data Paging, Inc. is incorporated
by reference to Exhibit 10(b) to Form 10-SB
Registration Statement of the Registrant
10(b)......................................................... Stock Exchange Agreement between the Registrant
and Ronald Scalise and Allson Gallagher dated
March 23, 1998 to acquire 100% of Crescent Paging,
Inc., excluding exhibits, is incorporated by
reference to Exhibit 10(b) to Post-Effective
Amendment No. 1 to the Form 10-SB of the Registrant
10(c)......................................................... Promissory note payable to David Pressler is
incorporated by reference to Exhibit 10(c) of Post-
Effective Amendment No. 2 to the Form 10-SB of the
Registrant.
11 Statement re: computation of per share earnings... Reference is made to the Consolidated
Statements of Operations of the Registrant
for its fiscal years ended December 31,
1998, and 1997, which are incorporated
herein by reference.
21 A description of the subsidiaries of the
Registrant........................................ Description of subsidiaries of Registrant is
incorporated by reference to Exhibit 21 of
Post-Effective Amendment No. 2 to the Form 10-SB of the
Registrant.
23 Consent of Independent Auditors................... Consent of Garner Prichard and Middleton, P.C.
27 Financial Data Schedule........................... Incorporated by reference to Exhibit 27
of Amendment No. 1 to the Form 10-SB
Registration Statement of the Registrant
and to the Form/10-QSB of the Registrant
for the nine month period ended
September 30, 1999
</TABLE>
24
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this Post-Effective Amendment No. 3 to the
registration statement to be signed on its behalf by the undersigned,
hereunto duly authorized.
COMMUNITRONICS OF AMERICA, INC.
Date: January 13, 2000
By:
---------------------------------- ----------------------------------
David R. Pressler James H. Flanagan
Director, President Director
And Chairman of the Board of
Directors
----------------------------------
Samuel Mastrull
Director, Secretary and
principal accounting officer
25
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
Consolidated Financial Statements
and Accompanying
Information
for the years ended
December 31, 1998 and 1997
and
for the nine months ended
September 30, 1999
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-2
Consolidated Balance Sheets F-3 - 4
Consolidated Statements of Operations F-5
Consolidated Statements of Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-7 - 8
Notes to Consolidated Financial Statements F-9 - F-18
Accompanying Information
Independent Auditors' Reports on Accompanying Information F-19
Schedule 1 - Consolidated Services, Rent and Maintenance Expenses F-20
Schedule 2 - Consolidated General and Administrative Expenses F-21
</TABLE>
With respect to the unaudited financial statements of the Company at
September 30, 1999, appearing herein, such statements have not been audited
or reviewed by Garner Prichard & Middleton, P.C. and such firm does not
express an opinion on them. Because the unaudited financial statements of the
Company as of September 30, 1999, included herein where prepared by
management of the Company, there is no assurance that material differences
will not occur in such information upon audit, although the Company believes
such information is correct and complete to the best of its knowledge and
belief. The Company has made all adjustments which in the opinion of
management are necessary in order to make the unaudited financial statements
not misleading.
F-1
<PAGE>
Garner Prichard & Middleton, P.C.
---- Certified Public Accountants & Consultants
GP Telephone 6925 Cottage Hill Road Suite A Facsimile
&M (334) 639-0801 Mobile, Alabama 36695 (334) 639-7429
---- www.gpm.com
Members:
Perry A. Garner, CPA American Institute of CPAs
Robert L. Prichard, IV, CPA Alabama Society of CPAs
F. Wesley Middleton, Jr., CPA Mississippi Society of CPAs
INDEPENDENT AUDITORS' REPORT
The Stockholders
Communitronics of America, Inc.
Daphne, Alabama
We have audited the accompanying consolidated balance sheet of Communitronics
of America, Inc. (formerly Oneida General Corporation) as of December 31, 1998
and 1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audits in accordance with generally accepted audited
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatements. An audit includes examining on
a test basis, evidence supporting the amounts and disclosures in the
consolidated 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 audits provide a reasonable basis for our opinion.
In our opinion, the 1998 and 1997 consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Communitronics of America, Inc. as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
As described in note 2, an error was discovered subsequent to the issuance of
the financial statements for the year ended December 31, 1998, in which the
issuance of stock in connection with a consulting agreement was recorded at an
improper amount. The financial statements for the year ended December 31,
1998, have been adjusted to reflect the proper amount.
Garner Prichard & Middleton P.C.
February 26, 1999
(except for note 2, as to which
the date is February 23, 2000)
F-2
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30
1999 December 31 December 31
(Unaudited) 1998 1997
-------------- ----------------- -----------------
Assets
<S> <C> <C> <C>
Current assets
Cash $ - $ 31,865 $ -
Accounts receivable - trade, less allowance
for doubtful accounts of $1,045 for
1998 (note 3) 117,531 130,778 -
Inventory 108,238 70,524 -
Due from stockholder (note 10) 5,574 45,857 -
-------------- ---------------- -----------------
Total current assets 231,343 279,024 -
Property and equipment, at cost, net of
accumulated depreciation (note 4) 743,340 661,069 -
Investment in network (note 5) 336,305 - -
Deferred consulting charges (note 6) 303,750 - -
Deposits 4,054 4,054 -
-------------- ---------------- -----------------
$ 1,618,792 $ 944,147 $ -
============== ================ ================
Liabilities and Stockholders' Equity
Current liabilities
Bank overdraft $ 10,191 $ - $ -
Current maturities of long-term debt (note 8) 91,864 53,942 -
Accounts payable - trade 116,921 42,796 107,528
Payroll and sales taxes payable 5,236 9,790 -
Acquisition purchase price liability - 15,000 -
Due to officer - 7,500 -
-------------- ---------------- -----------------
Total current liabilities 224,212 129,028 107,528
Long-term debt, less current maturities (note 8) 235,070 37,473 -
Note payable to stockholder (note 10) 266,676 - -
-------------- ---------------- -----------------
Total liabilities 725,958 166,501 107,528
-------------- ---------------- -----------------
</TABLE>
Commitments and contingencies (notes 8, 9 and 15)
(continued)
F-3
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
September 30
1999 December 31 December 31
(Unaudited) 1998 1997
---------------- -------------- -----------------
<S> <C> <C>
Liabilities and Stockholders' Equity (continued)
Stockholders' equity
Common stock, $.01 par value; 50,000,000
shares authorized, 7,860,236 shares issued
and outstanding at September 30, 1999,
6,987,936 shares issued and outstanding at
December 31, 1998 and 3,184,400 shares
issued and outstanding at December 31, 1997 78,602 69,879 31,844
Common stock subscribed, $.01 par value;
717,300 shares pending issuance - 7,173 -
Additional paid-in capital 1,399,394 1,074,694 205,356
Accumulated deficit (note 11) (585,162) (374,100) (344,728)
---------------- -------------- -----------------
Total stockholders' equity 892,834 777,646 (107,528)
---------------- -------------- -----------------
$ 1,618,792 $ 944,147 $ -
================ ============== =================
</TABLE>
See accompanying notes to consolidated financial statements and
accountants' report
F-4
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Nine
Months Ended
September 30 Year Ended Year Ended
1999 December 31 December 31
(Unaudited) 1998 1997
---------------- --------------- --------------
<S> <C> <C> <C>
Revenues $ 872,116 $ 1,156,731 $ -
Less cost of revenues 449,063 509,432 -
--------------- --------------- --------------
Gross profit 423,053 647,299 -
--------------- --------------- --------------
Operating expenses
General and administrative 404,738 409,926 37,719
Non-recurring expenses (note 13) 132,705 200,354 -
Depreciation 76,026 62,019 -
--------------- --------------- --------------
Total operating expenses 613,469 672,299 37,719
--------------- --------------- --------------
Operating loss (190,416) (25,000) (37,719)
Other expenses
Interest expense 20,646 4,372 -
--------------- --------------- --------------
Net loss $ (211,062) $ (29,372) $ (37,719)
=============== =============== ==============
Net loss per share (note 14) $ (0.03) $ (0.01) $ (0.01)
=============== =============== ==============
</TABLE>
See accompanying notes to consolidated financial statements and
accountants' report
F-5
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1998 and 1997
and
Nine Months Ended September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Common Additional Retained
Common Stock Paid-in Earnings Stockholders'
Stock Subscribed Capital (Deficit) Equity
------------- -------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $ 1,844 $ - $ 205,356 $ (307,009) $ (99,809)
Issuance of 3,000,000 shares of
common stock 30,000 - - - 30,000
Net loss - - - (37,719) (37,719)
------------- -------------- ------------ ------------- --------------
Balance, December 31, 1997 31,844 - 205,356 (344,728) (107,528)
Issuance of 1,303,500 shares of
common stock 13,035 - 117,315 - 130,350
Issuance of 5,500,000 shares of
common stock in connection
with acquisitions 55,000 - 511,741 - 566,741
Cancellation of 3,000,000 shares
of common stock (30,000) - - - (30,000)
Common stock subscribed, 717,300
shares - 7,173 240,282 - 247,455
Net loss - - - (29,372) (29,372)
------------- -------------- ------------ ------------- --------------
Balance, December 31, 1998 69,879 7,173 1,074,694 (374,100) 777,646
Issuance of 717,300 shares of
common stock 7,173 (7,173) - - -
Issuance of 155,000 shares of
common stock 1,550 - 324,700 - 326,250
Net loss - - - (211,062) (211,062)
------------ -------------- ------------ ------------- --------------
Balance, September 30, 1999 $ 78,602 $ - $1,399,394 $ (585,162) $ 892,834
============ ============== ============ ============= ==============
</TABLE>
See accompanying notes to consolidated financial statements and
accountants' report
F-6
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine
Months Ended
September 30 Year Ended Year Ended
1999 December 31 December 31
(Unaudited) 1998 1997
------------- ------------- ----------------
<S> <C> <C> <C>
Operating activities
Net loss $ (211,062) $ (29,372) $ (37,719)
------------- ------------- ----------------
Adjustments to reconcile net loss to net
cash provided (used) by operating activities
Depreciation 76,026 62,019 -
Issuance of common stock for services 311,250 - 30,000
(Increase) decrease in
Accounts receivable 13,247 (130,778) -
Inventory (37,714) (70,524) -
Deferred consulting charges (303,750) - -
Increase (decrease) in
Bank overdraft 10,191 - -
Accounts payable 74,125 (64,732) 7,719
Accrued expenses (4,554) 9,790 -
------------- ------------- ----------------
Total adjustments 138,821 (194,225) 37,719
------------- ------------- ----------------
Net cash used by operating
activities (72,241) (223,597) -
------------- ------------- ----------------
Investing activities
Purchase of property and equipment (158,297) (37,366) -
Investment in network (336,305) - -
Acquisition liability (15,000) 15,000 -
Repayments (loans) of stockholder loans 40,283 (45,857) -
------------- ------------- ----------------
Net cash used by investing activities (469,319) (68,223) -
------------- ------------- ----------------
Financing activities
Proceeds (repayments) from stockholder
loans 259,176 7,500 -
Proceeds from sale of common stock 15,000 244,805 -
Borrowing of long-term debt 254,707 81,598 -
Repayments of long-term debt (19,188) (10,218) -
------------- ------------- ----------------
Net cash provided by financing
activities 509,695 323,685 -
------------- ------------- ----------------
</TABLE>
(continued)
F-7
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Nine
Months Ended
September 30 Year Ended Year Ended
1999 December 31 December 31
(Unaudited) 1998 1997
------------- ------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in cash (31,865) 31,865 -
Cash
Beginning of period 31,865 - -
------------- ------------- ---------------
End of period $ - $ 31,865 $ -
============= ============= ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 20,646 $ 4,372 $ -
============= ============= ===============
</TABLE>
See accompanying notes to consolidated financial statements and accountants'
report
F-8
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 1999 (unaudited), December 31, 1998 and 1997
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
Communitronics of America, Inc. (formerly Oneida General Corporation) (the
Company) is a provider of wireless messaging and information delivery
services. The Company maintains an extensive network of radio towers
positioned to deliver wireless messaging services throughout the coastal
regions of Alabama, Louisiana, Mississippi and the Florida Panhandle. The
consolidated financial statements include the accounts of all the Company's
wholly-owned subsidiaries. All intercompany transactions have been eliminated.
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.
STATEMENT OF CASH FLOWS
The Company defines cash and cash equivalents as cash on hand, demand
deposits and short-term (three months or less) highly liquid investments.
ACCOUNTS RECEIVABLE
An allowance for doubtful accounts is computed based on specific receivables
deemed uncollectible by management of the Company and historical experience.
INVENTORY
Inventory, consisting primarily of certain types and brands pagers held for
resale, is carried at the lower of cost or market.
F-9
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. When retired or otherwise
disposed of, the related carrying value and accumulated depreciation are
removed from the respective accounts and the net difference, less any amount
realized from the disposition, is recorded as gain or loss on disposition of
assets. Maintenance and repairs are charged to operating expenses. Costs of
significant improvements and renewals are capitalized.
DEPRECIATION
Property and equipment are being depreciated over their estimated useful
lives using straight-line method. The estimated useful lives of significant
assets are as follows: radio towers, 30 years; transmission equipment, 7
years; computer equipment, 5 years; vehicles, 5years; and, furniture and
fixtures, 7 years.
REVENUE RECOGNITION
Services, rent and maintenance revenues are recognized in the month the
related services are performed. Product sales are recognized upon delivery of
product to the customer.
INCOME TAXES
In accordance with Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES, income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes resulting primarily from the use of
accelerated depreciation methods for tax purposes.
NOTE 2 - RESTATEMENT
Subsequent to the issuance of the financial statements for the year ended
December 31, 1998, it was discovered that an error had been previously made
during 1998 in the recording of shares of stock that were issued in
connection with a consulting agreement. The financial statements for 1998
have been restated by recording prepaid expenses of $303,750 and increasing
additional paid-in capital by a comparable amount. The error had no effect on
net income for 1998 or prior years. Additionally, the error in recording
transaction would have had no effect on the auditors' report if it had been
known as of the date of the report and had not been reflected in the
financial statements due to the fact that the error understated assets and
stockholders' equity.
NOTE 3 - CONCENTRATION OF CREDIT RISK
The Company operates from locations in Daphne and Foley, Alabama, Metaerie
Louisiana and Gulfport and Pascagoula, Mississippi. The Company grants credit
(accounts receivable) to customers, substantially all of whom are
individuals, located in the vicinity of the operating locations. In order to
reduce the credit risk relative to subscriber services, the Company requires
all subscribers to execute a one-year service contract which allows the
Company to charge a $200 fee upon early cancellation of service.
F-10
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
September 30
1999 December 31
(Unaudited) 1998
------------- -------------
<S> <C> <C>
Radio towers $ 464,003 $ 464,003
Transmission equipment 808,764 643,512
Computer equipment 99,535 99,535
Vehicles 45,269 45,269
Furniture and fixtures 32,843 39,797
------------- -------------
1,450,414 1,292,116
Less accumulated depreciation 707,074 631,047
------------- -------------
Net property and equipment $ 743,340 $ 661,069
============= =============
</TABLE>
NOTE 5 - INVESTMENT IN NETWORK (UNAUDITED)
In January 1999, the Company entered into an agreement with it majority
stockholder to assume certain obligations related to an investment in Beepers
Network, Inc., a Tennessee corporation. The investment included $200,000 in
cash and the acquisition of tower equipment to be used by Beepers Network,
Inc. in the amount of $136,305. The $200,000 in cash was used by Beepers
Network, Inc. to build-out new tower locations.
The Company's investment in Beepers Network, Inc. was made in order to meet
the FCC's time requirement concerning build-out of Beepers Network, Inc.'s
additional facilities which would be of mutual benefit to both companies.
These facilities enhanced the Company's network in that Beepers and the
Company operate on the same frequency and therefore pass each others traffic
(paging customers). This investment enhanced the geographical coverage area
of both companies. Also, as a result of the investment, Beepers Network, Inc.
has granted an option to the Company to purchase Beepers Network, Inc. at a
later undecided date on terms to be mutually agreed upon in the future. As of
September 30, 1999, the option had not been exercised and the balance of the
investment totalled $336,305.
NOTE 6 - DEFERRED CONSULTING CHARGES (UNAUDITED)
In January 1999, the Company entered into an agreement with a firm to provide
financial and public relations services beginning at such time as the Company
became compliant with all U.S. Securities and Exchange Commission reporting
requirements and reinstatement of the Company's stock to trading on the OTC
Bulletin Board. The Company issued 150,000 shares to the firm which at the
time of issuance were trading at $2.025. At September 30, 1999, no services
have been provided under this agreement, none of the aspects of this agreement
have expired and the balance remaining on the agreement totalled $303,750.
NOTE 7 - INTANGIBLE ASSETS
The Company owns seven Certificates of Public Convenience and Necessity
issued by the Alabama Public Service Commission and thirty-four frequencies
licensed by the Federal Communications Commission. These certificates and
licenses allow the Company to provide wireless messaging services in certain
cities in Alabama, Florida, Mississippi, Louisiana, Georgia, Tennessee,
Arkansas and Texas.
F-11
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
NOTE 7 - INTANGIBLE ASSETS (CONTINUED)
At September 30, 1999 and December 31, 1998, the original costs of intangible
assets were fully amortized. The information relative to original costs and
accumulated amortization at September 30, 1999 and December 31, 1998, was not
available. Based on appraisals, the approximate fair market value of the
certificates and licenses is in excess of $10,000,000 (unaudited).
NOTE 8 - LONG-TERM DEBT
The Company's long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30
1999 December 31
(Unaudited) 1998
--------------- ------------------
<S> <C> <C>
Union Planters Bank, 10%, 180-day note, principal and interest due
December 15, 1999, secured by by real property $ 17,390 $ 18,280
Union Planters Bank, 10%, due in equal monthly
principal and interest installments of $233 through
August 2000, unsecured 2,855 4,265
Union Planters Bank, 7%, 180-day note, principal and interest due January
8, 2000, secured by personal property 20,035 20,035
Union Planters Bank, 7.8%, due in equal monthly
principal and interest installments of $708 through
December 2003, secured by vehicle 30,612 35,035
Corporation, 10%, due in annual principal payments
equal to 10% of outstanding principal balance through
June 2019, unsecured 200,000 -
Non-interest bearing note payable to a stockholder of Crescent Radio
Electronics, Inc. (the predecessor company of Crescent Paging, Inc., a
wholly-owned subsidiary of the Company), due in equal monthly principal
</TABLE>
F-12
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
<TABLE>
<CAPTION>
<S> <C> <C>
installments of $600 through February 2005, unsecured 9,000 13,800
NOTE 8 - LONG-TERM DEBT (CONTINUED)
Union Planters Bank, 7.8%, due in equal monthly
principal and interest installments of $754 through
February 2001, secured by vehicle 12,101 -
Merit Leasing Corp., 38.75%, due in equal monthly
principal and interest installments of $1,801 through
April 2002, secured by equipment 34,941 13,800
-------------- ------------
Total long-term debt 326,934 91,415
Less current maturities 91,864 53,942
-------------- ------------
Long-term debt, less current maturities $ 235,070 $ 37,473
============ ===========
Maturities of long-term debt at September 30, 1999, are as follows:
Year ending September 30,
2000 (included in current liabilities) $ 91,864
2001 44,483
2002 34,706
2003 22,565
2004 15,218
Thereafter 118,098
------------
$ 326,934
============
</TABLE>
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company is committed to several operating leases of radio towers and office
facilities. Approximate future minimum lease payments of all non-cancelable
operating leases for the next five years are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
For the year ending September 30,
2000 $ 62,682
2001 34,178
2002 18,242
2003 12,250
</TABLE>
F-13
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C>
2004 7,660
Thereafter 13,200
---------
$ 148,212
=========
</TABLE>
Rental expense under these operating leases for the nine months ended
September 30, 1999 (unaudited) and for the year ended December 31, 1998,
amounted to $ 54,419 and $ 48,809, respectively.
As part of the stock exchange agreement with Crescent Paging, Inc., the
Company guaranteed the former stockholders of Crescent Paging, Inc. that the
Company's common stock would be worth no less than $3.00 per share at the
date of sale following the required holding period pursuant to Rule 144. The
agreement also stated that in the event the shareholders of Crescent Paging,
Inc. sold their shares of stock for an amount less than $3.00 per share, the
Company would be required to pay them additional compensation equal to the
difference between actual sales price per share and the agreed upon price
of $3.00 per share, an amount up to $1,254,000. Management believes that if
any additional compensation is due relating to this agreement it can be
satisfied by issuing additional shares. As of September 30, 1999, management
has determined that it is possible that additional compensation will be due
the former stockholders but cannot reasonably estimate the amount, if any.
Accordingly, no provision has been made in the accompanying financial
statements for such liability.
The Company may be required to pay the former stockholders of Data Paging,
Inc. additional compensation up to $500,000 if the value of the Company's
common stock is selling for less than $2 per share after a one year holding
period from the date of acquisition. This additional compensation can be paid
by issuing shares of 144 stock to make up the difference between the actual
value and the agreed upon price of $2.00 per share. As of September 30, 1999,
management has determined that it is possible that additional compensation will
be due the former stockholders but cannot reasonably estimate the amount, if
any. Accordingly, no provision has been made in the accompanying financial
statements for such liability.
NOTE 10 - RELATED PARTY TRANSACTIONS
At September 30, 1999 and December 31, 1998, the Company had outstanding a
note due from its majority stockholder in the amount of $5,574 and $45, 857,
respectively. The note bears interest at the rate of 10% and is due upon
demand.
At September 30, 1999 (unaudited), the Company had a note payable to its
majority stockholder which bears interest at 6.25% and is due on December 31,
2003. The balance at September 30, 1999 (unaudited) totaled $266,676.
NOTE 11 - RETAINED EARNINGS
On October 26, 1998, the Company merged with Communitronics, Inc. (as more
fully discussed in note 11 below). As of the date of the merger, the Company
had an accumulated deficit in the amount of $344,728 which resulted from
losses incurred during its years of active operations between 1970 and 1985.
From 1985 to the date of merger, the Company had no material operations or
assets.
NOTE 12 - INCOME TAXES
For the nine months ended September 30, 1999 and the year ended December 31,
1998, the Company had no provision or benefit for income taxes because the
deferred tax liability was offset
F-14
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
by an increase (decrease) in the valuation allowance of ($41,734) and $5,655,
respectively. The change in the valuation allowance at September 30, 1999 and
December 31, 1998, had no effect on operations.
NOTE 12 - INCOME TAXES
Significant components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
September 30 December 31
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax asset
Net operating loss carryforwards $ 64,644 $ 17,324
---------- ----------
Deferred tax liabilities
Depreciation (82,831) (77,245)
Valuation allowance 18,187 59,921
---------- ----------
Net deferred tax liabilities (64,644) (17,324)
---------- ----------
$ - $ -
========== ==========
</TABLE>
At September 30, 1999 and December 31, 1998, the Company has net operating loss
carryforwards of approximately $323,000 and $87,000 that will expire in 2014 and
2013 respectively..
NOTE 13 - NON-RECURRING CHARGES
During the nine months ended September 30, 1999 and the year ended December 31,
1998, Communitronics, Inc., one of the Company's wholly-owned subsidiaries,
incurred significant costs (i.e., professional fees, travel, etc.) in connection
with its "going public" efforts. Such costs, amounting to approximately $133,000
and $200,000, respectively, have been charged to operations in the period
incurred.
NOTE 14 - COMMON STOCK AND NET LOSS PER SHARE
Net loss per share amounts are computed based on the weighted-average number
of common shares outstanding. The number of shares used to compute per share
amounts for the nine months ended September 30, 1999 and the year ended
December 31, 1998 was 7,779,425 and 3,968,615, respectively.
F-15
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
As of September 30, 1999 and December 31, 1998, the Company has 50 million of
authorized shares, all of which are Common Stock. There are no additional
rights or privileges other than those afforded to a common stock shareholder.
NOTE 15 - BUSINESS COMBINATIONS
On September 28, 1998, the Company entered into a letter of intent for the
acquisition of 100% of the issued and outstanding shares of Communitronics,
Inc. and its wholly-owned subsidiary, Crescent Paging, Inc. (the
"Acquisition") for $6,086,000. As part of the transaction, the Company agreed
to issue to the shareholders of the Acquisition 5,500,000 shares of its
restricted common stock. The Acquisition was accounted for under the
requirements of Accounting Principles Board Opinion No. 16, whereby the
acquisition was treated as a business combination by the purchase method.
Accordingly, principles were followed that are normally applicable under
historical cost accounting to recording acquisitions of assets and issuances
of stock and to accounting for assets and liabilities after acquisition at
their fair values. The current directors of the Company agreed to cancel an
aggregate 3,000,000 shares of the Company's restricted common stock owned by
them. The acquisition became effective October 26, 1998. At closing, the
current board of directors of the Company, consisting of Mr. Ken Kurtz, Ms.
Carrie Kurtz and Ms. Tammy Gehring, resigned and were replaced by a board
consisting of Mr. David R. Pressler, Mr. Samuel Mastrull, Mr. James H.
Flanagan and Mr. Charles H. Hillman. In addition, Mr. Kurtz has resigned as
President of the Company and has been replaced by Mr. Pressler. Ms. Kurtz has
resigned as Vice-president and Ms. Gehring has resigned as Secretary and
Treasurer. Mr. Mastrull has replaced Ms. Gehring as Secretary. The
Vice-President and Treasurer positions remain unfilled.
On December 22, 1998, the Company acquired all of the outstanding common
stock of Data Paging, Inc. in a stock-for-stock, tax free exchange for
$500,000. As part of the transaction, the Company agreed to issue to the
shareholders of Data Paging, Inc. 250,000 shares of its restricted common
stock. The acquisition was accounted for under the requirements of
Accounting Principles Board Opinion No. 16, whereby the acquisition was
treated as a business combination by the purchase method. Accordingly,
principles were followed that are normally applicable under historical
cost accounting to recording acquisitions of assets and issuances of stock
and to accounting for assets and liabilities after acquisition at their fair
values.
Details of the results of operations of the previously separate companies for
the year ended December 31, 1998 that are included in the current combined
net income are as follows:
F-16
<PAGE>
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
<TABLE>
<CAPTION>
Crescent Data
Communitronics, Paging, Paging
Inc. Inc. Inc. Total
---------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
Revenue $ 436,516 $ 398,289 $ 321,926 $ 1,156,731
Expenses 362,854 378,070 240,453 981,377
---------------- --------------- --------------- ------------
</TABLE>
NOTE 15 - BUSINESS COMBINATIONS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Operating income 73,662 20,219 81,473 175,354
Other expenses (204,726) - - (204,726)
--------------- --------------- --------------- ------------
Net income (loss) $ (131,064) $ 20,219 $ 81,473 $ (29,372)
=============== =============== =============== ============
</TABLE>
NOTE 16 - SEGMENT INFORMATION
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS 131). The Company
has adopted SFAS 131 in its 1998 annual financial statements. SFAS 131
requires that a public company report annual and interim financial and
descriptive information about its reportable operating segments pursuant to
criteria that differ from current accounting practice. Operating segments, as
defined, are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision-maker in deciding how to allocate resources and in assessing
performance.
The Company has determined that it has no reportable segments. The Company's
basis for the segments relates to the types of products and services each
segment provides. The Company's core operations, which includes the
traditional one-way display and alphanumeric services, are the only
reportable financial information is available that is evaluated regularly by
the chief operating decision-maker in deciding how to allocate resources and
in assessing performance.
NOTE 17 - YEAR 2000 ISSUE
The year 2000 issue is the result of shortcomings in many electronic data
processing systems and other equipment that may adversely affect the Company's
operations beginning January 1, 2000. The Company has conducted an inventory of
computer systems and other equipment necessary to conducting Company operations.
Management has contacted the manufacturers of such systems and
F-17
<PAGE>
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
equipment and has received assurances that the Company's systems and
equipment are year 2000 compatible.
Because of the unprecedented nature of the year 2000 issue, its effects will not
be fully determinable until the year 2000 and thereafter. Management cannot
assure that parties with whom the Company does business will be year 2000 ready.
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
ON ACCOMPANYING INFORMATION
The Stockholders
Communitronics of America, Inc.
Daphne, Alabama
Our report on our audit of the basic consolidated financial statements of
Communitronics of America, Inc. (formerly Oneida General Corporation) for the
year ended December 31, 1998 appears on page 2. That audit was conducted for
the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The accompanying information on pages 17-19 is
presented for purposes of additional analysis and is not a required part of
the basic consolidated financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements, and, in our opinion, the information is
fairly stated in all material respects in relation to the basic consolidated
financial statements taken as a whole.
February 26, 1999
Mobile, Alabama
F-19
<PAGE>
Schedule 1
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Services, Rent and Maintenance Expenses
For the Year Ended December 31, 1998
<S> <C>
Airtime charges $ 30,933
Freight 2,965
General insurance 31,571
Licenses 2,091
Repairs and maintenance 24,914
Telephone 111,359
Tower rent 48,809
--------
$252,642
========
</TABLE>
F-20
<PAGE>
Schedule 2
COMMUNITRONICS OF AMERICA, INC.
(Formerly Oneida General Corporation)
And Subsidiaries
<TABLE>
<CAPTION>
Consolidated General and Administrative Expenses
For the Year Ended December 31, 1998
<S> <C>
Advertising $ 9,487
Auto 9,672
Bank charges 2,034
Contract labor 10,304
Dues and subscriptions 638
Insurance - group 7,895
Legal and accounting 38,670
Licenses 9,336
Office expense 14,830
Office rent 43,822
Outside services 939
Postage 7,769
Salaries 205,067
Supplies 8,354
Taxes - other 3,128
Taxes - payroll 17,927
Telephone 4,860
Travel and entertainment 2,869
Utilities 12,325
---------
$ 409,926
=========
</TABLE>
F-21
