SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED SEPTEMBER 30, 1997 COMMISSION FILE NO. 1-10682
PAGE AMERICA GROUP, INC.
(Exact Name of registrant as specified in its charter)
NEW YORK 13-2865787
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ONE INTERNATIONAL PLACE, BOSTON MA 02110
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (617) 330-8950
125 STATE STREET, SUITE 100, HACKENSACK, NJ 07601
(Former address, if changed since last report) (Zip Code)
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period of time that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days.
Yes X No____
As of October 31, 1997, there were outstanding 16,025,087 shares of Registrant's
common stock.
Page 1 of 13
<PAGE>
<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
SEPTEMBER 30, 1997
($ IN THOUSANDS)
ASSETS
<S> <C>
Cash and cash equivalents $ 2,305
Prepaid expenses and other assets 553
Equity investments (Note C) 42,744
-------
45,602
LIABILITIES
Accounts payable and accrued expenses 2,441
Senior Credit Facility (Note C) 14,945
Subordinated notes payable (Note C) 17,875
------
35,261
Net assets in liquidation (Note C) $10,341
=======
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(GOING CONCERN BASIS)
DECEMBER 31, 1996
($ IN THOUSANDS)
ASSETS
Current assets
<S> <C>
Cash and cash equivalents $ 290
Accounts receivable, net of allowance for
doubtful accounts of $278 899
Prepaid expenses and other current assets 672
Total current assets ---------
1,861
Equipment, net of accumulated depreciation
and amortization of $19,027 5,382
Other assets
Certificates of authority and other intangibles,
net of accumulated amortization of $15,830 31,815
Deposits and other non-current assets 503
--------
32,318
--------
$39,561
=========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
(GOING CONCERN BASIS)
DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
<S> <C>
Current maturities of long-term debt $ 51,814
Accounts payable and accrued expenses 3,807
Dividends payable 2,864
Other current liabilities 1,785
--------
Total current liabilities 60,270
Long-term debt, less current maturities 37
Shareholders; equity (deficit)
Series one convertible preferred stock, 10% cumulative
$.01 par value, authorized--310,000 shares; issued and
outstanding--286,361 shares; liquidation value--
$105 per share 30,068
Common stock--$.10 par value, authorized--100,000,000
shares, issued and outstanding--16,025,087 shares 1,604
Paid-in capital 53,501
Accumulated deficit 105,919)
--------
(20,746)
--------
$ 39,561
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
SEPTEMBER 30, 1997
<S> <C>
Shareholders' deficit, December 31, 1996 $ (20,746)
Net loss for the six months ended June 30, 1997
Continuing operations (3,822)
Discontinued operations (307)
-----------
Net loss (4,129)
Dividends on preferred stock (1,432)
-----------
Net loss applicable to common stock (5,561)
Changes in common stock (4)
-----------
Shareholders' deficit (Deficit in net assets),
June 30, 1997 (26,311)
-----------
Transactions on July 1, 1997:
Gain on sale of assets 23,276
Reversal of accrued dividends on preferred stock 4,295
-----------
Changes in net assets on July 1, 1997 27,571
-----------
Net assets at July 1, 1997 (Date of Plan of
Liquidation adopted) 1,260
-----------
Changes in net assets in liquidation attributed to:
Interest expense (1,144)
Dividend income on preferred stock 525
Sales, general and administrative expenses (128)
Gain on sale of equity investments 383
Unrealized gain on equity investments held for sale 9,899
Income taxes (454)
----------
Net change in net assets in liquidation 9,081
----------
Net assets in liquidation at September 30, 1997 $10,341
=======
Changes in the components of net assets in liquidation
for the three months ended, September 30, 1997:
Decrease in cash and cash equivalents $ (277)
Decrease in prepaid expenses and other 114
Net increase in equity investments held for sale 9,177
Decrease in senior credit facility 367
Increase in accrued expenses (300)
----------
Net change in net assets in liquidation $ 9,081
==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
UNAUDITED
NOTE A - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (which
include only normally recurring adjustments) necessary to present fairly the net
assets in liquidation and changes in net assets in liquidation of the Company
for all interim periods presented have been made.
As a result of the sale of substantially all of the Company's assets to
Metrocall, Inc., the Company changed its basis of accounting from the going
concern basis to the liquidation basis in accordance with generally accepted
accounting principles, effective July 1, 1997. Consequently, assets have been
valued at estimated net realizable value and liabilities are presented at their
estimated settlement amounts, subject to the terms of the Forbearance Agreement.
NOTE B - PREFERRED AND COMMON STOCK
Capital stock outstanding as of September 30, 1997 consists of the
following:
Series One
Preferred Common
Stock Stock
Par value $.01 $.10
Shares authorized 310,000 100,000,000
Shares issued and outstanding 286,361 16,025,087
Series One Convertible Preferred Stock has a liquidation value of $1.05 per
share and a 10 percent dividend which was payable semi-annually in arrears.
Payment of dividends may be made in cash or in Common Stock of the Company.
Dividends in arrears aggregated $4,295,000, or $15.00 per preferred share, at
June 30, 1997. The Preferred shareholders, upon the completion of the sale of
assets on July 1, 1997, waived their rights to receive the dividend payment of
$4,295,000 and their rights to future dividends (see Note C).
The holders of Page America's Series One Preferred Stock have agreed that
30% of any distributions otherwise payable to them with respect to their
liquidation preference will be distributed to the holders of Page America's
Common Stock.
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTE C - SALE OF ASSETS AND PLAN OF LIQUIDATION
On July 1, 1997, the Company sold substantially all of its assets to
Metrocall, Inc. ("Metrocall") for a sale price of approximately $60.3 million
including the assumption of $2.2 million of liabilities, pending final
determination of the value of the Company's actual working capital at June 30,
1997. Page America received $24.8 million in cash, $15 million of Series B
Junior Convertible Preferred Stock of Metrocall and $18.3 million of Common
Stock of Metrocall. Certain shares of Metrocall common stock with a fair market
value of $4.0 million at the date of sale were held in escrow pursuant to the
sale agreement. Excluded from the sale were cash, assets related to the employee
benefit plans and to the Florida and California operations which had been
previously sold, liabilities under the Credit Facility, subordinated debt
agreement and NEC America leasing contract, obligations with respect to federal,
state and local taxes and certain other liabilities. As of September 30, 1997,
the Company has recognized a gain from the sale of assets to Metrocall of
approximately $23.3 million, net of expenses related to the sale of
approximately $1.5 million. During the month of September 1997, the Company sold
150,000 shares of Metrocall common stock and realized a net gain of $383,000. In
October, 1997, in connection with the final determination of the value of the
Company's actual working capital at June 30, 1997, the Company returned 85,602
shares of Metrocall common stock reducing the actual number of shares held by
the Company to 3,761,856, which has been reflected in the statement of changes
in net assets in liquidation, at September 30, 1997.
In connection with the sale discussed above, the Company adopted a plan of
complete liquidation and dissolution of the corporate entity which became
effective with the completion of the Metrocall sale. Accordingly, on July 1,
1997, the company changed from the going concern basis of accounting to the
liquidation basis of accounting. The value of the assets to be available for
payment of its liabilities and distribution to the Page America shareholders
upon liquidation cannot be ascertained at this time and will depend among other
things, on the total amount of its liabilities, the number of shares of
Metrocall Common Stock available to Page America from the escrow, the market
value of the Metrocall Common Stock, and the value of the Preferred Stock.
Concurrently with the sale of substantially all of the Company's assets,
the Company's Credit Facility was amended. Among other things, the amendment
provided for an extension of the maturity date to December 31, 1998 and a waiver
of all existing covenant defaults. In addition, the Company was required to use
$20.5 million of the cash proceeds from the sale to reduce the debt by
approximately $18.4 million and pay accrued interest of $2.0 million and certain
closing expenses. On September 30, 1997, pursuant to the amended agreement, the
Company paid a reinstatement fee of $350,000 originally due on November 30,
1996.
The holders of Subordinated Notes have agreed to forbear from collecting on
such Subordinated Notes until the earlier of December 31, 1998 or the occurrence
of certain events relating to Page America, as described in the Forbearance
Agreement. During the forbearance period, the holders of the Subordinated Notes
will not initiate any action, exercise any remedy or make any claim against the
Company with respect to the Subordinated Notes. In consideration of such
forbearance, and in complete satisfaction of all amounts of principal and
interest due, after all amounts have been paid in full under the Credit
Facility, the holders of the Subordinated Notes will be entitled to receive 70%
of cash available for distribution to the Subordinated Noteholders, and the
Preferred and Common Shareholders, up to an aggregate amount of $19 million,
with the remaining 30% to be distributed to the Preferred and Common
shareholders of Page America. After the holders of Subordinated Notes have
indefeasibly received a total of $19 million, any remaining amounts available
for distribution to the Subordinated Noteholders and the Preferred and Common
Shareholders will be made 50% to the holders of the Subordinated Notes and 50%
to the Preferred and Common shareholders of Page America. Interest will continue
to accrue on the Subordinated Notes until the full amount of principal and
interest due thereunder shall have been paid in full or the obligations
thereunder shall have been otherwise satisfied in accordance with the terms and
provisions of the Forbearance Agreement.
Pursuant to the Forbearance Agreement, Page America's obligations to
repurchase the warrants held by the holders of the Subordinated Notes will be
terminated. Page America is not permitted to enter into transactions with its
stockholders, officers or directors or conduct any business or incur any debt
other than in connection with the satisfaction of its obligations under the
Credit Facility, payment of other permitted liabilities and the implementation
of the Plan of Liquidation.
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
CHANGES IN NET ASSETS IN LIQUIDATION for
the three months ended September 30, 1997
CASH AND CASH EQUIVALENTS
Cash and cash equivalents were $2.3 million at September 30, 1997. On July
1, 1997 the Company sold substantially all of its assets to Metrocall. Page
America received cash proceeds of $24.8 million which were used as follows:
$19.3 million to repay current maturities of long-term debt, $2.6 million to pay
accrued interest and accounts payable, $654,000 for transaction costs and the
remainder for working capital purposes. In September, 1997 the Company received
$1.1 million from the sale of 150,000 shares of Metrocall common stock. During
the third quarter, the Company paid interest on senior debt of $470,000,
additional expenses related to the sale of $408,000 and estimated income taxes
of $329,000.
PREPAID EXPENSES AND OTHER
The Company received $326,000 which represents the final escrow payment
from the sale of its Florida and California operations. This was applied to pay
down the principal of the senior credit facility. Dividends of $525,000 on the
Series B Preferred Stock of Metrocall have been accrued for the three months
ended September 30, 1997
EQUITY INVESTMENTS
At the closing of the sale on July 1, 1997, the Company received 1,500
shares ($15 million) of Series B Junior Convertible Preferred Stock of Metrocall
and 3,997,458 ($19 million) of Common Stock of Metrocall. In September, 1997,
the Company sold 150,000 shares of Metrocall common stock and realized a net
gain of $383,000. The company returned 85,602 shares of Metrocall common stock
in connection with the final determination of the value of the company's actual
working capital at June 30, 1997. On September 30, 1997, the Company revalued
the remaining Metrocall common stock based on a closing price of $7.375 and
recorded an unrealized gain of $9.9 million.
ACCRUED EXPENSES
On September 30, 1997, pursuant to the amended agreement, the company paid
a reinstatement fee of $350,000 which was originally due on November 30, 1996.
During the third quarter of 1997, the company accrued interest on the
subordinated debt of $670,000.
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
CHANGES IN NET ASSETS IN LIQUIDATION
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Pursuant to an Amended and Restated Asset Purchase Agreement dated January
30, 1997, as amended (the "Agreement"), on July 1, 1997, the Company sold
substantially all of its assets to Metrocall, Inc. ("Metrocall") for
consideration consisting of $24.8 million in cash, 1,500 shares of Series B
Junior Convertible Preferred Stock of Metrocall having a value upon liquidation
or redemption of $15 million and 3,997,458 shares ($19 million) of Common Stock
of Metrocall. Of the shares of the Common Stock of Metrocall received by the
Company, 832,250 shares ($4 million) were placed in escrow pursuant to the
provisions of the escrow agreement. As of September 30, 1997, the Company has
recognized a gain from the sale of assets to Metrocall of approximately $23.3
million, net of expenses related to the sale of approximately $1.5 million.
During the month of September 1997, the Company sold 150,000 shares of Metrocall
common stock and realized a net gain of $383,000. In October, 1997, in
connection with the final determination of the value of the Company's actual
working capital at June 30, 1997, the Company returned 85,602 shares of
Metrocall common stock reducing the actual number of shares of common stock held
by the company to 3,761,856, which has been reflected in the statement of
changes in net assets in liquidation. On September 1, 1997, $3.75 million of the
Metrocall Preferred Stock became convertible into 567,644 shares of common
stock. Additional shares of Preferred Stock will be convertible at the rate of
$3.75 million on each of December 1, 1997, March 1, 1998 and June 1, 1998.
The cash proceeds of $24.8 million were used as follows: $19.3 million to
repay current maturities of long-term debt, $2.6 million to pay accrued interest
and accounts payable, $654,000 for transaction costs and the remainder for
working capital purposes.
In connection with the Agreement, the Company adopted a plan of complete
liquidation and dissolution of corporate entity which became effective with the
completion of the Metrocall sale. Accordingly, on July 1, 1997, the Company
changed from the going concern basis of accounting to the liquidation basis of
accounting. The cash received by the Company from this sale was not sufficient
for the Company to pay in full in cash its outstanding obligations under the
Credit Facility or under the Subordinated Notes or to pay its other outstanding
liabilities. Page America will pay off the balance of its obligations from
proceeds generated by the sale or redemption of Metrocall Common Stock and
Series B Preferred Stock.
In connection with the transaction, Page America renegotiated its Credit
Facility such that the remaining outstanding balance of $15,271,831 is due and
payable on or prior to December 31, 1998. In August, 1997, the Company paid down
$326,484 of the Credit Facility reducing the balance to $14,945,347. Any amounts
outstanding under the Page America Credit Agreement will bear interest payable
monthly at prime plus 2% to 4% depending on the principal amount outstanding
thereunder from time to time. In accordance with the amended Agreement, Page
America paid $350,000 in cash to such lenders on September 30, 1997, which
represents a reinstatement fee originally due on November 30, 1996. Until
payment in full of the balance due under the Credit Facility, Page America will
not be permitted to make any payments to the holders of the Subordinated Notes
or its common or preferred stockholders, but it will be permitted to pay
accounts payable, claims, expenses and liabilities incurred in connection with
its liquidation. Subject to payment of such accounts, claims, expenses and
liabilities, any amounts received by the Company from the sale or redemption of
any Metrocall securities must be paid in reduction of amounts outstanding under
the Credit Facility. Page America is required to maintain a ratio of face amount
of Series B Preferred Stock and value of Metrocall Common Stock, excluding
832,250 shares held in escrow, to amounts outstanding under the Credit Facility
of at least 1.5 to 1.
The holders of Subordinated Notes have agreed to forbear from collecting on
such Subordinated Notes until the earlier of December 31, 1998 or the occurrence
of certain events relating to Page America, as described in the Forbearance
Agreement. During the forbearance period, the holders of the Subordinated Notes
will not initiate any action, exercise any remedy or make any claim against the
Company with respect to the Subordinated Notes. In consideration of such
forbearance, and in complete satisfaction of all amounts of principal and
interest due, after all amounts have been paid in full under the Credit
Facility, the holders of the Subordinated Notes will be entitled to receive 70%
of cash available for distribution to the Subordinated Noteholders and the
Preferred and Common Shareholders, up to an aggregate amount of $19 million,
with the remaining 30% to be distributed to the Preferred and Common
shareholders of Page America. After the holders of Subordinated Notes have
indefensibly received a total of $19 million, any remaining amounts available
for distribution to the Subordinated Noteholders, and the Preferred and Common
Shareholders will be made 50% to the holders of the Subordinated Notes and 50%
to the Preferred and Common shareholders of Page America. Interest will continue
to accrue on the Subordinated Notes until the full amount of principal and
interest due thereunder shall have been paid in full or the obligations
thereunder shall have been otherwise satisfied in accordance with the terms and
provisions of the Forbearance Agreement.
Pursuant to the Forbearance Agreement, Page America's obligations to
repurchase the warrants held by the holders of the Subordinated Notes will be
terminated. Page America is not permitted to enter into transactions with its
stockholders, officers or directors or conduct any business or incur any debt
other than in connection with the satisfaction of its obligations under the
Credit Facility, payment of other permitted liabilities and the implementation
of the Plan of Liquidation.
The holders of Page America's Series One Preferred Stock have agreed that
30% of any distributions otherwise payable to them with respect to their
liquidation preference will be distributed to the holders of Page America's
Common Stock.
Following the repayment of the Senior Credit Facility and provision for the
liabilities of Page America, the Plan of Liquidation contemplates that Page
America will distribute any remaining assets to its shareholders and to the
holders of Subordinated Notes in accordance with the terms and provisions of the
Forbearance Agreement. It is anticipated that the remaining assets will be any
shares of Metrocall Preferred Stock and Common Stock not previously sold or
redeemed and cash proceeds, if any, in excess of amounts required to satisfy its
liabilities. The value of the assets to be available for distribution to the
Page America shareholders upon liquidation cannot be ascertained at this time
and will depend, among other things, on the total amount of its liabilities, the
number of shares of Metrocall Common Stock available to Page America from the
escrow and the value of the Metrocall Common Stock and Preferred Stock to be
realized by Page America.
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 15, 1997
PAGE AMERICA GROUP, INC.
(Registrant)
/S/ DAVID A. BARRY
--------------------------
David A. Barry
President and Chairman
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,305
<SECURITIES> 42,744
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 553
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 45,602
<CURRENT-LIABILITIES> 2,441
<BONDS> 0
0
30,068
<COMMON> 1,602
<OTHER-SE> (21,329)
<TOTAL-LIABILITY-AND-EQUITY> 45,602
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (72)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,223
<INCOME-PRETAX> 21,867
<INCOME-TAX> 355
<INCOME-CONTINUING> 21,512
<DISCONTINUED> (307)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,205
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 0
</TABLE>
