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 JUNE 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 August 31, 1997, there were outstanding 16,025,087 shares of Registrant's
common stock.
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<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)
June 30, December 31,
1997 1996 (a)
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 623 $ 290
Accounts receivable 326 1,486
Prepaid expenses and other current assets 113 85
Assets held for sale, net of liabilities assumed 34,102 --
--------- ---------
Total current assets 35,164 1,861
EQUIPMENT, net of accumulated depreciation and amortization
of $0 and $19,027 -- 5,382
OTHER ASSETS
Certificates of authority and other intangibles, net of accumulated
amortization of $0 and $15,830 -- 31,815
Deposits and other non-current assets 473 503
---------- ---------
473 32,318
---------- --------
$35,637 $39,561
======= =======
(a) Reclassified to conform with the current year presentation
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
</TABLE>
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<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
June 30, December 31,
1997 1996 (a)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $52,448 $51,814
Accounts payable and accrued expenses 5,205 3,807
Dividends payable 4,295 2,864
Other current liabilities -- 1,785
---------- ---------
Total current liabilities 61,948 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 --
$105 per share 30,068 30,068
Common stock--$.10 par value, authorized--100,000,000
shares, issued and outstanding--16,025,087 shares 1,602 1,604
Paid-in capital 53,499 53,501
Accumulated Deficit (111,480) (105,919)
---------- ----------
(26,311) (20,746)
--------- ---------
$ 35,637 $ 39,561
========= ========
(a) Reclassified to conform with the current year presentation.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
</TABLE>
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<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
June 30, June 30,
1997 1996 (a)
----------- -----------
<S> <C> <C>
Revenues -- --
Expenses
Sales, general and administrative $355 $275
Interest 1,536 1,578
Other 10 469
---------- ----------
Total expenses 1,901 2,322
---------- ----------
Net loss from continuing operations (1,901) (2,322)
Net profit (loss) from discontinued operations (394) 409
---------- ------------
Net loss (2,295) (1,913)
Dividends on preferred stock (716) (716)
---------- -----------
Net loss applicable to common stock $(3,011) $(2,629)
Net loss from continuing operations
applicable to common stock $(2,617) $(3,038)
Net profit (loss) from discontinued operations
applicable to common stock $ (394) $ 409
-------- ---------
Net loss applicable to common stock, per share $ (.19) $ (.27)
========== ==========
Net loss from continuing operations
applicable to common stock, per share $(.16) $(.31)
Net profit (loss) from discontinued operations
applicable to common stock, per share $ (.03) $ .04
---------- -----------
Weighted average number of shares outstanding 16,028,650 9,786,919
========== ============
(a) - Reclassified to conform with the current year presentation.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
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<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
SIX MONTHS ENDED
June 30, June 30,
1997 1996 (a)
----------- ----------
<S> <C> <C>
Revenues -- --
Expenses
Sales, general and administrative $671 $744
Interest 3,045 3,218
Other 106 485
----------- ----------
Total expenses 3,822 4,447
---------- ----------
Net loss from continuing operations (3,822) (4,447)
Net profit (loss) from discontinued operations (307) 679
------------ ----------
Net loss (4,129) (3,768)
Dividends on preferred stock (1,432) (1,432)
------------ -----------
Net loss applicable to common stock $(5,561) $(5,200)
============ ===========
Net loss from continuing operations
applicable to common stock $(5,254) $(5,879)
Net profit (loss) from discontinued operations
applicable to common stock $ (307) $ 679
============= ============
Net Loss applicable to common stock, per share $ (.35) $ (.58)
============= ============
Net loss from continuing operations
applicable to common stock, per share $(.33) $(.66)
============= ============
Net profit (loss) from discontinued operations
applicable to common stock, per share $(.02) $ .08
============= ============
Weighted average number of shares outstanding 16,032,849 8,919,612
============ =============
(a) - Reclassified to conform with the current year presentation.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
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<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)
SIX MONTHS ENDED
June 30, June 30,
1997 1996(a)
---------- ----------
<S> <C> <C>
Net loss $(4,129) $(3,768)
Adjustments to net loss:
Depreciation and amortization 2,321 3,153
Net book value of pagers sold 379 644
Provision for losses on accounts receivable 307 371
Provision for lost pagers 95 90
Issuance of promissory notes to satisfy
interest subordinated debt 975 975
Other 55 319
Change in assets and liabilities:
Increase in accounts receivable (81) (213)
Increase in prepaid expenses
and other (97) (6)
Increase (decrease) in accounts payable 122 (176)
Increase in accrued expenses 1,868 308
(Decrease) Increase in customer deposits and
deferred revenue (62) 314
--------- --------
Net cash provided by operating activities 1,753 2,011
--------- --------
Cash flows from investing activities:
Capital expenditures (962) (2,145)
Licensing costs (14) (4)
Net proceeds from disposal of assets 256 --
--------- ---------
Net cash used in investing activities (720) (2,149)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of debt 87 834
Principal payments on debt (504) (562)
Costs related to financing of debt -- (111)
Cost related to sale of assets (283) (144)
---------- ---------
Net cash (used in) provided by financing activities (700) 17
--------- --------
Net increase (decrease) in cash and cash equivalents 333 (121)
Cash and cash equivalents at beginning of period 290 751
-------- -------
Cash and cash equivalents at end of period $623 $ 630
======== =======
(a) - Reclassified to conform with the current year presentation.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
(Unaudited)
SIX MONTHS ENDED
June 30, June 30,
1997 1996(a)
---------- ---------
Supplemental schedule of noncash investing and financing activities:
<S> <C> <C>
Dividends accrued on preferred stock $ 1,432 $ 1,432
Dividend payment on preferred stock -- 1,432
Capital expenditures in accounts payable
and accrued expenses 611 592
Capital expenditures financed 94 --
(a) - Reclassified to conform with the current year presentation.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
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PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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
consolidated financial position, results of operations and cash flows of the
Company for all interim periods presented have been made. The results of
operations for the period ended June 30, 1997 are not necessarily indicative of
the operating results that may be expected for the year ending December 31,
1997.
NOTE B - DIVIDENDS ON PREFERRED STOCK
Series One Convertible Preferred Stock has a 10 percent dividend, 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 agreed, contingent
upon the completion of the sale of assets, to waive their rights to receive the
dividend payment of $4,295,000 and to accrue future dividends (see Note D).
NOTE C - LOSS PER SHARE
Loss per share is computed based upon the weighted average number of common
shares outstanding during the periods presented and is computed after giving
effect to preferred stock dividend requirements. Stock options, warrants and the
assumed conversion of the convertible preferred stock have not been included in
the calculation, since their inclusion would not be dilutive for each of the
periods presented.
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PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTE D - SUBSEQUENT EVENTS
On July 1, 1997, the Company sold substantially all of its assets to
Metrocall, Inc. ("Metrocall") for a sale price of approximately $60.7 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 $24.5 million in cash, $15 million of Series B
Junior Convertible Preferred Stock of Metrocall and $19 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. Net assets related to the
sale are reflected in the accompanying balance sheet as assets held for sale.
In connection with the sale discussed above, 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
bases 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 and the market value of the Metrocall
Common Stock to be received by Page America.
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.
In addition, the Subordinated Notes were modified such that the
Subordinated Note holders 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 the Company, as described in the Forbearance
Agreement. In consideration of such forbearance, after all amounts have been
paid under the Credit Facility, the holders of the Subordinated Notes will be
entitled to receive 70% of all subsequent distributions made by Page America,
until they have received $19 million. The Subordinated Note holders will then be
entitled to receive 50% of any additional distributions made by the Company.
Interest will continue to accrue at 15% 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.
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PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
SALES, GENERAL AND ADMINISTRATIVE EXPENSES were relatively constant for the
three and six month periods, as compared to the same periods in 1996.
INTEREST EXPENSE was relatively constant for the three and six month periods, as
compared to the same periods in 1996.
OTHER EXPENSES decreased by $459,000 (97.9 percent) and $379,000 (78.1 percent)
in the respective three and six month periods of the current year, principally
due to banking fees of $450,000 associated with the modification of the senior
credit facility incurred in the second quarter of 1996.
NET LOSS FROM CONTINUING OPERATIONS was $1.9 million in the quarter ended June
30, 1997 as compared to $2.3 million in the same quarter of 1996 and $3.8
million in the six month period ended June 30, 1997 as compared to $4.4 million
in the same period of 1996.
NET LOSS FROM DISCONTINUED OPERATIONS was $394,000 in the quarter ended June 30,
1997 as compared to a net profit of $409,000 in the same quarter of 1996 and
$307,000 in the six month period ended June 30, 1997 as compared to a net profit
of $679,000 in the same period of 1996.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficiency of approximately $26.8 million
at June 30, 1997 as compared to a deficiency of approximately $58.4 million at
December 31, 1996. The decrease in working capital deficiency was primarily due
to the reclassification of paging assets acquired and liabilities assumed by
Metrocall, Inc. to net assets held for sale amounting to $34.1 million.
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PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
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 $24.5 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.
The cash proceeds of $24.5 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. 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.
Page America is obligated to pay an additional $350,000 in cash to such lenders
by September 30, 1997, which represents a reinstatement fee which was due
November 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 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, 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 all
distributions made by Page America, up to an aggregate amount of $19 million to
the Subordinated Note holders, with the remaining 30% to be distributed to the
stockholders of Page America. After the holders of Subordinated Notes have
indefeasibly received a total of $19 million, any remaining distributions will
be made 50% to the holders of the Subordinated Notes and 50% to the stockholders
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 payable to them with respect to their liquidation
preference will be distributed to the holders of Page America's Common Stock.
Following the discharge and/or 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, and
any shares of Metrocall Common Stock released from the escrow after all
indemnification obligations have been satisfied or the proceeds from the sale of
the foregoing. 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 market value of the Metrocall Common Stock to be received by Page
America.
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 12, 1997, the Company held a special meeting of shareholders at
which the shareholders were asked to vote on a proposal to approve the Amended
and Restated Asset Purchase Agreement dated as of January 30, 1997, as amended,
providing for the acquisition by Metrocall, Inc. of substantially all the assets
of the Company and a plan of complete liquidation and dissolution of the
Company. The proposal was approved by a vote of 17,293,316 for, 715,396 against
and 18,796 abstentions.
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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: September 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 623
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,164
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 35,637
<CURRENT-LIABILITIES> 61,948
<BONDS> 0
0
30,068
<COMMON> 1,602
<OTHER-SE> (57,981)
<TOTAL-LIABILITY-AND-EQUITY> 35,637
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 777
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,045
<INCOME-PRETAX> (5,228)
<INCOME-TAX> 26
<INCOME-CONTINUING> (5,254)
<DISCONTINUED> (307)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,561)
<EPS-PRIMARY> (0.35)
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