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 MARCH 31, 1998 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
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 April 30, 1998, there were outstanding 16,025,087 shares of Registrant's
common stock.
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
($ IN THOUSANDS)
March 31, 1998 December 31, 1997
(unaudited)
--------------- ----------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,375 $ 1,382
Other assets 882 287
Equity investments (Note D) 38,634 33,890
-------- -------
40,891 35,559
LIABILITIES
Accounts payable and accrued expenses 2,342 1,655
Senior Credit Facility (Note C) 12,000 14,195
Subordinated notes payable (Note C) 18,850 18,850
-------- -------
33,192 34,700
-------- -------
Net assets in liquidation (Note C) $ 7,699 $ 859
======== ========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
MARCH 31, 1998
($ In Thousands)
<S> <C>
Net assets in liquidation at December 31, 1997 $ 859
---------
Changes in net assets in liquidation attributed to:
Interest expense, net (1,145)
Dividend income on preferred stock 545
Gain on sale of equity investments 893
Unrealized gain on equity investments held for sale 6,678
General and administrative expenses (131)
Net change in net assets in liquidation 6,840
---------
Net assets in liquidation at March 31, 1998 $ 7,699
=========
Changes in the components of net assets in liquidation:
Decrease in cash and cash equivalents $ (7)
Increase in other assets 595
Net increase in equity investments 4,744
Decrease in senior credit facility 2,195
Increase in accrued expenses (687)
----------
Net change in net assets in liquidation $ 6,840
========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
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.
In connection with the sale of substantially all of the
Company's assets to Metrocall, Inc., the Company adopted a plan of liquidation
and has 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 March 31, 1998 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 $105 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>
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 $60.7 million
including the assumption of $2.2 million of liabilities. Page America received
$24.8 million in cash, $15 million of Series B Junior Convertible Preferred
Stock of Metrocall and $18.7 million of Common Stock of Metrocall inclusive of a
post-closing working capital adjustment resulting in the Company returning
85,602 shares of common stock to 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 until April 1, 1998 and, pursuant to the sale agreement, these 832,250
common shares were released to the Company on that date. 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. The Company recognized a gain from the sale of assets to
Metrocall of approximately $22.9 million, net of expenses related to the sale of
approximately $1.5 million. During the three month period ended March 31, 1998,
the Company sold 401,800 shares of Metrocall common stock and realized a net
gain of $893,000. During the six month period ended December 31, 1997, the
Company sold 248,200 shares of Metrocall common stock and realized a net gain of
$627,000. At March 31, 1998, the Company held 3,261,856 shares of common stock
of Metrocall.
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 market value of the
Metrocall common stock, and the value of the Metrocall Preferred Stock. Pursuant
to the plan of liquidation, the Company will continue in existence for the sole
purpose of winding up its affairs and will not engage in any business activities
other than activities related to implementation of the plan of liquidation.
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. Pending payment in full of the Credit Facility, the Company will not be
permitted to make any payments to the holders of Subordinated Notes or to its
common or preferred shareholders. Any amounts received from the sale of
securities of Metrocall in excess of appropriate cash reserves must be paid in
reduction of amounts outstanding under the Credit Facility.
The holders of Subordinated Notes and the Company entered into a
Forbearance Agreement (the "Forbearance Agreement") pursuant to which the
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
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 of the Company, up to an aggregate distribution to Subordinated
Noteholders 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 $19 million, any
remaining amounts available for distribution to the Subordinated Noteholders and
the Preferred and Common Shareholders of the Company will be made 50% to the
holders of the Subordinated Notes and 50% to the Preferred and Common
shareholders of Page America. Interest will continue to accrue on the
Subordinated Notes until the full amount of principal and interest due
thereunder shall have been paid in full or the obligations thereunder shall have
been otherwise satisfied in accordance with the terms and provisions of the
Forbearance Agreement.
Pursuant to the Forbearance Agreement, Page America's obligations to
repurchase the warrants held by the holders of the Subordinated Notes were
terminated. Under the Forbearance Agreement, Page America is not permitted to
enter into transactions with its stockholders, officers or directors or conduct
any business or incur any debt other than in connection with the satisfaction of
its obligations under the Credit Facility, payment of other permitted
liabilities and the implementation of its Plan of Liquidation.
NOTE D - EQUITY INVESTMENTS
<TABLE>
<CAPTION>
The Company's equity investments at March 31, 1998, are as follows ($
in Thousands):
Fair Value Cost
<S> <C> <C>
Metrocall Series B Junior Convertible Preferred Stock $15,790 $15,790
Metrocall Common Stock 22,833 15,698
Other Marketable Securities 11 10
-------- -------
$38,634 $31,956
======= =======
</TABLE>
The Series B Junior Convertible Preferred Stock has a 14% dividend rate
payable semi-annually in arrears on May 15 and November 15. Payment of dividends
may be made in cash or in kind. The Series B Preferred Stock may be redeemed by
Metrocall at any time and must be redeemed by Metrocall on July 1, 2009, if not
previously redeemed or converted by that date. On November 15, 1997, the Company
received 79 shares ($790,000 fair value ) of Series B Junior Convertible
Preferred in payment of dividends accrued from July 1 to November 15, 1997.
Accrued but unpaid dividends on the Series B Junior Convertible Preferred Stock
were approximately $824,000 at March 31, 1998. As of March 31, 1998, 25% of the
Metrocall Series B Convertible Preferred Stock is convertible at $6.61 per
share, 25% is convertible at $5.85 per share and 25% is convertible at $6.45 per
share. In total, as of March 31, 1998, $11,842,500 of the Metrocall Series B
Convertible Preferred Stock is convertible into 1,884,340 shares of Metrocall
Common Stock. The remaining Preferred Stock of $3,947,500 will become
convertible beginning on June 1, 1998. In the opinion of management, the
estimated fair value of the Metrocall Series B Junior Convertible Preferred
Stock is not less than its face value.
The estimated fair value of the Metrocall Common Stock is based on the
closing price of $7.00 per share on March 31, 1998 which resulted in net
appreciation of $6,677,000 for the three months ended March 31, 1998. The fair
value of other marketable securities has been determined through information
obtained from quoted market sources.
Realized gains and losses on the sale of these securities and net
unrealized gains or losses on these securities available for sale have been
reflected in the statement of changes in net assets in liquidation.
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
CHANGES IN NET ASSETS IN LIQUIDATION for
the three months ended March 31, 1998
CASH AND CASH EQUIVALENTS
Cash and cash equivalents were $1.4 million at March 31, 1998 and December
31, 1997. During the three months ended March 31, 1998, the Company received
$2.8 million from the sale of 401,800 shares of Metrocall common stock.
Disbursements principally consisted of $2.2 million of principal and $435,000 of
interest on the senior credit facility.
OTHER ASSETS
Dividends of $545,000 on the Series B Preferred Stock of Metrocall
have been accrued for the three months ended March 31, 1998.
EQUITY INVESTMENTS
During the three month period ended March 31, 1998, the Company sold
401,800 shares of Metrocall common stock for $2.8 million and realized a net
gain of $893,000. On March 31, 1998, the Company revalued its remaining
Metrocall common stock of 3,261,856 shares based on a closing price of $7.00 and
recorded an unrealized gain of $6,677,000.
ACCRUED EXPENSES
During the three month period ended March 31, 1998, the Company accrued
interest on the subordinated notes of $707,000.
SENIOR CREDIT FACILITY
During the three month period ended March 31, 1998, the Company paid $2.2
million of principal on the senior credit facility.
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
In connection with the sale of substantially all of its assets to
Metrocall, Inc., the Company adopted a plan of complete liquidation and
dissolution of corporate entity which became effective with the completion of
the Metrocall sale (See Note C to the Condensed Consolidated Financial
Statements). 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 primarily 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 and October, 1997, the
Company paid $326,484 and $750,000, respectively, of the Credit Facility, and
during the three month period ended March 31, 1998, the Company paid down an
additional $2,195,347 of the Credit Facility, reducing the balance to
$12,000,000. Any amount 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. 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 in excess of appropriate cash reserves 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.
On July 1, 1997, concurrent with the sale of the Company's assets, 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 Note holders and 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 Note Holders
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.
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Pursuant to the Forbearance Agreement, Page America's obligations to
repurchase the warrants held by the holders of the subordinated Notes have been
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 its 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 common and preferred
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 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: May 15, 1998
PAGE AMERICA GROUP, INC.
(Registrant)
/s/ David A. Barry
--------------------------
David A. Barry
President and Chairman
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,375
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 40,891
<CURRENT-LIABILITIES> 33,192
<BONDS> 0
0
30,068
<COMMON> 1,603
<OTHER-SE> (23,972)
<TOTAL-LIABILITY-AND-EQUITY> 40,891
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 114
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,159
<INCOME-PRETAX> 179
<INCOME-TAX> 17
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<NET-INCOME> 162
<EPS-PRIMARY> .01
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</TABLE>
