<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/ X / QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
-------------------------
to
------------------------
COMMISSION FILE NUMBER 0-14002
AMERICAN MOBILE SYSTEMS INCORPORATED
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 22-2412153
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
20920-C Warner Center Lane
Woodland Hills, CA 91367-5002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (818) 593-3000
Indicate by check mark whether the 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 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares of the registrant's common stock as of May 12,
1995 was 7,285,354, including 42,348 shares held in Treasury.
Page 1 of 20
<PAGE> 2
INDEX
AMERICAN MOBILE SYSTEMS INCORPORATED AND SUBSIDIARY
Part I Financial Information
- ----------------------------------------------
Item 1 Financial Statements (unaudited)
Condensed Consolidated Balance Sheets -
March 31, 1995 and June 30, 1994
Condensed Consolidated Statements of
Operations - Three Months Ended
March 31, 1995 and 1994
Condensed Consolidated Statements of
Operations - Nine Months Ended March
31, 1995 and 1994
Condensed Consolidated Statements of
Cash Flows - Nine Months Ended March
31, 1995 and 1994
Notes to Condensed Consolidated
Financial Statements - March 31, 1995
Item 2 Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Part II Other Information
- ----------------------------------------------
Item 1 Legal Proceedings
Item 6 Exhibits and Reports on Form 8-K
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<PAGE> 3
PART I - FINANCIAL INFORMATION
AMERICAN MOBILE SYSTEMS INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(000'S OMITTED)
ASSETS
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
--------- --------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,135 $ 584
Accounts Receivable
Trade, net of allowance for
doubtful accounts of $751
at March 31, 1995 and
$617 at June 30, 1994 236 272
Other 163 549
Inventories, net 445 485
Other assets 97 100
-------- -------
Total Current Assets 2,076 1,990
NOTES RECEIVABLE 63 63
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and
amortization 5,057 5,864
INTANGIBLE ASSETS, net of
accumulated amortization 11,167 12,206
DEFERRED OFFERING COSTS 1,142 520
OTHER ASSETS 329 379
-------- -------
$ 19,834 $ 21,022
======== =======
</TABLE>
(Continued)
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<PAGE> 4
AMERICAN MOBILE SYSTEMS INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(CONTINUED)
(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
--------- --------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ -- $ 136
Current maturities of secured
debt and capitalized lease
obligations 11,203 11,367
Accounts payable 463 584
Accrued expenses 730 587
Accrued interest 77 64
Other 440 62
-------- --------
Total Current Liabilities 12,913 12,800
CAPITALIZED LEASE OBLIGATIONS 54 128
OTHER DEBT 95 240
-------- --------
Total Liabilities 13,062 13,168
-------- --------
COMMON STOCK SUBJECT TO REPURCHASE,
$.01 PAR VALUE; 714 SHARES ISSUED -- 5,000
STOCKHOLDERS' EQUITY
Preferred Stock - $1.00 par value;
authorized 5,000 shares;
none issued and outstanding -- --
Common stock - $.01 par value;
authorized - 20,000 shares; issued
and outstanding - 7,247 shares at
March 31, 1995 and 6,533 shares
at June 30, 1994 73 66
Additional paid-in capital 55,190 50,197
Accumulated deficit (47,859) (46,777)
-------- --------
7,404 3,486
Less 38 shares of treasury
stock - at cost (632) (632)
-------- --------
Total Stockholders' Equity 6,772 2,854
-------- --------
$ 19,834 $ 21,022
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE> 5
AMERICAN MOBILE SYSTEMS INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1995 1994
-------- --------
<S> <C> <C>
AIRTIME
Sales $ 1,402 $ 1,283
Cost of Sales (348) (383)
Depreciation and amortization (268) (300)
-------- --------
Gross profit on airtime 786 600
-------- --------
EQUIPMENT
Sales 809 1,054
Cost of Sales (503) (636)
-------- --------
Gross profit on equipment 306 418
-------- --------
Total gross profit 1,092 1,018
-------- --------
OPERATING EXPENSES
Selling, general and administrative 871 1,048
Depreciation and amortization 326 370
Interest expense and amortization of
debt issuance costs, net 329 196
-------- --------
1,526 1,614
-------- --------
OTHER INCOME
Gain on sale of assets -- 10
-------- --------
NET LOSS $ (434) $ (586)
======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,247 7,238
======== ========
LOSS PER SHARE $ (0.06) $ (0.08)
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE> 6
AMERICAN MOBILE SYSTEMS INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the Nine Months Ended
March 31,
-------------------------------
1995 1994
-------- --------
<S> <C> <C>
AIRTIME
Sales $ 4,127 $ 3,750
Cost of Sales (1,121) (1,180)
Depreciation and amortization (804) (894)
-------- --------
Gross profit on airtime 2,202 1,676
-------- --------
EQUIPMENT
Sales 2,432 2,625
Cost of Sales (1,492) (1,655)
-------- --------
Gross profit on equipment 940 970
-------- --------
Total gross profit 3,142 2,646
-------- --------
OPERATING EXPENSES
Selling, general and administrative 2,616 3,023
Depreciation and amortization 1,003 1,134
Interest expense and amortization of
debt issuance costs, net 795 621
Interest expense on subordinated
convertible notes payable -
stockholder -- 68
-------- --------
4,414 4,846
-------- --------
Loss before other income (1,272) (2,200)
-------- --------
OTHER INCOME
Gain on sale of assets 4 11
Reduction in provision for doubtful
receivable from a former officer 186 400
-------- --------
190 411
-------- --------
NET LOSS $ (1,082) $ (1,789)
======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,247 7,092
======== ========
LOSS PER SHARE $ (0.15) $ (0.25)
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
-6-
<PAGE> 7
AMERICAN MOBILE SYSTEMS INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(000'S OMITTED)
<TABLE>
<CAPTION>
For the Nine Months Ended
March 31,
--------------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,082) $ (1,789)
------- --------
Adjustments to reconcile net loss
to net cash provided (used) in
operating activities:
Depreciation and amortization 1,807 2,023
Provision for doubtful receivables 149 187
Reduction in provision for doubtful
receivable from a former officer -- (400)
Interest expense applied to
principal 18 --
KOP loan extension fee applied to
principal 80 --
Compensation expense - stock option -- 23
Gain on sale of assets (4) (11)
Change in operating assets and liabilities:
Decrease (increase) in accounts
receivable 273 (186)
Decrease (increase) in inventories 40 (53)
Increase in other assets and deferred
offering costs (196) (208)
Increase (decrease) in accounts
payable and accrued expenses 128 (332)
Increase in accrued interest 13 85
------- --------
Total adjustments 2,308 1,128
------- --------
Net cash provided (used) in
operating activities 1,226 (661)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and
equipment (209) (372)
Expenditures for acquisitions of
SMR systems and intangible assets (116) (202)
Proceeds from sale of assets 5 21
Net decrease in receivable from a
former officer -- 16
------- --------
Net cash used in
investing activities (320) (537)
------- --------
</TABLE>
(Continued)
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<PAGE> 8
AMERICAN MOBILE SYSTEMS INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(CONTINUED)
(000'S OMITTED)
<TABLE>
<CAPTION>
For the Nine Months Ended
March 31,
-------------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued for exercise of
stock option $ -- $ 14
Principal payments under capitalized
lease obligations (336) (543)
Expenditures from issuance of common
stock -- (157)
Payments of notes payable, subordinated
debt, and secured debt (19) (1,582)
-------- --------
Net cash used in financing activities (355) (2,268)
-------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 551 (3,466)
CASH AND CASH EQUIVALENTS, beginning of
period 584 4,020
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 1,135 $ 554
======== ========
</TABLE>
(continued)
-8-
<PAGE> 9
AMERICAN MOBILE SYSTEMS INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(000'S OMITTED)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the nine months ended March 31, 1995, the following noncash investing
and financing activities occurred.
a. Upon the dissolution of the Resco/AMS partnership, the Company's investment
in the partnership was closed out and the net cost of the Jacksonville
license distributed in June 1994 was reduced by $148 (See Note C-2)
b. AMS and Dial Call (successor to JCC) entered into an agreement in February
1995 regarding the settlement of certain liabilities with respect to the
AMS/JCC transaction that closed in August 1991, whereby various notes
payable to JCC were reduced by $262, with a corresponding reduction in the
net cost of the Miami and Tampa licenses acquired from JCC in August 1991.
During the nine months ended March 31, 1994, the following noncash investing
and financing activities occurred:
a. Common stock valued at $632 was received from a former officer of the
Company in payment of a note receivable with a net balance of $369. The
difference of $263 was recorded as a reduction in provision for doubtful
receivable from a former officer.
b. SMR licenses valued at $330 were acquired in settlement of $188 in notes
receivable and $5 in deposit receivable. The remaining $137 was recorded as
a reduction in provision for doubtful note receivable from a former officer.
c. 462 shares of common stock were issued upon the conversion of $2,873 of debt
and accrued interest (See Note C-2).
d. The Company acquired Resco, Inc.'s 50% interest in Resco/AMS' SMR systems in
Jacksonville, Florida for approximately $800. Accordingly, the Company's
investment in the Resco/AMS partnership was reduced by the net cost of the
Jacksonville assets in Resco/AMS (See Note C-3).
e. Various SMR licenses valued at $588 were acquired in settlement of $576 in
notes receivable and the assumption of a $12 option payable.
f. An employee exercised a stock option, which resulted in recording $23 of
compensation expense and a corresponding increase in additional paid-in
capital.
See Notes to Condensed Consolidated Financial Statements
-9-
<PAGE> 10
AMERICAN MOBILE SYSTEMS INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1995
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of the Company and its subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation of these unaudited
financial statements have been included. Operating results for any interim
period are not necessarily indicative of the results that may be expected for
the full year. These condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto contained in the Company's annual report on Form 10-K for the year
ended June 30, 1994.
Loss per share is computed by dividing the loss for the period by the weighted
average number of shares of common stock outstanding.
NOTE B - NATURE OF BUSINESS AND MANAGEMENT PLANS
The Company has incurred losses in fiscal years 1992, 1993 and 1994 and the
first three fiscal quarters of 1995. During most of this period, the Company
also used net cash in its operating activities and had net working capital
deficits. The Company met its cash requirements through its financing
activities and investing activities during this period. The Company
anticipates that its working capital and cash requirements for the balance of
fiscal 1995 will be principally drawn from the following sources: (i) the
existing cash on hand; and (ii) cash flow from operations, pending the
Company's anticipated business transaction with Nextel. As described in more
detail under Note C, the Company is currently expected to consummate the Merger
Agreement with Nextel during the first quarter of fiscal 1996. However, there
can be no assurance that the proposed transaction will be completed. If the
Company is unable to close its proposed business transaction with Nextel, it
would need to seek financing to repay amounts due to Kansallis-Osake-Pankki
("KOP") or obtain the agreement of KOP to a rescheduling of the Company's
repayment obligations. No assurance can be given that such financing could be
obtained on acceptable terms, or that KOP would agree to such a rescheduling.
The Company negotiated an extension of approximately $3,871,000 in total
principal repayments under its credit agreement with KOP, which were originally
due between December 31, 1993 through June 30, 1995 and are now due June 30,
1995. KOP charged an $80,000 extension fee as a condition of extending certain
principal repayments in March 1995. The Company is seeking another extension
to the date that the transaction with Nextel is anticipated to be completed.
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<PAGE> 11
AMERICAN MOBILE SYSTEMS INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1995
NOTE C -- SIGNIFICANT TRANSACTIONS AND EVENTS
1. NEXTEL TRANSACTION
On April 25, 1995, the Company and Nextel Communications, Inc. ("Nextel")
entered into a definitive Agreement and Plan of Merger, dated as of April 25,
1995 (the "Merger Agreement"), by and among the Company, Nextel and Mobile
Communications of Florida, Inc., a wholly owned subsidiary of Nextel ("MCF").
The Merger Agreement provides for MCF to merge with and into the Company, with
the Company being the surviving corporation (the "Merger"). In the Merger,
each share of Common Stock, par value $.01 per share ("Common Stock"), of the
Company issued and outstanding (except for shares held by Nextel or the
Company) will be converted into the right to receive 0.62 of a share of Class A
Common Stock, par value $.001 per share ("Nextel Stock"), of Nextel (based on
there being no more than 6,775,721 shares of Common Stock outstanding on a
fully diluted basis (other than any shares held by Nextel)), resulting in
approximately 4,200,000 shares of Nextel Stock becoming issuable in connection
with the Merger. Each unexercised employee stock option of the Company
outstanding after the Merger will be assumed by Nextel and will be converted
into an option to purchase that number of shares of Nextel Stock that the
holder thereof would have received in the Merger had such holder exercised such
option immediately prior to the Merger.
The Merger is subject to customary closing conditions, including (i)
approval of the Merger by the holders of the Company's Common Stock, (ii)
Nextel and the Company having obtained all governmental and third party
consents and approvals required in connection with the Merger, including under
the indentures pursuant to which certain of Nextel's outstanding indebtedness
has been issued (the "Nextel Indentures"), (iii) each of Nextel and the Company
having received an opinion of counsel to the effect that, among other things,
the Merger can be consummated on a tax free basis, and (iv) the Company
receiving an opinion from its financial advisor that, from a financial point of
view, the Merger is fair to the public holders of Common Stock. Additionally,
the Merger is subject to (i) the consummation of the purchase of equity
securities of Nextel by an affiliate of Craig O. McCaw contemplated by that
certain Securities Purchase Agreement, dated as of April 4, 1995 (the "McCaw
Purchase"), (ii) no holder of Common Stock being entitled to exercise appraisal
rights in connection with the Merger, and (iii) Nextel's ability to cause the
Company to repay all of its outstanding indebtedness following the Merger
without prepayment penalties or similar charges or any third party consents.
As described in earlier financial statements, the Company and Nextel are
also parties to a certain Stock Purchase Agreement, originally dated as of
August 25, 1993 (as amended, the "Stock Purchase Agreement"), pursuant to which
Nextel had agreed to purchase a majority equity interest in the Company. Upon
the signing of the Merger Agreement, the
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<PAGE> 12
AMERICAN MOBILE SYSTEMS INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1995
NOTE C -- SIGNIFICANT TRANSACTIONS AND EVENTS
1. NEXTEL TRANSACTION (continued)
Stock Purchase Agreement was terminated and superseded, subject to the Stock
Purchase Agreement being automatically returned to full force and effect if the
Merger Agreement is terminated pursuant to the applicable provisions of the
Merger Agreement in any of the following circumstances: (i) if the McCaw
Purchase is not consummated by September 15, 1995, (ii) if the Common Stock is
not listed on the Nasdaq National Market on the record date for the special
meeting of the holders of the Common Stock relating to the Merger, or (iii) if
Nextel is unable to obtain the necessary consents relating to the Merger under
the Nextel Indentures by September 15, 1995 or (iv) if the proxy
statement/prospectus relating to the Merger is not mailed to the holders of the
Common Stock by July 31, 1995. In addition to the circumstances described
above and certain other circumstances described in the Merger Agreement, the
Merger Agreement may also be terminated by either the Company or Nextel (but
without the Stock Purchase Agreement being returned to full force and effect)
if the Merger is not consummated by September 30, 1995.
In connection with the Merger Agreement, Tele-Communications, Inc. ("TCI")
and Nextel have entered into a voting agreement (the "Voting Agreement")
pursuant to which TCI has agreed, among other things, (i) not to dispose of its
Common Stock prior to the Merger except in certain limited circumstances and
(ii) to vote (or grant a proxy to Nextel to vote) its shares of Common Stock in
favor of the Merger. In addition, pursuant to the Merger Agreement Nextel has
agreed to vote its Common Stock in favor of the Merger. Together, Nextel and
TCI beneficially own approximately 46% of the outstanding shares of Common
Stock.
The foregoing summary descriptions of the Merger Agreement and the Voting
Agreement are qualified in their entirety by reference to the precise terms and
conditions of such agreements, copies of which have been filed as exhibits to
this report and which are hereby incorporated by reference for all purposes.
2. RESCO/AMS PARTNERSHIP DISSOLUTION
The Company and Resco, Inc., the general partners of Resco/AMS Partnership
dissolved the Resco/AMS partnership as of December 31, 1994. All remaining
assets of the partnership have been distributed among its partners in
accordance with the partnership agreement.
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<PAGE> 13
AMERICAN MOBILE SYSTEMS INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1995
NOTE C -- SIGNIFICANT TRANSACTIONS AND EVENTS
3. PENDING ASSET SALE
In December 1994, the Company entered into various agreements with
PowerSpectrum of Miami, Inc. ("PowerSpectrum") by which the Company expects to
sell a ten-channel 900 MHz SMR facility, excluding equipment, located in Miami,
Florida to PowerSpectrum for a purchase price of $300,000. In December 1994,
the Company received $270,000 of such purchase price as a deposit in connection
with the sale of the SMR system to PowerSpectrum, and such funds are only
required to be returned to PowerSpectrum in certain limited circumstances.
Also in December 1994, the Company entered into various agreements with Frank
DiRico and a company which he controls by which the Company expects to sell a
ten-channel 900 MHz SMR facility, excluding equipment, located in Miami,
Florida to Frank DiRico for a purchase price of $400,000. In December 1994,
the Company received $80,000 of such purchase price as a deposit in connection
with the sale of such SMR system, and such funds are only required to be
returned by the Company in certain limited circumstances. Both of the
aforementioned sales are contingent upon FCC approval.
4. STOCKHOLDER EQUITY
As a result of the termination of the Put Agreement on November 18, 1994,
the number of issued and outstanding shares of common stock was increased by
714,286 shares, and the total stockholders'equity balance was increased by a
corresponding $5 million.
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<PAGE> 14
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Nine Months Ended March 31, 1995 Compared
to March 31, 1994
The Company's total sales increased by 2.9% from $6,375,000 in the nine
months ended March 31, 1994 to $6,559,000 for the same period in 1995. Sales
are comprised of two components: Sales of airtime to customers and sales of
equipment and service. As a percentage of total sales, sales of airtime for
the period ended March 31, 1995, were 62.9%, up slightly from 58.8% for the
same period in 1994. Airtime sales increased by 10.1% from $3,750,000 for the
period ended March 31, 1994 to $4,127,000 for the same period in 1995. This
was a result of the Company's net subscriber growth and an increase in the
average rate charged per subscriber unit. Sales of equipment and service have
decreased by 7.3% from $2,625,000 for the period ended March 31, 1994 to
$2,432,000 for the same period in 1995 as a result of a small sales team.
There was a decrease of 5.0% in the cost of sales for airtime from $1,180,000
for the period ended March 31, 1994 to $1,121,000 for the same period in 1995,
and a decrease of 9.8% in the cost of sales for equipment and service from
$1,655,000 for the period ended March 31, 1994 to $1,492,000 for the same
period in 1995. Overall, the total cost of sales decreased by 7.8% from
$2,835,000 for the period ended March 31, 1994 to $2,613,000 for the comparable
period in 1995.
The Company's selling, general and administrative expenses have decreased
13.5% from $3,023,000 for the period ended March 31, 1994 to $2,616,000 for the
same period in 1995. This decrease was the combined result of the reduction in
sales and service personnel and the decrease in legal fees for the period ended
March 31, 1995. Interest expense increased by 2.8% from $621,000 for the
period ended March 31, 1994 to $795,000 for the same period in 1995 due to
increases in the interest rate and an $80,000 extension fee charged by KOP in
connection with an extension of certain principal repayments in March 1995.
It is anticipated that the Company will continue to report operating losses
during its current fiscal year because of its continuing significant interest,
depreciation and amortization expenses, as well as continued costs of marketing
incurred to increase the number of subscribers to the Company's systems.
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<PAGE> 15
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company had recurring losses in fiscal years 1992, 1993 and 1994 and in
the first three quarters of fiscal 1995. During these periods, the Company
also incurred working capital deficits and used net cash in its operating
activities during fiscal years 1992, 1993 and 1994. The Company anticipates
that its working capital and cash requirements for the balance of fiscal year
1995 will be principally drawn from the following sources: (i) the existing
cash on hand and (ii) cash flow from operations, pending the Company's
anticipated business transaction with Nextel which is currently expected to be
completed by the first quarter of fiscal 1996. However, there can be no
assurance that the proposed transaction will be completed. The Company has
negotiated an extension of approximately $3,871,000 in total principal
repayments under its credit agreement with KOP which were originally due
between December 31, 1993 through June 30, 1995 and are now due June 30, 1995.
The Company is seeking another extension to the date that its business
transaction with Nextel is anticipated to be completed.
In order to commence the construction of its proposed ESMR digital mobile
network, the Company will need to secure the necessary funding from outside
sources. No assurances can be given at this time that such funding will be
obtained.
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<PAGE> 16
PART II
OTHER INFORMATION
Item 1 - Legal Proceeding
On or about March 26, 1992, Frank and Kathleen Seidman (together, the
"Plaintiff") filed a complaint (the "Seidman Complaint") in the United States
District Court for the Eastern District of Pennsylvania, Civil Action No.
92-1782, against the Company and William J. Young, the Company's former
Director, President, Chief Executive Officer and Chief Financial Officer (the
"Seidman Action"). The Seidman Complaint was filed as a class action on behalf
of a putative class consisting of all persons who purchased the Company's
Common Stock during the period commencing April 9, 1991 and ending March 24,
1992 and who claimed to have suffered damages as a result thereof.
The Plaintiff asserts claims against the Company and Mr. Young for
violations of Federal securities laws, including Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the Securities
and Exchange Commission (the "SEC") thereunder. In substance, the Plaintiff
alleges that Mr. Young, in his capacity as President and Chief Executive
Officer of the Company, directed and approved the unauthorized transfer of $4.1
million from the accounts of the Company, and that the Company did not properly
account for the unauthorized transfers in its financial statements, which
results in those statements materially misrepresenting the Company's financial
condition.
On March 16, 1993, the Company timely answered the Seidman Complaint,
denying all allegations of wrongdoing and specifically denying that the Company
violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder.
On March 24, 1993, the Plaintiff filed a complaint (the "Deloitte
Complaint") in the United States District Court for the Eastern District of
Pennsylvania, Civil Action No. 93-1564, against Deloitte & Touche, the
accounting firm formerly responsible for performing audit services for the
Company (the "Deloitte Action"). The Deloitte Complaint was filed as a class
action on behalf of a putative class consisting of all persons who purchased
the Company's Common Stock during the period commencing July 1, 1990 and ending
March 24, 1992 and who claimed to have suffered damages as a result thereof.
The Deloitte Complaint asserts claims against Deloitte & Touche for violations
of Federal securities laws, including Section 10(b) of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated by the SEC thereunder, in connection
with the same events as those described in the Seidman Complaint.
On July 26, 1993, the Seidman Action and the Deloitte Action were
consolidated under Civil Action No. 92-1782.
On August 5, 1993, the Plaintiff filed a consolidated complaint in the
United States District Court for the Eastern District of Pennsylvania, Civil
Action Number 92-1782, against the Company, William J. Young and Deloitte &
Touche (the "Consolidated Complaint"). The Consolidated Complaint was filed as
a class action on behalf of a
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<PAGE> 17
PART II
OTHER INFORMATION
Item 1 - Legal Proceeding (continued)
putative class consisting of all persons who purchased the Company's Common
Stock during the period commencing July 1, 1990 and ending March 24, 1992 and
who claimed to have suffered damages as a result thereof. The Consolidated
Complaint reasserted the claims against the Company, Mr. Young, and Deloitte &
Touche for violations of Federal securities laws, including Section 10(b) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the SEC
thereunder.
On August 20, 1993, the Company timely answered the Consolidated Complaint,
once again denying all allegations of wrongdoing and specifically denying that
the Company violated Section 10(b) of the Securities Exchange Act and Rule
10b-5 promulgated thereunder.
On September 30, 1994, the United States District Court for the Eastern
District of Pennsylvania, Civil Action No. 91-1782, granted the Plaintiff's
motion for class certification in the Consolidated Complaint and certified the
class to consist of all persons who purchased or acquired the Common Stock of
the Company during the period from July 1, 1990 until March 24, 1992 and who
were injured as a result thereof. Additionally, the Plaintiff was certified as
the representative of the class.
The Company intends to continue to defend itself vigorously against the
class action lawsuit.
Three purported class action lawsuits were filed by certain of the
Company's stockholders on September 9 and 12, 1994 in the Delaware Court of
Chancery against the Company, its directors (Richard G. Somers, Gary S. Howard
and William L. Wedum) and Nextel in connection with Nextel's previously
announced proposal to acquire the Company in a tax-free merger in which the
Company's stockholders would receive 3,000,000 shares of Nextel Class A Common
Stock. The complaints in the three actions allege that the Company's
directors, who allegedly were aided and abetted by Nextel, breached their
fiduciary duties to the Company's stockholders by supposedly failing to seek
the highest available price in connection with the proposed sale of the
Company. On September 26, 1994, the Company entered into an agreement in
principle regarding a proposed merger in which Nextel would acquire the Company
through a merger in which the Company's stockholders would receive 3,700,000
shares of Nextel Class A Common Stock. On November 15, 1994, the Delaware
Chancery Court entered an order consolidating the three lawsuits for all
purposes in an action styled as In re: American Mobile Systems Incorporated
Stockholders Litig.; Consol. C.A. No. 13731. The consolidated order also
provides that plaintiffs in the consolidated action will file an amended and
supplemental complaint as soon as possible. To date, no such complaint has
been filed.
The Company believes the complaints are without merit and intends to
vigorously defend against them.
-17-
<PAGE> 18
PART II
OTHER INFORMATION
Item 1 - Legal Proceeding (continued)
The Securities and Exchange Commission (the "Commission") has conducted a
formal investigation (In the Matter of American Mobile Systems Incorporated,
HO-2624) concerning events surrounding the unauthrorized transfers of funds
from the accounts of AMS by William J. Young. AMS voluntarily cooperated with
an informal investigation by the Commission and continued its cooperation
during the formal investigation by the Commission.
-18-
<PAGE> 19
PART II
OTHER INFORMATION
Item 6 - Exhibits and Reports Filed on Form 8-K
(a) Exhibits:
(i) Item 5 of Current Report on Form 8-K, dated January 10, 1995,
of Nextel Communications, Inc., without exhibits.
(ii) Agreement and Plan of Merger, dated as of April 25, 1995, by
and among the Company, Nextel and Mobile Communications of Florida, Inc. (filed
on May 1, 1995 as Exhibit 2 to the Company's Report on Form 8-K, dated April
28, 1995, and incorporated herein by reference).
(iii) Letter, dated as of April 25, 1995, from Tele-Communications,
Inc. to Nextel (filed on May 1, 1995 as Exhibit 99.1 to the Company's report on
Form 8-K, dated April 28, 1995, and incorporated herein by reference).
(b) The following Form 8-K was filed during the quarter through the date
of this filing:
(i) Report of the Company on Form 8-K dated January 12, 1995
regarding Nextel's filing with the SEC on Form 8-K dated January 10, 1995,
disclosing certain debt covenant compliance issues.
(ii) Report of the Company on Form 8-K, dated April 28, 1995,
regarding Merger between the Company and Nextel.
-19-
<PAGE> 20
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.
AMERICAN MOBILE SYSTEMS INCORPORATED
By: /s/Alice L. Cheung
--------------------------------
Alice L. Cheung, Treasurer and
Controller (Principal Financial
and Accounting Officer)
Date: May 12, 1995
-20-
<PAGE> 21
EXHIBIT INDEX
-------------
Exhibit 27 - Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from
American Mobile Systems Incorporated and Subsidiary Condensed Consolidated
Balance Sheets (unaudited) as of March 31, 1995 and Condensed Consolidated
Statements of Operations (unaudited) for the nine months ended March 31, 1995
and is qualified in its entirety by reference to such financial statements
appearing in the Company's quarterly report on Form 10-Q for the quarter ended
March 31, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-1-1994
<PERIOD-END> MAR-31-1995
<CASH> 1,135
<SECURITIES> 0
<RECEIVABLES> 236
<ALLOWANCES> 0
<INVENTORY> 445
<CURRENT-ASSETS> 2,076
<PP&E> 5,057
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,834
<CURRENT-LIABILITIES> 12,913
<BONDS> 0
<COMMON> 73
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 19,834
<SALES> 6,559
<TOTAL-REVENUES> 6,749
<CGS> 2,613
<TOTAL-COSTS> 7,831
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 795
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,082)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> 0
</TABLE>
