SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF EARLIEST REPORTED EVENT - MARCH 31, 1999
TELEMETRIX INC.
(Exact name of Registrant as specified in its charter)
Delaware 0-14724 59-3453156
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification Number)
1612 N.Osceola Avenue
Clearwater, Florida 33755
(Address of Registrant's principal executive offices)
727-443-3434
(Registrant's telephone number, including area code)
727-443-5240
(Registrant's facsimile number, including area code)
Arnox Corporation
(Former name or former address, if changed since last report)
<PAGE>
ITEM 1.CHANGE IN CONTROL OF REGISTRANT
General. Telemetrix Inc., a Delaware corporation formerly known as Arnox
Corporation (the "Registrant") was incorporated in Delaware in 1983 to develop,
manufacture, market and license fire retardant products and technology. The
Registrant conducted an initial public offering in August, 1985 pursuant to an
effective Form S-1 Registration Statement under the Securities Act of 1933, as
amended (the "Securities Act"). In connection with an application to list its
Common Stock on the NASDAQ system, the Registrant also registered its Common
Stock pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the
"Exchange Act"). As a result of a 1989 bankruptcy proceeding, the Registrant
became an inactive shell that had with no material assets or liabilities and no
ongoing business activities. The Registrant remained inactive until it August
1996 when its stockholders approved a plan of reorganization proposed by Capston
Network Company of Clearwater, Florida ("Capston") that authorized Capston to
seek a suitable business combination opportunity for the Registrant. Capston and
its president, Sally A. Fonner, who has also served as the Company's sole
director since July 1997, have been actively seeking a business combination
opportunity for the Registrant since August 1996. After investigating a number
of opportunities, Capston negotiated a business combination on behalf of the
Registrant with Telemetrix Resource Group, Inc., a Colorado corporation ("TRG"),
Tracy Corporation II d/b/a Western Total Communications, a Nebraska corporation
("WTC"), and the stockholders of TRG and WTC. The parties executed the business
combination agreement on March 22, 1999.
The business combination. The Registrant acquired TRG and will, upon the
receipt of requisite regulatory approvals, acquire WTC in a business combination
transaction that was structured as a reverse takeover, or "RTO," in which the
stockholders of TRG and WTC agreed to exchange their shares in TRG and WTC for
newly issued stock of the Registrant. Immediately prior to the completion of the
RTO, the Registrant had no material assets, liabilities or business operations.
No relationship existed between the Registrant and TRG or WTC prior to the RTO,
other than the contractual relationship under the agreement governing the
business combination. No funds of the Registrant were expended to acquire the
stock of either TRG or WTC. As consideration for engaging in the business
combination, the Registrant issued shares of Common Stock to the former
stockholders of TRG and WTC. The amount of consideration given by the Registrant
in the RTO was determined by negotiation between the parties. The RTO will
accounted for as an acquisition of the Registrant by the stockholders of TRG and
WTC in consideration of transfer of TRG and WTC to the Registrant.
Until March 31, 1999, the Registrant had 3,439,247 shares of common stock
("Old Common") issued and outstanding. In preparation for the RTO, the
Registrant changed its name to Telemetrix Inc, and effected a "reverse split"
where the Old Common was consolidated in the ratio of one post-consolidation
share ("Common Stock") for every eleven and one-half (11-1/2) shares of Old
Common, provided, however, that no single stockholder's holdings were reduced to
fewer than 100 shares of Common Stock. In connection with the RTO, the
Registrant agreed to acquire all of the issued and outstanding shares of TRG in
exchange for 6,127,200 shares of Common Stock and all of the issued and
outstanding stock of WTC in exchange for 5,372,800 shares of Common Stock. In
addition, the Registrant agreed to issue 1,067,000 shares of Common Stock to
certain consultants and advisors (including 300,000 shares of Common Stock
issued to certain designees of Capston, 300,000 shares of Common Stock issued to
legal counsel for the parties and 467,000 shares of Common Stock issued to
certain financial consultants as finders fees). While the acquisition of TRG
closed on April 5, 1999, the acquisition of Tracy II is subject to the receipt
of final regulatory approval from the Federal Communications Commission which is
expected in due course. Taking all of the foregoing into account, there are
approximately 7,514,200 shares issued and outstanding on the date of this Report
on Form 8-K and there will be approximately 12,887,000 shares of Common Stock
issued and outstanding upon the closing of the WTC acquisition. The shares of
Common Stock issuable to the former stockholders of TRG and WTC constitute
approximately 82.8% of the outstanding Common Stock on the date of this Report
on Form 8-K and will constitute approximately 90% of the outstanding Common
Stock after upon the closing of the WTC acquisition.
In summary, (i) prior to the RTO, the Registrant changed its name and
effected a reverse-split of its outstanding Old Common in the ratio of one share
of Common Stock for every eleven and one-half (11-1/2) shares of Old Common held
by a stockholder, provided, however, that no single stockholder's share
ownership was reduced to fewer than 100 shares of New Common, (ii) the
Registrant's authorized capitalization was increased to 25,000,000 shares of
$0.001 par value Common Stock and 5,000,000 shares of $0.01 par value preferred
stock, (iii) the Registrant changed its name to Telemetrix Inc. (iv) all of the
outstanding common stock of TRG was transferred to the Registrant in exchange
for 6,127,200 shares of Common Stock, (v) subject only to the receipt of the
requisite regulatory approvals, the stockholders of WTC agreed to transfer all
of the outstanding common stock of WTC to the Registrant in exchange for
5,372,800 shares of Common Stock, and (vi) the Registrant issued 1,067,000
shares of Common Stock to certain consultants and advisors (including 300,000
shares of Common Stock issued to certain designees of Capston, 300,000 shares of
Common Stock issued to legal counsel for the parties and 467,000 shares of
Common Stock issued to certain financial consultants as finders fees).
After giving effect to all of the foregoing into account, there are
approximately 7,514,200 shares issued and outstanding on the date of this Report
on Form 8-K and there will be approximately 12,887,000 shares of Common Stock
issued and outstanding upon the closing of the WTC acquisition. Upon completion
of the WTC acquisition, the former stockholders of TRG and WTC will hold
approximately 90% of the Registrant's issued and outstanding Common Stock and
will control the Registrant. The following table sets forth the number of shares
of Common Stock owned, (a) as of the date of this Current Report on Form 8-K and
(b) after completion of the WTC Closing, by (i) each executive officer and
director, (ii) executive officers and directors as a group, and (iii) each
person who will own of record or own beneficially, more than five percent (5%)
of the Registrant's outstanding Common Stock.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Current Holdings (1) After WTC Closing (2)
Shares Percent Shares Percent
Owned of Class Owned of Class
<S> <C> <C> <C> <C>
Hartford Holdings Ltd. ("HHL") 6,127,200 81.6% 6,900,000 53.6%
Box 143,Cayman Islands, British West Indies
William W. Becker (Chairman of the Board of Directors). 6,127,200 (4) 81.6% 6,900,000 (5) 53.6%
Box 143,Cayman Islands, British West Indies (3)
Oz Pedde (Chief Executive Officer & Director) -- -- 0.0%
c/o Michael L. Glaser
633 17th Street, Suite 2700, Denver, Colorado 80202
Michael J. Tracy (President, Treasurer & Director) -- 4,140,000 32.2%
c/o Michael L. Glaser
633 17th Street, Suite 2700, Denver, Colorado 80202
Michael L. Glaser (Vice President, Secretary & Director) 90,000 1.2% 550,000 (6) 4.3%
633 17th Street, Suite 2700, Denver, Colorado 80202
Executive Officers and Directors as a Group (4 persons) 6,217,200 82.8% 11,590,000 90.0%
<FN>
- --------------
1) Based on 7,514,200 shares of Common Stock outstanding at the date of this
Notice.
2) Based on 12,887,000 shares of Common Stock outstanding after completion of
the WTC Closing.
3) William W. Becker exercises sole voting and investment control over shares of
Common Stock held by HHL.
4) Includes 6,127,200 shares of Common Stock held by HHL. 5) Includes 6,900,000
shares of Common Stock held by HHL. 6) Includes 90,000 Shares issued to Mr.
Glaser as payment for legal fees.
7) Apart from the RTO, there the Company is not aware of any arrangements that
may result in a change in control of the Company subsequent to the date of
this Notice.
</FN>
</TABLE>
The Agreement permits the former stockholders of TRG and WTC to replace the
Registrant's current Board with their own nominees (the "New Directors"). This
change in the Board will not become effective and the New Directors will not
assume office, until 10 days after the Registrant files an Information Statement
and Notice of Change in the Majority of the Board of Directors with the U.S.
Securities and Exchange Commission (the "Commission") and sends copies of the
Notice to all record stockholders. At that time, Sally A. Fonner the
Registrant's sole current director will appoint the New Directors to the Board
and then resign. Thereafter, the New Directors and the executive officers they
appoint will manage the Registrant's business.
In connection with the plan of reorganization approved by the Company's
stockholders, certain persons designated by Capston received 300,000 shares of
Common Stock for administrative and management services. Ms. Fonner, the
Registrant's former sole officer and director, received 110,500 of those shares
for her personal account. In addition, 150,000 shares of Common Stock were
issued to legal counsel for Capston for services rendered since 1996.
A total of 467,000 shares of Common Stock were issued to two finders who
assisted in the identification of TRG and WTC as potential business combination
candidates, the introduction of TRG and WTC to the Company, the collection and
analysis of due diligence information on TRG and WTC, and other financial
consulting and advisory services.
Mr. Michael Glaser, a proposed New Director and officer of the Registrant,
received 90,000 shares of Common Stock for legal services performed in
connection with the RTO. In addition, Mr. Glaser's law firm, Haligman Lottner
Rubin & Fishman, P.C., received 60,000 shares of Common Stock for legal services
performed in connection with the RTO.
All shares of Common Stock issued to designees of Capston, legal counsel
for the parties and the finders were registered prior to issuance on a Form S-8
Registration Statement under the Securities Act of 1933.
The Registrant believes that each of these transactions were on terms no
less favorable to the Company than it could have obtained in transactions with
unrelated third parties.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As described in Item 1, the Registrant is acquiring all of the stock of TRG
and WTC in exchange for 11,500,000 shares of Common Stock. The following
material relating to the future business of the Registrant was prepared by the
management of TRG and WTC for inclusion in this Current Report on Form 8-K.
The Registrant will offer customer service facilities and enabling
technologies for digital telecommunications networks, particularly wireless
Personal Communications Services ("PCS"). The Registrant's complementary
products and services include:
o A wireless data acquisition system with applications for meter reading,
alarm reporting, remote control and monitoring;
o Wireless local loop data and voice services;
o Development of equipment and standards to support Tier 3 and 4 markets
for advanced PCS services1
o Provisioning and post-sales support to support deployed products; o
Software to perform order fulfillment, rating, bill generation,
customer care, fraud control, accounts receivable processes, for
comprehensive customer management; and
o Software development and maintenance.
Potential customers for the Registrant's carrier support services include
Incumbent Local Exchange Carriers ("ILECs"), Competitive Local Exchange Carriers
("CLECs"), cable companies, Internet Service Providers ("ISPs"), utilities and
interexchange carriers ("IXCs"), in U.S., Canadian and international markets. As
telecommunications markets grow and service categories converge, carriers must
both expand the scope of their services and retain their customer base with
quality customer service. The Registrant believes that its products and services
offer both quality customer service management and the ability to expand a
carrier's service offerings.
TRG, together with its wholly owned Canadian subsidiary, Telemetrix
Resource Group Ltd. ("TRG-Canada") has a suite of proprietary software for
comprehensive customer management. These packages, Telemetrix Revenue Awareness
Customer Care System ("TRACCS") and Intro CCB, have integrated database-driven
components for managing Order Processing, Provisioning, Customer Care, Account
Development, Billing and Financial Management, Fraud Control, Network
Management, Performance Reporting and related and supporting Office Products
software. Using TRACCS' built-in reporting capabilities, to sort, organize and
present data, wireless and wireline telecommunications carriers can effectively
and efficiently utilize their customer and billing information. TRG works
closely with its carrier customers to define their needs and then designs,
develops and implements user-based billing and customer care solutions based on
the existing TRG software offerings. Carriers can either license TRG's software
for use in their customer management operations or hire TRG to perform the
customer management services. TRG currently has five customers for whom it is
providing billing and information management services, producing monthly
revenues of $136,500.00. TRG is in negotiations with four additional customers
for the provision of similar services.
WTC currently provides paging and mobile communications services through
numerous licenses issued by the Federal Communications Commission ("FCC") in
Western Nebraska, Eastern Wyoming and Northeastern Colorado, and currently holds
three PCS licenses issued by the FCC; two licenses for Scottsbluff and one
license for McCook, Nebraska. Although WTC has entered into an Agreement with
Pinpoint Communications ("Pinpoint") for the sale of WTC's McCook PCS license to
Pinpoint, subject to prior approval of the FCC. WTC and Pinpoint have not yet
filed an Application seeking fcc approval of this sale. WTC's PCS licensed
service areas encompass approximately 138,000 persons including McCook. WTC
intends to expand its PCS service offerings to include PCS Wireless Local Loop
services (i.e., local exchange services), monitoring, data collection and
distribution, meter reading and mobile PCS.
WTC also holds 34 paging and mobile telephone licenses serving 27 locations
in Western Nebraska, Eastern Wyoming and Northeastern Colorado.
WTC also is developing DATATRAK, a name which WTC presently utilizes to
describe its system, which is a hardware and software system for data
collection, system monitoring, distribution and billing. DATATRAK applications
will allow a wide variety of Applications including wireless local loop ("WLL"),
and monitoring of vending machines, home security, home health and automatic
utility meter reading plus other specialty applications. The DATATRAK system has
been designed for use in both wireless and wireline telecommunications. WTC's
COMM Center, a proprietary communications hardware and software gateway uses
digital communications technology to deliver residential or business local
exchange telephony (wireline) bypass. The COMM Center also can be configured to
be compatible with different communications protocols and transmission media
(i.e., wireless and wireline; Global System for Mobile Communications ("GSM"),
Code Division Multiple Access ("CDMA") or Time Division Multiple Access
("TDMA")). The COMM Center can function as a wireless local-loop interface
replacing or supplementing existing wireline telephone service equipment or
providing additional telephone service. The COMM Center wireless local loop
interface will provide wireless basic telephone service over existing in-home or
in-business telephone wiring. Using these products, PCS operators (particularly
rural operators in areas of low population density) can offer additional
services and thereby increase their revenue potential. WTC expects to deploy
DATATRAK and COMM Centers in its own wireless and PCS networks to demonstrate
their efficacy and to generate additional PCS revenue.
The Registrant believes the operations and services of TRG and WTC
complement each other and combining their businesses will achieve greater
efficiencies and competitiveness.
INDUSTRY OVERVIEW
The U.S. telecommunications industry has approximately 1,350 service
providers, serving more than 90 million households and 25 million businesses
(approximately 158 million access lines), and generated revenues approaching
$196.3 billion. Telecommunications wireline services are provided in three
principal markets: long distance, local exchange and data products and services.
Wireless communications services include cellular telephone service, Personal
Communications Services ("PCS"), Specialized Mobile Radio ("SMR") and paging.
The Registrant believes service providers in each of these market segments can
benefit from the Registrant's carrier support services. The DATATRAK and COMM
Center technology should appeal to both wireless service providers as well as
original equipment manufacturers ("OEMs") who sell their products to
telecommunications carriers. The Registrant's TRACCS billing system can
facilitate new carriers' entry into the local exchange market by enabling
carrier to focus on developing and enhancing their services without sacrificing
customer care and administration. The Registrant's systems also have the
flexibility to adapt to carriers' changing service offerings and to
implementation of new services.
The Long Distance Market. The FCC's Statistics of Common Carriers reports
that the domestic long distance industry generated revenue of approximately
$88.6 billion in 1997. The long distance market is comprised of three tiers. The
first tier consists of facilities-based long distance carriers, such as AT&T,
MCI, WorldCom and Sprint, who provide long distance communications services
using their own equipment to transmit telephone calls. These carriers
collectively accounted for approximately 80% of all toll revenues in 1997.
"Second tier" carriers, consisting primarily of switched resellers such as Excel
Communications Inc., Cable and Wireless, plc., LCI International Inc. and
Frontier Corporation ("Frontier"), accounted for approximately 6.0% of toll
revenue in 1997. The remaining market share, or "third tier," is held by smaller
companies primarily consisting of switchless resellers.
The Local Exchange Market. According to FCC data, total revenue from local
telecommunications services in 1997 was approximately $103 billion. The U.S.
federal Telecommunications Act of 1996 ("Telecommunications Act") seeks to
increase competition in the local telecommunications industry and provide a
framework for other carriers to compete with LECs by reselling local telephone
service, leasing unbundled elements of the ILECs' networks or building new local
service facilities. The Telecommunications Act has created many opportunities
for new providers to enter the local services market.
The Data Products and Services Market. Data products and services has been
the highest growth segment of the telecommunications industry in the 1990s.
According to Data Communications, data-related products and services accounted
for revenues of almost $79.0 billion in 1997--a growth rate of approximately 17%
from 1996. According to the Yankee Group, current trends suggest that data
revenues will double over the next three years and will grow five times faster
than voice revenues.
The Wireless Services Market. The wireless communications market, which
includes cellular telephone service, Personal Communications Services ("PCS"),
Specialized Mobile Radio ("SMR"), paging, and other applications has grown
dramatically in recent years. For example, U.S. cellular telephone service
revenues grew from $5.8 billion in 1991 to $19.0 billion in 1995, and the number
of subscribers increased from 7.6 million in 1991 to 53.3 million in 1997. The
growth in wireless communications results from lower prices for consumer
equipment (e.g., cellular telephones and pagers), more comprehensive service
coverage, lower rates and technological advances that have improved transmission
quality and reliability. Other studies forecast approximately 47 million new
subscribers during the next five years. By 2001, total wireless phone
penetration is projected to reach approximately 40%, with more than 55%
household penetration. While the major PCS operators will likely focus on mobile
telephone services that will compete with cellular telephone services, small and
rural PCS operators must offer additional "niche" PCS service offerings in order
to increase utilization of their services.
Billing Systems. With continued deregulation, increased complexity of
products and features, bundled Internet services and the drive to combining
multimedia (voice, data and video), telecommunications carriers' billing needs
are becoming increasingly complicated. This situation requires a market response
with provision of a more robust billing system that is stable and easy to both
modify and implement across a multitude of carrier services. The total North
American market for billing software is approximately about $3 billion per year
and rapidly growing at approximately 25% per year. The Registrant will initially
target smaller carriers, which represent about 25% of the total market. Thus the
Registrant estimates a potential North American billing software market of $700
million, rising to $900 million by 2000.
TECHNOLOGY OVERVIEW
To assist understanding of the Registrant's products and services, the
following summary briefly describes the configuration of PCS networks and local
loops.
PCS Networks. Certain wireless communications networks, such as cellular
telephone and PCS, use a cellular architecture, where the service region is
divided into multiple cells, each containing a Base Station (including a
transmitter, receiver and signaling equipment) which is connected to the
wireless network switch and which, in turn, is connected to the public switched
telephone network "PSTN"). Within a cell, the mobile units (e.g., the handset)
communicate with the Base Station using radio waves; to prevent interference,
adjacent cells use different radio frequencies. As a mobile unit moves away from
the Base Station in a particular cell, the network switch monitors the signal
strength of the call and switches the call to a new Base Station in another cell
where the signal strength is greater. PCS licensed services use higher radio
frequencies than traditional cellular telephone, which reduces the distance PCS
transmissions can travel without significant degradation. Consequently, PCS
networks require smaller operating cells and more Base Stations than cellular
telephone networks. When a mobile unit leaves the wireless carrier's service
area, the call will be disconnected unless the wireless carrier in the new
service area accepts and handles ("carries") the call. This "roaming" among
different wireless carriers requires both technical compatibility and agreements
between carriers to carry calls from other carriers' subscribers. Cellular
carriers generally have roaming agreements, however, since PCS is still
developing and PCS operators are utilizing different technical standards,
roaming between PCS systems is somewhat limited.
Local Loop: Local wireline telephone systems consist of a network of
switches, transmission facilities between switches and the "local loop"
connections between subscribers' premises and the nearest local exchange switch.
The local exchange switches route calls initiated by subscribers either directly
to recipients served by the same switch or, for more remote recipients, to the
long distance carriers' points of presence ("POP"). Wireline local loops
generally consist of telephone wires that run along aerial or underground
rights-of-way to each subscriber premise. Older wireline local loops generally
carry analog transmissions and have relatively low capacity, sufficient to carry
only a single two-way voice conversation. CLECs generally do not develop their
own local loops, due to the expense and effort of obtaining rights-of-way and
installing a telephone line to each telephone user. These difficulties are
magnified in rural areas with low population density. Consequently, CLECs must
utilize the ILEC's local loops, which inhibits competition. This large expense
and effort also deters ILECs from upgrading the transmission capacity of the
local loop. Thus, the local loop constitutes a significant hindrance to
competition and better quality service. WTC's proposed COMM Center is designed
to include a Wireless Local Loop ("WLL") capability. Using this feature, CLECs
and wireless service providers can replicate the local loop using wireless
technology and thereby avoid costly and extensive infrastructure.
PRODUCTS AND SERVICES
The Registrant will provide customer service capabilities and enabling
technologies for telecommunications networks. The Registrant's complementary
products and services include:
o Software to perform order fulfillment, rating, bill generation, customer
care, fraud control, accounts receivable processes, for comprehensive
customer management;
o A wireless data acquisition system with applications for meter reading,
alarm reporting, remote control and monitoring;
o Wireless local loop networking; o hardware designed to implement Rural PCS
services; o Provisioning and post-sales support to enhance customer care; and
o Software development and maintenance.
Customer Care Software. Through TRG, the Registrant offers a portfolio of
products that address a carrier's order fulfillment, customer care, fraud
control, billing, remittance, and accounts receivable processes. This portfolio
offers Year 2000 compliant, feature rich, user friendly convergent billing and
information management software products. Carriers are moving away from treating
billing as simply an isolated medium for revenue collection and towards using
billing as the basis for effective marketing and customer service. TRACCS was
originally developed and implemented as an in-house integrated customer care
system that supported 124,000 accounts and over 225,000 active access lines for
facilities-based long distance telecommunications services providers. TRG
acquired this system in 1995 and has continued to develop TRACCS into a fully
integrated suite of applications designed for large Tier II through Tier IV
telecommunication carriers and providers. TRG also acquired Intro CCB, a
PC-based integrated billing and customer care solution suitable for customers
who have sophisticated functional demands but do not require the processing
power of a mainframe hardware platform. The Management Network Group, a
recognized industry expert, independently evaluated TRACCS and concluded that it
was more advanced, functionally robust, and performed better than existing
billing software products.
The DATATRAK System. WTC is developing the DATATRAK system, a new
application technology for integrated data collection, transmission, storage,
and compilation. The main components of the DATATRAK system are the COMM Center,
Optical Meter Reader, Network Operations Center and Access Server Software. The
DATATRAK system, compatible with standard digital communications protocols,
integrates a Wireless Local Loop ("WLL") to and from the home into existing PCS
and other digital communications technology infrastructure. Unlike other WLL
technologies, DATATRAK also provides an integrated method to monitor utility
meters and security systems, provide complete telemetry functionality and manage
utility consumption. These incremental features can be a significant new source
of revenue for the wireless service provider. WLL serves as a voice channel
provided to the customer's home or business premises. By connecting the COMM
Center to a customer's existing telephone wiring, WLL which can be utilized
either to replace existing service from the ILEC or as a second line. WLL also
can be used as a "follow-me" service, whereby the WLL home or office system is
called if the PCS mobile telephone is not answered. In addition, the DATATRAK
system utilizes the Short Message Service ("SMS") capability of the existing
digital communications system to establish various two-way data applications
into the customer's home or business premises.
Current solutions for monitoring electric, gas and water utilities are not
compatible with each other, nor do they offer WLL. DATATRAK, however, reads
different types of meters utilizing the Optical Meter Reader and other
interfacing devices, becoming a single reading method and a single source for
collection, storage and transmission of data. Once deployed, DATATRAK can be
utilized for a suite of applications including voice communications, automatic
utility meter reading, home security, home health, vending replenishment as well
as other specialty applications. DATATRAK can be also be expanded to include
control functions from remote locations and includes a complete data
acquisition, distribution, and billing system. The DATATRAK system is currently
in beta testing in Gering, Nebraska and is expected to be available for full
deployment in the second/third quarter of 1999. DATATRAK's services and
applications, when combined with the WLL capability, represent a significant new
source of revenue for the digital wireless communications service provider.
COMM Center. The heart of the DATATRAK system is the COMM Center, an
intelligent device located on or near a customer's premises. The COMM Center has
40 access ports, consisting of twenty intelligent ports able to collect and
store data from various sources such as utility meters, plus 20 non-intelligent
data registers (bi-directional I/O ports) able to detect and transmit a signal
when devices, such as fire alarms, burglar alarms or temperature monitors, have
been set off. The COMM Center also provides the ability to remotely control
on-premise devices (e.g,. turn off heat or air conditioning), which is necessary
for load shedding by utilities as well as whole home or building management
services currently under development. It can collect data from multiple sources,
such as gas, water and electric meters, store the data in memory and release the
data upon request from an authorized polling point (utility).
The COMM Center contains a Subscriber Line Interface Circuit ("SLIC") and
related proprietary circuitry, which allows direct connection to the customer's
in-house telephone wiring. This connection supports up to five extensions and
allows some or all of the customer's existing telephone sets to be provided with
wireless local service (i.e., WLL). Customers can use this capability to
establish a second line (e.g., for fax service) or to eliminate existing service
from the incumbent ILEC or service provider altogether. The COMM Center also
contains the PCS RF Module, which provides both a Voice Channel and SMS
connection to the existing PCS service provider's network. The COMM Center
performs all data functions via the SMS system without affecting the overall
traffic (data or voice) capacity of a PCS system, and provides WLL.
Optical Meter Reader. WTC has an oral agreement with the patent holder of
an Optical Meter Reader to "patent" over the reader and include it as a part of
the DATATRAK system. WTC expects this agreement to be finalized in writing in
the near future. The oral agreement provides that WTC will offer the improved
manufactured Optical Meter Reader units to the patent holder for purchase. WTC's
price to the patent holder will enable WTC to make a profit on the sales of the
reader to the patent holder. The Optical Meter Reader can accurately read
utility meters through the glass or plastic meter cover. The Optical Meter
Reader can be adapted to provide the same low cost monitoring for anything
measured or monitored by a mechanical or electro-mechanical display. The reading
obtained can be transmitted to the COMM Center's intelligent ports by either a
wired or wireless connection. The low cost Optical Meter Reader offers
eliminates the need for costly meter retrofit or meter removal and replacement
and the optionally available wireless connection from the meter to the COMM
Center eliminates the need for installation of additional costly on-premise
wiring. Together, these capabilities can dramatically reduce utilities' costs
for automatic meter reading and resource management.
The Network Operations Center. The Network Operations Center ("NOC") is a
PC-based system, which collects all data transmitted from the COMM Center. The
NOC receives data from the various premise-based sources (e. g., alarms, utility
meters) and translates it into the appropriate format and/or reports as defined
by the individual service providers (e.g., alarm companies, utilities). The
formatted data is then transmitted, with appropriate security measures, to the
service providers.
The Access Server Software. This software can operate on a standard PC
located at the service provider's premises. This software interfaces to the
Network Operations Center, or in some cases directly to the COMM Center, and
receives formatted data or reports as defined by the service provider. In
situations requiring control of on-premises devices (e. g., Load Shedding), the
Access Server may send the appropriate control signals to activate the on/off
ports in the COMM Center
Mobile PCS. WTC currently holds three PCS licenses covering a population of
138,000, primarily in western Nebraska and eastern Wyoming. WTC constructed six
PCS sites covering a population base of 56,000, and is now testing PCS services
for commercial use. By deploying the DATATRAK system, the Registrant will expand
its PCS and paging service offerings to include WLL, remote monitoring and
access, meter reading, and other data collection and distribution services.
Enhanced features available to PCS and paging customers include:
o Enhanced Features - Caller identification, call hold, voice mail, numeric
paging, plus custom calling features such as call waiting, conference
calling and call forwarding.
o Messaging and Wireless Data Transmission (DATATRAK) - Digital networks
offer voice and data communications, including text messaging, through a
single handset, including short message or alphanumeric paging service,
mobile office applications (e.g., facsimile, electronic mail and
connecting notebook computers with computer/data networks), access to
stock quote services, transmission of text, connections of wireless
point-of-sale terminals to host computers, monitoring of alarm systems,
automation of meter reading and monitoring of status or inventory levels.
o Call Security and Privacy - Encryption algorithms provide increased call
security, encouraging users to make private, business and personal calls
with significantly lower risk of eavesdropping than on analog-based
cellular systems.
o Smart Card - "SIM" cards, programmed with the user's billing information
and a specified service package, allow subscribers to obtain GSM
technology based PCS connectivity automatically, simply by inserting their
SIM cards into compatible PCS handsets. If the Registrant has a roaming
agreement with a local GSM technology based PCS provider, SIM cards could
also enable subscribers to obtain service in that region.
o Over-the-Air Activation and Over-the Air Subscriber Profile Management -
The Registrant will be able to transmit changes in the subscriber's
feature package, including mobile number assignment and personal directory
numbers, directly to the subscriber's handset. This capability eliminates
the need to manually program the handset and simplifies the activation
process for both the sales agent and the subscriber.
o Roaming - The Registrant intends to obtain roaming agreements with
carriers that use GSM based technology. Subscribers should be able to roam
in substantial portions of the United States, either on other technically
compatible PCS systems by using dual-mode handsets that permit operation
on systems using different signal transmission technologies or even on
existing cellular systems.
o Zoned Calling Areas - WTC's service area will feature zoned calling areas
permitting subscribers to pay a flat monthly service fee for calls to
different coverage areas (zones) outside of the subscriber's base coverage
area.
The Registrant also expects that providing these enhanced services on its
own network will act as a showcase for the DATATRAK System.
CLEC License. WTC holds a certificate of public convenience and necessity
("CPCN") from the Nebraska Public Service Commission ("NPSC") to operate as a
wireless and wireline competitive local exchange carrier in the state of
Nebraska in the market areas served by the major incumbent local exchange
carriers such as U.S. West Communications ("US West"), Sprint Corporation
("Sprint"), and Alliant ("Alliant"). The CPCN will enable WTC to offer wireline
and wireless local exchange services to residential and business customers in
Nebraska in this area. WTC has an application pending before the NPSC to provide
wireless and wireline competitive local exchange services in all other areas of
the State of Nebraska.
POTENTIAL CUSTOMERS AND MARKETS
The Registrant believes that its products and services can be utilized by a
broad range of utilities and telecommunications service providers both in the
United States and Canada and worldwide. Such potential customers include
Incumbent Local Exchange Carriers ("ILECs"), Competitive Local Exchange Carriers
("CLECs"), Cable companies, Internet Service Providers ("ISPs"), utilities (gas
and electric) and Interexchange Carriers ("IXCs"). In addition, WTC's PCS
license areas encompass approximately 138,000 potential subscribers in western
Nebraska, eastern Wyoming and eastern Colorado.
Since many large telecommunications carriers perform billing and customer
care in-house, TRG will first target smaller carriers, such as lower Tier 2 and
all Tier 3 and Tier 4 telecommunications service providers (service providers
with less than $100 million in annual sales). Tier 2 and Tier 3 service
providers generate approximately 25% of all billing records, a market of $600
million. The Registrant believes such carriers are more likely to outsource
billing and customer care or traditionally have marginal and inefficient
customer care operations. TRG also could offer specific product applications to
ILECs and larger companies.
With the COMM Center's Wireless Local Loop capability, carriers such as
CLECs, IXCs and PCS providers can extend their local service area coverage
rapidly by providing wireline access deployment to offices and residences
without the necessity for substantial additional capital investments. WTC has
signed a letter of intent with a U.S. CLEC for a joint venture aimed at
utilizing the DATATRAK system to provide wireless local loop and automated meter
reading applications. The Registrant also believes that DATATRAK will appeal to
small and rural PCS operators needing additional "niche" PCS service offerings
in order to increase utilization of their services. Original Equipment
Manufacturers ("OEMs") also may wish to incorporate DATATRAK into products such
as PBX systems and vending machines. While utility and energy companies should
be the initial customers, the quick, low cost data gathering provided by
DATATRAK, COMM Center and the Optical Meter Reader will interest industries that
must monitor consumption of any commodity and periodically replenish that
commodity.
MARKETING AND SALES
Since its products and services are innovative and relatively unknown, the
Registrant must engage in considerable "missionary" work to create awareness of
its products and services. The Registrant will seek out telecommunications and
utilities service providers wishing to:
o add value to their existing services; o bundle services for additional
revenue opportunities; o enter new markets; and o increase their subscriber
bases.
The Registrant expects new entrants and smaller companies to have these
characteristics. While each subsidiary will have its own target markets, the
Registrant's portfolio of products and services will have significant overlap.
Such overlap offers opportunities for cross-selling. Consistent marketing and
communications programs should develop the concept of a "family" of products and
services.
The Registrant hopes to establish recognition by obtaining a few key
accounts and leverage that experience to attract new customers. In addition to
direct sales contacts, the Registrant anticipates that industry trade shows
(such as CTIA, PCSA `99, Billing World, CBTA, and Telephone Resellers
Association) could serve as a primary prospective customer contact point. The
Registrant also intends to develop strategic alliances with a few systems
integrators and OEMs, to act as indirect sales channels. Customers can either
license TRG's software for use in their own customer management operations or
hire TRG to perform the customer management services. For in-house licenses,
customers will pay an initial fee plus a recurring annual maintenance fee. When
performing customer management services, TRG anticipates charging a fee of 3%-5%
of the customer's annual revenue, which is generally lower than the customary
4%-6% fee for telecommunications billing services as described in Operations (p.
1 above). TRG is currently providing services to six customers and is
negotiating agreements for services with four additional customers.
WTC intends to use its wireless network and services as the showcase for
small market PCS equipment, service and service offerings for WTC's PCS services
and DATATRAK (especially the COMM Center and the Optical Meter Reader). The
facility has been designed to met the needs of Tier 3 and Tier 4 markets, to
show the scalability of the Registrant's infrastructure equipment and to
demonstrate the data gathering operations and services. The WTC PCS network will
demonstrate to potential customers how the DATATRAK system operates, the costs
for installing the equipment and the revenues from each service segment.
WTC will market DATATRAK through direct contact with PCS licensees. The
Registrant will participate in regional and national trade shows, conferences
and seminars, where WTC will provide demonstrations of its products using the
local wireless network. The Registrant expects to license DATATRAK to only one
operator or carrier in a market. The licensee will pay an equipment fee based on
the number of households in the licensed market or area, plus a commission on
revenue produced by the Registrant's products. WTC also will seek joint ventures
with CLECs, ILECs and IXCs. Such joint ventures would focus on Tier 1 and Tier 2
markets, while WTC conducts direct marketing to Tier 3 and Tier 4 markets. WTC
has executed a letter of intent with a CLEC for such a joint venture. As
DATATRAK and WLL applications become widely accepted, the Registrant will begin
to license its technology to manufacturers of PCS equipment, security systems,
and vending systems.
To obtain PCS subscribers in its license territory, WTC will offer several
attractive rate packages based on a monthly fixed fee. WTC's PCS offerings
include features not offered by cellular competitors that, in combination with
its rate plans, should create significant subscriber interest for WTC's PCS
services.
COMPETITION
The telecommunications services industry is highly competitive, rapidly
evolving and subject to constant technological change. In particular, there are
numerous companies offering wireless services and local exchange services, and
the Registrant expects competition to increase in the future. The Registrant
believes that existing competitors are likely to continue to expand their
service offerings to appeal to existing or potential customers of the
Registrant. Many of the Registrant's existing competitors have financial,
personnel and other resources, including brand name recognition, substantially
greater than that of the Registrant.
Billing Systems. There are more than 10 large billing system providers,
such as CBIS, Billing Concepts, LHSG, ITDS, USCS and Saville, all public
companies with sales in excess of $100 million. Other large billing systems
companies include privately-held Kenan Systems and EDS which has many other
non-billing activities. The Registrant also expects many small suppliers to
provide competition for TRG. The Registrant believes that there is no dominant
smaller system supplier.
Mobile, Personal and Wireless Communications Industry. Numerous carriers
offer wireless communications, presenting significant competition. Competition
for wireless service subscribers is based principally upon the services and
features offered, the technical quality of the wireless system, customer
service, system coverage, capacity and price. Such competition may increase to
the extent that licenses are transferred from smaller, stand-alone operators to
large, better capitalized and more experienced wireless communications operators
who may be able to offer subscribers certain network advantages similar to those
offered by the Registrant. WTC expects to face increased competition from
companies providing other communications technologies and services.
There may be up to six PCS licensees in each PCS market. The Registrant's
principal competitors in its PCS business are Sprint Spectrum and Western
Wireless Communications, Inc. as well as the two existing cellular providers in
its PCS markets Alliant Cellular and Cellular One. The Registrant also competes
with paging, dispatch and landline telephone service providers. One-way or
two-way paging or beeper services that feature voice messaging and data display
as well as tone only service may be adequate for potential subscribers who do
not need to speak to the caller. The FCC has licensed Specialized Mobile Radio
("SMR") dispatch system operators to construct digital mobile communications
systems on existing SMR frequencies, referred to as ESMR, in many areas
throughout the United States. When constructed, ESMR systems could be
competitive with the Registrant's wireless service but these systems probably
will not deploy rapidly in rural areas, and then most likely will initially
deploy along interstate highways. Similarly, several companies have announced
plans to design, construct, deploy and operate satellite-based
telecommunications systems worldwide. Continuing technological advances in
communications and FCC policies encourage development of new spectrum-based
technologies may result in new technologies that compete with the Registrant's
PCS systems.
Data Collection Systems and WLL. Immediate competition to DATATRAK comes
from existing utility meter reading companies that read utility meters manually
or use the control channel of cellular companies or 800 MHz radio systems.
Numerous carriers, for example AT&T, are attempting to deploy wireless local
loop technology.
REGULATION
The following summary of regulatory developments and legislation does not
purport to describe all present and proposed federal, state and local
regulations and legislation affecting the telecommunications industry. Other
existing federal, state and local legislation and regulations are currently the
subject of judicial proceedings, legislative hearings and administrative
proposals which could change, in varying degrees, the manner in which this
industry operates. Neither the outcome of these proceedings, nor their impact
upon the telecommunications industry or the Registrant, can be predicted at this
time. This section summarizes regulatory issues pertaining to the Registrant's
operation.
WTC's wireless telecommunications services are subject to significant
regulation. To the extent the Registrant's business strategy changes, the
Registrant could become subject to additional regulatory requirements. Pursuant
to the Communications Act of 1934, as amended (the "Communications Act")
including as amended by the Telecommunications Act of 1996, the FCC exercises
jurisdiction over all of WTC's facilities and services used to provide,
originate, or terminate interstate or international communications. Provision of
PCS and other wireless services requires radio frequency licenses from the FCC
or a contractual arrangement with a licensee. The provision of local exchange
service through wireless local loop may be subject to state regulation.
Approvals from state and local governments may be required to utilize public
rights-of-way necessary to install and to operate networks, transmission towers,
equipment, and other facilities. The FCC and numerous state agencies also impose
prior approval requirements on transfers of control of certificated carriers and
assignments of regulatory authorizations.
The Communications Act restricts foreign ownership of companies that
directly or indirectly hold radio frequency licenses. However, the FCC has
authority to approve certain levels of foreign ownership and recently has
approved substantial foreign ownership in PCS licenses when the public interest
is served. The Registrant has significant indirect foreign ownership and has
requested FCC approval of its current ownership. The Registrant anticipates that
the FCC will approve its indirect foreign ownership of WTC's radio licenses.
The FCC and state regulatory agencies generally retain the right to
sanction a carrier, impose forfeitures, mandate refunds or impose other
penalties in the event of regulatory non-compliance by a carrier. The
jurisdictional reach of federal, state and local regulatory authorities is
subject to continuous change, controversy and judicial review. The Registrant is
unable to predict the effect or outcome of such changes, controversy or judicial
review.
INTELLECTUAL PROPERTY RIGHTS
The Registrant believes its technologies provide a competitive advantage.
The Registrant has three pending patent applications for the DATATRAK and COMM
Center products. TRG owns all intellectual property rights in TRACCS and Intro
CCB systems. The Registrant will file additional patent applications and
amendments as it develops technologies and will use intellectual property
protections, such as patents, copyrights, trademarks, trade secrets and
non-disclosure agreements to protect its technologies and prevent competitors
from duplicating the Registrant's products. The Registrant believes that its
expertise in developing technology is of far greater importance than protecting
technological issues through patents, and it will rely upon beating its
competition with better technology. However, it will vigorously defend its
intellectual property rights as its success depends in part on its ability to
enforce intellectual property rights for its proprietary billing software
technology, both in the United States and in other countries.
Patents are "intellectual property" conferred by congressional legislation
and authorized by the U.S. Constitution. Utility patents are available for new,
useful and non-obvious process, methods, machines, manufactured articles,
compositions of matter or improvements of these items. U.S. patents are awarded
based upon a first-to-invent system, rather than a first-to-file system. When
more than one inventor seeks patent rights to the same invention, the method for
deciding who was the "first" to invent and therefore entitled to the patent
rights, is to identify the inventor that: (1) first formulated a definite and
permanent idea of the complete and operative invention (referred to as
"conception"); and (2) first "reduced the invention to practice." Reduction to
practice may be either constructive (i.e., filing a patent application) or
actual (i.e., building the invention).
Patent applications must be filed by the first and original inventor, and
the application must be filed either before or within one year after the date of
any commercial exploitation of the invention. The average time period from the
filing date of a patent application to issuance or abandonment is approximately
18 months although some applications have been pending for more than a decade.
Patent applications are usually kept strictly secret until the patent is allowed
to issue. After an application is filed, an examiner in the U.S. Patent and
Trademark Office ("PTO") reviews the application to determine whether the patent
constitutes a new, useful and non-obvious invention. Upon examination, the PTO
Examiner invariably objects or rejects the application, which requires the
applicant to provide responsive arguments and amendments to the application. If
the application is ultimately allowed, the Examiner will issue a Notice of
Allowance and a further government issue fee is then required. A short
description of the invention is published in the PTO Official Gazette when the
patent is officially issued.
Patents allow the holders to exclude others from making, using, or selling
the patented invention in the United States; the duration of utility patents is
17 years. The scope of protection provided under a patent is determined by the
breadth and width of the invention identified in the claims." Patent holder may
file suit in the federal district courts to enforce patents; as a defense to an
infringement action, a purported infringer may attack the patent's validity.
Infringement of a valid patent can result in injunctive relief, a monetary award
for up to three times the amount of damages, together with interest and costs,
and in exceptional cases, attorney fees.
LITIGATION
Neither the Registrant, WTC nor TRG are currently engaged in any legal
proceedings.
RISK FACTORS
Stockholders should consider carefully the risk factors set forth below as
well as the other information contained in this Current Report on Form 8-K when
evaluating the Registrant.
Developmental Stage of Business, Products and Services. As a result of a
1989 bankruptcy proceeding, the Registrant was an inactive shell that had no
material assets or liabilities and no ongoing business activities until the
completion of the RTO. In addition, the proposed products, services and
associated technology of TRG and WTC are still under development. For example,
WTC's Optical Meter Reader, DATATRAK systems and COMM Center have been operated
only in limited trials. TRG has only began marketing software and services in
the latter party of 1998. Thus, there is little information for evaluating the
Registrant's viability. The Registrant expects to incur significant operating
losses and to generate negative cash flows from research and development and
manufacturing activities during the completion of the initial development
period. There can be no assurances as to the Registrant's ultimate success.
New Business. Since the Registrant was inactive until completion of the RTO
and WTC and TRG (the "Subsidiaries") have had only limited operations, the
Registrant must be considered to be essentially a new business. Thus, the
Registrant will face the customary risks for a new business; availability of
capital; interest rates for debt financing; manufacturing products; rendering
services; management and administration; creating marketing strategies;
obtaining sales and employing experienced personnel.
Minimal Commercial Experience. To achieve profitable operations, the
Registrant must successfully develop, manufacture and market its products,
generate significant demand for its communications services and manage diverse
products and services. The Registrant has never operated on a consolidated
basis, while the Subsidiaries have little experience in developing
manufacturing, marketing and selling products or services. No assurance can be
given that the Registrant's development efforts will be successfully completed,
that the products can be successfully manufactured, or the products and services
will be successfully marketed or will achieve market acceptance. In addition,
TRG expects that services to affiliated companies will constitute approximately
40% of its revenue during the first year of operations; however, certain of
those affiliated companies have restrictions on related party transactions.
Moreover, while the Registrant's products and services are related, there can be
no assurance of the successful integration of the Subsidiaries. Consequently,
the Registrant projects operating losses for the foreseeable future. In
addition, the Registrant is subject to certain risk factors that may cause the
Registrant's plans to change. Factors that might cause such changes include, but
are not limited to; evolving technologies and markets; competitive developments;
ability to attract and retain motivated qualified persons; development of
technologies and strategies and commercialization of products incorporating such
technologies. The failure of the Registrant to generate significant customer
traffic, implement its products and related technology in a timely manner,
effectively manage customer services, or operate its business at a profit could
have a material adverse effect on the Registrant's business, operating results
and financial condition.
Need for Additional Funds and Negative Cash Flow. The development of the
Registrant's products and services will require significant capital in order to
complete prototype development, pre-production testing, continued research and
development and manufacture tooling. The Registrant will require substantial
capital to fully expand its operations, marketing, sales and distribution
network along with its product development. There can be no assurance that such
funds will be forthcoming, or, if provided, will be available on a timely basis
or on favorable terms, or that raising additional funds would not result in a
substantial additional dilution to existing stockholders. Furthermore, operating
expenses and capital expenditures will result in the Registrant incurring
negative cash flow until sufficient products and services are sold to cover the
cost of operations.
Management. The Registrant's Board and its management will operate and
manage the Registrant's business and the Stockholders will have no direct
control over the Registrant's business and operations. There can be no assurance
the Registrant will be managed profitably or efficiently. The success of the
Registrant will depend to a large extent upon the ability of management to hire
experienced and competent personnel to expand the market for the Registrant's
products and keep the Registrant profitable.
Forward Looking Information. Certain statements contained or incorporated
by reference in this Current Report on Form 8-K, including without limitation,
statements containing the words "believes," "anticipates," "expects" and words
of similar import, constitute "forward-looking statements." Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the
Registrant, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Certain of these factors are discussed in detail
below and elsewhere herein. Given these uncertainties, stockholders are
cautioned not to place undue reliance on such forward-looking statements.
Sales and Marketing. The Registrant has limited experience in this type of
sales, marketing or distribution. To market its products and services, the
Registrant must develop a substantial sales force with technical expertise.
Since the Registrant's products and services are relatively new and unproven,
demand is only speculative. There can be no assurance that actual demand will
arise for the Registrant's products and services. Moreover, the Registrant
currently does not have many existing contracts for the provision of its
products and services. There can be no assurance that the Registrant will be
able to build a sales force or that its sales and marketing efforts will be
successful.
Technological Uncertainty. The Registrant's business strategy relies upon
the DATATRAK systems and the COMM Center and demonstrating its viability through
its own and other wireless communications service offerings. Enhancements to
these products and to TRG's software are continually under development.
Unforeseen problems could emerge with respect to the products and software. The
limited testing and operation that have occurred do not necessarily prove the
viability or efficacy of the products and services when fully deployed or in a
situation with heavy telecommunications traffic. The telecommunications industry
is subject to rapid and significant changes in technology. There can be no
assurance that the Registrant will maintain competitive services or develop new
technologies on a timely basis or on satisfactory terms. Failure to maintain
competitive services or to develop new technologies could have a material
adverse effect on the Registrant's business, operating results and financial
condition or possibly even render stockholders' investments worthless.
Customers. The Registrant currently has few customers but believes that its
products and services can be marketed to a wide range of telecommunications
companies, such as PCS providers, ILECs, CLECs, IXCs and OEMs. Many of the
Registrant's likely customers could be new entrants or smaller companies, who
themselves face significant risks, especially competition from large established
companies, need for substantial additional capital and development of their own
businesses. Consequently, the Registrant may be dependent upon such companies
becoming successful. Larger industry participants, such as the Regional Bell
Operating Companies ("RBOCs"), have substantial embedded investment. As a class,
they have demonstrated a tendency to be risk averse and are distrustful of
change or technological innovation without cautious, time-consuming testing and
evaluation. They also tend to purchase from major hardware and software vendors
that they have utilized previously and with whom they have ongoing business
relationships. This phenomenon, sometimes referred to as "the inertia of capital
commitment" is a barrier to market acceptance of the Registrant's products and
services. Without some level of market acceptance, the probability of the
Registrant's long-term success is greatly diminished.
Patents and Proprietary Rights. The Registrant relies on a combination of
patent, copyright and trademark laws, and on trade secrets, confidentiality and
non-disclosure agreements and other contractual provisions to protect its
proprietary rights, which measures afford only limited protection. The
Registrant currently has several pending patent applications. There can be no
assurances that patents will be timely issued or that the Registrant's means of
protecting its proprietary rights in the United States or abroad will be
adequate or that competitors will not independently develop similar
technologies. The Registrant's future success will partly depend on its ability
to protect its proprietary rights to the technologies used in its principal
products. Despite the Registrant's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Registrant's products or
obtain and use information that the Registrant regards as proprietary. In
addition, the laws of some foreign countries do not protect proprietary rights
as fully as do the laws of the United States. There can be no assurance that any
issued patent will preserve the Registrant's proprietary position, or that
others will not be able to develop technologies similar to or superior to the
Registrant's technology. Failure of the Registrant to enforce and protect its
intellectual property rights could have a material adverse effect on the
Registrant's business, operating results and financial condition.
In the future, third parties, including competitors of the Registrant,
might assert patent, copyright and other intellectual property rights to
technologies that are important to the Registrant or that are relevant to
products that might be of interest to the Registrant. The Registrant also might
receive notices of claims of the intellectual property rights that such third
parties have obtained. The Registrant might be subject to infringement claims as
the number of products and competitors in the telecommunications industry grow
and the functionality of products overlap. Any infringement claim or other
litigation against or by the Registrant could materially adversely affect the
Registrant's business, operating results and financial condition.
Limited Intellectual Property Protections. The Registrant is still
obtaining copyrights, patents and other intellectual property protections. The
Registrant also must maintain intellectual property rights and trade secret
protection and must operate without infringing on the proprietary rights of
third parties. There can be no assurance that the Registrant can obtain such
intellectual property protections, that the Registrant will develop additional
proprietary products that will receive intellectual property protection, that
any intellectual property rights will provide the Registrant with any
competitive advantages or will not be challenged by any third parties, or that
the intellectual property rights of others will not adversely affect the
Registrant's ability to conduct business. Furthermore, there can be no assurance
that others will not independently develop similar products, duplicate any of
the Registrant's services, or, if intellectual property rights are issued to the
Registrant, design around those intellectual property rights. No assurance can
be given that any licenses the Registrant may be required to obtain to patents
or other proprietary rights of third parties would be made available on terms
acceptable to the Registrant. If the Registrant does not obtain such licenses,
it could encounter delays in market introductions while it attempts to design
around such intellectual property rights, or could find that the development,
manufacture or sale of products requiring such licenses could be foreclosed. In
addition, the Registrant could incur substantial costs in defending itself in
suits brought against the Registrant on such intellectual property rights or in
suits in which the Registrant's intellectual property rights may be asserted by
the Registrant against another party.
Intellectual Property Rights of Employees, Contractors and Consultants. The
Registrant has utilized employees, contractors and consultants in the
development of its products and received assignments of intellectual property
rights from such employees, consultants and contractors, and their respective
employees. Based on these assignments and the "work-for-hire" doctrine, the
Registrant should have full intellectual property rights in its products. There
can be no assurances, however, that such employees, contractors and consultants
and will not attempt to assert rights to the products.
Management of Growth. The Registrant's expected growth may place
significant strains on its management, staff, working capital and operating and
financial control systems. There can be no assurance that management, staff,
working capital and systems will be adequate to support the Registrant's future
anticipated growth. The failure to recruit qualified staff, to continue to
upgrade operating and financial control systems or to respond effectively to
difficulties encountered during expansion could have a material adverse effect
on the Registrant's business, financial condition and results of operations.
Competition. The telecommunications services industry is highly
competitive, rapidly evolving and subject to constant technological change. In
particular, there are numerous companies offering wireless services and local
exchange services, and the Registrant expects competition to increase in the
future. The Registrant believes that existing competitors are likely to continue
to expand their service offerings to appeal to existing or potential customers
of the Registrant. Many of the Registrant's existing competitors have financial,
personnel and other resources, including brand name recognition, substantially
greater than that of the Registrant. New competitors are likely to enter the
telecommunications market, some of whom may have financial, personnel and other
resources, including brand name recognition, substantially greater than that of
the Registrant. In addition, the telecommunications regulatory environment is
undergoing significant change. As this regulatory environment evolves, changes
could create greater or unique competitive advantages for all or some of the
Registrant's current or potential competitors, or could make it easier for
additional parties to provide services or products.
Regulation. Telecommunications services are subject to significant
regulation at the federal, state, local and international levels, affecting the
Registrant and its existing and potential competitors. Delays in receiving the
required regulatory approvals or the enactment of new and adverse legislation,
regulations or regulatory requirements may have a material adverse effect on the
Registrant's business, operating results and financial condition. In addition,
future legislative, judicial and regulatory agency actions could alter
competitive conditions in the markets where the Registrant intends to operate,
in ways disadvantageous to the Registrant.
The Registrant currently is subject to federal and state regulation of its
wireless communications services, local wireless loop services and may be
subject to regulation of any future services that are deemed local exchange
services. At the federal level, provision of PCS and other wireless services
requires radio frequency licenses from the FCC or a contractual arrangement with
a licensee. The Registrant must maintain tariffs containing the currently
effective rates, terms and conditions for those services. Although the FCC
eliminated the tariffing requirements for interstate non-dominant carriers, such
carriers must continue to file interstate tariffs until a federal court
completes reviewing such detariffing and declares that the detariffing order is
lawful. WTC will file interstate tariffs with the FCC and state tariffs with the
State of Nebraska and the states where the Registrant is certified to provide
wireless local exchange services. Intrastate services and local exchange
services are subject to various state laws and regulations, including
certification, notification, registration and tariffing requirements. The FCC
and numerous state agencies also impose prior approval requirements on transfers
of control of certificated carriers and assignments of regulatory
authorizations. States also often require prior approvals or notifications for
the issuance of stock, bonds or other forms of indebtedness. The FCC and state
regulatory agencies generally retain the right to sanction a carrier, impose
forfeitures, mandate refunds or impose other penalties in the event of
regulatory non-compliance by a carrier. There can be no assurance that future
regulatory, judicial or legislative activities will not have a material adverse
effect on the business, operating results and financial condition of the
Registrant or that domestic or international regulators or third parties will
not raise material issues with regard to the Registrant's compliance or
non-compliance with applicable laws and regulations.
Restrictions on the Registrant's Ownership or Operation of Radio Licenses.
WTC currently holds radio frequency licenses to provide PCS and other wireless
services including paging. The Communications Act imposes restrictions on
foreign ownership of companies holding radio frequency licenses. However, the
FCC has authority to approve certain levels of foreign ownership. A principal
stockholder of the Registrant is not a U.S. citizen, so the Registrant must
obtain FCC approval before acquiring WTC, and has made an application for FCC
consent to the transaction. Based on the FCC's current policies, Telemetrix
believes that the FCC will approve its acquisition of WTC. However, there can be
no assurance that the Reorganization will be acceptable to the FCC. If the FCC
does not approve Telemetrix's acquisition of WTC, WTC's licenses must be
transferred to a qualified owner before the Registrant could acquire WTC.
Dependence on Key Personnel. The Registrant must procure and retain
exceptional key personnel to achieve substantial, sustainable growth and
profitability. The Registrant's success depends to a significant degree upon the
continuing contributions of key management, sales, marketing, engineering and
product development personnel. The Registrant's business is currently managed by
a small number of key management and operating personnel. The Registrant
believes that its future success will depend in large part upon its ability to
attract and retain highly skilled managerial, sales, marketing and product
development personnel. The loss of the services of key personnel, or the
inability to attract, recruit and retain sufficient or additional qualified
personnel, could significantly impede the Registrant's ability to achieve its
financial, expansion, marketing and other objectives, with a corresponding
material adverse effect on the Registrant.
Concentration of Voting Power. Certain principal stockholders have a
substantial percentage of the total voting power. After completion of the WTC
acquisition, the Registrant's principal stockholders will hold, in the
aggregate, approximately 91% of the Registrant's Common Stock. As a result, the
principal stockholders, if they act together, could exercise control over the
Registrant's business, policies and affairs, and would have the power to approve
or disapprove all actions requiring Stockholder approval, including amendments
to the Certificate of Incorporation and Bylaws, purchases and sales of
properties, and removal of management.
Limited Market for the Securities. While the Registrant's Common Stock is
quoted on the NASD's Over-The-Counter Bulletin Board ("OTC-BB"), there currently
is a very limited market for the resale of the Common Stock and the Registrant's
Common Stock has not traded actively since the late 1980s. Therefore, the
Registrant's existing stockholders might be unable to sell or to otherwise
dispose of all or any portion of their shares of Common Stock. In the future,
the Registrant will apply for listing on the Nasdaq or other national securities
exchanges. There can be no assurance that the Registrant's Common Stock will
qualify for listing on the Nasdaq or any securities exchange or that any trading
market that does develop will be active or sustained. The lack of an exchange
listing will prevent access to larger public trading markets with a possible
corresponding loss of appeal to private markets, thereby reducing the liquidity
of the Registrant's Common Stock.
Absence of Dividends on Common Stock. The Registrant intends to retain any
future earnings to finance the development and expansion of its business. The
Registrant therefore does not anticipate paying any dividends on its Common
Stock in the foreseeable future.
Indemnification of Management. The Registrant's Certificate of
Incorporation and By-laws are intended to take full advantage of the enabling
provisions of the General Corporation Law of the State of Delaware ("GCLD") with
respect to limiting the personal liability of its officers, directors, employees
and agents. The Certificate of Incorporation and By-laws provide that the
Registrant may indemnify current and former directors, officers, employees and
agents, and persons serving in similar capacities in the subsidiaries or other
entities in which the Registrant has an interest to the fullest extent permitted
by the GCLD. Thus, the Registrant may be prevented from recovering damages for
certain alleged errors or omissions by the officers and directors of the
Registrant. Under the Registrant's By-laws, indemnification payments may only be
made upon a determination that the indemnified person acted in good faith and in
a manner such person reasonably believed to be in, or not opposed to, the best
interests of the Registrant and, with respect to a criminal proceeding, had no
reasonable cause to believe such conduct was unlawful. Such determination shall
be made (i) by a majority of the disinterested members of the Board of
Directors, (ii) by independent legal counsel in a written opinion, or (iii) by
the stockholders. It is the position of the SEC that exculpation from and
indemnification for liabilities arising under the Act and the rules and
regulations thereunder is against public policy and therefore unenforceable.
Year 2000 Incompatibility. The term "Year 2000 Issue" generally describes
the various problems that might result from improper processing of dates and
date-sensitive calculations involving dates in the Year 2000 and beyond. The
"Year 2000 Issue" results from computer programs using two digits rather than
four digits to define the applicable year, so that all dates are interpreted as
being between 1900 and 1999. Computers and other equipment using such programs
will incorrectly interpret dates after the year 1999. Such misinterpretation
might cause system failures or miscalculations and thereby disrupt operations,
for example, temporary inability to process transactions, to send invoices, or
to engage in similar normal business activities. The Registrant believes that
its computer systems, products and services are Year 2000 compatible; however,
the Registrant has not yet fully assessed the Year 2000 compatibility of all its
equipment, products and services, or of third parties with whom the Registrant
transacts business. The Registrant believes that adequate resources have been
allocated for the purpose of evaluating its Year 2000 compatibility and does not
expect to incur significant expenditures to address this issue. However, there
can be no assurance that the Registrant will identify all Year 2000 problems in
its systems in advance of their occurrence or that the Registrant can
successfully remedy any problems that are discovered. The expenses of the
Registrant's efforts to address such problems, or the expenses or liabilities to
which the Registrant may become subject as a result of such problems, could
materially adversely affect the Registrant's business, prospects, operating
results, financial condition and its ability to service and repay indebtedness.
In addition, the revenue stream and financial stability of existing customers
may be adversely impacted by Year 2000 problems, which could cause fluctuations
in the Registrant's revenues and operating profitability.
MANAGEMENT
The business affairs of the Registrant are managed by a Board of Directors,
which presently consists of one member, Ms. Sally A. Fonner. Effective at 8:00
a.m., Denver Time, on April 25, 1999, Ms. Fonner will resign her position as the
Registrant's sole director and appoint a successor Board consisting of four New
Directors nominated by the former stockholders of TRG and WTC.
The day to day business affairs of the Registrant are entrusted to its
executive officers. The officers, who are appointed by the Board, hold office
for the periods specified in their respective employment agreements. In
connection with the RTO, the former stockholders of TRG and WTC have nominated a
slate of four New Directors who will assume their positions on April 25, 1999.
Immediately thereafter, the newly constituted Board will nominate certain
officers to manage the affairs of the Registrant. The nominees of the former
stockholders of TRG and WTC, and the positions to be held by each such nominee
are set forth below. After their appointment, it is anticipated that the newly
appointed directors and officers of the Registrant will continue to serve in
such capacities for the foreseeable future.
Name Age Positions
William W. Becker................... 70 Chairman of the Board
Oz Pedde............................ 57 Chief Executive Officer &
Director
Michael J. Tracy.................... 53 President, Treasurer &
Director
Michael L. Glaser................... 59 Secretary & Director
William W. Becker, Chairman of the Board. Mr. Becker is the authorized
representative of HHL and also serves as Chairman of TeleHub Communications
Corporation, a telecommunications services provider, and SkyConnect Inc., a
Colorado-based cable services firm. He has been active in the industry for a
number of years, most recently as an initial investor and developer of IntelCom
Group Inc. (now known as ICG Communications, Inc.), an American Stock
Exchange-listed competitive access provider. Mr. Becker has founded and controls
a number of companies involved in telecommunications, cable TV, oil and gas,
real estate development, and other industries.
Oz (Oswald) Pedde, Chief Executive Officer and Director. Mr. Pedde became
associated with Telecommunications Resource Group Inc. in October 1998. He
previously was President and CEO of Watson & Associates, a Toronto based
telecommunications service and consulting firm from January 1998 to October
1998. From 1995 to 1998, Mr. Pedde was self-employed as a consultant. From 1991
to 1995, Mr. Pedde was President and CEO of Manitoba Telephone Systems, a
diversified Canadian telecommunications company and was one of the founding
members of the Council of CEOs that created the "Stentor Alliance," an
association of Canada's major telephone companies. During such period, Mr. Pedde
was also a director of Telesat, Canada's satellite carrier. Mr. Pedde also has
been as a director of TeleHub Communications Corporation (an affiliate of HHL)
since March 1998.
Michael J. Tracy, President, Treasurer & Director. Mr. Tracy currently is
President of Tracy Broadcasting Corporation, licensee of KMOR, KOAQ and KOLT
AM/FM radio in Scottsbluff, Nebraska. He is also President of Tracy II, Western
Total Communications (WTC). Mr. Tracy's professional career began in 1969, as
Director of Instrumental Music with a Nebraska secondary school. A year later he
became Vice President of City and Country Insurance company. He started Tracy
Broadcasting Corporation in 1976 and in 1982, developed Western Total
Communications (WTC), a paging, PCS and mobile telephone company. His years of
experience with WTC led to the development of the DATATRAK system, a unique
package of communications services for home and business that includes Wireless
Local Loop, utility meter reading, alarm monitoring, appliance control and much
more. Mr. Tracy has been a member of several civic and professional boards, as
well as a lecturer for the University of Nebraska.
Michael L. Glaser, Vice President, Secretary & Director. Mr. Glaser has
over thirty years legal and regulatory experience in the telecommunications
field. Mr. Glaser currently is a stockholder of Haligman Lottner Rubin &
Fishman, P.C., the Registrant's legal counsel in Denver, Colorado, which he
joined in January 1996. Previously, Mr. Glaser was a director and stockholder
of Hopper and Kanouff, P.C., from July 1992 to January 1996, and a partner at
Holme Roberts & Owen from July 1990 through June 1992. Mr. Glaser serves as
Co-Chairman of the Telecommunications Law Forum of the Colorado Bar
Association, and is licensed to practice in Colorado, Maryland and the
District of Columbia. Mr. Glaser received both his undergraduate degree and
law degree (with honors) from the George Washington University.
The Board currently does not have any committees; after the appointment of
the New Directors, the Board intends to form an Audit Committee and a
Compensation Committee. The Audit Committee will review the services provided by
the Registrant's independent accountants, consult with the independent
accountants on audits and proposed audits of the Registrant and review certain
filings with the SEC and the need for internal auditing procedures and the
adequacy of internal controls. The Compensation Committee will determine
executive compensation and review transactions between the Registrant and its
affiliates, including any associates of affiliates.
Executive Compensation
Compensation of Executive Officers and Directors. No officer or director of
the Registrant has received any cash compensation for services performed during
the four years prior to the RTO. In connection with the plan of reorganization
approved by the Company's stockholders, certain persons designated by Capston
received 300,000 shares of Common Stock for administrative and management
services. Ms. Fonner, the Registrant's former sole officer and director,
received 110,500 of those shares for her personal account. The Registrant's new
directors and officers (who are also the principal stockholders) initially will
not receive any compensation. After the Registrant formulates and begins
implementing its business plans, the Board of Directors' Compensation Committee
will address executive and director compensation.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions. During 1998, the Board did not have a Compensation Committee; the
Board has the responsibility to review all Executive Officer compensation
issues. The current Board will establish a Compensation Committee to adopt
executive compensation policies.
Executive Employment Contracts. There are no employment agreements
between the Registrant and any of its current or former officers.
Certain Transactions. TeleHub Communications Corporation ("TeleHub"), an
affiliate of HHL, recently hired TRG to provide billing processing and
consulting services. TRG billed TeleHub approximately $458,000 for these
services during 1998, and TRG continues to provide such services during 1999.
Additionally, in February 1999, TRG entered into a letter of intent to sell
TeleHub a license for the TRG billing software license for approximately $2.5
million. In March 1999, TeleHub advanced $250,000 to TRG, which represents 10%
of the software license fee. This advance is refundable, less outstanding fees
for any services rendered.
Michael J. Tracy ("Tracy") owns the building in Gering, Nebraska from which
WTC conducts its operations. WTC pays Tracy a monthly rental rate of $2,500. The
terms and conditions of the rental arrangement are market conditions.
Item 4.
CHANGES IN THE REGISTRANT'S CERTIFYING ACCOUNTANT.
The financial statements of the Registrant. for the years ended December
31, 1998 and 1997 were audited by the firm of Want & Ender, Certified Public
Accountants. In connection with the acquisition of TRG and WTC, the firm of Fred
A. Lockwood & Company, Certified Public Accountant, was retained to audit the
financial statements of WTC as of December 31, 1998 and their related statements
of income, cash flows and shareholders equity for the year then ended, and the
Company is currently negotiating a retainer with BDO Seidman, LLP, in Denver,
Colorado, with respect to the audit of TRG's financial statements as of December
31, 1998 and their related statements of income, cash flows and shareholders
equity for the year then ended. During the fiscal years ended December 31, 1998
and 1997, and the subsequent interim periods preceding the appointment of the
foregoing, there were no reportable disagreements between the Registrant and the
firm of Want & Ender, Certified Public Accountants, on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
Item 5.
OTHER EVENTS
Based on a resolution approved by the affirmative vote of a majority in
interest of its stockholders, the Registrant changed its name from Arnox
Corporation to Telemetrix Inc. on March 31, 1999.
Item 6.
RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS.
No director has resigned or declined to stand for re-election to the Board
of Directors since the date of the last annual meeting of stockholders because
of any disagreement with the Registrant on any matter relating to the
Registrant's operations, policies or practices.
As a condition of the RTO, Ms. Fonner agreed to resign as the Company's
sole director and appoint four New Directors nominated by the stockholders of
TRG and WTC. The New Directors will not assume office, until 10 days after the
Company mails the Notice required by SEC Rule 14(f)-1 to all record
stockholders. At that time, Ms. Fonner will appoint a successor Board consisting
of four New Directors and resign from the Board. Thereafter, the New Directors
and the executive officers they appoint will manage the Company's business.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
(i) Financial Statements for Telemetrix Resource Group, Inc., a
Colorado corporation.
TRG recently completed its fiscal year and is in the process of
preparing audited financial statements for the periods specified in
Item 310(c) of Regulation S-B. Consequently, it is impracticable to
provide the required financial statements for TRG with this filing. The
Registrant expects to file the required audited financial statements
for TRG under cover of Form 8 within 60 days after this Current Report
was filed.
(ii) Financial Statements for Tracy II Corporation, a Nebraska corporation.
WTC recently completed its fiscal year and is in the process of
preparing audited financial statements for the periods specified in
Item 310(c) of Regulation S-B. Consequently, it is impracticable to
provide the required financial statements for WTC with this filing. The
Registrant expects to file the required audited financial statements
for WTC under cover of Form 8 within 60 days after this Current Report
was filed.
(b) Pro forma financial information.
While the Registrant has commenced the preparation of pro forma
financial statements for the periods specified in Item 310(d) of
Regulation S-B, the financial statements from which the pro forma
financial statements will be derived are currently undergoing audit and
are not expected to be completed until mid-June. This Current Report on
Form 8-K will be amended to provide the pro-forma financial statements
required by Item 310(d) of Regulation S-B within the prescribed period
of time.
(c) Exhibits.
(2.1) Reorganization Agreement, dated March 22, 1999, between and among the
Registrant, TRG, WTC and the stockholders of TRG and WTC
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.
TELEMETRIX INC., a Delaware corporation
(formerly known as Arnox Corporation)
April 14, 1999
By: /s/
Sally A. Fonner, Chief Executive Officer
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1 The U.S. PCS markets have been divided into Basic Trading Areas ("BTAs") as
defined by Rand-McNally and then sorted by size and segmented into four tiers.
These tiers are defined by total population as: - Tier 1 - Top 10 BTAs by
population - Population = 74,444,000 - Tier 2 - Next 40 BTAs by population -
Population = 72,140,000 - Tier 3 - Next 100 BTAs by population - Population =
55,584,000 - Tier 4 - Rest of U.S. markets - Population = 50,366,000
