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Commission File Number
SECURITIES AND EXCHANGE COMMISSION 0-27658
Washington, D.C. 20549 -------
CUSIP Number
FORM 12b-25 739905 10 7
NOTIFICATION OF LATE FILING
(Check One) [X]Form 10-K and Form 10-KSB [ ]Form 20-F [ ]Form 11-K
[ ]Form 10-Q and Form 10-QSB [ ]Form N-SAR
For Period Ended: 12/31/96
[ ] Transition Report on Form 10-K
[ ] Transition Report on Form 20-F
[ ] Transition Report on Form 11-K
[ ] Transition Report on Form 10-Q
[ ] Transition Report on Form N-SAR
For the Transition Period Ended:
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READ ATTACHED INSTRUCTION SHEET BEFORE PREPARING FORM. PLEASE PRINT OR TYPE
Nothing in this form shall be construed to imply that the Commission has
verified any information contained herein.
If the notification relates to a portion of the filing checked above,
identify the Item(s) to which the notification relates:
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PART I - REGISTRANT INFORMATION
Preferred Networks, Inc.
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Full Name of Registrant
Not Applicable
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Former Name if Applicable
850 Center Way
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Address of Principal Executive Office
Norcross, Georgia 30071
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City, State and Zip Code
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PART II -
RULES 12b-25(b) and (c)
If the subject report could not be filed without unreasonable effort or expense
and the registrant seeks relief pursuant to Rule 12b-25(b), the following
should be completed. (Check the appropriate box)
[X] (a) The reasons described in reasonable detail in Part III of this
form could not be eliminated without unreasonable effort or
expense;
[X] (b) The subject annual report, semi-annual report, transition
report on Form 10-K, Form 20-F, 11-K or Form N-SAR, or portion
thereof, will be filed on or before the fifteenth calendar day
following the prescribed due date; or the subject quarterly
report or transition report on Form 10-Q, or portion thereof,
will be filed on or before the fifth calendar day following
the prescribed due date; and
[ ] (c) The accountant's statement or other exhibit required by Rule
12b-25(c) has been attached if applicable.
PART III
NARRATIVE
State below in reasonable detail the reasons why the Form 10-K and Form 10-KSB,
11-K, 20-F, 10-Q and Form 10-Q-SB, N-SAR or the transition report or portion
thereof could not be filed within the prescribed time period. (Attach Extra
Sheets if Needed)
The registrant is engaged in negotiations with its primary lender and
certain of its shareholders regarding a covenant in its existing loan
agreement that requires the registrant to raise at least $20 million in
additional subordinated debt or equity by July 1, 1997. In connection
with such negotiations, the registrant is seeking to obtain an amendment of
the covenant from the lender and to raise the amount of capital then
required by the covenant and its projected operational needs from certain
of its shareholders. Because the attention of the registrant's officers
and employees has been diverted to the negotiations and to the preparation
of financial and other information required by the lender and the
shareholders, the registrant is unable, without unreasonable effort or
expense, to complete and file its annual report on Form 10-K by March 31,
1997, the prescribed deadline for filing. In addition, because the
registrant intends to file its Form 10-K promptly after agreements are
reached, the registrant may file its Form 10-K with information materially
different from the information now applicable. The independent auditors'
report may also be significantly different from the report that will be
given upon conclusion of the negotiations, which would be misleading under
the circumstances. The delay in filing will allow the registrant to
resolve its negotiations and/or cause its officers and employees to provide
complete and appropriate disclosures in its Form 10-K.
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PART IV
OTHER INFORMATION
(1) Name and telephone number of person to contact in regard to this
notification:
Kim Smith Hughes 770 582-3566
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(Name) (Area Code) (Telephone Number)
(2) Have all other periodic reports required under Section 13 or 15(d) of
the Securities Exchange Act of 1934 or Section 30 of the Investment
Company Act of 1940 during the preceding 12 months or for such shorter
period that the registrant was required to file such report(s) been
filed? If the answer is no, identify report(s).
[X] Yes [ ] No
(3) Is it anticipated that any significant change in results of operations
from the corresponding period for the last fiscal year will be
reflected by the earnings statements to be included in the subject
report or portion thereof? [X] Yes [ ] No
If so: attach an explanation of the anticipated change, both
narratively and quantitatively, and, if appropriate, state the reasons
why a reasonable estimate of the results cannot be made:
See Attachment
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PREFERRED NETWORKS, INC.
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(Name of Registrant as Specified in Charter)
has caused this notification to be signed on its behalf by the undersigned
hereunto duly authorized.
Date March 26, 1997 By: /s/ Kim Smith Hughes
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Chief Financial
Officer
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PREFERRED NETWORKS, INC.
NEWS RELEASE
FOR MORE INFORMATION CONTACT:
Mary Ann Haskins
770/582-3507 February 19, 1997
PREFERRED NETWORKS REPORTS 1996 RESULTS
FOURTH QUARTER REVENUES INCREASE 127%
ATLANTA . . . February 19, 1997 -- Nasdaq: PFNT -- Preferred Networks, Inc.
(PNI), a leading provider of outsourcing services and network operations for the
wireless industry, today announced results for the fourth quarter and year ended
December 31, 1996.
Total revenues for the fourth quarter of 1996 increased 127% to $5.4
million from $2.4 million for the fourth quarter of 1995. EBITDA (earnings
before interest, taxes, depreciation and amortization), a standard measure of
operating cash flow in the wireless industry, was negative $3.8 million for the
quarter compared with negative $948,000 for the prior-year period. The net loss
for the quarter was $4.7 million, or $0.32 per share, compared with a loss of
$1.2 million, or $0.23 per share, for the fourth quarter of 1995.
For the year ended December 31, 1996, total revenues increased 82% to a
record $13.4 million from $7.4 million for 1995. 1996 EBITDA was negative $8.6
million compared with a negative $2.2 million for 1995. The net loss for 1996
was $10.2 million, or $0.79 per share, compared with a loss of $2.9 million, or
$0.48 per share, for 1995.
At December 31, 1996, PNI had five of its planned ten Technical Control
Centers (TCCs) in operation with three under construction. At year-end, the
Company had networks in operation in 21 markets with networks under construction
in an additional 28 markets. There were 362,481 units in service or under agency
agreement at year-end, a 136% increase from 153,901 units in service at year-end
1995.
Commenting on the results, Chairman and Chief Executive Officer Mark
Dunaway said, "In 1996, we made great progress toward building networks
nationwide utilizing the 157.740 MHz channel, and broadened the scope of our
carrier's carrier strategy from being purely an operator of wholesale one-way
paging networks to providing outsourcing services for the wireless industry,
including engineering and maintenance of networks and systems equipment, and
repair and fulfillment services for paging and cellular companies.
"The strong growth in revenues for both the fourth quarter and year
reflects, among other things, the continued expansion of our networks into key
new markets, a ramp-up of service in existing markets and the contribution of
Preferred Technical Services and EPS Wireless. As expected, we reported negative
EBITDA and a net loss for the year, reflecting, among other things, the
significant investment we are making in networks, systems and personnel to
complete the build-out of our networks nationwide and TCCs."
Strategic acquisitions in 1996 included:
-- more --
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PFNT Reports 1996 Results
February 19, 1997
Page 2
- Paging Services Inc. (now Preferred Technical Services, Inc. -- "PTS"),
which expanded PNI's services to include repair, maintenance,
installation services, and equipment sales to paging and PCS carriers.
- Big Apple Paging Corporation, which increased PNI's presence in New York,
New Jersey, and Connecticut.
- Mercury Paging & Communications, Inc., a carrier in the New Jersey, New
York, and Southern Connecticut markets. (The definitive agreement was
executed in September 1996, and the acquisition closed in early 1997.)
- EPS Wireless Inc., which expanded PNI's capabilities to offer wireless
product repairs, sales of new and refurbished paging and cellular
products, inventory management, and product fulfillment.
Other significant events in 1996 included:
- Significant increases in our credit facilities to be used primarily for
financing paging network acquisitions and capital expenditures.
- Addition of an industry-renowned director to our board, John J. "Jack"
Hurley, Vice Chairman of Glenayre Technologies, Inc.
"With the expansion of our core business and the strategic alliances that
we have developed, such as with Teletouch and Metrocall, we are creating a truly
unique organization to serve the wireless industry and provide added value to
our customers. In 1997, we expect to see the incremental benefit of PTS and EPS
to our core network business. We also expect continued growth in units in
service as we ramp-up services on our existing network and complete the
build-out of our 157.740 MHz network nationwide."
Preferred Networks, Inc., headquartered in metropolitan Atlanta, provides
outsourcing solutions to the wireless industry which allow companies to offer
branded wireless services directly to subscribers, while relying on PNI to
provide high-quality network, technical, and product services. PNI offers its
services through its wholesale paging networks as one of the largest carrier's
carriers, and through its wholly-owned subsidiaries: Preferred Technical
Services, which provides paging network equipment installation, maintenance and
engineering services; and EPS Wireless, which is one of the five largest repair
facilities providing paging and cellular product repair, sales, and fulfillment
services. PNI's address on the World Wide Web is: http://www.pni.net.
-- more --
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PFNT Reports 1996 Results
February 19, 1997
Page 3
PREFERRED NETWORKS, INC.
FINANCIAL HIGHLIGHTS
(UNAUDITED)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Revenues
Pager airtime............................... $ 1,823 $ 1,173 $ 6,121 $ 3,549
Pager sales................................. 2,493 1,123 5,818 3,651
Maintenance and other....................... 1,035 60 1,412 153
----------- ---------- ----------- ----------
Total Revenues........................... 5,351 2,356 13,351 7,353
Cost of revenues
Pager airtime............................... 1,723 616 4,621 1,768
Pager sales................................. 4,009 1,363 8,329 4,558
Other....................................... 542 -- 663 --
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(923) 377 (262) 1,027
Selling, general and administrative........... 2,876 1,325 8,338 3,180
Depreciation and amortization................. 1,081 275 2,479 763
----------- ---------- ----------- ----------
Operating loss.............................. (4,880) (1,223) (11,079) (2,916)
Interest expense.............................. 48 85 242 317
Interest income............................... 215 143 1,122 363
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Net loss...................................... $ (4,713) $ (1,165) $ (10,199) $ (2,870)
=========== ========== =========== ==========
Historical net loss per share of common
stock....................................... $ (0.32) $ (0.23) $ (0.79) $ (0.48)
=========== ========== =========== ==========
Weighted average common shares outstanding
used in calculating historical net loss per
share....................................... 14,818,573 9,158,397 13,643,474 9,158,406
EBITDA*....................................... $ (3,799) $ (948) $ (8,600) $ (2,153)
</TABLE>
* Earnings before interest, taxes, depreciation and amortization
-- more --
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PFNT Reports 1996 Results
February 19, 1997
Page 4
PREFERRED NETWORKS, INC.
STATISTICAL HIGHLIGHTS
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
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<S> <C> <C>
Technical Control Centers:
In operation.............................................. 5 2
Under construction........................................ 3 2
Markets:
In service................................................ 21 12
Under construction........................................ 28 8
Units in Service:
Reseller units............................................ 186,482 129,983
Co-location/interconnection units......................... 89,236 23,918
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Total units in service................................. 275,718 153,901
Under agency agreement.................................... 86,763 --
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Total.................................................. 362,481 153,901
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Average Revenue Per Unit.................................... $ 2.48 $ 2.94
</TABLE>
