<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 19, 1997.
REGISTRATION NO. 333-21027
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
______________________
SPECIALTY TELECONSTRUCTORS, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
NEVADA 1623 85-0421409
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
12001 HWY 14 NORTH
CEDAR CREST, NEW MEXICO 87008
(505)281-2197
(Address and telephone number of principal executive offices and principal place
of business)
______________________
MICHAEL R. BUDAGHER
CHIEF EXECUTIVE OFFICER
12001 HWY 14 NORTH
CEDAR CREST, NEW MEXICO 87008
(505)281-2197
(Name, address and telephone number of agent for service)
______________________
COPIES TO:
JEFFREY A. HOWARD, ESQ.
JORDAAN, HOWARD & PENNINGTON, PLLC
300 CRESCENT COURT, SUITE 1670
DALLAS, TEXAS 75201
(214) 871-6550
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the date this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [_]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
______________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
================================================================================
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
50,000 UNITS,
CONSISTING OF 100,000 SHARES OF COMMON STOCK AND
50,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
-----------
550,000 SHARES OF COMMON STOCK
UNDERLYING REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This Prospectus relates to the offering by Specialty Teleconstructors, Inc.
("Specialty" or the "Company") of (i) 50,000 Units, each Unit consisting of two
(2) shares of Common Stock, $.01 par value per share ("Common Stock") and one
(1) Redeemable Common Stock Purchase Warrant ("Warrant"), underlying unit
purchase warrants ("Underwriters' Warrants") issued to certain Underwriters (the
"Representatives") in connection with the Company's November, 1994 initial
public offering (the "IPO"), (ii) 50,000 shares of Common Stock underlying the
50,000 Warrants included in the Units underlying the Underwriters' Warrants and
(iii) 500,000 shares of Common Stock underlying the 500,000 Warrants included in
the 500,000 Units sold to the public in the IPO. Each Underwriters' Warrant
entitles the holder thereof to purchase one (1) Unit at an exercise price of
$12.15 per Unit until November 3, 1999. Each Warrant entitles the holder
thereof to purchase one (1) share of Common Stock at an exercise price of $6.00
per share until November 3, 1999. Prior to November 3, 1999, the Company may, at
its option, redeem all the Warrants then outstanding, at a redemption price of
$.05 per Warrant, if the closing sales price of the Common Stock as reported by
the Pacific Stock Exchange or other national trading market on which the Common
Stock may then be listed has equaled or exceeded $9.00 per share for ten (10)
consecutive trading days (the "Target Price"). The price of the Common Stock has
exceeded the Target Price. Warrants included in the Units underlying the
Underwriters' Warrants are not subject to redemption by the Company prior to
exercise of the Underwriters' Warrants. As of the date of this Prospectus no
Underwriters' Warrants or Warrants had been exercised and 500,000 Warrants (the
"Warrants Called for Redemption") were outstanding.
The Company has caused a notice of redemption to be sent to the holders of the
Warrants Called for Redemption and set the date for redemption thereof on
March 26, 1997 (the "Redemption Date"). All holders of Warrants Called for
Redemption have the right to exercise their Warrants Called for Redemption until
5:00 p.m. New York City time on the March 25, 1997, the last business day
preceding the Redemption Date. Warrants Called for Redemption may be exercised
by surrendering, at the corporate office of American Stock Transfer & Trust
Company (the "Warrant Agent") at 40 Wall Street, New York, New York 10005, the
Warrant Certificate evidencing such Warrants Called for Redemption together with
a subscription in the form set forth on the reverse side of the Warrant
Certificate, duly executed, and accompanied by the tender, in U.S. dollars, of
either federal funds or a certified check or bank cashier's check, payable to
the order of the Warrant Agent for the applicable exercise price for the
Warrants Called for Redemption. Any Warrants Called for Redemption not so
exercised will be redeemed for $.05 per Warrant Called for Redemption after the
Redemption Date. Upon exercise of the Underwriters' Warrants, the Company
intends to notify the holders of the Warrants included in the Units underlying
the Underwriters' Warrants so exercised of the Company's intention to redeem
such Warrants as soon as practicable.
The Common Stock is traded on the Nasdaq National Market System ("Nasdaq/NMS")
under the symbol "SCTR" and on the Pacific Stock Exchange under the symbol
"SPP." On February 13, 1997, the closing sale price of the Common Stock as
reported by Nasdaq/NMS was $14.375 per share.
-----
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION AND ARE SUITABLE ONLY FOR PERSONS WHO
CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE INFORMATION SET FORTH HEREIN UNDER "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================
PRICE TO UNDERWRITING
PUBLIC DISCOUNTS AND PROCEEDS TO
COMMISSIONS (1) COMPANY (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit ....................... $12.15 $0 $12.15
- --------------------------------------------------------------------------------
Per Share ...................... $ 6.00 $0.42 $ 5.58
- --------------------------------------------------------------------------------
Total(3) ....................... $3,907,500 $210,000 $3,697,500
================================================================================
</TABLE>
(1) The Company has agreed to pay a fee equal to seven percent (7%) of the
exercise price of the Warrants Called for Redemption to H.J. Meyers & Co., Inc.
if certain conditions are met. See "PLAN OF DISTRIBUTION."
(2) Before deducting expenses of this offering payable by the Company, estimated
at $70,000.
(3) Assumes exercise of all (i) the Underwriters' Warrants, (ii) the Warrants
included in the Units underlying the Underwriters' Warrants and (iii) the
Warrants Called for Redemption, although there can be no assurance that all such
securities will be exercised.
It is expected that delivery of the certificates representing the securities
offered hereby will be made against payment therefor on or about the Redemption
Date.
The date of this Prospectus is February 20, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information may be inspected, without
charge, and copies may be obtained, at prescribed rates, at the public reference
facilities of the Commission maintained at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at 7 World
Trade Center, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such reports and other information may also
be obtained by mail at prescribed rates, from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a site on the World Wide Web at http://www.sec.gov that contains
reports, proxy and other information statements regarding registrants that file
electronically with the Commission.
No person has been authorized to give any information or to make any
representations in connection with the offering described herein other than
those contained in this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities offered hereby by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to
anyone to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein contained is
correct as of any time subsequent to the date of this Prospectus.
The Company has filed with the Commission a Registration Statement on Form SB-2
(as amended from time to time and together with all exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the securities offered hereby. This
Prospectus constitutes a part of the Registration Statement and does not contain
all the information set forth in the Registration Statement, certain parts of
which have been omitted as permitted by the rules of the Commission. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete and, where such
contract or other document is an exhibit to the Registration Statement, each
such statement is qualified in all respects by the provisions of such exhibit,
to which reference is hereby made for a full statement of the provisions
thereof. For further information pertaining to the Company and the securities
offered hereby, reference is made to the Registration Statement.
The Registration Statement may be inspected, without charge, and copies may be
obtained, at prescribed rates, at the public reference facilities of the
Commission maintained at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices at 7 World Trade Center, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of the Registration Statement may also be obtained by mail at
prescribed rates, from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549.
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the more
detailed information and Consolidated Financial Statements and notes thereto
appearing elsewhere in this Prospectus. Unless the context otherwise requires,
the terms "Specialty" and the "Company" refer to Specialty Teleconstructors,
Inc., a Nevada corporation, and its consolidated subsidiaries, including
Specialty Constructors, Inc., a New Mexico corporation, Specialty Combined
Resources, Inc., a Texas corporation, Specialty Management, Inc., a Nevada
corporation Specialty Fortress, a Nevada corporation, Specialty Acquisitions,
Inc., a Nevada corporation, Specialty Training, Inc., a Nevada corporation and
Specialty Financial, Inc., a Nevada corporation. The securities offered hereby
are highly speculative and involve a high degree of risk and immediate
substantial dilution and are suitable only for persons who can afford the loss
of their entire investment. Prospective investors should carefully consider the
information set forth herein under "RISK FACTORS."
THE COMPANY
GENERAL
The Company designs, builds, installs, modifies and maintains (collectively,
"wireless infrastructure building and implementation services") wireless
communications transmitting and receiving facilities primarily for providers of
wireless communications services. In addition, the Company (i) provides
electrical design, engineering, and testing services (collectively, "wireless
infrastructure electrical design and engineering services") and site acquisition
and evaluation services ("site acquisition services") in connection with the
installation and location of wireless communications facilities. The Company
also sells unmanned communications shelters designed to be located adjacent to
wireless transmitting and receiving facilities to house electrical equipment
associated with such facilities. The Company's customers include providers of a
broad range of wireless communications services including paging services,
analog and digital cellular telephone services, personal communications services
or "PCS", specialized mobile radio or "SMR" services, enhanced specialized
mobile radio or "ESMR" services and microwave communications services. The
Company's headquarters are located in Cedar Crest, New Mexico, approximately
seven miles from Albuquerque, New Mexico. The Company also maintains regional
offices in Laguna Hills, California, Gilbert, Arizona (located just outside
Phoenix, Arizona), Houston, Texas, Fairview Heights, Illinois (located just
outside St. Louis, Missouri), Crest Hill, Illinois (located just outside
Chicago, Illinois), Birmingham, Alabama, Columbus, Ohio, Raleigh, North Carolina
and Orlando, Florida.
HISTORY
The Company was incorporated in April, 1994 for the purpose of acquiring all of
the issued and outstanding shares of capital stock of Michael R. Budagher
Specialty Constructors, Inc., a New Mexico corporation. In 1995, Michael R.
Budagher Specialty Constructors, Inc. changed its corporate name to Specialty
Constructors, Inc. Originally, the Company's primary business was constructing,
maintaining and modifying microwave transmission and receiving facilities
predominantly for providers of short- and long-distance microwave communications
services. Later, the Company began installing electronic and other related
equipment in connection with these facilities. Following the initiation of the
build out of cellular telephone networks in the United States, which began in
1983, the Company began to build, construct, enhance and maintain cellular
transmitting and receiving facilities as well as microwave transmitting and
receiving facilities. Throughout the late 1980's and continuing until the mid-
1990's, a majority of the Company's growth and revenues were derived from
wireless infrastructure building and implementation services related to the
continuing build out and expansion of cellular telephone and paging networks. In
the early 1990's, the Company began an effort to expand the scope of the
services offered by the Company to include wireless infrastructure electrical
design and engineering services. As a part of this expansion, in July 1995, the
Company acquired ST Combined Resources, Inc., a California-based provider of
electrical design and engineering services to the wireless communications
industry. Following the acquisition, ST Combined Resources, Inc. changed its
corporate name to Specialty Combined Resources, Inc.
RECENT TRENDS
During the fiscal year ended June 30, 1996, the Company continued to derive a
significant portion of its revenues from wireless infrastructure building and
implementation services rendered to providers of microwave, analog and digital
cellular-based wireless communications services. In addition, beginning during
approximately the last half of the fiscal year ended June 30, 1996, the Company
experienced increasing demand for its services from providers of wireless
communications services utilizing new or enhanced wireless communications
technologies such as PCS and ESMR. This trend continued through the first six
months of fiscal 1997. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
3
<PAGE>
In January, 1997, the Company determined to cease manufacturing unmanned
communications shelters at its manufacturing facilities located in Albuquerque,
New Mexico. Instead, the Company intends to obtain unmanned communications
shelters from unaffiliated third parties for resale to its customers.
Historically, sales of these shelters have not comprised a significant component
of the Company's revenues or results of operation. The Company does not
anticipate that the cessation of manufacturing operations related to these
shelters will have a material impact on its business, results of operations and
financial condition. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS- Cessation of Shelter Manufacturing
Operations."
BUSINESS STRATEGY
The Company intends to seek to capitalize on the demand for wireless
infrastructure building and implementation services by continuing to expand its
workforce and geographic presence in the marketplace. To accomplish these
objectives, the Company intends to (i) continue its geographic expansion by
opening new regional offices when demand for the Company's services or
acquisition opportunities make such expansion feasible, (ii) continue to enhance
its indigenous new employee hiring, training and retention programs as a method
for attracting, training and retaining new, highly skilled workers and (iii)
continue to seek to acquire other companies engaged in the wireless
infrastructure building and implementation services and wireless infrastructure
electrical design and engineering services businesses that have good reputations
for quality service and highly skilled workers. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS- Business Strategy."
RECENT ACQUISITIONS
On July 1, 1995, the Company acquired all of the issued and outstanding capital
stock of ST Combined Resources, Inc., a provider of wireless infrastructure
electrical design and engineering services located in Laguna Hills, California.
This acquisition was accounted for as a pooling of interests.
On October 23, 1995, the Company acquired substantially all the assets of
Orlando Tower, Inc., an Orlando, Florida-based builder of wireless transmitting
and receiving facilities, for approximately $163,000 in cash. This acquisition
was accounted for as a purchase.
On July 2, 1996, the Company acquired substantially all the assets of East Coast
Tower, Inc., a Greensborough, North Carolina-based builder of wireless
transmitting and receiving facilities, for approximately $90,000 in cash. This
acquisition was accounted for as a purchase.
On October 30, 1996, the Company acquired substantially all the assets of Data
Cell Systems, Inc. ("Data Cell"), a builder of wireless transmitting and
receiving facilities located in Gilbert, Arizona (located just outside Phoenix,
Arizona), in exchange for $160,000 in cash and the issuance of 93,405 shares of
Common Stock. The purchase price of the assets acquired from Data Cell is
subject to increase by an amount not to exceed $200,000 in the aggregate if
certain pre-tax earnings targets are achieved by the Company during the three
fiscal years immediately following the date of the acquisition and if certain
other conditions are met. This acquisition was accounted for as a purchase. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Recent Acquisitions."
The Company's principle executive offices are located at 12001 Hwy 14 North,
Cedar Crest, New Mexico 87008 and its telephone number is (505) 281-2197.
4
<PAGE>
THE OFFERING
Securities Offered by the Company: 50,000 Units, each Unit consisting of
two (2) shares of Common Stock and
one (1) Warrant, at a price of $12.15
per Unit (120% of the price at which the
Units were sold to the public in the
Company's November 1994 initial public
offering (the "IPO")) issuable upon
exercise of the Underwriters' Warrants.
The shares of Common Stock and Warrants
included in the Units underlying the
Underwriters' Warrants are immediately
separately transferrable
50,000 shares of Common Stock at a price
of $6.00 per share, issuable upon
exercise of 50,000 Warrants included in
the Units underlying the Underwriters'
Warrants
500,000 shares of Common Stock at a
price of $6.00 per share, issuable upon
exercise of 500,000 Warrants (the
"Warrants Called for Redemption")
included in 500,000 Units (the "Public
Units") sold to the public in the IPO
Common Stock outstanding:
Before the offering 4,195,713 shares (1)
After the offering 4,845,713 shares (1)(2)
Warrants outstanding:
Before the offering 500,000
After the offering 0 (2)
Use of Proceeds The Company intends to use the net
proceeds of this offering for working
capital and for other general corporate
purposes, including possible future
acquisitions. See "USE OF PROCEEDS."
Risk Factors The securities offered hereby are highly
speculative and involve a high degree of
risk and immediate substantial dilution.
Prospective investors should carefully
consider the information set forth
herein under "RISK FACTORS."
Dividend Policy The Company has never declared or paid
any cash dividends on the Common Stock
and does not anticipate paying dividends
on the Common Stock at any time in the
near future. The current policy of the
Company's Board of Directors is to
retain earnings, if any, to provide
funds for operations and expansion of
the Company's business. Any future
determination as to the payment of
dividends will be at the discretion of
the Board of Directors of the Company
and will depend on the Company's
earnings, capital requirements and
financial condition and such other
factors as the Board of Directors may
deem relevant. See "DIVIDEND POLICY"
and "RISK FACTORS."
Nasdaq/NMS Market Symbols "SCTR" and "SCTRW"
Pacific Stock Exchange Symbols "SPP" and "SPPW"
___________
(1) Does not include (i) up to 363,895 shares of Common Stock issuable upon
exercise of outstanding options granted under the Company's Amended and
Restated 1994 Stock Option Plan and Outside Directors' Stock Option Plan at
an average exercise price of $4.62 per share, of which 153,895 are
exercisable as of the date of this Prospectus. See "MANAGEMENT-Amended and
Restated 1994 Stock Option Plan," "MANAGEMENT-Outside Directors' Stock
Option Plan" and "RISK FACTORS-Outstanding Options; Risk of Further
Dilution. "
(2) Assumes exercise of all (i) the Underwriters' Warrants, (ii) the
Warrants included in the Units underlying the Underwriters' Warrants and
(iii) the Warrants Called for Redemption, although there can be no
assurance that all such securities will be exercised. See "RISK FACTORS-
Underwriters' Warrants; Risk of Further Dilution."
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following summary financial information is derived from the Consolidated
Financial Statements appearing elsewhere herein. This information should be
read in conjunction with the Consolidated Financial Statements and notes
thereto, and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
EARNINGS STATEMENT DATA:
Fiscal Year Ended June 30, Six Months Ended December 31,
-------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Contract revenues earned............. $ 16,759 $ 8,415 $ 14,592 $ 6,488
Cost of revenues earned.............. 13,987 6,990 11,956 5,128
Gross profit......................... 2,772 1,425 2,636 1,360
Selling, general and administrative
expenses............................ 1,701 1,051 1,381 781
Earnings from operations............. 1,071 374 1,255 579
Net earnings......................... 804 340 758 409
Net earnings per share............... $0.20 $0.09 $0.18 $0.10
Weighted average common and
common equivalent shares outstanding 4,104,336 3,750,806 4,261,264 4,092,308
</TABLE>
BALANCE SHEET DATA(1):
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Working capital.......................................................... $ 5,584
Total assets............................................................. 13,961
Current liabilities...................................................... 5,110
Long-term debt........................................................... 668
Stockholders' equity..................................................... $ 7,951
</TABLE>
______________________
(1) Assumes no exercise of outstanding options to purchase shares of Common
Stock granted pursuant to the Company's Amended and Restated 1994 Stock
Option Plan and Outside Directors' Stock Option Plan. See "RISK FACTORS-
Outstanding Options; Risk of Further Dilution," "MANAGEMENT-Amended and
Restated 1994 Stock Option Plan" and "MANAGEMENT-Outside Directors' Stock
Option Plan."
6
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION AND ARE SUITABLE ONLY FOR PERSONS WHO
CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. IN ADDITION TO THE OTHER
INFORMATION IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED
CAREFULLY IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY. THIS
PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
COULD DIFFER MATERIALLY. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW, AS WELL AS
THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS.
DEPENDENCE ON THE WIRELESS COMMUNICATIONS INDUSTRY
The Company is dependent on the continued growth, viability and financial
stability of its customers, which are in turn substantially dependent on the
continued growth, viability and financial stability of the wireless
communications industry. The wireless communications industry is highly
competitive and has been characterized by rapid technological and regulatory
change. Examples of recent technological changes include the advent or continued
rapid development of new or enhanced wireless communications technologies such
as PCS, ESMR and satellite-based wireless communications technologies. These
technological changes could reduce, delay or make unnecessary the expansion or
construction of new wireless communications networks, which in turn could render
the Company's products and services obsolete or noncompetitive or otherwise
reduce the demand for such products and services. A recent example of regulatory
changes affecting the industry is the enactment of Telecommunications Act of
1996 which is expected to cause significant changes in existing regulation of
the telecommunications industry that are intended to promote the competitive
development of new services, to expand public availability of telecommunications
services and to streamline regulation of the industry. In addition, many of the
Company's customers are affected by general economic conditions. Any downturn or
other disruption of the wireless communications industry caused by adverse
competitive developments, technological changes, government regulation or other
factors would have a material adverse effect on the Company's business, results
of operations and financial condition. See "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and "BUSINESS--The Wireless
Communications Industry", "RISK FACTORS"- Government Regulation" and "BUSINESS--
Government Regulation."
DEPENDENCE ON KEY PERSONNEL
The Company relies on the business and technical expertise of its senior
management personnel and certain other key employees. The Company's future
performance depends in substantial part upon the continued contributions of
these individuals. The loss of the services of any one of these individuals
could have a material adverse effect on the Company's business results of
operations and financial condition. In particular, the Company's future
performance is highly dependent on the continued contributions of Mr. Michael R.
Budagher, a founder, director and the Company's Chairman of the Board,
President, Chief Executive Officer and Treasurer. The loss of the services of
Mr. Budagher would have a material adverse effect on the Company's business,
results of operations and financial condition. Mr. Budagher is not bound by an
employment agreement with the Company and no assurances can be given that his
services will be available at acceptable levels of compensation. The Company
currently maintains key-man life insurance in the amount of $7,000,000 on Mr.
Budagher. However, the Company believes that the proceeds from such insurance
would not be sufficient to compensate it for the loss of Mr. Budagher's
services. See "BUSINESS -- Employees" and "MANAGEMENT."
DEPENDENCE ON LABOR FORCE
The Company's future success is also particularly dependent on its ability to
attract and retain experienced, highly qualified technical employees, project
managers and other key employees who perform and manage the wireless
infrastructure building and implementation of services provided by the Company.
The Company believes there is, and there will continue to be, intense
competition for the services of these individuals from competitors in the
wireless infrastructure development and implementation industry and from
providers of wireless communications services. The loss of significant numbers
of the Company's current technical and project management personnel or the
inability to attract and retain sufficient numbers of additional technical and
project management personnel to support the expansion of the Company's business
would have a material adverse effect on the Company's business, results of
operations and financial condition. There can be no assurance that the Company
will be able to retain its key employees or that it will be able to attract or
retain other experienced, highly qualified technical and project management
personnel in the future. See "BUSINESS --Employees."
7
<PAGE>
ACQUISITIONS
As a key component of its growth strategy, the Company has pursued and intends
to continue to pursue acquisitions of companies that provide wireless
infrastructure building and implementation services and wireless infrastructure
electrical design and engineering services. In furtherance of this component of
its growth strategy, since July, 1995, the Company has substantially all the
assets and employees of three companies that provided wireless infrastructure
building and implementation services similar to those provided by the Company,
and one company that provided wireless infrastructure electrical design and
engineering services. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Recent Acquisitions." Execution of this
component of its growth strategy requires the Company's management to, among
other things: (i) identify geographic markets in which the Company can
successfully compete; (ii) identify acquisition candidates who are willing to be
acquired at prices and on terms acceptable to the Company; and (iii) consummate
identified acquisitions. In addition, it is possible that future acquisitions
will require the Company to obtain additional financing either to consummate the
acquisition or to provide additional working capital to facilitate the increased
level of business activity caused by the acquisition. Certain risks are
inherent in an acquisition strategy, such as dilution of outstanding equity
securities, increased leverage and debt service requirements, the difficulty in
combining different company cultures and facilities and the possibility of
significant turnover among key employees of the acquired company following the
acquisition, any of which could materially adversely affect the Company's
operating results or the market price of the Common Stock prevailing from time
to time. The success of any completed acquisition will depend in part on the
Company's ability to effectively integrate the acquired business, which
integration may involve unforeseen difficulties and may require a
disproportionate amount of management's attention and the Company's financial
and other resources.
The Company is currently considering several acquisitions of companies engaged
in the wireless infrastructure building and implementation services and wireless
infrastructure electrical design and engineering services businesses that the
Company believes can complement or expand the Company's current customer base
and ability to provide wireless infrastructure building and implementation
services and wireless infrastructure electrical design and engineering services
to its customers. No agreement, definitive or otherwise, with respect to any of
these potential acquisitions has been reached. From time to time the Company
has, and in the future may continue to, enter into negotiations with respect to
potential acquisitions for these purposes, some of which have resulted or may
result in preliminary agreements. In the course of these negotiations and/or
due diligence, these negotiations and/or preliminary agreements may be abandoned
modified or terminated. No assurance can be given that the Company will
complete any of the acquisitions currently under consideration, that additional
suitable acquisition candidates will be identified, that such future
acquisitions, if any, will be made on terms acceptable to the Company, or that
future acquisitions, if completed, will be successful. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--
Business Strategy."
POSSIBLE NEED FOR ADDITIONAL FINANCING
In addition to the management challenges presented by the continued
implementation of the Company's growth strategy, future growth may require
significant capital. Although the Company currently estimates that the net
proceeds of this offering, together with cash generated from operations, will be
sufficient to finance its current operations and planned capital expenditure
requirements for at least twelve months following the date of this Prospectus,
there can be no assurance that the Company will not require additional capital
at an earlier date. The Company may, from time to time, seek additional funding
through public or private financing, including debt or equity financing. There
can be no assurance that adequate funding will be available as needed or, if
available, on terms acceptable to the Company. If additional funds are raised
by issuing equity securities, existing stockholders may experience dilution.
Insufficient funds may inhibit future growth or require the Company to scale
back or eliminate some or a significant part of its business. See "USE OF
PROCEEDS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Liquidity and Capital Resources."
COMPETITION
Historically, the market for wireless infrastructure building and implementation
services has been highly competitive but also highly fragmented. As such, most
participants in this market have been relatively small firms of between three to
fifty employees. However, the Company has also faced competition in the market
for wireless infrastructure building and implementation services from wireless
communications equipment manufacturers that provide such services in conjunction
with the sale of wireless communications equipment. While the industry continues
to be comprised predominately of these smaller firms, over the past two years,
the increased demand for wireless infrastructure building and implementation
services has motivated other competitors to enter the market. These new
competitors include, but are not limited to, traditional,
8
<PAGE>
non-wireless engineering and construction companies and non-wireless
subcontractors who have begun to enter the market either alone or in conjunction
with wireless equipment manufacturers. In addition, the Company faces
competition in the market for wireless infrastructure electrical design and
engineering services from stand-alone electrical engineering and design firms,
other providers of wireless infrastructure building and implementation services
and wireless communications equipment manufacturers. Many of these new
competitors as well as many of the Company's historical competitors have
significantly greater financial and other resources than the Company. As demand
for wireless infrastructure building and implementation services increases, the
Company expects that more non-traditional competitors will enter the market and
provide increased competition to the Company. There can be no assurance that the
Company will be able to compete effectively or that such increased competition
will not have a material adverse effect on the Company's business, results of
operations and financial condition.
GOVERNMENT REGULATION
The wireless communications industry is subject to regulation by state
regulatory agencies, the FCC, Congress, the courts and other governmental
bodies. There can be no assurance that any of these governmental bodies will not
adopt or change regulations or take other actions that would adversely affect
the wireless communications industry and the Company's business, financial
condition and results of operations.
In addition, the Telecommunications Act of 1996 is expected to cause significant
changes in existing regulation of the telecommunications industry that are
intended to promote the competitive development of new services, to expand
public availability of telecommunications services and to streamline regulation
of the industry. These changes include requirements that local exchange carriers
must: (i) permit other competitive carriers, which may include many wireless
communications service providers, to interconnect to their networks; (ii)
establish reciprocal compensation agreements with competitive carriers to
terminate traffic on each other's networks and (iii) offer resale of their local
loop facilities. The implementation of these requirements by the FCC and state
authorities potentially involves numerous changes in established rules and
policies that could adversely affect the wireless communications industry and
the Company's business, financial condition and results of operations.
In addition, the construction and installation of wireless transmitting and
receiving facilities are often the subject to state or local zoning, land use
and other regulation. Such regulation may include zoning, environmental and
building permit approvals or other state or local certification. The
Telecommunications Act of 1996 provides that state and local authority over the
placement, construction and modification of personal wireless services
(including cellular, and other cellular mobile radio services ("CMRS") and
unlicensed wireless services) shall not prohibit or have the effect of
prohibiting personal wireless services or unreasonably discriminate among
providers of functionally equivalent services. Although state and local zoning
authorities retain their rights over land use, their actions cannot have the
effect of banning wireless services or picking and choosing among similar
wireless providers.
ALLEGED HEALTH RISKS RELATED TO RF EMISSIONS
Allegations have been raised that the use of cellular telephones and other
wireless communications devices may pose health risks to humans due to radio
frequency ("RF") emissions from the handsets. Studies performed by wireless
telephone equipment manufacturers dispute these allegations, and a major
industry trade association and certain governmental agencies have stated
publicly that the use of such phones poses no undue health risk. Regardless of
the truth of these allegations, they could have an adverse effect on the
wireless communications industry which in turn could have an adverse effect on
the Company. In addition, digital wireless telephones have been shown to cause
interference to some electronic devices, such as hearing aids and pacemakers.
Concerns over RF emissions also may have the effect of discouraging the use of
wireless communications. The FCC currently is conducting a rulemaking proceeding
to update the guidelines and methods used for evaluating RF emissions from radio
equipment, including wireless telephones. The FCC's proposal, if adopted, would
impose more restrictive standards on RF emissions from devices such as hand-held
cellular and PCS telephones. These concerns could have an adverse effect on the
wireless communications industry which in turn could have an adverse effect on
the Company.
SEASONALITY OF INSTALLATION ACTIVITIES.
Historically, the rate at which contracts for the installation and retrofit of
wireless communications facilities are awarded has been lower during the period
from January 1 to March 31 of each year due to contracting practices of many
providers of wireless communications. In addition, cold weather and the limited
daylight hours in the winter months in certain markets have lowered the revenues
received from wireless infrastructure building and implementation services
during these months. Therefore, the Company may experience lower than average
revenues during the winter season.
9
<PAGE>
TRANSACTIONS WITH AFFILIATES
The Company often enters into transactions with its affiliates and other persons
or entities affiliated with the Company or its affiliates. There are numerous
conflicts of interest between the Company and its affiliates, particularly
between the Company and entities that are affiliated with individuals having
executive responsibility for the Company. Typically, these include the
possibility of channeling business to entities other than the Company that is
more appropriately business of the Company, the Company paying excessive prices
to affiliated entities, or the Company subsidizing the affiliated entity by
charging less than market rates. The Company has extensive experience in costing
the services it provides, and management of the Company believes that the
Company's costing to affiliated entities is consistent with its general costing.
Similarly, products or services received by the Company from affiliated entities
have been at substantially the same rates charged other enterprises. The Company
has compared these rates prior to engagement with independent quotes or with
rates charged by other entities. None of the agreements or arrangements with
affiliates are subject to adjustment.
While there has been no independent determination as to the fairness of the
Company's transactions with affiliated entities, the Company's Board of
Directors has reviewed these transactions and has found the terms of these
transactions to be fair and reasonable to the Company. Management of the Company
believes that the transactions with affiliated entities that occurred in the
past have been fair and reasonable to the Company and that practical measures
have been taken to assure that any such transactions in the future will be fair
and reasonable to the Company. Nonetheless, almost all transactions between the
Company and affiliated entities have been with entities that are controlled by
Michael R. Budagher. As of the date of this Prospectus, Michael R Budagher
controls the Company. As a result of this control, Michael R. Budagher has the
legal power to elect directors and thus elect those that set the Company's
policies, including policies involving related party transactions, that is,
should Michael R. Budagher determine to have a different policy regarding
transactions with affiliates, he has the power to elect directors that would
implement that new policy. Michael R. Budagher has no intent to have any
transaction with an affiliated entity that is not fair and reasonable to the
Company, now or in the future. See "RISK FACTORS -- Concentration of Ownership"
and "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
CONCENTRATION OF OWNERSHIP
Michael R. Budagher, the Company's Chairman, President, Chief Executive Officer
and Treasurer, will retain beneficial ownership of approximately 48.6% of the
Common Stock outstanding after this offering assuming all the Warrants Called
for Redemption, the Underwriters' Warrants and the Warrants included in the
Units underlying the Underwriters' Warrants are exercised. There can be no
assurance that all such securities will be exercised. As a result, Mr. Budagher
will have the ability to exert significant influence over the business affairs
of the Company, including the ability to influence the election of directors and
the results of voting on all matters requiring stockholder approval. See
"MANAGEMENT" and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT."
SHARES ELIGIBLE FOR FUTURE SALE; POTENTIAL ADVERSE EFFECT ON MARKET PRICE ON
COMMON STOCK
At the date of this Prospectus, 4,195,713 shares of Common Stock were
outstanding, 2,875,713 of which were "restricted securities" under applicable
securities laws. Upon completion of this offering, assuming all the Warrants
Called for Redemption, the Underwriters' Warrants and the Warrants included in
the Units underlying the Underwriters' Warrants are exercised, the Company will
have 4,845,713 shares of Common Stock outstanding. All of the securities sold
in this offering will be freely transferable without further restriction or
registration under the Securities Act, except for any securities purchased by an
"affiliate" of the Company (as defined under the Securities Act). Additional
shares of Common Stock may become eligible for sale in the public market from
time to time upon exercise of warrants and stock options. See "RISK FACTORS-
Outstanding Options; Risk of Further Dilution" and "RISK FACTORS-Underwriters'
Warrants; Risk of Further Dilution."
Holders of restricted securities must comply with the requirements of Rule 144
in order to sell their shares in the open market. In general, under Rule 144 as
currently in effect, any affiliate of the Company and any person (or persons
whose sales are aggregated) who has beneficially owned his or her restricted
shares for at least two years, would be entitled to sell in the open market
within any three-month period a number of shares that does not exceed the
greater of: (i) 1% of the then outstanding shares of the Company's Common Stock;
or (ii) the average weekly trading volume reported on the Nasdaq System during
the four calendar weeks preceding such sale. Sales under Rule 144 are also
subject to certain limitations on manner of sale, notice requirements, and
availability of current public information about the Company. Nonaffiliates who
have held their restricted shares for three years are entitled to sell their
shares under Rule 144 without regard to any of the above limitations, provided
they have not been affiliates of the Company for the three months preceding such
sale.
The Company can make no prediction as to the effect, if any, that sales of
shares of additional shares of Common Stock or the availability of such shares
for sale will have on the market price of the Common Stock. Nevertheless, sales
of significant amounts of Common Stock could adversely affect the prevailing
market price of Common Stock, as well as impair the ability of the Company to
raise capital through the issuance of additional equity securities. See "SHARES
ELIGIBLE FOR FUTURE SALE."
DILUTION
The exercise price of each of the Underwriters' Warrants, the Warrants included
in the Units underlying the Underwriters' Warrants and the Warrants Called for
Redemption, when divided by the number of shares of Common Stock receivable upon
such exercise, is substantially higher than the current book value per share of
Common Stock. Consequently, the purchasers of the shares of Common Stock
offered hereby and issuable upon exercise of the Underwriters' Warrants, the
Warrants included in the Units underlying the Underwriters' Warrants and the
Warrants Called for Redemption will experience immediate, substantial dilution.
OUTSTANDING OPTIONS; RISK OF FURTHER DILUTION
As of the date of this Prospectus, the Company has outstanding options to
purchase a total of 363,895 shares of Common
10
<PAGE>
Stock at a weighted average exercise price of $4.62 per share including 343,895
options granted under the Company's Amended and Restated 1994 Stock Option Plan
and 20,000 options granted under the Company's Outside Directors' Stock Option
Plan. Of these options, 153,895 are currently exercisable including 133,895
options granted under the Amended and Restated 1994 Stock Option Plan and all
the options granted to date under the Outside Directors' Stock Option Plan. In
the future, the price which the Company would receive for its Common Stock upon
exercise of such options could be significantly less than the value of, or
market price for, the Common Stock at the time such options are exercised. While
such options are outstanding, the holders thereof are given, at little or no
cost, the opportunity to profit from a rise, if any, in the value of or market
price (if any) for the Common Stock without assuming the risk of ownership. To
the extent that any such options are exercised, the interests of the Company's
stockholders will be diluted proportionately. See "SHARES ELIGIBLE FOR FUTURE
SALE."
UNDERWRITERS' WARRANTS; RISK OF FURTHER DILUTION
In connection with the IPO, in November, 1994, the Company sold the
Underwriter's Warrants to the Representatives for nominal consideration. The
Underwriters' Warrants enable the holders thereof to purchase from the Company
up to 50,000 Units, each Unit consisting of two (2) shares of Common Stock and
one (1) Warrant, at an exercise price of $12.15 per Unit (120% of the price at
which the Units were initially offered to the public in the IPO), until November
3, 1999. The Warrants included in the Units underlying the Underwriters'
Warrants entitle the holders thereof to purchase one (1) share of Common Stock
at an exercise price of $6.00 per share until November 3, 1999 and are identical
to the Warrants Called for Redemption except that the Warrants included in the
Units underlying the Underwriters' Warrants such are not subject to redemption
by the Company prior to exercise of the Underwriters' Warrants. As of the date
of this Prospectus, none of the Underwriters' Warrants had been exercised.
In connection with the issuance of the Underwriters' Warrants, the Company
granted to the Representatives certain demand and incidental registration rights
obligating the Company under certain circumstances to register under the
Securities Act and applicable state securities acts, at the expense of the
Company, the Units underlying the Underwriters' Warrants, the shares of Common
Stock and Warrants included in such Units and the shares of Common Stock
underlying such Warrants. These securities have been included in the
Registration Statement of which this Prospectus is a part in accordance with
these registration rights. There can be no assurance that all the Underwriters'
Warrants or the Warrants included in the Units underlying the Underwriters'
Warrants will be exercised. In the future, the price which the Company would
receive for the shares of Common Stock included in the Units underlying the
Underwriters' Warrants or issuable upon exercise of the Warrants included in
such Units could be significantly less than the value of, or market price for,
the Common Stock at the time such Underwriters' Warrants or such Warrants
included in the Units underlying such Underwriters' Warrants are exercised. For
the life of the Underwriters' Warrants and the Warrants included in the Units
underlying such Underwriters' Warrants, the holders thereof are given, at
nominal cost, the opportunity to profit from the difference, if any, between the
exercise prices thereof and the value, or market price (if any) of, the Common
Stock receivable upon exercise thereof without assuming the risk of ownership.
The terms on which the Company could obtain additional capital during the
exercise period of the Underwriters' Warrants and the Warrants included in the
Units underlying such Underwriters' Warrants may be adversely affected as the
holders of such securities may be expected to exercise them when in all
likelihood, the Company would be able to obtain any needed capital by a new
placement of securities on terms more favorable than those provided for by the
Underwriters' Warrants or the Warrants included in the Units underlying such
Underwriters' Warrants. See"SHARES ELIGIBLE FOR FUTURE SALE."
NO INTENTION TO PAY DIVIDENDS
The Company has never declared or paid any cash dividends on the Common Stock
and does not anticipate paying dividends on the Common Stock at any time in the
near future. The current policy of the Company's Board of Directors is to
retain earnings, if any, to provide funds for operations and expansion of the
Company's business. Any future determination as to the payment of dividends
will be at the discretion of the Board of Directors of the Company and will
depend on the Company's earnings, capital requirements, and financial condition
and such other factors as the Board of Directors may deem relevant. See
"DIVIDEND POLICY."
LIMITATIONS ON DIRECTOR LIABILITY
Section 78.751 of the General Corporation Law of Nevada ("NGCL") empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, except an action by or
in the right of the corporation, by reason of the fact that he or she is or was
a director, officer, employee or agent of the corporation or is or was serving
at the request
11
<PAGE>
of the corporation as a director, officer, employee or agent of another
corporation or enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding if the person indemnified
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. In the case of any action by or in the right of the
corporation, no indemnification may be made in respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation or for amounts paid in settlement to the corporation unless and only
to the extent that the court in which such action or suit was brought or other
court of competent jurisdiction determines that in view of all the circumstances
of the case such person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper. Section 78.751 of the NGCL further
provides that to the extent a director or officer of a corporation has been
successful in the defense of any action, suit or proceeding referred to above or
in the defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith.
The Articles of Incorporation, as amended (the "Articles"), and By-Laws of the
Company provide, in effect, that to the extent and under the circumstances
permitted by Section 78.751 of the NGCL and subject to certain conditions, the
Company shall indemnify any person who was or is a party or is threatened to be
made a party to or is involved in any action, suit or proceeding of the type
described above by reason of the fact that he or she is or was a director or
officer of the Company or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation. Reference is made
to the Company's Articles and By-laws, both of which have been filed as Exhibits
to the Registration Statement of which this Prospectus is a part.
The indemnification provisions set forth in the Articles and the Company's By-
laws provide for broad indemnification under Nevada law with no express
exclusion for liabilities arising under or in connection with the Securities
Act. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. At present, there is no pending litigation or
proceeding involving a director or officer of the Company in which
indemnification is required or permitted, and the Company is not aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain Statements in the Prospectus Summary and under the captions "RISK
FACTORS," "USE OF PROCEEDS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS," "BUSINESS" and elsewhere in this
Prospectus constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among others, the following general
economic and business conditions: industry capacity; other industry trends;
demographic changes; competition; the loss of any significant customers; changes
in business strategy or development plans; availability and successful
integration of acquisition candidates; availability, terms and deployment of
capital; advances or changes in technology; quality of management; business
abilities and judgment of personnel; availability of qualified personnel;
changes in, or the failure to comply with, government regulations; labor costs;
and other risk factors, uncertainties and cautionary statements appearing in
this Prospectus. The risk factors, uncertainties and other cautionary statements
appearing in this Prospectus should not be construed as exhaustive.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on the Common Stock
and does not anticipate paying dividends on the Common Stock at any time in the
near future. The current policy of the Company's Board of Directors is to
retain earnings, if any, to provide funds for operations and expansion of the
Company's business. Any future determination as to the payment of dividends
will be at the discretion of the Board of Directors of the Company and will
depend on the Company's earnings, capital requirements, and financial condition
and such other factors as the Board of Directors may deem relevant.
12
<PAGE>
USE OF PROCEEDS
Assuming all the Warrants Called for Redemption, the Underwriters' Warrants and
the Warrants included in the Units underlying the Underwriters' Warrants are
exercised, the net proceeds to be received by the Company from the sale of the
securities offered hereby, after deducting the estimated expenses of this
offering, are expected to be approximately $3,627,500. However, there can be no
assurance that all such securities will be exercised. The Company intends to
use the net proceeds from this offering as working capital to support accounts
receivable generated by the Company's wireless infrastructure building and
implementation services business, to effect acquisitions of other companies
engaged in the wireless infrastructure building and implementation services and
wireless infrastructure electrical design and engineering services businesses
and for other general corporate purposes.
The exact allocation of the proceeds for such purposes and timing of such
expenditures has not been finally determined and may vary significantly
depending upon numerous factors, including the continued expansion of the
Company's wireless infrastructure building and implementation services business
and the Company's success in securing acquisition opportunities. Until utilized
for the above purposes, the net proceeds from this offering are intended to be
invested in short-term, investment-grade securities. The Company estimates that
such proceeds will be sufficient to fund such expenditures and other cash
requirements for at least the next 12 months. However, such time periods may
vary significantly depending upon a number of factors, and no assurances can be
given in this regard. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
13
<PAGE>
CAPITALIZATION
(IN THOUSANDS)
The following table sets forth the capitalization of the Company as of December
31, 1996. This information should be read in conjunction with the Consolidated
Financial Statements and notes thereto, and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" appearing elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
December 31,
1996(1)
-----------------
<S> <C>
Short-term debt:
Current portion of long term debt......................... $ 61
Short term borrowings..................................... 924
------
985
Long-term debt............................................... 668
Stockholders' equity:
Common stock, $.01 par value (10,000,000 shares
authorized, 4,185,713 shares issued and
outstanding).............................................. 42
Additional paid-in capital................................ 4,831
Retained earnings......................................... 3,078
------
Total stockholders' equity................................... 7,951
------
Total capitalization......................................... $9,604
======
</TABLE>
____________
(1) Assumes no exercise of outstanding options to purchase shares of Common
Stock granted pursuant to the Company's Amended and Restated 1994 Stock
Option Plan and Outside Directors' Stock Option Plan. See "RISK FACTORS-
Outstanding Options; Risk of Further Dilution," "MANAGEMENT-Amended and
Restated 1994 Stock Option Plan" and "MANAGEMENT-Outside Directors' Stock
Option Plan."
14
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is quoted on the Nasdaq National Market under the
symbol "SCTR" and on the Pacific Stock Exchange under the symbol "SPP." On
January 24, 1997, there were approximately 1,701 holders of record of the
Company's common stock. The following table sets forth the quarterly high and
low bid prices for the Company's common stock. These prices reflect inter-dealer
prices and do not include adjustments for retail mark-ups, mark-downs or
commissions and may not represent actual transactions.
<TABLE>
<CAPTION>
Fiscal Year Ended
June 30, 1995: High Low
- -------------- ---- ---
<S> <C> <C>
Fiscal Quarter* $ 5.00 $ 2.75
Fiscal Quarter $ 4.625 $ 2.875
Fiscal Quarter $ 3.625 $ 2.125
* Reflects trading from November 7, 1994 through December 31, 1994.
Fiscal Year Ended
June 30, 1996: High Low
- -------------- ---- ---
Fiscal Quarter $ 3.875 $ 2.50
Fiscal Quarter $ 3.375 $ 2.00
Fiscal Quarter $ 5.75 $ 2.25
Fiscal Quarter $ 6.25 $ 3.625
Fiscal Year Ended
June 30, 1997: High Low
- -------------- ---- ---
Fiscal Quarter $ 9.625 $ 3.9375
Fiscal Quarter $ 10.0625 $ 6.75
3/rd/ Fiscal Quarter
(through February 7, 1997) $ 15.125 $10.00
</TABLE>
To date, the Company has not declared or paid any cash dividends on its common
stock, and the present policy of the Board of Directors is to retain any
earnings to provide for the Company's growth. Any future determination to pay
dividends will be at the discretion of the Board of Directors, and dependent
upon the Company's financial condition, results of operations, capital
requirements and such other factors as the Board of Directors deems relevant.
See "RISK FACTORS-No Intention to Pay Dividends," and "DIVIDEND POLICY."
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table sets forth selected consolidated earnings statement data for
the fiscal years ended June 30, 1996 and 1995 and the six months ended December
31, 1996 and 1995 and selected balance sheet data as of December 31, 1996. This
information has been derived from the Consolidated Financial Statements
appearing elsewhere herein. This information should be read in conjunction
with, and is qualified by, the Consolidated Financial Statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
EARNINGS STATEMENT DATA:
Fiscal Year Ended June 30, Six Month Ended December 31,
---------------------------- ----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Contract revenues earned......... $ 16,759 $ 8,415 $ 14,592 $ 6,488
Cost of revenues earned.......... 13,987 6,990 11,956 5,128
------ ----- ------ -----
Gross profit..................... 2,772 1,425 2,636 1,360
Selling, general and administrative
expenses......................... 1,701 1,051 1,381 781
----- ----- ----- ----
Earnings from operations......... 1,071 374 1,255 579
Other income (deductions):
Gain (loss) on sale of equipment (5) 13 -- (12)
Interest income................. 219 170 31 117
Interest expense................ (27) (11) (56) (36)
Other, net...................... 18 3 -- 2
----- ----- ----- -----
Earnings before income tax
expense....... 1,276 549 1,230 650
Income tax expense (credit)...... 472 209 472 241
----- ----- ----- -----
Net earnings per common.......... $ 804 $ 340 $ 758 $ 409
Net earnings per common share
and common equivalent share... $ 0.20 $ 0.09 $ 0.18 $ 0.10
Weighted average common shares
and common equivalent shares
outstanding (1)................. 4,104,336 3,750,806 4,261,264 4,092,308
</TABLE>
BALANCE SHEET DATA(1):
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Working capital......... $5,584
Total assets............ 13,961
Current liabilities..... 5,110
Long-term debt.......... 668
Stockholders' equity.... 7,951
</TABLE>
- -----------------------
(1) Assumes no exercise of outstanding options to purchase shares of Common
Stock granted pursuant to the Company's Amended and Restated 1994 Stock Option
Plan and Outside Directors' Stock Option Plan (See "RISK FACTORS-Underwriters'
Warrants; Risk of Further Dilution," "MANAGEMENT-Amended and Restated 1994
Stock Option Plan" and "MANAGEMENT-Outside Directors' Stock Option Plan."
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following discussions contains forward-looking statemente within the meaning
of the Reform Act and should be read in conjunction with the consolidated
Financial Statements and the notes thereto and the risk factors, uncertainties
and other cautionary satements appearing elsewhere in this Prospectus. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements, including the risks, uncertainties and other
cautionary statements set forth under "RISK FACTORS," "USE OF PRECEEDS,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," "BUSINESS" and elsewhere in this Prospectus. The risk factors,
uncertainties and other cautionary statements appearing in this Prospectus
should not be construed as exhaustive. For a more complete understanding of the
Company's operations, see "RISK FACTORS" and "BUSINESS."
RESULTS OF OPERATIONS
COMPARISON OF THE FISCAL YEARS ENDED JUNE 30, 1996 AND 1995
The following table sets forth certain consolidated financial data expressed as
a percentage of net sales for the fiscal years ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
Percentage of Revenues
------------------------
Fiscal Year Ended June 30,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Contract revenues earned 100.0% 100.0%
Cost of revenues 83.4 83.1
----- -----
Gross profit 16.6 16.9
Selling, general and
administrative expenses 10.1 12.5
----- -----
Earnings from operations 6.5 4.4
Other net - .2
Interest expense ( .2) ( .1)
Interest income 1.3 2.0
----- -----
Earnings before income tax expense 7.6 6.5
Income tax expense 2.8 2.5
----- -----
Net earnings 4.8% 4.0%
===== =====
</TABLE>
Revenues. For the fiscal year ended June 30, 1996, revenues increased to
$16,758,629 from $8,414,590 in the fiscal year ended June 30, 1995, which
represents an increase of $8,344,039 or 99% over fiscal 1995. This increase in
revenues resulted primarily from growth in the Company's wireless infrastructure
building and implementation services business. Beginning during approximately
the last half of the fiscal year ended June 30, 1996 the Company experienced
increasing demand for its services from providers of wireless communications
services utilizing new or enhanced wireless communications technologies such as
PCS and ESMR. During the fiscal year ended June 30, 1996, three customers
represented approximately 44% of the Company's revenues; PCS PrimeCo 18%, Sprint
Cellular Company 16% and Cellular One 10%.
Gross Profit. Gross profit for fiscal year ended June 30, 1996 increased
$1,347,476 or 95% from $1,424,802 in fiscal 1995 to $2,772,278 in fiscal 1996.
Gross profit as a percentage of revenue remained unchanged at 17% for both
fiscal 1995 and fiscal 1996.
Selling, general and administrative ("SG&A") expenses. As a percentage of
revenues, SG&A expenses decreased from 12% of revenues in fiscal 1995 to 10% of
revenues in fiscal 1996. SG&A expenses increased $650,188 or 62% from $1,050,666
in fiscal 1995 to $1,700,854 in fiscal 1996. The decrease in SG&A expenses as a
percentage of revenue was primarily attributable to increased operating and
administrative efficiencies realized as a result of additions to the Company's
administrative staff and facilities during the fiscal year ended June 30, 1995
and the increase in revenues generated during the
17
<PAGE>
fiscal year ended June 30, 1996. The increase in SG&A expenses resulted
primarily from increased marketing and administrative expenses associated with
additional personnel added to accommodate the Company's growth.
Net Earnings. Net earnings increased $464,200 or 136% to $804,355 in the fiscal
year ended June 30, 1996 from $340,155 in the fiscal year ended June 30, 1995.
As a percentage of revenue, net earnings increased to 5% in fiscal 1996 from 4%
in fiscal 1995. This increase in net margin was primarily attributable to
improvements in the Company's operating margin resulting from strong demand for
the Company's wireless infrastructure building and implementation services and a
decrease in SG&A expenses as a percentage of revenue.
COMPARISON OF THE FISCAL YEARS ENDED JUNE 30, 1995 AND 1994
The following table sets forth certain consolidated financial data expressed as
a percentage of net sales for the fiscal years ended June 30, 1995 and 1994.
<TABLE>
<CAPTION>
Percentage of Revenues
----------------------
Fiscal Year Ended June 30,
--------------------------
1995 1994
---- ----
<S> <C> <C>
Contract revenues earned 100.0% 100.0%
Cost of revenues 83.1 72.9
----- -----
Gross profit 16.9 27.1
Selling, general and
administrative expenses 12.5 11.4
----- -----
Earnings from operations 4.4 15.7
Other net .2 .2
Interest expense ( .1) ( .1)
Interest income 2.0 .2
----- -----
Earnings before income tax expense 6.5 16.0
Income tax expense 2.5 6.0
----- -----
Net earnings 4.0% 10.0%
===== =====
</TABLE>
Revenues. The Company's revenues for the fiscal year ended June 30, 1995
increased to $8,414,590 from $6,435,759 for the same time period in the prior
year, an increase of approximately 31%. Four accounts represented 55% of the
Company's revenues for the year ended June 30, 1995; Bell Atlantic Mobile 21%,
Cellular One 10%, Nextel Communications 10% and Sprint Cellular 14%.
Gross Profit. Beginning late in the Company's second quarter of fiscal 1995, the
Company began to increase its project management staff, eventually increasing
the staff by 275% and opening four regional offices. Beginning at the same time
and continuing through the third quarter of fiscal 1995, the Company's
revenue growth paused. The Company believes that this pause may have occurred
because service providers were preoccupied with the auctioning of PCS licenses
by the federal government and the consequences of that action on the short and
long-term plans of service providers. The increase in project management staff
significantly increased the Company's cost of revenues. This increase, together
with the lack of revenue growth during the same period, adversely affected the
Company's gross profit. Gross profit, as a percentage of revenues, decreased
from 27% to 17% for the year ended June 30, 1995 compared to the year ended June
30, 1994. There are two significant contributors to this decline, namely, the
275% increase in project management staff and the increased resources needed to
supply its customers' demand for unmanned communications shelters.
In anticipation of growth, the Company expanded its operations and personnel in
various regions throughout the United States. In December of 1994, the Company
opened an office in the Chicago, Illinois area staffed by three project
managers, two of whom were newly hired or promoted. In February of 1995, the
Company opened an office in the Columbus, Ohio area staffed by two project
managers, both of whom were newly promoted. In April of 1995, an office was
opened in Birmingham, Alabama with one newly promoted project manager and one
newly promoted site supervisor. In June 1995, the Company opened an office in
Wycoff, New Jersey with two newly hired project managers. In total, the Company
increased its project management staff by 275% throughout the course of the
fiscal year ended June 30, 1995. The project manager is viewed as the front-
line person responsible for customer satisfaction through quality services and
timely completion of the projects. The Company experienced inefficiencies
associated with the 275% growth in project
18
<PAGE>
management staff. These inefficiencies resulted from project management staff
being in place prior to contracts being entered into that utilized such staff
and the hiring of required field personnel. The Company believes that a strong
project management staff is critical to continued growth of the Company.
During the year ended June 30, 1995, the Company was asked by one of its major
customers to provide unmanned portable shelters to house communications
equipment used at cellular transmission facilities. In anticipation of the
potential for a significant market in these shelters to multiple customers, the
Company established a manufacturing facility in Albuquerque, New Mexico and
began producing as demand required.
SG&A Expenses. SG&A expenses for the year ended June 30, 1995 increased to
$1,050,666 from $732,290 for the same time period in the prior year, an increase
of 4% as a percentage of revenues. The Company incurred an increase in SG&A
costs attributable to the opening of four new offices, as discussed above. In
addition, the company incurred costs associated with the acquisition of two
companies, the equipment and personal property of Vidano Corporation in April
1995 and the equity of ST Combined Resources, Inc. in July 1995. A significant
percentage of the increase in SG&A expenses was attributable to fees associated
with being a publicly traded entity, such items as investor relations, legal and
accounting fees for public filing requirements and directors and exchange
listing fees.
Net Earnings. Net earnings decreased to $340,155 for the fiscal year ended June
30, 1995 from $654,044 for the fiscal year ended June 30, 1994, a decrease of
approximately 4% expressed as a percentage of revenues. This decrease was
attributable to increases in costs associated with the 275% increase in project
management staff, the building of unmanned communications shelters, the costs
associated with opening new offices and being a publicly traded entity.
COMPARISON OF THE SIX-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1995
The following table sets forth certain consolidated financial data expressed as
a percentage of contract revenues earned for the six-month periods ended
December 31, 1996 and 1995.
<TABLE>
<CAPTION>
Percentage of Revenues
----------------------
Six Months Ended December 31,
-----------------------------
1996 1995
---- ----
<S> <C> <C>
Contract revenues earned 100.0% 100.0%
Cost of revenues 81.8 79.1
----- -----
Gross profit 18.2 20.9
Selling, general and
administrative expenses 9.5 12.1
----- -----
Earnings from operations 8.7 8.8
Other net - -
Interest expense ( .4) ( .6)
Interest income .2 1.8
----- -----
Earnings before income tax expense 8.5 10.0
Income tax expense 3.3 3.7
----- -----
Net earnings 5.2% 6.3%
===== =====
</TABLE>
Revenues. The Company's revenues for the six-month period ended December 31,
1996, increased approximately 125% to $14,591,735 as compared to $6,487,722 for
the same six-month period in the prior year. The Company believes the increase
is related to growth in the Company's wireless infrastructure building and
implementation services business related primarily to an increase in the
installation of facilities related to new PCS systems.
Gross Profit. Gross profit for the six-month period ended December 31, 1996
increased approximately 94% to $2,635,502 as compared to $1,360,189 for the same
six-month period in the prior year. Gross profit as a percentage of revenue
decreased from 20.9% for the six-month period ended December 31, 1995 to 18.2%
for the six-month period ended December 31, 1996.
SG&A Expenses. SG&A expenses as a percentage of revenues decreased from 12.1%
to 9.5% for the six-month period ended December 31, 1995 and 1996, respectively.
This decrease was a result of operational efficiencies realized with the
19
<PAGE>
increase in revenues.
Net earnings for the six-month period ended December 31, 1996 increased
approximately 85% to $758,037 compared to $409,475 for the same six-month period
in the prior year. As a percentage of revenue, net earnings decreased to 5.2%
from 6.3% in the same period in the prior year.
RECENT ACQUISITIONS
On July 1, 1995, the Company acquired all of the issued and outstanding capital
stock of ST Combined Resources, Inc., a provider of wireless infrastructure
electrical design and engineering services located in Laguna Hills, California.
This acquisition was accounted for as a pooling of interests.
On October 23, 1995, the Company acquired substantially all the assets of
Orlando Tower, Inc., an Orlando, Florida-based builder of wireless transmitting
and receiving facilities, for approximately $163,000 in cash. This acquisition
was accounted for as a purchase.
On July 2, 1996, the Company acquired substantially all the assets of East
Coast Tower, Inc., a Greensborough, North Carolina-based builder of wireless
transmitting and receiving facilities, for approximately $90,000 in cash. This
acquisition was accounted for as a purchase.
On October 30, 1996, the Company acquired substantially all the assets of Data
Cell Systems, Inc. ("Data Cell"), a builder of wireless transmitting and
receiving facilities located in Gilbert, Arizona (located just outside Phoenix,
Arizona), in exchange for $160,000 in cash and the issuance of 93,405 shares of
Common Stock. The purchase price of the assets acquired from Data Cell is
subject to increase by an amount not to exceed $200,000 in the aggregate if
certain pre-tax earnings targets are achieved by the Company during the three
fiscal years immediately following the date of the acquisition and if certain
other conditions are met. This acquisition was accounted for as a purchase.
CESSATION OF SHELTER MANUFACTURING OPERATIONS
In January, 1997, the Company determined to cease manufacturing unmanned
communications shelters at its manufacturing facilities located in Albuquerque,
New Mexico. Instead, the Company intends to obtain unmanned communications
shelters from unaffiliated third parties for resale to its customers.
Historically, sales of these shelters have not comprised a significant component
of the Company's revenues or results of operation. The Company does not
anticipate that the cessation of manufacturing operations related to these
shelters will have a material impact on its business, results of operations and
financial condition.
SEASONALITY
Historically, the rate at which contracts for the installation and retrofit of
wireless communications facilities are awarded has been lower during the period
from January 1 to March 31 of each year due to contracting practices of many
providers of wireless communications. In addition, cold weather and the limited
daylight hours in the winter months in certain markets have lowered the revenues
received from wireless infrastructure building and implementation services
during these months. Therefore, the Company may experience lower than average
revenues during the winter season.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had cash and temporary investments totaling
$644,434, a decrease of $2,219,035 from June 30, 1996. During the six-month
period ended December 31, 1996, cash utilized for operating activities was
$730,805. Net cash flow from operating activities was impacted primarily by
increases in accounts receivable associated with increased revenues generated
during the six-month period ended December 31, 1996 as compared to the
comparable period last year. During the six-month period ended December 31,
1996, the Company expended $896,559 on capital expenditures, primarily for
vehicles and equipment used in the Company's wireless infrastructure building
and implementation services business, and $160,000 in connection with the
acquisition of substantially all the assets of Data Cell Systems, Inc. (See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS-Recent Acquisitions").
In November, 1994, the Company completed an initial public offering (the "IPO")
of 500,000 Units. Each Unit consisted of two (2) shares of the Company's Common
Stock and one (1) Warrant. Each Warrant entitles the holder thereof to purchase
20
<PAGE>
one (1) share of the Company's common stock for a purchase price equal to $6.00
at any time prior to November 3, 1999. Prior to November 3, 1999, the Company
may, at its option, redeem all the Warrants then outstanding ("Warrants Called
for Redemption"), at a redemption price of $.05 per Warrant Called for
Redemption, if the closing sales price of the Common Stock as reported by the
Pacific Stock Exchange or other national trading market on which the Common
Stock may then be listed has equaled or exceeded $9.00 per share for ten (10)
consecutive trading days (the "Target Price"). The price of the Common Stock has
exceeded the Target Price and the Company has caused a notice of redemption to
be sent to the holders of the Warrants Called for Redemption on the date of this
Prospectus and set the date for redemption thereof on March 26, 1997 (the
"Redemption Date"). All holders of Warrants Called for Redemption have the right
to exercise their Warrants Called for Redemption until 5:00 p.m. New York City
time on the March 25, 1997, the last business day preceding the Redemption Date.
Any Warrants Called for Redemption not so exercised will be redeemed for $.05
per Warrant Called for Redemption after the Redemption Date. At December 31,
1996, $868,423 of proceeds from the IPO remained. At present, the Company
intends to utilize the majority of the unexpended proceeds of the IPO together
with the net proceeds, if any, of the securities offered hereby, for working
capital to support accounts receivable generated by the Company's wireless
infrastructure building and implementation services business, to effect
acquisitions of other companies engaged in the wireless infrastructure building
and implementation services and wireless infrastructure electrical design and
engineering services businesses and for other general corporate purposes. See
"USE OF PROCEEDS," "RISK FACTORS-Acquisitions" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS-Cautionary Note
Regarding Possible Future Acquisitions."
At December 31, 1996, the Company had a $2 million line of credit (the "First
State Bank Line of Credit") with First State Bank, Albuquerque, New Mexico, to
be used for working capital. The First State Bank Line of Credit is secured by
the accounts receivable of Specialty Constructors. At December 31, 1996,
outstanding borrowings under the First State Bank Line of Credit totaled
$923,928 and $1,076,072 were available for future borrowing. The final maturity
date of the First State Bank Line of Credit is May 1997. Outstanding borrowings
under the First State Bank Line of Credit accrued interest at the prime rate
which was 8.25% at December 31, 1996. On January 22, 1997, the First State Bank
Line of Credit was replaced with a new line of credit (the "Norwest Line of
Credit") from Norwest Bank New Mexico, N.A. ("Norwest"). On January 29, 1997,
all outstanding borrowings under the First State Bank Line of Credit were repaid
from the proceeds of an advance under the Norwest Line of Credit and the First
State Bank Line of Credit was canceled.
On January 22, 1997, the Company entered into the Norwest Line of Credit. The
Norwest Line of Credit provides up to $6 million in financing for working
capital and is secured by substantially all the Company's accounts receivable.
The Norwest Line of Credit also provides up to $1 million in additional
financing for purchases of vehicles and equipment. As of the date of this
Prospectus, outstanding borrowings under the Norwest Line of Credit totaled
approximately $2 million leaving approximately $4 million and $1 million
available for future borrowing for working capital and purchases of vehicles and
equipment, respectively. The final maturity date of the Norwest Line of Credit
is November 30, 1997. Outstanding borrowings under the Norwest Line of Credit
accrue interest at a variable rate equal to the Norwest Bank Minnesota, N.A.
Base Lending Rate plus .5%. As of the date of this Prospectus, the interest
rate on the Norwest Line of Credit was 8.75%.
The Company's future cash requirements for fiscal 1997 and beyond will depend
primarily upon the level of wireless infrastructure building and implementation
business conducted by the Company, the level of working capital needed to
generate the revenues associated with such business and acquisition
opportunities. The Company believes that revenues from operations, amounts
available under the Norwest Line of Credit, net proceeds from the sale of the
securities offered hereby and other capital resources available to the Company
will be adequate to satisfy its working capital requirements for at least twelve
months following the date of this Prospectus. See "RISK FACTORS-Acquisitions,"
and "RISK FACTORS-Possible Need for Additional Financing."
BUSINESS STRATEGY
The Company believes its success is dependent on, among other factors, the
continued expansion and development of the wireless communications industry and
the Company's ability to attract and retain experienced, highly skilled workers.
Historically, the expansion of the wireless communications industry has
necessitated the construction of large numbers of new transmitting and receiving
facilities. Because the construction of wireless transmitting and receiving
facilities is highly specialized, such construction demands highly skilled,
experienced personnel. Over the past several years, the Company has experienced
increasing demand for the Company's wireless infrastructure building and
implementation services. The Company believes this increasing demand is a result
of the continued expansion of the wireless communications industry, the
Company's expertise and experience in the implementation of wireless
transmitting and receiving facilities and the Company's reputation for quality
workmanship. See "RISK FACTORS-Dependence on the Wireless Communications
Industry" and "RISK FACTORS-Dependence on Labor Force."
21
<PAGE>
The Company believes the growth in demand for wireless infrastructure building
and implementation services will continue as the wireless communications
industry continues to expand and develop, fueled in part by the introduction of
new and enhanced wireless communications technologies such as PCS, ESMR and
digital cellular. As an example, the Company anticipates that the completion in
1995 and 1996 of FCC auctions of the A-, B- and C- Block portions of the radio
spectrum allocated by the FCC for PCS licensees will result in the build out of
significant numbers of new PCS systems over the next five to ten years. This is
due in part to the fact that the FCC has mandated that recipients of PCS
licenses adhere to five-year and 10-year build out requirements. Under both
five- and 10-year build out requirements, all 30 MHZ PCS licensees (which
includes holders of all of the approximately 595 A-, B- and C-Block PCS licenses
awarded as of September 1, 1996) must construct facilities necessary to provide
coverage to at least one-third of the population in their service areas within
five years from the date of initial license grants. Service must be provided to
two-thirds of the population within ten (10) years. Violations of these
regulations could result in license revocations, forfeitures or fines.
The Company also anticipates that implementation of new PCS systems may create
significant wireless infrastructure building activity as new PCS licensees pay
to alter or relocate certain existing communications facilities operated by
holders of fixed microwave licenses that currently operate within the same
frequency ranges as the new PCS licensees. This is because, in an effort to
balance the competing interests of existing microwave users and newly authorized
PCS licensees, the FCC has ruled that for a period of up to five years after the
grant of a PCS license, PCS licensees may be required to share their radio
spectrum with existing fixed microwave licensees operating on the same
frequencies as those of the new PCS licensees. In order to initiate service
within the required time frame, many of these new PCS licensees will arrange and
pay for the relocation of certain of these existing users to alternate spectrum
locations or transmission technologies.
The Company intends to seek to capitalize on the demand for wireless
infrastructure building and implementation services by continuing to expand its
workforce and geographic presence in the marketplace. To accomplish these
objectives, the Company intends to (i) continue its geographic expansion by
opening new regional offices when demand for the Company's services or
acquisition opportunities make such expansion feasible, (ii) continue to enhance
its indigenous new employee hiring, training and retention programs as a method
for attracting, training and retaining new, highly skilled workers and (iii)
continue to seek to acquire other companies engaged in the wireless
infrastructure building and implementation services and wireless infrastructure
electrical design and engineering services businesses that have good reputations
for quality service and highly skilled workers.
CAUTIONARY NOTE REGARDING POSSIBLE FUTURE ACQUISITIONS
As a key component of its growth strategy, the Company has pursued and intends
to continue to pursue acquisitions of companies that provide wireless
infrastructure building and implementation services and wireless infrastructure
electrical design and engineering services. In furtherance of this component of
its growth strategy, since July, 1995, the Company has substantially all the
assets and employees of three companies that provided wireless infrastructure
building and implementation services similar to those provided by the Company,
and one company that provided wireless infrastructure electrical design and
engineering services. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Recent Acquisitions."
The Company is currently considering several acquisitions of companies engaged
in the wireless infrastructure building and implementation services and wireless
infrastructure electrical design and engineering services businesses that the
Company believes can complement or expand the Company's current customer base
and ability to provide wireless infrastructure building and implementation
services and wireless infrastructure electrical design and engineering services
to its customers. No agreement, definitive or otherwise, with respect to any of
these potential acquisitions has been reached. From time to time the Company
has, and in the future may continue to, enter into negotiations with respect to
potential acquisitions for these purposes, some of which have resulted or may
result in preliminary agreements. In the course of these negotiations and/or
due diligence, these negotiations and/or preliminary agreements may be abandoned
modified or terminated. No assurance can be given that the Company will
complete any of the acquisitions currently under consideration, that additional
suitable acquisition candidates will be identified, that such future
acquisitions, if any, will be made on terms acceptable to the Company, or that
future acquisitions, if completed, will be successful. See "RISK FACTORS-
Acquisitions."
In addition, the consummation of one significant acquisition or any number of
smaller acquisitions could require the Company to seek additional financing. As
a consequence, the Company may, from time to time, seek additional funding
through public or private financing, including debt or equity financing. There
can be no assurance that adequate funding will be available as needed or, if
available, on terms acceptable to the Company. See "RISK FACTORS-Possible Need
for Additional Financing."
22
<PAGE>
BUSINESS
GENERAL
The Company designs, builds, installs, modifies and maintains (collectively,
"wireless infrastructure building and implementation services") wireless
communications transmitting and receiving facilities primarily for providers of
wireless communications services. In addition, the Company (i) provides
electrical design, engineering, and testing services (collectively, "wireless
infrastructure electrical design and engineering services") and site acquisition
and evaluation services ("site acquisition services") in connection with the
installation and location of wireless communications facilities. The Company
also sells unmanned communications shelters designed to be located adjacent to
wireless transmitting and receiving facilities to house electrical equipment
associated with such facilities. The Company's customers include providers of a
broad range of wireless communications services including paging services,
analog and digital cellular telephone services, personal communications services
or "PCS", specialized mobile radio or "SMR" services, enhanced specialized
mobile radio or "ESMR" services and microwave communications services. The
Company conducts business primarily through its subsidiaries. The Company's
principal operating subsidiaries include Specialty Constructors, Inc., a New
Mexico corporation ("Specialty Constructors"), Specialty Combined Resources,
Inc., a Texas corporation ("Specialty Combined Resources"), Specialty
Management, Inc., a Nevada corporation ("Specialty Management") and Specialty
Fortress, a Nevada corporation ("Specialty Fortress"). The Company's
headquarters are located in Cedar Crest, New Mexico, approximately seven miles
from Albuquerque, New Mexico. The Company also maintains regional offices in
Laguna Hills, California, Houston, Texas, Fairview Heights, Illinois (located
just outside St. Louis, Missouri), Crest Hill, Illinois (located just outside
Chicago, Illinois), Birmingham, Alabama, Columbus, Ohio, Raleigh, North Carolina
and Orlando, Florida.
HISTORY
The Company was incorporated in April, 1994 for the purpose of acquiring all of
the issued and outstanding shares of capital stock of Michael R. Budagher
Specialty Constructors, Inc., a New Mexico corporation. In 1995, Michael R.
Budagher Specialty Constructors, Inc. changed its corporate name to Specialty
Constructors, Inc. Originally, the Company's primary business was constructing,
maintaining and modifying microwave transmission and receiving facilities
predominantly for providers of short- and long-distance microwave communications
services. Later, the Company began installing electronic and other related
equipment in connection with these facilities. Following the initiation of the
build out of cellular telephone networks in the United States, which began in
1983, the Company began to build, construct, enhance and maintain cellular
transmitting and receiving facilities as well as microwave transmitting and
receiving facilities. Throughout the late 1980's and continuing until the mid-
1990's, a majority of the Company's growth and revenues were derived from
wireless infrastructure building and implementation services related to the
continuing build out and expansion of cellular telephone and paging networks. In
the early 1990's, the Company began an effort to expand the scope of the
services offered by the Company to include wireless infrastructure electrical
design and engineering services. As a part of this expansion, in July 1995, the
Company acquired ST Combined Resources, Inc., a California-based provider of
electrical design and engineering services to the wireless communications
industry. Following the acquisition, ST Combined Resources, Inc. changed its
corporate name to Specialty Combined Resources, Inc.
RECENT TRENDS
During the fiscal year ended June 30, 1996, the Company continued to derive a
significant portion of its revenues from wireless infrastructure building and
implementation services rendered to providers of microwave, analog and digital
cellular-based wireless communications services. In addition, beginning during
approximately the last half of the fiscal year ended June 30, 1996 the Company
experienced increasing demand for its services from providers of wireless
communications services utilizing new or enhanced wireless communications
technologies such as PCS and ESMR. This trend has continued into through the
first quarter of fiscal 1997. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
In January, 1997, the Company determined to cease manufacturing unmanned
communications shelters at its manufacturing facilities located in Albuquerque,
New Mexico. Instead, the Company intends to obtain unmanned communications
shelters from unaffiliated third parties for resale to its customers.
Historically, sales of these shelters have not comprised a significant component
of the Company's revenues or results of operation. The Company does not
anticipate that the cessation of manufacturing operations related to these
shelters will have a material impact on its business, results of operations and
financial condition. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS-Cessation of Shelter Manufacturing
Operations."
23
<PAGE>
THE WIRELESS COMMUNICATIONS INDUSTRY
Overview. The demand for wireless communications services in the United States
has grown dramatically during the last five years. At present, the rate of
wireless telephony penetration in the United States is estimated to be 13% and,
according to Kagan Associates, is expected to reach 48% by 2006. According to
the Cellular Telecommunications Industry Association ("CTIA"), the compound
annual growth rate of cellular subscribers exceeded 45% from 1990 through 1995.
The wireless communications industry is characterized by networks that use radio
waves to transmit voice and data signals. Typically, different technologies or
applications use different frequencies within the radio spectrum. Examples of
wireless communications technologies include paging services, which involve one-
way or limited two-way data transmission capability, and cellular, PCS services,
SMR and ESMR services, all of which involve two-way voice and data transmission
capabilities.
Cellular. Although SMR and other radio-based communications technologies have
been utilized commercially by taxi cabs, ambulance fleets and other fleet
dispatch services and by government entities such as police and fire departments
for many years, the widespread use of wireless communications technologies for
the general public began with the advent of the cellular telephone industry. The
cellular telephone industry began in 1983 when the FCC began granting licenses
to two licensees in each metropolitan statistical area ("MSA") and many rural
areas ("rural service areas") throughout the United States. Cellular licenses
were eventually awarded in 306 MSAs and 428 rural service areas. In 1986, the
FCC granted additional portions of the radio spectrum to each holder of a
cellular license. Cellular networks operate within a 50 MHZ band located in the
800-900 MHZ frequency range. Paging services also began to expand rapidly in the
1980's. Paging services utilize a different portion of the radio spectrum and,
while not offering two-way voice transmission capability, historically have
offered a lower-cost alternative for mobile communications than cellular
telephony.
PCS. During the late 1980's and early 1990's, advances in technology of
wireless communications gave rise to a new technology known as PCS. PCS is a
digital, wireless communications system supported by high-density call
transmitters. PCS typically involves a network of small, low-powered
transceivers placed throughout a neighborhood, business complex, community or
metropolitan area to provide customers with mobile and portable voice and data
communications. PCS enables subscribers to have dedicated personal telephone
numbers and to communicate using small digital radio handsets that can be
carried in a pocket or purse. In 1993, Congress enacted legislation directing
the FCC to allocate a portion of the radio spectrum for PCS via competitive
bidding. In response, the FCC established PCS service areas in the United States
and began to hold auctions for portions or "Blocks" of the radio spectrum
designated for PCS services. Compared with cellular, PCS will operate at higher
frequencies within a 140 MHZ band in the 1850-1990 MHZ frequency range and in
slightly different geographic coverage areas. The geographic areas for PCS
licenses are divided into 51 major trading areas ("MTAs") for A- and B-Block
licenses, and 493 basic trading areas ("BTAs") for other PCS licenses, including
the C-, D-, E- and F-Block licenses. MTAs and BTAs are different than the
metropolitan statistical areas and rural service areas.
In March 1995, the FCC completed the A- and B-Block PCS auction, resulting in
the award of two 30 MHZ licenses in each MTA. In May 1996, the FCC completed the
C-Block Auction, resulting in the award of one 30 MHZ license in each BTA. After
completion of the C-Block auction, the FCC reauctioned 18 C-Block licenses for
which the high bidders failed to make initial post-auction down payments. On
January 14, 1997, the FCC completed the auctions for the D-, E- and F-Block
licenses, each of which was for one 10 MHZ license in each BTA.
SMR and ESMR Services. As a result of advances in digital technology some
providers of wireless communications services have begun to design and deploy or
modify networks that utilize SMR and ESMR technologies. ESMR technology converts
analog SMR services into an integrated digital transmission system providing for
call hand-off, frequency reuse and wide area call delivery networks. ESMR
technology also increases the capacity of SMR networks enabling more efficient
use of the allocated frequency. This increase coupled with additional advances
in switching technologies are intended to enable ESMR networks to compete
effectively with cellular and PCS networks. While ESMR technology may offer
certain cost advantages over cellular and PCS technologies, at the present time,
it is unclear whether ESMR technologies can compete effectively with cellular
and PCS networks.
Other Wireless Communications Technologies. The FCC has proposed or adopted
final rules authorizing additional wireless communications services. For
example, the FCC has proposed to authorize the use of the 37 and 39 GHz bands
for the provision of fixed and mobile communications services. In May 1996, the
FCC adopted final rules to permit Interactive Video and Data Service licensees
to provide mobile two-way data services. Also in May 1996, the FCC authorized
local multipoint distribution service licensees to provide certain fixed and
mobile communications services. The FCC has proposed to reallocate former
federal government spectrum located at 4 GHz for a broad range of wireless fixed
and mobile services, and is expected to reallocate additional former federal
government spectrum for wireless mobile services in the future.
24
<PAGE>
Several national and global mobile satellite or "MSS" based systems also have
been proposed that are intended to compete directly with land-based wireless
communications networks. In theory, this technology could create an alternative
to land-based wireless networks that might reduce or slow the growth in demand
for new and enhanced land-based wireless communications transmitting and
receiving facilities, which could have a material adverse effect on the
Company's business, financial condition and results of operation. At the present
time, it is not possible to forecast the effect, if any, that MSS or any other
alternative technology will have on the demand for wireless communications
infrastructure development. However, at the present time, the Company does not
believe that MSS technologies will adversely effect demand for the Company's
services in the foreseeable future.
COMPETITION
Historically, the industry for wireless infrastructure building and
implementation services has been highly competitive but also highly fragmented.
As such, most participants in this industry have been relatively small firms of
between three to fifty employees. However, the Company has also faced
competition in the market for wireless infrastructure building and
implementation services from wireless communications equipment manufacturers
which provide such services in conjunction with the sale of wireless
communications equipment. While the industry continues to be comprised
predominately of these smaller firms, over the past two years, the increased
demand for wireless infrastructure building and implementation services has
motivated other competitors to enter the market. These new competitors include,
but are not limited to, traditional, non-wireless engineering and construction
companies and non-wireless subcontractors who have begun to enter the market
either alone or in conjunction with wireless equipment manufacturers. In
addition, the Company faces competition in the market for wireless
infrastructure electrical design and engineering services from stand-alone
electrical engineering and design firms, other providers of wireless
infrastructure building and implementation services and wireless communications
equipment manufacturers. Many of these new competitors as well as many of the
Company's historical competitors have significantly greater financial and other
resources than the Company. As demand for wireless infrastructure building and
implementation services increases, the Company expects that more non-traditional
competitors will enter the market and provide increased competition to the
Company. There can be no assurance that the Company will be able to compete
effectively or that such increased competition will not have a material adverse
effect on the Company's business, results of operations and financial condition.
See "RISK FACTORS-Competition."
EMPLOYEES
As of January 24, 1997, the Company employed 218 full-time employees, 190 in
wireless infrastructure building and implementation services, 16 in wireless
infrastructure electrical design and engineering services and the remainder in
executive and administrative positions. This is an increase of 62 employees from
September 1, 1996. This increase is primarily due to additional installation and
maintenance personnel and administrative personnel required to facilitate the
Company's growth and the acquisition of substantially all the assets and
employees of Data Cell Systems, Inc. in October, 1996. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS- Recent
Acquisitions." None of the Company's employees is represented by a labor union
and the Company considers its employee relations to be good. The Company's
future success is dependent on its ability to attract and retain experienced,
highly qualified technical employees, project managers and other key employees
who perform and manage the wireless infrastructure building and implementation
services and wireless infrastructure electrical design and engineering services
provided by the Company. See "RISK FACTORS -- Dependence on Labor Force."
FACILITIES
The Company presently leases approximately 5,400 square feet of office space
from Michael R. Budagher, its Chairman of the Board, President, Chief Executive
Officer, Treasurer and a Director, for $16,800 annually. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."
The office space is located in a 6,400 square foot building in Cedar Crest, New
Mexico. This office serves as the Company's headquarters and as a regional
office for the Company's wireless infrastructure building and implementation and
wireless infrastructure electrical design and engineering operations. The
Company believes the Company's offices in Cedar Crest will be adequate to meet
the Company's needs for at least the next twelve months.
In addition, the Company maintains two regional offices in Illinois and one each
in Ohio, Alabama, North Carolina, Florida, Texas, California and Arizona, from
which the Company conducts primarily wireless infrastructure building and
implementation operations. In addition to the Company's headquarters facility
in Cedar Crest, New Mexico, the Company's electrical design and engineering
operations are conducted primarily from offices located in Laguna Hills,
California and Houston, Texas. Until January, 1997, the Company also maintained
a facility for the construction of shelters in Albuquerque, New Mexico. In
January, 1997 the Company ceased manufacturing these shelters and instead
intends to obtain shelters from unaffiliated third parties for resale to its
customers. All of the Company's regional offices and its shelter manufacturing
facility are leased pursuant to operating leases that do not exceed five years
in duration. During fiscal 1996, the Company closed its Wycoff, New Jersey
regional office.
25
<PAGE>
LEGAL PROCEEDINGS
The Company is, and, from time to time may be, a party to routine legal
proceedings incidental to its business. The outcome of these legal proceedings
is not expected to have a material adverse effect on the Company's business,
financial condition or results of operation, based on the Company's current
understanding of the relevant facts and law. The Company maintains general
liability insurance against risks arising out of the normal course of business.
GOVERNMENT REGULATION
The wireless communications industry is subject to regulation by state
regulatory agencies, the FCC, Congress, the courts and other governmental
bodies. There can be no assurance that any of these governmental bodies will not
adopt or change regulations or take other actions that would adversely affect
the wireless communications industry and the Company's business, results of
operations and financial condition.
In addition, the Telecommunications Act of 1996 is expected to cause significant
changes in existing regulation of the telecommunications industry that are
intended to promote the competitive development of new services, to expand
public availability of telecommunications services and to streamline regulation
of the industry. These changes include requirements that local exchange carriers
must: (i) permit other competitive carriers, which may include many wireless
communications service providers, to interconnect to their networks; (ii)
establish reciprocal compensation agreements with competitive carriers to
terminate traffic on each other's networks and (iii) offer resale of their local
loop facilities. The implementation of these requirements by the FCC and state
authorities potentially involves numerous changes in established rules and
policies that could adversely affect the wireless communications industry and
the Company's business, results of operations and financial condition.
In addition, the construction and installation of wireless transmitting and
receiving facilities are often the subject to state or local zoning, land use
and other regulation. Such regulation may include zoning, environmental and
building permit approvals or other state or local certification. The
Telecommunications Act of 1996 provides that state and local authority over the
placement, construction and modification of personal wireless services
(including cellular and other CMRS and unlicensed wireless services) shall not
prohibit or have the effect of prohibiting personal wireless services or
unreasonably discriminate among providers of functionally equivalent services.
Although state and local zoning authorities retain their rights over land use,
their actions cannot have the effect of banning wireless services or picking and
choosing among similar wireless providers.
26
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of the date of this
Prospectus with respect to the directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
----- --- --------
<S> <C> <C>
Michael R. Budagher(1) 38 Chairman of the Board, President, Chief
Executive
Officer, Treasurer and Director
Kari A. Young(2) 36 Chief Financial Officer, Treasurer, Secretary
and Director
Dennis K. Hartnett(3) 42 Chief Accounting Officer, Secretary and
Assistant Treasurer
John D. Emery(4)(5) 49 Director
Terry D. Farmer(2)(3)(4)(5) 47 Acting Secretary and Director
Jon D. Word(4)(5) 36 Director
</TABLE>
_______________________
(1) Mr Budagher is a member of the Stock Option Committee of the Board of
Directors and became Treasurer of the Company following the resignation of
Ms. Young on June 14, 1996.
(2) Kari A. Young resigned as Chief Financial Officer, Treasurer, Secretary and
Director of the Company effective June 14, 1996, at which time Terry D.
Farmer became Acting Secretary of the Company. Until her resignation, Ms.
Young was also a member of the Stock Option Committee of the Board of
Directors.
(3) Dennis K. Hartnett, CPA was appointed Secretary and Assistant Treasurer of
the Company effective July 8, 1996, at which time Terry D. Farmer resigned
as Acting Secretary of the Company.
(4) Member of the Compensation Committee of the Board of Directors.
(5) Member of the Audit Committee of the Board of Directors.
Directors hold office until their term expires and until their successors have
been elected and qualified. Officers are appointed annually and serve at the
discretion of the Board of Directors. There are no family relationships among
executive officers or directors of the Company.
Mr. Budagher founded the Company in 1981 and has been Chairman of the Board,
President, Chief Executive Officer and a Director of the Company since its
inception. Mr. Budagher was appointed Treasurer of the Company in June, 1996
following the resignation of Ms. Young as the Company's Chief Financial Officer,
Treasurer, Secretary and a Director, which was effective June 14, 1996. Mr.
Budagher is also a founder, stockholder and President of Specialty Antenna Site
Resources, Inc. ("SASR") and a founder, stockholder and President of Specialty
Constructors Coatings, Inc. ("SCC"). See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
Ms. Young resigned as Chief Financial Officer, Treasurer, Secretary and a
Director of the Company effective June 14, 1996. Prior to her resignation, Ms.
Young had been Chief Financial Officer of the Company since 1990 and Secretary,
Treasurer and a Director of the Company since November, 1994. Prior to her
resignation from the Company, Ms. Young was a stockholder in Specialty
Manufacturing, Inc. ("SMI"). See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS." Ms. Young received her Bachelor of Business Administration from
the University of New Mexico in 1985 and her Certificate of Public Accountancy
in 1990. Ms. Young is a member of the American Institute of Certified Public
Accountants and the New Mexico Society of Certified Public Accountants.
Mr. Hartnett became employed by the Company as Chief Accounting Officer in June,
1996 and was appointed Secretary and Assistant Treasurer of the Company in July,
1996. From February, 1996 to June, 1996, Mr. Hartnett was Chief Financial
Officer of New Mexico Mortgage Company, Inc. From April, 1995 to February, 1996,
Mr. Hartnett was self-employed as an independent accounting and management
consultant. From March, 1991 to April, 1995, Mr. Hartnett was a Senior Asset
Manager for Northcorp Realty Advisors, Inc.
27
<PAGE>
Mr. Emery has been a Director of the Company since 1994. For more than five
years, Mr. Emery has been president of Corporate Development Center, Inc., a
consulting firm specializing in assisting fast growth companies, arranging
mergers and acquisitions, rendering expert valuations, and providing crisis
management services to businesses. In addition, Mr. Emery has taught
Entrepreneurship, Business Ethics and Organizational Environment, and Business
Policy and Strategy at the University of New Mexico. Mr. Emery holds a Master of
Business Administration from the Harvard Business School.
Mr. Farmer has been a Director of the Company since 1994. Mr. Farmer has been a
stockholder, officer and director of the Albuquerque law firm of Moses, Dunn,
Farmer & Tuthill, P.C. for more than five years. Mr. Farmer is a past
President of the Albuquerque Lawyers Club and the Young Lawyers Division of the
State Bar of New Mexico. In 1994, Mr. Farmer was elected a fellow in the New
Mexico Bar Foundation. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
Mr. Word has been a Director of the Company since 1994. Mr. Word has been
President and Chief Executive Officer of Contact New Mexico, L.P., a paging and
messaging service provider in New Mexico and Southern Colorado since August,
1992. Mr. Word also is an owner and director of Rural Telco, Inc., a cellular
telephone provider in North Carolina and is President and Director of Word SMR,
Inc. which holds specialized mobile radio licenses in several locations
throughout the United States. In 1991 and 1992, Mr. Word was a consultant in
the wireless telecommunications industry and from 1988 through 1991 he was Vice
President of Operations for Cellular Information Systems, Inc., a wireless
communications company. Mr. Word received a Bachelor of Science Degree from
Texas A&M University in 1984.
COMPENSATION AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended June 30, 1996, there were four (4) meetings of the
full Board of Directors. All Directors attended at least 75% of the meetings
held during the fiscal year ended June 30, 1996. The Company's Board of
Directors has an Audit Committee, a Compensation Committee and a Stock Option
Committee. Each committee met at least once during the fiscal year ended June
30, 1996. All committee members attended at least 75% of the committee meetings
held during their terms as members of such committees the fiscal year ended June
30, 1996.
Audit Committee. The Audit Committee is currently composed of three (3) non-
employee Directors. The current members of the Audit Committee are Messrs.
Emery, Farmer and Word. This committee meets with the Company's independent
public accountants to review the scope and results of auditing procedures and
the Company's accounting procedures and controls. The Audit Committee also
provides general oversight with respect to the accounting principles employed in
the Company's financial reporting. The Audit Committee met one (1) time during
the fiscal year ended June 30, 1996.
Compensation Committee. The Compensation Committee is composed of three (3) non-
employee Directors. The current members of the Compensation Committee are
Messrs. Emery, Farmer and Word. The Compensation Committee is responsible for
determining and reviewing the compensation of the officers of the Company,
including the Company's Chief Executive Officer. The Compensation Committee
determines and reviews executive bonus plan targets and allocations and
administers the terms and provisions of the Company's Amended and Restated 1994
Stock Option Plan. The Compensation Committee met one (1) time during the fiscal
year ended June 30, 1996.
Stock Option Committee. The Stock Option Committee was formed by the Board of
Directors in 1994 and charged with the responsibility for administering the
Company's Outside Directors' Stock Option Plan (the "Outside Directors' Stock
Option Plan"). Prior to June 14, 1996, the Stock Option Committee administered
the terms and provisions of the Outside Directors' Stock Option Plan and was
comprised of Mr. Budagher and Ms Young. Pursuant to the provisions of the
Outside Directors' Stock Option Plan, so long as the Stock Option Committee is
responsible for administering the Outside Directors' Stock Option Plan, the
Stock Option Committee must be comprised of at least two (2) Directors neither
of whom is eligible to receive stock options under the Outside Directors' Stock
Option Plan. Ms. Young's resignation on June 14, 1996 as the Company's Chief
Financial Officer, Assistant Secretary, Treasurer and a Director, created a
vacancy on the Stock Option Committee that could not be filled in compliance
with the terms of the Outside Directors' Stock Option Plan because Mr. Budagher
is the only remaining member of the Board of Directors who is eligible to serve
on the Stock Option Committee. Consequently, from and after June 14, 1996 to the
present, the Outside Directors' Plan has been administered by the entire Board
of Directors. The Stock Option Committee met one (1) time during the fiscal
year ended June 30, 1996.
Cash Compensation. Directors receive $500 for each Board of Directors meeting
attended and reimbursement for expenses incurred in attending such meetings. In
addition, Directors who serve on committees receive $100 per hour for time spent
attending meetings of such committees.
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<PAGE>
Outside Directors' Stock Option Plan
The Outside Directors' Stock Option Plan (the "Outside Directors Option Plan")
was approved by the Board of Directors and Stockholders of the Company on May
16, 1994. A total of 50,000 shares of Common Stock has been authorized and
reserved for issuance under the Outside Directors' Stock Option Plan, subject to
adjustment to reflect changes in the Company's capitalization in the case of a
stock split, stock dividend or similar event. The Outside Directors' Stock
Option Plan is currently administered by the entire Board of Directors. Until
June 14, 1996, the Outside Directors' Stock Option Plan was administered by the
Stock Option Committee of the Board of Directors which consisted of Michael R.
Budagher and Kari A. Young. Following Ms. Young's resignation on June 14, 1996
as Chief Financial Officer, Treasurer, Secretary and a Director of the Company,
in accordance with the terms of the Outside Directors' Stock Option Plan, the
Outside Directors' Stock Option Plan began being administered by the entire
Board of Directors. Currently, the Board of Directors has the sole authority to
interpret the Outside Directors' Stock Option Plan to determine the persons to
whom options will be granted, to determine the basis upon which the options will
be granted and to determine the exercise price, duration and other terms of
options to be granted under the Outside Directors' Stock Option Plan; provided
that, (i) the exercise price of each option granted under the Plan may not be
less than the fair market value of the Common Stock on the day of the grant of
the option, (ii) the exercise price must be paid in cash and or stock upon
exercise of the option, (iii) no option may be exercisable for more than 10
years after the date of grant, and (iv) no option is transferable other than by
will or the laws of descent and distribution. If an optionee's status as an
Outside Director is terminated for any reason other than death, the optionee may
exercise his option at any time within 90 days after such termination to the
extent it was then exercisable. If an optionee dies while an Outside Director
and shall not have fully exercised options granted under the Outside Directors'
Stock Option Plan, such options may be exercised in whole or in part within six
months of the optionee's death by the executors or administrators of the
optionee's estate or by the optionee's heirs. The vesting period, if any,
specified for each option will be accelerated upon the occurrence of a change of
control or threatened change of control of the Company.
Options under the Outside Directors' Stock Option Plan are granted only to
Outside Directors. Under the Outside Directors' Stock Option Plan, the term
"Outside Directors" means only those directors of the Company or a subsidiary of
the Company who are not regular salaried employees of either the Company or a
subsidiary as of the date the option is granted. No stock options were granted
under the Outside Directors' Stock Option Plan during the fiscal year ended June
30, 1996. As of the date of this Prospectus, (i) 30,000 options had been issued
under the Outside Directors' Stock Option Plan, of which 10,000 had been
exercised and 20,000 remained outstanding and currently exercisable, and (ii)
20,000 options remained available for future issuance under the Outside
Directors' Stock Option Plan.
Options are not transferable or assignable by an optionee, voluntarily or by
operation of law, other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order. Each option is exercisable,
during the optionee's lifetime, only by the optionee, his guardian or legal
representative.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding compensation,
aggregate stock option grants and exercises during the fiscal year ended June
30, 1996 and fiscal year-end stock option values for the Chief Executive Officer
and each executive officer ("Named Executive Officer") of the Company whose
total annual salary and bonus exceeded $100,000 during such fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------------
Awards Payouts
--------------- -------
Other Restricted Securities All other
Name and Annual Stock Underlying LTIP Compen-
Principal Salary Bonus Comp. Award(s) Options/ Payouts sation(1)
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- -------- ---- ------ ----- ------ --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael R. 1996 $ 85,000 -- -- -- -- -- --
Budagher 1995 $100,000 -- -- -- -- -- $16,374
(C.E.O.) 1994 $117,645 -- -- -- -- -- --
</TABLE>
_______________________
(1) Reflects employer contributions under the Specialty Constructors, Inc.
Profit Sharing Plan.
29
<PAGE>
Neither the Chief Executive Officer nor any Named Executive Officer received
personal benefits, securities or property in excess of the lesser of $50,000 or
10% of such individual's reported salary and bonus. Neither the Chief Executive
Officer nor any Named Executive Officer has any employment agreement with the
Company or any of its subsidiaries.
Employment Arrangements
The Company has entered into an Employment Agreement with Mr. Hartnett, its
Chief Accounting Officer, Secretary and Assistant Treasurer, the term of which
is terminable at will by either the Company or Mr. Hartnett. The Company has
not entered into any employment agreements or arrangements with any of its other
executive officers, including Mr. Budagher. See "RISK FACTORS-Dependence on Key
Personnel."
Stock Options
No options to purchase Common Stock of the Company were granted to the Chief
Executive Officer or any Named Executive Officer in the fiscal year ended June
30, 1996. At June 30, 1996, neither the Chief Executive Officer nor any Named
Acceptive Officer held any unexercised options to purchase shares of the
Company's common stock and no such options were exercised during the fiscal year
ended June 30, 1996.
Amended and Restated 1994 Option Plan
The Company's 1994 Stock Option Plan was approved by the Board of Directors and
Stockholders of the Company on May 16, 1994 to provide for the grant of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986 as amended. A total of 100,000 shares of Common Stock was
originally authorized and reserved for issuance under the 1994 Stock Option Plan
subject to adjustment to reflect changes in the Company's capitalization in the
case of a stock split, stock dividend or similar event. During fiscal 1996, the
Board of Directors approved the amendment and restatement of the 1994 Stock
Option Plan (as amended and restated, the "Amended and Restated 1994 Stock
Option Plan") to increase the number of shares authorized for issuance under the
1994 Stock Option Plan from 100,000 to 400,000. The Amended and Restated 1994
Stock Option Plan and the grant of certain options under the Amended and
Restated 1994 Stock Option Plan to employees and advisors during fiscal 1996
were approved by a vote of the holders of a majority of the Company's
outstanding Common Stock on November 1, 1996. The Amended and Restated 1994
Stock Option Plan is administered by the Compensation Committee, which consists
of the Company's three Outside Directors. Under the Amended and Restated 1994
Stock Option Plan, the term "Outside Directors" means only those directors of
the Company or a subsidiary of the Company who are not regular salaried
employees of either the Company or a subsidiary as of the date the option is
granted. The Compensation Committee has the sole authority to interpret the
Amended and Restated 1994 Stock Option Plan; provided that, (i) the exercise
price of each option granted under the Amended and Restated 1994 Stock Option
Plan may not be less than the fair market value of the Common Stock on the day
of the grant of the option, (ii) the exercise price must be paid in cash and or
stock upon exercise of the option, (iii) no option may be exercisable for more
than ten (10) years after the date of grant, and (iv) no option is transferable
other than by will or the laws of descent and distribution. No option is
exercisable after an optionee who is an employee of the Company ceases to be
employed by the Company or a subsidiary of the Company, subject to the right of
the Compensation Committee to extend the exercise period for not more than 90
days following the date of termination of an optionee's employment. An optionee
who was a director or advisor may exercise his option at any time within 90 days
after such optionee's status as a director or advisor terminates to the extent
he was entitled to exercise such option at the date of termination of his
status. If an optionee's employment is terminated by reason of disability, the
Compensation Committee has the authority to extend the exercise period for not
more than one year following the date of termination of the optionee's
employment or service as an advisor or director. If an optionee dies and shall
hold options not fully exercised, such options may be exercised in whole or in
part within one year of the optionee's death by the executors or administrators
of the optionee's estate or by the optionee's heirs. The vesting period, if
any, specified for each option will be accelerated upon the occurrence of a
change of control or threatened change of control of the Company.
As of the date of this Prospectus, (i) 343,895 options had been issued and
remained outstanding under the Amended and Restated 1994 Stock Option Plan, of
which none had been exercised and 133,895 were currently exercisable, and (ii)
56,105 options remained available for future issuance under the Amended and
Restated 1994 Stock Option Plan.
30
<PAGE>
INDEMNIFICATION AND LIMITATION ON LIABILITY
Section 78.751 of NGCL empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by reason
of the fact that he or she is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding if the person indemnified acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of any
action by or in the right of the corporation, no indemnification may be made in
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation or for amounts paid in settlement to
the corporation unless and only to the extent that the court in which such
action or suit was brought or other court of competent jurisdiction determines
that in view of all the circumstances of the case such person is fairly and
reasonably entitled to indemnity for such expenses as the court shall deem
proper. Section 78.751 of the NGCL further provides that to the extent a
director or officer of a corporation has been successful in the defense of any
action, suit or proceeding referred to above or in the defense of any claim,
issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith.
The Company's Articles and By-Laws provide, in effect, that to the extent and
under the circumstances permitted by Section 78.751 of the NGCL and subject to
certain conditions, the Company shall indemnify any person who was or is a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding of the type described above by reason of the fact that he or she is
or was a director or officer of the Company or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation.
Reference is made to the Company's Articles and By-laws, both of which have been
filed as Exhibits to the Registration Statement of which this Prospectus is a
part.
The indemnification provisions set forth in the Company's Articles and By-laws
provide for broad indemnification under Nevada law with no express exclusion for
liabilities arising under or in connection with the Securities Act. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. At present, there is no pending litigation or proceeding
involving a director or officer of the Company in which indemnification is
required or permitted, and the Company is not aware of any threatened litigation
or proceeding that may result in a claim for such indemnification.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a description concerning transactions which may not otherwise
be described herein by and between the Company and/or its affiliates and other
persons or entities affiliated with the Company or its affiliates. The Company
is of the view that each of such transactions was on terms no less favorable to
the Company than would otherwise have been available to the Company in
transactions with unaffiliated third parties, if available at all.
As of the date of this Prospectus, Michael R. Budagher owned 52% of SASR. In
1990, SASR acquired approximately 200 microwave towers and related land from
Western Union for future sale. SASR has sold approximately 95% of these towers.
The Company did not transact any business with SASR during fiscal 1996. However,
in fiscal 1994 and 1995, the Company received $13,974 and $1,200, respectively,
for services provided to SASR and, for these respective fiscal years, provided
management services to SASR in exchange for the use of the certain equipment in
the amount of $25,700 and none. The relationship with SASR is expected to be
negligible in the future.
As of the date of this Prospectus, Michael R. Budagher owned 50% of SCC. SCC
provides lead abatement services and finishes or refinishes metal structures,
principally elevated water towers. During the years ended June 30, 1994, 1995
and 1996, the Company had paid $17,449, $170,260 and $401,587, respectively, for
services provided by SCC to the Company. SCC operations are primarily involved
in specialized coatings and lead abatement activities. Historically, its
activities required skills that were different from those required by the
Company and included an element of environmental risk that the Company's Board
of Directors did not want the Company to be involved with. In recent years,
providers of wireless communications services have increasingly sought to locate
wireless transmitting and receiving facilities on these elevated
31
<PAGE>
water towers, often necessitating certain lead abatement procedures to be
conducted before these facilities could be installed. As a result, the demand
for services of the type provided by SCC has increased and the skills required
to conduct those activities have become increasingly similar to those needed to
conduct the wireless infrastructure building and implementation services
provided by the Company. The Company believes this trend towards locating
wireless transmitting and receiving facilities on these elevated water towers
and possibly other existing elevated structures, will continue in the future.
Consequently, the Company anticipates that its relationship with SCC will
continue in the indefinite future. In addition, although the Company has no
agreement and has conducted no negotiations with the principles of SCC regarding
a possible acquisition of SCC by the Company, the Company may seek to acquire
SCC in the future.
As of the date of this Prospectus, Bruce P. Budagher, vice president of
Specialty Constructors and the brother of Michael R. Budagher, and Sheril E.
Budagher, the spouse of Michael R. Budagher, owned all of the outstanding stock
of SMI. Prior to August, 1996, Kari A. Young, who resigned on June 14, 1996 as
Chief Financial Officer, Secretary, Assistant Treasurer and a Director of the
Company, owned 1/3 of the outstanding stock of SMI. Ms. Young's SMI stock was
repurchased by SMI as of August, 1996. SMI manufactures devices that ground
electric transmission lines. The Company buys these devices from SMI for use
in connection with certain of the Company's wireless infrastructure building
operations. During the 1994, 1995 and 1996 fiscal years, the Company purchased
$6,403, $12,065 and $13,285, respectively, of SMI products. This relationship is
expected to continue in the indefinite future.
The Company has utilized contract labor from Budagher's Nursery, Inc., a company
wholly owned by William J. Budagher, a brother of Michael R. Budagher and Bruce
P. Budagher. The Company paid $192,493, $126,884 and $92,391 for contract labor
services provided by Budagher's Nursery, Inc. for the years ended June 30, 1994,
1995 and 1996, respectively.
The Company leases its office building from Michael R. Budagher and the spouse
of Michael R. Budagher. The building has 6,400 square feet for which the
Company leases 5,400 square feet and pays $16,800 annually for the space. See
"BUSINESS-Facilities." Management of the Company believes that the rent for the
space is at least as favorable as could have been negotiated in an arms length
transaction.
There are numerous conflicts of interest between the Company and its affiliates,
particularly between the Company and entities that are affiliated with
individuals having executive responsibility for the Company. Typically, these
include the possibility of channeling business to entities other than the
Company that is more appropriately business of the Company, the Company paying
excessive prices to affiliated entities, or the Company subsidizing the
affiliated entity by charging less than market rates. The Company has extensive
experience in costing the services it provides, and management of the Company
believes that the Company's costing to affiliated entities is consistent with
its general costing. Similarly, products or services received by the Company
from affiliated entities have been at substantially the same rates charged other
enterprises. The Company has compared these rates prior to engagement with
independent quotes or with rates charged by other entities. None of the
agreements or arrangements with affiliates are subject to adjustment.
While there has been no independent determination as to the fairness of the
Company's transactions with affiliated entities, the Company's Board of
Directors has reviewed these transactions and has found the terms of these
transactions to be fair and reasonable to the Company. Management of the Company
believes that the transactions with affiliated entities that occurred in the
past have been fair and reasonable to the Company and that practical measures
have been taken to assure that any such transactions in the future will be fair
and reasonable to the Company. Nonetheless, almost all transactions between the
Company and affiliated entities have been with entities that are controlled by
Michael R. Budagher. As of the date of this Prospectus, Michael R. Budagher
controls the Company. As a result of this control, Michael R. Budagher has the
legal power to elect directors and thus elect those that set the Company's
policies, including policies involving related party transactions, that is,
should Michael R. Budagher determine to have a different policy regarding
transactions with affiliates, he has the power to elect directors that would
implement that new policy. Michael R. Budagher has no intent to have any
transaction with an affiliated entity that is not fair and reasonable to the
Company, now or in the future. See "RISK FACTORS-Concentration of Ownership."
Each of Michael R. Budagher and Bruce P. Budagher have represented to the
Company that, notwithstanding his equity or other interest in the businesses
other than the Company described herein, he intends to devote substantially all
of his efforts during regular business hours to the business of the Company.
During the fiscal year ended June 30, 1996, the Company engaged in transactions
with the law firm with which Mr. Farmer is associated. During the fiscal year
ended June 30, 1996, the Company paid $32,665 to the law firm of Moses, Dunn,
Farmer and Tuthill, P.C. Mr. Farmer is a stockholder, officer and director of
that firm and a Director of the Company.
32
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information, as of December 31, 1996, with
respect to the beneficial ownership of Common Stock by (i) each director of the
Company, (ii) each executive officer of the Company, (iii) each person known by
the Company to own beneficially 5% or more of the Common Stock, and (iv) all
directors and executive officers of the Company as a group. Unless otherwise
noted, the persons listed below have sole voting and investment power with
respect to such shares.
<TABLE>
<CAPTION>
PERCENTAGE BENEFICIALLY OWNED(2)
--------------------------------
NAME AND ADDRESS OF BENEFICIAL NUMBER OF SHARES
OWNER BENEFICIALLY OWNED(1) BEFORE OFFERING AFTER OFFERING(3)
--------------------- --------------- -----------------
<S> <C> <C> <C>
Michael R. Budagher(4)
12001 Hwy 14 North
Cedar Crest, New Mexico 87008 2,355,000 56.1% 48.6%
Bruce P. Budagher(5)
12001 Hwy 14 North
Cedar Crest, New Mexico 87008 327,750 7.8% 6.7%
John D. Emery(6)
Corporate Development Center, Inc.
1613 University Blvd. 11,500 * *
Albuquerque, New Mexico 87102
Terry D. Farmer
Moses, Dunn, Farmer & Tuthill, P.C.
612 First Street N.W.
Albuquerque, New Mexico 87102 10,000 * *
Jon D. Word(6)
10526 City Lights Drive, N.E.
Albuquerque, New Mexico 87111 10,000 * *
All directors and executive
officers as a group (4 persons)(7) 2,714,250 64.1% 55.6%
</TABLE>
_______________________
*Less than 1%.
(1) Unless otherwise noted and subject to community property laws, where
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.
(2) Computations of percent of the outstanding shares of Common Stock treat as
outstanding all shares issuable upon exercise of options exercisable within
60 days held by the particular beneficial owner that are included in the
number of shares beneficially owned by such beneficial owner but otherwise
assume no exercise of outstanding options to purchase shares of Common
Stock granted pursuant to the Company's Amended and Restated 1994 Stock
Option Plan and Outside Directors' Stock Option Plan (See "MANAGEMENT-
Amended and Restated 1994 Stock Option Plan" and "MANAGEMENT-Outside
Directors' Stock Option Plan").
(3) Assumes exercise of all (i) the Underwriters' Warrants, (ii) the Warrants
included in the Units underlying the Underwriters' Warrants and (iii) the
Warrants Called for Redemption, although there can be no assurance that all
such securities will be exercised. See "PROSPECTUS SUMMARY-The Offering"
and "RISK FACTORS-Underwriters' Warrants; Risk of Further Dilution."
(4) Consists entirely of shares owned by the Budagher Family Limited
Partnership #1 (the "Budagher Family Partnership") of which Michael R.
Budagher is the sole general partner. As the sole general partner of the
Budagher Family Partnership, Michael R. Budagher has sole voting and
investment power with respect to these shares.
(5) Includes 27,500 shares subject to options exercisable within 60 days.
(6) Includes 10,000 shares subject to options exercisable within 60 days.
(7) Includes 20,000 shares subject to options exercisable within 60 days.
33
<PAGE>
DESCRIPTION OF SECURITIES
Upon consummation of this offering, the Company's authorized capital stock will
consist of 10,000,000 shares of Common Stock, par value $.01 per share, of which
4,845,713 shares will be outstanding, assuming (i) no exercise of outstanding
options to purchase shares of Common Stock granted pursuant to the Company's
Amended and Restated 1994 Stock Option Plan and Outside Directors' Stock Option
Plan (See "RISK FACTORS-Outstanding Options; Risk of Further Dilution,"
"MANAGEMENT-Amended and Restated 1994 Stock Option Plan" and "MANAGEMENT-Outside
Directors' Stock Option Plan."), and (ii) exercise of all (a) the Underwriters'
Warrants, (b) the Warrants included in the Units underlying the Underwriters'
Warrants and (c) the Warrants Called for Redemption although there can be no
assurance that all such securities will be exercised. See "PROSPECTUS SUMMARY-
The Offering" and "RISK FACTORS-Underwriters' Warrants; Risk of Further
Dilution."
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held in the
election of directors and on all other matters submitted to a vote of
stockholders. Cumulative voting of shares of Common Stock is prohibited.
Accordingly, holders of a majority of the shares of Common Stock entitled to
vote in any election of directors may elect all of the directors standing for
election.
Holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." Upon the liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to receive ratably
the net assets of the Company available after payment of all debts and other
liabilities. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. The outstanding shares of Common Stock are,
and the shares offered by the Company in this offering will be, when issued and
paid for, fully paid and nonassessable.
WARRANTS
The Warrants have been issued in registered form under, governed by, and subject
to the terms of a warrant agreement (as amended, the "Warrant Agreement")
between the Company, American Stock Transfer & Trust Company as warrant agent
(the "Warrant Agent") and H.J. Meyers & Co., Inc., ("H.J. Meyers & Co., Inc.")
successor to Thomas James & Associates, Inc. The following statements are brief
summaries of certain provisions of the Warrant Agreement. Copies of the Warrant
Agreement may be obtained from the Company or the Warrant Agent and have been
filed with the Commission as an exhibit to the Registration Statement of which
this Prospectus is a part.
REDEMPTION OF WARRANTS
The Warrant Agreement provides that upon thirty (30) days' written notice the
Company may, at its option, redeem the Warrants then outstanding at $.05 per
Warrant if the closing sales price of the Common Stock on the Pacific Stock
Exchange or such other national trading market on which the Common Stock is then
listed is at least $9.00 per share for ten (10) consecutive trading days (the
"Target Price"). The price of the Common Stock has exceeded the Target Price.
Warrants included in the Units underlying the Underwriters' Warrants are not
subject to redemption by the Company prior to exercise of the Underwriters'
Warrants. As of the date of this Prospectus no Underwriters' Warrants or
Warrants had been exercised and 500,000 Warrants (the "Warrants Called for
Redemption") were outstanding.
The Company has caused a notice of redemption to be sent to the holders of the
Warrants Called for Redemption and set the date for redemption thereof on
March 26, 1997 (the "Redemption Date"). All holders of Warrants Called for
Redemption have the right to exercise their Warrants Called for Redemption until
5:00 p.m. New York City time on the March 25, 1997, the last business day
preceding the Redemption Date. Warrants Called for Redemption may be exercised
by surrendering, at the corporate office of American Stock Transfer & Trust
Company (the "Warrant Agent") at 40 Wall Street, New York, New York 10005, the
Warrant Certificate evidencing such Warrants Called for Redemption together with
a subscription in the form set forth on the reverse side of the Warrant
Certificate, duly executed, and accompanied by the tender, in U.S. dollars, of
either federal funds or a certified check or bank cashier's check, payable to
the order of the Warrant Agent for the applicable exercise price for the
Warrants Called for Redemption. Any Warrants Called for Redemption not so
exercised will be redeemed for $.05 per Warrant Called for Redemption after the
Redemption Date. Upon exercise of the Underwriters' Warrants, the Company
intends to notify the holders of the Warrants included in the Units underlying
the Underwriters' Warrants so exercised of the Company's intention to redeem
such Warrants as soon as practicable.
34
<PAGE>
Any redemption of Warrants, including redemption of the Warrants Called for
Redemption, shall also be subject to the following conditions: (i) the Company
must give, or cause to be given, within fifteen (15) days after the end of the
particular ten (10) consecutive trading days upon which the Redemption Date is
based, a notice to each registered holder of Warrants stating the Company's
intention to redeem the Warrants; (ii) the Company must permit each registered
holder of any Warrant to exercise his Warrant for a period, which may be
extended by the Company in its discretion, of not less than thirty (30) days
following the date of such notice; (iii) within three business days after the
Redemption Date, the Company must deposit with the Warrant Agent sufficient
immediately available funds for the purpose of redeeming the outstanding,
unexercised Warrants being redeemed; and (iv) following the Redemption Date,
holders of unexercised Warrants may surrender their Warrant at the corporate
office of such Warrant Agent at 40 Wall Street, New York, New York 10005, with
the Form of Assignment of the Warrant on the reverse side duly completed and
signed with the signature guaranteed. As soon as practicable after surrender of
the Warrants by the holder, the Warrant Agent shall forward payment of the
redemption price for such Warrants to each said holder by first class or
certified mail, postage pre-paid. The Warrant Agreement provides that after
expiration of the 30-day period following the notice date, each Warrant then
noticed for redemption shall automatically be converted into a right to receive
the redemption price and the Warrant Agent will no longer honor any purported
exercise of such Warrant.
UNDERWRITERS' WARRANTS
In connection with the IPO, in November, 1994, the Company sold the
Underwriter's Warrants to the Representatives for nominal consideration. The
Underwriters' Warrants enable the holders thereof to purchase from the Company
up to 50,000 Units, each Unit consisting of two (2) shares of Common Stock and
one (1) Warrant, at an exercise price of $12.15 per Unit (120% of the price at
which the Units were initially offered to the public in the IPO), until November
3, 1999. The Warrants included in the Units underlying the Underwriters'
Warrants entitle the holders thereof to purchase one (1) share of Common Stock
at an exercise price of $6.00 per share until November 3, 1999 and are identical
to the Warrants Called for Redemption except that the Warrants included in the
Units underlying the Underwriters' Warrants such are not subject to redemption
by the Company prior to exercise of the Underwriters' Warrants. As of the date
of this Prospectus, none of the Underwriters' Warrants have been exercised.
In connection with the issuance of the Underwriters' Warrants, the Company
granted to the Representatives certain demand and incidental registration rights
obligating the Company under certain circumstances to register under the
Securities Act and applicable state securities acts, at the expense of the
Company, the Units underlying the Underwriters' Warrants, the shares of Common
Stock and Warrants included in such Units and the shares of Common Stock
underlying such Warrants. These securities have been included in the
Registration Statement of which this Prospectus is a part in accordance with
these registration rights. There can be no assurance that all the Underwriters'
Warrants or the Warrants included in the Units underlying the Underwriters'
Warrants will be exercised. See "RISK FACTORS-Underwriters' Warrants-Risk of
Further Dilution."
STOCKHOLDER ACTION
Pursuant to the Company's Articles, with respect to any action required of or by
the holders of the Company's Common Stock, the affirmative vote of the holders
of a majority of the issued and outstanding shares of Common Stock entitled to
vote thereon is sufficient to authorize, affirm, ratify or consent to such act
or action, except as otherwise provided by law.
Under the NGCL, stockholders may take certain actions without the holding of a
meeting by a written consent or consents signed by the holders of a majority of
the outstanding shares of the capital stock of the Company entitled to vote
thereon. Prompt notice of the taking of any action without a meeting by less
than unanimous consent of the stockholders is required to be given to those
stockholders who do not consent in writing to the action. The purposes of this
provision are to facilitate action by stockholders and to reduce the corporate
expense associated with annual and special meetings of stockholders. Pursuant to
the rules and regulations of the Commission, if stockholder action is taken by
written consent, the Company will be required to send each stockholder entitled
to vote on the applicable matter, but whose consent was not solicited, an
information statement containing information substantially similar to that which
would have been contained in a proxy statement.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock and Warrants is American
Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
35
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, assuming all the Warrants Called for
Redemption, the Underwriters' Warrants and the Warrants included in the Units
underlying the Underwriters' Warrants are exercised, the Company will have
4,845,713 shares of Common Stock outstanding. All of the securities sold in
this offering will be freely transferable without further restriction or
registration under the Securities Act, except for any securities purchased by an
"affiliate" of the Company (as defined under the Securities Act). Additional
shares of Common Stock may become eligible for sale in the public market from
time to time upon exercise of warrants and stock options. See "RISK FACTORS-
Outstanding Options; Risk of Further Dilution" and "RISK FACTORS-Underwriters'
Warrants; Risk of Further Dilution.". At the date of this Prospectus, there
were outstanding 4,195,713 shares of Common Stock, 2,875,713 of which shares are
"restricted securities" under applicable securities laws. Additional shares of
Common Stock may become eligible for sale in the public market from time to time
upon exercise of warrants and stock options.
Holders of restricted securities must comply with the requirements of Rule 144
in order to sell their shares in the open market. In general, under Rule 144 as
currently in effect, any affiliate of the Company and any person (or persons
whose sales are aggregated) who has beneficially owned his or her restricted
shares for at least two years, would be entitled to sell in the open market
within any three-month period a number of shares that does not exceed the
greater of: (i) 1% of the then outstanding shares of the Company's Common Stock
(approximately 46,957 shares immediately after this offering); or (ii) the
average weekly trading volume reported on the Nasdaq System during the four
calendar weeks preceding such sale. Sales under Rule 144 are also subject to
certain limitations on manner of sale, notice requirements, and availability of
current public information about the Company. Nonaffiliates who have held their
restricted shares for three years are entitled to sell their shares under Rule
144 without regard to any of the above limitations, provided they have not been
affiliates of the Company for the three months preceding such sale.
As of the date of this Prospectus, (i) an aggregate of 400,000 shares of Common
Stock had been reserved for issuance to employees of the Company pursuant to the
Amended and Restated 1994 Stock Option Plan, (ii) 343,895 options had been
issued and remained outstanding under the Amended and Restated 1994 Stock Option
Plan, of which none had been exercised and 133,895 were currently exercisable,
and (iii) 56,105 options remained available for future issuance under the
Amended and Restated 1994 Stock Option Plan. In addition, at the date of this
Prospectus, (i) an aggregate of 40,000 shares of Common Stock has been reserved
for issuance to Directors of the Company pursuant to the Outside Directors'
Stock Option Plan, (ii) 30,000 options had been issued under the Outside
Directors' Stock Option Plan, of which 10,000 had been exercised and 20,000
remained outstanding and currently exercisable, and (iii) 20,000 options
remained available for future issuance under the Outside Directors' Stock Option
Plan. See "RISK FACTORS-Outstanding Options; Risk of Further Dilution."
In addition, at the date of this Prospectus, an aggregate of 150,000 shares of
Common Stock has been reserved for issuance in connection with the issuance of
Units issuable upon exercise of the Underwriters' Warrants and the exercise of
the Warrants included therein. See "DESCRIPTION OF SECURITIES-Underwriters'
Warrants" and "RISK FACTORS-Underwriters' Warrants; Risk of Further Dilution."
The Company can make no prediction as to the effect, if any, that sales of
shares of Common Stock or the availability of such shares for sale will have on
the market price of Common Stock. Nevertheless, sales of significant amounts of
Common Stock could adversely affect the prevailing market price of Common Stock,
as well as impair the ability of the Company to raise capital through the
issuance of additional equity securities.
PLAN OF DISTRIBUTION
No underwriters are employed with respect to the exercise of the Warrants Called
for Redemption, the Underwriters' Warrants or the Warrants included in the Units
underlying the Underwriters' Warrants, however, pursuant to the terms of the
Warrant Agreement, the Company is required to pay a fee equal to 7% of the
Exercise Price of the Warrants Called for Redemption to H.J. Meyers & Co., Inc.
if the following conditions are met: (i) the market price of the Company's
Common Stock is greater than the then Exercise Price of the Warrants Called for
Redemption, (ii) the exercise of the Warrant Called for Redemption was solicited
by a member of the National Association of Securities Dealers, Inc. ("NASD") as
designated in writing on the Warrant Certificate Subscription Form, (iii) the
Warrant Called for Redemption was not held in a discretionary account, (iv)
disclosure of compensation arrangements was made both at the time of the
original offering and at the time of exercise; and (v) the solicitation of the
exercise of the Warrant Called for Redemption was not in violation of Rule 10b-6
(as such rule or any successor rule may be in effect as of such time of
exercise) promulgated under the Securities
36
<PAGE>
Exchange Act of 1934. The Company anticipates that the shares of Common Stock
described in this Prospectus and issuable upon exercise of the Warrants Called
for Redemption, the Underwriters' Warrants and the Warrants included in the
Units underlying the Underwriters' Warrants, will be offered for sale by such
holders from time to time in the open market. None of these securities are being
offered through underwriters and no such arrangements have been made with any
outside broker, dealer, or underwriter for the resale of such securities. The
Company will not receive any proceeds from the sale of the shares of Common
Stock received by the holders of the Warrants Called for Redemption, the
Underwriters' Warrants or the Warrants included in the Units underlying the
Underwriters' Warrants upon exercise thereof; however, it will receive proceeds
from the exercise thereof, estimated at $3,627,500. There can be no assurance
that all the Warrants Called for Redemption, the Underwriters' Warrants or the
Warrants included in the Units underlying the Underwriters' Warrants will be
exercised.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by Jordaan, Howard & Pennington, PLLC, Dallas, Texas. Jeffrey A.
Howard, a member of Jordaan, Howard & Pennington, PLLC, owns options to purchase
60,000 shares of Common Stock under the Amended and Restated 1994 Stock Option
Plan, 20,000 of which are exercisable as of the date of this Prospectus.
EXPERTS
The consolidated financial statements of Specialty Teleconstructors, Inc. as of
June 30, 1996 and 1995 and for the fiscal years ended June 30, 1996 and 1995,
have been included herein and in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
37
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SPECIALTY TELECONSTRUCTORS, INC.
<TABLE>
<CAPTION>
UNAUDITED INTERIM FINANCIAL STATEMENTS Page
----
<S> <C>
Consolidated Balance Sheets at December 31, 1996 and 1995 (Unaudited) F-2
Consolidated Statements of Earnings for the six months ended December 31, 1996 and 1995 (Unaudited) F-3
Consolidated Statements of Cash Flows for the six months ended December 31, 1996 and 1995 (Unaudited) F-4
Consolidated Statements of Stockholders' Equity for the six-month periods ended December 31, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
AUDITED ANNUAL FINANCIAL STATEMENTS
Report of Independent Auditors F-9
Consolidated Balance Sheets at June 30, 1996 and 1995 F-10
Consolidated Statements of Earnings for the fiscal years ended June 30, 1996 and 1995 F-11
Consolidated Statements of Stockholders' Equity for the fiscal years ended June 30, 1996 and 1995 F-12
Consolidated Statements of Cash Flows for the fiscal years ended June 30, 1996 and 1995 F-13
Notes to Consolidated Financial Statements F-15
</TABLE>
F-1
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Balance Sheets
December 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Assets
------
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 644,434 $ 4,045,309
Contracts receivable 8,101,699 3,068,837
Costs and estimated earnings in
excess of billings on
uncompleted contracts 1,615,804 456,650
Other 331,820 18,000
----------- -----------
Total current assets 10,693,757 7,588,796
Property and equipment, net 2,884,360 1,295,139
Other assets 383,375 237,593
----------- -----------
$13,961,492 $ 9,121,528
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Short-term notes payable $ 923,928 $ 600,000
Current installments of notes
payable to banks 60,792 74,384
Trade accounts payable 3,179,979 574,957
Billings in excess of costs and
estimated earnings on
uncompleted contracts 295,675 241,193
Accrued expenses 462,766 517,066
Current income taxes - 119,089
Deferred income taxes 186,611 -
----------- -----------
Total current liabilities 5,109,751 2,126,689
Deferred income taxes 232,537 684,747
Notes payable to banks, excluding
current installments 667,886 177,201
----------- -----------
Total liabilities 6,010,174 2,988,637
----------- -----------
Stockholders' equity:
Common Stock, $0.01 par value,
authorized 10,000,000 shares;
issued, 4,185,713 in 1996 and
4,092,308 in 1995 41,857 40,923
Additional paid-in-capital 4,830,935 4,166,359
Retained earnings 3,078,526 1,925,609
----------- -----------
Total stockholders' equity 7,951,318 6,132,891
----------- -----------
$13,961,492 $ 9,121,528
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Statements of Earnings
For the six months ended December 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Contract revenues
earned $14,591,735 $ 6,487,722
Cost of revenues
earned 11,956,233 5,127,533
----------- -----------
Gross profit 2,635,502 1,360,189
Selling, general
and administrative
expenses 1,380,270 781,396
----------- -----------
Earnings from
operations 1,255,232 578,793
----------- -----------
Other income (deductions):
Interest income 30,490 116,790
Interest expense (55,743) (36,012)
Other, net 58 (9,614)
----------- -----------
(25,195) 71,164
Earnings before
income taxes 1,230,037 649,957
Income taxes 472,000 240,482
----------- -----------
Net earnings $ 758,037 $ 409,475
=========== ===========
Earnings per common share and common equivalent shares:
Net earnings $ .18 $ .10
=========== ===========
Weighted average common shares
outstanding 4,261,264 4,092,308
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Statements of Cash Flows
For the six months ended December 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings 758,037 409,475
Adjustments to reconcile net earnings
to net cash provided (used)by operating
activities:
Depreciation of property 436,698 124,934
and equipment
Amortization of goodwill 63,729 23,442
Gain(loss)on sale of equipment - 12,000
Changes in certain assets
and liabilities:
Contracts receivable (1,458,645) (609,397)
Costs and estimated earnings in
excess of billings on uncompleted contracts (552,365) (278,050)
Other assets (152,915) 124,252
Trade accounts payable 1,025,406 371,952
Billings in excess of costs and
estimated earnings on uncompleted contracts 59,211 (7,807)
Accrued expenses (293,359) 241,993
Current income taxes (467,725) 119,089
Deferred income taxes (148,877) (101,108)
----------- -----------
Net cash provided (used)by
operating activities (730,805) 430,755
----------- -----------
Cash flows from investing activities:
Purchases of property
and equipment (896,559) (427,392)
Cash expended in acquisition
of Data Cell Systems, Inc. (160,000) -
Other, net - 1,500
----------- -----------
Net cash used in
investing activities (1,056,559) (425,892)
----------- -----------
Cash flows from financing activities:
Line of credit with bank, net (976,072) -
Borrowings on notes payable to banks 586,466 -
Principal payments on
notes payable to banks (42,065) (46,791)
----------- -----------
Net cash used in financing
activities (431,671) (46,791)
----------- -----------
Net decrease in cash and cash
equivalents (2,219,035) (41,908)
Cash and cash equivalents at beginning of period 2,863,469 4,087,217
----------- -----------
Cash and cash equivalents at end of period $ 644,434 $ 4,045,309
=========== ===========
</TABLE>
F-4
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Statements of Cash Flows
For the six months ended December 31, 1996 and 1995
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Supplemental disclosure of cash flow information:
Interest paid $ 55,743 $ 36,012
========== ==========
Taxes paid $1,088,602 $ 9,060
========== ==========
Noncash transactions:
Acquisition of vehicles in exchange for debt $ - $ 241,455
========== ==========
Data Cell Systems, Inc. Acquisition:
Consisting of:
Accounts receivable 200,000 -
Property and equipment 267,000 -
Other current assets 100,000 -
Goodwill 258,510 -
---------- ----------
$ 825,510 -
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
SPECIALTY TELECONSTRUCTORS,INC.
Consolidated Statements of Changes in Stockholders' Equity
For the six months ended December 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
Common Stock
------------
Additional Retained
Shares Amount Paid-in-capital earnings Total
--------- ------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balances as of
June 30, 1995 4,092,308 $40,923 $4,166,359 $1,516,134 $5,723,416
Net earnings - - - 409,475 409,475
--------- ------- ---------- ---------- ----------
Balances as of
December 31, 1995 4,092,308 $40,923 $4,166,359 $1,925,609 $6,132,891
========= ======= ========== ========== ==========
Balances as of
June 30, 1996 4,092,308 $40,923 $4,166,359 $2,320,489 $6,527,771
Issuance of Common Shares
to acquire Data Cell Systems,
Inc. 93,405 934 664,576 - 665,510
Net earnings - - - 758,037 758,037
--------- ------- ---------- ---------- ----------
Balances as of
December 31, 1996 4,185,713 $41,857 $4,830,935 $3,078,526 $7,951,318
========= ======= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(Unaudited)
Note 1: Basis of Presentation
The consolidated financial statements and notes thereto at December 31,
1996 and for the six-month periods ended December 31, 1996 and 1995 are
unaudited and do not present all disclosures required under generally accepted
accounting principles but instead, as permitted by Securities and Exchange
Commission regulations, presume that users of the interim financial statements
have read the June 30, 1996 audited consolidated financial statements and notes
thereto included elsewhere in this Prospectus, and that the adequacy of
additional disclosure needed for a fair presentation may be determined in that
context.
The consolidated financial statements and notes thereto at December 31, 1996 and
for the six-month periods ended December 31, 1996 and 1995 reflect all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary to a fair presentation of the results for
interim periods. The results of operations for the six-month period ended
December 31, 1996 are not necessarily indicative of the results to be expected
for the full year.
Note 2: Acquisition
As of October 30, 1996, a wholly-owned subsidiary of Specialty Teleconstructors,
Inc., purchased substantially all the assets of Data Cell Systems, Inc., an
Arizona corporation, in exchange for $160,000 in cash and the delivery of 93,405
shares of common stock of the Company. The purchase price of the assets
acquired may be increased by an amount not to exceed $200,000 in the aggregate
if certain pre-tax earnings targets are achieved by the Company during the three
fiscal years immediately following the date of the acquisition and if certain
other conditions are met. The transaction was accounted for by the Company as a
purchase.
F-7
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
June 30, 1996 and 1995
(With Independent Auditors' Report Thereon)
F-8
<PAGE>
KPMG Peat Marwick LLP
6565 Americas Parkway NE, #700
Albuquerque, New Mexico 87190
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Specialty Teleconstructors, Inc.:
We have audited the accompanying consolidated balance sheets of Specialty
Teleconstructors, Inc. and subsidiaries as of June 30, 1996 and 1995, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Specialty
Teleconstructors, Inc. and subsidiaries as of June 30, 1996 and 1995, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Albuquerque, New Mexico
August 23, 1996
F-9
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1996 and 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,863,469 4,086,506
Contracts receivable, net 6,443,054 2,550,910
Income tax receivable - 208,121
Costs and estimated earnings in excess of billings on
uncompleted contracts (note 2) 1,063,439 178,600
Other 113,781 -
----------- ---------
Total current assets 10,483,743 7,024,137
Property and equipment, net (notes 3 and 5) 2,157,499 800,465
Other assets, net 153,718 180,783
----------- ---------
$12,794,960 8,005,385
=========== =========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Trade accounts payable $ 2,154,573 236,238
Short-term notes payable (note 5) 1,900,000 600,000
Billings in excess of costs and estimated earnings on
uncompleted contracts (note 2) 236,464 249,000
Accrued expenses 756,125 223,956
Current installments of notes payable to banks (note 5) 60,792 61,674
Current income taxes (note 7) 467,725 -
Deferred income taxes (note 7) 186,611 217,830
----------- ---------
Total current liabilities 5,762,290 1,588,698
Deferred income taxes (note 7) 381,414 568,024
Notes payable to banks, excluding current installments (note 5) 123,485 125,247
----------- ---------
Total liabilities 6,267,189 2,281,969
----------- ---------
Stockholders' equity:
Common stock, $.01 par value. Authorized 7,500,000 shares;
issued 4,092,308 shares in 1996 and 1995 (notes 6 and 11) 40,923 40,923
Additional paid-in capital 4,166,359 4,166,359
Retained earnings 2,320,489 1,516,134
----------- ---------
Total stockholders' equity 6,527,771 5,723,416
Commitments and contingency (note 4)
----------- ---------
$12,794,960 8,005,385
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Contract revenues earned (note 8) $16,758,629 8,414,590
Cost of revenues earned (notes 2 and 10) 13,986,351 6,989,788
----------- ---------
Gross profit 2,772,278 1,424,802
Selling, general and administrative expenses 1,700,854 1,050,666
----------- ---------
Earnings from operations 1,071,424 374,136
----------- ---------
Other income (deductions):
Gain (loss) on sale of equipment (5,112) 13,392
Interest income 219,126 169,530
Interest expense (26,618) (11,384)
Other, net 17,933 2,963
----------- ---------
205,329 174,501
----------- ---------
Earnings before income taxes 1,276,753 548,637
Income taxes (note 7) 472,398 208,482
----------- ---------
Net earnings $ 804,355 340,155
=========== =========
Earnings per common and common equivalent share $ .20 .09
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Common stock Additional
------------ paid-in Retained
Shares Amount capital earnings Total
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1994 3,000,000 $30,000 - 1,187,052 1,217,052
Issuance of common stock and
warrants to acquire common
stock 1,000,000 10,000 4,091,472 - 4,101,472
Adjustment for Specialty
Combined Resources, Inc.
pooling of interests (note 11) 92,308 923 24,000 (11,073) 13,850
Noncash compensation - - 50,887 - 50,887
Net earnings - - - 340,155 340,155
--------- ------ --------- --------- ---------
Balance at June 30, 1995 4,092,308 40,923 4,166,359 1,516,134 5,723,416
Net earnings - - - 804,355 804,355
--------- ------ --------- --------- ---------
Balance at June 30, 1996 4,092,308 $40,923 4,166,359 2,320,489 6,527,771
========= ======= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-12
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 804,355 340,155
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation of property and equipment 325,190 142,883
Amortization of goodwill 94,418 15,112
Loss (gain) on sale of equipment 5,112 (13,392)
Changes in certain assets and liabilities:
Contracts receivable (3,892,144) (1,204,185)
Income tax receivable 208,121 (178,136)
Costs and estimated earnings in excess of billings on
uncompleted contracts (884,839) 17,000
Other assets (181,134) (195,895)
Trade accounts payable 1,918,335 189,331
Billings in excess of costs and estimated earnings on
uncompleted contracts (12,536) 232,200
Accrued expenses 532,169 61,177
Current income taxes 467,725 (9,800)
Deferred income taxes (217,829) 238,818
----------- ----------
Net cash used in operating activities (833,057) (364,732)
----------- ----------
Cash flows from investing activities:
Proceeds from sales of property and equipment - 16,951
Purchases of property and equipment (1,687,336) (354,943)
----------- ----------
Net cash used in investing activities (1,687,336) (337,992)
----------- ----------
Cash flows from financing activities:
Line of credit with bank, net 1,300,000 600,000
Borrowings from notes payable to bank 88,979 -
Principal payments on notes payable to banks (91,623) (50,080)
Proceeds from sale of common stock and warrants to acquire
common stock - 5,062,500
Payment of registration costs associated with initial public
offering of common stock - (844,166)
----------- ----------
Net cash provided by financing activities 1,297,356 4,768,254
----------- ----------
Net increase (decrease) in cash and
cash equivalents (1,223,037) 4,065,530
Cash and cash equivalents at beginning of year 4,086,506 20,976
----------- ----------
Cash and cash equivalents at end of year $ 2,863,469 4,086,506
=========== ==========
</TABLE>
(Continued)
F-13
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Supplemental disclosure of cash flow information:
Interest paid $ 26,618 11,384
========= ========
Taxes paid $ - 188,815
========= ========
Noncash transactions - acquisition of vehicles in $ - 117,000
exchange for debt ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-14
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Description of Business
-----------------------
Specialty Teleconstructors, Inc. and its wholly owned subsidiaries
(the Company) are located in Cedar Crest, New Mexico. The Company
designs, builds, installs, modifies and maintains (collectively,
"wireless infrastructure building and implementation services")
wireless communications transmitting and receiving facilities
primarily for providers of wireless communications services. In
addition, the Company (i) provides electrical design, engineering, and
testing services (collectively, "wireless infrastructure design and
engineering services") and site acquisition and evaluation services
("site acquisition services") in connection with the installation and
relocation of wireless communications facilities. The Company also
manufactures and sells unmanned communications shelters designed to be
located adjacent to wireless transmitting and receiving facilities to
house electrical equipment associated with such facilities. The
Company's customers are located throughout the country.
(b) Principles of Consolidation
---------------------------
The consolidated financial statements include the financial statements
of Specialty Teleconstructors, Inc. and its wholly owned subsidiaries,
Specialty Constructors, Inc., Specialty Acquisitions, Inc., Specialty
Management, Inc., Specialty Combined Resources, Inc. and Specialty
Fortress, Inc. The Company operates under the name of Specialty
Constructors. All significant intercompany balances and transactions
have been eliminated in consolidation.
(c) Contract Revenue and Cost Recognition
-------------------------------------
Revenues from fixed-price construction contracts are recognized on the
percentage-of-completion method. Contract costs include all direct
material and labor costs and those indirect costs related to contract
performance. Selling, general and administrative costs are charged to
expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined.
"Costs and estimated earnings in excess of billings on uncompleted
contracts" represents revenues recognized in excess of amounts billed.
"Billings in excess of costs and estimated earnings on uncompleted
contracts" represents billings in excess of revenues recognized.
(d) Statements of Cash Flows
------------------------
For purposes of statements of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
F-15
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(e) Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation on property
and equipment is provided on a straight-line basis over the estimated
useful lives of the assets ranging from 3 to 10 years.
(f) Uses of Estimates
-----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(g) Goodwill
--------
The excess of purchase price over the value of net assets acquired is
included in other assets and is amortized on a straight-line basis
over the estimated benefit period from 2 to 5 years.
The Company periodically evaluates potential impairment of goodwill,
based on the intangible asset which gave rise to the goodwill and the
recoverability period involved. Any impairments would be recognized in
operating results in the period in which a permanent impairment
occurs.
(h) Income Taxes
------------
The Company uses the asset and liability method to account for income
taxes. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(i) Earnings Per Common Share
-------------------------
Earnings per common and common equivalent share are computed by
dividing net income applicable to common stock by the total of the
weighted average number of common shares outstanding and the
additional dilutive effect of stock options during the period. The
dilutive effect of outstanding stock options is computed using the
greater of the closing price or the average market price of the
Company's common stock for the period.
(Continued)
F-16
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The number of shares used in the earnings per share computation at
June 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Weighted average common shares
outstanding $4,092,308 3,747,103
Weighted average common share
equivalents 12,028 3,703
---------- ---------
$4,104,336 3,750,806
========== =========
</TABLE>
(j) Financial Instruments
---------------------
Statement of Financial Accounting Standards No. 107, Disclosures about
----------------------------------------------------------------------
Fair Values of Financial Instruments, requires the fair value of
financial instruments be disclosed. The Company's financial
instruments are accounts receivable, accounts payable, and long-term
variable rate debt. The carrying amounts of accounts receivable,
accounts payable, and long-term variable rate debt, because of their
nature, approximate fair value.
(2) Costs and Estimated Earnings on Uncompleted Contracts
-----------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Costs incurred on uncompleted contracts $ 3,837,204 2,334,759
Estimated earnings 2,090,890 1,032,736
Less billings to date (5,101,119) (3,437,895)
$ 826,975 (70,400)
----------- ----------
Included in the accompanying balance sheet:
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 1,063,439 178,600
Billings in excess of costs and estimated
earnings on uncompleted contracts (236,464) (249,000
------------ ----------
$ 826,975 (70,400)
=========== ==========
</TABLE>
(Continued)
F-17
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Property and Equipment
----------------------
Property and equipment consists of the following at June 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Vehicles $1,737,789 774,787
Furniture and fixtures 613,383 302,969
Equipment 579,540 207,446
Leasehold improvements 36,347 17,863
---------- ---------
2,967,059 1,303,065
Less accumulated depreciation (809,560) (502,600)
---------- ---------
$2,157,499 800,465
========== =========
</TABLE>
Depreciation expense on property, plant and equipment in 1996 and 1995 was
$325,190 and $142,883, respectively.
(4) Lease Obligations
-----------------
The Company leases its main office building from a shareholder and a
vehicle from an employee of the Company, who is also the shareholder's
brother (see note 10). The Company also leases office space for
regional offices located in Illinois, California, Ohio and Florida
from unrelated parties. These leases are operating leases that expire
over the next four years. The main office building lease contains a
renewal option for five years and requires the Company to pay all
executor costs such as maintenance and insurance. Rental expense for
operating leases was $116,343 and $30,492 for the years ending June
30, 1996 and 1995, respectively.
Future minimum lease payments under noncancelable operating
leases (see note 10) at June 30, 1996 are:
Year ending June 30
-------------------
1997 $63,592
1998 25,954
-------
Total minimum lease payments $89,546
=======
(Continued)
F-18
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Notes Payable to Banks
----------------------
Notes payable to banks consist of the following at June 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Short-term notes payable - $2,000,000 line of credit
with bank, interest due monthly at prime rate (8.25% at
June 30, 1996), balance due May 1997; secured by
accounts receivable of a subsidiary $1,900,000 600,000
========== =======
Long-term notes payable:
9.0% note payable in monthly installments of $292,
including interest, with the balance due May
1997; secured by a vehicle $ 5,904 8,720
8.0% note payable in monthly installments of $367,
including interest, with the balance due September
1998; secured by a vehicle 8,618 12,437
8.0% note payable in monthly installments of $773,
including interest, with the balance due January
1999; secured by a vehicle 20,707 28,543
8.2% note payable in monthly installments of $409,
including interest, with the balance due September
1999; secured by a vehicle 13,224 16,803
8.0% note payable in monthly installments of $773,
including interest, with the balance due June
1999; secured by a vehicle 12,153 15,610
8.5% note payable in monthly installments of $1,600,
including interest, with the balance due June 2000;
secured by vehicles 51,277 76,942
8.5% note payable in monthly installments of $1,309,
including interest, with the balance due August 2000;
secured by vehicles 54,163 -
8.0% note payable in monthly installments of $2,790,
including interest, with the balance due June 1996;
secured by vehicles - 27,866
Other 18,231 -
-------- -------
Total long-term notes payable 184,277 186,921
Less current installments 60,792 61,674
-------- -------
Notes payable to banks, excluding
current installments $123,485 125,247
======== =======
</TABLE>
(Continued)
F-19
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Subsequent to year end, the Company entered into a new note agreement
with a bank for $586,466 to finance vehicles purchased for cash in
fiscal 1996. The new note requires monthly payments of $12,068 with
the balance due July 1999, has a stated interest rate of 8.5 percent
and is secured by vehicles.
The aggregate maturities of notes payable to banks for each of the next
five years, including the July 1996 note payable to bank, are as follows:
<TABLE>
<CAPTION>
Year ending June 30
-------------------
<S> <C>
1997 $150,998
1998 166,687
1999 162,152
2000 289,266
2001 1,640
--------
Total $770,743
========
</TABLE>
The Company's borrowings available under the $2,000,000 secured line
of credit with bank are limited to seventy-five (75) percent of the
accounts receivable balances of one of their wholly owned
subsidiaries, which are less than ninety (90) days delinquent
(approximately $5,265,000 at June 30, 1996).
(6) Stockholders' Equity
--------------------
In November 1994, the Company completed an initial public offering of
1,000,000 shares of common stock and warrants to acquire 500,000
shares of common stock. Proceeds from the offering, net of commissions
and other related expenses, totaled approximately $4.1 million. The
Company intends to utilize substantially all of the net proceeds of
the initial public offering for the purpose of acquisitions, joint
ventures, and other similar business opportunities. The Company is
restricted from using the proceeds for payment to, or acquisition of,
any affiliated entity.
Warrants issued in connection with the public offering are exercisable
for $6.00 per share and expire November 1999. As of June 30, 1996,
none of the warrants outstanding have been exercised.
In connection with the public offering, the Company issued warrants to
the underwriters to purchase 50,000 units, each unit consisting of two
shares of common stock and one warrant to acquire a share of common
stock. The exercise price is 120 percent of the initial public
offering price of $10.125 per unit, or $12.15 per unit. The
underwriters' warrants are exercisable through November 1999. As of
June 30, 1996, none of the warrants have been exercised.
(Continued)
F-20
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company's Board of Directors resolved and the shareholders
approved an Incentive Stock Option Plan. The plan authorized 400,000
shares to be awarded to officers and key employees of the Company. The
plan may be terminated at any time by the Board of Directors, subject
to approval by the shareholders of the Company. The Company has
granted 310,145 options to acquire shares of common stock under the
terms of the plan. The exercise price of the options range from
$3.0625 to $4.5625 per share, market value at date of grant. The
options expire ten years from the date of grant or upon termination of
employment. As of June 30, 1996, 13,365 options granted have expired
under the terms of the plan, 40,145 options are exercisable under the
plan, and none of the options granted have been exercised.
The Company's Board of Directors resolved and the shareholders
approved an Outside Directors' Stock Option Plan. The plan authorized
50,000 shares to be awarded to nonemployee directors of the Company.
The plan will terminate in May 2004. The Company has granted 30,000
options to acquire shares of common stock under the terms of the plan.
The exercise price for the options is $3.0625 per share, market value
at date of grant. The directors are limited in the amount of options
they can exercise at any given time to no more than one-third each
year over the next three years. The options expire in May 2004. As of
June 30, 1996, none of the options granted have been exercised.
The Company has reserved 150,000 shares of common stock for issuance
pursuant to the Company's stock option plans.
(7) Income Taxes
------------
Income tax expense consists of:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Year ended June 30, 1996:
U.S. federal $634,264 (200,168) 434,096
State and local 55,963 (17,661) 38,302
-------- -------- -------
Total $690,227 (217,829) 472,398
======== ======== =======
Year ended June 30, 1995:
U.S. federal $(24,317) 206,978 182,661
State and local (6,019) 31,840 25,821
-------- -------- -------
Total $(30,336) 238,818 208,482
======== ======== =======
</TABLE>
(Continued)
F-21
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Income tax expense differed from the amounts computed by applying the
U.S. federal income tax rate of 34 percent to pretax income from continuing
operations as a result of the following factors:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Computed "expected" tax $434,096 186,537
State income taxes, net of federal tax benefit 28,159 17,371
Other 10,143 4,574
-------- -------
Total $472,398 208,482
======== =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
1996 and 1995 are primarily a result of the Company being a cash basis taxpayer
and are presented below.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Adjustment for conversion from cash basis to
accrual basis tax reporting $(583,634) (808,882)
Tax credit carryforward - 18,182
Amortization of goodwill for financial reporting
purposes in excess of tax amounts 15,609 4,846
--------- --------
Total deferred income tax liability $(568,025) (785,854)
========= ========
Current deferred income tax liability $(186,611) (217,830)
========= ========
Long-term deferred income tax
liability
$(381,414) (568,024)
========= ========
</TABLE>
(8) Major Customers
-----------------
Customers comprising 10 percent or greater of the Company's contract
revenues earned are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Bell Atlantic Mobile - 22%
Cellular One 10% 10%
Nextel Communications, Inc./Motorola, Inc. - 11%
PCS Prime Co. 18% -
Sprint Cellular Company 16% 15%
All others 56% 42%
---- ----
100% 100%
==== ====
</TABLE>
The Company generally does not require collateral from its customers.
(Continued)
F-22
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Profit-sharing Plan
-------------------
The Company has a defined contribution plan covering substantially all
of its employees. Contributions are discretionary based on the
operating results of the Company. Contributions to the plan were none
and $74,900 for the years ended June 30, 1996 and 1995, respectively.
(10) Related Party Transactions
--------------------------
(a) Leases
------
The Company leases its main office building from Michael R. Budagher
(a shareholder) and a vehicle from an employee of the Company (a
shareholder), who is also Michael R. Budagher's brother (see note 4).
(b) Budagher's Nursery, Inc.
------------------------
The Company uses contract labor provided by Budagher's Nursery, Inc.,
a corporation which is wholly owned by Michael R. Budagher's brother.
The Company incurred $92,391 and $126,884 for contract labor services
provided by Budagher's Nursery, Inc. during the years ended June
30,1996 and 1995, respectively.
(c) Specialty Constructors Coatings, Inc.
------------------------------------
The Company uses contract labor services provided by Specialty
Constructors Coatings, Inc. (SCC). SCC is a corporation which is 50
percent owned by Michael R. Budagher. The Company incurred $401,587
and $170,260 for contract labor services provided by SCC during the
years ended June 30, 1996 and 1995, respectively.
(d) Specialty Manufacturing, Inc.
-----------------------------
The Company purchases equipment from Specialty Manufacturing, Inc.
(SM) which is used in certain construction projects. SM is owned 34
percent by Michael R. Budagher's spouse, 33 percent by Michael R.
Budagher's brother and 33 percent by an employee of the Company. The
Company purchases from SM totaled $13,285 and $12,065 during the years
ended June 30, 1996 and 1995, respectively.
(Continued)
F-23
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Acquisitions
------------
On April 7, 1995, a wholly owned subsidiary of Specialty
Teleconstructors, Inc. purchased the equipment, inventory, furniture,
fixtures, customer lists and personal property of Vidano Corporation
(Vidano) for periodic cash payments estimated to total $315,660.
Vidano, located in Joliet, Illinois, builds and maintains wireless
communication transmitting and receiving facilities. The future
periodic payments are subject to reduction if employees of Vidano
leave employment of the company during the eighteen-month period
following the acquisition. The transaction was accounted for as a
purchase. Goodwill recorded from the purchase was approximately
$121,000 which will be amortized on a straight-line basis over the
estimated benefit period which management believes to be two years.
The Company's consolidated results of operations include the
operations of Vidano since the acquisition date.
On July 1, 1995, Specialty Teleconstructors, Inc. issued 92,308 shares
of restricted common stock of Specialty Teleconstructors, Inc. at a
price of $2.75 per share, determined by the closing price on or about
July 1, 1995, in exchange for all of the outstanding shares of
Specialty Combined Resources, Inc. (Specialty Combined). The source of
the shares for the transaction are unissued shares of the Company.
Specialty Combined, located in Laguna Hills, California, provides
engineering, design and coordination services of power, lighting and
control systems for communications, health care, petrochem,
institutional and commercial customers. The Company also entered into
a consulting and noncompete agreement with the former principal of
Specialty Combined for a period of thirty-six (36) months from the
date of the acquisition for $75,000. Additionally, the Company entered
into an employment agreement with the former principal of Specialty
Combined to provide services to the Company for a period of thirty-six
(36) months from the date of the acquisition. The transaction was
accounted for as a pooling of interests. Accordingly, the Company's
consolidated financial statements have been restated to include the
operations of Specialty Combined for all periods presented.
F-24
<PAGE>
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES OTHER THAN THE SECURITIES
TO WHICH IT RELATES OR AN OFFER TO OR A SOLICITATION OF ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
___________________________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Dividend Policy........................................................... 12
Use of Proceeds........................................................... 13
Capitalization............................................................ 14
Market for Common Equity and Related
Stockholder Matters.................................................... 15
Selected Consolidated Financial
Information............................................................ 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................................. 17
Business.................................................................. 23
Management................................................................ 27
Certain Transactions...................................................... 31
Security Ownership of Certain Beneficial
Owners and Management.................................................. 33
Description of Securities................................................. 34
Shares Eligible for Future Sale........................................... 36
Plan of Distribution...................................................... 36
Legal Matters............................................................. 37
Experts................................................................... 37
Index to Financial Statements............................................. F-1
</TABLE>
================================================================================
================================================================================
50,000 UNITS,
CONSISTING OF 100,000 SHARES OF COMMON STOCK AND 50,000 REDEEMABLE WARRANTS,
UNDERLYING UNDERWRITERS' WARRANTS
------------
550,000 SHARES
OF COMMON STOCK,
UNDERLYING REDEEMABLE COMMON STOCK PURCHASE WARRANTS
SPECIALTY
TELECONSTRUCTORS, INC.
_________________
PROSPECTUS
_________________
FEBRUARY 20, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751 of the Nevada General Corporation Law (the "NGCL") provides, in
effect, that any person made a party to any action by reason of the fact that
such person is or was a director, officer, employee or agent of the Company may
and, in certain cases, must be indemnified by the Company against, in the case
of a non-derivative action, judgments, fines, amounts paid in settlement and
reasonable expenses (including attorney's fees) incurred by such person as a
result of such action, and in the case of a derivative action, against expenses
(including attorney's fees), if in either type of action such 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 Company. This indemnification does not
apply, in a derivative action, to matters as to which it is adjudged that the
director, officer, employee or agent is liable to the Company, unless upon court
order it is determined that, despite such adjudication of liability, but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for expenses, and, in a non-derivative action, to any
criminal proceeding in which such person had reasonable cause to believe such
person's conduct was unlawful.
Article VII, Section 1 of the By-Laws of the Company, as amended (the "By-Laws")
provides that the Company shall indemnify each person who was or is a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigation, by reason
of the fact that he or a person of whom he is the legal representative is or was
a director or officer of the Company or is or was serving at the request of the
Company or for its benefit as a director or officer of another corporation, or
as its representative in a partnership, joint venture, trust or other
enterprise, to the fullest extent legally permissible under the NGCL against all
expenses, liability and loss (including attorneys, fees, judgments, fines and
amounts paid or to be paid in settlement) reasonably incurred or suffered by him
in connection therewith. The expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
Company as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it's ultimately determined by a court
of competent jurisdiction that he is not entitled to be indemnified by the
corporation. This right of indemnification is a contract right which may be
enforced in any manner desired by such person. This right of indemnification is
not exclusive of any other right which such directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any bylaw, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under the By-Laws.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses, other than underwriting discounts
and commissions, paid or payable in connection with the issuance and
distribution of the securities being registered hereby (as such expenses are
estimated except as noted):
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee...... $ 275.18
Nasdaq National Market Listing Fee....................... 13,000.00
Printing and Engraving Expenses.......................... 4,000.00*
Legal Fees and Expenses.................................. 44,000.00*
Accounting Fees and Expenses............................. 4,000.00*
Blue Sky Fees and Expenses............................... 1,000.00*
Transfer Agent and Registrar Fees........................ 2,500.00*
Miscellaneous Fees and Expenses.......................... 1,224.82*
-----------
Total............................................... $70,000.00*
===========
</TABLE>
_____________________
* Estimated
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In July 1995, in connection with the Company's acquisition of all of the
outstanding equity of ST Combined Resources, Inc. ("ST Combined Resources"), the
Company issued 92,308 shares of its Common Stock, $.01 par value ("Common
Stock") to the former sole shareholder of ST Combined Resources. No fees,
commissions or discounts were paid to any person in connection with this
issuance. These securities were issued without registration under the
Securities Act of 1933, as amended (the "Securities Act") pursuant to the
exemption afforded by Section 4(2) of the Securities Act. In connection with
the transaction, the recipient of these securities gave representations,
warranties and covenants to the Company customary for a transaction of this
type, including certain representations, warranties and covenants designed to
ensure the availability of the exemption afforded by Section 4(2) of the
Securities Act.
In October 1996, in connection with the Company's acquisition of substantially
all the assets of Data Cell Systems, Inc. ("Data Cell"), the Company issued
93,405 shares of its Common Stock to Data Cell. No fees, commissions or
discounts were paid to any person in connection with this issuance. These
securities were issued without registration under the Securities Act, pursuant
to the exemption afforded by Section 4(2) of the Securities Act. In connection
with the transaction, Data Cell and its sole shareholder each gave
representations, warranties and covenants to the Company customary for a
transaction of this type, including certain representations, warranties and
covenants designed to ensure the availability of the exemption afforded by
Section 4(2) of the Securities Act.
ITEM 27. INDEX TO EXHIBITS.
The following is a list of all exhibits filed as a part of this Registration
Statement on Form SB-2, including those incorporated herein by reference.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
3.1 Articles of Incorporation of the Registrant, as amended.(3)
3.2 Amendment to the Articles of Incorporation of the Registrant.(3)
3.3 By-laws of the Registrant.(4)
4.1 Specimen Common Stock Certificate, par value $.01, of the
Registrant.(4)
4.2 Specimen Redeemable Common Stock Purchase Warrant Certificate of
the Registrant.(2)
4.3 Warrant Agreement, dated November 4, 1994, by and among the
Registrant, American Stock Transfer & Trust Company and Thomas
James & Associates, Inc.(2)
4.4 Underwriters' Warrant dated as of November 4, 1994 issued to
Thomas James & Associates, Inc.(2)
4.5 Underwriters' Warrant dated as of November 4, 1994 issued to
Dillon-Gage Securities, Inc.(2)
4.6 Form of Notice of Redemption of Redeemable Common Stock Purchase
Warrants.(1)
5.1 Opinion of Jordaan, Howard & Pennington, PLLC as to the validity
of the issuance of the securities registered hereby.(1)
10.1 Lease Agreement by and among the Registrant and Michael R.
Budagher and Sheril E. Budagher.(4)
10.2 Amended and Restated 1994 Stock Option Plan of Specialty
Teleconstructors, Inc.(5)
10.3 Outside Directors Stock Option Plan of Specialty
Teleconstructors, Inc.(4)
10.4 Revolving Line of Credit Agreement, dated April 12, 1994 between
the Registrant and First State Bank of Albuquerque, New
Mexico.(4)
10.5 Letter Agreement and Promissory Note, dated January 22, 1997,
between the Registrant and Norwest Bank New Mexico, N.A.(2)
21 Subsidiaries of the Registrant.(2)
23.1 Consent of KPMG Peat Marwick LLP, independent certified public
accountants.(1)
23.2 Consent of Jordaan, Howard & Pennington, PLLC, (included in the
Opinion filed as Exhibit 5.1 to the Registration Statement).(1)
25 Power of Attorney (Included on page II-4 of the Registration
Statement).(2)
27.1 Financial Data Schedule.(2)
- ----------------
(1) Filed herewith.
(2) Previously filed.
(3) Incorporated by reference from the Registrant's Registration Statement on
Form S-8, SEC File No. 333-18899.
(4) Incorporated herein by reference from the Registrant's Registration
Statement on Form SB-2, SEC file No. 33-79998-D
II-2
<PAGE>
(5) Incorporated herein by reference from the Registrant's Definitive Proxy
Materials filed in connection with the Registrant's 1996 Annual Meeting.
ITEM 28. UNDERTAKINGS.
The Registrant hereby undertakes to:
1. File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement;
(iii) Include any additional or changed material information on the
plan of distribution.
2. For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the
initial bona fide offering.
3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cedar Crest, State of New Mexico, on the 19th day of
February, 1997.
SPECIALTY TELECONSTRUCTORS, INC.
By: /s/ Michael R. Budagher
----------------------------------
Michael R. Budagher Chairman of the Board,
President, Chief Executive Officer, and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<S> <C> <C>
/s/ Michael R. Budagher Officer, Treasurer and Chairman February 19, 1997
- ------------------------- of the Board
Michael R. Budagher
Dennis K. Hartnett* Chief Accounting Officer February 19, 1997
- -------------------------
Dennis K. Hartnett
John D. Emery* Director February 19, 1997
- -------------------------
John D. Emery
Terry D. Farmer* Director February 19, 1997
- -------------------------
Terry D. Farmer
Jon D. Word* Director February 19, 1997
- -------------------------
Jon D. Word
*By: /s/ Michael R. Budagher
-------------------------------------
Michael R. Budagher, Attorney-In-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
3.1 Articles of Incorporation of the Registrant, as amended.(3)
3.2 Amendment to the Articles of Incorporation of the Registrant.(3)
3.3 By-laws of the Registrant.(4)
4.1 Specimen Common Stock Certificate, par value $.01, of the
Registrant.(4)
4.2 Specimen Redeemable Common Stock Purchase Warrant Certificate of
the Registrant.(2)
4.3 Warrant Agreement, dated November 4, 1994, by and among the
Registrant, American Stock Transfer & Trust Company and Thomas
James & Associates, Inc.(2)
4.4 Underwriters' Warrant dated as of November 4, 1994 issued to
Thomas James & Associates, Inc.(2)
4.5 Underwriters' Warrant dated as of November 4, 1994 issued to
Dillon-Gage Securities, Inc.(2)
4.6 Form of Notice of Redemption of Redeemable Common Stock
Purchase Warrants.(1)
5.1 Opinion of Jordaan, Howard & Pennington, PLLC as to the validity
of the issuance of the securities registered hereby.(1)
10.1 Lease Agreement by and among the Registrant and Michael R.
Budagher and Sheril E. Budagher.(4)
10.2 Amended and Restated 1994 Stock Option Plan of Specialty
Teleconstructors, Inc.(5)
10.3 Outside Directors Stock Option Plan of Specialty
Teleconstructors, Inc.(4)
10.4 Revolving Line of Credit Agreement, dated April 12, 1994 between
the Registrant and First State Bank of Albuquerque, New
Mexico.(4)
10.5 Letter Agreement and Promissory Note, dated January 22, 1997,
between the Registrant and Norwest Bank New Mexico, N.A.(2)
21 Subsidiaries of the Registrant.(2)
23.1 Consent of KPMG Peat Marwick LLP, independent certified public
accountants.(1)
23.2 Consent of Jordaan, Howard & Pennington, PLLC, (included in the
Opinion filed as Exhibit 5.1 to the Registration Statement).(1)
25 Power of Attorney (Included on page II-4 of the Registration
Statement).(2)
27.1 Financial Data Schedule.(2)
________________
(1) Filed herewith.
(2) Previously filed.
(3) Incorporated by reference from the Registrant's Registration Statement on
Form S-8, SEC File No. 333-18899.
(4) Incorporated herein by reference from the Registrant's Registration
Statement on Form SB-2, SEC file No. 33-79998-D
II-5
<PAGE>
EXHIBIT 4.6
SPECIALTY TELECONSTRUCTORS, INC.
12001 HWY 14 NORTH
CEDAR CREST, NEW MEXICO 87008
FEBRUARY 20, 1997
NOTICE OF REDEMPTION
OF REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Dear Warrantholder:
The Warrant Agreement (the "Warrant Agreement") dated effective as of
November 4, 1994, between Specialty Teleconstructors, Inc., a Nevada corporation
(the "Company"), American Stock Transfer & Trust Company, a New York corporation
(the "Warrant Agent") and Thomas James & Associates, Inc., a New York
corporation, provides that the Company may, at its option, upon at least 30 days
prior written notice, redeem the Company's Redeemable Common Stock Purchase
Warrants (the "Warrants") if the closing sales price of the Common Stock as
reported by the Pacific Stock Exchange or other national trading market on which
the Common Stock may then be listed has equaled or exceeded $9.00 per share for
ten (10) consecutive trading days (the "Target Price"). As of the close of
trading on February 18, 1997, the price of the Company's Common Stock has
exceeded the Target Price, as reported by the Pacific Stock Exchange and Nasdaq,
for more than 10 consecutive trading days.
Pursuant to Section 8 of the Warrant Agreement, notice is hereby given to
all registered holders of the Warrants that the Company intends to redeem all
the outstanding Warrants at $.05 per Warrant. The Company has set the date for
redemption of the Warrants on March 26, 1997 (the "Redemption Date"). All
holders have the right to exercise their Warrants until 5:00 p.m. New York City,
New York time on the March 25, 1997, the last business day preceding the
Redemption Date. INVESTORS SHOULD CAREFULLY REVIEW THE ACCOMPANYING PROSPECTUS
RELATING TO THE SHARES OF COMMON STOCK TO BE ISSUED UPON EXERCISE OF THE
WARRANTS BEFORE MAKING ANY INVESTMENT DECISION.
Each Warrant entitles the holder to purchase one share of Common Stock at a
price of $6.00 per share of Common Stock (the "Purchase Price"). Warrants may be
exercised by surrendering, at the corporate office of American Stock Transfer &
Trust Company at 40 Wall Street, New York, New York 10005, the Warrant
Certificate evidencing such Warrants together with a subscription in the form
set forth on the reverse side of the Warrant Certificate, duly executed, and
accompanied by the tender, in U.S. dollars, of either federal funds or a
certified check or bank cashier's check, payable to the order of the Warrant
Agent for the applicable exercise price for the Warrants.
As soon as practicable after any Warrants have been so exercised, the
Company shall cause to be issued and delivered to the holder, or upon the order
of the registered holder of such Warrant, such name or names as may be directed
by him, a certificate or certificates for the number of full shares of Common
Stock to which he is entitled. All Warrant Certificates so surrendered shall be
delivered to and canceled by the Warrant Agent.
Irrespective of the date of issue and delivery of certificates for any
Common Stock issuable upon the exercise of Warrants, each person in whose name
any such certificate is issued shall be deemed to have become the holder of
record of the shares represented thereby on the date on which the Warrant
Certificate surrendered in connection with the subscription therefor was
surrendered and payment of the Purchase Price was surrendered.
Following the Redemption Date, holders of unexercised Warrants may
surrender, at the corporate office of the Warrant Agent at 40 Wall Street, New
York, New York 10005, the Warrant Certificate evidencing such Warrants together
with a subscription in the form set forth on the reverse side of the Warrant
Certificate, duly executed. As soon as practicable after surrender of the
Warrants by the holder, the Warrant Agent shall forward payment of the
redemption price for such Warrants to each said holder by first class or
certified mail, postage pre-paid.
Sincerely,
SPECIALTY TELECONSTRUCTORS, INC.
By: /s/ Michael R. Budagher
---------------------------------
Michael R. Budagher, Chairman of the
Board, President, Chief Executive
Officer and Treasurer
<PAGE>
EXHIBIT 5.1
JORDAAN, HOWARD & PENNINGTON, PLLC
ATTORNEYS AND COUNSELORS AT LAW
300 Crescent Court, Suite 1670
Dallas, Texas 75201
Jeffrey A. Howard (214) 871-6551
February 19, 1997
Specialty Teleconstructors, Inc.
12001 Hwy 14 North
Cedar Crest, New Mexico 87008
RE: Registration Statement on Form SB-2
SEC File No. 333-21027
Gentlemen:
We have acted as counsel to Specialty Teleconstructors, Inc., a Nevada
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act of 1933"), of (i) 50,000
units (the "Underwriters' Warrant Units"), each Underwriters' Warrant Unit
consisting of two (2) shares of common stock, $.01 par value per share ("Common
Stock"), and one (1) Redeemable Common Stock Purchase Warrant ("Warrant"),
issuable upon exercise of 50,000 Underwriters' Warrants (the "Underwriters'
Warrants") issued to the representatives of the Underwriters in connection with
the Company's underwritten initial public offering (the "IPO") of 500,000 Units
(the "Public Units"), each Public Unit consisting of two (2) shares of Common
Stock and one (1) Warrant, in November, 1994, (ii) 50,000 shares of Common Stock
issuable upon exercise of 50,000 Warrants included in the Underwriters' Warrant
Units, and (iii) 500,000 shares of Common Stock issuable upon exercise of
500,000 Warrants (the "Warrants Called for Redemption") that were included in
Public Units. The Public Units, including the shares of Common Stock and the
Warrants Called for Redemption included therein, were registered under the
Securities Act of 1933 pursuant to the Company's Registration Statement on Form
SB-2, SEC File No. 33-79998-D (as amended, the "Prior Registration Statement"),
which was declared effective by the Securities and Exchange Commission (the
"Commission") on November 4, 1994. The Warrants included in the Underwriters'
Warrant Units and the Warrants Called for Redemption are substantially identical
and entitle the holder thereof to purchase one (1) share of Common Stock of the
Company at a purchase price of $6.00 per share, subject to certain conditions
set forth in that certain Warrant Agreement, dated as of November 4, 1994, by
and among the Company, American Stock Transfer & Trust Company ("American Stock
Transfer & Trust Company") and Thomas James & Associates, Inc.
<PAGE>
Specialty Teleconstructors, Inc.
12001 Hwy 14 North
Cedar Crest, New Mexico 87008
February 19, 1997
Page 2
A registration statement on Form SB-2, SEC File No. 333-21027 (the
"Registration Statement") was filed with the Commission on February 3, 1997 and
Amendment No. 1 to the Registration Statement was filed with the Commission on
February 19, 1997. In connection with rendering this opinion we have examined
executed copies of the Registration Statement (as amended, the "Registration
Statement") and all exhibits thereto. We have also examined and relied upon the
original, or copies certified to our satisfaction, of (i) the Prior Registration
Statement and all exhibits thereto, (iii) the Articles of Incorporation, as
amended, and the Bylaws of the Company, (iii) minutes and records of the
corporate proceedings of the Company with respect to the issuance of the
Underwriters' Warrants, and the Warrants Called for Redemption and related
matters, and (iv) such other agreements and instruments relating to the Company
as we deemed necessary or appropriate for the purposes of the opinion expressed
herein. In rendering such opinion, we have made such further investigation and
inquiries relevant to the transactions contemplated by the Registration
Statement as we have deemed necessary to the opinion expressed herein, and have
relied, to the extent we deemed reasonable, on certificates and certain other
information provided to us by officers of the Company and public officials as to
matters of fact of which the maker of such certificate or the person providing
such other information had knowledge. Furthermore, in rendering our opinion, we
have assumed the authenticity of all documents submitted to us as originals, the
genuineness of all signatures, the legal capacity of natural persons and the
conformity to originals of all copies of all documents and corporate records
submitted to us.
We understand that American Stock Transfer & Trust Company was engaged as
of November 4, 1994 to be the transfer agent for the Common Stock and the
Warrants. We assume the records of American Stock Transfer & Trust Company are
true, accurate and complete, and contain all transactions with respect to the
Common Stock and the Warrants since November 4, 1994.
We are members only of the Bar of the State of Texas and are not experts
in, and express no opinion regarding, the laws of any jurisdiction other than
the State of Texas, the United States of America, and the General Corporation
Law of the State of Nevada.
Based upon the foregoing we are of the opinion that (i) the Underwriters'
Warrant Units, including the shares of Common Stock and the Warrants included
therein, to be issued by the Company upon exercise of the Underwriters' Warrants
as described in the Registration Statement, (ii) the shares of Common Stock to
be issued by the Company upon exercise of the Warrants included in the
Underwriters' Warrant Units as described in the Registration Statement and
(iii) the shares of Common Stock to be issued by the Company upon exercise of
the Warrants Called for Redemption as described in the Registration Statement,
have been duly and validly authorized for issuance and sale and when issued by
the Company and paid for as described in the Registration Statement, will be
validly issued, fully paid and nonassessable.
<PAGE>
Specialty Teleconstructors, Inc.
12001 Hwy 14 North
Cedar Crest, New Mexico 87008
February 19, 1997
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Sincerely,
JORDAAN, HOWARD & PENNINGTON, PLLC
By: /s/ Jeffrey A. Howard
__________________________
Jeffrey A. Howard, Manager
JAH/ja
<PAGE>
EXHIBIT 23.1
KPMG Peat Marwick LLP
6565 Americas Parkway NE, Suite 700
Albuquerque, NM 87190
The Board of Directors
Specialty Teleconstructors, Inc.
We consent to the use of our reports included herein and incorporated
herein by reference and to the reference to our firm under the heading "Experts"
in the prospectus.
KPMG PEAT MARWICK LLP
Albuquerque, New Mexico
February 14,1997
End of Document
