As filed with the Securities and Exchange Commission on ____________, 1996
Registration No. 333-4778
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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PRE-EFFECTIVE AMENDMENT
NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
ELECTRONICS COMMUNICATIONS CORP.
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(Exact name of issuer as specified in its charter)
Delaware 11-2649088
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Plog Road, Fairfield, New Jersey 07004
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(Address of Principal Executive Offices)
(Zip Code)
William S. Taylor, President
Electronics Communications Corp.
10 Plog Road
Fairfield, NJ 07004
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(Name and address of agent for service)
(201) 808-8862
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(Telephone number, including area code of agent for service)
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copies to:
Joel C. Schneider, Esq.
Sommer & Schneider LLP
600 Old Country Road, Suite 535
Garden City, NY 11530
(516) 228-8181
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of the Registration Statement.
If the Only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
<PAGE>
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED_________
ELECTRONICS COMMUNICATIONS CORP.
104,145 SHARES OF COMMON STOCK
800,000 CLASS A REDEEMABLE COMMON STOCK PURCHASE WARRANTS
AND 800,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF CLASS A REDEEMABLE WARRANTS.
This Prospectus relates to 104,145 shares of Common Stock, par value $.05
(the "Common Stock") and 800,000 Class A Redeemable Common Stock Warrants ("A
Warrants") and 800,000 shares of Common Stock issuable upon the exercise of the
A Warrants. The Common Stock, A Warrants and the shares of the Company's Common
Stock, underlying the A Warrants will be sold by holders of such securities. See
"Selling Securityholders". Each A Warrant entitles the holder thereof to
purchase one share of Common Stock, at $5.00 per share during the period from
May 12, 1995 to May 12, 1999 (the "Exercise Period"). The A Warrants are subject
to redemption by the Company, with the prior consent of Investors Associates,
Inc., the representative of the several Underwriters ("Representative") of the
Company's public offering consummated on May 19, 1995, at $.001 per A Warrant at
anytime following May 12, 1996, on 45 days prior written notice, provided the
closing bid quotation for the Common Stock or NASDAQ is at least $8.00 for the
20 consecutive trading days ending three days prior to the notice of redemption.
See "Selling Securityholders" and "Description of Securities". The Common Stock,
A Warrants and shares of Common Stock issuable upon the exercise of A Warrants
are sometimes collectively referred to herein as the "Securities".
The Company will not receive any of the proceeds from the sales by the
Selling Securityholders. The Selling Securityholders' Securities may be offered
from time to time by the Selling Securityholders, through ordinary brokerage
transactions in the over-the-counter market, in negotiated transactions or
otherwise, at market prices prevailing at the time of sale or negotiated prices.
The Selling Securityholders maybe deemed to be "underwriters" as defined in
the Securities Act of 1933, as amended (the "Securities Act"). If any
broker-dealers are used by the Selling Securityholders, any commissions paid to
broker-dealers and, if broker-dealers purchase any Selling Securityholders'
Securities as principals, any profits received by such broker-dealers on the
resale of the Selling Securityholders' Securities may be deemed to be
underwriting discounts or commissions under the Securities Act. In addition, any
profits realized by the Selling Securityholders, may be deemed to be
underwriting commissions. All costs, expenses and fees in connection with the
registration of the Selling Securityholders' offered by Selling Securityholders
will be borne by the Company. Brokerage commission, if any, attributable to the
sale of the Selling Securityholders' Securities will be borne by the Selling
Securityholders.
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No underwriting arrangements have been entered into by the Selling
Securityholders. The distribution of the A Warrants and Common Stock by the
Selling Securityholders, may be effected in one or more transactions that may
take place on the over-the-counter market, including ordinary broker's
transactions, privately-negotiated transactions or through sales to one or more
dealers for resale of such shares as principals, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or
negotiated prices. Usual and customary or specifically negotiated brokerage fees
or commissions may be paid by the Selling Securityholders, in connection with
sale of the Securities.
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" APPEARING ON PAGES 11-19.
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.
-----------------
The date of this Prospectus is ______________.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copies at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, NW, Room 1204, Washington, DC 20549; at 500 West Madison Street, Suite
1400, Chicago, IL 60661-2511; and at 75 Park Place, Suite 1400, New York, NY
10007. Copies of such material also may be obtained at prescribed rates from the
Public Reference Section of the Commission, 450 Fifth Street, NW, Judiciary
Plaza, Washington, DC 20549. In addition, material filed by the Company can be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, NW, Washington, DC 20002.
REPORTS TO SECURITYHOLDERS
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent certified public
accountants and with quarterly reports containing unaudited financial
information for each of the first three quarters of each fiscal year following
the end of each quarter.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference in this Registration
Statement and made a part hereof:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995; and
(b) The Company's Amended Annual Report on Form 10-KSB/A-1 for the fiscal
year ended December 31,1995; and
(c) The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1996; and
(d) The Company's Amended Quarterly Report on Form 10-QSB/A-1 for the
quarter ended March 31, 1996; and
(e) The Company's Prospectus filed pursuant to Rule 424(b) on May 15, 1995
as part of Registration No. 33-89336.
(f) Te Company's Form 8-K dated July 9, 1996
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(g) All other documents filed by the Company after the date of this
Registration Statement under Section 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, prior to the filing of a
post-effective amendment to the Registration Statement which indicates
that all securities offered have been sold or which deregisters all
securities then remaining in the Registration Statement and to be part
thereof from the date of filing of such documents.
Any person receiving a copy of this Prospectus may obtain without charge,
upon written or oral request, a copy of any of the documents incorporated by
reference herein, except for the exhibits to such documents (unless such
exhibits are specifically incorporated by reference into the documents which
this Prospectus incorporates). Request should be directed to Brenda Taylor,
Corporate Secretary, Electronics Communications Corp., 4 Madison Road,
Fairfield, New Jersey 07004, telephone number (201) 808-8862.
Any statement made in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that such statement is replaced or modified by a statement contained in a
subsequently dated document incorporated by reference or contained in this
Prospectus. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Until ______________, 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus with
respect to their solicitation of offers to purchase the Securities offered
hereby.
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PROSPECTUS SUMMARY
The following information is qualified in its entirety by more detailed
information and financial statements appearing elsewhere or incorporated by
reference in this Prospectus.
The Company
Electronics Communications Corp. (the "Company") is a Delaware corporation
engaged in the sale of cellular telephone service and related equipment. The
Company has four wholly-owned subsidiaries, Free Trade Distributors, Inc., Trade
Zone Distributors, Inc., Electrocomm Wireless, Inc. and Personal Communications
Network, Inc. Free Trade Distributors, Inc. ("Free Trade"), a New Jersey
corporation, distributes cellular mobile telephones and other home office
products (including electronic organizers, fax machines and copy machines),
through a network of dealers, typically, car stereo and automobile dealerships,
audio/video retailers, telephone inter-connect companies and some chain stores.
Trade Zone Distributors, Inc. ("Trade Zone"), a New Jersey corporation, is an
agent Bell Atlantic NYNEX Mobile Communications, Inc. ('BANMC") authorized to
appoint sub-agents (thereby, in the opinion of management, constituting the
Company a "master agent") and provides cellular telephone service through its
dealer network and through a direct sales force. Trade Zone acts as a
non-exclusive master agent for BANMC in the Cellular Geographic Service Area
("CGSA") comprising the Washington D.C./Baltimore area extending north to the
New York metropolitan area.
Electrocomm Wireless, Inc. ("Electrocomm"), a Delaware corporation, plans
to become a radio paging carrier in the New York City Metropolitan Area and in
the entire State of New Jersey (the "Paging Service Area"). To that end,
Electrocomm has been granted two paging licenses from the Federal Communications
Commission ("FCC"). Electrocomm has signed an agreement to purchase 18 paging
transmitters and the system is presently being built. The Company anticipates
that the system should be completed no later than June 1, 1996. Accordingly, the
Company will begin marketing its paging services in mid 1996. Electrocomm has
also completed the acquisition and transfer of seven two-way radio licenses in
the UHF band to offer commercial radio service over the frequencies utilizing
mobile trunking technology. Electrocomm has completed the construction of the
system and is currently testing the transmission. Electrocomm commenced
marketing this system in early 1996.
Personal Communications Network, Inc. ("PCN"), a Delaware corporation was
formed to enter the FCC Personal Communications Services ("PCS") Basic Trading
Areas ("BTA") Auction. The auction commenced on December 18, 1995 and PCN placed
a deposit of $1,000,000 with the FCC to participate in the auction. On May 8,
1996, PCN won six PCS licenses entitling; the Company to operate wireless PCS
telephone systems covering 1.5 million people in three states.
The licenses were won in the recently concluded Federal Communications
Commissions "C" Block Auction. The markets awarded the Company include
Elmire-Corning, New York; Bangor/Lewiston-Auburn/Waterville-Augusta, Maine; and
Burlington/Rutland-Bennington,
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Vermont. The Vermont markets encompass virtually the whole state. The Maine
markets cover a majority of the population and most of the state geographically.
The licenses expire and are subject to renewal after ten (10) years.
The Company's total winning bids amounted to $26,452,200, after the 25%
discount provided to small businesses, which the Company qualifies for, under
the terms of the auction. The Company utilized the above described $1,000,000
deposit and will pay an additional $1,645,220 or an aggregate of 10% of the
winning bids upon the grant of the license, which is anticipated shortly.
The Company raised the balance of the downpayment in a private placement.
See "Recent Significant Developments". The remaining balance will be paid out
over the next 10 years with interest only during the first six years. In the
future, the Company will attempt to secure additional equity or debt financing
to pay for the remaining balance due on the licenses.
On June 28, 1996, the Company completed the acquisition of 51% of the
issued and outstanding stock of Threshold Communications, Inc. ("TCI") for an
aggregate purchase price of $1,114,000. Previously, the Company loaned TCI an
aggregate of $725,000, which in addition to 194,500 shares of the Company's
Common Stock (at the time was $2.00 per share) represented the consideration
paid by the Company. TCI is a recently formed corporation engaged in the radio
paging business. TCI has recently acquired a paging subscriber base, associated
paging hardware and a paging carrier agreement with Skytel, a company that
provides nationwide paging, voice messaging and related messaging services to
subscribers and others. In addition, TCI owns a 900 megahertz FCC paging license
in the Paging Service Area and holds a long-term lease for a paging transmission
site.
On March 22, 1996 TCI acquired substantially all of the assets and assumed
certain liabilities of General Communications and Electronics, Inc. ("GCE"). As
part of the transaction with GCE, TCI, became a paging reseller with a
subscriber base of approximately 9,000 persons. TCI offers paging service
primarily through various paging carriers in the New York metropolitan area. TCI
offers national paging service through a sales and distribution agreement with
Skytel. Under this agreement, TCI pursues regional and national accounts through
its present dealer network in the Paging Service Area. TCI also has the
necessary infrastructure to operate a paging operation, including but not
limited to a full service technical shop and repair facility, engineering
capability, marketing and sales force, billing and collection systems and
ancillary product support capability for paging related products.
The Company's offices are located at 10 Plog Road, Fairfield, NJ 07004. Its
telephone number is (201) 808-8862.
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<PAGE>
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Common Stock being offered by Selling Securityholders......... 104,145
A Warrants being offered by Selling Securityholders........... 800,000
A Warrants Outstanding ....................................... 4,270,000
Common Stock Outstanding assuming no exercise of
outstanding A Warrants................................... 4,134,294
</TABLE>
NASDAQ Symbols for:
Common Stock........... "ELC"
A Warrants................. "ELCCW"
Boston Stock Exchange Symbols for:
Common Stock.......... "ELCC"
A Warrants................ "ELCW"
Description of A Warrants................ Each A Warrant is exercisable
during the period from May 12,
1995 to May 12, 1999. Each A
Warrant entitles the holder to
purchase one share of Common Stock
at a price of $5.00. The A
Warrants are redeemable by the
Company at $.001 per A Warrant
under certain conditions. See
"Description of Securities".
Risk Factors............................. An investment in the Securities
offered hereby involves a high
degree of risk. Prospective
investors should review carefully
and consider the factors described
in Factors".
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SUMMARY CONSOLIDATED FINANCIAL DATA
The following table set forth certain summary consolidated financial data
of the Company and its subsidiaries at the dates and for the periods indicated.
These summary consolidated financial data do not purport to be complete and
should be read in conjunction with the consolidated financial statements and
notes thereto set forth in the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1995, which financial statements are incorporated
herein by reference, and in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained therein.
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, March 31
------------------------------------- -----------------------
1995 1994 1993 1996 1995
---- ---- ---- ----- ----
Statements of Operations Data: (unaudited)
<S> <C> <C> <C> <C> <C>
Sales $8,736,515 $9,423,964 $6,377,425 $2,263,526 $1,602,764
Gross Profit 1,172,421 1,241,277 470,523 546,275 293,168
Operating Income (Loss)
Before Other Expenses and Income Taxes (892,823) 125,460 (242,847) 25,019 10,314
Income (Loss) Before Income Taxes (2,628,959) 34,093 (296,626) 1,257 (406,977)
Net Income (Loss) (2,628,959) 29,819 (296,626) 1,257 (406,977)
Earnings (Loss) Per Share (1.11) .02 (.25) 0.00 (.27)
Weighted Average Common
Shares and Equivalent
Shares Outstanding 2,368,809 1,506,227 1,176,086 3,082,318 1,516,086
</TABLE>
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994 March 31, 1996
Actual Actual Unaudited
------------- ------------- -----------------
Balance Sheet Data
<S> <C> <C> <C>
Current Assets $ 5,428,434 $ 2,309,894 $ 5,177,410
Total Assets 6,246,658 3,231,332 6,315,431
Working Capital 1,724,852 (615,872) 1,953,825
Total Liabilities 3,703,582 2,925,766 3,311,379
Stockholders' Equity 2,464,275 305,566 3,004,052
</TABLE>
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PRO FORMA CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Statements of Consolidated Balance Sheets
and Statements of Operations for the year ended December 31, 1995 and the period
ended March 31, 1996 gives effect to the acquisition of 51% of Threshold
Communications, Inc. as if this transaction occurred in the beginning of the
periods specified. The Unaudited Pro Forma Consolidated Balance Sheets are
presented for December 31, 1995 and March 31, 1996. The Unaudited Pro Forma
Consolidated Statements of Operations are for the periods ending December 31,
1995 and March 31, 1996. All of the entities presented have either historically
or pro forma use calendar year ends for reporting purposes.
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1995 March 31, 1996
----------------- -------------------
Statements of Operations Data:
<S> <C> <C>
Sales $11,172,097 $2,914,398
Gross Profit 2,403,022 866,564
Operating Income (Loss)
Before Other Expenses and Income Taxes (2,935,935) (112,142)
Income (Loss) Before Income Taxes (3,021,040) ( 58,356)
Net Income (3,021,040) ( 58,356)
Earnings (Loss) Per Share (0.92) (0.02)
Weighted Average Common
Shares and Equivalent
Shares Outstanding 3,267,657 3,267,657
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 March 31, 1996
----------------- -------------------
Balance Sheet Data:
<S> <C> <C>
Current Assets $5,168,036 $4,549,261
Total Assets 7,662,885 7,551,171
Working Capital 57,354 302,413
Total Liabilities 5,110,682 4,246,848
Stockholder's Equity 2,233,368 2,881,519
</TABLE>
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RECENT SIGNIFICANT DEVELOPMENTS
On July 21, 1995, the Company entered into an Advertising and Promotional
Services Agreement, pursuant to which the Company agreed to issue 200,000 shares
of its Common Stock, $.05 par value, in exchange for services previously
provided to the Company. These services included analysis, advice, advertising
and promotional ideas and a marketing campaign in connection with the Company's
development of its distribution of cellular products in South America. The
Company issued the stock to the consultant on August 8, 1995.
On June 28, 1996, the Company completed the acquisition of 51% of the
issued and outstanding stock of Threshold Communications, Inc. ("TCI") for an
aggregate purchase price of $1,114,000. Previously, the Company loaned TCI an
aggregate of $725,000, which in addition to 194,500 shares of the Company's
Common Stock (at the time was $2.00 per share) represented the consideration
paid by the Company. TCI is a recently formed corporation engaged in the radio
paging business. TCI has recently acquired a paging subscriber base, associated
paging hardware and a paging carrier agreement with Skytel, a company that
provides nationwide paging, voice messaging and related messaging services to
subscribers and others. In addition, TCI owns a 900 megahertz FCC paging license
in the Paging Service Area and holds a long-term lease for a paging transmission
site.
On March 22, 1996 TCI acquired substantially all of the assets and assumed
certain liabilities of General Communications and Electronics, Inc. ("GCE"). As
part of the transaction with GCE, TCI, became a paging reseller with a
subscriber base of approximately 9,000 persons. TCI offers paging service
primarily through various paging carriers in the New York metropolitan area. TCI
offers national paging service through a sales and distribution agreement with
Skytel. Under this agreement, TCI pursues regional and national accounts through
its present dealer network in the Paging Service Area. TCI also has the
necessary infrastructure to operate a paging operation, including but not
limited to a full service technical shop and repair facility, engineering
capability, marketing and sales force, billing and collection systems and
ancillary product support capability for paging related products.
On January 16, 1996 the Company consummated a Private Placement Offering of
69,430 shares of the Company's $.05 par value common stock at a price of $2.25
per share. The total offering resulted in gross proceeds of $156,218. The
proceeds of this offering were utilized as general working capital. Each
subscriber, in addition to the shares, received demand registration rights,
which require the Company to file a Registration Statement upon request of 25%
or more of the shares sold in the offering at anytime during the 18 month period
commencing 30 days from the closing date.
In March 1996, the subscribers demanded that the Company file a
Registration Statement covering their shares. The Company at that time was
unable to comply with the request. In order to avoid a potential litigation for
failing to file a Registration Statement on a timely basis, the Company issued
an aggregate of 34,715 additional shares to the subscribers. These shares along
with the original 69,430 shares are being registered herein.
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On February 29, 1996, the Company entered into a financing arrangement with
a corporation in the amount of $134,000. The proceeds of this loan were utilized
as general working capital. Interest is payable at a rate of 10% in monthly
installments of $1,117 per month. The loan becomes due on February 28, 1997. As
additional consideration, the Company issued the corporation 800,000 "A"
warrants with 90 day registration rights and "piggy back" registration rights
with any other offering of the Company. These A Warrants are being registered
herein
On March 21, 1996, the Company entered into a letter of intent with an
investment banking firm (the "Placement Agent"). Pursuant to which the Company
will offer $6,000,000 principal amount of the Company's Subordinated Convertible
Debenture (the "Debenture"). The principle amount of the Debentures shall be
convertible into shares of the Company's common stock at the option of the
holder, immediately upon issuance, at a price equivalent to 25% discount from
the average high closing bid price for five days prior to the conversion or
$1.50, whichever is less. The Debenture bears interest at the rate of 5% per
annum payable on April 1 of each year commencing April 1, 1997. The Debentures
are redeemable and callable for conversion under certain circumstances. The
Company has agreed to the Placement Agent a placement fee equal to 10% of the
gross proceeds, a 2% non-accountable expense allowance and to issue 200,000
Warrants to purchase the Company's common stock at $2.25 per share. As of the
date hereof, the Company has sold an aggregate of $2,715,000 of the Debentures.
Such proceeds were received by the Company in two tranches. The Placement Agent
has advised the Company that it has temporarily concluded offering the
debentures and will start a new offering on or about July 1, 1996. The Company
has used the proceeds of this offering pay its downpayment for the licenses it
won in the recently concluded PCS auction, build out its paging system and
general working capital purposes.
In May, 1996 the Company sold an aggregate of 500,000 shares of its Common
Stock for $625,000 or $1.25 per share. The Company received net proceeds from
this sale of $543,750. The Company utilized the proceeds generated by this
issuance of stock for general working capital purposes.
On March 4, 1996 the Company commenced an action entitled Electronics
Communications Corp. as Plaintiff against Toshiba America Consumer Products,
Inc. ("Toshiba") and Audiovox Corporation, case number 96 Civ. 1565 in the
United States District Court, Southern District of New York. The complaint
asserts claims for antitrust, breach of contract, tortious interference with
contract and tortious interference with prospective economic advantage and
business relations. The complaint seeks damages in excess of $5,000,000. This
action was commenced because the Company expended significant monies and
resources including the issuance of 200,000 shares of the Company's Common Stock
to a consultant in anticipation of a South American cellular telephone program
which the Company was to undertake exclusively on behalf of Toshiba. Immediately
prior to the commencement of the program, Toshiba discontinued manufacturing the
line of cellular telephones that the
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<PAGE>
program was designed to offer. This unilateral decision has caused significant
damages to the Company and the Company will vigorously prosecute this claim.
RISK FACTORS
The securities of the Company being offered by this Prospectus involve a
high degree of risk. They should be purchased only by a person who can afford to
lose his or her entire investment. Therefore, each prospective investor should,
prior to purchase, consider carefully the following risk factors, together with
other information in this Prospectus.
Competition; Uncertainties Related to New Business
The telecommunications industry in general, and the area of cellular
telephone service and equipment sales in particular, are highly competitive.
Among the Company's competitors are resellers of cellular telephone service and
cellular telephone system operators, such as those the Company represents as an
agent and other equipment manufacturers and distributors. In addition, the
Company's products and services are in competition with other products providing
similar benefits to the consumer such as, radio pages and mobile radios.
Competitive factors include quality of transmission, price, service and the
ability to increase sales through marketing. There are numerous paging carriers
operating in the Paging Service Area. While the Company believes it can appeal
to consumers, there can be no assurance that the Company can achieve a
sufficient customer base to operate a paging service profitably. Among the
Company's competitors are numerous companies that have vastly greater financial
resources, experience, and larger marketing and sales staffs than those of the
Company. Accordingly, there can be no assurance that the Company will be able to
compete successfully with other companies or that it will operate profitably.
History of Losses
The Company incurred net losses of $2,628,959 from sales of $8,736,515 for
the year ended December 31, 1995 compared to a net income of $29,819 from sales
of $9,423,964 for the year ended December 31, 1994. During 1995, a part of the
losses totaling $1,548,415 represented non-cash expenses related to the issuance
of shares of Common Stock and Warrants as part of the Company's Bridge Financing
($473,415) and the issuance of shares of Common Stock relating to an Advertising
and Promotional Services Agreement ($1,075,000). During the years ended December
31, 1993 and 1992, the Company's sales were $6,377,425 and $3,116,739 and the
Company incurred net losses of $296,626 and $48,100, respectively. For the three
months ended March 31, 1996 the Company had net income of $1,257. The Company
intends to continue its cellular agency business and wholesale distribution of
home office products which management believes will continue to grow. The
Company has invested in domestic paging systems, wireless telephone systems and
other telecommunications products, which may not be profitable for an extended
period of time, if at all. The Company was high bidder for six personal
communication services ("PCS"), which is a highly speculative endeavor. Such
license,
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<PAGE>
when granted to the Company, may not result in the development of a
commercially feasible system or revenues for an extended period of time.
Need for Additional Financing
The Company's plans call for it to act as a paging carrier in the Paging
Service Area and to bid for PCS licenses. While the Company believes it has
adequate capital from its recently completed public offering to construct,
develop and market its paging system consisting of equipment and installation
costs of $485,000, engineering expenses of $50,000 and marketing expenses of
$65,000 (assuming the outright purchase of the paging equipment),it will require
substantial additional capital to build a PCS system. The Company was high
bidder for six licenses covering 1.5 million people in three states. The
Company's total winning bids amounted to $26,452,200. The Company utilized the
$1,000,000 deposit and will utilize $1,645,220 of the proceeds received from the
sale of Debentures to pay the 10% downpayment upon the granting of the licenses.
The estimated capital cost, over a period of five to ten years, for the build
out of the system and payment of the licenses is $30,000,000 to $35,000,000.
This includes interest of approximately $1,500,000 per year on the licenses.
Although vendor financing for telecommunications equipment is generally
available, there can be no assurance that such financing will be available to
the Company on acceptable terms, if at all. In addition, the Company will
require additional capital to make the license payment. Although management
believes it can obtain such financing there is no assurance that such financing
will be available and at terms acceptable to the Company.
Dependence Upon External Suppliers
The Company will not manufacture its cellular telephone equipment or home
office equipment. Such equipment is supplied by a variety of vendors such as
Blaupunkt, NYNEX, Ericsson, Motorola, Cannon, Sharp, Mitsubishi, NEC America,
Inc. and others. The Company will be relying upon external sources, none of
which will be legally bound to supply the Company with its requirements. There
can be no assurance that a suitable supply of equipment will be available at
such times as the Company requires, if at all, except at higher than anticipated
cost and possibly some sacrifice of quality. Nevertheless, it is the Company's
policy to seek supplies of its products at advantageous prices from a variety of
sources which it could not do if it was contractually bound to a supplier. In
addition, during fiscal year 1995, the Company purchased 100% of its cellular
telephones from four major suppliers. The loss of a relationship with any of
these suppliers could have a substantial impact on the business of the Company.
Dependence Upon External Suppliers of Cellular Service
The Company is dependent upon non-wireline and wireline carriers to supply
it with cellular telephone service. The Company is presently being supplied with
cellular telephone service under agency agreements with NYNEX and Bell Atlantic.
The Company would be materially adversely affected if either NYNEX or Bell
Atlantic terminated its agency agreement,
13
<PAGE>
failed to provide adequate service or if they experienced financial, technical
or regulatory difficulties or if future demand exceeds current service
capabilities. In addition, the Company's ability to expand it cellular telephone
service as an agent is dependent upon its ability to enter into agency
agreements with other cellular telephone system operators and there is no
assurance that the Company would be successful in such expansion efforts.
Lack of Management's Experience in Building and Operating a New Paging System
and a PCS System
The Company and its current executive officers have not had any prior
experience in the construction and development of a paging system or PCS system.
To date, the Company has consulted with several engineers and paging operators
and intends to hire a systems manager and engineer to manage and operate the
paging system. There can be no assurance that the Company will be able to hire
qualified individuals to fill these positions. Further, while the Company
believes that the paging system it is planning to build will have adequate
power, range and transmission quality to enable it to operate effectively, there
can be no assurance that the paging system will be able to function on a
competitive basis. While there are presently no PCS systems in operation, the
Company's President, William S. Taylor, has experience managing the construction
and operation of a cellular service system which management believes is similar
to a PCS system. Mr. Taylor is the only officer of the Company that has any
experience in operating and constructing a wireless communications system.
Possible Changes in Government Regulation; Foreign Ownership Changes
Both the Federal Communications Commission (the "FCC") and state regulatory
agencies have regulatory jurisdiction over the cellular telephone industry. The
FCC regulates and licenses cellular telephone system operators, but does not
currently regulate or license agents of cellular telephone systems operators.
There can be no assurance that the FCC or state regulatory agencies will not
regulate such business in the future. State regulatory agencies regulate
cellular telephone system operators, while agents are not subject to regulation
at this time. The FCC licenses cellular mobile telephone and other mobile radio
carriers, and the Communications Act of 1934, as amended, has preempted state
and local rate and entry regulation. The FCC's jurisdiction extends to all
providers of commercial mobile radio service (including paging and traditional
two-way mobile). States and localities may exercise narrow authority over
carriers and regulate, for example, service "practices." With prior FCC
approval, however, states may be granted authority to regulate rates. Agents
such as the Company are not regulated by the FCC and are only subject to
regulations imposed by states and local jurisdictions on general businesses.
There can be no assurance that the FCC will not adopt regulations or take
actions that would have a material adverse effect on the Company's business.
Similarly, although most states and localities may simply continue to exercise
traditional regulatory powers over commercial mobile radio service providers,
some states may, seek and obtain FCC approval to impose rate regulation on
businesses operated by the Company or on for which it acts as agent, or expand
existing regulations. The Communications Act prohibits the issuance of a common
carrier (including PCS, cellular, paging, and other commercial mobile radio
services) license to,
14
<PAGE>
or the holding of a common carrier license by, any corporation of which any
officer or director is a non-U.S. citizen or of which more than 20% of the
capital stock is owned of record or voted by non-U.S. citizens or their
representatives or by a foreign government or a representative thereof, or by
any corporation organized under the laws of a foreign country (collectively,
"Aliens"). The Communications Act also authorizes the FCC, if the FCC determines
that it would be in the public interest, to prohibit the issuance of a common
carrier license to, or the holding of a common carrier license by, any
corporation directly or indirectly controlled by any other corporation of which
any officer or more than 25% of the directors are Aliens or of which more than
25% of the capital stock is owned of record or voted by Aliens. The FCC has
issued interpretations of existing law under which these restrictions in
modified form apply to other forms of business organizations, including
partnerships. As of the date hereof, less than 10/% of the outstanding shares of
Common Stock are held by Aliens. To insure the Company remains in compliance
with the Communications Act it will from time to time poll its largest
stockholders and review its stockholder list. The Company, to date, has not
determined a policy, in the event its foreign ownership exceeds the FCC maximum
but it may be required to take appropriate action to encourage foreign investors
to divest ownership.
Uncertainties Related to Personal Communications Services Auction
The Company intends to participate in the FCC auction to acquire PCS
licenses for Basic Trading Areas ("BTA") which is scheduled for December 18,
1995. A BTA is a geographical service area based on the Rand McNally 1992
Commercial Atlas & Marketing Guides 123rd Edition. The United States is divided
into 493 BTAs. Auctions for Major Trading Areas (MTAs") have been completed, but
due to the wide disparity in frequency spectrum available to the licensee and
the relative populations encompassed by MTAs vs. BTAs, prices paid for MTA
licenses are not indicative of the value of licenses for BTAs. There are a
number of factors that make this venture highly speculative. There can be no
assurance that the Company will obtain a license as a result of the bidding
process or that any license it acquires will justify the expenditures for
license fees. The Company intends to bid in the entrepreneurs' blocks, the PCS
frequency blocks designated "C" and "F". In those blocks, the FCC has reserved
spectrum for entrepreneurial businesses and small businesses. The FCC planned to
award bidding preferences and enhanced installment payments to small businesses
and to designated entities controlled by women or minorities. Under current
rules the Company meets the FCC's definition of a "small business," and would
enjoy a 10 bidding credit and the ability to pay winning bids over a 10-year
period with interest-only during the first two years. Under the FCC rules small
businesses controlled by women or minorities would be entitled to a 25% bidding
credit and to a more favorable payment plan. This factor would give these groups
a distinct financial advantage in bidding for a license. Additionally there may
be small businesses that have greater resources than the Company which may bid
on licenses targeted by the Company. Accordingly, there can be no assurance that
the Company will be a successful bidder.
15
<PAGE>
Uncertainties Related to Building and Operating a Personal Communication
Service System
In the event the Company is a successful bidder in the PCS auction, the
Company would be required to build a network infrastructure. The Company does
not presently know which BTA or BTAs it will be successful in acquiring and
therefore cannot prepare a development budget with any degree of accuracy. The
Company may seek a joint venture partner to assist in the construction of an
infrastructure, but there can be no assurance that a joint venture partner will
be available. Nor can it be determined that the characteristics of the BTA will
make it commercially feasible to build such infrastructure. Finally, PCS is in
its infancy stage and there is no assurance that the technology will be
commercially viable, or will be competitive with existing technology.
Technological Obsolescence
The telecommunications industry in general and wireless communications in
particular, are undergoing rapid and significant technological change. The
Company will need access to improving technology in order to remain competitive.
There can be no assurance that the Company can obtain access to such new
technology through licensing agreements, joint ventures or otherwise. The
Company does not allocate significant financial resources to research and
development. Consequently, the Company may invest time and financial resources
in new technology, such as PCS with no assurance that the Company will be
successful in accessing new technology and, even if the Company is successful in
its development efforts, that the technology will be commercially viable or will
be competitive with the then existing technology.
Lack of Proprietary Technology
The Company does not have nor does it presently intend to develop
proprietary communications technology. As noted above, the Company's
participation in the telecommunications industry is dependent upon it obtaining
access to technology for new products and services through purchase of equipment
and services from large suppliers. Large manufacturers dominate technological
development in the wireless communications industry and changes in their methods
of distributing such products could reduce access to technology and harm its
growth prospects.
Maintenance of Customer Base
During the year ended December 31, 1995, approximately 3% of the Company's
revenues was derived from residual payments from cellular carriers. While the
Company presently has a customer base of approximately 16,000 subscribers for
which it receives monthly residual payments from the cellular carriers, these
subscribers have no long-term contracts and they can terminate their service at
any time. Although the residual payments received by the Company as agent for
each subscriber typically continue for a period not to exceed three years, the
payments can terminate for various reasons at any time and there can be no
assurance that a substantial
16
<PAGE>
number of subscribers will continue to buy cellular telephone service through
the Company. In the event that a significant percentage of these subscribers are
lost, there can be no assurance that the Company will be able to replace its
customer base from other services.
Dependence Upon Key Personnel
The Company is highly dependent upon the personal efforts and abilities of
its President and Chief Executive Officer, William S. Taylor. The loss of the
services of Mr. Taylor could have a material adverse effect on the Company. The
Company has entered into a five-year employment agreement with Mr. Taylor
commencing on November 15, 1994 and expiring on November 15, 1999. The agreement
includes non-disclosure and non-competition provisions. The Company has obtained
key-person insurance on his life in the amount of $1,000,000, the proceeds of
which are payable to the Company.
Voting Control by Officers, Directors and Related Entities
The Company's officers and directors and persons which may be considered
affiliates of, or related to, such officers and directors beneficially own
approximately 12.7% of the Company's outstanding Common Stock. If they voted in
the same manner, such stockholders would represent a significant portion of the
votes required to elect the entire Board of Directors of the Company and, in
general, to determine the outcome of matters submitted to the stockholders for
approval.
Absence of Cash Dividends
The Board of Directors does not anticipate paying cash dividends on the
Common Stock in the foreseeable future and intends to retain future earnings to
finance the growth of the Company's business. Payment of dividends, if any, will
depend, among other factors, on earnings, capital requirements and the general
operating and financial condition of the Company.
Rights of Common Stockholders May be Materially Limited or Qualified by
Rights of Preferred Stockholders
The Company is authorized to issue 8,000,000 shares of Preferred Stock,
$.0l par value ("Preferred Stock"). The Preferred Stock may be issued in series
from time to time with such designation rights, preferences and limitations as
the Board of Directors of the Company may determine by resolution. The rights,
preferences and limitations of a separate series of Preferred Stock may differ
with respect to such matters as may be determined by the Board of Directors,
including without limitation, the rate of dividends, methods and nature of
payment of dividends, terms of redemption, amounts payable on liquidation,
sinking fund provisions (if any), conversion rights (if any), and voting rights.
Any and all such rights that may be granted to preferred stockholders may be in
preference to common stockholders and to common stockholders' detriment. In
general, additional shares of Preferred Stock may be issued by the Board of
Directors without stockholder approval. In the event of issuance, the Preferred
Stock
17
<PAGE>
could be utilized under certain circumstances as a method of discouraging,
delaying or preventing a change in control of the Company. This may have the
effect of discouraging third party bidders from ever making a bid, may reduce
any premium that such bid could yield to holders of Common Stock over market
value and may have a depreciative effect on the price of the Company's Common
Stock. Although the Company has no present intention to issue any shares of its
Preferred Stock, there can be no assurance that the Company will not do so in
the future. The Company will not publicly offer or sell any shares of Preferred
Stock without the consent of the Representative for a period of 24 months from
the date of this Prospectus.
Possible Adverse Market Effect of Exercise of Warrants and Limitation on
Future Financing
Assuming the exercise of the A Warrants currently outstanding and being
offered by the Selling Securityholders, there will be a 3,470,000 share increase
in the number of outstanding shares of Common Stock to a total of approximately
6,527,697 shares. If such exercise occurs within a reasonably short period of
time, this increase in the amount of Common Stock in any trading market could
cause a substantial reduction in the price of the Common Stock. The Warrants
give the respective holders the opportunity to benefit from an increase in the
market price of the Common Stock at nominal cost to them. While the Warrants are
outstanding, the terms on which the Company may obtain additional financing may
be adversely affected.
Possible Adverse Market Effect of Conversion of Debentures and Limitation on
Future Financing
The company has sold $2,715,000 of its Subordinated Convertible Debentures
and the Board of Directors has authorized the issuance of up to an aggregate
$6,000,000 of the Debentures. Assuming the conversion of the $2,715,000 worth of
Debentures outstanding based upon the current market price of the Company's
Common Stock, there will be a 1,810,000 share increase in the number of
outstanding shares of Common Stock. In the event all $6,000,000 worth of
Debentures are sold and converted based on the current market price of the
Company's Common Stock there will be a 4,000,000 share increase in the number of
outstanding shares of Common Stock. If such conversion occurs within a
reasonably short period of time, this increase in the amount of Common Stock in
any trading market could cause a substantial reduction in the price of the
Company's Common Stock. While the Debentures are outstanding, the terms on which
the Company may obtain additional financing may be adversely affected.
Possible Delisting of Securities from NASDAQ or Boston Stock Exchange
The NASD imposes stringent criteria for continued listing of securities on
the NASDAQ SmallCap Market. To maintain the listing of its securities on the
NASDAQ Small-Cap Market, the Company must have, among other things, total assets
of $2,000,000, capital and surplus of $1,000,000 and, in certain circumstances,
a minimum bid price for its common stock of $1.00 per share. In the event the
Common Stock or A Warrants are delisted from the NASDAQ Small-Cap Market as a
result of losses or otherwise, trading, if any, would thereafter be conducted in
18
<PAGE>
the over-the-counter market in the so-called "pink sheets" or the NASD's
Electronic Bulletin Board. The BSE imposes similar continuing listing
requirements. As a consequence of delisting, an investor could find it more
difficult to dispose of, or to obtain accurate quotations as to the price of,
the Company's securities. The Company could also suffer a loss of news coverage,
and information relating to the Company may become more difficult to obtain,
which could in turn result in a decline in the market for the Company's
securities and make it more difficult for the Company to obtain additional
financing.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure, relating to the market for penny stocks, in connection
with trades in any stock defined as a penny stock. The Commission recently
adopted regulations that generally define a penny stock to be an equity security
that has a market price of less than $5.00 per share, subject to certain
exceptions. Such exceptions include any equity security listed on the NASDAQ
Small-Cap Market and any equity security listed by an issuer that has (i) net
tangible assets of at least $2,000,000, if such issuer has been in continuous
operation for three years, (ii) net tangible assets of at least $5,000,000, if
such issuer has been in continuous operation for less than three years, or (iii)
average annual revenue of at least $6,000,000, if such an issuer has been in
operation for less than three years. Unless an exception is available, the
regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the risks
associated therewith.
In addition, if the Company's securities are not quoted on the NASDAQ
Small-Cap Market, or the Company does not have $2,000,000 in net tangible
assets, trading in the Company's securities would be covered by Rule 15g-9
promulgated under the Securities Exchange Act of 1934 for non-NASDAQ and
non-exchange listed securities. Under such rule, broker/dealers who recommend
such securities to persons other than established customers and accredited
investors must make a special written suitability determination for the
purchaser and receive the purchaser's written agreement to a transaction prior
to sale. Securities also are exempt from this rule if the market price is at
least $5.00 per share.
Although the Company's Common Stock and A Warrants will, as of the date of
this Prospectus, be outside the definitional scope of a penny stock, as they
will be listed on the NASDAQ Small-Cap Market, in the event the Common Stock and
A Warrants were subsequently to become characterized as a penny stock, the
market liquidity for the Company's securities could be severely adversely
affected. In such event, the regulations on penny stocks could limit the ability
of broker/dealers to sell the Company's securities and thus the ability of
holders of the Company's securities to sell their securities in the secondary
market.
Risk of Redemption of A Warrants
The Company may redeem the A Warrants, with the Representative's prior
consent, for $0.001 per A Warrant, commencing the first anniversary of the
Effective Date, at any time after the closing bid quotation for the Common Stock
on NASDAQ is at least $8.00 for 20 consecutive trading days ending three days
prior to the notice of redemption. Notice of
19
<PAGE>
redemption of the A Warrants could cause the holders thereof to exercise the A
Warrants and pay the exercise price at a time when it may be disadvantageous for
the holders to do so, to sell the A Warrants at the current market price when
they might otherwise wish to hold the A Warrants, or to accept the redemption
price, which is likely to be less than the market value of the A Warrants at the
time of redemption.
Investors May be Unable to Exercise A Warrants
For the life of the A Warrants, the Company has agreed to maintain a
current effective registration statement with the Securities and Exchange
Commission relating to the shares of Common Stock issuable upon exercise of the
A Warrants. If the Company is unable to maintain a current registration
statement, the A Warrant holders will be unable to exercise the A Warrants and
the A Warrants may become valueless. Although during the Offering the A Warrants
will not knowingly be sold in any jurisdiction in which they are not registered
or otherwise qualified, a purchaser of the A Warrants may relocate into a
jurisdiction in which the shares of Common Stock underlying the A Warrants are
not registered or qualified. If the Company is unable or chooses not to register
or qualify or maintain the registration or qualification of the shares of Common
Stock underlying the A Warrants for sale in all of the states in which the A
Warrant holders reside, the Company would not permit such A Warrants to be
exercised and A Warrant holders in those states may have no choice but to either
sell their A Warrants or let them expire. Prospective investors and other
interested persons who wish to know whether or not the Common Stock may be
issued upon the exercise of A Warrants in a particular state should consult with
the securities department of the state in question or send a written inquiry to
the Company.
Certain Anti-takeover Provisions
Section 203 of the Delaware General Corporation Law, as amended, contains
certain provisions that are normally considered to have the effect of inhibiting
a non-negotiated merger or other business combination. These provisions are
intended to encourage any person interested in acquiring the Company to
negotiate with and obtain the approval of the Board of Directors in connection
with the transaction. However, certain of these provisions may discourage a
future acquisition of the Company not approved by the Board of Directors in
which stockholders might receive the maximum value for their shares or which a
substantial number and even a majority of the Company's stockholders might
believe to be in their best interest. As a result, stockholders who might desire
to participate in such a transaction may not have the opportunity to do so.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the A
Warrants by the Selling SecurityHolders. The Company will apply any amounts paid
to the Company by the Selling Securityholders upon exercise of their A Warrants
to the Company's working capital.
20
<PAGE>
CERTAIN MARKET INFORMATION
Prior to May 12, 1995, the Company's Common Stock was traded
over-the-counter on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") Stock Market's Electronic Bulletin Board (the
"OTC Bulletin Board").
The Common Stock and A Warrants are currently traded in the NASDAQ Stock
Market's SmallCap Stock Market (the "NASDAQ SmallCap Market") and on the Boston
Stock Exchange, under the respective symbols "ELCC" and "ELCCW".
The following table sets forth the range of high and low bid quotations of
the Common Stock and A Warrants, as reported on the OTC Bulletin Board or the
NASDAQ SmallCap Market, for the periods indicated, as adjusted to reflect the 1
for 5 reverse stock split in the second quarter of 1995. These quotations
represent inter-dealer quotations, do not include retail mark-ups, mark-downs or
commissions, and do not necessarily represent actual transactions
<TABLE>
<CAPTION>
COMMON STOCK
---------------------
1994 Low High
- ---- --- ------
<S> <C> <C>
Second Quarter (beginning June 1, 1994).............. $5.312 $8.75
Third Quarter..........................................$2.50 $5.312
Forth Quarter..........................................$1.25 $5.00
1995
- ----
First Quarter..........................................$2.00 $4.25
Second Quarter (through May 12, 1995)..................$0.75 $4.75
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK A WARRANTS
------------------- ---------------
<S> <C> <C> <C> <C>
1995 Low High Low High
- ---- --- ---- --- ----
Second Quarter
(beginning May 15,1995).... $4.75 $5.50 $1.25 $1.375
Third Quarter.............. $4.75 $6.16 $1.12 $1.81
Fourth Quarter............. $2.00 $4.75 $ .50 $1.1875
1996
First Quarter.............. $1.875 $2.375 $ .375 $ .6875
Second Quarter............. $1.50 $2.593 $ .375 $1.156
</TABLE>
On July 9, 1996, the closing bid prices of the Common Stock and A Warrants
as reported on the NASDAQ SmallCap Market were $1.8125 and $.50 respectively. On
July 9, 1996, there were 452 record holders of the Common Stock and 29 record
holders of the A Warrants. The Company believes that there are in excess of 1000
beneficial holders of the Common Stock and A Warrants.
21
<PAGE>
SELLING SECURITYHOLDERS
This Prospectus relates to the sale by certain securityholders of the
Company (the "Selling Securityholders") of A Warrants. The following table sets
forth as of the date hereof certain information with response to the persons for
whom the Company is registering the securities for sale to the public. None of
such persons has held any position or office with the Company within the past
three years. The Company will not receive any of the proceeds from the sale of
the securities. The securities offered by the Selling Securityholders are not
being underwritten by the Underwriters.
<TABLE>
<CAPTION>
A WARRANTS
Beneficial Ownership Beneficial Ownership
Prior to Offering After Offering
Name of
Selling A Warrants
Securityholder A Warrants Percentage Offered A Warrants Percentage
- -------------- ---------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Technics In
Design & Manufacturing, Inc. 800,000 18.7% 800,000 -0- 0.0%
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK
Beneficial Ownership Beneficial Ownership
Prior to Offering After Offering
Name of
Selling Shares
Securityholder Shares Percentage Offered Shares Percentage
- -------------- ------ ---------- ------- ------ ----------
<S> <C> <C> <C> <C> <C>
Steven W. Machan 9,999 .03% 9,999 -0- 0.0%
Joseph Amedure 6,666 .02% 6,666 -0- 0.0%
Ann Marie DeMarco 3,333 .01% 3,333 -0- 0.0%
Richard G. Fishman 6,666 .02% 6,666 -0- 0.0%
Joseph P. Meyer 3,333 .01% 3,333 -0- 0.0%
Nancy H. Scher 37,500 1.2% 37,500 -0- 0.0%
Alan DeFabbio 13,332 .04% 13,332 -0- 0.0%
Angelina Lombardo 6,666 .02% 6,666 -0- 0.0%
Nicole Raineri 16,650 .05% 16,650 -0- 0.0%
</TABLE>
22
<PAGE>
PLAN OF DISTRIBUTION
The Selling Securityholders have advised the Company that sales of the
Securities may be effected from time to time by themselves, in transactions
(which may include transactions) in the over-the-counter market, in negotiated
transactions, through the writing of options on the Common Stock or a
combination of such methods of sale, at fixed prices that may be changes, at
market prices prevailing at the time of sale, or at negotiated prices. The
Selling Securityholders may effect such transactions by selling the Securities
directly to purchasers or through broker-dealers that may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Securityholders or the
purchasers of the Securities for whom such broker-dealers may act as agents or
to whom they sell as principals, or both (which compensation as to a particular
broker-dealer must be in excess of customary commissions).
The Selling Securityholders, and any broker-dealers that act in connection
with the sale of the Securities as principals may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act and any commissions
received by them and any profit on the resale of the Securities as principals
might by deemed to be underwriting discounts and commissions under the
Securities Act. The Selling Securityholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
Securities against certain liabilities, including liabilities arising under the
Securities act. The Company will not receive any proceeds from the sales of the
securities but will receive proceeds from the exercise of A Warrants. Sales of
the Securities, or even the potential of such sales, would likely have an
adverse effect on the market price of the Common Stock and A Warrants.
23
<PAGE>
DESCRIPTION OF SECURITIES
The following description relating to the Common Stock and A Warrants of
the Company is a summary and is qualified in its entirety by the provisions of
the Company's certificate of incorporation, as amended, and by-laws, copies of
which are available from the Company upon written request.
Common Stock
The shares of Common Stock (i) have equal ratable rights to dividends from
funds legally available therefore, when, as and if declared by the Board of
Directors of the Company are subject to the preference given to holders of
Preferred Stock; (ii) are entitled to share ratable in all of the assets of the
Company available for distribution to holders of Common Stock upon liquidation,
dissolution or winding up of the affairs of the Company; (iii) are not subject
to pre-emptive, subscription or conversion rights and there are no redemption or
sinking fund provisions applicable thereto, and (iv) are entitled to one
non-cumulative vote per share on all matters which stockholders may vote on at
all meetings of stockholders. All outstanding shares of Common Stock are, and
the shares of Common Stock to be sold in this Offering when issued and paid for
will be, fully paid and non-assessable.
The Company has paid no cash dividends and it is not anticipated that any
cash dividends will be paid in the foreseeable future. In all events, the
declaration of cash dividends will depend upon future earnings, if any, the
financial needs of the Company, and other pertinent factors.
The Company intends to furnish its stockholders with annual reports of its
operations, containing audited financial statements and with additional
information concerning the business and affairs of the Company whenever deemed
appropriate by the Board of Directors.
A Warrants
The A Warrants are governed by and subject to the terms of a warrant
agreement as amended (the "Warrant Agreement") between the Company and American
Stock Transfer and Trust Company, New York, New York, as the warrant agent (the
"Warrant Agent"). 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. See "Additional Information."
As of the date hereof, there are 4,270,000 A Warrants issued and
outstanding. The Company has reserved an equivalent number of shares of Common
Stock for issuance upon the exercise of the A Warrants.
24
<PAGE>
The Company may redeem the A Warrants with the consent of Investors
Associates, Inc. (the "Representative") at any time after May 12, 1996 at a
price of $0.001 per A Warrant upon 45 days' prior written notice if the closing
bid quotation of the Common Stock on NASDAQ has been at least $8.00 during the
20 consecutive trading days ending on the third day prior to the day on which
notice of redemption is given.
Each A Warrant entitles the holder thereof to purchase one share of Common
Stock at a price of $5.00 per share exercisable until May 12, 1999. The A
Warrants contain anti-dilution provisions that protect the Class A
warrantholders against dilution by adjustment of the exercise price in certain
events including, but not limited to, stock dividends, stock splits,
reclassifications or mergers. Class A warrantholders will not possess any rights
as a stockholder of the Company. The shares of Common Stock, when issued upon
the exercise of the A Warrants in accordance with the terms thereof, will be
fully paid and non-assessable.
During the time when the A Warrants are exercisable, the Company is
required to have a current registration statement on file with the Commission
and to effect appropriate qualifications under the laws and regulations of the
states in which the holders of A Warrants reside in order to comply with
applicable laws in connection with the exercise of the A Warrants and the resale
of the Common Stock issued upon such exercise. So long as the A Warrants are
outstanding, the Company has undertaken to file all post-effective amendments to
the Registration Statement required to be filed under the Securities Act, and to
take appropriate action under Federal and state securities laws to permit the
issuance and resale of Common Stock issuable upon exercise of the A Warrants.
However, there can be no assurance that the Company will be in a position to
effect such action under the federal and applicable state securities laws, and
the failure of the Company to effect such action may cause the exercise of the A
Warrants and the resale or other disposition of the Common Stock issued upon
such exercise to become unlawful. The Company may amend the terms of the A
Warrants but only by extending the termination date or lowering the exercise
price thereof. The Company has no present intention of amending such terms.
B Warrants
The Company has authorized the issuance of B Warrants to purchase a maximum
of 1,000,000 shares of Common Stock, and has reserved an equivalent number of
shares of Common Stock for issuance upon the exercise of such B Warrants. As of
the date hereof 990,000 B Warrants have been issued. No fractional shares will
be issued upon the exercise of the B Warrants, the Company will pay cash in lieu
of fractional shares.
The Company may redeem the B Warrants at a price of $.001 per warrant at
any time after May 12, 1996 upon 45 days' prior written notice if the closing
bid quotation of the Common Stock has been at least $8.00 on all 20 of the
trading days ending on the third day prior to the day on which notice of
redemption is given. Each B Warrant entitles the holder thereof to purchase one
share of Common Stock at a price of $5.00 per share until the fourth anniversary
of the Effective Date. On January 20, 1995, the Company agreed to reduce the
exercise price of
25
<PAGE>
300,000 B Warrants from $5.00 to $2.50 and amended the exercise period of these
300,000 B Warrants so that they are not exercisable until February 1, 1996. The
B Warrants contain provisions that protect the B Warrantholders against dilution
by adjustment of the exercise price in certain events including, but not limited
to, stock dividends, stock splits, reclassifications or mergers. B
Warrantholders will not possess any rights as a shareholder of the Company. The
shares of Common Stock, when issued upon the exercise of the B Warrants in
accordance with the terms thereof, will be fully paid and non-assessable. The
Company may amend the terms of the B Warrants. The Company has no present
intention of amending such terms.
Transfer and Warrant Agent
The Company's transfer and warrant agent is American Stock Transfer & Trust
Company, 40 Wall Street, 46th Floor, New York, NY 10005.
LEGAL MATTERS
The validity of the shares of Securities offered hereby will be passed upon
for the Company by the Sommer & Schneider LLP, 600 Old Country Road, Suite 535,
Garden City, NY 11530. A partner of the firm of Sommer & Schneider LLP owns
10,000 shares of the Company's Common Stock. EXPERTS
The consolidated financial statements of Electronics Communications Corp.
at December 31, 1995 and 1994 and for the years then ended incorporated by
reference in this Prospectus and the Registration Statement have been examined
by Stetz, Belgiovine CPAs, P.C. independent public accountants, as of and for
the periods indicated whose report thereon appears elsewhere in the Prospectus.
Such financial statements have been included in reliance upon the report of
Stetz, Belgiovine CPAs, P.C. given upon their authority as experts in accounting
and auditing.
26
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Estimated expenses in connection with the issuance and distribution of the
Securities to be registered are as follows:
Securities and Exchange Commission $ 1,737.80
Accounting 2,000.00
Printing 2,000.00
Legal Fees and Disbursements 15,000.00
Miscellaneous 1,000.00
-------------
$ 21,737.80
=============
The Selling Securityholders will not bear any portion of the expenses of
this Offering. The Company will therefore bear all expenses of this Offering.
Item 15. Indemnification of Officers, Directors and Others
Pursuant to the Company's certificate of incorporation, as amended, and
Bylaws, filed as exhibits hereto, the Company shall indemnify its directors,
officers, employees and agents to the fullest extent permissible under the
General Corporation Law of the State of Delaware, as effective from time to
time, or any other applicable law.
Under Section 145 of the Delaware General Corporation Law, the Company has
the power to indemnify directors, officers, employees and agents under certain
prescribed circumstances against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which any of them is a party by reason of
his being a director, officer, employee or agent of the Company if it is
determined that he acted in accordance with the applicable standard of conduct
set forth in such statutory provisions.
The Company's certificate of incorporation, as amended, and by-laws provide
that no director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for breach of his or her fiduciary duty as a
director, except: (i) for any breach of the director's duty of loyalty to the
Company or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) for
paying a dividend or approving a stock repurchase which was illegal under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper benefit.
II-1
<PAGE>
The foregoing provisions may provide indemnification against liabilities
arising under the Securities Act. Insofar as indemnification for liabilities
arising under 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 SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company 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 Company 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.
II-2
<PAGE>
Item 16. Exhibits
Exhibit Incorporated by
No. Description Reference to
- ------- ----------- ------------------
4.2 Form of Warrant Certificate (1)
4.3 Form of Warrant Agreement (2)
5.1 Opinion of the Law Offices of Herbert H. Sommer,
including consent (3)
23.1 Consent of Stetz, Belgiovine CPAs, P.C. (3)
23.2 Consent of the Law Offices of Herbert H. Sommer
(included in Exhibit 5.1) (3)
24 Power of Attorney (Contained on Page II-6) (3)
- ----------
(1) Incorporated by reference to Amendment No. 1 to Registration Statement on
Form SB-2 (File No. 33-89336).
(2) Incorporated by reference to initial Registration Statement on Form SB-2
(File No. 33-89336).
(3) Filed herein.
II-3
<PAGE>
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to any charter provision, Bylaw, contract arrangements,
statute, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other that the
payment by the registrant 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 registrant 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 Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement, and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) that, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) for determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer under Rule 424(b)(1), or
(4) or 497(h) under the Securities Act as part of this registration
statement at the time the SEC declared it effective, and
II-4
<PAGE>
(5) for determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that is has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fairfield, State of New Jersey, on June 25, 1996.
ELECTRONICS COMMUNICATIONS CORP.
By: /s/ William S. Taylor
------------------------------
William S. Taylor, Chairman of the Board
POWER OF ATTORNEY
Each person whose signature to this Registration Statement below hereby
appoints William S. Taylor and Les Winder or either of them, without joinder of
the other, as his/her attorney-in-fact to sign in his/her behalf individually
and in the capacity stated below and to file all amendments and post-effective
amendments to this Registration Statement, which amendment or amendments may
make such charges and additions to this Registration Statement as such
attorney-in-fact may deem necessary or appropriate. Pursuant to the requirements
of the Securities Act of 1933, this Registration Statement has been signed by
the following persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ William S. Taylor Chairman of the Board, July 9, 1996
- -------------------------- Chief Executive Officer,
William S. Taylor President (Principal Executive
and Financial Officer)
* Vice President and Treasurer July 9, 1996
- --------------------------
Les Winder
* Director and Secretary July 9, 1996
- --------------------------
Brenda Taylor
* Controller July 9, 1996
- --------------------------
Andrew A. Miller
Director July ___, 1996
- --------------------------
Mal Gurian
II-6
<PAGE>
Director July ___, 1996
- --------------------------
Ira J. Tabankin
* Director July 9, 1996
- --------------------------
Robert DePalo
/s/ William S. Taylo
- --------------------------
*By William S. Taylor
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that is has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fairfield, State of New Jersey, on April 25, 1996.
ELECTRONICS COMMUNICATIONS CORP.
By:____________________________________
William S. Taylor, Chairman of the Board
POWER OF ATTORNEY
Each person whose signature to this Registration Statement below hereby
appoints William S. Taylor and Les Winder or either of them, without joinder of
the other, as his/her attorney-in-fact to sign in his/her behalf individually
and in the capacity stated below and to file all amendments and post-effective
amendments to this Registration Statement, which amendment or amendments may
make such charges and additions to this Registration Statement as such
attorney-in-fact may deem necessary or appropriate. Pursuant to the requirements
of the Securities Act of 1933, this Registration Statement has been signed by
the following persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ William S. Taylor Chairman of the Board, April 25, 1996
- -------------------------- Chief Executive Officer,
William S. Taylor President (Principal Executive
and Financial Officer)
Vice President and Treasurer April 25, 1996
- --------------------------
Les Winder
Director and Secretary April 25, 1996
- --------------------------
Brenda Taylor
Controller April 25, 1996
- --------------------------
Andrew A. Miller
Director April 25, 1996
- --------------------------
Mal Gurian
II-8
<PAGE>
Director April 25, 1996
- --------------------------
Ira J. Tabankin
Director April 25, 1996
- --------------------------
Robert DePalo
II-9
Exhibits 5.1 and 23.2
SOMMER & SCHNEIDER LLP
600 OLD COUNTRY ROAD
GARDEN CITY, NEW YORK 11530
------------
Herbert H. Sommer Telephone (516) 228-8181
Joel C. Schneider Facsimile (516) 228-8211
July 10, 1996
Combined Opinion and Consent
Electronics Communications Corp.
4 Madison Road
Fairfield, NJ 07004
Re: Electronics Communications Corp.
Gentlemen:
We have acted as counsel to Electronics Communications Corp., a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933 as amended (the "Act") of the Company's Registration Statement on
Form S-3, filed contemporaneously with the Commission relating to the
registration under the Act of the proposed offering and sales by selling
securityholders (the "Selling Securityholders") of up to 104,145 shares of the
Company's Common Stock, .05 par value (the "Common Stock"), 800,000 Class A
Redeemable Warrants (the "Selling Securityholder Warrants") and 800,000 shares
of the Company's Common Stock, underlying the Selling Securityholder Warrants
(the "Selling Securityholders Underlying Shares").
In rendering this opinion, we have reviewed the Registration Statement on
Form S-3, as well as a copy of the Certificate of Incorporation of the Company,
as amended, and the By-Laws of the Company. We have also reviewed such statutes
and judicial precedents as we have deemed relevant and necessary as a basis for
the opinion hereinafter expressed. In our examination, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity with,
the original documents of all documents submitted to us as certified or
photostatic copies, and the authenticity of the originals of such copies.
Based on the foregoing and in reliance thereon, and subject to the
qualifications and limitations set forth herein, we are of the opinion that:
<PAGE>
Electronics Communications Corp.
July 10, 1996
Page 2
(1) The Company has been duly incorporated and is a validly existing
corporation under the laws of the State of Delaware; (2) The shares of
Common Stock are legally issued, fully paid and non-assessable;
(3) The Selling Securityholder Warrants, when sold in connection with the
offering described in the Registration Statement, will be binding
obligations of the Company, in accordance with their terms; and
(4) The shares of the Common Stock issuable upon the exercise of the Selling
Securityholders Warrants, when issued and paid for in accordance with the
terms of such warrants, will be legally issued, fully paid and
non-assessable.
This opinion is limited to the General Corporation Law and the
Constitution of the State of Delaware and we express no opinion with respect to
the laws of any other jurisdiction. We consent to your filing this opinion with
the Securities and Exchange Commission as an exhibit to the Registration
Statement on Form S-3. This opinion is not to be used, circulated, quoted or
otherwise referred to for any other purpose without our prior written consent.
Very truly yours,
Joel C. Schneider
JCS/md
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We have issued our report dated March 25, 1996 accompanying the financial
statements of Electronics Communications Corp. appearing in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995 and accompanying the
Company's Prospectus filed pursuant to Rule 424(b) on May 15, 1995 as part of
Registration No. 33-89336 which are incorporated by reference in the
Registration Statement of the aforementioned reports and the use of our name as
it appears under the "Experts."
STETZ, BELGIOVINE CPAs, P.C.
Montclair, New Jersey
July 10, 1996
