<PAGE>
FORM 10-KSB / A-2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: December 31, 1995
-------------------
Commission File Number: 0-24486
ELECTRONICS COMMUNICATIONS CORP.
(Exact Name of Registrant as Specified in its Charter)
Delaware 11-2649088
(State or other jurisdiction of (I.R.S Employer Identification No.)
incorporation or organization)
10 Plog Road, Fairfield, New Jersey 07004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 808-8862
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange on which
Title of each class each class is registered
- ------------------- ------------------------
Common Stock, $.05 par value BOSTON STOCK EXCHANGE
Class A Redeemable Warrants BOSTON STOCK EXCHANGE
Securities registered pursuant to Section 12 (g) of the Act: None
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements by
reference in Part III of this Form 10-KSB or any amendment to the Form 10-KSB.
[ X ]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
State issuer's revenue for its most recent fiscal year, $8,736,515
As of March 27, 1996, the aggregate value of the registrant's voting stock
held by non-affiliates was $4,627,738 (computed by multiplying the last reported
bid price on March 27, 1996 by the number of shares of common stock held by
persons other than officers, directors or by record holders of 10% or more of
the registrant's outstanding common stock. This characterization of officers,
directors and 10% or more beneficial owners as affiliates is for purposes of
computation only and is not an admission for any purposes that such persons are
affiliates of the registrant).
<PAGE>
As of March 27, 1996, there were 3,073,127 shares of the registrant's
common stock, $.05 par value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Document Form 10-KSB Reference
-------- ---------------------
Certain Previously Filed Exhibits IV
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth information concerning all remuneration paid
by the Company for the year ended December 31, 1995 to the Company's executive
officers and all executive officers as a group:
Name Position Salary
---- -------- ------
William S. Taylor President, CEO and Chairman $ 166,641
Les Winder Executive Vice President and Treasurer 117,245
Brenda Taylor Secretary and Director 38,278
---------
All executive officers
as a group (three persons) $ 322,164
---------
---------
STOCK OPTION PLAN
On September 27, 1994, the Board of Directors of the Company adopted a
Stock Option Plan (the "Plan") The Plan was amended by the Board of Directors
on November 22, 1994, and approved by stockholders on February 15, 1996, to
increase the number of shares as to which options may be granted from 100,000 to
300,000. The Plan permits the granting of awards to employees, directors and
consultants of the Company stock options. Stock options granted under the Plan
may be "incentive stock options," meeting the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended, or non-qualified options which do
not meet the requirements of Section 422. The Plan provides that 300,000 shares
of Common Stock are reserved for issuance pursuant to awards granted under the
Plan. As of the date hereof, there were 20,000 shares subject to stock options
outstanding under the Plan. All options granted pursuant to the Plan will be at
least 85% of the fair market value of the Company's Common Stock on the date of
grant.
The Plan is administered by a committee which was appointed by the Board of
Directors. The Plan gives broad powers to the committee to administer and
interpret the Plan, including the authority to select the individuals to be
granted options, and to prescribe the particular form and conditions of each
option granted.
B WARRANTS
On November 22, 1994, the Board of Directors of the Company authorized the
sale to officers, directors, principal stockholders and consultants of the
Company an aggregate of 1,000,000 B Warrants to purchase 1,000,000 shares of
Common Stock at $5.00 per share. The price per B Warrant is $.10. On January
20, 1995, the Company agreed to reduce the exercise price of an aggregate of
300,000 B Warrants from $5.00 to $2.50 owned by William S. Taylor (150,000),
Brenda Taylor (75,000) and Stewart Taylor (75,000). In addition, the exercise
period of these 300,000 B Warrants was changed so that they did not become
exercisable until February 1, 1996 and expire on May 12, 1999. In exchange, the
Company received certain financial guarantees and extensions of certain loans
due by the Company to William S. Taylor and Stewart Taylor. On November 16,
1995, William S. Taylor, Brenda Taylor, Stewart Taylor and Les Winder each sold
for $10 per B Warrant, 33,250 B Warrants or an aggregate of 133,000 B Warrants
to Mr. Joseph Albanese. On November 16, 1995, William S. Taylor, Brenda Taylor
<PAGE>
and Stewart Taylor each sold, for $.10 per B Warrant 50,000 B Warrants or an
aggregate of 150,000 B Warrants to Gary Holman. On November 16, 1995, Les
Winder sold, for $.10 per B Warrant, 50,000 B Warrants to Deborah Lanava
(40,000), and Merritt Fine (5,000) and Pauline Eskovitz (5,000). On November
20, 1995, the Board of Directors authorized an amendment to the Warrant
Agreement between the Company and American Stock Transfer and Trust Company,
(the Company's Warrant Agent) to provide for the consolidation of B Warrant
having the same economic terms as outstanding A Warrants and to permit the
holders of such B Warrants to hold A Warrants. Accordingly, as of the date
hereof, there are 300,000 B Warrants remaining outstanding. See "Item 11.
Security Ownership of Certain Beneficial Owners and Management" and "Item 12.
Certain Relationships and Related Transactions."
EMPLOYMENT AGREEMENTS
Effective December 1, 1994, the Company entered into an employment
agreement with Mr. Taylor for a term of five years with an option for additional
three one-year terms. The agreement provides for annual compensation of
$150,000 during the term of the employment agreement and entitles Mr. Taylor to
certain fringe benefits, including an automobile, maintenance, disability
insurance, medical benefits and life insurance coverage. Mr. Taylor has agreed
that during the term of his agreement and for 12 months thereafter (unless the
agreement is terminated without cause), he will be subject to non-competition
provisions. Upon termination of employment without cause, Mr. Taylor will be
entitled to a lump sum payment of $75,000 times the number of years of his
employment by the Company.
On May 17, 1995, the Company entered into an employment agreement with Mr.
Les Winder, which agreement was amended on October 1, 1996. The term of the
agreement is for five years with an option for additional one year terms. The
agreement provides for annual compensation of $137,500 during the term of the
employment agreement and entitles Mr. Winder to certain fringe benefits,
including an automobile (leasing and insuring), disability insurance, medical
benefits and life insurance coverage. Mr. Winder has agreed that during the
term of his agreement and for 6 months thereafter (unless the agreement is
terminated without cause), he will be subject to non-competition provisions.
Upon termination of employment without cause, Mr. Winder will be entitled to a
lump sum payment of 50,000 times the number of years of his employment by the
Company.
<PAGE>
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING DECEMBER 31, 1995, AND 1994
TABLE OF CONTENTS
PAGE
Independent Auditor's Report....................................... 1
Consolidated Balance Sheets........................................ 2-3
Consolidated Statements of Changes in
Stockholders' Equity(Deficit)...................................... 4
Consolidated Statements of Operations.............................. 5
Consolidated Statements of Cash Flows.............................. 6-7
Notes to Consolidated Financial Statements......................... 8-18
<PAGE>
Page 1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders
Electronics Communications Corp.
We have audited the accompanying consolidated balance sheets of Electronics
Communications Corp. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Electronics
Communications Corp. and subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
STETZ, BELGIOVINE CPAs, P.C.
March 25, 1996
Montclair, NJ 07042
<PAGE>
PAGE 2
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $18,000 $136,203
Restricted Cash 1,100,000 --
Accounts Receivable
(Net of $80,987 and $30,197 Allowance
for Doubtful Accounts at December 31, 1995
and 1994, respectively.) 2,204,789 1,590,943
Inventories 476,796 544,455
Bid Deposit 1,000,000 --
Loan Receivable 550,000 --
Prepaid Expenses 78,849 38,293
---------- ----------
TOTAL CURRENT ASSETS 5,428,434 2,309,894
---------- ----------
PROPERTY AND EQUIPMENT
Property and Equipment 335,858 116,264
Accumulated Depreciation (75,544) (25,579)
---------- ----------
NET PROPERTY AND EQUIPMENT 260,314 90,685
---------- ----------
OTHER ASSETS
Deferred Financing Costs -- 606,943
Deferred Offering Costs -- 196,716
Deferred Private Placement Costs 225,787 --
Deferred License Costs 293,810 --
Security Deposits and Other Assets 38,313 27,094
---------- ----------
TOTAL OTHER ASSETS 557,910 830,753
---------- ----------
TOTAL ASSETS $6,246,658 $3,231,332
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PAGE 3
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $1,783,344 $1,722,867
Notes Payable - Other 28,000 140,000
Notes Payable - Bank 1,225,000 90,000
Notes Payable - Bridge Financing -- 800,000
Notes Payable - Stockholders 252,007 64,391
Current Portion of Obligations Under Capital Leases 50,244 --
Private Placement Advance 116,223 --
Accrued Expenses and Taxes Payable 248,764 108,508
---------- ----------
TOTAL CURRENT LIABILITIES 3,703,582 2,925,766
---------- ----------
LONG TERM LIABILITIES
Obligations Under Capital Leases 78,801 --
---------- ----------
STOCKHOLDERS' EQUITY
Series A Non-Voting, Convertible Preferred Stock,
par value $.01 per share, 1,500,000 authorized,
240,000 issued and outstanding in 1994. -- 2,400
Common Stock, par value $.05 per share, 8,400,000
authorized, issued and outstanding 3,003,697
in 1995, issued and outstanding 1,516,086 in 1994. 150,186 75,804
Additional Paid-In Capital 5,320,629 644,942
Retained (Deficit) (2,947,539) (318,580)
Notes Receivable arising from Common Stock Purchase Warrants (59,001) (99,000)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 2,464,275 305,566
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $6,246,658 $3,231,332
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PAGE 4
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------------- ---------------------------
Shares Amount Shares Amount
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Balance as of January 1, 1994 -- -- 1,176,086 $58,804
Adjustment Due to Reverse
Acquisition (Notes 1 and 2) -- -- -- --
Sale of Common Stock (Notes 2) -- -- 340,000 17,000
Preferred Stock Issued in Bridge Financing (Note 7B) 240,000 2,400 -- --
Common Stock Purchase A Warrants
Issued in Bridge Financing (Note 7B) -- -- -- --
Common Stock Purchase B Warrants
Sold to Stockholders (Note 13) -- -- -- --
Net Income -- -- -- --
---------- ----------- ---------- -----------
Balance as of December 31, 1994 240,000 2,400 1,516,086 75,804
Payment of Loan for Purchase B Warrants -- -- -- --
Conversion of Preferred Shares (240,000) (2,400) 240,000 12,000
Sale of Common Stock (Note 2B) -- -- 1,000,000 50,000
Sale of 2,000,000 "A" Warrants (Note 2B) -- -- -- --
Sale of 300,000 "A" Warrants (Note 2B) -- -- -- --
Stock Issued in Connection with
Advertising and Promotional Services (Note 10) -- -- 200,000 10,000
Replacement of Shares -- -- 47,611 2,382
Net Loss -- -- -- --
---------- ----------- ---------- -----------
Balance as of December 31, 1995 -- -- 3,003,697 $150,186
========== =========== ========== ===========
<CAPTION>
Notes Receivable
Additional Retained Arising From
Paid-in Earnings Common Stock
Capital (Deficit) Purchase Warrants Total
---------- ----------- ----------------- -----------
<S> <C> <C> <C> <C>
Balance as of January 1, 1994 $17,196 ($348,399) -- ($272,399)
Adjustment Due to Reverse
Acquisition (Notes 1 and 2) (13,354) -- -- (13,354)
Sale of Common Stock (Notes 2) 33,000 -- -- 50,000
Preferred Stock Issued in Bridge Financing (Note 7B) 485,100 -- -- 487,500
Common Stock Purchase A Warrants
Issued in Bridge Financing (Note 7B) 24,000 -- -- 24,000
Common Stock Purchase B Warrants
Sold to Stockholders (Note 13) 99,000 -- (99,000) --
Net Income -- 29,819 -- 29,819
---------- ----------- ---------- -----------
Balance as of December 31, 1994 644,942 (318,580) (99,000) 305,566
Payment of Loan for Purchase B Warrants -- -- 39,999 39,999
Conversion of Preferred Shares (9,600) -- -- --
Sale of Common Stock (Note 2B) 3,396,569 -- -- 3,446,569
Sale of 2,000,000 "A" Warrants (Note 2B) 200,000 -- -- 200,000
Sale of 300,000 "A" Warrants (Note 2B) 26,100 -- -- 26,100
Stock Issued in Connection with
Advertising and Promotional Services (Note 10) 1,065,000 -- -- 1,075,000
Replacement of Shares (2,382) -- -- --
Net Loss -- (2,628,959) -- (2,628,959)
---------- ----------- ---------- -----------
Balance as of December 31, 1995 $5,320,629 ($2,947,539) ($59,001) $2,464,275
========== =========== ========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PAGE 5
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------
1995 1994
---------- ----------
<S> <C> <C>
SALES
Electronics $4,943,988 $5,414,765
Commissions 3,792,527 4,009,199
---------- ----------
TOTAL SALES 8,736,515 9,423,964
---------- ----------
COST OF SALES
Electronics 4,368,493 4,920,269
Commissions 3,195,601 3,262,418
---------- ----------
TOTAL COST OF SALES 7,564,094 8,182,687
---------- ----------
GROSS PROFIT 1,172,421 1,241,277
---------- ----------
EXPENSES
Selling 1,103,963 502,110
General and Administrative 961,281 613,707
Advertising and Promotional Services 1,075,000 --
---------- ----------
TOTAL EXPENSES 3,140,244 1,115,817
---------- ----------
OPERATING INCOME (LOSS) BEFORE OTHER INCOME,
OTHER EXPENSES AND INCOME TAXES (1,967,823) 125,460
---------- ----------
OTHER INCOME
Interest Income 31,234 --
---------- ----------
TOTAL OTHER INCOME 31,234 --
---------- ----------
OTHER EXPENSES
Interest Expense 85,427 42,810
Amortization of Bridge Financing Costs 606,943 48,557
---------- ----------
TOTAL OTHER EXPENSES 692,370 91,367
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (2,628,959) 34,093
Income Taxes -- 4,274
---------- ----------
NET INCOME (LOSS) ($2,628,959) $29,819
EARNINGS (LOSS) PER COMMON SHARE ($1.11) $0.02
========== ==========
AVERAGE COMMON SHARES OUTSTANDING (NOTE 11) 2,368,809 1,506,277
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PAGE 6
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ($2,628,959) $29,819
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used By Operations:
Non - Cash Advertising and Promotion Services $1,075,000 --
Depreciation and Amortization 656,908 60,496
Provision for Doubtful Accounts 50,790 21,094
Deferred Income Taxes -- (5,083)
Debt Issue Cost -- (144,000)
Changes in:
Accounts Receivable (664,636) (660,431)
Inventories 67,659 262,233
Prepayments (40,556) (22,047)
Accounts Payable 60,477 (33,594)
Security Deposits (17,715) (13,876)
Accrued Expenses and Taxes Payable 140,256 66,016
---------- ----------
TOTAL ADJUSTMENTS 1,328,183 (469,192)
---------- ----------
NET CASH USED BY OPERATING ACTIVITIES (1,300,776) (439,373)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Bid Deposit (1,000,000) --
Loan Receivable (550,000) --
Additions to Property and Equipment (88,021) (87,039)
Deferred License Costs (293,810) --
Collection of Notes Receivable 39,999 --
Other Assets 6,496 (8,220)
---------- ----------
NET CASH USED BY INVESTING ACTIVITIES (1,885,336) (95,259)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Proceeds from Bridge Financing -- 800,000
Payments of Bridge Loans (800,000) --
Net Payments of Other Loans (112,000) (60,000)
Net Proceeds (Payments) of Stockholders' Loans 187,616 (40,399)
Net Proceeds of Bank Loans 1,135,000 --
Restriction of Cash (1,100,000) --
Deferred Costs in Connection with Public Offering -- (186,216)
Deferred Private Placement Costs (225,787) --
Private Placement Advance 116,223 --
Principal Payments under Capital Lease Obligations (2,528) --
Sale of Common Stock 3,869,385 50,000
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,067,909 563,385
---------- ----------
NET (DECREASE) INCREASE IN CASH (118,203) 28,753
CASH, BEGINNING OF PERIODS 136,203 107,450
---------- ----------
CASH, END OF PERIODS $18,000 $136,203
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PAGE 7
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------------
1995 1994
---- ----
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE FOR CASH FLOWS
CASH PAID DURING THE YEAR FOR :
Interest $85,427 $36,207
Taxes -- --
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Issuance of Common Stock Purchase B Warrants
for Notes Receivable -- $99,000
Issuance of Preferred Stock in Connection
with Bridge Financing -- $487,500
Issuance of Common Stock Purchase A Warrants
in Connection with Bridge Financing -- $24,000
Non Cash Expenses in Connection with Bridge
Financing -- ($511,500)
Property Acquired Under Capital Lease ($131,573) --
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PAGE 8
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Business Activity and Basis of Presentation
On February 1, 1994, Electronics Communications Corp. (the "Company")
changed its name from Genetic Breeding, Inc. to Internow Affiliates,
Inc. and then to Electronics Communications Corp. Effective on January
1, 1994, the Company acquired Free Trade Distributors, Inc. (which
engages in the wholesale distribution of cellular telephones and
related accessories and electronic automobile and office products) and
Trade Zone Distributors, Inc. (which engages in the activation of
cellular radio subscribers for commissions, both serving the New York
metropolitan area) in a business combination accounted for as a
reverse acquisition (the "Acquisition"). Accordingly, the historical
financial statements of Free Trade Distributors, Inc. and Trade Zone
Distributors, Inc. (the "Operating Entities" or "Acquirers") are
included in the consolidated statements of operations for the periods
prior to the Acquisition. The assets acquired and the liabilities
assumed were recorded at cost. Historical Stockholders' Equity of the
Operating Entities has been retroactively restated, as set forth in
Note 2, in that the number of shares of common stock received in the
Acquisition, after adjustment of the par value of the Company's and
the Acquirers' common stock with an offset to additional paid-in
capital. Retained earnings (deficiency) of the Acquirers were carried
forward.
In February 1995, the Company formed Electrocomm Wireless, Inc., a
Delaware corporation as a subsidiary, to become a radio paging and
two-way radio carrier in the New York City metropolitan area and the
State of New Jersey. On January 6, 1995, Electrocomm Wireless, Inc.
entered into a one year contract to utilize the transmission
facilities of an unaffiliated paging carrier to commence paging
operations. The agreement required a non-refundable one-time
connection fee of $20,000, a monthly per diem charge per radio paging
customer and the Company's pro rata share of monthly access charges.
The contract expired in January and was not renewed. The Company is in
the process of securing FCC licensing for paging, two-way radio
transmission and personal communication services.
In July 1995 the Company formed Personal Communications Network, Inc.
a Delaware corporation, as a wholly owned subsidiary to participate in
the Federal Communications Commission auction for licenses to engage
in personal communications services. The Company has posted a bid
deposit of $1,000,000.
(B) Principles of Consolidation
The consolidated financial statements include the accounts of
Electronics Communications Corp., subsequent to the Acquisition, and
its wholly-owned subsidiaries, Free Trade Distributors, Inc., Trade
Zone Distributors, Inc. (Trade Zone Distributors , Inc. has a wholly
owned subsidiary, Trade Zone Distributors, II, Inc. which is an
inactive, non-operating entity), Electrocom Wireless, Inc. and
Personal Communications Network, Inc. All significant intercompany
accounts and transactions have been eliminated in consolidation.
(C) Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided
using accelerated methods over the estimated useful lives of the
respective assets (5 to 7 years). Depreciation expense charged to
operations for the years ended December 31, 1995 and 1994 was $49,965
and $11,551, respectively.
(D) Inventories
Inventories are valued at the lower of cost or market, cost is
determined using the first in, first out method.
<PAGE>
PAGE 9
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
(E) Revenue Recognition
It is the Company's policy to categorize revenue into either sales
from electronic goods or commissions for fees earned on sales of
cellular radio service contracts. Sales from electronic goods includes
but is not limited to cellular phones and related accessories and
other electronic automobile and office products. Revenue from the
above mentioned products are recognized when they are shipped.
Revenues from sales of electronic goods represented 57% of the
Companies total revenue in 1995 and 1994. Commissions are inclusive of
fees earned for the sale of cellular radio service contracts and
residuals received on those contracts. Revenues and related
commissions from the sale of the service contracts are recognized at
the point of activation. Revenues from residuals are realized when
approved by the cellular radio service supplier and are paid on
customer usage for a maximum of three years. Commission revenue
represented 43% of the Company's total revenue in 1995 and 1994. The
Company establishes a reserve of 3.5% for charge-backs on customers
that prematurely terminate cellular service. In addition to the
commissions paid by the cellular radio supplier, the Company receives
co-op fees. Co-op fees are reimbursements of expenditures that are
approved by the cellular radio supplier for advertising and promotion
in connection with the sale of cellular radio contracts. The Company
also received co-op fees which the cellular radio supplier applied as
payment for cellular products in 1994. These fees were recorded as
additional commission revenue in the amount of $129,267.
(F) Concentration of Credit Risk
The Company maintains its major cash accounts in banks in the New York
and New Jersey Area. The total cash deposits are insured by the
Federal Deposit Insurance Corporation up to $100,000 per account.
The Company currently receives all of its commission revenue from two
major cellular radio carriers. Although there are a limited number of
sources for this type of revenue, management believes that other
sources could provide similar commissions on comparable terms. A
change in carriers could cause a delay in activations and a loss of
sales which would affect operating results adversely.
(G) Use 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 period. Actual results could differ from those
estimates.
NOTE 2 - ACQUISITION, RECAPITALIZATION AND PUBLIC OFFERING
(A) As described in Note 1, the Company acquired all of the
outstanding common stock of the Operating Entities. For accounting
purposes the acquisition has been treated as a recapitalization of the
Operating Entities with the Operating Entities as the Acquirers
(reverse acquisition). The historical financial statements prior to
January 1, 1994 are those of the Operating Entities. As a result of
this transaction, historical additional paid-in capital of the
Operating Entities was retroactively reduced and common stock
increased by $58,804 for the par value of the 1,176,086 shares of
common stock received in the transaction. Prior to the acquisition,
Free Trade Distributors, Inc. had 200 shares outstanding at $75 par
value or $15,000 in common stock and $60,000 in additional paid-in
capital. The recapitalization of these shares resulted in a transfer
from common stock to additional paid-in capital of $15,000. In 1993,
Trade Zone Distributors, Inc. was capitalized and issued 200 shares of
$5 par value or $1,000 in common stock. The
<PAGE>
PAGE 10
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 2 - ACQUISITION, RECAPITALIZATION AND PUBLIC OFFERING - (Continued)
recapitalization of these shares resulted in a transfer from common
stock to additional paid-in capital in the amount of $1,000. As a
result of the reverse acquisition, additional paid-in capital was also
reduced by $13,354 on January 1, 1994 (the effective date of the
acquisition). This is reflective of the excess liabilities assumed
over the assets by the Operating Entities. On January 1, 1994, the
Company sold 340,000 shares of its common stock for $50,000. All
references in the financial statements and notes thereto to the number
of shares outstanding have been restated to reflect the 1 for 5
reverse common stock split described below. Additionally, On May 25,
1995, 47,611 shares were issued to a shareholder who did not receive
the proper allocation when the company had its reverse common split in
Note 2B.
(B) On May 12, 1995 the Company successfully completed a public
offering (the "Offering"). The Company sold 1,000,000 shares of Common
Stock and 2,000,000 Common Stock Purchase Warrants at an initial
offering price of $5.00 per share and $.10 per Warrant. In order to
complete this transaction the Board approved a 1 for 5 reverse common
stock split, in order to reduce the authorized Common Stock from
42,000,000 shares to 8,400,000 shares and increase the par value of
the shares from $.01 to $.05. The Company also registered 1,000,000
shares of common stock owned by certain officers, directors and
stockholders. In addition, the Company granted the Underwriter an
option to purchase up to 100,000 shares of Common Stock and 200,000
Common Stock Purchase Warrants. On September 12, 1995 the Underwriter
exercised the over-allotment option to purchase an additional 300,000
warrants. All references in the financial statements to average number
of shares outstanding, per share amounts and stock option plan data
have been restated to reflect the reverse common stock split.
NOTE 3 - ACCOUNTS RECEIVABLE
Accounts Receivable consist of amounts due for sales of electronic
goods and commissions due from major cellular radio suppliers.
Components of Accounts Receivable are $997,309 for the sale of
electronic goods and $623,831 for commissions at December 31, 1994 and
$1,503,303 and $782,473 at December 31, 1995.
NOTE 4 - OTHER ASSETS
(A) Deferred Financing Costs were fully amortized in 1995 due to the
repayment of the Bridge Notes on May 19, 1995. The following costs
were associated with the Bridge Notes described in Note 7B:
<TABLE>
<S> <C>
240,000 shares of Preferred Stock $487,500
480,000 Warrants 24,000
Investment Banking Fees 104,000
Legal Fees 40,000
----------
$655,500
Less: Amortization in 1994 (48,557)
----------
Balance at December 31, 1994 $606,943
Less: Amortization in 1995 (606,943)
----------
Balance at December 30, 1995 -0-
==========
</TABLE>
(B) Deferred offering costs consisted of certain legal, accounting,
printing fees and other costs in connection with the public offering
described in Note 2B. Those costs, together with any additional costs
incurred in connection with the offering were recorded as a reduction
of the proceeds received from the sale of the securities offered.
<PAGE>
PAGE 11
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 4 - OTHER ASSETS - (Continued)
(C) Deferred private placement costs consist of certain legal,
accounting, printing fees and other costs in connection with the
private placement described in Note 20B. Those costs, together with
any additional costs incurred in connection with the placement will be
recorded as a reduction of the proceeds to be received from the sale
of the securities offered.
(D) Deferred License Costs consists of various legal, consulting and
registration fees in connection with obtaining paging licenses,
two-way radio licenses and personal communication service licensing.
The licenses when put into service will be amortized over a fifteen
year period.
NOTE 5 - LOAN RECEIVABLE
The Loan Receivable consists of a $550,000 secured loan issued in
conjunction with the negotiations described in Note 20A.
NOTE 6 - BID DEPOSIT
The Company is participating in a Federal Communications Commission
(the FCC) auction for Personal Communication Services licenses. The
FCC required an advance payment in the amount of $1,000,000 which is
fully refundable in the event the Company is not the highest bidder.
NOTE 7 - NOTES PAYABLE
Notes Payable consist of the following:
(A) Notes Payable-Other in the amount of $140,000 at December 31,
1994, and $28,000 at December 31, 1995 with interest at 9% and 10%,
are payable on demand. Payment of the notes are personally guaranteed
by certain officers and stockholders, and secured by a pledge of their
personal property.
(B) Notes Payable-Bridge Financing consisted of an aggregate of
$800,000, 12% promissory notes, with principal and interest due on the
earlier of the closing of the Public Offering or November 1, 1995.
Payment of the notes were secured by a security interest in the
Company's accounts receivable, a pledge of the shares of Common Stock
of the Company owned by its officers, directors and certain
stockholders, and was guaranteed by the Company's President. In
connection with the bridge financing the Company issued to the
investors an aggregate of 240,000 shares of Series A Preferred Stock
(the "Preferred Stock") and 480,000 Series A Preferred Stock Purchase
Warrants (the "Preferred Warrants") with a Fair Value of $511,500.
Each investor exchanged their Preferred Stock and Preferred Warrants
into an identical number of shares of Common Stock and Class A
Redeemable Common Stock Purchase Warrants on the effective date of the
Offering. These notes were paid on May 19, 1995.
(C) On April 18, 1995, the Company entered into a financing agreement
with a bank in the amount of $100,000. This loan is personally
guaranteed by the Company's President, cross corporate guaranteed by
Free Trade and secured by the Company's inventory. Interest is payable
monthly at the rate of 1.5% per annum in excess of the bank's
fluctuating prime lending rate. As of the date hereof, the interest
rate was 10.5%. The loan becomes due and payable on April 18, 1996. At
December 31, 1995 the balance on this loan was $75,000.
(D) On October 6, 1995, the Company entered into a lending arrangement
with a bank. In connection therewith, the Company could borrow up to
$700,000 at an interest rate of 3/4% above the bank's base lending
rate, payable on demand. At December 31, 1995, the interest rate was
9.5%. The Company deposited a $700,000 three month certificate of
deposit with the bank as
<PAGE>
PAGE 12
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 7 - NOTES PAYABLE - (Continued)
collateral for such loan. The Certificate earns a 5% interest. The
loan is also secured by certain officers' personal guarantees,
245,000 shares of their stock and all the assets of the Company.
(E) On December 22,1995, the Company entered into a lending
arrangement with a bank. In connection therewith, the Company borrowed
$450,000 at an interest rate of 1% above the bank's base lending rate,
payable in ninety days. At December 31, 1995, the interest rate was
9.75%. The Company deposited a $400,000 three month certificate of
deposit with the bank as collateral for such loan. The Certificate
earns a 5% interest. The loan is also secured by certain officers' and
directors' personal guarantees and inventory.
NOTE 8 - NOTES PAYABLE-STOCKHOLDERS
Notes Payable-Stockholders are unsecured and payable on demand with
interest at rates from 7.5% to 10.65% per annum on the outstanding
principal at December 31, 1995 and 1994.
NOTE 9 - CAPITAL LEASE
Capital Leases include $131,576 for equipment. Minimum future lease
payments under capital leases as of December 31, 1995 for each of the
next five years and in the aggregate are:
<TABLE>
<S> <C>
1996 $50,244
1997 50,244
1998 50,244
1999 50,244
2000 38,334
---------
Total Minimum Lease Payments 239,310
Less: Amount Representing Interest (110,265)
---------
Present Value of Net
Minimum Lease Payments 129,045
Less: Current Maturities
included in Current Liabilities (50,244)
---------
Long Term Obligations Under
Capital Leases $78,801
=========
</TABLE>
The interest rate on the capitalized lease is 29.17% and is imputed
based on the lower of the Company's incremental borrowing rate at the
inception of each lease or the lessors implicit rate of return.
NOTE 10 - OTHER ADVERTISING AND PROMOTIONAL SERVICES
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 provided to the Company. These services included
analysis, advice, advertising and promotional ideas and 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 which resulted in a
non-cash expense of $1,075,000 in the year ending December 31, 1995.
<PAGE>
PAGE 13
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 11 - EARNINGS PER COMMON SHARE
The Company computes earning (loss) per common share by dividing the
net income (loss) by the weighted average number of shares of common
stock, as retroactively adjusted to reflect shares issued for the
business combination described in Note 1A and the 1 for 5 reverse
common stock split described in Note 2A, and common stock equivalents
outstanding during the period.
NOTE 12 - CONVERTIBLE PREFERRED STOCK
A summary of the outstanding preferred stock at December 31, 1994 is
as follows:
<TABLE>
<CAPTION>
Additional
Series Shares Par Value Paid-In Capital
------ ------ --------- ---------------
<S> <C> <C> <C>
Series A 240,000 $2,400 $485,100
</TABLE>
The holders of preferred stock were entitled to non-cumulative
dividends as declared by the Board of Directors at the rate of 7% per
annum. No dividends had been declared or were payable at December 31,
1994.
The Series A Preferred Stock was issued in connection with the Bridge
Financing described in Note 7B. On May 19, 1995, the holders of
preferred stock have exchanged the 240,000 shares of Series A
Preferred Stock for 240,000 shares of Common Stock. As a result of the
conversion, additional paid-in capital was reduced by $9,600.
NOTE 13 - WARRANTS TO PURCHASE COMMON STOCK
The Company approved the sale to certain officers, directors and
stockholders of 1,000,000 Common Stock Purchase B Warrants at a price
of $.10 per Warrant, exercisable at $5.00 per share. On November 30,
1994, the Company issued 990,000 Common Stock Purchase B Warrants for
$.10 per Warrant, payable by the Company accepting promissory notes
bearing interest at 8% per annum due on the earlier of the exercise of
the Warrants, or December 1, 1996. On January 20, 1995, the Company
agreed to reduce the exercise price of 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.
NOTE 14 - INCOME TAXES
The Company adopted the liability method of accounting for income
taxes, as set forth in Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes." Under the liability method,
deferred taxes are determined based on the differences between the
financial statement and tax basis of assets and liabilities at enacted
tax rates in effect in the years in which the differences are expected
to reverse. The Company has net operating loss carryforwards that it
does not expect to utilize pursuant to Internal Revenue Regulations.
Prior to the Acquisition, the Operating Entities elected to file
Federal income tax returns as small business corporations under
Section 1362 of the Internal Revenue Code (S-Corporations). Under this
election the Operating Entities were not subject to Federal income
taxes, but were subject to New Jersey State income taxes.
<PAGE>
PAGE 14
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 15 - CONTINGENT LIABILITIES
(A) On December 1, 1994, the Company entered into an employment
agreement with the President of the Company for a term of five years
with an option for an additional three one year terms. The agreement
provides for annual compensation of $150,000 during the term of the
employment agreement and entitles the President to certain fringe
benefits, including automobile maintenance, disability insurance,
medical benefits and life insurance coverage. The President has agreed
that during the term of his agreement and for 12 months thereafter
(unless the agreement is terminated without cause), he will be subject
to non-competition provisions. Upon termination of employment without
cause, the President will be entitled to a lump sum payment of $75,000
multiplied by the number of years of his employment by the Company.
(B) The Company has engaged a management company, which is an
affiliate of the Underwriter used in the Public Offering described in
Note 2B, as the Company's management consultant, for a period of 15
months commencing December 14, 1994, at a fee of $75,000 (exclusive of
out-of-pocket expenses), which was paid on May 12, 1995. In addition,
the Company has agreed, subject to any required regulatory approvals,
to pay the Representative a finder's fee, in the event that the
Representative originates within five years following the Effective
Date of the offering a merger, acquisition, joint venture or other
transaction to which the Company is party, in the amount equal to 5%
of the first $4,000,000, 4% of the next $1,000,000, 3% of the next
$1,000,000 and 2% of the excess, if any, over $6,000,000 of the
consideration actually received by the Company in any such
transaction.
(C) On June 1, 1995, the Company entered into a consulting agreement
with a corporation owned by four of the Company's legal
representatives for non-legal services. In consideration for services
performed by the consultant the Company agreed to pay $144,000 per
year for five years payable in monthly installments of $12,000.
(D) On May 17, 1995, the Company entered into an employment agreement
with the Mr. Les Winder , which agreement was amended on October 1,
1995. The term of the agreement is for five years with an option for
an additional one year terms. The agreement provides for annual
compensation of $137,500 during the term of the employment agreement
and entitles the President to certain fringe benefits, including
automobile maintenance, disability insurance, medical benefits and
life insurance coverage. Mr. Winder has agreed that during the term of
his agreement and for 6 months thereafter (unless the agreement is
terminated without cause), he will be subject to non-competition
provisions. Upon termination of employment without cause, Mr. Winder
will be entitled to a lump sum payment of $50,000 multiplied by the
number of years of his employment by the Company
NOTE 16 - MAJOR SUPPLIERS
During the year ended December 31, 1994 and 1995 Free Trade
Distributors, Inc. purchased 100% of its cellular telephones and
related accessories from four major suppliers and Trade Zone
Distributors, Inc. received 100% of its income from two cellular radio
suppliers.
NOTE 17 - OPERATING LEASE
In early 1994, the Company's leased office and warehouse space under
an operating lease agreement on a month to month basis. The rental
expense for the period ended December 31, 1995 and December 31, 1994
was $64,379 and $47,130 respectively.
On May 20, 1994 Free Trade Distributors Inc. entered into a five year
operating lease expiring May 31, 1999 for an 8,000 square foot
warehouse and office facility.
<PAGE>
PAGE 15
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 17 - OPERATING LEASE - (Continued)
The minimum future rental payments under this non-cancelable operating
lease for each of the remaining years are:
<TABLE>
<S> <C>
1996 $ 60,000
1997 60,000
1998 60,000
1999 25,000
----------
Total Minimum Future
Rental Payments $205,000
==========
</TABLE>
NOTE 18 - AMENDMENT TO CERTIFICATE OF INCORPORATION
On September 27, 1994, the Board of Directors authorized the amendment
of the Company's Certificate of Incorporation to authorize the
issuance of 8,000,000 shares of preferred stock and increase its
authorized shares of common stock to 42,000,000. The transaction
became effective on November 21, 1994. The amendment was adopted in
order to facilitate a contemplated public offering, the material terms
of which are described in Note 2B.
NOTE 19 - STOCK OPTION PLAN
The Company's Board of Directors adopted a Stock Option Plan (the
"Plan"), approved by stockholders, under which, options to purchase up
to an aggregate of 500,000 shares of Common Stock are available for
grants to officers, directors, consultants and key employees of the
Company. The Plan provides for the grant of incentive stock options,
non-qualified stock options and Director's options. The Plan will
terminate in 2004, unless sooner terminated by the Board of Directors.
As a result of the reverse split the Board of Directors, with
stockholders approval, increased the number of shares of Common Stock,
after the effective date of the reverse split, which may be subject to
options granted under the Plan from 100,000 to 300,000. On July 10,
1995 the Company issued 20,000 options to a director of the Company at
a price of $3.80, 5,000 of these options were exercisable immediately,
5,000 on July 10, 1996, 5,000 on July 10, 1997 and 5,000 on July
10,1998 and expire on July 10, 2,000. The fair value of the stock was
less than the option price therefore no compensation expense was
recognized in 1995.
NOTE 20 - SUBSEQUENT EVENTS
(A) As of December 31, 1995, the Company has loaned $550,000 to
Threshold Communications, Inc. ( "TCI" ).. TCI is a recently formed
corporation engaged in the radio paging business, having acquired a
paging subscriber base, associated paging hardware, and a paging
carrier agreement with SkyTel(R), a company that provides nationwide
paging, voice messaging and related messaging services to subscribers
and others. TCI has informed the Company that it intends to engage in
the radio paging carrier business utilizing, among other assets, one
or more 900 megahertz FCC paging licenses for the New York-New Jersey
area, a long-term lease for a paging transmission site in New Jersey
which it currently owns, and a customer base of approximately 9,000
paging service subscribers.
<PAGE>
PAGE 16
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 20 - SUBSEQUENT EVENTS - (Continued)
On March 22, 1996, TCI has entered into an agreement to acquire
approximately 6,000 paging service subscribers and other related
assets. The Company has advanced and additional $175,000 to TCI and
has guaranteed certain obligations in the amount of $739,000 for TCI.
As of the date hereof, the Company has not entered into an agreement
as to an acquisition or investment in TCI.
On November 1, 1995, the Company entered into an agreement (the
"Agreement") with TCI which superseded a prior agreement between the
parties. Under the Agreement, in consideration of the aforesaid
advances and qaurantees , the Company obtained an exclusive option
from TCI to acquire or invest in TCI on terms to be mutually agreed
upon. The option agreement further provides that if, on or before
January 31, 1996, the acquisition of TCI by the Company or an
investment by the Company in TCI has not been consummated, the Company
may demand repayment of these advances. If such advances are not
repaid within ten business days of such demand, the Company, at its
option, may foreclose on 100% of the stock of TCI which has been
pledged as collateral for the advances. The Agreement recites that the
specific terms of any acquisition of or investment in TCI cannot be
determined at this time and that the Company is under no obligation to
complete any such transaction. Any such transaction will require the
approval of the Board of Directors of the Company and will be subject
to the entry into definitive written agreements.
There can be no assurance that the Company will be able to reach an
agreement with TCI as to an acquisition of or investment in TCI. If it
does, which cannot be deemed to be probable at this time, there can be
no assurance as to the terms of any such agreement. If the Company
obtains ownership of TCI, the Company will own the lease to the radio
paging transmission facility and the aforesaid subscriber base and
related assets which the Company intends to use in the conduct and
expansion of its business.
(B) On January 16, 1996 the Company consummated a Private Placement
Offering of 69,460 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 of which $116,223 was advanced to the Company
prior to December 31, 1995. 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.
(C) On February 29, 1996, the Company entered into a financing
arrangement with a corporation in the amount of $134,000. Interest is
payable at a rate of 10% in monthly installments of $1,117 per month.
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.
(D) 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
<PAGE>
PAGE 17
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 20 - SUBSEQUENT EVENTS - (Continued)
Warrants to purchases the Company's common stock at $2.25 per share.
The Company intends to use the proceeds of this offering to increase
its deposit in the PCS auction, build out its paging system and
general working capital purposes.
(E) 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 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 South
American cellular telephone program which the Company was to undertake
exclusively of behalf of Toshiba. Immediately prior to the
commencement of the program, Toshiba discontinued manufacturing the
line of cellular telephones that the program was designed to offer.
This unilateral decision has caused significant damages to the Company
and the Company will vigorously prosecute this claim.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed by
the undersigned, thereunto duly authorized.
Dated: September 30, 1996 ELECTRONICS COMMUNICATIONS CORP.
By: /s/ William S. Taylor
-------------------------------
William S. Taylor,
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on behalf of the Registrant and in capacities and at the
dates indicated:
Signature Capacity Date
/s/ William S. Taylor Chairman of the Board, September 30, 1996
- ------------------------ Chief Executive Officer,
William S. Taylor President (Principal Executive
and Financial Officer)
/s/ Les Winder Executive Vice President, September 30, 1996
- ------------------------ Treasurer and Director
Les Winder
/s/ Brenda Taylor Director and Secretary September 30, 1996
- ------------------------
Brenda Taylor
/s/ Andrew A. Miller Controller September 30, 1996
- ------------------------
Andrew A. Miller
Director September __, 1996
- ------------------------
Mal Gurian
/s/ Robert DePalo Director September 30, 1996
- ------------------------
Robert DePalo
Director September __, 1996
- ------------------------
Ira J. Tabankin
