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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended
March 31, 1996 Commission File No. 0-24486
ELECTRONICS COMMUNICATIONS CORP.
(Exact name of Registrant as specified in its Charter)
Delaware 11-2649088
(State of Incorporation) (IRS Employer Identification No.)
4 Madison Road, Fairfield, New Jersey 07004
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (201) 808-8862
Former name, former address and former fiscal year, if changed since last
report: None
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 a 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 [ ]
As of May 13, 1996, there were 3,173,127 shares of Common Stock, $.05 par
value outstanding.
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Page 1
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PAGE 1
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
MARCH 31 DECEMBER 31,
------------ --------------
1996 1995
---- ----
(UNAUDITED)
CURRENT ASSETS
Cash $54,329 $18,000
Restricted Cash 1,100,000 1,100,000
Accounts Receivable
(Net of $35,634 Allowance for Doubtful
Accounts at March 31, 1996 and
$80,987 at December 31, 1995.) 1,276,394 2,204,789
Inventories 550,099 476,796
Bid Deposit 1,000,000 1,000,000
Loan Receivable 1,114,000 550,000
Prepaid Expenses 82,588 78,849
----------- -----------
TOTAL CURRENT ASSETS 5,177,410 5,428,434
----------- -----------
PROPERTY AND EQUIPMENT
Property and Equipment 454,755 335,858
Accumulated Depreciation (86,483) (75,544)
----------- -----------
NET PROPERTY AND EQUIPMENT 368,272 260,314
----------- -----------
OTHER ASSETS
Deferred Private Placements Parts 364,144 225,787
Deferred License Costs 306,410 293,810
Security Deposits and Other Assets 99,195 38,313
----------- -----------
TOTAL OTHER ASSETS 769,749 557,910
----------- -----------
TOTAL ASSETS $6,315,431 $6,246,658
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See Notes to Consolidated Financial Statements.
Page 2
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PAGE 2
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31, DECEMBER 31,
-------------- -------------
1996 1995
---- ----
(UNAUDITED)
CURRENT LIABILITIES
Accounts Payable $ 1,274,178 $ 1,783,344
Notes Payable - Other 139,000 28,000
Notes Payable - Bank 1,160,000 1,225,000
Notes Payable - Stockholders 193,948 252,007
Current Portion of Obligations
Under Capital Leases 69,180 50,244
Private Placement Advance -- 116,223
Accrued Expenses and Taxes Payable 387,279 248,764
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TOTAL CURRENT LIABILITIES 3,223,585 3,703,582
----------- -----------
LONG TERM LIABILITIES
Obligations under Capital Leases 87,794 78,801
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, par value $.05 per share,
8,400,000 authorized, issued and
outstanding 3,267,657 at March 31, 1995
and 3,006,697 at December 31, 1995 163,383 150,186
Additional Paid-In Capital 5,812,654 5,320,629
Retained (Deficit) (2,946,284) (2,947,539)
Notes Receivable arising from Common Stock
Purchase Warrants Sold (25,701) (59,001)
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TOTAL STOCKHOLDERS' EQUITY 3,004,052 2,464,275
----------- -----------
LIABILITIES AND STOCKHOLDERS EQUITY $6,315,431 $6,246,658
=========== ===========
See Notes to Consolidated Financial Statements.
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PAGE 3
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED (DEFICIT)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------
1996 1995
---- ----
SALES
Electronics $983,728 $906,826
Commissions 1,279,798 695,938
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TOTAL SALES 2,263,526 1,602,764
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COST OF SALES
Electronics 827,816 742,665
Commissions 889,435 566,931
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TOTAL COST OF SALES 1,717,251 1,309,596
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GROSS PROFIT 546,275 293,168
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EXPENSES
Selling 134,128 106,069
General and Administrative 387,128 176,785
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TOTAL EXPENSES 521,256 282,854
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OPERATING INCOME BEFORE OTHER EXPENSES
AND INCOME TAXES 25,019 10,314
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OTHER EXPENSES
Interest Expense - Net 23,762 24,306
Amortization of Bridge Financing Costs - 163,750
Accelerated Amortization of Bridge
Financing Costs - 229,235
TOTAL OTHER EXPENSES 23,762 417,291
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INCOME (LOSS) BEFORE INCOME TAXES 1,257 (406,977)
Income Taxes - -
----------- -----------
NET INCOME (LOSS) $1,257 ($406,977)
RETAINED (DEFICIT), BEGINNING OF PERIOD ($2,947,539) ($318,580)
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RETAINED (DEFICIT), END OF PERIOD ($2,946,282) ($725,557)
=========== ===========
LOSS PER COMMON SHARE $0.00 ($0.27)
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AVERAGE COMMON SHARES OUTSTANDING (NOTE 11) 3,082,318 1,516,086
=========== ===========
See Notes to Consolidated Financial Statements.
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PAGE 4
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $1,257 ($406,977)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Used By Operations:
Depreciation and Amortization 10,939 401,120
Changes in:
Accounts Receivable 928,392 255,238
Inventories (73,303) 219,100
Prepayments (3,739) (45,235)
Accounts Payable (509,166) (511,137)
Accrued Expenses and Taxes Payable 138,515 87,117
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TOTAL ADJUSTMENTS 491,638 406,203
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NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 492,895 (774)
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CASH FLOWS FROM INVESTING ACTIVITIES
Loan Receivable (564,000) -
Other Assets (60,882) -
Deferred License Costs (12,600) -
Additions to Property and Equipment (86,639) (4,506)
--------- ---------
NET CASH(USED) BY INVESTING ACTIVITIES (724,121) (4,506)
CASH FLOWS FROM FINANCING
ACTIVITIES
Net Proceeds (Payments) of Shareholder Loans (24,759) 63,823
Deferred Costs in Connection with Public Offering - (145,339)
Deferred Private Placement Costs (138,357) -
Payments of Bank Loans (65,000) -
Proceeds of Other Loans 134,000 (5,000)
Payments of Other Loans (23,000) -
Principal Payments of Capital Lease Obligations (4,329) -
Sale of Common Stock 389,000 -
--------- ---------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 267,555 (86,516)
--------- ---------
NET INCREASE (DECREASE) IN CASH 36,329 (91,796)
CASH, BEGINNING OF PERIODS 18,000 136,203
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CASH, END OF PERIODS $ 54,329 $ 44,407
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See Notes to Consolidated Financial Statements.
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PAGE 5
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------
1996 1995
---- ----
SUPPLEMENTAL DISCLOSURE FOR CASH FLOWS
CASH PAID DURING THE YEAR FOR :
Interest $3,184
Taxes - -
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Property Acquired Under Capital Lease ($32,258) -
See Notes to Consolidated Financial Statements.
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PAGE 6
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 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. On May 8, 1996 the Company obtained six PCS
licenses entitling it to operate wireless PCS telephone systems
covering nearly 1.5 million people in three states.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
necessarily include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management all adjustments (consisting
of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three
months ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1996. The
unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and footnotes
thereto included in the Company's annual report on form 10-SB for the
year ended December 31, 1995.
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PAGE 7
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
(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), Electrocomm 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 three months ended March 31, 1996 and 1995 was
$10,939 and $8,008, respectively.
(D) Inventories
Inventories are valued at the lower of cost or market, cost is
determined using the first in, first out method.
(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. 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. 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.
(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.
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PAGE 8
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
(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 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.
(C) 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.
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ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - ACQUISITION, RECAPITALIZATION AND PUBLIC OFFERING - (Continued)
(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 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.
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 $995,368 for the sale of
electronic goods and $316,660 for commissions at March 31, 1996 and
$1,503,303 and $782,473 at December 31, 1995.
NOTE 4 - OTHER ASSETS
(A) Deferred private placement costs consist of certain legal,
accounting, printing fees and other costs in connection with the
private placement described in Note 2D. 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.
(B) 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.
NOTE 5 - LOAN RECEIVABLE
(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. A principal stockholder of TCI is a
stockholder of the Company and is related to certain officers,
directors and principal stockholders of the Company.
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 in cash and
$389,000 in Common Stock 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.
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PAGE 10
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - LOAN RECEIVABLE - (Continued)
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.
NOTE 6 - BID DEPOSIT
The Company had participated 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.
On May 8, 1996 the Company obtained six PCS licenses entitling it to
operate wireless PCS telephone systems covering nearly 1.5 million
people in three states.
NOTE 7 - NOTES PAYABLE
Notes Payable consist of the following:
(A) Notes Payable-Other in the amount of $28,000 at December 31, 1995,
and $5,000 at March 31, 1996 with interest at 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.
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PAGE 11
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - NOTES PAYABLE - (Continued)
(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
March 31, 1996 the balance on this loan was $60,000. This note was
temporally extended by the bank .The Company in currently in negations
with the bank increase the credit line and extend the due date.
(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 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. On January 6, 1996 and then again an April 6, 996 the
bank extended the due date 90 days. The note becomes due and payable
on July 6, 1996.
(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. On March 22, 1996 the bank extended
the due date 90 days. The note becomes due on June 22, 1996.
(F) 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.
NOTE 8 - CAPITAL LEASE
Capital Leases include $163,834 for equipment. Minimum future lease
payments under capital leases as of March 31, 1996 for each of the
next five years and in the aggregate are:
1996 $56,052
1997 69,181
1998 51,801
1999 50,244
2000 38,334
---------
Total Minimum Lease Payments 265,612
Less: Amount Representing Interest (108,638)
---------
Present Value of Net
Minimum Lease Payments 156,974
Less: Current Maturities
included in Current Liabilities (69,180)
---------
Long Term Obligations Under
Capital Leases $87,794
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PAGE 12
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - CAPITAL LEASE - (Continued)
The interest rates on the capitalized leases rage from 16.909 to
29.17% and are 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 9 - 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 March 31, 1996 and December 31, 1995.
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.
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
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
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PAGE 13
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - INCOME TAXES - (Continued)
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.
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.
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PAGE 14
ELECTRONICS COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 March 31, 1996 and March 31, 1995 was
$24,682 and $17,871 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.
The minimum future rental payments under this non-cancelable operating
lease for each of the remaining years are:
1996 $ 45,000
1997 60,000
1998 60,000
1999 25,000
--------
Total Minimum Future
Rental Payments $190,000
========
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.
NOTE 20 - PENDING LITIGATION
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.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared to the Three Months Ended March
31, 1995
During the three months ended March 31, 1996 revenues from sales increased
$660,762 or 41.2% compared to the same period in 1995. Electronic equipment
sales increased $76,902, activation commissions and residual income increased
during the period by approximately $583,860 or approximately 83.9%. The small
increase in electronic equipment sales was consistent with the sales for the
same period in 1995. However, the Company sold a greater percentage of
communication equipment, versus home/office equipment in this quarter compared
to last year. The increase in commissions was due to increased activations of
cellular telephone numbers, as a direct result of an advertising campaign for
the Company's direct sales division and an increase in residuals as a result of
the Company's larger subscriber base with Bell Atlantic/Nynex Mobile.
Cost of electronic equipment sales increased $85,151 compared to the same
period in 1995, as a result of higher overall sales of electronic equipment.
Gross profit from electronics equipment salesdecreased approximately 2.3% from
18.1% to 15.8% during the same period in 1996. The decrease in gross profit was
due to greater sales of communications equipment which the Company generally
sells at a lower gross profit margin. The Company does not rely on any one major
equipment supplier, however, during the quarter the Company purchased 100% of
its cellular phones from four suppliers, the loss of any one of them would have
a negative impact on the Company.
Cost of activation commissions and residual income increased $322,504
compared to the same period in 1995, due to an increase in revenues. The gross
profit percentage related to these sales increased approximately 12% from 18.5%
for the three months ended March 31, 1995 versus 30.5% for the three months
ended March 31, 1996 as a result of greater sales from the Company direct sales
division.
Selling, general and administrative expenses increased approximately
$238,000 for the three months ended March 31, 1996 as compared to the same
period in 1995. This increase is due to a larger number of employees, higher
rental payments, increased professional expenses and increased advertising
compared to the same period of the prior year.
The Company had a net operating profit before other expenses and income
taxes of $25,019 for the three months ended March 31, 1996 compared to a profit
of $10,314 for the three months ended March 31, 1995.
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Interest expenses remained constant compared to the same period in 1995.
However, the Company did not experience any additional non-cash financing costs,
comparable to those incurred in 1995 as a result of the Company's Bridge
Financing completed in December 1994
LIQUIDITY AND CAPITAL RESOURCES
The operations of the Company's subsidiaries since inception in 1991
to date have been funded principally from cash flow from operations, capital
investments and loans from officers, directors, principal stockholders and third
parties. Although the officers and directors of the Company have provided the
financial accommodations to the Company in the past, there can be no assurance
that they will continue to do so in the future. In addition, the Company has a
$100,000 revolving line of credit with a bank. This loan is personally
guaranteed by the Company's President and a cross corporate guaranty of Free
Trade and secured by the Company's inventory. As of March 31, 1996, there was an
outstanding balance under this loan of $60,000 with interest payable monthly at
the rate of 1.5% per annum in excess of the bank's fluctuating prime lending
rate. As of March 31, 1996, the interest rate was 10.5%. This loan was due and
payable on April 18, 1996, however, this loan has been temporarily extended by
the bank. The Company is currently negotiating with the bank to increase the
credit line and extend the maturity date of the loan.
On October 6, 1995 the Company entered into a lending arrangement with a
bank. In connection therewith, the Company can borrow up to $700,000 at an
interest rate of 3/4% above the bank's base loan rate. As of March 31, 1996, the
interest rate was 9.5%. The Company deposited a $700,000 three month certificate
of deposit with the bank as collateral for such loan. The certificate of deposit
earns 5% interest. The loan is also secured by certain officers' personal
guarantees, 245,000 shares of their stock and all of the assets of the Company.
On January 6, 1996 and then again on April 6, 1996 the bank extended the due
date 90 days. The note becomes due and payable on July 6, 1996.
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. On March
31, 1996, 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
Certificates earns a 5% interest. The loan is also secured by certain officers'
and directors', personal guarantees and the Company's inventory. On March 22,
1996 the bank extended the due date 90 days. The note becomes due on June 22,
1996.
On March 31, 1996, the Company had working capital of $1,953,825, as
compared to a working capital of approximately $1,724,852 at December 31, 1995.
Included in the working capital is a $1,100,000 which has been deposited with
the bank as collateral for the above described loans.
The Bridge Financing, completed in December 1994, consisted of $800,000 of
12% promissory notes which were due the earlier of closing of a public offering
or November 1, 1995
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and the issuance of Common Stock and A Warrants. The proceeds of the Bridge
Financing were used to pay certain costs associated with the public offering;
to collateralize a letter of credit to one of the Company's vendor, to make an
initial investment for the Company's paging operations and contribute to
working capital. On May 19, 1995 the Company completed a public offering
resulting in gross proceeds of $5,200,000 and approximate net proceeds of
$4,200,000. The Company devoted substantial resources including a portion of
the net proceeds of the public offering, after payment of the Bridge Financing
indebtedness, primarily to paging and two-way radio. The Company will need to
seek other forms of financing to build a PCS infrastructure.
As of March 31, 1996 the Company loaned $550,000 to Threshold
Communications, Inc. ("TCI"). TCI is engaged in the radio paging business. On
March 22, 1996 TCI acquired all of the assets and assumed certain liabilities of
General Communications and Electronics, Inc. ("GCE"). In connection therewith,
the Company advanced an additional $175,000 to TCI and guaranteed certain
obligations of TCI in the amount of $739,000. As a result of the transaction
with GCE, TCI, in addition to a paging transmission site which it previously
owned, became a paging reseller. 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. As of the date hereof TCI has
approximately a 9000 person subscriber base. 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 is currently
negotiating the acquisition of TCI, however, there can be no assurance that the
Company will be able to reach an agreement with TCI. If the Company does acquire
TCI, it will utilize TCI's infrastructure in the operations of its own paging
system. TCI has recently acquired 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 hold a long-term lease for a
paging transmission site. A principal stockholder of TCI is a stockholder of the
Company.
On November 1, 1995 the Company acquired an exclusive option to purchase
TCI in consideration of the above mentioned loans. The option agreement further
provides that if, on or before January 31, 1996, the acquisition of TCI by the
Company or an investment in TCI is not consummated, the Company may demand
repayment of these advances. If the 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 was pledged as collateral for such advances. To date, the
Company has not made such a demand.
On January 16, 1996 the Company consummated a Private Placement of 69,460
shares of its Common Stock $.05 par value at a price of $2.25 per share. The
total offering resulted in gross proceeds of $156,217.50. Each subscriber, in
addition to the shares received, demand registrations 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
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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.
In light of the fact that the Company did not raise sufficient monies in
the above described Private Placement and had significant capital restricted
because of its deposit with the FCC and its collateral with its bank , the
Company was compelled on February 29, 1996, to borrow $134,000 from another
unrelated corporation. Interest is payable at the rate of 10% in monthly
installments of $1,117 per month. As additional consideration, the Company
issued to the corporation 800,000 A Warrants with 90 day registration rights and
"piggy back" registration rights.
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 principal 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
Debentures are also secured by certain officers and directors personal
guarantees.
The Company has agreed to the Placement Agent a placement fee equal to 10%
of the gross proceeds, a 2% non-accountable expense allowance, issue 200,000
Warrants to purchase the Company's common stock at $2.25 per share, and issue
1,350,000 Class A Warrants. The Company intends to use the proceeds of this
offering to increase its deposit in the PCS auction, and general working capital
purposes. As of May 13, 1996 the Company has received gross proceeds from this
offering of $1,250,000.
On May 8, 1996, the Company won six PCS licenses. The 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 has
deposited $1,.000,000 with the FCC 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 very shortly. The Company will use a portion of the proceeds of the
above described offering to pay the balance of the deposit.
The Company is seeking additional financing in the form of equipment
leasing, debt or equity financing utilization of vendor financing and joint
venture partners for the purchase of PCS equipment and for build-out of
infrastructure. There can be no assurance that such financing will be available
to the Company or if available, available upon acceptable terms.
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IMPACT OF INFLATION
The Company is subject to normal inflationary trends and anticipates that
any increased costs would be passed on to its customers.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 program was designed to offer. This
unilateral decision has caused significant damages to the Company and the
Company will vigorously prosecute this claim.
ITEM 2: CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 12, 1996, at a meeting of the Company's shareholders a
majority of the Company's shareholders voted in favor of an amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of the Company's Common Stock from 8,400,000 shares to 40,000,000
shares
ITEM 5. OTHER INFORMATION
On May 8, 1996, the Company's wholly owned subsidiary, Personal
Communications Network, Inc. won six Personal Communications Services ("PCS")
licenses entitling the Company to operate wireless PCS telephone systems
covering nearly 1.5 million people in three states.
The licenses were won in the recently concluded Federal
Communication Commissions ("FCC") "C" Block Auction. The markets awarded the
Company include Elmira-Corning, New York; Bangor/Lewiston -
Auburn/Waterville-Augusta, Maine; and Burlington
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/Rutland - Bennington, 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 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 has deposited $1,000,000 with the
FCC 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 very shortly.
The remaining balance will be paid out over the next 10 years with
interest only during the first six years.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: May 13, 1996
ELECTRONICS COMMUNICATIONS CORP.
By: /s/ William S. Taylor
---------------------------------
William S. Taylor, President
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: May 13, 1996
ELECTRONICS COMMUNICATIONS CORP.
By:______________________________
William S. Taylor, President
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