<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K / A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: JUNE 28, 1996
---------------------------------
(DATE OF EARLIEST EVENT REPORTED)
ELECTRONICS COMMUNICATIONS CORP.
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EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
DELAWARE 1-13764 11-2649088
- ------------------------------ ------------------- ---------------
STATE OF OTHER JURISDICTION OF COMMISSION FILE NO. I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION ID NO.
10 PLOG ROAD, FAIRFIELD, NEW JERSEY 07004
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 808-8862
--------------------
4 MADISON ROAD, FAIRFIELD, NEW JERSEY 07004
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(FORMER NAME OR FORMER ADDRESS IF CHANGED SINCE LAST REPORT)
<PAGE>
ITEM 2. ACQUISITION AND DEPOSITION OF ASSETS
On June 28, 1996, the Company completed the acquisition of 51% of the
issued and outstanding stock of Threshold Communications, Inc. ("TCI") for an
aggregate purchase price of $1,114,000. Previously, the Company loaned TCI an
aggregate of $725,000, which in addition to 194,500 shares of the Company's
Common Stock (at the time was $2.00 per share) represented the consideration
paid by the Company. TCI is a recently formed corporation engaged in the radio
paging business. TCI has recently acquired a paging subscriber base, associated
paging hardware and a paging carrier agreement with Skytel, a company that
provides nationwide paging, voice messaging and related messaging services to
subscribers and others. In addition, TCI owns a 900 megahertz FCC paging
license in the Paging Service Area and holds a long-term lease for a paging
transmission site.
On March 22, 1996 TCI acquired substantially all of the assets and assumed
certain liabilities of General Communications and Electronics, Inc. ("GCE"). As
part of the transaction with GCE, TCI, became a paging reseller with a
subscriber base of approximately 9,000 persons. TCI offers paging service
primarily through various paging carriers in the New York metropolitan area.
TCI offers national paging service through a sales and distribution agreement
with Skytel. Under this agreement, TCI pursues regional and national accounts
through its present dealer network in the Paging Service Area. TCI also has the
necessary infrastructure to operate a paging operation, including but not
limited to a full service technical shop and repair facility, engineering
capability, marketing and sales force, billing and collection systems and
ancillary product support capability for paging related products.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
(a) Financial Statement of Business Acquired
Not Applicable
(b) Pro Forma Financial Information
The following unaudited pro forma condensed consolidated financial
statements are filed with this report:
TCI - Unaudited Financial Statement for the year ended
December 31, 1995...................................... F-1 - F-9
Unaudited Financial Statement for the quarter ended
March 31, 1996......................................... F10 - F18
GCE - Unaudited Financial Statement for the year ended
December 31, 1995...................................... F-19 - F-26
Unaudited Financial Statement for the period ended
March 21, 1996......................................... F-27 - F-34
<PAGE>
GTA - Unaudited Financial Statement for the year ended
December 31, 1995...................................... F-35 - F-41
Unaudited Financial Statement for the period ended
March 21, 1996......................................... F-42 - F-48
Pro-Forma statement of operations for the year ended
December 31, 1995...................................... F-49 - F-50
Pro-Forma statement of operations for the period
January 1, 1996 through March 31, 1996................. F-51 - F-52
Pro-Forma balance sheet as of March 31, 1996........... F-53 - F-54
Pro-Forma statement of operations for the year ended
December 31, 1995...................................... F-55 - F-56
Pro-Forma statement of operations for the period
January 1, 1996 through March 31, 1996................. F-57 - F-58
The statements include the historical balance sheets of the Company,
Threshold Communications Inc. ("TCI"), and General Tower of America Inc.
("GTA"). On March 22, 1996, TCI acquired substantially all of the assets of
General Communications and Electronics Inc. ("GCE") for $1,420,529 with the
assumption of liabilities in the amount of $469,746. Certain assets and
liabilities not included in the sale remained with GCE. The following GCE
balance sheet is a pro forma balance sheet with represents the assets and
liabilities acquired by TCI. GCE's statement of operations presented herein
represents historical data. For the purpose of Unaudited Pro Forma Consolidated
Financial Data, the purchase of GCE's assets was treated as a purchase of a
wholly owned subsidiary. On March 22, 1996, TCI purchased 56 2/3% of the common
stock of GTA for $1.
On June 28, 1996, the Company acquired 51% of the common stock of TCI for
$1,114,000.
The March 31, 1996 statements include the historical consolidated balance
sheets of the Company and TCI. GCE's historical balance sheet was omitted
because of the sale of its assets to TCI on March 22, 1996. GTA's historical
balance sheet and statement of operations is included by its consolidation with
TCI. GCE's statement of operations is representative of historical data.
The statements below reflect the acquisitions in a two part process. The
first part reflects TCI's acquisition of certain assets of GCE and creates a pro
forma consolidated TCI statement. The second part step consolidates the pro
forma TCI statement with the Company to arrive at the Unaudited Pro Forma
Consolidated Financial Data.
<PAGE>
The pro forma assumes that all of the acquisitions occurred at the
beginning of the period presented. The consolidation of TCI, GCE, GTA and the
Company have been prepared using the purchase method of accounting, whereby the
total cost of the acquisition was allocated to the tangible and intangible
assets acquired and liabilities assumed based upon their respective fair values
as of the date of the actual transaction. For the purpose of the Unaudited Pro
Forma Consolidated Financial Data, such allocations were made based upon
preliminary valuations and other studies. The final purchase price allocation
in the Company's 1996 audited consolidated financial statements may have a
material impact on the accompanying Unaudited Pro Forma Consolidated Financial
Data. The Unaudited Pro Forma Consolidated Financial Data does not purport to
represent or be indicative of what the results of operation or financial
position of the Company would actually have been if all the acquisitions and
related transactions had in fact occurred on such dates or to project the
results of operations or financial position of the Company for any future data
or period. The Unaudited Pro Forma Consolidated Financial Data should be read
together with the consolidated financial statements of the Company and related
notes included elsewhere in this prospectus.
The following unaudited pro forma financial statements for the Company have
been prepared based upon certain pro forma adjustments to the historical
financial statements of the Company as of December 31, 1995 and March 31, 1996
set forth elsewhere.
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
<PAGE>
TABLE OF
CONTENTS
PAGES
Balance Sheet .................................................. 1
Statement of Operations and Retained Deficit .................... 2
Statement of Cash Flows ......................................... 3
Notes to Unaudited Financial Statements ......................... 4-7
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
BALANCE SHEET
DECEMBER 31, 1995
(UNAUDITED)
ASSETS
Current Assets
Cash $ 329
Loans Receivable 104,560
------------
Total Current Assets 104,889
------------
Equipment
Equipment 150,000
Accumulated Depreciation (5,355)
------------
Net Equipment 144,645
------------
Other Assets
Deferred Acquisition Costs 150,000
Paging Carrier Agreement 152,641
Accumulated Amortization (2,544)
------------
Total Other Assets 300,097
------------
Total Assets $ 549,631
------------
------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Income Taxes Payable $ 904
Loan Payable 550,000
------------
Total Current Liabilities 550,904
------------
Long Term Liabilities
Notes Payable-Stockholder 7,043
------------
Total Long Term Liabilities 7,043
------------
Stockholder's Equity
Common Stock, par value $1 per share,1000 shares
authorized, 49 shares issued and outstanding 49
Additional Paid-In Capital 951
Retained Deficit (9,316)
------------
Total Stockholder's Equity (8,316)
------------
Total Liabilities and Stockholder's Equity $ 549,631
------------
------------
1
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
STATEMENT OF OPERATIONS AND RETAINED DEFICIT
FOR THE PERIOD ENDING DECEMBER 31, 1995
(UNAUDITED)
Sales $ 123,394
Cost of Sales 123,394
------------
Gross Profit 0
Expenses 5,073
------------
Operating Loss Before Other Income,
Expenses and Income Taxes (5,073)
------------
Other Income and Expenses
Interest Income 4,560
Depreciation 5,355
Amortization 2,544
------------
Total Other Income and Expenses (3,339)
------------
Loss Before Income Taxes (8,412)
Income Taxes 904
------------
Net Loss (9,316)
------------
Retained Earnings, Beginning of Period 0
Retained Deficit, End of Period $ (9,316)
------------
------------
2
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDING DECEMBER 31, 1995
(UNAUDITED)
Cash Flows from Operating Activities
Net Loss $ (9,316)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operations:
Depreciation and Amortization 7,899
Changes in:
Income Taxes Payable 904 0
---------
Total Adjustments 8,803
----------
Net Cash Used By Operating Activities (513)
----------
Cash Flows From Investing Activities
Loan Receivable (104,560)
Deferred Acquisition Costs (150,000)
Other Assets (152,641)
Additions to Equipment (150,000)
---------
Net Cash Used By Investing Activities (557,201)
----------
Cash Flows From Financing Activities
Net Proceeds of Shareholder Loans 7,043
Proceeds from Loan Payable 550,000
Sale of Common Stock 49
Additonal Paid in Capital 951
---------
Net Cash Provided by Financing Activities 558,043
----------
Net Increase in Cash 329
Cash, Beginning of Period 0
----------
Cash, End of Period $ 329
----------
----------
3
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS ACTIVITY
Threshold Communications, Inc. (the "Company") was organized on May 15, 1995 to,
among other things, engage in the radio paging business to service the New York
metropolitan area.
(B) RECOGNITION OF REVENUE
The Company invoices its customers in the beginning of the month for that months
service and recognizes revenues at time of billing.
(C) EQUIPMENT
Equipment is 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 period ending December 31,
1995 was $ 5,355.
(D) PAGING LICENSES
This intangible asset is being amortized over a fifteen year period.
Amortization expense charged to operations for the period ending December 31,
1995 was $ 2,544.
(E) MANAGEMENT AGREEMENT
The Company has agreed to pay a fee equal to the gross profit on its Skytel
accounts to NITAS, Inc. (formerly General Communications and Electronics
Corp.) for billing, collections and servicing. This agreement may be
terminated at will by the Company.
NOTE 2 - ACQUISITION
On October 18, 1995, the Company acquired a paging subscriber base, associated
paging hardware, and a paging carrier agreement with Skytel -Registered
Trademark-, a company that provides nationwide paging, voice messaging and
related messaging services to subscribers and others.
NOTE 3 - LOAN RECEIVABLE
On June 7, 1995, the Company lent $100,000 to one of its consultants. The loan
is due on December 31, 1996 and bears an interest rate of 8% payable on demand.
4
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4 - DEFERRED ACQUISITION COSTS
The Company has paid a consultant $150,000 to find and negotiate the purchase of
a paging and two-way radio company.
NOTE 5 - LOAN PAYABLE
On November 1, 1995, the Company entered into an agreement (the "Agreement")
with Electronics Communications Corp ("ELCC") which superseded a prior agreement
between the parties. Under the Agreement, in consideration of advances, the
Company gave an exclusive option to ELCC to acquire or invest in the Company on
terms to be mutually agreed upon. The option agreement further provides that if,
on or before January 31, 1996, the Acquisition of the Company by ELCC or an
investment by ELCC in the Company has not been consummated, ELCC may demand
repayment of these advances. If such advances are not repaid within ten
business days of such demand, ELCC, at its option, may foreclose 100% of the
Company's stock which has been pledged as collateral for the advances. At this
time there has not been any definitive agreement to acquire or invest in the
Company. The Company has borrowed $550,000 for the period ending December 31,
1995.
NOTE 6 - INCOME TAXES
The Company has 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 difference 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 components of income tax expense are as follows:
December 31,
1995
------------
Current:
Federal $ -0-
State 904.00
Deferred:
Federal -0-
State -0-
--------
$ 904.00
--------
--------
5
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 7 - NEWLY ISSUED STANDARDS
The Company does not offer benefits covered by Statements of Financial
Accounting Standards No. 106 "Employers' Accounting for Post Retirement Benefits
Other Than Pensions" and No. 112, "Employers' Accounting for Post Employment
Benefits" and therefore is not affected by these statements.
The Company has elected to adopt Statements of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of Financial Statements". The Company
has no financial instruments as of December 31, 1995.
The Company adopted Statement of Financial Statements Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities". The
Statement requires the Company to classify investment securities as (i) held for
investment purposes (held to maturity); (ii) available for safe and (iii) held
for trading purposes. At December 31, 1995, the Company held no investment
securities covered by this statement.
NOTE 8 - OPERATING LEASE
The Company leases a radio paging transmission facility. Minimum future lease
payments under the capital lease at December 31, 1995 for each of the next five
years are:
1996 $8,388
1997 $8,388
1998 $8,660
1999 $8,854
2000 $3,689
-------
Total Minimum Lease Payments: $37,979
-------
-------
NOTE 9 - NOTES PAYABLE- STOCKHOLDER
The Company's sole shareholder has advanced the Company money from time to time
as needed. The note does not require a scheduled payout and bears no interest.
6
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 10 - SUBSEQUENT EVENTS
A) On March 22, 1996, the Company entered into an agreement to acquire 6,000
paging service subscribers and other related assets. The Company also
entered into an agreement to acquire 56 2/3% of General Tower of America,
Inc. (a two-way radio sales and service provider). The Company paid
$914,000 for both acquisitions and assumed certain off setting assets and
liabilities. In addition the Company gave the principal of the acquisition
a consulting agreement for one year, at $31,500 per year.
B) On March 22, 1996, the Company borrowed an additional $175,000 in cash and
$389,000 in securities from ELCC. In addition, ELCC guaranteed the
Company's obligation in connection with the above mentioned acquisitions.
C) On June 28, 1996, the Company issued 51 shares of common stock and sold
them to ELCC for $1,114,000. This transaction will account for 51% of
ownership.
7
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
FINANCIAL STATEMENTS
PERIOD ENDED MARCH 31, 1996
<PAGE>
TABLE OF
CONTENTS
Pages
-----
Balance Sheet ............................................. 1
Statement of Operations and Retained Deficit ............... 2
Statement of Cash Flows .................................... 3
Notes to Unaudited Financial Statements .................... 4-6
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
Balance Sheet
March 31, 1996
(Unaudited)
Assets
Current Assets
Cash $ 3,099
Loans Receivable 384,768
Accounts Receivable 185,133
Prepaid Expenses 17,815
-----------
Total Current Assets 590,815
-----------
Equipment
Equipment 600,000
Furniture & Fixtures 20,000
Auto & Trucks 32,000
Accumulated Depreciation (34,076)
-----------
Net Equipment 617,924
-----------
Other Assets
Security Deposits 22,542
Organization Costs 60
Paging Carrier Agreement 677,858
Accumulated Amortization (5,383)
-----------
Total Other Assets 695,077
-----------
Total Assets $1,903,816
-----------
-----------
Liabilities and Stockholder's Equity
Current Liabilities
Accounts Payable $ 493,173
Income Taxes Payable 904
Note Payable 1,464,000
-----------
Total Current Liabilities 1,958,077
-----------
Long Term Liabilities
Notes Payable-Stockholder 9,141
-----------
Total Long Term Liabilities 9,141
-----------
Stockholder's Equity
Common Stock, par value $1 per share, 1000 shares
authorized, 49 shares issued and outstanding 49
Additional Paid-In Capital 951
Retained Deficit (64,402)
-----------
Total Stockholder's Equity (63,402)
-----------
Total Liabilities and Stockholder's Equity $1,903,816
-----------
-----------
1
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
Statement of Operations and Retained Deficit
For the Period Ending March 31, 1996
(Unaudited)
Sales $ 136,325
Cost of Sales 124,594
-----------
Gross Profit 11,731
Expenses 37,251
-----------
Operating Loss Before Other Income,
Expenses and Income Taxes (25,520)
-----------
Other Income and Expenses
Interest Income 2,000
Depreciation 28,722
Amortization 2,839
Interest Expense 5
-----------
Total Other Income and Expenses (29,566)
-----------
Net Loss (55,086)
Retained Earnings, Beginning of Period (9,316)
-----------
Retained Deficit, End of Period $ (64,402)
-----------
-----------
2
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
Statement of Cash Flows
For the Period Ending March 31, 1996
(Unaudited)
Cash Flows from Operating Activities
Net Loss $ (55,086)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operations:
Depreciation and Amortization 31,561
Changes in:
Accounts Receivable (185,133)
Prepaid Expense (17,814)
Accounts Payable 493,173
----------
Total Adjustments 321,787
-----------
Net Cash Provided By Operating Activities 266,701
Cash Flows From Investing Activities
Loan Receivable (280,208)
Deferred Acquisition Costs 150,000
Other Assets (547,821)
Additions to Equipment (502,000)
----------
Net Cash Used By Investing Activities (1,180,029)
Cash Flows From Financing Activities
Net Proceeds of Shareholder Loans 2,098
Proceeds from Loan Payable 914,000
Net Cash Provided by Financing Activities 916,098
-----------
Net Increase in Cash 2,770
Cash, Beginning of Period 329
-----------
Cash, End of Period $ 3,099
-----------
-----------
3
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS ACTIVITY
Threshold Communications, Inc. (the "Company") was organized on May 15, 1995 to,
among other things, engage in the radio paging business to service the New York
Metropolitan Area.
(B) RECOGNITION OF REVENUE
The Company invoices its customers in the beginning of the month for that months
service and recognizes revenues at time of billing.
(C) EQUIPMENT
Equipment is 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 period ending March 31, 1996
was $28,722.
(D) PAGING LICENSES
This intangible asset is being amortized over a fifteen year period.
Amortization expense charged to operations for the period ending March 31, 1996
was $ 2,839.
(E) MANAGEMENT AGREEMENT
The Company has agreed to pay a fee equal to the gross profit on its Skytel
accounts to NITAS, Inc. (formerly General Communications and Electronics
Corp.) for billing, collections and servicing. This agreement was terminated
on March 22, 1996.
NOTE 2 - ACQUISITION
On October 18, 1995, the Company acquired a paging subscriber base, associated
paging hardware, and a paging carrier agreement with Skytel -Registered
Trademark-, a company that provides nationwide paging, voice messaging and
related messaging services to subscribers and others.
On March 22, 1996, the Company entered into an agreement to acquire 6,000
paging service subscribers and other related assets. The Company also
entered into an agreement to acquire 56 2/3% of General Tower of America,
Inc. (a two-way radio sales and service provider). The Company paid $914,000
for both acquisitions and assumed certain off setting assets and liabilities.
In addition the Company gave the principal of the acquisition a consulting
agreement for one year, at $31,500 per year.
4
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3 - LOAN RECEIVABLE
On June 7, 1995, the Company lent $100,000 to one of its consultants. The loan
is due on December 31, 1996 and bears an interest rate of 8% payable on demand.
NOTE 4 - LOAN PAYABLE
On November 1, 1995, the Company entered into an agreement (the "Agreement")
with Electronics Communications Corp. ("ELCC") which superseded a prior
agreement between the parties. Under the Agreement, in consideration of
advances, the Company gave an exclusive option to ELCC to acquire or invest in
the Company on terms to be mutually agreed upon. The option agreement further
provides that if, on or before January 31, 1996, the Acquisition of the Company
by ELCC or an investment by ELCC in the Company has not been consummated, ELCC
may demand repayment of these advances. If such advances are not repaid within
ten business days of such demand, ELCC, at its option, may foreclose 100% of the
Company's stock which has been pledged as collateral for the advances. At this
time there has not been any definitive agreement to acquire or invest in the
Company. The Company has borrowed $550,000 for the period ending March 31,
1996.
On March 22, 1996, the Company borrowed an additional $175,000 in cash and
$389,000 in securities from ELCC. In addition, ELCC guaranteed the Company's
obligation in connection with the above mentioned acquisitions.
NOTE 5 - INCOME TAXES
The Company has 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 difference 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.
NOTE 6 - NEWLY ISSUED STANDARDS
The Company does not offer benefits covered by Statements of Financial
Accounting Standards No. 106 "Employers' Accounting for Post Retirement Benefits
Other Than Pensions" and No. 112, "Employers' Accounting for Post Employment
Benefits" and therefore is not affected by these statements.
The Company has elected to adopt Statements of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of Financial Statements". The Company
has no financial instruments as of March 31, 1996.
5
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 6 - NEWLY ISSUED STANDARDS- (Continued)
The Company adopted Statement of Financial Statements Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities". The
Statement requires the Company to classify investment securities as (i) held for
investment purposes (held to maturity); (ii) available for sale and (iii) held
for trading purposes. At March 31, 1996, the Company held no investment
securities covered by this statement.
NOTE 7 - OPERATING LEASE
The Company leases a radio paging transmission facility. Minimum future lease
payments under the capital lease at March 31, 1996 and for each of the next five
years are:
1996 $6,291
1997 $8,388
1998 $8,660
1999 $8,854
2000 $3,689
-------
Total Minimum Lease Payments: $35,882
-------
-------
NOTE 8 - NOTES PAYABLE - STOCKHOLDER
The Company's sole shareholder has advanced the Company money from time to time
as needed. The note does not require a scheduled payout and bears no interest.
NOTE 9 - SUBSEQUENT EVENT
On June 28, 1996, the Company issued 51 shares of common stock and sold them to
Electronics Communications Corp. ("ELCC") for $1,114,000. This transaction will
account for 51% of ownership.
6
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
<PAGE>
TABLE OF
CONTENTS
Pages
-----
Balance Sheet ............................................. 1
Statement of Operations and Retained Deficit ............... 2
Statement of Cash Flows .................................... 3
Notes to Unaudited Financial Statements .................... 4-6
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
Balance Sheet
December 31, 1995
(Unaudited)
Assets
Current Assets
Cash $ 1,633
Accounts Receivable 168,337
Inventory 10,668
Loan Receivable 123,427
Prepaid Expenses 9,176
------------
Total Current Assets 313,241
------------
Property and Equipment
Property and Equipment 2,077,502
Accumulated Depreciation (1,665,024)
------------
Net Property and Equipment 412,478
------------
Other Assets
Intangible Assets (Net of Amortization) 438,177
Security Deposits 23,679
------------
Total Other Assets 461,856
------------
Total Assets $ 1,187,575
------------
------------
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 399,412
Accrued Expenses and Taxes Payable 14,381
Shareholder Loans 1,174,721
Customer Deposits 22,105
Security Deposits 2,400
------------
Total Current Liabilities 1,613,019
------------
Stockholders' Equity
Common Stock 315,000
Additional Paid-In Capital 200,000
Retained Deficit (940,444)
------------
Total Stockholders' Equity (425,444)
------------
Total Liabilities and Stockholders' Equity $ 1,187,575
------------
------------
1
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
Statement of Operations and Retained Deficit
For the Period Ending December 31, 1995
(Unaudited)
Sales $1,951,968
Cost of Sales 922,754
-----------
Gross Profit 1,029,214
Expenses 772,183
-----------
Operating Income Before Other
Expenses and Income Taxes 257,031
-----------
Other Expenses
Depreciation 204,000
Amortization 41,523
-----------
Total Other Expenses 245,523
-----------
Income Before Income Taxes 11,508
Income Taxes 0
-----------
Net Income 11,508
Retained Deficit, Beginning of Period (951,952)
-----------
Retained Deficit, End of Period ($940,444)
-----------
-----------
2
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
Statement of Cash Flows
For the Period Ending December 31, 1995
(Unaudited)
Cash Flows from Operating Activities
Net Income $11,508
Adjustments to Reconcile Net Loss to
Net Cash Used by Operations:
Depreciation and Amortization 245,523
Changes in:
Accounts Receivable (45,890)
Inventory 73,972
Prepaid Expenses (670)
Accounts Payable (86,485)
Accrued Expenses and Taxes Payable (2,397)
Customer Deposits 377
---------
Total Adjustments 184,430
----------
Net Cash Provided By Operating Activities 195,938
----------
Cash Flows From Investing Activities
Loan Receivable (30,145)
Additions to Equipment (151,844)
---------
Net Cash Used By Investing Activities (181,989)
----------
Cash Flows From Financing Activities
Payments of Shareholder Loans (29,101)
---------
Net Cash Used by Financing Activities (29,101)
----------
Net Decrease in Cash (15,152)
Cash, Beginning of Period 16,785
----------
Cash, End of Period $ 1,633
----------
----------
3
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS ACTIVITY
The Company engages in the radio paging business in the New York Metropolitan
Area.
(B) RECOGNITION OF REVENUE
The Company invoices its customers in the beginning of the month for that months
services and recognizes revenues at the time of billing.
(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 period ending
December 31, 1995 was $ 204,000.
(D) INVENTORY
Inventory consists solely of finished goods and are valued at the lower of cost
or market. Cost is determined using the first in, first out method.
(E) PAGING LICENSES
This intangible asset is being amortized over a fifteen year period.
Amortization expense charged to operations for the period ending December 31,
1995 was $ 41,523.
(F) 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.
(G) INCOME TAXES
The company has elected to be treated as a subchapter "S" corporation for the
purposes of federal income taxes, accordingly no tax provision has been made.
4
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
(H) ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company's account receivable are net of $20,952 allowance for doubtful
accounts.
NOTE 2- RELATED PARTIES
The loan receivable represents amounts due from a company controlled by a
shareholder of the Company. The note does not require a scheduled payout and
bears no interest.
NOTE 3- SHAREHOLDER LOANS
The Company's sole shareholder has advanced the Company money from time to time
as needed. The loan does not require a scheduled payout and bears minimal
interest.
NOTE 4- NEWLY ISSUED STANDARDS
The Company does not offer benefits covered by Statements of Financial
Accounting Standards No. 106 "Employers' Accounting for Post Retirement Benefits
Other Than Pensions" and No. 112, "Employers' Accounting for Post Employment
Benefits" and therefore is not affected by these statements.
The Company has elected to adopt Statements of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of Financial Statements". The Company
has no financial instruments as of December 31, 1995.
The Company adopted Statement of Financial Statements Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities". The
Statement requires the Company to classify investment securities as (i) held for
investment purposes (held to maturity); (ii) available for sale and (iii) held
for trading purposes. At December 31, 1995, the Company held no investment
securities covered by this statement.
NOTE 5- OPERATING LEASE
The Company leases its office, repair and service facility. This lease expires
on May 6, 1997. The minimum future lease payments under the capital lease at
December 31, 1995 and for the remainder of the lease are:
1996 $54,604
1997 $24,268
-------
Total Minimum Lease Payments: $78,872
-------
5
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 6 - COMMON STOCK
The Company has 100 shares of no par common stock issued and outstanding at
December 31, 1995.
NOTE 7- SUBSEQUENT EVENTS
On March 22, 1996, the Company sold substantially all of its assets to Threshold
Communications, Inc.for $889,000. In addition, the buyer gave the shareholder
a consulting agreement for one year, at $31,500 per year.
6
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
FINANCIAL STATEMENTS
FOR PERIOD ENDED MARCH 21, 1996
<PAGE>
TABLE OF
CONTENTS
Pages
-----
Balance Sheet ................................... 1
Statement of Operations and Retained Deficit ..... 2
Statement of Cash Flows .......................... 3
Notes to Unaudited Financial Statements .......... 4-6
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
Balance Sheet
March 21, 1996
(Unaudited)
Assets
Current Assets
Cash $ 270
Accounts Receivable 215,020
Inventory 50,081
Loan Receivable 79,852
Prepaid Expenses 4,992
-----------
Total Current Assets 350,215
-----------
Property and Equipment
Property and Equipment 1,971,249
Accumulated Depreciation (1,627,391)
-----------
Net Property and Equipment 343,858
-----------
Other Assets
Intangible Assets (Net of Amortization) 427,796
Security Deposits 22,542
-----------
Total Other Assets 450,338
-----------
Total Assets $1,144,411
-----------
-----------
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 447,615
Accrued Expenses and Taxes Payable 13,218
Shareholder Loans 1,126,510
Customer Deposits 21,984
Security Deposits 2,400
-----------
Total Current Liabilities 1,611,727
-----------
Stockholders' Equity
Common Stock 315,000
Additional Paid-In Capital 200,000
Retained Deficit (982,316)
-----------
Total Stockholders' Equity (467,316)
-----------
Total Liabilities and Stockholders' Equity $1,144,411
-----------
-----------
1
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
Statement of Operations and Retained Deficit
For the Period Ending March 21, 1996
(Unaudited)
Sales $ 426,671
Cost of Sales 254,921
-----------
Gross Profit 171,750
Expenses 168,241
-----------
Operating Income Before Other
Expenses and Income Taxes 3,509
-----------
Other Expenses
Depreciation 35,000
Amortization 10,381
-----------
Total Other Expenses 45,381
-----------
Loss Before Income Taxes (41,872)
Income Taxes 0
-----------
Net Loss (41,872)
Retained Deficit, Beginning of Period (940,444)
-----------
Retained Deficit, End of Period ($982,316)
-----------
-----------
2
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
Statement of Cash Flows
For the Period Ending March 21, 1996
(Unaudited)
Cash Flows from Operating Activities
Net Loss $(41,872)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operations:
Depreciation and Amortization 45,381
Changes in:
Accounts Receivable (46,683)
Inventory (39,413)
Prepaid Expenses 4,184
Security Deposits 1,137
Accounts Payable 48,203
Accrued Expenses and Taxes Payable (1,163)
Customer Deposits (121)
--------
Total Adjustments 11,525
---------
Net Cash Used By Operating Activities (30,347)
---------
Cash Flows From Investing Activities
Loan Receivable 43,575
Subtractions to Equipment 33,620
--------
Net Cash Provided By Investing Activities 77,195
---------
Cash Flows From Financing Activities
Payments of Shareholder Loans (48,211)
--------
Net Cash Used by Financing Activities (48,211)
---------
Net Decrease in Cash (1,363)
Cash, Beginning of Period 1,633
---------
Cash, End of Period $ 270
---------
---------
3
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS ACTIVITY
The Company engages in the radio paging business in the New York Metropolitan
Area.
(B) RECOGNITION OF REVENUE
The Company invoices its customers in the beginning of the month for that months
services and recognizes revenues at the time of billing.
(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 period ending
March 21, 1996 was $ 35,000.
(D)INVENTORY
Inventory consists solely of finished goods and are valued at the lower of cost
or market. Cost is determined using the first in, first out method.
(E) PAGING LICENSES
This intangible asset is being amortized over a fifteen year period.
Amortization expense charged to operations for the period ending March 21, 1996
was $ 10,381.
(F) 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.
(G) INCOME TAXES
The company has elected to be treated as a subchapter "S" corporation for the
purposes of federal income taxes, accordingly no tax provision has been made.
4
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
(H) ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company's account receivable are net of $23,680 allowance for doubtful
accounts.
NOTE 2- RELATED PARTIES
The loan receivable represents amounts due from a company controlled by a
shareholder of the Company. The note does not require a scheduled payout and
bears no interest.
NOTE 3- SHAREHOLDER LOANS
The Companay's sole shareholder has advanced the Company money from time to time
as needed. The loan does not require a scheduled payout and bears minimal
interest.
NOTE 4- NEWLY ISSUED STANDARDS
The Company does not offer benefits covered by Statements of Financial
Accounting Standards No. 106 "Employers' Accounting for Post Retirement Benefits
Other Than Pensions" and No. 112, "Employers' Accounting for Post Employment
Benefits" and therefore is not affected by these statements.
The Company has elected to adopt Statements of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of Financial Statements". The Company
has no financial instruments as of March 21, 1996.
The Company adopted Statement of Financial Statements Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities". The
Statement requires the Company to classify investment securities as (i) held for
investment purposes (held to maturity); (ii) available for sale and (iii) held
for trading purposes. At March 21, 1996, the Company held no investment
securities covered by this statement.
NOTE 5- OPERATING LEASE
The Company leases its office, repair and service facility. This lease expires
on May 6, 1997. The minimum future lease payments under the capital lease at
March 21, 1996 for the remainder of the lease are:
1996 $40,953
1997 $24,268
-------
Total Minimum Lease Payments: $65,221
-------
-------
5
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 6 - COMMON STOCK
The Company has 100 shares of no par common stock issued and outstanding at
March 21, 1996.
NOTE 7- SUBSEQUENT EVENTS
On March 22, 1996, the Company sold substantially all of its assets to Threshold
Communications, Inc.for $889,000. In addition, the buyer gave the shareholder
a consulting agreement for one year, at $31,500 per year.
6
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
<PAGE>
TABLE OF
CONTENTS
Pages
-----
Balance Sheet ........................................ 1
Statement of Operations and Retained Deficit .......... 2
Statement of Cash Flows ............................... 3
Notes to Unaudited Financial Statements ............... 4-5
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
Balance Sheet
December 31, 1995
(Unaudited)
Assets
Current Assets
Cash $ 6,001
Accounts Receivable 73,128
Inventory 20,168
----------
Total Current Assets 99,297
----------
Equipment
Equipment 11,486
Accumulated Depreciation (2,297)
----------
Net Equipment 9,189
----------
Total Assets $ 108,486
----------
----------
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 20,196
Sales Tax Payable 892
Loan Payable 123,427
----------
Total Current Liabilities 144,515
----------
Stockholders' Equity
Common Stock 0
Retained Deficit (36,029)
----------
Total Stockholders' Equity (36,029)
----------
Total Liabilities and Stockholders' Equity $ 108,486
----------
----------
1
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
Statement of Operations and Retained Deficit
For the Period Ending December 31, 1995
(Unaudited)
Sales $ 579,723
Cost of Sales 521,904
-----------
Gross Profit 57,819
Expenses 57,083
-----------
Operating Income Before Other
Expenses and Income Taxes 736
-----------
Other Expenses
Depreciation 2,297
-----------
Total Other Expenses 2,297
-----------
Loss Before Income Taxes (1,561)
Income Taxes 0
-----------
Net Loss (1,561)
Retained Deficit, Beginning of Period (34,468)
-----------
Retained Deficit, End of Period ($36,029)
-----------
-----------
2
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
Statement of Cash Flows
For the Period Ending December 31, 1995
(Unaudited)
Cash Flows from Operating Activities
Net Loss $ (1,561)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operations:
Depreciation 2,297
Changes in:
Accounts Receivabl 3,222
Inventory (4,791)
Accounts Payable (14,890)
Sales Tax Payable (1,474)
---------
Total Adjustments (15,636)
---------
Net Cash Used By Operating Activities (17,197)
---------
Cash Flows From Investing Activities
Additions to Equipment (11,486)
---------
Net Cash Used By Investing Activities (11,486)
---------
Cash Flows From Financing Activities
Proceeds from Loan Payable 30,145
---------
Net Cash Provided by Financing Activities 30,145
---------
Net Increase in Cash 1,462
Cash, Beginning of Period 4,539
---------
Cash, End of Period $ 6,001
---------
---------
3
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS ACTIVITY
The Company is a two way radio provider in the New York Metropolitan Area.
(B) RECOGNITION OF REVENUE
The Company invoices its customers in the beginning of the month for that months
services and recognizes revenues at the time of billing.
(C) EQUIPMENT
Equipment is 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 period ending December 31,
1995 was $ 2,297.
(D) INVENTORY
Inventory consists solely of finished goods and are valued at the lower of cost
or market. Cost is determined using the first in, first out method.
(E) 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.
(F) INCOME TAXES
The company has elected to be treated as a subchapter "S" corporation for the
purposes of federal income taxes, accordingly no tax provision has been made.
(G) ALLOWANCE FOR DOUBTFUL ACCOUNTS
Due to past collection experiences, the Company has not recorded an allowance
for doubtful accounts.
4
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 2 - RELATED PARTIES
The loan payable represents amounts due to a company owned by a shareholder of
the Company. The note does not require a scheduled payout and bears no interest
The Company uses an office and warehouse facility from a company owned by a
shareholder of the Company and pays a fee to that company for its uses. The
rental fee for the year ended 1995 was $5,500.
NOTE 3 - NEWLY ISSUED STANDARDS
The Company does not offer benefits covered by Statements of Financial
Accounting Standards No. 106 "Employers' Accounting for Post Retirement Benefits
Other Than Pensions" and No. 112, "Employers' Accounting for Post Employment
Benefits" and therefore is not affected by these statements.
The Company has elected to adopt Statements of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of Financial Statements". The Company
has no financial instruments as of December 31, 1995.
The Company adopted Statement of Financial Statements Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities". The
Statement requires the Company to classify investment securities as (i) held for
investment purposes (held to maturity); (ii) available for sale and (iii) held
for trading purposes. At December 31, 1995, the Company held no investment
securities covered by this statement.
NOTE 4 - COMMON STOCK
The Company has 100 shares of no par common stock issued and outstanding at
December 31, 1995.
NOTE 5 - SUBSEQUENT EVENTS
On March 22, 1996, a shareholder of the Company sold all of his shares of the
Company to Threshold Communications, Inc. for $1. This transaction accounted for
56 2/3% of the outstanding shares of the Company.
5
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
FINANCIAL STATEMENTS
FOR PERIOD ENDED MARCH 21, 1996
<PAGE>
TABLE OF
CONTENTS
Pages
-----
Balance Sheet .................................... 1
Statement of Operations and Retained Deficit ..... 2
Statement of Cash Flows .......................... 3
Notes to Unaudited Financial Statements .......... 4-5
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
Balance Sheet
March 21, 1996
(Unaudited)
Assets
Current Assets
Cash $ 6,957
Accounts Receivable 76,314
----------
Total Current Assets 83,271
----------
Equipment
Equipment 11,486
Accumulated Depreciation (3,676)
----------
Net Equipment 7,810
----------
Total Assets $ 91,081
----------
----------
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 46,160
Sales Tax Payable 2,118
Loan Payable 79,852
----------
Total Current Liabilities 128,130
----------
Stockholders' Equity
Common Stock 0
Retained Deficit (37,049)
----------
Total Stockholders' Equity (37,049)
----------
Total Liabilities and Stockholders' Equity $ 91,081
----------
----------
1
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
Statement of Operations and Retained Deficit
For the Period Ending March 21, 1996
(Unaudited)
Sales $ 132,836
Cost of Sales 118,477
----------
Gross Profit 14,359
Expenses 14,001
----------
Operating Income Before Other
Expenses and Income Taxes 358
----------
Other Expenses
Depreciation 1,378
----------
Total Other Expenses 1,378
----------
Loss Before Income Taxes (1,020)
Income Taxes 0
----------
Net Loss (1,020)
Retained Deficit, Beginning of Period (36,029)
----------
Retained Deficit, End of Period $ (37,049)
----------
----------
2
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
Statement of Cash Flows
For the Period Ending March 21, 1996
(Unaudited)
Cash Flows from Operating Activities
Net Loss $ (1,020)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operations:
Depreciation 1,378
Changes in:
Accounts Receivable (3,186)
Inventory 20,168
Accounts Payable 25,965
Sales Tax Payable 1,226
--------
Total Adjustments 45,551
---------
Net Cash Provided By Operating Activities 44,531
---------
Cash Flows From Financing Activities
Proceeds from Loan Payable (43,575)
--------
Net Cash Used by Financing Activities (43,575)
---------
Net Increase in Cash 956
Cash, Beginning of Period 6,001
---------
Cash, End of Period $ 6,957
---------
---------
3
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS ACTIVITY
The Company is a two way radio provider in the New York Metropolitan Area.
(B) RECOGNITION OF REVENUE
The Company invoices its customers in the beginning of the month for that months
services and recognizes revenues at the time of billing.
(C) EQUIPMENT
Equipment is 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 period ending March 21, 1996
was $ 1,378.
(D) 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.
(E) INCOME TAXES
The company has elected to be treated as a subchapter "S" corporation for the
purposes of federal income taxes, accordingly no tax provision has been made.
(F) ALLOWANCE FOR DOUBTFUL ACCOUNTS
Due to past collection experiences, the Company has not recorded an allowance
for doubtful accounts.
NOTE 2 - RELATED PARTIES
The loan payable represents amounts due to a company owned by a shareholder of
the Company. The note does not require a scheduled payout and bears no interest
4
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3 - NEWLY ISSUED STANDARDS
The Company does not offer benefits covered by Statements of Financial
Accounting Standards No. 106 "Employers' Accounting for Post Retirement Benefits
Other Than Pensions" and No. 112, "Employers' Accounting for Post Employment
Benefits" and therefore is not affected by these statements.
The Company has elected to adopt Statements of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of Financial Statements". The Company
has no financial instruments as of March 21, 1996.
The Company adopted Statement of Financial Statements Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities". The
Statement requires the Company to classify investment securities as (i) held for
investment purposes (held to maturity); (ii) available for sale and (iii) held
for trading purposes. At March 21, 1996, the Company held no investment
securities covered by this statement.
NOTE 4 - COMMON STOCK
The Company has 100 shares of no par common stock issued and outstanding at
March 21, 1996.
NOTE 5- SUBSEQUENT EVENTS
On March 22, 1996, a shareholder of the Company sold all of his shares of the
Company to Threshold Communications, Inc. for $1. This transaction accounted for
56 2/3% of the outstanding shares of the Company.
5
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL HISTORICAL PRO FORMA TCI
TCI GCE GTA ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C> <C>
Sales $ 123,394 $1,951,968 $ 579,723(1) $ (243,377) $2,411,708
Cost of Sales 123,394 922,754 521,904(1) (243,377) 1,324,675
---------- ----------- ------------ -----------
Gross Profit - 1,029,214 57,819 1,087,033
Operating Expenses 5,073 762,998 57,083 825,154
---------- ----------- ------------ -----------
Operating Profit (Loss) (5,073) 266,216 736 261,879
Other Income and Expense
Interest Income 4,560 - - 4,560
Interest Expense - (9,185) - (9,185)
Depreciation & Amortization (7,899) (245,523) (2,297)(2) (2,402) (258,121)
---------- ----------- ------------ -----------
Total Other Income & Expense (3,339) (254,708) (2,297) (262,746)
Minority Interest in Loss - - - (3) 671 671
Provision For Taxes (904) - - (904)
---------- ----------- ------------ -----------
Net Income (Loss) for Period $ (9,316) $ 11,508 $ (1,561) $ (1,100)
---------- ----------- ------------ -----------
---------- ----------- ------------ -----------
</TABLE>
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
NOTE 1
To eliminate intercompany sales and corresponding cost of sales.
NOTE 2
To amortize the difference between the cost paid by TCI over the book value
of GTA for a fifteen year period.
Amount paid for GTA $ 1
Book Value at December 31, 1995 (36,029)
----------
Amount paid in excess of book value $ 36,028
----------
----------
Amount of amortization for 1995 $ 2,402
----------
----------
NOTE 3
To record minority interest in loss which is calculated as follows:
Net Loss of GTA Minority % Minority Interest
$ 1,561 43.33 $ (671)
-------- --------
-------- --------
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL HISTORICAL PRO FORMA TCI
TCI GCE GTA ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C> <C>
Sales $ 136,325 $ 426,671 $ 132,836(1) $ (116,340) $ 579,492
Cost of Sales 124,594 254,921 118,477(1) (116,340) 381,652
----------- ----------- ----------- -----------
Gross Profit 11,731 171,750 14,359 197,840
Operating Expenses 40,090 178,622 14,001 232,713
----------- ----------- ----------- -----------
Operating Profit (Loss) (28,359) (6,872) 358 (34,873)
Other Income and Expense
Interest Income 2,000 - - 2,000
Interest Expense (5) - - (5)
Depreciation & Amortization (28,722) (35,000) (1,378) (65,100)
----------- ----------- ----------- -----------
Total Other Income & Expense (26,727) (35,000) (1,378) (63,105)
Minority Interest in Loss - - -(2) 442 442
----------- ----------- ----------- -----------
Net Income (Loss) for Period $ (55,086) $ (41,872) $ (1,020) $ (97,536)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD ENDED MARCH 31, 1996
NOTE 1
To eliminate intercompany sales and corresponding cost of sales.
NOTE 2
To record minority interest in net income.
<PAGE>
ELECTRONICS COMMUNICATIONS, CORP.
PRO FORMA BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA ELCC
ELCC TCI, INC. ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C>
CURRENT ASSETS
CASH $ 1,154,329 $ 3,099 $1,157,428
ACCOUNTS RECEIVABLE 1,276,394 185,133 1,461,527
INVENTORY 550,099 550,099
BID DEPOSIT 1,000,000 1,000,000
LOANS RECEIVABLE 1,114,000 384,768 ($1,114,000)(2) 384,768
PREPAID EXPENSES 82,588 17,815 100,403
INVESTMENT IN TCI - - 1,114,000 (2) -
(1,114,000)(3)
----------- ----------- ----------
TOTAL CURRENT ASSETS 5,177,410 590,815 4,654,225
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT 454,755 652,000 250,000 (3) 1,356,755
ACCUMULATED DEPRECIATION (86,483) (34,076) (1,562)(5) (122,121)
----------- ----------- ----------
NET PROPERTY AND EQUIPMENT 368,272 617,924 1,234,634
OTHER ASSETS
DEFERRED PRIVATE PLACEMENT COSTS 364,144 - 364,144
PAGING CARRIER AGREEMENT - 672,475 300,101 (3) 967,574
(5,002)(4)
DEFERRED LICENSE COSTS 306,410 - 306,410
SECURITY DEPOSITS AND OTHER ASSETS 99,195 22,602 121,797
GOODWILL 28,310 (3) 27,838
(472)(6)
----------- ----------- -----------
TOTAL OTHER ASSETS 769,749 695,077 1,787,763
----------- ----------- -----------
TOTAL ASSETS $6,315,431 $1,903,816 $7,676,622
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES
ACCOUNTS PAYABLE $1,274,178 $493,173 $1,767,351
NOTES PAYABLE 1,299,000 1,464,000 ($1,114,000)(1) 1,649,000
SHAREHOLDERS LOAN 193,948 9,141 203,089
CURRENT PORTION OF CAPITAL LEASES 69,180 69,180
ACCRUED EXPENSES 387,279 904 388,183
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 3,223,585 1,967,218 4,076,803
LONG TERM LIABILITIES
OLIGATIONS UNDER CAPITIAL LEASE 87,794 - 87,794
----------- ----------- -----------
MINORITY INTEREST - - 515,009(3) 515,009
----------- ----------- -----------
SHAREHOLDER EQUITY:
COMMON STOCK 163,383 49 51 (1) 163,383
(100)(3)
ADDITIONAL PAID-IN CAPITAL 5,886,423 951 1,113,949 (1) 5,886,423
(1,114,900)(3)
RETAINED DEFICIT (3,020,053) (64,402) 64,402 (3) (3,027,089)
(5,002)(4)
(1,562)(5)
(472)(6)
NOTES RECIEVABLE FROM WARRANTS SOLD (25,701) - (25,701)
----------- ----------- -----------
TOTAL SHAREHOLDERS EQUITY 3,004,052 (63,402) 2,997,016
----------- ----------- -----------
TOTAL LIABILITIES & EQUITY $ 6,315,431 $ 1,903,816 $ 7,676,622
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<PAGE>
ELECTRONICS COMMUNICATIONS, CORP.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
PERIOD ENDED MARCH 31, 1996
NOTE 1
To record the sale of 51 shares of stock to Electronics Communications,
Corp. by Threshold Communications, Inc.
NOTE 2
To record investment in Threshold Communications, Inc. by Electronics
Communications, Corp.
NOTE 3
To eliminate investment in subsidiary, write up assets to fair market
value, eliminate equity in subsidiary, and record minority interest in net
assets of subsidiary and goodwill.
NOTE 4
To amortize the additional amount of fair value recognized in a
consolidation for paging carrier agreements. The amount is calculated as
follows:
Excess fair value of asset to be
amortized over a 15 year period $ 300,101
Amount of amortization $ 5,002
NOTE 5
To depreciate the additional amount of fair value recognized in a
consolidation for leasehold improvements. The amount is calculated as
follows:
Excess fair value of asset to be
depreciated over a 40 year period $ 250,000
Amount of depreciation $ 1,562
NOTE 6
To amortize goodwill. The amount is calculated as follows:
Goodwill to be amortized over a 15
year period $ 28,310
Amount of amortization $ 472
<PAGE>
ELECTRONICS COMMUNICATIONS, CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL TCI PRO FORMA ELCC
ELCC PRO FORMA ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C>
Sales $ 8,736,515 $ 2,411,708(1) $ (51,127) $ 11,097,096
Cost of Sales 7,564,094 1,324,675(1) (51,127) 8,837,642
------------- ------------ -------------
Gross Profit 1,172,421 1,087,033 2,259,454
Operating Expenses 3,090,280 825,154 3,915,434
------------- ------------ -------------
Operating Profit (Loss) (1,917,859) 261,879 (1,655,980)
Other Income and Expense
Interest Income 31,234 4,560 35,794
Interest Expense (85,427) (9,185) (94,612)
Depreciation & Amortization (656,907) (252,845)(2) (19,690) (935,692)
(3) (6,250)
------------- ------------ --------------
Total Other Income & Expense (711,100) (257,470) (994,510)
Minority Interest in Loss - 671 (4) (2,046) (1,375)
Provision For Taxes - (904) (904)
------------- ------------ --------------
Net Income (Loss) for Period $ (2,628,959) $ 4,176 $ (2,652,769)
------------- ------------ --------------
------------- ------------ --------------
(Loss) Per Share ($0.81)
Average Shares Outstanding 3,267,657
</TABLE>
<PAGE>
ELECTRONICS COMMUNICATIONS, CORP.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
NOTE 1
To eliminate intercompany sales and corresponding cost of sales.
NOTE 2
To amortize the step up in Basis of the Paging Carrier Agreement. The
amount is calculated as follows:
Fair Value $ 721,364
Book Value (426,014)
---------
Excess of fair value over book value
to be amortized over 15 years
$ 295,350
---------
---------
Amount of amortization in 1995 $ 19,690
---------
---------
NOTE 3
To depreciate the step up in Basis of Leasehold Improvements. The amount
is calculated as follows:
Fair Value $ 250,000
Book Value 0
---------
Excess of fair value over book value
to be depreciated over 40 years $ 250,000
---------
---------
Amount of depreciation in 1995 $ 6,250
---------
---------
NOTE 4
To record minority interest in net income of subsidiary.
<PAGE>
ELECTRONICS COMMUNICATIONS, CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL TCI PRO FORMA ELCC
ELCC PRO FORMA ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C>
Sales $ 2,263,526 $ 579,492(1) $ (28,449) $ 2,814,569
Cost of Sales 1,717,251 381,652(1) (28,449) 2,070,454
------------ ---------- ------------
Gross Profit 546,275 197,840 744,115
Operating Expenses 510,317 232,713 743,030
----------- --------- ------------
Operating Profit (Loss) 35,958 (34,873) 1,085
Other Income and Expense
Interest Income - 2,000 2,000
Interest Expense (23,762) (5) (23,767)
Depreciation & Amortization (10,939) (65,100)(2) (5,002)
(3) (1,562)
(4) (472) (83,075)
Settlement of Potential Lawsuit (73,769) - (73,769)
----------- --------- ------------
Total Other Income & Expense (108,470) (63,105) (178,611)
Minority Interest in Loss - 442 442
----------- --------- -----------
Net Loss for Period $ (72,512) $ (97,536) $ (177,084)
----------- --------- -----------
----------- --------- -----------
(Loss) Per Share ($0.05)
Average Shares Outstanding 3,267,657
</TABLE>
<PAGE>
ELECTRONICS COMMUNICATIONS, CORP.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD ENDED MARCH 31, 1996
NOTE 1
To eliminate intercompany sales and corresponding cost of sales.
NOTE 2
To amortize the additional amount of fair value recognized in a
consolidation for paging carrier agreements. The amount is calculated as
follows:
Excess fair value of asset to be
amortized over a 15 year period $ 300,101
Amount of amortization $ 5,002
NOTE 3
To depreciate the additional amount of fair value recognized in a
consolidation for leasehold improvements. The amount is calculated as
follows:
Excess fair value of asset to be
depreciated over a 40 year period $ 250,000
Amount of depreciation $ 1,562
NOTE 4
To amortize goodwill. The amount is calculated as follows:
Goodwill to be amortized over a 15 year
period $ 28,310
Amount of amortization $ 472
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ELECTRONICS COMMUNICATIONS CORP.
By: /s/ William S. Taylor
-------------------------------
William S. Taylor, CEO, President and
Chairman of the Board
Date: September 30, 1996
