<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K / A-2
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.
--------------------------------
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 ID NO.
INCORPORATION OR ORGANIZATION
10 PLOG ROAD, FAIRFIELD, NEW JERSEY 07004
-----------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 808-8862
---------------
4 MADISON ROAD, FAIRFIELD, NEW JERSEY 07004
-------------------------------------------
(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 offer 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
TCI - Unaudited Financial Statement for the period ended
June 30, 1996
GCE - Unaudited Financial Statement for the year ended
December 31, 1995
2
<PAGE>
GCE - Unaudited Financial Statement for the period ended
March 21, 1996
GTA - Unaudited Financial Statement for the year ended
December 31, 1995
GTA - Unaudited Financial Statement for the period ended
March 21, 1996
Pro forma Consolidated Statement of Operations for period ended
September 30, 1996
The consolidated September 30, 1996 and June 30, 1996 financial statements
filed as part of the Form 10-QSB for the respective periods include the
historical balance sheets of the Company, Threshold Communications, Inc. ("TCI")
and General Towers of America, Inc. ("GTA"). On March 22, 1996, TCI acquired
substantially all of the assets of General Communicants and Electronics, Inc.
("GCE") for $1,420,529 with the assumption of liabilities in the amount of
$469,746. 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 historical March 21, 1996 financial statements of GTA and
GCE include the statements of operations from January 1, 1996 through the date
of sale (March 22, 1996). The June 30, 1996 TCI historical financial statements
include the operating activity of GTA and GCE from the date of acquisitions
through June 30, 1996. The Company's September 30, 1996 historical consolidated
financial statements filed as part of the Form 10-QSB for this period include
the operating activity of TCI from the date of Acquisition (June 28, 1996)
through September 30, 1996.
The pro forma statements below reflect the acquisition in a two part
process. The first part accounts for TCI's acquisition of GTA and certain
assets of GCE as if it had occurred on January 1 for each of the years
presented. The second step accounts for the Company's acquisition of TCI (using
the pro forma information described above), as if it had occurred on January 1
for each of the years presented.
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 acquisitions 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
3
<PAGE>
Company would actually have been if all the acquisitions and related
transactions has 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.
4
<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
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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
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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
------------
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
Additional 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 AND BASIS OF PRESENTATION
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.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for financial
information and with the instructions to Form 10-KSB and Article 10 of
Regulation S-X. In the opinion of management all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included.
(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.
4
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 2 - ACQUISITION - (Continued)
The following unaudited pro forma combined the results of operations for the
year ended December 31, 1995 accounts for the acquisitions described above and
in Note 10 as if it occurred on January 1, 1995. The pro forma results give
affect to the amortization of goodwill.
Unaudited Pro Forma
Combined Results of Operations
Year Ended
December 31, 1995
-----------------
Sales $2,441,708
Net Earnings (1,100)
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 - 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.
5
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THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
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
-------
-------
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.
6
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
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.
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,
Balance Sheet
June 30, 1996
(Unaudited)
Assets
Current Assets
Cash $ 16,489
Loans Receivable 106,560
Accounts Receivable 274,903
Inventory 71,230
Prepaid Expenses 11,666
------------
Total Current Assets 480,848
------------
Equipment
Equipment 614,545
Furniture & Fixtures 20,000
Auto & Trucks 32,000
Accumulated Depreciation (84,590)
------------
Net Equipment 581,955
------------
Other Assets
Security Deposits 22,542
Goodwill 20,647
Organization Costs 1,036
Paging Carrier Agreement 695,258
Accumulated Amortization (15,764)
------------
Total Other Assets 723,719
------------
Total Assets $ 1,786,522
------------
------------
Liabilities and Stockholder's Equity
Current Liabilities
Accounts Payable $ 292,642
Customer Deposits 38,742
Sales and Income Taxes Payable 5,131
Note Payable 454,080
------------
Total Current Liabilities 790,595
------------
Long Term Liabilities
Notes Payable-Stockholder 9,141
------------
Total Long Term Liabilities 9,141
------------
Minority Interest (25,077)
Stockholder's Equity
Common Stock, par value $1 per share,1000 shares
authorized, 100 shares issued and outstanding 100
Additional Paid-In Capital 1,114,900
Retained Deficit (103,137)
------------
Total Stockholder's Equity 1,011,863
------------
Total Liabilities and Stockholder's Equity $ 1,786,522
------------
------------
1
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THRESHOLD COMMUNICATIONS, INC.
Statement of Operations and Retained Deficit
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
<S> <C> <C>
Sales $ 616,538 $ 752,863
Cost of Sales 300,092 424,686
----------------- -----------------
Gross Profit 316,446 328,177
Expenses 307,050 344,301
----------------- -----------------
Operating Loss Before Other Income,
Expenses and Income Taxes 9,396 (16,124)
----------------- -----------------
Other Income and Expenses
Interest Income - 2,000
Depreciation 1,838 30,560
Amortization 350 3,189
Interest Expense 54,967 54,972
----------------- -----------------
Total Other Income and Expenses (57,155) (86,721)
----------------- -----------------
Minority Interest in Loss of Consolidated
Subsidiaries 9,024 9,024
----------------- -----------------
Net Loss (38,735) (93,821)
Retained Earnings, Beginning of Period (64,402) (9,316)
----------------- -----------------
Retained Deficit, End of Period $ (103,137) $ (103,137)
----------------- -----------------
----------------- -----------------
</TABLE>
2
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THRESHOLD COMMUNICATIONS, INC.
Statement of Cash Flows
For the Period Ending June 30, 1996
(Unaudited)
Cash Flows from Operating Activities
Net Loss $ (93,821)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operations:
Depreciation and Amortization 33,749
Minority Interest in Loss (9,024)
Changes in:
Accounts Receivable (274,903)
Prepaid Expense (11,666)
Inventory (71,230)
Accounts Payable 292,642
Customer Deposits 38,742
Sales and Income Taxes Payable 5,131
----------
Total Adjustments 3,441
----------
Net Cash Provided By Operating Activities (90,380)
Cash Flows From Investing Activities
Loan Receivable (2,000)
Security Deposits (22,542)
Goodwill (20,647)
Organization Costs (1,036)
Paging Carrier Agreement (392,617)
Additions to Equipment (474,796)
----------
Net Cash Used By Investing Activities (913,638)
Cash Flows From Financing Activities
Net Proceeds of Shareholder Loans 2,098
Payments of Loan Payable (95,920)
Sale of Common Stock 1,114,000
----------
Net Cash Provided by Financing Activities 1,020,178
----------
Net Increase in Cash 16,160
Cash, Beginning of Period 329
----------
Cash, End of Period $ 16,489
----------
----------
3
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS ACTIVITY AND BASIS OF PRESENTATION
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.
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 six months ended June
30, 1996 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1996.
(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 June 30, 1996
was $ 30,560.
(D) PAGING LICENSES
This intangible asset is being amortized over a fifteen year period.
Amortization expense charged to operations for the period ending June 30, 1996
was $ 3,189.
(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.
4
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
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.
The following unaudited pro forma combined results of operations for the six
months ended for June 30, 1996 accounts for the acquisitions described above as
if it occurred on January 1, 1996.
Unaudited Consolidated Pro Forma
Results of Operations
Six Months Ended
June 30, 1996
-------------
Sales 1,196,630
Net Earnings (136,271)
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
5
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4 - LOAN PAYABLE - (Continued)
definitive agreement to acquire or invest in the Company. The Company has
borrowed $550,000 for the period ending June 30, 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.
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.
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 June 30, 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 June 30, 1996, the Company held no investment
securities covered by this statement.
6
<PAGE>
THRESHOLD COMMUNICATIONS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 7 - OPERATING LEASE
The Company leases a radio paging transmission facility. Minimum future lease
payments under the capital lease at June 30, 1996 and for each of the next five
years are:
1996 $4,194
1997 $8,388
1998 $8,660
1999 $8,854
2000 $3,689
-------
Total Minimum Lease Payments: $33,785
-------
-------
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.
7
<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
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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.
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.
(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.
4
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
(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.
(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.
5
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
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
-------
-------
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.
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.
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 period ended March
21, 1996 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1996.
(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.
4
<PAGE>
GENERAL COMMUNICATIONS ELECTRONICS CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
(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.
(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 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 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.
5
<PAGE>
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
-------
-------
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 TOWER 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 Receivable 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.
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.
(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.
4
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
(G) 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.
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.
5
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
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.
6
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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
-----------
-----------
<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.
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 period ended March
21, 1996 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1996.
(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.
4
<PAGE>
GENERAL TOWERS OF AMERICA, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(CONTINUED)
(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.
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>
ELECTRONICS COMMUNICATIONS, CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Period Ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL TCI PRO FORMA ELCC
ELCC PRO FORMA ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C> <C>
Sales $ 6,393,442 $ 1,196,030 (2) $ (60,666) $ 7,528,806
Cost of Sales 5,138,003 681,744 (2) (60,666) 5,759,081
-------------- -------------- --------------
Gross Profit 1,255,439 514,286 1,769,725
Operating Expenses 4,109,699 536,924 4,646,623
-------------- -------------- --------------
Operating Profit (Loss) (2,854,260) (22,638) (2,876,898)
Other Income and Expense
Interest Income 16,600 2,000 18,600
Interest Expense (131,064) (54,972) (186,036)
Depreciation & Amortization (76,129) (70,127) (3) (10,004)
(4) (3,124)
(5) (1,595) (160,979)
Settlement of Potential Lawsuit (73,769) - (73,769)
-------------- -------------- --------------
Total Other Income & Expense (264,362) (123,099) (402,184)
Minority Interest in Loss 15,254 9,466 24,720
-------------- -------------- --------------
Net Loss for Period $ (3,103,368) $ (136,271) $ (3,254,362)
-------------- -------------- --------------
-------------- -------------- --------------
(Loss) Common Share
Primary ($0.69)
Fully Diluted ($0.57)
Average Shares Outstanding
Primary 4,711,574
Fully Diluted 5,722,563
</TABLE>
<PAGE>
ELECTRONICS COMMUNICATIONS, CORP.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD ENDED SEPTEMBER 30, 1996
NOTE 1
The pro forma TCI information represents activity through June 30, 1996.
All subsequent activity is included in the historical Consolidated
Electronics Communications Corporation Financial Statements.
NOTE 2
To eliminate intercompany sales and corresponding cost of sales.
NOTE 3
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 $ 10,004
NOTE 4
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 $ 3,124
NOTE 5
To amortize goodwill. The amount is calculated as follows:
Goodwill to be amortized over a 15 year
period $ 47,850
Amount of amortization $ 1,595
<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: January 29, 1997
