Exhibit 99
CAUTIONARY STATEMENTS
Certain statements in this annual report on Form 10-K of Applied Cellular
Technology, Inc. (the "Company"), and the documents incorporated by reference
herein, constitute "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of
1934 and the Private Securities Litigation Reform Act of 1995, and the Company
intends that such forward-looking statements be subject to the safe harbors
created thereby. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
the continued ability of the Company to sustain its growth through product
development and business acquisitions; the successful completion and integration
of future acquisitions; the ability to hire and retain key personnel; the
continued development of the Company's technical, manufacturing, sales,
marketing and management capabilities; relationships with and dependence on
third-party suppliers; anticipated competition; uncertainties relating to
economic conditions where the Company operates; uncertainties relating to
government and regulatory policies; uncertainties relating to customer plans and
commitments; rapid technological developments and obsolescence in the industries
in which the Company operates and competes; potential performance issues with
suppliers and customers; governmental export and import policies; global trade
policies; worldwide political stability and economic growth; the highly
competitive environment in which the Company operates; potential entry of new,
well-capitalized competitors into the Company's markets; changes in the
Company's capital structure and cost of capital; and uncertainties inherent in
international operations and foreign currency fluctuations. The words
"believes," "expects," "anticipates," "intends" and "plans" and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date the statement was made.
RISK FACTORS
In addition to the other information contained herein, the following
factors should be considered carefully in evaluating the Company and its
business.
Uncertainty of Future Financial Results
While the Company has been profitable for the last three fiscal years,
future financial results are uncertain. There can be no assurance that the
Company will continue to be operated in a profitable manner. Profitability
depends upon many factors, including the success of the Company's various
marketing programs, the maintenance or reduction of expense levels and the
ability of the Company to successfully coordinate the efforts of the different
segments of its business.
Future Sales of and Market for the Shares
As of March 20,1998, the Company had 22,187,960 shares of Common Stock
outstanding. Since January 1, 1998, the Company has issued an aggregate of
1,515,537 shares of common stock, of which 1,487,411 shares were issued in
acquisitions and 28,126 shares were issued for services rendered.
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Management of the Company anticipates that the Company will continue to
effect acquisitions and contract for certain services primarily through the
issuance of Common Stock or other equity securities of the Company. Such
issuance's of additional securities may be viewed as being dilutive of the value
of the Common Stock in certain circumstances and may have an adverse impact on
the market price of the Common Stock.
Risks Associated with Acquisitions and Expansion
The Company has engaged in a continuing program of acquisitions of other
businesses which are considered to be complementary to the lines of business
carried on by the Company, and it is anticipated that such acquisitions will
continue to occur. As of December 31, 1997, the total assets of the Company were
approximately $61 million. As of December 31, 1996, the total assets of the
Company were approximately $33 million, compared to approximately $4 million at
the end of 1995. Net operating revenues for 1997 were approximately $103
million. Net operating revenues for 1996 were approximately $20 million,
compared with $2.3 million in 1995. Managing these dramatic changes in the scope
of the business of the Company will present ongoing challenges to management,
and there can be no assurance that the Company's operations as currently
structured, or as affected by future acquisitions, will be successful. The
businesses acquired by the Company may require substantial additional capital,
and there can be no assurance as to the availability of such capital when
needed, nor as to the terms on which such capital might be made available to the
Company. It is the Company's policy to retain existing management of acquired
companies and to allow the new subsidiary to continue to operate in the manner
which has resulted in its success in the past, under the overall supervision of
senior management of the Company. Accordingly, the success of the operations of
these subsidiaries will depend, to a great extent, on the continued efforts of
the management of the acquired companies.
Competition
Each segment of the Company's business is highly competitive, and it is
expected that competitive pressures will continue. Many of the Company's
competitors have far greater financial and other resources than the Company. The
areas which the Company has identified for continued growth and expansion are
also target market segments for some of the largest and most strongly
capitalized companies in the United States. There can be no assurance that the
Company will have the financial, technical, marketing and other resources
required to compete successfully in this environment in the future.
Dependence on Key Individuals
The future success of the Company is highly dependent upon the Company's
ability to attract and retain qualified key employees. The Company is organized
with a small senior management team, with each of its separate operations under
the day-to-day control of local managers. If the Company were to lose the
services of any members of its central management team, the overall operations
of the Company could be adversely affected, and the operations of any of the
individual facilities of the Company could be adversely affected if the services
of the local managers should be unavailable.
10-K Page 73
Lack of Dividends on Common Stock; Issuance of Preferred Stock
The Company does not have a history of paying dividends on its Common
Stock, and there can be no assurance that such dividends will be paid in the
foreseeable future. The Company intends to use any earnings which may be
generated to finance the growth of the Company's businesses. The Board of
Directors has the right to authorize the issuance of preferred stock, without
further stockholder approval, the holders of which may have preferences as to
payment of dividends.
Potential Conflicts of Interests
Mr. Richard Sullivan, the Chief Executive Officer of the Company, is also
Chairman of Great Bay Technology, Inc. and Managing General Partner of the Bay
Group. Both these companies conduct business with the Company, and receive
compensation from the Company for various services, including assistance in
identifying potential acquisition candidates and in negotiating acquisition
transactions. The relationships among such companies, Mr. Sullivan and the
Company may involve conflicts of interest.
Possible Volatility of Stock Price
The Common Stock is quoted on the Nasdaq Small-Cap Market, which stock
market has experienced and is likely to experience in the future significant
price and volume fluctuations which could adversely affect the market price of
the Common Stock without regard to the operating performance of the Company. In
addition, the Company believes that factors such as the significant changes to
the business of the Company resulting from continued acquisitions and
expansions, quarterly fluctuations in the financial results of the Company,
shortfalls in earnings or sales below analyst expectations, changes in the
performance of other companies in the same market sectors as the Company and the
performance of the overall economy and the financial markets could cause the
price of the Common Stock to fluctuate substantially.
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