Exhibit 99.1
CAUTIONARY STATEMENTS
Certain statements in this quarterly report on Form 10-Q 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 "believe",
"expect", "anticipate", "intend" and "plan" 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 November 6, 1998, the Company had 33,771,952 shares of Common Stock
outstanding. In addition, 3,753,472 shares are reserved for issuance in exchange
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for the exchangeable shares of Commstar Limited and in exchange for certain
exchangeable shares to be issued by ACT-GFX Canada, Inc., a wholly-owned
subsidiary of the Company. Since January 1, 1998, the Company has issued or
reserved an aggregate of 17,132,018 shares of Common Stock, of which 11,953,749
shares of Common Stock were issued in acquisitions, 3,753,472 shares of Common
Stock are reserved for issuance upon exchange or redemption of exchangeable
shares issued in acquisitions, 850,000 shares of Common Stock were issued upon
the exercise of warrants, 100,000 shares of Common Stock were sold to an officer
of the Company, and 474,797 shares were issued for services rendered, including
services under employment agreements and employee bonuses.
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.
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 shareholder approval, the holders of which may have preferences as to
payment of dividends.
Potential Conflicts of Interests
Mr. Richard Sullivan, the Chairman and 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 have, in the past, conducted
business with the Company, and received 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.
Since July 1, 1998, the Company has ceased doing business with Great Bay
Technology, Inc. and the Bay Group.
Possible Volatility of Stock Price
The Common Stock is quoted on the Nasdaq National 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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