21ST CENTURY WIRELESS GROUP, INC.
CONDENSED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
ASSETS June 30 December 31
1996 1995
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 207,164 $ 763,822
Accounts receivable, net of allowance for doubtful
accounts of $4,930 105,479 29,635
Inventories 61,182 22,864
Prepaid expenses and other 6,997 8,461
----------- -----------
TOTAL CURRENT ASSETS 380,822 824,782
----------- -----------
Property and equipment 1,963,249 963,524
----------- -----------
Other assets:
Intangible assets, net of accumulated amortization
of $391,100 and $292,934, respectively 3,700,740 2,992,380
Prepaid acquisition and other 127,368 168,041
----------- -----------
3,828,108 3,160,421
----------- ----------
$ 6,172,179 $4,948,727
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 187,679 $ 71,145
Current maturities of long term debt 150,000 --
Accrued compensation 55,000 388,875
Accrued expenses - other 13,501 5,830
----------- -----------
Total current liabilities 406,180 465,850
----------- -----------
Long term debt, net of current maturities 300,000 --
Commitments and contingencies
Equity:
Partnership capital -- 4,482,877
Common stock ($0.001 par value, 25,000,000 shares --
authorized, 2,010,000 issued) 2,010 --
Additional paid-in capital 5,997,352 --
Accumulated deficit (533,363) --
----------- ----------
5,465,999 4,482,877
----------- ----------
6,172,179 4,948,727
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements
21ST CENTURY WIRELESS GROUP, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------------ ------------------------------
1996 1995 1996 1995
-------------- -------------- -------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUE $ 455,613 $ 138,492 $ 734,976 $ 236,479
COST OF REVENUE 244,300 91,605 408,637 111,195
----------- ----------- ----------- -----------
GROSS PROFIT 211,312 46,887 326,338 125,284
OPERATING EXPENSES
Selling 91,583 15,243 137,859 35,743
General and administrative 350,229 215,560 726,698 414,716
Partnership management fees -- 24,616 -- 63,441
----------- ----------- ----------- -----------
441,812 255,419 864,557 13,900
----------- ----------- ----------- -----------
OPERATING LOSS (230,500) (208,532) (538,219) (388,616)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest Income 4,392 30,011 11,606 34,544
Interest Expense (3,375) -- (6,750) --
Legal Fees -- (52,203) -- (99,413)
Restructuring Expenses -- (1,013) -- (26,541)
----------- ----------- ----------- -----------
1,017 (23,205) 4,856 (91,410)
----------- ----------- ----------- -----------
Net Loss (229,483) (231,737) (533,363) (480,026)
=========== =========== =========== ===========
Net loss per share $(0.11) $(0.14) $(0.27) $(0.29)
Weighted average common shares outstanding 2,010,000 1,650,000 2,010,000 1,650,000
</TABLE>
21ST CENTURY WIRELESS GROUP, INC.
STATEMENT OF CHANGES IN EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Partnership Shares Paid-in Accumulated
Capital Issued Amount Capital Deficit Equity
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE December 31, 1995 $ 4,482,877 -- $ -- $ -- $ -- $ 4,482,877
Conversion of partnership
capital to common stock (4,482,877) 1,650,000 1,650 4,481,227 -- --
Issuance of common stock for
accrued compensation to directors -- 159,000 159 388,716 -- 388,875
Net loss for the six months
ended June 30, 1996 -- -- -- -- (533,363) (533,363)
Issuance of common stock for
the acquisition of SMC 201,000 201 1,127,409 -- 1,127,610
------- --------- ----------- ----------- ----------- -----------
BALANCE June 30, 1996 $ -- 2,010,000 $ 2,010 $ 5,997,352 $ (533,363) $ 5,465,999
======= ========= =========== =========== =========== ===========
</TABLE>
21ST CENTURY WIRELESS GROUP, INC.
COMBINED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
-----------------------
1996 1995
--------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss (533,363) (480,026)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 106,780 61,500
Amortization 135,886 90,000
Changes in operating assets and
liabilities
Accounts receivable (75,844) (7,392)
Inventories (38,317) --
Prepaid expenses and other 1,464 9,630
Accounts payable 116,534 (24,589)
Accrued compensation 55,000 32,000
Accrued expenses -other 7,670 3,856
---------- ----------
Net cash used by operating activities (224,190) (315,021)
---------- ----------
INVESTING ACTIVITIES
Purchases of property and equipment (271,516) (214,867)
Proceeds from the sale of property
and equipment
Expenditures for intangible assets (29,870) --
Expenditures for prepaid acquisition -- --
costs and other (31,082) --
---------- ----------
Net cash used by investing activities (332,468) (214,867)
---------- ----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (556,658) (529,888)
CASH AND CASH EQUIVALENTS
Beginning of period 763,822 1,692,888
---------- ----------
End of period 207,164 1,163,000
========== ==========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
During the six months ended June 30, 1996, the Company issued stock as payment
for accrued compensation totaling $388,875.
Effective January 1, 1996, the Company issued 201,000 shares of its common stock
and $450,000 in notes payable to Alan Hansel and Southern Minnesota
Communications ("SMC") for substantially all of SMC's Specialized Mobile Radio
equipment and licenses valued at $1,649,365.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unuadited)
1. Basis of Presentation
The interim condensed financial statements are unaudited, but in the
opinion of management reflect all normal recurring adjustments necessary
for a fair presentation of the results of operations, financial position
and cash flows for the interim periods. The results of operations for any
interim period are not necessarily indicative of the results for the full
year. These financial statements should be read in conjunction with Form
10-SB.
2. Acquisition -
Effective January 1, 1996, the Company acquired certain assets of Alan M.
Hansel d/b/a SMC for $1,649,365 as follows:
Cash $ 50,000
Notes payable 450,000
Common stock 1,127,610
Additional costs of acquisition 21,755
----------
$1,649,365
==========
This acquisition was accounted for as a purchase and, accordingly, the
statement of operations includes the results of operations of SMC since the
acquisition. The purchase price was allocated to the assets acquired based
on the estimated fair market values at the date of acquisition as follows:
Property and equipment $ 834,989
FCC licenses 814,376
----------
$1,649,365
==========
3. Property and Equipment
Property and Equipment consist of the following:
June 30, December 31,
1996 1995
------------- ----------
Land $ 32,410 $ 12,000
Transmission equipment 2,062,609 1,042,122
Office furniture and equipment 142,920 77,312
------------- ----------
2,237,939 1,131,434
Less accumulated depreciation 274,690 167,910
------------- ----------
$ 1,963,249 $ 963,524
============= ==========
4. Loss per share
The loss per share calculation is based on the weighted average number of
common shares issued by the Company. The Company was a partnership
throughout 1995 and the weighted average number of common shares represents
the number of shares that were issued in exchange for the partnership
units.
5. Letters of Intent
Subsequent to June 30, 1996 the Company signed letters of intent with two
companies to acquire additional licenses and other business assets to
expand the current market segment of the Company. The agreements call for
the Company to pay approximately $7,000,000 in stock and cash contingent on
the Company's successful completion of a stock offering.
ITEM 6 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
REVENUE
The Company derives its revenue from fees charged for the use of its radio
transmission equipment and for the sale and servicing of Land Mobile Radio (LMR)
and paging equipment.
Revenue for the three months and six months ended June 30, 1996 was $456,000 and
$735,000 compared to $138,000 and $236,000 for the same periods of 1995.
The Company operated from locations in the Twin Cities area in 1995 and added
the operation of Southern Minnesota Communications (SMC) through an acquisition,
effective January 1, 1996. The results of SMC are included from January 1,
1996. Revenue from the Twin Cities locations increased by 35% from the first six
months of 1995 due to an increase in the number of subscribers.
During the first half of 1996, the Company added additional sites and has signed
over 700 new subscriber units which will result in additional air-time revenues
in the third quarter.
COST OF REVENUE
The cost of revenue is comprised of site rental, maintenance, and utilities for
the Company's transmission equipment, cost of land mobile radios sold to
customers, and service labor and parts.
Cost of revenue for the three months and six months ended June 30, 1996, was
$244,000 and $409,000 compared to $92,000 and $111,000 for the same periods of
1995. The increase was due to the addition of the sales and service operation of
SMC and the variable nature of the costs related to additional revenue.
The gross profit percentage for the three months and six months ended June 30,
1996, was 46% and 44% compared to 34% and 53% for the same periods last year.
The percentage in the second quarter of 1995 was lower due to the timing of
certain costs. The six month gross profit percentage is lower reflecting the
inclusion of the retail radio sales and service operation of SMC. Retail sales
of major manufacturers' radios result in lower margins than sales of service and
air-time.
The Company believes that as it expands, future sales will be a combination of
air-time and retail radio sales and service, and that the gross profit
percentage realized in 1996 will be more indicative of the future.
OPERATING EXPENSES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months and six months
ended June 30, 1996 were $442,000 and $865,000 and $255,000 and $514,000 for the
same periods last year, due to the addition of the SMC operations and
professional fees needed to support the company's acquisition strategy and
business registration with the SEC.
The Company has added a full time CFO, which should help reduce professional
fees by having expertise on staff. In addition, it is the Company's objective to
minimize S,G&A expenses through the elimination of redundancy as acquisitions
are finalized.
LEGAL FEES AND RESTRUCTURING EXPENSES
Legal fees and restructuring charges in the first half of 1995 are one-time
costs associated with the restructuring of the Company.
NET LOSS
For the six months ended June 30, 1996, net loss of $533,000 was slightly more
than the same period of last year. Loss per share improved by $0.02. The Company
was operating as a partnership in 1995 and the number of shares was imputed
reflecting the number of shares issued in exchange for partnership units.
For the three months ended June 30,1996, net loss was $2,000 less than the
same period last year and the loss per share of $0.11 was $0.03 better than the
second quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had current assets of $381,000 compared to
$825,000 at December 31, 1995. The change was due to $557,000 negative cash
flow, resulting from $224,000 negative cash flow from operations and $332,000
payments on acquisitions.
The Company is currently pursuing additional financing options (including a
stock offering) to enable it to continue to grow. Until such financing is
attained, the Company will control expenditures and defer any unnecessary
capital spending.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 207,164
<SECURITIES> 0
<RECEIVABLES> 110,409
<ALLOWANCES> (4,930)
<INVENTORY> 61,182
<CURRENT-ASSETS> 380,822
<PP&E> 2,237,939
<DEPRECIATION> (274,690)
<TOTAL-ASSETS> 6,172,179
<CURRENT-LIABILITIES> 406,180
<BONDS> 300,000
0
0
<COMMON> 2,010
<OTHER-SE> 5,463,989
<TOTAL-LIABILITY-AND-EQUITY> 6,172,179
<SALES> 209,608
<TOTAL-REVENUES> 734,976
<CGS> 130,679
<TOTAL-COSTS> 408,637
<OTHER-EXPENSES> 864,557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,856)
<INCOME-PRETAX> (533,363)
<INCOME-TAX> 0
<INCOME-CONTINUING> (533,363)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (533,363)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
