SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 COMMISSION FILE NO. 0-27770
[ ] Transition Report Pursuant to Section 13 or 15 (d) Securities and
Exchange Act of 1934
21ST CENTURY WIRELESS GROUP, INC.
NEVADA 41-1824951
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
406 GATEWAY BOULEVARD, BURNSVILLE, MINNESOTA
55337 (Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 612-890-8800
Check whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES _X_ NO __
Transitional Small Business Disclosure Format (check one): YES __ NO _X_
- --------------------------------------------------------------------------------
<PAGE>
21ST CENTURY WIRELESS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------------- ----------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE $ 748,803 $ 422,645 $ 2,313,450 $ 1,157,621
COST OF REVENUE 320,097 224,723 1,074,163 633,360
----------- ----------- ----------- -----------
GROSS PROFIT 428,706 197,922 1,239,287 524,261
OPERATING EXPENSES
Selling 138,874 84,977 421,234 222,836
General and administrative 379,820 375,987 1,152,307 1,102,685
----------- ----------- ----------- -----------
518,694 460,964 1,573,541 1,325,521
----------- ----------- ----------- -----------
OPERATING LOSS (89,988) (263,042) (334,254) (801,260)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income 320 2,073 2,057 13,679
Interest expense 6,173 (3,871) (10,713) (10,621)
----------- ----------- ----------- -----------
6,493 (1,798) (8,656) 3,058
----------- ----------- ----------- -----------
NET LOSS $ (83,495) $ (264,840) $ (342,910) $ (798,202)
=========== =========== =========== ===========
EBITDA 73,270 (120,166) 151,204 (415,718)
Net loss per share $ (0.02) $ (0.09) $ (0.10) $ (0.26)
Weighted average common shares outstanding 3,765,208 3,015,000 3,486,093 3,015,000
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE>
21ST CENTURY WIRELESS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
ASSETS Sept 30, December 31
1997 1996
----------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 155,763 $ 172,042
Accounts receivable, net of allowance for doubtful
accounts of $28,000 and $30,000 respectively 233,800 127,533
Inventories 345,982 334,626
Prepaid expenses and other 36,248 12,809
----------- -----------
Total current assets 771,793 647,010
----------- -----------
Property and equipment 2,580,141 2,563,137
----------- -----------
Intangible assets, net of accumulated amortization of
$721,494 and $494,994 respectively 4,650,674 4,869,449
----------- -----------
Total assets $ 8,002,608 $ 8,079,596
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of notes payable - related parties $ 233,205 $ 317,020
Current maturities of long-term debt 1,874 4,419
Accounts payable 261,659 493,064
Accrued expenses 94,077 108,234
----------- -----------
Total current liabilities 590,815 922,737
----------- -----------
Long-term liabilities
Notes payable - related parties 239,400 164,767
Long-term debt 74,646 63,347
----------- -----------
314,046 228,114
----------- -----------
Commitments and contingencies -- --
Shareholders equity
Common stock ($0.001 par value, 25,000,000 shares
authorized, 3,918,291 and 3,908,541 issued respectively) 3,918 3,309
Additional paid-in capital 8,603,095 8,053,170
Treasury stock, at cost 10,033 shares (65,424) (26,712)
Accumulated deficit (1,443,932) (1,101,022)
----------- -----------
Total shareholders equity 7,097,657 6,928,745
----------- -----------
Total liabilities and shareholders equity $ 8,002,518 $ 8,079,596
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE>
21ST CENTURY WIRELESS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss (83,495) (264,840) (342,910) (798,202)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 85,650 58,156 256,950 164,936
Amortization 75,450 84,720 226,350 220,606
Changes in operating assets and
liabilities
Accounts receivable (13,903) 19,553 (106,267) (56,291)
Inventories 3,735 (2,312) (11,266) (40,629)
Prepaid expenses and other (7,745) (10) (16,569) 1,464
Accounts payable (20,312) (2,533) (36,485) 114,001
Accrued expenses 10,369 (2,014) (14,157) 60,655
--------- --------- --------- ---------
Net cash provided (used) by operating activities 49,749 (109,280) (44,354) (335,460)
--------- --------- --------- ---------
INVESTING ACTIVITIES
Purchases of property and equipment (74,868) (87,529) (103,069) (359,045)
Cash Advance to related parties -- (33,000) (33,000)
Cash Acquired in the Peacock acquisition -- 5,275 5,275
Expenditures for intangible assets (12,725) (1,881) (7,575) (31,751)
Expenditure for other long term assets (6,870) (2,402) (6,870) (33,484)
--------- --------- --------- ---------
Net cash used by investing activities (94,463) (119,537) (117,514) (450,005)
--------- --------- --------- ---------
FINANCING ACTIVITIES
Proceeds from the exercise of warrants 370,800 39,000 370,800
Net proceeds from issuance of common stock 511,534 511,534
Stock Repurchase (35,712) (26,712) (38,712) (26,712)
Payments on long-term debt and notes payable (46,589) (375) (66,233) (375)
Payment of note payable-related party (300,000) -- (300,000) --
--------- --------- --------- ---------
Net cash provided by financing activities 129,233 343,713 145,589 343,713
--------- --------- --------- ---------
NET DECREASE IN CASH AND
CASH EQUIVALENTS 84,519 114,896 (16,279) (441,752)
CASH AND CASH EQUIVALENTS
Beginning of period 71,244 207,164 172,042 763,822
--------- --------- --------- ---------
End of period $ 155,763 $ 322,060 $ 155,763 $ 322,070
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
In the opinion of management these unaudited interim condensed consolidated
financial statements reflect all normal recurring adjustments necessary for
a fair presentation of the financial position, results of operations and
cash flows for the interim periods. The results of operations for any
interim period are not necessarily indicative of the results to be expected
for the full year. For further information, refer to the consolidated
financial statements and notes included in the Company's annual report on
Form 10-KSB for the year ended December 31, 1996.
2. Property and Equipment
Property and Equipment consist of the following:
September 30 December 31,
1997 1996
---------- ----------
Land $ 62,410 $ 62,410
Building 141,426 141,426
Transmission equipment 2,935,955 2,674,164
Office furniture and equipment 119,319 107,056
---------- ----------
3,259,110 2,985,056
Less accumulated depreciation 678,989 421,919
---------- ----------
$2,580,121 $2,563,137
========== ==========
3. Capital
A. Primary earnings per share is determined by dividing the net loss by the
weighted average number of shares of common stock outstanding and dilutive
common equivalent shares from stock options and warrants. The Company
issued 9,750 shares of common stock during the nine months ended September
30, 1997 to existing shareholders that exercised warrants at a price of
$4.00 per share.
B. On September 16, 1996, the Company declared a 3 for 2 split of the
Company's common stock for shareholders of record on that date. All share
data has been adjusted to reflect the stock split.
C. On July 9, 1997, the Company completed a transaction with a group of
private investors. The investors purchased 600,000 shares of common stock
of the Company at a purchase price of $1.00 per share. The investors also
received warrants to purchase another 800,000 shares of common stock of the
Company at a purchase price of $1.00 per share. The warrants are
exercisable for a period of 5 years.
<PAGE>
ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
REVENUE
The Company derives its revenue from fees charged for the use of its radio
transmission equipment and from the sale and servicing of Specialized Mobile
Radio (SMR) and paging equipment.
Revenue for the nine months and three months ended September 30, 1997 was
$2,313,450 and $748,803 compared to $1,157,621 and $422,645 for the same periods
last year, an increase of 100% and 77% respectively. The Company operated from
locations in the Twin Cities and Southern Minnesota (SMC) for the entire year
1996 and added Southern Operations in the Greater Memphis area through the
acquisition of Peacock's Radio and Wild's Computer Services (Peacock) effective
September 1, 1996 and Currie Communications (Currie) effective October 10, 1996.
The Peacock and Currie businesses have subsequently been merged together to form
the Southern Operations of 21st CENTURY WIRELESS GROUP, INC.
The results of Peacock have been included in the consolidated results of 21st
CENTURY WIRELESS GROUP, INC. for the month of September 1996 and all subsequent
periods. The results of Currie are included only in the 1997 results. On a
comparable basis, revenue from the businesses in Minnesota increased by 15% from
the nine-month period of 1996 due primarily to an increase in the number of
subscriber units loaded on the system.
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 and pagers sold
to customers, and service labor and parts.
Cost of revenue for the nine months and three months ended September 30, 1997
was $1,074,163 and $320,097 compared to $633,360 and $224,723 for the same
periods last year. The increase was due to the addition of the Southern
Operations and the variable cost associated with additional sales and service
revenue in Southern Minnesota. The cost structure of an airtime provider is
essentially fixed and consists of rent, power, and utilities at a tower site.
The cost structure of the retail sales and service operation is more variable
than an airtime provider, with the cost of revenue consisting of the products
that are re-sold.
The gross profit percentage for the nine months and three months ended September
30, 1997, was 54% and 57% compared to 45% and 47% for the same period last year.
The gross profit percentage for 1997 has increased due to the growth in
recurring revenue as a result of the increased number of radios loaded on the
Company's system.
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") for the nine months and
three months ended September 30, 1997 were $1,574,000 and $519,000 compared to
$1,326,000 and $461,000 for the same periods last year. The increase from last
year is due in part to the addition of the Peacock and Currie operations
($268,000) and increased depreciation and amortization expense ($118,000) due to
property additions throughout 1996 and revaluation of the assets acquired from
the predecessor company as a result of the settlement with the promoters of the
predecessor company. Included in the SG&A expense for the first quarter of 1996
were costs due to professional fees needed to support the Company's acquisition
strategy, business filing with the SEC, and the class action law-suit against
the promoters of the predecessor Company of approximately $150,000.
NET LOSS, EBITDA
For the nine months and three months ended September 30, 1997, the net loss of
$339,000 and $82,000 compared to $798,000 and $265,000 for the same periods last
year. Loss per share for the nine months improved by $0.16 from the same period
last year. The improvements are due to higher revenues and improved margins, as
discussed above.
Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) for the
nine months and three months ended September 30, 1997 was $151,000 and $73,000
compared to ($416,000) and ($120,000) for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
On July 9, 1997, the Company completed a transaction with a group of private
investors. The investors purchased 600,000 shares of common stock of the Company
at a purchase price of $1.00 per share. The investors also received warrants to
purchase another 800,000 shares of common stock of the Company at a purchase
price of $1.00 per share. The warrants are exercisable for a period of 5 years.
Also on On July 9, 1997, the Company completed the purchase of certain assets of
Alan M. Hansel and Southern Minnesota Communications, Inc. The Company
originally entered into a contract for this purchase on February 9, 1996 but
renegotiated the terms of the purchase. $300,000 of the proceeds from the sale
of stock to new investors was used to pay all of the current installments of the
purchase agreement with Mr. Hansel. The Company owes Mr. Hansel $399,400 under
the purchase agreement to be paid in three installments over the next two years.
At September 30, 1997 working capital was $182,000. The Company had negative
working capital of $276,000 at December 31, 1996.
<PAGE>
Included in the current liabilities at September 30, 1997 and December 31, 1996
was $223,000and $511,000 respectively of seller financed debt from the previous
owners of SMC and Currie, including $195,000 in accounts payable at December 31,
1996.
During the nine month period ended September 30, 1997 the Company offered its'
existing shareholders an opportunity to exercise their stock warrants. This was
the second offer of this nature in the past twelve months. The Company issued
9,750 shares of common stock and raised $39,000 in cash.
Cash flow from operations for the nine months and three months ended September
30, 1997 was ($44,000) and $35,000 compared to cash flow used of $333,000 and
$109,000 for the same periods last year.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material or pending or threatened legal, governmental,
administrative or other proceedings which the Company is party or of which its
property is subject.
ITEM 2. CHANGES IN SECURITIES
There have been no changes made to the rights of the holders of the
Company's common stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There have been no defaults.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the period
covered by this report.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON EXHIBIT 8K
A. None required.
B. On August 13, 1997, the Company filed a report on Exhibit 8K to
disclose the following matters:
<PAGE>
1) Completion of a stock subscription agreement with new
investors;
2) Final closing of the asset purchase agreement with Alan M.
Hansel and Southern Minnesota Communications, Inc;
3) The resignation of four members of the Company's board of
directors and
4) The appointment of three new members to the board of
directors.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
21ST CENTURY WIRELESS GROUP, INC.
Dated: November 14, 1997 By: /s/ Rodney H. Hutt
Rodney H. Hutt
President, Chief Operating Officer and Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 155,763
<SECURITIES> 0
<RECEIVABLES> 261,800
<ALLOWANCES> (28,000)
<INVENTORY> 345,982
<CURRENT-ASSETS> 771,793
<PP&E> 3,259,110
<DEPRECIATION> (678,989)
<TOTAL-ASSETS> 8,002,608
<CURRENT-LIABILITIES> 590,815
<BONDS> 0
0
0
<COMMON> 3,918
<OTHER-SE> 7,093,739
<TOTAL-LIABILITY-AND-EQUITY> 8,002,518
<SALES> 873,700
<TOTAL-REVENUES> 2,313,450
<CGS> 560,900
<TOTAL-COSTS> 1,074,163
<OTHER-EXPENSES> 1,573,541
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,875
<INCOME-PRETAX> (339,129)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (339,129)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
