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 MARCH 31, 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
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
21ST CENTURY WIRELESS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS March 31 December 31
1997 1996
----------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 149,204 $ 172,042
Accounts receivable, net of allowance for doubtful
accounts of $30,000 234,199 127,533
Inventories 333,306 334,626
Prepaid expenses and other 9,103 12,809
----------- -----------
TOTAL CURRENT ASSETS 725,812 647,010
----------- -----------
Property and equipment 2,483,735 2,563,137
----------- -----------
Intangible assets, net of accumulated amortization of
$570,444 and $494,994 respectively 4,793,999 4,869,449
=========== ===========
$ 8,003,546 $ 8,079,596
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of notes payable - related parties $ 306,528 $ 317,020
Current maturities of long-term debt 3,855 4,419
Accounts payable 520,298 493,064
Accrued expenses 130,366 108,234
----------- -----------
Total current liabilities 961,047 922,737
----------- -----------
Long-term liabilities
Notes payable - related parties 164,767 164,767
Long-term debt 63,347 63,347
----------- -----------
228,114 228,114
----------- -----------
Commitments and contingencies -- --
Shareholders equity
Common stock ($0.001 par value, 25,000,000 shares
authorized, 3,318,291 and 3,308,541 issued respectively) 3,318 3,309
Additional paid-in capital 8,092,161 8,053,170
Treasury stock, at cost 3,339 shares (26,712) (26,712)
Accumulated deficit (1,254,382) (1,101,022)
----------- -----------
6,814,385 6,928,745
----------- -----------
$ 8,003,546 $ 8,079,596
=========== ===========
See accompanying notes to condensed consolidated financial statements
</TABLE>
<TABLE>
<CAPTION>
21ST CENTURY WIRELESS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months
Ended March 31,
--------------------------------
1997 1996
----------- -----------
<S> <C> <C>
REVENUE $ 765,359 $ 279,363
COST OF REVENUE 398,620 164,337
----------- -----------
GROSS PROFIT 366,739 115,026
OPERATING EXPENSES
Selling 138,665 46,276
General and administrative 374,800 376,469
----------- -----------
513,465 422,745
----------- -----------
OPERATING LOSS (146,726) (307,719)
----------- -----------
OTHER INCOME (EXPENSE)
Interest income 1,110 7,214
Interest expense (7,744) (3,375)
----------- -----------
(6,634) 3,839
----------- -----------
NET LOSS $ (153,360) $ (303,880)
=========== ===========
EDITDA 14,374 (186,386)
Net loss per share $ (0.05) $ (0.11)
Weighted average common shares outstanding 3,315,854 2,807,573
See accompanying notes to condensed consolidated financial statements
</TABLE>
<TABLE>
<CAPTION>
21ST CENTURY WIRELESS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months
Ended March 31,
----------------------------
1997 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss (153,360) (303,880)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 85,650 53,390
Amortization 75,450 67,943
Changes in operating assets and
liabilities
Accounts receivable (106,666) (31,996)
Inventories 1,320 (3,002)
Prepaid expenses and other 3,706 (18,032)
Accounts payable 27,234 166,804
Accrued expenses 22,132 2,406
--------- ---------
Net cash used by operating activities (44,534) (66,367)
--------- ---------
INVESTING ACTIVITIES
Purchases of property and equipment (6,248) (88,251)
Expenditures for intangible assets -- (19,320)
Expenditure for other long term assets -- (11,062)
--------- ---------
Net cash used by investing activities (6,248) (118,633)
--------- ---------
FINANCING ACTIVITIES
Proceeds from the exercise of warrants 39,000 --
Payments on long-term debt and notes payable (11,056) --
--------- ---------
Net cash provided by financing
activities 27,944 --
--------- ---------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (22,838) (185,000)
CASH AND CASH EQUIVALENTS
Beginning of period 172,042 763,822
--------- ---------
End of period $ 149,204 $ 578,822
========= =========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES AND FINANCING ACTIVITIES
During the three months ended March 31, 1996, the Company issued stock as
payment for accrued compensation totaling $388,875.
Effective January 1, 1996, the Company issued 301,500 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 $1,577,610.
See accompanying notes to condensed consolidated financial statements
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:
March 31 December 31,
1997 1996
------------- ------------
Land $ 62,410 $ 62,410
Building 141,426 141,426
Transmission equipment 2,679,537 2,674,164
Office furniture and equipment 107,931 107,056
------------- ------------
2,991,304 2,985,056
Less accumulated depreciation 507,569 421,919
------------- ------------
$ 2,483,735 $ 2,563,137
============= ============
4. Capital and Loss per share
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 three months ended March 31,
1997 to existing shareholders that exercised warrants at a price of $4.00
per share.
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.
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 for the sale and servicing of Specialized Mobile
Radio (SMR) and paging equipment.
Revenue for the three months ended March 31, 1997 was $765,000 compared to
$279,000 for the same period last year, an increase of $486,000 (174%).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 and Currie are included in the results for the three
months ended March 31, 1997, but are not included in the same period last year.
On a comparable basis, revenue from the businesses in Minnesota increased by 40%
from the first quarter of 1996 due to an increase in the number of subscriber
units loaded on the system and increased sales and service revenue in Southern
Minnesota.
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 ended March 31, 1997, was $399,000 compared
to $164,000, an increase of $235,000 for the same period of 1996. 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 air-time 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 air-time provider, with the
cost of revenue consisting of the products that are re-sold.
The gross profit percentage for the three months ended March 31, 1997, was 48%
compared to 41% for the same period last year. The gross profit percentage for
1997 has increased due to the growth in recurring revenue due to the increased
number of radios loaded on the Company's system.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") for the three months ended
March 31, 1997 were $513,000 and $422,000 for the same period last year. The
increase from last year is due in part to the addition of the Peacock and Currie
operations ($105,000), increases in sales commissions resulting from additional
air-time and sales and service revenue ($35,000), and increased depreciation and
amortization expense ($40,000) 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 $100,000.
NET LOSS, EBITDA
For the three months ended March 31, 1997, the net loss of $151,000 was $178,000
less than the same period last year. Loss per share improved by $0.06 from the
same period of last year. The improvements are due to higher revenues and
improved margins, as discussed above.
Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) was
$14,000 for the three months ended March 31, 1997 compared to ($186,000) for the
same period last year.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had negative working capital of $235,000 compared
to $276,000 at December 31, 1996.
Included in the current liabilities at March 31, 1997 and December 31, 1996 was
$501,000 and $511,000 respectively of seller financed debt from the previous
owners of SMC and Currie, including $195,000 in accounts payable.
The Company has been actively pursuing additional sources of debt and equity
financing. During January, 1997, the Company retained the services of a Twin
Cities based Investment Banker to assist in raising funds on behalf of the
Company.
Until such financing is completed, the Company has curtailed any growth,
deferred any unnecessary capital expenditures, and reduced costs wherever
possible without jeopardizing the Company's revenue.
During the three month period ended March 31, 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 used by operations for the three months ended March 31, 1997 was
$45,000 due to an increase in accounts receivable caused by the buying cycle in
the rural areas serviced by the Company. Collections subsequent to the date
covered by this report, have reduced the accounts receivable balance to a level
more comparable to that at December 31, 1996. Cash flow used by operations for
the three months ended March 31, 1996 was $66,000.
Cash used by investing activities was $6,000 for the three months ended March
31, 1997 compared to $119,000 for same period of last year. Capital expenditures
were $6,000, as the Company has delayed all growth investments to conserve cash
until additional financing can be arranged.
Net cash generated from financing activities was $28,000. The Company raised
$39,000 from the exercise of warrants by the Company's shareholders and used
$11,000 to service debt owed to related parties. No cash was generated or used
in financing activities in the comparable period 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 fiscal
year covered by this report.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON EXHIBIT 8K
A. None required.
B. No reports have been filed on Form 8K for the most recent quarter.
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: May 15, 1997 By: /s/ Rodney H. Hutt
Rodney H. Hutt
President, Chief Operating Officer and Director
Dated: May 15, 1997 By: /s/ Stephen J. Mocol
Stephen J. Mocol
Vice President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 149,204
<SECURITIES> 0
<RECEIVABLES> 264,199
<ALLOWANCES> (30,000)
<INVENTORY> 333,306
<CURRENT-ASSETS> 725,812
<PP&E> 2,991,304
<DEPRECIATION> (507,569)
<TOTAL-ASSETS> 8,003,546
<CURRENT-LIABILITIES> 961,047
<BONDS> 0
0
0
<COMMON> 3,318
<OTHER-SE> 6,811,067
<TOTAL-LIABILITY-AND-EQUITY> 8,003,546
<SALES> 300,604
<TOTAL-REVENUES> 765,359
<CGS> 217,218
<TOTAL-COSTS> 398,620
<OTHER-EXPENSES> 513,465
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,634)
<INCOME-PRETAX> (153,360)
<INCOME-TAX> 0
<INCOME-CONTINUING> (153,360)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (153,360)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
