As filed with the Securities and Exchange Commission on August 5, 1996
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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WIRELESS CABLE & COMMUNICATIONS, INC.
(Name of small business issuer in its charter)
Nevada 87-0545056
(State of incorporation) (I.R.S. Employer
Identification No.)
102 West 500 South, Suite 320
Salt Lake City, Utah 84101
(801) 328-5618
(Address and telephone number of registrant's principal executive offices
and principal place of business)
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Lance D'Ambrosio, President
Wireless Cable & Communications, Inc.
102 West 500 South, Suite 320
Salt Lake City, Utah 84101
(801) 328-5618
(Name, Address and telephone number of agent for service)
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Copies to:
J. Gordon Hansen, Esq.
Scott R. Carpenter, Esq.
Parsons Behle & Latimer
Utah One Center, Suite 1800
Salt Lake City, Utah 84111
(801) 532-1234
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Common Shares, par value $.01 per share
(Securities to be Registered Under Section 12(g) of the Act)
NOT APPLICABLE
(Name of each exchange on which each class is to be registered)
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PART I
THE COMPANY
Overview of the Company's Business.
Business Operations. The Company is in the business of acquiring,
developing and operating wireless cable television systems. The Company owns a
non-operating wireless system comprised of four (4) channels and a leased
transmitter tower in Park City, Utah, and owns a non-operating wireless system
comprised of lease and license rights to a total of thirty (30) broadcast
channels in Auckland, New Zealand (consisting of ten 2.5 GHz and twenty 40 GHz
channels). The Park City channels and tower rights are held through the
Company's wholly-owned subsidiary, Transworld Wireless Television, Inc., a
Nevada corporation ("TWTV Park City"), and the New Zealand channel rights are
held through the Company's approximately 95% owned subsidiary, Auckland
Independent Television Services, Ltd., a New Zealand corporation ("AITS").
Business Strategy. The Company believes that a wireless cable operation may
successfully compete in the marketplace only where it provides a minimum number
of channels of programming to potential subscribers. Because only a finite
number of channels are authorized for each market area in the typical wireless
cable broadcast waveband (generally 32 channels in each United States market and
12 channels in each New Zealand market in the 2.5 GHz range), potential
operators have historically been reluctant to enter market areas (including a
significant number of the United States markets) where ownership of the
licensing rights to channels in the market are either highly fragmented or where
those licensing rights are held by only one or two holders. However, as a result
of recent advancements in wireless cable technology which allow several programs
to be carried in the amount of channel bandwidth where only one program
traditionally was capable of being carried, the Company now believes it is
possible to launch a commercially viable wireless cable operation with as few as
4 channels. By using this new technology, the Company believes the channel
rights it currently holds will provide it with channel capacity to provide the
equivalent of up to 40 channels of programming with the use of the new
technology in the Park City, Utah market area and several hundred channels of
programming in the Auckland, New Zealand, area. The Company believes its current
channel rights will be sufficient to develop commercially viable operating
systems in each of those market areas. See "Overview of the Wireless Cable
Industry -- Industry Trends."
The Company also believes that a substantial number of non-United States
wireless cable markets present viable acquisition and/or development markets.
Many of these markets are in areas that are becoming increasingly urbanized,
where there is only limited existing competition and where there is little or no
governmental regulation of wireless cable television systems in comparison to
that found in the United States.
Accordingly, the Company intends to focus its business strategy on (i) the
build-out and launch of its Park City, Utah and New Zealand systems, (ii) the
acquisition of existing operating wireless cable systems both inside and outside
of the United States, and (iii) the acquisition and development of groupings of
channels in market areas both inside and outside of the United States that are
not currently used to provide programming to subscribers. In each case, the
Company intends to focus its efforts in markets where it believes the population
density and terrain are conducive to economical transmission of wireless cable
programming. The Company may also acquire groupings of channels in market areas
that are not currently used to provide programming to subscribers or which do
not represent prime development targets for the purpose of "warehousing" those
channels for exchange or sale to third-parties attempting to develop operating
systems.
The Company has developed a complex series of criteria which it will use to
evaluate potential channel and system acquisitions. These criteria include
wireless cable channel availability in the market in question, the existence of
established groupings or blocks of channels in the market, the Company's ability
to use compression technology in the market area to increase the volume of
programming deliverable over any existing groupings of channels, the type of
potential subscriber base in the market, existing competition, the type and
extent of governmental regulation, topography, demographics and other factors.
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Once the Company acquires or develops operating systems, it intends to
focus its marketing efforts first on households in geographical areas within the
system's coverage area not passed by traditional cable systems. The Company
believes its marketing efforts will emphasize to potential subscribers the
Company's ability to provide them with programs that were previously unavailable
to them, allowing higher market penetration and lower subscriber turnover. The
Company's secondary market focus will be on households in the market which are
passed by, but do not subscribe to, traditional cable systems. The balance of
the Company's marketing efforts will be directed to households subscribing to
traditional cable or other pay television systems.
The Company has also established a goal of maintaining high levels of
customer satisfaction and service. The Company anticipates that its operating
systems will operate under a decentralized management structure, which will
allow each system to maximize its local presence in its market. Each of the
systems will be managed by a general manager, who will be responsible for the
day-to-day operations of his respective system, and the maintenance of staffing
and service procedures. The Company also anticipates that its operating systems
will design and implement specific marketing programs in their respective
markets based on local demand, general market characteristics and subscriber
surveys. The Company does not anticipate that its operating systems will target
all types of subscribers, but that each system will select and place marketing
emphasis on those subscriber segments it believes has the most growth potential
and will generate a loyal customer base with stable billings. The actual
programming in each market will be tailored to meet the demographics of that
market. To the extent possible, however, the Company intends to make major
programming and equipment purchases and budgeting and strategy decisions at the
Company level, rather then the operating system level.
The Company intends continuously to compile and analyze data regarding the
buying behavior of potential subscribers in each of its market areas in order to
refine its proposed marketing strategies. The Company's objective is to design
marketing packages that will develop a loyal subscriber base with demographic
and buyer characteristics consist with the Company's intended programming,
pricing programs and long-term business strategies. By maintaining market and
service decisions at the system level, and major strategy, budgeting and
purchase decisions at the Company level, the Company believes its systems will
be able to compete more effectively with traditional cable operators and other
pay television services.
Current Market Areas. The Company holds channel rights in both the Park
City, Utah and Auckland, New Zealand market areas. Due to recent changes in
wireless cable technology, the Company believes that these channel groupings are
sufficient to launch commercially viable wireless cable television systems.
The Park City Market. Currently, there is no competing wireless cable
system in the Park City, Utah area, although TCI operates a traditional cable
system in the area. The Company estimates that, once its Park City system is
launched, its basic wireless cable service (consisting of approximately 30
channels of programming) will cost approximately $19.95 per month. In contrast,
the typical, basic traditional cable package (consisting of 32 channels of
programming) provided by TCI is currently approximately $21.95 per month.
The Park City, Utah area had a total population of approximately 4,468 in
1990, in comparison to 2,883 in 1980. The corresponding figures for Summit
County, Utah (the area in which Park City, Utah is located) are 15,810 and
10,200, respectively. The Company estimates that there are approximately 7,500
households in the Park City, Utah area, of which the Company believes 6,750
households are serviceable and, of those homes, approximately 1,620 homes are
currently not passed by cable.
The Company anticipates that it will begin the build-out of its Park City
system in 1997, and that it will launch its subscriber drive at that time. The
Company further anticipates that its Park City, Utah system will have
approximately 1,100 subscribers by the first anniversary of the launch of the
system.
Auckland, New Zealand Market. There are no competing wireless cable
systems in Auckland, New Zealand, although the area now has a 5 channel wireless
UHF system in operation which has approximately 194,000 subscribers. The Company
estimates that, once the Auckland, New Zealand system is launched, its basic
wireless cable service (consisting of approximately 22 channels of programming)
will cost approximately $40.00 per month. In contrast, the 5 channel wireless
UHF system in operation in the Auckland area is currently approximately $32.00
per month.
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The Auckland, New Zealand area had a total population of approximately
915,000 in 1990. The area is the largest television market in New Zealand, and
the Company estimates that, of the approximately 350,000 total households in the
service area, approximately 300,000 of those homes are serviceable and, of those
homes, approximately 270,000 homes are not passed by cable.
The Company anticipates that it will begin the build-out of the Auckland,
New Zealand market in early 1997, and that it will launch its subscriber drive
in late 1997. The Company further anticipates that its Auckland, New Zealand
system will have between 5,000 and 10,000 subscribers by the end of 1997, and
between 90,000 and 100,000 subscribers by the end of the fifth year of
operation.
Other Markets. The Company is currently pursuing wireless cable license,
lease and operating rights in a number of foreign countries, including countries
in South America, Eastern Europe, the Mediterranean area and the far east. There
can be no assurance that the Company will be able to secure any such license,
lease or operating rights.
The Company recently entered into negotiations to acquire, for a cash
payment and in exchange for its common stock, a controlling interest in a
commercial entity that holds license rights for a 28 GHz wireless cable system
in Venezuela. The Company estimates that the Venezuela system, once constructed,
would be able to service approximately 450,000 line-of-site homes in the Caracas
area and approximately 1,425,000 homes outside the Caracas area. The Company's
negotiations with the holder of the Venezuela rights are in the preliminary
stage, and there can be no assurance the Company will be able to secure those
rights. The Separation. The Company was formed for the purpose of facilitating
the continuation of certain business operations formerly conducted by Transworld
Telecommunications, Inc., a Pennsylvania corporation ("TTI"). TTI is also in the
wireless cable television industry and, through its joint venture entity,
Wireless Holdings, Inc., a Delaware corporation ("WHI"), owns operating wireless
cable systems in Spokane, Washington and San Francisco Bay, California and
non-operating wireless systems or channel lease rights in Seattle, Washington,
San Diego and Victorville areas of California and Greenville, South Carolina
(the "WHI Systems"). TTI also owns a 20% interest in an operating wireless cable
system located in Tampa Bay, Florida ("Tampa Bay"), and, prior to the formation
of the Company, owned the Company's interest in TWTV Park City and AITS. The WHI
Systems and Tampa Bay have approximately 35,000 subscribers. In late November,
1995, TTI and its other joint venturer in the WHI Systems and Tampa Bay agreed
to sell their interests in WHI and Tampa Bay to Pacific Telesis Group and
certain of its affiliates. That transaction is anticipated to be closed in the
fall of 1996. On July 26, 1995, the Board of Directors of TTI voted to separate
its business operations into two groups of business assets. The first group of
business assets consisted of TTI's interest in the WHI Systems and Tampa Bay.
The second group of business assets included TTI's interests in TWTV Park City
and AITS. Under the terms of the business separation (the "Separation"), TTI
agreed to form a new corporation to hold the separated business operations, and
the stock of that corporation was then to be distributed to TTI's shareholders.
In order to complete the Separation, the Company was incorporated on July 31,
1995, and on August 1, 1995, it issued 3,500,000 shares of its common stock, par
value $.01 per share, to TTI in exchange for TTI's interest in AITS, TWTV Park
City and certain other miscellaneous assets. TTI immediately transferred the
shares in the Company to an escrow agent, Fidelity Transfer Company of Salt Lake
City, Utah, to be held for the benefit of TTI's shareholders of record on August
1, 1995. The distribution of the 3,500,000 shares to TTI's shareholders will be
delayed until the Company and TTI have complied with certain requirements of the
federal securities laws, including the registration of the Company's shares
under the Securities Exchange Act of 1934, as amended (the "Act") pursuant to
this Registration Statement. The 3,500,000 shares will then be distributed to
TTI shareholders of record as of August 1, 1995, on a non- pro rata basis, with
the management and principal shareholder of TTI relinquishing a portion of their
shares in the Company in favor of the TTI public shareholders. In general, the
public shareholders will receive approximately 1.6 shares of the Company's
common stock for each 10 shares of TTI common stock they held on August 1, 1995.
Principal Office. The Company's principal executive office and principal place
of business is at 102 West 500 South, Suite 320, Salt Lake City, Utah 84101. The
Company's telephone number at that address is (801) 328-5618.
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Overview of the Wireless Cable Industry. General. Wireless cable systems
use microwave radio frequencies licensed by governmental agencies to provide
multiple channel television programming services similar to that offered by
traditional cable systems. The radio frequencies used in such systems are
typically in the 2.5 GHz band, although other wavebands (such as 18, 28 or 40
GHz) may be used. The microwave signals are transmitted over the air from a
transmission tower (a "head-end") to an antenna at each subscriber's home,
eliminating the need for the networks of cable and amplifiers utilized by
traditional cable operators. Because of the relatively simplified engineering
and construction techniques required to build-out a wireless cable system,
systems typically can be completed in 90 to 120 days, whereas construction of a
traditional cable system with a comparable coverage area may take as long as 3
to 4 years.
The Company believes wireless cable is one of the most economical
technologies currently available for the delivery of pay television service.
Wireless cable systems do not require extensive networks of cable and
amplifiers, so the capital cost per installed wireless subscriber is generally
lower than for a traditional cable operator. This cost advantage generally
allows wireless cable operators to provide programming to subscribers at a lower
cost. The Company believes wireless cable will continue to maintain this cost
advantage, even following the deployment of fiber optics, direct broadcast
satellite and other microwave-based emerging technologies. See "Overview of the
Wireless Cable Industry -- Competition."
To the subscriber, a wireless cable system operates in the same manner as a
traditional cable system. At the subscriber's location, microwave signals are
received by an antenna and are passed through conventional coaxial cable to a
descrambling converter located near the subscriber's television set. However,
because wireless signals are transmitted over the air, rather than through
underground or above-ground cable networks, wireless systems are less
susceptible to outages and are less expensive to operate and maintain than
traditional cable systems. In contrast to traditional cable systems, most
service problems experienced by wireless cable subscribers are home-specific,
rather than neighborhood-wide problems.
A typical wireless cable system consists of the head-end equipment
(generally, satellite signal reception equipment, radio transmitters, and
transmission antennas) and reception equipment at each subscriber's location
(generally, an antenna, frequency conversion device and a set top device). Like
traditional cable operators, wireless cable operators generally are able to
offer a full range of basic and premium programming options, including local
off-air and on-air channels, movie channels, music channels, news and sports
channels and specialized programming.
Wireless cable systems using the 2.5 GHz format typically transmit signals
over distances of 20 to 40 miles from the head-end and, with an increase in
transmission power or tower height, may expand the coverage area to
approximately 40 or 50 miles. The transmission of wireless frequencies requires
a clear "line-of-sight" between the transmitter and the receiving antenna.
Buildings, dense foliage or hilly terrain can cause signal interferences which
can diminish or block signals. These line-of-sight constraints can be eliminated
by increasing the transmission power of the system and/or by using engineering
techniques such as pre-amplifiers, beam benders(TM) and signal repeaters, but
these techniques generally increase the cost of delivering programming to
subscribers.
Because wireless cable systems use high gain antennas at the subscriber
end, ghosting and reflection are generally minimized, so picture quality
typically exceeds that of a traditional cable picture. Further, wireless cable
systems typically broadcast their programming at a wavelength of 2.5 GHz (4.78
inches). this wavelength is long in relationship to the size of rain drops, hail
or snow, but is short in comparison to interference normally caused by
electrical utility currents and motors. As a result, wireless cable
transmissions are usually not affected by weather or electrical interference.
Further, in traditional cable systems the programming signal tends to decline in
strength as it travels along the cables and must be boosted by trunk and feeder
amplifiers. Each amplifier introduces some distortion into the television
signal. By contrast, wireless cable systems use only two principal pieces of
equipment -- a transmitter and a receiving antenna.
Like traditional cable systems, wireless cable systems are capable of
employing "addressable" subscriber authorization technology, which enables the
system operator to control centrally the programming available to each
subscriber without the need for a service call to the subscriber's home.
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The Company's channel rights in the Auckland market consists of both 2.5
GHz channels ("MMDS" channels), as described above, and 40 GHz channels. The 40
GHz channels operate similarly to the MMDS channels, but at a high frequency.
Forty GHz channels are now being utilized in parts of Europe and are generally
considered to be alternative to 28 GHz systems. At present, equipment costs for
40 GHz systems are marginally higher than other types of systems, but 40 GHz
systems use smaller antennas.
Industry Trends. The Company's business will be affected by industry trends
and, in order to acquire, maintain and increase its potential subscriber base,
the Company will need rapidly to adapt and modify its practices to remain
competitive. The industry trends affecting the wireless cable industry include
the following:
Compression. Several equipment manufacturers have developed digital
compression devices. These devices allow several programs to be carried within
the bandwidth that typically carries only one program. Various experts have
estimated that compression ratios as high as 10 to 1 are possible, allowing
operators to provide the equivalent of hundreds of channels of programming on
wireless cable systems. Currently, digital compression systems are in operation
in commercial systems which provide compression ratios of as high as 8 to 1.
The Company believes the typical subscriber may not use, or want to pay
for, the substantial increases in programming channel capacity available through
the application of compression technology. As a result, even though compression
may allow wireless cable operators to significantly expand their programming
capacity, that increased capacity may not result in either a substantial
increase in a wireless cable operator's subscriber base or a substantial
increase in the actual amount of programming provided by a wireless cable
operator. Instead, the Company believes that compression technology may have its
most important impact in the number of operators entering the wireless cable
market, since, by using compression technology, wireless cable operators with
rights to use as few as 3 or 4 channels may be able to provide the equivalent of
up to 30 or 40 channels of programming.
Pay-per-view services. In recent years, the cable television industry has
developed services that enable customers to order and pay for individually
selected programs. This type of service, which is known as "pay-per- view", has
been generally successful for specialty events such as concerts and sporting
events. The cable industry has also been promoting the pay-per-view concept for
purchases of movies, with the intent of competing directly with video rental
stores and movie theaters. The Company believes pay-per-view services will
become increasing popular as additional exclusive events become available for
distribution on pay-per-view channels.
In order for subscribers to purchase the right to view pay-per-view events,
they must have addressable converters, which allow the cable company to convert
what the subscriber watches without having to visit the subscriber's residence
to change equipment. The Company anticipates that its converters will be
addressable, allowing subscribers to receive pay-per-view programming.
Pay-per-view services are generally subscribed for by having the subscriber use
a telephone line to order the event. Certain cable operators have made efforts
to increase the use of pay-per-view services by installing "impulse" devices
which make it easier for subscribers to select programming and which do not
require a telephone link to order the program in question. The Company may
utilize "impulse" devices on its converters.
Interactivity. Several cable operators have recently publicized their
intention to develop services that allow subscribers to interact with the
wireless cable company. These systems allow the wireless cable provider to offer
features not generally available to television viewers, including the ability to
choose among different camera angles, take part in game shows, and even choose
particular types of commercial messages among the various types offered by
advertisers. These interactive services could also provide customers with the
ability to choose various types of home shopping and information shows. The
Company anticipates that it will offer interactive services in its systems when
they become available on a commercially reasonable basis.
Advertising. Most advertising on wireless and traditional cable
television systems has been sold by program suppliers, which sell national
advertising time as part of the signal they deliver to the cable operators.
Recently, however, advertisers have begun placing advertisements on channels
dedicated exclusively to advertising, as well as in the "local available time"
set aside by program suppliers for insertions of advertisements sold by local
cable operators. Use of local available time requires automatic "spot insertion"
equipment, which the Company expects to utilize in its systems when it becomes
economically prudent to do so.
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Competition. The Company believes its primary competition will be from
traditional cable operators. The technology used by such operators is a co-axial
cable system that transmits signals from a head-end, delivering local and
satellite delivered programming via a distribution network consisting of
amplifiers, cable and other components to subscribers. Regular system
maintenance is necessary due to water ingress, weather changes and other
equipment problems, all of which may affect the quality of the signal delivered
by the cable company to its subscribers. Traditional cable systems also
typically cost more to build and maintain than wireless cable systems. Although
the Company believes the head-end equipment cost of its systems will be
comparable to those for traditional cable systems, it also believes the
installation of co-axial cable and amplifiers would be considerably more costly
to traditional cable operators than is the installation by the Company of its
reception antennas and related equipment.
Several technologies are currently under development which may
significantly affect the pay television industry and result in new competitors
entering into the market. The Company cannot predict the competitive impact of
these new technologies and competitors on the wireless cable industry. The
Company expects, however, that wireless cable operators will be able to expand
their programming capacity and introduce new services, while continuing to
maintain a cost advantage over the other providers of pay television services.
The Company intends to exploit its comparative cost advantage by targeting a
value-conscience subscriber base that may be unwilling to pay for more costly,
specialized programming.
The technologies which may significantly impact upon the competitive nature
of the wireless cable industry include the following:
Fiber optics systems, digital compression and interactive services.
Traditional cable systems have historically been the principal providers of pay
television services. The maximum number of programming channels offered by
traditional cable systems has been limited, however, by the current analog
transmission and co-axial cable technologies. A number of new technologies are
under various stages of development to increase the channel capacity of these
systems. These new developments include the replacement of traditional cable
system co-axial cable networks with fiber optic matrix and the use of digital
techniques to compress more programming signals onto existing co-axial cable or
other networks.
The Company believes that the programming capacity of its wireless cable
systems, including the channel rights it holds through TWTV Park City and AITS,
may be substantially increased through the application of compression
technology. Depending upon the technology used, experts believe wireless cable
systems may be capable of transmitting up to 300 channels of programming. See
"Overview of the Wireless Cable Industry -- Industry Trends" and "The Company's
Property and Equipment." The Company believes that the application of
compression technology may tend to increase the potential number of wireless
cable system operators by reducing the minimum number of channels necessary for
a commercially viable system from between 20 and 25 channels to as few as 3 or 4
channels.
The Company also expects that digital technology will enable wireless cable
systems to transmit high definition television signals. Subject to the various
governmental agencies adopting rules governing the transmission of digital
signals, the Company anticipates that the wireless industry (and the traditional
cable industry) will have commercial access to compression technology on a
wide-spread basis in the near future. The introduction of expanded channel
capacity and interactive services by traditional cable systems will require
substantial new investment.
Telephone Company Competition. A number of telephone companies have
developed technology capable of providing audio/video services over telephone
lines ("video dial tone" service). The FCC recently adopted new regulations
permitting local telephone companies to provide video dial tone service in their
telephone franchise areas on a common carrier basis and to otherwise compete
with wireless cable operators. The competitive effect of the entry of telephone
companies into the pay television business is still uncertain, although the
Company believes that wireless cable systems will continue to maintain a cost
advantage over video dial tone service technologies. Telephone companies
currently also are permitted to operate traditional cable systems in areas
outside their telephone service areas and are permitted to offer pay telephone
services inside their franchise areas under certain conditions under the 1996
Act, as described below. Several large telephone companies have announced plans
either to enhance their existing distribution plants to offer video dial tone
service or to construct new distribution plans in conjunction with local cable
operators to offer video dial tone service.
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Also, as noted above with respect to the acquisition by Pacific Telesis
Group and certain of its affiliates of TTI's interest in WHI and Tampa Bay, a
number of telephone companies have recently acquired or made substantial
investments in wireless cable operations. The competitive effect of these
acquisitions and investments is uncertain.
Satellite Systems. "Backyard dish" or "direct-to-home" ("DTH") antenna
distributors using satellites to beam in programming offer customers access to
programming similar to that offered by traditional cable operators. The primary
advantages of wireless cable systems over DTH systems are lower equipment costs
and broader availability of local programming. A conventional DTH antenna system
costs approximately $1,000 to $3,000 per subscriber, depending on the features
of the system, plus monthly fees for access to certain programming. DTH systems
typically cannot receive local off-air broadcast channels, however, so DTH
subscribers generally are not able to watch local news, weather or sports
programs. DTH programs, on the other hand, enjoy the advantages of access to a
wider variety of satellite programming, generally superior reception and the
ability to service areas not serviceable by traditional or wireless cable
systems.
Several companies have recently begun orbiting high-powered transmission
satellites to distribute high capacity programming to DTH antennas as small as
18" in diameter ("directed broadcasting satellite" or "DBS"). The cost of
constructing and launching these new satellites is substantial, however, and DBS
receiver equipment for a single television set is typically approximately $700
per customer, plus installation fees and monthly subscriber fees for a
descrambling unit. Due to the cost of the DBS satellites and receiving
equipment, and because local programming cannot be received on a DBS system, the
Company believes wireless cable systems will continue to enjoy a comparative
cost and local programming advantage over these satellite systems.
Other Microwave Systems. Other frequencies than those currently
authorized for wireless cable operations may be used for the distribution of pay
television services. Recently, the Federal Communications Commission ("FCC") in
the United States proposed to relocate radio frequencies in the 28 GHz range of
the electro-magnetic spectrum for use in "cellular" pay television services.
Many European countries and New Zealand have authorized pay television services
to be carried in the 40 GHz range. Because 28 GHz systems have relatively short
broadcasting ranges, however, multiple cellular transmission sites will probably
be required in order to cover a broadcast area typically covered by a wireless
cable system.
Private Cable Systems. Private cable systems also compete with wireless
cable systems. Private cable systems are multiple channel television services
offered through a wired plant. Private cable systems are similar to a
traditional cable system, but they operate under agreements with private land
owners to service specific multiple dwelling units. Private cable systems may be
used in conjunction with wireless cable television operations. Because private
cable systems may only be used to provide programming to multiple dwelling unit
subscribers (such as hotels and large apartment complexes) the Company believes
wireless cable systems still enjoy a competitive advantage over private cable
only-systems.
Governmental Regulation. The use of the airways for microwave transmission
is generally governed by governmental regulation. The amount, type and extent of
that regulation varies from country to country. The following information
summarizes certain governmental regulations affecting the Company's ability to
operate its wireless cable television systems in the United States and in New
Zealand. The Company will also be required to meet the regulations governing
microwave transmissions in any other jurisdictions in which it owns and operates
any wireless cable system. These regulations may be similar to, or vastly
different from, the regulatory structure described below.
United States Regulation. The wireless cable industry in the United
States is subject to regulation by the FCC under the provisions of the
Communications Act of 1934 as amended (the "Communications Act"). Among other
things, the FCC may issue, revoke, modify and renew new licenses within the
spectrum available to wireless cable, approve the ownership of such licenses,
determine the location of wireless cable systems, regulate the kind,
configuration and operation of equipment used by a wireless cable systems, and
impose certain equal employment opportunity requirements on wireless cable
licensees. Under the 1984 Cable Act, wireless cable systems are not "cable
systems" for purposes of the Communications Act. Accordingly, unlike a
traditional cable system, a wireless cable system does not require a local
government franchise and is subject to fewer local regulations. Moreover, all
transmission and reception
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equipment associated with the wireless cable system can be located on
private property, eliminating the need for utility poles or dedicated easements,
which are required by traditional cable systems.
The FCC has authorized access for wireless cable service to a series of
channel groups, consisting of channels specifically allocated for wireless cable
(the "commercial" channels), and other channels originally authorized for
educational purposes, although excess capacity can be leased by wireless cable
providers (the "educational" channels). Currently 33 channels are potentially
available for licensing or lease by wireless cable companies in most markets. Up
to 12 channels in a given market typically can be licensed by commercial
operators for full-time commercial use. FCC rules generally prohibit the
licensing or leasing of commercial channels and educational channels by
traditional cable companies within their franchise areas.
Licenses have been issued, or applications are currently pending, for the
majority of commercial channel wireless cable licenses in most of the major
United States markets. In a number of markets, commercial channel and/or
educational channel frequencies are still available. However, except as noted
below, the eligibility for ownership of educational channel licenses is limited
to accredited institutions, certain governmental organizations engaged in the
formal education of enrolled students and other qualified entities ("qualified
educational entities"). Non-local applicants must demonstrate that they have
arranged with local educational entities to provide them with programming and
that they have established a local programming committee.
Of the 20 channels allocated for educational channel use in a given market,
at least 12 must be licensed to qualified educational entities. Commercial
applicants for educational channels must demonstrate there are not commercial
channels available for application, purchase or at least in lieu of the
educational channels for which they apply. All wireless operators who hold
licenses for "commercial" educational channels are required to provide 20 hours
per week per channel of educational programming.
The FCC awards licenses to use commercial and educational channels based on
applications demonstrating that the applicant is qualified to hold the license
and that the operation of the proposed channel will not cause impermissible
interference to other channels entitled to interference protection. Once a
commercial license application is granted by the FCC, a conditional license is
issued, allowing construction of the station to commence upon the satisfaction
of certain specified conditions. Construction of commercial stations generally
must be completed within one year of the grant of the conditional license.
Construction of educational channels generally must be completed within 18
months of the award of the license. If construction is not completed in a timely
manner, the license holder must file an extension application with the FCC. If
the extension application is not filed or granted, the channel license is deemed
canceled. Educational and commercial licenses generally have terms of 10 years.
The FCC has imposed "freezes" on the filing of applications and amendments
to applications for new commercial channels and filings of applications for new
educational channel facilities or, in some instances, major educational channel
modifications. The freezes were intended to allow the FCC time to update its
wireless cable database and to review and possible modify its application rules
related to those services. The freezes do not apply to the granting of licenses
for which applications were filed prior to the freeze.
Recently, the FCC adopted a competitive bidding (i.e., auction) mechanism
for the award of initial licenses for commercial channels. Auctions to award
initial commercial licenses began on November 13, 1995. Successful bidders will
receive a blanket authorization to serve entire "basic trading areas" ("BTAs"),
as defined by Rand McNally, on all commercial channels. The blanket
authorization will be subject to the submission of applications for commercial
channels demonstrating interference protection to the 35 mile radius protected
service areas of commercial and educational stations licensed, or for which
there is an application for a license pending as of September 15, 1995. A BTA
license holder must show coverage of at least two-thirds of the BTA within 5
years of receiving the BTA authorization. A successful bidder for a BTA also
will be granted a right to match the final offer of any proposed lessee of an
educational channel licensed or to be licensed in the BTA. This matching right
applies only to new offers of lease channels and will not interfere with present
education lease rights or the renewal of such rights. Educational licenses are
exempt from the auction process and applications for educational licenses are
expected to continue to be awarded according to the FCC's existing comparative
criteria. The Company did not compete in the BTA auctions.
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The United States Congress and the FCC have also recently begun to update
the rules and laws governing traditional and wireless cable systems. For
example, the FCC recently designated one of the wireless channels as a "return"
channel allowing signals to be received as well as transmitted by wireless cable
system operators. This will allow the implementation and use of interactive
systems.
In October of 1992, the United States Congress enacted the 1992 Cable Act.
The 1992 Cable Act was intended to regulate pricing practices and competition
within the franchise cable television industry and to establish and support
existing and new competitive multi-channel video services such as wireless
cable. The 1992 Cable Act and the FCC rules promulgated under it contain a
number of provisions that regulate the day to day operations of traditional
cable companies, including (i) limits on rates for basic levels of service, (ii)
uniform pricing practices, (iii) compatibility of a cable company's in-home
equipment (e.g. set top boxes) with subscriber's television sets and (iv)
minimum customer service standards. In addition, certain levels of basic service
offered by traditional cable companies may be subject to regulation if another
multi-channel video provider in the market is not serving at least 15% of the
households in the market and a formal complaint is being prosecuted by a local
franchise authority before the FCC. The principal regulatory provisions of the
1992 Cable Act (including, specifically, the provisions regarding the regulation
of rates) do not apply to wireless cable systems.
While the 1992 Cable Act and its amendments had the intended effect of
reducing prices charged by franchise cable companies in certain markets, the
Company believes it will continue to maintain a price advantage over its
franchise cable competitors. Moreover, the Company believes the uniform pricing
provisions of the new legislation will limit the ability of franchise cable
companies to lower their prices on a selective basis and in a given market in an
effort to compete with the Company.
The 1992 Cable Act also contains a number of provisions designed to enhance
the ability of other paid television media (such as wireless cable) to compete
with traditional cable companies. These provisions include (i) a requirement
that vertically integrated programming suppliers (such as those in which there
is a 5% direct or indirect ownership by a franchise cable operator) provide
access to programming to competing multi-channel video providers (such as
wireless cable companies) on fair and reasonable terms, (ii) a provision
permitting local broadcasters either to require carriage on their local cable
systems or otherwise require traditional cable operators to compensate the
broadcaster for retransmitting the broadcast or signal over the traditional
cable company system, and (iii) restrictions on the size of traditional cable
multi-system operators. The Company expects to benefit from the programming
access provisions of the 1992 Cable Act in the form of access to previously
unavailable programming material and reduced costs for certain programming
materials. The retransmission consent provision of the 1992 Cable Act requires
wireless cable companies to compensate broadcasters if the wireless cable
operator elects to retransmit a local broadcast signal over the wireless cable
system. The Company does not anticipate rebroadcasting local broadcast channels,
although it may find it necessary to retransmit local broadcast channels in the
future. The Company expects that the compensation paid to local broadcasters for
the retransmission will not exceed amounts currently paid for comparable cable
programming. Accordingly, the Company expects retransmission consent
requirements not to have a material effect on the Company's proposed operational
costs.
In early 1996, Congress passed the Telecommunications Act of 1996 (the
"1996 Act"). The 1996 Act contains provisions for (I) opening up local exchange
markets, (ii) updating and expanding telecommunications service guarantees,
(iii) removing certain restrictions relating to AT&T former operating companies
resulting from the anti-trust consent decree issued by the federal courts in
1984, (iv) the entry of telephone companies into video services, (v) the entry
of cable television operators into other telecommunications industries, (vi)
changes in the rules for ownership of broadcasting and cable television
operations, and (vii) changes in the regulations governing cable television. The
1996 Act is intended to improve competition among the various telecommunications
services, although there can be no assurance that it will have that effect.
The 1996 Act provides the former AT&T operating companies and other
telephone companies with the right to offer cable television service in their
home territories under certain restrictions. The 1996 Act contains anti-buyout
rules designed to discourage such telephone companies from simply purchasing the
incumbent cable television operator as a means of entering into the video
programming business.
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The 1996 Act also prohibits local authorities (such as municipalities,
zoning authorities and homeowner associations) from imposing rules on antenna
placement that impair the user's ability to receive television programming,
whether via satellite, wireless cable or over-the-air broadcast. Also, in
regulating the siting of personal wireless facilities, states and localities
cannot discriminate among service providers, directly or indirectly prohibit
personal wireless services, delay action, avoid divulging their reasoning and
evidence, or make decisions based upon considerations relating to radio
frequency emissions if the facilities in question comply with FCC regulations on
that subject.
The FCC is expected to issue extensive regulations relating to the 1996
Act. There can be no assurance that the 1996 Act or the regulations issued by
the FCC will not have an adverse effect on the Company and its intended or
proposed business operations within the United States.
New Zealand Regulation. The regulation of multi-point multi-distribution
licenses and 40-GHz licenses in New Zealand is governed by the Radio
Communications Act of 1989 (the "New Zealand Act"). The New Zealand Act governs
the licensing and regulation of radio equipment or licensing to authorize the
transmission of radio waves. The New Zealand Act is administered by the Ministry
of Commerce.
The management rights for particular frequency bands are created by the
Secretary of Commerce. Any manager granted particular frequency rights has the
authority to create licenses to transmit radio waves on those frequencies. These
licenses are granted in accordance with the provisions of the New Zealand Act,
but the terms under which they are allocated are determined by the manager.
Management rights and licenses are generally issued for long periods, sometimes
for periods as long as 20 years. Management rights and licenses may be traded,
and are deemed to be assets of a business for purposes of the Commerce Act of
1986, as well as the New Zealand anti-trust statutes. No written instrument
dealing with the management rights or granting or transferring of any licenses
has affect until is registered in accordance with the New Zealand Act.
Radio apparatus licensing is governed by the Radio Regulations of 1987,
which were continued under the New Zealand Act, and which provide for the
license of radio transmitting and receiving equipment. All radio apparatus
licenses granted by the Ministry of Commerce are renewable annually.
Other Forms of Regulation. Under the United States copyright laws,
persons transmitting video programs must first secure permission from the
copyright holder of those transmissions. Under Section 111 of the Copyright Act,
certain "cable systems" are entitled to engage in the secondary transmission of
programming without the prior permission of the holders of the copyrights if
they first secure a compulsory copyright license. Compulsory licenses are may be
obtained by filing certain required reports and paying the fees set by the
copyright royalty tribunal. Wireless cable operators typically rely on Section
111 of the Copyright Act in their broadcast operations. There can be no
assurance, however, that Section 111 of the Copyright Act will not be amended or
otherwise modified to prohibit or limit wireless cable company operators from
obtaining compulsory copyright licenses.
THE COMPANY'S PROPERTY AND EQUIPMENT
Channel Rights and Broadcast Equipment.
TWTV Park City Channel Rights. TWTV Park City has rights to four licenses
for channels in the Park City, Utah broadcast market. The licenses were issued
by the FCC in 1995, expire in 2001, and are currently in the name of TTI but
held and operated for the benefit of TWTV Park City. TTI and TWTV Park City have
filed applications for the transfer of the licenses to the Company. Each of the
licenses is subject to renewal but, while such renewals have been generally
granted by the FCC on a routine basis in the past, there can be no assurance
that TWTV Park City's licenses will continue to be renewed routinely in the
future. TWTV Park City's channels include the MDS-1 channel and the H1, H2 and
H3 channels.
In addition to its channel rights, TWTV Park City holds both a lease for
tower space and certain broadcast equipment. The tower lease requires payments
of $100 per year, is renewable annually, and is with Summit County. The tower is
located at Query Mountain, near Park City.
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TWTV Park City's equipment includes transmitters and related equipment for
each of its H1, H2, H3 and MDS- 1 channels. Some of the equipment is leased from
Bay Area Cablevision, Inc. The equipment lease, which began on July 1, 1995 (for
an initial term of 6 months, which was renewed), requires lease payments of $400
per month. TWTV Park City may purchase the equipment for $20,189.90 at any time
during the lease. The Company believes the equipment lease will be renewable for
additional 6 month terms on similar conditions.
The Company is currently reviewing various compression systems for use in
its Park City system. The Company anticipates that it will be required to
acquire a total of four compression systems for the Park City system, one for
each of its channels.
The Company estimates that the cost of completing the construction of the
transmission facilities for the TWTV Park City system will be approximately
$500,000. Based on the Company's current construction schedule, it believes that
it will be able to launch the system in 1997.
AITS Channel Rights. The Company's other wireless cable assets are held
through AITS, and consist of 10 of the 12 available broadcast channels in the
Auckland, New Zealand area (the "MMDS Channels"), and license rights for 20
channels in the 40 GHz band (the "40 GHz Channels"). AITS' MMDS Channel rights
are governed by three separate lease agreements with Telecom New Zealand Limited
("Telecom"), the manager of the channels. The first lease, which covers six of
the MMDS Channels, requires annual license fee payments of $77,422 N.Z.
(approximately $52,647 U.S., based on the exchange rate available in late May,
1996). This lease will expire in December of 1996. The second and third leases
each cover two of the MMDS Channels and continue until 2001. One lease requires
an annual license fee of $28,680 N.Z. (approximately $19,502 U.S., based on the
conversion rate in late May, 1995), plus 12.5% gross sales tax. The other lease
requires a $75,000 U.S. payment on October 1 of each of 1996, 1997 and 1998, and
a $35,000 U.S. payment on October 19 in the years 1999 through 2003. In
addition, AITS is required to pay $1,000 N.Z. (approximately $680 U.S. based on
the conversion rate in late May, 1996) in annual license fees for each of the
channels.
The Telecom leases are renewable in Telecom's sole discretion, and there is
no guarantee that Telecom will renew all or any of the leases. If Telecom fails
or refuses to renew the lease expiring in December of 1996, the Company still
believes that, as a result of the newly available compression technology, the
remaining Telecom channels will provide sufficient capacity to operate a
commercially viable wireless cable system in the Auckland, New Zealand market.
The Company's 40 GHz Channels were licensed to it on February 29, 1996 by
the Ministry of Commerce. At this point, the licenses are "conditional
licenses," in that they are granted subject to a one year use requirement. If
the Company does not begin transmission using the 40 GHz Channels by March 1,
1997, they will revert to the Ministry of Commerce. If the Company uses the
licenses, it anticipates that they will be renewed for successive periods.
AITS has no head-end facilities or tower arrangements, although it has had
discussions regarding the lease of tower space with both (Broadcast
Communications Limited) (BCL) and Terrafirma, two groups that control
transmitter locations which the Company believes are suitable for the system's
needs. The BCL tower site is located in the Waitakere Mountain range,
approximately 23 miles from the center of Auckland. The Terrafirma tower site is
located on Hopson Street, in the center of the city of Auckland.
AITS has also reached a tentative agreement with Isanbards, a local
television production company, to sublease space required for a head-end
location and to lease office space. The Company anticipates that the head-end
location will require a lease payment of approximately $850 N.Z. per annum, and
that the office space will be approximately $1 N.Z. per square foot per month.
The Company, through AITS, has also entered into discussions with a variety
of third parties for programming. The Company currently has firm commitments for
programming services from TNT/Cartoon, the Discovery Channel, CNN, Nostalgia,
the Box, Country Music Television and from various United States studios for
pay-per-view movies. The Company also intends to enter into negotiations with
ABC, CBN Philippines (which provides movies and children's programming) and
Australis Media Limited (which provides sports programming, as well as PBC,
Disney and various movie options).
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The Company has also entered into an exclusive arrangement with Decathlon
Communications, Inc. to deploy Decathlon's digital compression technology in New
Zealand. Under the terms of that agreement, the Company anticipates that it will
order 10 compression systems (one for each MMDS Channel it leases) and
approximately 200,000 set-top converters. The Company believes that Decathlon is
one of the leading developers of digital compression equipment for wireless
cable television, and that its equipment offers unique advantages over other
compression equipment. Decathlon is presently the only company employing
compression at the head-end, making it the only digital compression technology
that is currently compatible with existing analog head-end equipment.
Decathlon's set-top converter boxes are also fully addressable.
The Company estimates that the cost of building and installing the head-end
and related equipment for the New Zealand system will be approximately U.S.
$1,014,000. Based on the Company's current construction schedule, it anticipates
it will be able to launch the system in 1997, and that by the end of 1997 the
systems will have between 5,000 and 10,000 subscribers. The Company anticipates
that it will have between 90,000 and 100,000 subscribers at the end of the fifth
year of operation.
Office Space. The Company shares approximately 2,500 sq. ft. of leased
office space at 102 West 500 South, Suite 320, Salt Lake City, Utah. The lease
for the space requires monthly payments of $2,200, of which the Company is
responsible for $200. The Company believes the office space is adequate for its
current needs.
Neither AITS nor TWTV Park City lease space for their operations. The
Company anticipates that each system will lease space for its operations once
build-out of its respective system begins.
Employees. The Company does not have any full time employees. It does,
however, have consulting arrangements with two individuals in New Zealand to
provide consulting and technical services. See "Management -- Key Employees."
The Company believes that, once TWTV Park City and AITS launch their
systems, approximately 87% of the employees of each of TWTV Park City and AITS
will be directly involved in subscriber and technical services, and that
approximately 13% of their employees will be involved in administrative
services, including system management. Assuming the build-out and launch of the
Park City, Utah and Auckland, New Zealand systems occur on schedule, the Company
anticipates that AITS will have approximately 30 employees in December, 1997,
and that TWTV Park City will have approximately 14 employees in December, 1997.
PLAN OF OPERATION
The following should be read in conjunction with the Financial Statements
and Notes thereto and the other financial information appearing elsewhere in
this Registration Statement.
Overview. The Company was recently formed in connection with the
Separation, and is in the business of acquiring, developing, and operating
wireless cable television systems both inside and outside of the United States.
The Company's current wireless cable television assets consist of two groups of
wireless cable television channel rights -- 4 channels in the Park City, Utah
area and 30 channels (consisting of the ten MMDS Channels and the twenty 40 GHz
Channels) in the Auckland, New Zealand area. Neither of these channel groupings
presently comprise an operating wireless cable television system, and the
Company will be required to build out the systems and initiate marketing efforts
to acquire subscribers before either group of channel rights will begin
generating operating income.
Since its inception, the Company has sustained net losses and negative cash
flow, due primarily to start-up costs, expenses and charges for depreciation and
amortization of capital expenditures and other costs relating to its development
of its wireless cable systems. The Company expects to continue to experience
negative cash flow through at least fiscal 1997, and may continue to do so
thereafter while it develops and expands its wireless cable systems, even if
individual systems of the Company become profitable and generate positive cash
flow.
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The Company's assets (primarily its interest in TWTV Park City and AITS)
were formerly held and operated by TTI and were contributed to the Company in
connection with the Separation. The financial statements included as part of
this Registration Statement therefore reflect the business activities of AITS
and TWTV Park City through August 1, 1995, the effective date of the Separation.
As of that date, the Company's assets had a value of $1,199,012, of which
approximately $1,192,500 was attributable to AITS' and TWTV Park City's licenses
and other wireless cable channel rights. Total liabilities at that date were
$198,362, including an accrued current liability of $73,087 for license payments
on AITS' MMDS Channel rights and $117,669 payable to TTI for amounts advanced by
TTI on behalf of AITS and/or TWTV Park City as of August 1, 1995.
For the period from November 1, 1994 through August 1, 1995, the Company
had no revenues, but incurred total expenses of $294,068, resulting in a loss
per share (based on the 3,500,000 shares issued in connection with the
Separation) of $.08 per share. By August 1, 1995, the Company had net operating
loss carry-forwards of approximately $363,000, which it may offset against
future taxable income through 2009.
Liquidity and Capital Resources. The Company's business operations will
require substantial capital financing on a continuing basis. The availability of
that financing will be essential to the Company's continued operation and
expansion. There can be no assurances, however, that the Company will be able to
acquire or generate sufficient capital to build-out its existing channel rights
or acquire other channel rights (in operating systems or otherwise). Further,
the Company expects to incur net losses for the foreseeable future, although it
anticipates that its individual systems may generate positive monthly operating
cash flow approximately 12 months after start-up.
The Company anticipates that it will acquire the funding necessary to
finance its future operations through loans, equity investments and other
transactions. There can be no assurance the Company will generate sufficient
cash flow to meet its operating expenses, that the Company will be able to
satisfy its existing or future debt obligations, or that the Company will become
profitable following the launch of a system or the addition of subscribers to
that system. If the Company does not have sufficient cash flow or is unable to
otherwise satisfy its debt obligations, its ongoing growth and operations could
be restricted or adversely affected.
The Company has taken several actions which it believes will improve its
short-term and ongoing liquidity and cash flow. These actions include policies
designed to conserve cash (such as not currently paying its officers or
directors any compensation for their services), and the negotiation of a
commitment agreement with TTI pursuant to which TTI has agreed to loan up to $1
million to the Company during the one-year period following the Separation.
Under the terms of the TTI loan commitment (the "Commitment"), all amounts
advanced by TTI must be repaid, together with interest at the rate of 8% per
annum, on August 1, 2001. At the Company's option, however, its obligations to
TTI may be converted to a term loan (payable in monthly payments of principal
and interest) with a maturity date of 10 years from the first day of the month
following the conversion if (I) the Company is not in default under the
Commitment, (ii) there has been no material change in the Company's financial
condition which TTI reasonably determines to be materially adverse to the
Company or which materially increases TTI's risk of nonpayment, (iii) the
construction and build-out of the Company's systems are, in the sole opinion of
TTI, occurring in accordance with a projected schedule agreed to by the parties,
and (iv) the Company provides TTI with certain documentation, including
information regarding the uses of the amounts advanced by TTI under the
Commitment.
The amounts advanced under the Commitment may be used only for (I)
acquiring, owning, building-out and operating wireless cable television systems
and operations and (ii) the payment of general administrative and office
expenses incurred by the Company in connection with those operations, all in
accordance with a budget to be agreed upon by the parties. No amounts advanced
under the Commitment may be used for general investment purposes unless that
investment is for a period of not more than 30 days and pending the expenditure
of the funds in question for approved purposes. At TTI's request, the Company
has agreed to grant TTI a security interest in all or part of its assets to
secure the Company's repayment obligations.
TTI's obligation to advance funds to the Company under the Commitment is
limited to amounts constituting "advanceable amounts." In general, "advanceable
amounts" are those amounts from TTI's cash flow, accounts receivable and/or
other amounts payable to it as TTI shall reasonably (and in its sole discretion)
determine are available for advance
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to the Company without materially and adversely affecting TTI's ability to
conduct its ongoing business operations and meet its obligations as they become
due. TTI has represented that it will have sufficient "advanceable amounts" to
fund the Commitment. On June 28, 1996, TTI borrowed approximately $2.5 million
from an unrelated commercial lending party which it will use, in part, to fund
the Commitment. As an inducement for the lender (the "Lender") to make the loan
to TTI, the Company issued 145,833 shares of its common stock (the "Lender
Stock") to the Lender for a total payment of $1,600.00. The Lender Shares
represented approximately 4% of the Company's issued and outstanding shares.
Material Expected Commitments. The Company's expected commitments include
those associated with its current contractual obligations for TWTV Park City and
AITS and those arising as a result of its acquisition and/or development of
those or any other channel groups or operating systems it acquires.
Commitments for Existing Systems.
Auckland, New Zealand System. The Company estimates that the cost to
launch the AITS system will be approximately $1,014,000 (consisting of
approximately $750,000 for head-end equipment, $150,000 for tower related
equipment, $114,000 for compression and miscellaneous equipment, and that the
period between the Company's initial build-out operations and the launch of the
fully functional system will be approximately 6 months. The Company anticipates
that the system will have between 5,000 and 10,000 subscribers within 12 months
of its launch, and that it will have between 90,000 and 100,000 subscribers by
the end of the 5th year after launch.
In addition to the payments described in the preceding paragraph, AITS will
be required to make certain lease payments with respect to its channels, as
follows:
Dollar Amount
Year (in New Zealand Dollars)
1996 $97,164
1997 $97,164
1998 $97,164
1999 $57,164
Thereafter $164,163
Total Future Lease Payments $512,819
The lease payments shown above are exclusive of the participation payments
required under one of the AITS channel leases, which requires AITS to pay to
Telecom 12.5% of the gross revenue from the operation of 2 of AITS' 10 MMDS
licenses. The Company estimates that this participation fee will be
approximately $218,215 in 1996, $1,124,148 in 1997, $2,459,302 in 1998,
$3,508,665 in 1999 and $4,659,079 on a yearly basis thereafter, assuming a
subscriber base of approximately 10,010, 34,901, 54,832, 74,763 and 97,103 in
each of those years, respectively.
Park City, Utah System. TWTV Park City currently has a substantial
portion of the equipment it will need for an operating system. In order to
complete the system, it will need to expend approximately $350,000 for
additional head-end equipment, approximately $10,000 for additional tower
related equipment, approximately $400,000 for compression and miscellaneous
equipment and approximately $1,000,000 for additional antenna, down converter
and installation expenses. The Company also anticipates that the set-top
converters necessary to supply 5,000 subscribers will be approximately
$2,250,000. The Company anticipates that the initial build-out of the TWTV Park
City system will begin in 1997, and will take approximately 9 months, and the
system will have approximately 1,100 subscribers within 12 months of its launch.
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Commitments for Additional Systems. The Company estimates that the launch
of a new wireless cable system in each market for which it controls sufficient
channel rights will require approximately $950,000 in start-up expenses
(exclusive of any acquisition costs for the license or lease rights), consisting
of approximately $750,000 for wireless cable system head-end and transmission
equipment, and $200,000 for other pre-operational start-up expenses. In
addition, each subscriber added to a system after launch will require an
incremental installation cost of approximately $300 to $650 for equipment and
labor at subscriber locations. Although the Company anticipates that it will be
required to make head-end and transmission expenditures, as well as certain
other start-up expenditures, before it can begin to deliver programming to its
subscribers, installation costs for individual subscribers will be incurred only
after the subscriber signs up for the Company's services.
The actual amounts required to launch a system and for development and
expansion could be more than the estimated amounts described above if, among
other things, the development of a particular system is more difficult than
anticipated or if the Company decides to increase its estimated subscriber
installation activities. Actual expenditures could
be less than the estimated expenditures for a system if, among other
things, the development of the system is financed through debt, equipment lease
or financing, or other arrangements.
The Company expects that any financing it obtains will be structured as
secured loans to the operating subsidiaries holding the systems. The Company may
also finance its operations through the sale of equity (either in a public or
private offering) and/or through equipment leasing or other financing
arrangements. There can be no assurance, however, that such additional
financing, whether debt, equipment leasing or equity, will be available, or
that, if available, the terms will be acceptable to the Company.
MANAGEMENT
Directors, Executive Officers and Other Key Employees. The Company's
directors, executive officers and key employees, and their respective ages and
positions with the Company, are set forth below in tabular form. Biographical
information on each person is set forth following the tabular information. There
are no family relationships between any of the Company's directors or executive
officers, with the exception of Lance D'Ambrosio and Troy D'Ambrosio, who are
brothers. The Company's Board of Directors is currently comprised of 3 members,
each of whom are elected for a 1 year term. Executive officers are chosen by and
serve at the discretion of the Board of Directors.
Name Age Position
Lance D'Ambrosio 39 President and Director of the
Company
Paul Gadzinski 42 Executive Vice President
Troy D'Ambrosio 35 Vice President and
Director of the Company
Anthony Sansone 31 Secretary and Treasurer of
the Company
George Sorenson 40 Director of the Company
Lance D'Ambrosio - Mr. D'Ambrosio is the President and a director of the
Company, and holds other executive officer and director positions in the
Company's subsidiaries. Mr. D'Ambrosio is responsible for the Company's
acquisitions, strategic planning and mergers, and is responsible for all
financing plans for the Company. Mr. D'Ambrosio currently also serves as the
President, Chief Executive Officer and a director of TTI, is President and a
director of WHI and holds executive offices and/or director positions in WHI's
subsidiaries. Between 1987 and 1992, Mr. D'Ambrosio was the President of
Bridgeport Financial, Inc., a holding company that acquired a full service
broker/dealer securities operation. During this period, Mr. D'Ambrosio was also
the President of First Eagle Investment, a securities broker/dealer. He was also
President of Tri-Bradley Investments of Utah, which was primarily involved in
raising venture capital for
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investments in high-tech companies. Mr. D'Ambrosio holds a B.S. in
Marketing and Management from the University of Utah, which he obtained in 1979.
Paul Gadzinski - Mr. Gadzinski is the Executive Vice-President of the
Company. Since 1994, Mr. Gadzinski has also served as Vice-President for Market
Development for TTI and as Vice-President of Marketing for WHI. Between 1989 and
1994, Mr. Gadzinski served as Director of Marketing and was subsequently
promoted to Vice President and General Manager of Cross Country Wireless Cable,
a 40,000 plus subscriber wireless cable system located in Riverside, California
that was recently acquired by Pacific Telesis Group. Between 1985 and 1989, Mr.
Gadzinski was the Marketing Director and Operations Manager of Cablevision
International, a traditional cable operation located in Luquillo, Puerto Rico
(now doing business as TCI Cablevision of Puerto Rico, Inc.). Mr. Gadzinski
received an Associate of Arts Degree in Small Business Management from Santiago
Community College.
Troy D'Ambrosio - Mr. D'Ambrosio is the Vice-President and a director of
the Company. Mr. D'Ambrosio also holds other executive positions in TTI (where
he serves as Vice-President of Administration, Secretary and a director) and
WHI's subsidiaries. Mr. D'Ambrosio is also Vice President of WHI. From July of
1992 to November of 1993, Mr. D'Ambrosio was a vice-president and a partner in
Reputation, a public relations firm specializing in legal, economic and
government relations for business. Between 1985 and 1992, Mr. D'Ambrosio was
with American Stores, mostly recently as Vice-President of Corporate
Communications and Government Relations. Mr. D'Ambrosio received a Bachelor of
Arts in Political Science from the University of Utah in 1982.
Anthony Sansone - Mr. Sansone is the Secretary and Treasurer of the Company
and serves as its controller. Mr. Sansone is also the Treasurer and controller
of TTI. During 1993 and 1994, Mr. Sansone was the controller, Secretary and the
director of shareholder relations for Paradigm Medical Industries, Inc., a
manufacturer of ophthalmic cataract removal devices. During 1992 and 1993, he
was the assistant controller of HGM Medical Lasers, Inc., which manufactures and
sells surgical and dental lasers. Between 1988 and 1992, Mr. Sansone was the
assistant to the Vice President of Public Relations and the assistant to the
chairman of the board for American Stores Company, a large retail grocery and
drug store chain. Mr. Sansone received a Bachelors of Science Degree in
Accounting from Utah State University in 1988 and a Masters of Business
Administration from the University of Utah in 1991.
George Sorenson - Mr. Sorenson is a Director of the Company and also serves
as a director of TTI. Mr. Sorenson is a principal in FondElec Group, Inc., a
corporation which invests in energy and electricity markets in Latin America and
advises United States corporations on their investments in that area. Between
1990 and 1992, Mr. Sorenson was the Associate Director of Bear, Sterns & Co.,
Inc., where he was principally responsible for its international investment
banking in the Far East and coordinated product development, marketing and
account coverage for Japanese accounts in New York and Tokyo. Between 1983 and
1990, Mr. Sorenson worked for Drexel Burnham & Lambert, Inc., most recently as a
Senior Vice President in Tokyo, Japan, where he managed the company's high yield
bond operations in Asia. Mr. Sorenson received a Bachelors of Arts Degree in
Finance from the University of Utah in 1979, and a Masters in International
Business Management in 1981 from the American Graduate School of International
Management.
In addition to the officers and directors listed above, the Company will
rely on the services of several key employees and/or consultants. These include
Nicholas Fisher, a New Zealand barrister and solicitor, who acts as consultant
to the Company with respect to New Zealand legal affairs and the proposed
build-out and operation of the New Zealand system. Mr. Fisher represents a
number of communications clients (both locally and internationally), and
specializes in properties and communications law. Mr. Fisher received his
Bachelor of Laws from Auckland University in 1972. The Company has retained Mr.
Fisher as a consultant with respect to the application of New Zealand's
communications and investment laws to the Company's operations in New Zealand.
Under the terms of Mr. Fisher's agreements with the Company, the Company pays
Mr. Fisher for his consulting services on an hourly basis and at his normal
billing rate.
The Company also has a consulting arrangement with Robert Burgess, also a
New Zealand resident. Mr. Burgess primarily advises the Company with respect to
technical and administrative matters regarding the New Zealand wireless cable
industry. Mr. Burgess has held a number of consulting positions for listed
public New Zealand companies in the communications industry. Mr. Burgess is a
former director of Video Network News and between 1981 and 1988
16
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<PAGE>
was Managing Director of Visionhire Holdings, a listed public New Zealand
company. Under the terms of Mr. Burgess' arrangement with the Company, the
Company pays him $1,000 per month for his consulting services.
Director Compensation. Directors do not receive cash compensation for
serving on the Board of Directors, but are reimbursed for expenses they incur in
connection with attending Board or committee meetings.
EXECUTIVE COMPENSATION
None of the Company's executive officers has received any cash
compensation, bonuses, stock appreciation rights, long-term compensation, stock
awards or long-term incentive rights from the Company since its inception.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has not entered into, and does not currently plan to enter
into, any transaction for which disclosure must be made under Item 404 of
Regulation S-B, as promulgated under the Act.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table assumes the distribution of the common shares issued to
TTI for the benefit of its shareholders as having occurred on the effective date
of the Separation, August 1, 1995, and, based on that assumption, shows the
beneficial ownership (based on the distribution list prepared by TTI and the
Company with respect to the distribution of the common shares by the escrow
agent) of the Company's common stock as of the date hereof by (I) each
stockholder known by the Company to be the beneficial owner of more than 10% of
the outstanding shares of common stock, (ii) each director, (iii) each executive
officer and (iv) all directors and executive officers as a group. The following
table also reflects the issuance of the Lender Shares. The relative number of
the 3,500,000 shares to be distributed to the TTI shareholders is based in part
on those shareholders' respective interests in TTI, and the numbers set forth
below assume the exercise of all outstanding options by those shareholders to
acquire TTI shares as of the date of the Separation. The offices and positions
shown in parentheses after the names of certain of the persons shown below state
the current offices and positions held by those persons in the Company's
management. Unless otherwise indicated, each such person (either alone or with
family members) has been deemed to have authority or dispositive power of the
shares listed opposite that person's name:
17
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<PAGE>
<TABLE>
<CAPTION>
Number of Percent of
Name and Address Shares Class Class1
<S> <C> <C>
Lance D'Ambrosio (President, Director) 291,5322 Common 7.99%
6385 Shenandoah Park Ave
Salt Lake City, Utah 84121
Paul Gadzinski (Executive Vice President) 24,305 Common *
6649 Wintertree Drive
Riverside, California 92506
Troy D'Ambrosio (Vice President, Director) 33,173 Common *
2914 Nila Way
Salt Lake City, Utah 84124
Anthony Sansone (Secretary and Treasurer) 4,861 Common *
3692 South 645 East
Salt Lake City, Utah 84106
George Sorenson (Director) 14,1793 Common *
12 Fairgreen Lane
Old Greenwich, Connecticut 06870
F. Lorenzo Crutchfield, Jr. 1,214,3604 Common 33.3%
3 Crossfield Court
Greensboro, North Carolina 27408
George D'Ambrosio 472,3815 Common 12.96%
5151 South 1410 East
Holladay, Utah 84117
All Officers and Directors as a Group 368,050 Common 10.09%
(5 persons)
* Less than 1%
1 Assumes 3,645,833 issued and outstanding common shares, par value $.001
per share, and the effective distribution of all such shares currently held by
the escrow agent pursuant to the terms of the Separation.
2 Includes 34,729 shares held in the name of Mr. D'Ambrosio and 256,803
shares held in the name of entities over which Mr. D'Ambrosio has voting and/or
beneficial control, and for which he does not disclaimed beneficial ownership.
3 Includes 1,216 shares held in the name of Mr. Sorenson and 12,963 shares
held in the name of an entity over which Mr. Sorenson has voting and/or
beneficial control, and for which Mr. Sorenson does not disclaim beneficial
ownership.
4 Includes 1,184,546 shares held in the name of Mr. Crutchfield and 29,814
shares held in the name of an affiliate of Mr. Crutchfield over which he has
voting and/or beneficial control, and for which he does not disclaim beneficial
ownership.
5 Includes 63,355 shares held in the name of Mr. D'Ambrosio and 409,026
held in the name of entities over which Mr. D'Ambrosio has voting and/or
beneficial control, and for which he does not disclaim beneficial ownership. Mr.
D'Ambrosio is the father of Lance D'Ambrosio and Troy D'Ambrosio.
18
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
General. The authorized capital stock of the Company consists of 15 million
shares of common stock, par value $.001 per share, and 5 million shares of
preferred stock, par value $0.01 per share. Currently, 3,645,833 shares of the
Company's common stock are issued and outstanding (and are fully-paid and
non-assessable), of which 3,500,000 of such shares are held by an escrow agent
for the benefit of TTI's shareholders pursuant to the terms of the Separation.
No shares of preferred stock are issued or outstanding. Upon the distribution of
the common shares held in escrow, the outstanding shares of the Company will be
held of record by approximately 432 stockholders.
Common Stock. The holders of common stock are entitled to vote as a single
class on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any then outstanding preferred stock, all
holders of common stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available for
distribution. In the event of a liquidation, dissolution or winding up of the
Company, holders of the common stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
then outstanding preferred stock. Holders of common stock have no preemptive
rights and no right to convert their common stock into any other securities.
There are also no redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of common stock are fully paid and nonassessable.
In the election of directors, the holders of the common stock will be
entitled to elect the Company's directors. The holders of the common stock are
not entitled to cumulative voting in the election of directors. In general, each
of the Company's board of directors is elected for a 1 year term, and any action
by the Board of Directors will require the approval of the majority of the
members of the Board.
Preferred Stock. The Company's organizational documents authorize the Board
of Directors to issue the preferred stock in classes or series and to establish
the designations, preferences, qualifications, limitations, or restrictions of
any class or series with respect to the rate and nature of dividends, the price
and terms and conditions on which shares may be redeemed, the terms and
conditions for conversion or exchange of the preferred stock into any other
class or series of the stock, voting rights and other terms. The Company may
issue, without approval of the holders of common stock, preferred stock which
has voting, dividend or liquidation rights superior to the common stock and upon
terms which may adversely affect the rights of holders of common stock. The
issuance of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
adversely affect the voting power of the holders of common stock and, under
certain circumstances, make it more difficult for a third party to gain control
of the Company.
PART II
MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
The Company's equity securities are not traded on any established public
trading market, and its currently issued and outstanding common shares, in the
total number of 3,645,833 shares, are not subject to any outstanding options or
warrants to purchase, nor do they constitute securities convertible into, any
other equity security of the Company. Further, none of the currently issued and
outstanding shares of the Company could be sold pursuant to Rule 144 under the
Securities Act of 1933, as amended (the "1933 Act"). The Company has not agreed
to register any such shares under the 1933 Act for sale by such security
holders. No portion of the shares currently issued and outstanding are being, or
have been proposed to be, publicly offered by the Company except as provided
under the terms of the Separation. Under those terms, 3,500,000 currently issued
common shares of the Company are held by the escrow agent for distribution to
TTI shareholders of record as of August 1, 1995, and will be distributed to the
TTI shareholders only after the compliance by TTI and the Company of certain
federal securities law requirements, including the effectiveness of this
Registration Statement.
19
<PAGE>
<PAGE>
Under the terms of the Company's sale of the Lender Shares to the Lender,
it agreed to provide the Lender with notice of any registration rights it grants
to any third party, and to provide the Lender with registration rights
comparable to the most favorable registration rights that it grants to other
parties from time to time. The Company also agreed to provide the Lender with
(I) a right to acquire any newly issued securities of the Company (which right
will terminate on, and not apply to, an initial underwritten public offering of
the Company's common stock or the 5th anniversary of the sale of the Lender
Shares to the Lender), and (ii) a right to require the Company to purchase all
or a portion of the Lender Shares (which right will expire on the closing of an
initial underwritten public offering of the Company's common stock) for the
greater of the Company's book value per share, or the 30 day average of the
closing prices of the Company's common stock prior to the exercise of the put if
it is listed on the Nasdaq National Market System, or the 30 day average of the
last sales price of the Company's common stock if it is traded over the counter,
or the value agreed to by the parties (unless there is no agreement, and in
which case the value will be established by appraisal).
The Company has not declared or paid any cash dividends on its common stock
at any time and does not anticipate doing so in the foreseeable future. Under
Nevada law, the Company may pay a dividend on its common shares only if, after
giving effect to the dividend, the Company would be able to pay its debts as
they become due in the usual course of business or the Company's total assets
are in excess of the sum of its total liabilities plus the amount that would be
needed, if the Company were to be dissolved at the time of the dividend payment,
to satisfy any preferential liquidation or rights other than those of the
Company's common shareholders. In determining whether a dividend is allowed, the
Board of Directors may rely on financial statements prepared in accordance with
accounting practices that are reasonable under the circumstances, a fair
valuation of the Company's assets and liabilities, or any other method that the
Board deems reasonable under the circumstances.
If a director relies in good faith on the books of account of the Company
(or statements prepared by any of its officials) as to the value and the amount
of its assets, liabilities or net profits, or any other fact pertinent to the
amount of money from which dividends may be properly declared, that director is
not liable to either the Company or its creditors for the Company's payment of
that dividend. If, however, directors determine a dividend may be paid based on
their gross negligence (or, in the process, willfully ignore facts which show a
dividend may not be paid), the directors voting for that dividend are jointly
and severally liable to the Company (and, in the event of its dissolution or
insolvency, to its creditors at the time of the violation) for the lesser of the
full amount of the dividend paid or any loss sustained by the Company by reason
of the dividend payment.
LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding, and its
property is not the subject of any pending legal proceeding, other than routine
litigation incidental to its business operations. There is also no legal
proceeding pursuant to which any director, officer or affiliate of the Company,
or any owner of record or beneficially of 10% or more of any class of its voting
securities is a party adverse to the Company or in which any such person has a
material interest adverse to the Company.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no changes in or disagreements with accountants on any
accounting or financial disclosure matter since the Company's inception. Jones,
Jensen & Company, of Salt Lake City, Utah, acts as the Company's independent
accountants.
20
<PAGE>
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
The Company has entered into only two transactions involving the issuance
of its equity securities. The first issuance, the Separation, occurred in
connection with a transaction pursuant to which TTI contributed to the Company
all right, title and interest it held in and to AITS and TWTV Park City in
exchange for 3,500,000 shares of the Company's common stock. Those shares were
immediately distributed to the escrow agent, to be held for the benefit of TTI's
shareholders of record as of August 1, 1995, and subject to the satisfaction by
the Company and TTI of certain securities laws requirements, including the
effectiveness of this Registration Statement. Upon the satisfaction of those
requirements, the escrow agent will distribute the shares to the TTI
shareholders in accordance with the terms of the Separation documents. In
general, the distribution will be non-pro rata, with the shareholders other than
the inside shareholders of TTI acquiring shares in the Company on the basis of
approximately 1.6 shares of the Company's common stock for each 10 shares of TTI
stock they hold, and with the inside shareholders of TTI acquiring shares of the
Company at substantially reduced ratios. As a result of the non-pro rata
distribution of the Company's common shares to the TTI shareholders, the
non-inside TTI shareholders will own beneficially approximately 54% of the
issued and outstanding common shares of the Company, versus approximately 46% of
the issued and outstanding common shares of TTI currently held by them. Upon the
distribution of the shares by the escrow agent, the Company will have
approximately 432 shareholders. The Company believes that, because the shares
issued in connection with the Separation are being held in escrow for the
benefit of the TTI shareholders and will not be distributed to those
shareholders until after the effective date of this Registration Statement, the
distribution of the shares to the TTI shareholders should not constitute a sale
of an unregistered security in violation of the federal securities acts.
The second issuance of the Company's common stock resulted from the
Company's issuance to the Lender of the Lender Shares as an inducement for the
Lender to provide financing to TTI. It is anticipated that a portion of this
financing will be used by TTI to fund the Commitment. In connection with the
issuance of the Lender Shares, the Lender represented and warranted to the
Company that (I) it was aware that the Lender Shares had not been registered
under federal securities laws, (ii) it was acquiring the Lender Shares for its
own account for investment purposes and not with a view to or for resale in
connection with any "distribution" for purposes of the Securities Act of 1933,
(iii) it understood that the Lender Shares must be indefinitely held unless they
are registered or an exemption from registration applies to their disposition,
(iv) it was aware that the certificate representing the Lender Shares would bear
a legend restricting their transfer, and (v) it was aware that there was no
public market for the shares. The Company believes that, in light of the
foregoing, and in light of the sophisticated nature of the Lender and the fact
that the Lender constituted the only purchaser of the Lender Shares, the sale of
the Lender Shares to the Lender should not constitute the sale of an
unregistered security in violation of the federal securities laws.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Company's Articles of Incorporation, the Company is required to
indemnify its directors and officers to the fullest extent allowed by Nevada
law. Under Nevada law, a corporation's indemnification authority is relatively
broad, and includes the right to indemnify any officer or director who was or is
a party, or is threatened to be made a party to, any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative), except an action by or in right of the corporation, by reason of
the fact that the person was an officer or director of the corporation (or is or
was serving at the request of the corporation as an officer or director of
another corporation or entity), against all expenses, including attorneys fees,
judgments, fines and amounts paid in settlement, and which are actually and
reasonably incurred by the officer or director in connection with the action,
suit or proceeding. The right to such indemnification is premised on the
person's ability to show that he acted in good faith and in a manner which he
reasonably believed to be in (or not opposed to) the best interest of the
corporation. In order for a director or an officer to be indemnified for
criminal actions, the officer or director must have had no reasonable cause to
believe that the conduct in question was unlawful.
In addition, a corporation may indemnify any officer or director under
circumstances similar to those described in the preceding paragraph against
expenses (including amounts paid in settlement and attorneys fees actually and
reasonable incurred by that person) in connection with the defense or settlement
of the action or suit. This indemnification is also premised on the person's
ability to show that he acted in good faith and in a manner which he reasonably
believed
21
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<PAGE>
to be in (or not opposed to) the best interest of the corporation. However,
indemnification for expenses is limited to the amount that the court, after
viewing all of the circumstances of the claim, believes is reasonable under
those circumstances.
Under Nevada law, corporations may also purchase and maintain insurance or
make other financial arrangements on behalf of any person who is or was a
director or officer (or is serving at the request of the corporation as a
director or officer of another corporation or entity) for any liability asserted
against that person and any expenses incurred by him in his capacity as a
director or officer. These financial arrangements may include the creation of
trust funds, self insurance programs, the granting of security interests,
letters of credit, guarantees and insurance policies.
The Company has not sought or obtained any director or officer insurance
coverages or made any other arrangements for the funding of any indemnification
obligations it might incur under the terms of its Articles of Incorporation and
Nevada law.
F/S
The following financial information is provided in accordance with the
requirements of Item 310 of Regulation S-B.
INDEX TO FINANCIAL STATEMENTS
Item Page
Independent Auditor's Report 24
Consolidated Balance Sheet 25
Consolidated Statement of Operation 27
Consolidated Statement of Stockholder's Equity 28
Consolidated Statement of Cash Flow 29
Notes to Consolidated Financial Statements 30
22
<PAGE>
<PAGE>
WIRELESS CABLE & COMMUNICATIONS, INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 1, 1995
23
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Wireless Cable & Communications, Inc.
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheet of Wireless
Cable & Communications, Inc. and subsidiaries (a development stage company) as
of August 1, 1995 and the related consolidated statements of operations,
stockholders' equity, and cash flows for the period then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Wireless
Cable & Communications, Inc. and subsidiaries (a development stage company) as
of August 1, 1995 and the consolidated results of their operations and their
cash flows for the period then ended, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company does not have revenue sufficient to cover its
operating costs and its current liabilities exceed its current assets. Unless
the Company is able to generate sufficient revenue to cover its operating costs
and its current liabilities, there is substantial doubt about its ability to
continue as a going concern. Management's plan in regard to these matters are
also described in Notes 7 and 9. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Jones, Jensen & Company
August 23, 1995
24
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<PAGE>
WIRELESS CABLE & COMMUNICATIONS, INC.
(A Development Stage Company)
Consolidated Balance Sheet
ASSETS
August 1,
1995
------------
CURRENT ASSETS
Cash $ 2,000
------------------
Total Current Assets 2,000
------------------
PROPERTY AND EQUIPMENT (Note 3)
Equipment 13,000
Less - accumulated depreciation (8,883)
------------------
Total Property and Equipment 4,117
------------------
OTHER ASSETS
Licenses, net (Note 5) 1,192,500
Organization costs, net (Note 4) 395
------------------
Total Other Assets 1,192,895
------------------
TOTAL ASSETS $ 1,199,012
=================
The accompanying notes are an integral part of these financial statements
25
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<PAGE>
WIRELESS CABLE & COMMUNICATIONS, INC.
(A Development Stage Company)
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
August 1,
1995
----------------------
CURRENT LIABILITIES
Accounts payable $ 4,328
Accrued expenses (Note 5) 73,087
Advances from related parties (Note 6) 3,278
--------------------
Total Current Liabilities 80,693
--------------------
LONG-TERM DEBT (Note 7) 117,669
--------------------
Total Liabilities 198,362
--------------------
COMMITMENTS AND CONTINGENCIES (Notes 5 and 8) -
--------------------
STOCKHOLDERS' EQUITY
Preferred stock; $0.01 par value, 5,000,000 shares
authorized and -0- shares issued and outstanding -
Common stock; $0.01 par value, 15,000,000 shares
authorized and 3,500,000 shares issued and outstanding 35,000
Additional paid-in capital 1,328,545
Accumulated deficit (362,895)
-------------------
Total Stockholders' Equity 1,000,650
-------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,199,012
===================
The accompanying notes are an integral part of these financial statements
26
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<PAGE>
WIRELESS CABLE & COMMUNICATIONS, INC.
(A Development Stage Company)
Consolidated Statement of Operations
For the Period
From
November 1,
1994 Through
August 1,
1995
----------------------
REVENUES
Sales $ -
----------------------
Total Revenue -
----------------------
EXPENSES
Depreciation and amortization 103,241
Lease expense 173,187
Interest expense 4,353
General and administrative 13,287
----------------------
Total Expenses 294,068
----------------------
NET INCOME (LOSS) $ (294,068)
======================
INCOME (LOSS) PER SHARE $ (0.08)
======================
The accompanying notes are an integral part of these financial statements
27
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<PAGE>
WIRELESS CABLE & COMMUNICATIONS, INC.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
Additional
Common Stock Paid-in Accumulated
---------------------
Shares Amount Capital Deficit
--------- --------- --------- ---------
Balance, -- $ -- $ -- $ --
October 31, 1994
Common stock issued
to parent company in
acquisition of assets
at $.37 per share 3,500,000 35,000 1,328,545 (68,827)
Net loss for the period
ended August 1, 1995 -- -- -- (294,068)
--------- -------- --------- ---------
Balance,
August 1, 1995 3,500,000 $ 35,000 $1,328,545 $ (362,895)
========= ========== ========== ==========
The accompanying notes are an integral part of these financial statements
28
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<PAGE>
WIRELESS CABLE & COMMUNICATIONS, INC.
(A Development Stage Company)
Consolidated Statement of Cash Flows
For the Period
From
November 1,
1994 Through
August 1,
1995
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (294,068)
Adjustments to reconcile net income (loss)
to cash flows:
Depreciation and amortization 103,241
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable
and accrued expenses 79,512
----------------------
Net Cash Provided by Operating Activities (111,315)
----------------------
CASH FLOWS FROM INVESTING ACTIVITIES -
----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 113,315
----------------------
Net Cash Provided (Used) by Financing Activities 113,315
----------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,000
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD -
----------------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 2,000
======================
CASH PAID FOR
Interest $ -
Income taxes $ -
NON CASH FINANCING ACTIVITIES
Issuance of common stock to parent company
in acquisition of assets $ 1,294,718
The accompanying notes are an integral part of these financial statements
29
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<PAGE>
WIRELESS CABLE & COMMUNICATIONS, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
August 1, 1995
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Wireless Cable & Communications, Inc. (the Company) is involved in the
telecommunications industry with planned operations in wireless cable television
systems both domestically and internationally. The Company is currently seeking
to acquire additional cable channels and licenses within the wireless cable
industry.
On July 26, 1995, the Board of Directors of Transworld Telecommunications,
Inc. (TTI) voted to spin-off to its shareholders two of its subsidiaries, in
transactions qualifying under sections 355 and 368 (a) (1) (D) of the Internal
Revenue Code of 1986, into a Nevada corporation to be formed and called Wireless
Cable & Communications, Inc. (the Company). The two subsidiaries spun-off were
Auckland Independent Television Services, Ltd. in New Zealand and Transworld
Wireless Television, Inc. in Park City, Utah, both of which are in the wireless
cable business. The Company was incorporated under the laws of the State of
Nevada on July 31, 1995.
On August 1, 1995, the Company and TTI effected the spin-off
through the Company's issuance to TTI of 3,500,000 shares of
its common stock, which TTI then transferred to an escrow
agent to be held for the benefit of the Company's shareholders.
The distribution of the 3,500,000 shares from the escrow agent
will be delayed until the Company and TTI have complied
with certain requirements of the securities laws. Upon
completion of the terms in the escrow agreement, the 3,500,000
shares will be distributed to the Company's shareholders
of record as of August 1, 1995, on a non-pro rata basis, with
the management and principal shareholder relinquishing a portion
of their shares in favor of the public shareholders. The public
shareholders will receive 1.62 shares of the Company's common
stock for each 10 shares of TTI's common stock.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
b. Loss Per Share
The computation of loss per share of common stock is based on the
weighted average number of shares outstanding at the date of the
financial statements.
c. Provision for Taxes
At August 1, 1995,the Company has net operating loss carryforwards
of approximately $363,000 that may be offset against future
taxable income through 2009. No tax benefit has been reported in
the financial statements, because the Company believes there is a
50% or greater chance the net operating loss carryforwards will
expire unused. Accordingly, the potential tax benefits of the
net operating loss carryforwards are offset by a valuation
allowance of the same amount.
d. Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Principles of Consolidation
The consolidated financial statements include the accounts of
Wireless Cable & Communications, Inc. and its subsidiaries. The
Company's subsidiaries include Auckland Independent Television
Services, Ltd. (AITS) which as of August 1, 1995 was owned 94.9%
by the Company, and Transworld Wireless Television, Inc., (TWTI)
which is a wholly-owned subsidiary. All significant intercompany
accounts and transactions have been eliminated in the
consolidation. The statements of operations and cash flows
represent the activities of AITS and TWTI for the period November
1, 1994 through August 1, 1995.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Major additions and
improvements are capitalized. Minor replacements, maintenance and
repairs that do not increase the useful life of the assets
are expensed as incurred. Depreciation of property and equipment
is determined using the straight-line method over the expected
useful life of the assets of 5 years.
NOTE 4 - ORGANIZATION COSTS
Organization costs are recorded at cost. Amortization of the
organization costs is determined using the straight-line method
over the expected useful life of the asset of 10 years.
Accumulated amortization of the organization costs at August 1,
1995 was $150.
NOTE 5 - LICENSES
The Company has acquired certain lease and license agreements for
various multipoint multichannel distribution service (MMDS or
Wireless Cable) channels and frequencies within New Zealand and
Park City. Each license is for a specified number of channels and
frequencies for a specified length of time. The licenses were
acquired from the Company's parent company, Transworld
Telecommunications, Inc., through a spin-off and are recorded at
predecessor cost.
Amortization of the licenses is determined using the straight-line
method over the expected useful lives of the leases. Accumulated
amortization of the licenses at August 1, 1995 was $157,500.
Each license and lease has an annual license fee that is to be
paid in advance. Future lease payments that the Company will be
obligated to make are as follows:
1995 (current year payments) $ 73,087
1996 97,164
1997 97,164
1998 97,164
1999 57,164
2000 and thereafter 164,163
-------------------
Total future lease payments $ 585,906
===================
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company has received non-interest bearing advances from its
parent company, Transworld Telecommunications, Inc., in order to
pay minimal operating expenses. As of August 1, 1995, $3,278 was
payable by the Company as a result of these advances.
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NOTE 7 - LOAN AGREEMENT
The Company has entered into an agreement with its parent company,
Transworld Telecommunications, Inc.(TTI), relating to a commitment
by TTI to loan the Company, during the 12 month period beginning
August 1, 1995, up to $1,000,000 for the purpose of facilitating
the acquisition, operation, build-out and maintenance of the
Company's business operations. This amount is in addition to the
$117,669 that is already owed to TTI at August 1, 1995. Interest
on the entire amount will accrue at 8% per annum and shall be due
and payable in full on August 1, 2001. As of August 1, 1995, the
Company has not been advanced any amounts related to the
$1,000,000.
NOTE 8 - CONTINGENCY
The Company currently owes accrued lease payments of $73,087 for
its license agreements (Note 5). The Company is currently
involved in a dispute over an additional $150,000 of consideration
for the assets purchased in connection with two channel
frequencies in New Zealand. Management does not believe that the
Company will have to pay the amount because of failure by the
third party to meet the terms of the contract to acquire these
channels. Since the probability of payment is considered to be
remote, the amount is not accrued at August 1, 1995.
NOTE 9 - GOING CONCERN
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going
concern which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. The
Company has incurred losses from its inception through August 1,
1995. It has not established revenues sufficient to cover its
operating costs, to allow it to continue as a going concern.
Management believes that the Company will soon be able to generate
revenues sufficient to cover its operating costs. In the interim,
TTI has committed to meeting its operations costs. (see Note 7)
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INDEX TO EXHIBITS
Exhibit No. Exhibit Page
3.1 Articles of Incorporation 34
3.2 Bylaws 37
10.1 Agreement and Plan of Reorganization 50
10.2 Escrow Agreement between Fidelity 57
Transfer Company, TTI and the
Company
10.3 Commitment Agreement between the 63
Company and TTI
11.1 Computation of Earnings Per Share 73
21.1 Subsidiaries of the Registrant 74
23.1 Consent of Independent Certified 75
Public Accountants
27.1 Financial Data Schedule 76
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Company has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Name Title Date
By: /s/ Lance D'Ambrosio President (Principal Executive July 31,
1996
Lance D'Ambrosio and Officer) Director
By: /s/ Paul Gadzinski Executive Vice President July
31, 1996
Paul Gadzinski
By: /s/ Troy D'Ambrosio Vice President and Director
July 31, 1996
Troy D'Ambrosio
By: /s/ Anthony Sansone Secretary and Controller July 31,
1996
Anthony Sansone Principal Accounting Officer)
By: /s/ George Sorenson Director July 31,
1996
George Sorenson
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EXHIBIT 3.1
ARTICLES OF INCORPORATION
ARTICLES OF INCORPORATION
OF
WIRELESS CABLE & COMMUNICATIONS, INC.
The undersigned natural person over the age of 18 years, acting as the
incorporator of a corporation under the Nevada domestic and foreign corporation
laws, as codified at Chapter 78 of the Nevada Revised Statutes ("Statutes"),
adopts the following articles of incorporation for such corporation:
ARTICLE I
The name of the corporation is Wireless Cable & Communications,
Inc. (the "Corporation").
ARTICLE II
The name of the natural person or corporation designated as the
Corporation's resident agent and the street address of the resident agent where
process may be served upon the Corporation is: The Corporation Trust Company of
Nevada, One East first Street, Reno, Nevada 89501. The acknowledgment of the
resident agent's acceptance of that position is set forth below.
ARTICLE III
The Corporation shall have authority to issue Twenty Million
(20,000,000) shares of stock. Fifteen Million (15,000,000) of such shares are
designated "Common Stock" and Five Million (5,000,000) shares are designated
"Preferred Stock". The holder of each share of Common Stock and Preferred Stock
shall have one vote on all matters, and shall not be entitled to vote as a class
unless otherwise provided by law or by the board of directors, which may
restrict the voting rights of any series of Preferred Stock in the exercise of
its discretion granted pursuant to the following paragraph. The board of
directors shall prescribe the classes, series and the number of each class or
series of the Preferred Stock and the voting powers, designations, preferences,
limitations, restrictions and relative rights of each class or series of the
Preferred Stock.
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ARTICLE IV
The members of the governing board of the Corporation shall be
styled as "Directors". The initial board of directors shall be comprised of
three directors, whose names and addresses are set forth below: Lance D'Ambrosio
102 West 500 South Suite 320 Salt Lake City, Utah 84101
Troy D'Ambrosio
102 West 500 South Suite 320
Salt Lake City, Utah 84101
George Sorenson
102 West 500 South Suite 320
Salt Lake City, Utah 84101
ARTICLE V
The name and post office address of the incorporator signing
these Articles of Incorporation is as follows: William R. Gray Parsons Behle &
Latimer 201 South Main Street, Suite 1800 P.O. Box 45898 Salt Lake City, Utah
84145-0898
ARTICLE VI
To the fullest extent permitted by the Statutes, or any other
applicable law as now in effect or as may hereafter be amended, no director or
officer of this Corporation shall be personally liable to the Corporation or its
stockholders for damages for breach of his or her fiduciary duty as a director
or officer.
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ARTICLE VII
The Corporation shall indemnify any person who is or was a
Director, officer employee or agent of the Corporation to the fullest extent
allowed by the Statutes, or any other applicable law as now in effect or as may
hereafter be amended, except as may be limited by the bylaws of the Corporation
from time to time in effect.
ARTICLE VIII
The Corporation shall not be governed by Statutes sections
78.411 to 78.444, inclusive. IN WITNESS WHEREOF, the undersigned has subscribed
his name this 19th day of July, 1995.
WIRELESS CABLE & COMMUNICATIONS, INC.
/s/ William R. Gray
William R. Gray, Incorporator
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
I, a Notary Public, hereby certify that on the 19th day of July, 1995,
personally appeared before me William R. Gray, being by me first duly sworn,
declared that he is the person who signed the foregoing Articles of
Incorporation as incorporator and the statements therein contained are true.
/s/ Joyce J. Pollard
Notary Public
Residing at: Salt Lake County, Utah
ACCEPTANCE BY RESIDENT AGENT
The Corporation Trust Company of Nevada hereby accepts appointment as
resident agent for the Corporation.
By:/s/ Marcia J. Sunahara
Its: Assistant Vice President
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EXHIBIT 3.2
BYLAWS
BYLAWS
of
WIRELESS CABLE & COMMUNICATIONS, INC.
ARTICLE I
NAME, REGISTERED OFFICE, AND REGISTERED AGENT Section 1. Name.
The name of this corporation is Wireless Cable & Communications, Inc. Section 2.
Registered Office and Registered Agent. The board of directors shall designate
and the corporation shall maintain a registered office. The location of the
registered office may be changed by the board of directors. The initial
registered agent of this corporation is The Corporation Trust Company of Nevada.
ARTICLE II STOCKHOLDERS MEETINGS Section 1. Date of Meetings. The annual meeting
of the stockholders of the corporation shall be held in such month each year, at
such time and on such day as shall be determined by the board of directors. This
meeting shall be for the election of directors and for the transaction of such
other business as may properly come before the stockholders. Section 2. Place of
Meetings. The board of directors may designate any place, either within or
without the State of Nevada, as the place of meeting for any annual meeting or
for any special meeting called by the board of directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may also designate any
place, either within or without the State of Nevada, as the place for the
holding of such meeting.
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Section 3. Special Meetings. A special meeting of stockholders, other than
one regulated by statute, may be called at any time by the president or by a
majority of the directors, and must be called by the president upon written
request of the holders of a majority of the outstanding shares entitled to vote
at such meeting. Written notice of such meeting shall be given, which shall
state the place, the date and the hour of the meeting, the purpose or purposes
for which it is called, and the name of the person by whom or at whose direction
the meeting is called. The notice shall be given to each stockholder of record
in the same manner as the notice of the annual meeting. No business other than
that specified in the notice of the meeting shall be transacted at any such
special meeting. Section 4. Notice of Stockholders' Meetings. The secretary
shall give written notice stating the place, day, and hour of the meeting, and
in the case of a special meeting, the purpose or purposes for which the meeting
is called, which shall be delivered not fewer than ten (10) or more than sixty
(60) days prior to the date of the meeting, either personally or by mail, to
each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at its address as it appears on the books of the
corporation, with postage thereon prepaid. Section 5. Record Date. The board of
directors may fix a date not fewer than ten (10) or more than sixty (60) days
prior to any meeting as the record date for the purpose of determining the
stockholders entitled to notice of and to vote at such meeting of the
stockholders. The transfer books may be closed by the board of directors for a
stated period not to exceed sixty (60) days for the purpose of determining
stockholders entitled to receive payment of any dividend, or in order to make a
determination of stockholders for any other purpose. Section 6. Quorum.
Stockholders holding a majority of the voting power of the corporation,
represented in person or by proxy, shall constitute a quorum at a meeting of
stockholders. If a
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quorum is not present at a meeting, then stockholders holding a majority of
the voting power represented may adjourn the meeting without further notice. At
a meeting resumed after any such adjournment at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. The stockholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of stockholders in such number that less than a
quorum remains. Section 7. Voting. Every stockholder shall be entitled to one
vote for each share standing in his name on the books of the corporation, and
all corporate action shall be determined by a majority of the votes cast at a
meeting of stockholders entitled to vote thereon. Section 8. Proxies. At all
meetings of stockholders, a stockholder may vote in person or by proxy executed
in writing by the stockholder or by his duly authorized agent. Such proxy shall
be filed with the Secretary of the corporation before or at the time of the
meeting. No proxy shall be valid after six (6) months from the date of its
execution unless otherwise provided in the proxy. Section 9. Informal Action by
Stockholders. Any action required to be taken at a meeting of the stockholders
may be taken without a meeting if a consent in writing, setting forth the action
so taken, shall be signed by all the stockholders entitled to vote with respect
to the subject matter thereof. ARTICLE III BOARD OF DIRECTORS Section 1. General
Powers. Subject to the limitations in the Nevada Revised Statutes (the
"Statutes") or the articles of incorporation, the board of directors shall have
full control over the affairs of the corporation. The board of directors may
adopt such rules and regulations for the conduct of its meetings and the
management of the corporation as it deems proper.
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Section 2. Number, Tenure and Qualification. The number of directors of the
corporation shall be no fewer than three nor more than nine, as determined from
time to time by the directors or the stockholders. Each director shall hold
office until the next annual meeting of stockholders and until his or her
successor shall have been elected and qualified, unless said director is removed
or resigns in accordance with the provisions of these bylaws. Directors need not
be residents of the State of Nevada or stockholders of the corporation. Section
3. Regular Meetings. A regular meeting of the board of directors shall be held
without other notice than by these bylaws immediately following and at the same
place as the annual meeting of stockholders. Section 4. Special Meetings.
Special meetings of the board of directors may be called by any director or by
the president. The secretary shall give notice of the time, place and purpose or
purposes of each special meeting to each director by mailing the same at least
three days before the meeting or by telephoning the same at least one day before
the meeting. Section 5. Quorum. A majority of the members of the board of
directors shall constitute a quorum for the transaction of business, but less
than a quorum may adjourn any meeting until a quorum shall be present, whereupon
the meeting may be held. At any meeting at which every director shall be
present, even though without any notice, any business may be transacted. Section
6. Manner of Acting. At all meetings of the board of directors, each director
shall have one vote. The act of directors holding a majority of the voting power
of the directors at a meeting at which a quorum is present is the act of the
board of directors. Section 7. Vacancies. A vacancy in the board of directors
shall be deemed to exist in case of death, resignation, or removal of any
director, or if the authorized number of directors be increased, or if the
stockholders fail, at any meeting of the stockholders at which any director is
to be elected,
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to elect the full authorized number to be elected at that meeting. Any such
vacancy shall be filled by the directors then in office, though less than a
quorum, with the person elected to fill the vacancy to hold office until the
next annual meeting or until his or her successor is duly elected and qualified.
Section 8. Removals. Unless otherwise provided in the Statutes or the articles
of incorporation, directors may be removed from office by the vote of
stockholders representing not less than two- thirds of the voting power of the
corporation. No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his or her term of
office. Section 9. Resignation. A director may resign at any time by delivering
written notification thereof to the president or secretary of the corporation.
Resignation shall become effective upon its acceptance by the board of
directors; provided, however, that if the board of directors has not acted
thereon within ten (10) days from the date of its delivery, then the resignation
shall be deemed accepted upon the tenth day. Section 10. Presumption of Assent.
A director of the corporation who is present at a meeting of the board of
directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless his or her dissent is entered in the
minutes of the meeting or unless he files his or her written dissent to such
action with the person acting as the secretary of the meeting or by registered
mail to the secretary of the corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a director who votes in
favor of such action. Section 11. Directors' Compensation. The board of
directors may, by resolution, fix the compensation of directors for services in
any capacity. Section 12. Informal Action by Directors. Any action that may or
is required to be taken at a meeting of directors may be taken without a meeting
pursuant to the unanimous written consent of the directors of the corporation.
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Section 13. Committees. Unless prohibited by the articles of incorporation,
the board of directors may designate one or more committees which have and may
exercise the powers of the corporation. The names of the committees shall be
stated in the resolution of the board of directors creating such committees.
Section 14. Chairman. The board of directors may elect a chairman of the board,
who shall preside at all meetings of the board of directors and perform such
other duties as may be prescribed from time to time by the board of directors.
ARTICLE IV OFFICERS Section 1. Number. The officers of the corporation shall be
a president, a secretary, and a treasurer, each of whom shall be elected by a
majority of the board of directors. Such other officers and assistant officers
as may be deemed necessary may be elected or appointed by the board of
directors. Any natural person may hold two or more offices. Section 2. Election
and Term of Office. The officers of the corporation shall be elected annually by
the board of directors immediately after each annual meeting of the
stockholders. If for any reason the election of officers is not held at such
meeting, such election shall be held as soon thereafter as possible. Each
officer shall hold office until his successor shall have been duly elected and
qualified or until his resignation, removal, or death. Section 3. Resignations.
Any officer may resign at any time by delivering a written resignation either to
the president or to the secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
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Section 4. Removal. Any officer or agent may be removed by the board of
directors in its judgment. Any such removal shall require a majority vote of the
board of directors, exclusive of the officer in question if he or she is also a
director. Section 5. Vacancies. A vacancy in any office because of death,
resignation, or removal, or if a new office shall be created, may be filled by
the board of directors for the unexpired portion of the term. Section 6.
President. The president shall be the chief executive and administrative officer
of the corporation. He or she shall preside at all meetings of the stockholders
and, in the absence of the chairman of the board, at meetings of the board of
directors if he or she has been elected as a director. The president shall
exercise such duties as customarily pertain to the office of president and shall
have general and active supervision over the property, business, and affairs of
the corporation and over its several officers. He or she may appoint agents or
employees other than those appointed by the board of directors. The president
may sign, execute and deliver in the name of the corporation powers of attorney,
contracts, bonds and other obligations, and shall perform such other duties as
may be prescribed from time to time by the board of directors, the Statutes or
by these bylaws. Section 7. Secretary. The secretary shall, subject to the
direction of the president, keep the minutes of the meetings of the stockholders
and of the board of directors and, to the extent ordered by the board of
directors or the president, the minutes of meetings of all committees. The
secretary shall cause notice to be given of meetings of stockholders, of the
board of directors, and of any committee appointed by the board. He or she shall
have custody of the corporate seal, if any, and general charge of the records,
documents and papers of the corporation not pertaining to the performance of the
duties vested in other officers. He or she may sign or execute contracts with
the president or a vice president thereunto authorized in the name of the
corporation and affix the seal
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of the corporation thereto. The secretary shall perform such other duties
as may be prescribed from time to time by the president, the board of directors
or by these bylaws. Section 8. Treasurer. The treasurer shall, subject to the
direction of the president, have general custody of the collection and
disbursement of the funds of the corporation. He or she shall endorse on behalf
of the corporation for collection checks, notes and other obligations, and shall
deposit the same to the credit of the corporation in such bank or banks or
depositories as the board of directors may designate. The treasurer may sign,
with the president or such other persons as may be designated by the board of
directors, all bills of exchange or promissory notes of the corporation. He or
she shall enter or cause to be entered regularly in the books of the corporation
a full and accurate account of all monies received and paid by him on account of
the corporation, and shall at all reasonable times exhibit his or her books and
accounts to any director of the corporation upon application at the office of
the corporation during business hours. The treasurer shall, whenever required by
the board of directors or the president, render a statement of his accounts. He
or she shall perform such other duties as may be prescribed from time to time by
the president, the board of directors or these bylaws. Section 9. Salaries. The
salaries or other compensation of the officers of the corporation shall be fixed
from time to time by the board of directors, except that the board of directors
may delegate to any person or group of persons the power to fix the salaries or
other compensation of any subordinate officers or agents. No officer shall be
prevented from receiving any such salary or compensation by reason of the fact
that he or she is also a director of the corporation.
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ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The board of directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation; such authority may
be general or confined to specific instances. Section 2. Loans. No loan or
advance shall be contracted on behalf of the corporation, no negotiable paper or
other evidence of its obligation under any loan or advance shall be issued in
its name, and no property of the corporation shall be mortgaged, pledged,
hypothecated or transferred as security for the payment of any loan, advance,
indebtedness or liability of the corporation unless and except as authorized by
the board of directors. Any such authorization may be general or confined to
specific instances. Section 3. Deposits. All funds of the corporation not
otherwise employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositories as the board of
directors may select, or as may be selected by any officer or agent authorized
to do so by the board of directors. Section 4. Checks and Drafts. All checks,
drafts, and other evidences of indebtedness of the corporation shall be signed
by such officer or officers of the corporation in such manner as the board of
directors from time to time may determine. Endorsements for deposit to the
credit of the corporation in any of its duly authorized depositories shall be
made in such manner as the board of directors from time to time may determine.
Section 5. Bonds and Debentures. Every bond or debenture issued by the
corporation shall be evidenced by an appropriate instrument and be signed by the
president.
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ARTICLE VI
CAPITAL STOCK
Section 1. Stock Certificates. The stock of the corporation may be
represented by certificates signed by the president and by the secretary, and
may bear the seal of the corporation, if any. All certificates for shares shall
be consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
corporation. All certificates issued by the corporation shall bear a restrictive
legend similar to the following unless they are duly registered with the
Securities and Exchange Commission:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED UNLESS
THEY ARE REGISTERED UNDER THE SECURITIES ACT OF 1933, OR THE
COMPANY RECEIVES AN OPINION FROM COUNSEL SATISFACTORY TO IT THAT
SUCH REGISTRATION IS NOT REQUIRED FOR SALE OR TRANSFER, OR THAT THE
SHARES HAVE BEEN LEGALLY SOLD IN BROKER TRANSACTIONS PURSUANT TO
RULE 144 OF THE RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION.
No new certificate shall be issued in exchange for the surrender or
transfer of shares until the former certificate is surrendered to the
corporation and canceled, except that in case of a lost, destroyed or mutilated
certificate, a new one may be issued therefor upon such terms and indemnity to
the corporation as the board of directors may prescribe.
Section 2.Uncertificated Shares. The corporation may issue uncertificated
shares of any class or series of the corporation's stock. Within a reasonable
time after the issuance or transfer of uncertificated shares, the corporation
shall send the stockholder a written statement confirming the information
required on the certificates pursuant to section 78.235(1) of the Statutes.
Section 3. Transfer of Shares. Transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation by the holder of
record thereof or by his legal representative (who shall furnish proper evidence
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of authority to transfer) or by his attorney thereunto authorized by power
of attorney duly executed and filed with the secretary of the corporation, and
on surrender for cancellation of the certificate for such shares, if any. The
person in whose name shares stand on the books of the corporation shall be
deemed by the corporation to be the owner thereof for all purposes.
Section 4. Transfer Agent and Registrar. The board of directors shall have power
more transfer agents and registrars for the transfer and registration of
certificates of stock of any class, and may require that stock certificates
shall be countersigned and registered by one or more of such transfer agents
and registrars.
Section 5. Lost or Destroyed Certificates. The board of directors may
direct a new certificate to be issued to replace any certificate theretofore
issued by the corporation and alleged to have been lost or destroyed if the new
owner swears by affidavit that the certificate is lost or destroyed. The board
of directors may, at its discretion, require the owner of such certificate or
his legal representative to give the corporation a bond in such sum and with
such sureties as the board of directors may direct to indemnify the corporation
and transfer agents and registrars, if any, against claims that may be made on
account of the issuance of such new certificates. Section 6. Consideration for
Shares. The capital stock of the corporation shall be issued for such
consideration, but not less than the par value thereof, if any, as shall be
fixed from time to time by the board of directors. Such consideration may be in
the form of cash, property, or prior services rendered to the corporation,
subject to the requirements of the Statutes, but not in contemplation of future
services to the corporation. In the absence of fraud, the determination of the
board of directors as to the value of any property or services received in full
or partial payment of shares shall be conclusive.
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Section 7. Registered Stockholders. The corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder
thereof, in fact, and shall not be bound to recognize any equitable or other
claim to or interest in the shares.
ARTICLE VII
WAIVER OF NOTICE
Whenever any
notice is required to be given to any stockholder or director of the corporation
under the provisions of these bylaws, or under the provisions of the articles of
incorporation, or under the provisions of the Statutes, a waiver thereof in
writing signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Attendance at any meeting shall constitute a waiver of notice of
such meeting, except where attendance is for the express purpose of objecting to
the legality of that meeting.
ARTICLE VIII
AMENDMENTS
These bylaws may be altered, amended, repealed, or new bylaws adopted by a
majority of the entire board of directors at any regular or special meeting. Any
bylaw adopted by the board may be repealed or changed by action of the
stockholders. ARTICLE IX FISCAL YEAR The fiscal year of the corporation shall be
fixed and may be varied by resolution of the board of directors.
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ARTICLE X
DIVIDENDS
The board of directors may at any regular or special meeting, as it deems
advisable, declare dividends payable out of the surplus of the corporation.
ARTICLE XI
CORPORATE SEAL
The corporation may adopt an official seal which shall bear the name of the
corporation and the state and year of incorporation. * * * * * * * This is to
certify that the foregoing bylaws were adopted by the board of directors of the
corporation on August 1st, 1995.
/s/ Anthony Sansone
Anthony Sansone, Secretary
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EXHIBIT 10.1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made
effective
as of August 1, 1995, between TRANSWORLD TELECOMMUNICATIONS, INC.,
a
Pennsylvania corporation ("Transworld") and WIRELESS CABLE & COMMUNICATIONS,
INC., a Nevada corporation ("Wireless").
R E C I T A L S:
A. Wireless was recently formed by Transworld.
B. Pursuant to a plan of reorganization in accordance with SubSection
355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended,
Transworld intends to transfer certain assets and liabilities to Wireless
in accordance with the terms of the Assignment and Assumption Agreement
dated of even date herewith and in the form attached as Exhibit A hereto,
as well as such additional documents of transfer as are necessary or
appropriate to vest such assets and liabilities in Wireless (collectively,
the "Assignment Documents"), in exchange for all of the outstanding shares
of Wireless, consisting of 3.5 million Wireless common shares, par value
$.01 (the "Wireless Shares").
C. Transworld intends to transfer the Wireless Shares to its
shareholders on a non-pro rata basis and in accordance with the terms of
this Agreement.
NOW, THEREFORE, it is mutually agreed as follows:
1. Transfers to Wireless. Transworld shall transfer, assign, and
deliver to Wireless the assets set forth on Schedule A to Exhibit A hereto
("Assets"), subject to the liabilities and obligations described thereon or
arising from the ownership thereof, whether absolute, accrued, contingent
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or otherwise ("Liabilities"), as of the Closing Date, as described
below. Any tangible portions of the Assets shall be deemed to be
transferred "as is," and without any warranty other than any transferable
manufacturer's warranties.
2. Closing. The closing of the transactions described herein (the
"Closing") shall be held as soon as possible and within five business days
after the satisfaction of the conditions described in paragraph 4 (the
"Closing Date"). The Closing shall be held at the offices of Parsons Behle
& Latimer, 201 South Main Street, Suite 1800, Salt Lake City, Utah.
3. Transfer of the Shares. Immediately after the transfer of the
Assets and Liabilities to Wireless, Transworld shall transfer to Fidelity
Transfer Company, of Salt Lake City, Utah ("Fidelity"), all of the Wireless
Shares, to be held in escrow by Fidelity for the benefit of the
shareholders of Transworld pursuant to the terms of the Escrow Agreement in
the form attached hereto as Exhibit B. The Wireless Shares shall be
transferred to Fidelity in its escrow capacity by delivery to Fidelity of a
certificate in the name of Fidelity as escrow agent for Transworld's
shareholders. The number of Wireless Shares to be held by Fidelity for the
benefit of each of Transworld's shareholders shall be as set forth on
Schedule A to the Escrow Agreement. No fractional Wireless Shares shall be
issued to Transworld's shareholders, and any Transworld shareholders who
would otherwise receive a fractional Wireless Share shall receive an
additional full Wireless Share, with the difference to be obtained from the
Wireless Shares otherwise due one or more of the executive officers and/or
directors of Transworld. All such Wireless Shares shall be held and
distributed by Fidelity in accordance with the terms of the Escrow
Agreement.
4. Conditions to Closing. The parties' obligations to Close hereunder
shall be conditioned upon the satisfaction of the following conditions:
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(a) The execution and delivery by Transworld and Wireless of the Assignment
Documents;
(b) The execution and delivery by Transworld and Fidelity of the Escrow
Agreement; and
(c) The negotiation, execution and delivery by Transworld and Wireless of a
funding commitment and ancillary documents thereto (the "Commitment"), pursuant
to which Transworld shall agree to loan to Wireless, during the twelve month
period beginning as of the Closing Date, up to $1 million on commercially
reasonable terms for the purpose of building out and marketing wireless
television cable operations in the United States and foreign countries,
including, specifically, New Zealand.
5. Securities Laws Filings. Each of Wireless and Transworld shall take all
reasonable actions necessary to prepare and file, and shall cooperate with one
another in the preparation and filing of, all documents and statements necessary
or appropriate to (i) effectuate the registration by Wireless of the Wireless
Shares on Form 10 under the Securities Exchange Act of 1934, as amended (the
"Act"), (ii) provide to Transworld's shareholders disclosure materials
materially in compliance with the requirements of Regulations 14A and/or 14C of
the Act, and (iii) comply with any other federal or state securities laws
requirements relating to the transactions described herein.
6. Warranties, Representations and Agreements of Transworld. Transworld
represents, warrants and agrees that the following statements are true, correct
and complete:
(a) Organizational and Good Standing. Transworld is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, with full power and authority to execute, deliver
and perform the terms of this Agreement, the Commitment, the Assignment
Documents and the Escrow Agreement. No
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authorization of, consent or approval by, and no notice to, or filing with,
any governmental department, commission, or instrumentality, or any other
person, is or will be necessary for the valid execution or performance by
Transworld of this Agreement, the Assignment Documents, the Commitment or the
Escrow Agreement, or the consummation of the transactions contemplated hereby or
thereby. Transworld is not subject to any agreement which prohibits or would be
breached by the execution or performance of this Agreement, the Assignment
Documents, the Commitment or the Escrow Agreement, or the consummation of the
transactions contemplated hereby or thereby. This Agreement, the Assignment
Documents, the Commitment and the Escrow Agreement have been duly authorized by
Transworld and, when executed and delivered as contemplated hereby, will
constitute its legal, valid and binding obligations, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally and general principles of equity. (b) Assets. As of
the Closing Date, Transworld will be the lawful owner of the Assets, free and
clear of all liens, encumbrances, restrictions and claims of every kind, except
for the Liabilities and imperfections of title and encumbrances, restrictions
and claims which do not materially interfere with the present use or value of
the Assets. (c) Transfer. Subject to the provisions of this Agreement regarding
the distribution of the Wireless Shares to Fidelity in accordance with the terms
of the Escrow Agreement, Transworld will not transfer, distribute, assign or
convey the Wireless Shares to any party other than its shareholders. 7.
Warranties, Representations and Agreements of Wireless. Wireless represents,
warrants and agrees that the following statements are true, correct and
complete:
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(a) Organization and Good Standing. Wireless is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada, with full power and authority to execute, deliver and perform the terms
of this Agreement, the Commitment and the Assignment Documents. No authorization
of, consent or approval by, and notice to, or filing with, any governmental
department, commission, or instrumentality, or any other person, is or will be
necessary for the valid execution or performance by Wireless of this Agreement,
the Assignment Documents or the Commitment, or the consummation of the
transactions contemplated hereby or thereby. Wireless is not subject to any
agreement with prohibits or which would be breached by the execution or
performance of this Agreement, the Assignment Documents or the Commitment, or
the consummation of the transactions contemplated hereby or thereby. This
Agreement, the Assignment Documents and the Commitment have been duly authorized
by Wireless and, when executed and delivered as contemplated hereby, will
constitute its legal, valid and binding obligations, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency or similar laws effecting the enforcement of
creditors' rights generally and general principles of equity. (b) Wireless
Shares. The Wireless Shares, when issued at Closing, shall be duly authorized
and issued, fully paid and non-assessable common shares of Wireless, subject to
no liens, restrictions, options, commitments or encumbrances of any kind or
character, or any security or other interest whatsoever. 8. Miscellaneous. (a)
Further Assurances. Each of the parties will execute, acknowledge and deliver,
and cause to be done, executed, acknowledged and delivered, without further
consideration, all such further documents, instruments, acts, assignments,
transfers and assurances as shall be required in
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order to carry out this Agreement, the Assignment Documents, the Commitment
and the Escrow Agreement, and to give effect hereto and thereto.
(b) Successors and Assigns. This Agreement shall be binding on and inure to
the benefit of the parties hereto and their respective successors and assigns,
provided that no party hereto may assign its rights or obligations hereunder
without the prior consent of the other party hereto. There are no intended third
party beneficiaries of this Agreement.
(c) No Waiver. This Agreement may not be modified or discharged, nor may
any of its terms be waived, except by an instrument in writing, signed by the
party to be charged.
(d) Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart will for all purposes be deemed an
original, and all such counterparts shall together constitute one and the same
instrument. Facsimile transmission of a counterpart signature shall constitute
delivery of an original counterpart signature.
(e) Enforcement, etc. This Agreement was negotiated, documented and shall
be performed in the State of Utah, which is the site of the primary business
office of each of Transworld and Wireless. The validity, enforcement and
construction of this Agreement shall be governed in all respects by the law
applicable to contracts made and intended to be performed in the State of Utah.
This Agreement (including exhibits and schedules hereto, all of which are
incorporated herein) sets forth the entire understanding of the parties hereto
with respect to the subject matter hereof.
(f) Captions. Captions are inserted herein for convenience only and will
not be given any legal effect.
(g) Severability. If any provision of this Agreement shall be invalid, or
shall be inoperative or unenforceable in any particular case, such circumstances
shall not render the provision
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invalid or inoperative or unenforceable in any other case, or render any
other provision herein contained invalid, inoperative or unenforceable to any
extent.
(h) Indemnification. Each of Wireless and Transworld hereby agrees to
indemnify and hold the other party (and its respective officers, directors,
employees and agents) harmless from any and all costs, liabilities, expenses and
fees (including reasonable attorneys fees) arising from any material breach of
any representation or nonperformance by it hereunder. In the event either party
is forced to enforce the terms of this Agreement through legal action, that
party shall be entitled to receive from the other party the costs and expenses
of such enforcement action, including reasonable attorneys fees.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth on the first page hereof. TRANSWORLD TELECOMMUNICATIONS, INC.
By: /s/ Troy D'Ambrosio
Its: Vice President
WIRELESS CABLE AND COMMUNICATIONS, INC.
By: /s/ Lance D'Ambrosio
Its: President
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EXHIBIT 10.2
ESCROW AGREEMENT BETWEEN FIDELITY TRANSFER COMPANY,
TTI AND THE COMPANY
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Escrow Agreement") is entered into effective as of
the 1st day of August, 1995, by and among TRANSWORLD TELECOMMUNICATIONS, INC.,
a
Pennsylvania corporation ("Transworld"), WIRELESS CABLE & COMMUNICATIONS, INC.,
a Nevada corporation ("Wireless"), and FIDELITY TRANSFER COMPANY, a Utah
corporation ("Fidelity"), with reference to the following facts:
A. Transworld and Wireless are parties to that certain Agreement and Plan
of Reorganization of even date herewith (the "Plan") under which Transworld and
Wireless will enter into a transaction in compliance with the provisions of
Section 355 and Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as
amended, and pursuant to which Wireless will issue to Transworld, and Transworld
will thereafter distribute to its shareholders, 3,500,000 common shares of
Wireless (the "Wireless Shares").
B. Wireless and Transworld have agreed that, immediately after the issuance
by Wireless of the Wireless Shares to Transworld, the Wireless Shares will be
delivered by Transworld to Fidelity, to be held in accordance with the terms and
conditions of this Escrow Agreement, pending the compliance by Transworld and
Wireless of certain disclosure and registration requirements set forth in the
federal securities laws. C. Fidelity acts as transfer agent for Transworld's
securities, and is familiar with and maintains, Transworld's shareholder
records.
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D. Fidelity has agreed to act as escrow agent hereunder, and is willing to
accept delivery of, and to hold, the Wireless Shares on the terms and subject to
the conditions of this Escrow Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows: 1. Appointment of Escrow Agent.
Wireless and Transworld hereby appoint and designate Fidelity as escrow agent
hereunder. Fidelity accepts such appointment, subject to the terms and
conditions hereof. 2. Compensation. Transworld shall pay to Fidelity the amount
of Five Hundred Dollars ($500) as full compensation for its services hereunder.
Such amount shall be in addition to any amounts due or payable to Fidelity under
the provisions of paragraph 5. 3. Term of Escrow. The term of the escrow
established hereunder (the "Escrow") will begin as of the date of the initial
deposit of the Escrow Documents, as described below, into the Escrow, and will
continue thereafter until terminated as provided in this Escrow Agreement. 4.
Fidelity Instructions. Fidelity's conduct hereunder will be subject to the terms
and conditions specified in the other provisions of this Escrow Agreement and to
the specific instructions set forth in this paragraph 4. (a) Concurrently with
the Closing of the Plan, Transworld will deliver to Fidelity, for deposit into
the Escrow, the following certificates, documents, instruments, and agreements
(the "Escrow Documents"): (i) the Wireless Shares, represented by one
certificate in the name of Fidelity, as escrow agent for Transworld's
shareholders; and (ii) such other documents, instruments, stock powers,
endorsements or agreements as may be necessary or appropriate for the transfer
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amounts as shall be incurred by Fidelity in its capacity as transfer agent
for Transworld in connection with the transactions described herein (including,
without limitation, such certificate and document preparation fees, stock record
transfer fees and other costs and expenses as Transworld and Fidelity shall
agree upon). (b) In performing any of its duties under this Escrow Agreement, or
upon the claimed failure to perform hereunder, Fidelity shall not be liable to
anyone for any damages, losses, or expenses which may occur as a result of
Fidelity so acting or failing to act; provided, however, that Fidelity will be
liable for damages arising out of its negligence or willful default under this
Escrow Agreement. Accordingly, Fidelity will not incur any liability with
respect to (i) any action taken or omitted to be taken by it in good faith upon
written advice by independent counsel given with respect to any questions
relating to the duties and responsibilities of the escrow agent hereunder, or
(ii) any action taken or omitted to be taken in reliance upon any document,
including any written notice or instructions provided for in this Escrow
Agreement, the truth and accuracy of any information contained therein which
Fidelity in good faith believes to be genuine, to have been signed or presented
by the proper person or persons, and to conform with the provisions of this
Escrow Agreement. (c) Transworld hereby agrees to indemnify and hold Fidelity
harmless against and from any and all losses, claims, damages, costs,
liabilities and expenses, including without limitation, reasonable costs of
investigation and counsel fees and disbursements (the "Claims") incurred by it
arising from any litigation relating to the provisions of this Escrow Agreement;
provided, however, that if Fidelity is found guilty of willful default under
this Escrow Agreement, then in that event, Fidelity will bear all Claims
relating to such willful default and, in addition, will be liable to Wireless
and Transworld for their damages, costs, or losses arising from such action by
Fidelity.
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(d) Fidelity will be bound only by the terms of this Escrow Agreement and
will not be bound by or incur any liability with respect to the Plan or any
other document or understanding of Wireless and Transworld except as expressly
provided herein. Fidelity will not have any duties hereunder except those
specifically set forth herein.
6. Full Force and Effect. The parties hereby expressly consent to the terms
of this Escrow Agreement and agree that it will be given full force and effect.
7. Entire Agreement. This Escrow Agreement sets forth the entire
understanding of the parties as to the matters set forth herein and cannot be
altered or otherwise amended except pursuant to an instrument, in writing,
signed by all of the parties hereto.
8. Governing Law. This Escrow Agreement will be governed by and interpreted
in accordance with the laws of the State of Utah, without giving effect to the
choice of law provisions thereof.
9. Counterparts. This Escrow Agreement may be executed in any number of
counterparts and/or telecopied counterparts, each of which, when executed and
delivered, will be deemed an original, but all of which will together constitute
one and the same instrument.
10. Binding Agreement. This Escrow Agreement will be binding upon and will
inure to the benefit of the parties hereto and their heirs, personal
representatives, successors, and assigns.
11. Authorizations. Each individual executing this Escrow Agreement hereby
represents and warrants to each other person so signing (and to each other
entity for which another person may be signing) that he has been duly authorized
to execute and deliver this Escrow Agreement in the capacity of the person or
entity set forth for which he so executes this Escrow Agreement.
12. Notices. All notices required or permitted hereunder must be made in
writing to the party to be notified and at the address noted for such party
below. Notices delivered by United States
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mail will be deemed delivered two days after deposit in the United States
mail, postage prepaid; notices delivered by facsimile or in person will be
deemed made when actually received by such party with confirmation.
13. Time of Essence. Time is of the essence hereof. IN WITNESS WHEREOF, the
parties have executed this Escrow Agreement as of the date first shown above.
TRANSWORLD TELECOMMUNICATIONS, INC.
By:/s/ Troy D'Ambrosio
Its:Vice President
WIRELESS CABLE & COMMUNICATIONS, INC.
By:/s/ Lance D'Ambrosio
Its:President
FIDELITY TRANSFER COMPANY
By:/s/ Linda Kener
Its:President
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EXHIBIT 10.3
COMMITMENT AGREEMENT BETWEEN THE COMPANY AND TTI
COMMITMENT AGREEMENT
THIS COMMITMENT AGREEMENT ("Commitment") is entered into effective as of
the 1st day of August, 1995, by and between TRANSWORLD TELECOMMUNICATIONS,
INC.,
a Pennsylvania corporation ("Transworld") and WIRELESS CABLE & COMMUNICATIONS,
INC., a Nevada corporation ("Wireless"), with reference to the following:
A. Wireless was recently formed by Transworld for the purpose of holding,
acquiring and developing wireless cable television rights and other
communications-oriented businesses in the United States and in foreign
countries.
B. Pursuant to the terms of that certain Agreement and Plan of
Reorganization (the "Plan") dated of even date herewith, Transworld assigned,
conveyed and contributed to Wireless, in exchange for 3,500,000 of Wireless's
common shares, par value $.01 (the "Wireless Shares"), certain rights in and to
wireless cable television rights in the United States and New Zealand, together
with certain miscellaneous other assets.
C. In order to provide for the efficient and effective administration and
operation of Wireless in the conduct of its business, including, specifically,
the acquisition of certain assets, equipment and rights necessary to build-out
its wireless cable television business, Transworld as agreed and committed to
loan to Wireless, during the 12 month period beginning as of the date hereof, up
to a total of One Million United States Dollars (U.S. $1,000,000), subject to
the terms and conditions hereof.
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NOW, THEREFORE, in consideration of the foregoing recitals and other
valuable consideration, Transworld and Wireless agree as follows:
1. Commitment. Subject to the provisions of paragraph 4 below, Transworld
hereby commits to loan to Wireless up to a maximum of U.S. $1,000,000, or any
portion thereof, at any time, and from time to time, between the date hereof and
the first annual anniversary of this Commitment. All amounts advanced by
Transworld pursuant to the terms of this Commitment (i) shall be advanced in
accordance with its terms and shall be repaid to Transworld, together with
interest thereon (and such additional advances, costs and charges as may become
due and owning under the terms of this Commitment), from time to time as
hereinafter provided, (ii) shall, at the election of Transworld, be evidenced by
one or more promissory notes (the "Notes") containing standard commercial loan
provisions not inconsistent with the terms of this Commitment; and (iii) shall
be subject to the following terms and conditions:
(a) Interest Rate. All amounts advanced hereunder shall bear interest at
the rate of eight (8%) per annum until repaid in full.
(b) Payment Terms. The amounts advanced hereunder shall be due and payable
in full on August 1, 2001. At the option of Wireless, and subject to the
conditions and terms provided herein, such obligation may be converted to a term
loan, which shall be payable in monthly payments of principal and interest, with
a maturity date ten (10) years from the first day of the month following the
conversion to the term loan. The monthly payment of principal and interest for
the term loan shall be based upon a ten (10) year monthly payment amortization.
In order for the amounts advanced hereunder to be extended and converted into a
term loan (i) Wireless shall not be in default under this Commitment, or any of
the documents executed in connection with this Commitment (collectively, the
"Commitment Documents"); (ii) there shall be no material change in Wireless's
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financial condition which Transworld shall reasonably determine to be
materially adverse to Wireless or to materially increase Transworld's risk of
non-payment or non-performance hereunder or under any of the Commitment
Documents; (iii) the construction and build-out of the business of Wireless
shall, in the sole opinion of Transworld, be substantially in accordance with
the terms and conditions of a projected schedule of build-out as agreed to by
the parties; and (iv) Wireless shall provide to Transworld all requested
documentation relating to the Commitment hereunder, including the uses of the
proceeds advanced pursuant to this Commitment,
2. Use of Advances. Wireless shall use the amounts advanced hereunder
solely for the purposes of (i) acquiring, owning, building-out and operating
wireless cable television systems and operations in the United States and in
foreign countries, including without limitation, New Zealand; (ii) for the
payment of general administrative and office expenses incurred by Wireless in
connection with those operations (including salaries of employees, management
and officers of Wireless), all in accordance with the budget to be agreed upon
by the parties; and (iii) for such other purposes as Transworld shall agree to
in writing. No amounts advanced hereunder shall be used for general investments
unless such investment is for a period of not more than 30 days and pending
expenditure of such funds for the purposes set forth in this paragraph.
3. Security. Upon the request of Transworld at any time during the term of
this Commitment or at any time before the payment in full of all amounts
advanced hereunder, Wireless shall grant to Transworld a security interest in
and to all or part of its assets, contracts, accounts receivable, equipment,
cash, marketable securities, general intangibles, lease and license rights,
subscription contract rights and interest in all personal or real property.
Unless otherwise agreed to in writing by Transworld, the security interest(s)
granted hereunder shall be first priority security interests.
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4. Further Commitments. Transworld shall have the right, but not the
obligation, to fund after an Event of Default (as defined below) under this
Commitment, amounts in excess of or amounts constituting part of the Commitment,
from time to time, to pay accrued and unpaid interest, to complete construction
or build-out of Wireless's wireless cable operations or to correct any defaults
of Wireless in any of the Commitment Documents. Any such amounts so funded shall
be deemed to be part of this Commitment, shall bear interest at the interest
rate specified in paragraph 1(a) and, if a security interest in the property of
Wireless has been granted to Transworld in accordance with the provisions of
paragraph 3 above, shall also be secured by such assets. Promptly upon
Transworld's request, Wireless hereby agrees to execute any additional Notes or
other additional Commitment Documents (or modifications thereto) in favor of
Transworld, which shall further evidence and secure the amounts funded in
accordance with this paragraph.
5. Conditions For and Use of Loan Commitment Proceeds. In addition to the
other requirements set forth herein, Transworld shall be obligated to make
disbursements to or for the benefit of Wireless under this Commitment if, and
only so long as, all of the following conditions are satisfied at the time of
such disbursement:
(a) Full Compliance. Wireless is in full compliance with all of its
obligations under the Commitment Documents, and no event has occurred which
constitutes or would, with the passage of time or giving of notice or both,
constitute an event of default under any of the Commitment Documents.
(b) No Suits. There are no actions, suits or proceedings pending or, to
Wireless's
knowledge, threatened against or affecting Wireless or its business
operations, at law or in equity, or before any governmental authority, which if
adversely determined would impair the ability of Wireless to complete the
build-out and operation of its wireless cable operations in accordance with
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the provisions hereof and to pay, when due, any amounts which become
payable under the Commitment Documents.
(c) Compliance with Laws. Wireless shall be in compliance with all material
federal, state, national and local laws, statutes, acts, ordinances, rules,
regulations and any other requirements governing its business.
(d) Financial Disclosure. Wireless shall be in compliance with the
financial disclosure requirements set forth in paragraph 7.
(e) Security Documents. If requested by Transworld under paragraph 3,
Wireless has submitted to Transworld all security documents and other
instruments, agreements or certificates, necessary or appropriate to grant and
perfect Transworld's security interest in Wireless's assets.
(f) Request for Advance. Transworld shall have received from Wireless a
completed Request for Advance, in a form reasonably acceptable to Transworld and
as described in paragraph 6.
(g) No Breach of Commitment Documents. Wireless shall not be breach of any
of the representations, warranties or covenants set forth in the Commitment
Documents.
(h) Available Advancement Amounts. Transworld shall have Advanceable
Amounts, as hereafter defined, sufficient for such advance. As used herein, the
term "Advanceable Amounts" shall be such amounts from Transworld's cash flow,
accounts receivable and/or other amounts payable to it as its shall reasonably
(and in its sole discretion) determine are available for advance to Wireless
pursuant to the terms of this Commitment without materially and adversely
affecting Transworld's ability to conduct its ongoing business operations and
meet its obligations as they become due. Advanceable Amounts shall be determined
by Transworld on a monthly basis or more frequently as may be required in order
to meet the requirements of this Commitment and, upon
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Wireless's request, Transworld shall deliver to Wireless within 5 days of
such request a statement showing such Advanceable Amounts. Nothing in this
Commitment or in any of the Commitment Documents shall require Transworld to
advance to Wireless any amounts in excess of the Advanceable Amounts.
Notwithstanding the foregoing, Transworld believes that the Advanceable Amounts
available to it during the term of this Commitment shall be sufficient to fund
the entire commitment specified in paragraph 1 above.
6. Request for Advances and Method of Disbursement. Wireless shall submit
Requests for Advances to Transworld in such form as shall be reasonably
acceptable to Transworld. Each such Request for Advance shall be delivered to
Transworld at least ten (10) days before the date the advance is desired, and
Wireless shall be entitled only to such amount as may be approved by Transworld.
All Requests for Advances shall constitute a representation and warranty by
Wireless to Transworld that all representations and warranties of Wireless in
the Commitment Documents are true at the time of and as if the Requests for
Advance, and that all funds previously disbursed by Transworld to or on behalf
of Wireless hereunder have been expended for the purposes set forth herein.
Disbursements pursuant to any Request for Advance may be made by Transworld, at
its election, (i) by crediting Wireless's deposit account(s) with the amount of
such disbursement, (ii) by delivering funds to Wireless jointly with any
materialman, laborer or subcontractor engaged in the business of building-out
Wireless's wireless cable televisions systems, or (iii) by delivering funds to
any subcontractor, materialman or creditor of Wireless, for the benefit of
Wireless, as Transworld reasonably determines is entitled to payment in
connection with the business of Wireless.
7. Accounting and Financial Records and Statements. Wireless agrees to keep
detailed accounts and records in accordance with sound accounting practices, and
to make available to Transworld at reasonable times all books, statements,
invoices, receipted bills, orders and other
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records relating to its business operations, and to furnish Transworld,
upon Transworld's request, with copies of the same. During such time as any
amounts advanced hereunder shall remain unpaid to Transworld, Wireless shall
submit to Transworld full and complete financial statements for Wireless in
accordance with the requirements set forth below. All statements submitted to
Transworld shall be prepared in accordance with generally accepted accounting
principles applied on a consistent basis. The financial statements to be
furnished to Transworld shall be as follows:
(a) Within ninety (90) days of the end of Wireless's fiscal year, copies of
its audited financial statements, including without limitation a balance sheet
and statement of income and loss.
(b) Within sixty (60) days of the end of each fiscal quarter, unaudited
copies of its financial statements, including balance sheets and statements of
income or loss.
(c) All financial statements shall include such schedules and footnotes as
shall be necessary to present fully or explain the information contained in the
financial statements.
(d) If Wireless is a reporting company in accordance with the rules and
regulations of the Securities Exchange Act of 1934, it shall also provide to
Transworld its annual report to stockholders on Form 10-K and/or 10-KSB.
8. Events of Default. Upon the occurrence of any event of default, as
defined below, Wireless shall have the right to cure any monetary default within
ten (10) days after the due date without such event otherwise constituting a
default, and for any non-monetary default Wireless will have the opportunity to
cure that default within thirty (30) days after written notice to Wireless of
that event of default. If Wireless is reasonably and diligently acting to cure a
non-monetary default, the event shall not be an event of default. The following
constitute events of default (the "Events of Default"):
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(a) Non-Payment. The failure to pay in full, when due, any payment required
hereunder or under any note or any other Commitment Document.
(b) Advance Condition. The failure of Wireless to satisfy any condition to
its right to its receipt of an advance hereunder for a period in excess of
thirty (30) days after the request for such advance.
(c) Breach. The breach or default by Wireless of or under any covenant,
warranty, agreement, representation, performance or requirement contained in
this Commitment or the Commitment Documents, or if any covenant, warranty,
agreement or representation by Wireless shall prove to be false or misleading.
(d) Suit. A suit shall be filed against Wireless which, if adversely
determined, could substantially impair the ability of Wireless to pay and
perform each of its obligations under and by virtue of the Commitment Documents.
(e) Insolvency. The filing of any petition of the commencement of any case
or proceeding by or against Wireless under any federal or state law relating to
insolvency, bankruptcy or reorganization, unless such petition in the case or
proceeding initiated thereby is dismissed within thirty (30) days from the date
of such filing; or an adjudication that Wireless is insolvent or bankruptcy; or
the entry of an order for relief under the federal bankruptcy code with respect
to Wireless; or the appointment of or the taking of possession by a custodian,
trustee or receiver for all or any assets of Wireless, unless such appointment
is vacated or dismissed or such possession is terminated within thirty (30) days
from the date of such appointment or the commencement of such possession.
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Upon the occurrence any of any Event of Default which remains uncured as
described above, Transworld's obligation to make further disbursements of the
proceeds under this Commitment shall cease and it shall have the right, in
addition to all other rights and remedies available to lenders or creditors
under federal or state law, to accelerate the payment of any Notes issued in
accordance with terms of the Commitment Documents, appoint a receiver or seek
appointment of a receiver, or exercise any other right or privilege or remedy
available to it provided by applicable law or in equity.
9. Miscellaneous.
(a) Governing Law. This Commitment and the rights and obligations of the
parties to it shall be governed by and be construed in accordance with the laws
of the State of Utah.
(b) Binding Agreement. This Commitment shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No party's obligations and rights under this Commitment are
assignable without the prior written consent of the other party.
(c) Amendment. This Commitment may be amended or modified only by written
agreement executed by all of the parties to it.
(d) Integration. No oral covenants, agreements, representations or
warranties of any kind whatsoever have been made by any party hereto except as
specifically set forth in this Commitment. This Commitment (and the other
Commitment Documents) constitutes a single, integrated written contract
expressing the entire agreement of the parties hereto relative to the subject
matter hereof.
(e) Counterpart Execution. This Commitment, including facsimile
transmissions of it, may be executed in separate counterparts and shall be
effective when such counterparts have been exchanged among the parties.
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(f) Survival of Representations. All representations and warranties
contained in this Commitment shall survive the execution and performance of this
Commitment.
(g) Duty to Cooperate. The parties hereto shall cooperate fully with one
another in order to effectuate the terms and conditions of this Commitment and
they shall take all such actions and execute any and all documents, and vote in
favor of all such proposals, as shall be necessary or appropriate to effectuate
the intent and purposes of this Commitment.
(h) Attorneys' Fees and Costs. If any party to this Commitment employs
attorneys (i) to remedy, prevent or obtain relief from a breach or default of
this Commitment, or (ii) because of a breach or default of this Commitment, the
defaulting or breaching party shall reimburse upon demand to the prevailing
party all of the prevailing party's reasonable attorneys' fees, whether or not
suit is filed, and including, without limitation, those fees incurred in any and
all appeals and petitions therefrom.
(i) Facsimile (Fax) Documents. Facsimile transmission of any signed
original document and retransmission of any signed facsimile transmission shall
be the same as delivery of an original.
TRANSWORLD TELECOMMUNICATIONS, INC.
By: /s/ Troy D'Ambrosio
Its: Vice President
WIRELESS CABLE & COMMUNICATIONS, INC.
By: /s/ Lance D'Ambrosio
Its: President
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EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Number Days
Description Date of Shares Outstanding
Common stock issued in 8/1/95 3,5000,000 1 3,5000,000
acquisition of assets
-----------
Weight average shares outstanding 3,5000,000
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EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Subsidiaries of the Registrant
Transworld Wireless Television, Inc.
Auckland Independent Television Services, Ltd.
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EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
July 31, 1996
Wireless Cable & Communications, Inc.
Dear Sirs:
We hereby consent to the use of the audit report dated August 23, 1995 in
the form 10-SB registration statement of Wireless Cable & Communications, Inc.
Jones, Jensen & Company
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EXHIBIT 27.1
FINANCIAL DATA SCHEDULE
[ARTICLE] 5
[PERIOD-TYPE] 9
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] AUG-01-1995
[CASH] 2,000
[SECURITIES] 0
[RECEIVABLES] 0
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 2,000
[PP&E] 13,000
[DEPRECIATION] 8,883
[TOTAL-ASSETS] 1,199,012
[CURRENT-LIABILITIES] 80,693
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 35,000
[OTHER-SE] 965,650
[TOTAL-LIABILITY-AND-EQUITY] 1,199,012
[SALES] 0
[TOTAL-REVENUES] 0
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 289,715
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 4,353
[INCOME-PRETAX] (294,068)
[INCOME-TAX] 0
[INCOME-CONTINUING] (294,068)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (294,068)
[EPS-PRIMARY] (0.08)
[EPS-DILUTED] (0.08)
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</TABLE>
