As filed with the Securities and Exchange Commission on October 18, 1996,
and amended December 30, 1996
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-SBA
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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Commission file number 000-21143
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 (consisting of ten 2.5 GHz and twenty 40 GHz channels) in Auckland, New
Zealand. 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 94.9% owned subsidiary, Auckland Independent Television
Services, Ltd., a New Zealand corporation ("AITS").
The Company's interests in AITS and TWTV Park City were formerly held
by Transworld Telecommunications, Inc. ("TTI"), a Pennsylvania corporation which
is also in the business of acquiring, developing and operating wireless cable
television systems. The Company was formed for the purpose of acquiring and
continuing the operation of TTI's interest in AITS and TWTV Park City in
connection with the separation by TTI of its business operation into two groups
of business assets. See "The Company -- Overview of the Company's Business --
Business Development" below.
As discussed in more detail in the section entitled "Plan of
Operation," below, and in the financial statements attached to this Registration
Statement, the Company is a development stage enterprise. The Company does not
currently have sufficient revenue to cover its operating costs and its current
liabilities exceed its current assets. Although management is actively pursuing
additional financing for the Company and has taken steps to improve its short
terms and ongoing liquidity and cash flow, there can be no assurance that the
Company will be able to acquire or obtain any such additional financing upon
terms acceptable to the Company. The conditions raise doubt about the Company's
ability to continue as a going concern.
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), the
Company believes 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 (all of which are in non-operating
systems) will provide it with channel capacity to provide the equivalent of up
to 40 channels of programming 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. The Company believes that 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 future 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
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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.
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. The Company
anticipates that 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 than 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 consistent 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 Business and Market Areas. The Company holds channel rights in
both the Park City, Utah and Auckland, New Zealand market areas. Currently,
theses channel rights are not part of any operating systems. Due to recent
changes in wireless cable technology, however, the Company believes that these
channel groupings are sufficient to launch commercially viable wireless cable
television systems. The Company's Park City, Utah and Auckland, New Zealand
license and channel rights are described in greater detail in the sections
entitled "The Company's Property and Equipment" and "Plan of Operation," below.
o 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 assuming the use of digital
compression) 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.
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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.
o 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 200,000
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 $27.00 per month. In contrast,
the 5 channel wireless UHF system in operation in the Auckland area currently
costs approximately $32.00 per month.
The Auckland, New Zealand area had a total population of approximately
950,000 in 1995. The area is the largest television market in New Zealand, and
the Company estimates that, of the approximately 320,000 total households in the
service area, approximately 275,000 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 1997, and that it will launch its subscriber
drive in late 1997. See Liquidity and Capital Resources. The Company further
anticipates that its Auckland, New Zealand system could have between 5,000 and
10,000 subscribers by the end of 1997, and between 55,000 and 65,000 subscribers
by the end of the fifth year of operation.
o Future Business and Market Areas. The Company is currently
pursuing additional wireless cable license, lease and operating rights in a
number of foreign countries primarily in Central and South America. There can be
no assurance that the Company will be able to secure any such license, lease or
operating rights.
In November, 1996, the Company entered into an agreement to acquire a
controlling interest in Viva Vision, S.A., a Venezuelan corporation which has
rights to commercialize a license in the 28 GHz range, and pursuant to a
separate agreement has acquired (through December 30, 1996) a 4.4% interest in
the voting capital stock of Comunicaciones Centurion, S.A., the company that
holds the license rights for the 28 GHz frequencies ("Centurion") in exchange
for the payment of $440,000. The Company has the obligation to acquire an
additional 3.1% of Centurion for an additional payment of $310,000, and has the
right, but not the obligation, to acquire an additional 4.03% of Centurion under
existing Venezuelan law (for a total interest of 11.53%) for an additional
$403,000. The Company estimates that the Venezuela system, once fully
constructed, would be able to service approximately 700,000 line-of-site homes
in the Caracas area and approximately 1,170,000 homes outside the Caracas area.
Business Development. The Company was formed for the purpose of
continuing the development of certain business assets formerly held by 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, the 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.
On July 26, 1995, the Board of Directors of TTI voted to separate its
business operations into two groups of business assets in order to facilitate
TTI's ongoing business plans. 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
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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 pursuant to this Registration Statement
under the Securities Exchange Act of 1934, as amended (the "Act"). 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. If, for any reason (including the
Company's failure to register the shares pursuant to this Registration Statement
or otherwise meet the requirements of the Federal Securities laws with respect
to the distribution of the shares from the escrow), the shares could not be
distributed from the escrow, they would have been returned to TTI.
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.
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 as
little as 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. The Company believes 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, the Company believes 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.
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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. Transmission ranges for other wireless cable
frequencies, such as 28 GHz, are shorter, and amplifiers or repeaters are
typically used to increase the range of each system to ranges comparable to
those achieved with 2.5 GHz systems.
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 that 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. For
example, the wavelength of 2.5 GHz systems is approximately 2.8 inches. As a
result, wireless cable transmissions are usually not affected by weather or
electrical interference. However, 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.
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 higher
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 to adapt rapidly and modify its practices to remain
competitive. The Company believes that the industry trends affecting the
wireless cable industry include the following:
o Compression. Several equipment manufacturers have developed
digital compression devices. These devices allow several programs to be carried
within the microwave transmission bandwidth that typically carried 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 (such as TTI's Tampa
Bay system) 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 expand their programming capacity
significantly, the Company believes 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.
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o 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 increasingly 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.
o 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.
o 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.
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. Currently, TCI operates a traditional
cable system in the Company's Park City market. No traditional cable system
currently operates in the Auckland, New Zealand market area, although other
areas of New Zealand are serviced by a few small traditional cable operators
that have a subscriber base which the Company believes is, in the aggregate,
less than 10,000.
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:
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o 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 matrices 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.
o Telephone Company Competition. A number of telephone
companies have developed technology capable of providing audio/video services
over telephone lines ("video dial tone" service). In the United States, the
Federal Communications Commission ("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. In the United States,
telephone companies are currently permitted to operate traditional cable systems
in areas outside their telephone service areas and also are permitted to offer
pay telephone services inside their franchise areas under certain conditions
under the 1996 Act, as described below. In the United States, 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 plants in conjunction with local cable operators to offer video
dial tone service. Currently, no telephone company offers video dial tone
service in the Company's Park City or New Zealand markets. A telephone company
in New Zealand currently owns and operates a small traditional cable operation
in New Zealand in the Wellington, not Auckland, area.
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.
o 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
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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.
o Other Microwave Systems. Frequencies other than those
currently authorized for wireless cable operations may be used for the
distribution of pay television services. Recently, the FCC in the United States
proposed to relocate radio frequencies in the 28 GHz range of the
electro-magnetic spectrum for use in the "cellular" pay television services.
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 an MMDS wireless cable system. Also, many
European countries and New Zealand have authorized pay television services to be
carried in the 40 GHz range. As noted above, the Company holds a 40 GHz license
in New Zealand, and Centurion, in which the Company holds a minority interest,
holds a 40 GHz license in Venezuela.
o 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.
Government Regulation. The use of the airways for microwave
transmission is generally subject to government regulation. The amount, type and
extent of that regulation varies from country to country. The following
information summarizes certain government 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.
o 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 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. Excess capacity on the educational channels can be leased
by wireless cable providers. 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 for the majority of commercial channel
frequencies in 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.
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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 that there are
not commercial channels available for application, purchase or lease 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 possibly 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
received 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 is
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.
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. The Company believes 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 thereunder 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.
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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 or other wireless providers.
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.
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.
o 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.
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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 any effect until it 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
licensing of radio transmitting and receiving equipment. All radio apparatus
licenses granted by the Ministry of Commerce are renewable annually.
o 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 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 currently 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
TWTV Park City. TWTV Park City and the Company anticipate they will file
applications with the FCC for the transfer of the control of the licenses to the
Company. Each of the licenses is subject to renewal but, while such renewals
generally have been 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.
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 subsequently has been renewed through
July 1, 1997), 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 need to acquire a
total of four compression systems for the Park City system, one for each of its
channels, in order to make the system commercially viable.
The Company estimates that the cost of completing the construction of
the transmission facilities for the TWTV Park City system will be approximately
$1,750,000. Based on the Company's current construction schedule, it believes
that it will be able to launch the system in 1997. For a description of the
Company's capital commitments for the build out of the Park City, Utah market,
see the section entitle "Plan of Operation - Material Expected Commitments
Commitments for Existing Systems," below.
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AITS Channel Rights. The Company's other current 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 $54,195 U.S., based on the exchange rate on September 30, 1996).
This lease will expire on December 9, 1996. The second lease covers two of the
MMDS Channels and continues until 2001 with a guaranteed option to renew the
lease for an additional four years. This lease requires an annual license fee of
$28,680 N.Z. (approximately $20,076 U.S., based on the exchange rate on
September 30, 1996), plus 12.5% gross sales tax. The third lease covers two of
the MMDS Channels and continues until 2004. This lease requires a $75,000 U.S.
payment on September 1 of each of 1996, 1997 and 1998, and a $35,000 U.S.
payment on September 1 in the years 1999 through 2003. In addition, AITS is
required to pay $1,000 N.Z. (approximately $700 U.S. based on the exchange rate
on September 30, 1996) in annual license fees for the third lease.
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 28, 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 $1,000 U.S. per month,
and that the office space will be approximately $1 U.S.
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 (but has not entered into any definitive agreements) 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). The Company anticipates (but cannot guarantee) that any
definitive programming contracts that it enters into with programming suppliers
will be on standard terms normally utilized in the programming industry. Such
contracts typically have terms of one to three years, are renewable, and provide
for the payment to the programming supplier of a certain amount for each
subscriber, with a payment floor.
As part of the Separation, TTI transferred to the Company an exclusive
agreement with Decathlon Communications, Inc. ("Decathlon"). The agreement
grants the Company the exclusive countrywide rights to deploy Decathlon's
digital compression technology in New Zealand. Under the terms of the 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. This
agreement is subject to the negotiation of final terms and conditions acceptable
to both the Company and Decathlon and may be canceled at any time by the Company
or Decathlon without recourse or obligation to either party, prior to signing a
final agreement. 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
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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. $1,109,500. Based on the Company's current construction schedule, it plans
to launch the system in 1997, and anticipates that by the end of 1997 the system
could have between 5,000 and 10,000 subscribers. The Company anticipates that it
could have between 55,000 and 65,000 subscribers at the end of the fifth year of
operation. For a more detailed description of the Company's anticipated capital
commitments in the Auckland, New Zealand market, including the costs of system
launch, see the section entitled "Plans of Operation -- Material Expected
Commitments -- Commitments for Existing Systems," below.
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 is a development stage entity which was 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. In addition, although the Company
anticipates that its applications with the FCC for transfer of control of the
Park City licenses will be granted, there can be no assurance that these
applications will be approved.
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. Unless the Company is able to generate sufficient
revenue or acquire additional debt or equity financing to cover its present and
ongoing operating costs and liabilities, there is substantial doubt about its
ability to continue as a going concern.
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The Company's assets (primarily its interest in TWTV Park City and
AITS) were formerly held by TTI and were transferred to the Company in
connection with the Separation. The financial statements included as part of
this Registration Statement are the audited consolidated financial statements
for the period from July 31, 1995 (date of inception) through December 31, 1995,
and the audited consolidated financial statements for the nine month period
ended September 30, 1996. There is no comparative analysis of the consolidated
statements of operations for these periods, as the Company was formed on July
31, 1995.
For the nine months ended September 30, 1996, the Company had no
revenues, but incurred total expenses of $508,573. These expenses are comprised
of $143,595 in professional fees, $1,950 in depreciation expense, $238,308 in
amortization expense and lease expenses which are directly related to the AITS
assets, $65,177 in general and administrative expenses, and $59,543 in interest
expense related to the TTI loan commitment agreement, as described below. The
total expenses of $508,573 were reduced by minority interest in the loss of AITS
of $13,173, to arrive at the total net loss of $495,400.
For the five months ended December 31, 1995, the Company had no
revenues, but incurred total expenses of $161,703. These expenses are comprised
of $17,935 in professional fees, $1,085 in depreciation expense, $128,921 in
amortization expense and lease expense which are directly related to the AITS
assets, $7,323 in general and administrative expenses, and $6,439 in interest
expense related to the TTI loan commitment agreement. The total expenses of
$161,703 were reduced by minority interest in the loss of AITS of $6,575, to
arrive at the total net loss of $155,128.
Liquidity and Capital Resources. At September 30, 1996, the Company's
current liabilities exceeded its current assets by $66,054. 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 24 to 36 months after
start-up.
As of September 30, 1996, the Company had current assets of $216,112,
compared to $203,037 as of December 31, 1995, for an increase of $13,075. The
increase in current assets is primarily due to an increase in cash as a result
of increased borrowings. License rights decreased $130,500 from $1,092,333 as of
December 31, 1995 to $961,833 at September 30, 1996 due to amortization expense.
The Company had current liabilities of $282,166 as of September 30, 1996
compared to $218,851 as of December 31, 1995, for an increase of $63,315. The
increase in current liabilities is due to an increase in accounts payable
related to start-up expenses. Minority interest in subsidiary decreased $13,173
from $49,612 as of December 31, 1995 to $36,439 at September 30, 1996 due to
minority interest in loss of subsidiary. Long-term debt increased $586,428 from
$238,406 at December 31, 1995 to $824,834 at September 30, 1996. The increase
was due to additional advances by TTI, under a loan commitment agreement
described in Liquidity and Capital Resources below, and the related accrued
interest. Common stock and additional paid-in capital increased by $1,458 and
$37,997, respectively, between December 31, 1995 and September 30, 1996, due to
the June 1996 issuance of 145,833 shares of the Company's common stock for
$1,600 in cash.
The Company anticipates that it will obtain the financing necessary to
fund its future operations through loans, equity investments and other
transactions. While there can be no assurance that the Company will secure such
financing, the Company is currently in negotiations to obtain third party
financing of between $500,000 and $10,000,000 for its activities and management
believes that this funding can be obtained under terms satisfactory to the
Company. The Company anticipates that such funding would be in the form of
secured loans and/or equity investments. The terms and mix of any such funding
will be contingent on a number of factors, including the proportion of the
funding that takes the form of secured debt (versus equity), the type of
security interest the Company is able to provide the third party if the funding
is structured as a secured loan, the prevailing interest rates at the time of
any such funding, the third party's other investment opportunities and other
factors, some or all of which may be beyond the control of the Company. There
can be no assurance that the Company will be able to obtain any such financing.
In the event that the Company is unsuccessful in completing these financing
arrangements or in obtaining substitute funding commitments, the Company would
have difficulty in meeting its operating expenses, satisfying its existing or
future debt obligations, or succeeding in acquiring, developing or operating a
cable system or adding subscribers to such cable systems. If the Company does
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not have sufficient cash flow or is unable to otherwise satisfy its debt
obligations, its ongoing growth and operations could be restricted or the
viability of the Company could be adversely affected. Under such conditions,
there would be substantial doubt as to the Company's ability to continue as a
going concern.
The Company has taken several actions which it believes will improve
its short-term and ongoing liquidity and cash flow. These actions include
establishing policies designed to conserve cash and control costs, obtaining an
agreement to borrow up to $1 million from TTI, and pursuing additional financing
and capital resources as described above.
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. As of September 30, 1996, $796,707
plus accrued interest of $28,127 was outstanding on the loan.
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 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 Shares") to the Lender
for a total payment of $1,600. Because these shares were issued at below market
value, the Company recorded additional interest expense of $37,855 at the time
of the stock purchase. 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, 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.
o Auckland, New Zealand System. The Company estimates that the
cost to launch the AITS system will be approximately $1,109,500 (consisting of
approximately $787,500 for head-end equipment, $100,000 for tower related
equipment, $222,000 for office and radio equipment), and that the period between
the Company's initial build-out operations and the launch of the fully
functional system will be approximately 9 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 could have between 55,000 and 65,000 subscribers by the
end of the fifth year after launch. The Company's ability to build out and
launch the AITS systems will be contingent upon its ability to obtain additional
debt or equity financing.
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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 U.S. Dollars)
- ---- -----------------
1996 -
1997 $98,286
1998 98,286
1999 58,286
2000 58,286
2001 58,286
2002 and thereafter 139,157
-------
Total future lease payments $510,587
========
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 $67,528 in 1997, $734,549 in 1998, $1,574,033 in 1999, $2,392,092
in 2000 and $2,826,904 on a yearly basis thereafter, assuming a subscriber base
of approximately 6,750; 24,750; 42,750; 57,075 and 60,375 at the end of each of
those years, respectively.
o 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 converters
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, will take approximately 9 months, and the system
will have approximately 1,100 subscribers within 12 months of its launch. The
Company's ability to build out and launch the Park City system will be
contingent on its ability to obtain additional debt or equity financing.
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 $1,109,500 in start-up
expenses (exclusive of any acquisition costs for the license or lease rights),
consisting of approximately $887,500 for wireless cable system head-end and
transmission equipment, and $222,000 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 $370 to $510 for
equipment and labor at subscriber locations, depending on the number of
television set connections requested by the subscriber. 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.
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Forward-looking statements. This Registration Statement contains
forward-looking statements, which are not historical fact. Such forward-looking
statements include the Company's plans to launch the Auckland, New Zealand and
Park City, Utah wireless cable systems and corresponding financial and
subscriber projections. Such forward-looking statements also include the
Company's expectations concerning factors affecting the markets for its
services, such as government regulations, competitive factors, and demand growth
for the services. Actual results could differ from those projected in any
forward-looking statements for the reasons detailed in the Liquidity and Capital
Resources section of this Registration Statement and other risks detailed within
this Registration Statement. The forward-looking statements are made as of the
date of this Registration Statement.
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
Anthony Sansone 32 Secretary and Treasurer of
the Company
Troy D'Ambrosio 36 Director
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, was 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 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
attended Santiago Community College, where he majored in Small Business.
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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.
Troy D'Ambrosio - Mr. D'Ambrosio is a Director of the Company and also serves as
a director of TTI. Mr. D'Ambrosio is the manager of customer relations for
Wasatch Advisors, a mutual fund and investment services business. From November
of 1993 to September of 1996, Mr. D'Ambrosio held other executive positions in
TTI (where he served as Vice-President of Administration, Secretary and a
director) and WHI's subsidiaries. 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, most 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.
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 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.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into an agreement with TTI wherein, at TTI's
sole discretion, the Company will be allowed to borrow up to $1,000,000 for the
purposes of facilitating the acquisition, operation, build-out, and maintenance
of the Company's business operations. The term of the agreement, as amended,
provides for borrowings through December 31, 1996. Interest on any outstanding
balance will accrue at 8% per annum, with the principal and interest becoming
due and payable in full on August 1, 2001. As of September 30, 1996, $796,707
plus accrued interest of $28,127 was outstanding on the loan.
The Company has a current liability to Bridgeport Financial, an entity
owned by the father of the president of the Company, in the amount of $100,000
for consulting services related to the TTI acquisition of the New Zealand
channel frequencies. This liability was assumed by the Company during the
Separation. The obligation does not bear interest, is not secured by any assets
of the Company and is payable on demand.
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:
Number of Percent of
Name and Address Shares Class Class(1)
Lance D'Ambrosio (President, Director) 290,858(2) Common 7.98%
6385 Shenandoah Park Avenue
Salt Lake City, Utah 84121
Paul Gadzinski (Executive Vice President) 24,249 Common *
6649 Wintertree Drive
Riverside, California 92506
Anthony Sansone (Secretary, Treasurer) 4,850 Common *
3692 South 645 East
Salt Lake City, UT 84106
Troy D'Ambrosio (Director) 33,096 Common *
2914 Nila Way
Salt Lake City, UT 84124
George Sorenson (Director) 14,146(3) Common *
12 Fairgreen Lane
Old Greenwich, Connecticut 06870
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F. Lorenzo Crutchfield, Jr. 1,211,630(4) Common 33.23%
3 Crossfield Court
Greensboro, North Carolina 27408
George D'Ambrosio 471,291(5) Common 12.93%
5451 South 1410 East
Salt Lake City, Utah 84117
All Officers and Directors as a Group 367,199 Common 10.07%
(5 persons)
* Less than 1%
1 Assumes 3,645,833 issued and outstanding common shares, par value
$.01 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 34,649 shares held in the name of Mr. D'Ambrosio and 256,209
shares 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.
3 Includes 1,213 shares held in the name of Mr. Sorenson and 12,933
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 1,181,884 shares held in the name of Mr. Crutchfield and
29,746 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 63,209 shares held in the name of Mr. D'Ambrosio and 408,082
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.
DESCRIPTION OF CAPITAL STOCK
General. The authorized capital stock of the Company consists of 15
million shares of common stock, par value $.01 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. At December 31, 1995, no rights or preferences for the common
stock had been authorized by the Company's Board of Directors. 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.
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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. As of the date of this Registration Statement, no
rights or preferences for the preferred stock had been authorized by the
Company's Board of Directors.
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.
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
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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
On September 5, 1996, Deloitte & Touche LLP replaced Jones, Jensen &
Company as the Company's Independent Accountants for the year ending December
31, 1995. Jones, Jensen & Company's relationship with the Company was not
terminated because of any, resolved or unresolved, disagreement on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure. The decision to change Independent Accountants was approved
by the Company's Board of Directors.
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. If those conditions were not satisfied, the shares were to be
returned to TTI.
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 (i) 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; (ii) TTI had valid and compelling
business reasons for effecting the Separation; (iii)
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TTI's filings with the Securities and Exchange Commission and this Registration
Statement include descriptions of the Company's business, its assets, the
industry in which it operates, the regulatory and competitive environments in
which it operates and other business matters; (iv) this Registration Statement
will be disseminated to TTI's shareholders of record as of August 1, 1995 in
connection with or prior to the release of the shares from the escrow; (v) no
shareholder vote of TTI's shareholders was required to effect the Separation;
(vi) TTI's shareholders of record of August 1, 1995 were not required to make
any business decision in connection with the Separation; and (vii) TTI's
shareholders of record on August 1, 1995 were not required to provide any
further consideration to TTI for the shares held in the escrow, 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 (Pacific Mezzanine Fund, L.P.) of 145,833
shares of the Company's common stock 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 these
shares, the Lender represented and warranted to the Company that (i) it was
aware that these shares had not been registered under federal securities laws,
(ii) it was acquiring the 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 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 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, the fact that the Lender constituted the
only purchaser of the shares, and the fact that the Lender engaged in a due
diligence review of TTI and the Company prior ti its investment, the sale of the
shares to the Lender should not constitute the sale of an unregistered security
in violation of the federal securities laws by reason of the exemption provided
under ss. 4(2) of the Securities Act of 1933.
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 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.
23
<PAGE>
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.
24
<PAGE>
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 Auditors' Report 26
Consolidated Balance Sheets 27
Consolidated Statements of Operations 28
Consolidated Statements of Stockholders' Equity 29
Consolidated Statements of Cash Flows 30
Notes to Consolidated Financial Statements 31
25
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Wireless Cable & Communications, Inc.
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheets of Wireless Cable &
Communications, Inc. and subsidiaries (a development stage company) as of
December 31, 1995 and September 30, 1996 and the related consolidated statements
of operations, stockholders' equity, and cash flows for the period from July 31,
1995 (date of inception) through December 31, 1995 and for the nine months ended
September 30, 1996. 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company at
December 31, 1995 and September 30, 1996 and the results of its operations and
its cash flows for the period from July 31, 1995 (date of inception) through
December 31, 1995 and for the nine months ended September 30, 1996, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company is a development
stage enterprise engaged in the development of wireless cable television systems
both domestically and internationally. As discussed in Note 6 to the
consolidated financial statements, the Company does not have revenue sufficient
to cover its operating costs and its current liabilities exceed its current
assets. These conditions raise substantial doubt about its ability to continue
as a going concern. Management's plans concerning these matters are also
described in Note 6. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
October 17, 1996 (December 30, 1996 as to Note 7)
26
<PAGE>
WIRELESS CABLE & COMMUNICATIONS, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 2,075 $ 18,410
Prepaid license lease fees (Notes 2 and 3) 200,962 197,702
------------------- --------------------
Total current assets 203,037 216,112
INVESTMENTS (Note 2) - 300,000
EQUIPMENT - Net (Note 2) 3,033 1,083
LICENSE RIGHTS, - Net (Note 3) 1,092,333 961,833
------------------- --------------------
TOTAL ASSETS $ 1,298,403 $ 1,479,028
=================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 16,668 $ 73,774
Accrued license lease fees (Note 3) 102,183 108,392
Accrued consulting fees (payable to related
party, Note 4) 100,000 100,000
------------------- --------------------
Total current liabilities 218,851 282,166
LONG-TERM LIABILITIES:
Long-term debt (owed to related party, Note 4) 238,406 824,834
MINORITY INTEREST IN SUBSIDIARY (Note 1) 49,612 36,439
------------------- --------------------
Total liabilities 506,869 1,143,439
------------------- --------------------
COMMITMENTS AND CONTINGENCIES (Notes 3, 4 and 6) STOCKHOLDERS' EQUITY (Note 1):
Preferred stock; $0.01 par value; 5,000,000 shares authorized:
and no shares issued or outstanding
Common stock; $0.01 par value; 15,000,000 shares authorized:
3,500,000 and 3,645,833 shares issued and outstanding 35,000 36,458
Additional paid-in capital 911,662 949,659
Deficit accumulated during the development stage (155,128) (650,528)
------------------- --------------------
Total stockholders' equity 791,534 335,589
------------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,298,403 $ 1,479,028
=================== ====================
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
WIRELESS CABLE & COMMUNICATIONS, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JULY 31, 1995 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1995 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
July 31, 1995 from July 31,
(Date of 1995 (Date of
Inception) Nine Months Inception)
Through Ended Through
December 31, September 30, September 30,
1995 1996 1996
EXPENSES:
<S> <C> <C> <C>
Professional fees $ 17,935 $ 143,595 $ 161,530
Depreciation and amortization 73,585 132,450 206,035
Lease expense (Note 3) 56,421 107,808 164,229
General and administrative 7,323 65,177 72,500
------------------ ------------------- ------------------
Total 155,264 449,030 604,294
INTEREST EXPENSE (Note 4) 6,439 59,543 65,982
------------------ ------------------- ------------------
NET LOSS BEFORE MINORITY INTEREST 161,703 508,573 670,276
MINORITY INTEREST IN LOSS OF SUBSIDIARY (Note 1) 6,575 13,173 19,748
------------------ ------------------- ------------------
NET LOSS $ 155,128 $ 495,400 $ 650,528
================== =================== ==================
Net loss per common share $ (0.04) $ (0.14) $ (0.18)
================== =================== ==================
Weighted average common shares 3,500,000 3,550,030 3,532,104
================== =================== ==================
</TABLE>
See notes to consolidated financial statements.
28
<PAGE>
WIRELESS CABLE & COMMUNICATIONS, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 31, 1995 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1995 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
<S> <C> <C> <C> <C>
Issuance of common stock to TTI
shareholders in August 1995 (Note 1) 3,500,000 $35,000 $911,662
Net loss for the period from July 31, 1995
(date of inception) through December 31, 1995 $(155,128)
--------------- ------------ ------------- ---------------
BALANCE, DECEMBER 31, 1995 3,500,000 35,000 911,662 (155,128)
Issuance of common stock (Note 4) 145,833 1,458 37,997
Net loss for the nine months ended
September 30, 1996 (495,400)
--------------- ------------ ------------- ---------------
BALANCE, SEPTEMBER 30, 1996 3,645,833 $36,458 $949,659 $(650,528)
=============== ============ ============= ===============
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
WIRELESS CABLE & COMMUNICATIONS, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JULY 31, 1995 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1995 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
July 31, 1995 from July 31,
(Date of 1995 (Date of
Inception) Nine Months Inception)
Through Ended Through
December 31, September 30, September 30,
1995 1996 1996
CASH FLOWS FROM DEVELOPMENT ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (155,128) $ (495,400) $ (650,528)
Adjustments to reconcile net loss to net cash used in
development activities:
Depreciation and amortization 73,585 132,450 206,035
Minority interest in loss of subsidiary (6,575) (13,173) (19,748)
Change in assets and liabilities:
(Increase) decrease in prepaid license lease fees (87,344) 3,260 (84,084)
Increase in accounts payable 9,062 57,106 66,168
Increase in accrued license lease fees 25,441 6,209 31,650
------------------ ------------------- -------------------
Net cash used in development activities (140,959) (309,548) (450,507)
------------------ ------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in shares (Note 2) - (300,000) (300,000)
------------------ ------------------- -------------------
Net cash provided by investing activities - (300,000) (300,000)
------------------ ------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 2,000 39,455 41,455
Borrowings from related party (Note 4) 141,034 586,428 727,462
------------------ ------------------- -------------------
Net cash provided by financing activities 143,034 625,883 768,917
------------------ ------------------- -------------------
NET INCREASE IN CASH 2,075 16,335 18,410
CASH AT BEGINNING OF PERIOD - 2,075 -
------------------ ------------------- -------------------
CASH AT END OF PERIOD $ 2,075 $ 18,410 $ 18,410
================== =================== ===================
SUPPLEMENTAL SCHEDULE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest and income taxes NONE NONE NONE
================== =================== ===================
</TABLE>
SUPPLEMENTAL SCHEDULE FOR NONCASH INVESTING AND FINANCING ACTIVITIES In
connection with the Separation (see Note 1), the Company issued common stock
in exchange for the acquisition of assets and the assumption of liabilities as
follows:
Historical cost of assets acquired, including prepaid
license lease fees, equipment, and license rights $ 1,282,569
Common stock issued (946,662)
---------------
Liabilities assumed $ 335,907
===============
See notes to consolidated financial statements.
30
WIRELESS CABLE & COMMUNICATIONS, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM JULY 31, 1995 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1995 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
- -------------------------------------------------------------------------------
1. THE COMPANY
Wireless Cable & Communications, Inc. (the Company) was incorporated in
Nevada on July 31, 1995. 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 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 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 94.9% owned subsidiary, Auckland Independent Television
Services, Ltd., a New Zealand corporation ("AITS").
The authorized number of shares of the Company's preferred stock is
5,000,000, $0.01 par value. At December 31, 1995 and September 30,
1996, no preferred stock was issued or outstanding and no specific
rights or preferences for the preferred stock had been authorized or
established by the Company's Board of Directors.
The Company was formed for the purpose of continuing the development of
certain business assets formerly held by Transworld Telecommunications,
Inc., a Pennsylvania corporation ("TTI"). Under the terms of the
business separation (the "Separation"), TTI agreed to form a new
corporation to hold the separated business assets.
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
with a carrying value of approximately $946,662 which represents the
historical cost of TTI. The assets related to TWTV Park City and AITS
were $4,118 and $1,278,451, respectively. TTI immediately transferred
the shares in the Company to an escrow agent 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 met certain requirements of the federal securities
laws. 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its subsidiaries. The Company's
subsidiaries include AITS, which as of December 31, 1995 was owned
94.9% by the Company, and TWTV Park City, which is a wholly-owned
subsidiary. All significant intercompany accounts and transactions have
been eliminated in the consolidation. The Company's
31
<PAGE>
subsidiaries use the U.S. dollar as their functional currency. Foreign
currency translation gains and losses are included in expenses as they
are incurred and were not material for the periods ended December 31,
1995 or September 30, 1996.
Use of Estimates in Preparing Financial Statements - The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Prepaid License Lease Fees - Prepaid license lease fees are prepayments
of annual license lease fees relating to the Company's license rights.
Investments - The Company uses the cost method of accounting for its
investments in voting shares of other entities where it holds less than
20% of the voting shares of the other entity and where the Company does
not exercise significant influence. As of September 30, 1996 the
Company had invested a total of $300,000 for a 3% interest in
Comunicaciones Centurion, S.A., a Venezuelan company.
Equipment - Equipment consisting entirely of transmission equipment is
stated at cost. Depreciation is computed using the straight-line method
over the expected useful life of the assets of five years. Accumulated
depreciation on the equipment was $9,967 and $11,917 at December 31,
1995 and September 30, 1996 respectively.
Income Taxes - The Company accounts for income taxes under an asset and
liability approach that requires the recognition of deferred tax assets
and liabilities for expected future tax consequences of events that
have been recognized in the Company's consolidated financial
statements.
New Accounting Standard - Effective January 1, 1996, the Company
adopted SFAS 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." This Statement requires
that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The Company does not expect the adoption of
this standard in 1996 to have a material effect on its consolidated
financial statements.
3. LEASE AND LICENSE AGREEMENTS
The Company has certain lease and license agreements for various multi
point multi-channel distribution service (MMDS or wireless cable)
channels and frequencies within New Zealand. Each license is for a
specified number of channels and frequencies for a specified length of
time. The licenses were obtained from TTI through the Separation and
are recorded at TTI's historical cost.
The Company has three license agreements relating to ten channels in
New Zealand. The first license is for six channels and consists of a
three year lease expiring December 9, 1996. The accrued license lease
fees balance of $102,183 at December 31, 1995 and $108,392 at September
30, 1996 relates to the three year lease expiring December 9, 1996. The
Company has not remitted the accrued balance at September 30, 1996 of
$108,392 which represents two annual license lease fee payments. The
contractual amounts of this license are denominated in New Zealand
dollars which are subject to foreign exchange risk. The December 31,
1995 accrued balance of $102,183 has been converted to U.S. dollars
using the December 31, 1995 exchange rate of $0.65. The September 30,
1996 accrued balance of $108,392 has been converted to U.S. dollars
using the September 30, 1996 exchange rate of $0.70. The second license
is for two channels and consists of an
32
<PAGE>
eight year lease expiring March 1, 2001 with a guaranteed option to
renew the lease for an additional four years. The third license is for
two channels and consists of a ten year lease expiring September 30,
2004.
License rights are amortized using the straight-line method over the
life of the leases ranging from three to twelve years. Accumulated
amortization on the license rights was $357,667 and $488,167 at
December 31, 1995 and September 30, 1996, respectively.
In addition to owning the rights to use these licenses, the Company is
required to make certain license lease fee payments which vary
depending on the lease. These license lease fee payments are generally
paid in advance. Certain lease payments are denominated in New Zealand
dollars which are subject to foreign exchange risk. Lease expense under
all noncancelable operating leases totaled $56,421 and $107,808 for the
periods from July 31, 1995 (date of inception) through December 31,
1995, and for the nine months ended September 30, 1996, respectively.
Prepaid license lease fees represent prepayments of annual license
lease fees and totaled $200,962 and $197,702 as of December 31, 1995,
and September 30, 1996, respectively.
The Company is obligated to make the following future minimum lease
payments which have been converted to U.S. dollars using the September
30, 1996 exchange rate of $0.70:
Year ending December 31:
1996 $ -
1997 98,286
1998 98,286
1999 58,286
2000 58,286
2001 58,286
2002 and thereafter 139,157
-------------
Total future lease payments $510,587
=============
4. RELATED PARTY TRANSACTIONS
The Company has entered into an agreement with TTI wherein, at TTI's
sole discretion, the Company will be allowed to borrow from TTI up to
$1,000,000 for the purpose of facilitating the acquisition, operation,
build-out, and maintenance of the Company's business operations.
Interest on any outstanding balance will accrue at 8% per annum with
the principal and interest becoming due and payable in full on August
1, 2001. As of December 31, 1995, $231,967 plus accrued interest of
$6,439 was outstanding on the loan. As of September 30, 1996, $796,707
plus accrued interest of $28,127 was outstanding on the loan. The
estimated fair value of this long-term debt at December 31, 1995 and
September 30, 1996 was not materially different from the carrying value
presented in the consolidated balance sheet.
The Company has a current liability to an entity owned by the father of
the president of the Company in the amount of $100,000 for consulting
services related to the TTI acquisition of the New Zealand channel
frequencies. This liability was assumed during the Separation.
In June 1996, TTI borrowed $2,500,000 (the Loan) from Pacific Mezzanine
Fund, L.P., an unrelated party. As partial consideration for making the
Loan, Pacific Mezzanine Fund, L.P. remitted $1,600 for the purchase of
145,833 shares of the Company's common stock. Because these shares were
issued at below market value, the Company recorded additional interest
expense of $37,855 at the time of the stock purchase. The terms of the
Loan will allow TTI to loan funds to the Company pursuant to the loan
commitment agreement between the Company and TTI.
33
<PAGE>
5. INCOME TAXES
Under the asset and liability approach of Statement of Financial
Accounting Standards No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their existing tax bases.
The Company has federal and state net operating loss carryforwards of
approximately $9,000 and $127,000 as of December 31, 1995 and September
30, 1996, respectively, that may be offset against future taxable
income through 2010.
The long-term net deferred tax assets of $10,000 and $108,100 at
December 31, 1995 and September 30, 1996, respectively, are fully
reserved due to the uncertainty of realization and are comprised of the
following:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
<S> <C> <C>
Net operating loss carryforwards $3,100 $50,900
Depreciation 400 400
Organizational expenditures 7,000 57,400
------------------ --------------------
Gross deferred tax asset 10,500 108,700
Less gross deferred tax liability - amortization (500) (600)
Deferred tax asset valuation allowance (10,000) (108,100)
------------------ --------------------
Total net deferred tax asset NONE NONE
================== ====================
</TABLE>
6. 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's current wireless cable television assets consist of two
groups of wireless cable television channel rights, four 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
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.
The Company anticipates that it will obtain the financing necessary to
fund its future operations through loans, equity investments and other
transactions. While there can be no assurance that the Company will
secure such financing, the Company is currently in negotiations to
obtain third party financing for its activities; and management
believes that this funding can be obtained under terms satisfactory to
the
34
<PAGE>
Company. In the event that the Company is unsuccessful in completing
these financing arrangements or in obtaining substitute funding
commitments, the Company would have difficulty in meeting its operating
expenses, satisfying its existing or future debt obligations, or
succeeding in acquiring, developing or operating a cable system or
adding subscribers to such cable systems. 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
the viability of the Company could be 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 establishing policies designed to conserve cash and control
costs, obtaining an agreement to borrow up to $1 million from TTI (see
Note 4), and pursuing additional financing and capital resources as
described above.
7. SUBSEQUENT EVENTS
On July 17, 1996, the Company entered into an agreement with
Comunicaciones Centurion, S.A., ("Centurion"), to acquire up to 11.53%
of its voting capital stock (1% per $100,000 investment). Centurion is
a Venezuelan corporation which holds the license rights for the 28Ghz
frequencies within Venezuela. As of September 30, 1996, the Company had
remitted $300,000 to Centurion and had recorded a 3% investment in
Centurion. As of December 30, 1996, the Company has remitted an
additional $140,000 for an additional 1.4% investment in Centurion. The
Company has the obligation to acquire an additional 3.1% investment in
Centurion for $310,000. The Company has the right, but not the
obligation, to acquire an additional 4.03% investment in Centurion for
$403,000 (for a total interest of 11.53%, which represents the maximum
additional foreign ownership of Centurion that would be allowed under
Venezuelan law given other existing foreign ownership positions).
On November 8, 1996, the Company entered into an agreement to acquire a
controlling interest in Caracas VivaVision, T.V., S.A., a Venezuelan
corporation which has entered into an agreement with Centurion to
market and commercialize the 28Ghz frequencies within the country of
Venezuela.
35
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit Page
3.1 Articles of Incorporation 37
3.2 Bylaws 40
10.1 Agreement and Plan of 52
Reorganization
10.2 Escrow Agreement between Fidelity 59
Transfer Company, TTI and the
Company
10.3 Commitment Agreement between 65
the Company and TTI
10.4 Letter of Understanding with 75
Decathlon Communications, Inc.
11.1 Computation of Earnings Per Share 76
16.1 Letter on Change in Independent 77
Certified Public Accountants
21.1 Subsidiaries of the Registrant 78
23.1 Consent of Independent Certified 79
Public Accountants
27.1 Financial Data Schedule 80
In accordance with ss.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 December 30, 1996
-----------------------
Lance D'Ambrosio Officer) and Director
By: /s/ Paul Gadzinski Executive Vice President December 30, 1996
----------------------
Paul Gadzinski
By: /s/ Anthony Sansone Secretary and Treasurer December 30, 1996
----------------------
Anthony Sansone (Principal Accounting Officer)
By: /s/ Troy D'Ambrosio Director December 30, 1996
---------------------
Troy D'Ambrosio
By: /s/ George Sorenson Director December 30, 1996
---------------------
George Sorenson
36
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.
37
<PAGE>
All shares of stock shall have a par value of One Hundredth of One
Dollar (.01).
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.
38
<PAGE>
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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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 quorum is not present at a meeting, then
stockholders holding a majority of the voting power
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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.
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
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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, 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
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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.
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.
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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 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
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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.
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
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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.
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:
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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 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 to appoint one or 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.
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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
conclu sive.
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
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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.
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
51
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 ss.ss. 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 or
otherwise ("Liabilities"), as of the Closing Date, as described below. Any
tangible portions of the
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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:
(a) The execution and delivery by Transworld and Wireless
of the Assignment Documents;
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(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 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
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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:
(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
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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
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.
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<PAGE>
(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 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
57
<PAGE>
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
58
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
ss. 355 and ss. 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.
59
<PAGE>
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 of the Wireless Shares to the shareholders of
Transworld on the books and records of Wireless, in
60
<PAGE>
accordance with their respective interests as set forth on Schedule "A" attached
hereto, upon their release by Fidelity as provided herein.
(b) Upon the receipt by Fidelity of (i) the Escrow Documents;
and (ii) written notices (the "Release Notices") from both Wireless and
Transworld that they have complied with all requirements of the federal
securities laws necessary for the distribution of the Wireless Shares to
Transworld's shareholders (including the filing of a Form 10 under the
Securities Exchange Act of 1934, as amended (the "Act"), and/or proxy or
disclosure materials providing substantially all of the information required by
Regulation 14A and/or 14C of the Act), Fidelity will, and is hereby instructed
to, release the Escrow Documents and to cause to be prepared and delivered to
the respective Transworld shareholders at the addresses set forth in the
shareholders books and records of Transworld, as maintained by Fidelity,
separate certificates for the Wireless Shares in the respective amounts set
forth on Schedule "A". Upon Fidelity's delivery of the Escrow Documents in
accordance with the provisions of this paragraph, this Escrow Agreement will
terminate.
(c) If Transworld does not deposit the Escrow Documents,
and/or the Escrow Agent has not received the Release Notices from Transworld and
Wireless on or before February 1, 1996 (or such other date as Transworld and
Wireless will designate by written notice to Fidelity on or before February 1,
1996), Fidelity is hereby instructed to return the Escrow Documents to
Transworld, at which time this Escrow Agreement will terminate.
5. Escrow Agent Terms. The acceptance by Fidelity of its
obligations hereunder is subject to the following terms and conditions:
(a) Transworld hereby agrees to pay to Fidelity any and all
costs or expenses incurred by it in connection with the actions taken hereunder,
and to pay to Fidelity such other 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
61
<PAGE>
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.
(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.
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<PAGE>
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 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.
63
<PAGE>
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
64
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.
65
<PAGE>
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
66
<PAGE>
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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<PAGE>
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
68
<PAGE>
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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<PAGE>
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
70
<PAGE>
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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<PAGE>
(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
74
LETTER OF UNDERSTANDING WITH DECATHLON COMMUNICATIONS, INC.
[Company Letterhead]
June 26, 1995
Martin Frankel
President
Decathlon Communications, Inc.
7600 E. Eastman Avenue, Suite 406
Denver, CO 80231
Dear Martin:
This letter is to confirm our understanding that Decathlon Communications, Inc.,
(Decathlon) has granted Transworld Telecommunications, Inc., (TTI) its assigns
or designees the exclusive country- wide rights to deploy Decathlon's digital
compression technology in New Zealand. Transworld anticipates ordering 10
compression systems and up to 200,000 set-tops over several years.
This agreement is subject to the negotiation of final terms and conditions
acceptable to both TTI and Decathlon and may be canceled at any time by TTI or
Decathlon without recourse or obligation to either party, prior to signing of a
final agreement.
Sincerely,
/s/ Troy D'Ambrosio
- ------------------------------------------
Troy D'Ambrosio
Vice President
Decathlon Communications, Inc.
By: /s/ Martin Frankel
-------------------------------------------
Its: President
-------------------------------------------
Date: June 26, 1995
-------------------------------------------
75
<TABLE>
<CAPTION>
Number Days
Description Date of Shares Outstanding
<S> <C> <C> <C> <C>
Common stock issued in 8/1/95 to 3,5000,000 153 535,500,000
acquisition of assets 12/31/95
/ 153
------------------
Weight average shares outstanding for the five months
ended December 31, 1995 3,500,000
==================
<CAPTION>
Number Days
Description Date of Shares Outstanding
<S> <C> <C> <C> <C>
Beginning Common Stock 1/1/96 to 3,500,000 180 630,000,000
6/28/96
Issuance of Common Stock 6/29/96 to 3,645,833 94 342,708,302
9/30/96
972,708,302
/ 274
------------------
Weight average shares outstanding for the nine months
ended September 30, 1996 3,550,030
==================
<CAPTION>
Number Days
Description Date of Shares Outstanding
<S> <C> <C> <C> <C>
Beginning Common Stock 8/1/95 to 3,500,000 333 1,165,500,000
6/28/96
Issuance of Common Stock 6/29/96 to 3,645,833 94 342,708,302
9/30/96
1,508,208,302
/ 427
--------------------
Weight average shares outstanding for the period from August 1, 1995
through September 30, 1996 3,532,104
====================
</TABLE>
76
LETTER ON CHANGE IN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
October 11, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
WIRELESS CABLE & COMMUNICATIONS, INC.
We have read the "Changes in and Disagreements with Accountant on Accounting and
Financial Disclosure" section of Wireless Cable & Communications, Inc.'s Form
10-SB dated October 18, 1996 and are in agreement with the statements contained
therein.
Yours very truly,
Jones, Jensen & Company
77
Subsidiaries of the Registrant
Transworld Wireless Television, Inc.
Auckland Independent Television Services, Ltd.
78
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' CONSENT
Wireless Cable & Communications, Inc.
Dear Sirs:
We consent to the use in this Amendment No. 1 to Registration Statement No.
000-21143 of Wireless Cable & Communications, Inc., of our report dated October
17, 1996 (December 30, 1996 as to Note 7) appearing in the Form 10-SBA, which is
a part of such Registration Statement.
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
December 30, 1996
79
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