SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------
FORM S-1/A
Registration Statement
under
The Securities Act of 1933
Media Entertainment, Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 4841 72-1346591
(STATE OR OTHER (PRIMARY STANDARD (IRS EMPLOYER
JURISDICTION OF INDUSTRIAL CLASS- IDENDIFICATION
INCORPORATION IFICATION CODE NUMBER)
OR ORGANIZATION NUMBER
8748 Quarters Lake Road, Baton Rouge, Louisiana 70809
(504) 922-7744
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICE)
David M. Loflin
President
Media Entertainment, Inc.
8748 Quarters Lake Road, Baton Rouge, Louisiana 70809
(504) 922-7744
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
Eric Newlan, Esq.
NEWLAN & NEWLAN
2512 Program Drive
Suite 101
Dallas, Texas 75220
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement
becomes effective.
If any securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, check the following
box: /X/
<PAGE>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of each maximum maximum Amount of
class of Amount offering aggregate regi-
securities to to be price per offering stration
be registered registered unit price fee
- ------------- ---------- --------- --------- ---------
Common Stock 360,000 (1) (1) (1)
$.0001 par shares
value
per share
- ------------- ---------- --------- --------- ---------
Total 360,000 100.00(2)
shares
(1) The shares are being distributed to shareholders as a
dividend. The shares are valued at their book value, $.029
per share, or $172,711 in the aggregate.
(2) Previously paid.
The Registrant hereby amends this Registration Statement on
such date as may be necessary to delay its effective date
until Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
<PAGE>
MEDIA ENTERTAINMENT, INC.
Cross Reference Sheet
(Pursuant to Rule 404 and
Item 501(b) of Regulation S-K)
Item in Form S-1 Caption or Heading in Prospectus
- ---------------- --------------------------------
1. Forepart of the Outside Front Cover Page
Registration of Prospectus
Statement and
Outside Front
Cover Page of
Prospectus
2. Inside Front and Inside Front Cover Page;
Outside Back Outside Back Cover
Cover Pages of Page; Table of Contents
Prospectus
3. Summary Inform- Prospectus Summary; The
ation; Risk Company; Risk Factors
Factors and Ratio
of Earnings
to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Distribution of Securities
Offering Price of the Company
6. Dilution Dilution
7. Selling Security- Not Applicable
holders
8. Plan of Distribu- Distribution of Securities
tion of the Company
9. Description of Description of Securities
Securities to
be Registered
10.Interest of Named Legal Matters
Experts
11.Information with
Respect to the
Registrant Prospectus Summary; The Company; Risk
Factors; Dilution; Use of
Proceeds; Distribution of
Securities of the Company;
Dividends; Capitalization;
Selected Financial Data;
Management's Discussion and
Analysis of Financial Condition
and Results of Operations;
Regulation; Business; Management;
Certain Transactions; Principal
Shareholders; Litigation;
Description of Securities; Legal
Matters; Experts; Financial
Statements
12.Disclosure of Management - Indemnification
Commission of Directors and Officers
Position on
Indemnification
for Securities
Act Liabilities<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED AUGUST 5, 1997
360,000 Shares
Media Entertainment, Inc.
Common Stock
$.0001 par value
This Prospectus relates to the distribution by Entertainment
Corporation of America, a Delaware corporation ("ECA"), of
360,000 shares of the $.0001 par value common stock (the
"Common Stock") of Media Entertainment, Inc., a Nevada
corporation (the "Company"), as a dividend to the holders of
record of ECA common stock on March 15, 1997. (See
"Information Concerning ECA").
Certificates evidencing 360,000 shares of the Common Stock
of the Company will be distributed by mail within a
reasonable time after the date of this Prospectus on the
basis of .0732824 of a share of the Company's Common Stock
for each share of the outstanding common stock of ECA.
Holders of ECA Common Stock will not be charged or assessed
for the Common Stock of the Company distributed to them as a
dividend and the shareholders will be taxed on receipt of
such dividend to the extent of the value of the shares
received. Under the laws of the State of Delaware, the
state of incorporation of ECA, the distribution of the
360,000 shares of the Common Stock of the Company will be a
dividend out of capital surplus. (See "Federal Income
Taxes").
The Company was incorporated on November 1, 1996, and, on
November 15, 1996, issued to ECA 360,000 shares of its
$.0001 par value Common Stock for a cash consideration of
$360.00. There exist no affiliations between ECA and the
Company. The Company was organized with a view toward
operating as a holding company in the wireless cable
television and community (low power) television industries,
as well as other segments of the communications industry.
The Company intends to operate its business through
subsidiary corporations. (See "Business").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus does not cover resales of Common Stock of
the Company by persons who are deemed to be "affiliates" of
the Company under the Rules and Regulations of the
Securities and Exchange Commission. Any and all shares of
Common Stock of the Company received by an affiliate of the
Company as a dividend must either be registered under the
Securities Act of 1933, as amended (the "Act"), prior to
resale, or sold in compliance with Rule 144 under the Act or
pursuant to another exemption from registration.
The Company is bearing the expenses of the registration and
distribution of the Company's Common Stock. Neither the
Company nor ECA will receive any cash or other proceeds in
connection with the distribution of the Company's Common
Stock to the shareholders of ECA. (See "Use of Proceeds").
There are no underwriting arrangements made with respect to
the proposed distribution transaction to the knowledge of
the Company. Certain information concerning the federal
income tax consequences of the dividend distribution is set
forth herein under "Federal Income Taxes".
As of the date of this Prospectus, there has been no trading
market for the Company's Common Stock. There can be no
assurance that a trading market will develop or, if such
should develop, that such market will be maintained. (See
"Risk Factors").
OWNERSHIP OF COMMON STOCK OF THE COMPANY INVOLVES A DEGREE
OF RISK. SEE "RISK FACTORS", BEGINNING ON PAGE 3, FOR A
DISCUSSION OF PARTICULAR INVESTMENT RISKS.
The date of this Prospectus is -------------, 1997<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY
JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
This Prospectus contains information concerning the Company
as of the date of this Prospectus, unless otherwise
indicated. The delivery of this Prospectus at any time does
not constitute a representation that the information
contained herein is correct as of any date other than the
date of this Prospectus, unless otherwise indicated, and the
delivery of this Prospectus shall not create any implication
that there has been no change in the business or affairs of
the Company since such date.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange
Commission (the "Commission") a Form S-1 Registration
Statement (herein, together with all amendments thereto,
called the "Registration Statement") of which this
Prospectus constitutes a part, under the Securities Act of
1933, as amended, and the Rules and Regulations promulgated
thereunder (the "Act"), with respect to the Common Stock to
be distributed hereunder. This Prospectus omits certain
information contained in the Registration Statement, and
reference is made to the Registration Statement, including
the exhibits thereto, for further information with respect
to the Company and the securities offered hereunder.
Statements contained in this Prospectus as to the contents
of any contract or other document are summaries that are not
necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as
an exhibit to the Registration Statement, each such
statement herein being qualified and amplified in all
respects by such reference. Items of information omitted
from this Prospectus but contained in the Registration
Statement may be obtained from the Securities and Exchange
Commission, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon the payment of the fee
prescribed by the Rules and Regulations of the Commission or
may be examined without cost. Also, the Registration
Statement, with exhibits, may be examined on and/or
downloaded from the Internet at:
http://www.sec.gov/cgi-bin/srch-edgar.
PROSPECTUS SUMMARY
The Company
The Company was incorporated in the State of Nevada on
November 1, 1996, to operate as a holding company in the
wireless cable television and community (low power)
television industries, as well as other segments of the
communications industry. Effective December 20, 1996, the
Company acquired from certain of its officers and directors
and others licenses and leases of licenses to wireless cable
television channels and community (low power) television
channels. As of December 31, 1996, the Company acquired all
of the outstanding capital stock of (1) Winter
Entertainment, Inc., a Delaware corporation incorporated on
December 28, 1995 ("WEI"), and (2) Missouri Cable TV Corp.,
a Louisiana corporation incorporated on October 9, 1996
("MCTV"). WEI operates a community television station in
Baton Rouge, Louisiana; MCTV owns wireless cable television
channels in Poplar Bluff, Missouri, which system has been
constructed and is ready for operation, and Lebanon,
Missouri, which market's system has yet to be constructed.
In January 1997, the Company entered into a joint venture
(known as "Web One Wireless I.S.P. - Baton Rouge, J.V.")
(the "Joint Venture") which is to operate as a Wireless
Internet Service Provider (ISP) in Baton Rouge, Louisiana,
and acquired the right to utilize, on an exclusive basis, a
licensed Wireless Internet Access System in operating as a
Wireless ISP in several U.S. cities. The Company carries on
its business through its subsidiaries. References to the
"Company" include WEI, MCTV and the Joint Venture, unless
the context indicates otherwise. (See the "Company",
"Business" and "Certain Transactions").
Distribution of Securities of the Company
The Company presently has outstanding 6,170,000 shares of
Common Stock, $.0001 par value per share, of which 360,000
shares are held by Entertainment Corporation of America, a
Delaware corporation (ECA). Pursuant to this Prospectus,
ECA will distribute 360,000 shares of the Company's Common
Stock as a dividend to the shareholders of record of ECA as
of March 15, 1997. (See "Information Concerning ECA").
After such dividend distribution, the Company will be owned
by the persons and entities who were shareholders of record
of ECA on March 15, 1997, as to 360,000 shares and by those
persons and entities owning shares of Common Stock as of the
date of this Prospectus as to 5,810,000 shares. On March
15, 1997, there were approximately 900 shareholders of ECA;
therefore, the Company will have approximately 925
shareholders after the distribution of Company Common Stock
by ECA to its shareholders.
Certificates evidencing 360,000 shares of the Common Stock
of the Company will be distributed to holders of ECA Common
Stock of record as of March 15, 1997, by mail within a
reasonable time after the date of this Prospectus on the
basis of .0732824 of a share of Company Common Stock for
each share of ECA Common Stock. (See "Distribution of
Securities of the Company").
For information regarding the federal income tax
consequences of the proposed dividend distribution, see
"Federal Income Taxes" herein.
Use of Proceeds
Neither the Company nor ECA will receive any proceeds from
the dividend distribution described herein. (See "Use of
Proceeds").
Management
The directors of the Company are David M. Loflin, Waddell D.
Loflin, Richard N. Gill, Ross S. Bravata and Michael Cohn.
David M. Loflin is President of the Company and Waddell D.
Loflin is Vice President and Secretary of the Company. (See
"Management").
THE COMPANY
Media Entertainment, Inc. (the Company) was incorporated
under the laws of the State of Nevada on November 1, 1996,
primarily for the purpose of acquiring the rights to various
wireless cable television channels and various community
(low power) television channels, and, thereafter, to operate
as a holding company in the wireless cable television and
community (low power) television industries, as well as
other segments of the communications industry. Effective
December 31, 1996, Winter Entertainment, Inc. (WEI) and
Missouri Cable TV Corp. (MCTV) became wholly-owned
subsidiaries of the Company pursuant to separate
stock-for-stock reorganizations. WEI is a predecessor of
the Company. (See "History" under "Business"). The Company
has begun to engage in the development of wireless cable
television systems and the construction of community (low
power) television stations. The Company also is seeking to
acquire broadcast channels in other, as yet unidentified,
cities throughout the United States. In January 1997, the
Company entered into a joint venture (known as "Web One
Wireless I.S.P. - Baton Rouge, J.V.") (the Joint Venture)
which is to operate as Wireless Internet Service Provider
(ISP) in Baton Rouge, Louisiana, and the Company has
acquired the rights to utilize, on an exclusive basis, a
licensed Wireless Internet Access System in operating as a
Wireless ISP in several U.S. cities, including, among
others, Seattle, Washington, Portland, Oregon, New Orleans,
Louisiana, and Dallas and Houston, Texas. The Company
anticipates that it will enter other segments of the
communications industry as opportunities become available.
(See "Business"). References to the "Company" include WEI,
MCTV and the Joint Venture, unless the context indicates
otherwise.
The Company's headquarters is located at 8748 Quarters Lake
Road, Baton Rouge, Louisiana 70809. Its telephone number is
(504) 922-7744; its facsimile number is (504) 922-9123.
RISK FACTORS
The Common Stock of the Company should be considered an
investment involving a degree of risk. Factors which
holders and prospective purchasers of Common Stock should
weigh carefully include the following:
Risks Concerning the Company
Limited Operating History. The Company has only recently
begun to engage in business activities. The Company's
operations, and proposed operations, are subject to all of
the risks inherent in the establishment of a new business,
particularly one in the highly competitive communications
industry. The likelihood of the success of the Company must
be considered in light of the problems, expense,
difficulties, complications and delays frequently
encountered in connection with establishing a new business,
including, without limitation, market acceptance of the
Company's services, regulatory problems, unanticipated
expenses and competition. There is no assurance that the
proposed business activities of the Company will be
successful or that the Company will ever earn a profit from
such proposed activities. (See "History" under "Business").
Going Concern Opinion. The Company's independent auditor,
Weaver and Tidwell, L.L.P., expressed, in its opinion on the
Company's audited financial statements, substantial doubt
about the Company's ability to continue as a going concern.
Reference is made to the financial statements of the Company
included elsewhere herein, and, specifically, to the
Independent Auditor's Report and Note 1 to the financial
statements of the Company.
Dependence on Management. The Company is dependent on its
current management for its success. In particular, the
Company is dependent on the efforts of its President, David
M. Loflin, for its success. Mr. Loflin expects to devote
not less than 75% of his time to the business of the Company
during the initial stages of development, which amount of
time is expected o be adequate. The Company and Mr. Loflin
have not entered into an employment agreement, nor has any
key-man life insurance been purchased with respect to Mr.
Loflin or any other members of the Company's management.
However, it is anticipated that the Company and Mr. Loflin
will execute a written employment agreement in the near
future, although no assurance in this regard can be given.
The Company's success is also dependent upon its ability to
attract and retain qualified employees to meet the Company's
needs during its growth. (See "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
and "Management").
Control of the Company. After giving effect to the
distribution of the Company's Common Stock by ECA, the
Company's directors and executive officers will own
approximately 81.13% of the Company's outstanding shares of
Common Stock. Accordingly, these shareholders will continue
to be able to elect the Company's directors and thereby
control the management policies of the Company, as well as
determine the outcome of corporate actions requiring
shareholder approval by majority, or so-called "super
majority", action, regardless of how other shareholders of
the Company may vote. Such ownership of Common Stock may
have the effect of delaying, deferring or preventing a
change in control of the Company and may adversely affect
the voting rights of other holders of Common Stock. (See
"Management" and "Principal Shareholders").
Conflicts of Interest and Related Transactions. It is
possible that conflicts of interest could arise in the
negotiation of the terms of any transaction between the
Company and its shareholders, officers, directors or
affiliates. The Company has no plans or arrangements, such
as the hiring of independent consultants or arbiters, for
the resolution of disputes between the Company and such
persons if they arise. The Company and its public
shareholders could be adversely affected, should such
individuals choose to place their own interests before those
of the Company. No assurance can be given that conflicts of
interest will not cause the Company to lose potential
opportunities, profits or management attention. The Company
could acquire channel licenses or other assets from
management, principal shareholders or their affiliates or
from entities in which management, principal shareholders or
their affiliates may hold an interest. Such persons or
entities could derive monetary or other benefits from such
transactions. Such benefits could include, without
limitation, the assumption of, or release from, liabilities
incurred by such persons or result in increased control of
the Company by such persons.
The Company's President, David M. Loflin, owns a
television station, WTVK Channel 11, in Baton Rouge,
Louisiana, which operates in competition with the Company's
Baton Rouge community television station, K13VE Channel 13.
It is possible that Mr. Loflin's ownership of a competing
television station will result in a conflict of interest for
Mr. Loflin, particularly with respect to obtaining
advertisers. Mr. Loflin intends to resolve any such
conflict that may arise in accordance with his fiduciary
duty and duty of loyalty to the Company. There is no
assurance that Mr. Loflin will be able to resolve any such
conflict of interest to the Company's benefit.
To date, substantially all of the Company's assets have
been acquired from affiliates. In December 1996, the
Company acquired certain wireless cable and community (low
power) television assets from two of the Company's
directors, David M. Loflin and Waddell D. Loflin.
Specifically, the Company acquired wireless cable rights in
Port Angeles, Washington, Astoria, Oregon, Sand Point,
Idaho, The Dalles, Oregon, and Fallon, Nevada, and community
(low power) television channels in Monroe/Rayville,
Louisiana, Natchitoches, Louisiana, and Bainbridge, Georgia,
in exchange for a total of 1,682,761 shares of Company
Common Stock. Further, effective December 31, 1996, the
Company acquired all of the stock of WEI, a company formerly
100% owned by Mr. David Loflin, in exchange for 227,336
shares of Company Common Stock. Also effective December 31,
1996, the Company acquired all of the stock of MCTV in
exchange for shares of Company Common Stock. Pursuant to
the MCTV acquisition, Mr. David Loflin received, as a
shareholder of MCTV, 1,179,389 shares of Company Common
Stock, Mr. Ross S. Bravata, a director of the Company,
received, as a shareholder of MCTV, 42,887 shares of Company
Common Stock and Mr. Michael Cohn, a director of the
Company, received, as a shareholder of MCTV, 53,608 shares
of Company Common Stock. At the time of the MCTV
acquisition, neither of Messrs. Bravata and Cohn was a
director of the Company.
Need for Future Financing. The Company is in need of
additional financing to complete construction and
exploitation of its proposed wireless cable systems
(approximately $200,000 per system), community (low power)
television channels (approximately $50,000 per channel) and
Wireless ISP markets (approximately $175,000 per market).
The Company does not have a bank line-of-credit and there
can be no assurance that any required or desired financing
will be available, through bank borrowings, debt or equity,
or otherwise, on acceptable terms. To the extent that
future financing requirements are satisfied through the
issuance of equity securities, investors may experience
significant dilution in the net book value per share of
Common Stock. Any future debt incurred by the Company could
result in a substantial portion of the Company's cash flow
from operations being dedicated to the payment of principal
and interest on such indebtedness and may render the Company
more vulnerable to competitive pressures and economic
downturns. The Company's future capital requirements will
depend upon a number of factors, many of which are not
within the Company's control, including programming costs,
capital costs, marketing expenses, staffing levels,
subscriber growth and competitive factors. A failure by the
Company to secure such additional financing would render the
Company unable to exploit its channel licenses and leases of
channel licenses. In addition, the Company is in need of
additional financing to exploit its Wireless ISP business
opportunities. There is no assurance that the Company will
be able to secure such additional financing or, if found,
that such financing would be on terms favorable to the
Company. (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and
"Business").
Uncertainty of Significant Assumptions. The Company's
plans for implementing its proposed business operations and
achieving profitability from its intended operations are
based on the experience, judgment and certain assumptions of
its management, and upon certain available information
concerning the communications industry, in general, and the
Company's proposed plan of operation, in particular. No
independent market studies have been conducted concerning
the extent to which customers will utilize the services and
products to be offered by the Company, nor are any such
studies planned. There can be no assurance that the
Company's plans will materialize, or that the Company's
assumptions will prove correct. (See "Business").
Lack of Patent Protection. The Company has no material
proprietary technology or software. As a result, there are
no technological or patent barriers to entry by other
companies into the Company's areas of endeavor.
Risks Concerning Wireless Cable
Competition. The pay television industry is highly
competitive. Wireless cable systems face competition from
several sources, including, among others, hard-wire cable
companies, Satellite Master Antenna Television systems,
Direct Broadcast Satellite and other alternative methods of
distributing and receiving television transmissions.
Further, premium movie services offered by cable television
systems have encountered significant competition from the
home VCR industry. In areas where several local off-air
VHF/UHF broadcast signals can be received without the
benefit of cable television, cable television systems
(hard-wire and wireless) also have experienced competition
from the availability of broadcast signals generally and
have found market penetration to be difficult. In addition,
within each market, the Company initially must compete with
others to acquire, from the limited number of channel
licenses issued, rights to a minimum number of channels
needed to establish a viable system. Legislative,
regulatory and technological developments may result in
additional and significant competition, including
competition from local telephone companies and from a
proposed new wireless service known as local multi-point
distribution service. However, new digital compression
technologies may have the effect of allowing the Company to
compete in a particular market having acquired only two or
three channel licenses. Because the Company intends to
target its initial marketing effort in each of its markets
to households that are unpassed by hard-wire cable and that
have limited access to local off-air VHF/UHF broadcast
channels, the Company does not anticipate, during start-up,
significant direct competition from local hard-wire cable
companies. No assurance can be given, however, that the
Company will not face direct competition from hard-wire
cable companies in the future. It can be expected that
potential competitors of the Company will have greater
resources, financial and otherwise, than the Company. Also,
legislative, regulatory and technological developments may
result in additional and significant new competition,
including competition from local telephone companies. No
assurances can be given that the Company will compete
successfully in its wireless cable markets. (See "Business
- - Wireless Cable - Competition" under "Business").
Dependence upon Frequencies; No Automatic Renewal of
Licenses. The use of frequencies is subject to regulation
by the FCC, and, therefore, the ability of the Company's
wireless cable systems to utilize such channels is dependent
upon continuing compliance by the Company (or third-party
lessors) with such applicable regulations as the FCC may
adopt from time to time. FCC licenses for wireless cable
frequencies must be renewed periodically and there is no
automatic renewal of such licenses. If the underlying FCC
licenses are cancelled or not renewed, or if leases are
terminated or not renewed, the Company's wireless cable
systems would be unable to deliver programming on such
frequencies, which could have a materially adverse effect on
the Company. (See "Regulation").
Dependence Upon Programming Availability. The Company's
wireless cable systems must obtain contracts with various
program suppliers for non-broadcast programming services
(such as ESPN, HBO, CNN and MTV). The likelihood that
program material will be unavailable to the Company is
significantly mitigated by the Cable Act and various FCC
regulations issued thereunder, which, among other things,
impose limits on exclusive programming contracts and
generally prohibit cable programmers in which a cable
operator has an attributable interest from discriminating
against cable competitors with respect to the price, terms
and conditions of sale of programming. There is,
nevertheless, no assurance that any programming source will
be available to the Company's wireless cable systems or, if
available, that it will be available at reasonable prices or
will be acceptable to subscribers. (See "Business -
Wireless Cable - Programming" under "Business").
Impediments to Proposed Expansion. The Company has
adopted a business strategy which includes, in part, growth
through the development of additional wireless cable
systems. The Company's proposed expansion will be dependent
on, among other things: the availability of channel license
rights on terms and conditions acceptable to the Company, if
at all; successful development and construction of operating
systems; the availability of suitable management and other
personnel; the Company's general ability to manage growth;
and the availability of adequate financing. The Company's
management will be responsible for the selection of
expansion opportunities in its sole discretion and
shareholders will not be presented with advance information
regarding expansion opportunities or the ability to approve
or disapprove system expansion opportunities. There can be
no assurance that the Company will be successful in its
proposed business strategy.
Uncertainties Associated with Wireless Cable. The Company
has only recently entered the wireless cable industry and
has not yet launched its initial commercial broadcast. Due
to this lack of operating history, the Company's growth can
be expected to face unanticipated impediments, costs and
competitive factors in connection with the expansion of the
business, including changes in laws or regulations,
technological advances, the availability of funding for
future subscriber growth and the impact of new competitors
for subscribers. There is no assurance that the Company
will be able to compete successfully in its wireless cable
markets. (See "Business - Wireless Cable - Competition"
under "Business").
Physical Limitations of Wireless Cable Transmission. The
vast majority of wireless cable programming is transmitted
through the air via microwave frequencies (2500 to 2700 MHZ)
from a transmission facility to a small receiving antenna at
each subscriber's location, which generally requires a
direct "line-of-sight" from the transmission facility to the
subscriber's receiving antenna. Therefore, in communities
with tall trees, hilly terrain, tall buildings or other
obstructions in the transmission path, wireless cable
transmission can be difficult or impossible to receive at
certain locations without the use of signal repeaters known
as "beambenders". The terrain in the Company's markets is
generally conducive to wireless cable transmission and the
Company does not presently anticipate any material use of
beambenders. Nevertheless, because hard-wire cable systems
deliver the signal to a subscriber's location through a
network of coaxial cable and amplifiers and do not require a
direct line-of-site, it is possible that a particular
hard-wire cable system may have a competitive advantage over
the Company in those areas where the reception of wireless
cable transmission is difficult. In addition, extremely
adverse weather can damage transmission and receiving
antennas, as well as transmit-site equipment. However, the
Company does not believe such potential damage represents a
material risk.
A small number of wireless cable systems utilize several
low power television stations, built-out for wireless cable
operations, within a particular market to broadcast
programming to a small receiving antenna at each
subscriber's location. Because the programming of such a
wireless cable system is broadcast by low power television
stations rather than via microwave frequencies, most
"line-of-sight" limitations usually associated with wireless
cable are eliminated. Two of the Company's markets, Poplar
Bluff and Lebanon, Missouri, are designed in such a manner.
The Company's management intends to develop as many markets
as possible in this manner, because of management's belief
that this style of wireless cable system is superior to the
"traditional" wireless cable system structure. However, no
assurance can be made in this regard. (See "Business -
Wireless Cable - Company Markets" under "Business").
Government Regulation. The wireless cable industry is
highly regulated. The right to transmit on wireless cable
channels is regulated by the FCC and the retransmission of
local off-air VHF/UHF broadcasts is regulated by the U.S.
Copyright Office, pursuant to the Copyright Act.
Pursuant to the Cable Act, the FCC adopted rate
regulations relating exclusively to hard-wire cable systems,
which regulations provide for, among other things,
reductions in the basic service and equipment rates charged
by most hard-wire cable operators and FCC oversight of rates
for all other services and equipment. The Cable Act also
provides for rate deregulation of a hard-wire cable operator
in a particular market, once there is "effective
competition" in that market. Effective competition is
deemed to exist when, among other circumstances, another
cable operator exceeds a 15% penetration in that market.
The Company cannot predict precisely what effect these
regulations or further governmental regulations may have on
hard-wire cable operators as to price and service. While
current FCC regulations are intended to promote the
development of a competitive pay television industry, the
rules and regulations affecting the wireless cable industry
may change, and any future changes in FCC rules,
regulations, policies and procedures could have an adverse
effect on the wireless cable industry, as a whole, and on
the Company, in particular.
Secondary transmission of a broadcast signal is
permissible only if approved by the copyright holder or if
subject to compulsory licensing under the Copyright Act.
The U.S. Copyright Office has taken the position that,
effective January 1, 1995, wireless cable operators, unlike
hard-wire cable operators, will not be "cable systems"
entitled to a compulsory license under the Copyright Act.
Pursuant to the Cable Act, local broadcasters may now
require that wireless cable operators obtain their consent
before retransmitting local off-air VHF/UHF broadcasts. The
Wireless Cable Association International does not believe
that retransmission consents are applicable to wireless
cable system operators. However, the Company intends,
nonetheless, to seek to obtain such consents in each of its
markets where the Company may retransmit on a wireless cable
channel. There can be no assurance that the Company will be
able to obtain such consents on terms satisfactory to the
Company, if required.
Wireless cable operators are also subject to regulation by
the FAA with respect to the construction of transmission
towers and to certain local zoning regulations affecting
construction of towers and other facilities. There may also
be restrictions imposed by local authorities. There can be
no assurance that the Company will not be required to incur
substantial additional costs in complying with such
regulations and restrictions. (See "Wireless Cable" under
"Regulation").
Difficulties and Uncertainties of a New Industry.
Wireless cable television is a relatively new industry with
a short operating history. Potential investors should be
aware of the difficulties and uncertainties that are
normally associated with new industries, such as lack of
consumer acceptance, difficulty in obtaining financing,
increasing competition, advances in technology and changes
in laws and regulations. There is no assurance that the
wireless cable industry will, in general, and the Company,
in particular, develop and survive over the long term. (See
"Business").
Risks Concerning Community (Low Power) Television
Competition. Community (low power) television stations
compete for advertising revenue in their respective markets,
primarily with other broadcast television stations and cable
television channels, and compete with other advertising
media, as well. Such competition is intense. In addition,
competition for programming, management personnel and
network affiliations is severe. There is no assurance that
the Company's community television channels, once built, of
which there is no assurance, will be able to compete
effectively in their respective markets. (See "Business -
Community (Low Power) Television - Competition" under
"Business").
Government Regulation. Television broadcasting operations
are subject to the jurisdiction of the FCC under the
Communications Act. The Communications Act empowers the FCC
to issue, revoke or modify broadcast licenses, to assign
frequencies, to determine the locations of stations, to
regulate the broadcasting equipment used by stations, to
establish areas to be served, to adopt such regulations as
may be necessary to carry out the provisions of the
Communications Act and to impose certain penalties for
violation of its regulations. The Company's currently
operating television station is, and the Company's future
television stations will be, subject to a wide range of
technical, reporting and operational requirements. There is
no assurance that the Company will be able to comply with
such requirements in the future. Similarly, the Federal
Trade Commission, among other regulatory agencies, imposes a
variety of requirements that affect the business and
operations of broadcast stations. Proposals for additional
or revised requirements are considered from to time by the
FCC, other regulatory agencies and Congress. The Company is
unable to predict what new or revised Federal requirements
may result from such consideration or what impact, if any,
such requirements might have upon the operation of a
television station operated by the Company. (See "Community
(Low Power) Television" under "Regulation").
Risks Concerning Wireless Internet
Competition. The Company intends to operate as a Wireless
Internet Service Provider (ISP) in numerous U.S. cities.
Competition among traditional (telephone-line dependent) ISP
businesses is intense, with price and ease of Internet
access being primary points of competition. Because many of
the Company's potential competitors may possess greater
resources, financial and otherwise, than does the Company,
there is no assurance that the Company will be able to
attract customers for its Wireless ISP services. Thus, it
is possible that the Company will be unsuccessful in
establishing its Wireless ISP business in one or more of its
proposed Wireless ISP markets. (See "Business - Wireless
Internet - Competition" under "Business")
New Product; Possible Lack of Consumer Acceptance. The
Company intends to be the first Wireless ISP in each of its
proposed markets. While the Company expects that its
Wireless ISP service will be readily accepted by consumers,
as with any new product or service, there can be no
assurance that the Company's Wireless ISP service will be
accepted by consumers in commercially viable numbers.
Risks Concerning the Common Stock
Dividend Policy. The Company does not anticipate the
payment of cash dividends in the foreseeable future, but
intends to re-invest any profits which may be earned by the
Company's business. (See "Dividends").
Absence of Trading Market for the Common Stock. No market
for trading the Common Stock of the Company currently exists
and there is no assurance that a market ever will develop
or, should such ever be established, that it will be
maintained. Additionally, the Company does not expect that
its Common Stock will be eligible for listing on any
exchange or on the NASDAQ National Market System for the
foreseeable future.
Possible Volatility of Market for Common Stock. The
market prices for securities of newly public companies have,
historically, been highly volatile. Future announcements
concerning the Company or its competitors, including
operating results, technological innovations and government
regulations, could have a significant impact on the market
price of the Common Stock of the Company, increasing
possible volatility.
Market Overhang; Restricted Securities. 5,810,000 shares,
or 94.16%, of the outstanding shares of Common Stock of the
Company, after the dividend distribution of Common Stock to
the shareholders of ECA, will be owned by the current
shareholders of the Company. Such shares of Common Stock
will be eligible for resale to the public beginning in
November 1997, pursuant to the provisions of Rule 144 of the
Rules and Regulations of the Commission. Such amount of
Common Stock may represent a significant overhang on the
market for the Common Stock, if any develops. Such overhang
on the market for the Common Stock could, if a substantial
number of shares comprising such overhang were sold in a
short period of time, depress the then-current market price
for the Common Stock of the Company. However, no prediction
as to the effect of such overhang on the market for the
Common Stock of the Company can be made.
In general, under Rule 144, as currently in effect, a
person (or persons whose shares are aggregated) who has
beneficially owned his or her restricted stock for at least
one year, including persons who may be deemed "affiliates"
of the Company, as that term is defined under the Act,
would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of 1% of
the then-outstanding shares of the Company's Common Stock
(approximately 61,700 shares based on the current number of
outstanding shares) or the average weekly trading volume of
trading on all national securities exchanges and/or reported
through the automated quotation system of a registered
securities association of the Company's Common Stock during
the four calendar weeks preceding the filing of the Form 144
with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice
requirements, and to the availability of current public
information about the Company. However, a person who is not
deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has
beneficially owned his or her restricted shares for at least
two years, would be entitled to sell such shares under Rule
144 without regard to the requirements described above.
Market Overhang; Registration Rights. The Company has
granted registration rights with respect to 150,000 shares
of its currently outstanding Common Stock. As to such
shares, the holder can demand the registration of its shares
any time following the effective date of the Registration
Statement of which this Prospectus forms a part. (See
"Legal Matters"). Such amount of Common Stock may represent
a significant overhang on the market for the Common Stock,
if any develops. Such overhang on the market for the Common
Stock could, if a substantial number of shares comprising
such overhang were sold in a short period of time, depress
the then-current market price for the Common Stock of the
Company. However, no prediction as to the effect of such
overhang on the market for the Common Stock of the Company
can be made.
Penny Stock Regulation. Broker-dealer practices in
connection with transactions in "penny stocks" are regulated
by certain penny stock rules adopted by the Commission.
Penny stocks, in general, are equity securities with a
market price of less than $5.00 per share (other than
securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to
transactions in such securities is provided by the exchange
or system). The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure
statement prepared by the Commission that provides
information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer also
must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, as
well as the monthly account statements showing the market
value of each penny stock held in the customer's account.
In addition, the penny stock rules require that, prior to a
transaction in a penny stock not otherwise exempt from such
rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser's written
agreement tot he transaction. These disclosure requirements
may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes
subject to the penny stock rules. It can be expected that
the Company's Common Stock will, for the foreseeable future,
be subject to the penny stock rules, with the result that
investors in the Company's Common Stock may find it more
difficult to sell their shares.
Tax Risks
Valuation of Distribution. The Internal Revenue Service
(the "Service") is not bound by the determination of fair
market value of the Common Stock being distributed by ECA as
a dividend to its shareholders. In the event the Service
determines the Common Stock to have a higher value, the
recipients may have to pay income tax on a greater amount of
gain than that arising from the value attributed to the
Common Stock by ECA. (See "Federal Income Taxes").
No Internal Revenue Service Ruling. The Company has not
obtained, nor does it intend to obtain, an advance ruling
from the Service as to the valuation of the dividend
distribution Common Stock to be distributed under this
Prospectus. The absence of an advance ruling increases the
chance that the Service will challenge the valuation
attributed to the Common Stock received by a taxpayer. (See
"Federal Income Taxes").
USE OF PROCEEDS
Neither the Company nor ECA will receive any proceeds from
the dividend distribution to the shareholders of ECA of
360,000 shares of the Company's Common Stock.
INFORMATION CONCERNING ECA
General
Entertainment Corporation of America (ECA) was formed in
1987 under the laws of the State of Delaware under the name
"Mulka, Inc." In February 1988, all of the shares of Mulla,
Inc. were distributed to the shareholders of Forme Capital,
Inc. In September 1989, Mulla, Inc. changed its name to
"Entertainment Corporation of America" in connection with
the current management's acquiring control. Until 1994,
ECA's primary business was the operation of adult
entertainment facilities. The facilities, known as The Gold
Club, are located in Atlanta, Georgia, and Baton Rouge,
Louisiana. In 1994, ECA sold its interest in both such
facilities. Since 1994, ECA has searched for a going
business to acquire.
Management
John D. Kirkendoll, Alan G. Kirkendoll and Karen M. Rhea are
the directors of ECA as of the date of this Prospectus. Mr.
John Kirkendoll serves as President, Mr. Alan Kirkendoll
serves as Vice President and Ms. Rhea serves as
Secretary/Treasurer.
Outstanding Securities
On March 15, 1997, the record date for the distribution of
Common Stock of the Company, ECA had outstanding 4,912,500
shares of its $.001 par value common stock. The common
stock of ECA is not currently traded in any public market.
Prior Dividend Distribution
In August 1993, ECA distributed 300,000 shares of common
stock of K.L.S. Enviro Resources, Inc. (formerly K.L.S. Gold
Mining Company), a Nevada corporation ("KLS"), to its
shareholders as a property dividend. The common stock of
KLS currently trades on the OTC Electronic Bulletin Board
under the symbol "KLSE". The closing bid price for the
common stock of KLS on August 5, 1997, as reported by the
OTC Electronic Bulletin Board, was $1.8125 per share. There
is no assurance that a market for the Common Stock of the
Company will ever be established.
DISTRIBUTION OF SECURITIES OF THE COMPANY
Background and Reasons for Distribution
The principals of the Company envisioned, as part of their
overall plan for the Company, having the Company become
publicly owned soon after its inception. To that end, the
Company's directors investigated various methods of becoming
publicly owned. After their investigation, the directors
determined that the dividend distribution, or "spin-off",
method contemplated by this Prospectus would be the least
expensive, least ownership-dilutive means of becoming
publicly owned. Following an introduction facilitated by
counsel to the Company, the Company and ECA agreed to the
transaction to which this Prospectus relates.
The Board of Directors of ECA perceived a potential for
added value to the ownership of ECA common stock through the
dividend distribution of Company Common Stock. ECA's
management anticipates that its shareholders will benefit
from the dividend distribution, though there is no assurance
that such will be the case. (See "Risks Concerning the
Common Stock - Absence of Trading Market for the Common
Stock" under "Risk Factors").
Method of Distribution and Subsequent Trading
Certificates representing 360,000 shares of the Company's
Common Stock will be distributed by mail within a reasonable
time after the date of this Prospectus on the basis of
.0732824 of a share of Company Common Stock for each share
of ECA common stock (approximately one share of the
Company's Common Stock for each 14 shares of ECA held) to
holders of ECA common stock of record on March 15, 1997.
(See "Information Concerning ECA"). On March 15, 1997,
there were approximately 900 shareholders of ECA; therefore,
the Company will have approximately 925 shareholders after
the distribution. No exchange of shares, payment or other
action by holders of ECA common stock will be required.
Common Stock of the Company will be distributed to the
nearest number of whole shares; no fractional shares will be
issued. Any such fractional interests will not be
compensated by ECA.
A copy of this Prospectus will be mailed to each ECA
shareholder of record as of March 15, 1997, within a
reasonable time after the date of this Prospectus. Copies
will also be mailed to brokers and dealers who make a market
in the common stock of ECA, if any, and to other brokers and
dealers who may reasonably be expected to trade or make a
market in the Common Stock of the Company. There can be no
assurance, however, that any market will develop in the
Common Stock. The likelihood of the Common Stock of the
Company being regularly traded in any market or at any
particular price cannot be predicted.
DIVIDENDS
The Company anticipates that it will retain any profits from
its operation for re-investment in the Company's business
and does not anticipate paying any such dividends in the
foreseeable future. (See "Risks Concerning the Common Stock
- - Dividend Policy" under "Risk Factors").
CAPITALIZATION
The following table sets forth the capitalization of the
Company as of December 31, 1996, and as of March 31, 1997
(unaudited). This table should be read in conjunction with
the financial statements of the Company included herein.
As at As at
3/31/97 12/31/96
(unaudited) (audited)
Long-Term Debt $ --- $ ---
Shareholders' Equity:
Common Stock -
$.0001 par value;
100,000,000 shares
authorized, 6,000,000
and 6,170,000 shares
issued, respectively 617 600
Additional Paid-in
Capital 623,491 198,508
Deficit Accumulated
During the
Development Stage (110,398) (24,237)
Other (313,360) (2,160)
Shareholders' Equity 200,350 172,711
Total Capitalization 200,350 172,711
SELECTED FINANCIAL DATA
The following selected financial data have been derived from
the financial statements of the Company, which financial
statements are included elsewhere herein. The selected
financial data set forth below should be read in conjunction
with such financial statements, related notes and other
financial information included elsewhere in this Prospectus
and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
STATEMENT OF OPERATIONS DATA:
Period Cumulative
From Since
Three Inception Inception
Months (12/28/95) (12/28/95)
Ended to to
3/31/97 12/31/96 3/31/97
(unaudited) (audited) (unaudited)
----------- --------- -----------
Revenue $ 224 $ 3,337 $ 3,561
Expenses 86,385 27,574 113,959
Net loss (86,161) (24,237) (110,398)
Loss per share (0.04) (0.01) (0.30)
BALANCE SHEET DATA:
As at As at As at
3/31/97 12/31/96 12/31/95
(unaudited) (audited) (unaudited)
----------- --------- -----------
Working Capital
(Deficit) $ (27,113) $ (46,077) $ ---
Total Assets 265,131 233,600 17,337
Total Current
Liabilities 64,781 60,889 ---
Shareholders'
Equity 200,350 172,711 17,337
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Background
The Company, incorporated on November 1, 1996, has not
engaged in active business operations. One of the Company's
subsidiaries, Winter Entertainment, Inc. (WEI), acquired
effective December 31, 1996, has been engaged in television
broadcast operations since January 1996, while the Company's
other subsidiary, Missouri Cable TV Corp. (MCTV), also
acquired effective December 31, 1996, has only recently
begun to attempt to attract subscribers for its wireless
cable system located in Poplar Bluff, Missouri. Since its
inception and in addition to the acquisitions of WEI and
MCTV, the Company has acquired wireless cable channels and
community (low power) television channels from its founders
and others, has entered into a joint venture (known as "Web
One Wireless I.S.P. - Baton Rouge, J.V.") (the Joint
Venture) which is to operate as a Wireless Internet Service
Provider (ISP) and has begun to seek the capital necessary
to carry out its plan of business. (See "Business"). The
Company's fiscal year ends December 31st. References to the
"Company" include WEI, MCTV and the Joint Venture, unless
the context indicates otherwise.
Because the Company, WEI and MCTV were combined in a
reorganization of entities under common control, the
presentation contained in the financial statements of the
Company has been prepared in a manner similar to the
pooling-of-interests method. In this regard, reference is
made to Notes 1 and 3 of the Company's financial statements
appearing elsewhere herein. The following discussion
reflects such financial statement presentation.
Results of Operations
Year Ended December 31, 1996.
Wireless Cable Segment. For the year ended December 31,
1996 ("Fiscal 96"), the Wireless Cable Segment had no
activity, other than to acquire certain assets. The Company
has only recently begun to take preliminary steps to attract
subscribers in one of its wireless cable markets, Poplar
Bluff, Missouri. The Company's lack of funding has impaired
its efforts in this regard. To date, no subscribers have
been obtained.
The Wireless Cable Segment's revenues will primarily be
generated by subscription fees, pay-per-view fees and
installation charges. The Company anticipates that
installation fees will average $49.95 per subscriber and
will begin at $5.00 for promotional specials. The Company
anticipates that subscription fees will average $18.95 per
month for basic programming, plus approximately $9.00 per
month each for additional premium and movie channels. The
Company believes these programming fees are approximately
20% less than comparable hard wire cable prices.
Expenses will consist primarily of service costs,
selling, general and administrative expenses and
depreciation and amortization. Service costs include
programming costs, channel lease payments, if any,
transmitter site rentals, cost of program guides and repair
and maintenance expenditures. Of these, programming costs,
channel lease payments and costs of program guides will be
variable expenses that increase as the number of subscribers
increases. Also, it is possible that the addition of
subscribers will increase depreciation expense as the
Company will expend approximately $300 for an analog system
or $625 for a digital system to purchase and install the
wireless cable receiving antenna and related equipment
necessary at each subscriber's location.
The Wireless Cable Segment's profitability will be
determined by its ability to maximize revenue from
subscribers while maintaining variable expenses.
Significant increases in revenues will generally come from
subscriber growth. Currently, the Wireless Cable Segment
has no employees, but expects to have retained three
employees by the end of 1997, assuming adequate funding for
planned development is obtained, of which there is no
assurance. The Company does not intend to incur expenses
relating to research and development during the next 12
months, except for general market research in the ordinary
course of business.
The Wireless Cable Segment's success will be dependent
upon the extent to which its assumptions as to future
revenues and expenses prove to be correct. These
assumptions are based strictly on management's experience
and judgment and certain available information concerning
the wireless cable industry, in general. Because of the
substantial number of variables applicable to the Wireless
Cable Segment's proposed operations and the Wireless Cable
Segment's lack of operating history, there can be no
assurance that the Wireless Cable Segment's assumptions will
prove accurate or that its plan of business will lead to
future profitability. (See "Risk Factors").
Community Television Segment. To date, the Company's
only revenues have been derived from the operations of its
community television station in Baton Rouge, Louisiana, call
sign K13VE, Channel 13, which station has been engaged in
broadcast operations since January 1996. For the year ended
December 31, 1996, the Community Television Segment had
revenues of $3,337 and a net loss of $1,217. K13VE is, and
since the start of its broadcast operations has been, an
affiliate of the Video Catalog Channel, a video merchandise
sales firm. The Community Television Segment derives
revenues from commissions on sales made by the Video Catalog
Channel originating from zip codes within K13VE's principal
broadcast coverage area. The Community Television Segment
earns a commission equal to 10% of such sales (less returns)
as are attributable to its broadcast area. The Company
expects that K13VE will continue to operate in a similar
manner through the remainder of 1997. However, should K13VE
have an opportunity to become an affiliate of a national
broadcast network, such as FOX or UPN, it can be expected
that it would take advantage of such opportunity. To date,
no such opportunity has been presented to K13VE, and there
is no assurance that any such opportunity will arise. (See
"Business - Community (Low Power) Television - Business
Strategy" under "Business").
The Company is currently investigating the possibility
of establishing a network of independent community
television stations around the U.S. There is no assurance
that the Company will be successful in establishing such a
television network.
Wireless Internet Segment. The Company did not form the
Wireless Internet Segment until after the end of Fiscal 96.
Three Months Ended March 31, 1997, versus Three Months
Ended March 31, 1996. Revenues from the Company's
operations for the three months ended March 31, 1997
("Interim 97"), were $224 (unaudited) compared to revenues
of $0 (unaudited) for the three months ended March 31, 1996
("Interim 96"). During both interim periods, all of the
Company's revenues were generated by the Community
Television Segment. The Company expects that, during the
third quarter of 1997, the Wireless Internet Segment will
begin to generate revenues from operations. However, there
is no assurance in this regard. The Company's net loss of
$110,398 is attributable in large part to the issuance of
150,000 pursuant to a consulting and legal services
agreement, which shares have been valued for financial
accounting purposes at $2.50 per share, or $375,000, in the
aggregate. During Interim 97, $62,500 of such $375,000 was
expensed. It is anticipated that $31,250 of such $375,000
in pre-paid expenses will be expensed by the Company each
month, or $93,750 for each three month period, through the
first month of Interim 1998. Reference is hereby made to
Note 6 of the Company's financial statements included
elsewhere herein.
Wireless Cable Segment. The Company has only recently
begun to take preliminary steps to attract subscribers in
one of its wireless cable markets, Poplar Bluff, Missouri.
The Company expects that revenues will not exceed
expenditures in its Wireless Cable Segment for the remainder
of the year ended December 31, 1997 ("Fiscal 97"). During
Interim 97, the Wireless Cable Segment generated no
revenues, while incurring $3,334 (unaudited) in operating
expenses. The Company's ability to attract customers,
thereby generating revenues in this segment, and to expand
its Wireless Cable Segment is wholly dependent upon its
obtaining adequate capital. There is no assurance that any
such capital will be available to the Company.
Community Television Segment. Revenues from the
operations of the Community Television Segment for Interim
97 were $224 (unaudited) compared to revenues of $0
(unaudited) for Interim 96. The Company expects that this
segment's revenues will remain at Interim 97 levels for the
remainder of Fiscal 97. The Company has received FCC
authorization to increase the power of its currently
operating station to its maximum legal limit. Should the
Company be able to obtain necessary funds, of which there is
no assurance, the Company intends to commit $20,000 to
increase the power of such station, which would permit the
Company's broadcast signal to reach approximately 120,000
additional households. It is expected that the commissions
earned by K13VE from Video Catalog Channel sales originating
from its broadcast area would increase proportionately to
its increased number of households reached. There is no
assurance that such will be the case.
Wireless Internet Segment. The Wireless Internet
Segment has yet to generate any revenues. In January 1997,
the Company entered into a joint venture known as "Web One
Wireless I.S.P. - Baton Rouge, J.V." (the Joint Venture)
with Web One, Inc. ("Web One"), whereby the Joint Venture
will attempt to operate as a Wireless ISP in Baton Rouge,
Louisiana. The Joint Venture expects to begin to solicit
customers for its Wireless ISP service during August 1997.
With respect to the business of the Joint Venture, the
Company is dependent upon the efforts of Web One, which is
the Managing Venturer of the Joint Venture. The Company has
an option to acquire all of the outstanding capital stock of
Web One at any time on or before August 1, 1998. If the
option to acquire Web One is exercised by the Company, the
Company, at its sole option, may elect to utilize cash or
shares of its Common Stock in payment for the stock of Web
One. The value of the stock of Web One is to be established
by an independent appraiser. Should the Company elect to
utilize shares of its Common Stock with which to acquire the
stock of Web One, the per share value of the Company's
Common Stock shall be equal to the average closing bid price
of the Common Stock for the ten trading days immediately
prior to the closing of such acquisition, or, should no
public market for the Common Stock exist, the per share
value of the Common Stock shall be established by an
independent appraiser. There is no assurance that the Joint
Venture will be successful.
Pursuant to an agreement with Open Net, Inc. ("Open
Net"), Sacramento, California, the Company owns an exclusive
right of first refusal to utilize Open Net's Wireless
Internet Access System in several U.S. cities, including,
among others, Seattle, Washington, Portland, Oregon, New
Orleans, Louisiana, and Dallas and Houston, Texas. The
Company must pay the sum of $50,000 (for equipment and
set-up services) to Open Net for each of Open Net's Wireless
Internet Access Systems purchased by the Company. In
addition, the Company is required to pay to Open Net a
monthly customer maintenance fee of $5.00 per customer
utilizing the Company's Wireless ISP services. The Company
believes that it will require between $60,000 and $200,000
($50,000 to Open Net and the balance for marketing and other
general expenses), depending on the size of a particular
city, to commence Wireless ISP operations in a particular
city. These estimates are not based on a specific study or
market research conducted by the Company, but are based,
instead, on the business experience of the Company's
management, as well as general market surveys conducted by
the Company and others. There is no assurance that such
estimates will be accurate. Should funds be available, the
Company intends to commence its Wireless ISP operations in
Dallas, Texas, during the third quarter of 1997. After
Dallas, the Company intends to commence its Wireless ISP
operations, in order, in Houston, New Orleans, Seattle and
Portland. There is no assurance that the Company will
possess sufficient capital with which to develop any of such
markets.
In addition, the Company is currently developing its own
proprietary Wireless ISP system. It is likely that this
proprietary system will be ready for commercial use by the
Joint Venture, when it begins to market its Wireless ISP
services in Baton Rouge, Louisiana, during August 1997.
Should the Company's Wireless ISP system prove to be
commercially viable, the Company would likely elect not to
exploit its agreement with Open Net. Should the Company
make such an election, the Company would not incur any
liability therefrom. The Company expects that the
commercial viability of the Company's Wireless ISP system
will be determined by the end of the third quarter of 1997.
In the event the Company's Wireless ISP system proves to be
viable, there is no assurance that the Company will be able
to attract sufficient capital with which to exploit its
system.
Liquidity and Capital Resources
December 31, 1996. Since its inception, the Company has
required little capital with which to operate and has had a
working capital deficit throughout its history. At December
31, 1996, the Company's working capital deficit was $46,077.
During Fiscal 96, one of the Company's officers, David M.
Loflin, loaned to the Company a total of $68,000, which
funds were used primarily for operating expenses of MCTV and
for attorneys' fees and auditor's fees associated with the
Registration Statement of which this Prospectus forms a
part. Such loans are evidenced by promissory notes and bear
interest at 8% per annum and are payable on demand. The
Company does not currently possess funds necessary to repay
such loans. Mr. Loflin has advised the Company that he does
not intend to make demand for repayment of such loans for
the foreseeable future. Nevertheless, should Mr. Loflin
make such demand for repayment, the Company could be unable
to satisfy such demand, which would have a materially
adverse affect on the Company. In addition, none of the
officers of the Company will be paid a salary, and such
persons have agreed to work without pay, until such time as
payment of such officers' salaries would have no materially
adverse effect on the Company's financial condition. During
Fiscal 96, none of the officers of the Company was paid a
salary, nor did any officer's salary accrue. It is expected
that the Company's extreme lack of liquidity, and the
attendant working capital deficit, will continue until such
time as the Company is able to secure an equity investment
or bank or other loan. Without such additional funds, it is
likely that the Company would be unable to implement its
plan of business. There is no assurance that the Company
will be able to secure necessary funds.
During Fiscal 96, the Company utilized shares of its
Common Stock to acquire all of its currently-held assets.
Specifically, the Company acquired assets as follows:
Wireless Number of Appraised Value
Cable Market Shares Issued of Assets(1)
- ------------ ------------- ---------------
Poplar Bluff, Missouri 867,990 $1,004,560
Lebanon, Missouri 1,061,913 1,228,995
Port Angeles, Washington 374,602 433,541
Astoria, Oregon 336,418 389,350
Sand Point, Idaho 220,988 255,759
The Dalles, Oregon 284,074 328,770
Fallon, Nevada 242,738 280,930
-------------- ---------------
Total 3,388,723 $3,921,905
Community Number of Appraised Value
Television Market Shares Issued of Assets(1)
- ----------------- ------------- ---------------
Baton Rouge, Louisiana 227,336 $263,106
Monroe/Rayville,
Louisiana 80,271 92,900
Natchitoches,
Louisiana 39,421 45,623
Bainbridge, Georgia 104,249 120,652
------------- ---------------
Total 451,277 $522,281
______________
(1) The assets acquired were appraised by Broadcast
Services International, Inc. ("BSI"), a Sacramento,
California-based communications appraisal firm. The report
of BSI was based on 1990 Census Data. Valuation formulas
for the wireless cable markets of the Company were based on
initial public offerings within the wireless cable industry
during the past three years. The formulas used in
evaluation of the Company's broadcast channels were based on
recent sales and market evaluation techniques employed by
the Community Broadcasters Association, among others. (See
"Certain Transactions - Appraisal").
The Company may, when and if the opportunity arises,
acquire other businesses which are related to one of the
Company's current businesses. If such an opportunity
arises, the Company may use a portion of its available
funds, if any, shares of its Common Stock or a combination
of Common Stock and cash, for that purpose. The Company has
no specific arrangements with respect to any such
acquisition at the present time, and is not presently
involved in any negotiations with respect to any such
acquisition. There can be no assurance that any such
acquisitions will be made.
Wireless Cable Systems. The Company continues to seek
sources of capital with which to develop its wireless cable
systems. The Company may enter into joint ventures or form
general and/or limited partnerships in its efforts to
construct and develop its wireless cable systems, although
no agreement with any potential partner has been discussed.
The development of wireless cable systems entails
substantial capital investment and will require additional
funding. The future availability of funding and terms of
equity and debt financing cannot be predicted. The
unavailability or inadequacy of financing to meet future
capital needs could force the Company to modify, curtail,
delay or suspend some or all of its planned wireless cable
operations. The failure to obtain additional funds on a
timely basis could materially adversely affect the Company
and its business. The Company believes it will be able to
undertake limited development of one or more of such markets
(that is, with less rapid construction and less extensive
marketing) without such additional financing or partners.
(See "Risks Concerning the Company - Need for Future
Financing" under "Risk Factors").
Poplar Bluff, Missouri. Since the end of Fiscal 96, the
Company has taken steps toward the commencement of marketing
and customer installation activities for its Poplar Bluff
system. Should the Company be successful in securing
additional capital, of which there is no assurance, the
Company intends to commit not less than $30,000 to further
the development of its Poplar Bluff system. The Company
expects that it will be able to obtain approximately 300
subscribers with such amount of funding. The Company
anticipates that its Poplar Bluff system will generate
positive cash flow shortly after it reaches 300 subscribers,
although there is no assurance that such will be the case.
There is no assurance that such additional funding will be
available to the Company. A failure to secure additional
funding would severely impede the development of the Poplar
Bluff system. (See "Risks Concerning the Company - Need for
Further Financing" under "Risk Factors").
Other Systems. The Company owns rights to certain
wireless cable channels in Lebanon, Missouri, Port Angeles,
Washington, The Dalles, Oregon, Sand Point, Idaho, Fallon,
Nevada, and Astoria, Oregon, which systems are expected to
be developed in the order listed, assuming adequate funding
is available, of which there is no assurance. The Company
believes it will require approximately $200,000 for
construction, should it determine to construct an
analog-based system, or approximately $750,000 for
construction, should it determine to construct a
digital-based system, as well as approximately an additional
$40,000 to commence marketing and customer installation
activities for each system. There is no assurance that
funding will be available to the Company at such times as it
attempts to construct and market any one of its systems.
Without adequate funding, the Company will likely be unable
to develop any of its wireless cable systems.
Also, it is the Company's intention, should funds be
available, to make a $60,000 payment under a contract
pursuant to which it acquired certain wireless cable channel
rights in The Dalles, Oregon, Fallon, Nevada, and Sand
Point, Idaho, and to renegotiate such contract at such time
in accordance with an oral agreement reached with the person
who sold such channel rights to the Company. Should the
Company be unsuccessful in renegotiating such contract, the
Company will be required, under such contract, to make a
$100,000 payment in September 1997. The Company does not
currently possess sufficient capital with which to make such
payment and there is no assurance that it will ever possess
sufficient capital to make such payment.
Community Television Stations. The Company continues to
seek sources of capital with which to construct and operate
its community television stations. The Company does not
expect that it will seek joint venture partners or form
general and/or limited partnerships in its efforts to
construct and operate its community television stations.
Rather, the Company intends to construct and operate its
community television stations with funds derived from
operations, if any, or from debt or other equity offerings.
The availability or inadequacy of financing to meet future
capital needs could force the Company to modify, curtail,
delay or suspend some or all of its planned community
television station development. The failure to obtain
additional funds on a timely basis could materially
adversely affect the Company and its business. The Company
believes it will be able to undertake construction and
limited operations of one or more of its community
television stations without such additional financing,
although the speed of such construction would be severely
inhibited.
Baton Rouge, Louisiana. K13VE Channel 13, the Company's
Baton Rouge, Louisiana, community television station, has
been broadcasting since January 1996, as an affiliate of the
Video Catalog Channel. The Company's current broadcast
signal reaches approximately 30,000 households. The Company
is in need of approximately $20,000 in order to boost the
power of such station to its maximum legal limit, which
would permit the Company's broadcast signal to reach
approximately 150,000 households. It is expected that the
commissions earned by K13VE from Video Catalog Channel sales
originating from its broadcast area will increase
proportionately to its increased number of households
reached. There is no assurance that such will be the case.
Should the Company be successful in securing additional
capital, of which there is no assurance, the Company intends
to commit $20,000 to the upgrade of such television station.
Other Stations. The Company owns the licenses to
community television stations located in Monroe/Rayville,
Louisiana, Natchitoches, Louisiana, and Bainbridge, Georgia,
which television stations are expected to be constructed in
the order listed, assuming adequate funding is available, of
which there is no assurance. The Company believes it will
require approximately $50,000 to construct each station so
that it will be able to operate as an affiliate of the Video
Catalog Channel. Should the Company desire any such station
to become a fully operational television station, an
additional $100,000 would be required to expand the
facility. Because the Company intends to have each of its
stations become an affiliate of the Video Catalog Channel
immediately after construction has been completed, the
Company does not expect to require additional funds for
marketing. There is no assurance that funding will be
available to the Company at such times as it attempts to
construct any one of its community television stations.
Absent additional funding, the Company will likely be unable
to construct any of its community television stations.
Cash Flows from Operating Activities. The Company's
operations used $12,207 in cash during the period from
inception (December 31, 1995) to December 31, 1996. The use
of cash in operations is a result of the lack of revenues
compared to the operating expenses of the Company. A
substantial portion of the expenses incurred during such
period are attributable to the Company's Registration
Statement of which this Prospectus forms a part. Further,
the Company believes that substantially all expenses of
start-up have been incurred. The Company's management does
not expect that operations for all of Fiscal 97 will
generate positive cash flow. However, management is unable
to predict the level of cash flow to be generated during
such period of time, due to the uncertainty of the level and
timing of funding, if any, with which to commence its
proposed Wireless Cable and Wireless Internet operations.
Without any such funding, it can be expected that the
Company will not be able to generate positive cash flow from
operations.
Cash Flows from Investing Activities. Investing
activities of the Company used cash during the period from
inception (December 28, 1995) to December 31, 1996 of
$23,291. Cash used by investing activities was for the
acquisition of licenses and rights to licenses. Management
does not anticipate that investing activities will provide
any cash for Fiscal 97, taken as a whole.
Cash Flows from Financing Activities. During the period
from inception (December 28, 1995) to December 31, 1996 ,
financing activities provided $50,000.
Non-Cash Investing Fiinancing Activities. Non-cash
investing and financing activities for the year ended
December 31, 1996, include $179,611 of equipment given as
paid-in capital by the Company's majority shareholder,
subscription receivable of $2,160 for services rendered, and
$16,737 in exchange for common stock to majority
shareholder. No prediction can be made with respect to the
Company's future non-cash investing and financing
activities.
March 31, 1997. The Company remained in a substantially
illiquid position throughout Interim 97. At March 31, 1997,
the Company's working capital deficit was $27,113
(unaudited). No material revenues were generated by Company
operations, during Interim 97. During such period, one of
the Company's officers, David M. Loflin, loaned to the
Company a total of $8,000, which funds were used primarily
for operating expenses of the Company. Such loan is
evidenced by a promissory note and bears interest at 8% per
annum and is payable on demand. $5,000 of such loan was
repaid during Interim 97. Subsequent to Interim 97, Mr.
Loflin loaned to the Company the sum of $13,500, which funds
were used for operating expenses of the Company. Such loan
is evidenced by a promissory note and bears interest at 8%
per annum and is payable on demand. As of the date of this
Prospectus, the Company owed Mr. Loflin a total of $76,500,
plus accrued and unpaid interest of approximately $1,500.
The Company does not currently possess funds necessary to
repay the balance of such loan. Mr. Loflin has advised the
Company that he does not intend to make demand for repayment
of the balance of such loan for the foreseeable future.
Nevertheless, should Mr. Loflin make such demand for
repayment, the Company could be unable to satisfy such
demand, which would have a materially adverse effect of the
Company. In addition, none of the officers of the Company
will be paid a salary, and such persons have agreed to work
without pay, until such time as payment of such officers'
salaries would have no adverse affect on the Company's
financial condition. (See "Executive Compensation" under
"Management").
Since the end of Fiscal 96, the Company has issued shares
of its Common Stock on two occasions, both of which occurred
during Interim 97. First, the Company entered into a
Consulting and Legal Services Agreement (the "Newlan
Agreement") with its legal counsel, Newlan & Newlan,
Attorneys at Law. Under the Newlan Agreement, Newlan &
Newlan agreed to provide legal services to the Company for a
period of one year in consideration of the Company's
undertaking to pay $3,500 in cash per month and the issuance
to Newlan & Newlan of 150,000 shares of Company Common Stock
in pre-payment of legal services agreed to be $60,000.
However, for financial reporting purposes, these shares of
Common Stock have been valued at $2.50 per share, or
$375,000, in the aggregate. In this regard, reference is
made to Note 6 of the financial statements of the Company
included elsewhere herein. The Company believes it will be
able to meet its obligations under the Newlan Agreement.
(See "Legal Matters").
Also, in March 1997, the Company sold 20,000 shares of its
Common Stock to a single investor for $50,000 in cash. Such
funds have been allocated to the Company's working capital
account. Such investor, Michael Cohn, now a director of the
Company, has committed to invest an additional $100,000 on
the same terms during the second half of 1997. There is no
assurance that such investment will be made. (See "Stock
Purchase" under "Certain Transactions").
The Company will derive no liquidity from the dividend
distribution contemplated herein. (See "Distribution of
Securities of the Company"). Thus, immediately after the
Registration Statement of which this Prospectus forms a part
is declared effective by the Commission and the distribution
of Company Common Stock to the shareholders of ECA
hereunder, the Company will remain in a substantially
illiquid position.
The Company is currently seeking a bank loan in the amount
of $350,000 with which to commence operations in its
Wireless Cable and Wireless Internet Segments. Such level
of financing would permit the Company to operate for a
period of at lease one year. There is no assurance that a
financing source will be located. Should such a financing
source not be secured, the Company can be expected to remain
in a substantially illiquid position.
It is the Company's current intention to commence a public
offering of its Common Stock, in the approximate amount of
$1,000,000, and to file a registration statement relating
thereto immediately after the Registration Statement of
which this Prospectus forms a part has been declared
effective by the Commission. The Company currently is
investigating its options in this regard. As of the date of
this Prospectus, the Company had not reached any agreement
or understanding with an underwriter. Should the Company be
successful in obtaining such level of funding through its
proposed public offering, it would then possess funds with
which to operate for a period of not less than one year.
However, there is no assurance that the Company will realize
any funds from such proposed public offering. A failure in
this regard will cause the Company to remain in a
substantially illiquid position and unable to begin to
implement its plan of business.
Wireless ISP Markets. The Company owns the exclusive
right of first refusal to operate, utilizing Open Net's
Wireless Internet Access System, as a Wireless ISP in the
following markets: Dallas and Houston, Texas, New Orleans,
Louisiana, Seattle, Washington, and Portland, Oregon. The
Company intends to develop its Wireless ISP capabilities in
such markets utilizing its own funds, however derived. In
addition, the Company intends to seek joint venture partners
or form general and/or limited partnerships to develop its
Wireless ISP capabilities in the following markets:
Alexandria, Louisiana, Astoria, Oregon, Bainbridge, Georgia,
Lebanon, Missouri, Macon/Milledgeville, Georgia, Poplar
Bluff, Missouri, Port Angeles, Washington, Sand Point,
Idaho, and The Dalles, Oregon. It is possible that the
Company will develop one or more of such Wireless ISP
markets utilizing its own funds. However, no prediction can
be made with respect to the order of development of such
markets, nor can assurances be given that any of such
markets will, in fact, be developed.
For the development of any of its proposed Wireless ISP
markets, the Company will be required to purchase $50,000 of
equipment from Open Net. Thereafter, the amount of
marketing funds needed will vary from market to market,
depending on the size of a particular market. It can be
expected, however, that the initial marketing budget will
range approximately from $10,000 to $150,000. There is no
assurance that funding will be available to the Company at
such times as it attempts to develop any one of its Wireless
ISP markets. Should the Company be successful in obtaining
bank financing, of which there is no assurance, the Company
would possess funds necessary to construct and develop its
Wireless ISP in Dallas, Texas. However, absent such bank
financing, the Company will likely be unable to exploit any
of its Wireless ISP markets.
Dallas, Texas. Should the Company be successful in
securing additional capital, of which there is no assurance,
the Company intends to commit not less than $100,000 to the
establishment of its Wireless ISP in Dallas, Texas. The
Company expects that it will be able to begin to market its
Wireless ISP service in Dallas during the second quarter of
1997. The Company believes, after conducting an informal
market study, that Dallas, among its other proposed Wireless
ISP markets, offers the greatest opportunity for success,
although there is no assurance in this regard.
Cash Flows from Operating Activities. During Interim 97,
the Company's operations used cash of $23,011 (unaudited).
The use of cash in the current period is primarily due to
the Company's net loss of $86,161 (unaudited), which offset
a recognition of services performed for stock of $62,500
(unaudited). The Company intends to recognize $31,250 for
services performed for stock each month during the remaining
two quarters of Fiscal 97 and the first month of 1998. The
Company's use of cash in operations during Interim 96 is
attributable primarily to the Company's net loss for such
interim period. The Company's management does not expect
that operations for all of Fiscal 97 will generate positive
cash flow. However, management is unable to predict the
level of cash flow to be generated during such period of
time, due to the uncertainty of the level and timing of
funding, if any, with which to commence its proposed
Wireless Cable and Wireless Internet operations. Without
any such funding, it can be expected that the Company will
not be able to generate positive cash flow from operations.
Cash Flows from Investing Activities. Investing
activities of the Company during Interim 97 used $9,258
(unaudited), including $1,758 (unaudited) for the purchase
of equipment, $2,500 (unaudited) as an investment in the
Joint Venture and $5,000 (unaudited) for the purchase of
licenses and rights to leases of licenses. In comparison,
the Company had virtually no investing activities during
Interim 96. The Company's management is unable to predict
whether investing activities will provide cash during the
remainder of Fiscal 97. This uncertainty is caused by the
lack of a commitment by an underwriter relating to the
proposed future public offering of Company Common Stock or
other financing commitment. Absent any such funding, it is
expected that investing activities will continue to use the
Company's cash.
Cash Flows from Financing Activities. Financing
activities of the Company provided $54,300 (unaudited) in
cash during Interim 97, compared to Interim 96 when
financing activities provided $0 (unaudited). Substantially
all of the cash provided from financing activities during
the current interim period was the result of the sale of
20,000 shares of Company Common Stock for a total of $50,000
in cash. It is the Company's intention to sell shares of
its Common Stock as the primary means of securing capital
with which to implement its plan of business. Should the
Company have success in this regard, cash provided by
financing activities can be expected to be substantially
higher. However, no prediction as to the level of such cash
can be made by management, nor can any assurance be made
that any cash will be provided by financing activities.
Non-Cash Investing Activities. During Interim 97, the
Company's non-cash investing and financing activities
included the issuance of 150,000 shares of Common Stock in
consideration of consulting and legal services to be
performed, which shares were valued, pursuant to arm's-length negotiations,
at $60,000, in the aggregate. However, for financial reporting purposes,
these shares of Common Stock have been valued $2.50 per share, or $375,000,
in the aggregate. In this regard, reference is made to Note 6 of
the financial statements of the Company included elsewhere herein.
Management's Plans Relating to Future Liquidity
It is management's opinion that the Company will be unable
to improve its current liquidity position without an
infusion of cash in an amount of not less than $200,000.
The Company's current operations will be unable, on their
own, to alleviate the Company's current lack of liquidity.
Once the Registration Statement of which this Prospectus
forms a part has been declared effective by the Commission,
management believes it will be able to mitigate the effects
of its current financial condition in one or more of the
following ways: (1) the Company intends to commence a public
offering of its Common Stock, in the approximate amount of
$1,000,000, immediately following the effective date of the
Registration Statement of which this Prospectus is a part;
(2) the Company is currently seeking, and will continue in
the future to seek, a bank loan in an amount of not less
than $200,000; (3) the Company will attempt to locate one
ore more joint venture partners with whom the Company would
develop one or more of its proposed Wireless Internet
markets; or (4) the Company will pursue and other means of
financing its plan of business that may become available.
NO PREDICTION CAN BE MADE AS TO THE LIKELIHOOD THAT THE
COMPANY WILL BE SUCCESSFUL IN OBTAINING NEEDED FINANCING.
However, management believes that it will be successful in
obtaining needed funding within a reasonable time following
the date of this Prospectus. This belief is based on
management's business experience and preliminary reaction
from its potential Wireless ISP customers in Baton Rouge,
Louisiana. Should one of the described financing
transactions be consummated, of there is no assurance, the
Company's management believes that the operations that are
commenced with the obtained funds will be able to generate
sufficient cash flow to sustain the Company's activities
during the twelve months to end March 31, 1998. There is no
assurance that such will be the case.
Capital Expenditures
During the remainder of Fiscal 97, the Company expects to
apply substantially all of its available capital to the
construction of one or more of its wireless cable systems
(approximately $200,000 per system), one or more of its
community television stations (approximately $50,000 per
station) and one or more of its Wireless ISP markets (an
average of approximately $175,000 per market). There is no
assurance that any of the necessary capital for such
proposed activities will be available.
REGULATION
Wireless Cable
General. The wireless cable industry is subject to
regulation by the FCC pursuant to the Communications Act.
The Communications Act empowers the FCC to issue revoke,
modify and renew licenses within the spectrum available to
wireless cable; to approve the assignment and/or transfer of
control of such licenses; to approve the location of
wireless cable systems; to regulate the kind, configuration
and operation of equipment used by wireless cable systems;
and to impose certain equal employment opportunity and other
reporting requirements on wireless cable operators.
In the 50 largest U.S. markets, 33 channels are available
for wireless cable (in addition to local off-air VHF/UHF
broadcast channels that are not re-transmitted over the
microwave channels). In the Company's markets, 32 channels
are available for wireless cable (in addition to local
off-air VHF/UHF broadcast channels that are not re-transmitted over the
microwave channels), 12 of which can be owned by for-profit entities for
full-time usage without programming restrictions (multi-point distribution
service [MDS] channels). Except in limited circumstances, the other
20 wireless cable channels can only be owned by qualified
non-profit educational organizations, and, in general, each
must be used a minimum of 20 hours per week for educational
programming (instructional television fixed service [ITFS]
channels). The remaining excess air time on an ITFS channel
may be leased to wireless cable operators for commercial
use, without further restrictions (other than the right of
the ITFS license holder, at its option, to recapture up to
an additional 20 hours of air time per week per channel for
educational programming). Certain programming (including,
among others, The Discovery Channel and Arts &
Entertainment) qualifies as educational and thereby
facilitates full-time usage of an ITFS channel by commercial
wireless cable operators. Additionally, a technique known
as "channel mapping" permits ITFS licensees to meet their
minimum educational programming requirements by transmitting
educational programming over several ITFS channels at
different times, which the viewer sees as just one channel.
In addition, lessees of ITFS excess air time generally have
the right to transmit to their subscribers the educational
programming provided by the lessor at no incremental cost.
The FCC now permits "channel loading". Channel loading
permits ITFS license holders to consolidate their
educational programming on one or more of their ITFS
channels, thereby providing wireless cable operators leasing
such channels with greater flexibility in their use of ITFS
channels. The FCC's allocation of frequencies to wireless
cable is subject to change and, in the future, the FCC might
propose to alter the present wireless cable allocation to
provide a portion of the spectrum for other emerging
technologies. The FCC has formally inquired as to whether
certain wireless cable frequencies should be reallocated for
new computer-based communications services. It is uncertain
whether any definitive action will be taken with respect to
this inquiry. The Company believes that if any such action
were taken to reallocate these channels, the FCC would
allocate substitute frequency rights to the wireless cable
industry or provide other concessions.
As the Company expands, it may be dependent on leases with
unaffiliated third parties for most of its wireless cable
channel rights. Most wireless cable systems' channel
leases typically cover four ITFS and/or one to four MDS
wireless cable channels each. Generally, ITFS channels may
only be owned by qualified non-profit educational
organizations and, in general, must use a minimum of 20
hours per week per channel for educational programming. The
remaining excess ITFS channel time may be leased to wireless
cable operators for commercial use without further
restriction. MDS channels may be owned by commercial
entities and allow full-time usage without programming
restrictions. The use of such channels by the license
holders is subject to regulation by the FCC and a wireless
cable operator's ability to continue to enjoy the benefits
of its leases with channel license holders is dependent upon
the continuing compliance by the channel license holders
with applicable regulations, including the requirement that
ITFS license holders must meet certain educational use
requirements in order to lease transmission capacity to
wireless cable operators. Additionally, the FCC licenses
also specify construction deadlines, which, if not met,
could result in the loss of the license. Requests for
additional time to construct may be filed and are subject to
review pursuant to FCC rules.
Applications for wireless cable licenses are subject to
approval by the FCC. There is no limit on the time that may
elapse between filing the application with the FCC for a
modification or new license and action thereon by the FCC.
Once the FCC staff determines that the applications meet
certain basic technical and legal qualifications, the staff
then determines whether each application is proximate to
transmit and receive-site locations of other applications.
Those applications that would result in signal interference
to other pending applications must then undergo a
comparative selection process. The FCC's ITFS application
selection process is based on a set of objective criteria
that include whether an applicant is located in the
community to be served and the number of students that will
receive the applicant's educational programming. Thus, the
outcome of the selection process when two or more qualified
applicants are competing for the same channels lends itself
to a degree of predictability that varies according to the
circumstances. In 1985, the FCC established a lottery
procedure for awarding MDS licenses. In 1990, the FCC
established a filing "window" system for new multichannel
MDS (MMDS) applications. The FCC's selection among more
than one acceptable MMDS applications filed during the same
filing window was determined by a lottery. Generally, once
an MMDS application is selected by the FCC and the applicant
resolves any deficiencies identified by the FCC, a
conditional license is issued, allowing construction of the
station to commence. Construction generally must be
completed within one year of the date of grant of the
conditional license, in the case of MMDS channels, or 19
months, in the case of ITFS channels. ITFS and MMDS licenses
generally have terms of 10 years. Licenses must be renewed
and may be revoked for cause in a manner similar to other
FCC licenses. FCC rules prohibit the sale for profit of an
MMDS conditional license or of a controlling interest in the
conditional license holder prior to construction of the
station or, in certain instances, prior to the completion of
one year of operation. The FCC, however, does permit the
leasing of 100% of an MMDS license holder's spectrum
capacity to a third party and the granting of options to
purchase a controlling interest in a license, once the
required license holding period has lapsed and certain other
conditions are met.
Application for renewal of MDS and ITFS licenses must be
filed within a certain period prior to expiration of the
license term, and petitions to deny applications for renewal
may be filed during certain periods following the filing of
such applications. Licenses are subject to revocation or
cancellation for violations of the Communications Act or the
FCC's rules and policies. Conviction of certain criminal
offenses may also render a licensee or applicant unqualified
to hold a license.
Wireless cable transmissions are governed by FCC
regulations governing interference and reception quality.
These regulations specify important signal characteristics
such as modulation (e.g., AM/FM) or encoding formats (e.g.,
analog or digital).
The FCC also regulates transmitter locations and signal
strength. The operation of a wireless cable system requires
the collection of a commercially viable number of channels
operating with common technical characteristics. In order
to commence operations in a particular market, the Company
may be required to file applications with the FCC to modify
licenses for unbuilt stations. In applying for these
modifications, the Company must demonstrate that its
proposed signal does not violate interference standards in
the FCC-protected area of another wireless cable channel
license holder. A wireless cable license holder generally
is protected from interference within 35 miles of the
transmission site. An ITFS license holder has protection to
all of its receive sites, but only a 35 mile protected
service area during excess capacity use by a wireless cable
operator. The Cable Act. On October 5, 1992, Congress
passed the Cable Act, which imposes greater regulation on
hard-wire cable operators and permits regulation of prices
in areas in which there is no "effective competition". The
Cable Act directs the FCC to adopt comprehensive new federal
standards for local regulation of certain rates charged by
hard-wire cable operators. The legislation also provides
for deregulation of hard-wire cable in a given market once
other multi-channel video providers serve, in the aggregate,
at least 15% of the cable franchise area. Rates charged by
wireless cable operators, typically already lower than
hard-wire cable rates, are not subject to regulation under
the Cable Act.
Under the retransmission consent provisions of the Cable
Act and the FCC's implementing regulations, all
multi-channel video providers (including both hard-wire and
wireless cable) seeking to re-transmit certain commercial
broadcast signals must first obtain the permission of the
broadcast station. Hard-wire cable systems, but not
wireless cable systems, are required under the Cable Act and
the FCC's "must carry" rules to re-transmit a specified
number of local commercial television or qualified community
(low power) television signals.
In May 1993, the FCC issued new regulations implementing
the rate regulation provisions in the Cable Act. Hard-wire
cable operators with rates above a price benchmark average
for basic services were directed to reduce their rates by
approximately 10%. In February 1994, the FCC announced that
it would require hard-wire cable operators to implement a
further reduction in rates of another 7%. On November 18,
1994, the FCC adopted some exceptions to its cable rate
regulations. The FCC has also adopted regulations
implementing the Cable Act that require hard-wire cable
operators to establish standardized levels of customer
service. The Company cannot predict what effect these
regulations may have on the Company's price and service
competitiveness in its proposed wireless cable markets.
In February 1996, the Telecommunications Act was enacted.
Pursuant to the Telecommunications Act, all cable rate
regulation will be eliminated after three years, and for
"small systems", as defined in the Telecommunications Act,
and under certain other circumstances, rate regulation will
be eliminated immediately. Until these sunset provisions go
into effect, hard-wire cable operators will continue to be
subject to rate regulations.
While current FCC regulations are intended to promote the
development of a competitive pay television industry, the
rules and regulations affecting the wireless cable industry
may change, and any future changes in FCC rules,
regulations, policies and procedures could have a material
adverse effect on the industry, as a whole, and on the
Company, in particular. In addition, a number of legal
challenges to the Cable Act and the regulations promulgated
thereunder have been filed, both in the courts and before
the FCC. These challenges, if successful, could
substantially increase the Company's operating costs, make
some programming unavailable to the Company and otherwise
have a material adverse effect on the wireless cable
industry, as a whole, and the Company, in particular.
Specifically, those sections of the Cable Act which prohibit
discriminatory or unfair practices in the sale of satellite
cable and satellite broadcast programming to competing
multi-channel video programming distributors have been
challenged. The Company's costs to acquire satellite cable
and broadcast programming may be affected by the outcome of
those challenges. Other aspects of the Cable Act that have
been challenged are the Cable Act's provisions governing
rate regulation and customer service standards to be met by
hard-wire cable companies. The Cable Act empowered the FCC
to regulate the subscription rates charged by hard-wire
cable operators. As described above, the FCC recently
issued rules requiring such cable operators, under certain
circumstances, to reduce the rates charged for basic
services. The Cable Act also empowered the FCC to establish
certain minimum customer service standards to be maintained
by hard-wire cable operators. These standards include
prompt responses to customer telephone inquiries, reliable
and timely installations and repairs and readily
understandable billing practices. Should these provisions
withstand court and regulatory challenges, the extent to
which wireless cable operators may continue to maintain an
advantage over hard-wire cable operators in price and
customer service practices could be diminished.
Other Regulations. Because the use of coaxial cable by
hard-wire cable operators requires a "right of way" to cross
municipal streets, such operators must acquire a municipal
franchise and pay municipal franchise fees. Since wireless
cable uses FCC approved frequencies, no municipal right of
way is required. Accordingly, wireless cable operators are
not subject to municipal franchise fees. Hard-wire cable
operators are also required to set aside public access
channels for municipal and local resident use. Wireless
cable operators are not subject to such requirements.
Wireless cable license holders are subject to regulation
by the FAA with respect to the construction of transmission
towers and to certain local zoning regulations affecting
construction of towers and other facilities. There may also
be restrictions imposed by local authorities. There can be
no assurance that the Company will not be required to incur
additional costs in complying with such regulations and
restrictions.
Community (Low Power) Television
General. Television broadcasting operations are subject
to the jurisdiction of the FCC under the Communications Act.
The Communications Act empowers the FCC, among other things,
to issue, revoke or modify broadcast licenses, to assign
frequencies, to determine the locations of stations, to
regulate the broadcasting equipment used by stations, to
establish areas to be served, to adopt such regulations as
may be necessary to carry out the provisions of the
Communications Act and to impose certain penalties for
violation of its regulations. The Company's currently
operating community television station, as well as any
future stations, is subject to a wide range of technical,
reporting and operational requirements imposed by the
Communications Act and by FCC rules and policies.
The Communications Act provides that a license may be
granted to any applicant if the public interest, convenience
and necessity will be served thereby, subject to certain
limitations, including the requirement that the FCC allocate
licenses, frequencies, hours of operation and power in a
manner that will provide a fair, efficient and equitable
distribution of service throughout the United States.
Television licenses generally are issued for five-year
terms. Upon application, and in the absence of a
conflicting application that would require the FCC to hold a
hearing, or questions as to the licensee's qualifications,
television licenses have usually been renewed for additional
terms without a hearing by the FCC. An existing license
automatically continues in effect once a timely renewal
application has been filed until a final FCC decision is
issued.
Under existing FCC regulations governing multiple
ownership of broadcast stations, a license to operate a
television or radio station generally will not be granted to
any party (or parties under common control) if such party
directly or indirectly owns, operates, controls or has an
attributable interest in another television or radio station
serving the same market or area. The FCC, however, is
favorably disposed to grant waivers of this rule for certain
radio station-television station combinations in the top 25
television markets, in which there will be at least 30
separately owned, operated and controlled broadcast
licenses, and in certain other circumstances.
FCC regulations further provide that a broadcast license
will not be granted if that grant would result in a
concentration of control of radio and television
broadcasting in a manner inconsistent with the public
interest, convenience or necessity. FCC rules generally
deem such concentration of control to exist if any party, or
any of its officers, directors or shareholders, directly or
indirectly, owns, operates, controls or has an attributable
interest in more than 12 television stations, or in
television stations capable of reaching, in the aggregate, a
maximum of 25% of the national audience. This percentage is
determined by the DMA market ranking of the percentage of
the nation's television households considered within each
market. Because of certain limitations of the UHF signal,
however, the FCC will attribute only 50% of a market's DMA
reach to owners of UHF stations for the purpose of
calculating the audience reach limits. The Company will not
approach such limits for the foreseeable future. To
facilitate minority group participation in radio and
television broadcasting, the FCC will allow entities with
attributable ownership interests in stations controlled by
minority group members to exceed the ownership limits.
The FCC's multiple ownership rules require the attribution
of the licenses held by a broadcasting company to its
officers, directors and certain of its shareholders, so
there would ordinarily be a violation of FCC regulations
where an officer, director or such a shareholder and a
television broadcasting company together hold interests in
more than the permitted number of stations or more than one
station that serves the same area. In the case of a
corporation controlling or operating television stations,
such as the Company, there is attribution only to
shareholders who own 5% or more of the voting stock, except
for institutional investors, including mutual funds,
insurance companies and banks acting in a fiduciary
capacity, which may own up to 10% of the voting stock
without being subject to such attribution, provided that
such entities exercise no control over the management or
policies of the broadcasting company.
The FCC has recently begun a proceeding to consider
liberalization of the various TV ownership restrictions
described above, as well as changes (not all of which would
be liberalizing in effect) in the rules for attributing the
licenses held by an enterprise to various parties. The
Company is unable to predict the outcome of these
proceedings.
The Communications Act and FCC regulations prohibit the
holder of an attributable interest in a television station
from having an attributable interest in a cable television
system located within the coverage area of that station.
FCC regulations also prohibit the holder of an attributable
interest in a television station from having an attributable
interest in a daily newspaper located within the predicted
coverage area of that station.
The Communications Act limits the amount of capital stock
that aliens may own in a television station licensee or any
corporation directly or indirectly controlling such
licensee. No more than 20% of a licensee's capital stock
and, if the FCC so determines, no more than 25% of the
capital stock of a company controlling a licensee, may be
owned or voted by aliens or their representatives. Should
alien ownership exceed this limit, the FCC may revoke or
refuse to grant or renew a television station license or
approve the assignment or transfer of such license.
The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a licensee
without the prior approval of the FCC. Legislation was
introduced in the past that would impose a transfer fee on
sales of broadcast properties. Although that legislation
was not adopted, similar proposals, or a general spectrum
licensing fee, may be advanced and adopted in the future.
Recent legislation has imposed annual regulatory fees
applicable to the Company.
The foregoing does not purport to be a complete summary of
all of the provisions of the Communications Act or
regulations and policies of the FCC thereunder. Reference
is made to the Communications Act, such regulations and the
public notices promulgated by the FCC.
Other Regulations. The Federal Trade Commission, among
other regulatory agencies, imposes a variety of requirements
that affect the business and operations of broadcast
stations. From time to time, proposals for additional or
revised requirements are considered by the FCC, numerous
other Federal agencies and Congress. The Company is unable
to predict future Federal requirements or what impact, if
any, any such requirements may have on Company television
stations.
BUSINESS
History
The Company was organized in November 1996 to act as a
holding company primarily in the wireless cable and
community (low power) television industries. To this end,
the Company has acquired Winter Entertainment, Inc. (WEI),
which owns and operates a community (low power) television
station in Baton Rouge, Louisiana, and Missouri Cable TV
Corp. (MCTV), which owns the licenses necessary to operate
wireless cable systems in Poplar Bluff and Lebanon,
Missouri, has acquired licenses and leases of licenses
necessary to operate wireless cable systems in Port Angeles,
Washington, Astoria, Oregon, Sand Point, Idaho, The Dalles,
Oregon, and Fallon, Nevada, and has acquired licenses
necessary to operate community (low power) television
stations in Monroe/Rayville, Louisiana, Bainbridge, Georgia,
and Natchitoches, Louisiana. In January 1997, the Company
entered into a joint venture (known as "Web One Wireless
I.S.P. - Baton Rouge, J.V.") (the Joint Venture) which is to
operate as a Wireless Internet Service Provider (ISP) in
Baton Rouge, Louisiana, and acquired the rights to utilize,
on an exclusive basis, a licensed Wireless Internet Access
System in several U.S. cities, including, among others,
Seattle, Washington, Portland, Oregon, New Orleans,
Louisiana, and Dallas and Houston, Texas. In addition, the
Company intends, assuming funding is available to the
Company, to become involved in the following related areas:
(1) Local Multi-Point Distribution Service (LMDS), a new
spectrum anticipated to be put up for auction by the FCC
during 1997; (2) the acquisition of small, hard-wire cable
television systems as a means of entering the
telephony-based cable market, that is, to be able to provide
telephone service and ISP services in each such system's
market; and (3) the establishment of a broadcast television
network. References to the "Company" herein include WEI,
MCTV and the Joint Venture, unless the context requires
otherwise.
Business - Wireless Cable
General
Industry History - Cable Television. The cable television
industry began in the late 1940's and 1950's to serve the
needs of residents in predominantly rural areas with limited
access to local off-air VHF/UHF broadcasts. The cable
television industry expanded to metropolitan areas by
offering better reception and more programming than
available with off-air broadcasts. Today, cable television
systems offer various types of programming, which generally
include basic service, premium service and, in many
instances, pay-per-view services.
Wireless Cable Technology. Initially, most cable systems
were hard-wire systems, using coaxial cable and amplifiers
to transmit television signals. In 1983, the FCC allocated
a portion of the radio spectrum from 2500 to 2700 MHZ, which
had previously been allocated entirely for educational use,
to commercial wireless cable operation. Simultaneously, the
FCC also modified its rules on the usage of the remaining
portion of such spectrum allocated for educational use.
Nevertheless, regulatory and other obstacles impeded the
growth of the wireless cable industry through the remainder
of the 1980's. The FCC maintained burdensome restrictions
on the commercial use of educational channel capacity. In
addition, before enactment of the Cable Act (October 5,
1992), many program suppliers were unwilling to provide
programming to wireless cable operators on terms comparable
to those offered to hard-wire cable operators, if at all.
During the 1990's, several factors have contributed to the
growth of the wireless cable industry, including (I)
Congressional scrutiny of the rates and practices of the
hard-wire cable industry, (ii) improved technology,
particularly signal encryption and signal compression, (iii)
regulatory reforms by the FCC to facilitate the growth and
competitive impact of the wireless cable industry, including
permitting channel aggregation, (iv) increased availability
of programming for wireless cable systems, (v) strong
consumer demand for alternatives to hard-wire cable service
and (vi) increased availability of capital to wireless cable
operators in the public and private markets.
Wireless cable systems, like hard-wire cable systems,
operate from a head-end, consisting of satellite reception
and other equipment necessary to receive the desired
programming. Programming is then transmitted by microwave
transmitters from an antenna located on a tower to a small
receiving antenna located on a subscriber's rooftop. At the
subscriber's location, the microwave signals are converted
to frequencies that can pass through conventional coaxial
cable into an addressable descrambling converter located on
top of a television set. Because the microwave frequencies
used by wireless cable will not pass through large trees,
hills, tall buildings or other obstructions, wireless cable
requires a clear line-of-sight from tower to receiving
antenna. However, most signal blockages can be overcome
with the use of signal boosters which retransmit an
otherwise blocked signal over a limited area. Because
wireless cable systems do not require an extensive network
of coaxial cable and amplifiers, wireless cable operators
are able to provide subscribers with a high quality picture
and a reliable signal at a significantly lower
per-subscriber system cost, when compared to hard-wire cable
systems.
Hard-Wire Cable Technology. Hard-wire cable operators
transmit signals from a head-end, delivering local and
satellite-delivered programming through a network consisting
primarily of coaxial cable and amplifiers to subscribers.
As a direct result of the use of coaxial cable to deliver
signals throughout a service area, hard-wire cable systems
are susceptible to signal problems. Because signals can
only be transmitted through coaxial cable a fixed distance
without additional amplification, some degree of noise is
added each time a television signal is so amplified. A
series of amplifiers between the head-end and the viewer
leads to progressively greater noise and, accordingly, for
some viewers, a grainier picture. Also, an amplifier must
be properly balanced or the signal may be improperly
amplified. Failure of any one amplifier in the chain will
black out an area. Substantial regular system maintenance
is required due to water ingress, temperature changes and
other equipment problems, all of which may affect the
quality of signals delivered to subscribers. Some hard-wire
cable companies have begun installing fiber optic cable
networks. While this technology will substantially improve
the transmission and reception problems currently
experienced by most hard-wire cable systems, the high costs
associated with such technology may slow the conversion to
all fiber optic systems and further enhance the typical cost
advantages of wireless cable.
Programming
General. Once a wireless cable operator has obtained the
right to transmit programming over specified frequencies,
the operator must then obtain the right to use the
programming to be transmitted. With the exception of the
retransmission of local off-air VHF/UHF broadcast signals,
programming is made available in accordance with contracts
with program suppliers under which the system operator pays
a royalty based on the number of subscribers receiving
service each month. Individual program pricing varies from
supplier to supplier; however, more favorable pricing for
programming is generally afforded to operators with larger
subscriber bases. The likelihood that program material will
be unavailable to the Company has been significantly
mitigated by the Cable Act and various FCC regulations
issued thereunder, which, among other things, impose limits
on exclusive programming contracts and prohibit cable
programmers, in which a cable operator has an attributable
interest, from discriminating against cable competitors with
respect to the price, terms and conditions of programming.
Because only a few of the industry's programming services
are not currently directly owned by vertically integrated
multiple cable system operators, the Company expects little
difficulty in arranging satisfactory programming contracts.
The basic programming package expected to be offered in each
of the Company's markets can be expected to be comparable to
that offered by the local hard-wire cable operators.
Copyright. Under the Federal copyright laws, permission
from the copyright holder generally must be secured before a
video program may be retransmitted. 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 copyrights in the
programming. In order to do so, a cable system must secure
a compulsory copyright license. A license may be obtained
upon the filing of certain reports and the payment of
certain fees set by the Copyright Royalty Tribunal.
Wireless cable operators may rely on Section 111 of the
Copyright Act. The United States Congress recently enacted
legislation that confirmed the ability of wireless cable
operators to obtain the benefit of the compulsory copyright
license. Periodically, Congress has considered proposals to
phase out the compulsory license.
Local broadcasters may require that cable operators obtain
their consent before re-transmitting local off-air VHF/UHF
broadcasts. The FCC has exempted wireless cable operators
from the re-transmission consent rules if the receive-site
antenna is either owned by the subscriber or within the
subscriber's control and available for purchase by the
subscriber upon the termination of service. In all other
cases, wireless cable operators must obtain consent to
re-transmit local broadcast signals. The Company will
attempt to obtain such consents in each of its markets where
it will be re-transmitting on a wireless cable channel.
There can be no assurance that the Company will be able to
obtain such consents on terms satisfactory to the Company,
if at all.
Contract Programming. In each of its wireless cable
systems, the Company will be required to enter into
agreements with program suppliers, such as ESPN, CNN, HBO
and MTV. The Company has not yet determined the mix of
programming that will be offered in any of its wireless
cable systems. Thus, no agreements with program suppliers
have been made. It can be expected that such program
agreements will have three-year terms, with provisions for
automatic renewals, and be subject to termination for breach
of the agreement, including non-payment. As a rule, the
programming agreements can be expected to provide for
royalty payments based upon the number of Company
subscribers receiving the programming each month.
Individual program prices vary from supplier-to-supplier,
and more favorable pricing sometimes is afforded to
operators with larger subscriber bases; however, the Cable
Act requires cable programming to be made available for
purchase by all system operators at competitive pricing.
Pay-Per-View Services. The Company intends to offer
"pay-per-view" services that will enable customers to order,
and pay for, one program at a time. Pay-per-view services
have, in the past, been successful for specialty events,
such as wrestling and heavyweight prize fights, concerts and
early-release motion pictures. It is possible that the
Company will promote the purchase of movies on a
pay-per-view basis in competition with video rental stores.
Pay-per-view requires the subscriber to have an "addressable
converter". An addressable converter allows the cable
company to control what the subscriber watches without
having to visit the subscriber location to change equipment.
The Company intends to utilize addressable converters in all
of its systems. However, for customers to order
pay-per-view events conveniently, an impulse pay-per-view
converter is required. An impulse pay-per-view converter,
which has a return frequency (in a wireless system) to the
operator's computer system, enables a subscriber to make a
telephone call to order an event. The Company intends to
have impulse capability in all of its systems, but it does
not intend to offer impulse pay-per-view in the foreseeable
future.
Pay Television Industry Trends
The Company's business will be affected by pay television
industry trends and, in order to maintain and increase its
subscriber base in the years ahead, the Company will need to
adapt rapidly to industry trends and modify its practices to
remain competitive. Due to the limited number of physical
components of the wireless transmission system, the Company
believes it will be less expensive for it to adapt to coming
industry trends than for hard-wire cable operators. The
cost of such adaptation by the Company could, nonetheless,
be substantial.
Signal Compression. Several decoder manufacturing
companies are developing digital compression technology,
which would allow several programs to be carried in the
amount of bandwidth where only one program is carried now.
Manufacturers have projected varying compression ratios for
future equipment, with more conservative estimates ranging
from 3-to-1 to 10-to-1. The Company believes
second-generation 6-to-1 signal compression technology will
be available within three months. It is generally expected
that such digital compression technology would have at least
two major effects: (1) such technology will permit wireless
cable systems to be launched in a particular market with far
fewer channels having been licensed or leased, thereby
reducing start-up and operating costs; and (2) such
technology will permit dramatic expansion of pay-per-view
video services, thereby increasing the potential of greater
revenues for a particular system's operator. The Company
believes hard-wire cable companies will be required to
expend significant funds on upgrading current systems in
order to utilize digitally-compressed signals, the costs of
which may be prohibitive.
Addressability and Pay-Per-View. "Addressability" means
the ability to implement specific orders from, or send other
communications to, each subscriber, without having to modify
a subscriber's equipment. "Impulse addressability" allows a
subscriber to select specialized programming, such as
pay-per-view, on an immediate basis, simply through the
remote control. While the Company, like many wireless cable
operators, expects that it will use impulse-addressable
set-top converters, only approximately 35% of hard-wire
cable operators use addressability and only approximately 5%
use impulse-addressability. Without addressability, a
hard-wire customer not subscribing to a premium channel must
make two trips to the hard-wire cable operator's offices,
once to obtain the descrambling device and once to return
it. A customer subscribing to a premium channel must
telephone the hard-wire cable operator in advance. The
Company believes this lack of convenience has substantially
hindered pay-per-view sales. Pay-per-view is expected to
become more popular as additional events become available
for distribution exclusively on pay-per-view. Compression
technology will greatly expand the channel capacity
available for such programming. The Company believes that
the use of digital compression technology will provide an
additional advantage over most hard-wire cable operators,
because impulse-addressable set-top converters provide
greater convenience for subscribers. Hard-wire cable
operators will incur significant expenditures to upgrade
their systems to be able to offer impulse addressability.
Advertising. Until recently, most advertising on cable
has been sold by program suppliers, who sell national
advertising time as part of the signal they deliver to cable
operators. Recently, however, advertisers have begun
placing advertisements on channels dedicated exclusively to
advertising, as well as in local available time (typically,
two minutes each hour) set aside by program suppliers for
local insertions in their programming of advertisements sold
by cable operators. The Company expects that digital
compression technology will allow substantial flexibility in
the expansion of advertising sales, due to the increased
number of programming channels available. (See "Business
Strategy" hereunder).
Interactivity. Certain hard-wire cable operators have
announced their intentions to develop interactive features
for use by their subscribers. Interactivity would allow
subscribers to utilize their televisions for two-way
communications, such as video games and home shopping, among
others. Wireless cable operators will be able to utilize a
frequency which the FCC has made available for interactive
communications. At this time, the Company believes the
commercial viability of interactivity in the Company's
markets is at least several years away.
Business Strategy
The Company's primary business objective in the wireless
cable industry is to develop, own and operate wireless cable
television systems in markets in which the Company believes
it can achieve positive cash flow and operating income
rapidly after system launch. This period of development
would be followed by consolidation of its subscriber base
and expansion of programming.
Rural Market Focus. The Company intends to aggregate
wireless cable channel rights and to locate operations in
small to mid-size markets that have a substantial number of
households not currently passed by hard-wire cable and lack
off-air VHF/UHF broadcast channels. The Company believes
that this size market typically has a stable economic base,
less competition from alternative forms of entertainment and
other conditions conducive to wireless cable transmissions.
Market Penetration. Because the Company's officers will
be involved in each system launch in a hands-on manner, the
Company believes it will be able to achieve positive monthly
operating cash flow upon obtaining between 350 and 400
subscribers within a particular system. Initially, the
Company will direct its marketing at unpassed households.
Accordingly, the Company believes it will be able to launch
service successfully in most of its markets with
approximately 12 channels of programming, allowing it to
contain system launch costs and achieve positive cash flow
with a lower number of subscribers. The Company expects
that it will be able to achieve this level of programming in
each of its markets. It is the Company's plan that, once a
system achieves positive cash flow, the Company would expand
the channel offering and add subscribers. There is no
assurance that any of the Company's proposed systems will
ever generate positive cash flow or earn a profit. (See
"Risk Factors").
Low Cost Infra-Structure. Wireless cable systems
typically cost significantly less to build and operate than
hard-wire cable systems, for many reasons. First, while
both hard-wire cable operators and wireless cable operators
must construct a head-end, hard-wire cable operators must
also install an extensive network of coaxial cable and
amplifiers in order to transmit signals from the head-end to
subscribers. In a wireless cable system, once the head-end
is constructed, the Company estimates that each additional
wireless cable subscriber will require an incremental
capital expenditure by the Company of approximately $200.
Such incremental capital expenditures are variable costs and
will be partially offset by installation fees to be paid by
subscribers. Second, without an extensive co-axial cable
network to maintain, wireless cable operators typically
incur lower system maintenance costs and depreciation
expense. Third, programming is generally available to
hard-wire and wireless cable operators on comparable terms,
although operators that have a smaller number of subscribers
often are required to pay higher per-subscriber fees.
Finally, the Company expects that it will, based on industry
averages, experience a lower rate of subscriber turnover, as
compared to the "churn" rate of approximately 3% per month
typically experienced by hard-wire cable operators, although
no assurances can be made in this regard. Reduced
subscriber turnover can be expected to reduce installation
and marketing expenses.
Development Priority. The Company currently intends to
exploit its wireless cable markets in the following order:
(1) Poplar Bluff, Missouri, which is built out and will
become operational at such time as needed marketing funds
are obtained, of which there is no assurance; (2) Lebanon,
Missouri; (3) Port Angeles, Washington; (4) The Dalles,
Oregon; (5) Sand Point, Idaho; (6) Fallon, Nevada; and (7)
Astoria, Oregon. There is no assurance that the Company
will be able to launch any of its proposed wireless cable
systems. (See "Company Markets" hereunder).
Marketing and Customer Support. The Company intends
primarily to utilize door-to-door marketing, as well as
media advertising, telemarketing and direct mail, to gain a
subscriber base in each of its wireless cable markets. The
Company also intends to run promotional pricing campaigns
and take advantage of public relations opportunities. In
this regard, the Company expects that substantial consumer
education regarding wireless cable will be necessary in each
of its markets, which could slow the growth of its
subscriber base.
The Company believes that it will offer its subscribers
competitively priced installation and subscription fees.
Several points will be emphasized in the Company's
advertising, as discussed below. The Company anticipates
that installation fees will average $49.95 per subscriber
and begin at $5.00 for promotional specials, while monthly
subscription fees are expected to start at $18.95 for basic
programming. Pay-per-view stations may be made available in
the future at no additional charge. It can be expected that
the Company will offer specially-priced packages during
promotional periods. Hard-wire cable customer charges are
subject to local franchise taxes, whereas wireless cable
customers do not pay any franchise taxes. A focus on the
value received for the price paid, together with an emphasis
on increased programming availability, are expected to
provide a competitive choice to potential customers. There
is, however, no assurance that the Company will be
successful in attracting subscribers.
The Company intends to provide 24-hour-per-day service,
with rapid response time on subscriber telephone calls,
uniformed field personnel and flexible installation
scheduling. The Company will emphasize its picture quality
and reliability of its wireless transmission. The Company
believes that, within its signal pattern, its picture
quality will be as good or better than that received by
hard-wire cable subscribers because, absent any
line-of-sight obstruction, there is less opportunity for
signal degradation between transmitter and the subscriber.
Also, wireless cable service has proven very reliable,
primarily due to the absence of certain distribution system
components that can fail and thereby cause outages. The
Company intends to position itself as a reliable,
cost-effective alternative to hard-wire cable operations by
delivering a high-quality signal throughout its signal area
and personal service to its subscribers.
Equipment Reliability and Picture Quality. Several
manufacturers produce the equipment used in the wireless
cable systems, from transmitters to the set-top converters
which feed the signal to the television set. Because the
signal is broadcast over the air directly to a receiving
antenna, wireless cable does not experience the problems
caused by amplifying signals over long distances experienced
by some hard-wire cable subscribers. Amplification of
signals can lead to greater signal noise and, accordingly, a
grainier picture for some subscribers. Also, the
transmission of wireless signals is not subject to the
problems caused by deteriorating underground cables used in
hard-wire cable systems. As a result, wireless cable is
sometimes more reliable than hard-wire cable, and picture
quality is generally equal to or better than hard-wire
cable. In addition, extreme weather conditions typically do
not affect wireless cable transmitters, so customers seldom
experience outages sometimes common with hard-wire cable
systems.
Signal security is provided by encoding each wireless
cable channel and equipping the converter with a unique
decoding device that responds to a pilot signal carrying a
data stream, with authorizations instructions. Thus, the
system is fully "addressable". The converter boxes will not
be usable until they are authorized for service by each
system's central computer. All channels, both basic and
premium, are scrambled. Because the wireless cable system
is addressable, it can also accommodate pay-per-view
service.
Advertising. The Company will attempt to generate
advertising sales revenue in each of its proposed wireless
cable markets, through the use of surplus channels, that is,
channels on which the Company is not broadcasting regular
programming. It is expected that the Company would sell
space on such surplus channels to distributors of so-called
"infomercials", which can be expected to generate additional
revenues for the Company. In addition, it is possible that
the Company will establish a program production unit, which
would produce, among other types of programming,
infomercials for its own use, as well as for sale to other
systems in need of additional programming. There is no
assurance that the Company will be successful in this
regard.
Company Markets
General. The Company currently holds the rights to
wireless cable channels in the following cities:
Estimated
Total
Estimated Line-of-
Popu- Total Sight Current
City lation Households Households Channels
- ---- ------- ---------- ---------- --------
Poplar
Bluff, MO 120,710 54,590 51,136 26,28,31,35,
56,59,61,68*
Lebanon,
MO 135,474 75,979 74,092 18,29,31,40,
51,53,55,59*
Port
Angeles,
WA 64,553 30,085 25,141 H1-2-3
The Dalles,
OR 59,945 27,328 20,232 B1-2-3;
C1-2-3
Sand Point,
ID 46,750 25,510 15,739 B1-2-3;
C1-2-3
Fallon, NV 27,943 11,506 9,288 E1-2-3-4; H3
Astoria, OR 57,213 31,663 23,960 H2-3
------- ---------- ----------
Totals 512,588 256,661 219,588
- ------------
Source: 1990 Census Data.
* Each of these channels is a low power television channel,
not a channel in the FCC-allocated wireless cable
frequencies (2500-2700 MHZ).
The Company currently intends to exploit its wireless
cable markets in the order of the above presentation. Such
order of development was determined after an assessment of
the business potential of each of the markets based upon the
number of homes within the radius of the proposed transmit
site, the number of homes passed by hard-wire cable and
other demographic factors. Except where noted below, the
Company will seek additional financing, either equity or
debt, or form partnerships for the development of its
markets. The Company does not currently have such financing
or partners in place. The Company believes such financing
will be available on a market-by-market basis, especially
for the incremental capital needed as a particular wireless
cable system adds revenue-producing subscribers; however,
there can be no assurance that it will be able to obtain
such financing or partners on a timely basis and on
satisfactory terms and conditions, if at all. The failure
to obtain additional funds or partners on a timely basis
could materially adversely affect the Company and its
business. Nevertheless, the Company believes it will be
able to undertake limited development of one or more of its
markets (that is, with less rapid construction and less
extensive marketing) without such additional financing or
partners.
Poplar Bluff, Missouri. The Company's wireless cable
system in Poplar Bluff is based on low power television
channels rather than on the 2500-2700 MHZ channels
specifically allocated by the FCC to wireless cable. That
is, the low power television channels have been built-out
for wireless cable operations, with full encryption and
signal compression capability. The Company believes this
style of wireless cable system to be superior to a
"traditional" wireless cable system, inasmuch as the low
power television broadcast signal is not limited by
"line-of-sight" concerns associated with microwave
(2500-2700 MHZ) transmissions. Thus, terrain, large trees
and buildings cause far less signal interference.
Pursuant to separate Assignment and Assumption
Agreements, the Company holds the rights to leases of eight
low power television channels in the Poplar Bluff area.
Specifically, the Company holds the rights to channels 26,
28, 31, 35, 56, 59, 61, 68. The Company is obligated to pay
monthly fees of $.14 per subscriber for channels 26 and 31,
and $.10 per subscriber for the remainder of the channels.
The term of each of such agreements is 10 years, commencing
October 17, 1996, which term shall renew automatically for
an additional 10 years, at the Company's option.
Should funds be available, of which there is no
assurance, the Company intends to commit $100,000 to the
initial marketing and development efforts in Poplar Bluff.
The Company expects that it will be able to secure
approximately 300 subscribers with the expenditure of such
funds. There is no assurance that such will be the case.
(See "Management's Discussion and Analysis of Financial
Condition and Results of Operations").
The hard-wire cable system in Poplar Bluff carries
approximately 25 channels. The Company will offer 12
channels (including available off-air VHF/UHF channels), and
will charge approximately 20% less per month for programming
services than does the local hard-wire operator. In
addition, there are a large number of unpassed (by hard-wire
cable) residences in the Poplar Bluff area, which is the
market segment on which the Company will concentrate
initially. The Company expects to achieve market
penetration in the unpassed residences in the Poplar Bluff
area at a rate that meets or exceeds the national average.
However, no assurances can be given in this regard.
The Company will utilize door-to-door marketing,
newspaper and radio advertising to advertise its wireless
cable services. Other forms of advertising may be used,
should cost factors be acceptable. The Company's officers
expect to oversee installation and sales efforts. Once the
Poplar Bluff system is established, the Company expects to
employ one full-time and one part-time employee there.
Lebanon, Missouri. The Company's Lebanon, Missouri,
wireless cable system will contain the same feature as its
Poplar Bluff, Missouri, wireless cable system, that is,
transmission of programming will emanate from low power
television stations rather than a microwave transmitter.
Pursuant to separate Assignment and Assumption Agreements,
the Company holds the rights to leases of eight low power
television channels in the Lebanon area. Specifically, the
Company holds the rights to channels 18, 29, 31, 40, 51, 53,
55 and 59. The Company is obligated to pay monthly fees of
$.10 per subscriber. The term of each of such agreements is
10 years, commencing October 17, 1996, which term shall
renew automatically for an additional 10 years, at the
Company's option. The Company is currently unable to
predict when it will begin to construct its Lebanon system,
although the Company does not anticipate that it will
commence construction prior to 1998, at the earliest. The
Company does not currently possess capital sufficient to
commence construction of such wireless cable system. There
is no assurance that the Company will ever possess capital
with which it would be able to construct its Lebanon system.
Port Angeles, Washington. The Company holds the rights
to leases of three wireless cable channels in Port Angeles,
Washington, channels H1, H2 and H3. The Company is
currently unable to predict when it will begin to construct
such wireless cable system. Nevertheless, should funding of
approximately $200,000 be available, the Company anticipates
that it will begin construction of such wireless cable
system during the first quarter of Fiscal 98. There is no
assurance that such level of funding for construction of
such wireless cable system will be available. In addition,
the Company will be required to acquire more channel rights
and/or utilize available signal compression technologies, in
order to be in position to offer a viable wireless cable
alternative. There is no assurance that the Company will be
able to acquire any additional channel rights or acquire the
rights to utilize any signal compression technologies.
The Dalles, Oregon. The Company holds the rights to
leases of six wireless cable channels in The Dalles, Oregon,
channels B1-2-3 and C1-2-3. The Company is currently unable
to predict when it will begin to construct such wireless
cable system, inasmuch as the Company does not currently
possess capital with which to commence construction. There
is no assurance that funding for construction of such
wireless cable system will be available.
Sand Point, Idaho. The Company holds the rights to
leases of six wireless cable channels in Sand Point, Idaho,
channels B1-2-3 and C1-2-3. The Company is currently unable
to predict when it will begin to construct such wireless
cable system, inasmuch as the Company does not currently
possess capital with which to commence construction. There
is no assurance that funding for construction of such
wireless cable system will be available.
Fallon, Nevada. The Company holds the rights to leases
of five wireless cable channels in Fallon, Nevada, channels
E1-2-3-4 and H3. The Company is currently unable to
predict when it will begin to construct such wireless cable
system, inasmuch as the Company does not currently possess
capital with which to commence construction. There is no
assurance that funding for construction of such wireless
cable system will be available.
Astoria, Oregon. The Company holds the rights to leases
of two wireless cable channels in Astoria, Oregon, channels
H2 and H3. The Company is currently unable to predict when
it will begin to construct such wireless cable system,
inasmuch as the Company does not currently possess capital
with which to commence construction. There is no assurance
that funding for construction of such wireless cable system
will be available. In addition, the Company will be
required to acquire more channel rights and/or utilize
available signal compression technologies, in order to be in
position to offer a viable wireless cable alternative.
There is no assurance that the Company will be able to
acquire any additional channel rights or acquire the rights
to utilize any signal compression technologies.
Competition
In addition to competition from established hard-wire cable
television systems, wireless cable television operators face
competition from numerous other sources, including potential
competition from emerging technologies in the pay-television
industry, certain of which are described below.
Satellite Receivers. Satellite receivers are generally
seven to 12 foot dishes mounted in the yards of homes to
receive television signals from orbiting satellites. Until
the implementation of encryption, these dishes enabled
reception of any and all signals without payment of fees.
Having to purchase decoders and pay for programming has
reduced their popularity, although the Company will, to some
degree, compete with these systems in marketing its wireless
cable services.
Direct Broadcast Satellite (DBS). DBS involves the
transmission of an encoded signal direct from a satellite to
a customer's home. Because the signal is at a higher power
level and frequency than most satellite transmitted signals,
its reception can be accomplished with a relatively small
(18-inch) dish. DBS cannot, for technical and legal
reasons, provide local VHF/UHF broadcast channels as part of
its service, although many DBS subscribers receive such
channels through the use of standard over-air receive
antennas. Moreover, DBS may provide subscribers with access
to broadcast network distant signals only when a subscriber
resides in areas unserved by any broadcast station. The
cost to a DBS subscriber for equipment and service is
generally substantially higher than similar costs to
wireless cable subscribers. Several DBS services currently
are available nationwide. DBS currently has approximately
four million subscribers nationwide. At present, the
Company does not believe that, in the near-term, DBS will
constitute significant competition in the markets in which
the Company operates, due primarily to its cost and failure
to provide access to local VHF/UHF broadcast channels.
Satellite Master Antenna Television (SMATV). SMATV is a
multi-channel television service offered through a wired
plant quite similar to a hard-wire cable system, except that
it operates without a franchise from a local authority.
SMATV operates under an agreement with a private landowner
to service a specific multiple-dwelling unit (e.g.,
apartment complex). The FCC has recently amended its rules
to provide point-to-point delivery of video programming by
SMATV operators and other video delivery systems in the 18
gigahertz band.
Telephone Companies. Under the Communications Act, local
exchange carriers (LECs) are currently prohibited from
providing video programming directly to subscribers in their
respective telephone service areas. The FCC has recently
ruled, however, that LECs may acquire wireless cable
operations. Moreover, certain U.S. District Courts and
Courts of Appeal have held that the "telco-cable
cross-ownership ban" abridges the First Amendment rights of
LECs to free expression under the U.S. Constitution. Such
rulings are currently under appeal or are expected to be
appealed. The Telecommunications Act lifts barriers to the
provision of cable television service by telephone
companies. The FCC already permits LECs to provide "video
dial-tone" service, thereby allowing such carriers to make
available to multiple service providers, on a
nondiscriminatory common carrier basis, a basic platform
that will permit end users to access video program services
provided by others.
While the competitive effect of the entry of telephone
companies into the video programming business is still
uncertain, the Company believes that wireless cable systems
will continue to maintain a cost advantage over video
dial-tone service and fiber optic distribution technologies.
However, due to rapid technological advancements and the
capital resources of LECs, no assurances can be made in this
regard.
Video Stores. Retail stores rent VCRs and/or video tapes,
and are a major participant in the television program
delivery industry. According to Paul Kagan Associates,
Inc., there are over 75.5 million households with VCRs now
in use in the United States. This segment of the television
program delivery industry represents significant competition
for pay-per-view sales and premium programming channels.
Local Off-Air VHF/UHF Broadcasts. Local off-air VHF/UHF
broadcasts (such as ABC, NBC, CBS, FOX, UPN and WB) provide
a free programming alternative to the public. Prior to
October 1993, wireless cable systems could re-transmit these
broadcast signals without permission. However, with the
enactment of the Cable Act, local broadcasters may require
that cable operators obtain their consent before
re-transmitting local off-air VHF/UHF broadcasts. The
Company will attempt to obtain such consents in each of its
markets where the Company is re-transmitting on a wireless
cable channel.
Local Multi-Point Distribution Service. In 1993, the FCC
proposed to re-designate the 28 gigahertz band to create a
new video programming delivery service referred to as local
multipoint distribution service (LMDS). Final rules for
LMDS have not been established. Auctions for the
LMDS-related channels are not expected to begin until the
middle of 1997, and the Company does not expect to possess
sufficient capital to participate in such auction.
Community (Low Power) Television. Community Television
utilizes a limited portion of the spectrum allocated by the
FCC for local off-air VHF/UHF broadcasts, but Community
Television utilizes lower power transmission equipment than
local off-air VHF/UHF broadcasts and its signal may be
encrypted. Community Television requires a separate
transmitter for each channel and a standard antenna at the
receiving site.
Business - Community (Low Power) Television
General
Industry History. Community, or low power, television is
a relatively new broadcasting category created by the FCC in
the early 1980's. Community television stations, with their
narrow geographic coverage, usual unaffiliated status and
local programming focus, are becoming a more important part
of the current broadcasting mix. While able to cover, on
average, only between five and 20 miles radius (15-62 square
miles) with their signals, community television stations
have been able to expand greatly their coverage by having
their signals included in local and regional cable systems.
Entry into the community television industry requires
substantially less capital than entry into the high-power
television industry. There are currently approximately
1,700 community television stations licensed by the FCC,
with approximately the same number of applications for new
licenses now pending with the FCC.
Community television stations may be either affiliated
with one of the national networks (ABC, NBC, CBS, FOX, UPN
or WB) or may be independent. The Company does not
anticipate that its community television stations will
become network affiliates in the near term. However, it is
expected that, once operational, each of the Company's
stations will become an affiliate of the Video Catalog
Channel, a merchandise sales operation. The Company's only
operational station, Call sign K13VE, Channel 13, in Baton
Rouge, Louisiana, has been an affiliate of the Video Catalog
Channel since going on the air in January 1996. (See
"Business Strategy" hereunder).
Programming
Lacking a national network affiliation, independent
community (low power) television stations, in general,
depend heavily on independent third parties for programming.
Programs obtained from independent sources consist primarily
of syndicated television shows, many of which have been
shown previously on a network, and syndicated feature films,
which were either made for network television or have been
exhibited previously in motion picture theaters (most of
which films have been shown previously on network and cable
television). Syndicated programs are sold to individual
stations to be broadcast one or more times. Independent
television stations generally have large numbers of
syndication contracts; each contract is a license for a
particular series or program that usually prohibits
licensing the same programming to other television stations
in the same market. A single syndication source may provide
a number of different series or programs.
Licenses for syndicated programs are often offered for cash
sale or on a barter or cash-plus-barter basis to stations.
In the case of a cash sale, the station purchases the right
to broadcast the program, or a series of programs, and sells
advertising time during the broadcast. The cash price of
such programming varies, depending on the perceived
desirability of the program and whether it comes with
commercials that must be broadcast (a cash-plus-barter
basis). Bartered programming is offered to stations without
charge, but comes with a greater number of commercials that
must be broadcast, and, therefore, with less time available
for sale by the station. Recently, the amount of bartered
and cash-plus-barter programming broadcast industry-wide has
increased substantially.
For the foreseeable future, however, the Company anticipates
that each of its community television stations will be an
affiliate of the Video Catalog Channel, deriving all of its
programming therefrom. (See "Business Strategy" hereunder,
as well as "Management's Discussion and Analysis of
Financial Condition and Results of Operations").
Community Television Industry Trends
The Company believes that community television is in the
right position at a very dynamic time in the television
broadcasting market place. With the ever-growing number of
cable (hard-wire and wireless) channels in most markets,
coupled with the lack of programming available for channel
slots past the 70-channel mark, there appears to be room
available on such cable systems for additional stations.
This availability of channel room on cable systems has the
effect of giving community television far greater area
coverage than could be achieved solely by broadcasting a
signal. The potential for community television stations to
achieve historically high revenues exists, if a particular
market and/or region can be exploited effectively. There is
no assurance that the Company will be able to exploit each
of its community television markets.
Business Strategy
It is the Company's current intention for each of its
community television stations, as soon as it becomes
operational, to become an affiliate of the Video Catalog
Channel, a merchandise sales operation. It is the Company's
experience, from the operations of its Baton Rouge,
Louisiana, community television station, that this strategy
generates positive cash flow, from inception of
broadcasting. From such financial position, a station's
advertising sales efforts will be increased in an effort to
exploit such station's coverage area. Also, the Company
will attempt to secure a channel on each of the cable
systems within a particular market. There is no assurance
that the Company will be able to exploit effectively any of
its community television markets. It is possible that one
or more of the Company's community television stations
could, in the future, become an affiliate of one of the
national networks, such as FOX, UPN or WB. However, no
prediction in this regard can be made.
Company Markets
General. The Company currently operates a community
television station in Baton Rouge, Louisiana, and holds the
rights to community television stations in other cities, as
follows:
Estimated
Total Total
City Population Households Channel
- ---- ---------- ---------- -------
Baton Rouge, LA 637,555 252,106 13
Monroe/Rayville, LA 235,394 92,900 26
Bainbridge, GA 298,215 120,688 36
Natchitoches, LA 97,764 45,730 38
---------- ---------
Totals 1,268,928 511,424
- ------------
Source: 1990 Census Data.
The Company currently intends to establish its Community
Television stations in the order of the above presentation.
Such order of development was determined after an assessment
of the business potential of each of the markets based upon
the number of homes within the radius of the proposed
transmit site, as well as other demographic factors. Except
where noted below, the Company will seek additional
financing, either equity or debt, or form partnerships for
the development of its markets. The Company does not
currently have such financing or partners in place. The
Company believes such financing will be available on a
station-by-station basis; however, there can be no assurance
that it will be able to obtain such financing or partners on
a timely basis and on satisfactory terms and conditions, if
at all. The failure to obtain additional funds or partners
on a timely basis could materially adversely affect the
Company and its business.
Baton Rouge, Louisiana. K13VE, Channel 13, the
Company's Baton Rouge, Louisiana, community television
station, has been broadcasting since January 1996, as an
affiliate of the Video Catalog Channel. The Company's
current broadcast signal reaches approximately 30,000
households. Should the Company obtain necessary funds, of
which there is no assurance, the Company intends to commit
$20,000 to increase the power of such station to its maximum
legal limit, which would permit the Company's broadcast
signal to reach approximately 150,000 households. It is
expected that the commissions earned by K13VE from Video
Catalog Channel sales originating from its broadcast area
will increase proportionately to its increased number of
households reached. There is no assurance that such will be
the case.
Other Stations. The Company owns the licenses to
community television stations located in Monroe/Rayville,
Louisiana, Natchitoches, Louisiana, and Bainbridge, Georgia,
which television stations are expected to be constructed in
the order listed, assuming adequate funding is available, of
which there is no assurance. The Company believes it will
require approximately $50,000 to construct each station.
Because the Company intends to have each of its stations
become an affiliate of the Video Catalog Channel immediately
after construction has been completed, the Company does not
expect to require additional funds for marketing. There is
no assurance that funding will be available to the Company
at such times as it attempts to construct any one of its
community television stations. Absent additional funding,
the Company would likely be unable to construct any of its
community television stations.
Competition
Community television stations compete for advertising
revenue in their respective markets, primarily with other
broadcast television stations and cable television channels,
and compete with other advertising media, as well. Such
competition is intense. In addition, competition for
programming, management personnel and network affiliations
is severe. There is no assurance that the Company's
community television channels, once built, of which there
is no assurance, will be able to compete effectively in
their respective markets. (See "Risk Concerning Community
(Low Power) Television - Competition" under "Risk Factors").
Business - Wireless Internet
General
Wireless Internet is a new type of communications spectrum
recently designated by the FCC. The FCC has designated the
900 MHZ band for Wireless Internet use. Wireless Internet
requires a transmission facility maintained by the Wireless
ISP and the user's modem equipped with an antenna. Wireless
Internet capability allows users to access the Internet from
a stationary computer or from a mobile, lap-top computer
located within the Wireless ISP's transmission area; that
is, a user can travel in a car, bus, train, etc., within the
Wireless ISP's transmission area and maintain constant
Internet access. The Company believes that businesses,
particularly service businesses, once made aware of the
Wireless Internet technology, will readily subscribe to the
Company's Wireless ISP service, although no assurance can be
made in this regard.
During the second quarter of 1997, the Wireless Internet
technology to be employed by the Company will have been
developed so as to allow the user's connection to be the
equivalent of a traditional ISDN telephone line. This type
of connection permits much more efficient access to the
Internet than does a traditional (non-ISDN) telephone line.
The Company believes its Wireless ISP service will be
extremely competitive in its markets. However, there is no
assurance that such will be the case, inasmuch as the
Wireless ISP is a new technology and the Company has
conducted no formal market research in any of its proposed
Wireless ISP markets. (See "Business Strategy" hereunder).
Business Strategy
General. It is the Company's intention to develop its
Dallas Wireless ISP as quickly as possible. Assuming
funding is available, of which there is no assurance, the
Company intends to commit $200,000 to this end. Should the
Company be successful in obtaining bank financing, the
Company intends to begin to develop its Dallas Wireless ISP
as quickly as possible, a goal of commencement of customer
solicitation during the second quarter of 1997. Assuming
such financing is available, of which there is no assurance,
the Company intends to begin to develop its Houston Wireless
ISP as soon as its Dallas Wireless ISP's monthly revenues
exceed its monthly expenditures. No prediction can be made
with respect to when the Company's Dallas Wireless ISP will
begin to generate positive cash flow. There is no assurance
that the Company will successfully exploit any of its
Wireless ISP markets. (See "Competition" hereunder). The
Company's Baton Rouge, Louisiana, Wireless ISP has not yet
begun to solicit customers; thus, no determination of
consumer acceptance can yet be made. However, another
Wireless ISP in Monroe, Louisiana, utilizing the same
Wireless Internet Access System as the Company, reports that
consumer acceptance appears to be excellent. There is no
assurance that the Company will experience similar results.
Marketing. In marketing its Wireless ISP services, the
Company will emphasize the superior connection to the
Internet offered by its equipment, the low price relative to
the quality of the Internet connection, the mobility of the
Internet connection and the ability to gain access to the
Internet without dealing with the local telephone company.
There is no assurance that this method of marketing will be
successful.
Competition
Traditional (telephone-line dependent) Internet Service
Providers are currently engaged in severe competition for
market share, particularly in the larger markets of the U.S.
It can be expected that many competitors will possess far
greater resources, financial and otherwise, than does the
Company. There is no assurance that the Company will be
able to compete successfully in any of its Wireless ISP
markets. (See "Risk Factors Concerning Wireless Internet -
Competition" under "Risk Factors").
Company Employees
The Company currently has no salaried employees. However,
the Company's officers are performing all required business
and administrative functions without pay. Should the
Company be successful in securing funding, it is expected
that the Company would employ approximately 25 persons by
the close of 1997. The industries in which the Company
operates require a high level of expertise in many
positions. The Company does not anticipate any difficulty
in retaining necessary personnel.
Company Properties
The Company leases approximately 1,200 square feet for its
executive offices in Baton Rouge, Louisiana, for a monthly
rental of $1,600. The Company expects to lease additional
office space, as well as necessary transmitter space, as it
launches each wireless cable system, each community
television station and Wireless ISP.
MANAGEMENT
Directors and Officers
The following table sets forth the officers and directors of
the Company as of the date of this Prospectus.
Name Age Position(s)
David M. Loflin(1) 39 President and Director
Waddell D. Loflin (1) 47 Vice President, Secretary
and Director
Richard N. Gill 39 Director
Ross S. Bravata 38 Director
Michael Cohn 39 Director
- ------------
(1) David M. Loflin and Waddell D. Loflin are brothers.
The current officers and directors of the Company serve
until the next annual meeting or until their respective
successors are elected and qualified. All officers serve at
the discretion of the Board of Directors. The family
relationships between the Company's officers and directors
are noted in the table above. Certain information regarding
the backgrounds of each of the officers and directors of the
Company is set forth below.
David M. Loflin, President and Director of the Company,
has, for more than the past five years, owned and operated
Gulf Atlantic Communications, Inc. ("Gulf-Atlantic"), a
Baton Rouge, Louisiana-based wireless technology firm
specializing in development of wireless cable systems and
broadcast television stations. Gulf Atlantic has designed,
constructed and operated two wireless cable systems: (1)
Baton Rouge, Louisiana, and (2) Selma, Alabama. Mr. Loflin
developed and currently operates one television station,
WTVK-TV11, Inc. (a Warner Brothers Network affiliate),
Channel 11 in Baton Rouge, Louisiana. For over ten years,
Mr. Loflin has served as a consultant for Wireless One, one
of the largest wireless communications firms in the United
States. Mr. Loflin is a member of the Wireless Cable
Association International and the Community Broadcasters
Association.
Waddell D. Loflin, Vice President, Secretary and Director
of the Company, has, for more than the past five years,
served as Vice President of Operations and Treasurer of Gulf
Atlantic Communications, Inc. and WTVK-TV11, Inc., both in
Baton Rouge, Louisiana. In addition, Mr. Loflin serves as
Production Manager and Film Director for WTVK-TV11, Inc.
Mr. Loflin served as General Manager for Baton Rouge
Television Company, Baton Rouge, Louisiana, a wireless cable
system, where he directed the development and launch of such
wireless cable system. Also, Mr. Loflin has devoted over
five years to demographic research relating to the wireless
cable industry. Mr. Loflin is a member of the Wireless
Cable Association International and the Community
Broadcasters Association. Mr. Loflin holds a B.A. degree in
Social Sciences from Oglethorpe University, Atlanta,
Georgia.
Richard N. Gill, Director of the Company, has, for more
than the past five years, served as Chairman of the Board,
President and General Manager of Campti-Pleasant Hill
Telephone Company, Inc., a Pleasant Hill, Louisiana-based
independent telecommunications company involved in the
cellular telephone service industry, the wireless cable
industry and the Internet service provider industry. Mr.
Gill currently serves on the Board of Directors of Artcrete,
Inc., and is on the Advisory Board of Peoples State Bank,
Pleasant Hill, Louisiana. Mr. Gill received a degree from
the University of Southwestern Louisiana, Lafayette,
Louisiana, where he currently serves as a member of the
Industry Telecommunication Advisory Committee for the
Electrical Engineering Department. Mr. Gill is a
past-Chairman and current member of the Louisiana Telephone
Association. Mr. Gill is also a member of the United States
Telephone Association and the National Telephone Cooperative
Association.
Ross S. Bravata, Director of the Company, has, since 1981,
worked for Novartis (formerly Ciba Corporation), in various
positions, and currently serves as a Senior Control Systems
Technician. In such capacity, Mr. Bravata supervises the
service and maintenance of electronic instrumentation.
Since 1988, Mr. Bravata has served as a director and
principal financial officer of CG Federal Credit Union,
Baton Rouge, Louisiana. Also, Mr. Bravata has, since its
inception in 1994, served as a director of Trinity's
Restaurant, Inc. in Baton Rouge, Louisiana.
Michael Cohn, Director of the Company, has, for 20 years,
owned and operated Arrow Pest Control, Inc., Baton Rouge,
Louisiana. In addition, Mr. Cohn owns Arrow Pest Control of
New Orleans, Wilson and Sons Exterminating in Mobile,
Alabama, and Premier Termite and Pest Control in Florida.
Executive Committee
The Board of Directors of the Company has created an
Executive Committee to facilitate Company management between
regularly scheduled and special meetings of the full Board
of Directors. David M. Loflin, Waddell D. Loflin and Ross
S. Bravata comprise the Executive Committee of the Board of
Directors. The Company's Bylaws (Section 5.1) provide that
the Executive Committee has the authority to exercise all
powers of the Board of Directors, except the power to
declare dividends, issue stock, recommend to shareholders
any matter requiring shareholder approval, change the
membership of any committee, fill the vacancies therein or
discharge any committee member. The Executive Committee has
taken action by unanimous written consent in lieu of a
meeting once, since its creation.
Executive Compensation
None of the Company's officers is expected to receive any
cash, or other, compensation during Fiscal 97. Further, no
Company officer will begin to receive cash compensation
until such time as the payment of such compensation would
not adversely affect the Company's operations and proposed
development and expansion. No prediction can be made as to
when cash compensation will begin to be paid to the
Company's officers. It is expected that Mr. David M.
Loflin, the Company's President, will be paid an annual
salary of $120,000, at such time as the Company possesses
adequate funds. Any other cash compensation paid to Company
officers will be determined by the Board of Directors.
Indemnification of Directors and Officers
The Company currently is seeking officer and director
liability insurance, though none has been obtained as of the
date of this Prospectus.
Article X of the Articles of Incorporation of the Company
provides that no director or officer of the Company shall be
personally liable to the Company or its shareholders for
damages for breach of fiduciary duty as a director officer;
provided, however, that such provision shall not eliminate
or limit the liability of a director or officer for (1) acts
or omissions which involve intentional misconduct, fraud or
a knowing violation of law or (2) the payment of dividends
in violation of law. Any repeal or modification of Article
X shall be prospective only and shall not adversely affect
any right or protection of a director or officer of the
Company existing at the time of such repeal or modification
for any breach covered by Article X which occurred prior to
any such repeal or modification. The effect of Article X of
the Company's Articles of Incorporation is that Company
directors and officers will experience no monetary loss for
damages arising out of actions taken (or not taken) in such
capacities, except for damages arising out of intentional
misconduct, fraud or a knowing violation of law, or the
payment of dividends in violation of law.
As permitted by Nevada law, the Company's Bylaws provide
that the Company will indemnify its directors and officers
against expense and liabilities they incur to defend, settle
or satisfy any civil, including any action alleging
negligence, or criminal action brought against them on
account of their being or having been Company directors or
officers unless, in any such action, they are judged to have
acted with gross negligence or willful misconduct. Insofar
as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to
directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been
informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
CERTAIN TRANSACTIONS
Founders
In November 1996, the Company's officers purchased a total
of 1,800,000 shares of Company Common Stock for cash at $.10
per share, a total consideration of $1,800. Specifically,
David M. Loflin, President and a director of the Company,
purchased 1,600,000 shares and Waddell D. Loflin, Vice
President, Secretary and a director of the Company,
purchased 200,000 shares of Company Common Stock.
Joint Venture
In January 1997, the Company entered into a joint venture,
known as "Web One Wireless I.S.P. - Baton Rouge, J.V." (the
Joint Venture), with Web One, Inc. (Web One), a Louisiana
corporation owned by David M. Loflin (50%) and Ross S.
Bravata (50%), whereby the Joint Venture will operate as a
Wireless Internet Service Provider (ISP) in Baton Rouge,
Louisiana. The Joint Venture Agreement by which the Joint
Venture was formed requires that the Company and Web One
each contributed $5,000 to the capital of the Joint Venture.
As of the date of this Prospectus, the Company has only
satisfied $2,500 of its required capital contribution. The
Company will be unable to complete its capital contribution
obligation until such time as it has secured financing. No
prediction in this regard can be made. Nevertheless, Web
One has advised the Company that it will continue to make
allocations in accord with the provisions of the Joint
Venture Agreement. Since the formation of the Joint
Venture, each of Messrs. Loflin and Bravata has loaned a
total of $7,500 to the Joint Venture, which loans bear
interest at 8% per annum and are due on demand. Messrs.
Loflin and Bravata have advised the Joint Venture that they
have no intention of demanding payment of such loans for the
foreseeable future. It is expected that each of Messrs.
Loflin and Bravata will make similar loans to the Joint
Venture during the next six months, up to an additional
$7,500. However, there is no guaranty that Messrs. Loflin
and Bravata will make any such additional loans. Should
such additional loans not be made, it can be expected that
the Joint Venture's ability to achieve successful operations
would be severely impaired.
Under the Joint Venture Agreement, all net income and net
losses from Joint Venture operations shall be allocated 50%
to the Company, 50% to Web One; all net gains and net losses
of the Joint Venture in connection with the licensing or
sale of assets shall be allocated 50% to the Company, 50% to
Web One; and all net gains and net losses of the Joint
Venture in connection with the dissolution and termination
of the Joint Venture shall be allocated 50% to the Company,
50% to Web One. Cash distributions may, in the discretion
of Web One, as Managing Venturer, be made, on a quarterly
basis, 50% to the Company, 50% to Web One; provide, however,
that, upon the dissolution and termination of the Joint
Venture, cash distributions shall be made, first, to repay
any unpaid loans, including accrued and unpaid interest,
made by the Company or Web One to the Joint Venture, and,
next, 50% to the Company, 50% to Web One.
Web One, as Managing Venturer of the Joint Venture, has
exclusive and complete discretion in the management and
control of the Joint Venture; provided, however, that Web
One, as Managing Venturer, may not, without the consent of
the Company, do any act in contravention of the Joint
Venture Agreement, do any act which would make it impossible
to carry on the ordinary business of the Joint Venture,
confess a judgment against the Joint Venture, possess Joint
Venture property, or assign any rights in specific Joint
Venture property for other than a Joint Venture purpose and
change or reorganize the Joint Venture into any other legal
form.
The Joint Venture Agreement provides that Web One, as
Managing Venturer of the Joint Venture, will not be liable,
responsible or accountable in damages or otherwise to the
Company for any acts performed by it, or for its failure to
act, in good faith and within the scope of the Joint Venture
Agreement, and not attributable to gross negligence,
malfeasance, fraud, breach of fiduciary duty or breach of
any express warranty or representation contained in the
Joint Venture Agreement; and the Joint Venture, but not the
Company, shall indemnify and hold harmless Web One, as
Managing Venturer, from any loss, damage, liability, cost or
expense arising out of any act or failure to act by it, if
such act or failure to act is in good faith, within the
scope of the Joint Venture Agreement, and is not
attributable to gross negligence, malfeasance, fraud, breach
of fiduciary duty or breach of express warranty or
representation contained in the Joint Venture Agreement.
The Joint Venture shall be dissolved and its business wound
up, upon the earliest to occur of : (1) December 31, 2021;
(2) the written consent of the Company and Web One; (3) the
bankruptcy or insolvency of Web One; or (4) the sale of all
or substantially all of the Joint Venture's assets.
Web One serves as Managing Venturer of the Joint Venture
pursuant to a Joint Venture Management Agreement. In
consideration of the services to be rendered by Web One
pursuant to the Joint Venture Management Agreement, Web One
shall receive a management fee of $3,000 per month;
provided, however, that the management fee shall not begin
to be paid (and none will accrue) until the calendar month
immediately following the calendar month for which the Joint
Venture's revenues exceed cash expenses by an amount in
excess of $3,000. The Joint Venture has not yet paid Web
One any management fees, nor have any management fees
accrued. The Joint Venture Management Agreement is for an
initial term of five years and shall renew automatically for
an additional five-year term, unless the Joint Venture
elects to the contrary. Also, Web One may terminate the
Joint Venture Management Agreement at any time, upon 60-days' written notice.
Notwithstanding the foregoing, the Joint Venture may terminate the Joint
Venture Management Agreement at any time for just cause, including Web
One's failure to implement lawful policies or directions of the
Joint Venture, conduct of Web One that results in a material
adverse effect on the Joint Venture, Web One's intentionally
causing damage to any property of the Joint Venture and any
act of Web One, or one of its agents, involving personal
dishonesty or criminal conduct against the Joint Venture.
The Joint Venture Management Agreement may not be assigned
by Web One, without the consent of the Joint Venture.
The effect of the provisions of the Joint Venture Agreement
and the Joint Venture Management Agreement is that the
Company is dependent upon the efforts of Web One for the
success of the Joint Venture. There is no assurance that
Web One will operate the Joint Venture in a successful
manner.
The Company has a written option to acquire all of the
outstanding capital stock of Web One at any time on or
before August 1, 1998. If the option to acquire Web One is
exercised by the Company, the Company, at its sole option,
may elect to utilize cash or shares of its Common Stock in
payment for the stock of Web One. The value of the stock of
Web One is to be established by an independent appraiser.
Should the Company elect to utilize shares of its Common
Stock with which to acquire the stock of Web One, the per
share value of the Company's Common Stock shall be equal to
the average closing bid price of the Common Stock for the
ten trading days immediately prior to the closing of such
acquisition, or, should no public market for the Common
Stock exist, the per share value of the Common Stock shall
be established by an independent appraiser.
Loans by Officers
In October 1996, David M. Loflin loaned, on two separate
occasions, a total of $40,000 to MCTV, which loan is
evidenced by a promissory note, bears interest at eight
percent per annum and is payable on demand. In November
1996, Mr. Loflin loaned the sum of $20,000 to MCTV, which
loan is evidenced by a promissory note, bears interest at
eight percent per annum and is payable on demand.
In January 1997, Mr. Loflin loaned the sum of $8,000 to the
Company, which loan is evidenced by a promissory note, bears
interest at eight percent per annum and is payable on
demand. $5,000 of such loan has been repaid.
In June 1997, Mr. Loflin loaned the sum of $13,500 to the
Company, which loan is evidenced by a promissory note, bears
interest at eight percent per annum and is payable on
demand.
Mr. Loflin has advised the Company that he does not intend
to demand payment of such loans until such time as repayment
would not adversely affect the financial position of the
Company.
Subscription Agreements
Effective December 20, 1996, the Company entered into a
Subscription Agreement with its President, David M. Loflin,
whereby the Company issued 1,578,512 shares of Common Stock
to Mr. Loflin in exchange for assignments of licenses and
leases of licenses of television channels and wireless cable
television channels and options to acquire such assets, as
follows:
Community TV Market Channel
- ------------------- -------
Monroe/Rayville, Louisiana 26
Natchitoches, Louisiana 38
Wireless Cable Market Channels
- --------------------- --------------------
Port Angeles, Washington H1-2-3
Astoria, Oregon H2-3
Sand Point, Utah B1-2-3; C1-2-3
The Dalles, Oregon B1-2-3; C1-2-3
Fallon, Nevada E1-2-3-4; H3
The assets acquired by the Company under such Subscription
Agreement were valued at $1,826,873, which value was
determined pursuant to a market report and appraisal as of
December 20, 1996 (the "Appraisal"), delivered to the
Company by Broadcast Services International, Inc.,
Sacramento, California. (See "Appraisal" hereunder for a
full discussion of the Appraisal). Mr. Loflin's total
acquisition costs of the assets underlying such Subscription
Agreement are unknown. Accordingly, the financial
statements of the Company attribute no value to such assets.
See the second paragraph under "Appraisal" hereinbelow for a
discussion of Mr. Loflin's acquisition costs of the assets
vis-a-vis the appraised value of such assets.
Effective December 20, 1996, the Company entered into a
Subscription Agreement with its Vice President, Waddell D.
Loflin, whereby the Company issued 104,249 shares of Common
Stock to Mr. Loflin in exchange for an assignment of the
license of television channel 36 in Bainbridge, Georgia.
The assets acquired by the Company under such Subscription
Agreement were valued at $120,652, which value was
determined pursuant to the Appraisal. Mr. Loflin's
acquisition costs of the assets underlying such Subscription
Agreement are unknown. Accordingly, the financial
statements of the Company attribute no value to such assets.
See the second paragraph under "Appraisal" hereinbelow for a
discussion of Mr. Loflin's acquisition costs of the assets
vis-a-vis the appraised value of such assets.
Reorganizations
Effective December 31, 1996, the Company entered into an
Agreement and Plan of Reorganization (the "WEI
Reorganization") among the Company, Winter Entertainment,
Inc., a Delaware corporation (WEI), and David M. Loflin, as
WEI's sole shareholder, pursuant to which transaction WEI
became a wholly-owned subsidiary of the Company. WEI owns
and operates K13VE Channel 13 in Baton Rouge, Louisiana.
Under the WEI Reorganization, Mr. Loflin received 227,336
shares of Company Common Stock in exchange for his shares of
WEI common stock. The shares of WEI common stock acquired
by the Company in the WEI Reorganization were valued at
$263,106, which value was determined pursuant to the
Appraisal. WEI's acquisition costs relating to the rights
to K13VE Channel 13 were $6,750. In addition, WEI has
capitalized a total of $10,587 in exploiting such channel
rights, including station construction costs. See the
second paragraph under "Appraisal" hereinbelow for a
discussion of WEI's acquisition costs relating to K13VE
Channel 13 vis-a-vis the appraised value thereof.
Effective December 31, 1996, the Company entered into an
Agreement and Plan of Reorganization (the "MCTV
Reorganization") among the Company, Missouri Cable TV Corp.,
a Louisiana corporation (MCTV), and the shareholders of
MCTV, pursuant to which transaction MCTV became a
wholly-owned subsidiary of the Company. MCTV owns licenses
and leases of licenses of wireless cable television channels
in Poplar Bluff, Missouri, which system is ready for
broadcast operations, and Lebanon, Missouri, which system
has yet to be developed. Under the MCTV Reorganization,
David M. Loflin, as a shareholder of MCTV, received
1,179,389 shares of Company Common Stock in exchange for his
shares of MCTV common stock. The shares of MCTV common
stock acquired by the Company from Mr. Loflin in the MCTV
Reorganization were valued at $1,364,553. Also under the
MCTV Reorganization, Ross S. Bravata, a director of the
Company, received, as a shareholder of MCTV, 42,887 shares
of Company Common Stock in exchange for his shares of MCTV
common stock. The shares of MCTV common stock acquired by
the Company from Mr. Bravata were valued at $49,620. In
addition, Michael Cohn, a director of the Company,
received, as a shareholder of MCTV, 53,608 shares of Company
Common Stock in exchange for his shares of MCTV common
stock. The shares of MCTV common stock acquired by the
Company from Mr. Cohn were valued at $62,024. The value of
the shares of MCTV common stock acquired by the Company from
Messrs. Loflin, Bravata and Cohn under the MCTV
Reorganization was determined pursuant to the Appraisal.
MCTV acquired substantially all of its assets from Mr. David
Loflin, whose acquisition costs of such assets were
$179,611. The other shareholders of MCTV received their
shares of MCTV common stock for nominal consideration.
Since acquiring its assets from Mr. Loflin, MCTV has
capitalized an additional $22,722 in exploiting such assets.
See the second paragraph under "Appraisal" hereinbelow for a
discussion of Mr. Loflin's acquisition costs relating to
MCTV's assets vis-a-vis the appraised value thereof.
Stock Purchase
In March 1997, one of the Company's directors, Michael Cohn,
purchased 20,000 shares of Company Common Stock for cash in
the amount of $50,000. Mr. Cohn has advised the Company
that he intends to purchase, within 30 days from the date of
this Prospectus, an additional 40,000 shares for cash in the
amount of $100,000. However, there is no assurance that
such investment will be made.
Appraisal
Background. The Appraisal was delivered to the Company by
Broadcast Services International, Inc., a Sacramento,
California-based communications appraisal firm. The report
of BSI was based on 1990 Census Data. With respect to the
wireless cable markets, the engineering studies relied upon
by BSI indicate the number of households within the
broadcast radius using the 1200 MHZ frequency. The 1200 MHZ
frequency was assumed, due to BSI's experience that, given
all of the variables that may be present in a
market-by-market system build-out, the actual benchmark
performance is more truly reflected by using the higher
(1200 MHZ) frequency, such that the signal attenuation is
not over-stated. Valuation formulas for the wireless cable
markets of the Company were based on initial public
offerings within the wireless cable industry during the past
three years. The formulas used in evaluation of the
Company's broadcast channels are based on recent sales and
market evaluation techniques employed by the Community
Broadcasters Association, among others.
Use of Appraisal. At the Company's inception, the
Company's Board of Directors adopted a plan that provided
for the initial capitalization of the Company to be
6,000,000 shares of Common Stock. 1,800,000 of such shares
were sold as founders' stock and the 360,000 shares which
are the subject of this Prospectus were sold to ECA. The
balance of such shares, 3,840,000 shares, were to be
utilized to acquire the Company's assets, which assets were
acquired pursuant to the Subscription Agreements with Mr.
David Loflin and Mr. Waddell Loflin, the WEI Reorganization
and the MCTV Reorganization. The Board of Directors
utilized the Appraisal as a means to allocate the 3,840,000
shares among the assets underlying the referenced
Subscription Agreements, the WEI Reorganization and the MCTV
Reorganization, as follows:
Appraised Shares of
Value Common Historical
of Assets Stock Cost
Transaction Acquired Issued of Assets
- ----------- ---------- --------- ----------
Subscription
Agreement
with David M.
Loflin $1,826,873 1,578,512 Unknown
Subscription
Agreement
with Waddell
D. Loflin 120,652 104,249 Unknown
WEI Reorganization 263,106 227,336 $ 17,337
MCTV Reorganization 2,233,555 1,929,903 $202,333
- ----------- ---------- --------- ----------
Totals $4,444,186 3,840,000 $219,670
The apparent $1.157 per share value was determined by
dividing the 3,840,000 shares of Company Common Stock
allocated by the Board of Directors for asset acquisition
into the $4,444,186 total appraised value of the assets
acquired. The Board of Directors utilized this apparent per
share value for corporate purposes, that is, the
determination of consideration received for the issuance of
shares of Common Stock. However, the independent appraiser
did not value the shares of Company Common Stock issued in
consideration of the assets acquired. Rather, the
independent appraiser valued only the assets acquired by the
Company in the various transactions. The $1.157 per share
figure was utilized by the Board of Directors primarily as a
means of allocating the 3,840,000 shares among the four
asset acquisition transactions consummated in completing its
plan for the initial capitalization of the Company. Thus,
the $1.157 figure, while utilized in two ways by the Board
of Directors, was determined arbitrarily by the Board of
Directors and is not based on any accounting or other
financial criteria.
The appraised value of the assets described above bears no
relationship to the costs of such assets to the affiliates
from whom they were acquired. Prospective purchasers of
Company Common Stock should note that it is possible that
the Company would be unable to realize any of such asset's
appraised value in a sale transaction.
PRINCIPAL SHAREHOLDERS
On the date of this Prospectus, there were 6,170,000 shares
of Company Common Stock issued and outstanding. The
following table sets forth certain information regarding the
beneficial ownership of Company Common Stock as of the date
of this Prospectus, and after giving effect to the dividend
distribution of Company Common Stock to the shareholders of
ECA, by (i) persons known to the Company to be beneficial
owners of more than 5% of the Common Stock of the Company,
(ii) each of the Company's officers and directors and (iii)
the officers and directors of the Company as a group.
Name and Shares Per- Shares Per-
Address of Owned cent Owned cent
Beneficial Owner Beneficially Owned Beneficially Owned
- ---------------- ------------ ----- ------------ -----
David M. Loflin 4,585,237 74.31 4,585,237 74.31
8748 Quarters
Lake Rd.
Baton Rouge,
LA 70809
Waddell D.
Loflin 304,249 4.93 304,249 4.93
8748 Quarters
Lake Rd.
Baton Rouge,
LA 70809
Entertainment
Corporation
of America 360,000 5.83 --- ---
727 Iberville
New Orleans,
LA 70130
Ross S. Bravata 42,887 * 42,887 *
8748 Quarters
Lake Road
Baton Rouge,
LA 70809
Michael Cohn 73,608 1.19 73,608 1.19
8748 Quarters
Lake Road
Baton Rouge,
LA 70809
All officers and
directors as a
group (5 persons) 5,005,981 81.13 5,005,981 81.13
- ------------
* Less than 1%.
(1) Based on 6,170,000 shares outstanding and prior to the
dividend distribution described herein.
(2) Based on 6,170,000 shares outstanding and after giving
effect to the dividend distribution described herein.
FEDERAL INCOME TAXES
The summary discussion below is based on the Internal
Revenue Code of 1986, as amended (the "Code"), various
regulations promulgated pursuant to the Code,
interpretations published by the Internal Revenue Service
(the "Service") and court decisions.
This section was prepared by the law firm of Newlan & Newlan
("Counsel") and reflects the opinions of such firm regarding
the material federal income tax consequences arising from
the distribution of the Company's Common Stock as described
in this Prospectus. All opinions of Counsel rely upon the
accuracy of the information submitted and the
representations made by ECA. Such opinion is not binding on
the Service or on the courts. Accordingly, no assurance can
be given that the Service will agree with the opinions
expressed hereinbelow.
ECA will report the distribution of the Company's Common
Stock as a distribution subject to the provisions of Section
301 of the Internal Revenue Code of 1986, as amended (the
"Code"). ECA will recognize gain as a result of the
distribution to the extent the fair market value of the
Common Stock exceeds the adjusted basis of such Common Stock
in the hands of ECA. ECA can recognize no loss as a result
of the distribution. The fiscal year of ECA ends July 31
and the Company's fiscal year ends December 31.
Holders of ECA common stock will be taxed on the dividend
distribution as ordinary income to the extent of ECA's
current and accumulated earnings and profits, computed as of
the close of the tax year during which the distribution
occurs. A portion of the distribution, if any, which
exceeds ECA's current and accumulated earnings and profits
will reduce a shareholder's adjusted basis in his ECA common
stock, but not below zero. To the extent of any such
reduction in basis, the distribution will not be currently
taxable. If the amount of the distribution would have the
effect of reducing a shareholder's adjusted basis in his ECA
common stock below zero, the excess will be treated as a
gain from the sale or exchange of property. If the ECA
common stock is a capital asset in the hands of the
shareholder, the gain will be a capital gain, either
long-term or short-term, depending on whether the
shareholder has held his ECA common stock for more than one
year.
Non-corporate shareholders will be treated as having
received a distribution equal in value to the fair market
value, at the date of the distribution, of the Common Stock
they receive. Corporate shareholders will generally be
treated as having received a distribution in an amount equal
to the lesser of (I) ECA's adjusted basis in the Common
Stock immediately prior to the distribution, increased by
the amount of any gain recognized by ECA on the
distribution, or (ii) the fair market value of the Common
Stock on the date of the distribution. However, corporate
shareholders may be entitled to the dividends-received
deduction, which would generally allow them a deduction,
subject to certain limitations, from their gross income of
80% of the amount of the dividend.
A non-corporate shareholder's tax basis in the Common Stock
will equal the fair market value of the Common Stock on the
date of the distribution and a corporate shareholder's tax
basis in the Common Stock will generally equal the lesser of
the fair market value of the Common Stock on the date of the
distribution or the adjusted basis of the Common Stock in
the hands of ECA immediately prior to the distribution,
increased in the amount of any gain recognized to ECA on the
distribution.
The holding period of a corporate shareholder of ECA
attributable to the Common Stock of the Company will
commence on the date of the distribution. If gain is
recognized on the distribution by ECA, as will be the case
if the fair market value of the Common Stock distributed
exceeds its adjusted basis, a corporate shareholder's
holding period will begin on the date of the distribution.
If gain is not recognized by ECA on the distribution and the
basis of the Common Stock in the hands of the corporate
shareholder is determined under Code Section 301(d)(2)(B),
then (except for gain from certain sales or exchanges of
stock in foreign corporations) such corporate shareholder
will not be treated as holding the Common Stock distributed
during any period before the date on which such corporate
shareholder's holding period in its Common Stock began.
In the absence of a trading market for the Common Stock,
"fair market value" is to be calculated in accordance with
Internal Revenue Service Revenue Ruling 59-60,
1959-1C.B.237, which sets forth certain factors for such a
determination (for example, the nature of the business, its
history, the general economic outlook, book value of the
Company, earnings capacity, dividend paying capacity,
existence of good will and recent sales of Company shares).
Neither ECA nor the Company will advise the shareholders
what the "fair market value" of the Common Stock will be on
the distribution date. Each shareholder must make his own
determination. ECA intends to send to shareholders and the
Service, however, IRS Form 1099 DIV which will indicate a
value of the dividend distribution equal to the fair market
value of the Common Stock on the date of the dividend
distribution, in the opinion of ECA. Any portion of the
distribution which has the effect of reducing a
shareholder's adjusted basis below zero will be treated as a
gain from the sale or exchange of property.
The preceding discussion is a general summary of current
federal income tax consequences of the dividend distribution
as presently interpreted, and a shareholder's particular tax
consequences may vary depending on his individual
circumstances. Shareholders are encouraged to consult their
own tax counsel concerning the treatment of the distribution
on their income tax returns.
LITIGATION
The Company is not currently involved in any legal
proceeding.
DESCRIPTION OF SECURITIES
Authorized Capital Stock
The authorized capital stock of the Company consists of One
Hundred Million (100,000,000) shares of Common Stock, $.0001
par value per share. As of the date of this Prospectus,
there were 6,170,000 shares of Company Common Stock
outstanding.
Description of Common Stock
Each share of Common Stock is entitled to one (1) vote at
all meetings of shareholders. All shares of Common Stock
are equal to each other with respect to liquidation rights
and dividend rights. There are no preemptive rights to
purchase any additional shares of Common Stock. The
Articles of Incorporation of the Company prohibit cumulative
voting in the election of directors. The absence of
cumulative voting means that holders of more than 50% of the
shares voting for the election of directors can elect all
directors if they choose to do so. In such event, the
holders of the remaining shares of Common Stock will not be
entitled to elect any director. A majority of the shares
entitled to vote, represented in person or by proxy,
constitutes a quorum at a meeting of shareholders. In the
event of liquidation, dissolution or winding up of the
Company, holders of shares of Common Stock will be entitled
to receive, on a pro rata basis, all assets of the Company
remaining after satisfaction of all liabilities.
Transfer Agent and Registrar
The Company has retained Securities Transfer Corporation,
Dallas, Texas, as transfer agent and registrar for the
Common Stock of the Company.
LEGAL MATTERS
The law firm of Newlan & Newlan, Dallas, Texas, has acted as
legal counsel for the Company in connection with the
Registration Statement of which this Prospectus forms a part
and related matters. As of the date of this Prospectus,
Newlan & Newlan owned 150,000 shares of Company Common
Stock.
EXPERTS
The financial statements of the Company included in this
Prospectus and Registration Statement have been audited by
Weaver and Tidwell, L.L.P., independent auditor, for the
period indicated in its report thereon which appear
elsewhere herein and in the Registration Statement. The
financial statements audited by Weaver and Tidwell, L.L.P.,
have been included in reliance on its reports given as its
authority as an expert in accounting and auditing.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Director's and Stockholders
Media Entertainment, Inc.
We have audited the accompanying consolidated balance
sheet of Media Entertainment Inc., and subsidiaries (a
development stage company) as of December 31, 1996, 1995,
and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the
period from inception (December 28, 1995) to December 31,
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 audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence
supporting the amounts and disclosures in the
consolidated financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall consolidated financial statement
presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material
respects, the consolidated financial position of Media
Entertainment, Inc. and subsidiaries as of December 31,
1996, and the consolidated results of their operations
and their cash flows for the period then ended in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have
been prepared assuming that the Company will continue
as a going concern. As discussed in Note 1 to the
financial statements, the Company is in its development
stage and has no operating revenue. In addition, the
Company has limited capital resources and a loss from
operations since inception, all of which raise substantial
doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also
discussed in Note 1. The financial statements do not
include any adjustments that might result from the
outcome of this uncertainty.
WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
April 3, 1997
2875
F-2
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEET
December 31, December 31, March 31,
1995 1996 1997
(unaudited)
------------ ------------ -----------
ASSETS
CURRENT ASSETS
Cash $ 0 $ 14,502 $ 36,533
Accounts
receivable 0 310 225
Prepaid expenses 0 0 910
Total current
assets 0 14,812 37,668
PROPERTY AND
EQUIPMENT,
net of accumulated
depreciation of
$0, $706 and $882,
respectively 10,587 196,214 197,796
INVESTMENT IN
JOINT VENTURE 0 0 2,500
INTANGIBLES
Organization
costs,
net of accumu-
lated amortiza-
tion of $0, $19
and $47,
respectively 0 550 522
Licenses and
rights to leases
of licenses, net
of accumulated
amortization of
$0, $725 and
$1,105,
respectively 6,750 22,024 26,645
6,750 22,574 27,167
Total
assets $17,337 $233,600 $265,131
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable
to stockholder $ 0 $ 50,000 $ 53,000
Accounts payable 0 0 532
Accounts pay-
able - affiliate 0 10,069 10,069
Accrued interest 0 820 1,180
Total current
liabilities 0 60,889 64,781
STOCKHOLDERS' EQUITY
Common stock,
$.0001 par value,
100,000,000
shares author-
ized, 227,336,
6,000,000 and
6,170,000 shares
issued and
outstanding,
respectively 23 600 617
Additional paid-
in capital 17,314 198,508 623,491
Deficit accumulated
during the devel-
opment stage 0 ( 24,237) ( 110,398)
Subscriptions
receivable 0 ( 2,160) ( 860)
Deferred
compensation 0 0 ( 312,500)
17,337 172,711 200,350
TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY $17,337 $233,600 $265,131
The Notes to Consolidated Financial Statements are
an integral part of this statement.
F-3
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
Cumulative
Period Since
From Three Inception
Inception Months (December 28,
(December Ended 1995) to
28, 1995 to March 31, March 31,
December 31, 1997 1997
1996 (unaudited) (unaudited)
------------ ----------- -------------
Revenue $ 3,337 $ 224 $ 3,561
Expenses
Depreciation
and amorti-
zation 1,450 584 2,034
Professional fees 15,238 74,181 89,419
Rent 1,820 3,826 5,646
Salary 4,691 6,756 11,447
Other 4,375 1,038 5,413
27,574 86,385 113,959
Net loss ($24,237) ($86,161) ($110,398)
Loss per
common share ($0.04) ($0.01) ($0.30)
Weighted average
number of shares
outstanding 631,622 6,103,666 366,980
The Notes to Consolidated Financial Statements are
an integral part of this statement.
F-4
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
PERIOD FROM INCEPTION (December 28, 1995)
TO DECEMBER 31, 1996 AND
THREE MONTHS ENDED MARCH 31, 1997 (unaudited)
Deficit
Accumu-
lated Stock
Addi- During Sub-
tion the scrip- Def-
al Paid Develop- tions erred
Common Stock in Cap- ment Receiv- Compen-
Shares Amount ital Stage able sation
Balance
at in-
ception,
December
28, 1995 0 $ 0 $ 0 $ 0 $ 0 $ 0
Issuance
of
common
stock
for
assets 227,336 23 17,314 0 0 0
Net
income
(loss) 0 0 0 0 0 0
Balance,
Decem-
ber 31,
1995 227,336 23 17,314 0 0 0
Issuance
of
common
stock
for
as-
sets 1,929,903 193 179,418 0 0 0
Issuance
of
common
stock
for
sub-
scrip-
tion
receiv-
able 2,160,000 216 1,944 0 ( 2,160) 0
Issuance
of
common
stock
for
assign-
ment of
licenses
and
leases 1,682,761 168 ( 168) 0 0 0
Net loss 0 0 0 (24,237) 0 0
Balance,
Decem-
ber 31,
1996 6,000,000 600 198,508 (24,237) ( 2,160) 0
Unaud-
ited
Issuance
of
common
stock
for
future
services 150,000 15 374,985 0 0 (375,000)
Payment
on
subscrip-
tion re-
ceivable 0 0 0 0 1,300 0
Issuance
of
common
stock
for cash 20,000 2 49,998 0 0 0
Recog-
nition
of ser-
vices
per-
formed
for
stock 0 0 0 0 0 62,500
Net loss 0 0 0 (86,161) 0 0
Balance,
March 31,
1997 6,170,000 $617 $623,491 ($110,398) ($860) ($312,500)
The Notes to Consolidated Financial Statements are
an integral part of this statement.
F-5
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
Cumulative
Period Since
From Three Inception
Inception Months (December
December Ended 28, 1995) to
28, 1995) March 31, March 31,
to Decem- 1997 1997
ber 31,1996(unaudited) (unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss ($24,237) ($86,161) ($110,398)
Adjustment to
reconcile net
loss to net cash
used in operating
activities
Depreciation 706 176 882
Amortization 745 407 1,152
Recognition of
services performed
for stock 0 62,500 62,500
Decrease (increase)
in accounts
receivable ( 310) 85 ( 225)
Increase in
prepaids 0 ( 910) ( 910)
Increase in
accounts payable
and accruals 10,889 892 11,781
Net cash used
in operating
activities ( 12,207) ( 23,011) ( 35,218)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of
equipment ( 6,722) ( 1,758) ( 8,480)
Investment in
joint venture 0 ( 2,500) ( 2,500)
Purchase of
organization costs ( 569) 0 ( 569)
Purchase of
licenses and
rights to leases
of licenses ( 16,000) ( 5,000) ( 21,000)
Net cash used
in investing
activities ( 23,291) ( 9,258) ( 32,549)
CASH FLOWS FROM
FINANCING ACTIVITIES
Increase in note
payable to
stockholder 50,000 3,000 53,000
Issuance of
common stock 0 50,000 50,000
Decrease in
subscriptions
receivable 0 1,300 1,300
Net cash
provided by
financing
activities 50,000 54,300 104,300
Net increase
in cash 14,502 22,031 36,533
Cash, beginning
of period 0 14,502 0
Cash, end of
period $14,502 $36,533 $36,533
Noncash investing and financing activities for the year
ended December 31, 1996 include $179,611 of equipment given
as paid-in capital by majority shareholder, subscriptions
receivable of $2,160 for services rendered, and $16,737 in
exchange for common stock to majority shareholder.
Noncash investing and financing activities for the three
months ended March 31, 1997 (unaudited) include 150,000
shares issued for consulting and legal services to be
performed valued at $375,000.
The Notes to Consolidated Financial Statements are
an integral part of this statement.
F-6
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS, ORGANIZATION
AND BASIS OF PRESENTATION
Media Entertainment, Inc., (MEI) was incorporated in the
State of Nevada on November 1, 1996, to operate as a holding
company in the wireless cable television and community (low
power) television industries, as well as other segments of
the communications industry.
Effective December 31, 1996, MEI acquired all of the
outstanding common stock of Winter Entertainment, Inc., a
Delaware corporation incorporated on December 28, 1995
(WEI), and Missouri Cable TV Corp., a Louisiana corporation
incorporated on October 9, 1996 (MCTV). WEI operates a
community television station in Baton Rouge, Louisiana; MCTV
owns wireless cable television channels in Poplar Bluff,
Missouri, which system has been constructed and is ready for
operation, and Lebanon, Missouri, which has yet to be
constructed. The acquisition of WEI and MCTV by Media was
accounted for as a reorganization of companies under common
control. The assets and liabilities acquired were recorded
at historical cost in a manner similar to a pooling of
interests. Therefore, these financial statements include
the operations of MEI and its predecessors from inception of
WEI on December 28, 1995. WEI had no operations or cash
flows for the period ended December 31, 1995. Therefore,
statements of operations and cash flows for the three days
ended December 31, 1995 are not presented.
The financial statements have been prepared on a going
concern basis, which contemplates realization of assets and
liquidation of liabilities in the ordinary course of
business. Since the Company is in the development stage, it
has limited capital resources, insignificant revenue and a
loss from operations since its inception. The
appropriateness of using the going concern basis is
dependent upon the Company's ability to obtain additional
financing or equity capital and, ultimately, to achieve
profitable operations. The uncertainty of these conditions
raises substantial doubt about its ability to continue as a
going concern. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Management plans to raise capital by obtaining financing
and, eventually, through public offerings. Management
intends to use the proceeds from any borrowings to increase
the broadcast signal of WEI's community television station,
to start operation of MCTV's wireless cable channels in
Poplar Bluff, Missouri and to provide working capital. The
Company believes that these actions will enable the Company
to carry out its business plan and ultimately to achieve
profitable operations.
F-7
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include
all the accounts of MEI and its wholly owned subsidiaries,
WEI and MCTV, since inception of WEI. All intercompany
transactions and balances have been eliminated in
consolidation. The consolidated group is referred to as the
"Company".
Broadcast Equipment
Equipment is recorded at cost. Depreciation will be
calculated using a straight-line method over the estimated
useful lives of the assets, ranging from 3 to 15 years.
Cash Equivalents
The Company considers all highly liquid investments with
original maturities of ninety days or less from the date of
purchase to be cash equivalents.
Revenue
Revenue is recognized in the period service are provided.
Use of Estimates
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.
Recently Issued Pronouncements
The FASB has issued SFAS 128, "Earnings Per Share" which
establishes a new standard for computing and presenting
earnings per share (EPS). Under SFAS 128, basic EPS
excludes dilution and is computed by dividing income
available to common shareholders by the weighted-average
number of common shares outstanding for the period. It also
requires dual presentation of basic and diluted EPS for all
entities with complex capital structures. Diluted EPS
reflects the potential dilution that could occur if all
dilutive potential common shares had been issued. The
Company is required to adopt SFAS 128 for periods ending
after December 15, 1997. Earlier adoption is not permitted.
The Company anticipates that there will be no material
impact on implementation of this standard.
F-8
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
continued
Loss Per Common Share
Loss per common share is computed based on the loss for the
period divided by the weighted average number of common
shares outstanding during the period.
Amortization
Organization costs are being amortized on a straight-line
basis over 60 months. Licenses and rights to leases of
licenses will be amortized on a straight-line basis over the
license and lease rights periods expected to be 5 to 15
years.
NOTE 3. ACQUISITIONS
Effective December 31, 1996, the Company acquired WEI and
MCTV by issuing 2,157,239 shares of common stock in
exchange for all the common stock of each company. The
majority stockholder of the Company was also the sole
stockholder of WEI and the majority stockholder of MCTV.
Therefore, the acquisitions have been accounted for at
historical cost in a manner similar to a pooling of
interests. The consolidated statement of operations
includes the Company and its predecessors WEI and MCTV from
inception of WEI.
F-9
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. LICENSES AND RIGHTS TO LEASES OF LICENSES
The Company owns licenses or rights to leases of licenses in
the following wireless cable and community television
markets:
Wireless Cable Market Expiration Date
Poplar Bluff, Missouri October 16, 2006
Lebanon, Missouri October 16, 2006
Port Angeles, Washington December 21, 2003
Astoria, Oregon December 21, 2003
Sand Point, Idaho August 09, 2006
The Dalles, Oregon August 09, 2006
Fallon, Nevada August 09, 2006
Community Television Market
Baton Rouge, Louisiana July 01, 2007
Monroe/Rayville, Louisiana July 01, 2007
Natchitoches, Louisiana July 01, 2007
Bainbridge, Georgia July 01, 2007
Application for renewal of licenses must be filed within a
certain period prior to expiration.
NOTE 5. NOTES PAYABLE STOCKHOLDER
Notes payable to majority December March 31, 1997
stockholder, interest 31, 1996 (unaudited)
accrues at 8%, due on -------- --------------
demand and unsecured $50,000 $53,000
NOTE 6. SUBSEQUENT EVENTS
In January 1997, the Company entered into an agreement with
Web One, Inc. forming Web One Wireless I.S.P. - Baton Rouge,
J.V. (the "Joint Venture"). The Joint Venture was created
to operate as a Wireless Internet Service Provider in Baton
Rouge, Louisiana. The agreement gives the Company the
option to buy all the outstanding capital stock of Web One,
Inc. at any time on or before August 1, 1998. The option
price is to be based on an appraisal of Web One, Inc.
F-10
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. SUBSEQUENT EVENTS - continued
In addition, the Company entered into an agreement with Open
Net, Inc. whereby the Company has an exclusive right of
first refusal to utilize Open Net's wireless internet access
system in several U.S. cities. The Company must pay to Open
Net $50,000 for each such system purchased by the Company.
Since December 31, 1996, the Company has issued 150,000
shares of common stock to prepay legal services. In the
agreement pursuant to which these shares were issued, the
shares were valued at $.40 per share, or $60,000 in the
aggregate. However, for financial reporting purposes, the
shares have been valued at $2.50 per share, or $375,000 in
the aggregate, to approximate the fair value of the shares
on the date issued.
The Company has also sold 20,000 shares of common stock for
$50,000, and has issued options to purchase another 40,000
shares for $100,000.
NOTE 7. JOINT VENTURE (unaudited)
During the three months ended March 31, 1997, the Company
incurred $2,500 in costs relating to the acquisition of the
Joint Venture. As of March 31, 1997, the Joint Venture has
had no operations.
NOTE 8. FINANCIAL INSTRUMENTS
Financial instruments of the Company consist principally of
cash, accounts payable, and notes payable. Recorded values
approximate fair values due to the short maturities of these
instruments.
NOTE 9. INCOME TAXES
Deferred income tax assets and liabilities are computed
annually for differences between financial statement and tax
basis of assets and liabilities that will result in taxable
or deductible amounts in the future based on enacted tax
laws and rates applicable to the period in which the
differences are expected to affect taxable income.
Valuation differences are established when necessary to
reduce deferred tax assets to the amount expected to be
realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during
the period in deferred tax assets and liabilities. At
December 31, 1995, 1996 and March 31, 1997 (unaudited),
there was no current or deferred tax expense.
Deferred tax asset and liability balances are as follows:
December 31, December 31, March 31,
1995 1996 1997
------------ ------------ ---------
Deferred tax asset $ 0 $ 8,241 $ 37,535
Deferred tax
liability 0 0 0
Net deferred tax
asset 0 8,241 37,535
Valuation allowance 0 (8,241) (37,535)
------------ ------------ ---------
0 0 0
The net change in the valuation allowance for the periods
ending December 31, 1996 and March 31, 1997 (unaudited) were
$8,241 and $29,294, respectively. The deferred tax asset is
due to the net operating loss carryover.
The Company has a net operating loss carryover of
approximately $110,000 available to offset future income for
income tax reporting purposes which will ultimately expire
in 2011 is not previously utilized.
F-11<PAGE>
No dealer, salesperson or any other person has been
authorized to give any information or to make any
representations other than those contained in this
Prospectus in connection with the offering described herein,
and, if given or made, such information or representations
must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities
offered hereby in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to doe so or to
anyone to whom it is unlawful to make such offer of
solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances,
create an implication that the information herein is correct
as of any time subsequent to its date.
TABLE OF CONTENTS
Page
Additional Information
Prospectus Summary
The Company
Risk Factors
Use of Proceeds
Information Concerning ECA
Distribution of Securities
of the Company
Dividends
Capitalization
Selected Financial Data
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
Regulation
Business
Management
Certain Transactions
Principal Shareholders
Federal Income Taxes
Litigation
Description of Securities
Legal Matters
Experts
Index to Financial Statements F-1
360,000 Shares
Common Stock
$.0001 par value
Media
Entertainment,
Inc.
-----------------------
PROSPECTUS
-----------------------
___________, 1997<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Estimated expenses payable by the Company in connection with
the registration of Common Stock covered hereby are as
follows:
Registration fee $ 100.00
Underwriter's unaccountable expense allowance 0.00
Printing and engraving expenses 3,000.00 *
Legal fees and expenses 27,500.00
Accounting fees and expenses 7,500.00
Blue Sky fees and expenses
(including legal fees) 0.00
Transfer agent and registrar fees and expenses 5,000.00
Miscellaneous 750.00 *
- --------------- ----------
(* estimate) Total $43,850.00 *
Item 14. Indemnification of Directors and Officers.
Registrant is a Nevada corporation. Section 78.751 of
Nevada Revised Statutes (the "Nevada Act") empowers a
corporation to indemnify its directors and officers and to
purchase insurance with respect to liability arising out of
their capacity as directors and officers. The Nevada Act
further provides that the indemnification permitted
thereunder shall not be deemed exclusive of any other rights
to which the directors and officers may be entitled under
the corporation's bylaws, any agreement, vote of the
shareholders or otherwise.
Section VIII of Registrant's Bylaws, included as Exhibit 3.2
filed herewith, which provides for the indemnification of
directors and officers, is incorporated herein by reference.
Registrant has purchased no insurance for indemnification of
its officers and directors, agents, etc., nor has there been
any specific agreement for indemnification made between
Registrant and any of its officers and directors, or others,
with respect to indemnification for them arising out of
their duties to Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, the Securities Exchange
Act of 1934 or the Rules and Regulations of the Securities
and Exchange Commission thereunder may be permitted under
said indemnification provisions of the law, or otherwise,
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, any such indemnification
is against public policy and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection
with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in the Nevada Act and will be governed by the final
adjudication of such issue.
Item 15. Recent Sales of Unregistered Securities.
1. (a) Securities Sold. On November 1, 1996, a total of
1,800,000 shares of Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were sold to David M. Loflin (1,600,000 shares)
and Waddell D. Loflin (200,000 shares).
(c) Consideration. Such shares of Common Stock were
sold for cash at a price of $.10 per share, or $1,800.00 in
the aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
2. (a) Securities Sold. On November 15, 1996, a total of
360,000 shares of Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were sold to Entertainment Corporation of
America, a Delaware corporation.
(c) Consideration. Such shares of Common Stock were
sold for cash at a price of $.10 per share, or $360.00 in
the aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
3. (a) Securities Sold. On December 20, 1996, 1,578,512
shares of Company Common Stock were issued.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were issued to David M. Loflin.
(c) Consideration. Such shares of Common Stock were
issued in exchange for assignments of licenses and leases of
licenses of wireless cable channels and low power television
stations, pursuant to a Subscription Agreement, at a value
of $1.157 per share, or $1,826,873, in the aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
4. (a) Securities Sold. On December 20, 1996, 104,249
shares of Company Common Stock were issued.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were isssued to Waddell D. Loflin.
(c) Consideration. Such shares of Common Stock were
issued in exchange for an assignment of a license to operate
a television station, pursuant to a Subscription Agreement,
at a value of $1.157 per share, or $120,652, in the
aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
5. (a) Securities Sold. On December 31, 1996, 227,336
shares of Company Common Stock were issued.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were issued to David M. Loflin.
(c) Consideration. Such shares of Common Stock were
issued in exchange for all of the capital stock of Winter
Entertainment, Inc., a Delaware corporation, pursuant to an
Agreement and Plan of Reorgainzation, at a value of $1.157
per share, or $263,106, in the aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
6. (a) Securities Sold. On December 20, 1996, 1,929,903
shares of Company Common Stock were issued.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were issued to David M. Loflin (1,179,389
shares), Alvin J. Bernard (21,443 shares), Clyde and Linda
Bunker (32,165 shares), Ross and Becky Bravata (42,887
shares), Curtis Bunyett (10,722 shares), Mike and Lori Cohn
(53,608), Denis Mantei (21,443 shares), Sareth Morm and
Saoeth Im (32,165 shares), Nancy McRae L.T. dtd-12/4/86
(16,082 shares), Harold Miller (21,443 shares) Arthur
Rodriguez (21,443 shares), Don Reid (214,434 shares), Linda
Simmons (10,722 shares), David and Lynne Stenske (21,443
shares), Michael Stecher (26,804 shares), Glen and Maria
Thomas (21,443 shares), Gilbert and Eliza Tobon (16,082
shares), Carlton P. Weise (32,165 shares), Dunn Revocable
Trust (42,887 shares), Evangelical Center (26,804 shares),
Ted L. Flory Revocable Trust (21,443 shares), Ross Carey
Trust (21,443 shares) and 1993 Robbins Revocable Trust
(21,443 shares)
(c) Consideration. Such shares of Common Stock were
issued in exchange for all of the capital stock of Missouri
Cable TV Corp., a Louisiana corporation, pursuant to an
Agreement and Plan of Reorganization, at a value of $1.157
per share, or $2,233,555, in the aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
7. (a) Securities Sold. On February 1, 1997, 150,000
shares of Company Common Stock were issued.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were issued to Newlan & Newlan, Attorneys at
Law.
(c) Consideration. Such shares of Common Stock were
issued pursuant to a Consulting and Legal Services
Agreement, at a value of $.40 per share, or $60,000, in the
aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
8. (a) Securities Sold. On March 7, 1997, 20,000 shares
of Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were issued to Michael Cohn.
(c) Consideration. Such shares of Common Stock were
sold for cash pursuant to a Stock Purchase Agreement, at a
price of $2.50 per share, or $50,000, in the aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
Item 16. Exhibits and Financial Statements Schedules.
1. Exhibits.
Exhibit No. Description
----------- ------------
# 2.1 Agreement and Plan of Reorganization,
dated as of December 31, 1996, among
Registrant, Winter Entertainment,
Inc., a Delaware corporation, and
its Shareholder.
# 2.2 Agreement and Plan of Reorganization,
dated as of December 31, 1996, among
Registrant, Missouri Cable TV Corp.,
a Louisiana corporation, and its
Shareholders.
# 3.1 Articles of Incorporation of
Registrant.
# 3.2 Bylaws of Registrant.
# 3.3 Bylaws of Executive Committee of the
Board of Directors of Registrant.
# 4.1 Specimen Common Stock Certificate.
# 5.1 Opinion of Newlan & Newlan, Attorneys
at Law, re: Legality.
# 8.1 Opinion of Newlan & Newlan, Attorneys
at Law, re: Taxes.
# 10.1 Letter Agreement, dated November 15,
1996, between Registrant and
Entertainment Corporation of America.
# 10.2 Subscription Agreement, dated as of
December 20, 1996, between Registrant
and David M. Loflin.
# 10.3 Subscription Agreement, dated as of
December 20, 1996, between Registrant
and Waddell D. Loflin.
# 10.4 Office Lease, dated as of December 2,
1996, between Registrant and
8674 Corporation.
# 10.5 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc. and
Missouri Cable TV Corp., relating to
Channel K26EC, Poplar Bluff,
Missouri.
# 10.6 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc. and
Missouri Cable TV Corp., relating to
Channel K31EB, Poplar Bluff,
Missouri.
# 10.7 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc. and
Missouri Cable TV Corp., relating to
Channel K56FP, Poplar Bluff,
Missouri.
# 10.8 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc. and
Missouri Cable TV Corp., relating to
Channel K61FY, Poplar Bluff,
Missouri.
# 10.9 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc. and
Missouri Cable TV Corp., relating to
Channel K59FE, Poplar Bluff,
Missouri.
# 10.10 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc. and
Missouri Cable TV Corp., relating to
Channel K35EP, Poplar Bluff,
Missouri.
# 10.11 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc. and
Missouri Cable TV Corp., relating to
Channel K28ED, Poplar Bluff,
Missouri.
# 10.12 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc.
and Missouri Cable TV Corp., relating
to Channel K68FL, Poplar Bluff,
Missouri.
# 10.13 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc.
and Missouri Cable TV Corp.,
relating to Channel K18EK,
Lebanon, Missouri.
# 10.14 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc.
and Missouri Cable TV Corp.,
relating to Channel K29DA,
Lebanon, Missouri.
# 10.15 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc.
and Missouri Cable TV Corp.,
relating to Channel K31EC,
Lebanon, Missouri.
# 10.16 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc.
and Missouri Cable TV Corp.,
relating to Channel K40EP,
Lebanon, Missouri.
# 10.17 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc.
and Missouri Cable TV Corp.,
relating to Channel K51ES,
Lebanon, Missouri.
# 10.18 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc.
and Missouri Cable TV Corp.,
relating to Channel K53FK,
Lebanon, Missouri.
# 10.19 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc.
and Missouri Cable TV Corp.,
relating to Channel K55HD,
Lebanon, Missouri.
# 10.20 Assignment and Assumption Agreement,
dated as of October 17, 1996,
between Northeast Telecom, Inc.
and Missouri Cable TV Corp.,
relating to Channel K59FD,
Lebanon, Missouri.
# 10.21 Assignment of Contract for
Programming, dated as of December
1, 1995, between Gulf Atlantic
Communications, Inc. And Winter
Entertainment, Inc., relating to
television station K13VE, Baton
Rouge, Louisiana.
# 10.22 Letter of Understanding, dated as of
January 6, 1997, between Registrant
and Open Net, Inc., relating to
wireless internet territory rights.
* 10.23 Joint Venture Agreement, dated as of
January 24, 1997, between Registrant
and Web One, Inc., relating to a
joint venture to operate as a
wireless internet service provider.
# 10.24 License Agreement, dated as of
February 1, 1996, between Registrant
and Web One, Inc., relating to the
licensing of a trademark.
# 10.25 Consulting and Legal Services
Agreement, dated as of February 1,
1997, between Registrant and Newlan
& Newlan, Attorneys at Law,
relating to the performance of
consulting and legal services.
# 10.26 Stock Purchase Agreement, dated as of
March 10, 1997, between Registrant
and Michael Cohn, relating to the
sale of Common Stock.
# 10.27 Promissory Note, face amount $25,000,
dated October 14, 1996, with Missouri
Cable TV Corp. as maker and David M.
Loflin as payee.
# 10.28 Promissory Note, face amount $15,000,
dated October 22, 1996, with Winter
Entertainment, Inc. as maker and
David M. Loflin as payee.
# 10.29 Promissory Note, face amount $20,000,
dated November 15, 1996, with
Missouri Cable TV Corp. as maker
and David M. Loflin as payee.
# 10.30 Promissory Note, face amount $8,000,
dated January 31, 1996, with
Registrant as maker and David M.
Loflin as payee.
# 10.31 Agreement Appointing Securities
Transfer Corporation as Transfer
Agent and Registrar, dated
February 6, 1997, between Registrant
and Securities Transfer Corporation.
# 10.32 Promissory Note, face amount $13,500,
dated June 9, 1997, with Registrant
as maker and David M. Loflin
as payee.
* 10.33 Letter Agreement, dated July 31,
1997, between Registrant and the
shareholders of Web One, Inc.,
relating to an option to acquire
the capital stock of Web One, Inc.
* 11 Statement Regarding Computation of
Per Share Earnings
# 22.1 Subsidiaries of Registrant.
* 23.1 Consent of Weaver and Tidwell,
L.L.P., independent auditor.
# 23.2 Consent of Newlan & Newlan, Attorneys
at Law.
# 23.3 Consent of Broadcast Services
International, Inc., independent
appraiser.
------------------------------
# Filed previously.
* Filed herewith.
2. Financial Statement Schedules.
All schedules are omitted since they are furnished
elsewhere in the Prospectus.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
1. (a) To file, during any period in which
offers or sales are being made, a post-effective amendment
to this registration statement:
(I) To included any prospectus required
by Section 10(a)(3) of the Securities Act of 1933, as
amended (the "Act);
(II) To reflect in the prospectus any
facts or events arising after the effective date of the
registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth
in the registration statement; and
(III) To include any material
information with respect to the plan of distribution not
previously disclosed in the registration statement or any
material change to such information in the registration
statement.
(b) That, for the purpose of determining any
liability under the Act, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) To remove from registration by means of
a post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
2. Insofar as indemnification for liabilities
arising under the Act may be permitted to directors,
officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, the Registrant has duly caused this Amendment to
the Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of Baton Rouge, State of Louisiana, on August 5, 1997.
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin
President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to this Registration Statement on Form S-1
has been signed by the following persons in the capacities
and on the dates indicated:
Signatures Title Date
- ------------------- -------------------- ---------------
/s/ David M. Loflin President (Principal August 5, 1997
David M. Loflin Executive Officer and
Principal Accounting
Officer) and Director
/s/ Waddell D. Loflin Vice President, Secre- August 5, 1997
Waddell D. Loflin tary and Director
/s/ Richard N. Gill Director August 5, 1997
Richard N. Gill
/s/ Ross S. Bravata Director August 5, 1997
Ross S. Bravata
/s/ Michael Cohn Director August 5, 1997
Michael Cohn
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
10.23 Joint Venture Agreement, dated as of
January 24, 1997, between Registrant
and Web One, Inc., relating to a
joint venture to operate as a
wireless internet service provider.
10.33 Letter Agreement, dated July 31, 1997,
between Registrant and the
shareholders of Web One, Inc.,
relating to an option to acquire
the capital stock of Web One, Inc.
11 Statement Regarding Computation of
Per Share Earnings
23.1 Consent of Weaver and Tidwell, L.L.P.,
independent auditor.<PAGE>
-------------
EXHIBIT 10.23
-------------
JOINT VENTURE AGREEMENT
OF
WEB ONE WIRELESS I.S.P. - BATON ROUGE, J.V.
This Joint Venture Agreement, dated as of January 24, 1997,
by and between Media Entertainment, Inc., a Nevada
corporation ("MEI"), and Web One, Inc., a Louisiana
corporation ("WebOne"), MEI and WebOne collectively
sometimes referred to as the "Joint Venturers" or the
"Venturers" herein.
SECTION I - GENERAL
1.1 Venture Name. The name of the Joint Venture is
Web One Wireless I.S.P. - Baton Rouge, J.V.
1.2 Addresses of Venturers. The address of MEI is
8478 Quarters Lake Road, Baton Rouge, Florida 70809. The
address of WebOne is 8478 Quarters Lake Road, Baton Rouge,
Louisiana 70809.
SECTION II - DEFINITIONS
2.1 "Affiliate" means any person or entity directly or
indirectly controlling, controlled by or under common
control with another person or entity.
2.2 "Agreement" means this Joint Venture Agreement of
Web One Wireless I.S.P. - Baton Rouge, J.V.
2.3 "Capital Account" means, for each Venturer, the
amount of its capital contribution, which amount shall be
increased by (i) its additional capital contributions to the
Joint Venture, if any, and (ii) his proportionate share of
Joint Venture profits and gains, and decreased by (iii)
distributions by the Joint Venture to such Venturer and (iv)
such Venturer's proportionate share of Joint Venture losses.
2.4 "Gross Receipts" means the amount of Joint Venture
revenue from all sources whatsoever.
2.5 "Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended.
2.6 "Joint Venture" means the joint venture formed
under this Agreement under the name "Web One Wireless I.S.P.
- - Baton Rouge, J.V."
2.7 "Joint Venture Agreement" means this Joint Venture
Agreement of Web One Wireless I.S.P. - Baton Rouge, J.V.
2.8 "Managing Venturer" means Web One, Inc., a
Louisiana corporation.
2.9 "Net Cash Flow" means Gross Receipts from Joint
Venture operations for each fiscal year, less cash operating
expenses for each fiscal year.
2.10 "Registered Agent" means the person named in the
Joint Venture Agreement to receive legal service upon the
Joint Venture.
2.11 "Registered Office" means the office named in the
Joint Venture Agreement where all of the Joint Venture's
books and records will be kept.
2.12 "Remaining Net Cash Flow" means Net Cash Flow less
payments for the satisfaction of current debts and
obligations of the Joint Venture and establishing such
Working Capital Reserves as the Managing Venturer deems
necessary for Joint Venture operations.
2.13 "Unrecovered Cash Contributions" means the amount
of cash contributed to the capital of the Joint Venture
which has not been returned to the contributing Joint
Venturer by distributions from the Joint Venture pursuant to
Section VIII.
2.14 "Working Capital Reserves" means the amount of
cash reserves taken from Net Cash Flow of the Joint Venture,
which the Managing Venturer deems necessary to the prudent
operation of the Joint Venture.
SECTION III - TERM
3.1 The term of the Joint Venture shall be from the
date of the execution of this Joint Venture Agreement until
December 31, 2021, unless extended or sooner terminated in
accordance with this Agreement.
SECTION IV - PURPOSE
4.1 The purpose of the Joint Venture is to establish a
plan of business for, and operate as, a wireless Internet
Service Provider in the City of Baton Rouge, Louisiana, all
to earn a profit.
SECTION V - JOINT VENTURE OFFICE
AND REGISTERED AGENT
5.1 Joint Venture Office. The Registered Office of
the Joint Venture in the State of Louisiana shall be 8478
Quarters Lake Road, Baton Rouge, Louisiana 70809, or at such
other location as the Venturers may determine.
5.2 Registered Agent. The Registered Agent of the
Joint Venture in the State of Louisiana shall be David M.
Loflin, 8478 Quarters Lake Road, Baton Rouge, Louisiana
70809.
5.3 Documents to be Maintained. The Managing Venturer
shall keep the following documents at the Registered Office
of the Joint Venture specified in Section 5.1 hereinabove:
(a) a copy of this Agreement and all amendments
hereto;
(b) copies of the Joint Venture's federal, state
and local tax returns and reports for the three (3) most
recent years, if any; and
(c) copies of financial statements of the Joint
Venture for the three (3) most recent years, if any.
Such documents shall be available for inspection and copying
during ordinary business hours at the request of, and at the
expense of, the requesting Venturer.
SECTION VI - CAPITAL AND CONTRIBUTIONS
6.1 Upon formation of the Joint Venture, the Managing
Venturer will contribute to the capital of the Joint Venture
cash in the amount of $5,000.
6.2 Upon formation of the Joint Venture, MEI will
contribute to the capital of the Joint Venture cash in the
amount of $5,000.
6.3 Capital Accounts. Each Venturer's capital account
shall be increased (credited) by
(a) the amount of its capital contributions to
the Joint Venture pursuant to Sections 6.1 and 6.2;
(b) the amount of income from operations
allocated to it pursuant to Section 7.1(a);
(c) the amount of gains allocated to it pursuant
to Section 7.2(b);
and shall be decreased (debited) by
(d) the amount of losses from operations
allocated to it pursuant to Section 8.1;
(e) all amounts paid or distributed to it
pursuant to Section 8.1 (other than distributions to any
Venturers in repayment of principal and interest on loans);
and
(f) the amount of any losses allocated to it
pursuant to Section 8.2.
SECTION VII - NET INCOME AND LOSSES FROM OPERATIONS;
AND NET GAINS AND LOSSES FROM DISPOSITION OF ASSETS
7.1 Operations. All "net income" and "net losses" of
the Joint Venture from operations for any calendar quarter
or part thereof, as determined for federal income tax
purposes, shall be allocated as follows:
(a) for each fiscal year of the Joint Venture
from date of its formation, all net losses shall be
allocated 50% to MEI and 50% to WebOne;
(b) for each fiscal year of the Joint Venture
from the date of its formation, all net income shall be
allocated 50% to MEI and 50% to WebOne.
7.2 Interim Capital Transactions. All net gains and
net losses of the Joint Venture, as determined for Federal
income tax purposes, in connection with the sale of software
programs, licensing or sale of other assets, and any similar
transactions which, in accordance with generally accepted
accounting principles, are attributable to capital but which
do not result in dissolution of the Joint Venture (an
"Interim Capital Transaction") shall be allocated as
follows:
(a) first, an amount of the net gains up to the
amount of proceeds to be distributed pursuant to Section
8.2(a)(i) shall be allocated to the Joint Venturers in the
same amounts as the proceeds are to be distributed;
(b) then, after adjustment of the capital
accounts of the Joint Venturers to reflect the allocation of
gains under Section 7.1 and distributions and amounts
available for distribution pursuant to Section 8.2(a)(i),
the net gains or net losses shall be allocated as provided
for allocation of net gains and losses pursuant to Sections
7.1(a) (losses) and (b) (gains).
7.3 Dissolution and Termination. All net gains and
net losses of the Joint Venture, as determined for Federal
income tax purposes, in connection with a dissolution and
termination of the Joint Venture, shall be allocated between
the Joint Venturers as follows:
(a) 50% to MEI and 50% to WebOne.
SECTION VIII - DISTRIBUTIONS
8.1 Definition of "Taxable Distributable Income".
"Taxable Distributable Income" shall be determined at the
end of each fiscal year of the Joint Venture, and shall mean
Gross Receipts from operations of the Joint Venture for each
fiscal year, less cash operating expenses for each fiscal
year. For purposes of determining Net Operating Income and
Net Cash Flow, "Gross Receipts" shall mean proceeds from
sales of products by the Joint Venture in excess of the cost
to the Joint Venture for such products.
8.2 (a) Operations. During the period of operations
of the Joint Venture, from the date of its formation and
ending upon the dissolution and termination of the Joint
Venture, after providing for the satisfaction of the current
debts and obligations of the Joint Venture and establishing
such working capital reserves (the "Working Capital
Reserves") as the Managing Venturer deems necessary for
Joint Venture purposes. The Managing Venturer, may, in his
sole discretion, make distributions of "Remaining Cash Flow"
(Net Cash Flow less the above payments), at the end of each
calendar quarter, as follows:
(i) 50% to MEI and 50% to WebOne;
(ii) any Working Capital Reserves
subsequently included in Remaining Net Cash Flow and
distributed shall be distributed in the same manner as
described in Section 8.2(a)(i).
(b) Dissolution and Termination Proceeds. Upon
the dissolution and termination of the Joint Venture, the
Net Gross Proceeds of the sale of all the assets of the
Joint Venture after making payment of or provision for the
liabilities and obligations of the Joint Venture shall be
distributed or paid, as appropriate, in the following order
of priority:
(i) first, an amount equal to the unpaid
interest and principal of any unpaid loan by a Venturer to
the Joint Venture, such distributions being treated first as
in payment of accumulated interest and next as in payment of
principal of such loans;
(ii) next, 50% to MEI and 50% to WebOne.
8.3 Cash Distributions. All cash distributions to the
Joint Venturers shall be made to the Joint Venturers at the
addresses specified in Section 1.2 or such other addresses
of which the Joint Venturers shall notify the Joint Venture
in writing.
8.4 Limitation to Cash in Return of Capital. No
Venturer shall be entitled to demand and receive property
other than cash in return for its capital contributions to
the Joint Venture.
SECTION IX - CONTROL AND MANAGEMENT
9.1 Management. The Managing Venturer shall, except
as specifically limited herein, have full, exclusive and
complete discretion in the management and control of the
Joint Venture for the purposes set forth in Section 4.1. In
any exercise of management authority by the Managing
Venturer under this Section, the Managing Venturer agrees to
manage and control the affairs of the Joint Venture to the
best of its ability, and to conduct the operations
contemplated under this Agreement in a careful and prudent
manner and in accordance with good industry practice.
9.2 Specific Management Rights. Subject to any
limitations expressly set forth in this Agreement, the
Managing Venturer shall invest the capital of the Joint
Venture in pursuit of the purposes of the Joint Venture as
set forth in Section IV hereof. Without limiting the
generality of the foregoing, the Managing Venturer is
expressly authorized on behalf of the Joint Venture to:
(a) enter into a Joint Venture Management
Agreement with WebOne in the form attached hereto as
Exhibit "A";
(b) procure and maintain with responsible
companies such insurance as may be available in such amounts
and with respect to such risks as are deemed appropriate by
the Managing Venturer;
(c) execute and deliver on behalf of and in the
name of the Joint Venture, or in the name of an agent of the
Joint Venture, notes, financing statements, any and all
documents, agreements and undertakings relating to
institutional financing, leases, subleases, bills of sale
and any and all other instruments necessary or incidental to
the conduct of the Joint Venture's business;
(d) coordinate all accounting and clerical
functions of the Joint Venture and employ such accountants,
lawyers, managers, agents or other personnel as may be
required from time to time to carry on the business of the
Joint Venture; and
(e) control and perform, or cause to be
performed, all other activities incident to managing the
operations and affairs of the Joint Venture unless otherwise
specifically stated in Section 9.3 hereinbelow.
9.3 Limitation on Management Rights. Notwithstanding
the generality of the foregoing, the Managing Venturer shall
not, without the consent of MEI, be empowered to:
(a) do any act in contravention of this
Agreement;
(b) do any act which would make it impossible to
carry on the ordinary business of the Joint Venture;
(c) confess a judgment against the Joint Venture;
(d) possess Joint Venture property or assign any
rights in specific Joint Venture property for other than a
Joint Venture purpose; and
(e) change or reorganize the Joint Venture into
any other legal form.
9.4 Conflicts of Interest. Any Venturer may engage in
or possess an interest in other business ventures of any
nature or description independently or with others, except
that no venturer shall invest in, manage, own, participate
in directly or indirectly in any business, corporation,
partnership or other juridical entity, including a sole
proprietorship, having a business substantially similar to
that embodied in the business to be established hereunder.
To the extent any venturer shall engage in or possess an
interest in any other business not prohibited hereunder, no
other venturer shall have any rights in or to such
independent ventures or the income or profits derived
therefrom.
9.5 Limitations on Managing Venturer's Liability. The
Managing Venturer will not be liable, responsible or
accountable in damages or otherwise to its co-venturer for
any acts performed by it, or for its failure to act, in good
faith and within the scope of this Agreement, and not
attributable to gross negligence, malfeasance, fraud, breach
of fiduciary duty or breach of any express warranty or
representation in this Agreement; and the Joint Venture, but
not any Venturer, shall indemnify and hold harmless the
Managing Venturer from any loss, damage, liability, cost or
expense (including reasonable attorneys' fees) arising out
of any act or failure to act by it, if such act or failure
to act is in good faith, within the scope of this Agreement,
and is not attributable to gross negligence, malfeasance,
fraud, breach of fiduciary duty or breach of any express
warranty or representation in this Agreement.
SECTION X - OBLIGATIONS OF THE MANAGING VENTURER
10.1 Joint Venture Management. The Managing Venturer
shall act as the agent of the Joint Venture as sole Manager
and in such capacity shall perform for the Joint Venture all
services customarily performed by a managing venturer of a
joint venture engaged in the activity to be undertaken by
the Joint Venture.
SECTION XI - DISSOLUTION AND TERMINATION
11.1 Dissolution. The Joint Venture shall be dissolved
and its business wound up, upon the earliest to occur of:
(a) December 31, 2021;
(b) the unanimous written consent of the Joint
Venturers, that the Joint Venture should be dissolved;
(c) the bankruptcy or insolvency of the Managing
Venturer; or
(d) the sale of all or substantially all of the
Joint Venture's assets.
For the purposes of this Agreement, the term "Bankruptcy"
means the filing of a petition for relief as to any person
as debtor or bankrupt under the Federal bankruptcy laws
(except if such petition is contested by such person); or
the filing by such person or by another of a petition or
application to declare the insolvency of such person or for
the appointment of a receiver or a trustee for such person
or a substantial part of his assets; provided that if such
proceeding is commenced by another and such person indicates
his approval of such proceeding, consents thereto or
acquiesces therein, such proceeding is not contested by such
person. The insolvency of a person shall be deemed to occur
when such person's assets are insufficient to pay his
liabilities and he shall so admit to the Venturers.
11.2 No Release of Contractual Obligations. It is
understood and agreed, however, that no dissolution of the
Joint Venture shall release or relieve any of the parties
hereto of their contractual obligations under this
Agreement.
11.3 Distributions of Cash or In Kind. Upon any such
dissolution, all Joint Venture assets shall be sold and the
proceeds distributed, or such assets distributed in kind if
the Managing Venturer so elects, to the Venturers in their
respective shares as provided herein.
SECTION XII - ACCOUNTING
12.1 Fiscal Year. The fiscal year of the Joint Venture
shall be the calendar year.
12.2 Method of Accounting. The Managing Venturer may
maintain the Joint Venture's management reports on a cash
transaction basis; nevertheless, it shall keep, or cause to
be kept, full and accurate records of all transactions of
the Joint Venture either on a cash or accrual method of
accounting.
12.3 Books of Accounts. All of such books of account
shall, at all times, be maintained at the Registered Office
of the Joint Venture, and shall be open during reasonable
business hours for the reasonable inspection and examination
by the Joint Venturers or their authorized representatives,
who shall have the right to make copies thereof.
12.4 Tax Returns. The Managing Venturer, at Joint
Venture expense, shall prepare or cause to be prepared (by
March 1st of the year after the tax year to which such tax
return relates), a federal income tax return and such state
tax returns as are required for the Joint Venture on either
the accrual or cash method of accounting.
SECTION XIII - REPORTS AND STATEMENTS
13.1 Reports and Statements.
(a) Within sixty (60) days after the end of each
fiscal year of the Joint Venture, the Managing Venturer
shall cause to be delivered to the Joint Venturers an annual
Cash Flow Report for the prior fiscal year of the Joint
Venture showing all income and expenses for said fiscal
year. Said report shall be delivered to the Joint Venturers
together with any amounts distributable to such Joint
Venturers pursuant to Section VIII.
(b) On or before March 15th of the year following
the end of each fiscal year of the Joint Venture, the
Managing Venturer shall cause to be delivered to each of the
Venturers such information as shall be necessary (including
a statement for that year of each such Venturer's share of
net income, net gains and losses, and other items of the
Joint Venture) for the preparation by each Venturer of
federal and state income and other tax returns.
(c) Within ninety (90) days after the end of each
fiscal year of the Joint Venture, beginning with the fiscal
year ending December 31, 1997, the Managing Venturer shall
cause to be delivered to the Joint Venturers financial
statements which shall have been certified by a firm of
Certified Public Accountants, at the expense of the Joint
Venture, which certification shall state that such
statements fairly present the financial position and results
of operations of the Joint Venture in accordance with
generally accepted accounting principles applied on a
consistent basis.
SECTION XIV - BANK ACCOUNTS
14.1 The Managing Venturer shall open and maintain a
special bank account or accounts in which shall be deposited
all funds of the Joint Venture. Withdrawals from such
account or accounts shall be made upon the signature or
signatures of such person or persons as the Managing
Venturer shall designate.
SECTION XV - NOTICES
15.1 Whenever any notice is required or permitted to
be given under any provisions of this Agreement, such notice
shall be in writing, signed by or on behalf of the person
giving the notice, and shall be deemed to have been given
when delivered by personal delivery or mailed by certified
mail, postage prepaid, return receipt requested, addressed
to the person or persons to whom such notice is to be given
at the offices set forth in Section 1.2.
SECTION XVI - ARBITRATION
16.1 Any dispute arising under this Joint Venture
agreement shall be resolved by arbitration in New Orleans,
Louisiana, under the Rules of the American Arbitration
Association, as then in effect. The determination and award
of the arbitrator shall be final and binding on the parties
and may be entered as a judgment in any court of competent
jurisdiction.
SECTION XVII - BINDING EFFECT
17.1 Except as herein otherwise provided to the
contrary, this Agreement shall be binding upon, and inure to
the benefit of, the parties hereto, their successors and
assigns.
SECTION XVIII - NO ORAL MODIFICATION
18.1 No modification or waiver of this Agreement or any
part hereof shall be valid or effective unless in writing
and signed by the party or parties sought to be charged
therewith; and no waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other
subsequent breach or condition, whether of like or different
nature.
SECTION XIX - APPLICABLE LAWS
19.1 This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Louisiana.
SECTION XX - COUNTERPARTS
20.1 This Agreement may be executed in counterparts,
each of which shall be deemed an original, and said
counterparts shall constitute but one and the same
instrument which may be sufficiently evidenced by one
counterpart.
SECTION XXI - ENTIRE AGREEMENT
21.1 This Agreement constitutes the entire agreement
and understanding between the parties and may not be
modified or amended, except as specifically provided for in
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
and certified this Joint Venture Agreement as of the day and
year first above written.
MEDIA ENTERTAINMENT, INC. WEB ONE, INC.
By: /s/ David M. Loflin By: /s/ Ross S. Bravata
David M. Loflin Ross S. Bravata
President President
<PAGE>
----------------------------------
Exhibit "A"
to
Joint Venture Management Agreement
----------------------------------
JOINT VENTURE MANAGEMENT AGREEMENT
This Joint Venture Management Agreement is made as of the
24th day of January, 1997, between Web One Wireless I.S.P. -
Baton Rouge, J.V., a Louisiana Joint Venture ("Owner"), and
Web One, Inc., a Louisiana corporation ("Manager").
ARTICLE I
ESTABLISHMENT OF AGENCY AND MANAGEMENT RESPONSIBILITY
1.1 Exclusive Agency. Owner intends to engage in
business. The business in which Owner is to engage is the
establishment of a plan of business for, and operation as, a
wireless Internet Service Provider in the City of Baton
Rouge, Louisiana, all to make a profit.
Owner hereby appoints Manager and Manager hereby
accepts appointment on the terms and conditions hereinafter
provided as sole and exclusive management agent of Owner
with respect to the operation of Owner.
1.2 Owner's Representative. Owner shall designate one
(1) person to serve as Owner's Representative in all
dealings with Manager hereunder. Whenever the approval or
consent or other action of Owner is called for hereunder,
such approval, consent or action shall be binding on Owner
if specified in writing and executed by Owner's
Representative. Owner's exclusive Representative shall be
David M. Loflin. Such representative may be changed at the
discretion of Owner, at any time, by writing delivered to
Manager.
ARTICLE II
SERVICES TO BE PERFORMED BY MANAGER
2.1 Business Responsibilities of Manager. Manager
shall take any and all actions on behalf of Owner as may be
necessary to establish the wireless internet service
provider business of Owner, which actions shall include,
without limitation, procuring necesssary equipment and tower
lease space, developing and implementing a marketing
strategy designed to attract subscribers for Owner's
wireless internet access services and hiring such personnel
as may be necessary to the operation of Owner's business.
2.2 Expense of Owner. Everything done by Manager
under the provisions of this Agreement shall be done as the
agent of Owner, and all obligations or expenses incurred
hereunder shall be for the account of, on behalf of and at
the expense of Owner, except as otherwise specifically
provided in this Article II. All payments to be made by
Manager hereunder shall be reimbursed from funds deposited
in an account established pursuant to Section 2.3 hereof.
Manager shall not be obligated to make any advance to or for
the account of Owner or to pay any sums, except out of funds
held in an account maintained under Section 2.3, nor shall
Manager be obligated to incur any liability or obligation
for the account of Owner without assurance that the
necessary funds for the discharge thereof will be provided.
2.3 Employment of Personnel. Manager shall
investigate, hire, train, pay, supervise and discharge the
personnel necessary to be employed in order to operate
successfully the business of Owner. Such personnel shall,
in every instance, except those persons hired as independent
contractors, be deemed employees of Owner and not of
Manager. All reasonable salaries, wages and other
compensation (as permitted in Section 2.1 hereof) of
personnel employed by Manager hereunder, including so-called
fringe benefits, medical and health insurance plans, social
security, taxes, workmen's compensation insurance and the
like, shall be deemed to be reimbursable expenses of
Manager. Nothing contained in this Agreement shall be
deemed or construed to create a partnership or joint venture
between Owner and any other party (but nothing contained
herein shall affect Manager's responsibility to transmit
payments for the account of Owner as provided herein), it
being the intention of the parties that the only
relationship hereunder is that of agent and principal, and
Manager shall not represent to anyone that its relationship
to Owner is other than that set forth herein. Neither
Manager (nor any employee of Manager) shall be liable,
responsible or accountable in damages or otherwise to Owner
for any acts performed by it in good faith and within the
scope of this Agreement. Owner shall indemnify and hold
harmless Manager (and each employee of Manager) from any
loss, damage, liability, cost or expense (including
reasonable attorneys' fees) arising out of any act or
failure to act (including negligence) by Manager (or any
employee thereof) if such act or failure to act is in good
faith, within the scope of this Agreement and is not
attributable to gross negligence, malfeasance or fraud.
2.4 Bank Accounts. Manager shall establish one or
more bank accounts for the deposit of funds collected by the
Joint Venture and the disbursement of funds pursuant to this
Article II.
2.5 Insurance. Manager shall cause to be placed and
kept in force all forms of insurance required by law or
needed to protect adequately Owner and Manager, including,
but not limited to, workmen's compensation insurance, public
liability insurance, fire and extended coverage insurance,
and burglary and theft insurance. All insurance coverage
shall be placed with such companies, in such amounts, and
with such beneficial interest appearing therein, as shall be
reasonable and prudent, within the discretion of Manager.
Manager shall promptly investigate and make a full and
timely written report to the insurance company as to all
accidents, claims for damages relating to the Joint Venture
facilities and the estimated cost of repair thereof and
shall prepare any and all reports required by any insurance
company in connection therewith. All such reports shall be
timely filed with the insurance company as required under
the terms of the insurance policy involved. Manager is
authorized to settle any and all claims against insurance
companies arising out of any policies, including the
execution of proofs of loss, the adjustment of losses,
signing of receipts and the collection of money.
2.6 Collection of Monies. Manager shall collect any
and all monies due and owing Owner.
2.7 Manager Disbursements. The Manager shall, from
the funds collected and deposited, cause to be disbursed
regularly and punctually (a) Manager's compensation
hereunder; (b) the amounts reimbursable to Manager
hereunder; and (c) the amount of all sales taxes, personal
property taxes and other impositions levied by appropriate
authorities, including, without limitation, payroll and
related taxes. Any balance remaining at the end of each
calendar month during the term of this Agreement shall be
disbursed to Owner.
2.8 Records; Reporting.
(a) Records. All statements, receipts, invoices,
checks, leases, contracts, worksheets, financial statements,
books and records, and all other instruments and documents
relating to or arising from the operation of the Joint
Venture shall be maintained by Manager, and Owner and
Manager shall have the right to inspect and to copy all such
matters, at such party's expense, at all reasonable times,
and from time to time, during the term of this Agreement and
for a reasonable time thereafter not to exceed three (3)
years. Upon the termination of this Agreement, all of such
books, records and other information shall be the property
of Owner; provided, however, that the Manager or his
representatives shall have the right to inspect such books,
records and other information and to make copies thereof
during the three (3) year period referred to in the
preceding sentence at Owner's place of business upon
reasonable advance notice to Owner.
(b) Monthly Reports. Within 10 days after the
end of each month of operations of the Joint Venture under
this Agreement, Manager shall deliver to Owner an unaudited
statement of operations.
(c) Returns Required by Law. Manager shall
execute and file punctually when due all forms, reports and
returns required by law relating to employment of personnel
and other matters, including the operation of the Joint
Venture.
(d) Compliance with Legal Requirements. Manager
shall take such action as may be necessary to comply with
any and all orders or requirements affecting Owner by any
federal, state, county or municipal authority having
jurisdiction thereover. Manager, however, shall not take
any such action as long as Owner is contesting, or has
affirmed its intention to contest and promptly institutes
proceedings contesting, any such order or requirement,
except that if failure to comply promptly with any such
order or requirement would or might expose Manager to
criminal liability, Manager shall cause the same to be
complied with. Manager shall promptly, and in no event
later than 72 hours from the time of the receipt, notify
Owner in writing of all such orders and notices or
requirements.
ARTICLE III
MANAGER'S TERMS OF ENGAGEMENT
3.1 Manager's Compensation. In consideration of the
services to be rendered pursuant to this Agreement, Manager
shall receive a Management Fee in an amount equal to $3,000
per month, payable in arrears on the 1st day of every
calendar month during the term of this Agreement; provided,
however, that the Management Fee shall not begin to be paid
until the calendar month immediately following the first
calendar month for which Owner's revenues exceed cash
expenses by an amount in excess of $3,000.
3.2 Term and Termination. The initial term of this
Agreement shall be for a term of five (5) years and shall
renew automatically for an additional term of five (5)
years, unless written notice to the contrary shall be given
by Owner or Manager within sixty (60) days of the expiration
of the initial, or any additional, term of this Agreement.
This Agreement may be terminated at any time by Manager upon
sixty (60) days' written notice to Owner.
3.3 Non-Disclosure. Manager shall not at any time or
in any manner, either directly or indirectly, divulge,
disclose or communicate to any person, firm or corporation
in any manner whatsoever any information concerning any
matters affecting or relating to the business of Owner, its
manner of operation, its plans, processes, techniques or
other data without regard to whether all of the foregoing
matters will be deemed confidential, material or important,
the parties hereto stipulating that as between them, the
same are important, material and confidential and gravely
and materially affect the effective and successful conduct
of the business of Owner, and Owner's good will, and that
any breach of the terms and conditions of this Section shall
be a material breach of this Agreement.
Manager and Owner recognize that the services to be
rendered under this Agreement by Manager are special, unique
and of extraordinary character, and that in the event of the
breach by Manager of the terms and conditions of this
Agreement to be performed by it, or in the event Manager
performs services for any person, firm or corporation
engaged in a competing line of business with Owner, then
Owner shall be entitled, if it so elects, to institute and
prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to obtain damages
for any breach of this Agreement, or to enforce the specific
performance thereof by Manager, or to enjoin Manager from
performing services for any such other person, firm or
corporation.
3.4 Termination for Cause. Owner agrees not to
terminate this Agreement except for "just cause", and agrees
to give Manager written notice of its belief that acts or
events constituting "just cause" exist. Manager has the
right to cure, within thirty (30) days of Owner's giving of
such notice, the acts, events or conditions which led to
Owner's notice. For purposes of this Agreement, "just
cause" shall mean (i) the willful failure or refusal of
Manager to implement or follow the written policies or
directions of Owner, provided that Manager's failure or
refusal is not based upon Manager's belief in good faith, as
expressed to Owner in writing, that the implementation
thereof would be unlawful; (ii) conduct which is
inconsistent with Manager's position with Owner and which
results in a material adverse effect (financial or
otherwise) or misappropriation of assets of Owner; (iii)
the intentional causing of material damage to Owner's
tangible or intangible property; and (iv) any act involving
personal dishonesty or criminal conduct against Owner by any
agent of Manager.
If Manager should cease its employment hereunder
voluntarily for any reason, or is terminated for just cause,
all compensation payable to Manager shall thereupon, without
any further writing or act, cease, lapse and be terminated.
However, all defined compensation and reimbursements which
accrued prior to Manager's ceasing employment or
termination, will become immediately due and payable.
3.5 Non-Competition. Manager agrees and covenants
that it will not, directly or indirectly, in any capacity
whatsoever, for a period of one year from any termination of
its engagement hereunder, compete in the wireless internet
service provider business in the State of Louisiana.
Manager agrees that a breach of this covenant not to compete
with Owner would result in irreparable damage to Owner.
Owner shall be entitled, at its election, to initiate and
prosecute proceedings in any court of competent
jurisdiction, either at law or in equity, to obtain damages
for any breah of this covenant, and to obtain injunctive
relief to prevent any such breach.
3.6 No Assignment by Manager. Without the prior
written consent of Owner, Manager shall not have the right
to assign, transfer or convey any of its rights, title or
interest hereunder nor shall it have the right to delegate
any of the obligations or duties required to be kept or
performed by it hereunder, except to a corporation of which
the majority of voting stock is owned by Manager.
3.7 Notices. All notices, demands, consents,
approvals and requests given by either party to the other
hereunder shall be in writing and shall be sent by
registered or certified mail, postage prepaid, to the
parties at the following addresses:
If to Owner: Web One Wireless I.S.P.
- Baton Rouge, J.V.
8478 Quarters Lake Road
Baton Rouge, Louisiana 70809
If to Manager: Web One, Inc.
8478 Quarters Lake Road
Baton Rouge, Louisiana 70809
With Copy to: Newlan & Newlan
5525 N. MacArthur Boulevard
Suite 670
Irving, Texas 75038
Either party may, at any time, change its address by sending
written notice to the other party of the change in the
manner hereinabove prescribed. Notices shall be deemed to
be given on the third business day after mailing.
ARTICLE IV
COVENANTS
4.1 Manager covenants that it has full authority to
enter into this Joint Venture Management Agreement.
4.2 Owner covenants that it has full corporate
authority to enter into this Joint Venture Management
Agreement.
ARTICLE V
MISCELLANEOUS
5.1 If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, the remainder of
this Agreement, or the application of such term or provision
to persons or circumstances other than those as to which it
is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall
be valid and be enforced to the fullest extent permitted by
law.
5.2 The failure of Owner or Manager to seek redress
for any violation of, or to insist upon the strict
performance of, any term or condition of this Agreement
shall not prevent a subsequent act by Owner or Manager,
which would have originally constituted a violation of this
Agreement by Owner or Manager, from having all the force and
effect of an original violation. Owner or Manager may
restrain any breach or threatened breach by Owner or Manager
of any term or condition herein contained, but the mention
herein of any particular remedy shall not preclude Owner or
Manager from any other remedy one might have against the
other, either at law or in equity. The failure by Owner or
Manager to insist upon the strict performance of any one of
the terms or conditions of this Agreement or to exercise any
right, remedy or election herein contained or permitted by
law shall not constitute or be construed as a waiver or
relinquishment for the future of such term, condition,
right, remedy or election, but the same shall continue and
remain in full force and effect. All rights and remedies
that Owner or Manager may have at law, in equity or
otherwise upon breach of any term or condition of this
Agreement, shall be distinct, separate and cumulative rights
and remedies and no one of them, whether exercised by Owner
or Manager or not, shall be deemed to be in exclusion of any
other right or remedy of Owner or Manager.
5.3 This Agreement contains the entire agreement
between the parties hereto with respect to the matters
herein contained and any agreement hereafter made shall be
ineffective to effect any change or modification, in whole
or in part, unless such agreement is in writing and signed
by the party against whom enforcement of the change or
modification is sought.
5.4 In the event that Owner or Manager shall fail to
perform any duty or fulfill any obligation hereunder, to the
material detriment of the other, Owner or Manager, in
addition to any rights or remedies available to them under
law, shall have the right (but shall not be obligated) to
perform any such duty or fulfill any such obligation.
5.5 This Agreement shall be governed by and construed
in accordance with the laws of the State of Louisiana.
5.6 Neither this Agreement nor any part hereof nor any
service, relationship or other matter alluded to herein
shall inure to the benefit of any third party, to any
trustee in bankruptcy, to any assignee for the benefit of
creditors, to any receiver by reason of insolvency, to any
other fiduciary or officer representing a bankrupt or
insolvent estate of either party, or to the creditors or
claimants of such an estate. Without limiting the
generality of the foregoing sentence, it is specifically
understood and agreed that insolvency or bankruptcy of
either Owner or Manager shall at the option of the other,
void all rights of such insolvent or bankrupt party
hereunder (or so many of such rights as the other party
shall elect to void).
5.7 Unless the context clearly requires otherwise, the
singular number herein shall include the plural, the plural
number shall include the singular, and any gender shall
include all genders.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed as of the date first above
written.
WEB ONE WIRELESS I.S.P. WEB ONE, INC.
- - BATON ROUGE, J.V.
By: WEB ONE, INC. By: /s/ Ross S. Bravata
Ross S. Bravata
By: /s/ Ross S. Bravata President
Ross S. Bravata
President<PAGE>
-------------------
EXHIBIT 10.33
-------------------
July 31, 1997
Mr. David M. Loflin
Mr. Ross S. Bravata
8748 Quarters Lake Road
Baton Rouge, LA 70809
Re: Option to Acquire Stock of Web One, Inc.
Gentlemen:
This letter will serve to memorialize our oral agreement
whereby you agreed to sell to Media Entertainment, Inc.
(MEI) all of the stock of Web One, Inc., a Louisiana
corporation (Web One), owned by you (50% each) at any time
on or before August 1, 1998.
Should MEI determine to acquire all of the stock of Web One
from you, it is agreed that MEI may, in its sole discretion,
elect to utilize cash or shares of MEI common stock in
payment for the shares of stock of Web One. The value of
the stock of Web One is to be established by an independent
appraiser, who shall be mutually acceptable to MEI and you.
Should MEI elect to pay for your Web One stock in cash, the
payment shall be in a single payment within ten (10) days
from the date of delivery of the appraisal. Should MEI
elect to utilize shares of its common stock with which to
pay for your stock of Web One, the per share value of MEI's
common stock shall be equal to the average closing bid price
of the common stock for the ten trading days immediately
prior to the closing of MEI acquisitioin of your Web One
stock, or, should there be no market for MEI common stock,
the per share value of MEI common stock shall be established
by an independent appraiser, who shall be mutually
acceptable to MEI and you.
Should the foregoing accurately reflect our agreement,
please sign below in the appropriate places and return this
letter to us.
Thank you.
Sincerely,
MEDIA ENTERTAINMENT, INC.
By: /s/ Waddell D. Loflin
Waddell D. Loflin
Vice President
AGREED AND ACCEPTED:
/s/ David M. Loflin /s/ Ross S. Bravata
David M. Loflin Ross S. Bravata<PAGE>
----------
EXHIBIT 11
----------
STATEMENT REGARDING COMPUTATION OF
PER SHARE EARNINGS
Cumu-
lative
Since
Number Days In-
of Out- Since cep-
Shares standing Inception tion
--------- -------- --------- -------
Period
from in-
ception
(Decem-
ber 31,
1995) to
Decem-
ber 31,
1995
Decem-
ber 28 227,336 3/3 227,336 457/457 227,336
--------- -------- --------- --------
Decem-
ber 31 227,336 227,336
Year
Ended
Decem-
ber 31,
1996
Janu-
ary 1 227,336 364/364 227,336
Novem-
ber 1 1,800,000 61/364 301,648 151/457 99,669
Novem-
ber 15 360,000 47/364 46,484 137/457 13,935
Decem-
ber 20 1,578,512 11/364 47,702 101/457 10,543
Decem-
ber 20 104,249 11/364 3,150 101/457 696
Decem-
ber 20 1,929,903 1/364 5,302 91/457 1,056
--------- -------- --------- --------
Decem-
ber 31 6,000,000 631,622
Three
Months
Ended
March
31,
1997
Janu-
ary 1 6,000,000 90/90 6,000,000
Febru-
ary 1 150,000 59/90 98,333 59/457 3,431
March 7 20,000 24/90 5,333 24/457 1,050
--------- -------- --------- --------
March 31 6,170,000 6,103,666 366,980<PAGE>
------------
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the
incorporation by reference in this Form S-1/A Registration
Statement of our report dated April 3, 1997, relating to the
consolidated financial statements of Media Entertainment,
Inc. and Subsidiaries for the period from inception
(December 28, 1995) to December 31, 1996. We also consent
to the reference to this firm under the heading "Experts" in
this Registration Statement.
/s/
WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
August 6, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 14502 36533
<SECURITIES> 0 0
<RECEIVABLES> 310 225
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 14812 37668
<PP&E> 196214 197796
<DEPRECIATION> 706 882
<TOTAL-ASSETS> 233600 265131
<CURRENT-LIABILITIES> 60889 64781
<BONDS> 0 0
0 0
0 0
<COMMON> 600 617
<OTHER-SE> 187349 215652
<TOTAL-LIABILITY-AND-EQUITY> 172711 200350
<SALES> 0 224
<TOTAL-REVENUES> 3337 224
<CGS> 0 0
<TOTAL-COSTS> 27574 86385
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> (24237) (86161)
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (24237) (86161)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (24237) (86161)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (24237) (86161)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
