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 Indus- (IRS Employer
Jurisdiction of trial Classification Identification
Incorporation or Code Number) Number)
Organization)
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
5525 North MacArthur Boulevard
Suite 670
Irving, Texas 75038
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
Title of Proposed Proposed
each class Amount maximum maximum Amount
of securi- to be offering aggregate of regis-
ties to be regis- price per offering tration
registered tered 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, $.031
per share, or $187,949 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 of
Registration Statement Prospectus
and Outside Front
Cover Page of
Prospectus
2.Inside Front and Inside Front Cover Page;
Outside Back Cover Outside Back Cover Page
Pages of Prospectus
Table of Contents
3.Summary Information, Prospectus Summary; The Company;
Risk Factors and Risk Factors
Ratio of Earnings
to Fixed Charges
4.Use of Proceeds Use of Proceeds
5.Determination of Distribution of Securities of
Offering Price the Company
6.Dilution Dilution
7.Selling Securityholders Not Applicable
8.Plan of Distribution Distribution of Securities of
the Company
9.Description of Description of Securities
Securities to be
Registered
10.Interest of Named Not Applicable
Experts
11.Information with Prospectus Summary; The Company;
Respect to the Risk Factors; Dilution; Use of
Registrant 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 Position of Directors and Officers
on Indemnification
for Securities Act
Liabilities
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 27, 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" 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's activities
are, or will, in the near future, be, carried on in certain
cities in Georgia, Idaho, Louisiana, Missouri, Oregon and
Washington. 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 Private Securities Litigation Reform Act of 1995 provides
a "safe harbor" for forward-looking statements. Certain
information included in this Prospectus contains statements
that are forward-looking, such as statements relating to plans
for future expansion, as well as other capital spending,
financing sources and the effects of regulation. Such
forward-looking information involves important risks and
uncertainties that could significantly affect anticipated
results in the future and, accordingly, such results may
differ from those expressed in any forward-looking statements
made herein. These risks and uncertainties include, but are
not limited to, those relating to projected expenses, consumer
acceptance, the availability of financing, the ability to
obtain and maintain required licenses, development and
construction and dependence on existing management. The
Company cautions readers of this Prospectus not to place undo
reliance on any such forward-looking statements and to be
mindful that such statements speak only as of the date made.
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. 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.
Need for Future Financing. The Company is in need of
additional financing to complete construction and exploitation
of its proposed wireless cable systems, community (low power)
television channels and Wireless ISP markets. 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
Atraditional" 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 Aeffective 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 Acable 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.
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.
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 Mulka, Inc. were
distributed to the shareholders of Forme Capital, Inc. In
September 1989, Mulka, 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 April 16,
1997, as reported by the OTC Electronic Bulletin Board, was
$4.00 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 Aspin-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.
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 299,511 189,528
Deficit Accumulated During
the Development Stage (22,999) (19)
Shareholders' Equity 216,269 187,949
Total Capitalization 216,269 187,949
SELECTED FINANCIAL DATA
The following selected financial data have been derived from
the financial statements of the Company, Missouri Cable TV
Corp. (MCTV) and Winter Entertainment, Inc. (WEI), 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:
The
Company MCTV
For the For the
Period Period
From From WEI
Inception Inception For the Pro Forma
(11/1/96) (10/9/96) Year For the
Thru Thru Ended Year Ended
12/31/96 12/31/96 12/31/96 12/31/96
(audited) (audited) (audited) (unaudited)
--------- --------- --------- -----------
Revenue $ --- $ --- $ 3,337 $ 3,337
Expenses 19 7,763 4,554 12,336
Net loss (19) (7,763) (1,217) (8,999)
Loss per share (0.00) (0.00) (0.81) (0.00)
The Company
For the Three
Months Ended
3/31/97
(unaudited)
-------------
Revenue $ 224
Expenses 23,204
Net loss (22,980)
Loss per share (0.00)
BALANCE SHEET DATA:
The Company The Company
as at 3/31/97 as at 12/31/96
(unaudited) (audited)
------------- --------------
Working Capital (Deficit) $ (11,194) $ (30,839)
Total Assets 281,068 248,838
Total Current Liabilities 64,799 60,889
Shareholders' Equity 216,269 187,949
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, WEI, has been engaged in television broadcast
operations since January 1996, while the Company's other
subsidiary, MCTV, has only recently begun to attempt to
attract subscribers for its wireless cable system located in
Poplar Bluff, Missouri. Since its inception, 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 Acompany" include WEI, MCTV and the
Joint Venture, unless the context indicates otherwise.
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 attempt to attract subscribers in
one of its wireless cable markets, Poplar Bluff, Missouri.
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 Arisk Factors
Concerning Wireless Cable" under ARisk 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, UPN or WB, 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 (AInterim 97"), were
$224 (unaudited) which constituted all of the Company's
revenues. As the Company was not in existence, it had no
revenues for the three months ended March 31, 1996 ("Interim
96"). All of the Company's revenues were generated by the
Community Television Segment. The Company expects that,
during the second quarter of 1997, the Wireless Internet
Segment will begin to generate revenues from operations.
However, there is no assurance in this regard.
Wireless Cable Segment. The Company has only recently
begun to attempt 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 (AFiscal 97"). During Interim 97, the Wireless Cable
Segment generated no revenues, while incurring $225
(unaudited) in operating expenses. The Company's ability 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 of 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 similar levels for the remainder of Fiscal 97.
However, 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 its currently operating
station to its maximum legal limit, 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 June 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 second 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.
Liquidity and Capital Resources
December 31 1996. Since its inception, the Company has
required little capital with which to operate. 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.
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:
Number of Appraised Value
Wireless 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, in June 1997, 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
Sandpoint, 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.
March 31, 1997. During Interim 97, the Company required
little capital with which to operate. 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. 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. First, the Company
entered into a Consulting and Legal Services Agreement (the
"Newlan Agreement") with its legal counsel, Newlan & Newlan,
Attorneys at Law. (See "Legal Matters"). 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 $60,000 of legal services. 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, now a director of the Company, has
committed to invest an additional $100,000 on the same terms
in the near term. There is no assurance that such investment
will be made. (See "Stock Purchase" under "Certain
Transactions").
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. 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.
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.
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 $100,000 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 retransmitted 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 retransmitted 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 Achannel 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 Achannel 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'sspectrum 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 incomplying 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. Such 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. Aimpulse 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 Achurn" 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) Sandpoint, 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
Line-of- Estimated
Total Sight Total Current
City Population Households Households Channels
- ------------ ---------- ---------- ---------- --------
Poplar Bluff,
Missouri 120,710 54,590 51,136 26,28,31,
35,56,59,
61,68*
Lebanon,
Missouri 135,474 75,979 74,092 18,29,31,
40,51,53,
55,59*
Port Angeles,
Washington 64,553 30,085 25,141 H1-2-3
The Dalles,
Oregon 59,945 27,328 20,232 B1-2-3;
C1-2-3
Sand Point,
Idaho 46,750 25,510 15,739 B1-2-3;
C1-2-3
Fallon,
Nevada 27,943 11,506 9,288 E1-2-3-4;
H3
Astoria,
Oregon 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 Atraditional"
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, Louisiana 637,555 252,106 13
Monroe/Rayville, Louisiana 235,394 92,900 26
Bainbridge, Georgia 298,215 120,688 36
Natchitoches, Louisiana 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
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 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.
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.
Pursuant to the Joint Venture Agreement by which the Joint
Venture was formed, the Company and Web One each contributed
$5,000 to the capital of the Joint Venture. 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. In addition, 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.
Loans by Officers
In October 1996, David M. Loflin loaned, on two separate
occassions, 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.
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 shares issued to Mr. Loflin under such Subscription
Agreement were valued at $1.157 per share, or $1,826,873, in
the aggregate, 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).
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
shares issued to Mr. Loflin under such Subscription Agreement
were valued at $1.157 per share, or $120,652, in the
aggregate, which value was determined pursuant to the
Appraisal.
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 Company Common Stock issued to Mr.
Loflin in the WEI Reorganization were valued at $1.157 per
share, or $263,106, in the aggregate, which value was
determined pursuant to the Appraisal.
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 WEI 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 Company Common Stock issued to Mr. Loflin in the
MCTV Reorganization were valued at $1.157 per share, or
$1,364,553, in the aggregate. 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 valued at $1.157 per share, or $49,620, in the
aggregate, and Michael Cohn, a director of the Company,
received, as a shareholder of MCTV, 53,608 shares of Company
Common Stock valued at $1.157 per share, or $62,024, in the
aggregate. The value of the shares of Company Common Stock
received by Messrs. Loflin, Bravata and Cohn under the MCTV
Reorganization was determined pursuant to the Appraisal.
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
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.
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 Shares
Address of Owned Owned
Beneficial Benefi- Percent Benefi- Percent
Owner cially Owned cially Owned
- ----------------- ------- ------- ------- -------
David M. Loflin 4,585,237 74.31% 4,585,237 74.31%
8478 Quarters
Lake Rd.
Baton Rouge,
LA 70809
Waddell D. Loflin 304,249 4.93% 304,249 4.93%
8478 Quarters
Lake Rd.
Baton Rouge,
LA 70809
Entertainment 360,000 5.83% --- ---
Corporation
of America
727 Iberville
New Orleans,
LA 70130
Ross S. Bravata 42,887 * 42,887 *
8478 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, Irving, 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.
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 and the related
consolidated statements of operations, changes in
stockholders' equity and cash flows for the period from
inception (November 1, 1996) 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 from inception (November 1, 1996) through December 31,
1996 in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. 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 tatements 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
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEET
December 31, March 31,
1996 1997
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 14,502 $ 36,533
Accounts receivable 310 225
Prepaid expenses 0 910
Deferred offering costs 15,238 15,937
-------- --------
Total current assets 30,050 53,605
-------- --------
PROPERTY AND EQUIPMENT,
net accumulated depre-
ciation of 0 and $176,
respectively 196,214 197,796
-------- --------
INVESTMENT IN JOINT VENTURE 0 2,500
-------- --------
INTANGIBLES
Organization costs, net
of accumulated amort-
ization of $19 and $47,
respectively 550 522
Licenses and rights to
leases of licenses, $0
and $380, respectively 22,024 26,645
-------- --------
22,574 27,167
-------- --------
Total assets $248,838 $281,068
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to
stockholder $ 50,000 $ 53,000
Accounts payable 0 550
Accounts payable
- affiliate 10,069 10,069
Accrued interest 820 1,180
-------- --------
Total current
liabilities 60,889 64,799
-------- --------
STOCKHOLDERS' EQUITY
Common stock, $.0001 par
value, 100,000,000
shares authorized,
6,000,000 and 6,170,000
shares issued and out-
Standing, respectively 600 617
Additional paid-in
capital 189,528 299,511
Retained deficit ( 19) ( 22,999)
Subscriptions
receivable ( 2,160) ( 860)
Consulting and legal
services 0 ( 60,000)
-------- --------
187,949 216,269
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $248,838 $281,068
========= ========
The Notes to Consolidated Financial Statements are an integral
part of this statement.
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
Cumulative
Period Since
from Three Inception
Inception Months (November
(November Ended 1, 1996)
1, 1996)to to March to March
December 31, 1997 31, 1997
31, 1996 (unaudited) (unaudited)
Revenue $ 0 $ 224 $ 224
General and admini-
strative expenses 19 23,204 23,223
------- ------- -------
Net loss ($19) ($22,980) ($22,999)
------- ------- -------
Loss per common
share ($0.00) ($0.00) ($0.00)
======= ======= =======
The Notes to Consolidated Financial Statements are an integral
part of this statement.
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
PERIOD FROM INCEPTION (NOVEMBER 1, 1996) TO
DECEMBER 31, 1996 AND THREE MONTHS ENDED
MARCH 31, 1997 (unaudited)
Defi-
cit
Acc-
umu- Con-
lated sul-
Dur- ting
ing Stock and
the Sub- Legal
Addi- Dev- scrip- Ser-
tional elop- tions vices
Common Stock Paid-in ment Receiv- Agree-
Shares Amount Capital Stage able ment
--------- ------- -------- -------- -------- --------
Balance
at in-
cep-
tion
(Novem-
ber 1,
1996) $ 0 0 0 0 0 0
Issuance
of com-
mon st-
ock for
$1,800
subscr-
iption
receiv-
able
upon in-
corpor-
ation
of the
Company
on Nov-
ember
1, 1996 1,800,000 180 1,620 0 (1,800) 0
Sale of
common
stock
for $360
subscrip-
tion
receiv-
able on
November
15, 1996 360,000 36 324 0 (360) 0
Issuance
of common
stock for
assign-
ment of
licenses
and leases
on Decem-
ber 20,
1996 1,578,512 158 (158) 0 0 0
Issuance
of com-
mon stock
for as-
signment
of licen-
ses and
leases
on Decem-
ber 20,
1996 104,249 10 (10) 0 0 0
Issuance
of com-
mon stock
for the
acquisi-
tion of
Winter
Enter-
tainment,
Inc.,
effec-
tive Decem-
ber 31,
1996 227,336 23 16,097 0 0 0
Issuance
of com-
mon stock
for the
acquisi-
tion of
Missouri
Cable TV
Corp.
effec-
tive Decem-
ber 31,
1996 1,929,903 193 171,655 0 0 0
Net
loss 0 0 0 (19) 0 0
--------- --- ------- ----- ------ -------
Balance,
Decem-
ber, 31,
1996 6,000,000 600 189,528 (19) (2,160) 0
--------- --- ------- ----- ------ -------
Unaudited
Issuance
of com-
mon stock
for cash,
March 7,
1997 20,000 2 49,998 0 0 0
Payment
on sub-
scription
receiv-
able 0 0 0 0 1,300 0
Issuance
of com-
mon stock
for con-
sulting
and legal
services
agreement
dated
February
1, 1997,
valued at
$60,000 150,000 15 59,985 0 0 (60,000)
Net
loss 0 0 0 (22,980) 0 0
--------- --- ------- -------- ------ --------
Balance,
March 31
1997 $6,170,000 617 299,511 ($22,999) ($860) ($60,000)
========= ==== ======= ======== ==== ========
The Notes to Consolidated Financial Statements are an integral
part of this statement.
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
Cumulative
Period Since
from Three Inception
Inception Months (November
(November Ended 1, 1996)
1, 1996) March to March
December 31, 1997 31, 1997
31, 1996 (unaudited) (unaudited)
--------- ----------- -----------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss ($ 19) ($22,980) ($22,999)
-------- --------- ---------
Adjustment to
reconcile net
loss to net cash
used in operating
activities
Depreciation 0 176 176
Amortization 19 407 426
Decrease in
accounts
receivable 0 85 85
Increase in
prepaids 0 ( 910) ( 910)
Increase in
deferred
offering
costs 0 ( 699) ( 699)
Increase in
accounts
payable and
accruals 0 910 910
-------- --------- ---------
Net cash used
in operating
activities 0 ( 23,011) ( 23,011)
-------- --------- ---------
CASH FLOWS FROM
INVESTING ACTIVITIES
Cash acquired
in acquisition 14,502 0 14,502
Purchase of
equipment 0 ( 1,758) (1,758)
Investment in
joint venture 0 ( 2,500) ( 2,500)
Purchase of
licenses and
rights to
leases of
licenses 0 ( 5,000) ( 5,000)
-------- --------- ---------
Net cash (used
in) provided
by investing
activities 14,502 ( 9,258) 5,244
CASH FLOWS FROM
FINANCING ACTIVITIES
Increase in note
payable to
stockholder 0 3,000 3,000
Issuance of
common stock 0 50,000 50,000
Decrease in
subscriptions
receivable 0 1,300 1,300
-------- --------- ---------
Net cash provided
by financing
activities 0 54,300 54,300
-------- --------- ---------
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 three
months ended March 31, 1997 (unaudited) include 150,000 shares
issued for consulting and legal services to be performed
valued at $60,000.
The Notes to Consolidated Financial Statements are an integral
part of this statement.
<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 at historical cost.
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 or private 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.
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 the date of acquisition. 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.
Income Taxes
- ------------
The Company provides deferred taxes for the tax consequences
of temporary differences between the tax basis of assets and
liabilities and their reported amounts in the financial
statements. As of December 31, 1996, there are no significant
differences between financial statement and tax basis of
assets and liabilities that will result in taxable or
deductible amounts in the future.
As of March 31, 1997 (unaudited), there were no significant
deferred tax assets or liabilities.
Deferred Offering Costs
- -----------------------
Costs related to the Company's proposed public or private
offering of $15,238 are capitalized as deferred offering
costs. These costs will be offset against the proceeds of the
proposed offering upon its completion, as a charge to paid-in
capital, or expensed in the event the offering is
unsuccessful.
As of March 31, 1997 (unaudited), deferred offering costs were
$26,645.
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.
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 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. The consolidated statement of operations
includes only the Company, since the effective date of the
acquisition was the last day of the year. Proforma financial
information, as if the acquisition had occurred as of the
beginning of the year ended December 31, 1996, is as follows:
Revenue $ 3,337
Operating expense 4,787
----------
Operating loss ($ 1,450)
----------
General and
administrative
expenses 7,549
----------
Net loss ($ 8,999)
----------
Loss per common
share ($ 0.00)
==========
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 befiled within a
certain period prior to expiration.
NOTE 5. NOTES PAYABLE STOCKHOLDER
Notes payable to majority
stockholder, interest accrues
at 8%, due on demand and unsecured $50,000
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.
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 valued at $60,000.
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.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Director's and Stockholder
Missouri Cable TV Corporation
We have audited the accompanying balance sheet of Missouri
Cable TV Corporation, (a development stage company) as of
December 31, 1996 and the related statements of operations,
changes in stockholder's equity and cash flows for the period
from inception (October 9, 1996) to December 31, 1996. These
financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Missouri Cable TV Corporation as of December 31,
1996, and the results of its operations and its cash flows for
the period from inception (October 9, 1996) to December 31,
1996 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
As discussed in Note 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
<PAGE>
*** MISSOURI CABLE TV CORPORATION
(a development stage company)
BALANCE SHEET
December 31, March 31,
1996 1997
(unaudited)
------------ -----------
ASSETS
CURRENT ASSETS
Cash $ 13,742 $ 63
Due from affiliate 15,000 18,234
Prepaid expenses 0 910
--------- ---------
Total current assets 28,742 19,207
--------- ---------
PROPERTY AND EQUIPMENT 186,333 188,091
--------- ---------
LICENSES AND RIGHTS
TO LEASES OF LICENSES,
net of accumulated amorti-
zation of $225 and $492,
respectively 15,774 20,508
--------- ---------
Total assets $230,849 $227,806
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Note payable to
stockholder $ 50,000 $ 50,000
Accounts payable 8,181 8,181
Accrued interest 820 1,121
--------- ---------
Total current
liabilities 59,001 59,302
--------- ---------
STOCKHOLDER'S EQUITY
Common stock, no par value
1,800,000 shares author-
ized, issued and out-
standing 179,611 179,611
Deficit accumulated
during the development
stage ( 7,763) ( 11,107)
--------- ---------
171,848 168,504
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $230,849 $227,806
========= =========
The Notes to Financial Statements are an integral part of this
statement.
MISSOURI CABLE TV CORPORATION
(a development stage company)
STATEMENT OF OPERATIONS
Cumulative
Period Since
from Three Inception
Inception Months (October
(October Ended 9, 1996)
9, 1996)to March to March
December 31, 1997 31, 1997
31, 1996 (unaudited) (unaudited)
---------- ----------- -----------
Revenue $ 0 $ 0 $ 0
Operating expenses 225 0 225
-------- -------- --------
Operating loss ( 225) 0 ( 225)
-------- -------- --------
General and admini-
strative expenses 6,718 3,344 10,062
Interest expense 820 0 820
-------- -------- --------
Net loss ($7,763) ($3,344) ($11,107)
-------- -------- --------
Loss per common
share ($0.00) ($0.00) ($0.00)
======== ======== ========
The Notes to Financial Statements are an integral part of this
statement.
<PAGE>
MISSOURI CABLE TV CORPORATION
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
PERIOD FROM INCEPTION (OCTOBER 9, 1996) TO
DECEMBER 31, 1996 AND THREE MONTHS ENDED
MARCH 31, 1997 (unaudited)
Deficit
Accumulated
During the
Common Stock Development
Shares Amount Stage
------ ------ -----------
Balance at inception,
(October 9, 1996) 0 $ 0 $ 0
Contribution of
equipment for
common stock 1,800,000 179,611 0
--------- ------- --------
Net loss 0 0 (7,763)
--------- ------- --------
Balance, December
31, 1996 1,800,000 179,611 (7,763)
Unaudited
Net loss 0 0 (3,344)
--------- ------- --------
Balance, March 31,
1997 (unaudited) 1,800,000 $179,611 ($11,107)
========= ======== =========
The Notes to Financial Statements are an integral part of this
statement.
<PAGE>
MISSOURI CABLE TV CORPORATION
(a development stage company)
STATEMENT OF CASH FLOWS
PERIOD FROM INCEPTION (OCTOBER 9, 1996) TO
DECEMBER 3,1 1996 AND THREE MONTHS ENDED
MARCH 31, 1997 (unaudited)
Cumulative
Period Since
from Three Inception
Inception Months (October
(October Ended 9, 1996)
9, 1996)to March to March
December 31, 1997 31, 1997
31, 1996 (unaudited) (unaudited)
---------- ---------- ----------
CASH FLOWS FROM
OPERATINGACTIVITIES
Net loss ($7,763) ($3,344) ($11,107)
-------- -------- ---------
Adjustments to recon-
cile net loss to net
cash used in operat-
ing activities
Amortization 225 266 491
Increase in due from
affiliate (15,000) (3,234) (18,234)
Increase in pre-paids 0 (910) (910)
Increase in accounts
payable and accruals 9,001 301 9,302
-------- -------- ---------
Net cash used in
operating
activities (13,537) (6,921) (20,458)
-------- -------- ---------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of equipment (6,721) (1,758) (8,479)
Purchase of licenses
and rights to leases
of licenses (16,000) (5,000) (21,000)
-------- -------- ---------
Net cash used in
investing
activities (22,721) (6,758) (29,479)
-------- -------- ---------
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from
borrowings 50,000 0 50,000
-------- -------- ---------
Net cash provided
by financing
activities 50,000 0 50,000
Net increase
(decrease) in
cash 13,742 (13,679) 63
-------- -------- ---------
Cash at beginning
of period 0 13,742 0
-------- -------- ---------
Cash at end
of period $13,742 $ 63 $ 63
======= ======== ========
NONCASH INVESTING
ACTIVITIES
Contribution of
equipment
for common stock ($179,611) $ 0 ($179,611)
The Notes to Financial Statements are an integral part of this
statement.
<PAGE>
MISSOURI CABLE TV CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS, ORGANIZATION
AND BASIS OF PRESENTATION
Missouri Cable TV Corporation (MCTV), was incorporated in the
state of Louisiana on October 9, 1996 to operate in the
wireless cable television industry. The original stockholders
contributed equipment to MCTV upon incorporation on October 9,
1996 in exchange for all of the common shares of MCTV. MCTV
owns licenses or rights to leases of licenses to 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.
Effective December 31, 1996, the Company was acquired by Media
Entertainment, Inc. (Media). The stockholders of MCTV
exchanged their shares of MCTV for stock in Media. The
majority stockholder of MCTV at the time of the exchange is
also the majority stockholder of Media. MCTV will operate as
a wholly owned subsidiary of Media pursuant to the
acquisition.
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 or private offerings.
Managementintends to use a portion of the proceeds from
financing to begin marketing and installation activities and
to provide working capital. Management believes that these
actions will enable the Company to carry out its business plan
and ultimately to achieve profitable operations.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
Income Taxes
- ------------
The Company provides deferred taxes for the tax consequences
of temporary differences between the tax basis of assets and
liabilities and their reported amounts in the financial
statements. As of December 31, 1996, there are no significant
differences between financial statement and tax basis of
assets and liabilities that will result in taxable or
deductible amounts in the future.
As of March 31, 1997 (unaudited), there were no significant
deferred tax assets or liabilities.
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.
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
- ------------
Licenses and rights to leases of licenses are being amortized
on a straight-line basis over the licenses and lease rights
periods of 5 to 15 years.
Recently Issued Pronouncements
- ------------------------------
The FASB has also 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 period 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.
NOTE 3. FINANCIAL INSTRUMENTS
Financial instruments of the Company as of March 31, 1997
(unaudited) and December 31, 1996, consist principally of
cash, due from affiliate, accounts payable and note payable to
stockholder. Recorded values approximate fair values due to
the short maturities of these instruments.
NOTE 4. LICENSES AND RIGHTS TO LEASES OF LICENSES
The Company owns licenses or rights to leases of licenses in
the following wireless cable markets:
Wireless Cable Market Expiration Date
--------------------- ---------------
Poplar Bluff, Missouri October 16, 2006
Lebanon, Missouri October 16, 2006
Application for renewal of the license must be filed within a
certain period prior to expiration.
NOTE 5. NOTES PAYABLE - STOCKHOLDER
December March 31,
31, 1996 1997
(unaudited)
-------- -----------
Notes payable to majority
stockholder, interest
accrues at 8%, due on
demand and unsecured $50,000 $50,000
NOTE 6. RELATED PARTY TRANSACTIONS
Due from affiliate at December 31, 1996 consists of $15,000
advance to Winter Entertainment, Inc., a company related
through common ownership.
Due from affiliate as of March 31, 1997 (unaudited), consists
of advances to Winter Entertainment, Inc. and to Media of
$15,000 and $3,234, respectively.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Director's and Stockholder
Winter Entertainment, Inc.
We have audited the accompanying balance sheets of Winter
Entertainment Inc., (a development stage company) as of
December 31, 1996 and 1995 and the related statements of
operations, changes in stockholder's equity and cash flows
for the year ended December 31, 1996 and the period from
inception (December 28, 1995) to December 31, 1995. These
financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Winter Entertainment, Inc. as of December 31, 1996
and 1995, and the results of its operations and its cash flows
for the year ended December 31, 1996 and the period from
inception (December 28, 1995) to December 31, 1995 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
As discussed in Note 1 to the financial statements, the
Company is in its development stage and has insignificant
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
<PAGE>
WINTER ENTERTAINMENT, INC.
(a development stage company)
BALANCE SHEETS
December December March
31, 1995 31, 1996 31, 1997
(unaudited)
--------- --------- -----------
ASSETS
CURRENT ASSETS
Cash $ 0 $ 760 $ 702
Due from affiliate 0 15,997 16,212
-------- -------- ----------
Total current assets 0 16,757 16,914
-------- -------- ----------
PROPERTY AND EQUIPMENT
Broadcast equipment,
net of accumulated
depreciation of $0,
$706 and $882,
respectively 10,587 9,881 9,705
-------- -------- ----------
LICENSE, net of accumul-
ated amortization of
$0, $500, and $613,
respectively 6,750 6,250 6,137
-------- -------- ----------
Total Assets $17,337 $32,888 $32,756
======== ======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 0 $ 1,768 $ 1,768
Due to affiliate 0 15,000 15,000
-------- -------- ----------
Total current
liabilities 0 16,768 16,768
-------- -------- ----------
STOCKHOLDER'S EQUITY
Common stock, no par
value, 1,500 shares
authorized, issued
and outstanding 17,337 17,337 17,337
Deficit accumulated
during the develop-
ment stage 0 ( 1,217) ( 1,349)
-------- -------- ----------
17,337 16,120 15,988
-------- -------- ----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $17,337 $32,888 $32,756
======== ======= =========
The Notes to Financial Statements are an integral part of
these statements.
<PAGE>
WINTER ENTERTAINMENT, INC.
(a development stage company)
STATEMENTS OF OPERATIONS
Cumulative
Period Since
from Three Inception
Inception Months (November
(December Year Ended 1, 1996)
28, 1995) Ended March to March
to December December 31, 1997 31, 1997
31, 1995 31, 1996 (unaudited) (unaudited)
---------- --------- ---------- ----------
Revenue $ 0 $ 3,337 $ 224 $ 3,561
Operating
Expenses 0 4,543 0 4,543
--------- --------- --------- ---------
Operating
income (loss) 0 (1,206) 224 (982)
--------- --------- --------- ---------
General and
administrative
expenses 0 11 356 367
--------- --------- --------- ---------
Net income
(loss) $ 0 ($1,217) ($ 132) ($1,349)
--------- ---------- --------- ---------
Loss per
common share $ 0 ($0.81) ($0.09) ($0.90)
========= ========== ========= ========
The Notes to Financial Statements are an integral part of
these statements.
<PAGE>
WINTER ENTERTAINMENT, INC.
(a development stage company)
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
PERIOD FROM INCEPTION (DECEMBER 28, 1995) TO
DECEMBER 31, 1995, YEAR ENDED DECEMBER 31, 1996,
AND THREE MONTHS ENDED MARCH 31, 1997 (unaudited)
Deficit
Accumulated
During the
Common Stock Development
Shares Amount Stage
------ ------ -----------
Balance at inception,
(December 28, 1995) 0 $ 0 $ 0
Contribution of
equipment for
common stock 1,500 17,337 0
-------- -------- -----------
Net loss 0 0 0
-------- -------- -----------
Balance, December
31, 1995 1,500 17,337 0
-------- -------- -----------
Net loss 0 0 (1,217)
-------- -------- -----------
Balance, December
31, 1996 1,500 17,337 (1,217)
-------- -------- -----------
Unaudited
Net loss 0 0 (132)
-------- -------- -----------
Balance, March
31, 1997 1,500 $17,337 ($1,349)
======== ======== ==========
The Notes to Financial Statements are an integral part of
these statements.
<PAGE>
WINTER ENTERTAINMENT, INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
Cumulative
Period Since
from Three Inception
Inception Months (November
(December Year Ended 1, 1996)
28, 1995) Ended March to March
to December December 31, 1997 31, 1997
31, 1995 31, 1996 (unaudited) (unaudited)
----------- -------- ---------- -----------
CASH FLOWS
FROM OPERAT-
ING ACTIVITIES
Net income
(loss) $ 0 ($ 1,217) ($ 132) ($ 1,349)
-------- --------- --------- ----------
Adjustment to
reconcile net
income (loss)
to net cash
provided by
operating
activities
Depreciation
and amort-
ization 0 1,206 289 1,495
Increase in
accounts
receivable 0 (15,997) (215) (16,212)
Increase in
accounts
payable 0 1,768 0 1,768
Increase in
due to
affiliate 0 15,000 0 15,000
-------- --------- --------- ----------
Net cash
provided
by operat-
ing activ-
ities 0 760 (58) 702
-------- --------- --------- ----------
Net increase
(decrease)
in cash 0 760 (58) 702
-------- --------- --------- ----------
Cash at begin-
ning of period 0 0 760 0
-------- --------- --------- ----------
Cash at end
of period 0 760 702 702
-------- --------- --------- ----------
NONCASH INVESTING
ACTIVITIES
Contribu-
tion of
equipment
and license
agreement
for common
stock $17,337 0 0 0
The Notes to Financial Statements are an integral part of
these statements.
<PAGE>
WINTER ENTERTAINMENT, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS, ORGANIZATION
AND BASIS OF PRESENTATION
Winter Entertainment, Inc. (WEI), was incorporated in the
State of Delaware on December 28, 1995, to operate as a
community television station in Baton Rouge, Louisiana. The
original stockholder contributed equipment and a license
agreement to WEI upon incorporation on December 28, 1995 in
exchange for all of the common shares of WEI. Operations did
not commence until February of 1996, therefore, no operations
were shown prior to that date.
Effective December 31, 1996, the Company was acquired by Media
Entertainment, Inc. (Media). The sole stockholder of WEI
exchanged his shares of WEI for stock in Media. The sole
stockholder of WEI at the time of the exchange is also the
majority stockholder of Media. WEI will operate as a wholly
owned subsidiary of MEDIA pursuant to the acquisition.
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 or private offerings. Management
intends to use a portion of the proceeds from financing to
increase the broadcast signal of the Company's community
television station and to provide it with working capital.
Management believes that these actions will enable the Company
to carry out its business plan and ultimately to achieve
profitable operations.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
Income Taxes
- ------------
The Company provides deferred taxes for the tax consequences
of temporary differences between the tax basis of assets and
liabilities and their reported amounts in the financial
statements. As of December 31, 1996, there are no significant
differences between financial statement and tax basis of
assets and liabilities that will result in taxable or
deductible amounts in the future. As of March 31, 1997
(unaudited), there were no significant deferred tax assets or
liabilities.
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.
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
- ------------
Licenses are being amortized on a straight-line basis over the
license period of 5 years.
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 period 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.
NOTE 3. FINANCIAL INSTRUMENTS
Financial instruments of the Company consist principally of
cash, accounts receivable and accounts payable. Recorded
values approximate fair values due to the short maturities of
these instruments.
NOTE 4. LICENSES AND RIGHTS TO LEASES OF LICENSES
The Company owns a license to community television channels in
Baton Rouge, Louisiana which expires on July 1, 2007.
Application for renewal of the license must be filed within a
certain period prior to expiration.
NOTE 5. RELATED PARTY TRANSACTIONS
Due from affiliate consists primarily of legal fees paid on
behalf of Media, the Company's parent. Due to affiliate of
$15,000 consists of an advance to the Company from Missouri
Cable TV Corporation, a company related through common
ownership.
Due from affiliate as of March 31, 1997 (unaudited), consists
of legal fees paid on behalf of Media. Due to affiliate of
$15,000 consists of an advance to the Company from Missouri
Cable TV Corporation.
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
inwhich the person making such offer of solicitation is not qualified to do
soor to anyone to whom it is unlawful to make such offer or 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
360,000 Shares
Common Stock
$.0001 par value
MEDIA ENTERTAINMENT, INC.
-------------------
PROSPECTUS
-------------------
________ , 1997
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.
+ 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.
# 22.1 Subsidiaries of Registrant.
* 24.1 Consent of Weaver and Tidwell,
L.L.P., independent auditor.
# 24.2 Consent of Newlan & Newlan,
Attorneys at Law.
________________
# Filed previously.
* Filed herewith.
+ To be filed by amendment.
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 May 27, 1997.
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin
President
Pursuant to the requirements of the Securities Act of 1933,
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 May 27, 1997
David M. Loflin Executive Officer and
Principal Accounting
Officer) and Director
/s/ Waddell D. Loflin Vice President, May 27, 1997
Waddell D. Loflin Secretary and
Director
/s/ Richard N. Gill Director May 27, 1997
Richard N. Gill
/s/ Ross S. Bravata Director May 27, 1997
Ross S. Bravata
/s/ Michael Cohn Director May 27, 1997
Michael Cohn
<PAGE>
---------------------------------
EXHIBIT 23.1
---------------------------------
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the
incorporation by reference in this Form S-1 Registration
Statement of our reports dated April 3, 1997, relating to (1)
the consolidated financial statements of Media Entertainment,
Inc. and Subsidiaries, for the period from inception (November
1, 1996 to December 31, 1996, (2) the financial statements of
Winter Entertainment, Inc. for the year ended December 31,
1996, and the period from inception (December 28, 1995) to
December 31, 1995, and (3) the financial statements of
Missouri Cable TV Corp. for the period from inception (October
9, 1996) to December 31, 1996, included in the Form S-1
Registration Statement. We also consent to the reference to
this firm under the heading "Experts" in this Registration
Statement.
/s/
WEAVER & TIDWELL, L.L.P.
Certified Public Accountants
Fort Worth, Texas
May 27, 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> 30050 53605
<PP&E> 196214 197796
<DEPRECIATION> 0 176
<TOTAL-ASSETS> 248838 281068
<CURRENT-LIABILITIES> 60889 64799
<BONDS> 0 0
0 0
0 0
<COMMON> 600 617
<OTHER-SE> 187349 215652
<TOTAL-LIABILITY-AND-EQUITY> 248838 281068
<SALES> 0 224
<TOTAL-REVENUES> 0 224
<CGS> 0 0
<TOTAL-COSTS> 19 23204
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> (19) (22980)
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (19) (22980)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (19) (22980)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (19) (22980)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
