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 Industrial (IRS Employer
Jurisdiction of Classification Code Number) Identification No.)
incorporation or
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/
CALCULATION OF REGISTRATION FEE
Title of
each Proposed Proposed
class of maximum maximum
securities Amount offering aggregate Amount of
to be to be price per offering registration
registered registered unit price fee
Common 360,000 (1) (1) (1)
Stock, shares
$.0001
par 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.
- -----------------------------------
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
Registration Statement
and Outside Front
Cover Page Outside Front Cover
of Prospectus Page of Prospectus
2. Inside Front and
Outside Back Inside Front Cover Page;
Cover Pages Outside Back Cover
of Prospectus Page; Table of Contents
3. Summary Information,
Risk Factors and
Ratio of Earnings Prospectus Summary; The
to Fixed Charges Company; Risk Factors
4. Use of Proceeds Use of Proceeds
5.Determination of Distribution of Securities
Offering Price of the Company
6. Dilution Dilution
7. Selling Securityholders Not Applicable
8. Plan of Distribution Distribution of Securities
of the Company
9. Description of Securities
to be Registered Description of Securities
10.Interest of Named
Experts Not Applicable
11. Information with
Respect to the
Registrant Prospectus Summary; The
Company; Risk Factors;
Dilution; Use of Proceeds;
Distribution of Securities
of the Company; Dividends;
Capitalization; Selected Financial
Data; Management's Discussion
and Analysis of Financial
Condition and Results of
Operations; Regulation; Business;
Management; Certain Transactions;
Principal Shareholders; Litigation;
Description of Securities; Legal
Matters; Experts; Financial Statements
12. Disclosure of
Commission Position Management - Indemnification of
on Indemnification Directors and Officers
for Securities Act
Liabilities
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 (AECA@), of 360,000 shares of the
$.0001
par value common stock (the ACommon Stock@) of Media Entertainment,
Inc., a Nevada corporation (the ACompany"), as a dividend to the holders
of
record of ECA common stock on March 15, 1997. (See Ainformation
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 AFederal 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 ABusiness@).
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 Aaffiliates@ 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 AAct@), 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 AUse 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 AFederal 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 ARisk Factors@).
OWNERSHIP OF COMMON STOCK OF THE COMPANY INVOLVES
A DEGREE OF RISK. SEE ARISK FACTORS@ FOR A DISCUSSION
OF
PARTICULAR INVESTMENT RISKS.
The date of this Prospectus is -------------, 1997
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
ACommission@) a Form S-1 Registration Statement (herein, together with
all
amendments thereto, called the ARegistration Statement@) of which this
Prospectus constitutes a part, under the Securities Act of 1933, as
amended,
and the Rules and Regulations promulgated thereunder (the AAct@), 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 (AWEI@), and
(2)
Missouri Cable TV Corp., a Louisiana corporation incorporated on
October
9, 1996 (AMCTV@). 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 AWeb One Wireless I.S.P. - Baton Rouge, J.V.@) (the AJoint
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 ACompany@ include WEI, MCTV and the
Joint Venture, unless the context indicates otherwise. (See Athe
Company@,
ABusiness@ and ACertain 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 AInformation 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 ADistribution of Securities of
the Company@).
For information regarding the federal income tax consequences of the
proposed dividend distribution, see AFederal Income Taxes@ herein.
Use of Proceeds
Neither the Company nor ECA will receive any proceeds from the dividend
distribution described herein. (See AUse 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 AManagement@).
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 AHistory@ under ABusiness@).
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 AWeb 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 ABusiness@). References
to the ACompany@ 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 Asafe
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 AHistory@ under ABusiness@).
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
to 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 AManagement=s Discussion
and Analysis of Financial Condition and Results of Operations@ and
AManagement@).
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 Asuper 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 AManagement@ and
APrincipal 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
AManagement=s Discussion and Analysis of Financial Condition and Results
of Operations@ and ABusiness@).
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 ABusiness@).
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 ABusiness - Wireless Cable - Competition@
under ABusiness@).
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 ARegulation@).
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 ABusiness - Wireless Cable - Programming@ under
ABusiness@).
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 ABusiness -
Wireless Cable - Competition@ under ABusiness@).
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 Aline-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 Abeambenders@. 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 Aline-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 ABusiness -
Wireless
Cable - Company Markets@ under ABusiness@).
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 AWireless Cable@
under ARegulation@).
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 ABusiness@).
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 ABusiness -
Community (Low Power) Television - Competition@ under ABusiness@).
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 ACommunity (Low
Power)
Television@ under ARegulation@).
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 ABusiness - Wireless Internet - Competition@ under ABusiness@)
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 ADividends@).
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 ALegal 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 AService@) 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 AFederal
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 AFederal 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 AMulka, 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
AEntertainment 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 Club7, 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 (AKLS@), to its shareholders as a property dividend. The
common stock of KLS currently trades on the OTC Electronic Bulletin
Board
under the symbol AKLSE@. 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 ARisks Concerning the Common
Stock - Absence of Trading Market for the Common Stock@ under ARisk
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 AInformation
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 ARisks Concerning the
Common Stock - Dividend Policy@ under ARisk 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 AManagement's
Discussion and Analysis of Financial Condition and Results of Operations@.
STATEMENT OF OPERATIONS DATA:
The
Company MCTV
For the For the
Period Period Pro
From From WEI Forma
Inception Inception For the For the
(11/1/96) (10/9/96) Year Year
Thru Thru Ended 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 as at
3/31/97 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 AWeb 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 ABusiness@). 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 (AFiscal
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 ABusiness -
Community (Low Power) Television - Business Strategy@ under
ABusiness@).
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 (AInterim 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 AWeb One Wireless I.S.P. - Baton Rouge, J.V.@ (the
Joint
Venture) with Web One, Inc. (AWeb 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. (AOpen 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, WA 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
Number of Appraised Value
Community 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. (ABSI@), 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 ACertain
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 ARisks Concerning the
Company - Need for Future Financing@ under ARisk 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 ARisks
Concerning the Company - Need for Further Financing@ under ARisk
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 Aexecutive Compensation@ under Amanagement@).
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 ANewlan Agreement@) with its legal
counsel,
Newlan & Newlan, Attorneys at Law. (See ALegal 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 ALegal 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 AStock Purchase@ under ACertain 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 Awindow@ system for new
multichannel
MDS (MMDS) applications. The FCC=s selection among more than one
acceptable MMDS applications filed during the same filing window was
determined by a lottery. Generally, once an MMDS application is selected
by the FCC and the applicant resolves any deficiencies identified by the
FCC,
a conditional license is issued, allowing construction of the station to
commence. Construction generally must be completed within one year of
the
date of grant of the conditional license, in the case of MMDS channels, or
19
months, in the case of ITFS channels. ITFS and MMDS licenses generally
have terms of 10 years. Licenses must be renewed and may be revoked for
cause in a manner similar to other FCC licenses. FCC rules prohibit the
sale
for profit of an MMDS conditional license or of a controlling interest in the
conditional license holder prior to construction of the station or, in certain
instances, prior to the completion of one year of operation. The FCC,
however, does permit the leasing of 100% of an MMDS license holder=s
spectrum capacity to a third party and the granting of options to purchase a
controlling interest in a license, once the required license holding period
has
lapsed and certain other conditions are met.
Application for renewal of MDS and ITFS licenses must be filed within a
certain period prior to expiration of the license term, and petitions to deny
applications for renewal may be filed during certain periods following the
filing of such applications. Licenses are subject to revocation or
cancellation
for violations of the Communications Act or the FCC=s rules and policies.
Conviction of certain criminal offenses may also render a licensee or
applicant unqualified to hold a license.
Wireless cable transmissions are governed by FCC regulations governing
interference and reception quality. These regulations specify important
signal
characteristics such as modulation (e.g., AM/FM) or encoding formats
(e.g.,
analog or digital).
The FCC also regulates transmitter locations and signal strength. The
operation of a wireless cable system requires the collection of a
commercially
viable number of channels operating with common technical characteristics.
In order to commence operations in a particular market, the Company may
be required to file applications with the FCC to modify licenses for unbuilt
stations. In applying for these modifications, the Company must
demonstrate
that its proposed signal does not violate interference standards in the FCC-
rotected 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 Aeffective 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 Amust 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 Asmall 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 Aright of way@ to cross municipal streets, such
operators
must acquire a municipal franchise and pay municipal franchise fees. Since
wireless cable uses FCC approved frequencies, no municipal right of way is
required. Accordingly, wireless cable operators are not subject to
municipal
franchise fees. Hard-wire cable operators are also required to set aside
public
access channels for municipal and local resident use. Wireless cable
operators are not subject to such requirements.
Wireless cable license holders are subject to regulation by the FAA with
respect to the construction of transmission towers and to certain local
zoning
regulations affecting construction of towers and other facilities. There may
also be restrictions imposed by local authorities. There can be no
assurance
that the Company will not be required to incur additional costs in
complying
with such regulations and restrictions.
Community (Low Power) Television
General. Television broadcasting operations are subject to the jurisdiction
of
the FCC under the Communications Act. The Communications Act
empowers the FCC, among other things, to issue, revoke or modify
broadcast
licenses, to assign frequencies, to determine the locations of stations, to
regulate the broadcasting equipment used by stations, to establish areas to
be
served, to adopt such regulations as may be necessary to carry out the
provisions of the Communications Act and to impose certain penalties for
violation of its regulations. The Company=s currently operating community
television station, as well as any future stations, is subject to a wide range
of
technical, reporting and operational requirements imposed by the
Communications Act and by FCC rules and policies.
The Communications Act provides that a license may be granted to any
applicant if the public interest, convenience and necessity will be served
thereby, subject to certain limitations, including the requirement that the
FCC
allocate licenses, frequencies, hours of operation and power in a manner
that
will provide a fair, efficient and equitable distribution of service throughout
the United States. Television licenses generally are issued for five-year
terms. Upon application, and in the absence of a conflicting application
that
would require the FCC to hold a hearing, or questions as to the licensee=s
qualifications, television licenses have usually been renewed for additional
terms without a hearing by the FCC. An existing license automatically
continues in effect once a timely renewal application has been filed until a
final FCC decision is issued.
Under existing FCC regulations governing multiple ownership of broadcast
stations, a license to operate a television or radio station generally will not
be
granted to any party (or parties under common control) if such party
directly
or indirectly owns, operates, controls or has an attributable interest in
another
television or radio station serving the same market or area. The FCC,
however, is favorably disposed to grant waivers of this rule for certain
radio
station-television station combinations in the top 25 television markets, in
which there will be at least 30 separately owned, operated and controlled
broadcast licenses, and in certain other circumstances.
FCC regulations further provide that a broadcast license will not be granted
if that grant would result in a concentration of control of radio and
television
broadcasting in a manner inconsistent with the public interest, convenience
or necessity. FCC rules generally deem such concentration of control to
exist
if any party, or any of its officers, directors or shareholders, directly or
indirectly, owns, operates, controls or has an attributable interest in more
than
12 television stations, or in television stations capable of reaching, in the
aggregate, a maximum of 25% of the national audience. This percentage is
determined by the DMA market ranking of the percentage of the nation=s
television households considered within each market. Because of certain
limitations of the UHF signal, however, the FCC will attribute only 50% of
a market=s DMA reach to owners of UHF stations for the purpose of
calculating the audience reach limits. The Company will not approach such
limits for the foreseeable future. To facilitate minority group participation
in radio and television broadcasting, the FCC will allow entities with
attributable ownership interests in stations controlled by minority group
members to exceed the ownership limits.
The FCC=s multiple ownership rules require the attribution of the licenses
held by a broadcasting company to its officers, directors and certain of its
shareholders, so there would ordinarily be a violation of FCC regulations
where an officer, director or such a shareholder and a television
broadcasting
company together hold interests in more than the permitted number of
stations or more than one station that serves the same area. In the case of
a
corporation controlling or operating television stations, such as the
Company,
there is attribution only to shareholders who own 5% or more of the voting
stock, except for institutional investors, including mutual funds, insurance
companies and banks acting in a fiduciary capacity, which may own up to
10% of the voting stock without being subject to such attribution, provided
that such entities exercise no control over the management or policies of
the
broadcasting company.
The FCC has recently begun a proceeding to consider liberalization of the
various TV ownership restrictions described above, as well as changes (not
all of which would be liberalizing in effect) in the rules for attributing the
licenses held by an enterprise to various parties. The Company is unable to
predict the outcome of these proceedings.
The Communications Act and FCC regulations prohibit the holder of an
attributable interest in a television station from having an attributable
interest
in a cable television system located within the coverage area of that station.
FCC regulations also prohibit the holder of an attributable interest in a
television station from having an attributable interest in a daily newspaper
located within the predicted coverage area of that station.
The Communications Act limits the amount of capital stock that aliens may
own in a television station licensee or any corporation directly or indirectly
controlling such licensee. No more than 20% of a licensee=s capital stock
and, if the FCC so determines, no more than 25% of the capital stock of a
company controlling a licensee, may be owned or voted by aliens or their
representatives. Should alien ownership exceed this limit, the FCC may
revoke or refuse to grant or renew a television station license or approve
the
assignment or transfer of such license.
The Communications Act prohibits the assignment of a broadcast license or
the transfer of control of a licensee without the prior approval of the FCC.
Legislation was introduced in the past that would impose a transfer fee on
sales of broadcast properties. Although that legislation was not adopted,
similar proposals, or a general spectrum licensing fee, may be advanced and
adopted in the future. Recent legislation has imposed annual regulatory
fees
applicable to the Company.
The foregoing does not purport to be a complete summary of all of the
provisions of the Communications Act or regulations and policies of the
FCC
thereunder. Reference is made to the Communications Act, such
regulations
and the public notices promulgated by the FCC.
Other Regulations. The Federal Trade Commission, among other
regulatory
agencies, imposes a variety of requirements that affect the business and
operations of broadcast stations. From time to time, proposals for
additional
or revised requirements are considered by the FCC, numerous other
Federal
agencies and Congress. The Company is unable to predict future Federal
requirements or what impact, if any, any such requirements may have on
Company television stations.
BUSINESS
History
The Company was organized in November 1996 to act as a holding
company
primarily in the wireless cable and community (low power) television
industries. To this end, the Company has acquired Winter Entertainment,
Inc. (WEI), which owns and operates a community (low power) television
station in Baton Rouge, Louisiana, and Missouri Cable TV Corp. (MCTV),
which owns the licenses necessary to operate wireless cable systems in
Poplar Bluff and Lebanon, Missouri, has acquired licenses and leases of
licenses necessary to operate wireless cable systems in Port Angeles,
Washington, Astoria, Oregon, Sand Point, Idaho, The Dalles, Oregon, and
Fallon, Nevada, and has acquired licenses necessary to operate community
(low power) television stations in Monroe/Rayville, Louisiana, Bainbridge,
Georgia, and Natchitoches, Louisiana. In January 1997, the Company
entered into a joint venture (known as AWeb 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 ACompany@ 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-
ire 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 Acable
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-
ransmitting 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 Apay-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-
elease 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 Aaddressable
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. AAddressability@ 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
ABusiness 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 ARisk 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 ACompany 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 Aaddressable@. 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 Ainfomercials@, 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
Estimated Total
Total Line-of-Sight 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,
WA 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 Aline-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 AManagement=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 Atelco-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
Avideo 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 ABusiness 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 ABusiness
Strategy@ hereunder, as well as AManagement=s Discussion and Analysis of
Financial Condition and Results of Operations@).
Community Television Industry Trends
The Company believes that community television is in the right position at
a very dynamic time in the television broadcasting market place. With the
ever-growing number of cable (hard-wire and wireless) channels in most
markets, coupled with the lack of programming available for channel slots
past the 70-channel mark, there appears to be room available on such cable
systems for additional stations. This availability of channel room on cable
systems has the effect of giving community television far greater area
coverage than could be achieved solely by broadcasting a signal. The
potential for community television stations to achieve historically high
revenues exists, if a particular market and/or region can be exploited
effectively. There is no assurance that the Company will be able to exploit
each of its community television markets.
Business Strategy
It is the Company=s current intention for each of its community television
stations, as soon as it becomes operational, to become an affiliate of the
Video Catalog Channel, a merchandise sales operation. It is the
Company=s
experience, from the operations of its Baton Rouge, Louisiana, community
television station, that this strategy generates positive cash flow, from
inception of broadcasting. From such financial position, a station=s
advertising sales efforts will be increased in an effort to exploit such
station=s
coverage area. Also, the Company will attempt to secure a channel on
each
of the cable systems within a particular market. There is no assurance that
the Company will be able to exploit effectively any of its community
television markets. It is possible that one or more of the Company=s
community television stations could, in the future, become an affiliate of
one
of the national networks, such as FOX, UPN or WB. However, no
prediction
in this regard can be made.
Company Markets
General. The Company currently operates a community television
station
in Baton Rouge, Louisiana, and holds the rights to community television
stations in other cities, as follows:
Estimated
Total Total
City Population Households Channel
- ------------- ------------- -------------- ----------
Baton
Rouge, LA 637,555 252,106 13
Monroe/
Rayville, LA 235,394 92,900 26
Bainbridge,
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 ARisk Concerning Community (Low Power)
Television - Competition@ under ARisk 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 ABusiness
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 ACompetition@ 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 ARisk Factors
Concerning Wireless Internet - Competition@ under ARisk 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
- ----------- ------ ----------------
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.
(AGulf-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 AWeb
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, LA 26
Natchitoches, LA 38
Wireless Cable Market Channels
- ---------------------------- -----------
Port Angeles, WA H1-2-3
Astoria, Oregon H2-3
Sand Point, UT B1-2-3; C1-2-3
The Dalles, OR B1-2-3; C1-2-3
Fallon, NV 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 AAppraisal@), delivered to the Company by Broadcast Services
International, Inc., Sacramento, California. (See AAppraisal@ 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 AWEI 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 AMCTV 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
Address Shares Shares
of Bene- Owned Owned
ficial Bene- % Bene- %
Owner ficially Owned ficially 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
Corporation
of America 360,000 5.83% --- ---
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 ACode@), various regulations promulgated pursuant
to
the Code, interpretations published by the Internal Revenue Service (the
AService@) and court decisions.
This section was prepared by the law firm of Newlan & Newlan
(ACounsel@)
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 ACode@). 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, Afair 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 Afair
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
2875
F-2
<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
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 amortization
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 outstanding,
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.
F-3
<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 March to March
December 31. 1997 31, 1997
31, 1996 (unaudited) (unaudited)
Revenue $ 0 $ 224 $ 224
General and
administra-
tive 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.
F-4
<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)
Deficit
Accumu-
lated Consult-
During ing
the Stock and
Additional Develop- Subscrip- Legal
Common Stock Paid-in ment tions Agree-
Shares Amount Capital Stage Receivable ment
Balance
at incep-
tion (Nov-
ember 1,
1996) 0 $ 0 $ 0 $ 0 $ 0 $ 0
Issuance
of common
stock for
$1,800 sub-
scription
receivable
upon
incorpor-
ation of
the Com-
pany on
November
1, 1996 1,800,000 180 1,620 0 ( 1,800) 0
Sale of
common
stock
for $360
subscrip-
tion re-
ceivable
on Nov-
ember 15,
1996 360,000 36 324 0 ( 360) 0
Issuance of
common
stock for
assignment
of licenses
and leases
on Decem-
ber 20,
1996 1,578,512 158 ( 158) 0 0 0
Issuance of
common
stock
for assign-
ment of
licenses
and leases
on Decem-
ber 20,
1996 104,249 10 ( 10) 0 0 0
Issuance of
common
stock
for the
acquisition
of Winter
Entertain-
ment, Inc.,
effective
December
31, 1996 227,336 23 16,097 0 0 0
Issuance of
common
stock
for the
acquisition
of Missouri
Cable TV
Corp.
effective
December
31, 1996 1,929,903 193 171,655 0 0 0
Net loss 0 0 0 ( 19) 0 0
Balance,
December,
31, 1996 6,000,000 600 189,528 ( 19) ( 2,160) 0
Unaudited
Issuance of
common
stock for
cash,
March 7,
1997 20,000 2 49,998 0 0 0
Payment on
subscription
receivable 0 0 0 0 1,300 0
Issuance of
common
stock for
consulting
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 7,
1997 6,170,000 $617 $299,511 ($22,999)($860) ($60,000)
The Notes to Consolidated Financial Statements are
an integral part of this statement.
F-5
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
Cumulative
Period Since
from Three Inception
Inception Months (November
(November Ended 1, 1996)
1, 1996) to March to March
December 31. 1997 31, 1997
31, 1996 (unaudited) (unaudited)
CASH FLOWS
FROM OPERAT-
ING ACTIVI-
TIES
Net loss ($ 19) ($22,980) ($22,999)
Adjustment
to recon-
cile net
loss to
net cash
used in
operating
activities
Depreciation 0 176 176
Amortization 19 407 426
Decrease in
accounts
receivable 0 85 85
Increased 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 acqui-
sition 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 invest-
ing activ-
ities 14,502 ( 9,258) 5,244
CASH FLOWS FROM
FINANCING
ACTIVITIES
Increase in
note payable
to stock
holder 0 3,000 3,000
Issuance of
common
stock 0 50,000 50,000
Decrease in
subscrip-
tions
receivable 0 1,300 1,300
Net cash
provided
by financ-
ing activi-
ties 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.
F-6
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS, ORGANIZATION
AND BASIS OF PRESENTATION
Media Entertainment, Inc., (MEI) was
incorporated in the State of Nevada on November
1, 1996, to operate as a holding company in the
wireless cable television and community (low
power) television industries, as well as other
segments of the communications industry.
Effective December 31, 1996, MEI acquired all
of the outstanding common stock of Winter
Entertainment, Inc., a Delaware corporation
incorporated on December 28, 1995 (WEI), and
Missouri Cable TV Corp., a Louisiana
corporation incorporated on October 9, 1996
(MCTV). WEI operates a community television
station in Baton Rouge, Louisiana; MCTV owns
wireless cable television channels in Poplar
Bluff, Missouri, which system has been
constructed and is ready for operation, and
Lebanon, Missouri, which has yet to be
constructed. The acquisition of WEI and MCTV
by Media was accounted for as a reorganization
of companies under common control 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.
F-7
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Principles of Consolidation
The accompanying consolidated financial
statements include all the accounts of MEI
and its wholly owned subsidiaries, WEI and
MCTV, since 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.
F-8
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - continued
Loss Per Common Share
Loss per common share is computed based on
the loss for the period divided by the
weighted average number of common shares
outstanding during the period.
Amortization
Organization costs are being amortized on a
straight-line basis over 60 months. Licenses
and rights to leases of licenses will be
amortized on a straight-line basis over the
license and lease rights periods expected to
be 5 to 15 years.
NOTE 3. ACQUISITIONS
Effective December 31, 1996, the Company
acquired WEI and MCTV by issuing 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)
F-9
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. LICENSES AND RIGHTS TO LEASES OF
LICENSES
The Company owns licenses or rights to leases of
licenses in the following wireless cable and
community television markets:
Wireless Cable Market Expiration Date
Poplar Bluff, Missouri October 16, 2006
Lebanon, Missouri October 16, 2006
Port Angeles, Washington December 21, 2003
Astoria, Oregon December 21, 2003
Sand Point, Idaho August 09, 2006
The Dalles, Oregon August 09, 2006
Fallon, Nevada August 09, 2006
Community Television Market
Baton Rouge, Louisiana July 01, 2007
Monroe/Rayville, Louisiana July 01, 2007
Natchitoches, Louisiana July 01, 2007
Bainbridge, Georgia July 01, 2007
Application for renewal of licenses must be
filed within a certain period prior to
expiration.
NOTE 5. NOTES PAYABLE STOCKHOLDER
Notes payable to
majority 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.
F-10
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. SUBSEQUENT EVENTS - continued
In addition, the Company entered into an
agreement with Open Net, Inc. whereby the
Company has an exclusive right of first refusal
to utilize Open Net's wireless internet access
system in several U.S. cities. The Company
must pay to Open Net $50,000 for each such
system purchased by the Company.
Since December 31,1996, the Company has issued
150,000 shares of common stock to prepay legal
services 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.
F-11
<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
2893
F-12
<PAGE>
MISSOURI CABLE TV CORPORATION
(a development stage company)
BALANCE SHEET
March 31,
December 31, 1997
1996 (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
amortization 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 authorized,
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.
F-13
<PAGE>
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
administra-
tive
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.
F-14
<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 equip-
ment 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.
F-15
<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
OPERATING
ACTIVITIES
Net loss ($7,763) ($3,344) ($11,107)
Adjustments
to recon-
cile net
loss to
net cash
used in
operating
activities
Amorti-
zation 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 financ-
ing activ-
ities 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 ACTIVATES
Contribution
of equipment
for common
stock ($179,611) $ 0 ($179,611)
The Notes to Financial Statements are an integral
part of this statement.
F-16
<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.
F-17
<PAGE>
MISSOURI CABLE TV CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - continued
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.
F-18
<PAGE>
MISSOURI CABLE TV CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
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.
F-19
<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
2882
F-20
<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
accumulated
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 out-
standing 17,337 17,337 17,337
Deficit
accumulated
during the
development
stage 0 ( 1,217) ( 1,349)
17,337 16,120 15,988
TOTAL LIABILITIES
AND STOCK-
HOLDER'S EQUITY $17,337 $32,888 $32,756
The Notes to Financial Statements are an integral
part of these statements.
F-21
<PAGE>
WINTER ENTERTAINMENT, INC.
(a development stage company)
STATEMENTS OF OPERATIONS
Cumulative
Period Since
From Inception
Inception Three (December
(December Months 28, 1995)
(28, 1995) Year Ended to Decem-
to Decem- Ended March ber 31,
ber 31, December 31, 1997 March 31
(unaudited) 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
administra-
tive
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.
F-22
<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.
F-23
<PAGE>
WINTER ENTERTAINMENT, INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
Cumulative
Period Since
From Inception
Inception Three (December
(December Months 28, 1995)
(28, 1995) Year Ended to Decem-
to Decem- Ended March ber 31,
ber 31, December 31, 1997 March 31
(unaudited) 31,1996 (unaudited)(unaudited)
CASH
FLOWS
FROM
OPERAT-
ING ACT-
IVITIES
Net
income
(loss) $ 0 ($1,217) ($132) ($1,349)
Adjustment
to
reconcile
net income
(loss) to
net cash
provided
by
operating
activities
Depreciation
and amor-
tization 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
operating
activities 0 760 (58) 702
Net increase
(decrease)
in cash 0 760 (58) 702
Cash at
beginning
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.
F-24
<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.
F-25
<PAGE>
WINTER ENTERTAINMENT, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
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.
F-26
<PAGE>
WINTER ENTERTAINMENT, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
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.
F-27
<PAGE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in
thisProspectus in connection with the offering described herein, and, if
given ormade, such information or representations must not be relied upon
as havingbeen authorized by the Company. This Prospectus does not
constitute anoffer to sell or a solicitation of an offer to buy any securities
offered herebyin 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 F-1
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 ANevada 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 Reorgainzation, 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, Secretary May 27, 1997
Waddell D. Loflin 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
---------------------------------
EXHIBIT 24.1
---------------------------------
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 AExperts@ in this Registration Statement.
/s/
WEAVER & TIDWELL, L.L.P.
Certified Public Accountants
Fort Worth, Texas
May 27, 1997
