SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------
FORM S-1/A
Registration Statement
under
The Securities Act of 1933
Media Entertainment, Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 4841 72-1346591
(STATE OR OTHER (PRIMARY STANDARD (IRS EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSI- IDENTIFICATION
INCORPORATION FICATION CODE NUMBER)
OR ORGANIZATION) NUMBER)
8748 Quarters Lake Road, Baton Rouge, Louisiana 70809
(504) 922-7744
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICE)
David M. Loflin
President
Media Entertainment, Inc.
8748 Quarters Lake Road, Baton Rouge, Louisiana 70809
(504) 922-7744
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
Eric Newlan, Esq.
NEWLAN & NEWLAN
2512 Program Drive
Suite 101
Dallas, Texas 75220
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement
becomes effective.
If any securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, check the following
box: /X/
<PAGE>
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------
Title of Proposed Proposed
each class maximum maximum
securities Amount offering aggregate Amount of
to be to be price per offering registration
registered registered unit pricefee
- ---------- ---------- --------- --------- ------------
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, $.029
per share, or $172,711 in the aggregate.
(2) Previously paid.
The Registrant hereby amends this Registration Statement on
such date as may be necessary to delay its effective date
until Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
<PAGE>
MEDIA ENTERTAINMENT, INC.
Cross Reference Sheet
(Pursuant to Rule 404 and
Item 501(b) of Regulation S-K)
Item in Form S-1 Caption or Heading in Prospectus
1.Forepart of the Outside Front Cover Page of
Registration Statement Prospectus
and Outside Front
Cover Page of
Prospectus
2.Inside Front and Inside Front Cover Page; Outside
Outside Back Cover Back Cover Page; Table of
Pages of Prospectus Contents
3.Summary Information, Prospectus Summary; The Company;
Risk Factors and Risk Factors
Ratio of Earnings
to Fixed Charges
4.Use of Proceeds Use of Proceeds
5.Determination of Distribution of Securities of
Offering Price the Company
6.Dilution Dilution
7.Selling Security- Not Applicable
holders
8.Plan of Distribution Distribution of Securities of
the Company
9.Description of Description of Securities
Securities to be
Registered
10.Interest of Named Legal Matters
Experts
11.Information with
Respect to the
Registrant Prospectus Summary; The Company;
Risk Factors; Dilution; Use of
Proceeds; Distribution of
Securities of the Company;
Dividends; Capitalization;
Selected Financial Data;
Management's Discussion and
Analysis of Financial Condition
and Results of Operations; Regu-
lation; Business; Management;
Certain Transactions; Principal
Shareholders; Litigation;
Description of Securities; Legal
Matters; Experts; Financial
Statements
12.Disclosure of Management - Indemnification of
Position on Directors and Officers
Indemnification
for Securities Act
Liabilities<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED JULY 18, 1997
360,000 Shares
Media Entertainment, Inc.
Common Stock
$.0001 par value
This Prospectus relates to the distribution by Entertainment
Corporation of America, a Delaware corporation ("ECA"), of
360,000 shares of the $.0001 par value common stock (the
"Common Stock") of Media Entertainment, Inc., a Nevada
corporation (the "Company"), as a dividend to the holders of
record of ECA common stock on March 15, 1997. (See
"Information Concerning ECA").
Certificates evidencing 360,000 shares of the Common Stock
of the Company will be distributed by mail within a
reasonable time after the date of this Prospectus on the
basis of .0732824 of a share of the Company's Common Stock
for each share of the outstanding common stock of ECA.
Holders of ECA Common Stock will not be charged or assessed
for the Common Stock of the Company distributed to them as a
dividend and the shareholders will be taxed on receipt of
such dividend to the extent of the value of the shares
received. Under the laws of the State of Delaware, the
state of incorporation of ECA, the distribution of the
360,000 shares of the Common Stock of the Company will be a
dividend out of capital surplus. (See "Federal Income
Taxes").
The Company was incorporated on November 1, 1996, and, on
November 15, 1996, issued to ECA 360,000 shares of its
$.0001 par value Common Stock for a cash consideration of
$360.00. There exist no affiliations between ECA and the
Company. The Company was organized with a view toward
operating as a holding company in the wireless cable
television and community (low power) television industries,
as well as other segments of the communications industry.
The Company intends to operate its business through
subsidiary corporations. (See "Business").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus does not cover resales of Common Stock of
the Company by persons who are deemed to be "affiliates" of
the Company under the Rules and Regulations of the
Securities and Exchange Commission. Any and all shares of
Common Stock of the Company received by an affiliate of the
Company as a dividend must either be registered under the
Securities Act of 1933, as amended (the "Act"), prior to
resale, or sold in compliance with Rule 144 under the Act or
pursuant to another exemption from registration.
The Company is bearing the expenses of the registration and
distribution of the Company's Common Stock. Neither the
Company nor ECA will receive any cash or other proceeds in
connection with the distribution of the Company's Common
Stock to the shareholders of ECA. (See "Use of Proceeds").
There are no underwriting arrangements made with respect to
the proposed distribution transaction to the knowledge of
the Company. Certain information concerning the federal
income tax consequences of the dividend distribution is set
forth herein under "Federal Income Taxes".
As of the date of this Prospectus, there has been no trading
market for the Company's Common Stock. There can be no
assurance that a trading market will develop or, if such
should develop, that such market will be maintained. (See
"Risk Factors").
OWNERSHIP OF COMMON STOCK OF THE COMPANY INVOLVES A DEGREE
OF RISK. SEE "RISK FACTORS", BEGINNING ON PAGE 3, FOR A
DISCUSSION OF PARTICULAR INVESTMENT RISKS.
The date of this Prospectus is -------------, 1997<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY
JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
This Prospectus contains information concerning the
Company as of the date of this Prospectus, unless otherwise
indicated. The delivery of this Prospectus at any time does
not constitute a representation that the information
contained herein is correct as of any date other than the
date of this Prospectus, unless otherwise indicated, and the
delivery of this Prospectus shall not create any implication
that there has been no change in the business or affairs of
the Company since such date.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange
Commission (the "Commission") a Form S-1 Registration
Statement (herein, together with all amendments thereto,
called the "Registration Statement") of which this
Prospectus constitutes a part, under the Securities Act of
1933, as amended, and the Rules and Regulations promulgated
thereunder (the "Act"), with respect to the Common Stock to
be distributed hereunder. This Prospectus omits certain
information contained in the Registration Statement, and
reference is made to the Registration Statement, including
the exhibits thereto, for further information with respect
to the Company and the securities offered hereunder.
Statements contained in this Prospectus as to the contents
of any contract or other document are summaries that are not
necessarily complete, and, in each instance, reference is
made to the copy of such contract or other document filed as
an exhibit to the Registration Statement, each such
statement herein being qualified and amplified in all
respects by such reference. Items of information omitted
from this Prospectus but contained in the Registration
Statement may be obtained from the Securities and Exchange
Commission, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon the payment of the fee
prescribed by the Rules and Regulations of the Commission or
may be examined without cost. Also, the Registration
Statement, with exhibits, may be examined on and/or
downloaded from the Internet at:
http://www.sec.gov/cgi-bin/srch-edgar.
PROSPECTUS SUMMARY
The Company
The Company was incorporated in the State of Nevada on
November 1, 1996, to operate as a holding company in the
wireless cable television and community (low power)
television industries, as well as other segments of the
communications industry. Effective December 20, 1996, the
Company acquired from certain of its officers and directors
and others licenses and leases of licenses to wireless cable
television channels and community (low power) television
channels. As of December 31, 1996, the Company acquired all
of the outstanding capital stock of (1) Winter
Entertainment, Inc., a Delaware corporation incorporated on
December 28, 1995 ("WEI"), and (2) Missouri Cable TV Corp.,
a Louisiana corporation incorporated on October 9, 1996
("MCTV"). WEI operates a community television station in
Baton Rouge, Louisiana; MCTV owns wireless cable television
channels in Poplar Bluff, Missouri, which system has been
constructed and is ready for operation, and Lebanon,
Missouri, which market's system has yet to be constructed.
In January 1997, the Company entered into a joint venture
(known as "Web One Wireless I.S.P. - Baton Rouge, J.V.")
(the "Joint Venture") which is to operate as a Wireless
Internet Service Provider (ISP) in Baton Rouge, Louisiana,
and acquired the right to utilize, on an exclusive basis, a
licensed Wireless Internet Access System in operating as a
Wireless ISP in several U.S. cities. The Company carries on
its business through its subsidiaries. References to the
"Company" include WEI, MCTV and the Joint Venture, unless
the context indicates otherwise. (See the "Company",
"Business" and "Certain Transactions").
Distribution of Securities of the Company
The Company presently has outstanding 6,170,000 shares of
Common Stock, $.0001 par value per share, of which 360,000
shares are held by Entertainment Corporation of America, a
Delaware corporation (ECA). Pursuant to this Prospectus,
ECA will distribute 360,000 shares of the Company's Common
Stock as a dividend to the shareholders of record of ECA as
of March 15, 1997. (See "Information Concerning ECA").
After such dividend distribution, the Company will be owned
by the persons and entities who were shareholders of record
of ECA on March 15, 1997, as to 360,000 shares and by those
persons and entities owning shares of Common Stock as of the
date of this Prospectus as to 5,810,000 shares. On March
15, 1997, there were approximately 900 shareholders of ECA;
therefore, the Company will have approximately 925
shareholders after the distribution of Company Common Stock
by ECA to its shareholders.
Certificates evidencing 360,000 shares of the Common Stock
of the Company will be distributed to holders of ECA Common
Stock of record as of March 15, 1997, by mail within a
reasonable time after the date of this Prospectus on the
basis of .0732824 of a share of Company Common Stock for
each share of ECA Common Stock. (See "Distribution of
Securities of the Company").
For information regarding the federal income tax
consequences of the proposed dividend distribution, see
"Federal Income Taxes" herein.
Use of Proceeds
Neither the Company nor ECA will receive any proceeds from
the dividend distribution described herein. (See "Use of
Proceeds").
Management
The directors of the Company are David M. Loflin, Waddell D.
Loflin, Richard N. Gill, Ross S. Bravata and Michael Cohn.
David M. Loflin is President of the Company and Waddell D.
Loflin is Vice President and Secretary of the Company. (See
"Management").
THE COMPANY
Media Entertainment, Inc. (the Company) was incorporated
under the laws of the State of Nevada on November 1, 1996,
primarily for the purpose of acquiring the rights to various
wireless cable television channels and various community
(low power) television channels, and, thereafter, to operate
as a holding company in the wireless cable television and
community (low power) television industries, as well as
other segments of the communications industry. Effective
December 31, 1996, Winter Entertainment, Inc. (WEI) and
Missouri Cable TV Corp. (MCTV) became wholly-owned
subsidiaries of the Company pursuant to separate
stock-for-stock reorganizations. WEI is a predecessor of
the Company. (See "History" under "Business"). The Company
has begun to engage in the development of wireless cable
television systems and the construction of community (low
power) television stations. The Company also is seeking to
acquire broadcast channels in other, as yet unidentified,
cities throughout the United States. In January 1997, the
Company entered into a joint venture (known as "Web One
Wireless I.S.P. - Baton Rouge, J.V.") (the Joint Venture)
which is to operate as Wireless Internet Service Provider
(ISP) in Baton Rouge, Louisiana, and the Company has
acquired the rights to utilize, on an exclusive basis, a
licensed Wireless Internet Access System in operating as a
Wireless ISP in several U.S. cities, including, among
others, Seattle, Washington, Portland, Oregon, New Orleans,
Louisiana, and Dallas and Houston, Texas. The Company
anticipates that it will enter other segments of the
communications industry as opportunities become available.
(See "Business"). References to the "Company" include WEI,
MCTV and the Joint Venture, unless the context indicates
otherwise.
The Company's headquarters is located at 8748 Quarters Lake
Road, Baton Rouge, Louisiana 70809. Its telephone number is
(504) 922-7744; its facsimile number is (504) 922-9123.
RISK FACTORS
The Common Stock of the Company should be considered an
investment involving a degree of risk. Factors which
holders and prospective purchasers of Common Stock should
weigh carefully include the following:
Risks Concerning the Company
Limited Operating History. The Company has only
recently begun to engage in business activities. The
Company's operations, and proposed operations, are subject
to all of the risks inherent in the establishment of a new
business, particularly one in the highly competitive
communications industry. The likelihood of the success of
the Company must be considered in light of the problems,
expense, difficulties, complications and delays frequently
encountered in connection with establishing a new business,
including, without limitation, market acceptance of the
Company's services, regulatory problems, unanticipated
expenses and competition. There is no assurance that the
proposed business activities of the Company will be
successful or that the Company will ever earn a profit from
such proposed activities. (See "History" under "Business").
Going Concern Opinion. The Company's independent
auditor, Weaver and Tidwell, L.L.P., expressed, in its
opinion on the Company's audited financial statements,
substantial doubt about the Company's ability to continue as
a going concern. Reference is made to the financial
statements of the Company included elsewhere herein, and,
specifically, to the Independent Auditor's Report and Note 1
to the financial statements of the Company.
Dependence on Management. The Company is dependent on
its current management for its success. In particular, the
Company is dependent on the efforts of its President, David
M. Loflin, for its success. Mr. Loflin expects to devote
not less than 75% of his time to the business of the Company
during the initial stages of development, which amount of
time is expected o be adequate. The Company and Mr. Loflin
have not entered into an employment agreement, nor has any
key-man life insurance been purchased with respect to Mr.
Loflin or any other members of the Company's management.
However, it is anticipated that the Company and Mr. Loflin
will execute a written employment agreement in the near
future, although no assurance in this regard can be given.
The Company's success is also dependent upon its ability to
attract and retain qualified employees to meet the Company's
needs during its growth. (See "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
and "Management").
Control of the Company. After giving effect to the
distribution of the Company's Common Stock by ECA, the
Company's directors and executive officers will own
approximately 81.13% of the Company's outstanding shares of
Common Stock. Accordingly, these shareholders will continue
to be able to elect the Company's directors and thereby
control the management policies of the Company, as well as
determine the outcome of corporate actions requiring
shareholder approval by majority, or so-called "super
majority", action, regardless of how other shareholders of
the Company may vote. Such ownership of Common Stock may
have the effect of delaying, deferring or preventing a
change in control of the Company and may adversely affect
the voting rights of other holders of Common Stock. (See
"Management" and "Principal Shareholders").
Conflicts of Interest and Related Transactions. It is
possible that conflicts of interest could arise in the
negotiation of the terms of any transaction between the
Company and its shareholders, officers, directors or
affiliates. The Company has no plans or arrangements, such
as the hiring of independent consultants or arbiters, for
the resolution of disputes between the Company and such
persons if they arise. The Company and its public
shareholders could be adversely affected, should such
individuals choose to place their own interests before those
of the Company. No assurance can be given that conflicts of
interest will not cause the Company to lose potential
opportunities, profits or management attention. The Company
could acquire channel licenses or other assets from
management, principal shareholders or their affiliates or
from entities in which management, principal shareholders or
their affiliates may hold an interest. Such persons or
entities could derive monetary or other benefits from such
transactions. Such benefits could include, without
limitation, the assumption of, or release from, liabilities
incurred by such persons or result in increased control of
the Company by such persons.
The Company's President, David M. Loflin, owns a
television station, WTVK Channel 11, in Baton Rouge,
Louisiana, which operates in competition with the Company's
Baton Rouge community television station, K13VE Channel 13.
It is possible that Mr. Loflin's ownership of a competing
television station will result in a conflict of interest for
Mr. Loflin, particularly with respect to obtaining
advertisers. Mr. Loflin intends to resolve any such
conflict that may arise in accordance with his fiduciary
duty and duty of loyalty to the Company. There is no
assurance that Mr. Loflin will be able to resolve any such
conflict of interest to the Company's benefit.
To date, substantially all of the Company's assets have
been acquired from affiliates. In December 1996, the
Company acquired certain wireless cable and community (low
power) television assets from two of the Company's
directors, David M. Loflin and Waddell D. Loflin.
Specifically, the Company acquired wireless cable rights in
Port Angeles, Washington, Astoria, Oregon, Sand Point,
Idaho, The Dalles, Oregon, and Fallon, Nevada, and community
(low power) television channels in Monroe/Rayville,
Louisiana, Natchitoches, Louisiana, and Bainbridge, Georgia,
in exchange for a total of 1,682,761 shares of Company
Common Stock. Further, effective December 31, 1996, the
Company acquired all of the stock of WEI, a company formerly
100% owned by Mr. David Loflin, in exchange for 227,336
shares of Company Common Stock. Also effective December 31,
1996, the Company acquired all of the stock of MCTV in
exchange for shares of Company Common Stock. Pursuant to
the MCTV acquisition, Mr. David Loflin received, as a
shareholder of MCTV, 1,179,389 shares of Company Common
Stock, Mr. Ross S. Bravata, a director of the Company,
received, as a shareholder of MCTV, 42,887 shares of Company
Common Stock and Mr. Michael Cohn, a director of the
Company, received, as a shareholder of MCTV, 53,608 shares
of Company Common Stock. At the time of the MCTV
acquisition, neither of Messrs. Bravata and Cohn was a
director of the Company.
Need for Future Financing. The Company is in need of
additional financing to complete construction and
exploitation of its proposed wireless cable systems
(approximately $200,000 per system), community (low power)
television channels (approximately $50,000 per channel) and
Wireless ISP markets (approximately $175,000 per market).
The Company does not have a bank line-of-credit and there
can be no assurance that any required or desired financing
will be available, through bank borrowings, debt or equity,
or otherwise, on acceptable terms. To the extent that
future financing requirements are satisfied through the
issuance of equity securities, investors may experience
significant dilution in the net book value per share of
Common Stock. Any future debt incurred by the Company could
result in a substantial portion of the Company's cash flow
from operations being dedicated to the payment of principal
and interest on such indebtedness and may render the Company
more vulnerable to competitive pressures and economic
downturns. The Company's future capital requirements will
depend upon a number of factors, many of which are not
within the Company's control, including programming costs,
capital costs, marketing expenses, staffing levels,
subscriber growth and competitive factors. A failure by the
Company to secure such additional financing would render the
Company unable to exploit its channel licenses and leases of
channel licenses. In addition, the Company is in need of
additional financing to exploit its Wireless ISP business
opportunities. There is no assurance that the Company will
be able to secure such additional financing or, if found,
that such financing would be on terms favorable to the
Company. (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and
"Business").
Uncertainty of Significant Assumptions. The Company's
plans for implementing its proposed business operations and
achieving profitability from its intended operations are
based on the experience, judgment and certain assumptions of
its management, and upon certain available information
concerning the communications industry, in general, and the
Company's proposed plan of operation, in particular. No
independent market studies have been conducted concerning
the extent to which customers will utilize the services and
products to be offered by the Company, nor are any such
studies planned. There can be no assurance that the
Company's plans will materialize, or that the Company's
assumptions will prove correct. (See "Business").
Lack of Patent Protection. The Company has no material
proprietary technology or software. As a result, there are
no technological or patent barriers to entry by other
companies into the Company's areas of endeavor.
Risks Concerning Wireless Cable
Competition. The pay television industry is highly
competitive. Wireless cable systems face competition from
several sources, including, among others, hard-wire cable
companies, Satellite Master Antenna Television systems,
Direct Broadcast Satellite and other alternative methods of
distributing and receiving television transmissions.
Further, premium movie services offered by cable television
systems have encountered significant competition from the
home VCR industry. In areas where several local off-air
VHF/UHF broadcast signals can be received without the
benefit of cable television, cable television systems
(hard-wire and wireless) also have experienced competition
from the availability of broadcast signals generally and
have found market penetration to be difficult. In addition,
within each market, the Company initially must compete with
others to acquire, from the limited number of channel
licenses issued, rights to a minimum number of channels
needed to establish a viable system. Legislative,
regulatory and technological developments may result in
additional and significant competition, including
competition from local telephone companies and from a
proposed new wireless service known as local multi-point
distribution service. However, new digital compression
technologies may have the effect of allowing the Company to
compete in a particular market having acquired only two or
three channel licenses. Because the Company intends to
target its initial marketing effort in each of its markets
to households that are unpassed by hard-wire cable and that
have limited access to local off-air VHF/UHF broadcast
channels, the Company does not anticipate, during start-up,
significant direct competition from local hard-wire cable
companies. No assurance can be given, however, that the
Company will not face direct competition from hard-wire
cable companies in the future. It can be expected that
potential competitors of the Company will have greater
resources, financial and otherwise, than the Company. Also,
legislative, regulatory and technological developments may
result in additional and significant new competition,
including competition from local telephone companies. No
assurances can be given that the Company will compete
successfully in its wireless cable markets. (See "Business
- - Wireless Cable - Competition" under "Business").
Dependence upon Frequencies; No Automatic Renewal of
Licenses. The use of frequencies is subject to regulation
by the FCC, and, therefore, the ability of the Company's
wireless cable systems to utilize such channels is dependent
upon continuing compliance by the Company (or third-party
lessors) with such applicable regulations as the FCC may
adopt from time to time. FCC licenses for wireless cable
frequencies must be renewed periodically and there is no
automatic renewal of such licenses. If the underlying FCC
licenses are cancelled or not renewed, or if leases are
terminated or not renewed, the Company's wireless cable
systems would be unable to deliver programming on such
frequencies, which could have a materially adverse effect on
the Company. (See "Regulation").
Dependence Upon Programming Availability. The
Company's wireless cable systems must obtain contracts with
various program suppliers for non-broadcast programming
services (such as ESPN, HBO, CNN and MTV). The likelihood
that program material will be unavailable to the Company is
significantly mitigated by the Cable Act and various FCC
regulations issued thereunder, which, among other things,
impose limits on exclusive programming contracts and
generally prohibit cable programmers in which a cable
operator has an attributable interest from discriminating
against cable competitors with respect to the price, terms
and conditions of sale of programming. There is,
nevertheless, no assurance that any programming source will
be available to the Company's wireless cable systems or, if
available, that it will be available at reasonable prices or
will be acceptable to subscribers. (See "Business -
Wireless Cable - Programming" under "Business").
Impediments to Proposed Expansion. The Company has
adopted a business strategy which includes, in part, growth
through the development of additional wireless cable
systems. The Company's proposed expansion will be dependent
on, among other things: the availability of channel license
rights on terms and conditions acceptable to the Company, if
at all; successful development and construction of operating
systems; the availability of suitable management and other
personnel; the Company's general ability to manage growth;
and the availability of adequate financing. The Company's
management will be responsible for the selection of
expansion opportunities in its sole discretion and
shareholders will not be presented with advance information
regarding expansion opportunities or the ability to approve
or disapprove system expansion opportunities. There can be
no assurance that the Company will be successful in its
proposed business strategy.
Uncertainties Associated with Wireless Cable. The
Company has only recently entered the wireless cable
industry and has not yet launched its initial commercial
broadcast. Due to this lack of operating history, the
Company's growth can be expected to face unanticipated
impediments, costs and competitive factors in connection
with the expansion of the business, including changes in
laws or regulations, technological advances, the
availability of funding for future subscriber growth and the
impact of new competitors for subscribers. There is no
assurance that the Company will be able to compete
successfully in its wireless cable markets. (See "Business
- - Wireless Cable - Competition" under "Business").
Physical Limitations of Wireless Cable Transmission.
The vast majority of wireless cable programming is
transmitted through the air via microwave frequencies (2500
to 2700 MHZ) from a transmission facility to a small
receiving antenna at each subscriber's location, which
generally requires a direct "line-of-sight" from the
transmission facility to the subscriber's receiving antenna.
Therefore, in communities with tall trees, hilly terrain,
tall buildings or other obstructions in the transmission
path, wireless cable transmission can be difficult or
impossible to receive at certain locations without the use
of signal repeaters known as "beambenders". The terrain in
the Company's markets is generally conducive to wireless
cable transmission and the Company does not presently
anticipate any material use of beambenders. Nevertheless,
because hard-wire cable systems deliver the signal to a
subscriber's location through a network of coaxial cable and
amplifiers and do not require a direct line-of-site, it is
possible that a particular hard-wire cable system may have a
competitive advantage over the Company in those areas where
the reception of wireless cable transmission is difficult.
In addition, extremely adverse weather can damage
transmission and receiving antennas, as well as
transmit-site equipment. However, the Company does not
believe such potential damage represents a material risk.
A small number of wireless cable systems utilize
several low power television stations, built-out for
wireless cable operations, within a particular market to
broadcast programming to a small receiving antenna at each
subscriber's location. Because the programming of such a
wireless cable system is broadcast by low power television
stations rather than via microwave frequencies, most
"line-of-sight" limitations usually associated with wireless
cable are eliminated. Two of the Company's markets, Poplar
Bluff and Lebanon, Missouri, are designed in such a manner.
The Company's management intends to develop as many markets
as possible in this manner, because of management's belief
that this style of wireless cable system is superior to the
"traditional" wireless cable system structure. However, no
assurance can be made in this regard. (See "Business -
Wireless Cable - Company Markets" under "Business").
Government Regulation. The wireless cable industry is
highly regulated. The right to transmit on wireless cable
channels is regulated by the FCC and the retransmission of
local off-air VHF/UHF broadcasts is regulated by the U.S.
Copyright Office, pursuant to the Copyright Act.
Pursuant to the Cable Act, the FCC adopted rate
regulations relating exclusively to hard-wire cable systems,
which regulations provide for, among other things,
reductions in the basic service and equipment rates charged
by most hard-wire cable operators and FCC oversight of rates
for all other services and equipment. The Cable Act also
provides for rate deregulation of a hard-wire cable operator
in a particular market, once there is "effective
competition" in that market. Effective competition is
deemed to exist when, among other circumstances, another
cable operator exceeds a 15% penetration in that market.
The Company cannot predict precisely what effect these
regulations or further governmental regulations may have on
hard-wire cable operators as to price and service. While
current FCC regulations are intended to promote the
development of a competitive pay television industry, the
rules and regulations affecting the wireless cable industry
may change, and any future changes in FCC rules,
regulations, policies and procedures could have an adverse
effect on the wireless cable industry, as a whole, and on
the Company, in particular.
Secondary transmission of a broadcast signal is
permissible only if approved by the copyright holder or if
subject to compulsory licensing under the Copyright Act.
The U.S. Copyright Office has taken the position that,
effective January 1, 1995, wireless cable operators, unlike
hard-wire cable operators, will not be "cable systems"
entitled to a compulsory license under the Copyright Act.
Pursuant to the Cable Act, local broadcasters may now
require that wireless cable operators obtain their consent
before retransmitting local off-air VHF/UHF broadcasts. The
Wireless Cable Association International does not believe
that retransmission consents are applicable to wireless
cable system operators. However, the Company intends,
nonetheless, to seek to obtain such consents in each of its
markets where the Company may retransmit on a wireless cable
channel. There can be no assurance that the Company will be
able to obtain such consents on terms satisfactory to the
Company, if required.
Wireless cable operators are also subject to regulation
by the FAA with respect to the construction of transmission
towers and to certain local zoning regulations affecting
construction of towers and other facilities. There may also
be restrictions imposed by local authorities. There can be
no assurance that the Company will not be required to incur
substantial additional costs in complying with such
regulations and restrictions. (See "Wireless Cable" under
"Regulation").
Difficulties and Uncertainties of a New Industry.
Wireless cable television is a relatively new industry with
a short operating history. Potential investors should be
aware of the difficulties and uncertainties that are
normally associated with new industries, such as lack of
consumer acceptance, difficulty in obtaining financing,
increasing competition, advances in technology and changes
in laws and regulations. There is no assurance that the
wireless cable industry will, in general, and the Company,
in particular, develop and survive over the long term. (See
"Business").
Risks Concerning Community (Low Power) Television
Competition. Community (low power) television stations
compete for advertising revenue in their respective markets,
primarily with other broadcast television stations and cable
television channels, and compete with other advertising
media, as well. Such competition is intense. In addition,
competition for programming, management personnel and
network affiliations is severe. There is no assurance that
the Company's community television channels, once built, of
which there is no assurance, will be able to compete
effectively in their respective markets. (See "Business -
Community (Low Power) Television - Competition" under
"Business").
Government Regulation. Television broadcasting
operations are subject to the jurisdiction of the FCC under
the Communications Act. The Communications Act empowers the
FCC to issue, revoke or modify broadcast licenses, to assign
frequencies, to determine the locations of stations, to
regulate the broadcasting equipment used by stations, to
establish areas to be served, to adopt such regulations as
may be necessary to carry out the provisions of the
Communications Act and to impose certain penalties for
violation of its regulations. The Company's currently
operating television station is, and the Company's future
television stations will be, subject to a wide range of
technical, reporting and operational requirements. There is
no assurance that the Company will be able to comply with
such requirements in the future. Similarly, the Federal
Trade Commission, among other regulatory agencies, imposes a
variety of requirements that affect the business and
operations of broadcast stations. Proposals for additional
or revised requirements are considered from to time by the
FCC, other regulatory agencies and Congress. The Company is
unable to predict what new or revised Federal requirements
may result from such consideration or what impact, if any,
such requirements might have upon the operation of a
television station operated by the Company. (See "Community
(Low Power) Television" under "Regulation").
Risks Concerning Wireless Internet
Competition. The Company intends to operate as a
Wireless Internet Service Provider (ISP) in numerous U.S.
cities. Competition among traditional (telephone-line
dependent) ISP businesses is intense, with price and ease of
Internet access being primary points of competition.
Because many of the Company's potential competitors may
possess greater resources, financial and otherwise, than
does the Company, there is no assurance that the Company
will be able to attract customers for its Wireless ISP
services. Thus, it is possible that the Company will be
unsuccessful in establishing its Wireless ISP business in
one or more of its proposed Wireless ISP markets. (See
"Business - Wireless Internet - Competition" under
"Business")
New Product; Possible Lack of Consumer Acceptance. The
Company intends to be the first Wireless ISP in each of its
proposed markets. While the Company expects that its
Wireless ISP service will be readily accepted by consumers,
as with any new product or service, there can be no
assurance that the Company's Wireless ISP service will be
accepted by consumers in commercially viable numbers.
Risks Concerning the Common Stock
Dividend Policy. The Company does not anticipate the
payment of cash dividends in the foreseeable future, but
intends to re-invest any profits which may be earned by the
Company's business. (See "Dividends").
Absence of Trading Market for the Common Stock. No
market for trading the Common Stock of the Company currently
exists and there is no assurance that a market ever will
develop or, should such ever be established, that it will be
maintained. Additionally, the Company does not expect that
its Common Stock will be eligible for listing on any
exchange or on the NASDAQ National Market System for the
foreseeable future.
Possible Volatility of Market for Common Stock. The
market prices for securities of newly public companies have,
historically, been highly volatile. Future announcements
concerning the Company or its competitors, including
operating results, technological innovations and government
regulations, could have a significant impact on the market
price of the Common Stock of the Company, increasing
possible volatility.
Market Overhang; Restricted Securities. 5,810,000
shares, or 94.16%, of the outstanding shares of Common Stock
of the Company, after the dividend distribution of Common
Stock to the shareholders of ECA, will be owned by the
current shareholders of the Company. Such shares of Common
Stock will be eligible for resale to the public beginning in
November 1997, pursuant to the provisions of Rule 144 of the
Rules and Regulations of the Commission. Such amount of
Common Stock may represent a significant overhang on the
market for the Common Stock, if any develops. Such overhang
on the market for the Common Stock could, if a substantial
number of shares comprising such overhang were sold in a
short period of time, depress the then-current market price
for the Common Stock of the Company. However, no prediction
as to the effect of such overhang on the market for the
Common Stock of the Company can be made.
In general, under Rule 144, as currently in effect, a
person (or persons whose shares are aggregated) who has
beneficially owned his or her restricted stock for at least
one year, including persons who may be deemed "affiliates"
of the Company, as that term is defined under the Act,
would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of 1% of
the then-outstanding shares of the Company's Common Stock
(approximately 61,700 shares based on the current number of
outstanding shares) or the average weekly trading volume of
trading on all national securities exchanges and/or reported
through the automated quotation system of a registered
securities association of the Company's Common Stock during
the four calendar weeks preceding the filing of the Form 144
with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice
requirements, and to the availability of current public
information about the Company. However, a person who is not
deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has
beneficially owned his or her restricted shares for at least
two years, would be entitled to sell such shares under Rule
144 without regard to the requirements described above.
Market Overhang; Registration Rights. The Company has
granted registration rights with respect to 150,000 shares
of its currently outstanding Common Stock. As to such
shares, the holder can demand the registration of its shares
any time following the effective date of the Registration
Statement of which this Prospectus forms a part. (See
"Legal Matters"). Such amount of Common Stock may represent
a significant overhang on the market for the Common Stock,
if any develops. Such overhang on the market for the Common
Stock could, if a substantial number of shares comprising
such overhang were sold in a short period of time, depress
the then-current market price for the Common Stock of the
Company. However, no prediction as to the effect of such
overhang on the market for the Common Stock of the Company
can be made.
Penny Stock Regulation. Broker-dealer practices in
connection with transactions in "penny stocks" are regulated
by certain penny stock rules adopted by the Commission.
Penny stocks, in general, are equity securities with a
market price of less than $5.00 per share (other than
securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to
transactions in such securities is provided by the exchange
or system). The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure
statement prepared by the Commission that provides
information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer also
must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, as
well as the monthly account statements showing the market
value of each penny stock held in the customer's account.
In addition, the penny stock rules require that, prior to a
transaction in a penny stock not otherwise exempt from such
rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser's written
agreement tot he transaction. These disclosure requirements
may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes
subject to the penny stock rules. It can be expected that
the Company's Common Stock will, for the foreseeable future,
be subject to the penny stock rules, with the result that
investors in the Company's Common Stock may find it more
difficult to sell their shares.
Tax Risks
Valuation of Distribution. The Internal Revenue
Service (the "Service") is not bound by the determination of
fair market value of the Common Stock being distributed by
ECA as a dividend to its shareholders. In the event the
Service determines the Common Stock to have a higher value,
the recipients may have to pay income tax on a greater
amount of gain than that arising from the value attributed
to the Common Stock by ECA. (See "Federal Income Taxes").
No Internal Revenue Service Ruling. The Company has
not obtained, nor does it intend to obtain, an advance
ruling from the Service as to the valuation of the dividend
distribution Common Stock to be distributed under this
Prospectus. The absence of an advance ruling increases the
chance that the Service will challenge the valuation
attributed to the Common Stock received by a taxpayer. (See
"Federal Income Taxes").
USE OF PROCEEDS
Neither the Company nor ECA will receive any proceeds from
the dividend distribution to the shareholders of ECA of
360,000 shares of the Company's Common Stock.
INFORMATION CONCERNING ECA
General
Entertainment Corporation of America (ECA) was formed in
1987 under the laws of the State of Delaware under the name
"Mulka, Inc." In February 1988, all of the shares of Mulla,
Inc. were distributed to the shareholders of Forme Capital,
Inc. In September 1989, Mulla, Inc. changed its name to
"Entertainment Corporation of America" in connection with
the current management's acquiring control. Until 1994,
ECA's primary business was the operation of adult
entertainment facilities. The facilities, known as The Gold
Club, are located in Atlanta, Georgia, and Baton Rouge,
Louisiana. In 1994, ECA sold its interest in both such
facilities. Since 1994, ECA has searched for a going
business to acquire.
Management
John D. Kirkendoll, Alan G. Kirkendoll and Karen M. Rhea are
the directors of ECA as of the date of this Prospectus. Mr.
John Kirkendoll serves as President, Mr. Alan Kirkendoll
serves as Vice President and Ms. Rhea serves as
Secretary/Treasurer.
Outstanding Securities
On March 15, 1997, the record date for the distribution of
Common Stock of the Company, ECA had outstanding 4,912,500
shares of its $.001 par value common stock. The common
stock of ECA is not currently traded in any public market.
Prior Dividend Distribution
In August 1993, ECA distributed 300,000 shares of common
stock of K.L.S. Enviro Resources, Inc. (formerly K.L.S. Gold
Mining Company), a Nevada corporation ("KLS"), to its
shareholders as a property dividend. The common stock of
KLS currently trades on the OTC Electronic Bulletin Board
under the symbol "KLSE". The closing bid price for the
common stock of KLS on July 18, 1997, as reported by the OTC
Electronic Bulletin Board, was $2.375 per share. There is
no assurance that a market for the Common Stock of the
Company will ever be established.
DISTRIBUTION OF SECURITIES OF THE COMPANY
Background and Reasons for Distribution
The principals of the Company envisioned, as part of their
overall plan for the Company, having the Company become
publicly owned soon after its inception. To that end, the
Company's directors investigated various methods of becoming
publicly owned. After their investigation, the directors
determined that the dividend distribution, or Aspin-off",
method contemplated by this Prospectus would be the least
expensive, least ownership-dilutive means of becoming
publicly owned. Following an introduction facilitated by
counsel to the Company, the Company and ECA agreed to the
transaction to which this Prospectus relates.
The Board of Directors of ECA perceived a potential for
added value to the ownership of ECA common stock through the
dividend distribution of Company Common Stock. ECA's
management anticipates that its shareholders will benefit
from the dividend distribution, though there is no assurance
that such will be the case. (See "Risks Concerning the
Common Stock - Absence of Trading Market for the Common
Stock" under "Risk Factors").
Method of Distribution and Subsequent Trading
Certificates representing 360,000 shares of the Company's
Common Stock will be distributed by mail within a reasonable
time after the date of this Prospectus on the basis of
.0732824 of a share of Company Common Stock for each share
of ECA common stock (approximately one share of the
Company's Common Stock for each 14 shares of ECA held) to
holders of ECA common stock of record on March 15, 1997.
(See "Information Concerning ECA"). On March 15, 1997,
there were approximately 900 shareholders of ECA; therefore,
the Company will have approximately 925 shareholders after
the distribution. No exchange of shares, payment or other
action by holders of ECA common stock will be required.
Common Stock of the Company will be distributed to the
nearest number of whole shares; no fractional shares will be
issued. Any such fractional interests will not be
compensated by ECA.
A copy of this Prospectus will be mailed to each ECA
shareholder of record as of March 15, 1997, within a
reasonable time after the date of this Prospectus. Copies
will also be mailed to brokers and dealers who make a market
in the common stock of ECA, if any, and to other brokers and
dealers who may reasonably be expected to trade or make a
market in the Common Stock of the Company. There can be no
assurance, however, that any market will develop in the
Common Stock. The likelihood of the Common Stock of the
Company being regularly traded in any market or at any
particular price cannot be predicted.
DIVIDENDS
The Company anticipates that it will retain any profits from
its operation for re-investment in the Company's business
and does not anticipate paying any such dividends in the
foreseeable future. (See "Risks Concerning the Common Stock
- - Dividend Policy" under "Risk Factors").
CAPITALIZATION
The following table sets forth the capitalization of the
Company as of December 31, 1996, and as of March 31, 1997.
This table should be read in conjunction with the financial
statements of the Company included herein.
As at As at
3/31/97 12/31/96
----------- ---------
(unaudited) (audited)
Long-Term Debt $ --- $ ---
Shareholders' Equity:
Common Stock - $.0001
par value; 100,000,000
shares authorized,
6,000,000 and 6,170,000
shares issued,
respectively 617 600
Additional Paid-in
Capital 308,491 198,508
Deficit Accumulated
During the
Development Stage (47,898) (24,237)
Other (60,860) (2,160)
Shareholders' Equity 200,350 172,711
Total Capitalization 200,350 172,711
SELECTED FINANCIAL DATA
The following selected financial data have been derived from
the financial statements of the Company, Missouri Cable TV
Corp. (MCTV) and Winter Entertainment, Inc. (WEI), which
financial statements are included elsewhere herein. The
selected financial data set forth below should be read in
conjunction with such financial statements, related notes
and other financial information included elsewhere in this
Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
STATEMENT OF OPERATIONS DATA:
The Company
(WEI) from the
Date of
The Company The Company Inception
For the Three for the (12/28/95)
Months Ended Year Ended Thru
3/31/97 12/31/96 12/31/95
----------- --------- -----------
(unaudited) (audited) (unaudited)
Revenue $ 224 $ (3,337) $ ---
Expenses 23,885 27,574 ---
Net loss (23,661) (24,237) ---
Loss per share (0.00) (0.001) ---
BALANCE SHEET DATA:
The Company The Company
as at 3/31/97 as at 12/31/96
------------- --------------
(unaudited) (audited)
Working Capital
(Deficit) $ (27,113) $ (46,077)
Total Assets 265,131 233,600
Total Current
Liabilities 64,781 60,889
Shareholders' Equity 200,350 172,711
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Background
The Company, incorporated on November 1, 1996, has not
engaged in active business operations. One of the Company's
subsidiaries, Winter Entertainment, Inc. (WEI), acquired
effective December 31, 1996, has been engaged in television
broadcast operations since January 1996, while the Company's
other subsidiary, Missouri Cable TV Corp. (MCTV), also
acquired effective December 31, 1996, has only recently
begun to attempt to attract subscribers for its wireless
cable system located in Poplar Bluff, Missouri. Since its
inception and in addition to the acquisitions of WEI and
MCTV, the Company has acquired wireless cable channels and
community (low power) television channels from its founders
and others, has entered into a joint venture (known as "Web
One Wireless I.S.P. - Baton Rouge, J.V.") (the Joint
Venture) which is to operate as a Wireless Internet Service
Provider (ISP) and has begun to seek the capital necessary
to carry out its plan of business. (See "Business"). The
Company's fiscal year ends December 31st. References to the
"Company" include WEI, MCTV and the Joint Venture, unless
the context indicates otherwise.
Because the Company, WEI and MCTV were combined in a
reorganization of entities under common control, the
presentation contained in the financial statements of the
Company has been prepared in a manner similar to the
pooling-of-interests method. In this regard, reference is
made to Notes 1 and 3 of the Company's financial statements
appearing elsewhere herein. The following discussion
reflects such financial statement presentation.
Results of Operations
Year Ended December 31, 1996.
Wireless Cable Segment. For the year ended December 31,
1996 ("Fiscal 96"), the Wireless Cable Segment had no
activity, other than to acquire certain assets. The Company
has only recently begun to take preliminary steps to attract
subscribers in one of its wireless cable markets, Poplar
Bluff, Missouri. The Company's lack of funding has impaired
its efforts in this regard. To date, no subscribers have
been obtained.
The Wireless Cable Segment's revenues will primarily be
generated by subscription fees, pay-per-view fees and
installation charges. The Company anticipates that
installation fees will average $49.95 per subscriber and
will begin at $5.00 for promotional specials. The Company
anticipates that subscription fees will average $18.95 per
month for basic programming, plus approximately $9.00 per
month each for additional premium and movie channels. The
Company believes these programming fees are approximately
20% less than comparable hard wire cable prices.
Expenses will consist primarily of service costs,
selling, general and administrative expenses and
depreciation and amortization. Service costs include
programming costs, channel lease payments, if any,
transmitter site rentals, cost of program guides and repair
and maintenance expenditures. Of these, programming costs,
channel lease payments and costs of program guides will be
variable expenses that increase as the number of subscribers
increases. Also, it is possible that the addition of
subscribers will increase depreciation expense as the
Company will expend approximately $300 for an analog system
or $625 for a digital system to purchase and install the
wireless cable receiving antenna and related equipment
necessary at each subscriber's location.
The Wireless Cable Segment's profitability will be
determined by its ability to maximize revenue from
subscribers while maintaining variable expenses.
Significant increases in revenues will generally come from
subscriber growth. Currently, the Wireless Cable Segment
has no employees, but expects to have retained three
employees by the end of 1997, assuming adequate funding for
planned development is obtained, of which there is no
assurance. The Company does not intend to incur expenses
relating to research and development during the next 12
months, except for general market research in the ordinary
course of business.
The Wireless Cable Segment's success will be dependent
upon the extent to which its assumptions as to future
revenues and expenses prove to be correct. These
assumptions are based strictly on management's experience
and judgment and certain available information concerning
the wireless cable industry, in general. Because of the
substantial number of variables applicable to the Wireless
Cable Segment's proposed operations and the Wireless Cable
Segment's lack of operating history, there can be no
assurance that the Wireless Cable Segment's assumptions will
prove accurate or that its plan of business will lead to
future profitability. (See "Risk Factors Concerning
Wireless Cable" under "Risk Factors").
Community Television Segment. To date, the Company's
only revenues have been derived from the operations of its
community television station in Baton Rouge, Louisiana, call
sign K13VE, Channel 13, which station has been engaged in
broadcast operations since January 1996. For the year ended
December 31, 1996, the Community Television Segment had
revenues of $3,337 and a net loss of $1,217. K13VE is, and
since the start of its broadcast operations has been, an
affiliate of the Video Catalog Channel, a video merchandise
sales firm. The Community Television Segment derives
revenues from commissions on sales made by the Video Catalog
Channel originating from zip codes within K13VE's principal
broadcast coverage area. The Community Television Segment
earns a commission equal to 10% of such sales (less returns)
as are attributable to its broadcast area. The Company
expects that K13VE will continue to operate in a similar
manner through the remainder of 1997. However, should K13VE
have an opportunity to become an affiliate of a national
broadcast network, such as FOX or UPN, it can be expected
that it would take advantage of such opportunity. To date,
no such opportunity has been presented to K13VE, and there
is no assurance that any such opportunity will arise. (See
"Business - Community (Low Power) Television - Business
Strategy" under "Business").
The Company is currently investigating the possibility
of establishing a network of independent community
television stations around the U.S. There is no assurance
that the Company will be successful in establishing such a
television network.
Wireless Internet Segment. The Company did not form the
Wireless Internet Segment until after the end of Fiscal 96.
Three Months Ended March 31, 1997, versus
Three Months Ended March 31, 1996.
Revenues from the Company's operations for the three
months ended March 31, 1997 ("Interim 97"), were $224
(unaudited) compared to revenues of $0 (unaudited) for the
three months ended March 31, 1996 ("Interim 96"). During
both interim periods, all of the Company's revenues were
generated by the Community Television Segment. The Company
expects that, during the third quarter of 1997, the Wireless
Internet Segment will begin to generate revenues from
operations. However, there is no assurance in this regard.
Wireless Cable Segment. The Company has only recently
begun to take preliminary steps to attract subscribers in
one of its wireless cable markets, Poplar Bluff, Missouri.
The Company expects that revenues will not exceed
expenditures in its Wireless Cable Segment for the remainder
of the year ended December 31, 1997 ("Fiscal 97"). During
Interim 97, the Wireless Cable Segment generated no
revenues, while incurring $3,334 (unaudited) in operating
expenses. The Company's ability to attract customers,
thereby generating revenues in this segment, and to expand
its Wireless Cable Segment is wholly dependent upon its
obtaining adequate capital. There is no assurance that any
such capital will be available to the Company.
Community Television Segment. Revenues from the
operations of the Community Television Segment for Interim
97 were $224 (unaudited) compared to revenues of $0
(unaudited) for Interim 96. The Company expects that this
segment's revenues will remain at Interim 97 levels for the
remainder of Fiscal 97. The Company has received FCC
authorization to increase the power of its currently
operating station to its maximum legal limit. Should the
Company be able to obtain necessary funds, of which there is
no assurance, the Company intends to commit $20,000 to
increase the power of such station, which would permit the
Company's broadcast signal to reach approximately 120,000
additional households. It is expected that the commissions
earned by K13VE from Video Catalog Channel sales originating
from its broadcast area would increase proportionately to
its increased number of households reached. There is no
assurance that such will be the case.
Wireless Internet Segment. The Wireless Internet
Segment has yet to generate any revenues. In January 1997,
the Company entered into a joint venture known as "Web One
Wireless I.S.P. - Baton Rouge, J.V." (the Joint Venture)
with Web One, Inc. ("Web One"), whereby the Joint Venture
will attempt to operate as a Wireless ISP in Baton Rouge,
Louisiana. The Joint Venture expects to begin to solicit
customers for its Wireless ISP service during July 1997.
With respect to the business of the Joint Venture, the
Company is dependent upon the efforts of Web One, which is
the Managing Venturer of the Joint Venture. The Company has
an option to acquire all of the outstanding capital stock of
Web One at any time on or before August 1, 1998. If the
option to acquire Web One is exercised by the Company, the
Company, at its sole option, may elect to utilize cash or
shares of its Common Stock in payment for the stock of Web
One. The value of the stock of Web One is to be established
by an independent appraiser. Should the Company elect to
utilize shares of its Common Stock with which to acquire the
stock of Web One, the per share value of the Company's
Common Stock shall be equal to the average closing bid price
of the Common Stock for the ten trading days immediately
prior to the closing of such acquisition, or, should no
public market for the Common Stock exist, the per share
value of the Common Stock shall be established by an
independent appraiser. There is no assurance that the Joint
Venture will be successful.
Pursuant to an agreement with Open Net, Inc. ("Open
Net"), Sacramento, California, the Company owns an exclusive
right of first refusal to utilize Open Net's Wireless
Internet Access System in several U.S. cities, including,
among others, Seattle, Washington, Portland, Oregon, New
Orleans, Louisiana, and Dallas and Houston, Texas. The
Company must pay the sum of $50,000 (for equipment and
set-up services) to Open Net for each of Open Net's Wireless
Internet Access Systems purchased by the Company. In
addition, the Company is required to pay to Open Net a
monthly customer maintenance fee of $5.00 per customer
utilizing the Company's Wireless ISP services. The Company
believes that it will require between $60,000 and $200,000
($50,000 to Open Net and the balance for marketing and other
general expenses), depending on the size of a particular
city, to commence Wireless ISP operations in a particular
city. These estimates are not based on a specific study or
market research conducted by the Company, but are based,
instead, on the business experience of the Company's
management, as well as general market surveys conducted by
the Company and others. There is no assurance that such
estimates will be accurate. Should funds be available, the
Company intends to commence its Wireless ISP operations in
Dallas, Texas, during the third quarter of 1997. After
Dallas, the Company intends to commence its Wireless ISP
operations, in order, in Houston, New Orleans, Seattle and
Portland. There is no assurance that the Company will
possess sufficient capital with which to develop any of such
markets.
In addition, the Company is currently developing its own
proprietary Wireless ISP system. It is likely that this
proprietary system will be ready for commercial use by the
Joint Venture, when it begins to market its Wireless ISP
services in Baton Rouge, Louisiana, during July 1997.
Should the Company's Wireless ISP system prove to be
commercially viable, the Company would likely elect not to
exploit its agreement with Open Net. Should the Company
make such an election, the Company would not incur any
liability therefrom. The Company expects that the
commercial viability of the Company's Wireless ISP system
will be determined by the end of the third quarter of 1997.
In the event the Company's Wireless ISP system proves to be
viable, there is no assurance that the Company will be able
to attract sufficient capital with which to exploit its
system.
Liquidity and Capital Resources
December 31, 1996.
Since its inception, the Company has required little
capital with which to operate and has had a working capital
deficit throughout its history. At December 31, 1996, the
Company's working capital deficit was $46,077. During
Fiscal 96, one of the Company's officers, David M. Loflin,
loaned to the Company a total of $68,000, which funds were
used primarily for operating expenses of MCTV and for
attorneys' fees and auditor's fees associated with the
Registration Statement of which this Prospectus forms a
part. Such loans are evidenced by promissory notes and bear
interest at 8% per annum and are payable on demand. The
Company does not currently possess funds necessary to repay
such loans. Mr. Loflin has advised the Company that he does
not intend to make demand for repayment of such loans for
the foreseeable future. Nevertheless, should Mr. Loflin
make such demand for repayment, the Company could be unable
to satisfy such demand, which would have a materially
adverse affect on the Company. In addition, none of the
officers of the Company will be paid a salary, and such
persons have agreed to work without pay, until such time as
payment of such officers' salaries would have no materially
adverse effect on the Company's financial condition. During
Fiscal 96, none of the officers of the Company was paid a
salary, nor did any officer's salary accrue. It is expected
that the Company's extreme lack of liquidity, and the
attendant working capital deficit, will continue until such
time as the Company is able to secure an equity investment
or bank or other loan. Without such additional funds, it is
likely that the Company would be unable to implement its
plan of business. There is no assurance that the Company
will be able to secure necessary funds.
During Fiscal 96, the Company utilized shares of its
Common Stock to acquire all of its currently-held assets.
Specifically, the Company acquired assets as follows:
Number of Appraised Value
Wireless Cable Market Shares Issued of Assets(1)
- --------------------- ------------- ---------------
Poplar Bluff, MO 867,990 $1,004,560
Lebanon, MO 1,061,913 1,228,995
Port Angeles, WA 374,602 433,541
Astoria, OR 336,418 389,350
Sand Point, ID 220,988 255,759
The Dalles, OR 284,074 328,770
Fallon, NV 242,738 280,930
--------- ----------
Total 3,388,723 $3,921,905
Community Number of Appraised Value
Television Market Shares Issued of Assets(1)
- --------------------- ------------- ---------------
Baton Rouge, LA 227,336 $263,106
Monroe/Rayville, LA 80,271 92,900
Natchitoches, LA 39,421 45,623
Bainbridge, GA 104,249 120,652
------- --------
Total 451,277 $522,281
- -----------
(1) The assets acquired were appraised by Broadcast
Services International, Inc. ("BSI"), a Sacramento,
California-based communications appraisal firm. The report
of BSI was based on 1990 Census Data. Valuation formulas
for the wireless cable markets of the Company were based on
initial public offerings within the wireless cable industry
during the past three years. The formulas used in
evaluation of the Company's broadcast channels were based on
recent sales and market evaluation techniques employed by
the Community Broadcasters Association, among others. (See
"Certain Transactions - Appraisal").
The Company may, when and if the opportunity arises,
acquire other businesses which are related to one of the
Company's current businesses. If such an opportunity
arises, the Company may use a portion of its available
funds, if any, shares of its Common Stock or a combination
of Common Stock and cash, for that purpose. The Company has
no specific arrangements with respect to any such
acquisition at the present time, and is not presently
involved in any negotiations with respect to any such
acquisition. There can be no assurance that any such
acquisitions will be made.
Wireless Cable Systems. The Company continues to seek
sources of capital with which to develop its wireless cable
systems. The Company may enter into joint ventures or form
general and/or limited partnerships in its efforts to
construct and develop its wireless cable systems, although
no agreement with any potential partner has been discussed.
The development of wireless cable systems entails
substantial capital investment and will require additional
funding. The future availability of funding and terms of
equity and debt financing cannot be predicted. The
unavailability or inadequacy of financing to meet future
capital needs could force the Company to modify, curtail,
delay or suspend some or all of its planned wireless cable
operations. The failure to obtain additional funds on a
timely basis could materially adversely affect the Company
and its business. The Company believes it will be able to
undertake limited development of one or more of such markets
(that is, with less rapid construction and less extensive
marketing) without such additional financing or partners.
(See "Risks Concerning the Company - Need for Future
Financing" under "Risk Factors").
Poplar Bluff, Missouri. Since the end of Fiscal 96,
the Company has taken steps toward the commencement of
marketing and customer installation activities for its
Poplar Bluff system. Should the Company be successful in
securing additional capital, of which there is no assurance,
the Company intends to commit not less than $30,000 to
further the development of its Poplar Bluff system. The
Company expects that it will be able to obtain approximately
300 subscribers with such amount of funding. The Company
anticipates that its Poplar Bluff system will generate
positive cash flow shortly after it reaches 300 subscribers,
although there is no assurance that such will be the case.
There is no assurance that such additional funding will be
available to the Company. A failure to secure additional
funding would severely impede the development of the Poplar
Bluff system. (See "Risks Concerning the Company - Need for
Further Financing" under "Risk Factors").
Other Systems. The Company owns rights to certain
wireless cable channels in Lebanon, Missouri, Port Angeles,
Washington, The Dalles, Oregon, Sand Point, Idaho, Fallon,
Nevada, and Astoria, Oregon, which systems are expected to
be developed in the order listed, assuming adequate funding
is available, of which there is no assurance. The Company
believes it will require approximately $200,000 for
construction, should it determine to construct an
analog-based system, or approximately $750,000 for
construction, should it determine to construct a
digital-based system, as well as approximately an additional
$40,000 to commence marketing and customer installation
activities for each system. There is no assurance that
funding will be available to the Company at such times as it
attempts to construct and market any one of its systems.
Without adequate funding, the Company will likely be unable
to develop any of its wireless cable systems.
Also, it is the Company's intention, should funds be
available, to make a $60,000 payment under a contract
pursuant to which it acquired certain wireless cable channel
rights in The Dalles, Oregon, Fallon, Nevada, and Sand
Point, Idaho, and to renegotiate such contract at such time
in accordance with an oral agreement reached with the person
who sold such channel rights to the Company. Should the
Company be unsuccessful in renegotiating such contract, the
Company will be required, under such contract, to make a
$100,000 payment in September 1997. The Company does not
currently possess sufficient capital with which to make such
payment and there is no assurance that it will ever possess
sufficient capital to make such payment.
Community Television Stations. The Company continues to
seek sources of capital with which to construct and operate
its community television stations. The Company does not
expect that it will seek joint venture partners or form
general and/or limited partnerships in its efforts to
construct and operate its community television stations.
Rather, the Company intends to construct and operate its
community television stations with funds derived from
operations, if any, or from debt or other equity offerings.
The availability or inadequacy of financing to meet future
capital needs could force the Company to modify, curtail,
delay or suspend some or all of its planned community
television station development. The failure to obtain
additional funds on a timely basis could materially
adversely affect the Company and its business. The Company
believes it will be able to undertake construction and
limited operations of one or more of its community
television stations without such additional financing,
although the speed of such construction would be severely
inhibited.
Baton Rouge, Louisiana. K13VE Channel 13, the
Company's Baton Rouge, Louisiana, community television
station, has been broadcasting since January 1996, as an
affiliate of the Video Catalog Channel. The Company's
current broadcast signal reaches approximately 30,000
households. The Company is in need of approximately $20,000
in order to boost the power of such station to its maximum
legal limit, which would permit the Company's broadcast
signal to reach approximately 150,000 households. It is
expected that the commissions earned by K13VE from Video
Catalog Channel sales originating from its broadcast area
will increase proportionately to its increased number of
households reached. There is no assurance that such will be
the case. Should the Company be successful in securing
additional capital, of which there is no assurance, the
Company intends to commit $20,000 to the upgrade of such
television station.
Other Stations. The Company owns the licenses to
community television stations located in Monroe/Rayville,
Louisiana, Natchitoches, Louisiana, and Bainbridge, Georgia,
which television stations are expected to be constructed in
the order listed, assuming adequate funding is available, of
which there is no assurance. The Company believes it will
require approximately $50,000 to construct each station so
that it will be able to operate as an affiliate of the Video
Catalog Channel. Should the Company desire any such station
to become a fully operational television station, an
additional $100,000 would be required to expand the
facility. Because the Company intends to have each of its
stations become an affiliate of the Video Catalog Channel
immediately after construction has been completed, the
Company does not expect to require additional funds for
marketing. There is no assurance that funding will be
available to the Company at such times as it attempts to
construct any one of its community television stations.
Absent additional funding, the Company will likely be unable
to construct any of its community television stations.
Cash Flows from Operating Activities. The Company's
operations used $12,207 in cash during Fiscal 96. The use
of cash in operations is a result of the lack of revenues
compared to the operating expenses of the Company. A
substantial portion of the expenses incurred during Fiscal
96 are attributable to the Company's Registration Statement
of which this Prospectus forms a part. Further, the Company
believes that substantially all expenses of start-up have
been incurred. The Company's management does not expect
that operations for all of Fiscal 97 will generate positive
cash flow. However, management is unable to predict the
level of cash flow to be generated during such period of
time, due to the uncertainty of the level and timing of
funding, if any, with which to commence its proposed
Wireless Cable and Wireless Internet operations. Without
any such funding, it can be expected that the Company will
not be able to generate positive cash flow from operations.
Cash Flows from Investing Activities. Investing
activities of the Company used cash in Fiscal 96 of $23,291.
Cash used by investing activities was for the acquisition of
licenses and rights to licenses. Management does not
anticipate that investing activities will provide any cash
for Fiscal 97, taken as a whole.
Cash Flows from Financing Activities. During Fiscal 96,
financing activities provided $50,000.
March 31, 1997.
The Company remained in a substantially illiquid position
throughout Interim 97. At March 31, 1997, the Company's
working capital deficit was $27,113 (unaudited). No
material revenues were generated by Company operations,
during Interim 97. During such period, one of the
Company's officers, David M. Loflin, loaned to the Company a
total of $8,000, which funds were used primarily for
operating expenses of the Company. Such loan is evidenced
by a promissory note and bears interest at 8% per annum and
is payable on demand. $5,000 of such loan was repaid during
Interim 97. Subsequent to Interim 97, Mr. Loflin loaned to
the Company the sum of $13,500, which funds were used for
operating expenses of the Company. Such loan is evidenced
by a promissory note and bears interest at 8% per annum and
is payable on demand. As of the date of this Prospectus,
the Company owed Mr. Loflin a total of $76,500, plus accrued
and unpaid interest of approximately $1,500. The Company
does not currently possess funds necessary to repay the
balance of such loan. Mr. Loflin has advised the Company
that he does not intend to make demand for repayment of the
balance of such loan for the foreseeable future.
Nevertheless, should Mr. Loflin make such demand for
repayment, the Company could be unable to satisfy such
demand, which would have a materially adverse effect of the
Company. In addition, none of the officers of the Company
will be paid a salary, and such persons have agreed to work
without pay, until such time as payment of such officers'
salaries would have no adverse affect on the Company's
financial condition. (See "Executive Compensation" under
"Management").
Since the end of Fiscal 96, the Company has issued shares
of its Common Stock on two occasions, both of which occurred
during Interim 97. First, the Company entered into a
Consulting and Legal Services Agreement (the "Newlan
Agreement") with its legal counsel, Newlan & Newlan,
Attorneys at Law. Under the Newlan Agreement, Newlan &
Newlan agreed to provide legal services to the Company for a
period of one year in consideration of the Company's
undertaking to pay $3,500 in cash per month and the issuance
to Newlan & Newlan of 150,000 shares of Company Common Stock
in pre-payment of $60,000 of legal services. The Company
believes it will be able to meet its obligations under the
Newlan Agreement. (See "Legal Matters").
Also, in March 1997, the Company sold 20,000 shares of its
Common Stock to a single investor for $50,000 in cash. Such
funds have been allocated to the Company's working capital
account. Such investor, Michael Cohn, now a director of the
Company, has committed to invest an additional $100,000 on
the same terms during the second half of 1997. There is no
assurance that such investment will be made. (See "Stock
Purchase" under "Certain Transactions").
The Company will derive no liquidity from the dividend
distribution contemplated herein. (See "Distribution of
Securities of the Company"). Thus, immediately after the
Registration Statement of which this Prospectus forms a part
is declared effective by the Commission and the distribution
of Company Common Stock to the shareholders of ECA
hereunder, the Company will remain in a substantially
illiquid position.
The Company is currently seeking a bank loan in the amount
of $350,000 with which to commence operations in its
Wireless Cable and Wireless Internet Segments. Such level
of financing would permit the Company to operate for a
period of at lease one year. There is no assurance that a
financing source will be located. Should such a financing
source not be secured, the Company can be expected to remain
in a substantially illiquid position.
It is the Company's current intention to commence a public
offering of its Common Stock, in the approximate amount of
$1,000,000, and to file a registration statement relating
thereto immediately after the Registration Statement of
which this Prospectus forms a part has been declared
effective by the Commission. The Company currently is
investigating its options in this regard. As of the date of
this Prospectus, the Company had not reached any agreement
or understanding with an underwriter. Should the Company be
successful in obtaining such level of funding through its
proposed public offering, it would then possess funds with
which to operate for a period of not less than one year.
However, there is no assurance that the Company will realize
any funds from such proposed public offering. A failure in
this regard will cause the Company to remain in a
substantially illiquid position and unable to begin to
implement its plan of business.
Wireless ISP Markets. The Company owns the exclusive
right of first refusal to operate, utilizing Open Net's
Wireless Internet Access System, as a Wireless ISP in the
following markets: Dallas and Houston, Texas, New Orleans,
Louisiana, Seattle, Washington, and Portland, Oregon. The
Company intends to develop its Wireless ISP capabilities in
such markets utilizing its own funds, however derived. In
addition, the Company intends to seek joint venture partners
or form general and/or limited partnerships to develop its
Wireless ISP capabilities in the following markets:
Alexandria, Louisiana, Astoria, Oregon, Bainbridge, Georgia,
Lebanon, Missouri, Macon/Milledgeville, Georgia, Poplar
Bluff, Missouri, Port Angeles, Washington, Sand Point,
Idaho, and The Dalles, Oregon. It is possible that the
Company will develop one or more of such Wireless ISP
markets utilizing its own funds. However, no prediction can
be made with respect to the order of development of such
markets, nor can assurances be given that any of such
markets will, in fact, be developed.
For the development of any of its proposed Wireless ISP
markets, the Company will be required to purchase $50,000 of
equipment from Open Net. Thereafter, the amount of
marketing funds needed will vary from market to market,
depending on the size of a particular market. It can be
expected, however, that the initial marketing budget will
range approximately from $10,000 to $150,000. There is no
assurance that funding will be available to the Company at
such times as it attempts to develop any one of its Wireless
ISP markets. Should the Company be successful in obtaining
bank financing, of which there is no assurance, the Company
would possess funds necessary to construct and develop its
Wireless ISP in Dallas, Texas. However, absent such bank
financing, the Company will likely be unable to exploit any
of its Wireless ISP markets.
Dallas, Texas. Should the Company be successful in
securing additional capital, of which there is no assurance,
the Company intends to commit not less than $100,000 to the
establishment of its Wireless ISP in Dallas, Texas. The
Company expects that it will be able to begin to market its
Wireless ISP service in Dallas during the second quarter of
1997. The Company believes, after conducting an informal
market study, that Dallas, among its other proposed Wireless
ISP markets, offers the greatest opportunity for success,
although there is no assurance in this regard.
Cash Flows from Operating Activities. During Interim
97, the Company's operations used cash of $23,066
(unaudited). The use of cash in the current period is
primarily due to the Company's net loss of $23,661
(unaudited). The Company's use of cash in operations during
Interim 96 is attributable primarily to the Company's net
loss for such interim period. The Company's management does
not expect that operations for all of Fiscal 97 will
generate positive cash flow. However, management is unable
to predict the level of cash flow to be generated during
such period of time, due to the uncertainty of the level and
timing of funding, if any, with which to commence its
proposed Wireless Cable and Wireless Internet operations.
Without any such funding, it can be expected that the
Company will not be able to generate positive cash flow from
operations.
Cash Flows from Investing Activities. Investing
activities of the Company during Interim 97 used $9,259
(unaudited), including $1,759 (unaudited) for the purchase
of equipment, $2,500 (unaudited) as an investment in the
Joint Venture and $5,000 (unaudited) for the purchase of
licenses and rights to leases of licenses. In comparison,
the Company had virtually no investing activities during
Interim 96. The Company's management is unable to predict
whether investing activities will provide cash during the
remainder of Fiscal 97. This uncertainty is caused by the
lack of a commitment by an underwriter relating to the
proposed future public offering of Company Common Stock or
other financing commitment. Absent any such funding, it is
expected that investing activities will continue to use the
Company's cash.
Cash Flows from Financing Activities. Financing
activities of the Company provided $54,300 (unaudited) in
cash during Interim 97, compared to Interim 96 when
financing activities provided $0 (unaudited). Substantially
all of the cash provided from financing activities during
the current interim period was the result of the sale of
20,000 shares of Company Common Stock for a total of $50,000
in cash. It is the Company's intention to sell shares of
its Common Stock as the primary means of securing capital
with which to implement its plan of business. Should the
Company have success in this regard, cash provided by
financing activities can be expected to be substantially
higher. However, no prediction as to the level of such cash
can be made by management, nor can any assurance be made
that any cash will be provided by financing activities.
Non-Cash Investing Activities. During Interim 97, the
Company's non-cash investing and financing activities
included the issuance of 150,000 shares of Common Stock in
consideration of consulting and legal services to be
performed, which shares were valued, pursuant to arm's-length negotiations,
at $60,000, in the aggregate.
Management's Plans Relating to Future Liquidity
It is management's opinion that the Company will be unable
to improve its current liquidity position without an
infusion of cash in an amount of not less than $200,000.
The Company's current operations will be unable, on their
own, to alleviate the Company's current lack of liquidity.
Once the Registration Statement of which this Prospectus
forms a part has been declared effective by the Commission,
management believes it will be able to mitigate the effects
of its current financial condition in one or more of the
following ways: (1) the Company intends to commence a public
offering of its Common Stock, in the approximate amount of
$1,000,000, immediately following the effective date of the
Registration Statement of which this Prospectus is a part;
(2) the Company is currently seeking, and will continue in
the future to seek, a bank loan in an amount of not less
than $200,000; (3) the Company will attempt to locate one
ore more joint venture partners with whom the Company would
develop one or more of its proposed Wireless Internet
markets; or (4) the Company will pursue and other means of
financing its plan of business that may become available.
NO PREDICTION CAN BE MADE AS TO THE LIKELIHOOD THAT THE
COMPANY WILL BE SUCCESSFUL IN OBTAINING NEEDED FINANCING.
However, management believes that it will be successful in
obtaining needed funding within a reasonable time following
the date of this Prospectus. This belief is based on
management's business experience and preliminary reaction
from its potential Wireless ISP customers in Baton Rouge,
Louisiana. Should one of the described financing
transactions be consummated, of there is no assurance, the
Company's management believes that the operations that are
commenced with the obtained funds will be able to generate
sufficient cash flow to sustain the Company's activities
during the twelve months to end March 31, 1998. There is no
assurance that such will be the case.
Capital Expenditures
During the remainder of Fiscal 97, the Company expects to
apply substantially all of its available capital to the
construction of one or more of its wireless cable systems
(approximately $200,000 per system), one or more of its
community television stations (approximately $50,000 per
station) and one or more of its Wireless ISP markets (an
average of approximately $175,000 per market). There is no
assurance that any of the necessary capital for such
proposed activities will be available.
REGULATION
Wireless Cable
General. The wireless cable industry is subject to
regulation by the FCC pursuant to the Communications Act.
The Communications Act empowers the FCC to issue revoke,
modify and renew licenses within the spectrum available to
wireless cable; to approve the assignment and/or transfer of
control of such licenses; to approve the location of
wireless cable systems; to regulate the kind, configuration
and operation of equipment used by wireless cable systems;
and to impose certain equal employment opportunity and other
reporting requirements on wireless cable operators.
In the 50 largest U.S. markets, 33 channels are available
for wireless cable (in addition to local off-air VHF/UHF
broadcast channels that are not re-transmitted over the
microwave channels). In the Company's markets, 32 channels
are available for wireless cable (in addition to local
off-air VHF/UHF broadcast channels that are not re-transmitted over the
microwave channels), 12 of which can be owned by for-profit entities for
full-time usage without programming restrictions (multi-point distribution
service [MDS] channels). Except in limited circumstances, the other
20 wireless cable channels can only be owned by qualified
non-profit educational organizations, and, in general, each
must be used a minimum of 20 hours per week for educational
programming (instructional television fixed service [ITFS]
channels). The remaining excess air time on an ITFS channel
may be leased to wireless cable operators for commercial
use, without further restrictions (other than the right of
the ITFS license holder, at its option, to recapture up to
an additional 20 hours of air time per week per channel for
educational programming). Certain programming (including,
among others, The Discovery Channel and Arts &
Entertainment) qualifies as educational and thereby
facilitates full-time usage of an ITFS channel by commercial
wireless cable operators. Additionally, a technique known
as "channel mapping" permits ITFS licensees to meet their
minimum educational programming requirements by transmitting
educational programming over several ITFS channels at
different times, which the viewer sees as just one channel.
In addition, lessees of ITFS excess air time generally have
the right to transmit to their subscribers the educational
programming provided by the lessor at no incremental cost.
The FCC now permits "channel loading". Channel loading
permits ITFS license holders to consolidate their
educational programming on one or more of their ITFS
channels, thereby providing wireless cable operators leasing
such channels with greater flexibility in their use of ITFS
channels. The FCC's allocation of frequencies to wireless
cable is subject to change and, in the future, the FCC might
propose to alter the present wireless cable allocation to
provide a portion of the spectrum for other emerging
technologies. The FCC has formally inquired as to whether
certain wireless cable frequencies should be reallocated for
new computer-based communications services. It is uncertain
whether any definitive action will be taken with respect to
this inquiry. The Company believes that if any such action
were taken to reallocate these channels, the FCC would
allocate substitute frequency rights to the wireless cable
industry or provide other concessions.
As the Company expands, it may be dependent on leases with
unaffiliated third parties for most of its wireless cable
channel rights. Most wireless cable systems' channel
leases typically cover four ITFS and/or one to four MDS
wireless cable channels each. Generally, ITFS channels may
only be owned by qualified non-profit educational
organizations and, in general, must use a minimum of 20
hours per week per channel for educational programming. The
remaining excess ITFS channel time may be leased to wireless
cable operators for commercial use without further
restriction. MDS channels may be owned by commercial
entities and allow full-time usage without programming
restrictions. The use of such channels by the license
holders is subject to regulation by the FCC and a wireless
cable operator's ability to continue to enjoy the benefits
of its leases with channel license holders is dependent upon
the continuing compliance by the channel license holders
with applicable regulations, including the requirement that
ITFS license holders must meet certain educational use
requirements in order to lease transmission capacity to
wireless cable operators. Additionally, the FCC licenses
also specify construction deadlines, which, if not met,
could result in the loss of the license. Requests for
additional time to construct may be filed and are subject to
review pursuant to FCC rules.
Applications for wireless cable licenses are subject to
approval by the FCC. There is no limit on the time that may
elapse between filing the application with the FCC for a
modification or new license and action thereon by the FCC.
Once the FCC staff determines that the applications meet
certain basic technical and legal qualifications, the staff
then determines whether each application is proximate to
transmit and receive-site locations of other applications.
Those applications that would result in signal interference
to other pending applications must then undergo a
comparative selection process. The FCC's ITFS application
selection process is based on a set of objective criteria
that include whether an applicant is located in the
community to be served and the number of students that will
receive the applicant's educational programming. Thus, the
outcome of the selection process when two or more qualified
applicants are competing for the same channels lends itself
to a degree of predictability that varies according to the
circumstances. In 1985, the FCC established a lottery
procedure for awarding MDS licenses. In 1990, the FCC
established a filing "window" system for new multichannel
MDS (MMDS) applications. The FCC's selection among more
than one acceptable MMDS applications filed during the same
filing window was determined by a lottery. Generally, once
an MMDS application is selected by the FCC and the applicant
resolves any deficiencies identified by the FCC, a
conditional license is issued, allowing construction of the
station to commence. Construction generally must be
completed within one year of the date of grant of the
conditional license, in the case of MMDS channels, or 19
months, in the case of ITFS channels. ITFS and MMDS licenses
generally have terms of 10 years. Licenses must be renewed
and may be revoked for cause in a manner similar to other
FCC licenses. FCC rules prohibit the sale for profit of an
MMDS conditional license or of a controlling interest in the
conditional license holder prior to construction of the
station or, in certain instances, prior to the completion of
one year of operation. The FCC, however, does permit the
leasing of 100% of an MMDS license holder's spectrum
capacity to a third party and the granting of options to
purchase a controlling interest in a license, once the
required license holding period has lapsed and certain other
conditions are met.
Application for renewal of MDS and ITFS licenses must be
filed within a certain period prior to expiration of the
license term, and petitions to deny applications for renewal
may be filed during certain periods following the filing of
such applications. Licenses are subject to revocation or
cancellation for violations of the Communications Act or the
FCC's rules and policies. Conviction of certain criminal
offenses may also render a licensee or applicant unqualified
to hold a license.
Wireless cable transmissions are governed by FCC
regulations governing interference and reception quality.
These regulations specify important signal characteristics
such as modulation (e.g., AM/FM) or encoding formats (e.g.,
analog or digital).
The FCC also regulates transmitter locations and signal
strength. The operation of a wireless cable system requires
the collection of a commercially viable number of channels
operating with common technical characteristics. In order
to commence operations in a particular market, the Company
may be required to file applications with the FCC to modify
licenses for unbuilt stations. In applying for these
modifications, the Company must demonstrate that its
proposed signal does not violate interference standards in
the FCC-protected area of another wireless cable channel
license holder. A wireless cable license holder generally
is protected from interference within 35 miles of the
transmission site. An ITFS license holder has protection to
all of its receive sites, but only a 35 mile protected
service area during excess capacity use by a wireless cable
operator. The Cable Act. On October 5, 1992, Congress
passed the Cable Act, which imposes greater regulation on
hard-wire cable operators and permits regulation of prices
in areas in which there is no "effective competition". The
Cable Act directs the FCC to adopt comprehensive new federal
standards for local regulation of certain rates charged by
hard-wire cable operators. The legislation also provides
for deregulation of hard-wire cable in a given market once
other multi-channel video providers serve, in the aggregate,
at least 15% of the cable franchise area. Rates charged by
wireless cable operators, typically already lower than
hard-wire cable rates, are not subject to regulation under
the Cable Act.
Under the retransmission consent provisions of the Cable
Act and the FCC's implementing regulations, all
multi-channel video providers (including both hard-wire and
wireless cable) seeking to re-transmit certain commercial
broadcast signals must first obtain the permission of the
broadcast station. Hard-wire cable systems, but not
wireless cable systems, are required under the Cable Act and
the FCC's "must carry" rules to re-transmit a specified
number of local commercial television or qualified community
(low power) television signals.
In May 1993, the FCC issued new regulations implementing
the rate regulation provisions in the Cable Act. Hard-wire
cable operators with rates above a price benchmark average
for basic services were directed to reduce their rates by
approximately 10%. In February 1994, the FCC announced that
it would require hard-wire cable operators to implement a
further reduction in rates of another 7%. On November 18,
1994, the FCC adopted some exceptions to its cable rate
regulations. The FCC has also adopted regulations
implementing the Cable Act that require hard-wire cable
operators to establish standardized levels of customer
service. The Company cannot predict what effect these
regulations may have on the Company's price and service
competitiveness in its proposed wireless cable markets.
In February 1996, the Telecommunications Act was enacted.
Pursuant to the Telecommunications Act, all cable rate
regulation will be eliminated after three years, and for
"small systems", as defined in the Telecommunications Act,
and under certain other circumstances, rate regulation will
be eliminated immediately. Until these sunset provisions go
into effect, hard-wire cable operators will continue to be
subject to rate regulations.
While current FCC regulations are intended to promote the
development of a competitive pay television industry, the
rules and regulations affecting the wireless cable industry
may change, and any future changes in FCC rules,
regulations, policies and procedures could have a material
adverse effect on the industry, as a whole, and on the
Company, in particular. In addition, a number of legal
challenges to the Cable Act and the regulations promulgated
thereunder have been filed, both in the courts and before
the FCC. These challenges, if successful, could
substantially increase the Company's operating costs, make
some programming unavailable to the Company and otherwise
have a material adverse effect on the wireless cable
industry, as a whole, and the Company, in particular.
Specifically, those sections of the Cable Act which prohibit
discriminatory or unfair practices in the sale of satellite
cable and satellite broadcast programming to competing
multi-channel video programming distributors have been
challenged. The Company's costs to acquire satellite cable
and broadcast programming may be affected by the outcome of
those challenges. Other aspects of the Cable Act that have
been challenged are the Cable Act's provisions governing
rate regulation and customer service standards to be met by
hard-wire cable companies. The Cable Act empowered the FCC
to regulate the subscription rates charged by hard-wire
cable operators. As described above, the FCC recently
issued rules requiring such cable operators, under certain
circumstances, to reduce the rates charged for basic
services. The Cable Act also empowered the FCC to establish
certain minimum customer service standards to be maintained
by hard-wire cable operators. These standards include
prompt responses to customer telephone inquiries, reliable
and timely installations and repairs and readily
understandable billing practices. Should these provisions
withstand court and regulatory challenges, the extent to
which wireless cable operators may continue to maintain an
advantage over hard-wire cable operators in price and
customer service practices could be diminished.
Other Regulations. Because the use of coaxial cable by
hard-wire cable operators requires a "right of way" to cross
municipal streets, such operators must acquire a municipal
franchise and pay municipal franchise fees. Since wireless
cable uses FCC approved frequencies, no municipal right of
way is required. Accordingly, wireless cable operators are
not subject to municipal franchise fees. Hard-wire cable
operators are also required to set aside public access
channels for municipal and local resident use. Wireless
cable operators are not subject to such requirements.
Wireless cable license holders are subject to regulation
by the FAA with respect to the construction of transmission
towers and to certain local zoning regulations affecting
construction of towers and other facilities. There may also
be restrictions imposed by local authorities. There can be
no assurance that the Company will not be required to incur
additional costs in complying with such regulations and
restrictions.
Community (Low Power) Television
General. Television broadcasting operations are subject
to the jurisdiction of the FCC under the Communications Act.
The Communications Act empowers the FCC, among other things,
to issue, revoke or modify broadcast licenses, to assign
frequencies, to determine the locations of stations, to
regulate the broadcasting equipment used by stations, to
establish areas to be served, to adopt such regulations as
may be necessary to carry out the provisions of the
Communications Act and to impose certain penalties for
violation of its regulations. The Company's currently
operating community television station, as well as any
future stations, is subject to a wide range of technical,
reporting and operational requirements imposed by the
Communications Act and by FCC rules and policies.
The Communications Act provides that a license may be
granted to any applicant if the public interest, convenience
and necessity will be served thereby, subject to certain
limitations, including the requirement that the FCC allocate
licenses, frequencies, hours of operation and power in a
manner that will provide a fair, efficient and equitable
distribution of service throughout the United States.
Television licenses generally are issued for five-year
terms. Upon application, and in the absence of a
conflicting application that would require the FCC to hold a
hearing, or questions as to the licensee's qualifications,
television licenses have usually been renewed for additional
terms without a hearing by the FCC. An existing license
automatically continues in effect once a timely renewal
application has been filed until a final FCC decision is
issued.
Under existing FCC regulations governing multiple
ownership of broadcast stations, a license to operate a
television or radio station generally will not be granted to
any party (or parties under common control) if such party
directly or indirectly owns, operates, controls or has an
attributable interest in another television or radio station
serving the same market or area. The FCC, however, is
favorably disposed to grant waivers of this rule for certain
radio station-television station combinations in the top 25
television markets, in which there will be at least 30
separately owned, operated and controlled broadcast
licenses, and in certain other circumstances.
FCC regulations further provide that a broadcast license
will not be granted if that grant would result in a
concentration of control of radio and television
broadcasting in a manner inconsistent with the public
interest, convenience or necessity. FCC rules generally
deem such concentration of control to exist if any party, or
any of its officers, directors or shareholders, directly or
indirectly, owns, operates, controls or has an attributable
interest in more than 12 television stations, or in
television stations capable of reaching, in the aggregate, a
maximum of 25% of the national audience. This percentage is
determined by the DMA market ranking of the percentage of
the nation's television households considered within each
market. Because of certain limitations of the UHF signal,
however, the FCC will attribute only 50% of a market's DMA
reach to owners of UHF stations for the purpose of
calculating the audience reach limits. The Company will not
approach such limits for the foreseeable future. To
facilitate minority group participation in radio and
television broadcasting, the FCC will allow entities with
attributable ownership interests in stations controlled by
minority group members to exceed the ownership limits.
The FCC's multiple ownership rules require the attribution
of the licenses held by a broadcasting company to its
officers, directors and certain of its shareholders, so
there would ordinarily be a violation of FCC regulations
where an officer, director or such a shareholder and a
television broadcasting company together hold interests in
more than the permitted number of stations or more than one
station that serves the same area. In the case of a
corporation controlling or operating television stations,
such as the Company, there is attribution only to
shareholders who own 5% or more of the voting stock, except
for institutional investors, including mutual funds,
insurance companies and banks acting in a fiduciary
capacity, which may own up to 10% of the voting stock
without being subject to such attribution, provided that
such entities exercise no control over the management or
policies of the broadcasting company.
The FCC has recently begun a proceeding to consider
liberalization of the various TV ownership restrictions
described above, as well as changes (not all of which would
be liberalizing in effect) in the rules for attributing the
licenses held by an enterprise to various parties. The
Company is unable to predict the outcome of these
proceedings.
The Communications Act and FCC regulations prohibit the
holder of an attributable interest in a television station
from having an attributable interest in a cable television
system located within the coverage area of that station.
FCC regulations also prohibit the holder of an attributable
interest in a television station from having an attributable
interest in a daily newspaper located within the predicted
coverage area of that station.
The Communications Act limits the amount of capital stock
that aliens may own in a television station licensee or any
corporation directly or indirectly controlling such
licensee. No more than 20% of a licensee's capital stock
and, if the FCC so determines, no more than 25% of the
capital stock of a company controlling a licensee, may be
owned or voted by aliens or their representatives. Should
alien ownership exceed this limit, the FCC may revoke or
refuse to grant or renew a television station license or
approve the assignment or transfer of such license.
The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a licensee
without the prior approval of the FCC. Legislation was
introduced in the past that would impose a transfer fee on
sales of broadcast properties. Although that legislation
was not adopted, similar proposals, or a general spectrum
licensing fee, may be advanced and adopted in the future.
Recent legislation has imposed annual regulatory fees
applicable to the Company.
The foregoing does not purport to be a complete summary of
all of the provisions of the Communications Act or
regulations and policies of the FCC thereunder. Reference
is made to the Communications Act, such regulations and the
public notices promulgated by the FCC.
Other Regulations. The Federal Trade Commission, among
other regulatory agencies, imposes a variety of requirements
that affect the business and operations of broadcast
stations. From time to time, proposals for additional or
revised requirements are considered by the FCC, numerous
other Federal agencies and Congress. The Company is unable
to predict future Federal requirements or what impact, if
any, any such requirements may have on Company television
stations.
BUSINESS
History
The Company was organized in November 1996 to act as a
holding company primarily in the wireless cable and
community (low power) television industries. To this end,
the Company has acquired Winter Entertainment, Inc. (WEI),
which owns and operates a community (low power) television
station in Baton Rouge, Louisiana, and Missouri Cable TV
Corp. (MCTV), which owns the licenses necessary to operate
wireless cable systems in Poplar Bluff and Lebanon,
Missouri, has acquired licenses and leases of licenses
necessary to operate wireless cable systems in Port Angeles,
Washington, Astoria, Oregon, Sand Point, Idaho, The Dalles,
Oregon, and Fallon, Nevada, and has acquired licenses
necessary to operate community (low power) television
stations in Monroe/Rayville, Louisiana, Bainbridge, Georgia,
and Natchitoches, Louisiana. In January 1997, the Company
entered into a joint venture (known as "Web One Wireless
I.S.P. - Baton Rouge, J.V.") (the Joint Venture) which is to
operate as a Wireless Internet Service Provider (ISP) in
Baton Rouge, Louisiana, and acquired the rights to utilize,
on an exclusive basis, a licensed Wireless Internet Access
System in several U.S. cities, including, among others,
Seattle, Washington, Portland, Oregon, New Orleans,
Louisiana, and Dallas and Houston, Texas. In addition, the
Company intends, assuming funding is available to the
Company, to become involved in the following related areas:
(1) Local Multi-Point Distribution Service (LMDS), a new
spectrum anticipated to be put up for auction by the FCC
during 1997; (2) the acquisition of small, hard-wire cable
television systems as a means of entering the
telephony-based cable market, that is, to be able to provide
telephone service and ISP services in each such system's
market; and (3) the establishment of a broadcast television
network. References to the "Company" herein include WEI,
MCTV and the Joint Venture, unless the context requires
otherwise.
Business - Wireless Cable
General
Industry History - Cable Television. The cable television
industry began in the late 1940's and 1950's to serve the
needs of residents in predominantly rural areas with limited
access to local off-air VHF/UHF broadcasts. The cable
television industry expanded to metropolitan areas by
offering better reception and more programming than
available with off-air broadcasts. Today, cable television
systems offer various types of programming, which generally
include basic service, premium service and, in many
instances, pay-per-view services.
Wireless Cable Technology. Initially, most cable systems
were hard-wire systems, using coaxial cable and amplifiers
to transmit television signals. In 1983, the FCC allocated
a portion of the radio spectrum from 2500 to 2700 MHZ, which
had previously been allocated entirely for educational use,
to commercial wireless cable operation. Simultaneously, the
FCC also modified its rules on the usage of the remaining
portion of such spectrum allocated for educational use.
Nevertheless, regulatory and other obstacles impeded the
growth of the wireless cable industry through the remainder
of the 1980's. The FCC maintained burdensome restrictions
on the commercial use of educational channel capacity. In
addition, before enactment of the Cable Act (October 5,
1992), many program suppliers were unwilling to provide
programming to wireless cable operators on terms comparable
to those offered to hard-wire cable operators, if at all.
During the 1990's, several factors have contributed to the
growth of the wireless cable industry, including (I)
Congressional scrutiny of the rates and practices of the
hard-wire cable industry, (ii) improved technology,
particularly signal encryption and signal compression, (iii)
regulatory reforms by the FCC to facilitate the growth and
competitive impact of the wireless cable industry, including
permitting channel aggregation, (iv) increased availability
of programming for wireless cable systems, (v) strong
consumer demand for alternatives to hard-wire cable service
and (vi) increased availability of capital to wireless cable
operators in the public and private markets.
Wireless cable systems, like hard-wire cable systems,
operate from a head-end, consisting of satellite reception
and other equipment necessary to receive the desired
programming. Programming is then transmitted by microwave
transmitters from an antenna located on a tower to a small
receiving antenna located on a subscriber's rooftop. At the
subscriber's location, the microwave signals are converted
to frequencies that can pass through conventional coaxial
cable into an addressable descrambling converter located on
top of a television set. Because the microwave frequencies
used by wireless cable will not pass through large trees,
hills, tall buildings or other obstructions, wireless cable
requires a clear line-of-sight from tower to receiving
antenna. However, most signal blockages can be overcome
with the use of signal boosters which retransmit an
otherwise blocked signal over a limited area. Because
wireless cable systems do not require an extensive network
of coaxial cable and amplifiers, wireless cable operators
are able to provide subscribers with a high quality picture
and a reliable signal at a significantly lower
per-subscriber system cost, when compared to hard-wire cable
systems.
Hard-Wire Cable Technology. Hard-wire cable operators
transmit signals from a head-end, delivering local and
satellite-delivered programming through a network consisting
primarily of coaxial cable and amplifiers to subscribers.
As a direct result of the use of coaxial cable to deliver
signals throughout a service area, hard-wire cable systems
are susceptible to signal problems. Because signals can
only be transmitted through coaxial cable a fixed distance
without additional amplification, some degree of noise is
added each time a television signal is so amplified. A
series of amplifiers between the head-end and the viewer
leads to progressively greater noise and, accordingly, for
some viewers, a grainier picture. Also, an amplifier must
be properly balanced or the signal may be improperly
amplified. Failure of any one amplifier in the chain will
black out an area. Substantial regular system maintenance
is required due to water ingress, temperature changes and
other equipment problems, all of which may affect the
quality of signals delivered to subscribers. Some hard-wire
cable companies have begun installing fiber optic cable
networks. While this technology will substantially improve
the transmission and reception problems currently
experienced by most hard-wire cable systems, the high costs
associated with such technology may slow the conversion to
all fiber optic systems and further enhance the typical cost
advantages of wireless cable.
Programming
General. Once a wireless cable operator has obtained the
right to transmit programming over specified frequencies,
the operator must then obtain the right to use the
programming to be transmitted. With the exception of the
retransmission of local off-air VHF/UHF broadcast signals,
programming is made available in accordance with contracts
with program suppliers under which the system operator pays
a royalty based on the number of subscribers receiving
service each month. Individual program pricing varies from
supplier to supplier; however, more favorable pricing for
programming is generally afforded to operators with larger
subscriber bases. The likelihood that program material will
be unavailable to the Company has been significantly
mitigated by the Cable Act and various FCC regulations
issued thereunder, which, among other things, impose limits
on exclusive programming contracts and prohibit cable
programmers, in which a cable operator has an attributable
interest, from discriminating against cable competitors with
respect to the price, terms and conditions of programming.
Because only a few of the industry's programming services
are not currently directly owned by vertically integrated
multiple cable system operators, the Company expects little
difficulty in arranging satisfactory programming contracts.
The basic programming package expected to be offered in each
of the Company's markets can be expected to be comparable to
that offered by the local hard-wire cable operators.
Copyright. Under the Federal copyright laws, permission
from the copyright holder generally must be secured before a
video program may be retransmitted. Under Section 111 of
the Copyright Act, certain "cable systems" are entitled to
engage in the secondary transmission of programming without
the prior permission of the holders of copyrights in the
programming. In order to do so, a cable system must secure
a compulsory copyright license. Such a license may be
obtained upon the filing of certain reports and the payment
of certain fees set by the Copyright Royalty Tribunal.
Wireless cable operators may rely on Section 111 of the
Copyright Act. The United States Congress recently enacted
legislation that confirmed the ability of wireless cable
operators to obtain the benefit of the compulsory copyright
license. Periodically, Congress has considered proposals to
phase out the compulsory license.
Local broadcasters may require that cable operators obtain
their consent before re-transmitting local off-air VHF/UHF
broadcasts. The FCC has exempted wireless cable operators
from the re-transmission consent rules if the receive-site
antenna is either owned by the subscriber or within the
subscriber's control and available for purchase by the
subscriber upon the termination of service. In all other
cases, wireless cable operators must obtain consent to
re-transmit local broadcast signals. The Company will
attempt to obtain such consents in each of its markets where
it will be re-transmitting on a wireless cable channel.
There can be no assurance that the Company will be able to
obtain such consents on terms satisfactory to the Company,
if at all.
Contract Programming. In each of its wireless cable
systems, the Company will be required to enter into
agreements with program suppliers, such as ESPN, CNN, HBO
and MTV. The Company has not yet determined the mix of
programming that will be offered in any of its wireless
cable systems. Thus, no agreements with program suppliers
have been made. It can be expected that such program
agreements will have three-year terms, with provisions for
automatic renewals, and be subject to termination for breach
of the agreement, including non-payment. As a rule, the
programming agreements can be expected to provide for
royalty payments based upon the number of Company
subscribers receiving the programming each month.
Individual program prices vary from supplier-to-supplier,
and more favorable pricing sometimes is afforded to
operators with larger subscriber bases; however, the Cable
Act requires cable programming to be made available for
purchase by all system operators at competitive pricing.
Pay-Per-View Services. The Company intends to offer
"pay-per-view" services that will enable customers to order,
and pay for, one program at a time. Pay-per-view services
have, in the past, been successful for specialty events,
such as wrestling and heavyweight prize fights, concerts and
early-release motion pictures. It is possible that the
Company will promote the purchase of movies on a
pay-per-view basis in competition with video rental stores.
Pay-per-view requires the subscriber to have an "addressable
converter". An addressable converter allows the cable
company to control what the subscriber watches without
having to visit the subscriber location to change equipment.
The Company intends to utilize addressable converters in all
of its systems. However, for customers to order
pay-per-view events conveniently, an impulse pay-per-view
converter is required. An impulse pay-per-view converter,
which has a return frequency (in a wireless system) to the
operator's computer system, enables a subscriber to make a
telephone call to order an event. The Company intends to
have impulse capability in all of its systems, but it does
not intend to offer impulse pay-per-view in the foreseeable
future.
Pay Television Industry Trends
The Company's business will be affected by pay television
industry trends and, in order to maintain and increase its
subscriber base in the years ahead, the Company will need to
adapt rapidly to industry trends and modify its practices to
remain competitive. Due to the limited number of physical
components of the wireless transmission system, the Company
believes it will be less expensive for it to adapt to coming
industry trends than for hard-wire cable operators. The
cost of such adaptation by the Company could, nonetheless,
be substantial.
Signal Compression. Several decoder manufacturing
companies are developing digital compression technology,
which would allow several programs to be carried in the
amount of bandwidth where only one program is carried now.
Manufacturers have projected varying compression ratios for
future equipment, with more conservative estimates ranging
from 3-to-1 to 10-to-1. The Company believes
second-generation 6-to-1 signal compression technology will
be available within three months. It is generally expected
that such digital compression technology would have at least
two major effects: (1) such technology will permit wireless
cable systems to be launched in a particular market with far
fewer channels having been licensed or leased, thereby
reducing start-up and operating costs; and (2) such
technology will permit dramatic expansion of pay-per-view
video services, thereby increasing the potential of greater
revenues for a particular system's operator. The Company
believes hard-wire cable companies will be required to
expend significant funds on upgrading current systems in
order to utilize digitally-compressed signals, the costs of
which may be prohibitive.
Addressability and Pay-Per-View. "Addressability" means
the ability to implement specific orders from, or send other
communications to, each subscriber, without having to modify
a subscriber's equipment. "Impulse addressability" allows a
subscriber to select specialized programming, such as
pay-per-view, on an immediate basis, simply through the
remote control. While the Company, like many wireless cable
operators, expects that it will use impulse-addressable
set-top converters, only approximately 35% of hard-wire
cable operators use addressability and only approximately 5%
use impulse-addressability. Without addressability, a
hard-wire customer not subscribing to a premium channel must
make two trips to the hard-wire cable operator's offices,
once to obtain the descrambling device and once to return
it. A customer subscribing to a premium channel must
telephone the hard-wire cable operator in advance. The
Company believes this lack of convenience has substantially
hindered pay-per-view sales. Pay-per-view is expected to
become more popular as additional events become available
for distribution exclusively on pay-per-view. Compression
technology will greatly expand the channel capacity
available for such programming. The Company believes that
the use of digital compression technology will provide an
additional advantage over most hard-wire cable operators,
because impulse-addressable set-top converters provide
greater convenience for subscribers. Hard-wire cable
operators will incur significant expenditures to upgrade
their systems to be able to offer impulse addressability.
Advertising. Until recently, most advertising on cable
has been sold by program suppliers, who sell national
advertising time as part of the signal they deliver to cable
operators. Recently, however, advertisers have begun
placing advertisements on channels dedicated exclusively to
advertising, as well as in local available time (typically,
two minutes each hour) set aside by program suppliers for
local insertions in their programming of advertisements sold
by cable operators. The Company expects that digital
compression technology will allow substantial flexibility in
the expansion of advertising sales, due to the increased
number of programming channels available. (See "Business
Strategy" hereunder).
Interactivity. Certain hard-wire cable operators have
announced their intentions to develop interactive features
for use by their subscribers. Interactivity would allow
subscribers to utilize their televisions for two-way
communications, such as video games and home shopping, among
others. Wireless cable operators will be able to utilize a
frequency which the FCC has made available for interactive
communications. At this time, the Company believes the
commercial viability of interactivity in the Company's
markets is at least several years away.
Business Strategy
The Company's primary business objective in the wireless
cable industry is to develop, own and operate wireless cable
television systems in markets in which the Company believes
it can achieve positive cash flow and operating income
rapidly after system launch. This period of development
would be followed by consolidation of its subscriber base
and expansion of programming.
Rural Market Focus. The Company intends to aggregate
wireless cable channel rights and to locate operations in
small to mid-size markets that have a substantial number of
households not currently passed by hard-wire cable and lack
off-air VHF/UHF broadcast channels. The Company believes
that this size market typically has a stable economic base,
less competition from alternative forms of entertainment and
other conditions conducive to wireless cable transmissions.
Market Penetration. Because the Company's officers will
be involved in each system launch in a hands-on manner, the
Company believes it will be able to achieve positive monthly
operating cash flow upon obtaining between 350 and 400
subscribers within a particular system. Initially, the
Company will direct its marketing at unpassed households.
Accordingly, the Company believes it will be able to launch
service successfully in most of its markets with
approximately 12 channels of programming, allowing it to
contain system launch costs and achieve positive cash flow
with a lower number of subscribers. The Company expects
that it will be able to achieve this level of programming in
each of its markets. It is the Company's plan that, once a
system achieves positive cash flow, the Company would expand
the channel offering and add subscribers. There is no
assurance that any of the Company's proposed systems will
ever generate positive cash flow or earn a profit. (See
"Risk Factors").
Low Cost Infra-Structure. Wireless cable systems
typically cost significantly less to build and operate than
hard-wire cable systems, for many reasons. First, while
both hard-wire cable operators and wireless cable operators
must construct a head-end, hard-wire cable operators must
also install an extensive network of coaxial cable and
amplifiers in order to transmit signals from the head-end to
subscribers. In a wireless cable system, once the head-end
is constructed, the Company estimates that each additional
wireless cable subscriber will require an incremental
capital expenditure by the Company of approximately $200.
Such incremental capital expenditures are variable costs and
will be partially offset by installation fees to be paid by
subscribers. Second, without an extensive co-axial cable
network to maintain, wireless cable operators typically
incur lower system maintenance costs and depreciation
expense. Third, programming is generally available to
hard-wire and wireless cable operators on comparable terms,
although operators that have a smaller number of subscribers
often are required to pay higher per-subscriber fees.
Finally, the Company expects that it will, based on industry
averages, experience a lower rate of subscriber turnover, as
compared to the "churn" rate of approximately 3% per month
typically experienced by hard-wire cable operators, although
no assurances can be made in this regard. Reduced
subscriber turnover can be expected to reduce installation
and marketing expenses.
Development Priority. The Company currently intends to
exploit its wireless cable markets in the following order:
(1) Poplar Bluff, Missouri, which is built out and will
become operational at such time as needed marketing funds
are obtained, of which there is no assurance; (2) Lebanon,
Missouri; (3) Port Angeles, Washington; (4) The Dalles,
Oregon; (5) Sand Point, Idaho; (6) Fallon, Nevada; and (7)
Astoria, Oregon. There is no assurance that the Company
will be able to launch any of its proposed wireless cable
systems. (See "Company Markets" hereunder).
Marketing and Customer Support. The Company intends
primarily to utilize door-to-door marketing, as well as
media advertising, telemarketing and direct mail, to gain a
subscriber base in each of its wireless cable markets. The
Company also intends to run promotional pricing campaigns
and take advantage of public relations opportunities. In
this regard, the Company expects that substantial consumer
education regarding wireless cable will be necessary in each
of its markets, which could slow the growth of its
subscriber base.
The Company believes that it will offer its subscribers
competitively priced installation and subscription fees.
Several points will be emphasized in the Company's
advertising, as discussed below. The Company anticipates
that installation fees will average $49.95 per subscriber
and begin at $5.00 for promotional specials, while monthly
subscription fees are expected to start at $18.95 for basic
programming. Pay-per-view stations may be made available in
the future at no additional charge. It can be expected that
the Company will offer specially-priced packages during
promotional periods. Hard-wire cable customer charges are
subject to local franchise taxes, whereas wireless cable
customers do not pay any franchise taxes. A focus on the
value received for the price paid, together with an emphasis
on increased programming availability, are expected to
provide a competitive choice to potential customers. There
is, however, no assurance that the Company will be
successful in attracting subscribers.
The Company intends to provide 24-hour-per-day service,
with rapid response time on subscriber telephone calls,
uniformed field personnel and flexible installation
scheduling. The Company will emphasize its picture quality
and reliability of its wireless transmission. The Company
believes that, within its signal pattern, its picture
quality will be as good or better than that received by
hard-wire cable subscribers because, absent any
line-of-sight obstruction, there is less opportunity for
signal degradation between transmitter and the subscriber.
Also, wireless cable service has proven very reliable,
primarily due to the absence of certain distribution system
components that can fail and thereby cause outages. The
Company intends to position itself as a reliable,
cost-effective alternative to hard-wire cable operations by
delivering a high-quality signal throughout its signal area
and personal service to its subscribers.
Equipment Reliability and Picture Quality. Several
manufacturers produce the equipment used in the wireless
cable systems, from transmitters to the set-top converters
which feed the signal to the television set. Because the
signal is broadcast over the air directly to a receiving
antenna, wireless cable does not experience the problems
caused by amplifying signals over long distances experienced
by some hard-wire cable subscribers. Amplification of
signals can lead to greater signal noise and, accordingly, a
grainier picture for some subscribers. Also, the
transmission of wireless signals is not subject to the
problems caused by deteriorating underground cables used in
hard-wire cable systems. As a result, wireless cable is
sometimes more reliable than hard-wire cable, and picture
quality is generally equal to or better than hard-wire
cable. In addition, extreme weather conditions typically do
not affect wireless cable transmitters, so customers seldom
experience outages sometimes common with hard-wire cable
systems.
Signal security is provided by encoding each wireless
cable channel and equipping the converter with a unique
decoding device that responds to a pilot signal carrying a
data stream, with authorizations instructions. Thus, the
system is fully "addressable". The converter boxes will not
be usable until they are authorized for service by each
system's central computer. All channels, both basic and
premium, are scrambled. Because the wireless cable system
is addressable, it can also accommodate pay-per-view
service.
Advertising. The Company will attempt to generate
advertising sales revenue in each of its proposed wireless
cable markets, through the use of surplus channels, that is,
channels on which the Company is not broadcasting regular
programming. It is expected that the Company would sell
space on such surplus channels to distributors of so-called
"infomercials", which can be expected to generate additional
revenues for the Company. In addition, it is possible that
the Company will establish a program production unit, which
would produce, among other types of programming,
infomercials for its own use, as well as for sale to other
systems in need of additional programming. There is no
assurance that the Company will be successful in this
regard.
Company Markets
General. The Company currently holds the rights to
wireless cable channels in the following cities:
Estimated
Estimated Total Line-
Total 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,
Washington 64,553 30,085 25,141 H1-2-3
The Dalles,
Oregon 59,945 27,328 20,232 B1-2-3;
C1-2-3
Sand Point,
Idaho 46,750 25,510 15,739 B1-2-3;
C1-2-3
Fallon,
Nevada 27,943 11,506 9,288 E1-2-3-4;
H3
Astoria,
Oregon 57,213 31,663 23,960 H2-3
------- ------- -------
Totals 512,588 256,661 219,588
- ------------
Source: 1990 Census Data.
* Each of these channels is a low power television channel,
not a channel in the FCC-allocated wireless cable
frequencies (2500-2700 MHZ).
The Company currently intends to exploit its wireless
cable markets in the order of the above presentation. Such
order of development was determined after an assessment of
the business potential of each of the markets based upon the
number of homes within the radius of the proposed transmit
site, the number of homes passed by hard-wire cable and
other demographic factors. Except where noted below, the
Company will seek additional financing, either equity or
debt, or form partnerships for the development of its
markets. The Company does not currently have such financing
or partners in place. The Company believes such financing
will be available on a market-by-market basis, especially
for the incremental capital needed as a particular wireless
cable system adds revenue-producing subscribers; however,
there can be no assurance that it will be able to obtain
such financing or partners on a timely basis and on
satisfactory terms and conditions, if at all. The failure
to obtain additional funds or partners on a timely basis
could materially adversely affect the Company and its
business. Nevertheless, the Company believes it will be
able to undertake limited development of one or more of its
markets (that is, with less rapid construction and less
extensive marketing) without such additional financing or
partners.
Poplar Bluff, Missouri. The Company's wireless cable
system in Poplar Bluff is based on low power television
channels rather than on the 2500-2700 MHZ channels
specifically allocated by the FCC to wireless cable. That
is, the low power television channels have been built-out
for wireless cable operations, with full encryption and
signal compression capability. The Company believes this
style of wireless cable system to be superior to a
"traditional" wireless cable system, inasmuch as the low
power television broadcast signal is not limited by
"line-of-sight" concerns associated with microwave
(2500-2700 MHZ) transmissions. Thus, terrain, large trees
and buildings cause far less signal interference.
Pursuant to separate Assignment and Assumption
Agreements, the Company holds the rights to leases of eight
low power television channels in the Poplar Bluff area.
Specifically, the Company holds the rights to channels 26,
28, 31, 35, 56, 59, 61, 68. The Company is obligated to pay
monthly fees of $.14 per subscriber for channels 26 and 31,
and $.10 per subscriber for the remainder of the channels.
The term of each of such agreements is 10 years, commencing
October 17, 1996, which term shall renew automatically for
an additional 10 years, at the Company's option.
Should funds be available, of which there is no
assurance, the Company intends to commit $100,000 to the
initial marketing and development efforts in Poplar Bluff.
The Company expects that it will be able to secure
approximately 300 subscribers with the expenditure of such
funds. There is no assurance that such will be the case.
(See "Management's Discussion and Analysis of Financial
Condition and Results of Operations").
The hard-wire cable system in Poplar Bluff carries
approximately 25 channels. The Company will offer 12
channels (including available off-air VHF/UHF channels), and
will charge approximately 20% less per month for programming
services than does the local hard-wire operator. In
addition, there are a large number of unpassed (by hard-wire
cable) residences in the Poplar Bluff area, which is the
market segment on which the Company will concentrate
initially. The Company expects to achieve market
penetration in the unpassed residences in the Poplar Bluff
area at a rate that meets or exceeds the national average.
However, no assurances can be given in this regard.
The Company will utilize door-to-door marketing,
newspaper and radio advertising to advertise its wireless
cable services. Other forms of advertising may be used,
should cost factors be acceptable. The Company's officers
expect to oversee installation and sales efforts. Once the
Poplar Bluff system is established, the Company expects to
employ one full-time and one part-time employee there.
Lebanon, Missouri. The Company's Lebanon, Missouri,
wireless cable system will contain the same feature as its
Poplar Bluff, Missouri, wireless cable system, that is,
transmission of programming will emanate from low power
television stations rather than a microwave transmitter.
Pursuant to separate Assignment and Assumption Agreements,
the Company holds the rights to leases of eight low power
television channels in the Lebanon area. Specifically, the
Company holds the rights to channels 18, 29, 31, 40, 51, 53,
55 and 59. The Company is obligated to pay monthly fees of
$.10 per subscriber. The term of each of such agreements is
10 years, commencing October 17, 1996, which term shall
renew automatically for an additional 10 years, at the
Company's option. The Company is currently unable to
predict when it will begin to construct its Lebanon system,
although the Company does not anticipate that it will
commence construction prior to 1998, at the earliest. The
Company does not currently possess capital sufficient to
commence construction of such wireless cable system. There
is no assurance that the Company will ever possess capital
with which it would be able to construct its Lebanon system.
Port Angeles, Washington. The Company holds the rights
to leases of three wireless cable channels in Port Angeles,
Washington, channels H1, H2 and H3. The Company is
currently unable to predict when it will begin to construct
such wireless cable system. Nevertheless, should funding of
approximately $200,000 be available, the Company anticipates
that it will begin construction of such wireless cable
system during the first quarter of Fiscal 98. There is no
assurance that such level of funding for construction of
such wireless cable system will be available. In addition,
the Company will be required to acquire more channel rights
and/or utilize available signal compression technologies, in
order to be in position to offer a viable wireless cable
alternative. There is no assurance that the Company will be
able to acquire any additional channel rights or acquire the
rights to utilize any signal compression technologies.
The Dalles, Oregon. The Company holds the rights to
leases of six wireless cable channels in The Dalles, Oregon,
channels B1-2-3 and C1-2-3. The Company is currently unable
to predict when it will begin to construct such wireless
cable system, inasmuch as the Company does not currently
possess capital with which to commence construction. There
is no assurance that funding for construction of such
wireless cable system will be available.
Sand Point, Idaho. The Company holds the rights to
leases of six wireless cable channels in Sand Point, Idaho,
channels B1-2-3 and C1-2-3. The Company is currently unable
to predict when it will begin to construct such wireless
cable system, inasmuch as the Company does not currently
possess capital with which to commence construction. There
is no assurance that funding for construction of such
wireless cable system will be available.
Fallon, Nevada. The Company holds the rights to leases
of five wireless cable channels in Fallon, Nevada, channels
E1-2-3-4 and H3. The Company is currently unable to
predict when it will begin to construct such wireless cable
system, inasmuch as the Company does not currently possess
capital with which to commence construction. There is no
assurance that funding for construction of such wireless
cable system will be available.
Astoria, Oregon. The Company holds the rights to leases
of two wireless cable channels in Astoria, Oregon, channels
H2 and H3. The Company is currently unable to predict when
it will begin to construct such wireless cable system,
inasmuch as the Company does not currently possess capital
with which to commence construction. There is no assurance
that funding for construction of such wireless cable system
will be available. In addition, the Company will be
required to acquire more channel rights and/or utilize
available signal compression technologies, in order to be in
position to offer a viable wireless cable alternative.
There is no assurance that the Company will be able to
acquire any additional channel rights or acquire the rights
to utilize any signal compression technologies.
Competition
In addition to competition from established hard-wire cable
television systems, wireless cable television operators face
competition from numerous other sources, including potential
competition from emerging technologies in the pay-television
industry, certain of which are described below.
Satellite Receivers. Satellite receivers are generally
seven to 12 foot dishes mounted in the yards of homes to
receive television signals from orbiting satellites. Until
the implementation of encryption, these dishes enabled
reception of any and all signals without payment of fees.
Having to purchase decoders and pay for programming has
reduced their popularity, although the Company will, to some
degree, compete with these systems in marketing its wireless
cable services.
Direct Broadcast Satellite (DBS). DBS involves the
transmission of an encoded signal direct from a satellite to
a customer's home. Because the signal is at a higher power
level and frequency than most satellite transmitted signals,
its reception can be accomplished with a relatively small
(18-inch) dish. DBS cannot, for technical and legal
reasons, provide local VHF/UHF broadcast channels as part of
its service, although many DBS subscribers receive such
channels through the use of standard over-air receive
antennas. Moreover, DBS may provide subscribers with access
to broadcast network distant signals only when a subscriber
resides in areas unserved by any broadcast station. The
cost to a DBS subscriber for equipment and service is
generally substantially higher than similar costs to
wireless cable subscribers. Several DBS services currently
are available nationwide. DBS currently has approximately
four million subscribers nationwide. At present, the
Company does not believe that, in the near-term, DBS will
constitute significant competition in the markets in which
the Company operates, due primarily to its cost and failure
to provide access to local VHF/UHF broadcast channels.
Satellite Master Antenna Television (SMATV). SMATV is a
multi-channel television service offered through a wired
plant quite similar to a hard-wire cable system, except that
it operates without a franchise from a local authority.
SMATV operates under an agreement with a private landowner
to service a specific multiple-dwelling unit (e.g.,
apartment complex). The FCC has recently amended its rules
to provide point-to-point delivery of video programming by
SMATV operators and other video delivery systems in the 18
gigahertz band.
Telephone Companies. Under the Communications Act, local
exchange carriers (LECs) are currently prohibited from
providing video programming directly to subscribers in their
respective telephone service areas. The FCC has recently
ruled, however, that LECs may acquire wireless cable
operations. Moreover, certain U.S. District Courts and
Courts of Appeal have held that the "telco-cable
cross-ownership ban" abridges the First Amendment rights of
LECs to free expression under the U.S. Constitution. Such
rulings are currently under appeal or are expected to be
appealed. The Telecommunications Act lifts barriers to the
provision of cable television service by telephone
companies. The FCC already permits LECs to provide "video
dial-tone" service, thereby allowing such carriers to make
available to multiple service providers, on a
nondiscriminatory common carrier basis, a basic platform
that will permit end users to access video program services
provided by others.
While the competitive effect of the entry of telephone
companies into the video programming business is still
uncertain, the Company believes that wireless cable systems
will continue to maintain a cost advantage over video
dial-tone service and fiber optic distribution technologies.
However, due to rapid technological advancements and the
capital resources of LECs, no assurances can be made in this
regard.
Video Stores. Retail stores rent VCRs and/or video tapes,
and are a major participant in the television program
delivery industry. According to Paul Kagan Associates,
Inc., there are over 75.5 million households with VCRs now
in use in the United States. This segment of the television
program delivery industry represents significant competition
for pay-per-view sales and premium programming channels.
Local Off-Air VHF/UHF Broadcasts. Local off-air VHF/UHF
broadcasts (such as ABC, NBC, CBS, FOX, UPN and WB) provide
a free programming alternative to the public. Prior to
October 1993, wireless cable systems could re-transmit these
broadcast signals without permission. However, with the
enactment of the Cable Act, local broadcasters may require
that cable operators obtain their consent before
re-transmitting local off-air VHF/UHF broadcasts. The
Company will attempt to obtain such consents in each of its
markets where the Company is re-transmitting on a wireless
cable channel.
Local Multi-Point Distribution Service. In 1993, the FCC
proposed to re-designate the 28 gigahertz band to create a
new video programming delivery service referred to as local
multipoint distribution service (LMDS). Final rules for
LMDS have not been established. Auctions for the
LMDS-related channels are not expected to begin until the
middle of 1997, and the Company does not expect to possess
sufficient capital to participate in such auction.
Community (Low Power) Television. Community Television
utilizes a limited portion of the spectrum allocated by the
FCC for local off-air VHF/UHF broadcasts, but Community
Television utilizes lower power transmission equipment than
local off-air VHF/UHF broadcasts and its signal may be
encrypted. Community Television requires a separate
transmitter for each channel and a standard antenna at the
receiving site.
Business - Community (Low Power) Television
General
Industry History. Community, or low power, television is
a relatively new broadcasting category created by the FCC in
the early 1980's. Community television stations, with their
narrow geographic coverage, usual unaffiliated status and
local programming focus, are becoming a more important part
of the current broadcasting mix. While able to cover, on
average, only between five and 20 miles radius (15-62 square
miles) with their signals, community television stations
have been able to expand greatly their coverage by having
their signals included in local and regional cable systems.
Entry into the community television industry requires
substantially less capital than entry into the high-power
television industry. There are currently approximately
1,700 community television stations licensed by the FCC,
with approximately the same number of applications for new
licenses now pending with the FCC.
Community television stations may be either affiliated
with one of the national networks (ABC, NBC, CBS, FOX, UPN
or WB) or may be independent. The Company does not
anticipate that its community television stations will
become network affiliates in the near term. However, it is
expected that, once operational, each of the Company's
stations will become an affiliate of the Video Catalog
Channel, a merchandise sales operation. The Company's only
operational station, Call sign K13VE, Channel 13, in Baton
Rouge, Louisiana, has been an affiliate of the Video Catalog
Channel since going on the air in January 1996. (See
"Business Strategy" hereunder).
Programming
Lacking a national network affiliation, independent
community (low power) television stations, in general,
depend heavily on independent third parties for programming.
Programs obtained from independent sources consist primarily
of syndicated television shows, many of which have been
shown previously on a network, and syndicated feature films,
which were either made for network television or have been
exhibited previously in motion picture theaters (most of
which films have been shown previously on network and cable
television). Syndicated programs are sold to individual
stations to be broadcast one or more times. Independent
television stations generally have large numbers of
syndication contracts; each contract is a license for a
particular series or program that usually prohibits
licensing the same programming to other television stations
in the same market. A single syndication source may provide
a number of different series or programs.
Licenses for syndicated programs are often offered for cash
sale or on a barter or cash-plus-barter basis to stations.
In the case of a cash sale, the station purchases the right
to broadcast the program, or a series of programs, and sells
advertising time during the broadcast. The cash price of
such programming varies, depending on the perceived
desirability of the program and whether it comes with
commercials that must be broadcast (a cash-plus-barter
basis). Bartered programming is offered to stations without
charge, but comes with a greater number of commercials that
must be broadcast, and, therefore, with less time available
for sale by the station. Recently, the amount of bartered
and cash-plus-barter programming broadcast industry-wide has
increased substantially.
For the foreseeable future, however, the Company anticipates
that each of its community television stations will be an
affiliate of the Video Catalog Channel, deriving all of its
programming therefrom. (See "Business Strategy" hereunder,
as well as "Management's Discussion and Analysis of
Financial Condition and Results of Operations").
Community Television Industry Trends
The Company believes that community television is in the
right position at a very dynamic time in the television
broadcasting market place. With the ever-growing number of
cable (hard-wire and wireless) channels in most markets,
coupled with the lack of programming available for channel
slots past the 70-channel mark, there appears to be room
available on such cable systems for additional stations.
This availability of channel room on cable systems has the
effect of giving community television far greater area
coverage than could be achieved solely by broadcasting a
signal. The potential for community television stations to
achieve historically high revenues exists, if a particular
market and/or region can be exploited effectively. There is
no assurance that the Company will be able to exploit each
of its community television markets.
Business Strategy
It is the Company's current intention for each of its
community television stations, as soon as it becomes
operational, to become an affiliate of the Video Catalog
Channel, a merchandise sales operation. It is the Company's
experience, from the operations of its Baton Rouge,
Louisiana, community television station, that this strategy
generates positive cash flow, from inception of
broadcasting. From such financial position, a station's
advertising sales efforts will be increased in an effort to
exploit such station's coverage area. Also, the Company
will attempt to secure a channel on each of the cable
systems within a particular market. There is no assurance
that the Company will be able to exploit effectively any of
its community television markets. It is possible that one
or more of the Company's community television stations
could, in the future, become an affiliate of one of the
national networks, such as FOX, UPN or WB. However, no
prediction in this regard can be made.
Company Markets
General. The Company currently operates a community
television station in Baton Rouge, Louisiana, and holds the
rights to community television stations in other cities, as
follows:
Estimated
Total Total
City Population Households Channel
- ------------------ ---------- ---------- -------
Baton Rouge,
Louisiana 637,555 252,106 13
Monroe/Rayville,
Louisiana 235,394 92,900 26
Bainbridge,
Georgia 298,215 120,688 36
Natchitoches,
Louisiana 97,764 45,730 38
--------- -------
Totals 1,268,928 511,424
- ------------
Source: 1990 Census Data.
The Company currently intends to establish its Community
Television stations in the order of the above presentation.
Such order of development was determined after an assessment
of the business potential of each of the markets based upon
the number of homes within the radius of the proposed
transmit site, as well as other demographic factors. Except
where noted below, the Company will seek additional
financing, either equity or debt, or form partnerships for
the development of its markets. The Company does not
currently have such financing or partners in place. The
Company believes such financing will be available on a
station-by-station basis; however, there can be no assurance
that it will be able to obtain such financing or partners on
a timely basis and on satisfactory terms and conditions, if
at all. The failure to obtain additional funds or partners
on a timely basis could materially adversely affect the
Company and its business.
Baton Rouge, Louisiana. K13VE, Channel 13, the
Company's Baton Rouge, Louisiana, community television
station, has been broadcasting since January 1996, as an
affiliate of the Video Catalog Channel. The Company's
current broadcast signal reaches approximately 30,000
households. Should the Company obtain necessary funds, of
which there is no assurance, the Company intends to commit
$20,000 to increase the power of such station to its maximum
legal limit, which would permit the Company's broadcast
signal to reach approximately 150,000 households. It is
expected that the commissions earned by K13VE from Video
Catalog Channel sales originating from its broadcast area
will increase proportionately to its increased number of
households reached. There is no assurance that such will be
the case.
Other Stations. The Company owns the licenses to
community television stations located in Monroe/Rayville,
Louisiana, Natchitoches, Louisiana, and Bainbridge, Georgia,
which television stations are expected to be constructed in
the order listed, assuming adequate funding is available, of
which there is no assurance. The Company believes it will
require approximately $50,000 to construct each station.
Because the Company intends to have each of its stations
become an affiliate of the Video Catalog Channel immediately
after construction has been completed, the Company does not
expect to require additional funds for marketing. There is
no assurance that funding will be available to the Company
at such times as it attempts to construct any one of its
community television stations. Absent additional funding,
the Company would likely be unable to construct any of its
community television stations.
Competition
Community television stations compete for advertising
revenue in their respective markets, primarily with other
broadcast television stations and cable television channels,
and compete with other advertising media, as well. Such
competition is intense. In addition, competition for
programming, management personnel and network affiliations
is severe. There is no assurance that the Company's
community television channels, once built, of which there
is no assurance, will be able to compete effectively in
their respective markets. (See "Risk Concerning Community
(Low Power) Television - Competition" under "Risk Factors").
Business - Wireless Internet
General
Wireless Internet is a new type of communications spectrum
recently designated by the FCC. The FCC has designated the
900 MHZ band for Wireless Internet use. Wireless Internet
requires a transmission facility maintained by the Wireless
ISP and the user's modem equipped with an antenna. Wireless
Internet capability allows users to access the Internet from
a stationary computer or from a mobile, lap-top computer
located within the Wireless ISP's transmission area; that
is, a user can travel in a car, bus, train, etc., within the
Wireless ISP's transmission area and maintain constant
Internet access. The Company believes that businesses,
particularly service businesses, once made aware of the
Wireless Internet technology, will readily subscribe to the
Company's Wireless ISP service, although no assurance can be
made in this regard.
During the second quarter of 1997, the Wireless Internet
technology to be employed by the Company will have been
developed so as to allow the user's connection to be the
equivalent of a traditional ISDN telephone line. This type
of connection permits much more efficient access to the
Internet than does a traditional (non-ISDN) telephone line.
The Company believes its Wireless ISP service will be
extremely competitive in its markets. However, there is no
assurance that such will be the case, inasmuch as the
Wireless ISP is a new technology and the Company has
conducted no formal market research in any of its proposed
Wireless ISP markets. (See "Business Strategy" hereunder).
Business Strategy
General. It is the Company's intention to develop its
Dallas Wireless ISP as quickly as possible. Assuming
funding is available, of which there is no assurance, the
Company intends to commit $200,000 to this end. Should the
Company be successful in obtaining bank financing, the
Company intends to begin to develop its Dallas Wireless ISP
as quickly as possible, a goal of commencement of customer
solicitation during the second quarter of 1997. Assuming
such financing is available, of which there is no assurance,
the Company intends to begin to develop its Houston Wireless
ISP as soon as its Dallas Wireless ISP's monthly revenues
exceed its monthly expenditures. No prediction can be made
with respect to when the Company's Dallas Wireless ISP will
begin to generate positive cash flow. There is no assurance
that the Company will successfully exploit any of its
Wireless ISP markets. (See "Competition" hereunder). The
Company's Baton Rouge, Louisiana, Wireless ISP has not yet
begun to solicit customers; thus, no determination of
consumer acceptance can yet be made. However, another
Wireless ISP in Monroe, Louisiana, utilizing the same
Wireless Internet Access System as the Company, reports that
consumer acceptance appears to be excellent. There is no
assurance that the Company will experience similar results.
Marketing. In marketing its Wireless ISP services, the
Company will emphasize the superior connection to the
Internet offered by its equipment, the low price relative to
the quality of the Internet connection, the mobility of the
Internet connection and the ability to gain access to the
Internet without dealing with the local telephone company.
There is no assurance that this method of marketing will be
successful.
Competition
Traditional (telephone-line dependent) Internet Service
Providers are currently engaged in severe competition for
market share, particularly in the larger markets of the U.S.
It can be expected that many competitors will possess far
greater resources, financial and otherwise, than does the
Company. There is no assurance that the Company will be
able to compete successfully in any of its Wireless ISP
markets. (See "Risk Factors Concerning Wireless Internet -
Competition" under "Risk Factors").
Company Employees
The Company currently has no salaried employees. However,
the Company's officers are performing all required business
and administrative functions without pay. Should the
Company be successful in securing funding, it is expected
that the Company would employ approximately 25 persons by
the close of 1997. The industries in which the Company
operates require a high level of expertise in many
positions. The Company does not anticipate any difficulty
in retaining necessary personnel.
Company Properties
The Company leases approximately 1,200 square feet for its
executive offices in Baton Rouge, Louisiana, for a monthly
rental of $1,600. The Company expects to lease additional
office space, as well as necessary transmitter space, as it
launches each wireless cable system, each community
television station and Wireless ISP.
MANAGEMENT
Directors and Officers
The following table sets forth the officers and directors of
the Company as of the date of this Prospectus.
Name Age Position(s)
- -------------------- --- -------------------------
David M. Loflin(1) 39 President and Director
Waddell D. Loflin(1) 47 Vice President, Secretary
and Director
Richard N. Gill 39 Director
Ross S. Bravata 38 Director
Michael Cohn 39 Director
- ------------
(1) David M. Loflin and Waddell D. Loflin are brothers.
The current officers and directors of the Company serve
until the next annual meeting or until their respective
successors are elected and qualified. All officers serve at
the discretion of the Board of Directors. The family
relationships between the Company's officers and directors
are noted in the table above. Certain information regarding
the backgrounds of each of the officers and directors of the
Company is set forth below.
David M. Loflin, President and Director of the Company,
has, for more than the past five years, owned and operated
Gulf Atlantic Communications, Inc. ("Gulf-Atlantic"), a
Baton Rouge, Louisiana-based wireless technology firm
specializing in development of wireless cable systems and
broadcast television stations. Gulf Atlantic has designed,
constructed and operated two wireless cable systems: (1)
Baton Rouge, Louisiana, and (2) Selma, Alabama. Mr. Loflin
developed and currently operates one television station,
WTVK-TV11, Inc. (a Warner Brothers Network affiliate),
Channel 11 in Baton Rouge, Louisiana. For over ten years,
Mr. Loflin has served as a consultant for Wireless One, one
of the largest wireless communications firms in the United
States. Mr. Loflin is a member of the Wireless Cable
Association International and the Community Broadcasters
Association.
Waddell D. Loflin, Vice President, Secretary and Director
of the Company, has, for more than the past five years,
served as Vice President of Operations and Treasurer of Gulf
Atlantic Communications, Inc. and WTVK-TV11, Inc., both in
Baton Rouge, Louisiana. In addition, Mr. Loflin serves as
Production Manager and Film Director for WTVK-TV11, Inc.
Mr. Loflin served as General Manager for Baton Rouge
Television Company, Baton Rouge, Louisiana, a wireless cable
system, where he directed the development and launch of such
wireless cable system. Also, Mr. Loflin has devoted over
five years to demographic research relating to the wireless
cable industry. Mr. Loflin is a member of the Wireless
Cable Association International and the Community
Broadcasters Association. Mr. Loflin holds a B.A. degree in
Social Sciences from Oglethorpe University, Atlanta,
Georgia.
Richard N. Gill, Director of the Company, has, for more
than the past five years, served as Chairman of the Board,
President and General Manager of Campti-Pleasant Hill
Telephone Company, Inc., a Pleasant Hill, Louisiana-based
independent telecommunications company involved in the
cellular telephone service industry, the wireless cable
industry and the Internet service provider industry. Mr.
Gill currently serves on the Board of Directors of Artcrete,
Inc., and is on the Advisory Board of Peoples State Bank,
Pleasant Hill, Louisiana. Mr. Gill received a degree from
the University of Southwestern Louisiana, Lafayette,
Louisiana, where he currently serves as a member of the
Industry Telecommunication Advisory Committee for the
Electrical Engineering Department. Mr. Gill is a
past-Chairman and current member of the Louisiana Telephone
Association. Mr. Gill is also a member of the United States
Telephone Association and the National Telephone Cooperative
Association.
Ross S. Bravata, Director of the Company, has, since 1981,
worked for Novartis (formerly Ciba Corporation), in various
positions, and currently serves as a Senior Control Systems
Technician. In such capacity, Mr. Bravata supervises the
service and maintenance of electronic instrumentation.
Since 1988, Mr. Bravata has served as a director and
principal financial officer of CG Federal Credit Union,
Baton Rouge, Louisiana. Also, Mr. Bravata has, since its
inception in 1994, served as a director of Trinity's
Restaurant, Inc. in Baton Rouge, Louisiana.
Michael Cohn, Director of the Company, has, for 20 years,
owned and operated Arrow Pest Control, Inc., Baton Rouge,
Louisiana. In addition, Mr. Cohn owns Arrow Pest Control of
New Orleans, Wilson and Sons Exterminating in Mobile,
Alabama, and Premier Termite and Pest Control in Florida.
Executive Committee
The Board of Directors of the Company has created an
Executive Committee to facilitate Company management between
regularly scheduled and special meetings of the full Board
of Directors. David M. Loflin, Waddell D. Loflin and Ross
S. Bravata comprise the Executive Committee of the Board of
Directors. The Company's Bylaws (Section 5.1) provide that
the Executive Committee has the authority to exercise all
powers of the Board of Directors, except the power to
declare dividends, issue stock, recommend to shareholders
any matter requiring shareholder approval, change the
membership of any committee, fill the vacancies therein or
discharge any committee member. The Executive Committee has
taken action by unanimous written consent in lieu of a
meeting once, since its creation.
Executive Compensation
None of the Company's officers is expected to receive any
cash, or other, compensation during Fiscal 97. Further, no
Company officer will begin to receive cash compensation
until such time as the payment of such compensation would
not adversely affect the Company's operations and proposed
development and expansion. No prediction can be made as to
when cash compensation will begin to be paid to the
Company's officers. It is expected that Mr. David M.
Loflin, the Company's President, will be paid an annual
salary of $120,000, at such time as the Company possesses
adequate funds. Any other cash compensation paid to Company
officers will be determined by the Board of Directors.
Indemnification of Directors and Officers
The Company currently is seeking officer and director
liability insurance, though none has been obtained as of the
date of this Prospectus.
Article X of the Articles of Incorporation of the Company
provides that no director or officer of the Company shall be
personally liable to the Company or its shareholders for
damages for breach of fiduciary duty as a director officer;
provided, however, that such provision shall not eliminate
or limit the liability of a director or officer for (1) acts
or omissions which involve intentional misconduct, fraud or
a knowing violation of law or (2) the payment of dividends
in violation of law. Any repeal or modification of Article
X shall be prospective only and shall not adversely affect
any right or protection of a director or officer of the
Company existing at the time of such repeal or modification
for any breach covered by Article X which occurred prior to
any such repeal or modification. The effect of Article X of
the Company's Articles of Incorporation is that Company
directors and officers will experience no monetary loss for
damages arising out of actions taken (or not taken) in such
capacities, except for damages arising out of intentional
misconduct, fraud or a knowing violation of law, or the
payment of dividends in violation of law.
As permitted by Nevada law, the Company's Bylaws provide
that the Company will indemnify its directors and officers
against expense and liabilities they incur to defend, settle
or satisfy any civil, including any action alleging
negligence, or criminal action brought against them on
account of their being or having been Company directors or
officers unless, in any such action, they are judged to have
acted with gross negligence or willful misconduct. Insofar
as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to
directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been
informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
CERTAIN TRANSACTIONS
Founders
In November 1996, the Company's officers purchased a total
of 1,800,000 shares of Company Common Stock for cash at $.10
per share, a total consideration of $1,800. Specifically,
David M. Loflin, President and a director of the Company,
purchased 1,600,000 shares and Waddell D. Loflin, Vice
President, Secretary and a director of the Company,
purchased 200,000 shares of Company Common Stock.
Joint Venture
In January 1997, the Company entered into a joint venture,
known as "Web One Wireless I.S.P. - Baton Rouge, J.V." (the
Joint Venture), with Web One, Inc. (Web One), a Louisiana
corporation owned by David M. Loflin (50%) and Ross S.
Bravata (50%), whereby the Joint Venture will operate as a
Wireless Internet Service Provider (ISP) in Baton Rouge,
Louisiana. The Joint Venture Agreement by which the Joint
Venture was formed requires that the Company and Web One
each contributed $5,000 to the capital of the Joint Venture.
As of the date of this Prospectus, the Company has only
satisfied $2,500 of its required capital contribution. The
Company will be unable to complete its capital contribution
obligation until such time as it has secured financing. No
prediction in this regard can be made. Nevertheless, Web
One has advised the Company that it will continue to make
allocations in accord with the provisions of the Joint
Venture Agreement. Since the formation of the Joint
Venture, each of Messrs. Loflin and Bravata has loaned a
total of $7,500 to the Joint Venture, which loans bear
interest at 8% per annum and are due on demand. Messrs.
Loflin and Bravata have advised the Joint Venture that they
have no intention of demanding payment of such loans for the
foreseeable future. It is expected that each of Messrs.
Loflin and Bravata will make similar loans to the Joint
Venture during the next six months, up to an additional
$7,500. However, there is no guaranty that Messrs. Loflin
and Bravata will make any such additional loans. Should
such additional loans not be made, it can be expected that
the Joint Venture's ability to achieve successful operations
would be severely impaired.
Under the Joint Venture Agreement, all net income and net
losses from Joint Venture operations shall be allocated 50%
to the Company, 50% to Web One; all net gains and net losses
of the Joint Venture in connection with the licensing or
sale of assets shall be allocated 50% to the Company, 50% to
Web One; and all net gains and net losses of the Joint
Venture in connection with the dissolution and termination
of the Joint Venture shall be allocated 50% to the Company,
50% to Web One. Cash distributions may, in the discretion
of Web One, as Managing Venturer, be made, on a quarterly
basis, 50% to the Company, 50% to Web One; provide, however,
that, upon the dissolution and termination of the Joint
Venture, cash distributions shall be made, first, to repay
any unpaid loans, including accrued and unpaid interest,
made by the Company or Web One to the Joint Venture, and,
next, 50% to the Company, 50% to Web One.
Web One, as Managing Venturer of the Joint Venture, has
exclusive and complete discretion in the management and
control of the Joint Venture; provided, however, that Web
One, as Managing Venturer, may not, without the consent of
the Company, do any act in contravention of the Joint
Venture Agreement, do any act which would make it impossible
to carry on the ordinary business of the Joint Venture,
confess a judgment against the Joint Venture, possess Joint
Venture property, or assign any rights in specific Joint
Venture property for other than a Joint Venture purpose and
change or reorganize the Joint Venture into any other legal
form.
The Joint Venture Agreement provides that Web One, as
Managing Venturer of the Joint Venture, will not be liable,
responsible or accountable in damages or otherwise to the
Company for any acts performed by it, or for its failure to
act, in good faith and within the scope of the Joint Venture
Agreement, and not attributable to gross negligence,
malfeasance, fraud, breach of fiduciary duty or breach of
any express warranty or representation contained in the
Joint Venture Agreement; and the Joint Venture, but not the
Company, shall indemnify and hold harmless Web One, as
Managing Venturer, from any loss, damage, liability, cost or
expense arising out of any act or failure to act by it, if
such act or failure to act is in good faith, within the
scope of the Joint Venture Agreement, and is not
attributable to gross negligence, malfeasance, fraud, breach
of fiduciary duty or breach of express warranty or
representation contained in the Joint Venture Agreement.
The Joint Venture shall be dissolved and its business wound
up, upon the earliest to occur of : (1) December 31, 1997;
(2) the written consent of the Company and Web One; (3) the
bankruptcy or insolvency of Web One; or (4) the sale of all
or substantially all of the Joint Venture's assets.
Web One serves as Managing Venturer of the Joint Venture
pursuant to a Joint Venture Management Agreement. In
consideration of the services to be rendered by Web One
pursuant to the Joint Venture Management Agreement, Web One
shall receive a management fee of $3,000 per month;
provided, however, that the management fee shall not begin
to be paid (and none will accrue) until the calendar month
immediately following the calendar month for which the Joint
Venture's revenues exceed cash expenses by an amount in
excess of $3,000. The Joint Venture has not yet paid Web
One any management fees, nor have any management fees
accrued. The Joint Venture Management Agreement is for an
initial term of five years and shall renew automatically for
an additional five-year term, unless the Joint Venture
elects to the contrary. Also, Web One may terminate the
Joint Venture Management Agreement at any time, upon 60-days' written notice.
Notwithstanding the foregoing, the Joint Venture may terminate the Joint
Venture Management Agreement at any time for just cause, including Web One's
failure to implement lawful policies or directions of the
Joint Venture, conduct of Web One that results in a material
adverse effect on the Joint Venture, Web One's intentionally
causing damage to any property of the Joint Venture and any
act of Web One, or one of its agents, involving personal
dishonesty or criminal conduct against the Joint Venture.
The Joint Venture Management Agreement may not be assigned
by Web One, without the consent of the Joint Venture.
The effect of the provisions of the Joint Venture Agreement
and the Joint Venture Management Agreement is that the
Company is dependent upon the efforts of Web One for the
success of the Joint Venture. There is no assurance that
Web One will operate the Joint Venture in a successful
manner.
The Company has 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
occasions, a total of $40,000 to MCTV, which loan is
evidenced by a promissory note, bears interest at eight
percent per annum and is payable on demand. In November
1996, Mr. Loflin loaned the sum of $20,000 to MCTV, which
loan is evidenced by a promissory note, bears interest at
eight percent per annum and is payable on demand.
In January 1997, Mr. Loflin loaned the sum of $8,000 to the
Company, which loan is evidenced by a promissory note, bears
interest at eight percent per annum and is payable on
demand. $5,000 of such loan has been repaid.
In June 1997, Mr. Loflin loaned the sum of $13,500 to the
Company, which loan is evidenced by a promissory note, bears
interest at eight percent per annum and is payable on
demand.
Mr. Loflin has advised the Company that he does not intend
to demand payment of such loans until such time as repayment
would not adversely affect the financial position of the
Company.
Subscription Agreements
Effective December 20, 1996, the Company entered into a
Subscription Agreement with its President, David M. Loflin,
whereby the Company issued 1,578,512 shares of Common Stock
to Mr. Loflin in exchange for assignments of licenses and
leases of licenses of television channels and wireless cable
television channels and options to acquire such assets, as
follows:
Community TV Market Channel
-------------------------- -------
Monroe/Rayville, Louisiana 26
Natchitoches, Louisiana 38
Wireless Cable Market Channels
-------------------------- --------
Port Angeles, Washington H1-2-3
Astoria, Oregon H2-3
Sand Point, Utah B1-2-3;
C1-2-3
The Dalles, Oregon B1-2-3;
C1-2-3
Fallon, Nevada E1-2-3-4;
H3
The assets acquired by the Company under such Subscription
Agreement were valued at $1,826,873, which value was
determined pursuant to a market report and appraisal as of
December 20, 1996 (the "Appraisal"), delivered to the
Company by Broadcast Services International, Inc.,
Sacramento, California. (See "Appraisal" hereunder for a
full discussion of the Appraisal). Mr. Loflin's total
acquisition costs of the assets underlying such Subscription
Agreement are unknown. Accordingly, the financial
statements of the Company attribute no value to such assets.
See the second paragraph under "Appraisal" hereinbelow for a
discussion of Mr. Loflin's acquisition costs of the assets
vis-a-vis the appraised value of such assets.
Effective December 20, 1996, the Company entered into a
Subscription Agreement with its Vice President, Waddell D.
Loflin, whereby the Company issued 104,249 shares of Common
Stock to Mr. Loflin in exchange for an assignment of the
license of television channel 36 in Bainbridge, Georgia.
The assets acquired by the Company under such Subscription
Agreement were valued at $120,652, which value was
determined pursuant to the Appraisal. Mr. Loflin's
acquisition costs of the assets underlying such Subscription
Agreement are unknown. Accordingly, the financial
statements of the Company attribute no value to such assets.
See the second paragraph under "Appraisal" hereinbelow for a
discussion of Mr. Loflin's acquisition costs of the assets
vis-a-vis the appraised value of such assets.
Reorganizations
Effective December 31, 1996, the Company entered into an
Agreement and Plan of Reorganization (the "WEI
Reorganization") among the Company, Winter Entertainment,
Inc., a Delaware corporation (WEI), and David M. Loflin, as
WEI's sole shareholder, pursuant to which transaction WEI
became a wholly-owned subsidiary of the Company. WEI owns
and operates K13VE Channel 13 in Baton Rouge, Louisiana.
Under the WEI Reorganization, Mr. Loflin received 227,336
shares of Company Common Stock in exchange for his shares of
WEI common stock. The shares of WEI common stock acquired
by the Company in the WEI Reorganization were valued at
$263,106, which value was determined pursuant to the
Appraisal. WEI's acquisition costs relating to the rights
to K13VE Channel 13 were $6,750. In addition, WEI has
capitalized a total of $10,587 in exploiting such channel
rights, including station construction costs. See the
second paragraph under "Appraisal" hereinbelow for a
discussion of WEI's acquisition costs relating to K13VE
Channel 13 vis-a-vis the appraised value thereof.
Effective December 31, 1996, the Company entered into an
Agreement and Plan of Reorganization (the "MCTV
Reorganization") among the Company, Missouri Cable TV Corp.,
a Louisiana corporation (MCTV), and the shareholders of
MCTV, pursuant to which transaction MCTV became a
wholly-owned subsidiary of the Company. MCTV owns licenses
and leases of licenses of wireless cable television channels
in Poplar Bluff, Missouri, which system is ready for
broadcast operations, and Lebanon, Missouri, which system
has yet to be developed. Under the MCTV Reorganization,
David M. Loflin, as a shareholder of MCTV, received
1,179,389 shares of Company Common Stock in exchange for his
shares of MCTV common stock. The shares of MCTV common
stock acquired by the Company from Mr. Loflin in the MCTV
Reorganization were valued at $1,364,553. Also under the
MCTV Reorganization, Ross S. Bravata, a director of the
Company, received, as a shareholder of MCTV, 42,887 shares
of Company Common Stock in exchange for his shares of MCTV
common stock. The shares of MCTV common stock acquired by
the Company from Mr. Bravata were valued at $49,620. In
addition, Michael Cohn, a director of the Company,
received, as a shareholder of MCTV, 53,608 shares of Company
Common Stock in exchange for his shares of MCTV common
stock. The shares of MCTV common stock acquired by the
Company from Mr. Cohn were valued at $62,024. The value of
the shares of MCTV common stock acquired by the Company from
Messrs. Loflin, Bravata and Cohn under the MCTV
Reorganization was determined pursuant to the Appraisal.
MCTV acquired substantially all of its assets from Mr. David
Loflin, whose acquisition costs of such assets were
$179,611. The other shareholders of MCTV received their
shares of MCTV common stock for nominal consideration.
Since acquiring its assets from Mr. Loflin, MCTV has
capitalized an additional $22,722 in exploiting such assets.
See the second paragraph under "Appraisal" hereinbelow for a
discussion of Mr. Loflin's acquisition costs relating to
MCTV's assets vis-a-vis the appraised value thereof.
Stock Purchase
In March 1997, one of the Company's directors, Michael Cohn,
purchased 20,000 shares of Company Common Stock for cash in
the amount of $50,000. Mr. Cohn has advised the Company
that he intends to purchase, within 30 days from the date of
this Prospectus, an additional 40,000 shares for cash in the
amount of $100,000. However, there is no assurance that
such investment will be made.
Appraisal
Background. The Appraisal was delivered to the Company by
Broadcast Services International, Inc., a Sacramento,
California-based communications appraisal firm. The report
of BSI was based on 1990 Census Data. With respect to the
wireless cable markets, the engineering studies relied upon
by BSI indicate the number of households within the
broadcast radius using the 1200 MHZ frequency. The 1200 MHZ
frequency was assumed, due to BSI's experience that, given
all of the variables that may be present in a
market-by-market system build-out, the actual benchmark
performance is more truly reflected by using the higher
(1200 MHZ) frequency, such that the signal attenuation is
not over-stated. Valuation formulas for the wireless cable
markets of the Company were based on initial public
offerings within the wireless cable industry during the past
three years. The formulas used in evaluation of the
Company's broadcast channels are based on recent sales and
market evaluation techniques employed by the Community
Broadcasters Association, among others.
Use of Appraisal. At the Company's inception, the
Company's Board of Directors adopted a plan that provided
for the initial capitalization of the Company to be
6,000,000 shares of Common Stock. 1,800,000 of such shares
were sold as founders' stock. The balance of such shares,
4,800,000 shares, were to be utilized to acquire the
Company's assets, which assets were acquired pursuant to the
Subscription Agreements with Mr. David Loflin and Mr.
Waddell Loflin, the WEI Reorganization and the MCTV
Reorganization. The Board of Directors utilized the
Appraisal as a means to allocate the 3,840,000 shares among
the assets underlying the referenced Subscription
Agreements, the WEI Reorganization and the MCTV
Reorganization, as follows:
Appraised
Value of Shares Historical
Assets of Common Cost of Assets
Transaction Acquired Stock Issued Appraised
- ------------- ---------- ------------ --------------
Subscription
Agreement
with David M.
Loflin $1,826,873 1,578,512 Unknown
Subscription
Agreement
with Waddell
D. Loflin 120,652 104,249 Unknown
WEI Reorgan-
ization 263,106 227,336 $ 17,337
MCTV Reorgan-
ization 2,233,555 1,929,903 $202,333
---------- --------- --------
Totals $4,444,186 3,840,000 $219,670
The appraised value of the assets described above bears no
relationship to the costs of such assets to the affiliates
from whom they were acquired. Prospective purchasers of
Company Common Stock should note that it is possible that
the Company would be unable to realize any of such asset's
appraised value in a sale transaction.
PRINCIPAL SHAREHOLDERS
On the date of this Prospectus, there were 6,170,000 shares
of Company Common Stock issued and outstanding. The
following table sets forth certain information regarding the
beneficial ownership of Company Common Stock as of the date
of this Prospectus, and after giving effect to the dividend
distribution of Company Common Stock to the shareholders of
ECA, by (i) persons known to the Company to be beneficial
owners of more than 5% of the Common Stock of the Company,
(ii) each of the Company's officers and directors and (iii)
the officers and directors of the Company as a group.
Name and Shares Shares
Address of Owned Owned
Beneficial Bene- Percent Bene- Percent
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 "Code"), various
regulations promulgated pursuant to the Code,
interpretations published by the Internal Revenue Service
(the "Service") and court decisions.
This section was prepared by the law firm of Newlan & Newlan
("Counsel") and reflects the opinions of such firm regarding
the material federal income tax consequences arising from
the distribution of the Company's Common Stock as described
in this Prospectus. All opinions of Counsel rely upon the
accuracy of the information submitted and the
representations made by ECA. Such opinion is not binding on
the Service or on the courts. Accordingly, no assurance can
be given that the Service will agree with the opinions
expressed hereinbelow.
ECA will report the distribution of the Company's Common
Stock as a distribution subject to the provisions of Section
301 of the Internal Revenue Code of 1986, as amended (the
"Code"). ECA will recognize gain as a result of the
distribution to the extent the fair market value of the
Common Stock exceeds the adjusted basis of such Common Stock
in the hands of ECA. ECA can recognize no loss as a result
of the distribution. The fiscal year of ECA ends July 31
and the Company's fiscal year ends December 31.
Holders of ECA common stock will be taxed on the dividend
distribution as ordinary income to the extent of ECA's
current and accumulated earnings and profits, computed as of
the close of the tax year during which the distribution
occurs. A portion of the distribution, if any, which
exceeds ECA's current and accumulated earnings and profits
will reduce a shareholder's adjusted basis in his ECA common
stock, but not below zero. To the extent of any such
reduction in basis, the distribution will not be currently
taxable. If the amount of the distribution would have the
effect of reducing a shareholder's adjusted basis in his ECA
common stock below zero, the excess will be treated as a
gain from the sale or exchange of property. If the ECA
common stock is a capital asset in the hands of the
shareholder, the gain will be a capital gain, either
long-term or short-term, depending on whether the
shareholder has held his ECA common stock for more than one
year.
Non-corporate shareholders will be treated as having
received a distribution equal in value to the fair market
value, at the date of the distribution, of the Common Stock
they receive. Corporate shareholders will generally be
treated as having received a distribution in an amount equal
to the lesser of (I) ECA's adjusted basis in the Common
Stock immediately prior to the distribution, increased by
the amount of any gain recognized by ECA on the
distribution, or (ii) the fair market value of the Common
Stock on the date of the distribution. However, corporate
shareholders may be entitled to the dividends-received
deduction, which would generally allow them a deduction,
subject to certain limitations, from their gross income of
80% of the amount of the dividend.
A non-corporate shareholder's tax basis in the Common Stock
will equal the fair market value of the Common Stock on the
date of the distribution and a corporate shareholder's tax
basis in the Common Stock will generally equal the lesser of
the fair market value of the Common Stock on the date of the
distribution or the adjusted basis of the Common Stock in
the hands of ECA immediately prior to the distribution,
increased in the amount of any gain recognized to ECA on the
distribution.
The holding period of a corporate shareholder of ECA
attributable to the Common Stock of the Company will
commence on the date of the distribution. If gain is
recognized on the distribution by ECA, as will be the case
if the fair market value of the Common Stock distributed
exceeds its adjusted basis, a corporate shareholder's
holding period will begin on the date of the distribution.
If gain is not recognized by ECA on the distribution and the
basis of the Common Stock in the hands of the corporate
shareholder is determined under Code Section 301(d)(2)(B),
then (except for gain from certain sales or exchanges of
stock in foreign corporations) such corporate shareholder
will not be treated as holding the Common Stock distributed
during any period before the date on which such corporate
shareholder's holding period in its Common Stock began.
In the absence of a trading market for the Common Stock,
"fair market value" is to be calculated in accordance with
Internal Revenue Service Revenue Ruling 59-60,
1959-1C.B.237, which sets forth certain factors for such a
determination (for example, the nature of the business, its
history, the general economic outlook, book value of the
Company, earnings capacity, dividend paying capacity,
existence of good will and recent sales of Company shares).
Neither ECA nor the Company will advise the shareholders
what the "fair market value" of the Common Stock will be on
the distribution date. Each shareholder must make his own
determination. ECA intends to send to shareholders and the
Service, however, IRS Form 1099 DIV which will indicate a
value of the dividend distribution equal to the fair market
value of the Common Stock on the date of the dividend
distribution, in the opinion of ECA. Any portion of the
distribution which has the effect of reducing a
shareholder's adjusted basis below zero will be treated as a
gain from the sale or exchange of property.
The preceding discussion is a general summary of current
federal income tax consequences of the dividend distribution
as presently interpreted, and a shareholder's particular tax
consequences may vary depending on his individual
circumstances. Shareholders are encouraged to consult their
own tax counsel concerning the treatment of the distribution
on their income tax returns.
LITIGATION
The Company is not currently involved in any legal
proceeding.
DESCRIPTION OF SECURITIES
Authorized Capital Stock
The authorized capital stock of the Company consists of One
Hundred Million (100,000,000) shares of Common Stock, $.0001
par value per share. As of the date of this Prospectus,
there were 6,170,000 shares of Company Common Stock
outstanding.
Description of Common Stock
Each share of Common Stock is entitled to one (1) vote at
all meetings of shareholders. All shares of Common Stock
are equal to each other with respect to liquidation rights
and dividend rights. There are no preemptive rights to
purchase any additional shares of Common Stock. The
Articles of Incorporation of the Company prohibit cumulative
voting in the election of directors. The absence of
cumulative voting means that holders of more than 50% of the
shares voting for the election of directors can elect all
directors if they choose to do so. In such event, the
holders of the remaining shares of Common Stock will not be
entitled to elect any director. A majority of the shares
entitled to vote, represented in person or by proxy,
constitutes a quorum at a meeting of shareholders. In the
event of liquidation, dissolution or winding up of the
Company, holders of shares of Common Stock will be entitled
to receive, on a pro rata basis, all assets of the Company
remaining after satisfaction of all liabilities.
Transfer Agent and Registrar
The Company has retained Securities Transfer Corporation,
Dallas, Texas, as transfer agent and registrar for the
Common Stock of the Company.
LEGAL MATTERS
The law firm of Newlan & Newlan, Dallas, Texas, has acted as
legal counsel for the Company in connection with the
Registration Statement of which this Prospectus forms a part
and related matters. As of the date of this Prospectus,
Newlan & Newlan owned 150,000 shares of Company Common
Stock.
EXPERTS
The financial statements of the Company included in this
Prospectus and Registration Statement have been audited by
Weaver and Tidwell, L.L.P., independent auditor, for the
period indicated in its report thereon which appear
elsewhere herein and in the Registration Statement. The
financial statements audited by Weaver and Tidwell, L.L.P.,
have been included in reliance on its reports given as its
authority as an expert in accounting and auditing.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Director's and Stockholders
Media Entertainment, Inc.
We have audited the accompanying consolidated balance
sheet of Media Entertainment Inc., and subsidiaries (a
development stage company) as of December 31, 1996 and
the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the
year then ended. These consolidated financial statements
are the responsibility of the company's management. Our
responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the 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 year then ended in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have
been prepared assuming that the Company will continue
as a going concern. As discussed in Note 1 to the
financial statements, the Company is in its development
stage and has no operating revenue. In addition, the
Company has limited capital resources and a loss from
operations since inception, all of which raise substantial
doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also
discussed in Note 1. The financial statements do not
include any adjustments that might result from the
outcome of this uncertainty.
WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
April 3, 1997
F-2
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEET
December 31, December 31, March 31,
1995 1996 1997
(unaudited)
------------ ------------ -----------
ASSETS
CURRENT ASSETS
Cash $ 0 $ 14,502 $ 36,533
Accounts
receivable 0 310 225
Prepaid expenses 0 0 910
Total current
assets 0 14,812 37,668
PROPERTY AND
EQUIPMENT,
net of accumulated
depreciation of
$0, $706 and $882,
respectively 10,587 196,214 197,796
INVESTMENT IN
JOINT VENTURE 0 0 2,500
INTANGIBLES
Organization
costs,
net of accumu-
lated amortiza-
tion of $0, $19
and $47,
respectively 0 550 522
Licenses and
rights to leases
of licenses, net
of accumulated
amortization of
$0, $725 and
$1,105,
respectively 6,750 22,024 26,645
6,750 22,574 27,167
Total
assets $ 17,337 $ 233,600 $ 265,131
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable
to stockholder $ 0 $ 50,000 $ 53,000
Accounts payable 0 0 532
Accounts pay-
able - affiliate 0 10,069 10,069
Accrued interest 0 820 1,180
Total current
liabilities 0 60,889 64,781
STOCKHOLDERS' EQUITY
Common stock,
$.0001 par value,
100,000,000
shares author-
ized, 227,336,
6,000,000 and
6,170,000 shares
issued and
outstanding,
respectively 23 600 617
Additional paid-
in capital 17,314 198,508 308,491
Retained deficit 0 ( 24,237) ( 47,898)
Subscriptions
receivable 0 ( 2,160) ( 860)
Deferred
compensation 0 0 ( 60,000)
17,337 172,711 200,350
TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY $ 17,337 $ 233,600 $ 265,131
The Notes to Consolidated Financial Statements are
an integral part of this statement.
F-3
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
Cumulative
Since
Three Inception
Months (December 28,
Ended 1995) to
Year Ended March 31, March 31,
December 31, 1997 1997
1996 (unaudited) (unaudited)
Revenue $ 3,337 $ 224 $ 3,561
General and
administrative
expenses 27,574 23,885 51,459
Net loss ($24,237) ($23,661) ($47,898)
Loss per
common share ($0.04) ($0.00) ($0.13)
Weighted average
number of shares
outstanding 631,622 6,117,000 369,361
The Notes to Consolidated Financial Statements are
an integral part of this statement.
F-4
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
PERIOD FROM INCEPTION (December 28, 1995)
TO DECEMBER 31, 1996 AND
THREE MONTHS ENDED MARCH 31, 1997 (unaudited)
Deficit
Accumu-
lated Stock
Addi- During Sub-
tion the scrip- Def-
al Paid Develop- tions erred
Common Stock in Cap- ment Receiv- Compen-
Shares Amount ital Stage able sation
Balance
at in-
ception,
December
28, 1995 0 $ 0 $ 0 $ 0 $ 0 $ 0
Issuance
of
common
stock
for
assets 227,336 23 17,314 0 0 0
Net
income
(loss) 0 0 0 0 0 0
Balance,
Decem-
ber 31,
1995 227,336 23 17,314 0 0 0
Issuance
of
common
stock
for
as-
sets 1,929,903 193 179,418 0 0 0
Issuance
of
common
stock
for
sub-
scrip-
tion
receiv-
able 2,160,000 216 1,944 0 (2,160) 0
Issuance
of
common
stock
for
assign-
ment of
licenses
and
leases 1,682,761 168 ( 168) 0 0 0
Net loss 0 0 0 (24,237) 0 0
Balance,
Decem-
ber 31,
1996 6,000,000 600 198,508 (24,237) ( 2,160) 0
Unaud-
ited
Issuance
of
common
stock
for cash 20,000 2 49,998 0 0 0
Payment
on
subscrip-
tion re-
ceivable 0 0 0 0 1,300 0
Issuance
of
common
stock
for
future
services 150,000 15 59,985 0 0 (60,000)
Net loss 0 0 0 (23,661) 0 0
Balance,
March 31,
1997 6,170,000 $ 617 $ 308,491 ($47,898) ($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 (December
December Ended 28, 1995) to
28, 1995) March 31, March 31,
to Decem- 1997 1997
ber 31,1996 (unaudited) (unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss ($24,237) ($23,661) ($47,898)
Adjustment to
reconcile net
loss to net cash
used in operating
activities
Depreciation 706 176 882
Amortization 745 407 1,152
Decrease (increase)
in accounts
receivable ( 310) 85 ( 225)
Increase in
prepaids 0 ( 910) ( 910)
Increase in
accounts payable
and accruals 10,889 892 11,781
Net cash used
in operating
activities ( 12,207) ( 23,011) ( 35,218)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of
equipment ( 6,722) ( 1,758) ( 8,480)
Investment in
joint venture 0 ( 2,500) ( 2,500)
Purchase of
organization costs ( 569) 0 ( 569)
Purchase of
licenses and
rights to leases
of licenses ( 16,000) ( 5,000) ( 21,000)
Net cash used
in investing
activities ( 23,291) ( 9,258) ( 32,549)
CASH FLOWS FROM
FINANCING ACTIVITIES
Increase in note
payable to
stockholder 50,000 3,000 53,000
Issuance of
common stock 0 50,000 50,000
Decrease in
subscriptions
receivable 0 1,300 1,300
Net cash
provided by
financing
activities 50,000 54,300 104,300
Net increase
in cash 14,502 22,031 36,533
Cash, beginning
of period 0 14,502 0
Cash, end of
period $14,502 $36,533 $36,533
Noncash investing and financing activities for the year
ended December 31, 1996 include $179,611 of equipment given
as paid-in capital by majority shareholder, subscriptions
receivable of $2,160 for services rendered, and $16,737 in
exchange for common stock to majority shareholder.
Noncash investing and financing activities for the three
months ended March 31, 1997 (unaudited) include 150,000
shares issued for consulting and legal services to be
performed valued at $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. The assets and liabilities acquired were recorded
at historical cost in a manner similar to a pooling of
interests. Therefore, these financial statements include
the operations of MEI and its predecessors from inception of
WEI on December 28, 1995. WEI had no operations or cash
flows for the period ended December 31, 1995. Therefore,
statements of operations and cash flows for the three days
ended December 31, 1995 are not presented.
The financial statements have been prepared on a going
concern basis, which contemplates realization of assets and
liquidation of liabilities in the ordinary course of
business. Since the Company is in the development stage, it
has limited capital resources, insignificant revenue and a
loss from operations since its inception. The
appropriateness of using the going concern basis is
dependent upon the Company's ability to obtain additional
financing or equity capital and, ultimately, to achieve
profitable operations. The uncertainty of these conditions
raises substantial doubt about its ability to continue as a
going concern. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Management plans to raise capital by obtaining financing
and, eventually, through public offerings. Management
intends to use the proceeds from any borrowings to increase
the broadcast signal of WEI's community television station,
to start operation of MCTV's wireless cable channels in
Poplar Bluff, Missouri and to provide working capital. The
Company believes that these actions will enable the Company
to carry out its business plan and ultimately to achieve
profitable operations.
F-7
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include
all the accounts of MEI and its wholly owned subsidiaries,
WEI and MCTV, since inception of WEI. All intercompany
transactions and balances have been eliminated in
consolidation. The consolidated group is referred to as the
"Company".
Broadcast Equipment
Equipment is recorded at cost. Depreciation will be
calculated using a straight-line method over the estimated
useful lives of the assets, ranging from 3 to 15 years.
Cash Equivalents
The Company considers all highly liquid investments with
original maturities of ninety days or less from the date of
purchase to be cash equivalents.
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.
Recently Issued Pronouncements
The FASB has issued SFAS 128, "Earnings Per Share" which
establishes a new standard for computing and presenting
earnings per share (EPS). Under SFAS 128, basic EPS
excludes dilution and is computed by dividing income
available to common shareholders by the weighted-average
number of common shares outstanding for the period. It also
requires dual presentation of basic and diluted EPS for all
entities with complex capital structures. Diluted EPS
reflects the potential dilution that could occur if all
dilutive potential common shares had been issued. The
Company is required to adopt SFAS 128 for periods ending
after December 15, 1997. Earlier adoption is not permitted.
The Company anticipates that there will be no material
impact on implementation of this standard.
F-8
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
continued
Loss Per Common Share
Loss per common share is computed based on the loss for the
period divided by the weighted average number of common
shares outstanding during the period.
Amortization
Organization costs are being amortized on a straight-line
basis over 60 months. Licenses and rights to leases of
licenses will be amortized on a straight-line basis over the
license and lease rights periods expected to be 5 to 15
years.
NOTE 3. ACQUISITIONS
Effective December 31, 1996, the Company acquired WEI and
MCTV by issuing 2,157,239 shares of common stock in
exchange for all the common stock of each company. The
majority stockholder of the Company was also the sole
stockholder of WEI and the majority stockholder of MCTV.
Therefore, the acquisitions have been accounted for at
historical cost in a manner similar to a pooling of
interests. The consolidated statement of operations
includes the Company and its predecessors WEI and MCTV from
inception of WEI. Proforma financial information of the
previously separate enterprises for the period before the
combination was consummated that are included in current
operations is as follows:
WEI MCTV
Revenue $3,337 $ 0
Operating expense 4,787 7,763
Net loss ($1,217) ($7,763)
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 8,742 19,207
PROPERTY AND EQUIPMENT 186,333 188,091
LICENSES AND RIGHTS TO
LEASES OF LICENSES, net
of accumulated amorti-
zation of $225 and $492,
respectively 15,774 20,508
TOTAL ASSETS $230,849 $227,806
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Note payable to
stockholder $ 50,000 $ 50,000
Accounts payable 8,181 8,181
Accrued interest 820 1,121
Total current
liabilities 59,001 59,302
STOCKHOLDER'S EQUITY
Common stock, no par
value 1,800,000 shares
authorized, issued and
outstanding 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 9,
(October Ended 1996) to
9, 1996) March 31, March 31,
to Decem- 1997 1997
ber 31,1996(unaudited) (unaudited)
Revenue $ 0 $ 0 $ 0
Operating expenses 225 0 225
Operating loss ( 225) 0 ( 225)
General and
administrative
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
equipment
for
common
stock 1,800,000 179,611 0
Net loss 0 0 ( 7,763)
Balance,
December
31, 1996 1,800,000 179,611 ( 7,763)
Unaudited
Net loss 0 0 ( 3,344)
Balance,
March 31,
1997
(unaudited) 1,800,000 $179,611 ($ 11,107)
The Notes to Financial Statements are an integral part of
this statement.
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 9,
(October Ended 1996) to
9, 1996) March 31, March 31,
to December 1997 1997
31, 1996 (unaudited)(unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss ($ 7,763) ($ 3,344) ($ 11,107)
Adjustments to
reconcile net
loss to net
cash used in
operating
activities
Amortization 225 266 491
Increase in due
from affiliate ( 15,000) ( 3,234) ( 18,234)
Increase in
prepaids 0 ( 910) ( 910)
Increase in
accounts
payable and
accruals 9,001 301 9,302
Net cash used
in operating
activities ( 13,537) ( 6,921) ( 20,458)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of equipment ( 6,721) ( 1,758) ( 8,479)
Purchase of licenses
and rights to
leases of licenses ( 16,000) ( 5,000) ( 21,000)
Net cash used in
investing
activities ( 22,721) ( 6,758) ( 29,479)
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from
borrowings 50,000 0 50,000
Net cash provided
by financing
activities 50,000 0 50,000
Net increase
(decrease)
in cash 13,742 ( 13,679) 63
Cash at beginning
of period 0 13,742 0
Cash at end of period $ 13,742 $ 63 $ 63
NONCASH INVESTING 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.
Management intends 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 31, March 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
March 31,
December December 1997
31, 1995 31, 1996 (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 author-
ized, issued
and outstanding 17,337 17,337 17,337
Deficit accum-
ulated during
the develop-
ment stage 0 ( 1,217) ( 1,349)
17,337 16,120 15,988
TOTAL LIABILITIES
AND STOCKHOLDER'S
EQUITY $17,337 $32,888 $32,756
The Notes to Financial Statements are an integral part of
these statements.
F-21
<PAGE>
WINTER ENTERTAINMENT, INC.
(a development stage company)
STATEMENTS OF OPERATIONS
Cumulative
Since
Three Inception
Months (December
Ended 28, 1995) to
Year Ended March 31, March 31,
December 31, 1997 1997
1996 (unaudited) (unaudited)
Revenue $3,337 $ 224 $3,561
Operating Expenses 4,543 0 4,543
Operating income
(loss) ( 1,206) 224 ( 982)
General and
administrative
expenses 11 356 367
Net income (loss) ($1,217) ($ 132) ($1,349)
Loss per
common share ($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 ($1,349)
The Notes to Financial Statements are an integral part of
these statements.
F-23
<PAGE>
WINTER ENTERTAINMENT, INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
Cumulative
Since
Three Inception
Months (December
Year Ended 28, 1995)
Ended March 31, to March
December 31, 31, 1997 1997
1996 (unaudited) (unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) ($ 1,217) ($132) ($1,349)
Adjustment to
reconcile
net income
(loss) to
net cash
provided
by operating
activities
Depreciation
and amortization 1,206 289 1,495
Increase in accounts
receivable ( 15,997) ( 215) ( 16,212)
Increase in accounts
payable 1,768 0 1,768
Increase in due to
affiliate 15,000 0 15,000
Net cash provided
by (used in)
operating activities 760 ( 58) 702
Net increase (decrease)
in cash 760 ( 58) 702
Cash at beginning of
period 0 760 0
Cash at end of period $ 760 $ 702 $ 702
Noncash investing activities for the period of inception
(December 28, 1995) to December 31, 1995, consisted of
contribution of equipment and license agreement for common
stock valued at $17,337. There were no other cash
activities for the period then ended.
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>
<PAGE>
No dealer, salesperson or any other person has been
authorized to give any information or to make any
representations other than those contained in this
Prospectus in connection with the offering described herein,
and, if given or made, such information or representations
must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities
offered hereby in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so or 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<PAGE>
360,000 Shares
Common Stock
$.0001 par value
Media Entertainment, Inc.
Prospectus
______, 1997<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Estimated expenses payable by the Company in connection with
the registration of Common Stock covered hereby are as
follows:
Registration fee $100.00
Underwriter's unaccountable expense allowance 0.00
Printing and engraving expenses 3,000.00*
Legal fees and expenses 27,500.00
Accounting fees and expenses 7,500.00
Blue Sky fees and expenses
(including legal fees) 0.00
Transfer agent and registrar fees and expenses 5,000.00
Miscellaneous 750.00*
- --------------- ---------
(* estimate) Total $43,850.00*
Item 14. Indemnification of Directors and Officers.
Registrant is a Nevada corporation. Section 78.751 of
Nevada Revised Statutes (the "Nevada Act") empowers a
corporation to indemnify its directors and officers and to
purchase insurance with respect to liability arising out of
their capacity as directors and officers. The Nevada Act
further provides that the indemnification permitted
thereunder shall not be deemed exclusive of any other rights
to which the directors and officers may be entitled under
the corporation's bylaws, any agreement, vote of the
shareholders or otherwise.
Section VIII of Registrant's Bylaws, included as Exhibit 3.2
filed herewith, which provides for the indemnification of
directors and officers, is incorporated herein by reference.
Registrant has purchased no insurance for indemnification of
its officers and directors, agents, etc., nor has there been
any specific agreement for indemnification made between
Registrant and any of its officers and directors, or others,
with respect to indemnification for them arising out of
their duties to Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, the Securities Exchange
Act of 1934 or the Rules and Regulations of the Securities
and Exchange Commission thereunder may be permitted under
said indemnification provisions of the law, or otherwise,
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, any such indemnification
is against public policy and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection
with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in the Nevada Act and will be governed by the final
adjudication of such issue.
Item 15. Recent Sales of Unregistered Securities.
1. (a) Securities Sold. On November 1, 1996, a total of
1,800,000 shares of Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were sold to David M. Loflin (1,600,000 shares)
and Waddell D. Loflin (200,000 shares).
(c) Consideration. Such shares of Common Stock were
sold for cash at a price of $.10 per share, or $1,800.00 in
the aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
2. (a) Securities Sold. On November 15, 1996, a total of
360,000 shares of Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were sold to Entertainment Corporation of
America, a Delaware corporation.
(c) Consideration. Such shares of Common Stock were
sold for cash at a price of $.10 per share, or $360.00 in
the aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
3. (a) Securities Sold. On December 20, 1996, 1,578,512
shares of Company Common Stock were issued.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were issued to David M. Loflin.
(c) Consideration. Such shares of Common Stock were
issued in exchange for assignments of licenses and leases of
licenses of wireless cable channels and low power television
stations, pursuant to a Subscription Agreement, at a value
of $1.157 per share, or $1,826,873, in the aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
4. (a) Securities Sold. On December 20, 1996, 104,249
shares of Company Common Stock were issued.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were isssued to Waddell D. Loflin.
(c) Consideration. Such shares of Common Stock were
issued in exchange for an assignment of a license to operate
a television station, pursuant to a Subscription Agreement,
at a value of $1.157 per share, or $120,652, in the
aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
5. (a) Securities Sold. On December 31, 1996, 227,336
shares of Company Common Stock were issued.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were issued to David M. Loflin.
(c) Consideration. Such shares of Common Stock were
issued in exchange for all of the capital stock of Winter
Entertainment, Inc., a Delaware corporation, pursuant to an
Agreement and Plan of Reorgainzation, at a value of $1.157
per share, or $263,106, in the aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
6. (a) Securities Sold. On December 20, 1996, 1,929,903
shares of Company Common Stock were issued.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were issued to David M. Loflin (1,179,389
shares), Alvin J. Bernard (21,443 shares), Clyde and Linda
Bunker (32,165 shares), Ross and Becky Bravata (42,887
shares), Curtis Bunyett (10,722 shares), Mike and Lori Cohn
(53,608), Denis Mantei (21,443 shares), Sareth Morm and
Saoeth Im (32,165 shares), Nancy McRae L.T. dtd-12/4/86
(16,082 shares), Harold Miller (21,443 shares) Arthur
Rodriguez (21,443 shares), Don Reid (214,434 shares), Linda
Simmons (10,722 shares), David and Lynne Stenske (21,443
shares), Michael Stecher (26,804 shares), Glen and Maria
Thomas (21,443 shares), Gilbert and Eliza Tobon (16,082
shares), Carlton P. Weise (32,165 shares), Dunn Revocable
Trust (42,887 shares), Evangelical Center (26,804 shares),
Ted L. Flory Revocable Trust (21,443 shares), Ross Carey
Trust (21,443 shares) and 1993 Robbins Revocable Trust
(21,443 shares)
(c) Consideration. Such shares of Common Stock were
issued in exchange for all of the capital stock of Missouri
Cable TV Corp., a Louisiana corporation, pursuant to an
Agreement and Plan of Reorganization, at a value of $1.157
per share, or $2,233,555, in the aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
7. (a) Securities Sold. On February 1, 1997, 150,000
shares of Company Common Stock were issued.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were issued to Newlan & Newlan, Attorneys at
Law.
(c) Consideration. Such shares of Common Stock were
issued pursuant to a Consulting and Legal Services
Agreement, at a value of $.40 per share, or $60,000, in the
aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
8. (a) Securities Sold. On March 7, 1997, 20,000 shares
of Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of
Common Stock were issued to Michael Cohn.
(c) Consideration. Such shares of Common Stock were
sold for cash pursuant to a Stock Purchase Agreement, at a
price of $2.50 per share, or $50,000, in the aggregate.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provisions of
Section 4(2) thereof, as a transaction not involving a
public offering.
Item 16. Exhibits and Financial Statements Schedules.
1. Exhibits.
Exhibit No. Description
----------- -----------
# 2.1 Agreement and Plan of Reorganization,
dated as of December 31, 1996, among
Registrant, Winter Entertainment,
Inc., a Delaware corporation,
and its Shareholder.
# 2.2 Agreement and Plan of Reorganization,
dated as of December 31, 1996, among
Registrant, Missouri Cable TV Corp.,
a Louisiana corporation,
and its Shareholders.
# 3.1 Articles of Incorporation of
Registrant.
# 3.2 Bylaws of Registrant.
* 3.3 Bylaws of Executive Committee of the
Board of Directors of Registrant.
* 4.1 Specimen Common Stock Certificate.
# 5.1 Opinion of Newlan & Newlan, Attorneys
at Law, re: Legality.
# 8.1 Opinion of Newlan & Newlan, Attorneys
at Law, re: Taxes.
# 10.1 Letter Agreement, dated November 15,
1996, between Registrant and
Entertainment Corporation of America.
* 10.2 Subscription Agreement, dated as of
December 20, 1996, between Registrant
and David M. Loflin.
* 10.3 Subscription Agreement, dated as of
December 20, 1996, between Registrant
and Waddell D. Loflin.
# 10.4 Office Lease, dated as of December 2,
1996, between Registrant and
8674 Corporation.
# 10.5 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K26EC, Poplar Bluff, Missouri.
# 10.6 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K31EB, Poplar Bluff, Missouri.
# 10.7 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K56FP, Poplar Bluff, Missouri.
# 10.8 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K61FY, Poplar Bluff, Missouri.
# 10.9 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K59FE, Poplar Bluff, Missouri.
# 10.10 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K35EP, Poplar Bluff, Missouri.
# 10.11 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K28ED, Poplar Bluff, Missouri.
# 10.12 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K68FL, Poplar Bluff, Missouri.
# 10.13 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K18EK, Lebanon, Missouri.
# 10.14 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K29DA, Lebanon, Missouri.
# 10.15 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K31EC, Lebanon, Missouri.
# 10.16 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K40EP, Lebanon, Missouri.
# 10.17 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K51ES, Lebanon, Missouri.
# 10.18 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K53FK, Lebanon, Missouri.
# 10.19 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K55HD, Lebanon, Missouri.
# 10.20 Assignment and Assumption Agreement,
dated as of October 17, 1996, between
Northeast Telecom, Inc. and Missouri
Cable TV Corp., relating to Channel
K59FD, Lebanon, Missouri.
# 10.21 Assignment of Contract for
Programming, dated as of December 1,
1995, between Gulf Atlantic
Communications, Inc. And Winter
Entertainment, Inc., relating to
television station K13VE,
Baton Rouge, Louisiana.
# 10.22 Letter of Understanding, dated as of
January 6, 1997, between Registrant
and Open Net, Inc., relating to
wireless internet territory rights.
# 10.23 Joint Venture Agreement, dated as of
January 24, 1997, between Registrant
and Web One, Inc., relating to a
joint venture to operate as a
wireless internet service provider.
# 10.24 License Agreement, dated as of
February 1, 1996, between Registrant
and Web One, Inc., relating to the
licensing of a trademark.
# 10.25 Consulting and Legal Services
Agreement, dated as of February 1,
1997, between Registrant and Newlan
& Newlan, Attorneys at Law, relating
to the performance of consulting
and legal services.
# 10.26 Stock Purchase Agreement, dated as of
March 10, 1997, between Registrant
and Michael Cohn, relating to the
sale of Common Stock.
# 10.27 Promissory Note, face amount $25,000,
dated October 14, 1996, with
Missouri Cable TV Corp. as maker
and David M. Loflin as payee.
# 10.28 Promissory Note, face amount $15,000,
dated October 22, 1996, with
Winter Entertainment, Inc. as maker
and David M. Loflin as payee.
# 10.29 Promissory Note, face amount $20,000,
dated November 15, 1996, with
Missouri Cable TV Corp. as maker
and David M. Loflin as payee.
# 10.30 Promissory Note, face amount $8,000,
dated January 31, 1996, with
Registrant as maker and David
M. Loflin as payee.
# 10.31 Agreement Appointing Securities
Transfer Corporation as Transfer
Agent and Registrar, dated February
6, 1997, between Registrant and
Securities Transfer Corporation.
* 10.32 Promissory Note, face amount $13,500,
dated June 9, 1997, with
Registrant as maker and David
M. Loflin as payee.
# 22.1 Subsidiaries of Registrant.
* 23.1 Consent of Weaver and Tidwell, L.L.P.,
independent auditor.
# 23.2 Consent of Newlan & Newlan, Attorneys
at Law.
* 23.3 Consent of Broadcast Services
International, Inc., independent
appraiser.
- --------------------
# Filed previously.
* Filed herewith.
2. Financial Statement Schedules.
All schedules are omitted since they are furnished
elsewhere in the Prospectus.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
1. (a) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement:
(I) To included any prospectus required by
Section 10(a)(3) of the Securities Act of 1933, as amended
(the "Act);
(II) To reflect in the prospectus any facts
or events arising after the effective date of the
registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth
in the registration statement; and
(III) To include any material information
with respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration statement.
(b) That, for the purpose of determining any
liability under the Act, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
2. Insofar as indemnification for liabilities arising
under the Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection
with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
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 July 18,
1997.
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin
President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the 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 July 18, 1997
David M. Loflin Executive Officer and
Principal Accounting
Officer) and Director
/s/ Waddell D. Loflin Vice President, July 18, 1997
Waddell D. Loflin Secretary and
Director
/s/ Richard N. Gill Director July 18, 1997
Richard N. Gill
/s/ Ross S. Bravata Director July 18, 1997
Ross S. Bravata
/s/ Michael Cohn Director July 18, 1997
Michael Cohn
<PAGE>
----------------------
INDEX TO EXHIBITS
----------------------
Exhibit No. Description
- ----------- -----------
3.3 Bylaws of Executive Committee of the
Board of Directors of Registrant.
4.1 Specimen Common Stock Certificate.
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.
10.32 Promissory Note, face amount $13,500,
dated June 9, 1997, with Registrant
as maker and David M. Loflin as payee.
23.1 Consent of Weaver and Tidwell,
L.L.P., independent auditor.
23.3 Consent of Broadcast Services
International, Inc., independent
appraiser.
<PAGE>
________________________________
EXHIBIT 3.3
________________________________
MEDIA ENTERTAINMENT, INC.
EXECUTIVE COMMITTEE BYLAWS
I. NUMBER AND TERM OF OFFICE
The number of directors who shall constitute the
whole Executive Committee of the Board of Directors
(the "Executive Committee") shall be three; each
member shall be a director of the Corporation.
Each Executive Committee Member shall be elected
for a term of one year and until his successor is
elected and qualified, except as otherwise provided
herein or required by law.
II. VACANCIES
If the office of any Executive Committee Member
becomes vacant by reason of death, resignation,
disqualification, removal or other cause, a
majority of the Executive Committee Members
remaining in office, although less than a quorum,
may elect a successor for the unexpired term and
until his successor is elected an qualified.
III. REGULAR MEETINGS
Regular meetings of the Executive Committee shall
be held at such place or places, on such date or
dates, and at such time or times as shall have been
established by the Executive Committee and
publicized among all Executive Committee Members.
A notice of each regular meeting shall not be
required.
IV. SPECIAL MEETINGS
Special meetings of the Executive Committee may be
called by one or more of the Executive Committee
Members then in office and shall be held at such
place, on such date, and at such time as they or he
or she shall fix. Notice of the place, date and
time of each such special meeting shall be given
each Committee Member by whom it is not waived by
mailing written notice not less than three days
before the meeting or by telegraphing the same not
less than eighteen hours before the meeting or by
communicating via telephone or telecopier with the
same not less than eight (8) hours before the
meeting. Unless otherwise indicated in the notice
thereof, any and all lawful business may be
transacted at a special meeting.
V. QUORUM
At any meeting of the Executive Committee, a
majority of the members shall constitute a quorum
for all purposes.
VI. PARTICIPATION IN MEETING BY
CONFERENCE TELEPHONE
Members of the Executive Committee may participate
in a meeting of such committee by means of
conference telephone or similar communications
equipment that enables all persons participating in
the meeting to hear each other. Such
participation shall constitute presence in person
at such meeting.
VII. CONDUCT OF BUSINESS
At any meeting of the Executive Committee, business
shall be transacted in such order and manner as the
Committee may from time to time determine, and all
matters shall be determined by the vote of a
majority of the members present, except as
otherwise provided herein or required by law.
Action may be taken by the Executive Committee
without a meeting if all members thereof consent
thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the
Executive Committee.
VIII. POWERS
The Executive Committee may, except as otherwise
required by law, exercise all such powers and do
all such acts and things as may be exercised or
done by the Board of Directors, except the
following:
A. Declare dividends;
B. Issue Stock;
C. Recommend to shareholders any action
requiring their approval; and
D. Change the membership of any committee,
fill the vacancies thereon or discharge
any committee.<PAGE>
---------------------------------
EXHIBIT 4.1
---------------------------------
COMMON STOCK PAR VALUE $.0001
Number Shares
MEI ______
This certificate is trans- See Reverse Side for
ferable in Dallas, Texas. certain Definitions.
MEDIA ENTERTAINMENT, INC.
a Nevada corporation
CUSIP 482530 10 2
This Certifies That
is the record holder of
Fully paid and non-assessable shares of common stock of
MEDIA ENTERTAINMENT, INC.
transferable only on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon
surrender of this Certificate properly endorsed. This
Certificate and the Shares represented hereby are issued
under and shall be subject to all of the provisions of the
Articles of Incorporation and Bylaws of the Corporation.
This certificate is not valid until countersigned by the
Transfer Agent and registered by the Registrar.
In Witness Whereof, the said Corporation has caused the
facsimile signatures of its duly authorized officers and its
facsimile seal to be affixed hereto.
/s/ David M. Loflin Dated:
President
SEAL Countersigned and
/s/ Waddell D. Loflin Registered:
Secretary Securities Transfer
Corporation, Transfer
Agent and Registrar
By:
Authorized Signature
<PAGE>
MEDIA ENTERTAINMENT, INC.
The Corporation will furnish to the record holder of this
certificate without charge on written request to the
Corporation at its principal place of business a full
statement of the powers, designations, preferences and
relative, participating, optional or other special rights of
each class of stock or series thereof which the Corporation
is authorized to issue and the qualifications, limitations
or restrictions of such preferences and/or rights.
Ths following abreviations, when used in the inscription on
the face of this certificate, shall be construed as though
they were written out in full according to applicable laws
or regulations.
TEN COM - as tenants in common
UNIF GIFT MIN ACT - ____ custodian ____
(custodian) (minor)
under Uniform Gifts to Minors Act ________
(State)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
Additional abbreviations may also be used though not in the
above list.
For value received __________, hereby sell, assign and
transfer unto _________________
Shares of the common stock represented by the within
Certificate, and do hereby irrevocably constitute and
appoint _______________________ Attorney to transfer the
said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated: __________________
X _______________
Notice: the Signature(s) to this
assignment must correspond with
the name(s) written on X________________
the face of the certificate in
every particular without
alteration or enlargement or
any change whatever.
The signature(s) should be guaranteed by an eligible
Guarantor institution pursuant to SEC Rule 17AD-15
Signature(s) guaranteed by:
------------------------
EXHIBIT 10.2
------------------------
SUBSCRIPTION AGREEMENT
This Subscription Agreement is entered into as of December
20, 1996, by and between Media Entertainment, Inc., a Nevada
corporation, ("MEI"), and David M. Loflin, an individual
resident of the State of Louisiana ("Loflin"), in light of
the following facts:
1. MEI is a development-stage communications company
operating primarily within the wireless cable and community
television industries; and
2. Loflin is the owner of certain assets useful in the
wireless cable and community television industries; and
3. Loflin desires to sell such assets in exchange for Common
Stock of MEI.
WITNESSETH:
THEREFORE, the agreement of the parties, the promises of
each being consideration for the promises of the other:
I. DEFINITIONS
Whenever used in this Agreement, the following terms shall
have the meanings set forth below:
a. "Agreement" shall mean this Subscription Agreement
and all exhibits hereto or amendments hereof.
b. "Loflin" shall mean David M. Loflin, an individual
resident of the State of Louisiana.
c. "MEI" shall mean Media Entertainment, Inc., a Nevada
corporation with offices in Baton Rouge, Louisiana.
d. "Knowledge of MEI" or matters "known to MEI" shall
mean matters actually known to the Board of Directors or
officers of MEI, or which reasonably should be or should
have been known by them upon reasonable investigation.
e. "Securities Act" shall mean the Securities Act of
1933, as amended, and includes the rules and regulations of
the Securities and Exchange Commission promulgated
thereunder, as such shall then be in effect.
f. "Louisiana Act" shall mean the Securities Act of
Louisiana, and includes the rules and regulations of the
Louisiana Securities Commission promulgated thereunder, as
such shall then be in effect.
Any term used herein to which a special meaning has been
ascribed shall be construed in accordance with either (i)
the context in which such term is used, or (ii) the
definition provided for such term in the place in this
Agreement at which such term is first used.
II. DISCLOSURES
MEI is a development stage company with no history of
operations and which has not yet begun to do business in its
chosen field of endeavor. It intends to operate as a
holding company in the wireless cable and community
television industries, among other endeavors.
III. PURCHASE AND SALE
Loflin hereby sells to MEI and MEI hereby buys from Loflin
all of the assets set forth in Exhibit "A" attached hereto
and incorporated herein by this reference in consideration
of 1,578,512 shares of the $.0001 par value Common Stock of
MEI, at the price set forth below, subject to all of the
terms and conditions set forth herein.
IV. PURCHASE PRICE - PAYMENT
Loflin shall deliver to MEI assignments conveying each of
the assets listed in Exhibit "A" hereto, for a price of
$1,826,873, payable by issuance and delivery by MEI to
Loflin of 1,578,512 shares of the $.0001 par value Common
Stock of MEI, a consideration of $1.157 per share.
V. THE EXCHANGE
Loflin agrees to deliver to MEI assignments conveying each
of the assets listed in Exhibit "A" hereto, wherein title in
and to all of the assets is transferred to MEI. Upon
delivery of such assignments by Loflin, MEI shall deliver to
Loflin a certificate representing 1,578,512 shares of the
$.0001 par value Common Stock of MEI, properly executed and
issued.
VI. REPRESENTATIONS AND WARRANTIES OF MEI
MEI represents and warrants to Loflin:
a. Organization and Corporate Authority. MEI is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. MEI has all
requisite corporate power and authority, governmental
permits, consents, authorizations, registrations, licenses
and memberships necessary to own its property and to carry
on its business in the places where such properties are now
owned and operated or such business is being conducted.
b. Issuance of the Common Stock. The shares of $.0001
par value Common Stock of MEI to be issued hereunder, when
issued and delivered in accordance with this Agreement, will
be duly and validly issued, fully paid and non-assessable,
and will be free and clear of any liens or encumbrances and,
to the knowledge of MEI, will be issued in compliance with
applicable state and federal laws.
c. Compliance with Agreements. The execution and
performance of this Agreement will not result in any
violation or be in conflict with any agreement to which MEI
is a party.
d. Authorization. All corporate action on the part of
MEI and its officers, directors and shareholders necessary
for the authorization, execution and delivery of this
Agreement, for the performance of MEI's obligations
hereunder and for the issuance and delivery of the $.0001
par value Common Stock of MEI. This Agreement, when
executed and delivered, shall constitute a legal, valid and
binding obligation of MEI.
e. Legality of Share Issuance. MEI warrants that the
Common Stock to be issued hereto will be legally issued
without registration under the Securities Act or the
Louisiana Act pursuant to applicable exemptions from
registration thereunder.
VII. REPRESENTATIONS AND WARRANTIES OF LOFLIN
a. Title to Assets. Loflin owns each of the assets
listed in Exhibit "A" hereto, free and clear of adverse
claims, liens or encumbrances.
b. Legal Capacity. Loflin is under no legal disability
with respect to the execution and performance of this
Subscription Agreement.
c. Investment Intent of Shareholder. Loflin represents
and warrants that the shares of MEI Common Stock acquired
hereunder by Loflin are being purchased by him solely for
his own account for investment purposes only and not for the
account of any other person and not for distribution,
assignment or resale to others.
d. Restrictive Legend. Loflin further consents to the
placement of the following legend, or a legend similar
thereto, on the certificate or certificates representing
shares of MEI Common Stock deliverable hereunder:
THESE SECURITIES HAVE BEEN ISSUED IN RELIANCE UPON THE
EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2)
OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED WITHOUT AN OPINION OF COUNSEL
SATISFACTORY TO
THE CORPORATION TO THE EFFECT THAT ANY SUCH PROPOSED
TRANSFER IS IN ACCORDANCE WITH ALL APPLICABLE LAWS,
RULES
AND REGULATIONS.
VIII. MISCELLANEOUS
Survival of Covenants. Unless otherwise waived as provided
herein, all covenants agreements, representations and
warranties of the parties made in this Agreement and in the
financial statements or other written information delivered
or furnished in connection therewith and herewith shall
survive the Exchange hereunder, and shall be binding upon,
and inure to the benefit of, the parties and their
respective successors and assigns.
Governing Law. This Agreement shall be deemed to be a
contract made under, governed by and construed in accordance
with the substantive laws of the State of Louisiana.
Counterparts. This Agreement may be executed simultaneously
in counterparts, each of which when so executed and
delivered shall be taken to be an original; but such
counterparts shall together constitute but one and the same
documents.
Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors or assigns
of the parties hereto.
Entire Agreement. This Agreement, the other agreements and
the other documents delivered pursuant hereto and thereto
constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and
thereof.
IN WITNESS WHEREOF, the parties have signed this Agreement
as of the day and year first above written.
MEDIA ENTERTAINMENT, INC.
(a Nevada corporation)
By: /s/ Waddel D. Loflin
Waddell D. Loflin
Vice President
/s/ David M. Loflin
David M. Loflin, individually<PAGE>
---------------------------
EXHIBIT "A"
TO
SUBSCRIPTION AGREEMENT
---------------------------
1. All right, title and interest under (a) that certain MDS
Channel Lease Agreement (ANNEX I hereto) between Gateway
Partners, as lessor, and Gulf Atlantic Communications, Inc.,
as lessee, and (b) that certain Transfer and Assignment for
Forgiveness of Debt (ANNEX II hereto) between Gulf Atlantic
Communications, Inc. and David M. Loflin, the subject of
such lease and forgiveness agreement being 2 H-Group
Channels located in Astoria, Oregon.
2. All right, title and interest under (a) that certain MDS
Channel Lease Agreement (ANNEX III hereto) between Gateway
Partners, as lessor, and Gulf Atlantic Communications, Inc.,
as lessee, and (b) that certain Transfer and Assignment for
Forgiveness of Debt (ANNEX II hereto) between Gulf Atlantic
Communications, Inc. and David M. Loflin, the subject of
such lease and forgiveness agreement being 3 H-Group
Channels located in Port Angeles, Washington.
3. All right, title and interest under that certain
Transfer and Assignment Agreement (ANNEX IV hereto) between
K&D Partners, as lessor, and David M. Loflin, as lessee, the
subject of such agreement being 4 C-Group Channels located
in The Dalles, Oregon.
4. All right, title and interest under that certain
Transfer and Assignment Agreement (ANNEX IV hereto) between
K&D Partners, as lessor, and David M. Loflin, as lessee, the
subject of such agreement being 4 E-Group Channels located
in Fallon, Nevada.
5. All right, title and interest under that certain
Transfer and Assignment Agreement (ANNEX IV hereto) between
K&D Partners, as lessor, and David M. Loflin, as lessee, the
subject of such agreement being 4 B-Group and 4 C-Group
Channels located in Sand Point, Idaho.
6. All right, title and interest under that certain Lease
Agreement (ANNEX V hereto) between Don Rayburn, Jr., as
lessor, and David M. Loflin, as lessee, the subject of such
agreement being Channel 26 located in Rayville, Louisiana.
7. All right, title and interest under that certain Low
Power Television/Television Translator Broadcast Station
Construction Permit, the subject of such permit being
Channel 36 located in Natchitoches, Louisiana.<PAGE>
-------------------------
ANNEX I
TO
EXHIBIT "A"
TO
SUBSCRIPTION AGREEMENT
-------------------------
MDS CHANNEL LEASE AGREEMENT
This H-Group Channel Lease Agreement (the "Agreement")
executed as of the 10th day of September, 1993, by Gateway
Partners ("Carrier") and Gulf Atlantic Communications, Inc.
("Customer") witnesses that the Parties have made the
recitals and agreements set out below.
RECITALS
A. WHEREAS, Gateway Partners has received a valid
conditional license (the "Conditional License") issued by
the Federal Communications Commission, and agency of the
Unites States government (the "FCC"), to construct a station
for the operation of the 2 H-Group channels specified in 47
C.F.R. Paragraph 21.901(b) (the "Channels"), in the
Chinook/Astoria, OR, Metropolitan Statistical Area (the
"Market"); and,
B. WHEREAS, Carrier intends to have constructed said
station and to receive a permanent operating license
therefor from the FCC (the "License"); and,
C. WHEREAS, Customer desires to have the use of all of
the Carrier's capacity on the Channels, including the
associated subcarriers, vertical blanking intervals and
response channels (the "Channel Capacity"), and Carrier is
willing to lease such Channel Capacity to Customer for all
lawful purposes consistent with the License, as same may be
modified from time to time.
NOW, THEREFORE, in consideration of the recitals and the
mutual promises set forth below, the Parties agree as
follows:
1. Definitions. As used in the Agreement, the
following terms shall have the meanings indicated:
1.1. "Business" or "MMDS Service" means the
Multichannel Multipoint Distribution Service, as defined in
the rules and regulations of the FCC, provided by Customer
to subscribers in the Market.
1.2. "License Date" means the date Carrier files
an FCC Form 494A Certificate of Construction (or successor
thereto) upon completion of the construction of the
( ) channel station herein contemplated.
1.3. "Transmission Facility" means the
transmission site equipment and facilities used solely to
transmit the Channels, to be owned by Customer, leased by
Carrier, and used by Customer in its Business.
1.4. "Final Order" means Public Notice of an
order or action by the FCC that is not and cannot be subject
to any timely filed or taken petition for reconsideration,
application for review, appeal, stay or set aside sua
sponte.
2. Term. The term of this Agreement shall begin on
the date of execution of this Agreement and shall continue
for a period of sixty (60) months following the License
Date. Assuming that Carrier's authorization to operate the
Channels has been renewed as necessary by the FCC, this
Agreement shall be automatically renewed for three (3)
additional sixty (60) month consecutive terms under the same
terms and conditions as contained herein provided the
Customer is not in default, unless the Customer delivers to
Carrier a notice of termination no later than one hundred
and twenty (120) days prior to the end of the then existing
term, in which event this Agreement shall terminate as of
the end of the term during which such notice is delivered.
3. Lease of the Channels. Commencing on the License
Date, Carrier hereby leases to Customer all of the Channel
Capacity for the Channels on the terms and conditions set
forth in this Agreement. For this purpose, Channel Capacity
shall include all rights to transmit, video, audio, and data
programming over Carrier's entire frequency spectrum.
4. Control of Facilities. Notwithstanding anything in
this Agreement to the contrary, Carrier, as the FCC licensee
of the Channels, shall be responsible for the compliance
with all applicable FCC rules and policies. Carrier will
have control, in accordance with FCC rules and policies, of
the construction, operation, management and maintenance of
the Transmission Facilities to the extent necessary to
comply with such rules and regulations.
5. Payments. In consideration of Carrier's agreement
to lease the Channels, Customer agrees to make the following
payments to Carrier:
5.1. Recurring "Monthly Fee". In consideration
of the service to be provided hereunder by Carrier, and
commencing the earlier of one year from the License Date, or
when Customer has ten (10) paying subscribers in its MDS
Service, and continuing thereafter for the initial Term of
this Agreement and any renewal term thereof, Customer agrees
to pay to Carrier a recurring Monthly Fee determined as
follows: the greater of (1) Two Hundred ($200) or 0.10 per
subscriber per channel.
5.2. Cost-of-Living Adjustment. The minimum
Monthly Fee shall be adjusted upward or downward for each
renewal Term based upon the percentage change in the
Consumer Price Index as reported by the U.S. Department of
Labor (1967=100) from the base year of 1992 through the end
of the prior Term.
5.3. Late Fee and Interest. Monthly Fees are due
and payable on the fifteenth (15th) of the following month.
On the first of the next monthly, the payment will be
considered past due, and a late fee of 5% of the amount due
will be assessed. At that point until paid, a one and
one-half percent (1.5%)
per month finance
charge from the due
date will be assessed in addition to the late fee. Example
would be May's activity is due June 15th, a late fee would
be assessed on July 1st and finance charges would start to
accrue from June 15.
5.4. Taxes. The Monthly Fee set out in this
Agreement is the net charge to Customer. If Federal, state
or local taxes (other than taxes on the income of Carrier)
are applicable, or become applicable to this Fee, it will be
the responsibility of the Customer to pay these taxes and to
accept the liability of any unpaid taxes which may
subsequently become applicable retroactively.
5.5. Audit. Customer shall provide to Carrier a
certified gross revenue and subscriber statement prepared by
a mutually agreeable certified public accountant within
ninety (90) days following the end of each business year.
The audit would include a calculation of the fees owed on
the revenue under this Agreement and compared with actual
payment made. In the event that there is an underpayment of
fees owed, Customer shall pay to Carrier a penalty equal to
five percent (5%) of the amount of such underpayments. Any
underpayment, including penalties, or excess would then be
paid by Customer or Carrier within 30 days of audit report.
5.6. Prorations. Al payments made under this
Agreement shall be prorated for the rendering of the Channel
Capacity as being unusable by way of FCC actions or
inactions as it applies to the Channels involved herein,
and/or economically unreasonable cost requirements to
accommodate other frequency users.
5.7. Reimbursement of Expenses. Unless otherwise
expressly stated herein, Customer shall reimburse Carrier
for Carrier's actual costs and expenses, including necessary
legal, consulting, engineering, and FCC filing fees,
incurred by Carrier subsequent to the date of this
Agreement, to obtain the initial or subsequent FCC
authorizations necessary to construct and operate the
Transmission Facilities, or to prepare, file and prosecute
amendments, applications, modifications or notifications
related thereto. Such reimbursement shall take place within
thirty (30) days of written request thereof to Customer,
along with adequate documentation to substantiate Carrier's
expenses.
6. Liability Insurance. It is agreed that Carrier
shall be insured as a third party named insured under any
liability insurance obtained by Customer. The liability
insurance maintained by Customer shall contain minimum
limits of at least $1,000,000/$2,000,000 for bodily injury
and $300,000 for property damage. Customer shall maintain
liability, property damage and errors and omissions
insurance, in amounts judged adequate by industry standard,
to cover its obligations to Carrier and other s under this
Agreement, including Section 11 indemnification. Customer
shall furnish Carrier, annually, an insurance certificate
showing coverages and Carrier as an additional insured under
all such policies. All insurance must be placed and
maintained with an insurance company having an A rating by
Best Insurance Reports.
7. Construction. The Parties agree to determine and
specify as soon as possible the Transmission Facilities and
a site which will be required to commence operation of
Customer's MDS Service, and meet from time to time
thereafter as mutually agreed to determine and specify such
Transmission Facilities or site as may be appropriate to
improve Customer's MDS Service. Upon such determination and
specification, Carrier will use its best efforts to obtain a
Conditional License for the use of such Transmission
Facilities and site from the FCC. Customer, not Carrier,
shall be responsible for all costs, including but not
limited to consultant, design, engineering and site costs,
legal fees, and licensing fees to the FCC, associated with
the construction, relocation and engineering of the
Transmission Facilities described and specified in this
Section 7, and any licenses, permits, authorizations, or
approvals necessary to acquire transmitter sites or obtain
the use of such sites. Upon the FCC's grant of a
Conditional License to Carrier for the Transmission
Facilities and site described and specified in this Section
7 and the satisfaction of all other applicable regulatory
requirements, Customer shall, at its sole cost and expense,
commence construction and complete construction of the
Transmission Facilities as authorized by the FCC, and in
accordance with Section 2.1.
7.1. Lease of Transmission Facilities to Carrier.
Subject to an Event of Default, for the sum of One dollar
($1.00) per year, and the other recitals and terms and
conditions of this Agreement, the receipt and sufficiency of
which are hereby acknowledged by Customer, Customer shall
lease the Transmission Facilities to Carrier for a term
equal to the duration of this Agreement, including renewal
terms thereof, plus one hundred twenty (120) days. In the
event Customer finances the Transmission Facilities, it is
agreed that such financing agency shall agree to give third
party notification of default and sale of financed equipment
to Carrier hereunder, with the opportunity, but not the
obligation, for Carrier to cure any such defaults within a
reasonable time before such sale. Customer shall not pledge
the License owned by Carrier.
7.2. Operation and Maintenance. Subject to the
provisions of Section 4, Customer shall, at its sole cost
and expense, operate and maintain the Transmission
Facilities in good operating condition and repair with
Carrier being notified of all such repairs. All persons
performing maintenance, repairs, or any other duties at the
Transmission Facilities shall be technically qualified and
properly licensed to perform such duties and shall work
under Customer's direct and continuing supervision and in
accordance with good engineering practices consistent with
industry standards and FCC requirements. In the event
transmission service is interrupted for any reason for a
period exceeding 24 hours, Customer shall notify Carrier
within 24 hours of such interruption. In addition, Customer
shall ensure that all FCC tower lighting and painting
requirements are followed, and shall hold Carrier harmless
for any violations related thereto.
7.3. Purchase of Equipment under Default. In the
event of Default by Customer as defined in Section 10,
Carrier shall have the right to purchase Customer's channel
transmitting equipment, subject to any and all rights of
secured party, for the fair market value of such equipment.
7.4. Reception Equipment. If requested by
Carrier in writing after the License Date, within sixty (60)
days after Customer's receipt of such request, Customer
agrees to install equipment, selected by Customer, at its
own expense, to receive transmissions over the Channels at
up to two (2) receive sites located at private residential
single family houses in the Market, to be used for the
exclusive use of Carrier's monitoring of the quality of such
transmissions and compliance with FCC rules. Title to all
equipment provided by Customer hereunder shall remain with
Customer. Subject to Carrier's ultimate control, such
reception equipment shall be installed, maintained, operated
and controlled by Customer to the extent required by the
FCC's rules at the sole expense of Customer.
7.5. [deleted]
8. Governmental and Third Party Authorizations.
Carrier shall use its best efforts, and Customer shall
cooperate with Carrier, to obtain any all FCC licenses,
permits authorizations or approvals required to carry out
the transactions contemplated by this Agreement and to
operate the Business; provided, however, that Carrier shall
not be required to pay for the reallocation, reconstruction,
or similar costs related to the waiver of the Instructional
Television Fixed Services ("ITFS"), as authorized under Part
good offices to assist Carrier in obtaining necessary
clearances from co-channel and adjacent channel ITFS
operators as necessary. Carrier shall use its best efforts
to acquire and maintain the License for the Channels in
effect. At the end of the term of the License, Carrier
shall use its best efforts to cause such License to be
renewed.
9. Representations and Warranties of Customer.
Customer represents and warrants as follows:
9.1. Organization. Customer warrants that it is
duly organized, validly existing and in good standing under
the laws of the State of Louisiana. Customer is qualified
or otherwise entitled to do business in all jurisdictions in
which such qualification or entitlement is required by
reason of its business, activities, or ownership of
property. Customer has all requisite power and authority to
own its properties and to carry on its business. Customer
has all requisite power to execute, deliver, and, subject to
the regulatory authority of the FCC, perform this Agreement.
9.2. Authorization. All necessary actions on the
part of Customer to authorize the execution and deliver of
this Agreement, and the performance of the obligations of
Customer herein, have been taken. This Agreement is valid
and legally binding on Customer and enforceable in
accordance with its terms insolvency or the laws relating to
the enforcement of creditor's rights or by the application
of equitable principles.
9.3. No Violation. The execution, delivery and
performance of this agreement and all actions and
transactions contemplated hereby: (I) will not violate any
provision of law or of the Articles of Incorporation or
Bylaws of Customer, any order of any court or other agency
of government to which Customer is party or by which it or
any of its properties is bound, and (ii) will not violate,
be in conflict with, result in a breach of or constitute
(with notice or lapse of time or both) a default under any
applicable law, order or regulation, indenture, agreement or
other instrument to which Customer is a party or by which it
or any of its properties is bound and which has not been
waived or consented to, or result in the creation or
imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of its property or assets.
9.4. Reliance. Carrier would not enter into this
Agreement but for its reliance upon the foregoing
representations and warranties of the Customer.
10. Defaults. For purposes of this Agreement, it
shall be an "Event of Default" hereunder if:
10.1. Payment. Customer fails to make any
payment due and payable under this Agreement within thirty
(30) days after the date upon which a payment is due
hereunder; or
10.2. Representations and Warranties. If any of
the material "Representations and Warranties" of this
Customer or Carrier prove at any time to be incorrect as of
the date of this Agreement; or
10.3. Breach of Covenant. Either party
materially breaches any covenant or agreement herein or
fails to comply with any material provision of this
Agreement, and such breach or failure continues for thirty
(30) days after written notice thereof shall have been sent
by the nonbreaching party to the breaching party.
10.4. Loss of FCC License. Carrier shall
forfeit, surrender, submit for cancellation, suffer the
revocation of , or suffer or accept the adverse modification
of the License, such default having no cure period, and
considered fully matured as of the last day that the Carrier
may lawfully operate the facilities or, if adversely
modified, may lawfully operate the facilities as authorized
prior to modification.
10.5. Rights in Event of Default. In the Event
of Default under this Section 10, and in addition to all
other remedies available in law or equity, the nondefaulting
party, if not itself in default, shall be entitled to
terminate this Agreement, at its sole and exclusive
election, upon written notice to the other party, and all
rights and obligations hereunder shall cease as of such
notice date.
11. Indemnification. Customer shall indemnify, defend
and hold Carrier harmless from any and all claims, damages,
causes of action, penalties, statutory damages, interest,
and costs and expenses, including attorney's fees and court
costs, arising out of any transmission over the Transmission
Facilities prohibited by Section 7.5 or that violates
applicable federal or state lottery laws, the Communications
Act of 1934, as amended, or the rules and policies of the
FCC, or that infringes in any respect the copyright,
trademark, property or other rights of any person, or
resulting from Customer's breach of this Agreement or from
any negligence, omission or wrongful act by Customer, its
agents or employees. This indemnification shall include the
providing of full legal defense on behalf of Carrier,
including Carrier's right to select counsel, and to have all
of Carrier's reasonable attorney's fees and reasonable
costs, taxable and nontaxable to be paid by Customer.
12. Representations, Warranties and Covenants of
Carrier. Carrier represents and warrants as follows:
12.1. Authorization. Carrier has all requisite
Carrier has all requisite power and authority to enter into
this Agreement and to perform the obligations to be
performed by it under this Agreement. This Agreement
constitutes a valid, binding and enforceable obligation of
Carrier.
12.2. The execution and delivery of this
Agreement by Carrier and the performance of Carrier's
obligations hereunder are not in violation or breach of, do
not conflict with or constitute a default under, and will
not accelerate or permit the acceleration of the performance
required by, any of the terms or provisions of any note,
debt instrument, security agreement or mortgage or any other
contract or agreement, written or oral to which Carrier is a
party or by which any of its assets or properties are bound
and will not be an event which, after notice or lapse of
time or both, will result in any such violation, breach,
conflict, default or acceleration or authority or court,
whether federal, state or local, at law or in equity, and
applicable to Carrier and will not result in the creation or
imposition of any lien (whether or not perfected),
encumbrance, equity or restriction in favor or any third
person upon any of the properties of Carrier; provided,
however, that the Carrier shall not be in default of this
provision if the FCC determines that any provision of this
Agreement, or the Agreement as a whole, violates FCC rules
or policies or the Communications Act of 1934, as amended.
In such event, the Parties shall negotiate in good faith
such changes to the Agreement so as to effect compliance
with FCC requirements and, so nearly as is possible, retain
the status quo hereunder.
13. Carrier Access to Records. From time to time and
upon reasonable notice to Customer, Carrier or its
accountants or attorneys shall have the right to request
information or be permitted at all reasonable times to
inspect and copy any and all records of Customer which
Carrier or its accountants or attorneys reasonably consider
necessary to verify Customer's compliance with the terms and
provisions of this Agreement. It is understood by Carrier
that such information is to be held in confidence and not
disclosed to any third parties without prior consent of
Customer. In the event that there is discovered an
underpayment of the Monthly Fee, as defined in Section 5.2,
Customer shall immediately pay to Carrier the amount of each
such underpayment along with a penalty equal to five percent
(5%) of such underpayment.
14. Notices. All notices, requests, consents and
other communications hereunder shall be in writing and shall
be effective upon receipt, in each case addressed:
If to Carrier, to: Gateway Partners
3534 Remco Street
Castro Valley, CA 94546
If to Customer, to: Gulf Atlantic Communications, Inc.
P.O. Box 40483
Baton Rouge, LA 70835
With a copy to: Lyn Guin
c/o Broadcast Services Int'l
2618 J Street, Suite 3
Sacramento, CA
provided, however, that if any party shall have designated a
different address by notice to the others, then to the last
address so designated.
15. Waivers. Any waiver by any Party of any breach of
or failure to comply with any provision of this Agreement by
the other Party shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any
other provision of this Agreement. All waivers must be in
writing and signed by the waiving Party.
16. Complete Agreement. This Agreement sets forth the
entire understanding of the Parties hereto and supersedes
all prior agreements, covenants, arrangement,
communications, representations or warranties, whether oral
or written, by any Party or any officer, employee or
representative of any Party.
17. Governing Law. This agreement shall be construed
and interpreted in accordance with and governed by the laws
of the State of California and of the United States of
America. The heading of the Sections of this Agreement are
inserted for convenience of reference only and shall not be
deemed to constitute a part hereof. Unless otherwise
stated, references in this Agreement to sections refer to
the Sections of this Agreement.
18. Force Majeure. If by reason of force majeure
either party is unable in whole or in part to carry out its
obligations hereunder, said party shall not be deemed in
violation or default during the continuance of such
inability. The term "Force Majeure", as used herein, shall
mean the following: acts of God; acts of public enemies;
orders of any kind of the government of the United State of
America or of any individual state or any of their
departments, agencies, political subdivisions, or officials;
or any civil or military authority; insurrections; riots;
epidemics; landslides; lightning; earthquakes; fires;
hurricanes; volcanic activity; storms of extraordinary
force; floods; washouts; droughts; civil disturbances;
explosions; or any other cause or event not reasonably
within the control of the adversely affected party.
19. Amendment. This Agreement may be amended or
terminated only by an instrument in writing duly executed by
the Parties.
20. Counterparts. More than one counterpart of this
Agreement may be executed by the Parties hereto, and each
fully executed counterpart shall be deemed an original.
21. Dealings with Third Parties. Neither Party is,
nor shall either Party hold itself out to be, vested with
any power or right to contractually bind, act on behalf of
the other as its contracting broker, agent or otherwise for
committing, selling, conveying or transferring any of the
other Party's assets or property, contracting for or in the
name of the other party, or making any contractually binding
representations as to the other Party which shall be deemed
representations contractually binding such Party.
22. Severability. If any provision of this Agreement
is declared void by any court of competent jurisdiction, the
validity of any other provision of this Agreement shall not
be affected.
23. Survival. This Agreement shall be binding upon
the inure to the benefit of the Parties hereto, and their
respective assigns, heirs, successors and legal
representatives.
24. Assignment. This Agreement may be assigned by
Carrier or Customer, provided that that Party obtains the
prior written consent of the other Party, which consent
shall not be unreasonably withheld.
25. Time of Essence. Whenever this Agreement shall
set forth any time for the performance of an act, such time
shall be deemed of the essence.
26. Attorney's Fees. If it shall be necessary for
either the Carrier of the Customer to employ an attorney to
enforce their respective rights pursuant to this Agreement
because of the Default of the other Party, the defaulting
Party shall reimburse the prevailing Party for reasonable
attorney's fees.
27. Independent Relationships. Nothing in this
contract shall be construed as creating an employer-employee
relationship by and between Carrier and Customer, and
Carrier shall not be held or responsible for the acts or
omissions of the Customer.
28. Option. Carrier hereby grants customer, or its
assignee, an option (the "Option") to acquire by assignment
the License for the Channels. The price for the assignment
(the "Option Price") shall be Ten Thousand Dollars
($10,000.00).
28.1. Option Timing. This Option may be
exercised by written notice thereof, subject to Section 28.2
hereunder, anytime after one year from the License Date.
28.2. Assignment of License upon Option Exercise.
Each of Carrier and Customer shall join in and file such
applications, notices and reports as may be required or
requested by the FCC to gain its consent to the assignment
to Customer of such FCC license. The application therefor
shall be prepared and filed within thirty (30) days of
Carrier's receipt of Customer's notice of Option exercise,
and each party shall bear its own costs and fees therefor.
The License shall be assigned to Customer and Customer shall
pay Carrier the Option Price by agreement of assignment
reasonably satisfactory in form and substance to Customer,
within thirty (30) days of the FCC's grant of its consent to
assignment is a Final Order.
IN WITNESS WHEREOF, the Parties have caused this
Agreement to be executed by their duly authorized officers
as of the day and year first above written.
"CARRIER": "CUSTOMER":
GATEWAY PARTNERS GULF ATLANTIC COMMUNICATIONS,
INC.
By: /s/ Richard Samaras By: /s/ David M. Loflin
Richard Samaras David M. Loflin
Managing Partner President
<PAGE>
-------------------------
ANNEX II
TO
EXHIBIT "A"
TO
SUBSCRIPTION AGREEMENT
-------------------------
TRANSFER AND ASSIGNMENT FOR
FORGIVENESS OF DEBT
This Transfer and Assignment for Forgiveness of Debt
Agreement is entered into this 8th day of November, 1996, by
and between Gulf Atlantic Communications, Inc. and David M.
Loflin.
WITNESSETH:
WHEREAS, Gulf Atlantic Communications, Inc. is a corporation
organized under the laws of and doing business in the State
of Louisiana, Parish of East Baton Rouge (hereinafter
"Gulf"), herein represented by its duly authorized agent
and/or employee; and
WHEREAS, David M. Loflin is the holder of a Note dated Sept.
4, 1996 (hereinafter "David").
Now, therefore, in consideration of representations,
warranties, covenants, conditions and terms of this
Agreement, and for other consideration, the receipt and
adequacy of which is hereby acknowledged, Gulf and David M.
Loflin hereby agree as follows:
1. Gulf is the holder/lessee of certain MMDS channel leases
more completely described as follows:
Date of Lease/City Channels Owner
- ------------------ -------- -----
09-10-93/Astoria, OR H2-3/WNTM826 Gateway Partners
09-10-93/Port Angeles, H1-2-3/WNTM957 Gateway Partners
WA
(hereinafter collectively referred to as the "leases").
2. David is the holder and owner for value of certain notes
made payable to any future holder by Gulf, which notes are
more completely described in Exhibit "A" that is attached
hereto and made a part hereof by reference thereto.
3. Gulf does hereby transfer, set over and assign, with full
warranty of title, all of its right, title and interest in
and to the leases to David, his successors and assigns, in
return for the forgiveness of the obligations represented by
the notes described in Exhibit "A".
4. David hereby accepts the assignment of the lease from
Gulf and hereby forgives, acquits and releases Gulf, its
successors and assigns, from any and all obligations
evidenced by the note described in Exhibit "A".
5. Gulf, in furtherance of this assignment and without the
necessity of any additional compensation being paid or
tendered by David agrees to execute any and all
documentation that is reasonably requested of it by David to
evidence the transfer of the leases from Gulf to David.
6. The parties agree that this instrument comprises the
complete agreement between themselves and that there can be
no modification of same without both parties agreeing to
such a modification in writing.
7. The parties agree that should this Agreement be placed in
the hands of an attorney for the purposes of the enforcement
of any of its terms or conditions than then the prevailing
party shall be entitled to the reimbursement of all costs
and attorney's fees relating in any way to such enforcement
effort.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
GULF ATLANTIC COMMUNICATIONS, INC.
By: /s/ David M. Loflin
David M. Loflin
President
/s/ David M. Loflin
David M. Loflin<PAGE>
---------------------------
EXHIBIT "A"
TO
TRANSFER AND ASSIGNMENT
FOR FORGIVENESS OF DEBT
---------------------------
NOTE
STATE OF LOUISIANA
PARISH OF EAST BATON ROUGE
September 4, 1996
For value received, the makers, jointly, severally, and in
solido, promise to pay to the order of any future holder the
sum of Ten Thousand ($10,000) Dollars, together with
interest thereon at a rate of ten (10%) percent per annum
from date; payable:
ON DEMAND, Sixty (60) days after date.
Upon failure to make any payment on its due date, the
remaining principal balance with any accrued interest, at
the option of the holder, shall become immediately due and
payable in its entirety. Should this note be placed in the
hands of an attorney-at-law for collection, suit or for the
enforcement of any of its terms, then the maker hereby
agrees to pay in addition to any principal and interest owed
on the Note the sum of ten (10%) percent of said principal
and interest as attorney's fees, plus all costs of any suit
or collection effort.
The maker does hereby waive presentment for payment, demand,
notice of non-payment, protest, and all pleas of discussion
and division, and agrees that the payment hereof may be
extended from time to time, one or more times, and that
delay may be granted for the performance of any of the other
obligations of this Note, all at the option of the holder
hereof without notice to the maker.
GULF ATLANTIC COMMUNICATIONS, INC.
By: /s/ David M. Loflin
Its President
<PAGE>
-------------------------
ANNEX III
TO
EXHIBIT "A"
TO
SUBSCRIPTION AGREEMENT
-------------------------
MDS CHANNEL LEASE AGREEMENT
This H-Group Channel Lease Agreement (the "Agreement")
executed as of the 10th day of September, 1993, by Gateway
Partners ("Carrier") and Gulf Atlantic Communications, Inc.
("Customer") witnesses that the Parties have made the
recitals and agreements set out below.
RECITALS
A. WHEREAS, Gateway Partners has received a valid
conditional license (the "Conditional License") issued by
the Federal Communications Commission, and agency of the
Unites States government (the "FCC"), to construct a station
for the operation of the 3 H-Group channels specified in 47
C.F.R. Paragraph 21.901(b) (the "Channels"), in the Port
Angeles, WA, Metropolitan Statistical Area (the "Market");
and,
B. WHEREAS, Carrier intends to have constructed said
station and to receive a permanent operating license
therefor from the FCC (the "License"); and,
C. WHEREAS, Customer desires to have the use of all of
the Carrier's capacity on the Channels, including the
associated subcarriers, vertical blanking intervals and
response channels (the "Channel Capacity"), and Carrier is
willing to lease such Channel Capacity to Customer for all
lawful purposes consistent with the License, as same may be
modified from time to time.
NOW, THEREFORE, in consideration of the recitals and the
mutual promises set forth below, the Parties agree as
follows:
1. Definitions. As used in the Agreement, the
following terms shall have the meanings indicated:
1.1. "Business" or "MMDS Service" means the
Multichannel Multipoint Distribution Service, as defined in
the rules and regulations of the FCC, provided by Customer
to subscribers in the Market.
1.2. "License Date" means the date Carrier files
an FCC Form 494A Certificate of Construction (or successor
thereto) upon completion of the construction of the
( ) channel station herein contemplated.
1.3. "Transmission Facility" means the
transmission site equipment and facilities used solely to
transmit the Channels, to be owned by Customer, leased by
Carrier, and used by Customer in its Business.
1.4. "Final Order" means Public Notice of an
order or action by the FCC that is not and cannot be subject
to any timely filed or taken petition for reconsideration,
application for review, appeal, stay or set aside sua
sponte.
2. Term. The term of this Agreement shall begin on
the date of execution of this Agreement and shall continue
for a period of sixty (60) months following the License
Date. Assuming that Carrier's authorization to operate the
Channels has been renewed as necessary by the FCC, this
Agreement shall be automatically renewed for three (3)
additional sixty (60) month consecutive terms under the same
terms and conditions as contained herein provided the
Customer is not in default, unless the Customer delivers to
Carrier a notice of termination no later than one hundred
and twenty (120) days prior to the end of the then existing
term, in which event this Agreement shall terminate as of
the end of the term during which such notice is delivered.
3. Lease of the Channels. Commencing on the License
Date, Carrier hereby leases to Customer all of the Channel
Capacity for the Channels on the terms and conditions set
forth in this Agreement. For this purpose, Channel Capacity
shall include all rights to transmit, video, audio, and data
programming over Carrier's entire frequency spectrum.
4. Control of Facilities. Notwithstanding anything in
this Agreement to the contrary, Carrier, as the FCC licensee
of the Channels, shall be responsible for the compliance
with all applicable FCC rules and policies. Carrier will
have control, in accordance with FCC rules and policies, of
the construction, operation, management and maintenance of
the Transmission Facilities to the extent necessary to
comply with such rules and regulations.
5. Payments. In consideration of Carrier's agreement
to lease the Channels, Customer agrees to make the following
payments to Carrier:
5.1. Recurring "Monthly Fee". In consideration
of the service to be provided hereunder by Carrier, and
commencing the earlier of one year from the License Date, or
when Customer has ten (10) paying subscribers in its MDS
Service, and continuing thereafter for the initial Term of
this Agreement and any renewal term thereof, Customer agrees
to pay to Carrier a recurring Monthly Fee determined as
follows: the greater of (1) Two Hundred ($200) or 0.10 per
subscriber per channel.
5.2. Cost-of-Living Adjustment. The minimum
Monthly Fee shall be adjusted upward or downward for each
renewal Term based upon the percentage change in the
Consumer Price Index as reported by the U.S. Department of
Labor (1967=100) from the base year of 1992 through the end
of the prior Term.
5.3. Late Fee and Interest. Monthly Fees are due
and payable on the fifteenth (15th) of the following month.
On the first of the next monthly, the payment will be
considered past due, and a late fee of 5% of the amount due
will be assessed. At that point until paid, a one and
one-half percent (1.5%)
per month finance
charge from the due
date will be assessed in addition to the late fee. Example
would be May's activity is due June 15th, a late fee would
be assessed on July 1st and finance charges would start to
accrue from June 15.
5.4. Taxes. The Monthly Fee set out in this
Agreement is the net charge to Customer. If Federal, state
or local taxes (other than taxes on the income of Carrier)
are applicable, or become applicable to this Fee, it will be
the responsibility of the Customer to pay these taxes and to
accept the liability of any unpaid taxes which may
subsequently become applicable retroactively.
5.5. Audit. Customer shall provide to Carrier a
certified gross revenue and subscriber statement prepared by
a mutually agreeable certified public accountant within
ninety (90) days following the end of each business year.
The audit would include a calculation of the fees owed on
the revenue under this Agreement and compared with actual
payment made. In the event that there is an underpayment of
fees owed, Customer shall pay to Carrier a penalty equal to
five percent (5%) of the amount of such underpayments. Any
underpayment, including penalties, or excess would then be
paid by Customer or Carrier within 30 days of audit report.
5.6. Prorations. Al payments made under this
Agreement shall be prorated for the rendering of the Channel
Capacity as being unusable by way of FCC actions or
inactions as it applies to the Channels involved herein,
and/or economically unreasonable cost requirements to
accommodate other frequency users.
5.7. Reimbursement of Expenses. Unless otherwise
expressly stated herein, Customer shall reimburse Carrier
for Carrier's actual costs and expenses, including necessary
legal, consulting, engineering, and FCC filing fees,
incurred by Carrier subsequent to the date of this
Agreement, to obtain the initial or subsequent FCC
authorizations necessary to construct and operate the
Transmission Facilities, or to prepare, file and prosecute
amendments, applications, modifications or notifications
related thereto. Such reimbursement shall take place within
thirty (30) days of written request thereof to Customer,
along with adequate documentation to substantiate Carrier's
expenses.
6. Liability Insurance. It is agreed that Carrier
shall be insured as a third party named insured under any
liability insurance obtained by Customer. The liability
insurance maintained by Customer shall contain minimum
limits of at least $1,000,000/$2,000,000 for bodily injury
and $300,000 for property damage. Customer shall maintain
liability, property damage and errors and omissions
insurance, in amounts judged adequate by industry standard,
to cover its obligations to Carrier and other s under this
Agreement, including Section 11 indemnification. Customer
shall furnish Carrier, annually, an insurance certificate
showing coverages and Carrier as an additional insured under
all such policies. All insurance must be placed and
maintained with an insurance company having an A rating by
Best Insurance Reports.
7. Construction. The Parties agree to determine and
specify as soon as possible the Transmission Facilities and
a site which will be required to commence operation of
Customer's MDS Service, and meet from time to time
thereafter as mutually agreed to determine and specify such
Transmission Facilities or site as may be appropriate to
improve Customer's MDS Service. Upon such determination and
specification, Carrier will use its best efforts to obtain a
Conditional License for the use of such Transmission
Facilities and site from the FCC. Customer, not Carrier,
shall be responsible for all costs, including but not
limited to consultant, design, engineering and site costs,
legal fees, and licensing fees to the FCC, associated with
the construction, relocation and engineering of the
Transmission Facilities described and specified in this
Section 7, and any licenses, permits, authorizations, or
approvals necessary to acquire transmitter sites or obtain
the use of such sites. Upon the FCC's grant of a
Conditional License to Carrier for the Transmission
Facilities and site described and specified in this Section
7 and the satisfaction of all other applicable regulatory
requirements, Customer shall, at its sole cost and expense,
commence construction and complete construction of the
Transmission Facilities as authorized by the FCC, and in
accordance with Section 2.1.
7.1. Lease of Transmission Facilities to Carrier.
Subject to an Event of Default, for the sum of One dollar
($1.00) per year, and the other recitals and terms and
conditions of this Agreement, the receipt and sufficiency of
which are hereby acknowledged by Customer, Customer shall
lease the Transmission Facilities to Carrier for a term
equal to the duration of this Agreement, including renewal
terms thereof, plus one hundred twenty (120) days. In the
event Customer finances the Transmission Facilities, it is
agreed that such financing agency shall agree to give third
party notification of default and sale of financed equipment
to Carrier hereunder, with the opportunity, but not the
obligation, for Carrier to cure any such defaults within a
reasonable time before such sale. Customer shall not pledge
the License owned by Carrier.
7.2. Operation and Maintenance. Subject to the
provisions of Section 4, Customer shall, at its sole cost
and expense, operate and maintain the Transmission
Facilities in good operating condition and repair with
Carrier being notified of all such repairs. All persons
performing maintenance, repairs, or any other duties at the
Transmission Facilities shall be technically qualified and
properly licensed to perform such duties and shall work
under Customer's direct and continuing supervision and in
accordance with good engineering practices consistent with
industry standards and FCC requirements. In the event
transmission service is interrupted for any reason for a
period exceeding 24 hours, Customer shall notify Carrier
within 24 hours of such interruption. In addition, Customer
shall ensure that all FCC tower lighting and painting
requirements are followed, and shall hold Carrier harmless
for any violations related thereto.
7.3. Purchase of Equipment under Default. In the
event of Default by Customer as defined in Section 10,
Carrier shall have the right to purchase Customer's channel
transmitting equipment, subject to any and all rights of
secured party, for the fair market value of such equipment.
7.4. Reception Equipment. If requested by
Carrier in writing after the License Date, within sixty (60)
days after Customer's receipt of such request, Customer
agrees to install equipment, selected by Customer, at its
own expense, to receive transmissions over the Channels at
up to two (2) receive sites located at private residential
single family houses in the Market, to be used for the
exclusive use of Carrier's monitoring of the quality of such
transmissions and compliance with FCC rules. Title to all
equipment provided by Customer hereunder shall remain with
Customer. Subject to Carrier's ultimate control, such
reception equipment shall be installed, maintained, operated
and controlled by Customer to the extent required by the
FCC's rules at the sole expense of Customer.
7.5. [deleted]
8. Governmental and Third Party Authorizations.
Carrier shall use its best efforts, and Customer shall
cooperate with Carrier, to obtain any all FCC licenses,
permits authorizations or approvals required to carry out
the transactions contemplated by this Agreement and to
operate the Business; provided, however, that Carrier shall
not be required to pay for the reallocation, reconstruction,
or similar costs related to the waiver of the Instructional
Television Fixed Services ("ITFS"), as authorized under Part
good offices to assist Carrier in obtaining necessary
clearances from co-channel and adjacent channel ITFS
operators as necessary. Carrier shall use its best efforts
to acquire and maintain the License for the Channels in
effect. At the end of the term of the License, Carrier
shall use its best efforts to cause such License to be
renewed.
9. Representations and Warranties of Customer.
Customer represents and warrants as follows:
9.1. Organization. Customer warrants that it is
duly organized, validly existing and in good standing under
the laws of the State of Louisiana. Customer is qualified
or otherwise entitled to do business in all jurisdictions in
which such qualification or entitlement is required by
reason of its business, activities, or ownership of
property. Customer has all requisite power and authority to
own its properties and to carry on its business. Customer
has all requisite power to execute, deliver, and, subject to
the regulatory authority of the FCC, perform this Agreement.
9.2. Authorization. All necessary actions on the
part of Customer to authorize the execution and deliver of
this Agreement, and the performance of the obligations of
Customer herein, have been taken. This Agreement is valid
and legally binding on Customer and enforceable in
accordance with its terms insolvency or the laws relating to
the enforcement of creditor's rights or by the application
of equitable principles.
9.3. No Violation. The execution, delivery and
performance of this agreement and all actions and
transactions contemplated hereby: (I) will not violate any
provision of law or of the Articles of Incorporation or
Bylaws of Customer, any order of any court or other agency
of government to which Customer is party or by which it or
any of its properties is bound, and (ii) will not violate,
be in conflict with, result in a breach of or constitute
(with notice or lapse of time or both) a default under any
applicable law, order or regulation, indenture, agreement or
other instrument to which Customer is a party or by which it
or any of its properties is bound and which has not been
waived or consented to, or result in the creation or
imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of its property or assets.
9.4. Reliance. Carrier would not enter into this
Agreement but for its reliance upon the foregoing
representations and warranties of the Customer.
10. Defaults. For purposes of this Agreement, it
shall be an "Event of Default" hereunder if:
10.1. Payment. Customer fails to make any
payment due and payable under this Agreement within thirty
(30) days after the date upon which a payment is due
hereunder; or
10.2. Representations and Warranties. If any of
the material "Representations and Warranties" of this
Customer or Carrier prove at any time to be incorrect as of
the date of this Agreement; or
10.3. Breach of Covenant. Either party
materially breaches any covenant or agreement herein or
fails to comply with any material provision of this
Agreement, and such breach or failure continues for thirty
(30) days after written notice thereof shall have been sent
by the nonbreaching party to the breaching party.
10.4. Loss of FCC License. Carrier shall
forfeit, surrender, submit for cancellation, suffer the
revocation of , or suffer or accept the adverse modification
of the License, such default having no cure period, and
considered fully matured as of the last day that the Carrier
may lawfully operate the facilities or, if adversely
modified, may lawfully operate the facilities as authorized
prior to modification.
10.5. Rights in Event of Default. In the Event
of Default under this Section 10, and in addition to all
other remedies available in law or equity, the nondefaulting
party, if not itself in default, shall be entitled to
terminate this Agreement, at its sole and exclusive
election, upon written notice to the other party, and all
rights and obligations hereunder shall cease as of such
notice date.
11. Indemnification. Customer shall indemnify, defend
and hold Carrier harmless from any and all claims, damages,
causes of action, penalties, statutory damages, interest,
and costs and expenses, including attorney's fees and court
costs, arising out of any transmission over the Transmission
Facilities prohibited by Section 7.5 or that violates
applicable federal or state lottery laws, the Communications
Act of 1934, as amended, or the rules and policies of the
FCC, or that infringes in any respect the copyright,
trademark, property or other rights of any person, or
resulting from Customer's breach of this Agreement or from
any negligence, omission or wrongful act by Customer, its
agents or employees. This indemnification shall include the
providing of full legal defense on behalf of Carrier,
including Carrier's right to select counsel, and to have all
of Carrier's reasonable attorney's fees and reasonable
costs, taxable and nontaxable to be paid by Customer.
12. Representations, Warranties and Covenants of
Carrier. Carrier represents and warrants as follows:
12.1. Authorization. Carrier has all requisite
Carrier has all requisite power and authority to enter into
this Agreement and to perform the obligations to be
performed by it under this Agreement. This Agreement
constitutes a valid, binding and enforceable obligation of
Carrier.
12.2. The execution and delivery of this
Agreement by Carrier and the performance of Carrier's
obligations hereunder are not in violation or breach of, do
not conflict with or constitute a default under, and will
not accelerate or permit the acceleration of the performance
required by, any of the terms or provisions of any note,
debt instrument, security agreement or mortgage or any other
contract or agreement, written or oral to which Carrier is a
party or by which any of its assets or properties are bound
and will not be an event which, after notice or lapse of
time or both, will result in any such violation, breach,
conflict, default or acceleration or authority or court,
whether federal, state or local, at law or in equity, and
applicable to Carrier and will not result in the creation or
imposition of any lien (whether or not perfected),
encumbrance, equity or restriction in favor or any third
person upon any of the properties of Carrier; provided,
however, that the Carrier shall not be in default of this
provision if the FCC determines that any provision of this
Agreement, or the Agreement as a whole, violates FCC rules
or policies or the Communications Act of 1934, as amended.
In such event, the Parties shall negotiate in good faith
such changes to the Agreement so as to effect compliance
with FCC requirements and, so nearly as is possible, retain
the status quo hereunder.
13. Carrier Access to Records. From time to time and
upon reasonable notice to Customer, Carrier or its
accountants or attorneys shall have the right to request
information or be permitted at all reasonable times to
inspect and copy any and all records of Customer which
Carrier or its accountants or attorneys reasonably consider
necessary to verify Customer's compliance with the terms and
provisions of this Agreement. It is understood by Carrier
that such information is to be held in confidence and not
disclosed to any third parties without prior consent of
Customer. In the event that there is discovered an
underpayment of the Monthly Fee, as defined in Section 5.2,
Customer shall immediately pay to Carrier the amount of each
such underpayment along with a penalty equal to five percent
(5%) of such underpayment.
14. Notices. All notices, requests, consents and
other communications hereunder shall be in writing and shall
be effective upon receipt, in each case addressed:
If to Carrier, to: Gateway Partners
3534 Remco Street
Castro Valley, CA 94546
If to Customer, to: Gulf Atlantic Communications, Inc.
P.O. Box 40483
Baton Rouge, LA 70835
With a copy to: Lyn Guin
c/o Broadcast Services Int'l
2618 J Street, Suite 3
Sacramento, CA
provided, however, that if any party shall have designated a
different address by notice to the others, then to the last
address so designated.
15. Waivers. Any waiver by any Party of any breach of
or failure to comply with any provision of this Agreement by
the other Party shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any
other provision of this Agreement. All waivers must be in
writing and signed by the waiving Party.
16. Complete Agreement. This Agreement sets forth the
entire understanding of the Parties hereto and supersedes
all prior agreements, covenants, arrangement,
communications, representations or warranties, whether oral
or written, by any Party or any officer, employee or
representative of any Party.
17. Governing Law. This agreement shall be construed
and interpreted in accordance with and governed by the laws
of the State of California and of the United States of
America. The heading of the Sections of this Agreement are
inserted for convenience of reference only and shall not be
deemed to constitute a part hereof. Unless otherwise
stated, references in this Agreement to sections refer to
the Sections of this Agreement.
18. Force Majeure. If by reason of force majeure
either party is unable in whole or in part to carry out its
obligations hereunder, said party shall not be deemed in
violation or default during the continuance of such
inability. The term "Force Majeure", as used herein, shall
mean the following: acts of God; acts of public enemies;
orders of any kind of the government of the United State of
America or of any individual state or any of their
departments, agencies, political subdivisions, or officials;
or any civil or military authority; insurrections; riots;
epidemics; landslides; lightning; earthquakes; fires;
hurricanes; volcanic activity; storms of extraordinary
force; floods; washouts; droughts; civil disturbances;
explosions; or any other cause or event not reasonably
within the control of the adversely affected party.
19. Amendment. This Agreement may be amended or
terminated only by an instrument in writing duly executed by
the Parties.
20. Counterparts. More than one counterpart of this
Agreement may be executed by the Parties hereto, and each
fully executed counterpart shall be deemed an original.
21. Dealings with Third Parties. Neither Party is,
nor shall either Party hold itself out to be, vested with
any power or right to contractually bind, act on behalf of
the other as its contracting broker, agent or otherwise for
committing, selling, conveying or transferring any of the
other Party's assets or property, contracting for or in the
name of the other party, or making any contractually binding
representations as to the other Party which shall be deemed
representations contractually binding such Party.
22. Severability. If any provision of this Agreement
is declared void by any court of competent jurisdiction, the
validity of any other provision of this Agreement shall not
be affected.
23. Survival. This Agreement shall be binding upon
the inure to the benefit of the Parties hereto, and their
respective assigns, heirs, successors and legal
representatives.
24. Assignment. This Agreement may be assigned by
Carrier or Customer, provided that that Party obtains the
prior written consent of the other Party, which consent
shall not be unreasonably withheld.
25. Time of Essence. Whenever this Agreement shall
set forth any time for the performance of an act, such time
shall be deemed of the essence.
26. Attorney's Fees. If it shall be necessary for
either the Carrier of the Customer to employ an attorney to
enforce their respective rights pursuant to this Agreement
because of the Default of the other Party, the defaulting
Party shall reimburse the prevailing Party for reasonable
attorney's fees.
27. Independent Relationships. Nothing in this
contract shall be construed as creating an employer-employee
relationship by and between Carrier and Customer, and
Carrier shall not be held or responsible for the acts or
omissions of the Customer.
28. Option. Carrier hereby grants customer, or its
assignee, an option (the "Option") to acquire by assignment
the License for the Channels. The price for the assignment
(the "Option Price") shall be Ten Thousand Dollars
($10,000.00).
28.1. Option Timing. This Option may be
exercised by written notice thereof, subject to Section 28.2
hereunder, anytime after one year from the License Date.
28.2. Assignment of License upon Option Exercise.
Each of Carrier and Customer shall join in and file such
applications, notices and reports as may be required or
requested by the FCC to gain its consent to the assignment
to Customer of such FCC license. The application therefor
shall be prepared and filed within thirty (30) days of
Carrier's receipt of Customer's notice of Option exercise,
and each party shall bear its own costs and fees therefor.
The License shall be assigned to Customer and Customer shall
pay Carrier the Option Price by agreement of assignment
reasonably satisfactory in form and substance to Customer,
within thirty (30) days of the FCC's grant of its consent to
assignment is a Final Order.
IN WITNESS WHEREOF, the Parties have caused this
Agreement to be executed by their duly authorized officers
as of the day and year first above written.
"CARRIER": "CUSTOMER":
GATEWAY PARTNERS GULF ATLANTIC COMMUNICATIONS,
INC.
By: /s/ Richard Samaras By: /s/ David M. Loflin
Richard Samaras David M. Loflin
Managing Partner President
<PAGE>
-----------------------------
ANNEX IV
TO
EXHIBIT "A"
TO
SUBSCRIPTION AGREEMENT
-----------------------------
TRANSFER AND ASSIGNMENT AGREEMENT
This Transfer and Assignment Agreement is entered into this
12th day of
November, 1996, by and between K&D Partnership ("K&D") and
David M.
Loflin ("David").
WITNESSETH:
WHEREAS, K&D is organized and doing business in the State of
Louisiana,
Parish of Richland, herein represented by its duly
authorized agent;
WHEREAS, Loflin is resident of the State of Louisiana and is
under no legal
disability with respect to entering into this Agreement;
NOW, THEREFORE, in consideration of the representations,
warranties,
covenants, conditions and terms of this Agreement, and for
other
considerations, the receipt and adequacy of which is hereby
acknowledged,
that K&D and Loflin hereby agree as follows:
1. K&D is the holder of Assignment and Assumption
Agreements of
certain ITFS and MMDS channel agreements, as follows:
Date - City of Agreement Channels Owner
- ------------------------ -------- -----
10/30/96 - The Dalles, WMX694/WMX695 The Dalles
OR B1234/C1234 Settlement
Group
10/30/96 - Sand Point WMX677/WMX651 Sandpoint F
ID B1234/C1234 Settlement
Group
10/31/96 - Fallon, NV WLW698/E1234 Four Pro
Plus Partners
10/31/96 - Fallon, NV WMS351/H-3 Ryan Ball
Partnership
Plus - Fallon, NV Pending w/ FCC Ken Diebel
(hereinafter collectively referred to as the "Channel
Agreements").
2. K&D hereby assigns, sells, conveys and transfers,
with full warranty of title, all of its rights, title and interest in
and to the Channel Agreements to Loflin, his successors and assigns.
3. In consideration of K&D's assignment of the Channel
Agreements, Loflin hereby agrees to make total payments for all of K&D's
rights in and to the Channel Agreements of $425,000, to be paid by
September 30, 1997,
as follows:
A. $100,000, in cash.
B. $325,000, in cash or shares of common stock of
Media Entertainment, Inc., a Nevada corporation, the value of
which shares shall be determined by an independent appraiser.
4. K&D shall pay any and all monies due by it to
assignors of the Channel Agreements.
5. In the event Loflin, his successors and assigns,
should fail to make payments due by September 30, 1997, this Agreement shall
terminate without any further obligation of either party.
6. The parties agree that this instrument comprises
the complete agreement between themselves and that there can be no
modification of same without both parties agreeing to such a modification in
writing.
7. The parties agree that, should this Agreement be
placed in the hands of an attorney for the purpose of the enforcement of any
of its terms or conditions, then the prevailing party shall be entitled to
the reimbursement of all costs, including, without limitation, attorney's
fees, relating in any way to such enforcement effort.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
K&D PARTNERSHIP
By: /s/
Its authorized agent
/s/ David M. Loflin
David M. Loflin
<PAGE>
-----------------------------
ANNEX V
TO
EXHIBIT "A"
TO
SUBSCRIPTION AGREEMENT
-----------------------------
LEASE AGREEMENT
This Lease Agreement, made and entered into as of the 1st
day of November, 1996, by and between David M. Loflin (the
"Lessee") and Don Rayburn, Jr.(the "Licensee" or "Lessor").
WITNESSETH:
Whereas, Licensee has a valid construction authorization
issued by the Federal Communications Commission (the "FCC")
for construction of the ONE channel 26 in the LPTV Service
in the Rayville, LA area;
Whereas, Lessee, subject to the Licensee's supervision and
control, intends to construct the station in accordance with
the FCC construction authorization and file, subject to the
Licensee's supervision and control, all necessary documents
for operation with the FCC;
Whereas, Licensee intends to obtain a valid license(s)
("License") issued by the FCC for the operation of the ONE
channel 26 in the LPTV Service in the Rayville, LA area;
Whereas, Lessee desires to lease all of Licensee's capacity
on the channel, including transmission facilities,
associated sub-carriers, vertical blanking intervals, and
response channels (the "Channels");
Whereas, Licensee is willing to lease such Channels to
Lessee, subject to the Licensee's supervision and control;
and
Whereas, the parties desire to enter into an agreement for
the lease of Channels in the Rayville, LA area by Lessee;
NOW, THEREFORE, in consideration of the promises and the
mutual undertakings herein contained, the receipt and
sufficiency of which are hereby acknowledged, the Licensee
and the Lessee, both intending to be legally bound, hereby
agree as follows:
1. Lease of Channels. By execution of this Agreement, and
in accordance with the terms and conditions contained
herein, for the period commencing on the effective date of
this Agreement until termination of the Agreement or the
expiration of the term of this Agreement, the Licensee
hereby agrees to lease the Channels to Lessee for the
operation of the Channels in a manner consistent with this
Agreement, subject to the Licensee's supervision and
control. In recognition of its responsibilities hereunder,
Lessee shall use its best efforts to comply in all material
respects, and to cause each of its employees, independent
contractors, agents and representatives to comply with all
applicable federal, state and local laws, rules,
regulations, statutes and ordinances. Licensee agrees that
it will take no steps to interfere with Lessee's operation
of the Channels so long as such operation is consistent with
covenants and restrictions contained in this Agreement and
with all such applicable laws. In undertaking the tasks
required hereunder, Lessee shall take all steps necessary to
ensure that an orderly transition will occur in the case of
termination, as provided in Section 13 hereof.
2. Effective Date and Term. This Agreement shall be
effective as of the date and year set forth above (the
"Effective Date"). Unless earlier terminated pursuant to
Section 13 of this Agreement, this Agreement shall be for a
term of five (5) years from the Effective Date. Lessee
shall have the option to renew this Agreement for three (3)
additional five (5) year terms upon written notice to the
Licensee at least sixty days prior to the expiration of each
term.
3. Construction of the Channels.
a. Subject to the Licensee's supervision and control,
and upon the FCC's grant of a License for the Channels
described and specified herein, and the satisfaction of all
other applicable regulatory requirements, Lessee shall, at
its sole cost and expense, commence and complete
construction of the Channels as authorized by the FCC.
b. Lessee agrees to complete construction of the
Channels within the time allotted for such construction by
the construction authorization issued by the FCC, including
any extensions thereof. In the event that the Channels are
not constructed in accordance with this provision, this
Agreement shall terminate immediately, and Lessee shall have
no further rights hereunder.
4. Control of Facilities. Notwithstanding any provision in
this Agreement to the contrary, Licensee holds ultimate
responsibility for the supervision and control of the
Channels in compliance with all applicable FCC rules,
regulations and policies (collectively, "FCC Rules").
5. FCC Applications. From time to time, Lessee may, as
necessary or appropriate in connection with the operation of
the Channels, consult with Licensee regarding the need to
apply to the FCC for orders or actions that would allow
modifications or enhancements of the Channels. Licensee
shall, during the term of this Agreement, cooperate with
Lessee in the preparation, filing, prosecution, and
application of all such FCC applications, and any other
applications to or communications with the FCC deemed
necessary by Lessee.
6. FCC Compliance. The parties agree to comply with all
applicable FCC Rules and regulations governing the Channels
and specifically agree as follows:
a. to the extent required by FCC regulations, Licensee
shall maintain ultimate control over the licensed facilities
leased hereunder, including the right to terminate service
should its public interest obligations as an FCC Licensee so
require.
b. Lessee shall not represent itself as the FCC
licensee offering service on the Channels.
c. Each customer billed by Lessee shall be clearly
advised that service is provided over facilities operated
under a License held by Licensee.
d. Neither Lessee nor Licensee shall represent itself
as the legal representative of the other before the FCC.
The parties will cooperate with each other with respect to
FCC matters concerning the Channels.
e. Licensee shall, in cooperation with Lessee, take all
actions necessary to keep the License for the Channels in
forced and shall prepare and submit to the FCC or any other
relevant authority all reports, applications, renewals,
filings, or other filings or documents necessary to keep the
License for the Channels in full force and good standing.
Licensee shall respond promptly to all FCC correspondence or
inquiries and will immediately notify Lessee of the receipt
thereof. Licensee shall promptly report any change of
address to the FCC and to Lessee.
f. Licensee and Lessee are familiar with FCC Rules
regarding a licensee's responsibility under the
Communications Act of 1934, as amended, and applicable FCC
Rules. Nothing in this Agreement is intended to diminish or
restrict Licensee's obligations as an FCC licensee and both
parties desire that this Agreement and each party's
obligations hereunder be in compliance with FCC Rules. In
the event that the FCC determines that any provision of this
Agreement violates any FCC Rules, the provisions of Section
20 of this Agreement shall govern.
7. Revenues and Expenses; Compensation.
a. As its sole additional compensation for the lease of
the Channels pursuant to this Agreement, Licensee shall be
entitled to receive, on a monthly basis, the greater of
$250.00 or 0.10 cents per Subscriber per Channel. During
the term of this Agreement, all direct expenses for
construction, operation, maintenance, and repair of the
Channels shall be paid by or reimbursed through Lessee.
b. Unless otherwise expressly stated herein, Lessee
shall reimburse Licensee for Licensee's actual costs and
expenses of construction, operation, maintenance, and
repair, including necessary legal, consulting, engineering,
and FCC authorizations necessary to operate the Channels, or
to prepare, file and prosecute amendments, applications,
modifications, or notifications related thereto. Such
reimbursement shall take place within thirty (30) days of
written request thereof to Lessee, along with adequate
documentation to substantiate Licensee's expenses.
c. Lessee shall be responsible for all costs of
construction, operation, maintenance and repair of the
Channels, including but not limited to consultant, design,
engineering and site costs, legal fees, and FCC licensing
fees, associated with construction, relocation and
engineering of the Channels, and any licenses, permits,
authorizations or approvals necessary to acquire transmitter
sites or obtain the use of such sites. Notwithstanding the
foregoing, the Licensee shall obtain and maintain all right,
title and interest in the equipment and facilities
associated with the Channels.
d. Monthly fees are due and payable on the 15th day of
the next month. On the first day of the month following the
next month, the payment will be considered past due, and a
late fee of five (5) percent of the amount due will be
assessed. Until the monthly fee is paid, a one and one-half
(1.5) percent finance charge will be assessed from the due
date on a monthly basis in addition to the late fee.
Example: May's activity is due June 15; a late fee would be
assessed on July 1 and finance charges would begin to accrue
from June 15.
e. Lessee shall provide to Licensee a gross revenue and
subscriber statement within 90 days following the end of
each business year. The statement shall include a
calculation of the fees owed on the revenue under this
Agreement and compared with actual payments made. Any
underpayment or excess will then be paid by Lessee or
Licensee within 30 days of delivery of such statement.
8. Lease of Equipment. Licensee hereby leases to Lessee,
rent-free during the term of this Agreement, all real and
personal property, facilities and equipment used for
construction, operation, maintenance and repair of the
Channels. This rent-free lease shall expire upon
termination of this Agreement pursuant to the provisions of
Sec. 13 hereof; upon such termination, Licensee shall pay to
Lessee, in cash, the fair market value of such facilities
and equipment, or the depreciated book value thereof,
whichever is greater. No such payment by Licensee shall be
required if this Agreement is terminated pursuant to the
provisions of Sec. 13(d) hereof. Licensee hereby grants to
Lessee a security interest and mortgagee's interest in all
such facilities and equipment, as collateral security for
Licensee's obligation to make the payment required by this
Sec. 8, and agrees to cooperate fully I the taking of all
such steps as may be required by local law to perfect the
same. The security interest and/or mortgagee's interest in
such facilities and equipment shall also serve as collateral
security for Licensee's obligation to convey title pursuant
to the option granted by Sec. 9 below.
9. Option
a. Licensee hereby grants to Lessee an exclusive option
(the "Option") to purchase the Channels together with all of
Licensee's interest in and to all real and personal
property, both tangible and intangible, which is necessary
to operate the Channels. Lessee may exercise this Option
prior to the expiration of the first five (5) year term of
this Agreement.
b. As consideration for the purchase of the Assets, on
the closing Date, Lessee shall pay to Licensee $12,500.00
immediately available funds, together with all outstanding
sums due and owing Licensee under Section 7 of this
Agreement.
c. The option is to be exercised by written notice hand
delivered to Licensee or delivered to Licensee by certified
or registered mail, return receipt requested, or overnight
delivery service at the address set forth in Section 15
below. The effective date of notification by hand delivery
shall be the date on which delivery occurred, and the
effective date of notification by certified or registered
mail or overnight delivery service shall be the date the
carrier first attempts delivery.
d. Upon exercise of the Option, the parties shall
promptly execute an Asset Purchase Agreement setting forth
the terms of the purchase of the Assets. The Lessee shall,
at its expense, prepare and file with the FCC the
appropriate application for FCC consent to the assignment of
the Channels to Lessee. Licensee shall cooperate with and
assist Lessee in the preparation and filing of such
applications and in the submission of any other
documentation or information related thereto which the FCC
may request. The closing of the purchase and sale of the
Channels ("Closing") shall occur at any time, at Lessee's
option, after issuance of all FCC orders approving the
assignment of the License for the Channels to the Lessee,
provided, however,, that the Closing shall occur no later
than 15 days after such approvals have become Final Orders.
An order shall be deemed a Final Order when, by lapse of
time or otherwise, it is no longer subject to administrative
or judicial reconsideration, review, appeal or stay. At the
Closing, Licensee shall execute any bills of sale or other
assignment documents requested by Lessee to effectuate and
confirm Lessee as holder of the License.
e. During the first term of this Lease Agreement,
Licensee shall not solicit, make, or accept any offers to
sell, purchase, assign or otherwise transfer the License or
the Channels or an interest in the License or the Channels,
nor shall Licensee enter into any other agreements,
including, without limitation other management agreements,
inconsistent with this Agreement or any of the terms and
provisions contained herein. During the second five (5)
year renewal term of this Agreement, Licensee grants to
Lessee a first right of refusal with respect to bona fide
offers for the purchase, transfer or other assignment of the
License, the Channels or any interest therein.
10. Covenants.
a. During the term of this Agreement, Licensee (a)
shall not permit any liens or encumbrances to attach to the
License or the Channels and shall immediately cure and
remove all such liens and encumbrances; (b) shall take no
action that would jeopardize the License, the Channels or
the rights of Lessee under this Agreement; (c) shall
immediately notify Lessee of any pending or threatened
action by the FCC or any other governmental agency, court or
third party to suspend, revoke, terminate or challenge the
License or to investigate the operation or loading of the
Channels; and (d) shall not interfere with Lessee's exercise
of performance of its rights and obligations pursuant to
this Agreement.
b. During the term of this Agreement, Licensee shall be
insured as a third party named insured under any liability
insurance obtained by Lessee. The liability insurance
maintained by Lessee shall contain minimum limits of at
least $1,000,000.00/2,000,000.00 for bodily injury and
$300,000.00 for property damage. Lessee shall maintain
liability, property damage and errors and omissions
insurance, in amounts judged adequate by industry standard,
to cover its obligations to Licensee and others under this
Agreement. Lessee shall furnish Licensee, annually, an
insurance certificate showing coverages and Licensee as an
additional insured under all such policies. All insurance
must be placed and maintained with an insurance company
having an A rating by Best Insurance Reports.
c. During the term of this Agreement, Lessee shall take
no action that would jeopardize the License, the Channels or
the Licensee's interest therein.
11. Representations and Warranties of Licensee. Licensee
hereby represents and warrants to Lessee as follows:
a. Licensee, as an individual, has the authority to
enter into this Agreement;
b. This Agreement has been duly authorized, executed
and delivered by Licensee and constitutes the valid and
binding obligation of Licensee enforceable in accordance
with its terms;
c. The execution and delivery of this Agreement by
Licensee and the performance by Licensee of the transactions
contemplated hereby will not violate, or conflict with, or
constitute a breach or default under, or result in the
creation or imposition of any lien under (i) any applicable
statute, law, regulation, rule, order, or decree of any
governmental authority, or court; or (ii) any contract,
instrument, agreement, lease, mortgage, judgment, order,
decree or other restriction to which Licensee is a party or
by which Licensee is bound;
d. No filing with or approval or authorization of any
governmental authority or other third party is required for
Licensee to enter into and to perform its obligations under
this Agreement;
e. The License is valid, in good standing and in full
force and effect with the FCC, and there is no pending or,
to the best of Licensee's knowledge, threatened action by
the FCC or any other entity to revoke or challenge the
License; and
f. Licensee is in compliance with all FCC Rules
applicable to Licensee, the License or the Channels.
12. Representations and Warranties of Lessee. Lessee
hereby represents and warrants to Licensee as follows:
a. If Lessee is a corporation or partnership, Lessee is
duly organized, validly existing and in good standing under
the jurisdiction of its organization and in each
jurisdiction in which it owns assets or conducts business,
with all requisite power and authority to conduct its
business as now conducted and to enter into and perform its
obligations under this Agreement;
b. This Agreement has been duly authorized, executed
and delivered by Lessee and constitutes the valid and
binding obligation of lessee enforceable in accordance with
its terms;
c. The execution and delivery of this Agreement by
Lessee and the performance by Lessee of the transactions
contemplated hereby will not violate, or conflict with, or
constitute a breach or default under, or result in the
creation or imposition of any lien under (i) any applicable
statute, law, regulation, rule, order, or decree of any
governmental authority, or court; (ii) any contract,
instrument, agreement, lease, mortgage, judgment, order,
decree or other restriction to which Lessee is a party or by
which Lessee is bound; or (iii) the Articles of
Incorporation or regulations of Lessee; and
d. No filing with or approval or authorization of any
governmental authority or other third party is required for
Lessee to enter into and perform its obligations under this
Agreement.
13. Termination. This Agreement shall terminate upon:
a. notice of breach of this Agreement by either party
and failure, within ninety days, of the breaching party to
cure such breach;
b. the loss, revocation or expiration without renewal
of the License, including such loss due to the automatic
cancellation of the License due to failure to construct the
Channels in a timely fashion;
c. the Lessee's voluntary or involuntary bankruptcy
(defined as the filing of initial papers by or against the
Lessee in a court of competent jurisdiction) or assignment
for the benefit of creditors;
d. consummation of the purchase and sale of the
Purchased Assets by the Lessee following exercise by Lessee
of the Option; or
e. otherwise, as mutually agreed by the parties in
writing.
In the event of termination not due to Lessee's exercise of
the Option created herein, Lessee shall take all steps
necessary to ensure an orderly transition of its
responsibilities, including, but not limited to, assignment
of all rights to and interests in site locations and
delivery of all other tangible and intangible property
associated with the operation of the Channels.
14. Indemnification. Lessee shall indemnify and hold
Licensee harmless from and against any and all claims,
actions, suits, liabilities, losses or expenses, caused by
or arising from, negligence on the part of Lessee in
construction or operating the Channels.
15. Notices. All notices or other communications hereunder
shall be in writing and shall be deemed to have been duly
given if personally delivered, delivered via overnight
express service or mailed by registered or certified mail,
return receipt requested, postage paid, addressed to the
following:
a. If to Licensee, to:
Tobey Loflin
315 Sterling Rd., N.E.
Milledgeville, GA 31061
b. If to Lessee, to:
Waddell D. Loflin
P.O. Box 40483
Baton Rouge, LA 70835
16. Legal Expenses. The prevailing party in any legal
action brought by one party against the other and arising
out of this Agreement shall be entitled, in addition to any
other rights and remedies it may have, to reimbursement for
its expenses including any costs of litigation, court costs
and attorney's fees.
17. Waivers; Amendments. No delay or failure to exercise
any right, power or remedy accruing to any party hereunder
shall be construed to be a waiver of any breach or default
under this Agreement, or any acquiescence therein, or a
waiver of any similar breach or default therefore or
thereafter occurring. No provision of this Agreement shall
be waived unless such waiver is made in writing signed by
both parties. This Agreement may not be amended, modified
or changed except by a written document signed by both
parties hereto.
18. Successors and Assigns. This Agreement shall be
binding upon and inure to the parties hereto, their
respective heirs, representatives, successor and permissible
assigns. Neither Licensee nor Lessee may assign this
Agreement and their rights and obligations hereunder without
the written approval of each other, which approval shall not
be unreasonably withheld. Licensee and Lessee may, without
written approval, assign their rights and obligation to an
entity controlled by either party or to an affiliate or
subsidiary under common control, or defined by the
Commission as a pro forma transfer or assignment, without
such consent.
19. No Third Party Beneficiaries. Nothing herein,
expressed or implied, is intended to nor shall confer on any
person other than the parties hereto any rights, remedies,
obligations or liability under or by reason of this
Agreement.
20. Governing Law; Severability. This Agreement shall be
governed by and construed in accordance with the laws of the
State of California, without reference to its provisions
relating to conflicts of law. In the event that any
provision of this Agreement is found invalid or
unenforceable, that provision will be enforced to the
maximum permissible under applicable law, and the remaining
provisions of this Agreement will stay in force. In
addition, the parties agree to negotiate in good faith a
provision to replace the provision found invalid or
unenforceable that will have, to the extent possible the
same economic effect.
21. Counterparts. This Agreement may be executed in
multiple counterpart copies, each of which shall be
considered an original and all of which shall constitute one
and the same instrument.
22. Interpretation. The sections and other headings
contained in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this
Agreement.
23. Power of Attorney. Licensee hereby appoints Lessee as
its true and lawful attorney-in-fact to take any such
actions and sign all such documents or instruments as may be
incumbent upon Licensee to take or sign hereunder, and all
such actions taken by Lessee hereunder shall be valid and
binding upon Licensee.
24. Entire Agreement. This Agreement supersedes any other
agreement between the parties, whether oral or written,
relating to the matters contemplated herein and constitutes
the entire agreement by and between the parties, there being
no other agreements or understandings between the parties
except as expressly set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
"Licensee": "Lessee":
By: /s/ Don Rayburn, Jr. By: /s/ David M. Loflin
Title: Owner Title: Lessee
<PAGE>
_____________________________
EXHIBIT 10.3
_____________________________
SUBSCRIPTION AGREEMENT
This Subscription Agreement is entered into as of December
20, 1996, by and between Media Entertainment, Inc., a Nevada
corporation, ("MEI"), and Waddell D. Loflin, an individual
resident of the State of Louisiana ("Loflin"), in light of
the following facts:
1. MEI is a development-stage communications company
operating primarily within the wireless cable and community
television industries; and
2. Loflin is the owner of certain assets useful in the
community television industry; and
3. Loflin desires to sell such assets in exchange for
Common Stock of MEI.
WITNESSETH:
THEREFORE, the agreement of the parties, the promises of
each being consideration for the promises of the other:
I. DEFINITIONS
Whenever used in this Agreement, the following terms shall
have the meanings set forth below:
a. "Agreement" shall mean this Subscription Agreement
and all exhibits hereto or amendments hereof.
b. "Loflin" shall mean Waddell D. Loflin, an individual
resident of the State of Louisiana.
c. "MEI" shall mean Media Entertainment, Inc., a Nevada
corporation with offices in Baton Rouge, Louisiana.
d. "Knowledge of MEI" or matters "known to MEI" shall
mean matters actually known to the Board of Directors or
officers of MEI, or which reasonably should be or should
have been known by them upon reasonable investigation.
e. "Securities Act" shall mean the Securities Act of
1933, as amended, and includes the rules and regulations of
the Securities and Exchange Commission promulgated
thereunder, as such shall then be in effect.
f. "Louisiana Act" shall mean the Securities Act of
Louisiana, and includes the rules and regulations of the
Louisiana Securities Commission promulgated thereunder, as
such shall then be in effect.
Any term used herein to which a special meaning has been
ascribed shall be construed in accordance with either (i)
the context in which such term is used, or (ii) the
definition provided for such term in the place in this
Agreement at which such term is first used.
II. DISCLOSURES
MEI is a development stage company with no history of
operations and which has not yet begun to do business in its
chosen field of endeavor. It intends to operate as a
holding company in the wireless cable and community
television industries, among other endeavors.
III. PURCHASE AND SALE
Loflin hereby sells to MEI and MEI hereby buys from Loflin
all of the assets set forth in Exhibit "A" attached hereto
and incorporated herein by this reference in consideration
of 104,249 shares of the $.0001 par value Common Stock of
MEI, at the price set forth below, subject to all of the
terms and conditions set forth herein.
IV. PURCHASE PRICE - PAYMENT
Loflin shall deliver to MEI assignments conveying each of
the assets listed in Exhibit "A" hereto, for a price of
$120,652, payable by issuance and delivery by MEI to Loflin
of 104,249 shares of the $.0001 par value Common Stock of
MEI, a consideration of $1.157 per share.
V. THE EXCHANGE
Loflin agrees to deliver to MEI assignments conveying each
of the assets listed in Exhibit "A" hereto, wherein title in
and to all of the assets is transferred to MEI. Upon
delivery of such assignments by Loflin, MEI shall deliver to
Loflin a certificate representing 104,249 shares of the
$.0001 par value Common Stock of MEI, properly executed and
issued.
VI. REPRESENTATIONS AND WARRANTIES OF MEI
MEI represents and warrants to Loflin:
a. Organization and Corporate Authority. MEI is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. MEI has all
requisite corporate power and authority, governmental
permits, consents, authorizations, registrations, licenses
and memberships necessary to own its property and to carry
on its business in the places where such properties are now
owned and operated or such business is being conducted.
b. Issuance of the Common Stock. The shares of $.0001
par value Common Stock of MEI to be issued hereunder, when
issued and delivered in accordance with this Agreement, will
be duly and validly issued, fully paid and non-assessable,
and will be free and clear of any liens or encumbrances and,
to the knowledge of MEI, will be issued in compliance with
applicable state and federal laws.
c. Compliance with Agreements. The execution and
performance of this Agreement will not result in any
violation or be in conflict with any agreement to which MEI
is a party.
d. Authorization. All corporate action on the part of
MEI and its officers, directors and shareholders necessary
for the authorization, execution and delivery of this
Agreement, for the performance of MEI's obligations
hereunder and for the issuance and delivery of the $.0001
par value Common Stock of MEI. This Agreement, when
executed and delivered, shall constitute a legal, valid and
binding obligation of MEI.
e. Legality of Share Issuance. MEI warrants that the
Common Stock to be issued hereto will be legally issued
without registration under the Securities Act or the
Louisiana Act pursuant to applicable exemptions from
registration thereunder.
VII. REPRESENTATIONS AND WARRANTIES OF LOFLIN
a. Title to Assets. Loflin owns each of the assets
listed in Exhibit "A" hereto, free and clear of adverse
claims, liens or encumbrances.
b. Legal Capacity. Loflin is under no legal disability
with respect to the execution and performance of this
Subscription Agreement.
c. Investment Intent of Shareholder. Loflin represents
and warrants that the shares of MEI Common Stock acquired
hereunder by Loflin are being purchased by him solely for
his own account for investment purposes only and not for the
account of any other person and not for distribution,
assignment or resale to others.
d. Restrictive Legend. Loflin further consents to the
placement of the following legend, or a legend similar
thereto, on the certificate or certificates representing
shares of MEI Common Stock deliverable hereunder:
THESE SECURITIES HAVE BEEN ISSUED IN RELIANCE UPON THE
EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2) OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION TO THE EFFECT THAT ANY SUCH PROPOSED
TRANSFER IS IN ACCORDANCE WITH ALL APPLICABLE LAWS, RULES
AND REGULATIONS.
VIII. MISCELLANEOUS
Survival of Covenants. Unless otherwise waived as provided
herein, all covenants agreements, representations and
warranties of the parties made in this Agreement and in the
financial statements or other written information delivered
or furnished in connection therewith and herewith shall
survive the Exchange hereunder, and shall be binding upon,
and inure to the benefit of, the parties and their
respective successors and assigns.
Governing Law. This Agreement shall be deemed to be a
contract made under, governed by and construed in accordance
with the substantive laws of the State of Louisiana.
Counterparts. This Agreement may be executed simultaneously
in counterparts, each of which when so executed and
delivered shall be taken to be an original; but such
counterparts shall together constitute but one and the same
documents.
Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors or assigns
of the parties hereto.
Entire Agreement. This Agreement, the other agreements and
the other documents delivered pursuant hereto and thereto
constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and
thereof.
IN WITNESS WHEREOF, the parties have signed this Agreement
as of the day and year first above written.
MEDIA ENTERTAINMENT, INC.
(a Nevada corporation)
By: /s/ David M. Loflin
David M. Loflin
President
/s/ Waddell D. Loflin
Waddell D.Loflin, individually
<PAGE>
_____________________________
EXHIBIT "A"
TO SUBSCRIPTION AGREEMENT
_____________________________
ASSIGNMENT
For good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the undersigned,
Waddell D. Loflin, a resident of the State of Louisiana
("Assignor"), hereby assigns, sells, conveys and transfers
to Media Entertainment, Inc., a Nevada corporation
("Assignee"), all of his right, title and interest under
that certain Lease Agreement (the "Lease"), dated November
1, 1996, between Tobey Loflin, as lessor, and Waddell D.
Loflin, as lessee, a copy of which is attached hereto as
Exhibit "A" and incorporated herein by this reference, the
subject of the Lease being Channel 36 located in Bainbridge,
Georgia, all as more specifically described in the Lease.
Dated: December 20, 1996.
/s/ Waddell D. Loflin
Waddell D. Loflin
<PAGE>
_____________________________
EXHIBIT "A" TO ASSIGNMENT
_____________________________
LEASE AGREEMENT
This Lease Agreement, made and entered into as of the 1st
day of November, 1996, by and between Waddell D. Loflin (the
"Lessee") and Tobey Loflin (the "Licensee" or "Lessor").
WITNESSETH:
Whereas, Licensee has a valid construction authorization
issued by the Federal Communications Commission (the "FCC")
for construction of the ONE channel 36 in the LPTV Service
in the Bainbridge, GA area;
Whereas, Lessee, subject to the Licensee's supervision and
control, intends to construct the station in accordance with
the FCC construction authorization and file, subject to the
Licensee's supervision and control, all necessary documents
for operation with the FCC;
Whereas, Licensee intends to obtain a valid license(s)
("License") issued by the FCC for the operation of the ONE
channel 36 in the LPTV Service in the Bainbridge, GA area;
Whereas, Lessee desires to lease all of Licensee's capacity
on the channel, including transmission facilities,
associated sub-carriers, vertical blanking intervals, and
response channels (the "Channels");
Whereas, Licensee is willing to lease such Channels to
Lessee, subject to the Licensee's supervision and control;
and
Whereas, the parties desire to enter into an agreement for
the lease of Channels in the Bainbridge, GA area by Lessee;
NOW, THEREFORE, in consideration of the promises and the
mutual undertakings herein contained, the receipt and
sufficiency of which are hereby acknowledged, the Licensee
and the Lessee, both intending to be legally bound, hereby
agree as follows:
1. Lease of Channels. By execution of this Agreement, and
in accordance with the terms and conditions contained
herein, for the period commencing on the effective date of
this Agreement until termination of the Agreement or the
expiration of the term of this Agreement, the Licensee
hereby agrees to lease the Channels to Lessee for the
operation of the Channels in a manner consistent with this
Agreement, subject to the Licensee's supervision and
control. In recognition of its responsibilities hereunder,
Lessee shall use its best efforts to comply in all material
respects, and to cause each of its employees, independent
contractors, agents and representatives to comply with all
applicable federal, state and local laws, rules,
regulations, statutes and ordinances. Licensee agrees that
it will take no steps to interfere with Lessee's operation
of the Channels so long as such operation is consistent with
covenants and restrictions contained in this Agreement and
with all such applicable laws. In undertaking the tasks
required hereunder, Lessee shall take all steps necessary to
ensure that an orderly transition will occur in the case of
termination, as provided in Section 13 hereof.
2. Effective Date and Term. This Agreement shall be
effective as of the date and year set forth above (the
"Effective Date"). Unless earlier terminated pursuant to
Section 13 of this Agreement, this Agreement shall be for a
term of five (5) years from the Effective Date. Lessee
shall have the option to renew this Agreement for three (3)
additional five (5) year terms upon written notice to the
Licensee at least sixty days prior to the expiration of each
term.
3. Construction of the Channels.
a. Subject to the Licensee's supervision and control,
and upon the FCC's grant of a License for the Channels
described and specified herein, and the satisfaction of all
other applicable regulatory requirements, Lessee shall, at
its sole cost and expense, commence and complete
construction of the Channels as authorized by the FCC.
b. Lessee agrees to complete construction of the
Channels within the time allotted for such construction by
the construction authorization issued by the FCC, including
any extensions thereof. In the event that the Channels are
not constructed in accordance with this provision, this
Agreement shall terminate immediately, and Lessee shall have
no further rights hereunder.
4. Control of Facilities. Notwithstanding any provision in
this Agreement to the contrary, Licensee holds ultimate
responsibility for the supervision and control of the
Channels in compliance with all applicable FCC rules,
regulations and policies (collectively, "FCC Rules").
5. FCC Applications. From time to time, Lessee may, as
necessary or appropriate in connection with the operation of
the Channels, consult with Licensee regarding the need to
apply to the FCC for orders or actions that would allow
modifications or enhancements of the Channels. Licensee
shall, during the term of this Agreement, cooperate with
Lessee in the preparation, filing, prosecution, and
application of all such FCC applications, and any other
applications to or communications with the FCC deemed
necessary by Lessee.
6. FCC Compliance. The parties agree to comply with all
applicable FCC Rules and regulations governing the Channels
and specifically agree as follows:
a. to the extent required by FCC regulations, Licensee
shall maintain ultimate control over the licensed facilities
leased hereunder, including the right to terminate service
should its public interest obligations as an FCC Licensee so
require.
b. Lessee shall not represent itself as the FCC
licensee offering service on the Channels.
c. Each customer billed by Lessee shall be clearly
advised that service is provided over facilities operated
under a License held by Licensee.
d. Neither Lessee nor Licensee shall represent itself
as the legal representative of the other before the FCC.
The parties will cooperate with each other with respect to
FCC matters concerning the Channels.
e. Licensee shall, in cooperation with Lessee, take all
actions necessary to keep the License for the Channels in
forced and shall prepare and submit to the FCC or any other
relevant authority all reports, applications, renewals,
filings, or other filings or documents necessary to keep the
License for the Channels in full force and good standing.
Licensee shall respond promptly to all FCC correspondence or
inquiries and will immediately notify Lessee of the receipt
thereof. Licensee shall promptly report any change of
address to the FCC and to Lessee.
f. Licensee and Lessee are familiar with FCC Rules
regarding a licensee's responsibility under the
Communications Act of 1934, as amended, and applicable FCC
Rules. Nothing in this Agreement is intended to diminish or
restrict Licensee's obligations as an FCC licensee and both
parties desire that this Agreement and each party's
obligations hereunder be in compliance with FCC Rules. In
the event that the FCC determines that any provision of this
Agreement violates any FCC Rules, the provisions of Section
20 of this Agreement shall govern.
7. Revenues and Expenses; Compensation.
a. As its sole additional compensation for the lease of
the Channels pursuant to this Agreement, Licensee shall be
entitled to receive, on a monthly basis, the greater of
$250.00 or 0.10 cents per Subscriber per Channel. During
the term of this Agreement, all direct expenses for
construction, operation, maintenance, and repair of the
Channels shall be paid by or reimbursed through Lessee.
b. Unless otherwise expressly stated herein, Lessee
shall reimburse Licensee for Licensee's actual costs and
expenses of construction, operation, maintenance, and
repair, including necessary legal, consulting, engineering,
and FCC authorizations necessary to operate the Channels, or
to prepare, file and prosecute amendments, applications,
modifications, or notifications related thereto. Such
reimbursement shall take place within thirty (30) days of
written request thereof to Lessee, along with adequate
documentation to substantiate Licensee's expenses.
c. Lessee shall be responsible for all costs of
construction, operation, maintenance and repair of the
Channels, including but not limited to consultant, design,
engineering and site costs, legal fees, and FCC licensing
fees, associated with construction, relocation and
engineering of the Channels, and any licenses, permits,
authorizations or approvals necessary to acquire transmitter
sites or obtain the use of such sites. Notwithstanding the
foregoing, the Licensee shall obtain and maintain all right,
title and interest in the equipment and facilities
associated with the Channels.
d. Monthly fees are due and payable on the 15th day of
the next month. On the first day of the month following the
next month, the payment will be considered past due, and a
late fee of five (5) percent of the amount due will be
assessed. Until the monthly fee is paid, a one and one-half
(1.5) percent finance charge will be assessed from the due
date on a monthly basis in addition to the late fee.
Example: May's activity is due June 15; a late fee would be
assessed on July 1 and finance charges would begin to accrue
from June 15.
e. Lessee shall provide to Licensee a gross revenue and
subscriber statement within 90 days following the end of
each business year. The statement shall include a
calculation of the fees owed on the revenue under this
Agreement and compared with actual payments made. Any
underpayment or excess will then be paid by Lessee or
Licensee within 30 days of delivery of such statement.
8. Lease of Equipment. Licensee hereby leases to Lessee,
rent-free during the term of this Agreement, all real and
personal property, facilities and equipment used for
construction, operation, maintenance and repair of the
Channels. This rent-free lease shall expire upon
termination of this Agreement pursuant to the provisions of
Sec. 13 hereof; upon such termination, Licensee shall pay to
Lessee, in cash, the fair market value of such facilities
and equipment, or the depreciated book value thereof,
whichever is greater. No such payment by Licensee shall be
required if this Agreement is terminated pursuant to the
provisions of Sec. 13(d) hereof. Licensee hereby grants to
Lessee a security interest and mortgagee's interest in all
such facilities and equipment, as collateral security for
Licensee's obligation to make the payment required by this
Sec. 8, and agrees to cooperate fully I the taking of all
such steps as may be required by local law to perfect the
same. The security interest and/or mortgagee's interest in
such facilities and equipment shall also serve as collateral
security for Licensee's obligation to convey title pursuant
to the option granted by Sec. 9 below.
9. Option
a. Licensee hereby grants to Lessee an exclusive option
(the "Option") to purchase the Channels together with all of
Licensee's interest in and to all real and personal
property, both tangible and intangible, which is necessary
to operate the Channels. Lessee may exercise this Option
prior to the expiration of the first five (5) year term of
this Agreement.
b. As consideration for the purchase of the Assets, on
the closing Date, Lessee shall pay to Licensee $12,500.00
immediately available funds, together with all outstanding
sums due and owing Licensee under Section 7 of this
Agreement.
c. The option is to be exercised by written notice hand
delivered to Licensee or delivered to Licensee by certified
or registered mail, return receipt requested, or overnight
delivery service at the address set forth in Section 15
below. The effective date of notification by hand delivery
shall be the date on which delivery occurred, and the
effective date of notification by certified or registered
mail or overnight delivery service shall be the date the
carrier first attempts delivery.
d. Upon exercise of the Option, the parties shall
promptly execute an Asset Purchase Agreement setting forth
the terms of the purchase of the Assets. The Lessee shall,
at its expense, prepare and file with the FCC the
appropriate application for FCC consent to the assignment of
the Channels to Lessee. Licensee shall cooperate with and
assist Lessee in the preparation and filing of such
applications and in the submission of any other
documentation or information related thereto which the FCC
may request. The closing of the purchase and sale of the
Channels ("Closing") shall occur at any time, at Lessee's
option, after issuance of all FCC orders approving the
assignment of the License for the Channels to the Lessee,
provided, however,, that the Closing shall occur no later
than 15 days after such approvals have become Final Orders.
An order shall be deemed a Final Order when, by lapse of
time or otherwise, it is no longer subject to administrative
or judicial reconsideration, review, appeal or stay. At the
Closing, Licensee shall execute any bills of sale or other
assignment documents requested by Lessee to effectuate and
confirm Lessee as holder of the License.
e. During the first term of this Lease Agreement,
Licensee shall not solicit, make, or accept any offers to
sell, purchase, assign or otherwise transfer the License or
the Channels or an interest in the License or the Channels,
nor shall Licensee enter into any other agreements,
including, without limitation other management agreements,
inconsistent with this Agreement or any of the terms and
provisions contained herein. During the second five (5)
year renewal term of this Agreement, Licensee grants to
Lessee a first right of refusal with respect to bona fide
offers for the purchase, transfer or other assignment of the
License, the Channels or any interest therein.
10. Covenants.
a. During the term of this Agreement, Licensee (a)
shall not permit any liens or encumbrances to attach to the
License or the Channels and shall immediately cure and
remove all such liens and encumbrances; (b) shall take no
action that would jeopardize the License, the Channels or
the rights of Lessee under this Agreement; (c) shall
immediately notify Lessee of any pending or threatened
action by the FCC or any other governmental agency, court or
third party to suspend, revoke, terminate or challenge the
License or to investigate the operation or loading of the
Channels; and (d) shall not interfere with Lessee's exercise
of performance of its rights and obligations pursuant to
this Agreement.
b. During the term of this Agreement, Licensee shall be
insured as a third party named insured under any liability
insurance obtained by Lessee. The liability insurance
maintained by Lessee shall contain minimum limits of at
least $1,000,000.00/2,000,000.00 for bodily injury and
$300,000.00 for property damage. Lessee shall maintain
liability, property damage and errors and omissions
insurance, in amounts judged adequate by industry standard,
to cover its obligations to Licensee and others under this
Agreement. Lessee shall furnish Licensee, annually, an
insurance certificate showing coverages and Licensee as an
additional insured under all such policies. All insurance
must be placed and maintained with an insurance company
having an A rating by Best Insurance Reports.
c. During the term of this Agreement, Lessee shall take
no action that would jeopardize the License, the Channels or
the Licensee's interest therein.
11. Representations and Warranties of Licensee. Licensee
hereby represents and warrants to Lessee as follows:
a. Licensee, as an individual, has the authority to
enter into this Agreement;
b. This Agreement has been duly authorized, executed
and delivered by Licensee and constitutes the valid and
binding obligation of Licensee enforceable in accordance
with its terms;
c. The execution and delivery of this Agreement by
Licensee and the performance by Licensee of the transactions
contemplated hereby will not violate, or conflict with, or
constitute a breach or default under, or result in the
creation or imposition of any lien under (i) any applicable
statute, law, regulation, rule, order, or decree of any
governmental authority, or court; or (ii) any contract,
instrument, agreement, lease, mortgage, judgment, order,
decree or other restriction to which Licensee is a party or
by which Licensee is bound;
d. No filing with or approval or authorization of any
governmental authority or other third party is required for
Licensee to enter into and to perform its obligations under
this Agreement;
e. The License is valid, in good standing and in full
force and effect with the FCC, and there is no pending or,
to the best of Licensee's knowledge, threatened action by
the FCC or any other entity to revoke or challenge the
License; and
f. Licensee is in compliance with all FCC Rules
applicable to Licensee, the License or the Channels.
12. Representations and Warranties of Lessee. Lessee
hereby represents and warrants to Licensee as follows:
a. If Lessee is a corporation or partnership, Lessee is
duly organized, validly existing and in good standing under
the jurisdiction of its organization and in each
jurisdiction in which it owns assets or conducts business,
with all requisite power and authority to conduct its
business as now conducted and to enter into and perform its
obligations under this Agreement;
b. This Agreement has been duly authorized, executed
and delivered by Lessee and constitutes the valid and
binding obligation of lessee enforceable in accordance with
its terms;
c. The execution and delivery of this Agreement by
Lessee and the performance by Lessee of the transactions
contemplated hereby will not violate, or conflict with, or
constitute a breach or default under, or result in the
creation or imposition of any lien under (i) any applicable
statute, law, regulation, rule, order, or decree of any
governmental authority, or court; (ii) any contract,
instrument, agreement, lease, mortgage, judgment, order,
decree or other restriction to which Lessee is a party or by
which Lessee is bound; or (iii) the Articles of
Incorporation or regulations of Lessee; and
d. No filing with or approval or authorization of any
governmental authority or other third party is required for
Lessee to enter into and perform its obligations under this
Agreement.
13. Termination. This Agreement shall terminate upon:
a. notice of breach of this Agreement by either party
and failure, within ninety days, of the breaching party to
cure such breach;
b. the loss, revocation or expiration without renewal
of the License, including such loss due to the automatic
cancellation of the License due to failure to construct the
Channels in a timely fashion;
c. the Lessee's voluntary or involuntary bankruptcy
(defined as the filing of initial papers by or against the
Lessee in a court of competent jurisdiction) or assignment
for the benefit of creditors;
d. consummation of the purchase and sale of the
Purchased Assets by the Lessee following exercise by Lessee
of the Option; or
e. otherwise, as mutually agreed by the parties in
writing.
In the event of termination not due to Lessee's exercise of
the Option created herein, Lessee shall take all steps
necessary to ensure an orderly transition of its
responsibilities, including, but not limited to, assignment
of all rights to and interests in site locations and
delivery of all other tangible and intangible property
associated with the operation of the Channels.
14. Indemnification. Lessee shall indemnify and hold
Licensee harmless from and against any and all claims,
actions, suits, liabilities, losses or expenses, caused by
or arising from, negligence on the part of Lessee in
construction or operating the Channels.
15. Notices. All notices or other communications hereunder
shall be in writing and shall be deemed to have been duly
given if personally delivered, delivered via overnight
express service or mailed by registered or certified mail,
return receipt requested, postage paid, addressed to the
following:
a. If to Licensee, to:
Tobey Loflin
315 Sterling Rd., N.E.
Milledgeville, GA 31061
b. If to Lessee, to:
Waddell D. Loflin
P.O. Box 40483
Baton Rouge, LA 70835
16. Legal Expenses. The prevailing party in any legal
action brought by one party against the other and arising
out of this Agreement shall be entitled, in addition to any
other rights and remedies it may have, to reimbursement for
its expenses including any costs of litigation, court costs
and attorney's fees.
17. Waivers; Amendments. No delay or failure to exercise
any right, power or remedy accruing to any party hereunder
shall be construed to be a waiver of any breach or default
under this Agreement, or any acquiescence therein, or a
waiver of any similar breach or default therefore or
thereafter occurring. No provision of this Agreement shall
be waived unless such waiver is made in writing signed by
both parties. This Agreement may not be amended, modified
or changed except by a written document signed by both
parties hereto.
18. Successors and Assigns. This Agreement shall be
binding upon and inure to the parties hereto, their
respective heirs, representatives, successor and permissible
assigns. Neither Licensee nor Lessee may assign this
Agreement and their rights and obligations hereunder without
the written approval of each other, which approval shall not
be unreasonably withheld. Licensee and Lessee may, without
written approval, assign their rights and obligation to an
entity controlled by either party or to an affiliate or
subsidiary under common control, or defined by the
Commission as a pro forma transfer or assignment, without
such consent.
19. No Third Party Beneficiaries. Nothing herein,
expressed or implied, is intended to nor shall confer on any
person other than the parties hereto any rights, remedies,
obligations or liability under or by reason of this
Agreement.
20. Governing Law; Severability. This Agreement shall be
governed by and construed in accordance with the laws of the
State of California, without reference to its provisions
relating to conflicts of law. In the event that any
provision of this Agreement is found invalid or
unenforceable, that provision will be enforced to the
maximum permissible under applicable law, and the remaining
provisions of this Agreement will stay in force. In
addition, the parties agree to negotiate in good faith a
provision to replace the provision found invalid or
unenforceable that will have, to the extent possible the
same economic effect.
21. Counterparts. This Agreement may be executed in
multiple counterpart copies, each of which shall be
considered an original and all of which shall constitute one
and the same instrument.
22. Interpretation. The sections and other headings
contained in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this
Agreement.
23. Power of Attorney. Licensee hereby appoints Lessee as
its true and lawful attorney-in-fact to take any such
actions and sign all such documents or instruments as may be
incumbent upon Licensee to take or sign hereunder, and all
such actions taken by Lessee hereunder shall be valid and
binding upon Licensee.
24. Entire Agreement. This Agreement supersedes any other
agreement between the parties, whether oral or written,
relating to the matters contemplated herein and constitutes
the entire agreement by and between the parties, there being
no other agreements or understandings between the parties
except as expressly set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
"Licensee": "Lessee":
By: /s/ Tobey Loflin By: /s/ Waddell D. Loflin
Title: Owner Title: Lessee
<PAGE>
-------------------------------
EXHIBIT 10.32
-------------------------------
PROMISSORY NOTE
June 9, 1997
Baton Rouge, Louisiana
$13,500.00
FOR VALUE RECEIVED, Media Entertainment, Inc., a Nevada
corporation ("Maker"), promises to pay to David M. Loflin,
an individual resident of the State of Louisiana ("Payee"),
the sum of THIRTEEN THOUSAND FIVE HUNDRED DOLLARS
($13,500.00), plus interest at the rate of eight percent
(8%) per annum, on demand.
Place of Payment
All payments shall be made to Payee at 8748 Quarters Lake
Road, Baton Rouge, Louisiana 70809.
Waiver of Protest and Extension of Time
Each maker, endorser and guarantor or other surety of this
Promissory Note does hereby waive demand, grace, notice,
presentment for payment and protest, and further does hereby
agree and consent that this Promissory Note may be renewed,
and the time for payment extended without notice, and
without releasing any of the parties.
Costs of Collection
Maker will pay on demand all reasonable costs of collection,
legal expenses and attorney's fees actually paid by the
holder in collecting or enforcing this Promissory Note on
default.
Waiver
No delay or omission on the part of the holder in exercising
any right hereunder shall operate as a waiver of such right
or of any other right under this Promissory Note. A waiver
on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any future occasion.
Definitions
As used in this Promissory Note, the word "holder" shall
mean the payee or other endorsee of this Promissory Note who
is in possession of it, or the bearer of this Promissory
Note, if this Promissory Note is at the time payable to the
bearer. The word "maker" shall mean the undersigned, unless
such signer shall indicate on this instrument that it is
signed in the capacity of a guarantor.
MEDIA ENTERTAINMENT, INC.
(a Nevada corporation)
By: /s/ Waddell D. Loflin
Waddell D. Loflin
Vice President<PAGE>
-----------------------------------
EXHIBIT 11
-----------------------------------
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Days Days
Number Out- Since Out- Since
of stand- Incep- stand- Incep-
Shares ing tion ing tion
--------- ------ --------- -------- --------
Period from
Inception
(December
28, 1995)
to Decem-
ber 31,
1995
December
28, 1995 227,336 3/3 227,336 457/457 227,336
December
31,1995 227,336 227,336
Year Ended
December
31, 1996
January 1,
1996 227,336 364/364 227,336
November
1, 1996 1,800,000 61/364 301,648 151/457 99,669
November
15, 1996 360,000 47/364 46,484 137/457 13,935
December
20, 1996 1,578,512 11/364 47,702 101/457 10,543
December
20, 1996 104,249 11/364 3,150 101/457 696
December
31, 1996 1,929,903 1/364 5,302 91/457 1,056
--------- ------ -------- ------- -------
December
31, 1996 6,000,000 631,622
========= =======
Three
Months
Ended
March
31,
1997
January
1, 1997 6,000,000 90/90 6,000,000
March 7,
1997 20,000 84/90 18,667 84/457 3,431
February
1, 1997 150,000 59/90 98,333 59/457 12,695
--------- ----- --------- ------- -------
March 31,
1997 6,170,000 6,117,000 369,361
========= ========= =======
<PAGE>
---------------------------------
EXHIBIT 23.1
---------------------------------
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the
incorporation by reference in this Form S-1 Registration
Statement of our reports dated April 3, 1997, relating to
(1) the consolidated financial statements of Media
Entertainment, Inc. and Subsidiaries, for the period from
inception (November 1, 1996 to December 31, 1996, (2) the
financial statements of Winter Entertainment, Inc. for the
year ended December 31, 1996, and the period from inception
(December 28, 1995) to December 31, 1995, and (3) the
financial statements of Missouri Cable TV Corp. for the
period from inception (October 9, 1996) to December 31,
1996, included in the Form S-1 Registration Statement. We
also consent to the reference to this firm under the heading
"Experts" in this Registration Statement.
/s/
WEAVER & TIDWELL, L.L.P.
Certified Public Accountants
Fort Worth, Texas
July 18, 1997
<PAGE>
---------------------------------
EXHIBIT 23.3
---------------------------------
CONSENT OF INDEPENDENT APPRAISER
We hereby consent to the reference to our appraisal, dated
December 20, 1996, relating to: (1) the following wireless
cable markets: Port Angeles, Washington; Astoria, Oregon;
Poplar Bluff, Missouri; Lebanon, Missouri; Sand Point,
Idaho; The Dalles, Oregon; Fallon, Nevada; and Eagle River,
Wisconsin; and (2) community television channels in the
following markets: Baton Rouge, Louisiana; Natchitoches,
Louisiana; Monroe/Rayville, Louisiana; Bainbridge, Georgia;
and Sandersville, Georgia. We also consent to the
references to this firm in this Registration Statement.
/s/
BROADCAST SERVICES INTERNATIONAL, INC.
Sacramento, California
July 16, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 14502 36533
<SECURITIES> 0 0
<RECEIVABLES> 310 225
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 14812 37668
<PP&E> 196214 197796
<DEPRECIATION> 706 882
<TOTAL-ASSETS> 233600 265131
<CURRENT-LIABILITIES> 60889 64799
<BONDS> 0 0
0 0
0 0
<COMMON> 600 617
<OTHER-SE> 172711 200350
<TOTAL-LIABILITY-AND-EQUITY> 233600 265131
<SALES> 3337 224
<TOTAL-REVENUES> 3337 224
<CGS> 0 0
<TOTAL-COSTS> 27574 23885
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> (24237) (23661)
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (24237) (23661)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (24237) (23661)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (24237) (23661)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
