Form 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
[ X ] Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
OR
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission File No. 333-26385
Media Entertainment, Inc.
(Exact Name of Small Business Issuer
as Specified in its Charter)
NEVADA 72-1346591
(State or Other Jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number
8748 Quarters Lake Road, Baton Rouge, Louisiana 70809
(Address of Principal Executive Offices,
including Zip Code)
(504) 922-7744
(Issuer's telephone number, including area code)
Indicate by check mark whether Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that Registrant as
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest
practicable date:
Class Outstanding as of 11-14-97
- ----- --------------------------
Common Stock,
$.0001 par value 6,324,000
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Media Entertainment, Inc.
Consolidated Balance Sheets as of September
30, 1997 (unaudited), and December 31, 1996
Consolidated Statement of Operations for the
Three Months Ended September 30, 1997 and 1996
(unaudited), and the Six Months Ended September
30, 1997 and 1996 (unaudited)
Consolidated Statement of Cash Flows Six Months
Ended September 30, 1997 and 1996 (unaudited)
Notes to Consolidated Financial Statements
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEET
12/31/96 9/30/97
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 14,502 $ 37,001
Accounts receivable 310 310
Prepaid expenses 0 0
Total current assets 14,812 37,311
PROPERTY AND EQUIPMENT,
net of accumulated
depreciation of $706
and $1,587, respectively 196,214 198,620
INVESTMENT IN JOINT VENTURE 0 13,100
INTANGIBLES
Organization costs,
net of accumulated
amortization of $19
and $84, respectively 550 485
Licenses and rights to
leases of licenses,
net of accumulated
amortization of $725
and $2,227, respectively 22,024 25,523
22,574 26,008
Total assets $233,600 $275,039
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to
stockholder 50,000 83,000
Accounts payable 0 14,477
Accounts payable - affiliate 10,069 45,769
Accrued interest 820 5,950
Total current liabilities 60,889 149,196
STOCKHOLDERS' EQUITY
Common stock, $.0001 par
value, 100,000,000 shares
authorized, 6,000,000 and
6,240,000 shares issued and
outstanding, respectively 600 624
Additional paid-in capital 198,508 798,484
Deficit accumulated during
the development stage (24,237) (372,405)
Subscriptions receivable (2,160) (860)
Deferred compensation 0 (300,000)
172,711 125,843
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $233,600 $275,039
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
Three Six
Months Ended Months Ended
September 30 September 30
1997 1996 1997 1996
(unaudited) (unaudited)
Revenue $ 288 $1,180 $1,110 $2,748
Expenses
Depreciation
and amor-
tization 1,299 264 2,467 528
Professional
fees 103,450 0 291,956 0
Rent 4,410 0 12,272 0
Salary 16,570 0 30,027 0
Other 6,321 1,180 12,556 2,748
132,050 1,444 349,278 3,276
Net loss $(131,762) $( 264) $(348,168) $( 528)
Loss per
common
share $(.021) $(.000) $(.057) $(.000)
Weighted
average
number
of shares
outstanding 6,171,762 2,157,239 6,147,740 2,157,239
<PAGE>
MEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Nine
Months Months
Ended Ended
9/30/97 9/30/96
(unaudited) (unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(348,168) $( 528)
Adjustment to
reconcile net
loss to net cash
used in operating
activities
Depreciation 881 528
Amortization 1,567 0
Recognition of
services performed
for stock 215,705 0
Decrease (increase)
in accounts payable 85 0
Increase in prepaids ( 910) 0
Increase in accounts
payable and accruals 14,477 0
Net cash used
in operating
activities (231,805) 0
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of equipment ( 762) 0
Investment in joint
venture (13,100) 0
Purchase of organ-
ization costs ( 0) 0
Purchase of leases
and rights to
leases of licenses ( 5,000) 0
Net cash used
in investing
activities (18,862) 0
CASH FLOWS FROM
FINANCING ACTIVITIES
Increase in note
payable to
stockholder 33,000 0
Issuance of common
stock 50,000 0
Increase in open
account payable to
stockholder 35,700 0
Decrease in sub-
scriptions receivable 1,300 0
Net cash provided
by financing
activities 120,000 0
Net increase
in cash 22,499 0
Cash, beginning of period 14,502 0
Cash, end of period 37,001 0
Noncash investing and financing activities for the nine
months ended September 30, 1997 (unaudited):
- 150,000 shares issued for consulting and legal
services to be performed valued at $375,000.
- 10,000 shares issued for consulting services to be
performed valued at $25,000.
- 60,000 shares issued for business and communications
consulting services valued at $150,000.<PAGE>
MEDIA ENTERTAINMENT, INC.
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 1997
(Unaudited)
Note 1. Nature of Business, Organization
and Basis of Presentation
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 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 the Company
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.
Management plans to raise capital by obtaining financing
and, eventually, through public offerings. Management
intends to commence the commercial exploitation of its
proprietary Wireless Internet Access System with the initial
proceeds from any borrowings or sales of its common stock,
as well as 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.
However, there is no assurance that such will be the case.
Begiinning in October 1997, the Company's Board of Directors
determined that the Company's business segment development
priority would be: (1) Wireless Internet; (2) Community
Television; and (3) Wireless Cable.
Note 2. Interim Consolidated Financial Statements
In the opinion of management, the accompanying consolidated
financial statements for the nine months ended September 30,
1997 and 1996, reflect all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly
the financial condition, results of operations and cash
flows of the Company, including subsidiaries, and include
the accounts of the Company and all of its subsidiaries.
All material intercompany transactions and balances are
eliminated.
The financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission
("SEC"). Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these unaudited financial
statements be read in conjunction with the financial
statements and notes thereto included in the Company's
Registration Statement on Form S-1 filed with the SEC (file
no. 333-26385). Certain reclassifications and adjustments
may have been made to the financial statements for the
comparative period of the prior fiscal year to conform with
the 1997 presentation. The results of operations for the
interim periods are not necessarily indicative of the
results to be obtained for the entire year.
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 shareholder of the Company was also the sole
shareholder of WEI and the majority shareholder 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.
Note 4. Notes Payable to Shareholder
September 30, 1997
(unaudited)
Notes payable to majority
stockholder, interest accrues
at 8%, due on demand and unsecured $83,000
In addition, during the nine months ended September 30,
1997, the same stockholder advanced to the Company a total
of $37,500 on open account, at 8% per annum, which is
payable on demand.
Note 5. Joint Venture
During the nine months ended September 30, 1997, the Company
incurred $13,100 in costs relating to the acquisition of the
Joint Venture. As of September 30, 1997, the Joint Venture
has had no operations.
Note 6. Option Agreement - Web One
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.
Note 7. Stock Issuances
During the nine months ended September 30, 1997, the Company
issued a total of 220,000 shares of common stock, as
follows:
A. 20,000 shares of common stock were sold for $2.50 per
share, or $50,000, in the aggregate, in cash, and an option
to purchase another 40,000 shares for $100,000 was granted
by the Company.
B. 150,000 shares were issued to prepay legal services. In
the agreement pursuant to which these shares were issued,
the shares were valued at $.40 per share, or $60,000 in the
aggregate. However, for financial reporting purposes, the
shares have been valued at $2.50 per share, or $375,000 in
the aggregate, to approximate the fair value of the shares
on the date issued.
C. 10,000 shares were issued in payment of financial public
relations consulting services, which shares were valued at
$2.50 per share, or $25,000, in the aggregate.
D. 60,000 shares were issued to prepay business and
communications consulting services, which shares were valued
at $2.50 per share, or $150,000, in the aggregate.
Note 8. Subsequent Events
Subsequent to September 30, 1997, the Company issued 40,000
shares of is common stock to a consultant to prepay
financial public relations consulting services, which shares
were valued at $3.00 per share, or $120,000, in the
aggregate. Also under the agreement pursuant to which such
40,000 shares were issued, the Company may be required to
issue, as a bonus to the consultant, up to an additional
80,000 shares of common stock, as follows:
At any time during the one-year period following the date of
the agreement, should the closing bid price (as reported by
the NASD's OTC Electronic Bulletin Board [OTCEBB]) of the
Company's Common Stock be
A. in excess of $3.00 per share for 10 consecutive trading
days, the Company shall issue to the consultant 10,000
shares of Common Stock, which shares shall be valued at the
average bid price (as reported by the NASD's OTCEBB) of the
Company's Common Stock for the 15 trading days immediately
preceding the date of issuance of such shares;
B. in excess of $4.00 per share for 10 consecutive trading
days, the Company shall issue to the consultant 10,000
shares of Common Stock, which shares shall be valued at the
average bid price (as reported by the NASD's OTCEBB) of the
Company's Common Stock for the 15 trading days immediately
preceding the date of issuance of such shares;
C. in excess of $5.00 per share for 10 consecutive trading
days, the Company shall issue to the consultant 10,000
shares of Common Stock, which shares shall be valued at the
average bid price (as reported by the NASD's OTCEBB) of the
Company's Common Stock for the 15 trading days immediately
preceding the date of issuance of such shares;
D. in excess of $6.00 per share for 10 consecutive trading
days, the Company shall issue to the consultant 10,000
shares of Common Stock, which shares shall be valued at the
average bid price (as reported by the NASD's OTCEBB) of the
Company's Common Stock for the 15 trading days immediately
preceding the date of issuance of such shares;
E. in excess of $7.00 per share for 10 consecutive trading
days, the Company shall issue to the consultant 10,000
shares of Common Stock, which shares shall be valued at the
average bid price (as reported by the NASD's OTCEBB) of the
Company's Common Stock for the 15 trading days immediately
preceding the date of issuance of such shares;
F. in excess of $8.00 per share for 10 consecutive trading
days, the Company shall issue to the consultant 10,000
shares of Common Stock, which shares shall be valued at the
average bid price (as reported by the NASD's OTCEBB) of the
Company's Common Stock for the 15 trading days immediately
preceding the date of issuance of such shares;
G. in excess of $9.00 per share for 10 consecutive trading
days, the Company shall issue to the consultant 10,000
shares of Common Stock, which shares shall be valued at the
average bid price (as reported by the NASD's OTCEBB) of the
Company's Common Stock for the 15 trading days immediately
preceding the date of issuance of such shares;
H. in excess of $10.00 per share for 10 consecutive trading
days, the Company shall issue to the consultant 10,000
shares of Common Stock, which shares shall be valued at the
average bid price (as reported by the NASD's OTCEBB) of the
Company's Common Stock for the 15 trading days immediately
preceding the date of issuance of such shares.
Also subsequent to September 30, 1997, the Company granted
to a consultant, pursuant to a consulting agreement, an
option to purchase up to 300,000 shares of Company common
stock, as follows:
A. 100,000 shares may be purchased by the consultant at a
price of $3.00 per share. The purchase rights with respect
to such 100,000 shares are exercisable at any time, in whole
or in part, prior to the close of business on January 31,
1998.
B. 100,000 shares may be purchased by the consultant at a
price of $4.00 per share. The purchase rights with respect
to such 100,000 shares are exercisable at any time, in whole
or in part, prior to the close of business on June 30, 1998.
C. 100,000 shares may be purchased by the consultant at a
price of $5.00 per share. The purchase rights with respect
to such 100,000 shares are exercisable at any time, in whole
or in part, prior to the close of business on November 30,
1998.
<PAGE>
Item 2. 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. In October 1997, the
Company's Board of Directors determined to alter the
Company's business segment development priorities from: (1)
wireless cable television markets, beginning with the Poplar
Bluff and Lebanon, Missouri, markets; (2) community (low
power) television stations, beginning with the Baton Rouge,
Louisiana, market; and (3) wireless internet Baton Rouge,
Lousiana, and Dallas, Texas, markets; and changed the
Company's development priority to: (1) wireless internet
markets, (2) community (low power) television markets and
(3) wireless cable television markets. The change in
development priority is a result of the unexpectedly rapid
completion of a market-ready version of the Company's
Wireless Internet Access System. 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
Nine Months Ended September 30, 1997, versus Nine Months
Ended September 30, 1996.
Revenues from the Company's operations for the nine months
ended September 30, 1997 ("Interim 97"), were $1,110
(unaudited) compared to revenues of $2,748 (unaudited) for
the nine months ended June 30, 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 fourth quarter of 1997, the
Wireless Internet Segment will begin to generate revenues
from operations. However, there is no assurance in this
regard. The Company's net loss of $348,168 is attributable
in large part to the issuance of 150,00 shares pursuant to a
consulting and legal services agreement, which shares have
been valued for financial accounting purposes at $2.50 per
share, or $375,000, in the aggregate. During Interim 97,
$250,000 of such $375,000 was expensed. It is anticipated
that $31,250 of such $375,000 in pre-paid expenses will be
expensed by the Company each month, or $93,750 for each
three month period, through January 1998. Reference is
hereby made to Note 7 of the Company's financial statements
included elsewhere herein.
Wireless Cable Segment. The Company has only recently
begun to take preliminary steps to attract subscribers in
one of its wireless cable markets, Poplar Bluff, Missouri.
The Company expects that revenues, if any, will not exceed
expenditures in its Wireless Cable Segment through June
1998. During Interim 97, the Wireless Cable Segment
generated no revenues, while incurring only immaterial
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 $1,110 (unaudited) compared to revenues of $2,748
(unaudited) for Interim 96. The Company expects that this
segment's revenues will remain at Interim 97 levels for the
remainder of Fiscal 97 and the first half of 1998. 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. 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.
The Company has completed the development of its own
proprietary Wireless Internet Access System. It is the
Company's intention to establish a Wireless ISP in as many
U.S. cities as is possible in as short a time as is
possible. The Company believes that it wil require between
$60,000 and $200,000 ($50,000 for equipment and the balance
for marketing and other general expenses), depending upon
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
and informal 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 first quarter of 1998. There is no assurance
that the Company will possess sufficient capital with which
to develop the Dallas market.
Liquidity and Capital Resources
September 30, 1997.
The Company remained in a substantially illiquid position
throughout Interim 97. At September 30, 1997, the Company's
working capital deficit was $111,885 (unaudited), compared
to a working capital deficit at December 31, 1996, of
$46,077 (audited). This deterioration in the Company's
working capital deficit is attributable to the fact that 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
$46,500, which funds were used primarily for operating
expenses of the Company and the purchase of equipment. Such
loans are evidenced by promissory notes and bear interest at
8% per annum and are payable on demand. $5,000 of a prior
loan by the same shareholder was repaid during Interim 97.
In addtion, during the nine months ended September 30, 1997,
the same shareholder advanced to the Company a total of
$37,500 on open account, at 8% per annum, which is payable
on demand. As of the date of this Quarterly Report on Form
10-QSB, the Company owed Mr. Loflin a total of $118,700,
plus accrued and unpaid interest of approximately $5,950.
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 the 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 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.
During Interim 97, the Company issued shares of its Common
Stock on four occasions:
A. 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.
B. In February 1997, the Company entered into a
consulting and legal services agreement with its legal
counsel. Under such agreement, counsel 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 counsel of 150,000 shares
of Company Common Stock in pre-payment of legal services
agreed to be $60,000. However, for financial reporting
purposes, these shares of Common Stock have been valued at
$2.50 per share, or $375,000, in the aggregate. In this
regard, reference is made to Note 6 of the financial
statements of the Company included elsewhere herein. The
Company has been unable to meet its obligations under such
agreement; as of the date of this Quarterly Report on Form
10-QSB, the Company owed counsel a total of $14,000 under
such agreement.
C. In September 1997, the Company entered into a
consulting agreement with a consultant. Under such
agreement, the consultant agreed to provide consulting
services relating to financial public relations for a period
of six months in consideration of the Company's issuing
10,000 shares of Common Stock to the consultant. These
shares were valued at $2.50 per share, or $25,000, in the
aggregate.
D. Also in September 1997, the Company entered into a
business and communications consulting services agreement
with a consultant. Under such agreement, the consultant
agreed to provide consulting services relating to business
and communications matters, including communications laws
compliance, in consideration of the Company's issuing 60,000
shares to the consultant. These shares were valued at $2.50
per share, or $150,000, in the aggregate.
Subsequent to Interim 97, the Company issued 40,000 shares
of its Common Stock to a consultant to pre-pay consulting
services relating to financial public relations, which
shares were valued at $3.00 per share, or $120,000, in the
aggregate. The financial consulting services agreement
under which such 40,000 shares were issued provides that up
to an additional 80,000 shares may be issued to the
consultant, as follows:
At any time during the one-year period following the date
of the agreement, should the closing bid price (as reported
by the NASD's OTC Electronic Bulletin Board [OTCEBB]) of the
Company's Common Stock be:
A. in excess of $3.00 per share for 10 consecutive
trading days, the Company shall issue to the consultant
10,000 shares of Common Stock, which shares shall be valued
at the average bid price (as reported by the NASD's OTCEBB)
of the Company's Common Stock for the 15 trading days
immediately preceding the date of issuance of such shares.
B. in excess of $4.00 per share for 10 consecutive
trading days, the Company shall issue to the consultant
10,000 shares of Common Stock, which shares shall be valued
at the average bid price (as reported by the NASD's OTCEBB)
of the Company's Common Stock for the 15 trading days
immediately preceding the date of issuance of such shares.
C. in excess of $5.00 per share for 10 consecutive
trading days, the Company shall issue to the consultant
10,000 shares of Common Stock, which shares shall be valued
at the average bid price (as reported by the NASD's OTCEBB)
of the Company's Common Stock for the 15 trading days
immediately preceding the date of issuance of such shares.
D. in excess of $6.00 per share for 10 consecutive
trading days, the Company shall issue to the consultant
10,000 shares of Common Stock, which shares shall be valued
at the average bid price (as reported by the NASD's OTCEBB)
of the Company's Common Stock for the 15 trading days
immediately preceding the date of issuance of such shares.
E. in excess of $7.00 per share for 10 consecutive
trading days, the Company shall issue to the consultant
10,000 shares of Common Stock, which shares shall be valued
at the average bid price (as reported by the NASD's OTCEBB)
of the Company's Common Stock for the 15 trading days
immediately preceding the date of issuance of such shares.
F. in excess of $8.00 per share for 10 consecutive
trading days, the Company shall issue to the consultant
10,000 shares of Common Stock, which shares shall be valued
at the average bid price (as reported by the NASD's OTCEBB)
of the Company's Common Stock for the 15 trading days
immediately preceding the date of issuance of such shares.
G. in excess of $9.00 per share for 10 consecutive
trading days, the Company shall issue to the consultant
10,000 shares of Common Stock, which shares shall be valued
at the average bid price (as reported by the NASD's OTCEBB)
of the Company's Common Stock for the 15 trading days
immediately preceding the date of issuance of such shares.
H. in excess of $10.00 per share for 10 consecutive
trading days, the Company shall issue to the consultant
10,000 shares of Common Stock, which shares shall be valued
at the average bid price (as reported by the NASD's OTCEBB)
of the Company's Common Stock for the 15 trading days
immediately preceding the date of issuance of such shares.
Also subsequent to Interim 97, the Company issued to a
consultant, pursuant to a consulting agreement, an option to
purchase up to 300,000 shares of Company Common Stock, as
follows:
A. 100,000 shares may be purchased by the consultant
at a price of $3.00 per share. The purchase rights with
respect to such 100,000 shares are exercisable at any time,
in whole or in part, prior to the close of business on
January 31, 1998.
B. 100,000 shares may be purchased by the consultant
at a price of $4.00 per share. The purchase rights with
respect to such 100,000 shares are exercisable at any time,
in whole or in part, prior to the close of business on June
30, 1998.
C. 100,000 shares may be purchased by the consultant
at a price of $5.00 per share. The purchase rights with
respect to such 100,000 shares are exercisable at any time,
in whole or in part, prior to the close of business on
November 30, 1998.
There is no assurance that any of such options will be
exercised.
In addition, the Company is currently seeking a bank loan
in the amount of $350,000 with which to commence operations
in its Wireless Internet and Community Television Segments.
Such level of financing would permit the Company to operate
for a period of at least 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 in the near future. 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.
There is no assurance that the Company will realize any
funds from such a 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. In general, for the development
of any of its proposed Wireless ISP markets, the Company
will be required to purchase approximately $50,000 of
equipment. 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.
Unidentified Western U.S. Wireless ISP. Should the
Company obtain $100,000 in capital, the Company intends to
establish a Wireless ISP in a medium-size city located in
the Western U.S., a city featuring flat terrain and few
large trees. These topographical features will allow the
Company to minimize operating costs in such city. As of the
date hereof, the Company had not made any commitment to
launch a Wireless ISP operation in any such city, although
the Company intends to commence Wireless ISP operations in
such a city as soon as funds become available, of which
there is no assurance. Without additional capital, the
Company will be unable to establish such a Wireless ISP.
Baton Rouge, Lousiana. The Joint Venture has not
commenced full-scale operations. The Company is currently
seeking approximately $10,000 so as to permit the Joint
Venture to begin operations. Should such funds be
available, management anticipates that the Joint Venture
will begin to generate positive cash flow beginning in the
first quarter of 1998. However, there is no assurance in
this regard.
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 first half of
1998, should funds be available. 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 $231,8805 (unaudited). The use of cash in the current
period is primarily due to the Company's net loss of
$215,705 (unaudited), which offset a recognition of services
performed for stock. The Company intends to recognize
$31,250 for services performed for stock each month during
the remaining quarter of Fiscal 97 and January 1998. The
Company's use of cash in operations during Interim 96 is
attributable primarily to the Company's net loss for such
interim period. The Company's management does not expect
that operations for all of Fiscal 97 will generate positive
cash flow. However, management is unable to predict the
level of cash flow to be generated during such period of
time, due to the uncertainty of the level and timing of
funding, if any, with which to commence its proposed
Wireless Internet and Community Television 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 $18,862 (unaudited), including $762 (unaudited) for the
purchase of equipment, $13,100 (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 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 $120,000
(unaudited) in cash during Interim 97, compared to Interim
96 when financing activities provided no cash. $33,000 of
such cash was the result of loans from a shareholder, as
well as advances to the Company by the same shareholder on
open account in a total of $35,700. The sale of 20,000
shares of Company Common Stock for a total of $50,000 in
cash provided substantially all of the balance of cash from
financing activities, during Interim 97. 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 following: (A) the
issuance of 150,000 shares of Common Stock in consideration
of consulting and legal services to be performed, which
shares were valued, pursuant to arm's-length negotiations,
at $60,000, in the aggregate. However, for financial
reporting purposes, these shares of Common Stock have been
valued $2.50 per share, or $375,000, in the aggregate. In
this regard, reference is made to Note 7 of the financial
statements of the Company included elsewhere herein; (B) the
issuance of 10,000 shares of Common Stock in consideration
of consulting services to be performed, which shares were
valued at $2.50 per share, or $25,000, in the aggregate; and
(C) the issuance of 60,000 shares of Common Stock in
consideration of business and communications consulting
services to be performed, which shares were valued at $2.50
per share, or $150,000, in the aggregate.
Subsequent to Interim 97, the Company issued 40,000
shares of its Common Stock to a consultant to pre-pay
consulting services relating to financial public relations,
which shares were valued at $3.00 per share, or $120,000, in
the aggregate. The financial consulting services agreement
under which such 40,000 shares were issued provides that up
to an additional 80,000 shares may be issued to the
consultant, as follows:
At any time during the one-year period following the
date of the agreement, should the closing bid price (as
reported by the NASD's OTC Electronic Bulletin Board
[OTCEBB]) of the Company's Common Stock be:
A. in excess of $3.00 per share for 10
consecutive trading days, the Company shall issue to the
consultant 10,000 shares of Common Stock, which shares shall
be valued at the average bid price (as reported by the
NASD's OTCEBB) of the Company's Common Stock for the 15
trading days immediately preceding the date of issuance of
such shares.
B. in excess of $4.00 per share for 10
consecutive trading days, the Company shall issue to the
consultant 10,000 shares of Common Stock, which shares shall
be valued at the average bid price (as reported by the
NASD's OTCEBB) of the Company's Common Stock for the 15
trading days immediately preceding the date of issuance of
such shares.
C. in excess of $5.00 per share for 10
consecutive trading days, the Company shall issue to the
consultant 10,000 shares of Common Stock, which shares shall
be valued at the average bid price (as reported by the
NASD's OTCEBB) of the Company's Common Stock for the 15
trading days immediately preceding the date of issuance of
such shares.
D. in excess of $6.00 per share for 10
consecutive trading days, the Company shall issue to the
consultant 10,000 shares of Common Stock, which shares shall
be valued at the average bid price (as reported by the
NASD's OTCEBB) of the Company's Common Stock for the 15
trading days immediately preceding the date of issuance of
such shares.
E. in excess of $7.00 per share for 10
consecutive trading days, the Company shall issue to the
consultant 10,000 shares of Common Stock, which shares shall
be valued at the average bid price (as reported by the
NASD's OTCEBB) of the Company's Common Stock for the 15
trading days immediately preceding the date of issuance of
such shares.
F. in excess of $8.00 per share for 10
consecutive trading days, the Company shall issue to the
consultant 10,000 shares of Common Stock, which shares shall
be valued at the average bid price (as reported by the
NASD's OTCEBB) of the Company's Common Stock for the 15
trading days immediately preceding the date of issuance of
such shares.
G. in excess of $9.00 per share for 10
consecutive trading days, the Company shall issue to the
consultant 10,000 shares of Common Stock, which shares shall
be valued at the average bid price (as reported by the
NASD's OTCEBB) of the Company's Common Stock for the 15
trading days immediately preceding the date of issuance of
such shares.
H. in excess of $10.00 per share for 10
consecutive trading days, the Company shall issue to the
consultant 10,000 shares of Common Stock, which shares shall
be valued at the average bid price (as reported by the
NASD's OTCEBB) of the Company's Common Stock for the 15
trading days immediately preceding the date of issuance of
such shares.
Also subsequent to Interim 97, the Company issued to a
consultant, pursuant to a consulting agreement, an option to
purchase up to 300,000 shares of Company Common Stock, as
follows:
A. 100,000 shares may be purchased by the
consultant at a price of $3.00 per share. The purchase
rights with respect to such 100,000 shares are exercisable
at any time, in whole or in part, prior to the close of
business on January 31, 1998.
B. 100,000 shares may be purchased by the
consultant at a price of $4.00 per share. The purchase
rights with respect to such 100,000 shares are exercisable
at any time, in whole or in part, prior to the close of
business on June 30, 1998.
C. 100,000 shares may be purchased by the
consultant at a price of $5.00 per share. The purchase
rights with respect to such 100,000 shares are exercisable
at any time, in whole or in part, prior to the close of
business on November 30, 1998.
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.
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 could receive up to
$1,200,000 upon the exercise of currently outstanding
options to purchase shares of Company Common Stock, although
there is no assurance that any of such options will be
exercised; (2) the Company intends to commence a public
offering of its Common Stock, in the approximate amount of
$1,000,000, in the near future; (3) 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; (4) the Company
will attempt to locate one or more joint venture partners
with whom the Company would develop one or more of its
proposed Wireless ISP markets; or (5) 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 in
the near term. This belief is based on management's
business experience and preliminary reaction from its
potential Wireless ISP customers in Baton Rouge, Louisiana,
and the reaction of persons who participate in various
segments of the capital markets. Should one of the
described financing transactions be consummated, of which
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 June 30, 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 ISP markets (an
average of approximately $175,000 per system), one or more
of its wireless cable systems (approximately $200,000 per
system) and one or more of its community television
stations (approximately $50,000 per station). There is no
assurance that any of the necessary capital for such
proposed activities will be available.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
During the three months ended September 30, 1997, the
Company issued unregistered securities on two occasions, as
follows:
1. (a) Securities Sold. On September 22, 1997, the
Company sold 10,000 shares of its Common Stock.
(b) Underwriters and Other Purchasers. Such
shares were issued to Clarion Financial Services, Inc.
(c) Consideration. Such shares were issued in
payment of consulting services.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provision of
Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Not
applicable.
2. (a) Securities Sold. On September 30, 1997, the
Company sold 60,000 shares of its Common Stock.
(b) Underwriters and Other Purchasers. Such
shares were issued to The Humbolt Corporation.
(c) Consideration. Such shares were issued in
payment of consulting services.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provision of
Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Not
applicable.
Subsequent to September 30, 1997, the Company issued
unregistered securities on two occasions, as follows:
1. (a) Securities Sold. On October 14, 1997, the
Company issued options to purchase up to 300,000 shares of
its Common Stock.
(b) Underwriters and Other Purchasers. Such
options were issued to Wall Street Marketing Group, Inc.
(c) Consideration. Such options were issued in
payment of consulting services.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provision of
Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. (1) 100,000
shares may be purchased by the consultant at a price of
$3.00 per share. The purchase rights with respect to such
100,000 shares are exercisable at any time, in whole or in
part, prior to the close of business on January 31, 1998;
(2) 100,000 shares may be purchased by the consultant at a
price of $4.00 per share. The purchase rights with respect
to such 100,000 shares are exercisable at any time, in whole
or in part, prior to the close of business on June 30, 1998;
and (3) 100,000 shares may be purchased by the consultant at
a price of $5.00 per share. The purchase rights with
respect to such 100,000 shares are exercisable at any time,
in whole or in part, prior to the close of business on
November 30, 1998.
2. (a) Securities Sold. On October 29, 1997, the
Company sold 40,000 shares of its Common Stock.
(b) Underwriters and Other Purchasers. Such
shares were issued to Tre Vega.
(c) Consideration. Such shares were issued in
payment of consulting services.
(d) Exemption from Registration Claimed. These
securities are exempt from registration under the Securities
Act of 1933, as amended, pursuant to the provision of
Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Not
applicable.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a
Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on From 8-K.
No Current Report on Form 8-K was filed during the
three months ended September 30, 1997. However, subsequent
to September 30, 1997, on or about October 22, 1997, the
Company filed a Current Report on Form 8-K. Such Current
Report described the Company's change in business segment
development priority.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities
Exchange Act of 1934, Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: November 14, 1997.
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin
President and
Principal Financial
Officer
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